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See Hong Chen & Sons Sdn Bhd & Ors v

Datuk M Kayveas (as Public Officer ofPeople' s Progressive Party of Malaysia

(PPP))

[2012] 2 MLJ 460Benjamin Goo Koon Wern A132312

Muslan Hong bin Muslin Hong A132205

Lee Zhen Ying A132558Lim Kai Hau A131599

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Facts

- 1998, pf was in occupation of a property. It was public auctioned andplaintiff bought it through 5th defendant (said to be plaintiff incorporatedinvestment arm).

- 26/12/2003, purchase price RM2,673,000. Pf paid RM263K through 5th df

and balance of payment obtained from 1

st

df was also paid through 5

th

df.

- 17/3/2005, 5th df shares transferred to 1st df 99,998 shares, and hisnominees 2nd and 3rd df held 100K shares of RM1.00 each on trustpending repayment from the loan given by 1st df to pf to buy the property.No consideration given by df.

- 29/11/2005, alleged breach of trust whereby 1st df transfer to 4thdefendant through share sale agreement.

- 12/11/2007, actual transfer of share to 4th df.

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Issue

Whether constructive trust exist between Pf

and Df?

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Plaintiff Contention

- Payment RM1.8M was made several occasion.Balance due RM605K, since purchase date,plaintiff occupied the property , no rental $ wasmade and had paid all assessment rlvt

authorities, have receipt (conduct showingconstructive trust)

- No consideration given by 4th

df when transactionof share was made as it was a security for 4th dfgiving loan to 1st df.

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Defendant Contention

- Loan was paid by 1st df t 4th df after 2003.

- There exist consideration of monetary paymentby 4th df.

- 4th df is bona fide purchaser as it has no noticeof plaintiffs right.

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High Court (Y.A.Datuk Dr. Haji Hamid

Sultan bin Abu Backer)

- Judgment for Pf.

- There was no evidence from the 4th to 7th df to show thatthey actually paid for the property or for the purchase of

shares in the 5th

Df.

- plaintiff has discharged the burden of proof on a balanceof probabilities as to the existence of the trust via bothdocumentary evidence as well as oral evidence and I accept

the submission of the plaintiff that the doctrine ofconstructive trust will be applicable in the instant case toprovide the relief as

prayed against the 4th, 6th and 7th defendants.

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- 4th df is not a bona fide purchaser as there is

no evidence of payment of the shares.

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COA

- Judgment in favour of appellant

- Constructive trust did not exist neither express trust exist .

- Respondent contended gentleman agreement on 2003 as express trust. However it is not in favourof respondent as it is not a valid trust.

- 'certainty of subject' is one of the three essentials of a valid trust, the 99,998 shares not being inexistence in 2003 could not conceivably be the subject matter of an express trust in favour of therespondent in 2003.

- in 2003, PW1 and B Vijayandran a/l S Balasingam were the only registered shareholders of the secondappellant. Following the definition of an express trust, it is reasonable therefore to examine whetherthe first defendant declared himself to be a trustee and, if so, for whom. However, in order for the firstdefendant to declare himself a trustee, the aforesaid two shareholders ought to have transferred their

shares to him. This is consistent with the rule of equity that a settlor must vest the trust property(subject) in the trustee com-pletely for the trust to come into existence. The vesting of property onlyhave in 2005.

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- Respondent take loan from 1st df however no

documentary evidence of the loan and was

stated 1st df held share on trust.

- Taking account of circumstances, PPP is a

registered political party and size of loan

approximate RM2.41M, respondent should be in

possession of documentary evidence of

repayment. However the loan was stilloutstanding( non-existent of constructive trust).

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Characteristic of CT

Bona fide purchaser protected from

constructive trust.

In order for constructive trust to be valid, 3

certainties must exist.

Conduct of parties must shows that it is

inferred to be held on trust.

By operation of law and not intention.