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2011 MarsdenLR 5087
ZAINUN ALI, RAMLY ALI, ZAHARAH IBRAHIM
QIMONDA MALAYSIA SDN BHD – Appellant
Versus
SEDIABENA SDN BHD & ANOR – Respondent
Retention monies held by an employer in a construction contract can be deemed trust funds for the contractor, even if not segregated prior to the employer's liquidation, emphasizing fiduciary obligations.
Headnote:(A) Trust Law - Nature of Retention Monies - The retention sum of RM6,127,884.50, held by the appellant under a contract for constructionwork, is deemed to be held in trust for the respondents despite not being separated from general funds prior to liquidation. The court emphasizes that the intention to create a trust can manifest without an explicit clause in a contract. (Paras 11-12, 19-22)
(B) Fiduciary Obligations - The relationship established by contract imposes a fiduciary duty, indicating that the appellant, as employer, is a trustee for the respondents. The beneficial interest in retention monies remains with the contractor despite the employer's liquidation, thus securing the contractor’s claim to the funds. (Paras 13-16, 25-30)
Facts of the case:
The case involves a construction contract requiring the appellant to retain certain amounts as a guarantee against defects. The appellant did not pay the retention sums, leading to a legal dispute regarding their nature as trust monies.
Findings of Court:
The respondent’s claim to the retention money was upheld, reinforcing that these sums are trust monies and affirming the High Court's decision granting the respondents their claim.
Issues: The core issues were whether retention monies constitute trust monies and whether respondents were estopped from asserting this due to filing a proof of debt.
Ratio Decidendi: The court concluded that the retention monies were inherently trust funds, emphasizing the fiduciary relationship and asserting that no prior segregation of funds is necessary for the trust status.
Result: Appeal dismissed; decision of the High Court affirmed.
| Table of Content |
|---|
| 1. existence of a contract and retention sums (Para 1 , 2 , 3 , 4 , 5 , 6 , 7) |
| 2. appellants and respondents' contentions regarding trust (Para 8 , 9) |
| 3. court's determination on the implication of a trust based on circumstances (Para 10 , 11 , 12 , 13 , 14 , 15 , 16) |
| 4. retention monies as trust funds despite not being segregated (Para 17 , 18 , 19 , 20 , 21) |
| 5. comparison of cases and decision on trust creation (Para 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30) |
| 6. estoppel issues and their relevance (Para 31 , 32 , 33 , 34 , 35) |
| 7. conclusion on trust and entitlements of respondents (Para 36) |
Ramly Ali JCA:
The Appeal
(1) The present appeal before this court is against the decision of the learned High Court judge dated 22 April 2011 in allowing the respondents application for a declaration that the retention sum held by the appellant under the relevant contract is held on trust by the appellant in favour of the respondents and granting injunctive reliefs as prayed with costs of RM25,000. The appellant was the defendant and the respondents were the plaintiffs at the court below.
Factual Background
(2) The parties have agreed to the following facts which are stated in the statement of agreed facts:
(a) the respondents and the appellant company entered into a contract dated 22 August 2007 for a project known as the Design and Build for Qimonda Global Module House Project at Senai, Johor ("the contract");
(b) the 1st respondent was the design and build contractor of the said project to design, construct and maintain the Global Module House at Lot 1, Airport Logistic Park, Sultan Ismail International Airport, 81259 Johor ("the works"). The 1st respondent was the contractor for their part of the works (CSA Package) under the contract while the 2nd respondent was the nominated sub-contractor for their part of the works (MEP Package) under the contract;
(c) under cl. 22.1.3 of the contract, the retention monies were to be deducted for value of work already and actually done and materials supplied as certified in the payment certificates;
(d) pursuant to cl. 23.1 of the contract, the appellant company shall release one half of the retention monies to the respondent upon the issuance of the handing over certificate. cl. 23.2 of the contract further states that the appellant company shall release the second half of the retention sum monies to the respondents upon the issuance of the maintenance certificate or after the issuance of the certificate of statutory completion for the works by the relevant authority, whichever is the later;
(e) to date, the retention monies of RM6,127,884.50 has not been paid by appellant company to the respondents;
(f) the Global Module House was handed over to the defendant company on 30 June 2008. A certificate of practical completion was also issued by the architect on 17 July 2008. To date, the respondents have not obtained the certificate of statutory completion;
(g) the appellant companys records contain a copy of a letter from Advanced Engineering (Asia) Pte Ltd dated 10 February 2009 recommending the full release of the retention monies for MEP Package and 1st half retention monies for CSA Package in the sum of RM4,515,192.25;
(h) on 9 April 2009, the directors of the appellant company passed a board resolution and declared that the appellant company could not, by reason of its liabilities, continue its business. They decided to voluntarily wind up the appellant company. A provisional liquidator, Dato Gan Ah Tee was appointed over the appellant company;
(i) a meeting of the members and the creditors of the appellant company was held on 23 April 2009 and Dato Gan Ah Tee and Mok Chew Yin were jointly and severally appointed as the liquidators of the appellant company;
(j) the respondents have submitted their proof of debt in Form 77 to the appellant company on 14 September 2009;
(k) the defect liability period under the contract had expired on 30 June 2010; and
(l) prior to the liquida
