Vijay Raj explains the significance of the Semenyih Jaya Case.
SECTION 40D – STRUCK DOWN
The Federal Court has, in its recent decision in Semenyih Jaya Sdn Bhd v Pentadbir Tanah Daerah Hulu Langat & Another Case
 5 CLJ 526, unanimously struck down section 40D of the Land Acquisition Act 1960 (“Act”) for being ultra vires
the Federal Constitution.
Both appeals concerned a challenge to the constitutionality of certain provisions of the Act, including section 40D. One was an appeal by the landowner against a decision of the Court of Appeal and the other, a reference by the Court of Appeal of constitutional questions that arose in the course of an appeal for determination by the Federal Court.
In one of the appeals, the appellant also challenged the Court of Appeal’s decision not to recognise its claim for loss of profit as a result of the extinguishment of the business carried out by the appellant on the land that was acquired.
Section 40D, which was introduced by way of an amendment to the Act in 1998, empowered the two valuers (commonly referred to as assessors) who assist a High Court Judge in a Land Reference, to determine the amount of compensation that ought to be awarded in respect of a land acquisition. It reads as follows:
“(1) In a case before the Court as to the amount of compensation or as to the amount of any of its items the amount of compensation to be awarded shall be the amount decided upon by the two assessors.
(2) Where the assessors have each arrived at a decision which differs from each other then the Judge, having regard to the opinion of each assessor, shall elect to concur with the decision of one of the assessors and the amount of compensation to be awarded shall be the amount decided upon by that assessor.
(3) Any decision made under this section is final and there shall be no further appeal to a higher Court on the matter.
The Federal Court held that, by virtue of section 40D, a High Court Judge in a Land Reference could not award compensation which differed from the amount decided by the assessors, and if the assessors themselves differed on the amount, the High Court Judge could only concur with one of them. Tan Sri Datuk Zainun Ali, FCJ, who delivered the judgment of the Federal Court commented:
“Wherefore now stands the Judge? It would appear that he sits by the sideline and dutifully anoints the assessors’ decision.
JUDICIAL POWER OF THE FEDERATION
In striking down the provision, the Federal Court held that it is not possible for Parliament to pass laws that have the effect of diluting the exercise of judicial power by the Judiciary because the Federal Constitution vests that power in the Judiciary. The Federal Court described the concept of judicial power as follows:
“Judicial power is the power every sovereign State must of necessity have, to decide controversies between its subjects or between itself and its subjects, whether the rights related to life, liberty or property ...
Prior to the introduction of section 40D in 1998, there had been a period of time, that is until 1984, when it was not objectionable for judges in Land References to sit with assessors to determine compensation for compulsory acquisitions of land. Those sittings were however held pursuant to older provisions of the Act that were repealed in 1984, and although the assessors played a vital role thereunder in giving advice regarding the amount of compensation which ought to be awarded, the decision on the amount of compensation would ultimately be arrived at by the judges.
CHECK AND BALANCE
The Federal Court took the view that the placement of judicial power in the Judiciary represents an important feature of our democratic system of government because it is the judicial branch of government which is tasked with the duty of checking and balancing the powers vested in the other two branches of government, namely the legislative branch represented by Parliament, and the executive branch represented by the Prime Minister and his Cabinet.
It should go without saying that the judicial branch of government can only be effective as a check and balance if it is independent of legislative and executive influences. Law students learn very early on that the need for an independent judiciary and an effective system of checks and balances is of utmost importance and that that need, forms an integral part of the doctrine of separation of powers which modern democracies aspire to implement.
Although the doctrine and its requirements may seem obvious, the matter however had not been clear-cut in the context of our Judiciary due to an amendment to the Federal Constitution in 1988. The amendment in question was carried out by Act A704 which deleted the reference to the vesting of the judicial power of the Federation in the courts from Article 121(1) of the Constitution. However, according to the Federal Court, the words “judicial power” continued to remain in the marginal note to the said Article, and they currently appear in the shoulder note thereof as reflected in the current, reprinted, version of the Federal Constitution. The Federal Court then stated:
“Thus it is clear to us that the 1988 amendment had the effect of undermining the judicial power of the Judiciary and impinges on the following features of the Federal Constitution:
(i) The doctrine of separation of powers; and
(ii) The independence of the Judiciary.
With the removal of judicial power from the inherent jurisdiction of the Judiciary, that institution was effectively suborned to Parliament, with the implication that Parliament became sovereign. This result was manifestly inconsistent with the supremacy of the Federal Constitution …”
BASIC FABRIC CANNOT BE ALTERED
The matters stated above formed the setting for what is perhaps the most important aspect of the Federal Court’s judgment – which is their Lordships’ view that it is not permissible for Parliament to amend the basic structure of the Federal Constitution even if the proposed amendment is passed by both Houses of Parliament with a two-thirds majority.
Specifically, the Federal Court said that Parliament does not have power to make amendments to the Federal Constitution that had the effect of undermining the independence of the Judiciary and the doctrine of separation of powers, both of which are basic features of our Constitution. According to Tan Sri Datuk Zainun Ali, FCJ:
“It is worthwhile reiterating that Parliament does not have power to amend the Federal Constitution to the effect of undermining the features as stated in (i) and (ii) above for the following reasons:
The effect of sub-s. 8(a) of the Amending Act A704 appeared to establish Parliamentary supremacy; this consequentially suborned the Judiciary to Parliament, where by virtue of the amendment, Parliament has the power to circumscribe the jurisdiction of the High Court.
Consequentially this has the unfortunate effect of allowing the executive a fair amount of influence over the matter of the jurisdiction of the High Court.”
Her Ladyship referred to various decisions where the apex court had rejected the notion of Parliamentary supremacy and in particular to Sivarasa Rasiah v Badan Peguam Malaysia & Anor
 2 MLJ 333, 342 where Gopal Sri Ram FCJ said:
“… Further it is clear from the way in which the Federal Constitution is constructed there are certain features that constitute its basic fabric. Unless sanctioned by the Constitution itself, any statute (including one amending the Constitution) that offends the basic structure may be struck down as unconstitutional.
PROSPECTIVE EFFECT OF DECISION
The Federal Court however clarified that their declaration of the unconstitutionality of section 40D will carry only a prospective effect. In other words, it will not be possible for completed Land Reference cases to be reopened by former landowners, although an exception was made for cases pending at the appellate stage to be revisited if the application of section 40D may have caused prejudice to the appellants therein.
Turning their attention thereafter to the facts of the appeal before them, the Federal Court held that the Land Administrator and the High Court failed to award compensation for the extinguishment of the business that had been undertaken on the land by the Appellant at the time of acquisition and consequently, the case was remitted to the High Court for a determination of the appropriate amount of compensation that ought to be awarded on that ground.
Ordering compensation to be paid for the extinguishment of business due to an acquisition of land is itself significant because the First Schedule of the Act, which lays down the principles relating to the determination of compensation in land acquisitions, does not expressly provide for such compensation. However, the Federal Court held that that head of compensation is permissible as it ought to be considered part of the “market value” of the land which had been acquired.
The importance of Semenyih Jaya
lies not in the mere fact that the apex court struck down section 40D of the Act. It is a landmark case in Malaysian constitutional law as it makes it clear that the Federal Constitution contains certain entrenched provisions that even Parliament cannot amend with a two-thirds majority, including for example, those that have the effect of undermining the doctrine of separation of powers and the independence of the Judiciary.
This decision has received widespread praise from members of the legal fraternity and the academia as it affirms the importance of an independent judiciary and the doctrine of separation of powers in forming the bedrock of a truly democratic system of government.