R&A TRADING (K.L.) SDN. BHD. v 1. ) JIWA RAKYAT SDN. BHD. 2. ) LIM AH LIM 3. ) CHAN YONG SIN 4. ) TETUAN ABDUL AZIZ RAHIM & CO.

Case Significance

A significant illustration of a stakeholder solicitor's duties and the liability of solicitors complicit in a client's fraud: the firm was held in breach of its stakeholder duties and trust over the stake monies and jointly and severally liable in conspiracy to defraud the purchaser.

This High Court decision at Kuala Lumpur concerns a purchaser defrauded in a land sale and the liability of the vendor's solicitors who acted as stakeholders. The plaintiff had paid more than RM2.8 million to purchase land but received nothing in return. The defendants comprised the vendor company, two of its directors, and a firm of advocates and solicitors, the fourth defendant, which had acted for the vendor and had also held the balance of the purchase price as stakeholder. The court noted that the defendants had been sued in several other suits by other victims of fraud, employing a similar modus operandi, and had been held liable in those cases for conspiracy to defraud, with the solicitors also liable for breach of stakeholder duties, and that those findings had either been upheld on appeal or become final. The issues were whether the money received by the solicitors was to be held as stake monies, whether the stakeholders breached their duties in releasing the stake monies to third parties or appropriating part as legal fees, whether the solicitors were complicit in a series of frauds by the vendor's directors in selling the same land more than once, whether the solicitors owed a duty to disclose that the vendor's land title had been cancelled by a court order, and whether they conspired with the client to defraud the purchaser. The court held that the fourth defendant had breached its stakeholder duties and was in breach of trust in respect of the stake monies, being liable to repay the sum of RM814,342.30, and that the defendants were jointly and severally liable in conspiracy to defraud the plaintiff. It granted judgment for the plaintiff on both the breach of stakeholder duties and the conspiracy claims. The judgment is a significant illustration of a stakeholder solicitor's duties and of the liability of solicitors who are complicit in a client's fraud.