REMOVAL OF CAVEATSBy G. Vijay Kumar

25 February 2016

Introduction

Malaysia utilises the Torrens system, the principles which are embodied in the

provisions of the National Land Code 1965 (“NLC 1965”), where title to or

interest in land vest and divests only upon registration. However, unregistered

interest in a land is protected by lodging of caveats. A caveat is a formal notice

of unregistered interest in land.

There are four (4) types of caveats under the NLC 1965, namely –

1. Private Caveats (Sections 322 – 329)

May be entered by the Registrar at the instance of any of the person or

bodies claiming title to or any registrable interest in any alienated land,

any person or body or guardian of any minor claiming to be beneficially

entitled under any trust affecting any such land or interest.

Wednesday, July 14, 2010

Introduction

Introduction

4. Trusts Caveats (Sections 332 – 333)

May be entered by the Registrar in respect of any land or interest

which is expressed to be held by any persons or bodies as trustees.

Private Caveat

Private Caveat is the most common form of caveat used to protect

interests in land.

It is entered by the Registrar upon application by a person or a body who

has a “caveatable interest”.

It is in a nature of statutory injunction which has the effect of protecting

claim to an existing unregistered registrable interest in land.

Private Caveat

Effect of Private Caveat –

A notice to the world at large that the caveator has a claim to an alleged

interest in the disputed land.

Preserves the status quo of the land pending resolution of the dispute by the

court.

Restrains the caveatee from dealing with the land in dispute pending the

determination of the caveator’s interest in the land by the courts.

Private Caveat

Who can apply for Private Caveat?

S. 323 NLC 1965 specifies 3 categories of persons:

a) Any person or body claiming title to, or any registrable interest in any

alienated land, or any right to such title or interest. (2 limbs)

b) Any person or body claiming to be beneficially entitled under any trust

affecting such land or interest;

c) The guardian or next friend of any minor claiming to be entitled under any

trust affecting such land.

Private Caveat

Interpretation of the First Limb of S. 323 (1)(a) – can be divided into 2:

“Person of body claiming title to land.”

E.g. A prior registered proprietor challenging the title of a new

registered proprietor is a body claiming title to the land under S. 323(1)(a)

and has a caveatable interest

“Person and body claiming a registrable interest in land”

E.g A chargee could enter a private caveat where the charge document

had been signed but had yet to be registered.

Private Caveat

Interpretation of the Second Limb of S. 323 (1)(a) :

The second limb “person or body claiming ANY RIGHT to such title or

interest” may cover those who have signed contracts relating to land and

have an equitable or “in personam” right to have such contract enforced.

This would include a purchaser who has signed the SPA and has paid the

deposit towards the purchase.

However, an intended purchaser at negotiation stage who has not yet

concluded a contract does not have any caveatable interest.

Private Caveat

How to enter a Private Caveat?

a)Fill in the prescribed statutory Form 19B

b) Accompanied by:

i. Prescribed fee; and

ii. Statutory declaration of applicant or solicitor to verify the claim.

c) Upon receipt of Form 19B, Registrar will note on the application the time it

was received.

Private Caveat

d) Registrar will endorse on the Register Document Title (“RDT”) the word

“private caveat” together with a statement specifying 4 things:

i. Whether the caveat binds the land itself or a particular interest.

ii. Name of caveator.

iii. Time it is effective – time the application was received

iv. The reference under which it is filed

e) The Registrar will notify the proprietor in Form 19A or any other person

vested with the interest caveated

Private Caveat

Duration of a Private Caveat?

S. 328(1) provides that a private caveat lapses after 6 years

Once a caveat has lapsed, the caveator will not be able to rely on any claim

to a caveatable interest in the land anymore.

Can a Private Caveat be withdrawn?

Yes, S.325 provides that a Private Caveat can be withdrawn by filling in

From 19G and a prescribed fee.

Private Caveat

Can a Private Caveat be removed?

Yes, this is provided under S. 326 and S. 327.

How can a Private Caveat be removed?

A caveatee can apply to the Registrar for removal of the Private Caveat

under S. 326. Caveat will be removed after 2 months unless the caveator

obtains a court order to extend the duration of the caveat.

“Any other person or body aggrieved by the existence of the private

caveat” may apply to the High Court under S. 327 for an order to remove

the caveat.

The purposes and procedure under S. 326 and S. 327 differs.

Private Caveat

Removal of Private Caveat by Registrar - S. 326 NLC 1965

“Any person whose land or interest is bound by a Private Caveat” may

apply

This would mean:

1) The registered proprietor

2) A registered chargee

3) Registered lessee or sub-lessee

Private Caveat

Procedure under S. 326

Caveatee applies for removal of caveat by presenting Form 19H

accompanied by prescribed fee.

Registrar will serve the caveator with a Notice of Intended Removal in

Form 19C and endorse the RDT that Form 19C has been served.

Under S. 326(IB), the caveat will lapse after 2 months specified in the

notice, unless the caveator obtains a court order to extend the said

caveat.

Private Caveat

Extension of Private Caveat under S. 326

It is the caveator who applies to the court for extension.

He is to satisfy the court that there are sufficient grounds in fact and in law

for continuing the caveat in force.

The court will not usually test the validity of the claim/interest protected by

the caveat but will consider whether or not the caveator had taken any other

court action to determine his claim. (E.g. Claim for specific performance of

the agreement)

Private Caveat

Effect of removal of Private Caveat under S.326

The caveator cannot enter another private caveat on the same grounds.

(S.329(2))

Private Caveat

Removal of Private Caveat by the Court – S. 327

A “person aggrieved” may apply to the court for the Private Caveat to be

removed

This refers not only to the registered proprietor but to any party who is

claiming interest in the land but is unable by virtue of the caveat to register

his interest.

Private Caveat

Meaning of “aggrieved party” in S. 327 not defined in NLC

The word was taken by the court to mean “something wrongful in law

which has been done to a person or body that affects their title to the

property”.

The courts has taken the view that whether a person is aggrieved by the

existence of a caveat will depend on whether he will suffer loss if the

caveat is not removed.

Private Caveat

Two approaches for the Court to decide in S. 327:

Traditional approach in Macon Engineers S/B v Goh Hooi Hin [1976]

(Federal Court decision)

The guidelines set by the Privy Council in Eng Mee Yong & Ors v

Letchumanan [1979]

Private Caveat

Macon Engineers’ Approach

In an application under S. 327, the court is to ask first, “Whether the

caveator has a “caveatable interest”

If no, caveat will be removed.

If yes, caveator must show that his claim is not frivolous or vexatious

Courts have therefore equated “caveatable interest” with “serious question

to be tried”.

Private Caveat

Guidelines in Eng Mee Yong

If the applicant has no registered interest on the land, he must first satisfy

the court that he is a person aggrieved by the existence of the caveat.

If he is not, his application to remove the caveat will be dismissed.

If the applicant manages to prove he is a person aggrieved, then the onus

shifts to the caveator.

The caveator must then satisfy the court that on the evidence presented to

it, his claim to an interest in the land does raise a serious question to be

tried and show that on a balance of convenience, it would be better to

maintain the status quo until the trial of the action.

Private Caveat

“Serious question to be tried”

The claim is neither frivolous nor vexatious

The Caveator must establish a sufficient likelihood of success to justify the

preservation of the status quo pending the trial.

Private Caveat

“Balance of convenience”

The courts weigh one need against another and determine where "the

balance of convenience" lies in allowing or refusing the removal of a

Private Caveat.

Significant factor in assessing where the balance of convenience lies is

the extent to which the disadvantages to each party would be incapable of

being compensated in damages in the event of his succeeding at the trial.

Usually, if the Caveator has met the first requirement of satisfying the

court that the claim on which his caveat is based does raise a serious

question to be tried, the balance of convenience would in the normal way

and in the absence of any special circumstances be in favour of leaving

the caveat in existence until the trial.

Private Caveat

Current approach of the courts?

• The courts in more recent cases favours the approach in Eng Mee Yong.

(See Murugappa Chettiar v Lee Teck Mook and Soon Seng Co. v Toko

Palayakat Jamal (M) S/B)

Private Caveat

Compensation for Wrongful Caveat

S. 329(1) provides that any person or body who, wrongfully or without

reasonable cause, secures the entry of, or fails to withdraw, any private

caveat shall be liable to pay compensation to any person or body who

suffers any damage or loss.

The court will determine whether there is a property value loss (decrease in

the price of the said property) after the land is offered for sale subsequent to

the removal of the caveat.