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[2016] ZASCA 40
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Brookstein v Brookstein (20808/2014) [2016] ZASCA 40; 2016 (5) SA 210 (SCA) (24 March 2016)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 20808/2014
DATE:
24 MARCH 2016
Reportable
In
the matter between:
ANDREW
CHARLES
BROOKSTEIN
...........................................................................
APPELLANT
And
JEANETTE
BROOKSTEIN
.........................................................................................
RESPONDENT
Neutral
citation:
Brookstein v Brookstein
(20808/14)
[2016] ZASCA 40
(24 March
2016)
Coram:
Maya AP, Swain JA and Tsoka, Baartman and
Kathree-Setiloane AJJA
Heard:
26 February 2016
Delivered:
24 March 2016
Summary
:
Arbitration Act 42 of 1965
– interpretation of ‘matrimonial
cause or matter incidental to such cause’ in
s 2
of the Act –
court order incorporating settlement agreement disposed of all
matrimonial issues and its natural consequences
– deliberate
non-disclosure of true value of accrual – delictual claim
susceptible to arbitration –
Matrimonial Property Act 88 of
1984
– date for determination of value of accrual – date
of dissolution appropriate date, not litis contestatio.
ORDER
On
appeal from
: Gauteng Local Division of
the High Court, Johannesburg (Nicholls J sitting as court of first
instance).
The
appeal is dismissed with costs including the costs consequent upon
the employment of two counsel.
JUDGMENT
Tsoka
AJA (Maya AP, Swain JA and Baartman, Kathree-Setiloane AJJA
concurring)
[1]
The issues for determination in this appeal are twofold. First,
whether the respondent’s delictual claim for damages is
a
‘matrimonial cause or matter incidental to such cause’,
as contemplated in s 2 of the Arbitration Act 42 of 1965
(the Act),
and is therefore incapable of referral to arbitration. Secondly,
whether the arbitrators erred in assessing the extent
of an accrual
in a matrimonial dispute, as at the date of the dissolution of the
marriage and not at the date of litis contestatio.
If so, whether
this constituted an error of law resulting in the arbitrators
misconceiving the whole nature of the enquiry, with
the consequence
that the award falls to be set aside in terms of s 33(1) of the Act.
[2]
The facts giving rise to the appeal are, briefly, the following. The
appellant, Mr Charles Brookstein and the respondent, Mrs
Jeanette
Brookstein were married out of community of property but subject to
the accrual system on 14 February 1987. The ante-nuptial
agreement
which governed their marital regime was entered into before their
wedding, on 13 February 1987. The marriage did not
survive and, on 30
November 2006, the respondent instituted a divorce action in the
Gauteng Local Division of the High Court, Johannesburg.
She sought a
decree of divorce and ancillary relief including a claim under s 3 of
the Matrimonial Property Act 88 of 1984 (the
MPA) for half of the
accrual of the latter’s estate, as her estate showed no accrual
or a smaller accrual than that of the
appellant.
[3]
On 5 May 2008, pursuant to a settlement agreement that was made an
order of court, a final decree of divorce was granted. The
appellant
was ordered to pay the respondent the amount of R8 007 340
in instalments, in respect of her portion of the
accrual. However,
two months later it became public knowledge that a listed company on
the Johannesburg Stock Exchange, Esorfranki
Limited, was interested
in purchasing the shares and claims of the Patula Group of Companies
(Patula) in which the appellant had
a substantial interest. The
respondent got wind of this information. As a result, in 2010, she
successfully launched an ex parte
application with a view to verify
the information. Pursuant to the application, the sheriff attached
management accounts and other
documents of Patula which confirmed
that, for the period before the granting of the divorce, the
appellant’s estate had shown
a substantial accrual in excess of
R167 million.
[4]
On 4 February 2010, the respondent instituted a claim for delictual
damages in the sum of R83,9 million on the basis that the
appellant
falsely or negligently represented that his shares in that company
were worth only R20 712 527, when in truth the shares
were worth more
than R167 million. According to her, had she known the truth, she
would not have settled as she did but would have
settled for more. In
the alternative, she asserted that the appellant knew the true value
of the shares but fraudulently or negligently
failed to disclose this
information thereby inducing her to settle to her detriment.
[5]
The respondent obtained judgment by default against the appellant as
he had failed to defend the action. For reasons irrelevant
to the
appeal, that judgment was thereafter rescinded by the court and the
matter proceeded on an opposed basis. The trial was
set down for
August 2012, but it did not proceed as the parties, on the eve of the
trial, entered into an arbitration agreement
referring, on an urgent
basis, ‘the dispute in the action’ to arbitration.
[6]
The arbitration proceeded from 20 August 2012 to 21 November 2012
before the retired Deputy President of the Supreme Court of
Appeal,
Harms. The main issue for determination in the arbitration was
whether the appellant had misrepresented the value of the
accrual,
ie, his interest in Patula. This claim was dismissed on the basis
that a misrepresentation had not been established. Also
at issue was
the non-disclosure by the appellant of his loan account, in respect
of which the respondent alleged that a dividend
had been declared for
the 2008 financial year, of which R7, 8 million had been credited to
the appellant’s account. This
claim was upheld and the
respondent was awarded R3,9 million with costs plus interest.
Dissatisfied with these findings, the appellant,
on 7 December 2012
lodged an appeal before an appeal tribunal, while the respondent
cross-appealed.
[7]
On 5 October 2013, the appeal proceeded before the appeal tribunal
comprising retired Judges of Appeal, President Howie and
Streicher
JA, and Mr Van der Linde SC. On 15 October 2013 they upheld the
respondent’s cross-appeal and dismissed the appellant’s
appeal. The appellant was ordered to pay the respondent the amount of
R35 739 287 with interest, less the maintenance payable
or paid
to her in terms of the divorce order. The appeal tribunal agreed with
the finding of the arbitrator that misrepresentation
had not been
established but found that non-disclosure, in circumstances where the
appellant had a duty to disclose, had been established.
The appeal
tribunal also held that as the action was for pure economic loss, the
requirements for factual and legal causation,
for purposes of delict
had been proved. It also found that the non-disclosure was deliberate
and intended to induce the respondent
into agreeing to an accrued
value of the appellant’s estate that was materially
understated. The appeal tribunal was satisfied
that all the other
elements of a delictual damages claim for pure economic loss had been
established. Accordingly, it awarded to
the respondent damages, being
the difference between the true value of the accrual and the amount
she agreed to in terms of the
settlement agreement.
[8]
In December 2013 the appellant launched an application in the court a
quo (Nicholls J) against the appeal award. The appellant’s
two
principal arguments in the court a quo as set out above were the
following. First, the dispute referred to arbitration was
incidental
to the matrimonial cause and was accordingly prohibited for referral
to arbitration in terms of s 2 of the Act. Secondly,
the appeal
tribunal misconceived the nature of the enquiry by assessing the
accrual as at the date of divorce rather than at litis
contestatio,
which had the effect that the calculation of the value of the accrual
was incorrect. This resulted in an irregularity
that rendered the
entire enquiry procedurally unfair.
[9]
Dealing with the first issue, the court a quo held that the words any
‘matrimonial cause or a matter incidental to such
cause’
in s 2 of the Act must be interpreted to mean any live matrimonial
cause either pending, or in the process of being
instituted. Once the
settlement agreement was made an order of court on 5 May 2008 the
matrimonial cause and all matters incidental
thereto, including the
claim for half of the accrual, were no longer alive. The matrimonial
cause had come to its natural conclusion.
It also held that whilst
the duty to disclose the accrual was a statutory duty arising from s
7 of the MPA, the delictual claim
was for payment of damages suffered
as a result of fraudulent or negligent misrepresentation
alternatively, non-disclosure with
regard to the true amount of the
accrual. This was incidental to a delictual cause and not incidental
to a matrimonial cause. Regarding
the second point, the court held
that as the claim arises on dissolution of the marriage, the
assessment of the value of the accrual
must take place at that date.
The court went on to hold that even if it could be said that the
assessment date was incorrect, this
did not result in the appeal
tribunal misconceiving the enquiry. It simply meant that it had erred
in law which was not reviewable
in terms of the Act. The court a quo
accordingly dismissed the application with costs. This appeal is with
its leave.
[10]
Counsel for the appellant submitted that, on the pleadings, the real
issue for determination was the accrual of the appellant’s
estate. He asserted that the appeal tribunal’s frequent use of
the words ‘accrual’, ‘the accrual system’,
‘the Act and its provisions’ and the fact that the delict
was committed in the context of an accrual had as a consequence
that
the action, in essence, was a ‘matrimonial cause or matter
incidental to such cause’. The referral to arbitration
was
therefore incompetent and void ab initio. Respondent’s counsel
on the other hand, submitted that the issue referred to
arbitration
was a delictual claim which was neither a ‘matrimonial cause
nor matter incidental to such cause’ although
its genesis lay
in the accrual of the appellant’s estate.
[11]
It is necessary for the determination of the first issue to examine
the legal consequences of a settlement agreement being
made an order
of court. At the stage when the respondent instituted the delictual
action against the appellant, the parties’
marriage had been
dissolved in terms of the court order which incorporated their
settlement agreement. The effect of the settlement
agreement being
made an order of court ‘is to change the status of the rights
and obligations between the parties. Save for
litigation that may be
consequent upon the nature of the particular order, the order brings
finality to the lis between the parties;
the lis becomes res judicata
(literally, “a matter judged”). It changes the terms of a
settlement agreement to an enforceable
court order….’
[1]
[12]
After the order was granted, there was no longer any matrimonial
cause to speak of. Neither was there anything incidental to
such
cause, as all of the matrimonial issues were disposed of when the
court granted the order incorporating the settlement agreement.
Consequently, there cannot be any issue still outstanding relating to
the marriage. The inevitable result is that the marriage
and all its
natural consequences came to an end, and anything relating thereto,
such as proprietary consequences, became res judicata.
That being so,
the delictual claim that was referred to arbitration cannot be said
to be incidental to any matrimonial cause.
[13]
Although the failure to disclose the true value of the accrual arose
in the context of the accrual regime which existed between
the
parties, it was, accordingly, unavoidable that the pleadings and the
tribunal would refer to the accrual system and the Act.
That,
however, does not detract from the true cause of action that was
referred to arbitration which was rooted in delict. The
respondent’s
contention and argument that the delictual claim, is therefore a
matter ‘incidental to matrimonial cause’
is unsustainable
and offends the clear and unambiguous language of s 2 of the Act.
[14]
The appellant’s reliance on
Taylor
v Kurstag NO
[2]
was misplaced. In that matter, the referral of custody of the
children, maintenance and proprietary consequence of a pending
marriage
to an ad hoc Beth Din (Jewish Ecclesiastical Court) for
determination ‘according to arbitration laws of the Republic’
was held impermissible. Correctly so, as the matrimonial cause was
still alive including the issues of custody, maintenance and
the
proprietary consequences of such marriage. The appellant’s
reliance on
Pitt
v Pitt
[3]
was similarly misplaced. In that matter, the applicant sought an
order enforcing the terms of a settlement agreement which regulated
the proprietary consequences of their divorce.
[15]
I turn to the issue as to when the value of an accrual should be
determined, ie, whether the value of the accrual should be
determined
at the close of pleadings, or at the dissolution of the marriage,
either by death or by divorce.
[16]
The provisions of the MPA are clear and unambiguous. In terms of s 3
thereof, a spouse acquires a right to claim an accrual
at the
‘dissolution of a marriage’. An exception arises in terms
of s 8 of the MPA. In terms of this section, a spouse
is entitled to
approach the court for immediate division of the accrual, where his
or her right to share in it at dissolution of
the marriage ‘will
probably be seriously prejudiced by the conduct or proposed conduct
of the other spouse’. It is
only then that the date for
determination of an accrual is brought forward, instead of at
‘dissolution of the marriage’.
Furthermore, in terms of s
4 of the MPA the net value of the accrual of the estate of a spouse
is determined at the dissolution
of the marriage.
[17]
This issue has given rise to dissenting decisions in two lines of
cases in the high court. The one view is that the correct
date upon
which the accrual must be determined is at the stage of litis
contestatio, whereas the other view is that this must be
calculated
at the date of dissolution of the marriage. In
MB
v NB
[4]
Brassey AJ held that although s 3 establishes the moment at which the
contingent right possessed by a spouse becomes perfected
ie, at the
dissolution of the marriage, it does not establish the moment by
reference to which the respective estates of the parties
must be
assessed. The learned acting judge was of the view that the problem
was one of procedure, not substance, and owed its origin
to the fact
that litigation takes time to complete. In his view, the established
principle was that the operative moment was litis
contestatio, for
that was the moment when the dispute crystallises and can be
presented to court for decision. The view in
MB
v NB
was followed in
MB
v DB
[5]
and
KS
v MS
.
[6]
[18]
However, in
JA
v DA
[7]
Sutherland J correctly pointed out at para 11 that the views of
Brassey AJ were obiter and disagreed with the view that the date
of
the close of pleadings is the date upon which to determine the
content and value of the estates. In his view, that date was
irrelevant for this exercise and the date of dissolution was the only
relevant date upon which to calculate the respective estates.
Because
the event of litis contestatio was purely procedural, it had no
bearing on the definition of, or identification of any
alleged right
which was the subject of litigation, nor had it any bearing on the
determination when, by operation of law, or upon
any given facts any
right comes into being. Sutherland J then stated the following at
para 17:
‘
When,
as in this case, a claim is based on the existence of a right and the
claim is for a performance measured by value it is not
possible to
calculate that value at a moment prior to the coming into existence
of the right.’
[19]
The view of Sutherland J that the time when the right comes into
existence is determinative of the calculation of the value
of that
right is undoubtedly jurisprudentially correct. I do not agree with
the view expressed in
Le
Roux v Le Roux
[8]
which was followed in
KS
v MS
[9]
that this conclusion will result in a piecemeal adjudication of
issues resulting in further litigation between the parties. This
view
was based upon the proposition that a litigant would have to engage
in two distinct actions. The first would be for a divorce
and the
second for an order in terms of s 3 of the MPA. I agree, however,
with the view of Sutherland J that it would not be inappropriate
to
sue for both a divorce and an order pursuant to s 3 of the MPA in a
single action, in which the accrual order is made dependent
upon the
grant of a divorce order.
[20]
The other problems averted to by Brassey AJ and Sutherland J which
may result from this determination of the date upon which
the accrual
must be calculated, cannot obscure what is the clear meaning of the
Act. As stated in
Natal
Joint Municipal Pension Fund v Endumeni Municipality.
[10]
‘
Judges
must be alert to, and guard against, the temptation to substitute
what they regard as reasonable, sensible or businesslike
for the
words actually used. To do so in regard to a statute or statutory
instrument is to cross the divide between interpretation
and
legislation. . .’
Consequently,
MB v NB
and
MB v DB
as
well as
KS v MS
which held that the date for determination of accrual is at litis
contestatio rather than at the dissolution of marriage, were
wrongly
decided.
[21]
In argument counsel for the appellant was constrained to concede
that, jurisprudentially, the passage of Sutherland J quoted
above in
JA v DA
was correct. The tribunal accordingly made no error in calculating
the accrual as at the date of the divorce order. In the result,
I
find that the date at which the accrual of the value of a spouse
married in terms of the MPA is to be determined is the date
of
dissolution of the marriage either by death or divorce.
[22]
It was common cause that paragraph 87 of the appeal tribunal award
contains an error, which has to be referred back to the
tribunal for
correction as the court a quo ordered. I agree.
[23]
It is ordered that:
The
appeal is dismissed with costs including the costs consequent upon
the employment of two counsel.
M
Tsoka
Acting
Judge of Appeal
APPEARANCES:
For
Appellant: JG Wasserman SC (with him C Woodrow)
Instructed
by:
Thomson
Wilks Inc.; Johannesburg
Webbers
Attorneys, Bloemfontein
For
Respondent: H Epstein SC (with him M Smit)
Instructed
by:
David
C Feldman Attorneys, Johannesburg
Lovius
Block Attorneys, Bloemfontein
[1]
Eke
v Parsons
[2015] ZACC 30
;
2015 (11) BCLR 1319
(CC) para 31.
[2]
Taylor
v Kurstag NO & others
2005 (1) SA 362
(W).
[3]
Pitt
v Pitt
1991 (3) SA 863
(D).
[4]
MB
v NB
2009
ZAGPJHC 76;
2010 (3) SA 220
(GSJ).
[5]
MB
v DB
[2013]
ZAKZDHC 33;
2013 (6) SA 86
(KZD)
.
[6]
KS
v MS
[2015]
ZAKZDHC 43; 2016 (1) SA (64) (KZD).
[7]
JA
v DA
2014 (6) SA 233
(GJ).
[8]
Le
Roux v Le Roux
(2010)
JOL 26003
(NCK).
[9]
Para 23.
[10]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012]
ZASCA 13
;
2012
(4) SA 593
(SCA) para 18.