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2024 MarsdenLR 2180
HIGH COURT MALAYA KUALA LUMPUR
FELCRA BERHAD – Appellant
Versus
ADLI SHARIDAN SAHAR & ORS – Respondent
[Civil Suit No: WA-22NCVC-425-07-2018]
Solicitors have a fiduciary duty to account for client funds, and failure to do so constitutes a breach of trust, resulting in joint and several liability among partners.
Headnote:(A) Legal Profession Act 1976 - Sections 94 and 13 - Partnership Act 1961 - Section 12 - Breach of trust and fiduciary duty by solicitors in managing funds for a housing project - Defendants liable to account for unremitted purchase prices and loans. (Paras 1-3, 22-28, 47-48, 127)
(B) Fiduciary Duty - Solicitors owe a fiduciary duty to clients and must act in good faith and with loyalty - Failure to account for client funds constitutes a breach of this duty. (Paras 47, 47-48)
Facts of the case:
The plaintiff, a statutory body, engaged the defendants, including solicitors and law firms, for a housing project. The defendants failed to remit substantial amounts received from purchasers, leading to claims of breach of contract and trust. (Paras 1-3, 22-28)
Findings of Court:
The court found that the defendants acted in breach of their fiduciary duties and trust, failing to account for significant sums received, and held them jointly and severally liable. (Paras 47-48, 127)
Issues: Whether the defendants, including incoming and retired partners, should be held liable for unaccounted funds received prior to and after their respective tenures. (Paras 2-3, 47-48)
Ratio Decidendi: The court ruled that all defendants, regardless of their partnership status, were jointly and severally liable for the funds mismanaged, emphasizing the continuing fiduciary obligations under the Partnership Act. (Paras 47-48, 127)
Result: Judgment in favor of the plaintiff for RM7,157,869.54 and exemplary damages of RM715,787.00, with costs on an indemnity basis. (Paras 147-149)
JUDGMENT
"Of equal importance, the public too must be able to depend on the honesty and integrity of all practitioners in the legal profession which plays an indispensable role in the administration of justice and conduct of matters in law for members of the public"
(As per Vernon Ong JCA (later FCJ) in Majlis Peguam Malaysia v. Lim Yin Yin , [2019] 6 MLJ 571 , para [28])
Introduction
[1] In undertaking a housing project, the plaintiff entrusted the seven defendants, four of whom were advocates and solicitors, two were law firms and one who was alleged to be held out to be a partner of one of the law firms, to handle the conveyancing aspect including collecting the purchase price and loan sums for its benefit. The plaintiff sued for inter alia breach of contract and trust and negligence for the monies which ought to have been received by the defendants and remitted to it, general, aggravated and exemplary damages, interest on the monies and damages together with costs on an indemnity basis. After a trial conducted over 12 days, judgment was pronounced in favour of the plaintiff and these are the grounds for the decision made.
[2] In this judgment, the following issues, which are not free from difficulties, are addressed:
(i) whether an incoming partner should be liable jointly and severally with existing partners to account for monies in a client's or trust account which was opened before the incoming partner joined the law firm but with the client's or trust account continuing to be held under the name of the law firm after the incoming partner has joined the law firm;
(ii) whether a retired partner of a law firm should be liable jointly and severally with the existing partners to account for monies in a client's or trust account opened when he was a partner and which were not accounted to the client when he ceased to be a partner of the law firm; and
(iii) whether a salaried partner as well as another person who is not an advocate and solicitor but held out to be a partner of a law firm should similarly be liable jointly and severally with the other partners; and
(iv) whether a law firm and its partners who are said to have relinquished the firm's files for its client but who continue to receive monies under the name of its law firm ought to be jointly and severally liable to account to the client.
Parties
[3] The plaintiff is a statutory body corporate established under the National Land Rehabilitation and Consolidation Authority (Succession and Dissolution) Act 1997. One of its objectives is to look after the welfare of the settlers' community and improve their quality of life and the lives of future generations that follow.
[4] The 1st defendant (Adli Sharidan Sahar or "D1"), 2nd defendant (Nurul Adzliana Ainnie Abdullah or "D2"), 3rd defendant (Mohd Irwan Nizam Khorizan or "D3"), 4th defendant (Norazlina Mat Saad or "D4") were at the material time, advocates and solicitors.
[5] Both D1 and D2 are cousins and the 7th defendant (Nor Azlan Md Huri or "D7") is the husband of D2.
[6] The 5th defendant (Sharidan & Co or "D5") and the 6th defendant (Adzliana & Partners or "D6") are law firms.
[7] D7 was the Office and Marketing Manager of D6. He was also the Office and Marketing Manager of D5 and was held out to be a partner of D6 in D6's firm profile even though it is undisputed that he was never an advocate and solicitor.
Legal Representation Of The Defendants
[8] D1 and D5 are represented by Messrs Afiq Aziz & Co. The other defendants, D2, D3, D4, D6 and D7 had initially retained the same set of solicitors, Messrs Skrine. A common defence was put up. However, new solicitors came in to act for them and an amendment to the defences of D2 and D3 as well as that of D4 and D6 was filed. During the trial, the legal representations of seven defendants were as follows:
(i) D1 and D5 by Messrs Afiq Aziz & Co;
(ii) D2 and D3 by Messrs Fadhly Yaacob & Co;
(iii) D4 and D6 by Messrs Skrine; and
(iv) D7 by Messrs Rafiee & Sani.
[9] D7 had been
