Najib, son get reprieve in RM1.69b tax bankruptcy case

The Court of Appeal has allowed former prime minister Najib Abdul Razak and his son, Nazifuddin, to stay bankruptcy proceedings over unpaid tax arrears amounting to RM1.69 billion.

A three-member panel chaired by judge Alwi Abdul Wahab unanimously allowed their appeal, ruling that the Kuala Lumpur High Court had erred in refusing to grant a stay of proceedings on Nov 17 last year.

The decision means Najib and Nazifuddin can suspend bankruptcy proceedings pending the disposal of their appeals before the Special Commissioner of Income Tax (SCIT), as today’s panel recognises that the father-son duo’s appeal before the commissioner raised serious and substantial issues.

“With respect, the lower court brushed aside these issues and failed to address or weigh them in deciding whether sufficient grounds for a stay had been established. 

“Instead, the appeal was disposed of at the level of the general principle of ‘pay first, dispute later’ without due regard to the settled principle of law that the discretion to grant a stay exists to prevent injustice.

“While we accept the proposition that the merits of an appeal on its own do not constitute sufficient grounds to warrant a stay, the complexity, novelty, and seriousness of the legal issues raised by the appellant in this case may properly justify the exercise of the court’s discretion to stay the proceeding,” he said.

Presiding with Alwi were judges Shahnaz Sulaiman and Ong Chee Kwan this morning.

The panel held that grave prejudice would ensue if the bankruptcy proceedings were to advance to the stage of issuing a bankruptcy order.

“Such an order would cripled the appellant’s ability to prosecute his appeal before the SCIT, thereby rendering his statutory rights nugatory.

“We are of the view that the harm occasioned cannot be adequately rectified for remedy by subsequent refund, should the SCIT ultimately re-evaluate and adjust the assessment in the appellants’ favour.”

The panel also identified novel issues involving overlaps of the funds subjected to additional tax assessment and those that form the basis of criminal charges against Najib, raising the question of whether proceeds alleged to be unlawful can be subjected to taxation as legitimate income at the same time.

The judges, in their finding, took judicial notice of the numerous criminal and civil proceedings involving Najib and held that issuing a bankruptcy notice would automatically postpone those proceedings, which may disrupt the administration of justice by causing further delays.

The panel tied its decision to Nazifuddin’s appeal to the parties’ earlier agreement and awarded RM30,000 costs for each appeal.

Govt’s suit

In June 2019, the government, through the Inland Revenue Board (IRB), filed a suit against Najib, seeking over RM1.69 billion from the former premier, with an annual five percent interest rate beginning from the date of judgment, as well as costs and other relief deemed fit by the court.

In its statement of claim, the government said Najib had failed to pay his income taxes for 2011 to 2017 within the stipulated 30-day period after assessment notices were issued.

IRB, on July 22, 2022, obtained a summary judgment from the High Court to recover the RM1.69 billion from Najib.

The Federal Court dismissed Najib and Nazifuddin’s appeal to set aside the summary judgment on Oct 16, 2023, which meant that they had to settle RM1.69 billion and RM37.6 billion in unpaid taxes and penalties.

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