What is the position of the chargee bank if the chargor's title is held to be defeasible by fraud under section 340(2)(a) NLC

Let me starts off with section 340 of the National Land Code (NLC).

Section 340. Registration to confer indefeasible title or interest, except in certain circumstances.

(1) The title or interest of any person or body for the time being registered as proprietor of any land, or in whose name any lease, charge or easement is for the time being registered, shall, subject to the following provisions of this section, be indefeasible.

(2) The title or interest of any such person or body shall not be indefeasible -

(a) in any case of fraud or misrepresentation to which the person or body, or any agent of the person or body, was a party or privy; or

(b) where registration was obtained by forgery, or by means of an insufficient or void instrument; or

(c) where the title or interest was unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law.

(3) Where the title or interest of any person or body is defeasible by reason of any of the circumstances specified in sub-section (2) -

(a) it shall be liable to be set aside in the hands of any person or body to whom it may subsequently be transferred; and

(b) any interest subsequently granted thereout shall be liable to be set aside in the hands of any person or body in whom it is for the time being vested:

Provided that nothing in this sub-section shall affect any title or interest acquired by any purchaser in good faith and for valuable consideration, or by any person or body claiming through or under such a purchaser.

According to section 340(1) NLC, a person who has his name appeared in the registered document of title (RDT) is deemed to be the absolute owner over the land to the exclusion of all others. His title is indefeasible in the sense that no one can dispute his title over his land. 

However, the indefeasibility of his title can be challenged or his name can be removed from RDT if section 340(2) NLC applies. 

I will discuss the situation where fraud is successfully established against the owner of the land under section 340(2)(a) NLC. 

In Kasai Reiko v. Annie Lor Lee Fong & Ors; Public Bank Bhd (Intervener) [2014] 3 CLJ 869, the court found that Annie as the owner of the land was in fact a constructive trustee of the land to Kasai. Annie committed fraud against Kasai when she registered the land into her name and refused to transfer it back to Kasai. However, it was also discovered that she has charged the land to Public Bank as security for a loan. 

Lee Swee Seng JC held that the Public Bank was not a party nor a privy over the fraud committed by Annie. Therefore, section 340(2)(a) NLC has not satisfied. 

Be that as it may, as a subsequent holder of interest, Public Bank is also protected by the proviso in section 340(3) NLC, that is, it is a bona fide purchaser for valuable consideration. According to His Lordship, the word "purchaser" has a wider meaning and it includes those who taking an interest in the land such as a bank. 

The next question is what is the position of the Public Bank if Annie's title over the land was impugned. 

Lee Swee Seng JC made the following orders:

a) Annie to transfer the land back to Kasai;

b) Annie to discharge the charge by paying the redemption sum still owing to Public Bank;

c) Kasai is at liberty to discharge the charge and recover the sum so paid against Annie by way of judgment sum.  

What is the effect of the Irrevocable Power of Attorney when the donor of the Power of Attorney dies?

Put it in another way, can the donee of the power of attorney (PA) transferred the land to a third party or to himself pursuant to the PA after the donor died?

It is pertinent to look for section 6 of the Powers of Attorney Act (POAA).

Section 6. Powers of attorney given for valuable consideration

(1) If a power of attorney, given for valuable consideration, is in the instrument creating the power expressed to be irrevocable, then, in favour of a purchaser—

(a) the power shall not be revoked at any time, either by anything done by the donor of the power without the concurrence of the donee of the power, or by the death, marriage, mental disorder, unsoundness of mind, or bankruptcy of the donor of the power; and

(b) any act done at any time by the donee of the power, in pursuance of the power, shall be as valid as if anything done by the donor of the power without the concurrence of the donee of the power, or the death, marriage, mental disorder, unsoundness of mind, or bankruptcy of the donor of the power, had not been done or happened; and

(c) ... ...

From section 6 POAA, it seems that the donee can transfer the land pursuant to the PA and the death of the donor will not affect the power of the donee to do so. However, the pre-conditions are the donee must be a purchaser who has paid for the purchase price over the land and the PA is expressed to be irrevocable. 

Be that as it may, the matter does not end here.

As the issue concerned land matter, it is necessary to have a look at section 311 of the National Land Code (NLC) as well. 

Section 311. Enquiries by Registrar.

In determining the fitness for registration of any instrument to which section 309 applies, the Registrar -

(a) may, without prejudice to the generality of his powers under section 302, require from the attorney or his principal a statutory declaration, or other evidence upon oath or affirmation, that the power of attorney was, at the material time, still in force; but

(b) shall not, in the exercise of those powers, require proof of the due execution of any power of attorney where the document delivered to him pursuant to paragraph (a) of sub-section (1) of the said section 309 was an office copy thereof.

From the above section, the Registrar has power to require the attendance of the donor or his solicitor to give a attested statutory declaration that the PA is still in force or valid. Thus, if the registrar did require such attested declaration and the donor was dead, the donee will have to find the donor's solicitor who has prepared the PA to attest that the PA is still in force. 

When the registrar did not require such attestation, then the donee can proceed to execute and present the instruments of dealing such as Memorandum of Transfer (MOT) for registration. 

The execution of the instruments of dealing is provided in section 210 NLA. 

Section 210. Execution of instruments of dealing.

(1) Every instrument effecting any dealing under this Act shall be executed in accordance with the following provisions of this section by each of the parties and the parties consenting thereto or, in the case of any particular party, by a person acting on his behalf under a valid power of attorney or on the authority of any written law (including this Act) or the order of any court.

The donee of the PA can execute the instruments of dealing provided that the PA is valid. It seems that this section also applies if donee transfers the land to himself pursuant to the PA.

For presentation of instruments of dealing, it is necessary to look into section 292 NLA. 

Section 292. Instruments capable of being registered, and method of presentation therefor   

(1) The following instruments may be registered under this Part, and may be presented to the Registrar for that purpose in accordance with the provisions of sub-section (2) -

(a) any transfer under Part Fourteen of land, of an undivided share in land, or of any lease, sub-lease or charge;

(b) ... ...

(4) The death of any person by or on behalf of whom any instrument of dealing has been executed shall not affect the validity thereof, and any such instrument may, accordingly, be presented for registration under this Part as if the death had not occurred.

The effect of subsection (4) can be seen in the case of Dan Sin Wah v. Chan Hai Swee [1951] 1 MLJ 189 where Briggs J held that "death of any person" and "executed by" in section 85(ii) Land Code was referring to the donor of the PA and not the donee. 

In that case, His Lordship held that if the fact of the death of the donor was brought to the notice of the Registrar, the instruments of dealing shall not be registered. This was pursuant to section 85(ii) Land Code. 

Section 85(ii) Land Code provides that "the death of any person prior to the presentation of any instrument executed by him shall prevail so as to prohibit registration of such instrument, and such instrument if registered shall be void". 

From section 85(ii) Land Code, it seems that when the donee presents for registration of the instruments of dealing, the donor of the PA must alive even though the instruments have been executed by the donor himself. 

However, in section 292(4) NLC, there are the words "on behalf of whom" which did not appear in section 85(ii) Land Code.

In my view, the words "on behalf of whom" refers to the donee of the PA. The effect of it is as long as the donee of the PA is still alive, he can present the instruments of dealing for registration. The death of the donor is immaterial. 

In conclusion, the effect of the irrevocable PA is still the same and valid notwithstanding that the donor of the PA has died. In other words, the donee can transfer the land to himself or third party pursuant to the PA, POAA and NLC. However, such power is subject to section 311 of the NLC where the Registrar may request for a statutory declaration from the donor or his solicitor concerning the validity or enforceability of the PA.