Article 13 of the Federal Constitution states that “no person shall be deprived of property save in accordance with law” and allows for the lawful acquisition of private land by the government, provided that the acquisition is carried out under the Land Acquisition Act (LAA) 1960. Under the LAA, landowners (or persons with registered interests) are entitled to compensation for acquired land.
However, landowners are often dissatisfied with the compensation awarded by the land administrator.(1) While there is an opportunity to object, the question arises as to what extent the compensation awarded can be challenged. The Federal Court addressed this in Pentadbir Tanah Daerah Johor v Nusantara Daya Sdn Bhd (2021).(2) The apex court held that the high court is the highest court to which parties may go when challenging the compensation amount.
Land Reference Proceedings
Subject to sections 37(1)–37(3) of the LAA, landowners may object to the land administrator’s award by submitting a written application (Form N), requesting that the matter be referred to the high court for determination. These are known as land reference proceedings.
The procedure is set out in the Third Schedule of the LAA. In summary:
-
Parties submit their valuer’s reports and may rebut opposing reports.
-
Evidence from factual witnesses may be brought, and valuers may be cross-examined with the court’s leave.
-
For compensation disputes, the high court appoints two assessors – one from the government and one from the private sector – to assist the judge in determining the compensation.(3)
The high court judge, with the aid of the assessors, determines the final amount of compensation.(4)
Appealing Land Reference Decisions
Section 49(1) of the LAA provides that a party to land reference proceedings may appeal a high court decision to the Court of Appeal and Federal Court, but there is no absolute right of appeal.
The question arises: what is appealable under section 49(1)? This issue was addressed in Nusantara Daya.
Case Facts: Nusantara Daya
Nusantara Daya Sdn Bhd, the respondent, owned land “Lot 46200”, acquired under the LAA for a water treatment plant project in Southern Malaysia. The land administrator awarded RM16,516,800, whereas the respondent claimed RM28,830,074.40 (RM6,458.35 per sqm) based on a private valuer’s report, and RM40,200 for loss of income from the land used as a car park.
The government valuer recommended RM3,700 per sqm after adjusting for differences in land and comparable sales. The land administrator rejected the income loss claim. Dissatisfied, the respondent referred the matter to land reference proceedings.
High Court Decision
The high court, assisted by assessors under section 40C of the LAA, increased compensation to RM19,026,907. The judge adjusted the values presented by both parties and stated reasons for each adjustment. The respondent appealed to the Court of Appeal, dissatisfied with the quantum.
Court of Appeal Decision
The appellant argued that the appeal was barred under section 49(1) as it concerned questions of fact, including:
-
10% deduction to market value
-
Double counting
-
Potential development value of the land
The appellant claimed the appeal sought only to increase compensation, which is barred.
The respondent contended that the appeal was grounded in law, arguing there was no evidence for the high court’s conclusions on the three points.(5)(6)
The Court of Appeal agreed, holding that these points were questions of law, following Semenyih Jaya Sdn Bhd v Pentadbir Tanah Hulu Langat [2017] 5 CLJ 526.(7) The appeal was allowed, and compensation increased.
Federal Court Decision
The Federal Court examined the proviso in section 49(1) of the LAA, which states:
“Provided that where the decision comprises an award of compensation there shall be no appeal therefrom.”
The Court clarified:
-
The bar applies only to questions of fact on the quantum of compensation.
-
Appeals on questions of law remain permissible.
-
What constitutes a question of law must be narrowly and strictly construed.
The Federal Court held that the respondent’s appeal to the Court of Appeal challenged valuation principles applied by the high court – essentially an appeal against the quantum of compensation, which is not appealable under section 49(1). Appeals on other matters, such as land measurement, payees, or apportionment of compensation, are permissible.
Comment
The Federal Court’s decision clarifies the question of law exception under section 49(1). Appeals against the high court’s computation of compensation are not allowed, even if valuation principles are applied incorrectly.
The decision emphasizes:
-
The importance of fully canvassing all issues and evidence during land reference proceedings.
-
The proviso in section 49(1) ensures finality on compensation.
-
The exception for questions of law is narrowly interpreted.
Separately, the Federal Court recommended relevant authorities delete section 40(D) of the LAA following Semenyih Jaya.
Landowners should ensure all issues relating to the market value of acquired land are properly presented in land reference proceedings, as this is their only opportunity to do so.
Contact
Foo Joon Liang FCIArb FSIArb FHKIArb
Partner, Gan Partnership
E: joonliang@ganlaw.my
Eri Fu Swee Theeng
Senior Associate, Gan Partnership
E: eri.fu@ganlaw.my
References
(1) Section 14 of the LAA.
(2) Pentadbir Tanah Daerah Johor v Nusantara Daya Sdn Bhd (Appeal 01(f)-24-08/2019(J), 20 May 2021).
(3) Section 40A(2) of the LAA.
(4) Sections 40(A) to 40(D) of the LAA; see also Semenyih Jaya Sdn Bhd v Pentadbir Tanah Daerah Hulu Langat [2017] 3 MLJ 561.
(5) Paragraph 11 of the Federal Court judgment.
(6) Ibid.
(7) [2017] 5 CLJ 526.
(8) Paragraph 40 of the Federal Court judgment.
DISCLAIMER: This article is for general information only and should not be relied upon as legal advice. The position stated herein is as at 13 July 2021.
