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Comparison of latest amendments via National Land Code (Amendment) Act 2016 (Act

A1516)

1.0 What is Notice of Demand (Form 16D) and its effect?

Prior initiating an application for order of judicial sale enshrined in Section 256 NLC, a
chargee must comply with Section 254 NLC1 whereby a Notice of Demand (Form 16D) must
be served to the chargor who has breached an obligation for one calendar month so that he is
given adequate notice2 of further one month or as specified in the charge to remedy the fault.
Section 254(1)(a) NLC requires Form 16D to specify the particular breach of terms of the
charge and subsection 1(c) to warn an order for sale is to be followed for his failure to
remedy. Chargee may only apply for order for sale upon chargor’s failure to remedy as per
Section 254(3) NLC.

Such notice is served so that the chargor has a further chance to comply the requirements of
the charge in order to preserve his title to the charged property and raise necessary funds
besides informing him the consequence of his failure to comply3. Chargee’s failure of not
serving Form 16D would cause a subsequent order for sale liable to be set aside as being void
and of no effect.4

2.0 Pre-A1516 Amendment

The duration of Form 16D is an area of controversy because, even though Section 254(1)(b)
NLC provides that a duration of 1 month is given for chargor’s benefit to remedy breach and
protect his property from foreclosure proceedings, but the word ‘or such alternative period’ is
interpreted by the courts to allow a period shorter or longer than a month so long stipulated in
the charge. Thus, no time limit was needed to impose on the duration of breach due to money
being payable on demand, this constituted an other period stipulated in the charged as
illustrated in Bank Bumiputra Malaysia Bhd v Mahmud bin Haji Mohamed Din (Datin
Hajjah Salma bte Md Jamin, Intervener 5. In this case, the notice was held to have given

1
Nira Sdn Bhd v Malayan Banking Bhd [1990] 1 MLJ 110, para 112
2
Bank Bumiputra Malaysia Bhd v Mahmud bin Haji Mohamed Din (Datin Hajjah Salma bte Md Jamin,
Intervener) [1989] 1 MLJ 381
3
National Land Code: A Commentary. Under Part Sixteen: Charges and Liens: Chapter 3: Remedies of Chargees:
Sale: Notice before Salepara [8455-8500]
<https://www.lexisnexis.com.proxyvlib.mmu.edu.my/my/academic/Default.asp> accessed 22 January 2019
4
Muniandy a/l Thamba Kaundan & Anor v Development & Commercial Bank Bhd & Anor [1996] 1 MLJ 374
5
[1989] 1 MLJ 381
adequate notice of demand even though the breach had continued only for 6 days at the date
of the notice whilst the Form 16D referred to a breach continuing for 7 days because the
Court held that Form 16D was intended to give charger sufficient notice prior an order for
sale and this was complied with by Bank Bumiputera. However, absolute waiver of notice
would be unlawful as NLC requires some degree of notice 6 for chargor’s benefit even though
period of notice may be less than statutory one month..

A similar position is also supported by Court of Appeal in Citibank Bhd v Mohamad


Khalid b Farzalur Rahaman & Ors 7 which it held the Parliament intended to expressly
allow a chargor by contract to accept a statutory notice of less than one month. Gopal Sri
Ram JCA also explained the Federal Court judgement in Kimlin Housing Development Sdn
Bhd (Appointed receiver and manager) (In liquidation) v Bank Bumiputra (M) Bhd &
Ors8 did not refer to any inability on registered chargor’s part to agree to a lesser notice
period. Thus, 7-days notice was deemed adequate in Citibank’s case. Following Citibank’s
principle and rejecting Kamalanathan Ratnam J’s holding in that the alternative period of
breach mentioned in Section 254(1) NLC should be more than one month9, 7-days notice
was also deemed adequate in Malayan Banking Bhd v United Cartel Sdn Bhd 10 as it fully
complied with the words ‘such alternative period to be specified in the charge’ and not a
cause to the contrary.

In short, Section 254(1) NLC’s omission to mention specific timing may imply that the
Parliament did not intend so and an alternative period of less or more than the statutory one
month is expressly allowed so long in accordance with the parties’ terms of the contract.11

3.0 Post-A1516 Amendment

A1516 has amended Section 254(1)(b) NLC by inserting ‘which shall not be less than one
month’ after ‘in the charge’. Consequently, prior the order for judicial sale, unlike the
previous position which allows the alternative period to be less than one month, the
6
National Land Code: A Commentary. Under Part Sixteen: Charges and Liens: Chapter 3: Remedies of Chargees:
Sale: Notice before Sale, para [8501.8]
<https://www.lexisnexis.com.proxyvlib.mmu.edu.my/my/academic/Default.asp> accessed 22 January 2019
7
[2000] 4 MLJ 96; [2000] 3 CLJ 739
8
[1997] 2 MLJ 805
9
Mohamad Khalid bin Farzalur Rahaman & Anor v. Citibank Bhd & Anor [2000] 2 CLJ 797 HC para 426C-D
10
[2006] 6 CLJ
11
National Land Code: A Commentary. Under Part Sixteen: Charges and Liens: Chapter 3: Remedies of
Chargees: Sale: Procedure Registry Title, Qualified Title Corresponding Thereto, And Subsidiary Title para
[9305] <https://www.lexisnexis.com.proxyvlib.mmu.edu.my/my/academic/Default.asp>
amendment requires the duration of the notice of demand to be either one month, or an
alternative period not less than one month as specified in the charge for the chargor to remedy
his breach of agreement.

However, despite the post-amendment requirement, with due respect, it is unfortunate that the
court in OCBC Bank (Malaysia) Berhad v Motif Era Sdn Bhd 12 granted the application for
order for sale by relying on the previous position of Section 246(1) NLC enunciated in
Citibank Bhd v. Mohamad Khalid Farzalur Rahaman & Ors 13 whereby a chargor is
expressly permitted to accept a statutory notice of less than one month by contract. This is
because the Court should have rejected the application as the statutory provision referred by
the Court was the amended Section 254(1)(b) NLC, in which the alternative period of 7 days
given by OCBC was contrary to the provision.

This case should be distinguished from Koperasi Serbaguna Kebangsaan Bhd lwn
Perusahaan Bumi Tulin Sdn Bhd14 whereby the court rightfully allowed the application for
order for sale despite 7-days-notice of demand to remedy the breach by the Defendant
because the Plaintiff only commenced foreclosure proceedings a year after Form 16D was
issued yet the Defendant did not make use of this long period to remedy his breach. Thus, the
High Court of Shah Alam did not find the 7-days-notice served prior the amendment
(10.8.2015) to be prejudicial to the Defendant despite its alternative period contrary to the
amended Section 254(1)(b) NLC15 which requires one month notice for chargor to remedy
his breach.

4.0 Comparison pre and post-amendment

Clearly, after the A1516 amendment, by requiring the alternative period specified in the
charge to be at least one month prior applying for order for sale, the chargor should have
more time to remedy his breach to ensure his charged property is not ordered for sale by the
Court. This is because the previous position, which acknowledged the validity of duration of
notice of demand to be less than one month since it was within the definition of ‘such
alternative period’ specified in the charge, such as requiring the chargor to remedy the breach

12
[2017] 1 LNS 189

13
[2000] 3 CLJ 739

14
[2018] MLJU 1522
15
Ibid. para 42, 45
in 7 days, could be prejudicial to the chargor’s interest as failure to repay the debt after the
notice being served would result his property being foreclosed.