spouses case study ppt - final

50
PRESENTED BY: ALL GROUP MEMBERS SHARIAH RULES & FINANCIAL TRANSACTION:- PRESENTED TO: ASSOC. PROF. DR. NOOR INAYAH YAA’KUB

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Page 1: Spouses Case Study Ppt - Final

PRESENTED BY:ALL GROUP MEMBERS

SHARIAH RULES &FINANCIAL TRANSACTION:-

PRESENTED TO:ASSOC. PROF. DR. NOOR INAYAH YAA’KUB

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Conclusion – Remedy (Civil & Islamic)

Transaction Types

Introduction and Identifying Issues

Rights of the Wife (Civil & Islamic)

CASE STUDY - PRESENTATION STRUCTURE

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IDENTIFYING ISSUES

11

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In a country like Malaysia where there exist dual-system of financial institution, the prerogative is on the part of the customer/debtor to choose the most viable means of financial assistance which he can benefit from, be it with a conventional bank or an Islamic bank.

However, there could be some underlying requirements such as a personal guarantee by a third party to be liable together with the debtor and charging a property to the bank as security for the loan.

Therefore, both the debtor and the guarantor must be aware of their rights and implication of the contract they enter into with financial institutions.

INTRODUCTION

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First, to identify what is the transaction/contract type in the above scenario. What does it is called in conventional banks and what does it is called in Islamic banks.

What is the principles of the transaction above (both under conventional and Islamic banks)?

Distinguish the features of contracts under both conventional and Islamic bank and its elements.

IDENTIFIED ISSUES

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The wife claims that she entered into the transaction under undue influence (not voluntarily). Can she use this element of “involuntary/unwillingness” to defend herself ?

What is the effect of undue influence under the contract law? Void? Voidable?– Tips: Undue influence is in Equity. Does the

relationship between husband and wife satisfy/falls under the presumption of undue influence?

IDENTIFIED ISSUES

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(3)(b) What is the stand of someone entering into a contract involuntarily under

Islamic law? Is the position the same or different?

What is the element of contract in Islamic Commercial law (formation of contract) in relation to this case above? Has all the conditions been satisfied with?

IDENTIFIED ISSUES

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(4) What is the scope of liability of the husband upon default? Does he need to

pay all loan amount i.e RM50,000? or only that part of the loan which has not been paid i.e the balance 15 years (the payment default occured after he paid for 5 years)?

What is the difference between conventional’s and Islamic banks’ practices on this aspect?

IDENTIFIED ISSUES

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(5) What is the scope of liabilities of a person (in this case, the wife) acting as a guarantor/surety for

a loan given by bank as above? Is it the same as the principle borrower (the husband)

? What could be the provision under both conventional and Islamic banks?

• Tips : Any case law? Any precedent? • Tips : Under Islamic banking provisions, the

transacting parties does not only shares the profit, but also shares risks. Whereas in conventional banks provisions, sometimes the transacting parties shares the risk but sometimes it does not.

IDENTIFIED ISSUES

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TRANSACTION TYPES

22

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Shariah Concept : Business Tawarruq

Shariah Contract : Bai’ Murabahah and Wakalah

FINANCING PRODUCT

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• - } { : البقرة DَعF Dْي Fب ال HُهJ الَّل JَّلDَحD َوDَأ تعالى 275قولُه ،• - عَّلى - لعامَّلُه َوسَّلم َوآلُه عَّلْيُه الَّلُه صَّلى َولقولُه

:خْيبر• ( ^ جنْيبا بالدراهم ابتَع ثم بالدراهم، الجمَع بَع

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MECHANISM OF THE PRODUCTS

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The customer applies financing product based on Tawarruq concept from the Bank. Bank obtains Tawarruq transaction documents from the customer.

Bank will buy the commodity through Broker 1.

Under the Murabahah contract, Bank then sells the commodity to the customer at Bank’s Selling Price (Principle + Profit) on deferred payment term. Under the Wakalah contract, customer requests Bank to sell the commodity in the market.

Acting as the appointed sale agent for the customer, Bank sells the commodity to Broker 2.

Bank then credits the Wariq (proceed) from the sale of commodity to the customer’s account.

Finally, customer pays amount due to the Bank (Principal + Profit) by way of agreed instalment method.

FLOW OF TRANSACTION

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• Upon Loan Approval, the bank will automatically credit the approved amount into personal Saving / Current Account and the customer are deemed to have accepted

• the loan amount disbursed even though the amount approved is lower than the amount applied and even if the loan remains unused in Saving / CurrentAccount

CONVENTIONAL LOAN

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WOMEN’S RIGHTS

33

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THE LAW1. Married Women Act 1957, Amendment 19942. Law Reform (Marriage and Divorce) 1976 (Act

164)3. Law Reform (Marriage and Divorce)

(Amendment) 1980. (Act A498)4. Law Reform (Marriage and Divorce) 1986 (Act

650)5. Law Reform (Marriage and Divorce) Rules

1982 (PU (A) 53 of 1982)

THE RIGHTS OF WIFE - CONVENTIONAL

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1. Personal Status Including Civil CapacityThe Married women Act 1957 provides that a married woman shall be:- i. capable of rendering herself, and being renderedii. liable in respect of any tort, contract, debt or obligationiii. suing or being suedin her own name

Shall be entitled to all remedies and redress for all purposes in all respects as if she were a feme sole.

RIGHTS OF WIFE – MARRIED WOMAN ACT 1957, AMENDMENT 1994

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2. Property RightThe Married women Act 1957 provides that a married woman shall be:- i. capable of acquiring, holding and disposing any property in all respects as if she were a feme sole.ii. subject to the law relating to bankruptcy and the enforcement of judgment and orders in all respects as if she were a feme sole.

RIGHTS OF WIFE – MARRIED WOMAN ACT 1957, AMENDMENT 1994

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A married women who is an executrix or administratrix, alone or jointly with any other person or persons, of the estate of any deceased person, or a trustee alone or jointly with any other person or persons of property subject to any trust, may sue and be sued, and may transfer or join in tranferring any movable or immovable property belonging to the estate on trust without her husband as if she were a feme sole.

RIGHTS OF WIFE – MARRIED WOMAN ACT 1957, AMENDMENT 1994

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Teh Eng Kim v Yew Peng Siong the parties, husband and wife, had jointly paid for the down payment of a house and subsequently the husband arranged to pay the instalments on the house. The wife was also working and she paid for the upkeep of the house. The Federal Court held that were husband and wife are working and have agreed to share in the purchase and running of the matrimonial home, then, prima facie, on divorce the proceed of sale thereof are to be divided them in equal shares.

REFERENCES CASE

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1. The rights of a woman/wife before a marriage2. The rights of a woman/wife during a marriage 3. The rights of a woman/wife after a marriage

RIGHTS OF WOMAN/WIFE – ISLAMIC FAMILY LAW ACT 1984

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1. Mahar (Obligatory Marriage Payment) and gift. A woman has the right to receive mahar and gifts during the wedding ceremony. It shall be given in the presence of the person solemnizing the marriage and two other witnesses (Section 21 (1)).

2. Ta’liq In a marriage, the Act gives the right of the prescribed ta’liq or other ta’liq to a woman. It must be registered in the Marriage Register (Section 22 (1)).

RIGHTS OF WOMAN/WIFE (DURING MARRIED) 1984

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3. Maintenance (Nafkah) A wife is entitled to maintenance upon marriage. The court may order a man to pay maintenance to his wife or former wife. A wife will not be entitled to maintenance once she is disobedient or nusyuz until she repented and obeyed commands from her husband (Section 59(1), (2) and (3))

4. Divorce by talaq or by order The Act permits a wife who desires divorce from her husband and has the rights to do so but must hand in application form accompanied by a declaration to the court. The declaration contains particulars of the marriage; particulars of the facts giving the court jurisdiction under section 45

RIGHTS OF WOMAN/WIFE (DURING MARRIED) 1984

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5. Khul’ Divorce or cerai tebus talaq If the husband does not agree voluntarily to pronounce a talaq, but both parties agree to a divorce, they can do it by redemption or cerai tebus talaq. Court will order the husband to pronounce a divorce by redemption after the amount of payment is agreed upon by both parties. This is called ba-in sughra or irrevocable (Section 49(1).

6. Resumption of conjugal relationship or ruju’ In this talaq raji’i, a husband and a wife may resume conjugal relations within the period of ‘iddah (Section 51).

RIGHTS OF WOMAN/WIFE (DURING MARRIED) 1984

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7. Divorce under ta’liq or stipulation (S.50) When a marriage takes place, a married woman has the rights to pursue a ta’liq certificate made upon a marriage agreed by the husband (Section 50).

8. Dissolution of marriage or fasakh (S. 52) This Act protects a wife from being abused by a husband and she is entitled to obtain an order for the dissolution of marriage or fasakh before the court. Therefore, it must be based on certain grounds as stated in the Act.

RIGHTS OF WOMAN/WIFE (DURING MARRIED) 1984

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9. Presumption of death If the husband of any married woman has died, believed to have died or has not been heard of for more than seven years; the court may presume in accordance with Syariah law that the husband to be dead. According to this Act, the woman can remarry (Section 53 (1)).

10. Resume cohabitation A wife has the rights to resume cohabitation by appealing to the court in manner required by Syariah law. The court then may order the husband of the wife to resume cohabitation (Section 120).

RIGHTS OF WOMAN/WIFE (DURING MARRIED) 1984

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11. Desertion of wife Any husband who neglects the court’s order to resume cohabitation with his wife can be penalized. And if he is found guilty, the husband will be punished with a fine not exceeding five hundred ringgit or with imprisonment not exceeding six months or both (Section 126).

 12. Ill-treatment of wife.

Any husband who ill-treats his wife or cheats his wife’s property is punishable with fine not exceeding one thousand ringgit or with imprisonment not exceeding six months or both (Section 127).

RIGHTS OF WOMAN/WIFE (DURING MARRIED) 1984

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13. Failure to provide proper justice to wife Any husband who fails to give proper justice to his wife can be punished with a fine not exceeding one thousand ringgit or with imprisonment not exceeding six months or both (Section 128).

RIGHTS OF WOMAN/WIFE (DURING MARRIED) 1984

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CONCLUSION AND REMEDY – CIVIL AND ISLAMIC LAW

PERSPECTIVE

44

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BANK YBANK Y HUSBANDHUSBAND

RM500,000 Conventional

Loan/Islamic Financing

20 years period of

repayment

Wife as GUARANTOR – claimed that she

had signed the contract with NO

VOLUNTARILY

Wife as GUARANTOR – claimed that she

had signed the contract with NO

VOLUNTARILY

Failed to pay monthly

installment by the

5th year

Failed to pay monthly

installment by the

5th year

JUST TO REITERATE…..

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“NO VOLUNTARILY” – possible factors???“NO VOLUNTARILY” – possible factors???

Undue influence – one person taking advantage of a position of power over another person

Misrepresentation – false statement of fact made by one party to another party to induce enter the contract

Duress – a person performs an act as a result of violence, threat of other pressure against other person

Possibility (High)Possibility (High)

Possibility

(Medium)

Possibility

(Medium)

Possibility (Poor)

Possibility (Poor)

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RIGHTS Obtain a copy of guarantee

document Seek advice from lawyer

(self-paid) Information on loan

outstanding balance – with borrower’s consent

Call upon the borrower to pay off the loan to release guarantor liabilities

To be indemnified by the borrower for any payment made to financial institution

LIABILITIES Extent of the liability will

be as specified in the guarantee document

May be held liable for the liabilities of the borrower in accordance with the terms of the guarantee document

Can only be rendered liable under a guarantee if the borrower is in default

As a results, the financial institution could makes a demand payment

GUARANTOR

GUARANTOR

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IMPERATIVE TO OBTAIN

INDEPENDENT LEGAL ADVICE

BEFORE SIGNING A CONTRACT OF GUARANTEE

IMPERATIVE TO OBTAIN

INDEPENDENT LEGAL ADVICE

BEFORE SIGNING A CONTRACT OF GUARANTEE

A surety or guarantee (in finance) is a promise by one party (the guarantor) to assume responsibility for the debt obligation of a borrower if that borrower defaults…..

...THUS it is…..

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Do not have a financial, business or moral interest in the transaction

Have doubts as to the ability or integrity of the borrower

Feel that under undue influence or pressure or duress to do so

Do not understand the terms of the guarantee

Believe that have no capacity to settle the debts

DO NOT SIGN IF… DO NOT SIGN IF… IN THIS CASE, THE WIFE...IN THIS CASE, THE WIFE...

could benefitted/suffered from her husband success/failure in the businessshould know better her husband financial condition and capacityclaimed she were under undue influences situation to perform as a guarantor - no strong evidences

should have legal advise pertaining the contract at the first place

should realize her own capacity before agreed to be a guarantor

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EXAMPLE – PRACTICE BY BANK RAKYAT…..

PERSONAL LOAN i-ASLAH

YESGUARANTOR

YESGUARANTOR

NOINSURANCE

COVER

NOINSURANCE

COVER

NOGUARANTOR

NOGUARANTOR

YESINSURANCE

COVER

YESINSURANCE

COVER

PREVIOUSPREVIOUS

CURRENTCURRENT

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CONCLUSION

ASSUMPTION:

The transaction did not manifestly disadvantageous

the wife

Wife was initially had obtained legal advice for being a

guarantor and aware with the contract TNC

ASSUMPTION:

The transaction did not manifestly disadvantageous

the wife

Wife was initially had obtained legal advice for being a

guarantor and aware with the contract TNC

As a results… Bank could proceed with

foreclosure proceeding As valid guarantor, the wife

are legally bound to pay back loan/financing balance due to her husband’s default

Bank could claim payment from the wife of balance from total loan minus the value of matrimonial house plus 5 years settled payment by husband

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REMEDIES - CIVIL

SCENARIO 1:

Wife is aware about her position as her husband’s

guarantor

The wife benefitted from the

loan transaction performed by her

husband

SCENARIO 1:

Wife is aware about her position as her husband’s

guarantor

The wife benefitted from the

loan transaction performed by her

husband

REMEDIES

The wife need to bear the cost and continue the repayment

However, the law will usually give the surety a right of subrogation, even in the absence of express an agreement

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REMEDIES - CIVIL

SCENARIO 2:

Husband persuaded the wife to sign contract by

giving some unclear/false information

The bank failed to conveyed the

clear messages on the wife liability as

guarantor

SCENARIO 2:

Husband persuaded the wife to sign contract by

giving some unclear/false information

The bank failed to conveyed the

clear messages on the wife liability as

guarantor

REMEDIES

The wife could set aside the charge on the ground of misrepresentation by her husband/bank

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REMEDIES – CIVIL –SUPPORTING CASES

CASE 1: YORKSHIRE BANK PLC v TINSLEY

Facts Married couple mortgaged matrimonial home to fund husband’s business Business failed and bank proceed with foreclosure preceding Wife claimed mortgage obtained under undue influence The wife emphasized that she would not have agreed if she had known

Court Held There was presumption of undue influence Bank has the burden of proof to prove that the transaction was in order The solicitor presence does not prove acquiescence by the wife

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REMEDIES – CIVIL –SUPPORTING CASES

CASE 2: BARCLAYS BANK v BRIEN

Facts Plaintiff offered matrimonial home as security He told his wife the charges was limited to $60,000 and last for few weeks Initially, the wife refused to sign but was later persuaded Husband convince by highlights the impact to family if not sign Bank manager sent document to branch Bank instruction – wife was to be advised the full extent of liability Bank clerk failed to do so Wife claimed under influence and misrepresentation in her defence

Court Held Undue influence defence failed - wife involve in Coy’s financial matters Misrepresentation defence successful – bank failed to take reasonable steps

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REMEDIES - CIVIL

FROM BOTH CASES WE CONCLUDE THAT…

1.No clear misrepresentation (unless she can prove/demonstrate) performed by the husband - thus the wife cannot set aside her responsibility as guarantor.2.Undue influence was not a strong defence to be raised in order to make the wife innocent - hence she assumed to known about the nature of being a guarantor3.A husband & wife relationship does not automatically raise the presumption of undue influence.

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In general, the Shariah Courts have jurisdiction only

over matters involving Muslims –

The jurisdiction conferred is like marriage, divorce and

family matters

In general, the Shariah Courts have jurisdiction only

over matters involving Muslims –

The jurisdiction conferred is like marriage, divorce and

family matters

REMEDIES – SHARIAH

Therefore, need to be referred to Civil jurisdiction as the case is in

regards to loan/financing and home ownership transaction…

Therefore, need to be referred to Civil jurisdiction as the case is in

regards to loan/financing and home ownership transaction…

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THE POSSIBLE RIGHTS OF WIFE IN SHARIAH LAW ARE BASED ON THE GROUND OF…THE POSSIBLE RIGHTS OF WIFE IN SHARIAH LAW ARE BASED ON THE GROUND OF…

5 DHAMAN’

S PILLARS

5 DHAMAN’

S PILLARS

1. Dhamin - Guarantor

2. Madhmun Lahu - Creditors

3. Madhmun Anhu - Debtors

4. Madhmun – Debt/Loan/Financing

5. Sighah – Surety/Guarantee

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REMEDIES – SHARIAH - DHAMAN

In this case the wife performed as Dhamin (guarantor)…

In the event that (as a guarantor) the wife is required to pay or perform due to the principal's failure/default, Shariah law will usually give the surety a right to claim back her money from the husband.

By using her contractual rights, she deserve to recover the cost of making payment or performing on her husband’s behalf.

However, the wife must have or posses mutual consent and permission by the husband when her agreed to become a guarantor at the beginning.

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ISSUES ON GUARANTORS IN MALAYSIA

““In Malaysia, the problem of guarantors being In Malaysia, the problem of guarantors being penalized for the failure of the principal debtor has penalized for the failure of the principal debtor has long been a predicament affecting the public. long been a predicament affecting the public. According to Malaysian Insolvency Department, According to Malaysian Insolvency Department, from the period of 2005 up to June 2010, there are from the period of 2005 up to June 2010, there are 81,908 individual declared bankrupts where 4.66% 81,908 individual declared bankrupts where 4.66% of them involved social guarantee and 5.32% are of them involved social guarantee and 5.32% are from corporate guarantee .. “from corporate guarantee .. “

(The Star - Sunday, August 1, 2010). This effect has caused discomfort amongst public in Malaysia, which calls for demand for better legislation to address this issue.

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CONVENTIONAL GUARANTEE VS KAFALAH

Guarantee is a promise to answer the debt, default Guarantee is a promise to answer the debt, default or miscarriage of another. or miscarriage of another. The failure of principle debtor, means the failure of the guarantor. It is a device to secure future obligation and leads to discomfort and bankruptcy

Kafalah literally means joining, combination and Kafalah literally means joining, combination and responsibility. In law it means to add an obligation responsibility. In law it means to add an obligation to an existing obligation. In Islam, the aim of to an existing obligation. In Islam, the aim of kafalah is to help other people who are in need. kafalah is to help other people who are in need.

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HOW KAFALAH CAN BE THE ANSWER TO GUARANTOR PREDICAMENT

1. Harmonisation of Law – setting up of Law Harmonisation Committee for finance industry comprising members from government, the Attorney General Chambers, industry players and experienced Islamic finance legal practitioners

2. Establishment of benevolent fund by Islamic institutions by set aside their profits to help the guarantor who has difficulty to pay the principle’s debt

3. Role of zakat may help gharim who trapped to fullfill their basic need

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GUARANTOR REPLACED BY TAKAFUL

1. Personal Loan Aslah using Bai Al’inah concept - for eligible individuals of government and private

sector to get financing for personal use

- no guarantor or collateral but required to contribute for takaful to cover the loan outstanding in case of permanent disability or death of the debtor

- reduced the possibility of bankruptcy for the debtor in case of default and not burdened the next of kin to repay loan in case of death

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- CLASS DISCUSSION -- CLASS DISCUSSION -

THANK YOU