Security dealings charge

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Transcript of Security dealings charge

  • *Ainul Jaria Maidin - LAW 3111- SECURITY DEALINGS

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- Meaning A dealing created to secure the repayment of a loan.Elements present loan, security in the form of either title or interest over real property

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  • *Ainul Jaria Maidin - LAW 3111- Type of securityLand can be used and accepted as a security for a loan, owing to its special attributes as an immovable property as it is permanent, its value is never lost and capable of conferring different interests to various persons as the same time so it is regarded as a good security. Further, if borrower fails to repay the money borrowed together with interest, the lender can recover his money by selling the land by way of public auction or by way of private treaty (with consent from the chargor).

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- Security dealings recognised by National Land Code 1965

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111-

    Charge Legal Charge or Torrens ChargeLien Statutory Lien

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- Torrens/Legal Charge

    A charge is a form of security dealing created by a registered proprietor or a lessee by using his land as a collateral or security in return for the loan given to him by the Lender. One can either go to a bank or a finance company, which is in business of lending money or even to an individual to borrow money and in return may pledge his land as security to pay back the money with interest.

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- The Torrens charge is a creation of statute, i.e. the National Land Code 1965 and its characteristics are different from the common law deed of mortgage. The Malaysian courts have always appreciated the difference between mortgage and a charge. There are a few differences between the two dealings

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  • *Ainul Jaria Maidin - LAW 3111- CasesGan Khor v Soan Bin Pelita (1935) MLJ 158Paramoo v Zeno (1968) 2 MLJ 230BBMB Bhd v Doric Development Sdn Bhd. & Ors (1988) 1 MLJ 462Malayan United Finance Bhd. v Tan Lay Soon [1991] 1 MLJ 504These cases will be discussed in the first tutorial session next week. PLEASE READ!

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  • *Ainul Jaria Maidin - LAW 3111- Powers of ChargingS.241(1)(a)(b)(c) NLC 1965 The owner of an alienated land has power to create a charge of his land irrespective of whether final or qualified title or as a parcel in strata title. The landowners powers to create a charge is subject to the restrictions imposed in S.241(3)NLC 1965.

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- What can be charged

    S.241(1) NLC provides for powers of charging and type of property that should be charged.Whole, but not part of any alienated land. Undivided shares in alienated land must be the whole undivided share and not only a portion of it. the interest of lease in alienated land can also be charged for loan.

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- S.241(1)(b) NLC provides that charge can be created over the whole but not a part only of any undivided share in alienated land. This means a co-proprietor is empowered to charge his undivided share in an alienated land. However, only the entire undivided share in the land can be charged, not merely a part. Rationale for this provision is to avoid difficulties in identification of the quantification and on default, in the chargee enforcing his remedies.

    Problems with charge over part of land

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- CaseJ Raju v Kwong Yik Bank Berhad [1994] 2 MLJ 408, it was decided that it is possible to charge part of land but only by way of an equitable charge. This transaction however, is not capable of registration. The statutory remedy under the NLC is only available to a registered chargee.

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  • *Ainul Jaria Maidin - LAW 3111- Alienated land S.241 -Charge can only be created over alienated land and not any other types of land such land held under TOL, mining lease, squatter land etc.Lease of alienated land

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- secure the repayment of debtThe charge must be to secure the repayment of any debt or the repayment of any sum other than a debt or of any annuity or other periodic sum. (S.241(1) NLC).

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- CaseR&I Securities Sdn. Bhd. v Golden Castle Finance Corp (M) Ltd.[1979] 1 MLJ 46, the creation of a charge where there is no loan transaction is not possible since it defeats the essence of the charge, which is to secure is repayment of the loan and the obligations to repay it. In Yee Sin Cheong v UMBC [1992] 2 CLJ 1298 the court said that unless there is a loan in existence, no security is therefore required.

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  • *Ainul Jaria Maidin - LAW 3111- Express and Implied Conditions

    Express conditions to a charge is prescribed in the charge agreement itself. This is often referred as the Annexure to the Charge and it is annexed to the Statutory Form 16A or 16B. The Implied conditions are provided in Ss.249-252 NLC.

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111-

    These conditions must be observed by the chargor and the chargee during the subsistence of the charge. Failure on the part of the chargee to comply with the express or implied conditions provided in the NLC, then he faces the risk of the chargee instituting foreclosure proceedings.

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  • *Ainul Jaria Maidin - LAW 3111- Restrictions on Powers of ChargingThe powers of charging of ones property is subject to certain restrictions as specified in s 241(3) NLC 1965:(a) any prohibition or Limitation for example Malay Reservation Enactment 1933 restricts the creation of charge of land held under Malay Reservation title in favour of a non-Malay chargee;

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  • *Ainul Jaria Maidin - LAW 3111- Restrictions ..cont.b) any restriction on interest, as specified in Ss.103-129 NLC 1965 wherein the State Authority has endorsed on the issue document of title to the land the restriction to create a charge without first obtaining the written consent of the State Authority;(c) if the land is subject to lease then the express and implied conditions of the lease should apply.

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- Charge in favour of two or more persons

    S.241(4) NLC provides that no charge may be granted to two or more persons or bodies unless they are acting in the capacity of trustees or representatives. In this case the charge may be held jointly by them all. In cases of leases the issue document of title or duplicate lease may be held by the first chargee unless there is a contrary agreement to that effect.

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  • *Ainul Jaria Maidin - LAW 3111- Void Charges

    The charges, which fails to comply with certain requirements, e.g. Non compliance with the terms of the Moneylenders Ordinance 1951, is not enforceable and considered as void charges.

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- CasesPhuman Singh v Khoo Kwang Chong [1965] 2 MLJ 189 and Associated Finance Corporation Ltd. v Poomani [1972] 1 MLJ 117, the court emphasised that the moneylending agreement (the basis upon which the charge was created) was void for being in contravention of the respective Moneylenders Ordinance in force.

    Ainul Jaria Maidin - LAW 3111-

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    Menaka v Lum Kum Chum [1977] 1 MLJ 91.Keng Soon Finance Bhd. v MK Retnam Holdings Sdn. Bhd [1996] 4 CLJ 52.

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- Prerequisite or Requirements to Create a Torrens Charge

    Conditions to be fulfilled by Chargor & Chargee in order to create a valid charge.

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- Requirement to use the Prescribed Stereotype Statutory Form / Instrument

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- Forms 16A or 16BS 242(1) NLC 1965 prescribes the statutory instrument or form to be used to create a charge to secure the repayment of a debt or the payment of any sum other than a debt shall be in Form 16A.

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  • *Ainul Jaria Maidin - LAW 3111- Form 16B is the appropriate form for charges providing for the payment of an annuity or other periodic sum. The payment of an annuity is referred to as a rent-charge whereby the payment of an annual sum is charged on the land. Any other conditions that need to be imposed on the chargee and chargor will be made out in an annexure to the charge.

    Ainul Jaria Maidin - LAW 3111-

  • *Ainul Jaria Maidin - LAW 3111- Variation to Forms The Forms may be varied as long as the variation is not a matter of substanceS.207 NLC 1965 - A matter of substance is one, which represents a material alteration to the requisite information so that the substantive nature of the underlying transaction or the liability of one party is altered thereby. Any conditions agreed between the chargor and chargee can be inserted in the annexure to the charge.

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