The South African Supreme Court of Appeal (“the SCA”), in Tosholo v Road Accident Fund, clarified the position regarding the effect of a settlement agreement on ongoing litigation.
Background
Ms Tosholo filed a claim with the Road Accident Fund ("the RAF") after a car accident and agreed to accept ZAR17 000 in full and final settlement of her claim. Thereafter, she consulted with a firm of attorneys, which attempted to file a new claim. However, the RAF informed her attorneys that the claim had already been lodged and could not be re-registered. Following this, Ms Tosholo underwent several medical examinations as required by both her attorneys and the RAF.
The RAF advised Ms Tosholo's attorneys to contact the RAF Direct Claims Department to clarify the claim. This was not done, and instead, Ms Tosholo's attorneys issued summons against the RAF in August 2014. The RAF responded without mentioning the previous claim.
In June 2017, the RAF's attorneys indicated that a settlement offer would be made, but the RAF later claimed that the original claim had been settled and suggested reopening the file for a new offer based on the medical examinations. No new settlement offer was made, prompting Ms Tosholo's attorneys to apply for an interim payment order. The RAF opposed this, claiming that it was a duplicate of the settled claim. The application and summons were then withdrawn.
In January 2018, a new summons was issued, arguing that the original claim had been under-settled. The RAF raised two defences: res judicata (the matter had already been decided) and prescription (the claim was too late).
Findings of the SCA
The SCA concurred with the High Court's finding that the special plea of res judicata should be upheld. The court highlighted that accepting a settlement offer without any reservations or conditions generally implies that the creditor gives up any right to pursue the remaining part of their claim.
In addition, the court ruled that a compromise agreement (settlement) discharges the debtor's existing obligations, making the creditor's claim res judicata. Once a settlement is reached, the dispute is considered resolved, and any subsequent litigation would not address the original dispute but would be based on non-compliance with the settlement agreement.
The court commented that the conduct of both parties was not reasonable. For instance, the court pointed out that the RAF advised Ms Tosholo's attorneys to contact the RAF Direct Claims Department to clarify the claim. Instead of doing this, her attorneys caused summons to be issued, despite the position remaining unclarified. In addition, the court found the RAF to not appreciate that a lay litigant as Ms Tosholo would not understand the legal intricacies of personal damages claims. The court also found that the RAF delayed matters by only raising the argument that the matter was finally settled after the new summons in January 2018 was issued.
As a result of this, the SCA made no order as to costs. In addition, the court held that due to the way Ms Tosholo's attorneys handled her claim, the court urged Ms Tosholo's attorneys to not seek any legal fees from her.
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