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KUALA LUMPUR, Thurs: A five-member bench of the Federal Court today unanimously ruled that the previous Federal Court had misconstrued the provisions of section 340(3) of the National Land Code, 1965 ("NLC") in its decision of Adorna Properties Sdn Bhd v Boonsom Boonyanit 2000 ("Adorna Properties") because the principle of deferred and not immediate indefeasibility applies to the NLC.

Delivering the main judgment of the apex court, Chief Judge of Malaya, Tan Sri  Arifin Zakaria said the Court has to depart from Tun Eusoff Chin's four-page judgement in Adorna Properties as it is erroneous. Tan Sri Arifin also held that the decision of Court of Appeal Judge Datuk NH Chan in OCBC Bank (M) Bhd v Pendaftar Hakmilik, Negeri Johor Darul Takzim 1999 in so far as holding the OCBC Bank's charge as invalid is wrong as the learned judge has misapplied the principle of deferred indefeasibility in the case.

In delivering his supporting judgment, Chief Justice Tun Zaki Azmi described the error committed in Adorna Properties as "obvious and blatant". He added that it is a well known fact that some unscrupulous people have taken advantage of this error by falsely transferring titles to themselves. (Please click here to download the judgments of Tan Sri Arifin and Tun Zaki.)

In an immediate response, counsel for Bar Council, Roger Tan, who is also a former Chairman of its Conveyancing Practice Committee, described the decision as a victory for all landowners in this country. He said the Bar welcomes the decision despite a gruelling wait of more than nine years.

"The Bar hopes that judges below will from now on follow today's decision made by this powerful panel of Federal Court, and that no judge would deviate from this decision on the ground that there now exists two conflicting decisions of the Federal Court because today's decision is equivalent to having overruled or reversed Adorna Properties", said Tan.

The Federal Court is finally able to revisit Adorna Properties today after more than nine years when the Court granted leave in May last year to the appellant landowner Tan Ying Hong to appeal on this question: "whether an acquirer of a registered charge or other interest or title under the National Land Code, 1965 by means of a forged instrument acquires an immediate indefeasible interest or title."

The case before the Federal Court can be traced back to 1976 when without the knowledge of Ying Hong, the Pahang State Government had "mysteriously" alienated and issued the document of title of a nine-acre plot of land in Kuantan in favour of him. Ying Hong only came to know about the existence of the land in 1985 when he received a letter from the United Malayan Banking Corporation Bhd (now RHB Bank Bhd) demanding repayment of the sum of about RM300,000 being the outstanding loan sum granted by the RHB Bank to Cini Timber Industries Sdn. Bhd.

Upon enquiry, Ying Hong discovered that the conman, Tan Sian San, who is now missing and not related to Ying Hong, had forged Ying Hong's signature by creating a power of attorney in favour Sian San himself in 1977. With the forged power of attorney, Sian San had charged the land to RHB Bank in 1984 as security for the loan facilities granted to Cini Timber Industries Sdn. Bhd.

The High Court dismissed Ying Hong's application in 2003 and this was affirmed by the Court of Appeal last year. The appeal was heard on October 29 last year before Tun Azmi, Court of Appeal President Tan Sri Alauddin Mohd Sheriff, Tan Sri Arifin and Federal Court judges Datuk Zulkefli Ahmad Makinudin and Datuk James Foong Cheng Yuen.

On the facts of the case, the Federal Court held that as RHB Bank is an immediate purchaser/chargee within the meaning of s 340(2), the proviso that protects a subsequent purchaser/chargee who is a bona fide purchaser for value in s340(3) will not assist the respondent bank. The Court added that it is immaterial that there is evidence to show that the land was alienated to the appellant without his knowledge as the validity of the alienation was not even challenged by the respondent bank. The Court then awarded a sum of RM75,000 as costs to the appellant, and the ownership of the land which now should be worth a few millions of ringgit reverts to the appellant.

Appearing before the Court today were T. Mura Raju who acted for Ying Hong, and Datuk Bastian Pius Vendargon and Ong Siew Wan acted for RHB Bank.

Head of the Civil Division in the A-G’s Chambers, See Mee Chun appeared for the Attorney General as amicus curiae whilst Roger Tan and Tony Woon appeared as amici curiae who held a watching brief for the Bar Council.

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