Be careful, living together may cost you half of your assets when you breakup.
Recent case law in South Africa has far reaching consequences for unmarried couples who live together. In one case the court concluded that an unmarried woman who devoted all her time, effort and energy in promoting the interests of both parties by maintaining their common home in raising their children was entitled to 30 % of her partner’s net asset value at the date their relationship ended. In another case an award of more than R 6 million was granted to an unmarried woman who actively helped her partner in building his estate.
In the recent case of Cloete versus Maritz case number 6222/2010 and 16433/2012, in the Western Cape High court a judge has made a farmer (Mr Maritz) pay more than R 6 million for leaving his fiancée (Miss Cloete) of 10 years after he downplayed the role she played in building up his businesses and suggested she had illegally occupied his house in Cape Town.
After 10 years together, the court heard, how the man deserted his fiancée in March 2009, and by December that same year he married somebody else. Judge Robert Henney of the Cape Town High Court ordered the man to compensate his fiancée just over R6 million within 30 days, failing which his house could be attached.
The facts of the case were briefly as follows:
Having been in a relationship with each other, the parties on or about 10 March 1998 agreed to marry each other within a reasonable time after such date. As a result of this, the parties became engaged to one another during February 1999. Cloete alleged that on 24 April and 7 May 2009 Maritz repudiated the agreement by refusing to marry her. It was alleged that he did so by informing her that he did not want to see her again and that he had somebody new in his life. She alleged that the rejection was wrongful an unlawful and she issued summons against him whereby she claimed a 50% share of the value of the assets of Maritz based on a universal partnership, repayment of the sum of R 26,000 which was donated by her to Maritz and R 25,000 for damages for breach of promise to marry her. Throughout their relationship, Maritz and Cloete started various business ventures, both in South Africa and also in Namibia. According to Cloete, she invested considerable time in the businesses, including a farm in Namibia, since Maritz had a permanent job.
In 2001, they also bought a house in Cape Town as an investment, and they discussed changing it into a guest-house with the goal of ultimately retiring there. The house was registered in Maritz’s name. In March 2009 Maritz broke the news that he had someone new in his life, Cloete then moved into the house in Cape Town since according to her, she had nowhere else to go. Cloete testified that she later wrote a letter in which she told Maritz she had nothing to her name, even though she had worked hard to build up their businesses. Maritz filed a counter-claim that Cloete was unlawfully occupying the property and requested the court to evict her and also that she be ordered to pay damages to him equal to reasonable market related monthly rental of R 20,000 for 21 months unlawful occupation. Maritz disputed that there was a legally enforceable engagement, or that a universal partnership existed. He maintained that the decision to end the relationship was mutual. He also argued that he and Cloete signed an antenuptial contract prior to their intended marriage, and said this was an indication that they never intended to form a universal partnership.
The court’s finding
Judge Henney said in his judgement that Cloete came across as an honest and genuine person, who did not contribute to and assist Maritz purely to gain financially, but because of her deep love, affection, admiration and loyalty she had for him. It was clear it was never her intention, when she entered into the relationship with Maritz, to gain financially from it. The impression created was that she was the submissive and the caring partner who at all times acted in (his) best interests,” the judge said. Maritz, on the other hand, tried to downplay Cloete’s involvement, and diminish her contribution to that of an ordinary worker.
The Judge felt that Cloete’s role in the partnership was not limited to that of a housewife who tended to the maintenance of the home. He found that Cloete assisted Maritz in executing the commercial undertaking of the partnership. This contribution she made was in addition to the indispensable contribution she made to the businesses where she contributed her skills, energy, time, capital and income to promote the interests of the universal partnership. The judge found further that she contributed her admin skills and know-how for the promotion of the businesses she further contributed to the financial growth of the businesses and as a result of this, they acquired a number of assets during the relationship. Given the relationship they were involved in and businesses, the only conclusion that the court could come to was that a universal partnership came into existence.
Judge Henney said in light of the relationship and Cloete’s “inextricable” involvement in the businesses, the only conclusion was that a universal partnership had existed. He ordered Maritz to pay Cloete R 6.166 million, which constitutes a 50 % share in the universal partnership, as well as R 25 000 for breach of promise. Maritz was also ordered to pay costs.
Judge Henney mainly relied on the case of Butters v Mncora (181/11)  ZASCA 29, discussed below.
A question that needs to be considered is whether there was a universal partnership that existed between the parties. The legal principles applicable to a universal partnership was summarised by the Supreme Court of Appeal in Butters v Mncora (181/11)  ZASCA 29. The Appellate Division held that while cohabitation does not give rise to special legal consequences, a cohabitee can invoke remedies in private law which in this case was based on the law of partnership.
In this case, the parties were involved in a 19 year relationship, most, but not all, of which was spent living together. They had been engaged for nearly 10 years, but never married. During the course of the relationship, Butters had accumulated a sizeable estate from his business interests, which included a security company. Mncora had initially worked briefly as a secretary but, at the persistence of Butters, had stopped working to stay at home and care for the couple’s children and Butters’ child from another relationship. Butters had provided for all the financial needs of the family. The relationship terminated abruptly and a dispute soon ensued as to whether Mncora was entitled to any of Butters’ assets, even though she had never been married to Butters.
In the trial court, the plaintiff accepted that she had had virtually nothing to do with the defendant’s business and, in fact, had never entered the business premises. She conceded that her contribution to the partnership was limited to caring for the family and running the family home. The legal premise for the majority’s judgement started by recording that “the general rule of our law is that cohabitation does not give rise to special legal consequences”. However, the cohabitee has a remedy derived from the law of partnership and has the onus of establishing the partnership essentials. The path breaking aspect of the judgement is the finding that the partnership enterprise need not be confined to a commercial undertaking and that therefore “once it is accepted that the partnership enterprise may extend beyond commercial undertakings, logic dictates, in my view that the contribution of both parties need not be confined to a profit-making entity… It can be accepted that the plaintiff’s contribution to the commercial undertaking contacted by the defendant was insignificant. Yet, she spent all her time, effort and energy in promoting the interests of both parties in the communal enterprise by maintaining their common home in raising their children. On the premise that the partnership enterprise between them could notionally include both the commercial undertaking and the non-profit making part of their family life, for which the plaintiff took responsibility, her contribution to that notional partnership enterprise can hardly be denied”.
In light of the Butters case it appears that if a cohabitees evidence is accepted that “everything was for both of us… we were sharing everything”, this may well be sufficient to prove a universal partnership, even in circumstances where the plaintiff’s contribution were limited to running the joint household and raising the children.
The appeal court considered the essential elements of partnerships. Firstly, each of the parties must contribute something into the partnership or bind themselves to bring something into the partnership, whether it be money or labour or skill. The second element is that the partnership business should be carried on for the joint benefit of both parties. The third is that the object should be to make a profit.
There are two kinds of universal partnerships; firstly, ones where the parties agreed to put in common all their property present and future; and secondly, those where parties agreed that all they may acquire during the existence of the partnership from every kind of commercial undertaking, will be partnership property. A universal partnership does not require an express agreement. Like any other contract it can come into existence by tacit (unspoken) agreement, that is by an agreement derived from the conduct of the parties. Where the conduct of the parties is capable of more than one interpretation, the test for when a tacit universal partnership can be held to exist is whether it is more probable than not that a tacit agreement had been reached.
It is clear that the Butters case broadened the application of a universal partnership, certainly in the case of cohabitees. This has very important practical consequences given the rising trend of people living in domestic partnerships in South Africa. In America for example, 40% of all couples living together are unmarried. In Sweden, 9/10 couples marrying for the first time already lived together and in Denmark, more than one third of women in the early 20’s are living in extra marital intimate relationships. A report recently published in the UK using the latest data from the Office for National Statistics revealed a generational shift away from the institution of marriage, with youths far less likely ever to wed than their parents and grandparents. The research by the Marriage Foundation showed that, for a variety of reasons, 47% of women and 48% of men aged 20 will never marry. In South Africa an increasing number of couples are cohabiting and delaying their walk down the aisle.
Given the latest developments in the law of universal partnerships, couples who do not wish to be married would be well advised to consider entering into a written cohabitation agreement to regulate their cohabitation relationship, otherwise separation may just have devastating consequences.
Compiled by Bertus Preller
Family Law and Divorce Attorney and author of Everyone’s Guide to Divorce and Separation – Random House.