Court cases discussed in this article:
- Broodie N.O. v Maposa and Others 2018 (3) SA 129 (WCC)
[The court of first instance] &
- Marais N.O. and Another v Maposa and Others (642/2018) [2020] zasca 23 (25 March 2020)
[The court of Appeal]
When entering into any form of a financial transaction with someone who is married in community of property, that person’s spouse’s consent may also be required for the business contract to be valid, binding and enforceable.
But what does this mean and is there a legal duty to investigate as to what the marital status of the other person is?
These questions were asked and answered in the above-mentioned two court cases. In this article I will explain what the respective Judges decided on these issues.
Broodie N.O. v Maposa and Others
The facts:
Mrs Broodie married Mr Broodie in 1967 in community of property. The marriage was a civil one in terms of the then Black Administration Act, 38 of 1927. This means that Mr and Mrs Broodie were married in community of property.
Mr Broodie also, had a longstanding extra-marital relationship with Ms Ledwaba, which commenced in 1986 and which lasted until Mr Broodie’s death on 4 December 2016, and he had two children with Ms Ledwaba. Mr Broodie died without a valid Will. Consequently, the provisions of the Intestate Succession Act, 81 of 1987, were applicable in the administration of his deceased estate.
Mr Broodie had lived between his two households. Ms Ledwaba knew that Mr Broodie was married civilly. However, she contended, that she did not know, or reasonably could not have known, that Mr and Mrs Broodie were married in community of property.
Shortly before his death, in 2014, Mr Broodie transferred 75% of his member’s interest in a CC to Ms Ledwaba and their two children.
The validity of this transaction was the focus of this case. The 75% of member’s interest in the CC was worth about R20 million. This formed the greater part of the joint estate leaving a residue of a mere two or three million for Mrs Broodie and her children.
Mrs Broodie was appointed as the executrix of Mr Broodie’s deceased estate. Mrs Broodie instituted legal action against Ms Ledwaba and her two children on the basis that the transaction where Mr Broodie transferred his 75% member’s interest to Ms Ledwaba and her two children back in 2014 was invalid and void.
Mrs Broodie’s application was based on three factors: Firstly, that the transaction occurred without her consent and hence was invalid; secondly, that Ms Ledwaba had acted fraudulently; and thirdly that Mr Broodie lacked the necessary mental capacity to contract when the transfer was done.
For purposes of this article, we will only be focusing on the first leg of Mrs Broodie’s application.
The law:
The relevant legislation applicable, is the Matrimonial Property Act, 88 of 1984 (“MPA”), and, more particularly, Section 15 thereof, which states as follows:
“15. Powers of Spouses
(1) Subject to the provisions of subsections (2), (3) and (7), a spouse in a marriage in community of property may perform any juristic act with regard to the joint estate without the consent of the other spouse.
(2) ….
(3) A spouse shall not without the consent of the other spouse: -
a. …
b. …
c. donate to another person any assets of the joint estate or alienate such an asset without value, excluding an assets of which the donation or alienation does not and probably will not unreasonably prejudice the interest of the other spouse in the joint estate, and which is not contrary to the provisions of subsection (2) or paragraph (a) of this subsection.
d. …
(9) When a spouse enters into a transaction with a person contrary to the provisions of subsection (2) or (3) of this section, or an order under section 16(2), and: -
a. that person does not know and cannot reasonably know that the transaction is being entered into contrary to those provisions or that order, it is deemed that the transaction concerned has been entered into with the consent required in terms of the said subsection (2) or (3), or while the power concerned of the spouse has not been suspended, as the case may be;
b. that spouse knows or ought reasonably to know that he will probably not obtain the consent required in terms of the said subsection (2) or (3), or that the power concerned has been suspended, as the case may be, and the joint estate suffers loss as a result of that transaction, an adjustment shall be effected in favour of the other spouse upon the division of the joint estate.”
The court of first instance:
In Broodie N.O. v Maposa and Others 2018 (3) SA 129 (WCC) the court accepted that the transaction referred to was a donation made by Mr Broodie to Ms Ledwaba and their two children. Because of the provisions of subsection (3) of the MPA Mrs Broodie’s consent was required for the donation to be valid.
The question now brought into play was whether or not there was ‘deemed consent’ by Mrs Broodie in terms of section 15(9)(a) of the MPA.
Ms Ledwaba contended that she did not know that Mr Broodie was married in community of property to Mrs Broodie, and that she could not have reasonably known that the transaction occurred contrary to the provisions of Section 15(3)(c).
The court ruled that it was not incumbent on Ms Ledwaba to investigate the legal character of Mr Broodie’s first marriage before she accepted the donation.
The court ruled that Ms Ledwaba’s position was protected by Section 15(9)(a) and that it was deemed that the donation was made with Mrs Broodie’s consent as required in terms of Section 15(3) of the MPA.
In other words, the court of first instance ruled that the transaction was valid and enforceable.
Mrs Broodie, however, did not accept this judgment and appealed to the Supreme Court of Appeal.
The court of Appeal:
This court ruled that:
“A duty is cast on a party seeking to rely on the ‘deemed consent’ provision in terms of Section 15(9)(a) to make the enquiries that a reasonable person would make in the circumstances as to whether the other contracting party is married, and if so, in terms of what marriage regime, whether the consent of the non-contracting spouse is required and, if so, whether it has been given.”
The court said that the third party needs to make reasonable enquiries to find out how the other party is married. .
This answers the question asked in the beginning of this article in the affirmative. Yes, when contracting with a third party, there is a duty placed on you to enquire as to the marital status of the person with whom you are contracting, their marital regime and if consent is required from their spouse.
Mrs Broodie’s appeal was granted: The transaction, or donation, from Mr Broodie to Ms Ledwaba and the two children, was set aside. This means that the members’ interest in the CC reverted to the joint estate of Mr and Mrs Broodie.
- Written by Talita Erasmus a practicing attorney at Alan José Incorporated.
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