The recent judgment in Bwanya v Master of the High Court and Others brought into sharp focus how several of our Laws around ownership and inheritance in the “Common Law Spouse” arena are either too broad or not quite specific enough to protect each party in the event of several prospective life events.
In the above case the common law spouse survived her long-term partner. Unfortunately for her his Will had not provided for her nor had it provided for the fact that his mother had pre-deceased him, which left his estate devolving in terms of intestacy. The current provisions of the Intestate Succession Act were adjudged by the High Court as to being “inconsistent with the Constitution and declared it invalid to the extent…” that it excludes the, “surviving partner of a permanent heterosexual life partnership“.
The judgement went further to comment that they “…consider it appropriate to refer the matter to Parliament for it to consider passing legislation to address the affairs of the permanent life partnerships which we are now told involve more than 3.2 million South Africans. This is not to suggest that Parliament must give those partnerships the recognition and status of a marriage.“
This judgement has been taken quite seriously by various arms of government, including SA Revenue Services (“SARS”).
In a recent victory for a taxpayer, who had entered into a common law union but who had not made the union an order of court and who had then subsequently entered a Termination of Life Partnership agreement – again which was not made an order of court, SARS conceded to grant the relief requested.
The underlying issue arose when the ownership of one-half share in an immovable property, which had been co-owned by the couple, and which ownership was to be transferred to the taxpayer in terms of the Termination of Life Partnership Agreement. The conveyancer applied for an exemption from payment of Transfer Duty in terms of the provisions of section 9(1)(i) of the Transfer Duty Act, 40 of 1949, in respect of the transfer of the half share given that their union had been dissolved. SARS rejected the application and assessed the transaction for payment of Transfer Duty at the appropriate rate and issued their assessment which the taxpayer had to settle before the transfer to the taxpayer would be allowed at the Deeds Office. The conveyancer and a tax advisor in his firm applied to SARS via an Alternative Dispute Resolution (ADR1) for the waiver of the transfer duty on the grounds that the parties met the definitions of “Spouse” in both the Transfer Duty Act as well as the Income Tax Act.
The Transfer Duty Act defines a “spouse” as follows in section (c) :
“in relation to any person, means the partner of such person –
(c) in a same-sex or heterosexual union which the Commissioner is satisfied is intended to be permanent.
The Income Tax Act 58 of 1962 defines a “spouse” as follows:
“spouse”, in relation to any person, means a person who is the partner of such person-
- in a marriage or customary union recognised in terms of the laws of the Republic;
- in a union recognised as a marriage in accordance with the tenets of any religion; or
- in a same-sex or heterosexual union which is intended to be permanent,
and “married”, “husband” or “wife” shall be construed accordingly: Provided that a marriage or union contemplated in paragraph (b) or (c) shall, in the absence of proof to the contrary, be deemed to be a marriage or union out of community of property
The ADR1 was rejected, as SARS advised the union had not complied with Section 9(1)(i) of the Transfer Duty Act, which reads as follows:-
“a surviving or divorced spouse who acquires the sole ownership in the whole or any portion of property registered in the name of his or her deceased or divorced spouse where that property or portion is transferred to that surviving or divorced spouse as a result of the death of his or her spouse or dissolution of their marriage or union;”
Our interpretation of the above provision is that the Transfer Duty exemption is not only limited to divorced spouses, but also to those spouses in a union which union has subsequently been dissolved. The Termination of Life Partnership Agreement by the parties to this transfer would amount to a dissolution of a union as provided for in the Transfer Duty Act. The parties to the transfer were in a union for 10 years, purchased property together and lived together in the property as a couple (as common law husband and wife). This, from our perspective, supports the notion of permanency. Based on our understanding of the definition of “spouse”, both in the Income Tax Act coupled with the exemptions listed in the Transfer Duty Act, our view is that the parties fall within the ambit of spouses. Furthermore their union has been dissolved by way of a Termination of Life Partnership Agreement.
The difficulty for SARS had when dealing with this case is that this section does not recognise unions that are common in law, which in relation to the judgement of Bwanya v Master of the High Court and Others, renders this interpretation as unconstitutional. It further does not correlate with the definitions of “spouse” in the Transfer Duty Act, as common law unions are rarely made orders of court and consequentially nor are the termination agreements, as is suggested in the above paragraph, so their unions may never be recognised as “divorces”.
We requested that SARS expand the interpretation of “divorced spouse” in section (9(1)(i) to include spouses as referred to in clause (c) of the definition of “spouse” in the Transfer Duty Act.
A further meeting was held with SARS officials to request the reasons for their decision resulting in the request from SARS that a further ADR be drafted and submitted to them, bringing into focus the judgement of Bwanya v Master of the High Court and Others.
During the final meeting with SARS we were advised that they agreed to expand the interpretation of “divorced spouse” to include persons such as the purchaser in our transaction.
The taxpayer was successful in having the full assessed transfer duty refunded. SARS have indicated in the background that they have made fundamental amendments to their procedures for assessing similar cases.
Fairbridges Wertheim Becker Attorneys have in the process paved the way forward for those who find themselves in similar relationships afforded a protection from historical unconstitutional practices.
The case of Bwanya v Master of the High Court and Others will certainly make the space of Administrative Law an interesting one in the coming years.
The team at Fairbridges Wertheim Becker who assisted the client was led by Mr. Pieter Pretorius (Property Law) and given support by Nicole Ferris (Estate Administration) and Sheri Breslaw (Family Law).
Article by Nicole Ferris.