The Malaysian Bar - Federal Court closes loophole on land fraud

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Federal Court closes loophole on land fraud

Thursday, 21 January 2010 09:52pm

©Bernama (Used by permission)
by Tan Yi Liang

PUTRAJAYA (Jan 21, 2010): The Federal Court has plugged a legal loophole in Malaysian land law which allowed unscrupulous individuals to transfer land titles to third parties with legal immunity.

In a landmark decision today, a five-man bench led by Chief Justice Tun Zaki Azmi unanimously decided to reverse the ruling in the Adorna Properties Sdn Bhd vs Boonsom Boonyanit case in 2000.

The other four on the panel were Court of Appeal President Tan Sri Alauddin Mohd Sheriff, Chief Judge of Malaya Tan Sri Arifin Zakaria and Federal Court judges Datuk Zulkefli Ahmad Makinudin and Datuk James Foong Cheng Yuen.

In deciding on the case of Tan Ying Hong v Tan Siang San & two others, the court ruled that transfers of property by fraudulent or forged documents were no longer legally valid under Section 340(2) of the National Land Code 1965.

This defeated the application of Section 340(3) of the National Land Code to Section 340(2) as was done in the Boonyanit case by the Federal Court sitting then.

Section 340(2) states that the title or interest of any such person or body shall not be indefeasible:

> 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

> where registration was obtained by forgery, or by means of an insufficient or void instrument; or

> 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.

Zaki said with the closing of the "blatant and obvious" error made by the Federal Court in the Boonyanit case, it would prevent further exploitation of the loophole created by the 2000 decision.

"It is quite well-known that some unscrupulous people had taken advantage (of this loophole) to transfer land to themselves. I hope the land authorities will be extra careful when they register transfers of land," said Zaki.

He added that he was "legally obligated" to correct the problem created for landowners by that decision.

The Federal Court also directed RHB to pay RM75,000 in legal costs to Ying Hong, who is still living in Kuantan, as it held that he had fought for the matter in his personal interest and did not bring the case to court as a public interest case.

The apex court decision, which follows on from a 2009 Court of Appeal decision, marks the end of Ying Hong's long legal battle.

In 1976, the Pahang government alienated and issued a land title for a nine-acre plot in Kuantan in Tan's name without his knowledge. However, in 1985, he received a letter from United Malayan Banking Corporation (UMBC, now RHB) which directed him to pay back RM300,000 for an outstanding loan paid by the bank to Cini Timber Industries.

Ying Hong later discovered that one Tan Sian San had forged his signature in 1977 to obtain a power of attorney acknowledging that Sian San was acting on behalf of Yin Hong.

In 1984, Sian San charged the land to UMBC as security for a loan to Cini Timber Industries, and subsequently disappeared, prompting Ying Hong to file a suit against the then-UMBC.

Ying Hong lost his case in the High Court in 2003, and subsequently in the Court of Appeal last year.

The Federal Court was asked on Oct 29 last year to determine a question of law arising from its decision which was delivered by then-Chief Justice, Tun Eusoff Chin in his four-page Boonyanit decision in 2000.

The Federal Court had ruled then that a person who acquires a title to land either through legal means or by a forged or fraudulent title, had a legal claim to the property.

The Boonyanit case began in 1998, when an impostor claiming to be Mrs Boonsoom Boonyanit made a statutory declaration claiming that she had lost the original titles to two plots owned by the real Boonsoom Boonyanit in Tanjung Bungah, Penang.

She was able to convince the Land Office to issue certified copies of the title, which were then sold to Adorna Properties for RM12 million, which prompted the suit when Boonyanit, a Thai national, discovered the sale.

She lost her case in the Penang High Court in 1995, but won in the Court of Appeal in 1997. She however lost in the Federal Court appeal which was brought by Adorna Properties in 2000.