The Novel Question: When Must a Spouse Comply with a Section 7 Notice?
When it comes to financial disclosure in divorce proceedings, some spouses treat their assets like a magician’s most guarded illusions – appearing and disappearing at will behind a veil of complexity. However, in a judgment that would make even the most skilled illusionist nervous, Acting Justice Friedman of the Gauteng High Court has illuminated the dark corners where assets sometimes hide.
In D.M v D.M (2021 043212) [2025] ZAGPJHC 31, handed down on 28 January 2025, the court confronted a crucial question that has long haunted our divorce courts: when exactly must a spouse comply with a section 7 notice under the Matrimonial Property Act 88 of 1984? The case, which has been winding its way through the legal system for nearly four years, tackles this previously unexplored territory with both wisdom and pragmatism.
While the judgment spans an impressive 62 paragraphs of legal analysis, its central message rings clear as a magician’s bell: the era of treating financial disclosure like a sophisticated disappearing act is drawing to a close. For legal practitioners navigating the intricate maze of matrimonial property law, this judgment serves not only as a detailed roadmap but also as a stern reminder that in the theatre of divorce proceedings, the most powerful magic lies not in concealment, but in transparency.
The judgment provides what generations of family law practitioners have been waiting for – clear guidance on the interplay between judicial discretion and the fundamental obligation of financial disclosure. It is a masterclass in balancing the courts’ constitutional powers with the practical realities of complex divorce litigation, reminding us that sometimes the most effective way to handle assets is simply to lay all cards face-up on the table.
The court delved into this unexplored territory while considering an application to compel compliance with a section 7 notice. While previous Supreme Court of Appeal decisions, including ST v CT 2018 (5) SA 479 (SCA) and AB v JB 2016 (5) SA 211 (SCA), had established that financial disclosure could be demanded during divorce proceedings rather than after their conclusion, none had directly addressed the timing of such disclosure or the court’s discretion to regulate it.
The judgment carefully analysed the interpretation of the word “necessary” within section 7, considering whether it created an objective test or allowed for judicial discretion. Drawing on constitutional principles, particularly section 173 of the Constitution, which grants courts the inherent power to protect and regulate their own processes, Friedman AJ concluded that courts retain discretion to determine when compliance with a section 7 notice should be ordered.
This discretionary approach allows courts to consider practical realities, such as whether compliance would be premature, impractical, or prejudicial to either party. However, the D.M case emphasises that this discretion must be exercised with careful consideration of the fundamental principle of full and frank disclosure in matrimonial matters, as highlighted in cases like DEB v MGB [2014] JOL 32339 (SCA).
The judgment represents a significant development in South African matrimonial law, balancing the need for comprehensive financial disclosure against practical considerations in complex divorce proceedings. It provides much-needed guidance to practitioners and courts dealing with contested section 7 notices, particularly in cases involving allegations of beneficial ownership and complex corporate structures.
The Court’s Finding on Judicial Discretion in Section 7 Applications
Acting Justice Friedman undertook a meticulous analysis of the court’s discretionary powers in section 7 applications. The judgment establishes that this discretion flows from section 173 of the Constitution, which empowers courts to protect and regulate their own processes, rather than from the interpretation of the word “necessary” in the Matrimonial Property Act.
The court held that while this discretion exists, it should be exercised with a strong presumption in favour of disclosure. The judgment emphasises that courts should only refuse to compel compliance with a section 7 notice in compelling circumstances. These might include situations where the application is an abuse of process, where the information has already been provided through other means, where the notice was issued for an ulterior purpose, or where compliance would be demonstrably premature or prejudicial.
Importantly, the judgment distinguishes between the concepts of “necessary” and “appropriate” in legal interpretation. The court noted that had section 7 of the Matrimonial Property Act used the term “appropriate” instead of “necessary,” the discretionary nature of the court’s power would have been more readily apparent. However, the judgment concludes that even with the use of “necessary,” courts retain their constitutional power to regulate the timing and manner of disclosure.
The court’s approach reflects a sophisticated understanding of the practical challenges in matrimonial litigation, particularly in cases involving complex financial structures. The judgment recognises that while courts must retain control over their processes, this power should not be exercised in a way that undermines the fundamental principle of full and frank disclosure between divorcing spouses.
The court’s reasoning also addresses the relationship between a court’s discretion and the “catch-me-if-you-can” principle established in the DEB case. The judgment emphasises that recognition of judicial discretion should not provide an incentive for parties to hide assets or engage in tactical litigation aimed at wearing down their opponents through endless interlocutory applications.
Full and Frank Disclosure: Moving Away from “Catch-Me-If-You-Can” Tactics
The judgment in D.M provides crucial guidance on how parties should approach disclosure in matrimonial matters, particularly regarding beneficial ownership of assets. The court emphasises that spouses can make full disclosure without compromising their legal positions or prejudicing their cases.
Acting Justice Friedman provides practical guidance on how a comprehensive section 7 response should be formulated. A spouse could, for instance, list assets registered in their name while also identifying assets that might fall under beneficial ownership based on the other spouse’s pleaded case. The response could then explicitly reserve the right to argue later that certain assets should be excluded.
The court draws an important distinction between assets that a spouse genuinely believes should be excluded from their estate and those they believe they can strategically argue for exclusion. This distinction highlights a systemic problem in divorce litigation where parties conflate these categories, leading to protracted legal battles and depleted estates.
The judgment critiques the current state of divorce litigation where disputes about valuable estates often drag on for years, punctuated by numerous interlocutory skirmishes. These tactics, the court notes, primarily serve to enrich legal representatives at the expense of the contested estates. The D.M case itself, approaching its fourth year, exemplifies this problem.
Particularly significant is the court’s treatment of disclosure in cases involving complex corporate structures and trusts. The judgment clarifies that requiring disclosure of beneficially owned assets does not improperly extend beyond section 7 of the Matrimonial Property Act. Instead, it aligns with the definition of beneficial ownership in the Companies Act, which includes the ability to exercise control or materially influence company management.
The practical effect of this judgment is to encourage a more transparent approach to disclosure, where parties are urged to be forthcoming about their assets while preserving their right to argue about the legal implications of such ownership at trial. This approach aims to streamline divorce proceedings and reduce unnecessary tactical litigation.
The Interplay Between Separation Applications and Section 7 Disclosure
The judgment carefully examines how a pending Rule 33(4) separation application might affect a court’s exercise of discretion regarding section 7 disclosure. The court grappled with an application to separate two key issues: the interpretation of section 4(1)(a) of the Matrimonial Property Act regarding trust assets, and whether company assets beneficially owned by a spouse should be considered in determining accrual.
Acting Justice Friedman found that the separation application did not justify delaying section 7 disclosure. The court reasoned that most disputed assets were not affected by the legal questions proposed for separation. Rather, they involved factual disputes about beneficial ownership that would ultimately need to be resolved at trial.
The court noted that even if certain legal principles around beneficial ownership were separated for preliminary determination, this would not impact a spouse’s fundamental duty to disclose their understanding of their estate. The judgment emphasises that a spouse’s honest belief about what constitutes their estate should guide their disclosure, with legal arguments about inclusion or exclusion of assets to be determined later.
Significantly, the court considered the respondent’s delay in pursuing the separation application as relevant to exercising its discretion. While acknowledging that Practice Directive 1 of 2024 allowed either party to advance the separation application, the court viewed the respondent’s failure to file a replying affidavit for approximately five months as potentially indicative of tactical delay.
The judgment also references the earlier findings of Bezuidenhout AJ in a Rule 43 application, where the respondent had previously been found to have failed to make full disclosure of his financial position. This history of inadequate disclosure influenced the court’s discretion in favour of compelling compliance with the section 7 notice.
Practical Implications for Divorce Litigation in South Africa
The D.M judgment offers significant guidance for legal practitioners and divorcing parties regarding the management of complex financial disclosure. The court’s order provides a practical template, granting 20 days for compliance with section 7 notices rather than the requested 10 days, emphasising the importance of allowing adequate time for comprehensive disclosure.
Practitioners should note the court’s treatment of costs in section 7 applications. Despite allegations of abuse of process from both parties, the court applied the default Scale A for party and party costs, indicating that punitive costs orders should not be readily granted in such applications merely because of the acrimonious nature of divorce proceedings.
The judgment introduces a nuanced approach to beneficial ownership disclosure. Legal practitioners should advise clients to provide detailed responses that include both directly-owned assets and those that might fall under beneficial ownership, while explicitly reserving their right to argue about inclusion or exclusion at trial. This approach balances transparency with the protection of legal positions.
The court’s finding regarding the relationship between section 7 notices and corporate structures provides essential guidance for cases involving complex business interests. Where beneficial ownership is alleged, practitioners should ensure their clients’ responses address control and material influence over companies, as defined in the Companies Act, while maintaining their right to contest such characterisation.
The judgment suggests that courts will increasingly scrutinise tactical delays in divorce proceedings. Practitioners should be mindful that failure to advance pending applications, such as rule 33(4) separation applications, may influence judicial discretion in related procedural matters. This emphasises the importance of maintaining momentum in divorce proceedings and avoiding unnecessary tactical manoeuvres that could be interpreted as deliberate delay tactics.
Questions and Answers
What is the main legal question addressed in the D.M judgment? The judgment addresses when it becomes “necessary” for a spouse to comply with a section 7 notice under the Matrimonial Property Act, and whether courts have discretion to regulate the timing of such disclosure.
How does section 7 of the Matrimonial Property Act relate to accrual? Section 7 provides that when necessary to determine the accrual of a spouse’s estate, that spouse must furnish full particulars of the value of their estate within a reasonable time upon request from the other spouse.
What constitutional provision forms the basis for the court’s finding on judicial discretion? Section 173 of the Constitution, which gives courts the inherent power to protect and regulate their own processes, forms the basis for finding that courts have discretion to determine when compliance with a section 7 notice should be ordered.
What is meant by the “catch-me-if-you-can” principle in matrimonial law? This principle, established in the DEB case, warns against allowing parties to hide assets or engage in tactical litigation designed to frustrate the other spouse’s legitimate attempts to obtain full financial disclosure.
How should beneficial ownership be handled in section 7 responses? The judgment directs that spouses should disclose assets registered in their name and identify assets that might fall under beneficial ownership based on the other spouse’s pleaded case, while reserving their right to argue about inclusion or exclusion at trial.
What factors should courts consider when exercising discretion regarding section 7 applications? Courts should consider whether compliance would be premature, impractical, or prejudicial, whether the application is an abuse of process, whether the information has already been provided through other means, and whether the notice was issued for an ulterior purpose.
How does the judgment address the relationship between separation applications and section 7 disclosure? The judgment holds that pending separation applications under Rule 33(4) do not automatically justify delaying section 7 disclosure, particularly where the separated issues don’t affect the fundamental duty to disclose.
What is the court’s position on the timing of disclosure in divorce proceedings? The court emphasises that while disclosure cannot be indefinitely delayed, courts retain discretion to regulate the timing of compliance based on the specific circumstances of each case.
How does the definition of beneficial ownership in the Companies Act affect section 7 disclosure? The judgment incorporates the Companies Act’s definition of beneficial ownership, which includes the ability to exercise control or materially influence company management, into the scope of what must be disclosed under section 7.
What is the default position regarding compelling compliance with section 7 notices? The default position is in favour of disclosure, with courts requiring compelling reasons to justify refusing an application to compel compliance with a section 7 notice.
How should parties handle disputed assets in their section 7 responses? Parties should disclose all assets they believe form part of their estate, including disputed assets, while explicitly reserving their right to argue about the legal implications of such ownership at trial.
What approach does the judgment take to costs in section 7 applications? The judgment applies the default Scale A for party and party costs, indicating that punitive costs orders should not be readily granted merely because of the acrimonious nature of divorce proceedings.
What constitutes adequate time for compliance with a section 7 notice? The judgment suggests that 20 days is a reasonable time for compliance, rather than the shorter 10-day period often requested, to allow for comprehensive disclosure.
How does previous non-disclosure affect the court’s discretion in section 7 applications? Previous findings of inadequate disclosure, such as in Rule 43 applications, may influence the court’s discretion in favour of compelling compliance with section 7 notices.
What role does tactical delay play in the court’s consideration of section 7 applications? The court considers tactical delay, such as failure to advance pending applications, as a relevant factor in exercising its discretion regarding section 7 compliance, potentially influencing decisions against parties perceived to be causing unnecessary delays.
Written by Bertus Preller, a Family Law and Divorce Law attorney and Mediator at Maurice Phillips Wisenberg in Cape Town and founder of DivorceOnline and iANC. A blog, managed by SplashLaw, for more information on Family Law read more here.
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