Topic 1

© 2009 CCH Asia Pte Ltd, Principles of Business and Corporate Law, Malaysia, by Loganathan Krishnan,
Parimaladevi Rajoo & Anne Chrishanthani Vergis.
Reconstructed by Noor Maizudin Bin Mohamad Noor, Faculty of Business Administration, Unirazak
 At the end of this chapter you will be able to:
• Understand the definition of the word ‘law’.
• Know the difference between public, private and international law.
• Differentiate between constitutional and criminal law.
• Know the three main components of private law.
• Differentiate between public international and private international law.
• Identify the different legal systems in Malaysia.
• Differentiate between Historical Sources, Legal Sources, and Textbook and authorities.
• Distinguish between the written and unwritten law.
• Illustrate the difference between Federal and State Constitution.
• Understand how a Bill can become a law.
• Understand the applicability of English Law in Malaysia.
• Understand the effect of the different customs in Malaysia.
• Differentiate between common law and equity.
• Know the roles and functions of superior and subordinate courts.
 The word ‘law’ has been given many definitions.

 ‘the body of enacted or customary rules recognized by a community as binding’ – Oxford

English Dictionary

 ‘a command set by a superior being an inferior being and enforced by sanctions or

punishments. The superior being is the state (government) and the inferior being is the
individual. The sanctions or punishments include imprisonment, fines, damages and
injunctions’ – John Austin in his book, The Province of Jurisprudence Determined

 ‘the body of principles recognized and applied by the State in the administration of
justice…. In other words, law consists of the rules recognized and acted on by courts of
justice’ – Sir John Salmond in his book, Jurisprudence

 To put it simply, law may be defined as a body of rules which are enforced by the state.
 The term ‘law’ is defined by Art 160(2) of the Federal Constitution and item (43C) of sec 2(1)
of the Interpretation and General Clauses Ordinance 1948 to include the written law, common
law in so far as it is in operation in the Federation or any part thereof, and any custom or usage
having the force of law in the Federation or in any part thereof.

 In Malaysia, the Federal Constitution declares itself as the Supreme law of the Federation.
 Law applies to all individuals citizens, public authorities, governmental departments, private
bodies, profit making organizations as well as non-governmental organizations.

 Law protects the basic individual rights and freedom such as liberty, equality and freedom of
speech. It prevents individuals in powerful positions from taking an unfair advantage of other
people. Law ensures a safe and peaceful society, in which individual rights are preserved.

 Law develop and changes as the norms and needs of society changes.
 Malaysia practices Parliamentary democracy with Constitutional Monarchy, wherein the Yang
Di-Pertuan Agong (the King) is the Paramount Ruler.

 The Federal Constitution was legislated with the setting up conditions for this system to exist.

 The Constitution of Malaysia divides the authority of the Federation into three branches:
• Legislative
• Administrative or Executive
• Judiciary
 Legislative authority is the power to make laws and also the power to raise taxes and authorize
expenditure.
 At Federal Level, the legislative authority power is vested in the Parliament. The Parliament is
divided into three components:
• The Yang Di-Pertuan Agong
• The Senate (Dewan Negara) – which is the upper house of the Parliament. The Senate
reviews legislation that has been passed by the lower house of the Parliament.
• The House of Representatives (Dewan Rakyat) – which is the lower house of the
Parliament. A general election is held every five years to elect members of the Dewan
Rakyat.

 Parliament passes federal laws, makes amendments to existing federal laws, examines the
government policies, approves the government’s expenditures and approves new taxes.
 At State level, the power is vested in the respective State legislature, for which elections are
held every five years.
 The Executive, because of its control of Parliament (the party with the most votes can form a
government to rule the country), is the most powerful branch in Malaysia.

 Executive Authority or the authority to rule is vested in the Yang Di- Pertuan Agong as
provided in Art 39 of the Federal Constitution, but it can be exercised by a Cabinet of
Ministers headed by the Prime Minister. The Cabinet is directly responsible to the Yang Di-
Pertuan Agong.
 Unlike the Legislature and the Executive, which are intertwined, the Judiciary is entirely
separate from and independent of either of the other two branches.

 The judicial power in Malaysia is vested in the Federal Court, the High Court of Borneo and
subordinate courts as provided by federal law. The Head of the Judiciary is the Chief Justice of
the Federal Court.

 The Federal Court has jurisdiction to determine the validity of any law made by Parliament or
by a State legislature and disputes between States or between the Federation and any State. It
also has the authority to interpret the Federal and State Constitutions.
 Law

Public Law Private Law

(Individuals and State) (Individuals per se)

Criminal Contract Tort Trust

Constitutional Law
Law

International Law
(Law that prevails between States)

Public International Law Private International Law

 Law may be classified into three categories:

 Public law
 Private law
 International law
 Public law is the area of law which governs the relationship between the individuals and the
state.

 Public law consists of:

 Constitutional law – lays down the rights of individuals in the state and also covers areas
such as state and federal powers.

 Criminal law – covers different offences committed by individuals against the state, such
as murder, manslaughter, theft, etc.
 Private law or civil law is the law affecting the rights and duties of individuals.

 It consists of:
 Law of contract – based on an agreement made between two or more parties. It determines
when a promise or set of promises is legally enforceable. Where one party has breached
the contract, the law of contract provides for compensation to the other party not in breach.

 Law of tort – based on legal obligations and is defined as a civil wrong. It serves to
determine a person’s interest that has been adversely affected by the acts or omissions of
the defendant. It aims at compensating the loss suffered by the plaintiff as a result of the
tort. Areas under tort include negligence, defamation, nuisance and trespass.

 Trust law – an equitable obligation between a trustee and a beneficiary. The trustee holds
the property in trust for the benefits of a particular beneficiary. If the trustee breaches his
duty, then he can be sued under the trust law.
 International law consists of the principles and rules of conduct which the states themselves
feel bound to observe with each other.

 It consists of:
 Public international law – the law that prevails between states. An example would be when
a state signs a treaty.

 Private international law (or ‘conflict of laws’) – part of municipal law, as a result of which
in every country there will be a different version of it. It consists of the rules that guide a
judge when the laws of more than one country affect a case.
 Malaysia has three parallel legal systems:
• Common law system – introduced in the 19th century by the British. It forms the
foundation of the country’s constitutional, administrative, criminal and commercial laws.

• Islamic law system – applies in the Syariah Courts. It only applies to Muslims.

• Native law system – only applies to the native in Sabah and Sarawak, eg the Penans, Ibans
and Kadazan people.
 Sources of Malaysian Law

Historical Sources Legal Sources Textbook and Authorities

Written Law Muslim Law Unwritten Law

Federal Constitution State Constitution English Law Judicial Precedent Customs

Legislation Common Law Equity

Subsidiary Legislation
 The three sources of Malaysian Law:
• Historical sources – factors that have been influential in the development of the law but
themselves are not recognized as law. Examples : religious practices and beliefs, local
customs, and the opinion of jurists.

• Textbook and authorities – for example in the United Kingdom, textbooks by Coke and
Blackstone are recognized as a source of law.

• Legal sources – the most important sources of the law. It is divided into:
 Written law
 Unwritten law
 Islamic law
 Written law means that it is written in black and white. It refers to the laws embodied in the
Federal and State Constitutions and in a code or a statute, including subsidiary or delegated
legislation.

 Written law is divided into:

• Federal Constitution
• State Constitution
• Legislation
• Subsidiary legislation
 Federal Constitution – the supreme law of the country. It applies to the whole of Malaysia. It
lays down the powers of the federal and state government as well as the basic or fundamental
rights of the individual.

 Art 159 and Art 161E contains provisions to allow the Constitution to be amended with the
condition of two thirds’ majority in both houses of Parliament agreeing to the amendment.

 State Constitution – only applies to the particular state. If there is a conflict between the
Federal Constitution and the State Constitution, then according to Art 4(1) of the Federal
Constitution, the Federal Constitution will take precedence.
 Legislation – law is legislated by Parliament at the federal level and state legislative assemblies
at the state level. For a bill to become an Act of Parliament, the Bill must be passed by both the
Dewan Rakyat and the Dewan Negara and finally obtain the Royal Assent that is, the Yang Di-
Pertuan Agong’s seal or signature.

 Legislation made by Parliament after Independence in 1957 are called Acts. Prior to that, they
were called Ordinances. Laws made by the state legislative assemblies (except in Sarawak) are
called Enactments. In Sarawak, the laws are called Ordinances.
 Legislation – HOW ARE LAWS MADE IN PARLIAMENT?
• A Bill is normally presented to Parliament by the Minister responsible for the particular
portfolio.

• The Minister wishing to present a Bill is required to give notice to the Clerk of the relevant
House before which he intends to introduce it.

• First reading – This stage is a formality. The Minister mentions the title and main aims of
the Bill and then proceeds to give oral notice as to when he wishes to move the Second
reading. The Bill is printed and circulated to all members of the House.

• Second reading – Motion is moved by the Minister and must be seconded. Debate on the
Bill is carried out.

• Committee stage – The Bill is committed to a Committee and the members are allowed to
discuss the Bill in detail and to propose amendments in a more informal proceeding.
 Legislation – HOW ARE LAWS MADE IN PARLIAMENT?
• Report stage – The Minister then reports that the Bill has been considered and accepted by
the Committee. He then moves a motion for the Bill to be read a third time and passed.

• Third reading – The Bill is read and the Minister moves a motion to pass the Bill. If it is
accepted then the Bill is considered passed.

• When the Bill has been passed in this manner in either House, it is then transmitted or sent
to the other House for consideration. Similar procedure occurs in the later House. If the
Bill is rejected by the later House then a committee is appointed to draft the Reason or
Reasons for the rejection and it will be transmitted together with the Bill to the former
House.

• If the House insists on the amendments, then the Bill is said to be ‘laid aside’.

• Once the bill is accepted in both Houses, it is then presented to the Yang Di-Pertuan Agong
for the Royal Assent. The Bill becomes a law when Royal Assent is given.
 Subsidiary Legislation (delegated legislation/subordinate legislation) – defined in
Interpretation Act 1967 as any proclamation, rule, regulation order, notification, by-laws or
other instrument made under any Act, Enactment or Ordinance or other lawful authority and
having legislative effect.

 Parliament and state legislative assemblies may delegate some of their legislative powers to
subordinate authorities. However, delegated legislation made by such subordinate authorities is
normally confined to matters of detail as Parliament and state legislative assemblies have
neither the time nor the technical expertise to enact laws on every detail.

 Subsidiary legislation cannot be made in contravention of the parent Act or the Federal
Constitution. If there is contravention, then the subsidiary legislation is void.

 If there is a conflict between the (parent) legislation and subsidiary legislation, then the
legislation will always take precedent.
 Unwritten law does not mean that the law is literally unwritten.

 It is a reference to that portion of Malaysian law which is not enacted by the legislature
(Parliament and State Assemblies) and which is not found in the written Federal and State
Constitutions.

 Unwritten law is made up of:

• English Law
• Judicial Precedents
• Customs
 English law - English law is mainly found in English common law and rules of equity.

• Common law - Before the Norman Conquest, there was no unified system of law in
England. Local areas had their own law and their own system of courts. William the
Conqueror introduced a strong central government and from this emerged a system of
justice which was common to the whole country that is, the common law.

• The Courts of the common law were divided into three types:
 (a) Courts of the King’s Bench (criminal matters and some civil matters)
 (b) Courts of Common Pleas (civil actions-land)
 (c) Courts of Exchequer (taxation and civil matters)
 English law
• Common law – Defects of common law
 Lack of appropriate remedies. If a litigant won his case, the Curia Regis (the early
common law court) had only one remedy, which was that of damages. However, damages
was not a suitable remedy to meet all circumstances and furthermore, it could only be
given after the event. The law had no means of preventing a legal wrong being committed.
 There was strict rules of procedure in the common law courts. One of these was that writ
was needed detailing the circumstances of the case. Prior to 1258 and the Provisions of
Oxford, the court would create new writs to meet new situations; after the Provisions of
Oxford were installed in 1258, no new writs could be issued without the consent of the
Curia Regis. This severely impeded the development of law.
 The system of pleading was very formal. It had to be specific; if there were any error or
omission, the case would be thrown out.
 There was no right of appeal.

Due to these defects, equity came into existence.

 English law
• Equity - Equity means ‘fairness’. It was developed by the Lord Chancellor and the
Chancery courts. The remedies offered were injunctions, specific performance, rescission
and rectification.

• Equity was not a complete system of law – it merely filled the gaps in the common law
and softened the strict rules of common law. If there is a conflict between common law and
equity, then equity should always prevail: the Earl of Oxford’s Case (1615).

• The Judicature Acts of 1873-75 provided that equity and common law could both be
administered by all courts.

• Equitable principles have had their greatest impact in the development of the law of
property and contract, law of trusts and mortgages. Equity has shown itself capable of
adapting and expanding to meet new needs. It is a discretionary remedy, in that it is up to
the judges to decide whether or not to grant the remedies.
 English law - CAN ENGLISH LAW BE USED IN MALAYSIA?

• Not all of England’s common law and rules of equity form part of Malaysian law. Whether
English law can be used in Malaysia depends on the Civil Law Act 1956 which came into
force on 1 April 1972.

• Section 3(1)(a) of the Civil Law Act 1956 states that English law is applicable in West
Malaysia until 7 April 1956.

• Section 3(1)(b) of the Civil Law Act 1956 states that English law is applicable in Sabah
until 1 December 1951.

• Section 3(1)(c) of the Civil Law Act 1956 states that English law is applicable in Sarawak
until 12 December 1949.
 English law - CAN ENGLISH LAW BE USED IN MALAYSIA?

• However, this is subject to two conditions:

 there must be no Malaysian law on this area, and
 only English law that is suited to Malaysian circumstances can be applied.

• With regard to English commercial law, s 5(1) of Civil Law Act 1956 states that English
law in commercial matters is applicable in Peninsular Malaysia (except Penang and
Malacca) until 7 April 1956.

• Section 5(2) of Civil Law Act 1956 states that for Penang, Malacca, Sabah and Sarawak,
English commercial law is applicable to date.

• Section 6 of Civil Law Act 1956 prohibits the application of English land law in Malaysia.
 Judicial Precedents
• Judicial precedent means that decision of the higher courts automatically binds all lower
courts. For example, a Federal Court decision automatically binds the Court of Appeal,
High Court, Sessions Court, Magistrates Court and the Small Claims Court.
 
• Decisions made by judges previously in similar situations are binding upon future cases
depending on the hierarchy of the courts.
 
• The system of binding precedent is called the doctrine of stare decisis (meaning ‘stand by
what has been decided’) in English law.

• The principle of stare decisis comprises:

 Ratio decidendi – which means ‘reasons for the decisions which is binding on the lower
courts’.
 Obiter dictum – which mean ‘incidental remarks by a judge’ which is persuasive only.
 Judicial Precedents – Advantages

• Uniformity – everyone is treated equally.

• Certainty – it creates certainty in the law so that lawyers can advise their clients on the
probable outcome of their case.
• Flexible – new rules arise out of concrete facts or situations.
• Time saving – it saves court time as for most situations there is already an existing
solution.
• Legal costs will be minimised as the matter is resolved quickly.
• The judge’s personality will not influence the outcome of a dispute in court as judges will
be bound to follow previous decisions.
• New rules can be established or old ones adapted to meet new circumstances and the
changing needs of society.
 Judicial Precedents – Disadvantages

• Rigidity – in the sense that once a rule has been laid down it is binding even if it is thought
to be wrong.
• Illogicality – Due to rigidity, judges who do not wish to follow a particular decision may
attempt to draw very fine distinctions in order to avoid following the rule, thus introducing
an element of illogicality and artificiality into the law.
• Complexity – hundreds of cases are reported each year, making it hard to find the relevant
precedent which should be followed.
• Bulky – there are so many precedents with thousands of fine distinctions that no one can
know them all.
• The body of case law cannot grow quickly enough to meet modern demands.
• Slow and expensive - the system depends on litigation for rules to emerge but litigation
tends to be slow and expensive.
• It is difficult to find the ratio decidendi of a case – this detracts from the element of
certainty.
 Customs
• Customs are another important source of unwritten law. Customs are inherited from one
generation to another generation. Every race has its own customs. Customary law consists of
customs and traditions of the various races.

• Malays have the Adat Perpatih and the Adat Temenggong.

 Adat Perpatih applies in Negeri Sembilan and Nanning in Malacca. It applies the
matrilineal system where property can only be inherited by the female descendants of the
deceased owner.
 Adat Temenggong applies to all other states. It applies the patrilineal system where the
property can only be inherited by the male descendants of the deceased owner.

• The Chinese and Hindus are governed by Chinese Customary Law and Hindu Customary
Law respectively.

• For the Natives in Sabah and Sarawak, Native Law which relates to land and family matters
is applicable.
 Only applies to Muslims and the court which applies is the Syariah Court.

 Today, besides family and estate matters, Islamic laws are increasingly applied in banking and
land laws.

 The Yang Di-Pertan Agong is the head of Islam in his home state, Penang, Malacca, Sabah,
Sarawak and Federal Territories. The head of Islam of other States is the Sultan.
 Superior Courts

Federal Special
Court
Court

Court of Appeal

High Court High Court in

in Sabah and
Malaya Sarawak

Subordinate Courts

Sessions Court

Other courts:

Magistrates’ Court for Penghulu’s Native

Court Children Court Court Syariah
Court
 Subordinate Courts – The Subordinate Courts in Malaysia consist of:
• Magistrates’ Court
• Sessions Court
• Other courts  

 Magistrates Court
• Has the jurisdiction to try all civil actions and suits where the amount in dispute or value
of the subject matter does not exceed RM25,000.

• In Malaysia, small claims proceedings are heard in the Magistrates Court. Claims can be
filed under the Small Claims Procedure where the amount of the subject matter does not
exceed RM5,000.
 Sessions Court
• The civil jurisdiction of the Sessions Court is wider as compared to that of the Magistrates’
Court.

• The Sessions Court has the jurisdiction to try all actions and suits where the amount in
dispute or the value of the subject matter does not exceed RM250,000.
 

 Superior Courts - The superior courts in Malaysia consist of:

• High Court
• Court of Appeal
• Federal Court (formerly known as Supreme Court)
 High Court
• The High Court has unlimited jurisdiction over all civil proceedings where the amount in
dispute or the value of the subject matter exceeds RM250,000.
 
• The High Court also hears appeals against the decision of the subordinate courts and the
amount in dispute must ordinarily exceed RM100,000.

• There are two High Courts in Malaysia, namely; the High Court in Malaya and the High
Court in Sabah and Sarawak.

 Court of Appeal
• The Court of Appeal strictly performs the function of an appellate court.
 
• For civil matters, the Court of Appeal hears and determines appeals from any judgment or
order of the High Court where the case involves a claim of at least RM250,000.
 Federal Court
• This is the highest judicial authority in Malaysia. It is the final court of appeal. It hears
civil and criminal appeals from the Court of Appeal. Federal Court decisions bind all the
courts below.
 

 Other Courts
 
• Court For Children (formerly the Juvenile Court) 
 Court For Children was established under the Child Act 2001. Section 2 of the Act
defines ‘child’ as a person under the age of 18 years, and for the purpose of criminal
proceedings, means a person who has attained the age of ten.
 
 A child who is found guilty of an offence is not be imprisoned, but among others, may
either be sent to an approved school or released on bail. For capital offences, the child
will be detained in prison at the pleasure of the Ruler (s 91 to s 97, Child Act 2001).
 Penghulu’s Court
• Applicable only in West Malaysia, the court is presided over by a penghulu or headman
appointed by the State Government for a ‘mukim’.
 
• Penghulu’s Court hears and determines original proceedings of
 a civil nature in which the plaintiff seeks to recover a debt or liquidated demand in
money not exceeding RM50.00
 a criminal nature where the offences are minor in nature which are specifically
enumerated in the Penghulu’s letter of authority (Kuasa) and which can be adequately
punished by a fine not exceeding RM25.00,
• and where all parties involve are Asians and they speak and understand the Malay
language.

• A Penghulu’s Court may pass any sentence authorised by law not exceeding a fine of
RM25.00.
 Native Court
• The Native Court are constituted in Sabah and Sarawak under the Native Courts
Ordinance 1992 to hear and determine disputes among native in relation to native
customary laws.

• Native Courts are conferred jurisdiction to hear criminal cases which are punishable with
imprisonment for a term not exceeding two years or/and with a fine not exceeding
RM5,000. However, if the offence is an offence under the Penal Code, Native Courts do
not have jurisdiction to try the case.

 Syariah Court
• Muslims in Malaysia are governed by Islamic personal and family law which has been in
existence in Malaysia since the 15 th century. Syariah/Islamic laws have been administered,
not only by the Syariah Courts, but also the Civil Courts. However by Art 121 (1A) of the
Federal Constitution, today, exclusive jurisdiction has been given to the Syariah Courts in
the administration of Islamic laws. The Syariah laws in Malaysia do not apply to non-
Muslims. The state legislatures have the power and are permitted to make Islamic laws
pertaining to persons professing the Islam religion.
 Special Court 
• Established pursuant to Art 182 of the Federal Constitution, the Special Court hears any
action civil or criminal instituted against the Yang Di-Pertuan Agong or any of the nine
Malay Rulers.

• However, Art 183 prohibits any action (civil or criminal) to be instituted against the Yang
Di-Pertuan Agong or any Rulers of States in respect of anything done or omitted to be
done by him in his personal capacity except with the consent of the Attorney General.