WT and Others v KT

• Jurisdiction: South Africa
• Judge: Lewis JA, Bosielo JA, Pillay JA, Mbha JA and Mayat AJA
• Judgment Date: 13 March 2015
• Citation: 2015 (3) SA 574 (SCA)
• Docket Number: 933/2013 [2015] ZASCA 9
• Hearing Date: 18 February 2015
• Counsel: T Strydom SC for the appellants. AP Allison for the respondent.
• Court: Supreme Court of Appeal

Mayat AJA (Lewis JA, Bosielo JA, Pillay JA and Mbha JA concurring):

C [1] The crisp issue in the present appeal, brought with the leave of the court a quo, is whether or not assets of a discretionary family trust can be regarded as part of the assets of the joint estate of parties married in community of property.

Pertinent background to proceedings

D [2] WT (the plaintiff in the court below, and the first appellant), who was married to KT (the defendant in the court below, and the respondent) in community of property on 6 October 2001, instituted an action in the Gauteng Local Division of the High Court against KT in January 2010, claiming a decree of divorce as well as ancillary relief. While KT did not E oppose the decree of divorce sought by her husband, she filed a counterclaim relating to the extent of the assets of their joint estate. Both WT and his brother (the third appellant), each cited nomine officio in their capacities as duly appointed trustees of a trust, were joined as parties to the counterclaim as the second and third defendants in reconvention, respectively, in the court below.

F [3] KT's amended counterclaim was premised upon the contention that assets of a trust with master's reference IT11246/1999 established in 1999 (the trust), formed part of her joint estate with WT. Specifically, the following averments were made in this regard in the counterclaim:

'5.5

The plaintiff [WT] deceived and made false representations to the G defendant [KT], inter alia the plaintiff falsely represented to the defendant that the purchase of a dwelling . . . [for] the plaintiff and the defendant, would be registered in terms of a Trust to protect it from the plaintiff's business/es [creditors] and in terms of which both the plaintiff and the defendant would be beneficiaries, but proceeded to exclude the defendant from the Trust as a H beneficiary and, from her 50% entitlement thereto in the joint estate in the event of a divorce.'

It was further averred in the amended counterclaim that:

'8.

The defendant pleads that for the purposes of determining the assets in the joint estate the assets of the Trust alternatively the I prior matrimonial home . . . registered in the name of the Trust falls to be included in the joint estate as:

8.1

The Trust was established as the alter ego of the plaintiff [WT] in that:

. . .

8.1.2

Plaintiff had no true intention to establish the Trust as an J entity separate from him and the joint estate.

Mayat AJA (Lewis JA, Bosielo JA, Pillay JA and Mbha JA concurring)

8.1.3

Plaintiff effectively de facto controlled the . . . Trust, having A regard to the terms of the Trust Deed and the manner in which the affairs of the Trust were conducted.

8.1.4

Plaintiff regarded the Trust as a financial vehicle whereby he and the joint estate could amass his own wealth and obtain a financial advantage for himself and the joint estate. B

8.1.5

Plaintiff, but for the Trust would have acquired and owned the assets of the Trust in the joint estates' name.

8.1.6

Plaintiff regarded the Trust as a financial vehicle for his and the joint estates' benefit.

8.2

Plaintiff is and always has controlled the Trust, having regard to the terms and the manner in which Trustees conducted themselves and affairs of the Trust. C

9.

In the premises, the Trust was and is in reality no Trust at all, the assets forming part of the Plaintiff's estate and thereby the joint estate.'

[4] The court below (Lamont J) determined the counterclaim as a D separated issue in the context of the divorce action. More specifically, the court a quo granted an order in the following terms in relation to the separated issue on 19 September 2013:

'1.

The joint estate includes the assets of the [WT] Trust.

2.

The action is postponed sine die to enable the value of the joint estate to be determined. E

3.

Any party requiring the Order in 2 to be reconsidered should within 7 days of the date hereof deliver a notice declaring such hearing on a date to be arranged.

4.

The Plaintiff is to pay the Defendant's costs including the costs of the claim against the [WT] Trust.'

Paragraph 1 of this order constitutes the subject-matter of the present F appeal.

Relevant evidentiary framework

[5] On the basis of the evidence of both WT and KT, the circumstances surrounding the development of their relationship and the establishment G of the trust by WT were largely common cause. During March 1996 WT met KT, a mother of two daughters from a previous marriage. He was a bachelor at the time and she was in the process of getting divorced from her previous husband. WT was employed by RPP Developments (Pty) Ltd (RPP) as a project manager, whilst KT was employed as a store manager by the Foschini Group. H

[6] In the middle of 1997 KT and WT moved in together into a house he was caretaking for RPP. WT subsequently identified an immovable property in Ormonde Street, Bryanston (the property), as a good investment. The trust purchased the property in October 1999 and the property was subsequently registered in the name of the trust in I February 2000. WT and KT (who were still not married at that stage) then took occupation of the property in February 2000 and lived together on the property for almost 10 years, until October 2009. There was no formal agreement between them and the trust relating to their occupation of the property, but it appeared from the evidence that they lived on the property, free of any consideration. J

Mayat AJA (Lewis JA, Bosielo JA, Pillay JA and Mbha JA concurring)

A [7] WT had created the trust in terms of a written trust deed dated 4 October 1999, apparently on the advice of his father. A trust deed concluded at the time reflected WT's father as the founder of the trust. It was also stipulated in the preamble to the trust deed that WT's father had created the trust by way of a donation to the trustees of the trust for the B benefit of income and capital beneficiaries (as defined), subject to the terms and conditions laid down by the founder which were incorporated in the trust deed. In terms of letters of authority issued by the Master of the High Court in November 1999, WT and his brother were both appointed as the trustees of the trust. They remained the only trustees of the trust since inception.

C [8] The capital beneficiaries of the trust were defined in terms of clause 1.2(b) of the initial trust deed as beneficiaries selected by the trustees from the ranks of the children of WT; the legal descendants of such children; any trust created for any such beneficiaries; and the testate or intestate heirs of WT if none of the said beneficiaries were alive at the D vesting date of the trust.

[9] In due course, after WT instituted a divorce action against KT, he also procured the amendment of the trust deed in February 2010 in relation to the defined beneficiaries of the trust. On the basis of such amendment, WT and his brother remained trustees of the trust.

E [10] The purchase consideration of the property by the trust was R500 000. The acquisition was financed by a loan in the sum of R400 000 from Standard Bank of South Africa Ltd (Standard Bank) to the trust. The balance of the purchase price in the sum of R100 000, as well as transfer costs in a sum of approximately R50 000, F were lent to the trust by WT. Whilst KT testified that she had contributed to the deposit for the property during 1999, she also confirmed in her evidence that she had only contributed the limited amount of about R7900 in the preceding year (1998) to WT for their joint living expenses at the time. Be that as it may, the loan from Standard Bank to the trust was secured with a mortgage bond registered against the property. WT, G who was still unmarried at the time, also bound himself as surety for the obligations of the trust to Standard Bank. The further loan from WT to the trust was interest-free, unsecured and with no fixed repayment dates.

[11] WT commenced business for...