BT : A 10-year legal wrong finally righted

Business Times - 22 Jan 2010
A 10-year legal wrong finally righted

TEN years ago, Malaysia's apex court made a decision that many considered bizarre and introduced much uncertainty into investors' decisions.

In the case of Adorna Properties vs Boonsom Boonyanit, a buyer who had bought a piece of land without knowing it had been fraudulently transferred was allowed to keep it, thus depriving the person who had been defrauded of his rights. Thus, for 10 years, the registered (and therefore rightful) owner of a property who suddenly discovers that his title has been fraudulently transferred to someone else had no legal recourse to reclaim his property. That decision, which had been made by a three-man panel headed by then Chief Justice Eusoff Chin, had set a binding precedent for disputes over land ownership.

Happily, all that changed yesterday when the current Federal Court, now with different judges, reversed what it called the 'blatant and obvious' mistake of the Adorna ruling. This time, a five-man bench led by current Chief Justice Zaki Azmi unanimously ruled that the rightful owner of a property title can set aside the second man's claim even after the title has been transferred to the latter. It was based on Section 340(2) of the National Land Code 1965, which states unequivocally that a title would not be defensible if it had been subject to fraud in any way. What the Federal Court did yesterday was to right a decade-old wrong. CJ Zaki noted that it is 'quite well known that some unscrupulous people had taken advantage (of the mistaken Adorna ruling) to transfer land to themselves'.

The Federal Court's ruling followed submissions last October for Pahang landowner Tan Yin Hong, who was appealing against a Court of Appeal decision in 2009. Mr Tan's case dates back to 1976, when the Pahang state government mysteriously issued a land title for a 3.6-hectare piece of land in Kuantan in his name and without his knowledge. Land matters come under the ambit of state governments in Malaysia. In 1985, Mr Tan received a letter from RHB Bank telling him to pay back RM300,000 as an outstanding loan given by the bank to a timber company. Upon investigation, Mr Tan found out that a person named Tan Sian San had in 1977 forged his signature and obtained power of attorney to represent Mr Tan. In 1984, Tan Sian San charged the land to RHB as security for a loan to Cini Timber Industries, and subsequently disappeared. Mr Tan sued the bank. In 2003, the High Court dismissed his application and the Court of Appeal upheld that decision.

But yesterday, the Federal Court decided the bank's charges against Mr Tan were invalid because of the forgery. And, in doing so, it threw the Adorna decision onto the scrapheap of history. It will go a long way in reassuring both Malaysians and foreigners interested in buying land in the country - either for residential or for industrial purposes - that their rights will be protected.