Retrospective Law – Does it Alter Your Legal Rights?

What happens if a new law comes into force? Will it supplement/ replace its predecessors? Will it replaces the rights that you have acquired by virtue of conforming to the existing law? Which law must you adhere to? Will you be breaching the new law if you are to adhere to the old law? This is where the concept of retrospective law comes into play.

What is retrospective law?

Retrospective laws are laws that attach new consequences to existing law. The consequences can range from:

1. Removing or impairing any vested or existing rights acquired under the existing laws; 
2. Creating a new obligation to an agreement; or
3. Altering the legal consequences of the existing laws/ agreements. 

Can the consequences mentioned above applies to the existing laws/ rights/ legal obligations? To find out more, let us briefly look at the Federal Court case of Jack-In Pile (M) Sdn Bhd v Bauer (Malaysia) Sdn Bhd.

Brief facts

Jack-In Pile was appointed by Bauer as its subcontractor for a development project. Under the contract, Jack-In Pile was to supply and install spun piles for the development for a contract sum of RM1,850,000.00. In the contract, specifically under clause 11.1 of the contract, Bauer will only pay Jack-In Pile within 7 days from the date Bauer received their related progress payments from the employer of this project. This became a practice (also known as a “conditional payment” in the construction industry) until a dispute as to the amount needed to be paid to Jack-In Pile arose 2016. It was then Jack-In Pile decided to file a claim under the Construction Industry Payment and Adjudication Act (“CIPAA”) for the monies that were due to them by Bauer. 

At the conclusion of the proceedings, the adjudicator allowed Jack-In Pile’s claim. Jack-In Pile then proceeded to file an application in the High Court to enforce its claim while Bauer simultaneously filed an application to set aside the adjudicator’s decision. 

In both their respective claims, Jack-In Pile contended that Section 35 of CIPAA applied retrospectively, effectively making the conditional payment clause void, while Bauer contended that section 35 of CIPAA can only be applied on a prospective basis. The High Court allowed Jack-In Pile’s claim. However, the decision was overturned in the Court of Appeal and the subsequent appeal by Jack-In Pile was also dismissed by the Federal Court.

What did the court say?

The court held that in order for a law to be applied retrospectively:

1. The legislation itself must clearly state that it intends to apply the new law retrospectively- there is a presumption under the common law and statute (i.e. the Interpretation Acts) that the effect of any new laws is only applicable to future events; and
2. In the event that a new law intends to apply retrospectively, it cannot impair any substantive rights of any parties that have relied on the existing laws to perform their obligation/ duties. 

**What is a substantive right? A substantive right is a right that is conferred upon a person under an existing law whilst relying on the existing law to perform their duties/ obligations. 

In Jack-In Pile, the substantive right was the right to freedom of contract (in this case, a construction contract). The court held that as the parties are entitled to regulate their business affairs, applying the law retrospectively will inevitably have a significant effect the construction contract entered between Jack-In Pile and Bauer, thus affecting the right of parties to the construction contract as the conditional payment clause cannot now be enforced and thereby frustrating the bargain entered into by Jack-In Pile and Bauer. 

In conclusion, until and unless the new law complies with the above requirements (for it to have retrospective effect), it is safe to say that the new will not alter your existing legal rights and obligations that you owe to another party/ due to you by another party.

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