IS it right for the Johor government to forcibly acquire private land and then resell it for a hefty profit?
That is the crux of the suit MPHB Capital Bhd has brought against the state government as the first defendant and national oil company Petronas as the second defendant.
MPHB’s subsidiary Kelana Megah Development Sdn Bhd (KMD) filed the suit as the landowner on May 9.
In essence, the Johor government and Petronas are being accused of conspiring to unfairly and forcibly acquire seven parcels totalling 1,150ha (2,841 acres), which is an abuse of the Land Acquisition Act.
Here are the salient points of the suit according to affidavits filed in court by Kelana Megah:
• The Johor government used the Land Acquisition Act to buy the land at 93 sen psf without granting KMD sufficient time to appoint an independent valuer to value the land. KMD was notified on Aug 9, 2012, and at a land enquiry conducted by the state land administrator on Sept 3, 2012, that the administrator had fixed the acquisition price at 93 sen after refusing a KMD request to delay a decision pending submission of an independent valuation.
• The state government proceeded with the acquisition at 93 sen on Oct 8, 2012, while it already had an agreement to sell the same land to Petronas at RM8 psf, which the national oil company needed for its Refinery and Petrochemical Integrated Development (RAPID) project.
• KMD alleges that the RM8 psf price was agreed upon by the state government and Petronas in May 2012 — four months before the Sept 3 enquiry that decided that KMD was only to get 93 sen psf from the state.
• KMD further alleges that three of the seven parcels acquired were not on the original list of land that Petronas had asked for and needed for RAPID and so should not have been acquired by the state.
The land administrator set the price at 93 sen psf despite KMD producing a receipt for the payment of stamp duty on one of the parcels, which had been valued at RM5.75 psf just a year before.
At RM5.75 psf, all seven parcels would have been valued at RM711.55 million, based on a back-of-the-envelope calculation by The Edge.
The price difference between the RM8 psf paid by Petronas to the state government and the 93 sen psf awarded by the land administrator to KMD means that the state government made a whopping profit of RM800 million.
“Why should the state get the difference between the RM8 and 93 sen?” asks a corporate executive. “If the acquisition was made in the name of national interest, surely, the state should not have made money at the expense of the private landowner?”
Landowners are watching the outcome of the court case with great interest, although this is not the first time one of them has taken both the federal and state governments to court (see accompanying story).
The RAPID project, announced by Prime Minister Datuk Seri Najib Razak in May 2011, is positioned to turn southern Johor into Southeast Asia’s oil and gas and petrochemical hub.
Petronas plans to have the RAPID project commissioned by 2016. However, opposition to the project from the local residents and the complexity of acquiring individual parcels and relocating the affected people raised concerns that the project may not see the light of day.
Petronas then turned to the state government for assistance in acquiring 8,200 acres in Pengerang, including the seven parcels belonging to KMD.
According to KMD, it should have been given sufficient time to determine the valuation of its land since Petronas had said it would only make a decision on RAPID in 2013. In fact, it was only in April this year that a final investment decision was made by the national oil company on the project.
In its suit, KMD is seeking a declaration by the court that the acquisition of the land was illegal and of no effect and to order the state authority to take all necessary steps to revoke the acquisition.
It is also seeking an order that Petronas deliver vacant possession of the land within seven days, pay damages for trespassing on the land, general damages for cutting down trees and destroying its oil palm estate as well as interest at the rate of 5% per annum from the date of the acquisition.
State may repeat federal government’s mistake By compulsorily acquiring land owned by MPHB Capital Bhd in Pengerang, the Johor government risks repeating a mistake made by the federal government more than 50 years ago in Kuala Lumpur. In 1960, the federal government paid RM1.3 million in compensation to Semantan Estate (1952) Sdn Bhd to acquire its 250-acre Ladang Batu for the purpose of developing a diplomatic enclave in what is now the Jalan Duta area. Today, the land is valued at about RM4.6 billion based on current prices of around RM425 psf. Semantan Estate filed two cases against the government, the first in 1960 to seek legal remedy for the amount of compensation the collector of land revenue paid for the land. The company claimed that its land was worth RM13,000 per acre or a total of RM3.25 million. The then High Court judge Justice Ong found that the collector had not complied with several conditions of the Land Acquisition Enactment and ordered it to rectify the matter, but this was ignored. Thus, the government proceeded to build its offices on the land, some of which are still standing today. The area is also home to the National Hockey Stadium, the National Tennis Complex, the National Archives and the Federal Territory Mosque, among others. Then in 1989, Semantan Estate sued the government for “trespassing” based on the grounds that it had taken possession of the land unlawfully. After 20 years of pursuing the suit all the way to the then Supreme Court, the case was finally heard in 2010. On March 31, 2010, High Court judge Justice Zura Yahya declared the government had not taken the land lawfully and “hence has remained in unlawful possession of the said land”. She ordered the government to pay “mesne profit” — any profits accrued during the dispute over the land ownership — as damages to Semantan Estate. It is understood that Semantan Estate appointed real estate valuer C H Williams Talhar & Wong to estimate the value of the land, which put it at RM1.6 billion. Semantan Estate and the federal government are currently negotiating a final settlement. If the legal tussle between MPHB, Petronas and the Johor government drags on, the Semantan Estate case should act as the legal precedent. As Petronas has already started work on the land, another costly battle between a private entity and the authorities could be avoided if the issue is amicably rectified soon. |
This article first appeared in The Edge Malaysia Weekly, on May 26, 2014.