A widow’s right to sell: Surprising legal twist on a longstanding inheritance practice

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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 which emanated from a testamentary provision in respect of a usufruct. In this case, the right of usufruct was however extended in a not-so-common fashion.

The late Peter Dionysius Hart (the deceased), passed away on 22 September 2013. The deceased’s Will stipulated that his four sons were to inherit the whole of his estate in equal shares.

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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 (Mrs Hart). The first three sons will be jointly referred to as “the respondents”.

The deceased also 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 therefore evident from the deceased’s Will that he intended for Mrs 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 asset upon which the testamentary provisions had bearing was an immovable property situated in Camps Bay (“property”), which was operated as a guest house. Due to Mrs Hart’s age, she no longer wished to operate the property as a guest house, but wanted to sell the property, reinvest the proceeds and live off the income derived from the investment. She also procured a purchaser who offered to purchase the property for R17m.

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 then had to decide whether Mrs 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, and whether the approval to reinvest the proceeds of sale had been unreasonably withheld by the respondents.

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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 upon a purposeful interpretation of the Will, the deceased intended for the property to be a cushion to prevent Mrs 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 the deceased intended for the two clauses to co-exist.

Sale of property and reinvestment of proceeds

The respondents were of the view that in order for them to decide upon the reinvestment of the proceeds of sale, they had to consent to the sale itself. The Court however found that there was no provision in the Will that required the respondents’ consent for the sale of the property. It was held that Mrs 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 creating of the usufruct as placing a duty upon both Mrs 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 in order to preserve its value. Mrs Hart therefore had to reinvest the proceeds, and the respondents had to approve of the investment (which approval may not unreasonably have been withheld).

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The respondents’ submission that the reinvestment was only to be in another immovable property was rejected by the court and it was held that Mrs Hart was entitled to invest the proceeds in any other asset.

Mrs Hart proposed to reinvest the proceeds in a financial investment structure which 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. Mrs 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 Mrs 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 Mrs 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.