Ubisi, MK and Nel, van der Merwe & Smalman Inc v Road Accident Fund

Mr Matedewuja Kenneth Ubisi (first appellant) sustained injuries in a motor vehicle accident and issued summons against the Road Accident Fund (RAF) on 15 September 2017 claiming R9,500,000 for past and future medical expenses, loss of earnings and general damages. Liability was settled on 5 June 2019 with the RAF agreeing to compensate Ubisi for 100% of proven or agreed damages. The matter was set down for quantum on 25 November 2021 before Mbongwe J. On that day, the RAF made an offer of settlement concerning quantum covering general damages, loss of earnings and an undertaking for future medical expenses. On 16 February 2022, Ubisi's attorneys (Smalman Inc, second appellant) accepted the offer. A draft order dated 6 May 2022 containing the settlement agreement was prepared, and the RAF consented to it being made an order of court. The agreed terms included general damages of R500,000, loss of earnings of R2,049,830.20, and a section 17(4)(a) undertaking for future medical expenses. The matter was heard on the settlement roll on 5 June 2022. The high court refused to simply make the settlement an order of court, indicating it needed to interrogate the offer and was not a rubber stamp. The court reserved judgment and on 1 August 2022 set aside the settlement agreement, ordered Ubisi's attorneys to pay all costs de bonis propriis, and directed that the matter be referred to the RAF CEO and Legal Practice Council for investigation of alleged impropriety and fraud. The high court based its decision on perceived inconsistencies in expert reports, finding that Ubisi did not qualify for loss of earnings or general damages.

• Whether a court has jurisdiction to set aside a settlement agreement between parties when the validity of the agreement is not in issue before it
• Whether a court may refuse to make a settlement agreement an order of court and the circumstances in which it may do so
• What powers a court has when parties present a settlement agreement to be made an order of court
• Whether findings of fraud and dishonesty can be made against legal practitioners without affording them an opportunity to be heard
• The effect of a settlement agreement on the lis between parties (res judicata)
• Whether a settlement agreement that terminates a dispute ends the court's jurisdiction to pronounce on the merits

1. The appeal is upheld. 2. The order of the high court is set aside and replaced with the following: 'The draft order marked "X" is made an order of court.' 3. There is no order as to costs.

1. Contractual agreements concluded freely and voluntarily by parties must be respected and enforced according to the principle pacta sunt servanda. 2. As a general rule, a judge should not interfere with the terms of a settlement agreement. 3. A judge may raise concerns about a settlement agreement in circumstances contemplated in Eke v Parsons, such as when the agreement is unconscionable, illegal, immoral, or offends public policy (for example, when the amount differs significantly from similar cases to give rise to reasonable suspicion, or when the amount exceeds the pleaded claim). 4. When a judge raises concerns about a settlement agreement, it is for the parties to elect whether to address the concerns or confirm the matter is settled between them. If parties do not address the concerns, the judge may note the matter as settled but refuse to make it an order of court - this does not invalidate the settlement agreement. The validity of the settlement depends on its terms and the law. 5. A settlement agreement puts an end to the lis between the parties and has the effect of res judicata, thereby terminating the court's jurisdiction to pronounce on the merits. 6. A court has no power to set aside a settlement agreement when its validity is not placed in issue before it. 7. Courts must exercise restraint to ensure there is no undue imposition on parties' contractual freedom. 8. Adverse findings of fraud or dishonesty against legal practitioners cannot be made without affording them notice and an opportunity to be heard (audi alteram partem). 9. A court is not entitled to make a finding of fraud without clear evidence.

The Court made important observations about the exercise of judicial power, citing with approval the statement from Motswai v RAF that through the authority vested in courts by section 165(1) of the Constitution, judges wield tremendous power and their findings often have serious repercussions for persons affected by them. Findings may vindicate those wronged but may also condemn others and destroy livelihoods and reputations. This power must therefore be exercised judicially and within parameters prescribed by law. The Court observed that the findings made by the high court and the consequent order had the potential to tarnish the reputation of the attorneys and counsel and would set the law in motion to have them both investigated professionally, unduly so. The Court noted that the appellants would have had to approach it on appeal regardless of the RAF's position, given the adverse order made against the legal representatives. The Court's comments reinforce the importance of procedural fairness and the serious consequences that can flow from judicial findings, particularly findings impugning professional integrity.

This case is significant in South African law as it clarifies and reinforces the principles governing judicial treatment of settlement agreements, particularly in RAF claims. It emphasizes the sanctity of contracts (pacta sunt servanda) and the limited circumstances in which courts may interfere with settlement agreements freely entered into by parties. The judgment provides important guidance on the proper procedure when a court has concerns about a settlement: the court may raise concerns but must leave it to the parties to decide whether to address them, and refusal to make an agreement an order of court does not invalidate the settlement itself. The case also serves as an important reminder of the principles of natural justice and procedural fairness, particularly that adverse findings against legal practitioners (especially findings of fraud or dishonesty) cannot be made without affording them notice and an opportunity to be heard. It reinforces that settlement agreements create res judicata, ending the lis between parties and terminating the court's jurisdiction to pronounce on the merits. The judgment affirms the boundaries of judicial power and the need for restraint to avoid undue imposition on parties' contractual freedom. It builds on the Constitutional Court's decision in Mafisa v Road Accident Fund and this Court's decision in Road Accident Fund v Taylor, creating a consistent body of jurisprudence on settlement agreements in the RAF context that has broader application to civil litigation generally.