A financial planner’s take on landmark Divorce Act judgment

Last week, we reported on the landmark judgment by the Pretoria High Court that declared parts of the Divorce Act unconstitutional and invalid. The ruling means that individuals married out of community of property without accrual will be entitled to claim a redistribution of assets despite what their signed antenuptial contract may provide.

Read: Court ruling has major implications for divorcing couples married out of community of property

Moneyweb’s Boitumelo Ntsoko interviewed Eric Jordaan, a Certified Financial Planner and a director of Crue Invest, about the potential implications of the ruling. We have extracted the following key points from the interview, which you can read in full here.

What was the context to the Pretoria High Court’s ruling?

Eric Jordaan: The parties were married, in 1998, out of community of property excluding the accrual system. When the parties divorced, the court was asked to make a ruling on whether section 7.3 of the Divorce Act is constitutional insofar as it excludes a party married out of community property without the accrual system after 1984 from laying a claim on the other party’s assets, based on an equitable distribution of these assets.

In this case, the one party was a stay-at-home mom, meaning she looked after the family, looked after the kids, made sure that they were well educated – which meant she could not further her career, could not grow her own estate – whereas the husband could continue his farming operations and was very successful at it, which allowed him to grow his estate quite substantially.

When the parties ended the marriage, the wife wanted to have an equitable distribution of the growth that took place in her husband’s estate while they were married. She wanted to have an equitable share of the growth in that estate – in other words, the value that she added to his estate while they were married.

If someone was married out of community of property excluding accrual, but they have been divorced for a while, can they now approach the court for a settlement?

Jordaan: Yes. Each matter would have to be dealt with based on the facts of the case. Some of the factors that would have to be taken into account are the date on which the divorce took place, whether the divorce was done via a settlement agreement, or whether it was a contested matter where the court made a ruling.

But in essence, it is possible to have a divorce order amended, and you would either have to appeal the decision that was made by the court, or you would have to apply for a variation of the divorce settlement or divorce order that was granted by the court based on the settlement agreement. The success of that would depend on the facts of each matter.

If someone is considering doing this, would they have to wait for the Constitutional Court to confirm the Pretoria High Court’s ruling first?

Jordaan: I think that would definitely be the first step. The matter was referred to the Constitutional Court to confirm the ruling. Once that is done, it’ll provide more direction and a firmer basis on which you could apply for any such variation, or if you are in the process of being divorced, of claiming a distribution of assets based on the judgment.

Why would someone contest a settlement instead of relying on the Maintenance Act?

Jordaan: Often, the Maintenance Act will provide, say, limitations in terms of the lifestyle that any person was accustomed to, and it also takes into account the individual spouses’ personal assets and what they would be entitled to, how they would be able to provide for themselves.

This claim is much wider. It looks at the full growth of the assets, and it needs to determine an equitable distribution of the growth in each party’s assets while the marriage was in existence. It also looks at what contribution each spouse made to that marriage and what that resulted in, in terms of the growth and asset value.

The ruling has generated a lot of debate. One side argues that the wife should not receive a settlement, because her husband is working and the least that she can do is look after the home and children. On the other hand, a few years ago, a study found that if a housewife were to be compensated for all the work that she does, she would be paid about R50 000 a month. What are your thoughts?

Jordaan: It’s a tricky question. But when you look at it objectively, each party does bring something to the marriage that allows one party to focus more on their career and build some wealth, while the other party potentially looks after raising the family and so forth.

Each party brings into the marriage a value, which should be rewarded or considered in some way or form. What the exact amount is for equitable distribution, or what contribution each party makes to the marriage, is very difficult to put into numbers, as it depends on the parties’ lifestyles or what they are accustomed to, so that would have to be considered in each individual case. But in principle, it is a justifiable claim to have against the other party in the event of a divorce.

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