RAF’s legal rope nearing its end as High Court tells fund to pay R33 million

The Road Accident Fund’s argument that it is not liable for past medical expenses paid by an injured person’s medical scheme following a motor vehicle accident has been rejected again – this time by the Pretoria High Court.

As “again” suggests, this is not the first time the RAF has made this argument and lost. So far, the RAF has been unsuccessful in its argument in the Supreme Court of Appeal (Bane and Others v D’Ambrosi and Road Accident Fund v Abdool-Carrim and Others) and the High Court (Discovery Health v Road Accident Fund and Another, Rayi NO v Road Accident Fund, Watkins v Road Accident Fund, and Van Tonder v Road Accident Fund).

In the most recent case – Road Accident Fund v Sheriff of the High Court for the District of Centurion East and Another – heard on 13 December last year, the RAF contested a debt of R33 million owed to individuals (the second respondents) injured in car accidents for past medical expenses. These individuals, who have medical scheme cover, secured court orders for their expenses, but the RAF failed to pay up. Facing the imminent sale of assets to cover the debt, the RAF hurriedly filed an application to halt the execution of these court orders until it launches applications to challenge them.

The “central controversy” to be decided in this case was whether the RAF had met its onus to stay the execution of the writs.

The RAF contended that a sale of execution involving R33m of its assets would be enough to interfere with its daily functioning. The second respondents contended that the RAF had been aware of these writs for a long time, and the judgments underpinning them were granted more than a year ago.

In the judgment delivered on 19 February, Acting Judge Irene de Vos, dismissed the RAF’s urgent stay application and granted the order for the RAF to pay the costs, including the costs of two counsel on the attorney-and-client scale.

Section 19 of the Road Accident Fund Act

In an internal communiqué dated 12 August 2022, the RAF’s acting chief claims officer instructed regional managers to ensure that their teams assessed claims for past medical expenses and rejected the claims if a medical scheme had already paid them.

“The reason to be provided for the repudiation will be that the claimant has sustained no loss or incurred any expenses relating to the past medical expenses claimed. Therefore, there is no duty on the RAF to reimburse the claimant,” the communiqué said.

It has since been alleged that the directive is unlawful and inconsistent with the provisions of section 17 of the RAF Act, which obliges the RAF to pay a claimant’s proven damages, of which past medical expenses are a part.

De Vos AJ described the legal relationship as a contractual one between the person and the scheme, which obliges the person to pay back the monies received from the RAF to the scheme, as well as a statutory relationship: between the RAF and the person, which obliges the RAF to pay the injured person’s damages, which include past medical expenses.

A thread that runs through the various cases heard so far is the RAF’s reliance on section 19(d)(i) of RAF Act.

Section 19 excludes the RAF’s liability in certain circumstances.

Section 19(d)(i) provides that the RAF shall not be obliged to compensate any person in terms of section 17 for any loss or damage “where the third party has entered into an agreement with any person in accordance with which the third party has undertaken to pay such person after settlement of the claim, a portion of the compensation in respect of the claim”.

In short, the RAF argues section 19(d)(i) excludes its liability when people enter agreements with medical schemes.

However, De Vos AJ repeated the SCA’s view that the purpose of section 19(d) is to protect injured persons from entering champertous (unlawful litigation funding) agreements.

The judge said the SCA expressly approved how section 19 is functioning.

Per the SCA judgment: “For if a third party’s claim is valid and enforceable and the supplier’s is not, the fund would still be liable to compensate the third party, who in turn remains contractually liable to the supplier.”

Donald Dinnie, director at Norton Rose Fullbright, commented on the High Court’s judgment in an article posted on the law firm’s website.

According to Dinnie, South African courts have expressly approved the way section 19 functions.

“The supplier’s (in this case, the medical scheme’s) right to claim from the RAF is conditional on the validity and enforceability of the injured person’s claim and does not render the scheme’s claim unenforceable against the RAF,” he said.

He said that in Road Accident Fund v Sheriff, the court reaffirmed that an agreement between a medical scheme and an injured person is an insurance agreement and not champertous.

Dinnie added that the court referred to and accepted that it is bound by various judgments that have held, as a matter of principle, that payment by a medical scheme does not relieve the RAF “of its obligation to compensate the plaintiff for past medical expenses”.

“The court discussed and reaffirmed the principles of double compensation and a new intervening cause (res inter alio actos), and the judgment will, therefore, be of interest to all insurers engaging in both recoveries and dispute resolution processes,” said Dinnie.

The general principle, Dinnie said, is that benefits received by a claimant from their own insurers and other paid-for indemnifiers are not to be taken into account in claiming or reducing damages claimed.