• Jenny Gordon, Head: Technical Advice: Investments

Ruling by Supreme Court of Appeal changes the law on the treatment of living annuities in divorce

A 2016 ruling by the Johannesburg High Court that a living annuity cannot be taken into account for the purposes of calculating the assets on divorce has been overturned on appeal by the Supreme Court of Appeal (SCA). The SCA ruled in the case of Montonari v Montonari that the right to the income of a living annuity formed part of the assets of a marriage for the purposes of divorce.

The 2016 Montonari Judgement

In Lighthouse 17/2016 we discussed the judgement of the High Court in the Montonari case which ruled that the underlying assets of a living annuity, underwritten by an insurer, are owned by the insurer and not the annuitant. They cannot be included as assets in the annuitant’s estate available for distribution in a divorce.

Although an actuary gave evidence that the income of the living annuity had a value, which could be capitalised, this was disregarded by the court.

The court ruled that the monthly or periodical income from the living annuity could only be considered in respect of a maintenance claim by the other spouse, together with other income sources.

The case of ST v CT in 2018

In Lighthouse 8 / 2018 we informed you of the case of ST v CT (2018) which came before the SCA. This was the first time the issue of whether a living annuity forms part of the assets of a divorce had come before the SCA.

  • The court reached a similar conclusion. It accepted that the capital backing a member held living annuity is owned by the insurer and does not fall into the assets of the annuitant.

  • The monthly income derived from the living annuity, forms part of total income and has a bearing on whether the annuitant has the means to pay maintenance to the other spouse.

  • The court did not have to consider the issue of whether the right to a future annuity is a right capable of valuation because evidence was not lead by the parties on this.

The 2020 Montonari Judgement – Supreme Court of Appeal (SCA)

Leave to appeal the 2016 judgement was granted to the spouse of the annuitant, which succeeded.

The SCA made an order that :-

  • the value of the annuitant’s right to future annuity payments under a living annuity is an asset in his estate for the purposes of calculating the accrual in his estate.

  • The matter must be remitted to the trial court for the admission of evidence on the value of the annuitant’s right to receive future payments in respect of the living annuities.

The findings of the SCA