Augustine Paul JCA:

[1] The appellant (the plaintiff in the High Court) was a client of Labuan Securities Sdn. Bhd. (hereinafter referred to as "LSSB"), a stock broking company, and had given several loans to LSSB. On 12 February 1999, a Special Administrator was appointed for LSSB as provided for under s. 24 of the Pengurusan Danaharta Nasional Berhad Act 1998 to settle LSSB's financial problems with its creditors. As a result of the appointment a Transfer of Liability Agreement dated 30 October 2000 was entered into between the parties. Accordingly, all of LSSB's liabilities to its creditors as of 2 September 1999 were transferred to Balforn Holdings Sdn. Bhd. (hereinafter referred to as "Balforn") as "Special Purpose Vehicle" for the purpose of the proposal for settlement. Subsequently, Balforn was wound up and on 17 January 2001, the respondents were appointed as the liquidators at the creditors meeting. On 1 March 2001, the respondents as Balforn's liquidators invited the creditors to submit proof of debt through an advertisement placed in the New Straits Times. The appellant then submitted a proof of debt in Form 55 of the Companies (Winding-Up) Rules 1972 (hereinafter referred to as "the rules") for the amount of USD5,169,154.76, SGD3,664,417.92 and RM42,165. On 24 May 2001 the respondents rejected the appellant's proof of debt in Form 59 of the rules (hereinafter referred to as the "respondents' decision"). The appellant was dissatisfied with the respondents' decision and thus filed an originating summons against the respondents seeking an order to reverse or vary the respondents' decision.

Submission By The Appellant In The High Court

[2] By a letter of offer dated 4 July 1997 (hereinafter referred to as the "letter of offer"), it was agreed by both the appellant and LSSB that the appellant would advance a sum of USD3.8 million only to LSSB as a loan at an interest to be calculated in accordance with the terms of the letter of offer (hereinafter referred to as the "loan facilities"). Pursuant to the letter of offer and subsequent verbal agreements the appellant transmitted into LSSB's account the total sum which was more than what had been agreed upon. LSSB and the respondents did not deny the receipt of the sum advanced and it was not the appellant's concern as to whether or not LSSB gave the money to another party after such acceptance. It was also not denied by LSSB and the respondents that the money was transmitted into LSSB's account. The letter of offer was clearly signed by the authorized signatories of LSSB and was witnessed by an advocate and solicitor and its contents were admitted by the respondents in their submission. It was not proved that there was an understanding between the parties that the money was for the benefit of third parties. All the documents showed that LSSB was the receiver of the money. One Tan Eam Thong has admitted that LSSB had accepted the money from the appellant. The correspondence between the appellant and LSSB did not show that the money was for the benefit of Tan Eam Thong. If in fact the loan was made to Tan Eam Thong, the respondents did not explain in their affidavits the presence of the appellant's name in LSSB's statement of affairs.

Submission By The Respondents In The High Court

[3] The appellant's proof of debt was rejected by the respondents on the ground that the money received was for the benefit of third parties and that LSSB was not the real borrower. Even if the letter of offer was signed and accepted by LSSB it was the understanding between the parties that the loan facilities were for the benefit of LSSB's clients. LSSB only acted as an intermediary to arrange financial facilities for its clients for the purpose of purchasing shares at the Kuala Lumpur Stock Exchange (KLSE). There are documents to show that the appellant had knowledge that the loan was for the benefit of third parties and that they were to pledge their shares in respect of the loans which