The High Court in Cape Town has ruled that a man’s later nomination of his second wife as the beneficiary of his living annuity did not displace the right his former wife had acquired under their divorce settlement.
The deceased and his former wife were married out of community of property, according to the judgment, which was delivered on 9 November 2026. On 11 July 2013, they signed a settlement agreement dealing with maintenance and the proprietary and other consequences of their divorce. The agreement was incorporated into the divorce order granted on 30 September 2013.
The agreement recorded that the deceased held the Allan Gray Living Annuity Plan. It required him to retain the annuity as his sole and absolute property and ensure that his former wife remained the beneficiary until it matured. She would be entitled to the proceeds if he died.
The deceased also agreed not to hypothecate, encumber, or otherwise deal with the annuity except as provided for in the settlement. He undertook, at his own expense, “to do all that may be necessary to give formal effect to this irrevocable nomination including the signing of forms and the recording and registration with the insurers of the nomination”.
The settlement further provided that its terms would bind the parties’ estates, executors, heirs, and assigns.
The deceased married his second wife in community of property on 31 March 2015. He subsequently nominated her as the beneficiary of the living annuity.
After his death in July 2024, the former wife contacted Allan Gray about her entitlement and was informed that she was not the beneficiary reflected on its records.
Allan Gray did not oppose the former wife’s application seeking an order directing it to pay her the proceeds of the policy.
Second wife relied on the nomination and joint estate
The second wife contended that her marriage in community of property entitled her to the proprietary benefits flowing from that matrimonial-property regime. She also relied on her nomination as the sole beneficiary of the living annuity.
She submitted that a life insurance policy constituted a bilateral agreement, and the insurer was obliged to adhere strictly to the beneficiary nomination on record when the insured died. On her version, a policyholder retained an unfettered right to select and change beneficiaries, and the deceased had lawfully exercised that right when he nominated her.
The second wife also challenged the certainty of the divorce settlement. She contended that its relevant provisions were vague because they did not state the percentage to which the former wife would be entitled when the annuity matured, what would happen to the policy benefits, or whether the former wife’s entitlement was deferred until the deceased died.
Acceptance caused the right to vest
The Court characterised the settlement as a valid contract for the benefit of a third party, or stipulatio alteri. It found that the former wife accepted the benefit by signing the agreement. Her right then vested, and the deceased could not unilaterally withdraw or defeat it through the later nomination.
“It is trite that once the benefit under the deed of settlement was accepted, it became a vested contractual right that the deceased could not legally strip away or transfer to his second wife. Consequently, the contractual obligations established by the deed of settlement could not be revoked or overridden by a subsequent beneficiary nomination,” Judge Constance Nziweni said.
She said parties may bind themselves to a particular disposition of their property and renounce their power to revoke it. The principle that agreements must be honoured meant the deceased could not defeat obligations he had voluntarily assumed by subsequently executing an inconsistent nomination.
The Court rejected the argument that the settlement was too vague to enforce. Applying the contextual, purposive, and commercial approach to contractual interpretation stated by the Supreme Court of Appeal in Natal Joint Municipal Pension Fund v Endumeni Municipality, it found that the agreement had a clear purpose: to secure the former wife’s financial maintenance through the proceeds of the designated policies when the deceased died.
“Crucially, the absence of minor procedural mechanics or explicit percentage breakdowns does not render a clause void for vagueness when the substantive intent, to deliver the policy proceeds to the applicant upon the deceased’s demise, is clear and undeniable,” Judge Nziweni said.
The Court concluded that the deceased had legally divested himself of the right to revoke, substitute, or alter the nomination unilaterally. Although a beneficiary nomination may ordinarily be an administrative choice, he had contractually bound his estate to retain his former wife as the beneficiary.
Court order restricted the power to change the beneficiary
The Court described the judicial status of the settlement as the “high-water mark” of the case. The deceased’s obligations were not confined to a private contract because the settlement had been incorporated into the divorce order.
Relying on the Constitutional Court’s decision in Eke v Parsons, the Judge Nziweni said a settlement made an order of court changes the legal status of the parties’ rights and obligations. A court order remains binding and enforceable until a competent court sets it aside.
“Once a settlement agreement is elevated to an order of court, its legal status shifts from a mere contractual pact to an enforceable judicial command. Hence, there was a strict legal restriction on the deceased’s capacity to change the beneficiary of the policy,” she said.
The Court found that the divorce order took precedence over and invalidated the subsequent nomination because the nomination conflicted with an order requiring the deceased to maintain his former wife as the beneficiary and give effect to an irrevocable nomination. His legal capacity to change the beneficiary had been restricted during his lifetime, from the time the court order was granted.
The Court distinguished the position from that of a statutory retirement fund, where a trustee or statute has the final say. In this case, the annuity-policy beneficiary designation was subject to the contractual and judicial restrictions placed on the policyholder during his lifetime.
Later marriage did not remove existing encumbrances
The Court rejected the argument that the marriage in community of property gave the second wife a superior claim to the proceeds.
In addressing her argument, the Court accepted that an annuity policy carries economic value and generally falls into a joint estate by operation of law. But it held that an asset could not enter a joint estate stripped of legal burdens that already attached to it.
Because the divorce order predated the second marriage, any interest in the annuity that entered the joint estate remained subject to the pre-existing contractual and judicial encumbrances. The joint estate’s claim was subordinate to the restrictions imposed by the earlier order.
“A subsequent marriage cannot retroactively undo or dilute the binding nature of a prior court order,” Judge Nziweni said.
The Court also considered the doctrine of notice. Referring to the SCA’s decision in Dream Supreme Properties 11 CC v Nedcor Bank Ltd, it said a party who acquires a subsequent right with actual or constructive knowledge of an earlier personal right cannot act in fraud of that pre-existing right.
The judgment stated that the judicial restrictions and the former wife’s rights under the divorce order were matters of public record and were fully known before the second marriage. The Court found that the second wife could therefore not rely on the subsequent joint estate to escape or dilute those obligations.
The Court directed Allan Gray to pay the living-annuity proceeds into the former wife’s nominated account within 14 days of the order. It ordered the second wife to pay the costs of the application, including the costs arising from an earlier postponement.
