When settlements are not settlements

07 Jan 2021

Often disputes end in a settlement and as legal practitioners we encourage that. In Absa Bank Limited v Future Indefinite Investments 201 (Pty) Ltd and others [2020] JOL 48740 (WCC) the Court was faced with determining whether a settlement was just that.

Facts

Absa applied to Court for a judgment against the defendants for payment of R617 597.47 plus interest and attorney/client costs, coupled with an order declaring the first defendant’s immovable property specially executable. Absa’s claim is founded on a written loan agreement.

On the other hand, the defendants seek orders directing Absa to sign a particular ‘settlement agreement‘, and for same to be made an order of Court, alternatively that they be ordered to pay R700 000 in instalments of R25 000 per month for a period of 28 months with effect from 1 September 2020, with each party to pay their own costs, save that attorney/client costs are sought, it would seem, from 14 August 2020.

The issue for determination is therefore whether the settlement agreement validly settled the matter.

Law

Insofar as the non-variation clauses relied upon by Absa are inapplicable in that the clauses do not preclude settlement in the manner affected.

In Shifren [1] the Appellate Division held that where it is stipulated in an agreement that variations to it may only be in writing, such an agreement cannot be varied orally. This principle survived constitutional scrutiny in Brisley v Drotsky where the Supreme Court of Appeal held that a court has no discretion to decline to enforce a valid contractual term (of which a non-variation clause is a part). Considerations of reasonableness and fairness do not come into play in the enforcement of such non-variation clauses.

In the instant case, it is common cause that the settlement agreement was concluded orally, notwithstanding that its terms were afterwards reduced to writing by Absa’s attorney on the same day. In addition to the averments in Absa’s plea in reconvention, Mr Jonker argued that the settlement agreement amounts to a variation of the agreement in respect of Absa’s right to accelerate the full indebtedness in the event of default.

The Supreme Court of Appeal in Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash and Another:

‘…it is necessary to remind ourselves that when parties impose restrictions on their own power to vary or cancel a contract – as they did in this case – they do so to achieve certainty and avoid later disputes. The obligation to reduce the cancellation agreement to writing and have it signed was aimed at preventing disputes regarding the terms of the cancellation and the identity of the parties authorised to effect it. Our courts have confirmed the efficacy of such clauses.’

The Court concluded that the settlement reached was a compromise of the pending litigation. An additional consideration is that, irrespective of the merits of the pleaded defence to Absa’s claim, the defendants disputed their liability from the outset.

Footnotes:
[1] SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren en Andere 1964 (4) SA 760 (A)

See also:

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
Nicolene Schoeman-Louw

Mrs Nicolene Schoeman – Louw founded the firm in 2007, aged 24, and is now the Managing Director of the firm. Nicolene is an admitted Attorney of the High Court...

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