1. Paramoo v. Zeno Ltd. [1968] 2 M.L.J.

230

FACTS

The first defendants are registered proprietors of land held under E.M.R. (Extract from
Mukim Register) 4031 for Lot 703 in the Mukim of Bukit Raja, in the District of Klang. On
16th February, 1962, a resolution was passed by the plaintiffs. It authorised the company,
first, to attach their seal to a memorandum of charge created by the first defendants in favour
of the plaintiffs to secure the repayment of $75,000 lent to the plaintiffs and secondly, to
approve the sum of $75,000 lent to the first defendants between October 1961 and February
1962. On the same day the first defendants executed a "mortgage and general charge" in
favour of the plaintiffs to secure repayment of the principal sum of $75,000 lent to the first
defendants with interest there on at 5 per annum. The charge was never registered in the Land
Office though it was registered under s. 80 of the Companies Ordinance No. 49 of 1940 on 9
March 1962.

It was a term of the charge that (clause 6) "the mortgagor (first defendants) further hereby
deposit the title for the land concerned with the lender (the plaintiffs) as security for principal
and interest and the lender may lodge a caveat with the Collector of Land Revenue to create a
lien." A caveat was lodged with the Collector of Land Revenue, Klang, on 23 April 1962.

ISSUE

a) Whether the lien is avoided as the charge was not enforceable

b) Whether there is an intention to create a lien as required by section 134 of the Land
Code

JUDGEMENT & REASON OF JUDGEMENT

On appeal the court ruled that the Land Code makes it quite clear that a charge is quite
distinct from a lien. A lien is a separate legal-statutory lien and that it has an independent
existence apart from a charge. Therefore, if a charge is avoided for non-compliance with the
law, the lien is not avoided, provided it complies with the law. The court also held that the
Plaintiff’s lien has a priority over the 2nd defendant’s claim because there was an intention to
create a lien from the clause 6 of the mortgage and general charge. This was due to the fact
that the issue document of title (IDT) has been deposited to the lender as security for loan and
not for any other purposes. However, the element of intention is not satisfied if possession of
the IDT was obtained through fraud or misrepresentation and the deposit of title as security
was never authorised by the registered proprietor.

CONCLUSION

Intention may be derived from the fact that the IDT was deposited to create a lien and not for
other purposes. Such intention may also be inferred from all relevant circumstances of the
case and it need not be expressly documented. This requirement may be seen from the fact
that there must be an intention to deposit the IDT or duplicate lease with the lender as a
security for the loan. Unlike a chargee, a person entitled to a lien under the Code must have
first obtained judgment for the amount due to him. It is only when the requirement is fulfilled
that he can apply to the court for sale.