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2014 MarsdenLR 866
COURT OF APPEAL PUTRAJAYA
INDUSTRIAL CONCRETE PRODUCTS BERHAD – Appellant
Versus
HUANG KHAIRUN KUMAR & ASSOCIATES – Respondent
[Civil Appeal No: B-02-(NCVC)(W)-653-03-2013]
An agent's entitlement to fees conditioned on success is illegal under the Legal Profession Act, invalidating the agreement and the claim for fees.
Headnote:(A) Legal Profession Act 1976 - Section 112(1)(b) - Sales Tax Act 1972 - Sections 10 and 32 - Appointment of agent for tax refund - Agreement deemed illegal as fees contingent upon success - Court ruled that appointment of first respondent was not exclusive, allowing subsequent appointment of another agent to pursue claim - Failure of the first respondent to make timely appeal to customs department invalidated its claim to fees. (Paras 13, 16, 18)
(B) Contract Law - Validity of agreements - Legal principle established that a contract is illegal if conditioned upon obtaining a benefit contingent upon success. (Para 13)
(C) Appellate procedure - Court's discretion to address legality of contract despite lack of raised issues, maintaining judicial integrity. (Paras 13, 14)
Facts of the case:
Appellant engaged first respondent to recover sales tax erroneously paid; contract included conditional fee clause. Subsequent to inaction, appellant appointed second agency which successfully recovered the tax; first respondent demanded payment claiming entitlement.
Findings of Court:
First respondent did not fulfill contractual obligations, as appeal was not correctly addressed; therefore, no entitlement for fees.
Issues: Whether first respondent was entitled to claim fees despite the legality of the engagement and its role in securing the tax refund.
Ratio Decidendi: The agreement with a conditional fee clause was deemed illegal; proper procedural steps to secure tax refund were not followed by the first respondent, leading to denied claim.
Result: Appeal allowed; order of trial judge set aside; costs awarded to the appellant.
| Table of Content |
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| 1. factual background of the appointment and refunds. (Para 1 , 2 , 3 , 4 , 5) |
Background Facts
[1] The appellant appointed the respondent vide letter dated 10 May 2000 to secure a refund of sales tax amounting to RM4,349,897.05 ("sales tax") allegedly erroneously paid by the appellant to the royal customs and excise department ("customs department"). The terms of the appointment inter alia included the following:
(i) The appellant would pay the respondent a fee of RM1,087,474.20 "upon receiving refund of the said sum of sale tax erroneously paid"; and
(ii) "There shall be no fee payable if the refund is not successful".
[2] Pursuant to the aforesaid letter of appointment, the respondent had written three appeal letters to the Minister of Finance on 7 June 2000, 7 March 2005 and 22 September 2005. The first two letters of appeal were rejected by the Minister of Finance. On the third and last appeal letter ie, appeal letter dated 22 September 2005, the "Timbalan Menteri Kewangan" wrote an instruction/notation addressed to the Director General of Customs to refund the sales tax erroneously paid by the appellant, if they are entitled to it.
[3] The respondent treated the notation of the Timbalan Menteri Kewangan as amounting to an approval and sought to retrieve the original receipts for the payments effected by the appellant. Pursuant to the written request of the respondent for the aforesaid original receipts, the appellant duly released the receipts to the respondent on 26 September 2005. It is not clear from the evidence as to how the respondent dealt with the original receipts but the letter of 5 October 2005 from the office of the Timbalan Menteri Kewangan addressed to the Ketua Pengarah Kastam dan Eksais makes reference to the inclusion of unspecified documents.
[4] The letter of 5 October 2005 from the office of the Timbalan Menteri Kewangan did not evoke any response from the customs department. The absence of any response for almost two years caused the appellant to appoint another firm of consultants namely Top Tier Services Sdn Bhd ("Top Tier") in March 2007 to undertake the task of recovering the sales tax from the customs department.
[5] Following their appointment, Top Tier caused to be written a letter dated 19 March 2007 to the Ketua Pengarah Kastam for the refund of the erroneously paid sales tax by the appellant. The customs department responded to Top Tier's letter with the reply dated 17 August 2007. In this reply the customs department formally acknowledged its fault in the collection of the sum of RM4,349,897.05 from the appellant and advised the appellant to appeal to the Minister of Finance for the refund of the aforesaid sum of money. The response from the customs department prompted the appellant to appoint Top Tier as its representative, this time for the appeal to the Minister of Finance and duly notified the Ministry of Finance of their appointment of Top Tier vide its letter of 5 September 2007. The office of the Kementerian Kewangan Malaysia by a letter dated 25 March 2008 addressed to the appellant and copied to Top Tier refunded the erroneously paid sales tax of RM4,349,897.05 together with the penalty of RM2,174,948.51.
