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DISPUTE RESOLUTION
Are Private Hospitals now Responsible for Doctors who are Independent Contractors thanks to “Common Sense”?
IN THIS ARTICLE, V SHARVEENA THEVY LOOKS AT THE CASE OF VINCENT MANICKAM S/O DAVID (SUING BY HIMSELF & AS ADMINISTRATOR OF THE ESTATE OF CATHERINE JEYA SELLAMAH, DECEASED) & ORS V DR S HARI RAJAH & ANOR[1].
Introduction
A medical malpractice lawsuit is an action brought by a distraught patient or his or her family members against doctors and healthcare providers under the tort of negligence. This action is usually triggered by substandard medical treatment rendered on patients resulting in harm.
The law has been long settled that hospitals are not liable for the negligence of their doctors, so long as they have engaged properly qualified persons[2].
This is because doctors are usually appointed as “independent contractors” by private hospitals, absolving the hospitals from any form of liability stemming from the doctors alleged negligent conduct.
However, the law on this is changing. Recently, the Court of Appeal in Vincent Manickam s/o David (suing by himself & as administrator of the estate of Catherine Jeya Sellamah, deceased) & Ors v Dr S Hari Rajah & Anor had deviated from this position and held a private hospital liable for the negligence of a surgeon who was an “independent contractor” by virtue of the “common sense approach” which served as a guiding compass in determining the hospital’s liability.
What is the hype all about?
In this case, the patient (now deceased) was admitted to a private hospital with symptoms of vomiting, diarrhoea and severe lower abdominal pain over a period of two days. A laparotomy and appendectomy were performed by a consultant general surgeon at the hospital on the same day and she was discharged after a few days.
Subsequently, the patient was re-admitted following complaints of similar symptoms. She was diagnosed by the surgeon to be suffering from paralytic ileus which caused abdominal distension and the possibility of collection of residual pus in the abdomen. The patient was immediately started on antibiotics and was transferred from the ward to the Intensive Care Unit (“ICU”) due to her worsening condition.
In the ICU, the patient had a cardiac arrest. She recovered following CPR and cardiac support. Unfortunately, she passed away a few days later in the hospital due to “multiple organ failure - septicaemia acute appendicitis - peritonitis”.
The patient’s husband and their children filed a suit against the surgeon and the hospital at the High Court.
The High Court proceedings
The learned High Court judge held that the surgeon was negligent in the management of the patient. However, the suit against the hospital was dismissed as the surgeon was an independent contractor.
The appeal to the Court of Appeal
Being dissatisfied with the decision of the High Court in dismissing the claim against the private hospital and on the quantum of damages awarded, an appeal was filed to the Court of Appeal.
The Court of Appeal unanimously decided to depart from the long-standing position that private hospitals are not responsible for the conduct of independent contractors and held “… the issue of liability is examined by adopting a more realistic approach following a recognition of the way businesses and services are now arranged and provided”.
It further went on to state that “[36] The underlying contractual agreement between the parties is also not the conclusive determinant of the relationship between the respondents”.
In arriving at its decision, the Court of Appeal applied the “common sense approach” based on the case of Tan Eng Siew v Dr Jagjit Singh Sidhu[3].
The Court of Appeal was of the view that in order to make private hospitals vicariously liable for the negligence of its doctors, consultants or nurses, investigation and evaluation of whether such persons are truly independent contractors or employees or in special relationships with the hospital become a vital exercise. The Court of Appeal held that the “common sense approach” was the most appropriate test as the evaluation involves mixed questions of fact and law.
This “common sense approach”, also known as the test of various indicia[4], acknowledges the relevance of factors such as the way healthcare and health service business arrangements are run today. Having said that, the following factors were examined further.
Agreement between the surgeon and the hospital
The court examined the clauses in the Consultant Agreement and Resident Consultant Agreement thoroughly before concluding that the terms and conditions in the agreements amply indicate the existence of a special relationship between the surgeon and the hospital and the surgeon was not truly independent of the hospital.
This is in light of the fact that the hospital was in constant control of the surgeon as it was mandatory for the surgeon to treat, manage and care for the patient only at that hospital in accordance to the terms and conditions specified in the agreement failing which the hospital can terminate the agreement.
Position under the Private Healthcare Facilities and Services Act of 1998 (“the Act”)
Under the Act, a private hospital is described as a “healthcare facility”[5] which provides healthcare services regulated by and under the law to members of the public.
Any business arrangement does not absolve hospitals from accountability and liability in law in the healthcare services business. This is because the key components in healthcare services are healthcare professionals. Therefore, the hospital owes a duty of care to the clients or patients.
Non-delegable duty of care
The Court also highlighted that a hospital does not discharge its duty by simply delegating its performance to an employee or an independent contractor by virtue of the doctrine of non-delegable duty of care[6].
For the reasons above, the Court of Appeal held that the High Court’s decision in finding the surgeon to be an independent contractor was an error of law as the evidence indicated that the surgeon was “part and parcel of the organisation”.
This matter has been appealed to the Federal Court.
Conclusion
It is yet to be ascertained whether this decision is only a temporary setback to private hospitals or a new legal development in the area of medical law. Private hospitals may have to review their contractual agreements with the doctors in light of the Court of Appeal decision[7].
V SHARVEENA THEVY
DISPUTE RESOLUTION PRACTICE GROUP
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REAL ESTATE
National Land Code (Amendment) Act 2016 [Act A1516]
IN THIS ARTICLE, ALEXIS YONG MEY LING HIGHLIGHTS THE CHANGES IN THE NATIONAL LAND CODE (AMENDMENT) ACT 2016 (“NLC Amendment Act”).
Introduction
By Federal Government Gazette P.U.(B) 527/2016 and Federal Government Gazette P.U.(B) 531/2016 both dated 21 December 2016, the NLC (Amendment) Act came into operation in the Peninsular Malaysia and the Federal Territory of Labuan on 1 January 2017 with the exception of sections 34, 35, 45, 48, 49, 56 and 76 thereof.
The NLC (Amendment) Act has, inter alia, amended sections 433B, 433E and 433H of the National Land Code 1965 ("NLC").
Amendment of section 433B(1) of the NLC
Before the coming into force of the NLC (Amendment) Act, a disposal of or dealing in any land or any interest in land which is subject to the category of “agriculture” or “building” or to any condition requiring its use for agriculture or building purposes can only be effected in favour of a non-citizen[1] or a foreign company[2] after the prior approval of the State Authority had been obtained. Such approval, however, was not required for any land or any interest in land which is subject to the category “industry” or to any condition requiring its use for industrial purposes.
Before it was amended, section 433B(1) of the NLC provided as follows:
“(1) Notwithstanding anything contained in this Act or in any other written law —
(a) a non-citizen or a foreign company may acquire land by way of a disposal under Division II;
(b) a dealing under Division IV with respect to alienated land or an interest in alienated land may be effected in favour of a non-citizen or a foreign company;
(c) alienated land, or any share or interest in such land, may be transferred or transmitted to, or vested in, or created in favour of any person or body as ‘trustee’, or of two or more persons or bodies as ‘trustees’, where the trustee or one of the trustees, or where the beneficiary or one of the beneficiaries, is a non-citizen or a foreign company;
(d) the Registrar may in respect of any land register any person or body as ‘representative’ or make a memorial in favour of any person or body as ‘representative’ if such person or body is a non-citizen or a foreign company;
(e) the Registrar may endorse any memorial of transmission on the register document of title to any land in favour of a non-citizen or foreign company,
but only after the prior approval of the State Authority has been obtained upon an application in writing to the State Authority by such non-citizen or foreign company:
Provided that no such approval shall be required in respect of —
(aa) any land or any interest in land which is subject to the category ‘industry’ or to any condition requiring its use for industrial purposes;
(ab) any dealing effected pursuant to a sale and purchase agreement for which an approval has been granted under section 433E and executed by the same parties in such agreement; and
(ac) any dealing or act with regard to alienated land or any interest in land exempted by rules made under paragraph (aa) of subsection (1) of section 14.
And provided further that no such approval shall be required in respect of any dealing effected pursuant to a sale and purchase agreement for which an approval has been granted under section 433E and executed by the same parties in such agreement.”[3]
Pursuant to section 77(a) of the NLC (Amendment) Act, the proviso in section 433B(1) of the NLC was amended by deleting paragraph (aa). Accordingly, with effect from 1 January 2017, a disposal or dealing for any land or any interest in any land which is subject to the category “industry” or to any condition requiring its use for industrial purposes can only be effected in favour of a non-citizen or a foreign company upon the with approval of the State Authority.
Amendment of sections 433B(4), (5) and (6) of the NLC
Similarly, with effect from 1 January 2017, the approval of the State Authority is required to be obtained in order for a non-citizen or a foreign company to bid at a sale where the land is subject to the category “industry” or to any condition requiring its use for industrial purposes[4]. Prior to the amendment, such approval was only required for the land subject to the category “agriculture” or “building” or to any condition requiring its use for any agricultural or building purpose[5].
Amendment of section 433E(1) of the NLC
Pursuant to section 78 of the NLC (Amendment) Act, a person or body who conveys or disposes of, in a manner other than those specified in sub-section (1) of section 433B, any alienated land or any interest in land which is subject to the category “industry” or to any condition requiring its use for industrial purposes in favour of a non-citizen or a foreign company is now also required to obtain the prior approval of the State Authority.
Amendment of section 433H of the NLC
Prior to the amendment, section 433H of the NLC provided as follows:
“This Part shall not apply in the case of bodies and persons referred to in paragraph (c) of section 43.”
Accordingly, Part Thirty-Three (A) of the NLC[6] did not apply to sovereigns, governments, organisations and other persons authorised to hold land under the provisions of the Diplomatic and Consular Privileges Ordinance 1957[7].
Pursuant to section 79 of the NLC (Amendment) Act, section 433H of the NLC is amended:
“(1) This Part shall not apply in the case of bodies and persons referred to in paragraph (c) of section 43[8].
(2) Without prejudice to subsection (1), no corporation considered to be foreign incorporated or registered under any written law shall be capable of holding any land except in accordance with this Part.”
With this amendment, a new subsection 433H(2) makes it clear that foreign companies can only acquire land in accordance with Part Thirty-Three (A) of the NLC.
Conclusion
With the introduction of the NLC (Amendment) Act, the amended sections 433B and 433E have further restricted the ownership of property by non-citizens and foreign companies. This is driven home by the amendment to section 433H.
ALEXIS YONG MEY LING
REAL ESTATE PRACTICE GROUP
(a) a foreign company as defined in the Companies Act 2016;
(b) a company incorporated under the Companies Act 2016 with fifty per cent or more of its voting shares being held by a non-citizen, or by a foreign company referred to in paragraph (a), or by both, at the time of the proposed acquisition of any land or any interest in land or at the time of the execution of the instrument or deed in respect of any alienated land or any interest therein, as the case may be; or
(c) a company incorporated under the Companies Act 2016 with fifty per cent or more of its voting shares being held by a company referred to in paragraph (b), or by a company referred to in paragraph (b) together with a non-citizen or a foreign company referred to in paragraph (a), at the time of the proposed acquisition of any land or any interest in land or at the time of the execution of the instrument or deed in respect of any alienated land or any interest therein, as the case may be.
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CORPORATE & COMMERCIAL LAW
The New Malaysian Code on Corporate Governance
IN THIS ARTICLE, DINESH SADHWANI DISCUSSES THE NEW MALAYSIAN CODE ON CORPORATE GOVERNANCE.
On 26 April 2017, the Securities Commission Malaysia (“SCM”) released a new version of the Malaysian Code on Corporate Governance (“Code”) which supersedes the previous version released in 2012.
In its introductory remarks to the Code, the SCM said:
“Malaysian Code on Corporate Governance (MCCG) is a set of best practices to strengthen corporate culture anchored on accountability and transparency.
The new MCCG places greater emphasis on the internalisation of corporate governance culture, not just among listed companies, but also encourages non-listed entities including state-owned enterprises, small and medium enterprises (SMEs) and licensed intermediaries to embrace the code.
The code has 36 practices to support three principles namely board leadership and effectiveness; effective audit, risk management, and internal controls; corporate reporting and relationship with stakeholders.
The MCCG also adopts a differentiated and proportionality approach in the application of the code taking into account the differing sizes and complexity of listed companies. The code now identifies certain practices and reporting expectations to only apply to companies on the FTSE Bursa Top 100 Index and those with market capitalization of RM 2 billion or more.”
As mentioned above, the Code comprises three principles, namely:
- Board Leadership and Effectiveness: this in turn comprises three sub-principles, that is, Board Responsibilities, Board Composition and Remuneration.
- Effective Audit and Risk Management: this in turn also comprises three sub-principles, that is, Audit Committee, Risk Management and Internal Control Framework.
- Integrity in Corporate Reporting and Meaningful Relationship with Stakeholders: this comprises two sub-principles, that is, Communication with Stakeholders and Conduct of General Meetings.
Key features of the Code
One of the requirements in the Code is that at least half of the board should comprise independent directors. For large companies (companies on the FTSE Bursa Malaysia Top 100 Index or with a market capitalisation of RM2 billion and above at the start of the companies’ financial year), the majority of the board should comprise independent directors. It is interesting to note that this sets a higher threshold compared to Bursa’s Main Market Listing Requirements[1] (“MMLR”) where a listed issuer only needs to ensure that at least two of its directors or one-third of its board of directors, whichever is higher, are independent.
Another interesting feature in the Code is the tenure of independent directors. The Code says that the tenure of an independent director should not exceed a cumulative term of nine years. Upon completion of the nine years, an independent director may continue to serve on the board as a non-independent director. If the board intends to retain an independent director beyond nine years, it should justify this decision and seek annual approval for it. If the board continues to retain the independent director after the 12th year, the board should seek shareholders’ approval annually through a two-tier voting process. Under the two-tier voting process, shareholders’ votes will be cast in the following manner at the same shareholders’ meeting:
- Tier 1: Only the large shareholder(s) of the company vote; and
- Tier 2: Shareholders other than large shareholders vote.
A “large shareholder” is defined in the Code as a person who is entitled to exercise, or control the exercise of, not less than 33% of the voting shares in the company, is the largest shareholder of voting shares in the company, has the power to appoint or cause to be appointed a majority of the directors of the company or has the power to make or cause to be made, decisions in respect of the business or administration of the company, and to give effect to such decisions or cause them to be given effect to.
The decision for the above resolution is determined based on the vote of Tier 1 and a simple majority of Tier 2. If there is more than one large shareholder, a simple majority of votes determines the outcome of the Tier 1 vote. The resolution is deemed successful if both Tier 1 and Tier 2 votes support the resolution. However, the resolution is deemed to be defeated where the votes of the two tiers differs or where Tier 1 voter(s) abstain from voting.
The Code further says that large companies are not encouraged to retain an independent director for a period of more than 12 years. To justify retaining an independent director beyond the cumulative term limit of nine years, the board should undertake a rigorous review to determine whether the independence of the director has been impaired. Findings from the review should be disclosed to the shareholders for them to make an informed decision.
In respect of women directors, large companies must have at least 30% women directors. The Code goes on to add that other companies should also work towards achieving this target.
The Code prescribes that listed companies with a large number of shareholders or which have meetings in remote locations should use technology to facilitate voting including voting in absentia and remote shareholders’ participation at general meetings. This is a reinforcement of the position under the Companies Act 2016[2] which allows a company to convene a meeting of members at more than one venue using any technology or method that enables the members of the company to participate and to exercise the members’ rights to speak and vote at the meeting.
Legal effect of the Code
One critical point is that the Code does not have force of law and, strictly speaking, there are no legal consequences per se for non-compliance. This is notwithstanding that the MMLR[3] provides that a listed issuer must ensure that its board of directors provides a narrative statement of its corporate governance practices with reference to the Code in its annual report. In making such a statement, the listed issuer must include the following information:
- how the listed issuer has applied the principles set out in the Code to its particular circumstances, having regard to the recommendations stated under each principle; and
- any recommendation which the listed issuer has not followed, together with the reasons for not following it, and the alternatives adopted by the listed issuer, if any.
Significance of corporate governance
The question that is likely to arise amongst companies and investors is whether corporate governance really matters. Can a company get away by paying mere lip service to the Code or “corporate governance” generally? In addition, is it reasonable to say that the business world is too complex to be summarised in a corporate governance index and there is no consistent relationship between the academic and related commercial governance indices and measures of corporate performance[4]?
Empirical studies have apparently concluded that the quality of a particular company’s governance practices and procedures (whether generally or specifically) positively correlates with both good corporate financial performance and stockholder value[5]. This includes a review of 5,200 US companies where the conclusion was that there is a very strong positive relationship between firm value and corporate governance[6].
Hence, companies would be well advised to do more than pay mere lip service in complying with the Code or generally demonstrating good corporate governance.
DINESH SADHWANI
CORPORATE AND COMMERCIAL LAW PRACTICE GROUP
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TAX & REVENUE
Ketua Pengarah Hasil Dalam Negeri v United Malacca Berhad[1]
A CASE NOTE BY JESS NGO HUI ZHONG.
Facts
In 1995, 1996 and 2001, several parcels of land (“Lands”) owned by United Malacca Berhad (“Taxpayer”) were compulsorily acquired by the government and the Taxpayer was awarded compensation for the same. Dissatisfied with the amount of compensation, the Taxpayer referred the matter to court.
As a result of the litigation, the Taxpayer was awarded additional compensation together with late payment charges (“Late Payment Charges”). In 2009, the Taxpayer was reimbursed by the Land Administrator for retrenchment benefits paid to its then employees sometime in 1998 (“Reimbursements”). These employees were estate workers who had previously worked on the Lands which had since been compulsorily acquired.
On 6 January 2011, Ketua Pengarah Hasil Dalam Negeri (“KPHDN”) issued a notice of additional assessment for Y/A 2009 (“NOAA”) to charge the Reimbursements and Late Payment Charges to income tax and also imposed penalties under section 113(2) of the Income Tax Act 1967 (“ITA”) on the tax allegedly shortpaid on the Reimbursements.
Aggrieved by the NOAA, the Taxpayer appealed against it to the Special Commissioners of Income Tax (“SCIT”).
Issues
The central issues were whether the Late Payment Charges and the Reimbursements were subject to income tax under the ITA and if the imposition of penalties was valid.
Decision of the Special Commissioners of Income Tax
The SCIT held in favour of the Taxpayer.
Decision of the High Court
KPHDN appealed to the High Court and the High Court affirmed the decision of the SCIT for the following reasons.
Late Payment Charges were capital in nature and not chargeable to income tax
The character of the Late Payment Charges should follow the nature of the underlying asset which is the Lands in this case. As the Lands were capital in nature, it follows that the Late Payment Charges were also capital in nature. The Late Payment Charges were intended to compensate the Taxpayer for the accretion to the value of the Lands between the time the land was acquired and the time the compensation was paid and such a construction is supported by the change of the term “interest” in section 48 of the Land Acquisition Act 1960 (“LAA”) to the term “late payment charges”.
The Court also applied the decision of the SCIT in Sime UEP v KPHDN[2] (consent judgment filed in the High Court accepting this position) in which the SCIT held that any late payment interest received on property that is a capital asset of the taxpayer would be a capital receipt, not income.
Reimbursements were not subject to income tax
The learned High Court judge held that Reimbursements were payment for actual expenditure incurred as a result of the compulsory acquisition of the Lands and were not in the nature of income. Therefore, the Reimbursements were not subject to income tax.
Further, pursuant to section 22(2) of the ITA, a reimbursement would only be taxable as income if it had been deducted in ascertaining the adjusted income of a taxpayer. In this case, the Taxpayer did not deduct the payment of the retrenchment benefits under section 33(1) of the ITA when the Taxpayer’s employees were paid in 1998 and 1999. Accordingly, it would be wrong to tax the Taxpayer on the Reimbursements as it would constitute double taxation.
The learned High Court judge held that as the Reimbursements were not chargeable to income tax, it follows that the penalties had been wrongly imposed on the Taxpayer.
Conclusion
The High Court’s decision which is a final decision as the KPHDN did not lodge an appeal to the Court of Appeal confirms that late payment charges under section 48 of the LAA are capital in nature.
JESS NGO HUI ZHONG
TAX AND REVENUE LAW PRACTICE GROUP
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INTELLECTUAL PROPERTY
To Madrid, or not to Madrid?
IN THIS ARTICLE, AMEET KAUR PURBA ANALYSES THE MADRID PROTOCOL.
The Madrid Protocol (“Protocol”) is an international treaty administered by the International Bureau (“IB”) of the World Intellectual Property Organisation (“WIPO”), located in Geneva, Switzerland. There are currently 98 contracting nations to the Protocol including India, China, the United Kingdom and the United States[1].
To date, the Philippines, Singapore, Vietnam, Cambodia, Lao DPR and Brunei have acceded to the Protocol and Malaysia is in the process of amending the Trade Marks Act 1976 in order to accede to the Protocol[2].
The Protocol is a procedural multinational system that provides an additional route for trademark owners to obtain trademark registrations in numerous member countries by filing a single trademark application. Its objectives are two-fold:
- Firstly, it facilitates obtaining trademark protection.
- Secondly, it simplifies the subsequent management of the registered trademark[3].
This article briefly analyses both the key benefits and drawbacks of the Madrid Protocol that the trademark applicants or owners, who are desirous of obtaining trademark registrations in a number of countries, would need to consider before deciding whether to seek registration under the Madrid Protocol or via individual national registrations.
How the Protocol works
For the Protocol to apply, there must be a currently registered national trademark (“Basic Registration”), or a newly filed application for trademark registration (“Basic Application”) in a country that is a contracting party to the Protocol (“Office of Origin”). There must also be a connecting nexus through establishment, domicile or nationality between the applicant and the Office of Origin[4]. The Basic Registration/Application is followed by filing an International Application (“IA”) by the applicant at the Office of Origin[5].
The Office of Origin presents the IA to the IB to ensure adherence to the Protocol’s formalities. Where there are procedural irregularities, the IB will object to that IA. Once the irregularities are dealt with, the IB will convey the IA to the national trademark office of each country designated in the application for trademark protection. Each trademark office examines the IA according to their national trademark laws and must notify the IB within 12 to 18 months should they refuse the IA. If there are no objections, the IB will issue a statement of grant of protection. Objections to the IA are dealt with between the applicant and the national trademark office of the designated country concerned, without the IB’s involvement[6].
Key benefits
The Protocol’s main advantage is that protection of a trademark in each designated country is the same as if the trademark registration had been applied for in the office of the designated country concerned[7]. The International Registration (“IR”) is therefore equivalent to a bundle of national registrations, although it stems from a single registration. Protection can be refused, limited or renounced with respect to only some of the designated countries, but the mark nonetheless remains protected in the other designated countries that did not object to the IR, unlike other unitary regional rights such as the Community Trade Mark [8].
Another benefit is the reduction of filing fees typically incurred when filing separate national applications in individual countries. Under the Protocol, the applicant is only required to pay one filing fee to the IB, instead of paying separate filing fees in each national registry office where a trademark application was filed. Trademark owners can also avoid incurring the costs of engaging a local agent from each designated country as there is no necessity to do so unless objections or oppositions are raised against the trademark application.
The post-registration stage is also made inexpensive and efficient as recordal of changes in names and addresses of the trademark owner, renewals and assignments are carried out centrally at the IB without filing fees having to be paid in each of the designated countries. Additionally, the renewal process of trademark registrations will be expedited and uncomplicated as the centralised renewal system at the IB allows trademark owners to avoid the varied renewal procedures required by the various national trademark offices[9].
A further advantage is that the applicant may proceed to file an IA whilst the corresponding national application at the Office of Origin, which is the Basic Application, is still pending. The Protocol therefore allows trademark owners to claim the filing date of the Basic Application as the priority date of the IA if the IA is filed within six months of the filing date of the Basic Application[10]. Thus the trademark owner or applicant would enjoy the benefit of the earlier filing date of the Basic Application as the effective filing date of the IA.
Drawbacks
One of the disadvantages of the Protocol is the possibility of a “central attack”. For five years from the date of registration, the IR remains dependent on the Basic Application/Registration in the Office of Origin. If, during that time, the Basic Application is refused or withdrawn, or the Basic Registration is cancelled, or lapses, protection of the IR can no longer be invoked.
To counteract the IR’s vulnerability to central attacks, the Protocol allows the owner of an IR cancelled as the result of a central attack to register the mark as a national registration with the previously designated countries within three months of the cancellation date, which defeats the cost-saving advantage of the Protocol.
Another disadvantage is that the Protocol potentially causes trademark owners to incur additional costs should the IA be refused at the trademark offices of the designated countries which would then require the owner of the mark to appoint a local trademark agent in the relevant jurisdiction to handle the refusal[11]. Other limitations of the Madrid Protocol are that the goods and/or services applied for in the IR also cannot be broader than the Basic Registration. This may result in refusals due to the differing guidelines on classification of goods. Further, the IR is not transferrable to an entity based in a country that is not a contracting party of the Protocol.
Conclusion: to Madrid or not to Madrid?
Despite the drawbacks of the Protocol, trademark owners, especially those aiming to establish a global presence should consider the potential significant cost savings and uniformity offered under the Protocol.
AMEET KAUR PURBA
INTELLECTUAL PROPERTY PRACTICE GROUP
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EMPLOYMENT & ADMINISTRATIVE LAW
Injunctions as a Backdoor Means to Bind a Bank’s Prerogative to Transfer its Employees
IN THIS ARTICLE, REENA ENBASEGARAM CONSIDERS THE HIGH COURT DECISION ON INJUCTIONS.
Introduction
Recently, a ripple was caused within the banking industry when the National Union of Bank Employees, State of Malaya (“NUBE”) obtained an ex-parte injunction which directly challenged a bank’s contractual right to transfer its employees.
NUBE’s membership is open to all employees whose job contents consist mainly of clerical functions irrespective of the designation; excluding those who are employed in a managerial, executive, confidential or security capacity in commercial banks in Peninsular Malaysia.
The right to transfer
In industrial jurisprudence, the right to transfer can be both expressed and implied[1]. The courts have long recognised the implied right to transfer especially in instances where the entity in question has branches elsewhere.
The Malayan Commercial Banks’ Association (“MCBA”), of which a significant number of banks are members, has entered into collective agreements, on behalf of its members, with various unions including NUBE. The provisions of those collective agreements bind the member banks as well as the relevant union. The terms of the collective agreements form part of the employment terms of the employees who fall within the scope of the applicable collective agreement.
One of the pertinent provisions in the collective agreements between MCBA and NUBE is Article 15[2], which expressly provides that the member banks have a right to transfer the relevant employees.
This is over and above any transfer clause that may be found in the individual employment contracts of the employees.
The reasonableness of a transfer instruction
Contractual right aside, it is trite that, in the event the employer is able to establish that the transfer instruction was not tainted with mala fide/capriciousness/unfair labour practice[3], the Industrial Court will uphold the transfer instruction.
Injunctions as a means of fettering the right to transfer
In KLHC Originating Summons No: WA-24-98-08/2016 between NUBE v Bank Muamalat Malaysia Berhad & 1 Ors, NUBE had filed an action in the High Court seeking an injunction against Bank Muamalat’s transfer instruction issued against some of its clerical staff who held messenger positions, transferring them to Kuala Lumpur. The employees had proceeded to transfer to Kuala Lumpur under protest.
The injunction sought by NUBE was in direct contravention of section 20(1)(b) of the Specific Relief Act 1950. The aforesaid contractual provision is also consistent with the common law position as espoused by the Federal Court in Fung Keong Rubber Manufacturing (M) Sdn Bhd v Lee Eng Kiat[4], and the Court of Appeal in the case of Dr David Vanniasingham Ramanathan v Subang Jaya Medical Centre Sdn Bhd[5] that, as a contract of employment is dependent on the volition of the parties, it cannot, in the absence of special circumstances, be specifically enforced.
The long-established legal position notwithstanding, NUBE succeeded in obtaining an ex-parte mandatory injunction, ordering those messengers back from Bank Muamalat’s headquarters in Kuala Lumpur to their respective original branches. As a result of the ex-parte injunction, Bank Muamalat was compelled to transfer the relevant employees back to branches where there was no work for the messenger position as the same has been undertaken by other employees following a restructuring exercise. Subsequently, vide letters dated 12 August 2016, the services of those employees were terminated on the basis that the position of messenger no longer existed.
Legal status quo resumed when the High Court subsequently declined to extend the injunction when the matter came up for inter partes hearing. The High Court noted that the application before it was to maintain the position of the three employees pending the determination before the Industrial Court, related to three articles in the collective agreement.
In dismissing the application, the High Court took the position, inter alia, that the provisions of Article 15 on transfer was quite clear, and that those employees had already been terminated which made the application academic. The High Court also noted that there was other recourse available including a complaint of unfair dismissal under section 20 of the Industrial Relations Act 1967.
Conclusion
The High Court reaffirmed the long-established legal position of a bank’s prerogative and contractual right to transfer its employees.
REENA ENBASEGARAM
INDUSTRIAL AND ADMINISTRATIVE LAW PRACTICE GROUP
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Advocate & Solicitors
Notary Public
Registered Patent Agents
Trade Mark Agents
Industrial Design Agents
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Peguambela & Peguamcara
Notari Awam
Ejen Paten Derdaftar
Ejen Cap Dagangan
Ejen Rekabentuk Perindustrian
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This newsletter is produced by the Knowledge Management Department. Please contact the department of the newsletter editorial committee at KM@shearndelamore.com if you need any information about this newsletter.
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Kuala Lumpur Office:
7th Floor
Wisma Hamzah-Kwong Hing
No 1, Lebuh Ampang,
50100, Kuala Lumpur,
Malaysia
T: 603 2027 2727
F: 603 2078 5625
E: info@shearndelamore.com
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Newsletter Editorial Committee:
Goh Ka Im
Christina S C Kow
K Shanti Mogan
Marhaini Nordin
Zaraihan Shaari
Lai Wai Fong
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Publisher:
Shearn Delamore Corporate Services Sdn Bhd
Suite 10.05, 10th Floor
Wisma Hamzah-Kwong Hing
No 1, Lebuh Ampang
50100, Kuala Lumpur
T: 603 2027 2727
F: 603 2078 5625
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