The court clarified that to establish a trust, the three certainties must be present; without clear intention or proof of a trust, garnishment claims based on alleged trust funds fail.

JUDGMENT

Lim Chong Fong J:

Introduction

[1] This is an appeal against the dismissal of the intervention application and resultant garnishment order on monies deposited in the bank made by the registrar.

[2] The Appellant/Proposed Intervener is a private limited company involved in the construction contracting business.

[3] The First Respondent/Plaintiff (judgment creditor) is likewise a private limited company involved in the construction contracting business.

[4] The Second Respondent/ First Defendant (judgment debtor) is also a private limited company involved in the construction contracting business.

[5] The Third Defendant (garnishee) is a public limited banking company licensed under the Financial Services Act 2013.

[6] For ease of referencing, they will hereinafter be referred as DB, MS, IC and AB respectively.

Background Facts

[7] By a letter of acceptance dated 21 August 2017 ("Main Contract"), the State Government of Selangor ("Government") appointed DB as the main contractor to construct and complete a Maahad Integrasi Tahfiz Sains building at Bagan Lalang, Sepang Selangor ("Project") at the contract sum of RM15,893,937.52. The Main Contract is based on the PWD Form 203A Conditions of Contract (Rev 1/2010).

[8] DB thereafter by a sub contract dated 4 October 2017 ("Sub-Contract") sub-contracted the construction and completion of the Project totally on 'back to back' basis to IC at the contract sum of RM15,393,937.52.

[9] Pursuant to the terms of the Main Contract, DB is entitled to advance payment subject to an advance payment guarantee is furnished to the Government.

[10] Consequently and at the request of IC pursuant to the Sub-Contract, DB applied for advance payment in the sum of RM3,238,813.44 from the Government. In this connection, both DB and IC on 6 November 2017 applied to AB to issue the advance payment guarantee ("Guarantee") to the Government.

[11] IC has a banking facility with AB by virtue of an Open All Monies facilities Agreement dated 3 January 2017. Thus by a letter of offer dated 8 November 2017, AB agreed to issue the Guarantee on condition that IC placed 30% of the advance payment received from the Government as security for the Guarantee.

[12] As the result upon the issuance of the advance payment guarantee, DB directed the advance payment of RM3,328,813.44 received from the Government be remitted to IC's bank account maintained with AB subject to the sum of RM977,368.03 be placed in fixed deposit as security for the Guarantee.

[13] Consequently, IC carried out the construction of the Project accordingly subject to the recoupment of advance payment from the payment payable pursuant to the Main Contract.

[14] The Guarantee lapsed on 13 April 2020 notwithstanding that the Project was still ongoing and the advance payment not having been fully recouped by the Government.

[15] As the result, IC on 6 January 2021 applied to AB to uplift the RM977,368.03 in fixed deposit and AB unconditionally released the funds into IC's current account in AB.

[16] In early 2021, DB unilaterally terminated the Sub-Contract.

[17] In the meantime, MS on 5 May 2020 obtained an adjudication decision against IC pursuant to the Construction Industry Payment and Adjudication Act 2012 ("CIPAA") pursuant to a contract for traffic diversion and road improvement for the TRX project which is unrelated to the Project.

[18] By reason of IC's failure to pay, MS therefore applied and obtained an enforcement order against IC pursuant to s 28 of the CIPAA. Consequently on 24 December 2020, the registrar granted a show cause order against AB pursuant to the garnishment proceedings instituted by MS.

[19] By letter dated 15 January 2021 issued by AB to MS's solicitors pursuant to the garnishment proceedings, AB admitted its indebtedness to IC in the sum of RM1,009,318.92.

Preliminary

[20] On 4 February 2021, DB hence applied to intervene in the garnishment proceedings to be added as a party and accordingly defend the garnishment proceedings ("Application").

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