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Malayan Law Journal Articles/1995/Volume 1/The Land Acquisition (Amendment) Act 1991

[1995] 1 MLJ lxxxi

Malayan Law Journal Articles

1995

The Land Acquisition (Amendment) Act 1991

Grace Xavier LLB

(Hons) (Lond), LLM (Mal), CLP Advocate & Solicitor , High Court of Malaya Lecturer, Faculty of Law,
University of Malaya

Introduction

The Land Acquisition (Amendment) Act 1991 ('the Amendment Act') came into effect on 13 September 1991.
It amended s 3 and inserted a new s 68A in the Land Acquisition Act 1960.

Under the amended s 3 and the newly inserted s 68A, the position of the landowner in Malaysia appears to
be on shaky ground. Under s 3, there is a wider scope for the purposes of land acquisition from a private
individual, especially when the land is required for economic development of the country. Section 68A
provides that any subsequent disposal of the acquired land, whether or not in compliance with the original
purpose for which the land was acquired, will not invalidate the acquisition. There is, therefore, among
landowners, a feeling that acquisition procedures may be abused due to the lack of substantive or procedural
safeguards.

Property rights in Malaysia

In Malaysia, the rights of a property owner are governed by the provisions contained in the Federal
Constitution ('the Constitution'), the National Land Code 1965 ('the Code') and the Land Acquisition Act 1960
('the Act'). Under art 13 of the Constitution, the nature and extent of property rights of a person are as
follows:

(1) No person shall be deprived of property save in accordance with law.

(2) No law shall provide for compulsory acquisition or use of property without adequate compensation.

The above provisions ensure that a person is not deprived of his property without adequate compensation
being made. The criteria for assessing adequate compensation is laid out in the First Schedule to the Act.
However, the principles to be taken into account when assessing adequate compensation will not be dealt
with in this article. This article merely focusses on the effect of ss 3 and 68A of the Act.

The Land Acquisition Act 1960

The Act came into force on 13 October 1960. The purpose of the enactment is to provide a clear,
unambiguous and simple system of acquisition supported by a uniform procedure of essential forms.
Uniformity of procedure is
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1 MLJ lxxxi at lxxxii

essential to ensure that each acquisition is carried out without any prejudice. Apart from securing uniformity
in acquisition proceedings throughout Malaysia, the Act was formulated to ensure that the State is not
hindered in its plans towards development and industrialization of the country. Under the provisions of the
Act, the State is bestowed with powers, conferred by Parliament, to acquire private lands for public use upon
the payment of adequate compensation to the landowner.

From its inception, the Act has undergone a number of amendments. However, one amendment has not
been well received. This is the Land Acquisition (Amendment) Act 1991.

The Land Acquisition (Amendment) Act 1991

The Amendment Act 1991 came into force on 13 September 1991. It amended s 3 of the principal Act and
inserted a new s 68A. The original s 3 was:

The State Authority may acquire any land which is needed --

(a) for any public purpose; or

(b) by any person or corporation undertaking a work which in the opinion of the State Authority is of public
utility; or
(c) for the purpose of mining or for residential, agricultural, commercial or industrial purposes.

A reading of the above section shows that acquisition of private land for public purposes was clearly confined
to the taking of land to undertake work which was of public utility. This position was similar to the position of
land acquisition proceedings in the US,1 India2 and Singapore.3

Under the Amendment Act in Malaysia, there is concern about whether the public utility test has paled into
insignificance. This is because the amended sub-s (b) of s 3 does not carry the words 'public utility' or 'public
purpose'.
1 MLJ lxxxi at lxxxiii

The amended sub-s (b) of s 3 reads:

by any person or corporation for any purpose which in the opinion of the State Authority is beneficial to the economic
development of Malaysia or any part thereof or to the public generally or any class of the public; ...

This subsection extends the power of acquisition to purposes of beneficial economic development of
Malaysia or any part thereof or to the public generally or any class of the public. Therefore, there appears to
be, a wider scope for the purposes of land acquisition for economic development of the country when
compared to the earlier provision which placed emphasis on 'public utility'. Which then brings us to
ascertaining the meaning of 'economic development' and whether such development must take into account,
public purpose and public utility.

Economic development

A broad definition of economic development must include any development which is carried out to meet the
demands and needs of the people. It must benefit the community at large, increase the wealth of the nation,
create employment opportunities, and generally improve the social conditions of the population. This is
economic development viewed from a global perspective.
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In the subsection, the wording is 'economic development of Malaysia or any part thereof or to the public
generally or any class of the public'.

Can the subsection be construed to mean economic development of any particular class of the public? If yes,
then the following questions arise. What is the particular class? Who is the person or body which determines
that the needs of this class of persons require land to be acquired? Will the benefit that accrues to this
particular class prejudice the rights of other members of the community? Are we, in fact, under the guise of
legislation, in danger of allowing genuine landowners to be deprived of their heritage, not for the economic
development of a nation or even a community, but for a preferred class of persons? This cannot be the
intention of Parliament.

The discretion to determine the acquisition for purposes under s 3(b) is given to the State Authority.4 There
are no guidelines, in the Act or schedules to the Act, as to how the discretion is to be exercised. It cannot be
the intention of Parliament, when the amendment was enacted, that any discretion given to any power is to
be exercised without any consideration being given to public purpose or public utility needs.

No doubt the words 'public purpose' or 'public utility' have been omitted from sub-s (b) of s 3. But that does
not mean that the amendment must be read in isolation. One must look at the purpose for which the parent
Act was enacted when construing the amended provisions. Whenever a new provision is interpreted, one is
obliged to look at the surviving
1 MLJ lxxxi at lxxxiv
connected provisions in order to gather the intention of the legislature as a whole.5The main purpose of
enacting the Act was to ensure that development of the country was not hindered by selfish owners who
refused to part with their lands. Therefore, the Act provides for acquisition of land for the purposes of
development and future planning. The Act is also instrumental in the control and use of land by the State for
public purposes and economic development.

This is where the courts play a vital role in the construction of this particular subsection. Even though the
crucial words have been omitted from the subsection, economic development must, therefore, be construed
to include development which will be in the public interest.6 When the intention of the enactment is observed,
together with the property rights of an individual entrenched in the Constitution, it is evident that economic
development must encompass development in the interest of the general public.7 Thus it can be surmised
that before land is acquired for economic development, then even if it is for a class of the public, the general
interest of the community must override the particular interest of the individual from whom the land is
acquired and the purpose must be for public good, not for the good of a particular or preferred class.

Section 68A

Of even greater importance, and the cause of much dissatisfaction to many landowners, is the addition of a
new provision, s 68A.8 This section provides that any subsequent disposal, or use of, or dealing with, the
acquired land, by the party on whose behalf it was acquired, shall not invalidate the acquisition.
1 MLJ lxxxi at lxxxv

This new section would appear to suggest that any subsequent disposal or use of, or dealing with the
acquired land, whether or not in compliance with the original purpose for which the land was acquired, will
not invalidate the acquisition.

In one respect, the new s 68A allows the acquiring body to release any acquired land which, for some reason
or other, is not or is no longer suitable for the purpose for which it was originally acquired. However, the lack
of any substantive or procedural safeguards as to when the power thereunder can be exercised, may render
the section open to abuse.

The disconcerting effect of the amendment is that it gives the right to the acquisitioning authority to acquire
lands for economic development, resell the lands to any private body or corporation for any development to
be carried out, and even if there is a vast difference in the price between the acquisition price paid to the
original landowner and subsequent resale to the said body or corporation, the original landowner is
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prevented from questioning the issue or challenging the matter in court.9 Which was one of the fears voiced
in Parliament during the debates which preceded the passing of the Amendment Act:10

That the jurisdiction of the court would be curtailed or even removed in land acquisition matters. The court may not
have the power to declare null and void any acquisition even if mala fides (bad faith) could be attributed to the
acquisition.

A cursory look at the wording of s 68A would appear to mean exactly that. The court is not allowed to enquire
in the vires of the acquisition, the subsequent disposal or use of, or dealing with the land. Which then means
that the State Authority is vested with absolute powers in relation to acquisition of land and subsequent
disposal of the said land. That can never be.

Discretion of the State Authority11

All legal power, as opposed to duty, is discretionary. What must be determined is the nature and standard of
discretion and the way the discretion is to be exercised. The law must control the substance of discretionary
decisions and the procedure governing them. Where a statute provides for discretion to be exercised without
laying down the procedural guidelines to be followed, then the courts must ensure that the discretionary
1 MLJ lxxxi at lxxxvi
powers are not misused or abused. There can be no such thing as unfettered discretion.12

In Pengarah Tanah dan Galian, Wilayah Persekutuan v Sri Lempah Enterprise Sdn Bhd,13 the powers of the
Executive were discussed. His Honour, Suffian LP14 referred to a number of English decisions regarding the
powers of the local authorities and came to the conclusion that whatever powers were given to the
authorities, these powers had to be exercised fairly and reasonably. The authorities were not at liberty to use
their powers for an ulterior object, however desirable that object may seem to them to be in the public
interest.

Conclusion

The Land Acquisition Act 1960, together with the Amendment Act, tries to balance the needs of two parties:
on one hand, it strives to ensure that the economic development of the country is not hindered; and on the
other hand, to ensure that the private property owner is gratified, adequately, for the loss of his property.
1 MLJ lxxxi at lxxxvii

Under the provisions of the Act, a landowner has no right of appeal or even to question the issue of the
acquisition of his property.15 He only has a right of appeal against the amount of compensation awarded to
him.16 The compulsory acquisition of land by the State is also provided for in the Federal Constitution.17

Acquisition of land from a private individual is not an easy task. Such proceedings have always given rise
to difficulties and it is not pessimistic to foresee that greater difficulties are waiting to surface, especially in
the light of the amendment which appears to give a wide discretion to the State Authority.18

From the discussion above, it is possible to conclude that:

-- acquisition of land, albeit for economic development, must be for the public good.
-- even if it is for any class of the public, it must be for the good of the public generally and not for
any preferred class of persons.
-- section 68A must be read in conjunction with s 3(b) and any subsequent disposal must be in
line with economic development and for the good of the public generally.
-- discretion of the State Authority must be exercised reasonably, in good faith and with relevant
considerations taken into account with no abuse of any kind so that the decision does not
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become capricious or arbitrary.

1 In the United States, the sovereign right to acquire private property at a fair price for a public use, is known as 'eminent
domain'. The Fifth Amendment to the United States Constitution states that: 'No person shall ... be deprived of life, liberty, or
property without due process of law; nor shall private property be taken for public use, without just compensation.'

2 In India, the right of the property owner is recognized under art 31 of the Constitution of India which states: (1) no person shall
be deprived of his property save by authority of law; and (2) no property shall be compulsorily acquired or requisitioned save for
a public purpose and save by authority of law which provides for compensation for the property so acquired.

3 In Singapore, the preamble to the Land Acquisition Act, Cap 272 amended by the Land Acquisition (Amendment) Act (Act No
66 of 1973), reads: 'An Act to provide for the acquisition of land for public and certain other specified purposes, the
assessment of compensation to be made on account of such acquisition and for purposes connected therewith.'

Section 5 of the Act clearly defines that the land is only to be acquired for any public purpose (s 5(1)(a)); or for any work or an
undertaking which, in the opinion of the Minister, is of public benefit or of public utility or in the public interest; or for any
residential, commercial or industrial purposes.

4 See s 3(b): '... by any person or corporation for any purpose which in the opinion of the State Authority is beneficial to the
economic development ...'.

5 See Chai Wooi v PP [1957] MLJ 234.

6 In Hamabai Framjee Petit v Secretary of State AIR 1914 PC 20 at p 21, the Privy Council affirmed Batchelor J's definition of
public purpose as follows: '... the phrase ... must include a purpose, that is an object or aim, in which the general interest of the
community, as opposed to the particular interest of individuals, is directly and vitally concerned'.

7 See Ayr Harbour Trustees v Oswald (1882-83) 8 App Cas 623 at p 634 where Lord Blackburn said: '... where the legislature
confer powers on any body to take lands compulsorily for a particular purpose, it is on the ground that the using of that land for
that purpose will be for the public good.'

8 Section 68A: 'Where any land has been acquired under this Act, whether before or after the commencement of this section,
no subsequent disposal or use of, or dealing with, the land, whether by the State Authority or by the Government, person or
corporation on whose behalf the land was acquired, shall invalidate the acquisition of the land.'

9 Ibid.

10 See proceedings of the Dewan Rakyat dated 30 July 1991.

11 For a detailed discussion on the discretionary powers of the State Authority and principles governing judicial review of
administrative decisions, see Gan Ching Chuan, 'Section 68A Land Acquisition Act 1960: A StumblingBlock to Judicial
Review?'(1993) 20 JMCL 203.

12 As per his Honour, Raja Azlan Shah Ag CJ (Malaya) in Pengarah Tanah dan Galian, Wilayah Persekutuan v Sri Lempah
Enterprise Sdn Bhd [1979] 1 MLJ 135 at p 148:

'... Unfettered discretion is a contradiction in terms. My understanding of the authorities in these cases, and in
particular the case of Pyx Granite Co Ltd v Ministry of Housing and Local Government[1958] 1 All ER 625 and
its progeny compel me to reject it and to uphold the decision of the learned judge. It does not seem to be
realized that this argument is fallacious. Every legal power must have legal limits, otherwise there is
dictatorship. In particular, it is a stringent requirement that a discretion should be exercised for a proper
purpose, and that it should not be exercised unreasonably. In other words, every discretion cannot be free
from legal restraint; where it is wrongly exercised, it becomes the duty of the courts to intervene. The courts
are the only defence of the liberty of the subject against departmental aggression. In these days when
government departments and public authorities have such great powers and influence, this is a most important
safeguard for the ordinary citizen: so that the courts can see that these great powers and influence are
exercised in accordance with law. I would once again emphasize what has often been said before, that 'public
bodies must be compelled to observe the law and it is essential that bureaucracy should be kept in its place'
(per Dankwerts LJ in Bradbury v London Borough of Enfield [1967] 3 All ER 434 atp 442).'
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13 [1979] 1 MLJ 135.

14 Ibid at p 145.

15 Sections 7 and 8.

16 Section 37.

17 See art 13 of the Federal Constitution.

18 The number of reports that appear in the local newspapers on a regular basis is evidence of this fact. Some examples are:
The Star, 26 March 1994, 'Amend Land Act To Prevent Abuse'; 8 April 1994, 'New Land Law Needs Immediate Amendment';
The New Straits Times, 20 May 1993, 'Court Quashes Acquisition Order'; 12 October 1994, 'Solution In Sight To Malacca Land
Controversy'; 10 November 1994, 'Malacca Puts Off Land Acquisition Projects'; 11 December 1994, 'Landowners Reject New
Deal'; 16 December 1994, 'Owners Can Seek Redress On Issues Of Land Acquisition'. The reports mentioned here are only a
fraction of the reports that appear in the newspapers regularly.

See also the Prime Minister's statement in 'Review of Land Acquisition Act' The New Straits Times, 31 March 1995, that there
are certain weaknesses which need to be rectified. The comment stated that the Government was planning to review the Act in
the coming Parliament meeting in view of the controversy surrounding land acquisition for development projects in recent
months.