Squatters, or individuals who occupy land or buildings without the legal right to do so, are a common issue in many parts of Malaysia. Dealing with squatters can be a complex and challenging process, requiring knowledge of both legal frameworks and practical considerations. In this article, we will provide an overview of the legal framework for dealing with squatters in Malaysia, as well as some practical tips for landowners who are facing this issue.
Defining and Identifying Squatters
According to the Oxford Dictionary, a squatter is “a person who unlawfully occupies an uninhabited building or unused land.” From a legal perspective, a squatter is someone who occupies a piece of land or property without legal title or right to do so. This means that they do not have an agreement (such as a tenancy, lease or licence) with the owner of the land or property to be there.
Justice Richard Malanjum explained squatters in this way: “What is a squatter? He is one who, without any colour of right, enters on an unoccupied house or land, intending to stay there as long as he can. He may seek to justify or excuse his conduct. He may say that he was homeless and that this house or land was standing empty, doing nothing. But this plea is of no avail in law” (Tjia Swan Nio v Ng Nyuk Moi & Ors [1992] 2 MLJ 666).
Practically, landowners may identify squatters on their land in different ways. The most common way is through the observation of makeshift buildings, tents, or structures made of metal or wood. Squatters often use these structures as temporary housing while occupying the land illegally. However, it is important to note that some squatters may also construct more permanent buildings, including brick-and-mortar structures. In some cases, squatters may even attempt to take over a vacant or abandoned building and use it as their own.
Limitation Periods and Adverse Possession
Squatters have no legal right to the land they occupy, regardless of how long they have been unlawfully occupying the land. In Malaysia, this principle is firmly established under Section 341 of the National Land Code 1960 and further supported by the Federal Court’s decision in Sidek Bin Haji Muhamad & 461 Ors v The Government of The State Of Perak & Ors [1982] 1 MLJ 313. Practically, this means that the landowner can take appropriate action to evict squatters at any time and after any period of delay.
Unlike the United Kingdom, the principle of adverse possession does not apply in Malaysia. Adverse possession refers to a situation where a person who occupies land without legal entitlement can eventually acquire ownership rights after a specific period, typically 12 years in the UK. However, in Malaysia, the legal position is different, and squatters cannot acquire ownership rights through adverse possession, regardless of the length of time they have occupied the land.
Risks and Dangers of Self-Help
While landowners have the right to remove squatters from their land, it is advisable to follow the appropriate legal procedures to ensure a smooth and lawful eviction process.
Resorting to self-help is not advisable when dealing with squatters. Landowners taking matters into their own hands by forcefully evicting squatters without a court order can lead to various legal repercussions. Landowners may be held liable for causing interference with the property of the squatters, which can result in claims for damages. Moreover, engaging in forceful eviction may expose landowners to accusations of assault and battery.
Aside from the legal risks, uncooperative squatters may pose a threat to the safety and well-being of the landowners. Confrontations with squatters can escalate into violent situations, putting the landowners at risk of physical harm.
To ensure a lawful and safe resolution, it is recommended that landowners seek legal assistance. Experienced property lawyers can guide landowners through the proper legal procedures, protect their rights, and handle the eviction process in a legally compliant and effective manner.
Legal Proceedings for Evicting Squatters
There are two types of legal proceedings to evict squatters in Malaysia: (1) writ of summons against the squatters for trespass and eviction, and (2) originating summons for summary proceedings to recover possession of land under Order 89 of the Rules of Court 2012. Understanding the differences between these proceedings is crucial in determining the most appropriate approach for a landowner’s specific situation.
Writ of Summons for Trespass and Eviction:
This type of legal proceeding involves initiating a lawsuit against the squatters for trespass and seeking their eviction from the property. Landowners need to file a writ of summons, which contains details of the claim, including the identification of the squatters (by name and NRIC/passport). However, this method has certain challenges. It may be difficult to identify uncooperative squatters, and the process typically involves a longer time frame due to witness examination and court processes. Additionally, even if successful, enforcing monetary damages against squatters who lack financial resources can be challenging.
Originating Summons for Summary Proceedings under Order 89:
The alternative is to initiate summary proceedings under Order 89 of the Rules of Court 2012. This approach allows landowners to seek a court order for the recovery of possession of the land. Unlike a writ of summons, summary proceedings are generally more efficient and expedient. Landowners can file an originating summons supported by affidavits, which provide a summary of the facts and legal arguments, without the need for witness examination. The court will then consider the application based on the submitted documents and decide on the possession of the land.
In summary, while a writ of summons involves a trial with a longer duration and potential challenges in enforcing damages, an originating summons for summary proceedings under Order 89 of the Rules of Court 2012 offers a more streamlined and efficient process.
Procedure for Evicting Squatters under Order 89
The procedure for evicting squatters under Order 89 of the Rules of Court 2012 involves several important steps to ensure a lawful and effective eviction process.
1. Filing an Originating Summons and Affidavit in Support:
The landowner initiates the process by filing an originating summons along with an affidavit in support. The affidavit should include essential information, such as:
a) The landowner’s interest in the land;
b) The circumstances in which the land has been occupied without licence or consent, leading to the landowner’s claim to possession;
c) Confirmation that the landowner does not know the names of the squatters (if they are not named in the summons); and
d) Details of the reasonable steps taken to identify the persons occupying the land (if their identity cannot be ascertained).
2. Service of Originating Summons and Affidavit:
The originating summons and affidavit must be personally served on the identified squatters. Alternatively, the documents can be affixed to the main door or another conspicuous part of the land and inserted into the letterbox (if available) in a sealed envelope addressed to “the occupiers.
3. Uncontested Originating Summons:
If the squatters do not contest the originating summons, the court may proceed to make an order for possession of the land at least 5 clear days after the service or affixing of the originating summons and affidavit.
4. Filing a Writ of Possession:
Upon obtaining an order for possession of the land, the landowner may file a writ of possession within 3 months from the date of the possession order. The writ of possession directs the court bailiff to carry out the eviction of the squatters
5. Contested Originating Summons:
Squatters may contest the originating summons by claiming they have the landowner’s consent for occupying the land. If they provide evidence of such consent, the court may order the matter to proceed to a full trial, as decided by the Federal Court in Shaheen Bte Abu Bakar v Perbadanan Kemajuan Negeri Selangor [1998] 4 MLJ 233 and the Court of Appeal in Tekad Urus Sdn v Penduduk-penduduk yang Menduduki Kawasan yang dipanggil Desa Perwira [2004] 2 CLJ 516.
Execution Of The Order
Once a writ of possession has been issued, the execution process begins to regain lawful control over the land. The following steps outline the execution procedure under Malaysian law:
1. Issuance of Notice for Vacant Possession:
Upon obtaining the writ of possession, the court will issue a Notice for Vacant Possession. This formal notice informs the squatters of the specific timeframe within which they must vacate the land. Generally, squatters are given fourteen (14) days from the date of the Notice to vacate the premises.
2. Appointment of Court Bailiff:
A court bailiff is appointed to oversee the execution process and is empowered to deploy reasonable force to repossess the land. The court bailiff plays a crucial role in enforcing the possession order and ensuring compliance with legal requirements.
3. Enforcement of the Notice:
After the fourteen (14) day period mentioned in the Notice expires, the court bailiff, accompanied by police officers, will be present to ensure the squatters’ compliance with the possession order. If necessary, the court bailiff may use reasonable force to repossess the land.
Practical Considerations
When the day of eviction arrives, landowners should consider practical aspects to ensure a smooth process with the court bailiff. Taking the following steps into account can help protect your rights and property:
1. Engaging Demolition Contractors:
The landowner may have contractors present on the site to assist with the demolition of any unlawful buildings constructed by the squatters. This proactive measure can expedite the restoration of the land to its original state and help ensure that the squatters do not quickly return to their buildings.
2. Securing Open Land:
In cases where the land is open and devoid of structures or fences, the landowner should erect fences along the perimeter to secure the property. This preventive measure will help prevent the squatters from returning after eviction and deter other squatters from occupying the land in the future
3. Seeking Assistance from Relevant Authorities:
To maintain a peaceful and orderly eviction process, it is recommended that the landowner seeks the assistance of relevant authorities, such as the local police or the fire department. This collaboration helps ensure the safety and security of all parties involved, minimising the risk of unnecessary conflicts with uncooperative squatters.
4. Having Lawyers Present
Having lawyers present during the eviction process offers numerous advantages. They provide expert legal guidance, act as witnesses, and deal with emergent issues. Lawyers ensure compliance with the law, protect the landowner’s rights, and handle any disputes or complications that may arise during eviction. Their presence adds credibility, representation, and peace of mind.
Other Options for Dealing With Squatters
Dealing with squatters through legal proceedings can be a complex and daunting process. However, landowners have alternative methods at their disposal to address squatter issues. Here are some viable options:
1. Negotiations:
Landowners can explore negotiations with squatters as an alternative approach. This can involve issuing a letter of demand, formally requesting the squatters to vacate the land within a specific timeframe. Engaging in discussions with the squatters to convince them to leave voluntarily is worth trying. If the squatters are cooperative, an amicable settlement can expedite the process of regaining vacant possession and potentially avoid the need for legal proceedings.
2. Criminal Trespass:
In cases where squatters are uncooperative, landowners can consider lodging a police report against them. The Public Prosecutor may, although unlikely, initiate charges for criminal trespass under Section 447 of the Penal Code in Malaysia. Criminal trespass occurs when a person enters or remains on a property without the owner’s consent, intending to commit an offence or cause annoyance, intimidation, or insult to the property’s possessor (as per Section 441 of the Penal Code). The offence carries a penalty of imprisonment for up to 6 months, a fine, or both.
Evicting Tenants v. Squatters
Evicting tenants and squatters are distinct legal processes with significant differences. Here are the key differences:
1. Applicable Legal Procedures:
The legal procedures for evicting tenants and squatters differ. The suit for trespass and eviction and summary proceedings under Order 89 of the Rules of Court 2012 are specifically designed for evicting squatters. These procedures do not apply to the eviction of tenants. Evicting a tenant generally requires following the appropriate laws governing landlord-tenant relationships.
2. Tenant Holding Over vs. Squatter:
A tenant holding over is a former tenant who continues to occupy the premises after the expiration of the tenancy. They had a lawful right to occupy the property initially through a valid tenancy agreement. In contrast, a squatter is an unauthorised occupant who has no legal right or permission to be on the property. Squatters occupy properties without any prior legal authorization or agreement with the owner.
While a tenant holding over may still have certain legal protections and rights as a tenant, a squatter has no legal entitlement to the property and is considered an unlawful occupant.
Conclusion
In Malaysia, landowners have legal rights and procedures in place to address the eviction of squatters from their properties. Understanding these rights is crucial to protect their interests and regain possession of the land lawfully. The National Land Code 1960 and Order 89 of the Rules of Court 2012 provide the legal framework for dealing with squatters.
Squatters have no legal right to the land they occupy, regardless of the duration of their unlawful occupation. Landowners can initiate legal proceedings, such as the summary proceedings under Order 89, to evict squatters and recover possession of their land. Alternative methods like negotiations and criminal trespass charges may also be considered depending on the circumstances.
Engaging experienced lawyers with expertise in property law disputes can provide valuable guidance throughout the eviction process and ensure compliance with the applicable laws. Landowners should be aware of their rights, seek appropriate legal advice, and follow the prescribed procedures to effectively address squatter issues and protect their property interests.
By Raymond Mah, Joseph Khor and Ow Jeong Jun
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.
Wednesday, 7 June 2023
3:00 pm – 4:00 pm Navigating Divorce Obligations: Insights on Varying and Enforcing Decree Nisi Orders
About this talk
Upon the dissolution of a marriage, individuals often face ongoing obligations outlined in a decree nisi, including financial support for their spouse and children, as well as the transfer of matrimonial assets. Unfortunately, situations can arise where individuals are unwilling or encounter difficulties in fulfilling these obligations.
Join us for an insightful online talk where our lawyers will shed light on the circumstances under which a decree nisi can be varied, and the methods of enforcement in case of non-compliance with the decree’s terms. Expand your knowledge and gain clarity on divorce obligations.
The talk will be delivered over video conference using Zoom.us. You can either view the talk from your web browser or download the Zoom app.
Talk Points
- Methods of Enforcing a Decree Nisi
- Case studies on Enforcing a Decree Nisi
- Situations in which a Decree Nisi may be varied
- Case studies on Varying a Decree Nisi
Speakers
- Rachel Ng, Associate, Dispute Resolution Practice Group
- Kirthika Padmanapan, Associate, Dispute Resolution Practice Group
Since the introduction of the Capital Markets and Services Act 2007 (CMSA), Malaysia’s capital market intermediaries have been required to obtain a capital market service licence (CMSL) from the Securities Commission of Malaysia. The licence is a crucial authorization for businesses operating in the capital markets, and helps to ensure investor protection and promote trust in Malaysia’s regulatory framework.
However, with the rise of digital platforms and fintech, the line between regulated businesses and service providers has become increasingly blurred. This has led to a need for businesses to understand whether they fall under the Capital Markets and Services Act 2007 and whether they require a capital market service licence to conduct regulated activities in Malaysia’s evolving fintech industry.
In this article, we explore the requirements for obtaining and maintaining a capital market service licence for digital platforms, and discuss the importance of complying with the guidelines on conduct for capital market intermediaries issued by the Securities Commission. We will provide insights on how businesses can navigate the regulatory landscape and ensure compliance in today’s rapidly evolving fintech industry.
Capital Markets and Services Act 2007
The Capital Markets and Services Act 2007 (CMSA) is an important piece of legislation in Malaysia’s financial industry. The act aims to regulate and enhance the efficiency, transparency, and integrity of the country’s capital markets. Under the CMSA, capital market intermediaries must obtain a license from the Securities Commission to operate legally in the country. The CMSA provides a single licensing regime for capital market intermediaries, which includes capital market service licence (CMSL) holders, registered persons, and persons registered under Section 76A of the CMSA to provide capital market services.
The relevance of the CMSA to the topic of digital platforms and fintech is significant. With the increasing use of digital platforms and the rise of fintech in the financial sector, the CMSA has had to evolve to meet the changing demands of the industry. In particular, the need to distinguish between regulated businesses and service providers has become more complex in the digital age. Therefore, the CMSA has had to keep up with the rapid pace of technological change to ensure that it remains an effective regulatory framework for the financial industry.
In the context of the evolving fintech industry in Malaysia, it is crucial for businesses to understand the requirements for obtaining a CMSL and to be aware of the regulations governing their activities. Failure to comply with the CMSA and the guidelines on conduct for capital market intermediaries issued by the Securities Commission can lead to serious consequences for businesses, including fines and even criminal charges. Therefore, it is essential for businesses to navigate the regulatory landscape carefully and ensure compliance with the relevant laws and guidelines.
The Securities Commission has issued guidelines on conduct for capital markets intermediaries under Section 377 of the CMSA. The guidelines set out standards of conduct and corporate governance for capital market intermediaries to follow in order to promote trust and transparency in the capital market.
Capital Market Service Licence
A capital market service licence (CMSL) is divided into different categories which cover different types of services where the applicant is required to apply for a licence to carry on the business in any one or more of the following eight activities which are regulated by the Securities Commission:
(a) Dealing in securities – to allow licensees to buy and sell securities on behalf of clients
“Securities” mean debentures, stocks or bonds issued or proposed to be issued by any government; shares or debentures of a body incorporated or unincorporated body; or units in a unit trust scheme; or prescribed investments.
(b) Dealing in derivatives – to allow licensees to deal in derivatives on behalf of clients
“Derivatives” means any contract, either for the purposes of creating an obligation or a right or any combination of both, of which its market value, delivery or payment obligations are derived from, referenced to or based on, but not limited to, underlying securities or commodities, assets, rates, indices or any of its combination, whether or not a standardised derivative or an over-the-counter derivative.
(c) Clearing for securities or derivatives
“Clearing for securities or derivatives” means, whether as principal or agent, carrying on the business of assuming obligations for the delivery and payment of a person’s transaction relating to listed securities or standardised derivatives as set out in the rules of the approved clearing house.
(d) Fund management – to allow licensees to manage investment funds on behalf of clients
“Fund management” means undertaking on behalf of any other person the management of (a) a portfolio of securities or derivatives or a combination of both, by a portfolio fund manager, whether on a discretionary authority or otherwise; or (b) an asset or a class of asset in a unit trust scheme by an asset fund manager.
(e) Dealing in a private retirement scheme
“Dealing in private retirement schemes” means, whether as principal or agent, making or offering to make with any person, or inducing or attempting to induce any person, to enter into or to offer to enter into any agreement for or with a view to (a) acquiring, or disposing of beneficial interest under a private retirement scheme; or (b) making contributions to a private retirement scheme.
(f) Advising on corporate finance – to allow licensees to provide advice on corporate finance matters including mergers and acquisitions
“Advising on corporate finance” means giving advice concerning (a) compliance with or in respect of Part VI of the CMSA, any regulation made under section 378 and any guidelines issued under section 377 relating to any matter provided under Part VI, or relating to the raising of funds by any corporation; (b) compliance with the listing requirements of the stock exchange in relation to the raising of funds or related party transactions; (c) arrangement or restructuring of a listed corporation or a subsidiary of the listed corporation of its assets or liabilities.
(g) Investment advice
Investment advice” means carrying on a business of advising others concerning securities or derivatives or as part of a business, issues or promulgates analyses or reports concerning securities or derivatives.
(h) Financial planning – to allow licensees to provide financial planning services to clients
“Financial planning” means analysing the financial circumstances of another person and providing a plan to meet that other person’s financial needs and objectives, including any investment plan in securities, whether or not a fee is charged in relation thereto.
If the nature of an applicant’s business falls under any of the above categories of services, the applicant must apply for a CMSL from the Securities Commission before commencing business.
CMSL Requirements
Depending on the category of services applied for, applicants must meet certain requirements and comply with regulations set by the Securities Commission to ensure the protection of investors and the stability of the capital market industry in Malaysia.
In general, some of the licensing requirements include having persons being fit and proper as set out under sections 64 and 65 of the CMSA. Every applicant will be required to submit their business model and scope of activities to be carried out.
A summary of other requirements include the following:
(a) Organisational Structure- requiring the company to be incorporated in Malaysia, to have licensed directors and a compliance officer, amongst others;
(b) Shareholder Composition – for companies owned by individuals, you must have majority shareholders who must have a requisite track record of experience in capital markets; and
(c) Adequacy of Financial Resources – there are financial requirements for each regulated activity with minimum financial thresholds by way of paid up share capital.
For a more comprehensive overview, see the Securities Commission Licensing Handbook.
Digital Platforms
Digital platforms in the context of capital markets services refer to online platforms or marketplaces that facilitate the buying and selling of securities or financial products. These platforms provide a virtual space where buyers and sellers can connect and interact in real-time, without the need for physical presence. Examples of digital platforms in the capital markets space include online trading platforms, crowdfunding platforms and digital investment management platforms. Digital platforms have become increasingly popular in recent years due to their convenience, accessibility, and cost-effectiveness.
The regulators in Malaysia have encouraged the development of digital platforms and also adjusted regulatory frameworks to facilitate this growth. Whilst there is no one-size-fits-all regime for any fintech or capital markets operator, licensing requirements depend on the nature of the business and services provided by companies within this sphere.
For example, the Malaysian Digital Economy Corporation Sdn Bhd (MDEC) is an agency under the Ministry of Communications and Digital which encourages digital transformation in our economy and offers corporate tax exemptions for technology start-ups.
It is also helpful to understand whether the business as a digital platform provider is one which acts as an operator or service provider. An operator for financial or capital market services is required to be licensed as either a CMSL or Digital Investment Manager (DIM), which falls under the purview of the Securities Commission. However, acting as a service provider for a technology platform or software developer in which services are outsourced by a CMSL or DIM holder, may not require the service provider itself to be licensed, provided the requirements of Chapter 10 of the Securities Commission Licensing Handbook is adhered to by the CMSL or DIM holder.
Venture Capital and Private Equity
Businesses intending to provide fund management services and activities for private equity or venture capital funds must also register with the Securities Commission. This requirement is in the Guidelines on the Registration of Venture Capital and Private Equity Corporations and Management Corporations.
Venture capital (“VC”) enthusiasts will be pleased to learn about the available tax incentives for qualifying investments in startups. To qualify for these incentives, startups must obtain a tax incentive certification from the Securities Commission. Detailed information regarding the certification process and requirements can be found on the Securities Commission’s website, accessible here.
Conclusion
Malaysia’s fintech industry presents challenges and opportunities for digital platform businesses. Obtaining a capital market service licence (CMSL) from the Securities Commission is essential to protect investors and build trust in the regulatory framework. As the line blurs between regulated businesses and service providers, it is crucial to determine obligations under the Capital Markets and Services Act accurately.
This article explored the requirements for obtaining and maintaining a CMSL for digital platforms, emphasizing compliance with the Securities Commission’s conduct guidelines. By navigating the regulatory landscape and staying informed about developments, businesses can embrace fintech’s transformative potential while contributing to the growth of Malaysia’s capital market ecosystem. Adapting to changing regulations and best practices ensures compliance and success in the dynamic fintech industry.
We have advised several start-ups and established foreign companies on whether their business and companies require licensing or approvals by local regulators and authorities. Get in touch with us if you have any questions or need legal advice in this context.
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.
Wednesday, 31 May 2023
3:00 pm – 4:00 pm Industrial Court vs Labour Court: Understanding the Process, the Law and Recent Amendments to Protect your Rights
About this talk
Confused about the differences between the Labour Court and the Industrial Court? Recent amendments to the Employment Act 1955 and the Industrial Relations Act 1967 have made it more important than ever for both employers and employees to be updated with the latest changes as it could make or break their claim.
Join our online talk where our speakers will guide you through the process of filing and defending a claim in the Industrial Court and the Labour Court. You’ll learn about the jurisdiction and the differences between the two courts and gain a comprehensive understanding of the recent amendments to the Employment Act 1955 and the Industrial Relations Act 1967.
The talk will be delivered over video conference using Zoom.us. You can either view the talk from your web browser or download the Zoom app.
Talk Points
- Jurisdiction of the Labour Court and the Industrial Court
- The process of filing a claim in the Labour Court and the Industrial Court
- Amendments to the Employment Act 1955 and Industrial Relations Act 1967
- Reported cases from the Industrial Court and the Labour Court
Speakers
- Naveen Joshua, Senior Associate, Dispute Resolution Practice Group
- Kirthika Padmanapan, Associate, Dispute Resolution Practice Group
Wednesday, 3 May 2023
3:00 pm – 4:00 pm Medical Negligence Claims: What Patients and Their Families Need to Know
About this talk
If you or a loved one has suffered harm due to medical negligence, you may be entitled to compensation. But navigating the claims process can be daunting and you may have a number of questions. For example, do you need medical records or expert reports in order to succeed? What if the hospital refuses to provide you with your medical records? What kinds of damages can you claim in a medical negligence claim?
Our webinar on medical negligence claims will help you understand the legal framework for these claims, the gathering of evidence, and how to overcome common obstacles. We will also discuss the types of damages you can claim and the impact of interest rates and costs. Join us to learn how to maximise your recovery and get the compensation you deserve
The talk will be delivered over video conference using Zoom.us. You can either view the talk from your web browser or download the Zoom app.
Talk Points
- Obtaining discovery of medical records
- Seeking independent expert medical opinions
- Grievance mechanism; deceased patients; limitation periods; etc
- The types of damages claimable
- Interest rates and legal costs
Speakers
- Jeremy Balang, Associate, Dispute Resolution Practice Group
- Kar Men Fung, Associate, Dispute Resolution Practice Group
The Strata Management Tribunal provides a cost-effective alternative to court litigation to resolve disputes related to strata properties in Malaysia. The Strata Management Tribunal enables proprietors, joint management bodies (JMBs), management corporations (MCs) and developers to obtain relief for matters related to strata management or strata living.
The jurisdiction of the Strata Management Tribunal is stated in the Fourth Schedule of the Strata Management Act 2013. After a hearing, the Strata Management Tribunal will deliver its decision in the form of a Tribunal Award.
However, what happens if a proprietor, JMB or MC is dissatisfied with the decision of the Strata Management Tribunal? Are they entitled to challenge the Tribunal Award? The short answer is yes. This article will look into how a Tribunal Award can be challenged and under what circumstances a Tribunal Award can be challenged and set aside.
Relevant legislation
A Tribunal Award is deemed to be final and binding on all parties to the tribunal proceedings. A Tribunal Award is also deemed to be an order of a court and can be enforced by any party to the tribunal proceedings.
Nevertheless, Section 121 of the Strata Management Act 2013 specifically provides that any party to the tribunal proceedings may apply to the High Court to challenge a Tribunal Award on grounds of serious irregularity which has affected the Tribunal Award.
The process of challenging a Tribunal Award at the High Court is by way of a judicial review. An application for judicial review must be filed in the High Court within 3 months from the date the award is communicated. A brief explanation of the judicial review process can be found here: Understanding Dispute Resolution in Malaysia
Grounds for Challenging an Award
For a party to the tribunal proceedings to successfully challenge a Tribunal Award in Court, the party must show that there is a serious irregularity that has affected the Tribunal Award.
A serious irregularity under Section 121 of the Strata Management Act 2013 includes the following scenarios which have caused substantial injustice to the applicant:
- The failure by the Strata Management Tribunal to comply with Section 113 of the Strata Management Act 2013, which is to “act fairly and impartially as between the parties, giving each party a reasonable opportunity of presenting his case and dealing with that of his opponent”;
- The failure of the Strata Management Tribunal to deal with all the relevant issues that were put to the Tribunal; or
- There is uncertainty or ambiguity as to the effect of the Tribunal Award.
Powers of the High Court
If the High Court is satisfied that there is serious irregularity affecting a Tribunal Award, the High Court has the power to either:
- Remit the Tribunal Award, in whole or in part, for reconsideration; or
- Set aside the Tribunal Award in whole or in part.
In Tham Sau Hoong v Tribunal Pengurusan Strata & Satu Lagi [2019] 7 CLJ 132, the High Court set aside the award of the Tribunal and ordered the applicant’s claim to be heard by another Chairman in the Strata Management Tribunal.
The applicant, who was also the Chairman of the Gold Coast Resort Condominium Management Corporation (second respondent), filed a complaint to the Office of the Building Commissioner about the breach of the Strata Management (Management and Maintenance) Regulations 2015 by four unit owners, who were later elected as committee members. The issue remained unresolved, and the applicant challenged the eligibility of some of the committee members in the annual general meeting. The AGM referred the qualification issues to the Commissioner of Buildings (COB), which decided that only four of the seven elected members could be on the new committee, provided they remedied the wrongdoing within the specified time. The applicant disputed that the four members remedied the wrongdoing, but the COB confirmed their qualifications as committee members.
The applicant then filed a claim in the Strata Management Tribunal, seeking an order for the management corporation to comply with the Regulations. However, the claim was rejected on the basis that it was academic because the seven unit owners had already retired from their position as committee members. The applicant applied for a judicial review, arguing that the Tribunal committed serious irregularities and did not comply with the requirement to provide reasons for the decision.
The High Court was satisfied that the applicant was successful in proving to the court that the Strata Management Tribunal had committed a “serious irregularity” under Section 121(3)(b) of the Strata Management Act 2013. The court held that the first respondent failed to take into account the relevant facts, misunderstood the facts and issues presented, and relied solely on the COB’s letter as evidence. The High Court allowed the application for a writ of certiorari, quashing and setting aside the entire decision of the Tribunal. The court ordered the applicant’s claim to be heard by another Chairman in the Strata Management Tribunal. The decision highlights the statutory responsibility of the Tribunal to enforce the Regulations and to compel any party to comply with any regulation or to prevent non-compliance with any regulation.
Similarly, in Perbadanan Pengurusan Sunrise Towers v Tribunal Pengurusan Strata & Yang Lain [2019] 3 CLJ 414, the High Court held that the Strata Management Tribunal allowed the applicant’s judicial review and set aside the award of the Tribunal.
The applicant (the management corporation) commenced an action in the Sessions Court against the 2nd and 3rd respondents (parcel owners) on, amongst others, the outstanding maintenance charges, insurance charges, quit rent and late payment interest. The Sessions Court allowed the applicant’s claim. Dissatisfied with the decision of the Sessions Court, the applicant then filed an appeal to the High Court. The High Court allowed the appeal and set aside the Sessions Court’s decision.
Based on the High Court’s decision to set aside the Sessions Court’s decision, the applicant filed the Tribunal claim against the 2nd and 3rd respondents to recover the outstanding charges. The Tribunal dismissed the claims against the 2nd and 3rd respondents. The applicant then filed a judicial review application at the High Court.
The High Court in allowing the judicial review, held that the Strata Management Tribunal failed to take into account the following relevant facts:
- That the management corporation had a statutory duty to collect maintenance charges that are in arrears;
- That there is a statutory duty on the 2nd and 3rd respondents as co-proprietors of a unit in the strata development to pay maintenance charges and it is unjust for the 2nd and 3rd respondents to enjoy the facilities in the strata development without paying maintenance charges; and
- That the 2nd and 3rd respondents admitted that they are liable to pay the arrears in maintenance charges.
As a result of the Strata Management Tribunal’s failure to consider these relevant issues, the High Court held that the Tribunal Award was irregular, set aside the Tribunal Award and ordered the applicant’s claims to be reheard by another President of the Tribunal.
In the case of Law Hock Hua v PJ8 Joint Management Body & Ors [2019] MLJU 350, the applicant, a parcel owner of three units in PJ8 Service Suite and former treasurer of the PJ8 Joint Management Body (JMB), filed a tribunal claim against the JMB seeking to nullify resolutions passed by the JMB to revise the service charge for unit owners of Block A and C at the rate of 11 cents psf and 44 cents psf for unit owners for Block D. In response, the JMB filed a defence and counterclaim, to claim for the shortfall of services charges in the sum of RM314,086 and to prevent the applicant from participating, voting, or serving on any committee related to PJ8 Service Suite.
However, the applicant’s claim was struck off as he had mistakenly gone to the wrong tribunal for the hearing. He applied to reinstate the claim but was denied. The JMB’s counterclaim was heard and dismissed, but the tribunal still ordered the applicant to pay RM250,000 and costs of RM1,000 to the JMB. The applicant then filed a judicial review in the High Court, arguing that the tribunal had no jurisdiction to hear the JMB’s counterclaim because it exceeded the jurisdiction limit of RM250,000 and was related to a breach of fiduciary duty, which the tribunal had no authority to decide.
The High Court allowed the judicial review and held that the tribunal’s decision was tainted by errors of law, irrationality, and serious irregularities that warranted court intervention. Specifically, the court found that the JMB’s counterclaim for RM314,086 exceeded the tribunal’s jurisdiction limit of RM250,000 and was in any event, not supported by any evidence.
In the case of Commissioner of Buildings Hang Tuah Jaya Municipal Council v Joint Management Body of Ixora Apartments & Anor [2020] MLJU 1374, the High Court allowed the applicant’s judicial review application and held that the Strata Management Tribunal erred in law and fact when it failed to deal with all the relevant issues that were put to it.
The 1st respondent (the Joint Management Body), applied to the applicant (the Commission of Buildings) for payment of allowances to some committee members of the JMB particularly the Chairman, the Secretary and the Treasurer. The COB refused the applicant on the grounds, amongst others, that the application for payment of the allowances was neither discussed nor put forward in any general meeting, and was not made known to all parcel owners who paid the maintenance fees to the JMB. The COB found that there was no transparency in the decision to pay allowances to selected committee members.
The JMB filed a case at the Strata Management Tribunal to challenge the decision of the COB. The Tribunal set aside the COB’s decision and ordered the JMB to submit a new application to the COB for the payment of allowances.
The COB then filed a judicial review application against the decision of the Tribunal. The High Court allowed the applicant’s judicial review application on the following grounds:
- Although the decision of the Strata Management Tribunal is said to be final, the decision is still subject to review by the Court under Section 121 of the Strata Management Act 2013 and the inherent jurisdiction of the Court to do justice;
- The COB has no right to determine the payment of any expenditure because the exercise of that power is subject to public scrutiny by the parcel owners; and
- A general meeting is required to approve the payment of allowances to comply with public accountability and good corporate governance.
Conclusion
The Strata Management Tribunal provides a useful forum for resolving disputes related to strata properties in Malaysia. However, parties who are dissatisfied with a Tribunal Award have the right to challenge it under certain circumstances. To challenge a Tribunal Award, the dissatisfied party must demonstrate a serious irregularity that has affected the Tribunal Award. If successful, the High Court may set aside the award or remit it for reconsideration.
It is important to note that challenging a Tribunal Award requires prompt action, adherence to proper procedures, and seeking legal advice. By understanding the grounds for challenging an award and the process involved, strata property owners can protect their rights and interests.
By Raymond Mah and Fung Kar Men
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.
Wednesday, 19 April 2023
3:00 pm – 4:00 pm Eviction of Squatters: A Landowner’s Right to Vacant Possession
About this talk
Are squatters illegally occupying your land, causing you financial loss and inconvenience? As a landowner, you have the right to file legal proceedings under Order 89 of the Rules of Court 2012 to evict them, but do you know what the process entails and what your rights are as a landowner?
Join us for our upcoming webinar where our property disputes lawyers will guide you through the legal process of evicting squatters and provide you with insights into the rights of landowners and squatters in Malaysia.
The talk will be delivered over video conference using Zoom.us. You can either view the talk from your web browser or download the Zoom app.
Talk Points
- Rights of landowners
- Court process to evict squatters
- The difference between evicting squatters and tenants
- Pitfalls and tips for evicting squatters
Speakers
- Vivien Fan, Senior Associate, Dispute Resolution Practice Group
- Ow Jeong Jun, Associate, Dispute Resolution Practice Group
Company directors play a crucial role in the effective management and operation of a company. Directors are responsible for making important decisions that affect the company and its shareholders, and they must ensure that their actions are legal, ethical, and in the best interest of the company. Understanding the scope of their duties and responsibilities helps directors to fulfil their obligations and avoid any potential civil or criminal liabilities. It also helps shareholders to hold directors accountable and ensure that the company is operating responsibly and sustainably.
A company has a separate legal personality from its directors because it is considered a separate legal entity under the law. This means that the company can enter into contracts, sue and be sued, and own assets and liabilities in its name, independent of its directors. The directors are responsible for managing the company’s affairs, but they are not personally liable for the company’s debts and obligations unless they have acted in breach of their duties and responsibilities.
A director has both fiduciary duties and statutory duties to act in the company’s best interests. A director’s fiduciary duties are based on common law. Statutory duties are specific legal obligations imposed by legislation. The common law and statutory duties of directors exist simultaneously to complement the director’s role in the daily operation of a company. The duties and responsibilities that will be addressed in this article are non-exhaustive.
Common Law Duties
At common law, the fiduciary duties of a director include:
- To act in good faith and in the best interests of the company
- To exercise reasonable care, skill, and diligence
- To exercise powers for the purpose for which they were conferred
- To avoid conflicts of interest between personal and company matters
- To maintain the confidentiality of the company’s information
- To act with impartiality towards shareholders
- To declare any interest in a proposed transaction or arrangement with the company
- Not to make secret profits or take advantage of their position for personal gain
- Not to compete with the company
Statutory Duties
The common law fiduciary duties were previously codified in the Companies Act 1965. Since the Companies Act 1965 was repealed, the statutory position on director duties is now set out in the Companies Act 2016. Some of the important director’s duties and responsibilities are as follows:
The statutory duties of a company director are set out in Part III of the Companies Act 2016 and include the duty:
- To exercise powers for a proper purpose (Section 213(1))
- To act in good faith in the best interests of the company (Section 213(1))
- To exercise reasonable care, skill, and diligence (Section 213(2))
- To make business judgments for a proper purpose and in good faith (Section 214(1)(a)); and
- To avoid conflicts of personal interest in making business judgments (Section 214(1)(b)).
- To disclose any conflict of interest (Section 221).
- To abstain from voting on any matter with a conflict of interest (Section 222)
- To ensure that the company maintains proper accounting records (Section 245)
- To prepare and submit the company’s financial statements and reports (Section 258)
Reasonable Care, Skill and Diligence
Section 213 of the Companies Act 2016 codifies the common law duties of a company director to act in good faith and in the company’s best interests when performing their duties. Whilst doing so, a director should also perform their duties with a standard of knowledge, skill and experience that may reasonably be expected from other directors. This section is one of the most relevant to directors. Section 213 reads as follows:
213. (1) A director of a company shall at all times exercise his powers in accordance with this Act, for a proper purpose and in good faith in the best interest of the company.
(2) A director of a company shall exercise reasonable care, skill and diligence with—
(a) the knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities; and
(b) any additional knowledge, skill and experience which the director in fact has.
(3) A director who contravenes this section commits an offence and shall, on conviction, be liable to imprisonment for a term not exceeding five years or to a fine not exceeding three million ringgit or to both.
Business Judgment Rule
The business judgment rule is a common law legal principle that protects directors from personal liability for decisions made in good faith and with reasonable care, skill, and diligence. Under the business judgment rule, courts will generally not second-guess a decision made by a director, even if the decision turns out to be wrong or causes loss to the company. However, the rule does not provide blanket immunity, and directors may still be held liable if they have breached their duties to the company.
The business judgment rule is intended to encourage directors and officers to take risks and make decisions in the best interests of the company without the fear of personal liability, while also holding them accountable for their actions.
In Malaysia, the business judgment rule has been codified in Section 214 of the Companies Act 2016, which reads:
214. (1) A director who makes a business judgment is deemed to meet the requirements of the duty under subsection 213(2) and the equivalent duties under the common law and in equity if the director—
(a) makes the business judgment for a proper purpose and in good faith;
(b) does not have a material personal interest in the subject matter of the business judgment;
(c) is informed about the subject matter of the business judgment to the extent the director reasonably believes to be appropriate under the circumstances; and
(d) reasonably believes that the business judgment is in the best interest of the company.
(2) For the purposes of this section, “business judgment” means any decision on whether or not to take action in respect of a matter relevant to the company’s business.
Federal Court Decisions
Board of Trustees of the Sabah Foundation & 2 Ors v Datuk Syed Kechik bin Syed Mohamed & Anor [2008] 5 MLJ 469
The requirement of a director to act in good faith and in the best interests of the company can also be found in common law as part of a director’s fiduciary obligations to the company. The Federal Court case of the Board of Trustees of the Sabah Foundation & 2 Ors v Datuk Syed Kechik bin Syed Mohamed & Anor [2008] 5 MLJ 469 explained that a director’s fiduciary duty at common law is aligned with the duties provided in Section 214 of the Companies Act 2016. Essentially, a director’s fiduciary duty provides that the director has to act in good faith and must not act for his own benefit.
There were two appeals before the court in the Board of Trustees of the Sabah Foundation case – the Zara Appeal and the Banita Appeal. In the Zara Appeal, the Sabah Foundation (SF) and its subsidiaries sued Datuk Syed Kechik bin Syed Mohamed (DSK) and his company, Zara Sdn Bhd (Zara), alleging that DSK committed a breach of fiduciary duty by failing to fully disclose information about the tower and coastal highway projects. The main issue in the Zara Appeal was whether DSK breached his fiduciary duty to SF.
The High Court found that DSK had breached his fiduciary duties by making decisions regarding the construction of the tower and coastal highway without declaring his interests in his company, Zara. The High Court ordered the disgorgement of profits made from the enhancement of the value of the Zara land due to the construction, which was assessed to be RM10 million. However, the Court of Appeal reversed this decision and found that the decisions regarding the construction were made by the state government, not DSK, and therefore he did not breach his fiduciary duties or act dishonestly. The Court of Appeal also dismissed a cross-appeal by SF and its subsidiaries. The Court of Appeal considered factors such as the Chief Minister’s dominant personality and control over important matters in the state and the government department status of SF and its subsidiaries.
The Federal Court dismissed the Zara Appeal, and found that DSK did not commit any breach of fiduciary duty, as he did not use or misuse trust information belonging to the appellants and did not place himself in a position of conflict of interest. He acted in good faith towards the appellants. The court also noted that even the trial judge did not find that DSK had been dishonest or committed the appellants to projects with the primary purpose of enhancing the value of the Zara land.
In the Banita Appeal, Banita Sdn Bhd sued DSK, alleging that he fraudulently concealed his control and beneficial interest in Banita. The main issue in the Banita Appeal was whether a director of a corporation could be held liable for breach of fiduciary duty when the corporation was a contractor to the state government and the state government granted a benefit to a company controlled by the director. The appellants in the Zara Appeal also challenged the validity of the decision of the Court of Appeal dated 6 June 2003 on various grounds.
The High Court found that DSK was liable for breach of fiduciary duty and awarded the respondents a combined sum of approximately RM29 million (including compound interest). The Court of Appeal dismissed the appellants’ appeal on liability but reduced the trial judge’s award to RM6.4 million and substituted the award of compound interest with simple interest. The Court of Appeal upheld the High Court’s finding on liability on the basis that DSK had made use of trust information belonging to SF.
The Federal Court found that DSK was in breach of his fiduciary duty to his principal, SF, and that a conflict of interest had arisen when he applied for the special timber licence of the Wallace Bay area without informed consent from SF. The court confirmed that a trustee must disgorge the entirety of any profit made in breach of fiduciary duty.
Tengku Dato’ Ibrahim Petra bin Tengku Indra Petra v Petra Perdana Bhd and Another Appeal [2018] 2 MLJ 177
Decided cases also provide guidance on what it means to act in good faith and in the best interest of the company. The Federal Court in the recent case of Tengku Dato’ Ibrahim Petra bin Tengku Indra Petra v Petra Perdana Bhd and Another Appeal [2018] 2 MLJ 177 applied both subjective and objective tests simultaneously to assess the director’s duties and responsibilities depending on the different company cultures and company policies. The Federal Court emphasised that the subjective test depends on what a director considers to be an act done in good faith and in the interest of the company, and not what a court may consider as being in the best interest of a company. The court’s assessment would come in the form of an objective test whereby the court would examine the director’s subjective assessment of what the director considers as being an act done in the best interest of the company.
The case of the Tengku Dato’ Ibrahim Petra involved two appeals against the respondent company, Petra Perdana Berhad. The dispute was based on whether the appellants, former directors of the company, had acted in the best interest of the company when divesting shares in Petra Energy Bhd (PEB). The company had sued the appellants and four others, alleging that they had acted in breach of their statutory duties and conspired to injure the company, causing loss and damage. The appellants argued that they had acted according to the mandates of the board of directors in the best interests of the company, which included meeting its urgent liquidity needs and alleviating its dire cash flow position. The High Court dismissed the company’s claim, but the Court of Appeal allowed the appeal against the appellants. The Court of Appeal held that the second and third divestments were not bona fide in the best interests of the company. The Federal Court allowed the appeal by three former directors and set aside the findings of the Court of Appeal.
The Federal Court found that the former directors had acted in good faith and in the best interests of the company when they sold PEB shares to address liquidity problems. The reasons for the sale were genuine, and there was no evidence of personal gain or ulterior motives. The board of directors considered all options and concluded that the sale of the PEB shares was the only way to resolve the cash flow problem. The disposal price of the shares under the third divestment was higher than the mandated price and the market price, and fell within the valuation range of the fairness consideration report procured by DSK before affecting the sale.
The Federal Court’s comments in the Engku Petra case highlight that a director’s actions should be reasonable and compared to those of other directors. The Court will objectively assess if the directors are acting reasonably and in good faith. A director must act in the best interests of the company and ensure their decisions are reasonable. Good faith alone is not enough; the court must assess reasonableness. If a director acts in good faith and makes reasonable decisions in the best interests of the company, they will likely not breach their fiduciary duties.
Other Statutory Duties
Reliance on information provided by others
Section 215 of the Companies Act 2016 allows directors to rely on information provided by others when making decisions, including advice, opinions, reports or statements. Directors may rely on information provided by company officers, professionals or experts, other directors or committees. This reliance is considered reasonable if it is made in good faith and after the director has made an independent assessment of the information, taking into account the complexity of the company’s structure and operations. This provision protects directors who make decisions based on information provided by others, as long as they act in good faith and exercise their own judgement.
Prohibition against improper use of property and position
Section 218 of the Companies Act 2016 prohibits a director or officer of a company from using the property of the company, information acquired by virtue of their position, their position as a director or officer, any opportunity of the company, or engaging in business in competition with the company, to benefit themselves or harm the company, without the consent or ratification of a general meeting. This provision aims to prevent directors and officers from using their positions for personal gain at the expense of the company.
General duty to make disclosure
Section 219 of the Malaysian Companies Act 2016 requires directors to give written notice to their company when they acquire or dispose of shares, debentures, or contracts in the company, or if there is any change in the information previously provided. The purpose of this requirement is to ensure transparency and accountability in the management of the company and to protect the interests of shareholders
Duty to avoid a conflict of interest
Section 221 of the Companies Act 2016 requires directors to disclose any interest they have in a contract or proposed contract with the company, either directly or indirectly. They must declare the nature of their interest at a board meeting as soon as possible after becoming aware of the facts.
Section 222 of the Companies Act 2016 sets out the rules regarding a director’s participation in contracts where they have an interest, whether directly or indirectly. If a director is interested in a contract, they must disclose their interest and cannot participate in any discussion or vote on the contract. However, there are exceptions for private companies and contracts involving indemnity or a director’s interest in another company.
Duty for accounts to be kept
Section 245 of the Companies Act 2016 requires companies and their directors and managers to maintain proper accounting and other records that explain the financial position and transactions of the company. The records must be kept in a way that allows for easy auditing and must be retained for at least seven years after the transactions or operations have been completed. These records must be kept at the company’s registered office or a place chosen by the directors but must be available for inspection by the directors.
Breach of director’s duties and penalties
A director who breaches his or her duties to the company can be held liable for damages. The company or its shareholders may bring a civil lawsuit against the director seeking monetary compensation for any losses suffered as a result of the director’s breach. In addition, the director may also be required to compensate any third parties who have suffered loss as a result of the breach. The sum of damages awarded will depend on the nature and extent of the breach and the losses suffered.
Section 347 of the Companies Act 2016 provides an avenue for shareholders to initiate a derivative action against a director who has breached his or her duties. This action is brought on behalf of the company rather than the shareholders themselves, as the company is the entity that has been harmed by the director’s breach. The purpose of Section 347 is to provide a means for shareholders to hold directors accountable for breaches of their duties, even if the company’s management is unwilling or unable to do so.
A director can also be arrested, charged and convicted for breaching his or her duties as set out in the Companies Act 2016. For example, a director who contravenes Sections 213, 219(1), 221 or 222 commits an offence and upon conviction may be liable to a fine of RM3 million or 5 years imprisonment.
Conclusion
Directors need to know what their duties are because they play a critical role in the effective management and operation of a company. They are responsible for making important decisions that affect the company and its shareholders, and they must ensure that their actions are legal, ethical, and in the best interest of the company. Understanding their duties and responsibilities helps directors to fulfil their obligations and avoid any potential civil or criminal liabilities. It also helps shareholders to hold directors accountable and ensure that the company is operating responsibly and sustainably.
By Raymond Mah, Aaron Liew and Jazlynn Wong
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.
Wednesday, 5 April 2023
3:00 pm – 4:00 pm The Future of Sports Sponsorship in Malaysia
About this talk
Are you a National Sports Association, Athlete, or Sponsor looking to learn more about Sports Sponsorship, Image Rights, and Sports Contracts? In our upcoming webinar, our speakers will provide valuable insights into different types of sports sponsorship, image rights exploitation, management, and protection, sponsorship negotiations and the future of sports sponsorship. Register now to secure your spot and gain valuable knowledge from industry experts.
The talk will be delivered over video conference using Zoom.us. You can either view the talk from your web browser or download the Zoom app.
Talk Points
- Types and importance of sports sponsorship
- Image rights exploitation, management & protection
- Impact of technology on sponsorship
Speakers
- Lesley Lim, Partner, Dispute Resolution Practice Group
- Jeffrey Ong, Olympian & Former Sports Marketing Professional
Wednesday, 29 March 2023
3:00 pm – 4:00 pm AGMs for Stratified Developments: Essential Insights for Developers, JMBs, MCs and Property Managers
About this talk
Effective AGMs are the cornerstone to successfully managing strata developments. Join our online talk to learn about the duties and obligations required to convene an Annual General Meeting. Our lawyers will walk you through the pre-AGM requirements, eligibility of voting, types of resolutions and management committee election and appointment. Don’t miss this chance to gain valuable insights and ensure your AGMs run smoothly.
The talk will be delivered over video conference using Zoom.us. You can either view the talk from your web browser or download the Zoom app.
Talk Points
- The duty to convene AGMs
- Pre-AGM requirements
- Eligibility to vote at AGMs
- Types of resolutions at AGMs
- Election of management committee members
Speakers
- Daphne Rethual, Senior Associate, Dispute Resolution Practice Group
- Karmen Fung, Associate, Dispute Resolution Practice Group
When patients suffer brain injuries as a result of medical negligence, they may be entitled to compensation for medical expenses, lost income (in the case of adult patients), general damages for pain and suffering and loss of amenities of life, future damages, etc. In this article, we explore various successful claims in medical negligence and the damages awarded by the Malaysian courts to patients and their families.
Brain Injuries from Medical Negligence
Brain injuries or brain damage resulting from medical negligence can occur when a healthcare professional fails to provide an adequate standard of care, leading to an injury or damage to the patient’s brain.
Such injuries can cause significant physical, cognitive, and emotional impairments, including memory loss, speech and language difficulties or impairments, motor problems, neurological deficits, and premature death.
Such injuries would also have devastating consequences for patients and their family members. It can lead to a lifetime of medical expenses, lost income, and reduced quality of life. In addition, the emotional and psychological impact of brain injuries can be profound, both for the patient and their loved ones.
Compensation for Patients Who Suffered Brain Injuries from Medical Negligence
The courts in Malaysia have in successful cases awarded damages that total millions of ringgit for loss and damage including special damages, pre-trial damages, general damages, aggravated damages, and future damages as well as party-and-party costs and interest.
Some of the successful plaintiffs include infants who suffered a hypoxic insult to their brains during the birth events. There are also adult patients who suffered brain injuries during the course of medical treatment. Unfortunately, not all patients who suffer brain injuries are able to survive the consequences
The goal of such medical negligence claims is to seek compensation and redress for the life-long and permanent injuries suffered by such patients by way of court-awarded damages. In Malaysia, damages are assessed on a once-and-for-all basis (unlike in the United Kingdom). The courts when determining damages will have to decide how much money is to be awarded to cover the costs of such patients’ needs for the remainder of their lives.
Justice Vazeer Alam stated as follows in Nurul Husna binti Muhammad Hafiz & Anor v the Government of Malaysia & Ors [2015] 1 CLJ 825, a case concerning an infant patient who suffered brain injuries:
“I will now move on to the issues of the future needs of Nurul Husna. The award of future damages or cost of future care in Malaysia is done on a once-and-for-all assessment basis, unlike in England where damages may be assessed periodically, following judgment on liability. Thus, in Malaysia the victim cannot return to Court in the future to claim more damages because his or her injuries have worsened, or if unexpectedly the victim has more needs and the original award had proved inadequate …”
“Thus, in making this once and for all assessment, courts are invariably guided by the opinions of experts and in this regard the court must see that the expert opinion is reasonable, responsible and respectable; and that it stands up to a logical analysis. (see: Bolitho v City Hackney Health Authority [1997] 4 All ER 771). The future exigencies of the plaintiff’s needs are best determined by educated and well-informed surmises and postulations by experts in that field. The Courts have had regard to well established principles in trying to make a reasoned and well-informed award of future damages. The standard of proof regarding future damages is not the balance of probabilities but the possibility of danger of some adverse future developments…”
Infant Patients with Cerebral Palsy
Infants who suffer from brain injuries are often diagnosed with cerebral palsy, which is a group of disorders that can impact their ability to move normally in different parts of their bodies. This condition affects their posture, gait, muscle tone, and coordination of movement. The term “cerebral” refers to the cerebrum, which is the part of the brain that controls motor function, while “palsy” describes the paralysis of voluntary movement in certain parts of the body.
Unfortunately, there is currently no cure for cerebral palsy, and patients with this condition are at a much higher risk of suffering from seizures, spinal contractures, developmental issues, and other health problems. Infants with cerebral palsy are also more susceptible to diseases and are more likely to become ill than the average infant. Sadly, many of these infants do not survive or have significantly reduced life expectancies compared to the average person.
However, the courts often award damages to patients with brain injuries for the cost of future treatment, therapies, and rehabilitation, with the aim of improving their quality of life and potentially prolonging their shortened lives. This principle which arose from the English case of James Robshaw v United Lincolnshire Hospitals NHS Trust [2015] Med. L.R. 339 has been accepted by the Malaysian courts in various cases.
Many cases involving cerebral palsy patients are related to birth or perinatal asphyxiation or hypoxia resulting from obstetric treatment provided to the mother and unborn fetus. This may occur due to a delay in detecting fetal distress, poor monitoring of the mother’s labour, or a delay in delivering the fetus. Infants born under these circumstances often have poor outcomes, including metabolic acidosis, low Apgar scores that do not improve (although high Apgar scores are not conclusive evidence of the infant’s well-being), the need for intubation post-delivery and prolonged treatment in the Neonatal Intensive Care Unit.
In many cases, such infants are later diagnosed with hypoxic ischemic encephalopathy, which occurs when the baby’s brain doesn’t receive enough oxygen during delivery, and spastic quadriplegia, a type of cerebral palsy that affects movement in the arms and legs.
In Nur Zulaikha binti Dzulzaili v Medi-Circle Sdn Bhd v 2 Ors, the infant Zulaikha was delivered in 2003. She suffered severe injuries to her brain as a result of negligent treatment provided to her mother at a private hospital while in labour.
A suit was filed in 2018 and the High Court allowed Zulaikha’s claim and awarded damages of approximately RM8 million excluding interest and costs. This remains one of the highest quantum of damages ever awarded by the trial courts in a medical negligence claim.
The defendants in that case appealed. The Court of Appeal allowed the two doctors’ appeal and held the hospital solely liable for the injuries suffered by Zulaikha (see Medi-Circle Sdn Bhd v Nur Zulaikha binti Dzulzaili & Other Appeals [2022] 1 LNS 1546). The Court of Appeal also reduced the multiplier applied by the High Court to calculate future damages, effectively reducing the total damages to approximately RM6 million excluding interest and costs.
On 24.2.2023, the Federal Court dismissed the hospital’s appeal on the question of whether there was a duty of care in law owed to unborn fetuses. The Federal Court in dismissing the appeal declined to answer the question of law posed by the hospital and effectively confirmed that the hospital does owe a duty of care to unborn fetuses.
In Adam Azfar Syahmi bin Zamzuri v The Government of Malaysia & 13 Ors, the infant was born in 2008 and suffered severe brain injuries as a result of treatment received by his mother at a Government hospital while she was in labour. The suit was filed in 2019 for medical negligence. The Government admitted liability in 2021 but disputed the claim for damages.
Following a trial to determine the damages to be awarded, the High Court in 2022 awarded the sum of approximately RM4.1 million in damages and costs, excluding interest. The Government did not appeal the High Court’s decision.
In Yasmin Nabilah binti Zulhilmi v The Government of Malaysia & 9 Ors, the infant suffered severe brain injuries as a result of, amongst others, a delay in undertaking the delivery of the fetus. The infant suffered prolonged hypoxia in utero.
The Government admitted liability and the High Court awarded damages of approximately RM1.4 million (see Yasmin Nabilah binti Zulhilmi v The Government of Malaysia & 9 Ors [2021] 1 LNS 320). The award was later increased to approximately RM2.9 million by the Court of Appeal in 2022.
Adult Patients with Brain Injuries
In Naren a/l Vejayan v The Government of Malaysia & 67 Ors, the patient Naren was 26 years of age when he was involved in a motor vehicle accident in Johor Bahru in 2016. Naren was then brought to a Government hospital in Johor Bahru. As a result of negligent treatment, he suffered severe injuries to his brain. His injuries left him in a vegetative state and Naren is cared for entirely by his mother and brothers.
In Naren’s case, the Government had admitted liability and the case proceeded to a trial to determine the quantum of damages to be awarded. After the trial, the High Court awarded damages of approximately RM4.8 million excluding interest. Some of the notable items of damages included the following:
- RM1.2 million as future damages for the cost of nursing care;
- RM500,000 as future damages for the cost of purchasing suitable accommodation for Naren and his caregivers;
- RM400,000 as general damages for Naren’s pain and suffering and loss of amenities of life; and
- RM288,000 as damages for Naren’s loss of income (before his injuries, Naren earned money from undertaking odd jobs including repairs and renovations in households and as a part-time driver).
Naren’s case is currently pending appeal in the Court of Appeal.
In Fareed Reezal bin Arund v Pantai Medical Centre Sdn. Bhd. & 4 Ors, the patient Fareed was 44 years old in 2015 when he suffered severe brain injuries as a result of negligent medical treatment. Before his injuries, he was a director and majority shareholder of his own company and earned a sizable monthly income.
Fareed’s claim against the hospital was allowed by the High Court which also awarded damages of approximately RM7 million. The total award sum was increased to RM7.5 million by the Court of Appeal with some variations to various items of damages (see Pantai Medical Centre Sdn Bhd v Fareed Reezal bin Arund (mendakwa melalui isteri dan wakil litigasinya Wan Zafura binti Wan Kassim) and another appeal [2022] 1 LNS 1914).
Fareed’s case is currently pending appeal in the Federal Court. Unfortunately, Fareed passed away before the said appeal could be heard.
In Siow Ching Yee v Dr Megat Shiraz bin Megat Abd Rahman & 2 Ors, the patient Siow was 35 years old in 2010 when he suffered severe brain injuries as a result of negligent treatment which he received at a private hospital. Siow was a director and received, amongst others, directors’ fees for managing two companies.
The High Court in allowing Siow’s claim against the anaesthetist defendant awarded damages of approximately RM1.9 million excluding interest and costs and which award was increased to approximately RM2 million by the Court of Appeal. Siow’s case is currently pending appeal in the Federal Court.
In Yusnita binti Johari v The Government of Malaysia & 16 Ors, the patient Yusnita was 32 years old in 2013 when she suffered severe brain injuries as a result of negligent treatment received at a Government hospital. The injuries to her brain came as a result of poor management of her condition post-delivery of her child, following which she suffered significant blood loss and required cardiopulmonary resuscitation.
Before her injuries, Yusnita, a mother of two young children, worked as an administrative executive and also sold cakes on a part-time basis.
The High Court allowed Yusnita’s claim in 2021 and awarded approximately RM4.8 million in damages, excluding interest. Yusnita’s case is pending appeal in the Court of Appeal.
In Henry Siang Len v Universiti Kebangsaan Malaysia & 17 Ors, the patient Henry was a 22-year-old Myanmar refugee who was assaulted by a group of people sometime in 2010. He sought treatment for his injuries at a university-owned hospital. He was unfortunately given 5 times the intended dosage of the anaesthetic drug Ketamine, and as a result, he suffered a cardiac arrest and was diagnosed later to have suffered severe brain injuries.
The High Court allowed Henry’s claim and awarded approximately RM730,000 in damages and costs, which was increased later by the Court of Appeal in 2020 to approximately RM1.7 million excluding interest.
Henry was married and awaiting resettlement in the United States of America prior to his injuries. His pregnant wife had gone ahead to the U.S. and has since resettled there and given birth to their son. Henry remains in Malaysia in a vegetative state and is cared for by a charitable organisation. Henry’s wife did not return to see him following the events at the hospital.
Cerebral Palsy from Non-Obstetric Events
There have been medical negligence cases involving cerebral palsy patients arising out of non-birth events. In Ahmad Thaqif Amzar bin Ahmad Huzairi v Kuala Terengganu Specialist Hospital Sdn Bhd & 11 Ors, the infant Thaqif was 11 months old in 2011 when he first visited a private hospital with complaints of fever and swelling on his neck. The doctor at that hospital prescribed various medications and sent Thaqif and his parents home.
However, they returned to the private hospital the next day and informed the doctor that Thaqif’s condition had worsened. The doctor intended to have Thaqif admitted to the hospital but the parents could not afford it. Instead of referring Thaqif to a public hospital, the doctor advised the parents to wait a few days and to continue giving the medications provided earlier.
The parents, relying on the doctor’s advice, went home and cared for Thaqif over the next few days. After a few days, seeing that Thaqif’s condition was not improving, they decided to bring him to a Government hospital
However, despite the severity of Thaqif’s condition, he was only seen by an Ear, Nose & Throat (“ENT”) specialist approximately 14 hours after his admission to the Government hospital. A plan was then made to intubate Thaqif in order to secure his airway but Thaqif collapsed while being transported to the operating theatre for intubation. The collapse was due to the swelling on his neck moving and blocking his airway. He was resuscitated, but the damage to his brain was already done. He was later diagnosed with, amongst others, hypoxic ischemic encephalopathy.
A suit was filed in 2018 against both the private and Government hospitals and the practitioners involved. The defendants argued that Thaqif’s parents were wholly or contributorily negligent as they had, amongst others, allegedly delayed in bringing Thaqif to the Government hospital.
The High Court allowed Thaqif’s claim and awarded approximately RM1.9 million in damages, excluding interest and costs (see Ahmad Thaqif Amzar bin Ahmad Huzairi v Kuala Terengganu Specialist Hospital Sdn Bhd & 11 Ors [2021] 9 MLJ 10). However, the High Court also apportioned liability in the following manner; the private hospital and the doctor who attended to Thaqif there at 15 %; the Government hospital and the tortfeasor doctors at 55%; and the parents at 30%.
The parties appealed and the Court of Appeal maintained the High Court’s apportionment of liability and also reduced the damages awarded by the High Court to approximately RM1.5 million (see Kuala Terengganu Specialist Hospital Sdn Bhd & Anor v Ahmad Thaqif Amzar bin Ahmad Huzairi (claiming through mother and her litigation representative, Majdah bt Mohd Yusof) and other appeals [2023] 1 MLJ 281). Thaqif has since obtained leave to appeal to the Federal Court.
Thaqif’s case is one of the few reported medical negligence cases involving a cerebral palsy infant patient who did not suffer brain injuries before or during the birth events but as a result of medical treatment received much later in life. It is possible for infant patients to suffer brain injuries as a result of, for example, negligent paediatric or neonatal care provided to the infant following his or her birth.
Death from Brain Injuries
Many patients, including cerebral palsy patients, die from their brain injuries. Death from brain injuries can occur suddenly or after a period of deterioration.
In Irwanbudiana bin Amsah v The Government of Malaysia & 10 Ors, the plaintiff is the father of Uwais, an infant born at a Government hospital in 2015 and was diagnosed with hypoxic ischaemic encephalopathy following his birth. He passed away at the age of 5 years and 7 months. His cause of death was listed as “Cerebral Palsy (OKU)”.
The suit was filed in 2019 at a time when Uwais was still alive. Uwais however passed away in 2021, just a few months before the trial of the case was scheduled to be heard. The Government admitted liability but only much later in 2022.
Following the trial on the issue of damages, the High Court in 2022 awarded the sum of approximately RM840,000 in damages and costs, excluding interest. The High Court awarded RM250,000 for Uwais’ pain and suffering and loss of amenities of life.
There are two other notable awards in Uwais’ case. The first is the sum of RM300,000 as aggravated damages. The High Court in making this award took into account the delay by the Government in admitting liability, the refusal by the Government to make a voluntary disclosure of medical records, the way the Government’s defence was pleaded, and the way the Government had conducted the litigation. Reproduced below is an excerpt of a passage from the unreported grounds of judgment in that case:-
“Further, the Court takes a serious view of the aggravating features such as the long delay of over 2 ½ years in admitting liability, refusal to make voluntary disclosure of medical records causing the cause of action for negligence to be concealed and the filing of this claim to be delayed by a few years and the way the defence is being pleaded and trial conducted…”
The second notable award is the sum of approximately RM49,000 as special damages, as there was evidence that Uwais’ parents had prior to the filing of the suit incurred expenses to renovate Uwais’s room, therapy space and bathroom in order to improve Uwais’ quality of life and to aid his long-term care.
Uwais’ case is pending appeal in the Court of Appeal.
In Mashitoh binti Musa v The Government of Malaysia & 11 Ors, the plaintiff is the mother of Fatimah, an infant who like Uwais was born at a Government hospital (though in 2014) and who was diagnosed to have suffered neonatal hypoxic ischaemic encephalopathy. She passed away at the age of 2 years and 8 months. Her cause of death was noted to be severe sepsis with underlying cerebral palsy.
A suit was filed in 2019 and the Government admitted liability in respect of the claim but much later in 2022. Following a trial on quantum, the High Court in 2022 awarded the sum of approximately RM380,000 in damages and costs, excluding interest. Similar to Uwais’ case, the High Court awarded RM250,000 for Fatimah’s pain and suffering and loss of amenities of life. Neither party appealed the High Court’s decision.
Conclusion
Brain injuries resulting from medical negligence have far-reaching implications for the patients and their family members who often act as their full-time carers. Many families often do not have the financial means of providing the type of expensive care that such patients require, let alone provide them with a high enough standard of care that may potentially increase their shortened life expectancies
Worse still, many families caring for brain injury patients do not realise that there had been negligent treatment provided and which led to such injuries. The courts have seen infants sue in medical negligence for events that occurred as far as 15 years later. In many instances, the patients do not outlive the consequences of their brain injuries and meet an untimely death.
Medical negligence litigation is a difficult and complex area of law. It requires, amongst others, specialised knowledge about both the law and medicine, extensive research of both areas, detailed analysis of voluminous documents including medical records and reports, and instructing medical experts of suitable qualifications and experience.
By Jeremy Balang and Raymond Mah
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.
Thurs, 22 June, 2023
9:30 am – 5:30 pm (MC) Mergers & Acquisitions: Benefits, Getting it Right and the Need for Due Diligence (Download pdf brochure)
RM680 per pax nett (Lunch and refreshments will be provided)
About this course
Businesses may undergo mergers and acquisitions (M&As) in order to grow, manage risk, restructure or for a number of other advantages. M&A deals involve complex processes and transactional documents which require lawyers to advise on. It is beneficial for business owners, investors and potential purchasers to understand how M&A transactions work to avoid common pitfalls.
Legal due diligence is very much part of an M&A deal and it is important for purchasers to investigate and verify the target company’s business documents, contracts and assets. A due diligence process may also raise red flags that parties can then discuss and address by changes to the purchase price and in the sale and purchase agreement.
This workshop will cover all the important aspects of a legal due-diligence process, what a merger and acquisition is, terms of the sale and purchase agreement and types of documents typically used in such transactions.
The talk will be delivered in person at Our office.
We are pleased to offer you a 10% discount (ACADEMY 10) for Early bird registration before 9 June 2023. Sign up before the early bird ends or get 20% discount (ACADEMY 20) if you register 3 pax or more.
To claim this offer, just key in the discount code “ACADEMY 10“ or “ACADEMY 20” into the Discount Voucher section during your checkout on our payment page.
Please join us and sign up!
**Note: Price includes lunch and refreshments during the seminar. Closing date for registration: 16 June 2023
Objective
Module 1: To understand the benefits of mergers and acquisitions and for companies/ individuals to learn what typically transpires in such transactions.
Module 2: To learn the benefits of a legal due diligence, what a legal due-diligence process entails, the type of due-diligence documents typically seen in Malaysia and how it impacts the acquisition purchase price
Seminar Points
Module 1
- Benefits of Legal Due Diligence
- Due Diligence Process
- Common Due Diligence documents
- How Due Diligence impacts an acquisition purchase price
Module 2
- Introduction to mergers and acquisitions
- The benefits of M&As for companies and SMEs
- Transaction documents in an M&A deal
- Difference between M&As and Joint Ventures
Learning Outcomes
By the end of the seminar, participants will be able to:
- Know what a due-diligence process is
- Recognise the documents typically reviewed in a due diligence exercise
- Understanding how due diligence impacts purchase price
- Understand what a Merger is, and what an Acquisition is
- Recognise the type of transaction documents typically used for an M&A exercise
- Identify the difference between M&As and Joint Ventures
Module 1
- Visually Identifying due-diligence documents and the process (Quiz)
- Identify how due diligence impacts purchase price (Role Play)
Module 2
- Describing the difference between Mergers & Acquisitions (Quiz)
- Knowing how to Use M&A transaction documents (Quiz)
Seminar features:
- High Engagement
- Small groups
- Hands-on learning
Target Audience
- Purchasers acquiring shares in companies
- Business investors
- Shareholders
- Directors
- Heads of Department
- Chief Financial Officers
- In-house Legal Department
Trainers
- Cassandra Nicole Thomazios, Partner, Corporate Practice Group
- Tommy Wong, Senior Legal Associate, Corporate Practice Group
Wednesday, 15 March 2023
3:00 pm – 4:00 pm Hiring foreign employees: Offences under the Anti-Trafficking In Persons and Anti-Smuggling of Migrants Act 2007 (ATIPSOM Act) and Recent Amendments
About this talk
Did you know that employers, directors, managers or even secretaries of a company can be criminally liable under the Anti-Trafficking In Persons and Anti-Smuggling of Migrants Act 2007 (ATIPSOM Act) for facilitating the movement of migrant workers into and out of the country without proper work permits? In fact, the laws under the ATIPSOM Act have become stricter and the penalties are heavier since the latest amendments which came into effect on 22.2.2022.
Join us for this online talk where our speakers will take you through the common offences under the ATIPSOM Act that employers should be aware of when hiring foreign workers, the recent amendments to the ATIPSOM Act including the introduction of new offences and its penalties.
The talk will be delivered over video conference using Zoom.us. You can either view the talk from your web browser or download the Zoom app.
Talk Points
- The definition of human trafficking and smuggling of migrants
- The common offences under the ATIPSOM Act and its penalties
- The latest amendments to the ATIPSOM Act
Speakers
- Vivien Fan, Senior Associate, Dispute Resolution Practice Group
- Wong Chee En, Associate, Dispute Resolution Practice Group
- Kirthika Padmanapan, Associate, Dispute Resolution Practice Group