Statutory discretion or common law power? Some reflections on “veil piercing” and the consideration of (the value of) trust assets in dividing matrimonial property at divorce – Part One

Abstract

Although it is an entrenched principle of company law that the abuse of corporate personality may require the “corporate veil” of a company to be “pierced”, this possibility has only recently become a feature of South African trust law. While this is a salutary development in theory, the application and practical usefulness of this remedy remain shrouded in uncertainty. A particularly acute manifestation hereof arises where it is argued that (the value of) trust property should be considered for the purposes of dividing matrimonial property at divorce. By drawing on the established principles of “piercing” in the company context and analysing relevant case law, Part One of this article concludes that the prevailing position in respect of trusts neither accords with the principles of proper trust administration nor gives effect to the legal obligations imposed on divorcing spouses by matrimonial property law. More specifically, it is argued that, while piercing the trust veil is a power that is derived from common law (as opposed to legislation), the actual exercising of this power in a divorce context is dependent on a nexus provided by the matrimonial property regime in question. From this platform, Part Two of this article will provide perspectives on how the property of an abused trust should be dealt with in divorces involving the three major matrimonial property regimes that are recognised by South African family law. In addition, it will be argued that potential litigation based on these contentions should contribute towards rectifying the unsatisfactory legal position that prevails.