How to use public policy to remedy trust law disputes

February 1st, 2023
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Picture source: Gallo Images/Getty

By Marietjie du Toit

‘A fundamental characteristic of South African constitutionalism is the principle of respect for the law’ as confirmed by P De Vos, W Freedman, D Brand, C Gevers, K Govender, P Lenaghan, D Mailula, N Ntlama, S Sibanda and L Stone in South African Constitutional Law in Context (Cape Town: Oxford 2015) at 78) (see Marietjie Du Toit ‘Building common-law principles of trust law: One cannot transfer more rights than one has’ 2022 (Aug) DR 15). ‘The supremacy of the Constitution was communicated strongly and unmistakably by Chaskalson P in Pharmaceutical Manufacturers Association of SA: In re Ex parte President of the Republic of South Africa 2000 (2) SA 674 (CC) at para 44:

“There is only one system of law. It is shaped by the Constitution, which is the supreme law, and all law, including the common law, derives its force from the Constitution and is subject to constitutional control”’ (Du Toit (op cit)).

Our laws (both common and legislative) are an expression of public policy. Although public policy often comprises unwritten principles on which social laws are established, all contracts or forms of conduct remain subordinate to the rule of law. In the opinion of RH Christie and V McFarlane (The Law of Contract in South Africa (Durban: LexisNexis 2006) at 17), and J Voet (The Selective Voet, being the Commentary on the Pandects (Durban: LexisNexis) 2 14 16), public policy is an effective, flexible and tested concept in South Africa to achieve all the consequences of good faith in conduct and contract and to achieve them with additional certainty. Voet accepted public policy as a test for the validity of contracts.

‘The objectives of public policy [as] constituted in good faith, reasonableness, fairness and ubuntu in conduct and agreement’ are rooted in the constitutive values of s 1 of the Constitution (Du Toit (op cit)). Adopted into the Constitution, is the Bill of Rights (BOR) ‘for the protection of the values of equality, human dignity and the advancement of human rights and freedoms’ (Du Toit (op cit)). By accepting the Constitution and the BOR as a consistent decree of public policy, the courts will have no difficulty declaring a contract which infringes on a provision in the BOR as invalid and unenforceable. The development of the concept of public policy can be seen as an ongoing process, which continues to define the concept.

I Currie and J De Waal (The Bill of Rights Handbook (Cape Town: Juta 2005) at 704), state that the rule of law establishes the fundamental principle that anyone may challenge the legality of any law or conduct. The first constitutional challenge to contractual terms was brought before the court in the case of Barkhuizen v Napier 2007 (5) SA 323 (CC) at para 59, where the verdict by Ngcobo J affirms the ‘inequality of bargaining power’.

In Beadica 231 CC and Others v Trustees, Oregon Trust and Others 2020 (5) SA 247 (CC) at para 13, the proper role of fairness, reasonableness, good faith and ubuntu in contract law was scrutinised by the Constitutional Court (CC). The appeal focused on the extent to which a court may refuse to enforce apparently valid contractual terms on the basis that the enforcement would be against public policy. Froneman J holds in Beadica at para 123, that ‘freedom of contract can thus never be absolute’. He also held that ‘freedom of contract is not the only principle of [the] law of contract’. ‘The individualism of [the] law of contract is one that takes account of the reasonable expectations of the parties’ contracting as well as the expectations of the wider community (Beadica at para 177). The present constitutional concept of ubuntu as a value of public policy must be understood as the necessity to do simple justice between the individuals contracting. Thus, the concept of ubuntu adds constitutional value and substance to the law of contract as ruled in Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (3) BCLR 219 (CC) at para 71.

The property rights of both contributing spouses in a joint and for that matter other matrimonial regimes must be protected against unconstitutional infringements on personal and property rights. It speaks for itself that by reasoning of the court in Beadica at para 231, the values honoured by public policy and ubuntu must also be reflected in decisions made by trustees in relation to the control of the fiduciary office. The principle of ubuntu provides a more expansive analysis and include the inequality of bargaining power.

In making a ruling based on public policy (the legality of contract, conduct and agreement), the decision of the court is strengthened by the protection in the BOR. Christie and McFarlane ((op cit) at 343-349) state that ‘public policy is a matter of fact and not law’, and transforms with the general consciousness of boni mores and the opinion of social justice as distinguished by the community. If the court finds that the limitation of rights is not justifiable and the infringement is to the prejudice of one party, the infringement cannot be protected. Therefore, those provisions, as included in trust deeds and deeds of settlement, must be declared unconstitutional and invalid and, therefore, contra public policy.

The four foremost principles fundamental for the protection of personal rights in trust deeds and deeds of settlement are equality, human dignity, freedom of association and property rights. Section 9 of the Constitution is a fundamental component of the transformative Constitution, based on the grounds of unfair discrimination provided for in subs 9(3). JD Sinclair and J Heaton The Law of Marriage (Cape Town: Juta 1996) at 206, state that the implications of the BOR for family law guarantee equality and equal protection as well as ‘the outlawing of unfair discrimination based on criteria’ such as gender and religion. The same is true of clauses which protect rights such as human dignity. Sinclair and Heaton (op sit) agree with Catharine MacKinnon that the questions of equality and of gender are questions of the distribution of power and hierarchy rather than of difference. They regard the questions of sex inequality as questions of systemic dominance. Sinclair and Heaton ((op cit) at 53-65 and 277) mentioned Deborah Rhode, who advises a movement away from conventional inequality analysis based on gender differences to an approach based on ‘gender disadvantage’. The authors make the significant statement that this approach invites dialogue about ‘consequences rather than motives’. They also claim that the remedy of unjustified enrichment is also available.

The campaign for formal equality has been more successful in Canada, with its Canadian Charter of Rights and Freedoms of 1982. However, the first 35 sex discrimination cases under the Charter seemed not to have provided much encouragement. Elizabeth Sheehy, as quoted by Sinclair and Heaton ((op cit) at 42-43), observes the cases of R v Seaboyer; R v Gayme (1991) 48 OAC 81 (SCC). She states that those cases clearly show that ‘the right to speak and make an argument does not include a corresponding obligation on the part of judges to listen, to understand, or even to answer feminist analysis’, with the consequence that ‘women’s legislative gains are being invalidated.’

Section 10 of the Constitution stipulates that the value of dignity is a central value of the rule of law and De Vos et al ((op cit) at 418) affirm that human dignity can be described as the most outstanding value and the cornerstone of the Constitution and the BOR. In National Coalition for Gay and Lesbian Equality and Another v Minister of Justice and Others 1999 (1) SA 6 (CC) at para 30, it was held that all people possess the same degree of human dignity, human dignity also includes respect. Human dignity is a fundamental right, and as a fundamental value it has a residual or permanent function, which indicates that it applies where many of the more specific rights do not apply. This principle was stated in Advance Mining Hydraulics (Pty) Ltd and Others v Botes NO and Others 2000 (2) BCLR 119 (T) at 127.

In Dawood and Another v Minister of Home Affairs and Others; Shalabi and Another v Minister of Home Affairs and Others; Thomas and Another v Minister of Home Affairs and Others 2000 (3) SA 936 (CC) at para 29, O’Regan J held that the right to dignity must protect marriages and family life. De Vos et al ((op cit) at 457) states that the right to human dignity implies and defines an expectation to be protected from conditions or treatment that infringes on and contravenes the subject’s sense of their worth in society, decreeing those human beings must be treated as unique individuals rather than representatives of the species. Justice Chaskalson in ‘Dignity as a Constitutional Value: A South African Perspective’ (2011) 26 American University International Law Review 1377 quoted the case of Law v Canada (Minister of Employment and Immigration) [1999] 1 SCR 497 at para 53, predicting that the norm establishes self-respect and self-worth and is violated when groups or individuals are devalued and ignored. In the case of King NO and Others v De Jager and Others 2021 (5) BCLR 449 (CC) at para 237, Victor AJ concludes with the following:

‘I will conclude with the importance of how the now constitutionally integrated value and norm of ubuntu applies. As outlined above, the facts in this case demonstrate a disregard for the dignity and value of women heirs. This court has affirmed ubuntu as a principle in our law which should inform all forms of adjudication. At the heart of ubuntu is the idea that a society based on human dignity must take care of its most vulnerable members and leave no one behind. It emphasises the adage that none of us are free until all of us are free.’

To verify the discussion above, depriving one of the spouses of his or her life savings and labour is cruel and inhuman and can, under the right to human dignity, not be justified or rational.

Section 18 of the BOR upholds the right that ‘everyone has the right to freedom of association’. This section is discussed in connection with the deed of settlement and limitation clauses on freedom of association as stipulated in the amendment of the trust deed in the event of divorce. Such clauses include the forfeiture of allocations as determined in the deed of settlement or the excluding as beneficiary in the case of a new relationship or a second marriage. According to Currie and De Waal ((op cit) at 420) in Democracy in America (1835) at 222, Alexis de Tocqueville wrote around 170 years ago that ‘no one, and certainly no legislator, may attack the right to freedom of association without distorting the very foundations of society’. The Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000, is the legislation developed to protect the right to freedom of association.

Section 25 of the BOR specify the right to property. Currie and De Waal ((op cit) at 538), affirm the right as ‘full ownership’. The CC held that the fundamentals of ownership can be seen as a bundle of rights and constitutes plenary ownership as ruled in First National Bank of SA Ltd t/a Wesbank v Commissioner, South African Revenue Service and Another; First National Bank of SA Ltd t/a Wesbank v Minister of Finance 2002 (4) SA 768 (CC) at para 100. Yacoob J states in Mkontwana v Nelson Mandela Metropolitan Municipality and Another; Bissett and Others v Buffalo City Municipality and Others; Transfer Rights Action Campaign and Others v MEC, Local Government and Housing, Gauteng, and Others (KwaZulu-Natal Law Society and Msunduzi Municipality as Amici Curiae) 2005 (1) SA 530 (CC), that ‘substantial interference or limitation that goes beyond the normal’, and excludes the use and enjoyment of property, would in an open, democratic society amount to deprivation and infringement on property rights. The question that could be asked is: What is the ambit of conduct that could be defined as not normal? Would it be normal, for instance, for the court to strip one spouse of all the protection provided for by the BOR and, in particular, the protection contemplated in s 25, as has happened in the divorce cases of WT and Others v KT 2015 (3) SA 574 (SCA) and Du Toit v Du Toit (GP) (unreported case no 59114/16, 21-11-2017) (Rabie J)?

The recognition of individual and property rights and the ‘underlying moral or value choice’ in Beadica at para 231, as protected by public policy in contracts, are further strengthened by the BOR. It is claimed that it is the duty of courts to develop the common law pertaining to the division of joint assets transferred to a family trust. Uncertainty contributes to unlawful contracts, agreements, and conduct, and needs the urgent attention of the judiciary and the legislator.

In conclusion, the constitutional values provide constitutional protection for the rights and freedoms of trust fund contributors in the event of divorce. Therefore, the prudence of public policy can no longer be dismissed by the legislator and the courts.

Marietjie Du Toit LLB (Unisa) LLM (NMU) is an accredited mediator of the Social Justice Foundation in Mossel Bay.

This article was first published in De Rebus in 2023 (Jan/Feb) DR 29.

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