Order For Sale In the event of default by chargor, the registered chargee may exercise his right(a) Order For Sale by way of public auction (b) Taking possession of the charged property; or (c) Assignment to Danaharta
Procedures towards obtaining OFS: (i) Statutory notice; (ii) Foreclosure proceeding; and (iii) OFS
(i) Statutory Notice -
It is a mandatory requirement to be complied by chargee before applying for OFS from Court/LA
-
National Bank of Australia Ltd v United Hand in Hand Consequences of failure to give notice:(i)
Sale cannot be effected;
(ii)
Registrar may refuse to register any transfer;
(iii) Chargor may obtain an injunction preventing the sale from the proceeding -
Chargee must first served a notice in F.16D (S.254 NLC) or F.16E (S.255 NLC) to the chargor
-
3 factors that will affect the validity of a statutory notice: (i) The form (type) of notice used -
Chargee is to served onto the chargor Form 16D when: (a) There is a breach of any express/implied obligations by chargor under the loan agreement(S.253(1)) b e the failure to pay installment only - The breach need not to be - The form of breach is the breach of any charge provision
and/or
mplied provision (sec 249, 250, 251 & 252). E.g. failure to pay quit rent or breach of condition of the land
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(b) The breach has continued at least one month or more.( issuance of notice before breach-immature proceeding) OR - Such alternative period as stated in the charge but must not be lesser than 1 month. (sec 254(1))
-
Chargee is to served onto the chargor form 16E when the charge agreement states that the chargee is entitled to demand the principal sum at any time The phrase usually found in the agreement would states(“payable on demand”) Chargee is allowed to demand for the principal sum, even without breach on part of chargor. By serving on the chargor a notice in Form 16E of his intention to demand for principal sum within 1 month from the date of the notice is served on the chargor. If chargor fails to comply, chargee entitled to apply for OFS F16D
F16E
Chargee to has specify breach
No need to specify breach
Requires
chargor
remedy
breach
within 1 month from the date of
It is relevant when principal sum is payable on demand
notice It can be any breach and breach has
No default/ breach is necessary
continued for a period of at least 1 month specified on the charge.
- Chargee to observe provision in charge doc before apply notice - Eliathamby v Sheikh Mohd Said [1970] 2MLJ 190 No provision in the charge agreement that allows the chargee to demand for principal sum but in the event of default chargee used Form 16E to demand for outstanding amount. Held: Form 16E was wrongly used.
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- VAM Hussain v BP Malaysia Sdn Bhd [1970] 2MLJ 69 The charge agreement provides that the principal sum secured was payable on demand. The chargee used Form 16E. Held: the Respondent had used the correct form i.e. Form 16E
- In the circumstances where there has been a breached as well as a clause demanding for principal sum, either Form 16D or 16E can be used:- Jacob v Overseas Chinese Banking Corp Appellant charged his land to Respondent to secure repayment of an overdraft. On default of payment, Respondent served F16D & applied for OFS Held: Where there has been a breach of any obligation F16D may be used, regardless of the nature of the obligation, including to demand payment of the principal sum and where the principal sum is payable on demand, then either the notice in F16D or F16E may be served
- Mary Michael v UMBC A charged his land to R as security an overdraft facility. On default of payment, R caused a notice in F16D to be served to A demanding payment. A contended that the notice in F16D is null & void Held: Notice in F16D applies to any charge. So, it can be validly be used even in the case of a charge where the principal sum is payable on demand. - (F16D used whenever there is any breach. Non-payment of loan is breach)
- Central Malayan Finance v Loke Kok Lai The charge agreement provides that in the event of default, the chargee would give notice under Section 254 NLC. The chargee issued Form 16E instead of 16D when the borrower defaulted in the payment. It was contended that the notice is void. Held: The notice was defective since it was covenanted to proceed under Section 254 (it used another form than in the agreement)
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- Syarikat Kewangan Melayu Raya v Malayan Banking Berhad The statutory notice of default in F16D wherein it cited 2 charges and lumped together the sums due from 2 separate loans granted to the chargor Held: Notice was not to be defective as the 2 charges related to the same land, same parties, same bank under same account. The chargor has not been prejudiced or misled by any defect therein
ii. The content of the notice - Must be in accordance with NLC and the loan agreement F16D shall indicate: - F16D shall (a) The amount due i.e principal and interest / the breach that has been done Co-operative Central Bank Ltd v Meng Kuang Properties Bhd Chargor defaulted payment. Chargee sent a notice of demand which included a default interest. In the charge document, a notice requiring payment must first be served. If default, then only default interest can be charged (where chargee did not do so Held: wrongful demand for payment of default interest which chargee bank is not entitled to render the notice of demand and F16D served invalid
(b) Requiring the chargor to remedy the breach within one month of the date of the notice or any other o ther time stipulated in the charge agreement
Citibank Bhd v Mohamed Khalid B. Farzalur Rahman & Anor The period prescribed in the annexure is 7 days to remedy the default. Applying the Golden Rule of the interpretation of statute, the period of breach referred to in section 254(1) of NLC should be at least one month. Alternative period must be a period greater than 1 month.
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Amendment 2007 of S.254- insertion of the word “which shall not be less than one month after the word in the charge If not stipulated in the agreement, NLC requires to gives 1 month period to remedy the breach. (c) To give warning that failure to comply with statutory notice chargee will proceed to obtain OFS
F16E shall indicate: - F16E shall (a) the amount of principal sum demanded (b) requiring the chargor to make payment within one month from the date of service of the notice
- Effect of non-compliance with the provision of the loan agreement or provision of NLC - Perwira Affin Bank v Saad Abdullah Facts: Df executed a 1 st legal charge in favor of Pf to secure banking facilities to Saad Sdn Bhd (borrower) up to the sum of RM 80k together with interest thereon. By the way of 2 nd charge, Df executed a 2nd legal charge to secure banking facilities to the borrower up to the sum of RM 50k together with interest. Subsequently Pf sent to Df a notice in Form 16D under section 254. There was no response from Df in relation to form 16D. Pf made an application for an OFS. Df submitted that Form 16D was invalid because the sum claimed and specific in it was not the sums secured under the charge. The alleged claim of principal and interest clearly exceeded the sums secured under the terms of the charge annexure. There was no evidence of notice of variation of interest being served on the Ds. Held: dismissing the application. There was a variation of interest in the notice from the loan agreement. The Court decided that the variation of interest might affect the notice if there is no notification of the variation to the chargor (the burden was on the P to show that Form 16D was issued in accordance with the charge).
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- Cempaka Finance Bhd v Abbas bin Yaakob chargee ‟s right to enforce its claim. - Proper demand is a pre requisite to chargee‟ Since the notice of demand di not comply with the terms of annexure and it is improper. The notice of demand did not show the exact breach that caused the said notice to be sent. In the absence of any clear mention of a default in payment of installment, the notice must be sent pursuant to clause 8(1)(b)of the annexure, annexure, since clause 8(1)(a) referred to a notice requiring payment within 7 days from the date thereof. In the circumstances, since a proper demand is a pre-requisite to Pf right to enforce its claim and since the notice of demand did not comply with the terms of the annexure, the application which premised on the faulty notice of demand must be dismissed.
iii. The service of the notice. - The method and forms of service of notices are referred to in Section 430433 NLC 431-notice can be delivered by way of - Section 431-notice a.
personal delivery
b.
leaving the notice at the person‟s last known address
c.
pre-paid registered post
d.
substituted service (order given by court)
- Notice must be served to last known address of chargor - Once notice has been validly served, time begins to r un. - After expiry of date in the notice and no payment received from the chargor, chargee is at liberty to apply for OFS
- Effect of non- compliance - the notice can be challenged - Standard Chartered Bank (M) Bhd v Tunku Mudzaffar Tunku Mustapha - “Just because the provisions of s 431(1)(c)(i) of the NLC contain the word 'leaving', it cannot be the law that the plaintiff's process server is at liberty to literally leave the Form 16D notice 'anywhere' or 'anyhow' at the address
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of the defendant in the manner he might have thought permissible, and thereafter to just mention the word 'meninggalkan' in his affidavit of service. As such, it is the duty of this court to ensure that service was done properly and fairly
- Kekatong Sdn Bhd v Bank Bumiputra (M) Bhd - It was decided that although the notice in Form 16D was correct in substance, yet the address at which it was served was incorrect as the chargee served it to the address that they knew it was no longer being occupied by the charger instead of its new registered address. - The word „may‟ is not merely directory. It is imperative.
- If cannot be personally served, use substitute service (S.432)- Notice can be published in newspapers, mosques, balai raya - Re Cheong Ah Moi Facts: Substituted service on bankruptcy notice Held: in making order for substitute service, the primary consideration of the court is „how the matter can best be brought to the personal attention of the person on chargor
(ii) Foreclosure proceeding
a) Tribunal empowered to grant OFS To determine which tribunal to initiate a foreclosure proceeding, depends on the title of the land High Court (Sec 256 NLC)-
Registry title title i.e. Final Final Title Title (Sec 86 NLC),
Grant/ State Lease, Qualified Title (Sec 177)-usually written as QT(R), HS(D), PN.- by way of originating summon Land Office/Land Adminstrator (Sec 263 NLC):NLC):- Land Office Title (Sec 87 NLC) i.e Mukim Grant/ Mukim lease, Qualified Title-usually written as QT(M), HS(M), PM. -Land Administrator, using Form 16G
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Tan Teng Pan v Wong Fook Shang Land held under an EMR (Entry in the Mukim Register) was charged by way of registered charge. On default, the chargee applied to the High Court for OFS. This was refused on the basis that the court had no jurisdiction in view of ss261 and 262 Held: In the case of land held under Land Office Title, the court has no jurisdiction to OFS of that land in the instances of an application by a chargee. Upon receipt of the application, the High Court or LA will grant OFS unless there is existence to the contrary
b) Existence of cause to the contrary No definition provided by NLC. Word appear in Section 256(3) & 263(1) NLC Literally it refers to a situation where if the judge or land administrator is satisfied that there is a valid reason or valid objection to the application, then order for sale will not be b e granted. Interpretation by court states that it means the court or land office will not grant an order for sale if granting that order will be against any rule of law or any rules of equity (Keng Soon Finance Bhd v MK Retnam Holdings Sdn Bhd) In Low Lee Lian v Ban Hin Lee Banking Bhd Bhd , Federal Court adopted 3 categories of cases in which „cause to contrary‟ might be established:established: (i) When a chargor was able to bring his case within any of the exceptions to Section 340, indefeasibility (ii) Where the chargor could established that the chargee had failed to meet the conditions precedent for the right to seek OFS; and (iii) Where the chargor could show that granting OFS would be contrary to any rule of law or equity.
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Examples of “cause to the contrary” (a) Charge is not registered:Oriental Bank v Chup Seng Restaurant R estaurant (Butterworth) Sdn Bhd
(b) Fraud Tai Lee Finance Co. Sdn Bhd v Official Assignee An application for OFS of land in Q will not be granted by the courts in cases where the chargee has been been fraudulent or where where the chargee and the chargor have acted in collusion to defraud 3 rd party. Public Finance Bhd v Narayanaswamy
(c) Contravention of statutes Phuman Singh v Kho Kwang Choon
(d) Invalid service of statutory notice (vs sec 254) Malayan United Finance v Tan Ah Moi The service of statutory notice was invalid by virtue of section 431(1)(c) post. Court refused to grant OFS.
(e) Defective or improper statutory notice of demand:- (vs sec 254) Co-operative Central Bank Ltdv Meng Kuang Properties The chargee included default interest which was more than prescribed interest- notice was defective RHB Bank Bhd v Syarikat Sg Nal Timber Industries No specific details of breach in F16D & amount claimed was more than allowed Multi-Purpose Bank Bhd v Maimoon Bte Abdul Razak
(f) Application made to wrong tribunal:Tan Teng Pan v Wong Fook Shang Charge was registered contrary to restriction in interest:United Malayan Banking Corp Bhd v Syarikat Perumahan Luas
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(g) Delay Public Finance Bhd v Hock Seng Housing Development An application for consolidation of accounts & for OFS was sought after foreclosure action against one charge had commenced and an OFS for it was made The application was dismissed on the ground that the delay to consolidate was inequitable to the purchasers, and in turn amounted to a cause to the contrary
(h) Contrary to any rule of Equity:(i)
Granting an OFS when chargee had knowledge that the land was previously sold to the 3 rd parties prior to the registration of the charge in their favour. Overseas Chinese Banking Corporation Ltd v Lee Tan Hwa
(ii)
When chargor turned to the 3 rd party to redeem the charged property and had in fact collected the redemption sums from the 3 rd party they are under some equitable duty. Kuching Plaza Sdn Bhd v Bank Bumiputra Malaysia Bhd Facts: Developer charged the land for development and parcels in the building were sold to sub-purchaser. Developer is unable to make repayment of the loan and chargee applies order for sale. Supreme Court decided that in this case, from the evidence the court deduced chargee had looked toward the sub-purchase of the parcels to redeem the property charged by developer. There is evidence that the chargee collected the redemption sums from the sub-purchaser to satisfy the loan. Therefore they cannot turn around to say that developer had breach the term of payment for the loan. Held: the court is of the opinion that these are valid circumstances and it would be unjust for chargee to foreclosure the charge because if the court granted the order it would be contrary to the rule of equity.
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(iii) Charge did not comply with the instruction from the borrower OCBC Bank Malaysia v Au Kee Sian & Anor Lender granted Overdraft facility to borrower and O/D was secured by a charge created by R. B gives instruction to L to reduce the overdraft limit. B made payment in order to effect the reduction of overdraft limit. However, L continue to allow B to utilise overdraft beyond its limit Referring to Law Lee Lian‟ Lian‟s case, it would be contrary to equity to grant OFS
Registry Title (High Court) Charge (registered) ↓ Default of repayment ↓ Serve Form 16D/16E ↓ 1 month / specified time) ↓ Application to court (originating Summons Summons & affidavit)-Order 83 RHC ↓ Hearing (before judge in chambers-to object/oppose-show cause to the contrary) ↓ OFS } sale by private treaty ↓ Application to Registrar for direction (fix reserve price/auction date/ public auctioneer/ terms of sale etc) ↓ Auction-Public auction ↓ →x buyer/bidder-postponed buyer/bidder-postponed as many time ↓ Buyer (Contract for sale ↓ Paid full purchase price (paid to chargee, residue refund to chargor, shortfall from chargor) ↓ Certificate of sale (Form 16F) ↓ Completion of sale (interest vest on new purchaser)
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Land Office Title-Land Administrator
Charge (registered) ↓ Default of repayment ↓ Serve Form 16D/16E ↓ 1 month/ specified time) ↓ Application to Land Office (Form 16G)-Section 263 NLC ↓ Hearing/Inquiry (before Land Administrator-to object/oppose-show cause to the contrary)-power of LA: default proven-any dispute refer to court ↓→→ OFS (Form 16H)LA functus officio } sale by private treaty ↓→→ Application to Registrar for direction (fix reserve price/auction date/ public auctioneer/ terms of sale etc) ↓ Auction-Public auction ↓ →x buyer/bidder-2x buyer/bidder-2x refer to court ↓ Buyer (Contract for sale) ↓ Paid full purchase price (paid to chargee, residue refund to chargor, shortfall from chargor) ↓ Certificate of sale (Form 16I) ↓ Completion of sale (interest vest on new purchaser)
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(iii)
Function of Land Administrator (OFS)
Limited power compare to power of court. LA has a mandatory duty to make an OFS unless there is a „cause to the contrary‟. Power of LA is only to determine whether the chargor has defaulted his repayment of loan and if it is proven that default has occurred, LA shall grant OFS. After granting OFS, LA has no power to vary OFS.
LA has no power to grant other order Government of Malaysia v Omar bin Haji Ahmad Collector of Land Revenue has no power to make an order requiring chargor to pay all money due by instalments to the chargee. Instead, he has to grant for the OFS when there is no existence of any cause to the contrary Any cancellation or alteration to order by LA only be made by the Court.
Gurpal Singh v Kananayer LA had considered allegations of fraud, mistake and other vitiating factors. He refused OFS. Held: “LA „has no power to adjudicate on the pleadings which ordinarily heard in the courts. …it would appear…that the power of the Collector in the enquiry should be limited. He should not go behind the charge in view of s340(1)…relating to indefeasibility…and only HC possesses the power to set aside any registered interest of the proprietor, chargee or lessee in any land title” (Mohamed Zahid J) (The court has the power to investigate the validity of the charge, and its priority)
Suppiah v Ponnampalam Thomson CJ explained “the Collector was bound to accept the register and once he was satisfied that the charge with which he was concerned was on the register then the only question for him to decide was whether or not there had been default in the payment provided for it. If he was not satisfied he could make no order, if he was so satisfied, he was o bliged to make an order…in other words the LA should not go behind the register”
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Lim Yoke Foo v Eu Finance Bhd Federal Court held that LA had no power to cancel the OFS as the LA is functus officio save as to his power under S.264(3) NLC 1965 to postpone the sale ordered or to formally rectify the first order within the purview of s33 with no power to make another or subsequent order under this section. Privy Council agreed that LA had no power to cancel OFS. In referring to the LA‟s lack of authority to cancel the order, PC noted that he only could postpone the date of the sale (s264(3)) or to correct certain error under s 33.
S.264A(1)- an S.264A(1)- an OFS may be postponed by LA subject to the following: (a) Postpone only once (b) Not exceeding period of 3 months (c) Application to postpone made by the chargee and agreed by Chargor (d) Application to postpone to be submitted to LA not less than 7 days before date of the proposed sale
Where there is default, Bank shall (a) Apply for OFS –foreclosure and sell property (b) If proceeds from sale is not sufficient to cover loan due, sue from Borrower/Chargor (c) If there is guarantee as part of security, can sue guarantor
OFS v Civil Suit The chargee may take 2 actions against borrower at the same time (simultaneously) provided there are 2 different securities. Re Tousti Jarranti When loan has been secured by two collateral securities (chargor and guarantee) there is nothing to prevent lender from proceeding against guarantor instead of chargor for realization of the debt.
BBMB v Esah Abd Ghani BBMB granted loan to Borrower & secured by a charge over 2 properties (belonging to the Borrower and 2 others) and a guarantee by 1 guarantor.
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Borrower defaulted & BBMB took action to apply for OFS but did not proceed further as one of the owners of the charged properties had died. BBMB proceed against the Borrower and guarantor under guarantee Held: Bank can pursue all remedies available under the law when the borrower defaults since there are 2 separate securities
HSBC v Wan Mohd Wan Ngah Chargor charged the house to the chargee as security for a loan. Charger defaulted in payment. Chargee applied for OFS to LA and it was granted. Before the date of the auction is set, the chargee also filed a civil action at the High Court for recovery of debt against the charger Held: To allow the bank to file an action at the High Court where the OFS have not even been completed is an abuse of the process of the Court. The auction is complete upon the sale of the land and if there is a short-fall from the sale price to cover the sum owing, the chargee can demand chargor to make good the difference
BBMB v Doric Development There was no express condition requiring foreclosure must first be applied before suing the guarantor. The chargee has a complete discretion to do what he wishes either to enforce the security of the charge by a foreclosure proceeding or enforce the guarantee by going after the guarantors
Kwong Yik Finance Bhd v Mutual Endeavour Sdn Bhd MESB borrowed money and created a charge for KYF. BB stood a guarantor. MESB defaulted to pay loan. KYF went after MESB and BB. Guarantor claimed that KYF must first go after the borrower by foreclosing the charge. Chargee should not be compelled to foreclose the property first before going after the guarantors
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Chargor to pay sums due before conclusion of sale (Right of Chargor) S.266, 278, 279 & 280 NLC. S.266(1)-
Right of chargor to tender payment at any time before sale
Any chargor may stop the sale by tendering the full amount due under the charge before the conclusion of the sale including accrued interest and expenses Chargor shall tender amount due to LA or Registrar of Court or to officer in ch arge of sale if payment made on auction day itself Lee Ah Chin v Wong Yoon Chai Any chargor may stop the sale by tendering the full amount due under the charge „before the conclusion of the sale‟, including accrued interest and expenses. The chargor would then be entitled to discharge of the charge and return of IDT
Before the conclusion of the sale is not defined. However by reference to the words in the proviso, right to tender would last until the signing of the contract of sale (sale to 3 rd party).
MJ Frozen Foods Sdn Bhd The term is used to signify the point of time when there was an acceptance of the bid
S.266(2)-The S.266(2)-The amounts referred to in sub-section (1) are(a) the amount shown in the order as due to the chargee at the date on which the order was made; (b) such further amounts (if any) as have fallen due under the charge between the date of the order and the date of the tender; and (c) An amount sufficient to cover all expenses incurred in connection with the making, or carrying into effect, of the order. (3) Where any order for sale ceases to have effect by virtue of this section, the Registrar of the Court or, as the case may be, Land Administrator shall give notice thereof to every chargee of the land or lease in question.
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S.278(1) Discharge otherwise than by payment. Any chargee may, by an instrument in Form 16N discharge the land or lease to which his charge relates (or, if it relates to more lands or leases than one, all or any of them) from all further liability thereunder, and the discharge shall take effect as from the date on which the instrument is registered. (2) (2) In the absence of express provision therein to the contrary, no instrument of discharge shall release the chargor from his personal liability under the charge.
S.279 Discharge by payment to Registrar in cases of death, absence or disability. (1) Any chargor may apply to the Registrar for relief under this section on the grounds that he is entitled to pay off of f the charge but(a) the chargee is dead, or cannot be found within the Federation, or evades or refuses to accept payment thereof, or is under a legal disability, AND (b) he is unable to trace any person or body authorised to receive payments on the chargee's behalf.
(2) Where the grounds specified in any such application, and the precise amount due under the charge, are established to his satisfaction, the Registrar shall authorise the chargor to deposit the amount in question with him; and upon the making of the deposit, the land or lease to which the charge relates shall be discharged from all liability thereunder
(3) The receipt of the Registrar for any monies deposited with him under this section shall, as respects the personal liability of the chargor, be a sufficient discharge therefore; and any such monies(a) shall be placed by the Registrar in the custody of such public officer as he may think proper; (b) may be claimed by the person or body entitled thereto at any time within six years of the date of deposit; and (c) if not so claimed, shall thereafter be paid into the Consolidated Fund of the State.
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S.280 Memorialisation on discharge by payment. payment. Where any land or lease has become discharged from liability under any charge by payment to the Registrar under section 279, the registration of the charge shall be cancelled by the Registrar pursuant to section 314; and any chargor may apply to the Registrar pursuant to section 314; and any chargor may apply to the Registrar under that section for cancellation of the registration of the charge on the grounds that a discharge has been effected by payment to the chargee.
S.257 &S.263- OFS by HC or LA shall be made in F16H
Public Auction S.257(1)(g) ,S.268, S.268A, S.301 United Malayan Banking Corp v Chong Bun Sun [1994] 2MLJ 221 It was decided that once OFS has been made by the court, it can only grant an OFS by way of public auction (section 257)
Auction will be held under the direction of the officer of the court or LA but can appoint licensed auctioneer. S.259(1) & S.265(1) Once auction is done, the successful bidder will sign the contract in the Proclamation Proclamation of Sale and will also be signed by HC or LA The balance purchased price needs to be paid within 120 days- S.257(1)(g) & S.263(2)(g) Upon full payment of the purchase price, the successful bidder is entitled to receive certificate sale-F.16F (HC), F.16I (LA) and the IDT/duplicate lease-S.259(3) & S.265(4)
S257. Matters to be dealt with with by order for sale. sale. (1) Every order for sale made by the Court under section 256 be in Form 16H and shall(a) provide for the sale to be by public auction; (b) require the sale to be held on, or as soon as may be after, a date specified therein, being a date not less than one month after the date on which the order is made;
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(c) specify the total amount due to the chargee at the date on which the date on which the order is made; (d) required the Registrar of the Court to fix a reserve price for the purpose of the sale, being a price equal to the estimated market value of the land or lease in question; (e) specify that no bidder shall be allowed to bid in the sale unless the officer of the Court is satisfied that the bidder possesses, at the time of the sale, the sum equivalent to ten per centum of the reserve price specified under paragraph(d) ; (f) specify that where the full amount of the purchase price is not paid after the fall of the hammer by the successful bidder, the sum specified in paragraph (e) shall be paid as deposit to the chargee and forthwith credited into the account of the chargor pending the settlement of the balance of the purchase price; (g) specify that the balance of the purchase price shall be settled on a date not later than one hundred and twenty days from the date of the sale and that there shall be no extension of the period so specified; and (h) specify that where the balance of the purchase price is not settled on a date specified under paragraph (g), the sum paid as deposit under paragraph (f) to the chargee shall be forfeited and disposed of in the manner specified under section 267A.
S.268 Application of purchase money. The purchase money is the money that is paid by the purchase who has purchased the land at the public auction either from the court or LA (1) The purchase money arising on any sale under this Chapter shall be applied as follows(a) firstly, in the payment of rent to the State Authority or the lessor (according as the charge was a charge of land or of a lease) and, so far as no person other than the chargor was responsible therefor, any other outgoings payable to the State Authority or any local authority; (b) secondly, in the payment of the expenses (as certified by the Registrar of the Court or Land Administrator, as the case may be) incurred in connection with the making and carrying into effect, of the order for sale
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(c) thirdly, in the payment to the chargee of the total amount due under the charge at the time of the sale; (d) fourthly, in the case of a charge to secure the payment of an annuity or other periodic sum, in accordance with any provision for the satisfaction of payments subsequently falling due included therein pursuant to paragraph (b) of subsection (2) of section 242; and (e) fifthly, in the payment off of subsequent charges, if any, in the order of their priority.
(2) The reference in paragraph (e) of sub-section (1) to the payment off of subsequent charges is a reference(a) In the case of a charge to secure the re-payment of a debt, or the payment of any sum other than a debt, to the payment to the chargee of the principal sum thereby secured (or so much thereof as is then outstanding) together with any interest then due, if any; (b) in the case of a charge to secure the payment of an annuity or other periodic sum, to the payment to the chargee of all sums then due, and the giving effect to any provision for the satisfaction of payments subsequently falling due included therein as mentioned in paragraph (d) of sub-section (1).
(3) The residue, if any, of the purchase money shall, subject to sub-section (3) of section 339, be paid to the chargor.
S.268A Application of purchase money by chargee who is a financial institution. (1) Upon receipt of the full payment of the purchase money of the sale, the chargee who is a financial institution shall immediately certify in writing to the Registrar of the Court or the Land Administrator, as the case may be, that the full payment has been received. (2) The chargee shall apply the purchase money in the manner specified as follows: (a) firstly, in the payment of the moneys due specified in paragraphs (a) and (b) of sub-section (1) of section 268 not later than fourteen days from the date of the receipt of the full purchase money of the sale; and
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(b) secondly, in the payment of moneys due to the persons or bodies in the order of priority specified in paragraphs (c) , (d) and (e) of sub-section (1) of section 268 not later than twenty-one days after receipt of the full amount of the purchase money. (3) A statement of accounts of the payments received and paid out as specified in sub-section (2) shall be submitted not later than thirty days after the receipt of the full purchase money to the Registrar of the Court or the Land Administrator, as the case may be.
S.301. When an instrument is fit for registration. (1) An instrument shall be fit for registration under this Part if, but only if, the following conditions are satisfied(a) that it is one of the classes of instrument set out in sub-section (1) of section 292 as authorised to be so registered; (b) that it complies with(i) the provisions of Part Thirteen as to the form, content, execution and attestation of instruments of dealing generally, and the persons and bodies capable of taking thereunder, and (ii) the provisions of Parts Fourteen to Seventeen with respect to instruments of the particular class in question; (c) that the dealing which it effects is not contrary to any prohibition or limitation imposed by this Act or any other written law for the time being in force, or to any restriction in interest to which the land in question is for the time being subject; (d) that it does not declare or, except as permitted by section 344, disclose the existence of any trust; and (e) that it is duly stamped in accordance with the provisions of the Stamp Act, 1949; Provided that where a certificate of sale has been given to a purchaser in respect of any charged land or lease under sub-section (3) of section 259 or sub-section (4) of section 265, any requirement to obtain the consent of the State Authority relating to the restriction in interest to such land or lease in question shall not be applicable
NurulAkhyar
Order For Sale
Effect of Sale Proprietary rights in the land do not pass to or vest in the purchaser/bidder until registration of the certificate of sale given under S.259(3)/S.264(4) Prior to sale, the chargor is still the legal owner of the land-S.267/268. Hence, he has the right to: (a)
Discharge the charge under S.266(1)
(b)
Have the land sold at the market value prevailing on the date of sale (Asia Commercial Finance(M) Bhd v Development Realtor Sdn Bhd)
(c)
Intervene if the sale has been prejudiced of the chargor
(d)
Balance of purchase price (surplus)
Sale by Private Treaty Private treaty is a private arrangement by the chargor to sell the charge property to a willful purchaser with the consent from the chargee. (normal sale and purchase transaction between two individuals- vendor and purchaser) Could be done before or after OFS Before OFS The chargor may before OFS is pronounced and with the consent of the chargee sell the charged property by way of private treaty
After OFS Section 266(1) NLC provides that any chargor whom an OFS has been granted may at any time before the conclusion of the sale, tender the outstanding amounts to Registrar of the Court or LA (as the case may be)-(or if the tender is made on the day fixed for the sale, to the officer having the direction thereof), and the order shall thereupon cease to have effect. Initially- in The Chartered Bank v Packiri Maideen Ma ideen It was decided that the chargee could sell by private treaty on default but that once he took proceeding under the legislation (i.e. OFS) then a public auction must be ordered. The present approach: even after OFS the chargor may still sell the charge property by way of private treaty in the light of Section 266 NLC.
NurulAkhyar
Order For Sale
Malayan United Finance Bhd v Tay Lay Soon “There is no statutory provision for the discharge of the charge by the chargor…However, under section 266(1) any any chargor may at any time before the conclusion of the judicial sale of a charged land tender the amounts due to the Registrar of the court or the Collector”. (Jemuri Serjan SCJ)
MJ Frozen Food Sdn Bhd v Siland Sdn Bhd “the chargor does not abrogate all his rights to the chargee at the making of the OFS. He is merely compelled to abide by the court‟s order for his property to be sold in accordance with the statutory safeguards on his interest as provided under ss 257 and 258 of the NLC …the divesting of the chargor‟s right occurs only on the completion of the contract of sale and conveyance…” (conclusion of sale means until full payment by the bidder is received by the chargee)
MUI Bank v Cheam Kim Yu Under NLC, they are nothing to prevent a chargor with the consent of the chargee to sell the charged property by private treaty. There are no specific provision in the Code for such sale but if such sale is concluded as purely business arrangement, it is for the chargee to discharge the charge to give full effect to the sale. That was not done here
Rights of Chargor after OFS Proprietary rights in the land do not pass to or vest in the purchaser until registration and after the issuance of certificate given under section 259(3)/ 264(4) NLC. Still the legal owner of the land (Section 267/268 NLC) Right to intervene if the sale has been prejudice p rejudice of the chargor; Right to object to any variation of the terms and conditions of the sale; Rights to balance of purchase price; Right to have the land sold at the market value prevailing on the date of the sale (Asia Commercial Finance (M) Bhd v Development Realtor Sdn Bhd [1992] 2 MLJ 504}; and
NurulAkhyar
Order For Sale
Right to discharge the charge under Section 266(1) of NLC. MUI Bank v Cheam Kim Yu “Under NLC, they‟re nothing to prevent a chargor with the consent of the chargee to sell the charged property by private treaty. There are no specific provisions in the Code for such sale but if such sale is concluded as a purely business arrangement, it is for the chargee to discharge the charge to give full effect to the sale. That was not done here” (Harun Hashim)
United Malayan Banking Corporation v Chong Bun Sun It was held that so long as the chargee‟s interest is not adversely affected, a chargor, may before an OFS has been made or even after an OFS has been ordered, until the sale of the charged property to a third party at a public auction is concluded and with the consent of the chargee, sell the charged property by way of private treaty. (chargor is entitled to tender outstanding amount at any time before the conclusion of the sale)
NurulAkhyar
Order For Sale
