BRIEF FACTS:

• One Mohd Sobri Chew bin Abdullah (“Sobri”) entered into a sale and purchase agreement dated 21-2-2012 with Syarikat Perumahan Negara Berhad (“SPNB”) being named as the proprietor and UDI Property Sdn Bhd being the developer (“the Developer”) with regard to a single storey terrace house at Seberang Perai Selatan (“the Property”).
  
  
• Having paid the full purchase price of the property on 23-2-2012, the Developer delivered vacant possession of the Property to Sobri.
  
  
• However, at that time Sobri is yet to be vested with the legal title of the Property.
  
  
• SPNB in their agreement with the Developer granted them a Power of Attorney to act and sign all documents on their behalf.
  
  
• Sobri later conducted a land search over the Property and discovered that SPNB, through the Developer, had created a charge on 28-8-2017 (“the Charge”) over the Property in favour of Champion Score Sdn Bhd, a licensed moneylender (“the Moneylender”).
  
  
• The Developer had used the PA to create the Charge as security for a loan granted by the Moneylender to the Developer.
  
  
• The Moneylender had done a search of the title and found that the title was clean.
  
  
• Aggrieved by the discovery, Sobri filed an action in Court to cancel the Charge.

DECISION BY THE HIGH COURT (HC)

• The HC held that the Developer is a bare trustee and cannot create a valid charge after receiving the full purchase price from Sobri.
  
  
• Therefore, the charge created was null and void and should be set aside.
  
  
• The HC held that once the purchase price is fully paid, Sobri assumes the position of beneficial owner with proprietary rights over the property, and stands in the same position as the legal owner in terms of enforcing ownership rights over it.
  
  
• The HC further held that the creation of the Charge is a breach of trust on the part of SPNB and the Developer as SPNB was holding the Property as a bare trustee for Sobri following the payment of the full purchase price.
  
  
• The HC also held that SPNB is equally liable to the Respondent Purchaser because it is a party to the SPA.
  
  
• The HC rejected the Moneylender’s argument that they are a bona fide purchaser for value without notice under the proviso to Section 340(3) of the NLC.
  
  
• The HC held that the Moneylender, as an immediate interest holder, is not entitled to protection under this proviso.
  
  
• The HC cancelled the charge. Further, the HC also ordered the transfer of the title to Sobri.
  
  
• Aggrieved by the High Court’s decision, the Moneylender appealed to the Court of Appeal. SPNB did not file an appeal, and the Developer did not defend the suit, as it had gone into liquidation.

DECISION BY THE COURT OF APPEAL (COA)

• The COA was satisfied that the full purchase price had been paid and that the charge was created only after the full payment.
  
  
• The COA upheld the HC’s findings and held that SPNB and the Developer are bare trustees, and that the charge was invalid and rightly set aside by the High Court.
  
  
• With regard to the competing rights between the Moneylender and Sobri, the COA held that it may invoke public policy to safeguard the interest of the purchaser who often would have no resources to protect himself but to trust the good office of the Developer, especially when supported by a government agency like SPNB as the proprietor of the development.