4.

Under general property principles, a valid contract of sale of land should create rights in equity
prior to the registration of an appropriate instrument under the Torrens legislation. However, this
principle causes problems in respect of the Code. The Peninsular Malaysian system is said, by some,
to be characterized by its exclusion of equity. Yet this exclusion is said, by others, to be limited.

This section recognizes the contractual operation of a transaction disregard of whether the dealing is
carried out in accordance with the Code or not. s.206(3) has to be read with a clear understanding of
s.206(1) and s.206(2) of the Code. S.206 provides that a proper instrument of dealing has to be duly
registered. The registration for the dealing must be done using the prescribed form under the Code.
However, s.206(2) of the Code further provides for the exception to the s.206(1) where in the case of
lien and tenancies no such registration is required. A separate sub-section under s.206(3) specifically
emphasises that nothing in s.206(1) shall affect the contractual operation of any transaction relating
to alienated land or any interest therein.

The code drew out the matters and effect of land transactions after a registration of the dealing and
not before the transaction. Matters regarding to transactions or contracts arising before the
registration are not governed by the Code. Therefore, the presence of s.206(3) is very important.
When a purchaser has fulfilled his side of the contract he acquires a right which is also a right. In
other words, a purchaser who has entered into a valid contract but is yet to register it can only sue
the vendor on his personal basis based on the contract. However, once he acquires a good title to
the land through registration he has the right to sue any party for any infringement of his rights in
the land. Not fulfilling any of the requirements for a valid contract would certainly postpone the
right of the parties in contract and thus fail the land transaction. Again, though the Code is said to be
a comprehensive code, nevertheless, there are a certain stages of land transaction that are not
covered by it.

The recognition of equity in s.206(3), where the foundation of equitable estoppels is either a
contract or the existence of some fact which the legal owner is estopped from denying even though
it does not provide for any proprietary interest arising from the contract. It is implicated that any
land contract would create a kind of land interest. Thus, in case of a breach of the contract, the
innocent party would be entitled for a kind of relief that is just and reasonable in the eyes of the law
and according to equity. In charge transactions relief outside the Code should be offered to parties
who are not qualified to pursue their remedies under the Code.

Section 206(3) could be used to assert that in the absence of illegality indulging the contract the
court has the discretion to enforce the terms of the contract. In Malaysia, the basic elements of
justice were described by Salleh Abas J His Lordship said, “The principle is an equitable principle
created for the protection of a person who has expended money because of his reliance upon the
encouragement by the other. It is because of his reliance upon the encouragement by the other. It is
because of the expenditure and encouragement that the parties are brought into a legal
relationship.”

It is generally accepted that s.206(3) merely provides a space for the parties in the contract to sue.
However, the latest development in the law has seen efforts to fully utilise the potential scope of
application of this section. For example, the contractual remedy resulting from breach of contract is
now extended to the breach of obligation. In the event of a breach for a valid land contract the usual
remedy is a ‘specific performance’ which is provided under the English equity. Specific performance
is a discretionary remedy which is also granted subject to others factors. For example, s.21(2)(a) of
the Specific Relief Act, the court may refuse to grant the relief of specific performance to the plaintiff
if it involves unforeseeable hardship for the defendant. However, damages in equity will be granted
when the court chooses not to grant specific performance or the specific performance per se is not
enough to give justice to the case. A pre-requisite for the remedy is the presence of an enforceable
and valid contract to operate upon. The basis for specific relief in land contract is equity in cases
where the common law damages are found to be insufficient. The main objective is to provide
justice for the parties in contract.

In other words, since the Torrens system only recognizes registered title and interest, equity remains
a basis for relief in the pre-registration stage of transaction. How far this principle is adopted in the
Malaysian land system remains uncertain, yet the use of ‘contractual operation’ under s.206 (3) may
give room for equitable principles to operate together with the registration system as a basis of
providing justice to the parties in the contract.

In the case of Templeton & Ors v Low Yat Holdings Sdn Bhd & Anor, Edgar Joseph Jr J held that
s.206(3) grants statutory authority for a liberal interpretation of equity whenever there is a basis for
that. Thus, it is important to determine what the bases for the liberal application of equity are.
Certainly, Joseph Jr J did not suggest the free and unqualified application of the principles of equity,
more so since they are originally British. Therefore, it was concluded that s.206(3) of the Code
provides statutory authority for the liberal application of equity whenever there is a basic for that.

Another important issue is whether s.206(3) undermines the concept of indefeasibility of title, which
stands as one of the main feature of Torrens system. Tracing the effect of registration, its objective is
to give indefeasibility to any registered title. As an indefeasible title, the validity of the title cannot
be challenged unless under few grounds as provided by the Code. The question whether s.206(3)
allows an unregistered interest or right to be influential on any indefeasible right or not invites
dispute. According to Judith, the effect of s.206(3) is to show that there is a marked difference
between the unregistered registrable interest and the unregistered unregistrable interest. Thus, to
maintain that equitable principles can be used to protect the unregistered unregistrable interest will
not certainly defeat the objective of the Torrens system. It is submitted that in any system, there
should be a provision that prescribes the right of any interest which does not comply to the law.
Therefore, the interpretation of s.206(3) with an emphasis on any contractual elements should not
be perceived as one of the ways to defeat the concept of indefeasibility of title ascribed by the
Torrens system.

Krishnadas & Ors v Maniyam, despite the guarantee from the state, s.206(3) has preserved the
contractual obligations or an claim to strike a balance to the indefeasibility of title under the Torrens
system. Thus, despite being a registered proprietor, an owner is still bound by personal equitable
obligations. The recognition of the in personam exception is an example of the emerging application
of equity within the statutory provisions. In the area of contract law, unconscionability as well as
fiduciary relationship are always used as a basis for an claim. Peh Swee Chin SCJ in has made an
effort to explain this concept. According to him, the expression of ‘remedy’ does not appear to be
fully realised semantically. The preposition ‘in’ means ‘against’ in Latin, so that the expression simply
means a relief granted against a person personally, and that, most often, is an injunction, mandatory
or otherwise, enforceable by imprisonment for contempt for its default. One side s 206(3) does
create a danger to the concept of indefeasibility under the Torrens system. The court can give a
plaintiff the status of ‘legal’ owner of the land or a person who possesses an interest in the land,
even though the plaintiff does not comply with the statutory requirement under the Code. At this
occasion, the question of security and certainty of the system is set aside. What has to be addressed
here is this right of claim. It should be emphasized that the claim is actually in line with the concept
of the registration system. Although an claim is derived from equitable principles, it works outside
the registration system. Its existence serves the purpose of protecting the right of the unregistered
party. It is submitted that any system which makes registration compulsory requires the law to
express clearly the position of an unregistered interest. This prerequisite may work hand in hand in
the Torrens system as a way to protect the right of the unregistered or unregistrable interest. Thus,
equity and s 206(3) serve to complement the defect arising under the strict registration system of
the Torrens. There is a need for other alternative systems to complement the present system. Thus,
as far as land contract is concerned, s 206(3) should not only serve as a statutory recognition for any
contractual operation relating to land. The time has come to widen the scope to include the
application of equitable principles as long as those principles support the aims and objectives of the
Torrens system.

5. Introduction

• Unlike the Torren system where the registration is everything, under the English Title Deed System,
the ownership need to be proven through documents. These documents that are related to the
transaction of the land are also known as “title deeds” or also the chain of title.

• However, under this system had caused the transfer of land to be slow, expensive and there is also
no certainty of title that was provided.

• Due to various reasons, this led to the need to change the tenure system. The Torren system was
introduced in the Malayan states with the formulation of the National Land Code 1965.

Content

• One of the problem arise here is what is the extent of the English law could be applied in the
Malaysian land system.

• Authorities that in favour of English law

• S. 3 of the Civil Law Act 1956 has allow the application of the common law of England and also the
rules of equity in West Malaysia as well as in Sabah and also Sarawak.

• Specific Relief Act 1950 could also be found to have provided the court with the power to grant
certain specific and also injunctive equitable remedies and also reliefs.

• S. 11(2) of the Specific Relief Act 1950 provided that the court may presume that the breach of a
contract to transfer immovable property cannot be adequately relieved by compensation in money

• S. 26(b) of the Specific Relief Act 1950 explains that specific performance of a contract may be
enforce on anyone that claims under the contract by a title that arise subsequently from a contract
with the exception that the transferee paid his money in good faith and without notice from the
original contract.

• Authorities that not in favour of English law

• When it comes to the National Land Code, it has remained silent on this matter. However, there
are two provisions in the National Land Code which may be related this this matter.

• S. 206 National Land Code stipulated that recognition is provided to contractual transaction
whether the dealing did or did not carried out based on the National Land Code. This in a way is a
way which allow the continued application of the English equitable principles.

• Cases

• Templeton v Low Yat Holdings Sdn Bhd

• What happened in this case is that the vendor in selling his land had obtained the remaining land
which is the benefit of right way. However, when the purchaser started work in the land he
purchased, this causes the vendor to have difficulty to access his part of the land. In order to
maintain the right of way that the vendor has claimed inter alia specific performance that he was
entitled to equitable easement in respect to such right.

• The grounds for such easement is because the sale and purchase agreement was entered because
the vendor was provided with the right of way. The purchaser also knew that the vendor will not sell
the land unless the right was agreed and there was also oral agreement to grant such right to the
vendor.

• The court granted the plaintiff relief on the basis of equity as the defendant was asked to execute
and register an easement in statutory form.

• This case clearly shows that the court was not prevented to apply the English equitable principles.

• Verama v Arumugan

• What happened in this case is that the plaintiff here that was registered as the proprietor of a
piece of land was also the administrator of the estate of a deceased person. The plaintiff later
claimed against the defendant for the possession of land.

• The land in question here was used by the defendant where they have built houses and also lived
on the land for more than 10 years.

• The defendants later tried to rely on the English principles of proprietary estoppel that was applied
in the case of Inwards v Baker as defence and claimed that they were entitled to live there as long as
they wished.

• The judge however refused to apply such defence because land law in Malaysia is governed under
the National Land Code which was based on the Torrens System and does not refer to the English
equitable principles.

• The court also further explains that under the National Land Code, the title of the registered
proprietor is indefeasible unless there is presence of fraud, mistake or undue influence but there
was no such presence here in this case. Instead, the defendants here were mere gratuitous licensees
which mean individuals that enters another person property without invitation and also did not
provide any consideration for such entry.

• Conclusion

• By referring to all the authorities that has been provided, we can see that the English law was not
totally stopped from being applicable. Nevertheless, there is indeed certain instances where the
judge opted not to refer to the English law since they believed that the National Land Code is
sufficient.

• In conclusion, the English law may be applicable as long as it does not go against the Malaysia land
system that mainly provided under the National Land Code.