Wasreno Development Pengerang Sdn Bhd v PEMUNGUT DUTI SETEM (WA-24-89-11/2023)

The Plaintiff, Wasreno Development Pengerang Sdn Bhd (“Wasreno”) appeals against the decision of the Collector of Stamp Duties (“Collector”) who, vide 3 Notices of Assessment the last of which was 16.2.2023, assessed the stamp duty payable for its acquisition of a piece of property at RM 1,278,920.00. The stamp duty was assessed premised on the valuation of its market value by Jabatan Penilaian Dan Perkhidmatan Harta Johor (“JPPH”).

Wasreno disputes the valuation and contends that the market value is much lower. Background facts

The facts upon which this appeal is brought is not in dispute.

On 28.04.2022, Wasreno executed a Sale and Purchase Agreement (“SPA”) dated with PIJ Holdings Sdn. Bhd. as the Vendor for the purchase of a piece of land held under individual title PTD9281 HS(M) 2346 (previously known as PTD5006 HS(M) 2104) in the Mukim of Pengerang, District of Pengerang, Johor (“Subject Property”).

The size of the Subject Property measured approximately 35,970 square metres (about 387,178 square feet). The consideration sum for the Subject Property as stated in the SPA was RM5,500,000.00.

Consequent upon the execution of the SPA, Wasreno applied for adjudication of stamp duty pursuant to paragraph 32(a) of the First Schedule to the Stamp Duty Act 1959 (“the Act”).

Based on Wasreno’s adjudication application, the Collector requested JPPH to conduct a valuation of the Subject Property. JPPH valued the Subject Property at a market value of

Premised on JPPH’s valuation, the Collector then issued A Notice of Stamp Duty Assessment dated 21.11.2022 to Wasreno for the amount of RM1,278,920.00.

On 15.12.2022, Wasreno appealed to the Collector for a revaluation of Subject Property. In support of its appeal, Wasreno submitted a valuation report dated 06.12.2022 prepared by a private valuer, PA International Property Consultants Sdn Bhd, whose valuation was RM11,620,000.00.

On 06.01.2023, by a 2nd Notice of Assessment, the Collector maintained the stamp duty payable at RM1,278,920.00.

On yet a subsequent appeal by Wasreno on 20.01.2023, the stamp duty assessed of RM1,278,920.00 was also maintained. A 3rd Notice of Assessment dated 16.2.2023 was issued.

12.

By a written notice dated 9.11.2023, Wasreno was informed that the review was rejected.

On 17.3.2024, Wasreno paid the stamp duty imposed of RM1,278,920.00, under objection.

15.

A declaration that the 3rd Notice of Assessment dated 16.02.2023 issued by the Collector is wrong, null and void;

(ii) A declaration that the stamp duty to be imposed in the Instrument of Transfer (Form 14A) dated 09.11.2022 between Wasreno and PIJ Holdings Sdn. Bhd. is RM204,000.00;

(iii) An order that RM1,074,920.00 which is the excess stamp duty paid to the Collector resulting from the wrong Assessment is repaid to Wasreno within 14 days from the date of order granted by this Honourable Court with interest at the rate of 8% per annum imposed on the aforementioned amount calculated from the date of payment made to the Collector until the date of settlement; and

(iv) An order that RM 53,800.00 which is the excess registration fee paid by Wasreno to the Kota Tinggi Land Office resulting from the wrong Assessment is repaid within 14 days from the date of order granted by this Honourable Court with interest at the rate of 8% per annum imposed on the aforementioned amount calculated from the date of payment made until the date of settlement. Wasreno’s Contention

Wasreno disputes JPPH’s valuation of the Subject Property and advances the following grounds in this appeal:

the market value of the Land by JPPH is flawed. The comparables used were not suitable comparables. Insufficient adjustments were made to the negative attributes of the comparables and adverse factors were not taken into account. The valuation by PA International Property Consultants Sdn Bhd (“PA International”) of the market value was more accurate; and

(ii) JPPH’s valuation report dated 14.12.2023 is suspect and is an attempt to post-justify the stamp duty which had been assessed by the Collector in the 1st Notice of Assessment dated 21.11.2022. The Collector’s response

The Collector contends that the market value arrived at by JPPH was premised on the correct principles of valuation. The 3 comparables used were appropriate, taking into account similar characteristics, features, location and date of transaction. Necessary adjustments were then made to the differing factors before arriving at the market value of RM 900.00 per square meter for the subject Property. Based on the size of the subject Property, the market value of RM 32,373,000.00 was correctly arrived at.

The Collector further refutes the allegation that JPPH’s report of 14.12.2023 is an after fact attempt to justify stamp duty charged. There were 2 other valuation reports made earlier by JPPH’s officers on 17.11.2022 and 4.1.2023 which had opined the market value of subject Property was RM 32,373,000.00. Analysis and findings

I shall deal first with the contention that JPPH’s report of 14.12.2023 ought not to be given weight.

I find no basis in the contention that the 3rd valuation of JPPH was an attempt to justify the earlier valuation. There were 2 other valuation reports of JPPH made prior to the last on 14.12.2023. On the basis of these valuation reports, the Collector maintained its assessment of stamp duty payable. All 3 reports came to the same market value. In absence of cogent evidence as to the allegation that the report of 14.12.2023 was to justify post-assessment of stamp duty, I would not given credence to it.

I now come to the central issue for determination, the market value of Subject Property. Both parties are on common ground that the date for valuation is the date of the SPA. This is also consistent with section 12A of the Act which provide that date for assessing market value shall be date of execution of the instrument.

Whilst various methods of valuation can be adopted in determining market value, the most common and safest method is the comparison method.

The Court of Appeal in Ku Ek Mei v Pemungut Duty Setem [2022] 3 MLJ 37 further elaborated on the principles and approach to be taken in the comparison method as follows: [37] Whilst we agreed with the submission of the appellant that it is the sales evidence of the actual price that must be used as the comparable, it is our considered view that the prices paid for such sales are qualified by the common rider ‘subject to making allowances for all the circumstances’. This is borne by the following oft quoted authorities of:

Collector of Stamp Duties v Ng Fah In & Ors where the Federal Court held that: … this amount [market value] can best be determined by looking at recent sales of comparable lands in the vicinity. The learned judge was aware of this principle. He was also aware of what the attitude of the court should be when considering comparable sales, for he quoted this passage from LAO v Venkateswami (1967) 1 An WR 79 cited by Aggarawala, Vol 1, 4th Ed, p 339: The underlying principle of fixing the market value with reference to comparable sales is to reduce to the minimum the element of speculation. In a comparable sale the features are:

It must be within a reasonable time of the date of notification, [in our case, the date of the transfer];

It should be a bona fide transaction;

It should be a sale of land acquired or of the land adjacent to the land acquired; and

It should possess similar advantages. It is only when all these factors are present that it could merit consideration as a comparable sale;

Ng Tiou Hong v Collector of Land Revenue, Gombak where the Federal Court opined that: Secondly, the market price can be measured by a consideration of the prices of sales of similar lands in the neighbourhood or locality and of similar quality and positions. The safest guide is evidence of sales of similar lands of similar quality or position in the locality at or prior to the time of acquisition. The prices paid for such sales can be used as comparables subject to making allowances for all the circumstances.

Setia Usaha Tetap Kementerian Pelajaran v Collector of Land Revenue, Butterworth [1972] 2 MLJ 155 at p 157 where Chang Min Tat J (as he then was) wherein His Lordship after making reference to the three recognised methods of valuation under a parallel legislation, namely, the land acquisition legislation in the judgment of Buhagiar J in Nanyang Manufacturing Co v The Collector of Land Revenue, Johore [1954] 1 MLJ 69 opined that: Of these three methods, the learned Judge considered that the safest guide to determine the fair market value was evidence of sales of the same land or similar land in the neighbourhood after making due allowance for all the circumstances.

Malakoff Bhd v Pemungut Hasil Tanah Seberang Perai Utara, Butterworth [2005] 2 MLJ 229 at p 232; [2005] 1 CLJ 365 at p 368, where the Federal Court echoed the view expressed in Ng Tiou Hong v Collector of Land Revenue, Gombak stating: In determining market value, our courts as a matter of course have adopted the comparable method of valuation of land where there is ample evidence of sales or awards involving similar lands. What this method entails was succinctly explained by the Federal Court in Ng Tiou Hong v Collector of Land Revenue, Gombak’. The case of Malakoff Bhd v Pemungut Hasil Tanah Seberang Perai Utara, Butterworth was cited by the respondent.

The valuers for both parties have also adopted the comparison method to determine the market value.

JPPH had 3 comparables, and PA International had 5 comparables to support their valuation. There is a common comparable selected by them, namely Lot PTD 173, Mukim of Pantai Timur, Kota Tinggi, Jalan Teluk Ramunia. Each of the valuers arrived at their valuation of the market value based on the comparables selected, and gave their respective reasons.

However, Wasreno demonstrated that there was an obvious error in the valuation of JPPH. This is with regard to the size factor. JPPH’s comparable no. 1 measured 5,083 square metres. The size of the Subject Property on the other hand, measured 35,970 square metres. JPPH’s report stated the size of the Subject Property as only 3 times bigger than comparable no.

There is a clear mathematical error as the Subject Property is in fact about 7 times larger than comparable no.1.

It is a trite principle in valuation the size of a property is a material consideration. In Bangunan Ng Leong Sing Sdn Bhd v Pentadbir Tanah Daerah Wilayah Persekutuan Kuala Lumpur [2005] 4 CLJ 25, the Federal Court held that a smaller land can command higher value than a bigger land.

JPPH then made a downward adjustment of 15% to the transacted price for comparable no. 1, premised on its size which was mistakenly thought to be only 3 times smaller than the Subject Property. If the Subject Property is in fact 7 times bigger in size, then a higher percentage of downward adjustment is warranted. In view of the premise of the adjustment being in error, the market value arrived at is also wrong.

The same mistake was also made in respect of JPPH’s Comparable No.

This comparable measured 4,046 square metres. Again, it was stated that the Subject Property was 3 times bigger, and a negative adjustment of 15% made. In actual fact, the Subject Property is almost 8 times bigger than Comparable no. 2.

The mistake as to size was repeated for Comparable no. 3 which measured 6,601 square metres. This time, the size of the subject Property was stated as two times bigger, with a downward adjustment of only 10% made.

In summary, all the 3 comparables of JPPH are significantly smaller in size compared to the Subject Property. There was an obvious mathematical error which led to a wrong adjustment made to arrive at the value of the Subject Property. PA International’s valuer in his Affidavit In Reply affirmed on 24.4.2024, had affirmed to these errors in JPPH’s report. However, there was no rebuttal by JPPH.

In view of the factual errors in JPPH’s report, I am of the view that its report ought to be treated with caution.

Faced with 2 valuation reports, that of JPPH and PA Valuation, the latter which has not been materially challenged, I find that the valuation of PA International is to be considered with regard to the issue of market value. I find the valuation arrived at is supported by clear and cogent reasons. I therefore accept that the market value of the subject Property is RM 11,620,000.00.

I have requested counsels to compute the stamp duty payable on a market value of RM 11,620,000.00. Having done so, and premised on the findings as aforementioned, the Plaintiff’s appeal against the decision of the Defendant is allowed, subject to the following orders:

The 3rd Notice of Stamp Duty Assessment dated 16.2.2023 is declared as wrong, null and void;

(ii) The stamp duty payable on the Form 14A dated 9.11.2022 executed in respect of property PTD 9281, HS(M) 2346, Mukim Pengerang, Daerah Pengerang, Johor by the Plaintiff and PIJ Holdings Sdn. Bhd. is assessed as RM 448,800.00 based on the market value of RM 11,620,000.00;

(iii) The amount of RM830,120.00 being stamp duty paid in excess to the Defendant is to be repaid to the Plaintiff within 60 days together with interest at the rate of 3% per annum calculated from 17.3.2023 being the date the sum was paid to the Defendant, until the date of settlement;

(iv) The excess registration fee paid by the Plaintiff to the Kota Tinggi Land Office resulting from the wrong assessment is to be repaid within 60 days from the date of order herein with interest at the rate of 3% per annum calculated from the date of payment until the date of settlement;

Costs of RM 5,000.00 to be paid by the Defendant to the Plaintiff. Date: 24th June 2026 -sgd-Alice Loke Yee Ching Judge High Court Kuala Lumpur Counsel for Plaintiff: Pn. Maggie Khor Chee Peng (Pn. Liew Jia Yuan together with her) Tetuan CP Khon & Tan Counsel for Defendant: Pn. Nurul Nasyrah binti Mohd Nasir Senior Revenue Counsel (Pn. Sharifah Saffa’ binti Syed Abd Kadir, Revenue Counsel together with her)