The effects of sequestration following a divorce in community of property

Couples, who marry in community of property often register immovable property such as a house in both their names. However, what happens should they get divorced and after the divorce, one of the spouses becomes insolvent – who is entitled to decide and deal with what happens to the immovable property in such a case. The solvent ex-spouse or the trustees of the insolvent’s estate?

 

Allen West of Deeds Training (Pretoria) recently published an article on the Ghost Digest website wherein he investigated the legal ramifications of sequestration following termination (divorce) of marriages in community of property, based on a High Court case (judgement) between Corporate Liquidators (Pty) Ltd and Mrs M A Wiggill in 2007. This case is a ground-breaking one and defined the parameters for situations such as these.

 

When Mr and Mrs Wiggill, who were married in community of property, got divorced in 1998, the divorce settlement (order) stated that some of the immovable property in their joint estate be split in a specific manner between the two. Subsequent to the divorce Mr. Wiggill married Mrs. E H Wiggill, again in community of property. Sadly, in 2002 they (joint estate) were sequestrated and their property placed in the hands of a trustee for the benefit of their creditors.

 

When the first Mrs Wiggill approached the trustees to have her portion of the immovable property transferred to her name, they refused on the grounds that her portion was part of the insolvent estate. She then took them to court and won with the proviso that the trustees could appeal to a full bench. This they did, but lost the appeal as the court decided that immovable property of spouses, who were married in community of property and then got divorced with a specified settlement, would be converted to free co-ownership. In other words, the allocated split as per the divorce agreement ensured that the shares were not bound to a joint estate and that each spouse was entitled to their share.

 

This particular case highlighted the fact that if the terms of a court sanctioned divorce settlement stated that the property was to be shared in a particular ratio, then only the insolvent spouse’s portion could be used by the trustee to pay creditors and that the trustees were obligated to transfer the insolvent spouse’s portion into their name.

 

We therefore, highly recommend that couples execute an antenuptial contract prior to marriage to avoid the ramifications of marriages in community of property (in general) and to approach your attorney before you buy property or, before you agree to a divorce settlement to help you make an informed decision which can be implemented after the conclusion of your divorce.

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