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Malayan Law Journal Unreported/2014/Volume / ESPL (M) Sdn Bhd v Radio & General Engineering Sdn
Bhd & Ors and another suit - [2014] MLJU 1084 - 18 November 2014
[2014] MLJU 1084

ESPL (M) Sdn Bhd v Radio & General Engineering Sdn Bhd & Ors and another suit
HIGH COURT (KUALA LUMPUR)
AZIZUL AZMI ADNAN JC
CIVIL SUIT NOS S3-22-145 OF 2004 AND S3-22-199 OF 2014
18 November 2014
Malik Imtiaz Sarwar (Chan Wei June with him) (Malik Imtiaz Sarwar, Advocates & Solicitors) for the
appellant.
Leonard Yeoh (Wong Weng Yew with him) (Tay & Partners) for the respondent.
Azizul Azmi Adnan JC:
JUDGMENT
INTRODUCTION
[1] Dato' Chan Tien Gee, referred to in this judgment as TG Chan, is the applicant in the proceedings before
this court. He is also the fourth defendant in the civil suit S3-22-145-2004 (the 145 suit) and the first
defendant in the civil suit S3-22-199-2004 (the 199 suit).
[2] TG Chan has applied to this court to, inter alia, set aside the judgment of the High Court dated 19
September 2011 delivered by Nik Hasmat Nik Mohamad JC (as her ladyship then was), on grounds that the
court did not have jurisdiction to grant the judgment.
SALIENT FACTS
[3] This dispute involves three suits that had been commenced in the High Court, and arose in connection
with the construction in the late nineties of the podium block of the Suria KLCC shopping centre. The owner
and project employer had engaged Henz Construction as the main contractor for the project. Henz
Construction was an unincorporated joint venture between (among others) Harbert International
Establishment Sdn. Bhd., the second defendant in the suits before this court, and Nam Fatt Corporation
Berhad, the third defendant in the 145 suit. Henz Construction appointed Radio & General Engineering Sdn.
Bhd. (the first defendant in the 145 suit, referred to in this judgment as R&G) as the subcontractor for the
mechanical and engineering works for the project. R&G in turn subcontracted Econoler Singapore Pte Ltd to
undertake the air conditioning and mechanical ventilation works for the project (the ACMV works). Econoler
subsequently novated this sub-subcontract to its subsidiary, ESPL (M) Sdn. Bhd. (ESPL), the plaintiff and
respondent in this action.
[4] In relation to the works undertaken by ESPL, R&G and ESPL agreed for a bank account to be opened in
the name of R&G, which account was to have been jointly operated between them. It was also agreed that
all money and payment received in respect of the ACMV works were to have been deposited into this jointly
operated account.
The 620 Suit
[5] A dispute arose between R&G and ESPL, which resulted in the commercial suit D8-22-620-1999 (the 620
suit) having been commenced by R&G against ESPL on 3 September 1999. In this 620 suit, R&G claimed
damages against ESPL for breach of the latter's obligations under the sub-subcontract for the ACMV works

(the ACMV Subcontract). ESPL counterclaimed, basing its action in contract as well as in equity for breach of
fiduciary duties and breach of trust. (See paragraphs 57A, 57B and 65 of the defence and counterclaim,
Exhibit CTG-2 of Enclosure 47, where breach of fiduciary duties and breach of trust were pleaded.)
[6] In the course of discovery between 2002 and 2004, ESPL obtained evidence that R&G had departed
from the agreed arrangement to make payments into the jointly operated account.
[7] ESPL applied for an injunction to compel R&G to pay moneys into court or into a stakeholder account.
This application was dismissed by Kang Hwee Gee J. (as his lordship then was) at first instance, but was
allowed by the Court of Appeal in a judgment that was reported (ESPL (M) Sdn Bhd v Radio & General
Engineering Sdn Bhd [2004] 4 CLJ 674; [2005] 2 MLJ 422). In order to move the court to grant the
interlocutory relief that it was seeking, it was necessary for ESPL to establish that it was a beneficiary under
a trust in respect of money relating the ACMV works received by R&G from Henz Construction. The Court of
Appeal found not only that R&G was a trustee for ESPL in respect of the money that ought to have been paid
into the jointly operated account, but also that it had breached its duties as trustee.
[8] It will be seen later that an important issue arises out of the findings by the Court of Appeal that a trust
existed and that R&G had breached that trust. Counsel for TG Chan argued in the present case that any
finding at an interlocutory stage was merely a provisional finding and was thus not binding on Kang J., the
trial judge hearing the 620 suit, or on Nik Hasmat J. at the subsequent trial.
[9] Kang J., in his grounds of judgment, did not make any determination on the issue of breach of trust, on
the basis that this issue was redundant by the time the trial was completed:
A number of issues were also framed for the determination of the court during case management. But they became
redundant at the end of the trial at the submission stage -- for the issues were, by the agreement of the parties, further
reduced to the question whether the defendant had committed a breach of the contract in failing to complete the ACMV
works on time and the consequence that should flow from such breach. (Exhibit CTG-4 of Enclosure 47, at 238)

[10] Kang J. found that ESPL had breached the ACMV Subcontract but also that it had completed at least
95% of the ACMV works, and was therefore entitled to be paid RM25,731,122.32. ESPL's counterclaim was
disallowed, which was also an important point raised by Dato' Malik Imtiaz, counsel for TG Chan, on which
more later.
[11] ESPL did not appeal against the decision of Kang J. in the 620 suit.
145 Suit
[12] The 145 suit was commenced by ESPL against R&G, Harbert International Establishment Sdn. Bhd.,
Nam Fatt Corporation Berhad and TG Chan on 6 February 2004. In this suit, ESPL alleged that R&G had
breached its fiduciary duties in respect of the operation of the jointly operated account, and was therefore
liable to account to ESPL for the sums received from Henz Corporation in respect of the ACMV works. The
remaining defendants were alleged to have dishonestly assisted R&G.
[13] ESPL's claims against Harbert International Establishment Sdn. Bhd. and Nam Fatt Corporation Berhad
were struck out on 1 September 2009.
199 Suit
[14] ESPL commenced the 199 suit on 17 February 2004 against TG Chan and Harbert International
Establishment Sdn. Bhd. The cause of action in this suit was inducement of a breach of contract.
[15] The 145 and 199 suits were consolidated, and were heard by Nik Hasmat J.
[16] In the course of submissions, it was argued by counsel for TG Chan that the decision of Kang J. in the
620 suit had finally and conclusively determined the dispute between ESPL and R&G, and therefore res
judicata ought to apply, preventing ESPL from succeeding in its claim against the remaining defendants.
The Decision in the Consolidated Suits

[17] In both the 145 suit and the 199 suit, Nik Hasmat J. found in favour of ESPL, the reasons for which
decision are set out in her grounds of judgment dated 19 September 2011.
[18] The issue of res judicata was not specifically dealt with in the grounds of her judgment, although given
the decision that was arrived at by her ladyship, it is clear that she did not consider the plaintiff being
prevented from relief, whether on grounds of res judicata or otherwise.
Appeals
[19] TG Chan appealed against the decision of the High Court in the consolidated suits, which appeal was
dismissed by the Court of Appeal on 8 January 2013. No written grounds are available to this court in respect
of the decision of the Court of Appeal.
[20] TG Chan then applied for leave to appeal to the Federal Court. Leave was refused on 2 September
2013.
[21] TG Chan further sought to review the decision of the Federal Court in refusing to grant leave to appeal,
but this too was dismissed by the Federal Court on 27 November 2013.
The Current Action
[22] TG Chan has now applied to this court to set aside the decision of Nik Hasmat J. on grounds that the
High Court was functus officio when it entered judgment on 19 September 2009, as the dispute between the
parties had been conclusively determined in the earlier 620 suit. Accordingly, the applicant contended, the
High Court was not seised of the jurisdiction or authority to order judgment and that the subsequent
bankruptcy proceedings against TG Chan and orders made pursuant to such proceedings were null and
void.
[23] The issues arising from this application are considered in the following paragraphs.
ISSUES AND ANALYSES
The Jurisdiction of this Court
[24] A threshold issue for consideration is whether this court has the requisite jurisdiction to hear the
application. The application was made pursuant to the inherent jurisdiction of this court under Order 92 rule 4
of the Rules of Court 2012.
[25] The Federal Court in Serac Asia Sdn Bhd v Sepakat Insurance Brokers Sdn Bhd [2013] 5 MLJ 1; [2013]
6 CLJ 673 affirmed the principle that the High Court may only set aside a final judgment or order obtained
from another High Court in the exceptional case where the judgment was made "in defiance of a substantive
statutory provision which renders it null and void on grounds of illegality or lack of jurisdiction" (ibid at
paragraph 31 of the judgment).
[26] The learned counsel for the applicant argued that the judgment of Nik Hasmat J. should be set aside on
grounds that the decision of Kang J. in the 690 suit had finally determined the issue of breach of trust and
breach of fiduciary duties, and therefore the High Court was functus officio and the principle of res judicata
would apply, with the attendant result that when Nik Hasmat J. delivered the judgment in the 145 and 199
suits, she was not in possession of the requisite jurisdiction to do so. Counsel further argued that, because of
this lack of jurisdiction, it is now open to this court to set aside such judgment.
[27] A question that arose was whether the decision of a court of concurrent jurisdiction may only be set
aside by this court where such decision was made in contravention of a statutory provision. I requested
further submissions on this point of law, and am grateful to counsels for their further and well-reasoned
submissions.
[28] The learned counsel for the applicant argued that the Federal Court in Serac did not intend to limit the
categories of cases in which a judgment could be set aside ex debito justitiae. Accordingly and by
implication, the proposition put forward by Dato' Malik was that there need not be a contravention of statute
before the High Court may exercise its inherent jurisdiction to set aside its prior decision. He cited as support

for this proposition the following passage from the judgment of Mohd Azmi FCJ in Badiaddin bin Mohd
Mahidin v Arab Malaysian Finance Berhad [1998] 1 MLJ 393; [1998] 2 CLJ 75 :
It is of course settled law as laid down by the Federal Court in Hock Hua Bank's case that one High Court cannot set
aside a final order regularly obtained from another High Court of concurrent jurisdiction. But one special exception to
this rule (which was not in issue and therefore not discussed in Hock Hua Bank) is where the final judgment of the High
Court could be proved to be null and void on ground of illegality or lack of jurisdiction so as to bring the aggrieved party
within the principle laid down by a number of authorities culminating in the Privy Council case of Isaacs v Robertson
[1985] AC 97 where Lord Diplock while rejecting the legal aspect of voidness and voidability in the orders made by a
court of unlimited jurisdiction, upheld the existence of a category of orders of the court '... which a person affected by
the order is entitled to apply to have set aside ex debito justitiae in the exercise of the inherent jurisdiction of the court,
without his needing to have recourse to the rules that deal expressly with proceedings to set aside orders for
irregularity, and give to the judge a discretion as to the order he will make'.
The Privy Council through Lord Diplock also emphasized that the courts in England have not closed the door as to the
type of defects in the final judgment of the court that can be brought into the category that attracts ex debito justitiae the
right to have it set aside without going into the appeal procedure, 'save that specifically it includes orders that have
been obtained in breach of rules of natural justice'.

[29] The decision of the Judicial Committee of the Privy Council in Isaacs v Robertson [1985] AC 97 was
cited in the speeches of both Mohd Azmi FCJ and Gopal Sri Ram JCA (as his lordship then was), sitting in
the Federal Court. In this case, Lord Diplock stated:
Their Lordships would, however, take this opportunity to point out that in relation to orders of a court of unlimited
jurisdiction it is misleading to seek to draw distinctions between orders that are "void" in the sense that they can be
ignored with impunity by those persons to whom they are addressed, and orders that are "voidable" and may be
enforced unless and until they are set aside. Dicta that refer to the possibility of there being such a distinction between
orders to which the descriptions "void" and "voidable" respectively have been applied can be found in the opinions
given by the Judicial Committee of the Privy Council in the appeals Marsh v Marsh [1945] AC 271 284, and MacFoy v
United Africa Co Ltd [1962] AC 152 160; but in neither of those appeals nor in any other case to which counsel has
been able to refer their Lordships has any order of a court of unlimited jurisdiction been held to fall into a category of
court orders that can simply be ignored because they are void ipso facto without there being any need for proceedings
to have them set aside. The cases that are referred to in these dicta do not support the proposition that there is any
category of orders of a court of unlimited jurisdiction of this kind, what they do support is the quite different proposition
that there is a category of orders of such a court which a person affected by the order is entitled to apply to have set
aside ex debito justitiae in the exercise of the inherent jurisdiction of the court without his needing to have recourse to
the rules that deal expressly with proceedings to set aside orders for irregularity and give to the judge a discretion as to
the order he will make. The judges in the cases that have drawn the distinction between the two types of orders have
cautiously refrained from seeking to lay down a comprehensive definition of defects that bring an order into the
category that attracts ex debito justitiae the right to have it set aside, save that specifically it includes orders that have
been obtained in breach of rules of natural justice.

[30] The Federal Court in Serac had occasion to re-examine the ratio in Badiaddin. This is what the Federal
Court had to say in Serac:
[31] It is settled law that the High Court cannot set aside a final judgment/order regularly obtained from another High
Court unless the judgment was made in defiance of a substantive statutory prohibition which renders it null and void on
the grounds of illegality or lack of jurisdiction. Only in that exceptional case can a defective judgment be struck out ex
debito justitiae. It is thus only in this situation that a High Court may exercise its inherent jurisdiction to strike out a
regularly obtained judgment of another court of concurrent jurisdiction, (see: Badiaddin's case)
[32] The Court of Appeal in Selvam Holding said that besides the situation above, Badiaddin seemingly had "extended
the scope and extent of the inherent and discretionary jurisdiction of a court" to set aside an order "where in exceptional
cases, the justice of the case requires the court to intervene and correct an earlier order that contains a serious defect
and there is a need to have it set aside".
[33] We have carefully re-examined Badiaddin and could not find anywhere in its ratio to say that the court's inherent
jurisdiction has an extended scope to correct an earlier regular judgment or order in exceptional circumstances other
than where the judgment had been granted in contravention of a statute.

[31] Abdull Hamid Embong FCJ, after considering the speeches of all three judges inBadiaddin, concluded
as follows:

[35] We are thus in agreement with the appellant's stand that an earlier judgment can only be impeached when it is
prohibited by statute; and that Badiaddin to us merely reaffirmed that rule and does not extend the inherent jurisdiction
of the court to correct a perfected order or judgment beyond any statutory prohibition. This established rule was
explained in Tenaga Nasional which we had earlier adverted to. In our view, that part of the holding of the Court of
Appeal in Selvam Holdings should not be interpreted as giving the courts a broad power to set aside a previous
perfected orders under the guise of "exceptional cases". We think that the Badiaddin 's phrase "to intervene and correct
a serious defect in the order" should be read in the context of where an order was obtained in a manner which
contravened a statute, resulting in that order being illegal or made outside the jurisdiction of the court. It is in this
respect that the court's inherent jurisdiction may be exercised, to strike out an earlier order, ex debitojustitiae and
without the need for file afresh suit.

[32] I agree with the submission of the counsel for the applicant, that the Federal Court in Serac did not
intend to limit the categories of cases in which a judgment may be set aside ex debito justitiae to only those
involving a contravention of written law. The position is neatly summarised in the following passage from the
decision of the Court of Appeal in Hew Hooi Chun v KL Teksi Radio Bhd [2011] 3 MLJ 754; [2010] 4 CLJ
657, a decision that was recently cited with approval by the Federal Court (See CIMB Investment Bank
Berhad v Metroplex Holdings Sdn Bhd Rayuan Sivil No 02(i)-03-01/2013(W) (4 November 2014):
[17] In Badiaddin, the Federal Court settled that there is inherent and discretionary jurisdiction to set aside ex
debitojustitiae an order of court regularly obtained where there has been a breach of the rules of natural justice
following the Privy Council case of Isaacs v Robertson [1985] AC 97. However, the Federal Court cautioned "that in
any attempt to widen the door of the inherent and discretionary jurisdiction of the superior courts to set aside an order
of court ex debito justitiae to a category of cases involving orders which contravened 'any written law', the contravention
should be one which defies a substantive statutory prohibition so as to render the defective order null and void on
ground of illegality or lack of jurisdiction".
[18] The contravention must be one which defies a substantive statutory prohibition so as to render the defective order
null and void on ground of illegality or lack of jurisdiction (in MacOuire (Malaysia) Sdn Bhd v HSBC Bank Malaysia Bhd
& Anor and Another Appeal [2007] 6 CLJ 176, Selvam Holdings (Malaysia) Sdn Bhd v Grant Kenyon & Eckhardt Sdn
Bhd; BSN Commercial Bank Malaysia & Ors (Intervenors) [2003] 1 CLJ 465 HC, and Yee Seng Plantations Sdn Bhd v
Kerajaan Negeri Terengganu & Ors [2000] 3 CLJ 666, the Court of Appeal applied Badiaddin per Mohd Azmi). In
Badiaddin, the contravention defied a substantive statutory prohibition contained in the Malay Reservations Enactment.
In Meenakshi Naidoo v Subramaniya Sastri LR 14 1A 160 (cited by Gopal Sri Ram JCA, as he then was, in Badiaddin),
the High Court at Madras purported to entertain an appeal which was not appealable. And in Chief Kofi Forfie v Barima
Kwabena Seifah [1958] AC 59; [1958] 1 All ER 289 (also cited by Gopai Sri Ram JCA, as he then was, in Badiaddin),
the judgment was delivered when the presiding judge of the Chief Commissioner's Court had no power to exercise
judicial functions. There must be "a breach of the rules of natural justice or a contravention of a statute which is a sine
qua non to invoke the very limited jurisdiction of a court to have its orders declared as void" (Annie Quah Lay Nah v
Syed Jafer Properties Sdn Bhd & Ors And Another Appeal [2007] 1 CLJ 1 per Gopal Sri Ram JCA). The order must be
tainted by "fraud or some other vitiating element and not a judgment that was merely irregular in the sense that it is one
obtained in breach of a rule of court or of practice (Chong Keat Realty Sdn Bhd v Ban Hin Lee Bank Bhd [2003] 3 CLJ
532 per Gopal Sri Ram JCA).

[33] It is clear from the passages cited above that the circumstances under which a prior judgment or order
may be set aside ex debito justitiae include where the judgment or order in question had contravened a
substantive statutory provision, where the order was tainted with fraud or where there was a breach of the
rules of natural justice. Although these categories are not closed, it is also clear that lack of jurisdiction does
not of itself form the grounds for which a judgment or order may be set aside. A close analysis of the
judgment in Serac will reveal that lack of jurisdiction is not a ground on which a judgment may be impeached
but rather is one of the reasons why a judgment or order made in contravention of a statutory provision
would be null and void.
[34] The next issue for consideration is the question whether a judgment made in respect of an issue that
has been finally determined in a prior decision of the court could be said to be in contravention of statute and
therefore liable to be set aside. If res judicata is not a principle of law found in a substantive statutory
provision of our laws, then the applicant may not avail itself of the authority of the decided cases discussed in
the preceding paragraphs, and will have to persuade this court that lack of jurisdiction should form a
separate category of circumstances under which a prior order may be set aside, in addition to those
summarised by the Court of Appeal in Hew Hooi Chun.

Res judicata as written law

[35] This issue has been considered by the Federal Court in Manoharan a/l Malayalam v Menteri Dalam
Negeri, Malaysia & Anor [2009] 2 MLJ 660; [2009] 2 CLJ 839 :
Res Judicata is defined in Black's Law Dictionary, 7th edn as follows:
[literally in Latin 'a thing adjudicated] 1. An issue that has been definitively settled by judicial decision.
2. An affirmative defence barring parties from litigating a second lawful lawsuit on the same claim, or
any other claim arising from the same transactions and that could have been -- but was not raised in
the first suit. The three essential elements are (1) an earlier decision on the issue (2) a final judgment
on the merits, and (3) the involvement of the same parties, or parties in privity with the original parties.
Restatement (Second) of Judgments ss. 17, 24 (1982) - Also termed res adjudicata, claim preclusion.
Cf. COLLATERAL ESTOPPEL.
Res Judicata has been used in this section as a general term referring to all new
ways in which one judgment will have a binding effect on another. That usage is and
doubtless will continue to be common, but it lumps under a single name two quite
different effects of judgments. The first is the effect of foreclosing any litigation of
matters that never been litigated, because of the determination that they should have
been advanced in an earlier suit. The second is the effect of foreclosing relitigation of
matters that have once been litigated and decided. The first of these, preclusion of
matters that were never litigated, had gone under the name, "true res judicata " or the
names "merger" and "bar", The second doctrine, preclusion of matters that have
once been decided, has usually been called "collateral estoppel" Professor Alan
Vestal has long argued for the use of the names "claim preclusion" and "issue
preclusion" for these two doctrines [Vestal, Rationale of Preclusion, 9 St. Louis U U
29 (1964)], and this usage is increasingly employed by the Courts as it is by
Restatement Second of Judgment". Charles Alan Wright, Law of Federal Courts s.
100A, at 722-23 (5th ed. 1994).

George Spencer Bower and Sir Alexander Kingcome Turner in their book "The Doctrine of Res Judicata" 2nd edn at p.
1 defined res judicata, inter alia, as follows:
21. In English jurisprudence a res judicata, that is to say a final judicial decision pronounced by a
judicial tribunal having competent jurisdiction over the cause or matter in litigation, and over the
parties thereto, disposes once and for all of the matters decided, so that they cannot afterwards be
raised for re-litigation between the same parties or their privies.
The common law doctrine of res judicata has been incorporated into the statute law in Malaysia as
can be found in s 25(2) of the Courts of Judicature Act 1964 ("CIA") which confers additional
powers to the High Court as set out in item 11 of the schedule to the CJA as follows:
11. Power to dismiss or stay proceedings where the matter in question is res judicata
between the parties, or by reason of multiplicity of proceedings in any Court or Courts
the proceedings ought not to be continued.

[36] Based on the authority of Manoharan a/l Malayalam v Menteri Dalam Negeri, Malaysia & Anor, I accept
as correct the submission of Dato' Malik Imtiaz that the principle of res judicata has been received into
statute law by virtue of section 25(2) of the Courts of Judicature Act 1964, read together with item 11 of
the Schedule to that Act. Accordingly, a judgment or order made in respect of an issue that is res judicata
between the parties would be in contravention of a substantive provision of written law, and therefore would
be liable to be set aside ex debito justitus by this court. I examine in paragraphs 41 et seq. the question of
whether there was a final determination in the 620 suit on the issue of breach of trust and breach of fiduciary
duty.
Is the Applicant himself barred by Res Judicata?

[37] Before I examine the decision in the 620 suit, I would like to address the argument put forward by
counsel for ESPL, which was that TG Chan ought to be barred by the doctrine of res judicata from
challenging the decision of Nik Hasmat J. in the 145 and 199 suits, as TG Chan had already exhausted his
avenues of appeal to the Court of Appeal and the Federal Court.
[38] Although the applicant had raised res judicata in his defence of the consolidated suits, Nik Hasmat J. did
not specifically rule on this issue in the grounds of her judgment. Given the decision that was arrived at by
her ladyship, it can be surmised that she did not consider ESPL as being prevented from relief on grounds of
res judicata.
[39] It was further submitted by Dato' Malik that the issue of lack of jurisdiction was not argued before the
Court of Appeal, and was only raised at the review application before the Federal Court. Dato' Malik further
argued, on the authority of Datuk Syed Kechik Syed Mohamed & Anor v The Board of Trustees of the Sabah
Foundation & Ors [1991] 1 MLJ 257; [1991] 1 CLJ 325, that the fact that the Federal Court refused leave to
appeal does not mean that it affirmed the decision of the Court of Appeal.
[40] In my view, the critical issue for consideration is whether the High Court in the consolidated suits had
the requisite jurisdiction to hear the issues before it. If this court finds that there was no jurisdiction, then the
subsequent proceedings before the Court of Appeal and the Federal Court would be irrelevant, as neither
appellate court could confer jurisdiction where there was none. In order to ascertain whether the High Court
had jurisdiction, we consider in the following paragraphs whether the doctrine of res judicataought to have
applied in connection with the findings in the 620 suit.
Determination by the High Court in the 620 Suit
[41] The liability of TG Chan in the 145 suit for having assisted R&G in its breach of trust and breach of
fiduciary obligations was predicated on R&G having been found to have breached its fiduciary duties owed to
ESPL or committed a breach of trust. It follows therefore that, if R&G is not liable for breach of trust or breach
of fiduciary duties, no liability will lie against TG Chan in the 145 suit.
[42] The applicant's position was that the judgment in the 620 suit, having been perfected, meant that the
High Court was functus officio. The learned counsel argued that, because Kang J. had disallowed the
counterclaim of ESPL in the 620 suit, this necessarily meant that there had been no breach of trust or
fiduciary duties as claimed in the counterclaim. As the issue of breach of trust has been conclusively
determined in the 620 suit, Dato' Malik Imtiaz argued that Nik Hasmat J. was wrong to have found that R&G
breached trust and fiduciary obligations owed to ESPL. The principle of res judicata would apply, contended
counsel, which meant that the High Court no longer had jurisdiction to grant the order that it did in relation to
the 145 suit.
[43] In my view, the fact that Kang J. disallowed the counterclaim does not inexorably lead to the conclusion
that he had had made a definitive finding that there was no breach of trust or fiduciary duties. His grounds of
judgment stated that a number of the issues identified at the case management stage for determination
during trial had become redundant at the submission stage. Kang J. found R&G liable to ESPL for more than
RM25 million due under the contract pursuant to the doctrine of substantial performance, taking into account
the finding of fact that ESPL had completed 95% of its contractual obligations under the ACMV Subcontract.
This liability of R&G to pay under contract would have existed independently of any trust. Paragraph 6 of the
grounds of judgment set out the computation of the amount awarded under the contract. I am of the view
that, even if Kang J. had found a trust to have existed, the remedies granted by Kang J. would have been
substantially similar as those actually awarded under contract (save and except that ESPL would have also
been able to avail itself to the equitable doctrine of tracing, thereby ring-fencing the assets of the trust from
the claims of the creditors of R&G in the event of its winding-up or liquidation).
[44] Therefore, the dismissal of the counterclaim by Kang J. was not because he had found that no trust
existed as contended by the applicant, but because the issues to be tried were reframed in a manner that
made it unnecessary for his lordship to come to a judicial determination on the issue of trust in order to
dispense a just resolution to the dispute.
[45] That this was the case can be seen from, and is supported by, the reported decision of the Court of
Appeal in hearing the interlocutory appeal by ESPL from the decision of Kang J. in refusing to grant the

mandatory injunction for moneys to be paid into court or to a stakeholder. We now turn to the decision of the
Court of Appeal.
The Court of Appeal Judgment in the 620 Suit
[46] In hearing the interlocutory appeal, the Court of Appeal found that not only was there was a breach of
that trust (see paragraph 54(b), post).
[47] The learned counsel for the applicant rightfully pointed out to this court that any finding made at an
interlocutory stage of proceedings is merely a provisional finding and that at the main trial, the judge is free to
come to a conclusion that may be diametrically opposed to the finding made at the interlocutory stage (see
for example Hock Hua Bank (Sabah) Bhd v Yong Liuk Thin & Ors [1995] 2 MLJ 213; [1995] 2 CLJ 900).
[48] There is no doubt that this correctly represents the general position in law. However, the key question is
whether, in all cases, the findings of a court at the interlocutory stage must necessarily be merely provisional
findings. Allied to this question is whether, once Kang J. disallowed the counterclaim, the finding by the Court
of Appeal thus fell away and would no longer operate to bind the parties.
[49] In my view, the answer to the first question must be no, as the issue of whether the finding during the
interlocutory stage was definitive finding must depend on what the judge in question had intended. It is
conceivable that a judge may have examined the circumstances surrounding an issue raised during an
interlocutory stage in sufficient detail so as to make a definitive finding, whether of fact or law.
[50] It is true that, in the vast majority of cases, findings at the interlocutory stage of proceedings are merely
provisional findings, and therefore subject to review in the course of and after the main trial. Nonetheless, to
exclude even the possibility of a definitive finding being made at an interlocutory stage is, to my mind, too
sweeping a proposition of law for this court to accept.
[51] Whether or not an interlocutory finding was intended to be a definitive finding would be ascertained from
a proper construction of the judgment or order in question. That a finding at the interlocutory stage will have
been made based on mere affidavit evidence is no bar to the court concluding that the finding is definitive.
This is a matter of judicial discretion, taking into account the protean circumstances of the cases before a
judge. The point may also be validly made that an issue before a judge may be so clear cut that it would not
be inappropriate to come to a definitive finding of fact or law without having to hear viva voce evidence.
[52] I now examine the decision of the Court of Appeal, with the object of ascertaining whether the findings of
the existence and breach of trust were intended to have been definitive, and accordingly binding on the
parties to the 620 suit.
[53] To recap, ESPL, the defendant in the 620 suit, moved the High Court for a mandatory injunction
requiring R&G to pay monies held by it into a stakeholder account. Kang J. refused the application on
grounds that the amount was unascertained or unascertainable because of the set-off claimed by R&G.
[54] The following observations may be made of the judgment of Gopal Sri Ram JCA:
(a)

(b)

The learned judge stated, in the first paragraph of the judgment that "the facts so far as this
appeal is concerned are not in dispute". This was an important observation by the judge, as it
established that there was no specific finding of fact by the Court of Appeal that drove or
affected the decision of the court. The application was determined purely on points of law, and
accordingly viva voce evidence adduced at the main trial would not have operated to controvert
the facts deposed at the interlocutory hearing, given that such facts were undisputed.
The Court of Appeal found that all the elements necessary to constitute a trust were extant:
Having established that there was an intention here to create a trust, it is now necessary to see if the
other two requirements, namely, certainty of subject matter and of objects are present on the facts.
Unless all three certainties are present there cannot be a trust. See, Knight v Knight [1840] 49 ER 68.
So far as certainty of objects is concerned, there is no difficulty whatsoever here. The documents
make it clear that it is the defendant who is the nominated beneficiary. As for certainty of
subject-matter, again there is no difficulty. The trust attaches to all sums receivable by the plaintiff
from Henz. These monies are payable by the plaintiff into Account No. 1. The corpus is therefore

sufficiently certain. See, Hunter v Moss [1994] 1 WLR 452. As for the extent of the defendant's
beneficial interest, this too is sufficiently certain in the sense that the defendant is entitled to its share
of the monies in Account No. 1 after any set-off claimed by the plaintiff is adjudicated upon in the
usual way through arbitration. The fact that the plaintiff alleges that it is entitled to a set-off does not
absolve it of its duty to pay into Account No. 1 all the monies received from Henz. In our judgment, the
act of the plaintiff in diverting these monies away from Account No. 1 amounts to a serious breach of
trust.
To summarise the points made thus far, the defendant has established the existence of a trust and
therefore a proprietary right to the monies receivable by the plaintiff from Henz. (ibid at 690e et seq
(CLJ), 434G et seq (MLJ))

(c)
(d)

(e)

The same passage cited above also established that there was a breach of that trust.
The learned judge considered the applicable principles in the grant of mandatory and
prohibitory injunctions and quoted at length from the decision of Hoffmann J. in Films Rover
International Ltd and Ors v Cannon Film Sales Ltd [1986] All ER 772, which established the
test for granting interlocutory injunctions. I risk offence by stating the obvious: the Court of
Appeal clearly and very patently appreciated the generally impermanent nature of interlocutory
injunctions.
The learned judge cited with approval his decision in Keet Gerald v Mohd Noor bin Abdullah &
Ors [1995] 1 MLJ 193; [1995] 1 CLJ 293, which sets out the steps to be taken by a judge in
considering an interlocutory injunction. In particular, the learned judge reminded himself that a
judge in determining whether the facts before him disclosed a bona fide serious issue to be
tried, must:
... bear in mind that the pleadings and evidence are incomplete at that stage. Above all, he must
refrain from making any determination on the merits of the claim or any defence to it. (ibid at 694h
(CLJ), 438E (MLJ))

(f)

Despite this, his lordship nonetheless acknowledged that he had ventured beyond the
boundaries of his own prescription in Keet Gerald, and into the merits of the case, and provided
his justification for so doing:
It may appear from this judgment that the Keet Gerald line has been crossed by entering into the
merits of the case to some extent. That is quite true. But there are good reasons for this.
We are here dealing with a mandatory injunction in terms in which it gives to the defendant at the
interlocutory stage, the whole of the relief it claims under its counterclaim. So, once the mandatory
injunction is granted, there is really no need for a trial on the issue of a trust. Keet Gerald was a case
where the grant or refusal of an injunction at the interlocutory stage did not put an end to the action.
The present is quite the opposite case. Hence, following Cayne v Global Natural Resources Plc [1984]
1 All ER 245 and NWL Ltd v Woods [1979] 3 All ER 614, it has become necessary to place a higher
threshold in the defendant's path by requiring it to prove a case on merits before deciding whether the
orders asked for should be granted.
To sum up, it is our respectful opinion that the defendant has established a trust in its favour in which
the plaintiff had constituted itself as trustee. (ibid at 697g et seq (CLJ), 441A et seq (MLJ))

(g)

The passages cited in the preceding subparagraph is of crucial importance because it

distinguishes Keet Gerald on the basis that the mandatory injunction granted by the Court of
Appeal in favour of ESPL would grant the whole of the relief sought by ESPL in its counterclaim
and would, as a consequence, put an end to the main action. This passage also determined
that there was no further need for a trial on the issue of trust, on the basis that -- in my view -the Court of Appeal considered the issues relating to the existence and breach of trust as
having been finally determined.

[55] Having carefully considered the judgment of the Court of Appeal and for the reasons set out in the
preceding subparagraphs, I find that this was one the rare and perhaps exceptional case where the court -an appellate one in this instance -- considered its finding made at an interlocutory stage of proceedings as
being a definitive finding.

10

[56] I now return to the second question posed at paragraph 48 ante: whether the fact that Kang J. had
disallowed the counterclaim meant that the findings by the Court of Appeal thus fell away and would no
longer operate to bind the parties.
[57] In my view, the grounds of judgment of Kang J., where he stated that a number of issues that had been
framed for determination at trial had become redundant at the submissions stage, must be read in the light of
the imperative from the Court of Appeal that no trial was necessary on the issue of trust. As a consequence,
the finding of the existence of a trust and the breach of that trust by the Court of Appeal survives the
determination of the dispute by Kang J. and remains binding on R&G and ESPL, as parties to the 620 suits.
That the counterclaim was disallowed does not cause the Court of Appeal's findings to fall away, as there
was no finding to the contrary in Kang J.'s grounds of judgment, perhaps unsurprisingly so, given the
direction of the appellate court on the issue of trust.
Judgment of the High Court in the Consolidated Suits
[58] We now turn to the decision of Nik Hasmat J. It is the view of this court that her ladyship was correct to
have formed the view that the issue of trust was fully determined by the Court of Appeal and binding on R&G
and ESPL. At paragraphs 3 and 4 of her ladyship's judgment ([2011] 1 LNS 1760) she stated as follows:
[T]he Court of Appeal on 9 September 2004 in Civil Appeal No. N-02-206-2002 had allowed the Plaintiff's appeal to
compel R&G to pay to the Plaintiff monies received in respect of payment for the mechanical works from Henz which in
accordance with clause 27.1 of the subcontract was to be held as a trust fund for the benefit of the Plaintiff. The Court
of Appeal further held R&G as trustee for monies received from Henz for the Plaintiff's mechanical works, had
breached their fiduciary duties and trust that was owed to the Plaintiff in the diversion of the aforesaid monies into
R&G's own account. The said trust monies, payable to parties joint bank account was supposed to be payment for the
Plaintiff's portion of the mechanical works for the project but had been unilaterally and surreptitiously diverted into
R&G's own account with the knowledge, consent and authorisation of the Plaintiff. It is clear that R&G had clearly
breached the mode of payment that was agreed by both parties which require payment for the mechanical works be
paid into the parties joint bank account and not into R&G exclusive account. It was clear to the court that despite the
agreed payment arrangement of the parties, R&G without the Plaintiff's knowledge and consent had unlawfully diverted
payments received from Henz for Plaintiff's mechanical works into their account.
Consequent to the Court of Appeal decision, and pending the outcome of Suit 620, the High Court in an order dated
24.11.2004 had further ordered R&G to pay the sum of RM19,312,836.48 into the court or into parties' joint account.
Therefore, as the issue of R&G's liability to the Plaintiff in respect of payment for the mechanical works and the issue of
fiduciary duties that was owed by R&G to the Plaintiff had been fully determined, both the Count of Appeal and High
Court's findings prevail, and is clearly binding on R&G and the Plaintiff in this suit.

[59] The fact that Kang J. did not specifically deal with the issue of trust in the 620 suit is of no consequence,
as there were definitive findings by the Court of Appeal on the existence of a trust and a breach of that trust.
Accordingly and as a consequence, this court further finds that no issue of res judicata arises in respect of
the decision by Nik Hasmat J. in respect of the causes of action in the 145 suit, on the basis that there was
no finding by Kang J. that a trust did not exist.
The Cause of Action in the 199 Suit
[60] Even if I am wrong in my findings thus far in this case, I am of the view that the application should
nonetheless be dismissed on grounds that the cause of action in the 199 suit and the findings of Nik Hasmat
J. in respect thereof are unaffected by the doctrine of res judicata.
[61] The cause of action in the 199 suit was for inducing a breach of contract. No finding of breach of trust or
breach of fiduciary duties needs to be made in order to sustain a claim for inducing a breach of contract. It is
clear from the judgment of Nik Hasmat J. that the learned judge had found TG Chan liable for having induced
the breach by R&G of its contractual obligation to pay the proceeds received in respect of the ACMV works
into the jointly operated bank account. The following is the pertinent extract from her grounds of judgment of
23 December 2011:
Based on the oral testimony of Plaintiff's witness, the documentary evidence and written submission from counsels for
both parties, the court is satisfied that on a balance of probabilities, the Plaintiff had successfully proved plaintiff's
cause of action against the 1st Defendant and 4th Defendant as per paragraph 55 of suit 145 and, as against 1st

11

Defendant as per paragraph 39 of suit 199 of Plaintiff's amended statement of claim is allowed with costs. [Emphasis
added]

[62] The finding of liability on the cause of action in the 199 suit is independent of any finding of liability for
breach of trust or fiduciary duties on the part of R&G. Accordingly, even if the postulations by the counsel for
the applicant were correct in that:
(a)
(b)
(c)
(d)

the Court of Appeal findings were merely provisional findings that ceased to have effect upon
the disallowance of the counterclaim in the 620 suit;
Kang J. had finally determined the issue of trust in so disallowing the counterclaim;
the doctrine of res judicata prevented a finding of liability on the part of R&G in the 145 suit for
breach of trust and fiduciary duties; and
TG Chan cannot be made liable for having knowingly assisted the breach of trust by R&G when
no such breach existed,

TG Chan would nonetheless still be liable in the 199 suit for having induced the breach by R&G of its
contractual obligations owed to ESPL under the ACMV Subcontract.
SUMMARY OF FINDINGS
[63] The following summarises the findings of this court:
(a)

(b)
(c)
(d)
(e)
(f)

as a general principle, a judgment or order made in respect of an issue that is res judicata
between the parties would be in contravention of a substantive provision of written law by virtue
of the operation of section 25(2) of the Courts of Judicature Act 1964, read together with item
11 of the Schedule to that Act, and therefore such a judgment or order may be set aside ex
debito justitiae;
the findings of the existence of a trust and the breach of that trust by the Court of Appeal were
definitive findings and remain binding on R&G and ESPL, as parties to the 620 suit;
the disallowance of the counterclaim by Kang J. did not have the effect of vitiating the findings
by the Court of Appeal;
accordingly, the High Court was not functus officio upon the perfection of the judgment of Kang
J. in as far as the issue of breach of trust and breach of fiduciary duties were concerned;
the decision of Nik Hasmat J. in respect of the claims in the 145 suit should not therefore be set
aside for want of jurisdiction;
in any event, and independently of the findings of this court summarised in the preceding
subparagraphs, TG Chan would nonetheless still be liable in the 199 suit for having induced the
breach by R&G of its contractual obligations owed to ESPL under the ACMV Subcontract.

DECISION
[64] For the reasons set out above, the application by TG Chan is dismissed with costs of RM25,000 to be
borne by the applicant.