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How safe is your title?
26/11/2005 NST-PROP By Salleh Buang

A woman in Penang lost her land, a very valuable piece of property in Tanjung Bungah, when a con-artist, also a woman, impersonating her transferred the land to a purchaser, a Malaysian-registered company.

For the rightful owner then, a decade-long battle began as she tried valiantly to get back her land. It was a battle that took her up the ladder of the three-tier Malaysian judicial system.

She suffered an initial setback when she lost her bid in the High Court, but won on appeal to the Court of Appeal. However, her victory was short-lived when the nation’s highest court, the Federal Court, held that the right of the bona fide purchaser must be protected and upheld.

That unfortunate woman has since died. Quite recently, her son tried a last-ditch effort to move the Federal Court to review its earlier decision. The court, however, declined. I respect its decision, but still find it distressing.

There is nothing more anyone can do about this case - apart from continuing to ask whether the woman and her heirs were given justice. In the years ahead, this case - and perhaps the many others that are bound to follow - will become a painful legacy of our Torrens system, leaving future generations to grapple with the question of how secure is our system of land tenure.

While this sad tale is known to many people from all walks of life, I doubt the same can be said of the following case.

In late 1985, a Chinese gentleman, whom I shall call CLS, living not too far away from downtown Kuala Lumpur, was asked the whereabouts of his land title by his second son. It was, he said, with Bank X, to which the title had been charged and deposited as security for a fixed loan.

“Are you sure?” son number two asked.

Perplexed by the question, he checked with the bank. To his horror, he found out that it no longer had the title. In fact, it had been discharged and subsequently charged to Bank Y.

The gentleman later found out that his first son - who was missing and on the run from the police - had been up to his tricks again. He had deceived both banks and by forgery, had carried out the impugned transaction (land charge) in favour of Bank Y.

The father took the matter to court. To cut the story short, he won. The court held that because of the proven fraud and forgery, Bank Y (to which the title had been charged by the plaintiff’s prodigal son) must restore and return the title to the father.

Two things impressed me about this case. The first was the testimony of a woman officer, an expert with the Chemistry Department who convinced the court that forgery had indeed been committed.

Second, the readiness of the learned trial judge to hold that since the transaction had been vitiated by fraud and forgery, Section 340(2) of the National Land Code must be applied and Bank Y’s interest must be held to be defeasible.

In simple terms, the Chinese gentleman in the second case won because of two things: One, the judge held that he should not be deprived of his land title through the deceit and trickery of his second son; and two, the case did not go any further beyond that point.

The irony is that one of the precedents cited before the trial judge was the Court of Appeal decision in the matter of the woman from Penang. It was this particular judgment - the woman’s solitary court victory - that the judge followed in his decision handed down on Oct 1, 1998.

This is what the trial judge said in his ruling for the Chinese gentleman: “The very fact of forgery suffices by itself in making a registered title defeasible, irrespective of the absence of knowledge or implication on the part of the proprietor. In other words, it affects the immediate proprietor even if he be an innocent purchaser for value.”

However, I have a lingering doubt. Since the Federal Court overturned the Court of Appeal decision in the first case, is the 1998 decision of the High Court that relied on an overturned decision still good law?

Assuming that the last word on the matter was laid down by the Federal Court as in the Penang woman’s case, where does that leave us on the global question: “How safe are our land titles?”

A look at some international documents can help us assess where we stand in terms of achieving an international standard in our land tenure system.

Going by the United Nations Guidelines on Land Administration, the term “land administration” means “the process of determining, recording and disseminating information about the ownership, value and use of land when implementing land management policies”. Such information must obviously be complete, accurate and dependable.

A good land administration system is expected to:

• Guarantee ownership and security of tenure;
• Support land and property taxation;
• Provide security for credit;
• Develop and monitor land markets;
• Protect State lands;
• Reduce land disputes;
• Facilitate land reform;
• Improve urban planning and infrastructure development; and
• Support environmental management.

A good and efficient land administration system must also be seen as a “service” to society as a whole. It is an important part of an economic infrastructure, not an end in itself.

Likewise, the objective of a good land registration system is also to serve society. It should not be too complicated or costly, nor involve too many players.

The basic principles of a modern land registration system, according to the UN Guidelines, include:

  • Security: It guarantees ownership and security of tenure. This means that the State assumes responsibility for the correctness of the registered information and can be held liable in case of error or omission;

  • Simplicity: The requirements of the law or procedures are easily understood by the public and can be complied with without any great difficulty;

  • Speed: There is minimal red tape and delay;

  • Cost effectiveness: For the public as well as the State; and

  • Sustainability: The system must be compulsory and enable information to be updated easily.

In a lengthy article titled “Land Tenure Security as a Market Stimulator in China”, the author Joyce Palomar said security of tenure is crucial to stimulating the development of land. If land tenure is not secure, both local and foreign investors will be hesitant to invest in land development.

Apart from being an important stimulator of land development, security of land tenure also becomes the basic foundation of a market economy and the catalyst for sustainable economic growth.

Economists and historians alike often cite the late 18th century as an example of the close relationship between recognised and secured property rights and the emergence of the modern market system.

Needless to say, security of tenure facilitates access to credit. In the United States, 70 per cent of the commercial credit extended to new businesses is secured with land titles offered as collateral for loans.

With access to credit, property owners can develop their land, grow more crops, establish businesses, hire more workers, pay better wages and generally generate more business and profit. In due time, the general well-being of the community will improve.

Increased prosperity all around and the enhancement of property values will also improve State revenue as a result of the expanded tax-base.

In our own shores, the picture does not seem to be too bright. A recent news report (“Public land sold using fake titles”, New Straits Times, Nov 12, 2005) quoted a lawyer-cum-politician as alleging that a syndicate was selling public land using fake titles with the official stamp and signatures.

He believes that “someone is tampering” with the computerised land registration system at the Perak Land and Mines Department. Someone had succeeded in hacking into the official computer records of land registry, he said.

“This means there is no security of tenure, as any property can have its records altered to belong to someone else,” he added.

This reminds me of another case a little while ago, which occurred at a particular land office in Selangor....

Salleh Buang is senior advisor of a company specialising in competitive intelligence. He is also active in training and public speaking and can be reached at


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