Accrual Claims in Divorce and Estate proceedings and the manner in which Trust Assets are viewed

Published on November 17, 2022

Attorneys are often approached to assist with claims for the division of the difference between the accrued assets of spouses upon divorce or death. The antenuptial contract entered into by the parties prior to marriage is always the starting point in such investigations.

The net value of the estate of a spouse at commencement of marriage is either declared in the antenuptial contract itself or declared in a statement declaring the value thereof within six months of date of signing of the antenuptial contract, subject to certain requirements (Section 6 of the Matrimonial Property Act).

Section 3(1) of the Matrimonial Property Act stipulates as follows:

At 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, or his estate if he is deceased, acquires a claim against the spouse or his estate for an amount equal to half of the difference between the accrual of the respective estates of the spouses

The date on which the accrual be established would be the date of dissolution of the marriage or the date of death.

Subsection 3(1)(b)(iii) of the Act provides for the determination and adjustment of the commencement value in accordance with the consumer price index as published from time to time.

The antenuptial contract or statement of value referred to above, serves as prima facie proof of the net value of the estate of the estate of the spouse concerned at the commencement of marriage.

In the matter of M. vs. M GP62488/15 ([20016] ZAGPPHC 1120) the Court held that the declared commencement value in an antenuptial contract constituted conclusive proof of such value and not merely prima facie proof (on appeal, a full Court upheld this decision).

As in the case of any other contract, a party can always attack the antenuptial contract on any of the recognized grounds such as misrepresentation, duress, undue influence, etc. A party is therefore bound to the agreed commencement value in the antenuptial contract or statement unless a case is made out for the said contractual remedies. The remedy for rectification also remains available to a party if the requirements for such rectification of an antenuptial contract are met.

OLIVIER vs. OLIVIER 1998 (1) SA 550 (D).

It remains trite law that a party wishing to rely on a contractual remedy, must not only plead it but also need to prove it clearly and distinctly.

GILBEYS DISTILLERS vs. MORRIS N.O. AND ANOTHER 1990 (2) SA 217 (SE).

(See EC Chemia and Sons vs. Lamé Van Blerk 2006(4) S.A. 574 (SCA) for when evidence may go beyond the pleadings).

The assets of trusts and/or other entities such as companies are often at the centre of a dispute concerning the calculation of a party's accrual. The question is always whether an alienation was made with the specific intention to frustrate a spouse's claim to share in the accrual of the other spouse. If so, it will be in breach of a protectable contingent right which parties married in terms of the accrual system will have. PAF vs. SCF 2022 (6) ZASCA 101.

A further aspect is the difference between piercing the veneer of a trust or having a trust declared as a sham.

A successful piercing of the veneer of a trust may result in the inclusion of the value of the trust assets in the calculation of a spouse's accrual. It is not the trust assets itself but only the value thereof that is taken into account.

However, when a trust is declared a sham, the trust assets will evolve to the founder of the trust, who may not be either of the spouses. Only if a spouse is also the founder of the trust will the assets of the sham trust evolve the his/her estate.

The Supreme Court of Appeal in PAF vs. SCF 2022 (6) S.A. 162 (S.C.A.) on 171 para 26 summarized the position as follows:

• Where trust property is involved, the default position is that such property does not form part of the normal estate of the trustee, except in so far as he or she, as trust beneficiary, is entitled to the trust property.
• A court can disregard this in two instances: where it finds that a trust is a sham or simulated or when it finds that there has been abuse of the trust form.
• The notion of a trust being a sham is premised upon the trust not existing.
• If it is found that a trust is a sham, the result is that no effect will be given to the transaction and “the founder” will remain the owner of the “trust assets” and neither the trustees nor the beneficiaries will acquire any rights with regard to these assets.
• On the other hand, piercing the trust veneer implicitly recognizes the validity of a trust in the legal sense, but finds that there may be justification to disregard the ordinary consequences of its existence for a particular purpose.
• These two remedies are distinct from each other and should not be conflated.

It follows from the above that it will only make sense to allege that a trust is a sham, if the founder of the trust is/was also a spouse to a marital regime including the accrual system.

C.M. Weiss
Practicing Consultant