Since termination by the Road Accident Fund (RAF) of its mandate with its panel, many claims against the RAF take a long time to reach finality. In some of these matters, the RAF takes steps to have the matter settled either before the matter goes on trial, or during the course of the trial. In such instances, when the parties reach an agreement, a judge must be approached to make this agreement an order of court. In some High Court divisions, the judiciary have unilaterally decided to alter the agreements entered into by the parties if the agreements do not meet with their approval. In Mafisa v Road Accident Fund [2024] ZACC 4 the Constitutional Court had to decide whether the courts may make such unilateral alterations. In this matter, the applicant was involved as passenger in an accident in January 2016 and suffered injuries as a result of the driver’s negligence. Summons was issued in the High Court for an amount of R2 387 568, which included a claim for past and future loss of earnings in an amount of R1 537 568. The matter was set down for hearing for two days. On the first day of the hearing, the parties requested that the matter stand down for settlement negotiations.
On the second day, the parties informed the judge hearing the matter that they had concluded a settlement agreement, which they requested the judge to make an order of court. In terms of the agreement, the RAF would pay the applicant an amount of R1 652 715 which included an amount of R1 302 715 for past and future loss of earnings. It is important to note that no evidence was adduced, and no hearing took place.
The judge, who was in possession of the court file, without providing an explanation, informed the parties that she was not satisfied with the terms of the draft order and reserved judgment. Subsequently, when handing down the judgment, she unilaterally amended the settlement agreement between the parties. She held that, amongst other reasons, no evidence had been led and that she did not find the report by the applicant’s industrial psychologist persuasive. The applicant’s claim for loss of earnings was dismissed and the court granted an order for only general damages.
The applicant’s request for leave to appeal was dismissed by the High Court and further attempts, including a petition to the Supreme Court of Appeal, suffered the same fate.
In the Constitutional Court, two constitutional issues were raised [para 16]. The first was that the unilateral alteration of a settlement agreement, without affording the parties an opportunity to be heard, amounts to a procedural and substantive irregularity. The applicant argued that his right to a fair hearing was infringed and thus the doctrine of fairness and justice was undermined.
The second constitutional issue was that the High Court discarded its role as an impartial arbiter when it stepped into the role of the executive, as the guardian of public funds, and so infringed the separation of powers doctrine.
The applicant also argued that the settlement agreement created a substantive contract with new rights and obligations that existed independently of the original cause, and that the original cause was therefore res judicata.
The applicant acknowledged the discretion of the courts to make a settlement agreement an order of court and that, when exercising this discretion, courts had to consider all the relevant factors as set out by the Constitutional Court in the matter of Eke v Parsons 2016 (3) SA 37 (CC). In the Eke decision the court held that when parties approach a court to make a settlement agreement an order of court, it must be competent and proper in that the agreement must:
- relate directly or indirectly to the dispute between the parties;
- not be objectionable in that it must accord with the Constitution and the law and not be offensive to public policy;
- hold some practical and legitimate advantage Eke [paras 25-26].
The Personal Injury Plaintiff Lawyers Association (PIPLA), which was admitted as amicus curiae, raised similar arguments. It submitted that a court’s jurisdiction is determined by the dispute between the parties and an agreement between the parties terminates the litigation between the parties and thus has the effect of res judicata. PIPLA further submitted that the applicant and the RAF did not approach the court to decide on the validity and enforceability of the settlement agreement and therefore the High Court did not have the power to do so.
PIPLA further submitted that the unilateral alteration of the settlement agreement infringed on the right to contract freely and disregarded the right of parties to settle a dispute voluntarily on agreeable terms. The unilateral alteration amounted to an intrusion by the court into the sphere of the executive and, by acting as a custodian of the RAF, the applicant’s right to equal treatment before the law was infringed. Finally, PIPLA submitted that if the High Court was of the view that the settlement agreement did not comply with any of the factors set out in Eke, the court should have called upon the parties to make submissions before reaching a decision. The court’s failure to do so infringed on the parties’ right to have their dispute resolved by the application of law decided in a fair public hearing [paras 20 – 25].
After holding that it had jurisdiction to hear the matter, the Constitutional Court considered the legal principles relating to a compromise. It held that this is an agreement between parties to prevent or terminate a dispute by adjusting their differences by mutual consent. When parties agree to a compromise, new contractual rights and obligations rise from that compromise and parties are barred from proceeding on the original cause of action [para 33].
The Constitutional Court noted that at no stage in the High Court were the parties provided with an opportunity to address any concerns that the judge might have had, despite the obligation on courts to hear the parties before making an adverse order. Therefore, the audi alteram partem principle was not adhered to. The court further noted that, while a compromise brings an end to the dispute between parties, this does not mean that a court has no power to raise concerns regarding a settlement agreement. The court referred to the factors set out in the Eke decision and held that the second element – that a settlement agreement must not be objectionable in law or offensive to public policy – was relevant to the current matter.
While in general a judge should not interfere with the terms of a settlement agreement, certain exceptions may arise when a settlement agreement may offend public policy. An example is if a significant difference exists between the amount agreed to in the settlement agreement and the amount which could reasonably be expected to be agreed between parties in similar cases, or decided by a court had the matter proceeded to trial, so as to give rise to a reasonable suspicion that the amount may be inflated or that there may be corruption involved [para 50].
The court held that, since the settlement purports to be a settlement of an existing lis, a court is entitled to look at the pleadings. It gave a further example; when the settlement agreement includes heads of damages which are not the subject of a claim in the particulars of claim, a court may raise concerns. However, even in such circumstances, the court does not have free rein and must exercise restraint to ensure that there is no undue imposition on contractual freedom.
In the light of the above, the Constitutional Court held that, when a judge finds items of concern regarding the settlement agreement, he or she may either refuse to make the settlement agreement an order of court or notify the parties of their concern. However, a judge is not entitled to demand that the parties address these concerns. Should the parties elect not to address these concerns, they could indicate to the judge that they regard the matter as settled between them [para 53].
In this case, the Constitutional Court held that if the High Court was unwilling to make the settlement agreement an order of court, the parties should have been notified of its concerns and given an opportunity to elect whether to address the court or not. Also, the High Court had regard to expert reports in the court file which were never placed in evidence before it. The Constitutional Court held that, as the parties had settled their litigious dispute, they had thereby terminated the court’s authority or jurisdiction to make a ruling on it [para 53].
In conclusion, the Constitutional Court held that the High Court had exceeded its jurisdiction when it unilaterally amended the settlement agreement. It was improper for the High Court to consider the expert reports and reject the agreed settlement amount in respect of past and future loss of earnings. The High Court had also failed to raise its concerns with the applicant and the RAF to enable them to elect whether to persuade the Judge on the validity of the agreement. As a result, the appeal was upheld and the High Court order set aside.
The Constitutional Court’s judgment has made it clear that the courts cannot unilaterally alter settlement agreements. Courts have the option to either refuse to make a settlement agreement an order of court, or to raise their concerns with the parties, for the parties to elect whether they will address the court on this issue or not.
The implication of the above judgment to litigants is that should a settlement agreement be concluded between the parties, when approaching a court to make the settlement agreement an order of court, the courts may not unliterally amend the agreement. Litigants will have to ensure that the terms of the agreement do not go against public policy and bear in mind that the courts will use the factors set out in the Eke decision to test the terms of the agreement. Should the terms be against public policy, the courts may refuse to make the agreement an order of court or alternatively raise the concerns that the court has with the parties.
