BUSINESS LAW

Part 1
An Introduction to Law

What is law?
The word ‘Law’ has been given many definitions. To understand law, one need to
know the classification of law (types of law) and to acquaint (get to know) oneself
with the types of law in existence; in particular, those that are relevant.

Definition of Law
In the Oxford English Dictionary the word law is defined as ‘the body of enacted
or customary rules recognized by a community as binding’. (acceptable by all
citizen of Malaysia despite the unfairness) – follow it strictly. Because the citizen
are forced to follow it.

*****What is the function of law? List down

Law performs many functions in society:
1. Regulates the relations between the citizen and the state.
（government）
2. Regulates the relations between individuals. (rights of the citizen are
protected directly and indirectly)
3. To protect the harmony and peace of the country.
4. To have balance in the legal system.
5. To punish the wrongdoer and protect the innocent.

Classification of Law – Public Law & Private Law

The function of law can be better understood by classifying them into 3 broad
divisions:
(1) Public Law
(2) Private Law
(3) International Law.

NB: In our study here we will focus only on Public Law and Private Law.

a. What is Public Law?

Public law is that area of law which governs the relationship between
individuals and the State (i.e. Malaysia and its citizens).
It can be subdivided into:
(i) Constitutional law,
(ii) Administrative law, and
(iii) Criminal law.

Constitutional Law – regulates and defines the structure of the principal

organs of government and their relationship to each other, and determines
their principal functions. It deals with the supremacy of Parliament, state
and federal powers and rights of citizens.
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Administrative law –regulates the duties and the exercise of powers by

administrative authorities i.e. government bodies, e.g. the powers of local
councils.

Criminal Law – codifies the various offences or wrongdoings committed

by individuals against the state, such as murder, robbery, criminal breach
of trust, causing grievous hurt, theft, cheating and counterfeiting.
It aims at punishing criminals and suppressing crime. Thus, criminal law
imposes on individuals the obligation not to commit crime.
Murder – hang to death or life imprisonment or hang until death
Manslaughter – 7 years or 10 years imprisonment

Crime
A ‘crime’ is a wrong against the State for which punishment is inflicted by
the state, and proceedings can only be brought by the Public Prosecutor,
under the Attorney General’s chamber.

b. What is Private Law?

Private law or more appropriately called Civil law is concerned with
matters that affect the rights and duties of individuals amongst
themselves.

The main areas of Civil Law covers the following areas i.e. Contract Law –
(including Insurance, Sale of Goods, Bills of Exchange), Torts, Trusts,
Family law, Company law, Property Law etc.

Legal action is initiated by the individual who feels he or she has been
wronged by another and wants the matter or the wronged to be made
right.

The party who initiated the legal action is referred as ‘the plaintiff’ and the
other party being sued is ‘the defendant’.
The action is called a civil proceeding and the procedure governing its
process differs from that of criminal proceeding.

In simple – Plaintiff (innocent )( 原 告 ) Defendant (wrongdoer)( 被 告 ).

Appellant (plaintiff)(重述者) and Respondent (defendant)

Albert(P) v Mary(D) v – sue

Albert sue Mary (Albert win the case)
Mary appeal again Mary(A) v Albert(R)
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Part 2 - Sources of Malaysian Law

The aim of this topic is to provide a basic knowledge as to how and from where
Malaysian laws evolved. Sources of Malaysian law - means the legal sources i.e.
the rules that make up the law.

Two main sources of law

There are basically two main legal sources of law in Malaysia – written law and
unwritten law. The other sources of law are Islamic law and Native law.

Unwritten law does not mean it is not in writing. It means that these laws are not
made by Parliament and it is not part of the Constitution. It is also called non-
statutory law. Unwritten law comprise of:

(1) English law which can be used in Malaysia

(2) Decisions of the Superior Courts i.e. laws made by judges or common law.
(Judicial precedent)
(3) Local customs / culture

Sources of Written Law: Section B (min 10-max 15 marks)

Written law is the most important source of law in Malaysia. The main sources of
written law in Malaysia comes from:

1. The Federal Constitution

2. Legislation i.e. laws made by our Parliament.
3. State Constitutions and state laws made by respective State Assemblies.
4. Subsidiary or delegated legislation.

Sources of Malaysian Law

Malaysian
Law

Written Unwritten Islamic Native

Law Law Law Law

Subsidiary English Court

Constitution Legislation Legislation Law Decisions Customs
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Federal Constitution (Human Rights) (人权 )

The Federal Constitution of Malaysia is a 1 written document which lay down the
2 powers of the federal government and the rights of the citizens. It is the 3
supreme law of the country . The law set by Federal constitution 4 must be
complied and followed strictly. 5 Any law created against the constitution will be
void (invalid).

Legislation (law making authority) (立法 )

Legislation happens at two levels – Those made by Parliament at the Federal
level and those by the State Legislative Assembly for the State.

a. Acts of Parliament
Parliament legislate laws which applies throughout the country.
After 1957, laws passed by parliaments are called Acts.

Prior to 1957, the laws made between the periods of the Malaysian Union
in 1946 and 1959 are called Ordinances.

b. Enactment
Laws made by the State Legislative Assemblies are called Enactments.
Exception - for Sarawak where the laws passed by the state assembly are
called Ordinances.
The laws enacted by the State Assembly is applicable to the state only.

Laws made at the Federal and State Legislatures are not supreme. They are
restricted in their law-making powers by virtue of the Constitution(100%follow
Federal Constitution). They can only make laws within the limits set by the
Federal Constitution.

State Constitution (government)

There are 13 states which comprises the federation. Each state has its own
written constitution governing the state.
Mandate – power given by people through election

Subsidiary or delegated legislation (委任立法)

Subsidiary legislation is also known as subordinate legislation (sometimes called
delegated legislation). This means the right to make laws are delegated or given
to an authorized body. Delegated legislation usually comes in the form of
regulations and by-laws. These rules and regulations are enacted under powers
conferred by an Act of Parliament or State Enactment. E.g. local council by-laws.
(The power will be given by Parliament to this authorized body to create laws and
it is applicable to all)
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Subsidiary legislation – secondary law making power which is given by the

parliament to help in solving important issues.

Civil servant – government department

They have knowledge and experience to make law to solve the problem
They can make law within 24 hours and reply any time – remove the law within
24 hours.
Law is made based on the human behavior or your attitude toward the problem
Speed limit is set by JPJ (subsidiary legislation – not government or prime
minister)

The Interpretation Act 1967 defines subsidiary legislation as any proclamation,

rule, regulation, order, notification, by-law or other instruments made under any
Ordinance, Enactment or other lawful authority and having legislative effect.
(example -MBPP,JPP and etc)

Reasons for delegated legislation: (Section A)

1. Parliament‘s time is limited, and as such Parliament cannot make laws on

every detail.
2. At times there is a need for specialized expertise in certain areas of law.
Since not all members of Parliament are experts in that particular area, it
would be better for the experts in the respective government department
to make the rules in those areas.
3. Easiest and fastest solution -law can created in 24 hours and remove in
24hours

Advantages of delegated legislation (Section B)

1. Flexibility and speed of making law.
2. The ability to accommodate the changing needs of society quickly.
3. Less time required to enact such law
4. Ability to handle emergency situations. – law made without parliament
approval – example -MCO,CMCO and so on.

E.g. Sometimes there may be an emergency or crisis wherein the Minister

has to act quickly as in an economic crisis where the Minister of Finance
has to act fast by making new regulations to alleviate or control the
situation. Once the regulations become outdated, the Minister can rescind
them easily, thus they are flexible.

*****Disadvantages of delegated legislation

1. The function and power to make law which is given to Parliament through
a mandate by the people who elect them, is now given to non-elected civil
servants or government bodies which could result in abuse of power.
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2. Too much power in the hands of non-elected civil servants who are not
directly accountable to either Parliament or the people.
3. Over-delegation may result in the legislature abdicating or ‘giving-up’ its
actual constitutional role i.e. to make law, and is now given to the
executive.
4. Lack of publicity as the law introduce by them can be for a short period of
time
5. The law made by them can be for their best interest and they are not in
the obligation to follow the federal constitution. -own interest.
Sources of Unwritten Law:

Common Law
Common law means judge-made law arising from judicial decisions or court
decisions. They are made by judges sitting in the Superior Courts. This practice
is inherited from England.

Our judges make laws in the following two ways:

(i) By establishing a principle of law to a new situation or set of facts, where

there is no statutory law.

(ii) Interpreting statutes made by the legislature. Judges are frequently called
upon to decide what they mean and how are they are to be applied to a
particular situation. (See Statutory interpretation).

English Law (Section A)

As a former colony of Britain, it is natural that English law is embedded into the
foundation of our legal system. English law is adopted only in so far as they are
suitable to local conditions. After 1 st April 1972 all these laws have now been
incorporated into our Civil Law Act 1956 (Revised 1972).
*See acceptance of English Law in Malaysia below.

Since we have own law in Malaysia, is it possible

Conditions required before English law can be used in Malaysia

Two conditions must be satisfied before English law can be used in Malaysia:

i. Only where there is no Malaysian statute on the particular subject can

English law be used. See Privy Council case in United Malayan Banking
Corporation & Anor. V Pemungut Hasil Tanah, Kota Tinggi (1984). (if
ther is a lacuna(gap) in the law- no solution -no law -no guide)

ii. Only English law which is suitable to local conditions can be used. See
Section 3(1) Civil Law Act 1956 (supra). Malaysian society is different
from English society, so to used English law wholesale would not be
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proper. See what Maxwell CJ said in Chou Choon Neoh v
Spottiswoode:

‘In this colony, so much of the law of England as was in existence when it
was imported here, and as if of general (and not merely local) policy, and
adapted to the condition and wants of the inhabitants, is the law of the
land; and further, that law is subject, in its application to the various alien
races established here, to such modifications as are necessary to prevent
it from operating unjustly and oppressively on them. Thus, in question of
marriage and divorce, it would be impossible to apply our law to
Mohammedans, Hindoos, and Buddhists, without the most absurd and
intolerable consequences, and it is therefore held inapplicable to them’.

Other Sources of Law:

Islamic Law
Islamic law is applicable only to Muslims and administered in the Syariah Courts.
Except for the federal territories of Kuala Lumpur and Labuan, the powers to
administer Islamic law are primarily that of the States.
The Syariah Court is a state court established by state law whereas the ordinary
civil courts are federal courts. The Syariah Courts has its own hierarchy.
Clause (1A) of Article 121 Federal Constitution states that the Civil Courts ‘shall
have no jurisdiction in respect of any matter within the jurisdiction of the Syariah
Courts’. The religious court possess civil jurisdiction (allowed to claim damages
only) in proceedings between parties who are Muslims. -Family , divorce or civil
(small) matters only – the head of Islamic Law is YDPA

Native Law
This law is applicable to natives of Sabah and Sarawak. Natives are the
indigenous people of these two states. There is a hierarchy of Native Courts in
both states exercising jurisdiction over natives in respect of their personal laws
e.g. native customs, religion and matrimonial maters.

Part 3
The Federal Constitution of Malaysia
The Federal Constitution establishes Malaysia as a country that adopts a federal
system of government which controls the 13 states.

The constitution states that the federation shall be govern by the three organs of
state namely Parliament, the Executive and the Judiciary.

Thus, the Federal Constitution is the supreme law of Malaysia and any law that
goes against the Constitution is invalid.
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Basic features of the Federal Constitution:

i. The Federation comprises 13 states controlled by a central

government.

ii. There is a constitutional Monarch called the “Yang di-Pertuan Agong”

who is the titular head of the country with 13 state rulers.
iii. It practices a system of parliamentary democracy comprising of a
legislative body called Parliament, and the Executive or cabinet.

iv. The Judiciary is a separate and independent branch of the

government.

v. Islam is the religion of the Federation; but other religions may be

practised in peace and harmony in any part of the Federation- Art.3(1)

vi. The fundamental liberties of the citizens.

vii. Financial provisions for the country.

viii. Elections
ix. Public Services
x. The states of Sabah & Sarawak.

a. The Monarch - YDPA

The Monarch is the Yang di-Pertuan Agong who is the Head of State just like the
Queen of the United Kingdom. The position of the King was created in 1957.
Only the nine Rulers of the states are eligible to be chosen as King to serve on a
rotation basis for a term of 5 years. (Majlis raja-raja)

The King must act in accordance with the advice of the Cabinet. This is stated in
the constitution. Thus the King has no real power, even though he is part of
Parliament, laws are made in his name and bills passed by legislature are signed
by him. He is also the Head, in the normal sense, of the three branches of
government. Ministers, judges and ambassadors are appointed by him, but on
the recommendation of the Cabinet. (Royal Assent)

1. Head of Malaysia
2. Head of Army
3. Head of Islamic Law
4. Head sitting in Parliament
5. Provides Royal Consent or sigature

b. State Constitutions
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There are 13 states which comprises the federation. Each state has its own
constitution governing itself by a single chamber legislative assembly.

The 9 former Malay States, each is headed by a hereditary constitutional ruler

except for Negeri Sembilan and Perlis where the ruler is called the ‘Yang di-
Pertuan Besar’ and ‘Raja’ respectively. The government of the state is headed by
the Menteri Besar.

The 4 ex-British colonies of Penang, Malacca, Sabah and Sarawak do not have a
ruler but Governors are appointed on a fixed term. Each of these states is
headed by a ‘Yang di-Pertua Negeri’ or Chief Minister, and supported by a local
cabinet known as Executive Council. In Sabah and Sarawak, members of the
executive council are called State Ministers.

Doctrine of Separation of Powers

Separation of powers is a basic principle in a democratic form of government. It
means there should be three distinct branches of government i.e.:

 the legislature,
 the executive and
 the judiciary.

All three branches are separate and independent of each other.

The American system of government is the closest to this concept of separation
of powers.

*****The Malaysian system, however, is more like the British system. There is no
separation between executive and legislative power because of the Cabinet-style
of organization. There is a fusion of legislative and executive functions. The
cabinet consists of the ministers who are also members of Parliament. So the
executive branch of government is also part of the legislature.

As the Cabinet usually controls a large majority in parliament(75% vote),

Parliament is controlled by the executive. So the Cabinet usually gets its way
with passing legislation along this line. Thus in practice the executive controls
Parliament, even though in theory it is Parliament which controls the government
by approving or disapproving legislation.

During election, Members of Parliament will be elected and they will be siting in
the Parliament to make law for the citizens. If they are from the majority party
then they will be appointed as Cabinet Minister, Prime Minister and government
minister. This gives they have two power one as government and another as
Parliament
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But the judiciary is still independent of the other two branches. No Member of
Parliament or the executive can become a member of the judiciary or vice-versa.
Judicial independence in relation to length of service and remuneration is
secured by the Constitution. See chapter on “The Judiciary” for more details on
this.

The Judiciary
The Constitution states that the judiciary is to carry out the judicial powers. In a
democracy such as Malaysia, the judiciary is the third branch of government and
plays as important role in maintaining the balance of power. The judiciary
performs the following functions:-
1. Decide on civil and criminal matters.
2. Interpretation of the Federal and State Constitutions.
3. Determining whether legislative and executive acts are legally correct.

Doctrine of Judicial Precedent

What is a precedent?

Judges, when arriving at a decision will follow certain accepted principles

commonly known as judicial precedents.

A judicial precedent can be defined as ‘a judgment or decision of a higher court

of law cited as an authority for the legal principle embodied in its decision’ and
this legal principle is automatically binding on all lower courts.

A binding precedent means when determining a dispute before the courts, the
judges will follow what their predecessors had decided earlier in a similar
situation. This practice is sometimes called *****‘stare decisis’ meaning a doctrine
according to which previous judicial decisions must be followed. (‘Stare decisis’
means ‘to stand by past decisions’).

And, according to the hierarchy of courts, a judicial precedent made by a superior

or higher court is automatically binding on the lower courts. E.g. the decision of
the Federal Court automatically binds the Court of Appeal2, the High Courts3,
Session Court1 and the Magistrate Court4.

Supreme court – highest court

Court of Appeal – 2nd highest
High court – 3th highest
Magistrate and Session – lowers court

Once a precedent is made, it remains binding on the lower courts until it is

overruled by a higher court in a later case.

*****Advantages and Disadvantages of Judicial Precedents

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Judicial precedent is important. They make judge-make laws certain but at the
same time they can be rigid (too strict) and retard development of the law.(slow
development) Thus the need for legislation to improve on the common law.

The advantages of the precedent system are

1. Certainty – the rule creates certainty in the law i.e. if the legal problem has
been solved before, the court is bound to adopt the solution. Lawyers can
thus advise their clients on the probable outcome of the case.
2. Uniformity – every person is treated equally.
3. Flexibility – new principles of law can be established from the situation or
facts.
4. The judge’s personality will not influence the outcome of the case
5. Less time consming

The disadvantage of the precedent system is its rigidity, which may sometimes
caused hardship. Also, the judges must keep themselves updated with the ever
increasing bulk of new reported cases in order to determine the law.

Note: The efficiency of the common law system depends on the accurate reporting of
cases decided in the Superior Courts. The main set of law reports for Malaysia is the
Malayan Law Journal. The cases are reported in chronological order.

Statutory Interpretation

Do judges make law?

Judges do not make law. Only Parliament make statute laws. The judge’s duty is
to apply the law by interpreting the law i.e. he has to give meaning to the law, but
in so doing the judge is said to be making the law. Thus the judges making law
and the legislature making law are closely related.

The Rules of Statutory Interpretation – (Methods the Court use to interpret statutes).
The courts have over the years developed four rules or methods to help them
interpret statutes. In addition to these four methods, the courts also employ
certain aids to interpretation.

1. The Literal Rule

This rule states that the words in question must be given its literal or ordinary
meaning. The duty of the court is to interpret the words that the legislature has
used. It is not the duty of the court to ‘fill in the gaps in the law’. Meaning the
judge is not supposed to change the law but merely give meaning to the words.
This rule was first laid down in the English case of Sussex v Peerage.

The advantage of the literal rule is that it respects the sovereignty of Parliament
in making laws.
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The disadvantage is that using the literal rule may lead to an absurd or unjust
decision and Parliament certainly does not intent to make laws that lead to
absurdity and injustice.

2. The Golden Rule

Established in the English case of Grey v Pearson, the golden rule presumes
that a mistake has been made in the wordings of the Act and allows the judge to
modify the language used in the legislation to overcome the defects of the Act
which have resulted in absurdity.

The advantage of the golden rule is that it can prevent absurdity and injustice
caused by applying the literal rule.

The disadvantage, according to the Law Commission is that the ’rule’ provide no
clear meaning of an ‘absurd result’. Also such practice was judged by reference
to whether a particular interpretation was in line with the general policy of the
legislature.

3. The Mischief Rule

Sometimes the words in the statute are ambiguous i.e. the words have more than
one meaning. The court has to determine the right meaning to give the right
effect to the law. To do this the court had to consider four factors, also known as
the rule in Heydon’s Case (1584).

Four factors the court should consider when interpreting the law:

1. What was the common law before the statute was passed?
2. What was the ‘mischief’ or problem that the statue was attempting to
remedy?
3. What remedy had Parliament resolved to provide, and
4. the true reason for the remedy?

The judge is to interpret the law so as to ‘suppress the mischief, and advance the
remedy’. This rule gives the judge the right to go behind the words used in the
statute and look at the problem that the statute was aim at remedying.

4. The Purpose Approach

Sometimes the court is faced with difficulty deciding because some words used
in the statute did not give a clear meaning and intention of the law. Here the court
may then proceed to look at the overall intention of the legislature by reading the
statute as a whole and ask ‘What is the purpose of the statute when it was
enacted?’ Is it to remove a problem or to prevent something?
This is the purposive approach, where the judge attempts to find out the purpose
of the statute by reading the whole statute.

AIDS TO INTERPRETATION:
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These methods are used by judges to help them when interpreting the law.

a. Ejusdem Generis Rule

This is where general words are used together with a class of specific words.
The rule of interpretation would be to interpret the general word restrictively so as
to bring its meaning within the class of words used. E.g. the law prohibits the
possession of ‘heroin, opium, cocaine, marijuana and any other drugs’.

The phrase ‘any other drugs’ does not mean all other drugs but only drugs of the
same kind or class to heroin, opium, cocaine or marijuana, which are all made
from plants. Therefore the possession of the drug penicillin would not be within
the provision, but the possession of cannabis or hashish which is plant based
would fall within the meaning of ‘any other drugs’.

E.g. 'Do not smoke in the hall, lounge, meeting rooms or in any enclosed places’.
Notice that these are all related to smoking inside a building. A person who
smoke in a restaurant would have committed an offence as the restaurant would
fall within the meaning of ‘any enclosed places.

Legal Terminologies:

*Ratio decidendi: means the legal reasoning contained in the decision of the
higher court which forms the precedent is binding on
the lower courts.

*Obiter dictum: Is an incidental remark of a ratio (legal reasoning or

principle) made by the judge on facts not found in the case
before him. Just an expression of opinion by the judge on a
question of law not directly related to the case before him.
Such remark is not part of the ratio but merely persuasive.

Binding precedent: this is a doctrine that, if the facts of the case are similar, a
precedent from an earlier case must be followed even if the
judge in the later case does not agree with the legal
reasoning or principle.

*Overrule: This is a decision of the court which states that a ruling in an

earlier decision was wrong.

Reversed: where the higher court hearing the same case on appeal
overturns the decision of the lower court.

*Distinguishing: is a method used by judges to avoid a previous precedent by

showing that the facts in the present case are different.