Malaysia: Case Update: Federal Court Delivers Verdict On Compensation For Illegally Erected Buildings

LAND LAW

Lembaga Lebuhraya Malaysia – Land acquisition – Zoning Laws – Illegal land use – National Land Code – Town and Country Planning Act – Appeal

Lembaga Lebuhraya Malaysia v Pentadbir Tanah Daerah Klang & Anor

Civil Appeal No. 01(f)-8-03/2020(B) |Federal Court

- see the grounds of judgment here

Facts There are three appeals laid before the Federal Court. Two of which are by Lembaga Lebuhraya Malaysia (the 'Appellant') and the third is by MMC Tepat Teknik Sdn Bhd (the '2^nd Respondent'). All three appeals arise out of the compulsory acquisition of lands belonging to the 2^nd Respondent under the Land Acquisition Act 1960. The 2^nd Respondent owned three lots of land, Lots 1604, 1605, and 1608. The lands were originally designated as agricultural but were used for heavy machinery fabrication. The buildings on the lots were constructed without proper zoning permits and violated planning laws. The 2^nd Respondent claimed compensation for the value of the industrial buildings on all three lots and sought reinstatement of compensation for contractual damages, overhead costs, and relocation costs. Subsequently, the Land Administrator made an award of compensation, however both the Appellant and the 2^nd Respondent were dissatisfied with the award, and it was referred to the High Court. The learned High Court Judge drew a distinction between the three lots. For one of the lots, both the compensation for value of land and buildings were maintained. However, for the other two lots, the award of compensation for value of buildings located on these lots were set aside. Both the 2^nd Respondent and the Appellant appealed. The Court of Appeal allowed the 2^nd Respondent appeal only to the extent of reinstating the Land Administrator's award on the contractual losses in ongoing projects or existing contracts. The Appellants' appeal was dismissed in its entirety. Once again, both 2^nd Respondent and the Appellant appealed. Hence, these appeals.

Issues 1. Whether buildings, especially industrial buildings constructed on lands contrary to conditions as to category of land use as appearing in the documents of title and also contrary to the relevant planning and/or zoning laws, may nevertheless be recognised and awarded compensation under the terms of Land Acquisition Act 1960.

Held In unanimously allowing the appeals by the Appellant and dismissing the Appeal by the 2^nd Respondent, Justice Dato' Mary Lim, Judge of the Federal Court held that compensation could not be granted for the value of the industrial buildings constructed on land that was used in contravention of planning laws. The Court emphasized that compensation is only valid when the land's use is proper, valid, and legal. Since the buildings were erected without proper zoning permits and were used in violation of the residential zoning status under the local plan, compensation for their value ought to be denied. Furthermore, the Federal Court quashed compensation for contractual damages, overhead costs, and relocation costs, as these claims were related to the unlawfully constructed buildings and their use. The Federal Court affirmed the significance of complying with planning laws and reading land-related legislation holistically, rather than in isolation. In conclusion, the appeals by the Appellant were allowed and the Federal Court set aside the decision of the Court of Appeal and clarified that the compensation cannot be granted for buildings and expenses related to unlawful land use and construction.

To read the original article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.