Nemo Dat vs Indefeasibility (A Case Study)

Introduction

The recent Court of Appeal decision in EKO Property Holdings Sdn Bhd v Soo Jia Xuan & Anor [2025] 1 MLJ 935 serves as a pivotal ruling in Malaysian property law, particularly in the application of the nemo dat quod non habet principle and the indefeasibility of title under Section 340 of the National Land Code (NLC). The case highlights the protections available to purchasers and beneficial owners when property transactions are tainted by fraud or misrepresentation.

What is Nemo Dat Quod Non Habet?

The nemo dat quod non habet principle is a fundamental doctrine in property law that translates to “no one can give what they do not have.” This means that a person who does not have ownership or legal title to a property cannot transfer a better title than what they possess. In property transactions, this principle ensures that fraudulent or unauthorized sales do not grant valid ownership to buyers. Under Malaysian law, Section 27 of the Sale of Goods Act 1957 codifies this principle, and the courts have extended its application to land transactions under the National Land Code.

Case Background

Soo Jia Xuan and Soo Yam Hoong (the plaintiffs) entered into a Sale and Purchase Agreement (SPA) in 2007 with Alor Vista Sdn Bhd (D1) for the purchase of two commercial lots. The plaintiffs fully paid for the properties and took vacant possession. However, their names were never registered as owners. Instead, in 2014, D1 sold the properties to EKO Property Holdings Sdn Bhd (D2), prompting the plaintiffs to file a legal action claiming ownership.

The plaintiffs argued that:

D1’s sale of the properties to D2 was fraudulent.
As beneficial owners, they retained equitable rights over the properties.
The nemo dat principle applied, meaning D1 could not transfer valid title to D2.

D2, on the other hand, contended that it was a bona fide purchaser for valuable consideration and was entitled to indefeasible title under Section 340(3) of the NLC.

Court of Appeal’s Decision

The Court of Appeal ruled in favor of the plaintiffs, holding that:

The plaintiffs had established beneficial ownership of the properties by virtue of full payment and vacant possession.
D1 had no authority to resell the properties as it had effectively become a bare trustee.
The nemo dat principle applied, rendering the sale to D2 void ab initio.
D2 could not claim immediate indefeasibility under Section 340(3) NLC because:
- It was the immediate purchaser (not a subsequent one).
- The transaction was affected by fraud and an invalid instrument.
The High Court’s decision was affirmed, and D2’s appeal was dismissed.

Legal Significance

This case reiterates several important legal principles:

1. Beneficial Ownership and Bare Trust Doctrine

When a purchaser fully pays for a property and takes vacant possession, the vendor becomes a bare trustee. This means the vendor cannot resell the property without breaching the trust.

2. Application of Nemo Dat in Land Transactions

The nemo dat principle is well-established in Malaysian property law. It ensures that a seller cannot transfer better title than they possess. This decision affirms that even under the Torrens system, nemo dat can override indefeasibility in cases of fraud or an invalid transaction.

3. Limits of Indefeasibility Under Section 340 NLC

Section 340 NLC does not protect a direct purchaser who acquires property through a fraudulent or defective transaction. Only a subsequent bona fide purchaser for value enjoys full protection.

Implications for Property Transactions.

This ruling serves as a cautionary tale for property developers and investors:

Developers must ensure proper title transfers to buyers to avoid potential litigation.
Purchasers should conduct due diligence to confirm that properties are free from prior claims.
Financial institutions must verify ownership status before granting loans based on land titles.

Conclusion

The Court of Appeal’s decision in EKO Property Holdings Sdn Bhd v Soo Jia Xuan & Anor strengthens purchaser protections in land transactions and reinforces the nemo dat principle. It sends a clear message that fraudulently transferred properties will not be safeguarded under the doctrine of indefeasibility. With the matter now escalated to the Federal Court, its final ruling could further clarify the interaction between nemo dat and Section 340 NLC, shaping the future landscape of Malaysian land law.