A private express trust was established as of 11 April 2016, requiring full payment of acquisition costs for immediate beneficial ownership, with dividends held in trust until obligations met.

Introduction

[1] The bone of contention in this appeal is whether the appellant was a beneficiary of 250,000 shares of a company known as Sekoplas Industries Sdn Bhd (hereafter "the said shares"), and whether the appellant was in breach of a Trust Deed dated 11 April 2016 (hereafter "the Trust Deed") in regard to the mode of payment towards the acquisition of the said shares which were registered in the name of the respondent, and whether the appellant was entitled to enjoy the benefit of the dividends to the said shares immediately despite not having paid the full amount of his portion of the shared acquisition costs to the respondent.

[2] The respondent contended that it was entitled under the Trust Deed to demand from the appellant the shared acquisition costs for the said shares together with interest, whereas the appellant, in his counterclaim, contended that his payment for the shared acquisition costs was by way of offsetting his entitlement to the dividends declared from the said shares, and that the dividends received would be used to offset the amount owing to the respondent for the acquisition of the said shares. In essence, the appellant's counterclaim sought immediate benefit and entitlement of the dividends accrued from time to time despite the appellant not having paid in full his part of the shared acquisition costs (including the purchase price) of the said shares.

[3] The High Court found in favour of the respondent, and did not accept that the parties had created a trust for the said shares in that the respondent was holding on trust the said shares for the benefit of the appellant. Consequently, the High Court dismissed the appellant's counterclaim. Dissatisfied with the decision of the High Court, the appellant appealed to the Court of Appeal.

Brief Facts

[4] The appellant, Ong Kwee Lee, and one Ng Keng Hoe were friends and business partners. In early 2016, they agreed to jointly acquire 500,000 shares of the company, Sekoplas Industries Sdn Bhd, and each would be entitled to 250,000 shares. The purchase price for the 500,000 shares was RM18,750,000.00. The appellant could not come up with his portion (50%) of the purchase price of the 500,000 shares. They then decided to use the respondent company as the vehicle to acquire all the 500,000 shares.

[5] The appellant contributed cash of RM500,000.00, and the respondent contributed the entire balance purchase price, including other costs incidental to the acquisition of the 500,000 shares. The respondent took out a term loan to finance the purchase of the 500,000 shares from a local bank. The appellant and the respondent (through Ng Keng Hoe) agreed that the 500,000 shares would be used as security (by way of a charge) for the term loan.

[6] In addition to the shares being the security for the loan, the respondent also provided a 3rd party charge of a property which belonged to Ng Keng Hoe's wife and further provided a personal Joint and Several Guarantee executed by Ng Keng Hoe and the wife in favour of the local bank. The loan was a term loan over a repayment period of seven years by way of monthly instalments. The acquisition of the 500,000 shares was completed on 11 April 2016. On the same day, 11 April 2016, the appellant and respondent entered into the Trust Deed. The salient terms of the Trust Deed read as follows:

"Whereas:

A. The Trustee [the respondent] is presently the registered owner of 500,000 ordinary shares of RM1.00 each, representing 50% of the issued and paid- up share capital ("Total Shares") of SEKOPLA