The Certainty of Settlement

• Jurisdiction: South Africa
• Published date: 27 May 2019
• Date: 27 May 2019
• Citation: (2016) 27 Stell LR 25
• 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 settlement, the issue arises as to what

happens if one of the parties contends that no agreement exists or that the

agreement is unenforceable for some reason. With the growth of mediation,

the conicts that can a rise in such circumst ances have given rise to a

substantial body of case law in other jurisdictions.1 While enforcement of

mediated settlement agreements does not curre ntly appear to be a difculty in

South Africa, as mediation is increasingly adopted as the process to resolve

commercial disputes, t he discussion below will have increasing importance.2

The parties’ intentions, the mediation context, relevant statutory

requirements, and principles of contract law are all relevant factors in

determining the legal status of mediated settlement agreements.3 The parties

may reduce their agreement to a “heads of agreement” document, a non-

binding document outli ning the main issues relevant to a tentative agre ement,

and there may also be a cooling-off period, or it can take the form of a

formal comprehensive signed agree ment that will be binding and enforceable

according to normal contractual principles provided it is correctly drafted.4

In the event of non-compliance by one party, the other party cannot 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, specic

performance or an interdict are possible remedies for non-compliance with

the terms of a mediated settlement 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 mediation is employed to resolve conflict in various fields including family, 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 Africa” Committee Newsletter (September 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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(2016) 27 Stell LR 25

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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 difculties

with mediated settleme nt agreements including t heir conversion into an arbitral

award, and proposes the optimal approach the judiciary and the legislature

should take to ensure enforcement in the appropriate circumstances. 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 inuence,

duress and coercion, unconscionability, incompetence or incapacity, lack of

authority, fraud and mistake. In light of the various challenges to settlement

agreements and the consequent impact upon their enforceability, part three

reviews the practical ste ps that can be taken by the parties to a set tlement and

their lawyers to limit the problems that may otherwise be encountered with

the enforcement of mediated settlement agreements. Where compliance may

be an issue, the possibility of converting the settlement into a judgment or

an a rbitr al award unde r the New York C onvention is reviewed i n part four.

This part also elucidates proposals for legislative reform that could facilitate

the effective enforcement of mediated set tlement agreements. This conversion

of a mediated settlement agreement into a judgment or arbitral award would

ensure that par ties could obtain through mediation a result that has the same

value for enforcement purposes a s an arbitral award or a judgment. Moreover,

a conict resolution process is li kely to pr oduce more satisfactory results,

while preser ving condentiality to a higher degr ee than ordinary court

proceedings.

2 Review of mediated settlement agreements and grounds for

evading them

A complex fact-nding exercise is underta ken by a court or t ribunal

where a matter proceeds 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 his opinion which was final and binding unless disputed within 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 the agreement were designed to ensure continuation of the work pending arbitration.

While the ca se involved non-binding arbit ration rather than me diation it has since been s uggested that

it nonetheless points to judicial respect for mediation 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.

26STELL LR 2016 1

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agreements between willing parties in exceptional circumstances,7 there

have been circumstances, notably in Australia, where this has occurred. An

eight-day hearing was required in one case in order to resolve the issue of

whether a nal set tlement was reached in a mediation.8 There have also been

situations where courts were asked to determine whether a valid mediation

agreement existed bet ween the parties, and if so what were its ter ms,9 whether

a mediated settlement was represented in a particular document,10 whether

settlement terms compr ised sufcient certainty,11 and whether performance

was in terms of a mediat ed settlement agreement.12 Courts can be requ ired to

interpret clauses in complex mediated settlements, for example, on the effect

of statutory obligations on a med iated settlement.13

Mediated settlement agreements are subject to the normal contractual

principles regarding thei r validity, regardless of the practical problems caused

by mediation condent 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 settlement agreements in the United States.

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 specic conrmat ion of

understandi ng of the sign icance of the agreement;

7 Brockhurst v Edconcombe Pty Ltd [2000] QDC 313 (27 October 2000) as referred to in L Boulle

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.

10Burchell v Gol den Wood Pty Ltd [2000] VSC 485 (10 November 200 0) as referred to in Bo ulle Mediation

451.

11Miller v Owne rs Corporation [2003] NSWCTT27 (22 Ja nuary 2003) as referre d to in Boulle Mediation

451.

12Dalmation No minees Pty Ltd v Franko Ma rinovich [1998] WASC 354 (20 November 1998) as referred

to in Boulle Mediation 451. For a discussion on the evidential court process in determining whether

a settlement was reached in the context of an insolvency dispute see RNH Anderson “The Place of

Mediation in t he Greater Scheme of T hings” (2007) 23 Con LJ 505-510.

13Myross (NSW ) Pty Ltd v Kahlefeldt Secu rities Ltd (2003) NSW ConvR 56-055 as refe rred to in Boulle

Mediation 451.

14See Boulle & Nesic Mediat ion 500-501.

15S 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.

16For a detailed overview of the earlier cases, a discussion on the underlying contract principles 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 All Wrong: Why the UMA’s Exception to the Mediation Confidentiality 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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