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Court case about trust assets and accrual upon divorce – P A F v S C F [2022] ZASCA 101

P A F v S C F [2022] ZASCA 101

The applicant (P) and the respondent (S) were married in 2001, out of community of property with inclusion of the accrual system. They were getting divorced in 2015. The divorce trial started on 18 February 2015. Twenty days prior to the start of the trial P set up a trust in the British Virgin Islands (BVI) with their minor daughter as the only beneficiary and P’s brother, M, who was practising as a Queens Council in the BVI, as the only trustee. A day after the formation of the trust, P donated a sum of GBP115,000 to the trust. P’s version was that the trust was set up to cater for the minor daughter’s maintenance needs.

S averred that the setting up of the trust in the BVI was to make it more difficult for her to monitor the actions of the trustee or to take any action in case that was to become necessary. She also argued that the sum was placed in trust to frustrate her accrual claim. It was common cause that P’s estate experienced the greater accrual during the marriage.

The KwaZulu-Natal (Pietermaritzburg) High Court granted the divorce and ruled that the donation to the trust and the recording of an alleged loan by P’s father to him was done with the “fraudulent intention” to deprive S of her rightful accrual claim. The high court granted leave to appeal to a full bench of the KZN high court. The full bench dismissed the appeal.

P applied for special leave to appeal to the Supreme Court of Appeals (SCA). This application was done out of time and P had to apply for condonation of the late lodging of his application.

The SCA (Makgoka JA (Dambuza and Molemela JJA, and Makaula and Weiner AJJA concurring), held that there were no special circumstances why the late filing of the application should be condoned. The court also dealt with the prospects of success as part of the process and held that the timing of the setting up of the trust and the donation to the trust leads, in the absence of a reasonable explanation by P, to the conclusion that it was done to frustrate the accrual claim. The court also dealt with previous judgements about the nature of the court’s power to pierce the veneer of the trust and held that it is derived from common law and not from the Matrimonial Property Act or the Divorce Act. As such the court held that the assets in the trust in the BVI should be taken into consideration in the calculation of the accrual claim. As there were no reasonable prospects of success, the late application for special leave to appeal to the SCA was dismissed with costs.