MALAYAN BANKING BERHAD 1. ) Mohd Affandi Bin Ahmad 2. ) Aminah Binti Ahmad

MALAYAN BANKING BERHAD 1. ) Mohd Affandi Bin Ahmad 2. ) Aminah Binti Ahmad

Appeal allowed. The Federal Court held that where a land is registered in the name of the purchaser and there is no notice or caveat, a subsequent purchaser/chargee who relied on the register and conducted ordinary due diligence is a bona fide purchaser for valuable consideration under the proviso to s.340(3) NLC; the Court of Appeal erred in requiring banks to investigate underlying completed SPAs or to prove it was "impossible" to discover unlawfulness; negligence alone does not equal fraud and does not automatically negate bona fides under the Torrens system.

Citation
02(f)-5-03/2024(J) (Mahkamah Persekutuan)
Parties
Appellant / Defendant 3: Malayan Banking Berhad; Respondent / Plaintiff 1: Mohd Affandi bin Ahmad; Respondent / Plaintiff 2: Aminah binti Ahmad (as Pentadbir kepada harta pusaka Ahmad bin Buang); Defendant (d1): Pembangunan Tanah Dan Perumahan Sdn. Bhd.; Defendant (d2): Q Development Sdn. Bhd.
Court
f
Jurisdiction
Malaysia
Judgment Date
3 July 2024
Case Number
02(f)-5-03/2024(J) (Mahkamah Persekutuan)
Procedural Posture
Civil Appeal / Final Appeal (federal Court of Malaysia)
Outcome
Appeal allowed; decisions of the High Court and Court of Appeal set aside; charge in favour of Malayan Banking Berhad restored
Legal Topics
Indefeasibility of Title, Bona Fide Purchaser for Value, Section 340 National Land Code 1965, Constructive Notice Vs Caveat, Due Diligence of Chargee, Charges as Security
Source Language
Malay/English
Property Law Land Registration / Torrens System Banking and Finance Law Equity and Trusts Indefeasibility of Title Bona Fide Purchaser for Value Section 340 National Land Code 1965 Constructive Notice Vs Caveat +2 more

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Parties

Malayan Banking Berhad

Appellant / Defendant 3

Mohd Affandi bin Ahmad

Respondent / Plaintiff 1

Aminah binti Ahmad (as Pentadbir kepada harta pusaka Ahmad bin Buang)

Respondent / Plaintiff 2

Pembangunan Tanah Dan Perumahan Sdn. Bhd.

Defendant (d1)

Q Development Sdn. Bhd.

Defendant (d2)

Procedural Posture

Civil Appeal / Final Appeal (federal Court of Malaysia)

Legal Issues

  1. 1 Whether a bank/chargee must investigate underlying sale and purchase agreements behind the land register to qualify as a subsequent purchaser in good faith under the proviso to s.340(3) NLC
  2. 2 Extent of bona fides required of a subsequent purchaser/chargee and whether negligence or failure to inquire negates good faith
  3. 3 Whether the bank must prove impossibility of knowing unlawfulness even after examination of underlying documents

Ratio Decidendi

Appeal allowed. The Federal Court held that where a land is registered in the name of the purchaser and there is no notice or caveat, a subsequent purchaser/chargee who relied on the register and conducted ordinary due diligence is a bona fide purchaser for valuable consideration under the proviso to s.340(3) NLC; the Court of Appeal erred in requiring banks to investigate underlying completed SPAs or to prove it was "impossible" to discover unlawfulness; negligence alone does not equal fraud and does not automatically negate bona fides under the Torrens system.

Court Disposition

Appeal allowed; decisions of the High Court and Court of Appeal set aside; charge in favour of Malayan Banking Berhad restored

Orders

  • Set aside the orders of the High Court and the Court of Appeal
  • Appeal allowed with costs of RM50,000.00 to be paid to the appellant here and below subject to allocator