LAND LAW – PROPERTY SOLD TWICE: OWNERSHIP NOT TRANSFERRED IN FIRST SALE

Summary and Facts

The Court of Appeal (COA) case Malayan Banking Bhd v Mohd Affandi bin Ahmad & Anor and another appeal [2024] 1 MLJ 1 involved a dispute from the sale of two properties initially purchased by the deceased under valid Sale and Purchase Agreements (SPAs) but not transferred due to a lapse of 50 years. The vendor subsequently sold the same properties to another purchaser, leading to a charge created in favor of Malayan Banking Bhd. The administrators of the deceased’s estate challenged the second SPA and the bank’s charge.

Legal issues

i. Were the SPAs executed by the deceased binding and enforceable?
ii. Did the vendor hold the properties in trust for the deceased’s estate?
iii. Did the second purchaser and the bank qualify as bona fide purchasers for value under Section 340(3) of the National Land Code (NLC)?
iv. Was the bank negligent in verifying the legitimacy of the second SPA?

Court Findings

• The deceased’s SPAs were deemed valid and enforceable, as the full purchase price had been paid, recorded in the vendor’s ledgers, and ratified by subsequent acts.
• The vendor was held to hold the properties on constructive trust for the deceased’s estate. The first defendant’s prolonged inaction and acknowledgment supported this conclusion.
• The second purchaser was not entitled to deferred indefeasibility as both the deceased and the second purchaser were considered first-layer immediate purchasers.
• The bank, relying on the defective second SPA, could not claim protection as a bona fide purchaser due to its failure to exercise due diligence.
• The bank’s omissions, including inadequate verification of the payment and property conditions (misrepresented as vacant lands), disqualified its claim for bona fide purchaser status. A simple site visit or evaluation would have revealed the properties were occupied.

Practical Implications

This case reinforces the binding nature of the Sales and Purchase Agreement and serves as a stark reminder of the critical role of due diligence in safeguarding legal interests.

Reference Case and Legislation

• Malayan Banking Bhd v Mohd Affandi bin Ahmad & Anor and another appeal [2024] 1 MLJ 1
• He-Con Sdn Bhd v Bulyah bt Ishak & Anor (as administrators for the estate of Nor Zainir bin Rahmat, the deceased) and another appeal [2020] 4 MLJ 662, FC (refd)
• National Land Code s 340(3)