The collaboration between Halim Hong & Quek and Harold & Lam Partnership started in late 2020. As part of our vision as alliance partners to better serve our clients, we decided to organise a joint conference to discuss the areas of law which are relevant to our clients.
Our writers, Desmond Liew Zhi Hong, Chau Yen Shen, Hee Sue Ann and Ainie Ajiera were at the event to capture the great moments and has penned this down to share with us further on the event.
Welcome Speech by Dato’ Quek Ngee Meng, Managing Partner of HHQ
The event started with a speech by the managing partner of HHQ, Dato’ Quek Ngee Meng, where he welcomed the guests, lawyers and attendees to the Halim Hong & Quek and Harold & Lam Partnership’s Inaugural Joint Conference – the first joint conference organised by HHQ & HLP. Dato Quek shared on the strategic alliance between HHQ & HLP, which was formed with the main objective of providing high quality and cost-effective legal services to clients from various industries. The formation of the alliance expanded the areas of practice offered by both firms. With combined resources of more than 63 lawyers, and more than 140 employees, both firms believe that the services provided to clients can be achieved effectively and efficiently. Dato’ Quek also introduced HHQ’s new tax partner, Mr Desmond Liew Zhi Hong who will be heading HHQ’s tax department, which will be mentored by Mr Harold Tan Kok Leng. He expressed that the addition of the new tax department is one of the strategies to provide a comprehensive and more holistic legal service to all our existing and potential clients, serving as a one-stop centre to go to.
In his speech, Dato’ Quek took the opportunity to highlight the firm’s close working relationship with REHDA. He expressed his utmost gratitude to Datuk Ho Hon Sang, the Deputy President of REHDA Malaysia, the speakers and panellists, Mr James Tan Kok Kiat, CEO of Suntrack Development Sdn. Bhd. as well as the partners of the alliance for their presence and support towards the event. Dato’ Quek also took the opportunity to thank the organising committee for the successful execution of this inaugural joint conference. He expressed in high hopes that the conference will benefit the attendees and empower them with law.
Opening Speech by Datuk Ho Hon Sang, the Deputy President of REHDA Malaysia
On behalf of REHDA Malaysia, Datuk Ho Hon Sang welcomed the attendees to the Inaugural Joint Conference by HHQ & HLP, a platform to address current issues, as well as to exchange the best practices and views on the effects of the law to the property and construction industry today. Datuk Ho further acknowledged the effort of both firms, in organising this event to address the pressing issues faced by the said industries in these years.
Datuk Ho also expressed his gratitude to HHQ and HLP for the invitation, and he also congratulated the organising committee in holding the inaugural joint conference that he believes will benefit many.
Session 1: Tax Issues in Real Estate & Construction
The first session of HHQ x HLP Inaugural Joint Conference started with a sharing by Harold Tan Kok Leng, Partner at HLP and Desmond Liew Zhi Hong, Tax Partner at HHQ on Tax Issues in Real Estate and Construction, moderated by Noelle Low Pui Voon. The selected tax issues discussed were (i) Bad and Doubtful Debts Tax Treatment, (ii) Real Property Gains Tax (“RPGT”) vs Income Tax and (iii) Director’s Liability under Income Tax Act 1967.
The tax treatment of bad and doubtful debts is often overlooked by taxpayers and is always targeted by the Inland Revenue Board of Malaysia (“IRB”) during tax audit. The speakers observed that this happens as often than not, taxpayers have different policies and methods in handling bad and doubtful debts. For example, some taxpayers opt to write off such debts if the amount is negligible, to maintain provisions or to absorb, ‘forgive’ or ‘forgo’ such debts.
The speakers highlighted that taxpayers are advised to take into account the Public Ruling No. 4/2019 on Tax Treatment of Wholly & Partly Irrecoverable Debts and Debt Recoveries issued by the IRB on 24.9.2019 (“Public Ruling”) in determining their own policy and method in handling bad and doubtful debts. The Public Ruling has, among others, set out the circumstances when debts are considered irrecoverable, reasonable steps that ought to be taken by the taxpayers to recover debts, and evaluation of each debt.
After discussing a case study on bad debts, the speakers suggested to the audience to conduct a self-evaluation on their own policy and method in handling bad and doubtful debts. The self-evaluation questions that taxpayers can ask, include (i) whether there was any credit control mechanism or relevant internal policy in place; (ii) if yes, whether such mechanism and policy sets out all reasonable steps to recover debt; and (iii) whether they have kept sufficient documents for evidential purposes.
The second tax issue addressed was RPGT vs Income Tax. In discussing this issue, the speakers shared two real life cases that they have experienced in their practice. The speakers observed that taxpayers who are ‘frequently’ involved in buying and selling real properties are more likely to be targeted. And the vast difference between the RPGT rate and the income tax rate often becomes the centre of dispute.
Further, there is no time-bar for the IRB to revisit high-value real property transactions which took place more than 5 years ago and subsequently issue a notice of assessment if the IRB finds, amongst others, negligence on the part of the taxpayer.
The speakers recognise that whilst taxpayers can appeal against the notice of assessment, however, the current tax appeal regime operates in the manner of ‘pay first talk later’ – which may pose a big challenge to many taxpayers (especially in this post-pandemic era where businesses are trying to put their business operation back on track). In addition, although taxpayers can consider filing a judicial review application to challenge such an assessment and concurrently apply for a stay order to stay the payment obligation in relation to such assessment, the speakers reminded the audience that a judicial review application is not the default route, and such application will only be allowed provided that very exceptional circumstances are shown.
Again, the audience were invited to conduct a self-evaluation on their real property disposal transactions and test such transactions against the Badges of Trade test. The speakers recommended the audience to revisit their real property disposal transactions (in particular high-value transactions) and any transactions that were executed during the RPGT exemption periods.
The last issue discussed was the director’s liability under Section 75A of the Income Tax Act 1967 (“Director’s Liability”). This issue is often overlooked by many directors who are also shareholders of their companies. In the event a director falls under under Section 75A of the Income Tax Act 1967 (which would be any person occupying the position of director by whatever name called and hold directly or indirectly at least 20% ordinary share capital of the company), then, he or she runs the risks of being held jointly and severally liable for any tax or debt due by the company.
With this, the speakers reminded the audience to revisit their companies’ shareholding structures and to examine whether any of them or any of their management personnel are being exposed to such risks unnecessarily. Taxpayers are further advised to be mindful in a M&A transaction to avoid any tax liability being extended to them personally.
It was an interactive and fruitful session indeed, which ended with a question-and-answer session.
Session 2: Dissecting the Amendments to the Employment Act 1955
The panellists for Session 2 were Mr Ankit Sanghvi, Partner of HHQ, Mr Rohan Arasoo Jeyabalah, Partner of HLP and the session was moderated by Ms Teoh Yen Yee, a senior associate of HLP. Session 2’s discussion focused on the recent amendments to the Employment Act 1955.
The Employment Amendment Bill 2021 has been passed by both the Lower and Upper House of Parliament on March 2022, received Royal Assent on 26th April 2022 and gazetted as the Employment (Amendment) Act 2022 on 10th May 2022.
This latest amendment to the Employment Act 1955 is expected to come into force on 1st January 2023, with the aim to keep up with current international standards and practices as required by the Trans-Pacific Partnership Agreement, the Malaysia-United States Labour Consistency Plan and the International Labour Organization.
The key takeaways from the Speakers during the session:-
- 1. New Scope of Applicability of the Employment Act
Starting from 1st January 2023, the Employment Act will apply to all employees who have entered into a contract of service, save for a few sections relating to overtime payments, shift work and termination benefits which will not apply to employees earning more than RM4,000.00 a month. As such, for employees earning less than RM4,000.00, it would be mandatory for employers to pay the employees for overtime work, works on rest day and holidays etc. based on the rate as prescribed in the Employment Act.
As quipped by Mr Rohan, “This is the most significant amendment to the Employment Act and it will apply all across the board”.
- 2. No Written Contract of Employment
Pursuant to Section 101C of the Employment Act (as amended), a person would be presumed to be an employee where his manner of work and his hours of work are subject to the control or directions of another person, where he is provided with equipment to carry out the work, where his work constitutes an integral part of another person’s business, where his work is performed for the benefit for another person and where he is paid regularly for the work done. Therefore, even if a workman is not provided with an employment contract, he would be deemed to be an employee should all of the above factors be established.
- 3. Changes to Working Hours
The current law provides for a maximum 48 working hours a week. However, employees shall not be required to work more than 45 hours a week once the new amendments take effect from next year which will apply to all employees irrespective of wages earned.
What then would happen if there is a need for an employee to work beyond the mandated 45 hours per week?
This amendment does create ambiguities as currently many employees work beyond the mandated 48 hours per week given the agreed terms in their contract of service that they shall work beyond the standard working hours if there is a need by the employers.
- 4. Flexible Working Arrangement (“FWA”)
The introduction of FWA under the amended Employment Act marks a formal recognition of the concept in Malaysia.
The new Section 60P provides the manner on how an application process should take place between employers and employments.
Whilst it is not mandatory for employers to have in place a Flexible Working Policy, introducing such policy would be a recommended practice as doing so will provide clarity to both the management and employees on the employer’s position is relation to FWA.
A Flexible Working Policy can range in complexity and length, but some of the few key issues which an effective Flexible Working Policy should address should include:-
- i. Stating clearly the applicability, scope, and effect of the policy;
- ii. Stating the different types of flexible working arrangements recognised by the company;
- iii. Setting pre-determined conditions or limitations on FWA;
- iv. Setting out obligations in relation to confidentiality;
- v. Setting out potential changes to salary, flexible working allowances, or other benefits/remuneration in the FWA Policy;
- vi. Setting out the company’s expectations of employees under FWA;
- vii. Setting out the application process.
Ankit has summarised the position of the new Amendment Act as follows: “This new provision is very much welcomed. However, the new Act is still missing on explanations and detailed guidelines.”
- 5. Enhanced Maternity Benefits & Protection
Previously, the Employment Act provided for just 60 days, but when the amendments come into force, female employees will be entitled to 98 days of maternity leave.
The extension of maternity leave is in line with recommendations by the International Labour Organisation, which states that governments should guarantee 98 days of paid maternity leave.
Further pursuant to the amended Employment Act, a female employee who is pregnant or is suffering from an illness arising out of her pregnancy cannot be terminated from her employment except in a situation where she has committed a wilful breach of the terms of her employment or where she has committed a misconduct or if there is a closure of the employer’s business. The employee will bear the burden of proving these grounds.
This is a significant departure from the current position where an employer may terminate an employee who is absent from work for a period exceeding 90 days post pregnancy due to illness.
- 6. Paternity Leave for Married Male Employees
The amended Employment Act will now see for the first time a provision for paid paternity leave. This is a landmark reform of the employment law in Malaysia, one that will see working fathers entitled to 7 days of consecutive, paid paternity leave under section 60FA.
The entitlement however comes with certain conditions as follows:
- i. that the male employee must be married to the mother in question;
- ii. that he must have been employed by the same employer for at least 12 months; and
- iii. that he must notify the employer at least 30 days from expected confinement (or as early as possible).
There is also limitation to this new entitlement, i.e. a male employee may only apply for such paternity leave up to a total of 5 confinements only, regardless of the number of spouses.
- 7. Sick Leave Entitlement
Currently, an employee is entitled to 60 days paid sick leave, which shall be inclusive of hospitalisation. With the amendment, an employee would be entitled to 60 days paid leave in the event of hospitalisation irrespective of any non-hospitalisation sick leave taken.
- 8. Discrimination at Workplace
By virtue of the amended Employment Act, in the event an employee is discriminated at the workplace, a complaint can be lodged to the Director General of the Industrial Relations Department who may then investigate the complaint.
This amendment shows that discrimination is being viewed more seriously and should be taken seriously by employers and employees.
- 9. Awareness on Sexual Harassment
Protection against sexual harassment has already been there in the current Employment Act. The new amendment does not make it any sterner, but employers will now be imposed an obligation to exhibit a notice to raise awareness on sexual harassment in a conspicuous space at the workplace.
The panellists concluded the session by discussing the increased general penalty, from a fine not exceeding RM10,000.00 which would soon be amended to a maximum fine of RM50,000 on conviction, when the amendments come into force.
Session 3: Project Ready for Delivery: Challenges Faced by Developers and Contractors
After the short tea/ coffee break, we had our third and final session, which was a panel discussion on Project Ready for Delivery of Vacant Possession: Challenges Faced by Developers and Contractors. The panellists were, Mr James Tan Kok Kiat, CEO of multi award-winning developer, Suntrack Development Sdn Bhd, who is also a National Council Member for Malaysia Real Estate Housing Developers Association (“REHDA”) and Chairman for Planning Policies and Standard Committee; Mr Thoo Yee Huan, Head of the Dispute Resolution Department in Halim Hong & Quek; Ms Lim Jus Tine, Partner from Real Estate and Banking Department of Halim Hong & Quek; and Ms Lynn Foo, Partner from Harold & Lam Partnership who focuses primarily in Infrastructure, Construction & Engineering law. The session was moderated by Ms Amy Hiew Kar Yi.
Five (5) interesting issues were discussed and addressed during the panel discussion:-
- i. Bumiputera Quota and Low-Cost Housing Development;
- ii. Imposition of Contribution Fund for the Upgrading of Public Street;
- iii. Extension of Time (“EOT”) and Variation of Sale and Purchase Agreement;
- iv. Shortage on Construction Raw Materials; and
- v. Quality Assessment System and Defect Issues.
- i. Bumiputera Quota and Low-Cost Housing Development
It is common for the State Authority to impose conditions relating to the reservation of certain minimum units of housing project and to be granted with discounts to bumiputera purchasers based on the Malaysia New Economic Policy (“NEP”), which has been introduced since the 1970s. Mr James Tan was of the opinion that the State Authority was not empowered under the National Land Code (“NLC”) to impose the Bumiputera quota and Bumiputera discount to the bumiputera purchasers.
Ms Jus Tine however opined that the State Authority by virtue of Art 74 of the Federal Constitution is granted with such authority to enact laws and formulate policies on matters relating to forming policy to Malay and native reservation land, including the imposition of bumiputera quota.
The conditions of bumiputera quota release varies in different State:
- ii. Imposition of Contribution Fund for the Upgrading of Public Street
The panel next discussed the local authority’s power under the Street, Drainage and Building’s Act 1974 (“SDA 1974”) to collect contribution fund from developers. Mr James Tan was of the opinion that local authority should consider the proximity of the development area when collecting the contribution fund by reason of the wording of s.8 of the SDA 1974.
In agreement with Mr James Tan, Ms Jus Tine added that the SDA 1974 expressly states that local authority shall only recover the upgrading cost from developers upon the completion of such works instead of collecting in advance. Ms Jus Tine then shared about the High Court case of Rethina Development Sdn Bhd v Majlis Perbandaran Seberang Perai, Butterworth  2 MLJ 111, whereby the court held that it was illegal for the local authority to collect contribution fund prior to physically having the work carried out.
- iii. Extension of Time (“EOT”) and Variation of Sale and Purchase Agreement
Next, the panel discussed the inescapable issue concerning developers in the industry – EOT and computation of liquidated damages (“LAD”). Mr Thoo shared with the audience the current position of law, as well as the ongoing cases in our Courts which may affect the legal position on the issue of EOT. Mr Thoo is hopeful that the current lacunas caused by the Federal Court in its landmark decision of Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and other appeals  1 MLJ 281 (“Ang Ming Lee’s case”) will be revisited in the Federal Court again soon.
As for the issue of computation of LAD, Mr Thoo was of view the Court of Appeal has departed from PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah and Ng Chee Kuan and Other Appeals  2 CLJ 441, that developers should not be penalised for the delay contributed by purchasers in executing the sale and purchase agreement.
Mr James Tan, speaking from the developer’s perspective, suggested that developers should aim to complete their developments within 36 months to be on the safe side.
- iv. Shortage on Construction Raw Materials
One other major issue faced by both developers and contractors is the shortage of raw materials and the price hike of the construction materials. Ms Lynn Foo was of the opinion that the contractors should always protect their rights by including in the contract a clause to allow for the review of contractual terms should there be an event of global shortage of raw material or a price hike in the industry beyond their control, but perhaps subject to substantiation and justification being proven by contractors.
Whilst this may be ideal, Mr James Tan shared that it may on the other hand be unfair to developers if contractors are allowed to review the contractual terms when the developers will have to absorb this price increase as the developers would have sold the houses at a fixed, settled price to purchasers.
- v. Quality Assessment System and Defect Issues
The session ended with a discussion on the quality assessment standard and quality standards. Upon the delivery of vacant possession of a property, disputes revolving defect rectification is indeed unavoidable. It was mentioned by Mr James Tan that the CIS 7: 2021 or also known as QLASSIC, aims to establish a standard assessment system for quality of workmanship of building projects. It was however not intended to be used as specification or compliance’s requirement. Ms Jus Tine also had added that despite as mentioned by Mr James Tan, there was a Tribunal case in Johor Bahru which awarded the purchaser’s claim based on the QLASSIC assessment system used by the Tribunal Technical Team to measure the quality level achieved by a completed building project.
The session received welcoming responses from the audience who attended in-person as well as those who joined virtually. It was indeed an eye-opening session.
Closing remarks by Serene Hiew Mun Yi, Partner of Harold & Lam Partnership
On behalf of the HHQ & HLP, Ms Serene Hiew expressed her appreciation to the speakers and moderators for their contribution to the Inaugural Joint, in sharing their knowledge on the recent updates on the relevant topics. She also congratulated the organising committee team led by Mr Leon Gan for the successful event. She expressed her gratitude to all attendees for their time in participating in this event, with high hopes that this event would be a catalyst of greater things in the future and serves as an opportunity to exchange ideas and knowledge among people from various backgrounds. Ms Serene Hiew ended her speech with the hope that this inaugural joint event will benefit more people from various industries.
This article is intended to be informative and not intended to be nor should be relied upon as a substitute for legal or any other professional advice.
About the Authors
Desmond Liew Zhi Hong
Halim Hong & Quek
Chau Yen Shen
Halim Hong & Quek
Hee Sue Ann
Halim Hong & Quek
Ainie Ajiera Rosman
Halim Hong & Quek