1. ) Tanjung Rhu Land Sdn Bhd (Penerima dan Pengurus Dilantik) v 1. ) Kauthar Venture Capital Sdn Bhd (WA-24NCvC-4945-10/2023)

Content

1 DALAM WILAYAH PERSEKUTUAN KUALA LUMPUR Dalam perkara mengenai Tanjung Rhu Land Sdn Bhd [No. Syarikat: 198301011415 (106757-T)] (Penerima dan Pengurus Dilantik) dan Reka Intisari Sdn Bhd [No. Syarikat: 199301016515 (271255-T)] (Penerima dan Pengurus Dilantik Dalam perkara mengenai

Schedule

Jadual Keenam dan Seksyen-Seksyen 383 dan 384 Akta Syarikat 2016 Dalam perkara mengenai Seksyen-Seksyen 298, 327, 329 dan 417 Kanun Tanah Negara 1965 Dalam perkara mengenai Aturan 7 kaedah 2 Kaedah-Kaedah Mahkamah 2012 ANTARA 1. Tanjung Rhu Land Sdn. Bhd. [No. Syarikat: 198301011415 (106757-T)] (Penerima dan Pengurus Dilantik) 05/09/2024 12:26:32 WA-24NCvC-4945-10/2023 Kand. 65 2. Reka Intisari Sdn. Bhd. [No. Syarikat: 199301016515 (271255-T)] (Penerima dan Pengurus Dilantik) …PLAINTIF-PLAINTIF 1. Kauthar Venture Capital Sdn. Bhd. [No. Syarikat: 168654-A] 2. Pendaftar Hakmilik Tanah & Galian Kedah …DEFENDAN-DEFENDAN GROUNDS OF JUDGMENT Introduction [1] One of the features of the Torrens System, as codified in our National Land Code 1965 (“NLC”), permits a person with caveat-able interest in any land in peninsula Malaysia to enter a private caveat on the Register Document of Title of the land very expeditiously by simply filling in a standard form (Form 19B) prescribed under the NLC, stating the nature of the claim on which his application is based, affirming a short statutory declaration to verify his claim and paying a small fee to lodge a private caveat. [2] Since private caveats could be entered so easily and cheaply, they could be misused to block legitimate transactions from being registered – just as I had found to be the situation in this case. I therefore allowed the Plaintiffs’ application for an order to remove the Defendant’s caveat. My reasons, in detail, are as explained below. The Plaintiffs’ Application for removal of the 1st Defendant’s caveat [3] The 1st Plaintiff is the registered proprietor of land held under HS(D) 623 PT 904 Mukim Ayer Hangat, Daerah Langkawi, Kedah (“the said Land”). The 2nd Plaintiff is a company that had entered into contracts with the 1st Plaintiff and has interests in the said Land as well several plots of land adjacent to the said Land. [4] The Plaintiffs commenced this action by way of an Originating Summons (Enclosure 1) to remove a private caveat lodged by the 1st Defendant (“the 1st Defendant’s Caveat”) on the Register Document of Title of the said Land and for damages to be assessed and paid by the 1st Defendant. The Registrar of Land Titles of Kedah was initially named as the 2nd Defendant but the Plaintiffs had discontinued their claim against the 2nd Defendant – who would have been a nominal defendant in any event. [5] The 1st Defendant’s director had affirmed an affidavit on 30th November 2023 to resist the Plaintiffs’ application to remove the 1st Defendant’s Caveat. In response, the Plaintiffs filed an affidavit-in-reply on 12th December 2023 to reply to the 1st Defendant’s said affidavit, thus closing the exchange of affidavits for the Plaintiffs’ substantive application (Enclosure 1). [6] Written submissions were filed by both sides and the Plaintiffs’ application was fixed for hearing on 5th April 2024. [7] On 4th April 2024, which was just a day before the hearing date of the Plaintiffs’ application on 5th April, the 1st Defendant filed an application (Enclosure 33) for leave to file further affidavits to resist the Plaintiffs’ application. I heard Enclosure 33 and decided to dismiss it with no order as to costs. Thereafter, the Plaintiffs’ substantive application (Enclosure 1) was heard and I decided to allow prayer (1) and (5) thereof, to remove the caveat and for damages to be assessed, and lastly, for costs of RM8,000.00 to be paid by the 1st Defendant to the Plaintiffs. Two Notices of Appeal were filed by the 1st Defendant [8] Since there were two Notices of Appeal filed by the 1st Defendant, to appeal against my decisions in dismissing Enclosure 33 and allowing Enclosure 1 respectively, my reasons for both decisions shall be stated herein. [9] I shall state my reasons first for dismissing the 1st Defendant’s application to file further affidavits, followed by my reasons for allowing the Plaintiffs’ substantive application. The 1st Defendant’s Application to file further affidavits [10] As mentioned above, the 1st Defendant’s application (Enclosure 33) for leave to file further affidavits to resist the Plaintiffs’ application was filed on 4th April 2024, which was just a day before the hearing date of the Plaintiffs’ application on 5th April 2024. The final affidavit-in-reply was filed on 12th December 2023, and written submissions had been filed and exchanged more than 3 months earlier, in January 2024. Decision regarding the 1st Defendant’s Application to file further affidavits [11] The 1st Defendant’s said application (Enclosure 33) for leave to file further affidavits, contained the following prayers: - [12] The proceedings in Originating Summons No. WA-24NCvC-701- 02/2024 mentioned in the 1st Defendant’s prayers were actually first filed in the Commercial Division of the High Court, and registered as Originating Summons No: WA-24NCC-88-02/2024 (“OS No.88”). OS No.88 was subsequently re-registered as WA-24NCvC-701-02/2024 because applications to remove caveats are generally fixed for hearing at the Civil Division of the High Court. [13] The intitulement of OS No.88 (subsequently registered as OS No.701) shows that Bank Pembangunan Malaysia Berhad is the plaintiff therein. Though the Defendant in these proceedings is the same defendant as in OS No.88, that does not in any way affect the Plaintiffs’ claim in this case. A screenshot of the intitulement of OS No.88 is pasted below for convenient reference. [14] In Hun Tee Siang (Menyaman atas kapasiti sebagai pemegang jawatan di Persatuan Penduduk Country Heights Damansara, Kuala Lumpur) & Ors v. Mega Palm Sdn Bhd & Anor [2024] 6 CLJ 56, I had opined that there would be situations where an additional affidavit is justifiable and ought to be permitted after the close of exchange of affidavits before a decision is pronounced by the court. I was also of the view that those three “Ladd v Marshall conditions” could, disjunctively, provide invaluable guidance to a court of first instance in deciding whether to admit further additional affidavits after the exchange of affidavits pursuant to O.32 r.13(2) RC had closed, and even after written submissions had been filed. [15] Of those three “Ladd v Marshall conditions”, the second condition ought to be the primary condition to be satisfied because the new evidence, if given, must have an important influence on the result of the case, although it need not be decisive. On the contrary, if the new evidence, if given, would have no important influence on the result of the case, there would be no justification whatsoever to allow the further affidavit – which would invariably necessitate an adjournment of the hearing to grant the opposing party an opportunity to file an affidavit in reply and/or for counsel to prepare to address the further affidavit evidence. [16] In our present case, the further affidavits that the 1st Defendant was attempting to adduce as further evidence were for the purpose of exhibiting documents from OS No.701 (originally registered as OS No.88) in which the Plaintiffs herein are not parties thereto. Though Bank Pembangunan Malaysia Berhad, as the plaintiff therein, was also seeking an order to remove the 1st Defendant’s Caveat, the cause papers in OS No.701 were wholly irrelevant for this court to decide whether the 1st Defendant has a caveatable interest in the said Land to justify the entry of the 1st Defendant’s Caveat. [17] Further, the fact that another party, who is also aggrieved by the presence of the 1st Defendant’s caveat, had filed an application in another court does not create a ‘duplicity of proceedings’ – especially when the present case was filed earlier and was ready for hearing on merits. [18] Based on the reasons explained above, I was of the view that the 1st Defendant’s application (Enclosure 33) for leave to file further affidavits – which was filed just a day before the hearing date of the Plaintiffs’ application on 5th April 2024 – was devoid of merit. I therefore dismissed it and proceeded to hear the Plaintiffs’ substantive application. Decision regarding the Plaintiffs’ application to remove the 1st Defendant’s Caveat [19] A registered proprietor of any land in peninsula Malaysia is presumed under the NLC to be aggrieved by the existence of any caveat on his land title, and has a statutory right under S.326 NLC to demand its removal by applying to the Registrar of Land Titles whereupon the Registrar shall issue and serve a Notice (in Form 19C) on the caveator. If the caveator fails to obtain a court order to extend his caveat, the Registrar will cancel the caveat upon the expiry of two months specified in the said Notice. [20] Instead of applying to the Registrar of Land Titles pursuant to S.326, a registered proprietor may apply to the High Court pursuant to S. 327(1) NLC which states: “Any person or body aggrieved by the existence of a private caveat may at any time apply to the Court for an order for its removal…” The High Court has the power to order the removal of a private caveat on urgent basis upon an ex-parte application if the circumstances so require. [21] In this case, the 1st Plaintiff is the registered proprietor of the said Land, and indisputably had the locus standi to apply to remove any caveat entered on the title of its land – as is clear from a reading of S.326. [22] As for the 2nd Plaintiff, it had the right to jointly apply with the 1st Plaintiff as a party “aggrieved” by the existence of the 1st Defendant’s Caveat that had caused instruments presented for registration on the title of the said Land to be rejected. [23] The question, as to whether the burden of proof in a S.327 NLC application rests on the shoulders of the applicant or the caveator, had been answered by the Federal Court in Nanyang Development (1966) Sdn. Bhd. V. How Swee Poh [1970] 1 MLJ 145 more than half a century ago. It was held that a caveator bears the burden of proof to justify his caveat. The following passages provide guidance: “The question in this appeal is: on whom does the onus lie to satisfy the court that it may remove a private caveat when the registered proprietor aggrieved by its existence applies to the court under section 327 of the National Land Code for an order for its removal? The respondent, who is a caveator, says that it lies on the appellant the registered proprietor. The learned judge agreed. The proprietor appeals, arguing that the onus lies on the caveator. In deciding this matter, it is necessary to bear certain factors in mind. First, under our system of land tenure, the person for the time being registered as proprietor such as the appellant is almighty, and save in certain circumstances his title or interest is indefeasible, section 340, and he may deal with the land in any manner he thinks fit. Secondly, to protect the interest of a person who is also interested in the land, for example a person who has lent money on the security of the land, Part Nineteen of the National Land Code enables such a person to enter a private caveat effected by the endorsement on the register document of title. When applying for the entry of the caveat he must specify on Form 19B the nature of the claim on which his application is based… I am of the opinion that it is for the caveator to satisfy the court that it is just for the caveat to remain. I say so because, first, as between the proprietor and the caveator, the proprietor is in a superior position; secondly, because the fact that the caveat has been entered on the register does not necessarily mean that the caveator's claim to restrain the proprietor's dealings with the land is necessarily valid in view of subsection (1) of section 324.” [24] The main prayers in the Plaintiffs’ application, for an order that the 1st Defendant’s caveat be removed and for damages caused by that caveat to be assessed and paid by the 1st Defendant, were worded as follows: [25] A private caveat causes serious consequences for a land owner and/or a party with a legitimate interest to be registered on the Register Document of Title of the land. This is because once a private caveat is entered, S.322 of the National Land Code 1965 prohibits the registration, endorsement or entry on the Register Document of Title of the land of any instrument of dealing executed by or on behalf of the proprietor (the land owner), and any certificate of sale relating thereto, any claim to the benefit of any tenancy exempt from registration granted by the said proprietor, and any lienholder’s caveat. In other words, a private caveat has the effect of a prohibitory injunction for a statutory period of six years unless it is sooner withdrawn by the caveator or removed by the Registrar of Land Titles (a lengthy process of at least three months) or by an order issued by a judge of the High Court. [26] The need for applications to remove private caveats to be heard expeditiously is heightened by the fact that a private caveat may be entered by any person by simply filling in Form 19B of the NLC, stating the nature of the claim on which his application is based, affirming a statutory declaration to verify his claim and paying a small fee to lodge a private caveat. [27] When an application to enter a private caveat is received by the Land Registry, it is not required to verify the contents of the application to ensure that a caveator really has a caveatable interest in the subject land. This is because S.324(1) requires the Registrar of Land Titles to endorse the caveat “without being concerned to enquire into the validity of the claim on which it is based”. In other words, the entry of a private caveat is a purely administrative function by officers of the Land Registry. This admittedly opens the door for abuse of the system. However, this weakness is ‘a necessary evil’ – as to require verification would defeat the fundamental objective of enabling the preservation of status quo of a land speedily without applying for an injunction. Thus, the Court must hear applications to remove caveats expeditiously, so as not to allow a caveator without caveatable interest to delay and hold a land proprietor to ransom. It was for this reason that I refused the 1st Defendant’s application to adjourn the hearing of the Plaintiffs’ application after I dismissed the 1st Defendant’s application for leave to file further affidavits. [28] The law on removal of private caveats had been expounded by the Federal Court and Court of Appeal in numerous reported cases. In Score Options Sdn Bhd v Mexaland Development Sdn Bhd [2012] 6 MLJ 475, the Federal Court made it crystal clear that only those who have a claim to a registrable interest in the land title or a claim to any right to such title or registrable interest, may enter a private caveat. The following passages (at page 487) are instructive: “It is our considered view, therefore, that based on the provisions of the NLC and the authorities cited above, the only parties who are authorised to lodge a private caveat are those who may effect dealings in the particular interests in the land. Those parties may either have a claim to the title to the land or a claim to a registrable interest in the land or a claim to any right to such title or registrable interest. Emphasis should be given to the words ‘registrable interest’ in s 323(1)(a) of the NLC. To be caveatable, the interest must be an interest in the land and that interest must be capable of registration. In short, it must represent a transaction that can ultimately lead to its registration on the register. (emphasis added) [29] The caveator in Score Options (supra) had submitted that the rights that it obtained under a joint venture agreement as having conferred upon it the right to enter the subject caveat. This argument was categorically dismissed by the Federal Court with the following explanation: “Reverting to this appeal before us, although the appellant has conferred numerous rights on the respondent under the JVPM agreement and the powers of attorney, all these rights are merely rights to develop the land that would give rise only to a monetary interest, ie a right in personam against the appellant and does not create any interest in the land. Under the NLC, these rights are not capable of registration. They do not fall under any scheme of dealings in alienated lands as provided under Division IV of the NLC.” [30] Thus, it is trite that legal rights to develop any land, that would give rise only to a monetary interest, would not give the holder of those rights any “registrable interest” to become eligible to lodge a private caveat. [31] Further, for the purpose of applying Score Options (supra) to this present case, I would cite another passage therefrom, as authority that a caveator must have a present interest as opposed to a potential interest in the land, to be eligible to lodge a caveat. The following words of Arifin Zakaria CJ (as he then was) were unequivocal: “It is also our considered view that the caveator under s.323(1)(a) of the NLC must have a present interest as opposed to a potential interest in the land. The registrable interest that the caveator is claiming for, must be an existing interest. The caveator under s 323(1)(a) of the NLC must be limited to those who are claiming to an existing interest in the land or right to such existing interest and cannot include potential interest or interest in futuro. This principle is firmly embedded in our Torrens system. This can be seen in the decision of the Supreme Court in Tan Heng Poh v Tan Boon Thong & Ors [1992] 2 MLJ 1. In that case, a caveat lodged by a residuary beneficiary was ordered to be removed because the administration of the estate was still incomplete at the time the caveat was lodged, as such his interest in the land was still unascertainable.” [32] The caveat entry application form (Form 19B) filed by the 1st Defendant in this present case disclosed no registrable interest in the said Land. It stated as follows: [33] A perusal of the 1st Defendant’s affidavit that was filed to resist the Plaintiffs’ application was, with respect, also completely lacking in facts that could possibly amount to a caveatable interest in the said Land. The only attempt to create a caveatable interest was at para 25 and 26 therein, which averred as follows:- “25. Defendan Pertama dan PKNK menjadi pemegang-pemegang saham dalam TRL untuk menggunakan kepakaran komersial Defendan Pertama dan Tanah A, Tanah B dan Tanah C TRL, untuk membantu PKNK mencapai obligasi-obligasi berkanunnya dan juga membangunkan secara komersial 3 bidang tanah tersebut untuk Defendan Pertama.” 26. Walaupun Defendan Pertama dan PKNK adalah dalam undang-undang, pemegang-pemegang saham TRL, Defendan Pertama dan PKNK sentiasa terlibat dalam keputusan-keputusan penting yang diambil oleh TRL untuk pembangunan keseluruhan 3 bidang tanah secara bersama dan holistic, serta keputusan-keputusan tersebut yang akan memberi kesan kepada aspek-aspek sosio-ekonomi kawasan-kawasan sekitar dan Langkawi secara keseluruhnannya.” [34] Now, if the 1st Defendant was hoping to assert that a caveatable interest existed by virtue of being a shareholder in the 1st Plaintiff company, the short answer is that under Company law, a shareholder does not have any personal interest in the assets of the company. This was highlighted in the judgment of Mohd. Azmi SCJ (as he then was) in Hew Sook Ying v Hiw Tin Hee [1992] 2 MLJ 189. Needless to say, this rule is simply a manifestation of the doctrine of separate legal entity between a company and its shareholders. The relevant passage from Hew Sook Ying v Hiw Tin Hee (supra) is as follows: “It is a well-established principle of law that a limited company incorporated under the Companies Act 1965 and the individuals forming the company are distinct legal entities, however completely in control it might be by one or more individuals of the company (see Salomon v Salomon & Co Lt d 3). (See also Tunstall v Steigmann 4.) Any departure from a strict adherence of the principle has only been made to deal with special circumstances where a limited company might well be a facade concealing the real facts behind the corporate veil.” “In this appeal, we must not lose sight of the fact that the company is the registered proprietor of the land under caveat, and it is the company that sold the property to the appellant at a price of $35,000. The company has in fact handed to the appellant not only the instrument of transfer but also the document of title for necessary registration. In such circumstances, it is impossible to envisage how the managing director either personally or as a shareholder or as an officer of the company, can be said to have a caveatable claim to title or registrable interest under s 323(1) merely because of internal squabbles between him and certain directors of the company.” [35] I am of the view that a shareholder of a company may caveat land belonging to the company if and only if he is doing so in a different capacity, for example, as a purchaser of the company’s land or as an intended transferee pursuant to any voluntary liquidation exercise where there is an order authorising the company to distribute its real properties to its shareholders. Otherwise, a shareholder – as in this case simply as a shareholder sui juris – has no caveatable interest in his company’s land. Conclusion [36] Faced with trite law as enunciated by the Federal Court in Score Options (supra) and the doctrine of separate legal entity, the 1st Defendant’s caveat simply had no legs to stand on. The 1st Defendant had no caveatable interest whatsoever. Its caveat must therefore be removed forthwith and not to impede the registration of legitimate interests on the land title. [37] As for the Plaintiffs’ prayer for damages to be assessed for wrongful entry of the 1st Defendant’s Caveat, S.329 NLC must be given effect to in cases where the court found that the caveator had no caveatable interest. S.329 (1) of the NLC 1965 states: “ (1) Any person or body who, wrongfully or without reasonable cause, secures the entry of, or fails to withdraw, any private caveat shall be liable to pay compensation to any person or body who thereby suffers any damage or loss.” [38] Pivotal to the fact that damages may be ordered to be paid to the 2nd Plaintiff (which is not the registered proprietor of the said Land) is the wording of the said S.329(1) of the NLC. Damages are not limited to just the damage or loss suffered by the registered proprietor of the subject Counsel for the Plaintiffs: Liew Seong Yee (Yiew De Quan with him) SOLICITORS FOR THE PLAINTIFFS: MESSRS SHEARN DELAMORE & CO. Advocates & Solicitors 7th Floor, Wisma Hamzah-Kwong Hing, No. 1, Leboh Ampang, 50100 KUALA LUMPUR. Counsel for the Defendants: Christie Marie a/l Mariasoosai Nathan (Jusween Kaur with him) SOLICITORS DEFENDANTS: MESSRS CHRISTIE SOOSAY NATHAN & ASSOCIATES. Advocates & Solicitors J-5-11, No. 2, Jalan Solaris Mont Kiara, 50480 KUALA LUMPUR. Wafiy bin Azman watching brief for Bank Pembangunan Malaysia Berhad CASES REFERRED: 1. Hun Tee Siang (Menyaman atas kapasiti sebagai pemegang jawatan di Persatuan Penduduk Country Heights Damansara, Kuala Lumpur) & Ors v. Mega Palm Sdn. Bhd. & Anor [2024] 6 CLJ 56. 2. Nanyang Development (1966) Sdn. Bhd. v. How Swee Poh [1970] 1 MLJ 145. 3. Score Options Sdn. Bhd. v. Mexaland Development Sdn. Bhd. [2012] 6 MLJ 475. 4. Hew Sook Ying v. Hiw Tin Hee [1992] 2 MLJ 189. LEGISLATION REFERRED: 1. O.32 r.13(2) Rules of Court 2012 2. S. 322 National Land Code 1965 3. S. 324(1) National Land Code 1965 4. S. 326 National Land Code 1965 5. S. 327(1) National Land Code 1965 6. S. 329(1) National Land Code 1965