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Suri (trading as C.E.S Allied Construction BN 20000161) v Solomon Islands Planned Parenthood Association [2021] SBHC 43; HCSI-CC 77 of 2019 (14 May 2021)

HIGH COURT OF SOLOMON ISLANDS

IN THE HIGH COURT OF SOLOMON ISLANDS
CIVIL JURISDICTION

Civil Case Number 77 of 2019

BETWEEN

ERIC SURI (T/A C.E.S ALLIED CONSTRUCTION BN 20000161)
Claimant

AND:

SOLOMON ISLANDS PLANNED PARENTHOOD ASSOCIATION
Defendant

Date of Hearing: 3 May 2021
Date of Ruling: 14 May 2021

Mr. G. Suri for the Claimant
Mr. D. Marahare for the defendant

RULING ON WHETHER OR NOT TO DEDUCT “7.5 % WITHOHOLDING TAX” ON A LUMP SUM SETTLEMENT PAYMENT AGREED UNDER A “DEED OF RELEASE AND DISCHARGE”

1. Claimant filed a further amended claim by leave of the Court on 28/04/2020. Amended claim is a contract dispute, whereby claimant is seeking outstanding payments for work he or his company did on refurbishing defendant’s office building (house). Claimant seek reliefs inter-alia for: -
   • (i) $297,405.00, being the remaining 20 % of the original contract price for work claimant did to construct defendant’s house.
   • (ii) $ 436,777.13, being for variation work on the original contract claimant did to construct defendant’s house.
   • (iii) $254,204.00, being other necessary works claimant did on defendant’s house falling outside the original contract price and variation contract price.

A total quantum of around $988,356.00 is being sought after in the further amended claim.

2. Pleadings also show the original contract price for defendant’s house that claimant constructed was $1,487,025.00. Of the $1,487,025.00, claimant had received part payment from defendant. Part payment claimant already received was about $1.1 million^[1] dollars. For the $ 1.1 million dollars, pleadings also show and Mr Suri confirmed in submission that defendant had already deducted 7.5 % withholding tax, close to $100,000.00^[2]. The point is, gross payments (part payments) were already paid and received on the contract price. And defendant already deducted 7.5 % withholding tax on the part payments paid and received pursuant to Section 37 of the Income Tax Act (Cap 123). And perhaps already remitted to the tax office.
3. A claim for about $988,356.00 was settled only at $200,000.00, payable in four equal instalments (See Deed of Release and Discharge executed on 16/02/2021 – “Deed”). First instalment payment of $50,000.00 was paid on 8/03/2021. But defendant deducted $3,750.00 in respect of 7.5 % withholding tax. So claimant only received $46,250.00 instead of the expected $50,000.00 on the first instalment. Claimant disagreed, saying the Deed did not allow for anymore deductions. And that no deductions should be paid under Section 37 of the Income Tax Act (Cap 123). The said section provides that withholding tax of 7.5% will apply to a gross payment paid to a resident person on incomes earned from contracts – Section 37 (2) (a) of the above Act.
4. Counsel Suri says, 7.5 % withholding tax on the gross payments, had already been deducted by the defendant (around $100,000.00), when part payments were made, prior to filing this claim. For the $200,000.00 payable under the Deed, the Deed expressly forbids any more deductions.
5. Strictly the $200,000.00 is not a gross payment under the contract price (See reliefs 1 (ii) and (iii) above – paragraph 1). Claimant already received gross payments (part payments), under the contract price. And 7.5% withholding tax of around $100,000.00 was already deducted from the said gross payments (part payments) – in accordance with Section 37 (2) (a) of the Act. The $200,000.00 is a settlement lump sum payable under this case by virtue of the Deed. Deed was meant to settle and close this claim. Under this claim, Court can order 5 % interest annually and cost, on the quantum claimed, if claimant succeeds on his claim. Defendant will pay 5 % annually and cost on top of whatever judgment sum Court will award to claimant. Court cannot order 7.5 % withholding tax, on any judgment sum awarded. On the other hand, if claimant loses his claim, he will not take anything home. Court will order claimant to pay cost to the defendant. Court will not order claimant to pay 7.5 % withholding tax to the defendant to be transmitted to the tax office.
6. This shows that this claim and anything that emanates out from this claim, like the Deed, is not a tax issue matter. This is a contractual dispute claim for outstanding payments and other payments (See reliefs 1 (i), (ii) and (iii) above – paragraph 1). And when parties have willingly settled, on specified terms, not to deduct any more monies on the $200,000.00, no one is permitted to pull in tax issue matters. The terms and intentions of the Deed must be adhered to without alterations. Court cannot interfere with the Deed, unless there were some vitiating factors like misrepresentation, mistake, undue influence, duress, incapacity, illegality, frustration etc.
7. Accordingly, defendant is not allowed to deduct 7.5 % withholding tax, from the $200,000.00 settlement sum, payable under the Deed. Claimant is entitled to cost set at $3,750.00 against the defendant for this hearing.

THE COURT
JUSTICE JOHN A KENIAPISIA
PUISNE JUDGE

^[1] Exact figure is in the pleadings, but is very close to $1.1 million dollars.
^[2] Exact figure is in the pleadings, but is very close to $100,000.00.