The two legal teams were meeting last night to discuss evidence in the case and were not about to thrash out a deal behind closed doors, a spokeswoman for Earl Spencer said.
Amid confusion outside the court in Cape Town, Shelley-Anne Claircourt backtracked on earlier statements and said: "The case goes on. Discussions are taking place with respect to the striking out of letters that were discussed on the first day of court. They are not going beyond that... "
Later, Earl Spencer's lawyer, Leslie Weinkove, refused to comment on whether a settlement had been discussed between the two legal teams.
One hour earlier the hearing had been adjourned until 10am today for what a court official described as "housekeeping".
But speculation continued of a settlement because the adjournment came just before the first of the high-profile witnesses were to give evidence for Lady Spencer.
Lady Spencer was due to go in the witness box following her lawyers' claims that her estranged husband had affairs with up to 12 women while she was in a clinic with an eating disorder.
Her father John, 66, a former RAF officer, was also expected to give evidence along with the Earl's former lover, Chantal Collopy.
The hearing is to decide if the divorce case will be heard in England or in South Africa where any settlement is likely to be less favourable to Lady Spencer.
The hearing this morning centred on discussions about how much Lady Spencer, 32, would get in a divorce settlement.
She has requested a clean break settlement of about pounds 3.75m to prevent constant wrangling about payments.
The Earl, 33, who the court heard had a personal fortune of about pounds 6m, is offering a lump sum of pounds 300,000, pounds 30,000 maintenance a year and other items including her home in a plush suburb of Cape Town. Any maintenance for the couple's four children would be worked out separately.
Lady Spencer's legal team said today that she wanted a clean break so she was "not standing at the gate like Oliver Twist".
During cross-examination, Nicholas Mostyn QC, an expert on family law and who is appearing for Earl Spencer, said future payments were secure because of his wealth.
He said: "The money is as secure as the Bank of England. It comes from his landed estates, it's absolutely guaranteed."
Mr Mostyn also said that the Earl was angered by what had been said during the opening of the case when the affairs were alleged.
He said: "I have been in the room when he has expressed considerable upset at the way the case has been conducted thus far."
The Earl was said to be determined to have his day in court to rebut the allegations and his spokeswoman has said there had been some "pretty sensational allegations made against him".Reuse content