Private Caveat vs Bank Foreclosure Auction: High Court Confirms Successful Bidder Gets Clean Indefeasible Title in Landmark Property Dispute

In Solid Ho Sdn Bhd v Indrani A/P Subramaniam [2026] MLJU 6, the Penang High Court ordered the removal of a private caveat lodged by a would-be purchaser who had paid a deposit to the original owner, ruling that her equitable interest was extinguished when the property was sold at public auction by AmBank (M) Berhad (“the Chargee”) exercising its statutory power of sale. The court held that the Defendant’s caveat, which was lodged after the registered charge and based on a superseded “Booking to Purchase” agreement, could not defeat the indefeasible title acquired by the successful auction purchaser, as sections 215(3) and 267(1)(a) of the National Land Code make clear that upon registration of a Certificate of Sale, title vests in the purchaser free from all subordinate encumbrances.

This case provides helpful guidance on the principles governing caveat removal applications, particularly regarding the requirements for establishing both “aggrieved person” status and a valid caveatable interest. The court applied the Luggage Distributors Test, examining whether the plaintiff qualified as an “aggrieved person” under Section 327 of the National Land Code and whether the defendant possessed a subsisting caveatable interest capable of supporting the caveat. The judgment demonstrates that a successful auction purchaser clearly qualifies as an aggrieved person, as the caveat directly impedes their ability to register the property despite being the declared successful bidder.

On the question of caveatable interest, the court emphasized several key principles. First, courts will examine the caveat strictly within the grounds stated in the instrument itself—caveators cannot later rely on different or superseding agreements to justify a caveat based on an earlier document. Second, a caveatable interest must be valid and subsisting at the time of the removal application; an interest based on a superseded ‘Booking to Purchase’ cannot support a caveat when that document has been replaced by a formal Sale and Purchase Agreement. Third, the court considered whether the claimed interest—even if initially valid—continued to exist after the Chargee exercised its statutory power of sale under Sections 259 and 267 of the National Land Code, finding that subordinate equitable interests are extinguished upon such sale. The judgment also addressed the nature of caveatable interests in the context of registered charges, noting that an equitable right to specific performance cannot constitute a caveatable interest once the underlying agreement becomes impossible to perform due to foreclosure proceedings.

Background of the Case

The Plaintiff successfully purchased property at a public auction conducted by the Chargee, but was unable to register the property due to a private caveat lodged by the Defendant. The Defendant had paid a deposit to the original owner under a “Booking to Purchase” agreement, which was later superseded by a formal Sale and Purchase Agreement dated 7.06.2024, though no new caveat was lodged for this agreement. The Defendant argued she had a caveatable interest entitling her to specific performance and should not pay compensation under Section 329 of the National Land Code. The property was subject to a registered charge in favour of the Chargee that predated the Defendant’s caveat.

Court Rulings

High Court: Allowed the Plaintiff’s application and ordered removal of the caveat, with costs awarded to the Plaintiff. The court found that:

• The Defendant’s caveat was founded solely on a “Booking to Purchase” that had been superseded, and a caveator cannot enlarge or vary caveat grounds by introducing new facts after lodgment.
• The Defendant expressly acknowledged in her caveat form that the property was charged to AmBank, showing awareness that any interest was subordinate to the Chargee’s rights.
• Upon the Chargee’s exercise of its statutory power of sale, all subordinate or equitable interests were extinguished by operation of Sections 215(3) and 267(1)(a) of the National Land Code.
• The Plaintiff acquired indefeasible title as a bona fide purchaser at lawful public auction.
• Any right to specific performance lay against the original proprietor, not the auction purchaser.
• The maxim qui prior est tempore potior est jure (first in time, stronger in right) did not assist the Defendant as her caveat was lodged after the registered charge.
• The Sale and Purchase Agreement became impossible to perform once foreclosure proceedings were completed.

Key Takeaways

1. Indefeasible Title: Successful bidders at bank foreclosure auctions acquire indefeasible title free from subordinate encumbrances upon registration of the Certificate of Sale.
2. Auction sale trumps Private caveats: On its facts, private caveats based on prior agreements to purchase will not defeat a lawful auction sale by a charge.
3. Parties in dispute: Legal recourse for disappointed purchasers may lie against the original owner/borrower and potentially the bank, not the successful auction bidder.