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[2014] ZAGPJHC 42
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V.Z v V.Z and Others (2011/5122) [2014] ZAGPJHC 42 (14 February 2014)
SAFLII
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Certain
personal/private details of parties or witnesses have been
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IN
THE SOUTH GAUTENG HIGH COURT, JOHANNESBURG
(REPUBLIC
OF SOUTH AFRICA)
CASE
NUMBER : 2011/5122
In
the matter between
V.Z.,
DIANNE WINDSOR
MORRELL Applicant
and
V.Z.,
DEMO First
Respondent
V.Z.,
DEMO
N.O. Second
Respondent
THE
BEST TRUST COMPANY (JHB) (PTY) LTD
N.O. Third
Respondent
JUDGMENT
André
Gautschi AJ :
[1]
The applicant obtained a rule 43 order
against the first respondent, her […..], in this court on 11
October 2011. In
terms thereof,
inter
alia
, the first respondent was ordered
to pay R25 000.00 per month for their two children, at that time
[…….] and
[……] years old respectively,
and R10 000.00 per month for the applicant, in addition to his
obligation to retain
them on his medical aid scheme and to continue
paying the minor children’s school fees. He was also
ordered to pay
R18 000.00 as a contribution to costs.
[2]
The first respondent has consistently
failed to pay the maintenance ordered, and has instead, equally
consistently, paid only R4 000.00
per month. The result is
that he has steadily fallen into arrears, which at the time of the
launching of this application
amounted to R558 000.00 and, I am
advised from the Bar, presently amount to R883 000.00.
Attempts to execute against
his assets have been met with the reality
that he has no, or virtually no, assets in his personal name, but has
placed or acquired
all his assets in four trusts, namely the RSA
Family Trust, the RSA Share Trust, the ASR Residence Trust and the
RSA Investment
Trust.
[3]
Accordingly, the applicant seeks an order
declaring that the first respondent is in contempt of the court order
of 11 October 2011;
directing that he pay the arrears; committing him
to prison for contempt of court, such committal to be suspended on
condition
that he pays the arrears; directing that the veils of the
trusts be pierced; and declaring that the assets of those trusts are
assets, or deemed to be assets, of the first respondent.
[4]
It
is not in dispute that the rule 43 order was granted, that the first
respondent had knowledge thereof and that he has failed
to comply
therewith. The first respondent therefore bears an evidential
burden to establish a reasonable doubt as to whether
his
non-compliance was wilful and
male
fide
.
Should he fail to advance evidence that establishes a reasonable
doubt as to whether his non-compliance was wilful and
male
fide
,
contempt will have been established beyond reasonable doubt
[1]
.
[5]
It
was not in dispute at the hearing that an order to pay maintenance
classifies as an order
ad
factum praestandum
as opposed to an order
ad
pecuniam solvendam
,
and is therefore enforceable also by way of committal for
contempt
[2]
.
[6]
In his answering affidavit, the main attack
by the first respondent is on the alleged fraud and perjury of the
applicant in the
rule 43 proceedings, the injustice of the order and
the fact that a section 31 (of the Maintenance Act, 98 of 1999)
prosecution
in the Magistrates’ Court has been converted into a
section 6 maintenance enquiry, which is allegedly a more suitable
forum
to deal with the issue of the quantum of his maintenance
obligations. Notably, there was no attempt by the first
respondent
to set aside or alter the rule
43 order because of the alleged fraud and perjury of the applicant in
those proceedings, nor an application
in terms of rule 43(6).
The first respondent simply, unsuccessfully, approached the
Magistrates’ Court to have the
maintenance amount altered,
thereby, as it were, attempting to appeal the rule 43 order.
[7]
Nevertheless, shorn of the irrelevant
aspects, the following are the facts placed before me by the first
respondent in regard to
the reasons for his non-compliance :
7.1
He was “quite simply unable to make
payment in full of the cash components of R35 000.00 plus
R3 000.00 each month
pendente lite
as ordered” by this court.
7.2
All his assets, including his estate agency
business (run through a close corporation called Global Lifestyle
Properties CC –
GLP) reside in the four trusts.
7.3
GLP arranged to increase its bank overdraft
limit from R200 000.00 to R280 000.00 in order to pay the
shortfall on bond
instalments due by the trusts on the eight
properties which they own.
7.4
GLP remains in overdraft in an amount of
approximately R280 000.00 and is obliged to repay a bridging
finance loan of R68 000.00.
7.5
During the rule 43 proceedings, his
earnings (per month) amounted to R32 327.87. “Currently,
I earn less than R32 000
per month.”
7.6
The cash component received by him from GLP
is adjusted by journal entries against income earned by him from GLP.
7.7
He has been crippled by escalating
litigation costs.
7.8
“…
as I am now compelled to
conduct the business of GLP from the garage of my residential
premises, in the current property market
and economic climate I am
but one short step away from closing the doors of the business if the
Applicant persists with her outrageous
demands”
.
[8]
Bearing
in mind
that the rule 43 proceedings took place in 2011, and that the first
respondent
’
s answering affidavit
in this application was signed on 30 May 2013, I
would have expected the first respondent
to
have taken the court into his confidence and to have provided
up-to-date figures and documents relating to his, GLP’s and
the
trusts’ financial positions. Instead he only provided the
annual financial statements for the year ended 29 February
2012 for
the RSA Family Trust. The last annual financial statements
available for his business, GLP, were for the year ended
29 February
2012, which were annexed to the founding affidavit. He did not
provide GLP’s annual financial statements
for the year ended 28
February 2013, or, if that was not available, any management accounts
or draft annual financial statements
for that period. He has
provided no bank statements for the period up to 30 May 2013 for
any of the entities or himself.
[9]
The paucity of information given by the
first respondent
gives rise to the danger
that my own analysis of the available figures might give a wrong
impression of the true position.
The annual financial
statements for GLP for the year ended 29 February 2012 show, in the
income statement, that member’s
commission of R334 877.00
was paid, and salaries and wages of R1 481 659.00.
According to the first respondent
in the
rule 43 application, his three sales persons all earned purely
commission, and he paid a secretary R8 000.00 per month.
The inference then is that some R1 400 000 of the salaries
and wages for that year was drawn by himself, in addition
to the
“member’s commission”. Whilst I would not
wish to draw such an extreme inference, an adverse inference
must
nevertheless be drawn against the first respondent for failing to
place proper, up-to-date figures and explanations before
me.
[10]
It is the applicant’s case that the
first respondent has access to funds through GLP, gives preference to
paying the shortfalls
between rentals and bond instalments on the
investment properties and is not truthful about his inability to pay
the maintenance
order. The first respondent has done nothing to
negative that case. He cannot hope to persuade a court that he
is not
male fide
and wilful with regard to his non-compliance with the court order if
he contents himself with a statement that he has had to increase
his
overdraft (more correctly GLP’s overdraft) and is currently
earning less than he earned at the time of the rule 43 order,
without
making the least attempt to substantiate such allegations.
[11]
There is a further feature in this matter.
At the time of the rule 43 proceedings, the first respondent tendered
to pay maintenance
of R4 000.00 per month (apart from medical
aid and school fees). After the order was given that he should
pay a cash
portion of R35 000.00, he doggedly continued to pay
R4 000.00 per month. At no stage did he make an attempt to
pay more than R4 000.00 in any one month (notwithstanding that
he was able to source sufficient funds to pay the shortfalls
on the
bonds of the investment properties of approximately R10 000.00
per month and able to source funds to purchase a motor
bike for their
one son in October 2011 for R4 750.00). Had he not been
male fide
,
I would have expected him to have paid what he could, and to have
explained that, for instance, in one month he could only afford
R11 000.00, or in another month R9 000.00. His
obstinate approach that he would pay R4 000.00 per month (which
he had tendered) and not a cent more, is to my mind indicative of
wilful and
male fide
conduct; it amounts to thumbing his nose at the court.
[12]
Counsel for the first respondent
urged upon me to find that the matter of
maintenance should be left to the maintenance court, which he
submitted was a more suitable
forum. Even if the maintenance
court reduces the amount of maintenance payable, that does not
detract from the fact that
there has been an extant court order since
11 October 2011 which the first respondent
has
consistently flouted, and which must be obeyed for as long as it
stands. In any event, I am advised in the replying affidavit
that the maintenance enquiry has been postponed
pending the outcome of this application.
[13]
I therefore find that the first respondent
is in contempt of the court order of 11 October 2011.
[14]
The form of the order is problematic.
It is unrealistic to order the first respondent to pay the arrears
with the 10 days
sought by the applicant. It is equally
unrealistic to give him, say, six months to raise the money and to
expect the applicant
to wait for that period. I accordingly
intend to stagger the repayment of the arrears, and to extend the
period of suspension
of the committal order for a suitable period to
ensure compliance with the court order.
[15]
I then turn to the position of the trusts.
[16]
Persons are generally
entitled
to organise their financial affairs to maximum advantage without fear
of opprobrium. Trusts are well recognised as
permissible
vehicles for estate and financial planning. Corporate vehicles
are used to shelter individuals from the vagaries
and risks of
conducting a business. The separateness of a
company
frim its shareholders is recognised in law, as is
the shelter a trust provides for its beneficiaries.
[17]
A
court is entitled to “lift” or “pierce” the
“corporate veil”, which is done only in exceptional
circumstances. A court has no general discretion to disregard
the existence of a separate corporate entity whenever it considers
it
just or convenient to do so
[3]
.
One such instance where this is permitted is where the corporate
entity is the alter ego of the controlling person.
In an
appropriate case, “the veneer of a trust can be pierced in the
same way as the corporate veil of a
company
.”
[4]
[18]
Our courts have considered the question of
whether the assets of a trust should be taken into
account
when making a redistribution order in a [……]. The
following factors, not exhaustive, would point to
such a conclusion :
18.1
That
the party in question (for simplicity let me assume, the husband)
de
facto
controlled the trust
[5]
.
18.2
That
but for the trust the husband would have acquired and owned the
assets in his own name
[6]
.
18.3
If
the other trustees are close relatives or friends who are either
supine or do the bidding of their appointer
[7]
.
18.4
If
large amounts of money flow between trusts without any formal
decisions in regard thereto
[8]
.
18.5
The
fact that the wife is not a beneficiary under the trust deed
[9]
.
[19]
To
determine whether the husband had
de
facto
control, it is necessary to first have regard to the terms of the
trust deed and secondly to consider the evidence of how the affairs
of the trust were conducted during the marriage
[10]
.
[20]
The trustees of the trust are the first
respondent
(who is cited in his capacity as
trustee as second respondent) and the third respondent, which is The
Best Trust Company (Jhb) (Pty)
Ltd N.O., represented by Mr Velosa.
In effect then, the trustees are the first respondent and Mr Velosa.
[21]
There
is no real evidence in this matter of the precise relationship and
interaction between the first respondent and Mr Velosa
as trustees.
The applicant states (as a statement of fact but I assume without
personal knowledge) that Mr Velosa plays no
role in the decisions
made in respect of the trust assets. To that the first
respondent responded by referring to the terms
of the deed of trust,
and by the equally bald statement that “the Third Respondent
indeed plays an active role in the administration
of the Trusts and
decisions regarding the Trusts’ assets” and that “there
is nothing to suggest that the Third
Respondent will simply vote in
favour of any resolution I propose.”. Mr Velosa simply
confirmed this in a confirmatory
affidavit, without adding any
evidence of his own. I do not believe that I can draw any
conclusions, and certainly not bearing
in mind the
Plascon-Evans
test
[11]
, from these
allegations. However, I do find the following facts relevant :
21.1
It seems as if the first respondent has
placed all his assets into trusts. Counsel for the respondents
could not point to
any assets which had not been placed in trusts.
Thus, the RSA Family Trust owns all the furniture and household
effects,
and a life policy. The deed of donation of 2007 (there
is another which has surfaced dated September 2010) reflects a
donation
totalling R65 150.00 made of furniture, kitchen
appliances, braai equipment, camping equipment, garden furniture and
implements,
lawnmower, power tools, bathroom towels and toiletries,
cell phone, leather wallet, Rayban sunglasses and a car phone, to
mention
but a few. The other three trusts respectively own the
following :
(a)
The RSA Share trust owns GLP, a
Mercedes-Benz motor vehicle, and office furniture and equipment.
(b)
The ASR Residence Trust owns the first
respondent’s residence and a residence where his mother, who
has since passed away,
lived.
(c)
The RSA Investment Trust owns six
residential units varying in value (according to the first
respondent) of between R500 000.00
and R700 000.00 each.
Whilst I could understand
the rationale for placing a business and properties in trusts, there
does not seem to me to be any commercial
rationale for placing all
one’s household and personal effects into a trust.
21.2
The trusts were formed at a time when the
marriage relationship was already turbulent, to put it mildly.
According to the
applicant, and this is not denied by the first
respondent, the first respondent deserted her and the children seven
times during
their marriage. The applicant contends that she
was unaware of the formation of the trusts at the time. The
first respondent
does not contend that he consulted the applicant
before establishing the trusts, and simply contends that she has been
aware of
the existence of the trusts as early as 2006/2007. I
can therefore accept that he embarked upon his “prudent estate
planning” without consulting the applicant and at a time when
the marriage relationship was on shaky grounds.
21.3
From the information given by the first
respondent, all four trusts are discretionary trusts and were formed
originally with himself
and the two minor children as the
beneficiaries. Even the RSA Family Trust did not initially
include the applicant as a beneficiary.
She was added as a
beneficiary in December 2009 by way of an amendment. He
therefore formed the four trusts in such a way
as to exclude the
applicant as a beneficiary and transferred,
inter
alia,
all household effects into the
RSA Family Trust. Ironically, despite the resolution ostensibly
having been passed on 7 December
2009, the annual financial
statements for the RSA Family Trust for the year ended 29 February
2012 do not reflect the applicant
as a beneficiary of that trust.
21.4
The first respondent has, on oath, shown
that he regards and treats the assets and liabilities of the trusts
as his personal assets
and liabilities. Thus, in the rule 43
application he said the following :
(a)
“
I am an adult male estate agent,
trading as Global Lifestyle Properties CC”.
(b)
“
The only relevant point mentioned is
my immovable property …”.
(c)
(Referring to the common home, whose
furniture had been donated to a trust in 2007) “I have left all
my belongings behind
…”.
(d)
“
I have not changed my car since
2005.”
(e)
(Referring to the six investment
properties) “The properties were acquired by me before the
implementation of the Credit Control
Act (
sic
)”
and “I have obtained financing for the abovementioned
properties and obtained 100% financing for each property.”
(f)
I admit that I have a 100% membership share
in Global Lifestyle Properties CC”.
(g)
“
My mother is of an advanced age and
I elected not to put her in an old age home but bought her a property
for retirement.”
(h)
“
I have bought my mother a 1995
Toyota for her personal daily use.”
(i)
“
My Mercedes-Benz has a current value
of approximately R90 000.00.”
(j)
I have stopped giving 10% of my company
profit to the church as a religious contribution
during the latter part of 2010.”
(k)
“
Our house has up to early last year
been furnished with quality furniture and appliances.”
(l)
“…
there is a monthly
shortfall (between bond instalments and rental on the investment
properties) of R9 147.57, for which I am
liable.”
(m)
“
There is no rental income from the
properties in the ASR Residence Trust, only monthly bond payments,
rates and taxes and levies
accounts, which I pay.”
(n)
“…
my bank overdraft …”.
21.5
The aforegoing extracts from the first
respondent
’
s opposing affidavit in
the rule 43 application show that the first respondent at that time,
and after the establishment of the
four trusts, regarded all the
assets and liabilities of the trusts as his own. In other
words, the first respondent treated
the trusts as his alter ego.
21.6
Although the first respondent referred to
the RSA Investment Trust in the rule 43 application, he did not refer
to the other trusts,
and reflected, by statements such as those
quoted above, that he regarded the assets, income and expenses of the
trusts as his
own.
21.7
Mr Velosa’s role in the trusts is
equivocal, and it is not said that he would block any decision
against the wishes of the
first respondent. His involvement in
the trusts seems to be less than the first respondent
would
have me believe. In terms of the trust deed attached (said to
be the same as the others), any trustee may appoint an
alternate to
act or vote on his behalf at meetings or to sign resolutions.
The annual financial statements for the year ended
29 February
2012 for the RSA Family Trust, to which I have already referred, were
signed by Mr André Manuel da Silva
acting as alternate
signatory for Mr Velosa. Mr da Silva also signed six other
resolutions which are attached to the answering
affidavit bearing on
the RSA Family Trust.
21.8
The first respondent
appears
to have chosen his words very carefully when referring to the
involvement of Mr Velosa in his trusts. An example will
suffice. The applicant contends
inter
alia
that “the Third Respondent
plays no role in the decisions made in respect of the trust assets
…”. The
allegations are denied by the first
respondent, who then, in support refers not to the actual conduct of
Mr Velosa, but to the
terms of the deed of trust which he attached
which he says show clearly that he alone “cannot possibly
exercise
de facto
control of management, acquisition and sale of Trust assets.”
He then refers to a resolution which amended the RSA
Family Trust
deed of trust to include
inter alia
the
applicant as a beneficiary, which he says “bears testimony”
to the fact that proper procedures and governance are
followed and
that the third respondent indeed plays an active role in the
administration of the trust and decisions regarding the
trust’s
assets. What is then confirmed by Mr Velosa in his confirmatory
affidavit is that the document “bears
testimony” to those
facts, and he is spared from having to confirm that he in fact plays
an active role in the conduct and
decisions of the trusts. So
too the first respondent alleges that “there is nothing to
suggest that the Third Respondent
will simply vote in favour of any
resolution I propose.” Again, all that Mr Velosa is
called upon to confirm, is that
“there is nothing to suggest”,
and he is again spared from having to confirm actual facts. It
lies within the
direct and intimate knowledge of the first respondent
and Mr Velosa precisely what role Mr Velosa plays in each trust, and
to what
extent he is simply supine and allows the first respondent to
treat the trusts as his personal fiefdoms. They have not done
sufficient to dispel the latter, more probable, inference.
21.9
In regard to the first respondent’s
control of GLP, in his answering affidavit in this application, he
said the following :
“
54.1
I am, in my personal capacity, merely the manager [of] Global
Lifestyle Properties CC (“GLP”) and deny that,
in my
capacity as such, I am required to consult with the Third Respondent
regarding the conduct of the business of GLP or that
I simply
transfer monies at my sole discretion and refer the Court to Annexure
“
AA16
”
hereto.”
(Annexure
“AA16” is a resolution signed by the first respondent and
Mr Velosa to allow GLP to increase its banking overdraft
limit from
R250 000.00 to R280 000.00.)
The
above statement contrasts with his statement in the rule 43
application that he trades as Global Lifestyle Properties CC and
he
has a 100% membership share in GLP. It is noteworthy that he
denies that he is required to consult with Mr Velosa regarding
the
conduct of the business of GLP but paradoxically he denies that he
simply transfers monies at his sole discretion. These
are
however vague statements.
[22]
The reality seems to be that payments flow
between the trusts, GLP and the first respondent
without
any formal decisions, and clearly entirely within the control of the
first respondent.
[23
]
Accordingly, despite the applicant’s
inability to describe factually precisely what role Mr Velosa plays
in the trusts, I
am satisfied that the first respondent has created
and uses the trusts to place his assets out of the reach of the
applicant, that
he treats the trusts’ assets as his own and has
de facto
control over them. The following allegations made by the
applicant
in her founding affidavit
are therefore in my view justified :
“
9.
The trusts were established as the alter ego of the First
Respondent. He did not intend to
establish the trusts as
entities separate from his personal estate. He at all times
de
facto
controlled the trusts. He
has used the trusts as financial vehicles whereby he could amass his
own wealth and obtain a financial
advantage for himself. But
for the trusts he would have acquired the assets in his own name.”
[24]
In addition to the aforegoing, in terms of
clause 3.3 of the antenuptial contract, assets or liabilities
incurred as a result of
any business venture entered into by either
party before or during the subsistence of the marriage would be
excluded from the accrual
system,
“
save
that as soon as there is a child or children born of the marriage the
businesses owned by the parties shall with effect from
the birth of
such child or children immediately accrue to the benefit of each
party and the businesses aforesaid irrespective of
how owned by each
party shall form part of the accrual system referred to in clause 2.”
Accordingly,
the business of GLP by agreement forms part of the accrual system,
but the first respondent
has sought to
place it beyond the reach of the applicant by registering its
member’s interest in one of the trusts.
[25]
In my view then the applicant
is
also entitled to the relief on the second leg of this application.
[26]
The first respondent
’
s
conduct described above is such that I would visit my displeasure on
him in awarding costs on a punitive scale.
[27]
I accordingly make the following order :
1.
It is declared that the first respondent is
in contempt of the court order dated 11 October 2011.
2.
Apart from his obligations to continue to
pay maintenance as ordered in the court order dated 11 October 2011,
the first respondent
is ordered to pay all the arrears due under that
court order to date hereof, together with interest thereon at the
rate of 15.5%
per annum from the due date of each monthly payment to
the date of payment, to the applicant’s attorneys, Kim Meikle
Attorneys
trust account, Nedbank, Killarney
branch, account number 1165 001209, branch code 191605, as
follows :
2.1
R50 000.00 on or before 28 February
2014.
2.2
R50 000.00 on or before 31 March 2014.
2.3
R50 000.00 on or before 30 April 2014.
2.4
R50 000.00 on or before 31 May 2014.
2.5
The balance on or before 30 June 2014.
3.
The first respondent
is
committed to prison for a period of three months, which committal is
suspended for a period of one year on condition that the
first
respondent
complies with paragraph 2 of
this order.
4.
In the event that the first respondent
fails to make any payment as set out in paragraph 2 of this order,
the sheriff of this court
is authorised and directed to arrest the
first respondent and to deliver him to the relevant authorities to
serve the aforesaid
period of imprisonment.
5.
It is declared that the assets of the RSA
Family Trust, the RSA Share Trust, the ASR Residence Trust and the
RSA Investment Trust
are deemed to be assets of the first respondent
for all purposes including in any redistribution order made in the
[…..]
action between the parties.
6.
The first respondent is ordered to pay the
costs of this application on the attorney
and
client scale.”
ANDRÉ
GAUTSCHI
ACTING
JUDGE OF THE HIGH COURT
Date
of hearing
:
27
January 2014
Date
of judgment
:
14
February 2014
Counsel
for the applicant
:
P
V Ternent
Instructed
by
:
Kim
Meikle Attorneys
Counsel
for the respondents
:
E
L Theron
Instructed
by
:
Kevin
Hyde Attorneys
c:\users\morag\documents\arg\acting\2014\V.Z.
v V.Z..docx
[1]
Fakie
N.O. v CCII Systems (Pty) Ltd
[2006] ZASCA 52
;
2006 (4) SA 326
(SCA) at 344I-345A
[2]
Williams
v Carrick
1938 TPD 147
;
Bannatyne
v Bannatyne (Commission for Gender Equality, as
amicus
curiae
)
[2002] ZACC 31
;
2003 (2) SA 363
(CC) at para
[18]
[3]
Cape
Pacific Ltd v Lubner Controlling Investments (Pty) Ltd and Others
[1995] ZASCA 53
;
1995 (4) SA 790
(A) at 802G-803A;
Hülse-Reutter
and Others v Gödde
2001
(4) SA 1336
(SCA) at 1346A-C
[4]
Rees
and Others v Harris and Others
2012 (1) SA 583
(GSJ) at para [17]
[5]
Badenhorst
v Badenhorst
2006 (2) SA 255
(SCA) at 260J and 261A-B
[6]
Badenhorst
supra
at 261A
[7]
Badenhorst
supra
at 261B
[8]
Jordaan
v Jordaan
2001 (3) SA 288
(C) at 300F, para [29]
[9]
Badenhorst
supra
at 262B-C quoting from the unreported judgment of
Grobbelaar
v Grobbelaar
(TPD).
[10]
Badenhorst
supra
at 261B-C
[11]
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634-5