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[2021] ZAWCHC 87
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Reynolds N.O v Smith (22726/2017) [2021] ZAWCHC 87 (7 May 2021)
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
Case
No: 22726/2017
In the matter between:
MICHAEL JOHN REYNOLDS
N.O.
Applicant
and
HENDRIK JOHANN
SMITH
Respondent
Coram:
Justice J Cloete
Heard:
11 March 2021, supplementary notes delivered 26 March
and 6 April 2021
Delivered
electronically:
7 May 2021
JUDGMENT
CLOETE J
:
[1] This is an
application by the executor of the deceased estate of the
late Mareze
Smith (“the deceased”) to compel the respondent to
furnish wide-ranging information and documentation purportedly
for
the purpose of determining whether the deceased estate has an accrual
claim against the respondent (or his estate) and, if
so, the amount
thereof,
[1]
although in seeking this relief the applicant does not rely on
PAIA
[2]
(it does not apply to the respondent in his personal capacity, but it
does apply to the various entities in respect of which information
and documentation is also sought) or uniform rule 35, nor any
specific provision in the Administration of Estates Act
[3]
or the Matrimonial Property Act (“MPA”).
[4]
[2] The
deceased and respondent were married to each other out of community
of property by antenuptial contract incorporating the accrual system
as provided in Chapter 1 of the MPA at the time of her death
on
25 January 2010, although they were in the process of divorcing
and had already concluded a deed of settlement (on 7 December
2009) in contemplation thereof. It is correctly not suggested by
either party that the deed of settlement remains binding. It is
also
not in dispute that there has been no accrual in the estate of the
deceased.
[3] Upon his
appointment as executor on 23 April 2010 the applicant
assumed
the duty to recover all assets of the deceased’s estate.
[5]
He alleges that during its winding-up it appeared that her estate
‘
may have an accrual claim’
against the
respondent.
[4] On 8 July
2010 the respondent was thus requested to provide valuations
at date
of the deceased’s death of all properties registered in his
name or any entity in which he held an interest, as well
as his motor
vehicles, furniture and any other assets (save for those excluded in
the antenuptial contract), together with details
of his liabilities
and proof thereof. On 18 November 2010 the respondent’s
erstwhile attorney provided a detailed schedule
reflecting these
dated 31 August 2008 (“particulars schedule”),
together with various supporting documents and
a letter from the
respondent’s auditor pertaining to his 33% shareholding in a
property owning company, Clifton B-Three (Pty)
Ltd. The respondent
also provided details of claims which he allegedly had against the
deceased estate totalling R1.43 million.
[5] In the
particulars schedule the respondent had placed a value of R2 million
on his shareholding in Clifton B-Three (Pty) Ltd. In the letter,
which is dated 15 November 2010, the respondent’s auditor
advised that for the reasons set out therein, it would be appropriate
to rather take the book value thereof at 28 February
2010 of
R1 081 144. Subsequently on 7 March 2011 the
respondent alleged that his shareholding in Clifton B-Three
(Pty) Ltd
was mistakenly not excluded from the accrual when the antenuptial
contract was drawn up.
[6] The
information provided did not satisfy the applicant who proceeded
to
request further documents to support some of the particulars
furnished by the respondent, and also raised a number of queries.
The
respondent replied through his attorney, furnishing more
documentation and providing explanations in response to the further
queries raised.
[7] Still the
applicant was not satisfied and yet further information and
documentation was requested. This to-ing and fro-ing continued on and
off until some 6 years later, when on 23 November 2016
the
respondent’s erstwhile attorney informed the applicant’s
attorney
inter alia
as follows:
‘
7.
We understand the duties of an executor but it is clear to us from
the background of
the matter and the contents of this letter that the
executor must now make a judgment call, whether to pursue Mr Smith,
given the
collateral evidence and indications by collateral parties.
It is our submission that it would be a waste of substantial legal
costs
to pursue the matter against Mr Smith. It is further our
submission that serious consideration should also be given to the
fact that any claim against Mr Smith has prescribed.
8.
In the premises it is therefore our instructions not to supply you
with any further
documentation or other information as this process
is also a huge inconvenience for Mr Smith, who does not understand
your sporadic
and/or delayed attempts to pursue him.
9.
Please note that it is our instructions that we receive any and all
legal notices
on behalf of Mr Smith and that our offices can be
used as a service address so that we may act and reply in the
appropriate
manner.’
[8] This did
not deter the applicant whose attorneys addressed a further
letter in
similar vein to the respondent’s attorneys on 18 January
2017, to which the latter did not reply. It was 11
months later, on
12 December 2017, that the applicant launched this application.
[9] The
respondent raised two defences to the relief sought. First, the
applicant’s claim has prescribed. Second, what the applicant in
truth seeks are orders amounting to pre-litigation discovery
and a
response to pre-litigation interrogatories which include
“explanations” from third parties who are not joined
in
these proceedings as well as the creation of documents. I deal with
each in turn.
[10] The relevant sections of the
MPA are s 3 and s 7 which read as follows:
‘
3.
Accrual system.
---(1)
At the dissolution of a marriage subject to the accrual system, by
divorce or by the death of one or both of the spouses,
the spouse
whose estate shows no accrual or a smaller accrual than the estate of
the other spouse, or his estate if he is deceased,
acquires a claim
against the other spouse or his estate for an amount equal to half of
the difference between the accrual of the
respective estates of the
spouses.
(2) Subject to the
provisions of section 8 (1), a claim in terms of subsection (1)
arises at the dissolution of the marriage…
[S
8 (1) is not relevant for present purposes].
7.
Obligation to furnish particulars of value of estate.
---
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.’
[11] Section 3(1) of the MPA
makes clear that the claim is one sounding in money since it is
for
‘
an amount’
. In terms of s 11 of the
Prescription Act
[6]
the accrual claim would prescribe upon the expiration of 3 years
after prescription began to run. Although in the answering affidavit
the respondent appears to have relied on a prescription period of 6
years on the basis that the debt arose from a notarial contract,
it
is my view that the claim did not arise from such a contract but
rather as a result of the deceased’s death, which is
when the
deceased estate became vested with a legally enforceable right to the
accrual:
NCO and Another v Stellenbosch Municipality
.
[7]
[12] Section 12 of the
Prescription Act provides as follows:
‘
12.
When prescription begins to run.
---(1)
Subject to the provisions of subsections (2), (3), …
prescription shall commence to run as soon as the debt
is due.
(2) If the
debtor wilfully prevents the creditor from coming to know of the
existence of the debt, prescription shall not
commence to run until
the creditor becomes aware of the existence of the debt.
(3) A debt
shall not be deemed to be due until the creditor has knowledge of the
identity of the debtor and of the facts from
which the debt arises:
Provided that a creditor shall be deemed to have such knowledge if he
could have acquired it by exercising
reasonable care…’
[13] The respondent bears the
evidentiary burden of proving that the applicant’s claim
has
prescribed. Moreover:
[8]
‘
In order to
successfully invoke s 12(3) of the Prescription Act either actual or
constructive knowledge must be proved. Actual knowledge
is
established if it can be shown that the creditor actually knew the
facts and the identity of the debtor… Constructive
knowledge
is established if the creditor could reasonably have acquired
knowledge of the identity of the debtor and the facts on
which the
debt arises by exercising reasonable care. The test is what a
reasonable person in his position would have done, meaning
that there
is an expectation to act reasonably and with the diligence of a
reasonable person. A creditor cannot simply sit back
and by supine
inaction arbitrarily and at will postpone the commencement of
prescription. What is required is merely the knowledge
of the minimum
facts that are necessary to institute action and not all the evidence
that would ensure the ability of the creditor
to prove its case
comfortably.’
[14] Although the evidentiary
burden rests upon the respondent, it is convenient to first summarise
why the applicant maintained in argument that the debt (i.e. the
accrual claim) has not prescribed. It was submitted by
Mr
Grobbelaar
who appeared on his behalf that there are two reasons.
First, the applicant cannot establish whether such a claim exists
without
the information and documentation sought from the respondent
in this application. Second, the purpose of the relief is not to
establish
the quantum of the claim but rather whether there is a
claim at all.
[15] However the second reason is
not supported by the case made out in the founding papers,
which is
that the relief is directed at establishing both the debt’s
existence and if so, its quantum. I will thus focus
on the first
reason, which in turn involves some scrutiny of the antenuptial
contract, the particulars schedule and the subsequent
exchange of
correspondence.
[16] The deceased and respondent
had been married for just over 2 years at the time of her
death. In
their antenuptial contract entered into on 17 November 2007,
each declared the commencement value of their respective
estates as
R200 000. Both also excluded certain assets from the operation
of the accrual. In the respondent’s case these
were 13
identified immovable properties and his members interest in Smith &
Smith Architects CC. The deceased excluded an immovable
property and
her members interest in Jetvest 1137 CC.
[17] The particulars schedule
furnished on 18 November 2010 lists each asset and attendant
liability in a clearly identifiable manner, accompanied by values. In
addition the assets are separately categorised in respect
of those
owned by the respondent personally and those held in other entities
in which he had an interest. He also updated the schedule
in
accordance with the antenuptial contract by identifying those which
on his version were now excluded from the accrual.
[18] It is apparent that the
respondent held a substantial property portfolio either personally
or
through other entities. In terms of s 4(1)(b)(ii) of the MPA any
asset acquired by virtue of an excluded asset is similarly
not taken
into account for purposes of calculating the accrual.
[19] That the applicant must have
applied his mind to the provisions of the antenuptial contract
and
particulars schedule is evident from the exchange of correspondence
that followed. He appears to have accepted the respondent’s
position that the assets reflected as excluded in the particulars
schedule did not form part of the accrual, since he requested
valuations of assets ‘
with the exception of the assets
excluded’
. The applicant also accepted that any assets held
in trusts (including shareholdings by these trusts in any entities)
were similarly
excluded. Particulars of these shareholdings were
provided to the applicant by the respondent’s erstwhile
attorney on 7 March
2011, as was a summary of the respondent’s
liabilities at date of the deceased’s death.
[20] On 13 October 2011 the
applicant’s current attorney advised the respondent’s
erstwhile attorney that ‘
We are now handling the
administration on behalf of… the executor… all of the
documentation in connection with the
estate has been handed to us and
we have had the opportunity… to familiarise ourselves with all
relevant issues, in particular
the issue of the accrual claim…’.
[21] In a subsequent letter dated
10 February 2012 the financial statements of the excluded
entities were requested in order to establish the value of any credit
loan account held therein by the respondent. Most of the
respondent’s
explanations were accepted but he was requested to provide proof that
he owned the furniture and that one of
the vehicles, a Toyota Prado,
was indeed registered in Smith & Smith Architects CC.
[22] In a letter dated 20 January
2013 the applicant’s attorney expressed concern
as to the
sufficiency of the financial statements subsequently provided to her
by the respondent’s auditor. Further queries
were raised,
including in relation to other entities in which the respondent might
have an interest.
[23] On 15 October 2013 the
respondent was advised that should the further information
requested
not be forthcoming by 31 October 2013 ‘
the executor
reserves the right to approach the court for an order compelling you
to do so’.
The respondent did not reply but the threatened
application did not materialise either.
[24] Nothing more happened until
3 years later when on 12 October 2016 the applicant’s
attorney again addressed the respondent’s erstwhile attorney.
The telling portion of this letter reads as follows:
‘
We advise that the
below mentioned information/documentation is still required by the
estate
in order
to finalise the accrual claim which the estate has against…
your client
’.
[emphasis supplied]
[25] To my mind, the exchange of
correspondence leads one to accept that upon receipt of the
particulars schedule as far back as 18 November 2010 the
applicant must have formed the view (for whatever reason) that it
contained sufficient information for him to conclude that the
deceased estate indeed had an accrual claim against the respondent.
[26] This is because all of the
further documents and information sought thereafter were aimed
at
establishing
the quantum
of that claim. If the applicant’s
understanding of the particulars schedule was that there was, prima
facie, no accrual in
the respondent’s estate, the queries
subsequently raised would surely have been directed at attempting to
establish whether
or not there was indeed an accrual.
[27] That the applicant must have
approached the matter thereafter on the basis of establishing
only
the quantum of the accrual claim is supported by his subsequent
requests for valuations and queries directed at establishing
the
existence and values of possibly undisclosed further assets,
seemingly not reflected in the particulars schedule. Any doubt
that
this was in truth his approach was clarified by the plain wording of
his attorney’s letter dated 12 October 2016,
namely that
the outstanding information and documentation was required to
finalise an
existing
accrual claim.
[28] Accordingly, on the
applicant’s version, he must have had knowledge of the minimum
facts necessary to institute an action based on an accrual claim
after applying his mind to the particulars schedule after its
receipt
on 18 November 2010 or, at the latest, 7 March 2011, when
he received particulars of the respondent’s shareholdings,
became aware of the latter’s stance that his shareholding in
Clifton B-Three (Pty) Ltd should have been excluded from the
accrual,
and was placed in possession of a summary of the respondent’s
liabilities at date of the deceased’s death.
[29] Had the applicant wished to
pursue an accrual claim on behalf of the deceased estate he
should
therefore have instituted an action during February 2014 at the
latest. He did not require all of the evidence that would
ensure his
ability to prove his case comfortably in order to do so.
[30] It happens routinely in
divorce actions that a spouse alleges there has been no accrual
in
her estate but an accrual in the estate of the other spouse, and
seeks an order in terms of s 3 of the MPA. This is an
acceptable
manner of pleading and it is not necessary to plead how the accrual
is calculated. The applicant’s position is
thus no different,
and this was all he needed to have done, which in turn would have
interrupted prescription.
[31] In addition, by instituting
a s 3 action, during the usual process of discovery and
the
furnishing of trial particulars he would presumably have been placed
in a position to prove the quantum of that claim against
the
respondent.
[32] I thus conclude that the
applicant’s claim on behalf of the deceased estate against
the
respondent has prescribed. However if I am wrong in reaching this
conclusion, I deal with the second defence of pre-litigation
discovery, etc. To an extent what follows overlaps with what I have
considered in reaching my conclusion on prescription.
[33] At the outset it is
important to repeat that the relief sought by the applicant is not
premised on s 7 of the MPA, namely the respondent’s
obligation to furnish full particulars of the value of his estate.
Put differently, there is no allegation in the founding papers that
the particulars provided by the respondent did not meet the
requirements of that section.
[34] In
ST v CT
[9]
the Supreme Court of Appeal described the s 7 obligation as one
of ‘
full disclosure of relevant information’
,
[10]
and went on to state that a failure to make full disclosure may
warrant the drawing of an adverse inference that a party has
concealed
assets ‘
where it is reasonable in the
circumstances to do so’
.
[11]
[35] In that case the Supreme
Court of Appeal was dealing with an opposed divorce action, but
there
is no reason why what was stated should not also apply to situations
such as the present, since s 7 draws no distinction
between
marriages dissolved by divorce and those dissolved by death.
[36] The importance of the
description by the Supreme Court of Appeal of the s 7 obligation
is that it plainly refers to “information” and does not
go so far as to require a party to make full discovery at the
same
time.
[37] This makes sense since the
discovery procedure contained in uniform rule 35, which applies
irrespective of the nature of the litigation, would otherwise be
rendered nugatory solely in cases involving s 3 claims. There
is
moreover no indication in the MPA either that ‘
full
particulars’
include the requirement that all supporting or
source documents must simultaneously be furnished.
[38] This being the extent of the
s 7 obligation there is no basis upon which the applicant
should
be entitled to more. In the notice of motion he seeks orders that the
respondent furnishes financial statements for the
year ending
28 February 2009 in respect of 20 separate entities in which
third parties also have interests; certificates of
balance in respect
of any amount owing by these entities to the respondent at date of
death of the deceased ‘
issued by the accountant who prepared
the financial statements and certificates of balance’
; an
explanation from the ‘
said accountant’
if there is
a difference between the financial statements for the 28 February
2009 tax year and such certificates of balance; values
of
shareholdings in 19 of the 20 entities which include trusts which the
applicant already accepted were excluded from the accrual;
audited
financial statements of Clifton B-Three (Pty) Ltd for the tax year
ending 28 February 2009 (despite the applicant
having taken no
steps to dispute the respondent’s claim that this should have
been excluded from the accrual) and various
calculations pertaining
thereto; proof that furniture in the erstwhile marital home was owned
by a particular trust; various details
regarding a BMW motor vehicle
which according to the applicant’s attorney in fact was the
property of the deceased; proof
of registration of the Toyota Prado
in Smith & Smith Architects CC; and a ‘
spreadsheet’
of the respondent’s net worth on date of the deceased’s
death, alternatively as at 28 February 2009 (i.e. 11 months
before she died).
[39] I agree with
Mr Bremridge
SC
who appeared with
Mr De Vries
for the respondent, that
this is nothing more than an attempt to obtain pre-litigation
discovery and/or impermissible pre-litigation
responses to
interrogatories. In a comparable context, dealing with an application
in terms of PAIA, the Supreme Court of Appeal
in
Unitas Hospital v
Van Wyk and Another
[12]
approved the following formulation articulated in
Cape
Metropolitan Council v Metro Inspection Services (Western Cape) CC
and Others
:
[13]
‘
Information can only
be required for the exercise or protection of a right if it will be
of assistance in the exercise or protection
of the right. It follows
that, in order to make out a case for access to information…
an applicant has to state what the
right is that he wishes to
exercise or protect, what the information is which is required, and
how that information would assist
him in exercising or protecting
that right.’
[40] On the established facts the
applicant does not require the documentation and information
sought
in this application to assist him in the exercise or protection of
what he considers to be the right of the deceased estate,
namely the
accrual claim. All that he requires, at least allegedly, is
documentation and/or information to establish the full extent
of the
quantum of that claim. The appropriate manner in which to procure
these is by way of discovery and/or trial particulars
once action has
been instituted. It follows that, in my view, the application in any
event cannot succeed.
[41] As far as costs are
concerned, this is a matter of considerable importance to the
respondent,
who has had this sword of Damocles hanging over his head
for the past 11 years. This factor, taken together with the manner in
which the application was brought, in my view justified the
employment of two counsel.
[42]
In the result the
following order is made:
1.
The application is dismissed.
2.
The applicant, in his
representative capacity, shall bear the costs of this application on
the scale as between party and party
as taxed or agreed, including
the costs of two counsel where employed as well as any reserved costs
orders.
J I CLOETE
[1]
Founding Affidavit para 56.
[2]
Promotion of Access to Information Act 2 of 2000
.
[3]
66 of 1965.
[4]
88 of 1984.
[5]
Meyerowitz: The Law and Practice of Administration of
Estates 5ed at 127.
[6]
68 of 1969.
[7]
(A244/2019)
[2020] ZAWCHC 35
(12 May 2020) at para
[78].
[8]
Macleod v Kweyiya
2013 (6) SA 1
(SCA) at paras
[9] to [10]. See also
Minister of Finance v Gore N.O.
2007
(1) SA 111
(SCA) at para [17].
[9]
2018 (5) SA 479 (SCA).
[10]
At para [33].
[11]
At para [36].
[12]
[2006] ZASCA 34
;
2006 (4) SA 436
(SCA) at para
[16]
.
[13]
2001 (3) SA 1013
(SCA) at para [28].