W 01 797 2010
W 01 797 2010
W 01 797 2010
PERAYU
... RESPONDEN
Plaintif
Dan
Konsortium JGC Corporation and Kellogg Brown &
Root, Inc. dan Sime Engineering Sdn Bhd dan JGC
(Malaysia) Sdn Bhd dan Kellogg (Malaysia) Sdn Bhd
(disaman selaku perkongsian tanpa diperbadankan)
Defendan
Diputuskan oleh Yang Arif Hakim Dr Haji Hamid Sultan Bin Abu Backer di
Kuala Lumpur pada 25 November, 2010)
CORAM:
ABDUL WAHAB PATAIL, JCA
ANANTHAM KASINATHER, JCA
MOHAMAD ARIFF MD YUSOF, JCA
GROUNDS OF JUDGMENT
A.
INTRODUCTORY BACKGROUND
[1]
This was an appeal against the decision of the High Court dated
(a)
(b)
(c)
(d)
any
electrical,
mechanical,
water,
gas,
petrochemical
or
telecommunication works; or
(e)
[2]
[3]
shall determine the contract sum of the construction works for the
purpose of determining the amount of the levy payable by the registered
contractor.
B.
[4]
1.
Whether the plaintiff has construed the CIDB Act and the
relevant documents wrongly and determined and imposed an
incorrect levy amount (according to Regulation 6 of the
Construction Industry (Collection of Levy) Regulations 1996), in
particular:
(i)
as
engineering,
procurement,
supervision,
2.
3.
[5]
the levy was reflected in the vast difference between their respective
positions. The appellant calculated the proper levy as initially RM
14,667,656.08. This amount was later revised to RM 13,129,934.05. The
respondent, on the other hand, argued that the proper levy was RM
2,802,130.21, which was arrived at by disregarding sums attributed to
the "offshore works" and the "non-construction works".
C.
[6]
defendant in the High Court, and to quote the relevant passages in the
judgment, his lordship's findings were as follows:
(a) That the plaintiff has construed the CIDB Act and the relevant
documents wrongly and determined and imposed an incorrect
(i)
(ii)
(iii)
works
performed
offshore
such
as
[7]
prayers (1) and (2) of the plaintiff's statement of claim (which dealt with
its alleged entitlement to claim the full sum of levy mentioned earlier on
the basis of the quarter percent of the contract sum under section 34).
As regards prayers (3) and (4) therein (which prayed for judgment to be
entered for the balance levy sum of RM 10,327,803.84 and interest at
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the rate of 8% per annum from 5.2.2001 until full settlement), the learned
judge decided that no orders should be made since the levy had been
calculated on a misconceived basis, although conceding that the plaintiff
had the liberty to file an action to claim the levy "according to law in the
event the defendant refuses to pay."
[8]
[9]
[11] The hearing before the High Court, being based on an Order 14A
application that was filed at the behest of the appellant/plaintiff, the issue
of
proper
construction/interpretation
of
the
contractual
joint
venture
comprising
three
Malaysian
incorporated
[13] The Scope of Work and Project Specification were spelt out clearly
in the EPCC Contract. We noted the breadth of Article 2:
The WORK consists of all things, whether or not of a permanent or
temporary nature, necessary for the realization of the PROJECT so far as
the necessity thereof is specified or is to be inferred from the CONTRACT,
such as but limited to:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(a)
(b)
(c)
(d)
[15] The EPCC Contract also divided the contract price into two
components - the Offshore and the Onshore Prices - which were given a
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The Offshore Contract Price represent the Contract Price for the part
of the WORK to be sourced and/or performed outside Malaysia by
non-Malaysian incorporated members of CONTRACTOR; the
Onshore Contract Price represents the CONTRACT PRICE for the
part of the WORK to be sourced and/or performed inside Malaysia
by Malaysian incorporated members of CONTRACTOR.
(ii)
Payment of the Offshore Contract Price shall be made to nonMalaysian incorporated members of CONTRACTOR; payment of the
Onshore Contract Price shall be made to Malaysian incorporated
members of CONTRACTOR
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ONSHORE WORK
All the WORK to be sourced within Malaysia, including but not limited to
design and engineering rendered inside of Malaysia and rendering of
procurement services for and supply of all equipment and materials
sourced inside of Malaysia, and construction work at the Site of
PROJECT, as more fully described in Article 3 hereof.
(a)
(b)
(c)
all
(e)
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(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
[17] The Consortium Agreement further provided under Article 4 for the
respective party's entitlements to the contract price, i.e. the Offshore JV
shall be entitled to receive the contract price for offshore work ("Offshore
Price") and for the Onshore Consortium to receive the contract price for
onshore work ("Onshore Price").
F.
[18] The initial position taken by the Lembaga was that the levy under
the CIDB Act was payable on the quarter percent of the full contract sum
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maintenance,
renewal,
time
such
title
and
property
pass
from
the
relevant
[20]
Despite the explanation, the Lembaga insisted that the contract sum
included the cost of all resources, including the onshore and offshore portions
and included costs relating to equipment, materials, labour, transportation and
all other costs necessary for the execution and completion of the project. See
the letter written by the Lembaga dated 6.12.2000 in which the levy was
calculated on the basis of a quarter percent of (USD 1,481,254,379.00 plus
Euro 59,630,597.00) i.e. RM 5,867,062,431.93, which gave a total of RM
14,667,656.08. The letter stated:
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"2. Please be informed that CIDB Act 520 clearly defines the contract
there as a person who undertakes to carry out and complete any
construction works. Any party including consortium partnership who is
being awarded to undertake the construction contract in Malaysia is
covered under this Act and needs to be registered with CIDB. In
determining whether the contractor or the party awarded the contract
needs to be registered, the Board will scrutinise the scope of work in the
contract whether it falls under the category of "construction works".
[21] This was the first levy calculation where the Lembaga refused to
distinguish between the offshore and the onshore portions of the
contract by relying on the argument that as long as the offshore portion
formed "part and parcel of the construction works" it was subject to the
levy.
[22] Deloitte then wrote to the Lembaga for an extension of time, which
was granted by the Lembaga. Deloitte wrote to the Lembaga thereafter
16
stating that the amount of the levy was excessive and enclosing
payment of RM 2,802,130.21, which the Lembaga accepted on a without
prejudice basis.
[23] The appeal record also disclosed that the Lembaga had revised
the initial levy amount by allowing the respondent to deduct design cost
from the contract sum. The letter from the Lembaga was also dated
6.12.2000, appearing on page 463 of Volume 2 (iv) of the Appeal
Record. See also pages 464 to 465 of the same volume of the Appeal
Record for the precise calculation leading to the levy sum of RM
13,129,934.05. The balance sum demanded by the Lembaga for
payment, i.e. RM 10,327,803.84 was based on this lower figure which
excluded the design cost, less the RM 2,802,130.21 paid by the
respondent.
[24] The essence of the dispute with the parties was just that - whether
under the CIDB Act and the 1996 Regulations, the Lembaga was
entitled to impose levy in respect of non-contracting works performed
offshore. More fundamentally, the issue was whether the levy could be
imposed on non-contracting works, whether performed onshore or
offshore.
G.
[25] Before us, counsel the appellant attempted to argue that the
respondent was not competent to split themselves into two components.
The offshore consortium played a major role in the construction, and it
was false to assume that they had no legal or business presence within
Malaysia. This was evidently an attempt to persuade us to accept that
17
The component of JGC Corporation and Kellogg Brown & Root, Inc. as
the leader was responsible for:
(i)
(ii)
(iii)
(iv) where urgent action was required, JGC Corporation and Kellogg
Brown & Root, Inc. should take such measures as were required to
protect the interests of the consortium; and
(v)
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[26] Counsel also argued that the High Court had stretched the plain
meaning of "construction works" to a meaning "which no ordinary person
would think of."
[27] Counsel for the respondent, on the other hand, fully agreed with
the High Court's conclusion that no levy could be imposed for the
offshore works and for non-construction works. It was impressed upon
us that the CIDB Act was in essence a taxing statute and there could be
no imposition of tax unless the statute was clear. Any ambiguity had to
be resolved in favour of the respondent. Our attention was also drawn to
a subsequent amendment to the CIDB Act which had clarified the legal
position, but this amendment had no retrospective effect, and had then
not even been brought into force. Under the Lembaga Pembangunan
Industri Pembinaan Malaysia (Amendment) Act 2011, the s. 2 definitions
of construction industry and construction works have been extended.
Under this amendment, they are defined thus:
construction industry means the industry related to construction works,
including design, manufacturing, technology material and workmanship
and services for purposes of construction;
"construction works" means the construction, extension, installation,
repair, maintenance, renewal, removal, renovation, alteration, dismantling,
or demolition of (a)
(b)
(c)
(d)
any
electrical,
mechanical,
telecommunication works; or
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water,
gas,
petrochemical
or
(e)
[28] It
appears
clear
from
the
amended
provisions
that
the
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H.
[30] Mindful that the appeal concerned and Order 14A application, we
had obviously to consider whether the High Court had properly
considered and determined the questions of law or the construction of
the contractual documents before the court, and further, whether the
High Court's determination could finally determine the entire cause or
matter before the Court. We bore in mind that the rules also provide that
the application did not need to dispose of the entire case, but it would be
sufficient if substantial matters of the case could be disposed of
(Petroliam Nasional Bhd & Anor v Kerajaan Negeri Terengganu [2004] 1
MLJ 8). Having considered the entirety of the judgment of the High
Court, we saw no reason to disagree with the findings and conclusions
of the learned judge below as reflected in his lordship's order. This was a
case where it was correct to apply the usual principles of statutory
interpretation in relation to a taxing statute. It is trite that a taxing statute
has to be strictly construed and the introduction of s.17A of our
Interpretation Act 1948 and 1967 which enjoins a purposive reading to
be taken when interpreting a statute, has not relaxed this rule. That
purposive reading will require the court to bear in mind that the court is
interpreting a taxing statute where the law requires a strict reading in
favour of the taxpayer. The learned judge referred to the slew of
authorities bearing on this point which lay down the accepted principle
that the intention to impose a charge upon a subject must be shown by
clear and unambiguous language (Cape Brandy Syndicate v Inland
Revenue Commissioners [1921] 1 KB 64, as referred to in National Land
Finance Co-operative Society Ltd v Director General of Inland Revenue
[1994] 1 MLJ 99 and Palm Oil Research and Development Board
Malaysia & Anor v Premium Vegetable Oils Sdn Bhd & another appeal
21
[2005] 3 MLJ 97). Even in WT Ramsay Ltd v CIR [1982] AC 300, the
case which ushered in the so-called Ramsay principle which requires
courts to look at context and scheme of legislation in ascertaining the
clear words of legislation, the Cape Brandy principle was upheld in
these words (per Lord Wilberforce):
A subject is only to be taxed on clear words, not on intendment or on the
equity of an Act. Any taxing Act of Parliament is to be construed in
accordance with this principle.
[31] By section 34(2) of the CIDB Act, the Lembaga was authorised to
impose on the respondent a levy of a quarter percent of the contract
sum, and "contract sum" has been defined under subsection (8) of
section 34 as meaning "the consideration for a contract in respect of any
construction works". We agree that the key issue is the meaning to be
ascribed to the term "Construction works" which is defined in section 2 of
the CIDB Act in very specific terms. As the law stood at the time the
case was heard, the categories of activities described all related to
construction activities proper. To recapitulate, the section provides:
maintenance,
renewal,
removal,
renovation,
alteration,
dismantling, or demolition of
(a)
(b)
(c)
(d)
any
electrical,
mechanical,
water,
gas,
petrochemical
or
telecommunications works; or
(e)
[32] On a strict and plain reading of the words, and reading the various
words in their context on the principle of noscitur a sociis, the other
works forming an integral part of those activities earlier described, could
not, on the facts of this appeal, i.e. the engineering design performed
offshore, legitimately be accepted as falling within the definition of
construction works. From our viewpoint, it was less important in this
connection to conclude on the basis that the work was done offshore; it
was simply not within the statutory scope. The law has of course been
amended subsequently to include this activity, but this appeal had to be
decided on the basis of the unamended law.
[33] We also considered the fact that the procurement by the Offshore
JV was done offshore on a FOB basis where property in the materials
passed to the owner at the port of shipment. So, there could not arise
any question of liability to pay levy on these particular procurement
activities in any event.
[34] On the issue of extra-territorial effect of the CIDB Act, Section 1
(2) of the CIDB Act which provides that the Act "shall apply throughout
Malaysia", is obviously territorial in effect. Again, the principle in this
connection is trite - the statute must expressly be stated as having an
extra-territorial effect. No such provision appears in the CIDB Act.
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[35] Thus, for the reasons described above, we agreed with the High
Courts findings and conclusions and dismissed the appeal with costs of
RM 30,000.00 to be paid to the respondent, by a unanimous decision.
The order of the High Court was affirmed.
Sgd.
(DATO MOHAMAD ARIFF BIN MD. YUSOF)
Judge
Court Of Appeal
Malaysia
Dated: 30th December 2014
Counsels/Solicitors
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