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Division of Matrimonial Assets

 

Ezane Chong and Vivian Siew explain the principles that govern the distribution of assets upon a divorce

The issue of how to divide property following the breakdown of a marriage is a vexed one which has spawned many a battle amongst estranged couples. This article outlines the principles that govern the division of matrimonial assets among non-Muslims in Malaysia.

COURT'S POWER TO DIVIDE MATRIMONIAL ASSETS

Section 76 of the Law Reform (Marriage and Divorce) Act 1976 ("Act") empowers the Malaysian court, when granting a decree of divorce or judicial separation, to order the division between the parties of any assets acquired during the marriage.

In this regard, a distinction is drawn between those assets acquired by the joint efforts of both husband and wife and those acquired by the sole effort of one spouse.

Division of jointly acquired assets

The principles governing jointly acquired assets are set out in sections 76(1) and 76(2) of the Act, where the court is directed to incline towards equality of division, having regard to:

  1. the extent of the contributions made by each party in money, property or work towards the acquiring of the assets;
  2. any debts owing by either party which were contracted for their joint benefit; and
  3. the needs of minor children, if any, of the marriage.

Division of assets acquired by the sole effort of one spouse

On the other hand, sections 76(3) and 76(4) deal with solely acquired assets and the factors to be taken into consideration are:

  1. the extent of the contributions made by the party who did not acquire the assets to the welfare of the family by looking after the home or by caring for the family; and
  2. the needs of the minor children, if any, of the marriage.

Subject to the above considerations, the court may divide the assets or the sale proceeds in such proportions as it thinks reasonable but in any case the acquirer shall get a greater proportion.

WHAT CONSTITUTES MATRIMONIAL ASSETS?

For parties who are getting a divorce or contemplating one, it is pertinent to know just what kind of property will be classified as matrimonial property and thus subjected to division upon divorce. The Act is silent on what constitutes matrimonial assets but from a study of case law, the following have been held to comprise matrimonial assets:

  • The matrimonial home and everything put into it by either spouse to be used jointly and severally for the benefit of the family as a whole;
  • All landed properties acquired during the marriage apart from the matrimonial home;
  • Cars, cash in bank accounts, jewellery, shares in companies including the family business(es) and even club memberships if acquired during the marriage;
  • Contributions made to the Employees' Provident Fund during the marriage;
  • Insurance policies, gratuity payments, employment and retirement benefits accumulated during the marriage by either or both spouse(s);
  • Assets owned by one party before the marriage, provided that such assets have been "substantially improved" by the other party during the marriage or by their joint efforts (section 76(5) of the Act);
  • Gifts from one spouse to the other, especially gifts of substantive value.

Inherited properties and gifts by a third party are generally excluded from division because, arguably, they do not comprise assets acquired by the "joint efforts" of both spouses or the "sole effort" of either of them. However, applying section 76(5), an inheritance or gift received before marriage may form part of matrimonial assets and be subjected to division if it can be shown that the inheritance or gift has been substantially improved through the efforts of one or both parties during the marriage.

THE OPERATION OF SECTIONS 76(1) and 76(2)

In Malaysia, there is no presumption of equal sharing of matrimonial assets. Equality of division may apply only if the court is satisfied that the claimed property is jointly acquired by the spouses in terms of "money, property or work towards the acquiring of the assets".

In Koay Cheng Eng v Linda Herawati Santoso [2008] 4 CLJ 105, the parties were married and lived in the UK for a number of years during which the husband bought some properties there. The UK properties were sold when the couple returned to Malaysia and the proceeds were then used to acquire other properties in Malaysia. Upon divorce 17 years later, the wife claimed inter alia the value of half of all those properties. The husband argued that she was not entitled to them as she did not contribute towards the purchases.

At the High Court, the judge accepted the wife's evidence that she had made a direct financial contribution as she had used her salary to pay for the upkeep of the household as well as to buy groceries, while her husband paid for the monthly instalments when they were in the UK. Since it was the monies brought back from the UK that helped the parties finance the properties subsequently acquired in Malaysia, the wife was held to be entitled to half the current value of those properties. On appeal, the Court of Appeal agreed that the division as ordered by the trial judge was reasonable.

The position in England differs from that in Malaysia. Although there is also no statutory presumption of equal sharing in England, the House of Lords broke new ground in White v White [2000] UKHL 54 by deciding that fairness requires the division of assets to be measured against the "yardstick of equality" to ensure that there is no discrimination between the contributions of a breadwinner and a homemaker. Accordingly, equality should be departed from only if, and to the extent that, there is good reason for doing so.

Against this backdrop, it is not surprising that Pauline Chai, a former Miss Malaysia, sought to have her divorce proceedings heard in England whilst her husband, Tan Sri Khoo Kay Peng, a Malaysian tycoon, strived to have the proceedings heard in Malaysia. At the time of writing, the substantive hearings in both jurisdictions are ongoing.

THE OPERATION OF SECTIONS 76(3) and 76(4)

The court may divide a solely acquired asset as it thinks reasonable, provided that the acquirer shall receive a greater proportion.

In Shireen a/p Chelliah Thiruchelvam v Kanagasingam a/l Kandiah [2012] 7 MLJ 315 the husband was the person making payments for the properties most of the time. The wife's main contribution was to the welfare of the family by looking after the home and caring for the family. Taking a broad-brush approach, the judge held that the wife was entitled to a 35% share and the husband, 65% share of the matrimonial assets.

DOES CONDUCT AFFECT THE DIVISION OF ASSETS?

At this juncture, it is appropriate to address an often-asked question: whether adultery or unreasonable behaviour by one spouse will entitle the 'innocent' spouse to lay a bigger claim on the matrimonial assets? The answer is 'no'. In Malaysia, the parties' conduct however good or bad does not affect the division of assets as there is no such consideration mentioned in section 76.

CONCLUSION

Section 76 of the Act is centred on a dichotomy between "joint efforts" and "sole effort". For the efforts to be treated as "joint", there must usually be evidence of monetary contributions by both parties towards the acquiring of the property, whereas when dealing with "solely acquired assets" regard is had to the non-financial acquirer's contribution to family welfare.

As a consequence, the courts in Malaysia are required to consider the contributions, even if minute, made by each spouse towards the acquisition of the properties, to determine the proportion in which the properties should be divided. This can be a tedious exercise for both the court and the disputing parties' respective legal advisers.

That said, judges do have considerable discretion and will often strive to reach an outcome which is fair to both parties, having regard to the individual circumstances of the case.

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WRITERS' NAMES : EZANE CHONG & VIVIAN SIEW

WRITERS' PROFILE:

Ezane is a Partner in the Dispute Resolution Division of SKRINE. Her main practice areas are civil and commercial litigation and family law.

Vivian is an Associate in the Dispute Resolution Division of Skrine. She graduated from Cardiff University in 2012.

SUBJECT : FAMILY LAW

 
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