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for an order of sale. If default is proved an order of sale is made and the sale must be by auction. If the application is made by the first chargee the land will be sold free of all subsequent registered charges. If the application is made by a second or subse- quent chargee the sale will be subject to the charges of any prior registered chargees who have not joined in the application. Any prior chargee who has joined in the application is of course paid out of the proceeds of sale in priority to any subsequently registered chargee. Priority of registration thus becomes a matter of considerable valut.

28. There is no counterpart in the local law to the power of sale by a mortgagee or the power of sale possessed by a receiver appointed by the mortgagee.. The title (grant or lease) can only be transferred by (a) the grantee or lessee or (b) by an officer of the Court after sale by auction at the instance of a chargee. The former can of course act by a duly constituted attorney and in the case of a company by a liquidator. A transfer executed by a chargee or receiver appointed by him would not be registered. 29. There is nothing to prevent the chargee if such a document as a trust deed similar to those executed by the Company is in existence, entering into possession and managing the land either personally or by a receiver, but the title to the land can only be dealt with as indicated in the preceding paragraph.

30. It is now possible to deal with the concluding part of the Committee's letter under reference. The Committee appear to refer to one trust deed only, viz., that which relates to the guaranteed Debenture-holders but the rights of the parties cannot possibly be clarified without referring to the other trust deeds, i.e., those of the Prior Lien and of the participating debentures, and also to the charge deed in favour of the Federated Malay States Government. In each of the three trust deeds the terms relating to the creation of charges over land are identical and I refer below to the clause numbers in the guaranteed Debenture-holders' deed of the 30th November, 1926.

31. By Clause 8 the Company purports to charge by way of first specific charge all the immoveable property of the Company. This clause can have no effect under the local land law until statutory charges have been executed and registered and in order to preserve the existing priorities the charges should be presented and regis- tered in the order set forth in paragraph 11 above.

32. Clause 9 (a).-The Company is to hand over to the trustees all title deeds It is clear that the Prier Lien debenture trustees and not the guaranteed debenture trustees will be entitled to custody of the title deeds though under a system of registra tion of titles custody of titles has not the same value that it has under English law.

33. Clause 9 (b).-The Company is to execute "legal and local mortgages" and such other assurances in order to vest in the trustees the legal estate. As pointed out above the words legal estate and mortgages are inapplicable here and the parties will if they are well advised cause local statutory charges to be executed and registered.

34. Clause 10.-Every local or legal mortgage or further assurance may take the form of a conveyance or assurance upon trust for sale or of a legal mortgage and in the case of leasehold property any mortgage or further assurance may take the form of a subdemise for the term for which the same is held less a nominal reversion. Now even under English law only the Prior Lien debenture trustees as first chargees could get a legal mortgage or subdemise and the guaranteed and participating debenture trustees would have to be content with equitable mortgages. Under the local law it would no doubt be possible to execute in favour of a single de facto mortgagee a sub- demise with a proviso for release on repayment of the loan but such an instrument would not have the same effect as an English mortgage by way of subdemise and would not be otherwise satisfactory. Moreover, it would not be possible to protect the interests of the 2nd, 3rd, and 4th chargees by any form of registrable document.

35. It may as well be recognized that Clauses 8, 9, and 10 were drafted without reference to the local law of registration of title in which happily the English law of mortgages finds no place. It would therefore seem desirable for the parties concerned to cause local statutory charges to be executed and registered.

36. It is not for this Government to advise the three trustee corporations as to whether they should or should not in due course present statutory charges for registra- tion, but should they decide not to do so this will not prevent the Federated Malav States Government from registering a charge to secure the payment of its £850,000 loan and it will almost certainly do so.

37 It will be noted that the Trade Facilities Act Advisory Committee's opinion that the leases cannot be registered and that no valid charges can be registered against the leases is based on an inaccurate view of the local law. Leases can be and in some

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cases have been registered and charges can be registered against the leases. That being so the Committee will probably desire to withdraw its suggestion as to caveats which are in many ways less satisfactory than registered charges.

38. If the parties decide on the execution of charges it will be well for them to instruct Solicitors praetising in the Federated Malay States to prepare the draft charges and to submit them to this office for scrutiny, in order to make sure that they are in a registerable form and comply with the requirements of the local law. The charges will have to be executed both by or on behalf of the Company and the Trustee Cor- porations and if the charges are to be executed in the Federated Malay States the Company and the Trustee Corporations should appoint local attorneys empowered to execute the charges.

39 In this matter of charges and registration generally the solicitors for the various parties would be well advised to consult the Land Code, 1926 (Federated Malay States Enactment 24 of 1926).

Kuala Lumpur,

3rd November, 1932.

W. S GIBSON.

Legal Adviser, Federated Malay States.

Enclosure 2 in No. 24.

MEMORANDUM II.

The Company are occupying or will occupy land under-

(a) Leases issued or to be issued under Clause 1 (v) (vi) of the Concession

Agreeident.

(b) Permanent titles acquired by purchase from former owners.

(c) Way-leaves over State land.

(d) Way-leaves over alienated land.

2. The Government does not encourage the acquisition of land under permanent

title as the position of such land under Clause 23 of the Concession Agreement is somewhat doubtful. In view, however, of Clause 7 (a) of the Agreement the Govern- inent cannot prevent the Company from buying land held under permanent title when it so desires.

3. When land is acquired compulsorily as provided by Clause 7 (b) of the Agreement the policy of the Government is to issue leases under Clause 1 (v) of the Agreement.

4. The Company is entitled to way-leaves over State land under Clause 2 of its electricity licence vide Appendix E to the Agreement and under Section 5 of the Electricity Enactment, 1931.

5. Way-leaves over alienated land not belonging to the Company do not appear to be contemplated by the Concession Agreement but are not prohibited thereby. They are provided for in Section 11 of the Electricity Enactment, 1931.

6. Registrable charges can be registered against leases and permanent titles but Got against way-leaves. For this reason the trustees for the Debenture-holders would probably be within their rights in objecting to these way-leaves and in insisting on the issue of leases after acquisition of the land if necessary as provided by Clause 7 (b) of the Agreement.

7. The Company's land may be divided into—

(a) the Chenderoh dam site.

(b) the inundation areas.

(c) the Malim Nawar steam station site.

(d) various sub-station sites,

(e) the transmission lines.

The land is situated in the administrative districts of Upper Perak, Kuala Kangsar,

Kinta, and Batang Padang.

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In regard to the Chenderoh dam site having an area of about 200 acres the survev has recently been completed and leases can be issued at an early date.

9. The land required for the inundated areas was acquired as to the greater part of the area compulsorily by Government and as to the remainder by the Company by private treaty.

This It is proposed to issue no title for the inundated area. proposal has the support of the Perak Government as the grantors of the Concession, of the Treasury and of the Federated Malay States Government as third chargees, but the consent of the Company and of the trustees for the various Debenture-holders who are 1st, 2nd, and 4th chargees has vet to be obtained.

میم

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