Auction

Generally, an auction is a system of buying and selling goods by offering them for bidding, allowing
people to bid and sell to the highest bidder. In Malaysia, the property public auction is conducted by
financial institutions, land offices and the High Court. These bodies have their procedures and
processes to dispose of the properties auction.
There are two types of public property auctions in Malaysia: the judicial auction and the non-judicial
auction. The judicial auction applies to property with title in foreclosure proceedings or enforcement
of judgment and is regulated by the National Land Code and the Rules of Court 2012. The non-
judicial auction applies to a property for which no title has been issued and is governed by the law of
assignment and power of attorney. These various bodies, properties and statutes have resulted in different
roles and functions of the available bodies, including the process applicable to implementing public
property auctions in Malaysia.

Judicial auction is governed by specific laws such as the National Land Code (NLC) or Rules of Court
2012 (ROC), depending on the circumstances. This type of auction applies to properties with titles and
those that have been charged to a bank. The NLC sets out requirements regarding the reserve price, sale
conditions, payment methods, and public advertisement of the sale. Before and after obtaining an order
for sale, the chargee/lienholder or judgment creditor must adhere to these statutory provisions.

On the other hand, non-judicial auction, which is not regulated by any specific legislation, typically
involves properties for which no title has been issued. This often includes flats, apartments, or
condominiums. In such cases, since there is no title, no charge can be created under the NLC. Instead,
borrowers usually assign their rights over the property to the bank as security for a loan. If the borrower
defaults on repayment, the bank, as per the contractual agreement, can proceed to sell the property
through a public auction without the need for a court order.
In summary, while judicial auction follows legal procedures outlined in statutes like the NLC or ROC for
properties with titles, non-judicial auction applies to properties without titles, allowing the lender, usually
a bank, to sell the property directly in the event of default by the borrower.

Order for Sale

The process of conducting public auctions for immovable properties is primarily triggered by an Order for
Sale, typically issued when the chargor defaults on their agreements with the chargee or lender. Judicial
auction procedures, governed by the National Land Code (NLC) or Rules of Court 2012 (ROC), involve
specific steps such as issuing Letters of Demand and Recall, followed by statutory notices like Form 16D
and Form 16E. There are statutory limitations under the Limitation Act 1953 regarding the
commencement of foreclosure proceedings, with a limitation period of twelve years from when the right
to receive money accrues. However, certain exemptions apply, as ruled in CIMB Bank Bhd v Sivadevi
a/p Sivalingam, where breach by the chargor does not necessarily trigger the limitation period.

In non-judicial auctions, applicable to properties without titles, lenders typically have contractual rights to
sell the property without a court order. This was upheld in cases like PhileoAllied Bank (Malaysia) Bhd
v Bupinder Singh a/l Avatar Singh & Anor and Damai Freight (M) Sdn Bhd v Affin Bank Bhd. The
court may grant an Order for Sale unless there is cause to the contrary, which may include exceptions to
the indefeasibility doctrine, failure to meet conditions precedent, or contravention of legal or equitable
principles. This principle was established in Low Lee Lian v Ban Hin Lee Bank Bhd. Order 31 of the
ROC governs the court's orders on the sale of immovable property, particularly through public auctions.
Such sales may be necessary to resolve disputes, as seen in Yong Hin Seong v Yong Teik Seong.

In cases of enforcing judgments via writs of execution, procedures outlined in Order 45 and Order 47 of
the ROC are followed, with prohibitory orders preventing property transfer until the judgment debt is
recovered. However, writs of seizure and sale cannot be used against properties jointly owned by debtors.
Overall, whether through judicial or non-judicial means, the sale of immovable properties via public
auctions involves adherence to legal procedures and statutory requirements to protect the rights of all
parties involved.

Conduct

The conduct of property auctions can be carried out either electronically through e-Lelong or manually
with the assistance of a licensed auctioneer.

(a) e-Lelong:

Order 31A of the ROC introduced the e-Lelong system for online property auctions, effective from 1
March 2018. Auctions are conducted online via the e-Lelong System website, with proclamation and
conditions of sale prepared by the Registrar. Interested bidders must register on the website and deposit a
sum equivalent to 10% of the property's value at the operation centre. Additional 3% of the reserved price
must be deposited via the e-court finance system as an execution fee. Auction sessions are scheduled on
weekdays and monitored by a Registrar. Successful bidders settle the balance purchase price with the
chargee/solicitors, and upon payment, receive confirmation and relevant forms for registration as the
property's new proprietor.

(b) Manually:

The land administrator appoints a licensed auctioneer to conduct the auction. Proclamation of sale is
prepared and advertised in newspapers as ordered by the land administrator. Auctions are held at
designated locations such as land offices, courts, or public auctioneer premises. Bids are received and the
highest bidder declared as the purchaser. Successful purchasers pay the required deposit and settle the
remaining balance within 120 days. Upon full payment, a certificate is issued, and the document of title
transferred to the purchaser. In summary, both electronic and manual property auctions follow specific
procedures outlined by the law, ensuring transparency and legality in the sale process.

Landmark case

Ambank (M) Bhd v AIM Edition Sdn Bhd [2022] 1 MLJ 357 (Federal Court)

The case at hand revolved around the fundamental question of whether a breach of contract occurs when
the actual size of land acquired at a public auction, conducted under the provisions of the National Land
Code (NLC), does not match the specifications outlined in the Proclamation of Sale (POS). This inquiry
underscores the importance of precision and accuracy in property transactions, particularly in the context
of auction sales regulated by statutory frameworks.

The Purchaser's legal recourse stemmed from discrepancies between the advertised size of the land in the
POS and its actual dimensions, revealed upon post-purchase inspection. Initially, the High Court
dismissed the Purchaser's claim, contending that no contractual relationship existed between the
Purchaser and the Bank, acting as a chargee in the auction. The High Court's verdict leaned heavily on the
doctrine of caveat emptor, emphasizing the Purchaser's obligation to conduct due diligence and bear the
risk associated with the property's condition.

However, the Court of Appeal adopted a contrasting stance, acknowledging a binding contract between
the Purchaser and the Bank. This pivotal shift rested on the interpretation of previous case law and the
role of the chargee as the de facto vendor in auction transactions. Contrary to the High Court's ruling, the
Court of Appeal emphasized the contractual nature of the auction process, with the POS serving as the
basis of the agreement between the parties.

In dissecting the specifics of the case, the Court of Appeal scrutinized the representations made in the
POS, deeming them integral to the contractual relationship. Consequently, discrepancies in land size
constituted a breach of contract, warranting compensation to the Purchaser. This ruling underscores the
chargee's responsibility to provide accurate and comprehensive information in the POS, thereby
mitigating the risk for prospective purchasers.

Ultimately, the case sets a precedent emphasizing the contractual dimensions of auction sales under the
NLC. It reinforces the principle that chargees bear accountability for the accuracy of property descriptions
in the auction process. As such, meticulous adherence to statutory requirements and transparent disclosure
of property details are imperative to safeguard the integrity of auction transactions and protect the
interests of all parties involved.