Muhammad Amni Fitri bin Azami v Pentadbir Tanah Jajahan Kota Bharu (DA-15-181-12/2024)

This is a reference pursuant to section 38(1) of the Land Acquisition Act 1960 ("the Act") arising from the award of compensation made by the Land Administrator in respect of the compulsory acquisition involving Lot 2089, PM 6, Mukim Demit, Jajahan Kota Bharu, Kelantan ("the subject land").

The Applicant challenges the adequacy of the compensation awarded by the Respondent, particularly in relation to the claim for loss of business income arising from the cessation of the petrol station business operated on the subject land.

Having considered the valuation reports, documentary evidence, submissions of parties, the opinions of the assessors and the applicable authorities, this Court finds that the award made by the Land Administrator substantially reflects fair and reasonable compensation. In particular, this Court finds that the Applicant's claim for projected loss of business income extending over more than eight years is speculative, remote and unsupported by cogent evidence.

The Applicant operates a Petronas petrol station situated on land held under PM 6, Lot 2089, Mukim Demit, Jajahan Kota Bharu, Kelantan. The registered proprietor of the subject land is Petronas Dagangan Berhad ("Petronas").

The acquisition was undertaken for the purpose of upgrading Jalan PT209 and FT131 from Persimpangan Bertingkat Pasir Hor to Panchor, Demit, Kota Bharu, Kelantan. The section 4 Gazette Notification was published on 28.10.2021 whilst the section 8 Gazette Notification was published on 26.05.2022.

The subject land measures 1,484 square metres, of which 516 square metres were acquired. The land is categorised as building land with the express condition of "Stesen Minyak".

The Applicant claimed total compensation amounting to RM3,670,771.52 whereas the Land Administrator awarded RM865,744.00 to the Applicant, and the sum of RM3,543,522.00 to Petronas. Petronas did not challenge the award made by the Land Administrator in this proceeding.

The principal dispute concerns the Applicant's claim for loss of business income.The Applicant claims RM3,397,000.00 based on the remaining contractual tenure with Petronas Dagangan Berhad of approximately 8 years,2 months and 17 days.

Both assessors recommended that the award for loss of business income made by the Land Administrator in the sum of RM786,744.00 be maintained. The private assessor however recommended an additional sum of RM53,644.00 in respect of disposal losses involving fuel stock.

The issues for determination are as follows:

Whether the Applicant is entitled to compensation for loss of business income;

Whether the Applicant has successfully proven the quantum claimed for projected loss of business income over a period of more than eight years; and

Whether there is any basis to interfere with the award made by the Land Administrator. The Law

Article 13(2) of the Federal Constitution guarantees that no person shall be deprived of property without adequate compensation. In Nanyang Manufacturing Co Ltd v Collector of Land Revenue, Johore [1954] 1 MLJ 69, the Court adopted the words of Jenkins, C.J. in Kailas Chandra v Secretary of State 17 Cal LJ 35 as follows: "The market value of the land may be roughly described as the price that an owner willing and not obliged to sell might reasonably expect to obtain from a willing purchaser with whom he was bargaining for the sale and purchase of the land."

In Ng Tiou Hong v Collector of Land Revenue, Gombak [1984] 2 MLJ 35, the Federal Court held that the safest guide in determining market value is evidence of comparable sales of similar lands within the locality.

The Applicant relies heavily upon the Federal Court decision in Semenyih Jaya Sdn Bhd v Pentadbir Tanah Daerah Hulu Langat [2017] 3 MLJ 561 where the Federal Court held: "The principle of equivalence required that the appellant was compensated for its true loss. This had to include compensation for loss of its business. Such claim fell under the heading of 'market value' of the land as stated in paras 1 and 2(a) of the First Schedule. The value of the land in its actual condition together with its profit value should be considered in determining the market value of the acquired land. At the time of acquisition, the appellant had embarked on commercially developing the land into an industrial area. Thus, its loss of business should be incorporated in the development value or profit value of the land forming part of the market value of the acquired land. In determining market value of the land as stated in paras 2(a) of the First Schedule, the LA and the court must give consideration to the profit value of the land at the time of acquisition"

However, the Federal Court equally emphasised that compensation must correspond to the landowner's "true loss". The principle of equivalence does not extend to speculative or remote losses unsupported by reliable evidence. The Federal Court made it clear that no compensation for loss of future profit is to be determined where relocation of the business is impracticable, and that compensation for consequential loss must not be too remote. The passage is reproduced as follows: [205] In cases where relocation is impracticable (as in the appeal), no compensation is to be determined for loss of future profits. Instead the claim is to be considered based on 'the extinguishment basis'. The loss of business goodwill is contained within the market value of the land. The claim does not therefore form the basis for an item of consequential loss. [206] The general principle governing the extent of compensation claimable for consequential loss is that such loss must not be too remote and that it is the natural and reasonable consequence of the acquisition (Harvey v Crawley Development Corporation [1957] 1 QB 485).”

The Applicant's principal claim concerns projected business income over the remaining contractual tenure with Petronas.

This Court accepts that Semenyih Jaya recognises that loss of business may, in an appropriate case, form part of compensable loss under the principle of equivalence. However, the decision does not stand for the proposition that every projected future profit must automatically be compensated irrespective of the evidence adduced.

The factual matrix in Semenyih Jaya is materially distinguishable from the present case. In Semenyih Jaya, the Federal Court dealt with an active industrial development project supported by substantial contemporaneous evidence including ongoing construction works, executed sale and purchase agreements, deposits collected from purchasers, professional fees incurred and identifiable commercial commitments already in existence at the date of acquisition. The losses claimed were therefore grounded upon actual commercial realities already materialising at the time of acquisition.

Here, the Applicant's claim for RM3,397,000.00 is premised upon an assumption that the petrol station business would continue generating income uninterrupted for more than eight years into the future. In my view, such an assumption is speculative and remote.

Commercial ventures are inherently subject to market fluctuations, operational risks, regulatory changes, economic downturns and other contingencies. This Court cannot simply presume that the Applicant's business would continue operating profitably at the rate suggested by the Applicant throughout the entire remaining contractual duration without interruption.

This Court agrees with the Respondent's position that the proper measure of compensation cannot be based on the entirety of the remaining contractual tenure. Reasonable compensation must instead reflect the period reasonably required for the Applicant to secure alternative opportunities and generate replacement income following cessation of the existing business operations.

Apart from a one-page calculation prepared by the Applicant's valuer, there is no cogent evidence demonstrating how the projected losses were derived. There are no audited financial projections, secured future contractual earnings, independent market analysis or expert economic evidence capable of substantiating the substantial future profits claimed.

With due respect to the Applicant's valuer, whilst I accept his expertise as a land valuer, he is not equipped with technical expertise of projecting future profit of businesses, which is best left to the appropriate expert. Whilst he produced a one page calculation of projected profit for the business as "Lampiran XI" to his valuation report, he did not explain the origin of this document, nor did he produce any document to support this calculation.

The Federal Court in Semenyih Jaya repeatedly emphasised that compensation must correspond to the landowner's "true loss". In the present case, for the reasons stated above, the Applicant has failed to establish such "true loss" to the extent claimed.

This Court must guard against transforming the constitutional guarantee of adequate compensation into an avenue for speculative enrichment. Compensation under Article 13(2) guarantees adequate compensation, not windfall compensation.

In the circumstances, this Court is satisfied that the award of RM786,744.00 made by the Land Administrator and supported by both assessors represents a fair and reasonable assessment of the Applicant's actual business loss.

The substantially inflated claim advanced by the Applicant based upon projected business income over eight years is therefore rejected. To award the sum of projected future profit claimed by the Applicant would be tantamount to awarding speculative profit for the whole remaining duration of the contract without the Applicant having to perform any of its obligations under the contract with Petronas.

In relation to disposal costs involving fuel stock remaining in underground tanks, this Court agrees with the private assessor that the Applicant's assumption that all remaining fuel required complete disposal is unreasonable. The Applicant could reasonably have mitigated losses through transfer or remarketing of the remaining fuel stock.

The private assessor's recommendation assessing actual loss at 40% of the total stock value is reasonable and supported by practical commercial considerations. Accordingly, this Court allows an additional sum of RM53,644.00 under this head.

This Court finds no basis to interfere with the awards made by the Land Administrator in respect of relocation costs, temporary rental, damage to goods during relocation, compensation for termination of employees and loss of licence function.

The Applicant failed to substantiate these claims with sufficient documentary evidence such as receipts, quotations or supporting financial documents. The awards made by the Land Administrator under these heads are fair, reasonable and ought to be maintained.

For the reasons stated above, this Court affirms the award made by the Land Administrator apart from the additional compensation for disposal of fuel stock.

The Applicant's claim for projected loss of business income extending over more than eight years is speculative, remote and unsupported by credible evidence. Whilst Semenyih Jaya recognises that loss of business may constitute compensable loss in an appropriate case, such claim must nevertheless be established through cogent and reliable evidence demonstrating actual loss. That burden has not been discharged in the present case.

Accordingly, this Court allows only an additional sum of RM53,644.00 in respect of disposal losses involving fuel stock. Late payment charges pursuant to section 48 of the Land Acquisition Act 1960 shall apply to the additional compensation awarded.

There shall be no order as to costs. This Grounds of Judgment is dated 18.5.2026 SHAMSUL BAHRIN BIN ABDUL MANAF Pesuruhjaya Kehakiman Mahkamah Tinggi (3) Kota Bharu Kelantan PIHAK-PIHAK: Peguam bagi pihak Pemohon: Tetuan Sasha Sapizan & Co. PT 883, Lorong Telok, Belakang Masjid Baba & Mama, 16400 Kota Bharu, Kelantan. Bagi pihak Responden: Penolong Penasihat Undang-Undang Pejabat Penasihat Undang-Undang Negeri Kelantan, Blok 5, Aras Bawah, Kota Darulnaim, 15050 Kota Bharu, Kelantan.