Indefeasibilty Flashcards
Proviso to Sec 340(3)
- Bona Fide Purchasers; and
- for Valuable Consideration
When does the proviso apply?/ The relationship between Sec 340(2) and Sec 340(3)
-MAIN CASES-
Adorna Properties [Immediate Indefeasibility]
- Under immediate Indefeasibility, proviso to Sec 340(3) even applies to Sec 340(2),whereby it is not confined to the transactions subsequent to the one which the vitiating factors took place.
Tan Yin Hong, FC [Deferred Indefeasibility]
- Overruled Adorna Properties and held that Sec 340 only provides for Deferred Indefeasibility.
- It does not apply to Sec 340(2).
- Under Deferred Indefeasibility, the proviso to Sec 340(3) only applies to the transaction subsequent to when the viatiating factors stipulated in Sec 340(2) took place.
More cases on “the relationship between Sec 340(2) and (3) before Tan Yin Hong
- Owe Then Kooi (cf) OCBC Bank
Owe Then Kooi v Au Thiam Seng
Facts:
ATS forged OTK’s signature and transferred OTK’s share of the land to himself, and then charged the land to the bank.
Held:
1. OTK could get back the share of his land but had to take it subject to the charge.
2. The charge granted by OTK, the immediate registered proprietor whose title was defeasible under Sec 340(2). However, since the chargee/Bank was a bona fide purchaser with valuable consideration under the proviso to Sec 340(3), the bank has an indefeasible charge.
OCBC Bank
Held:
1. Where the title was defeasible under Sec 340(2), the proviso to Sec 340(3) applies to subsequent transactions and that they provided for Deferred Indefeasibility.
2. The Court gave a conjunctive reading to Sec 340(3)(a) & 17 (b) - that the proviso to Sec 340(3) only takes effect AFTER the immediate registered proprietor/holder TRANSFERRED [Sec 340(3)(a)] his defeasible TITLE to someone else. It does not apply when the immediate registered proprietor whose title is defeasible has GRANTED an INTEREST to someone else.
Note:
Tan Yin Hong - the FC held that COA decision in OCBC on this point is FLAWED, on the ground that holder of subsequent interest in the land is protected by the proviso to Sec 340(3).
CIMB Bank Bhd
Who is “purchaser with good faith with valuable consideration”?
Purchaser - “Sec 5 of NLC”
Au Meng Nam:
1. 1st Defendant was NOT a bona fide purchaser for value as he has acted hastily and concluded the sale without any proper investigation into the title or the person claiming to be proprietors despite knowing that the purchase price was below the market value.
2. A purchaser in good faith DOES NOT include a purchaser who is careless or negligent.
Who bears the “Burden of Prove”?
Tan Yin Hong
- The burden of proving that he acquired the title or interest in good faith and for valuable consideration lies on the person SEEKING to rely on the PROVISO.
What is Deferred Indefeasibility?
Under Deferred Indefeasibility, the title or interest acquired by the registered proprietor as a result of the vitiating circumstances under Sec 340(2), will not acquire an indefeasible interest.
The indefeasibility is postponed until the time when a subsequent purchaser acquires the title in good faith with valuable consideration.
Also note that, the registered proprietor, under the sale and purchase agreement, despite himself not possessing an indefeasible title, may give an indefeasible title to a bona fide purchaser - proviso to Sec 340(3)
What if Immediate Indefeasibility?
Under Immediate Indefeasibility, the immediate registered title or interest of the proprietor immediately to the vitiating circumstances is conferred with statutory protection despite the vitiating circumstances provided that they are bona fide purchaser with valuable consideration.
The proviso to Sec 340(3) is not confined to transaction subsequent and can be resorted to even for transaction where the vitiating circumstances took place.
