Sale of Land and Allegations of Fraud

CHONG SONG v. UMA DEVI V KANDIAH
COURT OF APPEAL, PUTRAJAYA
SULAIMAN DAUD JCA
SYED AHMAD HELMY JCA
MOHAMED APANDI ALI JCA
[CIVIL APPEAL NO: N-02-984-2001]
22 NOVEMBER 2010

Brief facts :

The respondent (‘plaintiff’) was the original registered proprietor of
a piece of land in Johor (‘land’). A charge and an irrevocable
Power of Attorney was granted by the plaintiff to the 2nd
defendant in respect thereto. The appellants (‘3rd and 4th
defendants) entered into a sale and purchase Agreement with the
2nd defendant in April 1996 and the land subsequently registered
in the 3rd and 4th defendant’s names. The plaintiff sued the
defendants for a declaration that she still was the registered
proprietor of the land and for an order that the sale and transfer
of the land to the 3rd and 4th defendants had been done
fraudulently, thus rendering it null and void. In the High Court,
the plaintiff’s claim was allowed. The 3rd and 4th defendants thus
brought this appeal.


Plaintiff's case :

1) The plaintiff averred that on or before May
1994 the 1st defendant and the 2nd defendant had through
misrepresentation, deceit and fraud had caused her to execute a
charge and given the Power of Attorney as the chargor of the
land.
2) The plaintiff also averred that it was a friendly loan
transaction whereby the plaintiff had borrowed a sum of
RM75,000 from the 1st and 2nd defendants. The plaintiff further
averred that she had up to October 1994 paid RM13,125 towards
repayment of the loan and had requested for time to pay the
outstanding balance.
3) In respect of the 3rd and 4th defendants, the plaintiff alleged
that they are not bona fide purchasers of the land, as they were
aware that the land was a charged land and thus could only be
transacted in accordance with the provisions of the National Land
Code.
4) The plaintiff further alleged that the 3rd and 4th defendants
had colluded with the 1st and 2nd defendants in the sale
transaction and transfer of land with the intention of denying the
rights of the plaintiff.

The Defence :

1) The 1st and 2nd defendants denied the allegations and
claims of the plaintiff. The 1st and 2nd defendants averred that
the land was bought via a Sales and Purchase Agreement dated
30 May 1994 in consideration of a purchase sum of RM100,000
and the said sum was paid in full on the date of execution of the
Sale and Purchase Agreement, via Bank of Commerce Cheque
No. 658002.

2) The 3rd and 4th defendants also denied any knowledge of
all the allegations by plaintiff and averred that they purchased the
land via a Sale and Purchase Agreement executed on 20
April1996 with the 2nd defendant in her capacity as the donee to
the Power of Attorney given by the plaintiff. The 3rd and 4th
defendants claimed that they have paid the purchase price in full
and are bona fide purchasers of the land, and as such the title as
registered in their names is an indefeasible title.

Appellate Judge's Decision :

Held (allowing the appeal with costs)
Per Mohamed Apandi Ali JCA delivering the judgment of
the court:
(1) The sale and transfer of the land to the 3rd and 4th
defendants could be validly executed by the 1st defendant in
her capacity as an attorney acting on behalf of the chargor,
the plaintiff. The sale and transfer of the land by the chargee
and attorney to the 3rd and 4th defendants was valid,
effective and proper.

(2) There was no issue of a void or insufficient instrument as the
memorandum of transfer had been executed by the 1st
defendant as the donee of an irrevocable Power of Attorney.

(3) The late payment of stamp duty on the Power of Attorney
and the sale and purchase agreement between the plaintiff and
the 1st defendant had not affected the validity and
admissibility of the documents.

(4) There was no evidence to show any inkling of a fraudulent act
or omission by the 3rd and 4th defendants. They had been
innocent purchasers of the land. In any event, mere knowledge
of the existence of a charge could not reasonably be inferred
as part of a fraudulent charge.

(5) At the trial in the High Court, two advocates and solicitors,
SP3 and SP4, had given evidence for the defendants and
confirmed the execution of the relevant documents pertaining
to the transactions over the land and the transfer of the same
to the 3rd and 4th defendants.

(6) The evidence at the trial had clearly shown that the facts of
this case did not fall within the exceptional circumstances
envisaged under s. 340(2) of the National Land Code. In any
event, the 3rd and 4th defendants’ acquisition of the title and
interest to the land had been well protected by the proviso
to s. 340(3) of the NLC. The 3rd and 4th defendants were
purchasers in good faith and for valuable consideration, which
consideration had been paid in full. Thus the 3rd and 4th
defendants had in law, upon being registered as proprietors,
acquired an indefeasible title and interest to the land.

(7) The learned trial judge had erred when he made his decision
based on the wrong standard of proof in the factual matrix of
the case where fraud was specifically pleaded. Such an error
was a serious misdirection and had affected the outcome of
the case.