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 the 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 ...
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 the 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
Matrimonial Causes Act [Chapter 5:13] 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= 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
counsel for the appellant 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 Matrimonial Causes Act [Chapter 5:13] 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 Matrimonial
Causes Act [Chapter 5:13] 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 Matrimonial Causes 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 Matrimonial
Causes 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…,:
“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 counsel for the appellant 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, counsel for the
respondent 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 Matrimonial Causes Act [Chapter 5:13].
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
Shipping Corp of India Ltd v Evdomon Corp & Anor 1994 (1) SA 550
(A)…, quoted with approval by SANDURA JA in Van Niekerk v Van
Niekerk & Ors 1999 (1) ZLR 421 (S)…, 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…, 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”.
Counsel
for the appellant 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 Matrimonial Causes Act [Chapter 5:13] 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.