Entitlement of a non-member spouse in a marriage in community of property in respect of pension interest in a divorce

Bianca Larratt a Director in the Litigation Department at Garlicke & Bousfield.

Sections 7(7) and 7(8) of the Divorce Act 70 of 1979 (“the Act”) relate to the determination of the monetary benefits to which the parties to any divorce action may be entitled. In terms of section7(7)(a), the pension interest of a party may be deemed to be part of his assets subject to other subsections of the Act. The court granting a decree of divorce in respect of the member spouse of a pension fund where the fund is deemed to be included, may make an order in terms of section7(8) on notification to the fund, in favour of the spouse who is not a member where that spouse has an accrual claim against the member spouse or where the parties were married in community of property.

These sections of the Act were challenged in the Supreme Court of Appeal recently in the case of GN v JN 2017(1) SA 342 (SCA) where the appellant and respondent were previously married in community of property, but divorced on 25 May 2012. The divorce order ordered that the settlement agreement between the parties be made an order of court. The settlement agreement itself, stated that their joint estate would be divided equally between both parties but at that stage the method of division had not been decided upon. No mention was made specifically of the pension fund in either the divorce order or the settlement agreement, or in the Plaintiff’s original summons and particulars of claim.

An application was brought by the appellant in the High Court of Pretoria in respect of, inter alia, the division of the joint estate and for an order that each party was entitled to 50% of the other’s pension fund as at date of divorce, payable to the non-member spouse when the pension benefit accrued. The respondent opposed this on the basis that a spouse in a marriage in community of property would only be entitled to the pension interest of the other spouse in circumstances where the court granting the decree of divorce had made an order in terms of s7(8), declaring such pension interest to be part of the joint estate. No such order had been made here. The High Court agreed and held that where there was no such order by the divorce court, the pension interest did not form part of the joint estate.

The matter was further appealed to the Supreme Court of Appeal where it was held that the pension interest did form part of the joint estate by operation of law and that, in order for there to be a proper division of the estate, the value of the pension interest should also be taken into account as at date of divorce.

The Appeal Court accordingly granted an order that each party was entitled to an amount equal to 50% of the nett pension interest in their respective pension fund schemes calculated as at the date of divorce. This does not mean that practitioners can be slovenly in the drafting of their pleadings and documents as the court stressed that in this case the joint estate had not as yet been divided at the time of the appeal and the 5 judges of the Supreme Court of Appeal were split 3 to 2 in favour of this interpretation. It is, therefore, imperative that pension interests are explicitly dealt with in any divorce action and settlement agreement so that the court order made on divorce correctly reflects the split of marital assets.