DALAM MAHKAMAH RAYUAN MALAYSIA

(BIDANG KUASA RAYUAN)

RAYUAN SIVIL NO: B-01(NCVC) (W)-144-05/2015

ANTARA

SYARIKAT IMATERA DIGITAL

IMAGE SERVICES … PERAYU

DAN

1. DATO’ ABD NASIR BIN HASSAN

2. KERAJAAN NEGERI

SELANGOR DARUL EHSAN

3. PENGARAH TANAH DAN

GALIAN SELANGOR … RESPONDEN-

RESPONDEN

[Dalam Mahkamah Tinggi Malaya di Shah Alam Dalam Negeri Selangor Darul Ehsan, Malaysia

Guaman No: 21NCvC-11-01/2012

Antara

Malayan Banking Berhad … Plaintiff

Dan

Dato’ Abd Nasir Bin Hassan & 6 Lagi … Defendan-Defendan

Dan

Syarikat Imatera Digital Image Services … Pihak Ketiga

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CORAM:

MOHD. ZAWAWI BIN SALLEH, JCA

VERNON ONG LAM KIAT, JCA

ABDUL RAHMAN BIN SEBLI, JCA

GROUNDS OF JUDGMENT

INTRODUCTION

[1] At the High Court, the 1st to 3rd defendants were ordered to pay

damages to the plaintiff for breach of statutory duty, negligence and

conspiracy to commit fraud resulting in the plaintiff’s losses from the non-

payment of a loan granted by the plaintiff to the 5th defendant for the

purchase of a piece of land from the 4th defendant. The 1st to 3rd

defendants were ordered to pay RM8.45 million to the plaintiff and a

further sum of RM4.55 million as contribution to the 5th defendant. In turn,

the third party were ordered to indemnify the 1st to 3rd defendants.

[2] This is the third party’s appeal against the judgment of the High

Court holding the third party liable to indemnify the 1st to 3rd defendants.

After hearing of submission of counsel, we allowed the third party’s

appeal. We now set forth our reasons. In this judgment, the parties shall

be referred to as they were in the court below.

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THE SALIENT FACTS

[3] Sometime in 2008, the 4th and 5th defendants entered into an

agreement whereby the 4th defendant agreed to sell and the 5th defendant

agreed to purchase a piece of land in Selangor. Pursuant thereto, the 5th

defendant obtained a loan of RM8.45 million from the plaintiff bank to

finance the purchase of the land.

[4] On 22.1.2009, the transfer and charge documents together with the

issue document of title to the land were presented at the land registry of

the Pejabat Tanah dan Galian Selangor (the 3rd defendant) for

registration. After receipt of the presentation number(s), the loan sum was

released after the plaintiff was advised by its solicitors to release the loan

sum to the 4th defendant on 3.2.2009.

[5] Meanwhile, on 22.12.2009 the Pengarah Tanah dan Galian Negeri

Selangor (the 1st defendant) lodged a Registrar’s caveat on the land as

there were two pending civil actions involving conflicting ownership claims

over the land. In fact, back in 2004, a Registrar’s caveat had been lodged

on the land because of complaints about land title forgery.

[6] On 29.3.2011, the 1st defendant wrote to the plaintiff’s solicitors

informing that they could not register the charge documents which were

presented on 22.1.2009. The ownership dispute was subsequently

resolved after a consent judgment was recorded wherein Dynamic Lifters

(M) Sdn Bhd and not the 4th defendant was declared the registered owner

of the land.

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[7] The 1st to 3rd defendants admitted that the issue document of title

to the land was a forgery and that they had lodged a police report on the

forgery and loss of security papers used to print the forged issue

document of title.

[8] On the facts as found in the High Court, the learned judge held that

the plaintiff had proved its case against the 1st to 3rd defendants for

negligence, breach of statutory duty and conspiracy to commit fraud. The

learned judge ordered the 1st to 3rd defendants to pay the plaintiff RM8.45

million together with interest and costs and further ordered that the 1st to

3rd defendants pay to the 5th defendant by way of contribution the sum of

RM4.55 million.

[9] Insofar as the 1st to 3rd defendants’ claim for an indemnity against

the third party is concerned, it is pertinent to set out these background

facts:

a) In 2000, the Ministry of Land and Cooperative appointed the

third party to provide services for the implementation of the

computerisation of register documents of title system known as

Sistem Pendaftaran Tanah Berkomputer (SPTB) for the states

of Johor, Kelantan, Melaka, Negeri Sembilan, Perak, Pulau

Pinang and Selangor;

b) The data collection and keying in of the data manually into the

SPTB is done by the personnel of the third party who will be

assigned an ID number and password which can be accessed

into the system through the assigned ID number and password

number;

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c) The third party was required to key in the data manual of land

titles furnished by the 1st to 3rd defendants into the SPTB system

developed by the third party;

d) The implementation period of the SPTB contract was between

22.2.2002 to 21.8.2002; the warranty period from 22.8.2002 to

21.8.2003 and the maintenance period from 22.8.2003 to

21.8.2008; and

e) The change of ownership of the land from Dynamic Lifters (M)

Sdn Bhd to the 4th defendant was done by a person named

‘Azhan’ during warranty period i.e. on 31.7.2003.

[10] It is the 1st to 3rd defendants’ pleaded case that the registration of

the 4th defendant’s name as the registered owner of the land in the

computerised register of title was due to fraud (“penipuan”) which is

ascribed to the third party in the performance of its services. The 1st to 3rd

defendant’s claim against the third party was heard separately.

FINDINGS OF THE HIGH COURT

[11] The findings of the learned judge may be summarised as follows:

a) The third party is contractually obliged to ensure that the system

developed by them is free from any defects during the term of

the contract including the period;

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b) It was not possible for others who did not have the ID and

password to have access into the system;

c) The person who could have access into the system must be

someone who has had the ID and password; and

d) It was an employee of the third party who had accessed to the

system during the warranty period and who could have

manipulated the date pertaining to the land and printed the

column ‘kerani’ as Azhan.

SUBMISSION OF COUNSEL

[12] Learned counsel for the third party took up three main points. First,

he argued that there is no privity of contract between the 1st to 3rd

defendants and the third party to found a cause of action. Second, he

argued that the 1st to 3rd defendants pleaded fraud but did not plead

negligence against the third party; as such their claim for negligence

should be precluded. Thirdly, learned counsel argued that fraud was not

proved.

[13] On the first point, it was argued that the contract for the

implementation of the SPTK was between the Government of Malaysia

and the third party. The 1st to 3rd defendants are not privy to the contract.

As such, the 1st to 3rd defendants have no right to sue or claim any relief

under the contract (Kepong Prospecting Ltd & Ors v Schmidt [1968] 1

MLJ 170; Badiaddin bin Mohd Mahidin & Another v Arab Malaysian

Finance Bhd [1998] 1 MLJ 393; Tiong Hoo Teck v Wong Ho Enterprise

Sdn Bhd & Ors [2014] MLJU 298).

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[14] On the second point, learned counsel contended that the 1st to 3rd

defendants only alleged fraud against the third party and did not plead

negligence. It is not the duty of the court to make out a case for one of the

parties when the party concerned does not raise or wish to raise the point.

In disposing of a suit involving a disputed question of fact, it is not proper

for the court to displace the case made by a party in its pleadings and give

effect to an entirely new case which the party had not made out in its own

pleadings. The trial of the action should be confined to the pleas on which

the parties are at variance (per Sharma J in Janagi v Ong Book Kiat

[1971] 2 MLJ 196).

[15] On the third and final point, learned counsel argued that as far back

as 2004, the 1st to 3rd defendants already knew of the disputed ownership

of the land which was why they lodged the first Registrar’s caveat in 2004

and the second Registrar’s caveat in 2009. Other than the allegation that

the fraud was committed on 31.7.2003 by one ‘Azhan’ who was alleged

to be an employee of the third party at the material time, no evidence was

adduced to disprove exhibits D1 and D2 which showed Nor Azahan was

no longer an employee of the third party after December 2002. There is

also no evidence to show that Nor Azahan was at the Selangor land

registry on the date in question. Further, there was evidence to show that

Nor Azahan who was the former data entry clerk was working with the

third party from 21.7.2001 to 30.12.2002. In addition, the 1st to 3rd

defendants’ witnesses (DW2 and DW3) said that the third party and its

employees had no access to the database once Version 0 had been

converted to Version 1 and that only the Registrar could make changes

after the titles had been converted. There was no evidence adduced to

show how the third party’s employee could have gained access and made

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the alteration to the title on 31.7.2003 as alleged without the knowledge

or involvement of the Registrar.

[16] In reply to the first point, learned counsel for the 1st to 3rd defendants

argued that the state of Selangor was one of the intended recipients and

beneficiaries of the SPTB. As such, learned counsel argued that the third

party’s contractual obligations under the SPTB contract is also extended

to the 2nd and 3rd defendants (Shanklin Pier Ld. V Detel Products Ld

[1951] 2 KB 854). Therefore, the 1st to 3rd defendants’ action against the

third party is maintainable at law for the benefit of the 1st to 3rd defendants

as third parties under the SPTB contract (Beswick v Beswick [1968] AC

58).

[17] Learned counsel for the 1st to 3rd defendants did not respond to the

second point relating to pleadings. However, in reply to the third point,

learned counsel argued that the learned judge’s finding of fraud is

supported by the evidence. The change to the ownership particulars in the

issue document of title to the land in question were made after the

conversion from manual to digital SPTB system was completed. The

changes were made without being checked or authorisation of the 1st to

3rd defendants.

DECISION

[18] On the first point, it is clear that on the settled facts there is no privity

of contract between the third party and the 1st to 3rd defendants. However,

it is pertinent to note that the implementation of the SPTB included the

state of Selangor which thereby required the third party to perform the

services under the SPTB contract at the 3rd defendant’s premises and

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facilities. As such, the 2nd and 3rd defendants were the intended

beneficiary of the services to be rendered by the third party under the

SPTB contract; which therefore included the third party’s obligation during

the implementation period, the warranty period and the maintenance

period. We are, therefore, in agreement with the submission of the 1st to

3rd defendants that on the facts, the third party was obliged to carry out

the services, undertake and honour the warranties under the SPTB

contract and perform the maintenance works during the maintenance

period – in short, that the third party is to ensure the accuracy and integrity

of the data collection and keying in of the date into the SPTB.

[19] Insofar as the second point is concerned, it is patent on the

pleadings that negligence was not pleaded. Before dealing with the points

raised by the third party, we think it prudent to first ascertain the cause of

action upon which the 1st to 3rd defendants’ claim against the third party is

premised. A perusal of the 1st to 3rd defendants’ statement of claim against

the third party confirmed that the pleaded case against the third party is

that the issue document of title endorsing the 4th defendant as the

registered owner of the land is a forgery procured by fraud on the part of

the third party’s employee. Accordingly, we will proceed to deal with the

third point on whether fraud was proved.

[20] Whether fraud is proved is essentially a question of fact. It is well

settled that an appellate court will be slow to disturb a decision or finding

of fact of a trial court. An appellate court starts on the premise the trial

judge had the benefit and advantage of hearing and seeing witnesses

before making his conclusion or inference on weight of evidence.

Accordingly, an appellate court will not interfere with a finding of fact

unless there are circumstances that show the trial court to be plainly

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wrong in arriving at its decision. Where there is conflict of evidence, an

appellate court will have special regard to fact that trial judge saw and

heard the witnesses. In this regard, we would adopt the following

approach taken by the Court of Appeal in Perembun (M) Sdn Bhd v

Conlay Construction Sdn Bhd [2012] 4 MLJ 149, 154 (CA). The proper

approach is that if (i) it be shown that the judgment cannot be explained

or justified by the special advantage enjoyed by the trial judge by reason

of having seen and heard the witnesses testify and being tested before

him, and (ii) an injustice is demonstrated to have been occasioned by any

error by the trial judge, for example: (a) the judgment is based on a wrong

premise of fact or of law; (b) there was insufficient judicial appreciation by

the trial judge of the evidence of circumstances placed before him; (c) the

trial judge completely overlooked the inherent probabilities of the case; (d)

that the course or events affirmed by the trial judge could not have

occurred; (e) the trial judge had made an unwarranted deduction based

on faulty judicial reasoning from admitted or established facts; or (f) the

trial judge had so fundamentally misdirected himself that one may safely

say that no reasonable court which had properly directed itself and asked

the correct questions would have arrived at the same conclusion; an

appellate court will intervene to rectify the error so that injustice is not

occasioned.

[21] One must also distinguish between the finding of a specific fact and

a finding of fact which was really an inference from facts specifically found.

Whilst appellate courts are generally reluctant to reject a finding of specific

fact, particularly where the finding could be founded on the credibility or

bearing of a witness, there is nevertheless no less a willingness to form

an independent opinion about the proper inference of fact, subject only to

the weight that should be given to the judge’s opinion.

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[22] In this instance, the learned judge found as a specific fact that the

third party was obliged to ensure that the system developed by them are

free from any defects during the warranty period. Based on that finding,

the learned judge went on to make the following inferences of fact that (i)

it was not possible for others who do not have the ID and password to

have access to the system, (ii) the person who could have access to the

system must be someone who had the ID and password, and (iii) it was

an employee of the third party who had access to the system during the

warranty period and who could have manipulated the date pertaining to

the land and printed the column ‘kerani’ as ‘Azhan’.

[23] In our considered view, the learned judge erred when he discounted

exhibits D1 and D2 which went to show that Nor Azahan was no longer

employed with the third party after December 2002; there was no

evidence in rebuttal or any evidence for that matter to indicate that Nor

Azahan was at the Selangor land registry on the date on question, coupled

with the fact that the 3rd defendant’s internal inquiry failed to identify the

culprit. Further, there is no evidence to support the inference that the

name ‘Azhan’ which was recorded as the person who manipulated the

database was the same person as Nor Azahan. Since Nor Azahan was

no longer employed by the third party at the material time, it is improbable

that the person who effected the change to the date system under the

name ‘Azhan’ could have been Nur Azahan. We have also examined the

record of appeal and find that there is nothing even remotely to connect

Nur Azahan to the matter. Therefore, on a preponderance of probabilities

the person who effected the change to the data is not ‘Nur Azahan’; it must

have been some other person. Accordingly, we are constrained to hold

that the learned judge made wrong inference from the facts.

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[24] By reason of the foregoing, the 1st to 3rd defendants’ assertion of

fraud is not proven as there is no evidence to support the assertion.

Accordingly, we are constrained to allow the third party’s appeal as the 1st

to 3rd defendants’ claim against the third party has not been proven on a

balance of probabilities. The order of the learned judge is set aside. We

also award costs of RM30,000.00 here and below to the third party.

sgd

( Vernon Ong ) Judge Court Of Appeal Malaysia

Dated: 3rd October 2017

Counsel:

For the Appellant : Elisabeth Iype (Muhammad Haniff bin Othman &

Mahsuri binti Hussein bersamanya) Zainal Abidin & Co.

For the Respondent: Nik Haizie Azlin binti Nabidin (Muhammad Haziq bin Hashim bersamanya)

Penolong Penasihat Undang-Undang Negeri Selangor Kamar Penasihat Undang-Undang Negeri Selangor