When the Doctrine of Stare Decisis is Challenged

By: Zuhaidi Mohd Shahari

Senior Associate
+603-21185029

After 6 long years the Court of Appeal has finally overturned what has universally come to be seen as an unfair principle
of law. The Court of Appeal has decided for two brothers, Au Meng Nam and Au Ming Kong, two innocents who lost their
land to unscrupulous individuals who had forged their land transfer documents. The case came about when the two
forgers, who claimed to be the legitimate proprietors of the land, sold the property to Ung Yak Chew 11 years ago. The
brothers filed an action at the High Court in Johor Baru, which later dismissed their suit on the grounds that Ung was a
bona fide purchaser. The trial judge found that the instrument of transfer was a forged document but in applying the
principle propounded in the Federal Court ruling, he held that Ung was a genuine purchaser and had acquired an
indefeasible title to the property. Thus it appeared that if a third party had acquired valid title from a vendor who had
acquired the property by fraud, the third party’s title was indefeasible, even if the original owners of the property who were
the victims of the fraud claimed their rightful property. The decision was roundly criticised by academics, lawyers and the
public.

Sitting in the Court of Appeal, Gopal Sri Ram J allowed the decision to be appealed, but this time, he chose not to follow
the binding decision of the Federal Court in the case of Adorna Properties Sdn Bhd v Boonsom Boonyanit (2001), one of
the very few instances where a lower court has chosen not to follow a precedent set down by a higher court, in this case
the highest court in the land!

Section 340 of the National Land Code provides that the title and interest of a registered proprietor of a land is
indefeasible. The decision Fels v Knowles in (1906) had confirmed the same when the judge in this case held that the
cardinal principal of the statute is that the register is everything.

The Federal Court however, in deciding Adorna, has made clear its openness to accept exceptions to the indefeasibility of
title and depart from the basic idea of security of interest in land solely by having a registration bearing one’s own name. It
is therefore proven that as far as our Torrens System of land registration is concerned, registration is not everything. In
Adorna, the instrument of transfer was forged and the genuine title was transferred to the bona fide purchaser. Deciding in
favour of the purchaser who purchased the land in good faith for valuable consideration, the Federal Court was of the
opinion that the purchaser obtained good title to the land even though the title was proved to have been acquired under a
forged document

This decision shows how much the Federal Court favours the incorporation of English equitable principles into the proviso
to Subsection 3 of Section 340 of our National Land Code. Although section 340(3) of National Land Code provides that
the title or interest of a person shall not become indefeasible when the registration was obtain by forgery, the proviso
clearly excludes any purchaser who acquired the title in good faith for valuable consideration. The Federal Code decision
appears to undermine the integrity of land titles, and this decision leaves the original owners without any means to recover
their own lands.

The innocent Purchaser, often referred to as the darling of equity, is the luckiest person as far as the decision in Adorna is
concerned. This is due to the Federal Court’s (and the courts in general) belief that the Torrens register is so reliable to
the extent that they often decided that it is not necessary for the Purchaser to go behind the fact of registration and search
for possible hidden equitable interests. The decisions in Teh Bee v Maruthamuthu (1977) 2 MLJ 7 at 12C (HC) and Wu
Shu Chen (sole executrix of the estate of Goh Keng How, deceased) v Raja Zainal Abidin bin Rraja Hhussin (1997) 2 MLJ
487 at 491A (CA) confirmed this judicial tendency.

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The reason for the courts’ reluctance to depart from the equitable principle is probably best illustrated by the case of The
Commonwealth v The State of New South Wales (1918) 25 CLR 325. In a joint judgment by Isaacs and Rich JJ in, the
court held that the State registration is something more than non-interference with rights. This registration confers title and
sometimes confers a better title than the transferor possessed. It provides, as the Privy Council said in Gibbs v Messer
[1891] AC 248 at 254: '... that everyone who purchases, in bona fide and for value, from a registered proprietor and enters
his deed of transfer or mortgage on the register, shall thereby acquire an indefeasible right, notwithstanding the infirmity of
his author's title.' ‘... It is, therefore, quite different from a transaction dependent for its result merely on the agreement and
acts of the parties themselves. It is not the parties who effectively transfer the land, but it is the State that does so, and in
certain cases more fully than the party could. In short, a transferee seeking registration of a transfer seeks State
affirmance of his position.’

Despite these weighty and binding precedents, Gopal Sri Ram J chose to decide in favour of what was right, rather that
opting to slavishly abide by precedents. He opined that the Federal Court decision in Adorna Properties was an incorrect
decision as according to him, the supreme court of the land had overlooked two important cases in deciding that case. For
him, the decision in Adorna was merely an interpretation of the National land Code and did not in any way introduce a
new rule necessary to uphold justice. Furthermore, his departure from Federal Court ruling was due to the different facts
of Adorna and the present case involving the hapless Au brothers. A large section of the public, and indeed many quarters
within Malaysia’s legal fraternity applauded Gopal Sri Ram J’s decision to depart from Adorna, which they viewed as
inherently wrong and causing a grave injustice.

To say that the decision of Court of Appeal has overriden the decision of the Federal Court is something which is not right,
as we still remain bound by the doctrine of stare decisis where the lower court is bound by the decision of the higher court.
To blindly abide by the doctrine of binding precedent is however something which goes against the principles of natural
justice.

In a situation like this, Parliament as the supreme legislative authority, should step in to resolve this quandary. It is prudent
for the owners of the land to be allowed to caveat their own land, something which is not provided for by our National
Land Code. Introducing a system where all transfer documents should bear the thumbprint of the owner as a safeguard
against being defrauded of one’s property through identity theft (i.e. the use of forged identity cards to fraudulently transfer
property) is also something that should be looked into. The calls by the Bar Council for a reform of the National Land
Code and for the introduction of insurance schemes that would protect land buyers from fraudulent land transfers should
be adopted in order to put a stop to problem of fraudulent land transfers.

All parties to a property transaction, and not just the landowners, should also play an active role in resolving the problem
of fraudulent land transfers. For instance, lawyers should make official searches at the land office to ascertain if any
duplicates of land title were issued and the authorities should take stiff action against the perpetrators of fraudulent
transfers, instead of only defending the equitable interest of a bona fide purchaser.

Up to April of this year alone, the Federal Land and Mine Department handled 105 such cases of fraudulent land
transfers. In fact, just two months ago, two brothers from Jinjang North found that their ancestral land had been
appropriated by forgers. Fortunately for them, the four suspects were apprehended and they will be charged in court. Also
pending in court is the case of a man from Perlis whose land title was forged and transferred to a third party. He is now
hoping that the decision by the Court of Appeal departing from Adorna would allow him to get his the land back.

Although the doctrine of stare decisis is an ancient and venerable principle of the law which is intended to ensure
certainty and conformity in judicial decisions and the application of the law by the courts thereby enabling society
certainty in their everyday transactions, secure in the knowledge that the law would not be applied in a capricious manner
which can only lead to uncertainty which can be exploited by unscrupulous individuals, it cannot be that a blatantly wrong
decision should be followed blindly. The doctrine of stare decisis cannot and should not be an excuse for judges to simply
decide cases based on binding precedent laid down by higher courts, and they can and should exercise their knowledge
and experience of the law to decide cases in order to ensure that justice is done according to the particular facts of the
case. Not every case is exactly alike, and where a previous binding decision is blatantly wrong and causes injustice,
judges should be brave enough to depart from the precedent in order to ensure that justice is done.

Thus, the Court of Appeal’s decision to depart from the binding principle laid down in Adorna, rather than plunging the
legal system into confusion and uncertainty, actually served to secure the public’s interest by protecting land owners
against fraudulent land transfers.

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