Malayan Banking Bhd. v.

[1982] CLJ (Rep) Agencies Service Bureau Sdn. Bhd. & Ors. 217

MALAYAN BANKING BHD. a

v.
AGENCIES SERVICE BUREAU SDN. BHD. & ORS.
FEDERAL COURT, KUALA LUMPUR
WAN SULEIMAN ACTING CJ (MALAYA)
SALLEH ABAS FJ b
MOHD. AZMI J
[FC CIVIL APPEAL NO. 207 OF 1980]
7 & 8 DECEMBER 1981
BANKING: Securities for advances - Guarantee - Document not properly stamped - Whether
admissible - Power of Court to impound document and order it to be admitted on payment c
of appropriate penalty - Whether unprofessional to raise a stamp objection - Costs.
In this case the appellant sued the respondents on a guarantee signed by them in
consideration of the appellant granting overdraft facilities to the first respondent. Although
the guarantee document was dated the 17 April 1974 there was evidence that it was in fact
executed on the 16 November 1973. If the document was executed on 16 November 1973
then it would be subject to payment of a penalty if submitted for stamping on the 17 April d
1974. It was therefore argued in the Sessions Court on behalf of the third respondent that
the lack of stamping rendered the document unenforceable and null and void. Counsel for
the appellant in the Sessions Court did not dispute this proposition of law but fought the
case on the basis that the document was executed on the 17 April 1974. The learned
President was confused and left in a real doubt as to when the guarantee was signed. He
held that the plaintiff had failed to prove that the guarantee was valid and he dismissed the e
case.
When the appeal came before the High Court, counsel for the appellant repeated his stand
in the Sessions Court. He submitted that the document was executed on 17 April 1974 and
was therefore in order. The learned Judge however held that the document was executed on
the 16 November 1973 and he ruled that as the document was not properly stamped, it was f
not admissible. He therefore dismissed the appeal.
It was only before the Federal Court that counsel for the appellant referred to s. 52(1) of the
Stamp Ordinance and argued that the document should be impounded and admitted in
evidence on payment of the penalty. The Federal Court held that as the guarantee document
was not a document which falls under any of the three categories mentioned in sub-section
(1) of s. 47 of the Stamp Ordinance (in which case the prohibition against admissibility would g
be absolute), the document could be admitted in evidence in accordance with proviso (a) to
s. 52(1) on payment of the penalty.
Salleh Abas FJ in his judgment said:
The purpose of the Stamp Ordinance 1949 is to impose and to collect taxes on legal and
commercial documents by compelling these documents to be stamped on pain of being h
inadmissible. The Ordinance provides that payment of duty can be made before or at the
time when documents are executed, and even later except for certain type of documents. The
duty must be paid within 30 days of execution or even on a later date when the documents
are used provided that an appropriate penalty is paid. Failure to pay the duty or the penalty
prevents the use of the instrument. If the use is intended for a judicial proceeding the document
is not admissible until the duty or the penalty is paid, unless the document belongs to special
categories stated earlier. To ensure that the duty is paid s. 51 imposes an obligation on those i
whose function is to receive evidence including the Courts to be specially vigilant to see whether
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218 Reprint [1982] CLJ (Rep)

a a document produced before them is duly stamped or not. If it appears to be unstamped the
authority concerned has no choice but to impound the document and admit the same on
payment of the necessary duty or penalty under proviso (a) to s. 52(1) and thereafter send
the impounded documents to the Collector of Stamp Duty together with the duty or penalty
for stamping under s. 53.
Because a stamp objection really relates to the need of safeguarding Government revenue,
b the practice in England regarding an unstamped document is that the Court will admit such
document upon payment of the necessary duty or penalty, if any, unless of course the lack
of stamping goes to the root or the validity of the document itself or the case is a revenue
dispute. Further the General Council of the Bar also ruled that it is unprofessional for an
advocate to make a stamp objection in those two cases, i.e. revenue cases and cases in which
lack of stamping goes to the root or validity of the document.

c After referring to the cases in England in this matter, Salleh Abas FJ said:
In this country similar situation should prevail in view of the responsibility of the Court
under s. 51 to impound unstamped documents and to admit them under proviso (a) to
s. 52(1) on payment of stamping duty or penalty, if any. As regards the question whether
the Bar Council in this country would consider any of its members as being unprofessional
for raising a stamp objection, this is a matter entirely left to that body to decide. As far as
d the Court is concerned the Court is under an obligation, and solicitors and counsel appearing
before it as officers of the Court are also under an obligation, to draw the Court’s attention
to its powers under s. 51 and s. 52(1), including its provisos.
In this case therefore the Court ordered the document to be impounded and to be admitted
on payment of the appropriate penalty. The Court also gave judgment for the appellant in
the sum prayed.
e
On the question of costs, the Court held that as both parties were at fault in not drawing
attention to the power of the Court to impound the document with a view to admitting it in
evidence, both parties should bear their own costs.
Cases referred to:
Navaradnam v. Suppiah Chettiar [1973] 1 MLJ 173
f In re Coolgardie Goldfields Ltd. [1900] 1 Ch 475
Parkfield Trust v. Dent [1931] 2 KB 579
Wirth v. Weigel [1939] 3 All ER 712
Hamilton Finance Co. v. Coverley Westray & Anor. [1969] 1 Lloyd’s Rep 53
Routledge v. McKay [1954] 1 WLR 615
Legislation referred to:
g Stamp Act 1891 [UK], s. 38(1)
Stamp Ordinance 1949, ss. 41, 43, 47, 51, 52, (1)

Other sources referred to:

Sergeant on Stamp Duties, 6th Edn., p. 54
For the appellant - Ong Kok Keng; M/s. Yazid Baba & Co.
For the respondent - Dulip Singh; M/s. Dulip Singh & Co.
h
JUDGMENT
Salleh Abas FJ:
This appeal arose from a guarantee dated at Kuala Lumpur on 17 April 1974 in which
respondents Nos. 2 and 3 signed in consideration of the appellant granting overdraft facilities
i to respondent No. (1). Respondent No. (1) having failed to pay the debts, the appellant sued
 Malayan Banking Bhd. v.
[1982] CLJ (Rep) Agencies Service Bureau Sdn. Bhd. & Ors. 219

all three of them before the Sessions Court, Kuala Lumpur based on the guarantee. The a
appellant’s case is solely based on this guarantee, the rejection of which deprived the
appellant of the material evidence to prove its case. Respondent No. 3 on the other hand
contended that the guarantee was invalid because it was not duly stamped as it was not
executed on 17 April 1974 as it was dated but on 16 November 1973. Thus the date of its
execution became very vital. During the trial before the President of Sessions Court Kuala
Lumpur the guarantee was admitted and marked as Exh. P2. No objection was taken by anyone b
as to its admissibility and the trial revolved around the issue of fact as to the date of its
execution. There was a clear evidence given by plaintiff’s witness P1 that Exh. P2 was
executed on 16 November 1973 and not on 17 April 1974. But contrary to this, the Deputy
Collector of Stamp Duty (DW1) testified that as far as he was concerned the document was
executed on 17 April 1974. Because of the apparent contradiction the learned President
therefore became uncertain and stated in his grounds of judgment that he was left in “a real c
doubt” as to when the guarantee was signed. Consequently he held that the plaintiff failed
to prove that the guarantee was valid and as such dismissed the case with costs.
On appeal before Mr. Justice Hashim Yeop A. Sani the “real” doubt entertained by the learned
President as to the date when P2 was signed was resolved by the learned Judge in that in
view of the evidence of PW1 and respondent No. (3), i.e. DW1 the date of the execution
d
was 16 November 1973 and not 17 April 1974 as appearing on the face of the document. The
view of the Deputy Collector of Stamp Duty (DW2) as to the correctness of the stamping
was clearly based on his erroneous assessment of fact as to the date of execution of the
guarantee Exh. P2. Such view could be disregarded. The learned Judge further held that as
the guarantee Exh. P2 was stamped on 18 April 1974, some five months after execution it
should be subject to a penalty of RM25 under s. 47 of the Stamps Ordinance, 1949 and that
e
as the penalty was not paid, by virtue of s. 52 the document was clearly inadmissible. He
therefore dismissed the appeal with costs. We could find no fault with this ruling.
Before us Mr. K. Thayalan the leading Counsel for the appellant who did not appear in the
Courts below submitted that he now accepted that the guarantee Exh. P2 was executed on
16 November 1973 and therefore not duly stamped but he urged us to impound and admit
the document on the basis of a well-known professional practice of the General Council of f
the Bar in England in that except in revenue cases Counsel should not object to the
inadmissibility of the instrument on account of lack of stamp unless such defect goes to the
validity or the root of the document, such as bill of exchange or a promissory note. (Sergeant
on Stamp Duties 6th Edn., p. 54) Counsel therefore submitted that the Courts in this case
should have impounded Exh. P2 under s. 51 of the Ordinance and admit it under proviso (a)
to s. 52(1) subject to payment of penalty in accordance with s. 53 and that as the two Courts g
below did not exercise this power he submitted that we should do so and enter judgment for
the appellant.
We are glad at last Counsel for the appellant accepted that the guarantee Exh. P2 was
executed on 16 November 1973 and therefore not duly stamped instead of fighting the issue,
as his junior colleague had done in both the Sessions Court and the High Court despite
clear evidence to the contrary including the appellant’s own witness (PW1). However, in h
order to consider the new submission as to whether the Court should have impounded the
exhibit, we must examine the implication of s. 52(1). This section enacts:
52(1): No instrument chargeable with duty shall be admitted in evidence for any purpose by
any person having by law or consent of parties authority to receive evidence, or shall be
acted upon, registered, or authenticated by any such person or by any public officer, unless
i
such instrument is duly stamped:
 Current Law Journal
220 Reprint [1982] CLJ (Rep)

a Provided that:
(a) any such instrument shall, subject to all just exceptions be admitted in evidence on payment
of the duty and the penalty, if any, chargeable in respect thereof under the provisions of
s. 43 or s. 47 of this Ordinance:
(b) ...

b (c) ...
It is clear that under this section except for certain types of instruments prohibition against
admissibility of an instrument on account of not being duly stamped is not an absolute
prohibition but conditional on payment of a duty or a penalty, if any, under ss. 43 and 47.
The duty and the penalty required to be paid under s. 43 are those in respect of a bill of
exchange or cheque or promissory note drawn outside Federation, whilst the duty and the
c penalty required to be paid under s. 47 are as regards instruments other than those stated in
paras. (a), (b) and (c) of subsection (1) of the section namely:
(a) a bill of exchange, cheque or promissory note drawn or made within the Federation; or
(b) a receipt for money or other property the amount or value of which exceeds twenty
dollars; or
d (c) a power or letter of attorney for the sole purpose of appointing or authorising a person
to vote as proxy at one meeting only of a company or association,
Thus, it is clear that as to an instrument falling under any of these three categories the
prohibition against admissibility is absolute. Unless it is stamped before or at the time of its
execution as provided in s. 41 there is no way in which it could be admitted under proviso
e (a) to s. 52(1). In other words the prohibition is absolute or goes to the root or validity of
the instrument. It is for this reason that in the case of Navaradnam v. Suppiah Chettiar
[1973] 1 MLJ 173 no issue was raised or could possibly be raised that a promissory note
rejected for lack of stamping should be impounded and admitted on payment of proper
stamps. Proviso (a) to s. 52(1) simply does not cover such document. In the present case,
however, the guarantee Exh. P2 is not a document which falls under any of the three categories
f mentioned in subsection (1) of s. 47, and that being the case, Exh. P2 could be admitted in
evidence in accordance with proviso (a) to s. 52(1) on payment of a penalty of RM25 under
s. 47 of the Ordinance.
The purpose of the Stamp Ordinance 1949 is to impose and to collect taxes on legal and
commercial documents by compelling these documents to be stamped on pain of being
inadmissible. The Ordinance provides that payment of duty can be made before or at the
g time when documents are executed, and even later except for certain type of documents. The
duty must be paid within 30 days of execution or even on a later date when the documents
are used provided that an appropriate penalty is paid. Failure to pay the duty or the penalty
prevents the use of the instrument. If the use is intended for a judicial proceeding the
document is not admissible until the duty or the penalty is paid, unless the document belongs
to special categories stated earlier. To ensure that the duty is paid s. 51 imposes an obligation
h on those whose function is to receive evidence including the Courts to be specially vigilant
to see whether a document produced before them is duly stamped or not. If it appears to be
unstamped the authority concerned has no choice but to impound the document and admit
the same on payment of the necessary duty or penalty under proviso (a) to s. 52(1) and
thereafter send the impounded documents to the Collector of Stamp Duty together with the
duty or penalty for stamping under s. 53.
i
 Malayan Banking Bhd. v.
[1982] CLJ (Rep) Agencies Service Bureau Sdn. Bhd. & Ors. 221

Because a stamp objection really relates to the need of safeguarding Government revenue, a
the practice in England regarding an unstamped document is that the Court will admit such
document upon payment of the necessary duty or penalty if any, unless of course the lack
of stamping goes to the root or the validity of the document itself or the case is a revenue
dispute. Further the General Council of the Bar also ruled that it is unprofessional for an
advocate to make a stamp objection in those two cases, i.e. revenue cases and cases in
which lack of stamping goes to the root or validity of the document. As early as 1900 In re b
Coolgardie Goldfields Ltd. [1900] 1 Ch 475, 477 Cozens-Hardy J observed:
Notwithstanding the express language of s. 14 of the Stamp Act 1891, it is the settled practice
to allow an unstamped document to be used upon the personal undertaking, not of the parties
to the action, but of solicitors who are officers of the Court, to stamp it and to produce it
so stamped before the order is drawn up.
c
In Parkfield Trust v. Dent [1931] 2 KB 579, 582 an unstamped memorandum of contract was
admitted to prove the plaintiff’s case upon his solicitors undertaking to stamp the
memorandum and to pay penalties on it. Similarly in Wirth v. Weigel [1939] 3 All ER 712 an
unstamped instrument in the nature of guarantee was also admitted upon the plaintiff’s
Counsel’s undertaking to pay the stamp duty and penalty, if any. On the other hand in
Hamilton Finance Co. v. Coverley Westray & Anor. [1969] 1 Lloyd’s Rep 53 the Court
d
rejected five bills of exchange because they were not stamped before acceptance. Such bills
under s. 38(1) of the Stamp Act 1891 of UK could not be made available for any purpose
whatsoever, nor could the holder thereof recover thereon. In other words lack of stamping
went to the root or the validity of these bills.
In this country similar situation should prevail in view of the responsibility of the Court
under s. 51 to impound unstamped documents and to admit them under proviso (a) to e
s. 52(1) on payment of stamping duty or penalty, if any. As regards the question whether
the Bar Council in this country would consider any of its members as being unprofessional
for raising a stamp objection, this is a matter entirely left to that body to decide. As far as
the Court is concerned the Court is under an obligation, and solicitors and Counsel appearing
before it as officers of the Court are also under an obligation, to draw the Court’s attention
to its powers under s. 51 and s. 52(1), including its provisos. f
Thus in our view the Court should impound the guarantee Exh. P2 for lack of stamping and
order it to be admitted on payment of an appropriate penalty. The fact that this course of
action had escaped the attention of the two Courts below is immaterial, because the operation
of ss. 51 and 52 does not cease there, but continues right up here. In Routledge v. McKay
[1954] 1 WLR 615 the Court of Appeal in England held that if the lower Court had overlooked
g
a stamp point, the Court of Appeal may take notice of it.
The next point for us to consider is the question of costs. In the Sessions Court, there was
a great deal of confusion regarding the validity and the admissibility of the Exh. P2. It was
the contention of the respondent No. 3 that lack of stamping renders the document
unenforceable and null and void (see para. 4 of statement of defence). This led the learned
President of Sessions Court to hold in his grounds of judgment that the “plaintiff’s case h
would stand or fall on the validity or otherwise of P2”. Mr. Ong Kok Keng who appeared for
the appellant further added to this confusion by tacitly accepting this proposition of law
and so fought the case on the basis of fact, namely that Exh. P2 was not executed on 16
November 1973, but on 17 April 1974 and therefore in order, despite the fact that his own
witness (PW1) – not to say respondent No. (3) himself (DW1) – said otherwise. He seemed
to have been misled by the opinion of the Deputy Controller of Stamp Duty (DW2) as to i
 Current Law Journal
222 Reprint [1982] CLJ (Rep)

a the correctness of the stamping of the exhibit, but little did he realise that such opinion was
based on an erroneous assessment of fact as to the date of the execution of Exh. P2 and
therefore of little value. Counsel therefore made no attempt to submit to the learned President
to impound the Exh. P2 under s. 51 and admit it under proviso (a) to s. 52(1), if the learned
President found that the date of the execution was on 16 November 1973. The case was
thus fought on the footing that lack of stamping rendered the document invalid. Let us remind
b ourselves that it is not so. The exhibit is perfectly valid, but merely becomes inadmissible
unless the stamp duty is paid.
When the case came before Mr. Justice Hashim Yeop A. Sani, Mr. Ong Kok Keng repeated
his stand in the Sessions Court. He submitted that the date of execution of Exh. P2 was on
17 April 1974 and therefore the document was in order. He made no alternative submission
that if the learned Judge was not with him the learned Judge should use his power under
c
s. 51 to impound the exhibit with a view to admitting it in evidence. It is therefore not
surprising that the learned Judge ruled that the document was not properly stamped and
therefore not admissible. It is only before us that Mr. K. Thayalan made this submission
that we should impound the document.
The history of this case clearly shows therefore that both parties were at fault with Counsel
d for the appellant sharing a greater part of it. Thus we feel that both parties should bear their
own costs here and in the two Courts below. Subject to that the appeal is allowed.
The proper order which we should make in this case is that (a) the guarantee Exh. P2 is
impounded and (b) the appellant must pay the penalty of RM25 to the Registrar who will
send the sum together with the exhibit to the Collector of Stamp Duty for stamping, (c) the
judgment in the sum prayed should be entered for the appellant (d) both parties are to bear
e their own respective costs both here and in the two Courts below and (e) the stamping of
the guarantee Exh. P2 in accordance with s. 53 must first be done before the order is drawn.

Also found at [1982] CLJ 66