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[2014] ZAGPJHC 245
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T v T (2010/02268) [2014] ZAGPJHC 245 (19 September 2014)
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REPUBLIC
OF SOUTH AFRICA
IN
THE SOUTH GAUTENG HIGH COURT
JOHANNESBURG
Case no: 2010/02268
Not reportable
Not of interest to other
judges
Date: 19 September 2014
In the matter between:
T[...], W[...]
E[...]
....................................................................................................................................
Plaintiff
and
T[...],
K[...]
..........................................................................................................................................
Defendant
JUDGMENT
LAMONT.
J
:
[1] The parties were married to each
other on 6
th
October 2001 in community of property at
Bryanston. There are no children born of the marriage. The marriage
broke down irretrievably
and the plaintiff instituted action against
the defendant. Save for one issue which has two components the
parties are in agreement
on all the issues forming the subject-matter
of the action.
[2] The issue for decision is whether or
not assets which are owned by a trust including the former common
home and the shares held
by the trust in a company form part of the
joint estate.
[3] The related issue concerns the value
of the assets,
[4] At the commencement of the trial I
separated the issue of the value of the assets from the other issue.
[5] The sole issue which I must
determine is whether or not the assets of the trust form part of the
joint estate.
[6] The parties met each other during
March 1996. At that time the defendant was in the process of
obtaining a divorce from her
former husband. The defendant had two
children from that marriage. The defendant’s evidence was that
the plaintiff proposed
to her after about a month. The defendant was
not prepared to marry the plaintiff at that time and suggested a
regime whereby the
parties would first date each other for two years,
then live together for two years, then be engaged for two years after
which
if they were still satisfied that they were in love with each
other they would be married. The plaintiff had a university degree,
in B.Sc Building Management which he obtained at the University of
Pretoria. The defendant’s formal education was a Standard
9.
The plaintiff was employed as a Project Manager and the defendant as
a Store Manager. During 1997 they decided to live together
and did so
in a house which they occupied on behalf of the plaintiff’s
employer. The parties were in secure and productive
employment. The
plaintiff was however ambitious. His father was a Chartered
Accountant as was his brother. The advice which the
plaintiff
received and which coincided with his own view was that he was better
off being employed than working for his own account,
If he were
employed for himself all the funds which he could generate would
belong to him and he believed that that income would
far exceed the
income which he received as an employee.
[7] The defendant was in stable
employment and had been in the same employment for some years. She
deposited her income into a savings
account held at a building
society and was saving money in the form of policies which had been
taken out for her two children.
[8] When the defendant commenced living
with the plaintiff the plaintiff said that it would be advisable for
her to obtain an account
at the plaintiff’s bankers. The
plaintiff would take care of the money and manage it on behalf of
both of them. He would
have access to it, and withdraw monies from it
as and when he thought it advisable.
[9] The defendant's evidence was that
the plaintiff spoke of this account being a joint account. The
plaintiff denied having said
this. It was common cause however that
the defendant in fact moved her money to an account at the plaintiffs
banker and that the
plaintiff in fact managed that account. It was
common cause that he alone had access to the internet transferring
facility and
that he had moved money in and out of the account as and
when he wished including to a money market account, the business of
the
trust and the trust, it is further common cause that the
plaintiff in doing so ensured that there was an amount left in the
bank
account for the defendant to draw as and by way of cash from
time to time when she needed cash. It was also common cause that he
did not on each occasion seek the mandate of the defendant to make
the withdrawals and move the money as he did. It was apparent
from
the evidence that the plaintiff was in control of the financial
affairs and that he was the person manipulating the funds.
He agreed
that the family unit conducted its affairs out of “one pocket”,
That is a concept incorporating pooling of
income and paying all the
expenses out of the pool.
[10]
The probabilities favour the defendant's evidence. In my view it is
unlikely that she would without any reason have changed
bankers. It
is further improbable that the defendant would have permitted the
plaintiff to operate the bank account in the manner
in which he did
without a reason. The defendant’s evidence was that they
anticipated living together forever and that all
moneys they had
between them would be used in their joint interest. The plaintiff at
times in his evidence furnished two conflicting
reasons for the
manner in which the defendant’s money was used. The one reason
furnished was that he used the monies to pay
the defendant’s
expenses (day to day living expenses of the defendant, her daughters
when they lived with them and cars which
were bought for them). The
other was that he was taking care of the defendant’s money to
ensure that it grew at a better
rate than she would be able to
achieve and hence that the money would be available for her. These
are materially conflicting versions
within the plaintiffs own
evidence about why there was a joint account. This type of evidence
was persistent throughout his evidence.
For example at one time he
said he bought a car (meaning otherwise than by using her money to do
so) for the defendant and her
daughter and at another that her money
was used to pay for the cars. My impression of the plaintiff was that
he indiscriminately
said what he believed suited his case as he gave
evidence. The evidence of the defendant is also consistent with
making money available
to the plaintiff to pursue his stated object
of finding immovable property where the parties could live and which
would also be
a investment which they would share equally. It is
likely that all
“
the
family
money
”
would be used to pursue that object. At a point in time they did in
fact became engaged. The plaintiff bought the defendant a diamond
which had not been set in a ring but which represented the arrha.
Over this period the plaintiff and defendant pursued the common
object of establishing themselves as a family unit both emotionally
and economically. The plaintiff ran the financial affairs and
paid
several of the household expenses. The defendant drew cash from her
account and paid several of her own and the household
expenses. I
accept that the defendant believed, in consequence of what the
plaintiff said and did that their assets formed a unit
in which they
would share equally. At the time of the commencement of the sharing
neither party had any assets of any value or
consequence. They were
in love, starting a financial and emotional relationship which they
believed would last.
[11]
The plaintiff commenced working for his own account through a variety
of entities. Eventually the primary income earning entity
became a
company known as Pentad Project Management (“
PPM
”
).
The parties pursued the idea of buying a house. Both parties looked
for a suitable house and eventually the plaintiff found one
which the
defendant looked at and did not like it. The plaintiff persuaded the
defendant that it was the right house for them as
it was a good
investment.
[12] During this time (prior to the
marriage) the plaintiff’s father indicated to the plaintiff
that he should be sure to
protect his assets from creditors and that
he should make appropriate estate planning. This advice meant that
the plaintiff should
establish a trust and that assets acquired
should be kept within the trust. It was present in the mind of the
plaintiff that the
immovable property which was to be bought should
be owned by the trust. Later the plaintiff would acquire a trust
which would own
the immovable property and the shares in PPM.
[13] It is common cause that the
plaintiff and defendant discussed the question of the immovable
property being owned by a trust.
The difference between the evidence
of the plaintiff and the defendant is that on the defendant’s
evidence notwithstanding
the fact that the trust would own the
property it was agreed between the plaintiff and the defendant that
she and the plaintiff
would own it equally. They would be the
beneficial owners notwithstanding that they were not reflected in the
trust as much. This
is not
an
unusual situation and is recognized in our law. See e.g.
Standard
Bank of
S.A
Ltd v Ocean
Commodities inc
1983(1
)SA 276(A) at 289. The plaintiff’s evidence was that the
discussion concerning the ownership of the property related
only to
the fact that it would be owned by the trust. On the plaintiff’s
evidence he was single, earning as much as he could
for himself and
no portion of what he owned or acquired through PPM and later the
trust would be shared either with his creditors
or his wife if he
married. Hence so went the evidence the trust was a genuine free
standing entity in which only those persons
nominated as
beneficiaries would share. The defendant was not a beneficiary,
neither was the plaintiff: he was a trustee.
[14] in order to decide whose evidence
on these issues is true it is necessary to consider the
probabilities. At the time of this
discussion the parties were not
married. Their income was being pooled and used by the plaintiff
(save for the cash withdrawals
from the account by the defendant) as
and how he saw fit without any objection from the defendant. Those
monies were being deposited
to and withdrawn from a variety of
entities including PPM, a money market account owned by a company
called Blue Lakes and later
when the trust was formed by the trust
itself. The flow of monies has been charted on the schedules in
exhibit F, The parties were
in love, were going to five in the house
and in due course expected to be married. It is common cause that
over the period the
parties lived together the defendant contributed
every cent she had available to this common account and that it was
consumed.
Those contributions included contributions which resulted
from both her income and later her savings in the form of policies
she
had taken out as well as her retrenchment package. The
defendant’s evidence is that throughout she believed that she
was,
pursuant to the agreement contributing ail the monies she had to
the family and the assets the family would acquire, including the
house and the businesses of the plaintiff.
[15]
In due course the parties were married in community of property. The
effect of this is that all the plaintiff’s assets
and all the
defendant’s assets as well as the liabilities became jointly
owned. This is what the defendant had been led to
believe and did in
fact believe was just a continuation of an existing situation between
the parties. She was not made privy to
the fact that plaintiff had
nothing to share, would never have anything to share, but would share
in the defendant’s estate.
The plaintiff on the other hand
intended so he said that his assets would always be owned by the
trust which by this time had already
been formed. The effect of the
community of property
inter partes
would
be that the plaintiff would never acquire any assets (assets
generated by his endeavours were never to be owned by him). He
would
share in the only assets in the joint estate namely the defendant’s
assets. I do not accept that the plaintiffs evidence
on this point is
true. He tried at a point in his evidence to create the impression
that he had been hurried into marriage without
giving proper
consideration to it. This impression he sought to create was false.
In fact he became engaged, bought a diamond,
had an occasion to
celebrate the engagement, was engaged in close proximity to one of
the two year anniversaries and in due course
arranged a church
marriage. It is probable that he was married in community of property
as that was the arrangement between his
wife and himself. It is
improbable that at that point if he had a hidden agenda of protecting
all his assets from both his wife
and creditors that he would have
been able to raise that issue without stiff opposition from the
defendant, it is even less probable
that he without significant
objection would be able to state to the defendant that his
contribution to the joint estate would be
nil and that although on
the face of it he was contributing all he appeared to own, he was in
fact contributing nothing. On the
probabilities the plaintiff would
seek to protect assets from his creditors by not owning them himself.
This protection was against
creditors not his wife. She was not a
creditor. She was a party to an emotional and financial arrangement
in terms of which the
plaintiff and defendant shared equally. There
is nothing unusual in establishing this type of financial
arrangement. Whether or
not the defendant was actually a nominated
beneficiary was irrelevant as between plaintiff, defendant and trust.
The plaintiff
as trustee would take steps to ensure that his rights
were adequately protected in terms of the arrangement between them.
The defendant
was ignorant of the status of the financial entity and
relied on the plaintiffs explanations and his
bona tides
.
[16] This analysis leads me to conclude
that the plaintiff and the defendant agreed to share their emotional
and financial futures
equally and that the fruits of the plaintiff's
endeavours however they appeared to the outside world were to be
shared equally
between them.
[17] After the plaintiff had found an
immovable property which was suitable and the defendant had agreed
they should buy it and
live in it the plaintiff requested his father
to form a trust so that the immovable property which it was proposed
would be purchased
and be registered into the name of the trust. The
founder of the trust was the plaintiffs father and the two trustees
the plaintiff
and his brother The trust was established for the
benefit of the beneficiaries nominated in paragraph 1.2 of the trust
deed. The
beneficiaries were defined as follows in the trust deed. -
17.1 The income
beneficiaries were those persons who may benefit from the income of
the trust in terms of the discretionary powers
vested in the
trustees, and which beneficiaries were to be elected from the ranks
of the capital beneficiaries, their relatives
related to them by
blood or affinity and any trust created in terms of paragraph 15 of
the trust deed.
17.2 The capital
beneficiaries were those persons upon whom the capita! would devolve
during the currency or on termination of the
trust in terms of the
provisions of the trust deed and which beneficiaries were to be
selected from:
17.2.1 the children
of the plaintiff;
17.2.2 the legal
descendants of the children of the plaintiff;
17.2.3 any trust
created for any beneficiaries being the children of the plaintiff or
the descendants of those children;
17.2.4 the testate
or intestate heirs of the plaintiff if none of the earlier persons
referred to were alive or in existence on
the vesting date.
[18] The vesting date is the date upon
which:
18.1 The trustees
make interim distributions of capital in terms of the powers they
had.
18.2 The date on
which the trustees in their sole discretion determined as the vesting
date.
18.3 A date
determined by the plaintiff in his Last Will and Testament.
[19] The trust is a discretionary trust
and accordingly trustees with impunity can change who the
beneficiaries are. The trustees
in fact varied the terms of the trust
during 2010 to include as capital beneficiaries the children of the
plaintiffs brother. As
there was no vesting in beneficiaries, with a
stroke of the pen the plaintiff could direct anyone including both
himself and the
defendant as the beneficiaries. If there was no
vesting in beneficiaries at the time of plaintiffs death he could
govern from the
grave by dealing with the issue in his will. The
plaintiffs brother was a malleable trustee and agreed to whatever the
plaintiff
wanted. There were two trustees in name only. The plaintiff
determined ail the actions of the trust.
[20] At the time of the creation of the
trust and the transfer of the property into it the plaintiff and
defendant were not married.
They were engaged and living together.
They had been living together for some period of time. At that point
they expected to be
married and in due course were in fact married.
At that time the plaintiff knew that in the event of his marriage to
the defendant
they would not have children. At that time the
plaintiff and defendant expected their marriage to last forever. At
that time the
plaintiff knew that he would never have children if
that expectation was fulfilled.
[21] The beneficiaries contemplated by
the trust un-amended would never come into existence otherwise than
if the plaintiff nominated
them in his will as contemplated by clause
27.
[22] At the time the trust was created
the plaintiff’s mindset was that he wished to generate as much
wealth for himself as
he could by working for himself and acquiring
assets which would be good investments and which would grow as much
as possible.
He believed the immovable property to be such an asset.
In the pursuit of this object of good investment he would seek to
make
as much money as he could at as little cost as possible and with
as little risk as possible. These were his three financial
objectives.
[23] The plaintiff at all times was
conscious of his financial situation and the need to protect his
assets. That protection was
a protection which he sought against
creditors of the business which he was conducting through companies
owned by the trust. The
material issue to consider is not merely
whether he would have wanted to protect his assets but whether he
would want to and did
seek to protect them against any rights of the
defendant. The defendant’s evidence was explicit that she and
the plaintiff
were sharing equally in everything and on that basis
she was contributing all her money and effort. The plaintiffs
evidence was
that the defendant was a person against whom the
protection he sought would also operate and that she knew that the
effect of a
trust was to create an independent entity. The absurdity
of the plaintiff’s artificial distinction is apparent from the
fact
that there were no beneficiaries who could inherit and that
there was no vesting. The plaintiff could do as he wished with trust
assets. The defendant’s evidence on this point was that she was
told that whether or not it was a separate entity she would
be
protected at least as to 50% directly and that she would inherit the
remaining 50% on the plaintiffs death. During cross-examination
the
defendant was extensively examined on whether or not she had been
told expressly that she was to be made a beneficiary in the
trust.
Her evidence was somewhat garbled. I attribute this to her inability
to distinguish between the technical concept of a beneficiary,
meaning someone named in the trust and the general concept of
beneficiary meaning someone who would benefit. It was apparent that
the first concept was unknown to defendant until it was explained to
her. How well it was explained is unknown. The indiscriminate
use of
the word beneficiary in affidavits and pleadings is a matter for
which the person who drew the documents is responsible.
The defendant
was consistent in her factual explanation on this issue.
[24] It follows from the analysis that
the defendant was entitled to a vested 50% interest in the trust with
the other 50% being
held by the plaintiff.
[25] At the time of the marriage in
community of property the joint estate acquired those rights.
[26] It was submitted to me that a claim
on this basis was not properly formulated. The defendant claimed a
division of the joint
estate which was tendered by the plaintiff. The
claim for a division of the joint estate encompasses a decision on
what comprises
the estate. To this extent the pleadings are adequate.
It is true that the issue may not be readily apparent on a perusa! of
the
pleadings. Pleadings and the rules are tools devised to achieve
the abstract concept of justice.
Arendsnes
Sweefspoor CC v Dal/a Marcelie Botha (471/12)
[2013] ZASCA 86
It is trite that the
rules exist for the courts, and not
the courts for the rules (see
Republikeinse
Publikasie
(Edms) Beperk v Afrikaanse Pers Publikasie (Ed
ms) Bpk
1972
(1)
SA 773
(A) 783 A-B; Mynhardt v Mynhardt
[1986] 3 All
SA 197
;
1986
(1)456 (T) also Ncoweni v Bezuidenhout,
1927 CPD 130)
,
where it was
pertinently observed that:
the rules of
procedure of this court are devised for the
purpose of
administering
justice and not of hampering
it, and where the Rules are
deficient I shall
go as far
as
I
can in granting orders which would help to
further
the
administration of justice. Of course if one is absolutely
prohibited
by the Rule one
is bound
to
follow
this Rule, but if there
is
a construction
which
can assist
the administration of justice I shall be disposed
to adopt that
construction.'
Courts should
not be bound inflexibly by rules of procedure
unless the
language clearly
necessitates this- see
Simons v Gibert Harner & Co Ltd
1963
(1)
SA
897
(N) at 906. Courts have a discretion, which must be
exercised judicially
on a consideration of the facts of
each case
,
in essence
it
is a matter of
fairness to both parties (see
Federated Employers Fire &
General Insurance
Co
Ltd v Mckenzie
[1969] 3 ALL SA 424
;
1969 (3) SA 360
(A) at 363
G-H).
With the advent of the constitutional dispensation, it
has
become a
constitutional imperative to view the
object of the rule as ensuring a
fair trial or hearing.
‘
rules of court are delegated legislation, having statutory
force, and are
binding on the court, subject to the
court’s power to prevent
abuse of its
process/
And rules are provided to secure the inexpensive and
expeditious
completion of litigation and are devised to further the
administration
of justice (see LAWS A, third Edition
Volume 4 - paragraph 8-10
page
10
et
sec)
(see also Kgobane & another v Minister of Justice &
another
[1969]
3 ALL SA 379
or
1969 (3) SA 365
(A) at 369 F-H).
Considerations
of justice and fairness are of prime
importance in the
interpretation of
procedural rules
(see Highfield Milling Co
(Pty) Ltd
v A E
Wormald
& Sons
[1966] 3 ALL SA 27
;
1966 (2) SA 463
(E) at 465
F~G).
[27]
The matter appears to me to have been adequately pleaded and
certainly was canvassed during the course of the evidence before
me.
There can be no prejudice to the plaintiff if
I
deal
with the issue. However, assuming in favour of the plaintiff that the
pleadings were not widely enough framed I will canvass
the question
of whether or not in any event the trust and its assets fell into the
joint estate.
[28]
In order to ascertain whether or not the trust, on the face of it an
independent entity, fell into the joint estate it is necessary
to
make a decision on the question of whether or not
“
the
veil should be pierced
’
and
whether or not the entity is in fact the
alter ego
of
the plaintiff and so is an asset which is his.
[29] The reason why the trust was
created and what its purpose was has been dealt with earlier in this
judgment and I do not propose
to deal with it again. Suffice to say
that the trust and company were created at a time when the plaintiff
sought to obtain maximum
wealth at minimum cost with minimum risk. He
had no intention of divesting himself of any of his assets and
proposed to so structure
his affairs that he could make use of all of
his assets and achieve his financial objectives.
[30]
There are a number of authorities dealing with the question of the
circumstances in which in matrimonial proceedings properties
owned by
entities other than parties to the marriage have been held to form
part of an estate. See for example
Badenhorst v Badenhorst
2006 (2) SA 255
(SCA) which refers
to relevant authorities.
[31]
The submission was that in
e
ach of those cases the
court was concerned with a marriage out of community of property. In
each of those cases the court exercised
a discretion. As no
discretion was to be exercised in the present case the principles set
out in those cases were not of application.
[32] In each of the cases referred to in
the Badenhorst case the court dealt with a marriage out of community
of property with a
view to making money orders either in respect of
an accrual as to the amount to be transferred or in terms of a
Section 7(3) claim
made under the Divorce Act, Act no 70 of 1979 as
to the amount of the redistribution.
[33] The fiaw in the argument made to me
is that in each case it was necessary for the court to first
determine what the assets
were which belonged to the party against
whom the order was to be made. This involved a decision as to how big
the estate was and
what comprised the estate. Once that investigation
had been taken, a discretion was applied as to what the financial
consequences
of that decision were.
[34] There was no question of any
discretion playing any role in the formulation of the tests to be
applied in establishing whether
or not assets belonged to a
particular party.
[33] The issue in the present case is
identical. The investigation to be undertaken is whether or not the
assets in the trust are
the assets of the plaintiff and hence of the
joint estate.
[35]
In
Badenhorst
at
paragraph [8] a reminder is set out that a trust is not a separate
legal entity but rather that the assets and liabilities of
the trust
vest in the trustee. At paragraph [9] is stated that the mere fact
that the assets vest in the trustees and did not form
part of the
respondent’s estate did not
per se
exclude
them from consideration when determining what should be taken into
account.
[36] That was the milieu in which the
matter was being considered. It led to the paragraph stating:
“
A
trust is
administered and controlled by
trustees, much as the affairs of a
close corporation
are
controlled by its members and a company by its
shareholders.
To
succeed in a claim that trust assets be included in the
estate
of one of the
parties to a marriage there needs
to be evidence that such party
controlled the
trust and
but for the trust would have acquired and owned the
assets in
his own
name. Control must be de facto and not necessarily de
jure.
A nominee
of
a
sole shareholder may
have de jure control of the affairs of the
company but the
de
facto control rests with the shareholders. De iure control of
a
trust is in the
hands of the trustees but very often the
founder in business or
family trusts
appoints close
relatives or friends who are either supine or do the
bidding
of their
appointor. De facto the founder controls the trust.
To determine
whether a party has
such 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. It may be
that in terms of the trust
deed some or
all of the
assets are beyond the control of the founder, for
instance
where a
vesting is taken place by a beneficiary
,
such as a charitable
institution accepting
the
benefits. In such a case provided the party had not
made the
bequest
with the intention of frustrating the wife’s or
husband’s claim
for a redistribution
the asset or
assets concerned cannot be taken into account
[37] The present case reveals that:
37.1 The founder of
the trust was the plaintiff's father.
37.2 The trustees
are the plaintiff and his brother.
37 .3 The trust is
a discretionary trust. There is no vesting of rights in any of the
beneficiaries. The trust has been so framed
as to ensure that the
will of the plaintiff as to who the beneficiary is will be achieved
either through nomination or through
his will.
37.4 The stated
object of the plaintiff at the time the trust was created was to find
a vehicle to use to amass as much wealth as
he could as cheaply as
possible and with as little risk as possible.
37.5 The nominated
beneficiaries are persons who would never come snto existence as at
the time the trust was formed the plaintiff
was pursuing a
relationship and proposed marrying a woman who was unable to have
children. There is no suggestion that children
would have been
conceived or adopted.
37.6 The purpose of
the trust was not to create an independent vehicle but rather to
create a vehicle which would protect assets
from the plaintiff’s
creditors.
37.7 The plaintiff
would have no need to take steps to prevent assets which were not
beneficially owned as his own from creditors.
37.8 Throughout the
marriage the plaintiff and the defendant used the trust assets.
37.9 The plaintiff
manipulated the financial affairs of the trust and PPM and the money
market account as well as his own account
to set up flows of money
which were indiscriminateiy used to pay expenses and create credits.
This flow had as its objective the
benefit of the plaintiff by
allowing his access to funds and assets as he wished notwithstanding
the fixed salary he received.
37.10 The
plaintiffs brother the other trustee was supine and never took any
part in the trust affairs other than by way of preparing
the accounts
at the end of the financial year in accordance with the financial
position as he saw it. There were no meetings concerning
trust
activities, the flows of money save in limited circumstances.
37.11 The plaintiff
in the course of manipulating the affairs of the company, the trust
and his own bank account established a position
where he was able to
acquire virtually whatever assets he required at will. These included
an expensive motorcar for himself and
cars for the defendant and her
daughters, a huge income which the defendant was able to use on
credit card and by way of paying
through the various account far in
excess of the income which was plaintiffs stated income. At a point
in time the plaintiff was
earning some R350 000,00 per annum. This
notwithstanding he allowed his wife the use of a credit card on which
each month the expenses
were some R45 000,00. A simple calculation
reveals that of the R350 000,00 after tax he would have been in
receipt of some R25
000,00 per month. The amount of the defendant’s
credit card was almost double that. This simple expose of expenses
ignores
ail the others:- plaintiffs car, occupation of the home his
own day to day expenses and so on.
37.12 The plaintiff
throughout his evidence stated that he could do as he wished. He was
the person who earned the money and he
was the person who would put
the money where it was required as he saw it. The evidence revealed
that he regarded himself as the
indispensibie income carrier who had
rights to use it as he wished. In the affidavit filed in reply to the
Rule 43 application
he indicated an extremely low income with low
expenses. He was able to do this by manipulating trust affairs to
show all the other
expenses and income assets being his.
37.13 Ail the above
facts were common cause between the parties after the evidence had
been given.
[38]
I find the plaintiff to be an aggressive extremely clever, slippery,
arrogant and dishonest witness. On numerous occasions
he changed his
evidence on material issues as and when the inadequacy of his
evidence was explained to him. He said for example
at a time that he
had given the cars to the defendant and her daughters and at another
time the defendant and the daughters had
paid for them. His
explanations about why the defendant had paid money to the account
and what the money was to be used for and
why he had used it in the
manner in which he had were unacceptable. Originally whether or not
he instructed the defendant to do
so he and the defendant discussed
that money would be paid into an account which he would control with
a view to growing the money
paid in. Later this money was
indiscriminately paid into any of the accounts the plaintiff chose
and ultimately turned into Rand
nil. One of the explanations he gave
why it turned into Rand nil was that the defendant had consumed all
her costs out of the monies
paid in. The plaintiff apparently
allocated her money to the defendant and her daughters’
expenses. This was never discussed
with her nor does it appear that
it was the position originally. The defendant paid a substantial
amount of money into the account
when she was retrenched. These
monies simply vanished. Assuming there was some merit in the
plaintiffs explanation that the defendant
was obliged to pay for her
own expenses it must be remembered that he told her that she should
not work at a point. Obviously the
defendant after that time could
pay nothing. The piaintiff must have expected that she would pay
nothing as there was never any
discussion on the point. On plaintiffs
version when defendant stopped working her situation would change
dramatically as she would
not be abie to pay her way. Yet this was
never discussed. The reason there was no discussion is probably
because her position did
not change. She did not pay before and was
not to pay after she stopped work. She would have only been obliged
to pay pro rata
if she was earning an income. The plaintiff earned
significantly more than she did and there should be some monies over.
There
should at least be an accounting. There is no such accounting
which leads to the inevitable conclusion that the plaintiffs version
on these material issues is unacceptable. At a point during the trial
the plaintiff became aware of the difficulties which faced
him by
reason of the provision in the trust which provided that he could, by
will nominate what should happen to the trust assets.
Suddenly he was
explaining how a normal document which had been drafted was
unacceptable. This was never previously raised and
constituted a
remarkable
volte face.
[39] The plaintiffs evidence was
materially different in court before me to what, it was when he
deposed to the Rule 43 affidavit.
In the Rule 43 affidavit he was
indicating poverty, a very tiny income, very tiny expenses whereas in
truth and in fact he was
(as appears from the schedules in Exhibit
“F”) shifting large amounts of money, driving a very
expensive car, living
in a very expensive house and able to spend as
he pleased. His explanation of why he was able to spend as he pleased
is not only
unconvincing but evidence of the fact that he regarded
trust assets as his own. He said it mattered not what the debts were
as
he could earn more and so pay more as he wished could earn less
and so pay less as he wished. Whatever the trust needed he would
pay
and whatever he needed he would pay.
[40] I have not gone through each facet
of the plaintiff’s evidence. There are numerous other examples
of his inadequacies
as a witness. He was unable to deal with the two
primary improbabilities in the case:
40. 1 He was
structuring his affairs with a view to improving himself not some
other entity.
40..2 if he was
earning the small salary that he says he was (R350 000,00) and
spending money through loan accounts which ultimately
he would never
be able to repay. His expenses far exceeded his income and were
hidden in the books of the trust and the company.
This
notwithstanding, ultimately he was the sole source of income for all
the expenses. None of the accounts reveal this. They
reveal him in
receipt of a small salary and other money indiscriminately travelling
between entities, in truth his loan account
should have grown to
reflect his consumption of money in fact it did not.
40.3 The plaintiff
and his wife made use of the trust assets and company assets as if
they were the owners of them.
[41] On the probabilities the plaintiff
exercised control on his own in respect of all of the affairs of the
company PPM and the
trust. His brother was supine.
[42]
The second part of the test proposed in
Barnard
is
also met in that the evidence is clear that but for the existence of
the trust and PPM, the company, ali the assets would have
been in the
hands of the plaintiff.
[43]
It remains to consider the principles set out in
Rees v
Harris
2012 (1) SA 583
(SCA) at
588. This issue concerns the “
piercing of the veil'.
[44]
The principle is that the separate existence of legal entities
remains a figment of iaw liable to be curtailed or withdrawn
when the
objects of their creation are abused or thwarted (paragraph [12])
relying on the authority of
Ebrahim
and Another v Airport Coid Storage (Pty) Ltd
[2008] ZASCA 113
;
2008
(6) SA 585
(SCA). In certain circumstances accordingly the separate
identity of a company from its shareholders or controllers is
disregarded
by the court. This only happens in exceptional
circumstances. The test which is sanctioned in paragraph [14] of
Rees'
case
is the one set out in
Hulse-Reutter
and Others v Godde
2001
(4) SA 1336
(SCA) namely:
44.1 Unusual
circumstances must exist.
44.2 There is no
genera! discretion simply to disregard the existence of the separate
entity when it is considered just or convenient
to do so.
44.3 Control must
be considered.
44.4 Considerations
of policy and judicial judgment must be considered.
44.5 Some misuse or
abuse of the distinction between the separate entity and those who
control it must exist and that must result
in an unfair advantage
being afforded to the latter (the person in control).
[45]
The circumstances are unusual as has been set out earlier in this
judgment. The trust was created and intended to be a vehicle
through
which the plaintiff on his own and wife’s behalf and later the
joint estate’s behalf would accumulate wealth.
The question of
control has been dealt with
supra.
Policy
and legal principles dictate that the separate entity of the trust be
ignored, it is a waste to create an entity which by
a fiction is not
yours but which in reality is yours with a view to excluding your
wife from monies which she would otherwise be
entitled. The plaintiff
had obtained that advantage as well as the advantage over the period,
reducing the value of the assets
by increasing liabilities and
dissipating of funds. The immovable property which until recently had
a very small or no bond registered
over its assets. The monies
withdrawn from the bond were claimed to be in an account waiting to
be used to buy shares. During argument
when the dissipation issue was
raised it appeared that a significant sum had been spent. The
plaintiff being married in community
of property would not readily
without defendants consent been able to perform those acts.
[46] I separated the issue of value from
ownership. I did this on the basis of dealing with the separated
issue immediately, I decided
the ownership issue. This is no longer
possible. The order is interlocutory and can be reconsidered. If the
parties wish it to
be reconsidered and a liquidator to be appointed
they are given leave to place the matter before me to deal with this
issue. The
party seeking an audience shall within 7 days of date
hereof deliver a notice seeking such a hearing on a date to be
arranged.
[47] In the premises. The following
orders are made.
1. The joint estate
includes the assets of The W[...] T[...] Trust.
2. The action is
postponed sine die to enable the value of the joint estate to be
determined.
3 Any party
requiring the order in 2 to be reconsidered shall within 7 days of
date hereof deliver a notice seeking such a hearing
on a date to be
arranged.
4 The plaintiff is
to pay the defendant’s costs including the costs of the claim
against The W[...] T[...] Trust.
C
LAMONT
JUDGE
OF THE SOUTH GAUTENG
HIGH
COURT, JOHANNESBURG
COUNSEL FOR THE APPLICANT: Adv. T.
Strydom SC
APPLICANT’S ATTORNEYS: Louise Benn
Attorneys
COUNSEL FOR THE RESPONDENT: Adv. P.V.
Ternent
RESPONDENT’S ATTORNEYS: Schoeman
& Associates
DATE/S OF HEARING: 23, 26, 27, 28, 29
August & 5 September
DATE OF JUDGMENT: 19 September 2013