The decision by the Constitutional Court regarding divorce may lead to the division of “pension interest” between spouses.

Introduction

The recent decision by the Constitutional Court has brought about significant changes to the rights of individuals married without the accrual system under the out of community of property arrangement.

In its groundbreaking ruling on the Divorce Act on October 10, 2023, the apex court deemed section 7(3) of the Divorce Act unconstitutional and nullified it.

This ruling marks a notable shift as individuals married on or after November 1, 1984, without the accrual system can now seek a redistribution order from the court. Previously, only those married under this arrangement before November 1, 1984, had the right to apply for such an order, which involves transferring assets from one party to another.

The current debate revolves around whether these assets would encompass a party’s ‘pension interest.’ There is a compelling argument that suggests the answer could indeed be affirmative.

Far-reaching ruling

The recent Constitutional Court decision, as highlighted in the case of EB (born S) v ER (born B) and Others and KG v Minister of Home Affairs and Others, brings significant changes regarding couples who married on or after November 1, 1984, and excluded community of property, community of profit and loss, and accrual sharing through an antenuptial contract (ANC).

Previously, individuals could only seek a redistribution order under section 7(3) of the Divorce Act if they were married before November 1, 1984, and had opted for an ANC.

However, couples married with an ANC on or after November 1, 1984, were not permitted to apply for such a redistribution order during divorce proceedings.

The Constitutional Court found that this differentiation based on the marriage date indirectly discriminated against women, who were disproportionately impacted due to the lack of a distribution remedy. Consequently, the court declared section 7(3) of the Divorce Act unconstitutional and invalid, especially as it did not address dissolution of marriage by death.

To address these constitutional defects, the court suspended the declaration of invalidity for 24 months from the date of the order, allowing Parliament time to take the necessary steps to rectify the situation.

Immediate interim relief is available

Following the Constitutional Court’s decision and the pending remedial steps, section 7(3)(a) of the Divorce Act has been modified to exclude the reference to ‘before the commencement of the Matrimonial Property Act, 1984.’

As a result, the Constitutional Court has provided immediate interim relief allowing parties to divorce proceedings who were married on or after November 1, 1984, with an ANC to apply for a redistribution order. The court hearing the divorce case can then grant a redistribution order deemed ‘just and equitable.’

It’s crucial to note that individuals married with an ANC on or after November 1, 1984, are not automatically entitled to a share of their spouse’s assets upon divorce. To claim redistribution of all or part of the other party’s assets, sufficient evidence must be provided to demonstrate direct or indirect contributions to the other party’s estate.

An important question arising from this decision is whether it now allows for the potential distribution of all or a portion of a party’s ‘pension interest’ in a retirement fund upon divorce for those married with an ANC. This matter would likely depend on the specific circumstances of each case and how the court interprets the relevant laws and evidence presented.

Impact on the splitting of ‘pension interest’

The concept of pension interest in divorce proceedings refers to the benefit that a party would have received as a member of a retirement fund if their membership ended on the divorce date due to resignation from employment.

The entitlement to share in a spouse’s pension interest is governed by sections 7(7) and 7(8) of the Divorce Act. Section 7(7)(a) considers the pension interest as part of the party’s assets, subject to certain provisions.

However, section 7(7)(c) of the Divorce Act exempts divorcing parties who were married with an ANC on or after November 1, 1984, from the provisions of section 7(7)(a) regarding the pension interest being part of the assets.

The Supreme Court of Appeal affirmed in GN v JN 2017 that the pension interest of a member spouse at the divorce date is part of the joint estate for asset division purposes.

The question arises whether, under a redistribution order, a party can claim all or part of the other party’s pension interest and request the court to direct the retirement fund to pay the assigned pension interest to the non-member spouse per section 7(8) of the Divorce Act.

While the Constitutional Court didn’t specifically address pension interest, the judgment hinted at the possibility of ordering the transfer of specific assets or money in a redistribution claim.

Given that pension interest is deemed part of the assets under section 7(7)(a), and considering the recent Constitutional Court ruling, it’s conceivable that redistributed assets under a section 7(3) order could include all or part of the other party’s pension interest.

The specifics of splitting pension interest for parties married with an ANC will likely be subject to future legal proceedings and interpretations.