Paragon Pinnacle Sdn Bhd v Phua Hooi Yam (BA-24NCVC-1302-07/2023)

In our present case, the Plaintiff/ Paragon Pinnacle Sdn Bhd’s claims are for removal of the Defendant’s private caveat which was lodged by the Defendant on the land title for the Subject Land, and for ancillary orders.

Although this Court has ordered the removal of private caveat in favour of the Plaintiff, the Plaintiff is unhappy with the condition subsequent which directed it to pay into joint stakeholders’ account an amount RM120,000 pending the final disposal of the Defendant’s claim for loss of beneficial interest. As such, the Plaintiff has appealed to the Court of Appeal.

In Eng Mee Yong v. Letchumanan [1979] 1 MLRA 143, the Privy Council held : “The caveat under the Torrens system has often been likened to a statutory injunction of an interlocutory nature restraining the caveatee from dealing with the land pending the determination by the Court of the caveator's claim to title to the land, 3 in an ordinary action brought by the caveator against the caveatee for that purpose. Their Lordships accept this as an apt analogy with its corollary that caveats are available, in appropriate cases, for the interim protection of rights to title to land or registrable interest in land that are alleged by the caveator but not yet proved.” Per Lord Diplock in Eng Mee Yong case: “This is the nature of the onus that lies upon the caveator in an application by the caveatee under s. 327 for removal of a caveat: he must first satisfy the Court that on the evidence presented to it his claim to an interest in the property does raise a serious question to be tried; and, having done so, he must go on to show that on the balance of convenience it would be better to maintain the status quo until the trial of the action, by preventing the caveatee from disposing of his land to some third party.”

Suffian LP in the Federal Court case of Mahadevan & Anor v. Patel [1975] 1 MLRA 659 where said : “The whole system of caveats is founded on the principle that they exist for the protection of alleged as well as proved interests. It is not for us at this stage to say whether or not the respondent or whether or not the company has a good claim at law against the appellants, but it seems clear that there is evidence which if believed at the trial of the substantive issue would establish that the respondent who was managing director of the company was acting throughout on behalf of the company in regard to the money paid to Ratnavale, and as the principle is that it is not only a person who has a right to a registrable interest in land that may enter a caveat against the land, but it is any person claiming title to, or any registrable interest in, any alienated land or even claiming only a right to such title or registrable interest, 4 who may enter a caveat, in my judgment it was proper for the respondent to enter the caveat, and right for the learned judge to refuse to remove it, so that it may remain on the register until the disposal of the suit pending between the company and the appellants”.

In the Supreme Court case of Kumpulan Sua Bentong Sdn Bhd [1991] 1 MLRA 575, the court referred to the Federal Court case of Macon Engineers Sdn. Bhd. v. Goh Hooi Yin [1976] 1 MLRA 568, [1976] 2 MLJ 53, where Raja Azlan FJ said : “In my opinion what the Court at the present stage has to see is not that the caveator must ultimately succeed, but that he has a prima facie case, and that his claim is not baseless or frivolous. In such circumstances the Court will not summarily remove the caveat but will extend it until the hearing of the action. The burden of proof rests on the caveator as the person asserting the claim …We do not consider it proper and just that the question of the nullity or otherwise of the transfer be decided in these proceedings on contested evidence by affidavits, thereby rendering the civil suit otiose and an exercise in futility. Besides, to do so would be an embarrassment to the Judge who hears the action. At this stage of the proceedings on the authorities of the cases of In re Faulke's Caveat, Chin Cheng Hong and Eng Mee Yong , the relevant extracts of the judgments of which had already been quoted above, what we need to decide is not the appellant must ultimately succeed but that it has a prima facie case and its claim is not frivolous or vexatious. Lee Hun Hoe CJ (Borneo) in Su Meu Ging v. Philip Yong Khiam Poon & Ors. and Other Appeals [1988] 1 CLJ 282 (Rep) at p. 286 in the course of his judgment remarked: On the whole we consider that the appellants 5 had shown their claim to an interest in the property and did raise a serious question to be tried and that on the balance of convenience it would be better to maintain the status quo. It is not for us to speculate whether the appellants would succeed or not at the trial. But there are clearly triable issues and they are entitled to have them tried. Similarly, Raja Azlan Shah FJ (as he then was) in Macon Engineering case at p. 58 expressed the same view in similar vein: In the present case the respondent claims that he has an interest in the said land. He has filed a claim against the registered proprietors for specific performance, damages and lien over the said property. Whether he has good grounds for his alleged claim is surely worthy of argument and consideration. I cannot say that his claim is so baseless or frivolous that he should be deprived of his chance to have that tried in an action. And it would be a denial of that chance if the caveat were summarily removed, for once the appellants registered the transfer, the caveator's right, if he has any is destroyed. I further take the view that a caveat based on a document which prima facie is valid will not be removed on a summary application where the facts are involved and seriously disputed ... We would, therefore, as a matter of prudence, abstain from expressing any opinion on the merits of the appellant's claim in respect of the voidness or invalidity of the transfer at these interlocutory proceedings.” 6

In the case of Luggage Distributors (M) Sdn Bhd v. Tan Hor Teng & Anor [1995] 1 MLJ 719, the Court of Appeal reviewed and analysed the previous decisions of the appellate courts and then summarised the principle and procedure of application to remove a private caveat as follows:- ‘In considering an application for the removal of a caveat, the procedure to be adopted should be a simple and summary one. At the first stage, the court will examine the grounds expressed in the application for the caveat to see whether they show a caveatable interest. Once the court is satisfied that the caveator's claim amounts in law to a caveatable interest, it must then go on to consider whether the claim discloses a serious question meriting a trial. After these two stages have been crossed, the court must decide where the balance of convenience lies.’

From the Court of Appeal’s decision in Luggage Distributors (M) Sdn Bhd v. Tan Hor Teng & Anor, a private caveat will only be allowed to be continued if all the three (3) following requirements are fulfilled:

the caveator’s claim expressed in the grounds for caveat application amounts in law to a caveatable interest;

(ii) the caveator’s said claim discloses a serious question meriting a trial; and

(iii) the balance of convenience is in favour of allowing the private caveat to continue. 7 1st Stage: Whether the 1st Defendant has caveatable interest [8] Section 323 of the National Land Code 1965 provides the applications for entry of private caveats:- “Section 323 Applications for entry of private caveats.

The persons and bodies at whose instance a private caveat may be entered are –

any person or body claiming title to, or any registrable interest in, any alienated land or any right to such title or interest;

any person or body claiming to be beneficially entitled under any trust affecting any such land or interest; and

the guardian or next friend of any minor claiming to be entitled as mentioned in paragraph (b).” [9] In order to constitute caveatable interest, there must be rights relating to land and not mere personal rights under a contract: see the Federal Court’s decision in Wong Kuan Tan v. Gambut Development Sdn Bhd [1984] 2 MLJ 113 at pg 116. [10] In our present case the Defendant is the successful bidder of a plot of residential land, Lot D059 with an area of 5,250 sq ft., which forms part of the Subject Land, which was absolutely assigned by the original proprietor in favour of AIA Bhd and subsequently auctioned by the bank-assignee in a public auction. See Exhibits “PHY-2” and “PHY-3” at pages 16 to 20 of the Defendant’s Affidavit-in-Reply (Enclosure 4). [11] The Defendant/Phua HY here is claiming for the beneficial ownership of the said Lot No. 059, which forms part of the Subject 8 Land. The Defendant/Phua who claims beneficial ownership of a part of the Subject Land is a person claiming title to or any registrable interest in the said part of the Subject Land within the meaning of s. 323(1)(a) of NLC 1965. [12] In the considered view of this Court, the Defendant here has caveatable interest in part of the Subject Land, namely, Lot D059 with an area of 5,250 sq ft. 2nd Stage: Whether the caveator’s claim in the caveat application discloses a serious question meriting a trial [13] In our present case the Defendant/Phua is the successful bidder of a plot of residential land, Lot D059 with an area of 5,250 sq ft., which forms part of the Subject Land, which was absolutely assigned by the original proprietor in favour of AIA Bhd and subsequently auctioned by the bank-assignee in a public auction. See Exhibits “PHY-2” and “PHY-3” at pages 16 to 20 of the Defendant’s Affidavit-in-Reply (Enclosure 4). The Defendant/Phua has claimed for the beneficial ownership of the said Lot No. D059, which forms part of the Subject Land. [14] Under s. 322(2) of NLC 1965 a private caveat may be expressed to bind an undivided share in the land. The proviso to s. 322(2) states that where the claim is in respect of a part of the land, the caveat binds the whole land. S. 322(5A) provides that no consent of the caveator of a caveat entered on a part of the land is necessary to effectuate any registration, endorsement or entry of any instrument on the register document of title not affecting the claim relating to 9 that part of the land or interest therein. [15] The Defendant/Phua HY paid the full auction price for the said Lot No. D059: see Exhibits “PHY-4” and “PHY-5” at pages 22 to 25 of the Defendant’s Affidavit-in-Reply (Enclosure 4). [16] AIA Bhd, as financier-assignor, signed Deed of Assignment (by way of Auction) dated 16.8.2016 with the Defendant/Phua HY whereby AIA Bhd assigned in favour of the Defendant/Phua HY all the beneficial ownership, rights and interest in the said Lot No D059 : see Exhibit “PHY-6” at pages 27 to 34 of the Defendant’s Affidavit-in-Reply (Enclosure 4). [17] The Defendant/Phua HY has exhibited several news reports which publicised the abandoned housing project at the Subject Land, of which the said Lot No. D059 formed part thereof: see Exhibit “PHY- 7” at pages 36 to 58 of the Defendant’s Affidavit-in-Reply (Enclosure 4). Relying on such news reports, the Defendant/Phua argues that the Plaintiff/Paragon Pinnacle had or ought to have knowledge of the abandoned project and the purchasers’ claims for proprietary interest at the time it bought the Subject Land from the original landowner LBCN Development Sdn Bhd. [18] It was on 4.2.2020 that LBCN Development Sdn Bhd transferred the Subject Land to the Plaintiff/Paragon Pinnacle: Exhibit “PHY-1” at page 13 of the Defendant’s Affidavit-in-Reply (Enclosure 4). 10 [19] The supporting agreement and documents produced by the Defendant are not on the face lacking credibility or weight. [20] In the circumstances, this Court holds that there are serious questions meriting a trial here. 3rd stage: balance of convenience [21] In the present case, the Plaintiff/Paragon entered into Sale and Purchase Agreement dated 22.9.2015 with LBCN Development Sdn Bhd to buy the Subject Land of 270.81 hectares at a price of RM192,407,024.87 free from encumbrances: see paragraph 6 of the Plaintiff’s Affidavit In Support (Enclosure 2) and Exhibit “P-1”. [22] According to the Plaintiff/Paragon, it has also entered into 4 other agreements to purchase other lands, and the total acreage and purchase price for all 5 lands (including the Subject Land) is RM1,181,335,536.65: see paragraph 7 of the Plaintiff’s Affidavit In Support (Enclosure 2). [23] It is the Plaintiff/Paragon’s case that the purpose of having all 5 lands is to have a large landbank for Klang Valley North West mixed development for projects “Eco Grandeur”, “Eco Business Park” and “Laman Indah”: see paragraph 8 of the Plaintiff’s Affidavit In Support (Enclosure 2). [24] According to the Plaintiff/Paragon, the acquisitions of all these lands were announced to Bursa Malaysia on 22.9.2015 with wide media coverage in various newspapers and media in the nation: see 11 paragraph 9 of the Plaintiff’s Affidavit In Support (Enclosure 2) and Exhibits “P-3” to “P-12”. [25] The Plaintiff avers that despite wide publicity of the Plaintiff’s acquisition of the lands in the newspapers, the Plaintiff/Phua did not come forward promptly to make his claim known to the Plaintiff at the material times. [26] The Plaintiff/Paragon had paid the full purchase price to LBCN Development Sdn Bhd and the transfer of title of the Subject Land has been registered: see paragraph 12 of the Plaintiff’s Affidavit In Support (Enclosure 2). [27] It is averred by the Plaintiff that it has obtained a bank loan of RM195 million for the development of the Subject Land: see paragraph 13 of the Plaintiff’s Affidavit In Support (Enclosure 2). [28] The Plaintiff avers that it has already commenced the development works on the Subject Land to develop it into industrial units in phases known as “Eco Business Park V”, which forms part of the overall mixed development. 123 units of light and medium industrial units are included in the industrial project at the Subject Land with a gross development value of about RM367 million, and a number of these units have been sold to end purchasers: see paragraphs 15 and 16 of the Plaintiff’s Affidavit In Support (Enclosure 2) and Exhibits “P-20” and “P-21”. [29] According to the Plaintiff/Paragon, if the Defendant’s private caveat were allowed to continue, there would be very severe prejudice and 12 consequences upon the Plaintiff/Paragon including hindrance to development of the industrial project, inability to obtain subdivision of the master title into subdivided title for transfer to the purchasers of industrial units, inability to hand over the vacant possession of industrial units with CCC to the purchasers, very huge damages payable by the Plaintiff/Paragon to purchasers, purchasers would not be able to drawdowns on end-financing loans, exposure to penal steps from bridging financier, and inability to sell the balance industrial units: see paragraph 23(a) to 23(f) of the Plaintiff’s Affidavit In Support (Enclosure 2) and Exhibit “P-26”. [30] In the Plaintiff’s estimation, the Plaintiff would be exposed to liabilities totalling at least RM414 million if the Defendant/Phua’s private caveat were to be allowed to continue: see paragraph 24 of the Plaintiff’s Affidavit In Support (Enclosure 2). [31] In sharp contrast, the Defendant/Phua only paid RM90,000.00 for Lot No. D059 (with area of about 5,000 sq ft, or about 1/8th of an acre) for a comparatively much smaller part of the Subject Land. [32] In the entire circumstances, this Court finds that the balance of convenience is in favour of removal and cancellation of the Defendant/Phua’s private caveat in our present case, provided that the Defendant/Phua’s claim for beneficial interest can be secured in a stakeholder’s account. 13 Conclusion [33] In conclusion, this Court orders the removal and cancellation of the Defendant/Phua’s private caveat forthwith. [34] Nevertheless, this Court also finds it fit and just to impose a condition subsequent to the removal and cancellation of the Defendant/Phua’s private caveat so that the Defendant’s claim for beneficial ownership is not without any assurance of recompense. [35] The condition subsequent is that within 21 days after the removal and cancellation of the private caveat, the Plaintiff/Paragon shall deposit in a stakeholder’s account an amount of RM120,000.00 as security for the Defendant/Phua so that in the event the Defendant/Phua obtain a final court judgment for being liable to account for the Defendant/Phua’s claim for beneficial interest in the said Lot No. D059, the Defendant/Phua has a ready fund to lay his hand upon. The amount of RM120,000.00 is the sum of the principal amount RM90,000.000 paid by the Defendant/Phua to the auctioneer and RM30,000.00 being transaction expenses and holding costs. The stakeholder’s account is to be held jointly by the Plaintiff’s solicitor and the Defendant’s solicitor and shall be kept in a fixed deposit with a licensed bank. [36] Liberty to apply is given to the Defendant if the Plaintiff fails or neglects to deposit the RM120,000.00 with the stakeholders so that ancillary or consequential orders can be made in the event of such contingency. If the Plaintiff defaults in such payment of deposit, this Court may make ancillary for one of the subdivided titles in the 14 relevant project to be placed as security in lieu thereof. [37] In the circumstances, it is reasonable that each party should bear its own costs of the suit here. Dated this 26th October 2023 Signed ….….............................................................. TEE GEOK HOCK JUDGE HIGH COURT OF MALAYA AT SHAH ALAM (NCVC 10) To the parties’ solicitors:

For the Applicant : Joycelyn Goh Messrs Izral Partnership (Kuala Lumpur)

For the Respondent : Lee Fey Yee Messrs Azam-Malek & Soh (Klang)