Iskandar Waterfront Sdn Bhd v Pentadbir Tanah Daerah Johor Bahru (JA-24NCvC-246-02/2025)

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STATE GOVERNMENT OF JOHOR …RESPONDENTS GROUNDS OF DECISION Introduction

This is an appeal by the Appellant, Iskandar Waterfront Sdn Bhd, pursuant to Section 418 of the National Land Code 1965 (NLC) against the decision of the 1st Respondent, the Land Administrator, District of Johor Bahru, to reject the Appellant’s application for conversion of the category of land use and express condition of two parcels of land from “agriculture (oil palm)” to “commercial”.

The two parcels of land in question are PTB24831 HS(D) 626979 (Lot 24831) and PTB24832 HS(D) 626980 (Lot 24832) both situated in Mukim Bandar Johor Bahru, Daerah Johor Bahru, Negeri Johor (collectively, the “Lands”).

The Appellant seeks, inter alia, an order that the 1st Respondent’s decision to reject the Appellant’s conversion application (“Conversion Application”) as communicated by letter dated 1.12.2024 be set aside as null and void, and that the Respondents be directed to approve the Conversion Application.

The Respondents oppose the appeal, contending that the rejection was a bona fide exercise of the 1st Respondent’s statutory discretion under the NLC, grounded in the Appellant’s procedural non-compliance and ongoing breach of the express condition for land use under Section 115 of the NLC.

Having considered the written submissions of both parties, the affidavit evidence, and the authorities cited, this Court now delivers the decision. Background Facts

The factual background is largely not in dispute and may be summarised as follows. On 28.9.2005, Kumpulan Prasarana Rakyat Johor Sdn Bhd (“KPRJ”), a wholly-owned subsidiary of the 3rd Respondent (the State Government of Johor), applied to the 1st Respondent for government land at Stulang Laut, Johor Bahru for the purpose of integrated development.

Through the Johor State Executive Council meeting on 29.11.2006, the State Authority approved the alienation of land held under title HSD 443036 PTD 21910 Mukim Bandar Johor Bahru (approximately 63.463 hectares) to KPRJ for the purpose of mixed development, subject to payment and conditions of alienation. The title was registered to KPRJ on 25.4.2007.

Critically, although the Lands were alienated for the purpose of mixed development, the express conditions endorsed on the title were : category of land use - “agriculture”; and express condition - “Tanah ini hendaklah ditanam dengan tanaman kelapa sawit” (This Land shall be cultivated with oil palm trees). This disconnect between the intended purpose of the alienation and the express condition endorsed on the title lies at the heart of this dispute.

The title was subsequently transferred through a chain of related entities : first to Kota Selat Tebrau Sdn Bhd (registered 19.6.2007), and thereafter to the Appellant, Iskandar Waterfront Sdn Bhd (registered 5.10.2010), pursuant to a Subscription Agreement dated 17.1.2007 and a Restructuring Agreement in 2010. These transfers took place within the framework of a joint venture for the development of a waterfront city in the South Johor Economic Region. The 3rd Respondent, through KPRJ, remained a participant in this joint venture.

Following a partial compulsory acquisition of the original lot for the Johor Bahru - Singapore Rapid Transit System, the remaining land was subdivided into Lot 24831 and Lot 24832, with subdivision titles registered on 6.11.2023. The express conditions were carried over from the original title.

On 6.6.2024, the 1st Respondent issued Form 7A Notices under Section 128 of the NLC to the Appellant in respect of both Lots, requiring the Appellant to remedy the breach of the express condition (failure to cultivate oil palm) within 180 days, expiring on 3.12.2024.

On 6.9.2024, the Appellant filed Originating Summons No. : JA- 24NCVC-1150-09/2024 (“OS 1150”) challenging the Form 7A Notices. An ad interim order suspending the forfeiture proceedings was granted on 11.12.2024.

On 29.10.2024, the Appellant submitted the Conversion Application to the 1st Respondent, seeking to change the category of land use from “agriculture (oil palm)” to “commercial.”

By letter dated 1.12.2024 (served on the Appellant on 1.1.2025), the 1st Respondent rejected the Conversion Application, stating that the application could not be processed due to procedural non-compliance and the Appellant’s failure to comply with the express condition for oil palm cultivation under Section 115 of the NLC.

On 4.12.2024, a Form 7B Notice (show cause notice under Section 129 of the NLC) was issued to the Appellant.

The present appeal under Section 418 of the NLC was filed on 27.2.2025. This Court notes that OS 1150 was subsequently dismissed by the High Court (Civil 3) on 26.6.2025 and that decision is now the subject of an appeal to the Court of Appeal in Civil Appeal No. : J-01(NCvC)(A)-369-07/2025. Analysis

Having considered the submissions of both parties, this Court identifies the following issues for determination –

(a) Whether the 1st Respondent’s decision to reject the Appellant’s Conversion Application was irrational and unreasonable;

(b) Whether the Conversion Application was an afterthought filed merely in response to the Form 7A Notice;

(c) Whether the Appellant has a legitimate expectation that the Respondents would facilitate the conversion of the Lands for commercial use; and

(d) Whether the 1st Respondent’s decision was made in bad faith and constituted an abuse of power.

(A) Irrationality And Unreasonableness Of The Decision

Section 124(1) of the NLC empowers the proprietor of any alienated land to apply to the State Authority for, inter alia, the alteration of any category of land use. Section 124(4) NLC provides that the State Authority “may approve any application” either in the terms submitted or with modifications, with the consent of the applicant. The use of the word “may” confers a discretion on the State Authority. However, as the Federal Court held in Pengarah Tanah dan Galian, Wilayah Persekutuan v Sri Lempah Enterprise Sdn Bhd [1979] 1 MLJ 135 (“Sri Lempah”), that discretion is not absolute and must be exercised in accordance with natural justice, equity and good conscience.

More recently, the Federal Court in Perbadanan Pengurusan Sunrise Garden Kondominium v. Sunway City (Penang) Sdn Bhd & Ors And Another Appeal [2023] 2 CLJ 333 (“Sunrise Garden”) and Datuk Bandar Kuala Lumpur v Perbadanan Pengurusan Trellises & Ors and other appeals [2023] 3 MLJ 829 (“Trellises”) has affirmed the importance of administrative decision-makers providing reasons for their decisions. The giving of reasons ensures transparency, promotes public confidence and enables judicial scrutiny of whether a decision was lawfully reached. The failure to provide reasons may itself render a decision irrational and unreasonable.

This Court finds the following facts significant and, for the most part, undisputed –

(a) the Lands were originally alienated by the 3rd Respondent to its own wholly-owned subsidiary, KPRJ, for the purpose of mixed/commercial development. This is admitted by the Respondents at paragraph 6 of the Respondents’ Submissions;

(b) the Lands are currently completely submerged under seawater and were intended for land reclamation and the development of a waterfront city. Oil palm cultivation on the Lands is, as a matter of physical reality, impossible;

(c) under the Johor Bahru and Kulai District Local Plan 2025 (Replacement), the Lands are zoned for “Committed Commercial” development;

(d) the 3rd Respondent, through KPRJ, was and remains a participant in the joint venture for the commercial development of the Lands; and

(e) the 1st Respondent’s rejection letter dated 1.12.2024 cited “procedural non-compliance” and “failure to comply with the express condition under Section 115 NLC” as reasons for the rejection, but failed to specify what procedural requirements were allegedly not met. When the Appellant sought clarification, no response was forthcoming.

The Respondents’ reliance on the broad discretionary language of Section 124(4) NLC is noted. However, discretion must be exercised rationally and reasonably. The Sri Lempah principle requires the State Authority to act in accordance with natural justice, equity and good conscience. The question is whether a reasonable decision-maker, cognisant of all the relevant facts, could rationally have rejected this Conversion Application.

On that score, this Court finds that the answer is no, for the following reasons. First, there is a fundamental inconsistency in the Respondents’ position. The Respondents themselves alienated the Lands for commercial development. The 3rd Respondent participated, through KPRJ, in a joint venture for the express purpose of developing the Lands commercially. To then reject an application to align the title conditions with the very purpose for which the Lands were alienated is, on its face, irrational. The Respondents have offered no explanation for this volte-face.

Second, the physical impossibility of complying with the express condition fatally undermines the Respondents’ reliance on the Appellant’s “failure to comply with Section 115 NLC” as a ground for rejecting the Conversion Application. The Lands are submerged. Oil palm cannot be cultivated on seabed. The Respondents knew this when they alienated the Lands. To reject a conversion application on the basis that the landowner has not grown oil palm on submerged land borders on the absurd.

Third, and critically, the 1st Respondent failed to provide adequate reasons for the rejection. The rejection letter referenced “procedural non-compliance” without specifying what procedures were not followed. When asked for clarification, the 1st Respondent provided no answer. Following Sunrise Garden and Trellises, the failure to provide reasons is itself a ground for setting aside a decision, particularly where, as here, the decision departs from the established intention and practice of the State Authority itself.

This Court is fortified in this view by the observations of the Federal Court in Trellises, endorsing the principle that the giving of reasons where there is a departure from established plans improves the quality of decision-making and increases public confidence in the process. Here, the departure is from the Respondents’ own intended use of the Lands, and no reasons have been given for that departure.

Accordingly, this Court finds that the 1st Respondent’s decision to reject the Appellant’s Conversion Application was irrational and unreasonable.

(B) Whether The Conversion Application Was An Afterthought

The Respondents contend that the Conversion Application, made on 29.10.2024, was an afterthought, a tactical response to the Form 7A Notice issued on 6.6.2024. They emphasise that the Appellant had approximately 14 years from the date of title transfer (5.10.2010) to apply for conversion, but did not do so until enforcement proceedings were initiated.

This Court acknowledges that the timing of the Conversion Application, coming approximately five months after the Form 7A Notice and shortly before the expiry of the 180-day remedy period, is not ideal from the Appellant’s perspective. The Respondents’ point on timing has some force.

However, this Court must assess the timing in context. The evidence before this Court shows that the Lands were at all material times submerged and intended for a large-scale waterfront development project involving land reclamation, planning approvals from multiple agencies and complex commercial arrangements. The expert affidavits (Enclosures 12 - 14) speak to the complexity and layered approval processes inherent in such government-linked mega-projects. The absence of a formal conversion application for 14 years, while regrettable, is explicable in this context - the Appellant and the Respondents were both operating on the understanding that the Lands were to be developed commercially.

Importantly, the present case is distinguishable from the authorities relied upon by the Respondents. In Hamidah Mohd Khalid & Yang Lain lwn. Pentadbir Tanah Daerah Gombak [2016] MLRHU 443 and Eminent Farm Sdn Bhd v Pentadbir Tanah Daerah Muallim [2021] MLJU 2669, the landowners had actively used their land for unauthorised purposes in wilful breach of the express conditions. Here, the Appellant did not exploit the Lands for any purpose - the Lands remained submerged and unused. The breach, such as it is, consisted of a failure to do the impossible (cultivate oil palm on seabed), not an active misuse of the land.

Furthermore, the Conversion Application is a lawful exercise of the right conferred by Section 124(1) NLC. There is nothing in the NLC that bars a conversion application merely because a Form 7A Notice has been issued. The Appellant’s application to regularise the land use in accordance with the Respondents’ own original intention cannot properly be characterised as a tactical afterthought.

While the delay in filing the Conversion Application is a relevant consideration, it does not, in the circumstances of this case, justify the rejection of the application. The Conversion Application must be assessed on its merits, not dismissed on the basis of timing alone.

(C) Legitimate Expectation

The Appellant contends that it has a legitimate expectation that the Respondents would facilitate the commercial development of the Lands. The Respondents counter that the doctrine of legitimate expectation cannot override express statutory powers vested in the State Authority, relying on North East Plantations Sdn Bhd lwn Pentadbir Tanah Daerah Dungun dan satu lagi [2018] supp MLJ 293 and Pentadbir Tanah dan Daerah Petaling & Ors v Bandar Utama City Corp Sdn Bhd (previously known as Damansara Jaya Sdn Bhd) & Anor and another appeal [2021] 4 MLJ 689.

The authorities cited by the Respondents are not disputed as correct statements of law. Legitimate expectation cannot override express statutory powers. However, this Court accepts the Appellant’s submission that the doctrine operates in this case not to override statutory power but to inform the reasonableness of its exercise.

The factual matrix establishes the following : the Lands were alienated by the State to its own subsidiary for commercial development; the State, through KPRJ, entered into commercial agreements premised on the development of a waterfront city; the Appellant acquired the Lands within the framework of that State-sanctioned project; and the Lands are zoned under the local plan for committed commercial development. In these circumstances, the Appellant had a reasonable expectation that the State would act consistently with its own prior conduct and facilitate the conversion of the Lands to commercial use.

The Court of Appeal in Darahman B Ibrahim & 53 Ors v Majlis Mesyuarat Kerajaan Negeri Perlis & Ors [2008] MLJU 94 held that consistency of treatment should be secured when an authority departs from an established policy and that reneging on promises may amount to an abuse of power. This Court finds this principle applicable here. The Respondents’ refusal to process the Conversion Application represents a departure from the State’s own established conduct and intent regarding the Lands, without any articulated justification.

This Court is mindful that the doctrine of legitimate expectation must be applied cautiously in the context of land administration, where the State Authority exercises powers conferred for the public interest. However, there is no provision in the NLC that prevents the State Authority from approving a conversion application even where enforcement proceedings are pending. The two are not mutually exclusive. The Respondents have not identified any statutory bar.

Accordingly, this Court finds that the Appellant has a legitimate expectation, arising from the Respondents’ own conduct and participation in the Waterfront Project, that the Conversion Application would be considered on its merits and not summarily rejected.

(D) Bad Faith And Abuse Of Power

The Appellant alleges that the rejection of the Conversion Application was made in bad faith and constitutes an abuse of power, forming part of a broader scheme to forfeit the Appellant’s Lands and those of related companies. The Respondents deny this and contend that the allegation is baseless and speculative.

Allegations of bad faith and abuse of power carry a high evidentiary burden. Under Section 101 of the Evidence Act 1950, the party alleging bad faith must prove it. Having considered the evidence, this Court notes that while the circumstantial indicators are troubling, particularly the simultaneous enforcement actions against multiple companies in the same group and the inconsistency between the Respondents’ conduct in facilitating the Waterfront Project and their subsequent enforcement actions, the evidence falls short of establishing bad faith to the requisite standard on a balance of probabilities.

This Court is not satisfied that the Appellant has discharged its burden of proving that the 1st Respondent acted with the specific intent to cause harm or with an improper purpose. The circumstantial evidence is consistent with, but does not compel, an inference of bad faith. It is equally consistent with the Respondents exercising what they perceived to be their statutory duties, albeit in a manner that this Court has found to be irrational and unreasonable.

This Court notes that related proceedings, including the appeal against the dismissal of OS 1150, are pending before the Court of Appeal. The question of bad faith in relation to the forfeiture proceedings may be more fully ventilated in those proceedings. Accordingly, this Court declines to make a finding of bad faith on the evidence before this Court, while observing that the Respondents’ conduct raises serious concerns about the consistency and fairness of their exercise of statutory powers. Observations on Authorities Filed by the Appellant (Enclosure 25)

The Respondent highlighted to the Court that the Appellant filed Enclosure 25, being the Appellant’s Bundle of Authorities (3), which contains the Grounds of Judgment of this Court (Civil 3) in Iskandar Waterfront Sdn Bhd v Pentadbir Tanah Daerah Johor Bahru & Anor [JA-24NCvC-1150-09/2024] (“OS 1150 Judgment”), the Grounds of Judgment in Falcon Unigreen Sdn Bhd v Pentadbir Tanah Daerah Johor Bahru & Anor [JA-24NCvC-1653-12/2024] (“Falcon Unigreen Judgment”) and a Timeline of Events. This Court has considered these authorities and make the following observations.

The OS 1150 Judgment concerned the validity of the Form 7A Notices issued under Section 128 of the NLC. The question before Civil 3 was whether the Land Administrator was entitled to issue the enforcement notices and whether the 180-day remedy period was reasonable. The learned judge found that the Appellant’s breach of the express conditions was wilful and contumacious and that the issuance of the Form 7A Notices was neither premature nor made in bad faith. That decision is noted and was, in fact, already recorded in this judgment at paragraph 49 above.

The present appeal, however, concerns a distinct legal question, namely, the rationality and lawfulness of the 1st Respondent’s decision to reject the Appellant’s Conversion Application under Section 124 of the NLC. That the Appellant may be in breach of the express conditions of the Lands (as found in OS 1150) does not, without more, render the rejection of a lawful conversion application rational. Indeed, the very purpose of a conversion application under Section 124 of the NLC is to regularise a state of affairs where the existing conditions no longer reflect the intended or practicable use of the land. To reject such an application on the ground that the applicant has not complied with the very conditions it seeks to change is, as this Court has found, unreasonable.

There is accordingly no inconsistency between the OS 1150 Judgment and the present findings. The Form 7A Notices may have been validly issued under the NLC enforcement provisions and yet the rejection of the Conversion Application may still be irrational and unreasonable. These are separate statutory processes with distinct legal standards, and different outcomes are not only permissible but, on the facts of this case, logically necessary.

As regards the Falcon Unigreen Judgment, this Court notes that the facts are materially distinguishable. In that case, the land was physically accessible and had been used for an unauthorised purpose, a workshop had been erected on the land in breach of the express condition requiring multi-storey commercial buildings. The breach consisted of active misuse of the land. In the present case, the Lands are completely submerged under seawater and no use of any kind, authorised or otherwise, has been or could have been made of them. The Appellant’s failure to cultivate oil palm on seabed cannot be equated with the wilful erection of non-conforming structures on developable land.

These observations do not alter the analysis or conclusions set out in this judgment. The authorities filed in Enclosure 25, while relevant to the broader factual matrix involving the Appellant and related entities, do not address the specific question of whether the rejection of the Conversion Application was rational and lawful, which is the sole issue before this Court. Court’s Decision

For the reasons set out above, this Court finds that the 1st Respondent’s decision to reject the Appellant’s Conversion Application was irrational and unreasonable. The decision was made without adequate reasons, is inconsistent with the Respondents’ own conduct and intention in alienating the Lands and fails to give proper consideration to the physical impossibility of compliance with the existing express condition.

This Court is, however, mindful that the relief sought by the Appellant includes a mandatory order directing the Respondents to approve the Conversion Application and endorse the change of land use within 30 days. Such an order would effectively substitute the court’s judgment for the State Authority’s discretion under Section 124 of the NLC. The statutory scheme vests the power to approve or reject conversion applications in the State Authority and the court’s role under Section 418 of the NLC is supervisory in nature, to ensure that discretion is exercised lawfully, rationally and in good faith, not to dictate the outcome. This Court therefore makes the following orders –

(a) Prayer 1 is allowed. The 1st Respondent’s decision to reject the Appellant’s Conversion Application as communicated by letter dated 1.12.2024 is hereby set aside and declared null and void;

(b) Prayer 2 is allowed in modified terms. In lieu of a mandatory order to approve the Conversion Application, the 1st Respondent is directed to reconsider the Appellant’s Conversion Application de novo and on its merits, in accordance with the law and in a manner consistent with the principles set out in this judgment, within sixty (60) days from the date of service of this order. In reconsidering the application, the 1st Respondent shall –

(i) give proper consideration to the physical characteristics of the Lands, the original purpose of their alienation, the zoning under the local plan, and all other relevant circumstances;

(c) Prayer 3 is allowed. Service of a sealed copy of this order shall be effected on the Respondents by serving a copy at the office of the State Legal Advisor and/or their solicitors on record;

(d) Prayer 4 : Costs of RM10,000.00;

(e) Prayer 5 is allowed. Liberty is granted to the parties to apply for further and necessary directions or orders. Dated 13 March 2025 -signed-Dr Noradura binti Hamzah Judicial Commissioner High Court Civil 2 Johor Bahru Solicitor for the Applicant : : Joseph Khor Sheng Yang together with Raymond Mah Mun Kitt and Jeremiah Susaiyan Messrs. MahWengKwai & Associates Solicitor for the Respondents : : Arief Aiman Bin Hamir Hamzah Pejabat Penasihat Undang-Undang Negeri Johor