Malaysia: Rapid land woes

The Star 23 May 14;

PETALING JAYA: The unprecedented legal suit by a unit of MPHB Capital Bhd against the Johor state government and Petroliam Nasional Bhd (Petronas) indicates that the price of land in Pengerang could have appreciated by more than 800% within a space of two years.

According to legal documents, MPHB Capital alleged that its land was unlawfully acquired by the Johor state government at a price of 93 sen per square foot (psf) despite there being an agreement between the latter and Petroliam Nasional Bhd (Petronas) to purchase the land at RM8 psf.

MPHB’s unit, Kelana Megah Development Sdn Bhd, filed the suit in the High Court of Johor on May 9, 2014, and named both the state government and Petronas as defendants in a suit that underlies rising asset prices in Johor.

The case is yet another hiccup in the land acquisition for the Rapid project, which had earlier faced protests from villagers over issues ranging from valuation of land to relocation of existing houses.

However the suit by MPHB is a test case on whether the private sector would be able to ride on the upside of land prices stemming from the designation of Pengerang as the next oil and gas hub to be developed by Petronas.

The suit claims that the “purported” acquisition by the state was illegal and that the land and its titles should be returned to MPHB.

It is also seeking damages from Petronas for trespass to the seven plots of land and for the cutting of trees on that land.

The suit explains that MPHB was the owner of these seven plots of land which made up around 45% of the total land required by Johor state for building Petronas’ refinery and petrochemical integrated development (Rapid) project in Pengerang, Johor.

The suit states that MPHB’s seven plots covered an area of more than a thousand hectares of freehold land that was planted in oil palm trees which were income producing.

MPHB alleged that it was not given sufficient time to come up with a valuation report on the said land before the hearing to decide on the land acquisition under the Land Acquisition Act 1960.

It also alleged that the valuation report prepared by the state government during the land acquisition proceedings had “grossly undervalued” MPHB’s plots of land.

The statement of claim noted that Petronas did not take a position at the said hearing as to the amount of compensation to be paid to MPHB but that post the payment made to MPHB for the land acquisition, Petronas had taken physical possession of the seven plots of land on Oct 8, 2012, proceeding thereafter to cut all the threes in the said land.

MPHB subsequently filed a challenge against the amount of compensation using a provision granted within the Land Acquisition Act.

MPHB said it then discovered a number of procedural and technical irregularities surrounding how its land was acquired.

Interestingly, MPHB said that during the course of its legal fight against the land acquisition, that it had “anonymously” received on Jan 2, 2014, five documents through the post, which among others, revealed that Petronas and the Johor state authority “had between themselves, agreed on the price of the lands to be acquired for the Rapid project as being a minimum of RM8 psf and that these parties had agreed to price of RM8 psf prior to the beginning of the land acquisition process for MPHB’s land.

Hence MPHB is alleging that the state and Petronas had acted “wrongfully, dishonestly and in bad faith by using the land acquisition process to acquire MPHB’s land at a price of 93 sen when it was agreed that the land was valued much more.”

Petronas could not be reached for comments. The state and the national oil corporation are expected to file their counter claim on the suit in the next few weeks.

However it should be noted that Petronas had in the past stated that it had no direct dealings with any party acquiring land to build its Rapid project.