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Keeping forgers away from your property

19/05/2006 The Sun - Law & Realty By Andrew Wong and Nicole Tan

AFTER having paid a great deal of money to own a property, and after many years of hard work, toil and sweat to pay off your bank loan, you feel proud and happy that your property is now free from encumbrances and yours to enjoy. You further feel an immense sense of security as the original title is safely tucked under your mattress or locked in a bank vault. It is inconceivable that one fine morning, you can wake up and discover that your property is no longer yours. It happened to Madam Boonsom Boonyanit and it may happen to you as well.

Boonsom was a Thai national residing in Bangkok. Her husband had purchased two plots of land in Tanjung Bungah, Penang and in 1967 he transferred the lands to Boonsom as a gift. Thereafter the original titles were always in her possession. The assessment and quit rents were regularly paid by an accountant in Penang, on the instructions of Boonsom’s eldest son, Phiensak Sosothikul. She had never transferred or sold the lands to anyone.

Sometime in June 1989, Phiensak saw an advertisement in a Thai newspaper making reference to her mother’s lands in Penang. He immediately contacted the accountant and requested him to investigate. The accountant discovered that Boonsom was no longer the registered owner of the lands. She had apparently sold and transferred the lands to Adorna Properties Sdn Bhd (“Adorna”) sometime in May 1989.

It appeared that an impersonator, calling herself by the name of Boonsom, had made a statutory declaration that she was the owner of the lands and had lost the original titles. With this declaration, the fake Boonsom was able to obtain replacement titles from the appropriate authority. The fake Boonsom, who had also procured a forged passport, then sold the lands to Adorna. Although the fake Boonsom was represented by a solicitor in the sale, she signed the transfer before a land administrator and Adorna became the registered owner of the lands.

A police report was lodged. The impersonator had vanished into thin air, probably with RM1,865,798 in her pocket. In 1989, the real Boonsom instituted legal proceedings and claimed to be restored as the registered proprietor.

The relevant law on the subject is in section 340 of the National Land Code. 340(1) confers indefeasible title to any person who is registered as proprietor of any land. Nevertheless, 340(2) provides that a title may be defeasible in a case of fraud or misrepresentation, or where registration was obtained by forgery, or where the title was unlawfully acquired. 340(3) states that, where a title is defeasible, it may be set aside in the hands of any person to whom it may subsequently be transferred, and any interest subsequently granted may be set aside in the hands of any person in whom it is for the time being vested.

However, nothing in 340(3) shall affect any title acquired by any purchaser in good faith and for valuable consideration, or by any person claiming under such a purchaser ('the proviso").

The High Court Judge was not satisfied that the transfer was forged, but held that even if the transfer was forged, Adorna had obtained an indefeasible title as Adorna is a purchaser in good faith and for valuable consideration envisaged in the proviso. The learned Judge recognised that although registered landowners should be protected from being divested of their title through fraud or forgery, it is necessary for the economic well-being of the nation, to retain the confidence of prospective innocent purchasers. The Court declared that the intention of Parliament is clearly to protect parties who are bona fide and hence to provide immediate indefeasibility to such innocent parties.

The Court of Appeal restored Boonsom as the proprietor of the lands. Justice Datuk Gopal Sri Ram held that Adorna became the registered proprietor by means of a forged transfer, and hence the title it obtained is defeasible for the reason that Adorna is not the innocent purchaser envisaged in the proviso. The learned Judge went on to suggest that if Adorna had disposed of the lands to a third party who, in good faith pays the purchase price, then the third party will obtain an indefeasible title, as the third party would be the innocent purchaser envisaged in the proviso.

Adorna took the matter to the apex court of Malaysia, and in December 2000 the Federal Court agreed with the High Court Judge that even if the transfer was forged, Adorna had nevertheless obtained an indefeasible title as it is an innocent purchaser envisaged in the proviso. Fortunately, Boonsom did not suffer the agony of having to receive this judgement, as she had passed away in May 2000.

Within the legal fraternity, the Federal Court judgement had been severely criticised. The contention is that it should not be allowed to stand. The Federal Court may have unwittingly handed a carte blanche to conniving forgers. The Government must immediately fulfil its moral and legal duty to protect the citizens’ properties as enshrined in the Constitution by immediately amending the Code.

In the meantime, it may be necessary for a landowner, in particular of vacant plots of land, to conduct a regular title search on his own property. It may even be necessary to lodge a private caveat on your own property to restrain any dealings. It would be prudent to make prompt payments of quit rent and assessment and to check the name of owner printed thereon. This may not be conclusive but will certainly trigger off an alarm in the event of any discrepancy. Landowners who have charged their property to a bank as security appear to be safe, as forgers tend to shy away from any property which is encumbered.

The writers are members of the Conveyancing Practice Committee Bar Council


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