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Compulsory land acquisition
18/06/2005 NST-PROP By Salleh Buang

The Federal Constitution guarantees citizens right to ownership of property. Private property, states Article 13, cannot be “compulsorily acquired or used”, unless it is done in accordance with the law and the deprived owner is paid “adequate compensation”.

That “law” is the Land Acquisition Act, in force since Oct 13, 1960. It sets out in detail the meaning of “market value” - which represents the “adequate compensation” payable to the dispossessed owner.

A dispossessed owner can challenge the acquisition if the State, as the acquiring authority, fails to pay adequate compensation. Likewise, the landowner can also challenge a State authority’s failure to comply with the procedures for acquisition as laid down under the Act.

It should be noted that the Act only makes provision for compulsory acquisition. As far as I am aware, there is no equivalent legislation for compulsory “use” of private property.

Purpose of acquisition

Section 3(1) of the Act states that private property can be compulsorily acquired by a State authority if it is needed

• For any public purpose;

• By any person or corporation for a purpose which, in the opinion of the State authority, is beneficial to the economic development of Malaysia or any part thereof; or

• For mining/ residential/ agricultural/ commercial/ industrial/ recreational purposes or any combination of such purposes.

The term “public purpose” has not been expressly defined. Parliamentary reluctance has meant the matter is left to the courts to interpret. Unfortunately, the courts have consistently declined to do so.

In S. Kulasingam & Anor vs Commissioner of Lands, Federal Territory & Ors (1982, 1 MLJ 204), the court said, “The expression ‘public purpose’ is incapable of a precise definition”. In this, the Malaysian courts were following the practice adopted in India.

It is indeed a pity that when the relevant law in India was revamped, with the term “public purpose” extensively defined, Malaysia failed to follow suit. Thus, the term was left adrift in a sea of uncertainty, tossed between waves of conjecture and speculation.

As for the acquisition of private property for “economic development”, this provision has in the past led to abuse. There had been cases of alienated land being acquired from “X” only to be given to “Y” later, via privatisation.

In one northern State, there was a plan to acquire padi land and turn it into a golf course. There were strong objections from members of the public and mercifully, the plan was shelved.

In Syed Omar vs Government of Johor (1979, 1 MLJ 49), private property belonging to the plaintiff, measuring some 5,700 acres, was compulsorily acquired even though only 2,000 acres were actually needed for the construction of the Johor Port. The remaining portion of the land was marked for “future development”.

The aggrieved owner challenged the acquisition on various grounds, including mala fide (done in bad faith). His attempts failed.

It is rather unfortunate that counsel for the plaintiff (and the courts hearing the case at the trial as well as the appeal stages) did not refer to an earlier decision of the Privy Council in the Sydney Municipal Council vs Campbell (1925, AC 338). The decision could well have been be different, had they done so.

Detailed procedures

The Act sets out in detail the procedures a State authority will have to comply with if it wants to acquire land. There, many sections outlining the process, from the time the preliminary notice is given of the intention to acquire specific parcels of land (see related story).

The Act saw some dramatic amendments in 1997, when Parliament stepped in to check instances of past abuses. They now appear as Sections 3A to 3F (new procedures when land is acquired for development).

Another new section is 9A, with which the Land Administrator is empowered to obtain information on the current use of the land to be acquired, in order to work out compensation. Sections 40B to 40D specify the role of assessors in “assisting” a judge to decide the amount of compensation. This decision is “final” and not subject to appeal before a superior court.

Though welcomed, these amendments still fail to match the expectations of the people.

In 1998, the minister responsible for land matters brought in the Land Acquisition Rules with the approval of the National Land Council. These rules govern the procedures for the acquisition of land for economic development or for any other specific purpose.

Market value

To ensure that the dispossessed owner is adequately compensated, the term “market value” has also been extensively defined in the First Schedule of the Act.

Market value now means the value of the land as at the date the notice to acquire it is published in the Gazette, provided the notification is followed by a declaration to acquire, which must be made within 12 months. If the declaration is done later than 12 months, then the market value has to be the value on the date the declaration is published in the Gazette.

The First Schedule also outlines “matters to be considered in determining compensation” as well as “matters to be neglected” (or not to be considered) in determining the quantum of compensation.

In Ng Tiou Hong vs Collector of Land Revenue Gombak (1984, 2 MLJ 35), Federal Court’s Syed Agil Barakbah (J) explained that market value means the sum of money that a willing vendor might reasonably expect from a willing purchaser. The elements of unwillingness, sentimental value and urgency of the acquisition must be disregarded.

In Bukit Rajah Rubber Co. Ltd vs Collector of Land Revenue Klang (1968, 1 MLJ 176), Raja Azlan Shah (J) said that no hard and fast rule can be laid down for assessing the market value of the land acquired.

Evidence of (a previous) sale of the land is the safest guide. In the absence of such evidence, then evidence from the sale of similar land in the neighbourhood can be considered. The property must be valued not only with reference to its condition at the time of acquisition but also its potential development value.

Challenging the acquisition

Apart from accepting the award under protest and then referring it to the High Court (on the expectation that the court will enhance the amount of compensation), the dispossessed owner can also challenge the validity of the acquisition itself.

Various grounds have been raised by the dispossessed challenging the validity of land acquisition. Among them: That the move to acquire is ultra vires the Federal Constitution; that it is a breach of natural justice; that it doesn’t comply with certain provisions of the Act; that it is mala fide and delays processes.

Only a handful of these succeeded, with the majority of the challenges being rejected by the courts.

In Stamford Holdings Sdn Bhd vs Kerajaan Negeri Johor & 4 Ors (1998, 2 AMR 997), a compulsory acquisition case filled with high drama and political overtones, the Court of Appeal held in April 1995 that there was evidence of “unconscionable and unmeritorious conduct” on the part of the respondents and ordered a full trial of the case.

However, on Oct 6, 1999 the High Court in Johor Baru ordered the respondents - the Johor State Government, the then Menteri Besar, corporate figure Tan Sri Syed Mukhtar Albukhary, businessman Datuk Yahya Talib and the Johor State Islamic Economic Development Corporation - to pay Stamford, a plantation company, RM405 million as compensation. Zainun Ali (J) made the order in chambers after the respondents had agreed to a settlement.

Salleh Buang is senior advisor of a company specialising in competitive intelligence. He is also active in training and public speaking and can be reached at


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