Brief Summary

Divorce — Amendment of settlement agreement — Applicant seeks amendment and rectification of divorce settlement agreement to enforce a variation regarding property distribution — Parties previously agreed to vary terms concerning the transfer of properties following a joint venture with a developer — Respondent's failure to honor the variation agreement — Court finds that the correspondence between the parties constituted a binding agreement to vary the original settlement, thus enforceable against the respondent.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings took the form of a motion application in the Gauteng Local Division, Johannesburg, in which the applicant (Mr H[…]) sought the amendment and rectification of a divorce settlement agreement concluded with the respondent (Mrs H[…]) on 25 July 2014 and subsequently made an order of court when the parties were divorced on 9 April 2015. The primary relief sought was the substitution of the proprietary settlement clauses with a term requiring the respondent to pay the applicant R2 570 666,66 plus interest from 27 December 2018, alternatively the appointment of a liquidator to determine the parties’ accrual.

The applicant’s case was premised on an alleged subsequent variation agreement, said to be evidenced by emails and attorney correspondence exchanged after the divorce, and which he contended varied the proprietary terms of the original settlement agreement. He asserted that the respondent failed to honour the alleged variation and asked the court to enforce the settlement agreement “as varied”.

The general subject-matter concerned the enforceability of an alleged variation of a divorce settlement agreement that contained a non-variation clause permitting amendments only if “in writing and signed”, and, in the alternative, whether the applicant could effectively re-open the accrual calculation years after the divorce through the appointment of a liquidator notwithstanding a full and final settlement clause.

2. Material Facts

The parties were married out of community of property with the accrual system. Their marriage ended in divorce, and at the time the respondent’s accrued estate exceeded that of the applicant. They concluded a written settlement agreement regulating the proprietary consequences of their divorce, which was incorporated into the divorce order.

In terms of the settlement agreement, the respondent owned an immovable property (the former family home) which was to be sold to a developer. The conveyancer would pay the applicant R1 350 000,00 from the proceeds, with the balance to the respondent. The settlement also recorded that the developer would transfer three properties (units) (to be developed) to a family trust to be created by the parties, with both parties as trustees and the parties and their major children as beneficiaries.

Those transactions formed part of a joint venture arrangement between the respondent and the developer. The joint venture contemplated the transfer of the original property to the developer for consideration, and the respondent’s entitlement to take transfer of three subdivided and developed units, coupled with a development consideration credit. The joint venture further contemplated completion of development within 24 months, which period expired on 27 December 2018. It was common cause that the units were not developed by that date and had still not been developed by the time of the application, leading to disputes and litigation between the respondent and the developer.

It was also common cause that the property was transferred to the developer and that the applicant received the R1 350 000,00 contemplated by the settlement agreement. In about December 2018, the parties began discussing a change to clause 2.2 of the settlement agreement. The applicant proposed (by email of 7 December 2018) that the trust would no longer be formed and that two of the three units would be transferred to him (or his nominee) and one to the respondent (or her nominee). In a response email dated 17 December 2018, the respondent indicated that, on successful completion of the developer’s obligations, two of the three properties would be transferred to the applicant or his nominee. In the same email she recorded that, as they had discussed, the applicant would contribute his two-thirds share of the costs of litigation against the developer.

Further email exchanges in January 2019 reflected that the applicant considered the required amendment “confirmed”, but also raised that the deed of settlement had been made an order of court and that the parties might need to “re-think” aspects of the amendments, including the handling of costs and monies paid or received. The respondent asked for greater specificity so that both could proceed on the same basis.

Subsequently, attorney correspondence ensued. The applicant relied heavily on a letter from the respondent’s then attorneys dated 7 March 2019, which stated that the settlement order “was varied by you and our client” and recorded that the parties had decided not to establish the trust and would dispose of the three properties by allocating two to the applicant and one to the respondent. Later correspondence showed a dispute between the parties as to whether the applicant had agreed to pay two-thirds of the costs associated with securing the development and transfer of the units; the respondent’s attorneys asserted such agreement and treated it as reciprocal to any obligation to transfer units, while the applicant’s attorneys denied any such costs agreement.

On 2 July 2019, the applicant’s attorneys proposed a draft written variation agreement that, among other terms, contemplated that the respondent would ensure transfer of two properties to the applicant or, failing that, pay him a sum equivalent to the value of two such properties (as at December 2018), with interest from 27 December 2018, and recorded that the agreement was not subject to the joint venture’s performance. It was common cause that the respondent did not sign that draft or any similar written addendum.

A round-table meeting took place in September 2019 on a without prejudice basis. It became common cause that the respondent conveyed that developments in her dispute with the developer meant the units would be larger and more upmarket than initially anticipated. She proposed options to the applicant that included purchasing units at market value with a credit, purchasing one unit with a double credit, or receiving a cash settlement equivalent to the double credit, namely R2 570 666,66. The applicant claimed he elected the cash option, and his attorney wrote on 7 November 2019, recording that the election was made on a without prejudice basis and subject to the parties signing a supporting divorce variation agreement. The respondent did not make payment.

The application was then brought seeking to amend and rectify the divorce settlement agreement (as incorporated into the divorce order) to provide for payment of R2 570 666,66 plus interest, alternatively for the appointment of a liquidator to determine the accrual.

3. Legal Issues

The central legal question was whether the applicant established the existence of a valid and binding agreement varying the proprietary terms of the settlement agreement, in a manner compliant with the settlement agreement’s non-variation clause, which required any variation to be in writing and signed by the parties.

This question primarily concerned the application of legal principles of contract formation and variation to the documentary record (emails and letters), including whether the parties reached consensus on all material terms and whether the purported variation matched the relief sought. Although the applicant relied on the Electronic Communications and Transactions Act 25 of 2002 to argue that electronic communications satisfied “writing” and “signature” requirements, the respondent did not contest those submissions, and the court treated the decisive issue as whether agreement (consensus) was proved on the facts.

A further legal question was whether, absent an enforceable variation, the applicant could obtain alternative relief in the form of appointing a liquidator to determine accrual, effectively reopening proprietary consequences long after divorce, in the face of a settlement agreement containing a full and final settlement clause and making no provision for such appointment.

4. Court’s Reasoning

The court identified that clause 6 of the settlement agreement operated as a non-variation clause, allowing amendments only through an agreement “in writing” and “signed” by the parties. Because the respondent did not contest the applicant’s reliance on the Electronic Communications and Transactions Act, the court did not decide that point, and proceeded on the assumption (without making a binding finding) that the statutory provisions could potentially satisfy the formal requirements of writing and signature in this context.

The court held that the decisive enquiry was whether the applicant had shown, on the evidence, that the parties actually reached agreement to vary the deed of settlement in enforceable terms. In evaluating the correspondence, the court emphasised that from the inception of the parties’ discussions there were two interconnected issues: first, the proposed variation regarding the trust and the allocation of the three units on a two-to-one basis; and second, the question of who would bear the costs associated with achieving development and transfer of those units, particularly against the background of the respondent’s litigation with the developer.

On the court’s assessment, the costs issue was not collateral or severable. It was “interwoven” with the contemplated transfer of the units because the practical ability to obtain transfer depended on steps (and potentially litigation) that would incur costs. The correspondence showed that the respondent consistently asserted that the applicant had agreed to pay two-thirds of the costs, and the applicant consistently denied this. This unresolved dispute persisted through the attorneys’ correspondence and beyond the round-table meeting. In the court’s view, without consensus on this linked issue, it could not be concluded that the parties had reached a concluded agreement on the proposed variation in relation to the units.

A further difficulty identified by the court was a mismatch between the variation the applicant claimed was agreed and the relief he sought. The applicant’s case, based on the earlier correspondence, was that the parties agreed to cancel the trust mechanism and instead transfer two units to him and one to the respondent. However, the notice of motion did not seek an amendment in those terms; it sought an amendment requiring a cash payment of R2 570 666,66 plus interest (or, alternatively, the appointment of a liquidator). The court held that a cash payment in lieu of transfer was not part of the December 2018 and January 2019 communications, and was not reflected in the 7 March 2019 letter. Where such a cash alternative did appear was in the July 2019 draft addendum prepared by the applicant’s attorneys, but that draft was never signed, and there was no evidence of the respondent’s signed written agreement to those terms as required by clause 6.

Regarding the alleged cash settlement arising from the without prejudice meeting, the court accepted that the respondent made a without prejudice verbal proposal that included a cash option. The applicant relied on his attorney’s letter of 7 November 2019 as constituting written acceptance. The court rejected that contention, reasoning that in the absence of a written offer under the respondent’s signature (or her attorney’s), the requirement of clause 6 was not met for a variation on those terms. Moreover, the content of the letter itself did not reflect an unconditional acceptance of an immediate payable amount: it recorded that the respondent’s position was that the election could be made only within three days of an unspecified future “determination date” in relation to her order against the developer. The court regarded the demand for payment “without undue delay” as, at best, a counteroffer, not an acceptance. The letter further expressly made the applicant’s election subject to the parties signing a supporting divorce variation agreement, which never occurred. On the applicant’s own version, therefore, a condition to any agreement was not fulfilled.

On the alternative relief, the court characterised the request for appointing a liquidator as an attempt to reopen the accrual determination nearly seven years after the divorce, notwithstanding that the parties had concluded a deed of settlement in 2014 settling the proprietary consequences and containing a clause providing that neither party would have any claim against the other and that the agreement was in full and final settlement of all claims and obligations. The court held that, absent an agreement in writing to appoint a liquidator, the applicant could not obtain such relief through the court on the present application.

The court also dealt with the applicant’s reference in argument to an actio communi dividundo, noting that he had not pleaded that cause of action and had not produced evidence to sustain it. This meant he failed to establish entitlement to relief on that basis as well.

On costs, the respondent sought punitive costs on the basis that the application was bound to fail and constituted an abuse. The court, while finding the application not well-founded, was not persuaded that punitive costs were justified.

5. Outcome and Relief

The application was dismissed. The court refused both the primary relief seeking amendment/rectification to compel payment of R2 570 666,66 plus interest, and the alternative relief seeking the appointment of a liquidator to determine accrual.

The court ordered the applicant to pay the respondent’s costs on the ordinary scale; a punitive costs order was refused.

Cases Cited

No case law was cited in the judgment.

Legislation Cited

Electronic Communications and Transactions Act 25 of 2002.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that the applicant did not establish a concluded, enforceable agreement varying the divorce settlement agreement in compliance with the settlement’s non-variation clause. The correspondence relied upon did not demonstrate consensus on all material terms, particularly because the allocation of the units and the allocation of associated costs were treated as interrelated and the costs issue remained unresolved.

The court further held that the applicant’s primary relief sought a cash payment variation that was not shown to have been agreed in writing and signed by the parties, and the applicant’s reliance on the 7 November 2019 letter did not prove acceptance of a written and signed offer; it reflected, at most, a counteroffer and in any event was expressly conditional upon the parties signing a supporting variation agreement, which never occurred.

The court also held that the alternative relief seeking the appointment of a liquidator impermissibly attempted to reopen the accrual determination years after a full and final settlement, and that the applicant had neither pleaded nor substantiated any basis (including an actio communi dividundo) to justify such relief.

LEGAL PRINCIPLES

A settlement agreement incorporated into a divorce order remains subject to its contractual terms, including a non-variation clause requiring that any amendment be in writing and signed by the parties; the party alleging variation bears the burden of proving a concluded agreement complying with those requirements.

Where negotiations encompass interdependent issues, consensus must be shown on the material terms as a whole; an unresolved dispute on an issue that is logically and practically connected to performance may prevent the formation of a binding variation agreement.

A litigant seeking enforcement must demonstrate that the relief claimed corresponds to what was actually agreed; a court will not enforce a purported variation on terms not shown to have been agreed in the manner required by the governing non-variation clause.

A full and final settlement clause in a divorce settlement agreement generally precludes subsequent attempts to reopen proprietary consequences (including accrual) absent a valid and compliant written variation, and relief such as appointing a liquidator to determine accrual will not be granted where the agreement does not provide for it and no compliant subsequent agreement is proven.

H v H (27681/2014) [2022] ZAGPJHC 291 (3 May 2022)