Strategy for Examination
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Showing posts with label Law. Show all posts
Showing posts with label Law. Show all posts
Monday, December 24, 2018
Wednesday, March 21, 2018
New VAEP Act for Property Managers
Q. (Also posted in EstateAgentExam.com)
What is new about the VAEP Act 1981 on Property Management?
A.
Some areas of changes have been made to estate agency practice. Please see my earlier post here for VAEP Act amended 2017.
There is a totally new part called Part VB for Property Managers.
Actually, the original law had only Part V for Valuers and Appraisers. Then, as the estate agents were incorporated, it was inserted Part VA. Now, Property Managers is inserted as Part VB.
On a whole Part VB spells out the definition of Property Manager, registration of property managers under the Act, the qualification and registration of the probationers and practice by firm, etc pretty much similar in standard of requirement like that of Valuers and Estate Agents.
As there is critical needs of the profession* hence, the Board is introducing the liberalization exercise so that more property managers can be registered and regulated under the Act. There is a 12 month period where any practicing PM can get themselves registered without having to sit for examinations. Details of the conditions please refer to the Amended VAEP 1981 or LPPEH website.
Here, what is important is the scope of Property Management.
In the new Part VB, there is a S.22I which has this spelled out:
S.22I (2) The property management practice referred to in subsection (1) includes the following:
(a) enforcing the terms of leases and other agreements pertaining to the property;
(b) preparing budgets and maintaining the financial records for the property;
(c) monitoring outgoings for the property and making payments out of the income from the property;
(d) advising on sale, purchase and letting decisions;
(e) advising on insurance matters;
(f) advising on the opportunities for the realization of development or investment potentials of the property;
(g) advising on the necessity for upgrading the property or for the merging of interests;
(h) managing and maintaining the building and facilities attached to the building; and
(i) making or checking of inventories of furniture, fixtures, trade stocks, plant or machinery, or other effects.
Similar to S.22C on Restriction on Estate Agency Practice, S.22J is specific on Restriction on Property Mangement Practice.
S.22J (2) Paragraph (1)(b)# shall not apply to owner of any land, building and any interest therein who manages such land, building and interest.
#(1)(b) act as property manager;
Which means the profession of property manager is regulated to the below conditions:
Unless registered as a Property Manager,
(a) one cannot call himself a "Property Manager", "Managing Agent" or the equivalent thereto...
(b) act as a property manager
(c) carry on business or take up appointment or engagement as a property manager
(d) display any signboard or poster, or use, distribute or circulate any card, letter, pamphlet, leaflet, notice or any form of advertisement, implying...
(e) undertake for a fee or other consideration any of the work enumerated in S.22I (2) above,
(f) be entitled to recover in any court any fee, ...
The Register for Property Manager is created to be Part IV whereby Part I (Valuers), Part II (Appraisers), Part III (Estate Agents) and Part IV (Property Managers).
As it is to preserve the influence and positions of the Valuers and Appraiser, the new amended VAEP allows Valuers and Appraisers who were already in the Part I and II of the register be entered into Part IV. This simply means Valuers and Appraiser who are existing as of the new amendment are automatically property managers as well.
This is covered in S.22F of the VAEP Act 1981.
S.22F Registration of property managers
(3) Any registered valuer or registered appraiser who, immediately before the coming into force of this Part, had his name entered under Part I or II of the Register shall, upon the coming into force of this Part, be entitled to have his name entered under Part IV of the Register without payment of any fee.
However, it is not so easy for Estate Agents. In Subsection (1A) of Section 22B, no registered estate agent shall carry on property management. Nevertheless, subsection (2) has some allowance that a registered estate agent, if approved by the Board, can practice property management under certain conditions.
Now, in the amended Act 2017, the subsection (6) under S.22F (Registration of PM) is included as below:
(6) Any registered estate agent shall be entitled to have his name entered under Part IV of the Register if before the date of the coming into force of this Part he was permitted to undertake property management as specified in S.22B (2).
Which means, if a registered estate agent was previously allowed to practice Property Management by certain condition, he is now allowed to be a fully Registered Property Manager in Part IV.
As for the liberalization exercise, anyone who has been practising prior 12 months from the date of the coming into force this Part for registration (S.22F), shall be entitled to have his name so registered if conditions are fulfilled.
How to qualify?
S.22H which is a mirror of S.22D (EA) and S.18 (V), spells out the qualification to be registered as PM. Similarly, there are two ways, one is by having a degree recognized and another by passing the board Property Manager Examination.
The Act mentions about the probationer called Probationary Property Manager, who is required to obtain the practical experience and to pass the Test of Professional Competence prescribed by the Board or any equivalent (RISM). There is however, no mention of the length of practical experience like the case of PV S.18 (3) and PEA (S.22D (3) as this is specified in the VAEA Rules, 1981.
At the time of writing, I have not read the new VAEP Rules, 1986 so I do not know how many years is the requirement of practical experience for PPM. I would assume it is 2 years like that of PEA.
*Critical need of property managers. Refer to the article "Property managers given a year to register with BOVAEP" published in Malaysian Reserve on 12 January, 2018, extracted below.
She (Deputy DG Dr Zailan Mohd Isa - Valuation and Service Department) said currently 5,000 professionals in the business are still not registered.
“We want to ensure that after the timeframe given, all of them would conform to the Act,” Zailan said, adding that only 1,200 practitioners are already registered.
BOVAEP board member Kamaruzaman Jamil said that unregistered practitioners who fail to comply within the stipulated timeframe can be fined up to RM25,000 and barred from practising within the industry.
“The process to be part of the Act over the 12-month period would also be significantly flexible compared to the normal procedures, which are more stringent.
“I’d like to urge practitioners to come forward and be part of the Act to avoid any unwanted circumstance,” he said.
Last year, only 10 claims on mismanagement and malpractice by registered property managers were directed to BOVAEP, while 116 cases involved illegal practitioners.
To date, at least 19,000 strata schemes are available throughout Malaysia, benefitting 7.5 million people, or 30% of the total urban population.
Ref:
Valuers, Appraisers, Estate Agents (Amendment) Act, 2017.
What is new about the VAEP Act 1981 on Property Management?
A.
Some areas of changes have been made to estate agency practice. Please see my earlier post here for VAEP Act amended 2017.
There is a totally new part called Part VB for Property Managers.
Actually, the original law had only Part V for Valuers and Appraisers. Then, as the estate agents were incorporated, it was inserted Part VA. Now, Property Managers is inserted as Part VB.
On a whole Part VB spells out the definition of Property Manager, registration of property managers under the Act, the qualification and registration of the probationers and practice by firm, etc pretty much similar in standard of requirement like that of Valuers and Estate Agents.
As there is critical needs of the profession* hence, the Board is introducing the liberalization exercise so that more property managers can be registered and regulated under the Act. There is a 12 month period where any practicing PM can get themselves registered without having to sit for examinations. Details of the conditions please refer to the Amended VAEP 1981 or LPPEH website.
Here, what is important is the scope of Property Management.
In the new Part VB, there is a S.22I which has this spelled out:
S.22I (2) The property management practice referred to in subsection (1) includes the following:
(a) enforcing the terms of leases and other agreements pertaining to the property;
(b) preparing budgets and maintaining the financial records for the property;
(c) monitoring outgoings for the property and making payments out of the income from the property;
(d) advising on sale, purchase and letting decisions;
(e) advising on insurance matters;
(f) advising on the opportunities for the realization of development or investment potentials of the property;
(g) advising on the necessity for upgrading the property or for the merging of interests;
(h) managing and maintaining the building and facilities attached to the building; and
(i) making or checking of inventories of furniture, fixtures, trade stocks, plant or machinery, or other effects.
Similar to S.22C on Restriction on Estate Agency Practice, S.22J is specific on Restriction on Property Mangement Practice.
S.22J (2) Paragraph (1)(b)# shall not apply to owner of any land, building and any interest therein who manages such land, building and interest.
#(1)(b) act as property manager;
Which means the profession of property manager is regulated to the below conditions:
Unless registered as a Property Manager,
(a) one cannot call himself a "Property Manager", "Managing Agent" or the equivalent thereto...
(b) act as a property manager
(c) carry on business or take up appointment or engagement as a property manager
(d) display any signboard or poster, or use, distribute or circulate any card, letter, pamphlet, leaflet, notice or any form of advertisement, implying...
(e) undertake for a fee or other consideration any of the work enumerated in S.22I (2) above,
(f) be entitled to recover in any court any fee, ...
The Register for Property Manager is created to be Part IV whereby Part I (Valuers), Part II (Appraisers), Part III (Estate Agents) and Part IV (Property Managers).
As it is to preserve the influence and positions of the Valuers and Appraiser, the new amended VAEP allows Valuers and Appraisers who were already in the Part I and II of the register be entered into Part IV. This simply means Valuers and Appraiser who are existing as of the new amendment are automatically property managers as well.
This is covered in S.22F of the VAEP Act 1981.
S.22F Registration of property managers
(3) Any registered valuer or registered appraiser who, immediately before the coming into force of this Part, had his name entered under Part I or II of the Register shall, upon the coming into force of this Part, be entitled to have his name entered under Part IV of the Register without payment of any fee.
However, it is not so easy for Estate Agents. In Subsection (1A) of Section 22B, no registered estate agent shall carry on property management. Nevertheless, subsection (2) has some allowance that a registered estate agent, if approved by the Board, can practice property management under certain conditions.
Now, in the amended Act 2017, the subsection (6) under S.22F (Registration of PM) is included as below:
(6) Any registered estate agent shall be entitled to have his name entered under Part IV of the Register if before the date of the coming into force of this Part he was permitted to undertake property management as specified in S.22B (2).
Which means, if a registered estate agent was previously allowed to practice Property Management by certain condition, he is now allowed to be a fully Registered Property Manager in Part IV.
As for the liberalization exercise, anyone who has been practising prior 12 months from the date of the coming into force this Part for registration (S.22F), shall be entitled to have his name so registered if conditions are fulfilled.
How to qualify?
S.22H which is a mirror of S.22D (EA) and S.18 (V), spells out the qualification to be registered as PM. Similarly, there are two ways, one is by having a degree recognized and another by passing the board Property Manager Examination.
The Act mentions about the probationer called Probationary Property Manager, who is required to obtain the practical experience and to pass the Test of Professional Competence prescribed by the Board or any equivalent (RISM). There is however, no mention of the length of practical experience like the case of PV S.18 (3) and PEA (S.22D (3) as this is specified in the VAEA Rules, 1981.
At the time of writing, I have not read the new VAEP Rules, 1986 so I do not know how many years is the requirement of practical experience for PPM. I would assume it is 2 years like that of PEA.
***********************************************************************
*Critical need of property managers. Refer to the article "Property managers given a year to register with BOVAEP" published in Malaysian Reserve on 12 January, 2018, extracted below.
She (Deputy DG Dr Zailan Mohd Isa - Valuation and Service Department) said currently 5,000 professionals in the business are still not registered.
“We want to ensure that after the timeframe given, all of them would conform to the Act,” Zailan said, adding that only 1,200 practitioners are already registered.
BOVAEP board member Kamaruzaman Jamil said that unregistered practitioners who fail to comply within the stipulated timeframe can be fined up to RM25,000 and barred from practising within the industry.
“The process to be part of the Act over the 12-month period would also be significantly flexible compared to the normal procedures, which are more stringent.
“I’d like to urge practitioners to come forward and be part of the Act to avoid any unwanted circumstance,” he said.
Last year, only 10 claims on mismanagement and malpractice by registered property managers were directed to BOVAEP, while 116 cases involved illegal practitioners.
To date, at least 19,000 strata schemes are available throughout Malaysia, benefitting 7.5 million people, or 30% of the total urban population.
Ref:
Valuers, Appraisers, Estate Agents (Amendment) Act, 2017.
https://themalaysianreserve.com/2018/01/12/property-managers-given-year-register-bovaep/
Saturday, March 17, 2018
Amendment to VAEA Act 1981 that affected EAP
Q. (Also posted in EstateAgentExam.com)
What are the main CHANGES in Valuers, Appraisers, Estate Agents and Property Managers Act 1981 (amended 2017) that affect Estate Agency Practice?
A.
The piece of legislature VAEA Act 1981 was amended and passed in Dewan Negara on 21 August, 2017 to be called VAEP 1981. The Bill that enabled it was VAEA (Amendment) Act 2017, and come to force on 2nd Jan, 2018.
*The Act — now known as the Valuers, Appraisers, Estate Agents and Property Managers Act 1981 — was passed last October and gazetted on Jan 2, 2018. It was previously known as the Valuers, Appraisers and Estate Agents Act 1981. The main change is the inclusion of Property Managers as a NEW REGULATED PROFESSION under this ACT. Read more on Property Manager here.
According to the report, there are currently 5,000 professionals in the business are still not registered.
“We want to ensure that after the timeframe given, all of them would conform to the Act,” Zailan said, adding that only 1,200 practitioners are already registered.
BOVAEP board member Kamaruzaman Jamil said that unregistered practitioners who fail to comply within the stipulated timeframe can be fined up to RM25,000 and barred from practising within the industry."
However, this article is about the changes that affects the Estate Agency Practice. The key points in the amendment which affects the Estate Agents are below:
1. Better Definition
S.2 Interpretation
"Estate agency practice" has been deleted and inserted this definition in the key Section 22B Estate agency practice.
S.22B Estate agency practice
(1) ... no change
(1A) A person undertakes estate agency practice if he acts as an agent, or holds himself out to the public or to any individual or firm as ready to act as an agent, for a commission, fee, reward or other consideration -
(a) in respect of any sale or other disposal of land and buildings and of any interest therein;
(b) in respect of any purchase or other acquisition of land and buildings and of any interest therein;
(c) in respect of any leasing or letting of land and buildings and of any interest therein;
(d) in making know of the availability of land, building, or any interest therein for such sale or disposal, purchase or acquisition, or leasing or letting referred to in paragraph (a), (b) or (c), as the case may be; and
2. Included tenancy administration as NEW area
[NEW TO THE ACT]
(e) in respect of any tenancy administration including rental collection, payment of outgoings, arrangement for minor repairs and handing over and taking over the possession of a property of any land and buildings and of any interest therein.
3. The word "Consultant" is now included
In S.22C - Restrictions on estate agency practice, a new term is added to the restricted list of terms used to the profession.
This is particularly crucial as in the industry, many unlicensed brokers or sales personnel disguise themselves under various investor groups who call themselves "Real Estate Consultants" or "Real Estate Agency Consultants".
(1) No person shall unless he is a registered estate agent and has been issued with an authority to practise under section 16 -
(a) practise or carry on business or take up employment under any name, style or title containing the words "Estate Agent", "House Agent", "Property Agent", "Land Agent", "House Broker"...
"Real Estate Agency Consultant"
or the equivalent thereto, in any language or bearing any ...
4. Position of NEGOTIATOR
This has been much delay. The role of REN has never mentioned in the Legislation before and I have written article on this issue - see Agent's agent here. So, this new inclusion has put the foothold of NEGOTIATOR as a part of the LAW! Therefore, it would be something permanent in the future!
**My earlier prediction that the role of NEGOTIATOR will be replaced with increased PEAs - is now debunked.
Now, let us see how it is added to the ACT.
S.22C Restrictions on estate agency practice
(2) Notwithstanding subsection (1) -
[NEW SUBSECTION]
(2) (d) a negotiator may assist the registered estate agent in the estate agency practice.
Which means, despite saying that Section 22C (1) the restrictions, there are some exceptions to this estate agency practice, see Exceptions to Estate Agency Practice here.
This includes:
(2)(a) Owner himself
(b) licensed auctioneer,
(c) holder of Power of Attorney, and
now (d) Negotiators (newly added).
However, the wording used exactly is:
"assist the REA in Estate Agency Practice" which means it is NOT that a Negotiator can practice on his own.
This subsection (2)(d) is further given definition of "Negotiator" as in a new subsection of (2A) below.
(2A) For the purpose of paragraph (2)(d), "negotiator" means a person who is employed by a registered estate agent to assist him in the estate agency practice.
Lastly,
5. FOREIGNER can practice if qualified
S.22D Qualifications for registration of estate agents and probationary estate agents.
(1) to (5) defined what are qualification for registration, and (5) has been removed.
(5) A person who is not a citizen or permanent resident of Malaysia shall not qualify for registration as an estate agent or as a probationary estate agent ...
Other less important amendments are:
The use of "Registered Probationers" to include "Registered PV, PEA and PPM".
Ref:
Valuers, Appraisers, Estate Agents (Amendment) Act 2017
What are the main CHANGES in Valuers, Appraisers, Estate Agents and Property Managers Act 1981 (amended 2017) that affect Estate Agency Practice?
A.
Refer to updated write up on major changes to VAEP Act, 1981 at the link below:
The piece of legislature VAEA Act 1981 was amended and passed in Dewan Negara on 21 August, 2017 to be called VAEP 1981. The Bill that enabled it was VAEA (Amendment) Act 2017, and come to force on 2nd Jan, 2018.
*The Act — now known as the Valuers, Appraisers, Estate Agents and Property Managers Act 1981 — was passed last October and gazetted on Jan 2, 2018. It was previously known as the Valuers, Appraisers and Estate Agents Act 1981. The main change is the inclusion of Property Managers as a NEW REGULATED PROFESSION under this ACT. Read more on Property Manager here.
According to the report, there are currently 5,000 professionals in the business are still not registered.
“We want to ensure that after the timeframe given, all of them would conform to the Act,” Zailan said, adding that only 1,200 practitioners are already registered.
BOVAEP board member Kamaruzaman Jamil said that unregistered practitioners who fail to comply within the stipulated timeframe can be fined up to RM25,000 and barred from practising within the industry."
However, this article is about the changes that affects the Estate Agency Practice. The key points in the amendment which affects the Estate Agents are below:
1. Better Definition
S.2 Interpretation
"Estate agency practice" has been deleted and inserted this definition in the key Section 22B Estate agency practice.
S.22B Estate agency practice
(1) ... no change
(1A) A person undertakes estate agency practice if he acts as an agent, or holds himself out to the public or to any individual or firm as ready to act as an agent, for a commission, fee, reward or other consideration -
(a) in respect of any sale or other disposal of land and buildings and of any interest therein;
(b) in respect of any purchase or other acquisition of land and buildings and of any interest therein;
(c) in respect of any leasing or letting of land and buildings and of any interest therein;
(d) in making know of the availability of land, building, or any interest therein for such sale or disposal, purchase or acquisition, or leasing or letting referred to in paragraph (a), (b) or (c), as the case may be; and
2. Included tenancy administration as NEW area
[NEW TO THE ACT]
(e) in respect of any tenancy administration including rental collection, payment of outgoings, arrangement for minor repairs and handing over and taking over the possession of a property of any land and buildings and of any interest therein.
3. The word "Consultant" is now included
In S.22C - Restrictions on estate agency practice, a new term is added to the restricted list of terms used to the profession.
This is particularly crucial as in the industry, many unlicensed brokers or sales personnel disguise themselves under various investor groups who call themselves "Real Estate Consultants" or "Real Estate Agency Consultants".
(1) No person shall unless he is a registered estate agent and has been issued with an authority to practise under section 16 -
(a) practise or carry on business or take up employment under any name, style or title containing the words "Estate Agent", "House Agent", "Property Agent", "Land Agent", "House Broker"...
"Real Estate Agency Consultant"
or the equivalent thereto, in any language or bearing any ...
4. Position of NEGOTIATOR
This has been much delay. The role of REN has never mentioned in the Legislation before and I have written article on this issue - see Agent's agent here. So, this new inclusion has put the foothold of NEGOTIATOR as a part of the LAW! Therefore, it would be something permanent in the future!
**My earlier prediction that the role of NEGOTIATOR will be replaced with increased PEAs - is now debunked.
Now, let us see how it is added to the ACT.
S.22C Restrictions on estate agency practice
(2) Notwithstanding subsection (1) -
[NEW SUBSECTION]
(2) (d) a negotiator may assist the registered estate agent in the estate agency practice.
Which means, despite saying that Section 22C (1) the restrictions, there are some exceptions to this estate agency practice, see Exceptions to Estate Agency Practice here.
This includes:
(2)(a) Owner himself
(b) licensed auctioneer,
(c) holder of Power of Attorney, and
now (d) Negotiators (newly added).
However, the wording used exactly is:
"assist the REA in Estate Agency Practice" which means it is NOT that a Negotiator can practice on his own.
This subsection (2)(d) is further given definition of "Negotiator" as in a new subsection of (2A) below.
(2A) For the purpose of paragraph (2)(d), "negotiator" means a person who is employed by a registered estate agent to assist him in the estate agency practice.
Lastly,
5. FOREIGNER can practice if qualified
S.22D Qualifications for registration of estate agents and probationary estate agents.
(1) to (5) defined what are qualification for registration, and (5) has been removed.
Other less important amendments are:
The use of "Registered Probationers" to include "Registered PV, PEA and PPM".
Ref:
Valuers, Appraisers, Estate Agents (Amendment) Act 2017
https://themalaysianreserve.com/2018/01/12/property-managers-given-year-register-bovaep/
Wednesday, May 13, 2015
Restrictive Covenants in Employment Contract
Q.
I am a cook. Recently, I am approached by a prospective employer for a job offer. My employer has included a restrictive covenant in my service contract which prohibits me from joining any future employer who is in the vicinity of the new restaurant he is setting up. Is this clause fair and legal in employment contract?
A.
This is a typical question that comes out from Law Examination. It involves the employment law and contract law.
On the broader sense, any restrictive clause would be viewed as unfair, and contradicting the doctrine of freedom of movement, speech, assembly and association. This is enshrined in the Federal Constitution Articles 9 and 10. On a more stringent interpretation, the restrictive nature of the clause seems to enslave the employee into solely working for the employer, and this is contradicting to Article 6 of the Federal Constitution where Slavery and Forced Labour is prohibited.
Furthermore, Article 8 on Equality, clause (2) provides that
"except as expressly authorized by this Constitution, there shall be no discrimination against citizens on the ground only of religion, race, descent, place of birth or gender in any law or in the appointment to any office or employment under a public authority or in the administration of any law relating to the acquisition, holding or disposition of property or the establishing or carrying on of any trade, business, profession, vocation or employment." (Bold - highlights of my own)
Here, any trade, business, profession, vocation or employment are encompassing all activities of interaction in trades and businesses. Hence, any restriction to such activity would be contradicting the principle of Equality as enshrined in Article 8 of the Federal Constitution.
However, if the restrictive clause is to protect certain investment, as to restrict insider trading or criminal act of breach of trust, then, it is considered acceptable. For instance, a huge capital investment from a prospective employer who is genuinely legitimate in opening a restaurant in a new housing estate. And, his business venture is dependent on the special signature dish of native French Cuisine which you are employed for. He does not mind paying you a fat salary for coming to his restaurant as the lead chef, however he has to protect his interest in the business venture that you cannot, inter alia:
A good write up of this issue has been published by Jonathan Coley and Edward Goodwyn of Out-Law.com entitled "Restrictive covenants in employment contracts" and is based on UK law. It was last updated in October 2013 here.
As a summary, restrictive covenants are limited but legal and enforceable in employment contracts. There is strict guidance to whether such restrictive covenant is acceptable in a particular industry and base on the local laws of that country.
Some examples of restrictive covenants commonly used are:
Types of restrictive covenants
The standard types of restrictions which can be used by employers are:
"The extent of clauses, therefore, must be relative to the employee's position within the business. As more senior employees will be in contact with more sensitive information, restrictions placed upon them may be justified as being more onerous. Overall, a one-size fits-all policy on restrictive covenant clauses risks the clause becoming unenforceable.
Restrictive covenants may also require periodic review in order to maintain their enforceability as the reasonableness of the covenant is judged at the time it was entered into.
The court may have regard to what is standard practice in the employer's industry with regard to such covenants and the above factors."
On the other hand, if it is viewed from the law of Contract Act, 1950 (hereafter CA 1050), it is entirely prohibited!
Section 28 of CA 1950 mentions that:
"Agreement in restraint of trade void"
"Every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void."
Therefore, in such situation, the restriction covenant is void under CA 1950.
From a write up by Sivabalah Nadarajah of Shearn Delamore & Co., in "A regional guide to 'restrictive covenant', Asia", restrictive covenant in employment contract is illegal in Malaysia because of strict adherence to S.28 of the 'restraint of trade void' provision. Nevertheless, there are three (3) exceptions according to him:
1. There is an agreement not to carry on business of which goodwill is sold; or
2. There is an agreement between partners prior to dissolution;
3. There is an agreement during the continuance of a partnership.
Another issue of restrictive covenant is the notion that there is no competition - thus the Non-Competition clause (or non-compete clause). This is against the nature of Anti-Trust or Anti-Competition of the US. But, in Malaysia, the Malaysia Competition Act, 2010 (hereafter MCA 2010) is more on competition among enterprises, less on competition as restrictive of trade.
Furthermore, the MCA 2010 in its subsection S. 10 (3) specifies that:
"This section does not prohibit an enterprise in a dominant position from taking any step which has reasonable commercial justification or represents a reasonable commercial response to the market entry or market conduct of a competitor."
Therefore, what is interpreted as "commercial justification" is very much depending on the argument base on the industry or the nature of trade. In my opinion, the MCA 2010 does not provide clear guidance on anti-competition law on the above restriction covenant.
Thus, relying on the Employment Act and Contract Act, the answers to the following questions are extracted from Sivabalan Nadarajah's article:
Q.
I am a cook. Recently, I am approached by a prospective employer for a job offer. My employer has included a restrictive covenant in my service contract which prohibits me from joining any future employer who is in the vicinity of the new restaurant he is setting up. Is this clause fair and legal in employment contract?
A.
This is a typical question that comes out from Law Examination. It involves the employment law and contract law.
On the broader sense, any restrictive clause would be viewed as unfair, and contradicting the doctrine of freedom of movement, speech, assembly and association. This is enshrined in the Federal Constitution Articles 9 and 10. On a more stringent interpretation, the restrictive nature of the clause seems to enslave the employee into solely working for the employer, and this is contradicting to Article 6 of the Federal Constitution where Slavery and Forced Labour is prohibited.
Furthermore, Article 8 on Equality, clause (2) provides that
"except as expressly authorized by this Constitution, there shall be no discrimination against citizens on the ground only of religion, race, descent, place of birth or gender in any law or in the appointment to any office or employment under a public authority or in the administration of any law relating to the acquisition, holding or disposition of property or the establishing or carrying on of any trade, business, profession, vocation or employment." (Bold - highlights of my own)
Here, any trade, business, profession, vocation or employment are encompassing all activities of interaction in trades and businesses. Hence, any restriction to such activity would be contradicting the principle of Equality as enshrined in Article 8 of the Federal Constitution.
However, if the restrictive clause is to protect certain investment, as to restrict insider trading or criminal act of breach of trust, then, it is considered acceptable. For instance, a huge capital investment from a prospective employer who is genuinely legitimate in opening a restaurant in a new housing estate. And, his business venture is dependent on the special signature dish of native French Cuisine which you are employed for. He does not mind paying you a fat salary for coming to his restaurant as the lead chef, however he has to protect his interest in the business venture that you cannot, inter alia:
- Join another employer engaging in the same trade;
- Start up another similar trade nearby, within 5 km radius; and
- Engage in any activity of imparting or pass on the knowledge of the trade to a third party without the permission from the employer.
A good write up of this issue has been published by Jonathan Coley and Edward Goodwyn of Out-Law.com entitled "Restrictive covenants in employment contracts" and is based on UK law. It was last updated in October 2013 here.
As a summary, restrictive covenants are limited but legal and enforceable in employment contracts. There is strict guidance to whether such restrictive covenant is acceptable in a particular industry and base on the local laws of that country.
Some examples of restrictive covenants commonly used are:
Types of restrictive covenants
The standard types of restrictions which can be used by employers are:
- non-competition covenants - restrictions on the former employee working in similar employment for a competitor;
- non-solicitation covenants – which prevent poaching of clients/customers/suppliers of the former employer;
- non-dealing covenants – which prevent a former employee from dealing with former clients/customers/suppliers, regardless of which party approached the other;
- non-poaching covenants – which prevent an employee poaching former colleagues
"The extent of clauses, therefore, must be relative to the employee's position within the business. As more senior employees will be in contact with more sensitive information, restrictions placed upon them may be justified as being more onerous. Overall, a one-size fits-all policy on restrictive covenant clauses risks the clause becoming unenforceable.
Restrictive covenants may also require periodic review in order to maintain their enforceability as the reasonableness of the covenant is judged at the time it was entered into.
The court may have regard to what is standard practice in the employer's industry with regard to such covenants and the above factors."
On the other hand, if it is viewed from the law of Contract Act, 1950 (hereafter CA 1050), it is entirely prohibited!
Section 28 of CA 1950 mentions that:
"Agreement in restraint of trade void"
"Every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void."
Therefore, in such situation, the restriction covenant is void under CA 1950.
From a write up by Sivabalah Nadarajah of Shearn Delamore & Co., in "A regional guide to 'restrictive covenant', Asia", restrictive covenant in employment contract is illegal in Malaysia because of strict adherence to S.28 of the 'restraint of trade void' provision. Nevertheless, there are three (3) exceptions according to him:
1. There is an agreement not to carry on business of which goodwill is sold; or
2. There is an agreement between partners prior to dissolution;
3. There is an agreement during the continuance of a partnership.
Another issue of restrictive covenant is the notion that there is no competition - thus the Non-Competition clause (or non-compete clause). This is against the nature of Anti-Trust or Anti-Competition of the US. But, in Malaysia, the Malaysia Competition Act, 2010 (hereafter MCA 2010) is more on competition among enterprises, less on competition as restrictive of trade.
Furthermore, the MCA 2010 in its subsection S. 10 (3) specifies that:
"This section does not prohibit an enterprise in a dominant position from taking any step which has reasonable commercial justification or represents a reasonable commercial response to the market entry or market conduct of a competitor."
Therefore, what is interpreted as "commercial justification" is very much depending on the argument base on the industry or the nature of trade. In my opinion, the MCA 2010 does not provide clear guidance on anti-competition law on the above restriction covenant.
Thus, relying on the Employment Act and Contract Act, the answers to the following questions are extracted from Sivabalan Nadarajah's article:
Q.
Can an employer require a post-termination non-competition covenant from an employee?
A.
No
Q.
Are they capable of being valid?
A.
No
Q.
What does it take to show they are valid (legitimate interest, drafting pitfalls to avoid)?
A.
The effect of having a non-competition clause in an employment contract is that the employee will be prohibited from joining any organization that is deemed to be a competitor to its employer. When the employee is prohibited from joining any organization after they cease employment with their former employer, this will amount to restraint of trade which is expressly prohibited under Section 28 of the CA 1950.
No matter how narrow or wide the covenant was drafted, the employer would not be able to impose a non-competition covenant against its employee. However, if the employer can prove that the non-competition clause falls within the exception to Section 28 of the CA 1950, it may be valid and enforceable.
A case study:
In the case of Svenson Hair Centre Sdn Bhd v Irene Chin Zee Ling, an injunction was sought by the employer against the ex-employee to restrain the ex-employee from contacting or corresponding with all or any of the employer’s present customers.
The injunction was allowed.
The Court held that the injunction sought was merely to stop her from calling, approaching or contacting the employer’s customers that appear on the customer’s list, as opposed to stopping the employer from working with the competing business.
We take the view that the restrain sought by the employer in the above case amounts to restraint of trade under Section 28 of the CA 1950. By prohibiting contact with customers/clients, the ex-employee is restrained from freely conducting their own trade in any manner they wish. Although it is arguable that the list of customer is the employer’s confidential information but that does not mean that the customer can only conduct business with the employer.
In the circumstances, the injunction should not be allowed as it contravenes the express provision of the law. It is unlikely that the above decision will be followed by other Malaysian courts.
Ref:
- The Federal Constitution of Malaysia. Available at,
http://www.agc.gov.my/images/Personalisation/Buss/pdf/Federal%20Consti%20%28BI%20text%29.pdf
- Contract Act, 1950. Available at,
http://www.agc.gov.my/Akta/Vol.%203/Act%20136.pdf
- Jonathan Coley and Edward Goodwyn. 2013. Restrictive covenants in employment contracts. Out-Law.com. Available at,
http://www.out-law.com/page-7086
- Sivabalan Nadarajah. in A Regional Guide to 'Restrictive Covenant' Asia. Available at,
http://www.simpsongrierson.com/assets/pdfs/eBook%20App_Asia_Regional%20Guide%20to%20Restrictive%20Covenants.pdf
- Malaysia Competition Act, 2010. Available at,
http://mycc.gov.my/wp-content/uploads/2014/05/CA2010.pdf
Ref:
- The Federal Constitution of Malaysia. Available at,
http://www.agc.gov.my/images/Personalisation/Buss/pdf/Federal%20Consti%20%28BI%20text%29.pdf
- Contract Act, 1950. Available at,
http://www.agc.gov.my/Akta/Vol.%203/Act%20136.pdf
- Jonathan Coley and Edward Goodwyn. 2013. Restrictive covenants in employment contracts. Out-Law.com. Available at,
http://www.out-law.com/page-7086
- Sivabalan Nadarajah. in A Regional Guide to 'Restrictive Covenant' Asia. Available at,
http://www.simpsongrierson.com/assets/pdfs/eBook%20App_Asia_Regional%20Guide%20to%20Restrictive%20Covenants.pdf
- Malaysia Competition Act, 2010. Available at,
http://mycc.gov.my/wp-content/uploads/2014/05/CA2010.pdf
Tuesday, April 21, 2015
Landmark Cases
Q.
What are the key cases for D02 Intro to Law?
A.
The list below is not exhaustive. It is constantly updated as new cases are added to it.
--- Reading on Agency here.
Secret profit & Bribe
Misconduct of agent, right of Principal to benefit gained
Tan Kiong Hwa v. Andrew S.H. Chong [1974]
Andrews v. Ramsay and Co [1903]
Mahesan v. Malaysian Govt. Officers Co-operative Housing Society Ltd [1978]
Apparent Authority or Ostensible Authority
Worker at office acted like owner
Watteau v Fenwick (1892)
--- Law Teacher
Intention to create legal relations
ESSO Petroleum Co. Ltd. v Customs & Excise Commissioner [1976]
What are the key cases for D02 Intro to Law?
A.
The list below is not exhaustive. It is constantly updated as new cases are added to it.
Agency (Employment dismissal)
Cavenagh v Williams Evans Ltd [2012]--- Reading on Agency here.
Secret profit & Bribe
Misconduct of agent, right of Principal to benefit gained
Tan Kiong Hwa v. Andrew S.H. Chong [1974]
Andrews v. Ramsay and Co [1903]
Mahesan v. Malaysian Govt. Officers Co-operative Housing Society Ltd [1978]
Apparent Authority or Ostensible Authority
Worker at office acted like owner
Watteau v Fenwick (1892)
Contract
--- Reading on Contract here.--- Law Teacher
Intention to create legal relations
ESSO Petroleum Co. Ltd. v Customs & Excise Commissioner [1976]
Doctrine of promissory estoppel
Central London Property Trust Ltd v High Trees House Ltd [1947]
... a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made and which was in fact so acted on.
Hughes v. Metropolitan Railway Co [1877]
... with the initiation of the negotiations there was an implied promise by the landlord not to enforce their strict legal rights...
Acceptance
Pre-contract
Masters v Cameron [1954]
"Subject to..."
Low Kar Yit & Ors v Mohamed Isa & Anor [1963]
Counter offer
After counter offer, original offer no more open
Hyde v Wrench [1840]
Passage if time
Too long time offer elapsed that there was no contract
Ramsgate Victoria Hotel Co Ltd v Montefiore [1866]
Silence
Proposer cannot prescribe silence as a manner of acceptance
Fraser v Everett (1889)
Felthouse v Bindley (1862)
Performance of contract
Partly performed, cannot get paid, only fully completed can be discharged
Sumpter v Hedges [1898]
As in Quantum Meruit - Sumpter v Hedges
Strict Liability (Elements)
Tuberville v. Savage, 1 Mod. Rep. 3, 86 Eng. Rep. 684 (1669).
Dougherty v. Stepp, 18 N.C. 371 (1835).
Vosburg v. Putney, 80 Wis. 523, 50 N.W. 403 (Wisc. 1891).
The Thorns’ Case, Y.B. 6 Edw. 4, 7, pl. 18 (1466).
Central London Property Trust Ltd v High Trees House Ltd [1947]
... a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made and which was in fact so acted on.
Hughes v. Metropolitan Railway Co [1877]
... with the initiation of the negotiations there was an implied promise by the landlord not to enforce their strict legal rights...
Pre-contract
Masters v Cameron [1954]
"Subject to..."
Low Kar Yit & Ors v Mohamed Isa & Anor [1963]
Counter offer
After counter offer, original offer no more open
Hyde v Wrench [1840]
Passage if time
Too long time offer elapsed that there was no contract
Ramsgate Victoria Hotel Co Ltd v Montefiore [1866]
Silence
Proposer cannot prescribe silence as a manner of acceptance
Fraser v Everett (1889)
Felthouse v Bindley (1862)
Performance of contract
Partly performed, cannot get paid, only fully completed can be discharged
Sumpter v Hedges [1898]
As in Quantum Meruit - Sumpter v Hedges
Condition or warranty
Termination by breach of condition
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938)
Frustration
Theatre burned down, not my fault！
Taylor v Caldwell 1863
Contract (Option with consideration paid) is irrevocable
Termination by breach of condition
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938)
Frustration
Theatre burned down, not my fault！
Taylor v Caldwell 1863
Contract (Option with consideration paid) is irrevocable
Offer with option open cannot be withdrawn when consideration paid
Test of frustration
Completing over budget is not frustration of contract, not claimable for damage/overspent
Davis Contractors Ltd v Fareham Urban District Council [1956]
Injunction issued thus delayed completion, can claim for frustration of contract.
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982)
Relationship agent and principal
Bribe received for over valued land, fiduciary duty of an agent and tort, criminal.
Mahesan v Malaysian Government Officers Co-operative Housing Society Ltd [1975]
Minor no Legal Capacity
Void ab initio
Mohori Bibee v Dhumordas Chose (1903)
Scholarship contract
Government of Malaysia v Gucharan Singh [ 1971]
Duty of care
Donoghue v Stevenson 1932
2-Stage Test or Anns Test - Anns v Merton LBC (duty of care - overruled by Murphy v Brentwood)
3-Stage Test or Caparo Test - Caparo Industries v Dickman (Proximity, Foreseeable, Fair)
Foreseeability - Hedly Bryne v Helly
Reasonableness in Standard of Care - Blyth v Birmingham Waterworks
Breach of duty
Bolton v Stone 1951; Roe v Minister of Health 1954
Neogh Soo Oh & Ors v G Rethinasamy (1984)
Completing over budget is not frustration of contract, not claimable for damage/overspent
Davis Contractors Ltd v Fareham Urban District Council [1956]
Injunction issued thus delayed completion, can claim for frustration of contract.
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982)
Relationship agent and principal
Bribe received for over valued land, fiduciary duty of an agent and tort, criminal.
Mahesan v Malaysian Government Officers Co-operative Housing Society Ltd [1975]
Minor no Legal Capacity
Void ab initio
Mohori Bibee v Dhumordas Chose (1903)
Scholarship contract
Government of Malaysia v Gucharan Singh [ 1971]
Negligence
Duty of care
Donoghue v Stevenson 1932
2-Stage Test or Anns Test - Anns v Merton LBC (duty of care - overruled by Murphy v Brentwood)
3-Stage Test or Caparo Test - Caparo Industries v Dickman (Proximity, Foreseeable, Fair)
Foreseeability - Hedly Bryne v Helly
Reasonableness in Standard of Care - Blyth v Birmingham Waterworks
Bolton v Stone 1951; Roe v Minister of Health 1954
Neogh Soo Oh & Ors v G Rethinasamy (1984)
Watt v Hertfordshire County Council (1954)
Legal causation or remoteness
Palsgraf v Long Island Rail Road 1928
Hay (or Bourhill) v Young (1943)
Palsgraf v Long Island Rail Road 1928
Hay (or Bourhill) v Young (1943)
Strict Liability (Elements)
Tuberville v. Savage, 1 Mod. Rep. 3, 86 Eng. Rep. 684 (1669).
Dougherty v. Stepp, 18 N.C. 371 (1835).
Vosburg v. Putney, 80 Wis. 523, 50 N.W. 403 (Wisc. 1891).
The Thorns’ Case, Y.B. 6 Edw. 4, 7, pl. 18 (1466).
Monday, April 13, 2015
Exceptions on estate agency practice
Q.
A friend asked a probationary estate agent what is so special about being a Registered Estate Agent. He was informed that the Valuers, Appraisers and Estate Agents Act , 1981 safeguards the position of a Registered Estate Agency Practice. In fact, nobody shall carry out such professional practice unless having issued with an authority to practice estate agency under Section 16 of the Act. Hence, he asked about what if his girlfriend's mother wants to sell her own house without going through an Estate Agent. Of course, she dan do that right?
Advice this friend, and further elaborate on what occasions it becomes unnecessary to involve an Estate Agent.
A.
Section 22c of the Valuers, Appraisers and Estate Agents Act, 1981 - Restrictions on Estate Agency practice, specifies that under the situation below it does not require to follow the law:
Section 22c subsection (2) Notwithstanding subsection (1)* -
(a) an owner of any land, building and any interest therein may sell or rent or lease or sublease, or offer to sell or rent or lease or sublease, such land, building and interest;
(b) a licensed auctioneer may sell or offer to sell any land, building and any interest therein by public auction; and
(c) a holder of a power of attorney in respect of any land, building and any interest therein, acting gratuitously and for no commission, fee, reward or other consideration, may sell, purchase or rent, or offer to sell, purchase or rent, such land, building and interest.
* Subsection (1) No person shall unless he is a registered estate agent and has been issued with an authority to practice under section 16 -
(a) ... (d) on various requirements of estate agency practice.
Ref:
Section 22c of Valuers, Appraisers and Estate Agents Act, 1981.
A friend asked a probationary estate agent what is so special about being a Registered Estate Agent. He was informed that the Valuers, Appraisers and Estate Agents Act , 1981 safeguards the position of a Registered Estate Agency Practice. In fact, nobody shall carry out such professional practice unless having issued with an authority to practice estate agency under Section 16 of the Act. Hence, he asked about what if his girlfriend's mother wants to sell her own house without going through an Estate Agent. Of course, she dan do that right?
Advice this friend, and further elaborate on what occasions it becomes unnecessary to involve an Estate Agent.
A.
Section 22c of the Valuers, Appraisers and Estate Agents Act, 1981 - Restrictions on Estate Agency practice, specifies that under the situation below it does not require to follow the law:
Section 22c subsection (2) Notwithstanding subsection (1)* -
(a) an owner of any land, building and any interest therein may sell or rent or lease or sublease, or offer to sell or rent or lease or sublease, such land, building and interest;
(b) a licensed auctioneer may sell or offer to sell any land, building and any interest therein by public auction; and
(c) a holder of a power of attorney in respect of any land, building and any interest therein, acting gratuitously and for no commission, fee, reward or other consideration, may sell, purchase or rent, or offer to sell, purchase or rent, such land, building and interest.
* Subsection (1) No person shall unless he is a registered estate agent and has been issued with an authority to practice under section 16 -
(a) ... (d) on various requirements of estate agency practice.
Ref:
Section 22c of Valuers, Appraisers and Estate Agents Act, 1981.
Wednesday, May 7, 2008
Securities Law of Malaysia
by Thomas Sim, 26 Mar, 2001
What are the securities laws of Malaysia?
According to Securities Commission Act 1993, the followings are securities Law in Malaysia:
(1) Securities Commission Act 1993 (SCA)
This Act covers the activities of listed companies in listing, prospectuses and disclosure of information as a whole.
(2) Securities Industrial Act 1983 (SIA)
This Act covers the manners in which securities are traded in Malaysia.
(3) Securities Industrial (Central Depository) Act 1991
This Act governs the Central Depository Sdn Bhd and the scripless trading of securities in Malaysia.
Related Laws in the Derivative Market
Futures Industry Act 1993 (FIA)
(not a securities law under SCA 1993)
This Act governs the trading of futures and options in Malaysia. Futures are traded in KLOFFE. Currently the only futures traded is on Composite Index of the KLSE. It was introduced in Dec, 1995. This was followed by KLOFFE's second product, the KLSE CI Options contracts in December 2000.
Some Background
By old definition, the Companies Act 1965 is also a securities law as it governs companies out of the areas of Securities Industrial Act 1983 and Securities Commission Act 1993. Nevertheless, it is still the backbone in statutes related to regulation of private companies (Sendirian Berhad companies), therefore it is not part of the law under the enforcement of the Securities Commission (SC).
Companies Act 1965 is the main stair of law governing private companies under the enforcement of Registrar of Companies (ROC).
Relevance of securities law of Malaysia to ICSA Examination
The Professional Stage papers on Malaysian Corporate Law (MCL) and Malaysian Company Secretarial Practice (MCSP) are primarily designed to assess candidates of ICSA on the Companies Act 1965. In my opinion, there will be more emphasis on SCA and SIA in future examinations as company secretaries are heavily involved in listed companies.
What are the securities laws of Malaysia?
According to Securities Commission Act 1993, the followings are securities Law in Malaysia:
(1) Securities Commission Act 1993 (SCA)
This Act covers the activities of listed companies in listing, prospectuses and disclosure of information as a whole.
(2) Securities Industrial Act 1983 (SIA)
This Act covers the manners in which securities are traded in Malaysia.
(3) Securities Industrial (Central Depository) Act 1991
This Act governs the Central Depository Sdn Bhd and the scripless trading of securities in Malaysia.
Related Laws in the Derivative Market
Futures Industry Act 1993 (FIA)
(not a securities law under SCA 1993)
This Act governs the trading of futures and options in Malaysia. Futures are traded in KLOFFE. Currently the only futures traded is on Composite Index of the KLSE. It was introduced in Dec, 1995. This was followed by KLOFFE's second product, the KLSE CI Options contracts in December 2000.
Some Background
By old definition, the Companies Act 1965 is also a securities law as it governs companies out of the areas of Securities Industrial Act 1983 and Securities Commission Act 1993. Nevertheless, it is still the backbone in statutes related to regulation of private companies (Sendirian Berhad companies), therefore it is not part of the law under the enforcement of the Securities Commission (SC).
Companies Act 1965 is the main stair of law governing private companies under the enforcement of Registrar of Companies (ROC).
Relevance of securities law of Malaysia to ICSA Examination
The Professional Stage papers on Malaysian Corporate Law (MCL) and Malaysian Company Secretarial Practice (MCSP) are primarily designed to assess candidates of ICSA on the Companies Act 1965. In my opinion, there will be more emphasis on SCA and SIA in future examinations as company secretaries are heavily involved in listed companies.
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