CM AUTO HOLDINGS SDN. BHD. v 1. ) PENGERUSI, PERSATUAN PEMILIK HUB BANGI 2. ) PENDAFTAR HAKMILIK NEGERI SELANGOR

Case Significance

Illustrates the twin requirements of a claim under section 329 of the National Land Code for damages for wrongful caveat: the claimant must establish both that the caveat was entered without reasonable cause and that it causally produced the loss claimed.

This High Court decision at Shah Alam concerns an application to remove a private caveat and to recover damages for its allegedly unlawful entry under section 329 of the National Land Code. The applicant company had bought a property and sought the removal of a private caveat that had been lodged over it by the first respondent, an association, together with an award of damages on the footing that the caveat had been wrongfully entered. Section 329 exposes a person who enters a caveat without reasonable cause to liability to compensate anyone who sustains loss as a result. The court examined both whether the caveat had been unlawfully lodged and whether the applicant had established that any loss it claimed had been caused by the caveat. It held that the caveat had not been entered unlawfully: its purpose had been to facilitate the provisions of a deed of mutual covenant for business efficacy, which supplied reasonable cause for lodging it. On the claim for damages, the court applied the legal test of causation and the principles governing the assessment of damages, and concluded that the applicant had failed on the balance of probabilities to show that the caveat had caused the loss claimed. With the caveat by then already removed and no unlawful entry established, the court found the applicant's claim to fail on both limbs. The court emphasised that a caveat lodged to secure a genuine underlying arrangement is not wrongful merely because the caveatee finds it inconvenient, and that a claimant cannot recover damages without first tying an established loss to the caveat itself. It dismissed the originating summons with costs of RM7,000. The judgment illustrates the twin requirements of a section 329 claim: a claimant must prove both that the caveat was entered without reasonable cause and that there is a causal link between the caveat and the loss said to have been suffered.