Submission of Tutorial Question

Ahmad Ibrahim Kulliyyah of Laws

Land Law II (LAWS 3311)

Semester 2 2022/2023

Section 3

Prof. Dr Sharifah Zubaidah

Messrs Aliah & Co.

Matric No. Name

2015608 Nur Aliah Iman

2016163 Mohamad Demsy bin Sady

2016444 Zainati Nur Dini binti Mohd Rashid

2014038 Wan Nur Batrisyia binti Wan Mohd Zain

WEEK 4 (UNREGISTERED CHARGE AND DEFENDING A CHARGE ACTION)

1) Mr. Soo, a lawyer, comes to your legal firm seeking advice on a matter relating to creation of
a charge for his client.According to Mr. Soo, somewhere in the year 2021, he represented Kasa
Bank in a loan transaction amounting to RM 1 million in favour of Luna Sdn. Bhd. All the
related documents were duly executed and stamped in November 2021. Through oversight, the
conveyancing clerk in charge of presenting the charge instrument for registration at the land
office in Mr. Soo’s legal firm, forgot to do so. The duly executed Form 16A has been found lying
in her drawer for more than a year. Luna Sdn. Bhd. has now defaulted in the loan repayments and
Kasa Bank has instructed Mr. Soo to enforce the charge. Mr. Soo is worried and anxious on how
to advise his client concerning the matter. Advise Mr. Soo on the effect of the unregistered
charge and whether Kasa Bank may file a claim against Luna Sdn. Bhd. for a court order to
enforce the unregistered charge.
ANSWER:

The first issue is what is the effect of the unregistered charge between Kasa Bank and
Luna Sdn Bhd?

According to Section 5 of the National Land Code 1965, charge can be defined as a
registered charge. A charge under the National Land Code shall take effect upon registration in
accordance with the provisions pursuant to Section 243 of the National Land Code 1965. The
registered charge has the right to statutory remedies in the case where the default payment of
loan made by the chargor. Nevertheless, the court has accepted the position of unregistered
charge which is known as ‘equitable charge’. In the case of Mahadevan V Manilal & Sons
[1984], the judge stated that there is no provision in the National Land Code which prohibits the
creation of equitable charge. Such a charge gives rise to an equitable right in favour of the lender.
Likewise, in the case of Sockalingam Mudaliar V Ramasamy Chettiar, it was held that an
unregistered charge conferred on the plaintiff equitable interest in the lands which the court
ought to protect. The charge which is not registered pursuant to the National Land Code may
claim protection as an equitable charge and this can be seen under Section 206 (3) of the
National Land Code 1965. The chargee shall not be subjected to statutory remedies but can
only claim ‘in personam’ as the interest of the charge can be defeated.

One of the circumstances of unregistered charge is whereby a charge instrument has been
executed but not presented for registration. This can be seen in the case of Standard Chartered
Bank v Yap Sing Yoke [1989] 2 MLJ 49. It was held that by virtue of the unregistered charge
dated 1st April 1985 in favour of the plaintiff, the plaintiff had acquired a title in equity over the
land. The plaintiff is entitled to acquire an equitable lien over the land as the Issue Document of
Title (IDT) was all the time in his custody. To apply in the current case, it is mentioned that the
conveyancing clerk who is in charge of presenting the charge instrument for registration at the
land office had made a negligence in failure to present the charge. The procedure to register the
charge is not complied in accordance with the National Land Code. Hence, it is considered as an
unregistered charge. Kasa Bank has no right to enforce the statutory remedies either to apply for
possession or an order for sale stipulated under the National Land Code when Luna Sdn Bhd has
made a defaulted payment of loan. This depicts the interest of Kasa Bank has been defeated due
to the charge not being registered. Kasa Bank may only claim the right of personam against Luna
Sdn Bhd.

Since this case involves the issue of unregistered charge, it brings us to another issue
which is whether Kasa Bank can file a claim against Luna Sdn Bhd for a court order to
enforce the charge. Since the charge is considered as an unregistered charge due to the failure of
presentation for registration, Kasa Bank cannot enforce the charge. This is based on the decision
in the case of Southern Bank v Chuah Beng Hock, whereby the court in this case stated that
under Section 243 of the National Land Code 1965, every charge created under the National
Land Code 1965 shall take effect upon registration to render the land liable for security. The
chargee, which is Kasa Bank in our case, has no right to enforce the charge using National Land
Code 1965, since the unregistered charge created by Kasa Bank is not even in line with the
definition of charge stated in Section 5 of National Land Code 1965. In much simpler words, an
unregistered or equitable charge has no place under National Land Code 1965.

The case that illustrates that unregistered charge has no remedy under National Land
Code 1965 is the case of Sime Bank Bhd v Mohd Hassan bin Sulaiman, , the Judge said that
“for some unexplained reasons” the charge instrument was never registered. The court held that
since the charge was not registered, the lending bank (unregistered charge) has no remedy under
the Code. The bank’s application for an order for sale was therefore rejected.

Since they cannot enforce the charge, it brings us to another issue in order to help them,
which is whether there are any alternative course of actions in this case. Kasa Bank as a
chargee may still have a chance to get some sort of equitable and contractual remedies. For
contractual remedies, Kasa Bank may claim the debt under breach of contract / agreement and
breach of charge annexure. This is by referring to the case of Daito Kogyo (Sarawak) Sdn Bhd v
Port Dickson Land Development Sdn Bhd, the chargee may still claim the debt under
unregistered charge but it does not grant proprietary interest in the land.
 Besides, Kasa Bank may also enforce equitable lien in this situation. According to the
case of Standard Chartered Bank Bhd v Yap Sing Yoke , Lamin J stated: “as the IDT was at all
time in the custody of the P, it had acquired a lien in equity over the land. The equitable interest
is not affected by the absence of a caveat. The P had by right to lodge a caveat and may do so at
any time under the provision of the NLC. Lien creates an equitable interest in the land or lease
which gives the holder that interest the right to enter a lien-holder’s caveat. The nature of the
interest is treated as being an equitable charge whereby the lender obtains the right to retain the
IDT, copy of IDT issued under Section 343(3) of NLC to secure repayment of a loan.

In this case, the IDT is already in the hands of Kasa Bank, thus they have the right to
retain it. Upon entering into equitable lien, Kasa Bank could be upgraded to become a registered
chargee as taking into consideration that the Issue Document Of Title IDT is now in the hand of
the Bank, the Bank could always be able to register the charge though some penalties may be
imposed due to the delay of registration. The penalties if delay of registration happens is
provided under Section 293(1) (b) of National Land Code 1965, where it states Every instrument
presented for registration under this Part shall be accompanied by (b) if it is presented more than
three months after the date thereof, a delayed registration fee calculated in accordance with
subsection (2), Subsection (2) states the amount of the delayed registration fee payable in
respect of any instrument shall be the amount of the prescribed registration fee multiplied by the
number of completed periods of three months which have elapsed since the date thereof.