Kerajaan Malaysia v Mohd Nazifuddin Bin Mohd Najib (WA-29NCC-100-02/2021)

These Grounds are filed in respect of appeals (“the Appeals”) against the dismissal of the applications for stay of bankruptcy proceedings.

The Appeals are filed by MOHD NAJIB BIN HJ ABD RAZAK (“JD”) the Judgment Debtor (in Encl 67) in WA-29NCC-99- 02/2021 (“Suit 99”) and MOHD NAZIFUDDIN BIN MOHD NAJIB, the Judgment Debtor (in Encl 36) in WA-29NCC-100-02/2021 (“Suit 100”).

The initial decision dismissing the applications is that of the Deputy Registrar, Tuan Kamarul Aris bin Kamalluddin (“DR”) given on the 29.07.2024 who dismissed the applications with costs of RM3,000.00. The Appeals from the DR’s decision were then fixed before me.

The 2 Appeals are similar, and it was agreed between Counsel that the appeals would be decided on the basis of the Appeal in Suit 99 and a similar decision would then be handed down for Suit 100.

The contents of these Grounds are set out in the table below. Contents Para No INTRODUCTION 1-6 THE BACKGROUND FACTS 7-24 The Appeals 25-27 The Test for Stay 28-42 Irreparable Harm 43-44 CONCLUSION 45

The background facts set out below are taken from the submissions of Counsel for the JD for which I am grateful. I believe that these facts are undisputed.

The JD is the former Prime Minister of Malaysia, the former President of the United Malays National Organization (UMNO) and the former President of the Barisan Nasional coalition (BN). The JD’s political career commenced in 1976 and since then, the JD has held and/or is still holding the following offices:

Member of Parliament of Pekan from 1976 to date;

Menteri Besar Pahang from 1982 up to 1986;

Cabinet Minister in various portfolios since 1986 to 10.5.2018;

Deputy Prime Minister of Malaysia from 7.1.2004 to 2.4.2009;

Prime Minister of Malaysia from 3.4.2009 to 10.5.2018; and

Advisor to the Barisan Nasional coalition party.

The JC is the Government of Malaysia.

On 15.03.2019, the JC raised a notice of additional assessments against the JD (Form JA) for the years of assessment 2011 to

The said notice provided for additional assessments as follows: Year of Assessment Additional Tax Assessment 2011 RM 116,173,374.12 2012 RM 320,929,932.31 2013 RM 891,573,465.46 2014 RM 119,144,655.51 2015 RM 16,879,500.03 2016 RM 643,445.21 2017 RM 346,471.41 TOTAL

On 19.03.2019, the JC issued Form JR for the assessment years from 2011 to 2017 wherein it stated that the total additional tax assessments of RM1,465,690,844.00 was withdrawn and no additional tax was payable for such years.

On 20.03.2019, the JC reissued Form JA for the assessment years from 2011 to 2017 wherein it stated that the total additional tax assessments of RM1,465,690,844.00 was reinstated and became payable by the JD.

On 18.04.2019, the JD filed a notice of appeal (Form Q) to the Inland Revenue Board of Malaysia against the notice of additional assessments dated 20.03.2019.

On 25.06.2019, the JC through the Inland Revenue Board of Malaysia filed a Civil Suit in the KL High Court against the JD seeking payment of a total of RM1,692,872,924.83 with interest at 5% per annum from the date of judgment, together with costs and such other relief deemed fit by the Court.

The JC contends that the JD had failed to pay tax assessed within the stipulated period and as such, penalties (10% & 5% of the tax due and payable) have been imposed. The breakdown of the JC’s claim is as follows: Additional Assessment of Year 2011 Tax 116,173,374.12 Increased under s.103 of Income Tax Act 1967 (“ITA”) (10%) 11,617,337.41 Increased under s.103 6,389,535.57 134,180,247.10 Additional Assessment of Year 2012 Tax 320,929,932.31 Increased under s.103 32,092,993.31 Increased under s.103 17,651,146.27 370,674,071.81 Additional Assessment of the Year 2013 Tax 891,573,465.46 Increased under s.103 89,157,346.54 Increased under s.103 49,036,540.60 1,029,767,352.60 Additional Assessment of Year 2014 Tax 119,144,655.51 Increased under s.103 11,914,465.55 Increased under s.103 6,552,956.05 137,612,077.11 Additional Assessment of Year 2015 Tax 16,879,500.03 Increased under s.103 1,687,950.00 Increased under S.103 928,372.50 19,495,822.53 Additional Assessment of Year 2016 Tax 643,445.21 Increased under s.103 64,344.52 Increased under s.103 35,389.48 743,179.21 Additional Assessment of Year 2017 Tax 346,471.41 Increased under s.103 34,647.14 Increased under s.103 19,055.92 400,174.47 Total amount claimed 1,692,872,924.83

Civil proceedings were then commenced. On 04.07.2019, the JC served a Writ of Summons dated 25.6.2019 on the JD.

On 8.08.2019, the JC filed Notice of Application for Summary Judgement against the JD pursuant to Order 14 rule 1 of the Rules of Court 2012 (Encl 6).

On 22.08.2019, the Dispute Resolution Department referred the JD’s Form(s) Q to the Special Commissioner of Income Tax (“SCIT”).

On 22.07.2020, the High Court Judge allowed the JC’s summary judgment application with costs (“the Judgment”).

On 27.07.2020, the JD filed his Notice of Appeal to the Court of Appeal against the decision of the KL HCt dated 22.07.2020 granting the Judgment (“Order 14 Appeal”).

On 5.04.2021, the JD was served with the Bankruptcy Notice dated 04.02.2021 for the sum of RM1,738,804,204.16 being the Judgment sum, interest, and costs.

On 9.09.2021, the Court of Appeal dismissed the JD’s Order 14 Appeal.

On 13.09.2021, the JD filed a Motion for Leave to Appeal against the decision of the Court of Appeal dated 09.09.2021. On 10.05.2022, the Federal Court granted leave to appeal. On 20.05.2022, the JD filed a Notice of Appeal against the decision of the Court of Appeal dated 09.09.2021.

However, on 16.10.2023, the Federal Court dismissed the JD’s Order 14 Appeal. With this dismissal, there was no other realistic avenue left to challenge the Judgment.

The JD then filed an application for a stay of the bankruptcy proceedings. This stay was dismissed by the Registrar on 29.7.2024, which led to filing of the Appeals, which were before me.

It is clear that the Appeals are by way of a rehearing: Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd [1994] 2 CLJ 716 at para 3.

The JD submits that there are sufficient grounds warranting the granting of a stay of the bankruptcy proceedings being, inter alia, the following: a) the JD’s review against the additional tax is currently in progress with the Inland Revenue Board of Malaysia; b) the JD’s appeal to SCIT (Form Q) is currently pending; c) the Bankruptcy Order (if entered) would cause irreparable harm to the JD, which cannot be compensated with reimbursement and/or payment of costs; d) the stay of this bankruptcy proceedings does not cause any prejudice to the JC being an agent of the Government of Malaysia. e) there are merits to the appeal.

The merits of the appeal before SCIT are that there is gross error in the computation of the tax raised, due to: a) an error in computation in arriving at RM1,692,872,924.83 tax payable as the said funds are a donation and not within the definition of “income” as defined in ss. 3 and 4 of the ITA; b) there being a refund of the donation received amounting to RM2,034,350,000, which was unaccounted for; c) the inter-bank account fund transfer of RM251,333,116 was treated as Duplicate Income; d) the net total donations received and fully disbursed out was RM1,344,602,070; the JD did not retain these donations, which constitute a significant portion of the taxable sums. As at 31.03.2015, all funds related to these accounts no longer belong to the JD; e) that the dividend received from AmBank as ‘Hibah’ amounting to RM25,045,793 was fully utilised for political and corporate social responsibility purposes.

Initially, Counsel for the JD relied on, inter alia, s. 97 of the Insolvency Act (“IA”) as a basis for the stay. He also relied on Rule 137 of the Insolvency Rules 2017 and Order 92 rule 4 of the Rules of Court 2012.

What became increasingly apparent was that s. 97 had no application as there were no proceedings under a Petition filed as required by the section. All Counsel accepted that s. 97 did not apply. As such, it was also accepted that the test under s. of ‘sufficient reason’ could not apply.

Out of completeness, the test of ‘special circumstances’ for a stay of execution of judgment also did not apply to a stay of bankruptcy proceedings, see the Court of Appeal decision in Chen Ying @ Chin Ying v Export-Import Bank of Malaysia Bhd [2016] 4 MLJ 324. At p. 331, Mary Lim JCA held, commenting on the test of ‘sufficient reason’ under s. 97: “[17] We believe it is important to be reminded of the different considerations at play. In an application for stay of enforcement or execution of judgment, the test should rightly by ‘special circumstances.’ This has long been the abiding test – see Kosma Palm Oil Mill Sdn Bhd & Ors v Koperasi Serbausaha Makmur Bhd [2004] 1 MLJ 257; Ming Ann Holdings Sdn Bhd v Danaharta Urus Sdn Bhd [2002] 3 MLJ 49. That, however, is not the test for a stay of bankruptcy proceedings. The test as enunciated in s 97 itself is the provision of sufficient reason.” See also Re Rosli Abdul Kadir; Ex p Bank Kerjasama Rakyat Malaysia Bhd [2008] 5 CLJ 691: [6]. At page 334, Mary Lim JCA said: “[32] We agree. We are of the opinion that express statutory provision cannot be ignored nor can we try and draw parallels with the other test of stays of enforcement or execution of orders.”

The source of the power to grant stay in bankruptcy proceedings other than those under a bankruptcy Petition under s. 97 was revealed by the Federal Court in Mohd Najib bin Hj Abd Razak &

Anor v Government of Malaysia and another appeal [2023] 6 MLJ The case arose in the context of a challenge to s. 106(3) of the ITA as being unconstitutional for excluding the jurisdiction of the Court; since the provision precluded the court from entertaining any plea that the taxed amount was excessive, incorrectly assessed, under appeal or incorrectly increased. The Federal Court in a careful judgment, rejected the challenge, demonstrating that the powers of the Courts were preserved and not excluded, in particular, the power to grant a stay if there are sufficient grounds.

In para 9, the Federal Court, speaking through Nallini Pathmanathan FCJ, held: “[9] Although collection might precede the full adjudication of the dispute, it is relevant to note that the Director-General of Inland Revenue (‘DGIR’) possesses the power and discretion to allow for suspension, payment in instalments, partial payment and a variety of other means as an alternative to payment in full immediately (see s 107B of the ITA for instance). Similarly, the courts have the power to stay full enforcement on failure to pay by the taxpayer pending appeals, if sufficient grounds are made out.”

This is new and I would not want to hazard a guess as to what would be enough to constitute ‘sufficient grounds’ in this context.

However, I will approach the matter on the basis of what I believe will NOT be enough to warrant such a stay. This approach is enough to dispose of the Appeals.

Counsel for the JD submitted that the substantial merits of the JD’s appeal before SCIT, constitute sufficient reasons to warrant the granting of a stay pending the SCIT Appeal.

With respect, this submission misunderstands the tax model enshrined in the ITA. It is a ‘pay now dispute later’ model, which is designed to ensure prompt collection of tax in the interest of the nation. The merits are to be determined by SCIT and not by the Courts, the latter being merely to facilitate the collection of tax. The Federal Court held: “[86] Put another way, adjudication of the merits of an assessment fall to be considered by the SCIT under s 99(1) of the ITA with recourse to the superior courts by way of appeal. However, for purposes of immediate collection and recovery of sums assessed to be due by the DGIR, recourse is made to the courts under s 106 of the ITA supported by s 142(1) of the ITA and s 103B of the ITA to give effect to the ‘Pay first dispute later’ scheme and operation of the ITA. [87] The court under s 106 of the ITA is fulfilling the purpose of recovery or collection only. It is not undertaking a full judicial adjudicatory role. Its full adjudicatory judicial power is deferred to the appeal arising from the decision of the SCIT by way of questions of law, or administrative or constitutional judicial review at a subsequent stage.”

The Court’s role is therefore only to facilitate the recovery of tax, almost as a tax collection agency. The adjudication of the merits of a challenge to an assessment is left to SCIT under s. 99(1) of the ITA. The ‘pay now dispute later’ scheme of the ITA requires the Courts to facilitate the recovery of tax and not to adjudicate the merits of an assessment. The Federal Court held: “[90] This is borne out by the characterisation of the quantum of assessment (falling due after issuance by the DGIR and expiry of the time period given to make payment) as a ‘debt’ under s 106(1). This means that the sum assessed becomes a ‘debt’ due under the ITA, which is recoverable in civil proceedings. [91] This statutory certification of the sum assessed as a debt means that the sum so certified is statutorily due and payable. However, it is equally clear from a perusal of the ITA as a whole, that it is not a final determination of the sum due and owing by the taxpayer because s 99(1) of the ITA remains untouched and enables the taxpayer to proceed with his grievances through the SCIT and the entire hierarchy of the courts. It follows that the sum adjudged to be due under s 106 is to facilitate the collection and recovery of the sum assessed under the ‘Pay first, dispute later’ system. [92] This mode of construction of s 106 of the ITA is the preferred and correct construction for yet another reason. It is not open to a court to adjudicate on the same debt twice.”

Secondly, a pending appeal before SCIT is also not enough to justify a stay. Otherwise, it would hamper the collection of tax and disrupt the ‘pay first dispute later’ model of the ITA. The Federal Court held at paras 155 and 156: “[155] In other words, while the process of appeal is pending the tax becomes due, putting into effect the ‘Pay first, dispute later’ system that defers the dispute but requires immediate payment. This is an essential aspect of expeditious and efficient collection of tax which is required to enable the nation to function effectively. Therefore, notwithstanding the taxpayer’s right to challenge the tax assessed through the SCIT and subsequently the hierarchy of the courts, payment is not deferred. Any seeming ‘inequity’ is met by the guaranteed right of repayment under the Act. [156] The deferral of the challenge or dispute as to the tax assessed is further borne out by s 103B which provides: ‘The institution of any proceedings under any other written law against the Government or the Director General shall not relieve any person from liability for the payment of any tax, debt or other sum for which he is or may be liable to pay under this Part.”

And at para 165: “[165] Once the statutory s 106 debt is subject to a full-blown trial, there cannot be another or second attempt at litigation under s 99(1) of the ITA as that would give rise to res judicata and/or issue estoppel. Therefore, the entire purport and effect of the ITA would be thwarted by a full trial under the O 14 civil procedure under the Rules of Court 2012. This is in accord with the older case-law which stipulates that such defences are to be remitted to the equivalent of the then SCIT and not considered by the courts. To that extent there was appreciation of the fact that judgment under s 106 of the ITA was for purposes of ensuring payment of taxes first while disputes were adjudicated later.”

As such, a mere appeal to SCIT does not hamper the obligation to pay the tax assessed and to dispute the adjudication at a later date.

The effect of the model was accurately summarised in Re Osman bin Ahmad; ex parte The Government of Malaysia [2020] MLJU 2489 at para 8: “[8] … Even if there was a tax appeal lodged by the Appellant to the Special Commissioners of Income Tax, that does not deprive the Respondent from proceeding with recovery action by way of civil proceedings as provided in Section 103(1) of the Income Tax Act

In Chong Woo Yit v Government of Malaysia [1989] 1 CLJ 9, the Supreme Court held that: “[2] On service of a notice of assessment on the person assessed, the tax payable under the assessment becomes due and payable whether or not the person appeals against the assessment and would be recovered by the Government by civil proceedings as a debt due to the Government. [3] On such civil proceedings being brought by the Government, the Court, unlike the Special Commissioners of Income Tax, has no power to entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal, or incorrectly increased.”

As such, the law is clear and settled. The mere fact that the JD’s review against the additional tax is in progress with SCIT, does not render concurrent bankruptcy proceedings improper or an abuse.

It was argued that if the bankruptcy proceedings are not stayed, the JD will be declared bankrupt. It was submitted that this would inflict irreparable harm on the JD's financial situation, standing, and political career, damages that cannot be rectified should SCIT and/or other courts re-evaluate and adjust the tax assessments in the JD’s favour.

With respect, I find it difficult to accept these reasons, particularly when full refund will be made under s. 111 of the ITA if the JD is successful in the appeal before SCIT.

I therefore dismiss the appeal by the JD in Suit 99. As such, the appeal in Suit 100 is also dismissed. I award costs of RM7,500 for each appeal. Dated the 26th day of November 2025 ............................t.t............................ YA TUAN SAHERAN SUHENDRAN JUDICIAL COMMISIONER OF THE HIGH COURT HIGH COURT (COMMERCIAL 11) (INSOLVENCY 2) HIGH COURT OF KUALA LUMPUR IN THE FEDERAL TERRITORY, MALAYSIA Case References: • Chen Ying @ Chin Ying v Export-Import Bank of Malaysia Bhd [2016] 4 MLJ 324 • Mohd Najib bin Hj Abd Razak & Anor v Government of Malaysia and another appeal [2023] 6 MLJ 483 • Re Osman bin Ahmad; ex parte The Government of Malaysia [2020] MLJU 2489 • Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd [1994] 2 CLJ 716 Legislation References: Counsel for the Judgment Debtor: Solicitors: Wee Yeong Kang Messrs. Shafee & Co. (Kuala Lumpur) Counsel for the Judgment Creditor: Norhisham bin Ahmad + Al Hummidallah Idrus + Siti Maisarah Ab Rahim Lembaga Hasil Dalam Negeri (LHDN), Wilayah Persekutuan (Kuala Lumpur) • Insolvency Act (“IA”) • Order 92 rule 4 of the Rules of Court 2012 • Rule 137 of the Insolvency Rules 2017 Decision Date: 17th November 2025