The Certainty of Settlement
| Jurisdiction | South Africa |
| Published date | 27 May 2019 |
| Date | 27 May 2019 |
| Author | Ronán Feehily |
| Pages | 25-58 |
THE CERTAINTY OF SETTLEMENT
Ronán Feehily
Senior Lecturer, Middlesex University
Honorary Fellow of Commercial Law, Durham University*
1 Introduction
When mediation concludes with a set tlement, the issue arise s as to what
happens if one of the part ies contends that no agreeme nt exists or that the
agreement is unen forceable for some reason. With the growth of mediation,
the conicts that can a rise in such circumst ances have given rise to a
substantial body of case law in ot her jurisdictions.1 While en forcement of
mediated settlement agreements does not curre ntly appear to be a difculty in
South Africa, as me diation is increasingly adopte d as the process to resolve
commercial disputes, t he discussion below will have increasing importance.2
The parties’ intent ions, the mediation context, relevant stat utory
requirements, and p rinciples of contract law are all relevant factor s in
determin ing the legal status of mediated s ettlement agreements.3 T he parties
may reduce their agree ment to a “heads of agreement” do cument, a non-
binding document outli ning the main issues relevant to a tentative agre ement,
and there may also be a cooling-off p eriod, or it can take the form of a
formal comprehensive signed agree ment that will be binding and enforceable
according to norm al contractual pr inciples provided it is correctly draf ted.4
In the event of non-compliance by one par ty, the other party can not pursue
the original cause of act ion, but can sue on the settlement agreement.5 Similar
to non-compliance of an agreement to mediate, damages for breach, specic
performance or a n interdict are possible remedies for non-complia nce with
the terms of a mediated s ettlement agreement and the r ules of law applicable
* BComm (Hons) LLB (Ho ns) MBA (NUI) LLM (Dub) PhD (UC T) DipArb (NUI) PGC ERT (Dunelm)
FCIArb FHE A Solicitor (Irelan d, Northern I reland, England an d Wales) CEDR Accredited Mediat or.
1 Regarding th e experience in the USA, see E Su ssman “A Brief Survey of US Case Law on Enforc ing
Mediation Set tlement Agreement s over Objections to the Exis tence or Validity of such Agre ements and
Implication s for Mediation Confident iality and Mediator Testimo ny” Mediation Committee Newsletter
(April 2006) 32 32.
2 While medi ation is employed to resolve c onflict i n various fields i ncluding fami ly, employment and
communit y disputes, the focus of t his article is on the ce rtainty of settl ements in a commercia l context;
the agreeme nt that results from t he resolution of disputes b etween business pa rties through c ommercial
mediation. Se e R Feehily “Costs Sanct ions: The Critical Ins trument in the De velopment of Commercial
Mediation in So uth Africa” (2009) 26 SALJ 291 291-315; R Feehi ly & J Brand “Commercial Med iation
in South Afr ica” Committee Newsletter (Septembe r 2008) 44 and C Todd & J Brand “Comme rcial
Mediation: A New Er a For The Resolution Of Com mercial Dispu tes In South Af rica” (14-05-2009) CEDR
<www.cedr.com/ar ticles/?item=A-new-er a-for-South-Africa> (acc essed 10-11-2015). See als o E Carroll
& K Mackie Inter national Mediat ion – The Art of Busine ss Diplomacy 2 ed (200 6) 3-17.
3 L Boulle & A Rycroft Mediation: Principles, Process, Practice (1997) 249.
4 249.
5 It is for this reas on that a term was som etimes included i n the mediated set tlement agreemen t that, in the
case of non-compl iance, the partie s’ rights to pursue the o riginal cause of act ion were reinstated. Se e L
Boulle & M Nesic Mediation: Principles, Process, Practice (2001) 507.
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to those remedies, such as r ules regarding causation, remoteness and t he duty
to mitigate loss, are applicable.6
This article discusses the approach to adopt to limit enforcement difculties
with mediated settleme nt agreements including t heir conversion into an arbitral
award, and proposes the opt imal approach the judiciar y and the legislature
should take to ensure en forcement in the appropriate ci rcumstances. The
second part of the ar ticle analyses the various ways that settlement ag reements
can be set aside. These include the absence of cont ractual certai nty to bind the
disputing pa rties, rescission on a ccount of an unjust factor, undue inuence,
duress and coercion, u nconscionability, incompetence or incapacit y, lack of
authority, fraud and mist ake. In light of the various challenges to set tlement
agreements and the co nsequent impact upon their en forceability, part three
reviews the practical ste ps that can be taken by the parties to a set tlement and
their lawyers to lim it the problems that may otherwis e be encountered with
the enforcement of mediated sett lement agreements. Where com pliance may
be an issue, the possibility of conver ting the settlement into a judg ment or
an a rbitr al award unde r the New York C onvention is reviewed i n part four.
This part also elucidat es proposals for legislative reform that could facilitat e
the effective enforcement of mediated set tlement agreements. This conversion
of a mediated settlement agre ement into a judgment or arbitral awa rd would
ensure that par ties could obtain through mediation a result th at has the same
value for enforcement purposes a s an arbitral award or a judgment. Moreover,
a conict resolution process is li kely to pr oduce more satisfactory results,
while preser ving condentiality to a higher degr ee than ordinary court
proceedings.
2 Review of mediated settlem ent agreements and grounds for
evading them
A complex fact-nding exercise is underta ken by a court or t ribunal
where a matter proceed s before it where it is unclear what was agreed in a
mediation. While cou rts will usually only “look behind” mediat ed settlement
6 Boulle & Nesic Mediation 507. In the Sout h African ca se, Stocks & Stoc ks (Cape) (Pty) Ltd v Go rdon and
Others NNO 1993 1 SA 156 (T), a co nstruction co ntract provided for r eferral of dispute s to a “mediator”,
who was obliged to give h is opinion which wa s final and bi nding unless d isputed withi n fourteen
days. The medi ator’s opinion was to be bindin g and effective until it was ove r-ruled by any subsequent
arbitratio n or litigation. The cour t did not accept the arg ument that this last pr ovision was inapplicable
to monetar y claims arising from t he opinion of the mediator, as it bel ieved that the ADR mechanis ms
provided for in th e agreement were d esigned to ensu re continuat ion of the work pending a rbitration.
While the ca se involved non-binding arbit ration rather than me diation it has since been s uggested that
it nonetheless poi nts to judicial re spect for mediat ion agreements . See Boulle & Rycroft Mediation
250. In the English c ase of Thakrar v Ciro Citt erio Menswear PLC (in admini stration) EWHC (Ch) (1
October 2002), the c ourt reversed a decision t o refuse to approve a settlem ent that had been arr ived at
following the med iation of an insolvency disp ute. While the decision i nvolved technical issues rel ating
to insolvency pr actice, it makes it clear t hat the English High Cou rt has for some time bee n prepared to
recognise a nd enforce mediated se ttlement agreement s. See also the recent Eng lish case of Beauty Sta r
Ltd v Janmohame d [2014] EWCA Civ 451 that c onfirm s furthe r judicial suppor t for mediation ag reements
where the cour t ruled that a n accountant was a ppointed under a me diation agreem ent to prepare a rep ort,
and even if the re port contained m istakes it was bind ing as that was what t he parties had ag reed.
26 STELL LR 2016 1
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agreements bet ween willing part ies in exceptional circumsta nces,7 there
have been circumsta nces, notably in Australia, whe re this has occur red. An
eight-day hearing was re quired in one case in orde r to resolve the issue of
whether a nal set tlement was reached in a mediation.8 Ther e have also been
situations where cour ts were asked to determ ine whether a valid mediation
agreement existed bet ween the parties, and if so what were its ter ms,9 whether
a mediated settlement was re presented in a part icular document,10 whether
settlement terms compr ised sufcient certainty,11 and whether performa nce
was in terms of a mediat ed settlement agreement.12 Courts can be requ ired to
interpret clauses i n complex mediated settlements, for example, on the effect
of statutory obligations on a med iated settlement.13
Mediated settlement ag reements are subject to the nor mal contractual
principles regarding thei r validity, regardless of the practical problems caused
by mediation condent iality.14 It is of interest to consider how legislation can
affect a mediated agre ement.15
While the United State s of America (“USA”) comprises 50 state jurisdictions
and the federal juri sdiction, there is no single body of law governing mediation
or the enforcement of mediated sett lement agreements in the United St ates.
Some states have enacted legislation th at establishes rules for mediation such
as:16
• a requirement for a signed written agr eement;
• a requirement that an agreement contain a specic conrmat ion of
understandi ng of the sign icance of the agreement;
7 Brockhurst v E dconcombe Pt y Ltd [2000] QDC 313 (27 October 2000) as r eferred to in L Bou lle
Mediation: Principles, Process, Practice 2 ed (2005) 451.
8 Barry v Cit y West Water Ltd [2002] FCA 1214 8 as referred to in Boul le Mediation 451.
9 ANZ Bank v Ciav arella [2002] NSWSC 1186 as referred to in B oulle Mediation 451.
10 Burchell v Gol den Wood Pty Ltd [2000] VSC 485 (10 November 200 0) as referred to in Bo ulle Mediation
451.
11 Miller v Owne rs Corporation [2003] NSWCTT27 (22 Ja nuary 2003) as referre d to in Boulle Mediation
451.
12 Dalmation No minees Pty Ltd v Franko Ma rinovich [1998] WASC 354 (20 November 1998) as referred
to in Boulle Mediation 451. For a discussion o n the evidential c ourt process i n determi ning whether
a settlement wa s reached in the co ntext of an insolvency d ispute see RN H Anderson “T he Place of
Mediation in t he Greater Scheme of T hings” (2007) 23 Con LJ 5 05-510.
13 Myross (NSW ) Pty Ltd v Kahlefeldt Secu rities Ltd (2003) NSW ConvR 56-055 as refe rred to in Boulle
Mediation 451.
14 See Boulle & Nesic Mediat ion 500-501.
15 S 49(1) of the Consumer Prot ection Act 68 of 2008 ma y have implications i n this regard . It makes void any
provision or cond ition in a contract th at attempts to lim it or exempt a service provid er from liability for
any loss dire ctly or indirectly at tributable to the g ross negligence of the se rvice provider. S 49(2) makes
it clear that any me diator liability exemp tion clause would have to be speci fically drawn to th e parties’
attention i n order to be valid.
16 For a detailed over view of the earlie r cases, a discu ssion on the underly ing contract p rinciples and
mediation con fidentiality, and c itations to relevant st ate statutes, se e P Robinson “Centu ries of Contract
Common Law Can’t be Al l Wrong: Why the UMA’s Exception to t he Mediation Conf identialit y in
Enforcement P roceedin gs should be Embr aced and Broa dened” (2003) 2003 Jou rnal of Disp ute Resolut ion
135; P Thompson “Enforci ng Rights Generated in C ourt Connected Medi ation – Tension Between the
Aspiration s of a Private Facilitative Proc ess and the Reality of the Publ ic Adversarial Justice” (200 4)
19 Ohio St J on D isp Resol 509; E Deason “Enfo rcing Mediated Settle ment Agreements: Cont ract Law
Collides With Co nfidentiality” (2001) 35 UC Davis L Re v 33. See also Sussman Mediation Committee
Newsletter (April 200 6) 39.
THE CERTAINTY OF SETTLEMENT 27
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