A 53-year-old land acquisition that went wrong could cost the federal government well over RM1 billion in compensation to Semantan Estate (1952) Sdn Bhd, which has been declared by the courts as the rightful landowner.

This tussle between Semantan Estate and the government goes so far back that it is worth noting that the lawyer with Shook Lin & Bok who first represented the landowner was Yong Pung How, then just 34, who served as the Chief Justice of Singapore from 1990 to 2006.

The property in question is the 250-acre Ladang Batu, which is located in the Kuala Lumpur enclave of Jalan Duta. In 1960, the government paid RM1.3 million to acquire it under the then Land Acquisition Enactment for the purpose of developing a diplomatic enclave.

That did not happen and eventually, what was first built in the 1970s was the Jalan Duta government complex, which at one time housed the Ministry of Finance and the Ministry of International Trade and Industry.

Today, the 11 million sq ft parcel has an estimated value of RM4.6 billion based on a price of RM425 psf. Residential land in Bukit Tunku in the same area is going for around RM500 psf.

Originally just one piece, the land was divided into two when the road Jalan Duta was built in the mid-1960s. On one side of the road sits the National Hockey Stadium, the National Tennis Complex and the Institute of Islamic Understanding Malaysia (IKIM). Opposite these are the government complex, the Federal Territory mosque, the National Archives and several other government buildings.

But pockets of the land have still not been developed.

Why did the case drag on for so long?

The tussle dragged on for 53 years for a number of reasons, including issues between the two families that started Semantan Estate and mistakes and delays caused by the Collector of Land Revenue.

Semantan Estate filed two cases against the government. It first went to court in 1960 to seek legal remedy for the RM1.3 million compensation that the Collector of Land Revenue had paid for the land. That worked out to RM5,282 per acre and Semantan Estate wanted RM13,000 per acre or a total of RM3.25 million.

High Court Judge Justice Ong ruled that the Collector had not complied with several conditions of the Land Acquisition Enactment and ordered it to rectify the matter because the court could not otherwise hear the case.

Among others, the Collector was required to hold a proper enquiry into the acquisition and the amount of compensation.

In what those familiar with the matter described as incompetence or arrogance, the Collector ignored attempts by Semantan Estate to get it to comply with Justice Ong's order.

Semantan Estate then sought an order of mandamus from the court all the way to the then Supreme Court to compel the Collector to do as ordered by Justice Ong, but failed. An order of "mandamus" is to get a government authority to perform an act that it has neglected or refused to do.

The government then proceeded to build offices on the land.

Nothing happened for years primarily because of issues involving the two families of Semantan Estate following the passing of their respective patriarchs.

Then in the early 1980s, they decided to pursue the matter and approached law firm Chooi & Co to take up the case. By coincidence, its managing partner Chooi Mun Sou was Yong Pung How's legal assistant when the latter handled the original suit filed by Semantan Estate.

They went to court to compel the Collector to complete the acquisition of the land. However, they lost the case as the Collector had argued that the three-year period allowed for a public authority to be taken to court had lapsed.

Those familiar with the matter said the defeat proved to be the turning point, and coupled with action taken by the government to split and issue 38 land titles to the Land Commissioner, eventually enabled them to win the case.

In 1989, led by senior legal counsel Ira Biswas, Chooi & Co went to court on behalf of Semantan Estate to sue the government for "trespassing" on the grounds that it had taken possession of the land unlawfully.

Although the government initially succeeded in getting the High Court to strike out the suit, Semantan Estate went all the way to the then Supreme Court, which ruled in its favour and allowed the suit to proceed.

But it was close to 20 years before the trespassing case was finally heard and decided by the High Court. In the High Court ruling of March 31, 2010, Justice Zura Yahya declared that the government had not taken the land lawfully and "hence has remained in unlawful possession of the said land".

She also ordered the government to pay "mesne profits" as damages to Semantan Estate and that the Registrar of the High Court assess the amount.

Lawyers say "mesne profits" refer to any profit accrued during a dispute over land ownership. If it is later determined that the party using the land did not have legal ownership, the true owner will be entitled to some or all of the profits made in the interim by the illegal tenant.

The Attorney-General, representing the government, appealed the decision but lost in the Court of Appeal in May 2012 and finally, in the highest court of the land — the Federal Court — upheld the decision in November 2012.

What will happen next?

People familiar with the case say the registrar is expected to fix a date soon to hear arguments from both sides with regard to the quantum of compensation.

It is understood that Semantan Estate engaged real estate valuer C H Williams Talhar & Wong Sdn Bhd (WTW) to do an estimate and it came up with close to RM1.6 billion.

According to lawyers, even if the court registrar accepts WTW's estimate, the final amount it decides on will be less.

Sources also say the financial compensation is not the real headache for the government. "The real headache is this — the courts have said the rightful owner of the land is Semantan Estate and so the government should rightfully comply with the judgment and return the land," says a person familiar with the case.

"But with so many government buildings already built there, how is that going to happen?"

Chooi & Co and accounting firm Ernst & Young are representing Semantan Estate in trying to work out a solution with the government, the sources say.

Observers paint these possible scenarios:

1) The government enters into a long-term lease with Semantan Estate;
2) The government buys the land;
3) A compromise is reached whereby Semantan Estate contributes the parts of the land that house important institutions like the Federal Territory mosque, the National Archives, IKIM and the two sports complexes to the government, but gets to keep the undeveloped portions and the government office complex that is marked for demolition at some point.

According to property consultants, around 60 acres remain untouched. The site of the government complex is said to be around 20 acres, so Semantan Estate can get back around 80 acres.

Legal experts say the 53-year case reveals the incompetence and arrogance of certain government bodies as exemplified by the refusal of the Collector of Revenue to comply with the order of Justice Ong in 1960. Instead, the government proceeded to build on the land, knowing full well that the dispute with Semantan Estate was still before the courts.

They say the government should not repeat what happened in the 1960s and should respect the decision of the courts that it was a trespasser and that Semantan Estate is the rightful landowner.

But can Semantan Estate force the issue should the government ignore the decision of the court like it did in 1960?

"One would expect the government to respect the rule of law," says a senior lawyer. "If the government chooses to ignore a decision of the highest court in the country, then we have a problem. And it is going to send a bad message to all property owners."

What happens next will be closely watched.

Who owns Semantan Estate?

Semantan Estate was founded by Eng Lian Group and Ng Chin Siu & Sons Rubber Estates Sdn Bhd — the vehicles of two prominent land-owning families.

Although the families share the name Ng, they are not related, contrary to popular belief.

Semantan Estate is now in voluntary liquidation and has appointed Ernst & Young to handle the matter. A company in liquidation is wound down and its assets distributed to its shareholders.

The liquidation of Semantan Estate cannot be completed until a tussle over a 250-acre tract acquired 53 years ago by the government is fully settled because it involves billions of ringgit. The courts have ruled in favour of Semantan Estate in the case.

Aside from their joint interest in Semantan Estate, the two families have sprawling businesses.

Eng Lian Group is linked to the development of Bangsar in Kuala Lumpur from the 1970s. Today, Bangsar is a prime part of the city, and the group's commercial and retail showcase — Bangsar Village — sits prominently there.

Ng Chin Siu & Sons, on the other hand, has kept a low profile and has not done many developments in recent years. In fact, it has been selling much of its land. In fact, most of Desa Hartamas and Mont'Kiara once belonged to it.

The family concern once also owned the 1,600 acres that now house the Kuala Lumpur Golf & Country Club (KLGCC), the Royal Selangor Club (Kiara Annexe), the Sime Darby Convention Centre and the Bukit Kiara Equestrian Club, which is the subject of another tussle.

The government acquired the entire area in the late 1970s and ownership now rests with Kuala Lumpur City Hall (DBKL), which has since leased parts of it to the various clubs.

What the family still owns is a seven-acre parcel visible on the way to KLGCC, where the graves of the patriarch and his wife are located.

At today's land prices, those 1,600 acres are worth some RM25 billion, notes an observer.

The development of the area was not without controversy as questions were raised as to why DBKL, which had acquired the land for public purposes, leased it out to private clubs. KLGCC, in particular, attracted the most attention because DBKL's partner was a foreign party — Singapore's Lum Chang Group. Lum Chang eventually sold KLGCC to Sime Darby Bhd.

This story first appeared in The Edge weekly edition of July 1-7, 2013.