<figure id="attachment_2715231" aria-describedby="caption-attachment-2715231" style="width: 1600px" class="wp-caption aligncenter"><img loading="lazy" class="wp-image-2715231 size-full" src="https://media.freemalaysiatoday.com/wp-content/uploads/2024/03/4233a51a-mahkamah-rayuan-fmt-210324-1.webp" alt="Court of Appeal Mahkamah rayuan" width="1600" height="1000" /><figcaption id="caption-attachment-2715231" class="wp-caption-text">The Court of Appeal said the legal firm lacked clear instructions to disburse the funds to third parties instead of Tan Seng Tin, the property owner and seller.</figcaption></figure>
PUTRAJAYA: The Court of Appeal has ruled that a legal firm, acting as a stakeholder, breached its duty by releasing about RM1.1 million to unauthorised third parties in a property transaction based on a letter of confirmation that was wrongly admitted as evidence.
A three-member bench chaired by Justice Azhahari Kamal Ramli said AM Ong &amp; Partners, representing purchaser Yu Sheng Petrol Sdn Bhd, lacked clear instructions to disburse the funds to third parties instead of Tan Seng Tin, the property owner and seller.
Azhahari said the core issue was whether the legal firm, as stakeholder, had properly accounted for the RM1.143 million.
“The respondent’s (legal firm’s) sole justification for not paying the money to Tan was the Dec 31, 2015 letter of confirmation, which the trial judge admitted as conclusive proof that Tan had received the money.
“In our view, this finding was unsustainable,” he said in allowing Tan’s appeal with RM50,000 in costs.
Justices Ahmad Kamal Shahid and Evrol Mariette Peters also heard the appeal.
He said the legal firm did not produce evidence of payment — no bank records, receipts or other documents showing the transfer of the money to Tan.
Azhahari said Tan’s conduct of repeatedly demanding the money through lawyers, lodging a police report and complaining to the disciplinary board was inconsistent with someone who had already received the funds.
He said the more probable inference from the evidence was that the legal firm, acting on invalid instructions from former shareholders of the purchaser company, wrongly diverted stakeholder funds to settle private debts it believed Tan owed.
“This was a fundamental misapplication of stakeholder monies,” he said.
Facts of the case
The facts of the case revealed that Tan, the vendor of a property in Perak, sold it for RM3.3 million to Yu Sheng Petrol via a Dec 31, 2015 sale and purchase agreement (SPA).
Tan was unrepresented at the time the SPA was signed.
Tan, claiming he never received the bulk of the purchase price, sued the legal firm for breach of fiduciary duty as a stakeholder.
In October 2016, the legal firm remitted only RM101,384.21 to Tan, having deducted RM1.143 million from the purchase price, which was labelled as “taken by Tan Seng Tin”.
The legal firm produced a letter of confirmation, purportedly signed by Tan, acknowledging receipt of RM1.143 million from the previous shareholders of the purchaser.
Tan, however, denied signing the letter and claimed he was asked to sign blank papers.
In May 2016, the purchaser company was taken over by new shareholders.
In October the same year, the legal firm released the disputed RM1.143 million to third parties, including the previous shareholders, based on the letter of confirmation.

MatchPoint Times

Law firm breached duty by releasing RM1.1mil to third parties, court rules

The Court of Appeal says such payment amounts to a fundamental misapplication of stakeholder monies.

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