GST set to be introduced in Malaysia

Following the tabling of the Goods and Services Tax (GST) Bill 2009 in Parliament recently, the Goods and Services Tax, otherwise known as GST, is set to make its début within Malaysia. The move to introduce GST was first announced during the tabling of the 2010 annual Budget.

If things are smooth sailing, the Bill could come into force by the middle of the year 2011, imposing a 4% rate on the sale of goods and services, replacing the 5% sale and services tax imposed currently.

The proposal is controversial for potentially being detrimental to the poor, and although the Malaysian Government has assured to allay such concerns by introducing it below the current sale and services tax rate, several have countered that the rate could be further hiked once the GST is introduced, as what had happened in Singapore which had introduced the rate at 3% only to bring it up to 7% later, as well as other countries such as Australia. In the United Kingdom, the GST is as high as 15%-17%. GST was slated to be introduced in Hong Kong in 2006 but was later cancelled following public opposition.

Reading Law will run an analysis or two on the GST and its potential impact once we obtain a copy of the Bill. Meanwhile please let us know what you think by participating in the following poll.

Current known GST rates worldwide

  1. Australia                                        10%
  2. Canada                                             5%
  3. New Zealand                               12.5%
  4. Singapore                                         7%
  5. United Kingdom                            15%

Commencing an action in a Malaysian court

Since we have already discussed what elements are needed to sue and the time limitations thereof, it is high time we also focus on the modes of commencing a process of suing before the Malaysian courts. There used to be various modes proscribed in two pertinent sets of Rules that governed civil procedure in Malaysia, the Rules of the High Court 1980 (“RHC”) made pursuant to the Courts of Judicature Act 1964 and the Subordinate Courts Rules 1980 (“SCR”) made pursuant to the Subordinate Courts Rules Act 1955. However, these have been recently repealed in favour of a unified set of Rules governing civil procedure, the Rules of Court 2012 (“RC”) made pursuant to both the 1964 and 1955 Acts mentioned, and these new Rules came into force on 1 August 2012. There are of course, other Rules governing civil procedure in other courts such as the Court of Appeal and Federal Court, but these need not concern us here for actions are not commenced at first instance within those courts.

By virtue of Order 5 rule 1 of the RC, there are 2 proscribed modes of commencing an action in the High Court, namely;

1. Writ (of Summons) – Generally for those actions involving hotly contested facts; and

2. Originating Summons – Generally faster and easier disposed of than writ, as no witnesses are called. For those actions based mainly on construction of written law and documents (such as contracts and wills).

Two former modes of commencing actions, namely the Originating Motion and the Petition, have been abolished with the aim of simplifying civil procedure by reducing the number of modes in which an action is commenced at the courts and are only retained for specific laws which are set out in Appendix C to the RC, such as proceedings for divorce under the Law Reform (Marriage and Divorce) Act 1976 and for admission as an advocate and solicitor under the Legal Profession Act 1976.

In respect of the Subordinate Courts, before, under Order 4 of the recently repealed SCR, there were 3 modes of commencing an action in the subordinate courts, namely by way of summons, originating application and petition respectively.  However these three have given way to the two remaining modes described above as well.

An originating summons (“OS”) is a Court document served by the plaintiff (or applicant if on appeal) on the defendant (respondant). It is indeed a convinient mode of starting an action, for evidence is usually given on affidavit without the need for witnesses and thus can be summararily disposed of in chambers as opposed to in an open court. It is also much cheaper compared to a writ.

It is mandatory, by virtue of Order 5 rule 3, to begin an action by way of OS where it relates to written law unless otherwise required by statute. Order 5 rule  4(2) states that is is “appropriate” to begin the action by OS when the proceedings concern issues likely to turn on the construction of any written law or any instrument made under any written law, or of any contract or document and there is unlikely to be any substantial dispute of fact. Every OS must include a statement on the questions on which the party commencing the action seeks the determination or the direction of the court or a concise statement of the relief or remedy claimed in the proceedings.

For those actions involving substantial disputes of fact, the correct mode of starting an application would be via the writ. According to Order 5 rule 2, certain actions are to be begun by writ. They are namely those concerning relief for torts committed other than trespass to land, those alleging dealings of fraud, those of breach of any duty, those of breach of promise to marry, and those where patents have been infringed. The writ is preferred here because substantial disputes of fact are likely to occur in cases of these nature, and thus witnesses would need to be called to establish or disprove such facts.

At this point perhaps it would be appropriate to consider cases where the wrong mode of commencing an action was chosen and the reaction of the Malaysian courts to such errors on the part of the plaintiff. In the case of Pesuruhjaya Ibu Kota Kuala Lumpur v Public Trustee & Ors [1971] 2 MLJ 30, the claim was for the cost of removing squatters occupying a certain plot of land, and the action was commenced by OS. The opposing party claimed that the mode was wrong as substantial disputes of fact were involved. Eventually it was decided by Raja Azlan Shah J that the dispute of fact (that is the number of squatters removed) was not material for the courts determination, as the amount disputed varied according to area, not the number of squatters involved, and so therefore allowed the mode of commencement via OS to stand.

In the case of National Land Finance Co-Operative Society Ltd v Sharidal Sdn Bhd [1983] 2 MLJ 211 a plot of land was considered conditionally sold upon the appropriate authority’s approval. That authority in fact did not approve of the sale, and the plaintiff contended that the sale had become void and proceeded by OS for a declaration to that effect. The court held that this was the right mode of action as the matter concerned the pure construction of the agreement reached between the parties privy to the sale.

The case of Ng Wan Siew v Teoh Sin [1963] MLJ 103 concerned one of which substantial disputes of fact turned, and Thompson J therefore said that this case ought not to have been commenced by OS but by writ.

According to Order 2 rule 1 of the RC, the court is not to nullify any proceedings based solely upon the ground that the wrong mode of commencing an action had been taken, but to take such steps as are necessary to rectify the damage done. Such actions would include, for example, ordering that affidavits filed are to stand as pleadings (when actions begun by way of OS ought to have been begun by writ) for example, and vice versa. The power to do this is conferred by Order 28 rule 8. This power was exercised in the case of Ting Ling Kiew & Anor v Tang Eng Iron Works Co Ltd [1992] 2 MLJ 217 where proceedings begun by OS were converted and deemed as if begun by writ so as to allow taking in oral evidence by witnesses. Unfortunately, in spite of the clear position of statute law on this issue, decisions of the court have been shown that it is quite willing to dismiss an action solely on the ground of wrong mode of commencement, such as it was in the case of Lee Phet Boon v Hock Thai Finance Corp Bhd [1994] 2 MLJ 448.

Last updated: 1 December 2012.