Finance Corporation of Malawi LTD v New Building Society (Civil Cause 3455 of 2001) [2002] MWHC 76 (18 September 2002)

Finance Corporation of Malawi Ltd v New Building Society and others Principal Registry Tembo J Date of Ruling: 18 September 2002 Civil Cause No. 3455/2001 Land law — Registered Land Act — Caution — Legal effect of caution — Forbidding of registration of dispositions and making of entries in the property’s register and to entitle cautioner to a notice when there is an application to remove the caution Land law — Registered Land Act - Caution — Registration of caution without a charge — No power of sale granted Land law — Registered Land Act — Caution — Removal of caution without notice to cautioner - Inconsistent with caution - Registration of dealings contrary to provisions of the Act — Registration can be removed and caution restored Land law — Registered Land Act- Charge — Failure to register a charge — Charge not perfected and incomplete — No power of sale can be exercised Land Law — Registered Land Act — Charge — Power of sale — Failure to comply with conditions precedent — sale of property illegal and void Editorial Summary The third defendant was a customer for both the plaintiff and first defendant, New Building Society who were financial institutions providing financial services in Malawi. The third defendant obtained a loan from the New Building Society and pledged his property known as Title No. Soche West CM2/26 as security. The New Building Society registered a caution in the property register at the Lands Registry forbidding any dealings in the property and making of entries in the Register without the consent of New Building Society. It prepared a charge but did not register it. After a period of more than five years the third defendant obtained a loan from the plaintiff and offered the same property as security. The plaintiff presented a charge to the Land Registrar for registration in terms of section 128 (2) of the Registered Land Act. The Land Registrar removed the caution and registered the charge without notice to the New Building Society as was required by law. However, the New Building Society sold the property purportedly in the exercise of its power of sale under the unregistered charge. The plaintiff took out this action seeking a number of reliefs including, an order that the first defendant’s sale of the property was illegal, an order that the first defendant was holding the proceeds of the sale of the property on trust for the plaintiff, a declaration that its charge was validly registered, and the payment over of the proceeds of the sale of the property. The New Building Society on its part counterclaimed for a number of reliefs, including, an order that the plaintiff's charge be deregistered, an order reinstating its caution to the property’s register, and an order that the second defendant, the Attorney General and the third defendant should indemnify it for any loss suffered or it may suffer. The Attorney General contended that the plaintiff's charge had been registered by mistake and prayed for an order rectifying the register in terms of section 139 of the Registered Land Act. The third defendant contended that he was wrongly joined as a party to the proceedings, that he was not liable to indemnify the first defendant for any loss or damage and that the sale of the property was null and void and should be set aside. Held — Allowing in part the claims by all the parties with costs to the plaintiff and third defendant: (1) That the first defendant did not perfect and render complete its charge over the third defendant’s property when it failed to register the charge as required by section 60 (3) of the Registered Land Act as such it could not invoke its power of sale under sections 68 and 71 of the Act. (2) That none of the conditions precedent to the exercise of a power of sale had been fulfilled by the first defendant consequently the purported sale of the third defendant’s property was illegal and the sale was void ab initio. (3) That under sections 126, 127 and 128 (2) of the Registered Land Act the legal effect of a caution is to forbid the registration of dispositions and the making of entries in the property’s register and to entitle the cautioner to a notice when there is an application to remove the caution and not to grant a power of sale. (4) That the third defendant acted lawfully when he created a second charge over the property in favour of the plaintiff. (5) That the registration of the plaintiff's charge without notice first being given to the first defendant as the cautioner was inconsistent with the caution which had expressly forbidden the registration of dealings and the making of entries in the property’s register. The charge was registered by mistake and contrary to the provisions of the Registered Land Act. (6) That the register be rectified in terms of section 139 of the Registered Land Act by restoring unto the register the first defendant’s caution and deleting there from the plaintiff’s charge. (7) That the parties should take measures to comply with all the relevant provisions of the Registered Land Act in order for their respective charges to be validly registered. Cases cited No cases were cited For the plaintiff: Tembenu For the first defendant: Nkhoma For the second defendant: Nkhata For the third defendant: Naphambo [ . | ] = o " w E & L L } parr, iy [ N aomEE ke LR ¥ k e ‘ \ ! g D N P L T ] A . i t s . L T P - . - : $ ; L I % Y . . \ o B " - . s . . 1 ; A b T h C : . . R . - ' ! . ] = - T P R T h . N . v s N - . . ’ . . ¢ s L - ' . : - ' ' n . : B x ” q ¥ S N m , _ u a . H E i 1 - - [ ‘ ) L T E % ) R F o | ] | P R L . a i l v , v m . v . . H R R B - x E e t R t F o o o T R = ‘ s - e . . * P s . 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