The five-member bench led by Court of Appeal President Abang Iskandar Abang Hashim unanimously dismissed the appeal by the Malaysian government and Public Service Department (PSD) director-general to overturn the appellate court's decision.

The others on the bench were the chief judge of Malaya Mohamad Zabidin Mohd Diah, chief judge of Sabah and Sarawak Abdul Rahman Sebli, and Federal Court judges Hasnah Mohamed Hashim, Datuk Rhodzariah Bujang.

In delivering the court's decision, justice Mohamad Zabidin said Section 3 and Section 7 of the Pensions Adjustment (Amendment) Act 2013 (PAA), which allows a 2% increment annually, were less favourable to pensioners and thus contravened Article 147 of the Federal Constitution (which provide for the protection of pension rights).

"It is our unanimous decision that there is no merit in the appellants’ (the government and PSD director-general) appeal. The appeal is therefore dismissed and the decision and order of the Court of Appeal is affirmed," he said.

Justice Mohamad Zabidin also said both the High Court and Court of Appeal have observed that the amended Section 3 (2) of the PAA was, in fact, an acknowledgment that the amendments could result in a less favourable situation.

Justice Mohamad Zabidin said the appellate court was right to point out that the less favourable situation may never be rectified as the mechanism provided under the amended section 3 (2) of the PAA to address a less favourable situation should it arise, was merely "permissive" and imposes no obligation to act.

The amended Section 3 (2) of the PAA states that where the application of a specified rate of increment would result in a situation that is less favourable to an officer appointed before the coming into force of the amendment, the Yang di-Pertuan Agong may by order in the gazette prescribe an appropriate higher percentage of increment to be applied in such cases.

Justice Mohamad Zabidin also said that the Court of Appeal was correct to restore the status quo prior to amendments to the Act because when the court strikes down the statute or amendment to the statute, the pre-existing provision is automatically revived.

On Jan 13 last year, the Court of Appeal declared the amended Section 3 and Section 7 which came into effect from Jan 1, 2013, were null and void as they contravened Article 147 of the Federal Constitution.

Aminah Ahmad, who retired as a civil servant with the foreign affairs ministry, sued the Malaysian government and the PSD director-general in her personal capacity and on behalf of 56 retired members of the public services, claiming that the amendments to the PAA in 2013 resulted in a situation "less favourable" to her as compared with the preceding retirement adjustment scheme under the Pensions Adjustment Act 1980.

Under the old scheme, the retiree's pension is revised based on the prevailing salary of incumbent civil servants in that grade. However, the 2013 amendment was introduced based on a flat rate of 2% annual increment.

Aminah initially lost her case at the High Court in 2020. She then appealed to the Court of Appeal which decided in her favour. The government and the PSD director-general obtained leave to appeal last year.

Senior federal counsel Shamsul Bolhassan, Liew Horng Bin and Federal counsel M Kogilambigai appeared for the Malaysian government and PSD director-general while lawyers Lim Choon Khim, Chin Yan Leng and David Yii Kee Kiet represented Aminah.