This article was first published in the April 2019 China edition of Accounting and Business magazine.

It is not every day that Malaysia’s top judge issues a judgment in which he highlights a deficiency in a statute and urges the government to address it. And it is rarer still if the recommendation, when acted upon, may have a direct and significant impact on the business world.

This description fits the concurring judgment by Chief Justice Tan Sri Richard Malanjum on three civil lawsuits that went all the way to the Federal Court, where they were heard together in January.

These disputes relate to a land scam that resulted in a woman losing her property. The judge ruled that the company that subsequently bought the land did so in good faith and therefore acquired an indefeasible title, which means its ownership of the asset cannot be annulled, even though the woman was a blameless victim of fraud.

Courtroom battles arising from such circumstances – conmen selling land to unsuspecting buyers without the knowledge of the registered owners – are familiar to those who have dealings in the property market. How the judges rule on these cases has a bearing on the risks and costs of land transactions.

For many years, legal experts have been pointing out that Malaysia’s system of land registration, which is spelled out in the National Land Code, needs to include a way to compensate land owners who suffer losses due to fraud or registration mistakes. The system is based on the one introduced in South Australia in the 19th century. Championed by parliamentarian Robert Torrens, it has since been known as the Torrens system and is used in a number of jurisdictions.

According to the Alberta government in Canada, the Torrens system gives the government custody of all original titles, documents and plans, which has the legal responsibility for the validity and security of all registered land title information. Because of this, Alberta (like several other jurisdictions) has an assurance fund to ease the plight of those whose land titles end up in the hands of others as a result of the government’s errors or the wrongful actions of third parties.

This is what Malaysia lacks, and this has to be fixed in order to raise confidence in the land registration system and fortify the property sector.

In his written judgment, Malanjum said that the Torrens system should be implemented fairly, as it was originally conceived. The authorities must, he added, seriously look into amending the code so that Malaysia can have an effective assurance fund.

There will be tough challenges. Top of the list is working out how the fund gets its money. Land matters come under the purview of the respective states while the lion’s share of government revenue is collected by federal agencies. In addition, with the rising cost of living, the government has to be ultra careful with its spending.

Nevertheless, when the head of the judicial branch calls attention to a gap in the law, is it wise to take no heed?

Errol Oh is executive content officer at The Star.