PUTRAJAYA (Feb 25): An amendment to Sections 3 and 7 of the Pensions Adjustment Act 1980 (Amended 2013) (PAA) that may result in pensioners receiving “lesser remuneration” — which was declared null and void by the Court of Appeal (COA) last month — will come under scrutiny in the Federal Court.

This follows a motion of leave filed by the government and Public Service Department (PSD) director-general (DG) to appeal to the Federal Court on the decision, with four questions for determination at the apex court.

Leave or permission had to be gained from the apex court for the government's and the PSD DG's appeal to be heard on its full merits.

Sections 3 and 6 of the PAA of the original 1980 legislation had been amended and replaced with new Sections 3 and 7 of the 2013 amendment. A three-member bench had declared the amended Sections 3 and 7 null and void as it went against Article 147 of the Federal Constitution.

Article 147 of the Constitution on the protection of pension rights stipulates that:

147(1) The law applicable to any pension, gratuity or other like allowance (in this Article referred to as an “award”) granted to a member of any of the public services, or to his widow, children, dependant or personal representatives, shall be that in force on the relevant day or any later law not less favourable to the person to whom the award is made.

While the 2013 amendment that inserted the new Section 3 stipulates:

(1) Pensions and other benefits granted to officers and their dependants under any written law shall be adjusted annually by an increment of two percent in accordance with the provisions of this Act and shall be paid or be payable with effect from January of each year.

(2) Notwithstanding subsection (1), where the application of the specified rate of increment would result in a situation that is less favourable to an officer appointed before the coming into force of this section, the Yang di-Pertuan Agong may by order in the Gazette prescribe an appropriate higher percentage of increment to be applied in such case.

The 2013 amendment is also said to have deleted the definition of the term "corresponding last drawn salary" that is stipulated in Section 2 of PAA.

Aminah Ahmad, a retiree who previously worked with Wisma Putra and represented 56 other pensioners, challenged the constitutionality of both sections, as she argued that the new Section 3 introduces a new method of adjusting pensions and other benefits of annual increment of 2% applicable come January of each year.

She said the amendments had resulted in a situation less favourable to her and 56 others in the legal action compared to the PAA 1980 prior to the 2013 amendment.

COA judge Datuk Darryl Goon Siew Chye, who wrote the unanimous decision, agreed that the amendment may result in a less favourable position, and hence contravenes Article 147.

He reasoned that Section 3(2) that prescribes the Yang di-Pertuan Agong may prescribe different percentages of increment for different categories of recipients to remedy the situation.

The government and the High Court judge recognise the amended Section 3(2) of the PAA acknowledges that a less favourable condition may arise, Justice Goon said.

“In our (COA) view, the amended Section 3(2) of the PAA 1980 is in fact an acknowledgement that the amendments could result in a less favourable situation. On this, we are in agreement with the High Court judge. However, the mechanism built into Section 3(2) to address a less favourable situation, should it arise, is merely permissive. This is because what is clearly stated is that should a less favourable situation materialise, the Yang di-Pertuan Agong '… may by order in the Gazette prescribe an appropriate higher percentage of increment to be applied in such case'.

“It is plainly obvious that the term 'may', in Section 3(2) of the PAA 1980 as amended, imposes no obligation to act. 'May' is merely permissive. In context, it simply cannot be read as 'shall' and there is also no submission by the respondents (the government and PSD DG) to this effect,” he said.

“In our view, the amended Section 3(2) of the PAA 1980 does not ensure that Article 147 of the Federal Constitution is not contravened. It would have been so if, should a less favourable situation arise, the machinery provided for adjustment under the amended Section 3(2) were to be implemented automatically or that it shall be so implemented as of right, to extinguish the less favourable situation.”

The appellate court judge in declaring the two amended sections as null and void said under Article 147 it is the ‘later law’ that must not be ‘less favourable’.

“There is no requirement that any pensioner, for example, must first suffer actual loss or damage before the less favourable law may be held to contravene Article 147,” he said.

Sitting with Justice Goon were COA judges Datuk Vazeer Alam Mydin Meera, who led the bench, and Datuk Abu Bakar Jais.

Realising the impact of the decision, the bench also ruled that the effect of the decision will take effect prospectively from Jan 13, 2022, the date of the decision. It did not go into the calculations that are said to have resulted in lesser pension.

Realising the impact of the appellate court judgment — the government filed the motion and posed four questions of law, namely: