A purchaser came during lunch time and had inquired from me how to evade stamp duties payable on purchase of a landed property and of course he also wanted cheaper legal fees be paid in the purchase of the property. To him, paying lower stamp duties comes with it also lower legal fees in property transactions. “Wow! It’s a good idea!” I told him. I also told him, “Now, you also want free lunch?” He smiled and to his delight, I offered him some sweets but, no free lunch! He was happy before we started our conversations further. It seems that any small thing which is a benefit or a gain to him, however small, seems good thing to him. We can’t blame him because human nature teaches him to take advantage of opportunities that come along his way.
I then asked him, what will happen if the government has no money to run the country? Will there be development for us? If you are running the government what should you do? He just kept quiet and listened to me. I also asked him if he is a lawyer dealing with property transactions, what should he do when his clients insist paying less than what he should gets? I asked him, “How are you going to take care of your family and pay your staff when costs are running high in managing a law firm?” I looked straight at him, he gave no answer. Such a thing where clients come and ask lawyers on how to evade stamp duties in property transactions is a very common thing… I then had to explain to him that such a thing should not be practised and encouraged as it is against the law and can send all who play a part in the transactions into trouble with the authorities.
Stamp duties imposed in property transactions are assessed by the Stamp Office. The assessment of stamp duty at this moment in property transactions is based on current market value of the property. Lawyers have to collect their fees in accordance with the scales provided under the Advocates Remunerations Rules 1988 and could not collect anything less than the scales. If the lawyer is found to collect less than the scales, the lawyer can be penalized by the Disciplinary Board and can be barred from practice for a number of years. To the taxman, he knows how much to tax from the lawyer based on the valuation of the property, so it is very unlikely that the lawyer will not comply with the law and fork out something from his pocket to pay the taxman if he receives fees that are below the scales. Before, the end of each year the lawyer has to submit his Accountant Report to the Registrar of High Court who will ensure that that the accounts of the lawyer is proper before the Registrar will renew the lawyer’s annual practising certificate. So, there is very little likelihood that a lawyer will take the risk to help clients do illegal things.
In respect of evading stamp duties reference could be made to a court decision in Amalgamated Steel Mills Bhd v Ingeback (Malaysia) Sdn Bhd [1990] 2 MLJ 374 where a dispute arose among the parties in a sale and purchase of a piece of land. The learned Judge said that no court will lend its aid to a man who found his cause of action upon an unlawful act. The learned Judge also said an agreement formed for the purpose of evading the Stamp Ordinance 1949 and attempting fraud against the revenue department and deriving profits there from was certainly illegal.
In a recent judgment in Thong Foo Ching & Ors v Shigenori Ono [1998] 4 MLJ 585, where parties made agreements that contravened Real Property Gains Tax Act 1976 and Stamp Act 1949. His Lordship, Ahmad Fairuz held that the agreements by the parties was to avoid paying higher taxes which should have been paid to the government and such act contravenes public policy. Due to their intention to evade paying higher taxes to the government, the learned Lordship held that the considerations in the agreements were unlawful and as such, the agreements were void and unenforceable. What the parties did had the effect of defeating revenue laws and the court cannot knowingly enforce a void agreement. Her Ladyship, Siti Norma Yaakob sitting in the panel also held that section 66 of the Contract Act 1950 could not help to rescue the parties to recover monies paid from the parties who received from them in a void contract.
Therefore, do not attempt to evade stamp duties and do not try to pay less than what you should pay to the lawyer too. The whole transaction can be illegal! Whatever money you paid in an illegal transaction is irrecoverable!
