Wendy Tan Lee Peng (Pentadbir kepada harta pusaka Tan Ewe Kwang, si mati) & 3 Lagi v Ng Hoo Kui & 1 Lagi (P-02(NCVC)(W)-1803-09/2017)

1 DALAM MAHKAMAH RAYUAN MALAYSIA [BIDANGKUASA RAYUAN] RAYUAN SIVIL NO. P-02(NCVC)(W)-1803-09/2017 ANTARA

1. WENDY TAN LEE PENG PENTADBIR KEPADA

2. HARTA PUSAKA TAN EWE KWANG, SI MATI SOO JIA XUAN (NO. K/P: 840903-07-5700)

3. TAN YAN SHI (NO. K/P: 790110-71-5058)

4. ALOR VISTA SDN BHD (DALAM LIKUIDASI) (NO. SYARIKAT: 460221-U) … PERAYU-PERAYU DAN

1. NG HOO KUI (NO. K/P: 511224-02-5405)

2. ALOR VISTA DEVELOPMENT SDN BHD (NO. SYARIKAT: 1064754-V) … RESPONDEN-RESPONDEN 2 [Dalam Mahkamah Tinggi Malaya Di Pulau Pinang, Guaman Sivil No.: 22NCVC-74-05/2015 Antara

1. Ng Hoo Kui (No. K/P: 511224-02-5405)

2. Alor Vista Development Sdn Bhd (No. Syarikat: 1064754-V) … Plantif-Plantif Dan

1. Wendy Tan Lee Peng Pentadbir Kepada

2. Harta Pusaka Tan Ewe Kwang, Si Mati Soo Jia Xuan (No. K/P: 840903-07-5700)

3. Tan Yan Shi (No. K/P: 790110-71-5058)

4. Alor Vista Sdn Bhd (dalam likuidasi) (No. Syarikat: 460221-U) … Defendan-Defendan Yang diputuskan oleh Yang Arif Pesuruhjaya Kehakiman Dato’ Abdul Wahab Bin Mohamed Di Pulau Pinang pada 31hb. Julai 2017] 3 CORAM: ABANG ISKANDAR ABANG HASHIM, JCA KAMARDIN HASHIM, JCA HASNAH DATO’ MOHAMMED HASHIM, JCA JUDGMENT OF THE COURT [1] This is an appeal by the Appellants against the decision of the High Court dated 31.7.2017 made after a full trial, which allowed the Respondents’ claim, inter alia, for a declaration that the 1st to the 3rd Defendants hold their respective shares in the 2nd Plaintiff Company on trust for the 1st Plaintiff. [2] We heard this appeal on 1.3.2018, 22.6.2018 and 2.7.2018 and reserved our decision. After perusing the Records of Appeal, the written submissions filed by the respective learned Counsel and upon hearing learned Counsel, we adjourned the matter for our consideration and decision. [3] We now give our decision and the reasons for the same. [4] For ease of reference in this judgment the parties will be referred to as they were in the High Court. 4 The Background Facts [5] The First Plaintiff, Ng Hoo Kui (‘Ng’) is the director and shareholder of the Second Plaintiff Company, Alor Vista Development Sdn Bhd (‘AVD’). AVD is a private company limited by share and incorporated on 3.10.2013 as a RM2 company. Lim Weng Heng (SD3), a director of Alor Vista Sdn Bhd (AV), introduced the 1st Plaintiff to his uncle, Tan Ewe Kwang (TEK). Ng has been friends with SD3 for more than 10 years and trusted him. Based on the trust and friendship with SD3, Ng agreed to invest together with TEK. Ng and TEK are the original subscribers, shareholders and directors of AVD. AVD was set up to develop a mixed development housing project on two pieces of lands known as HS (D) 59387 and 59388, Lot No.10000 and Lot No.10001, Seksyen 4 Bandar Bukit Mertajam, Seberang Perai Tengah, Pulau Pinang (‘the Development Land’). The Development Land was purchased on 7.10.2013 from the subsidiary of a listed company, Ivory Properties Group Bhd at the purchase price of RM18,000,000.00. [6] AV (the 4th Defendant) is a company limited by shares. TEK was the director and shareholder and alter ego of AV. Through AV TEK developed a number of housing projects in Penang. AV was wound up on 4.12.2015. 5 [7] It is the Plaintiffs’ pleaded case that Ng had invested a total sum of RM10,490,000.00 as his investment as part of the paid-up capital of AVD in the following manner: i) the sum of RM4,290,000.00 was paid by cheque and cash directly into AVD’s account. This is not disputed. ii) the sum of RM6,000,000.00 was by cheque and cash but paid into AV’s account. Ng contended that the payment was made to AV as a conduit to transfer to AVD as the paid capital. The Defendants however, said that it was premium paid by Ng to TEK for Ng’s participation in the development project in AVD. [8] Ng purportedly discovered the RM6,000,000.00 was utilised by TEK by transferring the said sum from AV into TEK’s personal account. TEK deposited the sum of RM3,974,450.00 into AVD’s account as his contribution. [9] The 1st Defendant, Wendy Tan Lee Peng (‘Wendy’) is the administrator of the estate of TEK, a shareholder and former director of AVD. TEK passed away on 9.8.2015 before the Statement of Defence and Counter Claim was filed. The 2nd Defendant, Soo Jia Xuan (‘Soo’) is a shareholder and director of AVD. The 3rd Defendant, Tan Yan Shi (‘TYS’), is the daughter of TEK. Soo and TYS are the nominees of TEK. 6 [10] At the time of inception of AVD, the family of TEK (‘Tan Family’) and the family of Ng (‘Ng Family’) owned equal shareholding in AVD as follows: Number of shares Percentage TEK 1 50% Ng 1 50% Total 2 100% [11] The shareholding of the Ng Family and the Tan Family subsequently changed. As at 23.10.2013 shareholding of the respective family was as follows: Number of shares Percentage Ng Family Ng 1 + 999,999 25% Ong Siew Kheem 500,000 12.5% Ng Kean Shiang 500,000 12.5% Tan Family TEK 1 + 999,999 25% TYS 500,000 12.5% Soo 500,000 12.5% Total 4,000,000 100% 7 [12] TYS subsequently transferred 6.25% of her shares in AVD to the Ng Family sometime in August 2014. Thus, making the Ng Family the majority shareholder of AVD. It is contended that the capital contributions made by Ng and TEK into AVD are RM4,290,000.00 and RM3,974,450.00, respectively. As the majority shareholder, the Ng family wrote letters to TEK claiming they owned all the shares in the name of the Tan Family and that TEK’s contribution of RM3,974,450.00 into AVD actually came from the RM6,000,000.00 paid by Ng to AV. [13] It is the Plaintiffs’ pleaded case that Ng had paid the sum of RM6,000,000.00 into AV’s account as capital contribution in AVD. Ng also alleged that he had paid a further sum of RM4,290,000.00 into AVD’s account. It is however, not disputed that Ng had paid RM6,000,000.00 and RM 4,290,000.00 totaling RM10,290,000.00. Ng also alleged that he had further paid cash in the sum of RM200,000.00. The Defendants disputed the payment of this amount. [14] The Plaintiffs’ claim against the Defendants can be summarised as follows: a) A declaration that – i) The 1st, 2nd and 3rd Defendants hold 1,750,000 units of shares and/or any shares in AVD registered under the name of TEK, Soo and TYS as trustees for Ng; 8 ii) Ng is the lawful owner and the beneficial owner of the 1,750,000 units of shares and/or any shares in AVD registered under the name of TEK, Soo and TYS as trustees for Ng. b) An Order that Wendy, Soo and TYS transfer the ownership of the 1,750,000 units of shares and/or any shares in AVD registered under the name of TEK, Soo and within seven days of the Court Order; c) An order that Wendy, Soo and TYS procure the relevant director resolution to approve and effect the transfer of the 1,750,000 units in AVD to Ng; d) An Order that the Company Secretary rectify and/or correct the registration of members by replacing TEK, Soo and TYS with Ng as the beneficial owner of the 1,750,000 units of shares any shares in AVD registered under the name of TEK, Soo and TYS as trustees for Ng; e) An Order that AVD is restrained from distributing to Wendy, Soo and TYS any monies and/or dividends arising from their shareholding entitlement, bonuses and/or profits; f) An Order that AV to repay the sum of RM2,025,550.00; and g) An Order that the Estate of TEK repay the sum of RM200,000.00. 9 [15] The Defendants’ counterclaim is for the return of the 2,224,450 shares which were issued to Ng through the conversion of TEK’s loan. The High Court [16] The learned Judicial Commissioner considered five issues: i) Whether the RM6,000,000.00 paid by Ng into AV was a conduit to transfer to AVD as paid – up capital or whether it was for premium paid by Ng to AV and/or TEK for participating in the development project; ii) Whether the Defendants hold 1,750,000 million shares in AVD as constructive trustees for Ng; iii) Whether RM2,025,550.00 purportedly given by Ng as a loan is part of the RM10,490,000.00 paid by Ng; iv) Whether RM200,000.00 cash was given to TEK as paid – up capital of Ng in AVD; and v) Whether the sum of RM2,224,450.00 is Ng’s paid – up capital in AVD or the loan given by TEK to AVD as part of the premium of RM6,000,000.00 [17] After a full trial the learned Judicial Commissioner concluded that since the payment of RM6,000,000.00 made by Ng to AV was not in dispute, based on the evidence before him the Plaintiffs had proved its 10 case on a balance of probabilities and judgment entered for the Plaintiffs in the following terms: i) the 1st, 2nd and 3rd Defendants are holding the sum of 1,750,000 units of shares in the 2nd Plaintiff company and/or any shares in the 2nd Plaintiff company registered under names of TEK, 2nd and 3rd defendants as trustee for the 1st Plaintiff; ii) the 1st Plaintiff is the legal and beneficial owner of the 1,750,000 units of shares in the 2nd Plaintiff Company registered under the name of TEK, 2nd and 3rd Defendants as trustees for the 1st Plaintiff; iii) 1st, 2nd and 3rd Defendants transfer the ownership of the 1,750,000 units of shares in the 2nd Plaintiff company and/or shares in the 2nd Plaintiff company registered under the names of TEK, 2nd and 3rd Defendants to the 1st Plaintiff within seven (7) days of the order; iv) in the event the Defendants fail to transfer the ownership of the 1,750,000 units of shares in the 2nd Plaintiff company to the 1st Plaintiff, the Court Registrar shall sign the Form 32A on behalf of the Defendants; v) the Defendants shall procure the relevant director resolution to approve and effect the transfer; 11 vi) the Company Secretary shall rectify and/or correct the registration of members by replacing the Defendants with the 1st Plaintiff as the beneficial owner of the 1,750,000 units of shares in the 2nd Plaintiff Company; vii) the 2nd Plaintiff Company be restrained from distributing to the Defendants and the Defendants are restrained from receiving any money and/or the portion of dividends arising from the shareholding entitlement, bonuses, and /or profits obtained by the 2nd Plaintiff Company; viii) The Defendants are restrained from selling or transferring and/or surrendering, and/or disposing the 1,750,000 shares in the 2nd Plaintiff company and/or any shares in the 2nd Plaintiff under the names of TEK, 2nd and 3rd Defendants; ix) The Defendants are restrained from voting and/or interfering with affairs and/or management and maintenance and/or exercising their rights as the registered shareholders of the 2nd Plaintiff company in any way by virtue of the fact that the Defendants are trustees for the 1st Plaintiff; x) The 4th Defendant repay the sum of RM2,025,550.00 to the 1st Plaintiff being the loan given by the 1st Plaintiff to the 4th Defendant with interest at the rate of 5% per annum; 12 xi) The 1st Defendant repay the sum of RM200,000.00 to the 1st Plaintiff with interest at the rate of 5% per annum; and xii) The counterclaim of the Defendants was dismissed. Deliberation and Decision of this Court [18] We are mindful of the limited role of the appellate court in relation to findings of facts made by the court of first instance. The general principle is that the conclusion of a trial judge is a finding of fact on the oral evidence based on the demeanour and credibility of the witnesses before him or her. Generally, such finding ought not be disturbed unless the appellate court is convinced that it is plainly wrong. It would not be sufficient to warrant any interference merely because the appellate court entertains doubt whether such finding is right (See: Lee Ing Chin & Ors v. Gan Yook Chin [2003] 2 CLJ 19, Gan Yook Chin & Anor v. Lee Ing Chin & Ors [2004] 4 CLJ 309). [19] The appellate court must be slow to interfere with the findings made by the trial court unless it is shown that there was no judicial appreciation of the evidence adduced before it. [20] Having set out the legal principles underlying appellate intervention, we now turn to the facts of the present case. 13 Whether the RM6,000,000.00 paid by Ng into AV was a conduit to transfer to AVD as paid – up capital or whether it was for premium paid by Ng to AV and/or TEK for participating in the development project [21] It is undisputed that the sum of RM6,000,000.00 was paid into AV’s account. However, the purpose of the payment of the said sum is disputed. Ng said he had paid RM6,000,000.00 into AV’s account on the understanding that the said sum will be Ng’s capital contribution into AVD. AV is just a conduit to channel the RM6,000,000.00 into AVD. In addition to making the aforesaid payment, Ng paid RM4,290,000.00 directly into AVD as well as cash payment of RM200,000.00 to TEK as his capital contribution. This payment of RM200,000.00 is also disputed by the Defendants. [22] The Defendants, on the other hand, contended that the RM6,000,000.00 was a premium paid by Ng to TEK for his participation in the housing development project. The Defendants filed a counterclaim against the Plaintiffs for the return of 2,224,450 units of shares issued to Ng by converting TEK’s loan of RM2,224,450.00 to AVD into shares of Ng. 14 [23] The learned Judicial Commissioner found that the Plaintiffs had successfully proven its claim in respect of the RM4,000,000.00 being payment made into AV as capital contribution into AVD for the following reasons as stated in his Grounds of Judgment: “[37] …..

(ii) Since the equitable jurisdiction to enforce trusts depends upon the conscience of the holder of the legal interest being affected, he cannot be a trustee of the property if and so long as he is ignorant of the facts alleged to affect his conscience, ie, until he is aware that he is intended to hold the property for the benefit of others in the case of an express or implied trust, or, in the case of a constructive trust, of the factors which are alleged to affect his conscience.

(iii) In order to establish a trust there must be identifiable trust property. The only apparent exception to this rule is a constructive trust imposed on a person who dishonestly assists in a breach of trust who may come under fiduciary duties even if he does not receive identifiable trust property.

(iv) Once a trust is established, as from the date of its establishment the beneficiary has, in equity, a proprietary interest in the trust property, which proprietary interest will be enforceable in equity against any subsequent holder of the property (whether the original property or substituted property into which it can be traced) other than a purchaser for value of the legal interest without notice.” [35] Suriyadi Halim Omar FCJ in Datuk M Kayveas v. See Hong Chen & Sons Sdn Bhd & Ors [2013] 5 CLJ 949 explained the difference between an express trust and constructive trust: "[36] Due to the fine line drawn between an express trust and a constructive trust, perhaps a comparison of these two classes of trusts may help give a 21 clearer picture. An obvious difference is that an express trust comes into existence the moment the trust is expressed while for a constructive trust the unconscionable behaviour of the trustee ignites it into existence. Geraint Thomas Alastair Hudson in the Law of Trusts (2nd Ed) wrote: One significant distinction between an express trust and a constructive trust is that an express trust necessarily comes into existence from the moment at which the settlor declared it, whereas a constructive trust cannot exist but for the unconscionable behavior of the defendant which brings it into existence; therefore the express trust is brought into existence by the deliberate act of the settler whereas a constructive trust is brought into existence by means of the wrongful act of the trustee….Thus, the constructive trust is dependent on the unconscionability of the defendant's actions... [37] From the various opinions above it may be construed that a constructive trust arises by operation of law irrespective of the intention of the parties, in circumstances where the trustee acquires property for the benefit of the beneficiary, and making it unconscionable for him to assert his own beneficial interest in the property and deny the beneficial interest of another. Being bereft of any beneficial interest, and with equity fastened upon his conscience, he cannot transfer any interest to himself let alone a third party. If he does, then a constructive trust comes into existence. An aggrieved party, by equitable remedy, may demand restitution of the property if he has been deprived of his beneficial interest." 22 [36] In addressing the issue of constructive trust as alleged by the Plaintiffs, the learned Judicial Commissioner found that TEK is the constructive trustee of Ng: “[61] On the facts of the case especially on my findings in respect of RM6,000,000.00 paid by the 1st Plaintiff, I am satisfied that TEK, 2nd Defendant and the 3rd Defendant hold 1,750,000 units of shares on trust for the 1st Plaintiff as consideration for the 1,750,000 shares had been advanced from the money paid by the 1st Plaintiff into AV’s account. I agree with the Plaintiffs’ submission that to allow TEK, the 2nd and 3rd Defendants to be vested with the beneficial ownership of 1,750,000 shares when they did not contribute any money representing the par value of the said shares would be unconscionable and inequitable.” [37] The learned Judicial Commissioner opined that since the 2nd and 3rd Defendants did not contribute any money towards the acquisition of the 1,750,000 shares then they are holding the shares on trust for Ng as he had paid into AV’s account. Thus, to allow TEK, 2nd and 3rd Defendants to be vested with the beneficial ownership of the 1,750,000 shares would be unconscionable and inequitable. [38] This court in Heng Gek Kiau v. Goh Koon Suan [2007] 6 CLJ 626 held that the true intention of the purchaser must be determined. This is “..through a meticulous examination of the facts and evidence of the surrounding circumstances. It is only where there are no or insufficient 23 facts or evidence from which a fair inference of intention may be drawn that a court should turn to presumptions as a last resort to resolve the dispute.” Ng as the aggrieved party must adduce evidence that TEK was the trustee and had acquired the shares for his benefit as the beneficiary and that there was unconscionable conduct by TEK depriving him of his beneficial interest. [39] If indeed AV was meant to be used as a vehicle for the subscription of Ng’s shares in AVD, why did Ng make further payments even after he had discovered that the shares issued to him were disproportionate? No explanation was given by Ng as to why he continued making the payments when he realised that something was not quite right. [40] The Plaintiffs failed to adduce any evidence that Ng and TEK had any intention to create a trust neither was there any evidence of unconscionable conduct on the part of TEK, that is, there was element of dishonesty or acts/omissions done in bad faith. In our judgment the learned Judicial Commissioner erred in law and in fact when he concluded that the 2nd and 3rd Defendants held the 1,750,000 shares in trust as they did not contribute any money representing the par value of the said shares. 24 Whether RM2,025,550.00 is a loan given by Ng to AV is part of the RM10,490,000.00 paid by Ng [41] Learned counsel for the Plaintiffs submitted that the claim for RM2,025,550.00 is supported by documentary evidence, in particular, the Statement of Affairs filed by SD3 to the Malaysian Insolvency Department

(MDI). This argument was considered and accepted by the learned Judicial Commissioner: “[55] The Statement of Affairs of AV dated 28.6.2016 lodged by SD3,a director of AV, also confirmed that the money paid by the 1st Plaintiff to AV is for the purpose of obtaining shares in AVD.SD3 further in his testimony at trial confirmed that AV did not receive any premium from the 1st Plaintiff during TEK’s lifetime and that nobody from AV has filed any statement of affairs to contradict the Statement of Affairs which had previously been filed and which confirmed that no premium had been paid to AV.” [42] SD3, a director of AV testified that he was a nominee director and not involved in the management of the company. He testified that he had no knowledge of the premium but informed MDI that RM6,000,000,00 in AV’s account was the capital contribution of Ng for AVD as Ng had told him of it (See: page 224 Common Bundle of Document Volume 1): “Q: Now I refer you to page 4, the hand written part, “Saya mengakui bahawa Alor Vista Sdn Bhd berhutang sejumlah RM2,02550million (sic) 25 kepada Ng Hoo Kui saperti tuntutan di dalam penyata dilampirkan”. How did you get this information? A: Well, I get this information because I want to fill out all these things. In order to do that, I must make sure it is correct. So I approached Mr Ng. Q: You approached Mr Ng? A: Mr Ng, yes. To find out whether this my uncle is really owing the amount and he proved me, showed me all the bank statement and some table I believe that that is what he meant to show and correct, so I believe and willing to go ahead with this draft letter submitted together to the Insolvency Department.” [43] In the absence of any other contemporaneous documents in support, we agree with learned counsel for the Defendants' submission that there was no documentary evidence to support the allegation that RM2,025,550.00 was a loan given by Ng to AV and part of the RM10,490,000.00 paid by Ng. Whether RM200,000.00 cash was given to TEK as paid – up capital of Ng in AVD [44] It is contended by the Plaintiffs that Ng paid a sum of RM200,000.00 to TEK as capital contribution. On 18.10.2013 Ng paid RM100,000.00 and another RM100,000.00 on 4.4.2014. Ng relied as proof the money trail table which he himself prepared. No receipt or any form of 26 acknowledgement of payment was adduced except for the testimony of SP3 who testified that he witnessed the handing over of the cash of RM100,000.00 to TEK. However, when the bank account of AVD was opened on 18.10.2013 Ng had in fact deposited RM300,000.00 as his capital contribution. [45] We have carefully scrutinised the whole evidence and we are satisfied that the learned Judicial Commissioner had erred in allowing this claim. The learned Judicial Commissioner had failed to properly direct his mind on the evidence of the Plaintiffs’ claim. Since there was a palpable lack of evidence, this claim of RM200,000.00 ought not to have been allowed. Whether the sum of RM2,224,450.00 is Ng’s paid – up capital in AVD or the loan given by TEK to AVD as part of the premium of RM6,000,000.00 [46] TEK’s contribution in AVD was RM3,974.450.00 and the initial shareholding of the Tan Family was 2 million shares. TYS then transferred her 250,000 shares to Ng’s wife on 6.8.2014 reducing the Tan family shareholding in AVD to 1,750,000 units of shares. There is no dispute that TEK had paid RM3,974,450.00 into AVD, and thus, in our judgment based on the totality of the evidence TEK is entitled to the 2,224,450 units of shares in AVD. 27 Conclusion [47] We had considered very carefully the submissions of learned counsel, the appeal records and the learned Judicial Commissioner’s judgment and we are unable, with respect, to agree with the learned Judicial Commissioner’s decision. We are satisfied that there are merits in the complaints raised by the Appellants before us justifying us invoking our appellate powers. [48] For the foregoing reasons, we unanimously allow the appeal with costs. The Counterclaim of the Appellants for the return of shares of 2,224,450.00 is allowed. We set aside the High Court judgment. As for costs, we awarded a sum of RM70,000.00 here and below to the Appellants to be paid by the Respondents subject to payment of allocatur. We also order that the deposit be refunded to the Appellants. sgd (HASNAH BINTI DATO’ MOHAMMED HASHIM) Judge Court of Appeal, Malaysia Putrajaya Date: 19.12.2018 28 Counsels for Appellants Lee Khai Teh Chiew Yin Messer Ong and Manecksha Advocates and Solicitors No. 200 Victoria Street, 10300 Penang, Pulau Pinang. Counsels for Respondents Karin Lim Ai Ching Lee Kar Kheng Messers Presgrave & Matthews 1st Floor, Standard Chartered Bank Chambers, No. 2 Beach Street, 10300 Penang, Malaysia.