MULTIMEDIA UNIVERSITY UCY6413 Conveyancing Practice: Tri Oct/Nov 2024

(Term 2430)

Topic 1 – Introduction to Conveyancing Practice

TUTORIAL 1 & 2

Question 1

Mr. Beli, a Scot, would like to purchase a double storey house in Malaysia. Upon arrangement by the
property agent, Ms. Cake, Mr. Jual, the registered proprietor of all that piece of land held under
Individual Title Geran Mukim No. 83650, Lot No. 2468, Mukim Petaling, Daerah of Petaling, Negeri
Selangor together with a double storey house erected thereon (‘the Property’) agreed to sell the
Property to Mr. Beli at the purchase price of RM1,200,000.00 only. The Property was purchased by
Mr. Jual in 2022 and is currently charged to Money Bank Berhad (‘the Chargee’). The lease on the
Property expires on 5 October 2076 and the restriction-in-interest states ‘the said Land cannot be
transferred or charged or leased without the consent of the State Authority.’ Mr. Jual is desirous of
selling and Mr. Beli is desirous of purchasing the Property on an as is where is basis together with the
fixtures and fittings attached thereon with vacant possession and free from encumbrances, subject to
the conditions whether express or implied, and with the consent obtained from the State Authority.
Both Mr. Jual and Mr, Beli would like you to act for them in the sale and purchase of the Property. Mr.
Beli has never owned any property in Malaysia prior to it.

1. Advise the parties on the legal position with respect to the Legal Profession Act and the Bar
Council’s Conveyancing Practice Rulings.

Issue: Whether a solicitor may act for both the vendor and the purchaser at the same time in a sale and
purchase transaction.

Section 84 Legal Profession Act 1976 states when a solicitor who acts for a housing developer in a
sale of immovable property, he or any member of his firm cannot act for the purchaser of the property
in the same transaction.

Rule 18 of Bar Council’s Conveyancing Practice Rulings: Developer's Solicitor cannot act for the
Purchaser in respect of an individual lot. (A Solicitor acting for a Developer in a housing project
cannot act for any Purchaser in respect of any lot in the same phase of the project.)

Rule 19 of Bar Council’s Conveyancing Practice Rulings: A Solicitor shall act for one party only in
any transaction under the First, Second and Fourth Schedules of the Solicitors' Remuneration Order,
1991 but may witness or attest the signature of the other party without charge.

Order 7 Solicitors Remuneration Order (SRO) 2005: prohibits one Solicitor from acting for more than
one party. Paragraph (1) stated that In any transaction referred to in the First, Second, Third and
Fourth Schedules, a solicitor shall not act for more than one party in a particular transaction.

Ong Kim Khoon v Gaya Filem Bhd [1979] 1 MLJ 79: The FC Judge, Raja Azlan Shah: "It is
impossible for the same person to give satisfactory service as the confidential and expert adviser of
two parties with conflicting interests. The man who undertakes to serve two masters may easily find
himself in a position where he must be false to one and possibly to both”.

Lee Chong Fah v Soo Man Yoh held it is undesirable for the same solicitor to act for both vendor and
purchaser. Where this is the case, the solicitor should explain the terms and conditions of the contract
and make sure that the same are understood so that no party has any unfair advantage over the other.
Where there is a conflict of interest, the solicitor should advise the party to seek separate
representation.

In application, a solicitor is only allowed to act for one party in the same transaction. This is to avoid
any conflict of interest between parties, and to ensure that the solicitor serves his client fairly and
professionally.

In conclusion, I can only choose to act for either Mr Jual or Mr Beli.

2. If you are to act for Mr. Beli, explain to Mr. Jual what you can do for him if he chooses to be
unrepresented.

Whether vendor can choose not to be legally represented by another solicitor?

 Yes. The purchaser solicitor will include a clause in the Sale and Purchase Agreement stating
that vendor has chosen not to be represented by any solicitor.

Vendor: What can you do for me as the purchaser’s solicitor?

 Even though I am not the solicitor representing you, I am still qualified to attest or witness the
signing or execution of all documents including the SPA as stated under Section 211 of the
National Land Code 1965.

Things that vendor need to take note of if vendor choose not to be represented by any solicitor?
 Vendor will need to conduct his own follow-ups to ensure that the transaction proceeds within
the time frame stated in the SPA.

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The situation will be different if the vendor, Mr Jual choose not to be legally represented because now
we will be able to represent Mr Beli in this said transaction as it will not contravene S84 LPA and
O7(1) SRO.

However if one party chooses not to be represented, a disclaimer must be included into the Sale and
Purchase Agreement which will be stating “The Vendor is not desirous of engaging an independent
solicitor to act for him and instead the Vendors has requested the Purchaser’s Solicitors to attest to the
execution of all documents, including this Agreement, by the Vendors and to be the Stakeholders for
the parties for the purpose of this Agreement and to do such other matters as hereinafter stipulated.
The Vendor hereby agree to render his best assistance to the Purchaser’s Solicitors in completing this
sale and purchase transaction.”

In conclusion, if Mr Jual would not like to be represented a disclaimer will be inserted into the SPA
which will then be executed by Mr Jual and Mr Beli.

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For non-representation for Mr. Jual as a vendor, I am the purchaser solicitor may give advices to Mr.
Jual as he may have some legal issues that he is not used to. Besides, I might prepare a statutory
declaration for Mr. Jual to declare that he is non-represented. Even though I am not allowed to act for
both Mr. Jual and Mr. Beli. However, there may be exception where Mr. Jual did not want to appoint a
solicitor and by nonrepresentation, it is permissible and we may give some advices to Mr. Jual but no
legal charges should be imposed on Mr. Jual.
3. Advise Mr. Beli on the process of the sale and purchase from the purchaser’s perspective.
Explain the reasons for the various searches, risks, effect of bankruptcy, taxes and stamp
duty.

Duty of Purchaser
 pay the purchase price within the specified time
 accept the transfer free from encumbrances
 perform all other obligations incidental to the transfer within the specified time

Process of SPA
(before execution)
 Taking detailed instructions directly from client
 Know the parties and who you are acting for
 Determining the parties
 Land Searches
 Apply consent of transfer (S 422B)
 Drafting SPA
 Execution
 Drafting and stamping
(after execution of SPA)
 To effect a discharge of charge from Bank Kaya BHD
 Upon notification that purchaser has obtained loan,
o Prepare vendor’s undertaking to financier and Statutory Declaration (document to
declare specific facts by a person, eg purchaser non-bankrupt, stamped by
commissioner of oaths and kept by solicitor as proof, usually sent by vendor’s
solicitor to purchaser’s solicitor together with SPA)
 CKHD form 2A (within 60 days from SPA)
 Stakeholders
 Letter of undertaking
 Lodge caveat.
 Adjudicate instrument of transfer
 Ensure loan documentation completed
 Payment of differential sum
 Stamp instrument of transfer
 Ensure instrument of transfer and charge presented for registration to secure release of loan
 Ensure loan sum released to Vendor before expiry of Completion Period

Once finalize
 Ensure purchaser is registered as registered proprietor.
 Purchaser’s financier is registered as chargee.
 Collect title and deliver to purchaser or financier (with duplicate charge) for safe custody.
 File change of name with local authority

Reasons for the various searches

It is very important to conduct title search on the property prior to the execution of SPA and prior to
presentation of transfer or charge. The first title search is very important because it will reveal all
information regarding the property such as the title details and property ownership. Particulars derived
from the first title search such as the title number can be verified against the information provided by
the vendor. The title search will also show whether the property is subject to restrictions in interest. If
there is such a restriction in interest, the vendor must obtain the consent to transfer in favour of you. A
title search will also reveal whether the property has any encumbrances such as charge, caveat and
etc. Usually several land searches will be made to ensure that you will obtain a clear title. Besides
that, a bankruptcy search is also very important prior to the signing of the SPA in order to determine
Mr Jual and your solvency status.
S.384 of NLC states that a person may perform private searches subject to the payment of the
prescribed fees and other stipulated conditions, by taking extracts from any register of title,
Presentation Book or Correction Notebook and any instrument of dealing maintained by the Registrar.

S.385 of NLC stipulates that any person may make an official search to the Registrar by paying the
prescribed fees and the Registrar shall issue a certificate of search under his hand and seal, specifying
the details of the title.

The purpose of a title search is to confirm that the vendor is the actual legal owner and registered
proprietor of the property being sold. It also helps to ensure that the purchaser obtains a good title
which is not clouded by defects or encumbrances that could reduce the value of the land or would
subject the buyer to some sort of legal liability such as forgery, foreclosure actions, or charges.
Searches are also important to determine whether there are any restrictions of interest which may
affect the transfer of title to the purchaser, as property containing restriction of interest cannot be
transferred without the state’s authority.

Effect of bankruptcy in the sale and purchase transaction?

If you are adjudged a bankrupt, you may lose the payment made upon signing the SPA. On the other
hand, if the vendor is adjudged a bankrupt, it would not be possible to transfer the property unless
consent was obtained from the Insolvency Department. This means that you will not necessarily get
the property by paying the balance of the purchase price. The interest of the creditors of the vendor
would be a relevant consideration. If the vendor’s assets are more than his liabilities, such consent
may well be forthcoming. Otherwise the Insolvency Department may require you to make the full
sum for the transaction to be completed. However, you may choose to terminate the transaction and
lodge a claim with the Insolvency Department in respect of the initial sum paid and join the unsecured
creditors. Therefore, it is very important to conduct a bankruptcy search before the signing of the
SPA.

S.349(1) of NLC states that where the Official Assignee claims any land or interest in land relating to
bankruptcy, he may apply to the Registrar for registration. Registrar shall endorse a memorial of the
transmission on the register document of title of the subject land. S.349(3) of NLC states that the land
shall only vest in the Official Assignee under adjudication of bankruptcy until it is registered as per
s.349(1).

S. 24(4) of Bankruptcy Act 1967, when a debtor is adjudged a bankrupt his property shall vest in the
Director General of Insolvency (DGI) and his property shall be divisible among his creditors.

Re:Kwan Chiew Shen t/a Syarikat Kaaf (Official Asignee of the property of Kwan Chiew Shen a
bankrupt v Citibank NA [1981] 1 CLJ 314 held that a bankrupt does not lose his capacity to contract
if it has not been transmitted to the DGI under the NLC. He can pass a good title to the purchaser or
charge.

Effect of taxes
For taxes, the government will no longer impose Real Property Gains Tax or RPGT for residential
property disposals by individuals comprising Malaysian citizens and permanent residents starting
from the sixth year. This means that the RPGT rate for property disposals in the 6th year and
subsequent years of property ownership is to be reduced to 0%, effective from 1 Jan 2022. Previously,
Malaysian individuals who sell off their home in the sixth (and subsequent) years of ownership will
have to pay a 5% RPGT. However, the non-citizens and foreigners are still obliged to pay 10% RPGT.

Bear in mind that there are other RPGT exemptions for the following conditions: An exemption of
10% of profits or RM10,000 per transaction for Malaysian citizens and permanent residents
(whichever is higher) for these 2 scenarios:
 1. If an asset is transferred as a gift by a donor who is a Malaysian citizen and the acquirers are
either husband and wife, parent and children or grandparents and grandchildren. This exemption is
not applicable for transfers between siblings.
2. Once-in-a-lifetime exemption on the chargeable gain on disposal of 1 private residence by a
Malaysian citizen or Permanent Resident (PR).

Homeowners who own low or medium-cost housing priced below RM200,000 are exempted from
RPGT when disposing of their property.

Effect of stamp duty

Stamp duty is an unavoidable cost in property purchases. It is the tax placed on your property
documents during the sale or transfer of the property. This includes stamp duty on the Sale and
Purchase Agreement (SPA) and stamp duty for the Memorandum of Transfer (MOT), which are
calculated based on the purchase price. You also need to pay the stamp duty on your loan agreement.

Non-payment or evasion of the stamp duty will give rise to the fines and penalties under Stamp Act
1949. Non-stamping or inadequate stamping will be rejected by the Land Registry and cannot be used
as evidence in civil proceedings.

Stamp duty rates are calculated on a tier basis.

According to Penjana Economic Package 2020 in Malaysia, stamp duty exemptions are granted for
instruments of transfer (partial exemption) and loan agreements (full exemption) for sale and purchase
agreements signed between 1st June 2020 until 31st May 2021.

The reintroduction of the Home Ownership Campaign (HOC) for 2020 provides a partial exemption
of the stamp duty for residential properties priced between RM 300,000 to RM 2,500,000 (before 10%
discount), subject to at least 10% discount provided by the Developer. The stamp duty exemption on
the instrument of transfer is limited to the first RM 1,000,000 of the home price (which translates to a
maximum stamp duty saving of RM 24,000 for a property priced at RM 1 million), while full stamp
duty exemption is given to the loan agreement. However, do be reminded that stamp duty of 4% will
likely still apply to amounts above RM 1 million.

4. Both Mr. Jual and Mr. Beli are not able to come to your office to sign the Sale and Purchase
Agreement (SPA), requisite transfer forms, loan and charge documents. Discuss what may
be done by you as the solicitor.

Section 211 National Land Code states every execution by natural person shall be attested by the
persons mentioned in the Fifth Schedule which are (i) a Magistrate • (ii) State Director • (iii) Registrar
• (iv) Land Administrator • (v) An Advocate & Solicitor • (vi) Notary public.

It is crucial that solicitor only attest to signature he or she witness personally, if not it will be a
misconduct as seen in case of Albert Chew v Hong Leong Finance Bhd held the plaintiff admitted that
the signature which he said was signed in his presence and before him, was indeed never signed in his
presence. In other words, the advocate and solicitor had falsified the attestation. He had breached a
code so fundamental to the legal profession that the excuse he gave that it was a practice of the legal
firm to do as he did, makes his act more wrongful. Many legal firms use this procedure of having the
bank manager or official sign the documents in his office which is later sent to the solicitor for
attestation. At times the solicitor is given sample signatures of the signatory to the charge documents
from the bank. If this practice is widespread, it is time such practice is stopped.

However there are exceptions where video conference attestation is allowed as stated in Bar Council
Rulling 14.11(2), for Virtual or Remote Attestation or Witnessing of Execution of a Document by a
Solicitor. It state that unless physical presence is required by any written law, a Solicitor may virtually
or remotely attest or witness the signing or execution of a document. In attesting or witnessing the
signing or execution of the document virtually or remotely, the Solicitor shall comply with any
prevailing and applicable written law, or in the absence thereof, any conditions as may be determined
by the Bar Council from time to time for such purpose.

Conditions determined by the Bar Council, for “Virtual or Remote Attestation or Witnessing of
Execution of a Document by a Solicitor” pursuant to Ruling 14.11(2):
(a) In these conditions:
(i) "virtually" or "remotely" are used interchangeably and means the circumstances where the
party / parties who sign the document and the attesting Solicitor are not physically present in the
same location during the signing of the document;
(ii) "virtually" also means using information or communications technology, and not involving
people physically going somewhere;
(iii) "remotely" also means from a distance and without physical contact; and
(iv) "audio visual link" means technology that enables continuous and contemporaneous audio
and visual communication between persons at different places, including video conferencing.
(b) Where physical presence is required or prescribed under any written law, the Solicitor must
comply with that law. These conditions do not override any specific law on the witnessing or
execution of any document.
(c) Even if physical presence is not required or prescribed under any written law, the attesting
Solicitor should comply with all applicable laws which may regulate or explain how such documents
are to be signed, witnessed, or attested, including the Electronic Commerce Act 2006, and the Digital
Signature Act 1997.
(d) A Solicitor shall only attest to the signing or execution of a document conducted virtually or
remotely if he/she is satisfied that he/she has:
(i) explicitly identified all signing parties and the documents to be signed via an audio visual link
at the time of signing or execution of the document;
(ii) maintained an uninterrupted and continuous sight of the signing parties and the document
identified throughout the whole process via the audio visual link;
(iii) witnessed in real time the act of signing by the signing parties on the document identified via
the audio visual link without any interruption; and
(iv) ensured that the signing party’s signature, rubber stamp, and/or seal, is affixed on the
document identified.
(e) "In real time" means that the audio visual link communication, and remote attestation / witnessing
process, must be substantially simultaneous and continuous, ie without any unreasonable interruption,
disconnection, or delay in relay, excluding any reasonable or ordinary short delay that is inherent or
common to the technology used.
(f) The entire virtual or remote witnessing process must be recorded and saved by the attesting
Solicitor, and a copy of such electronic recording shall be kept by the attesting Solicitor for a
minimum of three years. Such recording is intended only to be of corroborative evidence, and any loss
of such recording shall not necessarily invalidate the remote execution or witnessing of the document.
(g) The electronic recording referred to in paragraph (f) must be reasonably secured in a manner that
prevents any subsequent change or modification to that electronic recording.
(h) The attesting Solicitor shall, as soon as practical after witnessing the signing remotely or virtually,
send a confirmation by email, instant messaging, or other electronic means, to all signatories, that the
document was signed remotely or virtually.
(i) The attesting Solicitor shall endorse on the document attested, words stating clearly that the
document was remotely witnessed, and the method adopted, eg: "This [name of document] was
signed [in counterpart (delete if not applicable)] and witnessed over audio visual link on [date], where
the witness was physically present at [place] and the document was signed by the signatory physically
present at [place]."
(j) The attesting Solicitor should, as soon as practical after attesting the document signed remotely,
electronically scan and send by electronic means, the said document, for all signatories to have sight
of all signatures on that document.

Question 2

Read and analyse the following cases. Explain how the fraudulent transaction occurred and discuss
what measures could have been taken by the solicitors to safeguard against fraudulent scams and
protect the innocent party and themselves from professional negligence.

(i) Rajamani Meyappa Chettiar v Eng Beng Development Sdn. Bhd. & Ors [2016] 4 CLJ 513
(CA)
Facts
1. Plaintiff is the registered proprietor of the land and possessed the original IDT, whose name as the
registered proprietor was replaced by the 2nd Defendant and later, the 1 st Defendant.
2. A fake vendor pretending to be the plaintiff sold the land to the 2nd Defendant who then sold it to
the 1st Defendant with the use of a fraudulent title.
3. The bogus Rajamani had her statutory declaration of linking her own passport number with the real
landowner’s passport as re-issuance of new passport and affirmed before the Indian Consular Office.
4. The fake vendor was represented by the 3rd (lawyer) and 4th Defendant (law firm), while the 2nd
Defendant was represented by the 7th Defendant that was tasked with getting a replacement title.
5. Plaintiff claimed that the transfer of the land is null and void as she did not consent to the transfer
and made a police report. She also entered the land into a private caveat to prevent the transfer of the
land.

Issues: Whether the solicitors acted in concert with the fraudulent transaction?

Judgment
The solicitors (3rd & 4th Defendants) were held to be negligent in failing to take further steps to
confirm the identity of the vendor even after noticing that there was a difference between the passport
number of the plaintiff and the fake vendor. However, since they only owe a duty of care to his client
and not to 3rd parties, they are not liable in negligence to the real proprietor.

Warning Signs for a Possible Land Scam:

There was a request put in for a replacement title for the property.

Negligence by the Solicitors:

1. Failed to carry out a proper search on the identity of the parties involved.
2. Failed to take further steps to clarify the identity of the fake vendor before proceeding with the
transfer of the property.

Steps to avoid Fraud:

Obtain certified hard copies of the documents to ascertain the identity of the individuals involved, the
IDT, SPA documents in regards to the particular property, copies of loan agreements and quit rent
receipts.
Conduct a title search to avoid conflict of interest and to ascertain the identity of the registered
proprietor of the land.
For passports, some passports may contain previous passport number.
(ii) Compare Rajamani’s case (CA) with Pushpaleela R Selvarajah & Anor v Rajamani
Meyappa Chettiar & Other Appeals [2019] 3 CLJ 441 (FC)

In this case, for the establishment of a duty of care in tort, the preferred test in Malaysia was the three-
fold test of foreseeability, proximity and policy considerations. It must be shown that the defendant, as
legal obligation had owed a duty of care by using these three tests.

Facts: a fraudster represented herself as the owner of a land, sold the land and engaged a solicitor to
act for her in the sale. The solicitor did not know of the fraud. The real owner did not engage the
solicitor for the transaction, as she was unaware of the sale.

Principle:
 A solicitor does not owe a duty of care to a non-client save for instances of disappointed
beneficiaries under a will.
 A solicitor does not owe a duty of care to a person not known or foreseen by him related to
the transaction.
 In this case, a solicitor for the fraudster did not owe a duty of care to the real owner, because
she was the fraudster’s solicitor and not the real owner’s solicitor and also the solicitor had no
knowledge whatsoever of the real owner’s existence. However, a solicitor may owe a duty to
a counter party to a transaction if (a) he has voluntarily assumed a duty to such a party and (b)
the reliance by that counter party was reasonable.
 The court applied the test of proximity

(iii) Ngan Siong Hing v RHB Bank Bhd [2014] 2 MLJ 449

Facts
This is an appeal case between a partner of a legal firm (the “Appellant”) and a bank (the
“Respondent”).The Appellant has appealed against the trial judge decision in favour of the
Respondent. The Respondent was the financier for the purchaser in a subsale transaction of two
apartment units (the “Properties”). By the way of letter of instruction or retainer dated 18 October
2000 (the “LOI”), the Respondent has appointed and instructed the Appellant of Abbas & Ngan to
prepare the loan security documents in respect of the facilities granted to the borrower. Upon
receiving confirmation from the Appellant that their interest was ‘adequately protected’, the bank
released the loan sum to the Respondent for their onward transmission to the vendor. However, when
the borrower defaulted in repayment of the bank’s facilities, the bank then discovered that the
borrower had a fictitious identity; that the vendor was never the beneficial owner of the properties;
and that the solicitors who had witnessed the sale and purchase agreement and who was acting for the
borrower was a bogus legal firm. The Respondent then commenced a legal proceeding against the
Appellant for the losses and damages suffered by it as a result of the Appellant’s breach of the
contractual obligation, which included, inter alia, failing to carry out the necessary searches on the
alleged vendor, proprietor, developer and the borrower/purchaser and alternatively in the tort of
negligence for the Appellant’s failure to discharge the duty of care owed by the Appellant to the
Respondent. In this case, the appeal was allowed with cost.

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The appellant failed to discharge the duty of care owed by the Appellant to the Respondent.
• Using the ‘but for’ test, the defendant will be liable only if the claimant’s damage would not have
accrued but for his negligence.
• The solicitor is not the proximate cause of the injury as the loss was not foreseeable, thus not liable
in contract or negligence.
• They were not required to do official search with the Bar Council on the bogus solicitors.

Application:
• The duties of the Solicitors of Vendor and Purchaser
• Each of them obtained copies of title from Vendor.
• Investigate the title before drafting Sale & Purchase Agreement o The Vendor is the owner of or
otherwise entitled to sell the property; o Any encumbrances on title can be revealed in the draft of
SPA; o Any defects in the title may be rectified before execution or completion of the SPA.
• Conduct proper land search and review its results.
• Both solicitors conducted the execution of SPA between the vendor and the purchaser. However, the
title was rejected due to the 2 caveats lodged by true registered owner and the vendor had obtained the
fraudulent replacement title.
• It showed that both solicitors did not conduct proper land search on the title before they drafted the
SPA.
• Applying to the case of Rajamani, the solicitor did not owed duty of care to the purchaser because
the solicitor cannot foresee the fraudster vendor and she had no knowledge about the fraud.
• However, in our current case, both solicitors owed duty of care because they could foresee the title
was fraudulent if they had conducted a thorough land search before drafting the SPA. This is because
both solicitors acted as the lawyers in the SPA.
• In addition, they failed to determine the existence of the encumbrances (2 caveats) in the title which
proves that they did not conduct proper search and review the results.
• By using the but-for-test in Ngan Siong Hing’s case, the solicitors will be liable because the
purchaser’s damage would not have accrued but for their negligence in failure to conduct and review
land search before drafting the SPA.
• Hence, both solicitors owed duty of care towards the purchaser.

(iv) Yap Ham Seow v Fathimawati Ismail & Ors [2013] 9 CLJ 577 (FC)

Facts:
1. Plaintiff is the registered proprietor of the land.
2. A forger that claimed to be acting under the power of a PA entered into an S&P Agreement with the
3rd Defendant over the land.
3. 3rd Defendant then entered into another S&P Agreement with the 4th Defendant.
4. Plaintiff only discovered the status of the land after being sent a quit rent receipt bearing the 3rd
Defendant’s name.

Issues:
1. Whether the 4th Defendant was a bona fide purchaser for valuable consideration who had acquired
an indefeasible title to the land by virtue of the proviso to S.340 (3) of the NLC?
2. Whether the 2nd Defendant had used reasonable care and skill in dealing with the power of attorney
in question?

Judgment:
1. The 4th Defendant, being a subsequent purchaser, obtains an indefeasible title if he can prove that
he is a purchaser in good faith for valuable consideration. No evidence was found that the 4th
Defendant had acted in cohort with the 3rd Defendant in the conveyance of the land and there was no
evidence to suggest that the 4th Defendant had notice that the 3rd Defendant’ title was defective nor
was there any circumstances surrounding the SPA to suggest that the land might have been owned by
someone else when the 4th Defendant inspected the land. Hence, the 4th Defendant is a bona fide
purchaser.
2. The duty of care of the 2nd Defendant is only to the forger alone and not duty bound to inform a
prospective solicitor who might take over, of any irregularities and discrepancies in the file. The 2nd
Defendant was not negligent and neither did it in any way act in cohort with the forger to strip the
plaintiff of her title. Therefore, the 2nd Defendant could not be faulted for the plaintiff’s loss.

Warning Signs for a Possible Land Scam:

1. The use of a PA when the registered proprietor is a Malaysian citizen.
2. The request for a replacement title by another party under the power of a PA when the registered
proprietor is a Malaysian citizen.
3. Copies of quit rent were unavailable.

Negligence by the Solicitors:

Solicitors concluded the sale without any proper investigation into the title or the persons who are the
actual proprietors.

Steps to avoid Fraud:

Solicitors should request for a certified true copy of the PA.
Should not attest documents without witnessing the documents being signed in front of the attester.

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The forger contended that the POA was given to him by the plaintiff. The duty of care of the 2nd
Defendant (the lawyer) is only to the forger alone and not duty bound to inform a prospective solicitor
who might take over, of any irregularities and discrepancies in the file. The 2nd Defendant was not
negligent and neither did it in any way act in cohort with the forger to strip the plaintiff of her title.
Therefore, the 2nd Defendant could not be faulted for the plaintiff’s loss.

Court also stated that plaintiff is the registered proprietor of the land. A forger claimed to be acting as
under the POA entered into S&P agreement with the 3rd defendant over the land. 3rd defendant then
entered into another S&P agreement with the 4th defendant. Plaintiff only discovered the status of the
land after being sent a quit rent receipt bearing the 3rd defendant’s name. The judge held that 4th
defendant is a bona fide purchaser if he can prove that he is indeed one for valuable consideration.a
purchaser in good faith does not include a purchaser who has been negligent or who had kept his eyes
shut. A purchaser is under the obligation to investigate properly all matters relating to the sale and not
just blindly accept. what was claimed by the vendor as correct and genuine. Land Office Registrar
must give notice to the original registered proprietor regarding the lost original title and of its
replacement. It was part of the solicitor’s negligence that the sale was done without proper
investigation into the title or the persons who are the actual proprietors. It must have been requested a
certified true copy of PA and documents should not be attested without witnessing the documents
being signed in front of the attester.

Court held that based on the surrounding facts and circumstances there were nothing to suggest the
purported power of attorney was irregular and it called for further investigation on the part of the
solicitor (DW5).

(v) Kok Weng Tuck and 2 Others v Ambank (M) Berhad [2016] 6 CLJ 196 (CA)

The respondent bank had acted upon the advice of the appellant solicitors by releasing loan monies to
the vendor who turned out to be a fraudster. In CL 15 of the law firm’s letter of advice and if the
respondent suffer any loss as a result appellant’s advice, the respondent would be fully indemnified.
The respondent claim was breach of contract + negligence. Thus, the appellant claim was not liable.
The Court of Appeal decision was there was a breach of contract. The appellant said it had liaised
with the developer directly, but this was not done. Therefore, appellant was liable for breach of
contract. In accordance for Negligence the appellant had employed a freelance dispatch clerk,
introduced to him by the fraudster, to do the liaising with the developer. Not properly done + Untrue
information + did not check with developer and not the standard procedure or practice followed by
legal firms. The loss arising out of a direct breach, by the law firm which was reasonably foreseeable.
Adopted ‘But-for test’: But for the impugned act of the appellant, would the respondent suffer loss but
for the appellant’s letter of advice, the bank would not have released the loan and suffer loss.
Therefore, appellant was solely negligent.

The measure to be taken is the solicitors must comply with the provisions of the retainer and not try to
take a short cut by hiring a freelance dispatch clerk, when liaising with the developer. Next If
freelance dispatch clerk is hired, the solicitors must follow-up with a telephone call to the developer
to ensure that the developer, did in fact receive the correspondence handled by the freelance dispatch
clerk and the solicitors must conduct search as to the identity of the parties to the transaction. This is
especially true before the solicitor gives any advice to his client to release a sum of money.

(vi) Pendaftar Hakmilik Negeri Selangor & Ors v Shaifulizam Mohd Saleh & Anor And
Another Appeal [2020] 5 CLJ 595

The Defendant 1 (D1) expressed the interest in purchasing property from the Plaintiff. The Plaintiff
was unaware that the D1 is a fraudster and D1 transferred property to Plaintiff to D1 using forged
documents. Besides that, D1 charged property to D2. D1 defaulted and D2 proceeded to sell property
via Public auction and the Plaintiff only found out about the fraud via the Public auction, P
commenced action.

It was held D1 title defeasible, D2 title indefeasible, LO liable for negligence. On appeal, A1, A2 (D1,
D2) defeasible as A1(D1) never had title hence A2(D2) was immediate purchaser, LO liable. The
lessons learned from this D2 solicitor did not make proper checks as D1 was a longtime customer.
The LO did not do their duty. Besides that, the Prevention are Solicitors must not neglect any checks
on clients no matter how long the client is known to Solicitors. Solicitors must ensure that the Vendor,
if not represented are signing the documents in their presence. If Vendor is represented, then the P
Solicitor should check with the Vendor Solicitors for confirmation. Solicitors must verify the veracity
of the documents presented to them and LO should implement Biometric verification for higher value
property to prevent fraud.

(vii) Pendaftar Hakmilik Negeri Selangor v Caesius Development Sdn. Bhd. & Ors and Another
Appeal [2020] 3 CLJ 327

D3-6, applied for a change of name from Plaintiff to D3 name through LO using forged documents
and fraudulent means. The LO approved change of name and the D3 transferred to D1 for purported
consideration of RM 2Million. The Plaintiff only found out about the fraud when real estate agent
contacted about land sale. P commenced action within 36 months. It was held At trial, D1 & D3 title
defeasible, LO liable for negligence but no damages awarded and A1(D7) Appealed, D3-6
unrepresented. Appeal dismissed.

The lesson learned D2 solicitor did not make proper checks as D1 was a longtime customer and the
LO did not do their duty. The prevention are solicitors must not neglect any checks on clients no
matter how long the client is known to Solicitors. Next Solicitors must ensure that the V, if not
represented are signing the documents in their presence. If V is represented, then the P Solicitor
should check with the V Solicitors for confirmation and solicitors must verify the veracity of the
documents presented to them and LO should implement Biometric verification for higher value
property to prevent fraud
MULTIMEDIA UNIVERSITY UCY6413 Conveyancing Practice: Tri Oct/Nov 2024
(Term 2430)

Question 3
(Adopted from Q6 CLP 2019 November Examination – for academic purpose only)

Mr. Rich obtained a loan from Bank Raya Berhad to finance her purchase of the single storey house in
Melaka. Mr. Lawyer was appointed by Bank Raya Berhad to handle the loan transaction. Due to his
busy schedule, Mr. Lawyer instructed his clerk, Ms. Dream to proceed with the presentation of the
charge for registration at the land registry. Ms. Dream had used up part of the registration fee to pay
for her personal debt thus she forwarded a fake presentation statement to Bank Raya Berhad for the
release of the loan sum to complete the transaction. The documents were hidden by Ms. Dream in her
drawer. Mr. Lawyer did not take his initiative to check the status of the registration via e-portal of the
land registry. Subsequently, Bank Raya Berhad released the loan sum based on the letter of advice
signed by Mr. Lawyer.

Three years later, Mr. Rich defaulted the loan and Bank Raya Berhad would like to request from Mr.
Lawyer the duly registered original title and duplicate charge to commence legal action to recover the
loan. Upon checking, Mr. Lawyer was shocked when discovered the unregistered documents in Ms.
Dream’s drawer. Ms. Dream resigned two years ago and is unreachable.

Discuss the liabilities of Mr. Lawyer. Advise Bank Raya Berhad on its right and what can be done to
protect its interest on the Property.

Prepared and revised by: Ms. Tan Yan Peng (with special acknowledgment to Dr. Gita and Mr. Wong Hua Siong,
the previous lecturers of the course, for the useful earlier information of the course.)

1. Bank Raya Berhad Rights

The issue is whether an equitable charge had been created over the said land in favour of
Bank Raya Berhad?

According to Section 206(3) of National Land Code (NLC) provides nothing in S.206(1)
shall affect the contractual operation of any transaction relating to alienated land or any
interest therein. In the case of Haji Abdul Rahman & Anor v. Mohamed Hassan, it was
decided that the NLC does not stop the creation of an equitable charge. However, according
to S.206(3) of the NLC, the right created by an equitable charge is just a contractual right. In
the case of Standard Chartered Bank v. Yap Sing Yoke, it was decided that a lien in equity
was put on the land because the registration had been returned because there wasn’t enough
proof and the plaintiff didn't know about it when a private caveat was filed. In this case, the
lack of a caveat doesn't change what is called “equitable interest.”

In this case, Bank Raya Berhad’s lawyer, Ms. Lawyer, and his clerk, Ms. Dream, did not
make sure that the charge on the single storey house was properly registered in Bank Raya
Berhad’s name. Even though the charge wasn’t registered, Bank Raya Berhad can still be said
to have a legal right to the land. This is because S.206(1) of the NLC, when read with
S.206(3) of the NLC, says that the non-registration of any interests does not change how a
transaction involving those interests works under a contract. This contractual right under
S.206(3) of the NLC is mostly about the existence of an equitable charge. In the case of Haji
Abdul Rahman & Anor v. Mohamed Hassan, the courts said that “an equitable charge is just a
contractual right under S.206(3) of the NLC.”
In conclusion, an equitable charge had been created over the said land in favour of Bank Raya
Berhad.

2. Protection of Bank Raya Berhad Interest on the house

The issue is whether the equitable interest of Bank Raya Berhad in the single storey house
may be protected.

S.206(1) of the NLC says that every transaction (including a charge) must be made with a
document that meets the requirements of S.207–212. Saying that the charge can only be made
if it is registered as required by S.206. If it is not registered, the NLC says that it is not valid.
S.206(3) of the NLC says that nothing in (1) changes the way a contract works for any
transaction involving land that has been sold or any interest in it. The law that should be used
to decide if Bank Kaya Berhad has an equitable interest in the charge even though it is not
registered. This is a type of equitable remedy. In the case of Oriental Bank v. Chup Seng
Restaurant (Butterworth), Sdn Bhd, NLC does not prevent the creation of an equitable
charge. Here, the NLC, which is a complete and thorough set of laws about land, makes it
clear that a charge must be registered in the prescribed form before it can be used to get
statutory remedies under the NLC.

When all of these laws were applied to the current situation, S.206(1) of the NLC said
that every transaction, including the creation of a charge, had to be done with the right
instruments according to S.207–212 of the NLC. Right now, this requirement wasn't met
when Ms. Dream got the loan by submitting fake documents. Still, S. 206(3) of the NLC says
that nothing in subsection (1) can change how a contract works when it comes to alienated
land or any interest in it. This gives Bank Raya Berhad a fair claim to the house, since the
absence of the instrument of dealing wouldn't change how the charge works under the
contract. Here, in reference to the Court's decision in the case of Oriental Bank v. Chup Seng
Restaurant (Butterworth), Sdn Bhd, it is acknowledged that the NLC is a clear and complete
set of laws, but it also says that a charge must be registered in the prescribed form before it
can be used to enforce any statutory remedies under the NLC. But this case also showed that
the NLC does not stop people from making a fair charge. So, because of this ruling, in the
current situation, Bank Raya Berhad can't use statutory remedies because the charge wasn't
properly registered. However, their equitable interest in the house can be protected through
equitable remedies, since not having the right document doesn't change the way the contract
works in this case.

Bank Raya Berhad’s equitable interest over the house may not be protected statutorily under
the NLC but may be protected under equity instead.

3. Mr. Lawyer’s liabilities

The issue is whether Mr. Lawyer can be held liable as a stakeholder for the non- registration
of Mr.Rich’s charge over the house to Bank Raya Berhad?

According to Rule 35(b) of Legal Profession (Practice & Etiquette) Rules 1978 (“LPR 1978”)
provides that an advocate and solicitor shall preserve his client’s confidence and this duty
outlasts his employment. In the case of Arab Malaysian Finance Berhad v Steven Phoa Cheng
Lon & Ors. In this case, the courts held that there are four conditions that needs to be
established in order for a client to successfully bring professional negligence claim against a
lawyer which are: 1) The plaintiff must show that he was owed a duty of care by the
defendant to take reasonable care. 2) The defendant had breached that duty. 3) The breach of
duty has caused the harm in question . 4) The plaintiff has suffered damage that is not too
remote. Further, in the case of Messrs. Yin Voon & Ooi and Wong Yin Voon v Rizal Song Bin
Abdullah and Heavy Industries Valley Sdn Bhd. In this case, the court held that when a
solicitor accepts the offer to take up a case, it creates a contractual relationship between him
and the client where the failure on the solicitor’s part to complete his task in favour of the
client will amount to a breach of contract. This then entitles the client who suffered damages
resulting from the breach by his solicitor to initiate a suit against him on the basis of
negligence in carrying out a contractual duty.

Applying these laws back to the present case, Mr. Lawyer as Bank Raya Berhad’s solicitor
owes BRB a duty towards BRB and has to preserve BRB’s confidence in him as long as his
employment lasts as stated in R.35(b) of LPPER 1978. Although Mr. Lawyer has sought the
assistance of her legal clerk, Ms, Dream to present the registration of charge at the land
registry, Mr. Lawyer still owes a reasonable duty of care to ensure that the registration of
charge takes place prior to issuing a letter of advice to BRB to release the loan sum to
Mr. Rich. This is then fatal on the part of BRB as they have effecitvely released a loan which
is unsecured due to the non-registration of their charge. Coupled with the fact that Mr.
Lawyer has never once checked back in on the status of the registration of the charge when
told by Ms. Dream that the documentation was pending registration by the land registry, it is
evident that Mr. Rich had failed to comply by her contractual duty towards BRB. This then
led to BRB suffering damages and encountering problems when attempting to commence
legal action to reclaim the loan. Therefore, BRB’s situation has fulfilled all the 4 conditions to
make a claim of professional negligence against Mr. Lawyer for his failure to comply by his
contractual obligations as per Steven Phoa’s case and Rizal Song’s case.

In conclusion, Mr. Lawyer can be held accountable for her actions and BRB has a cause of
action under professional negligence to recover damages from Mr. Lawyer. as hehas breached
his responsibilities as BRB’s advocate and solicitor under R.35(b) of LPPER 1978.

----------------------------------------------------------------------------------------------------------------

The first issue is whether Bank Raya Bhd has right to commence legal action to recover loan
against Mr. Rich. The general instance is borrowers are usually required to repay the loan
back to the financier once the instrument of charge of the land or property has failed to be
issued. This will be stated in the default provisions in the Sale and Purchase Agreement and
both parties to such agreement will be informed by the solicitors before they sign such
agreement. Thus, it means that both parties had agreed to such terms at the time they signed
the agreement. So, if the borrowers failed to repay the loan to the financier when there is
default in applying charge of the land, it amounts to breach of agreement under S. 41 of the
Contracts Act 1950 (‘CA’).

In application, Mr. Rich has defaulted in repayment of the loan sum as the failure of
registering charge for registration at the land registry. In application of S. 41 CA, this has
amounted to serious breach of the Agreement as Sweetie has not performed the promise to
repay the loan back to Bank Raya Berhad. Hence, Bank Raya Berhad has the right to
commence the legal action to recover loan against Mr. Rich.

The second issue is whether Bank Raya Berhad has any means to protect its interest on the
single storey house. Under S. 319(1)(a) read together with S. 320(1)(c) of the National Land
Code (‘NLC’), the Registrar could lodge caveat against a land to protect the interests by
reason of some error appearing to him to have been made in the register or issue document of
title to the land or any other instrument relating thereto. Thus, it means that the applicant can
apply to Registrar and Registrar, to lodge caveat against the land when there is some error in
the register or issue document of title to the land or any other instrument relating thereto,
which also includes charges.

By referring to S. 319(1)(a) together with S. 320(1)(c) of the NLC, the Bank Raya Berhad
could apply to Registrar to lodge caveat against the single storey house on the ground that
there is some error appeared in applying for the charge of such land at the land registry.
Through the caveat lodged by Bank Raya Berhad, Mr. Rich could be restricted from using the
house for any other transactions and Bank Raya Berhad could apply for charge at land
registry after the caveat has been granted by the Registrar.

The third issue is whether Mr. Lawyer is liable for registration fee used by Ms. Dream. Rule
14.10(3) of Bar Council Rulings, states that a solicitor that is acting as stakeholder must
strictly adhere to the terms of stake holding. No money held by a solicitor as stakeholder shall
be released, utilised, or otherwise dealt with by such solicitor. This is established in the case
of Lai Kee Ping v Tay Hup Lian, where a stakeholder is known to be a trustee. The breach of
stake holding terms is amounts to a breach of trust.

In application Mr. Lawyer is a stakeholder who held the registration fee paid by Mr. Rich for
the purpose of registration of charge. Even though the part of the registration fee is utilised by
Ms. Dream for purposes of paying off his personal loan, Mr. Lawyer is still liable for the
breach. This is due to the fact that Ms. Dream is an employee of Mr. Lawyer and failure to
supervise the money had led to Ms. Dream using the funds inappropriately. Thus, Mr. Lawyer
as stakeholder is liable for the misappropriation of money executed by Ms. Dream.

The fourth issue is whether Mr. Lawyer can be made liable for the release of the full loan sum
made by Bank Raya Berhad. Under S. 94(3)(d) of Legal Profession Act 1976 (‘LPA’) stated
that misconduct means conduct or omission to act in Malaysia by an advocate and solicitor in
a professional capacity which amounts to grave impropriety and includes breach of any rule
of practice and etiquette of the profession made by the Bar Council under this Act. Rules
14.09(1)(a) of Bar Council Rulings outlines that failure to honour an undertaking may
amount to professional misconduct.

In application, Mr. Lawyer wrote a letter of advice to release the loan sum to Bank Raya
Berhad without checking whether the charge was registered or not. It was misconduct on the
part of Mr. Lawyer as he did not follow up or confirm with the legal clerk whether the charge
was successfully registered. He just blindly issued the letter of advice to Bank Raya Bhd to
release the loan sum to Mr. Rich. Therefore, Mr. Lawyer is liable for the released of full loan
sum made by Bank Raya Berhad.