Can properties obtained via inheritance, gift, or love and affection transfer be subjected to division of matrimonial assets?

The definition of ‘matrimonial assets’ under the Law Reform (Marriage and Divorce) Act 1976

The interpretation and definition of the term ‘matrimonial assets’ under the Malaysian Law is rather wide and straightforward.

Section 76 of the Law Reform (Marriage and Divorce) Act 1976 (Act 164) empowers the court to order division of assets between parties as follows: –

S.76(1): The court shall have power, when granting a decree of divorce or judicial separation, to order the division between the parties of any assets acquired by them during the marriage by their joint efforts or the sale of any such assets and the division between the parties of the proceeds of sale¹.

This is further referred to and applied in the Federal Court case of Manokaram Subramaniam v Ranjid Kaur², where it was held that pursuant to S.76(1), the court can order division between the parties of any assets acquired by them during the marriage, and any proceeds of sale when granting a decree of divorce or judicial separation.

Section 76(5) further defines “matrimonial assets” as follows: –

For the purposes of this section, references to assets acquired during a marriage include assets owned before the marriage by one party which have been substantially improved during the marriage by the other party or by their joint efforts³.

Whether properties obtained via the transfer of “gifts”, “love and affection”, and inheritance are deemed as “matrimonial assets”?

At the outset, we would like to posit an illustration for your better understanding: –
The marriage between A and B has broken down and is beyond reconciliation, and both parties wanted to engage a solicitor to initiate their Joint Petition for Divorce. However, B knows that A’s father has transferred a few properties (could be some houses, shares, or cars) to A’s name, and B demands that half of the transferred properties should be given by A to B as part of the divorce agreement.

Now, what is the Malaysian position for this situation?

Here are a few cases which would pose as a guide to an answer: –
1. In the High Court case of GGC v CCC & Anor⁴, where the father transferred his company’s shares to the Respondent Husband while the Respondent Husband was still married to the Petitioner Wife, the High Court held that :-

“In short, the shares in the family company started by his father is outside the equation of division of matrimonial assets because these shares are not part of matrimonial assets to begin with…

It is trite law that gifts, inheritance or anything given in consideration of love and affection are not divisible as matrimonial assets and should be excluded from division…

It is a family business started by the Respondent Husband’s father. From the evidence the Petitioner Wife does not appear to have contributed to this business. I would hold that the Petitioner Wife has no claim on this shares currently held by the Respondent Husband.”

2. In the case of White v White⁵ , the House of Lords in the United Kingdom has drawn a line and distinguished the term ‘matrimonial assets’ and ‘inherited property’ as follows: –

“Property acquired before marriage and inherited property acquired during marriage come from a source wholly external to the marriage. In fairness, where this property still exists, the spouse to whom it was given should be allowed to keep it. Conversely, the other spouse has a weaker claim to such property…”

3. In Tay Chong Yew & Anor v Onn Kim Muah⁶ , the Court of Appeal held that: –

“These properties and shares were a gift to the first appellant by his father, Tay How Seng. Hence, it could not be said to be a matrimonial asset as it was acquired by the first appellant, no doubt during the subsistence of the marriage, by way of a gift with no contribution whatsoever from the respondent.”

In short: –

a) Where the property does not come from the marriage / is from an external source outside of the marriage; and
b) When one party does not contribute to the betterment of the said property,

Such property shall not fall under the ambit of “Matrimonial Assets”, and shall not be subject to division as of right upon a divorce proceeding.

Whether B is entitled to the properties upon divorce?

To answer the question as laid out in the above illustration, the short answer is a resounding “No”. At the surface, the law is clear that such properties shall not be a subject to division of matrimonial assets.

However, just like every law, there are exceptions to it. Whether such properties are divisible is also subject to the circumstances that arises within the period of marriage, and most importantly, the court does have the inherent jurisdiction to rule in favor of B. The court will consider the following factors in determining whether B is entitled to the said properties: –

• The intention of the A’s parents in making the gift;
• The financial circumstances of A and B;
• The needs of the children of the marriage;
• The length of the marriage; and
• The contributions made by each spouse to the marriage.

Conclusion

In conclusion, a party may be deemed as having the right to a share of the properties if the abovementioned factors are fulfilled, and when the court is satisfied of the same. In short, before deciding on such issue, the Court will consider on a number of factors, including the intention of the husband’s parents in making the gift, the financial circumstances of the husband and wife, the needs of the children of the marriage, and the length of the marriage.

It is important to note that this is just a general overview of the law. The specific circumstances of each case will need to be considered by the court in order to determine a party’s entitlement to the properties.

¹Section 76(1) of the Law Reform (Marriage and Divorce) Act 1976 (Act 164)
²[2008] 6 CLJ 209
³Section 76(5) of the Law Reform (Marriage and Divorce) Act 1976 (Act 164)
⁴[2016] MLJU 377
⁵[2000] 2 FLR 981
⁶[2016] 2 CLJ 579

If you have any questions or require any additional information, please contact our lawyer that you usually deal with.

This article is written by 

Seen Rui Yong
Senior Associate, Low & Partners