Subparagraph
(iv) may not act for its own benefit or the benefit of a third person without the informed consent of his principal. [69] On the issue of when a conflict of interest arises, it was stated in the Court of Appeal case of Vellasamy a/l Pennusamy & Ors v Gurbachan Singh a/l Bagawan Singh & Ors [2010] 5 MLJ 437 albeit in the context of the facts of the case and specifically as to the conflict of the lawyer involved therein, which I would opine is applicable before me as well, that: “[388]… A conflict of interest arises when a lawyer puts himself in a position of having irreconcilable duties or interests” [70] P3 further submits that no loss or damage has been caused to LKSB as a result of the proposed proposal to appoint QGS and that it was done in good faith as well in the best interest of LKSB as Andrew Woodward of QGS has extensive experience and expertise and refers to the testimony of SP1 where he had testified amongst others as follows: “Well, there is a link between the three companies, QGS, Plus 3 and CCR in Australia. But it’s a matter of marketing spread. So, geographically, Plus 3 are in Malaysia and Hong Kong and those other two companies are not. So, they wanted to take an interest here so that we could join the market on a more global basis, through the Middle East, Asia and Australasia…. We proposed Andrew Woodward because I think he is quite, he’s very remarkable in his field, for the best interest of our client” [71] Again, with respect, I am unable to agree with counsel for P3 on the above point, as the law is trite that where there exists a fiduciary duty to the principal there cannot be a conflict of interest on the part of the agent which has not been disclosed to the principal. This is because as mentioned above, in a fiduciary relationship the agent must inter alia not only act in good faith but must also not place itself in a position where its duty and its interest may conflict. [72] It is no defence for the agent to state that there has been no loss or damage caused to the principal/LKSB as a result of the proposed proposal to appoint QGS or that it was done in good faith or that it was done in the best interest of LKSB. [73] It was decided in the Principal Asset Management Berhad (formerly known as CIMB Principal Asset Management Berhad) (supra) case that: “[108] In fact, once an agent is found to have breached his agency duties in carrying out a transaction, that agent's right to remuneration would still be forfeited even if his principal suffers no loss or damage. This is also enunciated in the Rhodes case (supra): - "But I decide it on the broad principle that whether it causes damage or not, when you are employed by one man for payment to negotiate with another man, to take payment from that other man without disclosing it to your employer is a dishonest act. It does not matter that the employer takes the benefit of his contract with the vendor; that has no effect whatever on the contract with the agent, and it does not matter that damage is not shown. The result may actually be that the employer makes money out of the fact that the agent has taken commission. For instance, in a well-known case, Corporation of Salford v. Lever (1), a similar bribe was taken by the agents. The employers recovered it from the other side at once. They then claimed it from the agent, which would give it them twice, and the objection was taken in very much the same language as Mr. Vachell has used in this case: "You are suffering no damage; it is quite true that it was a bribe, but you cannot get it again from the agent," and in the Court of Appeal that objection entirely failed. It was not a question of whether it was damage or not. The agent acted inconsistently with his duty in a serious matter, and therefore could not claim any remuneration under the contract which he himself violated so seriously. (emphasis mine)" [74] LKSB had thus submitted that an agent is not entitled to his remuneration where he has breached his duties or misconducted himself and is precluded from recovering any remuneration for his conduct as agent in respect of the transaction in which he in fact acted dishonestly. To this they had cited in support of their proposition 4 UK cases namely Andrews v Ramsay [1903] 2 KB 635, Rhodes and another v Macalister [1923] 29 Comm Cas 19, Meadow & Another v C Mitchell & Co Ltd [1973] EGD 240 and Imageview Management Ltd v Jack [2009] EWCA Civ 63. The Indian case of Sirdhar Vasanta Rao Ananda Rao vs Gopal Rao AIR 1940 MAD 299 was also cited by learned counsel for LKSB to further support their contention. [75] A reading of the aforesaid cases cited by counsel for LKSB amongst others show that the duty by an agent to disclose any potential conflict is a policy reason meant to be a real deterrent which if breached will result in a breach of a fiduciary duty and where there is such a breach, the commission of the agent is forfeited. Thus, the principle which appears to be the underlying rule is as per Lord Alverstone C.J in Andrews v Ramsay (supra) that “a principle is entitled to have an honest agent and it is only the honest agent who is entitled to any commission.” [76] P3 submits that the obligation to disclose a conflict of interest attaches to the expert and not to the consultant who appoints the expert. With respect I disagree as I hold that it is the agent i.e. P3 who is placed in a fiduciary position and that it 'is not allowed to put himself in a position where his interest and duty conflict' (George Bray v John Rawlinson Ford [1896] AC 44. [77] Thus, it is my decision that it has been shown as stated in my grounds herein above, that there are irreconcilable duties or interests which P3 should have disclosed to LKSB as its principal with regards the recommendation and proposal of QSR as the expert for the Arbitration due to the relationship between P3 and QSR albeit by way of the relationship between its common shareholders and directors as well as its business understanding between the said 2 entities. [78] I must state that P3 had further argued that QGS did not have any effect on the arbitration proceedings whatsoever as their involvement in the case never went beyond the fee quote. It was thus submitted that the only amount expended by LKSB in relation to the appointment of the expert was the charge for Bob’s hours pursuing the appointment. This was RM 625 x 4.75 hours = RM2,968.75. [79] I do find that the case laws show that where an agent acts inconsistent with his duties as a fiduciary, the said agent is not entitled to his remuneration. This can also be seen in the aforesaid cited case of Principal Asset Management Berhad (formerly known as CIMB Principal Asset Management Berhad) (supra), where Ong Chee Kwan J held: “[121] As stated in the cases cited by learned counsel for PAMB, the principle that an agent is not entitled to his remuneration when the agent acts in a manner inconsistent with his duties has nothing to do with the issue of damages. It is a principle of law and this principle is encapsulated in section 173 of the CA. [122] In Sirdhar Vasanta Rao v. Gopal Rao A.I.R 1940 Madras 299, Varadachariar J in dealing with section 220 of the Indian Contracts Act which is equipollent to our section 173 of the Contracts Act 1950, similar argument canvassed by the Defendant herein was considered and rejected. This was what the learned judge said at page 301: 'There can be little doubt as to the legal principle applicable. We must express our dissent from the view of the lower Court that the agent's claim to remuneration will not be affected by his misconduct unless it is also shown that the principal has incurred loss thereby. We must observe that the learned Judge was in error in thinking that even where loss had been caused to the principal, it was sufficient if the agent was directed to make good the loss, and once he does it, he will be entitled to his full remuneration. These views of the learned Judge wholly ignore the provisions of S. 220, Contract Act; the illustrations to that Section make it clear that the payment of damages caused by the misconduct is in addition to the forfeiture of commission or remuneration, and the forfeiture of commission is the result of misconduct and not the loss arising from the misconduct. The principle underlying the rule is that "a principal is entitled to have an honest agent and it is only the honest agent who is entitled to any commission" (Per Lord Alverstone C.J. in [1903] 2 K.B. 635 at 638) Reference may also usefully be made to the following passage in Story's Laws of Agency in para 331: It is a condition precedent to the title of the commissions, that the contemplated services should be fully and faithfully performed. If therefore the agent does not perform his appropriate duties, or if he is guilty of gross negligence, or gross misconduct, or gross unskillfulness, in the business of his agency, he will not only become liable to his principal for any damages, which he may sustain thereby, but he will also forfeit all his commissions. (emphasis mine) Slight negligence, or slight omissions of duty will not indeed, ordinarily be visited with such serious consequences; although if any loss has occurred thereby to the principal, it will be followed by a proportionate diminution of the commissions.” [80] In Vellasamy a/l Pennusamy & Ors (supra), the Court of Appeal through the judgment of Abdul Malik Ishak JCA had held: “[323] Two general principles of importance must be advanced. The first would be this. It centres on the appropriation for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty of a significant possibility of such conflict and the principle objective is simply to preclude the fiduciary from being swayed by considerations of personal interest. The second takes this form. It requires the fiduciary to account for any benefit or gain obtained or received by reason of or by using his fiduciary position or of opportunity or knowledge resulting from it. The sole objective is to preclude the fiduciary from actually misusing his position for his personal advantage. [324] Put differently and in a comprehensive manner in terms of the liability to account, the principle of equity is rather simple. A person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain which has been obtained or received in circumstances where a conflict or a significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or which was obtained or received by use of or by reason of his position or of opportunity or knowledge resulting from it. And according to the case of Keith Henry and Company Proprietary Limited v Stuart Walker and Company Proprietary Limited and another (1958) 100 CLR 342 at p 350, any gain or benefit is held by the fiduciary as constructive trustee. …. [326] It seems to me, after reading a host of authorities, that the general principle requiring a fiduciary to account for a personal benefit or gain are framed in general terms like 'inflexible', 'inexorably', 'however honest and well-intentioned', 'universal application' to indicate the precise effect which the existence of a conflict with personal interest has had upon the performance of fiduciary duty (per Lord Eldon in James, Ex parte (1803) 32 ER 385 at p 345; and per Rich, Dixon and Evatt JJ (1803) 8 Ves Jun 337 in Furs Ltd v Tomkies and others (1936) 54 CLR 583 at pp 592–593).” [81] Based on Vellasamy a/l Pennusamy & Ors (supra), I hold that the Court of Appeal had stated that there can be, and I quote the words of the said Appellate Court “no appropriation for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty of a significant possibility of such conflict”. [82] This reference to there being no appropriation or benefit or gain to the fiduciary would in my view be applicable due to the real conflict of duty and interest disclosed and that the law would then require a person in a fiduciary relationship to account for such personal benefit or gain or opportunity to do so. [83] As stated in Bristol and West Building Society (supra) that “The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary”. [84] I now turn to the question, which Justice Abdul Malik Ishak JCA in Vellasamy a/l Pennusamy & Ors (supra), also asked himself i.e whether P3 had indeed shown to LKSB its “single minded loyalty”. In coming to my decision on this I have evaluated the explanation given by SP3, which I have referred, in cross examination he had testified: “The proposal to appoint QGS was done in good faith and in the best interest of LKSB. In cross examination PW3 explained the reason for the proposed appointment as follows: “Well, there is a link between the three companies, QGS, Plus 3 and CCR in Australia. But it’s a matter of marketing spread. So, geographically, Plus 3 are in Malaysia and Hong Kong and those other two companies are not. So, they wanted to take an interest here so that we could join the market on a more global basis, through the Middle East, Asia and Australasia. So, the personnel in resident in Qatar have no involvement at all in our day-to-day work. So, to my opinion, they are available for appointment as independent experts. And they can come in completely fresh. And we are using Andrew Woodward in Hong Kong on quite a big government dispute, and he’s taken as a complete independent expert. And it’s up to the arbitrator or the judge to give weight to the evidence on the background of the people. We proposed Andrew Woodward because I think he is quite, he’s very remarkable in his field, for the best interest of our client.” [85] With respect, from my examination of the facts and evidence before me, I find that the answer given by SP 1 of the alleged marketing spread and that the personnel in Qatar are not involved in a day to day work are purely administrative and operational issues which is no answer to whether there is a conflict of interest, whilst the fact that QGS come in ‘completely fresh’ as experts are in my decision also not pertinent to the all-important fact of whether there has been a breach of fiduciary duty in not disclosing the conflict of interest. [86] Thus, my answer to whether P3 had indeed shown to LKSB its “single minded loyalty” is that P3 had not shown its “single minded loyalty” to LKSB when it failed to disclose its business interest which it had with QSR resulting in a conflict of interest. [87] I have also tested this concept of “single minded loyalty” by examining in detail the following evidence which in this Court’s view speaks for itself and is on a balance of probabilities indicative of a lack of good faith on the part of P3 when recommending QSR as the expert. The said evidence are a. an Email from QGS to P3, at Bundle B1 (E112), pg 239 and 271 which states amongst others “…Since Plus 3 are already engaged, the proposal will be under Quantum”; b. an Email from P3 to QGS at B1 (E112), pg 313 which states “If the client is receiving quotes from the market that are considerably higher, can we please put our rates up a bit. I don’t understand why we want to do expert works at suicide rates?” Yes, I specifically removed the split. As there’s a risk that we’re stuck at an unsustainable rate, as I will now be wanting to charge more at the higher rates than at the ridiculously low rate of the support”; c. the said Shareholders Agreement, which took effect since 31.3.2020, which regulated the relationship between P3, QGS and Contract & Commercial Resources Holdings Pty Ltd (“CCR”) as the new shareholders of P3, and which amongst others governs matters pertaining to engagement of work in respect of P3’s existing clients and distribution of profits between parties; screenshots of P3’s website, found at Bundle B3 pages 902 to 910 essentially show that P3 and QGS share common directors and staff as well as Michael McIver who is P3’s CEO and director is listed as QGS’ Malaysian partner and that Andrew Woodward of QGS sits as a Testifying Expert in P3’s Dispute Solutions team. [88] To my mind, these instances of conflict of interest between P3 and QSR which was not disclosed to LKSB would in my view be a breach of P3’s fiduciary obligation to LKSB. [89] I find guidance in the case of Keppel v Wheeler [1925. K. 611.] [1927] 1 K.B. 577 where in that case the plaintiff engaged the defendant estate agents to sell a property. The property was listed at £6500, but the plaintiff indicated that he would accept £6000. The defendants introduced a purchaser who offered £6150. The plaintiff accepted this offer subject to contract. Before the contracts were exchanged, the defendants received a higher offer of £6750. At that point the plaintiff was in a position to reject the first offer and accept the second. However, instead of communicating the second offer to the plaintiff, the defendants approached the original purchaser with the suggestion that he acquire the subject property and on sell it for a profit to the second offeror. The defendants acted in the mistaken belief that their duty to the plaintiff had been discharged when the purchaser accepted the first offer, subject to contract. In fact, the defendants’ duty subsisted until contracts had been formally exchanged. [90] The UK Court of Appeal in Keppel v Wheeler (supra) held that the defendants were in breach of duty and awarded damages for the difference between the two offers. However, the defendants’ counterclaim for commission on the sale was upheld. In contrast to proceedings for breach of trust, the court took account of the nature of the wrong and the defendants’ subjective understanding of their obligations to the Plaintiff. [91] It is noteworthy that Bankes LJ in the said case had stressed that the agent was acting in good faith but under a misapprehension as to his legal position in reference to his client, which I find is not the case before me, and held that: “an agent might quite properly claim his commission, and yet have to pay damages for committing a bona fide mistake which amounts to a breach of duty.” [92] This Court also believes that it is crucial to highlight an important quote from Lord Atkin LJ in that case which reads as follows: “Now I am quite clear that if an agent in the course of his employment has been proved to be guilty of some breach of fiduciary duty, in practically every case he would forfeit any right to remuneration at all. That seems to me to be well established. On the other hand, there may well be breaches of duty which do not go to the whole contract, and which would not prevent the agent from recovering his remuneration; and as in this case it is found that the agents acted in good faith, and as the transaction was completed and the appellant has had the benefit of it, he must pay the commission. Therefore, I think, the defendants are entitled to recover on their counterclaim. The result is that I think that the appeal must be allowed with costs, and that the judgment should be varied by entering judgment for the plaintiff for 591l., but the judgment on the counterclaim must stand.” [93] A similar approach had also been taken in the case of Horace Brenton Kelly v Margot Cooper & Another [Appeal from the Court of Appeal of Bermuda] [1993] A.C. 205 where it was concluded that: “As to the defendants' claim for commission, even if a breach of fiduciary duty by the defendants had been proved, they would not thereby have lost their right to commission unless they had acted dishonestly.” [94] Thus, from an evaluation of the aforesaid cases of Keppel (supra) and, Horace Brenton Kelly (supra), I would surmise that the element of good faith must be present or to put it in other words, there must not be any element of dishonesty in order for an agent to receive any commission where there is any instance of non-disclosure of a conflict of interest or potential conflict of interest. [95] I have also considered section 173 of the Contracts Act 1950 which states: “An agent who is guilty of misconduct in the business of the agency is not entitled to any remuneration in respect of that part of the business which he has misconducted. ILLUSTRATIONS