ABDUL KADIR SULAIMAN JCA (DELIVERING JUDGMENT OF THE COURT)::

(1) This is an appeal against the decision of the learned judge of the Kuala Lumpur High Court given on 30 September 2000 allowing the respondent’s claim against the first appellant which decision indirectly affects the interest of the second appellant. However, the second appellant was not made party in the action before the learned judge.

(2) The facts are simple. By a written agreement dated 27 November 1980 entered into between the respondent and the first appellant (‘the principal agreement’), the respondent agreed to sell and the first appellant agreed to buy all the issued share capital in the two companies of which the respondent had beneficial interests. The total purchase price was stated to be RM206,252,345. The first appellant paid RM196,252,345 towards the total purchase price leaving a balance of RM10m unpaid and remained in the hand of the first appellant. The reason for that was because the respondent through its representative, the late Mr Chang Ming Thien, proposed to set up a charitable foundation to the extent of the amount short paid to be called ‘Chang Ming Thien Foundation’ (‘the Foundation’) on terms as set out in an undertaking (‘the supplementary agreement’) of the same date, entered into between the respondent and the first appellant, ‘in consideration of’ the principal agreement mentioned earlier. The supplementary agreement recited that ‘the management and control’ of which, ie the Foundation, was to be decided by the nominees of the first appellant. Thus the sum of RM10m remaining in the hand of the first appellant for the said purpose. The Foundation was only incorporated on 18 April 1990 as a company limited by guarantee, at the instance of the first appellant.

(3) In the meantime, on 27 March 1982, ie before the incorporation of the Foundation by the first appellant, Mr Chang Ming Thien died. All those while, the respondent did not take any step to incorporate the Foundation. If was the first appellant which took the necessary steps to incorporate the same, which object was clearly charitable. Steps were then taken by the first appellant to appoint its nominees to manage and control the activities of the Foundation in accordance with the terms of the supplementary agreement. While in the hand of the first appellant, the said sum of RM10m was duly invested which earns interest.

(4) Somehow, by a letter dated 6 September 1990, by which time the Foundation was already in existence under the management and control of the nominees of the first appellant, the respondent made a demand for the return of the said sum of RM10m. On 28 September 1990, the first appellant transferred the income derived from the RM10m investment, amounting to RM4,375,000 to the account of the Foundation, and still holding on to the principal sum. Then on 27 May 1991, the first appellant informed the respondent that it was ready to pay the principal sum of RM10m to the Foundation. But by a letter dated 12 June 1991, the respondent’s solicitors wrote as follows to the first appellant:

I refer to your letter dated 27 May 1991 which was only received in my

office on 1 June 1991.

In this connection, I write to place it on record and to bring it to

your attention that you hold the monies upon trust and to which my

clients are legally entitled.

My clients have instructed me to institute appropriate proceedings and

the necessary papers are being prepared for filing.

In the interim period, you are advised not to part with the monies

held by you. And in the event that you do, you will no doubt continue

to be responsible for the payment of the same to our clients in due

course.

Finally, it may be pertinent for me to point out as a caution to you

that paying out the money to anyone else would constitute criminal

breach of trust and there being attendant consequences. (Emphasis

added