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[2015] ZAWCHC 109
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Y.B v S.B and Others (8064/2014) [2015] ZAWCHC 109; 2016 (1) SA 47 (WCC) (13 August 2015)
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REPUBLIC OF SOUTH ARICA
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
DATE: 13 AUGUST 2015
Case No: 8064/2014
In the matter between:
[Y……..]
[B……..]
........................................................................................................................
Plaintiff
And
[S……….]
[B……..]
............................................................................................................
1st
Defendant
[S…….] [B………]
N.O
...................................................................................................
2nd
Defendant
[Y……….] [B………]
N.O
................................................................................................
3rd
Defendant
[B……….] [B…………]
N.O
.............................................................................................
4th
Defendant
CONRAD FREDERICK MEYER
N.O
...........................................................................
5th
Defendant
THE MASTER OF THE HIGH COURT OF
SOUTH
AFRICA, WESTERN CAPE
DIVISION
........................................................................
6th
Defendant
JUDGMENT
DELIVERED ON 13 AUGUST 2015
RILEY, AJ
[1] The background to this application
is that on 27 December 2006 plaintiff and the first defendant were
married to each other
out of community of property with the inclusion
of the accrual system specified in Chapter 1 of the Matrimonial
Property Act 88
of 1984 (“MPA”) in terms of an
antenuptial contract concluded between them. On 8 January 2015
plaintiff instituted
divorce proceedings against the first defendant.
The plaintiff seeks leave to amend her particulars of claim. For
the sake of
convenience I shall refer to the parties as in the
divorce action and to the second to fifth respondents collectively as
the trustees.
It is common cause that the plaintiff, the first
defendant, [B…….. B……….] and
Conrad Frederick
Meyer, an accountant, are the trustees of the Ruby
Trust. The second to fifth defendants have been joined in the
divorce action
in their capacity as trustees of the Ruby Trust.
[2] The legal basis for plaintiff’s
claim, as set out in the particulars of claim incorporating the
amendments sought, concerning
the assets of the Ruby Trust is crisply
summarised in plaintiff’s heads of argument and are as follows:
2.1 That first defendant was at all
times a co-trustee and a co-beneficiary of the Ruby Trust which he
established on 14 June 2011.
2.2 The beneficiaries of the Ruby Trust
are the plaintiff and the first defendant’s descendants.
2.3 During the marriage the first
defendant caused the trustees to acquire assets ostensibly in the
name of the trustees, which
were financed by the first defendant or
which he assisted in financing.
2.4 At the time the first defendant
caused the trustees to acquire the assets, first defendant intended
to retain control of such
assets for his personal benefit and to
treat them as if they were his personal assets and the trustees
intended for him to acquire
and retain beneficial ownership of the
trust assets.
2.5 At all material times thereafter,
the first defendant and the trustees intended the first defendant to
be the beneficial owner
of the assets ostensibly held in the name of
the trustees.
2.6 At all material times and with the
consent of the trustees, the first defendant was in effective control
of the assets which
were treated and used by the first defendant as
if they were beneficially owned by him.
2.7 Accordingly, the first defendant is
the beneficial owner of the assets ostensibly held in the name of the
trustees and the acquisitions
in the name of the trustees constitute
simulated transactions (i.e. a sham).
2.8 Consequently the net value of the
assets held ostensibly by the first defendent must be added to the
net value of the first
defendant’s personal estate, at the time
of the dissolution of the parties’ marriage, for the purpose of
calculating
the accrual of his estate in terms of
ss 3
and
4
of the
Matrimonial Property Act.
[3
] At the commencement of the
proceedings I was advised by Ms Gassner, counsel for the plaintiff,
and Mr Pincus (who was assisted
by Mr Randall), counsel for the
trustees, that a decision in this matter may have far reaching
implications for other divorce actions
where the parties contend that
marital assets are held in family trusts. I was further advised that
there are no reported decisions
in this division on the question as
to whether it constitutes a misjoinder to join the trustees of a
family trust in the context
of an accrual claim in a divorce action
where a spouse contends that the assets of the family trust are in
fact beneficially owned
by the other spouse, and accordingly are
subject to his or her accrual claim.
[4] I am indebted to both Mr Pincus and
Ms Gassner for their helpful arguments on the matter and in
particular for the detailed
submissions made by both of them in their
heads of argument which was of great assistance in clarifying the
issues to be decided.
[5] As appears from the content of
paragraph 2 hereinbefore, plaintiff avers that the acquisitions of
assets in the name of the
trustees of the Ruby Trust were simulated
transactions and fall to be set aside so as to reflect the first
defendant as the beneficial
owner of such assets and that the net
value of the assets held by the Ruby Trust, at the time of the
dissolution of the parties’
marriage, must be added to the net
value of first defendant’s personal estate for the purposes of
calculating the accrual
of first defendant’s estate in terms of
ss 3
and
4
of the MPA.
[6] The trustees have raised the
following grounds for the exception and/or objection to the
plaintiff’s particulars of claim:
1. The plaintiff has cited the trustees
and accordingly joined them in the action;
2. The trustees are not necessary
parties to the action, as the accrual to which plaintiff may be
entitled is a monetary claim in
which the trust and its trustees have
no possible financial or legal interest; and
3. The joinder of the trustees
accordingly constitutes a misjoinder to which the trustees object.
[7] The parties are agreed that the
main issue which arises in this application is whether the plaintiff
has pleaded a sufficient
cause of action in her particulars of claim
as sought to be amended in respect of the assets ostensibly held in
the name of the
Ruby Trust to establish that such assets are the
first defendant’s personal assets for the purposes of
calculating the plaintiff’s
accrual claim and to execute
against in satisfaction of any accrual award which may be granted in
plaintiff’s favour. The
parties are further agreed that this
court should approach the application for leave to amend as if on
exception and that if the
particulars of claim incorporating the
amendment are not excipiable, then the application for leave to amend
ought to be granted.
[8] In considering the relief sought by
the plaintiff, it is prudent to consider the legal principles for
amendment and joinder.
I accordingly turn briefly to deal firstly
with the legal principles relating to amendments.
[9] It is trite law that the tendency
of our courts have been to allow amendments where this can be done
without prejudice to the
other party and it is accepted law that a
court considering the grant and/or refusal of an application for the
amendment of a pleading
has a discretion to do so, and that such
discretion must be exercised judicially in the light of all the facts
and circumstances.
See: Herbstein and Van Winsen, The Civil
Practice of the High Courts of South Africa ed 5 vol 1 p 678;
Thekweni Properties (Pty)
Ltd v Picardi Hotels Ltd (and others as
third parties) 2008(2) SA 156(D) at paragraph 9.
[10] It is further generally accepted
that a court will allow an amendment unless the application to amend
is mala fide or unless
the amendment would cause an injustice to the
other side which cannot be compensated by costs or unless the parties
cannot be put
back in the same position as they were when the
pleading which is sought to be amended was filed. See Moolman v
Estate Moolman
1927 CPD 27
at 29. Similar sentiments, are expressed
in Macduff & Co (in liquidation) v Johannesburg Consolidated
Investment Co Ltd
1923 TPD 309
where the court placed reliance on
Rishton v Rishton
1912 TPD 718.
[11] The primary consideration in
applications of this nature seems to be whether the amendment will
have caused the other party
prejudice which cannot be compensated for
by an order for costs or by some or other suitable order such as a
postponement. See
Imperial Bank v Barnard and Others NNO 2013(5) SA
612 (SCA) at 616 para 8. It is of course necessary to bear in mind
that a further
important object of allowing an amendment is ‘to
obtain a proper ventilation of the dispute between the parties’.
See Trans-Drakensberg Bank Ltd (under judicial management) v
Combined Engineering (Pty) Ltd and Another 1967(3) SA 632(D) at 638A.
Our courts have also increasingly recognised that court rules and
pleadings are not there for their own sake but to advance ‘the
good order, and the administration of justice’. See Bankorp
Ltd v Anderson-Morshead 1997(1) SA 251(W) at 253D – G.
It is
accepted law that a court will not allow amendments where their
effect would render such a pleading excipiable or where
it does not
cure an excipiable pleading. See Erasmus, Superior Court Practice
Service 42, 2012 B 1 – 183. In Crawford-Brunt
v Kavnat and
Another 1967(4) SA 308(C) at 310G Tebbut AJ (as he then was) however
held that, ‘If the pleading would appear
to be possibly open to
exception or even if the court is of opinion that the question of
whether or not the pleading is excipiable
is arguable, it would seem
to me to be the more correct course to allow the amendment’.
[12] Considering the legal principles
as hereinbefore set out, Ms Gassner has in my view correctly
submitted that in so far as the
trustees’ objections to the
amendments in the present matter are directed at the alleged defects
in the particulars of claim
in relation to the trust assets, which
they contend render them bad in law, the following principles
governing exceptions are relevant
in assessing the grounds of
objection to the amendment sought:
1. The court must accept as correct the
allegations contained in the particulars of claim, incorporating the
proposed amendment,
and determine whether those allegations are
capable of supporting a cause of action in respect of the assets of
the Ruby Trust.
See Stewart and Another v Botha and Another 2009(6)
SA 310 (SCA) at para [4].
2. The defect on the pleadings must
appear ex facie the pleadings and no extraneous facts may be adduced
to show that the pleading
is excipiable. See Barnard v Barnard
2000(3) SA 741(C) at para [10].
3. It is for the excipient (i.e. the
trustees) to satisfy the court that the conclusion of law pleaded by
the plaintiff cannot be
supported by any reasonable interpretation of
the particulars of claim.
[13] Before dealing with the principles
relating to joinder, I deem it necessary to refer to certain general
principles regarding
locus standi which in my view find application
in this matter in so far as they relate to the submissions made by Mr
Pincus on
behalf of the trustees that the declaratory relief sought
by the plaintiff amounts to an academic exercise which the law does
not
permit and that the plaintiff has to prove that the trustees have
a direct and substantial interest in the matter to permit their
joinder in this matter.
[14] It is trite law that:
‘The person who sues must have an
interest in the subject matter of the suit, and that interest must
be a direct interest
…Courts of law … are not
constituted for the discussion of academic questions, and they
require the litigant to have
not only an interest, but also an
interest, that is not too remote.’ See Dalrymple and Others v
Colonial Treasurer
1910 TS 372
at 390.
The court held further at 390 that:
‘Whether the interest is remote
or not depend, upon the circumstances of the case, and no definite
rule can be laid down.’
[15] In Cabinet of the Transitional
Government for the Territory of South West Africa v Eins
1988 (3) SA
369
(A) at 388B Rabie ACJ expressed the general principle of our law
as follows:
‘A person who claims relief from
a court in respect of any matter must, as a general rule, establish
that he has a direct
interest in that matter in order to acquire the
necessary locus standi to seek relief,’
[16] In dealing with the concept of
locus standi the following was said in Jacobs en ‘n Ander v
Waks en Andere 1992(1) SA
521(A) at 533J – 534 E:
‘In die algemeen beteken die
vereiste van locus standi dat iemand wat aanspraak maak op regshulp
‘n voldoende belang
moet hê by die onderwerp van die
geding om die hof te laat oordeel dat sy eis in behandeling geneem
behoort te word. Dit
is nie ‘n tegniese begrip met vas omlynde
grense nie. Die gebruiklikste manier waarop die vereiste beskryf
word, is om te
sê dat ‘n eiser of applikant ‘n
direkte belang by die aangevraagde regshulp moet hê (dit moet
nie te ver
verwyderd wees nie); andersins word daar ook gesê,
na gelang van die samehang van die feite, dat daar ‘n werklike
belang
moet wees (nie abstrak of akademies nie), of dat dit ‘n
teenwoordige belang moet wees (nie hipoteties nie) - … . In
die omstandighede van die huidige saak is dit veral die vereiste van
‘n direkte belang wat op die voorgrond staan. Wat dit
betref,
is die beoordeling van die vraag of ‘n litigant se belang by
die geding kwalifiseer as ‘n direkte belang, dan
wel of dit te
ver verwyderd is, altyd afhanklik van die besondere feite van elke
afsonderlike geval, en geen vaste of algemeen
geldende reëls kan
neergelê word vir die beantwoording van die vraag nie (sien bv
Dalrymple and Others v Colonial Treasurer
1910 TS 372
per Wessel R op
390 in fine, en vgl Director of Education, Transvaal v McCagie and
Others
1918 AD 616
per Juta Wn AR op 627). Vorige beslissings kan
behulsame algemene riglyne vir bepaalde soort gevalle aandui, maar
meestal het
dit weinig nut om die besondere feite van een geval te
vergelyk met diè van ‘n ander.’
[17] In Vandenhende v Minister of
Agriculture, Planning and Tourism, Western Cape, and Others 2000(4)
SA 681(C) at 686J –
687 A Thring J was of the view that the
most useful source of guidance as to the approach which should be
adopted in matters of
this nature is to be found in the decisions of
our courts which over the years have dealt with the intervention and
joinder of
parties. The learned judge placed reliance on what was
stated by Corbett J (as he then was), in United Watch & Diamond
Co
(Pty) Ltd and Others v Disa Hotels and Another 1972(4) 409 (C)
when he held at 415A – B that:
‘In my opinion, an applicant for
an order setting aside or varying a judgment or order of Court must
show, in order to establish
locus standi, that he has an interest in
the subject-matter of the judgment or order sufficiently direct and
substantial to have
entitled him to intervene in the original
application upon which the judgment was given or order granted.’
[18] It is clear from the authorities
that it is not every interest in a dispute which will entitle a
person to join or to be joined
in legal proceedings. See Sheshe v
Vereeniging Municipalty 1951(3) SA 661 (A) at 667 A.
[19] Having regard to the authorities
hereinbefore referred to and applying them to the present matter, I
am of the view that the
plaintiff in the present matter is
accordingly required to show that the trustees have or will continue
to have ‘a direct
and substantial interest’, ‘n
direkte en wesenlike belang …by die uitslag van die geding’.
See Kock &
Schmidt v Alma Modehuis (Edms) Bpk
1959 (3) SA 308
(A) at 318 E – H. It is further clear that that interest must
be ‘a legal interest in the subject matter of the action
and it
was this interest which could be prejudicially affected by the
judgment’. See Henri Viljoen (Pty) Ltd Awerbuch Brothers
1953
(2) SA 151
(O) at 167E - F. Based on the authorities it is clear
that it is not sufficient for the interest concerned to be a merely
financial
or commercial one.
[20] Different principles however
govern a non-joinder dispute where the court must determine the right
of a defendant to demand
the joinder of another party or the court’s
duty to order such a joinder as opposed to a misjoinder dispute,
involving a
plaintiff’s right to join parties as co-defendants
in an action. The authors in Herbstein & Van Winsen, Civil
Practice
of the High Courts of South Africa 5th ed, Vol 1 p208 draw a
distinction between a joinder of necessity, where the failure to join
a party amounts to a non-joinder, and a joinder as a matter of
convenience, where the joinder of a party is permissible but not
essential.
[21] In his argument and submissions Mr
Pincus launched an attack on the joinder by the plaintiff of the
trustees on various fronts.
In the main, he contended that the
plaintiff’s accrual claim against first defendant, in terms of
SS 3
and
4
of the
Matrimonial Property Act, is
for a sum of money and
not for the transfer of assets. He submitted that the determination
of plaintiff’s claim involves
an arithmetical calculation which
is based on a factual enquiry. In his view, taking the assets of the
trust into account in determining
the accrual award does not impact
on the trust assets and accordingly the trustees have no legal
interest in the issues arising
out of the determination of the
accrual claim.
[22] He further contended that the
declaration of rights sought by the plaintiff in prayer 8 of the
particulars of claim is unnecessary
and is sought to give efficacy to
prayer 9, which in his view is also unnecessary and that both prayers
are accordingly totally
incompetent.
[23] He argued strongly that the relief
sought by plaintiff in the declaration amounts to an academic
exercise, which the law does
not permit, and that the relief sought
by plaintiff against the trust, pending any payment of any accrual
claim which she may have
as against the trust, for transfer of assets
from the Trust to the husband’s estate, post judgment, is
clearly designed to
enable her to execute her monetary accrual claim
against the assets transferred.
[24] In his view plaintiff ought to
have sought an anti-dissipation order against the Ttrust which she
has failed to do. To illustrate
his argument further, he referred to
the scenario where the husband’s assets have found their way
into the names of his siblings.
According to him it would be
impermissible to join the siblings and seek the transfer of assets
from their estates to the husband’s
estate for the execution of
the maintenance claim and an order to prove executability. He
submitted that in this example the court
could deem the assets to be
those of the husband and make an appropriate maintenance award but
once judgment is given, the court
is functus officio and will not
permit matters to be pleaded in an action for the purposes of
executing the judgment.
[25] He accordingly submitted: that the
Trust has no direct and substantial interest in the joinder; that the
amendment as sought
by the plaintiff renders the particulars of claim
excipiable; that because the relief sought was premised upon
abstract, academic
and hypothetical grounds, the application should
be dismissed.
[26] In reply, Ms Gassner contended
firstly that a valid cause of action had been pleaded in the
particulars of claim as amended
in respect of the relief concerning
the assets held in the name of the Trust. Secondly, and in relation
to the grounds objection,
she contended that the defendants’
objections ignore the fact that it is plaintiff’s case that
ownership of the assets
in the Trust never properly vested in
trustees and that such assets were held merely ostensibly in the name
of the trustees, and
that it was the intention of the trustees and
the first defendant that the first defendant would control and
beneficially own such
assets as if they were his personal assets. In
so far as ground 3 is concerned, she contended that it was clear from
an analysis
of the case law that it is not necessary for plaintiff to
plead and prove that the trust deed was a sham to substantiate a
claim
in respect of the trust assets. She finally submitted that it
is not correct, as contended by Mr Pincus, that the plaintiff’s
case regarding the simulated transactions is based on the first
defendant having retained effective control subsequent to the assets
having vested in the trustees as it is in clearly contradiction to
the specific allegations made in paragraphs 12.5 and 12.6.4
of the
particulars of claim, as amended, and is entirely inconsistent with
the import of paragraph 12, which, if read in its entirety,
is to the
effect that the assets in question were only ostensibly held in the
name of Trust or the trustees, but are in fact beneficially
owned by
the first defendant.
Discussion
[27]
Section 3
of the MPA provides that
at the dissolution of a marriage subject to the accrual system, by
divorce or by death of one or both
of the spouses, the spouse whose
estate shows no accrual or a smaller accrual than the estate of the
other spouse acquires a claim
against the other spouse or his estate
for an amount equal to half of the difference between the accrual of
the respective estates
of the spouses.
[28]
Section 4(1)(a)
of the MPA
provides that, ‘The accrual of the estate of a spouse is the
amount by which the net value of his estate at the
dissolution of his
marriage exceeds the net value of his estate at the commencement of
that marriage’.
[29] Section 12 of the Trust Property
Control Act 57 of 1988 provides that trust property shall not form
part of the personal estate
of the trustee except insofar as he, as
the beneficiary, is entitled to the trust property.
[30] It is accepted law that the assets
and liabilities of a trust vest in the hands of the trustees who are
required to keep trust
assets separate from their personal assets and
enjoyment thereof. It is further accepted law that in their
representative capacities
trustees are obliged to deal with trust
assets to further the interests of the beneficiaries and not to
further their personal
interest. Trustees may also be beneficiaries
under the trust.
[31] In the present matter, the
exception (objection) by the trustees of misjoinder is directed at
the plaintiff’s right to
join additional defendants in one
action, which is not confined to the joinder of necessary parties.
Rule 10(3) of the Uniform
Rules allows for a joinder of several
defendants in one action ‘whenever the question arising between
them … and the
plaintiff … depends upon the
determination of substantially the same question of law or fact
which, if such defendants were
sued separately, would arise in each
separate action.’
[32] It is however accepted law that
Rule 10(3) is not intended to be exhaustive of instances in which a
plaintiff may join separate
defendants in one action and that under
common law a number of defendants may be joined, whenever convenience
so requires, subject
to the power of the court to order separation of
actions. See LAWSA, 2nd ed, Vol 3 Part 1 at para 61.
[33] In Dendy v University of
Witwatersrand and Others 2005(5) SA 357(W) at 387 A-B the court held
that where there is a reasonable
prospect of an overlap of factual
issues in different trials, convenience dictates that the risk of
conflicting judgments on issues
that are common to all the actions
should be avoided and that in such circumstances joinder is
appropriate.
[34] In my view an accrual claim is a
sui generis claim, created by statute, which will result in the trial
court having to determine
exactly which assets are owed by a spouse
and the value of such assets. I do not agree with the contentions of
Mr Pincus that
the right of a spouse married according to the accrual
system is necessarily limited to a monetary claim.
Section 10
of the
Matrimonial Property Act provides
that the court may make orders
regarding the satisfaction of the claim, including ‘the
furnishing of security, the payment
of interest, the payment of
installments, and the delivery or transfer of specified assets, as
the court may deem just.’
It therefore follows that the court
could award an asset to the plaintiff in satisfaction of her accrual
award. According to
the
Matrimonial Property Act a
court may make an
order for immediate division of the accrual in terms of the
provisions of Chapter 1 or on such other basis as
the court may deem
just (See
section 8).
[35] I agree with Ms Gassner that a
crucial issue which the trial court will have to determine in
assessing the extent of the first
defendant’s estate for the
purposes of the plaintiff’s accrual is whether the assets
ostensibly held in the name of
the trustees are in fact beneficially
owned by the first defendant, as is alleged by the plaintiff. I have
no doubt that this
will involve controversial factual and legal
issues in the divorce trial. In my view, the argument that the
determination of the
plaintiff’s accrual claim involves purely
an ‘arithmetical calculation’ is an over-simplification
of the issue
and can therefore not be correct.
[36] I further agree with Ms Gassner
that for the purposes of deciding the misjoinder exception I will
have to accept as correct
the allegations as contained in the
particulars of claim regarding the trust assets, which would include
a finding in favour of
the plaintiff that the acquisition of assets
in the name of the Trust at all material times represented simulated
transactions
and fall to be set aside to reflect that the first
defendant is the beneficial owner of such assets. As appears from
the submissions
made by Mr Pincus the plaintiff must first prove her
accrual claim against the first defendant in respect of the trust
assets in
the divorce action, and if she is unsuccessful in
satisfying her accrual award, on execution she must then seek to
sequestrate
the first defendant. In his view, it is the trustees of
the first defendant’s insolvent estate and not the plaintiff
who
can then seek to transfer those assets ostensibly held in the
name of the trustees. It is correct that to satisfy her accrual
award that plaintiff will be entitled to levy execution against any
of the first defendant’s assets, including those assets
which
are ostensibly held in the name of the trustees, but which the court,
in the determination of the plaintiff’s claim,
has held to be
beneficially owned by the first defendant. What this however means
is that the Plaintiff, as execution creditor
and interpleader
claimant, will have the right to claim that the attached ‘trust
assets’ are in fact owned by the first
defendant if this is
disputed by the trustees. Should this occur, then it must be so that
there will inevitably be an overlap
of factual and legal issues in
the divorce trial and in the interpleader, with the risk of
conflicting judgments. In terms of
Rule 10(3) of the Uniform Rules
and the common law a plaintiff may guard against such a multiplicity
of issues by joining defendants.
Considering the issues involved it
seems to me that based on dictates of convenience, fairness, good
sense and reasonableness
there ought not to be a multiplicity of
actions where the issues are so closely interlinked. It is now
commonly accepted that
the expeditious disposal of litigation is
often best served by ventilating all the issues at one hearing.
[37] Since there are no reported
decisions in this division on the question as to whether it
constitutes a misjoinder to join the
trustees of a family trust in
the context of an accrual claim in a divorce action, where a spouse
contends that the assets of the
family trust are in fact beneficially
owned by the other spouse, and accordingly are subject to his or her
accrual claim, it is
necessary to consider the approach adopted by
other courts on the issue.
[38] In BC v CC and Others 2012(5) SA
562 (ECP) the plaintiff, the wife, sought an order in divorce
proceedings against the first
defendant, the husband, directing that
the value of assets held by a trust established by the husband be
taken into consideration
in determining the accrual of his estate as
intended in section 4 of the MPA. The wife alleged inter alia that
the husband had
full control over the management of the trust and of
the acquisition, management and sale of trust assets; had made
extensive use
of the trust to purchase property; had substantially
increased his personal loan account with the trust, thus creating a
further
asset in his personal estate; had drawn funds from trust
assets and was the source for the acquisition of assets by the trust.
[39] The husband pleaded in limine that
since the wife had not sought an order that the trust assets were in
fact his property or
had to be deemed as such, the assets held in the
trust could not be considered in determining the accrual of his
estate.
[40] Dambuza J dismissed the point
limine and held that if the wife had proved the alter ego
allegations, the particulars of claim
concerning the administration
of the trust, she would have succeeded in establishing that the
assets of the family trust were in
fact the property of the husband.
The present matter is clearly distinguishable from BC v CC supra in
that in this matter the
plaintiff has not confined herself to alter
ego allegations but expressly pleads that from inception, the assets
ostensibly held
in the name of the trust have been controlled and
beneficially owned by the first defendant.
[41] In Jordaan v Jordaan 2001(3) SA
288(C) and Badenhorst v Badenhorst 2006(2) SA 255 (SCA), the courts
dealt with the provisions
of section 7(3) of the Divorce Act and had
to decide whether it was just and equitable to grant a redistribution
order and in the
course thereof to take into account assets held by
the defendants in their capacity as trustees. In both the Jordaan
and Badenhorst
matters, as well as Smith v Smith and Others SECLD,
case no 619/2006, the courts held that assets held by the trustees in
their
capacities as trustees of the trust could be taken into account
in determining accrual and redistribution of estates.
[42] In the RP v DP and Others 2014(6)
SA 243 (ECP) the crisp issue for determination was whether the assets
of an inter vivos discretionary
trust created during the marriage may
be taken into account in determining the accrual claim of the wife in
terms of the MPA.
The wife had brought an application for the
joinder of the trustees of a family trust and an application for the
amendment of the
wife’s particulars of claim. As in the
present matter, the wife was also a co-trustee. One of the grounds
on which the
trustees objected to the joinder was that the wife had
not made out a sufficient case on the pleadings for ‘piecing
the veil’
and that she did not seek an order directing the
transfer of any trust assets to the personal estate of the husband
which would
justify the joinder of trustees.
[43] In a well-reasoned judgment Alkema
J granted the amendment sought by the wife in respect of the trust
assets and in my view
correctly held that the argument advanced by
the trustees was based on a misunderstanding of the wife’s
claim when he held
at paragraphs 47 and 48:
"[47] Her claim, essentially, is
that by virtue of first respondent's abuse of the trust form, many
transactions resulting
in the ostensible acquisition of trust assets
held by first respondent as trustee allegedly on behalf of the trust,
are simulated
transactions because in truth and in fact those assets
belong to first respondent and are assets in his personal estate and
not
in the estate of the trust. She effectively seeks the simulation
to be set aside and claims an order that those assets be taken
into
account as personal assets of the first respondent in determining her
accrual claim.
[48] The effect of setting the
simulation aside is to regard those assets as what they truly are,
namely assets in the personal
estate of the first respondent ab
initio. If so, they were never truly trust assets and were never in
truth and in fact kept by
first respondent in his capacity as a
trustee for the benefit of the beneficiaries. The applicant claims
that those assets must
be treated where they have always belonged,
namely in the private estate of first respondent, and should
therefore be taken into
account in determining her accrual claim
against first respondent's personal estate under ss 3 and 4 of the
MPA. In order to consider
these claims, it is unavoidable that the
court will have to pierce the trust veil." (own emphasis)
[44] Alkema J accepted that the wife's
claim, as formulated, was good in law when he held further at
paragraph [49] that:
"... Should the trial court find
that a particular transaction is simulated in that the asset or
assets in truth and in fact
constitute assets in first respondent's
personal estate, then it will pierce the trust veil and refuse to
recognise the separateness
of trust assets from the personal assets
of the trustee.
[45] The learned judge further pointed
out, at paragraph 53, that the Court was not required to necessarily
set aside the entire
trust as a simulated deed, when holding that
trust assets fell within the personal estate of a spouse and that it
will only be
required to set aside those transactions which are
proven to be simulated. I agree with Ms Gassner that the approach
adopted by
Alkema J is on all fours with the formulation of
plaintiff’s cause of action so pleaded in the particulars of
claim as amended
in the present matter.
[46] In the RP v DP matter (supra), the
trustees argued that the SCA case of Badenhorst v Badenhorst, where
the Court took into
account the husband's trust assets when making a
redistribution order in terms of s 7(3) of the Divorce Act, was
distinguishable
on the basis that the Court, in terms of those
statutory provisions, in contradistinction to the
Matrimonial
Property Act, had
a wide discretion in making a redistribution order.
Sections 3
and
4
of the
Matrimonial Property Act, on
the other hand,
so the argument went, involved a mathematical calculation based on
the accrual of the parties' personal estates
which did not allow for
the discretionary inclusion of trust assets. The trustees
consequently argued that the judgment in Badenhorst
had no
application to the facts in that case. Alkema J rejected this
argument as being premised on the incorrect hypothesis that
the
discretion to regard trust assets as personal assets of the trustee
was derived from the exercise of the court's discretion
under s 7 of
the Divorce Act. Alkema J confirmed that the discretion to pierce
the trust veil of separateness of trust assets
from personal assets
was derived from common law, with its origin in company law. In this
regard he pointed out that a trust was
not a separate legal entity
such as, for instance, a company, but that its assets and liabilities
vest in the hands of its trustees
which are required to keep trust
assets separate from their personal assets and enjoyment. The
learned judge held that the principle
of "piercing" or
"lifting the corporate veil", as recognised in company law,
also applies to trusts, but was
of the view that the metaphor in the
trust context was somewhat misleading. He explained that what was
pierced in the trust context
"is the veil which separates the
trust assets from the personal assets of the trustee". Alkema J
held that:
"[24] .... where the trust form is
abused and the trustee treats the trust as his or her alter ego (or
that of the founder),
then the court pierces the trust veil and
enquires into the separateness of the trust assets from the personal
assets of the trustee
or founder. In this sense 'piercing the veil'
is simply an exercise by the court of looking behind the transaction
to decide whether
or not the separateness of trust assets was
simulated to hide the personal assets of the trustee. No order or
declaratory is needed
to pierce the veil - it is done by virtue of
the evidence placed before the court. (emphasis supplied)
[25] In order decide [sic] whether
particular property constitutes true trust property or whether in
reality and truth it falls
within the personal estate of the trustee,
the court will have regard to, inter alia, the terms of the trust
deed, the extent of
the de facto control of the trustee over trust
affairs and assets, the nature of the assets, the liabilities of the
trust, and
the management of the affairs of the trust. Each case
will be decided on its own particular facts, and the veil is pierced
or
lifted only in respect of those assets under consideration in the
case. In all other respects the separation of trust assets and
assets in the personal estate of the trustee is kept intact."
[47] If regard is had to the above
extracts of the judgment in RP v DP supra, then it is clear that the
plaintiff’s case in
the present matter falls squarely within
the cause of action which Alkema J considered and held to be valid in
law in that case.
I agree with the approach and formulation adopted
by Alkema J. I further agree with Ms Gassner that in the present
matter, plaintiff
essentially avers that transactions reflecting that
assets were acquired and held in the name of the Ruby Trust are
simulated and
that such assets are in truth assets which from the
outset fall within the personal estate of the first defendant and
must accordingly
be taken into account for the purposes of
calculating the accrual in his personal estate.
[48] Insofar as any reliance may be
placed on MM v JM 2014(4) SA 384 (KZP), in which case the court
upheld an exception by the husband
and trustees of the family trust
against claims made by the wife in her claim in reconvention in
respect of trust assets, in connection
with her accrual claim, I am
of the view that that matter is distinguishable from the present
matter. In MM v JM (supra) the wife
pleaded that the trust was the
alter ego of the husband and that its assets should be deemed to form
part of his assets for the
purposes of determining the accrual of his
estate. She did not aver that the assets ostensibly owned by the
trust were in truth
the property of the husband, nor did she aver
that the trust was not a genuine one. Ploos Van Amstel J held at
paragraph [18]
– [19] that the court was in the circumstances
confined to calculating the accrual with reference to the husband’s
personal assets as it did not have a general discretion to have
regard to trust assets on the basis that it would be just to do
so.
It was accepted by both the excipients and the court that if the wife
had in fact pleaded that the assets of the trust were
in truth the
husband’s property, then her claim that those assets must be
taken into account in determining the accrual of
her estate would
have been valid in law. In the present matter, it is clear that the
plaintiff pleads that ownership of the assets,
ostensibly held in the
name of the trustees, was not intended to vest in them in their
capacity as co-trustees, nor in fact did
such assets in trust vest in
them.
[49] If I consider the dicta in RP v DP
(supra) and the approach adopted by the SCA in Badenhorst (supra) and
that adopted in Taute
v Taute Case No 2010/02268, South Gauteng High
Court (19 September 2013), it seems to me that the principles as laid
out in Badenhorst
(supra) as to when trust assets are to be held to
form part of a spouse’s estate are not confined to S 7(3)
situations.
In Taute’s case (at paras [33] – [34] Lamont
J expressed the view that, on a proper reading of the Badenhorst
case,
once the court had undertaken the investigation as to whether
or not the assets were in fact the personal assets of the husband,
only then did it exercise a discretion in terms of S 7(3) as to what
the consequences of the decision were. Lamont J accordingly
held
that the family trust assets, including the parties’ former
common home, formed part of the parties’ joint estate.
[50] In RP v DP (supra) at paras [37]
and [38] Alkema J similarly expressed the view that the SCA in
Badenhorst, when lifting the
corporate veil, did not do so in the
exercise of a wide discretion under S 7 of the Divorce Act, but did
so in the course of determining
the value of the husband’s
personal estate according to the principles of the common law.
[51] I am course mindful that in the
case of Van Zyl NNO v Kaye NO 2014(4) SA 452 (WCC) Binns-Ward J held
the view that there exists
a high threshold for a plaintiffto be
successful in establishing that trust assets fall within the personal
estate of a trustee,.
The learned judge held that the
maladministration of an asset validly vested in a properly founded
trust, in itself, does not
afford a sufficiently valid legal basis to
contend that the trust does not exist, or that its assets no longer
vest in the trustees.
The court held that on the facts of that
matter the trustees had not been party to a sham, nor had it been
established that the
property in question had not validly vested in
the trustees qua trustees. In my view the facts of Van Zyl NNO v
Kaye (supra) and
the issue to be decided in that case are with
respect distinguishable from the present matter and is not authority
for the proposition
that the cause of action pleaded by the plaintiff
in the present matter is insufficient to sustain an accrual claim in
respect
of the assets held in the name of the Ruby Trust. In the
present matter it is also not necessary to become involved in the so
called alter ego controversy as in my view it does not find
application.
[52] It is abundantly clear, on the
pleadings, that it is plaintiff’s case that ownership of the
assets of the trust never
properly vested in the trustees, that such
assets were held merely ostensibly in the name of the trustees, and
that their and the
first defendant’s intention was that the
first defendant would control and beneficially own such assets as if
they were his
personal assets. In my view it is accordingly not
necessary for plaintiff to plead and to prove that the trust deed was
a sham
to substantiate a claim in respect of the trust assets.
[53] The overwhelming authority, with
which I agree, supports a finding that the trustees have failed to
establish that the conclusion
of law pleaded by the plaintiff and the
relief claimed in respect of the trust cannot be supported by a
reasonable interpretation
of paragraph 12 of the particulars of claim
as amended.
[54] Notwithstanding the findings that
I have made above, it is necessary to deal with the additional
arguments raised on behalf
of the trustees that the relief sought by
the plaintiff against the trustees is academic and that accordingly
their joinder in
the divorce action constitutes a misjoinder.
[55] When I consider the pleadings, it
is apparent that the plaintiff has two separate causes of action
namely:
1.1 one against the first defendant,
inter alia, for an accrual claim; and
1.2 another against the trustees for a
declaratory order that the assets ostensibly held in the name of the
trustees are in fact
beneficially owned by the first defendant,
together with consequential relief.
[56] The trustees must satisfy the
court that the declaratory relief pleaded by the plaintiff is bad in
law. See Barnard v Barnard
2000(3) SA 741(C) at 746, para [10].
[57] Ms Gassner contended on behalf of
the plaintiff that it is competent to join the two separate causes of
action, against the
first defendant on the one hand, and the trustees
on other, in one action, in terms of Rule 10(3) and in terms of the
common law
for reasons of convenience and on the ground that a
material and far-reaching issue, namely the true ownership of the
assets ostensibly
held in the name of the trustees, which involves
questions of fact and law, arises both in the accrual claim and in
the claim
for a declaratory order against the trustees.
[58] This court’s power to grant
declaratory order is governed by
section 21(1)
of the
Superior Courts
Act 10 of 2013
which provides that a High Court has the power “in
its discretion, and at the instance of any interested person, to
enquire
into and determine any existing, future or contingent right
or obligation, notwithstanding that such person cannot claim any
relief
consequential upon the determination”. In my view the
section confers wide powers and a broad discretion on the court to
grant declaratory orders. It is therefore not correct as has been
submitted on behalf of the trustees that it is only competent
to
grant a declaratory order if it is necessary to do so.
[59] In Cordiant Trading CC v Daimler
Chrysler Financial Services (Pty) Ltd 2005(6) SA 205 (SCA) at para
[18], the SCA endorsed
a two stage approach when determining whether
or not to grant a declaratory order:
‘Put differently the two-stage
approach under the subsection consists of the following. During the
first leg of the enquiry
the Court must be satisfied that the
applicant has an interest in an ‘existing, future or contingent
right or obligation’.
At this stage the focus is only upon
establishing that the necessary conditions precedent for the exercise
of the Court’s
discretion exist. If the Court is satisfied
that the existence of such conditions has been proved, it has to
exercise the discretion
by deciding either to refuse or grant the
order sought. The consideration of whether or not to grant the order
constitutes the
second leg of the enquiry”.
[60] I am satisfied that when deciding
the misjoinder exception I am not required to, nor is it competent
for me to, exercise my
discretion regarding the granting of the
declaratory relief sought or to surmise as to how the divorce court
will exercise such
discretion. In my view, all that I am required to
do, for the purpose of the misjoinder, is to decide whether in law it
is legally
competent to grant the declaratory relief sought against
the trustees in the present matter.
[61] I am satisfied that:
1. The parties are agreed that for the
purposes of deciding the matter on exception it is assumed that the
plaintiff will be successful
in respect of her accrual claims,
including the trust assets. The plaintiff will accordingly have the
right to execute against
any of the first defendant’s assets in
satisfaction of her accrual award and therefore has an interest in
having first defendant’s
rights of ownership in respect of the
trust assets determined.
2. In terms of
section 10
of the MPA,
plaintiff will have the right, in the event that first defendant
applies to the court for deferment of payment of
the accrual award,
to have specific assets of the first defendant transferred to her in
part satisfaction of the accrual claim
or to ask that such assets be
put up as security, which would include assets ostensibly held in the
name of the trustees.
3. The plaintiff, as a beneficiary of
the trust, has locus standi in proceedings aimed at ensuring that the
trustees conduct the
administration of the trust lawfully.
4. As co-trustee of the trust,
plaintiff has an obligation to conduct the affairs of the trust
lawfully and to correctly reflect
in the books and records of the
trust what assets the trustees hold in their capacities as trustees.
5. As a co-trustee, the plaintiff has
an interest in having certainty regarding her obligations
particularly relating to the controversial
assets and the
beneficiaries have an interest in having legal certainty regarding
the question of the beneficial ownership of family
assets ostensibly
held in trust.
[62] If regard is had to what I have
said above, then it must be so that the plaintiff qualifies as a
‘person interested’
within the meaning of
section 21
(1) of the
Superior Courts Act (supra
).
I am further satisfied that there is no rule in our law that a
declaratory order can only be sought in respect of existing
rights.
See Reinecke v Incorporated General Services Ltd 1974(2) SA 84(A) and
SA Onderlinge Brand en Algemene Versekeringsmaatskappy
Bpk v Van den
Berg en ‘n Ander 1976(1) SA 602(A).
[64] The submissions on behalf of the
trustees that the declaratory order involves ‘abstract or
hypothetical’ questions
accordingly have no merit and
accordingly fall to be dismissed.
Conclusion
[65] In conclusion, I find that a
joinder of the trustees as defendants in the divorce action to seek
binding declaratory orders
against them regarding the ownership of
assets ostensibly held in the name of the trustees, as well as the
ancillary relief to
reflect the true ownership, is convenient and
fair for the following reasons:
1. Since the plaintiff and first
defendant are both co-trustees of the trust and co-beneficiaries
together with their minor children,
it is desirable in the interest
of the expedition and finality of litigation regarding the true
ownership of assets ostensibly
held by them in their capacity as
co-trustees of the Ruby Trust.
2. The joinder of the trustees will
prevent a multiplicity of trials with overlapping complex factual and
legal issues relating
to, for example,. whether or not the first
defendant is the beneficial owner of the assets ostensibly held in
the trustees’
name, which would involve in a lengthening of the
matter due to the duplication of evidence, witnesses having to
testify twice
on the same facts, potential conflicting findings on
the facts and on the credibility of witnesses and regarding the
ownership
of the assets of the Ruby Trust with beneficiaries
(witnesses) who will inevitably also be litigants in the divorce
action.
3. A declaratory order which is binding
on the trustees regarding the simulated status of the ‘trust
assets’ would effectively
safeguard the plaintiff’s award
and would avoid a situation where, in the absence of such binding
award, and in circumstances
in which the first defendant has
insufficient assets in his personal name to meet the accrual award
and the trustees chose to
ignore the finding by the divorce court,
plaintiff would be deprived of her accrual award and any growth in
such award.
4. The prejudice to be suffered by the
plaintiff in such a situation is in my view completely unnecessary,
untenable and contrary
to principles of fairness, justice, good sense
and reasonableness.
The order
[66] In the result I make the following
order:
1. The applicant’s application
for leave to amend the particulars of claim in the action pending
under case no 8064/14 in
the respects set out in the notice of
amendment marked “A” and dated 22 October 2011, is
granted.
2. The applicant is directed to file
the amended particulars of claim in the above action within ten days
of the granting of this
order.
3. It is directed that such respondents
who opposed the application for leave to amend pay the costs of the
application jointly
and severally, the one paying the others to be
absolved, such costs to include the costs of senior counsel.
RILEY, AJ