Only the original title must count

01/09/2001 NST

The recent decision of the Federal Court in the case of Adorna Properties Sdn Bhd v Boonsoon Boonyanit @ Sun Yok Eng (reported at page 241 of 2001 1 Malayan Law Journal) has placed registered
owners of landed property in jeopardy.

As a result of the decision, land owners may, one morning, find themselves no longer owning their landed properties without any fault or knowledge of their part.

By that decision, it would seem that the Malaysian Government or our system of laws affords no protection for land owners from being deprived of their properties if, by fraud and/or forgery, the property is transferred to a bona fide purchaser of value without notice of fraud or forgery.

The facts of the case are as follows: Mrs Boonsoom Boonyanit (BB) is the registered owner of two valuable pieces of land in Tanjung Bungah, Penang. She was and still is in possession of the two original issue documents of this title.

She is a Thai national. She never engaged any lawyer or anyone to sell the properties. BB paid all quit rents and assessments from the time she became the owner years ago.

One woman, masquerading as BB, used a forged passport and two false statutory declarations and obtained the replacement or duplicate titles from the Land Office. She signed the Memorandum of Transfer and sold the properties to Adorna Properties Sdn Bhd (Adorna). The real BB was completely oblivious of all these acts of the imposter.

The imposter originally asked for RM2,544,270 (i.e. RM30 per sq ft) but ultimately she sold the two pieces of land for RM1,865,798 (RM22 per sq ft) after Adorna negotiated. The imposter therefore gave a fantastic discount of RM678,472.

BB commenced an action in the High Court, Penang, in 1989 against Adorna and her most important claim is that she is still the registered proprietor of the properties. She asked for an order that Adorna's registration as proprietor be cancelled from the Register of Land Titles.

Adorna's main defence is that they are bona fide purchasers for value without notice of the fraud and/or forgery and therefore had acquire indefeasible titles.

The High Court dismissed BB's claims stating that Adorna had acquired indefeasible title over the properties by virtue of section 340 (3) of the National Land Code (NLC) which, in effect, protects any title or interest acquired by any purchaser in good faith and for valuable consideration. What about BB, who is an innocent registered owner?

BB successfully appealed to the Court of Appeal whereby the Registrar of land Titles was ordered to cancel all entries in favour of Adorna Properties and BB was restored as the registered owner.

The decision of the Court of Appeal delivered by Justice Datuk Gopal Sri Ram (reported in 1997 2 MLJ, page 622) sets out the correct legal position as well as a rational interpretation of Section 340 of the NLC. Adorna appeals to the Federal Court. The Federal Court reversed the Court of Appeal decision and upheld the High Court decision.

Before Section 340 of the NLC is applied, the courts must ensure that all the other relevant provisions of the NLC have been strictly complied with.

The decision of the High Court in Penang was delivered by Justice Vincent Ng whilst the Federal Court decision was written by (then Chief) Justice Tun Eusoff Chin.

Their decisions have shocked the legal fraternity and registered owner of landed properties. The decision has opened the floodgate for would-be criminals to do what the impersonator has done.

One may now throw one's original document down the drain in view of the said decision.

It must be noted that a purchaser must have in his possession the original document or the genuine duplicate or replacement thereof. But Adorna is in possession of the fraudulently procured documents of title, which are worthless, just like being in possession of counterfeit notes.

The documents of title, which were fraudulently procured, are in law and in accordance with the NLC null and void. So, the first question is, whether the impersonator/forger is clothed with good title, interest and rights to the said properties so as to be able to pass title to the immediate purchaser.

The second question is, whether the impersonator/forger can use two criminally-tainted and fraudulent documents of title and the forged memorandum of transfer and pass title of the lands concerned to Adorna.

The third question is, can the fraudulently procured documents of title replace or override the original titles that are in BB's possession?

It is common sense and trite law that an innocent purchaser cannot obtain good title from an imposter, impersonator or forger. Very importantly, a forger cannot pass title by using a fraudulently procured document of title so that even a subsequent innocent purchaser does not get any good title. Yet the High
Court and the Federal Court have come to such an unexpected and unprecedented conclusion.

There is only one title to one lot, i.e. the original issue document of title issued to the proprietor pursuant to the provisions of the NLC.

Adorna has other recourse or avenue to pursue their claim by way of recovery of the purchase price paid.

No court or any person in the country can defeat the owner's title, if the owner has in his/her possession the original issue document of title and has done nothing to part with his/her title, rights and interest in the property.

The only exceptions are Article 13 (2) of the Malaysian Constitution dealing with compulsory acquisition with adequate compensation and provisions of the NLC dealing with forfeiture from Sections 125 to 132 thereof.

(These legal points were not raised in this case)

It is the purchaser who has been cheated of his money because he is in possession of "stolen" properties and fraudulent and false documents of title and therefore he has not acquired
any title to the properties.

What the Court should be concerned is to enforce existing rights rather than prospective rights.

P.K. Nathan
Johore Bahru
(The writer is an advocate and solicitor)