Federal Court: Malay Reserve Land in Kedah can be charged to a Non-Malay

In Affin Bank Berhad v Jamaludin bin Jaafar (The Association of Banks in Malaysia & Anor – Intervenors) [2019] 4 AMR 729, the Federal Court held that the Kedah Malay Reservations Enactment No. 63 (“the Enactment”) does not prohibit Malay reservation land in Kedah owned by a Malay from being charged to a party which is not a Malay under the Enactment.
 
In this case, the following question of law was posed to the Federal Court –
 
Whether the Enactment prohibits a Malay Reservation land owned by a Malay from being charged to any party which is not categorised as a Malay under the said Enactment.”
 
The leave question turned on the interpretation to be given to section 6 of the Enactment which provides as follows –
 
(1)  Save as hereinafter provided in this Enactment, where any Reservation land is held under a document of title by a Malay, no right or interest therein shall vest, whether by transfer, sale in execution of a decree, sale at the instance of a chargee or otherwise, in any person who is not a Malay and where any Reservation land is held under a document of title by a Siamese no right or interest therein shall vest, whether by transfer, sale in execution of a decree, sale at the instance of a chargee or otherwise, in any person who is not either a Malay or a Siamese.
 
(2)  Any document or agreement purporting to vest in any person any right or interest contrary to the provisions of sub- section (1) shall be void.”
 
The Court of Appeal, relying on the words “no right or interest therein shall vest in any person who is not a Malayin section 6(1), held that the vesting of interest under that sub-section includes the vesting of interest by way of a charge.
 
The Federal Court disagreed with interpretation by the Court of Appeal.  Ahmad Maarop CJ (Malaya), who delivered the judgment of the Federal Court, said that the words “no right or interest therein shall vest are governed by the words whether by transfer, sale in execution of a decree, sale at the instance of a chargee or otherwise.  According to His Lordship -
 
The keywords which qualify the vesting of the right or interest in a document of title of a Malay reservation land of a Malay to a non-Malay, are vitally, transfer and sale. The general words or otherwise in the phrase no right or interest therein shall vest, whether by transfer, or sale in execution of a decree, sale at the instance of a chargee or otherwise, should be read ejusdem generis with the specific words transfer, sale in execution of a decree, sale at the instance of a chargee, where the effect is the devolution of proprietorship of the land. (Emphasis added)
 
The Federal Court added that “[t]he creation of a charge does not involve a transfer of ownership of the land by the chargee. A charge does not vest proprietorship of the land in the chargee. The chargor remains the proprietor of the land.”
 
The apex court concluded that while section 6 of the Enactment prohibits the sale by a chargee to a non-Malay of Malay reservation land owned by a Malay, it does not prohibit the creation of a charge of a Malay reservation land owned by a Malay in favour of a non-Malay. The Court further added that if the Legislature had intended to prohibit the creation of such a charge, it would have expressly provided so.
 
The court then as a matter of comparison cited section 8 of the Malay Reservations Enactment (FMS) (Cap. 142), section 9 of the Johor Malay Reservations Enactment No. 1 of 1936, section 5A of the Perlis Malay Reservations Enactment No. 7 of 1353, section 9 of the Terengganu Malay Reservations Enactment No. 10 of 1360 and section 108 of the National Lan Code (Penang and Malacca) Titles Act 1963, which contained provisions that expressly prohibited the creation of a charge over Malay reservation land in favour of a non-Malay.
 
For the reasons set out above, the question for which leave to appeal was granted was answered by the Federal Court in the negative.
 
Comments
 
While the reasoning of the Federal Court in this case is similar to the reasoning by Alauddin J (later PCA) in the High Court decision of Sime Securities Sdn Bhd v Tetuan Projek Kota Langkawi Sdn Bhd [1999] 4 MLJ 585, this decision, being a decision of our apex court, authoritatively determines that section 6(1) of the Enactment does not prohibit the creation of charge over Malay reservation land owned by a Malay in favour of a non-Malay.
 
As an aside, it is interesting to note that the Federal Court had allowed the first intervenor, the Association of Banks in Malaysia, to introduce evidence for the purpose of this appeal to show that the Second Schedule to the Enactment which purports to be a list of entities declared as “Malay” under the Enactment does not exist as the Enactment had never been amended to include that schedule. The Federal Court nevertheless added that, even if the Second Schedule forms part of the Enactment, it would not have affected the Court’s interpretation of section 6 of the Enactment.