THE HIGH COURT OF SOUTH AFRICA (WESTERN CAPE HIGH COURT) Case No: 24960/11 In the matter between: Not reportable BERENICE SEIDEL (born RUBIN, formerly BAUM) APPLICANT And KENNETH LIPSCHITZ N.O. FIRST RESPONDENT MICHAEL JOHN ANDREW TEUCHERT N.O. SECOND RESPONDENT PETER POSNIAK N.O. THIRD RESPONDENT Coram: ROGERS J Heard: 14 & 15 OCTOBER 2013 Delivered: 24 OCTOBER 2013 ______________________________________________________________ JUDGMENT ______________________________________________________________ ROGERS J:
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THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE HIGH COURT)
Case No: 24960/11
In the matter between: Not reportable
BERENICE SEIDEL (born RUBIN,
formerly BAUM)
APPLICANT
And
KENNETH LIPSCHITZ N.O. FIRST RESPONDENT
MICHAEL JOHN ANDREW TEUCHERT N.O. SECOND RESPONDENT
[1] The applicant is the surviving spouse of the late Wolf Seidel (‘the deceased’).
They were married by Jewish rites on 16 September 1981 and by civil law on 20
May 1996. They both had children from previous marriages. The deceased died on
4 October 2010. The applicant, who is now 74, claims maintenance from the
deceased estate in terms of the Maintenance of Surviving Spouses Act 27 of 1990
(‘the Act’).
[2] The first three respondents were cited in their capacities as the executors of
the deceased estate. They were cited again as the 4th to the 15th respondents in
their capacities as the trustees of four inter vivos trusts established by the deceased
during his lifetime for the benefit of his four children from the previous marriage. The
third respondent resigned as an executor after the institution of these proceedings.
[3] In her notice of motion the applicant claims maintenance from the
respondents (in their multiple capacities) in the amount of R80 000 per month
increasing annually by 10% or by CPI, whichever is the lesser. The respondents
oppose the application, contending that the applicant is not in need of maintenance
as contemplated in the Act. The applicant’s current legal team took over from the
applicant’s previous legal representatives during September 2013. Mr F Joubert SC,
leading Mr M Garces, appeared at the hearing before me on 14 and 15 October
2013 (they were not the authors of the heads of argument filed on behalf of the
applicant). Ms Gassner SC appeared for the respondents.
[4] The main application was launched on 8 December 2011. On the next day
the applicant filed an urgent application for interim maintenance. That application
was settled by way of a consent order made on 14 December 2011. In terms of that
order the executors agreed to pay the applicant a monthly amount of R45 000 and it
was further agreed that the applicant would be entitled to continue living at the
former matrimonial home,17 De Wet Road Bantry Bay. I was informed that the
interim amount was increased to R47 500 as from June 2012. I am satisfied that the
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respondents’ consent to pay interim maintenance was a step taken to avoid legal
costs and did not involve a concession that the applicant was entitled to that or any
other amount and did not set a benchmark for her maintenance needs.
The legal framework
[5] Our common law did not accord to a surviving spouse a right to claim
maintenance from his or her deceased spouse’s estate. This legal position was
changed by the Act which came into force on 1 July 1990. A surviving spouse’s
claim for maintenance is entirely governed by the provisions of the Act.
[6] In terms of s 2(1) of the Act the survivor of a marriage dissolved by death has
a claim against the estate of the deceased spouse ‘for the provision of his
reasonable maintenance needs until his death or re-marriage in so far as he is not
able to provide therefore from his own means and earnings’. Section 3 reads thus:
‘Determination of reasonable maintenance needs. – In the determination of the
reasonable maintenance needs of the survivor, the following factors shall be taken into
account in addition to any other factor which should be taken into account:
(a) the amount in the estate of the deceased spouse available for distribution to heirs and
legatees;
(b) the existing and expected means, earning capacity, financial needs and obligations of
the survivor and the subsistence of the marriage; and
(c) the standard of living of the survivor during the subsistence of the marriage and his age
at the death of the deceased spouse.’
[7] The expression ‘own means’ is defined in s 1 as follows:
‘“own means” includes any money or property or other financial benefit accruing to the
survivor in terms of the matrimonial property law or the law of succession or otherwise at the
death of the deceased spouse’.
[8] The leading authority on the approach to applications for maintenance in
terms of the Act is Oshry v Feldman 2010 (6) SA 19 (SCA). It was held in that case,
among other things, that the phrase ‘existing and expected means’ in s 3(b) did not
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include acts of generosity (para 35). The legislature did not intend to draw a
distinction between ‘existing and expected means’ and ‘own means’. The relevant
provisions of the Act had to be construed in accordance with constitutional norms
and values, with dignity (particularly of the vulnerable) being a prized asset:
‘The Act was intended to ensure, in the event that the stipulated jurisdictional requirements
were met, that the primary obligation of a spouse, who owed a duty of support, continued
after the death of that spouse. In effect, the executors of the deceased’s estate step into his
shoes. To construe these provisions so as to make surviving spouses dependent on the
largesse of others, including their children, defeats the purpose of the Act.’
[9] The main point decided in Oshry was that a court may, if it is shown that the
survivor is in need of maintenance, award a lump sum; the court is not confined to
ordering the payment of periodic maintenance until death or re-marriage. In the
course of its reasoning, the court said the following in a passage to which both
counsel referred me (para 56, emphasis in the original):
‘In claims under the Act the rights of beneficiaries and legatees are implicated. Section 3(a)
of the Act obliges a court to take into account the amount in the estate available to heirs and
legatees. This, of course, has to be balanced against the factors that bear upon the claimant
for maintenance, as set out in s 3(b) and s 3(c) of the Act, referred to in para [28] above.
These include the claimant’s needs and financial means and obligations, the subsistence of
the marriage and the couple’s standard of living during the marriage. Importantly, s 3 states
that these factors must be considered together with any other factor that should be taken
into account. A court is thus obliged to consider the totality of the circumstances of a case to
arrive at a just result.’
Affordability
[10] It is common cause that if the applicant’s reasonable maintenance needs
amount to R80 000 per month, the deceased estate can afford such maintenance.
The value of the assets in the estate otherwise available for distribution to legatees
and heirs exceeds R30 million.
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Factors of a general nature
[11] The applicant, as noted, is now 74. She was 42 when she and the deceased
were married by Jewish rites in September 1981 and 56 when they were civilly
married in May 1996. Their union lasted 29 years, while the duration of their civil
marriage was 15 years. Their relationship was by all accounts a happy one. There
were no children born from the union. The deceased had four children from a
previous marriage while the applicant had three children from a prior marriage.
[12] The deceased was an astute businessman. He built up the Cape Bag group
of companies into a prosperous business. The parties maintained a comfortable
upper middle-class existence. Their lifestyle was not lavish, though no doubt their
means would have permitted greater extravagance than they displayed. At the time
of the deceased’s death they were living at 17 De Wet Road Bantry Bay (‘the
property’). The applicant has continued to reside there since the deceased’s
passing. The property is owned by Elshamar (Pty) Ltd (‘Elshamar’), the shares in
which are held as to one quarter each by the four children’s trusts.
[13] The applicant did not pursue gainful employment during her marriage with the
deceased though she seems to have earned a nominal salary from the Cape Bag
group. It is common cause that she has no capacity to earn income from
employment. Such means as she has to maintain herself are constituted by capital
assets which do or can generate income and by rights to income which she enjoys.
She is in reasonable health. There is no evidence to indicate that her life expectancy
is greater or less than the average life expectancy of a woman of her age and socio-
economic circumstances. Prospects of re-marriage were not canvassed in the
papers. One knows that widowed people in their 70s do sometimes remarry though
it is not particularly common. If the applicant were to remarry, it is likely to happen
sooner rather than later.
[14] According to the first liquidation and distribution account lodged by the
respondents on 15 December 2011, legatees will receive R25,35 million and the
four residual heirs will receive a quarter-share each of R4 693 694. The residual
heirs are the four children’s trusts. Certain further assets have been uncovered
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which will be reflected in a second liquidation and distribution account. These further
assets will presumably also go to the residual heirs in quarter-shares. The
liquidation and distribution account does not reflect the applicant as a creditor in
respect of maintenance. If she were entitled to maintenance from the estate, this
would reduce the amount awarded to the residual heirs and potentially the amounts
that can be paid to legatees. For example, if the applicant’s reasonable maintenance
needs amounted to R80 000 per month (as claimed in the notice of motion) and if
this were to be provided for by payment of a lump sum which would generate that
monthly amount over the rest of the applicant’s lifetime (based on the applicable life
tables), the required lump sum (using the formula devised by the respondents’
actuarial expert, Mr Munro) would be R9 104 000. Subject to the value of assets to
be reflected in the second liquidation and distribution account, it seems likely that
the applicant’s maintenance claim in the notice of motion would result in the residual
heirs getting nothing and that there might be a need to reduce legacies pro rata.
They are legacies totalling R400 000 in favour of charitable institutions. The bulk of
the legacies are in favour of family and relatives. There is no evidence before me as
to the financial position and needs of the legatees or of the beneficiaries of the four
children’s trusts.
The applicant’s means
[15] In his will and codicil the deceased made the following provision for the
applicant:
[a] In the will he bequeathed to her a cash sum of R150 000. The parties were in
agreement that the effect of clause 2.2.2.1(b) of the will was to constitute her
interest in that sum as a usufruct so that she will only benefit from interest earned on
the bequest.
[b] In the codicil he established a testamentary trust for the applicant’s benefit to
which he bequeathed R1 million on the basis that the whole of the net income of the
testamentary trust should devolve on and be paid to the applicant for as long as she
should live. On the applicant’s death the testamentary trust will terminate and the
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capital then held is to be distributed to the deceased’s heirs in terms of clause 2.7 of
the will, ie in equal shares to the four children’s trusts.
[c] The deceased recorded in his will that the applicant and the deceased’s four
children were in equal shares beneficiaries of his pension fund and living annuity
policy. (This was not a bequest as such. During his lifetime the deceased nominated
these persons as the beneficiaries of the annuity upon his death.) The monthly
income stream from the applicant’s one-fifth share of the annuity is currently an
after-tax amount of R15 393. She has been or will be awarded a pension fund death
benefit of R196 000.
[d] The deceased recorded in his will that the entire contents of the house at 17 De
Wet Road belonged to the applicant and did not form part of his estate. (Again, this
was not a bequest.)
[e] The deceased directed his executors to purchase for the applicant the motor
vehicle she was using in her capacity as an ‘employee’ of the Cape Bag group and
to award it to her for her own and absolute use.
[16] Apart from the provisions of the will and codicil, the deceased in his capacity
as settlor left certain letters of wishes regarding the four children’s trusts and
regarding an offshore trust known as the Kelly Trust:
[a] In regard to the four children’s trusts (which own the shares in Elshamar, the
company that owns the property), the deceased expressed his wish that the trustees
should as far as possible so arrange matters that the applicant can continue to live
in the house on the basis that the applicant should not be responsible for any
expenses relating to the property or be liable for any rent. He stated that if the
trustees deemed it necessary to sell the house it was his wish that the trustees
provide the applicant with accommodation of similar standard and that the applicant
should likewise not be responsible for any expenses relating to the new
accommodation nor liable for any rent during her lifetime.
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[b] In regard to the Kelly Trust, the deceased expressed the wish that the trust
should pay US$ 150 000 to the applicant on his death.
[17] Pursuant to the letters of wishes relating to the children’s trusts, the trustees
of the various trusts formally resolved on 8 August 2012 to give effect to the
deceased’s wishes. They resolved inter alia that they would instruct the directors of
Elshamar to pass the necessary board resolution allowing the applicant to reside
rent-free for her lifetime either at the property or in accommodation of a similar
standard; and they resolved further that they would instruct the directors to pay
certain expenses directly associated with the property and where necessary engage
directly with outside parties to render the required services, namely: rates and taxes;
electricity, water, refuse, sewerage and service charges levied by the municipal
authority, subject to the proviso that the applicant’s water and electricity
consumption should be reasonable; swimming pool maintenance; and the
reasonable cost of maintaining the interior and exterior of the property in a sound
and good state of repair, limited to the expenses set out in an annexure to the
resolution.
[18] Mr Joubert did not argue that the trustees’ resolutions failed to provide the
applicant with legal certainty relating to her right of accommodation and to the
covering of the expenses mentioned in the resolutions. I nevertheless put it to Ms
Gassner for the respondents that it would be preferable for these matters to be
incorporated in an agreed order. She took instructions and informed me that the
trusts would have no objection to the content of their resolutions being incorporated
as an order in favour of the applicant. The provision made in this way for the
applicant’s accommodation and for the meeting of property-related expenses does
not constitute largesse of the kind contemplated in para 35 of Oshry. The trustees
intended that their resolutions would confer a right on the applicant and this will be
confirmed by the order to which the trusts have consented.
[19] In regard to the deceased’s letters of wishes concerning the Kelly Trust, the
corporate trustee notified the executors on 8 June 2011 that they were minded to
give effect to the deceased’s wishes and confirmed that they had set aside an
amount of US$ 150 000 for the applicant. On 27 March 2013 the Kelly Trust paid
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this sum to the applicant. The precise amount received by the applicant in rands has
not been stated by the applicant but she has not challenged the respondents’
assertion, based on the prevailing exchange rate, that she would have received
about R1,39 million.
[20] The applicant was also the deceased’s nominated beneficiary in respect of an
Old Mutual life insurance policy (no mention of this was made in the will or codicil).
The proceeds received by the applicant on this policy amounted to R749 935.
[21] Apart from these various benefits flowing from the deceased’s will and codicil,
his letters of wishes and from nominations as beneficiary in respect of pension fund
and annuity benefits, the applicant at the date of the deceased’s death owned
capital assets worth R2 829 884 (comprising immovable properties, investments
with Allan Gray, Stanlib and BOE and a container investment). She also held her
own living annuities with Investec and Old Mutual which generated monthly income
of R1 275 in her 2011 tax year.
[22] In summary, her financial means (excluding the benefit of rent-free
accommodation and the meeting of property expenses in accordance with the
resolutions of the children’s trusts) are the following:
[a] Monthly income streams from her share of the deceased’s annuity and from her
own annuities totalling R17 668.
[b] The right to such income as can be generated from the amounts totalling
R1 150 000 granted to her as usufructuary or trust benefits under the will and
codicil.
[c] Capital assets (constituting her own assets at the date of the deceased’s death,
the award from the Kelly Trust, the proceeds of the Old Mutual policy and the death
benefit from the pension fund) of R5 159 819. The respondents, in reckoning the
applicant’s means, have deducted from this capital value an amount of R620 615.
This is the sum of expenditure incurred by the applicant on her Cape Bag credit card
after the deceased’s death and which Cape Bag has debited to her loan account
10
with the company. Whether the applicant will be obliged to repay the sum is
uncertain. With the deduction of this amount, the net capital assets total R4 549 204.
[23] The respondents say that at 5,1% per annum the income benefit from the
usufructuary and trust assets of R1 150 000 would generate R4 888 per month until
the applicant’s actual death. This rate of return has not been challenged.
[24] The respondents’ actuary performed a further calculation to determine the
monthly amount which the applicant’s net capital assets could generate for the
applicant assuming a standard investment income and assuming that by the date of
the applicant’s assumed death the capital would be reduced to nil. In accordance
with the applicable life tables, the applicant’s life expectancy would be 851/4 years.
Mr Munro used a net capital amount of R4 396 005 in his calculations (not
R4 539 204) because at that stage he took the Kelly Trust award at only R1 227 900
(rather than R1,39 million) but slightly overstated the Old Mutual proceeds
(R762 836 rather than R743 935). However, his methodology provides a formula for
determining the monthly amount for any assumed capital sum: on his assumptions,
R1 130 800 of capital would generate an after-tax amount of R10 000 per month
over the applicant’s assumed lifetime, with such capital reducing to nil by the date of
assumed death. This formula assumes standard annual inflation of 5,4% over the
remainder of the applicant’s lifetime. In terms of this formula, net capital of
R4 539 204 would generate an after-tax amount of R40 142 per month until the
applicant’s assumed death at 851/4, increasing annually at 5,4%.1
[25] On this basis the applicant’s means would enable her to spend R62 698 per
month on her maintenance until her assumed death at 851/4.2 Of this amount, at
least R40 142 would annually increase at assumed CPI of 5,4%. The component of
R4 888 from the usufructuary and trust assets would not increase annually. It is
unclear whether the monthly income from the applicant’s one-fifth share of the
deceased’s annuity and the monthly income from her own two annuities (currently 1 In para 20 of the answering affidavit [record 298-299] the respondents' deponent incorrectly uses a figure of R1 138 00 – the correct amount is R1 130 800 [see the Munro report at 399; the correct amount is stated by the deponent earlier in his affidavit in para 19]. Based on the original capital figures used in para 20, capital of R4 396 005 would generate R38 875 per month (not R38 630 as stated in the affidavit). 2 R4 888 + R17 668 + R40 142.
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totalling R17 668) will increase annually. In response to a question from the court,
Ms Gassner delivered a supplementary note attaching a letter from the relevant
broker dated 16 October 2013, from which it appears that the present capital value
of the applicant’s one-fifth share of the deceased’s annuity is R1 969 636 which is
generating current after-tax income of R18 656 (somewhat higher than the after-tax
figure of R15 393 stated in the papers). Because this is a living annuity, the
applicant may withdraw variable sums per month within certain parameters. Ms
Gassner points out, however, that if the Munro formula were applied to the capital
value of R1 969 636, that sum would generate R17 418 per month increasing
annually in accordance with normal inflation until the applicant’s assumed death at
851/4.3
[26] Mr Munro’s calculation proceeds on the basis that the applicant’s means
include her capital and not merely the income which the capital can generate. I think
that is correct. There is nothing in the Act to indicate that a surviving spouse is
entitled to keep her capital intact in the assessment of the means at her disposal to
fund her maintenance.
[27] The respondents’ setting out of the applicant’s means and the calculation of
the overall monthly amount available to her until an assumed date of death at 851/4
was not seriously challenged by the applicant. In a supplementary replying affidavit
the applicant’s actuaries, Arch Actuarial Consulting (‘Arch’), performed calculations
on three alternative scenarios. The first scenario used a life expectancy of 851/4 (ie
in accordance with Mr Munro’s assumption) but assumed that maintenance inflation
would be 1% above CPI of 5,48%. In the second and third scenarios Arch assumed
a life expectancy of 90 and 95 respectively but allowed a 10% contingency
deduction. In the first scenario Arch unsurprisingly came to an answer very similar to
that of Mr Munro – namely that for every R10 000 amount of monthly maintenance a
capital sum of R1 135 999 would be needed (Mr Munro’s capital sum was
R1 130 800). In the second and third scenarios (and after deducting the contingency
allowance) the capital sum required to generate R10 000 per month increased to
R1 365 674 and R1 887 842 respectively. It is not apparent from the Arch report why
3 Ms Gassner gave the figure as R17 372 per month but that is because she erroneously used, as Munro's base amount, R1 133 800 instead of R1 130 800.
12
maintenance inflation was assumed to be higher than CPI. On Arch’s first scenario
calculation, the capital of R4 539 204 would generate R39 958 per month until an
assumed date of death at 851/4. In scenarios 2 and 3 the monthly amount drops to
R33 238 and R24 044 respectively.
[28] Mr Munro and Arch performed separate calculations to determine the capital
sum needed to generate R1 000 per month for medical aid, increasing in line with
medical inflation. Mr Munro assumed medical inflation of 8% (ie 2,6 percentage
points above ordinary inflation of 5,4%) whereas Arch assumes medical inflation at