‘Compensation’ bogey spreads from Penang to KL

It looks as if the residents of Taman Rimba Kiara are being intimidated by the prospect that the government might have to pay RM150m in compensation should it cancel the Rimba Kiara condo project.

If all this sounds like deja vu for Penang folks, it is because we have heard this familiar tune in Penang in the years after 2008: “To cancel these projects would require huge compensation being paid out to the developers…”

That constant refrain appeared aimed at quashing public pressure to cancel projects that were not in the public interest.

Over in KL, in the case of Rimba Kiara, the developers had apparently filed a suit for RM150m in compensation and damages when Kuala Lumpur City Hall revoked its approval.

Look, developers can claim any figure, but what they will actually get will be determined by the courts.

Two prominent lawyers, Ambiga Sreenevasan and Derek Fernandez, have spoken out:

“It is our view that the federal territories minister and the Cabinet ought to take proper, independent legal advice on the matter and review the whole process involved in this development.”

Ambiga and Fernandez said where a contract was found to be tainted by illegality, the so called “binding contracts” could be set aside, the Development Order revoked and the project terminated.

“It would then be arguable that any developer involved in such illegality is not entitled to any compensation for its termination on the grounds of public policy.”

They said the relevant Development Order issued by the minister for the project did not accord with the 2013 Draft KL City Plan where Bukit Kiara was zoned as a park with no changes.

They also noted that the gazetting of the 2018 KL City Plan was not legal as it violated the law and had included unilateral changes to the Bukit Kiara Park without displaying the same for public hearing, in accordance with the law.

“The only compensation payable in the event of termination (subject to any allegations of illegality being proven) and where the land is undeveloped, is the actual expenditure incurred as stated in section 25(6) of the Federal Territory (Planning) Act 1982. This would involve the purchase price paid for the land, the land premium and other expenses, all of which must be supported by receipts or proof of payment for the alleged expenditure. This is unlikely to be anywhere near RM150 million.”

Apart from this, it is simply poor negotiating stance for government ministers and officials to even suggest that the government could be liable to pay compensation. It is almost like an admission of liability before any negotiations or proceedings in court can take place – and almost gives the green light to developers to file large claims.

Back in 2012, I wrote: Generally speaking, I think we should refrain from conceding that the local government will have to pay high compensation for projects rejected or downsized. This may turn out to be a self-fulfilling prophecy as naturally, it may prompt developers to submit high compensation claims. I don’t think it is a street-savvy negotiating stance to concede right at the start that the local government may have to pay high compensation. It results in the public being cowed into silence and opens the door to potentially large claims.

Developers in general are free to submit all kinds of claims, but it is up to the local government to challenge or counter those claims and protect the interests of the people. The local government should make it known that it will vigorously contest any and all such claims to protect the public interest.

Developers who submit excessive compensation claims against the local government (which are accountable for public funds) should also be mindful that they stand to lose much in goodwill.

If the local government feels a particular developer’s action has been against the public interest, would it be possible to blacklist such a developer from future projects in the state?

Meanwhile, Hannah Yeoh says Taman Rimba Kiara “must not be touched for development”. Good for her for speaking out in support of the residents.

Speaking of which, it might be an interesting exercise to study the statements of politicians to find out which ones are speaking the language of developers and which ones are defending the public interest.