Pre-Nuptial Agreements in Malaysia

A Nuptial Agreement, whether post-nuptial or pre-nuptial is an agreement made between parties to address ancillary matters in the event the marriage should fail. The difference between the two is in the timing of when the agreements are signed.
 
A pre-nuptial agreement is “an agreement or deed entered into by parties before wedlock in contemplation of marriage”[1] while a post-nuptial agreement is one which is entered into after the registration of the marriage.
 
This is different from marital agreements such as a Deed of Separation or Settlement Agreements which are entered into by parties when the marriage has already broken down.
 
The focus of this article will be on pre-nuptial agreements and its enforceability in Malaysia. Before proceeding further, it is important to first understand the controversies surrounding such agreements and why couples enter into these agreements in the first place.

Why are Pre-nuptial Agreements Controversial?
 
Nuptial agreements have been gaining much popularity around the world, with some jurisdictions having formulated specific provisions to govern such agreements. However, there are still many jurisdictions which either do not recognize such agreements outrightly or are equivocal and ambivalent, often taking contradictory positions in relation to them.
 
The reason is because many, especially those with strong religious beliefs, view marriage as a sacred union between a man and a woman who have vowed to stay together and be committed to each other until the death of either party; hence the phrase “till death do us part”. This phrase is recited in traditional wedding vows which has been traced back in its origin to the Book of Common Prayer in medieval England.
 
Traditionally, marriage was designed and meant to be a lifelong commitment with the marriage pact only to be broken in death. This was the universal hope when couples were starting out in married life. However, when a couple decides to enter into a pre-nuptial agreement, they are contemplating and hence indirectly saying that the marriage may end before the death of either party. This goes against the very fundamental concept of the sanctity of marriage.
 
For Catholics, divorce has historically been unacceptable on any ground or for any reason, except for death. Till this very day, the Catholic Church still does not recognize divorce.
 
Reasons for Pre-nuptial Agreements
 
Though pre-nuptial agreements are controversial, there are indeed many reasons why parties choose to enter into what may seem to be an “unromantic act” before marriage.
 
Pre-nuptial agreements are important when parties intend to protect their assets from being divided by the Court and transferred to their spouse in the event the marriage breaks down. Examples when this may arise is when one party going into the marriage has more assets than the other or has assets involving family arrangements or family companies. Sometimes a party may have had a bitter experience from a previous contentious divorce which he or she seeks to avoid when going into a second marriage. Another scenario is where other family members of one of the parties are worried that the potential spouse may reach into the family assets and hence, they would like to ring-fence and protect them.
 
Besides that, parties may want an element of certainty in the event their marriage ends. For instance, how each party would be provided for, who provides for whom and how much; how will the assets be divided and so on. While these questions may seem unpleasant or unimportant when parties are about to tie the knot, nonetheless cases clearly show that determining these questions only once the marriage has broken down is not an easy task as parties are then in an emotional state and hence, unable to think rationally and consider the interests of the other party, as well as the children of the marriage.
 
Moreover, divorce proceedings can be quite an expensive and a long-drawn process, especially when parties cannot agree on the terms. Therefore, being able to have matters which could become an issue in the future sorted out from the beginning would definitely save time and cost, limit any unnecessary “drama” and acrimony, perhaps reduce protracted divorce proceedings and allow parties to achieve an amicable resolution.
 
People also desire to have the autonomy to decide how to manage their own affairs in unforeseen or unavoidable circumstances.  Therefore, the question that begs to be asked is, if two consenting adults are allowed to get married with hardly any restrictions, then why should they not be allowed to determine and regulate what happens in the event their marriage ends?
 
However, there are doubts on whether most couples fully understand the consequences of what they are agreeing to. Many enter into such agreements with the view that they would never divorce from the love of their lives, so there is really no necessity to consider the terms of the agreement carefully. They only do so to satisfy the other party and so as not to affect their upcoming nuptials.
 
In such a situation one would wonder whether the element of voluntariness is even present when the agreement is signed.[2] This situation may result in the terms being unfavourable to one party, which only becomes apparent when the marriage breaks down, at which point it might be too late.
 
Position in UK
 
As the foundation of our matrimonial law is the English common law and their statutes, it is useful as a guide to look at the English position on pre-nuptial agreements.
 
Historically, English law viewed marital agreements unfavorably.[3] The position pertaining to these agreements was that they were not binding and were unenforceable, on the ground that such marriage contracts violated public policy. In Hyman v Hyman[4], the Court held that no agreement could oust the jurisdiction of the Court as the role of the Court is to protect not only the spouse’s interest but also public interest.
 
However, the legal position in England has changed to one of growing recognition and acceptance of such agreements as reflected in the 2010 landmark decision of Radmacher (formerly Granatino) v Granatino.[5] The English Supreme Court ruled that “decisive weight” should be given to a German pre-nuptial agreement signed by a German heiress and her French husband where the husband had agreed he would make no claims on Mrs Radmacher’s estimated £100M fortune, stating that “a Court should give effect to a nuptial agreement that is freely entered into by each party with full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold parties to their agreement.”
 
It must be noted that the decision by the Supreme Court in Radmacher was not that such agreements are binding but rather that these agreements do have an influence in the exercise of the English Court’s discretion. The agreement cannot oust the jurisdiction of the Court, but weight is to be attached to the agreement. It was stated that “the reason why the court should give weight to a nuptial agreement is that there should be respect for individual autonomy. It would be paternalistic and patronizing to override their agreement simply on the basis that the court knows best.”[6] 
 
Therefore, a pre-nuptial agreement under UK law will not automatically be binding but may be upheld by a Court on a case to case basis, if it meets the qualifying criteria set by the UK Supreme Court, and that is, it must be freely entered into; both parties must understand the implications of the agreement and that is should not be unfair to hold parties to their agreement in the circumstances prevailing.
 
However, it is important to bear in mind Baroness Hale of Richmond’s statement when she delivered her dissenting judgment in Radmacher namely;
 
“… unlike a separation agreement, the object of an ante-nuptial agreement is to deny the economically weaker spouse the provision to which she – it is usually although by no means invariably she – would otherwise be entitled”.
 
Subsequent to the Supreme Court’s decision in 2010, the English Law Commission published The Matrimonial Property, Needs and Agreements Report in 2014, recommending the introduction of “qualifying nuptial agreements” as enforceable contracts which will effectively make nuptial agreements binding between parties if they meet certain requirements as follows:

However, no law has been passed in England to give effect to the above.[8]
 
Position in Malaysia
 
In Malaysia, there is as yet no decided case that has addressed and applied pre-nuptial agreements. Case law in Malaysia thus far has only dealt with either Deeds of Settlement or Separation Agreements.
 
In general, Courts in Malaysia view such agreements as being contrary to public policy as it goes against the very spirit and intent behind the concept of marriage.
 
The applicable statute to refer to in addressing the question is the Law Reform (Marriage and Divorce) Act 1976 (“LRA”).
 
Upon a perusal of the LRA, it is clear that agreements between parties to a marriage are provided for in the Act as seen in Sections 52, 56, 57, 80, 84, 92 and 97. However, it is important to note at this juncture that the term “agreement(s)” mentioned in these sections are silent as to when the agreement is entered into. Hence, it can be argued that pre-nuptial agreements would be included in this term.

This section allows parties to present a divorce petition on mutually agreed terms. A nuptial agreement can form the basis of terms presented to the Court in a joint petition for divorce. However, Section 52 LRA expressly grants the Court the discretion to only make a decree of divorce if it thinks fit, subject to satisfying two requirements which are, that both parties freely consent and proper provision is made for the wife and children of the marriage.
 
Even if these requirements are satisfied, this would still not preclude the Court from amending the terms. Thus, it is the Court that ultimately has the final say on whether the agreed terms between the parties are binding on them and it is only when the Court confirms the terms, that these terms will take effect. The Court retains the power to review and attach conditions to the terms of the agreement despite the parties having already agreed to them.

Section 56 LRA allows parties to refer any agreement or arrangement made between the parties “which relates to, arises out of, or is connected with, the proceedings for divorce” to the Court for an opinion to be expressed and directions to be given as it thinks fit.
 
Besides that, Section 57(1)(e) LRA requires that a petition set out any agreement regarding maintenance and the division of assets acquired by parties, whether solely or jointly, and in the alternative, the petitioner’s proposals.  
 
Both sections are worded sufficiently widely to allow pre-nuptial agreements to be referred to the Court, and by the provisions of Section 56 LRA, it would be for the Court to express an opinion on the reasonableness of the agreement and give directions, if any.  

This section refers to agreements in relation to lump sum spousal maintenance and provides that any such agreement is only effective when the Court approves it, and the Court can approve it subject to conditions.

This section mentions agreements made in respect of child maintenance. From the plain and literal meaning of this provision, it appears that an agreement can be made between spouses to provide that one of the parents for instance, need not provide for their child.
 
However, under common law, there is the concept of the Court’s role as parens patriae which means that the Court is the ultimate parent to any child within the jurisdiction.[9] As such, the Court’s jurisdiction cannot be ousted in relation to children. Therefore, if it appears that the agreement is not in the welfare and best interest of the child, the Court need not give effect to any such agreement.

These two provisions set out the powers of the Court to vary the terms of any agreement for spousal maintenance and to vary any agreement in relation to custody or maintenance of a child. In relation to spousal maintenance, the Court has the power to vary such maintenance where there has been a “material change in the circumstances”. In relation to agreements relating to custody or maintenance of a child, the Court has power to vary “where it is satisfied that it is reasonable and for the welfare of the child so to do”.
 
In both these sections, there is an express provision that the Court retains jurisdiction to vary the terms of any such agreement within the terms set out therein and its power to do so cannot be ousted as both provisions expressly state, “notwithstanding any provision to the contrary in any such agreement”. However, what must be noted is that the power to vary is limited to terms relating to maintenance and custody only.
 
While under the provisions of Section 56 and Section 57 LRA, pre-nuptial agreements can be referred to the Court for the Court to express an opinion and the various sections aforementioned deal with the Court’s powers as regards to agreements in relation to spousal and child maintenance, there is no section dealing with agreements in relation to the division of matrimonial assets.
 
Division of Matrimonial Assets
 
Provisions in any agreement to determine how matrimonial assets are to be divided upon divorce, need to be considered differently from provisions on other areas such as maintenance or custody.
 
Section 76 LRA provides for the division of matrimonial assets. This section grants power to the Court to order the division of assets acquired during the marriage and assets owned before the marriage by one party which have been substantially improved by the other party or by their joint efforts.
 
Section 76(2) LRA, which was amended effective from 15.12.2018, sets out 5 factors that the Court is to have regard to when dividing matrimonial assets between the parties. The section further states that, “subject to those considerations, the court shall incline towards equality of division.”
 
The factors that the Court must take into account when exercising its power are specific and circumscribed and none of them include considering prior agreements between the parties. It is the author’s view that there is no residual discretion reposed in the Court to take any other factors into account other than those expressly set out in this section.
 
Unlike England, Malaysia does not have any provisions similar to Section 25(1) and 25(2) Matrimonial Causes Act 1973, where there is an overarching provision for the Court to consider “all the circumstances of the case” and “the conduct of parties”.[10] Singapore also has a similar provision as England and this is seen in Section 112(2) and Section 112(2)(e) Women’s Charter 1961 which empowers the Court to consider “all the circumstances of the case” and “any agreement between the parties with respect to the ownership and division of the matrimonial assets made in contemplation of divorce”.[11]
 
Therefore, it is submitted that if an agreement on asset division is presented to a Malaysian Court, then the agreement must reflect the considerations in Section 76(2) LRA. Any attempts in a pre-nuptial agreement to circumvent the provisions, which would effectively oust the jurisdiction of the Court in the exercise of its power, will not be upheld by the Malaysian Court. 
 
Conclusion

Marriage is no longer viewed as a sacred union as it used to be.[12] Divorce rates among non-Muslims have increased throughout the years especially in Malaysia during the Covid period.[13] With the increasingly litigious nature of divorce proceedings, it is becoming more and more apparent that there is a need for these agreements to be considered and given weight to, with necessary safeguards as seen in UK and subject to any vitiating circumstances that would arise in a normal contractual situation, to render the agreement void or voidable.
 
Upon a deeper analysis of the relevant sections in the LRA, it appears that the LRA allows for the Court to consider agreements, which may also include pre-nuptial agreements.   The Court retains the power to express an opinion, give directions or to approve or vary agreements in relation to maintenance and custody.
 
However, terms regarding the division of matrimonial assets in an agreement, will not bind the Malaysian Courts which retain absolute power to order the division of matrimonial assets in accordance with the express factors set out in Section 76(2) LRA.

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