Dissipating Assets In Anticipation Of A Divorce

Getting a divorce is never easy and sometimes the breakdown of the marriage causes bitterness and resentment.  This acrimony may cause one Party to feel that the other may not be entitled to receive half of the joint estate. The Parties are sometimes willing to do whatever it takes to make sure that the other does not receive his/her fair share.

Our divorce law is based on a no-fault basis and the principle of punishing one Party for causing the breakdown, has been done away with. Upon the dissolution of a marriage, each Party becomes entitled to 50% of the joint estate when married in community of property, despite perhaps being guilty of causing the marriage to fail.

In anticipation of a divorce, Parties have been seen to dissipate assets in an attempt to avoid an equal division. This dissipation can happen by way of squandering assets or by donating assets without the other Party’s permission. Sometimes squandering takes place by selling assets for a price well below its market value and without the other Party’s consent.

We have seen people willing to lose money before sharing it with their spouses.  However, we have also seen a significant delay in divorce proceedings due to an unrealistic fear of the estate being dissipated. This is where one Party refuses to settle because of a fear that the other Party has squandered the joint estate. It is then important to understand the type of relief which may be sought and the circumstances under which such relief may be granted.

A Party being prejudiced by the dissipation is not without relief and may approach the Court for an anti-dissipation order. When seeking this type of relief, the Applicant needs to show a particular state of mind on the part of the Respondent, which is, that he/she is getting rid of the funds or he is likely to do so, with the intention of defeating creditors’ claims[1], a Specific intention is necessary.

In a 2008 Supreme Court of Appeal matter[2] Harms ADP said that for an Applicant to obtain an order which interdicts a Respondent from disposing of or dissipating assets, the Applicant has to satisfy the Court that the Respondent is wasting or secreting assets with the intention of defeating the claims of creditors.

When seeking relief, it is clear that concrete evidence must be presented to show firstly: – wasting or secreting and secondly that this wasting has been done with a specific intention which is to deliberately “defraud” the other party.

In a 2016 matter[3], the High Court in Grahamstown dismissed an anti-dissipation order as it was based on hearsay. In this particular matter, the Applicant heard from relatives of the Respondent that he intends to spend his pension money in a lavish manner. This was not enough for a Court to grant such an order.

An interdict is in order restricting the Respondent from disposing or dissipating assets. This may be sought when a Party is busy or has the intention to dissipate assets.

What happens if a Party has already dissipated the assets?

Section 15(9)(b) of the Matrimonial Property Act, is the appropriate point of departure when discussing dissipation of matrimonial assets. Section 15 in short provides that a Party may not, without the consent of the other spouse alienate, pledge, cede or donate valuable property like immovable property, shares, stocks, insurance policies, investments, mortgage bonds, fixed deposits, jewellery, coins, stamps, paintings or any other assets forming part of the joint estate and held mainly as investments.

It further provides that a Party may also not withdraw money held in the name of the other spouse in any account in a banking institution or enter, as a consumer, into a credit agreement to which the provisions of the National Credit Act, 2005 (Act 34 of 2005) apply, as ‘consumer’ and ‘credit agreement’ are respectively defined in that Act or bind himself as surety.

In addition to the above, a spouse shall not without the consent of the other spouse alienate, pledge or otherwise burden any furniture or other effects of the common household forming part of the joint estate or receive any money due or accruing to that other spouse or the joint estate.

The consent required may, except where it is required for the registration of a deed in a deeds registry, also be given by way of ratification within a reasonable time after the act concerned.

In certain circumstances, the consent required for the performance of the acts shall be given separately in respect of each act and shall be attested by two competent witnesses.

Donations without the consent of the other Party may be allowed under certain circumstances if it does not unreasonably cause prejudice to the interest of the other spouse in the joint estate. In determining whether a donation or alienation does not or probably will not unreasonably prejudice the interest of the other spouse in the joint estate, the Court shall have regard to the value of the property donated or alienated, the reason for the donation or alienation, the financial and social standing of the spouses, their standard of living and any other factor which in the opinion of the Court should be taken into account.

When a spouse enters into a transaction with a person contrary to the provisions as discussed above the Court may make an adjustment in favour of the other spouse upon the division of the joint estate if:

• The third Party does not know and cannot reasonably know that the transaction being entered into is contrary to the discussed provisions, (it shall be deemed that the transaction concerned has been entered into with the consent required) and;
• That spouse knows or ought reasonably to know that he/she will probably not obtain the consent required, and;
• the joint estate suffers a loss as a result of that transaction,

This basically means that if the estate has already been dissipated, and an interdict will no longer provide relief, the prejudiced party may ask the Court to make an adjustment in his/her favour upon dividing the joint estate. If successful, the Court may consider the value of the dissipated property as part of the joint estate.

Section 20 of the Matrimonial Property further also provides that A Court may, on the application of a spouse, if it is satisfied that the interest of that spouse in the joint estate is being or will probably be seriously prejudiced by the conduct or proposed conduct of the other spouse, and that other person will not be prejudiced thereby, order the immediate division of the joint estate in equal shares or on such other basis as the Court may deem just.  A Court making an order under this section may order that the community of property be replaced by another matrimonial property system, subject to such conditions as it may deem fit.

Michelle Soutter

Practising Attorney