BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

1. INTRODUCTION

1.1 Definition of Law

Oxford English Dictionary – the word ‘law’ is defined as ‘the body of enacted or
customary rules recognized by a community as binding’.

In Sir John Salmond’s jurisprudence book - law is defined as ‘the body of principles
recognized and applied by the state in the administration of justice…in other words, law
consists of the rules recognized and acted on by courts of justice. In short, law may be
defined as a body of rules which are enforced by the State.

1.2 Classification of Law

The functions of law can be classified into 3 divisions as follows:

(1) Public Law
(2) Private Law
(3) International Law.

1.2.1 Public Law

What is Public Law?

Public law is the areas of law which governs the relationship between individuals and
the State (i.e. Malaysia and its citizens).

It can be subdivided into:

(i) Constitutional law
- regulates and defines the structure and principle functions of the organs of
government (i.e. executive, legislature and judiciary), and the relationship
between the government organs (i.e. Federal and State government).
- It deals with the supremacy of Parliament, state and federal powers and
rights of citizens.

(ii) Administrative law

- regulates the duties and powers of the administrative authorities, e.g. the
powers of state councils.

(iii) Criminal law

- regulates the various offences or wrongdoings committed by individuals
against the state, such as murder, robbery, criminal breach of trust, causing
grievous hurt, theft and etc.
- It aims at punishing criminals and suppressing crime by imposing fine and
imprisonment.

1
BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

1.2.2 Private Law

What is Private Law?

Private law or commonly referred as Civil law is concerned with matters that affect the
rights and duties of individuals amongst themselves.

Legal action can be initiated by the individual who feels he/she has been wronged by
another and wants the matter to be made right. The party who initiated the legal action is
referred as ‘the plaintiff’ and the other party being sued is ‘the defendant’.

Example of Private Laws:

(i) Contract law - body of law that regulates the agreements between two or more
parties.
(ii) Companies law – body of law that regulates the formation and administration,
management and cessation of companies
(iii) Family law – body of law that regulates domestic relations such as marriage,
divorce, child custody and etc.

1.2.3 International Law

What is International Law?

International law is the law that governs the relationship between one State with another
State.

International law commonly divided into 2 categories:

(i) Public International Law
- governs the relationship between States with another States, individual, and
other entities.
- The areas of law covers under public international law such as law of the sea,
law of the war, human rights, refugee law and etc.

(ii) Private International Law

- primarily concerns on the disputes between individuals or
businesses/corporations when there is foreign elements (foreign legal
system).
- In such event, the local court has to select the applicable law (choice of law)
to govern the case by referring to “rules of conflict of laws”

Sources of International Law

Article 38 of the Statute of the International Court of Justice:
(a) Treaties between States;
(b) Customary international law derived from the practice of States;
(c) General principles of law recognized by civilised nations; and
(d) Judicial decisions and the writings of “the most highly qualified publicists.

2
BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

2. SOURCES OF MALAYSIAN LAW

2.1 Where do Malaysian laws comes from?

Malaysian
Law

Written Unwritten Islamic Native

Law Law Law Law

Subsidiary English Court

Constitution Legislation Legislation Law Decisions Customs

There are basically two main sources of law in Malaysia: –

(1) Written law
(2) Unwritten law

The other sources of law are:

(3) Islamic law
(4) Native law

2.2 Main Sources of Malaysian Law

2.2.1 Written Law

Written law is the most important source of law in Malaysia and it comes from:
a) Federal Constitution
b) State Constitutions and state laws made by respective State Assemblies.
c) Legislation (laws made by Parliament and State Legislative Assembly)
d) Subsidiary legislation.

a) Federal Constitution
The Federal Constitution of Malaysia is the supreme law of the country.

Article 4 of the Federal Constitution states:

‘This Constitution is the supreme law of the Federation and any law passed after
Merdeka Day which is inconsistent with this Constitution shall, to the extent of the
inconsistency, be void.’

3
BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

Thus, the Federal Constitution is the supreme law of Malaysia and any law that goes
against the Constitution is invalid, i.e if there is a conflict between the Constitution and
an Act of Parliament, the Constitution will prevail.

Federal Constitution is a written document which lay down the powers of the federal and
states government (in the Ninth Schedule) and the fundamental liberties of the citizens
such as:

Article 5 - Liberty of the person

Article 6 - Slavery and forced labour prohibited
Article 7 - Protection against retrospective criminal laws and repeated trials
Article 8 - Equality
Article 9 - Prohibition of banishment and freedom of movement
Article 10 - Freedom of speech, assembly and association
Article 11 - Freedom of religion
Article 12 - Rights in respect of education
Article 13 - Rights to property

b) State Constitution
There are 13 states in Malaysia which each state has its own state constitution to
govern the state. The State List in the Ninth Schedule of Federal Constitution lists down
the matters falls under the State jurisdiction, such as Islamic law, land, agriculture,
forest, local government, water supplies and etc.

c) Legislation
Legislation is the law enacted by the legislature. The power to enact the law is vested in
the Parliament at Federal Level and the State Legislative Assembly at the state level.

(i) Acts of Parliament

- Laws passed by Parliament are called Acts, but those laws passed between 1
April 1946 and 10 Sept 1959 are called Ordinances.
- Parliament may make laws with respect to the matters enumerated in the
Federal List or the Concurrent List (the First or Third List set out in the Ninth
Schedule of Federal Constitution).

(ii) Enactment / Ordinance

- Laws made by the State Legislative Assembly are called Enactments except
in Sarawak where the laws passed by the state assembly are called
Ordinances.
- The laws enacted by the State Assembly is applicable to the state only.
- the State Legislature may make laws with respect to the matters enumerated
in the State List or the Concurrent List (the Second List or Third List set out in
the Ninth Schedule of Federal Constitution).

4
BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

*Laws made by Parliament and the State Legislatures are not supreme. They are
restricted in their law-making powers. They can only make laws within the limits set by
the Federal Constitution.

d) Subsidiary Legislation
Subsidiary legislation also called as subordinate or delegated legislation. The Parliament
gives the power to an authorized body to make laws such as by-laws or regulations by
the local council

(i) Reasons/ Advantages for subsidiary legislation

1. Parliament has limited time where Parliament cannot make all the laws
which covers every aspect.

2. There is a need for specialized expertise in certain areas of law. Since not
all members of Parliament are experts in that particular area, it would be
better for the experts in the respective government department to make the
rules in those areas.

3. Subsidiary legislation is necessary in situations where laws need to be

made quickly (such as in emergencies), to be amended or repealed
quickly. If the regulations become outdated, the Minister can rescind them
easily, thus they are flexible.

(ii) Disadvantages of subsidiary legislation

1. There is an abuse of rights of the Members of Parliament (legislature) to
pass the law if the authorized body (the executive, such as government
officers) make the subsidiary legislation. Such abuses contravenes the
doctrine of separation of powers.

2. The power to make laws is given to civil servants who are not elected by
the citizen and not directly accountable to Parliament is vulnerable to
abuse, for example, lack of prior consultation and discussion.

3. Over-delegation may result in the legislature abdicating or ‘giving-up’ its

actual constitutional role (to make law) to the executive.

2.2.2 Unwritten Law

Unwritten law does not mean it is not in writing. It means that these laws are not made
by Parliament and it is not part of the Constitution. It is also called non-statutory law. The
main sources of unwritten law comprise of:

a) English Law (Common Law and Rules of Equity)

As a former colony of Britain, English law is embedded into the foundation of our legal
system.

5
BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

Section 3 of the Civil Law Act 1956 (CLA) authorised the general application of English
Law, where the court may apply English law in necessary circumstances.

Section 5 of CLA allows the specific application of English law in commercial matters.

Section 6 of CLA exclude the application of English Law in land matters.

In other words, English law may only be applied (i) in the absence of local legislation
and (ii) in certain local circumstances.

b) Court Decisions
Court/judicial decisions is made by the judges sitting in the Superior Courts. It also
known as judge-made laws. This practice is inherited from England.

The judges make laws in the following two ways:

(i) By establishing a principle of law (judicial precedent) to a new situation or set

of facts, where there is no statutory law.

(ii) By interpreting statutes made by the legislature i.e. judges are called upon to
decide the meaning of the law and how are they are to be applied to a
particular situation.

(i) Doctrine of Judicial Precedent/ Stare Decisis

A judicial precedent can be defined as a “previous judgment or decision of a superior
court” which is binding on the lower courts.

A binding precedent means the judges will follow what their predecessors had decided
earlier similar case. This practice is sometimes called as “stare decisis” meaning that
previous judicial decisions must be followed. (‘Stare decisis’ means ‘to stand by past
decisions’).

How does the doctrine of judicial precedent work?

Binding precedent works according to the hierarchy of courts. A judicial precedent or
decision made by the higher court is binding on the lower court .e.g. the decision of the
Federal Court will bind all courts below it.

Advantages of judicial precedent

The advantages of the judicial precedent are:
(i) Certainty - If the legal problem has been solved before, the court is bound to
adopt the same solution.
(ii) Precision – The court decision is consistent with other similar cases
(iii) Time saving – The judges may make similar decision in similar cases.

6
BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

Disadvantages of judicial precedent

The disadvantage of the judicial system are:
Rigid – The court decision could not be changed
Unfairness – create injustice as every case is different from one to another
Complexity - the judges must keep themselves updated with the increasing bulk of new
reported cases and not able to apply the law in the Acts.

Other Legal Terminologies in relation to judicial precedent

Ratio decidendi: is the legal reasoning contained in the decision of the court which
forms the principle of law (judicial precedent).

Obiter dictum: it is the opinion of the judge. Obiter dictum means ‘things said by
the way’. It is not part of the ratio decidendi and thus it is not binding
but merely persuasive.

(ii) Statutory Interpretation

How do judges make law?

Only Parliament can make laws. The judge’s duty is not to make law but to apply the law
by interpreting the law i.e. to give meaning to the law. Hence, the judge is said to be
making the law due to his interpretation of the statute.

The rules of Statutory Interpretation

The courts have over the years developed four basic methods to help them to interpret
statutes. These methods are as follows:

1. The Literal Rule

This is the most often used rule. The duty of the court is to interpret the words in
the statute by giving its ordinary or literal meaning. The judge is not suppose to
change or modify the words but to give meaning to the words even if the meaning
leads to unfairness or absurdity. It is not the duty of the court to fill in the gaps or
modify the words used in the statute.

Case: Sussex v Peerage

Tindall CJ said: ‘…If the words of the statute are in themselves precise and
unambiguous, then no more can be necessary than to explain those words in their
natural and ordinary sense. The words themselves alone do, in such case, best
declare the intention of the law giver.’

2. The Golden Rule

The judge may modify the language used in the statute to overcome the
defects/mistake of the wordings in the Act which have resulted in absurdity.

This happens when the court uses the literal rule and the word or words interpreted
gives rise to an absurd meaning, so the judge will modify it to overcome the
absurdity.
7
BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

Case: Grey v Pearson

The judge held that ‘……that in construing wills and indeed statutes, and all written
instruments, the grammatical and ordinary sense of the words is to be adhered to,
unless that would lead to some absurdity, or inconsistency with the rest of
the instrument, in which case the grammatical and ordinary sense of the
words may be modified, so as to avoid that absurdity and inconsistency, but no
farther.’

3. The Mischief Rule

Mischief Rule is where the words in the statute are ambiguous i.e. it has more than
one meaning. The judge must look at the Act or statute to see what the ‘mischief’ or
defect was in the Act / statute. Thus the judge is required to interpret the law to
meet the intention of the legislature.

The Malaysian case that adopted the mischief rule is Lim Moh Joo v P.P. where
Wan Suleiman J. in interpreting section 39(1) of the Criminal Procedure code said:
“This is, in my judgment, a case where the court must modify the language of the
law to meet what must be the intention of the legislature.”’

4. The Purposive Rule / Approach

This is where the statute did not give a clear meaning and intention of the law. The
judge may have to look at the overall intention of the legislature by reading the
whole statute and ask:
i. What is the purpose of the statute when it was enacted?
ii. Was it to remove a problem or to prevent something?
In this way the judge may be able to find out the purpose of the legislature and
interpret the law to meet that purpose.

The Malaysian case on this rule is United Hokkien Cemeteries, Penang v Majlis
Perbandaran Pulau Pinang.
The issue in this case was whether a columbarium, a place where urns of cremated
ashes of the deceased are kept, could be interpreted as a place of worship. This
requires the interpretation of the Municipal Ordinance on the phrase ‘all buildings
used exclusively as places of worship are exempted from the payment of rates’.

The Federal Court, Chang Min Tat FJ, using the purposive approach concluded – ‘I
see no reason why the same interpretations should be extended to a columbarium
and the repose of the ashes of the departed kept in their honour and in memory of
them should not be regarded as a religious worship…’

c) Customs
Customs is a regular pattern of social behavior which has been accepted by the society
as binding. Customary laws are customs which have legal consequences.

8
BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

The customary laws in Malaysia arise from Malay, Chinse and Hindu customary laws,
Orang Asli customary law (peninsular Malaysia) and Native customary law (non-muslim
indigenous in Sabah and Sarawak).

The Chinese and Hindu, and Native customary laws largely confined to family matters
such as marriage, divorce, adoption and inheritance. However, the Chinese and Hindu
customary laws on marriage and divorce have diminished since the coming into force of
the Law Reform (Marriage and Divorce) Act 1976. The Act does not operate
retrospectively. It does not affect the legality of polygamous and customary law
marriages contracted before the Act.

Besides family matters, the Orang Asli and Native customary laws also extend to their
rights to claim over the land.

The Malay customary law or known as “adat” law (adat perpatih) is still practiced in
Negeri Sembilan and Melaka.

These are customs practice by the different races e.g. Malay Adat, Chinese customs
and Indian customs which has some legal force, and

2.3 Other Sources of Malaysian Law

The other sources of law are:

(1) Islamic law
- Islamic law is applicable only to Muslims and administered in the Syariah
Courts. The Islamic law is a state matter except in the Federal Territories of
Kuala Lumpur, Labuan and Putrajaya (where it is a federal matter)
- The Syariah Court is a state court established by state law whereas the
ordinary civil courts are federal courts. The hierarchy of Syariah Courts are:
a) Syariah Appeal Court
b) Syariah High Court
c) Syariah Subordinate (lower) Courts

(2) Native law

- Native Law is applicable to natives of Sabah and Sarawak. Natives are the
indigenous people of these two states.
- There is a hierarchy of Native Courts in both states exercising jurisdiction
over natives in respect of their personal laws e.g. native customs, religion,
matrimonial and adoption matters.

9
BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

3. SYSTEM OF GOVERNMENT IN MALAYSIA

3.1 Introduction
The system of government in Malaysia is based on constitutional monarchy and a
parliamentary democracy.

i. The Federation comprises 13 states controlled by a central government.

(Malaysia adopts a federal system of government).

ii. The Head of State of the federation is the “Yang di-Pertuan Agong” where the
YDPA is elected by Rulers of the nine Malay states every 5 years.

iii. It practices a system of parliamentary democracy comprising of Legislature,

Executive and Judiciary.

3.2 Doctrine of Separation of Powers

Separation of powers is a basic principle in a democratic form of government. It means
that there should be three distinct branches of government:
 the legislature - Parliament whose function is to make laws,
 the executive - Cabinet whose function is to enforce the law and administer the
country
 the judiciary – Courts whose function is to administer the laws.

All three branches are to operate separately and independently of each other.

However, the Malaysian system is similar to British system. There is no separation of

executive and legislative power because of the mixture of legislative and executive
functions. The cabinet (Executive) consists of the ministers who are also members of
Parliament (Legislature). In other words, the executive branch of government is also part
of the legislature. But, the Judiciary is a separate and independent branch of the
government.

3.3 The Legislature

The Federal Constitution states that the legislative power of the country shall be in the
hands of Parliament which consists of the Dewan Rakyat (House of Representatives)
and Dewan Negara (The Senate).

Legislature or called as Parliament makes laws for the whole country.

State Legislatures or State Legislative Assembly makes laws for their respective states.

The Legislative Process

The process is set out in the Federal Constitution beginning from Article 66. The power
of Parliament to make laws shall be exercised by Bills passed by both Houses.

10
BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

How do Parliament make law?

1) First Reading
A Bill is presented to Parliament by one of the two houses. At this stage only the title of
the bill is introduced and read as a formality. A Bill may originate from either house, i.e.
either from the House of Representatives (Dewan Rakyat – 1st house) or the Senate
(Dewan Negara – 2nd house). After the bill is read, its text is printed and distributed to
the members of both houses.

2) Second Reading
Members of the house will debate on the bill. It is then passed on for consideration by
the Committee of the House.

3) Committee Stage:
The committee will discussed the bill in detail taking into consideration the debate in the
second reading and may make amends to any part of the bill. The committee then
submits a report to the house. If the report is accepted, the bill is then sent for the third
reading.

4) Third Reading:
 At this stage, no debate may take place nor any amendments be made. The house
will put to vote by a simple majority either to pass or defeat the bill.
 After passing it, the bill will go to the next house (Dewan Negara) where it goes
through a similar process.
 If the Dewan Negara amends the bill, it must be returned to the first house (Dewan
Rakyat) for approval.

5) Royal Assent:
After the Bill is passed by both Houses, it is presented to the Yang di-Pertuan Agong for
the Royal Assent. The Bill now becomes an Act of Parliament.

6) Gazette:
No law shall come into force until it has been gazetted (published). The date the Act of
Parliament is gazetted or published is the day the law will come into force.

3.4 The Executive

The Executive consists of Prime Minister, Cabinets and other public officers. The
Executive is led by the Prime Minister. YDPA appoint the Prime Minister and Cabinets
Ministers on the advice of Prime Minister.

Executive enforce the laws made by the legislature and it also responsible for the
government administrative system.

11
 BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

3.5 The Judiciary

The Constitution states that the judiciary is to carry out the judicial powers. In a
democracy such as Malaysia, the judiciary is the third branch of government and plays
an important role in maintaining the balance of power.

The judiciary performs the following functions:-

1. Decide on civil and criminal matters.
2. Interpretation of the Federal and State Constitutions.
3. Determining whether legislative and executive acts are legally correct.

The primary role of the courts is to apply the law. In order for the Judiciary to perform its
role effectively, it must be independent i.e. it has to be free from interference of any kind.

3.5.1 The Hierarchy of the Courts

Federal Court

Court
of Superior
Courts
Appeal

Subordinate High Court High Court

of of
Courts
Malaya Sabah & Sarawak

Sessions Sessions
Court Court

Magistrates Magistrates
Court Court

12
BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

Hierarchy of Courts
The court listed above are vested with general jurisdiction where it deals with civil and
criminal jurisdiction. The court system is in the form of a hierarchy like a pyramid.

The Superior Courts are the Federal Court, Court of Appeal and the High Courts of
Malaya and the High Courts of Sabah & Sarawak.

The Subordinate Courts comprises the Sessions Courts and below it the Magistrates
Courts

The hierarchy is essential for an appeals system. It distinguishes between higher and
lower courts so that if a party to a case feels that injustice has been done in a lower
court, that party can have his case reconsidered by a higher court.

The hierarchy also aid the lower courts in the application of judicial decision where the
decision made by the higher court has binding effect to the lower court.

3.5.2 Courts of Special Jurisdiction

a) Special Court
Special Court was established under Article 182 of the Federal Constitution.

The Special Court shall have exclusive jurisdiction to try all offences committed in the
Federation by the Yang di-Pertuan Agong or the Ruler of a State and all civil cases by or
against the Yang di-Pertuan Agong or the Ruler of a State.

b) Court For Children

CFC were established under the Child Act 2001.CFC were set up with the paramount
aim of protecting the interests of the children (below 18).

The Child Act 2001 provides measures that are intended to take children away from the
adult criminal justice system and to protect them from publicity such as:
i) CFC must, if practicable, sit in a different building or room from the ordinary courts.
ii) The proceedings are not open to the public.
iii) Unless authorized, the media must not reveal any particulars that lead to the
identification of the child.

3.5.3 State Courts

State courts are established by state law. Examples:
1) Syariah courts – only have jurisdiction over person professing the religion of Islam
2) Native courts – only exist in Sabah and Sarawak to hear cases on native
customary law

13
BBBL3033 Business Law – Chapter 1 & 2: Nature & Sources of Malaysian Law

3.5.3 Jurisdiction of Courts

Jurisdiction means the power of the court to hear and decide on the type of cases.
Every courts have different monetary jurisdiction and sentencing powers. E.g.:
1) Federal courts – deals with general jurisdiction (civil & criminal)
2) Special courts – deals with YDPA and the state rulers matters
3) Court for Children – deals with children below 18
4) State Courts – deals with Islamic matters and native customary law

14