Courts Cannot Unilaterally Amend Settlement Agreements

Introduction

In the judgment of Mafisa v Road Accident Fund and Another, handed down on April 25, 2024, the Constitutional Court addressed a significant legal issue regarding the authority of courts to unilaterally amend settlement agreements. The case originated from a dispute where the Free State Division of the High Court altered the terms of a settlement agreement between Tumalo Mafisa and the Road Accident Fund (RAF). Mafisa challenged this decision, raising important constitutional questions about procedural fairness and the separation of powers.

Summary of the Facts

On January 31, 2016, Tumalo Mafisa was involved in a car accident, allegedly caused by the negligence of another driver. As a result, Mafisa suffered bodily injuries and subsequently sued the RAF for past and future medical expenses, loss of income, and general damages. The RAF contested both the liability and the quantum of Mafisa’s claim.

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

However, the presiding judge was dissatisfied with the terms, particularly regarding the compensation for loss of earnings, which the judge felt lacked sufficient proof. Consequently, the judge amended the settlement agreement by excluding the amount allocated for loss of earnings and awarded Mafisa general damages only.

Mafisa’s attempts to appeal this decision at both the High Court and the Supreme Court of Appeal were unsuccessful. He then approached the Constitutional Court, arguing that the High Court's actions were procedurally and substantively irregular, violating his right to a fair hearing and the principle of separation of powers.

Findings of the Court

The Constitutional Court reviewed the role and limits of judicial intervention in settlement agreements. It emphasized that a compromise, once reached, creates new contractual rights and obligations independent of the original cause of action. These agreements are generally binding and can only be altered by mutual consent of the parties involved.

Referring to the case of Eke v Parsons, the Court outlined that while courts can scrutinize settlement agreements to ensure they are "competent and proper," they should not unilaterally amend them unless the agreement is against public policy or the law. The Court underscored 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 by unilaterally altering the settlement without giving the parties an opportunity to respond to its concerns. This action violated the audi alteram partem principle, which requires that both parties be heard before a decision is made. Additionally, the High Court improperly considered evidence (actuarial and industrial psychologist reports) that had not been formally presented during the proceedings.

Conclusion

The Constitutional Court concluded that the High Court exceeded its authority by unilaterally amending the settlement agreement between Mafisa and the RAF. It was improper for the High Court to disregard the terms agreed upon by the parties and to consider extraneous evidence not properly before it. Upholding Mafisa's appeal, the Constitutional Court reinstated the original settlement agreement as an order of the court.

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