Legal Update 5 of 2017

Which of the two purchasers has a better claim to a property where they had both purchased the same property from a developer.

CASE:

Chan Kwai Foong v Dato' Capt Mohd Najib bin Abdullah [2017] 1 AMR 617 CA


BRIEF FACTS:

  • This appeal concerns the sale of a property by the developer/owner to two different purchasers some 19 years apart.

  • In 1989, the plaintiff purchased a studio apartment at Menara Seputeh (the "property") from the developer Natarjaya Sdn Bhd ("Natarjaya") for a sum of RM57,540.00.

  • Natarjaya is the 1st defendant. The 2nd and 3rd defendants are directors of Natarjaya.

  • To finance this purchase, the plaintiff took a loan from BBMB Kewangan Berhad. 

  • The full purchase price was paid to Natarjaya.

  • The plaintiff had for many years resided in South Korea. He returned in 2012.

  • When the plaintiff returned in March 2012, he went to clean the said property. Upon arrival at the property, he discovered that the padlock and the wooden door had been changed without his knowledge. He then lodged a police report. 

  • Upon a search of the strata roll, the plaintiff discovered that there had been an entry by a person named Chan Kwai Foong (4th defendant/"Chan") as the registered owner of the said property. 

  • The plaintiff was shocked as he had never consented to have the property transferred to anyone. 

  • He then lodged another police report. He also informed the Land Office and lodged a caveat on the property in 2012.

  • It also turned out that Chan had executed a Sale and Purchase Agreement with Natarjaya on 8 September 2008 and Chand had paid the full purchase price of RM45,000.00 to Natarjaya.

  • It also transpired that Chan was in the process of selling the property to the 5th defendant for a sum of RM95,000.00.

  • A sum of RM45,000.00 had been paid and the balance was to be paid upon the removal of the plaintiff's caveat. 

  • Hence, the present appeal by Chan.  


DECISION: APPEAL DISMISSED

  • The main issue before us was whether the judge had erred when he required Chan to prove that she was a bona fide [innocent] purchaser for valuable consideration pursuant to section 340(3) of the National Land Code (NLC). Essentially, meaning she was unaware of the 1st Sale and Purchase transaction.

  • The judge held that there was no independent evidence or objective facts in the case that could support the allegation of fraud except perhaps the fact that the purchase price was only RM45,000.00 when the initial purchase price paid by the plaintiff some 20 years ago was RM57,540.00.

  • Chan had the purported to sell the said property to the 5th defendant for a sum of RM95,000.00

  • The burden of proving that she was bona fide [innocent] was on Chan who curiously did not testify in court but had given a power of attorney through which documentary evidence was tendered. 

  • The first was a document from Natarjaya dated 10 September 2008 where Natarjaya confirmed that it was the registered owner of the property in question.

  • The second was a copy of the strate title showing Natarjaya as the registered proprietor. 

  • The Court held that as the said property was being offered for sale at a suspiciously low price, there was a duty on the part of Chan to make the necessary enquiries and to investigate all matters relating to the sale.

  • Thus, it would be fair to surmise that the failure of Chan to testify would not only discredit her case but strengthen the plaintiff's case.

  • Natarjaya and its directors failed to turn up in court; hence the judge was then entitled to rule that the finding of fraud was taken to have been proved against the 1st, 2nd and 3rd defendants. 

  • With this finding, it further confirms the legal position that Chan could not have obtained good title from Natarjaya. Meanign the transfer from Natarjaya to Chan was tainted. 

  • Once the plaintiff had paid the purchase price, he became the beneficial owner of the property with the vendor [Natarjaya] holdin the legal title to the property as a bare trustee for the plaintiff. 

  • Accordingly, Natarjaya had no legal capacity to enter into any agreement with Chan. 

  • Chan's registration as legal owner on the Strata Title was therefore defeated. 

 

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