1

BUSINESS LAW
(LAW101)
Chapter 1 – Malaysian Legal System 1
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LEARNING OUTCOMES
• How Malaysian law is classified?
• What are the sources of law?
• What is the doctrine of Judicial Precedent?
• How to cite cases and statutes?
 3

Introduction
 4

Introduction

LAW

Superior Being Inferior Being Sanctions

The State The individual

Imprisonment Fines Damages Injunction Specific

performance
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Federation

LAW IN MALAYSIA
 Malaysia is a federation
 Each state in Malaysia has a
government and its own law making
body
 The law making body at the State level
is called the State Legislative Assembly
 At the state level, the state is run by the
Chief Minister / Menteri Besar and his
Exco members
 Malaysia, as a whole, has a government
and its own law making body
 The law making body at the Federal
level is called Parliament
 At the federal level, the country is run by
the Prime Minister and his Cabinet
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Federation
• Law made by Parliament is applicable to everyone is
Malaysia
• Laws made by the respective State Legislative Assembly
is only applicable in the state where the law is made
 7

Malaysia

Federal Level State Level

Parliament State Legislative

Assembly

Laws are applicable Laws are only

to everyone in applicable in the
Malaysia state where the law
was made
 8

Sources of Law

Written law Unwritten law

Sources that fall Sources that fall within

within this category this category are not
are formally and formally and officially
officially made by made
some law making
body or by someone
to whom the law
making body has
given power to make
laws
 9

Sources of Law
• Refers to where law can be found in Malaysia
• Laws in Malaysia can be found in 7 sources, namely: -
◦ Constitution
◦ Legislation / Statute
◦ Subsidiary legislation / delegated legislation
◦ Case law / Common law / Judicial precedent
◦ English common law
◦ Custom
◦ Islamic / Muslim law
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Sources of Law

Constitution Subsidiary Custom

legislation
Muslim law
Case law /
Legislation common law /
judicial precedent

English common
law
 11

Sources of Law
Muslim law

Written Law Unwritten Law

Constitution Subsidiary Custom

legislation
Case law /
Legislation common law /
judicial precedent

English common
law
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Written Law
• Refers to the law that is contained in a formal document
and which has been passed by a person or body that is
authorised to do so.
• Written law is the most important source of law
• These are the sources of law which have been codified
and consolidated
• They are organised and arranged properly
• In Malaysia, written law consists of:
• The Federal and State Constitutions,
• The legislation passed by Parliament and State Legislative
Assemblies
• Subsidiary legislation.
 13

Sources of Law
• Unwritten law is the portion of Malaysian law which is
not written e.g. which is not enacted by Parliament or
the State Assemblies and which is not found in the
written Federal and State Constitutions
• These are the sources of law which have not been
codified and consolidated
• Refers to the law that has not been formally enacted.
• The unwritten law consists of: -
• Case law (i.e. decisions of the superior courts which are binding
on the lower courts),
• customary law (i.e. local customs which have been accepted as
law by the courts) and
• Applicable principles of English common law and equity.
 14

Sources of Law
• One other important source of Malaysian law is Muslim
law
• Muslim or Islamic law is increasing being applied in our
local laws e.g. incorporation of some Islamic principles
into banking laws
• Muslim law applies to all persons who are Muslims e.g.
laws relating to family matters (e.g. marriage and divorce)
and estate matters relating to the division of property and
assets when a person dies
 15

The Federal Constitution

• Malaysia is a Federation of 13 States with a
written constitution
• The Federal Constitution is the supreme law of
the country
• It lays down the powers of the Federal and State
Governments and the basic or fundamental rights
of the individual
• It can only be changed by a two-thirds majority of
the total number of members of the legislature
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The Federal Constitution

 The Federal Constitution declares itself as the supreme
law of the Federation (Article 4(1) Federal Constitution)
 Thus, even laws enacted by Parliament which are
inconsistent with the Federal Constitution may be
declared void by the Courts
 In Repco Holdings Bhd. v. Public Prosecutor (1997), the
court held that s126(2) of the Securities Industry Act and
s39(2) of the Securities Commission Act to be
unconstitutional, null and void
 17

The Federal Constitution

 Article 73 of the Federal Constitution confers
legislative power to the Federal Parliament and
the State Legislatures
 Thus, Parliament may make laws for the whole
of Malaysia
 Article 74 of the Federal Constitution provides
that Parliament may make laws with respect to
any of the matters enumerated in the Federal
List (List I) or the Concurrent List (List III) of the
Ninth Schedule
DIVISION OF LEGISLATIVE POWER 18

Federal
Federal STATES
STATES
CCOO

CONCURRENT
NNCC

CONCURRENT

EXCLUSIVE
UURR
EXCLUSIVE

EXCLUSIVEPOWER
EXCLUSIVEPOWER

POWER
RREE

POWER
NNTT
PPOO
WWE
ERR

POWER
POWER

Article 74
Article 74
Article 7474 –– List
List III
III
Article Article
Article74
74
––List
ListII
–– List
List II II
 19

The Federal Constitution

 The Federal List (List I) may be summarised as
follows:
 External affairs
 National defence
 Internal security
 Civil and criminal law and procedure and the administration of
justice
 Federal citizenship and naturalisation; aliens
 The machinery of government
 Finance
 Trade, commerce and industry
 Shipping, navigation and fisheries
 Communications and transport
 Federal works and power
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The Federal Constitution

 The Federal List (List I) may be summarised as follows:
 Surveys, inquiries and research
 Education
 Medicine and health
 Labour and social security
 Welfare of the aborigines
 Professional occupations
 Holidays; standard of time
 Unincorporated societies
 Control of agricultural pests; protection against such pests;
prevention of plant diseases
 Newspaper; publications; publishers; printing and printing presses
 censorship
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The Federal Constitution

 The Federal List (List I) may be summarised
as follows:
 Theatres; cinemas; public amusements
 Federal housing and improvement trusts
 Co-operatives societies
 Prevention and extinguishment of fire, including fire services
and fire brigades
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The Federal Constitution

 The Concurrent List (List III) is summarised as follows:
 Social welfare, social services, protection of women, children and young
persons
 Scholarships
 Protection of wild animals and wild birds; National Parks
 Animal husbandry
 Town and country planning
 Vagrancy and itinerant hawkers
 Public health, sanitation and prevention of diseases
 Drainage and irrigation
 Rehabilitation of mining land and land which has suffered soil erosion
 Fire safety measures and fire precautions in the construction and
maintenance of buildings
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Federal Constitution
 The State List (List II) covers matters such as the
following: -
 Islamic law and personal and family law of Muslims; Malay customs;
offences by Muslims; Syariah Courts
 Land
 Agriculture and forestry
 Local government
 Local services
 State works and water
 Machinery of the State Government
 State holidays
 Offences against State Law
 Inquiries for State purposes
 Indemnity
 Turtles and riverine fishing
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The State Constitution

• Each State possesses its own constitution regulating the
government of that State
• The State Constitution contains provisions which are
enumerated in the 8th Schedule of the Federal
Constitution
• Some of these provisions include matters concerning: -
• The Ruler,
• The Executive Council,
• The Legislature,
• The Legislative Assembly,
• Financial provisions,
• State employees, and
• Amendment of the Constitution
 26

Legislation
• Refers to law enacted by a body constituted for
this purpose
• Laws are legislated by: -
• Parliament at federal level
• Various State Legislative Assemblies at state
level
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Legislation
Date Enacted by Called
After 1957 Parliament Act
State Legislative Enactment
Assemblies
(except
Sarawak)
Sarawak Ordinance
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Legislation
• Parliament and the State Legislatures are not supreme
• They have to enact laws subject to the provisions set
out in the Federal and State Constitutions
• The subject-matter for legislation is divided between the
Federal and State Governments
• As mentioned earlier,
 Parliament is competent to enact laws on matters enumerated
in List I of the Ninth Schedule
 The State Legislative Assembly can enact laws on matters
enumerated in List II (State List)
 Matters on List III (Concurrent List) are within the concurrent
competence of both authorities
 Matters not enumerated in any of the lists are within the
authority of the State Legislative Assembly
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Legislative Process
• Article 44 of the Federal Constitution vests the legislative
authority of Malaysia in Parliament, comprising: -
• The Yang di-Pertuan Agong
• The two Houses of Parliament: -
• Dewan Negara (Senate)
• Dewan Rakyat (House of Representatives)
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Legislative Process
• Legislation is enacted by Parliament by introducing a Bill
which is passed by both Dewan and assented to by the
Yang di-Pertuan Agong
• A Bill is a proposed law
• There are 3 types of Bills: -
 Public Bill
Proposed by the Government
 Private Bill
Proposed by maybe the Local Government, the State etc
 Hybrid Bill
Has the characteristics of both Public and Private Bill
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Legislative Process
 A Bill may originate in either Dewan, although it most
often originates in the Dewan Rakyat
 Bills concerning tax or expenditure (Money or Supply
Bills) must originate in the Dewan Rakyat
 The legislative process outlined focuses on government
Bills that originate in the Dewan Rakyat
 There are two main stages in the process:
◦ Pre-Parliamentary
◦ Parliamentary
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Legislative Process
• In each Dewan, the Bill goes through four stages
• First Reading
• Second Reading
• Committee Stage
• Third Reading
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• Government Proposal
Pre-Parliamentary • Meetings between relevant government authorities
Stage • Drafting of Bill by Parliamentary Draftsperson
• Cabinet approval of Bill

Parliamentary Stage First Reading Minister formally introduces the Bill in the Dewan
Rakyat by having its short title read

Second Debate on the general principles of the Bill, followed

Reading by a vote – simple majority or a two-thirds majority
of the total number of members of the Dewan

Committee Detailed examination of the Bill and consideration of

Stage amendments, followed by a report on the Bill to the
Dewan

Third Reading Further debate on the general principles of the Bill,

followed by a vote

Dewan Negara Similar procedures as in the Dewan Rakyat. If

passed, the Bill is referred back to the Dewan Rakyat

Royal Assent The Yang di-Pertuan Agong affixes the Public Seal
within 30 days of presentation. When assent is not
affected within the specified time, the Bill becomes
law as if it had been assented to. Bill becomes an Act
Publication Act comes into force
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Dewan Negara
 When the Bill is passed with or without amendments by
the Dewan Negara, it is returned to the Dewan Rakyat
 Any disagreement between the two Dewan over any
amendments are resolved by the appointment of a joint
committee by both Dewan under Article 66(3) of the
Federal Constitution
 The Dewan Negara has no power to veto, reject or insist
on its amendments to a Bill passed by the Dewan
Rakyat
 Under Article 68 of the Federal Constitution, the power of
the Dewan Negara is restricted to delaying the passage
of the Bill – one month if it is a Money Bill and 12 months
if it is a non-Money Bill
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Dewan Negara
 If the Dewan Negara does not pass the Bill or persists to
disagree with the Dewan Rakyat on its proposed
amendments, the Bill will be presented for Royal Assent
at the end of the specified period
 The only exception is a Bill amending the Federal
Constitution
 Such a Bill is required by the constitution to decide by
the requisite majority in each Dewan
 Such a Bill cannot be presented for the Royal Assent
until it has been passed by both Dewan
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Subsidiary Legislation
• Subsidiary / delegated legislations are laws which are
made by someone / somebody whom Parliament at
the Federal level or the State Legislative Assembly at
the State Level has given power to this body to make
such laws
• Parliament / State Legislative Assembly gives power to
somebody to make laws for them
 37

Subsidiary Legislation
• Legislations are made by Parliament through a
parliamentary process which is long and involves
several stages
• Parliament produces annually a very large output
of new legislations
• Some legislations regulate very complex matters
such as employment, social security, tax liability
and economic management
• Thus, It would be impossible to include in a
legislation all relevant details of these subjects
• Furthermore, it may be necessary to make
changes to some laws regularly, e.g. in a period
of severe inflation it will be necessary from time to
time to increase the amount of excise duties
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Subsidiary Legislation
 The need to fill in and to vary the details of statute law is
met by conferring, usually on the minister concerned, a
statutory power to make regulations for defined purposes
of the main statute
 This is called subsidiary legislation or delegated legislation,
since the parent Act delegates to some executive authority
power to legislate in this way
 A parent Act often confers similar powers upon local
authorities to legislate by way of bye-laws
 The reason for there to be subsidiary legislation is because
Parliament does have the time nor the expertise to
examine the regulation of every industry or aspect of the
community
 Subsidiary legislation give to certain bodies or people the
right to make ‘legislation’.
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Subsidiary Legislation
 The Interpretation Act 1967, defines subsidiary
legislation as “any proclamation, rule, regulation, order,
notification, by-law or other instrument made under any
Ordinance, Enactment or other lawful authority and
having legislative effect”
 Such persons or bodies include the Yang di-Pertuan
Agong, Ministers, local authorities etc.
 It is void if it contravenes the parent Act or the
Constitution
 40

DELEGATED LEGISLATION
PARLIAMENT

AUTHORITY
DELEGATES
SUBORDINATE BODY

LOCAL COUNCIL

MINISTERS
PROFESSIONAL BODIES
 41

Example
Legislation
 The Companies Act 2016
Subsidiary legislation
 The Companies Regulations 2017
 42

Subsidiary Legislation
• It is important because: -
• Delegated legislation can be passed very quickly and is more
flexible. This is because it does not have to undergo the various
stages of procedure which has to be followed in Parliament or the
State Legislative Assemblies. Similarly, if the need arises,
subsidiary legislation can be just as speedily amended or even
rescinded to meet the changing needs of society.
• Delegated legislation deals with the detailed rules necessary to
implement the law. As Parliament does not have sufficient time to
deal with such minute details, delegated legislation is the more
efficient way to fulfil this need.
• Some matters require the special skill and knowledge of experts
in that area. Parliament itself may not have sufficient experts for
this purpose. Thus, delegated legislation fulfils this need as well.
 43

Subsidiary Legislation
• Limitations: -
• Such legislation is made under powers given by Parliament and it
is considered appropriate to some cases that Parliament should
supervise the exercise of those delegated powers
• The second main limitation is the doctrine of ultra vires. The power
to make delegated legislation is given for specified purposes and
such legislation is invalid if it exceeds the scope of the delegated
power to legislate
 44

The Common Law

• Also known as case law and judicial precedent
• These are laws which are made by judges
• When a judge makes a decision, his decision may end up
becoming a law
• When a judge makes a decision in a case he is deciding,
this decision must be followed by all judges of lower
courts provided the facts of the case is similar
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The Common Law

• This can be found in the judicial decisions of the High
Court, Court of Appeal and the Federal Court and the then
Supreme Court, High Court and the Judicial Committee of
the Privy Council
• Decisions of these courts were made, and still are being
made, systematically by the use of what is called the
“doctrine of binding judicial precedent”
 46

The Common Law

• Judges do not decide cases arbitrarily
• They follow certain accepted principles commonly known
as precedents
• Precedents are basically decisions made by judges
previously in similar situations
• Example, if the Federal Court made a certain decision in
1987 and assuming the facts and situations before a High
Court judge deciding a case in 1990 are similar to the said
Federal Court case, the High Court judge must decide the
case before him by applying the principles laid down by
the Federal Court in 1987
 47

The Common Law

• If a judge applies an existing rule of law without extending
it, his decision may be called declaratory precedent
• If the case before him is without precedent, then the
decision made by him may be called an original
precedent
• Judges are constantly contributing to the growth of
unwritten law in this country
• The system of binding judicial precedent is called stare
decisis
 48

The Common Law

 The principle of law to be followed must form part of the
ratio decidendi of the case
 The ratio decidendi is the 'reason for the decision' and is
the principle of law as applied to the facts of the case; it
is a matter of interpretation for the later judge to
determining the similar dispute
 Obiter dicta (general judicial observation) is made by a
judge in the course of his judgement. It is not strictly
relevant to the decision. It is treated as persuasive
precedent i.e. for later judges to pay attention. These are
not binding but if stated by an important court in the
structure
RATIO DECIDENDI & OBITER DICTA
OBITER DICTA
RATIO DECIDENDI:
The main reason/s for
deciding a case in a
MAY
MAYBEBE
particular way
BINDING
BINDING

Other reasons given in passing

NOT
NOTBINDING
BINDINGBUT
BUTMAY
MAYBE
BEOF
OF
PERSUASIVE AUTHORITY
PERSUASIVE AUTHORITY
 50

The Common Law

• Hierarchy of Precedents
• The general rule regulating the hierarchy of precedents is based on
the principle that decisions of higher courts bind lower courts and
some courts are bound by their own decisions
 51

DOCTRINE OF PRECEDENT OR STARE DECISIS

BINDING Federal Court

Court of Appeal

NOT BINDING
High Court

Sessions Court
 52

DOCTRINE OF PRECEDENT OR STARE DECISIS

FACTS ARE
Federal Court DISTINGUISHABLE

DECISION DECISION
BASED ON
BASED ON Court of Appeal FACTS ABC
FACTS ABC
BINDING

BINDING
NOT
High Court

FACTS OF FACTS OF
SUBSEQUENT SUBSEQUENT
CASE = ABC Sessions Court CASE = ABX
 53

The Common Law

• It is not in every case that judges apply earlier precedents
• A judge may not wish to apply precedents in the following
circumstances: -
• Judges may ignore or overrule a precedent laid down by a
higher court, where the case is on appeal
• They may refuse to apply the earlier precedent if it is arrived
at per incuriam (i.e. made in ignorance of a statute or a
binding precedent)
• They may distinguish the case when they find there are
material differences in facts between the case before them
and the case laying down the precedent
 Advantages of Judicial Precedent
Flexible
It is more flexible
Legal Details
Case law is richer
when compared to in legal detail than
statute law statute law
enacted by
Actual Facts Parliament Certainty
Since the law is a It provides greater
result of an actual certainty in the
dispute rather than law
a hypothetical
situation, it is
more practical
since it evolved ADVANTAGES
through actual
experiences and
not a result of
abstract theory
 55

The Common Law

 Disadvantages: -
 As the number of cases decided can only increase, judges
and lawyers are compelled to engage in greater research
and reading. Due to the mass of material to be digested,
there is a tendency to overlook some authorities
 It is sometimes difficult to tell whether a particular statement
in a judgment is ratio or dicta. Judges seldom indicate the
ratio decidendi or obiter dicta
 Judges are not elected by the people unlike members of
Parliament who are representative of the people. Therefore,
judges may not know the needs of the general public when
making these case laws
 56

English Law
• Forms part of the laws of Malaysia
• Can be found in the English common law and rules of
equity
 57

English Law
 However, not all the English common law and rules of
equity form part of Malaysian law
 S3(1) of the Civil Law Act 1956 (Revised 1972) provides
that in Peninsular Malaysia, the courts shall apply the
common law of England and the rules of equity as
administered in England on the 7th day of April, 1956
 In Sabah and Sarawak, the courts shall apply the
common law of England and the rules of equity, together
with statutes of general application, as administered or in
force in England on the 1st day of December 1951 and
the 12th day of December 1949 respectively
 58

English Law
• However, the Supreme Court in Commonwealth of
Australia v Midford (Malaysia) Sdn. Bhd. & Anor held that
the developments of common law after 1956 may well be
applicable in Malaysia
 59

English Law
• The application of the law of England throughout Malaysia
is subject to 2 limitations: -
• It is applied only in the absence of local statutes on particular
matters i.e. there is lacuna in Malaysian law
• Only part of the English law that is suited to local circumstances
will be applied (proviso to s3(1) Civil Law Act)
 60

Islamic Law
• Applicable only to Muslims
• Administered by Syariah Courts
• Except for the federal territories of Kuala Lumpur and
Labuan, the power to administer Islamic law is primarily
that of the States
 61

Custom
• Customs of the local inhabitants in Malaysia are also a
source of law
• Customs relating to family law (marriage, divorce and
inheritance) are given legal force by the courts in Malaysia
• In Sabah and Sarawak, native custom-matters apply in
land dealings over native customary lands and family
matters
 62

QUESTIONS