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[2018] ZAGPJHC 29
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TS v TS (28917/2016) [2018] ZAGPJHC 29 (2 March 2018)
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IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 28917/2016
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: YES
DATE:
2 March 2018
In
the matter between:
TS,
R
Applicant
And
TS,
T
Respondent
RULING OF 2 MARCH 2018
CONFIDENTIAL
DOCUMENTS AND RELEVANCE
SPILG,
J:
INTRODUCTION
1.
This is a
rule 43 application. The outstanding issues still requiring a
decision relate to spousal and a few outstanding items regarding
child maintenance. A contribution towards costs order has already
been made. On 7 August 2017 I ordered the parties to make disclosure
of certain of their financial affairs. The judgment is cited in
SAFLII as
Ts
v Ts
[2017]
ZAGPJHC 244
2.
The order
reads:
1.
The
respondent may deliver an affidavit by no later than 14 August 2017
limited to a response to the allegations contained in the
applicant’s
supplementary affidavit
2.
By
no later than 22 August 2017 the parties shall depose to an affidavit
in which they provide full detail in respect of the following
accompanied by copies of the source documents as applicable :
a.
In
the case of the applicant;
i.
The
identity of the originating source of the funds from which the
holidays and motor vehicle that were purchased in 2015 through
Westrust and in the case of the car the source from which the
instalments continue to be paid;
ii.
The
basis on which the originating source has provided the funds to the
applicant and if pursuant to a contract a copy is
require and
the material terms are required to be provided;
iii.
Every
shareholding of the applicant is required to be identified including
the number and of shares, how many shares in total are
issued. By
shareholding is included every beneficial shareholding in which the
applicant has decision making powers or in respect
of which he
ultimately receives, whether directly or indirectly any dividend or
other benefit and if so what is such benefit;
iv.
All
sums of money that are owed to the applicant by any business
including company, partnership, other joint venture or trust by
way
of a loan account, partnership capital, undistributed monies ,
current account or the like;
v.
A
list of all directorships held at any time over the past 2 years and
if since resigned;
vi.
Copies
of the last audited financial statements of each of the companies in
which the applicant held a directorship at any time
over the past two
year.
vii.
Full
particulars of any pay-out in respect of any shares in any company in
which the applicant held a directorship at any time over
the past two
years
viii.
Copies
of all bank account and investment account statements held by
or on behalf of the applicant since 1 January 2017 to
date
ix.
Copies
of all credit card and shopping card statements held by
applicant or which she is entitled to use since January 2017
b.
In
the case of the respondent;
i.
A
copy of the Masingo Royal Trust Deed and all amendments to it;
ii.
The
identity of the donor, each trustee and beneficiaries of the Masingo
Royal Trust with their contact addresses;
iii.
All
letters to the trustees regarding the operation of the trust,
including any discretionary powers given to them;
iv.
How
the trustees are to exercise their powers;
v.
The
basis on which the respondent resides on any of the properties of the
trust;
vi.
Whether
the respondent has the use, benefit or other right in any other
property or asset of the Masingo Royal Trust and when did
he commence
deriving same;
vii.
What
is the value of each of the benefits derived by the respondent from
trust identified separately;
viii.
Is
the respondent a donor, trustees or beneficiary of any other Trust
and if so the contents of all the preceding paragraphs are
repeated;
ix.
Every
shareholding of the respondent is required to be identified including
the number and of shares, how many shares in total are
issued. By
shareholding is included every beneficial shareholding in which the
respondent has decision making powers or in respect
of which he
ultimately receives, whether directly or indirectly any dividend or
other benefit an if so what is such benefit;
x.
All
sums of money that are owed to the respondent by any business
including company, partnership, other joint venture or trust by
way
of a loan account, partnership capital, undistributed monies ,
current account or the like;
xi.
A
list of all directorships held at any time over the past 2 years and
if resigned;
xii.
Copies
of the last audited financial statements of each of the companies in
which the respondent held a directorship at any time
over the past
two year;
xiii.
Full
particulars of Any pay-out in respect of any shares in any company in
which the respondent held a directorship at any time
over the past
two years;
xiv.
Copies
of all bank account and investment account statements held by
or on behalf of the respondent since 1 January 2017 to
date;
xv.
Copies
of all credit card and shopping card statements held by
the respondent or which he is entitled to use since January
2017;
3.
At the time
of the last hearing the applicant had produced all the required
documents. The respondent however contended that a number
of
documents that were ordered to be produced were not relevant to the
rule 43 enquiry and are confidential. It is accordingly
necessary to
consider their status.
4.
The
respondent adopts a position that because the marriage is out of
community of property without the accrual system he is protected
from
having to disclose his financial status. This is a somewhat belated
point that should have been dealt with when the disclosure
issue was
argued. I will however allow it at this stage but the failure to
raise it at the appropriate time does have cost implications.
MARRIAGE
UNDER AN ANTE NUPTIAL CONTRACT AND DISCLOSURE OF FINANCES
5.
The
financial aspects of a rule 43 are directed at providing child
maintenance, spousal maintenance or a contribution towards cost.
The
relative financial obligations of each spouse has nothing to do with
the patrimonial consequences of a divorce but everything
to do
with the application of
s 7(1)
of the
Divorce Act 70 of 1979
[1]
and, in respect of a contribution towards costs, by ensuring a
level playing field when it comes to litigation between them.
[2]
6.
A court
would be unable to determine whether there has been a proper
disclosure of available income and the parties respective means
to
provide for maintenance or be able to litigate on a relative par
without assessing the available source of funds that historically
have been used to support the family prior to the parties’
separation and whether that has changed to any marked degree bearing
in mind that the households have been split.
7.
Where the
parties are wage earners employed by a complete outsider who, to
adopt a term from company law, is not a related person
[3]
,
then a court will have confidence in accepting pay slips, IRP5
forms and tax returns. The respondent is not an unrelated
party in
respect of the companies in which he held directorships or continues
to have a not insubstantial shareholding. There are
also
discretionary trusts in which he is a donor, trustee or beneficiary.
The fact that the applicant was removed as a beneficiary
confirms his
level of control over decisions taken in the structuring of the
trusts and the utilisation of its funds.
8.
Legal
entities and trusts are accepted means whereby income and assets may
be distributed in forms other than salary or cash. They
also enable
income to be deferred via retention in loan accounts or being
converted into investments or equity. Another illustration
is where
one legal entity passes a debit in its books resulting in the
transfer of funds to another entity which in turn may either
park the
proceeds or else immediately distribute them in one form or another
for the ultimate benefit of one of the parties to
the proceedings.
These
various structures may also facilitate the provision of readily
available or recurring revenue streams that are habitually
used by
one or both parties to the marriage to maintain the family lifestyle.
The mere fact that the revenue received is not reflected
in a regular
payslip or IRP5 return is of no consequence- at best these documents
are pieces of evidence. They however can never
be conclusive in such
circumstances since they are unlikely to account for funds received
in the form of loan account repayments
or of other benefits having an
economic value, such as the
de
facto
indefinite
occupation of residential property in the name of a trust, the use of
a company car or the provision of groceries through
a company credit
card, the payment of insurance premiums and the like.
9.
The nature
of the financial disclosure requirements in the Form E used in
matrimonial proceedings in England indicates that its
jurisdiction is
fully alive to the various means by which financial benefits have
actually been received and have been used to
maintain the family
during the marriage.
10.
In the
present case there are a number of trusts that have been established
and it is evident that much thought has gone into efficient
tax
planning.
11.
I might
consider going further in those cases where either there has been an
unequal contribution by one spouse based on their relative
earning
capacity and accumulated wealth or in cases where the one spouse may
have contributed financially or provided other material
assistance
such as skills or labour to the business in the expectation that the
marriage would last.
12.
The one
party may also exercise exclusive control over the use and
distribution of funds derived from the business despite the other
party having made a significant financial contribution. At best a
party will claim the existence of a universal partnership and
its
application is with respect well illustrated in the as yet unreported
decision of Brooks J in
Zincume
NO v Dukada and others
delivered
on 14 November 2017 (case no 534/2016 Eastern Cape Local Division,
Mthatha) is with respect a good illustration.
However
in a case I have just dealt with under
rule 43
, well over half of a
considerable retirement pay out was used to finance the husband
controlled business and to fully pay up bonds
that might otherwise
have been serviced out of business profits. Issues such
as
de
facto
gender
inequality over financial affairs within a marriage where the wife
has contributed capital to the husband’s business
or
allowed it to retain earnings for growth, without being given a stake
in the belief that the marriage would last, do not appear
to have yet
engaged the courts.
13.
The fact
that the English courts have on occasion ignored the limitations of
our ante nuptial contract regime suggests that there
are other
considerations of fairness that might militate against its mute
acceptance in suitable cases that may be worthy
of
consideration within a constitutional framework.
RELEVANCE
AND CONFIDENTIALITY
14.
Properly
categorised the position adopted by the respondent is that certain of
the documents are not relevant to the outstanding
issues because the
applicant has no legal right to maintenance. There is also an
argument raised that the disclosure of some
of the documents would
reveal the respondent’s financial investments.
15.
Adv
Fhedzisani
for
the respondent argued that the present case is different since the
applicant had expressly waived her right to claim maintenance.
Firstly
the ante nuptial contract provides that there would be no system of
accrual and that there would be no community of property
or community
of profit and loss.
Secondly
clause 25 of the various trusts in which the applicant was originally
a beneficiary deals with the ring fencing of destitutions
made to a
beneficiary so as to ensure that it does not fall into a joint
estate.
16.
As
mentioned earlier the issue is one of both spousal and child
maintenance
pendente
lite
,
while the claim for a contribution towards legal costs has already
been determined. These issues do not concern the distribution
of
property but the provision of maintenance out of the resources of one
or other of the parties, while tight to a contribution
for costs
would have been fundamentally concerned with a constitutional right
of access to justice, not with the distribution of
assets.
17.
The court
requires full financial disclosure because the nature of the
structuring of the respondent’s finances is such that
a court
would be failing in its obligations to make a proper determination
under
rule 43
(as read with the Children’s Act insofar as the
outstanding issues of maintenance impact on the children) if it was
not put
in a position to consider them.
18.
There is
another reason why full financial disclosure is necessary. The
applicant, who is the defendant in the divorce action,
has
counterclaimed that in consideration for signing an ante nuptial
contract the parties agreed verbally that if the marriage
terminated
there would be certain proprietary settlements the respondent would
make and he would also pay rehabilitative maintenance.
It is also
alleged that subsequent to the marriage and in 2005 the parties
agreed to jointly register West Side Trading in which
the applicant
would be the sole shareholder and that the profits of the business,
which it was agreed required the active involvement
of one of the
respondent’s companies, would provide ongoing financial support
for the applicant’s personal wellbeing.
Accordingly
the issue of ongoing financial support through structures over
which the respondent has control or a meaningful
say, if correct,
translates inter alia to the provision of ongoing maintenance.
Accordingly one of the
lis
before
the court at the main trial is the question of maintenance. The
argument that the documents are not relevant because there
is no
maintenance issue before the court must therefore fail.
19.
The
respondent however adds another leg to his argument. If the documents
are to be considered then the applicant cannot have regard
to their
contents for any purpose other than maintenance.
Adv
Mokotedi
argues
that the applicant’s hands cannot be tied in this manner.
20.
Frisky
there is an impracticability about implementing a condition of this
nature. I know of no Chinese wall that would allow the
applicant and
her legal representatives to disabuse their minds of the contents of
the documents. Nor should they.
21.
I start off
on the premise that this is an
a
fortiori case
of careful financial planning. Accordingly company payslips or
documents showing the resignation of directorships are inconclusive.
What they are relevant in demonstrating, due to the respondent’s
ability to have a say in the control of the companies and
trusts
involved, is that the monthly income now disclosed is incapable of
supporting the family lifestyle which the parties have
enjoyed. As a
result the court must treat them as inadequate and must undertake a
lifestyle assessment based on proper financial
disclosures.
22.
Financial
disclosure was ordered precisely for the purpose of enabling each
party to more properly assess their respective positions,
to present
argument based on a more informed position, to have an available
remedy for misrepresentation or material non-disclosure
and to enable
the court to make an order based on an informed decision which
available data indicates is likely to be of final
effect for the
reasons set out in
Ts
v Ts
at
paras 5 and 11.
23.
Secondly I
do not consider the case which the applicant makes out in her
counterclaim to be evidently vexatious or frivolous. The
papers
reveal the establishment of West Side Trading 334 (Pty) Ltd and the
applicant has been consistent in contending that the
respondent has
frustrated her ability to derive income out of the company. The
respondent’s allegations in reply support,
a least
prima
facie,
an
arrangement whereby she would derive income out of the tenders that
would be obtained by the company and which necessitated the
involvement of the respondent and a company effectively controlled by
him.
24.
Since full
financial disclosure is essential having regard to the financial
structures each party has had established or in which
they find
themselves there is no scope for limiting the use to which
information can be used in the main action, even if one could
find a
practical way of doing so. In any event it would have to be
discovered.
25.
I fully
understand that such information may be of a private nature and
should not be placed in the public domain without a substantive
application which is duly considered by a court after hearing the
respondent. I accordingly will provide such protection in the
order I
make.
COMPLIANCE
WITH THE DISCLOSURE ORDER
26.
The
respondent has provided a substantial number of documents pursuant to
the earlier order requiring financial disclosure. Only
the applicant
would be able to indicate whether they are complete. I will therefore
leave it to the applicant, once she has considered
the documents
produced, to indicate whether they are sufficient for purposes of
dealing with the outstanding issues in the rule
43 application.
COSTS
27.
The
respondent should have raised the present argument at the previous
hearing. This was not done and since the argument is unsuccessful,
it
is appropriate that the respondent should bear the wasted costs of
the hearing on the opposed scale.
ORDER
28.
I
accordingly order that:
1.
The
respondent is to deliver to the applicant by no later than 9 March
2018 the
full
set of documents that were filed in court pursuant to the
financial disclosure order granted on 7 August 2017 (“the
disclosure documents”). The documents consist of;
a.
Two lever arch files with dividers titled:
i.
Ante nuptial contract
ii.
Group Financials
iii.
Trusts
iv.
Banks
v.
Investments
vi.
Directorships
vii.
Financials of Trusts
viii.
SARS
b.
A bundle of various further documents
dealing inter alia with one of the Trusts, a property acquired by the
trust, maintenance calculations
, payment history and certain emails
c.
A bundle of documents described as;
i.
Credit facility;
ii.
Facility tiers
iii.
Facility approval
iv.
VAT
2.
The disclosure documents may not be published and may only be
utilised in relation to any litigation between the applicant and the
respondent or the children born of the marriage. This is without
prejudice to the rights any person may have to apply to this court
that such document or part thereof that might be used in the court
proceedings be published.
3.
The court will hear argument on the
outstanding rule 43 issues on a date to be agreed or determined by
the court
4.
The respondent is to pay the wasted costs
of the hearing of 13 February 2018 on the opposed scale
____________
SPILG J
DATES
OF HEARING: 13 February 2018
DATE
OF JUDGMENT: 2 March 2018
FOR
APPLICANT:
Adv K Mokotedi
Lingenfelder & Baloyi
Inc
FOR
RESPONDENT: Adv M
Fhedzisani
Thantsha Attorneys
[1]
See also
W v H
2017 (1) SA 196 (WCC)
[2]
See
Cary v Cary
1999
(3) SA 615
(C) at 621D-E and
Ts
v Ts
at para 59
[3]
See
s2(1)(a)
to (c) of the
Companies Act 71 of 2008