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Ezzen Heights Sdn Bhd v Ikhlas Abadi Sdn Bhd (Soh Yuh
[2011] 4 MLJ Mian, intervener) (Low Hop Bing JCA) 173

A Ezzen Heights Sdn Bhd v Ikhlas Abadi Sdn Bhd (Soh Yuh
Mian, intervener)

COURT OF APPEAL (PUTRAJAYA) — CIVIL APPEAL NO J-02–2454

B
OF 2009
LOW HOP BING, SYED AHMAD HELMY AND ZAHARAH
IBRAHIM JJCA
30 DECEMBER 2010
C
Civil Procedure — Inherent powers — Whether court had inherent powers to make
consequential orders — Rules of the High Court 1980 O 92 r 4 — Rules of the
Court of Appeal 1994 r 4
D
Company — Directors — Duties — Whether directors’ resolution for joint venture
agreement (‘JVA’) and irrevocable power of attorney validly passed — Whether
defendant was dealing in good faith with plaintiff ’s board of directors — Whether
defendant protected by rule in Turquand’s case — Whether plaintiff became
E
defendant’s constructive trustee upon completion of joint venture project —
Whether fiduciary relationship had been created between plaintiff and defendant
under JVA

F Contract — Agreement — Validity — Plaintiff and defendant entered into joint

venture agreement (‘JVA’) and irrevocable power of attorney (‘IPA’) — Whether
JVA and IPA valid and binding — Breach — Whether plaintiff could rely on its
own breach to terminate JVA
G
Contract — Sale and purchase of land — Plaintiff entered into agreement to sell
defendant’s lots to intervener one month before judgment delivered on plaintiff ’s
originating summons — Whether intervener had constructive notice of defendant’s
proprietary interest in land — Whether intervener bona fide purchaser acting with
H good faith — Whether sale could be construed as bona fide transaction

Ezzen Heights Sdn Bhd (‘the plaintiff ’) and Ikhlas Abadi Sdn Bhd (‘the
defendant’) entered into a joint venture agreement (‘the JVA’) dated 4 January
2007 to jointly develop the plaintiff ’s land situated in Johor (‘the land’) into 12
I lots of shop houses, of which the plaintiff was entitled to four lots (‘the
plaintiff ’s lots’) and the defendant developer the remaining eight lots (‘the
defendant’s lots’). The parties also entered into an irrevocable power of attorney
(‘IPA’) on the same date. Under cl 2(a) of the JVA the parties had expressly
agreed, inter alia, that the contractual obligation of obtaining the approval
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174 Malayan Law Journal [2011] 4 MLJ

from the appropriate authorities for the amended building plans would rest on A
the plaintiff. This meant that the plaintiff had to obtain the said approval on or
before 4 July 2007, which it had not done. However, cl 2(b) of the JVA
provided that if the plaintiff was unable to obtain the approval by 4 July 2007,
then the parties could mutually agree to extend the time. After the completion
date of the development on 2 January 2009, the plaintiff terminated the JVA B
and IPA by arguing that a breach of cl 2(a) of the JVA had put an end to the
JVA. When the defendant challenged the purported termination, the plaintiff
filed an originating summons (‘the OS’) seeking, inter alia, a declaration that
the JVA and IPA were null and void or alternatively a declaration that the IPA
was invalid and annulled. Before the High Court could deliver judgment on C
the OS, the plaintiff purportedly sold the defendant’s lots to a third party, Soh
Yuh Mian (‘the intervener’). The defendant asserted that the JVA and IPA were
valid. The defendant submitted that it was the beneficial owner of the
defendant’s lots and that the plaintiff had no right to sell those lots to the
intervener. The defendant thus prayed for consequential orders to remove the D
intervener’s private caveat, to restrain the plaintiff and the intervener from
dealing with the defendant’s lots and for the plaintiff and the intervener to
deliver the defendant’s lots to the defendant. The intervener submitted that he
was a bona fide purchaser and thus no consequential orders should be made
against him. The High Court dismissed the OS holding, inter alia, that the JVA E
and the IPA were valid and that the defendant was entitled to the defendant’s
lots as agreed in the JVA. This was the plaintiff ’s appeal against that decision.

Held, dismissing the appeal and granting the defendant the consequential
orders with costs to the defendant: F
(1) The JVA and the IPA were validly executed by the plaintiff ’s directors. In
the circumstances the directors’ resolution for the JVA and IPA would
bind and continue to bind the plaintiff in favour of the defendant until
and unless the said resolution was dissolved, cancelled or annulled either G
expressly or by implication. The plaintiff ’s claim that the IPA was
executed without the plaintiff ’s approval at the general meeting could not
be sustained as the defendant was well protected under the rule in Royal
British Bank v Turquand (1856) 6 E&B 327 (Turquand’s case). The
defendant was dealing with the plaintiff in good faith at all material times H
and was acting on the directors’ resolution of the plaintiff. Thus, it could
not be deemed to have constructive notice of some failure to comply with
an internal rule of management, which it had no means of discovering.
The general rule in Turquand’s case would apply to the facts in the instant
appeal and the facts did not attract the application of the exceptions to I
this rule. As such, the plaintiff was not permitted to repudiate its
liabilities under the JVA and IPA (see paras 14–15, 20).
(2) Upon completion of the joint venture project on 2 January 2009, the
plaintiff became a constructive trustee in equity for the defendant in
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Ezzen Heights Sdn Bhd v Ikhlas Abadi Sdn Bhd (Soh Yuh
[2011] 4 MLJ Mian, intervener) (Low Hop Bing JCA) 175

A respect of the defendant’s lots to which the defendant was entitled under
the JVA. Applying the legal principles to the instant appeal it was found
that the defendant’s proprietary interest was enforceable in equity against
the plaintiff as constructive trustee and the intervener as the subsequent
holder of the defendant’s lots. In addition to the constructive trust, a
B fiduciary relationship had been created between the plaintiff and the
defendant under the JVA. The plaintiff, being a party to the JVA, owed
the defendant fiduciary duties, including the duty of utmost good faith
and was not entitled to act in a manner contrary to these fiduciary duties.
The sale of the defendant’s lots to a third party such as the intervener
C herein would clearly constitute a breach by the plaintiff of its fiduciary
duties (see paras 21–26).
(3) After the completion date, the plaintiff had relied on its own breach of
cl 2(a) to terminate the JVA and to allow the plaintiff to benefit from its
D own breach would be inequitable and unconscionable (see para 31).
(4) As the defendant had entered a private caveat on the land, the intervener
had constructive notice of the defendant’s proprietary interest in the
defendant’s lots. Despite the constructive notice of the defendant’s
private caveat, the intervener had purchased the defendant’s lots from the
E plaintiff. In the circumstances, the intervener was not a bona fide
purchaser acting in good faith without notice of the rights of the
defendant. Hence the intervener could not have acquired the interest of
the defendant’s lots and could not legally defeat the defendant’s
entitlement under the terms of the valid JVA. Further the sale of the
F defendant’s lots by the plaintiff to the intervener, which took place one
month before the judgment was delivered on the OS, was a subversion of
judicial proceedings (see paras 36–38).
(5) The facts and circumstances of the instant appeal would attract the
G application of O 92 r 4 of the Rules of the High Court 1980 which
conferred on the High Court and, by virtue of r 4 of the Rules of the
Court of Appeal 1994, on this court the inherent powers to make
consequential orders to prevent injustice. As such the defendant would be
granted the consequential orders to remove the intervener’s private
H caveat, to restrain the plaintiff and the intervener from dealing with the
defendant’s lots and for the plaintiff and the intervener to deliver the
defendant’s lots to the defendant (see paras 39–41).

[Bahasa Malaysia summary

I Ezzen Heights Sdn Bhd (‘plaintif ’) dan Ikhlas Abadi Sdn Bhd (‘defendan’)
telah menandatangani perjanjian usahasama (‘PU’) bertarikh 4 Januari 2007
untuk secara bersesama memajukan tanah plaintif yang terletak di Johor
(‘tanah tersebut’) kepada 12 lot-lot rumah kedai, di mana plaintif berhak ke
atas empat lot (‘lot-lot plaintif ’) dan defendan pemaju terhadap lapan lot yang
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176 Malayan Law Journal [2011] 4 MLJ

lain (‘lot-lot defendan’). Pihak-pihak juga telah menandatangani surat kuasa A

wakil yang tidak boleh dibatalkan (‘SKW’) pada tarikh yang sama. Di bawah
klausa 2(a) PU pihak-pihak dengan nyata telah bersetuju, antara lain, bahawa
obligasi kontraktual untuk mendapatkan kebenaran daripada pihak-pihak
berkuasa yang berpatutan untuk pemindaan pelan bangunan terletak pada
plaintif. Ini bermaksud plaintif harus meminta kebenaran tersebut pada atau B
sebelum 4 Julai 2007, yang mana tidak dilakukan. Walau bagaimanapun,
klausa 2(b) PU memperuntukkan bahawa sekiranya plaintif gagal untuk
mendapatkan kebenaran tersebut sehingga 4 Julai 2007, pihak-pihak secara
bersama bersetuju untuk melanjutkan tempoh. Selepas tarikh penyempurnaan
untuk pembangunan tersebut pada 2 Januari 2009, plaintif telah membatalkan C
PU dan SKW dan berhujah bahawa pelanggaran klausa 2(a) PU telah
membatalkan PU. Apabila defendan mencabar pembatalan tersebut, plaintif
telah memfailkan saman pemula (‘SP’) memohon, antara lain, deklarasi
bahawa PU dan SKW adalah batal dan tidak sah atau sebagai alternatif
D
deklarasi bahawa SKW adalah tidak sah dan terbatal. Sebelum Mahkamah
Tinggi membuat penghakiman untuk SP, plaintif telah menjual lot-lot
defendan kepada pihak ketiga, Soh Yuh Mian (‘pencelah’). Defendan
menyatakan bahawa PU dan SKW adalah salah. Defendan berhujah bahawa ia
adalah pemilik benefisial lot-lot defendan dan bahawa plaintif tidak E
mempunyai hak untuk menjual lot-lot tersebut kepada pencelah. Defendan
oleh itu memohon untuk perintah berbangkit untuk mengeluarkan kaveat
persendirian pencelah, menghalang plaintif dan pencelah daripada
menguruskan lot-lot defendan dan untuk plaintif dan pencelah menyerahkan
lot-lot kepada defendan. Pencelah berhujah bahawa dia merupakan pembeli F
bona fide dan oleh itu perintah berbangkit tidak patut dibuat terhadapnya.
Mahkamah Tinggi menolak keputusan saman pemula tersebut, antara lain,
bahawa PU dan SKW adalah sah dan bahawa defendan berhak terhadap lot-lot
defendan seperti yang dipersetujui di dalam PU. Ini merupakan rayuan plaintif
terhadap keputusan tersebut. G
Diputuskan, menolak rayuan dan memberikan perintah berbangkit kepada
defendan dengan kos kepada defendan:
(1) PU dan PKW telah ditandatangani dengan sah oleh pengarah-pengarah
plaintif. Dalam keadaan ini, resolusi pengarah-pengarah untuk PU dan H
SKW akan mengikat dan seterusnya mengikat plaintif berpihak kepada
defendan sehingga dan melainkan resolusi tersebut telah dibubarkan,
dibatalkan atau dimansuhkan sama ada secara nyata atau implikasi.
Tuntutan plaintif bahawa SKW telah ditandatangani tanpa kebenaran
plaintif di mesyuarat umum tidak boleh dibenarkan memandangkan I
defendan dilindungi di bawah peraturan di dalam Royal British Bank v
Turquand (1856) 6 E&B 327 (‘kes Turquand’). Defendan telah
berurusan dengan plaintif dalam niat yang amat baik pada setiap masa
matan dan telah bertindak berdasarkan resolusi pengarah-pengarah
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Ezzen Heights Sdn Bhd v Ikhlas Abadi Sdn Bhd (Soh Yuh
[2011] 4 MLJ Mian, intervener) (Low Hop Bing JCA) 177

A plaintif. Justeru, ia tidak boleh dianggap untuk mendapat notis

konstruktif tentang sebarang kegagalan untuk mematuhi peraturan
dalaman pengurusan, yang mana ia tidak mempunyai apa-apa cara untuk
mengetahuinya. Peraturan am di dalam kes Turquand boleh diguna pakai
kepada fakta-fakta di dalam rayuan ini dan fakta-fakta tidak membawa
B kepada penggunaan pengecualian-pengecualian peraturan ini. Oleh
demikian, plaintif tidak dibenarkan untuk menafikan liabiliti-liabilitinya
di bawah PU dan SKW (lihat perenggan 4–15, 20).
(2) Setelah penyempurnaan projek usahasama pada 2 Januari 2009, plaintif
C
menjadi pemegang amanah konklusif dalam ekuiti kepada defendan
berkenaan dengan lot-lot defendan yang mana defendan berhak di
bawah SKW. Dengan menggunakan prinsip undang-undang kepada
rayuan ini, adalah didapati bahawa kepentingan proprietari defendan
berkuatkuasa dalam ekuiti terhadap plaintif sebagai pemegang amanah
D
konstruktif dan pencelah sebagai pemegang kemudian lot-lot defendan.
Tambahan kepada amanah konstruktif, hubungan fidusiari telah tercipta
di antara plaintif dan defendan di bawah PU tersebut. Plaintif, pihak
kepada PU, mempunyai kewajipan fidusiari terhadap defendan,
termasuk kewajipan niat baik sepenuhnya dan tidak berhak untuk
E
bertindak dalam cara yang berlawanan dengan kewajipan fidusiari
tersebut. Penjualan lot-lot defendan kepada pihak ketiga seperti pencelah
dengan jelas membawa kepada pelanggaran kewajipan fidusiari oleh
plaintif (lihat perenggan 21–26).
(3) Selepas tarikh penyempurnaan, plaintif telah bergantung kepada
F pelanggarannya terhadap klausa 2(a) untuk membatalkan PU dan untuk
membenarkan plaintif untuk mendapat faedah daripada pelanggarannya
sendiri adalah tidak adil dan tidak berpatutan (lihat perenggan 31).
(4) Memandangkan defendan telah memasukkan kaveat persendirian ke atas
G tanah tersebut, pencelah mempunyai notis konstruktif tentang
kepentingan proprietari defendan terhadap lot-lot defendan. Di sebalik
notis konstruktif tentang kaveat persendirian defendan, pencelah telah
membeli lot-lot defendan daripada plaintif. Dalam keadaan ini, pencelah
bukanlah pembeli bona fide yang bertindak dengan niat baik tanpa notis
H tentang hak-hak defendan. Oleh itu, pencelah tidak boleh memperolehi
faedah terhadap lot-lot defendan dan tidak boleh menyangkal hak
defendan di sisi undang-undang di bawah PU yang sah. Tambahan,
penjualan lot-lot defendan oleh plaintif kepada pencelah, yang mana
mengambil tempat sebulan sebelum penghakiman disampaikan
I terhadap SP, merupakan subversi prosiding kehakiman (lihat perenggan
36–38).
(5) Fakta-fakta dan keadaan rayuan ini boleh membawa kepada penggunaan
A 92 k 4 Kaedah-Kaedah Mahkamah Tinggi 1980 yang mana
memberikan, Mahkamah Tinggi dan mengikut k 4 Kaedah-Kaedah
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178 Malayan Law Journal [2011] 4 MLJ

Mahkamah Rayuan 1994, mahkamah ini kuasa sedia ada untuk A

membuat perintah berbangkit untuk menghindari ketidakadilan. Oleh
demikian, defendan boleh diberikan perintah berbangkit untuk
mengeluarkan kaveat persendirian pencelah, untuk menghalang plaintif
dan pencelah daripada menguruskan lot-lot defendan dan untuk plaintif
dan pencelah menyerahkan lot-lot defendan kepada defendan (lihat B
perenggan 39–41).]

Notes:
For a case on inherent power, see 2(2) Mallal’s Digest (4th Ed, 2010 Reissue)
paras 3134. C
For cases on sales and purchase of land in general, see 3(1) Mallal’s Digest (4th
Ed, 2010 Reissue) paras 4900–5059.
For cases on agreement in general, see 3(1) Mallal’s Digest (4th Ed, 2010
Reissue) paras 2466–2492.
For cases on duties of director, see 3(1) Mallal’s Digest (4th Ed, 2011 Reissue) D
paras 212–225.

Cases referred to
Chan Thiam Teng v Ban Swee Heng Sdn Bhd [1992] 2 MLJ 583, HC (refd)
Chooi Siew Cheong v Lucky Height Development Sdn Bhd & Anor [1995] 1 MLJ E
513, FC (refd)
Connelly v DPP [1964] AC 1254, HL (refd)
Dominic Selvam a/l S Gnanapragasam v Kerajaan Malaysia & Ors [2007] 2 MLJ
761, HC (refd)
Gimstern Corporation (M) Sdn Bhd & Anor v Global Insurance Co Sdn Bhd F
[1987] 1 MLJ 302, SC (refd)
Gloucester County Bank v Rudry Merthyr Steam and House Coal Colliery [1898]
1 Ch 629 (refd)
Golden Vale Golf Range & Country Club Sdn Bhd v Hong Huat Enterprise Sdn
Bhd [2008] 4 MLJ 839; [2008] 6 AMR 763 (refd) G
Hartela Contractors Ltd v Hartecon JV Sdn Bhd [1999] 2 MLJ 481; [1999] 2
AMR 2501,CA (refd)
Haw Par Brothers International Ltd and & Anor v Jack Chiarapurk & Ors [1991]
2 MLJ 428, HC (refd)
Hew Sook Ying v Hiw Tin Hee [1992] 2 MLJ 189, SC (refd) H
Howard v Patent Ivory Manufacturing Co (1888) 38 Ch D 156 (refd)
K Sivapragasam a/l Krishnar v Renominium Development Sdn Bhd & Ors [1998]
4 MLJ 535, CA (refd)
Kanssen v Rialto (West End) Ltd [1944] Ch 346 (refd)
Mahfuz bin Hashim v Koperasi Pekebun Kecil Daerah Segamat & Ors [2005] 3 I
MLJ 726, HC (refd)
Newacres Sdn Bhd v Sri Alam Sdn Bhd [2000] 2 MLJ 353; [2000] 2 AMR 1730,
FC (refd)
Newacres Sdn Bhd v Sri Alam Sdn Bhd [1991] 3 MLJ 474, SC (refd)
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Ezzen Heights Sdn Bhd v Ikhlas Abadi Sdn Bhd (Soh Yuh
[2011] 4 MLJ Mian, intervener) (Low Hop Bing JCA) 179

A Pacific Centre Sdn Bhd v United Engineers (Malaysia) Bhd [1984] 2 MLJ 143
(refd)
Royal British Bank v Turquand (1885) 5 E & B 248 (refd)
Standard Chartered Bank v Central Wood Tiles Sdn Bhd [1990] 2 MLJ 361, HC
(refd)
B Westdeutsche Landesbank v Islington, HL [1996] AC 669 HL (folld)

Legislation referred to
National Land Code Form 19B
Rules of the Court of Appeal 1994 r 4
C Rules of the High Court 1980 O 92 r 4
V Rajadevan (R Ananthan with him) (Ananth & Associates) for the appellant.
Wong Kim Fatt (Wong Boon Lee with him) (Gulam & Wong) for the respondent.
Devinder Kaur (Syuhaila & Co) for the intervener.
D Low Hop Bing JCA (delivering judgment of the court):
APPEAL

E [1] This appeal was brought by the appellant company (‘the plaintiff ’)
against the decision of the High Court in dismissing with costs the plaintiff ’s
amended originating summons (‘the OS’) which sought, inter alia, a
declaration that the joint venture agreement entered into between the plaintiff
as the landowner and the respondent company (‘the defendant’) as the
F developer (‘the JVA’), and the irrevocable power of attorney (‘the IPA’), both
dated 4 January 2007, are null and void, or alternatively a declaration that the
IPA is invalid and annulled.

FACTUAL BACKGROUND
G
[2] The plaintiff and the defendant entered into the JVA to jointly develop
the plaintiff ’s land held under GM 473, Lot No 412, Mukim of Padang Endau,
District of Mersing, State of Johor (‘the land’) into 12 lots of four storey shop
offices, out of which pursuant to cl 3(a) of the JVA, the plaintiff shall be entitled
H to four lots (‘the plaintiff ’s lots’) and the defendant, the remaining eight lots
(‘the defendant’s lots’) (for brevity and convenience, a reference hereinafter to a
clause is a reference to that clause in the JVA).

[3] On 2 January 2009 (‘the completion date’), the plaintiff had taken
I possession of the plaintiff ’s lots.

[4] Subsequently, the plaintiff ’s former solicitors Kuan & Co, vide letter
dated 10 February 2009, unilaterally declared that the JVA has been
terminated.
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180 Malayan Law Journal [2011] 4 MLJ

[5] The defendant’s solicitors Gulam & Wong, vide letter dated 1 April A
2009, challenged the purported termination.

[6] The plaintiff then filed the OS seeking, inter alia, to declare the JVA and
IPA null and void. Before the High Court could deliver judgment on
3 September 2009, the plaintiff had purportedly sold the defendant’s lots to the B
intervener.

[7] The plaintiff ’s OS was dismissed by the High Court on 3 September

2009. On 27 July 2010, we heard and dismissed the plaintiff ’s appeal. Our
grounds are set out below. C

SOLE GROUND OF APPEAL

[8] The plaintiff raised eight grounds in the memorandum of appeal.

However, learned counsel Mr V Rajadevan (assisted by Mr R Ananthan) relied D
solely on ground four, to the effect that ‘the learned Judge erred in law … in
failing to consider that by effluxion of time the joint venture agreement had
lapsed on 4 July 2007’. The plaintiff ’s counsel relied on the failure of the
plaintiff (as the landowner) to obtain the approval for the amended building
plans within the prescribed period of six months under cl 2(a) and (b) to E
persuade the High Court, and now this court, to declare the JVA and the IPA
null and void, in order to repudiate the plaintiff ’s liabilities under these two
documents.

[9] Learned counsel Dr Wong Kim Fatt (Mr Wong Boon Lee with him) F
asserted for the defendant that the JVA and the IPA, executed pursuant to
cl 5(xv), are valid. They took the view that the defendant is the beneficial owner
of the defendant’s lots which the plaintiff had no right to sell, and that no title
whatsoever could pass to the intervener. In the circumstances, the defendant
prayed for consequential orders to remove the intervener’s private caveat, to G
restrain the plaintiff and the intervener from dealing in any manner whatsoever
with the defendant’s lots, to direct the plaintiff to honour the undertaking to
deliver the issue document of title to the defendant, and to deliver the
defendant’s lots to the defendant, in the interest of justice based on the inherent
jurisdiction of the court. H

[10] The intervener’s learned counsel Ms Devinder Kaur maintained that

the intervener was a bona fide purchaser, and so no consequential orders should
be made. The plaintiff ’s learned counsel associated himself with the
intervener’s submission. I

[11] The High Court dismissed the OS holding, inter alia, that the JVA and
the IPA are valid, and that the defendant is entitled to the defendant’s lots
pursuant to cl 3(a).
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Ezzen Heights Sdn Bhd v Ikhlas Abadi Sdn Bhd (Soh Yuh
[2011] 4 MLJ Mian, intervener) (Low Hop Bing JCA) 181

A [12] Upon a careful consideration of the above submissions and the decision
of the High Court, we identified the question for determination in this appeal
as follows:

Upon a proper perusal of the JVA and the IPA, and in the light of the factual
B background unfolded above, are the JVA and the IPA valid and binding?

[13] The answer to the above question entails an in depth discussion of

important principles touching on the legal effect of the JVA and the IPA.
C
LEGAL EFFECT OF THE JVA AND IPA

[14] The JVA was executed by the plaintiff ’s (then) directors viz Yong Siok
Cheng and Yong Ee Chuang. The plaintiff had affixed its common seal
D pursuant to its directors’ resolution which was duly and validly passed on 2
January 2007 in accordance with its articles of association. The IPA was
prepared pursuant to cl 5(xv) and executed by the authorised directors in
accordance with the directors’ resolution of the plaintiff. It was attested by the
plaintiff ’s own solicitors and forwarded to the defendant’s solicitors on 10
E January 2007. It was duly registered in the Johor Bahru High Court vide No
282/2007 dated 25 January 2007. Until and unless it is dissolved, cancelled or
annulled, either expressly or by implication, the directors’ resolution for the
JVA and the IPA shall bind and continue to bind the plaintiff in favour of the
defendant: see eg Chan Thiam Teng v Ban Swee Heng Sdn Bhd [1992] 2 MLJ
F 583 at p 586B.

[15] The plaintiff ’s claim that the IPA was executed without the plaintiff ’s
approval at the general meeting cannot be sustained. The defendant was
dealing with the plaintiff in good faith at all material times and was acting on
G
the directors’ resolution of the plaintiff. The defendant is well protected under
the rule in Turquand’s case, Royal British Bank v Turquand (1885) 5 E & B 248.

[16] This rule has been succinctly stated by the Federal Court through the
H judgment Mohamad Azmi SCJ (as then was) in Hew Sook Ying v Hiw Tin Hee
[1992] 2 MLJ 189 at p 199, in the following words:

... a person dealing with a company does not need to enquire into the regularity in
the internal affairs and proceedings of the company and may assume that all is being
done regularly.
I
(See also eg Mahfuz bin Hashim v Koperasi Pekebun Kecil Daerah Segamat & Ors
[2005] 3 MLJ 726 at p 740; Standard Chartered Bank v Central Wood Tiles Sdn
Bhd [1990] 2 MLJ 361; and K Sivapragasam a/l Krishnar v Renominium
Development Sdn Bhd & Ors [1998] 4 MLJ 535).
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182 Malayan Law Journal [2011] 4 MLJ

[17] By way of amplification, this rule prescribes that if a person deals in A

good faith with the board of directors or other representative body of a
company which is in fact exercising powers of management and direction of its
business and affairs, that person is not affected by defects of procedure within
the company or by its failure to fulfil conditions which are required by the
company’s memorandum or articles to be fulfilled before the act or transaction B
in question is effected. The legal basis of the rule is that a person dealing with
a company has no right to insist on proof by its directors that the provisions of
its memorandum or articles have been complied with, and he cannot therefore
be deemed to have constructive notice of some failure to comply which he has
no means of discovering (Gloucester County Bank v Rudry Merthyr Steam and C
House Coal Colliery [1898] 1 Ch 629 at p 636 per Lindley LJ). Of course, a
person dealing with a company will not be able to rely on the rule, and the
company may refuse to be bound by the transaction, if he knows that there has
been some failure to comply (Howard v Patent Ivory Manufacturing Co (1888)
38 Ch D 156), or if he knows facts which would lead a reasonable man to D
enquire further and so discover the failure to comply (Kanssen v Rialto (West
End) Ltd [1944] Ch 346). The rule in Royal British Bank v Turquand is designed
to protect persons dealing with the company, not to protect the company itself:
Pennington’s Company Law (2nd Ed) at pp 137–138.
E
[18] We pause here for a moment to say that the general rule in Turquand
applies to the facts in the instant appeal. These facts however do not attract the
application of the exceptions enunciated by Pennington above.
F
[19] Closer to our shores, Walter Woon’s Company Law (2nd Ed) at pp 89–90
explained this rule in the following passage:

The actual authority of an agent is a relationship between principal and agent; the
rest of the world is a stranger to this relationship. A third party dealing with the agent
of a company does not know what the agent’s actual authority is, nor in most cases G
can he find out. Sometimes the authority of an agent to do certain acts depends on
compliance with certain formalities. For instance, it may be provided by the
company’s articles that the affixing of the company’s seal can only be authorized by
a resolution of the board. Sometimes, there is some irregularity in the management
which vitiates the authority conferred upon an agent. For instance, a directors’ H
meeting may have been irregularly held. A party outside the company has no way of
determining whether the company’s internal regulations have been complied with.
However, the law does not require an outside party to do so. If an agent has apparent
authority to do an act, a person dealing with the company is entitled to assume that
all matters of internal management and procedure prescribed by the articles have
I
been complied with. This is known as the ‘indoor management rule’ or the rule in
Turquand’s case. The rule in Turquand’s case is a presumption of regularity. In other
words, a person who deals with a company is entitled to assume that all procedural
matters have been taken care of by the company. There is a good practical reason for
this: an outsider cannot discover whether the company’s internal procedures have
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Ezzen Heights Sdn Bhd v Ikhlas Abadi Sdn Bhd (Soh Yuh
[2011] 4 MLJ Mian, intervener) (Low Hop Bing JCA) 183

A been complied with. If a company could get out of a transaction by pleading

non-compliance with its internal procedures, commercial certainty would be
thrown out of the window.

[20] By reason of the foregoing grounds, our answer to the above question is
B
in the affirmative. That being the case, the plaintiff is not permitted to
repudiate its liabilities under the JVA and the IPA. These liabilities are obvious
upon an analysis of the following issues:
(a) the plaintiff as trustee and fiduciary;
C
(b) the plaintiff ’s obligation to obtain approval;
(c) the plaintiff ’s reliance on its own breach;
(d) the plaintiff ’s failure to honour the undertaking to deposit the issue
D document of title;
(e) the plaintiff ’s sale of defendant’s lots to the intervener; and
(f ) consequential orders.

E THE PLAINTIFF AS TRUSTEE AND FIDUCIARY

[21] Upon completion of the joint venture project on 2 January 2009, the
plaintiff became a constructive trustee in equity for the defendant in respect of
the defendant’s lots to which the defendant was entitled under the JVA. The
F defendant was the equitable or beneficial owner of the defendant’s lots. This is
evident in cl 3(a) which expresses the defendant’s entitlement (as ‘the company’
therein) in the following clear and unambiguous words:

3(a) It is hereby agreed by the parties hereto that the Landowner shall be entitled to
G four (4) lots of the four (4) story shopoffices as comprised in the Building and
outline in RED in the site plan (hereinafter collectively referred to as ‘the
Landowner’s Lots’) upon completion of the Project whereas the Company shall be
entitled to the remaining eight (8) lots of the four (4) storey shopoffices as
comprised in the Building and outline in BLUE in the site plan (hereinafter
collectively referred to as ‘the Company’s Lots’).
H

[22] The said constructive trust arises by operation of law eg from the
plaintiff ’s unconscionable conduct or abuse of fiduciary relationship between
the plaintiff as trustee (or legal owner) and the defendant as cestui que trust (or
I beneficiary). The constructive trust enables the defendant as beneficiary to
enforce the trustee’s (‘the plaintiff ’s’) conscience in relation to the trustee’s (‘the
plaintiff ’s’) treatment of the beneficiary’s (‘the defendant’s’) lots, or the abuse of
fiduciary duties which the trustee (‘the plaintiff ’) owes to the beneficiary (‘the
defendant’).
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184 Malayan Law Journal [2011] 4 MLJ

[23] In Westdeutsche Landesbank v Islington [1996] AC 669 (HL), Lord A

Browne-Wilkinson propounded, inter alia, the following principles.
(a) Equity operates on the conscience of the owner of the legal interest. In the
case of a trust, the conscience of the legal owner requires him to carry out
the purposes for which the property was vested in him (express or implied B
trust) or which the law imposes on him by reason of his unconscionable
conduct (constructive trust); and
(b) Once a trust is established, as from the date of its establishment, the
beneficiary has, in equity, a proprietary interest in the trust property, C
which proprietary interest will be enforceable in equity against any
subsequent holder of the property (whether the original property or
substituted property into which it can be traced) other than a purchaser
for value of the legal interest without notice.
D
[24] Applying these principles to the instant appeal, we are of the view that
the defendant’s proprietary interest is enforceable in equity against the plaintiff
as the constructive trustee and the intervener as the subsequent holder of the
defendant’s lots. The defendant as the beneficiary can trace those proprietary E
rights into the original property in so far as the plaintiff is considered, or the
substituted property into which it can be traced, except where the intervener
can prove that he is ‘equity’s darling’; ie, ‘a purchaser for value of the legal
interest without notice’: Westdeutsche Landesbank v Islington.
F
[25] In addition to the constructive trust, a fiduciary relationship has been
created between the plaintiff and the defendant under the JVA. Support for this
proposition may be found in Haw Par Brothers International Ltd and Tiger
Balm Ltd v Jack Chiarapurk [1991] 2 MLJ 428. At p 433, Chao Hick Tin J (of
G
the Singapore High Court) held, inter alia, that there was a fiduciary
relationship to the joint venture therein, or at least an arguable case for such a
relationship.

[26] The plaintiff, being a party to the JVA, owes the defendant fiduciary H
duties, including the duty of utmost good faith: see eg Chooi Siew Cheong v
Lucky Height Development Sdn Bhd & Anor [1995] 1 MLJ 513 (FC); Newacres
Sdn Bhd v Sri Alam Sdn Bhd [1991] 3 MLJ 474 (SC); Newacres Sdn Bhd v Sri
Alam Sdn Bhd [2000] 2 MLJ 353 ; [2000] 2 AMR 1730 (FC); and Hartela
Contractors Ltd v Hartecon JV Sdn Bhd [1999] 2 MLJ 481 ; [1999] 2 AMR I
2501 (CA). The plaintiff is not entitled to act in a manner contrary to these
fiduciary duties. Any sale by the plaintiff as constructive trustee of the
defendant’s lots to a third party such as the intervener herein would clearly
constitute a breach by the plaintiff of the fiduciary duties.
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Ezzen Heights Sdn Bhd v Ikhlas Abadi Sdn Bhd (Soh Yuh
[2011] 4 MLJ Mian, intervener) (Low Hop Bing JCA) 185

A THE PLAINTIFF’S OBLIGATION TO OBTAIN APPROVAL

[27] Pursuant to cll 2(a) and (b), the parties have expressly agreed to the
plaintiff ’s contractual obligation of obtaining the relevant approval. The
relevant portions read:
B
2(a) The parties hereto hereby expressly agree that this Agreement is subject to and
conditional upon the Landowner obtaining the approval of the appropriate
authorities for the amended Building Plans (and specifications thereof ) of the
Building to be erected on the said Land …
C
2(b)In the event any one or more of the Approvals (including any appeals relating
thereto) is/are not obtained for any reason whatsoever within Six (6) Months
from the date of this Agreement and unless this Agreement is extended by the
parties hereto for such period(s) of time as the parties shall mutually agree upon,
this Agreement shall be deemed to be automatically terminated and thereafter
D this Agreement shall be null and void and of no further force or effect whatsoever
and neither party hereto shall have any claims whatsoever against the other.
(Emphasis added.)

E [28] Under cl 2(a), the parties have expressly agreed, inter alia, that the
contractual obligation of obtaining the approval from the appropriate
authorities for the amended building plans rests on the landowner ie the
plaintiff.
F
[29] The parties had further expressly agreed that the time frame for the
plaintiff to obtain the approval for the amended building plans is six months
from 4 January 2007, the date of the JVA. That would be on or before 4 July
2007. It also expressly provides that in the event the plaintiff is unable to obtain
G the approval by 4 July 2007, the parties may mutually agree to extend the time
pursuant to cl 2(b).

[30] As there was no mutual agreement to extend the time pursuant to cl

2(b), the plaintiff was in breach of cl 2(a) when the plaintiff ’s architects, Ho &
H Associates, submitted the amended building plans vide letter dated 28 August
2007 to the Pejabat Majlis Daerah Mersing (Mersing District Council) for
approval. The amended building plans were only approved by the said council
on 4 November 2007, vide the council’s letter dated 1 December 2007, thereby
exceeding the prescribed time frame by four months.
I
THE PLAINTIFF RELYING ON OWN BREACH

[31] After the completion date (2 January 2009), the plaintiff had, pursuant
to the letter of termination dated 10 February 2009, relied on its own breach of
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186 Malayan Law Journal [2011] 4 MLJ

cl 2(a) to put an end to the JVA. In our view, to allow the plaintiff to put an end A
to the JVA based on its own breach is to allow the plaintiff (as a defaulting
party) to benefit from its own breach. That would be inequitable and
unconscionable. This proposition is discernible from Gimstern Corporation
(M) Sdn Bhd & Anor v Global Insurance Co Sdn Bhd [1987] 1 MLJ 302 (SC),
where Wan Hamzah SCJ (as he then was), in delivering the judgment of the B
(then) Supreme Court, said at p 304 F–H that:

The rule is that if a stipulation in a contract be that the contract shall be void on the
happening of an event which one or either of the parties can by his own act or
omission bring about, then the party who by his own act or omission brings that C
event about, cannot be permitted either to insist upon the stipulation himself or to
compel the other party who is blameless, to insist upon it, because to permit the
blameable party to do either would be to permit him to take advantage of his own
wrong to put an end to the contract, vide the judgment of Lord Atkinson in New
Zealand Shipping Company Ltd v SDAECD France [1919] AC 1. D

[32] The above passage was applied by this court in Golden Vale Golf Range &
Country Club Sdn Bhd v Hong Huat Enterprise Sdn Bhd [2008] 4 MLJ 839;
[2008] 6 AMR 763 at p 769 [8], where Gopal Sri Ram JCA (later FCJ) E
affirmed the established principle that a party cannot rely on its own wrong to
defeat its opponent’s claim.

THE PLAINTIFF’S FAILURE TO DEPOSIT TITLE

F
[33] Under cl 5(xi), the plaintiff undertook to deposit the original issue
document of the land title with M/s Lim & Hooi as stakeholders. M/s Lim &
Hooi had sent a letter dated 16 January 2009 to M/s KH Choo & Co
demanding the deposit of the title pursuant to cl 5 (xi). However that request
has not been met. Till to date, the plaintiff had failed, neglected and/or refused G
to do so. As a result the defendant was unable to surrender the title to the
appropriate authorities for the purpose of applying for the issuance of separate
titles for the individual units of the lots in accordance with cl 5(xi). This is
another example of the plaintiff ’s breach of the JVA.
H
THE PLAINTIFF’S SALE OF THE DEFENDANT’S LOTS TO
INTERVENER

[34] In breach of the constructive trust and fiduciary duties under the JVA, I
the plaintiff had on 6 August 2009, without any directors’ resolution or
shareholders’ resolution, sold the defendant’s lots to the intervener. The sale
took place about one month before the judgment was delivered by the learned
High Court judge on 3 September 2009.
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Ezzen Heights Sdn Bhd v Ikhlas Abadi Sdn Bhd (Soh Yuh
[2011] 4 MLJ Mian, intervener) (Low Hop Bing JCA) 187

A [35] The plaintiff had by the sale blatantly breached cl 5(ii) which reads:

5 The Landowner hereby warrants, covenants and undertakes with the Company as
follows:
(i) …
B
(ii) the Landowner shall not at any time hereafter sell, transfer, lease, let, charge,
dispose or otherwise encumber howsoever the said Land or any part(s) thereof or
any rights, interest and or benefit therein or purport to do any of such acts or
things save and except in respect of the Landowner’s Lots only;
C
(iii) …

[36] The issue whether the intervener is ‘equity’s darling’ has to be addressed
in relation to the intervener’s notice or constructive notice of the defendant’s
D
proprietary interest in the defendant’s lots. Significantly, we note that as early as
6 April 2007, the defendant had entered a private caveat vide presentation No
100/2007 on the land. This is evident from the defendant’s application in Form
19B and the statutory declaration in support thereof. At all material times, the
E defendant’s private caveat was still subsisting. We are of the view that the
intervener knew or had notice, or ought to have known or to have notice, of the
defendant’s prior proprietary interest in the defendant’s lots. Despite the
intervener’s notice or constructive notice of the defendant’s private caveat, the
intervener had on 26 August 2009 purchased the defendant’s lots from the
F plaintiff. Further, the intervener had on 1 September 2009 entered a private
caveat vide presentation No 237/2009 on the land as in Form 19B, supported
by the intervener’s statutory declaration. In the circumstances, the intervener is
not entitled to rely on the defence of ‘equity’s darling’ as the intervener was not
a bona fide purchaser acting in good faith without notice of the rights of the
G beneficiary ie the defendant in the instant appeal.

[37] As the defendant, being the beneficial owner, is entitled to the

defendant’s lots, the plaintiff had no title to sell the defendant’s lots to the
H intervener. The plaintiff could not pass any title to the intervener. Nemo dat
quod non habet (No one can give what he does not have). Hence, the intervener
could not have acquired the interest of the defendant’s lots and could not
legally defeat the defendant’s entitlement under the terms of the valid JVA.

I [38] The sale and purchase agreement entered into between the plaintiff and
the intervener in respect of the defendant’s lots, in the face of the proceedings
pending in the High Court and before the decision of the High Court on 3
September 2009, was an affront to and a subversion of judicial proceedings.
The sale and purchase of the defendant’s lots cannot be construed as a bona fide
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188 Malayan Law Journal [2011] 4 MLJ

transaction. A

CONSEQUENTIAL ORDERS

[39] Order 92 r 4 confers on the High Court and, by virtue of r 4of the Rules
of the Court of Appeal 1994, on this court, inherent powers eg to make B
consequential orders to prevent injustice. O 92 r 4 merits reproduction as
follows:
4 For the removal of doubts it is hereby declared that nothing in these rules shall be
deemed to limit or affect the inherent powers of the Court to make any order as may C
be necessary to prevent injustice or to prevent an abuse of the process of the Court.

[40] The inherent powers of the High Court and the Court of Appeal have
been given statutory recognition by way of subsidiary legislation in Order 92 r
4. These potentially wide powers are procedural and may be exercised as D
residuary or reserve powers to suppress an abuse of the process of the court and
to defeat any attempted thwarting of its process: see eg Connelly v Deputy Public
Prosecutor [1964] AC 1254 at p 1301 (HL) per Lord Morris. These powers
include all the powers that are necessary to fulfil itself as a court of law; to
uphold, to protect, and to fulfill the judicial function of administering justice E
in a regular, orderly and effective manner: per Edger Joseph JR J (later FCJ) in
Pacific Centre Sdn Bhd v United Engineers (Malaysia) Bhd [1984] 2 MLJ 143 at
p 147. These powers may be invoked in an infinite variety of circumstances in
pending proceedings. The categories are not closed: Dominic Selvam a/l S
Gnanapragasam v Kerajaan Malaysia & Ors [2007] 2 MLJ 761 at pp 768–769 F
(on the scope of ‘inherent jurisdiction’ and ‘inherent powers’ of the court, see
also the majority judgment delivered by me in Ishak bin Hj Shaari v Public
Prosecutor, Court of Appeal Criminal Appeal No N-09–17 of 2005 dated 26
November 2010 and the cases cited therein).
G
[41] We are of the view that the facts and circumstances of the instant appeal
would attract the application of O 92 r 4, particularly the making of
consequential orders.

CONCLUSION H

[42] On the foregoing grounds, we dismissed this appeal with costs of

RM10,000 to the defendant, and affirmed the decision of the High Court.
Deposit to be paid to the defendant on account of the fixed costs.
I

[43] Pursuant to O 92 r 4, we made the following consequential orders:

(a) an order that the caveat entered by the intervener vide presentation No
237/2009 on 1 September 2009 on the land be forthwith removed;
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Ezzen Heights Sdn Bhd v Ikhlas Abadi Sdn Bhd (Soh Yuh
[2011] 4 MLJ Mian, intervener) (Low Hop Bing JCA) 189

A (b) an order restraining the plaintiff and the intervener whether by

themselves or their agents or otherwise from dealing in any manner
whatsoever with the defendant’s lots;
(c) an order directing the plaintiff and/or its solicitors including M/s TS
Chong & Co, in possession of the issue document of title of the land, to
B
forthwith deliver and deposit the original issue document of title with
M/s Lim & Hooi; and
(d) an order directing the plaintiff and the intervener to deliver vacant
possession of the defendant’s lots to the defendant on or before 27
C October 2010 ie within three months from the date we made our order
on 27 July 2010.

Appeal dismissed and consequential orders granted with costs to defendant.

D
Reported by Kohila Nesan