Badenhorst v Badenhorst [2006] JOL 16168 (SCA)
While Mr. & Ms Badenhorst (the Respondent and Appellant respectively) were married (out of community of property) the Respondent acquired a farm from his father. The farm was registered in the name of a trust of which the Respondent was the sole controller. The parties discussed it at the time and the Respondent advised the Appellant that the purpose was to protect them against creditors and to avoid Estate Duty. Later the Respondent also registered the names of other businesses and properties which he acquired in the name of the trust.
When the parties divorced, the question before the court was whether the inter vivos trust should be taken into account for the purpose of a redistribution order in terms of section 7(3) of the Divorce Act 70 of 1979 (‘the Act’).
The Supreme Court of Appeal held that:
The trust vests in the trustees. The mere fact that the assets vested in the trustees and did not form part of the respondent husband's estate did not per se exclude them from consideration when determining what must be taken into account for redistribution. But to succeed in a claim that trust assets be included in the estate of one of the parties there needs to be evidence that such party controlled the trust and but for the trust would have acquired and owned the assets in his own name. The control must be de facto (in reality or fact) and not necessarily de iure (according to law).
To determine whether a party has such control it is necessary to first have regard to the terms of the trust deed, and secondly to consider the evidence of how the affairs of the trust were conducted during the marriage. In the present case the Respondent had full control of the assets of the trust and used the trust as a vehicle for his business activities. The extent of his control is evident from the provisions of the trust deed. From the evidence of the Appellant it is clear that in his conduct of the affairs of the trust the Respondent seldom consulted or sought the approval of his co-trustee and he paid scant regard to the difference between trust assets and his own assets. It is evident that, but for the trust, ownership in all the assets would have vested in the respondent.
Therefore the inter vivos trust should be taken into account for the purpose of a redistribution order in terms of section 7(3) of the Act.
Note: Based on the evidence placed before the court, it would have been interesting to see whether the SARS would have included the trust assets to determine the value of Mr. Badenhorst’s Estate for Estate Duty purposes, should he have passed away and not got divorced. Section 3(3)(d) of the Estate Duty Act states that any property that the deceased was competent to dispose of for his own benefit or for the benefit of his estate immediately prior to his death needs to be included as deemed property.
(Jaco Bekker)
