When a marriage has effectively come to an end, but the divorce itself takes years to finalise, the parties are often left in an uncomfortable financial position. One spouse may have moved out of the matrimonial home years ago. The parties may have separate households, separate finances and very little interaction with one another. Yet, until the divorce is granted, they remain married. For parties married out of community of property subject to the accrual system, this can have significant financial consequences.
The obvious question is: should the accrual continue to run after the parties have separated?
The answer, ordinarily, is yes, but section 8 of the Matrimonial Property Act 88 of 1984 (“the Act”) provides an important remedy if continuing to wait for the divorce is likely to prejudice a spouse's accrual claim.
The ordinary position
The accrual system operates by comparing the growth in the parties' respective estates during the marriage. In terms of the Act, the right to share in the accrual arises on dissolution of the marriage. The Supreme Court of Appeal has confirmed that the relevant date is therefore ordinarily the date of divorce, and not the date on which the parties separated. In Brookstein v Brookstein 2016 (5) SA 25 (SCA), the Court confirmed the operation of sections 3 and 4 of the Act and the fact that the accrual is determined upon dissolution of the marriage. This was confirmed again in ST v CT 2018 (5) SA 479 (SCA), where the Court stated that the value of the accrual must be determined at the dissolution of the marriage.
The practical consequence is that moving out of the matrimonial home does not, in itself, bring the accrual to an end. This can be significant where there is a lengthy period between separation and divorce. A spouse who has built up his or her estate during that period may find that the increase is taken into account when the accrual is eventually calculated.
But what if the other spouse is not simply getting richer? What if assets are being moved, disposed of or otherwise dealt with in a way that places the eventual accrual claim at risk? That is where section 8 becomes relevant.
Section 8 - an important protection
Section 8 of the Act provides that a spouse may approach the court for an immediate division of the accrual before the marriage has been dissolved where the spouse's right to share in the accrual will be seriously prejudiced by the conduct, or proposed conduct, of the other spouse. The section is therefore aimed at a particular problem: the possibility that waiting until the divorce is granted will cause serious financial prejudice.
It is important, however, not to confuse this with simply asking the court to use the date of separation as the accrual date. Section 8 does not say that the accrual automatically stops when the parties separate. Instead, it provides the court with a mechanism to intervene where there is sufficient evidence that one spouse's conduct is putting the other spouse's accrual rights at risk.
What does that look like in practice?
The circumstances will vary from case to case. A concern may arise, for example, where a spouse starts transferring assets to a trust or related company after separation, disposes of assets at an undervalue, incurs unexplained liabilities, transfers money to related parties or restructures business interests in circumstances which may reduce the value of the estate.
The important question is not simply whether the spouse's estate has changed. It is why it has changed and whether the change is likely to prejudice the other spouse's accrual claim.
There is also a distinction between legitimate financial growth and conduct which is intended, or has the effect, of defeating an accrual claim. If a spouse continues to run a business after separation and the business grows because it is successfully operated, that does not necessarily amount to serious prejudice.
On the other hand, if the value of the business has been reduced or assets have been moved out of the spouse's estate without a proper commercial explanation, the position may be very different.
Why the separation date still matters
Although the date of separation does not ordinarily determine the accrual, it can be an important date when considering whether section 8 should be invoked. It provides a point against which the parties' financial positions can be measured. What did the spouse own when the parties separated? What does the spouse own now? What transactions took place in the intervening period? And what caused the value of the estate to change? These questions are particularly important where there has been a long delay in finalising the divorce.
For this reason, proper financial disclosure is often critical. Bank statements, company records, trust documentation, property and business valuations, loan accounts and details of significant transactions may all be required to understand what has happened to the parties' estates since separation.
Section 8 is not a remedy for every unfairness
It is important to appreciate that section 8 has a specific purpose and is not simply a means of achieving what a party considers to be a fairer result. A spouse's estate increasing after separation is not, without more, sufficient. The court must be satisfied that the applicant's right to share in the accrual will probably be seriously prejudiced by the conduct or proposed conduct of the other spouse. This means that a section 8 application should be based on evidence rather than suspicion.
Where there is a genuine concern, however, it should not necessarily be left until the divorce is finalised. Once assets have been dissipated or transferred, recovering their value may be considerably more difficult.
The practical takeaway
For parties who have been separated for a number of years, the financial consequences of that separation should be considered as part of the divorce strategy. The fact that one spouse moved out of the matrimonial home does not automatically mean that the accrual is calculated as at that date. The ordinary position remains that the accrual is determined at the date of divorce.
Section 8 provides a different form of protection. Where there is evidence that waiting until divorce will probably seriously prejudice a spouse's right to share in the accrual, the court can be asked to intervene and order an earlier division.
The important question is therefore not simply when the parties separated, but what has happened to their respective estates since separation. Where there has been a substantial change in the value or composition of an estate, it is worth understanding the reasons for that change and considering whether the circumstances justify the protection afforded by section 8.
In a prolonged separation, the accrual may continue to run, but section 8 may provide a means of ensuring that the passage of time does not unfairly compromise a spouse's rights.
