Can I say no?

A recent decision issued by the Malaysia Competition Commission (MyCC) imposed what I saw one of the heftiest penalty on a single entity for an infringement of Section 10 of the Competition Act 2010 – RM17mil. For some reason, this is much lower than the collective sum of RM33k in the earlier proposed decision on 7 tuition and day care centres for price fixing conduct, you can read my post on it here (which I am still waiting for any updates/ appeal/ decision *cough cough*).

The recent decision concerns the MyCC proposing to fine Dagang Net Sdn Bhd for abuse of its monopolistic decision (full proposed decision can be read here). Dagang Net seems to intend to challenge the Commission’s’ proposed decision and has also indicated to MyCC its intention to make an oral representation before the commission.

  1. The alleged infringement

Dagang Net Technologies Sdn Bhd is a wholly-owned subsidiary company of Dagang NeXchange Berhad (“DNeX”) and has a dominant position for Trade Facilitation under the National Single Window. According to the website, its’ e-services for trade facilitation include as follow:

Dagang Net Technologies is in the business of eService Trade Facilitation in which the exchange of trade documents among businesses and approving authorities and agencies is done electronically. An initiative by the Government in 2009 was to launch the National Single Window in order to simplify clearance procedures, facilitate the electronic exchange of trade-related data, reduce the cost of doing business and thereby enhancing trade efficiency and national competitiveness. Dagang Net Technologies had a contract and is now extended to 31st August 2019 for the said trade facilitation business.

Under the proposed decision, Dagang Net had provisionally infringed section 10 CA 2010 which subsection 10(1) reads: “ An enterprise is prohibited from engaging, whether independently or collectively, in any conduct which amounts to an abuse of a dominant position in any market for goods or services.” The proposed decision assumes a “monopoly” position by Dagang Net with restrictive conducts such as refusing to supply and imposing barriers to entry.

2. Refusing to supply

Normally the first step is to identify the relevant market to determine its’ market position to determine if it really is in a monopoly position as claimed. However, based on this phrase taken from their website: “In Malaysia, the NSW for Trade Facilitation system is developed, operated and managed by Dagang Net Technologies Sdn Bhd (Dagang Net).” I think I am safe to say that it is in a monopoly position for most of the process.

(Disclaimer: I don’t have hard evidence to prove or determine if they are indeed abusing their dominant position but merely analysing if they are based on the proposed decision and stating out the relevant law to it. Ps, I am waiting for MyCC cases judgment to be substantial enough to be quoted in each other’s cases…)

On Refusing to Supply, the Commission claims: The investigation has provisionally found that “Dagang Net … (refused) to supply new and/or additional electronic mailboxes to end users who utilized front-end software from software solutions providers which were not considered to be Dagang Net’s authorised business partners.” It was established in Commercial Solvents v Commission that a refusal to supply could amount to an abuse of dominant position as the reasons given for the refusal is often anti-competitive such as affecting competition on another market, dealings with a rival firm etc.

However, Refusal to supply is also difficult hard to be claimed as anti-competitive because there are equally good reasons as well. In Bronner, Advocate General Jacobs pointed out that the right to choose one’s trading partners and freely to dispose of one’s property are generally recognised principles in the laws of the Member States and incursions on those rights require careful justification. Hence the laissez-faire economic system dictates that parties are free to contract with whomever they choose and the terms to contract on.

→ Dagang Net currently holds a monopoly position and parties, therefore, have no other party to obtain the required services.

Secondly, sometimes duplication of facilities of a network is not feasible and may result in a loss-making situation for both parties. This is why most of the more regulated industries in the country such as water in Selangor is provided only by Air Selangor, electricity is only by Tenaga Malaysia and others.

→ This is unclear as the NSW for Trade Facilitation is still relatively new and it is not an essential facility per say since corporations may still use the longer and more tedious manual process.

Thirdly and most importantly, stated also in Bronner, it decentivises corporations to innovate and improve if it means that they would need to share it to ‘free riders’. In the Guidance, an obligation to supply and provide information or service may undermine an undertakings’ incentive to invest and innovate, even for a fair remuneration.

→ As provided in Dagang’s website, “the NSW for Trade Facilitation system is developed…. by (Dagang Net)” hence by forcing it to supply more may be detrimental to Dagang Net who perhaps invested a lot into developing the system and platform in which the NSW now runs on.

3. Deeper analysis

Now, onto the facts of the case. The basis that the Commission had identified as the reason for refusal to supply is because the “end users who utilized front-end software from software solutions providers which were not considered to be Dagang Net’s authorised business partners”. On a plain reading with no other facts given, this is prima facie an abuse of dominant position because

(1) It restricts what end users can choose as being their front-end software,

(2) It wants to affect the competition in another market by using its’ monopoly position in the trade facilitation market and

(3) it may or may not be a situation of tying/ bundling where only if the end users used software solution providers which were Dagang Net’s authorised business partners would Dagang Net provide new or additional mailboxes.

In Commercial Solvent, the factors leading to the finding of abuse were (amongst others):

  1. Using its dominant position on the raw material market to affect competition in the derivatives market
  2. Refusing to supply to an existing customer because it wanted to compete it downstream and the refusal risked eliminating the customer from the downstream market.

This seems to be quite apt to the current situation where Dagang Net where it seems to refuse to supply to again, affect competition in the front-end software by only providing services where the entities use their business partners services and it risked eliminating competition downstream. The distinguishing factor, however, is that in Commercial Solvent, it had a subsidiary who was also competing in the downstream market as the complainant and it refused to supply so that the complainant could not continue to produce a drug-related to the treatment of tuberculosis but its’ subsidiary could. In Dagang Net, the downstream was by its business partners hence not the same entity. Regardless, it seems pretty convincing to me that Dagang Net wanted to restrict competition perhaps because it was obtaining monetary benefits.

3.1 Essential facility doctrine

Also, “With great power comes great responsibility” (yes, I just quoted Uncle Ben from Spiderman) A quote apt to describe what monopoly players should note about the market obligations and responsibilities their position puts them in. Entities in a dominant position generally have an unspoken special obligation to maintain, protect or improve competition.

Currently, Dagang Net holds an “essential facility”. In Sealink, ‘essential facilities’ were defined as ‘a facility or infrastructure without access to which competitors cannot provide services to their customers’. This definition provides only a starting point. The challenge is to uphold the right of the undertakings under contracts and ensuring competition levels is maintained. In determining whether a refusal to supply amounts to abuse, a few issues must be addressed:

  • Is there a refusal to supply?
  • Does the accused undertaking have a dominant position in an upstream market?
  • Is the product to which access is sought indispensable to someone wishing to compete in the downstream market?
  • Would a refusal to grant access lead to the elimination of effective competition in the downstream market?
  • Is there an objective justification for the refusal to supply

And more.

Most often, this doctrine comes into play in the realm of patent and infrastructure. Dagang Net’s refusal to supply is very much like Bronner where it wanted to have access to the highly developed home-delivery distribution system of its much larger competitor, Mediaprint. The court preferred to use the term “indispensability” instead of “essential facility”. It stressed that the refusal must be likely to eliminate all competition from the undertaking requesting access, not merely making it harder to compete. Access must also be indispensable, not desirable or convenient and there must be no actual or potential substitute for the requested facility (Jones & Sufrin). It might be arguable that Dagang Net’s services were not “indispensable” because it was merely a simplification of the process from application to approval under the NSW system. Corporations and enterprises may still use the preceding method to obtain approval.

3.2 The balance between promoting competition and upholding contractual rights

On the contrary, other situations to consider are whether it is justifiable to force Dagang Net to provide new/ additional mailboxes for end-users who utilized front-end software who are not their business partners? There may be reasons such as to provide a more holistic and integrated to improve user experience because they are more familiar with business partners services and maybe some functions are catered to the needs of their business partners.

A prime example of streaming end-to-end processes is that you will never find an iPhone which runs on an Android system or an Android phone running on the iOS system. This is because Android phones are catered to maximise the user experience by only using the Android system whilst Apple users who prefer the iOS system will opt for the iPhone instead. One complements the other hence it makes sense to not deviate from the current business strategy.

Secondly, MyCC should not be concerned is because what Dagang Net holds is a contractual right given by the government for its’ exclusivity. In return for this exclusivity, Dagang Net may have invested a lot of money, manpower and time to develop the Trade Facilitation system in which forcing it to share with others might frustrate its’ incentives for further innovation.

However, it is not so straightforward and these arguments can fail. There is clear logic why the intervention of competition law to mandate shared access to a property is controversial. For example in Magill, only a hypothetical secondary market was affected but despite this, the courts ruled against its’ intellectual property rights and granted access. Magill is like the Genesis of Refusal to Supply under Competition law. Really, it all comes to where a balance can be obtained.

So… Can I say no?

Maybe (The most truthful answer you’ll get from every lawyer). In law, there is no hard and fast answer. This is even more where there are other elements such as economics and intellectual property rights into play. Competition law being the watchdog over the conduct of all industries will have to balance various stakeholders’ concerns and determine is a fair and just manner whether there was an infringement.

Monopoly or not, most corporations are profit-seeking but not all profits are obtained with an infringement of competition law. Here, I think there was an infringement if the Commission could prove that the infringement was due to the non-usage of business partners product. Additionally seeing as the monopoly position was ‘granted’ by the government, Dagang Net should not that it is not completely shielded by contract and impose restrictions to its’ whims and fancies.

I anticipate seeing more development in the case in the coming months/ years and also for the outcome of My E.G. Services Bhd & My E.G. Commerce Sdn Bhd’s infringement of Section 10 CA 2010.

The Tea Tiff

La Kaffa International Co Ltd v Loob Holdings Sdn Bhd and Another


Franchise Law

Franchising is simply defined as a tit for tat strategy where on one side it helps smaller companies to develop and prosper under the guidance of a bigger company while simultaneously allowing the bigger company to increase and expand their distribution. Guidance in this scenario encompasses being bound by rules of the franchise agreement.

Franchising in Malaysia is governed by the Franchise Act 1998 (Franchise Act), as amended by the Franchise (Amendment) Act 2012 which came into force on 1 January 2013, and the Franchise Regulations 1999 (amended by the Franchise (Forms and Fees) (Amendment) Regulations 2007).

Loob Holding Sdn Bhd (“Loob Holding”) was appointed as a Chatime franchisee in 2011 by La Kaffa International Co. Ltd (“La Kaffa”) and entered into a franchise agreement called Regional Exclusive Representation Agreement (RERA). Chatime outlets mushroomed across Malaysia with 165 outlets being owned and operated by Loob Holdings. Loob Holdings is the master franchisee with the outlets being either directly owned, sub-franchised or a joint venture with sub-franchisee.

“Due to disagreements with Loob Holdings, we have no choice but to make this painful decision”

Teresa Wang

Executive Vice President, La Kaffa

On 5th January 2017, despite having 24 more years to go, La Kaffa terminated RERA with Loob Holdings. Among others La Kaffa alleged that :

  1. Loob Holdings has violated Article 7 of RERA which states that Loob Holding can only purchase raw materials from La Kaffa.
  2. Loob Holdings has violated Article 10 of RERA by delaying and denying La Kaffa’s request to exercise its rights to inspect and audit.
  3. Despite repeated demands, Loob Holding has failed to comply with the terms of RERA and/or failed to make payment of, amongst others, the purchase of raw materials from the Plaintiff.

The dispute between the parties was to be resolved through arbitration in Singapore. This is due to Article 18 of the RERA which states that the RERA is governed by Singapore laws and any disputes regarding the RERA shall be arbitrated at the Singapore International Arbitration Centre.

“The three franchisees with four stores will maintain the Chatime name. The rest will be rebranded into Tealive from Feb 18 onwards”

Bryan Loo

CEO, Loob Holdings

Following the termination of RERA, in what appeared to be a well calculated and well maneuvered move, Loob Holdings was able to convince 95% of existing Chatime outlets to join them in new venture under the Tealive brand. At the time of the takeover, Chatime Malaysia accounted for 20% of La Kaffa’s total revenue. La Kaffa therefore commenced proceeding in the Malaysian High Court to obtain injunction (prohibitory and mandatory) against Loob Holdings pursuant to section 26(1) and 27(1) of the Franchise Act 1998. The interlocutory proceeding was issued pending the disposal of the Singapore Arbitral Proceedings under provision relating to application for interim injunction under section 11 of the Malaysian Arbitration Act 2005. As La Kaffa did not seek a perpetual injunction, if the Court grants interim injunction, it would last until the disposal of the Singapore Arbitral Proceeding.

The High Court held that it could not close Tealive down because provision s. 27 of the FA 1998 was not incorporated into the RERA and Loob Holdings and its related parties did not give a written undertaking to cease business for two years. The High Court was of the view that Tealive does not need to close down because Loob Holdings did not promise to close down after the termination of the RERA. The High Court Judicial Commissioner Wong Kian Kheong (as then he was) was of the view that the issue before the Court was whether La Kaffa is entitled to an interim injunction so that it can be used to support, assist, aid or facilitate the Singapore Arbitral Proceedings. Further, the high court found that the balance of convenience lies against the granting of the interim injunction in view that it carries a higher risk of injustice than a refusal of the interim injunction. As such, La Kaffa’s claim was refused.

“the following third parties will be adversely affected by interim restraining injunctions awarded against Loob

(iia)  161 Tealive Franchisees have to close shop immediately;

(iib)  the livelihood of about 800 employees of Loob and 161 Tealive Franchisees (Tealive Employees) will be jeopardised;

iic)  the families and dependants of Tealive Employees; (iid)  the suppliers and contractors of Loob and 161 Tealive Franchisees;

(iie)  the bankers and creditors of Loob and 161 Tealive Franchisees; and

(iif)  the landlords of the office and business premises of Loob and 161 Tealive Franchisees”


Judicial Commissioner High Court (Commercial Division)


La Kaffa appealed to the Court of Appeal next and in granting the prohibitory injunction, overturned the High Court’s decision. The Court of Appeal held that firstly, a simple construction of Article 15 of the RERA as well as s. 27 of FA 1998 will demonstrate that there is an obligation for Loob not to compete with La Kaffa’s business even after the termination of the RERA. In simple terms, The Court of Appeal said that the franchise agreement and the Franchise Act both state that the franchisee (Tealive) cannot carry on a competing business after terminating the franchise agreement. The creation of Tealive was, on the face of it, in contravention of the prohibition (doing something despite not being allowed to do it) under the franchise agreement and the Franchise Act. Secondly, In light of Article 15 of the RERA and s. 27 of FA 1998, the High Court ought not to have refused the prohibitory injunction. When parties have agreed not to do certain acts and a statute also provides for such protection, the court is obliged to give effect to ensure the salient terms of the agreement as well as the statute is not breached. The Court of Appeal held that the court should not allow someone to continue doing something that they aren’t legally allowed to do in the first place. Moreover, The Court of Appeal found it unjustifiable for the High Court to rely that the Tealive bubble tea business consisting of 161 outlets and the livelihood of 800 employees will be affected.

“Courts should not lend its hand to persons who on the face of records are seen to be cheats”

Hamid Sultan Bin Abu Backer, JCA

(Majority Decision)

Court of Appeal


Fortunately for Loob Holdings, despite being dismissed on a majority of 2-1, the stay of execution was granted by the Federal Court. Nevertheless, Tealive will be forced to close down until the disposal of the Singapore Arbitral Proceedings if the Federal Court were to refuse leave for Loob Holdings to appeal to the Federal Court.


In a joint statement released on the 30th August 2018, Loob Holding Sdn Bhd (Tealive) and La Kaffa International Co Ltd (Chatime) announced that both companies have reached an out- of court settlement to amicably resolve all disputes arising from their one time franchise relationship of the Chatime bubble tea brand.

In light of the amicable resolution, both parties have agreed to withdraw all ongoing proceedings in Malaysian courts as well as arbitration in Singapore.

Related or not related?

Identifying a related party transaction (RPT) is similar to playing detective and spotting the difference. If you’ve ever watched Suits (or the ongoing case of 1MDB), these transactions go from bank accounts to bank accounts, countries to countries and ending up settling in an offshore bank account. Tracing the chain of transactions is challenging at its simplest and are complicated to weave through the webs of thousands of transactions.

RPT is not always damaging to the companies as they might mutually benefit. For example, the principal company might award a contract to its subsidiary because of financial reasons and to save cost. However, RPT’s bad reputation and connotation stem from the fact that it is the most common way Directors and Trustees syphon out money from the company for personal benefit and money laundering.

  1. What is Related Party Transaction

As a basic and simple definition, a related-party transaction refers to any transaction involving the acquisition or disposal of interests in securities/assets by a company or any of its subsidiaries from or to a related party. The interest need not be financial or monetary interest. The Companies Act 2016 loosely defines “related” between corporation as:

Read that 3 times and see if you understand. Especially subsection (c ).


  1. A and B are deemed related because A is the holding company of B (assuming full control). Nothing difficult.
  2. A and B are deemed related because A is the subsidiary of B. Nothing difficult.
  3. C and B are deemed related because C is the subsidiary of the holding company A of another corporation B.

(C ) is obviously the most contentious one because the question is then how far can you stretch this concept? Is C’s subsidiary’s subsidiary’s subsidiary deemed related to B? This would be the moot point of most RPT.

2. Who are related parties?

In addition to the above, transactions between the corporation and individuals/ other corporations which the directors of the company or substantial shareholder are connected to are considered a Related Party Transaction. Companies Act 2016 defines the how a person can be connected:

However, under section 221(3), a director shall NOT be deemed to be interested in any contract or proposed contract by reason only (a)relates to any loan to the company that the director has guaranteed or party to the loan; or (b) for the benefit of a corporation by virtue of section 7 is deemed to be related to the company that he is the director of that corporation.

As mentioned earlier, RPT are dangerous and are scrutinized because directors may enter into certain transactions at a grossly overvalued or undervalued price in which the director gets a personal benefit to the companies’ detriment. For example, Director A sells a piece of land to Individual B at 40% the market price who then sells it to Individual C at market price and splits the profit with Director A. This transaction, however, will be caught under the following provision:

This means that the transaction would be void unless shareholder approval is obtained at a general meeting or company approval at a Board meeting.

3. When and how is approval needed and obtained?

By default, RPT of any value requires a shareholders’ approval. At the general meeting,

  • An interested director in a RPT, must inform the Board of Directors of the Company the details of the nature and extent of his interest, including all matters in relation to the proposed transaction that he is aware or should reasonably be aware of, which is not in the best interest of the Company.
  • The director with interest, direct or indirect must abstain from deliberation and voting on the relevant resolution in respect of the RPT at the Board meeting. In a general meeting to obtain shareholders’ approval, a director or major shareholder, with any interest, direct or indirect, or person connected to them must not vote on the resolution approving the transaction.
  • Votes are to be taken on poll.

A similar provision to section 228 is encapsulated under section 223 Companies Act 2016. This deals with substantial transactions rather than RPT but I’m including this if RPT also happens to be a substantial value transaction which has additional requirements.

What approval procedures to follow would depend on the type of company involved in the transaction.

  1. Where a company’s shares are listed on the stock exchange

Under Chapter 10.08 of the Listing Requirements, “where any one of the percentage ratios of a related party transaction is 0.25% or more, a listed issuer must announce the related party transaction to the (Bursa Malaysia) as soon as possible after terms of the transaction have been agreed”. The valuation for the percentage ratio is calculated from the value of the assets compared to the net assets of the corporation so for example, the value of a piece of land a company intends to sell to the net asset of the corporation.

However, exceptions apply where the value is less than RM0.5mil or that it is a Recurrent Transaction.

If the percentage ratio is more than 5%, the corporation must announce the transaction to Bursa Malaysia + send a circular to shareholders + obtain approval at a general meeting + appoint an independent advisor before the transaction is agreed upon.

If the percentage ratio is more than 25%, the corporation must, in addition to the above requirements, also appoint a Principal Adviser who, inter alia, advise whether such transaction is carried out on fair and reasonable terms and conditions, ensure that such transaction complies with the relevant laws & regulations, ensure full disclosure and all the necessary approvals have been obtained, that it has discharged its responsibility with due care in regard to the transaction.

More regulations apply where it is a very substantial transaction (close to 100%) and where the company is a property developer with core business in development and real estate with development potential,

B. Where it is an unlisted subsidiary whose holding company is a listed company

Directors of the Holding company would obtain a shareholders’ approval in a general meeting in addition to shareholders’ approval of the unlisted subsidiary.

C. “Dan Lain-lain”

A substantial value undertaking or property or a substantial portion is when it either:

  1. Exceeds 25% of the value of the assets of the company
  2. The net assets attributed to it amounts to more than 25% of the total net profit
  3. The value exceeds 25% of the issued share capital

Whichever is highest

For this, approval procedure for substantial value transaction and RPT are the same– shareholders’ approval at a general meeting.

4. What is not a RPT?

Under the Chapter 10.08 of the Listing Requirements, the below are not normally regarded as RPT:

  • The payment of dividend, issue of securities by the Company by way of a bonus issue or for cash
  • An acquisition or disposal by the Company or its subsidiaries, from or to a third party, of an interest in another corporation, where the related party holds less than 10% in that other corporation other than via the Company;
  • The provision or receipt of financial assistance or services by a licensed institution upon normal commercial terms and in the ordinary course of business;
  • Directors’ fees and remuneration
  • the entry into or renewal of tenancy of properties of not more than 3 years, the terms of which are supported by an independent valuation

…. And more.

The case is less clear for “Dan Lain-Lain” but we can gain some inspiration from the Listing Requirements about what is expected.


RPT particularly acute hence it is highly regulated and scrutinised to ensure the company has its’ checks and balances on its’ directors under the required rules and regulations. A breach of these regulations entails not only civil liability but also under criminal law where the director can be imprisoned and have a heavy fine upon them. Corporations must ensure that they are conducting business in an ethical, moral and legal manner hence the Companies Act 2016 places much more responsibility and liability on directors compared to Companies Act 1965.

Case comment: Of con men and chargees

The author discusses the case of CIMB Bank Berhad v AmBank Berhad & 2 Ors [2017] 5 MLJ 142. It is a Malaysian land law case on deferred indefeasibility, the position of chargees and the meaning of ‘purchaser’ in the National Land Code 1965 (‘NLC’). To appreciate this article, the reader must have a basic understanding of how to interpret section 340 of the NLC.

Many candidates who sat for the Certificate In Legal Practice must have collectively groaned (inaudibly, of course) when they laid their eyes on the Professional Practice paper last month. One of the questions bore some similarity to the case of CIMB v AmBank where the Federal Court made significant statements in its majority judgment and Jeffrey Tan FCJ delivered a dissenting judgment that, I believe, piques the interest of land law enthusiasts.

I thought that CIMB v AmBank was interesting because, unlike most other significant decisions on indefeasibility, this one involved two titans going head-to-head with one another in a decision that concerned many banks and financial institutions.

In this post, I will briefly outline the case facts. Then, I will summarize the decisions of the High Court, Court of Appeal and Federal Court here and offer my thoughts on the case here.

The brief facts

Diagram 2

On 17 March 2006, as security for a loan, a charge was granted over a piece of land owned by Ching Ting Seng and Ching Chong Lup (‘the Chings’) in favour of Southern Bank Berhad (‘SBB’). Soon after, CIMB Group Holdings Bhd acquired SBB, thus CIMB Berhad took over SBB’s assets. On 14 November 2008, Wong Chee Keong (‘Wong’) applied for a loan from AmBank to finance the purchase of said land from the Chings. Wong created a charge over the land in favour of AmBank as security for said loan.

Both Wong and AmBank appointed solicitors who dealt with each other extensively. Eventually, AmBank’s solicitors received the purported document of title, the duly stamped Memorandum of Transfer (‘MoT’), the purported Discharge of Charge executed by CIMB and the duplicate of the charge from Wong’s solicitors. It is undisputed that the purported document of title was not issued by the registering authority and that the purported Discharge of Charge was forged.

Following one failed registration attempt, AmBank’s solicitors tried again. They presented the purported Discharge of Charge, the MoT and the charge in favour of AmBank (‘the AmBank Charge’) for registration. The authorities registered the purported Discharge of Charge, the transfer to Wong, and the AmBank Charge.

Judging from the above, it appears that Wong had masterminded the transfer of title and discharge of charge of land in one fell swoop. Strangely, there may be a positive side to this story.

If the documents were in fact legitimate, the successful registration of title and charge would have been lauded as a testament to the system’s efficiency. However, it was this same efficiency that allowed Wong to hoodwink CIMB of its registered interest.

The decisions of the High Court and the Court of Appeal

The sole issue for determination in both the High Court and the Court of Appeal was whether AmBank was an immediate or subsequent purchaser.

The High Court found AmBank to be an immediate purchaser. The Court of Appeal found AmBank to be a subsequent purchaser and stated that the High Court failed to appreciate the two-stage nature of the transaction:

  1. First, CIMB’s charge was discharged and the transfer occurred from the Chings to Wong, resulting in Wong becoming the immediate purchaser.
  2. Then, AmBank derived their interest in the property from Wong, making AmBank the subsequent purchaser.
The blue arrow represents the High Court’s line of thinking and the red arrows represent the Court of Appeal’s argument that there was a two-stage transaction.

Now, what is an article on section 340 of the NLC without an excerpt of it?

340. Registration to confer indefeasible title or interest, except in certain circumstances
(1) The title or interest of any person or body for the time being registered as proprietor of any land, or in whose name, any lease, charge or easement is for the time being registered, shall, subject to the following provisions of this section, be indefeasible
(2) The title or interest of any such person or body shall not be indefeasible:
(a) in any case of fraud or misrepresentation to which the person or body, or any agent of the person or body, was a party or privy;
(b) where the registration was obtained by forgery, or by means of an insufficient or void instrument; or
(c) where the title or interest was unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law.
(3) Where the title or interest of any person or body is defeasible by reason of any of the circumstances specified in subsection 2:
(a) it shall be liable to be set aside in the hands of any person or body to whom it may subsequently be transferred; and
(b) any interest subsequently granted there out shall be liable to be set aside in the hands of any person or body in whom it is for the time being vested:
Provided that nothing in this subsection shall effect any title or interest acquired by any purchaser in good faith and for valuable consideration, or by any person or body claiming through or under such a purchaser.

Section 340(1) sets out the general rule that any registered title or interest is indefeasible. The exceptions to this is where one of the situations under section 340(2) applies. Holding AmBank to be an immediate purchaser has the effect of placing it under section 340(2). It is now trite law that section 340(2) cannot be read with the proviso under section 340(3). Following the High Court decision, AmBank was found to be an immediate purchaser and therefore its interest was defeasible.

The corollary to this is that holding AmBank to be a subsequent purchaser will enable the operation of section 340(3) and allows AmBank to rely on the protection under the proviso, which can only be read together with section 340(3).

Federal Court

At this point, you might be thinking that AmBank and its counsel thought to themselves “aiyah, no sweat” after receiving the Court of Appeal ruling. That is, until you learn that CIMB obtained leave to appeal to the Federal Court on the following question of law:

Whether a chargee comes within the meaning of ‘purchaser’ under the proviso to section 340(3) of the National Land Code?

But once again, AmBank’s counsel was victorious and CIMB’s appeal was dismissed by a majority of 4 to 1.

Md Raus Sharif CJ (as he then was) delivered the majority decision and concurred with the Court of Appeal in that AmBank was a subsequent purchaser, thus protected by the proviso. In answering the leave question, the majority judges referred to the definition of the word “purchaser” in section 5 of the NLC. The majority judgment agreed with the Court of Appeal that the transaction was done in two stages.

In his dissenting judgment, Jeffrey Tan FCJ held that both immediate and subsequent purchasers must be purchasers in good faith and for valuable consideration. His Lordship held that, since Wong was not an immediate purchaser in good faith, AmBank could not have been a subsequent purchaser. Thus, AmBank was an immediate purchaser and therefore its interest was defeasible.


1) On terminology

In the majority judgment, the former Chief Justice stated the following at Paragraph 14:

Thus, if a chargee does not come under the meaning of purchaser, then AmBank was an immediate purchaser and in such a situation AmBank’s interest as chargee was not protected by the principle of deferred indefeasibility. However, if a chargee comes within the meaning of purchaser, then AmBank was a subsequent purchaser, and thus was protected by s 340(3) of the NLC. (emphasis added)

This is confusing.

At face value, it looks like his Lordship suggested the following:

If a chargee WAS NOT a purchaser, then AmBank WAS an immediate purchaser;

If a chargee WAS a purchaser, then AmBank WAS a subsequent purchaser.

What his Lordship actually meant was:

If a chargee WAS NOT a purchaser within the meaning of the proviso, then AmBank was an immediate purchaser;

If a chargee WAS a purchaser within the meaning of the proviso, then AmBank WAS a subsequent purchaser.

I would like to humbly suggest that the use of the term “immediate purchaser” has the potential to bring about some confusion. This is because in section 340 the word “purchaser” only appears in the proviso and nowhere else. Perhaps a better term is “immediate transferee”.

My concerns are not imagined. In Paragraph 71, Jeffrey Tan FCJ stated,

With respect, the issue was not ‘whether a chargee comes within the meaning of s 340(3) of the NLC’ as proposed by the leave question. As rightly said by the Court of Appeal and agreed to by the first respondent before us, the issue was whether the first respondent was an immediate or subsequent purchaser. For if the first respondent, though purchaser, were not a subsequent purchaser, then the first respondent only acquired a defeasible interest. But of course, if the answer to the leave question were that a chargee does not come within the meaning of ‘purchaser’ under the proviso, then this appeal should be decided against the first respondent. (emphasis added)

In the highlighted text, Jeffrey Tan FCJ seems to have suggested that, following the leave question, if the respondent, though purchaser within the meaning of the proviso, were not a subsequent purchaser, then the first respondent only acquired a defeasible interest.

It is submitted that if the respondent is a purchaser within the meaning of the proviso, it must follow that it is a subsequent purchaser. In other words, it is impossible for a chargee to be protected by the proviso *and* be an immediate purchaser.

Aside from the highlighted text, I agree with his Lordship in that the true question was whether AmBank was an immediate purchaser or subsequent purchaser. His Lordship also expressed his disapproval over the framing of the leave question, which was “whether a chargee comes within the meaning of ‘purchaser’ under the proviso to s 340(3) of the National Land Code.” If answered in the negative, then it follows that chargees will never be able to benefit from the proviso. As Jeffrey Tan FCJ put it,

It would have far reaching consequences if financial institutions were excluded as purchasers.

His Lordship cited numerous authorities in support of the fact that a chargee comes within the ambit of “purchaser” within the meaning of the proviso. At one point, he even answered the leave question in the affirmative at Paragraph 90 even though he ultimately found in favour of CIMB.

I would like to propose that even though this case was a ruling on the meaning of “purchaser” within the meaning of the proviso, the most noteworthy comments were related to whether AmBank was protected by the proviso or not (i.e. “immediate purchaser” or “subsequent purchaser”) because it appears to conflict with OCBC Bank (M) Bhd v Pendaftar Hakmilik, Negeri Johor Darul Takzim [1999] 2 MLJ 511 (‘the OCBC case’).

2) Is the OCBC case still relevant?

CIMB’s counsel cited the OCBC case in support of its case. On the facts, Ng Kim Hwa (‘NKH’) alleged that Ng See Chow (‘NSC’) had forged a transfer of a piece of land and subsequently charged the land to OCBC. NKH only discovered the fraud when he was notified of an entry of a Registrar’s Caveat over the land.

Diagram 3

The title to NSC was defeated, but OCBC wanted to remain as chargee. The Court of Appeal held that OCBC could not rely on the proviso within the meaning of section 340(3) because section 340(3) had not been ‘activated’ to begin with. The late NH Chan JCA also stated the following:

A person who has no right or title to the land has no right to charge it because the land is not his, in the first place, for him to grant any interest (like a charge or a lease) in the land to someone else (such as a chargee or a lessee).

In light of CIMB v AmBank, it is clear that the above statement cannot stand. It is now clear that a charge (in favour of AmBank) will subsist even though the person who made the charge was not entitled to the ownership of the property in question (Wong). The majority reasoning may have been a long time coming, considering that the Federal Court at Paragraph 26 of Tan Ying Hong v Tan Sian San & Ors [2010] 2 MLJ 1 disapproved of the OCBC decision in obiter.

It was unfortunate that the majority judgment did not comment on the OCBC case. I believe that it would have been beneficial to do so, considering that the OCBC case also related to a two-stage transaction (i.e. of transfer and charge), yet OCBC’s interest was defeated. Since it was not overruled, we may still see counsel distinguishing CIMB v AmBank on the facts and preferring the OCBC case to defeat a registered charge.

Concluding remarks

All in all, I agree with the outcome of this decision. Surely, it is not feasible to deprive innocent chargees of protection in the absence of any principal-agent relationship (see: Abu Bakar Ismail v Ismail Husin [2007] 3 CLJ 97). Thus, the answer to the leave question could have only been ‘no’. Also, I prefer the majority decision’s ruling that there was a two-stage transaction.

It is clear from CIMB v AmBank that the concept of deferred indefeasibility reigns supreme and that there is still much room to expand on the jurisprudence relating to indefeasibility, particularly with regard to charges. I look forward to witnessing the continued maturity of this area of law.

4 facts about Malaysia’s Tax that you probably didn’t know

2 things are definite in this world: Tax and Death. Even after you die, if you owe the government tax payable, you would still need to pay it, without a doubt. After all, taxes are what funds the low-cost medical services (tooth extraction in government dental clinic is RM1.00 by the way), building of roads and highways, provision of public transport and as well as means to mitigate income inequality.

There are various types of taxes: Personal Income Tax, Corporate Tax, Goods and Service Tax, Real Property Gain Tax and Road Tax. Loosely speaking, tax could be divided into two categories: progressive tax and regressive tax. Progressive tax is a tax that takes a larger percentage of a larger income and a smaller percentage of a smaller income. ie Income Tax and Corporate Tax whereas Regressive Tax is a tax that takes a larger percentage from low income-earners and less from high income-earners i.e. Goods and Service Tax.

Here are some facts about Malaysia’s Tax that you probably may or may not know!

Fun fact 0.5: Malaysia is the first country in the world to be repealing an indirect tax act! (albeit being replaced by another soon in September 2018).

1. Who is taxed?

The straightforward answer is everyone. When you purchase a car, you pay consumption tax; when you sell a house, you pay capital gains tax; when you renew your car license, you pay road tax. However, not everyone pays income tax.

According to NST, Malaysia with a population of 32 million people, shockingly only 2.3 million people contribute to income taxes. Presently, employees who earn RM 3,100  or more each month, their employer will deduct an amount of income tax from the monthly salary.

For the larger proportion of the population whose income is not accounted for, correctly reported or under the threshold, GST and SST is a way to gain some income for the government from them as it would be very onerous if 2 million people had to shoulder most of the tax income from the 32 million population.

2. Amount of tax revenue

In the year 2017, the Inland Revenue Board (IRB) was able to collect a total of RM123.33bil, an 8.2% or RM9bil increase compared to the same period in 2016. This means that tax accounts for 56% of the nations’ RM220.406bil revenue.

From the RM123.33bil tax revenue, the-soon-to-be-repealed-GST contributed RM44bil (35%). In comparison, the SST fared quite behind at only RM20bil historically.

3. Malaysia doesn’t have a “Netflix tax” regime yet.

Presently, most countries are looking into the implementation and design of a new tax regime called “Netflix tax” aka digital tax. The rise in internet users and the simplicity of using the internet for various entertainment and services has made it much easier for any entrepreneur to sell their goods and services across the globe. However, on the topic of tax, they are mostly subjected to the tax of the country they’re in rather than the country they’re selling to, many of which go unreported. Corporations which might be affected by this include Netflix, Uber, Grab, Amazon to name a few. According to the government, this untapped segment is worth “billions of ringgit.

According to section 9 of the GST act (will update accordingly once the SST Act has come back into force), “A tax known as goods and service tax, shall be charged and levied on

  1. Any supply of goods and services made in Malaysia, including anything treated as a supply under this Act; and
  2. Any importation of goods into Malaysia

As above, services are only taxed where they are made in Malaysia and this requires a place of business in Malaysia. However, if the place of supply is outside Malaysia, they won’t be taxed. The prime example is Netflix. Netflix, unlike Astro, exists on the internet and in an intangible sphere beyond the reach of current regulations. There is a fixed membership fee to pay to enjoy their streaming services but they do not charge any GST if you bought a membership in Malaysia.

In fact, the government has been looking into taxing the digital economy for a while now but due to the change in government, we’ll wait and see what happens. Countries which has successfully implemented the regime includes Australia, Japan, Korea and the UK.

4. What to expect for the transition from GST to SST

I think the number one concern when the government announced that all corporations must reduce their prices pending repealing the GST is whether there will be enforcement and how effective enforcement will be. Larger corporations had been reducing prices post-GST (which led to abnormally weird price figures i.e. RM4.67 for a sandwich) but it’s the SMEs which will be reluctant to reduce prices.

Under the Section 14 Anti-Profiteering Act, “any person who, in the course of trade or business, profiteers in selling or offering to sell or supplying or offering to supply any goods and services commits an offence” where ‘profiteer” means “making profit unreasonably high”. Now, what means unreasonably high is not in the Act but in the regulations. During the transition specifically, it is an offence to profiteer where your profit margin is higher on 1st June than they were before 1st June. If your cost is RM5 whereas the selling price of the product is RM10, your profit margin is 50%. If you did not reduce your price but the cost goes down to RM4.30, your profit margin is now (5.7/10) 57%. Therefore, you profiteered. However, the mathematical equation and economic analysis and taking inflation into consideration allow for some leeway. (The equation is >50 pages long but just know it’s not very straightforward)

Consumers are always welcome to report any case of suspected profiteering to the Domestic Trade, Cooperatives and Consumerism Ministry.


Tax regimes are necessary to provide resources for the government to carry out various projects i.e. MRT 2 and LRT 3 but also an economic tool to prevent too much economic disparity between citizens. Personally, I prefer the GST regime instead of SST because the latter has many loopholes which were solved by the implementation of the GST. Example: Under the SST regime, fraudulent claims and forged cheques are common occurrences and the GST dispelled all of these. GST is also more straightforward in its implementation and enforcement with only one threshold across all industries whereas SST has various threshold across different ones.

Furthermore, the Anti-Profiteering & Price Control Act 2011 may require some amendments and diligent enforcement to have any positive impact on the economy. The problem also lies in the penalty provided in the act which states:

In a hypothetical situation where such person is a body corporate, and he commits and is convicted for an offence under the Act but makes a profit of RM10mil, he is only liable to pay RM0.5mil on the first offence and RM1mil on any subsequent offence. To the body corporate, he might as well happily pay the penalty and continue to profiteer and just sign a cheque to the court for each offence. There isn’t a deterrent element such as if such person were NOT a body corporate i.e. imprisonment to prevent any rampant behaviour of a body corporate under this Act.

Rumours have it that the SST to abolish the GST will be tabled next Monday so stay tuned!

Protecting shareholders’ rights

In light of recent events, this would be a good time to refresh and get relevant about Company Law and as the title suggests, shareholders’ rights in a company. Shareholders, being investors of the company, pour their money into a company in hopes to get a return on investment from the company so what can they do if they find RM2.6 billion appear in one of the directors’ bank account?

At its most fundamental level, the determination of shareholders’ rights depends on the types of shares they hold but this needs to be spelt out in the constitution. The type of shares they hold may confer preferential rights to distributions of capital or income, confer special, limited or conditional voting rights and also not confer voting rights (known as preferential shares).

Section 71 of the Companies Act 2016 provides that a company share, other than preference shares, confers on the shareholder the following rights:

(a) the right to attend, participate and speak at a meeting

(b) the right to vote on a show of hands on any resolution of the company

(c) the right to one vote for each share on a poll on any resolution of the company

(d) the right to an equal share in the distribution of the surplus assets of the company, or

(e) the right to an equal share in dividends.

  1. The right to vote at the AGM

By law, all public companies are required to have an Annual General Meeting once a year and failure to do so is a contravention to the law (s340). The change to the Companies Act 2016 has done away with the compulsory need for private companies to have one.

This is perhaps the most fundamental and powerful right of a shareholder– the power to influence the decisions of the company (#GE14). No shareholders should be denied the right to vote unless the share held doesn’t give the right to do so or other extraordinary reasons.

A key case dates back to the 19th century in Pender v Lushington wherein the Articles of Association, no one is allowed to vote on more than 100 shares in any meeting. Mr Pender who held 1000 shares split his votes and registered them under the names of a number of nominees. The Directors refused to have his votes counted. The court allowed an injunction for the votes to be counted. In a meeting, the company cannot look behind the ownership. A right to vote is a property right and an individual right in respect of which the member can sue. (Ps, this also allows a personal claim against the Directors for refusing to let the shareholders to vote).

(2) Statutory derivative action

A derivative action is made by a member of the company in respect of a cause of action vested in the company and in which relief is sought on behalf of the company. This is because the company is incapable of taking action against the directors who are controlling the actions of the company hence an action is brought by the concerned shareholders. As with the rule under Foss v Harbottle, the proper plaintiff in the action is the company and not individual shareholders.

Of course, the courts have been creating exceptions to the Foss v Harbottle rule where it assumes the appropriate body to decide whether litigation should be brought is the shareholders in a general meeting and leaves minimal scope for shareholders to commence derivative litigation (Kershaw). However, the new Company Act 2016 has done away with Common Law Derivative action and we only have the Statutory Derivative Action under the Act under section 347.

Therefore, Derivative proceedings can only be brought with leave of court and it will consider if (a) the complainant is acting in good faith; and (b) it appears prima facie to be in the best interest of the company that the application for leave is granted. Complainant is defined under s345.

It appears to give wide discretion to the courts whether leave will be granted. In Mohd Shuaib Ishak v Celcom (Malaysia) Berhad (the first reported case under S181A Companies Act 1965 which was the statutory derivative action then) Indeed there was no need to prove ‘wrongdoer control’, doesn’t exclude negligence and no set bar to the claim. This case serves as a wake-up call for directors to carefully consider how they handle a company’s affairs as their decisions can be subject to scrutiny by minority shareholders who have a statutory right to challenge the same in court if the requirements under section 181A of the Act are satisfied.

However, as seen in the Federal Court case of Perak Integrated Networks Services Sdn Bhd v Urban Domain Sdn Bhd & Ors, Section 347 have since abrogated the common law derivative action. Any derivative actions can now only be done by way of statutory derivative action as canvassed under Section 347. However, the case was useful in highlighting that even where there are no minority shareholders, a case of derivative action can still be brought i.e. 50/50 in this case.

(3) Oppressive action

The difference between Oppressive action and Derivative action is that for the latter, any damages reaped after litigation will go to the company instead of the member of the company. In other words, a derivative action is brought when the member does it (out of the goodness/ anger/ dissatisfaction of his heart OR) when the company is unable to sue for any wrongdoings done against itself.

An oppressive action is where the rights and interests of a shareholder are affected and hence the aggrieved shareholder would want to bring an action to protect those rights. An action of this nature is that the shareholder would bring a claim in its own name and any damages goes to the shareholder directly.

This means that the shareholder can bring an action against the directors of the company (or whoever is exerting the oppressive force). First, the shareholder would be required to prove 2 things to the court: that there was an element of unfairness and that it has affected interests as members, shareholders or debenture holders of the company.

This is a remedy that allows shareholders to bring an action when they had suffered a personal wrong. The courts will also scrutinize at any agreements between the shareholders and the directors to see if there had been any understandings or legitimate expectations. If there are any, the shareholders would have a stronger case for proving oppression.

Whilst there is no one rule for all test as to what amounts to oppression, Kumagai Gumi Co Ltd v Zenecon-Kumagai Sdn Bhd [1994] 2 MLJ 789 has the following to say: “With the wide wording employed in the statute, it is clear that the categories or examples of actions which would constitute oppression are not closed or limited. Having said that, oppression of minority shareholders usually occurs when an act of the majority infringes upon the rights of the minority shareholders. Usually, this involves actions which are unfair or actions which depart from standards of fair dealing“.

Simply put, it is where the directors (or similar) was aware of the complainant’s rights and interests but had deliberately chosen to ignore or act against those interests. Examples include where the director has breached its obligations under the company constitution to call an AGM, to allow a shareholder to vote or non-disclosure of company affairs and even non-payment of dividends.

Just note the case of Ng King Chong & Anor Nation Park Sdn Bhd & 2ors that the name of the oppressors must be named as a party to the action as the court finds that it gives them an opportunity to defend themselves.

Brady Part: 113280 | STOP Sign |

(4) Statutory Injunction

The Companies Act 2016 now has inherited Section 368A of the Companies Act 1965 under Section 351 which allows for statutory injunction relief.

An injunction relief carries traits of an equitable relief hence parties claiming injunction must come with clean hands, must contravention or attempts to contravene of the law and that the Honourable Court is of the opinion that such relief is in the interest of justice.

Winding up of a Company - Meaning, Modes and Effect - Free BCom Notes

(5) Winding up

If all attempts to properly settle the matter had failed, a shareholder may apply to the court for just and equitable winding up.

A just and equitable winding-up situation is not a primary remedy given by the Courts as the general approach is that the majority shareholders should buy out the minority shareholders for sustainability of the business. Actions of this nature often connote elements of legitimate expectation, shareholders’ deadlock, breakdown of mutual trust and confidence among the shareholders and/or management of the company which may justify the request to wind up the company.

Being an equitable relief, Lord Wilberforce explained in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360. that through the just and equitable clause, certain obligations common to partnership relations may come in; the analogy to partnership is convenient because the concepts of probity, good faith, and mutual confidence, developed in partnership law, become relevant considerations once the elements stated above are found to exist


The Companies Act 2016 has provided for vast improvements in protecting minority shareholder rights such as lower thresholds to amend the Articles of Association and shareholders meeting and gained the right, inter alia, for management review.

In conclusion, the law does give shareholders remedies for when their rights are being infringed and those rights were illegally exercised. It will be also useful to know about what director’s duties are such as promoting the success of the company, duty to exercise independent judgment and duty to exercise reasonable care, skill and diligence are amongst the core duties of company directors. Active participation on the part of shareholders will ensure that directors are held accountable and will not accumulate RM38 billion debt. (Illustrations are inspired by real-life stories hence any similarities may be coincidental).


Too much of a google thing is a bad thing?

People use Google for one of two things: to search something online or to check if their internet connection is working. If you’re the first, you may or may not have seen products being displayed on the top bar when you search for an object, for example:

Google generates about 0.3 billion USD daily and most of that revenue comes from advertising as you may see. Google shopping is no stranger to the world of shopping (indicated by the symbol sponsored) but in June 2017, Google was asked to change its ways on google shopping by the EU Competition Commission and was slapped with the largest fine imposed on a single entity in EU Competition history– €2.4bn fine. There are several reasons as to why this is justified but others argue that it is disproportionate and harms product innovation. Google search engine is used by 90% of worldwide internet users and to prevent exploitation of customers and preserving competition, someone needs to start sending a wakeup call to dominant players that doing as they please will be heavily penalised.


In 2010, the EU Competition Commission decided to open an investigation as to whether Google Shopping was a violation of competition rules. Google shopping allows consumers to compare products and prices online and find deals from online retailers of all types, including online shops of manufacturers, platforms (such as Amazon and eBay), and other re-sellers.

The opening of formal proceedings follows complaints by search service providers about the unfavourable treatment of their services in Google’s unpaid and sponsored search results coupled with an alleged preferential placement of Google’s own services. Google’s internet search engine provides for two types of results. These are unpaid search results, which are sometimes also referred to as “natural”, “organic” or “algorithmic” search results, and third party advertisements shown at the top and at the right-hand side of Google’s search results page.

In its media statement, the Commission mentioned that it will investigate whether Google has abused a dominant market position in online search by allegedly lowering the ranking of unpaid search results of competing services which are specialised in providing users with specific online content such as price comparisons and by according preferential placement to the results of its own vertical search services in order to shut out competing services.

After 7 years, the case has come with a €2.4bn fine.

The theory of harm

So what the Courts have told Google is that Google Shopping cannot favour its own product ads (where Google gets its revenue from) over those of other competitors. To illustrate what this means, a useful analogy may be to think what the Commission is doing is the equivalent of asking a newspaper company to carry/publish the advertising service of competing newspapers and in equal conditions whatever that means and without getting the revenue.

This might be shocking to some who don’t understand Competition Law but it is founded on the very rationale that its existence is to prevent “market exploitation”. Companies in a dominant position (such as Google with a whopping 90% market share in internet search engines in the EU) owe a “special obligation” to not distort and obtain an extra advantage from another market compared to other entities already existing in the secondary market.

Example: Windows was fined in the year the 2000s for having pre-installed the Windows Media Player into computers running the Windows system. Other media player companies lodged a complaint that this was an abuse of dominant position by using a pre-existing dominant position in one market (computer software market) to impute and create a dominant position in another market (the media player market). The Court agreed.

Some might argue that this is illogical because as consumers, we want convenience and reasonable price so by forcing Windows to remove the Windows Media Player (which it gave for free!!) isn’t it creating more trouble for consumers to have to search and download another media player? Also, what’s wrong with using what you’ve successfully created (through blood, sweat, tears and a lot of money) to promote something else you’re working on?

It is a little counterintuitive, but the argument on the flip side of the coin is that well, would you like it if one company dominated your whole life? It was to prevent a company from creating too many dominant positions that consumers are compelled if that dominant position became a monopoly position. Also, there are many considerations such as maintaining the level of competition, “too big to fail” and promoting consumer choices.

Back to Google, the EU Competition Commissioner, Margrethe Vestager, describes Google as obtaining an “illegal advantage by abusing its dominance in general Internet search” by promoting its own comparison shopping service in organic search results and demote rival comparison shopping services. The basis of the Commission’s decision is not spelt out on any relevant established anti-competitive practices such as constructive refusal to supply, price discrimination or tying but it was based on an overarching jurisprudence of competition law that dominant firms owe a “special obligation” as I’ve mentioned earlier.

Evidence of the foreclosure involved an in-depth analysis of Google Shopping’s effects on the market. It was found that as a result of Google’s illegal practices, traffic to Google’s comparison shopping service increased significantly, whilst rivals have suffered very substantial losses of traffic on a lasting basis.

  • Google’s comparison shopping service has increased its traffic 45-fold in the United Kingdom, 35-fold in Germany, 19-fold in France, 29-fold in the Netherlands, 17-fold in Spain and 14-fold in Italy.
  • The Commission found specific evidence of sudden drops of traffic to certain rival websites of 85% in the United Kingdom, up to 92% in Germany and 80% in France. These sudden drops could also not be explained by other factors. Some competitors have adapted and managed to recover some traffic but never in full.

Therefore, the theory of harm lies in that it was using its dominant platform (Google Search) to help establish another dominant position (Google Shopping) and this is supported with the exponential increase of traffic to Google Shopping and a fall in competitors. Also, it distorts reduces the level of relevancy in search results by displaying certain products over others.


I must admit first-hand that I am not a big fan of market liberalisation because it creates lesser competition and lowers competitive pressure. I am especially an opponent to the thought that “less is more” in the context of competition. For example, a self-sufficient country like China which holds one of the largest economies in the world has only a few companies running the bank by the billions/trillions: Tencent, Alibaba and Baidu to name a few. Competition is pretty dire there with only a handful of *very strong* players.

However, this decision is one where I am unconvinced of but understand the underlying rationale (and desperateness) of the decision. It’s a good decision but the explanation part leaves more to be desired.

Firstly, it stifles product innovation and improvement. The whole reason for the integration of the price comparison function into Google shopping is so that consumers like you and me need not individually check Amazon, Zalando, Asos, Missguided, Ebay to find the cheapest place to buy a shirt. A function which disadvantages rivals is not automatically anticompetitive practices but a balancing process needs to be taken place before it can be called an infringement of competition laws. Through improving and updating its price comparison function, Google was able to obtain a solid market standing which is not a “Google privilege” but maybe it offered something other price comparing websites don’t– the added convenience. But as seen in Windows/ Windows Media Player, added convenience isn’t always looked upon favourably.

Secondly, it’s quite unclear what kind of infringement this is. This is important because different tests are used for different infringements. At its closest, this appears to be a tying case such as Windows/ Windows Media Player but it wasn’t like consumers were prevented from using an alternate price comparison website and consumers didn’t need to buy Google Search to get Google shopping for free (welcome to the 21st century!). It is possible that this is a constructive refusal to supply case where if it can be proven ‘indispensability’ lead to a ‘margin squeeze’ and ‘a secondary market to be affected’. Bronner, Commercial Solvents, Magill and IMS Health all demonstrate this point (to a certain extent). The Commission notes in its Guidance that the existence of an obligation to supply – even for a fair remuneration – may undermine undertakings’ incentive to invest and innovate, which could be detrimental to consumers; and that, where a competitor can take a ‘free ride’ on the investment of the dominant firm, it is unlikely itself to invest and innovate, again to the detriment of consumers. So… What does it want Google to do exactly?

The part which baffled me the most is, as per the usual EU Competition Commission style, it did not tell Google how to remedy the problem but wants Google to figure out by itself on how it can be remedied and what commitments it plans to give. This is after 7 years of negotiation and various compromises being discussed hence it should be reasonable for the EUCC to at least give an idea of how to give a remedy the issue.

In other related thought, maybe EUCC has been overzealous with Google? It does have 2 cases pending with Google on it’s Adsense and Android workings…

The Gruber Deal

(I know I said in my previous post that Google Shopping would be the next post but since this is more recent… some urgent comments about it)

For people who can’t drive, people who do not want the trouble of finding a car park, people want to go out for lunch and people who would miss the last train (thanks to OT), Grab and Uber would be a staple app in the phone. According to The Edge Markets, Grab itself offers 3.5million rides a day which shows how reliant people have become on ride-hailing services compared to the traditional taxis.

I won’t talk about why the merger happened (you can read more here and here) but rather I want to focus on the market implications of the merger. Indeed it as raised red flags amongst Competition Commissions in Singapore, Vietnam and Philippines about what the implication of the merger will bring as it will be a monopoly in the region. Unfortunately, Malaysia has yet to have merger controls in place as the recent Competition Act focuses on dominant players and anti-competitive practices.

How might this concern me?

If all goes well and as expected, Grab would be a monopoly player in the ride-hailing market. For the society as a whole, we would want to prevent the existence of a monopoly if possible. Imagine if you could only go to Tesco for your groceries, wanting to buy a carton of milk and it costs you RM20? Sure you’ll be unhappy and unwilling to buy it but you have no alternatives, hence you plan what you can save throughout the week to afford that bottle of milk. Monopoly players might just do that, jacking up prices for their own profit gains.

Competition authorities are more cautious when approaching the topic of mergers compared to anti-competitive activities for 2 reasons:

  1. A merger would lead to a permanent structural change in the market and may damage the competition of the market. Once it is done, you cannot undo it. It has a much more lasting change than a cartel/ price-fixing agreement.
  2. A merger can actually lead to efficiencies and higher productivity compared to anti-competitive activities. For example, firms may want to combine IP resources to create a better product/ service.

Of the two possible outcomes, Competition authorities can only predict and make assumptions about the post-merger entity possible moves. They would have to look in the long term, such as 7 years from now, what economic benefits the entity would bring and at what cost to the society. It’s all based on speculation. This is a very onerous and risky decision just like how it is hard to speculate whether a 5-minute ride might either cost you an arm or just RM5.

How do Competition authorities come to a decision?

(I’m referencing merger control in place in the EU since Malaysia lacks one currently)

Currently, the test for whether mergers would affect competition negatively in the EU is the SIEC test: Will the concentration Significantly Impede Effective Competition in the common market?

The burden is on the Commission to establish that the merger is either compatible or incompatible with the internal market. In making the determination, the merger must be assessed in the context of the position that would exist were the merge not to be completed (counterfactual). The standard of proof is the balance of probabilities.

In fact, EU authorities have previously prevented several mergers such as O2/3 and Ryanair/ Aer Lingus.

For O2/3, they are both strong players in the telecommunications market which appears to be an oligopoly market. Market regulators focus on promoting competition and ensuring competition remains strenuous by keeping it fragmented. The mobile telecoms sector should be competitive so that consumers can enjoy innovative mobile services at fair prices and high network quality. The principle that efficiency claims can be put forward to outweigh any negative effects is more rhetoric than reality. Competition authorities are more prudent and cautious for merger cases and efficiencies play only a marginal role compared to the perceived negative effects.

In Ryanair/ Aer Lingus, the parties would have very high combined market shares on a large number of routes, but that the merger would eliminate competition between 2 closest competitors on the routes and that barriers to entry into the market were very high. The parties closely monitored the other’s marketing campaigns and price changes and constrained each other’s behaviour in relation to both price and other parameters of competition.

In cases where the parties are found not be close competitors, such as Facebook/Whatsapp, an unconditional clearance decision is likely. In contrast, a merger between firms which produce products with high degree of substitutability is more likely to produce anti-competitive consequence i.e. Ryanair/ Aer Lingus.

The reason for CCSS to delay the merger until May 9th is perhaps to assess either to allow the merger to pass and give commitments to ensure competition structure, prevent it and as such “Gruber” is not allowed.

But what if Uber said that because it keeps making losses hence selling off the SEA entity was to improve its business?

This is also called the “rescue merger” where a firm takes over another to prevent the latter from “failing”. This defence is well established in US antitrust practice where it seeks to give a “second chance” involving a firm which would face an inevitable liquidation. There are various advantages for this such as to protect all stakeholders, creditors, employees, and the economy. This approach is seen to be involved with distributive justice instead of focusing on efficiency gains by forcing a loss-making company to stay alive for the benefit of competition at the expense of others.

However, there are 3 criteria which the authorities will consider:

  1. The failing firm would in the near future be forced out of the market because of financial difficulties
  2. There is no less anti-competitive alternative purchase than a notified merger and in absence of a merger
  3. The assets of the failing firm would inevitably leave the market.

Note that this is a “last resort defence” and should be assessed very strictly to prevent abuse. Companies may record losses but have valuable assets such as Twitter and Instagram.

In Aegan/ Olympic II, the Commission approved it unconditionally accepting that Olympic was a failing firm and would be forced. The ongoing Greek financial crisis meant that domestic air travel would drop drastically. Absent the merger, it would leave the market completely and the merger would have no adverse effects on competition.

In Grab/ Uber’s case, Uber has been recording losses for years especially in SEA whilst Grab has been innovating rapidly with various initiatives. Uber, with various protocols and guidelines, has been said to lose to Grab due to lack of local preference. However, the situation does not seem to be as dire and critical as Aegan/ Olympic II because they are airlines which focuses on Greece region and there is a financial crisis ongoing. In fact, just a few weeks before the merger announcement, Uber said that it would invest more in SEA region to improve its market position.

It is probable that this argument will fail if we follow EU’s merger regulations and it’s (often criticised) strict approach to competition regulation. I personally prefer Uber over Grab for various reasons but I’ll leave this to the Competition authorities.

Okay, but can’t competition authorities stop Grab for anti-competitive practices post-merger?

Competition authorities would normally have 2 options if later they find the merger to be unfavourable: to unwind the merger or to assess the post-merger entity on anti-competitive practices legislation. Authorities are less likely to unwind a merger because of the significant cost involved and the structural changes to the market already caused. In the EU, once a merger is said to satisfy certain features, it must notify the Commission of intention to merge or else if it “gun-jumps”, a hefty fine can be penalised on it.

This brings us to the second option– under the Competition Act. Most Malaysian Uber/ Grab users would every now and then receive a text “free RM60 off your next 10 rides!” or “book now and redeem up to RM5 on your next ride!” but once that competitive pressure is off-loaded, would we still continue to see these rebates? According to Grab Malaysia Country Head Sean Goh, the merger would not make things any different and prices would remain the same. How much confidence or scepticism should Competition Authorities have on this statement?

Analysis of anti-competitive practices often takes much longer than preventing a merger. The previous may require months of overseeing, various economic theories and it is less obvious. For the latter, it’s all about speculation (and common sense), goes to the root of the problem instead of just plucking the weed and the Commission makes a judgment much faster than anti-competitive practices as businesses want finality and a decision fast before either party changes their mind. As mentioned previously, once a merger goes through, the damage is done. Catching them after the merger is definitely possible, but one that is less preferable than stopping it before and takes more time.


Personally, I don’t look the merger in a favourable light and 120% sceptical about the merger. My reasons are as follows

1.Monopolies are nightmares

When I was in the UK and Uber was the dominant player, Uber rarely ever had any promotion, discounts or rebates like I’ve been receiving in Malaysia where it’s almost every other week that I’ll receive a text about one. As such, I can imagine the same to happen here where it’s a matter of time where Malaysians would bid goodbye to those promotion texts and are forced to pay higher prices. Without Uber to offer those promotions, Grab would similarly find no reason to give offers as well. As such, it’s just a matter of time.

2.The efficiency gains might not be able to compensate for the reduction in competitive pressure

Unfortunately, and strangely, we live in a decade where monopolies are “normal” and hostile takeovers may be an everyday affair. China is an excellent example where the whole country’s technology lies in the hanof on a few who holds a monopoly in every market. Perhaps the citizens are more patriotic and hence support local apps more than foreign ones (Didi vs Uber) but within China itself, a country with a huge economy, there are very few players in each market i.e. Alipay dominates the card-less payment, Wechat reigns over Whatsappp and Weibo is the new Facebook there. It creates a no-choice, no-second option if I dislike any of them.

I’m really not a big fan of the theory “the bigger the more efficient” theory but I advocate for “the bigger the more risky to fail” theory. The bigger the company gets, the more it absolutely cannot fail and the more the need to sustain it. Call me a pessimist but when it comes to competition, no allowance should be made and no risk left unaccounted for. Look at the Financial crisis 2008/ 2012 and it’s obvious why.

Withholding tax 101

My Civil Procedure lecturer would always say this: There are 2 things that are certain in this world– death and tax, even when you die, you still need to pay tax. Now, most of us would know that there are certain types of taxes we need to pay to the country i.e. Income tax, Goods and Services Tax (GST), Capital Gains Tax (CGT) but the lesser few know about Withholding tax (WHT). Withholding tax isn’t one of those tax you might incur on a daily basis but it’s good to know about it to determine whether it applies to you (or risk IRB penalties)

  1. What is withholding tax

Withholding tax is an amount withheld by the party making payment (payer) on income earned by a non-resident (payee) and paid to the IRB. For example, A engages B who is a foreign consultant to give consultation on a project and pays $100,000. Under the S109B Income Tax Act 1967, A would need to withhold 10% of that amount as withholding tax, paying B only $90,000. (unless otherwise agreed)

Failure to withhold by the payer would have to pay an increase in tax of a sum equal to ten percent of the amount and no deduction is given for the payment made to a non-resident payee against business income in the income tax computation of the payer

WHT only applies to services/ income and not goods. Goods would incur import duty or GST instead. Under the Income Tax Act, the various types of services that would incur withholding tax and their respective rates are (accurate at the time of writing)

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Full list can be found here

2. How do I determine if I need to pay withholding tax

I’ll explain this via examples of some types of payments taxable.

i) Contract Payments

Under the Income Tax Act, it reads 107A.

(1) Where any person (in this section referred to as “the payer”) is liable to make contract payment to a non-resident contractor in respect of services under a contract, he shall upon paying or crediting such contract payment deduct therefrom tax at the rate of—

(a) 10% of the contract payment on account of tax which is or may be payable by that non-resident contractor for any year of assessment; and

(b) 3% of the contract payment on account of tax which is or may be payable by employees of that non-resident contractor for any year of assessment,

This provision was included to allow the collection at the source of tax due by non-resident contractors and professional firms engaged in services under a contract. This tax is not a final tax and will be refunded to the contractor upon finalization by the tax authorities.Payments made by Malaysian residents to non-resident contractors for services under a contract carried out and performed in Malaysia are subject to withholding tax of 13% (10% + 3%) on the service portion of the contract.

This would be akin to the example I gave above where A engages B, a foreign consultant for consultation services.

ii) Royalties and interest

Both come from the same statutory provision which is s109A of the Act.

However, the Finance Act 2017 has expanded the definition of Royalties. General understanding of the word “royalty” would encompass from common copyrights and trademarks i.e. payment to McDonald HQ for carrying out business in Malaysia using the brand “McDonald”.

Now, the definition includes any consideration for the right to use software, the reception of or the right to receive visual images or sounds transmitted to the public by satellite, cable, fibre optic or similar technology or in connection with television or radio broadcasting. Further, royalties paid for the use of or the right to use radio frequency spectrums. This is a much more comprehensive list and to my mind, would include everything and anything related to the use of others’ assets.

iii) Technical services

Amount paid in consideration of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme is subjected to WHT. However, day to day administrative work, such as bookkeeping and other routine services (no specialized knowledge, skills or expertise are needed) does not fall under the category “administration”; those amounts are not subject to WHT.

The definition of what amounts to “technical services” has also been enlarged and increased by the Finance Act 2017. Previously, the WHT provisions for service fees, WHT would only be applicable to service fees falling within Sections 4A(i) and (ii) where the services are rendered in Malaysia. From the enactment of the Act onwards, all payments made by a Malaysian resident taxpayer to a non-resident taxpayer for technical services are subject to 10 % WHT regardless where the services are physically performed.

For example, A UK based consulting firm provides consulting services to a Malaysian taxpayer, the services have been wholly performed in Singapore. Previously, the service fee paid to the legal firm was not subject to WHT. Under the new rules, the Malaysian service recipient has to withhold 10 % WHT on the whole amount.

3) Additional:

Now, you might be thinking why I said “unless otherwise agreed” in para 1 (and if you did, Good Job!!) and no, you cannot contract out of the Income Tax Act. This is because sometimes, especially with online advertising platforms, they ask that whatever price they name is the price you’ll pay them, and you’ll have to top up that amount as withholding tax.

As stated in Google’s Advertising Program Terms:

7. Payment. Customer will pay all charges incurred in connection with the Program… Charges are exclusive of taxes… Customer will pay (i) all taxes and other government charges ….

The formula works like this: if the advertising cost was $100,000, you would need to divide it by 0.9 and then multiply it by 0.1 and the withholding tax payable to the IRB would be $11,111. Hence, you are not entitled to say that from the $100,000, you would withhold 10% making it $10,000 but you would need to spend additional resources for the payment, making an additional burden because you’ve agreed to take on the supplemental cost.

If you’re interested more about taxing on online advertisement, you can read more here and here which talks more about Facebook and Google adverts where it is unclear whether the WHT is under royalties or technical services.


Teaser: next week I’ll be writing on the largest fine the EU Competition Commission has ever imposed on a single entity so stay tune!


  1. HLB Malaysia, Malaysia Understanding Withholding Taxes
  2. Techmonitor, Understanding Withholding Tax
  3. Azmi & Associates, Withholding tax in Malaysia
  4. Deloitte, International Tax Malaysia Highlights 2017
  5. Malaysia Luther News, Malaysia Enacts Finance Act 2017 – Expanded Scope of Withholding Tax
  6. KPMG: Malaysia: Withholding tax, royalty and service fee payments to non-residents

How to land a job as a paralegal in Malaysia – and ace it

The author discusses the tricky business of applying for paralegal work in Malaysia and the lessons she learned from applying for a role that was not advertised.

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One of the most frequent questions I have gotten recently is,

“Actually, what do you do?”

I have been working as a paralegal for the past eight months. Some in the industry may be familiar with the fact that the firm employing me does not normally take in paralegals. So, when someone asked me, “so, did you get here through a relative or a friend?” I was not surprised (my answer was ‘no’).

So how did I do it? Here are a list of things I did and the lessons I learned.

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1) Apply, apply, apply

Like most foreign law degree holders, I was not a ‘qualified person’ under section 5 of the Legal Profession Act. This meant that I was not entitled to petition the court for  admission as an advocate and solicitor. While working towards becoming a ‘qualified person’, I needed financial support and craved legal experience. So, I applied for entry-level positions at law firms.

At the job application stage, I sent my CV and personalised cover letters in response to job vacancies displayed on the websites of law firms and platforms such as OfficeParrots, JobStreet and JobsBAC. I also combed through the list of job vacancies publicized by the Malaysian Bar. Not wanting to limit myself, I even emailed law firms that did not showcase any job vacancies suitable for my level of experience and qualification – that was how I got my current job!

My advice: Don’t be afraid of thinking out of the box when applying for jobs. This applies to every stage of the job application process. Be bold and dare to deviate from commonly used phrases and ‘safe’ CV templates. After all, it has been reported that recruiters spend mere seconds reviewing a single application. When I took the initiative of emailing firms that were not actively recruiting, it probably bought me a few more seconds for some screenings.

Be patient and stay enthusiastic about every application. Companies and firms are not obliged to respond to you immediately and many of them may take days, even weeks to reply to you (if they respond at all!). There is no “Last Seen” notification for email, so you will not know if and when your email has been read. However, it is important to remain dedicated in your job search and professional in your correspondence, even if it means restraining yourself from dropping an email to check in on your application when you know you shouldn’t.

2) Actively collaborate with your (potential) employer

Now for the exciting bit – I was invited to an interview for a role that was not advertised. Since the firm did not normally hire paralegals, I could not point any reviews of the position to outline my expectations.

However, I did not walk into the interview completely blind. There were three key points of reference which gave me confidence in my interview ability:

  1. I knew about the firm’s ethos, history and values from my own research;
  2. I also understood my short-term and long-term goals; and
  3. I was familiar with my strengths and weaknesses.

I only learned about the scope of the job during the interview. On the spot, I used the above key points to assess whether the job was a right fit for me and whether I was a right fit for the company. That’s right – it wasn’t just about taking whatever I could get. Although in recent times, employers have lamented that fresh graduates should lower their standards, I strongly believe that individuals should set minimum standards and ensure that their personal interests are protected. It is healthy to set reasonable baseline expectations relating to travel distance, minimum salary, benefits (if any), among other things.

My advice: Be prepared to defend your baseline expectations and ask the relevant questions. Provided that your standards are reasonable, the interviewer may even be impressed with how self-assured you appear. For example, if you told yourself that you would turn down the offer if the pay is below X amount (for good reason), stick to that promise. Be aware of the power that the interviewer wields over the conversation, but do not be pressured into agreeing to terms that are incompatible with your baseline expectations. If you are offered a job on the spot, you are entitled to ask for some time to think about it.

Be honest with what you can offer the firm. Since I planned to work full-time while preparing for the CLP part-time, I made my priorities very clear in all the interviews I attended.

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3) Be inventive and resourceful

My official job title is ‘Paralegal’. ‘Legal Executive’ is also another commonly-used title for similar work in other firms. Like interns, paralegal work is often fluid and open-ended. Here is a useful and concise summary of the differences between interns, paralegals and secretaries / clerks. However, because my role is relatively new, my job scope is arguably even more fluid and open-ended than usual. I have been emboldened to do things without being asked, such as drafting outlines of litigation strategy. Of course, this had not been possible without fantastic superiors.

My advice: Try out new things! Being inventive is not the sole domain of those with newly-added roles like mine. Don’t banish yourself to the photocopier or coffee machine. Don’t fall into the trap that thinking that law does not allow you to be creative. Constantly think of ways to improve not only your own efficiency, but also your firm’s efficiency.

If you have extra time on your hands, ask for greater responsibility. This can be as simple as offering help, or as challenging as identifying niches to be filled. An example of the latter: if your firm does not circulate legal updates / related news internally, maybe you could volunteer to take up that mantle. Conversely, if you feel like you are doing too much, you might want to set boundaries for yourself (e.g. No Work Rule on weekends) and negotiating with your boss to reduce your workload.

A non-exhaustive list

There are many other tips that you can glean from a quick Google search, like asking someone else to proofread your CV and being on time for an interview. A lot has already been written on the subject, but I wanted to put a personal spin on it. I hope that you enjoyed reading this article as much as I enjoyed writing it.