Gopal Sri Ram JCA:

Background

[1] The appellant is a private limited company. It had two wholly owned subsidiaries. One was Dominion Holdings Sdn Bhd ("Dominion"). The other was Goodrich General Industries Sdn Bhd ("Goodrich"). Dominion and Goodrich together owned 40.68% of the issued and paid-up capital of United Malayan Banking Corporation Berhad ("UMBC"). They also owned RM12,202,996 loan stock in UMBC.

[2] On 6 July 1984, an agreement was entered into between the appellant and two companies, Daan Sdn Bhd and Dani Sdn Bhd whom I will collectively refer to as "the purchasers". The purchasers owned the entire issued and paid-up capital of Aslira Sdn Bhd ("Aslira"). Aslira owned 51% of the issued and paid-up capital of Malaysian French Bank Bhd ("MFB"). By this agreement, the parties agreed to exchange with each other their respective investments in UMBC and MFB. It is important to mention that the shares that formed the subject matter of exchange were of companies that owned land.

[3] Clause 3 of the agreement made it conditional upon obtaining the approval of "all relevant and appropriate Governmental and regulatory authorities of the Malaysian Government". That clause also required the consent of Bank Negara and, if necessary, the Foreign Investment Committee for the deletion of one of the articles of MFB's articles of association.

[4] On 9 July 1984 the appellant applied to the Foreign Investment Committee ("the FIC") and Bank Negara Malaysia their approval. On 3 October 1984 the FIC replied saying that it had no objections subject to the transaction being approved by Bank Negara. By a letter dated 8 November 1984 Bank Negara approved the transaction. Completion of the agreement took place on 4 December 1984. In June 1991 the appellant received a rude shock. The respondent served the appellant a notice of assessment dated 29 June 1991 essentially requiring the appellant to pay RM15,147,847.10 as share transfer tax under the Share (Land Based Company) Transfer Tax Act 1984 ("the Act"). The Act no longer exists. So the problem that is now before us may not recur. But the case is nevertheless important from the standpoint of the parties to this appeal.

The Act

[5] Now, I must say something about the background to the Act. In the early 1970's the price of land in this country sky-rocketed. Something had to be done to bring land prices under control. So Parliament enacted the Land Speculation Tax Act 1972. Any sale of land attracted a tax of 50% of the profit made by the vendor. That was quite harsh and the 1972 Act proved unpopular. So, in 1976 it was replaced with the Real Property Gains Tax Act. The 1976 Act only applied to gains made in respect of transactions involving the sale or exchange of land. It had no application to a sale or exchange of shares. Conveyancing solicitors and their clients took advantage of this loophole in the law. A company that was a shell was found or formed. Land would then be transferred to that company in return for shares. All those shares would then be sold to a purchaser who got the land which was the sole asset of the company. Mere ad valorem was paid as stamp duty on the share transfer forms The Government lost millions in revenue. It was to close the loophole and to attract revenue that the Act was passed.

[6] The Act was enacted on 31 December 1984. But it came into force on 19 October 1984 through a deeming provision. Section 3 of the Act, which is the charging provision created a tax called share transfer tax which is attracted by a disposal of a chargeable asset. The Act defines what a chargeable asset means. For present purposes the important provision is s 5. It underwent subsequent changes. But at the material time it said this:

A disposal of chargeable asset shall be deemed to take place:

(a) where there is an agreement in writing or otherwise for the disposal of the chargeable asset, on the date of such agreement; or

(b) where there is no agreement, on the date of delivery of the cha