JagdiS Singh a/l Banta Singh v Zakaria bin Yahaya; 2. M/s Zufaidi & Associates (A-02(NCVC)(W)-721-04/2017)

(i) to prepare the Agreement between the plaintiff and the 1st defendant; 6

menerima kesemua bayaran pinjaman persahabatan saya daripada Mr. Jagdis Singh berjumlah RM500,000.00. Pinjaman tersebut adalah untuk saya gunakan membayar wang lobi dan upah saya mengusahakan sehingga termeterainya satu perjanjian usahasama syarikat saya dengan KDYMM Sultan Pahang. 15 tersebut kepada penama-penama yang akan diberikan kelak. Bahawa perlantikan ini adalah berkuatkuasa dari tarikh di atas sehingga penyelesaian kes. Yang benar, …………………………….. ZAKARIA BIN YAHAYA” (emphasis ours) [34] Subsequently, the 1st defendant issued “Client Instruction” whereby the monies received by the 2nd defendant was to be disbursed to certain named persons and/or for certain purposes (page 38 of the CB of the 2nd defendant). [35] The learned trial Judge dealt with this issue in paragraphs 30 - 33 in his grounds and came to the conclusion at paragraph 35 that the plaintiff failed to prove any form of relationship between the plaintiff and the 2nd defendant. We do not find that the learned trial Judge was plainly wrong in his findings premised on the contemporaneous documents adduced. Apart from the bare assertion by the plaintiff that the 2nd defendant was appointed as stakeholder, there is no documentary evidence of the plaintiff appointing the 2nd defendant, which negative any form of trust being created. [36] Similarly, the argument of the plaintiff that the trust was in the nature of a “quistclose” trust is bereft of any basis. The Judge addressed this at para 28 in his grounds. 16 [37] A “quistclose” trust arises when assets were given to a person for a specific purpose. In the event such purpose fails, the asset reverts back to the transferor. If a loan was given to a debtor, who undertakes to use the loan for a specific purpose, and segregates the creditor’s money from his general assets, and if the debtor becomes insolvent, the creditor’s money is refundable, and would not be available to pay the debtor’s other creditors. This creates a situation of a resulting trust, i.e. due to the failure of the trust (as the purpose is not, or cannot be fulfilled), the monies become subject to a resulting trust in favour of the person who originally advanced the credit, and the person to whom the sums were advanced holds them as trustee. [38] “Quistclose” trust has its origin from the case of Barclays Bank Ltd v Quistclose Investments Ltd [1968] UKHL 4 (Quistclose). In Quistclose, Rolls Razor Ltd had declared dividends to its shareholders on 2.7.1964, however it had no money to pay. At the same time, Rolls Razor Ltd owed Barclays Bank Ltd some money and Barclays Bank refused to increase the overdraft facility. As a result, Rolls Razor Ltd applied for a loan from Quistclose Investments Ltd. Quistclose agreed to grant a loan on condition that the dividend would be paid with it, and that the money would be put into a separate account with Barclays Bank. Accordingly, the money was paid into this account. When Barclays Bank received the cheque, it also received a covering letter informing Barclays Bank that the monies had been provided on loan and was to be used only for the purpose of paying the dividend. However, before the dividend was distributed amongst its shareholders, Rolls Razor Ltd went into voluntary liquidation. Quistclose sought to recover the money, contending that 17 its agreement meant that Rolls Razor Ltd held the money on trust.

That I……. do hereby agreed to keep Messrs Zufaidi & Associates fully indemnified against any claims or loss whatsoever from Mr. Jagdis Singh A/L Banta Singh or any persons whosoever arising out of this transaction. DATED: 28.Jan 2012 Signed and agreed by, ……………………………….. NAME: ZAKARIA BIN YAHAYA” [40] The rule of construction of a document or a contract is that where the words in a document or contract are clear, the literal and ordinary meaning prevails. It is not for the court to improve upon the instrument of the contract which it is called upon to interprete. Gopal Sri Ram FCJ in the Federal Court case of Berjaya Times Square Sdn Bhd v M-Concept Sdn Bhd [2010] 1 MLJ 597 in delivering the judgment of the Federal Court held that: 19 “The court has no power to improve upon the instrument which it is called upon to construct, whether it be a contract, a statute or article of association. It cannot introduce terms to make it fairer or more reasonable. However, that meaning is not necessarily or always what the authors or parties to the documents would have intended. It is the meaning to a reasonable person having all the background knowledge which would reasonably be available to the audience to whom the instrument is addressed; See Investors Compensation Scheme Ltd v West Bromwich Building Society. It is this objective meaning which is conventionally called the intention of the parties, or the intention of parliament or the intention of whatever person or body was or is deemed to have been the author of the instrument.” The “Client Instruction” could not have spelt it out any clearer than what it states. One cannot read of any element or a hint of stakeholding nor undertaking on the part of the 2nd defendant in the said document. The 2nd defendant had disbursed the monies according to the instruction of the 1st defendant who had appointed him, and he cannot be faulted for doing just that. [41] Apart from submitting that there is a relationship between the plaintiff and the 2nd defendant as trustee and/or stakeholder for the monies received, the plaintiff submits that the 2nd defendant was a retainer for the plaintiff as well as the 1st defendant. In support, the plaintiff referred to the 2 receipts issued by the 2nd defendant (page 240 of the RR Jilid 1B). [42] The 1st receipt is in relation to the receipt of RM500.00 by the 2nd defendant from the plaintiff which states the purpose of the receipt, namely, “Open file for Charge”. Counsel for the plaintiff submitted that the loan agreement between the plaintiff and the 1st defendant dated 20

10.1.2012 mentioned about securities that is to be charged. The plaintiff had paid the 2nd defendant RM500.00 to prepare charges to be secured over the said 2 properties. However, the 2nd defendant in his evidence explained that the payment of RM500.00 was for travelling expenses to Maran Land Office to present the charge which was supposed to be prepared by the plaintiff’s legal firm. The 2nd defendant explained in his evidence as follows: “Q: The plaintiff alleges that he has paid you RM 500.00 to prepare charges to be secured over two properties mentioned in the Memorandum in pg 1 of Ikatan Dokumen B. Did you agree to prepare the legal documents? A: I did not . It was supposed to have been prepared by the plaintiff’s firm in Ipoh and sent to me for presentation in the land Office in Pahang. The RM500.00 was to cover part-payment of the registration fees and travelling expenses. Plaintiff volunteered to pay RM500.00 and asked me to tell him if the sum is not enough. I just agreed and was willing to assist him as plaintiff’s solicitors are from Ipoh which is far from Pahang.” [43] From the loan agreement, it was the plaintiff’s duty to obtain the title deeds from the registered owners of the 2 pieces of land and protect his interest. RM500.00 was paid as travelling expenses for the 2nd defendant in assisting the plaintiff and there was no duty on the part of the 2nd defendant to do anything more. [44] The 2nd receipt is in relation to the receipt of RM400,000.00 which states the purpose of payment was “balance of friendly loan sum pursuant to Memorandum of Understanding dated 10.1.2012”. This 21 refers to the loan agreement. From the evidence, it is not denied that RM400,000.00 was received by the 2nd defendant on behalf of the 1st defendant as part of the loan for the 1st defendant and the 2nd defendant had disbursed it according to the instructions of the 1st defendant. [45] The plaintiff alleged that the payment by the plaintiff to the 2nd defendant (i.e. RM400,000.00 and RM100,000.00) was to be paid by the 2nd defendant in the following manner: i) RM400,000.00 to the 1st defendant upon the execution of a JVA between the plaintiff and Ebony Ace Development Sdn Bhd; ii) RM100,000.00 to be paid over under the terms of that memorandum. The 2nd defendant was to have prepared the memorandum, the terms of which were set out in a sample precedent that the 2nd defendant gave to the plaintiff to read and keep. However there has not been any progress and the plaintiff took it that there is frustration of the intended contract. There was no evidence adduced to show that the 2nd defendant was instructed to prepare the JVA between the 1st defendant and Ebony Ace Development Sdn Bhd. The loan agreement dated 10.1.2012 was prepared by the plaintiff and there was no evidence to show that the 2nd defendant had anything to do with it. When the plaintiff and the 1st defendant came to see the 2nd defendant on 17.1.2012 they were concerned with the preparation of the 2nd 22 MOU with Tuanku. It has got nothing to do with the loan agreement between the plaintiff and the 1st defendant. In any event, the 2nd MOU with Tuanku can only come into being after the issuance of TOL to Tuanku had been obtained. The question of frustration raised in the plaintiff’s letter never arose because the application by Tuanku for TOL is still pending at the material time (page 25 of the CB of the 2nd defendant). The 2nd defendant came into the picture rather late. [46] Hence there is no evidence adduced by the plaintiff to prove that the monies given to the 1st defendant which was received by the 2nd defendant was to be held by the 2nd defendant on trust. There was no evidence of any appointment by the plaintiff of the 2nd defendant. Therefore, the issue of breach of trust does not arise and neither does the 2nd defendant owes any duty of care to the plaintiff, in the absence of any contractual relationship. Breach of fiduciary duty: [47] A fiduciary relationship is a situation where one who has undertaken to act for or on behalf of another in particular circumstances which gives rise to a relationship of trust and confidence. In Black’s Law Dictionary, 7th Edition, “fiduciary” is defined as “one who owes another the duties of good faith, trust, confidence and candour.” It also defines as “one who must exercise a high standard of care in managing another‘s money or property”. [48] For a fiduciary duty to exist, there must be a special relationship of fiduciary and principal. A civil cause of action of a breach of fiduciary 23 duty occurs when the fiduciary fails to meet one of its obligations which would entitle the principal to compensation for his loss or to restitution for the fiduciary’s unauthorized gain (Bristol & West Building Society v Mothew [1996] 4 AER). The Federal Court in Gurbachan Singh Bagwan Singh v Vellasamy Pennusamy [2015] 1 CLJ 719, said: “For a person to be a fiduciary he must first and foremost have bound himself in some way to protect and/or to advance the interest of another. This is perhaps the most obvious of the characteristics of the fiduciary office for equity will only oblige a person to act in what he believes to be another’s interest if he himself assumed a position which requires him to act for or on behalf of that other in some particular matter. Thus, the essential element is that there must be some undertaking on the part of a fiduciary to act with loyalty in the interest of the other party. A fiduciary is someone who had undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.” [49] Thus, distilling from the above authorities, in order to determine whether one owes a fiduciary duty to a principal, the nature of the functions and duties of the alleged fiduciary must be examined. The facts of the present case are devoid of any evidence of any form of entrustment nor of any contractual/fiduciary relationship between the plaintiff and the 2nd defendant. The plaintiff failed to prove that he had appointed the 2nd defendant to act on his behalf in the transaction. [50] From the contemporaneous documentary evidence adduced, it is clear that it was the 1st defendant who had appointed the 2nd 24 defendant and that the 1st defendant had issued instructions to the 2nd defendant on how the moneys he received were to be disbursed. The 2nd defendant has shown that the monies that he received and disbursed out were adequately accounted for and that there is no basis for any breach of trust or misappropriation of any kind. Apart from the legal fees that are due to him from the 1st defendant, which should not be the concern of the plaintiff, there is no evidence that the moneys were not disbursed according to instructions. [51] There is no causal link shown between the plaintiff and the 2nd defendant as far as the transaction for the TOL application is concerned. The 2nd defendant was neither a party nor privy to the negotiations, be it the loan agreement or the MOUs between the 1st defendant and Tuanku or the plaintiff and Tuanku. Whether there is conspiracy to defraud: [52] The plaintiff in his Memorandum Tambahan at page 3 of the RRT Jilid 1 states that the learned trial Judge erred when he failed to conclude that there was conspiracy between the 1st and the 2nd defendant when there were circumstantial evidence to support, namely: i) the 2 receipts issued by the 1st defendant to the 2nd defendant; ii) the letter of indemnity; iii) the appointment letter of the 1st defendant to the 2nd defendant; 25 iv) the sample agreement between Alefra Corporation Sdn Bhd and Tuanku which was prepared by the 2nd defendant where the 2nd defendant by mistake referred to the 1st defendant as being a director; v) 2nd defendant when preparing the sample agreement for and on behalf of the 1st defendant should have known that there was no application for the rights to harvest. [53] The learned trial Judge had addressed fleetingly in his grounds at paragraphs 21 and 25 of the tort of conspiracy to defraud as follows: “21. Defendan Pertama dan SD 1 di dalam keterangan mereka telah menyatakan bahawa mereka tidak langsung di maklumkan dengan keputusan DYMM Sultan Pahang menarik balik permohonan TOL. Keterangan SP 3 nyata memeranjatkan mereka. Persoalannya, apakah keterangan defendan pertama dan SD 1 berkemungkinan benar atau hanya satu keterangan “after thought” setelah terlibat dengan konspirasi untuk menipu seperti yang didakwa peguam pihak plaintif?

Persoalan seterusnya, apakah status perjanjian pinjaman tersebut? Pihak plaintif mendakwa ianya satu konspirasi untuk menipu plaintif. Peguam defendan pertama berhujah bahawa telah berlaku kekecewaan dalam perjanjian dan peruntukan s 57 Akta Kontrak 1950 terpakai. Peguam defendan kedua membangkitkan isu penggunaan sebahagian duit pinjaman untuk melobi kelulusan permohonan yang menjadikan perjanjian pinjaman berlawanan dengan kepentigan awam dan tidak sah.” After going through the loan agreement between the plaintiff and the 1st defendant, the MOUs and the TOL application, the learned trial 26 Judge concluded that parties labored under a mistake of fact, hence rendering the agreement between the plaintiff and the 1st defendant void under section 21 of the Contracts Act 1950 (Para 26 of the grounds). The learned trial judge did not make any specific finding on the tort of conspiracy to defraud, despite stating so, in paragraphs 21 and 25 in his grounds. [54] It is our observation that, firstly, the Re Amended Statement Of Claim at pages 137-145 of the RR Jilid 1A do not contain any averment of conspiracy/conspiracy to defraud against the 1st and/or the 2nd defendants. It is trite law that parties are bound by their pleadings and failure to plead will preclude the party from raising the same. Hence the plaintiff is precluded from raising this issue. [55] In any event, in determining the issue of conspiracy, there are 2 forms of the tort of conspiracy, namely, conspiracy to use unlawful means and conspiracy to injure. Conspiracy to use unlawful means is proven when 2 or more individuals combine to commit an unlawful act or to carry out an unlawful purpose with the intention to cause injury or damage to the plaintiff. In conspiracy to injure, lawful means are used but the plaintiff must prove that there was a predominant purpose on the part of the defendants to injure the plaintiff in carrying out their common purpose. As far as our case is concerned, it is not certain which form of conspiracy is the plaintiff advocating to, as there is no pleading as such nor particulars thereof. [56] The so called circumstantial evidence listed as in Memorandum Tambahan at page 3 of the RRT Jilid 1 (Paragraph 52 (i) – (iii) in this 27 judgment) could not establish any form of conspiracy to defraud against the 2nd defendant. As far as the document at para 52 (iv) in this judgment, relates to the copy of an the MOU between the 1st defendant and Tuanku, given to the plaintiff to be used as sample for the MOU to be signed between the plaintiff and Tuanku in the event the TOL application is successful. Nothing turns on this document. On paragraph 52 (v), plaintiff failed to call material witness to confirm the veracity of the TOL application by Tuanku and the letter to cancel the TOL application from the Private Secretary of Tuanku. There was no denial that the harvesting rights were legally applied for, by the 1st defendant and there is no evidence to suggest that the 1st defendant or the 2nd defendant were aware of the cancellation of the application by the Private Secretary of Tuanku. Neither was there a duty imposed on the 2nd defendant to find out about the status of the TOL application at the material time. [57] Therefore there is no basis for an allegation of conspiracy to defraud the plaintiff, against the 2nd defendant. [58] On the issue of illegality and section 21 of the Contracts Act 1950, it is relevant as against the 1st defendant, hence we chose not to address them here. Conclusion: [59] There is no evidence of any contractual relationship between the plaintiff and the 2nd defendant. Therefore the learned trial Judge did not err when he found that there was no trust created as against the 28 2nd defendant. Hence there is no issue of any breach thereof. The relief sought for a declaration that the monies i.e.RM550,000.00 is held by the 2nd defendant upon trust for the plaintiff, therefore fails. [60] Accordingly, we dismissed the appeal by the plaintiff against the 2nd defendant with costs subject to allocator. The appeal against the 1st defendant is struck out and deposit refunded. Signed by: Zabariah Mohd Yusof, Judge of Court of Appeal, Putrajaya. Date: 25.7.2018 COUNSEL: Mohd Haziq Pillai, Sangeet Deo, Imerdeep Singh for the Appellant [Messrs. Sandhu & Associates] Jason Singh for the 1st Respondent [Messrs. Jason Singh & Rakan-Rakan] Iruthuya Raj for the 2nd Respondent [Messrs. Raj Selva & Co]