Road Accident Fund v Advocate ELE Myhill NO (Swalibe Minors)

On 20 March 1997, Ms Seani Swalibe and her two minor children, Philippine (aged 2 years) and Lufuno (aged 4 months), were struck by a motor vehicle. Both children sustained serious head injuries and were hospitalised. Philippine was hospitalised for 10 days and Lufuno for 6 days. Medical records indicated that Lufuno suffered an infarct in the parietal area of the brain, and both children subsequently experienced seizures consistent with post-traumatic epilepsy. The plaintiff consulted attorney Ms Chabana who lodged claims with the Road Accident Fund (RAF) on behalf of both children in August 1998, claiming R57,260 for Philippine and R60,260 for Lufuno. The RAF assessed general damages at R10,000 per child but then offered only R8,000 for Philippine and R7,000 for Lufuno. These amounts were then reduced by a further 30% to account for alleged contributory negligence by the mother, resulting in final settlement offers of R5,600 and R4,900 respectively. The mother, acting as natural guardian, accepted these offers in May 1999. Ten years later, a curator ad litem was appointed who brought an application to set aside the settlements on the basis that they were prejudicial to the minors.

• Whether settlement agreements concluded on behalf of minors should be set aside on the basis that they were substantially prejudicial to the minors
• Whether a debtor sued by a custodian parent on behalf of a minor child may set-off against its liability to the child any amount personally owed to it by the custodian parent
• The application of the restitutio in integrum principle to contracts concluded on behalf of minors
• Whether the real possibility (as opposed to probability) of future medical expenses should be taken into account when settling claims on behalf of minors

The appeal was dismissed with costs, including the costs of two counsel. The settlement agreements were set aside.

A debtor liable to a minor child, when sued by the child's custodian parent in a representative capacity, may not set off against its liability to the child any amount that may be personally owed to it by the custodian parent in their individual capacity. This is because individuals in their personal capacities are treated as different persons from when they act in representative capacities, and the general principles of set-off require reciprocal indebtedness between the same parties in the same capacities. The principle in Voet 16:2:8(iii) permitting such set-off is of doubtful validity and inconsistent with established general principles. A settlement agreement concluded on behalf of a minor may be set aside under the restitutio in integrum principle if it is shown to be substantially prejudicial to the minor at the time it was concluded. In assessing claims on behalf of minors involving prospective loss, a real possibility (as opposed to a probability) of future loss occurring must be taken into account, and contingency allowances should be made for such possibilities.

The court observed that the principle in Voet 16:2:8(iii), which would permit set-off of a guardian's personal debt against a claim brought on behalf of a ward, appears to be inconsistent with the principles set out in Voet 16:2:8(i) and (ii) and 'flies in the face of well-established general principles of set-off'. The court noted that this principle has been subject to trenchant criticism by leading authors including Christie and Wessels, with Wessels commenting that 'it seems difficult to reconcile the opinion of Voet with the general principle' and that 'there is no evidence that the Roman-Dutch Law recognised Faber's principle'. The court suggested that even if Voet and Faber's underlying premise reflected the views of their time regarding non-prejudice to minors, it cannot be regarded as valid today, as the prejudice to a minor is obvious when an innocent minor's claim is diminished by reason of the fault of another. The court also commented on the general advantages of settlement, noting the old adage that 'a bird in the hand is worth two in the bush' and recognizing that settlement eliminates the inherent uncertainties of litigation, limits escalating costs, and brings about immediate payment. However, the court emphasized that despite these advantages, courts should intervene where there is substantial prejudice to minors.

This case establishes important principles in South African law regarding the protection of minors' interests in settlement agreements and the application of set-off principles. It confirms that settlement agreements concluded on behalf of minors can be set aside under the restitutio in integrum principle where they are substantially prejudicial to the minor from inception. The judgment clarifies that 'prejudice' must be assessed based on information available at the time of settlement, not with the benefit of hindsight. Crucially, the case establishes the binding principle that a defendant cannot set-off amounts personally owed by a custodian parent against claims brought by that parent on behalf of minor children. This protects minors from being prejudiced by the fault or liability of their guardians. The judgment also confirms that real possibilities (not just probabilities) of future losses must be taken into account when settling claims on behalf of minors, and that contingency allowances should be made for such possibilities. The case provides important guidance on the duties of parties settling claims on behalf of minors and reinforces the court's role in protecting vulnerable parties.