Divorce Attorney Cape Town

Appointing a receiver or liquidator in divorce – where the spouse can’t agree how to divide their estate


In a marriage in community of property it often happens that the parties can’t agree on a division of the joint estate. In matters such as these a Receiver or Liquidator needs to be appointed to divide the estate in a fair and just manner. In the case of Estate Sayle v Commissioner for Inland Revenue 1945 AD 388 the court held that a marriage in community of property means that the spouses become joint owners in undivided half shares of the assets they possess at the time of their marriage as well as of all assets acquired by them during the subsistence of their marriage. The merging of the properties takes place automatically by virtue of the parties being married in community of property.

The community of property continues for the duration of the marriage and only terminates, by either a decree of divorce or the death of one of one of the spouses. On termination of the marriage by death, the surviving spouse will acquire a half share of the joint estate, because he/she owns it, and not through inheritance. Where the marriage is dissolved by a decree of divorce, the parties may agree on a division of the joint estate, in which event a settlement agreement may be drafted to be incorporated in the decree of divorce and made an order of court.

In many instances the parties do not reach an agreement on how to divide their joint estate. In those instances our courts have allowed for the appointment of a receiver or liquidator to realise and divide the matrimonial assets. When two persons are married in community of property a universal partnership in all goods is established between them. When a court grants a decree of divorce that universal partnership ceases. The question then arises, who is to administer what was originally the joint property, in respect of which both spouses continue to have rights? As a general rule there is no practical difficulty, because the parties agree upon a division of the estate. But where they do not agree the duty devolves upon the court to divide the estate, and the court has the power to appoint some person to effect the division on its behalf. Under the general powers which the court has to appoint curators it may nominate and empower someone (whether he is called liquidator, receiver, or curator – perhaps curator is the better word) to collect, realise, and divide the estate.

The appointment of a receiver or liquidator is designed to protect the ownership rights of both spouses when they cannot agree on a suitable division.

A marriage in community of property creates what is called ‘tied’ co-ownership, where the rights of spouses are not only undivided but are also indivisible, as opposed to ‘free’ co-ownership, with freely disposable shares and the possibility of demanding a division at any time since each co-owned share is viewed as separate property. Holding that a spouse in a ‘tied’ co-ownership does not have an automatic right to the appointment of a receiver and liquidator leaves that spouse without a remedy.

There have been instances where courts have allowed the appointment of a receiver or liquidator where parties have agreed to this in advance. In the case of Revill v Revill 1969 (1) CPD 325 at 326C-D Van Zyl J held: ‘In my opinion … the applicant is entitled to move this court for the appointment of a receiver, unless the respondent agrees with the applicant in regard to the appointment of a receiver.’ Van Zyl J also stated at 326 E-F that:

‘The true position is that no man can be a judge in his own cause. In other words, neither party can take upon himself or herself the right to divide the joint estate. In fact, no party in any form of community is entitled to divide the common property and the other party be forced to accept that position. Once either of the parties has no faith in the bona fides of the other party, he is entitled to demand the appointment of a receiver.’

It therefore follows that if parties can agree on the appointment of a receiver in advance where they foresee difficulties in dividing the joint estate, and courts give effect to that, it cannot then be said that, in the absence of an agreement providing for the appointment of a receiver, trying to appoint a receiver at a later stage is a drastic measure.

The ideal situation is for the parties to agree on the division of the joint estate and the legislature, through the enactment of s 7(1) of the Divorce Act 70 of 1979, encourages parties to divide their joint estate by agreement. Section 7(1) provides a statutory mechanism in terms of which written settlement agreements are recognised by the courts. The relevant part of the section provides that ‘a court granting a decree of divorce may in accordance with a written agreement between the parties make an order with regard to the division of the assets of the parties’.

The written agreement in s 7(1) may provide for the appointment of a receiver and liquidator, the identity of such liquidator and the powers of such a liquidator. This means that divorcing spouses may agree in advance to the appointment of a receiver and liquidator. In the case of Van Onselen NO v Kgengwenyane 1997 (2) SA 423 (B) the parties, in their settlement agreement, which was made an order of court, had agreed in advance on the appointment of a receiver and liquidator to be nominated by them to sell a property.

The above are reasons in support of the argument that the appointment of a receiver and liquidator is a legal entitlement and courts should not have a discretion to withhold such an appointment where it is justified, as in the case of an order for forfeiture of benefits.

South African courts tend to apply in matrimonial affairs the principles applicable to the appointment of receivers and liquidators to divide assets of commercial partnerships (see the Van Onselen case at 428B).

Although there are similarities in the joint ownership of assets in commercial partnerships and marriages in community of property, the two are not the same and a crucial difference lies in the ‘free’ co-ownership of commercial partnerships and ‘tied’ co-ownership of marriages in community of property as set out above. Another stark difference is that it is settled law in commercial partnerships that, in the absence of any agreement between the partners on dissolution of the partnership, each partner gets a proportionate share of the assets according to his contribution (see Schrepfer v Ponelat (WCC) (unreported case no 17318/09, 26-8-2010) (Moosa J) at para 33).

In commercial partnerships partners will only get equal shares where their contributions were equal or where it is impossible to determine with certainty their exact contributions (see Isaacs v Isaacs 1949 (1) SA 952 (C) at 961). This does not apply in the dissolution by divorce of a marriage in community of property. In Engelbrecht v Engelbrecht 1989 (1) SA 597 (K) the position was stated as follows in the headnote:

‘Joint ownership of another party’s property is a right which each of the spouses acquires on concluding a marriage in community of property. Unless the parties (either before or during the marriage) make precisely equal contributions the one that contributed less shall on dissolution of the marriage be benefited above the other if forfeiture is not ordered. This is the inevitable consequence of the parties’ matrimonial property regime.’

In the absence of a forfeiture order, divorcing spouses will get equal shares irrespective of their contributions. HR Hahlo in The South African Law of Husband and Wife 5ed (Cape Town: Juta & Co 1985) at 157-158 states:

‘Community of property is a universal economic partnership of the spouses. All their assets and liabilities are merged in a joint estate, in which both spouses, irrespective of the value of their financial contributions, hold equal shares.’

This differentiation between these partnerships is of importance because for commercial partnerships our courts have held that they are not obliged to appoint a receiver and liquidator, and the same principles have been applied to the appointment of receivers and liquidators in matrimonial affairs. I submit that if principles developed to divide joint assets of commercial partnerships are to be employed in the division of matrimonial assets, then those principles must be tweaked and changed to the extent necessary to fit the circumstances of matrimonial assets.

The court in the case of Robson v Theron 1978 (1) SA 841 (A) at 855C held that a court has a wide equitable discretion in making a division of the joint estate, having regard, inter alia, to the particular circumstances, what is most advantageous to the co-owners and what they prefer. Two decisions in the KwaZulu-Natal division have held that courts are not obliged to appoint a receiver and liquidator. In Moosa NO and Others v Akoo and Others [2008] 1 All SA 585 (N) at 591G Msimang J held that:

‘… upon dissolution of a partnership, the court is not obliged to appoint a liquidator to realise the partnership assets, that no party is entitled to such an appointment and that the court has a wide equitable discretion on the issue … .’

Tshabalala JP in Bushnell v Robert (KZD) (unreported case no 6482/08, 9-9-2008) (Tshabalala JP) at 13 held that ‘whilst it is correct that a court is not obliged to appoint a liquidator upon dissolution of a partnership, the court has a discretion to appoint a liquidator’. In exercising its discretion to appoint a liquidator a court will obviously look at various factors including the fact that the parties cannot agree and the size of the joint estate.

Other cases on this aspect suggest that there are at least two considerations to take into account. One, that where parties cannot agree on how to divide the joint estate, or where they no longer trust each other as often happens in divorces, then either one or both of them may approach the courts for the appointment of a receiver and liquidator. In Botha NO v Deetlefs and Another 2008 (3) SA 419 (N), for example, Koen J held at para 15 that:

‘Upon termination and in the absence of agreement, a receiver should in the ordinary course and in the absence of agreement as to how the dissolution of the partnership is to be achieved, be appointed to collect all assets, discharge debts and generally liquidate the partnership.’

Two, the joint estate itself must not be of so trivial a nature or value that it does not justify the appointment of a receiver and liquidator. In the case of Schoeman v Rokeby Farming Co (Pty) Ltd 1972 (4) SA 201 (N) at 206D-G the court, in deciding whether or not the size of the joint estate justified the appointment of a receiver and liquidator, held that:

‘[The plaintiff] could claim the appointment of a liquidator … . In this case, however, there does not seem to be any practical purpose in doing so. … There are no difficulties with regard to capital contributions and it is simply a question of determining the expenses that have been incurred in the farming operations. … The farming activities do not appear to have been particularly complex nor to have extended over a long period. In fact the partnership has been of a very restricted nature. In these circumstances, it appears to me to be unnecessary to go through the formality of having a liquidator appointed … .’

The nature, value and size of the joint estate were also factors considered in the Moosa NO case: ‘Clearly, the partnership activities in casu are much more extensive and have been transacted over a period of approximately five years’ (at 591F). In the Robson case the business involved a partnership of veterinary surgeons and the joint estate to be divided was the goodwill of the partnership. In opting not to appoint a receiver and liquidator, the court at 858F-G reasoned that:

‘The practical and equitable solution in the circumstances, according to the substantive principles of law governing the actio pro socio or the utilis actio communi dividundo, is for the court to place arbitrio judicis a valuation on the goodwill with due regard to the particular circumstances concerning its value at the date of dissolution of the partnership and to order Dr Robson to pay Dr Theron one half thereof.’

Notwithstanding the above, Tshabalala JP in the Bushnell case held at para 13 that: ‘Therefore, as one can see from the abovementioned cases, there can be no general rule as to when a receiver/liquidator is appointed, each case should be judged according to its facts.’

Although parties should be encouraged to settle on an amicable division of their joint estate, where this is not possible the appointment of a receiver and liquidator should be recognised as a right they have where the circumstances of the joint estate permit such an appointment. If a court declines such an appointment, this not only leaves the parties without a remedy but may also force them to try to renegotiate, which may force a spouse in a weaker position to accept an unfair settlement in order to bring the proceedings to an end. The only solution if the court declines the appointment of a receiver and liquidator for fear that the appointment will burden the joint estate, is that the court itself must divide the estate. Existing case law suggests that courts have this power.

De Rebus

Divorce and the forfeiture of your assets


The case of JW v SW 2011 (1) SA 545 (GNP).

In a divorce action the plaintiff (Wife) claimed forfeiture of the defendant’s (Husband) patrimonial benefits of their marriage in community of property in terms of the Divorce Act 70 of 1979, s 9(1). The defendant counter-claimed for an order, in terms of s 7(8) (a) of the Act, that he was entitled to a share in plaintiff’s pension-fund benefits. When the parties entered into the marriage, the defendant brought immovable property into the estate with improvements, in the form of a house. The wife brought no assets into the marriage, but effected renovations to the property in respect of which she alleged the husband made no contributions. The wife had been in continuous employment for 25 years and had built up a pension interest, whereas the husband, due to his erratic employment history, had built no such interest.

The Court found, that, before the issue of whether a benefit was undue arose, it first had to be established that the party, against whom an order of forfeiture was sought, would in fact benefit if the order were not made. Only if the nature and ambit of the benefit were proved, could the court decide whether it was undue or not.

The Court found, further, that a party could only benefit from an asset brought into the estate by the other party, not from his own — a fortiori, such a party could not be ordered to forfeit her/his own asset. The wife only proved the value of the house when the divorce proceedings were instituted, but not what the house was worth when the parties entered into the marriage. The wife had therefore not proved the extent of the husband’s benefit on the dissolution of the marriage.

The Court found, further, that s 7(8) (a) of the Act conferred a discretion on the court in considering an order in terms thereof. Such discretion had to be exercised judiciously, taking into consideration all relevant factors, including fairness. It was fair and just, in the circumstances of the case, that no order be made in terms of s 7(8) (a) of the Act.

The wife’s claims for forfeiture of the benefits arising from the marriage, and the husband’s counter-claim for an order in terms of s 7(8) (a) of the Act, were both dismissed.

About the author – Bertus Preller is a Divorce and Family Law Attorney in Cape Town. He specializes in Family law and Divorce Law at Bertus Preller & Associates Inc. in Cape Town. Bertus is also the Family Law expert on Health24.com and on the expert panel of Law24.com. His areas of expertise are Divorce Law, Family Law, Divorce Mediation, Custody (care and contact) of children, same sex marriages, unmarried fathers rights, domestic violence matters and international divorce law.

http://www.divorceattorney.co.za

Divorce, Business Times Interview With Bertus Preller Top Divorce Attorney at Bertus Preller & Associates Inc.


Divorce and the obstacles facing matrimony in South Africa

Social networking sites should not be underestimated as contributors to divorce statistics. The impact of social network sites should not be underestimated in current divorce statistics as “virtual adultery” connects people outside of marriages.

The popularity of social networking websites  like Facebook and Mxit have brought the possibility to make new friends, and reconnect with old  friends from school or the more recent past, said Bertus Preller, a divorce and family law attorney at Abrahams & Gross in Cape Town. “It creates a platform for ‘virtual adultery'”. “As a divorce attorney I have seen a huge increase in the recent years in people producing print outs of emails, MXIT messages, Facebook wall screen-shots and sms messages to back up claims of their partner’s infidelity,” said Preller.

SA divorce statistics are high. Estimates suggest that 50% of all marriages end in divorce, or as much as two in three marriages end up in the divorce courts. A large proportion of those filing for divorce cite finances and money as the leading cause of separation – along with divorce or infidelity/ adultery, physical, emotional or verbal abuse, in-law problems, life transitions, addictions, childhood baggage, different life agendas, life overload, mid life crisis and controlling behaviour.

Money is a dominant theme. Many women stay in a marriage out of fear of being left with nothing. Preller said men generally want to keep their financial independence and tend to want to give away as little as possible. For many women, a divorce will be the biggest business deal of their lives.  “They need to know the financial ramifications of the decisions that they are making in the divorce and for their future. I see often that many women do not have the slightest idea of the assets of their husband,” he said.

When a couple splits, a woman’s standard of living generally drops with about 25% in the first year after a divorce. Spousal maintenance is not a right any longer, though rehabilitative maintenance i.e temporary maintenance to tie the woman over until she finds employment or until her financial position improves may be awarded to the wife depending on the circumstances of each particular case. A wife can also apply that her husband pays interim maintenance or pays a contribution towards her legal expenses pending the divorce action through rule 43 of the high court rules or she can apply for emergency monetary relief through the mechanisms of the domestic violence act if the husband abuses her financially.

Divorce is a business decision, said Preller. It is of utmost importance to obtain as much financial information as possible to establish the net worth of each party and their ability to make future payments such as child and spousal maintenance after divorce, he said.  In larger divorce matters, a divorce attorney will appoint a forensic auditor to determine the exact assets and liabilities of the parties to arrive at a fair split of the assets. Any divorce attorney should work towards what will be in the best interests of the children, if children are involved.

When an estate has very few if any assets, it may be better to use an online divorce service and it does not make sense to litigate in a divorce court because of the expense. In SA law, the patrimonial consequences of a marriage are governed by the law of the place where the husband was domiciled at the time of the marriage. If for example the husband was domiciled in England at the time of the marriage and no Antenuptial contract was entered into, the marriage will be out of community and in terms of English law. Should the parties later emigrate to SA, the marriage would remain out of community of property.

In a marriage in community of property, it is important to establish the net value of the communal estate at the date of divorce. Then one can establish what each party is entitled to. Often, spouses can’t agree on a division on the joint estate and a Receiver or Liquidator needs to be appointed to divide the assets. When a marriage in community of property dissolves through divorce, each spouse is entitled to 50% of the joint estate, which includes the parties’ pension benefits.

In a marriage out of community with accrual, an auditor often needs to be appointed to determine the accrual. Preller said however he’s been involved in a number of divorce matters where extremely wealthy people were married in community of property. They may not have received the proper legal advice, “or became so focussed on the wedding ceremony that they forget about the consequences of a failed marriage.

Where there has been a shift towards shared responsibility is with children. “When there are children involved, women generally focus more on their wellbeing than men would do. However through the years I have seen a definite shift regarding the parental responsibilities over the children”.  More and more, shared parenting arrangements between spouses over the children.

Source Sunday Times – Business Times Interview by Adele Shevel

Bertus Preller is a Divorce and Family Law Attorney in Cape Town and has more than 20 years experience in law and 13 years as a practising attorney. He specializes in Family law and Divorce Law at Abrahams and Gross Attorneys Inc. in Cape Town. Bertus is also the Family Law expert on Health24.com and on the expert panel of Law24.com. His areas of expertise are Divorce Law, Family Law, Divorce Mediation, Custody (care and contact) of children, same sex marriages, unmarried father’s rights, domestic violence matters and international divorce law.

Contact Bertus at info@divorceattorney.co.za

http://www.divorceattorney.co.za

%d bloggers like this: