Our law has since 1945, in Fink v Fink (the Fink-case), recognised the existence of universal partnerships between spouses married out of community of property. The jurisprudence developed by our courts in the Fink-case, and then later confirmed in Muhlmann v Muhlmann and V (aka L) v De Wet, established that parties who are married out of community of property can by their conduct provide facts and circumstances which, in the absence of an express agreement, would justify the inference that a commercial partnership existed between the spouses.
It is trite in our law that there can be a universal partnership expressly entered into when two people co-habitate without being married. The question however, which is further discussed here, is whether it is possible for such a universal partnership agreement to be entered into tacitly, between parties married out of community, and more specifically, without the accrual system. From the abovementioned cases, it seems this point has been generally acknowledged in our law, even though the logic behind this seem rather peculiar. It is peculiar because, if considered carefully, it almost seems to be contradicting what is agreed on between the parties in the antenuptial agreement. Be that as it may, I will look at the example as set out in the case of A v A , which judgement was handed down on 20 November 2015.
Case law acknowledging universal partnerships
The courts have had no difficulty in concluding that it is possible for a tacit “commercial” partnership to be valid between spouses married out of community of property without accrual. The matter of A v A was one of the more recent of such cases. Here the court held that whether or not such a partnership is established, would depend on whether three essential facts were present and whether, on a holistic assessment of all of the evidence, it was more probable than not that a tacit agreement had been reached. These three essentials will be discussed below in more detail.
In this case, whether the evidence led amounted to prima facie evidence of a universal partnership, and whether it is converted to proof of a partnership on a balance of probabilities, depended on the applicable legal principle and its application to the facts. In Dreyer v Sonop Beperk the court articulated the relevant principle as follows:
“There is no doubt that the amount of evidence in a case depends very much on the circumstances. It was pointed out by Sir James Rose-Innes in the case of Union Government v Sykes 1913 AD 156 at 173: “The important point is that less evidence will suffice to establish a prima facie case where the matter is peculiarly within the knowledge of the opposite party than would under other circumstances be required …..”
What is essentially said here, is that each matter will be judged on a case by case basis, and if the probable facts point to the existence of such agreement between spouses, it is usually indicative that one has been created tacitly.
Legal enforcement of a tacit Universal Partnership Agreement
A universal partnership affords partners in a permanent relationship a right to a share in the property acquired during such relationship or partnership. However, when parties are married out of community of property to each other, they do not sign any partnership agreements. Except, of course, the antenuptial agreement which inherently conclude that there is no community of property, or profit and loss. “What is mine is mine, and what is yours, is yours.”- as the saying goes. South African courts have however held that where there is a commercial partnership, such partnership can come into existence tacitly. This has the result that one party may have a claim based on such universal partnership should they divorce.
Such claims will often be come across in divorce proceedings, where the spouses were married to each other out of community of property with the exclusion of the accrual system. So, when partners in all material respects, without explicitly entering into a partnership agreement, act like partners, such a universal relationship can come into existence. Where the relationship then breaks down or the parties get divorced, the court will make an award regarding the share of the assets acquired during the relationship to each party.
Principle of a universal partnership
The court in A v A confirmed that there are certain essential requirements which will have to be satisfied in order to prove the existence of such tacit universal partnership:
- Each of the partners have to bring something into the partnership, whether it be money, labour or skill;
- The partnership should be carried on for the joint benefit of the parties;
- The object of the partnership should be to make a profit;
- The contract signed should be legitimate.
It is clear from the previous paragraphs that court cases in recent years determined that the contract does not have to be a written and expressly concluded agreement, and that it may be tacitly agreed on. It however remains clear that both parties need to contribute to the “business” in order for such a universal business partnership to come into existence. However, in A v A, the court stated that whether such an agreement exists, will need to be determined on a case to case basis, by traversing all relevant facts.
The courts have in the past drawn distinction between two kinds of partnerships and concluded that where spouses carried on a bona fide business and the foundations to create a partnership are present, such partnership will come into existence. It can further be deduced with the conclusion of an antenuptial contract, out of community of property, and of profit and loss, would automatically exclude the possibility of the societas universorum bonorum - where they share all present and future property. With that being said, it will also not automatically mean that they have entered into the societas universorum quae ex quaestu veniunt business partnership, meaning all that they may acquire from every kind of commercial undertaking, shall be the property of the partnership. This is the “commercial” partnership.
It is important to construct an antenuptial contract reflective of your intentions in marriage and in conducting business going forward. It is important that actions and these agreements align. As such, spouses should seek legal advice not only when they enter into marriage but also after marriage when planning a business venture.
Written by André Nortjé, Junior Associate, Schoeman Law