COMMENTS ON THE ROAD ACCIDENT FUND AMENDMENT BILL, 2003 SUBMITTED BY THE LAW SOCIETY OF SOUTH AFRICA

 

  1. THE LEGISLATIVE AND CONSULTATIVE PROCESS

The Memorandum which accompanies the Bill, states that the State Law Advisors and the Department of transport are of the view that the above Bill must be dealt with in accordance with the procedures established by section 75 of the Constitution, since it contains no provision to which the procedures set out in section 74 or 75 apply.

As we understand the normal legislative process pertaining to Section 75 Bills:-

    1. A Bill, which has been prepared by a government department, is submitted by the relevant Minister to the Cabinet for approval;
    2. The state law advisors must refine and approve the draft Bill;
    3. The Bill is then introduced and tabled in the National Assembly for the First Reading;
    4. The Bill is published in the Government Gazette;
    5. The Bill is then referred to the relevant Committee in the National Assembly which considers the Bill and may agree to it, propose amendments or reject the Bill, generally after a process of public consultation;
    6. The second reading then takes place at which the Bill is debated and voted on at a sitting of the National Assembly;
    7. If the Bill is passed, it is referred to the NOCP for consideration. The NOCP can accept or reject the Bill or propose amendments to it.

Within the space of approximately three weeks, three different versions of the Bill have appeared. What is assumed to be the final "official" version was apparently tabled in Parliament on 8 October 2003 (B64-2003). A copy of the Bill as published in the Government Gazette could only be obtained on 10 October 2003. We are given to understand that the First Reading of the Bill is scheduled for 21 October 2003.

When the Law Society South Africa first became aware of proposed amendments to the Road Accident Fund Act, 1996 it approached the Portfolio Committee on Transport to enquire when hearings would take place and to request an audience. Initially it was advised that there would be no public hearings. Subsequently it was advised by way of a fax dated 7 October 2003 that 30 minutes had been allocated to hear oral evidence from the Society on 14 October 2003 between 9h00 and 13h00 in order to supplement its written representations.

In the time available it is not possible to formulate comprehensive written submissions nor to prepare adequately for making verbal representations.

It is not understood why the normal legislative and consultative process is not being adhered to in regard to proposed legislation, which would have devastating effects on every person, unfortunate enough to be injured in a road accident, as well as profound implications on the future economy of the country. Furthermore, if the Fundís contention that this process was initiated in April 2002 is accepted, the Bill was conceived before the report of the SATCHWELL COMMISSION was published and the current Bill flies in the face of the comprehensive criticism of the 2002 draft made by the HONOURABLE JUDGE SATCHWELL which is referred to below.

It is submitted that by adopting this procedure to attempt to "fast track" the enactment of legislation that has been the subject of extensive examination by a commission that sat for four years, without regard to the findings of that commission and without proper consultation has the effect of subverting parliamentís role as a legislator and the right of civil society to participate in the process.

No doubt the Fund will contend that yet another financial "crisis" has arisen, necessitating urgent means to address the situation.

This is nothing new. At least, as long ago as 1991, and at the time of the MELAMMET COMMISSION the Fund claimed that it was insolvent. In doing so it has relied on its own records, statistics and accounting procedures.

The Fund has been criticized, repeatedly for its inadequate and inaccurate statistics.

The MELAMMET COMMISSION found that the Fund was not insolvent and it seems as if the SATCHWELL COMMISSION is of the same view.

If there is a financial crisis, then the Fund, itself, is the author of its own misfortune. Despite its own prophecies of financial doom, the Fund has continued, unabated, to spend increasing amounts on its own administration, which if regard is had to the remarks made by THE HONOURABLE JUDGE SATCHWELL in the attached memorandum and in the report of the COMMISSION, has been money largely wasted.

In 1994 the Fund spent R42 million on its own administration. By 2002 this expense had increased to R247 million (for 11 months). In the same period, income, from fuel and other sources was R2 651 million and claims paid amounted to R2 540 million. In other words a positive cash flow of R111 million before account is taken of the Funds own administration costs.

In the previous financial year the administration expenses of the Fund are reflected as R179 million. Thus in the 11 months to March 2002 the Funds own costs had increased by more than R60 million so as to put the Fund into a negative operating cash flow position.

As at the end of the 1998 financial year the Fund had generated an operating cash flow surplus of R1 321 million.

Why has the Fund continued to spend enormous amounts on its own administration to little effect on its delivery of compensation to Road Accident victims if not to attempt to force a financial crisis so as to enact legislation as per its own "wish list" which has scant regard for the persons it is supposed to benefit?

The Memorandum states, further, that the Bill and an explanatory memorandum were released for general comment, invitations were placed in five national newspapers and the draft was also made available on the Fundís website. Reference is made to a three day national conference held by the Board of the Fund on the current state of the road accident compensation environment at which the proposed legislative changes formed the main focus of the deliberations during the conference.

No doubt, the reference to publication and consultation relates to the "draft" ROAD ACCIDENT AMENDMENT BILL, 2002, which first made a brief appearance in late December 2001. It was "withdrawn" shortly after publication and then resuscitated in April 2002, some time before the "symposium", which took place on 6 to 9 May 2002.

At that time, the report of the ROAD ACCIDENT FUND COMMISSION was still outstanding. The status of the "draft" was uncertain. In fact, the then manager of the Fund when challenged on its status, described as nothing more than the Fundís "wish list". It seemed that the draft had been produced by certain Fund officials and, at that stage, had not been submitted to government for approval. The "draft" also differed, materially, from the current Bill.

When it became apparent that the "symposium" (despite its draft agenda) was really an exercise by the Fund, intended to attempt to legitimize the process and to justify proceeding with the "draft", the Society left in protest.

One can do no better than refer to the comments made public at that time by the HONOURABLE JUDGE SATCHWELL, who, herself, refused to attend the "symposium". A copy of the memorandum prepared by her is attached to these submissions.

To illustrate the fact that, even then, the status of the "draft" was uncertain we would quote the following from the memorandum prepared by the HONOURABLE JUDGE SATCHWELL:

"Wisely these proposals were withdrawn before the Fund was exposed to too great ridicule in connection therewith. However, what is of concern is the fact that these proposals were framed as draft legislation at all."

 

For the Fund to contend that the comment made and the debate that raged around the legitimacy and the status of the 2002 "draft" constituted meaningful consultation on the current official Bill is simply incorrect and misleading.

The perception is that careful consideration has not really been given to the Bill, inter alia, by the state law advisors, as it is apparent that many of the provisions are susceptible to constitutional challenge, in particular, all the provisions that the Bill seeks to introduce with retrospective effect.

The Bill proposes delayed payment, in installments, to accident victims of all compensation to which such person is entitled, including general damages for non-patrimonial loss. This is against a background of a delict based compensation scheme in which a claimant is obliged to prove fault on the part of the insured driver and prove the quantum of the loss suffered.

Quite apart from the obvious aim of reducing immediate cash flow requirements (regardless of the exponential increase in the actual liability thus incurred by the Fund and the well being of an accident victim) the proposed amendment, it is suspected, is also aimed at removing the involvement of lawyers and other professionals from the claims process.

It is common knowledge that party and party costs do not cover the actual costs incurred in any litigation process. In personal injury claims much expertise and time is required to properly prepare a claim, both in regard to merits and quantum. THE HONOURABLE JUDGE SATCHWELL has clearly acknowledged the importance and necessity of a claimant having access to legal and other professional assistance within the context of the current delict based system of compensation. The proposed amendments will effectively deny an accident victim professional representation.

Even under the current system, statistics show that approximately 80% of undertakings issued by the Fund in respect on future costs remain unused. The reason for this is apparent from the report of the Commission.

In terms of the current law, the Fund is entitled to give apportioned undertakings. Currently a claimant is able to make up the difference by utilizing the lump sum payment received and, thus, in theory, able to utilse the limited undertaking. With no lump sum payments, all apportioned undertakings for future costs will be totally useless. To this extent the proposed amendments will effectively deny an accident victim with an apportioned undertaking any future health care.

To compound matters, the installments for future general damages and loss of income will also be apportioned, thus ensuring that a seriously injured accident victim will never be able to recover, financially.

The Memorandum also states that the proposed amendments are aimed at improving the efficiency of the Fund. It is incomprehensible why it is necessary to consider changing the basis of compensating road accident victims because the Road Accident Fund, itself, is incapable of functioning efficiently.

Furthermore, the proposed amendments would require that the Fund function even more efficiently than it currently does, in order to administer the long term "benefits" contemplated in the payment of all compensation by way of installments. Once more the remarks made by THE HOUOURABLE JUDGE SATCHWELL in the attached memorandum are particularly apposite.

Finally, many fundamentally important details remain unknown as they are to be prescribed by regulation. Sight has not yet been had of the draft regulations. The legitimacy of this manner of legislating is questioned.

 

  1. COMMENT ON BILL B64-2003

 

2.1 SECTION 17(4)(a) OF THE ACT

Much criticism has already been leveled at the Fundís policy of issuing apportioned undertakings and the hardship that this causes. It is suggested that the section be changed to allow the Fund only to issue an un-apportioned undertaking. Any apportioned payment for future expenses should be by way of a lump sum, up front.

    1. SECTION 17(4)(b) OF THE ACT

Despite the current section, in practice it is often not possible for the Fund to come to an agreement with a claimant on the installments to be paid and the Fund has not been able to utilise the section to force a claimant to accept installments.

The Bill does not deal with the following:

      1. How frequent the instalments will be;
      2. How the instalments are to be calculated;
      3. The period over which they will be paid;
      4. Whether or not interest will be payable on the outstanding balance;
      5. The rate of such interest;
      6. If payments are made in instalments up to what age will the RAF pay the loss of income if the conditions of employment do not stipulate a retirement age;
      7. Loss of income and / or support in many instances has an element of housing subsidies, pension contributions by the employer and other perquisites. The proposal does not deal with these aspects;
      8. The proposal will also have serious implications where apportionment does apply. Payment in instalments will have the effect that depending on the apportionment a third party may only receive 20, 30 or 40% of his previous income. If such a person is a breadwinner this will mean financial disaster for the entire family. In the normal sequence of events a lump sum payment enables such a person to adapt and restructure his future. With apportioned instalments there is no prospect of recovery.

In accordance with the normal principles of delict a claimantís damages are assessed all at one time, including future damages.

Currently lump sum payments for future expenses are discounted to allow for the fact that they are being paid in advance. Contingencies are applied which serve to further reduce the payment.

As the Fund is merely deferring payment of a debt, which in accordance with the principles of delict becomes due and payable as at the date of the accident no doubt the Fund will be obliged to inflate the instalments from time to time, at least in keeping with the CPI and will probably have to pay interest on the outstanding balance at the legal rate.. The actual cost to the Fund, at the end of the day, assuming the claimant has a normal life expectancy will far exceed its liability in terms of a lump sum payment.

If the injured claimant is a breadwinner, and dies prematurely, presumably the instalments will die with him, giving his family no chance of surviving financially.

If lawyers are removed from the system, who will assist the seriously injured claimant in enforcing his rights?

The LSSA can simply not support this drastic and far reaching change.

 

    1. SECTION 17(4)(c)
    2. For an evaluation of the proposal it is necessary to understand "non-patrimonial loss". Our law does award damages for certain intangible "losses". These are non-pecuniary or non-patrimonial losses where there have been detrimental personal consequences in the form of pain and suffering, loss of amenities, loss of health, disfigurement and disablement.

      In HOFFA NO VS SA MUTUAL FIRE AND GENERAL INSURANCE COMPANY 1965( 2) SA 944

      Van Winsen J said :

      "Although it is true that pain and loss of amenities of life are not commensurable with money our law accorded the injured party a monetary compensation in respect of the aforegoing. Every person is entitled to live free from pain and in the enjoyment of those treasures of life which accrue to the possessor of a healthy mind and body and if, through the wrongful conduct of another he has lost those advantages the law affords him the comfort which is assumed to flow from being in possession of a sum of money."

      General experience has taught that especially people with serious injuries (loss of limbs, paralysis, blindness or deafness) use this compensation to adapt to the life changing effects suffered and to try to build a new life. It affords such a claimant independence and dignity. In many instances it is used to start a small business, which serves not only to provide some income but also an occupation.

      The section seems to introduce a completely new concept to General Damages, that is, "past" and "future" General Damages. Furthermore, there is reference to a threshold for General Damages.

      It is not clear if this means that:

      1. Damages below a certain value will not be paid at all (thus disqualifying many small claims entirely, which cannot be just, equitable or capable of withstanding the scrutiny of the Constitutional Court); or
      2. Whether damages up to a certain amount, will be paid in a lump sum and the balance in instalments;

       

      Further, it is difficult to see how a valid distinction is to be made with General damages incurred in the past, as opposed to General Damages in future. General damages are currently assessed and agreed or otherwise decided at the finalisation of the matter.

      A whole new system will have to be developed to cope with this new concept. Once again, with lawyers out of the system who will assist the injured claimant in interpreting and enforcing fair payment.

      .

    3. THE INSERTION OF SECTION 17A

To understand the implication of the proposal it is necessary to understand the principle that in terms of our common law a victim (third party) or the dependants of a deceased are entitled to receive full compensation in respect of the loss suffered. The function of damages in law is to place the injured party in the same position in which she or he would have been in but for the wrongful action. The rationale for the payment by the RAF of full compensation is to discharge the full liability or legal responsibility of the wrongdoer who therefore becomes absolved of any further responsibility.

In terms of Section 21 of the Act the claim for compensation lies against the Fund only and a third party may not claim compensation in respect of that loss or damage from the owner or driver of the vehicle.

The proposal will not only necessitate the amendment of Section 21 but it also open the debate of limited liability and the common law right of the third party to sue for the balance of damages.

It is a well-established principle of our law that a victim is entitled to treatment of choice. If a victim therefor does not have medical aid insurance he cannot exercise this basic right.

The proposal also does have no reference which prescribed medical tariff will apply and is therefor open to misuse by bureaucratic management of the RAF who may use this proposed section for crisis management.

 

2.5 THE INSERTION OF SECTION 17B

The Commission has dealt extensively with the principle of double compensation or collateral benefits in Volume 1, page 460 Ė 464 (par 17.190 Ė 17.209).

The question to be answered is why should you not be allowed to benefit from the precautions, which you yourself have taken and paid for. Is it a fair system if a person who does have an extravagant lifestyle with no personal insurance can receive full compensation but a person applying due diligence in respect of himself and his family is entitled to lesser compensation due to the fact that he has received collateral benefits in respect of precautions which he has paid for.

The LSSA supports the recommendation by the Commission (par 17.223 Ė 17.227). The report of the Commission dealt extensively with this aspect and is therefor not repeated in this memorandum.

The LSSA fully supports the view of the Commission that it is difficult to comprehend why prudent individuals should be penalized and the RAF relieved of its current statutory obligations. It is obvious that the only and real motivation for this proposed amendment is to save the RAF money.

The Society does support the deduction of collateral benefits that are paid by the state, such as disability grants, unemployment benefits, state old age pensions and the like.

 

    1. SECTION 18 OF THE ACT

The previous comments by the LSSA have dealt extensively with this aspect. The LSSA supports the capping of the claims of foreigners only in the event that all stakeholders have been consulted and in particular stakeholders in the tourism industry.

The LSSA appreciates that a foreigner may receive huge / extensive compensation with little if any premium paid in respect of the cover.

A proper investigation is suggested to ascertain whether from a tourism point of view it is not more viable to ensure the payment of a premium on entry in the Republic and ensure full compensation in the event of a mishap.

It is therefor suggested that further investigation, consultation and research are necessary.

 

2.7 SECTION 19 OF THE ACT

The decision in the Supreme Court of Appeal in ROAD ACCIDENT FUND VS SAULS 2002 (2) SA 55 needs to be investigated to support or oppose the proposed amendment.

The Court indicated that the question of liability is one of legal policy, reasonableness, fairness and justice. Over the years various limitations to claims of this sort have been considered here and abroad. The Court approved a previous decision in England where the applicable principle was formulated as follows:

"As regards the class of persons to whom a duty may be owed to take reasonable care to avoid inflicting psychiatric illness through nervous shock sustained by reason of physical injury or peril to another reasonable foreseeability should be the guide. I would not seek to limit the class by reference to particular relationships such as husband and wife or parent and child. The kinds of relationship which may involve close ties of love and affection are numerous and it is the existence of such ties which leads to mental disturbance when the loved one suffered a catastrophe."

The Court indicates that it must be accepted that in order to be successful a plaintiff must prove not mere nervous shock or trauma but that he / she had sustained a detectable psychiatric injury.

The Society submits that there is no reason in our law why somebody who, as the result of the negligent act of another has suffered psychiatric injury with consequent indisposition should not be entitled to compensation where as someone with only soft tissue injury is entitled to compensation. It is the submission that psychological or psychiatric injury is "bodily injury" as contemplated in the Act.

No open-ended liability will occur taking into account the principles set by the Court in the SAULS decision.

 

2.8 SECTION 24 OF THE ACT

The proposal by the Fund is a serious intervention of access to the courts of law in South Africa. Structures to accommodate mediation and arbitration proceedings are currently only available in Cape Town and George.

The Fund, itself, conceded at public meetings held in Cape Town to formulate new rules for a mediation arbitration process that referral to arbitration, at all times, has to be a matter of choice and can not be compulsory.

If a voluntary mediation arbitration process is initiated country wide and provided it delivers an affordable, independent, equitable and fair determination of disputes, then the Cape Town experience reveals that such a system will be well supported.

The Society thud supports the extension of the arbitration pilot project currently running in Cape Town provided that it remains a voluntary and alternative procedure, only.

    1. TRANSITIONAL ARRANGEMENTS

Any retrospective enactments will not withstand constitutional challenge on several grounds.

Certain sections, even if enacted prospectively will also be susceptible to constitutional challenge.

The Society will furnish a comprehensive written opinion on the constitutionality of the entire Bill, if afforded a reasonable time in which to do this.