A divorced woman who helped establish a trust to invest in a property in Hermanus has lost her bid to remain a beneficiary after the Western Cape High Court in Cape Town ruled that her entitlement, which arose from her marriage, ended when the marriage was dissolved.
In a judgment, Judge Hayley Maud Slingers dismissed the woman’s application for an order declaring her a beneficiary of the Fernkloof Investment Trust, finding that the trust deed did not extend the definition of “spouse” to include a former spouse.
The woman, an attorney and conveyancer whose identity was withheld in the judgment, had argued that she qualified as a beneficiary because she was married to one of the trust’s beneficiaries when the trust was established.
The couple divorced in February 2023.
The dispute centred on the interpretation of the trust deed, which provided that the beneficiaries included the named beneficiaries’ spouses, children and descendants. However, the document did not define the term “spouse” or specify whether it included former spouses.
The trust was established in November 2006, during the couple’s marriage. The woman said she and her former husband had pursued various commercial ventures to grow their joint assets and that the trust was one of the vehicles used for this purpose.
She said she had identified an investment opportunity in Hermanus in 2006, involving a property known as the H Village development. Because the couple did not have sufficient capital, they approached friends to help raise the money needed to acquire the property.
The property was subsequently purchased and registered in the trust’s name in May 2007.
The judgment records a R15.8 million suretyship entered into by the trustees and the applicant to secure a mortgage bond over the Hermanus property. This amount reflects only the suretyship recorded in the judgment and does not necessarily represent the total value of the trust or the property.
Continued trust benefits as a former spouse
The woman maintained that, by virtue of her marriage at the time the trust was formed, she fell within the definition of a beneficiary under clause 1.1.8 of the trust deed.
She further argued that she was entitled to half of the 33.33% allocation associated with her former husband’s position as a beneficiary, which she calculated as 16.67% of the trust’s benefits.
According to her court papers, she had previously enjoyed the use of the property and had been heavily involved in its administration. She alleged that, following the divorce, the trustees acted to her detriment by excluding her from the benefits associated with the property.
The trustees opposed the application, arguing that she no longer qualified as a beneficiary because she was no longer married to the named beneficiary.
They disputed her account of the trust’s purpose, saying it had been established through contributions from the husband’s friends and family. They also denied that the property was intended to serve as a second home for the former couple, maintaining that it was acquired for short-term rentals to generate income and recover costs.
The trustees described the arrangement as a discretionary trust and said no distributions had been made because rental income had not exceeded the expenses incurred. They also told the court that an application to have the trust declared insolvent was pending.
In explaining why, the trust deed referred generally to a beneficiary’s “spouse”, rather than naming spouses individually, the trustees said they had envisaged the trust continuing for a long time and did not want former wives to disrupt its operations.
Court interprets meaning of “spouse”
Judge Slingers said the central question was whether the term “spouse” in the trust deed referred only to someone who currently held that status or also covered a person who was married to a beneficiary when the trust was established but later divorced.
The judge said the trust deed had to be interpreted objectively, taking into account its wording, context, purpose and the circumstances in which it was drawn up.
A plain reading of the relevant clause did not support the woman’s argument, the court found. Nothing in the deed indicated that the term “spouse” was intended to include a former spouse or to refer specifically to the spouse of a beneficiary at the time the trust was created.
The judgment also noted that both sides accepted that the trust was intended to look to the future.
In her own replying affidavit, the woman had explained that the references to spouses, children and grandchildren were intended to provide flexibility for future circumstances and avoid the need to amend the trust deed whenever a child or grandchild was born.
The judge said the same reasoning applied to the use of the term “spouse”.
The court also questioned the woman’s explanation that naming individual spouses would have resulted in an unnecessarily complicated arrangement for the trustees. It noted that the trust deed could have identified spouses by name or specified that only current spouses qualified.
The judge said the woman’s own account made clear that her anticipated entitlement to benefits from the property, including rental income and holiday-home use, arose from her marriage.
“When that marriage ended, so did her entitlement to the benefits of the property because she was no longer a spouse,” the judgment stated in substance.
The court concluded that, after the divorce, she no longer fell within the category of beneficiaries described in the trust deed.
Offer of 16.67% did not change the outcome
The woman also relied on an offer made by her former husband during discussions to settle the couple’s financial arrangements following the breakdown of their marriage.
The judgment recorded that he had offered her his 16.67% share in the trust as part of the accrual calculation during settlement discussions.
She argued that the offer amounted to an admission that she was entitled to the relief she sought and that the trustees had opposed her application unnecessarily.
However, the judge rejected this argument.
The court found that the offer had been made by the former husband in his personal capacity in relation to his own estate, rather than in his capacity as a trustee on behalf of the trust.
The offer also differed from the relief sought in the application, which would have declared the woman a beneficiary for as long as the trust existed.
The judge therefore found that the offer could not be treated as a concession by the trust itself.
Ultimately, the court ruled that the woman had failed to establish that she remained a beneficiary under the trust deed following her divorce.
Her application was dismissed with costs.
sinenhlanhla.masilela@iol.co.za
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