Setia Makmur Facilities Management Sdn Bhd v Tetuan Rahman Mohamed & Associates (KA-22NCvC-75-10/2019)

This is a civil action brought by the Plaintiff, Setia Makmur Facilities Management Sdn. Bhd., against the Defendant, Tetuan Rahmah Mohamed & Associates, a legal firm acting as stakeholder solicitor 09/10/2025 17:37:57 KA-22NCvC-75-10/2019 Kand. 133 under a property redevelopment agreement. The dispute concerns the Defendant’s conduct in withholding stakeholder monies and interfering with the completion of the Plaintiff’s contractual obligations.

The Plaintiff alleges that the Defendant’s actions constituted a breach of fiduciary duty, breach of trust, and wrongful interference with the Plaintiff’s contractual performance. The Defendant denies the allegations and counterclaims that her actions were lawful and in accordance with professional obligations.

After a full trial and consideration of the pleadings, documents, witness statements, and written submissions, this Court delivered its decision on 6 May 2025, allowing the Plaintiff’s claim in full. These are the written Grounds of Judgment.

The Plaintiff is a facilities management and property services company appointed to undertake redevelopment and maintenance works at a housing project.

The Plaintiff took over an abandoned development project comprising 22 plots of land with individual titles in Sungai Petani, Kedah, that went into liquidation.

At the time the Plaintiff took over the Project, the Plaintiff was informed that the development of 20 housing units had reached 65%, and since 2006, the Project had been stalled. The Plaintiff took over the Project and, through an agreement dated December 16, 2010, (“Main Agreement”) and the terms of the takeover of the Project were formalized. Under the Main Agreement, the Defendant was appointed as stakeholder solicitor to hold and release monies pending completion of various stages of the transaction.

The Defendant’s duty as stakeholder was to act impartially and to release monies only upon satisfaction of the agreed conditions precedent. However, the Plaintiff contends that the Defendant withheld the monies, interfered with project administration, and purported to terminate the Main Agreement without lawful authority.

The Defendant asserts that her actions were to protect the purchasers’ interests and that she was justified in withholding the funds. The Plaintiff disputes this and maintains that the Defendant had exceeded her authority and acted in conflict of interest.

While the Plaintiff was diligently carrying out responsibilities under the terms of the Agreement, the Defendant deliberately delayed fulfilling its obligations as the following manner:

Failing to release the titles and/or transfer the ownership of the lots that had been redeemed and sold by the Plaintiff according to the terms of the Agreement; and

Failing to deliver the payments held by the Defendant as the “stakeholder” according to the terms of the Agreement.

The Defendant failed and/or refused to do so. Instead, the Defendant informs the Plaintiff that Main Agreement has been terminated by the Company purportedly based on a notice dated 3.5.2017 from the firm of Ummi Zakaria & Partners. (Refer Page 52 & 53 Bundle A). The Plaintiff sought an explanation from the Defendant, which the Defendant refused.

In her defence, the Defendant, vide letter dated 3.8.2017 made allegations that a suit was filed against the Plaintiff. The Defendant also said they are unable to attend to any of the Plaintiff's requests because of the purported court action against the Plaintiff. (Refer Bundle A page 49 & 50).

Plaintiff said it was not true. The Plaintiff then wrote to the legal firm Messrs. Ummi Zakaria regarding the purported termination and the purported legal suit that was filed by the Company. In the same letter, Plaintiff also listed down the losses that they had incurred due to the purported termination of the Main Agreement, and no reply was given to these letters. (Refer to Bundle A pages 44 to 46). Because of that, the Plaintiff stopped all work in the project and filed a suit against the Defendant.

The Plaintiff commenced proceedings by Writ of Summons and Statement of Claim filed on 11 December 2017 seeking, inter alia:

A declaration that the Defendant breached her fiduciary duty as stakeholder solicitor;

Restitution and payment of monies wrongfully withheld;

Damages for loss and delay; and

Costs and any other relief deemed fit.

In Defendant’s Counterclaim, the Defendant is claiming the following remedies;

declaration that the Main Agreement is null and void;

for an order to be appointed as the new contractor to complete the Project;

That the Plaintiff pay the sum of RM 616,259.30 to the Defendant together with interest of 5%;

That the Plaintiff pay the sum of RM 230,000.00 to the Defendant for the balance purchase price of the contract sum;

That Defendant be given the power to hold Lots 14,15 & 19 and the balance of the purchase price for Lots 4, 9 and 10 to be given to a new contractor as consideration to redeem the lots that are still under charge with BR and MBSB;

That the Defendant be given the power to hold the balance stakeholder sum of 5% and for the same to be used to redeem the units still under charge with BR and MBSB.

The Plaintiff filed a Reply and Defence to Counterclaim, maintaining that the Defendant’s acts were unlawful.

The issues for trial were recorded in the Agreed Issues (Enclosure 83), and the facts were largely undisputed in the Agreed Facts (Enclosure 84).

In Plaintiff’s Defence to the counterclaim, the Plaintiff stated that evidence not challenged by Defendant. Plaintiff submitted that the Defendant never raised or challenged the testimony of Plaintiff’s witnesses that the Plaintiff had complied to all the terms of the Main Agreement and that the non-completions and/or halt of the Project was due to the actions of the Defendant.

It is trite that failure to challenge evidence means that a party in a legal case did not actively question or dispute the evidence presented by the opposing party during cross-examination. Plaintiff’s witnesses' evidence uncontested, and this Court must accept it as true.

The Plaintiff, through its witness Dr Abdul Rahman, testified that the Defendant’s refusal to release stakeholder monies was without justification and caused project delay and financial loss. The Plaintiff’s documentary evidence showed compliance with the contractual conditions.

The Defendant’s witness represented by Rahmah Bee binti O Katti Mohamad, maintained that her actions were to safeguard third-party interests and that the Plaintiff had not fulfilled certain conditions precedent.

C. ISSUES FOR DETERMINATION The following issues arise for determination:

Whether the Defendant breached her fiduciary and stakeholder obligations under the Agreement;

Whether the Defendant was entitled to withhold or terminate the release of stakeholder monies;

Whether the Plaintiff is entitled to judgment as prayed; and

Costs and consequential orders. D. ANALYSIS OF THE COURT

In the Main Agreement, it is to be noted that there is no clause specifying that either party can lawfully terminate the Main Agreement. Hence, the right to terminate the agreement can either come from the Plaintiff (“Purchaser in the Main Agreement”) or the Company.

The Plaintiff submits that at all material times, they were ready to perform their part of the promise as per the terms of the Main Agreement. The only reason the Plaintiff was not able to proceed with the completion of the project was due to the delay and refusal of the Defendant in carrying out her duties as the Stakeholder for the Plaintiff.

When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promise may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.

Therefore, the Court must first interpret the promise as a whole and next view the performance of the promise from the point of view of the party in default. The test is not whether the innocent party received anything under the contract. The test is whether the party in default has failed to perform its promise in its entirety.

The power to terminate the agreement in the event of default is purely in the purview of the Plaintiff and the company. The Defendant is just acting as a stakeholder to facilitate the agreement and to act in the best interest of the Plaintiff and the company.

The Defendant submitted that there was a clause in the agreement that gave her the power to terminate the agreement. The Defendant repeatedly said that, based on clause 4.4, if the project was not completed, it means the project is terminated. Clause 4.4 of the Main Agreement reads as follows: “4.4 If the Purchaser fails to complete the project within the stipulated period as specified under Clause 14.1 below, the Purchaser and/or the Purchasers Solicitor shall be at liberty to appoint a new Contractor to complete the said project, upon which, all sums paid or advanced shall be forfeited as agreed liquidated damages and this Agreement shall become null and void and of no effect and neither party hereto shall have any claims against each other.”

The Defendant submitted that the clause clearly says the Purchaser and Purchaser’s Solicitors shall have the liberty to appoint a new contractor in the event the contract is not completed within the stipulated time.

At this juncture, Plaintiff submitted that the Defendant clearly committed a breach of misconduct when the Defendant, on their own accord, purportedly terminated the agreement. In the upshot, as there is no clear clause in the contract as to who can terminate the agreement, the agreement to date is still valid and binding upon the parties.

Pursuant to the agreement that was executed on 16th December 2010, the Defendant was the one who prepared the agreement and had been appointed by both parties to the contract to act for both of them, as a stakeholder. The Defendant’s failure to release the Titles to the Plaintiff, where the Plaintiff had in fact completed their part of the agreement, clearly shows the Defendant was in conflict of interest. Delay caused by the Defendant’s action

Defendant, as a stakeholder, has a duty to hold the Titles awaiting the completion of the Project. The Plaintiff was supposed to redeem and complete the entire project within 8 months, but couldn’t do that because the Defendant’s actions hindered the Plaintiff from completing the Project.

Is the Defendant entitled to the remedies that they prayed for in the Counterclaim? Based on the agreement entered, the Defendant is only a privy to the contract as a stakeholder, to facilitate the smooth ends of the agreement. The Defendant was never given any power or was never in any position to make any decision without consulting the Plaintiff or the Company. Its duty is just to take care of the interests of the Plaintiff and the company.

It has to be noted that, based on facts and evidence, it has been shown that the Plaintiff had numerous times contacted the Defendant to come to an amicable settlement. However, there were no responses from any of the parties, the Defendant or its solicitors at that time.

Having carefully considered the pleadings, agreed facts, oral and documentary evidence, and the written submissions of both parties, this Court finds that the Defendant’s conduct as stakeholder solicitor was wholly inconsistent with her professional and fiduciary obligations. The evidence demonstrates that the Defendant repeatedly acted in a manner calculated to delay, obstruct, and ultimately frustrate the Plaintiff’s contractual rights under the Main Agreement.

The Plaintiff’s evidence, particularly the testimony of Dr. Abdul Rahman, was coherent, supported by contemporaneous documents, and corroborated by the correspondence exchanged between the parties. In contrast, the Defendant’s explanations were evasive, inconsistent, and contradicted by the very documents emanating from her own office. The Defendant’s position shifted depending on convenience, and this Court is satisfied that she manipulated procedural steps to retain control of stakeholder funds and to exert pressure on the Plaintiff.

The Defendant was appointed as stakeholder solicitor under the Main Agreement executed between the Plaintiff and the purchasers. That position imposed a fiduciary duty of neutrality, transparency, and accountability. Instead of holding the stakeholder funds in trust pending fulfillment of the contractual conditions, the Defendant unilaterally purported to interfere with completion, questioned the Plaintiff’s entitlement, and withheld the funds contrary to the stakeholder undertaking.

This conduct constitutes a breach of fiduciary duty and a breach of trust. The Defendant ceased to act as a neutral stakeholder once she aligned herself with one contracting party, used her control of stakeholder monies to influence the transaction, and refused to release the funds when the conditions precedent had been met. Such behaviour undermines the fundamental obligation of impartiality imposed upon solicitors who act as stakeholders.

The principle is well-established, a stakeholder solicitor is a trustee of the stakeholder monies. In Lim Kean v Choo Koon Hean [1996] 2 MLJ 345, the Court of Appeal held that where a solicitor holds monies pending completion, those monies remain impressed with a trust and may not be dealt with contrary to the agreed terms. Similarly, in Raja Khalid v Tengku Ismail [2014] 5 CLJ 1, the High Court reaffirmed that a solicitor who departs from the stakeholder undertaking is personally liable for breach of trust.

Applying those principles, this Court finds that the Defendant’s withholding of the stakeholder monies and her purported termination of the Main Agreement were unlawful. Her explanation that she was “protecting the interest of the purchasers” is a transparent attempt to justify conduct that was in fact self-serving and outside the scope of her authority.

It is further apparent that the Defendant’s actions caused undue delay and prejudice to the Plaintiff. The Plaintiff was prevented from completing the project within the stipulated timeline and suffered loss and reputational damage as a result. These consequences were a direct product of the Defendant’s unilateral decisions.

This Court rejects the Defendant’s suggestion that the Plaintiff had acquiesced to her conduct. There is no credible evidence of any such consent. On the contrary, the Plaintiff’s contemporaneous letters repeatedly demanded release of the stakeholder funds and compliance with the Main Agreement. The Defendant’s persistent refusal, despite clear contractual conditions being met, evidences wilful disregard of her duties.

The Defendant’s counter-allegations of professional justification are untenable. A solicitor’s discretion does not extend to rewriting the contract between the parties or to retaining trust monies indefinitely. The Defendant’s role was limited to holding, accounting, and releasing the stakeholder funds upon satisfaction of the agreed conditions. Her attempt to assume the role of adjudicator was both improper and legally baseless.

The Defendant’s conduct throughout these proceedings, characterised by persistent delay, inconsistent explanations, and disregard of her professional duties, has unnecessarily prolonged this litigation and compelled the Plaintiff to incur avoidable costs. The award of costs therefore reflects the Court’s view that such conduct must not be condoned.

As a stakeholder, the Defendant bore a fiduciary duty to execute the obligations stipulated in the said agreement. However, the Defendant’s delay and failure to perform its duties materially impeded the Plaintiff from completing the project as envisaged in the agreement.

The Plaintiff, in fact, made genuine and reasonable efforts to resolve the matter amicably. Despite these efforts, the Defendant continued to refuse to fulfill its obligations, without providing any reasonable justification and relying merely on unsubstantiated allegations.

Furthermore, the Defendant was not entitled to unilaterally terminate the agreement on such grounds. Its dual role as a stakeholder and representative of a party to the agreement does not confer such authority, especially when neutrality and compliance are required.

The Court therefore holds that the Defendant breached her fiduciary obligations and the terms of the stakeholder undertaking, and this breach has caused significant prejudice to the Plaintiff. Therefore, the Plaintiff is entitled to judgment as prayed. The Defendant’s counterclaim, being predicated upon her own wrongful acts, must necessarily fail.

For the reasons set out above, this Court finds in favour of the Plaintiff, Setia Makmur Facilities Management Sdn Bhd. The Defendant, Tetuan Rahmah Mohamed & Associates, is found to have acted in breach of fiduciary duty and in violation of her obligations as stakeholder solicitor.

Accordingly, the Court makes the following orders:

Judgment is entered for the Plaintiff as prayed for in the

The Defendant’s counterclaim is dismissed in its entirety;

Costs of RM20,000 are awarded to the Plaintiff. Dated : 9th October 2025 ……………………………………………… (YA PUAN MAHAZAN BINTI MAT TAIB) JUDGE HIGH COURT OF MALAYA ALOR SETAR, KEDAH For The Plaintiff : Parkash Singh & S. Surendran Messrs. Harniza & Co Advocates & Solicitors For The Defendant : Aqbal Shiffuddin bin