You are currently viewing The Authority of Courts to Amend Settlement Agreements Unilaterally

The Authority of Courts to Amend Settlement Agreements Unilaterally

On the 25th of April 2024 the Constitutional Court handed down a judgment in the case Mafisa v Road Accident Fund and Another, wherein the legal issue relating to the authority of the courts to unilaterally amend settlement agreements was dealt with.

The case originated from a dispute where the Free State Division of the High Court amended the terms of a settlement agreement between Tumalo Mafisa and the Road Accident Fund (RAF). The High Court’s decision was challenged by Mafisa, which raised important constitutional questions about separation of powers and procedural fairness.

Mafisa v Road Accident Fund and Another

On the 31st of January 2016 , Tumalo Mafisa was involved in a motor vehicle collision, allegedly caused by the negligence of another driver. Mafisa suffered bodily injuries and subsequently claimed from the RAF for loss of income, past and future medical expenses, and general damages. The liability and quantum of Mafisa’s claim was contested by the RAF.

The parties agreed to negotiate a settlement in the Free State High Court during the initial hearing and they reached a settlement agreement where the RAF would pay Mafisa R1,652,715.70 for future medical costs and his taxed costs. The parties then sought to have this settlement made an order of the court.

The presiding judge was dissatisfied with the terms of the settlement agreement relating to the compensation for loss of earnings. The judge was of the opinion that it lacked sufficient proof. Consequently, the judge then amended the settlement agreement by excluding the amount allocated for loss of earnings and awarded Mafisa general damages only.

Mafisa attemptet to appeal this decision at both the High Court and the Supreme Court of Appeal, with no success. The Constitutional Court was then approached. It was argued that the High Court’s actions were substantively and procedurally irregular and it violated his right to a fair hearing and the principle of separation of powers.

Findings of the Constitutional Court

In the Constitutional Court the role and limits of judicial intervention in settlement agreements was considered. The Court indicated that once a compromise has been reached, it creates new contractual rights and obligations independent of the original cause of action. Such agreements are generally binding and can only be altered by mutual consent of the involved parties.

The court refered to the case of Eke v Parsons and stated that while courts have the authority to scrutinize settlement agreements as a way to ensure they are “competent and proper,” they should not unilaterally amend such agreements unless the agreement is against public policy or the law. The Court indicated that the principle of pacta sunt servanda, which asserts that agreements made freely and voluntarily should be upheld.

The Constitutional Court found that the High Court had overstepped its bounds when it unilaterally amended the settlement agreement without giving the parties an opportunity to respond to its concerns. The Court held that this action violated the audi alteram partem principle, wherein it is required that both parties should be heard before a decision is made. It was also held that the High Court improperly considered evidence (actuarial and industrial psychologist reports) that had not been formally presented during the proceedings.

The Constitutional Court reinstated the original settlement agreement as an order of the court.

Conclusion

This judgment reaffirms the importance of judicial restraint in altering settlement agreements and emphasises the importance of procedural fairness and adherence to the separation of powers. Courts are obliged to respect settlement agreements freely entered into by parties and should only intervene in exceptional circumstances where the agreement is contrary to public policy or law.

Please note that the information provided in this blog post is general in nature and should not be construed as legal advice. For specific legal guidance, we encourage you to reach out to our team of experienced attorneys.

Leave a Reply