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Phileoallied BANK (M) BHD v Bupinder Singh A L Avatar S
Land Law I (LIA2005)
Universiti Malaya
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- PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR, [1999] 3 MLJ 157 Client/Matter: -None- Search Terms: PhileoAllied Bank (M) Bhd v Bupinder Singh a/l Avatar Singh & Anor [1999] 3 MLJ 157 ( Search Type: Natural Language Narrowed by: Content Type Narrowed by MY Cases -None-
PHILEO ALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH
& ANOR
CaseAnalysis | [1999] 3 MLJ 157 | [1999] 2 CLJ 1023
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH &
ANOR [1999] 3 MLJ 157
Malayan Law Journal Reports · 31 pages
COURT OF APPEAL (KUALA LUMPUR)
GOPAL SRI RAM JCA, SITI NORMA YAAKOB JCA AND DENIS ONG JCA
CIVIL APPEAL NO W–02–736 OF 1998
7 June 1999
Case Summary
Land Law — Sale of land — No issue document of title or registered charge — Land assigned to lender as security for loan — Whether lender may, without obtaining an order of sale, realize his security — Whether assignee must obtain order for sale to recover monies due — Whether assignee an equitable chargee only if assignment was not absolute — Whether transaction amount to an equitable charge or mortgage — Whether assignee may contract out of O 83 of the Rules of the High Court 1980 and be allowed to exercise its contractual power of sale — Rules of the High Court 1980 O 31 r 1(1) & O 83
Land Law — Charge — Equitable charge — No issue document of title or registered charge — Absolute assignment by borrower of rights over immovable property — No deposit of title deed given as security for loan — Whether amount to mortgage at common law
The respondents entered into a sale and purchase agreement with the developer to purchase a shop lot in soon to be errected multi-storeyed building ('the subject property'). The subject property however was without a separate strata title. The respondents' purchase was funded by a loan from the appellant bank. A loan agreement cum assignment ('the assignment') was executed by the parties. Subsequently, the respondents defaulted in making repayment of the loan as provided under the assignment. The appellant took steps to sell the subject property by public auction, but without having first obtained an order of court in that behalf. In resorting to the remedy of self- help, the appellant relied on the powers of attorney (entered into earlier by the parties) and the assignment respondents, dissatisfied, took out an originating summons seeking, inter alia, a declaration that the exercise by the appellant of its right to sell the subject property by public auction is invalid and/or unlawful. At the High Court, the learned judge granted the declaration (see [1999] 1 MLJ 89). Having held the assignment to be absolute, the learned judge went on to hold that it was therefore incumbent for the appellant to apply for and obtain an order for sale pursuant to O 31 r 1(1) of the Rules of the High Court 1980 ('the RHC'). He further held that even if he were to hold the assignment not to be absolute, it created an equitable charge which was only enforceable by resort to the procedure laid down in O 83 of the RHC. The appellant appealed.
The main issue was whether a lender may, without obtaining an order of sale from the court, realize his security consisting of immovable property in respect of which there is no issue document of title and no registered charge. It was argued that the learned judge erred in concluding that: (1) an assignee who is similarly circumstanced as the appellant must obtain an order for sale from the court for the purpose of recovering monies due to it from a borrower; [*158] and (ii) the appellant was a equitable chargee only in the event that the assignment was not absolute. It was also submitted that a transaction such as this does not amount to an equitable charge or mortgage as there was no deposit of title deed given as security for the loan. Another issue was whether the fact that the assignment is an
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR
penyerahhakan tersebut adalah tidak mutlak, ia mewujudkan suatu gadaian ekuiti yang mana hanya boleh dikuatkuasakan dengan mengambil jalan keluar kepada prosedur yang diperuntukkan dalam A 83 KMT. Perayu merayu.
Isu utama adalah sama ada seorang pemberi pinjaman boleh, tanpa memperolehi suatu perintah jualan daripada mahkamah, merealisasikan cagaran yang terdiri daripada harta tak alih di mana [*160] tidak terdapatnya pengeluaran dokumen hakmilik dan tiada gadaian berdaftar. Adalah dihujahkan bahawa hakim yang bijaksana telah silap dalam membuat kesimpulan bahawa: (i) seorang pemegang serahhak yang dalam keadaan serupa seperti perayu mestilah memperolehi perintah jualan daripada mahkamah untuk tujuan mendapat kembali wang yang harus dibayar kepadanya daripada seorang peminjam; dan (ii) perayu adalah pemegang gadaian ekuiti hanya di dalam keadaan penyerahhakan tersebut adalah tidak mutlak. Adalah juga dihujahkan bahawa suatu urus niaga seperti ini tidak sama seperti gadaian atau gadai-janji ekuiti memandangkan tiada terdapatnya deposit suratikatan hakmilik yang diberikan sebagai cagaran untuk pinjaman tersebut. Suatu isu lagi adalah sama ada fakta bahawa penyerahhakan tersebut adalah gadai-janji ekuiti menghalang perayu daripada melaksanakan kuasa jualan kontrak.
Diputuskan , menolak rayuan:
(1) Adalah bukan mandatori untuk seorang pemberi pinjaman yang memperolehi cagaran suatu pinjaman melalui cara-cara suratikatan penyerahhakan ke atas harta tak alih — iaitu tanpa pengeluaran dokumen hakmilik — untuk mendorong mahkamah di bawah A 31 k 1(1) KMT dan memperolehi suatu perintah jualan untuk tujuan menguatkuasakan cagaran beliau (lihat ms 170F–G). (2) Mahkamah tidak bersetuju dengan hujahan peguamcara bahawa perayu adalah dalam keadaaan seperti dengan pemegang gadai-janji di bawah common law. Dalam gadai-janji common law, hakmilik undang- undang kepada harta tak alih adalah dipindahmilik secara mutlak oleh penggadai-janji kepada pemegang gadai-janji, penggadai-janji mempunyai suatu ekuiti untuk menebus hakmilik setelah membuat pembayaran pinjaman tersebut. Di dalam keadaan kini, cuma terdapatnya penyerahhakan muktamad kesemua manfaat-manfaat yang mana responden-responden telah di bawah perjanjian dengan pemaju. Apa yang dimiliki oleh responden-responden adalah hak di bawah kontrak untuk mendapat suatu penyerahhakan semula hak kepada mereka sendiri apabila mereka telah melangsaikan pinjaman tersebut. Ini adalah jauh berbeza daripada mengatakan bahawa mereka mempunyai penebusan ekuiti (lihat ms 171A–C). (3) Suatu penyerahhakan muktamad oleh peminjam akan kesemua hak-haknya ke atas harta tak alih yang tidak mempunyai pengeluaran dokumen hakmilik kepada pemberi pinjaman sebagai cagaran untuk suatu pinjaman adalah suatu gadai-janji ekuiti (lihat ms 182B–C); Chuah Eng Khong v Malayan Banking Bhd [1998] 3 MLJ 97 dan Malayan Banking v Zahari bin Ahmad [1988] 2 MLJ 135 diikut. Dengan demikian, penyerahhakan tersebut, yang merupakan suatu penyerahhakan muktamad akan hak-hak responden- responden ke atas harta subjek tersebut kepada perayu, adalah suatu gadai-janji ekuiti (juga dikenali [*161] sebagai gadaian ekuiti di dalam konteks jurisprudens kita). Maka mahkamah mesti menolak penegasan perayu bahawa penyerahhakan tersebut tidak terjumlah kepada suatu gadaian ekuiti (lihat ms 182D–E). (4) Tidak terdapatnya halangan untuk memberi kesan kepada suatu perjanjian untuk mewujudkan suatu gadai-janji di sisi undang-undang sebagai mewujudkan suatu gadai-janji ekuiti pada masa kini, jika ciri-ciri lain tersebut yang dicari oleh ekuiti, seperti tindakan-tindakan pelaksanaan sebahagian, wujud. Fasal 26 penyerahhakan tersebut — yang mengandungi suatu perjanjian oleh responden-responden untuk menyempurnakan dan menghantarserah kepada perayu suatu gadaian di bawah Kanun Tanah Negara 1965 sebaik sahaja hakmilik strata berkenaan dengan harta subjek tersebut telah dikeluarkan — adalah suatu janji de futuro oleh responden-responden untuk mewujudkan suatu gadaian di sisi undang-undang yang memihak kepada perayu ke atas harta subjek tersebut. Pinjaman tersebut yang dibuat oleh perayu, maka, sama seperti pelaksanaan sebahagian janji salingannya. Maka demikian, mahkamah boleh menganggap perjanjian tersebut di dalam fasal 26 penyerahhakan tersebut sebagai gadaian ekuiti, yang mana di dalam kes ini, adalah sinonim dengan gadai-janji ekuiti (lihat ms 183G–H, 184C–D). (5) Sebaik sahaja diputuskan bahawa penyerahhakan tersebut merupakan suatu gadaian ekuiti, perayu mesti mengambil jalan keluar dengan merujuk kepada A 83 KMT kerana: (a) seorang penggadai ekuiti tidak boleh berkontrak di luar peruntukan- peruntukan A 83, kerana ini akan bertentangan dengan polisi awam untuk membenarkan responden-responden sebagai ahli- ahli kelas yang mana manfaat wujud daripada sama ada mengenepikan atau berkontrak di luar peruntukan- peruntukannya; dan (b) fasal 23 yang
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR
menguntukkan kuasa di perayu untuk melaksanakan suatu jualan melalui lelong awam tanpa rujukan kepada mahkamah sama seperti berkontrak di luar dan maka demikian adalah batal dan tidak sah dan tidak mempunyai kesan (lihat ms 186D–E, 187B).]
Notes
For cases on equitable charge, see 8 Mallal's Digest (4th Ed, 1996 Reissue) paras 1426–1428.
For cases on sale of land generally, see 8 Mallal's Digest (4th Ed, 1996 Reissue) paras 2435–2819.
Cases referred to
Arab-Malaysian Credit Bhd v Tan Seang Meng [1995] 1 MLJ 525
[*162]
Chuah Eng Khong v Malayan Banking Bhd [1998] 3 MLJ 97
Chung Khiaw Bank Ltd v Hipparion (M) Sdn Bhd [1988] 2 MLJ 62
Haji Abdul Rahman v Mahomed Hassan [1917] AC 209
Hipparion (M) Sdn Bhd v Chung Khiaw Bank Ltd [1989] 2 MLJ 149
Kimlin Housing Development Sdn Bhd (Appointed receiver and manager) (In liquidation) v Bank Bumiputra (M) Bhd & Ors [1997] 2 MLJ 805
Lee Lee Cheng v Seow Peng Kwang [1960] MLJ 1
Lian Keow Sdn Bhd (In Liquidation) & Anor v Overseas Credit Finance (M) Sdn Bhd & Ors [1988] 2 MLJ 449
Luggage Distributors (M) Sdn Bhd v Tan Hor Teng & Anor [1995] 1 MLJ 719
Mahadevan & Anor v Manilal & Sons (M) Sdn Bhd [1984] 1 MLJ 266
Malayan Banking Bhd v Zahari bin Ahmad [1988] 2 MLJ 135
Malayan United Finance Bhd v Tan Lay Soon [1991] 1 MLJ 504
Nouvau Mont Dor (M) Sdn Bhd v Faber Development Sdn Bhd [1984] 2 MLJ 268
Pacific Centre Sdn Bhd v United Engineers (M) Bhd [1984] 2 MLJ 14
Raju Jayaraman Kerpaya v Chung Khiaw Bank Ltd [1997] 2 MLJ 590
Tennant v Trenchard (1869) 4 Ch App 537
Wan Salimah bte Wan Jaffar v Mahmood bin Omar (Anim bte Abdul Aziz, Intervener) [1998] 5 MLJ 162
Wicks v Wicks [1998] 1 All ER 977
Legislation referred to
Civil Law Act 1956 ss 3(1) , 4(3)
Indian Civil Procedure Code s 151
National Land Code 1965 s 257
Rules of the High Court 1980 O 31 r 1(1), O 83 rr 1(1), (2), 3 (1), (2), (3), O 92 r 4
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR
undertakes to continue to observe perform and be bound by all whatsoever conditions covenants and stipulations therein on the part of the borrower expressed and contained in the sale agreement. [*164]
23 The bank may at any time after an event of default or in making demand be entitled to exercise all or any of the rights and powers following:
23 the right and power to sell and assign the said property as the absolute unencumbered owner thereof at such price or prices and in such manner as the bank shall in its absolute discretion think fit free from any interest of the borrower hereunder or otherwise and to apply the proceeds of sale in or towards the satisfaction of the amount hereby secured and all the principal and interest and other monies due to the bank hereunder, the payment to the relevant authorities of all quit rent, assessment, drainage, rates and other outgoings payable in respect of the said property, the payment to the developer or the management corporation constituted under the Strata Titles Act 1985/the Land Ordinance (Sabah Cap 68) and the Land (Subsidiary Title) Enactment 1972 (Sabah)/the Land Code of Sarawak and the Strata Titles Ordinance 1972 (Sarawak), as the case may be, of all service charges and maintenance fees payable in respect of the said property and all costs expenses dues and fees including the bank's solicitor's costs on a solicitor and client basis and fees of the valuer real estate agent, if any, and the residue, if any, only shall be payable to the borrower and no assignee or purchaser from the bank shall be concerned to ascertain whether or not any such default has actually arisen so as to entitle the bank to exercise its powers of sale or assignment.
26 Upon the issue of a separate issue document of title/strata title, as the case may be, to the said property, the borrower shall at its own cost and expense and upon being so required to do by notice in writing from the bank take a transfer of the said property from the bank if the same shall have been transferred to the bank as assignee under the sale agreement or if the bank so deems fit at its absolute discretion directly from the developer, as the case may be, and shall execute and deliver to the bank a charge under the National Land Code 1965 or the Land Ordinance (Sabah Cap 68) or the Land Code of Sarawak as the case may be, in such form and containing such terms and conditions as may be prescribed by the bank over the said property in favour of the bank to secure the repayment to the bank of the banking facilities and all other monies together with interest thereon at the relevant prescribed rate payable and owing by the borrower by virtue of this assignment at the date of the execution of the said charge and notwithstanding the completion and perfection of the said charge this assignment shall as regards any antecedent default by the borrower remain in full force and effect.
The effect that is to be given to these clauses is a matter that must be dealt with later. For the moment, I return to what remains of the narrative.
By late 1997, the respondents had made default in making repayment of the principal and interest that the appellant was entitled to have under the assignment. After making unsuccessful demands for payment, the appellant took steps to sell the subject property by public auction, but without having first obtained an order of court in that behalf. In resorting to the remedy of self-help, the appellant relied on the powers of attorney and cl 8 read with cl 23 of the assignment. The respondents took exception to this. [*165]
On 8 April 1998, they took out an originating summons seeking a number of reliefs, including a declaration that the exercise by the appellant of its right to sell the subject property by public auction is invalid and/or unlawful. An injunction restraining the appellant from proceeding with the sale was also sought.
The learned judge who heard the summons, after considering the written submissions that had been put in, granted the declaration and the injunction I mentioned a moment ago (see [1999] 1 MLJ 89). He also directed an assessment of damages and awarded the respondents the costs of the action. The appellant then appealed to this court against the orders made by the judge.
The judgment under appeal
In holding for the respondents, the learned judge proceeded upon three main grounds. First , it appears that he held that the power of attorney given by each respondent was invalid. I say 'appears' advisedly because the learned judge did not make a specific finding that the powers of attorney were invalid. What he did say was that he doubted their validity because the certificate of authentication in respect of each preceded the date of its grant by several months. However, when read in its proper context, what he obviously meant was that it was not open to the
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR
appellant to rely upon the powers of attorney to sell the subject property by public auction. Although the appellant, in its memorandum of appeal, formulated a ground of complaint against this finding of the learned judge, the point was not pursued before us by Mr Porres Royan of counsel for the appellant is why I said earlier in this judgment that these powers of attorney were of no significance to the present appeal.
Second , the learned judge, having held the assignment to be absolute, went on to hold that it was therefore incumbent for the appellant to apply for and obtain an order for sale pursuant to O 31 r 1(1) of the Rules of the High Court 1980 ('the RHC'). The learned judge arrived at the latter conclusion based on his interpretation of the decisions in Chung Khiaw Bank Ltd v Hipparion (M) Sdn Bhd [1988] 2 MLJ 62 (affirmed by the Supreme Court, sub nom Hipparion (M) Sdn Bhd v Chung Khiaw Bank Ltd [1989] 2 MLJ 149 ) and Raju Jayaraman Kerpaya v Chung Khiaw Bank Ltd [1997] 2 MLJ 590. He thought that these cases were authority for the proposition that a lender similarly circumstanced as the appellant, notwithstanding an express power of sale reserved to him in the contract of loan, can realize his security through a judicial sale. Third , the learned judge held that even if he were to hold the assignment not to be absolute, it created an equitable charge which was only enforceable by resort to the procedure laid down in RHC O 83.
In essence, the second and third findings of the learned judge constitute his reasons for resolving the sole issue in this case, identified very early in this judgment, in the respondent's favour. Before us, the appellant attacked both findings. It therefore becomes necessary, in order to determine the sole issue in the appeal, to address separately each reason advanced by the learned judge. [*166]
The first ground: Applicability of O 31 r 1(1)
The starting point here is the assignment itself. The learned judge came to the conclusion that the assignment was absolute in nature and effect. In approaching the question of construction, he relied upon the decision of the Federal Court in Nouvau Mont Dor (M) Sdn Bhd v Faber Development Sdn Bhd [1984] 2 MLJ 268 where in an oft- quoted passage Seah FJ, said (at p 270C–E):
It was contended that since the assignment was entered into following the execution of a loan agreement between the appellant and the Public Bank, the said assignment should not be read in isolation but should be read in conjunction with the said loan agreement. With respect, we do not agree. In our judgment and it seems clear from the authorities above- mentioned, whether or not an assignment is an absolute one (not purporting to be by way of charge only) within the meaning of s 4(3) of the Civil Law Act 1956 is to be gathered only from the four corners of the instrument itself.
The reference to s 4(3) of the Civil Law Act 1956 is apposite in this case since it is equally relied upon here. This is what it says:
Any absolute assignment, by writing, under the hand of the assignor, not purporting to be by way of charge only, of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim the debt or chose in action, shall be, and be deemed to have been effectual in law, subject to all equities which would have been entitled to priority over the right of the assignee under the law as it existed in the State before the date of the coming into force of this Act, to pass and transfer the legal right to the debt or chose in action from the date of the notice and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor.
In a case in which the section becomes relevant, then (at p 270I–B):
... all the terms of the instrument must be considered; and whatever may be the phraseology adopted in some particular part of it, if, on consideration of the whole instrument, it is clear that the intention was to give a charge only, then the action must be in the name of the assignor. While, on the other hand, if it is clear from the instrument as a whole that the intention was to pass all the rights of the assignor in the debt or chose in action to the assignee, then the case will come within s 25 of the Judicature Act 1873 [being the UK equipollent of s 4(3)] and the action must be brought in the name of the assignee (Mathew LJ in Hughes v Pump House Hotel Co Ltd [1902] 2 KB 190 ).
Mr Porres Royan of counsel for the appellant has no quarrel with this part of the learned judge's judgment. He accepts that the assignment upon its true construction is an absolute assignment and comes within the statute. His main complaint is that the judge went wrong in concluding that Chung Khiaw Bank Ltd v Hipparion (M) Sdn Bhd and Raju Jayaraman Kerpaya v Chung Khiaw Bank Ltd are authority for the proposition that an assignee who is
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR
necessary to consider the contention of counsel that an equitable charge was made in this case. The appeal of the defendant was therefore dismissed with costs.
As may be seen from the proceedings before the Supreme Court, Hipparion did not challenge the High Court's finding on the jurisdiction point. The Supreme Court did not, however, disapprove the basis upon which Edgar Joseph Jr J, grounded jurisdiction to make the order for sale.
Raju Jayaraman Kerpaya v Chung Khiaw Bank Ltd was a case that was closely related to the decision in Hipparion. The sale of the property that formed the subject matter of the dispute in the earlier litigation before his Lordship Edgar Joseph Jr J, failed to produce sufficient proceeds to satisfy the bank's claim. Raju Jayaraman Kerpaya (the guarantor) had executed a guarantee as security for the loan to Hipparion. The bank brought proceedings to enforce the guarantee. It was argued, inter alia, for the guarantor that as the deed of assignment by Hipparion had been held by the Supreme Court to be absolute, it had the effect of extinguishing the loan so that the guarantor was no longer liable. This court, when rejecting the guarantor's argument, said (at pp 595–596):
The argument that the deed of assignment was absolute and therefore satisfied the loan in full upon its execution overlooks the fact that the point under discussion, namely whether the deed was absolute or by way of charge only, arose in the earlier proceedings between the respondent and Hipparion in a [*169] procedural context. It was never Hipparion's case in the earlier proceedings that its debt had been extinguished upon the execution of the deed in question. A careful reading of the judgment of Edgar Joseph Jr J (as he then was) at first instance and that of Gunn Chit Tuan SCJ [later CJ (Malaya)] delivered on behalf of the Supreme Court make these matters plain. It therefore follows as a matter of principle that the finding by the courts at all levels in the Hipparion proceedings that the deed of assignment was absolute and not by way of charge only was made in the context of the procedure adopted by the instant respondent to effect a sale of the subject property.
With respect, we do not see the decision of the Supreme Court in the Hipparion proceedings as facilitating the argument that the debt owed by Hipparion had been extinguished by the absolute assignment it gave the respondent principle and policy lie against the opposite conclusion. The principle we have already adverted to. As far as policy is concerned, countenancing the appellant's argument would have the effect of frustrating the recovery of loans in all cases where a financial institution takes an absolute assignment because there is unavailable a title capable of being subject to a registered charge. The construction and sale of multi-storeyed residential and commercial premises would grind to a halt because no financier will ever lend money if the law were to declare all sums due under a loan agreement irrecoverable because a deed of assignment absolute of particular premises has the effect of extinguishing the debt. We are unable to countenance a proposition that would produce so radical an effect.
In support of his argument that RHC O 31 r 1(1) is merely procedural and not jurisdictional, Mr Royan relied on the fairly recent decision of the English Court of Appeal in Wicks v Wicks [1998] 1 All ER 977. There, in regard to the identical rule in the English RSC, Ward LJ said (at p 989):
It does not follow that O 31 is an original source of jurisdiction. It is a procedural provision the exercise of which is dependant on there being a cause or matter in the Chancery Division relating to land or an application for ancillary relief in the Divorce Court relating to land. In its application in the Chancery Division, O 31 seems to remove the need for the previous practice to direct a sale either 'with the approbation of the judge' or 'out of court' and to give a flexible procedure for the management of any sale. It seems to be purely procedural in its intent and in its effect. I agree with Nicholls V-C in Panayiotou v Sony Music Entertainment (UK) Ltd [1994] 1 All ER 755 at p 761 ; [1994] Ch 142 at p 149 , when he said:
'These rules regulate and prescribe the 'practice and procedure' to be followed in the Supreme Court (s 84 of the Supreme Court Act 1981). They regulate the exercise of the court of its jurisdiction; they cannot extend the court's jurisdiction or confer a jurisdiction which, in the absence of rules, the court would otherwise lack.'
In my judgment O 31 has no application to the facts of this case. Moreover, and again with regret, I conclude that it is not a source of jurisdiction enabling the court to make interim orders for the sale of property pending the determination of the claims for ancillary relief.
For my part, I am content to say that whatever may be the jurisdictional effect; or more appropriately, the lack of such effect; of any or all of the provisions in the English RSC, the position in Malaysia differs. We have in our RHC O 92 r 4 which is absent in the English RSC and which expressly [*170]
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR
declares the inherent powers of the High Court. It is in essential respects ipsissima verba s 151 of the former Civil Procedure Code of Malaya which was repealed and replaced by the Rules of the Supreme Court 1957 and s 151 of the Indian Civil Procedure Code. The wide reach of the Malayan provision was recognized by the Court of Appeal of Malaya in Lee Lee Cheng v Seow Peng Kwang [1960] MLJ 1. Hepworth J, with whom the other members of the court concurred, observed (at p 5):
The court has therefore in many cases, where the circumstances require it, acted upon the assumption of the possession of an inherent power to act ex debito justitiae and to do that real and substantial justice for the administration of which alone it exists. The law cannot make express provisions against all inconveniences so that their dispositions shall express all the cases that may possibly happen, and it is therefore the duty of a Judge to apply them not only to what appears to be regulated by their express provisions, but to all the cases to which a just application of them may be made and which appear to be comprehended either within the express sense of the law or within the consequences that may be gathered from it. This section [ie, s 151] does not confer any powers but only indicates that there is a power to make such orders as may be necessary for the ends of justice and to prevent an abuse of the process of the court.
In Pacific Centre Sdn Bhd v United Engineers (M) Bhd [1984] 2 MLJ 143 it was held that RHC O 92 r 4 is a jurisdictional provision. See also Arab-Malaysian Credit Bhd v Tan Seang Meng [1995] 1 MLJ 525.
It follows that Edgar Joseph Jr J, was entirely right when he said that he had inherent power to make the declarations claimed and the consequential order for sale sought by the plaintiff in Chung Khiaw Bank Ltd v Hipparion (M) Sdn Bhd. Since his view upon the matter met with no adverse criticism from the Supreme Court, it is safe to assume that there was sub silentio affirmation of that view. But the conclusion I arrive at upon this part of the case does not, on a proper appreciation of Mr Royan's submissions, conclude the matter against the appellant.
To recall, his argument is that the decisions in Hipparion and Raju Kerpaya Jayaraman do not say that it is mandatory for an assignee similarly circumstanced as the instant appellant to move a court under RHC O 31 r 1(1) for an order for sale in the face of an express covenant granting the assignee an unconditional power of sale as is found to exist here in the form of cl 23 of the assignment. Having heard these two cases read during argument and having re-read them in the quiet of my chambers, I am constrained to agree with the submission of counsel.
In my judgment, these decisions are not authority for the proposition that it is mandatory for a lender who secures the loan by means of a deed of assignment over immovable property, that is without an issue document of title, to move the court under RHC O 31 r 1(1) and obtain an order for sale for the purpose of enforcing his security. They are merely authority for the proposition that if the lender does make such an application, then the court is seized of jurisdiction to grant him an order for sale.
For these reasons, I find myself unable to agree with the first ground advanced by the learned judge for granting the respondents the relief they claimed. [*171] The conclusion I have arrived at renders it unnecessary for me to address the other arguments advanced by Mr Royan on the first ground. But this much I will say: that I do not agree with his submission that the appellant is in a like position to a mortgagee at common law.
In a common law mortgage, the legal title to immovable property is transferred absolutely by the mortgagor to the mortgagee, the former having an equity to redeem the title upon making payment of the loan. In the present instance, there was merely an absolute assignment of all benefits which the respondents had under the agreement they had with the developer. In other words, it was an assignment of a chose in action. There was no conveyance of the title simply because the subject property had none issued in respect of it. What the respondents had was a right in contract (enforceable either by a decree of specific performance or an award of damages) to have a re- assignment of the chose unto themselves when they had paid off the loan is far from saying that they had an equity of redemption. See Haji Abdul Rahman v Mahomed Hassan [1917] AC 209.
I take the point as concluded against Mr Royan by high authority. There are several pronouncements upon the subject in the context of the law of immovable property under our version of the Torrens system. I will not go through them all here. Suffice to quote from just one authority.
In Malayan United Finance Bhd v Tan Lay Soon [1991] 1 MLJ 504 Jemuri Serjan SCJ (later CJ (Borneo)) said (at p 507):
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR
legacies to the plaintiff. The plaintiff brought an action claiming a declaration that the real estate his father owned at the latter's death was charged with the annuity of £1,000 under the covenant in the marriage settlement. At first instance, Pearson J granted the declaration. The defendant appealed, contending that the father had merely covenanted to do an act which did not have the effect of creating a charge. The majority of the English Court of Appeal (Cotton LJ, dissenting) rejected this contention.
Fry LJ said (at p 545):
The actual operation of the covenant is that the covenantor agrees that he will charge the annuity on a sufficient part of the real estate of which he shall die seized, but, as has been already observed by Lord Justice Bowen, the covenantor expressly declares that he enters into this covenant so as to render the real estate, if any, of which he, the Earl, shall die seized in fee, the fund primarily liable for the satisfaction or discharge of this covenant, if primarily liable, it is obvious that it is rendered liable; and therefore I find an express declaration of intention that this covenant, the covenant to charge an adequate part, is to render liable the entirety of the estate of which the testator shall die seized. That appears to me to have this operation, that it charges the entire estate of which the testator dies seized until the execution of a new instrument which shall charge an adequate part afresh, and thereby discharge the remainder of that which is primarily charged.
The distinction between an equitable charge and an equitable mortgage was lucidly explained by Buckley LJ in Swiss Bank Corp v Lloyds Bank Ltd & Ors [1982] AC 584 at pp 594G–596A
We are not concerned here with a charge on an equitable interest in property but with an equitable charge upon property in the legal ownership of the party creating the charge.
An equitable charge may, it is said, take the form either of an equitable mortgage or of an equitable charge not by way of mortgage. An equitable mortgage is created when the legal owner of the property constituting the security enters into some instrument or does some act which, though insufficient to confer a legal estate or title in the subject matter upon the mortgagee, nevertheless demonstrates a binding intention to create a security in favour of the mortgagee, or in other words evidences a contract to do so: see Fisher and Lightwood's Law of Mortgage (9th Ed, 1977), p 13. An equitable charge which is not an equitable mortgage is said to be created when property is expressly or constructively made liable, or specially appropriated, to the discharge of a debt or some other obligation, and confers on the chargee a right of realization by judicial process, that is to say, by the appointment of a receiver or an order for sale: see Fisher and Lightwood , p 14. It is not, I think, necessary to determine in the present case in what circumstances there is a true distinction between these two types of charge or precisely where it lies. From the way in which the judge dealt with the matter in his judgment it is, I think, clear that he was applying his mind to the question whether the [*174] circumstances of the case gave rise to an equitable charge by way of mortgage. The argument in this court has also proceeded upon the same lines, but I must not overlook the possibility of the existence of an equitable charge which is not of the nature of a mortgage.
The essence of any transaction by way of mortgage is that a debtor confers upon his creditor a proprietary interest in property of the debtor, or undertakes in a binding manner to do so, by the realization or appropriation of which the creditor can procure the discharge of the debtor's liability to him, and that the proprietary interest is redeemable, or the obligation to create it is defeasible, in the event of the debtor discharging his liability. If there has been no legal transfer of a proprietary interest but merely a binding undertaking to confer such an interest, that obligation, if specifically enforceable, will confer a proprietary interest in the subject matter in equity. The obligation will be specifically enforceable if it is an obligation for the breach of which damages would be an inadequate remedy. A contract to mortgage property, real or personal, will, normally at least, be specifically enforceable, for a mere claim to damages or repayment is obviously less valuable than a security in the event of the debtor's insolvency. If it is specifically enforceable, the obligation to confer the proprietary interest will give rise to an equitable charge upon the subject matter by way of mortgage.
It follows that whether a particular transaction gives rise to an equitable charge of this nature must depend upon the intention of the parties ascertained from what they have done in the then existing circumstances. The intention may be expressed or it may be inferred. If the debtor undertakes to segregate a particular fund or asset and to pay the debt out of that fund or asset the inference may be drawn, in the absence of any contra indication, that the parties' intention is that the creditor should have such a proprietary interest in the segregated fund or asset as will enable him to realize out of it the amount owed to him by the debtor: compare Re Nanwa Gold Mines Ltd [1955] 1 WLR 1080 and contrast Moseley v Cressey's Co (1865) LR 1 Eq 405 where there was no obligation to segregate the deposits. But notwithstanding that the matter depends upon the intention of the parties, if upon the true construction of the relevant documents in the light of any admissible evidence as to surrounding circumstances the parties have entered into a transaction, the legal effect of which is
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR
to give rise to an equitable charge in favour of one of them over property of the other, the fact that they may not have realized this consequence will not mean that there is no charge. They must be presumed to intend the consequence of their acts. (Emphasis added.)
The judgment of Buckley LJ, in the Court of Appeal was approved by Lord Wilberforce in the House of Lords. See Swiss Bank Corp v Lloyds Bank Ltd at p 615.
Concept apart, there is also a difference in point of remedies between these two forms of security. I take it as settled that for the most part, the remedies available to an equitable mortgagee are the same as those available to an equitable chargee. However, the important remedy of foreclosure which is available to the former is not available to the latter. See Tennant v Trenchard (1869) 4 Ch App 537 at p 542.
My reading of the leading works and decided cases upon the subject have led me to the conclusion that in English equity jurisprudence, an equitable mortgage is created in four distinct situations, subject always to a [*175] contrary intention being expressed in the relevant instrument or being found to exist inferentially from the surrounding circumstances of the particular case. The four instances are these:
(1) when money is lent on the strength of a deposit by the borrower of title deeds to real property as security for the loan. (2) where a loan is secured by an ineffectual attempt to create a legal mortgage to secure the transaction. (3) where the subject matter of the mortgage is an equitable interest in property. (4) where a loan is made upon an agreement by the borrower to create a legal mortgage.
I have laid emphasis upon the position in English equity jurisprudence for the purpose of reminding myself that our courts, while under a statutory direction to apply the rules of equity prevailing in England are also required to modify these to suit local conditions. In saying this, I refer, of course, to s 3(1) of the Civil Law Act 1956, and in particular, to the proviso to that subsection. Section 3(1) reads as follows:
(1) Save so far as other provision has been made or may hereafter be made by any written law in force in Malaysia, the Court shall —
(a) in West Malaysia or any part thereof, apply the common law of England and the rules of equity as administered in England on 7 April 1956;
(b) in Sabah, apply the common law of England and the rules of equity, together with statutes of general application, as administered or in force in England on 1 December 1951;
(c) in Sarawak, apply the common law of England and the rules of equity, together with statutes of general application, as administered or in force in England on 12 December 1949, subject however to sub-s (3)(ii):
Provided always that the said common law, rules of equity and statutes of general application shall be applied so far only as the circumstances of the States of Malaysia and their respective inhabitants permit and subject to such qualifications as local circumstances render necessary.
The proper approach to be adopted in the application of rules of equity to our land law was stated by Syed Agil Barakbah SCJ in Lian Keow Sdn Bhd (In Liquidation) & Anor v Overseas Credit Finance (M) Sdn Bhd & Ors [1988] 2 MLJ 449 at p 463 D–I as follows:
The Torrens system as codified by the National Land Code 1965 deals with registration of land and provides simplicity and certitude in transfers of land. It is a system of conveyancing and provides indefeasibility of title to a registered owner of land against any rival claimants except in the case of fraud or similar misconduct as provided under s 340(2) of the Code. It does not prevent or restrict the creation of beneficial interests in land by way of express, implied or resulting trust arising by operation of law in Malaysia by virtue of s 3 of the Civil Law Act 1956. It does not abrogate the principles of equity but [*176]
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR
Bank v Official Assignee [1969] 2 MLJ 196 ). The basis of this ruling is the very raison d'etre of the court's own existence and the imputed intention of the legislature. Terrell Ag CJ in Arunasalam Chetty 's case said:
'... It is the duty of the courts to do justice between parties, and unless expressly prohibited by Statute law, to give effect to ordinary commercial transactions, such as the advance of money on the security of title deeds ...' (p 22)
'... but it is difficult to believe that it was the deliberate intention of the Kedah legislature by the mere omission to exclude the recognition of the principle of an equitable deposit.' (p 21)
These statements were supported by Whitley Ag CJ (SS) who sat in the same case and said:
'... the courts will recognize equitable estates and rights except so far as they are precluded from doing so by the statutes.' (p 18)
Raja Azlan Shah J (as he then was) reaffirmed this judicial attitude in Mercantile Bank Ltd case when he said:
'... unless there are express words in the Act, this court is not precluded from giving effect to equitable rights existing between the parties ...'(p 197).
There is, however, no provision in the National Land Code prohibiting the creation of equitable charges and liens. The Code is silent as to the effect of securities which do not conform to the Code's charge or lien. Therefore, [*178] equitable charge and liens are permissible under our land law. (Emphasis added.)
The second authority is Malayan Banking Bhd v Zahari bin Ahmad [1988] 2 MLJ 135. The plaintiff there had lent money to the defendant on the security of a loan agreement and a deed of assignment over immovable property in respect of which no strata title had been issued. The defendant having defaulted in making payment of the instalments due under the loan agreement, the plaintiff instituted proceedings for a writ of possession and an order for sale pursuant to RHC O 83. Mohamed Dzaiddin J (now FCJ) held that the loan agreement and assignment in that case created an equitable charge. He then said in the concluding paragraph of his judgment (at p 136G–H):
In my opinion, an application such as the present one for an order of possession and for sale of property should be made under O 83 and not under O 31 because by its nature and substance O 83 provides for an application for sale by an equitable chargee. In the present case, the bank is an equitable chargee, as there is no issue document of title having been issued in respect of the said property.
The third and last authority is Chuah Eng Khong v Malayan Banking Bhd [1998] 3 MLJ 97 where the facts, so far as relevant to the present discussion, were these. Chuah Eng Khong, the appellant in that case, had borrowed a sum of money from the respondent, Malayan Banking Bhd, to purchase a piece of land in respect of which no document of title had been issued. The loan was secured by means of a document entitled'loan agreement cum assignment'. This document contained a covenant by Chuah to execute a charge over the said land once the document of title relating thereto was issued by the appropriate authority. An argument that the loan agreement cum assignment in that case did not operate to create an interest in land was rejected by the Federal Court. Peh Swee Chin FCJ when delivering the judgment of the court said (at pp 108I–112F):
At common law and under the relevant rules of equity, the said loan agreement would amount to an equitable mortgage because the assignment of the right, title and interest in the said land was expressly or obviously for the purpose of securing the loan given to the borrower to purchase the said land. The said loan agreement is not an out-and-out purchase of the said land. This view is reinforced by the promise that when the document of title of the said land was available after the completion of the subdivision aforesaid, the borrower would execute a charge in favour of the lender according to the provisions of the National Land Code 1965 ('the NLC'). It is true that nowhere in the said loan agreement has the word 'mortgage' been used, but it is a security transaction in connection with the loan given by the lender with a provision for repayment, after which, the borrower 'shall be entitled ... to obtain a discharge and release of the said lot from the lender' (see cl 27 of the said loan agreement). Thus, we have the loan, the contractual right to repay or to redeem the said land and the assignment of all 'right, title and interest' in the said land pending the exercise of such contractual right to redeem.
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR
The said loan agreement, therefore, at common law, will be a mortgage. It would be an equitable mortgage (and not a legal mortgage) because the borrower at [*179] the time of signing the said loan agreement had no legal estate (or registered proprietorship of a grant of land) but only an equitable interest as a purchaser by contract from a housing developer, pending the issuance of a separate document of title aforesaid. In other words, it is a mortgage in equity for which the actual form of words is immaterial, provided the meaning is plain when interpreting a document as a mortgage or equitable mortgage; see William Brandt's Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 at p 462.
If it is an equitable mortgage, like a legal mortgage, the borrower has obtained a second right to redeem after the contractual date for redemption has expired, ie, he has got the equity of redemption for, in the eyes of equity, the lender is not the owner of the said land notwithstanding the said assignment, but the borrower is, but subject to the mortgage, and the lender is a mere 'incumbrancer'. The equity of redemption arises as soon as any document, on a true construction, is found to be a mortgage. The use of the word 'mortgage' may sound like sacrilege in view of the presence of the NLC which does not use the word, especially to a legal man who specialises in 'common law' but not to one who is familiar with 'chancery practice', for to the latter, despite the assignment, the borrower is still the owner of the said land subject to the mortgage. The matter, of course, should not rest here. Further investigation into the legal position of a mortgage in this country is required.
The equity of redemption gives the borrower a second right to redeem after the contractual right to redeem the said land by a contractual date has lapsed due to expiry of time, practically in defiance of such contractual (ie legal) right to redeem. Such equity of redemption has been always recognized as an interest in land since somewhat ancient times; see Pawlett v Attorney General (1667) Hard 465 at p 469 and Usborne v Scarfe (1738) 1 Atk 603 at p 605 if old authorities are required.
If the said loan agreement is an equitable mortgage, by virtue of rules of equity, could it exist in the presence of the NLC? Let us discuss further.
Rules of equity in general are applicable by virtue of the Civil Law Act 1956 and those rules of equity relating to equitable interests in land have no doubt always been recognized and applied in Malaysia unless they are expressly or by necessary implication precluded by the NLC. This view has been asserted and reasserted in a number of cases in the appellate courts in Malaysia; in RRM Arunasalam Chetty s/o Sithambaram Chetty v Teah Ah Poh trading under the style of Mun Seng Hin Kee & Anor [1937] MLJ 17 in which money of a creditor was secured by a deposit of document of title by the debtor to his land in Kedah. It was held that the principles of equity were applicable to land in Kedah where such application would not be inconsistent with the provisions of the Kedah Land Code which was based on FMS Land Enactments 1911 and the Registration of Titles Enactment 1911, all in fact based on the Torrens system of registration of titles. The Court of Appeal then unanimously held that the deposit of the documents of title as security for repayment of debts operated as an equitable charge by virtue of which the party who lent there acquired an equitable interest in the land covered by the document of title. The Court of Appeal then relied on the following authorities in support of its decision, viz KALRM Karuppan Chetty v ARPLSP Muthia Chetty [1938] MLJ 221 Abigail v Lapin & Anor [1934] AC 491 at p 502 Hogg's Registration of Title to Land throughout the Empire (1920) at pp 278–285; Murugappa Chetty v Seenivasagam & Ors [1936] MLJ 217 The Motor Emporium v Arumugam [1933] MLJ 276 and others. This is not the [*180] place and time to elaborate on these cases cited there. The Court of Appeal granted the requested declaration of the creditor that he was an 'equitable chargee' though the original wording of the prayer did not use the word 'equitable' as an attributive.
Of greater and more direct interest to us in that case, other than the fact that the Court of Appeal had granted the declaration asked for by the creditor that he was entitled to be considered as an equitable chargee, is that Whitley Ag CJ (SS) held on the facts that the creditor was (also) an equitable mortgagee by deposit. Hogg's Registration to Title which was relied on by his Lordship also referred to it as a mortgage by deposit of document of title. Gordon Smith J also concluded that by virtue of the transaction (loan secured by deposit of document of title), the plaintiff was an equitable mortgagee or an equitable chargee. Terrell Ag CJ (FMS) discussed the transaction on the assumption by the clearest implication that it was an equitable mortgage by deposit. Such an equitable mortgage by deposit was, in relation to land enactments based on the Torrens system, discussed by his Lordship at length and he decided that the security did not contravene the provisions of the Land Code. At pp 20–21 of the report [ Arunasalam Chetty ], he said:
'The learned judge of the first division appears to consider that the proviso makes equitable principles inapplicable in cases of immovable property there is nothing in the Land Code which so provides. An equitable mortgage by deposit is not a charge contravening the express terms of the Land Code; it is a form of security quite outside the Land
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR
Learned counsel's submission that the said loan agreement did not create any interest in land is, therefore, fallacious in view of what has been discussed above, and further, the submission that the said loan agreement was a mere [*182] chose in action dealing with personal property (as opposed to land) would also fly in the face of the said interest in land. A chose in action is always in respect of personalty. It is basically a right to file an action to recover money due on a debt or to recover pecuniary compensation on account of breach of contract or tort.
Chuah Eng Khong v Malayan Banking Bhd being a decision of the present Federal Court, is plainly binding upon this court in accordance with the doctrine of precedent. I think this court is equally obliged to accept the decision in Malayan Banking Bhd v Zahari bin Ahmad as it appears to have been approved sub silentio by the Federal Court in Chuah Eng Khong. Accordingly, I must respectfully decline Mr Royan's invitation to treat these cases as wrongly decided. These cases are authority for the proposition that an absolute assignment by a borrower of all his rights over immovable property that has no issue document of title to a lender as security for a loan is an equitable mortgage.
In the present instance, it was found by the learned judge and is common ground before us that the assignment is an absolute assignment of the respondents rights over the subject property to the appellant. The assignment therefore falls squarely within the proposition stated a moment ago. Accordingly, it is an equitable mortgage, also known as an equitable charge in the context of our jurisprudence. On this ground alone, I must reject the appellant's contention that the assignment does not amount to an equitable charge.
I accept that there is much justification in Mr Royan's complaint about the route by which the learned judge in the instant case came to his finding that the assignment was an equitable charge. The language employed by the learned judge when arriving at his finding on this part of the case makes it amply clear that he found an equitable charge upon the assumption that the assignment was not absolute in nature and effect. Hence the words of qualification: 'Even if I were to hold that the security documents do not create an absolute assignment'. What the learned judge therefore did was to conclude that the assignment amounted to an equitable charge, if and only if , it was not absolute. In this, he was clearly wrong. The decisions in Chuah Eng Khong v Malayan Banking Bhd and Malayan Banking Bhd v Zahari bin Ahmad do not support such a conclusion. They support quite the opposite proposition.
But, binding precedent apart, I find that there is another ground upon which I must dissent from Mr Royan's submission.
I have earlier in this judgment adverted to four instances in which an equitable mortgage may be created under English law. The facts of the present case do not bring it within the first or the second. For, there was here neither a deposit by the respondents of title deeds to immovable property nor an ineffectual attempt to create a legal charge as security for the loan. I will not say anything of the application of the third instance since that is already covered by the observations of Peh Swee Chin FCJ in Chuah Eng Khong v Malayan Banking Bhd. It is the fourth instance with which I am concerned in the present case. It is based on the maxim that equity deems that as done which ought to be done. The doctrine has been applied [*183] in Malaysia on several occasions within the framework of the National Land Code 1965.
In Wan Salimah bte Wan Jaffar v Mahmood bin Omar (Anim bte Abdul Aziz, Intervener) [1998] 5 MLJ 162 Abdul Malik Ishak J applied the doctrine by giving effect in equity to an unregistered and unregistrable agreement which was void as a lease at law. I quote with approval the following passage from his judgment (at p 182A–F of the report) in which he reviewed the relevant authorities upon the subject:
The contractual obligations of the parties under the written agreement (P1) must be given effect. I am reminded of the principle that developed in the case of Walsh v Lonsdale (1882) 21 Ch D 9 to the effect that an agreement for a lease is said to be as good as a lease if it is capable of specific performance based on sufficient acts of part performance. In Hj Abdul Rahman v Mohamed Hassan [1917] AC 209 the Privy Council was of the view that an agreement, not in registrable form, to transfer back certain land upon a certain contingency happening, while useless as a transfer or burdening instrument, was good as a contract. In Lin Nyuk Chan v Wong Sz Tsin [1964] MLJ 200 the then Federal Court held that failure to comply with the registration provisions of s 88 of the Sabah Land Ordinance did not render the agreement for a lease invalid and unenforceable. In Yong Tong Hong v Siew Soon Wah & Ors [1971] 2 MLJ 105 the then Federal Court held that a non-registration of a 30-year lease was treated as a specifically enforceable agreement for a lease. In Inter- Continental Mining Co Sdn Bhd v Societe des Etains de Bayas Tudjuh [1974] 1 MLJ 145 the then Federal Court once again held that a purported sublease not in statutory form was good as an agreement for a sublease and specifically
PHILEOALLIED BANK (M) BHD v BUPINDER SINGH A/L AVATAR SINGH & ANOR
enforced it. One common thread that runs through these cases is this: equity intervened and treated an imperfect lease as an agreement for a lease provided it is valid and enforceable. In the present case, by the doctrine of equitable intervention, the written agreement (P1) would be treated as an agreement for a lease and since it had been partly executed by possession having been taken under it and two buildings have since been built on it, the equitable remedy of specific performance would be undoubtedly an appropriate remedy. It is germane to mention that the proposition that a grant of specific performance based on an act of part performance must be referable to an existing contract between the parties can be found in the case of Steadman v Steadman [1974] 2 All ER 977.
Returning to the present instance, it may be recalled that the assignment contains an express covenant by the respondents in cl 26 to 'execute and deliver to the bank (the appellant) a charge under the National Land Code 1965' once a strata title in respect of the subject property has been issued. This is a promise de futuro by the respondents to create a legal charge in the appellant's favour over the subject property my judgment, the making of the loan by the appellant amounted to part performance of its reciprocal promise.
In The Law of Securities (4th Ed) by Edward Sykes (an Australian work) at p 143, there appears the following passage which I consider helpful:
Nothing at great length need be said about the case of the express agreement to create a legal mortgage, save that there must be a sufficient memorandum of the contract of mortgage to satisfy the various legislative enactments which [*184] are based on the famous s 4 of the English Statute of Frauds, because a contract to create a mortgage is obviously one of the types of contract affected by that section, as being a contract involving the acquisition of an interest in land. Alternatively, there must have been sufficient part performance in accord with the doctrines of equity to take the case out of the statute. The implied agreement may, however, take various shapes. Thus, there may be an ineffectual attempt to create a formal legal mortgage, ineffectual by reason of failure to observe formalities; for example, one rendered ineffectual by the failure of the parties to employ seal. Equity, provided the money has been advanced, looks on the document as implying an agreement to give a legal mortgage and as creating a present mortgage in equity.
The reference to the Statute of Frauds is of no consequence as it has no application in our country. But that apart, it is plain that at least one other jurisdiction that enforces the Torrens system does give effect to an agreement to create a legal mortgage as creating a present mortgage in equity, provided those other features that equity looks for, such as acts of part performance, are present.
Adopting this reasoning, and having regard to existing Malaysian jurisprudence, I can see no impediment to this Court treating the covenant in cl 26 of the assignment as an equitable charge, which expression I treat for purposes of our law as being synonymous with an equitable mortgage.
Contracting out
That brings me to the next question. Does the fact that the assignment is an equitable mortgage preclude the appellant from exercising its contractual power of sale? As I earlier mentioned, Mr Royan with his customary frankness, conceded that the question must be resolved against his client. He said that once this court accepted that the assignment was an equitable charge, the appellant could only sell the subject property under the authority of an order of the court obtained pursuant to RHC O 83. This concession of counsel must now be tested for its accuracy, and if found to be correct, must be accepted.
The starting point for this exercise is an examination of RHC O 83 rr 1(1) and (2) of which read as follows:
(1) This Order applies to any action (whether begun by writ or originating summons) by a chargee or chargor or by any person having the right to foreclose or redeem any charge, being an action in which there is a claim for any of the following reliefs, namely —
(a) payment of moneys secured by the charge;
(b) sale of the charged property;
(c) foreclosure;
(d) delivery of possession (whether before or after foreclosure or without foreclosure) to the chargee by the chargor or by any other person who is or is alleged to be in possession of the property;
Phileoallied BANK (M) BHD v Bupinder Singh A L Avatar S
Course: Land Law I (LIA2005)
University: Universiti Malaya
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