A constructive trust can arise in land acquisition cases, entitling a party to compensation despite technical lapses in transfer processes, focusing on unconscionable conduct and loss suffered.

[1] This is an appeal by the appellant against the decision of the Court of Appeal in allowing the respondent's appeal against the decision of the High Court in awarding the compensation sum of RM3,035,145.00 ("the compensation sum") to the appellant in the Land Reference proceedings referred to the Court by the Land Administrator.

[2] The subject matter of the Land Reference proceedings is the compensation sum awarded by the Land Administrator of Kuala Selangor for the compulsory acquisition of the land held under HS(D) 4588, Lot PJ 3708, Mukim Api-Api, District of Kuala Selangor ("Api-Api land") pursuant to the Land Acquisition Act 1960 ("the Act").

[3] The High Court decided that the appellant was entitled to receive the compensation sum. The Court of Appeal reversed the decision of the High Court and held that the respondent is the party entitled to receive the said compensation on account of the compulsory acquisition of the Api-Api land.

[4] Leave to appeal was granted to the appellant on the following questions of law:

1. Where a vendor sells land subject to a restriction in interest that said land can only be transferred with the consent of the State Authority, and where a purchaser has paid the purchase price for the said land, whether in the absence of the consent of the State Authority to transfer the land to the purchaser:

(i) the vendor can in law be a bare or constructive trustee over said land;

(ii) whether the purchaser is entitled in law to sell the said land to a third party; and/or

(iii) whether the said third party can acquire an equitable interest in the said land of a nature that entitles the said third party to be entitled to compensation under the Act.

2. With reference to question (1) above, whether the unconscionable conduct of the vendor, if any, has basis in law for the third party to establish an equitable interest in the said land of a nature that entitles the said third party to be entitled to compensation under the Act.

Background Facts

[5] The relevant background facts of the case are these. By alienation letter dated 13 June 1990, the Selangor State Government approved the alienation of a piece of land measuring 109.265 acres in the Mukim of Jugra, in the District of Kuala Selangor ("the Jugra land") to the appellant, a statutory body and agency of the State Government of Selangor. Two years later, by alienation letter dated 28 July 1992, the State Government approved the alienation of another piece of land to the appellant. This time for an area measuring 137 acres in the Mukim of Api-Api, also in the District of Kuala Selangor. This is the subject matter of the present appeal.

[6] At the time of the approvals, the issue documents of title for these two plots of land had yet to be issued by the State Authority. Both lands were subject to the category of land use as being for aquaculture only and were also subject to a restriction in interest that the lands shall not be sold, leased, charged or transferred in any way whatsoever without the consent of the State Authority.

[7] With the approvals for alienation, the appellant became the beneficial owner of both the Jugra and the Api-Api lands. By a Sale and Purchase Agreement executed on 31 July 1995 ("the first agreement"), the appellant in its capacity as beneficial owner sold both lands to a company in which it was a shareholder, namely PKPS Aquaculture Sdn Bhd ("PKPS Aquaculture"). On the same day that it sold the Jugra and Api-Api lands to PKPS Aquaculture, the appellant entered into a Sale of Shares Agreement ("the second agreement") with another company under the style and name of Suati Holdings Sdn Bhd