Statutory Lien

Deposit of OR IDT/Duplicate lease Keeping of IDT Prerequisite (necessary items in order for something to happen elements) of Statutory Lien: Deposit of OR IDT/Duplicate lease Keeping of IDT Intention to create lien Entry/lodgment of Lien-Holder Caveat 2

1.Deposit of IDT/ Duplicate lease The right to create Lien belongs only to Proprietor of the appropriate interest. 3rd Party cannot create a lien on behalf of the 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) 3

Hong Leong Finance bhd v Staghorn Sdn Bhd (2005) 5 MLJ 101 Other Cases: Perwira Habib Bank (M) Bhd v Megat Najmuddin Megat Khas & Ors (1999) 5MLJ 334 Perwira Habib Bank (M) Bhd v Loo & Sons Realty Sdn Bhd & Anor (No. 1)(1996) 3 MLJ 409 Hong Leong Finance bhd v Staghorn Sdn Bhd (2005) 5 MLJ 101 United Overseas Bank (Malaysia) Sdn Bhd v. UJA Sdn Bhd & Anor (2010)6 CLJ 204 4

Hong Leong Finance Bhd v Staghorn Sdn Bhd (2008) 5 MLJ 101- Allowed lien to be created over a 3rd pty loan provided that there is an authorisation by the registered proprietor for the borrower to use the proprietor’s land as security for a loan granted in favour of the borrower by the lender 5

What can become the subject matter: Literally: the act of the proprietor handing over the subject matter of lien to the lender AND the act of keeping the subject matter of lien by the Lender will GIVE RISE TO A LIEN What can become the 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). 6

1.Keeping of IDT/ Duplicate lease The Lender must keep the IDT at all material time. Case: Sitambaram Chetty v Ramanathan Chetty (1922] 3FMSLR 8 7

Can the Lender part with the IDT? Lender may part with the IDT provided that the lien is a statutory lien Section 281(4) briefly allowed the lien holder to part with IDT upon: written request made by proprietor or lessee; but 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. 8

Cases: Ormomrm Manickavasagam Chetty of Teluk Anson v Thomas James Mc Gregor of Penang (1933) MLJ 295 9

3. Intention to Create Lien This can be inferred from: the type of transaction entered into by the parties; the conduct of the parties as a whole; the nature of the agreement. Thus the transaction MUST BE a security transaction i.e to obtain loan, the conduct of the parties i.e deposit and keeping the IDT must be for the purpose of the loan and the agreement executed by the parties is a loan agreement. 10

NO AUTHORISATION BY THE PROPRIETOR HOWEVER , 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. NO AUTHORISATION BY THE PROPRIETOR 11

transaction does not include any loan arrangement. Cases:- transaction does not include any loan arrangement. Master Strike Sdn Bhd v Sterling Height Sdn Bhd (2005) 3MLJ 585 12

Standard Chartered Bank Bhd v Yap Sing Yoke (1989) 2 MLJ 49 act of depositing title by Borrower to Lender originated from a loan transaction Standard Chartered Bank Bhd v Yap Sing Yoke (1989) 2 MLJ 49 the agreement executed between the parties incorporate the intention to use the title as a security Paramoo v Zeno Ltd (1968) 2 MLJ 230 13

4. Entry/lodgment 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 the lien is governed by the NLC; 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 14

SECTION 281(2) NLC LH is entitled to apply for an Order for Sale (OFS) This can only be invoked after the lender had obtained judgment from the court for the amount due to him from the borrower 15

Alagappa Chetti v Periyanayagam (1908) Innes 117 Remedy available under Section 281(2) NLC i.e right to recover debt (judgment debt) is still within limitation allowed under Limitation Act. Delay will render the action statute barred. Cases: Alagappa Chetti v Periyanayagam (1908) Innes 117 Cheong Kam v Loke Chow Tye (1924) 4 FMSLR 294 16

Effect of non-lodgment of LHC X lodgment of LHC the lien becomes an 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 loose priority against later caveated interest 17

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 loose priority against later caveated interest

Conclusion Advantages of Lien than of charge:- Simple 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 19