M E M O R A N D U M

To: The General Council of the Bar of South Africa

From: The Parliamentary Committee

re: ROAD ACCIDENT FUND SECOND AMENDMENT BILL

Introduction

  1. In terms of the Second Amendment Bill, 2003, the Road Accident Fund seeks to introduce far-reaching amendments into the provisions of the Road Accident Fund Act No. 17 of 1996, which require consideration and comment.

  2. When considering the proposed amendments to the Act it is important to appreciate that the object of the third party legislation which commenced with the Motor Vehicle Insurance Act of 1942 was to ensure, through the compulsory insurance of motor vehicles, that injured persons or their dependents who might be unable to recover damages owing to the inability of the parties liable at common law to pay, should, with certain exceptions, receive full compensation from insurers for loss or damage suffered as a result of bodily injury or death. In subsequent legislation the compulsory insurance of motor vehicles was replaced by a dedicated fuel levy. However, the object remained to compensate injured parties or their dependents fully.

  3. As highlighted more fully hereunder, certain of the proposed amendments seek to limit the compensation payable to injured parties whereas those parties will be precluded from claiming the balance of the damages suffered by them from the wrongdoer (section 21 of the Act remains unamended).

  4. Furthermore, certain of the proposed amendments seek to amend the common law and in many respects seem to be unconstitutional.

  5. Obligatory furnishing of undertaking in respect of future medical expenses:

    6. Whereas the present wording of s 17(4) of the Act provides for the discretionary furnishing of an undertaking by the Fund in respect of future medical expenses, the effect of the amendment will be that the Fund will in future have no discretion in this regard. In the past the Fund has not always tendered an undertaking. For example, where medical expenses will be incurred overseas, mindful of the fluctuation of the Rand the Fund has paid a globular amount usually at a substantial discount in settlement of claims for future medical expenses. It is considered that it is undesirable to remove this discretion and make the furnishing of undertakings obligatory in all situations irrespective of the circumstances.

  6. Payment of claims for future loss of income and support by instalment:

    7. Whereas on the present wording of the Act the Fund may furnish an undertaking to pay such claims by instalments in arrear, such instalments to be agreed upon by the parties, the effect of the amendment is to remove this discretion and make payment by instalment obligatory. The amendment also removes the requirement that the instalments must be agreed between the parties. It is pointed out that the Bill does not stipulate the period in respect of which instalments will be made, for example, whether such payments will be made annually or monthly. Experience has shown in the context of the administration by the Fund of undertakings for future medical expenses that the administration of such undertakings by the Fund has been unsatisfactory and, in certain instances, has led to further litigation. It is pointed out that for the Fund to administer, for example, monthly payments to the large number of claimants would be a massive logistical exercise and it is doubted that the Fund has the capacity to administer these payments. If such a system is not efficiently managed this will be to the prejudice of in most instances indigent claimants.

  7. Payment of general damages in instalments:

    8. Provision is made for the payment of general damages which will be suffered in the future by way of instalments in respect of such loss, which exceeds the prescribed amount. Such amount and the method of payment of such instalments are to be prescribed by regulation. This provision presupposes that a court will have to decide not only upon the overall quantum of the claim for general damages but separate the quantum of past from future damages. It is considered that this, in itself, will be an extremely difficult and unscientific exercise. Again, the administration of these payments will place a yet further burden upon the limited resources of the Fund to the ultimate detriment of claimants.

  8. Future medical expenses limited to prescribed tariff:

    9. Section 2 of the Bill makes provision for the limitation of medical expenses the Fund would be obliged to pay in terms of an undertaking to ‘the prescribed medical tariff’. No information is given as to the basis of the intended tariff. The tariff will presumably not constitute a full indemnity to the injured party and will probably not cover the cost of treatment at private hospitals and by medical practitioners in private practice. Unless the prescribed tariff is sufficient to cover the reasonable cost of treatment, the effect of the amendment will be to deny many claimants treatment at all where they cannot afford to cover the cost of the treatment which exceeds the prescribed tariff. This has happened in the past where the Fund has furnished a so-called apportioned undertaking in terms whereof it would only be liable for a percentage of the cost of treatment. In such instances an undertaking is practically worthless to most indigent claimants due to their inability to afford to pay the full cost. They are consequently denied medical treatment in respect of their injuries.

  9. Deduction of collateral benefit:

    10. The effect of this amendment is to discard the principle of res inter alios acta, which constitutes a major inroad to the principles of our common law. It is considered that this is unwarranted and would operate to penalise those prudent members of society who insure against these risks.

  10. Exclusion of non-residents:

    11. In terms of s 3 of the Bill the liability of the Fund is limited to an amount determined by the Minister in respect of claims at the instance of so-called ‘non-residents of the Republic’. No information is given as to the quantum of the prescribed amount. ‘Non-resident of the Republic’ is defined as a person who is not permanently resident in the Republic at the time of the occurrence. It is pointed out that apart from the large number of tourists who visit the country, there are many other persons who have homes in South Africa and overseas, but depending upon the circumstances, may or may not be regarded as being permanently resident in South Africa. These persons and ordinary tourists would have to arrange for top up cover and, it is considered, have a negative impact upon the tourist industry. The imprecise concept of permanent residence will also leave many people in uncertainty as to whether they would be fully covered or not. Such people may have take out insurance ex abundanti cautela.

  11. Damages for emotional shock:

    12. The effect of the amendment is to exclude a claim for damages for emotional shock, which again constitutes an inroad into the principles of our common law. It is pointed out that these claims do not constitute significant components of the damages paid by the Fund and that such an inroad into our common law is not warranted.

  12. Obligatory mediation and arbitration:

Section 5 of the Bill provides that a claimant may not institute action against the Fund unless the prescribed procedure for the resolution of disputes through mediation and arbitration has been exhausted. The effect of this amendment constitutes a serious inroad into the rights of claimants to access to our courts, in that mediation and arbitration can ordinarily only be implemented by consensus between the parties concerned. The role of the court would appear to be a very limited one, in that the process of arbitration would normally achieve a final decision on the matter and the court would simply be the mechanism by which the arbitral award is enforced against the other party. It is considered that to remove a claimant’s right to approach the courts not only offends the claimant’s constitutional rights for access to justice and to our courts, but is undesirable in the absence of the consensus of both parties.

13. General

There is no information concerning the nature of the regulations which the Minister will be empowered to promulgate. The amount and/or method of calculating the instalments payable in respect of future loss of earnings and general damages and the tariff of medical expenses are material issues in respect whereof no information has been provided. Further, the question of interest accrued due to the delay in payments must be addressed in order to afford injured parties and their dependents the compensation to which they are entitled without having the value thereof eroded by inflation.

OWEN ROGERS SC

Chairperson: Parliamentary Committee

General Council of the Bar of South Africa

10 October 2003