www.ipsofactoJ.com/archive/index.htm [1990] Part 4 Case 7 [HCM]    

 

HIGH COURT OF MALAYA

 

Khoo

- vs -

Khoo

Coram

BC LIM J

15 MAY 1990

Judgment

BC Lim J

  1. By an Originating Motion No 25-69–89 dated 8 September 1989 the applicant, as the sole surviving executor and trustee of the estate of Khoo Boo Gong deceased applied for the removal of the private caveats under presentation No 6618/89 jilid 104 Folio 150, presentation No 6617/89 Jilid 104 Folio 149 and presentation No 6619/89 Jilid 104 Folio 149 and Presentation No 6619/89 Jilid 104 Folio 151 presented by the respondent, Khoo Teng Peng (‘the earlier respondent’) against the lands held under CT 16118 lot 40 s 88A, CT 16135 lot 57 s 88A and CT 20982 lot 717 s 88A Town of Kuala Lumpur, District of Kuala Lumpur respectively pursuant to s 327(1) of the National Land Code 1965. By another Originating Motion No 25–89–89 dated 5 December 1989 the applicant also applied for the removal of the private caveats lodged by Khoo Teng Bin (‘the later respondent’) against the same parcels of land. The grounds for the removal of the caveats in both actions are the same and they are as follows:

    (a)

    the respondent has no interest in the said land;

    (b)

    the respondent does not have any right to claim title to or any registerable interest in the said lands; and

    (c)

    the said caveat [sic] was wrongfully presented by the respondent.

  2. The applicant also sought an order directing such damages as the court should deem fit to be awarded to the applicant pursuant to s 329 of the National Land Code 1965 for the loss suffered by the applicant as the result of the wrongful lodgement of the said private caveats be assessed. The parties agreed to have the two motions heard together as the facts and the laws affecting both motions would be the same and the decision made by the court on one motion would be binding on the other.

  3. The facts that are not in dispute are as follows.

  4. By reason of the caveats lodged by the two respondents the applicant was unable to affect a transfer of the disputed lands to Rositco Sdn Bhd; hence these two applications to remove the caveats.

  5. At the hearing of the motions, counsel for the applicant submitted (if I understand her correctly) that both the respondents had no caveatable interest in the disputed lands since each of them was entitled to only five shares of the residuary properties. Assuming that the respondents were relying on para (b) of sub-s (1) of s 323 of the National Land Code 1965 to contend that they were persons entitled to lodge the caveats, counsel submitted that it must be shown that they were holding the disputed lands in trust for a third party. Counsel then pointed out that under the will the testator had devised and bequeathed to his trustee all the rest and residue of his properties both movable and immovable of whatsoever nature with power to sell the same. The proceeds of the sales of the residuary properties were to be converted into 100 shares to be held in trust for the 19 beneficiaries in accordance with their respective shares of the said properties mentioned in the will. The disputed lands were not held in trust specifically for the respondents and hence they could not claim any interest in the said lands. In the circumstances, until all the real properties were sold and converted into moneys, it was impossible to assess the worth of the portion of the shares of the respective beneficiaries. Furthermore, the administration of the estate had not yet been completed. Counsel had cited a number of authorities in support of her arguments and I shall be referring to some of them presently.

  6. Counsel for the earlier respondent submitted that he was relying on para (b) of sub-s (1) of s 323 of the National Land Code 1965 to show that the said respondent was a person entitled to lodge the caveats. The scope of that section, according to him, was wide enough to allow a beneficiary of residuary properties to lodge a caveat if the beneficiary was able to show that he was beneficially entitled under any trust affecting land. Counsel went on to say that although the Collector of Estate Duty had allowed a postponement of the payment of the full estate duty, nevertheless, partial payment amounting to nearly $3m had been paid. Furthermore, the executor of the estate had furnished an account of the estate dated 31 December 1988 which showed that the estate was fully administered. On principle and authority the respondents were therefore entitled to lodge the caveats. Counsel too cited a number of authorities to which I shall make reference presently.

  7. Counsel for the later respondent in the main adopted the submission of counsel for the earlier respondent. He however stressed the point that when execution function ended, trustee’s function would commence. In the present case, as the properties had been divested from the estate and vested on the executor, he became trustee in respect of the properties. Counsel also referred to a letter dated 5 September 1989 written by the solicitors of the applicant which counsel said was an admission that all the properties of the estate had already been vested in the applicant as trustee. That being the case, the respondent therefore was entitled to caveat the disputed lands as they had an interest in them.

  8. It is useful at this juncture to set out in full the provisions of sub-s (1) of s 323 of the National Land Code 1965 which are as follows:

    The persons and bodies at whose instance a private caveat may be entered are -

    (a)

    any person or body claiming title to, or any registerable interest in, any alienated land or any right to such title or interest;

    (b)

    any person or body claiming to be beneficially entitled under any trust affecting any such land or interest; and

    (c)

    the guardian or next friend of any minor claiming to be entitled as mentioned in para (b).

  9. From s 323(1) it can be seen that only three categories are entitled to enter a caveat. The provisions which need to be considered first is para (a) of s 323(1). The types of persons who fall within s 323(1)(a) may be classified as follows:

    (i)

    any person claiming title to any alienated land;

    (ii)

    any person claiming any registerable interest in any alienated land; or

    (iii)

    any person claiming any right to such title or registrable interest.

  10. The scope of s 323(1)(a) has been commented in the book National Land Code by Judith Sihombing at p 600 where it is said:

    The terms ‘title to’ and registerable interest in this paragraph thus refer to

    (a) a claim to ownership of the land which is able to be protected by caveat;
    (b) a claim to an interest which gives the right to immediate registration of an instrument of dealing, i.e. a registerable interest which is thus able to be protected by caveat.

    Any lesser interest is able to be included in the definition of ‘any right to such title or interest’:

    These rights (i.e. any rights to such title or interest) referred to here would traditionally be defined as unregisterable interests, i.e. claims to interest which are not capable in their present form of causing a substantive entry to be made on the register .... To be caveatable however these claims must represent claims that can lead to the making of a substantive entry on the register, either because the interest is registerable or because it is one for which equitable relief by way of specific performance (albeit discretionary) can be sought. If the claim does not represent a transaction capable of registration then the claim is not caveatable for the caveat procedure is an interim procedure designed to freeze the position until an opportunity has been given to a person claiming a right under an unregistered instrument to regularize the position by registering the instrument.

  11. Judicial opinions voiced in two local cases seem to support the aforesaid commentary of the learned author.

  12. The first is Macon Engineers Sdn Bhd v Goh Hooi Yin [1976] 2 MLJ 53 where the Federal Court upheld the decision of the trial judge Arulanandom J who held that the respondent, who had merely entered into a contract for the sale and purchase of a property, had a right to enter a caveat against the said property and that the caveat was rightly entered. Ali FJ, one of the three judges hearing the appeal, after a detailed analysis of earlier decisions of the Malayan courts relating to the scope of s 323(a), held at p 56:

    A purchaser of land under an agreement cannot obviously have any registerable interest in land. But he has a right to the land or interest in land against the vendor personally which according to Thomas J (as he then was) in Bachan Singh v Mahinder Kaur [1956] MLJ 97 is not good against the world a whole. It will be good against the world as a whole if the vendor executes a legal transfer, that is to say, a transfer executed in the manner required by s 215 of the National Land Code and the transfer is registered in the land office. This is because on the registration of the transfer the purchaser becomes vested with the real legal right to or interest in land. In the case of a vendor who refuses to execute such a transfer the purchaser will have to sue him for specific performance which, if granted, would result in the vendor being compelled by the court to execute the transfer. While waiting for specific performance the purchaser must be able to do something to prevent the vendor from disposing of the land to another buyer or purchaser. He may ask the court for an injunction or he may avail himself of the protection given by the National Land Code. The latter, I think, is comparatively an easier way of protecting his right or interest. If he enters a caveat that is enough evidence to show that he is claiming a registerable interest in land.

  13. The second case is the Privy Council case of Eng Mee Yong v Letchumanan [1979] 2 MLJ 212 where Lord Diplock said at p 214:

    The caveat under the Torrens system has often been likened to a statutory injunction of an interlocutory nature restraining the caveatee from dealing with the land pending the determination by the court of the caveator’s claim to title to the land, in an ordinary action brought by the caveator against the caveatee for that purpose. Their Lordships accept this as an apt analogy with its corollary that caveats are available, in appropriate cases, for the interim protection of rights to title to land or registerable interest in land that are alleged by the caveator but not yet proved ....

    and His Lordship went on to say at p 215:

    Their Lordships have already noted the analogy between the effect of a caveat and that of an interlocutory injunction obtained by the plaintiff in an action for specific performance of a contract for the sale of land restraining the vendor in whom the legal title is vested from entering into any disposition of the land pending the trial of the action. The court’s power to grant an interlocutory injunction in such an action is discretionary. It may be granted in all cases in which it appears to the court to be just and convenient to do so.

  14. In the present case, it is clear that the two respondents cannot rely on para (a) of s 323(1) to contend that they are entitled under the said paragraph to enter any caveats against the disputed lands. They were therefore driven to rely on para (b) of s 323(1) to establish their rights. No authorities have been cited by counsel acting for the respective parties directly dealing with the scope of para (b) of s 323(1). However that may be, counsel for the respondents seemed to rely strongly on the case Liew Siew Yin v Lee Pak Yin [1940] MLJ 135 to support his contention that the respondents were persons entitled under the said para (b) to enter a caveat against the disputed lands. It is to be noted that in the Liew Siew Yin [1940] MLJ 135 case Murray-Aynsley J was posed with the question as to what was a caveatable interest under s 166 of the FMS Land Code 1926 which provided that:

    The grantor of any instrument of trust or a beneficiary or a guardian or next friend of any minor beneficiary or a trustee or any person claiming title to or registerable interest in land may present a caveat ....

  15. The testator’s lands in that case were subject to a trust for sale under the will and vested or contingent residuary beneficiaries were held competent to lodge a caveat. The words “claiming title to or registerable interest in land’ was held by the learned judge to qualify the words “any person’ and not to the preceding categories or classes mentioned in the section. It has been however held in Lee Ah Thaw v Lee Chun Tek [1978] 1 MLJ 173 that the decision in Liew Siew Yin v Lee Pak Yin [1940] MLJ 135 cannot be supported either in principle or on authority. Thus in his judgment in Lee Ah Thaw v Lee Chun Tek [1978] 1 MLJ 173 HH Lee CJ (Borneo) said at p 176 of the reported case:

    Mention may be made of the case of Liew Siew Yin v Lee Pak Yin [1940] MLJ 135 where the plaintiffs were residuary beneficiaries. The court held that irrespective of whether the plaintiffs’ interest was vested or contingent and although the land was subject to a trust for sale the plaintiffs were entitled to present a caveat. In my opinion this case was wrongly decided as the whole right of the property was in the deceased’s personal representative and until the administration was completed and the residue ascertained the residuary beneficiaries could claim no interest in such property. SK Das, the learned author of the Torrens System in Malaya (see p 339), is also of the view that Liew Siew Yin’s case [1940] MLJ 135 cannot be supported either in principle or on authority.

  16. It is important to note that (at least from my reading of Lee Ah Thaw v Lee Chun Tek [1978] 173) the provisions of s 173 of the Sarawak Land Code (Cap 81) which the Chief Justice (Borneo) had to consider were substantially similar to the provisions of s 166 of the FMS Land Code 1926. But neither s 166 of the FMS Land Code 1926 nor s 173 of the Sarawak Land Code (Cap 81) can be said to be similar to s 323(1) of the National Land Code. It follows, therefore, that the judicial opinions in Liew Siew Yin v Lee Pak Yin [1940] MLJ 135 and Lee Ah Thaw v Lee Chun Tek [1978] 1 MLJ 173 are of not much assistance in the interpretation of the scope of s 323(1) of the National Land Code 1965.

  17. It behoves on me to carry out the difficult task of giving a proper construction of the said section. Some assistance can be obtained from text books on land law relating to the scope of para (b) of s 323(1). The writers of these books unanimously agree that a private caveat may be entered by a beneficiary under any trust of which the land or interest in the land is trust property. [See Teo Keang Sood & Khaw Lake Tee, Land Law in Malaysia at p 288, Judith Sihombing, National Land Code at p 603 and David Wong, Tenure and Land Dealings in the Malay States at p 432.) From the commentaries of the authors of these textbooks and from my reading of para (b) of s 323(1), I am of the view that a trustee of property held in trust as well as a beneficiary of any trust property is entitled to enter a caveat pursuant to the said para (b). But a beneficiary, who is only entitled to a share of the general residue has no right to enter a caveat against the property of the estate when no part of the property of the estate has been expressly or impliedly devised and bequeathed under a trust created for his benefit. The words ‘any such land or interest’ appearing in the said para (b) seem to relate back to the land or interest mentioned in para (a) of s 323(1); otherwise the word ‘such’ is meaningless. That being the position, a beneficiary in order to be a person entitled under the said para (b) must show that he is a person entitled or beneficially interested in the land held under trust for him.

  18. Analogous decisions from New Zealand are illustrative of such a proposition.

    A caveat is the creature of statute and may be lodged only by a person upon whom a right to lodge it has been conferred by the statute. It is not enough to show that the lodging and continued existence of the caveat would be in some way advantageous to the caveator. He must bring himself within s 146 of the Land Transfer Act. In this case he must bring himself within para (a) of that section - that is to say, he must show that he is a person 'entitled to or beneficially interested in’ the land against which he has caveated ‘by virtue of some unregistered agreement or other instrument’ or ‘transmission or of a trust express or implied, or otherwise ‘howsoever’.

  19. The legal principle that a legatee of a share in residue has no interest in any property of the testator until the residue has been ascertained and that his right is only to have the estate properly administered and applied for his benefit when the administration is complete has been unanimously voiced by judicial opinions stretching over a period of nearly 100 years. The leading case advocating this principle is the case of Lord Sudeley v A-G [1897] AC 11 Lord Halsbury said in that case at pp 15 and 16:

    The thing that the legatee was entitled to was one-fourth share of a residuary estate, consisting, it may be, of many things; and I think it was fallacious on the part of Mr. Channel to say that the residue was very nearly ascertained, because the question is not only of amount - although I think that of itself would not be sufficient if it were only of amount - but it is a question of substance as well as a question of amount. It is uncertain until the residuary estate has been ascertained of what it will consist. It may consist of many things - it may consist of only a sum of money - and until that has been ascertained the actual right capable of instant assertion does not exist; and whether the character is that of executor or of trustee seems to me to be immaterial, because the legatee had no right to go and say ‘I will have this or that part of assets’. If a trustee is to be the character filled, the cestui que trust has no right to apply to the trust fund until a trust fund has been constituted, and by the hypothesis the trust fund is not constituted.

    Lord Herschell in the same case said at p 18:

    What she had a right to - what they as her executors had a right to - was one-fourth of the clear residue of Mr. Tollemache’s estate - that is to say, what remains of his estate after satisfying debts and legacies; and a bequest to them of one-fourth apart of his residuary estate does not seem to me to vest in them or in her a fourth part of each asset of which that estate consists, as contended for on the part I the appellants. It seems to me, as my noble and learned friend has pointed out, that until the estate is fully administered it is impossible to say of what assets the residuary estate will consist; we do not know how much the amount of the debt remaining unpaid was in the present case, and there was only one legacy unpaid. But the argument would be precisely the same if there had been a large amount of debt and many legacies still unpaid, that could not have made any difference in point of legal effect. Well, in that case how would it be possible to say that any one of the residuary legatees could point to any part of the assets of the testator and say, ‘This is a part of my estate’, when it depends entirely on the method of administration by the trustees in what form the residue becoming divisible will exist when the administration is at an end?

    The third Law Lord in that case, Lord Shand, holding the same view said at p 20:

    There was no allocation of any kind and the trust fund was not in a position to be wound up. Even though the legacies and debts had all been paid I should hold the same view. There were a number of persons having right to the residue and interested in its realization. The claim was really a claim to a share of the residue, and it had never been changed by allocation either by Mr. Tollemache’s trustees, or by arrangement with the other persons interested, so as to make the right of these executors a right to specific assets.

    The law in Lord Sudeley [1897] AC 11 was re-affirmed in the same terms in several later cases: e.g. Dr Barnado’s Homes v Special Income Tax Commissioners [1921] 2 AC 1 and Corbett v Commissioners of Land Revenue [1938] 1 KB 5677.

  20. In a more recent case of Commissioner of Stamp Duties (Queensland) v Hugh Duncan Livingston [1965] AC 694 the Privy Council carried out a thorough discussion of this legal principle. It is therefore useful to examine this case at some length.

  21. The question in the appeal before the Privy Council was whether the appellant was entitled to assess the respondent to those duties in respect of the Queensland assets of the unadministered estate of Livingston senior. The findings of the court as summarized in headnote (2) of the report was that in the case of an unadministered estate the assets as a whole were in the hands of the executor, his property, and until administration was complete it would not be said of what the residue, when ascertained, would consist or what its value would be. At the date of Mrs. Coulson’s death, therefore, there was no trust fund consisting of Livingston senior’s residuary estate in which she could be said to have a beneficial interest because no trust fund had as yet come into existence to affect the assets of his estate. Livingston senior’s property in Queensland, real or personal, was vested in his executors in full right and no beneficial interest in any item of that property belonged to Mrs. Coulson, his widow, at the date of her death and succession duty was not therefore payable.

  22. In arriving at the finding Viscount Radcliffe who delivered the unanimous judgment of the five Law Lords of the Privy Council raised a few interesting propositions which are relevant to the case before me. The first proposition appears at p 704 of the reported case:

    The testator’s assets consisted of real and personal estate in New South Wales and real and personal estate in Queensland. Mrs. Coulson died on 8 July 1950, intestate, having married her second husband on 22 June 1950. She thus survived her first husband by less than two years, and at the date of her death his estate was still in the course of administration, no clear residue had been ascertained, and, consequently, no final balance payable or attributable to the shares of residuary beneficiaries had been determined. It is essential to the decision of this case that Mrs. Coulson’s rights at her death were the rights of a person interested in a dead man’s unadministered estate.

    Viscount Radcliffe then went on to discuss the legal principle enunciated by the Law Lords in Sudeley [1897] Ac 11 and said at p 711:

    The members of the House who decided Sudeley case [1897] AC 11 were dealing with a branch of the law that was familiar and well established, and they were dealing with it with the precision that they regarded as being required by the particular issue that was before them. The law as they there stated it was reaffirmed by the House in the same terms in Dr Barnado’s Homes v Special Income Tax Commissioners [1921] 2 AC 1 It is sufficient to quote two short passages from speeches in that case. Viscount Finlay said: “.... the legatee of a share in the residue has no interest in any of the property of the testator until the residue has been ascertained. His right is to have the estate properly administered and applied for his benefit when the administration is complete’; while Viscount Cave said: ‘When the personal estate of a testator has been fully administered by his executors and the net residue ascertained, the residuary legatee is entitled to have the residue, as so ascertained, with any accrued income, transferred and paid to him; but until that time he has no property in any specific investment forming part of the estate or in the income from any such investment, and both corpus and income are the property of the executors and are applicable by them as a mixed fund for the purpose of administration’. Similar explicit statements of the true position will be found in the judgments of Lord Sterndale MR., when the Barnado case was in the Court of Appeal, and of Sir Wilfrid Greene MR. in Corbett v Commissioners of Inland Revenue [1938] 1 KB 567.

  23. Applying the legal principle discussed above, the question that has to be asked is whether in the present case the personal estate of Khoo Boo Gong (deceased) has been fully administered by his executor and the net residue ascertained.

  24. In my search for an answer to the aforementioned question, the first point which I have taken into consideration is that there is no allegation that the applicant in his capacity as the executor and trustee of the deceased’s estate had exceeded his power or wrongly exercised his power. The only complaint is that the applicant is disposing of the disputed land at a purchase price which does not reflect the current market price.

  25. The second point which I have considered is that the estate of the deceased is still in the course of administration. In this connection it is to be noted that the applicant had furnished a statement of accounts of 31 December 1988 in respect of the estate. The primary assets of the estate comprised of immovable properties, investments, and 25% share in the estate of one Khoo Chew Pan (deceased). The immovable properties comprised the four parcels of lands in dispute and three other parcels which have yet to be sold. The investments carried out comprised government bonds, stocks and shares of several local corps and one foreign corp. These bonds, stock and shares have not yet been realized or sold. The 25% share in the estate of one Khoo Chew Pan (deceased) has not yet been ascertained as the administration of that estate has not yet been completed. What is more important is that although a sum of nearly $3m had been made as partial payment of the estate duty, nevertheless, the remaining estate duty has yet to be assessed. The Collector of Estate Duty had certified that he had allowed the payment of the remaining sum to be postponed. Although some distributions of the assets of the estate were made to the beneficiaries in 1987 the distributions apparently came from the profits derived from the various investments and dividends received from the stocks and shares.

  26. From the statement of account of the estate of Khoo Chew Pan (deceased), the assets of that estate also comprised mainly investments made both locally and in foreign countries and some ten parcels of land of which one parcel was held in trust by Khoo Boo Gong (deceased). It was stated that the above real properties were not included as part of the assets of the estate in the balance sheet. I take it that the personal representative of that estate was not able to include the aforesaid real properties as part of the assets of the estate simply because none of the said properties had been valued as the personal representative was not ready to sell any one of the said properties. However that may be, there is no indication from which an inference can be drawn that the residue of the estate of this Khoo Chew Pan of which the deceased in the present case had 25% share is ready for distribution. It is essential to the decision of the present case that part of the assets of the estate of Khoo Bong Gong is derived from its 25% share of another dead man’s unadministered estate. Under the circumstances it cannot be gainsaid that the administration of the estate of the deceased had not been completed and that the balance of the residue has not yet been ascertained. That being the case, the respondents have no right in the title to or a registerable interest in any part of the assets of the estate. Counsel for the respondent relied on the case of George Attenborough & Son v Solomon [1913] AC 76 to support his contention that the administration of the estate had long been completed and the residue was ready for distribution. It is to be noted that in that case Viscount Haldane LC held that the executors there had assented to the trust dispositions taking into effect because the executors had put in a residuary account showing particulars of the estate of the testator and that all the debts had been paid and the balance of the residue was ready for distribution to the beneficiaries. In the present case, no inference can be drawn from the two statements of account that the executor has given an expressed or implied indication that the administration of the estate has been completed and that the residue has been ascertained.

  27. In the circumstances of this case, I am satisfied that the respondents are not entitled to caveat the lands in dispute. I therefore direct that the private caveats presentation No 6618/89 Jilid 104 Folio 150, Presentation No 6617/89 Jilid 104 Folio 149 and Presentation No 6619/89 Jilid 104 Folio 151 presented by the respondent in Originating Motion No 25–69–89 against the lands held under CT 16118 Lot 40, CT 16135 Lot 57, and CT 20982 Lot 717 all in s 88A Town of Kuala Lumpur, District of Kuala Lumpur respectively be forthwith removed pursuant to s 327(1) of the National Land Code 1965. Likewise, the private caveats Presentation No 7762/89 Jilid 107 Folio 28 presented by the respondent in Originating Motion No 25–89–89 against the same lands be forthwith removed pursuant to s 327(1) of the National Land Code 1965. Costs of these proceedings to be paid by the respondents to the applicant.

Cases

Macon Engineers Sdn Bhd v Goh Hooi Yin [1976] 2 MLJ 53; Eng Mee Yong v Letchumanan [1979] 2 MLJ 212; Liew Siew Yin v Lee Pak Yin [1940] MLJ 135; Lee Ah Thaw v Lee Chun Tek [1978] 1 MLJ 173; Re Bielfeld (Deceased) (1894) 12 NZLR 596; Guardian Trust and Executors Company of New Zealand v Hall [1938] NZLR 1020; Lord Sudeley v A-G [1897] AC 11; Dr Barnado’s Homes v Special Income Tax Commissioners [1921] 2 AC 1; Corbett v Commissioners of Inland Revenue [1938] 1 KB 5677; Commissioner of Stamp Duties (Queensland) v Hugh Duncan Livingston [1965] AC 694; George Attenhorough & Son v Solomon [1913] AC 76

Legislations

Land Code 1926 (FMS): s.166

Land Code (Sarawak, Cap 81): s.173

National Land Code 1965: s.323, s.327, s.329

Authors and other references

Teo Keang Sood & Khaw Lake Tee, Land Law in Malaysia

Judith Sihombing, National Land Code

David Wong, Tenure and Land Dealings in the Malay States

Representations

CB Ong for the respondent in Originating Motion No 25-69-89.

Izabella de Silva for the applicant.

BL Ooi for the respondent in Originating Motion No 25-89-89

Notes:-

This decision is also reported at [1990] 3 MLJ 37

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