INDEFEASIBILITY OF TITLE AND INTEREST (PART 2)

Areej Torla areej@iium.edu.my

EXCEPTIONS TO INDEFEASIBILITY OF TITLE

The exceptions:

Section 340(2)

1. Fraud/fraudulent misrepresentation

2. Registration obtained by forgery

3. Registration obtained by insufficient or void instrument

4. Unlawfully acquired title or interest

FRAUD / FRAUDULENT MISREPRESENTATION Must prove 3 elements of fraud:

1. “Actual fraud”

2. The RP whose title is to be defeated must be party or privy to the fraud.

3. Intention to cheat.

Actual Fraud

“dishonesty – a willful and conscious disregard and violation of the rights of other

persons”

– Waimiha Sawmilling Co. Ltd [1923] NZLR 1137

Tai Lee Finance v Official Assignee

Federal Court: there must be actual fraud to defeat a person of his title or interest.

Cited Assetts v Mere Roihi: “fraud in actions seeking to affect a registered

title means actual fraud, a dishonesty of some sort, not what is called constructive or equitable fraud”

“Party or privy” to the fraud.

Requirement laid down in section 340(2)(a).

In Assets v Mere Roihi, Privy Council: “The fraud must be brought home to the

person whose registered title is impeached or to his agents”.

Datuk Jagindar Singh v Tara Rajaratnam Tara, RP, lived on the land with husband

Devan and 5 children Devan’s brother, Dr. Das, obtained a loan from

Hong Kong and Shanghai bank in Singapore to obtain a loan for his computer medical centre.

Dr Das consulted Devan who persuaded Tara to put up the land as security for the loan.

Jagindar, a lawyer, was a guarantor for the loan. He and his friends, Suppiah and Arul, went to Tara’s house and asked her to signed a few documents.

They misrepresented to Tara that the security was to be effected by a transfer.

Without knowing it, Tara had transferred her land to Suppiah and 18 days later he transferred it to Arul.

Later, the land was transferred to a developer company belonging to Datuk Jagindar.

The land was subdivided and sold to various purchasers.

Held: There was fraud to defeat Suppiah’s title,

Arul’s title and the developer company’s title. However, the purchasers titles could not be

defeated since they were bona fide purchasers for value without notice of the fraud.

Intention to cheat

Goh Hooi Yin v Lim “it is not enough to show that the transfer had

the effect of depriving the plaintiff of a known existing right.

It must be demonstrated that the transfer was executed with the intention of cheating the

plaintiff of such right…”

Onus to prove fraud??

--beyond reasonable doubt (Saminathan v Pappa)

Note: onus to prove forgery is only on a balance of probability

Other cases on fraud:

Owe Then Kooi 1990 1 MLJ 234 Nallammal v Karuppanan 1993 4 CLJ 454

FORGERY

Forgery is the creation of a false written document or alteration of a genuine one, with the intent to defraud.

Although it is a species of fraud, under the NLC, forgery is not the same as fraud.

The requirements are different. No need to prove that the RP is party or privy

to the forgery.

Forgery relates to the instrument of transfer. Forgery invalidates the instrument of dealing. Focus is on the instrument, and not act of the

parties.

The instrument becomes a defective instrument of dealing.

Court of Appeal in Adorna Properties 1997 Court of Appeal: “A registration obtained by forgery is of no

effect…it is clear that there can be no registration without an instrument. Hence, one of the ways in which to defeat a registration is by impugning the very instrument of transfer by means of which the registered proprietor obtained his title. If the instrument was forged or by other reason was insufficient or void, the title of the registered proprietor may be set aside.”

Gibbs v Messer

Mrs. Messer (the RP) executed a POA to her husband, Mr. Messer, with power to transfer the land.

Both of them left the country and left the title in the custody of a solicitor, Mr. Creswell.

Creswell forged Mr. Messer’s signature and transferred the land to a Mr. Cameron (a fictitious person).

Creswell posed as an agent of Messer and presented the transfer for registration.

The transfer was registered. He then posed as an agent for ‘Mr. Cameron’,

who was now the RP, and created a mortgage over the land.

When Mrs. Messer returned, Creswell absconded.

Mrs. Messer brought an action for an order to cancel the certificate of title in the name of Mr. Cameron and for the issuance of a new title free from the mortgage.

Messer“Cameron”(fictitious person)

Mortgageetransfer mortgage

forgery

Issue: Whether Mrs. Messer could defeat the

mortgage on the grounds of forgery.

Held: The mortgage was invalid due to forgery

Frazer v Walker

Mr. Frazer

Radonskis Walkermortgage transfer

forgery

The Court held in favour of immediate indefeasibility

The title of the Radonskis was an indefeasible title from the time of registration.

Even though the mortgage was a void document at common law, it did not affect the indefeasibility of their title.

The Court’s decision in Frazer v Walker did not overrule Gibbs v Messer but distinguished it on the basis that Gibbs v Messer involved a fictitious person.

Standard of proof

Balance of probabilities -- Federal Court Adorna Properties

2001

(Note: Beyond reasonable doubt

--High Court in Adorna Properties 1995)

DEFECTIVE INSTRUMENTS

Other circumstances where registration is obtained by a defective instrument of dealing: It was signed by a minor It was signed under an invalid POA Insufficiently stamped Not attested

Effect: The instrument becomes void/voidable

If immediate indefeasibility applies, registration cures the defect.

The new RP obtains an indefeasible title even though a defective instrument was used.

If deferred indefeasibility applies, the title of the RP is open to attack (defeasible) until it is transferred to a subsequent transferee who is a bona fide purchaser for value without notice of the defect.

Mohammad bin Buyong

The Registrar had rejected the instrument of transfer as it was signed by the transferor under an invalid power of attorney.

The transferee (appellant) appealed claiming to be entitled to indefeasibility.

The appeal was dismissed. There was nothing registered in favour of the

appellant.

This case shows that Malaysia applies deferred indefeasibility.

Even if the transfer had been registered, the court would still hold that the appellant’s title is defeasible due to the invalid POA.