In the case of Ubisi and Another v Road Accident Fund, the Supreme Court of Appeal ("the SCA") reiterated the well-established principle that courts have limited powers to set aside settlement agreements.
Background
On 15 September 2017, Mr Ubisi issued a summons against the Road Accident Fund ("the RAF") in the High Court for a claim of ZAR9 500 000.00 Liability was settled on 5 June 2019 whereby the RAF agreed to compensate Mr Ubisi for 100% of his proven or agreed damages.
During the hearing to determine the damages on 25 November 2021, the RAF sent an offer of settlement to Mr Ubisi's attorneys. The offer was made in respect of general damages, loss of earnings and future medical expenses. On 16 February 2022, Mr Ubisi's attorneys accepted the offer of settlement made by the RAF, a total settlement value of ZAR 2 549 830.20. On 6 May 2022, the RAF consented to a draft order, to make provision for the terms of the settlement agreement, to be made an order of court.
Proceedings in the High Court
The High Court stated that it is not a rubber stamp of settlement agreements and that such agreements need to be interrogated.
The court was not satisfied with the amount agreed on in respect of the general damages, the loss of earnings and the terms of the draft order and also took the view that the agreement was at odds with the reports of Mr Ubisi's industrial psychologist.
Accordingly, the court found that the amount in the agreement was unjustified, prejudicial to the RAF, the public purse and concluded via fraudulent means. The High Court set aside the settlement agreement and costs de bonis propriis (personal costs) was ordered against Mr Ubisi's attorneys.
The SCA's findings
The court referred to the Constitutional Court case of Eke v Parson ("Parson") and reiterated the requirements for a valid settlement agreement whereby an agreement must:
- Be directly or indirectly related to the dispute between the parties;
- Not be objectionable and in compliance with public policy; and
- Hold practical and legitimate advantages.
In referring to the recent Constitutional Court case of Mafisa v RAF ("Mafisa"), the SCA explained that judges should generally not interfere with the terms of a settlement agreement. A judge may, however, raise concerns about the validity of a settlement agreement in terms of the requirements set out in Parson. The principle of pacta sunt servanda (agreements must be honoured) and the litigants' contractual freedom must be respected.
Click here to read a previous article by our Dispute Resolution team, where they unpack the Mafisa case.
The SCA, in Ubisi and after referring to the Mafisa case, explained that if a judge is unsatisfied with a settlement agreement, he or she may refuse to make it an order of court. However, this does not impact the validity of the terms of the agreement.
Only where the terms of the agreement are in dispute is where a court has jurisdiction to pronounce on the validity of the terms. If there is no dispute on the validity of the terms, the matter is res judicata (a matter already deemed to be judged). Where there is no dispute, the court has no power to set aside the settlement agreement.
Conclusion
The SCA reversed the findings of the High Court and the settlement agreement was made an order of court. The court also set aside the High Court's personal costs order and its findings of fraud and dishonesty and found that no evidence sustained these findings.
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