By Loke Yuen Hong

Imagine while you were leisurely enjoying your tea, reading newspaper. Life is blissful as it is serene. Suddenly, in the front page of Business section, you found out that XYZ Corporation is embarking on a billion dollar project on land plot ABC. You had a funny feeling, not because of the intensity of the project at this time of global economic meltdown, but rather, plot ABC is yours and you definitely had nothing to do with XYZ Corp nor its project.

You went to Land Office, and lo! the records showed that you sold your land to XYZ Corp two weeks ago. Whats more, the Document of Title that was used in the transaction is a duplicate one as you had “lost” the original ones some three weeks ago, though now you had it in your hand.

Had you had some amnesia? A quick check showed that “you” had done the transaction, though XYZ Corp. officers had seen you not.

Obviously, someone sold your land to XYZ Corp using your name. What can you do?

Nothing.

Yupe, you read it right.

Kiss your land goodbye and keep the document of title as a memory of a long gone land.

Because that was what happened in Adorna Properties Sdn. Bhd. v Boonsom Bonyanit. It all begins when a rogue pretending to be Boonsom managed to convinced the Land Office that she was Boonsom and that the original document of title went missing. When she got the duplicate, she sold the land to Adorna. By the time the real Boonsom knew of it, the title had already been registered in Adorna’s name.

Before we go far, in Malaysian Land Law, we practice Torrens System. One of the main feature of our Torrens System is indefeasibility of title which means once the land is registered as your, no one can say it isn’t. Section 340(2) National Land 1965 though provided for some exception to it, prompting some writers to define it as to mean Malaysia practised deferred indefeasibility of title. This work does not seek to examine whether Malaysia really practised deferred indefeasibility or to go through all the exceptions but rather only to examine the effect of Section 340(3) of the same Code where it was provided that a bona fide buyer for a valuable consideration will be excluded from the exception in Section 340(2), which basically means you cannot challenge at all, just like the opening scenario.

Back to Adorna, when the case reached Court of Appeal, Gopal Sri Ram CJA held that the title should be returned Boonsom. The word “purchaser” in Section 340(3) should not include immediate purchaser but only apply to subsequent purchaser.

The Federal Court, the apex court in Malaysia held otherwise. It was held that the word “purchaser” applies to all purchaser. Hence Adorna was exempted from the provision of Section 340(2) and its title cannot be challenged, though it is gotten though a forgery/fraud.

This ruling caused some outroar in Malaysia and no solution seems to be in sight, be it then or now.

To better understand the ruling and its effect, it is beneficial to examine why the Court of Appeal and the Federal Court had such a different decision.

Gopal Sri Ram CJA had since a few opportunity to explain his view, and the most recent one is in Au Meng Nam v Ung Yak Chew. Basically, His Lordship argued that such interpretation by Federal Court would be unjust and unfair. The rest of his argument is centred on why the Federal Court judgment is per incuriam and should not be followed. One of the main contention is the Federal Court equated proprietor (registered owner of title) with purchaser, of which Adorna becomes both. His Lordship also mentioned that Federal Court did not consider previous authority such as MJ Frozen Food case which stated that Malaysia practiced deferred indefeasibility.

It is submitted as far as interpretation goes, Gopal Sri Ram CJA effectively added his own word into the Code. He argued that to obtain fairness, this should be the way to interpret the section. His Lordship, as far as the principle of interpretation goes, has a valid point. It is widely accepted that the Parliament may not be able to ensure justice to all, especially minority opinion. Further, during formulation of law, the Parliament cannot, trying as hard as they may. envisage all situation and provide for it. Hence, the Judges, as the last bastion of Justice, would have to be creative in interpreting law to ensure justness and fairness, and not to decline a just decision just because the Parliament did not provide for it.

On the other hand, as for justness and fairness, it is submitted that Gopal Sri Ram CJA had miss out the justice for the equally pity innocent buyer. The buyer paid hard cash for the land. They would not be able, such as in Adorna case, be able to tell if the Boonsom they are seeing is the real Boonsom. And if the government agency, with all the information, and the fact that they are the one who issue the document of title, cannot detect a forged identification, what chance a person or corporation had? Was it not they too are victims and must be remedied?

Personally, it is believed that the buyer are normally not much considered in apportionment of justice due to a) deep pocket principle and b) caveat emptor(let the buyers beware).

It is always believed that the buyer must be capable to absorb the losses, such as in Adorna case where the buyer is a corporation. However, let us consider this - what if the buyer is a husband and wife, who pinched every penny to pour into their dream home. When they found one, they thought everything is alright. The procedure is a breeze and if the Land Office is satisfied, what else should they be wary of? And so they paid their deposit and gotten a loan, and all relevant procedure is done.

Then suddenly they realised the one who sold them the house is a rogue who managed to even fooled the Land Office. If the Court does not side them, they would have lost the house AND still have to pay for the housing loan. Now go figure what justice we can give them if Adorna is judged otherwise.

It is also always believed that the buyer must be beware of anything they buy and if anything happen then it is too bad. Yeah, try tell that to those babies who ate melamine tainted milk. Furthermore, as in the case in Adorna, the rouge can get everyone fooled and just how much can a buyer bewares?

Hence, to adjudge for either side would have caused injustice. And the interpretation of “purchaser”, if done according to Goapl Sri Ram CJA, would render unfairness to immediate buyer vis-a-vis subsequent buyer. What difference would they have other than the unfortunate timeline of their purchase?

It would seem to this author that there is no absolutely fair way to interpret the word “purchaser” and the best way would be those by the Federal Court.

As for equating both the word proprietor and purchaser, it shall be noted that as Adorna paid for the land, it becomes purchaser. When it is registered, it becomes proprietor. There is nothing irregular, at least for this case.

It shall also be noted that the Federal Court is free to overrule any previous ruling, even if done by its predecessor or itself. Even if it disregards previous authorities, there is nothing to render it per incuriam.

If Adorna is decided correctly, what then can the injured party seek?

At this juncture, it shall be mentioned that Torrens System is based on three principles namely the mirror principle, curtain principle and insurance principle. Insurance principle are of concern here, where if the Registrar of Titles committed a mistake which resulted in loss, the injured party may claim for compensation. There is, however, no provision to this effect in the National Land Code 1965. If there is, then Boonsom and many others might not go back empty-handed.

But as currently there is no such provision, the injured party may not claim for compensation from the Registrar or the State Authority. Then can the State Authority be sued in tort for its mistake? It would seem in ordinary course of dealing the answer would be in affirmative though the State Authority may be protected by statutory immunity, such as in the case of Steven Phoa v Majlis Perbandaran Ampang Jaya (Highland Tower case) among others where statutory immunity protected the State Authority from liability or claim.

In conclusion, even if you hide your land title in bank vault, it might avail to you nothing once a bona fide buyer bought over your land. In the meantime, try lobby for the Parliament to set up a claim mechanism where losses due to the mistake by State Authority in land matters can be claimed.