This case held that section 240(1) of the National Land Code confers an immediate indefeasible title or interest in land upon registration.
Note: This case had been criticised by academic writers and has been overruled by the Federal Court Case of Tan Ying Hong v Tan Sian San & Ors [2010] 2 MLJ 1
Facts of the Case
The Appellant (Adorna Properties Sdn Bhd) entered into a sale and purchase agreement dated 15 December 1988 to purchase two pieces of land in Penang from a Mrs Boonsoom Boonyanit (Thai passport No: 033852) (‘the vendor’). Appellant’s solicitors obtained the vendor’s name from a land search and her passport No. from the vendor’s solicitors. The vendor’s solicitor also prepared a statutory declaration to change the name of the title from Boonsom Boonyanit @ Sun Yok Eng to Mrs Boonsoom Boonyanit. The full purchase price of the was paid by the appellant and the properties were duly executed and the stamped memorandum of transfer was registered in favour of the appellant on 24 May 1989.
Around June 1989, the eldest son of the respondent (Boonsom Boonyanit @ Sun Yok Eng) saw an advertisement in the newspaper inserted by the vendor’s solicitors referring to the respondent’s properties. The respondent contacted an accountant to help her investigate the properties but he could not get any useful information from the vendor’s solicitor. Thus, respondent contacted her solicitor to take necessary action and also to lodge a police report.
The respondent brought an action against the appellant claiming that the name, passport number and the signature of the transferor in the memorandum of transfer was not her and was procured by forgery and/or fraud. She also testified that the statutory declaration was not affirmed by her. She claimed that she was the registered proprietor of the land which had been sold and transferred to the appellant. Hence, she claimed to be restored as the registered owner of the land. Appellant also tendered a memorandum of transfer which was registered on that she 18 January 1967 in her favour and a certificate from the Royal Thai Consulate General which showed that the vendor’s passport was a forgery. Appellant claimed that it was a bona fide purchaser of the properties for value and it had acquired indefeasible title in the properties through registration of the memorandum of transfer in their favour.
The High Court dismissed the respondent’s claim but the decision of the High Court was reversed by the Court of Appeal. The appellant appealed.
Issues of the Case
Whether the standard of proof to prove forgery is on the balance of probabilities or beyond reasonable doubt?
Whether a bona fide purchaser for valuable consideration without notice, acquired an indefeasible title to the land by virtue of section 340(3) of the National Land Code 1965?
Judgment of the Court
First issue: Whether the standard of proof to prove forgery is on the balance of probabilities or beyond reasonable doubt?
The Federal Court agreed on the decision of the Court of Appeal that the standard of proof required for forgery is on a balance of probabilities. The Court of Appeal held that the general rule of common law can be found in the case of Rejfek v McElroy (1965) 112 CLR 517 which decided that in the absence of a statutory provision to the contrary, proof in civil proceedings of facts amounting to the commission of a crime need only be on balance of probabilities. This approach was laid down as early as 1855 by the Privy Council on Doe D Devine v Wilson (1855) 14 ER 581 and it has been consistently applied by the High Court of Australia and stood unchallenged for more than a century.
The Court of Appeal also referred to United Asian Bank Bhd v Tai Soon Heng Construction Sdn Bhd [1993] 1 MLJ 182 which held that the charge of forgery in a civil case only need to be established on a balance of probabilities. Thus, the standard of proof required for forgery is on a balance of probabilities based on well-established authority and binding precedent.
Second issue: Whether a bona fide purchaser for valuable consideration without notice, acquired an indefeasible title to the land by virtue of section 340(3) of the National Land Code 1965?
Both of the High Court and the Court of Appeal held that the document of transfer was forged. There was sufficient evidence to prove that the respondent’s signature was forged. The High Court held that the registration of title conferred an immediate indefeasibility under our version of Torrens system, whereas the Court of Appeal held otherwise.
Section 340 of the NLC states:
“Registration to confer indefeasible title or interest, except in certain circumstances
340. (1) The title or interest of any person or body for the time being registered as proprietor of any land, or in whose name any lease, charge or easement is for the time being registered, shall, subject to the following provisions of this section, be indefeasible.
(2) The title or interest of any such person or body shall not be indefeasible —
(a) in any case of fraud or misrepresentation to which the person or body, or any agent of the person or body, was a party or privy; or
(b) where registration was obtained by forgery, or by means of an insufficient or void instrument; or
(c) where the title or interest was unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law.
(3) Where the title or interest of any person or body is defeasible by reason of any of the circumstances specified in sub-s (2) —
(a) it shall be liable to be set aside in the hands of any person or body to whom it may subsequently be transferred; and
(b) any interest subsequently granted thereout shall be liable to be set aside in the hands of any person or body in whom it is for the time being vested:
Provided that nothing in this sub-section shall affect any title or interest acquired by any purchaser in good faith and for valuable consideration, or by any person or body claiming through or under such a purchaser.
(4) Nothing in this section shall prejudice or prevent—
(a) the exercise in respect of any land or interest of any power of forfeiture or sale conferred by this Act or any other written law for the time being in force, or any power of avoidance conferred by any such law; or
(b) the determination of any title or interest by operation of law.”
The Court explained that subsection (1) of s 340 NLC states that every proprietor as long as he is currently a registered proprietor of that piece of land, his title or interest is indefeasible unless caught by subsection (2) and (3). Subsection (2) of s 340 NLC uses the word ‘such’. When the word ‘such’ occurs in a section it must not be ignored, but must be read as referring back to the preceding provision. Subsection (2) states that the title of any such person, ie any registered proprietor or co-proprietor for the time being, is defeasible if one of the three circumstances in subsection (2)(a), (b) or (c) occurs. We are concerned here with subsection (2)(b) where the registration had been obtained by forgery.
Subsection (3) says that where that title is defeasible under any of the three circumstances enumerated under subsection (2), the title of the registered proprietor to whom the land was subsequently transferred under the forged document, is liable to be set aside. However, it contains a proviso. the object of a proviso is to carve out from the substantive section or clause of a statute, a class or category of persons or things to whom or to which the main section does not apply. The proviso says that any purchaser in good faith and for valuable consideration or any person or body claiming through or under him are excluded from the application of the substantive provision of subsection (3). For this category of registered proprietors, they obtained immediate indefeasibility notwithstanding that they acquired their titles under a forged document. Therefore, the Federal Court agree with the High Court that even if the instrument of transfer was forged, the respondent nevertheless obtained an indefeasible title to the said lands.
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