Yew Huoi, How & Associates | Leading Malaysia Law Firm

Menu

PROPERTY LAW – CHARGED BUT NOT IN CHARGE: COURT PROTECTS HOMEBUYERS OVER LENDERS IN LANDMARK RULING

1. Summary and Facts

In Champion Score Sdn Bhd v Mohd Sobri Chew bin Abdullah [2025] 3 MLJ 732, the respondent, Mohd Sobri Chew, purchased a property under a housing development scheme and paid the full purchase price. Unbeknownst to him, the developer subsequently created a charge on the property in favour of Champion Score Sdn Bhd, a moneylender. Sobri Chew sued for cancellation of the charge, arguing that the developer, as a bare trustee, had no authority to encumber the property once it was fully paid for. He further contended the charge was void as it was created without his consent and under an insufficient power of attorney (“PA”). The High Court found in favor of Sobri Chew, cancelling the charge and ordering the title transfer to him. Champion Score appealed to the Court of Appeal.

2. Legal Issues

• Whether a developer, standing as a bare trustee after receiving the full purchase price, could create a valid charge over the sold property.
• Whether the charge instrument executed under an irrevocable PA was insufficient, rendering the charge defeasible under Section 340(2)(b) of the National Land Code (“NLC”).
• Whether public policy dictated the purchaser’s title should prevail over a subsequently created charge.

3. Court’s Findings

• The Court of Appeal unanimously upheld the High Court’s decision, dismissing the appeal.
• Upon receiving the full purchase price, the developer became a bare trustee, losing the authority to encumber the property. Hence, the charge created in favor of the moneylender was invalid, null, and void.
• The charge instrument executed by the developer exceeded the authority granted by the PA, making it an insufficient instrument under Section 340(2)(b) of the NLC.
• Public policy strongly favors protecting innocent purchasers from encumbrances unlawfully created by developers. Allowing such charges to stand would severely undermine public confidence in statutory protections designed for property purchasers under the Housing Development (Control and Licensing) Act 1966.

4. Practical Implications

This ruling emphasizes the following critical considerations:
i. Developers who have received full payment for properties become mere bare trustees, losing the power to further encumber the property.
ii. Moneylenders and financial institutions must meticulously verify the scope of authority under powers of attorney before accepting property charges.
iii. Contractual and statutory obligations protecting house buyers are paramount, reinforcing the judiciary’s protective stance in housing matters.

This judgment emphasises the judiciary’s commitment to upholding purchaser rights, providing clarity on indefeasibility exceptions, and reiterating stringent adherence to the scope of granted authority under a power of attorney.

Back to Latest Legal Updates

Recent Post

CIVIL PROCEDURE – STRIKE OUT UNDER ORDER 18 RULE 19(1)(A),(B) RULES OF COURT 2012 – EXTENSION OF TIME APPLICATION

In Badan Pengurusan Subang Parkhomes v Zen Estates Sdn Bhd [2025] MLJU 3591, the High Court reaffirmed that non-compliance with Order 37 Rule 1(5) of the Rules of Court 2012 does not automatically invalidate assessment of damages proceedings. The Court held that procedural rules must be read with the overriding objective of ensuring justice, and that the six-month time limit to file a Notice of Appointment is directory, not mandatory. Finding no prejudice to the defendant and noting active case management by the plaintiff, the Court dismissed the developer’s strike-out bid and allowed an extension of time for assessment to proceed. The decision underscores the judiciary’s commitment to substantive fairness over procedural rigidity in post-judgment proceedings.

Read More »
16 November ,2025 No Comments

TORT – PURE ECONOMIC LOSS BAR REAFFIRMED: MMC LIABLE FOR NEGLIGENCE BUT PROTECTED FROM LOST PROFIT CLAIMS

In Asia Pacific Higher Learning Sdn Bhd v Majlis Perubatan Malaysia & Anor [2025] MLJU 3144, the High Court awarded over RM2 million in damages against the Malaysian Medical Council (MMC) for negligence, breach of statutory duty, and misfeasance during its accreditation of Lincoln University College’s medical programmes. While the court allowed direct financial losses such as survey costs, it barred claims exceeding RM550 million for lost profits, reaffirming the Federal Court’s rulings in Steven Phoa and UDA Holdings that pure economic loss is not recoverable from public or statutory bodies. The second defendant was further ordered to pay RM100,000 in exemplary damages for acting with targeted malice, marking a rare personal liability finding against a regulatory officer.

Read More »
16 November ,2025 No Comments

ERINFORD INJUNCTION – COURT OF APPEAL CLARIFIES: EX-PARTE ERINFORD INJUNCTIONS ARE THE EXCEPTION, NOT THE RULE

In Edisijuta Parking Sdn Bhd v TH Universal Builders Sdn Bhd & Anor [2025] 5 MLJ 524, the Court of Appeal clarified that ex parte Erinford injunctions at the appellate stage should only be granted in truly exceptional circumstances where giving notice would defeat the purpose of the order. Wong Kian Kheong JCA held that, under rule 50 of the Rules of the Court of Appeal 1994, such applications should generally be heard inter partes to ensure fairness and prevent abuse. Exercising powers under section 44(1) of the Courts of Judicature Act 1964, the Court granted a conditional interim Erinford injunction pending appeal, fortified by a RM200,000 deposit and an undertaking to pay damages. The ruling provides clear guidance on balancing urgency, procedural fairness, and judicial efficiency in appellate injunctions.

Read More »
16 November ,2025 No Comments

TOTAL FAILURE CONSIDERATION – FEDERAL COURT OVERRULES BERJAYA TIMES SQUARE: TOTAL FAILURE OF CONSIDERATION REDEFINED

In Lim Swee Choo & Anor v Ong Koh Hou @ Won Kok Fong [2025] 6 MLJ 327, the Federal Court unanimously overruled Berjaya Times Square Sdn Bhd v M Concept Sdn Bhd and clarified that the doctrine of total failure of consideration applies only to restitutionary relief, not to contractual termination. The Court held that the correct test is whether the promisor has performed any part of the contractual duties in respect of which payment is due, adopting Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574. Finding that the appellants had partly performed their obligations and the respondent had derived benefits, the Court rejected the respondent’s claim for restitution and restored the appellants’ contractual claim. The landmark decision restores clarity between contract and restitution, reinforcing commercial certainty in Malaysian law.

Read More »
16 November ,2025 No Comments

CONTRACT (BILL OF LADING) – NO DUTY TO DETECT FRAUD: COURT CLEARS MAERSK OF LIABILITY FOR FALSE CONTAINER WEIGHTS

In Stournaras Stylianos Monoprosopi EPE v Maersk A/S [2025] 2 Lloyd’s Rep 323, the English Commercial Court held that carriers are not liable for fraudulent misdeclarations by shippers where bills of lading are issued for sealed containers. The Court ruled that Maersk had no duty to verify or cross-check declared weights against Verified Gross Mass (VGM) data under the SOLAS Convention, as its obligation under the Hague Rules extended only to the apparent external condition of cargo. However, the judgment signals that a limited duty of care could arise in future where a carrier is put on notice of fraud. For now, carriers may rely on shipper declarations, but consignees must exercise commercial vigilance and due diligence when relying on bills for payment.

Read More »
16 November ,2025 No Comments

EXEMPLARY DAMAGES – STATUTORY BODY DUTY – DAMAGES – OBTAINING APPROVAL

In Big Man Management Sdn Bhd v Tenaga Nasional Bhd [2025] 5 MLJ 290, the Federal Court reinstated nearly RM3.56 million in special damages and awarded RM100,000 in exemplary damages against TNB for wrongfully disconnecting electricity to an ice factory. The Court ruled that “strict proof” of special damages does not mean a higher burden beyond the civil standard of proof and affirmed that TNB, as a statutory monopoly, breached its statutory duty by using disconnection as leverage to collect payment. The judgment underscores that public utilities cannot misuse statutory powers, and consumers wrongfully deprived of essential services may be entitled to punitive remedies in exceptional cases.

Read More »
16 November ,2025 No Comments
en_USEN
zh_TWZH ms_MYMY en_USEN
× Contact Us