By Clement Marumoagae

South African High Courts have, in divorce proceedings, inconsistently applied the concept of pension interest when parties were married either in community of property or out of community of property with the application of the accrual system (see Merike Pienaar ‘Does a non-member spouse have a claim on pension interest?’ 2015 (Dec) DR 38). That in itself does not mean that there is doubt surrounding a claim that a non-member spouse of a member of a pension fund has against the pension interest of such a member. This article discusses the conundrum of whether a non-member spouse has a right to claim the pension interest of his or her spouse during divorce. I will illustrate that the court does not have discretion whether or not to grant the pension interest to the party claiming it, but rather that such a party would be entitled to the pension interest by virtue of the marital regime applicable to his or her marriage as well as the deeming provision of the Divorce Act 70 of 1979 (the Divorce Act).

Pension interest and the deeming provisions

According to Pienaar (op cit) ‘It seems to be clear from the wording of s 7(7)(a) of the [Divorce] Act that the legislature intended that a member spouse’s pension interest should form part of his or her estate on divorce. Although we can only speculate as to the reasons why s 7(7)(a) of the Act was promulgated, one of the reasons could have been an attempt to address the social dynamics characterising the predominant marital arrangement pre-1984.’ Due to women’s low earning capacity and the prejudice they experienced before the 1989 amendments to the Divorce Act when they divorced, the South African Law Commission recommended the sharing by the non-member spouse of the member spouse’s pension interest in accordance with the marital regime applicable to their marriage (Discussion Paper 77: Project 112 ‘Sharing of Pension Benefits’ 31 July 1998 at 9 (www.gov.za, accessed 29-6-2016)). It is interesting nonetheless that the commission did not recommend that the pension interest should form part of the joint estate, but rather suggested a mechanism which can be used to allow the non-member spouse to be able to have a claim to the pension interest of his or her spouse when it accrues. The commission made it clear that the non-member spouse should be entitled to make such a claim, and ultimately recommended that ‘the pension interest of a member of a pension fund should, for purposes of the division of the assets of the spouses on divorce, be deemed to be part of the assets of the member spouse’ (Discussion Paper (op cit) at 9 – 10). This recommendation was implemented when the Divorce Act was amended in 1989 with the incorporation of subss 7(7) and 7(8) to the Divorce Act. Section 7(7)(a) of the Divorce Act states that: ‘In the determination of the patrimonial benefits to which the parties to any divorce action may be entitled, the pension interest of a party shall, … be deemed to be part of his assets’. While it is true that our courts have been very inconsistent when interpreting the pension interest, it is not accurate to say that there is doubt as to whether the pension interest falls within the joint estate or not. I submit that the Divorce Act through its deeming provisions provides that the pension interest does not ordinarily form part of the joint estate, but it is conveniently shifted into the joint estate when the parties divorce in order to allow the non-member spouse to share therin. My understanding of the deeming provisions is that the pension interest is taken ‘as if’ it is an asset which is available for division and not necessarily that it is part of the joint estate. While it remains unclear as to why the commission recommended the deeming provision rather than treating the pension interest as an ordinary patrimonial benefit, it is important also to realise that s 7(7)(a) deliberately avoids the phrase ‘joint estate’ and instead uses the phrase ‘his estate’. This illustrates that the pension interest is actually deemed to be part of a member’s ‘personal’ estate and not the joint estate. As the law currently stands, the pension interest is not treated the same way as other patrimonial assets, which are due for division when the parties divorce. The rationale behind the current position remains unclear, and neither the courts nor the legislature have provided clarity in this regard.

Non-member spouse’s entitlement to the member’s pension interest

The issue regarding whether or not the pension interest automatically becomes part of the joint estate by operation of law is subject to controversy as a result of inconsistent application of this issue by various divisions of South African High Courts when parties are divorcing (for a thorough discussion on the said inconsistencies see MC Marumoagae ‘A non-member spouse’s entitlement to the member’s pension interest’ (2014) 17(6) PER at 2503 (www.nwu.ac.za, accessed 29-6-2016)). Such inconsistencies have led to a debate relating to the ‘entitlement’ if any, which non-member spouses have on the pension interest of their member spouses. According to Pienaar (op cit) ‘[i]t is clear from contrasting decisions … that there is currently no certainty regarding a non-member spouse’s entitlement to a pension interest where the issue has not been dealt with in the divorce order.’ Pienaar relying on PA van Niekerk A practical guide to patrimonial litigation in divorce actions (Durban: LexisNexis 2011), incorrectly in my view, argues that ‘parties in a divorce are not by right entitled to a part of the other’s pension interest, but that the value of the pension interest should merely be taken into consideration when determining the value of the assets of the estate’. I submit that this observation is seriously misleading, firstly, because the value in percentages, which should be accorded to the non-member spouse should be clearly stipulated in the pleadings and not merely considered by the court. Further, the court should order the pension fund concerned to endorse its records and pay over to the non-member spouse what is due to him or her any time after the order has been made in terms of s 7(8) in accordance with the clean-break principles as provided for in s 37D(4) of the Pension Funds Act 24 of 1956 as amended (see Marumoagae ‘Breaking up is hard to do, or is it? The clean-break principle explained’ 2013 (Oct) DR 38). Secondly, because the commission in its recommendations left the issue of ‘[t]he non-member’s spouse’s entitlement to a share of the member spouse’s pension interest on divorce … to be determined by the rules of the matrimonial property dispensation applicable to the marriage’ (Discussion Paper (op cit) at 10). This simply means that the marital regime of the parties determines whether or not the non-member spouse would be entitled to the pension interest of the member spouse. If parties are married in community of property or with the application of the accrual system (unless excluded in the antenuptual contract) then the non-member spouse would be entitled to share in the pension interest of the member spouse as a right. Such a right is established by the marital regime and then consolidated by the deeming provision in s 7(7)(a) of the Divorce Act. Furthermore, I am of the view that the uncertainty regarding the issue of ‘entitlement’ results from the unnecessary confusion caused when the concept of a pension interest is incorrectly likened to that of spousal maintenance. In Sempapalele v Sempapalele and Another 2001 (2) SA 306 (O) at 312, the court was wrongly of the view that just as the party seeking a spousal maintenance has to request such maintenance during the course of the divorce proceedings and obtain the necessary order in that she or he cannot do that post-divorce, ‘[s]imilarly, a spouse seeking a share in the pension interest of the other spouse must apply for and obtain an appropriate court order during the divorce proceedings’. The sentiments of the court are understandable from a practical view point, as the court can only order that which has been requested by the parties. In that, the party who wishes to claim a share of the pension interest must plead for same. However, the court erred that if pension interest was not claimed during divorce, it could not be claimed post-divorce. Due to the fact that the non-member spouse is entitled to such benefits, he or she does not lose a right to claim them if he or she failed to claim them during divorce. As it was stated in Chiloane v Chiloane (T) (unreported case no 27836/06, 7-9-2001) (Raulinga AJ) ‘a spouse seeking a share in the pension interest of the other spouse who had not, in terms of section 7(7)(a) applied for and obtained a court order during the divorce proceedings, may do so by way of motion proceedings after the divorce decree is granted’.

Concluding remarks

Pienaar (op cit) correctly points out that the discretion which has been awarded to courts in s 7(2) when adjudicating over spousal maintenance disputes is not present in the context of pension interest orders in terms of s 7(7)(a) of the Divorce Act. However, Pienaar seems to suggest that the court has some sort of discretion as far as s 7(8) of the Divorce Act is concerned, which provides that: ‘ … the court granting a decree of divorce of a member of such a fund, may make an order that –

(1) any part of the pension interest of that member which, by virtue of subsection (7), is due or assigned to that other party to the divorce action concerned, shall be paid by that fund to that other party when any pension benefits accrue in respect of that member’.

I am of the view that despite using the word ‘may’, this section does not grant the court a discretion to do or not do anything. Actually, this section guides the court once the non-member spouse has established his or her entitlement to his or her spouse’s pension interest in accordance with s 7(7)(a) of the Divorce Act to order payment of what is due to such a non-member spouse. Once such entitlement has been established, then the court does not have a discretion to refuse to grant such an order.  In other words, once the non-member spouse has satisfied the court that the deeming provisions are applicable to him or her, he or she automatically acquires a legal entitlement for the court to order payment of whatever percentage of the pension interest has been pleaded and proved before the court to him or her by his or her member spouse’s pension fund scheme. As such, the court cannot ‘exercise its discretion’ and refuse to grant such an order based on what it considers fair or equitable under the circumstances, as Pienaar suggests (op cit). Contrary to Pienaar’s contention, the court cannot mero motu decide that the non-member spouse is not entitled to the pension interest for reasons relating to substantial misconduct, unless the member spouse has pleaded and argued for forfeiture of patrimonial benefits in accordance with s 9(1) of the Divorce Act.

Clement Marumoagae LLM (Wits) LLM (NWU) Diploma in Insolvency (UP) is an attorney at Marumoagae Attorneys in Itsoseng.

This article was first published in De Rebus in 2016 (Aug) DR 30.