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Long shadow of Boonsom Boonyanit
02/07/2005 NST-PROP By Salleh Buang

Ask a lawyer who claims to know the National Land Code like the back of his hands which provision he would regard as the single-most important statute, and my guess is that he would say, “Section 340”. At least, I hope he would.

To me, Section 340 signifies the essence of the Torrens system - a land registration method built on two fundamental principles. These are, firstly, the mandatory use of prescribed forms when entering into any land deal recognised under the Code, and secondly, the registration of the deal at the appropriate Land Office.

Once you have complied with these two basic procedures, your name is registered on the title, whether as the new owner, chargee or lessee, and you are safe, home and dry.

Legally speaking, you now either have indefeasibility of title (if you are the new owner), or indefeasibility of interest (if you are the registered chargee or lessee). That is the law as expressed in subsection (1).

Put in its most basic structure as a simple arithmetic equation that can be readily understood by primary school pupils, the Torrens system in this country means forms plus registration equals indefeasibility. If only life could be so simple.

Unfortunately, section 340 has two other subsections - (2) and (3). The Code itself is obviously not the easiest statute for the uninitiated or the lay person.

However, matters have been made worse - and comprehension has become more difficult and distant - as a result of the constantly growing body of case law handed down by the judiciary in respect of subsections (2) and (3).

A case in point is Adorna Properties Sdn Bhd vs Boonsom Boonyanit (2001, 1 AMR 665), a heart-rending tale which took more than a decade before it finally ended with a painful outcome for the rightful landowner.

The judgment that was handed down by the highest court in the land and the facts of the case are briefly as follows:

Boonsom, a woman of Thai descent, owned two plots of land in Tanjung Bungah, Penang. Unknown to her, the land was transferred to a company, Adorna Properties. A woman who held herself out to be the true owner (somebody I shall refer to as “con artist”), made the sale.

Upon discovering what had transpired, and realising that she had become a victim of somebody’s deceit, Boonsom went to court to challenge the validity of the transfer of her land to Adorna Properties by the con artist.

Two grounds clearly come to mind - fraud (pretending to be who you are not) and forgery (of the prescribed instrument of transfer).

After considering the evidence before it, the High Court held that it could not determine whether the signature on the instrument of transfer was a forgery or not. It demanded a higher standard of proof of forgery from Boonsom, that she had to prove beyond reasonable doubt.

The High Court accordingly held that Adorna Properties had acquired an indefeasible title to the land and dismissed Boonsom’s claim. She then turned to the Court of Appeal.

Mercifully for Boonsom, the Court of Appeal arrived at a different decision. It held that forgery was proved, ruling that the standard of proof required to verify forgery in civil proceedings is “on the balance of probabilities”, not “beyond reasonable doubt”.

Since the instrument of transfer was forged, the Court of Appeal held that Adorna Properties had acquired its title by registration of a void document, thereby making its title defeasible. The Court of Appeal then ruled that the title be handed back to Boonsom.

Unfortunately for Boonsom, her victory was short-lived.

Dissatisfied with the decision of the Court of Appeal, Adorna Properties appealed to the Federal Court, where it raised two important issues: One, the standard of proof to verify forgery; and whether Adorna Properties had acquired an indefeasible title.

The Federal Court unanimously decided in Adorna Properties’ favour. It agreed with the Court of Appeal that the standard of proof to prove forgery in this case is on the balance of probabilities and not beyond reasonable doubt.

However, the Federal Court held that despite the instrument of transfer being a forgery (and therefore a void instrument), Adorna Properties had acquired an indefeasible title because it was a bona fide purchaser (BFP) for value without notice. The provision for a BFP is set out in subsection (3).

Emphasising that its duty is to determine “the real intention of Parliament” in enacting the law and to deduce that intention “from the language used” in the Code, the Federal Court said subsection (3) protects Adorna Properties because as a BFP, it had “obtained an immediate indefeasibility”, notwithstanding the fact that the instrument used was “a forged document.”

When the Federal Court’s decision was finally published in the legal journals, the reactions were as I had expected. I remember receiving e-mails from senior lawyers expressing their unhappiness with the decision.

Thus, while there were those who said that the highest court in the land had spoken and its decision had to be accepted and respected, there were others who asked, “Why look at subsection (3)? Why ignore subsection (2)? Why punish the innocent land owner and why reward the con artist for her blatant deception?”

Subsection (2) of section 340 states that if any land dealing is affected by a number of vitiating circumstances, such as forgery, fraud or misrepresentation, then the interest of the acquirer (the new owner, chargee or lessee) shall be defeasible. In this Penang case, there was clear evidence of both fraudulent conduct by the impostor, and forgery of the instrument of transfer.

Is the Code, as it stands today, good law? Or, did something go missing from our version of the Torrens System after we “borrowed” it from Australia towards the close of the 19th century? Can we honestly say a law is good law if an innocent party is made the victim?

The Federal Court decision came five years ago. Boonsom’s fight to seek justice and the restoration of her property is now old news. We watched her saga for about a decade before it finally concluded, with her being the ultimate loser. Though she has the sympathy of a lot of people, her case will, in time, be forgotten by most.

However, as events of last week have shown, her case may indeed keep coming back to haunt us, forcing us to continue to think and reflect.

The long shadow cast by Boonsom’s case fell on the Kuala Lumpur High Court, when it heard and deliberated a case affecting Bank Kerjasama Rakyat Malaysia Bhd. The trial judge in this case, Datuk Arifin Zakaria (J), admitted frankly that he had a “very difficult” case before him, but he felt obliged to follow the Federal Court decision in the Boonsom case.

In this matter, the High Court used the Federal Court’s Boomsom judgment to rule that a couple’s land rightfully belonged to Bank Kerjasama Rakyat Malaysia - which had registered its interest over the property - despite their signatures on the bank documents being forged

For details of this story, see page 6 of your New Sunday Times of June 26. For the record, Boonsom’s son tried a valiant last attempt in July 2002 to ask the Federal Court to set aside its earlier decision.

Like his mother, he also failed.

I look forward to the day - hopefully, in the not too distant future - when another panel of the Federal Court is given the golden opportunity to reconsider its earlier decision. Who knows - it may just reach a different conclusion.

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 sallehbuang@hotmail.com