MALAYAN BANKING BERHAD v Mohd Affandi Bin Ahmad (J-02(NCvC)(W)-452-03/2022)

MOHD AFFANDI BIN AHMAD

AMINAH BT AHMAD (NO. K/P SINGAPURA: S0569048Z) (DI DALAM KAPASITINYA SEBAGAI PENTADBIR KEPADA HARTA PUSAKA AHMAD BIN BUANG (NO. K/P SINGAPURA: S0620626C) ... RESPONDEN-RESPONDEN HEARD TOGETHER WITH DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN) RAYUAN SIVIL NO.: J-02(NCvC)(W)-549-03/2022 ANTARA Q DEVELOPMENT SDN.BHD. (SYARIKAT NO. 1271630-U) …PERAYU

MOHD AFFANDI BIN AHMAD

AMINAH BT AHMAD (NO. K/P SINGAPURA: S0569048Z) …RESPONDEN-RESPONDEN 06/10/2023 10:28:04 J-02(NCvC)(W)-452-03/2022 Kand. 33 (Dalam Mahkamah Tinggi Malaya Di Johor Bahru Dalam Negeri Johor Darul Takzim, Malaysia

Mohd Affandi Bin Ahmad (No. K/P Singapura: S1309381D)

Aminah Bt Ahmad (No. K/P Singapura: S0569048Z) ... Plaintif-Plaintif

Pembangunan Tanah Dan Perumahan Sdn. Bhd. (Syarikat No. 007545-P)

Q Development Sdn. Bhd. (Syarikat No. 1271630-U)

Malayan Banking Berhad (Syarikat No. 3813-K) ... Defendan-Defendan) CORUM RAVINTHRAN A/L N. PARAMAGURU, JCA HASHIM BIN HAMZAH JCA AZIMAH BINTI OMAR, JCA GROUNDS OF JUDGMENT A. BACKGROUND FACTS [1] The two Appeals before us concern a claim by co-administrators cum beneficiaries (“the Plaintiffs”) of a deceased’s estate (“the estate”) for unlawful transfers of two (2) of the deceased’s estate’s properties devised by Pembangunan Tanah dan Perumahan Sdn Bhd (“the 1st Defendant”) in which the 1st Defendant had wrongfully sold the same two (2) properties of the estate to multiple purchasers (firstly being the estate and the other purchaser being Q Development Sdn Bhd (“the 2nd Defendant”). [2] It remains clear to us that as far as the Plaintiffs and the 2nd Defendant are concerned, they are both the 1st Layer of immediate purchasers and supposed immediate transferees of the 2 properties. Thus, contrary to the parties’ submissions and the High Court’s analysis, the dispute between the Plaintiffs and the 2nd Defendant should not have been on the premise of Deferred Indefeasibility under Section 340(3) of the National Land Code. [3] Instead, the dispute should have appropriately been approached and deliberated on the premise of competing legal/equitable interests between two competing purchasers of the same 2 properties. The fact that the ‘repeated’ sale of the 2 properties to the 2nd Defendant occurred only decades after the 1st sale of the 2 properties to the deceased does not at all mean that there was a ‘subsequent purchaser’ or subsequent transferee of the 2 properties within the context of the principle of Deferred Indefeasibility. Thus, from the outset we can clearly identify that the parties’ submissions (and subsequently the High Court’s analysis) had embarked from the wrong tangent and trajectory. Now, although we agree with the High Court’s ultimate decision to allow the Plaintiffs’ claim, we are minded to state that we similarly find so on a totally different analysis and basis. In any case, the parties shall herein be referred to in their original capacities as they were before the High Court. [4] On the other hand, Malayan Banking Berhad (“the Bank”) is claiming for Deferred Indefeasible title as subsequent chargee over the 2 properties when the 2nd Defendant charged the 2 properties as collateral for the Bank’s Term Loan facilities. [5] The Plaintiffs’ case was allowed by the High Court. The 1st Defendant did not appeal against the High Court’s decision and finding of unlawful transfer. Nor did the 1st Defendant appeal against the High Court’s positive finding of the validity of the Sale and Purchase Agreements in which the deceased had entered into to purchase the 2 properties. The 2nd Defendant appealed against the High Court’s decision via appeal number J-02(NCVC)(W)-549- 03/2022 (“Appeal 549”) in an attempt to vitiate the estate’s claim over the 2 properties. Meanwhile, the Bank appealed against the same decision via appeal number J-02(NCVC)(W)-452-03/2022 (“Appeal 452”) to insist on the Bank’s Deferred Indefeasibility over the 2 properties as bona fide second purchaser of the properties through the charge created subsequent to the 2 properties’ transfer to the 2nd Defendant. SALE AND PURCHASE OF THE 2 PROPERTIES BETWEEN THE DECEASED & THE 1ST DEFENDANT [6] One of the core contentions by the 2nd Defendant was that the 2nd Defendant was attempting to impugn the validity of the sale and purchase of the 2 properties between the deceased and the 1st Defendant primarily on the ground of privity of contract. This was purportedly because the Sale and Purchase Agreement was entered into by the deceased with one Syed Ali Bin Mohamed Al- Attas (who soon after the agreement became the 1st Defendant’s Director upon the incorporation of the 1st Defendant) (“Syed Ali”) circa 1967. [7] The 2nd Defendant tried to impress upon the Court that the sale between Syed Ali and the deceased should not be considered as a valid sale between the deceased and the 1st Defendant on the ground that the 1st Defendant had not yet even been incorporated at the time the sale and purchase agreements were entered into between 1967 and 1968. This error and misconception by the 2nd Defendant shall be dealt with later down this Judgment. [8] In any case, we are minded that the proper party to dispute the sanctity of the sale between the 1st Defendant and the deceased was the 1st Defendant itself who was the actual privy to the sale and purchase agreement and not the 2nd Defendant who only came into the picture some 50 years after the sale of the 2 properties to the deceased’s estate. [9] It was apparent to us that the sale of the 2 properties were in anticipation of the subsequent incorporation of the 1st Defendant as a future transferee (to later be able to transfer the 2 properties to the deceased) as per the terms of the sale and purchase agreements. The legitimate sale of a third party’s property by a vendor (ahead of actual registration to vendor’s name) is not at all uncommon. In view of this arrangement, Syed Husain bin Junid, Syed Jaffar bin Alwee, Syed Yahya bin Junid and Tengku Othman bin Abdullah (“the 4 individuals”) granted a power of attorney to Syed Ali on 26.7.1967 to deal with their lands (which included the 2 subject properties). [10] The 4 individuals were desirous of selling the 2 properties to the deceased (via the intermediary medium of Syed Ali who later incorporated the 1st Defendant in December 1967). The deceased purchased Lot 97 via a Sale and Purchase Agreement signed together with Syed Ali (who later become the Director of the 1st Defendant) on 6.11.1967 (“97 SPA”). Subsequently, the deceased purchased lot 716 via a Sale and Purchase Agreement signed together with Syed Ali (who was already the Director of the 1st Defendant at that time) on 20.3.1968 (“716 SPA”) (collectively referred to as “the SPAs”). [11] The Judicial Commissioner (“the Learned JC”- now High Court Judge) correctly appreciated the crucial fact and evidence that although both the SPAs were signed with the Director of the 1st Defendant, the full purchase prices for both the 2 Properties were FULLY PAID TO THE 1ST DEFENDANT (NOT SYED ALI). The 1st Defendant although given the opportunity to cross-examine and dispute these payments, have clearly admitted to the truth of these full payments as the 1st Defendant had opted not to bring any witnesses and not to cross-examine the truth of these payments. The full payments of the purchase prices for both the 2 properties were clearly recorded in the 1st Defendant’s own company ledgers. [12] Again, 1st Defendant as the only other privy to the SPAs have neither challenged these evidences nor did the 1st Defendant cross-examined any of these evidence during Trial. The 1st Defendant’s unchallenged ledgers indicated that the final instalment for the full purchase price for Lot 97 was settled (“jelas”) on 11.12.1970, while the final instalment for the full purchase price for Lot 716 was settled (“jelas”) on 14.8.1969. All payments were recorded to have been paid to and received by the 1st Defendant-company. [13] Just about 1 month after the 97 SPA (and 4 months before the 716 SPA), the 1st Defendant was incorporated circa December 1967. In furtherance of the SPAs, the 1st Defendant had ratified the SPAs via a letter dated 27.12.2005 which the 1st Defendant had issued to the Police (“the Ratification Letter”). Subsequent to the completion of both the SPAs and ratification by the 1st Defendant, the deceased had for more than half a century even until today erected houses and occupied the 2 Properties (now occupied by deceased’s beneficiaries after his passing). BREACH OF THE SPAs AND THE 2ND SALE OF THE SAME 2 PROPERTIES TO THE 2ND DEFENDANT [14] 50 years or so passed without event. Unfortunate to the deceased, unbeknownst to him, the 1st Defendant had never transferred and registered the name of the deceased as the registered proprietor of both 2 properties. Unlawfully and in breach of both SPAs, the 1st Defendant had sold the same properties to a 2nd buyer, the 2nd Defendant-company via a sale and purchase agreement dated 8.8.2018 (“2nd SPA”). The peculiar feature of this 2nd SPA was that notwithstanding the clear half century occupation of the 2 properties by the deceased’s estate, the 2 properties WERE SOLD AS VACANT LANDS (which was untrue). [15] The deceased’s estate (via the Plaintiffs) have never slept on their rights and had consistently pursued the transfer of title from the 1st Defendant but to no avail. The matter came to ahead when the 2nd SPA was revealed to the Plaintiffs for the first time when the 1st Defendant filed its Defence and Counterclaim. SUBSEQUENT CHARGE OF THE 2 PROPERTIES TO THE 3RD DEFENDANT-BANK FOR TERM LOANS TO FINANCE THE 2ND SPA [16] Although the 3rd Defendant Bank were trying its best to separate itself from the nuances of the 2nd SPA, it remains undisputed that the Term Loan that the Bank had granted to the 2nd Defendant (as chargee of the 2 Properties) was granted on Redemption basis for the alleged full purchase price under the 2nd SPA. Succinctly, the Bank was the financier for the sale of the 2 properties under the 2nd SPA. The charge was then registered on 26.6.2019 (“impugned Charge”). [17] In protecting the interest of the deceased’s estate, the Respondent-Plaintiffs have commenced an action at the High Court to impugn the propriety of the 2nd SPA and the legality of the impugned Charge. B. THE HIGH COURT’S DECISION [18] After Full Trial before the High Court, the Learned JC had allowed the Plaintiffs’ claim primarily on the following grounds: a. The 2nd Defendant-company’s position as the 2nd purchaser was of the position of a 2nd Layer (subsequent purchaser) in the context of Deferred Indefeasibility: “[92] The exception to nemo dat quod non habet is where the subsequent transferee is able to prove that it falls within the category of bona fide purchaser for valuable consideration. Proof of these requirements, found in the proviso to section 340(3) of the National Land Code, would revive the title of the subsequent purchaser, which in this case was the Second Defendant. b. The 2nd Defendant-Company was not a bona fide purchaser for value as there was no actual proof that the purchase price was paid by the 2nd Defendant to the 1st Defendant under the 2nd SPA: “[97] There was no evidence of such payment made. In fact, the evidence provided by the Second Defendant’s first witness, who was its director, Chan Jui Hui (“DW1”), was unconvincing as he was unable to explain the details of the sale and purchase of Lots 97 and 716. He had even contradicted the evidence of the Second Defendant’s second witness and solicitor, one Wong Yen Chnan (“DW2”), when he said that the money was paid through the Second Defendant’s solicitors. DW2 had denied receipt of any such payment, but informed the Court that there was merely an acknowledgment from the First Defendant, stating that it had received the monies from the Second Defendant, although no such acknowledgment was adduced in Court. DW1 subsequently confirmed that there were no documents whatsoever in the Bundle of Documents to prove that the Second Defendant had made payment to the First Defendant for the purchase price of the Lots. The contradiction of the Second Defendant’s own witnesses fortified the Plaintiffs’ contention that the Second Defendant was merely a volunteer pursuant to the SPA of 8 August 2018. … Based on the aforesaid evidence, or lack thereof, it was my finding, that the Second Defendant was a mere volunteer, and, therefore, could not avail itself of the proviso to section 340(3) of the National Land Code. Alluding to established principles pertaining to the Torrens system registration of land, therefore, as a volunteer and not a purchaser for valuable consideration, the Second Defendant did not need any protection. c. There were dubious and inexplicable features in the 2nd SPA in an attempt to sell the 2 Properties as vacant lands. The 2nd SPA was entered into in bad faith: “A holistic evaluation of the evidence led this Court to the irresistible inference that the sale and purchase of Lots 97 and 716 by the Second Defendant was not done in good faith, and neither was there valuable consideration, leading to the conclusion that the title of the Second Defendant to Lots 97 and 716 must be set aside. At this juncture, I also have to add that during the trial, the Second Defendant had dedicated more time and effort in attempting to challenge the Plaintiffs’ claim vis-à- vis the First Defendant, rather than proving the requirements of bona fide purchaser for valuable consideration.” d. The Bank as chargee was not a subsequent purchaser in the context of Deferred Indefeasibility as the Bank was not within the category of the 2nd layer of subsequent purchaser under the principle. Instead, the Learned JC found that the Bank as chargee (within the third layer) derived its interest from the 2nd Defendant (who was already found not to be a bona fide purchaser for value): “[110] In the present case, a scrutiny of that part of the proviso is crucial. The word ‘purchaser’ in the proviso refers to the Second Defendant, and ‘any person or body claiming through or under such a purchaser’, refers to the Third Defendant. Since the Third Defendant’s interest was granted by the Second Defendant, its interest depended on the title of the Second Defendant, and was protected, only if the Second Defendant was a purchaser in good faith and for valuable consideration. Since it was my finding that the Second Defendant had failed to establish that it was a purchaser in good faith and for valuable consideration, its title remained defeasible and, as such, the Third Defendant’s registered charges were also defeasible. It did not matter if the Third Defendant was a bona fide purchaser for valuable consideration when it had agreed for the charges on Lots 97 and 716 to be registered in its favour, as the Third Defendant was not a subsequent transferee and as such, the requirements of bona fide purchaser for valuable consideration did not apply to the Third Defendant.” e. The Bank had also failed to prove good faith as the Bank had failed to do its due diligence to perform simple verification on numerous salient and obvious features of the 2nd SPA which require proper evaluation. For a sale that was based on a full redemption basis, it was peculiar and incredulous that the Bank would release the Term Loan sum without ever sighting an actual evidence of payment by the 2nd Defendant to the 1st Defendant. It was also peculiar that the Bank did not bother to verify the condition of the 2 properties and failed to identify that the 2 properties were already occupied and erected with houses instead of being mere vacant lands as stated within the 2nd SPA: “… and that such loan was on a reimbursement basis, which meant that the amount would be paid to the Second Defendant after the charge documents were filed at the Land Office. She further testified that the payment of the loan sum was never made directly to the First Defendant, and that no enquiries were made by the Third Defendant to ascertain if any monies had actually been transferred by the Second Defendant to the First Defendant. [116] In my view, this was sufficient to put the Third Defendant on notice of the suspicious nature of the purported sale and purchase of the Lots between the First and Second Defendants, and the failure of the Third Defendant to make further enquiries had rendered an absence of bona fide on its part. … … In fact, I had to agree with the Plaintiffs that if a proper valuation together with a site visit had been conducted, the Third Defendant would have known that although the loan was provided to the Second Defendant on the premise that the land was empty, it was, in fact, not the case, as the Third Defendant would have known that the Lots were occupied, as permanent structures were in fact built on it. [19] Dissatisfied with the Learned JC’s decision, the 2nd Defendant and the Bank had filed the two separate Appeals before us at present. Appeal No. J-02 (NCVC)(W)-452-03/2022 (“Appeal 452”) was primarily the Bank’s Appeal to defend its position as a bona fide purchaser for value as a ‘subsequent purchaser’ within the context of Deferred Indefeasibility. On the other hand, Appeal No. J-02 (NCVC)(W)-549-03/2022 (“Appeal 549”) was the 2nd Defendant’s Appeal primarily attempting to dispute the validity of the deceased’s purchase of the 2 properties from the 1st Defendant. C. THE APPEAL BEFORE US [20] We have perused both the Memorandums of Appeal, Records of Appeal, and all respective written submissions in both Appeals 452 and 549 and verily believe that the 2 Appeals can both be determined by answering the following issues: a. Issue 1: Whether or not the Learned JC was correct in finding that the SPAs entered into between the deceased and Syed Ali (on behalf of the 4 individuals and the 1st Defendant) were validly binding on the 1st Defendant; b. Issue 2: Whether or not the Learned JC was correct to decide on the position of the 2nd Defendant on the context and basis of Deferred Indefeasibility as a 2nd layer subsequent purchaser; c. Issue 3: Whether or not the Learned JC was correct to decide on the position of the Bank on the basis of the Bank being a 3rd layer chargee deriving its rights from the 2nd Defendant as 2nd layer purchaser; and d. Issue 4: Whether or not the Learned JC was correct to find that the Bank was not a bona fide purchaser for value. D. ISSUE 1: WHETHER OR NOT THE LEARNED JC WAS CORRECT IN FINDING THAT THE SPAs ENTERED INTO BETWEEN THE DECEASED AND SYED ALI (ON BEHALF OF THE 4 INDIVIDUALS AND THE 1ST DEFENDANT) WERE VALIDLY BINDING ON THE 1ST DEFENDANT. [21] As mentioned earlier, the 2nd Defendant’s core contention was to impugn the validity or at least the deceased’s privity to claim for the 2 Properties. This contention was premised on two primary grounds: a. The 2 SPAs were entered into with Syed Ali (the Director of the 1st Defendant) and not the 1st Defendant per se; and b. The 97 SPA was entered into prior to the incorporation of the 1st Defendant. [22] Notwithstanding, we reiterate that the timing of the 1st Defendant’s incorporation was a non-issue. There already was a barrage of facts that would positively indicate that the subsequent incorporation of and ratification by the 1st Defendant to the 2 SPAs were within the parties’ anticipation and intention: a. Firstly, it could not have been mere coincidence that Syed Ali was the appointed attorney for the 4 individuals as well as the 1st Defendant’s Director upon the 1st Defendant’s incorporation. There was clear proximity of relationship between the 1st Defendant-company, the 4 individuals, and the 1st Defendant’s Director; b. Secondly, it could not have been sheer coincidence that the 1st Defendant was incorporated just 1 month after the 97 SPA and mere 4 months before the 716 SPA. Thus, there was also a clear proximity of time between both the SPAs and the incorporation of the 1st Defendant (before and after incorporation); c. Thirdly, there was a myriad of subsequent conducts by all parties which would support the existence and mutual adherence of the 1st Defendant and the deceased to the terms of the 2 SPAs: i. The 1st Defendant had issued the Ratification Letter circa 2005 to cement the 1st Defendant’s commitment and ratification of both the SPAs in support of the deceased’s entitlement over the 2 properties; ii. There was also the independent testimony of Syed Husin bin Junid (“Syed Husin”) (who was one of the 4 individuals who granted power of attorney to Syed Ali) confirming that the 2 SPAs signed for Lot 97 and Lot 716 was intended to bind the 1st Defendant and the deceased. d. There was uncontroverted evidence of the 1st Defendant’s own ledgers and record that deceased have paid the full purchase price TO THE 1ST DEFENDANT and not Syed Ali per se; and e. For more than half of a century (51 years), the 1st Defendant although retaining registered interest over Lot 97 and Lot 716, has never complained of the deceased’s (and his beneficiaries’) continued occupation and erection of houses on the 2 properties. It is patently obvious that the 1st Defendant admitted to the deceased’s entitlement over the 2 Properties vide the validly signed SPAs. [23] In any case, we are minded that the 1st Defendant had waived its opportunity to participate in the Trial and defend against the Plaintiffs’ claims under the 2 SPAs. The 1st Defendant neither adduced any witnesses nor undertook any cross-examination to prove the contrary. It is now far beyond our hands to disregard the 1st Defendant’s admission to the Plaintiffs’ claims. Thus, we are in agreement with the Learned JC’s finding that judgment must be given in favour of the Plaintiffs considering that the 1st Defendant (the only other privy to the SPAs aside from the deceased via the Plaintiffs) had not even bothered to cross-examine the evidence regarding the validity of the SPAs at trial. This trite law was recently restated by the Federal Court in the case of He-Con Sdn Bhd v Bulyah Binti Ishak and another appeal [2020] MLJU 916: “… neither was it put to the lawyer SP1 that such was the 1st Defendant’s case vis-a-vis P1 during his cross examination. Failure to properly cross-examine a witness of the adverse party means there is an admission to the fact advanced by the adverse party. [See, Browne v. Dunn [1893] 6 R 67 and AEG Carapiet v. AY Derderian AIR [1961] Cal 359 as examples.] [24] Even assuming that the 1st Defendant did step up to impugn the validity of the 2 SPAs, it would be a grave injustice for us to allow any party (be it the 1st or 2nd Defendants) to now resile from a 50 years’ worth of consistent admission and acceptance of the terms of sale under the SPAs signed between the 1st Defendant (via Syed Ali) and the deceased. The 1st Defendant cannot at one breath accept payments and admits the validity of the 2 SPAs, and at the same breath contend the invalidity of the same 2 SPAs. [25] Estoppel shall apply to bar the 1st and 2nd Defendants from inequitably denying the validity of the 2 SPAs. The principle of estoppel was very recently restated by the Court of Appeal in the case of Ho Yau Hong & Ors v How Yaw Ming and another appeal [2023] MLJU 933: [40] The Federal Court’s decision in the case of Boustead Trading (1985) Sdn Bhd v Arab Malaysian Merchant Bank Bhd [1995] 3 MLJ 331 has cautioned against such adoption of contradictory stances: “When the parties to a transaction proceed on the basis of an underlying assumption either of fact or of law – whether due to misrepresentation or mistake makes no difference – on which they have conducted the dealings between them – neither of them will be allowed to go back on the assumption when it would be unfair or unjust to allow him to do so”. lt would facilitate moral decadence within our social structure. [41] Such approbating and reprobating of stances have also been cautioned against by the Court of Appeal in the case of Cheah Theam Kheang v City Centre Sdn Bhd & Other Appeals

2 CLJ 16 which had held the following: “In other words of Sir Nicolas Browne-Wilkinson VC in Express Newspapers Plc v News (UK) Ltd and Others

3 All ER 376 at pp. 383 to 384: There is a principle of law of general application that it is not possible to approbate and reprobate. That means you are not allowed to blow hot and cold in the attitude that you adopt. A man cannot adopt two inconsistent attitudes towards another: he must elect between them and, having elected to adopt one stance, cannot thereafter be permitted to go back and adopt an inconsistent stance” [26] Thus, in view of the validity of the 2 SPAs and the full payment of the purchase prices to the 1st Defendant-vendor by the deceased, we are in agreement with the Learned JC’s finding that the 1st Defendant (as vendor) now continuously hold the 2 Properties under constructive trust for the benefit of the deceased’s estate. (see Federal Court in Samuel Naik Siang Ting v Public Bank [2016] 6 MLJ 1) [27] All of the above considered we answer issue 1 in the POSITIVE in that it was correct for the Learned JC to find that the SPAs entered into between the deceased and Syed Ali (on behalf of the 4 individuals and the 1st Defendant) were validly binding on the 1st Defendant (and that the 1st Defendant now holds the 2 Properties on constructive trust for the benefit of the deceased’s estate). E. ISSUE 2: WHETHER OR NOT THE LEARNED JC WAS CORRECT TO DECIDE ON THE POSITION OF THE 2ND DEFENDANT ON THE CONTEXT AND BASIS OF DEFERRED INDEFEASIBILITY AS A 2ND LAYER SUBSEQUENT PURCHASER. [28] Although we appreciate the Learned JC’s in-depth digest of the principle of Deferred Indefeasibility under Section 340(3) of the National Land Code, we are pressed to find that the Learned JC’s application of the principle was unfortunately erroneous. We believe that the Learned JC’s misapprehension might have been caused by these following facts: a. The 2 Properties were first transferred to the 1st Defendant-vendor’s registered proprietorship before it was later transferred to the 2nd Defendant; and b. The 2nd Defendant’s subsequent purchase of the same 2 Properties is in a general sense a ‘subsequent purchase’ and subsequent transfer’ of the same 2 Properties. [29] However, the two facts above do not at all fall within the ambit of Deferred Indefeasibility. Firstly, the transfer of the 2 Properties to the name of the 1st Defendant was not an issue as the 1st Defendant’s rights to sell the 2 Properties as vendor was well entrenched within the 2 SPAs. The transfer to the 1st Defendant was not the initial transfer which would be the 1st layer of purchaser/transfer within the context of Deferred Indefeasibility. It was merely a transfer to cement the 1st Defendant’s position as vendor to sell the 2 Properties under the 2 SPAs and unfortunately abused to sell the same 2 Properties to the 2nd Defendant under the 2nd SPA [30] Secondly, just because the 2nd Defendant’s purchase of the 2 Properties was ‘subsequent in time’ does not necessarily mean that the 2nd Defendant’s purchase was a 2nd layer subsequent purchase within the context of Deferred Indefeasibility. Instead, in actuality the position of both the deceased and the 2nd Defendant was both of 1st Layer Immediate Purchasers from one and the same vendor (being the 1st Defendant-company). A typical case for Deferred Indefeasibility can be illustrated as per the illustration A below: illustration A (Deferred Indefeasibility) [31] As can be clearly understood from illustration A above, a 2nd Layer Purchaser (which equity would clothe with Deferred Indefeasibility) is a purchaser who have purchased the Property FROM THE 1ST LAYER PURCHASER (NOT THE VENDOR). 2nd Layer bona fide purchaser for value is dubbed as ‘equity’s darling’ because they are presumed to be innocent purchasers (unless proven otherwise) who were supposedly too remote from and non-partisan to the mischief and unlawful nature of the 1st Layer Immediate Purchase. The Federal Court in Kamarulzaman bin Omar & Ors v Yakub bin Husin & Ors [2014] 2 MLJ 768 explains Deferred Indefeasibility in similar terms as follows: [42] Tan Sook Yee's Principles of Singapore Law (3rd Ed) at p 285 thus illustrated the difference between immediate and deferred indefeasibility: “An illustration of the difference between both theories is as follows: X is the original owner. Y forges X's signature and sells the property to Z, who was not privy to the forgery. Z registers the transfer and becomes the new registered proprietor. If indefeasibility were conferred immediately, Z's rights over the land will prevail over X's, notwithstanding that Z's title was derived from forged documents. In contrast, under the theory of deferred indefeasibility, Z's rights will not prevail as against X. However, should Z then sell the land to A, A will be able to claim indefeasibility as against X. Indefeasibility of title is thus conferred to the next purchaser.” [32] In stark contrast to the principle of Deferred Indefeasibility, the positions of the parties in the present Appeal can be illustrated as follows: Illustration B (Competing Legal/Equitable Interests) [33] Therefore, it is apparent from illustration B above that both the deceased and the 2nd Defendant were 1st Layer Immediate Purchasers who bought the same 2 Properties from the 1st Defendant. Thus, although the 2nd Defendant’s purchase was subsequent in time, the 2nd Defendant was still not a 2nd Layer Subsequent Purchaser within the context of Deferred Indefeasibility. [34] The above considered, the facts of the present case are more relatable to the context of COMPETING LEGAL/EQUITABLE INTERESTS between two purchasers who unfortunately have bought the same properties from one singular vendor. A most relevant case in point would be the Federal Court decision in Tan Ong Ban v Teoh Kim Heng [2016] 3 MLJ 23 (“Tan Ong Ban”). In Tang Ong Ban, a property was first sold by the Vendor to the Appellant. The Appellant however had yet to pay the full purchase price. The vendor then sold the same Property to one Ismail who successfully paid the purchase price. Ismail then sold the same Property to the Respondent who also paid the full purchase price. [35] The Court of Appeal found that (and the Federal Court never disagreed) the Respondent was a bona fide purchaser for value as a 2nd Layer Purchaser (who bought the Property from Ismail). However, the position of both the Appellant and Ismail was discussed in the context of competing legal/equitable interest of two 1st Layer Immediate Purchasers as they both have purchased the same Property from the same singular Vendor: “The principle of beneficial ownership differentiates between the rights of a purchaser of a property who has fully settled the purchase price with one who has not. This principle clothed a purchaser who had settled the full purchase price with a distinct privilege equivalent to a legal owner, although he or she had yet to be registered as the proprietor of the property… … Therefore, based on the ordinary sale and purchase transaction, the purchaser would acquire, a right in rem or a right in personam. Applying the legal principles to the facts of the present case it was clear that the respondent, who had paid the purchase price in full, was the beneficial owner of the property and enjoyed a right in rem over the property, while the appellant, who had not paid the full purchase price of the property, was at best clothed with a right in personam as against the respondent upon the execution of the first SPA and payment of the sum of RM5,250 to JAS. As such, the appellant’s right was purely contractual in nature as against JAS and no cause of action could lie against the respondent, who was a complete stranger to the contract. [36] Applying the above to the Appeals before us, the deceased’s estate was already clothed with right in rem over the 2 Properties when he paid the purchase prices for both the 2 Properties circa 50 years ago. By this time, the 1st Defendant-vendor was already holding the 2 Properties as constructive trustee for the benefit of the deceased. It naturally follows that when the 2nd SPA was signed on 8.8.2018, the vendor actually no longer has good title to sell or pass onto the 2nd Defendant. Thus, even if the 2nd Defendant had later paid the full purchase price to the 1st Defendant-Vendor (which there were no proof of such payment being made) the 2nd Defendant would only hold a right in personam against the 1st Defendant-Vendor under the 2nd SPA. [37] Therefore, by and large, the entirety of the Learned JC’s discourse on whether or not the 2nd Defendant was a bona fide purchaser for value was unnecessary. The 2nd Defendant’s title over the 2 Properties as 1st Layer Immediate Purchaser does not at all enjoy any the protection of Deferred Indefeasibility and should accordingly be vitiated. [38] All of the above considered we answer issue 2 in the NEGATIVE. It was wrong for the Learned JC to decide on the position of the 2nd Defendant on the context and basis of Deferred Indefeasibility as a 2nd Layer subsequent Purchaser. The 2nd Defendant as an immediate purchaser of the 2 Properties from the 1st Defendant-vendor does not enjoy the protection of Deferred Indefeasibility. In any case, the 2nd Defendant as the 2nd Purchaser in time does not in any manner prevail over the rights and title of the deceased’s estate. F. ISSUE 3: WHETHER OR NOT THE LEARNED JC WAS CORRECT TO DECIDE ON THE POSITION OF THE BANK ON THE BASIS OF THE BANK BEING A 3RD LAYER CHARGEE DERIVING ITS RIGHTS FROM THE 2ND DEFENDANT AS 2ND LAYER PURCHASER [39] There is no need for us to go to extremity of lengths to determine this issue as it naturally follows from our answer in issue 2 that the Learned JC must also have been in error in deciding that the Bank as chargee derived its rights from the 2nd Defendant as the 2nd Layer Purchaser with Deferred Indefeasibility. [40] As we have mentioned in illustration B above, the Bank as chargee created the charge from the 2nd Defendant’s (not the 1st Defendant-vendor’s) supposed title as immediate purchaser over the 2 Properties. Thus, the Bank’s position as chargee falls within the classification of the 2nd Layer Subsequent Purchaser within the context of Deferred Indefeasibility. [41] This is in line with settled law as recently restated by the Federal Court in the case of See Leong Chye @ Sze Leong Chye & Anor v United Overseas Bank (M) Bhd and another appeal [2021] 5 MLJ 759: “The COA was correct to find that, on the facts, UOB was a subsequent purchaser. Heveaplast became an immediate purchaser when it was registered as the owner of the land pursuant to SPA1. In its capacity as immediate purchaser, Heveaplast created the UOB charges. Since a purchaser who acquired the interest from the immediate purchaser was a subsequent purchaser, it followed that UOB was a subsequent purchaser and the proviso to s 340(3) of the NLC applied. It was then only necessary to ascertain if UOB was a bona fide purchaser for value. If it was not, then its interest in the land under the UOB charges was defeasible and liable to be set aside. [42] Thus, we similarly answer issue 3 in the NEGATIVE. The Learned JC was wrong to decide on the position of the Bank on the basis of the Bank being a 3rd Layer chargee deriving its rights from the 2nd Defendant as 2nd layer Subsequent Purchaser within the context of Deferred Indefeasibility. G. ISSUE 4: WHETHER OR NOT THE LEARNED JC WAS CORRECT TO FIND THAT THE BANK WAS NOT A BONA FIDE PURCHASER FOR VALUE [43] It is trite law that a subsequent purchaser within the context of Deferred Indefeasibility is entitled to a qualified protection of Deferred Indefeasibility. A bona fide purchaser for value is bona fide if he can prove that valuable consideration was paid in view of a bona fide transaction. Even equity’s darling can be stripped of its protection if there was evidence of mala fide nature of the transaction. This qualified protection was also restated by the Federal Court in See Leong Chye (supra): “It was then only necessary to ascertain if UOB was a bona fide purchaser for value. If it was not, then its interest in the land under the UOB charges was defeasible and liable to be set aside. Since there was no evidence to the contrary, UOB was a subsequent purchaser in good faith and for valuable consideration and its interest in the land under the UOB charges was indefeasible under the proviso to s 340(3) and could not be set aside.” [44] Now, the Bank strenuously contended that it had exercised utmost due diligence to ascertain the propriety of the sale of the 2 Properties between the 1st Defendant and the 2nd Defendant to become the financier of the sale under the 2nd SPA. We are most aware that the Bank was neither a signatory nor a party involved in the negotiations leading up to the signing of the 2nd SPA. But, the Bank certainly was still involved in the transaction as the Bank was considering to become the chargee over the 2 Properties in consideration of the Term Loans to be granted to finance the purchase by the 2nd Defendant. Thus, as chargee financing the sale under the 2nd SPA, it is at least incumbent upon the Bank to the best of its capabilities to ascertain the validity, accuracy, correctness, and legitimacy of the transaction under the 2nd SPA before disbursing the Term Loan to finance the 2nd Defendant’s purchase. [45] The Learned JC had aptly appreciated the extent and nature of ‘good faith’ to qualify for the protection of Deferred Indefeasibility. Suffice for us to reproduce the Learned JC’s digest of the meaning of ‘good faith’ here: “[102] ‘Good faith’ in the context of the proviso to section 340(3) of the National Land Code includes due inquiry, and implies not only an upright mental attitude, and clear conscience of a person, but also the doing of an act, showing that ordinary prudence has been exercised according to the standards of a reasonable man. It contemplates an honest effort to ascertain the facts upon which exercise of the power must rest; it must, therefore, be summed up as ‘an honest determination from ascertained facts. Although the phrase may vary in the context of a different statute, subject and situation, honest intent free from taint or fraud, or fraudulent design, is a constant element of its connotation’: per Azahar Mohamed FCJ in T Sivam A/L Tharamalingam v Public Bank Berhad [2018] 6 CLJ 1. [103] ‘Good faith’ on the transferee’s part must involve more than a belief that all the steps have been regularly and properly done; the transferee must have no reason to believe that there is anything dubious about the transaction. ‘In this context, the transferee’s acting in good faith must also involve his not having knowledge about the fraudulent intent of the transferor. I will, therefore, consider good faith and knowledge together’: per Judith Prakash J in Wong Ser Wan v Ng Bok Eng Holdings Pte Ltd [2004] 4 SLR(R). [46] In brief, good faith must be proven in that the subsequent purchaser (or chargee in this Appeal) must prove that he had exercised all due diligence in critically examining the legitimacy of the transaction not just on the face of the register document of title, but on the documents involved in the transaction itself. Thus, the pristine ‘innocence’ and ‘conscience’ of the Bank must be proven in that the Bank must critically look into the documentation, transactional documents (payments and receipts) leading up to the sale and purchase of the 2 Properties under the 2nd SPA. [47] Although the general rule of the Torrens System is that every dealing regarding a property is assumed to be reflected within the register document of title, but it would be remiss and naive for us to rigidly apply such assumption while ignoring the glaring realities and dangers of unscrupulous transactions that can clearly be identified by examinations and verification exercises into the SPA documentation itself. The Bank must clearly prove that it was impossible for the Bank to have known of the unlawfulness of the transaction even after proper examination and verification of the documents under the 2nd SPA. [48] Now, the Bank firstly contended that the face of the title and the 2nd SPA’s documentations would not at all reveal any indication of the deceased’s interest vide the sale under the prior 2 SPAs. But we are pressed to state that even if the Bank would have no notice of the deceased’s interest, it does not automatically allow the Bank to assume the legitimacy and validity of the transaction under the 2nd SPA. It remains incumbent upon the Bank to examine the 2nd SPA even if there was no notice at all of the deceased’s interest from the face of the title. It must be remembered that notice of the deceased’s interest and notice of the illegitimacy of the 2nd SPA are two separate contexts and natures of notices. [49] Thus, even assuming that the Bank can prove that it genuinely had no knowledge of the deceased’s interest, it is still incumbent upon the Bank to prove that it genuinely had done proper examination into the propriety of the 2nd SPA between the 1st Defendant and 2nd Defendant. This rule was admitted by the Bank within the Bank’s own Written Submission as the Bank had listed down the due diligence it had exercised to ascertain whether or not the 2 Properties can be validly charged to the Bank: a. Appointing Messrs Yeow & Salleh (“Bank’s solicitors”) to prepare charge instruments and perform due diligence to verify that the Properties can be charged to the Bank; b. The Bank’s solicitors conducted company searches on the 1st and 2nd Defendants; c. The Bank’s solicitors conducted winding up searches on the 1st and 2nd Defendants; d. The Bank’s solicitors conducted Bankruptcy searches on the 1st and 2nd Defendants’ Directors; e. The Bank’s solicitors conducted land searches on the 2 Properties; and f. The Bank’s solicitors supposedly obtained confirmation of full payment of the purchase by the 2nd Defendant to the 1st Defendant company under the 2nd SPA. [50] Now, it is not within our scope of Appellate intervention to re-try the evidence at Trial at this Appellate stage. Thus, we shall proceed to examine Learned JC’s appreciation and deliberation into the evidences adduced into Court in determining the ‘innocence’ of the Bank during Trial. [51] One of the most curious and beguiling features within the 2nd SPA was the scrupulous circumstances surrounding the payment of the purchase price by the 2nd Defendant to the 1st Defendant. The Learned JC had aptly noted that, there was gross discrepancies regarding the evidence of actual payment ever being made by the 2nd Defendant to the 1st Defendant that should have reasonably come to the Bank’s notice (with reasonable due diligence): a. Firstly, the Learned JC astutely considered that it was peculiar that the Bank would be eager to release the Term Loan WITHOUT SIGHTING ANY ACTUAL EVIDENCE OF MONIES BEING PAID BY THE 2ND DEFENDANT TO THE 1ST DEFENDANT. It was the Bank’s own case that the Term Loan was granted on redemption basis upon proof of payment of full purchase price under the 2nd SPA to the 1st Defendant. Thus, it is patently obvious that actual proof of payment of the purchase price is indeed critical to the creation of the Charge. But instead, the Learned JC had noted that the Bank was already eager to release the Term Loan after only sighting a confirmation by the 1st Defendant of receiving the full purchase price from the 2nd Defendant; b. The Bank admitted that it had not gone beyond the 1st Defendant’s confirmation to enquire for proper accounts and receipts of the payment by the 2nd Defendant (which obviously would be crucial to determine the legitimacy of the payments by the 2nd Defendant); and c. The Learned JC astutely noted that there were contradictions between the 2nd Defendant’s own Director, Chan Jui Hui (DW1) and the 2nd Defendant’s own appointed solicitor, Wong Yen Chnan (DW2) regarding the manner and method the 2nd Defendant had paid the purchase price. DW1 testified that the 2nd Defendant’s payment was made through DW2. On the contrary, DW2 denied receiving any monies from the 2nd Defendant and that there was merely an acknowledgment of payment by DW1. [52] This entire conundrum regarding the payment under the 2nd SPA could have been demystified had the Bank just took the simple initiative to properly request for proper accounts and receipts to prove actual payment of the purchase price by the 2nd Defendant to the 1st Defendant. An obvious, simple, and straightforward initiative that the Bank had peculiarly failed to undertake. [53] Another conspicuous feature of the 2nd SPA that the Learned JC had noted was the fact that the 2nd SPA had transacted the 2 Properties on the basis that Lot 97 and Lot 716 WERE VACANT LANDS (which was untrue even before the time the 2nd SPA was initially executed on 8.8.2018). Now, it is not that we are supposing that the Bank as a financial institution would as a general rule be expected to do an in situ visit of all the lands which the Bank intends to take in as collateral under a Charge. Nonetheless, none can deny the utility of at least an Evaluation Report to be done before the Bank can determine the ‘fiscal viability’ of a purported Charge in comparison to the amount so applied for the Loan. [54] It is common sense in mathematical and logical sense that the Bank would ascertain the profit and loss margins it may incur in any financial facility the Bank may intend to grant. Thus, it surely must be within the Bank’s best interest for a valuation to be done to ascertain the value of the 2 Properties before the Bank can extrapolate the appropriate amount the Bank would be willing to risk if in case the Bank were to grant the Term Loan to the 2nd Defendant. Thus, the valuation of the 2 Properties would clearly reveal to the Bank of the actual status of the 2 Properties in that the Properties were clearly NOT VACANT and were for more than half a century occupied by the deceased (and or the deceased’s beneficiaries). Thus, although the Bank might not be expected to conduct an in situ visit upon the 2 Properties, it would be common business sense that it would be in the best interest of the Bank to ascertain whether or not the 2 Properties were Vacant Lands or built-up Lands (to ascertain the value of the 2 Properties). [55] Nonetheless, continuing the Bank’s series of questionable omissions, the Bank had failed to at least hire a valuer to prepare a Valuation Report upon the 2 Properties prior to agreeing to the charges to be created. The Learned JC also aptly appreciated that although the Bank’s own witness, DW3 had testified that the Bank had indeed conducted a valuation, the Bank had somehow failed and refused to adduce any Valuation Report before the High Court. [56] It is glaring to us that the Bank (apart from its indifference to the proof of actual payment under the 2nd SPA) somehow was also indifferent to the actual value and status of the Properties before agreeing to the Charge being created. [57] Thus, the numerous omissions by the Bank were sufficiently telling of the Bank’s indifference and failure of due diligence. The Bank had not exerted the reasonable amount of prudence which would have revealed to the Bank of the dubious features surrounding the 2nd SPA: a. Had the Bank prudently and reasonably enquired for actual proof of payment under the 2nd SPA, it would have been obvious to the Bank that the 2nd Defendant had not paid the purchase price as the 1st and 2nd Defendants had insisted; and b. Had the Bank prudently and reasonably enquired for the value and status of the 2 Properties, it would have been obvious to the Bank that the 2 Properties were definitely not mere vacant lands as the 2nd SPA had insisted. [58] All the above considered, it would be gravely unjust for us to allow the Bank to feign innocence in the face of its own glaring omissions, failure of enquiry, and insufficient due diligence. Thus, we are in full agreement with the Learned JC’s finding that the Bank was indeed not a bona fide purchaser for value. The Bank accordingly ought to be disqualified from relying on its Deferred Indefeasibility under Section 340(3) of the National Land Code. H. OUR DECISION [59] We pause here to state that the two Appeals here are strictly limited to Lots 97 and 716 as these were the only two Lots that were transferred by the 1st Defendant to the 2nd Defendant and was later charged to the Bank. We are aware that there were also Lot 430 and Lot 607 which were in dispute between the deceased’s estate (via the Plaintiffs) and the 1st Defendant that the 2nd Defendant and the Bank were never privy to. Considering that the 1st Defendant had not appealed against the entirety of the Learned JC’s decision, it is only appropriate that we do not overstep the scope of the present Appeals and disturb the Learned JC’s decision regarding Lot 430 and Lot 607. [60] Considering all of the above deliberations, in principle we are in FULL AGREEMENT with the Learned JC’s ultimate finding that: a. The 1st Defendant as trustee was and is still holding Lots 97 and 716 under a constructive trust for the benefit of the deceased’s estate; b. The 2nd Defendant does not hold good title or claim over Lots 97 and 716 that can prevail against the deceased’s estate’s prior title over the same 2 Properties; and c. The Bank was not a bona fide purchaser for value. [61] And therefore, the Learned JC’s final determinations above must not be disturbed. [62] In the result, the 2nd Defendant’s Appeal (Appeal 549) and the Bank’s Appeal (Appeal 452) are dismissed with costs. The decision of the High Court is affirmed. Accordingly, we order the Appellants in Appeal 549 and Appeal 452 to pay costs of RM30,000.00 each to Plaintiffs-Respondents subject to payment of allocator. Dated 25th September 2023 SGD -------------------- (AZIMAH BINTI OMAR) JUDGE COURT OF APPEAL For the Appellant (R6) - Messrs. Skrine 1. Claudia Cheah Pek Yee 2. Aufa binti Radzi 3. Chew Sue Peng For the Appellant (R7) - Messrs. Lua & Mansor Ummi Salhah binti Mohamad For the Respondent - Messrs. Kali & Associates Shakir Hussain a/l Khurshed Ibrahim