Gunn Chit Tuan SCJ:

The issues raised in these two appeals, which were heard together, involve the Court's interpretation of ss. 14 and 28 of the Stamp Act 1949 (Consolidated and Revised - 1989) (hereinafter referred to as "the Act"). The principal issue in these cases was concerned with the construction of s. 28 of the Act, that is,whether interest which is capitalised under a charge document still retains the character of interest so that stamp duty is chargeable on the original loan amount only under s. 28(1) of the Act. The other issue is connected with the principal issue and raises the question whether such capitalised interest is interest for the purpose of s. 14 of the Act so that no stamp duty is chargeable on it.

The background facts of these cases are simple. Two banks, namely the United Malayan Banking Corporation Berhad (hereinafter referred to as "UMBC") and the Oversea-Chinese Banking Corporation Limited (hereinafter referred to as "OCBC") as chargees had lent RM8,000,000 and RM150,000 respectively to the abovementioned respondents, both of whom had defaulted in repayment of principal and interest after service of notices in Form 16E under s. 255 of the National Land Code 1965. In the UMBC case, the loan agreement contained the following clause relating to interest:

8.4 Subject to the provisions of clause 8.5 hereof the interest on any principal money for the time being owing including capitalised interest shall at the end of each calendar month be capitalised and be added for all purposes to the principal sum then owing and shall thenceforth bear interest at the prescribed rate and be secured and payable accordingly and all the covenants and conditions contained or implied by these presents and all rules of law or equity in relation to the said principal sum and interest shall equally apply to such capitalised arrears of interest and to interest on such arrears.

And in the OCBC case, the annexure to the charge contained the following clause:

17. The interest on any principal moneys for the time being hereby secured including capitalised interest shall at the end of each calendar month be capitalised and added for all purposes to the principal sum then owing and shall thenceforth bear interest at the rate aforesaid and be secured and payable accordingly and all the covenants and conditions contained in or implied by these presents and all powers and remedies conferred by law or by these presents and all rules of law or equity in relation to the said principal sum and interest shall equally apply to such capitalised arrears of interest and to interest on such arrears.

Both banks subsequently applied by originating summons to the High Court at Kuala Lumpur under s. 256 of the National Land Code 1965, for orders that certain pieces of land charged to them in Kuala Lumpur be sold by public auction. In the course of hearing those applications, N.H. Chan J stated that there was a stamp duty question and after hearing submissions of Counsel for the parties concerned as well as Mr. M.S. Murthi, who was invited by the learned Judge to be amicus curiae, made an order in each case that proceedings be stayed pending the payment of stamp duties on the "interest capitalised" under the charges concerned.

UMBC and OCBC each filed a notice of appeal to this Court against the learned Judge's refusal to make an order for sale by way of public auction in respect of the lands in question. The memoranda of appeal of both the appellants raised several grounds of appeal which in effect amounted to a contention that the learned Judge had erred in his construction of the Act, particularly of s. 28 thereof, as requiring the charges concerned to be upstamped with ad valorem duty for "interest capitalised".

The Stamp Act 1949, is an Act relating to stamp duties and, as Lord Tenterden has stated in Tomkins v. Ashby [1827] 6 B & C 541, 542:

Statutes imposing duties are to be so construed as not to make any instruments liable to them