No Consent Does not Amount to no Liability

THE VALIDITY OF A SURETYSHIP AGREEMENT CONCLUDED BY A SPOUSE MARRIED IN COMMUNITY OF PROPERTY WHERE NO WRITTEN CONSENT WAS PROVIDED IN TERMS OF SECTION 15 (2) OF THE MATRIMONIAL PROPERTY ACT NO. 88 OF 1984.

Spouses who have failed and/or not concluded and registered a valid antenuptial contract expressly excluding community of property and community of profit or lost between them are by default or automatically in married community of property. This legal position extends to customary marriages as outlined Section 7(2) of the Recognition of Customary Marriages Act No.120 or 1998.

Generally, spouses married in community of property may perform or carry out several juristic acts like registering a company, selling, and buying movable assets and concluding certain transactions.

Section 15 of the Matrimonial Property Act No. 88 of 1984 (“the Act”) states the following – 

“Subject to the provisions of subsections (2), (3) and (7), a spouse in a marriage in community of property may perform any juristic act with regard to the joint estate without the consent of the other spouse.”

However, by virtue of a marriage in community of property Section 15 (2) of the Act imposes a limitation on such spouse’s powers in certain instances by requiring that such spouse entering or concluding a certain transaction must obtain the written consent of the other spouse.

Section 15 (2) lists 8 such transactions. (for the full list please read section 15(2)) where written consent is required by the other spouse:

  “Such a spouse shall not without the written consent of the other spouse

“(a) ……

(h) bind himself as surety. (own emphasis)”

It has become quite common for spouses married in community of property, when confronted with a legal action for the enforcement of a suretyship agreement to raise a defence of “no consent” therefor such suretyship agreement is invalid or void in an attempt to escape liability.

It does not necessarily follow that if a spouse has not provided written consent to their spouse to enter or conclude a suretyship agreement that such agreement is invalid or void and/or unenforceable.

Section 15(6) of the Act provides an exception to this protection by providing the following –

“The provisions of paragraph (b), (c), (f), (g) and (h) (bind himself as surety) of subsection 2 do not apply where an act contemplated in those paragraphs is performed by a spouse in the ordinary course of his profession, trade or business.”

This aspect was dealt with quite fittingly by the Supreme Court of Appeal in the matter of Strydom v Engen Petroleum Limited (184/2012) ZASCA (30 November 2012), where the Court was tasked to determine the validity of a suretyship agreement in circumstances where the spouse had not granted consent to enter into such suretyship agreement.  Click here for the full judgment.

On 15 December 2004, Mr Strydom had concluded a deed of suretyship in favour of Engen Petroleum where he bound himself as surety for and co-principal debtor of his company for the payment of all monies that might be or were owing by his company.

Engen Petroleum instituted action against Mr. Strydom in his capacity as surety for his company where they sought an amount of R 25 311 432. 21 together with interest and costs. Mr Strydom opposed such action and raised a defence where he contended that the suretyship agreement was invalid and unenforceable because Section 15(2)(h) of the Act required consent from his spouse and his spouse had not granted such consent and in fact had disapproved.

The Court held that for Mr. Strydom to be entitled to the protection of Section 15 (2) he was required to show the Court that he did not bind himself as surety in the ordinary course of his business/trade or profession.

The Court rejected Mr. Strydom defence and indicated that such suretyship was furnished by Mr. Strydom in the ordinary course of his business and therefor no consent was required. The fact that Mr. Strydom executed the suretyship agreement notwithstanding his wife’s disapproval had no bearing on the validity of such agreement.

The net effect of the judgment was that Engen Petroleum could proceed with its claim against the joint estate of the Strydom’s. Mrs. Strydom was unfortunately implicated in the debts of her husband despite her disapproval to the signing of the suretyship agreement. 

In a more recent matter of Sivemangal v AM Gas & General Suppliers (Pty) Ltd and Others (10174/17P) [2020] ZAKZPHC 8 (19 March 2020). The Court was again tasked with among other determining the validity of a suretyship agreement where a spouse married in community of property had not provided written consent and more so, had to consider such in circumstances where the spouses had since divorced. The Plaintiff in this matter instituted action against the Company, the husband who had signed surety and his wife.

Mr. Ashley Maharaj (“Mr. Maharaj”) had signed a deed of suretyship for the indebtedness of his company. At the signing of the suretyship Mr. Maharaj and Ms. Amanda Maharaj (“Ms. Maharaj”) were married in community of property. The suretyship agreement bound Mr. Maharaj for the amount of R 1 473 722.00 jointly and severally, as surety and co-principal debtor with his company.

Similar to the facts of the Strydom v Engen, Ms. Maharaj had not signed the deed of surety. When action was instituted against the company and the Maharaj’s (since divorced). Ms Maharaj disputed the validity of the suretyship agreement and contended that it cannot be enforced against her because it was not signed in the ordinary course of business, and she had since divorced Mr. Maharaj who in the divorce settlement agreement had indemnified her of all debts and liability arising therefrom.

The Court found that the suretyship agreement concluded by Mr. Maharaj was concluded in the ordinary course of business therefor Ms. Maharaj’s consent was not required. The suretyship agreement remained valid and enforceable. The debt was found to be the debt of the joint estate and the Plaintiff was allowed as outlined in section 17 (2) of the Act to sue both the company and the Maharaj’s (joint estate) for payment despite Ms. Maharaj non consent.

Furthermore, the defence which was raised by Ms. Maharaj that she was no longer married in community of property to Mr. Maharaj and therefor she should not be liable for the payment of the debt was dismissed. The Court found that the debt was recoverable from both parties despite the divorce settlement agreement as the debt/liability was incurred during the period where such parties were married in community of property. Click here for the full judgment.

CONCLUSION

A spouse who is married in community of property who seeks to escape liability by raising a defence of “no consent” will have extreme difficulty in mounting a successful defence against legal action based on a suretyship agreement.

It is advisable that spouses in such marital regime’s understand their contractual powers and the potential risk exposure to the joint estate. Individuals in such marital regimes are encouraged to obtain legal advice when entering and/or concluding certain transactions.