Shari’ah Guidelines on Property Management

By:
Prof. Dr. Mohd. Ma’sum Billah
masum@applied-islamicfinance.com
masum2001@yahoo.com
+6019-3699542

Introduction

In Malaysia, although we practice civil law generally in most governing law areas, but we also adapt the elements of Islamic Law or the Shariah as a guideline on property management.

This matter could be seen effectively enforced in the property management of wills, gifts, charities and charitable trust, wakaf, and probate. Basically, we could see this Shariah concept applicable in practice by Amanah Raya Berhad, Bank Islam and Bank Muamalat.

Regarding Islamic Law in Malaysia and Singapore, the practice in Malaysia and Singapore is not necessarily same as that in the Arabic culture of West Asia. The religion has accommodated indigenous pre-Islamic traditions. Malaysia is not an Islamic State although the Federal Constitution provides that Islam shall be the official religion of the State.

Islam in Malaysia has superimposed itself on the pre-Islamic customary laws and practices of the Malay people. There is significant integration between Muslim law and adat, although conflict does occasionally arise in regions where adat has taken a firm hold. Adat is fully rooted in the rural Malay community and even among the urban Malays.

There is no specific legislations on Islamic inheritance in Malaysia and Singapore. The law administered in Malaysia has absorbed some of Malay adat and applies to all Muslims, but it is subject in its application in variations in accordance with the school of law to which the parties belong. In some states it is provided that the rule of Malay customary law, which adapts the Islamic law, only applies to Muslims of the Malay race. In Sabah and Sarawak Muslim law only applies to ‘natives’ who are Muslims.

The law applied to Muslims in Peninsular Malaysia is Islamic Law including such custom as has been adopted and absorbed into the Islamic law. In the ‘adat perpateh’ ares of Negeri Sembilan and Naning in Malacca, there are customs in which have not yet been absorbed into the Islamic law. There have been some conflicts but these have been resolved by an attempt to apply both Islamic law and the rule of adat, where possible. The law as practiced in Malaysia appears to be Muslim law according to the Shaffi School and Malay adat modified by Muslim law. It regulates such matters as marriage, divorce, adoption, legitimacy and certain religious offences among those professing the religion of Islam.

Where there is law of general application, like the Evidence Act 1950, which is applicable to all persons in Malaysia, the court will apply its provision to Muslims, even though they may be contrary to Muslim law.

Certain rules of English law incorporated into local legislation or practice were held not applicable when they came into conflict with Islamic law. In Islamic law, a trust or Wakaf may be created with the custodian or trustee having rights in perpetuity although contrary to the principles of English law.

However, the practice adopted by courts in West Malaysia may differ somewhat from the courts in East Malaysia in respect of the same matter. In West Malaysia, the testamentary powers of disposition by Will is governed by Muslim law and is limited to the legal one third of the estate of a deceased Muslim subject to the consent of the lawful beneficiaries recognized under Islamic law. In Sabah and Sawak, wills are governed by the Muslim Wills Ordinance which provides that in the event of conflict between Islamic law and the division of property as set out in the Will, the Will will not be regulated by Islamic law but by the intentions of the testator as embodied in the Will.

Though the Charters of Justice had introduced foreign law into Straits Settlement comprising Singapore, Malacca and Penang, local customs and usages were given recognition. Over the years and through a number or legal decisions, the independent system of law in Islam was recognized by civilian courts and there existed a dual and parallel system consisting of Islamic law and the English common law, modified in its application to local circumstances.

The administration of Muslim Law Act enacted legislation for the administration on Islamic law in Singapore. The act, among other matters provides rules for distribution, according to Muslim law of property of Muslim dying intestate. The law may be modified where applicable by local custom and ‘harta sepencarian’, as doctrine of division on jointly acquired property between spouses, adopted by Muslims in South-East Asia.

Relevant Laws

According to Wills Act, both the Wills Act 1959 of West Malaysia and the Wills Act (Cap 352, 1985 Ed) of Singapore are based on the English Wills Act 1837. Under the Wills Act 1959 although the provisions regarding the validity of Wills applies to all persons, the testamentary powers of Wills of persons professing the religion of Islam are governed by Islamic law, the general principle being that testamentary distribution may not exceed one third of the estate of the deceased.

In Sabah and Sarawak the law governing the validity and effect of Wills is governed by the Muslim Wills Ordinance (Cap 81 of the revised law of Sarawak) which divides the provision of property made by Will, and if there is a conflict between the Islamic law and the division of property set out in the Will, the Will will not be regulated by Islamic law but by the intention of the testator as embodied in the Will. In Singapore the law governing the validity of Wills made by Muslims depends on the compliance with the provision as to execution and attestation contained in the Wills Act (Cap 352, 1985 Ed). However the Administration of Muslim Law Act 1966 makes the Muslim law applicable in cases of testacy and provides that a Muslim may dispose property by Will only in accordance with and subject to the restrictions imposed by the School of Law imposed by him.

For Intestate Succession, the Distribution Act 1958 applies only to non-Muslims. The Act was extended to Sarawak, but Sabah retained its own Intestate Succession Act 1960 which is modeled after the Intestate Succession Act 1952 of England.

In Malaysia, the applicable law governing probate and administration is the Probate and Administration Act 1959. The Small Estates (Distribution) Act 1955, is applicable to summary administration of “small estates”. In Singapore, the Probate and Administration Act (Cap 251, 1985 Ed) is applicable.

The Inheritance (Family Provision) Act 1971 (Act 39) applies throughout Malaysia, but does not apply to the estate of deceased Muslims or “natives” of any States of East Malaysia.

Regarding the Muslim Law under State Legislation, in Peninsular Malaysia, Islamic religious matters are the concern of the respective State legislatures. The two Federal Territories of Kuala Lumpur and Labuan come within the jurisdiction of Parliament.

In Sabah and Sarawak, Wills are governed by the Muslim Wills Ordinance (Cap 81, Revised Laws of Sarawak) and where there is a conflict between the Islamic law and the division of property set out in the Will, the Will shall not be regulated by the Muslim law but by the intentions of the testator embodied by the Will.

Certain federal statutes of general application have been interpreted in the light of dual system of Shari’ah law and civil law and as has been mentioned, this has brought uncertainty as to whether appeals, where the parties are Muslims, are truly part of Islamic law. Thus the Evidence Act 1950, the Trustee Act 1949 and the Guardianship of Infants Act 1961 apply equally to Muslims, though some of their provisions may be contrary to Islamic law

In Malaysia and Singapore, judges have often referred to treatises and manuals written by Muslim scholars on Islamic Law.

Will

A Will is a declaration of a person’s intentions concerning the disposition and devolution of his property after his death. The person making the Will, the testator, sets down how he wishes his property to be disposed after his death and states the names of the persons (the executors) who are to attend to its distribution.

A Will “speaks from death” and it has no legal effect until the death of the testator. Up till the time of death it is not enforceable and can be revoked or varied to suit changing circumstances. It is ambulatory, i.e. not permanent, and its provisions are not final until death. It can be revoked or cancelled in various ways. Alterations can be made by codicil which is really a supplementary Will. The property to which it relates is that of the testator at the date of his death, which may be more or less than what he owned at the time of making his Will.

There is full freedom of testation, except under Muslim law testamentary dispositions may not exceed one-third of the estate of the deceased. Moreover a Will which attempts to prefer one heir by giving him a larger share of the estate than he is entitled to by Muslim law is wholly invalid without the consent of the other heirs. The law allows non-Muslims as unfettered right to dispose of their property. However the courts can intervene, in spite of the testator’s expressed wishes, on how to dispose of his property, by providing for certain people who may or may not be catered for in the Will or by declaring that leaving property with certain conditions attached is contrary to public policy and therefore should not be allowed. To avoid this, it may well be for the testator to give the reasons, either in the Will itself, or in a signed, witnessed and dated documents which should be left with the Will. The court in making its decision whether to grant or refuse an application, will take note of the testator’s reasons for his failure to provide for the applicant in question.

The formalities prescribes by the statute must be strictly observed, except in the case of privileged Wills of soldiers, airmen or sailors (subject to certain provisions) for whom informal directions even in a letter, or by word of mouth, is sufficient. For all other testators, including those who profess in Islamic Religion, failure or inattention to the formalities may render the Will invalid.

The Will must be in writing (which includes handwritten, typewritten and printed words) and the wording need not be in legal or formal language, so long as it clearly identifies the testator, the executors and the various kinds of property dealt with, and the persons to be benefited from the Will. It must contain the attestation clause stating that the formalities had been carried out when it was executed, i.e. that it was signed by the testator and that the signing was witnessed by two competent witnesses.

The will must be signed by the testator or some other person in his presence and by his directions. If the testator can write, his usual signature would suffice. If he is illiterate or too unwell to sign in full, he may make his “mark” or initials alone. If he is incapable of holding a pen, someone else might sign for the testator, provided he is present at the same time and authorizes the signature. If the testator is blind or otherwise incapable of reading, the Will must be read over to him before his signature or mark placed on it.

Types of Wills

In West Malaysia the law governing the validity and effect on Wills is the Wills Act 1959 except that the Act does not apply to the Wills of persons professing the religion of Islam whose testamentary powers are governed by Islamic law.

A Will, as defined in section 2 of the Act, can be said to be a disposition or declaration in which the person making it (the testator) provides for the distribution or administration of property after his death. A Will does not come into effect until after the person’s death. Up until the time of death it is not enforceable and can be changed at any time. It is ambulatory, i.e. not permanent and is subject to revocation or alteration until the death of the testator.

In Re Goods of Haji Mohamed Thaib the Court held the document referred to the third party as ‘Attorney’ rather than as executor since the document from its own terms took effect from its date and not from the death of the couple, it was for all intents and purposes an informal declaration of a trust and not a Will.

When a law agent for the Court was struck off the rolls due to certain libelous statements, and he subsequently made a Will disposing trifle property, but the main part of the Will reflected on the administration on the Court, the Court being satisfied that under color and pretence of a Will, the intention was to libel the Court, refused to grant probate or to consider the same as a Will. The executors were brought up for contempt in bringing up the said Will and attempting to propound the same.

A noncupative Will is an Oral Will. It may be dictated by the testator his or her illness before a specific number of witnesses and later reduced to writing. It represents a limited exception to the general rule that a Will must be in writing.

A Holographic Will is a will entirely written and signed in the handwriting of the testator. It is validated without witnesses because the fact that the Will is entirely in the testator’s writing. The risk of fraud that the formalities are designed to prevent is reduced.

A will by a member of the armed forces in Malaysia who is in actual military service may be made either in writing or by word of mouth. Such soldier, airman and sailor may by such privileged Will dispose of his property or of the guardianship, custody or tuition of a child or may exercise a power of appointment exercisable by a Will. There was no need to prove that he was making a Will or that he was entitled to. It is sufficient if the Will manifests the intentions of the testator to be acted upon as being an effective Will.

A codicil is an instrument executed by a testator for adding to, altering or confirming a Will previously made by him. It becomes part of the Will, and the formalities required are similar to those for executing a normal and valid Will. The effect of a Codicil is to bring the Will up to the date of the Codicil, and to make the same dispositions of the testator’s estate as if the testator had at that date made a new Will, with the original disposition as altered by the Codicil.

In Fatimah Al Tway, deceased a gift inter vivos affected by an Arabic document known as ‘nasr’, executed and conforming to the Wills Ordinance No.3 (then in force in the Straits Settlements) so that she would not exceed her power of disposal more than one third under Mohamedan law, was held by the Court to be a valid testamentary document.

Where a testator made a Codicil amending Clause 5c of his Will to stand possessed of the residuary estate in trust for children in certain shares, and directed the trustees to hold the residuary estate in equal shares, the question was in whether other clauses, on the true construction of the Codicil, are revoked on the principle that where a gift is revoked is also revoked the gifts over clauses dependant on it, the Court held that the intention of the testator was to vary the shares his children would take and not to revoke the limitation over.

A Will can refer to other documents and these can be included as part of the Will, though they have not had the formalities of a Will such as the signature of the testator and the signatures of the two attesting witnesses.

Regarding Property Disposable by Will, under Muslim Law and Custom, a Muslim (professing the religion of Islam) cannot by Will dispose than more of one third of the surplus of his estate after payment for funeral expenses and debts and testamentary dispositions in excess of the legal one third cannot take effect unless the heirs consent to them after the death of the testator. Thus testamentary disposition of the testamentary of the legal one third are not valid unless the other heirs consent to the dispositions after the death of the testator. In such cases, as the provisions of section 6 of the Wills Act 1959 had been complied with, a separate application to the court by the defendant and other children of the deceased is necessary if they desire to vary the Will to make provisions for them in accordance to the school of law of Islam to which the deceased belonged.

A testator may dispose of any freehold land (and house of which he is sole owner). Where after making such Will in favor of someone, he sells his freehold in his lifetime, the beneficiary devisee named therein will not receive the freehold because at the time of the testator’s death the freehold no longer belonged to him so was not capable of being disposed by him.

A gift which does not refer to any specific or particular object is described as a general legacy. A specific legacy is a gift specifically described so as to be readily ascertainable. A demonstrative legacy is a gift of a sum of money to be paid out of a particular fund. A gift of money is known as a pecuniary legacy.

A Will disposing of property (both movables and immovable) that is situation abroad, generally is governed by the law of the country which the property situated. The general rule is that a Will must conform to the law the country where it was made or where the person making the Will was living permanently or where (in the case of Wills made in foreign countries) the testator was a national. A Will of items such as land and homes, mortgages, leaseholds, interests in freeholds, and even debentures representing proceeds of sale of freehold which are situated in another country will be construed according to the law of that country.

Members of a company have a right to transfer their shares to whomsoever they like, unless the articles otherwise provide. (Weston’s Case) In the case of private company the articles must restrict transfer. In the case of public company there must normally be no restrictions if a stock exchange quotation is given. Therefore, subject to any restrictions placed upon the disposal of shares by the Company, any shares can be disposed as a Will.

A life assurance policy which has been taken out by a person on his own life and for his own benefit forms part of his estate. On his death if the benefit of the policy passes to him, then it forms part of his estate.

A Will which devises or bequests the testator’s own property does not convey the property of which he is merely a trustee. Likewise an executor who is a mere trustee as regards the deceased’s property does not convey the property of the deceased.

Gifts.

The second type of property management is gift, a voluntary transfer of an interest of a property by the owner (the donor) to another (the donee) without any consideration or compensation. The lack of consideration distinguishes a gift from a transfer by a contract or sale. To be legally effective there must be a delivery of the subject matter to the donee. There must be a present intention by a competent donor to make the gift and there must be acceptance of the gift by the donee.

The Wills Act 1959 does not apply to the Wills of persons professing the religion of Islam as their testamentary powers are governed by Islamic Law.

Regarding Gifts under Muslim Law, the Wills Act 1959 applies to the state of West Malaysia only. It does not apply to the Wills of persons professing the religion of Islam whose testamentary powers remain unaffected by anything contained in the Act. The application of English Law is subject to the overriding presence of the local legislation and suitability to local circumstances. Certain rules of English law incorporated into local legislation or practice are held to be inapplicable when they come into conflict with Islamic law.

In general, most legal systems allow an unfettered right to dispose of one’s property as a person chooses, subject to the powers of the court to intervene where no adequate provisions have been made with regard to any moral obligation that a testator might have after his death to people who depended on him. Although Islamic Law is binding on all Muslims, the practice adopted in the courts of West Malaysia is somewhat different from applied in the courts of East Malaysia and Singapore.

The general principle of the Muslim law is that testamentary dispositions may not exceed one third of the estate of the deceased.

In Shaik Abdul Latif v. Shaik Elias Bux it was held under Muslim law a testator has power to dispose not more than one third of the property belonging to him at the time of his death; the remaining two thirds of the property must descend in fixed proportion to those declared by Muslim law to be his heirs. A Will of a Muslim which than he is entitled to by Muslim law is wholly invalid to such bequest without the consent of the other heirs.

In Abang Haji Zaini v Abang Haji Abdulrahim it was argued that a Muslim can only depart from the form of the Will prescribed under the Muslim Wills Ordinance if the keeps to the Muslim law of inheritance, i.e. the Muslim law as adopted in Sarawak as modified by custom and the provisions of the Ordinance. In that case, although a bequest was made to an heir, there was evidence that the other heirs consented to it.

Charities and Charitable Trusts

Regarding Charities and Charitable Trusts, a private trust is designed to benefit one person or a number of persons. A charitable trust is designed to benefit a society, or a part of it.

Regarding charitable trust under Muslim law, a wakaf is a Muslim court settlement of property usually for religious purposes. As it relates to the disposal and devolution of property it is subject to section 25 of Part VII of the Civil Law Act 1956, which reads:

Nothing in this Part, shall affect the disposal of any property according to Muslim law or, in the case of Sabah and Sarawak, native law and custom.

Among recent cases, is Commissioner for Religious Affairs & Ors v. Tengku Mariam binte Tengku Sri Wa Raja & Anor which was an appeal from the judgment of Wan Suleiman J. in which he declared the wakaf to be invalid as it was essentially for the benefit of Tengku Chik’s family and the gift to charity was illusory and contained a power of revocation. It also appeared that the parties had agreed to refer the document of wakaf to and to abide by the decision of the Mufti or the Majlis Alim Ulama, and the mufti gave a fatwa (religious ruling) that the wakaf was valid. The Federal Court in allowing the appeal held that although the wakaf was invalid, the parties were stopped from challenging its validity as they and their predecessors had agreed to abide by the decision of the Mufti in this case.

Testacy Under Muslim Law

Regarding testacy under Muslim law, the formal attestation and execution of a Muslim Will are determined by the provisions of the Wills Act 1959. Failure or inattention to these formalities may render a Will invalid. The testamentary powers of disposition of property in a Muslim Will are governed by Islamic law.

Under Muslim law, a “Wakaf” or trust may be created with the custodian or trustee having rights in perpetuity. The English rule against perpetuities did not extend to Wakafs.

In Re Dato Bentara Luar, deceased; Haji Yahya bin Yusof & Anor v. Hassan bin Othman the Federal Court held that a Wakaf (trust declared for religious purposes) was valid. The Wakaf was created when the English rule against perpetuities was not applied to Muslims in Johore; and when it was applicable, it was not applied to Muslims because matters of Muslims have always been governed by Muslim law and custom. Thus, the Wakaf is not against Perpetuities.

The general principle of Muslim law is that testamentary disposition may not exceed one third of the estate of the deceased.

Before 1966, the provisions of the Singapore Wills Act relating to testamentary dispositions applied equally to Muslims and in the case of In the Goods of Abdullah it was held that a Muslim may by Will dispose of the whole of his property. The Administration of Muslim Law 1966 now makes the Muslim law in Singapore applicable to cases of testacy, and a Muslim may dispose his property by Will only in accordance with and subject to School of Law professed by him. Hence the decision In the Goods of Abdullah is no longer good law.

As a conclusion, the Shari’ah guideline on property management in Malaysia is comprehensively effective to provide justice and equality to the Muslims. It also helps to avoid any injustice and slowly reduces the rivalry among the family member and relatives.