Sunsui Realty Sdn Bhd v Orix Credit Malaysia Sdn Bhd (BA-22NCvC-219-06/2023)

ORIX CREDIT MALAYSIA SDN BHD (No. Syarikat: 67108-U)

MA SU TENG (No. K/P: 540517715146) DEFENDAN PERTAMA DEFENDAN KEDUA GROUNDS OF JUDGMENT Introduction [1] The Plaintiff purchased 3.9109 hectares of freehold land held under Title Geran 20087, Lot 10477, Mukim Klang, Daerah Klang, Negeri Selangor ( ) at a public auction for RM8.1 million. The 2nd Defendant is the registered proprietor of the Land who had charged it to the 1st Defendant. The auction followed a foreclosure action on the charge and a judicial order for sale. [2] After paying the 10% deposit of RM810,000.00, the Plaintiff discovered that an electricity transmission pylon that support Tenaga Nasional Berhad ( TNB ) overhead high voltage transmission lines ( Tower ) occupy part of the Land. This was not disclosed in the proclamation of sale. 18/11/2024 14:42:28 BA-22NCvC-219-06/2023 Kand. 60 [3] According to the Plaintiff, it significantly reduced the usable area of the Land. The Plaintiff did not pay the balance purchase price under the memorandum of sale and instead, filed this suit to nullify the auction sale and seek the return of the RM810,000.00 deposit as well as general and exemplary damages against the Defendants. Questions of Law [4] claim appears to be premised in contract i.e. a misrepresentation that induced a contract and which, by operation of sections 18 and 19 of the Contracts Act 1950, renders the contract voidable at the option of the party whose consent was so compromised. [5] Misrepresentation is also a tort i.e. negligent misrepresentations are also known as negligent misstatements, while fraudulent misrepresentations are also known as deceit. That the pleading in this case is capable of supporting an action in tort is important because as highlighted by the Defendants, the Federal Court in Ambank (M) Bhd v AIM Edition Sdn Bhd [2022] 1 MLJ 357 made it clear that in a judicial sale, no contract is formed between the purchaser and the chargee. [6] In any case, t :

the usable area of the Land is less than as stated in the proclamation of sale (3.9109 hectares) due to the presence of the TNB Tower and Lines on the Land;

the Defendants were aware of the endorsement of a right of way for the TNB Tower and Lines on the grant of title (Presentation No. 4488/2015 Hak Laluan Talian Elektrik of 1.3270 hectares) ( ); and

non-disclosure of the TNB Right of Way in the proclamation of sale constitutes a misrepresentation that vitiates the auction sale. [7] The Plaintiff has applied under Order 14A of the Rules of Court 2012 to have the following questions of law determined without a trial:

Question 1: Whether a chargee is under a duty to disclose easements, caveats, tenancies, restrictions, encumbrances and rights not detectable through official title searches, specifically those that will involve changes to the use, size and area of land in a proclamation of sale?

Question 2: Whether the failure of a chargee to comply with the provisions of Section 257 of the National Land Code will render a sale pursuant to a proclamation of sale void?

Question 3: Whether the Order for Sale dated 19-9-2022 is defective and irregular on the principles of res judicata and/or on the reason that it has been considered by the Court in an earlier Originating Summons No. WA-24FC- 425-09/2021? The Law on O14A [8] Order 14A Rule 1(1) of the Rules of Court 2012 ( ) provides as follows:

The Court may, upon the application of a party or of its own motion, determine any question of law or construction of any document arising in any cause or matter at any stage of the proceedings where it appears to the Court that-

such question is suitable for determination without the full trial of the action; and

such determination will finally determine the entire cause or matter or any claim or issue therein. [9] The principles applicable in considering an O14A application are not controversial. The Court of Appeal in Mohd Zai Mustafa v. Menteri Pendidikan Malaysia & Ors And Other Appeals [2024] 2 CLJ 753 recently summarised it as follows: [21] The existence of a question of law or construction to be determined by the court must be clearly discernible from the pleadings of the parties. The question of law or construction must also be one that is capable of being determined without a full trial of the action, and hence, the procedure in O. 14A may not be appropriate where there are conflicting allegations of fact that affect the determination of the questions of law or construction, or where there are facts in issue that are interwoven with the legal issues raised. Where there exist disputes of fact on the affidavits, the court may, nonetheless, proceed to exercise its discretion to determine whether the undisputed or agreed facts provide a sufficient basis to determine the question of law or construction: see Bato Bagi & Ors v. Kerajaan Negeri Sarawak & Another Appeal [2011] 8 CLJ 766; [2011] 6 MLJ 297. A court should not decline to consider an application under O. 14A simply on the basis that the question of law or issue of construction is or appears to be complicated. (See Petroleum Nasional Bhd v. Kerajaan Negeri Terengganu & Another Appeal [2003] 4 CLJ 337; [2003] 5 AMR 696; [2004] 1 MLJ 8; [2003] 1 MLRA 582). The determination of the application under O. 14A need not necessarily dispose of the entire case; it suffices if the answer arrived at by the court disposes of "any claim or issue" in the action (supra, and Wang Bao' An & Ors v. Malaysian Airline System Bhd & Other Cases [2018] 7 CLJ 371; [2018] 11 MLJ 585). The question of law or construction, which the court is to determine, must be set out in clear and precise terms (Lekaz Constructions Sdn Bhd v. KOP Petroleum Sdn Bhd; HSBC Bank Malaysia Bhd (Intervener) [2003] 4 CLJ 377; [10] Another point to highlight is that in Nora Hayati v Amanah Raya Bhd [2012] 10 CLJ 634, the Court has held that a defendant's failure to strike out the plaintiff's action under Order 18 Rule 19 of the Rules of Court 2012 does not preclude it from applying for summary disposal of the suit under O14A: The court agrees with learned counsel for the defendant that relying on the afore-stated authorities, the doctrine of res judicata would not be applicable in this case. This is because the principles applicable in a striking out application under O. 18 r. 19(1) of the RHC 1980 are quite different from that of an application under O. 14A. The court agrees with learned counsel for the defendant that the Court of Appeal had not "necessarily and with precision" determined the issues that are now raised by the defendant in their O. 14A application such as to preclude them from [11] Thus, the fact that this Court had on 21-3-2024 dismissed applications by the Defendants to strike out the suit summarily does not prevent the Court from considering the present O14A application. Analysis of Questions [12] Broadly speaking, the Plaintiff has framed 3 questions around 2 issues, namely:

whether an auction sale is void due to non-disclosure of the TNB Right of Way in the proclamation of sale; and

whether the auction sale is void because of non-compliance with Section 257 of the National Land Code. [13] On a review of the pleadings, I agree with counsel for the Defendants that Question 2 and Question 3 do not arise from the pleadings. Although the Plaintiff narrates the history of the foreclosure proceedings that culminated in the auction sale, the sole vitiating factor pleaded in the Statement of Claim is misrepresentation caused by the-disclosure of the TNB Right of Way in the proclamation of sale. [14] I therefore decline to answer Question 2 and Question 3 for the above reason, and also for the following other reasons: a) referring to M&J Frozen Food Sdn Bhd & Anor v Siland Sdn Bhd & Anor [1994] 1 MLJ 294, it is the chargor who retains the right to object to and set aside the order for sale when there is non-observance of the terms ordered; and b) referring to Ann Joo Steel Bhd v Pengarah Tanah dan Galian Negeri Pulau Pinang & Anor and another appeal [2020] 1 MLJ 689, the Plaintiff cannot collaterally attack the validity of the order for sale and directions given by the High Court in favour of the chargee with due notice to the chargor. [15] The Defendants also opposed the determination of Question 1 without trial because they argue that it is not admitted that the TNB Right of Way is any of the restrictions in title set out in Question 1, namely easements, caveats, tenancies, restrictions, encumbrances and rights not detectable through official title searches. [16] Perhaps Question 1 was conceived in an attempt to frame a question of law of general application, but the Plaintiff has quite unnecessarily obfuscated the real question of law in this case by doing so. There is no requirement under O14A that the question of law must be one of general application. It is just a requirement that it be set out in clear and precise terms. [17] The intent behind Question 1 was made clear during oral submissions and there is no other pleaded subject of non-disclosure other than the TNB Right of Way. The real question of law that calls for ): Whether a chargee is under a duty to disclose the existence of the TNB Right of Way in a proclamation of sale if it is not detectable As parties have been given full opportunity to be heard on the Reframed Question, this Court will consider the Reframed Question and not the original Question 1. [18] If the answer is affirmative, then the omission is an actionable misrepresentation. misrepresentation must necessarily fail. Note that I have not discounted the possibility that it may not wholly decide the action. In an actionable misrepresentation, a trial would be necessary to determine if the misrepresentation is innocent, negligent or fraudulent. [19] In other words, the Reframed Question is a question of law that can be determined without a full trial and as a key issue in contention, it can wholly or substantially decide the action. As will be apparent shortly, the relevant facts material to the Reframed Question are undisputed. Relevant undisputed facts [20] The 1st Defendant obtained an Order for Sale of the Land in Originating Summons No. BA-24FC-425-09/2021 on 28-10-2021. The 1st Defendant filed a Summons for Directions a year later in Application for Execution No. BA-38-682-06/2022 and the first auction was held on 1-11- 2022 (1st Auction st Auction. [21] The Plaintiff was the successful bidder at an auction of the Land on 18-4-2023 ( nd ). The 2nd Auction was held according to directions given on 19-9-2022 under a second Summons for Directions in Application for Execution No. BA-38-1464-11/2022. [22] The 2nd Auction was carried out under a proclamation of sale dated 9-3-2023 ( ). On its successful bid, the Plaintiff entered into a Memorandum of Sale dated 18-4-2023 signed by the Registrar of the e-Lelong Operations Centre and sealed by the High Court. It is expressed to bind the 1st Defendant and the Plaintiff. [23] The Proclamation of Sale is in a standard form and has the following title details: BUTIR-BUTIR HAKMILIK: No. Hakmilik : Geran 20087 No. Lot : Lot 10477 Mukim/Daerah/Negeri : Klang/Klang/Selangor Pegangan : Hakmilik Kekal No. Petak/No.Tingkat/No. : Tiada/Tiada/Tiada Bangunan Keluasan Tanah : 9.660000 ekar : 3.910000 hektar Pemilik Berdaftar : Ma Su Teng Syarat Nyata : Pertanian Sekatan Kepentingan : Tiada Bebanan/Lain-lain : Sebanyak 0.1361 hektar dari kawasan / keluasan asal tanah sebanyak 4.0469 hektar telah diambil milik dan kawasan / keluasan tanah sebanyak 3.9109 hektar adalah selepas mengambil kira pengambilan milik tanah itu. Kawasan Rizab : Kaveat : [24] The Proclamation of Sale does not mention the existence of the TNB Right of Way. However, it contained the following disclosures, caveats and disclaimers typical of such document and the accompanying conditions of sale: [25] The TNB Tower and Lines are of course very large physical structures on the Land that are clearly visible to the eye. The Plaintiff admits that it did not carry out a physical visual inspection of the Land prior to bidding for it at the e-lelong auction on 18-4-2023. Condition of the Title [26] The TNB Right of Way is known to the Defendants as it is endorsed on the grant of title as follows: REKOD URUSAN No. Pers 4488/2015 Hak Laluan Talian Elektrik tanah seluas lebih kurang 1.3270 Hektar telah terlibat dengan talian bekalan elektrik mengikut Seksyen 11, Akta Bekalan Elektrik 1990 didaftarkan pada 4 Disember 2015 jam 09:17:39 pagi (No. Rujukan Fail: TNB 10/10/1525) [27] It is not disputed that there was no acquisition of land by TNB over the affected areas. TNB only holds the legal status of a licensee, acting as a wayleave holder with a right of way over the Land (Tenaga Nasional Bhd v. Majlis Daerah Segamat [2023] 9 CLJ 214). [28] According to Section 11(10) of the Electricity Supply Act 1990, the existence of the TNB Right of Way should also appear as an endorsement on the register document of title. [29] However, the TNB Right of Way did not appear on the official title search (Sijil Carian Rasmi) carried out by the Plaintiff. Instead, the TNB Right of Way appears on a title search dated 21-2-2024 (Sijil Carian Rasmi Hakmilik dan Maklumat Tidak Berkuatkuasa) produced by the 1st Defendant. It is listed-endorsan terdahulu yang tidak berkuat kuasa [30] Evidently, the Plaintiff did not conduct a search of expired endorsements. It also seems evident that there was an error at the registry in classifying the TNB Right of Way as an expired endorsement because it remains on the title grant. The Defendants have not pleaded otherwise and there is no evidence the TNB Right of Way has been revoked. Answer to the Reframed Question [31] The Plaintiff complains that there is misrepresentation by non-disclosure on the TNB Right of Way in the Proclamation of Sale since it is a restriction not detectable through official title searches and involves changes to the use, size and area of land that it affects. [32] The 2nd Defendant denies any involvement in the auction process while the 1st misdescription of the Land, it has no duty to disclose the TNB Right of Way and that caveat emptor applies. [33] Although this is an action to annul a judicial sale and not a contract of sale, a good starting point is the following extract from Chitty on Contracts (33rd Edition) at paragraph 7-175 (34th Edition 9-184): Contracts for the sale of land are not uberrimae fidae in the sense that the vendor has to make to the purchase a full disclosure of all material facts. In the absence of actual misrepresentation the general rule is caveat emptor. But certain qualifications must be made because the vendor is under a duty to disclose defects relating to title. Every material defect in the defective the vendor will be unable to perform his contract in the absence of a condition that the purchaser should accept a defective title. In consequence, if any such defect is not disclosed the purchaser may rescind the contract or resist a suit [34] That a contract for the sale of land is not a contract uberrimae fidei was affirmed by Court of Appeal in QVC Rock Products Sdn Bhd v Pohmix Kuari Sdn Bhd [2024] 3 MLJ 752: uberrimae fidei (utmost good faith). Thus, the appellant must itself be aware and make its own requisite inspection and inquiry on both Lot A and Lot B including the physical nature of the sites before entering into the SPA. As a matter of fact, it was the appellant itself who identified and chose Lot B in lieu of Lot X. The failure of the appellant to carry out its physical visual inspection as well as preliminary survey of both Lot A and B is hence fatal to its pleaded claim based on negligent misrepresentation. We are mindful that the appellant attempted to rely on cl 5.3.1 of the SPA to argue that it has 60 days upon the issuance of the TOL to conduct a due diligence on Lot B but we find that the purpose of cl 5.3.1 is for legal due diligence on the title but not on the physical state or condition of Lot B. The facts of the case of Gemakota Enterprise Sdn Bhd v Public Bank Bhd [1998] MLJU 389; [1998] 4 CLJ Supp 476 relied on by the [35] In Bayangan Sepadu Sdn Bhd v Jabatan Pengairan dan Saliran Negeri Selangor & Ors [2022] 2 CLJ 1, the Federal Court explains caveat emptor as follows: Caveat emptor that a purchaser should make inspection and inquiry as to that which he is proposing to buy. If a property is being sold on an "as is where is" basis, this means that it is being sold in its current condition, whatever this condition happens to be;

(ii) the principle of caveat emptor is applicable in a case of disclaimer of warranty as to the quality, nature, condition and/or defects of the property sold; and

(iii) the principle of caveat emptor will not assist the defendants who do not have any rights, title, interest and/or benefit in the [36] Based on the above, caveat emptor is a general principle that may apply analogously to a judicial sale and it has in fact been so applied. As this Court must proceed in a principled manner, I adopt the same test i.e. in the absence of actual misrepresentation or non-disclosure of material defects to title, caveat emptor applies. However, there is no clear principle in relation to the sale of land, on what exactly is a material defect to title that requires full disclosure. [37] The Plaintiff sought to rely on a UK decision SPS Groundworks & Building Limited v Ms Satvinder Kaur Mahil [2022] EWHC 371 ( ), an action for damages by the seller who the sale as a repudiatory breach of contract, and re-sold the land to another buyer. [38] In SPS Groundworks, the buyer claimed that there was misrepresentation in that the property register for the land sold contained a covenant running with the land which rendered development of the land impossible or unsustainable. There were other distinctive facts of that case, but for the present inquiry, the Court found that the seller had an equitable duty to disclose the restriction and that the disclosure in the legal pack for the auction was insufficient to bring it to the attention of potential bidders. [39] The Defendants on the other hand, referred to cases such as Ambank (M) Bhd v AIM Edition Sdn Bhd [2022] 1 MLJ 357 (different land area) and QVCRock Products Sdn Bhd v Pohmix Kuari Sdn Bhd [2024] 3 MLJ 752 (quarried land). Those cases referred to other cases like Ranjit Singh a/l Jarnail Singh v Malayan Banking Berhad [2016] 1 MLJ 165 (caveat); Mature Land Sdn Bhd v Atlantic Plantation Sdn Bhd [2013] 4 MLJ 565 (illegal occupier) and Richard Curtis & Co Sdn Bhd v Khatijah Abdul Majid [2012] 7 CLJ 878 (different land area). [40] In all of the abovementioned Malaysian cases, the purchasers were unsuccessful in their attempts to vitiate the sale and/or recover damages. In all of those cases also, the rights of the purchasers were limited, but the quality of the restrictions complained of were not discussed, only that caveat emptor applies and the purchasers were imprudent in not making their own inquiries. [41] Considering the cases cited, this Court notes that with regards to the duty of disclosure, the normal rule for commercial contracts is caveat emptor. There has been no prior recognition of the equitable duty of disclosure to temper the effect of the maxim in relation to sale of land and certainly not in relation to judicial sale of land. In specified circumstances, the equitable duty of disclosure should prevail since rules of equity are part of the law in Malaysia, and judicial notice may be taken that the Torrens system is not an infallible system of registration of interests. [42] Thus, this Court is inclined to hold that the equitable duty of disclosure in contracts for the sale of land requires full disclosure by the vendor of defects to title that materially limit the proprietary rights of the purchaser; and which a purchaser could not be expected to discover for itself with the care ordinarily used in such transactions such that further inquiries would be warranted. In such circumstances, caveat emptor will not apply to relieve the vendor. [43] As mentioned, the existence of the TNB Right of Way should have been noted on the register document of title. For some reason, it was not and the Defendants omitted any mention of it in the Proclamation of Sale. implied duty of good faith could be understood as a reference to this equitable duty of disclosure. [44] However, the difficulty for the Plaintiff in this case is this. One of the factors that must be present for the equitable duty of disclosure to arise is that the defect in title is one which a purchaser could not be expected to discover for itself with the care ordinarily used in such transactions. [45] that the care ordinarily used in an auction sale of a property on an as-is-where-is basis would include a visual inspection of the Land. Thus I refer to the principles from SPS Groundworks but distinguish that case on its own facts. The existence of the TNB Tower and Lines in this case could have been easily discovered, leading to further inquiries that would have uncovered the TNB Right of Way. [46] This is not a circuitous analysis. As an exception to the caveat emptor rule, equity may be invoked not to aid the indolent, but only where the defect in title could not reasonably be expected to have been discovered in the first instance. As the purchaser could reasonably be expected to have discovered the TNB Tower and Lines complained of, the equitable duty of disclosure does not arise and caveat emptor applies. [47] For the above reason, I would answer the Reframed Question in the negative. The effect of this determination is that the auction sale is not claim must be dismissed. Bearing in mind that the Defendants had opposed Enclosure 9, I only award costs of the action of RM5,000.00 to each Defendant. Bertarikh : 18 November 2024 SGD ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA SHAH ALAM Peguam Untuk Plaintif : Tay Shieh Chin, Messrs Ganaeswaren & Latib (Klang) Untuk Defendan Pertama : Chuah Thiam Ming, Messrs Azri Chuah & Yap (Kuala Lumpur) Untuk Defendan Kedua : Hazwan Lee Haris Lee, Messrs Shu Yin, Teh & Taing (Subang Jaya)