SECURED TRANSACTIONS

3 types: charges, statutory liens, jual janji. (Focus is on charge).

What is charge (touch n go)
Charge = Transaction entered between financier and proprietor as security for a loan.
S. 5 NLC: Only registered charge = charge.
S. 43 NLC: Registered proprietor of land can be individual/corporation. So, the financial
institution can enter into charge with these 2 types.
RP = chargor, FI = chargee
Differences between charge and mortgage (touch n go)
CHARGE MORTGAGE
Created under NLC Created by contract
Chargee x own land, chargee can only utilise Mortgagee owns the land, legal title is vested
remedies such as forclosure in mortgagee. Mortgagor to redeem land via
equity after loan is settled
Created by statutory form No prescribed form, only deed of conveyance
Need registration X need registration
Confers interest and not title Confers legal title
Chargee takes possession after chargor Mortgagee takes possession upon creation of
defaults deed

Who can charge and what type of land to be charged (touch n go)
S. 241(1) NLC: A proprietor may charge the whole, but not a part only, of any alienated land;
the whole, but not a part only, of any undivided share in alienated land; and any lease of
alienated land, with the repayment of any debt, or the payment of any sum other than a debt; or
the payment of any annuity or other periodic sum, subject to S. 241 (3).
J. Raju v Kwong Yik Bank Bhd [1994] 2 MLJ 408
Cannot charge part of undivided shares e.g half of the land, must charge the whole thing. Cannot
charge partial lease, must charge whole lease.
S. 241 (3) NLC: Power to charge is subject to prohibitions by this Act, ROI, provisions of leases.
Phuman Singh v Khoo Kwang Chong [1965]2 MLJ 189
Any charge created in contradiction with stipulated restrictions and requirements will be void ab
initio and unenforceable.
Associated Finance Corporation Ltd. v Poomani [1972] 1 MLJ 117
The court emphasised that the charge was void for being in contravention of the respective
Moneylenders Ordinance in force.
Forms for charges (not covered)
S. 242 NLC: The form for charges to secure repayment of debt is Form 16A, form to secure
payment of annuity or periodic sum (annual sum of rent charge made periodically) is Form 16B.
Tan Yen Yee v Equity Finance Corpn. Bhd [1991] 1 MLJ 237
A charge created using Form 16A to secure the payment of rent under a chattel-lease of
equipment. Court held that charge is recognised although wrong form had been used.
Interpretation Act: Any instrument shall not be invalidated by reason of any deviation that has no
substantial effect and that is not calculated to mislead.
Subsequent charges (touch n go)
S. 241 (2) NLC: Power to create subsequent charges. Where a person charges his land for the
second and third times or any number of times, these charges take priority in accordance with the
date of registration.
S. 244 (1) NLC: 1st chargee will hold the IDT. Person who holds the IDT can proceed with the
order for sale etc upon default.
Lai Soon Cheong v Kien Loong Housing Development [1986] 2 MLJ 369
Priority of charges will be in order of creation.
Samat Din Partners v Bank Pembangunan M’sia Bhd Anor [1997] 4 CLJ 153
The 1st chargee will have priority over the land as compared to any subsequent chargee and the 1
st chargee would have the right to retain possession of the issued document of title (IDT).
S. 244 (2) NLC: Chargor can request for IDT by written request to chargee.
Charge must be to secure repayment of something (touch n go)
Yee Sin Cheong v UMBC [1992] 2 CLJ 1298
Cannot create charge when there is no loan as it defeats the purpose of the charge.
R&I Securities S/B v Golden Castle Finance Corp (M) Ltd. [1979] 1 MLJ 46
The creation of a charge where there is no loan transaction is not possible since it defeats the
essence of the charge, which is to secure is repayment of the loan and the obligations to repay.
Effect of charge (touch n go)
S. 243 NLC: Charge will only take effect upon registration.
Mahadevan s/o Mahalingam v Manilal Sons S/B [1984] 1 MLJ 408
One Mr. Ratnavale received a sum of money from the appellant on a security of a piece of land.
It was the common intention of the appellants and Mr. Ratnavale to have the said land charged to
the appellant as temporary security. A charge was never registered.
Held that if you x register, you cannot enjoy the statutory remedies.
Oriental Bank v Chup Seng Restaurant (Butterworth) S/B [1990] 3 MLJ 493
An equitable chargee does not have the same legal rights as those of a registered chargee. He
cannot apply for an order for sale in the event of default by the chargor.
Co-operative Central Bank Ltd v Y&W Development S/B [1997] 3MLJ 373
Remedy of chargee is not against chargor, but against the property. Bank x take action against
borrower, bank just want the property. Bank can take possession of property or auction the
property.
Ho Giak Chay v Nik Aishah [1961] MLJ 49
Registered charge = indefeasible interest (subject to s. 340), chargee can enforce by way of order
for sale.
In this case, Malay reserve land was charged to non-Malay chargee, void because such interest
cannot be vested in non-Malay.
S. 278 NLC: Chargee may apply through Form 16N for a discharge of charge and release
chargor from liabilities.
Privileges of chargor (he touch n go)
Right to create subsequent charges (refer above-subsequent charges)
Right to consolidate
S. 245 NLC
Unless there is agreement to contrary, chargee has no right of consolidation. Can allow if both
parties consent. Charge documentation may exclude the application of NLC in this aspect to give
this right.
If a chargee is registered as proprietor of charges over different properties belonging to the same
chargor, the chargee can refuse to discharge one charge without the chargor simultaneously
discharging or paying off all the other existing charges. A person seeking to discharge any
charge may do so without making any payment towards the discharge of any other charge
created by him. Means that chargee can prevent redemption of one charge unless all other
charges are redeemed if same land is charged to multiple parties.
The effect of consolidation is to alter the priority of a subsequent chargee by restricting its
priority in respect of the land or lease by giving the consolidating chargee an advantage.
Public Finance Bhd v Hock Seng Housing Development & Ors [1991] 3 CLJ 496
Consolidation must be exercised before foreclosure, and only if both parties consent.
Right to tacking
S. 246 (1) NLC: Any chargee may, in the circumstances specified, make further advances to rank
in priority to any subsequent charge of the same land or lease. Means that chargee can make
agreement as to who can claim first as to the subsequent charge. Can give rights to second charge
to take first.
S. 246 (2) NLC: Tacking allowed where the making of the advance is expressly authorised by
the prior charge, or the purpose of that charge is to secure the balance from time to time due to
the chargee or where the advance is made with the consent of the subsequent chargee.
***Consolidation is many lands charged by same person. Tacking is 1 land charged by same
person to different charges.
Right to postponement
S. 247 NLC: Any charge may be postponed to any subsequent charge by an instrument in Form
16C. The charges to which any instrument of postponement relates shall rank, as between each
other, in the order therein specified as from the date on which the instrument is registered. For
example, if I am first chargee, I can let the second or third chargee to register first. Unlikely to
happen in a practical sense.
Breach by chargor and chargee’s remedies (touch n go)
S. 249 NLC: Chargor to comply with all the terms of the charge.
S. 250 NLC: In the absence of any term to the contrary that the chargor shall keep all buildings
on the land in good repair, insured and on failure of which the Chargee may take such action as
necessary to remedy the breach. For example, I’m staying in my house, bank as chargee does not
have ownership, but I must promise to keep my house in good condition, cannot simply destroy
my house, must have insurance etc, if I didn’t take care chargor can take action.
Foreclosure (important, I’ve added more details)
Note that Registry Title is HS (D), for town and city land. LO title is HS (M), for rural land
(mukim).
Registry Title
Step 1: Service of notice. Prior to application of order of sale
S. 253 (1) NLC: The provisions of Chapter 3 shall enable any chargee to obtain the sale of land
or lease upon breach by chargor.
S. 256 (2) NLC: The application for such an order of sale is to be in accordance with civil
procedure.
S. 254 (1) (b): The breach must have been ongoing for at least 1 month before the notice is to be
served. The notice to be served is the notice in Form 16D specifying the breach in question,
requiring it to be remedied within one month of the date on which the notice is served or such
alternative period as may be specified in the charge; and warning the chargor that if the notice is
not complied with, chargee will take proceedings to obtain an order for sale. This form is for
normal loan with instalments.
S. 255 NLC: Provides for the service of Form 16E served in the event of non-payment of loan
and the order for sale can be applied after one month of service of the notice. This form requires
the repayment of the principal sum on demand.
Wrong form
Jacob v OCBC [1974] 2 MLJ 161
It was held that serving the wrong form does not affect the validity of the notice.
Sykt. Kewangan Melayu Raya Bhd v Malayan Banking Bhd [1984] 1 MLJ 115
Service of Form 16D is mandatory. Burden of proof of service is on plaintiff.
RHB Bank v Syarikat Sungai Nal Timber Industries Sdn Bhd [2007] 4 MLJ 567
Irregularities x matter if Form 16D is sufficiently clear and specific as to the breach and amount
in default.
Mode of service
S. 431 (1) NLC: A notice under the NLC may be served by delivering the notice to the person in
question, or to the person’s usual or last-known address, or by leaving the notice in a cover
addressed to the person at his usual or last-known address or by posting the notice to the person’s
usual or last-known address.
Period of less than 1 month
Citibank Bhd v Md Khalid b Farzular Rahaman & Ors [2000] 4 MLJ 96
Notice can be less than 1 month if provided in the loan agreement. NOTE THIS IS PRIOR TO
AMENDMENT (I have no idea why this old law is in the slides, its NOT APPLICABLE)
Bank Islam Malaysia Berhad v Abu Talib bin Mohamed [2018] MLJU 1884
Current position. The court found that in order for the charge to be enforced, the chargee is
required to comply with s 254 which includes ensuring that the chargor is given at least 1 month
to remedy his breach, either through 1 month after the serving of the notice, or an alternative
period found in the charge of at least 1 month. In this case, this requirement was fulfilled as
Form 16D specifically required the defendant to remedy the breach within 1 month of the
serving of the notice.
CIMB Bank Berhad v Sivadevi a/p Sivalingam [2019] MLJU 1530
The notice of default in Form 16D was also served and gave the defendant a period of 30 days to
remedy the breach.
Step 2: Application for order of sale (when chargor x remedy the breach)
O. 3 r. 1 ROC: Provides that the proceeding is to be commenced by the commenced by chargor
or chargee, or by other persons with right to redeem or foreclosure, for the following reliefs i.e.
claims for repayment of money secured by charge, sale of charge property, foreclosure, delivery
of possession, redemption, recoveyance or discharge, delivery of possession etc.
S. 265 (1) (b) NLC: An application to the High Court by way of an originating summons is to be
supported by an affidavit for the sale of the land.
O. 83, r. 2 ROC: Provides that the process for a charge action begins with an originating
summons which must be served by the plaintiff upon the defendant within 4 days of the day
fixed for the first hearing.
O. 83, r. 4 ROC: If defendant is absent from the hearing and the hearing is adjourned, plaintiff
shall serve upon defendant a written notice together with any further affidavit intended to be
used at the hearing day not less than 2 days before the next hearing day.
O. 83, r. 3 (1) ROC : The affidavit in support of the originating summons by which an action to
which this rule applies is begun shall comply with the following provisions of this rule. This rule
applies to a charge action begun by originating summons in which the plaintiff is the chargee and
claims delivery of possession or payment of moneys secured by the charge or both.
O. 83, r 3 (2) ROC: The affidavit shall exhibit a copy of the charge.
O. 83, r 3 (3) ROC: Where the plaintiff claims delivery of possession the affidavit shall show the
circumstances under which the right to possession arises e.g. amount of loan, interest due,
installments in arrears etc; and, except where the Court in any case or class otherwise directs, the
particulars of the amount remaining due under the charge as at the hearing date of the originating
summons.
Failure to comply with O. 83
Nira S/B v MBB [1990] 1 MLJ 110
If there is a tenancy, need show how it was determined, proof of service of notice
Maimunah b Megat Montak v Maybank Finance Bhd [1996] 2 MLJ 422
Where the claim is for money the affidavit must prove all particulars of money due and payable
as above.
Where P’s claim includes a claim for interest up to judgment, calculation of the daily interest
must be shown.
Citibank NA v Ibrahim Othman [1994] 1 MLJ 608
Applicant failed to state the rate at which interest had been calculated.
Non compliance with requirements = struck off.
The objective of O 83 r 3 is to enable the defendant to know at least by the date the originating
summons is filed, what is the exact sum he is legally liable to pay so that he can make up his
mind to contest or pay up. If there is a dispute as to the amount payable, the court must be able to
say precisely when making its order ‘the total amount due to the charge at the date on which the
order is made’. These words are from s 257(1)(c) of the National Land Code 1965 and they are
mandatory.
HOWEVER, NOTE THAT court also held:
What the chargor has lost where there is a failure to comply with Order 83 r 3(3) is opportunity
to satisfy himself of the correctness of the amount claimed, and to challenge the figures if he is
not. A bare denial of a debt was never enough. The chargor also has an onus if he denies the
amount claimed to say how much he admits owing. In this kind of case the dismissal of the
application for non-compliance with some aspect of the rules does not estinguish the debt. The
chargee can start afresh but there will then be additional costs, interest and delay. Means that this
current action will be struck out but the chargee can file again as the debt still subsists.
Principle in this case applied in Rhb Bank Berhad lwn Pathmanathan a/l M Kumarasamy
[2017] MLJU 917 and Malayan Banking Bhd lwn Kang Tsi Yan @ Kang Tsi Ling dan satu
lagi [2017] MLJU 2296.
Perwira Habib Bank(M) Bhd. v Lum Choon Realty S/B [2006] 5 MLJ 21
Applicant failed to state amount of interest in arrears at the date of OS. Procedural requirements
of O 83 r 3(1), (3), (6) and (7) of the then RHC 1980 must be complied with strictly for the
purpose of seeking an enforcement of a charge registered under the NLC by way of an order for
sale, regardless of the reliefs sought.
Multi-Purpose Bank Bhd v Diamond Agreement Sdn Bhd & Anor [2000] 2 CLJ 73
Given that the provisions of s. 257(1)(a) – (d) of the NLC are mandatory, it is absolutely
essential that charges state the “total amount due as the date on which the order is to be made”,
so that the court may specify the total amount due to the chargee at the date on which the order is
made. It is imperative, therefore, the charges state the aggregate sum of the principal and overdue
interest due at the date on which the order is made.
Bank Pertanian Malaysia v Zainal Abidin bin Kasim [1995] 2 MLJ 537
Failure to state amount of repayments and amount of installments are serious omissions, action is
to be struck out. Purpose of this is to protect the chargor.
Step 3: Examining whether there is cause to the contrary (CTC)
S. 256 (3) NLC: The court upon receiving the application will decide whether there is default. If
satisfied that there is no cause to the contrary, it must issue the order for sale of the land. (refer
below, cause to the contrary)
Step 4: Making of order of sale by court
S. 257 (1) NLC: Provides that assuming that there is no cause to the contrary proven by the
chargor, the court shall proceed to make an order of sale within Form 16H.
S. 257 (1) (a) NLC: The contents of the order of sale include information such as providing for
the sale to be conducted by public auction.
S. 257 (1) (b) NLC: Specify the total amount due to the chargee at a later date.
S. 257 (1) (c) NLC: Reserve price.
S. 257 (1) (g) NLC: Specify that the balance of the purchase price must be paid by the successful
bidder within 120 days of the sale.
S. 258 (1) (a) NLC: Registrar of the Court is to serve a copy of the order for sale upon the
chargor and on the chargee.
S. 258 (1) (b) NLC: Auction is to be publicly advertised.
S. 258 (2) NLC: The chargee is to prepare conditions of sale according to the court order and to
deposit the issue document of title and duplicate lease to the court a week before auction date.
Step 5: Auction
S. 259 (1), S 259 (2) (a) and (b) NLC: The sale will be carried out by an officer of the court or a
licensed auctioneer who is responsible for receiving bids and settling questions which arose from
the proceedings.
S. 259 (1) (c) NLC: If there is no bid at or above the reserve price, auctioneer shall withdraw the
land from sale and put it up for auction at a later date.
S. 259 (1) (d) NLC: The auctioneer is to declare that the land has been auctioned to the highest
bidder.
Step 6: Conclusion of sale, payment etc
S. 259 (3) NLC: Upon conclusion of the sale, the successful bidder shall receive Form 16F which
is a certificate of sale from the court and the issue document of title or duplicate lease to the land,
provided the balance is paid in 120 days.
S. 267A NLC: Failure to do so will result in the deposit being forfeited.
S. 267 NLC: The certificate of sale will be given to the bidder, title and interest to be transferred
from charger to the successful bidder instead, and the charged land will be freed from all
liabilities under the charge.
S. 268 (1) NLC: The proceeds of the sale money are to be utilised for the purposes of paying rent
to the State Authority or the lessor, to cover expenses incurred in the process of carrying out the
order of sale, payment to the chargee the total amount due under the charge, to pay off
subsequent charges etc, and any balance is to be paid to the chargor.
S. 268A NLC: For FIs only. A financial institution is required to report the receipt of the full
payment to the Registrar of the Court.
LO Title (macam not so important, registry more likely to come out)
S. 254 and 255 NLC: Same notices applicable here.
S. 260 NLC: Chargee to apply for order for sale to LA in Form 16G.
United Asian Bank v Elgi Marka S/B [1995] 1 MLJ 301
Order for sale in respect of Land Office title, if made by the court under section 256 NLC, can be
nullified and is of no effect. Means the first person you go to is LA and not court.
S. 261 NLC: LA to hold enquiry upon receiving the above application. LA to appoint a time and
place for the holding of an enquiry with respect thereto; notify the chargee of the time and place
so appointed; and cause a summons to be served on the chargor, requiring him to appear at the
enquiry and show cause why the order should not be made.
S. 262 NLC: If the chargee fails to appear at the time fixed for the hearing of any such enquiry,
the Land Administrator shall dismiss the application. If charge appears but chargor is absent, the
LA shall proceed ex parte if he is satisfied that the summons was served on chargor. If x
satisfied, LA shall adjourn hearing, cause fresh summons to be served.
S. 263 (1) NLC: At the conclusion of any enquiry under S. 261, the Land Administrator shall
order the sale of the land or lease to which the charge in question relates unless he is satisfied of
the existence of cause to the contrary.
Note that LA is not to go beyond register.
Government of Malaysia v Omar bin Haji Ahmad
LA not required to investigate validity of charge when examining for CTC.
S. 263 (2) NLC: Order for sale to be in Form 16H. Sale to be by public auction, date of sale to be
specified. Date to be not less than one month after the date of making the order. Amount due to
the charge on the date of order is to be specified.
S. 264 (1) NLC: LA to serve copy of S. 263 order on chargor, charge and give public notice.
S. 264 (2) NLC: The chargee on whose application the order was made shall deposit with the
Land Administrator, not less than seven days before the date fixed for the sale, the duplicate
charge; and if in his custody, the issue document of title to the land or, as the case may be,
duplicate lease.
S. 265 (1) NLC: Sale to be directed by LA, can be assisted by licensed auctioneer. Chargee
entitled to bid.
S. 265 (2) NLC: If at the sale no bid is received at or above the reserve price, the land or lease in
question shall be withdrawn from the sale, and the Land Administrator shall direct that it be put
up for auction on a subsequent date, either at the same or at a new reserve price, and shall give
such notice of the subsequent date, either at the same or at a new reserve price, and shall give
such notice of the subsequent sale as he may consider appropriate.
S. 265 (3) NLC: If at the subsequent sale no bid is received at or above the reserve price, the
Land Administrator may direct that it be put up for auction at a subsequent date, either at the
same or a new reserve price and shall give such notice of the subsequent sale as he may consider
appropriate; or withdraw it from the sale and refer the matter to the Court.
S. 266 NLC: Allows the chargor to tender payment at any time before the sale. If the amount is
paid, the order for sale is no longer effective.
S. 267 NLC: Certificate of sale given to the purchaser, land discharged from all liabilities under
the charge.
S. 268 NLC: Proceeds of the money from the sale to be used to pay rent to the State Authority or
the lessor, together with any outgoings payable, cover any expenses which are incurred in the
process of making and carrying into effect on the order for sale. Chargee must be paid based on
the total amount due at that time, to secure the payment of an annuity or periodic sum for the
satisfaction of payments subsequently falling due, pay off the subsequent charges. If there is
balance of the purchase money, such balance shall be paid to the chargor.
Issue on S. 265 (3)
S. 265 (3) NLC: Provides that that if at the subsequent sale no bid is received at or above the
reserve price, the Land Administrator may direct that it be out up for auction at a subsequent
date, either at the same or a new reserve price and shall give such notice of the subsequent sale as
he may consider appropriate or withdraw it from sale and refer the matter to the Court.
S. 265 (3A) NLC: The Court can substitute the order of the LA with a new order for sale
pursuant to S. 256.
Collector of Land Revenue Kota Bahru v Yusoff Bin Yunus [1972] 2 MLJ 53
The court held that it is sufficient for a Certificate of Reference to be issued and delivered to the
charge is requested.
Lee Gee Pheng v RHB Sdn Bhd [2004] 1 MLJ 618
S. 265 (3) of the NLC cannot be construed as requiring the High Court to treat the originating
summons as a fresh application for an order for sale, but it merely confers upon the court the
power to substitute the first order of sale, and this is merely a continuation of the proceedings
whereby the order of sale by the LA is transformed into an order of sale by the High Court.
Clear that going to court after 2 failed auctions = not a new order of sale.
Issue on S. 266
S. 266 NLC: To stop the order for sale, the chargor must make payment of the full amount due
and owing, including the amount due towards the chargee, any further amounts falling due
thereafter and an amount sufficient to cover all expenses incurred in connection with the making
or carrying into effect of the order.
B Bank Bhd v Muthusamy Sinnakaundan [2008] 9 CLJ 621
If borrower hurriedly make payment before foreclosure, the proceedings can stop.
Eng Ah Mooi & Ors v OCBC
There will be no reason to prevent the chargor from seeking a discharge so long as the right of
the chargee was protected.
Malayan United Finance Bhd v Tan Lay Soon
The amount due to the Registrar of the Court or the Collector may be tendered by the chargor at
any time before the conclusion of a judicial sale along with the amount that is sufficient to cover
all expenses in connection with the sale.
Lee Ah Chin v Wong Yoon Chai [1981] 2 MLJ 32
The chargor may stop the sale by tendering the full amount due under the charger before the
conclusion of the sale
Lee Gee Pheng v RHB Sdn Bhd [2004] 1 MLJ 618
Held that the NLC does not prohibit the respondents from accepting payments after the order of
sale, and the order of sale will only cease upon accepting full payment of the amount due.
Settled that you can only be discharged if you paid up everything.
Issue of in functus officio
In functus officio = after order of sale has been granted and perfected, court may not disturn the
order i.e. cannot revoke or amend.
Ragavanaidoo v Supramaniam Chetty [1914] 1 FMSLR 139
LA has no power to cancel sale, rectify errors etc.
MUI Bank Bhd v Cheam Kim Yu (Beh Sai Ming Intervener) [1992] 2 MLJ 642
It was held that once the court has made an order of sale, the judge becomes functus officio and
does not have discretion to set aside the order of sale.
Rohaya Binti Ali Haidar v Ambank (M) Bhd
Property is a stratified property e.g. apartment, held under master title. Whole piece of land got
charged, so if landowner default, bank can recover the whole piece of land as bank is master
chargee. Purchaser upon settling full payment to developers, the developer must secure one letter
of release and disclaimer from master chargee e.g. release this one unit from foreclosure. In this
case, the master chargee overlooked this unit, and auctioned the plaintiff’s lot as well.
Held that to allow a judge in the court reopen a matter after it was decided by himself would lead
to chaos, hence a judge cannot set aside an order of sale once it was made even though a mistake
may have been made. Strict interpretation. Court suggested P to claim against D for damages
instead.
Lee Gee Pheng v RHB Bank Bhd [2004] 1 MLJ 618
It was held that the court can set aside the said order if the order was made in the absence of a
party at the hearing, or where the order has been obtained in breach of natural justice, where the
order contravenes a substantive statutory provision rendering it defective on grounds of illegality
or lack of jurisdiction, or where the justice of the case requires the court to correct a serious
defect in the order and to correct errors in expressions of the intention of the court.
Now, as long as fall within exceptions, can amend the order of sale.
Issue on cause to the contrary
S. 256 (3) NLC: Court shall order sale of land unless there is CTC.
Talam Corp Bhd & Anor v Bangkok Bank Bhd & Anor [2016] 8 MLJ 491
Right to raise CTC is the right of the registered proprietor, and not a third party
Low Lee Lian v Ban Hin Lee [1997] 1 MLJ 77
3 grounds of CTC: Falls within exceptions to indefeasibility doctrine in S. 340 NLC, chargee had
failed to meet the conditions precedent for the making of an application for an order for sale,
when a chargor could demonstrate that the grant of an order for sale would be contrary to some
rule of law or equity.
First limb: S. 340 NLC/illegality
S. 340 NLC: Fraud, misrep, forgery, insufficient or void instrument, unlawful.
S. 301 (c) NLC: Instrument is only for for registration if the dealing it effects is not contrary to
any prohibition by law.

Keng Soon Finance v MK Retnam Holdings [1989] 1 MLJ 457

Chargee who was a developer did not have license. Illegal under S. 340 (2), void ab initio. No
order of sale.
UMBC v Syarikat Perumahan Luas (No. 2) [1988] 3 MLJ 352
Breach of ROI as there was no consent of SA. The court held that the title or interest of the
registered charge is defeasible as the registration is obtained by means of insufficient or void
instrument according to S. 340(2)(b).
AmFinance Bhd v Lebik bt Haji Ali & Ors [2008] 6 MLJ 589
An order of sale shall not be granted because the whole charge document and its registration was
vitiated by the forgery of the third defendant’s thumbprint.
Tai Lee Finance Co Sdn Bhd v Official Assignee
It is concluded that order for sale of land will not be granted in the event of chargee and chargor
have acted in collusion to defraud third parties or the chargee acted fraudulently.
Harta Empat S/B v Koperasi Rakyat Bhd . [1997] 1MLJ 381
The appellant was a company registered under the Companies Act 1965 the respondent was a co-
operative society registered under the Co-operative Societies Act 1948. The appellant executed a
charge over its land to provide security for a loan made to a director of the appellant which was
to be used for the purposes of the appellant. The appellant applied to declare the charge as
against the law, null and void being not in compliance with s 133 of the Act and for a
consequential order to cancel the registration of the charge.
Held that Section 133(1) of the Act forbade the appellant company from providing the security
for the loan made to its director by the respondent. The prohibition in s 133(1) had rendered the
charge unfit for registration under s 301(c) of the Code. The charge is therefore invalid.
CCBLtd (in receivership) v Feyen Dev. S/B [1997] 2MLJ 829
Found that Harta Empat was per incuriam (doesn’t affect the principle on illegality).
Public Islamic Bank Berhad v Ratha a/p Vadevelo [2019] MLJU 896
The defendant takes the position that she and her husband had sought for a loan of
RM100,000.00 because they were in financial constraints at the material time. According to the
defendant, she and her husband were instead misled into an arrangement to obtain a loan for
RM200,000.00 from the plaintiff and the mechanism for the arrangement was the “sale” of the
property to the defendant by her husband and for the property to be charged to the plaintiff as
security for the loan. The defendant also claims that the loan sum was not disbursed to the
defendant’s husband as the vendor pursuant to the financing agreement but instead it was
disbursed to Messrs. May Chan Eiza & Co whereas Messrs. May Chan Eiza & Co was acting for
both defendant and the plaintiff. This is a breach of the financing agreement which was made on
the Islamic principle of Musharakah Mutanaqisah as the defendant’s husband never received the
purchase price.
Held that the defendant did not deny signing the charge documents in the manner of Form 16A
of the National Land Code, hence no defeasibility occurred. There is no evidence to show that a
grant of the order for sale would in any manner be contrary to a rule of law or equity. The loan
sum has been disbursed in accordance with the terms of the sale and purchase agreement i.e. the
disbursement to the solicitors were in compliance with the terms which have been expressly
agreed to by the defendant herself. It could not, by any stretch or arguments be said to be one
which is against or contrary to any rule of law.
Second limb: Condition precedent
Low Lee Lian
Variation of the rate of interest by the chargee without any valid notice would not fall within the
grounds for cause to the contrary. Does not amount to breach of condition precedent.
Standard Chartered Bank Malaysia v Hew Hai Woon [2007] 7 CLJ 454
LACA used, converted to charge which was executed, but bank never gave 16A to the defendant.
He has no knowledge. D defaulted, P issued Form 16D. Court said that yes copy of charge not
given and not signed by chargee, manager signed instead. The signatory is not correct, 16A not
signed by proper authorities, supposed to be signed by senior manager, in this case its only
manager. It did not stipulate PA number (PA given by CEO to senior manager to sign).
Dismissed because signatory wrong, but court acknowledge borrower never received a copy of
the charge. Note that any duplicate documents need to be given to clients, and ask them to
acknowledge receive or else might argue on receive or not.
Kuan Chew Holdings Sdn Bhd v Kwong Yik Bank Berhad [2011] 2 CLJ 269
CTC can be shown by showing that charge has failed to meet conditions precedent e.g. failure to
prove notice of forms, or demands sums not lawfully due. However, it is open to charge to serve
properly before starting afresh. Means you can quickly rectify. Failure to comply i.e. failure to
state amount of repayments, amount of installments in arrear = serious omissions. Purpose of
rule is to protect interests of chargor. Bank has done something to jeopardise interest of
borrowers= got CTC. Objective of O83 is for chargor to know at least by the date the OS is filed,
the exact sum he is legally liable to pay. Have to calculate until the date of OS. Since the demand
in Form 16D was a sum greater than owed by the defendant, it was a wrongful demand for
payment, = CTC.
United Overseas Bank (Malaysia) Bhd v Sri Ram Sarma and another case [2020] MLJU 237
Defendant contended that the Form 16D Notice dated 10.5.2013 is defective on the basis that the
said Form 16D fails to stipulate the conditions of the Charges that were purportedly breached by
the Defendant. And thus the Plaintiff’s non-compliance is a cause to the contrary and warrant for
a dismissal for the order for sale.
Held that considering the explicit requirements of the Form 16D Notice under S.254 (1) (b), of
the NLC, the court agreed with the Defendant’s contention that the Plaintiff’s 16D Notice based
on the purported breach as aforesaid did not comply with the express conditions laid down in this
sub-section in that particulars specifying the alleged breach of agreement as is mentioned in S.
253(1) of the NLC have not been stated.
There are two distinct and separate Form 16D Notices which were purportedly issued and served
on the Defendant. The Plaintiff had not proven the service of the Form 16 D Notice dated
5.3.2014 as Exhibit SSy-17A had never been served to the Defendant and no corroborative
evidence adduced by the Plaintiff.
Court held that Plaintiff had also failed to adduce sufficient evidence to prove that the service of
the Form 16D Notice was effected in accordance with the provisions under the National Land
Code. Under the circumstances, there can be no doubt that the existence of two Form 16D
Notices is in itself a cause to the contrary under limbs (b) and (c) of the case of Low Lee Lian
(supra) that would warrant a dismissal of the order for sale sought in this OS.
Ambank Bhd v Chidambra Nathan a/l MST Muthusamy & Anor [2014] 2 MLJ 86
Variations in the rate of interest, or even miscalculations of interest by the chargee does not
constitute cause to the contrary.
Malayan Banking Berhad v Hong San Frozen Food Sdn Bhd [2016] 2 CLJ 306
Increase of the rate of interest without proper notice does not constitute cause to the contrary.
RHB Bank Berhad v Zahidi Bin Abdullah & Rashidah Bt Robani [2011] MLJU 398
Defect in documents e.g. letter of demand not prerequisite to Form 16D = no CTC.
Arab Malaysian Merchant Bank v Silver Concept [2005 ]5 MLJ 210
In IB transaction, CTC can be established by statement of disapproval from shariah advisory
body.
Citibank NA v Ibrahim bin Othman [1994] 1 MLJ 608
Given that the provisions of s. 257(1)(a) - (d) of the NLC are mandatory, it is absolutely essential
that charges state the “total amount due as the date on which the order is to be made”, so that the
court may specify the total amount due to the chargee at the date on which the order is made. It is
imperative, therefore, the charges state the aggregate sum of the principal and overdue interest
due at the date on which the order is made.
Indeed, given that the “state of the account between the chargor and charge at the date on which
the order is made” is the aggregate sum of the principal and overdue interest due on the date the
order is made rather than the aggregate sum of the principal and overdue interest due at the date
of the affidavit, knowledge of the “amount of the interest in arrear at the date of the affidavit” or
absence thereof has no real significance. Rather, it is knowledge of the principal and overdue
intereset due at the date on which the order is made that holds real significance.
In the present case, the defendants had not been deprived of that knowledge. They knew and they
know the exact amount outstanding under the charge. The defendants had not been deprived of
any opportunity to repay the defendant. Therefore, the plaintiff’s failure to state the “amount of
the interest in arrear at the date of the affidavit” had not prejudiced the defendants and there was
no cause to the contrary.
Appears to mean that even if x comply, if it does not affect your rights there is no CTC.
Malayan Banking Berhad v Dynasty Streams Sdn Bhd [2020] MLJU 1346
The Defendant submitted that there was a breach of natural justice as the Defendant was not
given the opportunity to be heard. They did not appear because they did not receive the cause
papers. They only received them on 12th June 2019, one day after the Order was granted. Hence
the Order for Sale was irregular for non-compliance of Order 83, Rule 2 (2) of the Rules of Court
2012 for not observing the (4) clear days rule.
Held that the basic principle is that the Court has a wide discretion to consider and decide
whether a non-compliance with the Rules of Court 2012 is pardonable or correctable example,
without the need to strike out or set aside the Plaintiff’s Originating process. In exercising its
discretion, the Court will take into account whether the other party “has suffered prejudice” as a
direct consequence of the irregularity.
Hence, even if notice not served properly, there is the possibility it is not CTC.
Third limb: Contrary to rule of law/equity
Murugappa Chettiar v Letchumanan Chettiar (1938) MLJ 237
Respondent was chargee of certain land. Chargor was appellant and a “Meyappa Chettiar”.
Chargors were proprietors of land in equal shares but jointly liable for whole of money due on
the charge and the charge was for $20, 000. Appellant paid his share, but Meyappa did not.
Meyappa was a nominee of the chargee.
Chargee respondent cannot shelter himself behind his nominee “Meyappa” and evade his duty to
pay for his half of the share.
Buxton & Anor v Supreme Finance (M) Bhd [1992] 2 MLJ 481
Housing developer charged land to bank, later sold it to purchasers. Chargor x repay loan, bank
obtained order for sale. Purchasers contended that there was CTC. Court held that purchasers
bought the land with notice of the charge and they must accept the charge. They should have
protected their interests with a caveat or entered into an agreement w chargor and charge to pay
directly to the chargee.
Lim Ban Hooi v Malayan Banking Berhad [2018] MYCA 155
Chargor can bring in anything to say that bank violate law or equity. Chargor brought in S. 21 (1)
of Limitation Act in this case. Court held that in order to enforce charge, must comply with S.
256 and O83. Part 16 requires that the breach continues for 1 month or alternative period. In
O83, 12 year period commences a month after the breach. Period x alter the contractual
relationship between the parties. Rights to pursue this is triggered by the breach or default. Court
held that appellant showed CTC as the proceedings under o83 are barred by 21. S. 21
commenced from the date of the last payment as the right to foreclose was the default in the
repayment of the loan agreement. Time barred as last day to do is in 2015, bank only do in 2016.
Tan Swee Thiam v United Overseas Bank (M) Bhd and other appeals [2019] 5 MLJ 221
Chargee relied on notice of redemption and having accepted payment for which the chargee
sought the Director General of Insolvency’s agreement to keep the payment and treat the loan as
redeemed and the charge as lifted, good conscience and the rules of equity would dictate the
refusal of order of sale.
Tan Swee Thiam v United Overseas Bank (M) Bhd and other appeals [2019] 5 MLJ 221
When Tan was adjudged a bankrupt, he found out what the redemption sum for the property was
and fully paid the sum to UOB using his wife’s funds. Attaching a notice of redemption to his
solicitor’s letter to UOB, Tan informed UOB that the property had been fully redeemed and that
his solicitor would be attending to the discharge of the charge. The notice of redemption
contained Tan’s latest address which was the address of the property. UOB did not respond to
Tan’s letter but about 2 1/2 years later obtained an order to sell the property by way of public
auction.
Having relied on the notice of redemption and having accepted payment for which UOB sought
the DGI’s agreement to keep the payment and treat the loan as redeemed and the charge as lifted,
good conscience and the rules of equity militated against the granting of UOB’s application for
an order for sale of the property. The evidence showed that the redemption sum was fully paid
up, that UOB had every intention of lifting the charge and that it kept the redemption sum for a
substantial period before approaching the DGI to sanction its actions. After failing to procure the
DGI’s sanction, UOB never advised Tan or his wife about the state of affairs. It even failed to
respond to Tan’s letters
These were strong and compelling reasons to justify the withholding of the relief sought under s
256 of the NLC.
Arab-Malaysian Bank Bhd v Lian Yit Engineering Sdn Bhd [2000] 2 MLJ 51
The chargee is provided with the power and discretion to vary the rate of interest of the loan
facility. However, such discretion is limited to variations as per the scheme of interest prescribed
by the existing loan facility agreements. In the same case, the Bank as the chargee had actually
arbitrarily changed the scheme of calculation of interest to a totally different one, and thus the
court found that it would constitute cause to the contrary under the third ground which is actions
contrary to the rule of law and equity.
RHB Bank Bhd v Alom Industries S/b [2007] 4 MLJ 438
A charge action is an action in rem against the property and not an action in personam to settle
issues relating to the debt.
Jigarlal K Doshi @ Jigarlal a/l Kantilal Doshi v Resolution Alliance Sdn Bhd and another
appeal [2013] 3 MLJ 61
A foreclosure action is an action in rem being a statutory action under the NLC, as opposed to a
civil claim for the recovery of damages arising from a breach of contract, which is a suit in
personam. Therefore, in a foreclosure action, alleged breaches of contractual obligation is not
relevant, but such issues may be challenged in a separate civil suit.
Malayan Banking Berhad v Dynasty Streams Sdn Bhd [2020] MLJU 1346
Any challenges on the calculation of interest are not “cause to the contrary.
Ambank Bhd (successor in title 'Arab-Malaysian Finance Bhd') v Chidambara Nathan a/l
MST Muthusamy & Anor [2014] 2 MLJ 86
The Court of Appeal held that a chargor may defeat an application for an order for sale by
demonstrating that its grant would be contrary to some rule of law or equity. However, the
chargor must be able to point to a statutory direction or some rule of the common law or doctrine
of equity operating in his favour and against which an order for sale would militate. Anything
that falls short of this requirement will not amount to cause to the contrary under s 256(3) of the
NLC.
Tengku Azman bin Tengku Adnan & Anor v Hong Leong Bank Bhd [2014] 4 MLJ 91
Chargee varied the terms of loan agreement. Held that this x amount to breach as the agreement
allowed so.
It was further held that in a foreclosure action, challenges on the calculation of interest under the
loan agreement are actually not relevant. On a proper reading of s 256(3), the court ought not to
enter upon a discussion of the question of whether any or all of these complaints have or are
devoid of any merit.
Hap Seng Credit Sdn Bhd v Rentak Arena (M) Sdn Bhd [2017] MLJU 8
Breach of Moneylenders Act and also the loan agreement by the charge. Court held that these
were actions in personam and irrelevant to order of sale.
OCBC Bank (M) Bhd v Equal Ace (M) Sdn Bhd & Anor [2010] 9 MLJ 29
The court could not intervene simply because “it feels sorry for the borrower or because it
regards the lender as arrogant, boorish or unmannerly”.
Master title (refer chapter 3 part 2)
O. 31, r. 1 ROC: Where in any cause or matter relating to any immovable property it appears
necessary or expedient for the purposes of the cause or matter that the property or any part
thereof should be sold, the Court may order that property or part to be sold, and any party bound
by the order and in possession of that property or part, or in receipt of the rents and profits
thereof, may be compelled to deliver up such possession or receipt to the purchaser or to such
other person as the Court may direct.
RHB Bank Bhd v Zalifah Juan & Anor [2005] 4 CLJ 430
If property under master title, don’t need order of court to sell.
S. 22D HDA: Don’t need consent of developer to assign the property.
Tan Ong Ban (refer chapter 3 part 2) on beneficial ownership. Once you paid full purchase
price, you can assign the property.
Private Treaty (touch n go)
Chartered Bank v Pakiri Maidin [1963 ] 29 MLJ 276
The chargee may sell the land by private treaty on default of the chargor but once the chargee
takes proceedings under the legislation, then a public auction must be ordered.
Kimlin Housing Dev. S/B v BBMB [1997]
Sale by private treaty could be held at any time even after commencement of proceedings in
court provided that it is agreed by both parties, chargee cannot on its own sell privately after
order for sale by public auction, and the proceeds are sufficient to pay off amount due to chargee
in full and cover all incidental expenses.
Ravinderan A/L Raman @ Ramasamy v Eucalypt Mortgages Sdn Bhd [2017]
The court opined that the decision whether or not to give consent to a sale by private treaty is
totally up to the chargee. Hence, the chargor cannot apply to the Court and request the Court to
compel the chargee to give any consent if the chargee insists to proceed with judicial sale.
Discharge of Charge (touch n go)
S. 278 NLC: Any chargee may, by an instrument in Form 16N discharge the land or lease to
which his charge relates (or, if it relates to more lands or leases than one, all or any of them)
from all further liability thereunder, and the discharge shall take effect as from the date on which
the instrument is registered.
S. 279 (1) NLC: Any chargor may apply to the Registrar for relief under this section on the
grounds that he is entitled to pay off the charge but the chargee is dead, or cannot be found
within the Federation, or evades or refuses to accept payment thereof, or is under a legal
disability, and he is unable to trace any person or body authorised to receive payments on the
chargee's behalf.
S. 279 (3) NLC: The receipt of the Registrar for any monies deposited with him under this
section shall, as respects the personal liability of the chargor, be a sufficient discharge therefor;
and any such monies shall be placed by the Registrar in the custody of such public officer as he
may think proper; may be claimed by the person or body entitled thereto at any time within six
years of the date of deposit; and if not so claimed, shall thereafter be paid into the Consolidated
Fund of the State.
Eng Ah Mooi v OCBC [1983] 1 MLJ 209
Where chargee did not act to discharge property upon settlement of loan for a discharge to be
possible an order of court would be necessary The discharge of charge could be in respect of the
total or partial amount of the loan No time frame was specified for the charge to discharge.
Taking Possession (touch n go)
In S. 270 – 277 NLC. Only available to first chargee.
S. 271 (1) NLC – 2 methods
By receiving the rent payable to the chargor, if there is a tenant or lessee on the land. This is via
Form 16J service on tenant/lessee.
By going into occupation thereof, via Form 16K.
S. 273: Chargee may lease the land after taking possession and collect rent.
Statutory lien (sibeh touch n go)
Palaniappa Chetty v Dupire Bros [1919] FMSLR 374
Lien is a right to retain something belonging to another in his possession until certain demands
by the person in possession are satisfied.
S. 281 (1) NLC: Any proprietor or lessee for the time being may deposit with any other person or
body, as security for a loan, his issue document of title or, as the case may be, duplicate lease;
and that person or body may thereupon apply under Chapter 1 of Part 19 for the entry of a lien-
holder’s caveat; and shall, upon the entry of such a caveat, become entitled to a lien over the land
or lease. Means don’t need to register, you just need enter the LHC. Even if x register, you can
get lien in equity.
Conditions to register lien = Deposit IDT, intention, Form 19D, lien intended as security for
loan.
Perwira Habib Bank (M) Bhd v Loo & Sons Realty Sdn Bhd
Elements of lien: Express intention by the registered proprietor to create a lien; registered
proprietor must consent to the entry of caveat; IDT must be deposited with lender; lien can only
be created to secure a loan; upon default of payment, the lien holder must first obtain judgement,
then only can apply for an order for sale.
Perwira Affin Bank Bhd v Selangor Properties Sdn Bhd & Ors
There is no general rule of law that required the IDT to be deposited by the registered proprietor
himself.
Hong Leong Finance Bhd v Staghorn Sdn Bhd (2008) 5 MLJ 101
Lien can be created over third party loan if there is authorisation by the registered proprietor.
Paramoo v Zeno Ltd [1968] 2 MLJ 230
Intention may be gathered from the fact that the IDT to the land has been deposited with the
lender as security for the loan and for no other purposes.
Failure to register lien
Standard Chartered Bank Bhd v Yap Sing Yoke (1989) 2 MLJ 49
Although the charge was never registered, it is said that P acquired a right to lien in equity.
Mercantile Bank Bhd v OA of Property of How Han Teh (1969) 2MLJ 169
In other words, although failure to lodge a caveat does not entitle the depositee with whom the
issued document of title is deposited, to a lien under the Code, he still possesses a right to it in
equity, he can exercise that right by registering the caveat….at any time.
Remedies of lien holder
Similar to charge. The lien holder may obtain an order of sale of land or lease ROC O.83.
However unlike a chargee , a lien holder must first obtain a judgment on the amount due.
S. 281 (2) NLC: Right to recover judgment debt that is still within limitation allowed under
Limitation Act.
Allagappa Chetti v Perianayagam (1908) Innes 117
Where the right to recover the debt secured under the lien is statute-barred, the lien-holder will
lose his right to enforce his lien by way of an order for sale.
Determination of lien holder’s caveat
S. 330 (1) NLC: Lien is created upon entry of LHC.
S. 331 (1) NLC: Notice of withdrawal given to the Registrar by the lien holder.
S. 331 (2) NLC: By registration of a certificate of sale issued s 281(2) upon an order of sale
obtained by the lien holder.
S. 331 (3) NLC: Registrar receiving proof that all sums due under the lien had been duly paid.
S. 331 (4) NLC: Where the court is satisfied that the caveat ought not to have been entered or
ought to be withdrawn and makes an order for cancellation.
Differences between
lien and charge from
Paramoo case.