Indemnity

Indemnity is compensation for loss. For individuals who has insured against a loss, the insured is eligible for a compensation, but the amount compensated will not exceed the actual loss. There are few forms of imdemnity, which includes cash payments, repairs, replacement and reinstatement.

Based from Wikipedia, indemnity insurance compensates the beneficiaries of the policies for their actual economic losses, up to the maximum limit of the insurance policy. The insured has to prove the actual loss sufferred before he or she will be compensated. There are two types of indemnity insurance, which are personal and professional indemnity insurance.

In contrast with indemnity insurance, a contingency insurance involves payment on a contingent event and the amount paid will be based on value stated in the policy regardless of the loss incurred. An obvious example is the life insurance. The death of a person whose life is insured for reasons not excluded from the policy obligate the insurer to compensate the whole policy amount to the beneficiary. The amount of the compensation paid is irrelevant to the loss incurred by beneficiaries.

Nemo dat Quod non habet

Regarding the issue of transfer of title, it is often linked to the legal principle of "Nemo dat Quod non habet", which means 'no one can give a better title than (from) what he has himself'. This principal is stated in Section 27 of Sale of Goods Act 1957. Nemo dat Quod non habet is sometimes refered to as the nemo dat rule.

This rule is aimed to protect the right of ownership. Under this rule, individual who purchases stolen goods will not obtained the ownership even though there is no indication that the goods purchased are stolen. Therefore, this showed that the interest of the real owner is protected.

Example of case law related to nemo dat rule is the case of Lim Chui Lai v. Zeno Ltd [1964].

However, there are six exceptions to nemo dat rule, which are:

1) The operation of estoppel (Section 27)
- by record
- by deed
- by conduct

2) Sale by merchantile agent (Section 27)
3) Sale by one of joint owners (Section 28)
4) Sale under a voidable title (Section 29)
5) Sale by a seller in possession after sale (Section 30(1))
6) Sale by a buyer in possession (Section 30(2))

Income Tax Act 1967

Malaysian income tax is based on territorial basis. As mentioned in Section 3 of Income Tax Act 1967, a tax known as income tax shall be charged for each year of assessment upon the income of any person accruing in or derived from Malaysia or received in Malaysia from outside Malaysia. However, with effect from year 2004, foreign source income (income received in Malaysia from outside Malaysia) is exempted from tax under Paragraph 28, Schedule 6 of Income Tax Act 1967.

There are different classes of income subjected to Income Tax under Section 4 of Income Tax Act 1967, which are:

a) Profits or gains of a trade, business, profession or vocation
b) Profits or gains from personal services - employment
c) Dividends, interests and discounts
d) Rents, royalties and premiums
e) Pensions, charges or annuities or other periodical payments; and
f) Gains or profits not falling under any of the foregoing paragraph.

From Year of Assessment 2004, self-assessment for individuals was implemented. Under Self Assessment System (SAS), taxpayer himself or herself holds the responsibility to correctly compute the amount assessable, file the return and make payment of any tax due and payable within the stimulated dateline.

There are two types of forms available, which are BE Form for employment income only and B Form for business income and/or other income. The dateline for individuals without business income is 30th April while individuals with business income is 30th June.

Doctrine of Utmost Good Faith

Doctrine of Utmost Good Faith is known in its Latin form as "uberrimae fidei". The common law doctrine of "good faith" in insurance contracts originated in the 18th Century. Lord Mansfield is credited with first articulating this concept in Carter v Boehm (1766) 3 Burr 1905.

Doctrine of utmost good faith means that each party to a proposed contract is under a duty to disclose to the other all information which would influence his decision to enter into the contract, whether such information is requested or not. This doctrine is applied to many common financial transactions.

According to Investopedia, in the insurance market, the doctrine of utmost good faith requires that the party seeking insurance discloses all relevant personal information. The duty to disclose all the material facts of information rests more heavily on the insured than the insurer because the insured knows more about the subject matter of the insurance. For example, when taking a life insurance, the insurer would like to know the state of health, previous ailments or operations, family history and lifestyle habits like smoking or exercise. The premium that will be charged to the potential insured would be based on all the information that he or she has given.

A person is only required to disclose material facts and the non-disclosure of non material facts does not affect the validity of the contract. Take back the example of life insurance. The information regarding the insured's health and previous ailments are material facts as these will influence the mind of the insurer in deciding whether to accept the risk in insuring the insured and at what premium. On the other hand, the insured does not need to tell the insurer regarding his or her education background or the number of siblings in his or her family.

The failure to disclose material facts will give the other party (insurer) the right to avoid the contract. Two cases that are related to the doctrine of utmost good faith are case of Goh Chooi Leng v. Public Life Co. Ltd (1964) and case of New India Assurance v. Pang Piang Chong (1971).

Caveat Emptor

Caveat Emptor is a Latin word and in English, it is "let the buyer beware". It is a warning that notifies a buyer that the goods he or she is buying are "as it", or subject to all defects. Under the doctrine of caveat emptor, the buyer could not recover from the seller for defects on the property that rendered the property unfit for the ordinary purposes.

With Caveat Emptor, seller is not liable to disclose all the information of the product. The buyer must examine, judge, and test the product himself or herself before making the decision to purchase the product. Although Caveat Emptor may sound unfair to the buyer, this rule is not designed to protect the seller from any fraud or making any false statements on the quality and condition of the products that they intended to sell.

Usually, people use the phrase "caveat emptor" in eBay. eBay is an e-commerce model and buyer is not able to examine the products that they are interested in. Thus, it means buyers themselves have to be beware and aware of the quality of products that they are going to purchase.

Corresponding with caveat emptor, there are a number of implied conditions and warranties to protect the buyer. There are seven implied terms:

- Implied Condition as to Title
- Implied Warranty to Quiet Possession of the Goods
- Implied Warranty against Encumbrance of Charge
- Implied Condition on Sale by Description
- Implied condition of Fitness for Purpose
- Implied Condition of Merchantable Quality
- Implied Condition on the Sale by Sample

Opposite with the caveat emptor is the doctrine of caveat venditor. It is Latin for "let the seller beware". Despite the responsibilities imposed on buyers, sellers also have to bear the responbilities on goods to prevent themselves from being deceived. The case of MacPherson v. Buick Motor Co. (1916) is regarded as the origin of caveat venditor.

Salomon v. Salomon & Co. Ltd.

In this case, the main issue is the doctrine of corporate legal entity. After Salomon transferred his sole proprietor business into a company, he ran his business as before and he was issued a debenture. However, his business floundered and as a holder of the debenture, the assets of the company were used to pay Salomon and this caused the liquidator to sue Salomon. The Court of Appeal held that he was liable to indemnity the company against the losses. But, the House of Lords held that even though the business of the company was the same hands that received the profits, yet the company was not an agent or a trustee for the members and thus the members were not liable in respect of the company's obligations.

I agree that Salomon is a member of the company and he and the company are two separate legal entities. He has limited liability. Furthermore, he is a holder of debenture and as a separate legal entity, he had the right to be paid as he is a secured creditor. When the liquidator wanted to sue Salomon for not paying back the debt, the liquidator should be sueing the company, which is Salomon & Co. Ltd and not Salomon himself.

Holding and Subsidiary Company

In class, when we were taught of Company Law, we came across different classifications of companies. They are Unlimited & Limited Co., Public & Private Co. and Holding & Subsidiary Co. Here, I am going to give some examples on Holding & Subsidiary Co.

A company is a subsidiary of a holding company if the holding company controls the composition of the board of directors; controls over half of the voting power of the subsidiary; and holds more than half of the issued share capital of the subsidiary company.

Naim Holdings Berhad is a holding company while Naim Cendera Sdn Bhd (NCSB) is its subsidiary. NCSB is Naim Holdings Berhad's 100% owned subsidiary. It means that Naim Holdings Berhad controls more than half of the voting power of NCSB.

Another example is Berjaya Assets Berhad. Its subsidiary is Berjaya Times Square Sdn Bhd and Natural Avenue Sdn Bhd. Berjaya Times Square Sdn Bhd is a 100% owned subsidiary while for Natural Avenue Sdn Bhd, Berjaya Assets Berhad owns 65% of its shares.