Business Law Section: The Michigan Business Law Journal Fall 2014
Business Law
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Transcript of Business Law
Chapter 1 – Introduction to Law and the Malaysian Legal System
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How Malaysian law is classified? What are the sources of law? What is the doctrine of Judicial Precedent? How to cite cases and statutes?
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What is Law?◦ Law may be defined as a body of RULES which are
ENFORCED by the STATE◦ John Austin in his book “The Province of Jurisprudence
Determined” defined law as a command set by a superior being to an inferior being enforced by sanctions (punishment) Superior being – The State Inferior being – The individual Sanctions – Imprisonment, fines, damages, injunctions or
specific performance
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Law, The State and The Constitution
LAW IN MALAYSIAMalaysia, which consists of Peninsular
Malaysia, Sabah and Sarawak is one political unit, but is NOT governed by the same set of laws
There are 2 important links which unite the two parts of Malaysia – the Parliament and the Federal Court
Parliament can and does legislate for the whole country
Federal Court acts as a final court of appeal for the whole country
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Law, The State and The ConstitutionWHAT IS A “STATE”? Legal systems are administered almost entirely on the basis of the
political unit known as the State For international purposes, Malaysia is one state Within Malaysia, however, there are 13 States altogether – Kedah,
Perlis, Kelantan, Terengganu, Penang, Perak, Pahang, Selangor, Negeri Sembilan, Johore, Malacca, Sabah and Sarawak and the Federal Territories of Kuala Lumpur, Labuan and Putrajaya
Every state has a government and has rules which lay who shall govern and how
Malaysia has a WRITTEN constitution
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The Role of Parliament
To make laws of the country
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Law
Public Law (individuals & the
State)
Private Law (individuals inter se)
Constitutional Law (Rights of individuals in
the State)
Criminal Law (Offences against the
State. Obligations imposed on individuals)
Trust (Relationship between trustee and
beneficiary)
Tort (Offences against
individuals)
Contract (Rights and obligations
that arise by agreement)
International Law (Law that prevails between States)
Public International Law
Private International Law
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Law can be classified into: -Public lawPrivate lawInternational law
Public law ◦Relationship between the citizen and the
State◦Example
Constitutional law Lays down the rights of individuals in the State
Criminal law Offences committed by individuals against the
State Aims at punishing criminals and suppressing the
crime Imposes on individuals the obligation not to
commit crimes A crime is a wrong against the State for which
punishment is inflicted by the State, the proceedings being brought by the Public Prosecutor
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Private law◦ Relationship between the citizen and another◦ Private or civil law is intended: -
to give compensation to persons injured, to enable property to be recovered from
wrongdoers, and to enforce obligations (contracts & trusts)
◦ Example – contracts, tort and trusts
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Private law◦ Example
Law of contract determines when a promise or a set of promises is legally enforceable
A tort is a civil wrong and is the breach of a general duty imposed by the law (and not agreed between the parties)
A trust is an equitable obligation binding a person to deal with property over which he has control for the benefit of persons of whom he may himself be one and any one of the beneficiaries may enforce the obligation
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Body of law which is composed for its greater part of the principles and rules of conduct which States feel themselves bound to observe, and consequently commonly do observe, in their relations with each other
Subdivided into: -Public international lawPrivate international law
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International LawInternational Law
Public international law Law that prevails between StatesExample: -
Climate Change – UNFCCC & Kyoto ProtocolTransboundary movement of toxic wastes – Basel
ConventionAntarctic Region – Antarctica Treaty
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International LawInternational Law
Private international law“Conflict of laws” – every country there
will be a different version of lawsIt consists of the rules that guide a
judge when the laws of more then one country affect a case
Malaysian law can be classified into: -◦ Written law◦ Unwritten law
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Written law is the most important source of law
It includes: -◦ The Federal and State Constitutions◦ Legislation enacted by Parliament and State
Assemblies e.g. Act of Parliament, Ordinance, Enactments etc
◦ Subsidiary legislation made by persons or bodies under powers conferred on them by Acts of Parliament or State Assemblies e.g. Rules and Regulations, By-Laws, Guidelines, etc.
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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
Unwritten law is found in cases decided by the courts, local customs, etc.
The unwritten law comprises the following: -◦ Principles of English law applicable to local
circumstances◦ Judicial decisions of the superior courts, i.e. the High
Courts, Court of Appeal and the Federal Court◦ Customs of the local inhabitants which have been
accepted as law by the courts
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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
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In short, the main sources are◦ The Federal Constitution◦ The 13 Constitutions of the State◦ Federal Laws made by Parliament◦ State Laws made by the State Assemblies◦ Federal and State subsidiary legislation
(delegated legislation)◦ Judicial decisions of the Superior Courts (Common
law/judge-made laws)◦ Principles of English Law suitable to local
circumstances◦ Islamic Law – applicable only to Muslims
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Malaysia is a Federation of 13 States with a written constitution, the Federal Constitution, which is the supreme law of the country
Lays down the powers of the Federal and State Governments and the basic or fundamental rights of the individual
Can only be changed by a two-thirds majority of the total number of members of the legislature
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The written constitution in Malaysia is called 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
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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 or the Concurrent List
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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 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 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 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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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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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
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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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Date Enacted by Called
After 1946 but before 1957
Parliament Ordinance
After 1957 Parliament Act
State Legislative Assemblies (except Sarawak)
Enactment
Sarawak Ordinance
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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
Parliament is competent to enact laws on matters enumerated in List I of the Ninth Schedule
The State 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
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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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Legislation is enacted by Parliament by introducing a Bill which is passed by both Dewan and assented to by the Yang di-Pertuan Agong
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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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In each Dewan, the Bill goes through four stages◦ First Reading◦ Second Reading◦ Committee Stage◦ Third Reading
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• Government Proposal• Meetings between relevant government authorities• Drafting of Bill by Parliamentary Draftsperson• Cabinet approval of Bill
Pre-Parliamentary Stage
First Reading
Minister formally introduces the Bill in the Dewan Rakyat by having its short title read
Second Reading
Committee Stage
Publication
Royal Assent
Dewan Negara
Third Reading
Debate on the general principles of the Bill, followed by a vote – simple majority or a two-thirds majority of the total number of members of the Dewan
Detailed examination of the Bill and consideration of amendments, followed by a report on the Bill to the Dewan
Further debate on the general principles of the Bill, followed by a vote
Act comes into force
Similar procedures as in the Dewan Rakyat. If passed, the Bill is referred back to the Dewan Rakyat
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
Parliamentary Stage
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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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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An Act of Parliament or statute is brought into being by Parliament through the parliamentary process which is long and involves several stages
Parliament now produces annually a very large output of new legislation in the form of Acts of Parliament
This legislation is an attempt to regulate very complex matters such as employment, social security, tax liability and economic management
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It would be impossible to include in the Acts of Parliament all relevant details of these subjects
Moreover, during the period of validity of a statute, it may be necessary to vary some of these details, e.g. in a period of severe inflation it will be necessary from time to time to increase the amount of excise duties if they are to be maintained as a constant proportion of the current retail selling price
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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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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
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Why is subsidiary legislation important?
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It is important because: -◦ Legislation by Parliament and the State
Legislatures is insufficient to provide laws required to govern everyday matters
◦ Subsidiary legislation deals with the details about which legislature has neither the time nor the technical knowledge to enact laws
◦ Legislature merely lays down the basic and main laws, leaving the details to persons or bodies to whom they delegate their legislative powers
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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
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Malaysian law can also 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”
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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
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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
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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
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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
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Federal Court
Court of Appeal
High Court in Malaya High Court in Sabah & Sarawak
Syariah Court
Sessions Court
Magistrates’ Court
Small Claims Court
Penghulu’s Court
Native Court &
Syariah CourtSessions Court
Magistrates’ Court
Small Claims Court
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 lower 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
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What are the advantages and disadvantages of judicial precedents?
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Advantages◦ Since the law is a result of an actual dispute
rather than a hypothetical situation, it is more practical since it evolved through actual experiences and not a result of abstract theory
◦ It is more flexible when compared to statute law enacted by Parliament
◦ Case law is richer in legal detail than statute law◦ It provides greater certainty in the law.
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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
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Forms part of the laws of Malaysia Can be found in the English common law
and rules of equity
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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
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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
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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◦ Only part of the English law that is suited to local
circumstances will be applied (proviso to s3(1) Civil Law Act)
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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
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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
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A case is normally cited in support of a legal proposition and this is done by qouting the name, date, volume number and first page of the reportTan Bing Hock v Abu Samah [1968] 2 MLJ 221
Plaintiff – Tan Bing Hock Defendant – Abu Samah Reported in the Malayan Law Journal of 1968,
Volume 2 at page 221 Act of Parliament – Hire-Purchase Act 1967
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