Wong Ing Tong v Yap Piat Eng @ Yap Lien Eng (W-01(NCVC)(W)-104-02/2020)

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IN THE COURT OF APPEAL OF MALAYSIA AT PUTRAJAYA (APPELLATE JURISDICTION) CIVIL APPEAL NO. W-01(NCVC)(W)-104-02/2020 WONG ING TONG

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(ii) A land held under HS (D) 33356 Mukim Cheras, Selangor together with a 3 1/2 storey building erected thereon bearing the address No. 39, Jalan SL 1/4, Bandar Sg Long, 43200 Cheras, Selangor (2nd property). (hereinafter referred to as "the properties"). [2] Yap Piat Eng @ Yap Lien Eng (the 1st plaintiff) was the registered proprietor of the 1st property since 1995. The 2nd plaintiff, Hoyen Enterprise Sdn Bhd was the registered proprietor of the 2nd property since 1996. [3] The 2nd plaintiff is a company in which the 1st plaintiff and her husband, one Chong Wai Onn are the directors and shareholders. Chong Wai Onn owns 95% of the shares in the 2nd plaintiff. [4] The properties are adjacent shop lot and are occupied by tenants. [5] Without the plaintiffs' knowledge and consent,the properties were transferred and registered into Wong Ing Tong's name (the 2nd defendant). [6] Thereafter, the 2nd defendant charged the properties to Malayan Banking Berhad (the 6th defendant). [7] The plaintiffs claim that they did not sell the properties to the 2nd defendant. They brought this action to set aside the transfer of the properties to the 2nd defendant and to cancel the charges in favour of the 6th defendant. [8] On 31.12.2019, the High Court allowed the plaintiffs' claim. The court set aside the transfer and registration of the 2nd defendant's name as the registered proprietor of the properties; cancelled the charges in favour of the 6th defendant and awarded damages to the plaintiffs. [9] Dissatisfied with the High Court's decision, the plaintiffs (Appeal No.144), the 2nd defendant (Appeal No.104) and the 6th defendant (Appeal 145) appealed to this court. [10] We heard the three appeals together on 1.10.2021 and adjourned for decision to 9.11.2021. On 9.11.2021, we unanimously dismissed all three appeals with no order as to costs. [11] This is our judgment. In this judgment, we will refer the parties as they were in the High Court. BACKGROUND FACT [12] Sometime in March 2014, the 1st plaintiff (Madam Yap) appointed one Yap Kok Sheng (YKS) to transfer her husband's half share in the 1st property to her name. YKS is a lawyer practising in the legal firm of M/S Sheng Lee Law Office (the 1st defendant). For that purpose, Madam Yap handed the issue document of title for the 1st property to YKS. Madam Yap claims the issue document of title for the 1st property was returned to her by the 1st defendant. [13] On 20.9.2016, Madam Yap was informed by her tenants that they were disturbed by the 2nd defendant and/or his agent who claimed that the tenants had to make payments of rental to the 2nd defendant directly or the tenants would have to vacate the properties on the basis the 2nd defendant was the owner of the properties. The tenants also received a notice of demand from the 2nd defendant's lawyer, M/S Michael Chen & Co. [14] Upon hearing this, the plaintiffs instructed their new solicitors, M/S Norendra & Yap to conduct a private land searches on the properties. It was only on or about 29.9.2016 that the plaintiffs discovered for the first time about the transfer of the properties to the 2nd defendant as well as the documents purportedly executed between the plaintiffs and the 2nd defendant in relation to the sale and transfer of the properties to the 2nd defendant. [15] Amongst the documents purportedly executed between the plaintiffs and the 2nd defendant are the sale and purchase agreement dated 30.3.2016 for the respective property; Powers of Attorney dated 1.4.2016 and Form 14A dated 18.7.2016 for the respective property; (hereinafter referred to as "the disputed documents"). [16] The disputed documents revealed the following facts:

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(ii) That the 2nd property was transferred to the 2nd defendant on 8.8.2016;

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(iii) That in the sale and purchase transaction of the properties,the solicitors purportedly representing the plaintiffs were the 1st defendant (YKS) and the solicitors representing the 2nd defendant was the 3rd defendant.

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(iv) That the purported purchase price for the 1st and 2nd property were RM1,500,000.00 and RM850,000.00 respectively;

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(ii) They did not appoint nor instructed YKS to sell the properties;

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(iii) They had never instructed YKS or the 3rd defendant to prepare and execute the disputed documents;

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(iv) They did not sign the disputed documents;

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(vi) They did not receive any payment from the 2nd defendant directly or otherwise. [21] On 14th March 2017, the plaintiffs commenced this action against the defendants to restore the properties back to the plaintiffs and for damages for the losses they had suffered. The plaintiffs alleged that the transfers and the charges could not have been effected without the fraudulent conduct involving the defendants. In addition to fraud, the plaintiffs also alleged negligence against the 3rd defendant and breach of statutory duty against the 5th defendant. THE HIGH COURT DECISION [22] Upon considering the facts and the law, the High Court made the following orders:-

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(1) Judgment be entered against the 1st defendant for a sum of RM228,000.00 being loss of rental in respect of the 1st property and a sum of RM161,000.00 being loss of rental in respect of the 2nd property and costs to the plaintiffs.

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(2) In respect of the claim against the 2nd defendant and the 6th defendant:

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(ii) a declaration that the 2nd plaintiff is the legitimate registered proprietor and beneficial owner of the 2nd property;

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(iii) a declaration that the transfer of the properties to the 2nd defendant are null and void and an order that the transfer be set aside and the 2nd defendant is to be removed as the registered proprietor of the properties;

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(iv) a declaration that the charges created in favour of the 6th defendant are null and void and an order that they be set aside and cancelled;

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(vi) costs in favour of the plaintiffs against the 6th defendant.

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(vii) no order as to costs in respect of the plaintiffs' claim against the 2nd defendant.

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(3) The action against the 3rd, 4th and 5th defendants was dismissed with costs against the plaintiffs.

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(4) The action against the 7th defendant was dismissed with no order as to costs.

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(5) Parties to have liberty to apply. APPEAL NO.104 [23] In this appeal, the appellant (2nd defendant) raised two issues as follows:

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(ii) The learned High Court Judge had erred in holding the 2nd defendant's titles are defeasible. [24] On the forgery issue, learned counsel for the 2nd defendant submitted that having found the plaintiffs have failed to prove fraud against the 2nd defendant, the learned High Court Judge (HCJ) had erred in making a finding of forgery when forgery was pleaded as part of the fraud. It was submitted that the learned HCJ had failed to consider: (a) that there was no evidence of dishonesty on the part of the 2nd defendant; (b) that the 2nd defendant has paid the full purchase price of the properties; and (c) the transactions were handled by the 2nd defendant's solicitors and the 1st defendant who represented himself as the plaintiffs' solicitors. [25] In response, learned counsel for the plaintiffs submitted that the learned HCJ's finding of forgery was a finding of fact which was supported by the evidence of the witnesses. [26] Upon perusal of the appeal records and the grounds of judgment of the learned HCJ, we agree with learned counsel for the plaintiffs' submission. In this case, both the plaintiffs' witnesses have testified that they have not seen nor signed the disputed documents. They also said their purported signature on the disputed documents were not their signature and were forged. [27] We find the plaintiffs' evidence on forgery were supported by the evidence of the plaintiffs' handwriting expert, PW6 who testified that the plaintiffs' purported signature on the disputed documents were from different authorship. [28] Further evidence in support of forgery came from three other witnesses as follows:

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(ii) Mr Lim Chau Yean (PW4) is an advocate and solicitor practising in Messrs Sheng Lee Law Office (legal firm). He left the legal firm in 2013. He gave evidence that he did not witness the 1st plaintiff signed the sale and purchase agreement dated 23.4.2015 and the Form 14A in relation thereto. He further said that the signature appearing on those two documents were not his signature and were forged. To protect himself, he lodged a police report. His evidence was accepted by the high court.

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(iii) The 3rd defendant, Miss Yu Ai Ting (DW4) is an advocate and solicitor practising in M/S Y.S Lim & Ng. DW4 was the solicitor who acted for the 2nd defendant in the sale and purchase transactions. DW4 admitted that she had signed as having witnessed or seeing the 1st plaintiff signed on the Form 14A dated 18.7.2016 as "instructed by Yap Kok Sheng (YKS)". In actual fact, she admitted that she did not actually witnessed the 1st plaintiff sign the said Form 14A. Her admission support the 1st plaintiff's assertion that she had not seen nor signed the purported Form 14A. DW4's admission was accepted by the high court. [29] It is pertinent to note that the learned HCJ had also made a finding of fact that none of the defendants' witnesses had testified that they have met the 1st plaintiff and her husband. Instead, the 2nd defendant and the 3rd defendant deal directly with the 1st defendant only. [30] In light of the above evidence, we agree with the finding of fact made by the learned HCJ at para [224], [234], [269] and [281] of His Lordship's judgment which states as follows: "[224] The testimonies of PW4, the 3rd defendant and PW3 were, in my view, indicative of some impropriety that was afoot relating to the dealings with the properties. [234] Clearly PW6's opinion cannot per se be conclusive. However, even if his opinion is unreliable by reason of the lack of sufficient specimen signatures to compare with, this does not mean it was therefore proven that the 1st plaintiff and Chong Wai Onn did sign the disputed documents. [269] On a balance of probabilities, I find that neither the 1st plaintiff or Chong Wai Onn signed on any of the disputed documents relating to the sale and transfer of the properties, including the Powers of Attorney. [281] Having found that the plaintiffs did not sign any of the documents relating to the sale and transfer of their respective properties to the 2nd defendant, it would follow that the registration of the 2nd defendant as proprietor of the properties was obtained by forgery, or in any event, by means of insufficient or void instruments." [31] At the High Court, the 2nd defendant had contended that the plaintiffs' pleaded case was fraud. Therefore, it was submitted that the plaintiffs cannot rely on section 340 (2) (b) of the National Land Code 1965 (NLC) which provides as follows: 340 (2)The title or interest of any such person or body shall not be indefeasible-

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(ii) The 3rd and 4th defendants owed no duty of care to the plaintiffs; and

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(iii) The plaintiffs have failed to prove fraud, negligence and breach of statutory duty against the 5th defendant. [41] The issues raised by the plaintiffs are as follows:

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(ii) The learned HCJ had failed to hold the 3rd and 4th defendant were negligent;had assumed a duty of care to the plaintiffs and had breached the duty of care which amount to fraud.

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(iii) The learned HCJ only awarded RM161,000.00 against the 1st defendant as the loss of rental of the 2nd property, less than RM212,820.00 claimed by plaintiffs;and

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(iv) The learned HCJ had failed to award exemplary damages to the plaintiffs. [42] The particulars of fraud alleged against the 2nd defendant is pleaded in paragraph 48 and 48A of the amended statement of claim. Among them were that the 2nd defendant was involved in procuring or caused the issue of forged copies of the issue documents of title in respect of the properties, instructing or causing to be prepared the disputed documents relating to the sale and transfer of the properties, withdrawing the plaintiffs' caveats without the knowledge of the plaintiffs and entering into a sham sale and purchase agreement with the 7th defendant. The learned HCJ refers these allegations of fraud as "a blunderbuss of allegations". [43] With regard to the plaintiffs' allegations of fraud against the 2nd defendant, the learned HCJ found there was no evidence of any fraud against the 2nd defendant. His Lordship also found there was no evidence that the 2nd defendant had conspired with anyone to fraudulently transferred the properties to himself. Instead the learned HCJ ruled that the 2nd defendant's purchase of the properties were done through his lawyers, the 3rd and 4th defendant. [44] The particulars of fraud alleged against the 3rd and 4th defendant is pleaded in paragraph 49 of the amended statement of claim. Among them were the 3rd and 4th defendant were involved in executing or caused to be executed the sale and purchase agreements, Powers of Attorney and Form 14A; withdrawal of the plaintiffs' caveat without the plaintiffs' knowledge and failure to investigate the authenticity of the witness of the 1st plaintiff's signature by Lim Chau Yean (PW4) from Sheng Lee Law Office where (PW4) ceased practising in Sheng Lee Law Office since 2013. [45] The learned HCJ found there was no evidence led by the plaintiffs of any actual fraud on the part of the 3rd and $ 4^{th} $ defendants. In fact, when the $ 1^{st} $ plaintiff was cross-examined by the learned counsel for the $ 3^{\mathrm{rd}} $ and $ 4^{\mathrm{th}} $ defendants as to whether she has any evidence to support the allegations of fraud against the $ 3^{\mathrm{rd}} $ and $ 4^{\mathrm{th}} $ defendants, the $ 1^{\mathrm{st}} $ plaintiff says she does not know the $ 3^{\mathrm{rd}} $ and $ 4^{\mathrm{th}} $ defendants and she had no evidence against them. [46] As against the 5th defendant, the plaintiffs' allegation of fraud, among others, are failure to ensure that only one original issue document of title exist; to ensure that the system of registration or the records were correct and up to date; accepting the Forms 14A and the forged issue documents of title for the purposes of the transfers when they were not valid and failure to conduct an investigation. Against these allegations, the learned HCJ makes the following finding of facts:

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(ii) There was no evidence of any fault or failure on the part of the 5th defendant; and

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(iii) None of the allegations of fraud, negligence or breach of statutory duty were made out against the 5th defendant. [47] In relation to the plaintiffs' claim in negligence against the 3rd and 4th defendants, the learned HCJ ruled that the transactions in this case were done between the solicitors for the vendors and solicitors for the purchaser. That there was no direct dealing between the 3rd and 4th defendant with the plaintiffs. That the whole problem arose as a result of the $ 3 ^{rd} $ defendant's reliance on the 1st defendant's representations and not the plaintiffs' reliance on the 3rd defendant's representation if ever made. In the circumstances of the case, the learned HCJ held that the 3rd and 4th defendants owed no duty of care to the plaintiffs. [48] We agree with the finding of facts made by the learned HCJ on the issue of fraud and negligence against the 2nd to 5th defendant. The truth is the plaintiffs do not know and had no dealing with the 2th to 5th defendant. It would be impossible for the plaintiffs to adduce evidence to prove fraud against the 2nd to 5th defendant. The plaintiffs can only testify on the impugned documents, namely their signatures were forged. As for the negligence alleged against the 3rd defendant, although the learned HCJ found the 3rd defendant was reckless, no duty of care is owed to the plaintiffs as there was no solicitor-client relationship between the 3rd defendant and the plaintiffs. We see no good reason to disturb the finding of fact made by the learned HCJ. [49] In relation to the award of loss of rental in the sum of RM288,000.00 for the 1st property and RM161,000.00 for the 2nd property, the plaintiffs' complaint is the learned HCJ did not grant any award for the loss suffered by the plaintiffs up until the properties were recovered from the 2nd defendant. In the absence of any explanation by the learned HCJ as to why His Lordship only allow the sums of RM288,000.00 and RM161,000.00 for the respective property, we are not in a position to say the award is erroneous. [50] With regard to the plaintiffs' claim for exemplary damages, we agree with the learned HCJ that this is not a suitable case to award exemplary damages as there was no clear evidence as to whose conduct amongst the defendants that can be calculated to make a profit for himself which may well exceed the compensation payable to the plaintiffs. [51] For the aforesaid reasons, we find there is no merit in this appeal. The appeal is, therefore dismissed. The decision of the High Court is affirmed. APPEAL NO.145 [52] The appeal by the 6th defendant (Maybank) is against the decision of the High Court which held that Maybank was not a purchaser in good faith within the meaning of the proviso in section 340 (3) of the NLC by reason of it having notice of the caveats and consequently, the charges created in favour of Maybank were void and set aside. [53] By reason of the titles acquired by the 2nd defendant were defeasible under section 340 (2) (b), the charges created in favour of Maybank were also defeasible unless Maybank can prove it had acquired its interest in the properties ie the charges, in good faith and for valuable consideration under the proviso of section 340 (3) which reads as follows: 340 (3) Where the title or interest of any person or body is defeasible by reason of any of the circumstances specified in subsection (2) -

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(ii) Knowledge of a dispute as to the ownership of property and knowledge of fraud allegation vitiate good faith; (T Sivam's case).

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(iii) Elements of carelessness and negligence negate good faith; (Au Meng Nam & Anor v Ung Yak Chew & Ors [2007] 5 ML J 136. [55] In this case, the plaintiffs have lodged a caveat on 4.10.2016. In Form 19B for the 1st property, the 1st plaintiff states inter alia as follows:

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(viii) Saya amat terkejut mendapati bahawa harta tersebut telah secara penipuan telah dipindahmilik kepada Wong Ing Tong pada 2.9.2016.

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(ix) Saya telah mengarahkan peguam saya untuk memulakan satu tindakan guaman untuk membatalkan pindahmilik secara fraud tersebut.

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(viii) Saya amat terkejut mendapati bahawa harta tersebut telah secara penipuan dipindahmilik kepada Wong Ing Tong pada 8.8.2016.

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(ix) Saya telah mengarahkan peguam Syarikat untuk memulakan satu tindakan guaman untuk membatalkan pindahmilik secara fraud tersebut.

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(ii) The requirement to give notice to the caveator was bypassed by using the Powers of Attorney when it would be reasonable to make enquiries to ascertain that the Powers of Attorney was genuinely executed;

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(iii) Maybank was not concerned with the issue of fraud, why the caveats existed and how they were removed. It appears that Maybank is only concerned with getting the caveats removed. [63] Before us, learned counsel for Maybank submitted that the caveats dated 4.10.2016 are merely assertions of an interest in a property by the caveator. It is submitted that a caveat is not a notice of fraud, but merely a notice of an adverse claim that may be asserted by anyone, bona fides or otherwise. Maybank relies on the Court of Appeal case of Rabiah bt Lip & Ors v Bukit Lenang Development Sdn Bhd and other appeals [2008] 5 M J 128. [64] In Rabiah's case, the appellants who are squatters in six plots of land (out of 407 plots purchased by the respondent developer) had lodged a private caveat in respect of the six plots, claiming each of them had paid RM3000.00 to the land owner to purchase their respective plot. The High Court found there was no concluded agreement for the purchase of the six plots as contended by the appellants. The Court of Appeal affirmed the High Court's decision and ruled that the caveat entered by the appellants were an after thought. We find Rabiah's case does not apply because the facts and issue in that case is totally different from the present case. [65] It was submitted that Maybank has taken sufficient reasonable steps to enquire about the caveats and Wong Ing Tong's ownership of the properties. Therefore, it was submitted that the learned HCJ placed an erroneous burden on Maybank to meet the good faith requirement. [66] We disagree with the learned counsel for Maybank's submission. In our view, a reasonable prudent purchaser in Maybank's position would investigate as to what, why and how the plaintiffs had alleged there was fraud. Surely, Maybank ought to take precautions to find out the truth of the matter before deciding to grant a loan to the the $ 2^{\mathrm{nd}} $ defendant. If Maybank conduct an investigation, it will discover that the documentary evidence relied upon by Maybank to effect the transfer of the properties to Wong Ing Tong were tainted with forgeries. Despite having actual knowledge of the dispute of ownership and the allegation of fraud, Maybank treat the caveats as insignificant and had them removed. Maybank then proceed to grant a loan to the 2nd defendant and create the charges. In the circumstances of this case, we find Maybank had not acted reasonably and fairly. Our view is, Maybank's conduct exclude good faith. Therefore, we find the learned HCJ had not erred in making a finding that Maybank was not a purchaser in good faith. [67] For the aforesaid reasons, we find no merit in the appeal. We, therefore dismissed the appeal. [68] In view of the circumstances of this case, we make no order as to costs for all three appeals. Dated: 18th Februari 2022 Hadhariah binti Syed Ismail Judge Court of Appeal For the Appellants/PlaintiffsMr Wong Mun Hoe(Long Chay Jo, Chua Heaw Eng and Ching Zi Xuan with him);Messrs Munhoe & MarFor the Appellant/2nd defendantR Rajasurian(Vasudevan Appu and Dennis Xavier with him);Messrs Vasudevan A&Co.For the Appellant/6th defendantShanti Mogan(hee Hui Ting with her);Messrs Shearn Delamore&Co.