Queck Han Tiong v 1. ) Chia Chin Koon 2. ) Neo Ching Hoe PENCELAH NEO CHING YUEN

Case Significance

Illustrates the availability of a restitutionary remedy for total failure of consideration: where shares are transferred in anticipation of a transaction that does not materialise, the transferor may recover them in unjust enrichment, and the court here resolved the claim in the plaintiff's favour with costs of RM50,000.

This High Court decision at Kuala Lumpur (Commercial Division), delivered by Judge Quay Chew Soon after a full trial, concerns a claim for the return of shares said to have been transferred for a consideration that wholly failed. The plaintiff had become a shareholder of a company (referred to in the judgment as Kujaya) in November 2020, holding one million ordinary shares, and in September 2021 had transferred 480,000 shares to the first defendant and 120,000 shares to the second defendant, a total of 600,000 shares. Those transfers had been made against the backdrop of a proposal to merge two groups of companies with a view to a listing on the Taipei stock exchange. When the anticipated basis for the transfers did not materialise, the plaintiff sued for the retransfer of the 600,000 shares, framing the claim as one for total failure of consideration.

The court analysed the claim as one lying in restitution and unjust enrichment rather than in contract, holding that where shares are transferred and the consideration for the transfer wholly fails, the transferor may recover them by way of restitution. Drawing on authority in which the facts were closely comparable, including Kong Hoi Cheing v AK Land Sdn Bhd, the court accepted that restitution of the shares was the appropriate response to the total failure of consideration, and it referred to the statutory framework governing share dealings under section 101 of the Companies Act 2016 and to the evidential provisions in sections 101(2), 102 and 114(g) of the Evidence Act 1950 in assessing the parties' competing accounts. The court resolved the matter in the plaintiff's favour and awarded costs of RM50,000 to the plaintiff. A notable feature of the reasoning is its treatment of the claim as restitutionary rather than contractual, so that the plaintiff's entitlement to recover did not depend on establishing a breach of any concluded bargain, but on the simple proposition that a party who parts with property on a basis that entirely fails ought not to allow the recipient to retain the benefit. The judgment illustrates the availability of a restitutionary remedy to recover shares transferred on a basis that fails entirely.