MALABA
JA:
This
is an appeal against part of the judgment given by the High Court on
22 February 2006 in an action for a decree of divorce and ancillary
relief commenced by the appellant against the respondent.
The
question for determination is whether in making the order with regard
to the division, apportionment or distribution of the assets of the
spouses, the court a quo failed to judicially exercise the discretion
conferred upon it under section 7(1) of the Matrimonial Causes Act
[Cap. 5:13] (“the Act”) as alleged in the grounds of appeal.
The
marriage, which was dissolved by the court a quo on 22 February 2006,
had been solemnized by the parties on 20 May 1972 in terms of the
African Marriages Act [Cap. 238] (now the Customary Marriages Act
[Cap. 5:07]). It was a potentially polygamous marriage relationship.
For a period of thirty-five years the parties enjoyed a happy
marriage relationship which was blessed with four children, two girls
and two boys. The children are all adults.
In
2002, irreconcilable differences developed between the parties
leading to a voluntary separation on 7 October. On 13 April 2004, the
appellant, who had taken another wife, issued out of the High Court
summons commencing action in which he claimed against the respondent
a decree of divorce and the division of the assets in the manner he
considered would be just and equitable.
The
respondent conceded that the marriage relationship had irretrievably
broken down. She claimed the division of the assets in the manner she
too considered would be just and equitable.
She
also claimed periodical payment of maintenance at the rate of
$2,000,000.00 per month until she died or re-married.
At
the end of the trial the court a quo made an Order in the following
terms:
“1.
That a decree of divorce be and is hereby granted in terms of the
plaintiff's claim;
2.
That the defendant be awarded all the household movable assets except
the Imperial upright freezer and a washing machine which are awarded
to the plaintiff.
3.
That the defendant be awarded:
(a)
25% of the value of the Mazda 626 and No.12 Lomagundi Road which
shall be valued by a valuer from the Master's Office's list of
valuers.
(b)
That the defendant be awarded 25% of the value of the Domboshava
House.
4.
That the farm (Wonder Valley Farm), the farm equipment, farm movables
including the herd of cattle be shared at the rate of 70% for the
plaintiff and 30% for the defendant.
5.
That the defendant is awarded 25% of the value of Wonder Valley (Pvt)
Ltd.
6.
That the value of the assets to be shared under 3(b), 4 and 5 shall
be obtained by adding the plaintiff's and the defendant's
valuation and dividing that figure by two.
7.
That the plaintiff shall maintain the defendant at the rate of
$2,000,000 per month until she dies or re-marries.
8.
That the plaintiff is granted the option to buy out the defendant in
respect of Orders 3, 4 and 5 by not later than the 30th of July 2006.
9.
That the plaintiff shall pay the defendant's costs.”
The
appeal was noted against the orders in paragraphs 3, 4, 5 and 7.
At
the hearing of the appeal Mr Takaindisa indicated that the appellant
was abandoning the appeal against the orders in paragraphs 4 and 5.
He
also said that he was unable to point to any misdirection on the part
of the learned Judge to support the ground of appeal against the
order awarding the respondent periodical payments of maintenance in
the sum of $2, 000,000.00 per month until she died or re-married.
In
arriving at the decision to order periodical payments of maintenance
in the amount fixed, the court a quo exercised a broad discretion.
For this Court to interfere with the exercise of discretion by the
court a quo, it had to be shown that one of the grounds upon which an
appellate court may interfere with the exercise of discretion by a
trial court existed.
In
Barros & Anor v Chimphonda 1999 (1) ZLR 58 (S) GUBBAY CJ at
62G-63A said:
“These
grounds are firmly entrenched. It is not enough that the Appellate
Court considers that if it had been in the position of the primary
court it would have taken a different course. It must appear that
some error has been made in exercising the discretion. If the primary
court acts upon a wrong principle, if it allows extraneous or
irrelevant matters to guide or affect it, if it mistakes the facts,
if it does not take into account some relevant consideration, then
its determination should be reviewed and the Appellate Court may
exercise its own discretion in substitution provided always it has
the materials for so doing. In short, this Court is not imbued with
the same broad discretion as was enjoyed by the trial court.”
As
the court a quo was not shown to have made any of the errors referred
to in the Barros case supra, this court has no ground on which it can
interfere with the determination of the question of the liability of
the appellant to make periodical payments of maintenance to the
respondent until she died or re-married.
The
order in paragraph 3 directing the appellant to pay the respondent
25% of the value of the Mazda 626 registration No. 843-703 S and 25%
of the value of Domboshava House was appealed against on the ground
that the learned Judge misdirected himself in treating these assets
as “matrimonial property”.
The
contention was that the appellant acquired the motor vehicle and
completed the construction of the house long after the parties had
separated.
The
same argument was advanced in respect of Stand No.12 Lomagundi Road,
Mount Pleasant.
It
was argued further that the immovable property was registered in the
name of a third party.
The
effect of the contention was that the court in the exercise of the
broad discretion conferred on it under section 7(1) of the Act
should not have granted the respondent the right to a portion of the
value of property purchased by the appellant when the parties were on
separation.
The
Mazda 626 motor vehicle was, indeed, purchased by the appellant and
registered in his name in 2003. He completed the construction of the
Domboshava House in 2004. The construction commenced when the parties
were still living together. The intention had been to use the house
as a matrimonial home whenever they visited the communal area.
Stand
No. 12 Lomagundi Road, Mount Pleasant was purchased in July 2004. He
registered the property in the name of his new wife.
It
was also common cause at the trial that in 1994 the appellant formed
a company called Wonder Valley (Pvt) Ltd (“the company”). The
company had four shares of $1.00 each which the appellant allotted to
the respondent, two sons and himself.
The
nominal shareholders did not pay for the shares.
The
object of the company was to carry on farming business on Wonder
Valley Farm (“the farm”). The farm was owned by the appellant,
so were all the equipment and implements used at the farm. The
appellant took full responsibility of managing the farming business
which involved growing cotton and maize. The respondent joined her
husband at the farm in March 1987. She, however, did not play an
active role in the management of the farming business. She looked
after the matrimonial house and the children. She started a poultry
project and generated income which she used as she pleased.
The
respondent claimed 25% of the value of the Mazda 626 and the
immovable properties on the ground that the money used to purchase
the assets in question came from the proceeds of the farming
operations. The contention was that the money belonged to the company
in which she had an interest. She said that the appellant had no
other source of income besides the farming business.
The
appellant did not deny that the money he used to purchase the assets
in question came from the sale of farm produce.
The
learned Judge found that the money used by the appellant to purchase
the Mazda 626, Stand No.12 Lomagundi Road, Mount Pleasant and for the
construction of the Domboshava house belonged to the company. On the
basis that the respondent had an interest in the company he held that
she was entitled to 25% of the value of each property.
Whilst
Mr Takaindisa argued that the learned judge misdirected himself in
approaching the question of the apportionment of the proceeds used to
purchase these assets on the basis that the respondent had a right to
claim company property, he nonetheless confessed that he was unable
to go so far as to contend that the resultant apportionment was in
effect not just and equitable when viewed in a situation where the
corporate veil has been lifted.
It
is important to note that a court has an extremely wide discretion to
exercise regarding the granting of an order for the division,
apportionment or distribution of the assets of the spouses in divorce
proceedings.
Section
7(1) of the Act provides that the court may make an Order with regard
to the division, apportionment or distribution of “the assets of
the spouses including an Order that any asset be transferred from one
spouse to the other”.
The
rights claimed by the spouses under section 7(1) of the Act are
dependent upon the exercise by the court of the broad discretion.
The
terms used are the “assets of the spouses” and not “matrimonial
property”. It is important to bear in mind the concept used because
the adoption of the concept “matrimonial property” often leads to
the erroneous view that assets acquired by one spouse before marriage
or when the parties are on separation should be excluded from the
division, apportionment or distribution exercise. The concept “the
assets of the spouses” is clearly intended to have assets owned by
the spouses individually (his or hers) or jointly (theirs) at the
time of the dissolution of the marriage by the court considered when
an order is made with regard to the division, apportionment or
distribution of such assets.
To
hold, as the court a quo did, that as a matter of principle assets
acquired by a spouse during the period of separation are to be
excluded from the division, apportionment or distribution a court is
required to make under section 7(1) of the Act is to introduce an
unnecessary fetter to a very broad discretion, on the proper exercise
of which the rights of the parties depend.
It
must always be borne in mind that section 7(4) of the Act requires
the court in making an order regarding the division, apportionment or
distribution of the assets of the spouses, and therefore granting
rights to one spouse over the assets of the other, to have regard to
all the circumstances of the case.
The
object of the exercise must be to place the spouses in the position
they would have been in had a normal marriage relationship continued
between them.
As
was pointed out by LORD DENNING MR in Watchel v Watchel [1973] 3 ALL
ER 829 at p 842:
“In
all these cases it is necessary at the end to view the situation
broadly and see if the proposals meet the justice of the case.”
Each
case must depend on its own facts.
I
accept the contention by Mr Takaindisa that having found that the
money used to purchase the Mazda 626, Stand No.12 Lomagundi Road,
Mount Pleasant and for the construction of the Domboshava house
belonged to the company, the learned Judge erred in holding that the
respondent was entitled to make a claim to a share of company
property.
A
company being a legal persona owns its own property. Shareholders do
not own company property.
Whilst
accepting the principle that company property does not belong to the
shareholders and that only officials duly authorized by resolutions
can claim company property from third parties, Mr Tsivama argued that
this was a proper case where the circumstances justified the lifting
of the corporate veil in order that justice could be done in the
apportionment of the assets in terms of section 7(1) of the Act.
In
other words, the court a quo was faced with the question whether the
property rights, a proportion of the value of which was claimed by
the respondent, in reality lay with the appellant or the company.
In
the Shipping Corp of India Ltd v Evdomon Corp & Anor 1994 (1) SA
550 (A) at 566C-E, quoted with approval by SANDURA JA in Van Niekerk
v Van Niekerk & Ors 1999 (1) ZLR 421 (S) at 427H-428A, CORBETT CJ
said:
“It
seems to me that, generally, it is of cardinal importance to keep
distinct the property rights of a company and those of its
shareholders, even where the latter is a single entity, and that the
only permissible deviation from this rule known to our law, occurs in
those (in practice) rare cases where the circumstances justify
'piercing' or 'lifting' the corporate veil. … I do not find
it necessary to consider, or attempt to define, the circumstances
under which the court will pierce the corporate veil. Suffice it to
say that they would generally have to include an element of fraud or
other improper conduct in the establishment or use of the company or
the conduct of its affairs.”
In
Cattle Breeders Farm (Pvt) Ltd v Veldman (2) 1973 (2) RLR 261 the
husband used the company to claim an eviction of his wife from a
matrimonial house leased by the company. It was found that the
company was a “one man company”. The husband was its sole
effective shareholder. The court was prepared to pierce the corporate
veil to do justice to the wife.
BEADLE
CJ said that the husband owned the company and its mind was his.
The
learned CHIEF JUSTICE went on say at p 267C-D that:
“In
the circumstances of this particular case it seems to me that the
appellant company was nothing more than Veldman's alter ego, and
that the appellant company possessed no greater rights to eject the
respondent than Veldman himself possessed.… I propose to examine
this application on the basis that it was Veldman himself who brought
the application because I cannot see on the facts of this case how it
can be held that the appellant company could have any greater rights
than Veldman himself possessed.”
Had
the corporate veil not been lifted, Veldman would have succeeded in
using the company to avoid the duty he owed to his wife to provide
her with suitable alternative accommodation before evicting her from
the matrimonial house.
In
this case, the respondent did not take any active part in the
administration of the affairs of the company. For all practical
purposes the company was a “one-man company”. The appellant was
the sole active director. He used his own land, implements and labour
to generate the income which he used to purchase the properties, the
proportion of the values of which the respondent claimed. The three
assets which belonged to him constituted the income-producing assets.
The share held by the respondent was not an income producing asset.
In
other words, there was no share capital invested by the respondent in
the company which contributed to the production of the money used to
purchase the properties in question.
Stripped
of the corporate veil, the proceeds from the farming operations
belonged to the appellant. The company was nothing more than the
appellant's alter ego. It had no greater right to the money than he
possessed.
The
question is whether, considering all the circumstances of the case,
the apportionment of the values of these assets ordered by the court
a quo produced a just and equitable result. In other words, did the
apportionment achieve the main purpose of the exercise which is to
place the parties in the position they would have been in had a
normal marriage relationship continued.
I
am proceeding on the basis that the proceeds from the farming
operations belonged to the appellant and would have fallen within the
category of the “assets of the spouses”.
The
Mazda 626 motor vehicle and the Domboshava house belonged to the
appellant at the time the court a quo made the Order with regard to
the apportionment of their values. The fact that the assets were
acquired or created during the period the spouses were on separation
does not put them outside the category of the “assets of the
spouses”.
Mr
Takaindisa properly conceded the fact that when all the circumstances
of the case are taken into account the granting to the respondent of
the right to 25% of the value of each of these assets was a proper
exercise of discretion by the court a quo.
The
25% share in the proceeds from the farming operations which came into
the possession of the appellant before he used it to purchase Stand
No. 12 Lomagundi Road, Mount Pleasant would have been a benefit to
which the respondent would have been entitled had a normal marriage
relationship between the spouses continued. It is a benefit she lost
as a result of the breakdown of the marriage.
Section
7(4)(f) of the Act enjoins a court to have regard to the value of
such a benefit.
To
place the spouses in the position they would have been in had a
normal marriage relationship continued, it was just and equitable to
award the respondent 25% of the value of Stand No.12 Lomagundi Road,
Mount Pleasant.
The
real rights in the house vested in the new wife.
The
respondent did not claim a share in the house. She claimed an amount
of money equivalent to 25% of the value of the immovable property.
The claim did not affect the interests of the new wife in the
property. The value of the property is necessary only for the purpose
of fixing the amount of money the appellant would be obliged to pay
to the respondent. Since the respondent would have no right to
enforce the order by executing against the immovable property owned
by the third party, it was inappropriate for the learned Judge to
give the appellant the right of option in paragraph 8 to buy out the
respondent in respect of Stand No. 12 Lomagundi Road, Mount Pleasant.
The
property does not belong to him.
The
order in paragraph 8 must be read as excluding any reference to Stand
No. 12 Lomagundi Road, Mount Pleasant.
It
is also necessary to extend the time within which the option to buy
out the respondent in respect of the other assets referred to in
paragraph 8 of the order may be exercised to 30 July 2009.
The
appeal is otherwise dismissed with costs.
SANDURA
JA: I agree.
ZIYAMBI
JA: I agree.
Scanlen
& Holderness, appellant's legal practitioners
Chihambakwe,
Mutizwa & Partners, respondent's legal practitioners
