JRI Resources Sdn Bhd v Kuwait Finance House (Malaysia) Berhad (06-06-07/2017 (B))

I have read the written judgments in draft of my learned brothers Mr. Justice Mohd Zawawi Salleh and Mr. Justice Azahar 3 Mohamed. With due respect I am unable to agree with their reasons and conclusions. I have also read the written judgment in draft of Justice David Wong Dak Wah. I agree with his reasons and conclusion. However, in view of the importance of the issues involved in this reference I should also state my reasons for supporting the conclusion arrived at by Justice David Wong Dak Wah. Basically my reasons revolve in the context of the Federal Constitution (‘FC’) on issues involving the proper understanding and interpretation of these concepts, namely:-

(i) separation of powers vis-a-vis judicial independence;

Constitutions based on the Westminster model are founded on the underlying principle of separation of powers, with which the drafters are undoubtedly familiar. Nevertheless, “(I)f you knew nothing of the history of the separation of powers, if you made no comparison of the American instrument of government with ours, if you were unaware of the interpretation it had received before our Constitution was framed according to the same plan”, 4 the provisions of the Constitution cannot but indicate an intention to confine the exercise of legislative, executive, and judicial power to the respective branches of government. (See: R v Kirby; ex p Boilermakers’ Society of Australia [1956] ALR 163).

Indeed, the separation of powers is a logical inference from the arrangement of the constitution itself, the words in which the powers are vested, and the careful and elaborate provisions defining the repositories of the respective powers. “This cannot all be treated as meaningless and of no legal consequence… It would be difficult to treat it as a mere draftsman’s arrangement”. (See: R v Kirby; ex p Boilermakers’ Society of Australia (supra); Victorian Stevedoring & General Contracting Co Pty Ltd v Dignan [1932] ALR 22).

As such, while the FC does not expressly delineate the separation of powers, the principle is taken for granted as a constitutional fundamental. The absence of express words in the FC prohibiting the exercise of a particular power by a different branch of government does not by any means imply that 5 it is permitted. As articulated by Lord Diplock in Hinds v The Queen [1977] AC 195 at page 212: “It is taken for granted that the basic principle of separation of powers will apply to the exercise of their respective functions by these three organs of government. Thus the constitution does not normally contain any express prohibition upon the exercise of legislative powers by the executive or of judicial powers by either the executive or the legislature. As respects the judicature, particularly if it is intended that the previously existing courts shall continue to function, the constitution itself may even omit any express provision conferring judicial power upon the judicature. Nevertheless it is well established as a rule of construction applicable to constitutional instruments under which this governmental structure is adopted that the absence of express words to that effect does not prevent the legislative, the executive and the judicial powers of the new state being exercisable exclusively by the legislature, by the executive and by the judicature respectively.” (Emphasis added) 6 5. Similar sentiment was expressed by Lord Pearce in Liyanage v The Queen [1967] 1 AC 259 at page 287 when he said this: “These provisions manifest an intention to secure in the judiciary a freedom from political, legislative and executive control. They are wholly appropriate in a Constitution which intends that judicial power shall be vested only in the judicature. They would be inappropriate in a Constitution by which it was intended that judicial power should be shared by the executive or the legislature. The Constitution's silence as to the vesting of judicial power is consistent with its remaining, where it had lain for more than a century, in the hands of the judicature. It is not consistent with any intention that henceforth it should pass to or be shared by, the executive or the legislature.” (Emphasis added) The Rationale 6. The fundamental reason for the division of the powers of government into three branches is to ensure a proper mechanism of checks and balances, in order to avoid tyranny or arbitrary government. Since the 18th century Montesquieu, the 7 classic proponent of the principle of separation of powers, cautioned against the great danger if judicial power is joined with either legislative or executive power: “Again, there is no liberty, if the judiciary power be not separated from the legislative and executive. Were it joined with the legislative, the life and liberty of the subject would be exposed to arbitrary control; for the judge would be then the legislator. Were it joined to the executive power, the judge might behave with violence and oppression.” (See: Charles Montesquieu, The Spirit of the Laws

He went on to warn that, “there would be an end of everything” should all three powers be united in the same body. His reasoning is this: “whilst the legislature is concerned solely with declaring ‘the general will of the state’ and the executive with ‘nothing more than the execution of that general will’, only the judiciary applies the laws to particular persons. Consequently, the true definition of despotism is the uniting of this power with the other two.” (See: Richard Bellamy, The Rule of Law and the 8 Separation of Powers, Routledge, 2017 (London: Routledge, 2016) at 261).

Our Court too had expressed similar view on the importance of checks and balances to maintain the rule of law. In the case of Bato Bagi & Ors v Kerajaan Negeri Sarawak and another appeal [2011] 6 MLJ 297 at page 316 this Court said this: “With due respect, a piece of legislation passed by Parliament or State Assembly may be the will of the majority but it is the court that must be the conscience of the society so as to ensure that the rights and interests of the minority are safeguarded. For what use is there the acclamation: 'All persons are equal before the law and entitled to the equal protection of the law' (art 8 of the FC) when it is illusory. If an established right in law exists a citizen has the right to assert it and it is the duty of the courts to aid and assist him in the assertion of his right. The court will therefore assist and uphold a citizen's constitutional rights.” 9 9. Thus, “the separation and the consequent exclusive character of the powers conferred upon each of the three departments is basic and vital - not merely a matter of government mechanism” (per Sutherland J in Springer v Philippine Islands (1927) 277 US 128 at page 201). The separation of powers is a necessary device to provide security against the gradual concentration of power and to control the abuse of government. The government must be obliged to control itself. The aim is to divide and arrange the branches of power in such a manner that each may be a check on the other. (See: James Madison, “The Structure of the Government Must Furnish the Proper Checks and Balances Between the Different Departments”, The Federalist Papers No. 51 (1788)).

Accordingly, in distributing the powers of government, it is essential that “all the parts of it form a mutual check upon each other. The three parts, each part regulates and is regulated by the rest” (See: Blackstone, Commentaries, Vol. 1, 1765/1979 at 154). Under this system, “if a given policy can be implemented only by a combination of legislative enactment, judicial application, and executive implementation, no man or 10 group of men will be able to impose its unchecked will.” (See: United States v Brown (1965) 381 US 437 at 443.) Separation Of Judicial Power From Legislative/Executive Power 11. Countries adopting the Westminster model of government do not subscribe to an absolute separation of powers. It has been observed that the separation between legislative and executive powers is not rigid: the executive, for instance, is often empowered by the legislature to exercise regulative functions. Moreover, it can be safely said that the executive mostly initiates legislations with the legislature only to consider and pass them into law upon complying with the relevant procedural requirements.

However, the partial overlap between functions is confined to the spheres of legislative and executive powers. The notion that the separation of powers applies “to a certain extent” has a special application where these two powers are concerned. The justification for such an overlap is to promote efficiency of government. (See: Sir Owen Dixon, ‘The Law and the Constitution’ (1935) 51 Law Quarterly Review 590 at 606). It must be remembered that in a Commonwealth frame of 11 government, the executive is responsible to Parliament. (See: Victorian Stevedoring & General Contracting Co v Dignan (supra)). Since the executive body is at all times subject to the control of the legislature, the delegation of regulative power by the legislature to an executive body does not mean that the legislature has abdicated a constitutionally vested power. (See: Attorney-General for Australia v The Queen [1957] AC 288 at page 315).

In contrast, questions of judicial power occupy a place apart under the constitution due to its special nature. The absolute independence of the judiciary is the bulwark of the constitution against encroachment whether by the legislature or by the executive. (See: Attorney - General for Australia v The Queen (supra) at page 315). The importance of judicial power having a distinct and separate existence was underlined by Sir William Blackstone (in Commentaries on the Laws of England (supra) at pages 259-260) by these words: “In this distinct and separate existence of the judicial power… consists one main preservative of the public liberty; which cannot subsist long in any state, unless the 12 administration of common justice be in some degree separated both from the legislative and also from the executive power. Were [judicial power] joined with the legislative, the life, liberty, and property, of the subject would be in the hands of arbitrary judges, whose decisions would be then regulated only by their own opinions, and not by any fundamental principles of law; which, though legislators may depart from, yet judges are bound to observe. Were it joined with the executive, this union might soon be an overbalance for the legislative… Nothing therefore is more to be avoided, in a free constitution, than uniting the provinces of a judge and a minister of state.” (Emphasis added)

Quoting the passage from Blackstone above, Deane J in Re Tracey; ex parte Ryan [1989] 84 ALR 1 said this: “Therein lie the main point and justification of the doctrine of the separation of judicial from executive and legislative powers upon which the Constitution is structured. To ignore the significance of the doctrine or to discount the importance of safeguarding the true independence of the 13 judicature upon which the doctrine is predicated is to run the risk of undermining, or even subverting, the Constitution's only general guarantee of due process.”

As such, whatever overlap there may be between the exercise of legislative and executive powers the separation between these two powers on the one hand and judicial power on the other is total or effectively so. (See: Director of Public Prosecutions of Jamaica v Mollison [2003] 2 AC 411 at paragraph [13]). Such separation, based on the rule of law, is a characteristic feature of democracies. (See: R (Anderson) v Secretary of State for the Home Department [2003] 1 AC 837 at paragraph [39]). As aptly described by Harrison Moore (W H Moore, The Constitution of the Commonwealth of Australia, 2nd ed (Melbourne: Maxwell, 1910) at 101) thus: “Between legislative and executive power on the one hand, and judicial power on the other, there is a great cleavage.”

It should also be noted that the principle of separation of powers and the concept of judicial independence have been recognised 14 as sacrosanct, forming part of the basic structure of the FC. (See: Semenyih Jaya v Pentadbir Tanah Daerah Hulu Langat [2017] 3 MLJ 561 at paragraph [90]). It is the duty of the courts to protect the constitution from being undermined by the whittling away of the principles upon which it is based. As such, the judicial power of the Federation vested in the judiciary “will naturally be the subject of our special watchfulness even to the point of jealousy” (See: Lynham v Butler (No. 2) [1933] IR 74 at page 97). The Implications 17. Based therefore on a proper understanding of the principle of separation of powers, these are some of the basic tenets in relation to judicial powers that must be observed:-

(i) First, judicial power cannot be removed from the judiciary;

Parliament is also restrained from reposing any other than judicial power upon the courts. (See: Victorian Stevedoring & General Contracting Co v Dignan (supra)). As Taft CJ noted in Hampton v United States 276 US 394 at pages 406-7: “It is a breach of the national fundamental law if Congress gives up its legislative power and transfers it to the President, or to the judicial branch, or if by law it attempts to invest itself or its members with either executive power or judicial power.” 16

The power of Parliament to make laws with respect to the matters enumerated in the Federal or Concurrent Lists of the FC must be understood in the context of the constitutional scheme as a whole. The entries in the legislative lists are not to be read as a carte blanche for Parliament to make law contrary to the principle of separation of powers or the exclusive vesting of judicial power under Article 121. In fact, despite the lists in the FC the scope of the Parliament conferring legislative powers to the executive is not without limit. (See: Victorian Stevedoring & General Contracting Co v Dignan (supra)).

In my view it is therefore a fallacy to suggest that the purported “flexibility” of the separation of powers doctrine allows an “overlap and blending” of functions between branches of government, so that each can exercise the powers of another. Such suggestion ignores the fundamental separation of judicial power from legislative and executive power. It would be a complete mockery to the doctrine of separation of powers if Parliament were allowed to delegate legislative power to the judiciary. In the words of Abdoolcader SCJ in Public Prosecutor v Dato’ Yap Peng [1987] 2 MLJ 311 at page 319 such act would 17 render the court’s lip service to the principle “no more than a teasing illusion, like a munificent bequest in a pauper’s will”. Rule Of Law 21. The exclusive vesting of judicial power in the judiciary is also inextricably intertwined with the underlying principle of the rule of law. On a basic level, the rule of law requires that the law is capable of fulfilling its function of guiding the behaviour of persons living under it. For persons to be able to be guided by the law, it is essential that principles of law are correctly and authoritatively decided. (See: Tan Eng Hong v Attorney-General [2012] 4 SLR 476 at paragraph [16]).

From a broader constitutional standpoint, the rule of law requires that every power must have legal limits. Unfettered discretion is contrary to the rule of law. (See: Pengarah Tanah dan Galian, Wilayah Persekutuan v Sri Lempah Enterprise Sdn Bhd [1979] 1 MLJ 135 at page 148, Chng Suan Tze v Minister of Home Affairs & Ors [1988] 1 SLR 132 at page 157). It is for the courts to determine whether the limits of power have been exceeded. As Sundaresh Menon (Chief Justice Singapore) explained in Tan Seet Eng (supra) at paragraph [1]): 18 “The rule of law is the bedrock on which our society was founded and on which it has thrived. The term, the rule of law, is not one that admits of a fixed or precise definition. However, one of its core ideas is the notion that the power of the State is vested in the various arms of government and that such power is subject to legal limits. But it would be meaningless to speak of power being limited were there no recourse to determine whether, how, and in what circumstances those limits had been exceeded. Under our system of government, which is based on the Westminster model, that task falls upon the Judiciary. Judges are entrusted with the task of ensuring that any exercise of state power is done within legal limits.”

The role of the judiciary is intrinsic to our constitutional structure and the modern democratic state. The words of Lord Bingham in A and others v Secretary of State for the Home Department [2004] UKHL 56 at paragraph [42] are a pertinent reminder: 19 “It is of course true that the judges in this country are not elected and are not answerable to Parliament. It is also of course true, as pointed out at [29], above, that Parliament, the executive and the courts have different functions. But the function of independent judges charged to interpret and apply the law is universally recognised as a cardinal feature of the modern democratic state, a cornerstone of the rule of law itself. The Attorney General is fully entitled to insist on the proper limits of judicial authority, but he is wrong to stigmatise judicial decision-making as in some way undemocratic.” (Emphasis added)

As such, the power of the courts is a natural and necessary corollary not just to the separation of powers, but also to the rule of law. (See: Indira Gandhi a/p Mutho v Pengarah Jabatan Agama Islam Perak (supra) at paragraph [33]). Approach To Interpretation 25. The central question to be determined in this reference is whether judicial power has been impermissibly vested in the 20 SAC by virtue of sections 56 and 57 of the Central Bank of Malaysia Act 2009 (“CBMA 2009”).

The approach to be adopted is to interpret the impugned sections of the CBMA 2009 to discern whether the SAC was intended by Parliament to exercise judicial power. Such an intention may be express or appear from the nature of the functions assigned. (See: Federal Commissioner of Taxation v Munro [1926] ALR 339). It is immaterial whether the label ascribed to the SAC’s function in the CBMA 2009 is one of “ascertainment” rather than “determination”. Considering the substance and actual effect of the impugned provisions can only discover the true nature of their function. It is the substance of the provisions that mater, not the form. After all “Parliament cannot evade a constitutional restriction by a colourable device”. (See: Hinds v The Queen (supra) at page 227).

A similar view was expressed by Griffith CJ in Waterside Workers Federation of Australia v JW Alexander Ltd (1918) 24 ALR 341: 21 “It is impossible under the Constitution to confer such functions upon any body other than a court, nor can the difficulty be avoided by designating a body, which is not in its essential character a court, by that name, or by calling the functions by another name. In short, any attempt to vest any part of the judicial power of the Commonwealth in any body other than a court is entirely ineffective.” (Emphasis added) Judicial Power 28. Against the background of legal principles aforementioned, I now turn to the unenviable task of considering the meaning and scope of judicial power. General Principles 29. Judicial power is not to be delimited in a narrow or pedantic manner. It extends to all incidental and necessary matters necessary to render it effective. (See: Boilermakers’ Society of Australia (supra); Mellifont v Attorney-General (Queensland) [1991] 104 ALR 89 at page 94). In determining whether judicial power is vested in the SAC, the true criterion is not what powers are expressly or by implication excluded from the scope of 22 judicial power, but what powers are expressly or by implication included in it. (See: Attorney - General for Australia v The Queen (supra) at page 319).

Despite many attempts to define judicial power, “it has never been found possible to frame a definition that is at once exclusive and exhaustive”. (See: R v Davison [1954] ALR 877 per Dixon CJ and McTiernan J; Brandy v Human Rights and Equal Opportunity Commission [1995] 127 ALR 1; R v Trade Practices Tribunal, ex p Tasmanian Breweries Pty Ltd [1970] ALR 49; Palmer v Ayres [2017] 341 ALR 18 at paragraph [43]). The amorphous notion of judicial power seems to “defy or transcend purely abstract conceptual analysis”. (See: Tasmanian Breweries (supra)). It is a concept that may more appropriately be defined “by way of description rather than of precise formula”. (See: Lynham v Butler (No. 2) [1933] IR 74 at page 99).

In light of these difficulties, one would be wary of purporting to lay down a mandatory checklist of essential features of judicial power. There is no single feature or element that is conclusive of the exercise of judicial power. The “answer to the question is 23 to be sought by an examination of all their elements or features”. (See: Tasmanian Breweries (supra) per Walsh J). (See also: Labour Relations Board of Saskatchewan v John East Iron Works Ltd [1949] AC 134 at page 149 per Lord Simonds LC).

Of course, the modern understanding of judicial power as an exclusive area has two important conceptions. (See: Palmer v Ayres [2017] 341 ALR 18 at paragraph [47]). At the centre of that exclusive area lies the core or essential function of quelling controversies of legal rights and obligations by ascertaining facts, applying law, and exercising discretion. (See: Rizeq v Western Australia [2017] HCA 23 at paragraph [52]). On the fringe of that area lies certain other functions that may not, on their own, be exclusively judicial in character, but are ancillary or incidental to the exercise of judicial power. These two areas will be considered in turn. Core Features Of Judicial Power 33. The classic description of judicial power is that of Griffith CJ in Huddart, Parker & Co v Moorehead [1909] 8 CLR 330: 24 “I am of opinion that the words ‘judicial power’ as used in Section 71 of the Constitution [which vests the judicial power of the Commonwealth in the courts of Australia] mean the power which every sovereign authority must of necessity have to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to life, liberty or property. The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action.”

The dicta has been generally accepted not as a comprehensive definition, but an accurate statement or description of its “broad features”. (See: Labour Relations Board of Saskatchewan v John East Iron Works Ltd [1949] AC 134). These features broadly correspond to the three common features of judicial power posited by the 2nd Intervener, whose submissions are adopted by the Respondent, namely:

(i) the exercise of an adjudicative function;

The task of adjudication involves determining questions of fact and law, applying the law as determined to the facts, and reaching an outcome that imposes liability or affects rights. (See: Tasmanian Breweries (supra)). The Commentaries of Sir William Blackstone (Vol. III), published in 1768, explained an exercise of judicial power in these terms: “In every court there must be at least three constituent parts, the actor, reus and judex; the actor or plaintiff, who complains of an injury done; the reus, or defendant, who is called upon to make satisfaction for it; and the judex or judicial power, which is to examine the truth of the fact, to determine the law arising upon that fact, and, if any injury 26 appears to have been done, to ascertain and by its officers to apply the remedy.” (Emphasis added)

One integral part of the adjudication process is the determination of questions of law. “All questions of law are for the court”. (See: Federal Commissioner of Taxation v Munro (supra) per Isaacs J). A pronouncement on a question of law arising from a judicial proceeding was held to constitute an exercise of judicial power in Mellifont v Attorney-General (Queensland) (supra). In that case, an accused was discharged in the trial court after the prosecution entered a nolle prosequi. A question of law arising from a ruling by the trial judge was referred to the Queensland Court of Criminal Appeal (QCCA). The majority in the High Court of Australia held that the proceedings before the QCCA constituted an exercise of judicial power, since the question of law arose from an actual controversy before the court (at page 98): “True it is that the purpose of seeking and obtaining a review of the trial judge's ruling was to secure a correct statement of the law so that it would be applied correctly in 27 future cases. However, in our view, in the context of the criminal law, that does not stamp the procedure for which s 669 a (2) provides as something which is academic or hypothetical so as to deny that it is an exercise of judicial power… The fundamental point, as it seems to us, is that s 669 a (2) enables the Court of Criminal Appeal to correct an error of law at the trial. It is that characteristic of the proceedings that stamps them as an exercise of judicial power and the decision as a judgment or order within the meaning of s 73.”

Another aspect of adjudication is this: the subject matter adjudicated upon concerns the rights and liabilities of parties in dispute. The “essential element is that [the body] should have power by its determination within jurisdiction, to impose liability or affect rights”. (See: R v Local Government Board (1902) 2 IR 349 at page 373). The determination itself must result in “the creation of instant liability in specified persons, as distinct from laying down a rule or standard of conduct for the future”. (See: Rola Company (Australia) Pty Ltd v Commonwealth [1944] 69 CLR 185 per Latham CJ; Waterside Workers Federation v Alexander [1918] 25 CLR 434 at page 463). As expressed by 28 Holmes J in Prentis v Atlantic Coast Line Company (1908) 211 US 210 at page 226: “A judicial inquiry investigates, declares, and enforces liabilities as they stand on present or past facts and under laws supposed already to exist. That is its purpose and end.”

Where the adjudication does not relate to the rights and obligations of disputing parties, but involves general considerations of policy, it points against the exercise of judicial power. In Tasmanian Breweries (supra), the statutory function of the Trade Practices Tribunal is to determine whether a restriction or practice is contrary to the public interest. The Commissioner of Trade Practices sets the Tribunal in motion. The effect of the determination is to render any agreement providing for such a restriction or practice unenforceable for the future. The High Court of Australia (McTiernan, Kitto, Menzies, Windeyer, Owen and Walsh JJ.) held that the functions of the Tribunal did not constitute an exercise of judicial power. 29 40. The court placed significant weight on the fact that the determination itself does not involve any claim of right. In Tasmanian Breweries (supra) Kitto J said this: “None of the powers of the Tribunal, then, involves any adjudication upon a claim of right. This negative consideration, however, does not stand by itself. The effect given by the Act to a determination under s 49 that a restriction or practice is contrary to the public interest is to render unenforceable for the future an agreement under which the restriction is accepted or the practice is provided for (s 51), and to enable the Tribunal to make such orders as it thinks proper for restraining future conduct which falls within certain descriptions (s 52). The determination itself has no operative effect: it constitutes the factum by reference to which the Act operates to alter the law in relation to the particular case.”

Further, the determination by the Tribunal on questions of public interest for future guidance “attracts indefinite considerations of policy that are more appropriate to law-making”, (per Windeyer J). Such a determination is far removed from the paradigm case 30 of adjudicating upon the existing rights and liabilities of parties in dispute. It is important to read the following views of Kitto J in this context: “Thus the work of the Tribunal is work which would be appropriate for the legislature itself to do if it had the time to consider individual cases. It would be obviously impracticable for the Parliament to apply its own ideas as to what is contrary to the public interest, either by passing a special Act for every individual case or by laying down a definition which in every case would be sure to produce a result satisfactory to it.”

Turning therefore to the facts of the present reference, the background to the dispute can be summarised as follows. The Respondent granted Ijarah facilities to the Applicant concerning the leasing of shipping vessels. The Respondent obtained summary judgment against the Applicant for outstanding amounts due under the facilities. The Applicant appealed, alleging that its failure to derive income from the leasing of the vessels was due to the failure of the Respondent to carry out the major maintenance works thereon. In this regard, the Applicant 31 challenged the Shariah compliance of clause 2.8 of the Ijarah facilities, which provides that the parties agree for the costs of major maintenance works to be borne by the customer [the Applicant]. The Court of Appeal allowed the appeal, and directed the High Court to refer to the SAC the specific question of law, namely whether clause 2.8 is Shariah-compliant.

The SAC delivered a ruling to the effect that negotiations to determine which party should bear the cost of an asset is allowed, as long as it has been agreed by the contracting parties. The effect of the ruling is that clause 2.8 of the Ijarah facilities is Shariah-compliant. The parties are bound by the clause and as the customer, the Applicant is obliged to bear the cost of the major maintenance works on the vessels as agreed. The basis of the Applicant’s appeal against the summary judgment – that the Respondent has failed in its obligation to carry out the major maintenance works – becomes unsustainable. The central issue in the case has thus been disposed of by virtue of the SAC ruling. Unlike the Tribunal in the case of Tasmanian Breweries (supra), the SAC ruling is not a general pronouncement on policy matters for the future, but a determination affecting the rights and liabilities of the parties in the dispute before the court. 32

Under section 57 of the CBMA 2009, the ruling is binding on the High Court. It is not open to the High Court to determine the question of law or consider expert evidence on the issue. There is also no question of the High Court applying the SAC ruling to the facts. The specific clause in dispute was referred to the SAC and the SAC had pronounced on its Shariah compliance. In this case, the High Court was unable to reach any other possible outcome on the issue.

In substance therefore, the rights and obligations of the parties in dispute have effectively been determined by virtue of the SAC ruling. This substantive effect is not annulled by the declaration in the SAC’s ruling and in the manual issued by Bank Negara Malaysia, that the function of the SAC is merely to state the Hukum Syarak. The task of adjudication has been removed from the High Court and assigned to the SAC. On the facts of this case, the function exercised by the SAC undoubtedly exhibits the first feature of judicial power as submitted by the 2nd Intervener. 33 Finality In Resolving The Whole Dispute 46. In respect of the second alleged feature of judicial power, the 2nd Intervener contended that the ruling of the SAC does not finally resolve the whole dispute between the parties.

However, striking parallels can be drawn between the role of the SAC under sections 56 and 57 of the CBMA 2009 and the role of land assessors under section 40D of the Land Acquisition Act 1960 (“LAA 1960”). Section 40D empowers the assessors to determine the amount of compensation. The High Court judge is required either to adopt the opinion of the two assessors, or in the event of a difference in opinion between them, elect to concur with one assessor. All decisions as to the amount of compensation are final and non-appealable.

Section 40D was held to be unconstitutional for purporting to vest judicial power in the assessors in the landmark case of Semenyih Jaya v Pentadbir Tanah Daerah Hulu Langat (supra). This Court observed that the section did not empower the judge to disagree with the assessors or to give them directions or instructions but “the aggrieved landowner is left without any recourse, as the assessors’ decision is final” (at 34 paragraph [109]). The land assessors’ final determination on a single issue - the amount of compensation - to the exclusion of the judge was found to be an usurpation of judicial power. Zainun Ali FCJ described the residual role of the judge on the issue of compensation in the following words (at paragraphs [51]-[52]): “Wherefore now stands the judge? It would appear that he sits by the sideline and dutifully anoints the assessors’ decision.”

The facts of the present case are, for all relevant purposes, virtually indistinguishable from that of Semenyih Jaya (supra). The ruling of the SAC is final as regards the issue of whether the clause is Shariah compliant. It cannot be challenged by the parties with contrary expert evidence, nor reviewed by the High Court, nor overturned on appeal. In exercising this function, the SAC is not subject to any check and balance mechanism. Whether the function of the SAC involves judicial power does not depend on the number of additional issues raised by the parties in any particular dispute. In any event, on the facts of the present case, it is not apparent what, if at all, is left of the dispute to be 35 resolved by the High Court. Accordingly, the ruling of the SAC also demonstrates the second suggested indicia of judicial power. Power To Enforce Its Own Decision 50. It was contended that the giving of a binding and authoritative decision does not itself indicate judicial power. The decision must be enforceable by the decision-making body itself. Since the SAC itself cannot enforce its own ruling, as the argument goes, judicial power still remains with the court for the SAC decision must be forwarded to the court.

It is interesting to note that in all of the cases cited to support the proposition that a binding decision does not judicial power make, the decisions in question were binding on the parties involved. No authority was produced in relation to a decision by a non-judicial body which is binding on the court. The cases cited lend little, if any, assistance to the Respondent and the 2nd Intervener, for such decisions are wholly different in nature from decisions binding on a court. 36 52. The 2nd Intervener relied heavily on the case of Rola Company (Australia) v Commonwealth (supra), where Latham CJ expressed the following view: “The mere giving of the decision is not the action to which the learned Chief Justice referred. If a body which has power to give a binding and authoritative decision is able to take action so as to enforce that decision, then, but only then, according to the definition quoted, all the attributes of judicial power are plainly present.” (Emphasis added)

Once again, it is important to appreciate the context in which the statement was made. In that case, the Women’s Employment Board was established by regulation to determine whether a particular work fell within certain categories, whether women could be employed or continue to be employed in that work, and the terms of employment such as the hours and rate of pay. A Committee of Reference reviewed decisions referred from the Board. Pertinently, the determination was a finding of fact binding upon the employer and the women concerned. 37 54. The High Court of Australia held that neither the Board nor the Committee exercised judicial power. Latham CJ explained that: “The decision of an ordinary court that B is bound to pay money to A applies a pre-existing standard of rights and duties not created by the court itself, with the result that there is an immediately enforceable liability of B to pay to A the sum of money in question. The decision of the Women's Employment Board does not create any such liability, nor does the determination of a Committee of Reference create any such liability. In order to impose an immediately enforceable liability upon any employer, for example, to pay wages to a particular female, it would be necessary for the female or some person on her behalf — see reg 9A — to sue in a court of competent jurisdiction. If such a proceeding succeeded there would then be a liability created by the determination of the court. In such a proceeding the determination of the Committee of Reference would be evidence of the facts to which it related, but that determination would not in itself create liability.” (Emphasis added) 38

The SAC ruling in the present case is, however, of a wholly different nature. The ruling is binding not on the parties but on the High Court. It is not merely evidence of Syariah compliance, but a decision from which the High Court cannot depart. Unlike in the case of Rola, (supra) there is no necessity for the parties to commence any subsequent proceedings in order to enforce the SAC ruling.

The SAC ruling bears a closer resemblance to the Commission’s decision in Brandy v Human Rights and Equal Opportunity Commission [1995] 127 ALR 1. In that case, the Human Rights and Equal Opportunity Commission conducted an inquiry on a complaint under the Racial Discrimination Act 1975, and determined that the plaintiff should apologise and pay damages to the complainant. The plaintiff challenged the provisions in the statute which required determinations by the Commission to be registered with the Federal Court, and provided that registered determinations would take effect as if they were orders of that court. The High Court of Australia held that the impugned provisions invalidly vested judicial power in the Commission. 39 57. It was found that the making of a determination of a complaint did not itself involve the exercise of judicial power by the Commission, for the statute provides that such a determination was not binding or conclusive between any of the parties. However, it was constitutionally impermissible to provide that the determination would take effect as an order of the court. In their joint judgment, Mason CJ, Brennan J and Toohey J stated that (at page 10): “But s 25zab goes beyond providing the machinery for the enforcement of a determination. It purports to give a registered determination effect ‘as if it were an order made by the Federal Court’. A judicial order made by the Federal Court takes effect as an exercise of Commonwealth judicial power, but a determination by the Commission is neither made nor registered in the exercise of judicial power. An exercise of executive power by the Commission and the performance of an administrative function by the Registrar of the Federal Court simply cannot create an order which takes effect as an exercise of judicial power; conversely, an order which takes effect as an exercise of judicial power cannot be made except after the making of 40 a judicial determination. Thus, s 25zab purports to prescribe what the Constitution does not permit.” (Emphasis added)

In the present case, the High Court cannot be said to have retained judicial power by reason of SAC merely forwarding its ruling to it. The effect of the SAC ruling will necessarily be reflected in the order of the High Court on which it binds. It means the determination of the SAC on the issue referred to it becomes enforceable forthwith. Following Brandy (supra) it is impermissible for the decision of a non-judicial body to take effect as an exercise of judicial power.

Based on the foregoing, it is clear that all three proposed indicia of judicial power are present on the facts of the present case, namely, the SAC exercises an adjudicative function, finally resolves the dispute on the issue of Shariah law, and gives a decision which is immediately enforceable. The sting lies in the ruling being binding on the High Court. The function of the SAC in this case thus falls clearly within what may be termed the core area of judicial power. 41 Functions Ancillary/Incidental To Judicial Power 60. Be that as it may and at the risk of repetition, it must be emphasised the three features discussed above are by no means exhaustive, and that none of them is determinative of judicial power. The absence of any particular feature also does not necessarily negate judicial power. The difficulties in delineating the precise boundaries of judicial power arise because many functions are not exclusive to one particular power, but may be ancillary or incidental to legislative, executive, or judicial power depending on its context. One example of a function with a “double aspect” is the appointment of new trustees. It may be done in the course judicial administration of trusts and assets, or as an administrative act in the exercise of governmental control over public charities. (See: R v Davison [1954] ALR 877).

The functions falling within this penumbral area has been described as “a borderland in which judicial and administrative functions overlap”. (See: Labour Relations Board of Saskatchewan v John East Iron Works Ltd (1949) AC 134 at page 148). Thus, it was observed in Boilermakers’ Society of 42 Australia (supra) (see also Queen Victoria Memorial Hospital v Thornton [1953] 87 CLR 144 at 151) that: “... a function which, considered independently, might seem of its own nature to belong to another division of power yet, in the place it takes in connection with the judicature, falls within the judicial power or what is incidental to it.”

As such, while the features outlined above are broadly indicative of the “paradigm case of judicial power”, as alluded earlier on, they are by no means an exhaustive description of all the functions falling within the scope of judicial power. The core features of judicial power above relate to the nature or effect of a particular function. To determine whether a function is incidental or ancillary to judicial power, one must also consider the purpose or context of that function. Approach 63. If a function is consistent with either judicial or other powers, the matter must be examined further. 43 “It is at that point that the character of the proceeding or of the thing to be done becomes all important. Where the difficulty is to distinguish between a legislative and a judicial proceeding, the end accomplished may be decisive.” (See: R v Davison (supra))

“The nature of the final act determines the nature of the previous inquiry”. (See: Prentis v Atlantic Coast Line Co (1908) 211 US 210 per Holmes J). An incidental function takes its dominant character from the main purpose. (See: Federal Commissioner of Taxation v Munro [1926] ALR 339) or the jurisdiction of which it is a phase (Tasmanian Breweries (supra)). The test was succinctly put by Dixon CJ, McTiernan, Fullagar and Kitto JJ in Boilermakers’ Society of Australia (supra): “What belongs to the judicial power or is incidental or ancillary to it cannot be determined except by ascertaining if it has a sufficient relation to the principal or judicial function or purpose to which it may be thought to be accessory.” 44 Application 65. The facts of R v Davison (supra) offer an illuminating illustration of this approach. The case concerned the statutory power of a deputy registrar to hear bankruptcy petitions and make sequestration orders. Kitto J noted that while the function of bringing about a bankruptcy could be either a judicial or executive act, in the context of the particular statute, a debtor may only be made a bankrupt by way of a court order upon hearing a petition presented to the court. Consequently, the power was a judicial power and cannot be delegated to a Deputy Registrar: “… while it may be that a provision would be constitutionally valid which enabled a debtor to bring about his own bankruptcy by applying to an executive officer such as a Registrar in Bankruptcy for the performance of some purely administrative act, that proposition does not support the provision which we have here to consider. The Bankruptcy Act provides no way by which a debtor may be made a bankrupt except by means of an order made in the exercise of judicial power upon the hearing of a petition presented to a court. But it purports to authorize the 45 registrars, the very officials whose office for constitutional reasons has been completely excluded from the organization of the several courts, to come, as it were, into the courts, to take into their own hands proceedings which they find pending upon debtors' petitions presented to those courts, to perform in place of the judges of those courts the function of hearing such petitions, and to dispose of the proceedings by means of orders taking effect, by virtue of s 24(2), as if they were orders of the courts made in exercise of judicial power.” (Emphasis added)

Another striking example is Mellifont v Attorney-General (Queensland) (supra), alluded to earlier, which concerned the referral of a question of law arising from a trial judge’s ruling to the Queensland Court of Criminal Appeal (QCCA). The majority in the Australian High Court noted that “the reference and the decision on the reference arise out of the proceedings on the indictment and are a statutory extension of those proceedings” (at page 98). For this reason, it was held that the decision of the QCCA constituted an exercise of judicial power (at page 97): 46 “Such answers are not given in circumstances divorced from an attempt to administer the law as stated by the answers; they are given as an integral part of the process of determining the rights and obligations of the parties which are at stake in the proceedings in which the questions are reserved. Once this is accepted, as indeed it must be, it follows inevitably that the giving of the answers is an exercise of judicial power because the seeking and the giving of the answers constitutes an important and influential, if not decisive, step in the judicial determination of the rights and liabilities in issue in the litigation. Viewed in this context, it matters not whether the giving of the answers is, as a matter of legal theory, a binding determination, that is, binding on the court at first instance and the parties, as Mason CJ and Dawson J thought (at CLR 245, 302) or influential, that is, binding in a practical sense or virtually so, as Deane, Gaudron and McHugh JJ thought (at CLR 279–80).” (Emphasis added)

These cases can be contrasted with Pioneer Concrete (Vic) Pty Ltd v Trade Practices Commission [1982] 43 ALR 449, 47 which concerned the power of the Trade Practices Commission to require persons to furnish information or produce documents. It was acknowledged that the function of inquiry “is not necessarily an exercise of judicial power”, and “may be made for executive or legislative purposes”, (per Gibbs CJ at page 452). Mason J elaborated that (at page 456): “It may constitute an element in the exercise of judicial power when the power is part of the proceedings of the court, its object being to aid the court or the parties to obtain and present evidence in those proceedings. Then the exercise of the power by the court or the parties in proceedings in the court is for the purpose of enabling the court to hear and determine the lis and is, accordingly, incidental to, if not an element in, the exercise of judicial power.” (Emphasis added)

Interestingly, the learned judge took the view that (at page 457): “… once a court begins to exercise the judicial power in relation to a particular matter it has the exclusive right to 48 exercise, or control the exercise of, the functions which form part of that power or are incidental to it.”

However, on the facts of the case, Mason J found nothing in the nature of the Commissioner’s powers “to suggest that its sole, substantial or immediate object is to aid the court in its function of hearing and determining cases”. The possibility that inquiries by the Commissioner may yield information to be presented as evidence in court is merely “consequential and altogether too remote to enable us to say that the power is incidental to the exercise of judicial power” (at page 457). Purpose And Context Of The SAC Ruling 70. The realities of government and the multifarious character of many functions call for a more nuanced and contextual approach to judicial power than an identification of its core features.

Consider the function of ascertaining Islamic law in isolation, divorced from the present facts. Independently, the function may be consistent with judicial or non-judicial power. The true character of the function would depend on the purpose or end to which it is used. For instance, the ascertainment of Islamic law 49 for the purposes of enacting Islamic banking regulations would be an exercise of legislative power. If it is done in for the purpose of approving the activities or transactions of a central bank, it could be regarded as an administrative function.

However, under sections 56 and 57 of the CBMA 2009, the ascertainment of Islamic law by the SAC occurs in the context of an ongoing judicial proceeding before the High Court. The purpose of such ascertainment is for the SAC to make a ruling on a Shariah matter, which arose from proceedings relating to Islamic financial business, and which is referred to it by the High Court. Because of the ruling is binding upon the High Court the ascertainment becomes an integral and inextricable part of the judicial process of determining the rights and liabilities of the parties in dispute.

Thus, even if (contrary to my finding above) the SAC’s function is merely one of ascertainment and does not exhibit any core feature of judicial power, it cannot be regarded otherwise than as ancillary or incidental to the exercise of judicial power. In view of its purpose and context, the issuance of a binding ruling by the SAC undoubtedly falls within the ambit of judicial power. 50 Legislative Purpose 74. The legislative purpose behind the enactment of sections 56 and 57 of the CBMA 2009 is a commendable one. Given its composition, there is no doubt that the members of the SAC would possess the requisite expertise in Shariah law to make rulings on Islamic finance matters. A series of inconsistent court decisions gave rise to concerns over the need for legal certainty in the industry. The method chosen by Parliament to address this concern is to remove from the court and vest in the SAC the power to make decisions on Shariah matters in Islamic finance business (extract from the Hansard of 30.6.2009): “Peranan Majlis Penasihat Syariah Kewangan Islam telah dipertingkatkan di bawah rang undang-undang yang dicadangkan keputusan yang dibuat oleh Majlis Penasihat Syariah mengikat mahkamah yang membuat rujukan kepada majlis ini mengenai perkara syariah berkaitan dengan perniagaan kewangan Islam.” (Emphasis added)

However, the good legislative intentions do not excuse a constitutional transgression. The commendable purposes of a legislation cannot be done at the expense of judicial 51 independence and power. (See: Semenyih Jaya v Pentadbir Tanah Daerah Hulu Langat (supra) at paragraph [97]). The Privy Council expressed the point in no weak terms in Liyanage v The Queen (supra) (at page 291): “If such Acts as these were valid the judicial power could be wholly absorbed by the legislature and taken out of the hands of the judges. It is appreciated that the legislature had no such general intention. It was beset by a grave situation and it took grave measures to deal with it, thinking, one must presume, that it had power to do so and was acting rightly. But that consideration is irrelevant, and gives no validity to acts which infringe the Constitution. What is done once, if it be allowed, may be done again and in a lesser crisis and less serious circumstances. And thus judicial power may be eroded.” (Emphasis added)

The same point was stressed in Hinds v The Queen (supra), where the Privy Council held that the vesting of judicial power in the Review Board under the Gun Court Act 1974 was unconstitutional. Lord Diplock explained (at page 226): 52 “Whilst none would suggest that a Review Board composed as is provided in section 22 of the Gun Court Act 1974 would not perform its duties responsibly and impartially, the fact remains that the majority of its members are not persons qualified by the Constitution to exercise judicial powers. A breach of a constitutional restriction is not excused by the good intentions with which the legislative power has been exceeded by the particular law. If, consistently with the Constitution, it is permissible for the Parliament to confer the discretion to determine the length of custodial sentences for criminal offences upon a body composed as the Review Board is, it would be equally permissible to a less well-intentioned Parliament to confer the same discretion upon any other person or body of persons not qualified to exercise judicial powers, and in this way, without any amendment of the Constitution, to open the door to the exercise of arbitrary power by the executive in the whole field of criminal law.” (Emphasis added) 53 77. The constitutional invalidity of section 57 CBMA 2009, in so far as it vests judicial power in the SAC, is not absolved by the best intentions of Parliament. Moreover, the same legislative purpose can be achieved through other methods that do not involve an infringement of judicial power. For instance, parties to an Islamic finance agreement can agree to submit any questions of Shariah law to the SAC for determination in the event of a dispute, and to be bound by the determinations of the

The agreement may also include a form of “conclusive evidence clause”, stating that the determination of the SAC is conclusive evidence of the position of Shariah law. In such a case, the court should give effect to the agreement between the parties, and is not at liberty to go behind the determination to question its correctness in the absence of fraud, mala fide, or manifest error. (See: Malaysia Land Properties Sdn Bhd (formerly known as Vintage Fame Sdn Bhd) v Tan Peng Foo [2014] 1 MLJ 718 at paragraph [12] in the context of an architect’s certificate; Bangkok Bank Ltd v Cheng Lip Kwong [1990] 2 MLJ 5 at page 8; Bank of Tokyo-Mitsubishi (Malaysia) Bhd v Sim Lim 54 Holdings Bhd [2001] MLJU 125 in the context of a bank’s certificate of indebtedness). Conclusion 79. For the above reasons, I find that section 57 of the CBMA 2009 contravenes Article 121 of the FC in so far as it provides that any ruling made by the SAC pursuant to a reference is binding on the High Court making the reference. The effect of the section is to vest judicial power in the SAC to the exclusion of the High Court on Shariah matters. The section must be struck down as unconstitutional and void.

However, it does not follow that striking down section 57 completely obliterates the role of the SAC in all judicial proceedings and leaves the High Court to deal with questions of Shariah law unaided. In Semenyih Jaya v Pentadbir Tanah Daerah Hulu Langat (supra), having struck down section 40D of the LAA 1960 and pending its replacement with a new section, this Court issued guidance on the process to determine the amount of compensation in land acquisition proceedings. The role of the land assessor was not to be removed but “redefined”. While the opinion of the assessors no longer binds the court, it 55 was emphasised that weight should be accorded it (at paragraphs [121]-[124]): “In so doing, it is not uncommon for the judge to give weight to the opinion of the assessors, for as experts in valuation of property, their opinion stand persuasively to be considered by the judge… Should the judge finds himself in disagreement with the opinion of both the assessors, he is at liberty to decide the matter, giving his reasons for so doing. These then are to be made clear in place in the proposed new s 40D. It would in no small way, emphasise the punctilious nature of the assessors’ advice and the value their role represents.”

Persuasive weight ought to be accorded by the High Court to the ruling of the SAC pursuant to a reference, taking into account its composition, expertise, and special status as the statutory authority for the ascertainment of Islamic law for the purposes of Islamic financial business. 56

The approach to SAC rulings may be similar to the treatment of muftis’ fatwas which have not become law under the respective State Enactments/Ordinances: courts would ordinarily have no reason to justify the rejection of the expert opinion, given that the opinion was expressed by the highest Islamic authority and that judges were not trained in this system of jurisprudence. (See: Re Dato' Bentara Luar Decd Haji Yahya bin Yusof & Anor v Hassan bin Othman & Anor [1982] 2 MLJ 264 (Federal Court) at pages [271]-[272]). In the event that the judge disagrees with a particular ruling, he is at liberty to do so, and reasons should be given.

I would answer the Questions 1(b) and (c) in the affirmative. I need not answer Question 2(a). Accordingly this matter is remitted to the High Court for further action. (TAN SRI DATUK SERI PANGLIMA RICHARD MALANJUM) Chief Justice Federal Court Of Malaysia Dated: 10th April 2019 57 Counsel For The Appellant: Malik Imtiaz Sarwar, Pradeep Nandrajog, Chan Wei June, Dinesh Nandrajog, Clinton Tan Kian Seng, Aliff Benjamin Solicitors for the Appellant: Messrs Nandrajog Advocates & Solicitors UOA Business Park No. 1 Jalan Pengaturcara U1/51A Section U1 40150 Shah Alam Counsel For The Respondent: Yoong Sin Min, Samuel Tan Lih Yau, Sanjiv Naddan Solicitors For The Respondent: Messrs Shook Lin & Bok Advocates & Solicitors 55 Jalan Raja Chulan Bukit Ceylon 50200 Kuala Lumpur Counsel For The 1st Intervener: Mohd Johan Lee, Muhamad Nakhaie Bin Ishak Solicitors For The 1st Intervener: Messrs J. Lee & Associates Advocates & Solicitors A-16-13, Tower A Menara UOA Bangsar No. 5 Jalan Bangsar Utama 1 59000 Kuala Lumpur Counsel For The 2nd Intervener: Dato’ Cyrus Das, Abdul Rashid Ismail, Siti Nurani Zahidi Solicitors For The 2nd Intervener: Messrs Rashid Zulkifli Advocates & Solicitors D2-5-5, Block D, Solaris Dutamas No. 1 Jalan Dutamas 1 50480 Kuala Lumpur