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2011 MarsdenLR 780
HIGH COURT MALAYA KUALA LUMPUR
SIGMA ELEVATOR (M) SDN BHD – Appellant
Versus
FADASON HOLDINGS SDN BHD & ANOR – Respondent
[Civil Suit No: 22NCVC-459 Of 2011]
A solicitor holding a stakeholder sum in trust must release it upon instructions from the party that deposited it, without imposing unrelated conditions or exercising a lien on the trust money.
Headnote:(A) Rules of the High Court 1980 - Order 14 and 14A - Suit involving stakeholder sum of RM495,000 held in trust by the second defendant for the plaintiff - The first defendant instructed the second defendant to release the stakeholder sum, and the second defendant's refusal was unjustified as the money was deemed trust money and not subject to a solicitor's lien - The court ruled that the second defendant was legally bound to release the sum in accordance with the undertaking given to the plaintiff. (Paras 19-29)
(B) Legal Obligations and Undertakings - A solicitor who holds a client’s money in trust has no right to impose conditions unrelated to the agreement or to retain it for their own benefit. (Paras 27-29)
Facts of the case:
Plaintiff entered into a subcontract with the first defendant for a project and was entitled to a payment of RM495,000 held by the second defendant as a stakeholder. The second defendant refused to release this amount, claiming a lien against the first defendant.
Findings of Court:
The second defendant is obliged to release the stakeholder sum to the plaintiff, as it is held in trust for the plaintiff's benefit, and the first defendant has validly instructed its release.
Issues: The court addressed whether the second defendant was legally obliged to release the said money to the plaintiff upon the first defendant’s instruction, and the validity of the second defendant's claims of lien on the stakeholder sum.
Ratio Decidendi: The court found that the second defendant's lien argument was baseless and contrary to the terms of the undertaking to release the stakeholder sum, emphasizing the trust nature of the funds and the obligations of solicitors.
Result: Summary judgment granted, ordering the second defendant to pay the stakeholder sum of RM495,000 to the plaintiff within five days and dismissing the claim against the first defendant.
| Table of Content |
|---|
| 1. overview of the plaintiff's claims and contract details. (Para 1 , 1) |
| 2. employment of stakeholders and contractual terms. (Para 2 , 3) |
| 3. arguments presented by the plaintiff and defendants regarding the stakeholder sum. (Para 7 , 9 , 11) |
| 4. court's determination of legal obligations regarding stakeholder sum. (Para 13 , 20 , 21 , 22 , 24 , 30) |
| 5. court finds second defendant legally obligated to release funds. (Para 19 , 26 , 31) |
[1] By the statement of claim dated 1 June 2011 (encl 2), the plaintiff has pleaded, briefly and, inter alia, as follows:
(a) the plaintiff is the subcontractor of the first defendant for a project known as 'Kerja-kerja Tambahan Untuk Cadangan Pembangunan 10 Tingkat Kedai/ Pejabat/ Service Apartment di atas Sebahagian Lot 9016 dan 9017, Mukim Batu, Kuala Lumpur Untuk Fadason Holdings Sdn Bhd ('the project');
(b) the second defendant was the first defendant's solicitors at that material time;
(c) pursuant to the first defendant's letter dated 19 January 2010 ('the appointment letter'), the plaintiff had upon the first defendant's request, agreed to continue with the installation of lifts work under the project ('the work');
(d) in consideration of the plaintiff agreeing to continue with the work for the first defendant for the sum of RM695,000 ('contract sum'), the first defendant had paid the plaintiff a sum of RM200,000 being the initial payment of the plaintiff's work ('the initial payment');
(e) it is, inter alia, a term of the appointment letter dated 19 January 2010 that the first defendant is to deposit the balance contract sum of RM495,000 ('the stakeholder sum') with the second defendant as stakeholder and the second defendant is to issue to the plaintiff an revocable undertaking to release to the plaintiff the stakeholder sum upon the second defendant receiving and/or the first defendant receiving from the plaintiff the relevant 'Perakuan Kelayakan' from 'Jabatan Keselamatan & Kesihatan Pekerjaan'.
(f) as the terms of the first letter of undertaking is not in accordance with the terms in the letter of appointment, the plaintiff put a stop order to the work pending the issuance of a revised letter of undertaking from the second defendant.
(g) in accordance with the letter of appointment dated 19 January 2010:
(i) the first defendant had deposited the stakeholder sum with the second defendant;
(ii) the second defendant had then issued a letter of undertaking dated 10 February 2010 to the plaintiff and undertook to pay the plaintiff the stakeholder sum upon the first defendant's written instructions to the second defendant for the works undertaken by the plaintiff for the first defendant ('the first letter of undertaking'). (Emphasis added.)
(h) the second defendant had then issued a revised letter of undertaking dated 11 May 2010 (second letter of undertaking) to the plaintiff confirming as follows:
(i) the second defendant was in receipt of the stakeholder sum;
(ii) the second defendant irrevocably undertakes to release the stakeholder sum to the plaintiff upon the second defendant's receipt from the first defendant the relevant 'Perakuan Kelayakan' from 'Jabatan Keselamatan & Kesihatan Pekerjaan' ('JKKP'). (Emphasis added.)
(i) in consideration of and in reliance of the second letter of undertaking, the plaintiff had continued and completed the work. What remains is merely to conduct the testing and commissioning of the installed lifts and the application for the 'Perakuan Kelayakan' from JKKP (Emphasis added.);
(j) on or about 18 April 2011, the plaintiff and the first defendant had reached an agreement whereby the stakeholder sum will be released to the plaintiff on the plaintiff's undertaking to obtain 'Perakuan Kelayakan' from JKKP and not upon the plaintiff having had obtained the 'Perakuan Kelayakan';
(k) accordingly, the first defendant had on 18 April 2011 instructed the second defendant to release the stakeholder sum to the plaintiff (Emphasis added.);
(l) the second defendant refuse
