SITI NORMA YAAKOB FCJ:

[1] In the High Court, the respondent's claim for a declaration that the appellant ("the bank") holds a stated amount of monies as a trustee for the respondent was dismissed with costs.

[2] The Court of Appeal however disagreed with the High Court, overturned the decision of the latter and entered judgment for the respondent.

[3] Subsequently this court granted leave to the bank to pose the following questions of law for our determination.

(1) Whether under Malaysian law a trust may arise and be relied on as a cause of action against another party when the following requirements are absent;

(a) There is no intention to create a trust for any person at the time of the execution of the Insurance Policy;

(b) The element of certainty of subject matter is not proven;

(c) The identity of the beneficiary of the trust is absent at the material time of execution of the contract of insurance.

(2) Whether evidence of an oral agreement with a third party can in the context of law of trust and equity be adduced to contradict and deny the existence of a clear written agreement.

(3) Whether and in what circumstances a trust can be created in favour of a purchaser of goods pursuant to an ordinary contract for the sale of goods and whether and to what extent such a trust can be enforced as against secured creditors of the vendor.

(4) If such a trust may be created as set out in para. 3 above, whether the same may be enforced as against a third party who is not a party to the contract of goods and who has no notice of any such trust.

(5) Whether the effect of a Mortgage Clause in a fire insurance policy covers a third party and imposes a trust on the mortgage for the benefit of a purchaser of a contract for the sale of goods who is not intended to be a beneficiary under the said policy.

(6) Whether the purchaser under a contract for the sale of goods, if proven to be beneficially entitled to any monies paid by an insurer to a mortgage, will be entitled to preferential ranking over the mortgagee who is a secured creditor by virtue of being a debenture holder when the debenture holder was first in time in terms of any beneficial interest in the insurance monies.

(7) To what extent is it possible for a beneficiary to a trust to trace into proceeds in the hands of a third party who is a stranger to such a trust.

[4] The chronology of events leading to the filing of the respondent's claim happened in the following manner.

[5] On 6 November, 1984, a company known as Lampak (M) Timber Sdn. Bhd. ("Lampak") borrowed monies from the Bank as capital to manage its sawmilling business and by way of security, Lampak created fixed and floating charges of all its assets by way of a debenture. By cl. 9(i)(a) of the debenture, both Lampak and the bank had to insure all materials, stocks-in-trade, other properties and assets covered by the debenture against loss or damage by fire. Both parties executed a joint fire insurance policy dated 4 March 1985, with Hong Leong Assurance Sendirian Berhad ("Hong Leong") for the insured sum of RM1 million. The insured sum was subsequently revised to RM2 million.

[6] At all material times, Lampak was in the business of buying and selling sawn timber at a sawmill located at the 11¼ mile Jalan Kuala Kangsar, Chemor, Perak, which was owned by another company known as Foong Seng Fuat Sawmill Sdn. Bhd. ("Foong Seng Fuat").

[7] It is the respondent's case that before 14 June 1985, it had entered into various contracts with Lampak for the purchase of sawn timber to the total value of RM597,152.39 and that amount had been tendered to Lampak. However before Lampak could make delivery, a fire broke out at the sawmill on 14 June 1985, that completely destroyed all the sawn timber purchased by the respondent.

[8] Following the fire, three civil suits were filed by the various parties who had suffered losses.

[9] The first is Ipoh High Court Civil Suit No. 2300 of 1985 filed by the bank and Lampak jointly ag