JUDGMENT

Lee Hun Hoe CJ (Borneo):

This appeal is concerned with the question whether the appellant is entitled to relief from stamp duty under s. 15(1) of the Stamp Ordinance 1949 in respect of a scheme of"reconstruction and amalgamation" carried out in 1984.

The facts were set out in great detail by the learned Judge. Cold Storage Holding PLC (PLC) is a company incorporated in England and originally held 100% of Cold Storage (Malaysia) Bhd. (i.e., the appellant) and Fima Supermarkets Malaysia Berhad (FSMB). Both the appellant and FSMB were incorporated in Malaysia. The appellant had an authorised capital of RM40,000,000 divided into 40 million ordinary shares of RM1 each of which 25,000,000 ordinary shares had been issued and were fully paid up. FSMB had an authorised capital of RM30,000,000 divided into 30 million ordinary shares of RM1 each of which 24,000,000 ordinary shares had been issued and were fully paid up.

In 1980 in response to the New Economic Policy (NEP) of the Government of Malaysia PLC reduced its holding to:

(a) 70% in the case of FSMB (30% being sold to Kumpulan Fima);

(b) 65% in the appellant.

In giving approval to PLC to divest, the Foreign Investment Committee (FIC) imposed a condition that PLC should divest itself of a further 5% of the appellant to Bumiputra within two years.

In 1984 PLC decided to go beyond the FIC requirement and reduce its holdings to a greater extent so that it became a minority shareholder from its position as a majority shareholder. It proposed a scheme to the authorities that it should restructure the appellant and FSMB in such a way that all Malaysian participation would be concentrated in one company, i.e., the appellant. This would tidy up equity holdings in the group. The proposal involved two stages. First, the appellant would take over all the issued share capital of FSMB from PLC and Kumpulan Fima in exchange for shares in the appellant with no cash element. The result is that Kumpulan Fima, instead of being a shareholder of FSMB, became a shareholder of the appellant and FSMB became the wholly-owned subsidiary of the appellant. Secondly, the issue of shares of the appellant was followed immediately by the sale of shares for cash by PLC of approximately 25% and by Kumpulan Fima of approximately 4.6% of the enlarged issued share capital of the appellant to Pradaz Sdn. Bhd. (Pradaz), a wholly-owned Bumiputra company. The effect of these arrangements is that the equity distribution of the shares in the appellant will be as follows:

42.5% by PLC;

29.64% by Pradaz;

10% by Kumpulan Fima;

17.86% by others.

In implementing the reconstruction scheme various documents were executed by the parties concerned. We need only refer to two agreements for the purpose of this appeal. By an agreement dated 28 January 1984 Kumpulan Fima Bhd (FIMA) and PLC agreed to sell their holdings comprising 100% of the issued share capital of FSMB in exchange for 24,000,000 shares of the appellant subject, inter alia , to the approval of FIC.

By an agreement dated 13 April 1984 PLC agreed to sell shares in the appellant to Pradaz conditional, inter alia, upon the agreement dated 28 January 1984 being effected and the approval of FIC.

The proposal was presented as a package for approval of and which was approved by the FIC as well as the Capital Issues Committee (CIC).

Following upon the approvals of FIC and CIC, the transfers relating to the 24,000,000 shares of FSMB was submitted to the respondent for adjudication. By his letter dated 9 May 1985 the respondent assessed stamp duty on the said transfers at RM201,960. The said letter reads:

Dear Sir,

Re: Amalgamation of Fima Supermarkets Malaysia Berhad with Cold Storage Malaysia Berhad

Thank you for your letter of 11 April 1985 and enclosures. Those show that both companies had earlier restructured within the New Economic Policy goals and that the amalgamation would not directly result in any change in the existing ratios of equity ownership of Cold Storage. The changes in