L.J v P.H.A.J (HCA35/2022) [2023] ZALMPPHC 49 (18 July 2023)
INTRODUCTION
This case was an appeal to the High Court Limpopo Division against the rulings made by an Acting Magistrate, who presided over a Maintenance Court at the Tzaneen Magistrate Court on 14 July 2022. In September 1992, two individuals, both of whom are now of advanced age, finalized their divorce in what was then known as the Transvaal Provincial Division of the High Court of South Africa.
As part of their divorce settlement, the respondent was ordered to pay the appellant a monthly maintenance amount of R4,500. This amount was subject to annual increases and would continue until the appellant either remarried or passed away.
Fast forward to July 2022, and the respondent was paying a significantly escalated maintenance amount of R19,500 per month, in compliance with the now three-decade-old court order.
Feeling the financial strain, the respondent sought to have the maintenance order revised. He filed an application at the Tzaneen Magistrate Court, arguing that he was no longer financially capable of adhering to the existing maintenance terms. He requested that the monthly payment be reduced to a maximum of R10,000.
The Maintenance Court Hearing
In a notably concise judgment, which lacked in-depth analysis of the extensive evidence or detailed reasoning, the Acting Magistrate sided with the respondent. The key points of the ruling were outlined in paragraphs 6.4 and 6.5:
Paragraph 6.4: The court chose not to engage with the issue of property ownership and income generation for either party, stating that it was not relevant to the case at hand. This was despite the fact that both parties had properties that could be used to generate income.
Paragraph 6.5: The Magistrate concluded that the respondent had effectively shown that the existing maintenance order was financially unfeasible for him.
Following this, the Magistrate approved the respondent’s request to vary the maintenance order. The monthly payment was lowered from R19,000 to R15,000, with the change taking effect on 31 August 2022, and no further annual increases.
The Appeal
Dissatisfied with the varied maintenance order, the appellant sought to challenge the decision in a higher court.
Issue Under Consideration: As was evident from the background information, the central question that had been before the appeal court was whether a compelling case had been presented to justify the variation of the maintenance order. In other words, the court had to determine if the respondent had convincingly demonstrated, both factually and legally, that he was no longer able to comply with the original 1992 maintenance order.
Stance of the Parties: As the court had noted, the two parties were in direct opposition on this key issue, much like they had been before the Acting Magistrate. The respondent’s position was essentially, “I can’t afford it,” while the appellant countered with, “Yes, you can afford it.”
Statutory Guidelines: The Appeal Court clarified that according to sections 6 and 19 of the Maintenance Act 99 of 1998, and section 8 of the Divorce Act 70 of 1979, a party involved in a maintenance order has the legal right to request a variation if there’s a compelling reason or cause.
The Appeal court referred to the following cases:
Georghiades v Janse van Rensburg 2007(3) SA 18 (C): The court cited this case to emphasize the gravity of altering a maintenance order that was part of a comprehensive divorce settlement. The court cautioned that making changes to one part of such an agreement would go against the principle of ‘pacta sunt servanda,’ which holds that agreements must be honoured.
The court also referred to Prophet v Prophet 1948(4) SA 325(0), Stone v Stone 1966(4) SA98(C), and Claassens v Classens 1981(1) SA 360(N) as longstanding legal precedents. These cases establish that the primary factor for varying a maintenance order is a significant change in circumstances, which could pertain to either party.
Havenga v Havenga 1988(2) SA 438(T): This case was cited to stress that without a substantial change in circumstances, there’s no adequate justification for altering a maintenance order.
Strydom v Strydom 2012 (6) SA 482 (KZP): The court pointed to this case to outline the burden of proof on the applicant seeking a variation. An applicant must not only show a decrease in income but also prove that this decrease renders him unable to meet the existing maintenance obligations.
Applying the Law to the Facts: A Deep Dive
Key Witnesses and Their Testimonies
In the court proceedings, both sides agreed that the crux of the dispute hinged on the evidence presented by two key witnesses. Representing the appellant was Mr. Hartman from Sanlam, while the respondent’s case was bolstered by the testimony of Mr. Linde, an auditor.
The Pivotal Question
The appeals court faced a pivotal question: If Mr. Hartman’s assertion that the respondent’s financial situation had not changed is convincing, then the appeal should be upheld. Conversely, if Mr. Linde’s testimony persuaded the court that the respondent’s financial state had deteriorated to the point where he could no longer fulfill the existing maintenance order, then the appeal should be dismissed.
The Evidence Presented
The appellant relied heavily on Mr. Hartman’s evidence, which was summarised as follows:
Financial Assets: According to Hartman, the respondent had two Living Annuity Plans with Sanlam. The first was valued at R1.7 million, and the second at R8.8 million.
Annual Income: From the first plan, the respondent was receiving an annual income of R38,229.72, calculated at an income level of 2.5% of the underlying assets. From the second plan, he was receiving R154,769.32 per year, also calculated at a 2.5% income level.
Flexibility in Income Levels: Hartman pointed out that the 2.5% income level was the baseline, and the respondent had the option to increase this percentage up to 17.5% if he wished.
The Appellant’s Argument
Based on this evidence, the appellant argued that the respondent had not demonstrated a financial downturn that would justify the variation in the maintenance order. Specifically, the appellant emphasized that the respondent had the flexibility to adjust his income levels from the annuities, thereby failing to prove any financial hardship.
The Respondent’s Case: A Closer Look at the Evidence
Key Testimonies for the Respondent
The respondent’s case largely rested on the evidence provided by Mr. Linde, a chartered accountant, and to some extent, Mr. Thomas, an attorney with expertise in trusts. Their testimonies formed the backbone of the respondent’s arguments before the court.
The Core Arguments
Insufficient Income: According to Mr. Linde, the income that the respondent was receiving from the annuities—R38,229.72 and R154,769.32 per year, as confirmed by Mr. Hartman—was inadequate to meet the obligations of the existing maintenance order.
Economic Sensibility: Linde argued that it wouldn’t be economically wise for the respondent to increase the income levels from the annuities beyond the current 2.5%.
Tax Consequences: There would be tax ramifications if the respondent attempted to adjust his income levels from the annuities or trusts.
Additional Income: Beyond the income from the Sanlam Annuities, which amounted to R16,872.00 per month, the respondent was also receiving R19,879.00 per month from a family trust. This trust had a net value of R28 million and generated approximately R1.5 million per year.
Future Inability: While the respondent could currently meet the maintenance order, Mr. Linde indicated that ‘within a year or so,’ the respondent would be financially incapable of continuing the payments.
The Respondent’s Position
Based on this evidence, the respondent contended that his financial circumstances had changed to the point where he could no longer sustain the existing maintenance order, especially considering future financial constraints.
Critique of the Lower Court’s Reasoning
The Appeals Court judge had initially noted that the lower court’s reasoning, as outlined in paragraphs 5 and 6 of its judgment, was both meager and lacking in substance. The judge criticized the lower court for not delving into the key aspects of both parties’ cases. Instead, the lower court had oddly stated that it was not concerned with the properties owned by the parties, a point that seemed to either misinterpret or distort the issues at hand.
Interpretation of the Pacta Sunt Servanda Doctrine
The Appeals Court judge had also expressed confusion over the appellant’s reliance on the ‘pacta sunt servanda’ doctrine, as cited in the Georghiades case. The judge had disagreed with the notion that a maintenance order, being part of a larger divorce settlement, could not be varied. The judge had sided with the respondent’s argument that it was permissible to alter the maintenance component without affecting the rest of the contract.
Respondent’s Financial Position
The judge had understood that, at the time of the lower court’s hearing, the respondent was (or at least had been) capable of honouring the existing maintenance order but might face difficulties in doing so in the near future. Despite this, the respondent had wanted the court to find that he was financially incapable of meeting the maintenance order either at present or at the time of the lower court’s hearing.
Burden of Proof
The judge had pointed out that the burden of proving sufficient reason for varying the original maintenance order rested with the applicant seeking the variation. This was supported by a citation from Hahlo’s “The South African Law of Husband and Wife” (5th Edition, 1995, page 364).
Lack of Clarity in Appellant’s Evidence
Lastly, the judge had noted that nowhere in the appellant’s evidence was it explicitly stated when, how much, and for what reason the respondent had begun to suffer from financial difficulties.
Skepticism Over Lack of Detail
The Appeals Court judge had expressed skepticism over the lack of detail provided to explain why the respondent could no longer honor the maintenance order. The judge had questioned why the court should ignore the reasonable possibilities of the respondent increasing his income levels from the annuities, as testified by Hartman, especially when no compelling reasons were given to deem such scenarios improbable.
Requirement for Substantiation
The judge had reiterated that the standard approach to variation applications required the applicant to demonstrate an inability to pay maintenance. This needed to be proven with evidence, not merely alleged without substantiation.
Assessment of Respondent’s Financial Status
The judge had pointed out that the respondent, an 84-year-old trustee of a R28 million trust with more than R12 million in annuity investments, was in a financially stable position. The judge had noted that the respondent’s asset base was more than sufficient to sustain both him and the appellant for the rest of their lives, even without considering potential market fluctuations.
Failure of the Lower Court
In the judge’s view, the lower court had failed to recognise that the respondent had not even begun to meet the legal thresholds set by Section 6 of the Maintenance Act, as well as the Claassens, Havenga, and Strydom cases, for proving just cause or changed circumstances.
Alignment with Hahlo’s View
The judge had aligned himself with the legal scholar Hahlo, who had been quoted in the Georghiades case. Hahlo had argued that maintenance agreements should generally be considered final, and variations should only be made in the most exceptional circumstances. The judge had not been persuaded that such exceptional circumstances existed in this case to warrant a variation.
A Retrospective Take on the Appeals Court Judge’s Final Remarks
Feasibility of Increasing Income
The judge had seen no reason to question Hartman’s evidence that the respondent could feasibly increase his income. According to the judge, the respondent had the option to adjust the income levels from his two annuities beyond the current baseline.
Skepticism Over Economic Uncertainty and Tax Concerns
The judge had not been convinced by arguments suggesting that Hartman’s recommendations should be viewed cautiously due to economic unpredictability or potential tax implications. The judge had noted that the inherent risks associated with economic ventures should not serve as a reason to alter a maintenance order based on speculative future economic downturns.
Waiting for Objective Verification
The judge had suggested that it would be more prudent to wait for any economic downturn to actually occur and then objectively verify its impact before considering a variation in the maintenance order. The judge had also dismissed the idea that tax considerations could be used as an excuse for the respondent to deliberately impoverish himself and then claim reduced means for maintenance.
Order
For all these reasons, the judge had concluded that the appeal should be successful.
As a result of the judge’s findings, the following decisions were made:
Appeal Upheld: The appeal had been successful.
Reversal of Lower Court’s Decision: The judgment and orders issued by the Learned Acting Magistrate Nkgapele on July 14, 2022, which had varied the original maintenance order dated September 25, 1992, were set aside.
Revival of Original Maintenance Order: The maintenance order from September 25, 1992, was reinstated and retained.
Costs of Appeal: The respondent had been ordered to cover the costs of the appeal, calculated on a party-and-party scale.
Summarised by Bertus Preller, a Family Law and Divorce Law attorney at Maurice Phillips Wisenberg in Cape Town. A blog, managed by Lawsplash, for more information on Family Law read more here.
Read the judgement here: