The SCA allowed the appeal and set aside the rescission order granted by Molopa-Sethosa J in the high court.  A compromise agreement had been made an order of court but the only grounds for rescinding a compromise are fraud or justus error provided the mistake (error) vitiated true consent and did not merely relate to motive or to the merits of the dispute.  The SCA held the court has no discretion to set aside a consent order if underlying compromise is not set aside.

Slabbert v MEC for Health and Social Development of Gauteng Provincial Government (432/2016) [2016] ZASCA 157 (3 October 2016) per Potterill AJA (Mpati AP, Petse, Willis and Dambuza JJA concurring):

SCA summary:

Civil procedure – Compromise agreement made an order of court – Grounds for rescinding compromise are only fraud or justus error provided the mistake (error) vitiated true consent and did not merely relate to motive or to the merits of the dispute – Or mistake common to the parties – Court has no discretion to set aside consent order if underlying compromise is not set aside – Compromise agreement and consent order not rescinded.

Excerpts without footnotes

[7]        An agreement of compromise creates new rights and obligations as a substantive contract that exists independently from the original cause.[1] The purpose of a compromise is twofold: (a) to bring an end to existing litigation and (b) to prevent or avoid litigation.[2] When a compromise is embodied in an order of court the order brings finality to the lis between the parties and it becomes res judicata.[3] The court order changes the terms of a settlement agreement to an enforceable court order – through execution or contempt proceedings.[4] Thus, litigation after the consent order will relate to non-compliance with the consent order and not the underlying dispute.

[8]        This being said, a transactio (compromise) is made by consent between parties and like any contract or order of court made by consent, it may be set aside on the ground that it was fraudulently obtained.  It may also be set aside on the ground of justus error, ‘provided that such error vitiated true consent and did not merely relate to motive or to the merits of a dispute which it was the very purpose of the parties to compromise.’[5] A compromise agreement may also be set aside if the parties to the agreement laboured under a common mistake.[6] However, a unilateral mistake on the part of one party that does not flow from a misrepresentation by the other does not allow for the former party to resile from a consent agreement.[7] The question thus is whether one of these grounds exists for the MEC to resile from the compromise agreement.

. . . . .

[15]      The compromise agreement thus cannot be set aside on the basis of a mutual error as there was no mutual error.  The MEC cannot rely on her own mistake to avoid a contract which was in any event initiated by her.[1] This unilateral mistake accordingly did not amount to a justus error.   As stated by Christie:[2]

‘However material the mistake, the mistaken party will not be able to escape from the contract if his mistake was due to his own fault.  This principle will apply whether his fault lies in not carrying out the reasonably necessary investigations before committing himself to the contract that is, failing to do his homework’.  (Footnote omitted.)

[16]      The court a quo was correct that a court cannot ignore facts placed before it, but these facts must sustain one of the established grounds on which a compromise agreement can be rescinded.  Although a High Court has inherent discretion, it can never exercise it against recognised principles of substantive law.  Our constitutional dispensation does not afford courts a carte blanche to ignore substantive law and grant orders couched as being in the ‘interests of justice’.  Moreover, certainty and finality are key elements of justice.  Parties to a compromise agreement accept an element of risk that their bargain might not be as advantageous to them as litigation might have been.  This element of risk is inherent in the very concept of compromise.  It, however, does not afford parties the right to go back on the bargain for unilateral mistakes.  Settlement agreements have as their underlying foundation the benefit of orderly and effective administration of justice.  Courts cannot allow for consent orders to be set aside for reasons not sanctioned by applicable legal principles.

[17]      A court also does not have a discretion to set aside a consent order where there are no grounds for setting aside the underlying agreement of compromise pursuant to which the consent order was made.  In Botha this court found as follows (para 13):

‘In Theron NO v United Democratic Front (Western Cape Region) & others 1984 (2) SA 532 (C) at 536G this court held that a court has a discretion whether or not to grant an application for rescission under rule 42(1).  But where, as here, the court’s order recorded the terms of a valid settlement agreement, there is no room for it to do so.’ (Footnote omitted.)

. . . . .

[19]      The rescission orders in form appear to be interlocutory and prima facie not of final effect.  On closer examination, the rescission of the compromise agreement is, however, final in substance and effect.  To determine whether an interim order is appealable regard must be had to the effect of the order rather than its mere appellation or form.[1] In the words of Harms AJA in Zweni v The Minister of Law and Order 1993 (1) SA 523 (A) at 531J-532A:

‘The emphasis is now rather on whether an appeal will necessarily lead to a more expeditious and cost-effective final determination of the main dispute between parties and, as such, will decisively contribute to its final solution.’

. . . . . .

[20]      In this matter the rescission orders will stand unless upset on appeal.   As these orders were wrongly granted, they should be corrected forthwith and before the orders have consequences.  The court a quo cannot change the consequences of the orders because the compromise agreement and consent order would have been laid to rest by the rescission orders.  If the orders are not set aside, the consequences will, in effect, be to send the parties to ventilate an issue that has been lawfully settled by compromise in a costly, protracted trial.  ‘A compromise once lawfully struck is very powerfully supported by the law, since nothing is more salutary than the settlement of lawsuits’.[1] Accordingly, the rescission of the consent order must be set aside because the court a quo did not have a discretion to set it aside in circumstances where there was no justification in law to set aside the compromise agreement.  It would, thus, in these circumstances be appropriate to adjudicate the appeal as the order being appealed against has final effect.