Stakeholder

Lee Yoke Chye v. Toh Theam Bock

Stakeholder" is often used both by estate agents and the courts to describe the status of an estate
agent who accepts a deposit (a) in the course of negotiation or (b) after a contract has been
concluded.

The essence of stakeholding in vendor and purchaser cases is that a binding contract of sale has
been entered into and the intending purchaser deposits with a third party a sum to be held pending
completion; meanwhile the third party holding that deposit may part with it to neither contracting
party without the con-sent of the other, and if competing demands arise he can interplead.

Toh Theam Hock v. Kemajuan Pewira Management Corp

The word 'stake' is in common parlance used to apply to any money to be disposed of in accordance
with what may happen in future: and whoever is in possession of the money is often described as a
stakeholder. The manner in which the money is to be disposed of depends on the terms on which it is
held.

Burt v Claude Cousins & Co Ltd & Another [1971] 2 QB 426

The liability of a stakeholder is as follows

‘If an estate agent or a solicitor, being duly authorised in that behalf, receives a deposit 'as
stakeholder', he is under a duty to hold it in medio pending the outcome of a future event. He does
not hold it as agent for the vendor, nor as agent for the purchaser. He holds it as trustee for both to
await the event.’

OCBC v. Lee Lee Fah

The correctness of the decisions depends on the question whether under the contract the
purchasers had performed all the conditions precedent entitling them to a transfer of the land. It is
wrong to say that until the money is in the hands of the vendors, the purchasers are not entitled to
the transfer.

In the present case, both parties mutually agreed that the solicitor be made the stakeholder even
though the solicitor was nominated by the purchaser. However, the court here is concerned with the
appointment in the capacity as a stakeholder.

By handing over the balance of the purchase price to the stakeholder, the purchaser had done
everything that needs to be done under the agreement. The purchaser had parted with the balance
of the purchase price beyond recall to the stakeholder. Even if the purchaser changes its mind, the
purchaser is in no position to recall the money from the stakeholder. Therefore, the purchaser is
under no duty to ensure that the money in the hands of the stakeholder was actually handed over to
the vendors. In the normal course of events it would be handed over to the vendors. The loss must
remain where it fell in the hands of the vendors. The vendors have sold the property for which they
have not received the balance of the purchase price, therefore their remedy lies only against the
stakeholder.

In addition to being deprived of the balance of the purchase price, the respondents have also lost
their titles to the land.
*When the solicitor who is the stakeholder misappropriates the money, the loss must fall on the
vendors even though the solicitor was appointed by the purchasers. This is because the true position
in law that by mutual consent the parties have made the purchasers' solicitor the stakeholder. The
fact that the particular solicitor was appointed by the purchasers as their solicitor was immaterial.
The loss must be allowed to remain where it falls. The purchasers had done everything under the
agreement to obtain title to the properties and there was no duty on the part of the purchasers to
ensure that the vendors did receive the money from the stake-holder. The remedy of the vendors
was to proceed against the stakeholder.

*the court distinguished Kuldip Singh,

“ It is this mutuality of appointment that singles out the instant appeals from the facts of the case of
Kuldip Singh & Anor v Lembaga Letrik & Anor…. In Kuldip Singh there was no express appointment of
any stakeholder in the sale and purchase agreement. Wan Hamzah J (as he then was) held that on
the facts before him, he was of the opinion that the solicitors who acted for the purchasers and also
received part of the purchase price on behalf of the vendor, held such money as stakeholders for a
limited period i.e. until the happening of two specific events, which he identified. On the happening
of the two events, the solicitors ceased to hold the money as stakeholders and it was at this point of
time that the money was appropriated. Additionally cl 4 of the sale and purchase agreement
specifies that any payment out of the money in the solicitors' possession was to be done by them in
their capacity as the purchasers' solicitors. As such Kuldip Singh's case is distinguishable based on its
own peculiar facts.”

Whoever is entitled to the money has a right to claim, he has to bear the lost
It depends on which stage the transaction was – here the purchaser paid the
price and the vendor has executed the registrable document but had not
received the money yet. So, the vendor is entitled to the money and he had
to bear the loss.

Kuddip Singh v Lembaga Letrik Negara [1983] 1 MLJ 256

Where the specified events for which a stakeholder is appointed have taken place, the stakeholder
would then be treated as only an agent for the parties. No longer trustees for both parties. The
appointment of the role has come to an end as the two events had taken place.

If the stakeholder absconded, the loss should fall on the person according to the contract had a
claim to the money at that time when he absconded. Whoever is entitled to the money should bear
the loss and who would be able to claim from the stakeholder. Your remedy is against the
stakeholder.

“ I am of opinion that Brar received the cheque of $46,000 as a stakeholder. But Brar was holding the
money as a stakeholder not all the time but only until the occurrence of the specific events stated in
paragraph 2 of the letter of June 3, 1976. The events were:--

(a) signing of the transfer form by the Second Defendant and the Plaintiffs, and

(b) the solicitor feeling certain that the transfer could be registered free from encumbrances
There is nothing in the evidence to show that the transfer could not be registered free from
encumbrances if Brar was willing to do what he was supposed to do, i.e. to send sufficient amount
out of the $46,000 to Chung Khiaw Bank Limited to obtain discharge of the encumbrance on the
house. On the occurrence of the events (a) and (b) Brar ceased to hold the money as stakeholder,
and at the time when he appropriated it he was no longer holding it in the capacity of stakeholder
but in the capacity of solicitor for the Plaintiffs, because upon the occurrence of the events (a) and
(b) he as solicitor for the Plaintiffs was supposed to pay a part of the money to Chung Khiaw Bank
Limited and the balance to the Second Defendant. It is clear from clause 4 of the sale and purchase
agreement that he was to make the payments in the capacity of solicitor for the Plaintiffs.

I emphasise the words "purchasers' solicitors"to stress the point that the payments to the Bank and
to the vendor (the Second Defendant) were to be made by the purchasers' solicitors on behalf of the
purchasers. Since Brar had appropriated the money at a time when he was holding it as solicitor and
agent for the Plain-tiffs, it is not the First Defendant but the Plaintiffs who should bear the loss. The
loan should be treated as having been paid to the Plaintiffs and the First Defendant is entitled under
the loan agreement to make monthly deductions from the Plaintiffs' salaries to recover the loan.

At no time was Brar holding any part of the money as solicitor or agent for the Second Defendant.
The signed instrument of transfer "shall be kept by the purchasers' solicitors who shall also act for
the vendor". The only occasion when Brar was acting as solicitor for the Second Defendant was
when he was keeping the signed instrument of transfer, and he was acting for the Second Defendant
for that purpose only and for no other purposes

In Sorrell v Finch [1976] 2 WLR 833 Lord Edmund-Davies repeated what he had stated earlier in
another case as follows:--
"The just solution of the problem of which of two innocent parties should suffer should depend very
largely (and possibly conclusively) upon what rights could have been asserted by each of them in respect
of the money in the (estate) agent's (i.e. the stakeholder's) hands at all material times."

So in the present case if, for example, the Second Defendant refused to sign the transfer, the First
Defendant would have the right to call back the money from the stakeholder, i.e. Kirpal Singh Brar &
Co.; and if Brar had appropriated the money after the Second Defendant had refused to sign the
transfer, the First Defendant would have to bear the loss. But the First Defendant had no right to
claim the money in the hand of Kirpal Singh Brar & Co. after the Plaintiffs and the Second
Defendant had signed the transfer and it became clear that the transfer could be registered free
from encumbrances after redemption in accordance with the sale and purchase agreement; and
Kirpal Singh Brar & Co. was then holding the money as agent for the Plaintiffs for the purpose of
making payments in accordance with the sale and purchase agreement.”