The High Court held that a purchaser who has paid the full purchase price of a property has the equivalent privilege of a legal owner although he is not the registered proprietor of the property.
Facts of the Case
The applicant entered into a sale and purchase agreement (“SPA”) dated 20 April 2017 with the second respondent to purchase a property for RM150,000. A caveat was entered on 8 April 2018 but it was removed through the second respondent’s application on 7 February 2019. Applicant had settled the full purchase price on 13 June 2019.
The first respondent entered a caveat on the property on 28 March 2019 on the basis that he had entered into an agreement dated 11 March 2019 to purchase the property from the second respondent for RM310,000. He stated that he paid RM31,000 as the deposit and obtained a loan of RM278,000 from Hong Leong Bank Bhd.
The applicant applied to the High Court to remove the first respondent’s caveat and sought for a declaration that the second respondent held the property as a trustee to the applicant.
Issues of the Case
Whether purchaser who has proved payment of full purchase price has privilege equivalent to a legal owner?
whether the applicant was an aggrieved party?
whether the first respondent had a caveatable interest?
Judgment of the Case
The first respondent argued that upon removal of applicant’s caveat on 7 February 2019, the applicant’s rights to the property had been extinguished. The first respondent relied on R.A.P. Nathan v. Haji Abdul Rahman bin Haji Yusoff & Ors [1980] 1 MLJ where the Court held that:
“... Once it lapsed the court has no power to revive, renew or continue a caveat as its extinction is final and irrevocable. That is because the court has no inherent jurisdiction to go beyond the powers expressly given to it by statute. ...”.
The first respondent also submitted that the removal of caveat had affected the priority to the property of applicant as against the first respondent. In Zeno Ltd. v. Prefabricated Construction Co. (Malaya) Ltd. & Anor [1967] 2 MLJ 104 it was stated that:
“In my view the caveat establishes priority and the onus is therefore on the holder of a subsequent equity to show facts which render it inequitable for the holder of a prior equity to insist as against him on that priority. Although priority in time is the ordinary test, in the final analysis where evidence discloses some act or omission on the part of the holder of a prior equity the rule that “who has the better equity” applies; ...”
the High Court was of the view that the decision in R.A.P. Nathan does not prohibits the applicant from applying to remove the caveat in the property. On the issue of priority, the case of United Malayan Banking Corporation Bhd v. Goh Tuan Laye & Ors [1976] 1 MLJ 169 held that:
“... In the case of a contest between two equitable claimants the first in time, all other things being equal, is entitled to priority. But all other things must be equal, and the claimant who is first in time may lose his priority by any act or omission which had or might have had the effect of including a claimant later in time to act to his prejudice. ...”
In the present facts, applicant had paid the full purchase price but there was no evidence of payment of deposit or loan being obtained by the first respondent. Only a letter of offer was exhibited but no loan documents. Hence, there was no competing interest between the applicant and the first respondent. Therefore, the subsequent issue would be whether the applicant was an aggrieved party and whether the first respondent had a caveatable interest.
Section 327(1) of the National Land Code (“NLC”) states:
“Any person or body aggrieved by the existence of a private caveat may at any time apply to the Court for an order for its removal, and the Court (acting, if the circumstances so require, ex parte) may make such order on the application as it may think just.”
In Tan Ong Ban v Teoh Kim Heng [2016] 3 CLJ 193, the Court held that:
“[34] According to this principle, when a purchaser of a property has performed his or her contractual obligation upon the full settlement of the purchase price besides executing all the formal documents to effect the registration of ownership, equity accords him or her with all the rights and privileges of a legal owner over the property. The purchaser thus enjoys the benefit of being the owner of the acquired property even though he or she has yet to become its registered owner.”
Since the applicant in the present case had proved payment of the full purchase price, he has the privilege equivalent to a legal owner and therefore he was an aggrieved person under section 327(1) NLC which entitle him to apply to the Court for an order for the removal of the caveat.
The first respondent further submitted that the SPA between the applicant and the second respondent had been terminated on 20 June 2018 because the completion date was 12 months from 20 April 2017 with a one month extension. Given that the redemption was made on 19 March 2019 and there was no evidence of an extension, the SPA would have terminated under Clause 14 for not paying the balance purchase price within the completion date. Then, the second respondent shall be entitled to forfeit the deposit and the SPA shall have no effect. However, the Court held that the SPA has not been terminated because there was no evidence showing that the second respondent had exercised their right to terminate.
As to the issue whether the first respondent had a caveatable interest, section 323(1) of the NLC states:
“The persons and bodies at whose instance a private caveat may be entered are:
(a) Any person or body claiming title to, or any registrable interest in, any alienated land or any right to such title or interest;
(b) any person or body claiming to be beneficially entitled under any trust affecting any such land or interest; and
(c) the guardian or next friend of any minor claiming to be entitled as mentioned in paragraph (b)”
As mentioned earlier, there was no evidence of any payment of deposit and no evidence of a loan obtained by the first respondent. The SPA between the first and second respondent was also dated later then the applicant’s SPA. Thus, the second respondent was a bare trustee where the applicant had paid the full purchase price and he could not have possibly sold the property to the first respondent. As such, the first respondent did not have caveatable interest on the property and it should be removed by this application.
Principle of the Case
A purchaser who has paid the full purchase price of a property has the equivalent privilege of a legal owner although he is not the registered proprietor of the property. Such purchaser is an aggrieved party and is entitled to remove any caveat that has been lodged on the said property.
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