Can Settlement Agreements Be Clothed With Judgement Consequences Between Parties At Will? | Legal Articles

 

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Can Settlement Agreements Be Clothed With Judgement Consequences Between Parties At Will?

Was it not the German Chancellor Theobald von Bethmann-Hollweg who, upon being told that Great Britain had declared war against German for its violation of Belgium’s neutrality in 1914, referred to the Treaty of London of 1839 as a “scrap of paper?” Had assurances not been given by the leading powers in Europe in the 1800s to guarantee the neutrality of Belgium in case of conflict in Europe?

The aforementioned shows how fragile agreements can be and how obligations that flow from them can be ignored in the same breath as they were created. This is why parties sometimes seek to clothe their agreements with the force of judgments in order to secure their interests.

Some of us have come across settlement agreements where parties provide for the agreement being made an order of Court. Usually this is done at the instigation of the creditor or the complainant in the matter. The idea behind this is to attach some force to the agreement so that the debtor or the breaching party will feel compelled to honour any and all obligations that flow from the agreement.

 

Alternative dispute resolution methods (e.g Mediation) provide expedient, pragmatic and cost-effective ways of resolving disputes. Upon the successful conclusion of these processes, parties usually enter into settlement agreements to keep a record of the terms that have been settled upon. It is therein where provisions are usually made that the agreement will be made an order of Court, to clothe it with some judicial force. In fact, there are other matters where legislation provides for alternative dispute resolution processes and in such, the Courts have no wide discretion not to make orders to give effect to the agreements concluded thereafter e.g Mediation in Certain Divorce Matters Act of 1987. 

 

In the case of Avnet South Africa (Pty) Limited v Lesira Manufacturing (Pty) Limited and Another (18/38649) [2019] ZAGPJHC 72 the Court was faced with a question on whether a settlement agreement may be made an order of Court without the commencement of litigation. In this case the Applicant had advanced goods to the amount of R23.59 million to the Respondent. The parties then concluded a settlement agreement for repayment of the debt and that the agreement would be made an order of Court, unopposed.  

 

In answering the above question the Court considered differing decisions in the cases of Growthpoint Properties Ltd v Makhonyana Technologies (Pty) Ltd And Others NGHC Case No. 67029/2011 where the Court granted the order, while in Lodestone Investments (Pty) Ltd v Muhammad Ebrahim t/a Ndimoyo Transport GLD Case No. 5716/2016 (29 April 2016) and National Youth Development Agency v Dual Point Consulting (Pty) Ltd and Another (06982/2016) [2016] ZAGPJHC 114, the Court declined to decide on the issue.

Despite declining to decide on the issue, the Court in National Youth Development Agency v Dual Point Consulting (Pty) Ltd And Another raised important points citing that:

  • Had the legislature intended to lend the force of Court orders to settlement agreements regardless of how they would have came about or the circumstances, there would have been deliberate legislation to that effect;
  • The Court system is designed to adjudicate disputes; and
  • Making a settlement agreement an order of Court attaches consequences, albeit without Court procedures being followed to obtain such order, in a way amounts to the Court playing the role of a debt collector.

 

Relying on the dictum in Eke v Parsons 2016 (3) SA 37 (CC) the Court declined to make the settlement agreement an order of Court, without litigation having commenced. With further reference to the case of PL v YL 2013 (6) SA 28 (ECG) the Court also held that its orders must be competent and proper, for that to happen there must be a nexus between the order and the dispute. Therefore, without there being a dispute before the Court in which it adjudicates in full or in part, that cannot be achieved.

 

Van Deventer and Van Deventer Incorporated assists with civil and general litigation, criminal litigation, human rights law, family law matters such as maintenance, divorces, protection orders, Rule 43 applications, Rule 58 applications and others. We also assist in labour and employment law, personal injury, company law and deceased estates amidst an array of others.

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