Ramly Ali JCA

(delivering judgment of the court):

THE APPEAL

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 plaintiff’s at the court below.

FACTUAL BACKGROUND

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 first 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 first respondent was the contractor for their part of the works (‘CSA package’) under the contract while the second respondent was the nominated subcontractor 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. Clause 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 company’s 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 first 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 liquidation of the appellant company, the respondents had never requested the appellant company to appropriate and set aside the retention sum into a separate trust fund account.

The parties also have agreed on the following issues to be tried:

(a)whether the retention monies which had not been paid by the appellant company to the respondent under the contract amounting to RM6,127,884.50 are trust monies held by the appellant company in favour of respondents;

(b)whether the respondents are estopped from asserting that the retention monies are in fact trust monies due to their action of submitting the proo