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Federal Court Rules That Attempts To Auction National Land Code Charge Lands After 12 Years Not Time-Barred

On 21.10.2019, in the case of  RHB Bank Berhad v Dato’ Haji Muhammad bin Hamzah, the Federal Court allowed the appeal by RHB Bank Berhad and laid down the principle that a land chargee is not time-barred from pursuing any further attempts to auction the charged land, more than 12 years AFTER the date of the Order for Sale.

Messrs. Shook Lin & Bok took over the matter after the Court of Appeal had on 5.7.2018 allowed the land chargor’s application for a declaration that the charge action was time-barred after 12 years from the Order for Sale and ruled that no further attempts to auction the land may take place. Our Ms Yoong Sin Min obtained leave to appeal from the Federal Court and conducted the Federal Court appeal hearing.

The Court of Appeal had relied on sections 21(1) and 6(3) of the Limitation Act, 1953 and held that an application to fix an auction date amounted to an action to enforce a charge and of a judgment (the Order for Sale) could not be taken after 12 years of the Order for Sale.

The Federal Court heard the Bank’s appeal on 30.4.2019 and reserved decision to 21.10.2019. The Federal Court in delivering its decision and allowing the Bank’s appeal held that:

  1. section 21(1) of the Limitation Act, 1953 bars only fresh actions/suits. The chargee’s applications for auction dates are not fresh actions/suits but merely to enforce the Order for Sale;
  2. an Order for Sale is granted upon the execution of a statutory remedy under section 256 of National Land Code 1965. Such Order for Sale is not a judgment and therefore s.6(3) of the Limitation Act, 1953 is not applicable.

With this decision, the concerns surrounding the inability of chargees to realise their land security within 12 years of the Order for Sale, particularly where there are impediments to a successful sale (as in the RHB Bank case),  are put to rest.

For further information, you may contact:

Yoong Sin Min
[email protected] 
Heng Chia Leng
Senior Associate
[email protected]