‘Common sense’ judgment by SCA on settlement agreements

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This month’s judgment by the Supreme Court of Appeal that settlement agreements of a medico-legal damages claim would not fall within the ambit of the National Credit Act is “common sense” decision, writes an expert.

Donald Dinnie, CEO of Natmed Medical Defence, writes: Very few medical malpractice matters proceed all the way to a trial and judgment. In 2018, there were only 22 judgments nationally dealing with medical malpractice disputes – a number of which did not deal with the merits of the case but with interlocutory issues.

Many malpractice issues are resolved at the doors of court or, one way or another and for various reasons, well before proceeding to trial. Where they are resolved, that is normally evidenced by way of a written settlement agreement.

That agreement usually provides that any settlement is without admission of liability and that the settlement is confidential. If there is to be a payment to the plaintiffs on the part of the defendant or defendants, amounts are specified, there may be a deferral of payment, provision for payment in instalments, for payment of interest thereon, and for acceleration of the agreed debt in the event of a default of the payment of the instalments.

Those settlements resolve what is usually a claim in delict (although sometimes in contract), for alleged negligent conduct on the part of the medical practitioner and facility defendants.

On a literal interpretation of section 8(4)(f) of the National Credit Act, a settlement agreement concluded in relation to a claim would fall within the ambit of the National Credit Act. That, however, could never have been the intention of the legislature. The consequences would be absurd for agreements of settlement in respect of non-contractual claims. The National Credit Act (the Act) must be interpreted in the manner which gives effect to its purposes. That Act is concerned, in the main, with the advancement of money or the granting of credit to individual consumers.

In terms of section 3 of the Act, its purposes are: “to promote and advance the social and economic welfare of South Africans; to promote, fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry; and to protect consumers.”

Our courts have previously held that although a settlement agreement referred to deferral of payment and interest, the agreement did not constitute a credit transaction because the underlying transaction was a damages claim in respect of which the plaintiff, by agreement, awarded the defendants a deferred payment. The transaction did not fall within the business of money-lending and the furnishing of credit in the ordinary sense of the word.

The Supreme Court of Appeal, in a judgment handed down on 01 April 2019 – Ratlou v Man Financial Services (1309/17) [2019] ZASCA 49 (01 April 2019) (http://www.justice.gov.za/sca/judgments/sca_2019/sca2019-049.pdf), has confirmed that the National Credit Act was not designed to regulate settlement agreements where the underlying agreements or causa were not covered by the Act. Clearly, a medico-legal damages claim would not fall within the ambit of the Act.

The Supreme Court of Appeal held that a purposive interpretation, and not a literal interpretation of the relevant section of the Act, was required because it was quite clear that the Act was not aimed at settlement agreements. The application to them “will have a devastating effect on the efficacy and the willingness of parties to conclude settlement agreements, and thereby curtail litigation. “

The clarification is not a surprise, and constitutes a common sense and purposive approach to the interpretation of the National Credit Act.

Litigants to any medico-legal dispute, in settling that dispute, should ensure they have the benefit and protection of a properly structured, clearly worded, written and signed settlement agreement.

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