Supreme Court rules in favour of RAF CEO Letsoalo, holds RAF liable instead for costs of delayed claims

Road Accident Fund CEO Collins Letsoalo and the RAF board were let off the hook by the Supreme Court of Appeal, which found that it was instead the RAF that was liable to pay costs for two victims who challenged the delay of their payments.

This after the RAF, Letsoalo and the board challenged the Mbombela High Court’s ruling that ordered them to pay costs in their personal capacity for an inquiry by the court into the delays of settling the two RAF claims. These settlements happened a day before the matters were to be heard for trial as the two claimants, Dumisani Elvis Hlatshwayo and Mzwandile Modcay Masilela, had instituted delictual claims.

In the first matter, Hlatshwayo instituted a claim in March 2018, which was not rejected and the RAF acknowledged receipt of the claim.

However, on September 10 2019, Hlatshwayo instituted an action against the RAF. The RAF was notified of the judicial case management hearing and the conference, but it did not attend. The trial was set down for March 7 2022, but a day before the trial, the RAF made an offer to Hlatshwayo’s attorneys, which was accepted on the day of the trial.

In the second matter, Masilela instituted a direct claim against the RAF on January 12 2018, which was registered by the RAF and no objection of validity of the claim was proved. On March 17 2018, the RAF requested Masilela to provide hospital and clinical records, but Masilela instead opted to issue a summons.

After an exchange of pleadings between the RAF’s appointed firm of attorneys and Masilela’s attorneys, the hospital records were submitted in August. After Masilela’s attorneys delivered the conference and judicial case management meeting notices to the RAF’s previous panel of attorneys, which no longer serviced the RAF as the tender was terminated, the attorneys failed to respond to the notice or appear at the case management hearing.

While Masilela had claimed for loss of earnings, expert reports from the occupational therapists, the industrial psychologist and the actuary were still outstanding, which the RAF said was the reason they could not sit down for the case management hearing.

Despite this, the trial was to be heard on March 14 2022, but the RAF made an offer in respect of the merits, future medical expenses and general damages on March 9 2022. Masilela accepted the offer the same day, but the claim was partially settled due to the outstanding issue of the loss of earnings. The partial settlement was also concluded a day before the hearing, similar to Hlatshwayo’s settlement.

However, due to the late settlement of the claims, the Mbombela High Court refused to make the settlement agreements orders of the court. Instead, the late settlements of the claims prompted the judge president to establish a full court to inquire into the reasons for the delay and late settlement of claims.

In January 2023, the full court handed down judgment and ordered that Letsoalo and the RAF Board pay, jointly and severally, the costs connected to the late settlement of each matter.

These costs included the costs related to the inquiry proceedings and costs of two counsels for the late settlement of the claims.

Letsoalo was ordered to bring the judgment to the attention of the minister of transport and the board.

The RAF, its CEO, and the board sought leave to appeal the order at the high court, which dismissed their leave to appeal application. However, their leave to appeal at the Supreme Court of Appeal was granted.

The SCA had to first determine if it was appropriate for the judge president to refer Hlatshwayo and Masilela’s claims to the full court for an inquiry and whether a case has been made for the orders granted.

Acting judge of appeal Pitso Molitsoane said the judge president of the high court followed practice directives of the high court, which state that where settlement is concluded on the day of the trial, the court may inquire into the cause of the late settlement. This will be to determine which party should handle the costs.

“Over and above this, it was within the prerogative of the judge president, acting in terms of the ... SCA to constitute a full court. The high court was entitled, in terms of the practice directives, the empowering [rules] as well as the wide discretion it has in the award of costs, to hold an inquiry when the two cases were brought before it for the purpose of making the settlement agreement orders of court. It was thus competent and proper for it, to refer the two cases to the full court to inquire into the question of wasted costs,” said Molitsoane.

The second contention the court had to determine was whether it was proper for the court to order that the RAF, the board and CEO pay costs in their personal capacity.

However, neither the RAF board nor any of its members were before the full court during the inquiry. Despite the CEO “serving at the pleasure of the board”, Molitsoane found that this did not justify ordering the board to pay costs. It was common cause that the board was not part of the proceedings from the start to the end of the inquiry, he said.

“The full court issued numerous directives calling on different functionaries of the RAF to provide explanatory affidavits and in some instances, calling for relevant people to appear before it in person during these proceedings, but such an invitation was never extended to the board. The full court was fully aware that the board and/or any of its members were not before it, hence it also directed the CEO to bring its judgment and order to the attention of the board.

“The full court ordered personal costs orders against the board without affording it the opportunity to be heard. There is no explanation or reasons advanced in the judgment why the board has been mulcted with costs. Such an order goes against the notion of procedural fairness and cannot stand.”

The third matter the court needed to decide on was whether the costs should have been granted against Letsoalo as the CEO and the board in terms of the Road Accident Fund Act.

According to the RAF Act, no member of the board or officer or employee of RAF shall be liable for anything done in good faith when performing his or her functions or duties in terms of the act.

The RAF, Letsoalo and the board contended that the full court did not properly consider and apply the facts of whether they acted maliciously in delaying the settlement. According to section 15(3) of the act, should functions be performed in bad faith, the RAF should be held liable for costs.

Molitsoane then turned to the issue of whether the RAF should bear the costs of the inquiry.

There was no dispute that the RAF was liable for costs in the litigation between itself and the respondents, he said.

“The respondents [Hlatshwayo and Masilela] did not contend for an award for personal costs against [Letsoalo] and [the board]. However, both respondents contend that the RAF should be liable for the costs of the inquiry. The only issue thus remains is whether the RAF should be mulcted with costs in respect of the inquiry as envisioned in ... practice directives.”

Instead, the full court blamed the late settlement of the claims on the RAF on two grounds.

The first being that the system implemented by the RAF after terminating its contract with panel attorneys resulted in the “failure” by the RAF to participate in the pretrial procedure and failure to attend court on the trial dates. Second, the high court found that the problems experienced by the RAF “were actually caused by lack of planning at the time when the files were demanded from the panel of attorneys” when the contracts were terminated.

“The full court, in scrutinising the conduct of the RAF after its contracts with its panel of attorneys had terminated, found that the RAF did little to expedite the finalisation of the claims before litigation.”

While the inquiry was not as a result of a request by the RAF, the RAF, however, failed to validate its claims as required by the act and failed to attend the conferences and judicial case management hearings, which led to the high court holding an inquiry into costs, said Molitsoane.

“[RAF] was to blame for the holding of the inquiry. The case management procedures, including hearings relating to costs, necessarily form part and parcel of litigation. It is thus in the interests of justice that the RAF be held liable for the costs of the inquiry as [Hlatshwayo] and [Masilela] were not responsible in any way.”

The court upheld the appeal by Letsoalo and the board but dismissed the appeal application by the RAF, ordering the RAF to pay Hlatshwayo and Masilela’s legal costs.

“The [RAF] is ordered to pay [Hlatshwayo and Masilela’s] costs of suit, including the costs of the inquiry and of two counsels in the inquiry, where so employed,” said Molitsoane.