1. Low Wan Choon v Kesb Properties Sdn. Bhd. (BA-12BNCvC-25-04/2018)

LOW WAN CHOON (NRIC No.: 530817-08-5503)

LAW NGUAN CHOOI (NRIC No.: 630425-08-5027) … APPELLANTS AND KESB PROPERTIES SDN. BHD. … RESPONDENT JUDGMENT (Appeal to High Court against Sessions Court’s decision after trial)

This judgment will refer to parties as they are in the Sessions Court (SC).

The plaintiffs (Plaintiffs) have sold their three-storey semi-detached shop/office to the defendant company (Defendant) by way of a sale and purchase agreement dated 27.11.2015 (SPA).

Regarding the SPA, Goods and Services Tax (GST) amounting to RM270,000.00 (Sum) had been paid by the Plaintiffs to the Director-General of Customs (DG).

The Plaintiffs claim that they are entitled to be indemnified for the Sum by the Defendant under clauses 12.2 and 12.3 SPA (Clauses 12.2 and 2

12.3). However the Defendant disputed such a claim. Hence, the Plaintiffs filed this suit in the SC for a reimbursement of the Sum by the Defendant (This Suit).

In This Suit -

the Plaintiffs applied for summary judgment (O 14 Application) but the O 14 Application was dismissed with costs by the SC (Dismissal of O 14 Application); and

This Suit proceeded to trial. After a trial, the learned SC judge (SCJ) dismissed This Suit with costs (SC’s Decision). This is the appeal by the Plaintiffs against SC’s Decision (This Appeal). B. SC’s Decision

According to the ground of judgment of the learned SCJ (GOJ), there are only two issues as follows:

whether Clauses 12.2 and 12.3 apply when the Plaintiffs have registered as a “taxable person” for the purpose of GST (GST Registration) after the completion of the SPA (Completion); and

whether Clauses 12.2 and 12.3 require the Defendant to indemnify the Plaintiff for the Sum (paragraph 6 GOJ).

The SC’s Decision is as follows: 3

the Plaintiffs had failed to discharge the legal burden under s 101 of the Evidence Act 1950 (EA) to prove that the Defendant should indemnify the Plaintiff regarding the Sum (paragraphs 7-12 GOJ). This was because the Plaintiffs had failed to call an officer from the Royal Malaysian Customs Department (RMCD), Encik Abdul Razak bin Ahmad Arshad (Encik Abdul Razak), who had sent a letter dated 15.6.2017 to the Plaintiffs’ solicitors (RMCD’s Letter). RMCD’s Letter answered the queries raised by the Plaintiffs’ solicitors regarding whether GST was chargeable in respect of the SPA;

a RMCD officer was also required to be called by the Plaintiffs in This Suit to explain the effect of “DG’s Decision:4, 2014” and “DG’s Decision:2, 2015” (DG’s Decisions) (paragraph 13 GOJ);

the evidence of a RMCD officer was important to determine whether GST was payable by the Plaintiffs when the Plaintiffs’ GST Registration took place after the Completion (paragraph 14 GOJ); and

the Dismissal of O 14 Application was based on the Plaintiffs’ failure to adduce evidence from RMCD. Despite the Dismissal of O 14 Application, the Plaintiffs still refused to call an officer from RMCD to testify in This Suit (paragraph 15 GOJ). C. Issues

I am of the view that the following questions arise in This Appeal: 4

in interpreting Clauses 12.2 and 12.3, whether the court is barred by ss 91 and 92 EA from considering the following matters -

the fact that the Plaintiffs’ GST Registration took place after the

the effect of RMCD’s Letter and DG’s Decisions;

the fact that the Plaintiffs may not be liable to pay GST under the Goods and Services Tax Act 2014 (GSTA);

the evidence of Encik Abdul Razak regarding RMCD’s Letter; and

the testimony of an officer of RMCD concerning the effect of DG’s Decisions and whether the Plaintiffs were required to pay GST for the SPA after the Completion;

has the learned SCJ committed, among others, an error of law when the SC took into account the Dismissal of O 14 Application?;

whether the SC can draw an adverse inference under s 114(g) EA against the Plaintiffs for not calling Encik Abdul Razak or any other RMCD officer regarding the construction of Clauses 12.2 and 12.3;

have the Plaintiffs breached GSTA?; and

whether this appellate court can set aside the trial court’s erroneous interpretation of Clauses 12.2 and/or 12.3?. D. Effect of ss 91 and 92 EA 5

Sections 91 and 92 EA provide as follows: “Evidence of terms of contracts, grants and other dispositions of property reduced to form of document s 91. When the terms of a contract or of a grant or of any other disposition of property have been reduced by or by consent of the parties to the form of a document, and in all cases in which any matter is required by law to be reduced to the form of a document, no evidence shall be given in proof of the terms of the contract, grant or other disposition of property or of the matter except the document itself, or secondary evidence of its contents in cases in which secondary evidence is admissible under the provisions hereinbefore contained. … Exclusion of evidence of oral agreement s 92. When the terms of any such contract, grant or other disposition of property, or any matter required by law to be reduced to the form of a document, have been proved according to section 91, no evidence of any oral agreement or statement shall be admitted as between the parties to any such instrument or their representatives in interest for the purpose of contradicting, varying, adding to, or subtracting from its terms: Provided that -

any fact may be proved which would invalidate any document or which would entitle any person to any decree or order relating thereto, such as fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, the fact that it is wrongly dated, want or failure of consideration, or mistake in fact or law;

the existence of any separate oral agreement, as to any matter on which a document is silent and which is not inconsistent with its terms, may be proved, and in considering whether or not this proviso 6 applies, the court shall have regard to the degree of formality of the document;

the existence of any separate oral agreement constituting a condition precedent to the attaching of any obligation under any such contract, grant or disposition of property, may be proved;

the existence of any distinct subsequent oral agreement, to rescind or modify any such contract, grant or disposition of property, may be proved except in cases in which the contract, grant or disposition of property is by law required to be in writing, or has been registered according to the law in force for the time being as to the registration of documents;

any usage or custom by which incidents not expressly mentioned in any contract are usually annexed to contracts of that description may be proved if the annexing of any such incident would not be repugnant to or inconsistent with the express terms of the contract; and

any fact may be proved which shows in what manner the language of a document is related to existing facts. …” (emphasis added).

It is clear that ss 91 and 92 EA apply to SPA (including Clauses 12.2. and 12.3). By reason of ss 91 and 92 EA, no evidence can be adduced by the Plaintiffs and Defendant to -

contradict;

vary; 7

add to; or

subtract from - the contents of SPA (including Clauses 12.2. and 12.3). In this respect, I rely on Chang Min Tat FJ’s judgment in the Federal Court case of Tindok Besar Estate Sdn Bhd v Tinjar Co [1979] 2 MLJ 229, at 232-233.

In this case, the Defence did not plead or allege the application of any one of the provisos (a) to (f) of s 92 EA to SPA. Hence, the Defendant is barred by ss 91 and 92 EA from adducing any evidence to contradict, vary, add to or subtract from Clauses 12.2 and 12.3 - please see Wan Hamzah SCJ’s judgment in the Supreme Court in Ho Shee Jan v Hadayat Harta Holdings Sdn Bhd [1989] 1 MLJ 33, at 35. E. How to construe Clauses 12.2 and 12.3?

Clauses 12.2 and 12.3 read as follows: “12.2 In the event that any tax is levied or imposed on the sale and purchase of the Property herein pursuant to [GSTA] the [Defendant] hereby agrees to and shall pay such tax imposed under the GSTA to the [Plaintiffs] upon demand by the [Plaintiffs]. The [Defendant] hereby agrees that the [Defendant] shall pay GST which may or become chargeable or imposed by the Appropriate Authorities, if applicable within [14] days from the date the [Defendant’s] receipt of a valid tax invoice issued by the [Plaintiffs] in compliance with any law under which GST is imposed. 8

12.3 The [Defendant] shall indemnify and keep the [Plaintiffs] fully indemnified against any GST and/or fines and/or penalties (which may arise as a result of any late payment or default in payment of GST) which may be or become chargeable or imposed by the Appropriate Authorities in respect of any payment of the Purchase Price for goods and services supplied under or in consequence of this [SPA].” (emphasis added).

It is trite law that interpretation of a contract is a question of law to be decided by the court and not by witnesses through their oral evidence. In the Court of Appeal case of NVJ Menon v The Great Eastern Life Assurance Company Ltd [2004] 3 CLJ 96, at 103-104, Gopal Sri Ram JCA (as he then was) delivered the following judgment: “… This is because the construction of a contract is a question of law for determination by the court and not by witnesses through their oral evidence. … It matters not a jot to us what the plaintiff thought his entitlements under the contract with the defendant were. Neither does it matter to us what the defendant’s witnesses thought of the way in which that contract ought to be interpreted. Their views are entirely irrelevant; as irrelevant as the views of the witnesses who gave their interpretation of the Financial Orders in Reynolds. In the instant case, the learned judge referred to the oral testimony and relied upon it for the interpretation of the agreements and circulars. That, in our view is clearly an inadmissible method of construction.” 9 (emphasis added).

The SPA concerns a commercial transaction and should be construed in a commercially sensible manner - please see the Federal Court’s judgment delivered by Gopal Sri Ram FCJ in Berjaya Times Squares Sdn Bhd (formerly known as Berjaya Ditan Sdn Bhd) v M Concept Sdn Bhd [2010] 1 MLJ 597, at [10].

Interpreting Clauses 12.2 and 12.3 in a commercially sensible manner (without considering any extrinsic evidence which is barred by ss 91 and 92 EA), I am of the following view:

the second sentence in Clause 12.2 [Clause 12.2 (2nd Sentence)] provides that the Defendant “shall pay GST which may or become chargeable or imposed” within 14 days from the date of the Defendant’s receipt of a valid tax invoice issued by the Plaintiffs in compliance with GSTA. In this case, it is not disputed that the Plaintiffs have paid the Sum. The phrase “GST which may or become chargeable or imposed” in Clause 12.2 (2nd Sentence) is sufficiently wide to include the Defendant’s obligation to reimburse the Sum to the Plaintiffs (after payment by the Plaintiffs) even though -

there has been a delay in the Plaintiffs’ GST Registration;

there is a Completion of the SPA; and

the Plaintiffs are not bound under GSTA to pay the Sum and had erroneously made such a payment (Alleged Error). In respect 10 of the Alleged Error, if the Defendant has reimbursed the Sum to the Plaintiffs, the Defendant may claim from the DG a refund of the Sum under s 57(1) GSTA. Section 57(1) GSTA provides as follows - “Refund of tax, etc., overpaid or erroneously paid s 57(1) Any person who has overpaid or erroneously paid any tax, surcharge, penalty, fee or any other money may make a claim thereof in the prescribed form to the Director General within six years from the time the overpayment or erroneous payment occurred and the Director General may refund the tax, surcharge, penalty, fee or any other money, as the case may be, after being satisfied that the person has properly established the claim.” (emphasis added);

Clause 12.3 is wider than Clause 12.2 (2nd Sentence). According to Clause 12.3, the Defendant “shall indemnify and keep the [Plaintiffs] fully indemnified against any GST … which may be or become chargeable or imposed … in respect of any payment of the Purchase Price … under or in consequence of this [SPA].”. Clause 12.3 imposes an obligation on the Defendant to repay the Sum to the Plaintiff (after the Plaintiffs have paid the Sum) despite any one or all of the matters stated in the above sub-paragraphs (1)(a) to (c); and

Clauses 12.2 (2nd Sentence) and 12.3 are independent of each other. In other words, the Defendant is liable to indemnify the Sum to the Plaintiffs under either one or both of Clauses 12.2 (2nd Sentence) and 12.3. 11 F. Had learned SCJ committed error of law?

A construction of a contractual provision is a question of law and not fact - Menon, at p. 103.

With respect, I am of the view that the learned SCJ has committed the following three errors of law (3 Legal Errors) regarding the interpretation of Clauses 12.2 (2nd Sentence) and 12.3 in this case:

according to the learned SCJ, the interpretation of Clauses 12.2 and 12.3 required the oral evidence of Encik Abdul Razak (who sent RMCD’s Letter). On the contrary, pursuant to ss 91 and 92 EA, the SC cannot consider the contents of RMCD’s Letter and any testimony from Encik Abdul Razak in the construction of Clauses 12.2 (2nd Sentence) and 12.3;

the SC had wrongly held that the Plaintiffs should have called an officer of RMCD to explain the effect of DG’s Decisions and the delay in the GST Registration. Premised on 91 and 92 EA, the learned SCJ cannot refer to DG’s Decisions in interpreting Clauses 12.2 (2nd Sentence) and 12.3; and

the learned SCJ had erroneously referred to the Dismissal of O 14 Application. In deciding a trial, the court is not bound by any previous interlocutory decision made before the trial. The learned SCJ is duty bound to consider This Suit without being fettered by the Dismissal of O 14 Application. I cite the following judgment of Gopal Sri Ram JCA (as he then was) in the Court of Appeal case of Hock Hua Bank (Sabah) Bhd v Yong Liuk Thin & Ors [1995] 2 MLJ 213, at 220, as follows - 12 “In my judgment, a judge may, after expressing a view in the course of an interlocutory proceeding, quite properly hear the main action and come to a conclusion diametrically opposite to that expressed at the interlocutory level. Translated to a case such as the present, a judge may grant an interlocutory injunction because he finds a particular line of defence taken to be untenable and yet, after hearing all the evidence and detailed argument at the trial, reach the opposite conclusion and dismiss the suit. I cannot help but think that such an occurrence is commonplace in our courts as it is indeed in other jurisdictions.” (emphasis added). G. Can court draw adverse inference against Plaintiffs?

The Defendant’s learned counsel has invited me to invoke an adverse inference under s 114(g) EA against the Plaintiffs due to the Plaintiffs’ failure to call Encik Abdul Razak or any other RMCD officer regarding the interpretation of Clauses 12.2 and 12.3. As explained in the above paragraph 13, the SC cannot consider any oral evidence in the construction of Clauses 12.2 (2nd Sentence) and 12.3. Accordingly, there is no basis to make any adverse inference under s 114(g) EA against the Plaintiffs for not calling Encik Abdul Razak or any other RMCD officer in this case. H. Whether Clause 12.2 (2nd Sentence) and 12.3 are enforceable

The Defendant has submitted that the Plaintiffs have contravened GSTA (Alleged Illegality). Consequently, the Plaintiffs cannot enforce Clauses 12.2 and 12.3 based on the maxim “ex turpi causa non oritur actio”. 13

Firstly, I find no evidence of any breach of GSTA by the Plaintiffs, especially when the Plaintiffs have paid the Sum. Secondly, if the Alleged Illegality exists -

the DG would have imposed a penalty on the Plaintiffs under GSTA; or

the Public Prosecutor would have commenced prosecution against the Plaintiffs for committing an offence under GSTA.

It is to be noted that according to Clause 12.3, the Defendant “shall indemnify and keep the [Plaintiffs] fully indemnified against any GST and/or fines and/or penalties (which may arise as a result of any late payment or default in payment of GST) which may be or become chargeable or imposed”. It is clear that even if the Plaintiffs have incurred any fine or penalty regarding the GST to be paid for the SPA (there is no proof in this case), the Defendant is still contractually bound by Clause 12.3 to indemnify the Plaintiffs regarding the Sum, fine and penalty. I. Whether there should be appellate intervention

The Defendant’s learned counsel has cited a host of cases regarding the reluctance of the appellate courts to set aside trial court’s findings of fact, especially findings regarding credibility of witnesses.

This Appeal concerns solely an interpretation of Clauses 12.2 (2nd Sentence) and 12.3. There is no finding of fact, let alone finding on credibility of witnesses, by the learned SCJ. Regarding the construction of a contract, an appellate court is the same position as the trial court and 14 does not suffer any audio-visual disadvantage of not having the benefit of -

listening to the oral evidence of witnesses given at the trial; and

assessing the demeanour of witnesses. Based on the above reasons, an appellate court can set aside a trial court’s interpretation of a contract if such an interpretation is erroneous and has caused an injustice to the appellant.

Sitting in an appellate capacity, I have no hesitation to set aside SC’s Decision because -

the learned SCJ has committed 3 Legal Errors regarding the construction of Clauses 12.2 (2nd Sentence) and/or 12.3 - please refer to the above paragraph 17;

an injustice has been caused to the Plaintiffs who have paid the Sum and the Defendant has breached Clauses 12.2 (2nd Sentence) and 12.3 by not reimbursing the Sum to the Plaintiff; and

if This Appeal is allowed, there is no prejudice to the Defendant who may claim for a refund of the Sum from the DG - please see the above sub-paragraph 15(1)(c). J.

In view of the above reasons, This Appeal is allowed with costs. The Defendant should be mindful that there is a six-year time period (from the date of the Plaintiff’s payment of the Sum) to claim for a refund of the Sum from the DG pursuant to s 57(1) GSTA. 15 WONG KIAN KHEONG Judge High Court of Malaya Shah Alam, Selangor Darul Ehsan DATE: 22 APRIL 2019 Counsel for Appellants: Ms. Ling Lae Feei (Messrs Feei, Feisal & Partners) Counsel for Respondent: YM Engku Aminuddin bin Engku Ibrahim (Messrs Engku Aminuddin & Co.)