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1 Definition - Charge
Definition
Sec 5 NLC: A charge is a “registered charge”.
Types of charge
Differences between charge and mortgage.
Mahadevan s/o Mahallingam v Manilal & Sons (M) Sdn Bhd [1984] 1 MLJ 266 at 270
Our land law does not recognize a mortgage if it means a mortgage in the sense of English land law
whereby the legal estate, i.e. ownership of the land is transferred to the mortgagee and what is left
with the mortgagor is only an equitable right to redeem, known as equity of redemption. But our land
law certainly recognizes a mortgage in the sense of Torrens system, whereby the mortgagor retains
the legal ownership whilst the mortgagee acquires a statutory right to enforce his security. For the
purpose of avoiding confusion, our National Land Code drops the word "mortgage" and uses the word
"charge" in place of Torrens mortgage.
Malayan United Finance Bhd v Tan Lay Soon [1991] 1 MLJ 504
This case basically says that equity of redemption in English and equity of redemption under the law
of New South Wales, Australia which is closely similar to Malaysia are no equal.
Interest in land
Ho Giok Chay v Nik Aishah [1961] MLJ 49
Here the land was a Malay reserve land and was charged by the Kelantan Land Enactment. However,
by the Malay Reservations Enactment, the vesting of interest in a Malay reserve land cannot by
transfer or transmission the interest be vested in a non Malay. The chargee was non-Malay. The order
for sale by public auction was dismissed and summons dismissed.
T Bariam Singh v Pegawai Pentadbir Pesaka, Malaysia [1983] 1 MLJ 232
His Lordship said that a charge does not amount to interest in land because the charge is not gven any
interest as to the enjoyment of the use of land. Also, he said that it was not the intention of the
enactment to create charges in favour of non-Malays in the event of default as the land can never be
sold to a non-Malay.
The case of Ho Giok Chay which charge was registered under the Kelantan Land Enactment 1938 no
longer applicable as it had been repealed by the NLC and now a chargee can enforce a sale on the
land.
Malaysia Building Society Bhd v Johore Mining And Stevedoring Company Sdn Bhd [2004] 5 CLJ
82
I: D1 PA to D2 to obtain loan and subdivide land. D2 obtain loan from P but IDT in LO for
subdivision so charge not registered. Substituted PA made from D2 to P. Undertaking between made
between D2 and P that charge to be made once subdivision complete. D2 got RM 20million and
defaulted on repayment. D1 revoked 1st PA and refused to execute charges. P aggrieved and applied
for declaration for charge entitlement of subdivided land.
H: At the time the Substituted Power of Attorney was executed, the second defendant was the first
defendant’s lawful attorney. Hence, the assignment of the legal propriety interest in the parent land
and the power to sell and enter possession into the 1019 parcels in the event of default was in fact
granted to the plaintiff by the first defendant through its attorney, the second defendant. Consequently,
the plaintiff had a proprietary interest in the 1091 IDTs. That proprietary interest is more in the nature
of a right in rem taking the form of an equitable charge.
(a) What can be charged: s 241
Sec 241(1): Powers of charging
(a) the whole, but not a part only, of any alienated land;
(b) the whole, but not a part only, of any undivided share in alienated land; and
(c) any lease of alienated land, may be charged under this Act with-
(aa) the repayment of any debt, or the payment of any sum other than a debt; or
(bb) the payment of any annuity or other periodic sum.
Sec 241(2): The powers conferred by sub-section (1) shall include power to create second and
subsequent charges.
Sec 241(3): Restrictions
The said powers shall be exercisable in any particular case subject to-
(a) any prohibition or limitation imposed by this Act or any other written law for the time being in
force;
(b) any restriction in interest to which the land in question is for the time being subject; and
(c) in relation to leases, the provision thereof, express or implied.
Phuman Singh v Khoo Kwang Chong
Any charge created in contradiction with stipulated restrictions and requirements will be void ab
ibnitio & held unenforceable.
Sec 241(4): Without prejudice to paragraph (a) of sub-section (3), no charge may be granted to two or
more persons or bodies otherwise than as trustees or representatives.
Sec 244(1): Chargee can be entitled to the IDT (or in cases, the duplicate lease), in the event there is
still liability in the charge.
Types of land which can be charged:
Sec 247: Postponement of priority of a charge to a subsequent charge can be made by Form 16C.
Sec 245: Restriction on consolidation.
a. where a charge instrument has been executed but not presented for registration
b. where no separate title has been issued and, instead of a charge, a loan agreement and a deed
of assignment are entered into to secure a loan
Sec 253: Remedies of Chargee: Sale (purpose and scope of the chapter) – enables
the chargee to obtain the order for sale by public auction the sale of the land or lease
to which his charge relates in the event if there’s a breach.
Sec 254: Service of default notice, and effect thereof. One month or alternative
period (as specified in charge). Notice in Form 16D specifying the required info
and warning of order for sale.
Sec 255: Special provision with respect to sums payable on demand: Form 16E, related to monthly
repayment.
Sec 256: Application to Court for Order for sale.
Sec 257: Matters to be dealt with by order for sale: Form 16H: information required (please read).
Sec 258: Procedure prior to sale: notice, advertisement, conditions of sale, IDT deposition etc.
Sec 259: Procedure at sale (please read)
Sec 260: Application to Land Administrator for order for sale.
Sec 261: Land Administrator to hold enquiry.
Sec 262: Provisions as to enquiry.
Sec 263: Order for sale, and matters to be dealt with thereby.
Sec 264: Procedure prior to sale.
Sec 264A: Postponement or cancellation of an order for sale by Land Administrator.
Sec 265: Procedure at sale.
Sec 266: Right of chargor to tender payment at any time before sale.
Sec 266A: Statement of payment due.
Sec 267: Effects of sale.
Sec 267A: Application of deposit upon failure to settle purchase price etc..
Sec 268: Application of purchase money.
Sec 268A: Application of purchase money by chargee who is a financial institution.
Sec 269: Protection of purchasers.
Form 16D & 16 E: Two sets of procedures for the chargee to enforce his
remedy by way of sale on the ground of the chargor’s default depending on
the type of title.
RT: Sec 256, Order 83 RHC – High Court.
LOT: Sec 260 Land Administrator.
4.4.2 Taking possession of land
Sec 270: Limitation of powers to certain lands, and to first chargees only.
Sec 271: Power of chargee to take possession on any default by chargor.
Sec 272: Procedure for taking possession, Form 16J, Form 16K. Court order.
Sec 273: Duration of right to possession. As long as liability continues.
Sec 274: Position of chargee in possession – profits from land and rent etc.
Sec 275: Power of chargee in possession to grant leases and accept surrenders.
Sec 276: Provisions as to notices by chargees to receive rents.
Sec 277: Application of rents and profits by chargees in possession.
Sec 270(1)&(2): To registrar title, and to first chargees, only
Sec 271(1)(a): Power of chargee to take possession on any default by charger
Malaysia Credit Finance Bhd v Yap Hock Choon [1989] 2 MLJ 363
The learned judge said that it seemed that Sec 271 and 272 seemed to unmistakably give a right to the
chargee to oust the chargors from their possession of the charged land.
Right to possession
The chargee has been conferred with power to take possession of land subject to lease or tenancy on
default by chargor. However Sec 270(1)(aa) seems to have restricted this from subject matters that
involve an undivided share in the land.
Procedure for taking possession
Form 16J – Serve notice on lessee or tenant and a copy on chargor where he will collecting rental
from the rent to the chargor under any lease or tenancy. This will lead the rights of the chargor to be
passed to the chargee.
Form 16K – Serve this when chargor wishes to go into occupation. If within a chargor on whom a
notice in Form 16K is served fails within the period specified in that behalf in the notice to admit or
secure the admission of the chargee into occupation of the land, chargee can apply for a court order.
Duration of right to possession
A chargee can remain in possession until the loan remains unpaid. A chargee in possession by his
rights in Sec 275 has right to lease the land or obtain the rent payable under the lease. Form 16J
pursuant to Sec 272(2) or Sec 275(7) of NLC shall be in force and bind the lessee or tenant on whom
it is served and any subsequent transferee of the lease or tenancy in question, until it is withdrawn by
the chargee or cancelled by the chargor or by the purchaser of the land. Cancellation of notice of
possession must be made by serving on the existing lessee or tenant with a notice in Form 16L or
16M.
Effects of taking possession
Chargee can take all the profits accrued from the land. But chargee is liable to the chargee is liable to
the chargor for any act whereby the capital value of the land is impaired or the chargor is otherwise
put to other loss.
Article: Challenges to Charges: Principle and Precedent, RR Sethu [1993] 3 MLJ xc
4.4.3 Appointing receiver
No provision in NLC.
Only happens when the chargor is a company registered under Companies Act 1965 which land is
charged to the financial institutions as security for loans granted to them.
Such right arises out of contract and not by virtue of the statutory powers conferred by NLC.
4.5 Order for Sale
Kimlin Housing Development Sdn Bhd (appointed receiver and manager (In liquidation) v Bank
Bumiputra [1997] 2 MLJ 805. Not a judgment debt. Order for sale is not a judgment or
decree: Kandiah Peter v Public Bank Bhd [1994] 1 MLJ 119.
4.5.1 Notice of Demand
(a) Form of notice: Form 16D or 16E
There are two types on notices prescribed by the Code: Notice of default (16D) or Notice of demand
(16E).
Form 16D: served to defaulter to notify intention to commence proceedings for sale as in the NLC in
respect of any breach of the terms of the charge (including failure to pay the money as agreed. A
duration of one month (or agreed duration) is given to correct the breach, if not; there will be
application for sale by public auction. Court will examine stipulated time to determine if the notice in
16D was given prematurely. Court can also give an alternative minimum period which is not less than
what stated in 16D
Form 16E: issued n respect of a debt where the principal sum is payable on demand whereby the
condition is that the payment will have to be made within a month from service or order for sales will
be applied, the duration under 16E cannot be reduced by chargee
Syarikat Kewangan Melayu Raya v Malayan Banking Berhad [1986] 2 MLJ 253
When two charges are lumped together in a notice of Form 16D, the court held it was not defective
because it did not prejudice or mislead. Whether the SD was defective in respect of its contents is a
question of fact.
Jacob v Overseas Chinese Banking Corp, Ipoh [1974] 2 MLJ 161 FC
Issue 1: The chargee had used Form 16D when the principal sum was payable on demand within Sec
255. The chargee had not made demand by Form 16E and the chargor argued that it was the usage of
the wrong instrument as the letter sent by the chargee had been worded that it the payment was not
made, “no alternative but to recover the overdraft from you”. Sec 255 (1) does states chargee “shall”
make demand by Sec 16E and not compels the chargee to in the event of recovery of principal sum. It
seems that if the chargee had made a demand using Form 16E, he did not need to use Form 16D; and
if he did not use Form 16E, it would be okay to use Form 16D. The main concern of the legislature is
for there to be sufficient notice given to the chargor before coming to court.
Issue 2: Principal and interest would be mean for Form 16D, and principal would be for Form 16E, is
this argumentation true? The learned judge said that this is not true, as neither Sec 254 nor Sec 255
used the word “interest”, so interest could be claimed by either form. Sec 62 of the Interpretation Act
too states that in the event of deviation from forms, the form shall not be invalidated if it does not
have substantial effect to mislead. The judge sees that there is no reason why the word “and interest”
cannot be added to the heading of Form 16E.
OCBC Bank (M) Bhd v Lean Seng Pottery Factory Sdn Bhd [1999] 2 MLJ 402.
Central Malaysian Finance Bhd v Great Pacific Development Sdn Bhd [1983] 1 CLJ 134
Malayan United Finance Bhd v Tan Ah Moi @ Tan Nyor Pong (F) & Satu Lagi [1933] 2 CLJ 427
Co-operative Central Bank Ltd v Mengkuang Properties Bhd [1991] 2 MLJ 283
Notice of demand of payment which does not specify the precise sum owing is not invalid if the
chargor is given a reasonable opportunity to comply with the notice by the chargee. Invalidation only
of the precise sum is mistaken.
VAM Hussain v BP Malaysia [1970] 2 MLJ 69
It was held that the proper notice to issue where the principal sum secured by a charge is payable on
demand should be in Form 16E. It was also held that inclusion of interest in Form 16E did not make
the notice defective.
Malayan Banking Bhd v PK Rajamani [1994] 1 MLJ 405
Perwira Affin Bank Bhd (formerly known as Perwira Habib Bank Malaysia bhd) v WT Low & Ng
Realty Sdn Bhd [1997] 5 MLJ 185
Citibank NA v Wong Ngai Poh [1983]
MIMB v Dhanoa Sdn Bhd [1988] 1 MLJ 257
Citibank Bhd v Mohamad Khalid Farzalur Rahaman & Ors [2000] 3 CLJ 739
Kekatong Sdn Bhd v BBMB [1998] 2 MLJ 440.
Khor Kim Yong v Public Bank Bhd & Anor [1998] 1 CLJ 668.
Cempaka Finance Bhd v Abbas bin Yaakob [1999] 2 MLJ 411.
Multipurpose Bank Bhd v Maimoon Bte Abdul Razak [1999] 6 MLJ 215.
Bank Kerajaan Rakyat Malaysia Bhd v Emcee Corporation Sdn Bhd [2003] 2 MLJ 408
Lee Gee Pheng v RHB Bank Bhd [2003] 4 CLJ 639; [2004] 1 MLJ 618
Alliance Bank Malaysia Bhd v MCK Development Sdn Bhd [2005] 5 CLJ 77
The Hong Kong & Shanghai Banking Corpn Ltd v Tan Sock Gin [1999] 7 CLJ 450.
Standard Chartered Bank Malaysia Bhd v Tunku Mudzaffar Bin Tunku Mustapha [2005] 1 MLJ
604
Service of notice is mandatory
Powers and requirements for issuing of notices are provided under s 254 & 255 NLC
Issue 1: is one month period a mandatory?
Sec 254(1) allows one month or otherwise agreed.
Mohamad Khalid b Farzular Rahaman & Ors v Citibank Bhd [2000] 5 MLJ 421 – can be shorter than
one month.
Issue 2: Will service of wrong notice be a bar to the chargee’s application for order for sale?
Jacob v Oversea Chinese Banking Corp (FC).
Accepted by OCBC Bank (M) Bhd v Hotel Rasa Sayang Sdn Bhd [2005] 7 MLJ 301.
Issue 3: whether the chargee can impose other charges (not provided in the charge agreement)?
Co-operative Central Bank Ltd v Meng Kuang Properties Bhd [1991] 2 MLJ 283 – not prima facie
entitled.
Illegality
Tan Ah Tong v Perwira Affin Bank Bhd & Ors [2002] 5 MLJ 49
Malayan Banking Bhd v PK Rajamani & Anor [2004] 3 CLJ 79
Perwira Affin Bank v Tan Ah Tong [2003] 5 MLJ 193
4.5.2 Powers of Court
Registry title – Sec 256 NLC; Order 83 RHC
Sec 257: Matters decided by the court, Form 16H
Sec 258-259: Procedure at sale.
Order 83 Rules of the High Court 1980: Non compliance will cause the case to be struck off.
Citibank NA v Ibrahim bin Othman [1994] 1 MLJ 608
Bank Pertanian Malaysia v Zainal Abidin bin Kassim & Anor [1959] 2 MLJ 537
Phileo Allied Bank (Malaysia) Bhd v Bupinder Singh Avatar Singh & Anor [2002] 2 CLJ 621
Chang Keat Realty Sdn Bhd v Ban Hin Lee Bank Bhd [2003] 3 CLJ 532
ii. Fraud
See also the Court of Appeal decision in Harta Empat Sdn Bhd v Koperasi Rakyat Bhd [1997] 1 MLJ
381 for a different opinion from Feyen case, and the explanation by Federal Court in Co-operative
Central Bank Ltd (In Receivership) v Feyen Development Sdn Bhd [1997] 2 MLJ 829.
In Harta Empat case, the court was not absolved by S 133 (1)(a) of the Act from the restriction against
providing the security for the loan made to its director by the respondent merely made it because the
loan was for the benefit of the appellant. In the case, the funds were not meant to meet the
disbursements of the director so that the prohibition against the appellant company providing the
security would still be applicable.
Other cases:
Oriental Bank v Santhnavakey [1998] 4 CLJ Supp 417
Phileo Allied Bank (M) Bhd v Narendran s/o Zhambimuthu [1999] 3 AMR 3721
OCBC Bank (M) Bhd v Astano Electric Sdn Bhd [1999] 3 MLJ 618
Ban Hin Lee Bank Bhd v Pang Lai Hin [1999] 2 MLJ 234
Overseas Union Bank (M) Bhd v L&H Properties Sdn Bhd [1999] 2 MLJ 637
Phileoallied Bank v Saddhona Indran Sevapragasan [1999] 3 CLJ 649
Perwira Affin Bank Bhd v Saad b. Abdullah & Anor [1999] 6 MLJ 418
Hong Kong Bank (M) Bhd v Nor Harizan binti Mohd Ali [1999] 2 AMR 2493
(c) Other important issues:
Sec 253: Purpose and scope of this Chapter: Order for sale
Sec 256(2): Registry title; procedure Order 83 Rules of High Court 1980.
Kandiah Peter v Public Bank Bhd [1994] 1 MLJ 119
Failure of the chargee to obtain order for sale does not prohibit the chargee from taking action in
personam against the chargor.
I: The appellant had charged certain lands to the respondent. The respondent later obtained orders for
sale of the appellant's land. The appellant unsuccessfully applied to set aside the orders and
subsequently brought an action for a declaration that the charges and annexures relating to the land
were null and void and for consequential relief. In his statement of claim, the appellant raised and
relied on facts and issues which the trial judge found to be identical to those raised by the appellant in
the foreclosure proceedings. The trial judge therefore dismissed the appellant's claim on the ground
that the matter was covered by the doctrines of estoppel and res judicata. The appellant appealed.
H: (1) A chargee who makes an application for an order for sale in foreclosure proceedings does not
commence an action. He merely enforces his rights as a chargee by exercising his statutory remedy
against the chargor in default. In order for the doctrines of res judicata, cause of action estoppel or
issue estoppel to apply, the earlier proceedings must have resulted in a
final judgment or decree. This requirement is not met by foreclosure proceedings which do not result
or terminate in a final judgment or decree.
(2) Where a chargor raises issues and relies upon facts to show 'cause to the contrary' in proceedings
brought against him by the chargee, he is not barred from bringing a fresh action against the chargee
(notwithstanding that an order of sale has been made) and raising in that action the same or similar
facts and issues as those raised by him in the foreclosure proceedings. Neither res judicata nor cause
of action estoppel nor issue estoppel are available to the chargee to meet the chargor's action.
(3) The trial judge was in error when he held that the appellant was estopped by res judicata from
raising in the subsequent action the identical issues which he had raised in the foreclosure
proceedings. The appeal was therefore allowed and a retrial of the action was ordered.
Perwira Affin Bank Bhd v WT Low & Ng Realty Sdn Bhd [1997] 5 MLJ 185.
Other cases:
Malayan Banking Bhd v Yong Chao Foo [1992] 2 CLJ 842
Arab-Malaysian Bhd v Razshah Enterprise Sdn Bhd [1993] 1 CLJ 41
United Malayan Banking Corp Bhd v Chong Bun Sun and another application [1994] 2 MLJ 221
Bank Pertanian Malaysia v Mohd Gazzali Mohd Ismail [1997] 3 CLJ Supp. 299
EON Bank Bhd v Deb Brata Das Gupta & Anor [1999] 6 MLJ 714
Foo Yoke Foon v Public Bank [2000] 3 CLJ 405
Public Bank Bhd v Noor Ehsannuddin bin Mohd Harun [2001] 5 MLJ 246
United Merchant Finance Bhd v Chang Miau Sin [2001] 1 CLJ 660
Phileo Allied Bank (Malaysia) Bhd v Koahish Credit & Leasing Sdn Bhd [2000] 4 CLJ 788
Arab-Malaysia Finance Bhd v Chan Sai Mee [2001] 6 CLJ 1
Malaysian Building Society Bhd v Univein Sdn Bhd [2002] 2 CLJ 81
Bumiputra Commerce v Tengku Ngah Putra bin Tengku Ahmad Tajuddin [2002] 4 MLJ 63
Lum Choon Realty Sdn Bhd v Perwira habib Bank Malaysia Bhd [2003] 4 MLJ 409
EON Bank Bhd v Hotel Flamingo Sdn Bhd [2005] 5 CLJ 253
OCBC Bank (Malaysia) Bhd v Au Kee Sian & ANor [2006] 4 CLJ 597
New evidence: admitted by Sec 37 appeal, not more than 3 years after such
decision made.
Lim Yoke Foo v Eu Finance Bhd [1985] 1 MLJ 17
It is only at the conclusion of the enquiry that the LA has jurisdiction to order a sale. The LA has no
power whatsoever to cancel such an order once made, although he may postpone the sale, if
expedient, or correct verbal errors or remedy accidental defects or omissions if not matters of
substance.
iv. Sec 265(2): Procedure at sale: LA may delay the sale if no bids or land/lease withdrawn
from sale
NKM Properties Sdn Bhd v Rakyat First Merchant Bankers Sdn Bhd [1992] 2 MLJ 349 SC.
The power of LA under s 263(1) is to order for sale of the charged land or lease. The order can only
be set aside if there is cause to the contrary. See s 261(1)(c).
4.5.4 Other matters pertaining to order for sale
Sec 263: Order for sale, and matters to be dealt with thereby -> 16H
Sec 264: Procedure prior to sale -> notice to chargor/chargee/public
Sec 264A: Postponement or cancellation of an order for sale by LA
Sec 265: Procedure at sale
Sec 266: Right of chargor to tender payment at any time before sale.
Sec 266A: Statement of payment due
Cases:
Bank Bumiputra Malaysia Bhd v Pentadbir Tanah Daerah, Gombak [1992] 1 MLJ 78
Perwira Affin Bank Bhd v Lim Weo Co [1998] 3 MLJ 56
Bank Pertanian Malaysia v Bakar @ Ismail b. Pelan [1999] 1 AMR 228
Procedure safeguarding the public auction
Eon Bank Bhd v Deb Brata Das Gupta & Anor [1999] 6 MLJ 714
Oriental Bank Bhd v Sykt Zahidi Sdn Bhd [1999] 1 CLJ 810
Lee Phet Boon v Hock Thai Finance Corp Bhd [1999] 3 MLJ 501
United Merchant Finance Bhd v Diamond Peak Sdn Bhd [1999] 3 CLJ 791
4.5.5 Powers of Court/ Land Administrator after the Granting of an Order for Sale
MUI Bank Bhd v Cheam Kim Yi (Beh Sai Ming, Intervener) [1992] 2 MLJ 642 SC
Once an order for sale has been granted, drawn up and perfected, the court is funtus officio.
M&J Frozen Food Sdn Bhd v Siland Sdn Bhd [1994] 1 MLJ 294 SC.
Malayan United Finance Bhd v Liew Yet Lan [1990] 1 MLJ 317; Siland Sdn Bhd v M&J Frozen Food
Sdn Bhd [1990] 2 MLJ 502.
Chi Liung Holdings Sdn Bhd v L&T Realty Sdn Bhd [2000] 3 MLJ 171 CA.
Maimunah Bt Megat Montak v Maybank Finance Bhd [1996] 2 AMR 2473.
Other cases:
Association Finance Corporation Ltd v Poomani [1972] 1 MLJ 117
Tan Teng Pan v Wong Fook Shang [1973] 1 MLJ 31
Asia Commercial Finance v Dev & Realtor [1992] 2 MLJ 504
Lum Choon Realty Sdn Bhd v Perwira habib Bank Malaysia Bhd [2000] 3 CLJ 119
Pan Wai Mei v Sam Weng Yee & Anor [2006] 1 CLJ 914
4.6 Rights /Relief for the Chargor and Third Parties
Until the registration and notwithstanding the conclusion of the sale, the chargor is not divested of his
proprietary rights. He has the right to intervene to set aside any sale on the ground of fraud,
impropriety or any breach of any statutory or contractual terms of the sale.
Sec 266: Right of chargor to tender payment any time before sale.
Rights of chargor
Malayan United Finance Bhd, JB v Liew Yet Lan [1990] 1 MLJ 137
The rights of a chargor may still remain to an extent.
M&J Frozen Food Sdn Bhd v Siland Sdn Bhd [1994] 1 MLJ 294 SC
The right of discharge of a charge is available at the instance of a chargor and no other.
Until registration of purchaser & notwithstanding the conclusion of the sale, the creditor is not
divested of his proprietary rights. He has the right to intervene to set aside any sale on ground of
fraud, impropriety, or any breach of statutory or contractual term of sale. (In the event where the new
purchaser fails to pay, the subsequent chargee can intervene before the new order for sale and try to
obtain the property by paying the price owed plus the necessary costs incurred)
Kimlin Development Sdn Bhd v Bank Bumiputra Malaysia Bhd
You can still discharge of the charge as long as its before the auction is successful.
Malayan United Finance Bhd v Tan Lay Soon [1991] 1 MLJ 504.
4.7 Effect of order for sale
Sec 267(1): Effect of Sale
Sale given under Sec 259 or 265 in respect of charge land or lease will be registered
with (a) a title discharged of all liabilities (b) as if the chargor had transferred the
land or lease to the purchaser as if under Part 14 (transfer of land)
Position after the registration of certificate of sale:
The position before the registration but after the payment of full purchase price: M&J Frozen Food
Sdn Bhd & Anor v Siland Sdn Bhd [1994] 1 MLJ 294.
Effect on the tenancy without endorsement: Hotel Ambassador (M) Sdn Bhd v Seapower (M) Sdn
Bhd [1991] 1 MLJ 404 SC.
Effect on the interest other than the method created under the NLC, see Holee Holdings (M) Sdn Bhd
v Chai Him & Ors[1997] 4 MLJ 601.
Other cases:
Malayan United Finance Bhd, Johore Bahru v Liew Yet Lan [1990] 1 MLJ 317
Perdana Properties Bhd v Yong Chon [1990] 1 MLJ 433
KL Finance v Yap Poh Khian [1992] 1 MLJ 472
Puah Bee Hong & ANor v PTD Wilayah Persekutuan Kl & Anor (Teo Keng Tuan Robert, Intervener)
and another appeal [1994] 2 MLJ 601
Lee Kim Guan v Malayan Produce Co Sdn Bhd [1993] 2 AMR 29:1259
(a) Purchase price obtained from the sale
Sec 267A: Application of deposit upon failure to settle purchase price etc -> as what required in Sec
268
Sec 268: Application of purchase money -> State Authority whatever required, payment for
administration etc.
(b) Sale – Private Treaty
Kimlin Housing Development Sdn Bhd v Bank Bumiputra Malaysia Bhd [1997] 2 MLJ 805
Court held that remedy of chargee of the land charged is only limited to the provisions of the NLC.
This kind of sale can be done outside the NLC (i.e. debenture) If you want to follow NLC, its only by
public auction, but if there’s not title charge, then you can go through a private auction/treaty.
Chung Khiaw Bank v Lau Ah Yen [1989] 2 MLJ 247
Where it was held that the provisions of section 260 of the NLC contemplates a sale by public auction
only and as such the court has no power to order sale by private treaty under the Code. But Wan
Adnan J noted that the court may allow a sale by PT in circumstances where the court is satisfied that
the proceeds of such sale are not less than the amount due to the chargee under the charge and that the
chargee will be duly paid in full out of the proceeds. Also, it was noted that the court refused
permission for sale by PT referring to express terms of Sec 259(2)(c) of the NLC which require the
land to be put for public auction, but on terms of Sec 266(1), it seemed to support the right to fall back
on PT when attempts to sell by public auction have been exhausted.
Priyamas Export Corp Sdn Bhd v Bank Buruh (M) Bhd [1998] 3 MLJ 273.
Kimlin case has criticized Chartered Bank v Pakiri Maidin [1963] MLJ 276
See also: Malaysia Credit Finance Berhad v Yap Hock Choon [1989] 1 MLJ 232.
Malayan United Bank v Cheah Kim Yu [1991] 1 MLJ 313
Malaysia Credit Finance v Yap Hock Choon [1989] 1 MLJ 232
Inter-Rally Motor Sdn Bhd v Karupiah a/l Palaniasamy [1992] 2 MLJ 650
Mui Bank Bhd v Cheam Kim Yu (Beh Sai Ming Intervener) [1992] 2 MLJ 642
UMBC v Chong Bun Sun and Nor Application [1994] 2 MLJ 221
4.8 Discharge of Charge
Chargee is obliged to discharge the charge upon full and final settlement of the loan amount secured
by the charge. NLC provides that Sec 278 provides that by Form 16N charge of the land or lease and
release the land from all further liability.
The discharge is effective from the date on Form 16N as registered at relevant land office.
In the sale of a private treaty, the chargee should discharge the charge so as to give full effect to the
sale. In this case, if the partial discharging of the charge also means not obtaining a security over the
remainder of the debt, the risk is to be borne by the chargee. In some occasions, the debt is protected
outside the NLC, perhaps by a third party, which may cover the rest of the debt. Though the charge is
discharged, the guarantee will remain in force. In the full discharge, it is doubtful whether the
guarantee which is linked to the debt remains in force, in this case, when a primary debt is discharged,
so will the accessory obligation. So nowondays they use the word “guarantor and principal debtor”.
This means that event there is a discharge, the chargor is not released from his personal liability.
Discharge by payment to Registrar in Cases of Death, Absence or Disability
Relief can be applied to the Registrar by Sec 279(1) if he is entitled to pay off the charge but chargee
is unable or unwilling to accept the payment:-
The money received by the Registrar for such discharge can be:-
If land/lease discharged from liability under any charge by payment to the Registrar under Sec 279,
the registration of the charge shall be cancelled by the Registrar pursuant to Sec 314.
Malayan United Finance Bhd v Tan Lay Soon [1991] 1 MLJ 504.
Eng Ah Mooi v Overseas Chinese Banking Corporation [1983] 1 MLJ 209 FC.