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[2013] ZAWCHC 158
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Seidel v Lipschitz NO and Others (24960/11) [2013] ZAWCHC 158 (24 October 2013)
THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE HIGH COURT)
Case No: 24960/11
In the matter between: Not reportable
BERENICE SEIDEL
(born RUBIN, formerly BAUM)
APPLICANT
And
KENNETH LIPSCHITZ
N.O.
FIRST
RESPONDENT
MICHAEL
JOHN ANDREW TEUCHERT N.O.
SECOND
RESPONDENT
PETER
POSNIAK N.O.
THIRD
RESPONDENT
Coram
: ROGERS J
Heard: 14 & 15 OCTOBER 2013
Delivered: 24 OCTOBER 2013
______________________________________________________________
JUDGMENT
______________________________________________________________
ROGERS J:
Introduction
The applicant is the surviving spouse of the late Wolf
Seidel (‘the deceased’). They were married by Jewish
rites
on 16 September 1981 and by civil law on 20 May 1996. They
both had children from previous marriages. The deceased died on 4
October 2010. The applicant, who is now 74, claims maintenance from
the deceased estate in terms of the Maintenance of Surviving
Spouses
Act 27 of 1990 (‘the Act’).
The first three respondents were cited in their
capacities as the executors of the deceased estate. They were cited
again as the
4
th
to the 15
th
respondents in
their capacities as the trustees of four
inter vivos
trusts
established by the deceased during his lifetime for the benefit of
his four children from the previous marriage. The third
respondent
resigned as an executor after the institution of these proceedings.
In her notice of motion the applicant claims
maintenance from the respondents (in their multiple capacities) in
the amount of
R80 000 per month increasing annually by 10% or
by CPI, whichever is the lesser. The respondents oppose the
application,
contending that the applicant is not in need of
maintenance as contemplated in the Act. The applicant’s
current legal team
took over from the applicant’s previous
legal representatives during September 2013. Mr F Joubert SC,
leading Mr M Garces,
appeared at the hearing before me on 14 and 15
October 2013 (they were not the authors of the heads of argument
filed on behalf
of the applicant). Ms Gassner SC appeared for the
respondents.
The main application was launched on 8 December 2011.
On the next day the applicant filed an urgent application for
interim maintenance.
That application was settled by way of a
consent order made on 14 December 2011. In terms of that order the
executors agreed
to pay the applicant a monthly amount of R45 000
and it was further agreed that the applicant would be entitled to
continue
living at the former matrimonial home,17 De Wet Road Bantry
Bay. I was informed that the interim amount was increased to R47 500
as from June 2012. I am satisfied that the respondents’
consent to pay interim maintenance was a step taken to avoid legal
costs and did not involve a concession that the applicant was
entitled to that or any other amount and did not set a benchmark
for
her maintenance needs.
The legal framework
Our common law did not accord to a surviving spouse a
right to claim maintenance from his or her deceased spouse’s
estate.
This legal position was changed by the Act which came into
force on 1 July 1990. A surviving spouse’s claim for
maintenance
is entirely governed by the provisions of the Act.
In terms of s 2(1) of the Act the survivor of a
marriage dissolved by death has a claim against the estate of the
deceased
spouse ‘for the provision of his reasonable
maintenance needs until his death or re-marriage in so far as he is
not able
to provide therefore from his own means and earnings’.
Section 3 reads thus:
‘
Determination
of reasonable maintenance needs. –
In
the determination of the reasonable maintenance needs of the
survivor, the following factors shall be taken into account in
addition to any other factor which should be taken into account:
(a) the amount in the
estate of the deceased spouse available for distribution to heirs and
legatees;
(b) the existing and
expected means, earning capacity, financial needs and obligations of
the survivor and the subsistence
of the marriage; and
(c) the standard of
living of the survivor during the subsistence of the marriage and his
age at the death of the deceased
spouse.’
The expression ‘own means’ is defined in
s 1 as follows:
‘“
own
means”
includes any money or property or other financial benefit accruing to
the survivor in terms of the matrimonial property law or
the law of
succession or otherwise at the death of the deceased spouse’.
The leading authority on the approach to applications
for maintenance in terms of the Act is
Oshry v Feldman
2010
(6) SA 19
(SCA). It was held in that case, among other things, that
the phrase ‘existing and expected means’ in s 3(b)
did not include acts of generosity (para 35). The legislature did
not intend to draw a distinction between ‘existing and
expected means’ and ‘own means’. The relevant
provisions of the Act had to be construed in accordance with
constitutional norms and values, with dignity (particularly of the
vulnerable) being a prized asset:
‘
The
Act was intended to ensure, in the event that the stipulated
jurisdictional requirements were met, that the primary obligation
of
a spouse, who owed a duty of support, continued after the death of
that spouse. In effect, the executors of the deceased’s
estate
step into his shoes. To construe these provisions so as to make
surviving spouses dependent on the largesse of others, including
their children, defeats the purpose of the Act.’
The main point decided in
Oshry
was that a court
may, if it is shown that the survivor is in need of maintenance,
award a lump sum; the court is not confined
to ordering the payment
of periodic maintenance until death or re-marriage. In the course of
its reasoning, the court said the
following in a passage to which
both counsel referred me (para 56, emphasis in the original):
‘
In
claims under the Act the rights of beneficiaries and legatees are
implicated. Section 3(a) of the Act obliges a court to take
into
account the amount in the estate available to heirs and legatees.
This, of course, has to be balanced against the factors
that bear
upon the claimant for maintenance, as set out in s 3(b) and
s 3(c) of the Act, referred to in para [28] above.
These include
the claimant’s needs and financial means and obligations, the
subsistence of the marriage and the couple’s
standard of living
during the marriage. Importantly, s 3 states that these factors
must be considered together with
any
other factor
that should be taken into account. A court is thus obliged to
consider the totality of the circumstances of a case to arrive at
a
just result.’
Affordability
It is common cause that if the applicant’s
reasonable maintenance needs amount to R80 000 per month, the
deceased estate
can afford such maintenance. The value of the assets
in the estate otherwise available for distribution to legatees and
heirs
exceeds R30 million.
Factors of a general nature
The applicant, as noted, is now 74. She was 42 when she
and the deceased were married by Jewish rites in September 1981 and
56
when they were civilly married in May 1996. Their union lasted 29
years, while the duration of their civil marriage was 15 years.
Their relationship was by all accounts a happy one. There were no
children born from the union. The deceased had four children
from a
previous marriage while the applicant had three children from a
prior marriage.
The deceased was an astute businessman. He built up the
Cape Bag group of companies into a prosperous business. The parties
maintained
a comfortable upper middle-class existence. Their
lifestyle was not lavish, though no doubt their means would have
permitted
greater extravagance than they displayed. At the time of
the deceased’s death they were living at 17 De Wet Road Bantry
Bay (‘the property’). The applicant has continued to
reside there since the deceased’s passing. The property
is
owned by Elshamar (Pty) Ltd (‘Elshamar’), the shares in
which are held as to one quarter each by the four children’s
trusts.
The applicant did not pursue gainful employment during
her marriage with the deceased though she seems to have earned a
nominal
salary from the Cape Bag group. It is common cause that she
has no capacity to earn income from employment. Such means as she
has to maintain herself are constituted by capital assets which do
or can generate income and by rights to income which she enjoys.
She
is in reasonable health. There is no evidence to indicate that her
life expectancy is greater or less than the average life
expectancy
of a woman of her age and socio-economic circumstances. Prospects of
re-marriage were not canvassed in the papers.
One knows that widowed
people in their 70s do sometimes remarry though it is not
particularly common. If the applicant were to
remarry, it is likely
to happen sooner rather than later.
According to the first liquidation and distribution
account lodged by the respondents on 15 December 2011, legatees will
receive
R25,35 million and the four residual heirs will receive a
quarter-share each of R4 693 694. The residual heirs are
the four children’s trusts. Certain further assets have been
uncovered which will be reflected in a second liquidation and
distribution account. These further assets will presumably also go
to the residual heirs in quarter-shares. The liquidation and
distribution account does not reflect the applicant as a creditor in
respect of maintenance. If she were entitled to maintenance
from the
estate, this would reduce the amount awarded to the residual heirs
and potentially the amounts that can be paid to legatees.
For
example, if the applicant’s reasonable maintenance needs
amounted to R80 000 per month (as claimed in the notice
of
motion) and if this were to be provided for by payment of a lump sum
which would generate that monthly amount over the rest
of the
applicant’s lifetime (based on the applicable life tables),
the required lump sum (using the formula devised by
the respondents’
actuarial expert, Mr Munro) would be R9 104 000. Subject
to the value of assets to be reflected
in the second liquidation and
distribution account, it seems likely that the applicant’s
maintenance claim in the notice
of motion would result in the
residual heirs getting nothing and that there might be a need to
reduce legacies
pro rata
. They are legacies totalling
R400 000 in favour of charitable institutions. The bulk of the
legacies are in favour of family
and relatives. There is no evidence
before me as to the financial position and needs of the legatees or
of the beneficiaries
of the four children’s trusts.
The applicant’s means
In his will and codicil the deceased made the following
provision for the applicant:
[a] In the will he bequeathed to her a cash
sum of R150 000. The parties were in agreement that the effect
of clause
2.2.2.1(b) of the will was to constitute her interest in
that sum as a usufruct so that she will only benefit from interest
earned
on the bequest.
[b] In the codicil he established a
testamentary trust for the applicant’s benefit to which he
bequeathed R1 million
on the basis that the whole of the net income
of the testamentary trust should devolve on and be paid to the
applicant for as long
as she should live. On the applicant’s
death the testamentary trust will terminate and the capital then held
is to be distributed
to the deceased’s heirs in terms of clause
2.7 of the will, ie in equal shares to the four children’s
trusts.
[c] The deceased recorded in his will that
the applicant and the deceased’s four children were in equal
shares
beneficiaries of his pension fund and living annuity policy.
(This was not a bequest as such. During his lifetime the deceased
nominated these persons as the beneficiaries of the annuity upon his
death.) The monthly income stream from the applicant’s
one-fifth share of the annuity is currently an after-tax amount of
R15 393. She has been or will be awarded a pension fund
death
benefit of R196 000.
[d] The deceased recorded in his will that
the entire contents of the house at 17 De Wet Road belonged to the
applicant
and did not form part of his estate. (Again, this was not a
bequest.)
[e] The deceased directed his executors to
purchase for the applicant the motor vehicle she was using in her
capacity
as an ‘employee’ of the Cape Bag group and to
award it to her for her own and absolute use.
Apart from the provisions of the will and codicil, the
deceased in his capacity as settlor left certain letters of wishes
regarding
the four children’s trusts and regarding an offshore
trust known as the Kelly Trust:
[a] In regard to the four children’s
trusts (which own the shares in Elshamar, the company that owns the
property),
the deceased expressed his wish that the trustees should
as far as possible so arrange matters that the applicant can continue
to live in the house on the basis that the applicant should not be
responsible for any expenses relating to the property or be liable
for any rent. He stated that if the trustees deemed it necessary to
sell the house it was his wish that the trustees provide the
applicant with accommodation of similar standard and that the
applicant should likewise not be responsible for any expenses
relating
to the new accommodation nor liable for any rent during her
lifetime.
[b] In regard to the Kelly Trust, the
deceased expressed the wish that the trust should pay US$ 150 000
to
the applicant on his death.
Pursuant to the letters of wishes relating to the
children’s trusts, the trustees of the various trusts formally
resolved
on 8 August 2012 to give effect to the deceased’s
wishes. They resolved
inter alia
that they would instruct the
directors of Elshamar to pass the necessary board resolution
allowing the applicant to reside rent-free
for her lifetime either
at the property or in accommodation of a similar standard; and they
resolved further that they would
instruct the directors to pay
certain expenses directly associated with the property and where
necessary engage directly with
outside parties to render the
required services, namely: rates and taxes; electricity, water,
refuse, sewerage and service charges
levied by the municipal
authority, subject to the proviso that the applicant’s water
and electricity consumption should
be reasonable; swimming pool
maintenance; and the reasonable cost of maintaining the interior and
exterior of the property in
a sound and good state of repair,
limited to the expenses set out in an annexure to the resolution.
Mr Joubert did not argue that the trustees’
resolutions failed to provide the applicant with legal certainty
relating to
her right of accommodation and to the covering of the
expenses mentioned in the resolutions. I nevertheless put it to Ms
Gassner
for the respondents that it would be preferable for these
matters to be incorporated in an agreed order. She took instructions
and informed me that the trusts would have no objection to the
content of their resolutions being incorporated as an order in
favour of the applicant. The provision made in this way for the
applicant’s accommodation and for the meeting of
property-related
expenses does not constitute largesse of the kind
contemplated in para 35 of
Oshry
. The trustees intended that
their resolutions would confer a right on the applicant and this
will be confirmed by the order to
which the trusts have consented.
In regard to the deceased’s letters of wishes
concerning the Kelly Trust, the corporate trustee notified the
executors on
8 June 2011 that they were minded to give effect to the
deceased’s wishes and confirmed that they had set aside an
amount
of US$ 150 000 for the applicant. On 27 March 2013
the Kelly Trust paid this sum to the applicant. The precise amount
received by the applicant in rands has not been stated by the
applicant but she has not challenged the respondents’
assertion,
based on the prevailing exchange rate, that she would
have received about R1,39 million.
The applicant was also the deceased’s nominated
beneficiary in respect of an Old Mutual life insurance policy (no
mention
of this was made in the will or codicil). The proceeds
received by the applicant on this policy amounted to R749 935.
Apart from these various benefits flowing from the
deceased’s will and codicil, his letters of wishes and from
nominations
as beneficiary in respect of pension fund and annuity
benefits, the applicant at the date of the deceased’s death
owned
capital assets worth R2 829 884 (comprising
immovable properties, investments with Allan Gray, Stanlib and BOE
and
a container investment). She also held her own living annuities
with Investec and Old Mutual which generated monthly income of
R1 275 in her 2011 tax year.
In summary, her financial means (excluding the benefit
of rent-free accommodation and the meeting of property expenses in
accordance
with the resolutions of the children’s trusts) are
the following:
[a] Monthly income streams from her share of
the deceased’s annuity and from her own annuities totalling
R17 668
.
[b] The right to such income as can be
generated from the amounts totalling
R1 150 000
granted to her as usufructuary or trust benefits under the will and
codicil.
[c] Capital assets (constituting her own
assets at the date of the deceased’s death, the award from the
Kelly Trust,
the proceeds of the Old Mutual policy and the death
benefit from the pension fund) of R5 159 819. The
respondents, in
reckoning the applicant’s means, have deducted
from this capital value an amount of R620 615. This is the sum
of expenditure
incurred by the applicant on her Cape Bag credit card
after the deceased’s death and which Cape Bag has debited to
her loan
account with the company. Whether the applicant will be
obliged to repay the sum is uncertain. With the deduction of this
amount,
the net capital assets total
R4 549 204
.
The respondents say that at 5,1% per
annum the income benefit from the usufructuary and trust assets of
R1 150 000 would
generate
R4 888
per month until the applicant’s
actual death. This rate of return has not been challenged.
The respondents’ actuary
performed a further calculation to determine the monthly amount
which the applicant’s net
capital assets could generate for
the applicant assuming a standard investment income and assuming
that by the date of the applicant’s
assumed death the capital
would be reduced to nil. In accordance with the applicable life
tables, the applicant’s life
expectancy would be 85
1/4
years. Mr Munro used a net capital
amount of R4 396 005 in his calculations (not R4 539 204)
because at that
stage he took the Kelly Trust award at only
R1 227 900 (rather than R1,39 million) but slightly
overstated the Old
Mutual proceeds (R762 836 rather than
R743 935). However, his methodology provides a formula for
determining the monthly
amount for any assumed capital sum: on his
assumptions, R1 130 800 of capital would generate an
after-tax amount of
R10 000 per month over the applicant’s
assumed lifetime, with such capital reducing to nil by the date of
assumed
death. This formula assumes standard annual inflation of
5,4% over the remainder of the applicant’s lifetime. In terms
of this formula, net capital of R4 539 204 would generate
an after-tax amount of
R40 142
per month until the applicant’s
assumed death at 85
1/4
,
increasing annually at 5,4%.
1
On this basis the applicant’s
means would enable her to spend
R62 698
per month on her maintenance until
her assumed death at 85
1/4
.
2
Of this amount, at least R40 142
would annually increase at assumed CPI of 5,4%. The component of
R4 888 from the usufructuary
and trust assets would not
increase annually. It is unclear whether the monthly income from the
applicant’s one-fifth share
of the deceased’s annuity
and the monthly income from her own two annuities (currently
totalling R17 668) will increase
annually. In response to a
question from the court, Ms Gassner delivered a supplementary note
attaching a letter from the relevant
broker dated 16 October 2013,
from which it appears that the present capital value of the
applicant’s one-fifth share of
the deceased’s annuity is
R1 969 636 which is generating current after-tax income of
R18 656 (somewhat higher
than the after-tax figure of R15 393
stated in the papers). Because this is a living annuity, the
applicant may withdraw
variable sums per month within certain
parameters. Ms Gassner points out, however, that if the Munro
formula were applied to
the capital value of R1 969 636,
that sum would generate R17 418 per month increasing annually
in accordance with
normal inflation until the applicant’s
assumed death at 85
1/4
.
3
Mr Munro’s calculation proceeds on the basis that
the applicant’s means include her capital and not merely the
income
which the capital can generate. I think that is correct.
There is nothing in the Act to indicate that a surviving spouse is
entitled
to keep her capital intact in the assessment of the means
at her disposal to fund her maintenance.
The respondents’ setting out of the applicant’s
means and the calculation of the overall monthly amount available to
her until an assumed date of death at 85
1/4
was not
seriously challenged by the applicant. In a supplementary replying
affidavit the applicant’s actuaries, Arch Actuarial
Consulting
(‘Arch’), performed calculations on three alternative
scenarios. The first scenario used a life expectancy
of 85
1/4
(ie in accordance with Mr Munro’s assumption) but assumed that
maintenance inflation would be 1% above CPI of 5,48%. In
the second
and third scenarios Arch assumed a life expectancy of 90 and 95
respectively but allowed a 10% contingency deduction.
In the first
scenario Arch unsurprisingly came to an answer very similar to that
of Mr Munro – namely that for every R10 000
amount of
monthly maintenance a capital sum of R1 135 999 would be
needed (Mr Munro’s capital sum was R1 130 800).
In
the second and third scenarios (and after deducting the contingency
allowance) the capital sum required to generate R10 000
per
month increased to R1 365 674 and R1 887 842
respectively. It is not apparent from the Arch report why
maintenance inflation was assumed to be higher than CPI. On Arch’s
first scenario calculation, the capital of R4 539 204
would generate
R39 958
per month until an assumed date
of death at 85
1/4
. In scenarios 2 and 3 the monthly
amount drops to R33 238 and R24 044 respectively.
Mr Munro and Arch performed separate calculations to
determine the capital sum needed to generate R1 000 per month
for medical
aid, increasing in line with medical inflation. Mr Munro
assumed medical inflation of 8% (ie 2,6 percentage points above
ordinary
inflation of 5,4%) whereas Arch assumes medical inflation
at 9,14% (ie 3,66 percentage points above assumed ordinary inflation
of 5,48%). However, in the answering papers the respondents as
executors have tendered that the estate will pay the applicant’s
medical aid premiums for a reasonable comprehensive medical aid
cover (but excluding excess payments or medical expenses not
covered
by such medical aid). Once again, Ms Gassner confirmed that this
could be incorporated in an order.
The applicant’s reasonable maintenance needs
In the determination of the applicant’s
reasonable maintenance needs one must leave out of account the cost
of accommodation
and the other property-related expenses covered by
the resolutions of the children’s trusts; and one must also
leave out
of account the cost of membership of a reasonably
comprehensive medical aid, since this has been tended by the estate.
These
resolutions and tender will apply until the applicant actually
dies, whether that is sooner or later than her ordinary life
expectancy
of 85
1/4
.
A preliminary question arises as to what assumption if
any should be made regarding the applicant’s life expectancy.
If
the applicant had no means at all, the maintenance obligation
resting on the estate could be met by paying the reasonably required
amount per month until the applicant actually dies or re-marries.
She might die or remarry prior to or after her current life
expectancy of 85
1/4
. There is no basis for assuming that
her actual lifetime is likely to be more rather than less than the
age indicated by the
applicable life tables. If a monthly amount
were paid, the applicant would be guarded against the risk that she
might survive
beyond her current life expectancy while the estate
would be guarded against the risk that she might die before her
current life
expectancy. However, it would generally be inconvenient
for an estate to be kept open for the potentially lengthy period
over
which monthly maintenance might have to be paid. One
possibility would be for the estate to purchase an annuity for the
claimant
and thus pass the mortality risk to an insurer. This
possibility was not canvassed in the papers though I was told from
the bar
by Ms Gassner that it is not possible in this country to buy
an annuity for a person who is 75 or older. The other possibility
would be for the estate to meet its maintenance obligation by paying
to the claimant a capital sum. Once that is done (and in
terms of
Oshry
this is permissible though
Oshry
does not say
that a court is obliged to reduce the maintenance obligation to a
lump sum), it is inevitable that one must make
an assumption as to
life expectancy. If fairness is to be done both to the surviving
spouse and to the legatees and residual
heirs, the just course is to
assume that maintenance will be needed over the remainder of the
claimant’s reasonably expected
lifetime. The life tables used
by actuaries provide the norm, and there is no reason not to use
that norm in the absence of evidence
to indicate that the claimant
is likely to die sooner or later than the norm.
Where the surviving spouse, as here, is possessed of
substantial means, it is likewise necessary to make some or other
assumption
regarding her life expectancy. Nobody would doubt in the
present case that if, for example, one could predict with confidence
that the applicant will die or remarry in two years’ time, her
existing means provide more than enough for her reasonable
maintenance needs during the two-year period. In order to make any
award in favour of the applicant, whether by way of monthly
payments
or lump sum, one needs to make some or other assumption regarding
her life expectancy. For the reasons stated in the
previous
paragraph, the actuarial life tables provide the appropriate
assumption in the absence of evidence pointing to a shorter
or
longer likely life expectancy. In the present case there is no
reason not to use the life expectancy indicated by the life
tables,
namely 85
1/4
.
It is true that on this assumption the sum awarded to
the applicant (if any) might be insufficient to provide for her
maintenance
if she lives to a riper age. But it is equally true that
if one made an award to her which assumed a longer life expectancy,
she might be given significantly more than she needs if it should
transpire that she dies or remarries sooner, and this would be
to
the detriment of the residual heirs and potentially the legatees. In
a case where there is no evidence to indicate a shorter
or longer
life expectancy than the norm, fairness to the claimant on the one
hand and to the legatees and heirs on the other
requires in my view
that one use the claimant’s ordinary life expectancy in
accordance with the life tables (cf
Jordaan v Jordaan
2001
(3) SA 288
(C) para 36, dealing with fixing a lump sum award in
terms of s 7(3) of the Divorce Act).
On this basis, the applicant’s reasonable
maintenance needs must be determined on the assumption that she will
live until
85
1/4
. As will appear from the previous
section of this judgment, the applicant’s accommodation and
property-related expenses
will be met by the children’s trusts
while the cost of providing her with reasonable comprehensive
medical aid cover will
be met by the estate, in both cases for as
long as she actually lives (ie life expectancy does not feature). It
is the remainder
of her maintenance needs which will have to be met
either from her own means or, if these are insufficient, by the
estate. Her
own means, as explained in the previous section of this
judgment, will provide her with a sum of R62 698 per month as
at
1 July 2012, escalating at CPI in respect of at least R40 142
thereof. It may also be noted that a portion of the monthly
total of
R62 698, namely the monthly income of R4 888 from the
usufructuary bequest and from the testamentary trust,
will continue
until the applicant actually dies (it is not clear whether the same
is true of the income from the various annuities).
The onus is on the applicant to establish her
reasonable maintenance needs. In her founding affidavit she attached
certain schedules
prepared by a chartered accountant, Mr H Jedeiken
(‘Jedeiken’). There was no expert report from Jedeiken
explaining
the schedules. Although he filed a confirmatory
affidavit, it is not of much help since the applicant’s own
founding affidavit
does not explain the schedules. The schedules
seek to gauge the applicant’s reasonable maintenance needs
with reference
to the expenditure she incurred in the six-month
period following the deceased’s death, ie from December 2011
to May 2012.
In one of the schedules, annexure FAS17, the
applicant’s estimated monthly expenditure is projected at
R55 510 to
which Jedeiken has added various ‘provisions’
totalling R38 500, giving a grand monthly total of R94 010.
I have not found it possible to reconcile the figure of
R55 510 to Jedeiken’s other schedules setting out the
expenditure
incurred by the applicant through the Cape Bag loan
account and her income statement for the year ended 28 February
2011. The
estimated expenditure of R55 510 was criticised by
the respondents as being exorbitant and unrealistic and as not
according
with Jedeiken’s other schedules of her actual
expenditure. For example, there is an item of R12 000 per month
for
‘medical’. Apart from the fact that the respondents
have tendered to pay premiums for reasonably comprehensive medical
aid cover, there is simply no evidence that the applicant is likely
to incur such substantial medical expenditure. There is an
item of
R2 000 per month for ‘donations’ (R24 000 per
annum) yet the applicant’s income statement
for the year ended
28
th
of February 2011 reflects that her donations for the
whole year amounted to only R1 980. The monthly allowance for
petrol
of R1 500 seems excessive for a lady of 74 living in
Bantry Bay. The list also includes some expenses which will in fact
be borne by the children’s trusts or the estate (rates,
electricity, water, garden and repairs).
The further provisions amounting to R38 500
include items which patently do not form part of the applicant’s
reasonable
maintenance needs, such as an allowance for making
donations to her children of R6 000 per month, other gifts and
bequests
of R3 500 per month, and ‘additional
entertainment’ of R2 000 per month (ie in addition to an
entertainment
allowance of R2 500 per month forming part of the
amount of R55 510). Also among the further provisions is an
amount
for ‘possible’ medical expenditure of R10 000
per month (bringing the total monthly allowance for medical
expenditure
to R22 000). Jedeiken also makes a provision of
R9 000 per month for possible frail care. The applicant is
certainly
not currently in need of frail care – the
occupational therapist’s report which she filed as part of her
replying
papers indicates that she is able to cope quite adequately
in the home. There is no evidence in the founding papers as to how
the monthly allowance of R9 000 was arrived at. The respondents
also correctly point out that if the applicant were required
to move
into a frail care facility, other expenditure for which she has made
allowance (such as the vehicle, petrol, entertainment
and travel)
would fall away or be significantly reduced.
I thus do not think that the material contained in the
founding papers provides a sound evidential basis for arriving at
the applicant’s
reasonable maintenance needs.
In their answering papers the respondents included an
expert report by Grant Thornton in which the expenditure incurred by
the
deceased and the applicant in the six months prior to his death
was analysed in order to determine the applicant’s reasonable
maintenance needs. According to the management of Cape Bag, all
personal expenditure incurred by the deceased and the applicant
in
the months leading up to his death were recorded in the records of
Cape Bag. Depending on the nature of the item of expenditure
in
question, the whole or a portion of the expenditure was allocated to
the applicant. For example, two-thirds of grocery expenditure
was
allocated to the applicant because provision would need to be made
for her and her domestic workers. Items were allocated
to the
applicant in full where it was inferred that the expense would be
unaffected by the death of the deceased (for example,
expenditure on
pets and Exclusive Books). Grant Thornton on this basis concluded
that over the six-month period April to September
2010 the
expenditure actually incurred on the applicant’s maintenance
in accordance with her then lifestyle amounted to
R31 860 per
month, which – adjusted for inflation – came to R37 456
as at February 2012. Since the applicant
and the deceased did not
travel in the six months prior to his death, Grant Thornton included
a provision of R4 747 per
month for travel (R56 964 per
year). The Grant Thornton figures excluded property-related costs
which will be borne in future
by the children’s trust but
included an inflation-adjusted monthly subscription of R3 069
to the Momentum Health Medical
Aid Scheme. Since the estate has
tendered to pay the premiums for reasonable comprehensive medical
aid cover, the amount of R37 456 should
strictly be
reduced to R34 563.
In the replying affidavit the applicant protested that
the six-month period prior to the deceased’s death was not
representative
because the deceased was ill. Included in the
replying papers was a report by Jedeiken (though no confirmatory
affidavit). The
covering letter to his report stated that it
contained financial opinions provided by the applicant and did not
constitute an
audit assignment or an opinion presented by Jedeiken’s
firm. Whereas Grant Thornton had analysed historical expenditure
while the deceased was still alive, Jedeiken (as he had done in the
schedules attached to the founding papers) examined the expenditure
incurred by the applicant subsequent to the deceased’s death.
Although his report provided information concerning the joint
income
of the household during the 2009 tax year and the applicant’s
projected income for the 2013 tax year, I do not find
that
information particularly helpful in assessing the applicant’s
reasonable maintenance needs. More to the point is Jedeiken’s
annexure C which sets out the expenditure incurred by the applicant
over the period October 2010 to August 2011 as reflected
in the Cape
Bag loan account. This schedule as read with the accompanying notes
reflected annualised expenditure of R938 145
or R78 179
per month to which Jedeiken added a provision of R12 500 per
month for frail care.
Annexure C was subjected to criticism by the
respondents in supplementary answering papers which they were
granted leave to file
(bearing in mind that Jedeiken’s report
constituted new matter):
[a] Jedeiken’s annexure incorporates
items for water, sewerage, electricity, pool care, repairs and
maintenance
which would be covered by the resolutions of the
children’s trusts. These items account for R4 327 per
month. Also included
in Jedeiken’s annexure is monthly
expenditure of R3 284 on medical aid, which is covered by the
respondents’ tender.
[b] Certain amounts are included which cannot
legitimately form part of the applicant’s reasonable
maintenance
needs – I refer here to an allowance of R5 350
per month to pay for the applicant’s grandchildren’s
school
fees.
[c] Other amounts are with justification
criticised by the respondents as excessive. For example, the grocery
bill in
annexure C (Pick ʼn Pay and Spar) has jumped up from
R4 622 per month (as per Jedeiken’s schedules attached to
the founding papers) to R20 235 per month, which is not
plausible. There is an allowance of R10 490 per month for travel
and holiday expenses (R124 908 per annum). Based on the history
of prior travel and the cost of a cancelled 2008 holiday,
the
respondents contended that a monthly allowance of no more than R5 427
for travel was appropriate. The allowance of R5 612
per month
for entertainment and hobbies was also challenged.
[d] Jedeiken allowed for petrol expenditure
of R1 573 per month which was, as before, disputed. The
respondents
pointed out that the applicant drove a 2003 Volvo with an
estimated mileage of only 65 000. Also included in Jedeiken’s
schedule was a provision of R7 175 per month (R86 102 per
annum) for the purchase of a new vehicle. This was based on
an
assumption that the applicant would acquire a new vehicle every six
years. The respondents pointed out that this was not in
line with the
car replacement history during the couple’s marriage, which
reflected a replacement every nine years. The respondents
recognised
that it would be reasonable for the applicant to replace her 2003
Volvo with a similar vehicle. That would cost R335 100
after
allowing for the trade-in value of their existing car. No further
replacements during her expected lifetime would be needed.
Although
the respondents’ calculations of the applicant’s
maintenance needs did not incorporate a provision for the
replacement
of the Volvo, they contended in the supplementary answering papers
that she could easily fund the cost of R335 100
from surplus
capital.
[e] Regarding this frail care provision, the
respondents repeated their contention that if the applicant went into
frail
care many other expenses would decline.
These criticisms have merit. I thus do not regard the
Jedeiken report attached to the replying papers as a reliable guide
to the
applicant’s reasonable maintenance needs. Nevertheless,
and in regard to provision for frail care, I raised with his Gassner
whether it would not be consistent with the deceased’s letter
of wishes in regard to rent-free accommodation for the applicant
that the resolutions of the children’s trusts should be
amplified to include provision for accommodation at a frail care
facility if that were to become reasonably necessary. After taking
instructions Ms Gassner indicated that the trusts were willing
to
include a tender of rent-free accommodation at a frail care facility
if the applicant so elects and amended resolutions to
this effect
dated 13 October 2013 have been provided to me.
In their supplementary answering papers the respondents
included a further accounting report, this time from Mazars. In
response
to the criticism that the six-month period analysed in the
Grant Thornton report was un-representative, the respondents by way
of the Mazars report provided an analysis of the maintenance
expenditure incurred by the applicant and the deceased over the
20-month period 1 August 2008 to 31 March 2010 (the period from
April 2010 to October 2010 having been already addressed in the
Grant Thornton report). Mazars concluded that the average monthly
maintenance expenditure for the couple over this period was
R60 822.
This figure derived from an analysis of the deceased’s loan
account in Cape Bag and of his bank account.
As before, expenditure
relating to the property was left out of account. Mazars also
excluded certain items which appeared to
be abnormal or which by
their nature did not constitute personal maintenance. For example,
during the period under review an
amount of R130 000 was given
to or spent on behalf of the applicant’s adult children.
Certain large cash withdrawals
or cheques in round figures likewise
appeared to be abnormal. Once-off expenditure of R11 235 in
jewellery was also treated
as abnormal.
To the remaining actual expenditure
reflected in these documents Mazars added an allowance of R10 855
per month for overseas
travel, based on a costing of R217 000
for a cancelled 2008 trip.
4
Mazars also assumed that the average
monthly salary received by the applicant from Cape Bag (R6 281)
was fully spent by her
on her own maintenance needs – this
correlated more or less with the picture presented by an analysis of
her private bank
account.
In order to arrive at the applicant’s historical
maintenance needs, Mazars allocated the joint expenditure to her in
varying
proportions, depending on the nature thereof. In the case of
the credit card expenditure debited to the company loan account,
half of the joint expenditure was allocated to the applicant. Half
of all medical expenditure was also allocated to her. The cost
of
insuring household contents was allocated in full to her as were
costs relating to the employment of domestic staff. Two thirds
of
general bills were treated as her expenditure. The cost of the
Multichoice subscription was allocated to her in full. On this
basis, Mazars determined that the average monthly amount spent on
the applicant’s maintenance over the 20-month period
in
question was R37 456.
As noted, Mazars allocated the
credit card expenditure to the deceased and the applicant on a 50/50
basis. In the Grant Thornton
report the credit card expenditure was
allocated item for item – certain items were allocated fully
to the applicant and
others on a two-thirds or 50/50 basis. The
Mazars report does not explain why the same approach was not
adopted. I thus think
it might be safer to allocate two-thirds of
the credit card expenditure to the applicant. This increases her
monthly average
from R37 456 to R40 351. If the once-off
expenditure on jewellery is averaged out over the 20-month period
and treated
as part of the applicant’s reasonable maintenance
needs, one would need to add a further R562, bringing her adjusted
total
to R40 913. Mazars included in their figures an amount of
R2 515 in respect of medical aid. Since the respondents have
tendered to pay the medical aid subscription, this amount should be
deducted, giving a final figure of
R38 398
.
This figure is not out of line with the Grant Thornton report, which
concluded that the applicant’s historical maintenance
needs
over the period April to October 2010 amounted to R37 500.
The adjusted Mazars figure of
R38 398 represents (on the assumptions made by Mazars) the
applicant’s historical maintenance
needs as at 31 March 2010.
The respondents filed a supplementary actuarial report by Munro. He
stated that the Mazars figure
of R37 455, adjusted for
inflation to 30 September 2013, amounted to R44 689. If I apply
the same inflation percentage
(19,31%) to my adjusted amount of
R38 398, I arrive at an amount as at 30 September 2013 of
R45 813
.
Bearing in mind that the respondents bear no onus on
this regard, I think no injustice will be done to the applicant if I
take
her current reasonable maintenance needs as being R45 813
together with the rent-free accommodation, property-related
expenditure
and medical aid premiums tendered by the children’s
trusts and the executors. Mr Joubert submitted in reply that since
there was something to be said both for the Jedeiken approach and
the Mazars approach, I should rather use the average of the two.
I
do not think that would be correct. The Jedeiken calculations are
unreliable for reasons I have explained. The respondents
themselves
pointed out various unsatisfactory features of his assessment of the
applicant’s maintenance needs. By contrast,
very little has
been said by the applicant in response to the detailed Mazars
analysis of the actual historical expenditure on
maintenance prior
to the deceased’s death.
Conclusion
Since the applicant’s current
means enable her to expend R62 698 per month on her maintenance
and since her current
reasonable monthly maintenance needs do not
exceed R45 813, she is able to provide for her reasonable
maintenance needs
from her own means. I do not lose sight of the
fact that, out of the total current monthly means of R62 698,
it is possible
that only R40 142 will increase annually at
assumed CPI though it seems likely from the supplementary
information provided
by Ms Gassner that the applicant’s
one-fifth share of the deceased’s living annuity may well
generate an after-tax
amount per month exceeding R17 000 in
current terms and increasing annually with inflation until the
applicant’s assumed
date of death. If the full R62 698
were to increase at CPI, Munro’s formula indicates that at the
applicant’s
assumed death at 85
1/4
she would have remaining capital of
R1 909 356
5
.
To the extent that the difference between R62 698 and R40 142
(ie R16 885) does not increase at CPI, there will
nevertheless
be for some time a substantial surplus between the applicant’s
monthly means and her reasonable monthly needs,
and this accumulated
surplus will, if necessary, provide a source from which the
applicant will be able to meet her monthly needs
in later years. The
surplus will also enable her to buy a new Volvo if she wishes to do
so.
It follows that the application must fail save for the
granting of orders to give effect to the tenders made by the
respondents.
As to costs, the respondents initially sought costs
against the applicant on the scale as between attorney and client.
After taking
instructions, Ms Gassner informed me that the
respondents did not press for costs against the applicant. I think
this was a correct
and fair decision. Normally costs follow the
result but they are always in the discretion of the court, though
naturally such
discretion must be exercised judicially. We are not
dealing here with ordinary commercial litigation. I do not think it
was unreasonable
for the applicant to believe that she was entitled
to maintenance from the estate, even though the assessment of her
expenditure
may have been extravagant. It is important to remember,
furthermore, that certain important events bearing on the assessment
of her maintenance needs occurred only after she had launched the
application on 8 December 2011. It was only in June 2012 that
the
trustees of the Kelly Trust confirmed that they had set aside an
amount of US$ 150 000 for the applicant in accordance
with
the deceased’s letter of wishes, and it was only in March 2013
that the sum was actually paid to her. Old Mutual only
paid the
proceeds of the deceased’s life policy (R743 935) to the
applicant in June 2012. And importantly, it was
only on 8 August
2012, shortly before the filing of the answering papers on 13 August
2012, that the children’s trusts
passed the resolutions
previously mentioned. The applicant only learnt in the answering
papers of these resolutions and of the
executors’ tender to
pay her medical aid premiums.
Although the applicant can be criticised for having
persisted with the application after the filing of the answering
papers and
in particular after the filing of the Mazars report in
the supplementary answering papers, she was no doubt acting on
advice.
The whole question of her maintenance was understandably one
of great importance and potential anxiety for her. While I do not
think that her claim had sufficient merit to justify the meeting of
her costs out of the estate, I do not think she should be
required
to pay the respondents’ costs, either of the main application
or of the interim application (the costs of which
were reserved for
later determination). The one exception are the wasted costs of one
day occasioned by the postponement of 7
August 2013, which wasted
costs the applicant has already been ordered to pay.
I make the following order:
[a] With the consent of the respondents in
their capacities as the trustees of the Lauren Seidel Trust
(T54/1972), the
Elaine Seidel Trust (T54/1072), the Mark Seidel Trust
(T53/1972) and the Sharyn Seidel Trust (T55/1972) (collectively ‘the
trustees’), it is ordered
(i) that the trustees shall take all
reasonable and necessary steps to ensure that the applicant is
provided with rent-free
accommodation until her death or remarriage,
on the terms and conditions set out in the resolutions dated 16
October 2013 which
have been adopted by each of the trusts, copies of
which are annexed hereto as ‘RES1’ to ‘RES4’
respectively;
(ii) that the trustees are directed to sign
all documents and take all such other steps which are reasonably
necessary
to give full force and effect to all the undertakings given
in favour of the applicant in terms of paragraphs 1 to 4 of the
resolutions.
[b] With the consent of the respondents in
their capacities as executors in the estate of the late Wolf Seidel,
the executors
of the said estate from time to time shall pay from the
estate the medical aid premiums for a reasonable comprehensive
medical
aid cover for the applicant (but excluding any excess
payments or medical expenses not covered by such medical aid).
[c] Save as aforesaid, the application is
dismissed with no order as to costs (save for those costs which the
applicant
has already been ordered to pay in terms of this court’s
order of 7 August 2013).
[d] The parties shall bear their own costs in
relation to the application for interim relief brought under case
25017/2011.
[e] The respondents are authorised to defray
from the estate the reasonable costs incurred by them in the present
case
and in case 25017/2011.
______________________
ROGERS J
APPEARANCES
For Applicant: Adv F Joubert SC & Adv M Garces
Instructed by:
Davidson England
Cape Town
For Respondents: Adv B Gassner SC
Instructed by:
Kantor Inc.
Cape Town
1
In
para 20 of the answering affidavit [record 298-299] the respondents'
deponent incorrectly uses a figure of R1 138 00
–
the correct amount is R1 130 800 [see the Munro report at
399; the correct amount is stated by the deponent
earlier in his
affidavit in para 19]. Based on the original capital figures used in
para 20, capital of R4 396 005
would generate R38 875
per month (not R38 630 as stated in the affidavit).
2
R4 888
+ R17 668 + R40 142.
3
Ms
Gassner gave the figure as R17 372 per month but that is
because she erroneously used, as Munro's base amount, R1 133 800
instead of R1 130 800.
4
R217 100
÷ 20 = R10 855. This allowance assumes an overseas trip
of this kind every 20 months.
5
R62 698
– R45 813 = R16 885. R1 130 800 ÷
10 000 x 16 885 = R1 909 356.