A constructive trust arises where one party holds property for the benefit of another due to lack of formal legal title transfer.

[1] The appellant's (plaintiff in the High Court) claim in the High Court against the respondent (defendant in the High Court) was to recover a piece of land held under HS(D) 27505, Lot No 19160, Kuala Lumpur, Wilayah Persekutuan with a double-storey shop house erected thereon (hereinafter referred to as "the land").

[2] The plaintiff claimed that it is the beneficial owner of the land, and the defendant is holding the land on trust for the plaintiff and the plaintiff is entitled to recover the defendant's undivided share in the land which is the trust property. The plaintiff is also claiming rental proceeds in the defendant's possession, or previously received by the defendant and converted to his own use.

[3] After a full trial, the learned trial judge of the High Court dismissed the said claim.

[4] The plaintiff appealed to the Court of Appeal. The matter came before us and after hearing submissions of the parties and perusing through the Appeal Records, we hereby unanimously, allowed the appeal and set aside the decision of the High Court Judge. Our reasons for doing so are as follows.

[5] Parties shall be referred to as they were in the High Court, in this judgment.

Background:

Undisputed Facts

[6] The plaintiff is an investment holding company. At the material time, the defendant and one Leng Fook Cheung (LFC) were the only Directors of the plaintiff. They were the founding members as well as the Directors since the incorporation of the plaintiff on 25 August 1981.

[7] The defendant and LFC were the co-registered proprietors of the land.

[8] On 19 August 1987, the defendant and LFC, as co-proprietors of the land entered into a Sale and Purchase Agreement (SPA) to sell the land to the plaintiff at a total consideration of RM350,000.00 (hereinafter referred to as "the SPA").