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Case Update: Federal Court Invalidates Unfavourable Pension Adjustment Law

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31 July 2023

CONSTITUTIONAL LAW
Public Servants – Pensions and Benefits – Public Interest – Pensions Adjustment Act 1980 – Federal Constitution

The Government of Malaysia & Anor v Aminah Binti Ahmad
Civil Appeal No. 01(f)-26-06/2022 (W) | Federal Court
- see the grounds of judgment here

Facts Aminah binti Ahmad (the ‘Respondent’), is a pensioner who served the Government of Malaysia (the ‘1st Appellant’) for more than 33 years. She retired from public service in September 2002. In 2013, the Pensions Adjustment Act 1980 (PAA1980) was amended by s.3 and 7 of the Pensions Adjustment (Amendment) Act 2013 (“2013 Amendment Act”) whereby s.3 and 6 of the PAA1980 was deleted. The said amendments came into effect on 1.1.2013. In 2017, the Respondent together with 5 other pensioners filled a summons against the Appellants, inter alia, praying for, amongst others, a declaratory order that s.3 and 7 of the 2013 Amendment Act to be deemed ultra vires to A. 147 of the Federal Constitution. At the High Court, the application was dismissed. Aggrieved by the High Court’s decision, the Respondent appealed to the Court of Appeal. The Court of Appeal reversed the High Court decision and found that the amendments to s.3 and 6 of the PAA1980, brought about by s.3 and 7 of the 2013 Amendment Act, resulted in a situation less favourable to the Respondent when compared with the preceding retirement adjustment scheme under the PAA1980, prior to the amendments. Aggrieved by the above decision, the Appellants appealed the matter to the Federal Court. Hence this appeal.

Issues 1. Whether s.3 and 6 of the PAA1980 as amended by s.3 and 7 of the 2013 Amendment Act contravene A. 147 of the Federal Constitution when a pensioner fails to prove that the adjusted pension received is actually financially less favourable when it is compared to the former law.
2. Whether s.3 of the PAA1980 as amended by s.3 of the 2013 Amending Act which enables or empowers the Yang di-Pertuan Agong to prescribe an appropriate higher percentage of increment to be applied to an officer appointed before the coming into effect of the amendment should a situation of less favourable arise is in itself in contravention of A. 147 of the Federal Constitution.
3. (a) Without granting a declaration that the pre-amendment law is to be revived, whether the pre-amendment law is revived by itself with the striking down of the impugned provision by the court.
(b) If the answer to the above is in the affirmative, whether a schedule to the pre-amendment law which has been deleted by Parliament with the coming into effect of the impugned provision, is likewise revived automatically.

Held In unanimously upholding the decision of the Court of Appeal and dismissing the appeal, the Federal Court held that the amendments did result in a less favourable situation for pensioners and contravened A. 147 of the Federal Constitution. The Federal Court held that A. 147 of the Federal Constitution does not require actual loss or damage to be suffered by pensioners for a less favourable situation to be established. The Federal Court held that the amended s.3(2) of the PAA1980, which provided a mechanism to address a less favourable situation, was merely permissive and did not ensure that the constitutional guarantee in A. 147 was preserved. The Federal Court noted that the word "may" used in s.3(2) did not impose an obligation to act, and therefore, there was no certainty that a less favourable situation would be remedied. Hence, the Federal Court dismissed the appeal and affirmed the decision of the Court of Appeal, restoring the status quo ante, which was the pre-amendment law.

Zul Rafique & Partners
{31 July 2023}

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