1.

Section 281(1) of the National Land Code provides that any proprietor may
deposit with any other person or body his issue document of title as security for a
loan. It follows that the act of depositing the issue document of title must be done
by the registered proprietor to secure a loan.
Comment on the statement above.
Hong Kong
Peter
Pewira Habib
ORMORM parting of the IDT
There are three elements to be fulfilled in order for a lien to be created. One of them is deposit
of Issue Document of Title or duplicate lease. According to Section 281(1) if the NLC, a lien can
be created by the proprietor of alienated land, co-proprietor of undivided share or a registered
lease holder. The terms of the subsection are clear that only the proprietor, co-proprietor or
lessee can deposit the issue document of title, copy of issue document of title or duplicate lease
with a creditor with the intention to create a lien.
Referring to the case of Hong Leong Bank Bhd v Staghorn Sdn Bhd, it was held that S 281(1) is
an enabling or empowering provision which allows or enables the RP to deposit IDT with any
person/body as security for loan. It does not prescribe the procedure for or the manner of
depositing. It does not mean that the RP must himself do the act of depositing. If the third party
did so upon the instruction, or with the authorization of the RP, it will be inferred that the third
party is acting on the registered proprietors will and the depositing of the issue document of title
is therefore valid. Thus, it clearly shows that the act of depositing the issue document of title is
not necessary be done by the registered proprietor. A third party doing so at the registered
proprietors will is also allowed.
Not necessary to discuss the intention
Other than that, the intention to create a lien must be proven. A mere deposit of an issue
document of title by a proprietor with any person but without the intention to borrow money from
the person will not be sufficient to establish the element of deposit. It must be proven that the
deposit was made on the advance of money. The lender must prove the true intention of the
proprietor when the title was deposited by the proprietor. In other words, the lender must show
that the deposit was made in order to secure a loan advanced by him to the proprietor. If the
deposit of issue document of title is for reason other than as security for a loan, no valid lien
could then be created.
This can be referred to in the case of Paramoo v Zeno Ltd where the court held that the
requirement that there must be an intention to deposit the issue document of title or duplicate
lease with the lender as a security for the loan and for no other purpose must be proved. The
intention to create a lien may be inferred from the fact that the issue document of title to the land
has been deposited with the lender as a security for the loan or for other purposes.

The element of intention is not satisfied if the possession of issue document of title is obtained
through fraud or misrepresentation and the deposit of issue document of title is never authorised
by the registered proprietor.
Deposited by third party but not within the authorization of the registered proprietor
In the case of Nallammal v Karuppanan, the 1st defendant took the title deed from the plaintiff
who was the registered proprietor of the land by giving the false pretext that he required it in
order to secure a contract job. The plaintiff then found out that the 1 st defendant had deposited
the title with Bank Buruh as a security for a loan which was utilised by the 1 st defendant without
the authorisation of the plaintiff. The plaintiffs thumbprint was affixed to the loan document
under undue influence by the 1st defendant. The court held that, the 1st defendant had no right in
law to make use of the issue document of title as security for the loan. The 1 st defendant did in
fact defraud the plaintiff to obtain the issue document of title.