1. LAND LAW II
(LIEN)

2. Lecture Outline
Definition
Modus Operandi
Types of Lien
Essential Characteristic/elements of Lien
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3. Definition
Section 281(1) NLC: Any proprietor or lessee for the time
being may deposit with any other person or body, as security
for a loan, his issue document of title or, as the case may be,
duplicate lease; and that person or body-
(a) may thereupon apply under Chapter 1 of Part 19 for the
entry of a lien-holder’s caveat; and
(b) shall, upon the entry of such a caveat, become entitled to
a lien over the land or lease.

4. Definition
Halsbury Laws of England (Vol
19 p2.): “Right of one man to retain
the property belonging to another
man until certain demand of the man
in possession of the goods are
satisfied”
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5. Modus Operandi
RP/Lessee Deposit IDT As security
with Lender for a Loan
Lender
enter
LHC
Lien
Holder

6. AND SO . . . LIEN
• … is a transaction wherein the
Proprietor/co-proprietor/lessee intends to
use the appropriate document as security
for a loan then advanced.
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7. Types of Lien
Equitable Lien
Statutory Lien
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8. Equitable Lien
Is when Lender/Creditor fail to enter
Lien-Holder caveat (LHC) BUT still
keep the title as security
This act h/ever will not affect the right
of the lien holder known as equitable
lien
This type of land creates an “equitable”
interest in the land or lease.
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9. Creditor possess a right to a lien in equity which is
enforceable by way of specific performance (contract
entered by the parties-good in law under Section
206(3) NLC.
Mercantile Bank Bhd v The Official Assignee of t
(1969) 2MLJ 169

10. “In other words, although failure to lodge
a caveat does not entitle the depositee
with whom the issued document of title is
deposited, to a lien under the Code, he still
possesses a right to it in equity, he can
exercise that right by registering the
caveat….at any time”( Raja Azlan Shah J)
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11. Standard Chartered Bank Bhd v Yap Sing Yoke (1989) 2 ML
Lamin J stated: “as the IDT was at all time in
the custody of the P, it had acquired a lien in
equity over the land. The equitable interest is
not affected by the absence of a caveat. The P
had by right to lodge a caveat and may do so
at any time under the provision of the NLC,
1965”
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12. Statutory Lien
Prerequisite elements of Statutory Lien
Deposit of OR IDT/Duplicate lease
Intention to create lien
Entry/lodgment of Lien-Holder Caveat
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13. 1.Deposit of IDT/ Duplicate lease
The right to create Lien belongs only to
Proprietor of the appropriate interest.
3rd Party cannot create a lien on behalf of the
Borrower
It was decided by the court that the right to
deposit the title as security for a loan is
restricted only to the proprietor (
Peter P’Chient v Ramasamy Chetty
(1923) 3 FMSLR 220)
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14. Cases:
Perwira Habib Bank (M) Bhd v Megat Najmuddin Me
Perwira Habib Bank (M) Bhd v Loo & Sons Realty Sdn
Hong Leong Finance bhd v Staghorn Sdn
Bhd (2005) 5 MLJ 101
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15. Hong Leong Finance Bhd v Staghorn Sdn
Bhd (2008) 5 MLJ 101-
Allowed lien to be created over a 3rd pty loan
provided that there is an authorisation by the
registered proprietor for the borrower to use
the proprietor’s land as security for a loan
granted in favour of the borrower by the lender
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16. Literally: the act of the proprietor handling over
the subject matter of lien to the Lender and the
act of keeping the subject matter of lien by the
Lender will give rise to a lien
Subject matter:
IDT-Registered Proprietor (Sec 281(1) NLC);
Copy of IDT- co-proprietor (Sec 343(6) NLC);
and
Duplicate lease-Registered lessee (Sec 281(1)
NLC).
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17. Can the Lender part with the IDT?
Lender may part with the IDT provided he enters
LHC on the land
Section 281(4) briefly allowed the lien holder to part
with IDT upon written request made by proprietor
or lessee but it only restricted to produce the IDT or
lease at any Registry or Land Office.
Parting with the possession of IDT for purpose for
which it is required under NLC or any other laws,
will not cause the lien to be lost.
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18. Sitambaram Chetty v Ramanathan
Chetty (1922] 3FMSLR 8
Ormomrm Manickavasagam Chetty of
Teluk Anson v Thomas James Mc
Gregor of Penang (1933) MLJ 295
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19. 2. Intention to Create Lien
Can be inferred from the relevant circumstances
of the situation or transaction. Inference can be
made from the conduct of the parties as a whole.
The deposit must be with the intention of
creating lien.
Thus, if it is a deposit for safe-keeping, no lien
will be created
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20. The element of intention is not satisfied if
possession of IDT was obtained through fraud
or misrepresentation and the deposit of IDT as
security was never authorised by the Registered
Proprietor.
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21. Examples:-
transaction does not include any loan
arrangement.
 Master Strike Sdn Bhd v Sterling Height Sdn
Bhd (2005) 3MLJ 585
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22. Intention can be determined thru:
(1) depositing of title by Borrower to Lender
originated from a loan transaction
Standard Chartered Bank Bhd v Yap Sing Yoke (1989)
2 MLJ 49
(2) the agreement executed between the
parties incorporate the intention to use the title as
a security
Paramoo v Zeno Ltd (1968) 2 MLJ 230
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23. 3. Entry/lodgment of LHC
Lodgment of LHC in pursuant of Section 330(1)
NLC
Lien is created upon the entry of LHC and not
before.
Effect of lodgment of LHC
 same effect as a private caveat- it will
restraint all dealings with the land
 In the event of default by the Borrower, the
Lender is entitled to invoke remedy available
under Section 281(2) NLC
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24. Effect of lodgment of LHC:
i. same effect as a private caveat- it will
restraint all dealings with the land
ii. in the event of default by the Borrower, the
Lender is entitled to invoke remedy available
under Section 281(2) NLC
X lodgment of LHC-equitable lien (LHC can be
entered at any time)

25. Failure to caveat timeously will not, for that
reason alone, cause the prior uncaveated lien to
loose priority against later caveated interest (
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26. Remedy available under Section 281(2) NLC /
right to recover debt (judgment debt) is still
within limitation allowed under Limitation
Act. Delay will render the action statute
barred.
Allagappa Chetti v Perianayagam (1908) Innes
117
Cheong Kam v Loke Chow (1924) 4 FMSLR 294
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27. Conclusion
Advantages of Lien:-
Simple form of security
Security can be perfected in a shorter time
Cheaper and less time consuming (no payment of
stamp duty)
Lien is useful as an interim measure prior to the
preparation of a charge
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