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LIST OF ARTICLES:-Wealth Management Advisory
1. Why must you have a will - Malaysian Perspective
2. Trust – An alternative to Will
Legal Advisory
4. Difference between Contract of Service and Contract for Service
Why must you have a will – Malaysian Perspective
A will is a declaration of a person’s intention concerning the disposition of his property after his death. It has no legal effect until the death of the testator (the person who makes a will).
In a will, the testator states the person who will conduct the distribution of his property (executor) to the person whom he wishes to give (beneficiary). He may wish to appoint a trustee to deal with his property such as to insure, to sell or to rent out his property. He can even appoint a guardian beside his spouse to take care of his children until they reach the age of majority.
There are a few compelling reasons why a person must make a will during his lifetime.
Firstly, a testator can bequeath his property to the persons he wish to bequeath in his will. For instance, he may wish to donate part of his property to a charitable organization or give part of it to a friend. Without a will, a person’s estate will be distributed according to the Distribution Act 1958. According to the Distribution Act 1958, the statutory beneficiaries are his spouse, issues (children, if no children grandchildren) and parents. The Court however, may intervene if a testator’s dependant who is not named as a beneficiary in the will applies for review.
Secondly, in the event of a person dies without a will, those who are entitled to his property as of right namely spouse, issues and parents will have to elect an administrator to take charge of the distribution of the estate. The administrator will have to apply through a lawyer to the Court for issuance of letter of administration before distribution of the estate. If his spouse, issues and parents are not in good relationship, they may face difficulty in the election of an administrator. In contrast, if a person dies with a will, the person who conducts the distribution of estate is stated in the will. He is the executor. He will apply to the Court for issuance of grant of probate before the distribution of the estate.
Thirdly, in the case of a person dies without a will, the Court requires two sureties who could respectively guarantees the gross value of the estate. If the gross value of the estate worth one million dollar, it will not be easy to look for a relative or friend to be a surety. Contrary to such situation, if a person dies with a will, no surety is required by the Court.
Fourthly, the application to the Court for a letter of administration will take about three to five years due to the difficulty in the election of an administrator, looking for sureties, finding out the deceased’s estate etc. In contrast, it only takes about six months for the Court to issue a grant of probate.
This article is published in www.ezinearticles.com.
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Trust – An alternative to Will
A trust is one of the estate planning tools for the accumulation, protection, preservation and distribution of one’s wealth.
In a trust, a settlor vests his assets to a trustee who is under a legal obligation to hold and manage the assets for the benefits of the beneficiaries for a duration of time. A trustee is an equitable owner of the assets whereas a beneficiary legal owner of the assets.
There are many advantages using trust to distribute his assets.
Firstly, unlike a will, a trust is a private document between a settler, a trustee and a beneficiary. Therefore the identity of the beneficiary can be concealed. It can be used to provide for the maintenance of dependents like children and parents.
Secondly, it could be used by a Muslim to distribute all his assets to beneficiaries he wishes to give. Distribution of assets using irrevocable trust is outside the Syariah law. In contrast,, a Muslim can only distribute one third of his assets using a will.
Thirdly, a settlor has freedom to choose his beneficiaries just like a testator in a will. The beneficiaries could be any person or organization. Different from a will, a trust is out of the reach of the Inheritance (Family Protection) Act 1971. This Act applies to a will whereby a dependent not catered for by the testator may apply to the Court for review.
Fourthly, a trust is creditor proof so long as it is made at least five years before any bankruptcy claim against the settlor. It provides full protection to the settlor against the creditors.
Fifthly, it is easy to create a trust. A settlor needs to look for a trustee, usually a public trustee. By a legal document called trust, he vests his assets with the trustee. The trust stipulates the powers and duties of the trustee in the administration of the trust. Of course, the settlor needs to have beneficiaries and assets to be bequeathed to them.
Sixthly, there is no delay in distribution of assets once a settlor dies. Under a will, the executor needs to apply to the Court vide a lawyer to obtain a Grant of Probate before distribution of estate. In a trust, it is specified that beneficiaries be provided a sum of money from time to time.
Seventhly, your assets will be managed according to your instruction. A trust can be customized to your needs like when to distribute and how to distribute your assets. You can even direct your trustee to invest your assets for the benefit of the beneficiaries. A testator in a will can only distribute his estate to his beneficiaries after his death.
Although a trust has many advantages over a will, it has a limitation. You need to have assets worth at least Ringgit Malaysia five hundred thousand in order to make a trust. This is because a trustee normally public trustee will charge an administration fee annually.
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Three Certainties in Trust
For a trust to be valid, three certainties must exist.
Firstly, there must be certainty of words. For instance, the person who makes a trust (settlor) stated “ in the fullest confidence…that my wife will…” does not give rise to a trust.
Re Snowden, the testatrix, an elderly widow living with a wealthy brother. Under the will, the residue of the testatrix estate was left to the brother absolutely. The court held that there was no secret trust in the case. The brother therefore took the residue free from any trust and on his death passed to his son absolutely.
Secondly, there must be certainty of subject matter. There are two factors that will determine the certainty of subject matter. Subject refers to a trust property. First and foremost, if the trust property in question is not certain then the whole trust will fail. The trust property will be taken by the beneficiary as a gift. The other factor is that the beneficial interest of each beneficiary must be ascertained. The Settlor can stipulate the beneficial interest of each beneficiary or he can leave it to the discretion of the trustee.
In a case Palmer v Simmonds (1854), a testatrix left on trust “the bulk” of her residuary estate. Kindersley VC after consulting a dictionary concluded that the word “bulk” was inadequate to specify any portion of the property as trust property. The trust therefore failed. The residuary legatee took the whole absolutely.
Thirdly, there must be certainty of object. The object is the beneficial interest of a trust. It depends on the testator’s intention. There are three ways the testator can direct the trustee to do namely
a. To create a fixed trust for the beneficiaries. In such case the settler by stating the beneficial interest of each beneficiary, does not give any discretion to the trustee as to the beneficial interest. The truss will not fail.
b. To allow the trustee to exercise their discretion in relation to the beneficial interest of each beneficiary. The settlor does not mention the beneficial interest but leave it to the discretion of the trustee. This is known as discretionary trust.
c. The settler can confer an absolute power or discretion to the donee absolutely. In the case, no trust has been created by the settlor/donor. The settlor has conferred a mere power to the done. The beneficiaries will not be entitled to the property unless the done decides to give them the property.
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Difference between Contract of Service and Contract for Service
Generally a contract of service is an employer-employee contract whereas a contract for service is a client-contractor contract.
The following are other differences in details
| Contract of Service | Contract for Service |
| 1. The employer controls the employee. |
1. The Contractor is independent of the client. He is self-employed to carry out an assignment/project for a company. |
| 2. It is covered under the Employment Act 1055. |
2. It is not covered under the Employment Act 1955. |
| 3. The employee does not risk his capital. |
3. The contractor risks his own capital. |
| 4. The employee does not make management decision. |
4. The contractor makes his own management decision. |
| 5. Need specific notice to terminate an employee. |
5. Once the contract is completed/the contractor defaults in his work, he can be terminated. |
| 6. Need to comply with the statutory benefits such as annual leave, sick leave etc. |
6. Do not need to comply. |
| 7. The employer needs to pay Employment Provident Fund. |
7. Client needs not to pay. |
| 8. The employee is not personally liable for any error he makes during completing his job. His emplopyer has vicarious liability on its employee. |
8. The contractor is liable for any defect in the works. As there is no employer-employee relationship, there is no vicarious liability. |
| 9. The employee must be present to do his job. He cannot send substitute. |
9. It is up to the contractor to send his men to conduct the job. |
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Can a minor enter into a Contract of Employment?
In Malaysian context, a minor is a person below the age of majority i.e. 18 years old (Age of Majority Act 1971).
Pursuant to Section 11 of the Contracts Act 1950, a contract with a minor is invalid.
Can an employer employ a minor to do its work?
The Malaysian Government has enacted an Act namely Children and Young Persons (Employment) Act 1966 to deal with such situations.
>Pursuant to the Interpretation in the Children and Young Persons (Employment) Act 1966, a minor is defined as “any person who has not completed his fourteenth year of age or of such age as the Yang di-PertuanAgong may by notification in the Gazette prescribe” whereas a young person is defined as “ any person who, not being a child, has not completed his sixteenth year of age”.
Therefore, the Children and Young Persons (Employment) Act 1966 is applicable to persons below the age of 16.
S2(1) of the Children and Young Persons (Employment) Act 1966 stipulates that no child or young person shall be engaged in any employment other than those specified in the Act.
S2(2) of the Act lists the employment of a child allowed by the Act. They are as follows:-
a. Employment involving light work suitable to his capacity in any undertaking carried by his family;
b. Employment in any public entertainment in accordance with the terms and conditions of a licence granted in that behalf under the Act;
c. Employment requiring him to perform work approved or sponsored by the Federal Government or the Government of any State and carried on in any school, training institution or training vessel; and
d. Employment in an apprentice under a written apprenticeship contract approved by the Director General with whom a copy of such contract has been filed.
It is obvious that a child is fully protected by the Act. The employment is contained within his family, school, training institution. If he goes to apprenticeship, where parties other than family, school and institution is involved, it must be approved by the Director General of Human Resource Department.
S2(3) stipulates the areas where a young person may be employed. They are as follows:-
a. Any employment in S2(2);
b. Employment as a domestic servant;
c. Employment in any office, shop (including hotels, bars, restaurants and stalls), godown, factory, workshop, store, boarding house, theatre, cinema, club or association;
d. Employment in an industrial undertaking suitable to his capacity; and
e. Employment in any vessel under the personal charge of his parent or guardian.
The Act qualifies that no female young person may be engaged in any employment in hotels, bars, restaurants, boarding houses or clubs unless such establishments are under the management or control of her parent or guardian.
If the circumstances of employment were detrimental to the interests of the child or young person, the Minister may by order prohibit any child or young person from being engaged in any employments mentioned in Section 2 of the Act.
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Ad Hoc Public Holiday
Times and again, the State Government or the Federal Government may announce ad hoc public holiday on reasons such as Johor Football Team has won a tournament, Malaysian athletes have won Olympic game etc.
Some employers may think that they have declared so many public holidays to their employees, they may not wish to follow.
Can the employers do so?
Legality of ad hoc public holiday
Talking about legality of ad hoc public holidays, one has to refer to two Acts i.e. Holidays Act 1951 (Act 369) and Employment Act 1955 (Act 265).
Pursuant to Section 8 of the Holidays Act 1951, the Minister may by notification in the gazette or in such other manner as he thinks fit, appoint in respect of Peninsular Malaysia or the Federal Territory of after consultation with the State Authority, in respect of a state, a day to be observed as a public holiday or a bank holiday in addition to, or in substitution for, any of the days mentioned in the Schedule of the Holidays Act 1951.
In short, an ad hoc public holiday declared under Section 8 of the Holidays Act 1951 has to be granted to employees covered by the Employment Act 1955.
In accordance with Section 60D of the Employment Act 1955, amended under Act 1419, the ad hoc public holiday announced has to be observed as a paid holiday in addition to other public holidays agreed to be granted to the employees.
For employee not covered under the Employment Act 1955, then there are 3 scenario to be observed:-
a. If the contract of service stipulates that the company is granting all public holidays, then the employee is entitled to the ad hoc public holiday with pay;
b. If a company only gives some of the gazetted public holidays, then the company is not compelled by law to grant an ad hoc public holiday as a day off to the employee.
c. If the employee concerned is required to work on the ad hoc holiday declared, then grant a substituted public holiday or benefits/payment in lieu as agreed.
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Can a minor enter into a Contract of Employment?
In Malaysian context, a minor is a person below the age of majority i.e. 18 years old (Age of Majority Act 1971).
Pursuant to Section 11 of the Contracts Act 1950, a contract with a minor is invalid.
Can an employer employ a minor to do its work?
The Malaysian Government has enacted an Act namely Children and Young Persons (Employment) Act 1966 to deal with such situations.
?rsuant to the Interpretation in the Children and Young Persons (Employment) Act 1966, a minor is defined as “any person who has not completed his fourteenth year of age or of such age as the Yang di-PertuanAgong may by notification in the Gazette prescribe” whereas a young person is defined as “ any person who, not being a child, has not completed his sixteenth year of age”.
Therefore, the Children and Young Persons (Employment) Act 1966 is applicable to persons below the age of 16.
S2(1) of the Children and Young Persons (Employment) Act 1966 stipulates that no child or young person shall be engaged in any employment other than those specified in the Act.
S2(2) of the Act lists the employment of a child allowed by the Act. They are as follows:-
a. Employment involving light work suitable to his capacity in any undertaking carried by his family;
b. Employment in any public entertainment in accordance with the terms and conditions of a licence granted in that behalf under the Act;
c. Employment requiring him to perform work approved or sponsored by the Federal Government or the Government of any State and carried on in any school, training institution or training vessel; and
d. Employment in an apprentice under a written apprenticeship contract approved by the Director General with whom a copy of such contract has been filed.
It is obvious that a child is fully protected by the Act. The employment is contained within his family, school, training institution. If he goes to apprenticeship, where parties other than family, school and institution is involved, it must be approved by the Director General of Human Resource Departmet.
S2(3) stipulates the areas where a young person may be employed. They are as follows:-
a. Any employment in S2(2);
b. Employment as a domestic servant;
c. Employment in any office, shop (including hotels, bars, restaurants and stalls), godown, factory, workshop, store, boarding house, theatre, cinema, club or association;
d. Employment in an industrial undertaking suitable to his capacity; and
e. Employment in any vessel under the personal charge of his parent or guardian.
The Act qualifies that no female young person may be engaged in any employment in hotels, bars, restaurants, boarding houses or clubs unless such establishments are under the management or control of her parent or guardian.
If the circumstances of employment were detrimental to the interests of the child or young person, the Minister may by order prohibit any child or young person from being engaged in any employments mentioned in Section 2 of the Act.
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Adjudication
Introduction
It is commonplace that construction industry is hurdled by payment problems. Malaysia has no exception in this context. Since 2003, the Malaysian Government has been urged by the construction industry to enact an Act to regulate and address the teething issues of cash flow problem prevalent in the industry.
Malaysia is the 5th country which adopts adjudication as an alternate dispute resolution (ADR) method to resolve construction cash flow problem after the United Kingdom, Australia, New Zealand and Singapore.
Construction Industry Adjudication Act (CIPA)
A statutory adjudication regime has been enacted by the Malaysian Parliament which was passed in the Parliament on 18 June 2012 and gazetted on 22 June 2012. It took effect on 15 April 2014.
Being a statutory adjudication, every construction contract executed in writing which is related to construction works in Malaysia will be covered by CIPA.
CIPA provides aggrieved parties with statutory rights to demand payment for work done. The process is simple, short and effective.
With CIPA comes into effect, the conventional practices such as “pay when paid’, “ pay if paid”, “back to back payment” and so on have been effectively made void under Section 35 of CIPA.
CIPA also has retrospective effect meaning a construction contract signed before 15 April 2014 is covered by it.
Benefits of CIPA
1. It is a statutory process that a claimant does not need to get agreement from the other party to start the adjudication process.
2. It provides a speedier process as opposed to arbitration or court proceeding to resolve the cash flow issues. The whole process needs approximately 100 days.
3. The Adjudication Decision is binding on the parties involved.
Process of Adjudication
Briefly the process of adjudication is as follows:
1. The grieved party to issue Payment Claim (S6(2))
2. The defaulted party to respond to the Payment Claim within 10 days (S6(4))
3. Parties to select The Adjudicator within 10 days
4. The Claimant (grieved party) to serve Adjudication Claim against the Respondent (defaulted party) (S9)
5. The Respondent to serve Adjudication Response (S10)
6. The Claimant to serve Adjudication Rely (S11)
7. Adjudication process to commence by the Adjudicator.
Within 45 days, the Adjudicator to issue Adjudication Decision
Withdrawal of Adjudication
At any stage of the above process, parties in agreement may apply to withdraw from the adjudication process (S17)
Effect of Adjudication Decision
Adjudication Decision is binding unless
a. It is set aside by the High Court on any ground as stipulated in S15
b. The subject matter of the decision is settled by a written agreement between the parties
c. The dispute is finally decided by arbitration or the Court.
Subsequently, depending whether you are a winning party or losing party, further steps could be taken.
Options for the winning party
1. Enforcing the Adjudication Decision by registering it as a Court Order (S28)
2. Suspending or reducing the rate of progress of works (S29)
3. Requesting payment from the Principal of the losing party (S30)
Options for the losing party
1. Going to the High Court to set aside the Adjudication Decision
2. Pursuing arbitration or civil suit
3. Applying for a stay of the Adjudication Decision (S16). May apply to the High Court if application to set aside Adjudication Decision has been made or the subject matter of the Adjudication Decision is pending the final determination by arbitration or civil suit.
Concurrent Exercise of Remedy (S31)
Unless a stay is obtained, the winning party may exercise any or all the remedies available such as garnishee proceeding .
Exception of CIPA
The Malaysia Government vide promulgation of Construction Industry Payment & Adjudication (Exemption Order) 2014 has exempted the following Government contract from the effect of CIPA:
a. Construction of power plant
b. Construction of water treatment plant
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