Amendments to the Hire Purchase Act 1967

The Hire Purchase (Amendment) Bill 2010 (click here to see the pdf version of the Bill) was passed in Parliament yesterday.

There are 3 main changes to the Hire Purchase Act 1967-

1) New sections 17A and 17B (Permitted Repossessors)-

• The appointment of car repossessors is now regulated. The owner of the vehicle (bank) will now need to appoint a repossessor by issuing a permit in writing, i.e. only those appointed by the Government via the Controller are allowed to carry out repossessions.
  

2) New section 30A (Booking Fees) and new subsections (1A) and (1B) to section 31 (Deposits)-

• Purchasers/ intended hirers will now only pay not more that 1% of the price of the car and the owner (bank) can ONLY collect the booking fee when the form set out in Part II of the Second Schedule has been duly completed. If the transaction is cancelled, the purchaser will only be entitled to refunded 90% of the booking fee.

• Upon signing of the HP Agreement, all booking fees and deposits will be paid to the bank. If the dealer fails to deliver the vehicle, then the purchaser will be refunded in full.

3) Amendment to section 16 (Repossession limits)-

• the bank cannot repossess your car WITHOUT A COURT ORDER if 75% or more of the cash price of the vehicle has been paid.
  
• the bank must still issue a Fourth Schedule notice giving not less than 21 days.

No doubt, the dealers will be effected by this new bill-

• Since monies will not actually touch their hands, they would need to dip into their own pockets first to secure a car.
• There will be more applications for overdraft facilities to cover their costs. It must be noted that cash-flow will now be affected.
  
• The waiting list is normally a forecast and should the waiting period tires out the customer, a cancellation will mean that the dealer may not get their costs back.
  

Banks too will be effected-

• They have to now mobilize more personnel to deal with collection of booking fees and deposits. I suspect a backlog may occur since the car sales in Malaysia have not really been affected substantially.
  
• The loans officers will be more itinerant compared to now, when dealers will handle most of the paperwork and deal with the banks at a later time.
  
• The hand-in-hand relationships banks have with dealers may now be superficial.
• Having now to apply for a repossession court order, banks will sustain more costs although I'm sure costs would be awarded. But what about the Courts' views on the matter? Is there going to be a special court to entertain these kinds of applications?
  

Deferred Indefeasibility As It was before the Federal Court in Adorna Properties

News of the Federal Court's decision in Tan Yin Hong v Tan Sian San & 2 Ors (Federal Court in Putrajaya, Civil Appeal No.: 02(f)-19-2009(c)) reversing its predecessor's decision in Adorna Properties Sdn Bhd v Boonsom Boonyanit (2001) 1 MLJ 241 was a cause for relieve and reason to celebrate. It has restored the correct position for purchasers and registered proprietors vis-a-vis the National Land Code, 1965.

340. Registration to confer indefeasible title or interest, except in certain circumstances.

(1) The title or interest of any person or body for the time being registered as proprietor of any land, or in whose name any lease, charge or easement is for the time being registered, shall, subject to the following provisions of this section, be indefeasible.

(2) The title or interest of any such person or body shall not be indefeasible-

(a) in any case of fraud or misrepresentation to which the person or body, or any agent of the person or body, was a party or privy; or

(b) where registration was obtained by forgery, or by means of an insufficient or void instrument; or

(c) where the title or interest was unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law.

(3) Where the title or interest of any person or body is defeasible by reason of any of the circumstances specified in sub-section (2)-

(a) it shall be liable to be set aside in the hands of any person or body to whom it may subsequently be transferred; and

(b) any interest subsequently granted thereout shall be liable to be set aside in the hands of any person or body in whom it is for the time being vested:

Provided that nothing in this sub-section shall affect any title or interest acquired by any purchaser in good faith and for valuable consideration, or by any person or body claiming through or under such a purchaser.

(4) Nothing in this section shall prejudice or prevent-

(a) the exercise in respect of any land or interest of any power of forfeiture or sale conferred by this Act or any other written law for the time being in force, or any power of avoidance conferred by any such law; or

(b) the determination of any title or interest by operation of law.

To quote an article in BERNAMA REPORT

PUTRAJAYA, Jan 21 (Bernama) -- Landowners can heave a sigh relief as the Federal Court here on Thursday pronounced a landmark decision protecting original landowners from losing their lands to forgers.

A Federal Court five-member bench led by Chief Justice Tun Zaki Azmi ruled that the controversial 2001 ruling in the case of Adorna Properties vs Boonsoom Boonyanit @ Sun Yok Eng, permitting fraudulent land transfer, was erroneous.

"I am legally obligated to restate the law since the error committed in Adorna Properties is so obvious and blatant.

"It is quite a well-known fact that some unscrupulous people have been taking advantage of this error by falsely transferring titles to themselves. I hope that with this decision, the land authorities will be extra cautious when registering transfers," Zaki said.

The other judges who presided with Zaki were Court of Appeal President Tan Sri Alauddin Mohd Sheriff, Chief Judge of Malaya Tan Sri Arifin Zakaria and Federal Court judges Datuk Zulkefli Ahmad Makinudin and Datuk James Foong Cheng Yuen.

Today's decision was welcomed by the Attorney-General's Chambers and the Bar Council.

The 2001 ruling had been strongly critised by landowners, the legal fraternity and academicians because it opened an avenue for fraudsters to fraudently acquire lands by forging documents, causing the principal registered landowners to lose their land through scam.

The interpretation applied to the proviso in the National Land Code by the previous Federal Court panel led by former chief justice Tun Eusoff Chin in the 2001 ruling protected subsequent innocent buyers of properties, where the titles were forged, leaving the original owners with little recourse.

The effect of the Adorna Properties principle conferred immediate indefeasibility of land title to a registered proprietor even if the instrument of transfer was forged.

In a unanimous decision departing from the Adorna Properties principle, Arifin said the previous Federal Court panel, in deciding on the Adorna Properties case nine years ago, had misconstrued Section 340 (1), (2) and (3) of the National Land Code, thereby making an erroneous conclusion.

He said the interpretation applied by the previous Federal Court panel had gone against the clear intention of Parliament and that error needed to be remedied in the interest of all registered proprietors.

The court was requested to revisit the Adorna Properties principle by counsel representing parties in a land matter dispute involving a businessman, Tan Ying Hong, and Cini Timber Industries Sdn Bhd and United Malayan Banking Corporation Bhd.

In that case, Tan was the registered proprietor of a nine-acre plot of land in Kuantan, Pahang.

However, a fraudster, who cannot be located now, forged a power of attorney from Tan and got the land charged to United Malayan Banking (now RHB Bank Bhd) to obtain loan facilities amounting to RM300,000 in favour of Cini Timber Industries.

Cini Timber defaulted payment and the bank commenced foreclosure proceedings on Tan, the registered land owner.

Tan then commenced legal proceedings to seek a declaration that the charges with the bank were of no effect as they were created by a forged power of attorney but his claim was dismissed by the High Court in 2003.

He brought the matter to the Federal Court after the Court of Appeal affirmed the High Court's decision. Today, the Federal Court set aside the High Court decision and allowed Tan's appeal.

It also ordered that Tan be paid RM75,000 in litigation costs for court proceedings in the lower court and federal courts.

Meanwhile, outside the court, Head of the Civil Division in the Attorney-General Chambers (AGC) See Mee Chun said today's decision had addressed the contentious issue.

She said the AG's Chambers was also looking at other aspects including amendments to the National Land Code to further protect registered owners.

Counsel Roger Tan, who held a watching brief for the Bar Council, said that after nine years of waiting, many landowners could finally see some light that their properties would be safer.

He hoped the lower courts would apply this new principle when adjudicating similar court cases on land disputes.

Adorna Properties was severely criticized as having ridden protection of purchasers under the NLC. In subsequent decisions, the Courts have strived to distinguish and give reasons not to follow Adorna Properties, such as Au Meng Nam & Anor v. Ung Yak Chew & Anor (2007) 4 CLJ 526 Court of Appeal, where is his lordship, Dato' Gopal Sri Ram JCA (as he then was) decided that the ratio in Adorna Properties was made per incuriam and should not be treated as binding because:-

• s.340(3) applies to subsequent acquirers of land, taking from a registered proprietor whose title is defeasible as stipulated in s.340(2), a class which Adorna Properties did not belong to because it took its title from a forger.

• the Federal Court overlooked some authorities which hold that the NCL provides for deferred indefeasibility such as Mohammad Bin Buyong v. Pemungut Hasil Tanah Gombak & Ors (1982) 1 LNS 114 and M.J. Frozen Food Sdn Bhd v. Siland Sdn Bhd & Anor (1994) 2 CLJ 14.

• the then CJ (Tan Sri Eusoff Chin) equated purchasers and registered proprietors overlooking the provisions of s.5 NLC which defines then separately and differently.
  

Well, the correct position is restored and the loophole is now plugged, eventhough 9 years later.

New Commercial Courts (NCC)

With effect from 1 September 2009, 2 (two) commercial courts were put in motion in the High Court of Kuala Lumpur to speed up the disposal of commercial cases.

For the moment, NCC1 presided by His Lordship Justice Dr. Hamid Sultan Abu Backer and NCC2 presided by His Lordship Justice Anantham Kasinater.

** With effect from 1 January 2010, His Lordship Tuan Mohd. Arif Bin Mohd. Yusof will preside over the new NCC 3. Source: Bar Council Circular 257/2009.

The central features of the NCC are as follows:-

1. Processing of all documents will be done on the same day as filing (i.e. documents filed prior to 3pm can be extracted on the same day)

Recently, our firm filed a Writ of Summons and was extracted 4 days later (including the weekends and within 2 working days and I think we would have gotten it on the same day had not it been our court clerks' movement schedule).

2. Court will take charge of Management of cases soon after filing

• All Writ of Summons will bear a return date 3 months from date of filing.

Continuing from above, attached on the right hand corner of the Writ was a note with a case management date 3 months later. I guess this extension of the "tracking system" into the NCCkeeps lawyers and litigants on their toes.

• All Winding Up Petitions will be fixed for a HEARING DATE within 2 months from date of filing.

I've always thought that winding-up petitions should be heard soonest. It certainly means that advertisement and Gazetting has to be speeded up so as to obtain the Registrar's Certificate. I only hope that the Govt Gazette publications can move just as fast as the Courts. The obvious potential problem is timing and availability of advertisement slots. However, as far as the daily papers are concerned, a 3-day advance booking would normally do the trick.

• All other cases and interlocutory applications will be fixed for Case Management before Registrar 2 weeks from date of filing. STRICT compliance required of all directions.

I think this is like the current "tracking system" of the A-track courts. Directions would include the not more than 5-pages skeletal submissions requirement and prior to that, ensure that all affidavits are exchanged.

• All applications will be allocated a hearing date within 2 months from date of filing.
  

• Full Trial Cases, if parties are ready, a Trial will be fixed within 1 month. In any event, the Court intends to dispose of all cases within 9 months of filing.

This pace mirrors that of the Singaporean and HK Courts. However, since commercial cases do involve voluminous documents sometimes, discretion should be given to extend the anticipated time so that all litigants can properly complete the common bundle of documents. I envisage lawyers will start to be overly insistent on clients reverting with instructions and documents for the sake of ensuring all documentary evidence is prepared. Witnesses may be a problem area and depending on which industry, some witnesses come and go. I reckon that more Writ Subpoena Ad Testifacandum would be taken out in view of litigants being "encouraged" to move their cases at this pace

3. To expedite all cases, the Court strongly encourages the following:-

• Parties to file an ENGLISH translation of all cause papers.

I thought this was a practice amongst lawyers in any event. Wasn't it always "strongly encouraged"? I remember my pupillage days when I noticed a notice on the bench table which read "Gunakanlah Bahasa Kebangsaan", something which is not practiced anymore these days, with the exception of some Courts. Even in the subordinate courts, I noticed counsels invoking their submissions in English, much to the pleasure of the bench.

• Parties to file the Form 63 RHC 1980 (Notice Pre Trial Case Management) immediately after close of pleadings.

But of course! This is directed by Order 34 RHC 1980. Always been the case, save as you actually enjoy receiving a 'show cause letter' from the Registry. But then again, if the new NCC cases are to be given a case management date in advance, the author ponders as to the usefulness of maintaining this procedure, much less it leads to more paperwork and filing fees.