DALAM MAHKAMAH RAYUAN MALAYSIA DI PUTRAJAYA

[BIDANGKUASA RAYUAN]
RAYUAN SIVIL NO: A-02-1613-2011

ANTARA

TUDINGAN TIMUR SDN BHD PERAYU

(Syarikat No: 220081-x)

DAN

CHE MAT BIN PADALI RESPONDEN

(No K/P: 500518-08-5469)

Dalam Mahkamah Tinggi Malaya di Taiping

Dalam Negeri Perak Darul Ridzuan
Saman Pemula No: 24-217-2010

(Dalam Perkara Seksyen

23(1) Akta Mahkamah
Kehakiman 1964
Dan
Dalam Perkara Seksyen 41
Akta Relief Spesifik 1950
Dan
Dalam Perkara Aturan 15
Kaedah 16 Kaedah-Kaedah
Mahkamah Tinggi 1980
Dan
Dalam Perkara Aturan 7
Kaedah 2 Kaedah-Kaedah
Mahkamah Tinggi 1980)

Antara

Tudingan Timur Sdn Bhd Plaintif

(Syarikat No: 220081-x)
Dan
Che Mat Bin Padali Defendan
(No K/P: 500518-08-5469)
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 Coram:
Abdul Wahab Patail, JCA
Tengku Maimun Tuan Mat, JCA
Mohd Zawawi Salleh, JCA

JUDGMENT OF THE COURT

The Antecedents

[1] For the purpose of this judgment, we will refer to the parties

in accordance with the title assigned to them in the court below.

[2] This is the plaintiffs appeal against the judgment of the

Taiping High Court, dismissing the plaintiffs claim against the

defendant for the return of RM200,000 that the defendant held on

trust for the plaintiff. For the reasons that follow, we have

unanimously allowed the appeal with cost of RM20,000 and set

aside the order of the High Court.

The Facts

[3] The facts of the case are fully set out in the judgment of the

learned trial Judge. Our narration of them, here, will therefore be

skeletal in nature. Whenever necessary in this judgment, some of

the facts relating to specific issues will be examined in greater

detail.
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[4] This unfortunate saga started off when the plaintiff and Batu

Sentosa Sdn Bhd had agreed, on a joint venture basis, to extract

timbers in Gerik, Perak. The plaintiff deposited a sum of

RM200,000 to Jabatan Kerja Raya Perak (JKR Perak) for the

usage of an access road to the logging site.

[5] After the completion of the works, the defendant, in his

capacity as a director of Batu Sentosa Sdn Bhd, wrote to JKR

Perak requesting the return of RM200,000.00 and for the said sum

to be credited into his personal bank account. The plaintiffs

director (now deceased), supported the defendants request. JKR

Perak released the said sum to the defendant.

[6] The plaintiff commenced proceedings to recover the said

sum from the defendant. The defendant admitted that the said sum

was received by him but contended the money had been returned

to the plaintiffs deceased director.

[7] The learned trial Judge found in favour of the defendant.

Hence this appeal.

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The Appeal

[8] The plaintiff has come to this Court canvassing two issues.

The first issue relates to the admissibility of the defendants

affidavit in reply affirmed on 11/11/2010. Secondly, whether the

respondent had received the said sum from JKR Perak as a

constructive trustee for the benefit of the appellant.

[9] We will consider each of these issues in turn.

The First Issue:

[10] In so far as it relates to the cause papers, the chronology of

events are as follows:-

(i) The Originating Summon and the affidavit in support

were served on the defendant on 5/10/2010. Pursuant

to Order 28 rule 3(4) of the Rules of the High Court

1980 (RHC), the defendant has 14 days from

5/10/2010 to file its reply i.e. on or before 18/10/2010.

(ii) The defendant did not file his affidavit in reply on or

before 18/10/2010.

(iii) On the second hearing date (26/10/2010), the

defendants solicitor requested a short adjournment for

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 2 weeks in order for him to obtain the defendants

instruction whether to file an affidavit in reply or to

initiate a third party proceedings.

(iv) The plaintiffs counsel objected to the said adjournment

but the High Court nevertheless adjourned the matter

to 12/11/2010 for case management before the Deputy

Registrar.

(v) The defendants affidavit in reply affirmed on

10/11/2010 was served on the plaintiffs solicitor on

11/11/2010.

[11] Upon a careful perusal of the notes of proceedings, it was

clear that the defendant only sought for an extension of time for 2

weeks. However, no order was made by the learned trial Judge as

to whether leave was granted. And, even if we assume for the

sake of argument that leave for extension of time was granted, the

defendant was given 14 days from 26/10/2010 to file his affidavit in

reply i.e. on or before 9/11/2010. The affidavit in reply was filed

and served on 11/11/2010. No application was made to the court

for the court to exercise its discretion to abridge the time.

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[12] When the matter came up for hearing on 27/01/2011, the

plaintiffs counsel objected the admission of the defendants

affidavit in reply. However, the learned trial Judge dismissed the

said objection and proceeded to fix another date for the hearing of

the main suit.

[13] Learned Counsel for the plaintiff submitted that the learned

trial Judge had erred when his Lordship dismissed the plaintiffs

objection on the admissibility of the defendants affidavit in reply. It

was further submitted that as the defendants affidavit in reply is

not admissible, the contents in the plaintiffs affidavit in support

must be treated as uncontradicted and thus must be accepted as

the truth.

[14] In reply, learned counsel for the defendant submitted that

Order 2 rule (1) of the RHC gives the court the widest possible

power to cure an irregularity in order to do justice. Learned

counsel further submitted that this Court is enjoined to do justice

without undue regard to technicalities. In support of his

submission, learned counsel relied upon the case of Inter

Heritage (M) Sdn Bhd v Asa Spoorts Sdn Bhd [2009] 2 CLJ

221, Securities Commission v UP & Famous Sdn Bhd & Ors

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[2010] 4 CLJ 638; Malayan Banking Bhd v Koay Kang Chuwan

& Anor [2010] 6 CLJ 172.

[15] We have considered the rival submission carefully. We are

inclined to the view that justice would not be served by acceding to

objections simply on technicalities for non-compliance. Order 2

rule 1 of RHC contains a caution against undue regard to

technicalities. This Order appears to be a reflection of the saying

that the rules of procedure are handmaid, not the mistress, of

justice, and cannot be permitted to hijack divine rhythm of justice.

The main concern of the court is to deliver substantive justice to

the parties and the court does not impose conditions on itself to

fetter the wide discretion given to it to do so. The rules of

procedure should be applied in such a way to advance the justice

and not to thwart it. The parties should win or lose on merits and

not on technicalities. (See Government of State of Pahang v

Tengku Abdul Aziz & Anor [1978] 2 MLJ 34; Metroinvest Ansalt

v Commercial Union [1985] 1 WLR 513; Syarikat Akin

Enterprises v Edwina Lau [2007] 10 CLJ 743).

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[16] In this regard, we agree with the observation of the Indian

Supreme Court in Bhagwan Swaroop and Ors v Mul Chand and

Ors, AIR 1983 SC 355, where the court said:

12. It is no doubt true that a Code of Procedure is

designed to facilitate justice and further its ends and it is
not a penal enactment for punishment and penalty and
not a thing designed to trip people up. Procedural laws
are no doubt devised and enacted for the purposes of
advancing justice. Procedural laws, however, are also
laws and are enacted to be obeyed and implemented.
The laws of procedure by themselves do not create any
impediment or obstruction in the matter of doing justice to
the parties. On the other hand, the main purpose and
object of enacting procedural laws is to see that justice is
done to the parties. In the absence of procedural laws
regulating procedure as to dealing with any dispute
between the parties, the cause of justice suffers and
justice will be in a state of confusion and quandary.
Difficulties arise when parties are at default in complying
with the laws of procedure. As procedure is aptly
described to be the hand-maid of justice, the Court may in
appropriate cases ignore or excuse a mere irregularity in
the observance of the procedural law in the larger interest
of justice. It is, however, always to be borne in mind that
procedural laws are as valid as any other law and are
enacted to be observed and have not been enacted
merely to be brushed aside by the Court. Justice means
justice to the parties in any particular case and justice
according to law. If procedural laws are properly
observed, as they should be observed, no problem arises
for the Court for considering whether any lapse in the
observance of the procedural law needs to be excused or
overlooked. As I have already observed depending on the
facts and circumstances of a particular case in the larger
interests of administration of justice the Court may and
the Court in fact does, excuse or overlook a mere
irregularity or a trivial breach in the observance of any
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 procedural law for doing real and substantial justice to the
parties and the Court passes proper orders which will
serve the interests of justice best..

[17] Learned counsel for the plaintiff has not pointed out to us any

injustice or prejudice that the plaintiff would suffer in the event that

the affidavit in reply is allowed to be admitted as evidence. In the

circumstances of the case, we are of the opinion that the delay in

filing the affidavit in reply does not prejudice the substantive rights

of the plaintiff.

The Second Issue:

[18] Now, we turn to the substratum of the plaintiffs claim. It is

pertinent to note that all the evidence adduced in this case was by

affidavits. In the circumstances, the trial court has no special

advantage over this Court and this Court may upon an

examination of the inferences drawn from the affidavit evidence,

intervene where there is any flaw in the reasoning leading to the

inferences. [See President, District Council, Batu Pahat v Lo

Hong Tan & Ors [1983] CLJ Rep 331].

[19] The question to be determined was whether the respondent

held the said sum in trust for the benefit of the plaintiff.

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[20] The High Court resolved the issue in the defendants favour

based on two main reasons:

(i) The deposit/sum was paid by the third party, Tim Seng

Tatt Sdn Bhd; and

(ii) The deposit/sum was paid to the deceased director.

[21] With respect, we are of the opinion that the learned trial

Judge fell into error in deciding as he did. The burden of proving

that the third party had made the payment lay on the defendant

which he had to discharge by adducing cogent evidence. In our

view, the defendant failed to do so.

[22] JKR Perak had duly issued official receipt dated 17/2/2006 in

the name of the plaintiff for the said sum. There was no

documentary evidence exhibited by the defendant to show that the

third party had indeed forwarded the money. Nor was there any

affidavit filed by Tim Seng Tatt Sdn Bhd to support the defendants

contention. Without any evidence to the contrary, the best

evidence to prove who had paid the deposit was the receipt issued

in the name of the payee. In the circumstances, the defendants

assertion was only a self-serving and unsubstantiated averment.

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[23] Another fact that affects adversely the defendants case was

his representation that he was the director of Batu Sentosa Sdn

Bhd. According to the plaintiff, the deceased director supported the

application based upon the impression that the defendant was a

director (which he never was). The defendant refuted that claim

and averred that he was authorised by the company board of

directors to oversee the logging activities. In our view, this by itself

would not confer rights upon the defendant to represent himself as

a director.

[24] It is clear that the plaintiff and the defendant (in his capacity

as the defendants site manager) were partners in a business

venture and they owed each other a duty to act with utmost good

faith. The mutual understanding was that the defendant would

return the said sum to the plaintiff, once JKR released the money.

[25] The defendant claimed that there was an agreement

between him and the deceased that the money was to be returned

to the deceased. Since the money was indeed returned to the

deceased director, the defendant had discharged his burden. Upon

a careful scrutiny of the acknowledgment in the voucher dated

19/07/2007 (exhibit CMP-3), we are not convinced that the money

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was returned to the plaintiff. As may be seen from the affidavits,

the defendants dealings were with the deceased. It should not be

confused with the dealings of a company. The said sum belonged

to the plaintiff, a company that is a separate entity from its

shareholders and directors [See Solomon v Salomon & Co

[1897] AC 22].

[26] We agree with the submission of learned counsel for the

plaintiff that in the circumstances of the case, the defendant had

received the said sum from JKR Perak as a constructive trustee for

the benefit of the plaintiff. Therefore, it is the duty of the defendant

to return the said sum to its owner, i.e. the plaintiff, and not to keep

it for himself or to release it to the deceased director, as claimed

by the defendant.

[27] In our opinion, the defendant having not paid the said sum to

the plaintiff, would be unjustly enriched. Whenever there is a clear

implication of unjust enrichment, the Court should apply a

constructive trust to satisfy the demands of justice and good

conscience. This was the decision of this Court in the case of Tay

Choo Foo v Tengku Mohd Saad Tengku Mansur & Ors And

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Another Appeal [2009] 2 CLJ 363 where Mohd Ghazali Yusoff

JCA (as his Lordship then was) said:

A constructive trust is simply a relationship

created by equity in the interest of conscience.
According to Snell's Equity, 26th edn, at p. 201, a
constructive trust is "a trust which is imposed by equity
in order to satisfy the demands of justice and good
conscience, without reference to any express or
presumed intention of the parties". In The Law of
Trusts by JG Riddall 3rd edn, at p. 359 the learned
author's views are as follows:

The constructive trust is a remedial device that is

employed to correct unjust enrichment. It has the effect
of taking title to property from one person whose title
unjustly enriches him, and transferring it to another who
has been unjustly deprived of it...

On constructive trusts, Halsbury's Laws of

England, 4th edn reissue, vol. 48 at pp. 301-306 reads
as follows:

585. Nature of constructive trust. A constructive trust

attaches by law to specific property which is neither
expressly subject to any trusts nor subject to a resulting
trust but which is held by a person in circumstances
where it would be inequitable to allow him to assert full
beneficial ownership of the property. Such a person will
often hold other property in a fiduciary capacity and it
will be by virtue of his ownership of or dealings with that
fiduciary property that he acquired the specific property
subject to the constructive trust. A stranger who receives
property in circumstances where he has actual or
constructive notice that it is trust property being
transferred to him in breach of trust will, however, also
be a constructive trustee of that property.

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 A person who holds property on a constructive trust is a
constructive trustee in respect of it. He cannot claim for
himself any increase in value of the property or any
profits earned by it. If he becomes bankrupt, the
property is not available for his general creditors but for
the beneficiaries in whose favour the constructive trust
subsists..

[28] In the same vein, the Supreme Court of Ohio has explained

the principle of constructive trust in Ferguson v Owen [1984], 9

Ohio St.3d 223, 225, 9 OBR 565, 459 N.E 2d 1293, in this fashion:

A constructive trust is defined in 76 American

Jurisprudence 2d (1975) 446, Trusts section 221, as:

[A] trust by operation of law which arises contrary

to intention and in invitum, against one who, by fraud,
actual or constructive, by duress or abuse of confidence,
by commission of wrong, or by any form of
unconscionable conduct, artifice, concealment, or
questionable means, or who in any way against equity
and good conscience, either has obtained or holds the
legal right to property which he ought not, in equity and
good conscience, hold and enjoy. It is raised by equity to
satisfy the demands of justice.

In Beatty v. Guggenheim Exploration Co. (1919), 225

N.Y. 380, 122 N.E. 378, we find the following pertinent
commentary by Justice Cardozo, at pages 386 and 389:

A constructive trust is the formula through which

the conscience of equity finds expression. When
property has been acquired in such circumstances that
the holder of the legal title may not in good conscience
retain the beneficial interest, equity converts him into a
trustee. ..... A court of equity in decreeing a constructive
trust is bound by no unyielding formula.

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 See, also Kuck v. Sommers (App.1950), 59 Ohio Law
Abs.400.

A constructive trust is, in the main, an appropriate

remedy against unjust enrichment. This type of trust if
usually invoked when property has been acquired by
fraud. However, a constructive trust may also be
imposed where it is against the principles of equity that
the property be retained by a certain person even
though the property was acquired without fraud. See 53
Ohio Jurisprudence 2d (1962) 578-579, Trusts, Section
88; V Scott on Trusts (3d Ed.1967) 3412, Section 462.

In applying the theories of constructive trusts, courts

also apply the well known equitable maxim, 'equity
regards [as] done that which ought to be done.".

[29] It should be noted that a constructive trust is not a right to

recover on a debt owing; it creates a right to recover property

wrongfully held. Therefore, a trust will follow property through all

changes in its state and form so long as such property, its product,

or its proceeds are capable of identification.

Conclusion:

[30] Based upon the foregoing, we are of the considered opinion

that by the defendant retaining the sum of RM200,000.00, he had

unjustly enriched himself with the money which belongs to the

plaintiff.

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[30] We therefore, allowed the appeal and set aside the order of

the High Court. Judgment is entered in the terms of prayers (1),

(2) and (3) of the Originating Summons dated 4 October 2010.

Costs is fixed at RM20,000.00. Deposit to be refunded.

Dated: 19 September 2013

Sgd.
(DATO HAJI MOHD ZAWAWI BIN SALLEH)
Judge
Court of Appeal
Malaysia

Counsel for the Appellant: K.B. Tan

K.B. Tan, Kumar & Partners
Peguambela & Peguamcara
No. 11C, Jalan Wan Mohd Salleh
Greentown
Ipoh, Perak

Counsel for the Respondent: N.P. Ramachandran

Tetuan N.P. Ramachandran
& Associates
Peguambela & Peguamcara
27A, (1st Floor)
Jalan Tun Sambanthan
30000 Ipoh, Perak

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