Hartajaya Benteng Timur AMR Jeli V Sdn Bhd v UOB (Malaysia) Berhad (WA-22NCC-337-08/2017)

The Plaintiff claims against the Defendant, United Overseas Bank (Malaysia) Bhd, for judgment for various sums and an account. I have dismissed the Plaintiff’s claims. These are the full reasons for my decision.

The trial was held from 13th to 16th August with the following witnesses: 2 a) For the Plaintiff, by PW-1 Dato’ Sri Ram a/l M.S. Sarma (“Dato’ Sri Ram”) and PW-2 Geetha Rubasundram, whose opinion evidence the court has ruled is to be disregarded and expunged; and b) For the Defendant, by DW-1 Soh Siew Ying.

The documents before the Court were marked as follows, with the authenticity of the documents not being in dispute: a) IP Bundle of Pleadings b) A Agreed Facts c) B Issues to be tried d) C Plaintiff’s Case Summary e) CBD-1 Common Bundle of Documents (Vol 1) f) CBD-2 Common Bundle of Documents (Vol 2) g) CBD-3 Common Bundle of Documents (Vol 3(i)) h) CBD-4 Common Bundle of Documents (Vol 3(ii)) i) CBD-5 Common Bundle of Documents (Vol 4) j) CBD-6 Plaintiff’s Additional Bundle of Documents 3 k) CBD-7 (Defendant’s) Additional Common Bundle of Documents; and l) The loose documents filed, subsequently compiled as Additional Bundle of Documents (2) (“CBD-8”).

The Plaintiff is a special purpose vehicle and was awarded contracts by Jabatan Kerja Raya (“JKR”). Amongst its contracts were several road works project in Negeri Sembilan (the “Seremban-PD Project”) and in Johor (the “Batu Pahat-Ayer Hitam-Kluang Project”) (the “Projects”). a) The shareholders of the Plaintiff are Hartajaya (Malaysia) Sdn Bhd (“Hartajaya”) and Benteng Timur Sdn Bhd (“Benteng”). i) Dato’ Sri Ram is a director in the Plaintiff. b) About 90% of the shareholding of Hartajaya is owned by Saron Holdings Sdn Bhd (“Saron”). 4 i) Dato’ Sri Ram and his wife, Datin Lorraine Crescentia Xavier (“Datin Lorraine”) are shareholders and directors of Saron. c) Datin Lorraine is a shareholder and director of Benteng, however she is not involved in the management of nor the running of either Benteng or of the Plaintiff. i) On the other hand, although he is neither shareholder nor a director, Dato’ Sri Ram is the Chief Executive Officer of and a cheque signatory in Benteng. ii) Dato’ Sri Ram is also a guarantor to the Benteng Facilities.

Benteng was the lead contractor for the Plaintiff for the Projects. JKR would pay the Plaintiff for the works completed and presumably, the Plaintiff would in turn pay Benteng.

Benteng obtained various banking facilities from the Defendant, which was revised from time to time, to finance the works under the Projects. The facilities enabled Benteng to do the works under the 5 Projects and when they were completed, JKR could pay the Plaintiff for the works done and presumably the Plaintiff would in turn pay Benteng. a) At all times, Benteng had several accounts with the Defendant: i) Current Account No. 347-3006-3881 (“Benteng 3881”); ii) Current Account No. 347-3011-7132 (“Benteng 7132”); iii) Current Account No. 347-3012-3566 (“Benteng 3566”); iv) PG Facility Account No. 347-8011-1906 (“Benteng 1906”); and v) Fixed Deposit Account No. 347-3015-0613 (“Benteng FD/SF Account”) (the “Benteng Accounts”). b) Benteng maintained monies comprising of fixed deposit and sinking fund in the Benteng FD/SF Account which was an interest earning account. c) The Benteng Accounts were the operating accounts for the works under the Seremban-PD Project. 6 d) Saron maintained a Current Account NO. 347-3006-2184 (“Saron 2184”).

At all times, Dato’ Sri Ram and Datin Lorraine were guarantors to the Benteng Facilities. It was always in their interests as guarantors that the Benteng Facilities were being repaid so as to avoid personal liability.

Quite apart from Benteng, Saron also obtained various banking facilities from the Defendant. At all times, Dato’ Sri Ram and Datin Lorraine were also guarantors to the Saron Facilities. It was also always in their interests that the Saron Facilities were also being repaid, otherwise the guarantors would stand to be personally liable for the sums due by Saron.

The following are the Benteng Facilities which were granted to finance the works under the Seremban-PD Project: a) In November 1999, an Overdraft of RM500,000.00; b) In June 2000, an additional facility of a Temporary Overdraft of RM500,000.00; 7 c) In January 2001, an additional Temporary Overdraft of RM310,000.00; d) In June 2005, an additional Overdraft of RM4,000,000.00 (OD/PC) drawn against 60% of the certified progressive claims of the Seremban-PD Project, and a Performance Guarantee (1) of RM10,000,000.00; i) Subsequently Benteng was allowed to draw against 50% of the OD/PC based on the repayment schedule of the net monthly claims made in the schedule agreed by JKR; these drawdown terms were later reverted back to 60% against the certified progressive claims. e) In October 2005, an additional Temporary Overdraft of RM1,000,000.00 (OD/PC) drawn against 75% of the repayment schedule of the net monthly claims made in the schedule agreed by JKR; f) In April 2006, an additional Temporary Trade facility of Letter of Credit, Trust Receipt and Financial Guarantee of RM1,000,000.00; 8 g) In July 2006, a

of RM6,000,000.00; h) In August 2007, a Letter of Credit Facility of RM4,000,000.00; i) In March 2008, 2 additional overdrafts – an Overdraft (3) of RM3,000,000.00 and an Overdraft (4) of RM1,000,000.00; and j) In August 2008, an additional overdraft of RM2,000,000.00 resulting in a Non Revolving Overdraft

of RM5,000,000.00, and an additional Letter of Credit Facility of RM2,000,000.00 resulting in a total Letter of Credit Facility of RM5,000,000.00.

In August 2007, Benteng was granted a Financial Guarantee (2) Facility of RM6,910,150.00 for the Batu Pahat-Ayer Hitam-Kluang Project. a) Benteng maintained a Current Account No. 347-3012-3566 (“Benteng 3566”) for this project. 9

Benteng drew on the Benteng Facilities through the Benteng Accounts, wrote cheques and paid trade bills, which facilities were reduced and/or cancelled over time from July 2008 and were eventually terminated in March 2010.

The following were some of the securities granted under the Benteng Facilities: a) the personal guarantees of Dato’ Sri Ram and Datin Lorraine; b) the personal charges of fixed deposits by Dato’ Sri Ram; c) the Plaintiff’s various Irrevocable Letters of Instructions (dated 18th May 2005, three (3) dated 27th June 2005, 14th April 2006, 1st September 2006 and 15th August 2007) which authorized the Defendant to debit the Plaintiff’s Current Account No. 347-3011-3064 (the “1st Account”), from the contract proceeds of the Seremban-PD Project, which in the several letters stated, towards the following purposes: i) to regularize, settle the overdue and excesses under Saron and under Benteng; 10 ii) to settle all sums due and payable under the OD/PC Facility of Benteng; iii) to deduct the sum of RM200,000.00 from the proceeds of each progressive claim received and credit into the 1st Account to build up the Sinking Fund to reach an amount of RM4,000,000.00; iv) to deduct the sum of RM10,000,000.00 to be placed as Fixed Deposit in the name of Benteng and charged to the Defendant to fully secure the Performance Guarantee Facility; v) to settle the outstanding bills, excesses, Temporary Overdraft and Financial Guarantees due under Benteng; vi) for payment of commission charges upon receipt of the retention sum from JKR; and vii) to settle all excesses and outstanding bills or any part thereof inclusive of Financial Guarantees and any temporary overdraft facilities granted to Benteng. d) The Plaintiff’s assignment over the contract proceeds by way of an Irrevocable Letter of Instruction to JKR to remit all contract proceeds directly in to the 1st Account; 11 e) Benteng fixed deposit of RM10,000,000.00; f) Benteng fixed deposit of RM4,000,000.00, built from a sinking fund of RM200,000.00 from the proceeds of the progress claims which they received from their works done under the Seremban-PD Project; and g) a Memorandum of Legal Charge over Deposits and a Letter of Set-Off (“MOD and LSO”), by Benteng.

In addition to the irrevocable instructions to the Defendant, the Plaintiff also stated that the Defendant was to credit any balance of the contract proceeds to the Plaintiff’s 2nd Account namely Current Account NO. 347-3011-6799 (the “2nd Account”) (only) after the indebtedness (owed under the Benteng Facilities and by Saron) had been fully settled.

Purportedly based on the Plaintiff’s mandates which were irrevocable authorizations and instructions, and to facilitate the utilization of the Benteng Facilities, the Defendant effected transfers of monies from the 1st Account from time to time to settle the overdue of trade bills, excesses of overdrafts and outstanding sums payable by both Benteng and Saron which were towards settlement of the Benteng Facilities and the Saron Facilities. 12 a) The Defendant upon the instructions of the Plaintiff, transferred monies either directly to settle 3rd parties who are owed monies by Benteng and/or by Saron to settle the overdue and excesses due thereunder.

Additionally the Defendant also effected transfers and debited monies from the 1st Account and placed them in the Bentong FD/SF Account. a) this was to enable Benteng to create Fixed Deposits and/or to build up the Sinking Fund in accordance with the terms and conditions of the Benteng Facilities. b) the Fixed Deposits and Sinking Funds in the Benteng FD/SF Account, were amongst the Benteng Accounts and which were operated in accordance with the terms and conditions of the grant of the Benteng Facilities, and the security documentation executed by Benteng. c) Benteng authorized these funds to be utilized towards payment of the Benteng Facilities. 13

For the first time some 12 years after the inception of both the 1st Account and the 2nd Account, the Plaintiff’s solicitors issued a letter dated 10th September 2014, making allegations in relation to the transfer of monies from the 1st Account, the 2nd Account and also from the funds transferred to the Benteng FD/SF Account. a) By paragraphs 8 and 9 of the letter, the Plaintiff noted that they had examined the transfer withdrawals and debit of trade bills in their bank statements. b) By paragraphs 10(1) and (2), the Plaintiff enquired about the interest earned on the Fixed Deposit and the Sinking Fund and the details of their liquidation and whether the payments were made to settle the debts owed by Benteng. c) By paragraph 10(3), the Plaintiff alleged that they did not mandate payment of trade bills. d) By paragraph 10(4), the Plaintiff queried the mandate for the debit of several sums of RM300.00. 14 e) By paragraph 10(5), the Plaintiff sought an account of the withdrawal of several sums of monies from the 2nd Account.

On 20th October 2014, the Defendant’s solicitors duly replied. a) with respect to paragraphs 10(1) and (2), the Defendant highlighted that the issues relating to interest earned, liquidation and payments made to settle the debts owed by Benteng from the Benteng FD/SF Account were within the purview of Benteng who was the account holder and could not be disclosed to the Plaintiff due to banker customer confidentiality. b) with respect to paragraph 10(3), the Defendant also highlighted the mandates given by the Plaintiff specifically in 2 of the Irrevocable Letters of Instructions dated 14th April 2006 and 15th August 2007 to enable the Defendant to pay trade bills owed by Benteng and Saron. c) with respect to paragraphs 10(4) and 10(5), the Defendant also highlighted that Dato’ Sri Ram as managing director of 15 the Plaintiff had agreed to the payment of the monthly service charges imposed on Benteng (for which Dato’ Sri Ram was chief executive officer).

Notwithstanding the reply by the Defendant’s solicitors, on 23rd September 2015, the Plaintiff filed action via Kuala Lumpur High Court Civil Suit NO. 22NCC-425-12/2015 against the Defendant raising identical allegations to the present action (the “2015 Action”). a) the Plaintiff withdrew the 2015 Action with liberty to file afresh.

The Plaintiff has now filed this Suit for repayment of various sums of money and for accounts to be rendered by the Defendant. In essence, the Plaintiff alleged that the Defendant had dealt with its monies in breach of mandate.

It cannot be disputed that the Plaintiff has utilised the monies in the 1st Account belonging to the Plaintiff in repayment of the indebtedness of Benteng and Saron to the Defendant and to third parties. The Defendant 16 says that it has acted according to the irrevocable mandate or letters of instruction given by the Plaintiff. The Plaintiff says that the Defendant has acted in breach of its mandate and is seeking inter alia judgment for sums due and an order for accounts from the Defendant.

One issue the Court has to determine is whether the Plaintiff is estopped from bringing this claim against the Defendant as the Plaintiff has never raised any queries in respect of the monthly statements of account in respect of the 1st Account and the 2nd Account forwarded by the Defendant to the Plaintiff. This defence will only relate to the 1st and 2nd Accounts as there were no statements of account to the Plaintiff for the Fixed Deposit and the Sinking Fund. At this juncture it should be mentioned that the Plaintiff has conceded that the withdrawals from the 2nd Account were in accordance with the mandate of the Plaintiff so the Plaintiff is not pursuing the claim with respect to the 2nd Account anymore.

In its Account Opening Form, the Plaintiff has expressly agreed to the provision stating that a copy of the Defendant’s Rules governing the conduct and operations of current accounts has been furnished to them and that they have read the same and the Plaintiff confirmed that they fully understood the contents and effect thereof and in particular Rule 13 17 relating to their obligation to check the monthly statement of account and they agreed to be bound thereby as well as any subsequent changes made to the Defendant’s’ Rules.

Rule 13 of the Defendant’s Rules state as follows: ‘STATEMENTS AND VERIFICATIONS

Statements of account will be sent by ordinary mail at monthly intervals or such other intervals as the Bank may deem fit. If there is no movement in the Account, no statement will be sent. The account is under a duty:

to check all entries in the statement of account;

(ii) to report promptly to the Bank any error or omission therein;

(iii) to sign and return any confirmation slip, including that related to auditing purposes (if requested to do so); and

(iv) to notify the Bank should he not receive any statement that is due to him. The Bank has the right to make adjustments to the Account if any amount is erroneously credited into the Account. 18 If the Bank does not receive a written objection from the Account Holder to the contents of the statement within thirty (30) days of the statement date, the Account Holder shall be deemed conclusively to have accepted the contents of such statement as true and accurate and such statement shall be final and conclusive and binding on the Account Holder for all purposes whatsoever including for purposes of legal proceedings”.

In addition, on every statement of account, it is stated that “the entries and balances shown…will be considered correct unless.. notify Branch Support/Customer Communications Management (as the case may be) at…of any discrepancies within 60 days from the statement date.”

The Plaintiff never raised any query, nor complained of any discrepancy and did not have any grievance or objections to the transactions effected under the 1st Account or the 2nd Account until September 2014, well after the 60 day period.

In Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd & Ors [1986] AC 80 at page 110, the Privy Council held that if banks wish to impose upon their customers an express obligation to examine their monthly statements and to make those statements, in the absence of 19 query, unchallengeable by the customer after expiry of a time limit, the burden of the objection and of the sanction imposed must be brought home to the customer. Clear and unambiguous provision is needed if the banks are to introduce into the contract a binding obligation upon the customer who does not query his bank statement to accept the statement as accurately setting out the debit items in the accounts.

In that case, the express terms of the company’s contracts with the banks included a requirement that the company should notify the banks within a specified time of any errors in its monthly bank statements which would otherwise be deemed to be correct. The Privy Council held that the terms do not constitute “conclusive evidence clauses” and are not such as to bring home to the customer either the intended importance of the inspection he is being expressly or impliedly invited to make or that they are intended to have conclusive effect against him if he raises no query, or fails to raise a query in time, upon his bank statements.

The Tai Hing Cotton Mill case has been followed by our Supreme Court in United Asian Bank Bhd v Tai Soon Heng Construction Sdn Bhd [1993] 1 MLJ 182. In that case, it was held that in the absence of a contract to the contrary, there is at common law no duty imposed upon 20 the customer to inspect his periodical bank statements to ensure that his account is being properly maintained by the bank. However, in that case, it is pertinent to note that the bank’s rules referred to in the account opening form were never produced in evidence nor was evidence given as to the existence of such rules.

In the present case, not only were the Defendant’s rules adduced as evidence, the account opening form itself referred specifically to Rule 13 relating to the Plaintiff’s obligation to check the monthly statement of account and the Plaintiff’s agreement to be bound thereby. I am of the view that in this case, it is a term of the contract between the Plaintiff and the Defendant that the Plaintiff is obliged to check the monthly statements of account and report to the Defendant any error or omission therein and if the Defendant did not receive a written objection within the specified time of 60 days, the Plaintiff shall be deemed conclusively to have accepted the contents of such statement as true and accurate and such statement shall be final and conclusive and binding on the Plaintiff for all purposes whatsoever including for purposes of legal proceedings. Unlike the Tai Hing case, in the present case, there are “conclusive evidence clauses”. 21

Accordingly, since the Plaintiff never raised any queries regarding the monthly statements of account within the specified 60 day period, the Plaintiff should be estopped from now seeking to query the transactions set out in the monthly statements of account. In Boustead Trading (1985) Sdn Bhd v Arab –Malaysian Merchant Bank Bhd [1995] 3 MLJ 331, the Federal Court said this at pages 344 to 346: “The time has come for this court to recognize that the doctrine of estoppel is a flexible principle by which justice is done according to the circumstances of the case. It is a doctrine of wide utility and has been resorted to in varying fact patterns to achieve justice. Indeed, the circumstances in which the doctrine may operate are endless. Edgar Joseph Jr J (as he then was) in an illuminating judgment in Alfred Templeton & Ors v Low Yat Holdings Sdn Bhd & Anor [1989] 2 MLJ 202 at p 244 applied the doctrine in a broad and liberal fashion to prevent a defendant from relying upon the provisions of the Limitation Act 1952. The doctrine may be applied to enlarge or to reduce the rights or obligations of a party under a contract: Sarat Chunder Dey v Gopal Chunder Laha LR 19 IA 203; Amalgamated Investment and Property Co Ltd (In liquidation) v Texas Commerce International Bank Ltd [1982] 1 QB 84; [1981] 3 All ER 577; [1981] 3 WLR 565. It has operated to prevent a litigant from denying the validity of an 22 otherwise invalid trust (see, Commissioner for Religious Affairs, Trengganu & Ors v Tengku Mariam bte Tengku Sri Wa Raja & Anor [1970] 1 MLJ 222) or the validity of an option in a lease declared by statute to be invalid for want of registration (see, Taylor Fashions Ltd v Liverpool Victoria Friendly Society [1981] 1 All ER 897; [1981] 2 WLR 576). It has been applied to prevent a litigant from asserting that there was no valid and binding contract between him and his opponent (see, Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387) and to create binding obligations where none previously existed (see, 1995 3 MLJ 331 at 345 Spiro v Lintern [1973] 3 All ER 319; [1973] 1 WLR 1002). It may operate to bind parties as to the meaning or legal effect of a document or a clause in a contract which they have settled upon (see the Amalgamated case) or which one party to the contract has represented or encouraged the other to believe as the true legal effect or meaning: American Surety Co of New York v Calgary Milling Co Ltd (1919) 48 DLR 295; De Tchihatchef v Salerni Coupling Ltd [1932] 1 Ch 330; Taylor Fashions. We would add that it is wrong to apply the maxim 'estoppel may be used as a shield but not a sword' as limiting the availability of the doctrine to defendants alone. Plaintiffs too may have recourse to it. The true nature of the doctrine in this context is that stated by Lord Russell of Killowen in Dawsons Bank v Nippon Menkwa Kabushiki Kaisha LR 62 IA 100 at p 108: Estoppel is not a cause of action. It may (if established) assist a plaintiff in enforcing a cause of action by preventing a defendant from denying the existence of some fact essential to establish the cause of action, or 23 (to put it in another way) by preventing a defendant from asserting the existence of some fact the existence of which would destroy the cause of action. It is also wrong to think that the doctrine is confined to cases where a representation of fact has been made or where a party has been encouraged by another to believe in the existence or in the non-existence of a fact. The decisions of the Privy Council in Sarat Chunder Dey and the Calgary Milling Co (among others) to which we have referred earlier concerned cases involving representations not of fact but of law. The width of the doctrine has been summed up by Lord Denning in the Amalgamated Investment case ( [1982] 1 QB 84 at p 122; [1981] 3 All ER 577 at p 584; [1981] 3 WLR 565 at p 575) as follows: The doctrine of estoppel is one of the most flexible and useful in the armoury of the law. But it has become overloaded with cases. That is why I have not gone through them all in this judgment. It has evolved during the last 150 years in a sequence of separate developments: proprietary estoppel, estoppel by representation of fact, estoppel by acquiescence, and promissory estoppel. At the same time it has been sought to be limited by a series of maxims: estoppel is only a rule of evidence, estoppel cannot give rise to a cause of action, estoppel cannot do away with the need for consideration, and so forth. All these can now be seen to merge into one general principle shorn of limitations. When the parties to a transaction proceed on the basis of 24 an underlying assumption – either of fact or of law – whether due to misrepresentation or mistake makes no difference – on which they have conducted the dealings between them – neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so. If one of them does seek to go back on it, the courts will give the other such remedy as the equity of the case demands. (Emphasis added.) In Lim Teng Huan v Ang Swee Chuan [1992] 1 WLR 113, an appeal from Brunei Darussalam, the Privy Council said that the decision in the Taylor Fashions case: … showed that, in order to found a proprietary estoppel, it is not essential that the representor should have been guilty of unconscionable conduct in permitting the representee to assume that he could act as he did: it is 1995 3 MLJ 331 at 346 enough if, in all the circumstances, it is unconscionable for the representor to go back on the assumption which he permitted the representee to make (per Lord Browne-Wilkinson at p 117). The essential nature of the doctrine does not appear to be any different in American equity jurisprudence. This is reflected by the following passage in the opinion of the Supreme Court of the United States in Dickerson v Colgrove (1880) 100 US 578 at p 580 (25 L Ed 618) delivered by Swayne J: 25 The estoppel here relied upon is known as an equitable estoppel, or estoppel in pais. The law upon the subject is well settled. The vital principle is, that he who, by his language or conduct, leads another to do what he would not otherwise have done, shall not subject such person to loss or injury by disappointing the expectations upon which he acted. Such a change of position is sternly forbidden. It involves fraud and falsehood, and the law abhors both. This remedy is always so applied as to promote the ends of justice. Thus far we have dealt with the operation of the doctrine in the context of there having been offered some active encouragement by the party sought to be estopped. But we do not apprehend the law to be different when the encouragement comes in the form of silence. The true principle in such cases is to be found in the following passage in the judgment of Thesiger LJ in De Bussche v Alt (1878) 8 Ch D 286 at p 314: If a person having a right, and seeing another person about to commit, or in the course of committing an act infringing upon that right, stands by in such a manner as really to induce the person committing the act, and who might otherwise have abstained from it, to believe that he assents to its being committed, he cannot afterwards be heard to complain of the act.”

On this ground alone, that the Plaintiff had contractually agreed that unless they had objected to the entries in their statements of 26 account within 60 days, they would be deemed final and conclusive against them, and the Plaintiff did not raise any objections within the stipulated time period, I would dismiss the Plaintiff’s claim as regards the withdrawals from the 1st Account. The Plaintiff seeks no order as regards the 2nd Account.

The Defendant also relied on the defence of limitation. The Plaintiff submitted that the Defendant did not raise the issue of limitation in evidence. The Plaintiff also submitted that the Defendant only pleaded that the claim is barred by limitation as opposed to time barred by limitation. I am of the view that limitation has been properly pleaded by the Defendant and the Plaintiff is not misled as it had responded to the plea in its Reply.

In the case of Lee Soo Eng & Ors v Majlis Perbandaran Manjung & Anor [2015] MLJU 1997, the defendants did not expressly plead that the claim was barred by the Limitation Act but merely that the claim was barred by limitation. The plaintiffs in their reply joined issue with the defendants on the defence of limitation by denying that their claim was barred by limitation. It was evident from the plaintiff’s own pleadings that they were aware that limitation was part of the pleaded case of the defendant. The court held that the purpose of pleadings is to 27 prevent surprise and it is clear that the plaintiffs were not taken by surprise. The court therefore ruled that the defence of limitation is available to the defendant and adequately pleaded.

In the present case, the Plaintiff joined issue on the plea of limitation by pleading thus in their Reply to Defence: “The Plaintiff denies paragraph 23 of the Defence that the claim is time barred under Limitation Act 1950. In this regard, the Plaintiff further repeats paragraph 6 hereof. The Plaintiff avers that the discovery of the fact that the Defendant had wrongfully operated the accounts in breach of their mandate and in breach of trust was after the month of August 2014 from the contents of the affidavit of the Defendant referred to in paragraph 7 of the Statement of Claim and from the contents of the reply of the Defendant’s solicitors dated 20.10.2014 in reply to the Plaintiff’s solicitors’ letter of demand for an account dated 10.9.2014 referred to I paragraphs 15 and 16 of the Statement of Claim where the Defendant save for maintaining that they were authorised to debit the accounts to pay the debts of Benteng-Timur Sdn Bhd refused to disclose any other facts. The Plaintiff avers that until the disclosure by the Defendant in the affidavit referred to in paragraph 7 of the Statement of Claim there was concealment by the Defendant in the manner of the operation of the account. The Plaintiff further avers that the action of the Defendant until the said disclosure was a concealment by the Defendant of the Plaintiff’s right of action and in the circumstances, limitation period ( if any) is postponed. The Plaintiff 28 avers that the Defendant is guilty of unconscionable conduct amounting to fraud.”

In order to determine what the relevant limitation period is one must determine what the Plaintiff’s cause of action is. Since the Defendant in its Defence has admitted that it was a trustee of the monies in the 1st Account and the 2nd Account and that it was to act with the monies in the said accounts as was mandated by the Plaintiff, I am of the view that the cause of action against the Defendant is for breach of trust. In this respect, I do not agree with the Defendant’s contention that the relationship is merely a contractual one. The limitation period is therefore 6 years from the date of the alleged breach of trust. The Plaintiff pleaded fraudulent concealment of the cause of action by the Plaintiff and said that it only discovered the fact that the Defendant had wrongfully operated the accounts in breach of mandate and in breach of trust after the month of August 2014 from the contents of the affidavit of the Defendant affirmed by Soh Siew Ying in another proceeding. The Plaintiff submitted that prior thereto the Defendant had wrongfully concealed the cause of action from the Plaintiff. The Plaintiff relied on the case of Lim Yoke Kong v Sivapiran a/l Sabapathy [1992] 2 MLJ 571 wherein the brief facts were as follows: 29 The Respondent was walking along the edge of a road when he was negligently knocked down by the appellant who was riding a motor cycle. The solicitors for the respondent attempted to trace the insurer of the motor cycle but were unable to do so until after the expiry of the limitation period. At the trial before the magistrate, liability was admitted by the appellant and the quantum of damages had also been agreed. The only issue was whether the claim was time-barred under s 6(1)(a) of the Limitation Act 1953 (“the Act”). The magistrate held that the claim was time-barred as he did not find the appellant or the insurer guilty of any fraud to warrant the intervention of s 29(b) of the Act. On appeal, the learned judge of the High Court held, on the basis of s 29(b) of the Act, that the period of limitation should be postponed due to the fraud of the insurer in withholding itself from being identified and thereby concealing the right of action from the respondent. The appellant appealed. It was held, dismissing the appeal that the learned judge was correct in law in coming to the conclusion that by intentionally refusing to come forward in response to the Motor Insurer’s Bureau circular letter, the reasonable conclusion to be drawn from such conduct was that the respondent’s right of action had been concealed by the fraud of the insurance company and as such the six year limitation period which expired on 31 March 1983 should be postponed until the respondent had discovered the fraud or could with reasonable diligence have discovered it. 30

I am of the view that the said case can be distinguished. In that case, the insurance company had intentionally refused to come forward in response to the Motor Insurer’s Bureau’s circular even though it was aware that the Motor Insurers’ Bureau was looking for them. In this case, the Affidavit of Soh Siew Ying was filed in separate proceedings and there is simply nothing to suggest any fraudulent concealment of anything on the part of the Defendant prior to the date of filing of the said Affidavit.

I am of the view that there is nothing to show that the Defendant had wrongfully concealed from the Plaintiff its right of action against the Defendant. Accordingly, the cause of action is not postponed by wrongful concealment of the right of action. The Plaintiff also argued that this is an action for the return of trust property or the proceeds thereof in the possession of the trustee or previously received by the trustee and converted to his use and therefore there is no period of limitation pursuant to section 22 of the Limitation Act 1953. However, that is not pleaded in the Reply to the Defendant’s Defence, as set out above. 31

As for the remedy of accounts, it is provided in section 6(2) of the Limitation Act 1953 that an action for an account shall not be brought in respect of any matter which arose more than 6 years before the commencement of the action. The Plaintiff however submitted that the limitation period of 6 years does not apply as the Defendant is a trustee of the monies in the 1st Account. The Plaintiff relied on the case of Paragon Finance Plc v D B Thakerar & Co ( a firm) Paragon Finance Plc and another v Thimbleby & Co (a firm) [1999] 1 All E R 400 where Lord Justice Millet at page 415 said the following: “The law on this subject has been settled for more than a hundred years. An action brought by a principal against his agent is barred by the statutes of limitation unless the agent is more than a mere agent but is a trustee of the money which he received.”

At page 416 he said the following: “Accordingly, the defendant’s liability to account for more than six years before the issue of the writ in Nelson v Rye depended on whether he was, not merely a fiduciary ( for every agent owes fiduciary duties to his principal) but a trustee, that is to say, on whether he owed fiduciary duties in relation to the money.” 32 “Unless the defendant was a trustee of the money which he received , however, the claim for an account was barred after six years.”

It would appear that the claim for an account in respect of the 1st Account would not be time barred. However, I have earlier held that due to the contractual obligation on the part of the Plaintiff to notify the Defendant as to any objection to the monthly statements of account and as the Plaintiff had not raised any objection as regards the 1st Account within the stipulated time period of 60 days, the Plaintiff is estopped from raising any queries with regard to the transactions in relation to the 1st Account.

The Defendant has set out in Annexure B the transaction of monies from the RM10 million Fixed Deposit.

It seems to be that the Plaintiff has a basis for questioning the use of funds in respect of the Fixed Deposit of RM10 million. This is because the Plaintiff’s mandate is to pay monies to make up the RM10 million Fixed Deposit to fully secure the PG facility but instead the monies in the Fixed Deposit have been used by the Defendant to pay the indebtedness of Benteng and Saron and not for the PG facility. In fact, the monies in the Fixed Deposit had been exhausted and the 33 Performance Guarantee was never called upon. The Defendant submitted that funds securing the PG facility meant that the Performance Guarantee which was issued to JKR by Benteng was to ensure that works would be done so that the Performance Guarantee would never be called upon by JKR. Accordingly the Defendant submitted that the funds in the Fixed Deposit would have to be utilised to prevent the PG facility from being called upon by JKR. I do not agree with the submission of the Defendant. The Fixed Deposit of RM10 million was to secure the PG facility which means that it can only be used to pay the Performance Guarantee if a call is made upon it by JKR. If JKR does not call upon the Performance Guarantee, by right, the RM10 million should have been returned to the Plaintiff provided the full indebtedness of Benteng has been settled. If the Defendant had wanted to use the Fixed Deposit of RM10 million to pay the indebtedness of Benteng, it should not have stated that the purpose of the RM10 million was to secure the PG facility. There is therefore a breach of mandate.

The question now is what are the damages flowing therefrom. The Defendant submitted that the Fixed Deposit was utilised to ensure that the works could be carried on so that JKR does not call on the Performance Guarantee. Assuming there had been no breach of mandate, it would mean that JKR is likely to have called on the 34 Performance Guarantee in which case the Fixed Deposit of RM10 million would have been utilised to pay the Performance Guarantee, for the benefit of JKR. Accordingly, it would appear that the Plaintiff did not sustain any loss or damage as a result of the breach of mandate on the part of the Defendant. On this basis, I would dismiss the claim in respect of the Fixed Deposit.

In any event, the last transaction in respect of the Fixed Deposit was on 13.10.2008 and the 1st Action was filed more than 6 years after that date. A cause of action in respect of the Fixed Deposit would therefore be time barred. Although the Plaintiff has relied on section 22(1)(b) of the Limitation Act to say that there is no limitation period where a beneficiary is seeking to recover trust property previously received by the trustee and converted to his own use, such a defence is not pleaded by the Plaintiff in its Reply to the Defence of the Defendant. The Plaintiff accordingly cannot rely on section 22(1)(b) of the Limitation Act.

It is trite law that a party is bound by his pleadings. In the case of RHB Bank Bhd ( substituting Kwong Yik Bank Bhd) v Kwan Chew Holdings Sdn Bhd [2010] 2 MLJ 188 at p. 202, the Federal Court said this: 35 “…It is a cardinal rule in civil litigation that the parties must abide by their pleadings. This is trite as can be seen from the decision of this court in Menah Sulong v Lim Soo & Anor [1983] 1 CLJ 26 where Ong Hock Thye CJ said: I think it is necessary in this case to emphasize once again that the courts should give their decision in strict compliance with the pleadings. As Lord Radcliiffe said in Esso Petroleum Co Ltd & Anor v Southport Corporation [1956] 2 WLR 81 at p 91: If an appellate court is to treat reliance as pedantry or mere formalism I do not see what part they play in our trial system. In fact the Court of Appeal itself has reiterated this in Amanah Butler (M) Sdn Bhd v Yike Chee Wah [1997] 1 MLJ 750; [1997] 2 CLJ 79 where Gopal Sri Ram JCA (as he then was) said; It is trite law that a party is bound by its pleadings. On this, we would like to add that it is not the duty of the court to invent or create a cause of action or defence under the guise of doing justice for the parties lest it be accused of being biased towards one against the other. The parties should know best as to what they want and it is not for the court to pursue a cavalier approach to solving their dispute by inventing or creating cause or causes of action which were not pleaded in the first place. Such activism by the court must be discouraged otherwise the court would be accused of making laws rather than applying them to a given set of facts.” 36

In any event, as a matter of fact, a large portion of the RM10 million was utilised to pay trade bills and cheques drawn by Benteng and/or Saron and were not used to pay the indebtedness of the said borrowers to the Defendant. Also, the Plaintiff is not entitled to any monies debited from the 1st Account until the full indebtedness of Benteng has been settled. To-date, the full indebtedness of Benteng has yet to be settled and so the Plaintiff cannot claim the return of the RM10 million in any event.

However, in the event I am wrong in my following findings: i) that the Plaintiff has suffered no loss as a result of the breach of mandate; and/or ii) that the claim is time barred; and/or iii) that the Plaintiff cannot claim the recovery of the RM 10 million since the indebtedness of Benteng has not been fully settled, then the Plaintiff would be entitled to claim the recovery of the sums which were paid to the Defendant, but not the sums paid for trade bills, cheques or any monies paid to third parties on behalf of Benteng or Saron. 37

In view of my findings, I would dismiss the claim in respect of the Fixed Deposit of RM10 million.

The Defendant has set out in Annexure C the transaction of monies from the sinking fund in the Benteng Fixed Deposit Account.

The monies in the Sinking Fund were used to pay trade bills and to reduce the overdraft limit in account No. 7132 and to pay Benteng’s indebtedness as a result of the termination of the Benteng facility. These are in accordance with the mandate given to the Defendant pursuant to the Plaintiff’s letters of instructions. I am of the view that once the monies are paid into the Sinking Fund, they are to be used in accordance with the arrangement agreed between the Defendant and Benteng, as it is not stipulated in the Plaintiff’s letter of instructions what the monies are for, other than that they are to be paid into the Sinking Fund. Accordingly, I find that there is no breach of mandate on the part of the Defendant in respect of the monies in the Sinking Fund and accordingly, the claim for the Sinking Fund of RM4 million is dismissed.

The Plaintiff has submitted that some of its letters of instructions were not applicable or not meant to be taken into consideration. I 38 disagree. The Plaintiff admitted signing all the letters of instructions produced in court and there is no evidence, other than the Plaintiff’s bare allegation, that some of them are not meant to be acted upon. They are all stated to be valid and irrevocable. I am of the view that all the letters of instructions issued by the Plaintiff are valid.

The Plaintiff also submitted that sometimes the Defendant had paid monies into the account of Benteng and/or Saron even though they were not in arrears or overdrawn but the Defendant had clarified that that was done when there is a proposed transaction on the account and the payment is to avoid the account going into default after the proposed transaction is effected.

In conclusion, I dismiss the Plaintiff’s claim for an account in relation to the 1st Account on the grounds that the Plaintiff was contractually obliged to notify to the Defendant any objections it might have as regards the monthly statements of account forwarded by the Defendant to the Plaintiff and the Plaintiff has failed to notify the Defendant of any objections within the stipulated deadline of 60 days. Accordingly, the Plaintiff is estopped from raising any query in respect of the 1st Account. 39

As regards the Sinking Fund of RM4 million, I find that there is no breach of mandate on the part of the Defendant and I accordingly dismiss the Plaintiff’s claim in respect of the Sinking Fund.

In respect of the Fixed Deposit of RM10 million, I find that the Plaintiff intended that sum to be to fully secure the PG facility but there was a breach of mandate on the part of the Defendant in that the Defendant utilised the money in the manner agreed to by Benteng without seeking the Plaintiff’s consent and the money was not used in relation to the PG facility but to pay the indebtedness of Benteng and/or Saron. However, I am of the view that the Plaintiff has not suffered any loss as a consequence of the breach of mandate and, in any event, the claim is time barred by limitation as the 1st Action was filed more than 6 years after the date of the last transaction. Further, the Plaintiff is not entitled to claim any monies from the Defendant since the indebtedness of Benteng has not been fully settled to-date.

In view of my findings it is unnecessary for me to consider the additional defence of the Defendant that the action herein is an abuse of process and filed for a collateral purpose. 40

I accordingly dismiss the Plaintiff’s action with costs of RM50,000.00 subject to allocator. Wong Chee Lin Judicial Commissioner Kuala Lumpur High Court Commercial Division Dated: 2018 41 Solicitors for the Plaintiff T Gunaseelan, Dennis Xavier, Keshrinjeet Singh & Vinod Messrs Gunaseelan & Associates Advocates & Solicitors Unit B-2-1, VIVA, No. 378 Jalan Ipoh 51200 Kuala Lumpur Tel : 03-4045 3421 / 4045 3091 Fax: 03-4045 3422 Solicitors for the Defendant Ng Sai Yeang & Wong Chee Chien Messrs Raja, Darryl & Loh Advocates & Solicitors Tingkat 18, Wisma Sime Darby