The Road Accident Fund (RAF) and its chief executive cannot be singled out to take accountability for the failure of a scheme that is unsustainable, the High Court in Pretoria held this week when it dismissed an application for the Fund’s chief executive to be sentenced to prison for unpaid judgment debts.
The application was brought by Advocate Michelle van Antwerpen on behalf of two applicants who were injured in road accidents. They obtained judgment against the RAF in 2019 for unpaid damages claims. The first applicant’s judgment was about R11.1 million and the second applicant’s judgment was about R1.8m.
The RAF settled the capital amounts but did not pay the interest. When the application was launched, the first and second applicants’ claims for outstanding interest were allegedly about R1.6m and R400 000 respectively.
Judge Denise Fisher said it appeared the RAF did not dispute that amounts were still due under the judgments, and her judgment was made on the basis that the judgment debts owing to the applicants had not been paid.
The applicants sought an order for the “coercive suspended imprisonment” of Collins Letsoalo, the Fund’s chief executive, because of the RAF’s failure to pay the judgment debts. They cited Letsoalo because he is responsible for the conduct of the RAF’s board.
The applicants argued the failure to pay constituted a deliberate flouting by the RAF’s board of its constitutional function. They alleged the RAF can meet its indebtedness but simply chooses not to pay. In support of this allegation, the applicants relied on the fact that Letsoalo reported in an affidavit in litigation in June 2021 that the RAF had an “unprecedented surplus of R3.2 billion as at the end of March 2021”.
The applicants conceded that the relief sought was extraordinary. However, they contended that the court’s wide powers under the Constitution allowed the proscription against civil imprisonment for failing to pay a judgment debt to be overridden in this case. They argued this was because the non-payment was not merely a debtor’s delinquency but also conduct inconsistent with the RAF’s obligations under section 12(1) of the Constitution, which accords to all the right to security of the person and freedom from violence.
Judge Fisher said it was common cause that the RAF’s bank accounts as at the date on which execution was attempted by the applicants were empty. The applicants suggested the RAF’s cash reserves might have been put beyond execution. But the judge said there was no evidence of any secreting away of reserves.
The main argument of the respondents (the RAF and Letsoalo) was that the temporary insufficiency of funds that resulted in the failure to pay is a feature of administering a fund that is insufficiently funded by the state.
Minister of Transport should have been joined
The RAF, which is entirely funded by the state, is a component of a central, governmentally run social security scheme. Such a scheme demands legislative and executive co-operation in accordance with section 41 of the Constitution, Judge Fisher said.
The RAF’s board is appointed by the Minister of Transport, and its authority is exercised subject to the minister’s powers.
The minister, the member of the national executive responsible for the administration of the RAF Act, was not joined in the application. This failure was a symptom of the applicants’ attempt to cast the RAF as the sole failure in what is a cohesive and co-operative constitutional scheme, Judge Fisher said.
“The targeting of the conduit for payment of social benefits without resort to the broader structure and in the absence of engaging the complexity of the scheme and governmental policy is patently without any legal cogency.”
Failure lies with government as a whole
Judge Fisher said it was beyond dispute that the RAF’s current board, as many of its predecessors, inherited a Fund that was insolvent.
“Whilst the RAF has apparently been reluctant to admit bankruptcy in these and other proceedings, there is no option but for this position to be met head-on. The RAF cannot seriously deny that it is unable to pay its debts as and when they fall due, and thus that it is technically insolvent,” she said.
The principles of co-operative governance espoused in section 41 of the Constitution mean Parliament has an obligation to provide a legislative scheme that provides reasonable, fair, and affordable compensation to all innocent victims of motor accidents.
It is not in dispute that certain judgment debts against the RAF are not being met. This, on the face of it, is undeniably a failure of social justice. But, Judge Fisher said, the responsibility for such failure accrues at various levels and in a number of spheres of government, not only the RAF.
“The flawed approach adopted by the applicants lies in the failure to allow for the location of the constitutional right with reference to the complex inter-governmental duties which are the source and origin of a social system which insures those who suffer injury and damages as a result of motor vehicle against their loss.”
The Constitution provides for the right to have access to a financially viable social security insurance fund with a compensation scheme that is fair, equitable, and sustainable. This constitutional duty can be realised only with legislative and executive co-operation.
“A proper challenge to an alleged failure cannot be launched without an inclusive approach and a holistic challenge to failings in the scheme.”
Remedy is counter-intuitive
Judge Fisher described the remedy sought by the applicants as counter-intuitive.
“The motive for coercive civil imprisonment is that payment will be extracted by the placing of he, who has the keys to his own freedom, in a position where he is forced to act in accordance with his duty in order to free himself.
“If, as the respondents allege, the RAF cannot, within the exercise of its powers and functions, pay the balance of the amount due to the applicants because its obligations to manage the fund do not allow for their preference in a commercially insolvent situation, then the conduct of the CEO has not been shown to be in conflict with the Constitution.
“Mr Letsoalo cannot command more resources to obtain his freedom in the event of his incarceration. If he were able to take moneys earmarked in the administration of the board for other debts, this preference would not serve to vindicate the function of the board in the context of the legislative scheme and the constitutional function which it is enjoined to fulfil.”
RAF cannot be singled out
Judge Fisher concluded that the RAF and its chief executive cannot appropriately be singled out as the state organ that must take direct and exclusive accountability for the failure of a scheme that is universally acknowledged to be interim in nature and unsustainable.
“This must not be interpreted to allow impunity for non-payment of due indebtedness by this state organ.
“A constitutional challenge of this nature would have to be mounted in a considered manner with due regard being paid to the co-operative nature of the scheme. The bringing of such a challenge may be overdue.”
The approach taken by the applicants was self-evidently devoid of achieving a proper constitutional remedy in a crucial area of social protection, Judge Fisher said.
The judge dismissed the application with costs, including the costs of senior and junior counsel.
In awarding costs, Judge Fisher said the applicants’ failure to acknowledge the broader social security environment and seeking a remedy that was inherently counter-intuitive and admittedly extraordinary was ill-considered. The manner in which the application was conceived was “insubstantial”, and it was evident that the Minister of Transport should have been joined in the application.
