Beneficial ownership in land under a constructive trust arises upon full payment of the purchase price; without it, the vendor retains ownership and cannot be a trustee.

S Nantha Balan JCA:

Introduction

[1] This is an appeal against the decision of the learned Judge ("the Judge") dated 19 April 2019 in Penang High Court Suit No 22NCVC-20-01/2014 ("Suit 20") wherein at the conclusion of a full trial (conducted on 4 and 12 October 2018, 7 and 10 December 2018, and 14 January 2019), the plaintiff's claim for reliefs under a bare trust, or alternatively under a constructive trust, was dismissed with costs. For convenience, the appellant, IB Capital Sdn Bhd shall be referred to as "the plaintiff", the first respondent, Ivory Indah Sdn Bhd as "D1" and the second respondent, CIMB Islamic Bank Berhad as "D2" Where necessary, D1 and D2 shall be referred to collectively as "the defendants".

[2] The subject matter of Suit 20 was a parcel of land held under GRN 1272 Lot 2838 Mukim 18, Daerah Timur Laut, Negeri Pulau Pinang ("the land"). At all material times, the registered (legal/beneficial) owner of the land was Dato' Krishna Kumar A/L T. N. Sharma ("Sharma"). A company called Trident Hill Sdn Bhd (Sharma's corporate vehicle) had taken loan facilities from Malaysian Assurance Alliance Berhad ("MAA"). Sharma offered the land as security. As such, legal charges in favour of MAA (as chargee) via Presentation No 29731/2004 and Presentation No 12651/2005 (collectively, "the MAA charges"), were registered over the land. On 5 September 2013, the MAA charges were discharged upon payment of the redemption sum. On the same day, the land was transferred to D1 and a legal charge was registered in favour of D2.

[3] The gist of the plaintiff's claim in Suit 20 was that initially the land was held by Sharma and later, by D1 and D2 as bare trustees, or as constructive trustees for the plaintiff. Sharma was not a party to and did not testify in Suit 20. The starting point of the plaintiff's case is that they had given loans totalling RM8.8 million to Sharma. The plaintiff executed various contracts with Sharma pursuant to which the land was offered as security for the loans. Later, it was agreed that the plaintiff would purchase the land, subject to payment of the redemption sum to MAA. Sharma gave Powers of Attorney to the plaintiff. The plaintiff entered private caveats over the land. The basis for the entry of the caveats was that the land was security for the loans and the plaintiff had a caveatable interest over the land. The loans were treated as part payment towards the purchase of the land. The plaintiff also relied on a Consent Judgment which was recorded in a suit that Sharma had commenced against the plaintiff. One of the terms of that Consent Judgment was that if Sharma failed to get a buyer to purchase the land, or to settle the sum of RM10,256,098.66 by 31 August 2008, then the beneficial ownership of the land would pass to the plaintiff. At any rate, it was contended that Sharma was a bare trustee/constructive trustee of the land for the plaintiff. Thereafter, D1 and D2 became bare trustees/constructive trustees for the plaintiff.

[4] Sharma failed to procure a buyer to purchase the land, or to settle the said sum before or even after 31 August 2008. The plaintiff contended that D1 would have been aware of the Consent Judgment. The plaintiff's claim was that D1 and D2 had actual or constructive knowledge of the plaintiff's prior interest over the land, and that despite becoming the registered owner and legal chargee respectively (with effect from 5 September 2013), they nevertheless held the land as bare trustees, or as constructive trustees for the plaintiff.

[5] At the conclusion of a full trial, the Judge however concluded that the plaintiff was not the beneficial owner of the land under a bare trust as they had not paid the full purchase price and had not paid the redemption sum to MAA to obtain a discharge of the MAA charges. The Judge held that the plaintiff's alleged interest did not enjoy priority, and that D1 and D2 obtained an indefeasible title under s 340 (1) of the National Land Code 1965