Court refuses to freeze order for Najib to pay RM1.69b taxes, says all taxpayers treated equally

KUALA LUMPUR : The High Court today dismissed Datuk Seri Najib Razak’s application to temporarily suspend a 2020 court order for him to pay RM1.69 billion in taxes and late payment penalties claimed by the government.

In a judgement delivered online today (June 14) by email and sighted by the media, High Court judge Datuk Ahmad Bache dismissed the stay application by Najib and also required him to pay legal costs of RM15,000.

Among other things, the judge had said that Najib’s case did not fall under “special circumstances” that would justify the court granting a stay — which is a temporary suspension of enforcement or execution — of the RM1.69 billion summary judgement.

The judge had among other things also said that allowing a stay would have estopped or prevented the Inland Revenue Board of Malaysia (IRB) from filing any actions under the law against Najib to seek recovery of the monies, and that this would then set a bad precedent for other taxpayers.

“As every taxpayer (like every citizen) stands equal before the law, and if this stay is granted to the defendant, who is a former prime minister and the former finance minister, the plaintiff will be estopped from filing any recovery actions against him. 

“It will set a bad precedent to be followed and used by other taxpayers as a ground to avoid and/or delay paying taxes and giving rise, albeit wrongly, to an inference that ‘double standards’ are being allowed and being practised,” the judge said when listing factors that he had taken into account in arriving at his decision.

Datuk Seri Najib Razak is pictured at the Kuala Lumpur High Court May 19, 2021. ― Picture by Ahmad Zamzahuri
Datuk Seri Najib Razak is pictured at the Kuala Lumpur High Court May 19, 2021. ― Picture by Ahmad Zamzahuri

When contacted, Najib’s lawyer Muhammad Farhan Muhammad Shafee confirmed that the High Court had dismissed Najib’s stay application.

Farhan said Najib’s lawyers will first proceed with the Court of Appeal’s June 16 hearing of Najib’s appeal against the 2020 High Court order, before making a decision whether to ask the Court of Appeal for a stay of enforcement of the 2020 High Court order.

“However, because the substantive appeal on the order is this week on the 16th, we will proceed with those arguments first before deciding if we want to apply for a further stay in the Court of Appeal,” he told Malay Mail.

Background of the case and why judge refused stay

On July 22, 2020, High Court judge Datuk Ahmad Bache had granted a summary judgment for Najib to pay RM1,692,872,924.83 (RM1.69 billion) as claimed by the IRB for the years 2011 to 2017 for additional income tax assessment and penalties for not paying the additional assessment.

On April 30, Najib had filed the application to stay the RM1.69 billion summary judgment, while pending his appeal at the Court of Appeal against the High Court’s summary judgment and his separate appeal to the Special Commissioners of Income Tax on the amount of RM1.69 billion which he claimed was wrongly calculated.

The High Court had given time for both Najib and the IRB via the Malaysian government to file in court documents for the hearing of the stay application, and had fixed June 11 (last Friday) for the hearing of the stay application to ensure it would be ahead of the June 16 appeal hearing.

In the 25-page High Court judgment today, the judge noted that the Income Tax Act 1967 gives the IRB wide powers to recover both income tax and additional income tax, as public interest requires that no working public should avoid paying their income tax as it is a revenue to be collected by the government for public benefit.

In the same judgment which dismissed Najib’s stay application and instead wanted him to take steps first to begin paying the RM1.69 billion sum despite pending appeals, the High Court judge pointed out that Malaysia’s income tax recovery system is based on a “pay first and talk later” principle.

The High Court judge adopted the Federal Court’s previous decision in a 1980 case, where the apex court had noted that the “pay first and talk later” principle under Malaysia’s tax laws is “harsh” but intentional due to the occurrence of tax evasion, and that sympathy should not be given to tax evaders but should be reserved for the innocent taxpayers who have been diligently making payments within the stipulated time but made to suffer along with tax evaders.

“This court holds that this position of the law regarding tax recovery applies to every tax payer, including the defendant as every tax payer (just like every citizen) are equal before the law.

“As held by this court in the summary judgment dated July 22, 2020 earlier, the defendant as a former minister of finance should know and ought to have known these provisions of the law, as LHDN as the collection agency, was under his purview at the material time and the amount involved is huge,” the judge added, referring to the IRB by its Malay initials LHDN.

While confirming that the court has powers to refuse or grant stay for situations such as preventing injustice and abuse of court process, the judge further noted that the High Court could also grant stay if the applicant seeking for stay can prove “special circumstances” to justify a stay and that the applicant’s appeal would become nugatory or invalid without a stay.

The court noted that Najib’s legal team had among other things argued that Najib would not be restored to his original position due to the colossal financial damage if stay is not granted, and that Najib would also arguably not be in position to pay the substantial RM1.69 billion claimed and which would result in the risk of him losing his Pekan MP seat due to bankruptcy proceedings.

Citing various other judgments, the High Court judge today however ruled that a “substantial amount” being claimed by tax authorities or “colossal financial damage” does not amount to “special circumstances”, further saying that the risk of Najib losing his MP qualification due to bankruptcy proceedings is nothing more than “fear of losing” and which would also not be considered “special circumstances” to justify a stay.

Noting that it is normal for a judgment to be executed once obtained and that it would not amount to special circumstances, the High Court also said Najib could still receive refunds of any extra tax amount collected if he subsequently wins his appeal at the Special Commissioners of Income Tax (SCIT) and that there is no issue of his appeal to the SCIT becoming nugatory.

The court said the IRB would be greatly prejudiced if a stay was granted to Najib, as it would prevent the IRB from enforcing its statutory duty to collect tax payable to the government and also prevent the government from taking recovery actions against Najib for the assessed taxes.

As for Najib’s arguments that some of the RM1.69 billion tax assessments were made beyond the statutory limitation period or his claims that the tax sum was incorrectly calculated as it involved purported political donations, the High Court said this should be dealt with by the SCIT instead.

The High Court today also dismissed Najib’s lawyer Tan Sri Muhammad Shafee Abdullah’s suggestion last week that “outside (political) interference” had resulted in bankrutpcy proceedings being filed against Najib in April to recover the RM1.69 billion sum. (By the time the bankruptcy proceedings were filed in a separate court, the amount claimed from Najib was at RM1,738,804,204.16 — comprising the RM1.69 billion sum plus interest. Najib is currently seeking to have the bankruptcy proceedings struck out.)

Instead, the High Court agreed with the arguments by the Malaysian government that it was normal to execute a judgment, and that bankruptcy proceedings was initiated after Najib remained “quiet for a very long time without making any proposal or discussion towards making payment of the judgement sum”, ruling: “This court agrees with

that argument. Hence, the issue of outside interference is unsustainable.”

An aerial view of the Kuala Lumpur High Court April 23, 2020. — Picture by Hari Anggara
An aerial view of the Kuala Lumpur High Court April 23, 2020. — Picture by Hari Anggara

Negotiations for settlement by paying installments possible

Affirming his own previous July 22, 2020 summary judgment for Najib to pay the RM1.69 billion tax claimed, the High Court judge — after considering all the legal points and past court decisions and the arguments by both sides — decided today to refuse Najib’s stay application.

The judge held that Najib had failed to prove that “special circumstances” exist to justify a stay, and also held that the Malaysian government has the monetary ability to compensate Najib if he succeeds in his appeal at the SCIT and that there would be “no unquantifiable loss that could not be recovered” from the government if Najib succeeds in his SCIT appeal.

Despite rejecting Najib’s application for stay, the High Court judge said “all is not lost” for Najib as he can still negotiate with the Malaysian government to make some payments first while waiting for the SCIT appeal to be heard and decided.

Noting that the IRB’s lawyers had confirmed that Najib had yet to make any efforts to make any payments for the RM1.69 billion sum such as by instalments, the High Court judge said the IRB is believed to be always open for discussions regarding tax payments.

“More often than not, LHDN subscribes to a payment scheme whereby the taxpayer will be allowed to pay by instalments, agreed upon by both parties on a ‘win-win situation’,” the judge said, noting that this was a “good and noble practice” as about 90 per cent of income tax cases registered in his court in one year were settled in such a manner and which avoided unnecessary trials and saved the courts’ time.

The judge said Najib and the IRB via the Malaysian government could still arrange for and agree on such a settlement while waiting for his SCIT appeal to be decided.

Apart from the June 16 Court of Appeal hearing of his appeal against the 2020 court order to pay RM1.69 billion, Najib also has an appeal pending at the SCIT which will be up for case management on July 21.


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