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Azhani Binti Arshad (Jul-Nov 1

Lecture Outline
 Definition
 Modus Operandi
 Types of Lien
 Essential Characteristic/
elements of Lien

 Halsbury Laws of England (Vol 19 p2.): “Right
of one man to retain the property belonging
to another man until certain demand of the
man in possession of the goods are satisfied”
 Section 281(1) NLC: lien as the act of any
proprietor depositing his title or duplicate
lease to another person as security for a loan.

 A lien creates an “equitable” interest in the
land or lease which gives the holder of that
interest the right to enter LHC.
 It is transaction wherein the Proprietor/co-
proprietor/lessee intends to use the
appropriate document as security for a loan
then advanced.

Modus Operandi
 Borrower;
 Lender;
 Borrower is the registered proprietor of a piece of
land or the registered lessee of a land;
 Loan amount released to Borrower by Lender; and
 In return, the Borrower used his IDT or duplicate
lease as security by depositing the same to the
Lender upon receipt of the loan.

Types of Lien
 Statutory Lien; and
 Equitable Lien.

Essential Characteristics/ Elements
of a Statutory Lien
 Registered Proprietor/Lessee
 Deposit of IDT/Duplicate lease
 Intention to create Lien
 Entry of Lien-Holder Caveat

Registered Proprietor/ Leasee
 The right to create Lien belongs only to Proprietor of
the appropriate interest.
 IDT must be registered in the name of Borrower.
 Prior to 2008, 3rd Party cannot create a lien on behalf
of the Borrower. (borrower=proprietor)
 It was decided by the court that the right to deposit
the title as security for a loan is restricted only to the
proprietor (Peter P’Chient v Ramasamy Chetty (1923)
3 FMSLR 220)

 Cases before 2008:
 Perwira Habib Bank (M) Bhd v Megat
Najmuddin Megat Khas & Ors (1999) 5MLJ
 Perwira Habib Bank (M) Bhd v Loo & Sons
Realty Sdn Bhd & Anor (No. 1)(1996) 3 MLJ
 Hong Leong Finance Bhd v Staghorn Sdn Bhd
(2005) 5 MLJ 101

 After 2008:
 3rd party can create lien with the instruction,
consent or authorization of the proprietor.
 Thus, the actual act of depositing may be
done by someone else.

Azhani Binti Arshad (Jul-Nov 2010) 10

 Cases after 2008:
 Hong Leong Bank Bhd (Formerly known as
Hong Leong Finance Bhd) v Staghorn Sdn
Bhd (2008) 5 MLJ 101
 UJA Sdn Bhd v United Overseas Bank
(Malaysia) Bhd (2008) 4 CLJ 779
 Amcard Services Berhad (formerly known as
Arab-Malaysian Credit Berhad) v Dato’ Joseph
Chong Chek Ah & Anor [2015] MLJU 1983

Deposit of IDT/ Duplicate lease
 Literally: the act of the borrower handling over the
subject matter of lien to the Lender.
 The act of keeping the subject matter of lien by the
Lender will give rise to a lien
 Subject matter:
 IDT-Registered Proprietor (Sec 281(1) NLC);
 Copy of IDT- co-proprietor (Sec 343(6) NLC); and
 Duplicate lease-Registered lessee (Sec 281(1) NLC).

Parting with IDT?
 Allow parting with IDT provided the entry of LHC on the
 Section 281(4) briefly allowed the lien holder to part with
IDT upon written request made by proprietor or lessee but
it only restricted to produce the IDT or lease at any
Registry or Land Office.
 Parting with the possession of IDT for purpose for which it
is required under NLC or any other laws, will not cause the
lien to be lost.

 Sitambaram Chetty v Ramanathan Chetty
(1922] 3FMSLR 8
 Manickawasagam Chetty v Mc Gregor (1933)
MLJ 295

Intention to Create Lien
 The intention need not be expressly
documented. It can be in an oral or any
written form.
 Can be inferred from the relevant
circumstances of the situation or transaction.
Inference can be made from the conduct of
the parties as a whole.
 The deposit must be with the intention of
creating lien.
 Thus, if there is a deposit for safe-keeping,
no lien will be created
 The element of intention is not satisfied if
possession of IDT was obtained through
fraud or misrepresentation and the deposit of
IDT as security was never authorised by the
Registered Proprietor.
 (Nallamal v Karuppanan (1993) 3 MLJ 476)

 Examples:-
 (1) transaction does not include any loan
 Master Strike Sdn Bhd v Sterling Height
Sdn Bhd (2005) 3MLJ 585

 (2) depositing of title by Borrower to Lender
originated from a loan transaction
 Standard Chartered Bank Ltd v Yap Sing Yoke &
Merchantile Bank v Official Assignee

 (3) the agreement executed between the parties

incorporate the intention to use the title as a security
 Palaniappa Chetty v Dupire Brother (1922) Vol 1
 Paramoo v Zeno Ltd (1968) 2 MLJ 230

 Zeno Ltd v Prefabricated Construction Co (M) Ltd

(1967) 2MLJ 104
 Sarojeanne @ Sulochana d/o Duraisamy & Anor v Dr
DM Thuraiappah [2000] 2MLJ 472

Entry of LHC

 Lodgment of LHC in pursuant of Section 330(1) NLC

 Lien is created upon the entry of LHC and not before.
 Effect of lodgment of LHC
 same effect as a private caveat- it will
restraint all dealings with the land
 In the event of default by the Borrower, the
Lender is entitled to invoke remedy available
under Section 281(2) NLC
 X lodgment of LHC-equitable lien (LHC can be
entered at any time)

 Failure to caveat timeously will not, for that
reason alone, cause the prior uncaveated lien
to lose priority against later caveated interest
(LH able to overrule the usual priority
principles because LH retains the IDT)

 RHB Bank Bhd (as executor and trustee of the
estate of Wong Kwonh Wah, deceased) & Ors
[2017] 4 MLJ 281
 Federal Court held: unlike private caveat (which could lapse-
on the expiry of a period of 6 years from the time it was
lodged) a lien-holder’s caveat did not lapse under NLC
except upon the registration of the certificate of sale of the
land which had been sold pursuant to a court order.
 The 54 titles were still held by the defendant as security for
the outstanding amount of Teng Kon’s loan for which
judgment has been obtained but not fully satisfied.
 Thus, the defendant’s lien, continued.

Azhani Binti Arshad (Jul-Nov 2010) 21

 Remedy available under Section 281(2) NLC /
right to recover debt (judgment debt) is still
within limitation allowed under Limitation Act.
Delay will render the action statute barred.
 Allagappa Chetti v Perianayagam (1908)
Innes 117
 Cheong Kam v Loke Chow (1924) 4 FMSLR

 When the borrower defaults, the LH has 2 steps in
his bid to sell the land to repay the debt:
 He must obtain a judgment debt (specifying the
amount due); and
 If the loan is to a 3rd party borrower, the judgment
against the 3rd party borrower must first be obtained
before an order for sale can be granted.

 He may apply to High Court for an Order For Sale

(OFS) pursuant to the terms of sec 253 to 269. (follow
the procedure provided for sale of charged land)

Equitable Lien
 A lien creates an “equitable” interest in the land or lease.
 Failure to enter Lien-Holder caveat (LHC)-the act of keeping the
title as security create an equitable lien. (fulfillment of element
1,2 &3)
 Creditor possess a right to a lien in equity which is enforceable
by way of specific performance (contract entered by the parties-
good in law under Section 206(3) NLC.
 As an equitable LH, Lender/creditor cannot part with IDT (the
only proof that he is a LH-in possession of IDT in pursuant to
advancement of loan given to the proprietor)
 The LH must ensure that his LHC is not removed (if already
entered on land) if he part with IDT.

 Merchantile Bank Bhd v The Official Assignee
of the Property of How Han Teh (1969) 2MLJ
 “In other words, although failure to lodge a
caveat does not entitle the depositee with
whom the issued document of title is
deposited, to a lien under the Code, he still
possesses a right to it in equity, he can
exercise that right by registering the
caveat….at any time”( Raja Azlan Shah J)

 Standard Chartered Bank Bhd v Yap Sing Yoke (1989)
2 MLJ 49
 Lamin J stated: “as the IDT was at all time in the
custody of the P, it had acquired a lien in equity over
the land. The equitable interest is not affected
by the absence of a caveat. The P had by right
to lodge a caveat and may do so at any time
under the provision of the NLC, 1965”

 Advantages of Lien:-
 Simpler form of security
 Security can be perfected in a shorter time
 Cheaper and less time consuming (no
payment of stamp duty)
 Lien is useful as an interim measure prior to
the preparation of a charge

 Differences between lien and charge:-
 A statutory lien has an independent existence apart
from a charge so that if a charge is avoided for non-
compliance with the law, lien is not avoided also
provided it complies with the law;
 In lien, there must be an intention to create a lien.
Failure to enter LHC not necessary deprive the lender
of the right to a lien in equity provided the pre-
requisite are fulfilled; and
 There is only 1 lien created at one time. However
several charges may be registered/ entered on the
same land.

 Definition of lien
 Elements of lien:-
 deposit IDT/ duplicate lease
 With the intention to create lien
 Subsequently enter Lien Holder’s Caveat (LHC)
 Equitable lien
 Remedy available under the Code


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