Whilst marriage in community of property is the default matrimonial property regime in South Africa, parties are able to contract out of this regime by way of an ante-nuptial contract (“ANC”). Where marriage in community of property entails that all the assets and liabilities of both parties fall into the joint estate and are held in equal and indivisible shares, the ANC can exclude such community of property, allowing parties to retain their separate estates. The accrual system provides an alternative to complete separation of estates, providing marrying couples with a matrimonial property regime to share in the growth of their estates during the marriage, without the risks associated with joining the separate estates and dividing them into equal halves upon dissolution.
At the dissolution of a marriage subject to the accrual system the spouse whose estate shows no accrual or a smaller accrual than the estate of the other spouse acquires a claim against the other for an amount equal to half of the difference between the accrual of the respective estates of the spouses. Whilst the Matrimonial Property Act (“the Act”) provides for workings of the accrual system, its interpretation and accordingly the determination of the accrual is not without issue.
The case of FB v FR 2018 ZAGPHC 699 illustrates one such issue of interpretation regarding the matter of exclusion of assets, and of particular issue the exclusion of future assets, from the accrual system. This article provides a brief overview of FB v FR and outlines its implications.
FB V FR
The case involves the interpretation and lawfulness of an ANC with the inclusion of the accrual system which explicitly excludes specific shares and loan accounts from the husband’s estate for accrual calculation purposes. The primary issue before the court was whether the shares acquired by the husband during the marriage, but not possessed at the marriage’s commencement, should be excluded from the accrual.
“That the assets of the Husband which are listed hereunder and all liabilities presently associated therewith or any other asset acquired by the Husband by virtue of his possession or former possession of such asset shall not be taken into account as part of the Husband’s Estate at either the commencement or dissolution of the marriage.”
The wording of the clause in the ANC mirrors section 4(1)(b) of the Act which provides that:
“In the determination of the accrual of the estate of a spouse an asset which has been excluded from the accrual system in terms of the antenuptial contract of the spouses, as well as any other asset which he acquired by virtue of his possession or former possession of the first- mentioned asset, is not taken into account as part of that estate at the commencement or dissolution of his marriage.”
The Court a quo
The Court a quo dismissed the Appellant’s contention that the difference in the issued share capital owned by the Respondent at the date of the dissolution of the marriage and that owned at the inception of the marriage were subject to accrual sharing. The court found that it was clear from the wording of the relevant clause that such assets owned at the commencement and dissolution of the marriage were to be excluded from the accrual and ruled accordingly.
Ruling and Legal Implications
On appeal, the High Court emphasized that it was incompatible with the accrual regime to exclude assets acquired during the marriage in anticipation of future acquisition. Section 5 of the Act outlines special cases where assets acquired after the marriage’s commencement are automatically excluded. However, it was made clear that spouses cannot have both an accrual during the marriage and exclude wealth or assets acquired by either party in the future. The court ruled that exclusion can only occur at the commencement of the marriage and disallowed any other act or timing of exclusion.
Furthermore, allowing the exclusion of assets that did not exist or possess rights at the marriage’s commencement would undermine the integrity of the accrual system. The High Court stated that only the assets possessed at the beginning of the marriage should be excluded.
FB v FR sheds light on the significance of precise language in antenuptial contracts when determining the exclusion of assets possessed by a spouse at the dissolution of the marriage but not at its commencement. The ruling clarifies that South African matrimonial property system does not permit the exclusion of assets acquired during the marriage in anticipation of future acquisition. This decision underscores the importance of careful drafting of ANC clauses to ensure clarity and alignment with the intended goals of the accrual system in matrimonial property law.
While this case provides valuable guidance, it’s essential to consult with legal professionals to fully understand the intricacies of South African matrimonial property law and its implications.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).