The parties were married on 27 March 1993 out of community of property subject to the accrual system in terms of the Matrimonial Property Act 88 of 1984. The commencement value of the respondent's assets was R20,000 and the appellant's was R175,000. During the marriage, the appellant established three trusts (Koens Besigheids Trust, Koens Familie Trust, and Bulhoek Trust) in 1999 and 2011, as well as a close corporation (Olivia Wildplaas CC), primarily for tax and estate planning purposes on professional advice. The appellant and respondent, together with their children, were capital beneficiaries of the trusts. Mr Johan van Rooyen was appointed as an independent co-trustee. When the respondent filed for divorce, she joined the trusts and CC as parties, claiming their assets should be included in calculating the accrual of the appellant's estate on the basis that these entities were the appellant's alter ego and that he exercised sole de facto control over them. She alleged the trusts and CC existed in name only, that the appellant made no distinction between his income/expenses and those of the entities, and that he established them to prejudice her accrual claim. The appellant denied these allegations, asserting the trusts were established for legitimate estate planning purposes long before contemplation of divorce.
The appeal was upheld with costs, including costs of two counsel. Paragraphs 2 and 6 of the High Court order were set aside and replaced with an order dismissing the plaintiff's (respondent's) claim that the assets of the Koens Besigheids Trust, Koens Familie Trust, Bulhoek Trust and Olivia Wildplaas CC should be used to calculate the accrual of the first defendant's (appellant's) estate, with costs including costs of two counsel where so employed.
To succeed in a claim that trust assets be included in a spouse's estate for purposes of calculating accrual in a divorce where the parties were married out of community of property subject to the accrual system, the claimant must plead and prove that the spouse transferred personal assets to the trust and dealt with them as trust assets with the fraudulent or dishonest purpose of avoiding the obligation to properly account for the accrual of the estate and thereby evade payment of what is due in accordance with the accrual claim. Mere de facto control of a trust by a spouse, or the allegation that the trust is the spouse's alter ego, is insufficient. There must be evidence of abuse of the trust form through dishonest or unconscionable conduct. The court is bound by the issues as defined in the pleadings and cannot adjudicate on a basis not pleaded by the parties, particularly where such basis would involve allegations of fraud or dishonesty that were never put to the opposing party. The legitimate use of trusts for estate planning and tax purposes, established on professional advice and from which both spouses benefited during the marriage, does not justify piercing the trust veneer absent evidence of abuse of the trust form.
The Court commented that trusts have for years been used and will continue to be used as a convenient tool for estate planning and are governed by the Trust Property Control Act 57 of 1988. The statutory definition of a trust requires that the trust founder must relinquish at least some control over the property to the trustee, requiring separation of ownership (or control) from the enjoyment of trust benefits. This separation is designed to ensure trustees exercise impartiality and diligence in protecting beneficiaries' interests. The Court noted that s 12 of the Trust Property Control Act provides for separation of trust assets from the personal assets of a trustee unless the trustee is also a beneficiary. While the mere fact that assets vest in trustees and do not form part of a spouse's personal estate does not per se exclude them from consideration when calculating accrual, the courts may only look behind the trust form where there is evidence of abuse of the trust by the trustee. The Court referred with approval to the principle stated in Land and Agricultural Bank of South Africa v Parker that where trustees act in breach of trust duties and the trust form is a mere veneer, courts may pierce that veneer in the interests of creditors. The Court also observed that the case of Badenhorst v Badenhorst, frequently cited in this context, concerned redistribution under s 7(3) of the Divorce Act in a pre-accrual marriage and did not involve piercing the trust veneer or finding the trust to be a sham.
This case is significant in South African matrimonial property law as it clarifies the requirements for piercing the trust veneer in accrual claims arising from divorce. It reinforces that courts cannot go beyond the pleadings and must adjudicate only on the issues properly raised by the parties. Most importantly, it establishes that to successfully claim that trust assets should be included in a spouse's estate for accrual calculation purposes, the claimant must plead and prove not merely control or that the trust is an alter ego, but that the spouse transferred assets to the trust with fraudulent, dishonest or unconscionable purpose to avoid accrual obligations. The case protects the integrity of legitimate estate planning through trusts and confirms that the use of trusts for tax planning and asset protection does not, without more, justify piercing the trust veneer. It provides important guidance on the distinction between cases involving redistribution orders under s 7(3) of the Divorce Act and cases involving calculation of accrual under the Matrimonial Property Act.
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