Mesra Retail & Cafe Sdn Bhd v Pemungut Duti Setem (WA-24-84-11/2023)

In this judgment, the sections or schedules mentioned refer to the Stamp Act 1949.

The issue in this case was whether the Novation Agreement ("the Agreement") dated 1 January 2022 is to be assessed for nominal duty under Item 4 or ad valorem duty under Item 32 of the First Schedule.

On 25 September 2025, I allowed the plaintiff's, Mesra Retail & Café Sdn Bhd, stamp duty appeal under Section 39(4) allowing a declaration that the Notice of Stamp Duty Assessment (ad valorem duty) dated 14 September 2023 (the Notice") is null and void and an order that RM7,468.00 being the excess stamp duty paid to the defendant, the Collector of Stamp Duties ("Collector"), is refunded with interest at the rate of 3% on the said sum from date the payment was made to the Collector. I held that the applicable stamp duty is RM10.00 under item 4 of the First Schedule.

My reasons for the decision are as stated below.

The facts are not in dispute and are as follows:

Petronas Dagangan Berhad ("PDB") is the owner of the petrol station building, structures, equipment, and other ancillary facilities. PDB had entered into 4 operating agreements with Golden Scoop Sdn Bhd ("Golden Scoop"). Golden Scoop as operator is the authorised license of the Baskin-Robbins brand for Malaysia and is involved in selling, amongst others, Baskin-Robbins ice cream. The operating agreements are for - Petronas Bukit Jelutong, Petronas Station Bandar Setia Alam, Petronas Station Jalan Tan Swee Hoe, and Petronas Station Sri Okid.

Under the operating agreements, PDB granted Golden Scoop a licence to use and occupy a certain area of the petrol stations for operating a BaskinRobbins Restaurant. In consideration, Golden Scoop would pay PDB a sum of money each month.

On 8 July 2021, PDB incorporated the plaintiff, a wholly owned subsidiary of PDB, for the purpose of focussing on the non-fuel business arm of PDB.

PDB then entered into a Master Novation Agreement dated 1 January 2022 with the plaintiff and Golden Scoop whereby PDB novates and transfers all rights, interests, obligations, and liabilities under the operating agreements to the plaintiff. Under the novation agreement, Golden Scoop agreed to release and discharge PDB from the operating agreements in consideration of the plaintiff undertaking to perform the obligations under the said operating agreements.

On 14 September 2023, the Collector issued the Notice and took the position that the Novation Agreement is subject to stamp duty at a rate of RM7,478.00. On 16 October 2023, the plaintiff paid the stamp duty under protest and submitted an application to objecting the assessment raised in the Notice. On 23 October 2023, the Collector rejected the objection, maintaining the stamp duty.

Hence, this appeal. ANALYSIS AND DECISION

The concept of novation is described in the oft-quoted case of Lyl Hooker Sdn Bhd v Tevanaigam Sovisthri & Anor [1987] CLJ 179 (Rep); [1987] 1 CLJ 356 as follows: Novation is a new contract. It extinguishes rights and obligations under the old contract for which the new contract is made. Being a new contract, there must be consent by all parties, and there must be consideration, and rights and obligations under it are not those transferred from the old contract, which is already extinguished. (See Chitty on Contract, Volume 1, 1983 edition at paragraphs 1315 and 1316).

It is trite that stamp duty is chargeable on an instrument and not on the transaction. The law is instructively stated by the Federal Court in BSAF Services (M) Sdn Bhd v Pemungut Duti Setem [2010] 5 CLJ 109, adopting C.C. Gallager Highmore's Stam Laws 4th Edt at page 7, where the learned author said: In order to determine whether any, and if any what, stamp duty is chargeable upon an instrument, the legal rule is that the real and true meaning of the instrument is to be ascertained; that the description of it given in the instrument itself by the parties is immaterial ... For instance, if a writing were headed by a recital that the parties had agreed to execute the promissory note thereinafter written, yet if in truth the contract set forth was not a promissory note, but an agreement of another character, the stamp duty would be not that of a promissory note, but of the agreement. The question, therefore, stamp or no stamp, and if a stamp to what amount, is to be determined upon the real and true character and meaning of the writing.

It is also useful to refer to the decision of the Court of Appeal in Pemungut Duti Setem Malaysia v Perbadanan Pembangunan Pulau Pinang [2024] CLJU 982 which provided, after a review of the principles in the abovementioned cases as well as other cases, a summary of the matters for the court to determine whether the stamp duty levied on an instrument is correctly imposed by the Collector. The matters are as follows:

the name, title, label, or description given to the instrument/document (label) by the parties in question is not conclusive. The court is not bound by the label and may go behind the label to determine the true nature of the instrument/document;

(ii) the court has to construe the instrument/document as a whole;

(iii) in addition to the instrument/document, the court may consider all relevant documents (relevant documents) so as to ascertain the true nature of the instrument/document;

(iv) in deciding the true nature of the instrument/document, the court may consider all relevant circumstances regarding the instrument/document (relevant circumstances); and

in considering the instrument/document, relevant documents, and relevant circumstances, the court determines the following matters:

what is the true nature of the rights and obligations of the parties?

what is the effect of the instrument/document, relevant documents, and relevant circumstances? and

what is the substance of the instrument/document?

The Collector submitted that under the Novation Agreement, PDB novates and transfers all its rights, interests, obligations, and liabilities under the operating agreements to the plaintiff without consideration. As such, the Novation Agreement attracts the application of Section 16(1), which reads as follows: "Any conveyance or transfer operating as a voluntary disposition inter vivos shall be chargeable with the like stamp duty as if it were a conveyance or transfer on sale".

It is clear that Section 16(1) charges voluntary conveyances for which no valuable consideration is given with ad valorem duty based on the value of the property conveyed. While item 32(a) of the First Schedule provides for the description of the instrument, i.e., conveyance, assignment, transfer, or absolute bill of sale, and the formula to calculate the proper stamp duty state, as follows: "On sale of any property (except stock, shares, marketable securities, and accounts receivables or book debts of the kind mentioned in paragraph (c))."

The true meaning of the instrument or its nature and effect is to be determined (see Tan Kay Thye & Ors v Commissioner of Stamp Duties [1991] 3 MLJ 150 and Lap Shun Textiles Industrial Co Ltd v Collector of Stamp Revenue [1976] 1 All ER 833). The question to be answered is whether the Novation Agreement falls within the meaning of Section 16(1).

The Collector contends that the purpose of the Novation Agreement is to transfer property to the plaintiff.

I found no transfer or conveyance of property from PDB to the plaintiff. The terms of the Novation Agreement show that it is a tripartite agreement between PDB, Golden Scoop, and the plaintiff, the subject matter of which are the operating agreements. The operating agreements were entered into between Golden Scoop and PDB. Under the operating agreements, PDB had given a licence to Golden Scoop to sell its products in a structure (i.e., Baskin-Robbins restaurant) constructed at its own costs and expenses on PDB's premises.

What the Novation Agreements does is as follows. The non-fuel business of PDB is novated with the transfer of all rights, interests, obligations, and liabilities under the operating agreements to the plaintiff. The plaintiff is a subsidiary of PDB, incorporated to deal with the non-fuel business of PDB. Under the Novation Agreement, Golden Scoop agreed to release and discharge PDB from the operating agreements in consideration of the plaintiff undertaking to perform the obligations under the said operating agreements.

Since no property transfer or conveyance of property occurred, Section 16(1) does not apply.

For the above reason, item 32 of the First Schedule and not item 4 of the First Schedule applies. In the circumstances, I allowed the declaration sought and set aside the assessment made under the Notice and the consequential order that the excess stamp duty that was paid be refunded with interest. DATED:17 NOVEMBER 2025 AMARJEET SINGH SERJIT SINGH JUDGE HIGH COURT KUALA LUMPUR Counsel of the Plaintiff: Nur Hanina Binti Mohd Azham Messrs Rosli Dahlan Saravana Partnership Level 16, Menara 1 Dutamas Solaris Dutamas No.1, Jalan Dutamas 1, 50480 Kuala Lumpur. Counsel of the Defendant: Intan Natasha Binti Yusri (Peguam Has Nur Zahirah Zamhuri (Peguam Hasil) Lembaga Hasil Dalam Negeri Malaysia Jabatan Undang-Undang, Aras 11 Persiaran Rimba Permai, Cyber 8 63000 Cyberjaya, Selangor. 1) Lyl Hooker Sdn Bhd v Tevanaigam Sovisthri & Anor [1987] CLJ 179 (Rep); [1987] 1 CLJ 356. 2) BSAF Services (M) Sdn Bhd v Pemungut Duti Setem [2010] 5 CLJ 109. 3) Pemungut Duti Setem Malaysia v Perbadanan Pembangunan Pulau Pinang [2024] CLJU 982. 4) Tan Kay Thye & Ors v Commissioner of Stamp Duties [1991] 3 MLJ 150. 5) Lap Shun Textiles Industrial Co Ltd v Collector of Stamp Revenue [1976] 1 All ER 833.