Property Friday: Can Fraud Defeat Indefeasible Title in Malaysia?

What is Fraud Under the Law?

Under Section 340(2)(a) of the National Land Code:

✔️Must be ACTUAL FRAUD (not just mistake)

✔️Must involve DISHONESTY

✔️Must be DELIBERATE violation of rights

✔️Committed BEFORE or AT registration

 

Examples of Fraud Acts:

✅Intentional deception

✅Deliberate dishonesty

✅Designed to cheat

Examples of Non-Fraud Acts:

❌Negligence

❌Mistake

❌Poor judgment

 

3 Elements of Fraud

1) Existence of Actual Fraud

• • Not constructive of equitable fraud
  • Must involve dishonesty & moral wrongdoing

2) Party/Privy to the Fraud

The registered owner must be:

• • • A party = directly involved
    • Privy = knew and participated

3) Intention to Cheat

• • • Not enough to show someone lost their right
    • Must prove the transfer was due to deception/designed to cheat them

Standard of Proof

How much proof do you need?

📊 Balance of Probabilities

• NOT “beyond reasonable doubt” (like criminal cases)
• Just show it’s MORE LIKELY than not

What does this mean?

• Court weighs evidence from both sides

✅ More likely fraud happened = You win

❌50-50 uncertain = Fraud claim fails

❌Less likely fraud happened = Claim dismissed

You don’t need to prove fraud “beyond reasonable doubt”, just show it’s more probable than not.

 

Datuk Jagindar Singh v Tara Rajaratnam [1983] 2 MLJ 196

Federal Court

📋FACTS

• Respondent (Owner) was induced by fraud and undue influence to transfer land to 2nd Appellant. Transfer was supposedly as “security” for money.
• Two undertakings given: (1) land would not be sold without owner’s consent for 1 year, (2) land would be transferred back upon repayment.
• Contrary to these undertakings, only 18 DAYS later, second appellant transferred property to third appellant Land was again transferred to development company owned by 1st Appellant. Land was subdivided and sold to public. The Appellants were lawyers.

⚖️ COURT’S DECISION

✅ Lawyers committed FRAUD

✅ They were “party and privy” to fraud

❌Original owner couldn’t get land back because it was already sold to innocent buyers

🎯KEY LESSON

The breach of undertakings just 18 days after transfer showed deliberate dishonesty and intention to cheat.

 

Goh Hooi Yin v Lim Teong Ghee & Ors [1990] 3 MLJ 23

High Court

📋FACTS

Plaintiff induced to enter written agreement to purchase property based on false representation by bank employees. They claimed bank held title as security for overdraft. Plaintiff paid deposit without searching title register. 4th Defendant (actual owner) later bought the property. 4th Defendant’s solicitor informed plaintiff his deposit was forfeited due to failure to complete. Plaintiff said he’d settle in 4 days if owner confirmed, otherwise would rescind. By this time, 4th Defendant was already registered proprietor. 4th Defendant gave oral undertaking not to transfer, but then sold to 5th Defendant.

⚖️ COURT’S DECISION

❌ NO fraud proven

❌ Transfer was NOT executed with intention to cheat

❌ Just showing someone lost a right ≠ fraud

🎯 KEY LESSON

It was not enough to show the transfer deprived plaintiff of existing right. Must demonstrate transfer was EXECUTED with INTENTION of cheating plaintiff of such right. The intention to cheat must have substantial influence on decision to transfer.

 

For further information, please contact us at Miranda & Samuel:

• Dato’ George Miranda (george@mirandasamuel.com)
• Joy Sam Jia Qian (joy@mirandasamuel.com)
• Alisyah Maisarah (alisyah@mirandasamuel.com)

 

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