The Right to Claim for Inadequacy of Compensation

Whenever the State authority may want to acquire a land that “deemed to be

beneficial to the economic development of the country” under Section 3 of the Land

Acquisition Act 1960(LAA), the person interested cannot refuse to be taken away of

his land. They must be given adequate compensation in return but when the losses

incurred due to the land acquisition is inadequately compensated, is such person able

to challenge the inadequacy of compensation under LAA?

Usually, a legal owner of land is eligible to challenge. It is important to highlight

that land owner has legal right to object to the amount of compensation awarded if he

felt it is inadequate as evident in Section 37 and Section 36(4) of LAA1 with support

of Article 13(2) of Federal Constitution2 which safeguards payment of adequate

compensation to land owner for land acquired. However, there might be a limitation

as to the right of appeal. In Kumpulan Darul Ehsan Bhd v Pentadbir Tanah

Daerah Sepang 3 , four pieces of land belonged to a registered proprietor being

compulsorily acquired under LAA. He filed four Forms N objecting to the amount of

the compensation as he was dissatisfied with the awards made by the Land

Administrator. It was held that the appellant's claim for a higher compensation in this

Court of Appeal on the basis that the category of land use of the acquired lands are

commercial instead of residential is not allowed according to Section 40D(3) of LAA.

Even if S40D(3) does not bar appellant from appealing to higher court, he is still

failed to establish the category as commercial.

1
Land Acquisition Act 1960, s37 & s36(4)
2
Federal Constitution, art 13(2)
3
Kumpulan Darul Ehsan Bhd v Pentadbir Tanah Daerah Sepang [2018] MLJU 92 (CA)
 Furthermore, in Semenyih Jaya Sdn Bhd v Pentadbir Tanah Daerah Hulu

Langata4, the appellant also objected against the Land Administrator’s award on the

amount of compensation but upon dissatisfying with High Court decision, they

appealed to the Court of Appeal and now it referred several constitutional questions to

the Federal Court. In allowing the appeal and answering the questions, the court

explained on two important points. Firstly, Section 40A(3) of LAA requires the Judge

to appoint 2 assessors in aiding him to make a fair and reasonable amount of

compensation but this section after amendment empowers the assessors to make final

decision instead of the previous wording which stated that decision of judge shall

prevail over the opinion of assessor. In addition to Section 40D(1) and(2) which

implies to allows the assessor to take over the judicial power of making decision from

High Court judge and also not empowering High Court judge to disagree with

assessors, it is clearly ultra virus to Article 121(1) of Federal Constitution which

intended the judicial power to be vested only in judiciary. This is because it has make

the power to be shared or discharged by non-qualified person which should be rightly

exercised only by a judge. Hence, S40D should be struck down replacing with a new

S40D as proposed in the case.

The second main issue is when Section 40D(3) following by Section 49(1) in

LAA prevented a landowner from appealing the High Court (in fact, assessor’s)

decision regarding award of compensation to higher court. The court opined that the

section is to be strictly interpreted and is not ultra virus to Article 121(1B) and (2)(a)

which empower Court of Appeal to determine appeal from High Court decision as

Article 121(1B) and(2)(a) are general provision that should be exercised in reference

to Courts of Judicature Act and such bar to appeal in S49(1) operates within

4
Semenyih Jaya Sdn Bhd v Pentadbir Tanah Daerah Hulu Langata [2017] 3 LRC 512 (FC)
framework of S68(1)(d) of the CJA. The court also explained that Section 40C which

requires assessors’ opinions in writing and recorded by Judge is attempted to balance

between the bar to appeal on compensation amount and the procedure to arrive

appropriate compensation and has protected the person interested.

Apart from the usual legal owner of land, there is a group of people who often

being affected who is the Orang Asli. Previously, the government was of view that the

best interest or title that the Orang Asli may obtain from their ancestral lands is as a

tenant-at-will. Hence, they are not the land owner but merely stay on a land belonged

to the state and are considered to stay there at the pleasure of the government only.

They who have been living on their ancestral lands for generations need to vacate the

land by only a short notice given by State authority5.

Due to the fact that they have no documentary records like certificate to

indicate their ownership of their land only having the fact of possessing and working

on the land, it is arguable if they are eligible to claim compensation under LAA. In

theory, the only way they can be compensated purely based on Sections 11 and 12 of

the Aboriginal Peoples Act 19546(APA). From these sections, they can only claim

for the loss of productive fruits, trees, buildings and any activities on the land but not

compensation for the acquisition or loss of the Orang Asli ancestral lands as there is

no provision provided so. Such compensation is obviously inadequate and is difficult

to sustain their future living. Moreover, such compensation is discretionary in nature

whereby it is up to the discretion and opinion of State authority to decide on the

5
Anuar Alias, ‘An Acquisition Of Orang Asli Native Land In Malaysia: Perceptions And Challenges
In Quantifying Of The
Compensation’<file:///C:/Users/user1/Downloads/AN_ACQUISITION_OF_ORANG_ASLI_NATIVE
_LAND_IN_MALAYS.pdf> accessed onn 30 August 2018
6
Aboriginal Peoples Act 1954, s 11 & 12
quantum of compensation to be paid. It is not mandatory and without fixed guideline.

Hence, the amount depends whether the authority is generous or strict.

However, in the case of Sagong bin Tasi & Ors v Kerajaan Negeri

Selangor & Ors7 and the following appeal case Kerajaan Negeri Selangor & Ors v

Sagong Tasi & Ors8, native who had been given inadequate compensation for land

acquired seems to be able to claim under LAA on basis of customary ownership.

After acquisition of their land for purpose of the construction of the Nilai-Banting

highway, the plaintiff, Sagong Tasi and other Orang Asli families were only been paid

a nominal amount for the destroyed crops, fruit trees and loss of homes but not

compensated for the loss of the land. Being dissatisfied with the way they were

treated by the defendant, they brought action including for compensation for the land

acquisition. The defendant who was the state authority argued that the plaintiff were

mere tenants on state land, refused to recognize their proprietary interest in land and

argued that they was not entitled to compensation under the LAA.

However, the High Court held that the land was continuously occupied and

maintained by them in pursuance of their culture and inherited by them from

generation to generation, thus, it falls within the ambit of ‘land occupied under

customary right’ within the meaning of the definition of the LAA.

In Court of Appeal, besides upholding trial court decision, Gopal Sri Ram JCA

held that the trial judge ought to have included the ungazetted areas in question for

purposes of compensation. The Orang Asli did possess native title over their land

without having it gazetted as an Orang Asli reserve or being untitled and the land is

considered as having been accorded the same rights as that of a titled land, thus, law

7
Sagong bin Tasi & Ors v Kerajaan Negeri Selangor & Ors [2002] 2 MLJ 591 (HC)
8
Kerajaan Negeri Selangor & Ors v Sagong bin Tasi & Ors [2005] 4 CLJ 169 (CA)
applying for acquisition should equally apply to the holders of ancestral lands. The

native as customary owners entitled to RM6.5 million9 as compensation according to

the market value as provided for under LAA for not only the crops on the lands but

also to the loss of the ancestral land.

Although in practice the native seems to be able to challenge the inadequacy

of compensation but it is recommended to make clear provision allowing

compensation for loss of ancestral land to secure their rights of action. Further, it is to

be noted that there is another issue as to the value of the Orang Asli ancestral lands

because it is permeated with cultural and spiritual characteristics that cannot be

equivalent to the economic market value. It is difficult to access but it is recommend

to come up with a method to include not only market value of land but also their

special attachment to the land for example solatium payment as its value should be far

beyond the market value of other private registered land.

The Lack of Other Types of Compensation

i. Resettlement

As discussed before, the award of compensation for land acquisition is

provided under Land Acquisition Act 1960(LAA 1960) and it is assessed based on the

First Schedule of LAA 1960. One of the issues that arise regarding inadequacy of

compensation for land acquisition in Malaysia is the absence of alternative

compensation other than monetary compensation.

By analyzing LAA 1960, it shows that this Act does not consist any provision

which provide resettlement of land as compensation to the person interested whose

9
Rita Jong, ‘Orang Asli win 14 years battle’ New Straits Times (Putrajaya, 27 May 2010)
land had been acquired. It only provides monetary compensation to the person

interested.

In reality, many person interested are more preferable to receive compensation

in form of resettlement of land as compared to money10. This is because sometimes

monetary compensation is inadequate to compensate their non-pecuniary loss such as

loss of livelihood, loss of enjoyment of land or injured feelings.

The wish of the person interested must be consulted when the court is

considering what type of compensation would be adequate for them. By replacing a

suitable land to the person interested will effectively reduce objections to the process

of land acquisition and prevent issues of inadequacy of compensation from occurring.

Resettlement of alternative land must be given as compensation to vulnerable

interested when the land acquisition amount to their loss of land that cause the loss of

their livelihoods. Besides that, such non-monetary compensation is more adequate

when monetary compensation granted would be inadequate for them to purchase a

similar land or inadequate for them in finding an alternative ways to earn their living.

Malaysian parliament is suggested to follow the steps of India. The Indian

parliament has passed an Act named the Right to Fair Compensation and

Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 which

empowers the court to grant resettlement as compensation to affected families by

virtue of Section 3111. It is suggested that LAA 1960 and APA 1954 should be

reviewed and amended to insert clear provision that provide resettlement as

10 Food and Agriculture Organization of the United Nations, FAO Land Tenure Studies 10: Compulsory

Acquisition of Land and Compensation (Rome, 2009)

11 The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act

2013, s 31
compensation and specify the circumstances which person interested may be granted

such compensation.

When enforcing resettlement plans in case of native land acquisition, State

government must make research in depth to ensure the relocation of new land does

not cause impoverishment to the person interested.

ii. Solatium Payment

One of the issues regarding to inadequacy of compensation arises when the

person interested wish to claim non-pecuniary damages in form of solatium payment.

Solatium is an additional amount claimed to compensate the grief or injured feelings

of the person interested resulted from the compulsory land acquisition by state

authority12. The main problem is that compensation provided under LAA1960 does

not include solatium payment. The matters of compensation listed out under

Paragraph 1 and 2 of First Schedule of LAA1960 also did not include solatium

payment. It means that the court has no power to grant compensation in form of

solatium payment to those who claims for it.

According to Liew Choong Kin v Pengarah Jabatan Ketua Pengarah

Tanah Dan Galian (Persekutuan) Wilayah Persekutuan Kuala Lumpur & Ors13,

the court refers to the judgement of Hashim Yeop A. Sani J in case of Lembaga

Amanah Sekolah Semangat Malaysia v Collector of Land Revenue, Dindings.

His Lordship held that LAA 1960 clearly establish that the market value and other

12 Anuar Alias and Mohd Nasir Daud, ‘Payment of Adequate Compensation for Land Acquisition in Malaysia’

Vol 12, No 3 < http://www.prres.net/Papers/PRPRJ_No_3_2006_Alias.pdf > accessed 1 September 2018

13 Liew Choong Kin v Pengarah Jabatan Ketua Pengarah Tanah Dan Galian (Persekutuan) Wilayah Persekutuan

Kuala Lumpur & Ors [2018] MLJU 97 (HC)

factors set out in paragraph 2 of the First Schedule is the basis for determining

adequacy of compensation. The court held that it was the express direction of the

Malaysian legislature to exclude all other considerations when they listed out all

matters of compensation covered in the First Schedule in LAA1960.

It is important to note that many countries had actually provided such

compensation in form of solatium payment in their land acquisition legislation. For

example, Section 44 of Land Acquisition and Compensation Act 1986 14 of

Victoria in Australia clearly provides that if it is reasonable to compensate the

claimant for intangible and non-pecuniary damage caused by the land acquisition, the

amount of compensation given may be increased by way of solatium at the rate of not

exceeding 10% of the market value of the land15.

It is suggested that Malaysian Parliament should make amendment to Section

2 of First Schedule of LAA1960 to clearly introduce solatium payment as one of the

matters that must be considered by court in determining compensation to the person

interested.

iii. Goodwill

Another issue of inadequacy of compensation is when the person interested is

unable to claim compensation for loss of goodwill. LAA 1960 of Malaysia did

provide compensation for business loss by virtue of Paragraph 2(e) of First

14 Land Acquisition and Compensation Act 1986, s 44

15 Mike Todd and John McDonagh, ‘Solatium Payments for Public Works - An International Comparison’ <

http://www.prres.net/papers/mcdonagh_solatium_payments_for_public_works.pdf > accessed 1 September 2018

Schedule16, in which it states that: “if, in consequence of the acquisition, he is or will

be compelled to change his residence or place of business, the reasonable expenses, if

any, incidental to such change”. However, it is important to note that loss of goodwill

is not covered under such compensation in LAA1960 if relocation of business place is

impractical. According to Semenyih Jaya Sdn Bhd v Pentadbir Tanah Daerah

Hulu Langat17, the court held that the First Schedule of LAA 1960 makes no

reference to a claim for loss of business goodwill when relocation is impractical.

The practice in United Kingdom which recognizes compensation for loss of

goodwill due to land acquisition is suggested to be adopted by Malaysia. According to

Section 38(1) (b) of Land Compensation Act 1973 (LCA1973)18, it allows the court

to grant disturbance payment to the owner of acquired land which includes

compensation for loss of goodwill, if he was carrying on a trade or business on that

land. As compared to LAA 1960, LCA 1973 empowers the court to grant

compensation for loss of goodwill in any cases if the court deems fit, even if

relocation is impractical.

It is suggested that the Parliament of Malaysia should expressly include loss

of goodwill as one of the factors in accessing amount of compensation payable under

Paragraph 2(e) of First Schedule of LAA 1960. The wordings of Paragraph 2(e) must

be amended to empower the Malaysian court to grant compensation for loss of

goodwill even in case where relocation is impossible.

16 Land Acquisition Act 1960, para 2 (e) First Schedule

17 Semenyih Jaya Sdn Bhd v Pentadbir Tanah Daerah Hulu Langat [2017] 3 LRC 512 (FC)

18 Land Compensation Act 1973, s 38 (1) (b)