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2013 MarsdenLR 2522
FEDERAL COURT PUTRAJAYA
DATUK M KAYVEAS – Appellant
Versus
SEE HONG CHEN & SONS SDN BHD & ORS – Respondent
[Civil Appeal No: 02-10-2012(W)]
A constructive trust arises when a trustee breaches duty, and a third party with notice cannot claim bona fide purchaser status. The court underscored trust principles and equitable remedies where unjust enrichment occurs.
Headnote:(A) Courts of Judicature Act 1964 - Sections 67 and 68 - Jurisdiction of the Court of Appeal - Appellant is a political party that obtained property through a disputed auction - 1st defendant breached trust by transferring shares to 4th defendant, resulting in a constructive trust being established - Court of Appeal erred in interfering with the High Court's order regarding trust and bona fide purchaser status. (Paras 3, 16, 47)
(B) Trust Law - Constructive trust arises when the trustee acts unconscionably and a party has notice of the trust - 4th defendant was found not to be a bona fide purchaser as he failed to establish payment for shares and failed to provide necessary documentation - The appellant was entitled to the return of shares from collective respondents. (Paras 14, 25, 46)
Facts of the case:
The appellant successfully bid for a property and subsequently obtained a loan from the 1st defendant, who was to hold shares in trust. The 1st defendant later transferred shares to the 4th defendant, leading to legal action by the appellant for the recovery of the shares.
Findings of Court:
The existence of a constructive trust was established due to the actions of the 1st defendant, and the 4th defendant was determined not to be a bona fide purchaser.
Issues: Whether the Court of Appeal had the jurisdiction to interfere with parts of the judgment, and whether the 4th defendant was a bona fide purchaser entitled to the shares.
Ratio Decidendi: The Court ruled that a constructive trust applied due to a breach of trust by the 1st defendant and that the collective respondents were not bona fide purchasers as they had notice of the trust.
Result: Appeal allowed with costs, reinstating the orders of the High Court.
| Table of Content |
|---|
| 1. trust created through share transfer. (Para 1 , 2 , 5 , 6 , 10) |
| 2. jurisdiction and procedural questions of law. (Para 3) |
| 3. details on property possession and infringement. (Para 4 , 8 , 9) |
| 4. facts surrounding the property acquisition and trust creation. (Para 7) |
| 5. contingent claims against defendants regarding trust breach. (Para 11) |
| 6. court's findings and acceptance of trust principles. (Para 12 , 13) |
| 7. doctrine of constructive trust applied. (Para 14 , 15 , 16 , 20) |
| 8. court of appeal's misinterpretation of trust. (Para 21 , 22 , 23 , 25) |
| 9. trust existence and evidentiary considerations. (Para 27 , 28 , 29 , 30 , 31) |
| 10. categories of trusts, express versus constructive trusts. (Para 32 , 35 , 36 , 37 , 38 , 39 , 40 , 41) |
| 11. constructive trust principles and implications. (Para 33 , 34 , 43) |
| 12. bona fide purchaser considerations. (Para 42 , 44) |
| 13. final orders and conclusions of the court. (Para 47 , 48 , 49 , 50 , 51 , 52 , 53) |
[1] For ease of reference, the plaintiff who is intituled in the statement of claim as Datuk M Kayveas though on a representative capacity shall be referred to as the appellant. Parties agree that the actual appellant is a political party, ie the Peoples Progressive Party of Malaysia (PPP). The 1st, 2nd, and 3rd defendants will be referred to in their respective original nomenclature as they never filed any appeal at any stage of the way. The 4th, 5th, 6th, and 7th defendants (who are in the one camp), being the relevant respondents in this appeal, will be referred to collectively as the collective respondents. Whenever necessary the specific persons will be referred to in their respective specific titles.
[2] The appellant filed an action against seven defendants and was successful at the High Court after a lengthy hearing. Being dissatisfied, only the collective respondents filed an appeal at the Court of Appeal. They succeeded and the High Court order was accordingly set aside. The next phase saw the appellant successfully obtaining leave to file an appeal against the decision of the Court of Appeal of 23 August 2011 and hence the matter before us.
[3] Leave was obtained pursuant to s 96 of the Courts of Judicature Act 1964 to determine these questions, namely:
i. whether the Court of Appeal has the jurisdiction and/or power under ss 67 and 68 of the of Judicature Act 1964 to interfere with a part of the judgment of the learned judge not forming the subject of an appeal in determining the appeal before it;
ii. where moveable property is held on trust and disposed to a third party in breach of the said trust, whether the said third party is entitled in law to claim title to such property where it is a bona fide purchaser for value without notice; and
iii. whether it is incumbent upon a party claiming to be a bona fide purchaser for value of immoveable property without notice to establish as a threshold requirement that consideration had in fact moved from the third party to the vendor.
[4] To appreciate the matter before us, it will not be inappropriate at the outset to state that the 1st defendant who is an important player in this case, has shown no interest in the outcome of the case at any stage of the way, even up to the current stage. He simply refused to defend his position or come forward to adduce evidence when subpoenaed by both parties. The 2nd and 3rd defendants being nominees of the 1st defendant likewise failed to file any appeal at the Court of Appeal, thus leaving only the collective respondents to contest the appeal. As the 4th defendant is the alter ego of the 5th defendant (a company), and the 6th and 7th being his nominees, the 4th defendants evidence will equally be applicable to them.
Facts Of The Case
[5] Being interested in an auctioned piece of property known as Grant No 27024 Lot 522 of Section 69, in Kuala Lumpur, Wilayah Persekutuan (the property), and in which the appellant was housed since 1998, the appellant made a successful bid for it on 28 August 2003. A 10
