Family Law Newsletter September 2016
In this issue - Husband Hiding Assets and Living Annuities fall outside the Accrual
Hiding Assets, non disclosure and forcing a spouse to sign an ANC or forget the marriage!
Bertus Preller -Family Law Attorney
W v H Western Cape High Court Case number: 25394/2010
The parties were married to each other in 1992, in Germany which marriage was governed by an Antenuptial Contract (“ANC”) incorporating the accrual system. The wife was from German ascent. The husband (Defendant) produced the ANC in which he excluded the wife from claiming maintenance in the event of the marriage breaking down for any reason whatsoever.
The husband, a senior advocate, testified that he inherited substantial assets and acquired a few properties. He stated in his evidence that when he met his wife, “I was very attracted to her and it was obviously developing”.
This was the husband’s second marriage and both his and her evidence was that he was deeply disturbed and upset by the Divorce Order in respect of his first marriage.
The ANC contained clauses and provisions which according to the judge were difficult to imagine that any right thinking woman would have agreed to have incorporated in an ANC. The husband described his first divorce as “very, very, very costly”. It was based on a “clean break” payment.
The wife (Plaintiff) was gullible and naive. She had been in a relationship with the husband for some time, during which time he took her on a tour of all the properties and assets that he owned, which impressed her enormously. After he persuaded her to marry him, he made it clear that he would not marry her unless she agreed, inter alia, to a clause, relating to her agreement that no Court could award her any maintenance for any reason whatsoever.
At the time of her marriage the wife was 28 years of age and the husband was 53 years of age. She was already pregnant and the husband was the father. At the time, the husband was a Senior Advocate who practised in South Africa, Namibia, Botswana and Lesotho and he was based in Johannesburg. He owned properties, a cattle farm and later on a wine farm.
The large age difference between the parties made the wife an attractive trophy for the husband, but it in no way diverted him from his course of protecting his money from her and in no way prevented him from planning the divorce action from the beginning. There were two children born of the marriage between the parties and a third child who was lost in a miscarriage.
From the start, the husband adopted a “scorched earth” policy in regard to this litigation. To do this he unnecessarily drummed up the costs of this divorce so as to put the wife in a position where she could not afford to fund litigation and, as he hoped, would surrender to his counterclaims. He raised spurious defences and demanded interim Orders all designed to increase the costs of this action.
The court was of the view that there was no way that the husband, as a Senior Advocate with a very lucrative practice, did not realise that all the various applications and objections that he was raising were devoid of merit, yet he recklessly pursued his claims during the divorce.
For example, the husband filed a Special Plea in which he claimed that the accrual could not be heard in the main divorce action because of the manner in which the accrual is described in the legislation, that relief can only be obtained after a Decree of Divorce is granted. He contended that there had to be two separate actions. One for the divorce and one for a division in terms of the accrual. Not only was this not the practice in the High Court Cape Town (which the husband must have known), but it was also a nonsensical approach and had no benefit other than drumming up extra costs so that the party that could afford those costs achieved an advantage over the other party. He also tried to invoke a questionable arbitration provision in the ANC to oust this Court’s jurisdiction to determine the wife’s accrual claim.
The marriage lasted since 1992. The husband opposed the claim for the wife’s personal maintenance on the basis that a clause in the ANC, stated that the wife accepts certain donations and in consideration therefor waived any present or future right to claim maintenance for herself (but excluding maintenance for any dependent child or children born of the intended marriage) should the intended marriage be dissolved in whatever manner and for whatever reason and regardless of the conduct of the parties.
Section 7 of the Divorce Act provides that a Court granting a Decree of Divorce may in accordance with a written agreement between the parties make an Order with regard to the payment of maintenance by one party to the other. Section 7 (2) provides that in the absence of an Order made in terms of sub-section (1):
“.... the Court may, having regard to the existing or prospective means of the parties, their various respective earning capacities, financial needs and obligations, the age or each of the parties, the duration of the marriage, the standard of living of the parties prior to the divorce, their conduct insofar as it may be relevant to the breakdown of the marriage .... and any other factor which in the opinion of the court should be taken into account, make an order which the court finds just in respect of the payment of maintenance by the one party to the other for any period until death or remarriage.... “.
The wife accepted the conditions of the donations in the ANC, however the husband did not in fact give effect to the donation of an immovable property which formed part of the donations. What he did was to sell that property and thereafter gave her a half share in another property. This was not in compliance with the ANC.
The wife contended that the waiver of maintenance in the ANC was contrary to public policy and is unenforceable. The court accepted that this was the correct position. The court was of the view that such a clause offends public interest and if regard is had to the relative situation of the contracting parties at the time the clause was sought to be enforced, it rendered the enforcement of that clause unreasonable and voidable on the grounds of unfairness. Not only did the court found that the clause per se was contrary to public policy, but having regard to the conditions which prevailed at the time that the ANC was concluded and the circumstances which prevailed at the hearing, that to ask the Court to enforce this waiver was unreasonable and offensive to public policy. According to the judge it was unfair, particularly because the parties were not negotiating on an equal footing. The wife was pregnant at the time and birth of the child was imminent. She was prevailed upon by the husband to accept the clause and to believe him when he said that he wanted to be a father to their child that was to be born and that her refusal to marry him was unfair to the child.
The judge found that generally any purported ouster of the jurisdiction of the Court which deprived a party of a legal right or remedy was per se against public policy. The judge referred to the decision in Schierhout v The Minister of Justice 1925 AD p.417, where the Court held that if the terms of an agreement are such as to deprive a party of his legal rights generally, or to prevent him from seeking redress at any time in the Courts of Justice for any future injury or wrong committed against him, there would be a good ground for holding that such an undertaking was against the public law of the land.
If one has regard to the Constitution as it presently stands and look at the above case that was decided in 1925, it seemed that for a long time the objectionable provision in the ANC was contrary to public policy.
The court also referred to HAHLO, “The South African Law of Husband and Wife”, 5th Ed. 1985 at p.259 where the author pointed out that clauses depriving the Courts of their statutory power of divorce to award post-divorce maintenance to one of the spouses or to order forfeiture of the benefits against one of the spouses, was contrary to the essential nature of the marriage relationship and, as such, is against public policy.
The court pointed out that public policy was now deeply rooted in our Constitution and the values that underlie it. Our Constitution, among other values, was founded on human dignity, achievement of equality and the enhancement of human rights and freedoms and the rules of law. The Bill of Rights enshrined the rights of all people in the country and affirmed the democratic founding values of human dignity, equality and freedom. Public policy must be determined with reference to the values which underlie our constitutional democracy and is expressed in the Bill of Rights. A term of a contract that is contrary to those values is contrary to public policy and is therefore unenforceable.
The wife’s Counsel pointed out there were five cardinal reasons why the ANC deeply offended the core constitutional values of this country:
Counsel has also quoted paragraph 116 of LAWSA, Vol 6 2nd Ed at pp.233-234 which provides that:
“The general rule relating to legality is that the term must not be contrary to any rule of statutory law nor be contrary to good morals, public policy, or the nature of marriage.
The following terms were contrary to the general rule:
(d) maintenance after divorce is regulated by statute and is subject to alteration by the courts for good reason. Therefore, a term which arranges maintenance after divorce is not contrary to the policy of the law, but it cannot exclude the power of the courts to vary the agreement....”
The Judge was of the view that the waiver was offensive because it purported immutably to waive the wife’s future rights at a time when she could not have known what her position would be on dissolution of the marriage. The legislator, for policy reasons, enacted Section 7 (2) of the Divorce Act and Section 7 (2) of the Maintenance of Surviving Spouses Act to alter the common law position. Section 7 (2) in particular expressly entitles any spouse to claim maintenance at the time of the divorce and vests the discretionary power to award maintenance in the Court. (The only time that a waiver of maintenance can be made enforceable would be when that waiver is made at the time of the divorce and is incorporated in a settlement agreement which may or may not be made an Order of Court.)
A further objection was that the clause in the ANC was that it was a waiver which was made even before the parties were married. Counsel for the wife also quoted the principle that notions of fairness, justice, equity and reasonableness cannot be separated from public policy. Public policy takes into account the need to do simple justice between individuals. Furthermore, the requirement that there should be an adequate and fair opportunity to seek judicial redress is consistent with the notions of fairness and justice.
The contract that was signed by the wife was not free and voluntary because the husband threatened that he would not marry her or be a father to their child if she did not agree to this particular clause. The wife was in an unequal bargaining position and the Court recognised the inequality of bargaining power. The husband exerted unfair pressure on the wife to obtain her assent to that clause. He took advantage of the fact that she was labouring under a pronounced disadvantage.
The wife’s ability to appreciate the full import of that ANC was limited because:
Although the Judge found that the clause was per se contrary to public policy and unenforceable, Counsel for the wife argued in the alternative that even if it were not per se contrary to public policy it was unreasonable and could not be enforced because it would be unfair and would offend public policy. The calculated result was effectively to subvert any accrual claim by the wife. The husband actively concealed from her even those assets which he during the trial acknowledged belonged to him.
Counsel for the wife pointed out that upon her arrival in South Africa she was forced to be even more dependent on the husband. He started speaking to her only in Afrikaans in a town in which she was a stranger and was having her first baby. She described herself as being scared and lonely.
Throughout the marriage the wife’s actual earnings and future earning capacity in South Africa was limited. She worked part-time during the marriage but could not earn enough to support her or the children at a standard of living to which they were accustomed. She sacrificed her own career in Germany to marry the husband and move to South Africa to care for the parties’ children. Had she remained in Germany, she would have continued working as a lawyer where she could have become a partner in a firm and earned a good salary. The court was of the view that if the wife could not pursue her claim for maintenance, she would suffer prejudice, deprivation and indignity.
The wife was further prejudiced by the fact that the husband systematically attempted to hide his assets and denude his estate. He set up a network of companies, trust companies and trust structures ostensibly for “estate planning purposes”. By his own account, he systematically removed the growth assets from his estate and advanced interest-free loans to those entities to the detriment of his estate. He moved assets offshore with the calculated objective of placing them beyond the wife’s reach and, as his own expert stated that he effectively removed the future growth of assets from his estate.
The husband demonstrably concealed assets in his estate and he refused to make proper disclosure as required by Section 7 of the Matrimonial Property Act. The Judge noted that no self-respecting South African attorney who was familiar with the provisions of the Matrimonial Property Act of South Africa and who practised in that field would have allowed his client to sign a document. The court was asked to exercise an overriding discretion to award maintenance to the wife in the absence of a written agreement between the parties with regard to the division of their assets or the payment of maintenance by one party to the other. The court was asked to hold that because the waiver clause disentitled the wife to any maintenance whatsoever. The court was satisfied that the terms of this ANC in regard to the payment of maintenance were contrary to public policy and were not binding upon the Court.
The husband wrongly refused to make discovery of relevant documents and obstructed the wife in the preparation of her case. These related to discovery of the Share Register of the companies in which the husband had an interest, the Minutes of the Directors’ and Shareholders’ Meetings and the fact that a company controlled by him owned shares in the wine farm company on his behalf. What was evident was that the husband, although an officer of the Court, made discovery of documentation which withheld discovery of relevant documents which he knew, or must have known, the wife was entitled to see.
The husband was under a duty to disclose the nature and extent of his assets and liabilities. Despite repeated demands, he has refused to make such disclosure.
Section 7 of the Matrimonial Property Act provides as follows:
“When it is necessary to determine the accrual of the estate of a spouse or a deceased spouse, that spouse or the executor of the estate of the deceased spouse, as the case may be, shall within a reasonable time at the request of the other spouse or the executor of the estate of the other spouse, as the case may be, furnish full particulars of the value of that estate.”
Such a request was addressed to the husband and was incorporated in various Requests for Particulars and demands for discovery, all of which were ignored. The Judge was referred to the unreported decision of B v B where the Court held as follows:
“Since community of property is excluded, each spouse maintains a separate estate. If a spouse so desires, the assets which make up the separate estate are under his or her sole control. In an accrual claim, therefore, the spouse making the claim often has little or no knowledge of the assets which make up the estate of the other party. It is presumably for this reason that the legislature enacted s7... It is therefore clear that the legislature requires full particulars if requested.”
Because of this statutory obligation there was an onus and an evidential burden upon the husband because he had peculiar knowledge of his assets and liabilities and he was under a statutory obligation to disclose it. The husband offended the Court’s statement in the matter of MB v DB which pointed out that litigation is not a game where parties can play their cards close to their chest in order to obtain technical advantages or to prejudice the other party.
The court was also referred to the decision of Mostyn J in NG v SG, an English case where the Court held that non-disclosure is a bane which strikes at the very integrity of the adjudicative process. Without full disclosure the Court cannot render a true, certain and just verdict. It cannot lawfully exercise its power. It is thrown back on inferences and guesswork which may result in an unjust result to one or other party. This judgment accorded with the process which was adopted in the Cape High court where Cloete AJ, as she then was, in the matter of AM v JM held that:
“Although the defendant’s counsel argued that plaintiff bears the onus to establish that defendant’s alleged excluded assets should form part of the accrual in his estate, it is clear that the defendant bears the onus to persuade this court that such assets should indeed be excluded from the accrual.”
Simply put, there was an onus on the husband to show that certain assets were excluded, to identify those assets and to trace those assets to show that they were still there and should remain excluded. He was in possession of all the facts relating to these assets and he had the onus of demonstrating what had happened to them.
As a witness, the husband was argumentative and often refused to answer questions. It was the husband’s fault that the divorce trial took 50 days of Court time. He adopted a “scorched earth” policy with a total disregard for the costs involved. As far as time and money that has been wasted was concerned, the blame for this, according to the Judge lied at the feet of the husband, who refused to make proper discovery and adopted an obstructive attitude throughout this litigation.
The judge was satisfied that the husband was adopting a “scorched earth” policy to this litigation. He was deliberately seeking to delay the proceedings and from the very beginning was engaging in dilatory tactics to drum up the costs of the action so as to put the wife into a position where she could not afford to defend herself. There was no question that the husband made discovery on an incremental basis throughout this matter. He was deliberately obstructive in giving discovery and a great number of Discovery Affidavits were filed.
Throughout this matter the husband engaged in selective and piecemeal discovery. He deliberately delayed in bringing that application so as to cause the maximum prejudice to the wife.
The parties were married to each other in 1992, in Germany which marriage was governed by an Antenuptial Contract (“ANC”) incorporating the accrual system. The wife was from German ascent. The husband (Defendant) produced the ANC in which he excluded the wife from claiming maintenance in the event of the marriage breaking down for any reason whatsoever.
The husband, a senior advocate, testified that he inherited substantial assets and acquired a few properties. He stated in his evidence that when he met his wife, “I was very attracted to her and it was obviously developing”.
This was the husband’s second marriage and both his and her evidence was that he was deeply disturbed and upset by the Divorce Order in respect of his first marriage.
The ANC contained clauses and provisions which according to the judge were difficult to imagine that any right thinking woman would have agreed to have incorporated in an ANC. The husband described his first divorce as “very, very, very costly”. It was based on a “clean break” payment.
The wife (Plaintiff) was gullible and naive. She had been in a relationship with the husband for some time, during which time he took her on a tour of all the properties and assets that he owned, which impressed her enormously. After he persuaded her to marry him, he made it clear that he would not marry her unless she agreed, inter alia, to a clause, relating to her agreement that no Court could award her any maintenance for any reason whatsoever.
At the time of her marriage the wife was 28 years of age and the husband was 53 years of age. She was already pregnant and the husband was the father. At the time, the husband was a Senior Advocate who practised in South Africa, Namibia, Botswana and Lesotho and he was based in Johannesburg. He owned properties, a cattle farm and later on a wine farm.
The large age difference between the parties made the wife an attractive trophy for the husband, but it in no way diverted him from his course of protecting his money from her and in no way prevented him from planning the divorce action from the beginning. There were two children born of the marriage between the parties and a third child who was lost in a miscarriage.
From the start, the husband adopted a “scorched earth” policy in regard to this litigation. To do this he unnecessarily drummed up the costs of this divorce so as to put the wife in a position where she could not afford to fund litigation and, as he hoped, would surrender to his counterclaims. He raised spurious defences and demanded interim Orders all designed to increase the costs of this action.
The court was of the view that there was no way that the husband, as a Senior Advocate with a very lucrative practice, did not realise that all the various applications and objections that he was raising were devoid of merit, yet he recklessly pursued his claims during the divorce.
For example, the husband filed a Special Plea in which he claimed that the accrual could not be heard in the main divorce action because of the manner in which the accrual is described in the legislation, that relief can only be obtained after a Decree of Divorce is granted. He contended that there had to be two separate actions. One for the divorce and one for a division in terms of the accrual. Not only was this not the practice in the High Court Cape Town (which the husband must have known), but it was also a nonsensical approach and had no benefit other than drumming up extra costs so that the party that could afford those costs achieved an advantage over the other party. He also tried to invoke a questionable arbitration provision in the ANC to oust this Court’s jurisdiction to determine the wife’s accrual claim.
The marriage lasted since 1992. The husband opposed the claim for the wife’s personal maintenance on the basis that a clause in the ANC, stated that the wife accepts certain donations and in consideration therefor waived any present or future right to claim maintenance for herself (but excluding maintenance for any dependent child or children born of the intended marriage) should the intended marriage be dissolved in whatever manner and for whatever reason and regardless of the conduct of the parties.
Section 7 of the Divorce Act provides that a Court granting a Decree of Divorce may in accordance with a written agreement between the parties make an Order with regard to the payment of maintenance by one party to the other. Section 7 (2) provides that in the absence of an Order made in terms of sub-section (1):
“.... the Court may, having regard to the existing or prospective means of the parties, their various respective earning capacities, financial needs and obligations, the age or each of the parties, the duration of the marriage, the standard of living of the parties prior to the divorce, their conduct insofar as it may be relevant to the breakdown of the marriage .... and any other factor which in the opinion of the court should be taken into account, make an order which the court finds just in respect of the payment of maintenance by the one party to the other for any period until death or remarriage.... “.
The wife accepted the conditions of the donations in the ANC, however the husband did not in fact give effect to the donation of an immovable property which formed part of the donations. What he did was to sell that property and thereafter gave her a half share in another property. This was not in compliance with the ANC.
The wife contended that the waiver of maintenance in the ANC was contrary to public policy and is unenforceable. The court accepted that this was the correct position. The court was of the view that such a clause offends public interest and if regard is had to the relative situation of the contracting parties at the time the clause was sought to be enforced, it rendered the enforcement of that clause unreasonable and voidable on the grounds of unfairness. Not only did the court found that the clause per se was contrary to public policy, but having regard to the conditions which prevailed at the time that the ANC was concluded and the circumstances which prevailed at the hearing, that to ask the Court to enforce this waiver was unreasonable and offensive to public policy. According to the judge it was unfair, particularly because the parties were not negotiating on an equal footing. The wife was pregnant at the time and birth of the child was imminent. She was prevailed upon by the husband to accept the clause and to believe him when he said that he wanted to be a father to their child that was to be born and that her refusal to marry him was unfair to the child.
The judge found that generally any purported ouster of the jurisdiction of the Court which deprived a party of a legal right or remedy was per se against public policy. The judge referred to the decision in Schierhout v The Minister of Justice 1925 AD p.417, where the Court held that if the terms of an agreement are such as to deprive a party of his legal rights generally, or to prevent him from seeking redress at any time in the Courts of Justice for any future injury or wrong committed against him, there would be a good ground for holding that such an undertaking was against the public law of the land.
If one has regard to the Constitution as it presently stands and look at the above case that was decided in 1925, it seemed that for a long time the objectionable provision in the ANC was contrary to public policy.
The court also referred to HAHLO, “The South African Law of Husband and Wife”, 5th Ed. 1985 at p.259 where the author pointed out that clauses depriving the Courts of their statutory power of divorce to award post-divorce maintenance to one of the spouses or to order forfeiture of the benefits against one of the spouses, was contrary to the essential nature of the marriage relationship and, as such, is against public policy.
The court pointed out that public policy was now deeply rooted in our Constitution and the values that underlie it. Our Constitution, among other values, was founded on human dignity, achievement of equality and the enhancement of human rights and freedoms and the rules of law. The Bill of Rights enshrined the rights of all people in the country and affirmed the democratic founding values of human dignity, equality and freedom. Public policy must be determined with reference to the values which underlie our constitutional democracy and is expressed in the Bill of Rights. A term of a contract that is contrary to those values is contrary to public policy and is therefore unenforceable.
The wife’s Counsel pointed out there were five cardinal reasons why the ANC deeply offended the core constitutional values of this country:
- it sought to exclude the statutory power of the Court to award maintenance at a future time when neither of the parties, nor the wife in particular, had any basis for apprehending the existence of her potential entitlement to maintenance upon divorce;
- it sought to exclude the statutory power which was awarded to the wife in terms of Section 2 of the Maintenance of Surviving Spouses Act of 1990 to claim maintenance from the husband’s estate on the dissolution of the marriage by the husband’s death, that is in the absence of any divorce;
- it specifically exempted the husband from the consequences of all misconduct on his part, including that misconduct which is cognisable by the Court in terms of Section 7 (2) of the Divorce Act;
- it was a unilateral waiver and was not accompanied by a corresponding waiver on the part of the husband. Hence the husband in these proceedings claimed personal maintenance for himself;
- the donations in the ANC were ostensibly given as a benefit in return for the waiver, but at the same time, contrary to Section 5 (2) of the Matrimonial Property Act of 1984, such donations are not excluded from the donee’s estate for accrual purposes. Nevertheless, in terms of the ANC, these donations were expressly to be taken into account as part of the wife’s estate.
Counsel has also quoted paragraph 116 of LAWSA, Vol 6 2nd Ed at pp.233-234 which provides that:
“The general rule relating to legality is that the term must not be contrary to any rule of statutory law nor be contrary to good morals, public policy, or the nature of marriage.
The following terms were contrary to the general rule:
(d) maintenance after divorce is regulated by statute and is subject to alteration by the courts for good reason. Therefore, a term which arranges maintenance after divorce is not contrary to the policy of the law, but it cannot exclude the power of the courts to vary the agreement....”
The Judge was of the view that the waiver was offensive because it purported immutably to waive the wife’s future rights at a time when she could not have known what her position would be on dissolution of the marriage. The legislator, for policy reasons, enacted Section 7 (2) of the Divorce Act and Section 7 (2) of the Maintenance of Surviving Spouses Act to alter the common law position. Section 7 (2) in particular expressly entitles any spouse to claim maintenance at the time of the divorce and vests the discretionary power to award maintenance in the Court. (The only time that a waiver of maintenance can be made enforceable would be when that waiver is made at the time of the divorce and is incorporated in a settlement agreement which may or may not be made an Order of Court.)
A further objection was that the clause in the ANC was that it was a waiver which was made even before the parties were married. Counsel for the wife also quoted the principle that notions of fairness, justice, equity and reasonableness cannot be separated from public policy. Public policy takes into account the need to do simple justice between individuals. Furthermore, the requirement that there should be an adequate and fair opportunity to seek judicial redress is consistent with the notions of fairness and justice.
The contract that was signed by the wife was not free and voluntary because the husband threatened that he would not marry her or be a father to their child if she did not agree to this particular clause. The wife was in an unequal bargaining position and the Court recognised the inequality of bargaining power. The husband exerted unfair pressure on the wife to obtain her assent to that clause. He took advantage of the fact that she was labouring under a pronounced disadvantage.
The wife’s ability to appreciate the full import of that ANC was limited because:
- of her emotional state;
- of the fact that they were busy arranging the wedding;
- of the need to obtain a Visa and Birth Certificate for the husband;
- she was at the time visiting friends and relatives and consulting her doctor for regular check-ups;
- having had the benefit of advice from an experienced matrimonial attorney beforehand, the husband arrived with a draft ANC prepared by him in conjunction with his South African attorney;
- she was German, had only visited South Africa for a few months, had no real knowledge or understanding of South African law and no access to a South African legal adviser or attorney with knowledge of the South African family and divorce law;
- she was pressured into a hasty marriage, in circumstances where she had no real opportunity to investigate the legal position;
- she had no knowledge of the law of maintenance in South Africa or of the Maintenance of Surviving Spouses Act and did not appreciate that the waiver was unilateral;
- her English was described as dreadful in 1991 when she was working in Cape Town and the husband refused to address her in English. This was her evidence and when she testified she maintained that she had a good command of English but this was not apparent to this Court, even after so many years;
- the husband said he would not marry her without the ANC and made it clear that he was not prepared to pay maintenance on divorce;
- the husband refused her request to postpone the wedding until December, obviously because he realised that the chances of her agreeing to the ANC would be reduced and he insisted that they marry before the child was born. He said it was either that, or not get married at all;
Although the Judge found that the clause was per se contrary to public policy and unenforceable, Counsel for the wife argued in the alternative that even if it were not per se contrary to public policy it was unreasonable and could not be enforced because it would be unfair and would offend public policy. The calculated result was effectively to subvert any accrual claim by the wife. The husband actively concealed from her even those assets which he during the trial acknowledged belonged to him.
Counsel for the wife pointed out that upon her arrival in South Africa she was forced to be even more dependent on the husband. He started speaking to her only in Afrikaans in a town in which she was a stranger and was having her first baby. She described herself as being scared and lonely.
Throughout the marriage the wife’s actual earnings and future earning capacity in South Africa was limited. She worked part-time during the marriage but could not earn enough to support her or the children at a standard of living to which they were accustomed. She sacrificed her own career in Germany to marry the husband and move to South Africa to care for the parties’ children. Had she remained in Germany, she would have continued working as a lawyer where she could have become a partner in a firm and earned a good salary. The court was of the view that if the wife could not pursue her claim for maintenance, she would suffer prejudice, deprivation and indignity.
The wife was further prejudiced by the fact that the husband systematically attempted to hide his assets and denude his estate. He set up a network of companies, trust companies and trust structures ostensibly for “estate planning purposes”. By his own account, he systematically removed the growth assets from his estate and advanced interest-free loans to those entities to the detriment of his estate. He moved assets offshore with the calculated objective of placing them beyond the wife’s reach and, as his own expert stated that he effectively removed the future growth of assets from his estate.
The husband demonstrably concealed assets in his estate and he refused to make proper disclosure as required by Section 7 of the Matrimonial Property Act. The Judge noted that no self-respecting South African attorney who was familiar with the provisions of the Matrimonial Property Act of South Africa and who practised in that field would have allowed his client to sign a document. The court was asked to exercise an overriding discretion to award maintenance to the wife in the absence of a written agreement between the parties with regard to the division of their assets or the payment of maintenance by one party to the other. The court was asked to hold that because the waiver clause disentitled the wife to any maintenance whatsoever. The court was satisfied that the terms of this ANC in regard to the payment of maintenance were contrary to public policy and were not binding upon the Court.
The husband wrongly refused to make discovery of relevant documents and obstructed the wife in the preparation of her case. These related to discovery of the Share Register of the companies in which the husband had an interest, the Minutes of the Directors’ and Shareholders’ Meetings and the fact that a company controlled by him owned shares in the wine farm company on his behalf. What was evident was that the husband, although an officer of the Court, made discovery of documentation which withheld discovery of relevant documents which he knew, or must have known, the wife was entitled to see.
The husband was under a duty to disclose the nature and extent of his assets and liabilities. Despite repeated demands, he has refused to make such disclosure.
Section 7 of the Matrimonial Property Act provides as follows:
“When it is necessary to determine the accrual of the estate of a spouse or a deceased spouse, that spouse or the executor of the estate of the deceased spouse, as the case may be, shall within a reasonable time at the request of the other spouse or the executor of the estate of the other spouse, as the case may be, furnish full particulars of the value of that estate.”
Such a request was addressed to the husband and was incorporated in various Requests for Particulars and demands for discovery, all of which were ignored. The Judge was referred to the unreported decision of B v B where the Court held as follows:
“Since community of property is excluded, each spouse maintains a separate estate. If a spouse so desires, the assets which make up the separate estate are under his or her sole control. In an accrual claim, therefore, the spouse making the claim often has little or no knowledge of the assets which make up the estate of the other party. It is presumably for this reason that the legislature enacted s7... It is therefore clear that the legislature requires full particulars if requested.”
Because of this statutory obligation there was an onus and an evidential burden upon the husband because he had peculiar knowledge of his assets and liabilities and he was under a statutory obligation to disclose it. The husband offended the Court’s statement in the matter of MB v DB which pointed out that litigation is not a game where parties can play their cards close to their chest in order to obtain technical advantages or to prejudice the other party.
The court was also referred to the decision of Mostyn J in NG v SG, an English case where the Court held that non-disclosure is a bane which strikes at the very integrity of the adjudicative process. Without full disclosure the Court cannot render a true, certain and just verdict. It cannot lawfully exercise its power. It is thrown back on inferences and guesswork which may result in an unjust result to one or other party. This judgment accorded with the process which was adopted in the Cape High court where Cloete AJ, as she then was, in the matter of AM v JM held that:
“Although the defendant’s counsel argued that plaintiff bears the onus to establish that defendant’s alleged excluded assets should form part of the accrual in his estate, it is clear that the defendant bears the onus to persuade this court that such assets should indeed be excluded from the accrual.”
Simply put, there was an onus on the husband to show that certain assets were excluded, to identify those assets and to trace those assets to show that they were still there and should remain excluded. He was in possession of all the facts relating to these assets and he had the onus of demonstrating what had happened to them.
As a witness, the husband was argumentative and often refused to answer questions. It was the husband’s fault that the divorce trial took 50 days of Court time. He adopted a “scorched earth” policy with a total disregard for the costs involved. As far as time and money that has been wasted was concerned, the blame for this, according to the Judge lied at the feet of the husband, who refused to make proper discovery and adopted an obstructive attitude throughout this litigation.
The judge was satisfied that the husband was adopting a “scorched earth” policy to this litigation. He was deliberately seeking to delay the proceedings and from the very beginning was engaging in dilatory tactics to drum up the costs of the action so as to put the wife into a position where she could not afford to defend herself. There was no question that the husband made discovery on an incremental basis throughout this matter. He was deliberately obstructive in giving discovery and a great number of Discovery Affidavits were filed.
Throughout this matter the husband engaged in selective and piecemeal discovery. He deliberately delayed in bringing that application so as to cause the maximum prejudice to the wife.
Living Annuities are not part of the Accrual
By Bertus Preller - Family Law Attorney
Montanari v Montanari Gauteng High Court Case number 14/26868
An interesting case was recently heard in the Gauteng High Court regarding whether or not a living annuity form part of the accrual of a parties’ estate.
The plaintiff, (husband) and the defendant (wife) were in the midst of divorce proceedings. They were married in 1999 out of community of property subject to the accrual system as defined in the Matrimonial Property Act 88 of 1984. The primary issue that the court had to determine in this matter was an interlocutory application to determine whether the husband’s living annuities when he retired from his pension fund during the marriage should form part of the accrual of his estate on divorce. The parties agreed to separate the issue of the living annuity to be determined by the court as a number of the issues in the divorce trial depended on the outcome of this point.
The real purpose of a marriage out of community of property with the inclusion of the accrual is that the asset growth accumulated during the marriage will be shared equally on divorce or death. The question whether an income producing asset such as a living annuity with a notional capital value and strictly controlled by legislation is in particular a non-commutable must on divorce be considered to be an asset in the annuitant’s estates and be available for re-distribution.
Background Facts
During July 2008 the plaintiff used a portion of his pension benefit which arose out of his employment to purchase a living annuity through Glacier. During November 2011 the plaintiff retired from his employment and use the remainder of his pension benefit to purchase a further living annuity also with the company Glacier. The plaintiff then used the living annuity as a monthly source of income.
Statutory Framework of the Living Annuity
A living annuity is defined as an investment product that provides an income upon the annuitant’s retirement from a pension fund. The annuitant as little flexibility with what he can do with a living annuity which is rigorously regulated by the Income Tax Act. The annuitant can for example choose an income from a range between 2.5% and 17% per annum, he can nominate the beneficiary of what remains of the living annuity on his death and in the absence of a nominee devolves on the annuitant’s estate. In the normal course with the term annuity is involved, the substance of the transaction will involve an investment of a capital sum by an investor to produce a return to the annuitant, calculated by reference to that capital sum to which is applied and agreed or defined percentage interest rate.
The plaintiff called an expert in pension law as a witness who testified that the Commissioner of SARS allows a pension fund to discharge its obligation to pay the member and annuity by interposing an insurer registered in terms of the long term assurance act number 52 of 1998 the retirement annuity fund is defined in the income tax act as a bone fide fund established for providing living annuities on the retirement of a taxpayer. In a retirement annuity fund member becomes unconditionally entitled to a living annuity, meaning he has a right to the annuity and not to the capital. The expert testified further that the living annuity has a notional capital value and the capital is owned by the insurer and is reflected on the insurers balance sheet. The expert also testified about the constraints placed on living annuities in terms of the second schedule of the income tax act. The individual annuitant never has a call on the capital but only a call on an income derived from the value of what he described as the insurers capital. The aforesaid income is currently between 2.5% and 17.5% of the notional capital. He further testified that living annuities carry on ‘living’ and told the capital value of the annuity that the insurer owns is completely depleted or reduced down to a certain amount which makes it commercially unviable to administer. He further testified that an annuity is not taken into account for estate duty purposes and that if he had to draw up a balance sheet for any person who is receiving a living annuity it would not be reflected as an asset but the income derived from the annuity would form part of the estate.
In this case the source of the living annuity whilst the plaintiff’s retirement from the pension fund. The definition of a living annuity is the right of a former member of a pension fund to an annuity and the amount of the annuity is determined in accordance with the method or formula prescribed by the Minister by notice in the Gazette. The plaintiff is prohibited from demanding back the capital amount invested as its source is the pension fund.
Context of acquisition of the living annuity
The characterisation of whether living annuity on divorce forms part of the accrual in a matrimonial estate is novel. The supreme court of appeal has pronounced that the pension interest terminates if prior to the date of divorce the party has moved the pension fund or has resigned from his employment in respect of which he had an interest in a pension fund. In the case of Eskom Pensioned and Provident Fund v Krugel 2011(3) BPLR (SCA) 314 [2011] ZASCA 96 at para 12 the court stated ‘that once a pension benefit has accrued to the member’s spouse before the date of divorce, the provisions of section 7(7) and 7(8) of the Divorce Act are no longer applicable’.
The aforesaid principle was followed in the matter of Saunders v Eskom Pension and Provident Fund 2013 JOL 30305 (PFA). The adjudicator in this matter help that the spouse had already resigned from his employment on the date of divorce and on a proper interpretation of section 7(7) and 7(8) of the Divorce Act 70 of 1979 there was no pension interest which formed part of his assets which could be assigned to the complainant.
The main consideration is whether within the context of the statutory framework of living annuities and its strict regulation, the capital can be said to be vested in the plaintiff for purposes of calculating the accrual. In this matter the plaintiff during the course of his marriage retired from his pension fund and use the pension benefit to acquire the living annuities.
A further expert was called upon to testify on behalf of the plaintiff. This expert testified that a living annuity is not a pension interest as contained in the Divorce Act. The expert further emphasised the plaintiff’s limitations in relation to the living annuity and the fact that the money could never during the plaintiff’s lifetime accrue to him as capital and that he was only entitled to the monthly, quarterly or other periodical payments.
Ultimately, the court found that a living annuity leads to the conclusion that a living annuity is not part of a person’s estate for purposes of accrual. The monthly or periodical payment of the annuity is relevant and can be taken into account to assess the future maintenance needs.
An interesting case was recently heard in the Gauteng High Court regarding whether or not a living annuity form part of the accrual of a parties’ estate.
The plaintiff, (husband) and the defendant (wife) were in the midst of divorce proceedings. They were married in 1999 out of community of property subject to the accrual system as defined in the Matrimonial Property Act 88 of 1984. The primary issue that the court had to determine in this matter was an interlocutory application to determine whether the husband’s living annuities when he retired from his pension fund during the marriage should form part of the accrual of his estate on divorce. The parties agreed to separate the issue of the living annuity to be determined by the court as a number of the issues in the divorce trial depended on the outcome of this point.
The real purpose of a marriage out of community of property with the inclusion of the accrual is that the asset growth accumulated during the marriage will be shared equally on divorce or death. The question whether an income producing asset such as a living annuity with a notional capital value and strictly controlled by legislation is in particular a non-commutable must on divorce be considered to be an asset in the annuitant’s estates and be available for re-distribution.
Background Facts
During July 2008 the plaintiff used a portion of his pension benefit which arose out of his employment to purchase a living annuity through Glacier. During November 2011 the plaintiff retired from his employment and use the remainder of his pension benefit to purchase a further living annuity also with the company Glacier. The plaintiff then used the living annuity as a monthly source of income.
Statutory Framework of the Living Annuity
A living annuity is defined as an investment product that provides an income upon the annuitant’s retirement from a pension fund. The annuitant as little flexibility with what he can do with a living annuity which is rigorously regulated by the Income Tax Act. The annuitant can for example choose an income from a range between 2.5% and 17% per annum, he can nominate the beneficiary of what remains of the living annuity on his death and in the absence of a nominee devolves on the annuitant’s estate. In the normal course with the term annuity is involved, the substance of the transaction will involve an investment of a capital sum by an investor to produce a return to the annuitant, calculated by reference to that capital sum to which is applied and agreed or defined percentage interest rate.
The plaintiff called an expert in pension law as a witness who testified that the Commissioner of SARS allows a pension fund to discharge its obligation to pay the member and annuity by interposing an insurer registered in terms of the long term assurance act number 52 of 1998 the retirement annuity fund is defined in the income tax act as a bone fide fund established for providing living annuities on the retirement of a taxpayer. In a retirement annuity fund member becomes unconditionally entitled to a living annuity, meaning he has a right to the annuity and not to the capital. The expert testified further that the living annuity has a notional capital value and the capital is owned by the insurer and is reflected on the insurers balance sheet. The expert also testified about the constraints placed on living annuities in terms of the second schedule of the income tax act. The individual annuitant never has a call on the capital but only a call on an income derived from the value of what he described as the insurers capital. The aforesaid income is currently between 2.5% and 17.5% of the notional capital. He further testified that living annuities carry on ‘living’ and told the capital value of the annuity that the insurer owns is completely depleted or reduced down to a certain amount which makes it commercially unviable to administer. He further testified that an annuity is not taken into account for estate duty purposes and that if he had to draw up a balance sheet for any person who is receiving a living annuity it would not be reflected as an asset but the income derived from the annuity would form part of the estate.
In this case the source of the living annuity whilst the plaintiff’s retirement from the pension fund. The definition of a living annuity is the right of a former member of a pension fund to an annuity and the amount of the annuity is determined in accordance with the method or formula prescribed by the Minister by notice in the Gazette. The plaintiff is prohibited from demanding back the capital amount invested as its source is the pension fund.
Context of acquisition of the living annuity
The characterisation of whether living annuity on divorce forms part of the accrual in a matrimonial estate is novel. The supreme court of appeal has pronounced that the pension interest terminates if prior to the date of divorce the party has moved the pension fund or has resigned from his employment in respect of which he had an interest in a pension fund. In the case of Eskom Pensioned and Provident Fund v Krugel 2011(3) BPLR (SCA) 314 [2011] ZASCA 96 at para 12 the court stated ‘that once a pension benefit has accrued to the member’s spouse before the date of divorce, the provisions of section 7(7) and 7(8) of the Divorce Act are no longer applicable’.
The aforesaid principle was followed in the matter of Saunders v Eskom Pension and Provident Fund 2013 JOL 30305 (PFA). The adjudicator in this matter help that the spouse had already resigned from his employment on the date of divorce and on a proper interpretation of section 7(7) and 7(8) of the Divorce Act 70 of 1979 there was no pension interest which formed part of his assets which could be assigned to the complainant.
The main consideration is whether within the context of the statutory framework of living annuities and its strict regulation, the capital can be said to be vested in the plaintiff for purposes of calculating the accrual. In this matter the plaintiff during the course of his marriage retired from his pension fund and use the pension benefit to acquire the living annuities.
A further expert was called upon to testify on behalf of the plaintiff. This expert testified that a living annuity is not a pension interest as contained in the Divorce Act. The expert further emphasised the plaintiff’s limitations in relation to the living annuity and the fact that the money could never during the plaintiff’s lifetime accrue to him as capital and that he was only entitled to the monthly, quarterly or other periodical payments.
Ultimately, the court found that a living annuity leads to the conclusion that a living annuity is not part of a person’s estate for purposes of accrual. The monthly or periodical payment of the annuity is relevant and can be taken into account to assess the future maintenance needs.