To begin with, there isn’t anything complicated with this situation at all. Simply put, the Philippines had always owned Sabah, now North Borneo, and all other countries claiming ownership to it had been leasing – meaning these foreigners have been paying rent to use North Borneo for a limited amount of time.
The problem arises when the rightful owner, the Sultan of Sulu, is caught in a pinch, and from there an Austrian, Baron de Overbeck, finally notices a chink in the armor and from that point ownership of North Borneo was obtainable with a leasing contract, presented by the Deed of 22 January 1878. Overbeck found an opportunity in selling the rights to Britishman Alfred Dent, and Dent established a company in order to both pay for the lease and make money of his own. When the company was down, Dent sold apparent rights to sovereignty to the British Government.
Except the only thing Dent bought from Overbeck was the lease contract and nothing more. That means these rights to sovereignty didn’t exist, and therefore the British Government’s purchase of North Borneo should have been considered nonexistent. All in all, the Sultan of Sulu still owns North Borneo.
During the Declaration of 24 April 1962 which was issued by the heirs of the Sultan of Sulu, North Borneo was ceded by these heirs and sovereignty was transferred to the Philippines.The heirs also passed a petition requesting to have North Borneo included in the national territory of the Philippines. On September 12, 1962, the Republic of the Philippines officially, legally accepted the cession of sovereignty over North Borneo by the Sultanate.
The Malaysian claim is based on the argument that the original document was a treaty of cession. It is claimed that the two adventurers, Overbeck and Dent, entered into the 1878 Deed as representatives of BNBC and thus attained sovereignty over Sabah.
The two Europeans never acquired sovereignty over Sabah and had no power to transfer that sovereignty to BNBC, to the British Crown or to Malaysia, which is merely a successor-in-interest to Britain.