REPUBLIC OF SOUTH AFRICA

ROAD ACCIDENT FUND AMENDMENT BILL, 2003

MINISTRY OF TRANSPORT

 

MEMORANDUM BY THE GENERAL COUNCIL OF THE BAR

OF SOUTH AFRICA

 

  1. This is a memorandum submitted by the General Council of the Bar of South Africa in response to the Road Accident Fund Amendment Bill. It is prepared under pressure particularly since the GCB was not consulted or requested to give verbal or written comments. The memorandum which accompanied the document headed "Road Accident Fund 2nd Amendment Bill, 2003" (apparently not the Bill which is being considered by the Portfolio Committee: Transport on 13 October 2003) does not list the GCB, or any of its constituent Bars, as a body from whom verbal or written comments were either elicited or received.
  2. The GCB represents the ten constituent Bars in South Africa; in turn they represent (except for a splinter group) by far and away most of the practising advocates in South Africa. In view of this fact, it is not understandable why the GCB was not consulted.
  3. The second preliminary issue concerns the identity and content of precisely which Bill is to be considered by the Portfolio Committee: Transport on 13 October 2003. This concern arises from the following.
  4. The GCB for the first time had sight of a Bill on 2 October 2003. By that stage, a Bill described as "Road Accident Fund 2nd Amendment Bill" had already been sent to the Law Society of South Africa, MVA Standing Committee, by 16 September 2003. After that date, on 2 October 2003, Nomusa Maeko, Manager: Office of the Director General of Transport, circulated under e-mail what appeared to be a second draft of the Bill which had by now been corrected by Adv. Herman Smuts in the Office of the State Law Advisor, Cape Town.
  5. We assume therefore that the second version, simply called "Road Accident Fund Amendment Bill", is the Bill which the committee will be discussing.
  6. The third preliminary matter is to record that the GCB represents not only the ten constituent Bars in putting up this memorandum, but also the South African Taxi Association, the South African Association of Personal Injury Lawyers, and the Quadriplegic Association of South Africa. The latter two associations have already, respectively by letters dated 29 September 2003 and 5 October 2003, addressed to the Portfolio Committee: Transport raised some of their objections to the proposed Bill.
  7. The fourth preliminary matter is to record that the comments referred to below should be understood merely to highlight the difficulties; the GCB requests an opportunity to address verbal submissions in amplification of the issues identified.
  8. PURPOSE OF THE ROAD ACCIDENT FUND ACT, 56 OF 1996

    The purpose of the Road Accident Fund Act is to provide compensation to injured victims of road traffic accidents. It replaced the earlier system whereby car owners were required by law to purchase third party liability insurance. Under the RAF Act, car owners now pay towards the compensation fund by means of a fuel levy in respect of all fuel sold with the Republic. As such, the car owner in South Africa are required to finance the Fund from which accident victims are compensated, be they pedestrians or passengers or car owners.

    Importantly, Section 21 of the Act provides that an injured person may only claim from the Fund for compensation and remove the injured personís common law right to claim from the wrongdoer. The quid pro quo for the removal of this right is the fact that the Fund is liable for all the damages that the wrongdoer would have been liable for under the common law (Section 17).

    Therefor, any amendment to the Act whereby the injured personís right to full compensation is diminished, it means that the injured person has no other realistic recourse to claim the full extent of the cost of the medical care that he needs or the earnings that he has lost. Conversely, the reduction of benefits by the Fund means the wrongdoer will be personally liable the remaining damages.

    During the past 15 years, the system whereby third party claims were administered by private insurance companies under contract with the Fund, was replaced by the present system where the Fund has taken over administration of all claims. As illustrated in the Satchwell Commission Report, that has had mixed results and has lead to a massive bureaucracy in which low productivity, alleged misapplication of funds and even corruption have become well publicised.

    While we do not agree with the recommendations of the Satchwell Commission, we believe that its report illustrates the complexity of the problems with third party compensation in the Republic and that a solution to those problems will require a comprehensive and careful consideration of options.

    It is our belief that the present Draft Bill before the committee is one that seeks to resolve certain symptoms only, while the underlying problems remain. It is our fear that this "superficial fix" will inflict substantial detriment on the lives of injured claimants at an alleged savings which do not justify the magnitude of such a negative impact.

  9. Proposed section 17(4)(a)
    1. The proposed change to section 17(4)(a) replaces the Fund's present election as to whether to foist an undertaking in respect of future hospital, medical and related expenditure upon a claimant, as opposed to effecting a lump sum payment, with an obligation to do so. In practice, the Fund has for a number of years now automatically elected furnishing an undertaking.
    2. What is however of concern is the proposed section 17A which ostensibly will apply only to claims arising after the Bill is adopted and becomes legislation. In terms of this section, future medicals are to be limited to a "prescribed medical tariff". This section takes away the right of a claimant to be compensated for all medical expenses necessarily and reasonably incurred, and to subject the claim to a tariff cap.
    3. De facto this means that a claimant who receives medical treatment otherwise than in a State hospital will not be compensated for the excess above the prescribed medical tariff. In effect therefore it reduces the compensation payable to a lowest common denominator.

  10. Proposed section 17(4)(b)
    1. The proposed section is both aimed at replacing the Fund's present right to elect to compensate future loss of income by means of an undertaking, and the effect of the judgment in Coetzee vs Guardian, 1993 (3) SA 388 (W) (absent agreement, no section 17(4)(b) undertaking can be foisted upon a claimant).
    2. What is not clear from the proposed wording, is whether the court or the Fund will determine the frequency and quantum of the instalments.

    A further concern is that the proposed amendment will require an expensive bureaucratic system whereby lost income will be paid out to Claimants for up to 50 years. That means that the Fund will have to invest and administer the present value of the future payments. It is not clear that any savings to the Fund will be effected by this amendment, while it will severely disempower Claimants. If the purpose of the amendment is to avoid abuse of lump sum payments, there are other, more economic, ways in which to provide safeguards.

  11. Proposed section 17(4)(c)
    1. The proposed section is to the following effect:
      1. the Minister will prescribe by regulation that general damages over a particular amount are to be paid in instalments;
      2. if the general damages as agreed or determined are less than the prescribed amount, the claimant will be entitled to a lump sum payment;
      3. if the general damages are above that prescribed amount, then the Fund may (and in practice will) pay the general damages in instalments.

    2. The first objection is that the frequency and quantum of the instalments is ostensibly a matter to be determined by the Fund.
    3. The proposed section involves a substantial diminution of rights, because unless the Minister prescribes some formula which would overcome inflation, the effect of instalment payments will be to reduce the real amount received to below the amount agreed and awarded.
    4. Moreover, the effect will be to diminish the ability of a claimant to satisfy his or her attorney's costs out of the award. It will likewise frustrate contingency fee arrangements and this in turn will limit claimants' access to justice. If the underlying purpose of these amendments may be to "cut out the lawyers", it will constitute a cynical attempt to deprive claimants of their constitutional right to legal representation.

    According to the reports by the Satchwell Commission, general damages comprised only 12,8 % of claims in excessive of R300 000,00 (Volume 2, page 1115). That means, for a total claim of R300 000,00 the general damages component is R38 400,00. It would appear that the savings effected by paying such an amount in instalments will be minimal, while the Claimants in this category are by definition seriously injured and in need of adequate, timeous compensation to get their lives in order.

  12. Proposed section 17B
    1. The proposed amendment is to abrogate the common law principle that collateral benefits are not to be taken into account in determining loss incurred.
    2. At present, collateral benefits are taking into account when the injured person derived them within the context of his or her employment. [Dippenaar v Shield Insurance Co Ltd 1979 (2) SA 904 (A); Santam Versekeringsmaatskappy Bpk v Beyleveldt 1973 (2) SA 146 (A).] In other words, if an employment related disability benefit or pension fund or medical aid pays part of the claimantís damages, those amounts are deducted from his or her claim.

      The proposed amendment seeks to also deduct pension benefits or medical payments which the claimant purchased separately from his own funds.

    3. This is a major inroad into the existing dispensation. It results in unequal treatment of personal injury victims despite the fact that all contribute equally to the Fund.

     

  13. Proposed section 18(5)
    1. The effect of the proposed amendment is that visitors to this country will no longer be dealt with on the same basis as local residents. In the past, a visitor involved in a motor accident might have elected to receive future medical treatment in his or her own country.
    2. It is now envisaged that benefits payable to visitors will be capped by an amount determined by the Minister.
    3. In practice, it means that a visitor to South Africa must know that he or she will have to take out private insurance to cover the consequences of a motor accident here. This does not auger well for the tourist industry.

  14. Proposed section 19(g)
    1. By the proposed amendment common law liability for emotional shock is specifically excluded.
    2. It is difficult to understand what the reasoning was that supports this proposal. In the previous memorandum it was said that "Ö there is concern that this new development (liability for emotional shock) is in danger of opening up the floodgates to claims which are so indirect and inherently problematical that they can justifiably be classified as too exotic for a public fund."
    3. This reasoning seems to anticipate that courts will develop the common law to include compensation for damages not actually suffered. There is no basis for this scepticism in the court's ability to limit claims to damages actually suffered.
    4. Moreover, there is no assessment of amounts actually awarded in respect of such damages so that one does not know how real this concern is. There can, at the very least, be no doubt that the concern has no proven substance.

    Claims for emotional shock has been recognized in the Republic since 1973, in the case of Bester v Commercial Union Versekeringsmaatskappy van SA Bpk 1973 (1) SA 769 (A). However, as recently as last year, the Supreme Court of Appeal held that there has been no indication that "flood gates" has opened as a result of the recognition of such claims. The Court, likewise, held that allowing claims by other persons who are genuinely psychiatrically damaged is unlikely to lead to multiplication of claims [Road Accident Fund v Sauls 2002 (2) SA 55 (SCA)].

  15. Proposed section 24(6)
    1. This proposed amendment contains the most radical departure from the common law.
    2. It is that a claimant will no longer be entitled as a right to approach a court for relief but will instead be obliged to follow a process of mediation and arbitration, which process is not described in the Bill itself but will be contained in a regulation.
    3. The proposed amendment takes away the primacy of the courts in road accident cases, and subjects it to a mediation and arbitration process, particulars of which are not supplied.
    4. Parliament is accordingly required to approve a Bill which removes, effectively, personal injury cases from the jurisdiction of the courts and to place it under the jurisdiction of a regulatory system over which Parliament will have no control.
    5. Since arbitral awards are by definition final and binding, and since the scope for judicial review of these is very narrow, a claimant's right to go to court is, it is submitted, illusory.

    For the last few years, the Fund has actively used the arbitration procedure in the Western Cape in order to adjudicate claims, but it has been on a voluntary basis and on all accounts that has worked well, although it has not necessarily resulted in cost saving. As explained above, the Claimant will also not be able to claim the balance of the cost of medical treatment from the wrongdoer and will have to carry the loss personally.

  16. Attached to this memorandum are the following documents:
    1. letter dated 29 September 2003 addressed by the South African Association of Personal Injury Lawyers to the Chairman, Portfolio Committee: Transport;
    2. letter dated 5 October 2003 by the Quadriplegic Association of South Africa addressed to the Chairman, Parliamentary Portfolio Committee: Transport.

  17. We stress that this memorandum is not a comprehensive account of the objections to the Bill by the GCB and the other parties whom it represents as identified above, and that an opportunity to be heard is requested.

Johannesburg

8 October 2003