A sham transaction cannot form the basis of an enforceable trust, barring relief for parties involved in illegality.

Introduction

[1] These are my grounds of judgment in respect of an appeal by the 1st defendant against the decision of the learned Sessions Court Judge ("the SCJ") dated 27 October 2016 after a full trial, by which the SCJ allowed the plaintiffs' claim with costs of RM25,000.00. Essentially, the SCJ declared that the plaintiffs were entitled to the disputed sum of RM431,201.11, which is the subject matter of the suit in the Court below and in this appeal before me. The sum of RM431,201.11 is presently held by Hong Leong Bank Berhad. They were the 2nd defendant in the Court below.

[2] For convenience, I shall refer to the parties by the following nomenclature: 1st defendant/appellant as "D1" and the respondents as "the plaintiffs". Where necessary, I shall specifically refer to the 1st plaintiff as "P1". Hong Leong Bank Berhad shall be referred to as "D2". The sum of RM431,201.11 shall be referred to as "the surplus sum".The record of appeal shall be referred to "AR". The SCJ's grounds of judgment shall be referred to as "GOJ".

[3] D2 is not a party to this appeal and they await the decision of this appeal, upon which the surplus sum will be released. The surplus sum came about as a result of a public auction which was carried out by D2 on 17 December 2014 in respect of a property known as No 37, Lorong Badang 13, Taman Castlefields, 57100 Kuala Lumpur ("the property"). The property was charged to D2 as security for a loan that was given to D1.

Background Facts

[4] At the time the property was sold at the auction on 17 December 2014, it was registered in the name of D1 as the registered proprietor The plaintiffs' pleaded case is that D1 was at all times holding the property on trust for the plaintiffs pursuant to a sale and purchase agreement dated 30 June 1999 ("the impugned SPA") entered between D1 (as so-called "purchaser") and the plaintiffs (as so-called "vendors"). The pith and substance of the plaintiffs' claim is that the surplus sum belongs to them pursuant to an alleged "transfer arrangement" or a "trust" which is evidenced by the impugned SPA. I turn now to background and genesis to the impugned SPA.

[5] The plaintiffs are siblings. P1 and D1 were at one time involved in a romantic relationship with each other The romantic relationship lasted a few years. The plaintiffs were previously the registered owners of the property.

[6] The property was transferred to them pursuant to a sale and purchase agreement dated 25 February 1992 entered into between the plaintiffs (as purchasers) and Tan Heng Hong @ Tan Siew Foong ("Mdm Tan") (as vendor). Tan is the wife of Phang Kok Wai @ Pang Kok Yew ("Phang") and she is also the mother of the plaintiffs. At all material times, Phang and Mdm Tan resided in the property. They lived in the property until after the auction, when they were compelled to vacate the property.

[7] According to the plaintiffs' pleaded case, what gave to the impugned SPA is that they intended to raise capital for a new business venture and this had to be done via financing of the property with a local financial institution. At the material time, the property was charged to Maybank Finance Berhad and the redemption sum as at 18 August 1999 was RM63,435.18. The new business venture that the plaintiffs had in mind was a laundry business which was to be run by Phang. P1 was a permanent resident in Malaysia. He was a non-citizen. According to D2's internal lending policy, loans would not be granted to noncitizens.

[8] Thus, the plaintiffs decided to apply for a loan by using the impugned SPA so as to give the impression or appearance to D2 that the purchaser was D1 and that the loan