Not every agreement between husband and wife legally binding, court rules

 Court of Appeal recognises marital agreements under Malaysian law but says promises made in a withdrawn divorce petition cannot be enforced.

The Court of Appeal held that not every arrangement reached between former spouses is automatically enforceable, particularly where it forms part of a settlement that is later withdrawn.

PUTRAJAYA:

Marital agreements between non-Muslim spouses are generally permissible under Malaysian law, specifically Section 56 of the Law Reform (Marriage and Divorce) Act 1976 (LRA), the Court of Appeal has ruled.

The court held that such agreements were consistent with the principle of party autonomy, subject to judicial scrutiny and the other provisions of the LRA.

Justice Evrol Mariette Peters said the approach accorded with Section 47 of the LRA, which allows Malaysian courts to have regard to principles applied by English courts exercising matrimonial jurisdiction, where appropriate, to local circumstances.

“English matrimonial law has increasingly recognised such agreements as an expression of party autonomy, subject always to judicial scrutiny,” she said in the broad grounds of judgment delivered on Monday.

The three-member bench, chaired by Justice Azhahari Kamal Ramli, with Justice Latifah Tahar sitting alongside, said this in partly allowing an ex-wife’s appeal over entitlement of her husband’s corporate shareholding.

The bench presided over appeals filed respectively by the former spouses who were dissatisfied with how the High Court judge had divided matrimonial assets upon pronouncing their divorce.

However, the Court of Appeal held that not every arrangement reached between former spouses was automatically enforceable, particularly where it formed part of a settlement that was later withdrawn.

The bench found that the former wife’s reliance on an alleged agreement contained in a joint divorce petition was misplaced as that petition had been withdrawn and never resulted in a divorce decree.

Peters said the arrangement was not an independent settlement agreement, but formed part of a broader compromise intended to facilitate the parties’ divorce.

It included the former wife’s resignation as a company director, the transfer of her shares in the company, and the former husband’s corresponding payment obligations.

She held that those obligations were interdependent and could not be selectively enforced after the joint divorce petition failed.

Peters said enforcing the arrangement would effectively give retrospective effect to a division of matrimonial assets before the court’s jurisdiction under Section 76 of the LRA had arisen, noting that such jurisdiction only arose upon the grant of a divorce decree or judicial separation.

She also noted that the shares were eventually included in the pool of matrimonial assets during the divorce proceedings, in which the former wife was awarded a share of them.

Enforcing the earlier payment arrangement would therefore amount to an impermissible double recovery, she said.

“Accordingly, the arrangement never crystallised into an independently enforceable agreement and remained inextricably linked to an abandoned divorce arrangement and a premature division of matrimonial assets,” she said.

The court also rejected the former husband’s argument that his professional medical practice fell outside the scope of matrimonial assets.

Peters said Section 76 encompassed assets acquired during the marriage that were capable of division, including those acquired through the sole effort of one spouse. She said the provision did not distinguish between “matrimonial” and “non-matrimonial” assets.

The court also affirmed the trial judge’s decision to rely on the valuation of the court-appointed expert instead of the former husband’s expert, leaving the net value of the corporate shareholding at RM11 million, excluding matrimonial properties and EPF savings.

However, the court found that the former wife’s award of 10% of the corporate assets was inadequate given the parties’ 25-year marriage.

It held that Section 76(2) required the court to consider both financial and non-financial contributions, including the role of a spouse who supported the family and enabled the other spouse to accumulate assets.

Applying what it described as the “broad-brush approach”, the court partly allowed the former wife’s cross-appeal and increased her entitlement from 10% to 25% of the former husband’s corporate shareholding, entitling her to about RM2.7 million, payable within 12 months.

The court also awarded the former wife RM50,000 in costs. - FMT