Ik Ngi Piau v Tiong Meng Kwong (Q-02(NCVC)(A)-1273-07/2017)

IN THE COURT OF APPEAL OF MALAYSIA AT KUCHING (APPELLATE JURISDICTION) CIVIL APPEAL NO: Q-02(NCVC)(A)-1273-07/2017 BETWEEN IK NGI PIAU (WN.KP.480707-13-5685) … 1ST APPELLANT LUCY WONG NYUK KING (F) (WN.KP.500620-13-5012) … 2ND APPELLANT both of Lot No. 4431, Lorong 2C 1d1, Desa Senadin, 98008 Miri, Sarawak. AND TIONG MENG KWONG (WN.KP.490715-13-5967) No.30, Tatau Bazaar, 97200 Tatau, Sarawak. … RESPONDENT [In the matter of Originating Summons No. BTU-24NCvC-7/6-2016 in the High Court of Sabah and Sarawak at Bintulu. In the matter of Caveat vide Instrument No. L.2401/2010 registered at the Bintulu Land Registry Office on the 30th day April 2010 against Lot 437 Block 22 Buan Land District 2 And In the matter of an application for an Order for Removal of Caveat under Section 177 of the Land Code (Cap.81) of Sarawak Between Ik Ngi Piau (WN.KP.480707-13-5685) … 1st Plaintiff Lucy Wong Nyuk King (WN.KP.500620-13-5012) both of Lot No. 4431, Lorong 2C 1d1, Desa Senadin, 98008 Miri, Sarawak. … 2nd Plaintiff And Tiong Meng Kwong (WN.KP.490715-13-5967) No.30, Tatau Bazaar, 97200 Tatau, Sarawak. … Defendant] CORAM IDRUS HARUN, JCA ZABARIAH MOHD YUSOF, JCA YEOH WEE SIAM, JCA 3 JUDGMENT OF THE COURT [1] By an Originating Summons dated 13.6.2016, the appellants herein, qua the plaintiffs in the court below, apply inter alia for –

158. When any land is intended to be subleased for any term exceeding one year, the proprietor and the sublessee shall execute for the purpose of registration a memorandum of sub-lease in Form L in the First Schedule, which memorandum shall give such description of the land as may be necessary to identify the same and shall refer to any entry in the Register relating thereto. Any such sub-lease may also include an agreement by the sub-lessee that he will insure and keep the property insured against loss or damage by fire and also such other conditions as may have been agreed to by the parties.” From our careful reading of the section itself and the indisputable evidence that we could discern, we are certain as indeed day follows night that both the appellants, as the proprietor of the said property, and the respondent, as the sub-lessee, are required to execute a memorandum for sub-lease in Form L for the purpose of registration of the sub-lease or tenancy. This is without doubt a mandatory stipulation under the law of 9 which in this case there was clearly no compliance with such requirement. Section 158 provides for a specific mode of registration of a sub-lease for any term exceeding one year and such sub-lease must be in the form of a memorandum of sub-lease as prescribed in Form L. [11] The words “unregistered agreement” in section 173 of the Land Code, in our judgment, could not have meant the unregistered tenancy agreement in the instant case since it was not entered into in accordance with section 158 of the Land Code. An unregistered agreement within the contemplation of section 173 must be one which is validly entered agreement such as a sale and purchase agreement involving a land or tenancy agreement for a term not exceeding one year which is valid without registration under section 161 of the Land Code, by virtue of which it could be said that a person could claim to be beneficially interested in the land so that he may at any time lodge a caveat with the Registrar. The result is therefore that it is not manifestly possible legally for such sub-lease to be recognised and enforced and for the respondent to claim to be beneficially interested in the said property for the purpose of any lodgement of caveat as the unregistered tenancy agreement dated 19.03.2008 entered into between the appellants and the respondent is in law not effectual to pass any interest therein to the respondent until it has been registered. There was therefore in this situation no legal interest to be caveated. For these reasons, the respondent is in no position to claim to be beneficially interested in the said property. [12] It follows that without legal interest acquired by the respondent under the unregistered tenancy agreement, the respondent does not have a caveatable interest against the appellants who are the registered proprietors of the said property, and therefore the caveat lodged by the 10 respondent is illegal and ought to be removed. We would be obliged to state that the learned judge erroneously held that the respondent had a caveatable interest by virtue of the unregistered tenancy agreement which fell within the scope of section 173 of the Land Code. Legally, the respondent could not lodge the said caveat in assertion of the rights under the ineffectual unregistered tenancy agreement. This is clearly provided in the Land Code in section 119(1) which reads – “Instrument not effectual until entry in Register 119(1) No instrument shall be effectual to pass any land or any interest therein, or render any land liable as security for the payment of money, until it has been registered in accordance with this Part.” [our emphasis] [13] Every court of competent jurisdiction, including the court below, is mandatorily bound to treat the ineffectual unregistered tenancy agreement as ineffectual until it has been registered in accordance with the provisions of the Land Code. Section 119(3) of the Land Code on this point deals with the effect or treatment of an ineffectual document such as the unregistered tenancy agreement herein. This is what it provides – “119(3) An instrument which, by virtue of this section, is ineffectual shall be treated as ineffectual by every court of competent jurisdiction until it has been registered in accordance with the provisions of this Code, notwithstanding the existence of a right to specific performance.” By reason of the clear and peremptory provisions of section 119(1) and

(3) of the Land Code, we accede to the argument urged for the appellants that the respondent did not acquire any interest whatsoever, whether legal or caveatable, against the said property as the tenancy agreement was 11 not registered in accordance with the law as provided under Part VII of the Land Code. Such agreement is pro tanto ineffectual to the extent that it does not pass any interest in the said property that would entitle the respondent to claim that he has a caveatable interest therein or enforce as against the appellants, qua the registered proprietors, any claim to any interest affecting the said property. [14] This is further made manifest when one considers the provision in section 119(2) of the Land Code, also couched in peremptory language, which prohibits the court from recognising, assisting, enforcing or protecting, as against a registered proprietor, any such claim to any interest affecting land which is founded upon or arises from any instrument which by reason of subsection (1) is not effectual. Section 119(2), we apprehend, dictates that the court must uphold and apply the law, any deviation from the peremptory stipulation in these provisions will render any decision therefrom as being ultra vires the Land Code. We now reproduce section 119(2) of the Land Code for easy reference – “119(2) No court of competent jurisdiction shall recognize, assist, enforce or protect, as against a registered proprietor or a person claiming though or under a registered proprietor, any claim to the possession, enjoyment or occupation of any land, or any interest affecting land, which is founded upon or arises from any instrument which by reason of section (1) is not effectual: Provided that nothing in this subsection shall operate to defeat a claim to damages or for specific performance founded upon, or arising from, such an instrument.” [our emphasis] 12 [15] However, the respondent is not left without any rights as the proviso to in section 119(2) of the Land Code is specifically enacted to allow recourse for remedies for a claim to damages or for specific performance. Since the said tenancy was not registered in accordance with the law, it is plain that the respondent, if he chooses to pursue further under the unregistered tenancy agreement, must file a claim for damages or for specific performance against the appellant in the High Court and if the respondent succeeds before the said High Court, then to have the decision registered against the said property under the Land Code. However, no such claim for damages or specific performance has been instituted by the respondent in the court. Even so, in our view, the respondent will find it extremely difficult or near impossible to succeed in the face of the irrefragable fact of the expiry of the unregistered tenancy agreement which consequently renders the same non-existent. It ought to be emphasized that without a judgment for damages or specific performance the respondent has no interest whatsoever to caveat the said property and the respondent’s caveat registered at the Bintulu Land Registry on the 30.4.2010 against the said property must be removed or lifted forthwith. The respondent has his rights in personam to claim for damages or specific performance yet he did not avail himself of such right. For these reasons, the respondent’s argument that he has a caveatble interest in the said property which entitles him to lodge and maintain the impugned caveat is wholly unmeritorious and manifestly fallacious. On that basis, there is certainly force in the appellant’s contention that the caveat ought not to be allowed to remain on the register. [16] The learned judge, we observe, did not address his mind to the issue of an unregistered tenancy agreement at all. The failure to do so constitutes a serious misdirection to warrant our appellate intervention. 13 His Lordship instead veered off course when he embarked on a consideration of the evidence that there was an outstanding period of 50 months under the tenancy and having relied on Part V (3)(a) of the tenancy agreement, held that the payment of rental was suspended after the fire and the respondent had waited for the appellants to repair and restore the said property to be fit for him to continue the remaining period of the tenancy. The respondent too took a similar stance in his submission. This argument of the respondent and the finding made by the learned judge involve the clear fallacy as it then begs the question regarding the legitimacy of such an argument and finding in the face of the indisputable clear evidence that the tenancy has come to an end after the expiry of the tenancy agreement and that the same was not executed in accordance with the law. The argument that the respondent would suffer injustice completely ignores and rides roughshed over the fact that the court could not enforce, recognize or protect as against the appellants, being the registered proprietors of the said property, the respondent’s claim to the interest affecting the said property. Indeed the appellants on the contrary would suffer grave injustice if this Court were to allow the caveat to remain on the register 8 years after its lodgment. [17] The next findings by the learned judge concern the retention of the deposit of RM3,300.00 by the appellants which was paid by the respondent and the payment of fire compensation of RM85,000.00 from the insurance company for the damage caused to the said property in the course of the fire. In our judgment, it was wrong for the learned judge to consider the deposit of RM3,300.00 as it was open to the respondent to claim the same from the appellants which the respondent never did. As for the insurance compensation of RM85,000.00, we would say that it is equally wrong for the learned judge to consider it as this compensation 14 rightly belonged to the appellants who bought and paid for the insurance and the premiums. [18] The learned judge in his judgment dealt with the issue of first option to purchase the said property in the event the appellants desired to sell or transfer the same. It cannot be denied that pursuant to Part V(7) of the tenancy agreement, the option must first be given to the respondent and likewise pursuant to Part V(10) thereof, it was agreed that the appellants should give priority to the respondent. By virtue of being an option holder, the learned judge held that the respondent had a caveatable interest in the said property. The respondent in his affidavits affirmed on 13.7.2016 and 15.8.2016 and submission adopted the position in a similar vein. Such position and finding overlook the fact that there is undoubtedly no longer a valid tenancy agreement as it had already expired, and as we have earlier found, it was not made in accordance with the law. That being the case, it is wishful thinking to imagine or assume, instead of referring to the evidence and the law and accepting reality, that as an option holder he has caveatable interest in the said property. In our judgment, a non-existent tenancy agreement or an ineffectual tenancy agreement cannot give any right to the respondent such as a caveatable right or interest on the said property as against the appellants being the registered proprietors thereof. In any event, it would be erroneous for the learned judge to consider the option as it was never exercised nor called into play because the said property was never sold nor rented out to anyone. We must however mention, lest it be said that we overlook it, that the appellants did state in their affidavit that they wanted to sell the said property but the intended sale failed or was aborted due to the caveat. 15 [19] The Privy Council in Eng Mee Yong & Ors v V Letchumanan [1979] 2 MLJ 212 in the judgment of Lord Diplock clearly explained the nature of the onus that lies upon the caveator in an application by the caveatee for the removal of a private caveat. This is what His Lordship there said at page 215B-2 – “This is the nature of the onus that lies upon the caveator in an application by the caveatee under s 327 for removal of a caveat: he must first satisfy the court that on the evidence presented to it his claim to an interest in the property does raise a serious question to be tried: and, having done so, he must go on to show that on the balance of convenience it would be better to maintain the status quo until the trial of the action, by preventing the caveatee from disposing of his land to some third party.” [20] In an action in which the appellants seek the removal of the respondent’s caveat lodged against the said property, we are constrained to hold, on the strength of the evidence available before this Court and for the reasons that we have given, that the respondent in the end fails to satisfy the court or persuasively prove his claim to an interest in the said property does raise a serious question to be tried. Mindful of the onus on the respondent that, as the caveator, he must justify the continued existence and maintenance of the caveat on the balance of convenience, we find that the respondent also fails to show that it would be better to maintain status quo. In this case, in our judgment, there is absolutely no action pending nor is there a scintilla of proof of imminent disposal of the said property. The learned judge misdirected himself in holding that the respondent had a caveatable interest in the said property. His Lordship’s evaluation of the evidence was not justified and we find strong grounds for this Court to interfere with the way in which his discretion was exercised. We find no difficulty whatsoever in allowing the appeal and setting aside 16 the decision of the learned judge. In the upshot, we make an order in terms of the appellants’ Originating Summons in prayers (1) to (4). As regards prayer (4), the case is remitted back to the High Court for compensation to be proved and assessed. The appellants are given costs of here and in the court below in the sum of RM20,000.00 subject to the payment of allocatur fee. The deposit is ordered to be refunded to the appellants. Signed ( IDRUS BIN HARUN ) Judge Court of Appeal, Malaysia Putrajaya Dated: 3 October 2018 Solicitors For The Appellant: Tai Choi Yu Messrs. Tai Choi Yu & Co. Advocates No.12, 1st Floor, Kiat Siang Building, Jalan Bendahara, 98000 Miri Sarawak Solicitors For Respondent: Henry Ling Kuong Meng Ling & Wong Advocates Tingkat 2, 5 Travillion Commercial Centre Jalan Petanak, Pandungan 93100 Kuching Sarawak