BL Chapter 2

Business Law
Oxford Fajar Sdn. Bhd. (008974-T) 2010

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CHAPTER 2
Sources of Malaysian
Law
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This chapter:
provides basic knowledge on how
Malaysian law evolved

identifies the sources of Malaysian law,
and explains where they can be found
OBJECTIVES
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PREVIEW
Meaning of Sources
Main Sources of Malaysian Law
- Written Law
- Unwritten Law
- Islamic Law
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1. Historical sources
2. Legal sources
3. Places where the law can be found

Sources of Malaysian law:
1. Islamic law
2. Written law
3. Unwritten law
MEANING OF SOURCES
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SOURCES OF MALAYSIAN LAW

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comprises of:
1. The Federal and State
2. Legislation enacted by Parliament and the State
Assemblies
3. Subsidiary legislation made by persons or bodies
under powers conferred on them
also referred to as statute law
law made by Parliament and any subordinate
bodies to whom Parliament has delegated
power to legislate
WRITTEN LAW
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where statute law and common law
conflict, statute law will prevail to the
extent of the conflict
when hearing cases, the courts are not
just performing an act of fact-finding; they
also interpret statutes

WRITTEN LAW (cont.)
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in interpreting statutes, courts are guided by:
a) Interpretation Acts
b) Extrinsic materials
c) Common law rules of statutory interpretation
d) Precedent
courts interpret legislation to reflect the
apparent purpose or intention of the
legislators (a purposive construction)

WRITTEN LAW (cont.)
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in Birmingham v Corrective Services
Commission of New South Wales, 3 conditions:
1. It knows the mischief with which the Act was dealing
2. It is satisfied that Parliament inadvertently
overlooked an eventuality which had to be dealt with
if the purpose of the Act was to be achieved
3. It can state with certainty the words that Parliament
would have used to overcome the omission if its
attention had been drawn to the defect
WRITTEN LAW (cont.)
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if the words of the Act are clear, effect must be
given to them notwithstanding that the end result
may be absurd
courts use extrinsic (external) material in the
interpretation of statutes:
some statutes set out their own definition or
interpretation
common law rules of statutory interpretation and
precedent
WRITTEN LAW (cont.)
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3 main approaches to interpretation used by
the courts:
1. Literal or plain meaning approach
2. Golden rule approach
3. Mischief approach
WRITTEN LAW (cont.)
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courts assume that the meaning and
intention of the legislature is clear in the
statute to be interpreted
disadvantage words can often have more
than one meaning, so the courts have to decide
which approach should apply
the whole Act is read and understood before a
detailed
examination of a section, or of particular words
in a section, is begun
LITERAL OR PLAIN MEANING
APPROACH
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words and sections must be read in the
context of the whole Act, rather than in
isolation
see Fischer v Bell
LITERAL OR PLAIN MEANING
APPROACH (cont.)
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takes the plain meaning of the words used
in the statute and adheres to that meaning
only a gloss of the literal or plain meaning rule
where the words in an Act are at variance with
the legislators intention or can lead to an
absurdity, injustice or repugnancy, the court will
attempt to choose a meaning that will avoid
such a result
see Lee v Knapp
GOLDEN RULE APPROACH
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where the literal interpretation is not
possible, courts will:
1. Look at the law before the statute was passed
2. Look to the overall intention of the legislation as
discovered from reading the Act as a whole
3. Ask: What mischief is it that this statute is
intended to remedy? What was its social
purpose?
where a statute provides a number of specific
examples, matters not stated are not covered

MISCHIEF APPROACH
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by going outside the text of the statute to
determine the Acts function, the mischief or
purpose approaches are significantly different
to the literal and golden rule approaches
see Smith v Hughes
courts may also be assisted by maxims

MISCHIEF APPROACH (cont.)
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maxims are necessary to aid construction
because no drafter (of legislation) can define
words in such a manner that every possible
interpretation is covered and no definition can
be exclusive or perfectly describe a class of
people, things or acts

2 maxims commonly used by the courts are:
noscitur a sociis
ejusdem generis

MISCHIEF APPROACH (cont.)
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means it is known from its associates
used where a word is ambiguous or unclear
in a group of specific words. Its meaning is
limited to the same class or types of things
as the specific words.
see Prior v Sherwood
NOSCITUR A SOCIIS
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means of the same kind, class, or nature
known as the class rule
the broad, general word is limited to the same
class as the more specific words preceding it
used to find a viable meaning for a broad
general word
written law in Malaysia:
1. The Federal Constitution
2. State Constitutions
3. Legislation
4. Subsidiary legislation
EJ USDEM GENERIS
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supreme law of the country
applies to all States in the Federation
laying down the powers of the Federal
and State Governments
enshrines the basic or fundamental rights
of the individual

THE FEDERAL CONSTITUTION
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each State possesses its own constitution
contain provisions which are enumerated
in the Eighth Schedule
Federal Constitution
some of these provisions include matters
concerning the Ruler
STATE CONSTITUTIONS
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the Executive Council, the Legislature, the
Legislative Assembly, financial provisions, State
employees, and amendment to the Constitution
if such essential provisions are missing, or if any
provision is inconsistent with them, Parliament
may make provision to give effect to them or to
remove any inconsistencies, as the case may be
Article 71, Federal Constitution
STATE CONSTITUTIONS (cont.)
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law enacted by a body constituted for this purpose
legislated by Parliament at federal level and by the
various State Legislative Assemblies at state level
laws that are enacted by Parliament after 1946 but
before Malaysias Independence in 1957
Ordinances
those made after 1957 Acts
laws made by the State Legislative Assemblies
(except in Sarawak) Enactments
laws in Sarawak Ordinances
LEGISLATION
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Interpretation Act 1967: any proclamation, rule,
regulation, order, notification, by-law or other
instrument made under any Ordinance, Enactment or
other lawful authority and having legislative effect
deals with the details about which the legislature has
neither the time nor the technical knowledge to enact
if made in contravention of either a parent Act or the
Constitution is void an exception to this rule is the
proclamation of emergency under Art 150 of the
Federal Constitution
see Eng Keock Cheng v Public Prosecutor
SUBSIDIARY LEGISLATION
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portion of Malaysian law which is not
written
comprises:
1. English law
2. Judicial decisions
3. Customs

UNWRITTEN LAW
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ENGLISH LAW
English common law and rules of equity
subject to 2 limitations:
1. It is applied only in the absence of local statutes
on the particular subjects
2. Only that part of the English law that is suited to
local circumstances will be applied
3. For Peninsular Malaysia English common law
and the rules of equity are applicable as they
stood on 7 April 1956
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4. For Sabah and Sarawak English common law
and the rules of equity together with statutes of
general application, as they stood on 1
December 1951 and 12 December 1949
respectively, apply
5. For commercial matters in Peninsular Malaysia
(other than Penang and Malacca), principles of
English commercial law as it stood on 7 April
1956 are applicable in the absence of local
legislation
ENGLISH LAW (cont.)
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6. For Penang, Malacca, Sabah and Sarawak English
commercial law at the date on which the matter has
to be decided is applicable in the absence of local
legislation
7. However, since there are so many local statutes
already passed which deal with commercial subjects,
there is no total reliance on English commercial law,
e.g.:
Companies Act 1965 (Revised 1973)
Partnership Act 1961 (Revised 1974)
ENGLISH LAW (cont.)
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Banking and Financial Institutions Act 1989
Contracts Act 1950 (Revised 1974)
Insurance Act 1963 (Revised 1972)
Bills of Exchange Act 1949 (Revised 1978)

see Kon Thean Soong v Tan Eng Nam
ENGLISH LAW (cont.)
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section 6 of the Civil Law Act 1956
see United Malayan Banking Corporation Bhd &
Anor v Pemungut Hasil Tanah, Kota Tinggi

Conflict between Common Law and Equity
section 3(2) of the Civil Law Act 1956 in the event
of conflict or variance between the common law and
the rules of equity with reference to the same matter,
the rules of equity shall prevail

ENGLISH LAND LAW
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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, the then Supreme
Court and the Judicial Committee of the Privy
Council

decisions of these courts were made and still
are being made by the doctrine of binding
precedent
JUDICIAL DECISIONS
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is basically a judgment or decision of a court of law
cited as an authority for the legal principle
embodied in its decision
may comprise:
res judicata final order of the court binding the
immediate parties to the decision
ratio decidendi the reason for the decision
obiter dictum (sayings by the way) no binding power,
although it can exercise an extremely strong influence
in a lower court, and even in a court of equivalent
standing, depending on the court and the judge
PRECEDENT
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following a precedent means that a question
should be resolved in a certain way today because
a similar question has been so decided before
this process of following an established procedure
is called stare decisis which literally means to
stand by a decision
advantages of precedents:
promote consistency, coherence and certainty
promote efficiency and justice, ensuring equality and
fairness
PRECEDENT (cont.)
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disadvantages of precedents:
certain precedent may not be relevant in todays
circumstances but the judge may have to nevertheless
follow it
may also be slow in responding to community changes
and it is cumbersome to change them as they may
require an Act of Parliament
in applying binding precedents, Malaysian law can
be found in the judicial decisions of the High Court,
Court of Appeal and the Federal Court and the then
Supreme Court, Federal Court and the Judicial
Committee of the Privy Council

PRECEDENT (cont.)
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decisions of these courts were made, and are still being
made, systematically by the use of what is called the
doctrine of binding judicial precedent
in the case of a binding precedent (the ratio decidendi of
an earlier case decision), each court is bound by the
decisions of courts of the same level or higher than it, in
the same hierarchy of courts
if a judge applies an existing rule of law without extending
it, his decision may be called a declaratory precedent
if the case before a judge is without precedent, then the
decision made by him may be called an original
precedent
PRECEDENT (cont.)
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the functioning of the system of precedents is based on the
hierarchy of decisions
although the Federal Court and the Judicial Committee
of the Privy Council do not form part of the present
judicial system, they were part of the judicial system until 31
December 1986 and decisions made by them are still binding
on the present courts
the Supreme Court was part of the judicial system from 1
January 1987 to 23 June 1994
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
HIERARCHY OF PRECEDENTS
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The present court system is as follows:

THE JUDICIAL SYSTEM
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Between the period of 1 January 1987 and 23
June 1994, the Court system was as follows:
PREVIOUS JUDICIAL SYSTEMS
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Prior to 1 January 1987, however, the court
system was as follows:
PREVIOUS JUDICIAL SYSTEMS
(cont.)
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was the final court of appeal of Malaysia prior to 1
January 1987
its decision was in the form of an advice to the Yang
di-Pertuan Agong who was obliged to give effect to it
appeals to the Privy Council on criminal and
constitutional matters were abolished on 1 January
1987
effective 1 January 1987, no more appeals could be
made to the Privy Council, and the highest court of
appeal was then the Supreme Court
JUDICIAL COMMITTEE OF THE
PRIVY COUNCIL
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abolished on 1 Jan 1987
in its stead, the Supreme Court was set up and
was the highest court until 23 June 1994
now it is the highest court
appeals from the High Court can be made to the
Court of Appeal
the Supreme Court has, therefore, been abolished
since 24 June 1994

FEDERAL COURT
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decision is binding on all subordinate courts but the
High Court judge is not bound to follow the
decision of another
however, he may do so as a matter of judicial
comity
Sessions Courts and the Magistrates Courts
are bound by precedents laid down by the superior
courts but their own decisions are not binding on
any court

HIGH COURT
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decisions of the Judicial Committee are binding
on all courts in Malaysia in the following
circumstances:
1. If the law decided is given on appeal from
Malaysia
2. If the decision is given on appeal from another
Commonwealth country and the law is in pari
materia or similar to that of the law in Malaysia
see Khalid Panjang & Ors v Public Prosecutor
HIGH COURT (cont.)
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it is not in every case that judges apply earlier
precedents
a judge may not wish to apply precedents in the
following circumstances:
1. The precedent is laid down by a lower court,
where the case is on appeal
2. The earlier precedent is arrived at per incuriam
(i.e. made in ignorance of a statute or a binding
precedent)
3. There are material differences in facts between
the case before them and the case laying down
the precedent
DISTINGUISHING PRECEDENTS
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advantages in applying the system of binding
judicial precedents:
1. The law evolved is a result of an actual dispute
rather than a hypothetical situation
2. It is more flexible when compared to statute law
enacted by Parliament
3. Case-law is richer in legal detail than statute law
(cont.)
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disadvantages in applying the system of binding
judicial precedents:
1. There is a tendency to overlook some authorities
inadvertently too many cases
2. It is sometimes difficult to tell whether a particular
statement in a judgment is ratio or dicta. It is the
ratio decidendi of a case which makes the decision
a precedent for the future while an obiter dictum is
not binding as a precedent

(cont.)
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generally, customs relating to family law, i.e.
marriage, divorce and inheritance, are given legal
force by the courts in Malaysia
adat applies to Malays
prior to the enforcement of the Law Reform
(Marriage and Divorce) Act 1976, Hindu and
Chinese customary law applied to the Hindus and
Chinese respectively
in Sabah and Sarawak, native customary laws
apply in land dealings over native customary lands
and family matters
CUSTOMS
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in Peninsular Malaysia there are two main varieties of
Malay customary law: the adat perpatih and the adat
temenggong
Adat Perpatih
prevalent among Malays in Negeri Sembilan and Naning
in Malacca
effective in matters such as land tenure, lineage and the
election of lembaga, undang and the Yang di-Pertuan
Besar
noted for its matrilineal system
CUSTOMS (cont.)
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Adat Temenggong
practised by the other states
originated from Palembang, Sumatra
patrilineal system of law

CUSTOMS (cont.)
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each State has the power to administer Islamic Law
the head of the Muslim religion in a state (except for
Penang,Malacca, Sabah, Sarawak and the Federal
Territories) is the Sultan
in Penang, Malacca, Sabah, Sarawak and the Federal
Territories, the Yang di-Pertua Negeri is the head
the courts enforcing Islamic law the Syariah Courts
Islamic law applies to Muslims only
in businesses, esp. areas of banking and finance,
Islamic principles are increasingly relevant in lending
and investments
ISLAMIC LAW
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REVIEW
Meaning of Sources
Main Sources of Malaysian Law
- Written Law (components)
- Unwritten Law (components)
- Islamic Law

BL Chapter 2

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Business Law

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