Indefeasibility of Title (IOT)

Question 1

What is the definition of Indefeasibility of Title (IOT) and its general rules?

Answer 1

1. An immunity from attack by adverse claim to the land/interest in respect of which he is registered
   -Frazer v Walker [1967]
2. An immunity given to any person whose name got into (RDT) as having the title/interest in the land.
3. Indefeasibility is fundamental to the Torrens registration system.
   “..the registration of transfer..under NLC defeats all prior unregistered interests in that land unless the party acquired the registered title has been guilty of fraud.” Raja Azlan Shah
   -PJTV Denson (M) Sdn Bhd v Roxy (M) Sdn Bhd [1980]
4. The title has immunity cannot be challenged as prescribed under S340(1).
5. (Torrens System) the register (RDT) is conclusive evidence (S89) of entries if it complied with 3 conditions precedent;
6. Transaction was one which was recognised by NLC (capable of being registered);
7. Instrument used for registration was in statutory form and IDT has been produced at the time of registration;
8. Transaction was not void or defective = PERFECT

Question 2

How is issue of (IOT) comes into the picture? Who will challenge the title/interest as defeasible and what will be the solutions?

Answer 2

1. Original registered proprietor, who later discovered that his title is registered in somebody else’s name, will challenge that the title was defeasible (eg. due to forgery).
2. Illustration 2; S340(2)
3. Illustration 4; S340(3)

Question 3

What are the types of Indefeasibility of Titles (IOT)?

Answer 3

1. From Section 340, it is clear that the protection and application of IOT
   and interest are only relevant to Subsequent Purchaser (Deferred
   IOT) and not Immediate Purchaser (Immediate IOT). But there were cases where judges interpreted IOT applies to
   Immediate Purchasers.
2. There are 2 types of IOT; Immediate IOT means IOT is given to an immediate Purchaser, even though he acquires the title or interest immediately after the defective acts, eg. the forged transfer;
3. Deferred IOT means IOT, the statutory protection is conferred on the subsequent Purchaser after the defective acts, eg. the
   forged transfer.

Question 4

What are the exceptions under the indefeasibility concept?

Answer 4

1. In Section 340(2), “the title or interest of any person or body shall not be indefeasible” (means it is defeasible and can be challenged)
2. If there is a fraud or misrepresentation;
3. By forgery;
4. By insufficient or void instrument;
5. Unlawfully acquired by the person or body of any power or authority conferred by any written law.

Question 5

Who has the burden of proof that the purchaser come within the protection of the proviso to Section 340(3) of the (NLC)?

Answer 5

1. The proof that one is a purchaser in good faith for valuable consideration lies on the person asserting it.
   -Abu Bakar bin Ismail & Anor v Ismail bin Husin & Ors
2. First defendant was relying on the proviso of S340(3), that he was bona fide purchaser for valuable consideration, the evidential burden falls on him.
   -Au Meng Nam v Ung Yak Chew
3. A person claiming that a title is defeasible would have to discharge the burden of proving fraud/misrep/forgery
4. Then, the burden shifts to the parrty claiming indefeasibility to prove that he/she is a bona fide purchaser for good value.

Question 6

What are the remedies for the original proprietor?

Answer 6

1. For Immediate (IOT), original registered properietor may get back his land as the forged title is defeasible under S340(2). Title and land are passed back to the proprietor.
2. For Deferred (IOT), the ‘immediate purchaser’ gets defeasible title, must retransfer the land to the proprietor (original title were through forgery). However, the proprietor gets back a charged land, as the banks’ interest over the land is indefeasible (assuming the bank is a bona fide purchaser for value under S 340(3)).

Question 7

How is the interpretation of Immediate IOT in Malaysia?

Answer 7

1. Even though under NLC it is clearly stated that IOT is only applicable to a Subsequent Purchaser, judges in Adorna’s
   case have misinterpreted the IOT provision.
   Adorna Properties Sdn Bhd v Boonsom Boonyanit (2001);
   -Federal Court applied concept of immediate indefeasibility;

-Whether the Appellant company’s title comes within S340(3)?
-Federal Court (Eusoff Chin CJ) held that even though the instrument of transfer was
forged, the Appellant obtained an indefeasible title to the said lands, they acted in good faith for valuable consideration.

-FC failed to consider in this case that; (a) the person who forged the signature & registered the transfer from the name of original proprietor directly into the name of Appellant’s company. That was an immediate transfer; (b) Appellant company was an immediate purchaser came within
section 340(2). An immediate purchaser who acquired a defeasible title could not apply the proviso under S340(3) (as the proviso is meant for subsequent purchaser only).

-Caused an uproar in the legal industry, a
grievous judicial error because there were previous judicial precedents clearly showed that Malaysia practise deferred IOT.

2. Under S340(3), the indefeasibility is postponed in favour of Subsequent Purchaser who subsequently acquires the title or interest. It is however subject to proviso of S340(3), i.e the
   subsequent purchaser acted in good faith and paid valuable consideration.
3. Application of deferred IOT in Malaysia was confirmed in Mohammad Bin Buyong v Pemungut Hasil Tanah Gombak & Ors [1982]. The judge also ruled that IOT will only takes effect upon registration of the title.
4. From Immediate to Deferred IOT in
   Malaysia has been reviewed in the controversial decision of Adorna’s case (2010). In 2010, landowners were relief as the Federal Court pronounced a landmark decision protecting original landowners from losing their lands to forgers as decided in the case of Tan Ying Hong v Tan Sian San [2010] .
5. Chief Justice Tun Zaki Azmi ruled
   that the controversial 2001 ruling in the case of Adorna Properties vs Boonsoom Boonyanit permitting fraudulent land transfer, was erroneous. Deferred IOT was put back into place in Tan Ying Hong.