By Gabriel Smit

Settlement agreements are a useful alternative to settling a dispute between parties without resorting to litigation or adjudication by a Court. Even if a process of litigation has commenced, the parties can settle the dispute between them before any Court adjudication. And, where the dispute has already been adjudicated by the Court and judgment is granted against the Defendant, the parties may further enter into an agreement for the payment of the judgment debt and an application for rescission of the judgment may be made by the Defendant.[1]

Settlement agreements are legally enforceable contracts[2] and usually take the form of a written agreement between the parties. It is not mandatory to record the settlement agreements in writing,[3] but it is always strongly advised in order to avoid future disputes regarding the actual terms of that agreement.

Importantly, there are instances where certain terms may not be included in a settlement agreement and will usually be severed from the rest of the agreement or make the settlement agreement void or unenforceable.

Terms that contradict or violate public policy

When a settlement agreement contains terms that are against public policy, it will make the settlement agreement unenforceable.[4] For example, if a term or clause obliges another party to perform an illegal act, or unreasonably goes against public policy,[5] it may not be included.

Compounding in settlement agreements

The crime of compounding is described as “unlawfully and intentionally agreeing, for reward, not to report or prosecute a crime other than one which is punishable by fine only”.[6]

According to Joubert and Kuhne,[7] the purpose of the common law crime of compounding is the protection of the administration of justice. It is not up to individuals to decide whether a person has committed a crime or not, because it is the function and duty of the police to investigate a crime and bring it before a Court for it to decide on the guilt or innocence of a person.[8]

Permitting someone to make a payment to another person with the aim of preventing the reporting of a crime, would result in a surge of criminal activity with more and more people committing crimes in the belief that they would not be prosecuted, because they could simply buy their way out of any criminal system consequences.[9]

So, how would compounding affect settlement agreements? Consider the scenario where a person commits an offence and, in order to avoid prosecution, they approach the victim and offer them a reward not to report the crime. The victim might accept the offer on the condition that the parties enter into a settlement agreement, with the consequence that the agreement would very likely contain a clause in which the offender will consent to judgment should he breach the terms of the settlement agreement by failing to meet his obligations in making payment as agreed. This will ensure some certainty that there will be consequences if the offender fails to make payment in terms of the settlement agreement.

The offender, however, also needs to have some certainty that the criminal offence will not be prosecuted, or if it was already reported, that the criminal charges will be withdrawn by the victim. So, in order to ensure that the charges are withdrawn, or the offence not to be reported to the SAPS, the parties will insert a clause in the settlement agreement which provides that the victim will withdraw the charges, or not report the offence, upon payment by the offender a certain reward, usually monetary.

In this scenario, the victim now has apparent certainty that the offender will make payment or risk having judgment against him; and the offender has apparent certainty that the victim will withdraw the criminal offence or not report the offence. Unfortunately for both parties, the settlement agreement will in actual fact be void. This is because no person may agree to perform an illegal activity, as it is against public policy, and both parties would be committing the crime of compounding – rendering the settlement agreement unenforceable.[10]

It is advisable that parties wishing to settle a dispute in which a criminal offence has been committed, should consult with litigation attorneys to approach the relevant public prosecutor who has the authority to withdraw a criminal charge.[11] Should they fail to resolve the dispute through the relevant channels such as the Court or the public prosecutor, or use other remedies such as those found in section 300 of the Criminal Procedure Act,[12] the parties may be subject to criminal charges for their conduct.

RMI4law members enjoy the benefit of legal advice from an attorney 24 hours a day.  If you wish to join RMI4law, call 0861 668 677.

Legalex (Pty) Ltd, registration number 2003/003715/07, is an authorized Financial Services Provider (FSP 5277) and underwritten by Guardrisk Insurance Company Limited (FSP 26/10/75)

Gabriel Smit is a Candidate Attorney in the Commercial Litigation Department at Barnard Incorporated Attorneys – a full service corporate and commercial law firm.

[1]        See rule 29 of the Magistrates’ Court Rules of Court; see further rule 42 of the Uniform Rules of Court.

[2]        Gbenga-Oluwatoye v Reckitt Benckiser South Africa (Pty) Limited and another 2016 JOL 36648 (CC) para 24.

[3]        See for example rule 82(6) of the Magistrates’ Court Rules of Court.

[4]        Barkhuizen v Napier 2007 (7) BCLR 691 (CC) para 30.

[5]        Beadica 231 CC and others v Trustees for the Time Being of the Oregon Trust and others 2020 (9) BCLR 1098 (CC) 1100 – 1101.

[6]        Arend and another v Astra Furnishers (Pty) Ltd 1974 1 All SA 522 (C) 532; Hunt and Milton South African Criminal Law and Procedure: Common-law crimes 204; Joubert and Kuhne LAWSA Volume 11 234.

[7]        Joubert and Kuhne LAWSA Volume 11 234.

[8]        Joubert and Kuhne LAWSA Volume 11 234.

[9]        Hunt and Milton South African Criminal Law and Procedure: Common-law crimes 205.

[10]       Hotz v Standard Bank (1906-1909) 3 Buch AC 53 59.

[11]       Section 20 of the National Prosecuting Authority Act 32 of 1998

[12]       51 of 1977.

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