Orange Rederiet APS v Ketua Pengarah Hasil Dalam Negeri (Permohonan Semakan Kehakiman No. WA-25-75-03/2017)

An Order of Certiorari to quash the decision of the respondent, Director General of Income Tax (“DGIR”) dated 29.1.2017;

(ii) A declaration that the DGIR is bound by and shall give effect to Article IX of the Malaysia-Denmark Double Taxation Agreement (“Malaysia-Denmark DTA”);

(iii) A declaration that the DGIR is bound by the decisions in Ketua Pengarah Hasil Dalam Negeri v. Damco Logistics Malaysia Sdn Bhd, Maersk Malaysia Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri and Thomson Reuters Global Resources v. Ketua Pengarah Hasil Dalam Negeri;

(iv) A declaration that the payments collected and remitted to the applicant through its agent, Wira Swire Sdn Bhd (“Wira Swire”) are not subject to withholding tax and that such payments is only taxable in Denmark under the Malaysia-Denmark DTA; and 3

Alternatively, a declaration that the payments collected by Wira Swire are subject to income tax in Malaysia under section 54 (1) of the Income Tax Act 1967 (“ITA 1967”). [2] The grounds of the application are:

That the DGIR’s decision was illegal, void, unlawful and/or in excess of authority;

(ii) That the DGIR’s decision is unreasonable; and

(iii) That the decision of the DGIR has been made without regard to the decision of the superior courts. [3] On 15.5.2017, leave was granted as the Attorney General did not object to the application for leave. [4] On 14.6.2017, the DGIR filed an appeal against this court’s decision in granting the application for leave. The Salient Facts [5] The applicant is in the business of shipping operations in the offshore industry. The applicant is owned by Swire Pacific Limited and is one of the companies within the Swire Pacific Offshore Group of Companies (“SPOGC”). SPOGC own and operate a fleet of vessels operating in various countries. 4 [6] On 30.12.2014, SPOGC through its representative Swire Pacific Offshore Operation Pte Ltd, executed the Exclusive Agency Agreement with a Malaysian company known as Wira Swire Sdn. Bhd. (“Wira Swire”). Wira Swire provides various services to the SPOGC in Malaysia as its agent within Malaysia and its adjacent waters. As a company within the SPOGC, the applicant engaged the services of Wira Swire to support its operational services in Malaysia. [7] Before the Malaysia-Denmark DTA came into effect, the applicant’s income derived from Malaysia was taxed in Malaysia as shipping income pursuant to S.54 of the ITA 1967 between the years of assessment (“YAs”) 1984 to 2009. [8] Between the YAs 2006 to 2009, the applicant subjected its income derived from its Malaysian operations to income tax by mistake despite the existence of the Malaysia-Denmark DTA. Consequently, the applicant applied to the DGIR for the refund of the taxes which the applicant has paid between YAs 2007 to 2009. [9] On 17.4.2013 and 8.1.2014, in accordance with Article IX of the Malaysia-Denmark DTA, the DGIR approved the applicant’s application and refunded the taxes that have been overpaid between YAs 1996 to 1998 and YAs 2007 to 2010 amounting to RM858,057.35. 5 [10] The applicant contends that by virtue of Article IX of the Malaysia-Denmark DTA, the applicant had also subjected its income derived from its business operations in Malaysia to be taxed in Denmark and that the applicant’s income in Malaysia is received from its customers all over Malaysia through its agent, Wira Swire. The applicant also does not have a place of permanent establishment in Malaysia. [11] On 6.4.2016, the DGIR performed a tax audit on Wira Swire. Subsequently, the DGIR informed the applicant that the payments collected by Wira Swire and remitted to the applicant should have been subjected to withholding tax under S.4(iii) of the ITA 1967 and that accordingly, the deduction claimed by Wira Swire for the payments made to the Applicant will be disallowed pursuant to S. 39(1)(j) of the ITA 1967. [12] On 8.12.2016, Wira Swire wrote to the DGIR and explained that payments made to the applicant do not attract withholding tax as the applicant falls under Article IX of the Malaysia-Denmark DTA. Nevertheless, the DGIR maintained its stand and sought to invoke section 39(1)(j) of the ITA 1967. [13] Thereafter, on 29.12.2016, on a without prejudice basis, the applicant through Wira Swire paid withholding tax amounting to RM6,160,482.87 together with late remittance penalty amounting to RM616,048.29 to the DGIR. 6 [14] On the same day, the applicant also wrote to the DGIR stating its legal position that pursuant to Article IX of the Malaysia-Denmark DTA and the case laws, payments received by the applicant from Wira Swire are not subject to withholding tax. Furthermore, the applicant reiterated that Article IX of the Malaysia-Denmark DTA prevails over S.4A (iii) of the ITA 1967. The applicant also expressly stated in the letter that if the DGIR fails to respond favourably to the applicant’s representation and appeal, then the applicant will treat its appeal and representation as being rejected by the DGIR. [15] When the DGIR fails to respond to the applicant’s letter dated 29.12.2016, the applicant takes the position that the DGIR’s letter dated 29.12.2016 is the decision of the DGIR and deemed to be have been served on the applicant on 29.1.2017. Hence, the applicant filed this this application for judicial review action. The Findings of the Court [16] The issue here is whether the DGIR can appeal against the decision to grant leave which was given on an ex parte basis pursuant to Order 53 r. 3(1) and (2) of the Rules of Court 2012 (“ROC 2012”), which reads: 7 “Leave (O.53, r.3)

3.

An application under this Order shall not be made unless leave therefor has been granted in accordance with this rule.

An application for leave must be made ex parte to a Judge in Chambers and must be supported by a statement setting out the name and description of the applicant, the relief sought and the grounds on which it is sought, and by affidavits verifying the facts relied on.” [17] It is common ground that there are two (2) stages in an application for judicial review under Order 53 ROC 2012. The first stage, pursuant to O. 53 r 3(1) ROC 2012 necessitates the obtaining of leave, as no application for judicial review under O. 53 shall be made unless leave therefor has been granted in accordance therewith. This is the preliminary application under O. 53 r 2(2) for leave to commence judicial review proceedings. Leave may be granted or refused in limine as the case may be. The second stage is regulated by Order 53 r 4(1) and (2) ROC 2012 and this will be the substantive application for certiorari/mandamus/declaration after leave has been granted. [18] In Advance Synergy Capital Sdn Bhd v. The Minister of Finance, Malaysia & Anor [2011] 7 CLJ 557, the Court of Appeal held as follows: 8 “[17] It is trite procedural law that judicial review proceedings under O. 53 consists of two stages. The first stage, set out in O. 53 r. 3(1), necessitates the obtaining of leave, as "No application under this order shall be made unless leave therefor has been granted in accordance with this rule". At this threshold stage, the grant or refusal of leave is considered. The second stage is regulated by O. 53 r. 4(1) and (2), concerning the substantive application for judicial review after leave has been granted. Under O. 53 r. 4(1), the substantive applicant is required to file a notice in Form IIIB. Under O. 53 r. 4(2), upon extraction of the sealed copy of Form IIIB, the applicant must serve a copy thereof together with a copy of the statement and all affidavits in support on all persons directly affected by the application not later than 14 days before the date of hearing specified therein. In a minority judgment in Chin Mee Keong & Ors v. Pesuruhjaya Sukan [2007] 5 CLJ 363 CA at [56] to [58], I took the opportunity to explain this position of two stages under O. 53. A similar sentiment was shown in the separate majority judgments of James Foong JCA (now FCJ) at p. 382 and 383 in [25] to [28] and of Suriyadi Halim Omar JCA in p. 401 in [92]. (See also George John v. Goh Eng Wah Bros Film Sdn Bhd & Ors [1987] 1 LNS 111 per Lim Beng Choon J (as he then was); Mohd Nordin Johan v. The Attorney-General, Malaysia [1983] 1 CLJ 130; [1983] CLJ (Rep) 271 per Raja Azlan Shah Ag 9 LP (now HRH the Sultan of Perak); and Bursa Malaysia Securities Bhd v. Gan Boon Aun [2009] 5 CLJ 698 CA, paras [21] and [22] at p. 715 and 712 per Heliliah Mohd Yusof JCA (later FCJ) ). [19] It is also not in dispute that during the leave stage, only the Honourable Attorney General has the right to appear and to object the leave application. In Tang Kwor Ham & Ors v. Pengurusan Danaharta Nasional Bhd & Ors [2006] 1 CLJ 926, Justice Zaleha Zahari (JCA) was of the view that at the leave stage “… the representative of the Attorney General had the right of appearance”. [20] However, the putative respondent, that is the party who is named as the respondent in the application, and in this case the DGIR, may apply for leave from the court to appear at the leave stage and to object the application for leave. In Advance Synergy Capital Sdn Bhd (supra) Justice Low Hop Bing held that: [21] On the other hand, the judge may, at the ex parte leave stage, invite the putative respondent to attend and make representations as to whether or not leave should be granted. Such invitation is normally extended where, on considering the papers, the judge comes to the conclusion that he really does not know whether there is or is not an arguable case: R v. Secretary of State for the Home Department, Ex Parte 10 Rukshanda Begum [1990] Crown Office Digest 109, DIP, CA (UK) per Lord Donaldson MR, as applied by the (then) Supreme Court in Tuan Sarip Hamid & Anor v. Patco Malaysia Berhad [1995] 3 CLJ 627, 633 per Edgar Joseph JR FCJ (as he then was). However, the putative respondent is not entitled as a matter of right to appear and demand to be heard: Tang Kwor Ham & Ors v. Pengurusan Danaharta Nasional Bhd & Ors [2006] 1 CLJ 927 p. 945 [14] per Zaleha Zahari JCA (delivering a dissenting judgment) (See also my judgment given in the High Court in Ta Wu Realty Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri & Anor [2004] 6 CLJ 398 HC at [18]; R v. Camden London Borough Council, Ex Parte Martin [1997] 1 All ER 307 HC; Inland Revenue Commissioners v. National Federation of Self-Employed and Small Business Ltd [1982] AC 617 HL, at 642, Lord Diplock; and Michael Supperstone QC and James Goudie QC in “Judicial Review” (1997) at pp. 16.4 and 16.6 - 16.7.) (emphasis added) [21] It is not in dispute that when the leave was granted on 15.5.2017, the DGIR was not present as they have not been served with the cause papers and was also not invited by this court. At this stage, only the Attorney General has the legal right to be present. [22] As the Attorney General has no objection to the application in a letter dated 11.4.2017, leave was granted on 15.5.2017. 11 [23] Since the application for leave was granted ex parte, the DGIR was not a party during the proceedings on 15.5.2017. Therefore, since the DGIR was not party to the proceedings on 15.5.2017, the DGIR cannot appeal against the said decision. The only option for the DGIR is to set aside the order under Order 42 r 13 of the ROC

[24] An application to set aside the must comply with Order 42 rule 13 of the ROC 2012, which reads: “13. Setting aside or varying judgment and orders Save as otherwise provided in these Rules, where provisions are made in these Rules for the setting aside or varying of any order or judgment, a party intending to set aside or vary such order or judgment shall make an application to the Court and serve it on the party who has obtained the order or judgment within thirty days after receipt of the order or judgment by him.” [25] Order 53 r. 9 ROC 2012 provides that an aggrieved party may appeal to the Court of Appeal, instead of applying to set aside the order. However, this is only applicable to the parties who are privy to the proceedings, and in this case, the leave application. If the application for leave was refused, the applicant may appeal and if the court grants leave, only the Attorney General may appeal. 12 [26] The Federal Court in Majlis Perbandaran Pulau Pinang v. Syarikat Bekerjasama-sama Serbaguna Sungai Glugor dengan Tanggungan [1999] 3 MLJ 1; [1999] 3 CLJ 65, has held that an application may be filed to set aside the grant of leave: “(2) The Alternative Remedy Point Did the existence of the statutory remedy of appeal and its non-exercise, in this case, exclude Judicial Review? Before considering this question, we should like to make a preliminary observation regarding the stage at which the question of alternative remedies should be dealt with. There is no hard and fast rule about this. As we have said, the case of R. v. Secretary of State for the Home Department ex p., Swati (ibid) shows that the existence of alternative remedies would be a ground for refusing leave to apply for judicial review. It is also a ground for setting aside a grant of leave given earlier. (R. v. Secretary of State for the Home Department ex p. Davendranath Doorga [1990] COD 109). Again, the alternative remedies argument may be considered at inter partes stage, even if leave had been granted and not challenged (R. v. Brentford General Commissioners, ex p. Chan [1986] STC 65. At the final hearing stage, the court can consider the alternative remedies objection as a preliminary point…” (emphasis added) 13 [27] In the premise, I am of the considered opinion that the DGIR has no legal right to appeal against the granting of leave ex parte, but may apply to set aside the leave granted. (AZIZAH BINTI HAJI NAWAWI) JUDGE HIGH COURT MALAYA (Appellate and Special Powers Division 2) KUALA LUMPUR Dated: 30th January 2018 For the Applicant : Saravana Kumar Segaran/ Toh Pei Roo (PDK) Messrs Lee Hishammuddin Allen & Gledhill Kuala Lumpur. For Attorney General Chambers : Puan Noor Fadzila Ishak Senior Federal Counsel Jabatan Peguam Negara Malaysia Putrajaya. Cases referred:

Advance Synergy Capital Sdn Bhd v. The Minister of Finance, Malaysia & Anor [2011] 7 CLJ 557.

Tang Kwor Ham & Ors v. Pengurusan Danaharta Nasional Bhd & Ors [2006] 1 CLJ 926. 14

Majlis Perbandaran Pulau Pinang v. Syarikat Bekerjasama-sama Serbaguna Sungai Glugor dengan Tanggungan [1999] 3 MLJ 1; [1999] 3 CLJ 65.