101 on Land Acquisition in Malaysia

Introduction

Malaysians enjoy a constitutionally protected right to property, as enshrined in Article 13 of the Federal Constitution. However, the language of Article 13 itself shows that this is not an absolute right as it provides that “no person shall be deprived of property save in accordance with law”.[1] One such law which impinges on one’s rights to property is the Land Acquisition Act 1960 (the “LAA”). This article aims to provide a brief overview of the land acquisition process in Malaysia including possible legal challenges available to a land owner.

General Process of Land Acquisition

The LAA allows the Government to acquire private land under certain circumstances. Once a land is the subject of an acquisition, the land owner will be entitled to compensation based on several factors, including the value of the land.When then, can the Government acquire private land? The Government may acquire any private land which is needed for any public purpose, for the benefit of the economic development of Malaysia, or for mining, residential, agricultural, or industrial purposes.[2]

The Government may acquire any private land which is needed for any public purpose

Generally, the steps involved in a Land Acquisition under the LAA are as follows:-

1. Notification of the land acquisition to the public;
2. The entry and survey of the subject land (the “Subject Land”) in question;
3. The marking of the Subject Land and notation of the acquisition on the Land Register;
4. An enquiry conducted by the Land Administrator (the “Enquiry”);
5. An award by the Land Administrator (the “Award”); and
6. If applicable, a Reference to the High Court after the Award.

Persons Interested

As an initial step, it is imperative to understand who is protected under the LAA. This would be “persons interested,” as found in Section 2 of the LAA. ‘Persons interested’ are defined as every person claiming an interest in compensation to be made on account of the acquisition of land under this Act, excluding tenants at will.[3] Arguably such persons would encompass registered proprietors, occupiers, and any persons with a registered interest in the land.[4] Only these persons interested are allowed to object to the Land Administrator’s Award, and are required to receive notification of any land acquisition.

1. Notification to the public about intention for land acquisition

The first step in a land acquisition process is the notification of the same to the public. The State Authority must publish its decision to acquire the land in question (the “Subject Land”) in the Government Gazette via Form A, which is a notice that land is likely to be acquired[5]. The Land Administrator must also give public notice of its decision to acquire such land by publishing the notification at either the District Land Office, on public notice boards where the land is situated, or near the land specified in that notification, and in other such places it deems fit.[6] If the acquisition is for a public purpose, the State Authority shall publish a declaration stating as such in the Government Gazette, via Form D. This is provided for under Section 8 of the LAA. These public notices are to ensure that the public, and the proprietor and/or occupier of the land, are notified and/or informed of the pending acquisition.

2. Entry and Survey of the Subject Land

In carrying out said acquisition, the Land Office may authorize any of its officers or persons to enter the land by way a letter of authority (Form B). The Form B shall also specify the work that an authorised officer can do, as provided for under Section 5 of the LAA. This work includes surveying the land, marking levels and boundaries, as well as all other acts necessary to ascertain whether the land is adapted for the purposes for which it is to be acquired.If requested, the said authorised persons must produce their letter of authority (Form B) and a copy of the notice to acquire the land (Form A), before they can enter onto the Subject Land. There can be no forced entry. However, the LAA also provides that persons authorised may enter the land upon giving the occupier three (3) days written notice.[7] In essence, Section 6 of the LAA protects the rights of the landowners and/or occupiers of the Subject Land in the event of any damage caused during by said the entry and survey. If any persons authorised causes damage to the land, he shall as soon as possible compensate the land owner for such damage.

3. The Enquiry

Next, the Land Administrator will hold an Enquiry to determine the compensation to be awarded for the land. In other words, this is where claims on compensation by persons interested in the Subject Land will be heard pursuant to Section 10 of the LAA. It is at this stage that persons interested are able to raise any objections and/or issues relating to the acquisition. The parties can have their lawyers present at the Enquiry.The Land Administrator shall not hold the Enquiry earlier than twenty-one (21) days after the date of publication of a notice of the Enquiry. This notice shall be given by way of ‘public notice’ in the form of Form E.[8] Pursuant to Section 52 of the LAA, public notice is given by the following means:-

1. Notification in the Gazette; and/or
2. Copies of said notice being posted at the District Land Office, on public notice boards in the relevant mukim or township; and
3. In other such places on or near lands specified in the document as the Land Administrator sees fit.

The Land Administrator is required to serve copies of Form E on the occupier, registered proprietor, any persons having a registered interest in the land, as well as any person whom the Land Administrator knows or has reason to believe to be interested therein.[9] This would inform the proprietor and/or occupier of the Hearing, as well as enable them to seek legal advice and/or prepare their objections in the event they intend to do so.[10]On the day of the Enquiry, the Land Administrator makes a full inquiry into the value of the acquired land. This includes inquiries into the respective interests of persons interested, and any objections raised.[11]

The procedure of an Enquiry is similar to that of civil court proceedings, and is provided for in Section 13 of the LAA. During the Enquiry, there are multiple considerations to be taken by the Land Administrator. In its deliberations, the Land Administrator shall request from the State Director of Town and Country Planning information on whether the Subject Land is within a local planning authority area, whether the land is subject to any development plan under the town and country planning, and if there is a developmental plan, the land use stated in said plan.[12] Additional considerations to be taken into account are related to the general features of the Subject Land, and the market value of the same. These are listed in the 1st Schedule of the LAA, as follows:-

(a) The market value of the Subject Land. This includes a consideration of the value of neighbouring land, as well as the category and use of the Subject Land;

(b) Any increase which shall be deducted from the total compensation, in the value of the other land of the person interested likely to accrue from the use to which the land acquired will be put;

(c) The damage, if any, sustained or likely to be sustained by the persons interested at the time of the Land Administrator’s taking possession of the land by reason of severing such land from his other land;

(d) The damage, if any, sustained or likely to be sustained by the person interested at the time of the Land Administrator’s taking possession of the land by reason of the acquisition injurious affecting the property in question – be it movable or immovable property;

(e) If, in consequence of the acquisition, the land owner/ occupier is or will be compelled to change his residence or place of business, the reasonable expenses, if any, incidental to such change; and

(f) Where only part of the land is to be acquired, any undertaking by the State Authority, or by the Government, person or corporation on whose behalf the land is to be acquired, for the construction or erection of roads, drains, walls, fences or other facilities benefiting any part of the land left unacquired, provided that the undertaking is clear and enforceable.

The Court of Appeal in Exxonmobil Malaysia Sdn Bhd v Pentadbir Tanah Daerah Petaling [2015] 5 MLJ 541 has determined what constitutes “reasonable expenses” under Item E of the 1st Schedule. It was held that reasonable expenses must be expenses incidental to the change in residence or place of business. In that case, the issue was whether a loss of income derived from the sale of petrol and diesel from the Appellant’s petrol station was a reasonable expense. It was held that this loss of income was not incidental to the change in residence or place of business, as hence not claimable under the LAA.In addition, Schedule 1 of the LAA also provides the following matters which the Land Administrator shall not to take into account during the Enquiry:-

(a) The degree of urgency which has led to the acquisition;

(b) Any disinclination of the person interested to part with the land acquired;

(c) Any damage sustained by the person interested which, if caused by a private person, would not be a good cause of action;

(d) Any depreciation in the value of the land acquired likely to result from the use to which it will be put when acquired;

(e) Any increase to the value of the land acquired likely to accrue from the use to which it will be put when acquired; and

(f) Any outlay on additions or improvements to the land acquired, which was incurred after the date of the publication of the declaration, unless such additions or improvements were necessary for the maintenance of any building and unless, in the case of agricultural land, it is any money which has been expended for the continuing cultivation of crops on it.

In practice, during the Enquiry the Land Administrator usually hears evidence provided by a government valuer and a valuer appointed by the landowner in coming to a decision regarding the compensation.The Courts have also attempted to clarify the scope of consideration required by a Land Administrator during an Enquiry. As an example, in relation to determining the potential value of land, the Court in Bukit Rajah Rubber Co Ltd v Collector of Land Revenue, Klang [1968] 1 MLJ 176b held that the property must be valued not only with reference to its condition at the time of acquisition but also its potential development value. Ordinarily, the objective assessment would be the price that an owner willing and not obliged to sell might reasonably expect to obtain from a willing purchaser.Additionally, the Court of Appeal in Mohd Shah bin Daud v Pentadbir Tanah Dan Jajahan Kota Bharu [2016] MLJU 240 held that illegal and/or unlawful acts cannot be a basis for compensation. In that case, the Court did not allow the appellant’s other claims for costs of filling and leveling the land because they were unlawful and/or not approved. The local council had admitted to the said work being unlawful acts of trespass. In addition, the costs were also incurred by the local authority, and not the appellant himself. Hence, the costs were not claimable as compensation.

Therefore, it is evident that the considerations of the Land Administrator during an Enquiry are bound by what is prescribed under the LAA. Limited judicial intervention on this subject matter appears to reflect the requirement of stringent compliance with the bounds as provided for under the LAA. 4. The Final Award by the Land Administrator At the conclusion of the Enquiry, the Land Administrator will prepare a written award which will be in the form of Form G.[13] The Form G shall be served on each persons interested by way of a notice of compensation (Form H).[14] In practice, an oral decision is normally given on the day of the Enquiry itself. This is then followed up with the issuance of the Form G. The Land Administrator will make a separate award for each person interested who are entitled to compensation.

Prima facie, every award shall be final and conclusive, regardless of whether the persons interested attended the Enquiry.[15] However, persons interested can challenge the award given by a Land Administrator and/or challenge the actual acquisition of land itself. These two objections are done via different processes and mechanisms as explained below.

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Contesting an Award of Compensation

Reference Proceedings

Persons interested who wish to object to the quantum of the Land Administrator’s award can do so via Referencing Proceedings. This is done by lodging a Form N to the Land Administrator pursuant to Section 37 of the LAA.[16] However, that person must lodge his objections within the prescribed time limit, and must not have fully accepted the award without protest.[17] Reference Proceedings are not available to all interested persons. In particular, the LAA provides that no objections can be made for awards not higher than RM3,000.00.[18] Meanwhile, for awards exceeding RM15,000.00, any Government, person, or corporation undertaking a work which for public utility and whose behalf the land was acquired shall be deemed to be an interested person entitled to raise an objection as to the compensation awarded for said land.[19]

The scope of an objection raised in Reference Proceedings is also limited by the LAA. Under Section 37 of the LAA, an interested person may raise objections only in relation to the measurement of land, amount of compensation payable, persons to whom it is payable, and apportionment of the compensation.[20]

i. Manner of Objecting and Process of Reference Proceedings

An important requirement of the Form N above is that it must contain all grounds on which the objection is made. Grounds not stated in the Form N will not be entertained by the High Court.[21] In relation to matters of procedure, only the Land Administrator is able to refer the objection to the High Court for its determination.[22] Once the matter is referred to the High Court, the proceedings shall be known as Land Reference Proceedings. During such proceedings, the parties involved are usually the Land Administrator and the objecting parties, such as the landowner.

During Land Reference Proceedings, both parties are at liberty bring factual and expert evidence relating to the issues raised in the Form N.[23] Evidence is usually adduced by way of affidavits.[24] Parties are also entitled to seek leave of Court to cross-examine the other party’s experts.[25] A Land Reference Proceeding shall be heard by a single High Court judge.[26] Where the objection raised is in relation to the amount of compensation, the Court shall appoint two (2) assessors (one being a Government assessor and the other from the private sector) to aide the Judge in determining the issue of compensation.

Previously, Section 40D of the LAA mandates that the Judge shall be bound by the findings of the assessors in relation to the issue of compensation. However, the Federal Court recently in Semenyih Jaya Sdn Bhd v Pentadbir Tanah Daerah Hulu Langat [2017] 3 MLJ 561 (“Semenyih Jaya”) has declared that these specific sub-provisions of Section 40D are unconstitutional. Specifically, the Federal Court in Semenyih Jaya held that Sections 40D(1) and (2) infringed Article 121 of the Federal Constitution, as they take away the judicial power vested in a judge in the High Court to make a determination.

In essence, the decision states that the opinion of the assessors should not be binding on the judge in question. The Federal Court has called for these provisions to be struck down. As a result, the Judge can now depart from the opinions of the assessors and come to his own decision on the amount of compensation, after taking into consideration the opinions of the assessors.

ii. Time Period to Object

There are two separate time periods relevant to a person interested to object to an award by the Land Administrator. Firstly, if the person was present or represented during the Enquiry, said person has six (6) weeks from the date of the Land Administrator’s award to lodge the Form N. Secondly, in any other case (e.g. when an interested person is not represented or not present at the Enquiry), the objection (Form N) has to be lodged with the Land Administrator within six (6) weeks of the receipt of the notice of compensation from the Land Administrator (Form H), or within six (6) months from the date of the Land Administrator’s general award (Form G) after the hearing of its enquiry, whichever expires first.[27]

The LAA provides that upon the lodgement of the Form N, the Land Administrator must refer the matter to the High Court within six (6) months.[28] Failing which, the person interested may apply directly to the High Court by way an Originating Summons to obtain an order to compel the Land Administrator refer the matter to Court.[29]

iii. Deposit Requirements

Before the Land Administrator makes a reference to Court, he may require the objector to deposit a sum of RM3,000.00 or 10% of the amount claimed, whichever is lesser, in respect of the interest under the reference.[30] This deposit will have to be settled within 30 days of it being required by the Land Administrator, failing which the reference is deemed to be withdrawn and the Land Administrator’s award becomes final.[31]

Right to Appeal

In the event the person interested is not successful in the Reference Proceedings, such person interested may then appeal the decision to the Court of Appeal, and subsequently the Federal Court, upon the granting of leave. This is provided in Section 49(1) of the LAA. However, it is important to note that where the High Court decides on the issue of compensation, a decision on the value of said compensation cannot be appealed against.[32] This has been confirmed by in the several Federal Court and Court of Appeal decisions,[33] where it has been concluded that Section 49(1) of the LAA – which prevents the appeal on any decision as to the value of compensation of land – is constitutional and within the rights of the Court as per the Courts of Judicature Act 1964.[34] This effectively means that persons interested are still prevented from appealing any decision as to the value of compensation of land as determined in a Land Reference Proceeding.Therefore, under the LAA a person interested in only able to contest the amount of compensation awarded up until the High Court in the Land Reference Proceedings. As such, it is crucial that all issues relating to the value of the land be thoroughly canvassed by that stage.

Judicial Review in the Civil Courts

Further, a land owner may challenge a land acquisition by way of Judicial Review at the High Court. In general, a judicial review application can be initiated if the State Authority fails to comply with the mandatory requirements of the LAA. The general grounds for challenging a land acquisition has been enunciated by the Court of Appeal, in the decision of Ahmad Saman v Kerajaan Negeri Kedah [2004] 1 CLJ 21, as follows:-

1. When the acquiring authority (Land Administrator or State Authority) has misconstrued its statutory powers;
2. Where the purpose of the land acquisition does not come within Section 3;
3. Where it can be shown that the acquiring authority has acted in bad faith; or
4. Where the acquiring authority has acted contrary to the law.

The Malaysian Courts have determined that the procedural requirements and substantive considerations imposed by the LAA are of paramount importance, and binding on the State Authority and Land Administrator. Notably, the Court of Appeal in United Allied Empire Sdn Bhd v Pengarah Tanah dan Galian Selangor & Ors [2018] 1 MLJ 661 has held that the compliance with the statutory requirements of the LAA is mandatory in a compulsory acquisition of land. In this case, the State Authority failed to issue a Form A as required under Section 4 of the LAA, thus resulting in no public notice of the acquisition. The Land Administrator also failed to endorse the memorial on Form K, pursuant to Sections 23 and 66 of the LAA. The Court of Appeal held that non-compliance of the statutory provisions of the LAA was fatal to the land acquisition. The land owner was awarded a declaration and certiorari (order) to quash the Government’s decision to acquire.The impact of procedural non-compliance was also discussed in the decision of Ee Chong Pang & Ors v The Land Administrator of The District of Alor Gajah & Anor [2013] 3 CLJ 649 where the Court held the acquisition in question to be unconstitutional. The Court of Appeal emphasize that the LAA is a legislation which empowers State Authority to deprive a person of his property. In that case, the Form A was never published by the State Authority, hence the land acquisition exercise not being carried out according to the law was contrary to Article 13(1) of the Federal Constitution.

Therefore, the provisions of the LAA must be given a strict interpretation in favour of the person deprived of his property. This is to ensure land owners are given constitutional protection under Article 13(1) of the Federal Constitution.There has also been a recent clarification on the time requirement to file a Judicial Review under Order 53 Rule 3(6) of the Rules of Court 2012. Order 53 Rule 3(6) states that a judicial review application is to be filed three (3) months from the date the grounds of the application first arose or when the decision was first communicated to the respondent.In relation to the acquisition of land, the Federal Court decision of Kijal Resorts Sdn Bhd v Pentadbir Tanah Kemaman & Anor [2016] 1 MLJ 544 has clarified that time to file a judicial review begins when the applicant has actual knowledge of a land acquisition decision – i.e. the delivery of Form E.

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Conclusion

The above provides an overview of the process and legal implications of a compulsory acquisition of private land under the LAA. One thing is clear, while our Federal Constitution protects a citizen’s right to land, the law still allows for the government to acquire said land. So, the next time you think a piece of freehold land belongs to you forever, you might want to think again.

[1] Article 13(1) Federal Constitution.
[2] Section 3, Land Acquisition Act 1960 (“LAA”).
[3] Section 2, LAA.
[4] See: Section 11, LAA requiring notice of any land acquisition to be notified to this group of individuals. 
[5] Section 4, LAA.
[6] See: Section 52, LAA prescribing the means of public notice.
[7] Section 5, LAA. 
[8] Section 10, LAA.
[9] Section 11, LAA.
[10] Section 37(1), LAA.
[11] Sections 12 and 13, LAA.
[12] Section 9A, LAA. 
[13] Section 14, LAA.
[14] Section 16, LAA.
[15] Section 14(2), LAA.
[16] See also Section 45 LAA. 
[17] Section 37 LAA.
[18] See Section 37(2) LAA. 
[19] Section 37(3); See also Unggul Tangkas Sdn Bhd v Pentadbir Tanah and ors [2016] 1 LNS 786. 
[20] Section 37(1) LAA.
[21] Section 38(2) LAA.
[22] See: Sections 38 and 36 of the LAA. 
[23] 3rd Schedule LAA.
[24] Item 5, 3rd Schedule LAA.
[25] Item 5(5), 3rd Schedule LAA.
[26] Section 40A, LAA.
[27] Section 38(3) LAA. 
[28] Section 38(5) LAA.
[29] Item 2, 3rd Schedule LAA
[30] Section 39(1) LAA.
[31] Section 39(2) LAA. 
[32] Sections 40D and 49(2) LAA. 
[33] Semenyih Jaya Sdn Bhd v Pentadbir Tanah Daerah Hulu Langat and anor case [2017] 3 MLJ 561; Calamas Sdn Bhd v Pentadbir Tanah Batang Padang [2011] 5 CLJ 125; Ng Chin Chai v Pentadbir Tanah Segamat and ors appeals [2016] MLJU 1702.
[34] Section 68(1)(d) of the Court of Judicature Act 1964.