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 sallehbuang@hotmail.com
