Bisi Anak Jinggot & 21 Lagi v Lembaga Amanah Kebajikan Darul Falah (Q-01(IM)(NCvC)-265-05/2021)

AND SUPERINTENDENT OF LAND AND SURVEY, KUCHING …DEFENDANTS

SARAWAK LEMBAGA AMANAH KEBAJIKAN DARUL FALAH 04/04/2024 21:41:15 Q-01(IM)(NCvC)-265-05/2021 Kand. 50 Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 2 CORAM SUPANG LIAN JCA MOHD NAZLAN GHAZALI JCA AZIZUL AZMI ADNAN JCA JUDGMENT OF THE COURT INTRODUCTION [1] The present appeal was against the decision of the High Court allowing an application under order 14A of the Rules of Court 2012, by which the appellant 5 plaintiffs’ case was struck out as against the respondent, which was the third defendant in the court below. The case turned upon the true construction of section 134 of the Sarawak Land Code, which provides for the circumstances under which a land title may be challenged on account of fraud. [2] We allowed the appeal and directed that the case be remitted back to the 10 High Court for trial. The reasons for our decision are recorded here. In these grounds of judgment, the parties will be referred to as they were in the court below. MATERIAL BACKGROUND FACTS [3] The plaintiffs in this case claimed native customary rights over land 15 measuring more than 220 acres in the Matang district in Sarawak. According to the plaintiffs, customary rights over this land were created in the 1940s. In 1993, the land was alienated to the third defendant, Lembaga Amanah Kebajikan Darul Falah. [4] A settlement survey exercise had been carried out over the subject lands 20 in 1972 by the first defendant, who is the Superintendent of Lands and Surveys, Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 3 Kuching. This survey recorded the names of several claimants of native customary rights over the subject land, including the predecessors-in-title and ancestors of the plaintiffs. [5] Despite this settlement survey having been conducted and without any extinguishment of the native customary rights of the claimants, the land in 5 question was alienated to the third defendant in 1993. Two leases were granted to the third defendant, the total land area of which was 90.817 hectares, or approximately 224.41 acres. The leases were granted for a period of 99 years. The consideration payable to the state for each lease is a peppercorn per annum. [6] The plaintiffs’ pleaded case was that the alienation and transfer to the 10 third defendant was effected fraudulently by the first defendant and the second defendant (being the state government of Sarawak). It was also contended that the first and second defendants were in breach of their fiduciary duties to the plaintiffs when they did so. The plaintiffs further contended that they had discovered the alleged fraud only in 2016, and hence they were not barred by 15 limitation. [7] It is important to observe the following points:

there was no allegation of fraud against the third defendant (the respondent here); and

the contention of fraud against the first and second defendants was 20 only raised in the plaintiffs’ reply to the defence. Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 4 [8] Among the reliefs sought by the plaintiffs was a declaration to the effect that the two titles held by the third defendant over the subject land are null and void. THE ORDER 14A APPLICATION [9] The third defendant made an application under order 14A of the Rules of 5 Court 2012 for the determination of two preliminary questions of law. The two questions posed were as follows (in verbatim):

whether, the effect of the decision of the Federal Court in TH Pelita Sadong Sdn Bhd v TR Nyutan & Ors [2018] 1 CLJ and Court of Appeal in Yahya Bin Timbon & Ors v Kumpulan Parabena Sdn Bhd [2020] 5 MLJ 774, on the 10 Plaintiffs’ action against the 3rd Defendant is that the Plaintiffs have no right in law whatsoever to claim declaratory order or any other legal remedy against the 3rd Defendant who is the registered proprietor of Lots 85 and 86 both of Block 1 Matang Land District and should therefore be summarily dismissed; and 15

(ii) whether the 3rd Defendant by virtue of being the registered proprietor of Lots 85 and 86 both of Block 1 Matang Land District and the holder of the issue documents of title thereto issued by the Superintendent of Lands and Surveys; holds an indefeasible title to the same as against the Plaintiffs who accordingly have no cause of action against the 3rd Defendant. 20 [10] Should these questions be answered in the affirmative, the third defendant prayed for the suit against it to be dismissed. THE DECISION OF THE HIGH COURT [11] The learned High Court judge hearing the application answered both the questions posed in the affirmative and proceeded to dismiss the plaintiffs’ claim 25 against the third defendant. [12] The High Court expressed two reasons for this decision: Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 5

first, the third defendant had obtained an indefeasible title that could not be challenged by the holder of prior (and unextinguished) native customary rights over the land; and

neither fraud nor conspiracy had been pleaded against the third defendant. 5 [13] The relevant passages of the grounds of judgment of the High Court bear setting out in full: [29] In respect of the NOA at Enclosure 125, applying the principles of TH Nyutan, the 3rd Defendant has indefeasibility of title and this is supported by the principals in Nikodemus Singai & Ors v Sibu Slipway Sdn Bhd & Ors [2010] 10 10 CLJ 383 whereby it was held that: and titles should not be issued over native customary land, unless they have been extinguished first but was respect, once the titles are issued, I take the contrary stand and the defendants are right—there is indefeasibility of title. 15 [30] Moreover, the land was alienated to the 3rd Defendant way back in 1993 and the allegation by the Plaintiffs were merely allegations that they might have knowledge of the fraud by the 1st and 2nd Defendants in giving the land to them could not hold water and unsustainable. [31] Furthermore, as highlighted by the 3 Defendant and in their pleading i.e 20 Statement of Claim, there is no allegation of fraud nor conspiracy being made against the 3 Defendant together with the 1st and 20 Defendants in the alienation process of the said Lands. It is mere suspicion that the 3d Defendant must have knowledge of the fraud by the 1st and 2d Defendants on the transaction and as a result Enclosure 125 ought to be allowed with a minimal 25 cost of RM1,000. ANALYSIS Summary [14] The following summarises the findings of this court:

There were no allegations of fraud made in the case of TH Pelita 30 Sadong v TR Nyutan Jami [2018] 1 CLJ 19, unlike in the present case. Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 6 Under the Sarawak Land Code, fraud has been expressly provided as an exception to the general principle of indefeasibility of title. Hence, the court below erred in law when it relied on TH Pelita Sadong v TR Nyutan Jami to dismiss the plaintiffs’ case.

Section 134(1) of the Sarawak Land Code, on its proper construction, 5 does not require fraud to have been committed by the registered proprietor. It suffices if the registered proprietor’s title had been “procured or made by fraud”, in which event it will be defeasible at the instance of the defrauded person. On the facts of the present case, the plaintiffs allege that the first and second defendants had acted 10 fraudulently in alienating the land to the third defendant. If the plaintiffs’ claims against the first and second defendant are made out, it follows therefore that the third defendant’s title would be liable to be set aside. This would be the case even though there is no allegation of fraud against the third defendant.

Section 134(2), which provides for the indefeasibility of title of a bona fide subsequent purchaser for valuable consideration, cannot be invoked by the third defendant, because the third defendant does not take its title from a prior purchaser. [15] These findings are explained in further detail in the following paragraphs. 20 Indefeasibility [16] The principle of indefeasibility of title applies under the Sarawak Land Code, as it does under the National Land Code 2020. Like for the rest of Malaysia, fraud is one of the exceptions that may operate to defeat the title of a registered proprietor. Section 132(1) of the Sarawak Land Code provides for the general 25 Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 7 principle of indefeasibility of the title of a registered proprietor, and also expressly states that fraud operates as an exception to that general principle: Indefeasibility of title 132.⎯(1) Subject to this Code, the registered proprietor of any estate or interest in land to which this section applies shall, except in the case of fraud, hold such estate 5 or interest subject to the interests noted on the Register but free from all other interest except⎯

the estate or interest of a proprietor included in the Register in priority to the title under or through which the first mentioned registered proprietor claims, being an estate or interest to which this section applies;

as regards any portion of land included in the issue document of title by virtue of a wrong description: Provided that this exception shall not apply if the registered proprietor is a purchaser in good faith and for value of the portion of land affected, or derives title through such a purchaser;

the implied conditions, obligations and restrictions referred to in section 32;

the interest of a tenant in possession of land for a term not exceeding one year;

any charge affecting the land under any written law; and (f) any easement lawfully created and subsisting on the 1st day of January, 1958, or at such later date when the estate or interest affected by such easement becomes included 20 in the Register. [17] Reliance was placed by both the third defendant and the High Court judge on the Federal Court case of TH Pelita Sadong v TR Nyutan Jami [2018] 1 CLJ 19 for the principle that a pre-existing native customary right over a piece of land would not have supremacy over a title subsequently registered over the same 25 land. In that case, the Sarawak state government alienated land by issuing provisional leases to the first and second defendants, who, during the pendency of the case at the High Court, sold the leases to TH Pelita Sadong Sdn Bhd and TH Pelita Gedong Sdn Bhd. These companies intervened in the subsequent appeals. The High Court had made a definitive finding of fact that the plaintiffs— 30 who were Ibans suing on behalf of their community in Kampung Lebor— Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 8 possessed pre-existing native customary rights over the land in dispute. Despite this, the Federal Court held that those unextinguished native customary rights could not defeat the subsequent registered titles of the interveners. The judgment of the Federal Court stated as follows: It is our judgment that s. 132 of the Sarawak Land Code pertaining to indefeasibility 5 of title remains applicable even if it could be shown that NCR had been created over land in the manner prescribed under the same Code. A claim for NCR does not defeat the indefeasibility of title of land, even though the interest stated in the issue document of title was issued after NCR was asserted. The first and second defendants' rights as leaseholders, and the first and second interveners as 10 proprietors and the third intervener as chargee are not defeated by the plaintiffs' claim to NCR. [18] In TH Pelita Sadong v TR Nyutan Jami, the plaintiffs had not alleged fraud on the part of the defendants or the interveners. This, in our considered judgment, is a critical point of distinction, because, as explained, fraud has been 15 expressly provided as an exception to the general principle of indefeasibility of the title of a registered proprietor. [19] In the context of present case, the court was not so much concerned with the question of whether native customary rights would prevail over a registered interest, but rather whether fraud on the part of a person other than the 20 registered proprietor could operate to defeat his title. [20] In TH Pelita Sadong v TR Nyutan Jami, the Federal Court expressly recognised none of the factors that could vitiate indefeasibility had been proven in that case: [40] It is our judgment that an NCR claim without title should not be put on a better 25 footing with differential treatment. (Bato Bagi & Ors v. Kerajaan Negeri Sarawak & Another Appeal [2011] 8 CLJ 766). A claim for NCR and indefeasibility of title exist side by side. Based on the facts of this case, the disputed lands were converted to registered entities even before the plaintiffs succeeded in their NCR claim. Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 9 [41] In the absence of the vitiating factors under s. 132 of the Sarawak Land Code, the first and second defendants' rights as leaseholders, and the first and second interveners as proprietors and the third intervener as chargee cannot be defeated by the plaintiffs' NCR. [Emphasis added] 5 [21] By contrast, in the present case, what is being alleged is the vitiating factor of fraud. It is accordingly our view that, the reliance placed by the court below on TH Pelita Sadong v TR Nyutan Jami at paragraph 29 of the grounds of judgment of the High Court was misplaced and constituted a misdirection in law. Fraud and section 134 10 [22] The effect of fraud is provided for by section 134 of the Sarawak Land Code, which reads as follows: Effect of fraud 134.⎯(1) Any issue document of title or entry or alteration in the Register procured or made by fraud shall be void as against any person defrauded, or who may be 15 defrauded, thereby, and no person who is a party or privy to the fraud, or who claims solely as a volunteer under such person, shall take any benefit therefrom.

Nothing in this Code shall be so construed as to place in doubt the title of any person who is a purchaser in good faith and for value of any interest, and who is registered as the proprietor of such interest, on the ground that the registered 20 proprietor through or under whom he claims was registered as proprietor through fraud or error, whether such fraud or error consisted in a misdescription of the land or otherwise. [23] Subsection (1) is the principal operative provision dealing with the effect of fraud on the title of a registered proprietor. Subsection (2), as we shall see, 25 deals with the rights of a subsequent purchaser. [24] Counsel for the respondent before us, Ms Yap, submitted that there are two limbs to subsection (1). [25] We agree. The two limbs are as follows: Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 10 Limb 1 Limb 2

The first limb provides that an issue document of title or registration procured or made by fraud would be void against the person who had been or would have been defrauded.

The second limb provides that any person who has been privy to the fraud as well as any person who subsequently obtains title from the 5 fraudster but who has not provided valuable consideration cannot obtain the benefit of the title or registration. Any issue document of title or entry or alteration in the Register procured or made by fraud shall be void as against any person defrauded, or who may be defrauded, 10 thereby, and no person who is a party or privy to the fraud, or who claims solely as a volunteer under such person, shall take any benefit therefrom. The constituent elements of both limbs are explained in detail in the following paragraphs. 15 The first limb of section 134(1) [26] Under the first limb of section 134(1) of the Sarawak Land Code, where an issue document of title has been procured or made by fraud, that title is defeasible at the instance of the person who had been defrauded. [27] The observation may be made that—and this is the determinative point 20 in the present case—there are no words in first limb of subsection (1) that requires the fraud to have been committed by the registered proprietor. It suffices if the registered proprietor’s title had been “procured or made by fraud”, in which event it will be defeasible at the instance of the defrauded person. On the facts of the present case, the plaintiffs allege that the first and 25 second defendants had acted fraudulently in alienating the land to the third defendant. If the plaintiffs’ claims against the first and second defendant are Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 11 made out, it follows therefore that the third defendant’s title would be liable to be set aside. This would be the case even though there is no allegation of fraud against the third defendant. [28] Before us, learned counsel for the third defendant sought to argue that section 134(1) may only be invoked if fraud is alleged against the registered 5 proprietor. We were unable to agree with this contention, as such a construction is not supported by a reading of the plain words of section 134(1). There is no ambiguity at all in the form of words used. The strained construction suggested by counsel found no support whether in authority or principle. [29] For these reasons, we were of the view that, even though the learned High 10 Court judge was correct in that fraud had not been pleaded against the third defendant, nonetheless the law does not require the registered proprietor to be complicit in the fraud before his title may be assailed; it suffices if his title had been procured by fraud by the action of others. Whether or not this was the case in the context of the present case was a matter that must be determined at a 15 trial of the action. The second limb of section 134(1) [30] The wording in the second limb of subsection (1) states as follows: …no person who is a party or privy to the fraud, or who claims solely as a volunteer under such person, shall take any benefit therefrom 20 [31] The second limb deals with two classes of persons:

a person who is a party or privy to the fraud—meaning someone who has been complicit in the fraudulent activity; Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 12

a person who had obtained title from someone coming within subparagraph (a), but who has not provided valuable consideration for the title. Good faith is immaterial. [32] Both of these categories of persons may not “take any benefit therefrom”. The word “therefrom” in this context refers back to the opening words “[a]ny 5 issue document of title or entry or alteration in the Register”. Thus, properly understood, the second limb prohibits (i) the fraudster, and (ii) persons who had acquired title from the fraudster but who has not provided valuable consideration, from taking any benefit from the title or the register. [33] The second limb is inapplicable in the context of the present case, because 10 there is no allegation of fraud against the third defendant. In any event, even if a “peppercorn” is adequate consideration, the third defendant had not acquired its title from a prior registered proprietor who was privy to any fraud. The words “volunteer under such person” connotes that the volunteer must have obtained title from a prior registered proprietor. In the present case, there was no prior 15 registered proprietor, because the land in question had been alienated for the first time to the third defendant. The bona fide subsequent purchaser for value: section 134(2) [34] Section 134(2) deals with the position of the bona fide purchaser for value. Under this subsection, the title of a bona fide subsequent purchaser for valuable 20 consideration is unassailable at law. [35] In our considered view, the respondent cannot avail itself of the protection accorded by section 134(2) because, on its true construction, subsection (2) only protects a bona fide purchaser for valuable consideration who is also a subsequent purchaser. This is so because of the presence of the 25 Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 13 phrase “on the ground that the registered proprietor through or under whom he claims was registered as proprietor through fraud or error”, which connotes the existence of a prior registered proprietor. The third defendant in this case does not take its title from a prior purchaser. [36] For the avoidance of doubt, we express no view as to whether a 5 peppercorn per annum would be sufficient to constitute valuable consideration for the purposes of section 134(2) or to elevate the status of a registered proprietor from a mere “volunteer” for the purposes of the second limb of section 134(1). The issue, in our considered view, simply does not arise in the context of the facts of the present appeal. However, the sufficiency of the 10 consideration—whether in a legal or commercial sense—may well have a bearing on the contention of fraud, which will be a matter for ventilation at the trial of the action. The pleading point [37] Counsel for the third defendant raised the point that the allegation of 15 fraud against the first and second defendants had not been made in the statement of claim, but had only been raised in the reply to the defence. [38] In our considered view, it is of course preferable that an allegation of fraud that had not previously been raised in pleadings be effected through an amendment of the statement of claim, rather than raised in the reply to the 20 defence. Nonetheless, in the context of the present case, there has not been any contravention of the rules on pleadings. [39] The applicable provision is order 18 rule 10 of the Rules of Court 2012, which reads as follows:

Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 14 Departure (O. 18 r. 10)

A party shall not in any pleading make an allegation of fact or raise any new ground or claim inconsistent with a previous pleading of his.

Paragraph (1) shall not be taken as prejudicing the right of a party to amend, or apply for leave to amend, his previous pleading so as to plead the allegations or 5 claims in the alternative. [40] Having carefully reviewed the plaintiffs’ pleadings in this case, we were unable to conclude that the contention of fraud in the reply to the defence is inconsistent with the contents of the statement of claim. Even if this had been the case, it was clear that the justice of the case would have required the court 10 to direct the plaintiffs to amend their statement of claim, rather than a total dismissal of the action against the third defendant. Summary of the applicable principles [41] The applicable principles may be summarised as follows:

Under section 134(1) of the Sarawak Land Code, where an issue 15 document of title or an entry or amendment on the register of titles has been procured or made by fraud, that title, entry or amendment is defeasible at the instance of the person who had been defrauded. This would be the case even if the registered proprietor had not been complicit in the fraud; for as long as his title or entry onto the register 20 had been procured or made by fraud, his title would be susceptible to challenge by the person defrauded.

Under the second limb of section 134(1), the title of the following categories of persons are void:

a person who is a party or privy to the fraud by means of which 25 title or registration had been obtained; and Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 15

(ii) a person who had not provided valuable consideration (a “volunteer”) and who had obtained title from a prior registered proprietor who had been a party or privy to the fraud by means of which that prior registered proprietor had obtained title or registration. This applies whether or not the volunteer had acted 5 in good faith.

The title of a bona fide subsequent purchaser for valuable consideration is indefeasible by virtue of section 134(2). [42] It may thus be seen that the Sarawak Land Code, like the National Land Code 2020, confers upon an acquirer of land deferred indefeasibility upon his 10 registration on the register of titles.

[43] For these reasons explained in this judgment, we were of the view that the two questions posed in the order 14A application ought to be answered in the negative. We allowed the appeal with costs and set aside the order of the 15 court below. The plaintiffs’ claim against the third defendant was remitted back to the High Court for a determination on the merits. 18 March 2024 20 Azizul A Adnan Judge of the Court of Appeal Bisi anak Jinggot v Lembaga Amanah Kebajikan Darul Falah 16 For the appellant: Mr Andrew Winston Kaya—Messrs Winston Kaya Advocates For the respondent: Ms Yap Khan Kee—Messrs Ee & Lim Advocates