David Israel Lieberman v Santam Ltd

On 13 October 1989, a motor vehicle collision occurred in Green Point, Cape Town, involving two vehicles. The appellant (Lieberman) and Melissa Meyer were passengers in a vehicle driven by Christoff Norwie. The other vehicle was driven by Ian Carter-Smith. Both passengers sustained injuries. On 3 October 1991, the appellant lodged a claim with the respondent (Santam) as agent under the Multilateral Motor Vehicle Accidents Fund Act 93 of 1989. The parties agreed the respondent would not plead prescription before 30 November 1994. Meyer instituted action against the respondent which was settled on 19 September 1994 by written agreement made an order of Court. The agreement provided for payment of R25,000 for Norwie's negligence (limited liability under the Act) and admitted 50% liability for damages arising from Carter-Smith's negligence (unlimited liability). Clause 3 extended these terms mutatis mutandis to the appellant. The respondent paid the appellant R25,000 for Norwie's negligence. Unable to agree on quantum regarding Carter-Smith's negligence, the appellant issued summons on 18 October 1995, claiming 50% of R2,130,631. The respondent pleaded prescription under Article 55 read with Article 57 of the Schedule to the Act, arguing more than five years had elapsed since the claim arose.

• Whether the September 1994 agreement constituted a novation of the original claim under the Multilateral Motor Vehicle Accidents Fund Act
• Whether the appellant's cause of action was based on the Act or on the subsequent contractual agreement
• Whether the claim had become prescribed under the five-year prescriptive period in the Multilateral Motor Vehicle Accidents Fund Act
• Whether the agreement created a new contractual obligation governed by the Prescription Act 68 of 1969 rather than the Act
• Whether prescription continued to run against the original statutory claim after the conclusion of the settlement agreement

The appeal was allowed with costs. The order of the Court a quo was set aside and replaced with an order dismissing the special plea of prescription with costs. The Court refused to make a special costs order regarding two sets of legal representatives employed at trial, finding no justification for ordering the respondent to pay for both sets where the duplication arose from the appellant's attorney's personal interest in defending against a professional negligence claim.

Where parties conclude a settlement agreement that creates a new contractual obligation to pay damages (as opposed to merely settling specific issues regarding an existing statutory claim), the new agreement provides an independent contractual basis for a cause of action. Such a contractual claim is governed by the Prescription Act 68 of 1969 rather than the prescriptive provisions of the statute under which the original claim arose. Prescription cannot begin to run against a claim to enforce a new contractual obligation before that obligation arises. The interpretation of whether an agreement creates a new obligation or merely settles aspects of an existing obligation depends on the express wording and intention of the parties as discerned from the agreement as a whole.

The Court noted, without deciding, the appropriateness of a court order being made in respect of a party (the appellant) who was not yet before the Court, albeit with his consent. The Court also observed that it was not necessary to decide whether the agreement compromised the original obligation under the Act in the sense of extinguishing it, or to determine the extent to which it altered that obligation. The Court commented on costs, noting that where a conflict of interest is feared, different legal representatives to conduct the whole trial should be employed rather than retaining original attorneys who then employ additional counsel to protect their personal interests, and that there is no justification for ordering the opposing party to pay for two sets of legal representatives in such circumstances.

This case is significant in South African law for establishing principles regarding the relationship between statutory claims under the Multilateral Motor Vehicle Accidents Fund Act and subsequent contractual agreements settling such claims. It clarifies that parties can create new contractual obligations that supersede or provide an alternative basis for claims originally arising under statute. The judgment is important for prescription law, holding that when a new contractual obligation is created, prescription runs from the date of that new obligation rather than from the original statutory claim. The case demonstrates that parties to a settlement agreement can alter the legal foundation of a claim, transforming it from a statutory to a contractual basis, with consequent implications for which prescriptive regime applies. It also illustrates the Court's approach to interpreting settlement agreements and the intention of parties in concluding such agreements.