IN THE FEDERAL COURT MALAYSIA (APPELLATE JURISDICTION) CIVIL APPEAL NO : 02(f)-101-12/2012(S) BETWEEN 1. SIA HIONG TEE 2. SIA HIONG SING 3. SIA MEE HUONG 4. SIA KEE YII … APPELLANTS AND 1. CHONG SU KONG 2. CHONG YU LEN 3. CHONG SHUK MUI 4. CHONG KUI MOI @ ROSE 5. CHONG SU MING 6. CHONG SU FOOK 7. CHONG FOOK EN … RESPONDENTS CORAM ARIFIN ZAKARIA (CJ) ABDULL HAMID EMBONG (FCJ) AHMAD HAJI MAAROP (FCJ) HASAN LAH (FCJ) HAJI MOHAMED APANDI ALI (FCJ) 1 JUDGMENT OF THE COURT Introduction [1] This is an appeal by the appellants (the defendants in the High Court) against the decision of the Court of Appeal in affirming the decision of the High Court. The Court of Appeal ruled that the title of the appellants is defeasible on the basis that the power of attorney that was used as authority to transfer the said land to the appellants is a forged instrument even though the land in question had been registered in the name of the appellants. That being the case, the Court of Appeal held that the appellants could not have acquired a valid title to the land. Leave to Appeal [2] This court had, on 5.12.2012, granted leave to the appellants to appeal against the decision of the Court of Appeal on the following questions of law: “(i) Whether bona fide purchasers for value and without notice, obtained good title to land immediately upon registration of the transfer under section 88 of the Land Ordinance (Sabah Cap. 68) (“Land Ordinance”) and is therefore an indefeasible registered interest in Land?; and, (ii) Whether the concept of deferred indefeasibility as adopted in Tan Yin Hong v Tan Sian San & Ors (2010) 2 CLJ 269 which was a case based on s. 340 of the National Land Code should be distinguished from the interpretation of section 88 of the 2 Land Ordinance since there is no similar provision in the Land Ordinance?” Background Facts [3] The background facts of the case are these. The respondents (plaintiffs in the High Court) were the registered owners of a piece of land held under CL015029213 measuring 25 acres located in the district of Menggatal, Kota Kinabalu (hereinafter referred to as “the land”). The custody of the title deed of the land was with the 2nd respondent (now deceased) until it was given to the 7th respondent allegedly for valuation purposes. It is not disputed that the 7th respondent had intended to sell the land and for that purpose he informed one Tong Chung Hing (Tong) that he may be agreeable to a sale price of RM 2.53 million. Tong later informed the 7th respondent that a certain Mr Ling was interested to purchase the land for RM2.53 million and is willing to pay in cash after Mr Ling had seen the original title and had valued the land. Upon the request of Tong, the 7th respondent gave the title deed to the land to Mr Ling for valuation purposes but the title deed was never returned to the 7th respondent. It was discovered later that the appellants had become the registered owners by virtue of a sale and purchase agreement dated 19.3.2004 with the 7th respondent signing for himself and on behalf of the 1st to 6th respondents pursuant to a power of attorney which the 1st to 6th respondents had allegedly given to the 7th respondent. The respondents contended that their signatures in the sale and purchase agreement dated 12.2.2004, the power of attorney dated 19.3.2004, the memorandum of transfer dated 25.3.2004 and Form PDS 15 were forged. 3 Proceedings in the High Court [4] In their claim, the respondents asked for, among others: an order that the transfer of the land effected under the Memorandum of Transfer dated 25th March 2004 to the 1st to 4th appellants be set aside and annulled on the ground of forgery; an order directing the 5th defendant (the Assistant Collector of Land Revenue, Kota Kinabalu) to expunge from the register and records at the Central Land Office the registration of the transfer dated 25th March 2004 and any other dealings effected by the 1st to 4th appellants after 25th March 2004; and, a declaration that the respondents are the registered co-owner of the land on 25th March 2004. [5] In opposing the claim, the appellants averred that they were not aware of any forgery in relation to the transfer of the land effected under the Memorandum of Transfer dated 25th March 2004 and claimed that they were bona fide purchasers for value without notice. The appellants also filed a claim against the third party i.e. a legal firm named Messrs. Johari & Zelika, for negligence in handling the sale and purchase of the land. [6] After a full trial, the learned High Court Judge allowed the respondents claim and made an order in terms of the prayers as per the statement of claim dated 13 March 2006. The learned High Court Judge held that: “In the present case, there is no dispute that the defendants had been dealing with the forger in getting themselves registered as legal owners and in applying the deferred indefeasibility concept, I have no option but 4 to hold that the title of the defendants to the property to be defeasible.” [7] However, it is also the finding of the High Court that the appellants were bona fide purchasers for value without notice. [8] In dismissing the claim against the third party, the High Court Judge held that: “… the third party owes no duty of care be it in tort or contract to the defendants. In tort, there is no relationship of proximity between the third party and the defendants. In contract, the defendants had no retainer with the third party. The only person who had relationship of proximity and a retainer with the defendants is DW2 and he is not a party to this suit, the Court is prohibited from making any finding on that relationship.” 5 Proceedings in the Court of Appeal [9] Aggrieved by the decision of the High Court, the appellant appealed to the Court of Appeal. In dismissing the appellants’ appeal, the Court of Appeal made the following findings: “However we would state at this juncture that the learned Judge had applied the correct standard of proof in this case which is that on balance of probability it is for the respondents to prove their case which is grounded on forgery. This principle was stated in very clear terms by the then Supreme Court in United Asian Bank Bhd v Tai Soon Heng Construction Sdn Bhd [1993] 1 MLJ 182, 188. The learned Judge was also correct in accepting the unchallenged evidence of the experts PW10 and PW11 called by the respondents to corroborate the direct evidence by the respondents that the respondents themselves did not sign the impugned power of attorney. On this issue the learned Judge wrote in his judgment as follows: “In my view there is direct evidence from the plaintiffs themselves that they did not sign the power of attorney which had been corroborated by the unchallenged evidence of the experts called by the plaintiffs in PW10 and PW11. It can be said that the expert reports had been quite unequivocal in stating that the plaintiffs did not sign the relevant documents. And when they are not challenged in any way by the defendants, the court though not bound by the opinions of the expert should accept the evidence unless cogent reasons are 6 provided. Here no cogent reasons had been produced by the defendants; hence I have no hesitation in accepting the evidence of the experts.” We fully endorsed the above views by the learned Judge”. [10] It is pertinent to note that although the Court of Appeal agreed with the learned High Court Judge on the finding of facts that the power of attorney used as authority to transfer the land to the appellants was a forged instrument, it disagreed with the application of the concept of deferred indefeasibility to section 88 of the Sabah Land Ordinance (SLO). The Court of Appeal held: “…from the judgment of Edgar Joseph Jr FCJ in Borneo Housing Mortgage Finance Berhad v Time Engineering Berhad (supra) it is clear that there is no provision in the Sabah Law Ordinance conferring indefeasibility of title to or interests in land, though the importance of registration in passing valid title or interests to the registered owner is recognized under s. 88 of the Ordinance.” [11] As regard the appellants’ claim against the third party, the Court of Appeal agreed with the finding of the High Court and hence the appeal by the appellants was accordingly dismissed. This is not an issue before us. 7 The issues before this Court Question 1 “Whether bona fide purchasers for value and without notice, obtained good title to Land immediately upon registration of the transfer under section 88 of the Land Ordinance (Sabah Cap. 68)(“Land Ordinance”) and is therefore an indefeasible registered interest in Land?” Appellants’ submission [12] Learned counsel for the appellants submitted that the appellants, as bona fide purchasers for value without notice, obtained good title to the land by way of registration under section 88 of the SLO. It follows therefore, by reasons of registration of their interest in the land, the appellants had received an immediate indefeasible registered title in the land. By virtue of the registration of the appellants as the registered owners of the land, the respondents were divested of the title or ownership to the land.