Research Report For FM Logistics File

Research How do you establish a lien? How do you enforce a claim on lien?
Question 1
Answer A lien under the National Land Code 1965 can be established once 3
requirements are met. Firstly, there must be a deposit of the issue
document of title by the proprietor of the land or the deposit of the duplicate
lease by the lessee of the land under Section 281(1) of the National Land
Code 1965. Secondly, the deposit is made with the sole intention of
securing a loan and thirdly, there must be an entry of a lien holder’s caveat
as provided under Section 330 of the National Land Code 1965. These
requirements are affirmed in the case of Perwira Affin Bank Bhd (formerly
known as Perwira Habib Bank Malaysia Bhd) v Selangor Properties Sdn
Bhd & Ors [2010] 3 MLJ 43 (COA).

To enforce a claim on lien, the lien holder can either apply for an order of
sale pursuant to Section 281(3) National Land Code 1965. The procedure
for an order of sale is similar to those adopted by chargor against chargee
under National Land Code 1965. This is confirmed in the cases of Perwira
Affin Bank Bhd v Selangor Properties [2010] 3 MLJ43 (COA) and
recently in Affin Bank Berhad v Koa Geok Heong [2016] MLJU 1430
(HC).

Research Is notice required?

Question 2
Answer Flowing from the first question, Section 254 and 255 NLC1965 states that a
statutory notice in either Form 16D or 16E must first be served before an
order of sale is applied (See the case of Jacob v Overseas 1974 2 MLJ
161 (FC)) . That said, there is no requirement that the statutory notice
issued must be preceded by a letter of demand (See: Multi Purpose Bank
v Mammon bin Abdul Razak 1999 6 MLJ 215 (HC)).

Sources of research:

● Case law and statute per Lexis Nexis Advance

● Halsbury’s Law of Malaysia Vol 8 pages 623 to 625
● Land Law in Malaysia Cases and Commentary 3rd Edn by Two Keang Mood & Khaw Lake
Tee
● Mallal’s Digest 4th Edn Vol 8 pages 453 to 456.
● Malaysian Rules of Court 2012 An Annotations Vol 1(Blue book)

In depth explanation and elaboration:

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1. What is a lien

A lien is a security transaction recognised by the National Land Code. Although it is not
statutorily defined, the Malaysian courts have accepted the following definition of a lien from
Halsbury’s Law of England. Specifically, it is “a right at common law in one man to retain
rightfully and continuously in his possession belonging to another until the present and accrued
claims of the person in possession is satisfied.”

Case citing the definition of lien from Halsbury’s Law of England:

Perwira Affin Bank Relevant paragraphs:
Bhd (formerly known [12] We say that an intention to create a lien may be gathered from
as Perwira Habib Bank the fact that the issue document of title to the land is deposited with
Malaysia) v Selangor the lender as a security for the loan and for no other purposes. If
Properties Sdn Bhd & authority is required for this simple proposition of the law, the case of
Ors [2010]3 MLJ 43 Paramoo vZeno Ltd [1968] 2 MLJ 230, a decision of the then Federal
Court would suffice. Then there is the case of Zeno Ltd v
(COA) Abdul Malik Prefabricated Construction Co (Malaya) Ltd & Anor [1967] 2 MLJ 104
Ishak JCA at p 105, where Raja Azlan Shah J (as His Majesty then was)
observed that the intention to create a lien may be inferred from all
the relevant circumstances of the case.

[12] Halsbury's Laws of England, Vol 28,(4th Ed, Reissue) at p 352

defines a 'lien' in this way:
In its primary or legal sense 'lien' means a right at common law in
one man to retain that which is rightfully and continuously in his
possession belonging to another until the present and accrued
claims of the person in possession are satisfied.

Page 615 of Land Law Definition of lien in Halsbury’s Law of England is referred to.
in Malaysia Cases and
Commentary 3rd Edn
by Two Keang Mood &
Khaw Lake Tee

2. How to establish a lien

First, there must be a deposit of the issue document of title by the proprietor of the land or the
deposit of the duplicate lease by the lessee of the land pursuant to Section 281 (1) of the
National Land Code to any person or body (also known as “the lien holder”).

Next, this deposit must be made with the intention of securing a loan and not for any other
purposes. While intention to create a lien is necessary, generally, all that is required is the
deposit of the title with an intention to secure a loan (see Perwira Affin Bank Bhd (formerly
known as Perwira Habib Bank Malaysia Bhd) v Selangor Properties Sdn Bhd & Ors [2010]
3 MLJ 43 (COA)

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It is to be noted that the element of intention is not satisfied if the issue document of title is
obtained through fraud or misrepresentation and the deposition of title as security was never
authorised by the registered proprietor (see Nallammal & Anor [1993]3 MLJ 476)

Thirdly, there must be an entry of a lien holder’s caveat as provided under section 330 NLC.

Sections of the National Land Code 1967 referred to:

S281(1)(a),(b) (1) Any proprietor or lessee for the time being may deposit with any other
person or body, as security, his issue document of title or, as the case may
Creation and be, duplicate lease; and that person or body-
effects of lien
(a) may thereupon apply under Chapter 1 of Part Nineteen for the
entry of a lien-holder's caveat; and

(b) shall, upon the entry of such a caveat, become entitled to a lien
over the land or lease.

S330(1) (1) Any person or body with whom the issue document of title to any land,
or any duplicate lease, has been deposited as security may, as provided in
Creaton and section 281, apply to the Registrar under this section for the entry of a lien-
effect of lien holder's caveat in respect of the land or lease in question.
holder’s caveat

Cases stating the above proposition:

Perwira Affin Bank Brief summary of facts:

Bhd (formerly Appellant bank granted 2nd respondent an overdraft facility in which the 2nd
known as Perwira Defendant and the 3rd Defendant deposited the original title deeds of the
Habib Bank land with the appellant who later lodged a lien-holder's caveat on the land.
Malaysia Bhd) v When the 2nd Respondent defaulted in the repayment, the Appellant issued
Selangor a letter of demand and subsequently obtain a judgment in default against the
Properties Sdn 2nd respondent. The appellant brought the present originating summons
Bhd & Ors [2010] seeking, inter alia, an order for the land to be sold by public auction.
3 MLJ 43 (COA)
The High Court dismissed the appellant's application with costs and held
Abdul Malik Ishakthat:
JCA (1) s 281 of the NLC as requiring the registered proprietor, ie the first
respondent, himself to do the act of depositing the document of title
with the appellant bank and not anyone else.
(2) there was no transfer of ownership of the land from the first
respondent to the second and third respondents and
(3) The appellant had delayed in instituting an action for the sale of the
land.

However in this present suit, the COA held that:

1) Intention to deposit can be found from the deposit of the title with the
lender as security for the loan and for no other purposes.

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 2) The appellant’s claim was filed within the time limit stipulate under the
Limitation Act 1953
3) The second and third respondents were the beneficial owners of the
land at the time the land title was deposited with the appellant.

Relevant paragraphs:
[18] A lien is said to be similar to an equitable mortgage where the lien-
holder retains the issue document of title together with the duplicate of the
registered lease or a copy of the issue document of title issued under s
343(3) of the NLC. And in such a situation, the interest secured would be
akin to that of a co-proprietor. The deposit of the issue document of title must
have been made with the intention that the deposited document would serve
as a security for the loan and that the loan must not be a registered charge
but rather an unregistered interest recognised by the NLC. It is at this point of
time that the lien creates what is known as an 'equitable' interest in the land
or lease and that would legally give the lien-holder the right to enter a lien-
holder's caveat which would definitely trigger a statutory interest.

[19] Once a lien-holder's caveat is entered, the lien-holder becomes a

secured creditor. This is a very important factor to be reckoned with in the
subsequent bankruptcy proceedings of the borrower (United Asian Bank Bhd
v Personal Representative of Roshammah (Decd) & Ors [1994] 3 MLJ 327;
[1994] 3 CLJ 681).

[20] It must be borne in mind that the lien-holder who retains possession of
the issue document of title or the duplicate lease or even a copy of the issue
document of title may feel free to enter the lien-holder's caveat at any time
during the currency of the loan without losing priority over subsequent
purchasers of the land or lease — the subject matter of the lien. See
Mercantile Bank Ltd v The Official Assigneee of the Property of How Han
Teh [1969] 2 MLJ 196
NALLAMMAL &
ANOR vBrief summary of facts:
KARUPPANAN &1st plaintiff, the registered proprietor of a piece of land ('the disputed land'),
ANOR [1993] 3loaned the title of the disputed land to the 1st defendant in the belief that he
MLJ 476 required it for some contract works. The 1st defendant later brought a
document for the 1st plaintiff to affix her thumb-print on. The1st defendant
used the title as security for a loan obtained from the second defendant and
the second defendant lodged a lien-holder's caveat over the disputed land.

The 1st plaintiff later brought an action to:

(1) declare documents thumbprint null and void,
(2) entry of the lien-holder's caveat lodged by the 2nd defendant be
removed
(3) the lien-holder's caveat be declared null and void and of no legal
effect; and
(4) that the disputed land be released by the second defendant.

The High Court held in favour of the Plaintff.

The relevant parts of the judgment:

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 “…
The learned writer also gave several instances whereby the element of
deposit of title was deemed to be unconnected with the loan advancement
and was, therefore, not proven, and I need only mention two of such
instances. They were: (i) possession of title obtained by a depositee through
fraud or misrepresentation; and (ii) deposit of title which had not been
authorized by a proprietor or was carried out without the consent of the
proprietor. In the present case, it is clear that the possession of the title to the
disputed land was obtained by the first defendant through fraud or
misrepresentation and, as such, the deposit of title had never been
authorized by the first plaintiff the proprietor of the disputed land.

From my findings as set out above, the only conclusion I can arrive at is that
there is insufficient proof of the alleged Torrens lien or statutory lien
purported to be created by the proprietor of the disputed land, that is the first
plaintiff. On the contrary, the plaintiffs have discharged the burden of proving
that the title of the disputed land was wrongfully taken from the first plaintiff
by the first defendant to create a lien on it. It follows, therefore, that the lien-
holder's caveat was likewise wrongfully lodged on the disputed land. The
orders or declarations requested for by the plaintiffs in prayers (a), (b) and
(d) are allowed. Prayer (e) is for damages for fraud which has been
withdrawn by the plaintiffs. The first and second defendants are directed to
pay the costs of this proceedings to the plaintiffs.”

3. Types of lien

Possession of title gives the lien holder an equitable interest in the land or lease which gives the
holder of the interest the right to enter a lien-holder’s caveat. The lien-holder’s caveat can be
entered into anytime so that failure to caveat timeously will not cause the prior uncaveated lien
to lose priority against later caveated interest.

Once a lien holder’s caveat is entered, the lien holder’s equitable right is converted to a
statutory but non registrable interest in land, lease or undivided share therein. (See S206(2)(b)
National Land Code and Perwira Affin Bank Bhd v Selangor Properties [2010] 3 MLJ43). It
must also be noted that the lien holder’s caveat does not create an interest but merely gives
notice to the world that there is an interest belonging to someone other than the registered
proprietor (See: United Malayan Banking Corporation v Goh Tuan Laye [1969] 2 MLJ 169
FC).

Sections of the National Land Code referred to:

S 206(2)(b)
(1) Subject to the following provisions of this section-

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Need for proper
instrument of (a) every dealing under this Act shall be effected by an instrument
dealing duly complying with the requirements of sections 207 to 212; and
registered
(b) no instrument effecting any such dealing shall operate to
transfer the title to any alienated land or, as the case may be, to
create, transfer or otherwise affect any interest therein, until it has
been registered under Part Eighteen.

(2) The provisions of sub-section (1) shall not apply to-

(a) the creation of, or other dealings affecting, tenancies exempt

from registration (which may be effected, instead, as mentioned in
subsection (2) of section 213); or

(b) the creation of liens (which may be created, instead, as

mentioned in section 281).

(3) Nothing in sub-section (1) shall affect the contractual operation of any
transaction relating to alienated land or any interest therein.

See the cases below:

Perwira Affin Bank - Same as above
Bhd (formerly - Relevant paragraphs: Para 18-20
known as Perwira

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Habib Bank
Malaysia Bhd) v
Selangor
Properties Sdn
Bhd & Ors [2010]
3 MLJ 43 (COA)
(Consolidated Difference between lien in equity and statutory lien under NLC
Credit) Co Sdn
Bhd v Gladys Loh 132 The principles of law/equity that may be culled from the cases that were
& Ors (as the adverted to by counsel may be summarised and restated as follows:
executrix of the
estate of Loh Hoot (a) the NLC does not abrogate rights in equity affecting land;
Yeang, deceased) (b) no statutory lien is acquired under the NLC until the lien holder’s caveat
and another suit is registered but that does not prevent the depositee of the document of
[2014] 10 MLJ 329 title from having some equitable right outside the NLC;
(c) a lien in equity or equitable lien or imperfect lien may be said to exist as
HIGH COURT a right alongside and with priority over any statutory right or interest that
(PULAU PINANG) may be acquired under the NLC or any other equitable right or interest;
S NANTHA (d) the registration of a caveat only gives notice to the world at large of a
BALAN JC claim to title to land or an interest in and over the land but does not of
itself create any interest in land nor does it accord priority;
(e) the rule relating to priority of interests is that in equity, all things being
equal, the first in time prevails; and
(f) priority of any equitable interests may be lost or forfeited due to any act
or omission or indolence of the claimant of the prior equitable interest
which might have had the effect of inducing a claimant later in time to
act to his prejudice.
133 Next, having regard to the factual matrix as discussed above and the
principles of law that are to be gathered from the cases alluded to by counsel
and summarised above, and proceeding on the assumption that the title to
the property was in fact deposited with (‘Consolidated Credit’) in or around
March 1998, I am of the view that notwithstanding their failure to enter a lien
holder`s caveat timeously, they would have acquired a lien in equity or
interest in the property which has priority over any other interest legal or
equitable that may arise subsequently thereafter.
United MalayanBrief summary of the case:
Banking Title of land deposited to secure overdraft facilities and caveat could not be
Corporation v Gohentered as it was prohibited under the Kelantan Land Settlement Ordinance,
Tuan Laye [1969]1955. The appellants obtained judgment in default against the firm and
2 MLJ 169 FC,subsequently obtained a writ of seizure and sale and prohibitory orders
Suffian LP relating to the lands. The respondents intervened and applied to set aside
the prohibitory orders.

Trial judge held that: On the date of those orders the respondents had paid
the full purchase price for the lands, that the owners were then only trustees
of the land on behalf of the respondents. The owners had no beneficial
interest in the lands and they had therefore nothing to be seized by their
creditors, the appellants.

The appellants appealed to the Federal Court. FC held that:

1) the respondent became equitable owners of the lands which was

7
 later in time than when the title were deposited with the appellants,
2) there were two parties with equitable interests, all interests being
unregistered and unprotected by caveats;
in these circumstances, the appellants were entitled to priority, other
things being equal;
3) the appellants had not been guilty of any act or omission which had
or might have the effect of inducing the respondents to act to their
prejudice and therefore they should have priority over the
respondent's equitable interest.

Relevant paragraph:
“ Here on the other hand the bank had not bought the lands. They only had
the documents of title deposited with them to secure repayment of an
overdraft. Also, they had not caveated the lands to protect their interest; but
that is not their fault because they were prohibited by law ( section 3(2) of the
Kelantan Land Settlement Ordinance, 1955) from doing so. Nevertheless the
law is quite clear: possession of the titles gives them an equitable interest in
the lands, which is not affected by the absence of a caveat, as a caveat in
itself does not create an interest but merely gives notice to the world of the
presence of an interest belonging to some one other than the registered
proprietor….[1976] 1 MLJ 169 at 171”

4. How to enforce a claim on lien

When the proprietor or lessee fails to repay the loan, the lien holder is entitled to seek the sale
of the subject property under Section 281(3) National Land Code 1965 which provides that the
application for sale is to be undertaken under the same principles which govern sale of registry
land subject to a charge. This is confirmed in the cases of Perwira Affin Bank Bhd v Selangor
Properties [2010] 3 MLJ43 (COA) and recently in Affin Bank Berhad v Koa Geok Heong
[2016] MLJU 1430 (HC). The procedure for an order of sale is pursuant to Order 47 r6 & of
ROC 2012.

Before applying for an order for sale, the lien holder just like the chargor must serve a notice on
the chargor. Under Section 254 and 255 NLC 1965, the notice is a statutory notice in either form
16D or Form 16E. The former form is used for breaches that had continued for a month while
the latter form is used to recover principal sum as well as interest due and payable provided
principal sum payable on demand (See the case of Jacob v Overseas 1974 2 MLJ 161 (FC))
or in a letter followed by statutory notice although there is no requirement that the statutory
notice must be preceded by a letter of demand - Multi Purpose Bank v Mammon bin Abdul
Razak 1999 6 MLJ 215 .

Statutes referred to:

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Section 281(3) (3) Any such application shall be made in accordance with any law for the
NLC time being in force relating to civil procedure; and the provisions of
sections 257 to 259 and section 266 to 269 shall apply, mutatis mutandis,
Creation and where any such application has been made as they apply where a chargee
effect of lien applies for an order under section 256.

Section 254 NLC (1) Where, in the case of any charge, any such breach of agreement as is
mentioned in sub-section (1) of section 253 has been continued for a
Service of default period of at least one month or such alternative period as may be specified
notice and effect in the charge which shall not be less than one month, the chargee may
thereof serve on the chargor a notice in Form 16D-
(a) specifying the breach in question;
(b) requiring it to be remedied within one month of the date on which the
notice is served, or such alternative period as may be specified in the
charge which shall not be less than one month; and
(c) warning the chargor that, if the notice is not complied with, he will take
proceedings to obtain an order for sale.

(2) Where, after the service of any such notice, the charged land or lease
becomes vested in any other person or body, the notice shall be as valid
and effectual against that person or body as it was against the person or
body on whom it was served.

(3) If at the expiry of the period specified in any such notice the breach in
question has not been remedied-
(a) the whole sum secured by the charge shall (if it has not already done
so) become due and payable to the chargee; and
(b) the chargee may apply for an order for sale in accordance with the
following provisions of this Chapter:
Provided that paragraph (a) shall not apply to any charge to secure the
payment of an annuity or other periodic sum.
Section 255 NLC (1) Where the principal sum secured by any charge is payable by the
chargor on demand, the chargee may make the demand by a notice is
Special provision Form 16E, and in that event, if the sum in question is not paid to him within
with respect to one month of the date on which the notice is served, may apply forthwith
sum payable on for an order for sale without being required to serve a notice in Form 16D
demand under sub-section (1) of section 254.

(2) The provisions of sub-section (2) of section 254 shall apply to notices in
Form 16E as they apply to notices in Form 16D.
Order
47r6ROC2012 This provision concerns immovable properties seized.

Order 47 r7 This order governs the sale of immovable property

Rules of Court
2012

See the cases below:

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Perwira Affin Bank - Same as above points
Bhd (formerly known
as Perwira Habib - Relevant paragraphs:
Bank Malaysia Bhd)
v Selangor Properties[21] According to s 343 of the NLC, a lien can be created over an
Sdn Bhd & Orsalienated land or even over a registered lease or even in an undivided
[2010] 3 MLJ 43share in an alienated land. And the best remedy available to the lien-
(COA) holder would be, firstly, to obtain a judgment debt under O 42 of the Rules
of the High Court 1980 for the amount due and, secondly, to apply to the
court for an order for sale of the land or the registered lease pursuant to
the provisions of ss 257–259 of the NLC.
Affin Bank Berhad vBrief Summary of Case
Koa Geok HeongForeclosure action initiated by the Plaintiff-bank against its loan defaulter
[2016] MLJU 1430 (Defendant-debtor). Basically, the Plaintiff-bank here is seeking for an
order for sale of a property owned by the Defendant-debtor of which a lien
(HC) AZIMAH BINTIholder’s caveat was registered in its favour as security for a loan facility
OMAR JC granted to the Defendant-debtor.

The entire defence raised by the Defendant-debtor to deny the Plaintiff’s

right to enforce its security by applying for an order for sale of the property
was premised on the validity of the Notice of Demand which was
grounded on erroneous misstatement of trite principles of law.

The High Court judge held that

(1) the debtor’s contentions are misled and that the present
enforcement of lien is not barred by res judicata
(2) Lien holders have the same remedies as chargees under the
National Land Code
(3) The notice of demand is valid to institute enforcement of lien as
the Defendants did not oppose the Notice sent

Relevant paragraphs:
[15] First and foremost, this Court has the utmost duty to correct and
clarify another mystifying misstatement of the law brought forth by the
Defendant regarding the position of a lien-holder and a lien-holder’s rights
to enforce the lien under the same provisions of the Land Code regarding
charges. It is trite that the position of a lien-holder is akin to the position of
a chargee and an action for enforcement of lien would rely on the same
provisions of an enforcement of charge.

...

[17] This Court cannot emphasise enough how preposterous this

supposition is. As much as the learned counsel of the Defendant ought to
seek the best interest of its client, a blatant misstatement of the law is
inexcusable. As it correctly stands, the entire provision of the Order for
Sale in the National Land Code is encapsulated in “Chapter 3” aptly
bearing the heading which reads “REMEDIES OF CHARGEES: SALE”.
Every single provision from Sections 253 to 259 refers to charges.
Nonetheless, it is already trite law that lien-holder’s remedies also fall

10
 within Chapter 3 of the National Land Code, and a lien-holder may apply
for an order for sale, the same manner a chargee may under the same
provisions of the National Land Code. This Court is guided by the
landmark decision of the Court of Appeal in the case of Perwira Affin Bank
Bhd (formerly known as Perwira Habib Bank Malaysia Bhd) v Selangor
Properties Sdn Bhd & Ors [2010] 3 MLJ 43 which had held that:

“[18] A lien is said to be similar to an equitable mortgage where the

lien-holder retains the issue document of title together with the duplicate
of the registered lease or a copy of the issue document of title issued
under s 343(3) of the NLC. And in such a situation, the interest secured
would be akin to that of a co-proprietor. The deposit of the issue
document of title must have been made with the intention that the
deposited document would serve as a security for the loan and that the
loan must not be a registered charge but rather an unregistered interest
recognised by the NLC. It is at this point of time that the lien creates
what is known as an ‘equitable’ interest in the land or lease and that
would legally give the lien-holder the right to enter a lien-holder’s
caveat which would definitely trigger a statutory interest. ….

[21] According to s 343 of the NLC, a lien can be created over an

alienated land or even over a registered lease or even in an undivided
share in an alienated land. And the best remedy available to the lien-
holder would be, firstly, to obtain a judgment debt under O 42 of the Rules
of the High Court 1980 for the amount due and, secondly, to apply to the
court for an order for sale of the land or the registered lease pursuant to
the provisions of ss 257–259 of the NLC.”
JACOB v OVERSEA-Brief summary of the case :
CHINESE BANKINGAppellant had charged his land to the respondent bank to secure the
CORPORATION, repayment of an overdraft. On default of payment the respondent bank
IPOH [1974] 2 MLJmade a demand for payment by letter and subsequently served on the
161 appellant a notice of default in the form of 16D prescribed by the National
Land Code. The bank applied for an order that the land be sold by public
(FC) Suffian LP auction and the application was allowed in the High Court. The appellant
appealed and one of the grounds of appeal was that the notice should
have been given in the form 16E.

On the issue of the statutory notice of demand and the deviation of the
type of statutory notice used, The Federal Court held that the object of the
legislature was to see that sufficient notice was given to the chargor
before the chargee applied for an order of sale and here the chargee had
given the chargor sufficient notice before coming to the court. Also, the
Federal Court held that where there was a demand for payment of
principal and interest, Form 16E could be used as well as Form 16D and
the demand may be made by either form;

Relevant paragraphs of judgment:

“ ..From the context, the word in italic must in my judgment mean the
entire overdraft. Subsection (1) of section 255 does not say that the
chargee shall make the demand by a notice in Form 16E, so that it is
open to it to make the demand in any other way, though I agree with

11
 counsel that the chargee cannot, for instance, do so by simply telephoning
the chargor. If the chargee here had simply made its demand by the letter
of 2nd December, 1971, the demand might in my view have been
defective, but here it followed it up by serving on the chargor a notice in
Form 16D, which clearly set out its complaint and fairly warned the
chargor that, if he failed to pay the money due, the chargee would apply
for an order of sale. The language of subsection (1) of section 255 would
seem to indicate that if the chargee had made its demand by using Form
16E it need not have followed it up by also serving notice by Form 16D,
but that if it did not first use Form 16E it would be all right if it used only
Form 16D. The object of the legislation is to see that sufficient notice is
given to the chargor before the chargee applies for an order of sale, and
in my judgment here the chargee has given the chargor sufficient notice
before coming to court.
...
It seems to me that much of the argument as to whether Form 16D or
Form 16E should be used would have been avoided if it is remembered
that section 62 of the Interpretation Act No. 23 of 1967 provides:
"Any written law prescribing a form shall be deemed to provide that an
instrument or other document purporting to be in that form shall not be
invalidated by reason of any deviation from the form if the deviation has
no substantial effect and is not intended to mislead."
Multi Purpose Bank vBrief summary of facts:
Mammon bin AbdulDefendant create 2 3rd party charges over the defendants over her
Razak 1999 6 MLJproperty in favour of the plaintiff bank. Upon default, the plaintiff took out a
215 (HC) Jamesforeclosure action against the defendant. Defendant resisted the
Foong J application based on the following arguments:
(i) the plaintiff has not forwarded to the defendant a letter of demand
which should precede the service of Form 16D of National Land Code
1965 ('the NLC');
(ii) the plaintiff had misrepresented to the defendant to execute the
second charge;
(iii) since the plaintiff had without consent from the defendant adopted a
new method of computing interest, the outstanding sum due under the
charge and consequently stated in Form 16D have been incorrectly
stated; thus, the statutory notice becomes ineffective and invalid.

With regards to the first issue, the High Court held that there is no
provision in the NLC which insists on a prior written notice of demand
separate from that of Form 16D before the issuance of the statutory
notice.

Relevant paragraphs of the judgment:

“..The first point raised is that the plaintiff has not forwarded to the
defendant a letter of demand which, according to En Haris, should
precede the service of Form 16D of National Land Code ('the NLC') on the
defendant. To support this, he cited a passage from the Federal Court
judgment of Gopal Sri Ram JCA in Low Lee Lian v Ban Hin Lee Bank Bhd
[1997] 1 MLJ 77 where at page 83 it states:

… failure on the part of the chargee to prove the making of a demand or

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service upon the chargee of a notice in Form 16D would constitute a
cause to the contrary.' (Emphasis added.)

I see no merits in this contention. There is no provision in the NLC which

insists on a prior written notice of demand separate from that of Form 16D
before the issuance of this statutory notice. And even reading the above
phrase of the Federal Court, I cannot find any indication of such a
prerequisite. The conjunctive word 'or' is used between 'the making of a
demand' and 'service upon the charger of a notice in Form 16D.' Thus,
when the latter is carried out, it is sufficient by law to fulfill the making of a
demand on the chargor before commencement of foreclosure action. In
this case, Form 16D was used and was duly served on the defendant
thereby amply satisfying the requirement under s 254(1) NLC.”

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