PROHIBITORY ORDER

Sharifah Zubaidah Syed Abdul Kader

LAW 3111

(2009)

Terminology:Judgment debt: a court judgment obtained by the judgment creditor to claim a debt from the judgment debtor.Judgment creditor: the party who claims the judgment debt.Judgment debtor: the party who owes money to the judgment creditor.Execution proceedings: proceedings to enforcement judgment.

Meaning of Prohibitory Order?

See s.334 NLC

‘is to be sold in execution proceedings’ refers to the judgment creditor obtaining a writ of seizure and sale that will enable the court to sell the land to pay off the judgment debt.

Thus, the PO will restrain the judgment debtor from disposing off the land to frustrate the execution proceedings.

Equivalent Concept

Writ of fieri facias :

a writ for the levy of property as a mode of enforcing a court judgment, authorising a court officer to seize and sell the property of the judgment debtor, proceeds of which would be used to satisfy the judgment debt.

When is a PO obtained?

When a judgment creditor applies to court to enforce the judgment debt by way of writ of seizure and sale against the land/interest under Order 47 Rule 6, Rules of the High Court 1980.

The court will issue a PO to restrain any dealings on the land/interest.

P.O. = Court Order

A prohibitory order is issued by the court.

It is an order of the court against the land owner who is the judgment debtor to stop him from dealing with his land.

PO effective only upon entry on the RDT

A PO is issued by the High Court but can only be effective to restrain dealings on land when it is entered by the Registrar on the RDT under section 335 NLC.

See s. 335.

O.47 r.6(3) RHC 1980:

“No PO issued under this rule shall affect any immoveable property/ registered interest therein and no immoveable

property…shall be deemed to have been seized until such PO shall have been

registered as provided by any written law relating to such land.”

Effect of PO:

See s. 336.A PO prohibits the registration or entry of:1) any instrument of dealing EXCEPT a

certificate of sale;2) any TER3) any Lien Holder’s CaveatIf PO is to restrain a particular interest on land, see effect in s.336(2).

Differences between a PO and a Private Caveat:

1) A P.O. must be entered by a judgment creditor, whilst a private caveat is entered by a person with a ‘caveatable interest’ in s.323(1) NLC.

2) A private caveat restrains the registration of a certificate of sale, a PO

does not. (See s.322(2) and 336)

Which has priority,a PO or Lien Holder’s Caveat?

S.336(1): If LH Caveat is to be entered after PO, PO takes priority and will restrain the entry of a LH Caveat and Registrar must reject the entry of a LH caveat. (see s.336(4))

S.336(3): If LH caveat presented/entered prior to PO, LH Caveat shall have priority.

When Can Land Subject to a PO Be Sold in Execution Proceedings?

14 days after entry of the PO on the RDT. (Order 47 rule 7(a) RHC 1980)

See discussion in p.420 of your textbook.

Standard Chartered Bank v Yap Sing Yoke & Ors. [1989]

The sale of land made 3 days after entry of a PO was set aside as being contrary to

Order 47 r.7(a) RHC – as 14 days had not yet expired.

Duration of PO?

6 months (see s. 338)

Can a PO be extended?

Yes, through application by the Judgment Creditor for a court order to extend the PO. (see s.338(1))

When is the extension order effective? (See s.338(2))

Karuppiah Chettiar v Subramaniam [1971] 2 MLJ 45

The vendor sold land to the purchaser and the transfer was executed but not registered.

On 13 Nov. 1968, the purchaser entered a private caveat on the land.

On 14 April 1969, the judgment creditors obtained judgment agst the vendor and entered a PO on the property already sold to the purchaser.

Purchase applied to set aside the PO.

Held:

High Court allowed the purchaser to set aside the PO.

Judgment creditors appealed to the Federal Court.

Federal Court dismissed the appeal on the ground that the vendor had already sold his entire interest in the land and had received the full purchase price. Hence the vendor (judgment debtor) was only a ‘bare trustee’.

Ong, CJ:

“If the land cannot be sold,

what is the point in allowing a PO to stand on the register?”

Principle from Karuppiah Chettiar’s case:

A purchaser who has entered a caveat in order to protect his interest in the vendor’s land has

priority over the claim of a Judgment Creditor who subsequently entered a Prohibitory Order in

respect of that land.

(Note however, such purchaser must have concluded a contract of sale and has paid the full

balance purchase price!)

Meriam bt Yaacob & Ors v Shell M’sia Trading S/B [1984] 2 MLJ 31

Federal Court held:

A judgment creditor can only take whatever interest the judgment debtor has in the land and not against any interest in the land in respect of which the right of the judgment

debtor has since ceased to exist.

Chua Hee Hung & Ors. v QBE Supreme Insurance Bhd. [1990]

This was an application to set aside the PO as the judgment debtor had sold the land.

Supreme Court held:

1) When the court orders the sale of a judgment debtor’s property, it cannot sell more than what the judgment

debtor himself is entitled to sell.

2) Neither a PO nor a caveat creates a legal interest in land.

Ban Hin Lee Credit S/B v Utama Computer Centre S/B & Anor. [1991]

Held: (High Court)

1) The court’s jurisdiction to renew a PO ought to be exercised with caution because a PO is in the nature of a

caveat and it interferes with the rights of a registered owner of the land in dealing

with it. The court can only renew a PO upon proof of special circumstances.

Cont.:

2) A sale of land in execution proceedings can only be carried out if a PO is in force. A void PO would vitiate the order for sale.

Airmartech Corp. M’sia S/B v Equaltra M’sia S/B [2002] 6 MLJ 657

There is no rigid formulation as to what constitutes ‘special circumstances’ in an application to extend a PO.

Depends on circumstances of each particular case.

In this case, court refused to extend the PO as it found no special circumstances.

See discussion on ‘further PO’ in this case discussed at p. 309 of your textbook.