Denys Roberts CJ:

Preliminary

In these two civil suits, which were consolidated by the Chief Registrar on 13 February the plaintiffs, a company incorporated in the Federal Republic of Germany and registered in Malaysia as a foreign company carrying on business in the territory of Labuan, Malaysia, claim the sum of RM880,600.60, or its equivalent in Brunei currency, and other ancillary relief.

Awang Rambli appeared in person at the trial, both on his own behalf and on that of the 1st defendant, Mrs. Annie Chong.

He assured me, and I have no reason to disbelieve him, that the 1st defendant is no more than a sleeping partner, who knew little of the business and had become a partner of his on 10 March 1984, because the Malaysians had insisted that he should have a partner who was a Malaysian, as she was because she had been born in Malaysia. He himself was born in Brunei and a Brunei citizen, though he was in Labuan for much of the time during the currency of the contract with the plaintiffs.

Although the defendants traded as the Sinar (S) Company, the latter was not incorporated at any time and remained a partnership, the 2nd defendant, the husband of the 1st defendant, remaining as the active partner who undertook all the work.

Background

It has been established to my satisfaction that at the material times in 1983 and 1984, the plaintiffs were carrying out work in Labuan at the methanol and power plants.

The defendants agreed, by an agreement which both parties said in evidence was entirely oral, to supply labour, at rates agreed with the plaintiffs, for use by the latter at the methanol and power plants.

During the progress of the agreement, the plaintiffs made payments to the defendants (which in practice meant the 2nd defendant) of RM4,403,003.02, according to their statement of claim.

About the middle of 1984, the Inland Revenue Department of Malaysia sought to recover from the plaintiffs 20% of the sums which the plaintiffs had paid to the defendants for the supply of labour.

This sum, amounting to RM880,600.60, was paid by the plaintiffs to the Inland Revenue Department of Malaysia from June 1985 onwards.

The plaintiffs assert that, under s. 107A of the Malaysian Income Tax Act, they are obliged to pay to the Inland Revenue Department 20% of all payments made to any non-resident and that it was only when the latter certified the defendants as non-resident that the plaintiffs were obliged to pay.

Was 20% deducted?

I must first try to find, though presented with inadequate evidence, whether or not 20%, or any other sum, was deducted by either party at the time of payment, or at any time thereafter, except to the Department itself. As to the later, I am satisfied that 20% or RM880,600.60, was paid by the plaintiffs to the Department in June 1985 and September 1985.

Mr. Lux, who alone gave evidence for the plaintiffs, was sure that there had been no mention of residence during his negotiations with the 2nd defendant. He assumed, he said, that the contract would be carried out according to law but did not make enquiries himself about status or about holding back any part of the contract sum.

Mr. Lux, though the site engineer for the plaintiffs, had been in charge of all contracts for the supply of labour, including that with the defendants.

Mr. Lux was sure that he did not discover that there was tax to pay before he received a demand in 1984, and that he never discussed this with Awang Rambli.

The 2nd defendant has a different story, though it must be noted that it is not one which he has previously raised, in his pleadings or elsewhere.

In his earlier defence, to CS 195/85, dated 14 July 1986, the 2nd defendant put forward a number of assertions, in relation to the amount of RM880,600.60, but none of these included any allegation that the 20% had been paid by the 2nd defendant to the plaintiffs at any time.

In his original affidavit of 11 December 1985, the solicitor for the 2nd defendant, acting on the instruction