Ridzuan Bin Sulaiman v Perbadanan Pengurusan Subang Square (BA-24NCvC-1931-10/2023)

In this Originating Summons, the Plaintiff seeks a declaration that the private caveat under Presentation No 43/2022 (“Private Caveat”) on Strata Title No. Geran 234503 M1-B/5/327 at Subang Square (“Property”) was lodged by the Defendant wrongfully and without reasonable cause, damages to be assessed under section 329 of the National Land Code 1965 (“NLC”) and other ancillary relief.

The Defendant is the Management Corporation of Subang Square and had lodged the Private Caveat on account of alleged unpaid management charges totalling RM61,546.15. It claims to have had a caveatable interest by reason of this debt, and further alleges that the Plaintiff suffered no loss by its entry because his claim of a cancelled sale of the Property is bogus.

The Plaintiff purchased the Property on 14-7-1999 from the developer that developed Subang Square in a joint venture with the landowner Majlis Bandaraya Petaling Jaya (“MBPJ”). On 8-2-2022, the Plaintiff wrote to the MBPJ to effect the transfer of title of the Property to him. MBPJ signed and returned the transfer forms.

On 4-2-2022, the Defendant commenced a Housing and Strata Management Tribunal action against the Plaintiff to recover the sum RM61,546.15 allegedly due to the Defendant on the Property. The Plaintiff disputed the claim and on 11-5-2022, counterclaimed for re-connection of water supply to the Property and removal of the Private Caveat.

The Private Caveat remained on the Property for over 18 months before the Defendant removed it on 21-8-2023. This was after the Plaintiff through his solicitors, paid the sum RM29,385.83 that was determined by 4 the Housing and Strata Management Tribunal to be owed by the Plaintiff to the Defendant in a decision dated 15-2-2023.

Meanwhile, the Plaintiff alleged that he had secured a purchaser for the Property on 13-4-2022 for RM1.6 million. He commenced this action because he claims that the purchaser, Lee Tow Cheng, pulled out of the sale after the discovery of the Private Caveat which existence was confirmed by a title search carried out on 14-4-2022.

On 22-8-2024, the Plaintiff sold the Property to Akitek Akiprima Sdn Bhd for RM945,000.00.

Section 329(1) of the NLC reads as follows: “(1) Any person or body who, wrongfully or without reasonable cause, secures the entry of, or fails to withdraw, any private caveat shall be liable to pay compensation to any person or body who thereby suffers any damage or loss”

When the Originating Summons came up for hearing, the following issues were raised:

Whether the Private Caveat entered by the Defendant was entered wrongfully or without reasonable cause

Whether the Plaintiff had suffered damages or losses as a result of the lodgment of the Private Caveat

Whether the Plaintiff has the locus standi to seek an injunction to restrain the Defendant from registering a new private caveat on the Property. [10] In respect of the second issue above, the primary contention made by the Defendant is that no order for any assessment of damages should be made at all because the Plaintiff has not proved any loss caused by the Private Caveat. [11] As a side note, I heard and dismissed the Defendant’s application to strike out the Originating Summons or alternatively, to convert it to a Writ action on 17-10-2024. In that application, the Defendant asserted that the alleged transaction between the Plaintiff and Lee Tow Cheng was fake and that this Originating Summons should be struck out or tried as a Writ action. [12] I held that the issues in the Originating Summons could be decided by affidavit evidence, with the mode of inquiry into damages to be determined. I made it clear then that assessment of damages may include liberty to cross-examine on the alleged transaction. This would allow for a just, expeditious and economical disposal of the proceedings. Caveatable Interest [13] According to the Statutory Declaration signed on 24-5-2021, the Defendant’s basis for entering the Private Caveat was solely on account of the alleged debt of RM61,546,15 as at 22-4-2021. The Defendant explicitly acknowledged that the private caveat was entered to prevent any transaction on the Property until the debt was settled. Throughout these proceedings, the Defendant maintained that it had a caveatable interest. [14] The Defendant relied on section 77 of the Strata Management Act 2013 (“SMA”) as the basis for its claim. Section 77 of the SMA provides that a proprietor guarantees the payment of amounts lawfully incurred by the management corporation in proportion to the number of his share units. However, it turns out that section 77 of the SMA has no application to the question of caveatable interest in property at all. [15] According to the Federal Court in Dubon Bhd v Wisma Cosway Management Corporation [2020] 6 CLJ 589 it does not even elevate the payment of management fees to the status of a secured debt, much less a registrable interest or claim to title to the property to which it relates. [16] The Defendant also relied on the NLC form for private caveats (Form 19B) and sought to make a distinction between “Kaveat Persendirian Atas Tanah” and “Kaveat Persendirian Atas Kepentingan” in the form. Although the Private Caveat was entered to bind the title of the Property, the Defendant submitted that it had legitimately applied for a private caveat on an interest. [17] The above argument was advanced without any attempt to state how the Defendant’s “interest” is a registrable interest. This, as opposed to the title, is obviously what “interest” in Form 19B refers to. Thus, there is no submission on how the Defendant’s “interest” is otherwise reconciled with section 323(1) of the NLC, the parameters of which are explained in Luggage Distributors (M) Sdn Bhd v Tan Hor Teng @ Tan Tien Chi and anor [1995] 3 CLJ 520. [18] Under section 323 (1) of the NLC, only three categories of persons are entitled to enter a caveat:

Any person claiming title to any alienated land;

Any person claiming any registrable interest in any alienated land; or

Any person claiming any right to such title or registrable interest. [19] On this issue, this Court has no difficulty finding that the Defendant never had a caveatable interest in the Property as its interest was a purely contractual claim on a debt (Wong Kuan Tan v Gambut Development Sdn Bhd [1984] 2 MLJ 113 and Score Options Sdn Bhd v Mexaland Development Sdn Bhd [2012] 6 MLJ 475). [20] The legal arguments raised by the Defendant were unsupported and determined to be red herrings. The Defendant could claim neither title to the Property, nor any registrable interest in the Property based on a debt or alleged debt. [21] Accordingly, this Court finds that the Defendant had wrongfully and without reasonable cause, secured the entry of the Private Caveat. Proof of Damage [22] In Quill Construction Sdn Bhd v Tan Hor Teng @ Tan Tien Chi [2003] 6 MLJ 279 Abdul Malik Ishak J held that damages under section 329(1) of the NLC must be assessed in accordance with the principles of the law of tort, following his earlier decision in Lo Foi v Lee Ah Hong @ Lee Lum Sow [1997] MLJU 310. See also MD Biomedical Engineering (M) Sdn Bhd v Goh Yong Khai [2021] 5 MLJ 408. [23] The Plaintiff’s contention is that the wrongful entry of the Private Caveat caused it damage as the purchaser, Lee Tow Cheng, allegedly pulled out of the intended sale within a week or so between 14-4-2022 and 29-4-2022 by virtue of the Private Caveat. According to the Plaintiff, he could not get another sale at the same price. [24] I have considered the evidence presently before the Court on the threshold question of authenticity of the alleged transaction with Lee Tow Cheng. According to the Plaintiff in this case, the intended sale of the Property to Lee Tow Cheng is evidenced by the following:

Offer to Buy dated 5-4-2022 and signed by the parties (Plaintiff and Lee Tow Cheng) on 13-4-2022 to purchase the Property for RM1.6 million (“Offer to Buy”)

Maybank cheque No. 956185 dated 13-4-2022 from Lee Tow Cheng in favour of the Plaintiff for the sum RM48,000.00 being the 3% earnest deposit

Averment made under oath by the Plaintiff in his affidavit that the purchaser did not wish to proceed with the transaction due to the presence of the Private Caveat

Letter dated 29-4-2022 from the Plaintiff to Lee Tow Cheng to document the cancellation of the sale because of the caveat, the return of the earnest deposit and payment of cash compensation in the sum RM9,600.00 to the purchaser.

Valuation report dated 1-8-2023 showing a reduction in the market value of the Property. [25] The Defendant contended that the alleged sale to Lee Tow Cheng is bogus because:

It is not corroborated by an affidavit affirmed by Lee Tow Cheng, any of the witnesses to the Offer to Buy or the law firm named in the Offer to Buy as the conveyancing lawyers;

It is not corroborated by proof of encashment of the RM48,000.00 earnest deposit or payment of the RM9,600.00 compensation to the purchaser; and

The sale price at RM1.6 million in 2022 is too high compared to the market valuation of RM900,000.00 in 2023. [26] I found that the documentation appears to be authentic and that there are no obvious signs of fraud by falsification of evidence, which is what the Defendant is effectively suggesting. It may be inferred that the Plaintiff wanted to sell the Property from both the measures taken in early 2022 to transfer the strata title from MBPJ and its eventual sale in 2024. The Plaintiff’s averments on affidavit about the intended sale and its cancellation are also not equivocal, inconsistent or inherently improbable. [27] When questioned during submissions, the only indicator of fraud that counsel for the Defendant alluded to was the RM1.6 million purchase consideration for the Property offered by Lee Tow Cheng. However, the sale price is not by itself indicative of fraud as the market value of the Property may be a subjective value attached to it by a prospective purchaser. [28] Ultimately, the Defendant’s assertion that the Plaintiff fabricated the Offer to Buy and its cancellation was made wholly on the basis of speculation. To my mind, it is not more probable that the Plaintiff would have implicated a law firm and various named individuals in the Offer to Buy and himself in the falsification of evidence, which is a fraudulent act susceptible to penal consequences. That said, it remains open for any such illegality to be uncovered. [29] The Defendant relied on the Court of Appeal decision in Antonina Marleen Yarendra v Chai Wei Chung [2017] 4 MLJ 359 (“Antonina”) for the proposition that the right to have damages assessed according to section 329 of the NLC is not a mandatory or automatic right of a party who successfully removes a private caveat: “[14] Again, such payment of compensation is only where the person has suffered damage or loss by virtue of such caveat – ‘pay compensation to any person or body who thereby suffers any damage or loss’. (Emphasis added). This clearly means that before the order for compensation may be made, the court must be satisfied that damage or loss by reason of the caveat has been established on the facts and in law. These terms in s329(1) are not surplusage but are instead the conditions which must be met before compensation may be ordered.” [30] Based on the above, the Defendant submitted that Antonina requires conclusive proof of damages suffered by virtue of the Private Caveat before an order for assessment of damages may be made. I am unable to agree with the above proposition because proof of damages in tort involves not only questions of causation, but also related questions of foreseeability and mitigation. These are not matters readily resolved by summary determination. [31] Per Lim Tee Hin v Ledchumanan A/L Nagappan [2004] 7 MLJ 212, for the purpose of assessing ‘compensation to any person or body who thereby suffers any damage or loss’ under section 329(1) of the NLC, the following principles apply from the review of case law: “(a) The assessment of compensation under s 329(1) must be undertaken on the facts and circumstances established by way of the evidence adduced before the assessor having regard to the terms of the order for such assessment;

The burden is on the claimant to prove real and actual loss: Cheng Chin Chong v Shak Heng & Sons Sdn Bhd [1981] CLJ 91 refd Mawar Biru (supra), Coke & Coal (supra), Minty Holdings (supra); Lo Foi (supra); and Quill Construction (supra).

The usual approach is by determining in the first instance, whether there is a property value loss in that there is a decrease in the price of the said property after the same is offered for sale subsequent to the caveat being removed: Mawar Biru (supra); Coke & Coal (supra). However, in my view, this is not the only approach.

The claimant must prove loss of his own money or loss of use of his own money: Coke & Coal (supra).

Damages must be assessed in accordance with the principles of the law of tort by reference to the reasonable foreseeability test, i.e., reasonable in law and not too remote: Lo Foi (supra).

Compensation would include any fee and expenses incurred to get the caveat removed: Lo Foi (supra); Quill Construction (supra).

The claimant has the duty to mitigate his loss: Coke & Coal (supra); Lo Foi (supra); and Quill Construction (supra).” [32] Antonina has held that section 329 of the NLC is not actionable per se. However, proof of damages under that provision is a matter that can also be determined during the inquiry into damages if the fact that damages was suffered cannot be summarily ruled out when liability for the wrongful caveat is established. Otherwise, most applications under section 329(1) of the NLC would require two stages of evidentiary hearings. [33] The facts in Antonina can be distinguished in that the respondent there had averred that the existence of the caveat resulted in the non-release of the loan for the purchase of the caveated auction property, forfeiture of the deposit, costs, loss of profits and loss of investment. However, no evidence of the claim of damage and loss was adduced when the order for assessment of damages was made. [34] In this case, there is sufficient evidence before the Court to find on a balance of probabilities that the Plaintiff did suffer damage or loss from a cancelled transaction due to the wrongful entry of the Private Caveat. It was not demonstrated that the intended sale in 2022 with Lee Tow Cheng was cancelled for any other reason unrelated to the Private Caveat. For example, the pending transfer of title from MBPJ and the settling of outstanding quit rents are matters that would have been ordinarily dealt with in the course of the conveyance. [35] Contrary to submissions made by the Defendant also, there is no requirement based on Antonina or any provision of the law that a claim for damages under section 329(1) of the NLC is conditional upon specific notice being given of a pending sale of the Property when a demand for the removal of a caveat is made. [36] In this Court’s view, foreseeability as a factual element does not require actual knowledge of the specific cause or kind of the loss. Constructive knowledge of the kind of losses suffered is sufficient i.e. it is reasonably foreseeable that a wrongfully entered caveat would cause the loss of interest by a prospective purchaser, and it is a risk that a wrongdoer takes in entering caveats wrongfully and without a reasonable cause. [37] The only other observation I would make is that it is not for the Defendant to say that the Plaintiff and/or Lee Tow Cheng overreacted to the Private Caveat and should have taken legal advice and waited for the Private Caveat to be removed in due course. The circumstances prevailing with the Offer to Buy are not known as yet and the general principle in tort is that a tortfeasor must take his victim talem qualem. This is also true in the context of an assessment of damages for wrongful caveats. [38] I have made no conclusive findings on all the legal and factual questions on the measure, causation, remoteness and mitigation of such damages. These may be further ventilated during the assessment proceedings which I am hereby ordering for the wrongful entry of the Private Caveat. [39] It may well be the case that no damages are proven, in which case on the authority of Aeon Co (M) Bhd v. Asia Plywood Company Sdn Bhd & Anor [2021] 5 CLJ 751: “[33] … once it is held that the party is entitled to recover damages, what follows is an exercise of the assessment of those damages. If at that stage he or she is unable to evidentially establish the measure of damage suffered, nominal damages will be awarded.” Locus standi for injunction [40] Based on supplementary affidavits filed by the parties, it is not disputed that the Plaintiff has sold the Property. In the circumstances, whether the Plaintiff has standing to restrain anyone from registering a new private caveat on the Property in the future depends entirely on whether it is an aggrieved party in that particular occasion. [41] The permanent injunction sought under the present application is not necessary as the sale of the Property would have in the ordinary course concluded, which leaves the Plaintiff with no further interest in it. Conclusion [42] I allowed the prayers in Enclosure 1, amended as follows:

Satu deklarasi bahawa kaveat persendirian yang telah dimasuki oleh Defendan pada 4-01-2022, No. Perserahan 43/2022 terhadap dokumen hakmilik No. Hakmilik Geran 234503 M1- B/5/327 adalah tidak sah dan tanpa alasan yang munasabah (“wrongful and without reasonable cause”);

Kerugian yang dialami oleh Plaintif ditaksirkan oleh Mahkamah yang Mulia ini seperti yang diperuntukkan di Seksyen 329 Kanun Tanah Negera 1965; dan

Kos akan ditentukan berikutan taksiran gantirugi. Bertarikh : 6 Februari 2025 SGD ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA SHAH ALAM Peguam Untuk Plaintif : Adeline Loh, Messrs Preakas & Partners Untuk Defendan : Gan Khong Aik (with Oh Saw Khim & Tong Ming Jie), Messrs