KUALA LUMPUR (Oct 17): The Kota Kinabalu High Court on Friday has ordered Putrajaya and the Sabah government to hold a mandatory review of the special grant of 40% return on state revenue that Sabah is entitled to. The review has been pending since 1974.

The order was made by High Court judge Celestina Stuel Galid, who also ruled that the federal government’s issuance of a special grant to the Sabah government, and its method of deriving the sum to be granted, was unlawful.

This ruling is the result of Galid allowing the judicial review by the Sabah Law Society (SLS), which was seeking to compel the federal government to hold a review with the Sabah government, so as to make good the constitutional promise made at the formation of Malaysia in 1963, that grants Sabah a 40% share of the net federal revenue collected in the state above the 1963 baseline amount, for each consecutive year from 1974 to 2021.

The SLS is further seeking an order for the federal government to pay the entitlement as determined.

Article 112D of the Federal Constitution stipulates for a periodic review of the special grants and assignments of revenue to the states of Sabah and Sarawak, as outlined in Article 112C, which the SLS claims had not been done since 1974.

Between 1974 to 2021, instead of conducting a second review order (RO) as stipulated in the first RO, the federal government had allegedly committed a breach of natural justice that has allegedly resulted in the 40% entitlement to be ignored for 48 years.

Gulid ordered for the review for the period from 1974 to 2021 to be made within 90 days, and for an agreement to be reached within 180 days from the date of the court order.

The 1974 to 2021 period is deemed as “the lost years”.

In arriving at the decision, the judge said that SLS had established that the second review order having not been conducted to make a special grant for the Sabah state over the years (from 1974 to 2021) thus made it unlawful, or ultra vires — beyond the legal powers entrusted to the two governments.

“It is unlawful on the part of the federal government to make the intended special grants under the Tenth Schedule to the state of Sabah, illegal and irrational to such an extent that it breached the Federal Constitution in the context of the judicial review,” the judge said.

SLS claims there had been procedural impropriety which failed to provide for the period between 1974 and 2021, and that the second review order failed to take into account the Inter-Government Committee report which entitles the state to receive a grant of 40% entitlement for that period.

They alleged that the second review order is disproportionate.

The federal government on the other hand argues that there is no outstanding payment owed to Sabah during that period with annual grants of RM26.7 million, which is a sum based on the sum paid on 1973 under the first review order.

The Sabah government’s stance is that it had always pursued its rights up until 2020 by corresponding with the federal government.

In the proceedings on Friday, SLS was represented by Dr David Fung Yin Kee, Jeyan Marimuttu, and Janice Junie Lim, while senior federal counsel Ahmad Hanir Hambaly @ Arwi, along with federal counsels Nur Atirah Aiman Rahim, and Mohammad Solehheen Mohammad Zaki appeared for the Federal government.

The Sabah government was represented by the Sabah attorney general Datuk Brenndon Keith Soh, Sabah state senior counsel Mohd Saifurrazee Hussin,  Devina Teo, and state counsel Roland Bin Alik.

On Nov 11, 2022, High Court judge Datuk Ismail Brahim granted SLS’ application for leave for the judicial review, ruling that SLS had locus standi for a judicial review as it was a public interest matter.

The Federal Court had last October dismissed the federal government’s decision for leave (permission) to the federal government to appeal the Kota Kinabalu High Court’s decision to allow SLS’ challenge, which was upheld by the Court of Appeal.

The apex court ruled that this matter deals with whether the failure to review and provide Sabah’s special grant amounts to a breach of the relevant Articles of the Federal Constitution, and whether Sabah was entitled to damages for the period from 1974 until 2021.

“That is not a matter of policy [as argued by the federal government]. Therefore, the grant of leave is not warranted, and the matter should proceed to be heard on its substantive merits (at the KK High Court),” Federal Court judge Tan Sri Nalini Pathmanathan, who led the bench, said.

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