Mandarin Pavilion Sdn Bhd v Chang Vui Lun dan Then Shyen Ze (S-02(A)-705-04/2017)

IN THE COURT OF APPEAL OF MALAYSIA APPELLATE JURISDICTION CIVIL APPEAL NO. S-02(A)-705-04/2017 BETWEEN MANDARIN PAVILION SDN BHD (Company No. 734735-M) ... APPELLANT AND CHANG VUI LUN (NRIC No. 820925-12-5387) THEN SHYEN ZE (NRIC No. 820927-12-5234) ... 1 $ ^{1 \mathrm{st}} $ RESPONDENT ... 2 $ ^{n d} $ RESPONDENT (In the matter of Originating Summons No. BKI-24-80/8-2016 (HC2) in the High Court of Sabah and Sarawak at Kota Kinabalu). In the matter of Sale and Purchase Agreement dated 01.04.2014 between Mandarin Pavilion Sdn Bhd as the developer, Adin Bin Sungan as the landowner, Chang Vui Lun and Then Shyen Ze as the purchasers And In the matter of the liability to pay Goods and Services Tax ("GST") for the Sale and Purchase Agreement dated 01.04.2014 Between Chang Vui Lun (NRIC No. 820925-12-5387) ...1st Plaintiff Then Shyen Ze (NRIC No. 820927-12-5234) ...2nd Plaintiff And Mandarin Pavilion Sdn Bhd (Company No. 734735-M) ...Defendant BEFORE THE HONOURABLE DAVID WONG DAK WAH, JCA ABANG ISKANDAR BIN ABANG HASHIM, JCA YEOH WEE SIAM, JCA JUDGMENT OF THE COURT Introduction:

1. This appeal related to the sole issue of whether the Government Service Tax (GST) is payable by the Respondents/Plaintiffs in the context of an agreement entered between the Appellant/Defendant and the Respondents prior to the introduction of the Goods and Service Tax Act 2014 (GST Act).

2. The High Court held that no GST was payable by the Respondents premised on the learned Judge's construction of Clause 25 of the agreement between the parties, resulting in this appeal.

3. We heard the appeal and dismissed the same. We now give our reasons for our decision. Background facts:

4. The Appellant is the developer of a project known as the "Austin Business Park Mogonibung" consisting of 53 units of 2-storey and 3-storey shop office.

5. The Respondents pursuant to a sale and purchase agreement dated 01.04.2014 (SPA) jointly purchased one (1) unit of three (3) storey shop office lot known as Lot 52, Block F, Austin Business Park Mogonibung (the Property) from the Appellant subject to the terms and conditions therein contained for a purchase price of RM1,349,000.00 which sum is to be paid by way of progressive payments premised on works completed.

6. At the time when the parties entered into the SPA on 01.04.2014, there was no GST Act, which Act only came into force on 01.04.2015.

7. The Appellant is a GST registered company under the GST Act. Appellant's position:

8. It is the position of the Appellant that with the introduction of the GST legislation, all progressive claims after the 1.4.2015 would be subject to GST and payable by the Respondents. Premised on that stand, the Appellant issued letters of Progressive Claims which included GST on 21.01.2016 and 10.05.2016 requesting the Respondents to settle the same. Respondent's position:

9. The position taken by the Respondents is simply this: as there is no provision in the SPA providing for the payment of the GST by the Respondent, the Appellant cannot pass and request for payment of the same from the Respondents. High Court Dispute:

10. The learned Judge in the High Court premised his decision to fix liability on the Appellant to pay the payable GST amount on Clause 25 of the SPA, which states that the Appellant is liable to pay any new fees, charges or impositions and applied the case of Q Sentral Retail Lot 11-2 Sdn Bhd v Cosy Bonanza Sdn Bhd [2016] MLJU 1473. Our grounds of decision:

11. It was our view that this appeal can be dealt with by construing clause 25 of the SPA, which reads as follows: "In the event of the introduction of any new laws, by-laws, rules or regulation which shall be imposed on the Developer, the Developer shall be liable to pay any new or additional fees or charges or impositions."

12. The Appellant had submitted that the learned Judge had erred in relying on clause 25 of the SPA to conclude that the Appellant is liable for the payment of the payable GST amount. The offending paragraph of the grounds of the learned Judge is this: "In my mind, with the implementation of GST, the cost to develop the estate would increased with the GST and it is in this manner that the development of the estate is affected"

13. It was the contention of learned counsel for the Appelent that clause 25 relates solely to the costs of the development of the commercial housing estate. This was how learned counsel put it: The learned Judge erred in his finding that with the implementation of GST [See: ROA [1], page 12, lines 3 to 6], the cost to develop the Estate would increase to include the GST because he failed to consider and also fail to understand that:-

14. Premised on the above, learned counsel submitted that the learned Judge ought to have concluded that Clause 25 of the SPA is not relevant or applicable in determining the issue of GST chargeable on the Property as Clause 25 refers to the introduction of any new laws, by-laws, rules or regulations "affecting the development of the Estate under the SPA which shall be imposed on the Appellant as the Developer".

15. We found merit in the submission of learned counsel as when Clause 25 was drafted, neither party would have envisaged the implementation of the GST Act. In any event, a correct construction of Clause 25 would be that any new costs, fees or tax must refer only to the development of the Estate. GST as alluded to earlier was nonexistent when the sale and purchase agreements were entered into and to impute those costs, fees or tax introduced by new laws to include GST would run contrary to the plain meaning to the words employed in Clause 25. GST payments cannot in any way affect the "development of the Estate".

16. Be that as it may, we did not find in favor of the Appellant and our reasons were these. GST Act is a law of general application imposed on supplier of goods and services as can be seen from sec 9(3) of the GST Act. In the context of this case, the Appellant is liable to pay the GST chargeable. We noted too that sec 9(3) does not provide for the supplier to claim reimbursement the GST paid from the consumer/Respondent. In that regard we departed from the decision of the Singapore case of Mah Ong Kee and another v Kaiyo Reptile Products Pte Ltd [2001] SGHC 188 which says that there is nothing to preclude the supplier from recovering the GST from the consumer. We found such finding unsupported by the express words of sec 8(3) of the Singapore GST Act which is similar to our sec 9 (3).

17. We found that for tax legislation any imposition of tax on anybody must be expressly provided for. There is no equity in tax jurisprudence. In respect of the SPA, there appeared to be no express provision for the Appellant to claim reimbursement of the GST paid from the Respondent. Conclusion:

18. It is our view that having applied the trite law of construction of statute, it is quite clear that the Appellant had no contractual or statutory right to recover any GST liability from the Respondent. Even if there is any ambiguity in clause 25 of the SPA it did not help the Appellant as the contra preferentum rule applied as it is not disputed that the sales and purchase agreement was prepared by the Appellant. The contra preferentum rule requires the Court to construe any ambiguity in the contract document against the party which drafts the ambiguous document.

19. We dismissed the appeal with costs of RM10,000.00 subject to payment of allocator. Deposit to be refunded. Dated: 3 October 2018 Salinan Diakui Sah Culne . (DAVID WONG DAK WAH) Chief Judge of Sabah and Sarawak JULINA BT. SUTIMAN ANTHEA GENNAVERA SAMUIN Setiausaha Kepada YAA Datuk David Wong Dak Wah Hakim Besar Sabah dan Sarawak For the Appellant : Lim Pitt Kong Messrs P K Lim & Co. For the Respondent : Ryan Soo Messrs Roland Cheng & Co. Notice: This copy of the Court's Reasons for Judgment is subject to formal revision.