Khas Cergas Sdn Bhd (Melalui Penerima dan Pengurus Bersama Ng Seing Liong dan Ng Choon Jin) v Sayyid Shah Bin Abdullah (WA-24NCvC-5791-12/2023)

This is an application by the Applicant, Khas Cergas Sdn Bhd (through its Receivers and Managers Ng Seing Liong and Ng Choon Jin), for an order to remove the private caveat lodged by the Respondent, Sayyid Shah Bin Abdullah, against the property known as No. GRN 65111, Lot 74 Section 3, Pekan Batu, District of Kuala Lumpur (the Property).

On 11.3.2024 after considering the cause papers and the submissions of both parties, this Court had allowed the application by the Applicant with costs of RM10,000. The Respondent, dissatisfied with the decision has lodged and appeal at the Court of Appeal. These are the reasons for this Court’s said decision. 03/05/2024 16:13:16 WA-24NCvC-5791-12/2023 Kand. 16

The facts of the case are straightforward. The Applicant obtained financing facilities from Small Medium Enterprise Development Bank Malaysia Berhad (SME Bank) to purchase the Property on 27.2.2014. As security for the financing facilities and pursuant to the agreements (including the debenture agreement) executed on 23.9.2014, the Applicant created a charge over the Property in favour of SME Bank. The debenture agreement was registered with the Companies Commission Malaysia (SSM) on 1.10.2014. The Applicant defaulted in repaying the financing facilities, and consequently, on 14.9.2022 SME Bank appointed Ng Seing Liong and Ng Choon Jin as the Joint Receivers and Managers of the Applicant.

The Applicant, through its Joint Receivers and Managers, entered into a Sale and Purchase Agreement dated 14.8.2023 with Health Lane Properties Sdn Bhd (the Buyer) to sell the Property. The Applicant and the buyer have executed Form 14A for the transfer of the Property. However, on 29.11.2023, the Respondent, who is a director and shareholder of the Applicant, lodged a private caveat bearing Presentation No. PDB19330/2023 against the Property. So currently the instrument of transfer is pending presentation and registration at the Kuala Lumpur Land Office due to the private caveat lodged by the Respondent.

Based on the Form 19B dated 29.11.2023 filed by the Respondent, the reasons for the lodgement of his private caveat were to protect his personal interest (as per his statutory declaration affirmed on 23.10.2023) and are:

A civil suit commenced by the Respondent against SMEBank and the Applicant’s Receiver and Manager (Suit No. WA- 22NCC-68-02/2023 (Suit 68);

(ii) 2 civil appeals pending at the Court of Appeal – Appeal No. W- 02-(IM)(NCC)-1041-06/2023 (Appeal 1041) and Appeal No. W-02(IM)(NCC)-1059-07/2023 (Appeal 1059). Parties’ arguments [6] The Applicant contended that the Respondent has no caveatable interest in the Property. The Respondent's interests as a shareholder and director of the Applicant are incapable of registration on the Property's title, and hence do not constitute a caveatable interest under our National Land Code (NLC). Further, the Applicant argued that the grounds stated by the Respondent for lodging the private caveat, namely the pending suits and appeals against the Joint Receivers and Managers, have been disposed of by the courts. As such, there are no more grounds to maintain the private caveat. [7] The Applicant further submitted that the Respondent's repeated lodgement of private caveats, despite the High Court's earlier decision that he has no caveatable interest in the Applicant's properties, is an abuse of the legal process. The Applicant claimed that the Respondent is attempting to prevent the completion of the transfer of the Property to the Buyer. [8] In response, the Respondent maintained that he has a registrable interest in the Property, and that his claim is not frivolous or vexatious. The Respondent argued that he still has residual powers as a director of the Applicant to challenge the conduct of the Joint Receivers and Managers in selling the Property below market value. The Respondent contended that the balance of convenience favoured maintaining the private caveat until he has exhausted all his remedies in the courts. This Court’s decision [9] Having considered the submissions of both parties and the applicable law, this Court is of the firm view that the private caveat lodged by the Respondent must be removed. [10] It is a fundamental principle of our legal system that orders and judgments of the courts must be respected and complied with. As eloquently stated by the Court of Appeal in Wee Choo Keong v MBF Holdings Bhd & Anor and another appeal [1993] 2 MLJ 217; [1993] 1 MLRA 260 at p220: "It is established law that a person against whom an order of court has been issued is duty bound to obey that order until it is set aside. It is not open for him to decide for himself whether the order was wrongly issued and therefore does not require obedience. His duty is one of obedience until such time as the order may be set aside or varied." [11] In the present case, the High Court has previously decided that the Respondent has no caveatable interest in the Applicant's properties. Despite this, the Respondent has proceeded to lodge another private caveat on essentially the same grounds. This is a blatant disregard of the court's order and cannot be condoned. The decision by the Court of Appeal in Wee Choo Keong v MBF Holdings Bhd & Anor and Another Appeal [1993] 2 MLJ 217 is instructive – at p220: “Obedience to court order It is established law that a person against whom an order of court has been issued is duty bound to obey that order until it is set aside. It is not open for him to decide for himself whether the order was wrongly issued and therefore does not require obedience. His duty is one of obedience until such time as the order may be set aside or varied. Any person who fails to obey an order of court runs the risk of being held in contempt with all its attendant consequences.” [12] Furthermore, the Respondent's contention that he has a registrable interest in the Property as a director and shareholder of the Applicant is unsustainable in law. It is settled principle that the interests of a shareholder or director in a company's property are incapable of registration, and hence do not constitute a caveatable interest under our NLC. As held by the Supreme Court in Hew Sook Ying v Hiw Tin Hee [1992] 2 MLJ 189; [1992] 1 MLRA 169; [1992] 1 CLJ (Rep) 120 at p198: "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." [13] The law provided for under s383(1) Companies Act 2016 (CA) conferred the Applicant’s Receivers and Managers the authority to sell the Property as conferred by clause 6.2 of the debenture agreement. Clause 6.2 of the debenture agreement empowered the Joint Receivers and Managers to bring, take, and/or defend any actions, suit or proceedings whatsoever, civil or criminal, in relation to the debenture assets. The said section 383(1) CA is reproduced herein for easy reference: “A receiver or receiver and manager shall have the powers and authorities expressly or impliedly conferred by the instrument or by the order of the Court, by or under which the appointment was made.” [14] The established principle as to what tantamount to caveatable interest was clearly decided in Luggage Distributors (M) Sdn Bhd v Tan Hor Teng [1995] 1 MLJ 719; [1995] 1 MLRA 225; [1995] 3 CLJ 520; [1995] 2 AMR 969 that clearly showed the Respondent did not have any caveatable interest that was capable of being registered – at p755: “The Code creates three categories of interest in land. They are as follows. Category 1: Registrable interests in land. Only certain interests are capable of registration. Within this are two subcategories, namely:

Registered title. This may be in perpetuity or for a term of years. It pertains to ownership of land. The ‘owner’ is termed by the Code as a ‘registered proprietor’,

Registrable interests falling short of ownership. These are leases charges and easements. Category 2: Interests that are capable of registration. These include tenancies exempt from registration, which may be protected by means of an endorsement upon the register document of title. Category 3: Caveatable interests These are unregistered interests which are capable of protection by the entry of a private caveat. In the context of s323(1)(a), it is only a claim to the interests falling under category 1(a) and (b) above that may be protected by the entry of a private caveat. Cases falling under category (2) are not caveatable interests. A private caveat cannot, therefore, be entered by one who claims such an interest. Protection for such interests must be secured in the manner prescribed by the Code.” [15] The Respondent's argument that the sale of the Property by the Joint Receivers and Managers below market value justifies maintaining the private caveat is also unmeritorious. The Joint Receivers and Managers are duty-bound to act in the best interest of the Applicant and to obtain the best possible price for the Property. In the absence of any cogent evidence to the contrary, the court must proceed on the basis that they have discharged their duties properly. [16] In any event, the Respondent's recourse, if he is dissatisfied with the conduct of the Receivers and Managers, is to pursue the appropriate legal remedies in court. It is not open to him to abuse the caveat mechanism to obstruct the lawful dealings with the Property. [17] In the circumstances, this Court is satisfied that the Applicant has established good grounds for the removal of the private caveat. The balance of convenience also clearly favours the removal of the private caveat to enable the completion of the sale of the Property to the Buyer. [18] Accordingly, this Court allowed the Applicant's application in terms of the originating summons. I order that the private caveat bearing Presentation No. PDB19330/2023 lodged by the Respondent on 29/11/2023 against the property known as No. GRN 65111, Lot 74 Section 3, Pekan Batu, District of Kuala Lumpur be removed forthwith. [19] This Court also granted the declaration sought by the Applicant that it has an indefeasible interest in the Property pursuant to s340 of our NLC as against any private caveat lodged by the Respondent. [20] Further, this Court granted an injunction restraining the Respondent, whether by himself or through his agents or representatives, from lodging any further private caveat against the Property on the same grounds as the private caveat that has been ordered to be removed. [21] As the Respondent's actions amount to an abuse of the legal process, this Court ordered costs of this application to be paid by the Respondent to the Applicant in the sum of RM10,000. The Court considered costs in the said amount as reasonable. [22] Let this be a lesson to all that court orders are not to be trifled with. The integrity of our legal system depends on the willingness of parties to abide by the decisions of the courts, whether they agree with them or not. Parties were reminded by this Court that a culture of disrespect for court orders will only lead to chaos and the erosion of the rule of law. DATED 24 APRIL 2024 ROZ MAWAR ROZAIN JUDICIAL COMMISSIONER HIGH COURT OF MALAYA KUALA LUMPUR