Luqman Zulhusni Bin Ismael & Ors v Musharaka Venture Management Sdn Bhd

Appellant(s):

• Luqman Zulhusni Bin Ismael
• Hairul Hisham Bin Mohamad Soradi
• Quantum Desire Sdn Bhd

Respondent(s): Musharaka Venture Management Sdn Bhd

• YA Datuk Noorin binti Badaruddin
• YA Dato' Ahmad Kamal Bin Md. Shahid
• YA Dato' Sri Latifah Binti Haji Mohd Tahar

• The first and second appellants were former employees and directors of the respondent who were found liable at trial for diverting a business project (a fund-management joint venture) from the respondent in breach of their fiduciary and fidelity duties, using the third appellant company as the vehicle for the diverted project; this liability finding was upheld on appeal and leave to the Federal Court was refused, rendering it final.
• During the subsequent assessment of damages, the appellants initially denied possession of the relevant Joint Venture Agreement (JVA), later produced an incomplete copy missing key appendices, with the complete documents only obtained via a subpoenaed third party; the trial judge drew adverse inferences from this conduct and imposed an unpleaded constructive trust requiring the appellants to account for benefits from the project.
• The High Court awarded the respondent RM44,612,274.40, comprising RM20 million in management fees and RM32 million in profits (both calculated using an assumed RM100 million fund size) plus RM3,765,343 in directors' remuneration treated as performance bonuses, less a 20% deduction for expenditure, prompting this appeal on quantum only.

• Whether a finding of liability, combined with adverse inferences drawn under s 114(g) of the Evidence Act 1950 for non-production of documents, can relieve a claimant of its burden to prove the factual foundation of substantial compensatory damages.
• Whether the High Court erred in adopting a "minimum targeted fund size" of RM100 million (rather than an actual sum raised or committed) as the evidential basis for calculating management fees and loss of profits.
• Whether the imposition of an unpleaded constructive trust, and the use of an accounting obligation, can substitute for the claimant's evidential burden of proving the quantum of loss or benefit obtained.

• The Court of Appeal held that establishing liability does not establish quantum, and a claimant must still prove the factual foundation of its loss on a balance of probabilities; an adverse inference under s 114(g) may indicate that undisclosed evidence would not have assisted a party, but cannot be used to prove the specific quantum of a claim or transform an unproved target into an established fact.
• The Court found that the RM100 million figure was merely a contractually stated "target" fund size, not proven to be an amount actually raised, committed, or probably achievable, and that the multiplication of a RM30 million actual fund by 12 investor agreements to infer a RM360 million fund was speculative and unsupported by evidence; consequently, the RM20 million management fee and RM32 million profit awards (both dependent on the RM100 million assumption) could not stand.
• The Court ruled that while a constructive trust may arise by operation of law even if unpleaded, it does not relieve a claimant of proving the quantum of benefit obtained, and directors' remuneration was not shown to be a "performance bonus" benefit that would have accrued to the respondent; the High Court's award was set aside in its entirety and replaced with nominal damages of RM20,000, with costs of RM30,000 awarded to the appellants.