MOHD NAGUIB BIN MD NADZRI v 1. ) FADZLISHAH BIN FADZIL 2. ) FNZ SHIPPING & FORWARDING AGENCY (M) SDN BHD

Case Significance

Illustrates how an express or constructive trust over registered shares may be established through the purpose of a payment and the parties' subsequent conduct even without a written trust instrument, with an adverse inference available under section 114(g) of the Evidence Act 1950 for an uncalled material witness.

This High Court decision at Shah Alam concerns a claim that shares in a company were held on trust. The subject matter was 160,000 ordinary shares in the second defendant, FNZ Shipping & Forwarding Agency (M) Sdn Bhd, which were registered in the name of the first defendant. The plaintiff claimed that those shares were held on trust for him and sought their return with damages, pleading an express trust or, alternatively, unjust enrichment and the imposition of a constructive trust. The company had originally been owned by two other individuals in equal shares, and the dispute centred on the purpose of a payment of RM100,000 that the plaintiff had made by cheque in favour of the company secretary's firm around October 2021. The issues for the court were whether the shares were held on trust, whether such a trust was consistent with the company's articles of association, whether an intention to create a trust could be found in the absence of any written record, and what light the purpose of the payment and the parties' subsequent conduct threw on that intention. The court also considered whether an adverse inference under section 114(g) of the Evidence Act 1950 should be drawn from a failure to call a material witness. On the evidence the court found the plaintiff's account credible and the first defendant's case so improbable that it had little difficulty disbelieving it. It allowed the plaintiff's claims in prayers (a) to (d) with costs, although no damages were proved, and it awarded costs of RM30,000 against the first defendant, making no order as to costs against the second defendant, which it treated as a nominal party. The judgment is a useful illustration of how an express or constructive trust over registered shares may be established through the purpose of a payment and the parties' subsequent conduct even without a written trust instrument.