1. Case Information
- Court: Supreme Court, Kuala Lumpur.
- Coram: Lamin Mohd Yunus PCA, Edgar Joseph Jr FCJ, NH Chan JCA.
- Decision Date: 24 May 1997.
- Parties: Kimlin Housing Development Sdn Bhd (Appellant/Borrower Company) vs. Bank Bumiputra Malaysia Bhd & Ors (Respondents/Bank and Receivers & Managers).
2. Background and Facts The Appellant, a registered proprietor of various lands, executed two legal charges under the National Land Code (NLC) and a deed of debenture in favour of the 1st Respondent to secure banking facilities. The Bank appointed Receivers and Managers (R&Ms) under the powers of the debenture. The R&Ms sought to sell the charged lands without resorting to NLC judicial sale proceedings. While the application was pending, the Appellant went into liquidation, and the Liquidator opposed the sale.
3. Issue 1: Power of Sale under Debenture vs. National Land Code The primary question was whether the R&Ms were entitled to sell the charged lands by virtue of the debenture without taking proceedings under the NLC to obtain a judicial sale. The Court distinguished the NLC statutory charge from a common law mortgage:
“Under the Torrens system there is no transfer of ownership of land by statutory mortgage… ‘no power of sale or foreclosure is conferred on the chargee himself, but proceedings must be taken to obtain a judicial sale.’“
The Court emphasized that the rights and powers of a chargee under the NLC “must flow from the relevant provisions of the Code with the charge taking effect as a security only, enforceable by proceedings in Court to obtain a judicial sale”.
4. Issue 2: Waiver and Contracting Out of the NLC The Respondents argued that the debenture’s contractual provisions conferred a power of sale independent of the NLC. The Court rejected this:
“the provisions of the Code as to the rights of chargors are designed for their protection and cannot be waived nor can the chargor contract himself out of the Code“.
The Court further held:
“any power of sale which purports to be conferred on a chargee himself, omitting all mention of notice and periods of default, by a debenture or power of attorney and the necessity for obtaining a judicial sale, would be invalid and ineffective to entitle a purchaser to be registered as owner”.
Regarding public policy, the Court stated:
“the provisions of the Code setting out the rights and remedies of parties under a statutory charge over land… are exhaustive and exclusive and any attempt at contracting out of those rights, unless expressly provided for in the Code, would be void as being contrary to public policy“.
5. Issue 3: Impact of Liquidation on Receivership The Court addressed whether the R&Ms’ powers survived the winding up of the company. It noted that unlike an English mortgage where ownership transfers, an NLC charge is security only:
“with the advent of liquidation, any sale by the receivers and managers of the lands pursuant to the Debenture would be a purported sale of property which belonged to the Borrower Company, and so would require the approval of the Court under s 223 of the Companies Act 1965“.
Furthermore, the Court highlighted the statutory definition of an R&M under Malaysian law:
“Because a receiver and manager… is by definition (see s 4(1)(b) of the Act) an officer of the corporation… the clear implication is that liquidation does not merely terminate the agency of a receiver and manager but also his powers on winding up, since there is no estate for the receiver and manager to administer“.
6. Outcome The Supreme Court allowed the appeal, setting aside the High Court’s judgment. It issued declaratory orders stating that the R&Ms were not entitled to sell the charged lands without NLC proceedings and that their powers to administer the estate ceased upon winding up.
Disclaimer: This post is for informational purposes only and does not constitute legal advice. Please consult a qualified Advocate & Solicitor for your specific legal needs.
