Court dismisses Selangor's application to strike out water subsidy claim

SHAH ALAM: The High Court here rejected with costs the application by the Selangor Government and Mentri Besar Tan Sri Khalid Ibrahim to set aside a suit filed by 711 water consumers.

The suit is over Khalid and the Selangor Government’s failure to provide free water as stated in Pakatan Rakyat’s 2008 general election manifesto.

Judicial Commissioner Hashim Hamzah made the decision after hearing submissions from both sides and also fixed April 15 for case management. On Sept 11 last year, 711 water consumers named Khalid, the state government and Syarikat Bek­alan Air Selangor Sdn Bhd (Sya­bas) as defendants.
They are seeking over RM400,000 in compensation. In their statement of claim, they said that in April 2008, the people of Selangor were promised free 20 cubic metres of water a month.

They said that every eligible consumer was supposed to receive the water subsidy of RM11.40 per month, regardless of whether the consumer used an individual or bulk meter. They added that the state government started implementing the free water scheme on June 1, 2008.However, they claimed that they had not been receiving the free water as promised. The plaintiffs also claimed that Khalid, in a press statement issued on Aug 30 last year, said that those using bulk meters were not eligible for the free water subsidy.

The plaintiffs are demanding a compensation of RM405,270 from the state government and/or Syabas or, alternatively, a compensation for the first 20 cubic metres of water monthly.

They are seeking a declaration that the free water scheme covers all water consumers in the state and not just those using individual meters. — Bernama

Latest Court of Appeal's decision on the issue pertaining to legality of Loan Agreement for abandoned project

CIMB BANK BHD v. GAN TEOW HOOI & ORS [2012] 9 CLJ 1003 

COURT OF APPEAL, PUTRAJAYA

ZAINUN ALI JCA, RAMLY ALI JCA, KANG HWEE GEE JCA

[CIVIL APPEAL NO: W-02(IM)(NCC)-2470-2010]

CONTRACT: Loan - Default of repayment of loan - Sale and purchase of Land to build House - Construction Agreement - Execution of loan Agreement - Investigation by Local Government and Housing Ministry on project - Vendor/contractor did not possess licence as Housing developer - Whether sale and purchase Agreement and construction Agreement void ab initio

The respondents had entered into a sale and purchase agreement with Paragon Nova Sdn Bhd ('the vendor') to purchase a vacant land at the price of RM125,000. Concurrently, the respondents also entered into a construction agreement with Atlaw Housing Sdn Bhd ('the contractor') to build a two and a half storey house on the vacant land at the price of RM200,000 which was to be paid in accordance with the third schedule of the construction agreement. The respondents applied for a housing loan in the sum of RM280,000 and this was approved by the appellant. The agreement stipulated that RM100,000 was to be released to the vendor for the purchase of vacant land while RM180,000 was for the building or construction price to the contractor. A loan agreement between the appellant and the respondents was executed and the loan sum of RM 100,000 was released to the vendor for the purchase of vacant land while the balance sum of RM180,000 was released to the contractor, pursuant to cl. 2 of the Third Schedule of the construction agreement. Since there was no notice of completion of work sent to the appellant, the sum of RM180,000 was not released to the contractor. The respondents defaulted in the repayment of the loan as stipulated in an express term of the loan agreement and several notices of demand were issued to the respondents. Almost a year later, the respondents lodged a police report against the vendor and contractor, on the basis that they did not have license as housing developer. On 9 April 2008, the Local Government and Housing Ministry issued a letter informing them they are in the process of investigating the said project. The appellant subsequently sent a notice of demand claiming for the total loan amount which was released to the respondents inclusive of the accrued interest. However no payment was made by them. The appellant then filed the writ of summons against the respondents. In the High Court, the main issue raised by the appellant was whether the sale and purchase agreement and construction agreement were void ab initio since the vendor/contractor did not have licence as housing developer. The appellant's claim was dismissed with costs. Hence, the present appeal against the said decision by the trial judge.

Held (allowing appeal with costs)

Per Zainun Ali JCA delivering the judgment of the court:

(1) The learned trial judge had misdirected himself in arriving at the decision he did. The said loan agreement was valid even if the sale and purchase agreement and construction agreement was illegal and void. Even if there was non-compliance with the Housing Development (Control and Licensing) Act 1966 for failing to obtain the required license as housing developer, it would not render the sale and purchase agreement and or the construction agreement as null and void. (paras 24-25 & 33)

(2) The loan sum had been released at the respondents' request and at all material times, there was no instruction from the respondent borrowers to stop the progressive release of the loan. Relying on such representation by the respondents, the appellant was under no duty to further verify the legality of the sale and purchase agreement and construction agreement. The principle of estopped applies. The respondents did not take either of these courses of action, and as such, must be deemed to have affirmed the legality of the agreements. In any case too, it would be unjust and inequitable to allow the respondents to raise the issue of illegality after seven of years the sale and purchase agreement and construction agreement having been executed. (paras 27-28 & 35-36)

Case(s) referred to:

Badiaddin Mohd Mahidin & Anor v. Arab Malaysian Finance Bhd [1998] 2 CLJ 75 FC (refd)

Beca (M) Sdn Bhd v. Tang Choong Kuang & Anor [1986] 1 CLJ 20; [1986] CLJ (Rep) 64 SC (refd)

Kin Nam Development Sdn Bhd v. Khau Daw Yau [1984] 1 CLJ 347; [1984] 1 CLJ (Rep) 181 FC (refd)

Legislation referred to:

Contracts Act 1950, s. 24

Housing Development (Control and Licensing) Act 1966, ss. 5(1), 18(a)

Counsel:

For the appellant - Hizri Hasshan (Ashmadi Othman & Mohd Helmy Razelan with him); M/s Che Mokhtar & Ling

For the respondent - Teh Beng Boon (Soo Pei Ping with him); M/s BB Teh

[Appeal from High Court, Kuala Lumpur; Suit No: D-22-NCC-193-2009]

Reported by Najib Tamby

Post Judgment Interest: What rate can be claimed?

Once judgment is granted by the civil court, every judgment creditor shall be entitled to an interest on the judgment sum. If the rate of interest has not been contractually agreed upon by the parties, then the judgment creditor is entitled to claim the interest rate as prescribed by the Court. Under Order 42 rule 12 of the Rules of Court 2012, it is provided that:

“Subject to rule 12A, except when it has been otherwise agreed between the parties, every judgment debt shall carry interest at such rate as the Chief Justice may from time to time determine or at such other rate not exceeding the rate aforesaid as the Court determines, such interest to be calculated from the date of judgment until the judgment is satisfied.”

Pursuant to Practice Direction No. 1 of 2012, the Chief Justice has fixed interest rate at 5% per annum. However, if parties have already agreed to an interest higher than 5% per annum, the court will allow the claim for higher interest rate as agreed by the parties.

Even though there is nothing in the Rules of Court 2012 to prevent the judgment creditor from claiming the agreed interest rate, section 43(6) of the Bankruptcy Act seems to limit the right of judgment creditor in claiming the interest against judgment debtor who has been adjudged a bankrupt. Section 43(6) of the Bankruptcy Act provides:

“(6) Where a debt has been proved upon a debtor's estate and such debt includes interest or any pecuniary consideration in lieu of interest, such interest or   consideration shall for the purposes of dividend be calculated at a rate not exceeding six per centum per annum, up to the date the receiving order is granted by the court.”

Based on the above provision, once judgment creditor has filed a Proof of Debt in accordance with the judgment, the Insolvency Department will quite often issue a Notice of Rejection of Proof of Debt (Form 64) to reduce the claim for interest at the rate of 6% per annum only. The issue now is whether section 43 (6) Bankruptcy Act is applicable to all cases when the said sub section was onlyntroduced through amendment on 1st October 2003.

In the recent case of Omega Securities Sdn Bhd v. Ketua Pengarah Insolvensi Malaysia [2012] 5 CLJ 868, the High Court has had the opportunity of analyzing the applicability of section 43(6) Bankruptcy Act. In this case, pursuant to the judgment obtained on 14/3/2001, the judgment creditor had claimed interest at the rate of 12.8% per annum on the judgment sum in their Proof of Debt. But, on 20/7/2011, the Director General of  Insolvency, had issued the Notice of Rejection of Proof of Debt and refused to admit the debt in the sum of RM65,995.35 as claimed by the judgment creditor and only accepted the Proof of Debt for the sum of RM34,449.89 by imposing interest rate at 6% per annum only.

Being dissatisfied with the said decision, the judgment creditor appealed to the High Court against the decision of the Insolvency Department. The judgment creditor contended that the amendment to section 43(6) Bankruptcy Act does not take effect retrospectively but  prospectively. The High Court agreed with this submission in law as the court is of the view that an amendment to the rate of   interest chargeable under section 43(6) is an amendment to a substantive law and not to a procedural  requirement. The amendment was only made on 1^st October 2003 and it cannot take away the judgment creditor's accrued right under section 43(6) as the amending Act did not clearly and specifically provide that the amendment would have a retrospective  effect. In delivering the judgment, the learned Judge Mah Weng Kwai J (now JCA) held:

“… the judgment creditor is lawfully entitled to claim for interest upon the rate specified in the judgment in   default. The right to claim interest at a specified rate pursuant to the terms of the judgment in default is a substantive right and the amendment ought not to be applied retrospectively. To do so would produce an unjust result as s. 43(6) deals with a substantive right. The judgment creditor had a legitimate expectation that as at 14 March 2001 (the date of the judgment in default) it had the right to interest at the rate of 12.8% per annum on the principal sum and not at 6% per annum until full realisation.”

Based on the aforesaid authority, it appears that section 43(6) Bankruptcy Act is only applicable for judgment obtained after 1^st October 2003. If the judgment creditor has obtained judgment after 1^st October 2003, the judgment creditor will only be entitled to claim interest at the rate of 6% per annum in its Proof of Debt. This provision of section 43(6) Bankruptcy Act will also be applicable for winding up cases by virtue of section 291 of the Companies Act 1965.

New Financial Services Act will give regulators more power for governance and checks and balances

The Star, Tuesday, 29 January 2013 02:09pm  
Corporate Notes by Gurmeet Kaur 

The new Financial Services Act (FSA) that will come into effect soon is a step in the right direction to strengthen the country's financial sector. It gives financial regulators stronger and tougher powers aimed at creating better governance and checks and balances among Malaysia's financial institutions.

We are all only too aware of the shenanigans that had taken place among the major international banking groups that led to the 2008 financial crisis that wreaked so much havoc.

To be sure, Malaysia already has a dynamic financial system, which has evolved in response to changing domestic and international trends. The FSA is part of the authorities' continuous improvement of regulating the local financial sector. It aims to provide a more uniformed framework in regulating the conventional banking sector, insurance and payment systems.

The FSA will replace several existing acts, including the Banking and Financial Institutions Act 1989 (Bafia), the Exchange Control Act 1953, the Insurance Act 1996 and the Payment Systems Act 2003.

Prior to this, the 1989 Bafia, which governs the local banking sector, had replaced the Banking Act 1973 and the Finance Companies Act 1969.

Economic and financial challenges will keep on growing with globalisation, and as the country looks to leapfrog into a high-income and developed nation status by 2020, the financing needs of the economy is expected to rise further and become increasingly more complex and diversified.

For this, a much stronger and integrated framework for the banking and finance sector is necessary to counter future risks in financial stability.

The aim of better regulation is to bring about more transparency, accountability and governance. Another goal is in making sure institutions have sufficient assets to meet their obligations.

Although the full implications of the FSA is still unclear at the moment the central bank is in the process of engaging the various stakeholders of the financial services sector some aspects of it are clear: It will give the central bank broader oversight over financial holding companies (FHC) that currently do not come under its purview.

Bafia regulates individual banking entities within these groups like the commercial and investment banks but not the FHC itself. But under the new framework, the FHC would be subjected to the same regulatory requirements as the banks under them, ie, prudential standards will be imposed, requiring them to retain more capital.

This, according to Maybank Investment Bank Research in a recent note, will impact FHCs like Affin Holdings Bhd, Alliance Financial Group Bhd, AMMB Holdings Bhd, BIMB Holdings Bhd, CIMB Group Holdings Bhd, Hong Leong Financial Group Bhd and RHB Capital Bhd.

More importantly, the new Act seeks to address concerns of the “double leverage” approach, where the FHC borrows money and, in turn, pumps it into the operating banks as equity. The recent move to take Hong Leong Capital Bhd private, according to some analysts, is perhaps part of a move to streamline and restructure the operations under the Hong Leong umbrella ahead of the new Act.

No doubt, the new FSA, which will come into affect this year, would be giving banking groups more work to reorganise and better capitalise themselves. But the stricter requirements will bode well for Malaysia's financial and banking system in the long run.

Here's another thing that the FSA is going to bring about: stricter penalties for financial crimes. It has been reported that the new Act will see a revision in the quantum for monetary penalties from the current maximum of RM10mil to RM50mil. It is also said to involve provisions of enforcement instruments for more effective enforcement.

Considering what has happened with errant banking groups in the West, this surely will be another welcomed move by all those concerned about the health of the financial sector.

Deputy news editor Gurmeet Kaur hopes that in meeting the stricter requirements imposed by the upcoming FSA, financial institutions do not end up passing additional costs to consumers.

50% stamp duty exemption for first time buyer of residential property (1/1/2013 - 31/12/2014)

Under the Budget 2013, the Government has agreed to extend the 50% stamp duty exemption for first-time house buyers to 31st December 2014. The price cap of the residential property will be raised to RM400,000 from RM350,000 under the revised ruling. 

The Government said the proposal is to reduce the cost of owning the first residential property and also due to the increase in the price of such property.

Pursuant to the Stamp Duty (Remission) (No. 4) Order 2012 [P.U (A) 417/2012], the effective date is for sales and purchase agreements (SPA) executed from 1st January 2013 to 31st December 2014.

The 50% stamp duty exemption is also applicable for loan agreement/financing agreement executed between the purchaser named in the SPA (who is Malaysian citizen) and the financial institutions listed in the Stamp Duty (Remission) (No. 3) Order 2012 [P.U (A) 416/2012] to finance the purchase of residential property costing not more than RM400,000.