Ikumi Terada v Jemix Co. Ltd (W-02(IPCv)(W)-1833-09/2018)

DALAM MAHKAMAH RAYUAN MALAYSIA 5 (BIDANG KUASA RAYUAN) RAYUAN SIVIL NO. W-02(IPCv)(W)-1833-09/2018 ANTARA 10 IKUMI TERADA … PERAYU DAN

1. JEMIX CO. LTD … RESPONDENT- 15 2. JEMIX HEAT TREATMENT (S) PTE. LTD. RESPONDENT

3. JEMIX HEAT TREATMENT (M) SDN BHD DIDENGAR BERSAMA 20 DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANGKUASA RAYUAN) RAYUAN SIVIL NO: W-02(IPCv)(W)-1840-09/2018 25 ANTARA AIZUDDIN BIN ABD. SAMAD … PERAYU (No. K/P: Malaysia: 510101-08-6051) 30 DAN

1. JEMIX CO. LTD … RESPONDEN- (No. Syarikat Jepun: T05UF1040F) RESPONDEN 35

2. JEMIX HEAT TREATMENT (S) PTE. LTD [Dalam Mahkamah Tinggi Malaya Di Kuala Lumpur (Bahagian Dagang) 40 Guaman Sivil No. WA-22IP-7-03/2016

1. Jemix Co. Ltd … Plaintif-Plaintif (No. Syarikat Jepun: T05UF1040F) 45 2

2. Jemix Heat Treatment (S) Pte. Ltd. 5 (No. Syarikat Singapura: 198102527H) Dan

1. Jemix Heat Treatment (M) Sdn Bhd … Defendan- 10 (No. Syarikat Malaysia: 150595-T) Defendan]

2. Ikumi Terada (No. Pasport Jepun: TZ0782388) 15 3. Aizuddin Bin Abd Samad (No. KPPN Malaysia: 510101-08-6051)

4. Keisuke Sakaguchi (No. Pasport Jepun: TX0806021) 20 CORAM 25 HAMID SULTAN ABU BACKER, JCA KAMALUDIN MD SAID, JCA MOHAMAD ZABIDIN MOHD DIAH, JCA 30 35 3 GROUNDS OF JUDGMENT 5 Introduction [1] There were two (2) appeals before this Court from the decision of the High Court at Kuala Lumpur delivered after trial on 10 6.8.2018 granted in favour of the Respondents against the Appellants. We heard both appeals. [2] In Appeal No. W-02 (IPCV) (W)-1833-09/2018 (“Appeal 1833”), the Appellant is the 2nd Defendant (Ikumi Terada) and 15 Respondents are the 1st and 2nd Plaintiffs and 1st Defendant. In Appeal No. W-02 (IPCV) (W)-1840-09/2018 (“Appeal 1840”), the Appellant is the 3rd Defendant (Aizuddin). The Respondents are the 1st and 2nd Plaintiffs. 20 [3] For the sake of brevity and convenience, in this appeal, the Appellants will be referred to as the 2nd and 3rd Defendants and the Respondents will be referred to as the 1st and 2nd Plaintiffs and 1st Defendant, consistent with their description in the High Court. 25 [4] In the notice of appeal 1833 dated 3.9.2018, the 2nd Defendant stated that the appeal is against part of the said decision which was in favour of the 1st and 2nd Plaintiff. Whereas, in the notice of appeal 1840 dated 3.9.2018, the 3rd Defendant stated that the 30 4 appeal is against part of the decision granting judgement against 5 him with Costs of RM165,719.80. [5] The Appellants in both appeals are not satisfied with the finding of the learned judge against the Appellants. The matter under appeal is the decision after trial of the learned judge, as to the 10 existence of an express trust over shares in a company. Brief facts of the case [6] The factual matrix of the facts of the case centred on the 15 arrangements which were operative with one outgoing managing director transferring his shares in the 2nd Plaintiff without any consideration to the incoming directors. [7] The 2nd Plaintiff is a company incorporated in Singapore and is in 20 the business of providing post-weld heat treatment services. The 1st Plaintiff held all the shares of the 2nd Plaintiff either in the name of nominee shareholders or in its own name at all material times. The 2nd Plaintiff at all material times acts under the management and direction of the 1st Plaintiff. 25 [8] Jemix Heat Treatment (M) Sdn Bhd, (the 1st Defendant) is a company incorporated in Malaysia and is in the business of providing post-weld heat treatment services. The 1st Defendant was an agent of the 1st Plaintiff from the time of the 1st 30 5 Defendant’s incorporation in 1986 until on or about 26 August 5 2015, when this agency relationship was terminated. The 1st Defendant is a party in Appeal 1833. [9] The 2nd Defendant (SD1) is a Japanese citizen and has his last-known address in Thailand. The Appellant was an employee of 10 the 1st Plaintiff from 21st May 1981 and was seconded from the 1st Plaintiff to the 2nd Plaintiff as the Managing Director of the 2nd Plaintiff from around 28 October 1994 to around 24 June 2013. SD-1 was also the son in law of SP-1, the then managing director of the 1st Defendant until his divorce from SP-1's daughter (and 15 SP-3's sister) in year 2014. [10] The Plaintiffs' case is that the 2nd Defendant held shares in the 1st Defendant on trust for the 2nd Plaintiff in his capacity as Managing Director of the 2nd Plaintiff. Accordingly, the 2nd 20 Plaintiff claims that the said shares and all shareholder dividends received by the 2 n d Defendant by way of his shares were held on trust for the 2nd Plaintiff. As a family member, trust was imposed by the 1st Plaintiff on the 2nd Defendant. 25 [11] The 2nd Defendant is also the director of the 1st Defendant since 30 May 2014. SP-1 was not aware that the 2nd Defendant got himself appointed as a director of the 1st Defendant since 30 May 2014 and only found out about the same from the business 6 profile search of JHTM conducted through SSM on or around 24 5 June 2015. [12] The 3rd Defendant (SD-2) is a Malaysian citizen and having his last-known address in Kuala Lumpur, Malaysia. From on or around 12 February 1993, SD-2 has been the director of the 1st 10 Defendant. SD-2 held 51,002 shares in the 1st Defendant from around 4 March 1993. The Plaintiffs’ claim that from around 18 March 2011, SD-2 has been holding 127,500 shares and all shareholder dividends derived therefrom in the 1st Defendant on trust for the 2nd Plaintiff. 15 [13] Keisuke Sakaguchi (the 4th Defendant in the High Court trial and not a party to these appeals) is a Japanese citizen and has his last-known office was in Bangkok, Thailand and his last-known residential address was in Chonburi, Thailand. The 3rd 20 Defendant claimed that he had transferred all his shares in the 1st Defendant to the 4th Defendant. [14] The 2nd Plaintiff claimed that the said shares in the 1st Defendant was held in trust for the 2nd Plaintiff and that the said transfer is 25 void and invalid for the reasons that the shares were transferred in breach of trust and in breach of fiduciary duty of the 3rd Defendant as a director of the 2nd Plaintiff and that the 4th Defendant knew or conspired in such breach of duty and that the share sale transaction was a sham or ineffective and/or that 30 7 the 4th Defendant did not purchase the same for value in that 5 no consideration is proved to have passed from the 4th Defendant to the 2nd Defendant. Decision of the High Court 10 [15] The grounds of judgment of the learned judge is at pages 59 to 126 of Common Bundle of Document (Vol.1). There were 4 issues for determination (see at pages 64 to 65 of the grounds of judgment). The main issue is whether there is an express trust that the 2nd and 3rd Defendants hold shares in the 1st Defendant 15 i.e. Jemix Heat Treatment (M) Sdn. Bhd) as trustees for the 2nd Plaintiff i.e. Jemix Heat Treatment (S) Pte Ltd. In this regard, issues related to article 6 of the 1st Defendant’s articles of association, estoppel principles, waiver, acquiescence or laches and adverse inference under section 114(g) of the Evidence Act 20 1950 were side issues raised for consideration. [16] The Supreme Court case of Yeong Ah Chee @ Yan Hon Wah v Lee Chong Hai & Anor and other appeals [1994] 3 CLJ 20 was referred to by the learned judge which decided that there are 25 three certainties to create an express trust i.e. certainty of settlor’s intention to create a trust (1st Certainty); certainty of subject matter (property) of the trust (2nd Certainty); and certainty of object or beneficiary of the trust (3rd Certainty). The law on proved of certainties was discussed based on some authorities cited by 30 8 the learned judge. We approved the learned judge’ reference and 5 reliance on the principles of law that certainties may be proven by a written agreement or document, oral evidence or conduct of the relevant parties (see pages 87 to 90 of the judgment). [17] The learned judge had applied the law to the facts and 10 circumstances from the evidence of witnesses and found that the 2nd and 3rd Defendants hold the shares in the 1st Defendant as trustees for the 2nd Plaintiff. The finding is at pages 90 to 96 of the grounds of judgment as follows - 15 “Who was beneficial owner of subscription shares in 1st Defendant (Subscription Shares)

34. This Court finds as fact that the Plaintiffs have proven on a balance of probabilities the Subscription Shares are held 20 on an express trust for the 2nd Plaintiff. Such a decision is based on the following evidence and reasons:

(1) the 1st Certainty is proven as follows – 25

(1965)]. 20

(2) the evidence and reasons elaborated in above sub 10 paragraphs (1)(a) to (f) support the inference that the 1st Certainty exists in this case;

(3) the 2nd Certainty is proven because there is sufficient certainty that the subject matter of the above express 15 trust is the ‘Subscription Shares’;

(4) there is no doubt that the 3rd Certainty is satisfied in this case because the beneficiary of the express trust regarding the Subscription Shares is the 2nd Plaintiff;

(5) the 2nd Defendant admitted that the 1st Defendant was part of the Jemix group of companies until 1993; and 25

(6) no trust deed or formal document had been executed by the Plaintiffs because as a matter of Japanese business culture, the Plaintiffs trusted their employees to hold shares in the 2nd Plaintiff and 1st 12 Defendant on trust for the 1st and 2nd Plaintiffs 5 respectively. Did Mr. Yakura hold 1st Defendant’s shares on trust for 2nd Plaintiff? 10

35. On 4.3.1993, there was an allotment of shares in the 1st Defendant as follows –

(1) 48,998 shares were allotted to Mr. Yakura (Mr. Yakura’s Shares); and 15

(2) 51,002 shares were allotted to the 3rd Defendant. I am satisfied that Mr. Yakura holds Mr. Yakura’s Shares as a trustee for the 2nd Plaintiff. This decision is premised 20 on the following evidence and reasons which prove the 3 Certainties:

(ii) Mr. Yakura would not have Mr. Yakura’s Shares save for the reasons that he was the 15 2nd Plaintiff’s MD at the material time and Mr. Yakura’s Shares were held on trust for the benefit of the 2nd Plaintiff; and

(1) the 3 Subscribers transferred the Subscription Shares to the 2nd Defendant. There was no evidence that the 2nd Defendant had paid for the Subscription 10 Shares. The 2nd Defendant has also not given any explanation on how he came to own the Subscription Shares. I find as a fact that the 2nd Defendant had not paid for the Subscription Shares. This finding is premised on the following evidence and reasons – 15

(2) the 2nd Defendant did not produce any documentary evidence to support his averment that he had paid for Mr. Yakura’s Shares by making monthly payments of 10 S$5,000.00 to Mr. Yakura’s between 1994 and 1995 (2nd Defendant’s Alleged Monthly Payments). If the 2nd Defendant’s Alleged Monthly Payments were true, there would have been at least one piece of documentary evidence in this digital age [such as 15 online banking transfer confirmation, email, message through SMS (Short Message Service), WhatsApp or any other messaging service provider] to substantiate the 2nd Defendant’s Alleged Monthly Payments; 20

(3) the 1st Plaintiff has sent the following two letter (2 Letters) -

(1) please see the reasons explained in the above sub-paragraphs 34(1)(d) to (f) and (6); and

(2) as explained in the above paragraphs 29, the 2nd Defendant is not a credible witness. Hence, this 20 Court cannot attach any weight to the self-serving bare allegations of the 2nd Defendant that he was the equitable owner of shares in the 1st Defendant.” Grounds of Appeals 25 [18] The 2nd Defendant in appeal 1833 grounded his appeal that the learned judge erred in law and/or in fact as follows –

1. In granting judgment against the 3rd Defendant and/or 4th 30 17 Defendant (Sakaguchi);

2. Failing to give any weight to the 3rd Defendant’s evidence in relation to their dealings with Yasumasa Yakura (Yakura) and/or Sakaguchi; 10 3. In finding the Jemix Group’s witnesses were credible;

4. In finding the 3rd Defendant to be untruthful witnesses based on his opinion of their demeanour without considering the evidence as a whole;

5. In considering and accepting; (1) hearsay evidence by Jemix Group’s witnesses; and (2) non-existent or erroneously assumed facts; to justify his findings; 20 6. In finding that the 3rd Defendant’s share in the 1st Defendant were held on express trust for the 2nd Plaintiff;

7. In finding the 2nd Plaintiff was not estopped from asserting beneficial interest in the 2nd Defendant’s shares in the 1st 25 Defendant;

8. In finding that the Singapore Suit could not be relied upon by the 2nd Defendant to invoke issue of estoppel against the 2nd Plaintiff; and 30 18

9. In pronouncing judgment against Sakaguchi despite him 5 not being served process. [19] The 3rd Defendant in appeal 1840 grounded his appeal that the learned judge erred in law and/or in fact as follows- 10 1. Failing to appreciate and apply the correct fundamental principles of law of evidence on burden of proof, namely “he who alleges must prove” and also the principle of law of trust; 15 2. By taking into consideration facts that were not pleaded by the Plaintiffs, despite numerous objections had been raised and recorded;

3. By taking into consideration hearsay evidence;

4. In holding that the 3rd Defendant is not a credible witness;

5. In holding that the 3rd Defendant is holding the 1st Defendant’s shares on express trust for the 2nd Plaintiff;

6. By making assumption as to the facts of the matter which had not been submitted nor raised by the Plaintiffs; 30 19

7. In holding that the 3rd Defendant did not plead that the 1st 5 Defendant does not recognised any trust arrangement pertaining to the 1st Defendant’s shares (see Article 6 of the 1st Defendant’s Article of Association);

8. That the Plaintiffs’ claim for beneficial ownership of 10 shares in the 1st Defendant is not barred by waiver, acquiescence and/or laches; and

9. Failing to draw an adverse inference against the Plaintiffs under s. 114 (g) Evidence Act 1950, for failing to call the 15 material witnesses privy/relevant to the alleged express trust to give evidence in Court. On the contrary, such inference was drawn otherwise. Our Decision 20 [20] We heard the submissions from counsel and also relying on the written submissions filed herein and we also read the Record of Appeals and the learned judge’s written grounds of decision. The decision of the case was made after considering the evidence 25 which the learned judge heard from the witnesses SP-1, SP-2, SP-3, SP-4, and SP-5 for the Plaintiffs including SD-1 and SD- 2 for the Defendants. The grounds of judgment indicate that there was a proper, adequate and correct judicial appreciation of the entire evidence in order to ascertain the truth of the matter. In 30 20 other words, this appeal turns upon question of facts based 5 on the credibility of the witnesses. [21] At paragraph 28 of the judgment, the learned judge made a finding of fact that all the five witnesses for the Plaintiffs are credible. The testimonies of the Plaintiffs’ witnesses regarding the 10 existence of an express trust over the 1st Defendant’s shares are consistent with the probabilities and circumstances of the case. Paragraphs 34 to 36 of the judgment above speak volume of his finding of fact during cross-examination of the Plaintiffs’ witnesses which did not reveal any reason to doubt the veracity of the 15 Plaintiffs’ witnesses and the testimonies of the Plaintiffs’ witnesses mutually corroborated each other. On the contrary, the learned judge found as a fact that the 2nd Defendant is not a truthful witness based on his dishonest answer given during cross-examination in respect of letters of reply written by him for 20 the 1st Plaintiff. The 2nd Defendant’s conduct showed a lack of probity on his part. The 2nd Defendant avoided to tell the truth by trying not to admit his own handwriting in letter written by him. The learned judge made an impression that an honest witness who has written something in his or her own handwriting, would 25 have easily admitted his or her own handwriting. The 2nd Defendant’s is less than honest witness and his conduct is relevant to the case citing section 8 (2) of the Evidence Act 1950 and the judgment of the Federal Court in Tindok Besar Estate Sdn Bhd v Tinjar Co [1979] 2 MLJ 229, at 234. 30 21 [22] Further, the learned judge had considered the issue related to the 5 relevant part of Rule 12 of the Management Rules” (Rules) introduced in 2005. The 2nd Defendant received dividends from the 1st Defendant when he was the 2nd Plaintiff’s MD on 31.12.2012. However, he claimed that Rule 12 does not apply to him because it was ‘compensation’. The learned judge was of the 10 opinion that the word “compensation” in Rule 12 has a wide meaning to include dividends. This is clear from rule 7 of the Rules which provides “compensation” to include the MD’s salary and fees. Accordingly, the learned judge found that the 2nd Defendant above conduct has breached Rule 12. 15 [23] Despite Rule 12, the 2nd Defendant testified that an employee of a company is allowed to have a commercial interest in a competitor of the company. Such an answer shows the 2nd Defendant lack of credibility. The 2nd Defendant was found to have given material 20 evidence which was self-contradictory. He stated that as the 2nd Plaintiff’s MD, he “required” Mr Wong (a director of the 1st Defendant) to report to him regarding the 1st Defendant’s activities. The 2nd Defendant then contradicted himself by testifying that Mr. Wong, as the 1st Defendant’s director, was not “obliged” to report to 25 him on the 1st Defendant’s business. [24] The Plaintiffs’ letters of demand dated 15.9.2014 and 17.9.2014 to the 2nd Defendant for, among others, the return of the 2nd Defendant’s Shares to the 2nd Plaintiff. The 2nd Defendant was 30 22 initially represented by Messrs “Benjamin Poh Law Office” 5 (Messrs BPL). By a letter dated 29.9.2014 from Messrs BPL, the 2nd Defendant denied the two (2) demands. The learned judge found the SPA was entered into by the 2nd Defendant and 4th Defendants on 16.10.2014, just 17 days after the 2nd Defendant’s Denial. The learned judge found as a fact that the SPA is a sham 10 agreement for the following reasons –

(ii) there is no documentary evidence of any bona fide negotiations at arm’s length between the 2nd and 4th Defendants prior to the conclusion of the SPA; 20

(iii) there is no written proof regarding PCS’s valuation fee and its payment by the 2nd and 3rd Defendants;

(iv) no evidence of offer and acceptance by the 2nd and 4th Defendants (which led to the SPA) has been tendered in 25 this case;

(vi) after the execution of the SPA, there was no correspondence between the 2nd and 4th Defendants regarding the completion of the SPA; 10

(vii) clause 3.1 of the SPA provided that the consideration for the 4th Defendant’s purchase of the 2nd Defendant’s Shares was RM2,000,000.00 (Purchase Consideration) which was “payable wholly in cash”. According to clause 3.2 of the SPA, (Clause 3.2), a proof of payment of the 15 Purchase Consideration or written instruction of the 2nd Defendant “shall” be delivered to Messrs BPL before the execution of the transfer of the 2nd Defendant’s Shares to the 4th Defendant. Clause 5.1 of the SPA (Clause 5.1) stated that the “Completion” of the SPA (defined in clause 20 1.1 of the SPA to mean the completion of the transfer of the 2nd Defendant’s Shares) “shall take place upon the full settlement” of the Purchase Consideration in accordance with Clause 3.2. 25

(viii) the 2nd Defendant did not tender any evidence that the 4th Defendant had paid the Purchase Consideration and yet, the 2nd Defendant’s Shares had been transferred to the 4th Defendant. The SPA is clearly a sham contract because the 2nd Defendant’s Shares had been transferred to the 4th 30 24 Defendant despite a breach of Clause 3.2 and 5.1 (4th 5 Defendant’s Breach). The 4th Defendant even received interim dividends amounting to RM156,800.00 from the 1st Defendant;

(ix) despite the 4th Defendant’s Breach, the 2nd Defendant did 10 not send any demand for the 4th Defendant to pay the Purchase Consideration; and

(ii) Secondly, Mr. Wong Ti Ti was not involved in the creation of express trust over the 1st Defendant's shares. His evidence is therefore not material in this case would 10 not attract an adverse inference pursuant to Section 114(g) of the Evidence Act; and

(iii) Thirdly, by way of the ample evidence provided by the Respondents, there is no need to call the 3 Original 15 Shareholders of the 1 s t Defendant. Even if adverse inference was invoked against the Respondents, the evidence regarding the express trust is sufficient to rebut such adverse inference. 20 4th Defendant not being served process [31] We agreed that this ground is unfounded. It was not disputed that the notice of writ was not served on the 4th Defendant as the Plaintiffs were unable to locate the 4th Defendant in Thailand. The 25 learned judge had given his view on this matter at paragraphs 66 to 70 of his grounds of judgment. At paragraph 69 the learned judge said amongst others that based on Order 1A and Order 35 Rule 1(2) of the Rules of Court 2012, in the interest of justice, the Court has a discretionary power to 30 29 proceed with a trial of a claim or counterclaim in the absence 5 of any party ("Trial in Absentia") and to give any judgment or order as the Court thinks fit ("Decision in Absentia"). In the interest of justice, a Trial in Absentia may be conducted and a Decision in Absentia may be given by the Court even though there is no service out of jurisdiction. 10 [32] The 4th Defendant received the 122,500 shares with full knowledge of the fact that the 2nd Defendant was selling these shares in breach of the 2nd Defendant’s trust obligations to the 2nd Plaintiff such that it is unconscionable for the 4th Defendant to 15 retain the benefit of the 122,500 shares. In addition, under the Share Sale Agreement, title is said to pass upon payment of the sum of RM2,000,000.00 from the 2nd Defendant to the 4th Defendant. During cross-examination, the 2nd Defendant gave evidence that no closing of the sale as contemplated under the 20 Share Sale Agreement took place and admitted he did not pay the purchase consideration to the 4th Defendant. Accordingly, apart from the knowing receipt of the shares in breach of trust, by the admission of the 2nd Defendant that no money was ever paid for the shares the title therefore did not pass to the 4th Defendant. We 25 agreed with the Plaintiffs that, as a result of the 4th Defendant’s knowing receipt of the 122,500 shares, the 4th Defendant is a constructive trustee of the 122,500 on behalf of the 2nd Plaintiff. 30 30 Estoppel/Res Judicata 5 [33] The Plaintiffs submitted that the 2nd Defendant’s allegation that the Plaintiffs were retaliating against the 2nd Defendant due to their lost in the Singapore High Court action (Suit No. 659 of 2013) and the deterioration of personal relationship between the 10 Plaintiffs and the 2nd Defendant is frivolous and does not assist the Defendants' case in the present matter. In addition, it was never pleaded in the 2nd Defendant’s defence that the principle of res judicata should be invoked against the Plaintiffs by way of their alleged failure to raise the present claim in this case against 15 the 2nd Defendant in the Singapore High Court Action. Therefore, the 2nd Defendant is barred from raising this argument in court. [34] In any event, we agreed with the Plaintiffs that the plea 20 of res judicata shall not apply in the present matter by way of the 2nd Defendant’s failure to plead the same (Florence Bailes V Dr Ng Jit Leong [1983] 2 MLJ 175). Further, it was submitted that the issues in the Singapore High Court action i.e. whether was there wrongful dismissal of the 2nd Defendant by the 25 2nd Plaintiff and the present action i.e. whether the shares of the 1st Defendant were held on express trust by the 2nd Defendant for the 2nd Plaintiff are substantially different, the principle of res judicata will not apply. In the case of Chung Guat Hooi (MW) V GH Goh [1954] 1 MLJ 131, it was held that the doctrine of res 30 31 judicata cannot be invoked if the issue between the parties in the 5 second proceedings is not substantially the same as that in the first proceedings. [35] On the issue of estoppel, we agreed with the learned judge that the 2nd Plaintiff is not barred by the issue of estoppel principle 10 from filing this action on express trust due to the following:

(ii) Even if it is assumed that the issue estoppel principle applies to the Singapore Court action, there is no room to apply this principle to estop the 2nd Plaintiff in this case because: 20 a. The 2nd Plaintiff’s counterclaim in the Singapore Court Action concerned issues which were not related to the shares in the 1st Defendant; 25 b. Any suit based on a claim that the 1st Defendant’s shares are held on trust for the benefit of the 2nd Plaintiff, must necessarily cite the 1st Defendant as a co-defendant. The 1st Defendant was not a party in the Singapore Court Action; 30 32

(iii) The 2nd Defendant held his shares on express trust for 5 the benefit of the 2nd Plaintiff. The 2nd Defendant has breached this express trust by selling the 2nd Defendant’s shares to the 4th Defendant by way of a sham SPA. It is unjust and unequitable to allow the 2nd Defendant to rely on the equitable doctrine of estoppel 10 in this case. Principles of Express Trust [36] In the case of Geh Cheng Hooi v Equipment Dynamics 15 Sdn Bhd [1991] 1 MLJ 293, SC, it was held that trusts are either express trust or trust arising by operation of law. The learned judge did not commit an error of law when dealing with the issue of trust before him. In fact, other than that, the case of Yeong Ah Chee @ Yan Hon Wah v Lee Chong Hai & Anor and 20 other appeals [1994] 3 CLJ 20, at 26, referred to in the judgment that there are three “essentials” of an express trust (3 Certainties), we may add that the three certainties were also discussed in the Court of Appeal’s decision in Fawziah Holdings Sdn Bhd v Metramac Corporation Sdn Bhd & another Appeal [2006] 1 25 CLJ 996. At page 1024, the Court of Appeal said: “[59] The law governing the certainty of a trust is that laid down by Lord Langdale MR in the seminal case of Knight v. Knight [1840] 49 ER 68. There it was held that for a trust to 30 33 be certain three requirements must be fulfilled. First, there 5 must be certainty of intention. Second there must be certainty of subject matter: both in terms of the corpus and the beneficial interest. Third, there must be certainty of the objects of the trust. A trust is void if there is uncertainty in any of these three elements”. 10 [37] In the Court of Appeal case of Qimonda Malaysia Sdn Bhd (in liquidation) v Se-diabena Sdn Bhd [2012] 3 MLJ 422 at 432, CA, it was held that the court must consider the circumstances concerning the relationship between the parties. 15 As trust can be implied even where the agreements themselves do not contain an express clause as it is clearly manifested in the agreements and the correspondence concerned that it was the intention of the parties to create one. 20 [38] According to Halsbury's Malaysia para [310.043], the law allows a declaration of trust of any property to be made informally and by parole. There is no necessity for a declaration of trust to be made in writing, to be valid (Teoh Heng Seng v Teoh Kiew Seng [2000] 1 MLJ 707). In respect of the certainty of intention, there 25 had to be clear evidence of an intention to create a trust and this could be inferred not only from the alleged settlor's words and conduct but also of the surrounding circumstances and the interpretation of any agreements that might have been entered into (Guy Neale v Nine Squares Pty Ltd [2014] SGCA 64). It is 30 34 not necessary for a trust to be in writing (Wan Naimah v Wan 5 Mohamad Nawawai [1974] 1 MLJ 41). Intention is a matter of evidence and it can be established by way of inference (Emas Offshore v Suhaimi Maryani [2014] 10 CLJ, 279). A person's intention for a trust is to be gathered from the totality of the particular circumstances of the case, including the words written 10 or spoken and the conduct of the parties (ESPL (M) Sdn Bhd v. Radio & General Engineering Sdn Bhd [2004] 4 CLJ 674). Express Trust-Certainty of Subject Matter [39] Pursuant to Halsbury's Laws of Malaysia [310.052]: 15 "In order to create a valid trust, the property to be affected by the trust must be either expressly designated or so defined that it is capable of being ascertained otherwise the trust is void for uncertainty." 20 Express Trust-Certainty of Object [40] The case of Re Chionh Ke Hu (deed) [1964] 1 MLJ 270 provides that the objects or persons to be benefited by a trust must 25 be expressly designated or so defined that they are capable of being ascertained. 30 35 Principles of Constructive Trust 5 [41] Para [310.024] of Halsbury's of Malaysia states that a constructive trust is automatically imposed in circumstances where it is unconscionable or contrary to fundamental equitable principles for the owner of particular property to hold it purely for 10 his own benefit. [42] It would be unconscionable to allow a person who did not pay for the shares to claim to be the beneficial owner of the same as held in Chempro Technology (M) Sdn Bhd v Wee Eng Hock 15 [2010] 1 LNS 1857. [43] In Tay Chao Foo@ Tay Chiew Foo v Tengku Mohd Saad@ Tengku Arifaad bin Tengku Mansur (all acting as administrators of the estate of Tunku Mansur bin Tunku 20 Yaacob (deed) [2009]1 MLJ 289, the Court of Appeal upheld the decision of the trial judge in imputing a constructive trust over certain shares held by the first defendant on trust for the deceased's estate. 25 [44] In Paragon Finance plc v DB Thakerar & Co (a Firm); Paragon Finance plc v Thimbleby & Co (a firm) [1999] 1 All ER 400 at 409, CA (Eng), Millett LJ held that the possession of the property is coloured from the first by the trust and confidence by means of which he obtained it, and his subsequent appropriation of the 30 36 property to his own use is a breach of the trust. 5 [45] In Malayan Assurance Alliance Bhd v Anthony Kulanthai Marie Joseph (suing as a representative of the estate of Martin Raj all Anthony Selvaraj, deceased) [2011] 1 CLJ 15, FC, the court, inter alia, held that where a 10 person is in possession of trust property which he knows does not belong to him, the law regards him as a constructive trustee. Constructive Trustee Strangers of Trust Property 15 [46] A stranger who receives property in circumstances where he has actual or constructive notice that it is trust property being transferred to him in breach of trust will also be a constructive trustee of that property, as held in Barnes v Addy (1874) 9 Ch App 244 at 251 per Lord Setborne LC; Soar v Ashwell 20 [1893] 2 QB 390 at 400, 405, CA (Eng), per Kay LJ. [47] In the case of Foskett v McKeown [2000] 3 All ER 97, HL, Lord Millet observed that the beneficiary's proprietary claims to the trust property or its traceable proceeds can be maintained 25 against the wrongdoer and anyone who derives title from him except that of a bona fide purchaser for value without notice of the breach of trust. 30 37 [48] Based on the facts and circumstances of the case and guided by 5 the authorities referred to in the judgment, we found that the learned Judge had correctly ruled that certainty of intention for the 1st Defendant's shares to be held on trust is proven as follows: 10

(ii) That SP-1 is the alter ego of the 1st Plaintiff at all material times. As the 2nd Plaintiff is controlled by the 1st Plaintiff, 15 SP-1 instructed Mr. Masatsugu Aoki (“Mr. Aoki”), an employee of the 1st Plaintiff to incorporate the 1st Defendant on 8th February 1986;

(iii) There was no evidence that the 3 Original Shareholders 20 paid for the shares of the 1st Defendant;

(iv) SP-1 testified that the 1st Defendant was incorporated as a shell company to enable the 2nd Plaintiff to provide services in Malaysia;

(vi) The 1st Defendant's change of name to "Jemix Heat Treatment (M) Sdn Bhd" is only possible because the 10 shares of the 1st Defendant are beneficially owned by the 1st Plaintiff. Furthermore, the 1st Defendant's change of name has the effect that the first three names of the 2nd Plaintiff and the 1st Defendant (i.e. Jemix Heat Treatment) are identical. There is no reason why the 15 Plaintiffs directed the name change of the 1st Defendant unless the 2nd Plaintiff is the equitable owner of the shares of the 1st Defendant;

(vii) The 2nd Defendant admitted that the 1st Defendant was 20 part of the Jemix Group until1993;

(viii) No trust deed or formal documents were executed by the Plaintiffs because as a matter of Japanese business culture, the Plaintiffs trusted their employees to hold 25 share in the 2nd Plaintiff and the 1st Defendant on trust for the 1st and 2nd Plaintiffs respectively;

(ix) That the 3 certainties of an express trust have been proven in this case: 30 39 a. The 3 Original Shareholders; 5 b. Mr. Yakura; and c. The 2nd and 3rd Defendants hold all the shares in the 1st Defendant as trustee for the 2nd Plaintiff;

(xi) That Article 6 of the 1st Defendant's articles of association 15 does not bar the enforcement of any trust regarding the 1st Defendant's shares;

(xii) That the 2nd Plaintiff is not barred by: 20 a. The issue of estoppel principle; b. Estoppel; c. Waiver, acquiescence or laches from claiming against the 2nd and 3rd Defendants in this 25 case;

(xiii) The Court declines to exercise its discretion to make an adverse inference under Section 114(g) of the Evidence Act against the Plaintiff for not calling the 3 Original 30 40 Shareholders, Mr. Yakura and Mr. Wong Ti Ti to testify in 5 this case. In the alternative, any adverse inference which may be drawn against the Respondents pursuant to Section 114(g) of the Evidence Act is rebutted by the evidence in support of an express trust in favour of the 2nd Plaintiff; and 10

(xiv) That notwithstanding that there is no service out of jurisdiction on the 4th Defendant, in the interest of justice, the Court exercises its discretion under Order 35 Rule 1(2) read with Order 1A of the Rules of Court 2012 to 15 decide that the 4th Defendant holds shares in the 1st Defendant as a constructive trustee for the 2nd Plaintiff because the 4th Defendant has knowing received those shares as a result of the 2nd Defendant breach of an express trust in favour of the 2nd Plaintiff. 20 [49] In the above circumstances, we were of the considered view that the finding that the 2nd and 3rd Defendants hold the shares in the 1st Defendant as trustees for the 2nd Plaintiff depended upon the credibility of witnesses and the impression formed by the Court 25 which has seen them and judged their honesty and accuracy. Hence, we did not think this is a proper case for this Court to interfere with the decision of the learned judge. In China Airlines Ltd v Maltran Air Corp Sdn Bhd (Formerly Known as Maltran Air Services Corp Sdn Bhd) And Another Appeal [1996] 2 MLJ 30 41 517, the Federal Court held that it is a settled principle of law that 5 in an appeal where facts have to be reviewed, it is undesirable to do so where the conclusions reached must to a large extent depend on the credibility of the witnesses and the impression formed by a court which has seen them and can judge their honesty and accuracy. 10 Perversity of decision [50] We raised an issue of 2nd and 3rd Defendants’ pleading in the memorandum of appeals. By stating that the learned judge had 15 erred in law and in fact in his decision based on the stated grounds, ultimately, it would be the submissions of the 2nd and 3rd Defendants to say that the learned judge’s decision was plainly wrong. This is because the law states that it is incumbent upon the appellant to demonstrate that the High Court was 'plainly wrong'. 20 In another situation it was held that the court should only upset a decision of the High Court where there is a clear error leading to a perverse finding or resulting in miscarriage of justice. Our preliminary view is that finding of plainly wrong decision and perverse decision are two distinct grounds. Hence, our preliminary 25 view is that the 2nd and 3rd Defendants ought to have expressly pleaded in the memorandum of appeal for specific ground of objection that the decision was also perverse. 42 [51] Finding of facts of the learned judge was based on the evidence 5 before him which the appellate Court did not have the specific audio-visual advantage that a trial judge has is in respect of the assessment of the credibility of the oral evidence, being the witness examined and cross-examined before the trial judge, and the assessment of weight of such non-documentary evidence 10 produced and examined before him. The findings of fact by the trial Judge on such evidence is entitled to great weight, and unless that finding flies in the face of the mute evidence, cannot warrant appellate intervention. (See: Lin Wen-Chih & Anor v Mycom Bhd

(2014) 3 MLJ 691). 15 [52] The jurisdiction of the Court of Appeal to intervene against a decision of the High Court has to rest on settled principles; the court should only upset a decision of the High Court where there is a clear error leading to a perverse finding or resulting in 20 miscarriage of justice, particularly where the lower court has decided on the basis of discretion. (Merbok Hilir Bhd v Sheikh Khaled Jassem Mohammad Jassem Al-Thani & Other Appeals [2013] 8 CLJ 309 (CA). 25 [See also: Yu Gui v Jeffrey Law Siew Su & Ors [2016] 7 CLJ 540 (CA); Bank Pertanian Malaysia Bhd v MCI Bio Tech Sdn. Bhd [2013] 9 CLJ 29 (CA); Conlay Construction Sdn Bhd v Perembun (M) Sdn Bhd [2013] 9 CLJ 828 (FC)] 30 43 [53] The decisions of the Federal Court in Pushpaleela a/p R 5 Selvarajah & Anor v Rajamani d/o Meyappa Chettiar and other appeals [2019] MLJU 135 held that the decision of the Court below will be reviewed if the findings were plainly wrong or perverse. In other words, our view is that the 2nd and 3rd Defendants ought to demonstrate that the decision of the learned 10 judge was perverse. The words ‘perverse’ means showing deliberate determination to behave in a way that most people think is wrong, unacceptable or unreasonable. A ‘perverse decision’ means one that people do not expect and think is wrong (see: Oxford Advance Learner’s Dictionary). 15 [54] We had considered the 2nd and 3rd Defendants’ further submission. It is not disputed that Rule 18 (1) of the Court of Appeal 1994 provides general procedure that the memorandum of appeal must contain the grounds of objection to the decision 20 appealed against, and specifying the points of law or fact which are alleged to have been wrongly decided. The 2nd and 3rd Defendants submitted that the decision being “plainly wrong” or “perverse” necessarily follows the argument of it being so based on the points of law or fact stated in the memorandum of appeal. 25 Our view is that the Rule 18(1) clearly states memorandum of appeal must contain the grounds of objection to the decision appealed against. Therefore, perversity of the decision must be stated as ground of objection to the decision appealed against for the Court of Appeal to examine if the learned judge’s finding 30 44 resulted in miscarriage of justice or clearly does not make sense. 5 Plainly wrong decision is when the learned judge is said to have failed to appreciate the totality of evidence. [55] In the case of S Quarry Sdn Bhd v Desaru Development Corporation Sdn Bhd & Ors [2019] 1 LNS 93, referred to by the 10 Defendants, this Court held that the requirement for the trial judge to have made a decision which was 'plainly wrong' before an appellate court may intervene is well settled in our appellate jurisprudence and practice. This strict requirement underscores the rationale that the appellate court should not reverse or disturb 15 the trial judge's finding even if the appellate court is of the view that it would not have arrived at the same conclusion as the trial judge did on the evidence on the record before it. It was also held that a plainly wrong decision happens when it can be shown that there is insufficient judicial appreciation of evidence by the trial 20 court. The requisite or correct standard to be applied is that no reasonable judge, on the evidence on record, could have reached the conclusion of the trial judge. The adverb 'plainly' does not refer to the degree of confidence felt by the appellate court that it would have reached the same conclusion as the trial judge. It 25 does not matter, with whatever degree of certainty that the appellate court considered that it would have reached a different conclusion. What matters is whether the decision under appeal is one that no reasonable judge could have reached. 30 45 [56] In Pushpaleela a/p R Selvarajah & Anor v Rajamani d/o 5 Meyappa Chettiar and other appeals (supra) the Federal Court held that “It has not been successfully shown to us that the findings were plainly wrong or perverse in any way. In this context, we 10 agree with the Court of Appeal that there was a specific plea of fraud against the seventh defendant, and that the plea of acting in concert was only with regards to the fraudulent execution of the sale and purchase agreement and the memorandum of transfer. There was no explicit plea of 15 conspiracy to defraud. On the evidence before us, we are of the opinion that the plaintiff’s pleaded case for fraud has been satisfactorily proved on the higher standard than applicable, as found by the High Court. The High Court however erred in taking a technical and restrictive approach and reading a “tort 20 of conspiracy? into plain pleadings for fraud”. [57] We were of the view that in the memorandum of appeals, the perversity of the decision must clearly or expressly be stated. It is insufficient to merely plead that the learned judge erred in law 25 and/or in fact and the argument of it being so based on the points of law or fact or the said decision was plainly wrong. Since there is non-pleaded ground to claim that the learned judge’ decision is perverse, we considered the appeals before us have no merits. It is very important to plead that the decision is perverse in the 30 46 memorandum of appeals so that it may allow the Court of Appeal 5 to see whether the said decision appeal against is perverse. [58] This Court in Sidambaran Torosamy v Loke Bee Yeong [2018] 3 CLJ 599, Hamid Sultan Abu Backer JCA gave the Court’s opinion as follows-: 10 “Jurisprudence Relating to Perverse Decision [7] It must be emphasized here that the appellate courts do not welcome perverse decisions of the trial courts. The reason 15 being that such decisions undermine the integrity of the decision-making process itself. The test to decide perversity is one materially related to common sense and miscarriage of justice. That is to say, the appellate court has to take into consideration the totality of the evidence, the law, pleading 20 rules, etc.; related to a particular issue dealt with by the trial judge and decide whether any reasonable tribunal appraised of the facts and law would have come to the same conclusion. A finding of the trial court will always remain perverse, if it is perverse to the totality of the evidence and/or law and/or rules 25 of procedure and/or evidence, etc.; sufficient to cause miscarriage of justice. If one factor or combination of factors had caused miscarriage of justice, the appellate court is obliged to intervene. However, on the totality of the evidence and/or the law, the plaintiff's suit needs to be wholly or partly 30 47 allowed or dismissed then the trial court's decision though 5 perverse may not require appellate intervention as there may not be a case to say there was indeed miscarriage of justice”. [8] The appellate court's function is to arrest miscarriage of justice based on sufficient grounds and in the process it is not 10 necessary to go through each and every issue of fact and principle of law the trial court has erred or got it correct. Trying to go through in a fault finding mission of the trial court in all aspects will be sheer waste of judicial time of the appellate court, notwithstanding a grocery list of complaints are raised 15 in the memorandum of appeal. In contrast, in arbitration, the arbitral tribunal is paid to answer all the questions posed by the parties. That is not the role of the trial courts or appellate courts. The courts' role is to deliver justice according to rule of law in line with the judges' oath of office to preserve, protect 20 and defend the Federal Constitution and based on its own assessment of facts and law the parties have placed before the court. [59] We subscribed to the view that perverse decisions mean 25 decisions which undermine the integrity of the decision-making process itself. The test employed by his Lordship that to decide perversity is one materially related to common sense and miscarriage of justice is correct. We agreed that the appellate court's function is to arrest miscarriage of justice based on 30 48 sufficient grounds and in the process it is not necessary to go 5 through each and every issue of fact and principle of law the trial court has erred or got it correct. Otherwise, there will be a fault finding mission of the trial court in all aspects which is sheer waste of judicial time of the appellate court, notwithstanding a grocery list of complaints are raised in the memorandum of 10 appeal. In other words, it is always incumbent upon the Appellants to expressly state the perversity of the decision in the memorandum of appeal. In the present case, we did not see the word ‘perverse’ had been stated in the memorandum of appeal. There is no ground pleaded to say the decision is perverse. On 15 this ground alone the appeal ought to be dismissed. Conclusion [60] In view of the above, it is our unanimous decision that this is not 20 proper case for this Court to review the learned judge’s decision. We affirmed the finding of the High Court that the Plaintiffs had successfully proven on a balance of probabilities that the shares of the 1st Defendant held by the 2nd and 3rd Defendants were held on express trust for the Plaintiffs. The 2nd and 3rd Defendants then 25 breach the express trust by transferring the shares to the 4th Defendant, who is currently holding the 1st Defendant's shares on constructive trust for the Plaintiffs. Accordingly, we dismissed both appeals with costs subject to payment of allocator fee. Deposits if 49 paid to be refunded to the 2nd and 3rd Defendants. We will now 5 hear the parties on the issue of costs. Dated this 12 June 2019 10 Sgd KAMALUDIN MD. SAID JUDGE COURT OF APPEAL MALAYSIA PUTRAJAYA 15 Parties 20

1. Ooi Huey Miin and Tung Tze Tzing for the Appellants 1 (Messrs Raja Darryl & Loh)

2. Cindy Goh Joo Seong, Keong Ming Wai and Hayden Tan Chee Khoon for the Appellants 2 25 (Messrs Chooi & Co + Cheang & Arif)

3. Oon Thian Seng, Lo Ee Yee, Cindy Goh Joo Seong, Keong Ming Wai and Hayden Tan Chee Khoon for the Respondent 1 30 (Messrs TS Oon & Pts. And Messrs Chooi & Co. + Cheang & Ariff)

4. Oon Thian Seng and Lo Ee Yee for the Respondent 2 (Messrs TS Oon & Pts)