LIEN HOLDER’S CAVEAT

LLB 30603 LAND LAW II

INTRODUCTION

A lien must be affected by

entering into lien-holder’s caveat
in order to get protection under
NLC.
 It is called as statutory lien.
 No entry of LHC- equitable lien
 Protection under section
206(3)
INTRODUCTION

 The holder or depositee may apply for the

entry of LHC under Sec. 330(1). Upon the
entry of such caveat, the depositee becomes
entitled to a lien over the land or lease.
 Sec. 330 deals mainly with the procedural
steps to be complied with before a LHC can be
validly created.
 The caveat provided by the code to protect
the lien is known as a LHC.
 The right granted by section 330(1) to enter a
LHC is a qualified right.
 This is so because a holder’s right of
application is as provided is Sec. 281
and therefore such a right does not
arise until and unless all the three
prerequisite elements provided for in
Sec. 281 have been strictly complied
with.
 When all these paramount
prerequisites are present, then the
depositee may apply to the Registrar
for an entry of a LHC.
 REQUIREMENTS OF
STATUTORY LIEN

 Section 281(1)- lien

Deposit IDT/ duplicate
lease Intention to secure a
loan
Lodgment of Lien-holder’s
caveat
A. CREATION OF LHC
 Section 330(1)
Must produce the IDT to prove the
element of deposit by the registered
proprietor
Application in Form 19D
Must fulfilled conditions under
section 281 (1)
Issue: Can another person not being the registered
proprietor deposit the IDT to the lender and later
apply for the entry of LHC

 NO
 S281(1) intended to allow the registered
proprietor to get speedy loan without
waiting for the registration of legal charge.
 In the event of default, the lender can
obtain judgment against the registered
proprietor
 S281(1)- apply order for sale of the land or
lease
Case: HONG LEONG FINANCE BHD V STAGHORN SDN BHD
[2005] 5 MLJ 101

 COURT OF APPEAL
 It is material in the creation of a lien holder's caveat under s 281
NLC to have the registered proprietor to deposit the document of
title to the lender for it is the registered proprietor who intends to
surrender his rights to the lender to deal with the said land in the
event of default in repayment of the loan which he obtained from
the lender.
 As a borrower, no other person can substitute the registered
proprietor in performing this task of depositing the document of
title with the lender for the creation of this statutory instrument.
To allow this would defeat the concept of the right of the
registered proprietor to deal with his own land.
 Section 281 NLC is intended for a registered proprietor
to raise money on loan, speedily, by depositing the
document of title registered in his name with the lender
as compared with the more complex process of
registering a legal charge over the land. But as the law
demands, it is only available to a registered proprietor
who borrows money and deposits his title with the
lender.
 It does not extend a beneficial owner who is yet to
become a registered proprietor. Since this facility is
only available to the registered proprietor, in the event
of default in repayment of the loan, judgment must be
obtained against the registered proprietor, as borrower.
LEKCHUMANAN SUPPIAH & ANOR
V RAVI RAJU [2017] 5 CLJ

The court also was of the considered view that the deposit of
the issue document of title in this case by the appellants with
the respondent (or his solicitor) only created an ‘equitable’
interest, which, to be enforced or realised required the
respondent to register with the land authorities a lien-
holder’s caveat under the provision of the Code over the
land. The respondent had to then obtain a judgment as to
the amount owed by the appellants before securing an order
for sale from the courts to enforce or recover monies under
the lien-holder’s caveat.
B. THE PROCEDURES OF LHC

 S330(2)
 Form 19D
 Fees
 IDT or duplicate lease
 S330(3)- The Registrar shall consider the application unless
he is prohibited by the existence:
 Registrar’s Caveat
 Private Caveat
 Trust caveat
 Prohibitory order
 Serve notification in Form 19A
Mahmud bin Hassan & Anor v
CIMB Bank Bhd[2018] 8 MLJ 663
 Based on s 319 of the Code, the
existence of the Registrar’s caveat
clearly prohibited the registration of the
plaintiff’s lien holder’s caveat.
 It followed that the plaintiff’s lien holder’s
caveat was unlawfully registered.
C. FUNCTION OF REGISTRAR

 Administrative in nature
 General rule: R must enter LHC if the application is in
order and if there is no RC,PC, TC,PO
 R must satisfy himself that the caveator has a valid
lien and the IDT has been deposited to the caveator
 Exceptions:
 RC- Registrar waives the prohibition [s319(3)]
 PC- the caveator gives consent in writing
[s322(5)(b)]
 TC- the terms of the trust permits the entry [s332(2)]
 PO- the terms of the order permits the entry (s334)
D. EFFECT OF LHC

 S330(5)- same effect as the private caveat as

specified in section 322 (2) to section 322 (5)
 But in section 322 (5)- the words ‘ at whose
instance the caveat was entered’ (the caveator)
is to refer to ‘ the person/body for the time being
entitled to the benefit of the lien’ (the registered
proprietor)
 If the endorsement of LHC is prohibited by private
caveat, the Registrar shall reject the application.
 Rejection of instrument is to follow the procedure
under section 298 and section 317
 CHEW SZE SUN v MUTHIAH CHETTIAR
(1983) 1 MLJ 390
 Held: In the light of Sec. 322(2) and
330(5) of the NLC 1965, the LHC being
created first in point of time, prohibited
the PC from being entered on the
register document of title. The collector
of Land Revenue should have, having
had the LHC endorsed on the
document of title, rejected the PC.
 ZENO ITD v PREFABRICATED CONSTRUCTION
CO (MALAYA) LTD & ANOR (1967) 2 MLJ 104
 Raja Azlan Shah J said that:-
 “The law regarding the creation of a lien order the
Land Code is well settled under Sec. 291 of the
code, a lien over any land can only be created by
the deposit of the relevant IDT by the proprietor
followed by a caveat by the holder of the lien, which
requires delivery of the IDT with the caveat for a
memorial there to be made… In my view, since
intention is always a matter of inference from all
the relevant circumstances, once the IDT is
deposited with the depositee that is evidence of
intention to create a statutory lien…”
Issue: What happened if the lien
holder did not enter LHC in time?

Case: VALLIPURAM SIVAGURU V PALANIAPPA CHETTY

[1936] 1 MLJ 158
Facts: G deposited his issue document of title to land with
D1 as security for a loan and in 1932 sold the same land
to N, explaining the absence of the issue document of
title by a false statement that it was lost. On account of
the absence of the issue document of title, N could not
obtain registration of the transfer on sale and in
consequence lodged a caveat against the land. G. died in
1932, shortly after executing the transfer in favour of N.,
and in 1933 D1 also lodged a caveat claiming a lien by
deposit with him of the issue document of title.
At the end of 1933, N executed a
transfer of his land in favour of P and
N died in June, 1934. In August,
1934, this land was transmitted to
D2 as administrator of G's estate.
Held: failure to caveat timeously will
not have the effect of defeating the
priority of lien holder.
 STANDARD CHARTERED BANK V
YAP SING YOKE & ORS [1989] 2 MLJ
49
 By virtue of the unregistered charge in favour of P, P had
acquired a title in equity over the land.
 As the issue document of title was all the time in the
custody of P, it had acquired a lien in equity over the
land. This equitable interest is not affected by the
absence of a caveat. P had the right to lodge a caveat
and may do so at any time under the provisions of the
National Land Code.
 P had not lost his priority of equity through his
negligence as P's counsel did not realize that the
documents had been returned by the Land Office and
that they were all the time in the drawer of a clerk. The
important thing was that the issue document of title had
not parted from their possession.
E. WITHDRAWAL OF LHC

 Section 331(1)- application to the Registrar by any

person/body having benefit under the lien
 R cancel LHC as soon as practicable when the
notice is received.
 The lien holder has no duty to withdraw the caveat
as long as he is still entitled to the benefit under the
lien.
 But if the entry or failure to withdraw has caused
loss or damage to another person, he must pay
compensation –s331(4)(b)
 F. CANCELLATION OF LHC
 Section 331(3) – where the debt due under the lien
have been fully paid (satisfaction of loan)
 Section 331(4)- where the court finds that (order of
court):
 LHC should not be entered
 LHC should be withdrawn
(a) Order R to cancel the LHC and
(b) pay any compensation suffered by the entry of
LHC
 Section 331(2) – where the court has ordered the
land to be sold, the caveat will lapsed and cancelled
when the certificate of transfer is registered under the
name of purchaser.
RHB Bank Bhd (previously known as United Malayan
Banking Corp Bhd and then as Sime Bank Bhd) v Wong
Kok Leong (as executor and trustee of the estate of
Wong Kwong Wah, deceased) & Ors [2017] 4 MLJ 281

 FC Held that Under the NLC, a lien-

holder’s caveat can only cease to
exist upon being cancelled under s
331 in various prescribed
circumstances. Unlike a private
caveat (which could lapse), a lien-
holder’s caveat did not lapse under
the NLC except upon the registration
of the certificate of sale of the land
which had been sold pursuant to a
court order.
 RHB Bank Bhd v Wong Kok Leong &
Wong Kok Sun & Anor [2017] 6 CLJ 1
 where the Federal Court held that a lien-
holder’s caveat can only cease to exist
upon being cancelled under section 331 in
different prescribed circumstances. The
lien-holder’s caveat did not lapse under
the Code except upon the registration of
the certificate of sale of the land which had
been sold pursuant to a court order.
Case: GAN LEONG CHAI & ORS V SIN HENG
CHAN (MALAYA) BHD & ANOR [1997] MLJU
186
Facts: The lien holder failed to remove
the caveat after settlement of the
outstanding sum.
Held: The lien is lost once the
outstanding amount is settled and the
lien holder must remove the caveat
 G. PAYMENT OF COMPENSATION FOR
WRONGFULLY ENTERED LHC

 S331(4)(b)
 The entry or failure to withdraw had caused
damage or loss the any person

Case: SAYANG PLANTATION BHD V KOH

SIAK POO [2006] 1 MLJ 230
 Issue whether damage or loss must be
proven before compensation could be
ordered under s 331(4)(b) of the National
Land Code 1965.
Case: SAYANG PLANTATION BHD
V KOH SIAK POO [2006] 1 MLJ
230
Facts: A lien holder's caveat was entered by
A on the R's land and was withdrawn
before the hearing of R's application for its
removal under the said section but the
learned judge, at R’s instance, ordered
compensation to be paid by A to R and
directed the senior assistant registrar to
hold an inquiry to assess the
compensation that may be payable by A to
R as a consequence of A having failed to
timeously withdraw the said caveat.
Court of Appeal

 The caveat had in effect gravely curtailed

the rights of R as registered proprietor in
that it wrongfully prevented him from
dealing with the land over that period when
the lien ceased to exist and with that, A's
entitlement to the benefit there under.
 Under such circumstance the failure to
withdraw the caveat 'has caused damage
or loss' to R.
 H. REMEDY TO THE LIEN
HOLDER

 Section 281 (2)

Shall be entitled to the debt
due to him; or
Shall be entitled to apply for
order for sale of the land upon
default of the repayment of
the loan.
Differences between LHC and a
PC

 1. Person entitled to caveat

 Where an IDT has been deposited by a proprietor with
his lender as security for a loan in strict compliance
with the provisions contained in Sec. 281(1), then that
lender is entitled under Sec. 330(1) to apply for entry
of a LHC and no other person / body.
 However, under Sec. 323, the persons capable of
applying for an entry of a PC is wider.
 2. Document to accompany application
 An application for entry of a LHC must be
accompanied by the IDT but there is no such
requirement in respect of an application for entry of a
PC.
 3. Duration of the Caveats
 A PC lapses on the expiry of 6 years from the time from
which it took effect. In the case of a LHC, its duration
continues until the caveat is cancelled under any one of the
three methods listed in Sec. 331.
 4. Enforcement of the caveats
 Since a PC, does not create any interest in land, there is no
question of any enforcement whatsoever. But in the case of
a LHC, since it is a kind of security dealing over land, Sec.
281(2) enable a lien holder to apply to a court for an order
for the sale of the land provided that the lien holder was first
proved his debt by obtaining a judgment against the
proprietor / borrower for the amount due to the lien-holder
under the lien transactions.