WAN SHAHRUL BIN WAN ABD WAHAB v 1. ) Pentadbir Tanah Daerah Petaling 2. ) CIMB BANK BERHAD 3. ) NORTHERN TOP PLATFORM (M) SDN BHD

Case Significance

Illustrates the strength of a registered chargee's interest under the National Land Code and the limited grounds on which a charge and a resulting auction sale can be impugned by a party asserting invalidity.

This High Court decision at Shah Alam concerns an application by originating summons to set aside a third-party charge over land and to nullify the auction of that land conducted by the chargee bank and won by a bidder. The plaintiff, an individual, sought to invalidate a third-party charge that had been registered in favour of the second defendant, a bank, over a property in the Mukim of Bukit Raja, District of Petaling, and to set aside with immediate effect the auction sale of the property, at which the third defendant had been the successful bidder. The relief was framed by reference to provisions of the National Land Code 1965, including those governing indefeasibility and the setting aside of dealings. The core issue the court identified was whether the charge registered in the name of the chargee was invalid, void and of no legal effect. The court's analysis engaged the principle of indefeasibility of title and interest and the protection given to a chargee, drawing on Federal Court authority on when a chargee qualifies as a subsequent bona fide purchaser under section 340(3) of the National Land Code, which limits the circumstances in which a registered interest can be defeated. Applying those principles to the facts, the court answered the core question in the negative, holding that the charge was not shown to be invalid or void, so that the foundation for setting aside the charge and the consequent auction was not made out. Accordingly, the court dismissed the application and ordered the plaintiff to pay costs of RM15,000.00 to the second defendant. The judgment is a useful illustration of the strength of a registered chargee's interest under the National Land Code and of the limited grounds on which a charge and a resulting auction sale can be impugned by a party asserting invalidity.