A will may, for example, specify that the testator bequeaths his immovable property (for instance his residential property) in equal shares to his two children, subject to a lifelong usufruct in favour of his wife.
A regular occurrence in the world of the drafting of wills is when a person wants to bequeath property to one or more heirs, subject to a usufruct — or right to use — the property in favour of another heir.
A will may, for example, specify that the testator bequeaths his immovable property (for instance his residential property) in equal shares to his two children, subject to a lifelong usufruct in favour of his wife.
After the death of the testator the property will be registered in the names of the two children, but their ownership in the property will be limited to the effect that the wife will have a lifelong right to use the property and receive the property’s fruits. The wife will, for the duration of her lifetime, be entitled to use the property as her place of residence and she will also be entitled to earn income from renting the property out. The children would then basically have no use or benefit of the property while the wife is alive.
Upon the wife’s death the usufruct would terminate, and the children will be at liberty to deal with the property without the prior restrictions of the usufruct.
Hart v Hart
In Hart v Hart, the high court dealt with a dispute over a usufruct. But in this case the right of usufruct was extended in a not-so-common fashion.
Peter Dionysius Hart (the deceased) died on 22 September 2013. His will stipulated that his four sons were to inherit the whole of his estate in equal shares. All four sons were also appointed as executors of his estate. His first three sons were born from a previous marriage and the fourth son was born from his marriage with Margaret Hart. The first three sons are referred to as “the respondents”.
Peter Hart included a further provision in his will: “I wish for my wife, Margaret, to enjoy the full usufruct of all my assets upon my death. She may dispose of any assets and invest the proceeds in any other asset that she wishes with the proviso that the executor/s of my estate approve of the investment, which approval shall not be unreasonably withheld. The purpose of this proviso is to ensure as best as possible that the capital is preserved. However, the comfort and well-being of my wife, Margaret, is to be the utmost considered criterion by my executor/s.”
It is evident from his will that he intended for Margaret Hart to not only have a usufruct over all his assets, but to also have the extraordinary right to dispose of the assets and reinvest the proceeds, provided that the executors approve of such reinvestment. It is worth noting that, as per the will, the executors may not unreasonably withhold such approval.
The Dispute
The property in question was in Camps Bay and operated as a guest house. Given her age, Margaret Hart no longer wished to run a guest house, and wanted to sell the property, reinvest the proceeds and live off the income derived from the investment. A purchaser had offered to buy the property for R17 million.
The respondents were of the view that their father’s intention as indicated in his will was: “To enable them to veto any proposed sale and investment of the proceeds, because the testator knew that any sale of the property and investment of the proceeds would affect their rights. They argued that the testator wanted to ensure that the capital would be preserved and protected against the risk of erosion by ensuring that the applicant’s entitlement to usufruct is balanced with the need to safeguard the interests of the heirs.”
The court had to decide whether Margaret Hart had an unfettered discretion to sell the property, whether the will granted the respondents the right to consent to the sale of the property and the reinvestment of the proceeds, whether the respondents had no right to refuse the sale of the property or whether the approval to reinvest the proceeds of sale had been unreasonably withheld by the respondents.
Interpretation of the will
The court dealt with the legal principles applicable to the interpretation of a will and also quoted from the judgment in Allen v Estate Bloch [1970] 2 SA 376 (C): “Basically, the duty of the court is to ascertain not what the testator meant to do when he made his will but what his intention is, as expressed in the will. Consequently, where his intention appears clearly from the words of the will it is not permissible to use evidence of surrounding circumstances or other external facts to show that the testator must have had some different intentions. At the same time no will can be analysed in vacuo. In interpreting a will the court is entitled to have regards to the material facts and circumstances known to the testator when he made it: it puts itself in the testator’s armchair.”
The court held that Peter Hart intended for the property to be a cushion to prevent Margaret Hart from falling into financial hardship after his death. Even though the testamentary clause which bequeathed the assets to the sons was the dominant clause, the clause relating to the creation of the usufruct was not in conflict with the dominant clause and Peter Hart intended for the two clauses to co-exist.
Sale of property and reinvestment of proceeds
The respondents were of the view that for them to decide upon the reinvestment of the proceeds of sale, they had to consent to the sale itself. But the court found that there was no provision in the will that required the respondents’ consent for the sale of the property. It was held that Margaret Hart had the absolute discretion to sell the property and that the respondents had no right to frustrate this process.
The court interpreted the testamentary clause relating to the creation of the usufruct as placing a duty upon both Margaret Hart and the respondents to preserve the capital of the proceeds of sale. This is in line with the legal principles surrounding usufructuary property in that it may not be consumed or destroyed by the usufructuary and must be maintained to preserve its value. Margaret Hart therefore had to reinvest the proceeds, and the respondents had to approve of the investment (which approval may not unreasonably have been withheld).
The respondents’ submission that the reinvestment was only to be in another immovable property was rejected by the court and it was held that Margaret Hart was entitled to invest the proceeds in any other asset. She proposed to reinvest the proceeds in a financial investment structure that would preserve the capital and allow her to live off the interest.
The court similarly rejected the respondents’ contention that financial securities by its very nature erodes capital and held that the respondents’ insistence on reinvesting the proceeds in another immovable property amounted to unreasonably withholding their approval.
The order
The high court ordered the respondents to sign all documentation necessary for sale and transfer of the property and to approve of the reinvestment scheme and sign any documentation required to give effect thereto. Margaret Hart was therefore entitled to insist on the sale of the property with a view to the reinvestment of the proceeds.
Postscript
An argument can however be made that, since the reinvestment plan was not before the court, the court should not merely have ordered the respondents to approve of the reinvestment plan and to sign any documentation to give effect thereto.
A more acceptable and sustainable approach may have been that Margaret Hart would have been entitled to sell the property provided that the reinvestment plan is approved by the respondents. The court should then have directed the respondents to apply their minds to the reinvestment plan and to ensure that the reinvestment plan meets the requirements of looking after Margaret Hart and preserving the capital.
This judgment highlights the importance of how carefully a will must be worded to set out the exact wishes of the testator.
Karel Kogler is an associate at Herold Gie Attorneys.
