Suretyships by spouses married in community of property
IN TERMS of Section 15 (1) of the Matrimonial Property Act 88 of 1984 (“the MPA”), both spouses have equal powers to deal with the assets of the joint estate, without the consent of the other spouse.
This power is limited in terms of sections 15(2) and 15(3) of the MPA. It is a requirement that the consent of the other spouse be obtained before certain transactions may be entered into.
Section 15(2)(h) of the MPA specifically prohibits a spouse from standing surety without consent of the other spouse.
However, this does not apply where a spouse is acting in the ordinary course of their profession, trade or business.
In the case of Strydom v Engen Petroleum Limited [2013] 1 All SA 563 (SCA), the Supreme Court of Appeal (“SCA”) reinforced the position regarding when a spouse married in community of property is required to obtain the consent of the other spouse if they wish to sign a suretyship.
In this case, Strydom, who was a director of a company, signed an unlimited suretyship in favour of Engen, binding himself as surety for the debts of the company. The company was later liquidated.
At that time, the company owed approximately R25 million to Engen.
Engen obtained judgment against Strydom in the North Gauteng High Court in terms of the suretyship.
Strydom appealed the judgement to the SCA on the basis that he was married in community of property and his wife had refused to consent to him signing the deed of suretyship. Accordingly, the suretyship was invalid.
The SCA held that the sections of the MPA could not be read in isolation.
Accordingly, the requirement that a spouse consents to the other spouse signing of a suretyship cannot be read separately from the proviso that this does not apply in circumstances where the suretyship is signed in the ordinary course of the spouse’s business.
For that reason it is not sufficient for a person to merely state that they are married in community of property and their spouse did not consent to the suretyship. They have to demonstrate that the suretyship was not signed in the ordinary course of their profession, trade or business.
The SCA held that, on the facts, Strydom was unable to prove that he was not acting in the ordinary course of his trade or business.
Accordingly, he could not rely on the restriction set out in Section 15(2) of the MPA. The SCA thus dismissed the appeal.
This case is a further illustration that if a person is married in community of property and signs a suretyship they may be binding the joint estate if the suretyship is not signed in the ordinary course of the spouse’s business, even if the other spouse has withheld their consent.
Thabo Vilikazi is an Associate at Cox Yeats Attorney and practices in the Property Law Team. He can be contacted on 031-536 8500 or via email tvilikazi@coxyeats.co.za
THE massive property price boom that all major South African regions experienced before the 2008 slump was “replicated” in Namibia, with its year-on-year house price growth also peaking at above 30% for a short time in 2004, and a significant price growth slowdown towards 2009.
Like the South African region, the Namibian residential market’s price growth showed a post2009 recovery. It has been in this post-2009 recovery period where we have periodically heard commentators expressing fears of a housing market “bubble” in Namibia. Such fears have been fuelled by a significantly stronger house price growth recovery in that region than in any other major rand area region.
The post-2008 market strength in Namibia meant that, since the beginning of 2001, the average house price growth in that country has been a massive 496.7% up until the 1st quarter of 2015.
This dwarfs anything in South Africa’s major regions, which are all nearer to 300% or lower, when measured according to the First National Bank set of house price indices.
It will always be difficult to ascertain the levels of speculative activity in a residential market or the level of “buyer panic”, two phenomena which can lead to market “overshoots”. But it is important not to draw “bubble” conclusions based on what appears to be strong house price inflation.
Demand
There are also sound economic reasons for Namibia’s superior house price growth performance since 2009. The country has experienced economic growth well in excess of South Africa’s over this post-boom period, and that should have led to far stronger primary residential demand growth compared to South Africa, even in the absence of any speculation or buyer panic, and without key affordability or indebtedness ratios necessarily getting totally out of hand.
It is also possible, given house price inflation having periodically been well above the interest rate percentage in Namibia, that there was speculative activity and buyer panic in excess of the weaker South African market.
However, in 2014, the start of interest rate hiking in the rand area, and a return to borrowing rates in excess of house price growth in that country, suggests that its residential market is not a “speculator’s paradise”.
It appears likely that a period of broadly slower house price growth has arrived for Namibia.
We saw average Namibian house price growth slow to 8.2% in 2014, down from 15.5% in 2013 and the lowest annual average growth since 2009.
In recent times, Namibia has shown signs that its economic growth has become a little more constrained, which would suggest that its housing market demand and price growth should probably move into a lower range compared with previous years.
While the country’s GDP growth in 2014 remained healthy at 4.5%, it has gradually tapered from a 6% high in 2010, more or less timed with a broad growth tapering Africa.
South Africa, Namibia’s major trading partner and thus a key influence on its economic growth direction, lacks positive structural changes to its economy, and this may have become a mild drag on the Namibian economy.
Also, being part of the rand area, Namibia has been obliged to start raising interest rates along with South Africa since early last year.
While its CPI inflation rate is now very low, largely owing to a massive drop in oil prices late last year, the effects of that drop look set to subside in the coming months and the inflation rates are expected to rise as a result.
This, in turn, is expected to lead to the resumption of interest rate hiking late in 2015.
Already in 2014, the small interest rate hikes may have just taken some heat out of the market, especially should there have been any speculative activity at the time.
Interest-rate hiking would seem appropriate in both countries in order to address key macro-economic imbalances that have been building, imbalances which increase vulnerability to currency and interest-rate shocks.
South Africa has had a chronic savings shortage with which to fund its gross domestic investment
in
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South since around 2003/4, translating into a wide current account deficit on the balance of payments, and requiring large foreign capital inflows to finance the shortfall.
More recently, since 2009 Namibia has worked up a sizeable deficit, too, to the tune of 6.6% of GDP. At some stage the central banks need to address this situation where both countries are living and consuming beyond their means, and while they address this it can be a situation that is mildly negative for economic growth.
Noticeable has been Namibia’s real household consumption expenditure well exceeding real economic growth in recent years. Since 2000, real consumption expenditure had risen by 159.82% by 2013. Over this period, real GDP growth had risen by a lesser 84.23%.
It would appear that Namibia’s residential market has run into some growth constraints, owing to mildly more significant economic growth constraints in recent times along with the start of interest rate hiking.
Although still a very healthy situation, this arguably explains a slower average house price growth rate in 2014, as well as household and mortgage credit growth rates having begun to slow from double-digit highs in the first half of 2014.