INTERNATIONAL BUSINESS SCHOOL

UNIVERSITI TEKNOLOGI MALAYSIA

LEGAL ASPECTS OF BUSINESS LAW

MRB 1072

MALAYSIAN LEGAL SYSTEM

ZAINAL ABIDIN PIT

Advocate & Solicitor
B.Sc, MBA (Finance), FCIS, LLB (Hons), CLP, CFP
[email protected]
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Introduction

 Legitimate expectations

 Legal Rights

 Remedies
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What is law?

 The body of principles, enacted or

customary, recognized and applied by the
State in the administration of justice.

 Justice refers to fairness or rightfulness;

justice, therefore is an abstract idea of right
and wrong, of fairness and equality.

 The primary aim of law is to attain justice in

society.
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Characteristics of Law

(i) Regulatory – regulates the conduct of the

State and the individuals living in it.

(ii) Reconciliatory – reconciles disputes that

arise between individuals and State and
between the individuals themselves.

(iii)Compensation & Punishment – requires

compensation from and imposes punishment
on those who break the law.
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Meaning of State
The unit in which a particular legal system is
administered like Malaysia, Singapore, Indonesia etc.

Organs of the State

Legislative Executive Judiciary

(makes the law) (implements and (interprets laws
enforces the law) & settle disputes )
[Parliament &
State Assembly] [PM & the Cabinet] [Courts]
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Classification of Law MALAYSIAN LEGAL SYSTEM

Law

Public Law International Law Private Law

(governs the relationship between (law that prevails (governs the relationship between the
the State and individuals. between States) Individuals themselves) – basically to
give compensation, enforce obligation.

Constitutional Law Criminal Law

Administrative Law 1. Codifies various offences committed by
individuals against the State.
Rights of individuals with the state 2. To punish criminals / suppress crimes

Law of Contract Law of Tort Law of Trust

-is based on agreement -is based on obligation/duty imposed -equitable obligation
-Applied when there is a promise by law but not agreed between the binding a person to
which is legally enforceable. parties. deal of property over
-if the promise/agreement is -the duty/obligation must not be a which one has control
breached, action can be taken. crime (civil in nature).
-e.g. : negligence, trespass.
Company Law

Property Law
Sale of Goods Agency Bills of Exchange Hire-Purchase

Land Law
Insurance Maritime Law
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Sources of Malaysian Law

Malaysian Law

Written Law Islamic Law Unwritten Law

Federal State Customs

Constitution Constitution Judicial
Article 4(1) Decisions

English Law

Legislation / Statutes Common Equity

-Acts of Parliaments Law
-State Enactments
-Subsidiary Legislations
-Articles 73 & 74 Federal Constitution
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Written Law
Federal Constitution
 Supreme law of the country, the issue of constitutional supremacy
see Art 4(1) FC which 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.”
 Follows the doctrine of constitutional supremacy as opposed to
parliamentary supremacy (based on the Westminster Model”]
 Lays down the powers of the Federal and State governments
 Enshrines the basic fundamental rights of the individual
 Establishes a constitutional monarchy and a federal system of
government
 The powers and rights can only be changed if approved by two -
third majority in the Parliament.
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Written Law
State Constitutions

 Each State possesses its own constitution, regulating the

government of each particular state in Malaysia.

 If there is any inconsistency between Federal and State

constitutions, the Federal Constitution shall prevail (Article 75
Federal Constitution)

 Provides for a unicameral or a single chamber legislative body

 Enactments - legislations passed by State Legislative

Assemblies
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Written Law
Legislation / Statutes
 In a federation, power is divided between the federal
government and the various state governments

see Art 44 FC which states that the legislative authority of the

Federation shall be vested in a Parliament, which shall consist of the
YDEPA, Dewan Negara and Dewan Rakyat
 Art 73 FC: Parliament may make laws for the whole or any part
of the Federation
 Art 74(1) FC : Parliament may make laws with respect to any
matter in the Federal List or the Concurrent List in the Ninth
Schedule
 Art 74(2) FC : Legislature of a state may make laws on matters
in the State List or the Concurrent List in the Ninth Schedule
 Subsidiary Legislations
“any proclamation, rule, regulation, order, notification, by-law or
other instruments made under any Ordinance, enactment or
other lawful authority and having legislative effect”
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Written Law
Legislation / Statutes

 Federal List : matters considered essential and vital to the

nation as a whole; covers external affairs, defense, internal
security; criminal law, finance and trade, citizenship

State List : covers Islamic law personal and family law,

procedures of Syariah law, land matters’ local government

Concurrent List : covers social welfare, scholarships, town

planning, drainage & irrigation culture

 Mamat bin Daud v Government of Malaysia

… held that Parliament has acted beyond its powers when enacting laws
and enforce the same on matters which relates to Islamic law

 Repco Holdings v Public Prosecutor

 PP v Dato Yap Pemg

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Written Law
Legislation / Statutes

 Legislation refers to laws made by a body which has the

power to make law (e.g. Article 74 FC)

 Act : federal law made by Parliament (previously those made

between 1946 and 10 September 1959 are called Ordinances)

 Enactment : A state law made by a state legislative Assembly

(with the exception of Sarawak where its law are still called
Ordinances)

 Ordinance : Law made by the YDPA during proclamation of

emergency when Parliament is not sitting concurrently
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- Islamic Law
 based on Al-Quran and Sunnah of the Prophet (peace be upon
him); touches on every aspects of life (governs the relationship
between God and human beings, between human beings
themselves and between human beings and the environment).
 But the application of Islamic Law in Malaysia is only confined to
the personal life of the Muslims such as marriage, divorce,
succession etc. and administered in the Syariah Courts
 It is not under the jurisdiction of the Federal Government but it is
the State Governments which enact and implement the law.
 If it is inconsistent with the Federal Constitution, the latter will
prevail.
 Civil courts shall have no jurisdictions in respect of any matter
within the jurisdictions of the Syariah courts [see Art 121(1A)]
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English Law

Unwritten Customs - Malay adats of Perpateh

Law and Temenggong.
- the adats of natives of
Sabah & Sarawak

Judicial Decisions
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English Law
 Two components of English Law – common
law & rules of equity

 Common law – was originally the customs of Anglo-

Saxon which later became law through its recognition
and application by the English courts

 Equity – the rules which are devised to eliminate

injustice caused by strict application of common law.
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Introduction of English Law into Malaysia.

a. English Law was first introduced by the royal charters of justice
granted for the Straits Settlements (1786- Penang, 1824 - Malacca and
1819 - Singapore) as law of general application.

b. This is because the charters established the Courts of judicature

exercising the jurisdiction of in all civil and criminal matters.

c. 1807 – The First Charter of Justice was granted to provide for the
government and administration of justice in Penang.

d. 1826 – the Second Charter of Justice was granted extending the

application of English law to Malacca and Singapore.

e. The Charters set up a system of courts and judiciary. However the

law must be of general application to suit the local customs, religions
and circumstances of the place.

Yeap Cheah Neo v Ong Cheng Neo

Held : In the Straits Settlement, English law is to be considered
as the governing law to the extent that it is applicable to
the circumstances in its application.
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Choa Choon Neo v Spottiswoode (1869)

Held : In the Straits Settlement, English law is to be applied generally and
subject to modification to prevent the law from operating unjustly and
oppressively on the various alien races inhabiting the colony.

f. In the Malay States, there is no blanket introduction of English law until

1951 when the FMS Civil Law Enactment 1937 was extended to the UFMS
via UFMS Civil Law Ordinance 1951.

g. But English law was already introduced indirectly before 1951 by way of :

1. Statutes modelled on the English, Indian and Australian

legislation and they were enacted on the advice of British
administrators

2. The judges who were trained in English based their

decisions on the English law

3. The practice of English law by the lawyers

h. In Sabah and Sarawak, English law was formally and directly introduced
through the North Borneo Application of Laws Ordinance 1951 and the
Sarawak Application of Laws Ordinance 1946.
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Application of English Law in Malaysia

S.5 of CLA 1956 S.3(1) of CLA 1956

(Application of English commercial law
-law of agency, banking, insurance, partnership,
sale of goods, hire-purchase, etc
Peninsular Malaysia Sabah & Sarawak

Peninsular Malaysia
(except Penang & Malacca) Apply English common law and Apply English common
Equity as it is administered in law, equity and statutes
Sabah & Sarawak, England on 7th April 1956. But of general application as
Penang & Malacca English statutes would not be administered on 1st Dec
S.5(1) – English commercial applicable if there Is local 1951 (Sabah) & 12th Dec
law is applied as it stood in statute on the same matter 1949 (Sarawak)
England on 7th April 1956 in
the absence of local
legislation.

S.5(2)-English commercial law applied is

as administered at the corresponding Limitations for applying English
period. It means continuous reception Law (proviso to S.3(1) of CLA)
but it must be in the absence of local
statutes on the particular subjects
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Section 3(1) of the Civil Law Act 1956 provides, in material parts, as follows:
1) Save so far as other provision has been made or may hereafter be made
by any written law in force in Malaysia, the Court shall:
a) in West Malaysia or any part thereof, apply the common law of
England and the rules of equity as administered in England on the 7 th
day of April 1956;
b) In Sabah, apply the common law of England and the rules of equity,
together with statutes of general application, as administered or in
force in England on the 1st day of December 1951;
c) In Sarawak, apply the common law of England and the rules of equity,
together with statutes of general application, as administered or in
force in England on the 12th day of December 1949, ….
Provided always that the said common law, rules of equity and statutes
of general application shall be applied so far only as the circumstances
of the States of Malaysia and their respective inhabitants permit and
subject to such qualifications as local circumstances render necessary.
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 In short, Section 3(1) of the Civil Law Act 1956

provides that in absence of any written law, the
Courts in Malaysia shall apply the common law and
rules of equity existing in England on: -
 7 April 1956 in West Malaysia
 1 December 1951 in Sabah; and
 12 December 1949 in Sarawak

 But the application of Section 3(1) is subject to the

following qualifications as stipulated in the proviso: -
a) Absence of local legislation
b) The Cut–off dates
c) Local circumstances
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Section 5 of the Civil Law Act 1956 provides as follows :

1) In all questions or issues which arise or which have to be decided in
the States of West Malaysia other than Malacca and Penang with
respect to the law of partnerships, corporations, banks and banking,
principals and agents, carriers by air, land and sea, marine
insurance, average, life and fire insurance, and with respects to
mercantile law generally, the law to be administered shall be the
same as would be administered in England in the like case at the
date of the coming into force of this Act, if such question or issue
had arisen or had to be decided in England, unless in any case other
provision is or shall be made by any written law.

2) In all questions or issues which arise or which have to be decided in

the States of Malacca, Penang, Sabah and Sarawak with respect to
the law concerning any of the matters referred to in subsection (1),
the law to be administered shall be the same as would be
administered in England, in the like case at the corresponding
period, if such question or issue had arisen or had to be decided in
England, unless in any case other provision is or shall be made by
any written law.
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SECTION 6 OF CIVIL LAW ACT 1956

 Section 6 of Civil Law Act 1956 expressly excludes the application of
English law in Malaysia concerning land tenure. Section 6 provides:

“Nothing in this part shall be taken into Malaysia or any of the States
comprised therein any part of the law of England relating to the
tenure or conveyance or assurance or succession to any immovable
property or any estate, right or interest therein.”

 The above provision has been elaborated in detail in the case of

United Malayan Banking Corporation v Pemungut Hasil Tanah Kota
Tinggi [1984], whereby it was held that the National Land Code is a
complete and comprehensive code of law governing the tenure of
land in Malaysia and the incidents of it, as well as other important
matters affecting land there, and there is no room for the
importation of any rules of English law in that field except in so far
as the code itself may expressly provide for this.
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The Judiciary

 Article 121(1) FC provides that there shall be two

High courts of co-ordinate jurisdiction and such
inferior courts as may be provided by Federal law
PP v Dato’ Yap Peng (1987)

 Article 121(1A) FC – courts in Clauses (1) shall have

no jurisdictions in respect of any matter within the
jurisdiction of the Syariah courts

 Article 121(1B) FC – there shall be a court of which

shall be known as the Court of Appeal

 Article 121(2) FC – Federal Court to hear appeals

from decisions of Court of appeal, of the High Court
or a judge thereof
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Hierarchy of Courts in Malaysia

Federal Court

Court of Appeal

High Court in Malaya High Court in Sabah & Sarawak

Sessions Court Sessions Court

Magistrate Court Magistrate Court

Note :
Civil and criminal jurisdictions of the Courts
Other Inferior Courts & Tribunals
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Judicial Decisions

 Judge makes or changes the law by applying or extending an

established principle of law to new facts or deciding not to apply it in a
certain situation
 But the judge must be subject to the doctrine of judicial precedent
(also known as the doctrine of stare decisis)
 The doctrine means in deciding a case the court must follow what has
been previously decided by the superior courts in similar situations
 If the judge applies an existing rule of law but does not extend it, his
decision is called declaratory precedent
 If the judge applies a case before him which is without a precedent, his
decision is original precedent
 Contents of decisions
 ratio decidendi (the binding part) – refers to the decision itself
and the reasoning to arrive at such decision
Orbiter dicta (non-binding) – refers to the remark made by the
judge in passing and elaborating the decision.
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Doctrine of Stare Decisis

 How the doctrine works ?

(I) the superior courts bind all subordinate courts (vertically).
(ii) Horizontally I.e. the court is bound by
- its own previous decisions
- the decisions of its predecessors
- the decisions of the courts of co-ordinate jurisdictions

 Application of the doctrine of judicial precedent in Malaysia :

Mah Kah Yew v PP
Held : the doctrine stare decisis (judicial precedent) is a necessary
doctrine in our judicial system which was inherited from England. So
when there is already a courts decision on a question of principle the court
in the subsequent cases must be bound by it. Otherwise there would be no
finality in the law.

PP V Datuk Tan Cheng Swee

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Doctrine of Stare Decisis (con’t)

 Prior to1985 : before abolishment of appeals to the Privy Council

JCOPC was the apex court in the hierarchical structure of courts

Khalid Panjang & Ors v PP (No. 2)

 The Institution of the Supreme Court 1985

Appeals to JCOPC abolished

 Post-1995
Federal Court instituted as the highest court in the land and the re-
instatement of the 3-tier appeal system
Decisions of the Federal courts now binding upon all courts lower in
the hierarchy.
Arulpragasan A/L Sandaraju v PP (1997) – FC did not follow previous
decision of the PC
FC declared that the principle of stare decisis “a cornerstone of our
system of jurisprudence” - CCB Ltd V Feyen Development Sdn Bhd 1997
Dalip Bhagwan Singh v PP 1998 – FC is bound by its own previous
decisions, power to depart from a previous decision to be exercised
sparingly.
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Advantages and Disadvantages of Judicial Precedent.

Advantages of Judicial precedent are as follows :
 Leads to an element of certainty in the law;
 Promotes stability in the judicial system;
 The law is able to grow as the needs of society alter; and
 The law is flexible in that new rules arise out of concrete facts or
situations i.e. more flexible when compare to statute law

Disadvantages of judicial precedent are as follows :

 Due to hierarchy of binding precedents being established, the
law becomes rigid;
 To prevent rigidity, courts tend to be keen to distinguish cases
on the facts; and
 The development of the law through new precedents may be
said to be slow and irregular; it is costly to move up the court
hierarchy.