Oh My…This Agreement Has Never Been Stamped All This While! So…Is It Considered Valid?
QUESTION:
My rental contract has already ended. I have never defaulted on paying the monthly rent and I left the house in good condition. However, after several months since the end of the contract, I have yet to receive the deposit payment that should be paid by the landlord. I have tried to reach him but to no avail. I intend to take legal action against him, but I just realised that the Rental Agreement has never been stamped. I’m lost and worried that the agreement is not valid in the eyes of the law. I need help!
ANSWER:
The purpose of stamping an agreement is to protect the contractual rights of the signatory parties to the agreement. Whether or not your document/agreement is stamped, it will result in different consequences.
This is because section 52 of the Stamp Act 1949 provides that:
“No instrument chargeable with duty shall be admitted in evidence…unless such instrument is duly stamped”.
This means that the Court shall not accept such unstamped document as evidence in Court. However, this does not necessarily mean that the law imposes an absolute prohibition against the admissibility of unstamped documents in evidence.
This is due to the legal position on the validity of unstamped instruments was clarified in a Federal Court case of Malayan Banking Bhd v Agencies Service Bureau Sdn Bhd & Ors (1982) 1 MLJ 198. In this case, the Court held that the unstamped agreement does not invalidate the agreement as it only affects the admissibility of the agreement as evidence in Court.
The Court further emphasized what should be ensured is for the agreement to be duly stamped together with the requisite payment of the penalty as in accordance with the Stamp Act.
Therefore, by referring to the case above, your next step is to proceed with stamping the agreement and pay the penalty fee as determined by the IRB in order for your agreement to be admissible as evidence in Court.
WHAT IS STAMP DUTY?
Stamp duty is a tax levied on document/instrument which has legal, commercial, and financial effect as enshrined in the First Schedule of Stamp Act 1949.
The stamp duty payable is determined by the Inland Revenue Board (IRB) as prescribed under Section 4 of the Stamp Act 1949.
TYPES OF STAMP DUTY
There are 2 types of stamp duty namely, ‘ad valorem’ or fixed.
1. Ad Valorem is where the stamp duty imposed is variable and not fixed, depending on the transacted value stated in the instrument or the market value of the property, whichever is higher.
2. Fixed Duty is where the stamp duty imposed is fixed, without any consideration of the value transacted or the amount stated in the instrument.
WHEN SHOULD AN AGREEMENT BE STAMPED?
Section 47 of Stamp Act 1949 states that:
“Save where other express provision is made by this or any other Act, any unstamped or insufficiently stamped instrument not being a cheque or promissory note drawn or made within Malaysia may be stamped after execution on payment of the unpaid duty if the instrument is presented for stamping within thirty days of its execution if executed within Malaysia, or within thirty days after it has been first received in Malaysia if it has been executed out of Malaysia.”
To make it simple, the penalty fee will be imposed if you failed to submit your agreement/document for stamping within 30 days from the day the agreement was signed.
HOW MUCH IS THE PENALTY FOR LATE STAMPING?
Under the Act, if you fail to stamp the instrument within the period stipulated, you will be liable to pay for the unpaid payable duty together with the penalty imposed under Section 47A which provides as follows:
(a) RM25.00 or 5% of the amount of the deficient duty, whichever sum be the greater, if the instrument is stamped within 3 months after the time for stamping;
(b) RM50.00 or 10% of the amount of the deficient duty, whichever sum be the greater, if the instrument is stamped later than 3 months but not later than 6 months after the time for stamping; or
(c) RM100.00 or 20% of the amount of the deficient duty, whichever sum be the greater, if the instrument is stamped beyond six months after the required time for stamping.
Let’s follow the High court case of Omega Securities Sdn Bhd v Dato’ Hamzah Bin Abdul Majid (2011) 8 MLJ 12
In this case, the issue raised before the Court was whether the Margin Facility Agreement is invalid due to the non stamping of the said agreement. The Court, in this case, has referred to the principle used in the Federal Court case of Malayan Banking Berhad and further held that “in this case, the non- stamping of the Margin Facility Agreement did not go to the root or validity of the document. It was only an issue of the government revenue”. Therefore, the Margin Facility Agreement remained to be valid.
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