This article first appeared in The Edge Malaysia Weekly on January 8, 2024 - January 14, 2024

SINCE 2014, the Penang Development Corporation (PDC) has been eyeing parcels of land within Sime Darby Plantation Bhd’s (SDPlantation) Byram Estate in Seberang Perai Selatan, near Batu Kawan.

In mid-2015, after exhaustive negotiations, PDC and Sime Darby Property Bhd (SDProperty) — then within the same group as SDPlantation prior to a demerger exercise — struck a collaborative deal to jointly develop 933.51 acres into an SME high-tech park, with an estimated gross development value (GDV) of RM1.8 billion.

However, the project did not materialise. Instead, a legal tussle ensued between PDC and SDPlantation with a hearing set for this Thursday (Jan 11) before Judicial Commissioner Kenneth Yoong Ken Chinson St James.

Here is what happened.

As the deal crumbled, the Penang government, wielding the Land Acquisition Act, invoked its power in January 2020 to forcefully acquire 18 plots of land measuring 380.195 acres in Mukim 11 of Byram Estate from SDPlantation. The plantation group reluctantly accepted the compensation award.

However, in a bold countermove in April 2021, SDPlantation mounted a judicial review application, seeking to annul the compulsory acquisition. The Penang Land and Mines director, the Seberang Perai Selatan land office administrator, PDC and the Penang government were named as respondents.

SDPlantation contends that PDC unilaterally converted the collaboration into a joint-venture agreement, leaving it with a smaller equity in the JV. It claimed in court documents that there was a significant difference in the valuation of the land, which was “intentionally jeopardising for Sime Darby”.

By early June 2021, SDPlantation had successfully obtained leave from the Penang High Court to commence a judicial review action against PDC for “wrongful compulsory acquisition”.

After 31 months of waiting, the stage is now set for a legal showdown on Jan 11.

For perspective, SDPlantation had in 2021 filed two separate causes of action. First, the Land Reference cases against the Penang State Authority for the insufficiency of award. Secondly, the application for judicial review to challenge the process of acquisition itself — in legal terms, this is called Certiorari and Mandamus.

In layman’s terms, Certiorari can quash an illegal decision, whereas Mandamus is a command to a public authority to perform its public duty.

When contacted by The Edge, the PDC confirmed that the judicial review case will be heard at the High Court of Penang on Jan 11.

“A stay of proceeding has been given to Land Reference cases pending the hearing of the judicial review,” the state development agency says.

It says that the Penang State Authority had acquired these 18 lots of land from SDPlantation for the “public purpose of industrial and mixed development”.

“The process of acquisition was completed with payment of award to Sime Darby Plantation and endorsement of Form K on all lots of land,” it adds.

What is the background of the coveted 18 lots of land?

SDPlantation is the owner of Byram Estate, comprising 933.51 acres of agricultural land in Seberang Perai Selatan. About 10 years ago, the Sime Darby Bhd group attempted to rezone the tract to industrial land. During the review process, PDC realised that the rezoning involved land it had wanted to acquire to be redeveloped for industrial and mixed-use development purposes.

After several rounds of negotiations, in mid-2015, Sime Darby Property (Utara) Sdn Bhd, a wholly-owned unit of SDProperty, decided to co-develop the land with PDC, creating a RM1.8 billion SME high-tech park under a master plan, instead of selling the land outright.

Based on the memorandum of understanding (MoU) signed on June 30, 2015, witnessed by then chief minister of Penang Lim Guan Eng and then Sime Darby president Tan Sri Mohd Bakke Salleh, SDProperty would develop the 933.51 acres for small and medium industry (SMI), whereas PDC would develop 4,017.4 acres it already owned for heavy, moderate, light industry, SMI and mixed-use development.

Note that SDPlantation was not a party to the MoU but this was prior to the demerger exercise.

Following the signing of the MoU, PDC withdrew its initial plan to acquire SDPlantation’s Byram Estate.

Subsequently, in 2016, when both SDProperty and SDPlantation were still part of Sime Darby, Byram Estate was rezoned for industrial use.

Then came the demerger of Sime Darby group, which was announced in January 2017 and completed in November the same year.

Certain quarters believe the demerger of Sime Darby Bhd in 2017, which resulted in the spin-off of its plantation and property units, played a hand in the collaborative agreement between PDC and SDProperty falling through.

Meanwhile, in the midst of the demerger, SDProperty wanted to acquire nine parcels of land, including Byram Estate, from SDPlantation. But for reasons unknown, Byram Estate was excluded from the new supplemental agreement in 2019.

It is not publicly known exactly when the MoU lapsed, and the SME high-tech park did not come to fruition.

In January 2020, SDPlantation was notified by the Penang government of its intention to compulsorily acquire 380.195 acres of land in Byram Estate.

At a land enquiry held in October 2020 and May 2021, the Seberang Perai Selatan land office administrator made a compensation award for the compulsory acquisition of the land. SDPlantation accepted the award under protest and subsequently filed an application to the Penang High Court to seek additional compensation.

Based on the advice of its solicitors, the plantation giant also filed a judicial review application to the Penang High Court on April 21, 2021, seeking orders to quash the compulsory acquisition of the land.

Asked to comment, SDPlantation tells The Edge it had successfully obtained from the Penang High Court a stay on the acquisition proceedings for the land, which means that the compulsory acquisition of the land could not continue pending the outcome of the judicial review process which is still ongoing.

“The Land Acquisition Act was invoked to compulsorily acquire only 380.195 acres of land in Sime Darby Plantation’s Byram Estate, which is now subject to judicial review. Since the stay of execution has been granted by the court, the compulsory acquisition of the land can not continue pending the outcome of the judicial review process,” it explains.

SDPlantation also confirms that the 380.195-acre land is part of the 933.51 acres that SDProperty had rezoned in 2016.

When asked to comment on the alleged “land grab”, SDPlantation remained tight-lipped “as the judicial review process is still ongoing”.

Lawyers to whom The Edge spoke acknowledge that land is a state matter, and the Land Acquisition Act invoked by the state is a powerful tool.

“It was used in the past on grounds of infrastructure development for the betterment of the people. For instance, during the construction of the PLUS Highway, the government relied heavily on the act to acquire public land.

“Even though the valuation is lower than the market rate, it can be argued that it is for the benefit of the people. The private sector that lost land to acquisition had gone to court against the government, but they lost eventually,” says a lawyer.

For clarity, the 380.195-acre land under dispute between SDPlantation and the PDC is not part of the 558.96 acres that Sunway Bhd’s 70%-owned unit Umech Land Sdn Bhd attempted to buy in September last year, according to the PDC.

Recall that Umech Land wanted to develop a RM3.5 billion mega industrial project, dubbed Batu Kawan Industrial Park 2 (BKIP2) by teaming up with the PDC.

The project put the PDC, Sunway and Umech Land under intense public scrutiny due to the perceived lack of transparency and governance in the way the Penang government handled the deal.

Although the PDC called off the controversial deal on Oct 17 last year, and made a request for proposal (RFP) instead, certain quarters believe the Umech Land saga had affected its image and reputation.

Will that affect SDPlantation’s ongoing lawsuit against the PDC over the 380.195 acres?

“The PDC is in the process of calling for a RFP. In our view, the RFP will not affect the court case since it does not involve Sime Darby’s land,” says the PDC.

It is learnt that the 558.96 acres that Umech Land had wanted to acquire from the PDC was originally from some private landowners and not SDPlantation.

Simply put, the 380.195 acres are all that the PDC is acquiring from SDPlantation.

“No land in Byram Estate has been sold to the PDC,” says the plantation company.

Out of the 933.51 acres of its Byram Estate, SDPlantation sold 208.5 acres to DPK Asset Sdn Bhd on March 14, 2022 for RM17.60 per sq ft. Additionally, about 69 acres have been leased out for a solar farm project.

Meanwhile, 380.195 acres are being compulsorily acquired by the PDC. The land acquisition process has taken place but is now on hold due to the judicial review process.

The remaining 276 acres of Byram Estate are now in the process of being sold by SDPlantation to another party.

A lawyer says “the optics are not favourable” to the PDC due to the recent fiasco over Umech Land. It remains to be seen whether the SDPlantation-PDC land dispute will be indirectly affected by the Umech incident.

“Sime Darby Plantation’s lawyers could now argue that the PDC may have an ulterior motive, and therefore, the case should be distinguished from other case precedents that were for the benefit of the people.

“As it is, it appears that the judge wants to let SDPlantation to fight out the trial to hear the arguments. And the Umech saga definitely doesn’t look good for the Penang government.

“But at the end of the day, I think the arguments matter more and the state government really needs to demonstrate that the grounds on which it invoked the Act were fair, just and reasonable,” says the lawyer.

Another lawyer concurs.

“Yes, Sime Darby Plantation’s lawyers could potentially use the Umech incident as grounds even though it may not be the true reason. It’s a matter of putting in as many grounds as is advantageous to the Sime Darby Plantation case. If they could convince the judge to believe there was an ulterior motive for the Act to be invoked by the state government, then Sime Darby Plantation may have a chance to win the case,” he says.

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