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Business Law

© Oxford Fajar Sdn. Bhd. (008974-T) 2010

All Rights Reserved
Ch2: 1

CHAPTER

2

Sources of Malaysian
Law

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

All Rights Reserved
Ch2: 2

OBJECTIVES
This chapter:

provides basic knowledge on how
Malaysian law evolved

identifies the sources of Malaysian law,
and explains where they can be found

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

All Rights Reserved
Ch2: 3

Written Law .PREVIEW   Meaning of ‘Sources’ Main Sources of Malaysian Law .Islamic Law Business Law © Oxford Fajar Sdn.Unwritten Law . (008974-T) 2010 All Rights Reserved Ch2: 4 . Bhd.

Written law 3. Legal sources 3. Islamic law 2. Historical sources 2. Bhd. Unwritten law Business Law © Oxford Fajar Sdn.MEANING OF ‘SOURCES’ 1. Places where the law can be found Sources of Malaysian law: 1. (008974-T) 2010 All Rights Reserved Ch2: 5 .

(008974-T) 2010 All Rights Reserved Ch2: 6 . Bhd.SOURCES OF MALAYSIAN LAW Business Law © Oxford Fajar Sdn.

WRITTEN LAW  comprises of: 1. (008974-T) 2010 All Rights Reserved Ch2: 7 . Bhd. 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  Business Law © Oxford Fajar Sdn. The Federal and State 2.

(008974-T) 2010 All Rights Reserved Ch2: 8 . statute law will prevail to the extent of the conflict  when hearing cases.)  where statute law and common law conflict.WRITTEN LAW (cont. they also interpret statutes Business Law © Oxford Fajar Sdn. Bhd. the courts are not just performing an act of fact-finding.

)  in interpreting statutes.WRITTEN LAW (cont. courts are guided by: a) b) c) d)  Interpretation Acts Extrinsic materials Common law rules of statutory interpretation Precedent courts interpret legislation to reflect the apparent purpose or intention of the legislators (a ‘purposive’ construction) Business Law © Oxford Fajar Sdn. (008974-T) 2010 All Rights Reserved Ch2: 9 . Bhd.

)  if the words of the Act are clear. Bhd. (008974-T) 2010 All Rights Reserved Ch2: 10 . 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 Business Law © Oxford Fajar Sdn.WRITTEN LAW (cont.

(008974-T) 2010 All Rights Reserved Ch2: 11 .THE FEDERAL CONSTITUTION     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 Business Law © Oxford Fajar Sdn. Bhd.

Bhd. (008974-T) 2010 All Rights Reserved Ch2: 12 .STATE CONSTITUTIONS  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 Business Law © Oxford Fajar Sdn.

Federal Constitution Business Law © Oxford Fajar Sdn. State employees.STATE CONSTITUTIONS (cont. (008974-T) 2010 All Rights Reserved Ch2: 13 .)  the Executive Council. the Legislature. as the case may be – Article 71. Parliament may make provision to give effect to them or to remove any inconsistencies. and amendment to the Constitution  if such essential provisions are missing. Bhd. financial provisions. or if any provision is inconsistent with them. the Legislative Assembly.

(008974-T) 2010 All Rights Reserved Ch2: 14 . Bhd.LEGISLATION       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 Malaysia’s Independence in 1957 – Ordinances those made after 1957 – Acts laws made by the State Legislative Assemblies (except in Sarawak) – Enactments laws in Sarawak – Ordinances Business Law © Oxford Fajar Sdn.

Bhd. order.SUBSIDIARY LEGISLATION    Interpretation Act 1967 defines: ‘any proclamation. by-law or other instrument made under any Ordinance. regulation. Enactment or other lawful authority and having legislative effect’ Also known as “delegated legislation” and “subordinate legislation. Cannot be made in contravention of either a parent Act or the Constitution. (008974-T) 2010 All Rights Reserved Ch2: 15 . rule. notification.If there is contravention then it is void – an exception to this rule is the proclamation of emergency under Art 150 of the Federal Constitution Business Law © Oxford Fajar Sdn.

 Business Law © Oxford Fajar Sdn. may still be valid.see Eng Keock Cheng v Public Prosecutor Held: The subsidiary legislation. power to legislate on any subject and to any effect. even if inconsistencies with Articles of Constitution are involved.Subject to certain exceptions set out in Article 150 (FC). nothwistanding that it is inconsistent with the Constitution. Bhd. (008974-T) 2010 All Rights Reserved Ch2: 16 . Parliament has. during an emergency.

English law 2. Bhd. Customs Business Law © Oxford Fajar Sdn. Judicial decisions 3. portion of Malaysian law which is not written comprises: 1. (008974-T) 2010 All Rights Reserved Ch2: 17 .UNWRITTEN LAW    Unwritten law does not mean that the law is literally unwritten.

It is applied only in the absence of local statutes on the particular subjects 2. For Peninsular Malaysia – English common law and the rules of equity are applicable as they stood on 7 April 1956 Business Law © Oxford Fajar Sdn. (008974-T) 2010 All Rights Reserved Ch2: 18 .ENGLISH LAW English Law comprises of common law and rules of equity  subject to 2 limitations:  1. Bhd. Only that part of the English law that is suited to local circumstances will be applied 3.

ENGLISH LAW (cont. For Sabah and Sarawak – English common law and the rules of equity together with statutes of general application. Bhd.) 4. principles of English commercial law as it stood on 7 April 1956 are applicable in the absence of local legislation Business Law © Oxford Fajar Sdn. (008974-T) 2010 All Rights Reserved Ch2: 19 . For commercial matters – in Peninsular Malaysia (other than Penang and Malacca). apply 5. as they stood on 1 December 1951 and 12 December 1949 respectively.

Bhd. Malacca.) 6. e.ENGLISH LAW (cont. since there are so many local statutes already passed which deal with commercial subjects. 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. For Penang. (008974-T) 2010 All Rights Reserved Ch2: 20 .g.: – Companies Act 1965 (Revised 1973) – Partnership Act 1961 (Revised 1974) Business Law © Oxford Fajar Sdn. However. there is no total reliance on English commercial law.

ENGLISH LAW (cont. Bhd. (008974-T) 2010 All Rights Reserved Ch2: 21 .) – – – – Banking and Financial Institutions Act 1989 Contracts Act 1950 (Revised 1974) Insurance Act 1963 (Revised 1972) Bills of Exchange Act 1949 (Revised 1978) Business Law © Oxford Fajar Sdn.

Kota Tinggi Held: The National Land Code is a complete and comprehensive code of law governing the tenure of land in Malaysia. (008974-T) 2010 All Rights Reserved Ch2: 22 .    Equity was not a complete system of law as it merely filled the gaps in the common law and softened the strict rules of common law.ENGLISH LAND LAW section 6 of the Civil Law Act 1956 see United Malayan Banking Corporation Bhd & Anor v Pemungut Hasil Tanah. Business Law © Oxford Fajar Sdn. Bhd.

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.  Equity developed maxims to ensure that decisions are morally fair • ‘He who comes to equity must come with clean hands’ • ‘Delay defeats equities’ Business Law © Oxford Fajar Sdn. (008974-T) 2010 All Rights Reserved Ch2: 23 . the rules of equity shall prevail. Bhd.

(008974-T) 2010 All Rights Reserved Ch2: 24 . Bhd.JUDICIAL DECISIONS  Malaysian law can also be found in the judicial decisions of the High 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’ Business Law © Oxford Fajar Sdn. Court of Appeal and the Federal Court.

Bhd. (008974-T) 2010 All Rights Reserved Ch2: 25 .JUDICIAL DECISIONS  Present court system Business Law © Oxford Fajar Sdn.

High Court.PRECEDENTS  Judicial precedents mean the decision of the higher courts automatically binds all lower court. Business Law © Oxford Fajar Sdn. Bhd. (008974-T) 2010 All Rights Reserved Ch2: 26 . Magistrates Court and the Small Claims Court.For example. Session Court. a Federal court decision automatically binds the Court of Appeal.

Bhd. depending on the court and the judge Business Law © Oxford Fajar Sdn.) it 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.PRECEDENT (cont. (008974-T) 2010 All Rights Reserved Ch2: 27 . although it can exercise an extremely strong influence in a lower court. and even in a court of equivalent standing.

PRECEDENT (cont. Bhd. ensuring equality and fairness Business Law © Oxford Fajar Sdn.) ‘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. (008974-T) 2010 All Rights Reserved Ch2: 28 .

Federal Court and the Judicial Committee of the Privy Council Business Law © Oxford Fajar Sdn.)  disadvantages of precedents: – certain precedent may not be relevant in today’s 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. Court of Appeal and the Federal Court and the then Supreme Court.PRECEDENT (cont. (008974-T) 2010 All Rights Reserved Ch2: 29 . Bhd. Malaysian law can be found in the judicial decisions of the High Court.

each court is bound by the decisions of courts of the same level or higher than 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 Business Law © Oxford Fajar Sdn.PRECEDENT (cont. (008974-T) 2010 All Rights Reserved Ch2: 30 . 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). Bhd.)     decisions of these courts were made. and are still being made. in the same hierarchy of courts if a judge applies an existing rule of law without extending it.

this is a precedent that is not binding on the court.  Declaratory precedent. Bhd. but judge may consider it and decide that it is a correct principle so he is persuaded that he should follow it. (008974-T) 2010 All Rights Reserved Ch2: 31 .means a judge merely applying an existing law  Business Law © Oxford Fajar Sdn.) Persuasive precedent.PRECEDENT (cont.

HIERARCHY OF PRECEDENTS     the functioning of the system of precedents is based on the hierarchy of decisions although the Judicial Committee of the Privy Council do not form part of the present judicial system. and some courts are bound by their own decisions Business Law © Oxford Fajar Sdn. 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. (008974-T) 2010 All Rights Reserved Ch2: 32 . Bhd.

(008974-T) 2010 All Rights Reserved Ch2: 33 .PREVIOUS JUDICIAL SYSTEMS Between the period of 1 January 1987 and 23 June 1994. Bhd. the Court system was as follows: Business Law © Oxford Fajar Sdn.

however. the court system was as follows: Business Law © Oxford Fajar Sdn.PREVIOUS JUDICIAL SYSTEMS (cont. (008974-T) 2010 All Rights Reserved Ch2: 34 . Bhd.) Prior to 1 January 1987.

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.CUSTOMS generally. customs relating to family law. Bhd. (008974-T) 2010 All Rights Reserved Ch2: 35 . marriage. native customary laws apply in land dealings over native customary lands and family matters  Business Law © Oxford Fajar Sdn.e. i. Hindu and Chinese customary law applied to the Hindus and Chinese respectively  in Sabah and Sarawak. divorce and inheritance.

)  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.CUSTOMS (cont. (008974-T) 2010 All Rights Reserved Ch2: 36 . lineage and the election of lembaga. undang and the Yang di-Pertuan Besar noted for its matrilineal system Business Law © Oxford Fajar Sdn. Bhd.

Sumatra  patrilineal system of law Business Law © Oxford Fajar Sdn.CUSTOMS (cont. (008974-T) 2010 All Rights Reserved Ch2: 37 .) Adat Temenggong  practised by the other states  originated from Palembang. Bhd.

the Yang di-Pertua Negeri is the head the courts enforcing Islamic law – the Syariah Courts Islamic law applies to Muslims only in businesses. Sabah. areas of banking and finance. Bhd.ISLAMIC LAW       each State has the power to administer Islamic Law the head of the Muslim religion in a state (except for Penang.Malacca. Malacca. Sabah. Islamic principles are increasingly relevant in lending and investments Business Law © Oxford Fajar Sdn. esp. (008974-T) 2010 All Rights Reserved Ch2: 38 . Sarawak and the Federal Territories. Sarawak and the Federal Territories) is the Sultan in Penang.