Nxumalo obo Minor and Others v Road Accident Fund (3207/2020; 4751/2021; 4752/2021) [2023] ZAMPMBHC 3 (24 January 2023)

FLYNOTES: MOTOR COLLISION – Road Accident Fund – Contingency fee agreements – Settlement by Fund where matter was before court – Whether lawful for Fund to make payment without a court order – Contingency Fees Act 66 of 1997, s 4(3).

IN THE HIGH COURT OF SOUTH AFRICA

MPUMALANGA DIVISION (MAIN SEAT)

REPORTABLE: YES

OF INTEREST TO OTHER JUDGES: YES

REVISED

24/1/2023

PLAINTIFS

THANDY NXUMALO OBO MINOR CASE

NO: 3207/2020

JETHRO SIBIYA CASE

NO: 4751/2021

LUBISI FIKILE RITHA CASE

NO: 4752/2021

And

ROAD ACCIDENT FUND DEFENDANT

JUDGMENT

LEGODI JP

[1] Any offer of settlement made to any party who has entered into contingency fee agreement, may be accepted after the legal representative has filed an affidavit with the court if the matter is before the court stating- (a) the full terms of settlement; (b) an estimate of the amount or other relief that may be obtained by taking the matter to trial; (c) an estimate of the chances of success or failure at trial; (d) an outline of the legal representative’s fees if the matter is settled as compared to taking matter to trial; ( e) the reasons why the settlement is recommended; (f) that the matters contemplated in paragraphs (a) to ( e) were explained to client, and the steps taken to ensure that client understands the explanation; and (g) that the legal practitioner was informed by the client that he or she understands and accepts the terms of the settlement.[1]

[2] The one question in these proceedings is inter alia, whether it is lawful for the Road Accident Fund to make a payment without court order where a contingency fee agreement has been entered into and the matter that is pending in court is settled. Mr Nkosi on behalf of the plaintiffs in these matters explained in his affidavits the practice that is utilised for payment by the Road Accident Fund as follows:

“… normally when it is computer generated offer, the Fund requires the attorneys to sign the sent offer and return it back to the Fund as a proof of acceptance of the offer. Then when a request for payment is made, the practice is that the attorney will then supply the Fund with contingency fee agreement, proof of banking details and an affidavit by both parties and tax compliance certificate”.

[3] It is this practice that prompted the court in all these three matters to issue an order on 23 August 2022 in terms of which the Fund was required to file affidavit to explain if what is explained by Mr Nkosi, is the Fund’s practice. In the order, the Fund was required to indicate if such practice does not conflict with the imperative in section 4 of the Contingency Fee Act which requires an oversight of the court read with subsection (3) of section 4. Subsection (3) provides that any settlement made where a contingency fees agreement has been entered into, shall be made an order of court, if the matter was before the court. The three matters were before court when they were settled and in all these matters contingency fee agreements have been concluded. (My emphasis).

[4] Mr Mogotsi Moumakwe employed by the Fund as a manager in one of the claims department in the Fund’s Menlyn branch, stated as follows in paragraphs 8.4 to 8.7 of his affidavit deposed to on 30 September 2022:

8.4. I have enquired from colleagues dealing with block settlement regarding the manner in which the issue of contingency fee agreement

compliance is undertaken. I am informed that the standing legal position was that, when an offer is made, the attorney will only communicate acceptance of the offer by submitting a signed offer accompanied by copy of the agreement and the two affidavits.

8.5. The court will note that according to the explanation given by Mr Nkosi, the Fund only ask for these documents at the time when payment is affected. I submit that this is because of an oversight on the part of the few officers who dealt with the position in that way which is wrong. This was never a conscious decision on the Defendant.

8.6. Mr Nkosi and officers he dealt with were not complying in that regard but same cannot be referred to as the practice of the Defendant. Mr Nkosi is an officer of the court and should under no circumstances form part of a practice, which is against the law.

8.7. For him to comply, he does not require any one to chase after him for compliance. He should instead volunteer it. He cannot say I broke the law because the Defendant allowed it”.

[5] ‘The standing legal standing position’ cannot be an oversight by the Fund in terms of the law. That oversight is given to the court in terms of section 4 of the Contingency Fee Act. It appears to be a wrong standing position that was consciously made by the Fund. Mr Moumakwe’s attempt to minimise the wrongs committed by the Fund and its officials and thus seek to attribute more blame to the legal practitioners for the plaintiffs, is in the circumstances unhelpful. It is the Fund that makes payment. It is therefore obliged to pay in terms of section (3) of the Road Accident Fund Act after having investigated and settled as provided for in section 4 (1) (b) of the Fund Act. The buck therefore stops with the Fund. If the Fund has created a procedure or a practice to follow when payment must be made, it is the Fund’s duty to ensure that the procedure strictly complies with the law before payment is made. Any payment without an order of court in circumstances where section 4(3) of the Contingency Fee Act applies, would offend against the law.

[6] The procedure or the practice as explained by Mr Nkosi above, still appears to be followed by the Fund. I suspect that this might be rife in other divisions. Simply put, the procedure is unlawful and seeks to subvert the courts’ powers and oversight role as contemplated in section 4 of the Contingency Fee Act read with sections 2 and 3 thereof. Hopefully, upon the handing down of this judgment, the practice will completely be halted throughout. However,

there seems to be a tendency amongst some attorneys in the division to now of late in RAF matters and matters against the MEC for Health to make an assertion that the plaintiffs have not entered into contingency fee agreements. A statement will be made to the effect that a simple fee agreement where the court’s oversight is not required, has been concluded. In a number of matters where it was suggested that no contingency fee agreement has been concluded, it was actually found that the fee agreements in question were nothing else but contingency fee agreements which did not conform to the imperative in the Contingency Fee Act. The suggestion that no contingency fees agreement has been concluded, appears to be intended to frustrate and subvert an oversight role of the courts and to render the provisions of section 4 academic and not worth the paper is written on.

[7] In paragraph 15.11.4 of the Division’s Practice Directive, it is required that in damages claims, particularly against the Fund and the Department of Health, an attorney who asserts that no contingency fees agreement has been concluded where a matter pending in court is settled, such an attorney is required to file an affidavit and provide information as set out in paragraph 15.11.4.1 of the Practice Directive as amended. Paragraph 15.11.4.1 of the Practice Directive is intended to ensure that compliance with the provisions of Contingency Fee Act is not side-stepped. Hopefully, the Fund will be vigilant in this regard.

[8] In the matter of Chiau v RAF (557/2016,1150/20) [2022] ZAMPMBHC 40 (2 June 22)-SAFLII a fee agreement which was said not to be a contingency fee agreement was actually found to be a contingency fee agreement which unlawful and unenforceable for non-compliance with the provisions of Contingency Fee Act. Some months thereafter the Road Accident Fund, still paid despite the agreement having been declared unlawful and unenforceable. This was brought to the attention of the Judge President by Ms Chiau’s attorney of record. He sought clarity as to what to do. It is very clear that the practice of receiving affidavits and fee agreements and the Fund then agreeing with the plaintiff’s attorneys that no contingency fee

agreement has been concluded, is rife. Payment on the unlawful agreement was in my view, a blatant disregard by the Fund to the

court order in question. This shows the extent to which an oversight of the court is required.

Blame game and enquiry on the issue of costs occasioned by late settlements

[9] The three cases were settled late and at the doors of trial. Enquiry as to costs occasioned by the late settlement followed as contemplated in rule 37A (12) (h) read with rule 39(1)(a)(i)(ii) of the Uniform Rules of Court. Parties were required to file affidavits. Mr M Moumakwe on behalf of the Fund elected to resort to blame shifting insofar as it related to the issue costs occasioned by the late settlement. To sum up, he states that the claimants and or their attorneys in general and in other matters including the three matters under discussion would fail to provide certain documents and that the Fund under such circumstances would raise lack of documents. The Fund will then be forced to wait for further documentation. He further stated that in most cases the documents are provided to the Fund when the matter is now at court just to put the Fund’s officers under pressure to make sure that the officers release offers of settlement while they are under duress. (My emphasis).

[10] This blame exposes the Fund and those in the management for not putting a proper and workable system in place. In particular, for not complying with the legislative imperative and protection provided to the Fund in the RAF Act. As a start, section 24 of the RAF Act deals inter alia, with the requirements for valid lodgement of claims. Section 24(5) provides that if the Fund or the agent does not within 60 days from the date on which the claim was sent by registered post or delivered by hand to the Fund or such agent as contemplated in subsection (1) object to the validity thereof, the claim shall be deemed to be valid in law in all respects.

[11] In the order of 23 August 2022 the Fund was required to indicate in its affidavit as to when the Fund had received the lodgement of the claim in each case, to whom was the file in each matter allocated upon lodgement and what efforts were taken by the Fund to investigate and settle before the issuing of the summons. In dealing with Nxumalo’s case, Mr Maumakwe in paragraph 5.1 of his affidavit alludes to the fact that the claim was lodged on 19 March 2020 at RAF, CSC-Nelspruit. More than 60 days thereafter, that is on 8 June 2020 the lodgement documents were then forwarded by the Nelspruit Branch to Menlyn Region. The claim that was lodged on 19 March 2020 was only registered on the RAF system on 16 October 2020. By this time the Fund had lost protection to object to the validity of the claim. The effect to this is that as on 20 May 2020 the claim was deemed valid in law and in all respects.

[12] The Fund did not only miss the protection under subsection (5) of section 24 but, it also missed the protection in terms of subsection (6) of section 24 which provides that no claim shall be enforceable by legal proceedings commenced by a summons served on the Fund or agent -

(a) before the expiry of a period of 120 days from the date on which the claim was sent or delivered by hand to the Fund or the agent as contemplated in subsection (1); and (b) before all requirements contemplated in section 19(f) have been complied with: Provided that if the Fund or the agent repudiates in writing liability for the claim before the expiry of the said period, the third party may at any time after such repudiation serve summons on the Fund or the agent, as the case may be.

[13] Section 19 deals with the exclusion of the liability of the Fund in certain circumstances. Paragraph (f) of section 19 provides that the Fund or an agent shall not be obliged to compensate any person in terms of section 17 for any loss if the third party refuses or fails-

(i) to submit to the Fund or such agent, together with his or her claim form as prescribed or within a reasonable period thereafter and if he or she is in a position to do so, an affidavit in which the particular of the accident that gave rise to the claim concerned are fully set out; or (ii) refuses or fails to furnish the Fund or such agent with copies of all statements and documents relating to the accident that gave rise to the claim concerned, within reasonable period after having come into possession thereof.

[14] In other words, paragraph (f) (i) of section 19 is confined to the sixty days as contemplated in section 24(5) referred to earlier in this judgment. On the other hand, failure or refusal by the third party (plaintiff) to furnish or provide the Fund or its agent on request with copies of all and documents relating the accident that gave rise to the claim within a reasonable period after having come into possession thereof, is confined to the 120 days referred to in subsection (6) (a) and (b) of section 24. Such failure or refusal to provide documents or copies of statement in respect of which the request was made within 120 days upon receipt of the lodgement documents, will prevent the claimant from enforcing the claim by legal proceedings commenced by a summons. Should the claimant not provide the information as requested, the Fund will be entitled repudiate the clam or to file a special plea in the form of repudiation, as the case may be.

[15] In other words, before all requirements contemplated in section 19(f) have been complied with and the request to comply with such requirements was made within 120 days from date of lodgement, the claimant would not be entitled to issue summons. Such summons can only be issued if the Fund raises repudiation before the expiry of the 120 as contemplated in the proviso under section 19(f). In the present cases, the Fund missed an opportunity to legitimately ask for compliance as contemplated in paragraph (f) (i) and the opportunity to ask for more documents as contemplated in paragraph (f) (ii) of section 19.

[16] Therefore, the statement that ‘the defendant is currently in trouble with this court solely because of the pressure which plaintiff has placed the defendant and that is the policy of the Fund that where all information necessary for claim to be settled is submitted and such claim to be settled by the settlement’, has context. Experience has shown that the Fund does not investigate and settle. Instead, it sits back until summons are

issued as it has happened in the three cases. It does not attend the pre-trial and case management conferences as it has also happed in these cases. Furthermore, the Fund starts to react only when served with dates of trial and does so when costs of litigation for trial had already been incurred as it has happened in these proceedings.

[17] In Nxumalo matter for example, the summons having been served at the beginning of 2021 and later received by the Fund office in Gauteng on 15 February 2021, the matter was only registered on 16 April 2021. This is said to be attributable to the extreme outstanding backlogs. In paragraph 6.2 of his affidavit, Mr Moumakwe makes a statement as follows:

“Thereafter, unfortunately, the matter had to join the queue of the influx of summons already served and waiting to be allocated to the state attorney. The settlement HUB section was however busy settling any matter in which claimant had submitted all documents”

[18] The statement is telling. That is, no appearance to defend was filed and at the same time the summons was not attended to because the claimant did not submit all documents. This latter assumption should be seen in the context of the Fund’s failure to object or repudiate. The suggestion therefore is unhelpful insofar as the Fund seeks to exonerate itself.

[19] Then in a strange way another statement is made as follows:

“6.3 The defendant managed to settle a substantial number of matters and a number of plaintiffs proceeded to withdraw court proceedings. For the above reasons, no one could be allocated the matter that period.

6.4 I submit that there is no specific person who failed to act precisely. The defendant had a backlog of matters caused by the national state of disaster and it became impossible for its employees to attend to the matters timeously.

6.5 The defendant in this regard apologises to this court for having failed to meet certain obligation but indicated that same was not intentional”.

[20] The statement has to be seen in this context: Covid-19 cannot be blamed on the inactive of the Fund. Covid-19 in any event affected everyone including the operation of the courts and the issuing of new matters. Since March 2020 judicial work was limited and courts were not operating optimally. Secondly, the Fund having received summons in February 2021 regarding Khumalo case did nothing to advance its resolution or finalisation. Look at it this way: Having been invited for pre-trial conference, the Fund absented itself. In dealing with the Fund’s failure to attend the pre-trial and judicial case management conferences, Mr Moumakwe in paragraph 7.1. of his affidavit states:

“The forced changes which needed to be made in order to protect the interest of the Fund, officials were then moved to attend the trial matters, which were at the time enrolled and as such with outstanding documents remained without officers being allocated.”

[21] The statement signifies chaos in the Fund’s management of the claims. The suggestion that ‘…the officials who were allocated to deal with the matter after it was scheduled for trial since explained to this court that they did not know about the pre-trial as well as JCM’, (meaning Judicial Case Management), is unhelpful to the Fund for the purpose of this enquiry. It surely shows management or administration of the Fund that is in chaos in dealing with cases that are pending in our courts. There is proof that the Fund was served with the pre-trial notices for all the three cases. But, no one from the Fund’s side cared to attend or respond thereto. The modes operandi and the explanation is the same in all these three matters.

[22] The point is this: In all these three matters, the summons was duly served. The plaintiffs’ attorney went beyond the call of duty by serving the Fund with notice for the pre-trial and judicial case management conferences including serving the Fund with notice of set down. In terms of Rule 31(4) of the Uniform Rule of Court, the proceedings referred to in sub-rules (2) and (3), shall be set down for hearing upon not less than five days’ notice to the party in default, provided that no notice of set down need be given to any party in default of notice of intention to defend. It is the indifferent attitude of the Fund towards litigation that caused these three cases to be settled late on the date of hearing. For this, the Fund cannot escape the punitive cost order contemplated in Rule 37(9)(a)(i) and (ii) of the Rule 37A (16) of the Uniform Rules of Court, especially those costs connected to or occasioned by the late settlement.

[23] Just to restate: In terms of Rule 37(9)(a)(i) of the hearing of the matter the court shall consider whether or not it is appropriate to made a special order as to costs against any party or such party’s attorney, because such party or such party’s attorney did not attend pre-trial conference. The Fund did not attend or participate in the case management process of these matters and also did not attend pre-trial conference that was convened by the plaintiff in each matter. The Fund therefor cannot escape the special order costs connected to or occasioned by the late settlement.

[24] Rule 37(9)(a)(ii) similarly, provides that at the hearing of the matter the court shall consider whether or not it is appropriate to made a special order as to costs against a party or such party’s attorney because failed to a material degree to promote effective disposal of the litigation. Failure to attend pre-trial conference and settlement of the matter on the date of trial when costs of preparation for trial have already been incurred, is failure to promote effective disposal of litigation. All these matters were settled late in similar circumstances and this did not amount to effective disposal of litigation.

[25] Paragraph (a) (ii) of Rule 37(9) should been seen in the context of Rule 37A which rule has introduced judicial case management process. These matters were all the subject to judicial case management as per Practice Directive of this Division. In terms of sub-rule (2) (a) of Rule 37A case management through judicial intervention shall be used in the interest of justice to alleviate congested trial rolls and to address the problems which cause delays in the finalisation of cases. Paragraph (c) of sub-rule (2) of Rule 37A inter alia, provides that case management through judicial intervention shall be construed and applied in accordance with the principle that notwithstanding the provisions of rule 37A providing for judicial case management the primary responsibility remains with the parties or their legal representatives to prepare properly, comply with all rules of court and to act professionally in expecting the matter towards trial and adjudication. The Fund absented itself in this regard.

[26] The Fund cannot escape from being penalised with punitive or adverse costs order as envisaged in Rule 37A (16). Sub-rule (16) provides that any failure by a party to adhere to the principle and requirements of Rule 37A may be penalised in by way of an adverse costs order. This should be linked to sub-rule 37 (9)(a)(ii) referred to above. The Fund refrained from participating in the pre-trial and judicial case management conferences. For this, I come to the conclusion that all costs connected to or occasioned by the late settlement resulting into this enquiry has to be borne by the Fund on an attorney and client scale.

[27] In conclusion, the claim-handlers’ failures can only be attributed to the management’s failures. The Fund’s management headed by the CEO and the Board are responsible for the failures to put a management system, policies or procedures that will ensure that the mandate of the Fund is complied with. However, the management failed to put such system, policies or procedures that will ensure that investigation of the claims and settlement thereof is adhered to including compliance with section 24(5) and (6) read with section 19(f) of the Act. The management, CEO and the Board are lucky that they were not given an opportunity to respond to these failures of the Fund which resulted in the late settlement in

these matters before me.

[28] Consequently an order is hereby made as follows:

28.1. Settlement in each matter is hereby noted and is hereby recorded as per the legal representative for the plaintiffs that contingency fee agreements have been concluded in all the three matters.

28.2. The plaintiff’s attorneys to comply with section 4 of the Contingency Fee Act read with paragraphs 15.8 to 15.11.3 of the amended Practice Directive dated 9 January 2020 before any payment can be made by the Fund.

28.3. The Fund to pay the costs accessioned by or connected to the late settlements on the date of trial on an attorney and client scale. Such cost to include the costs of the enquiry herein.

LEGODI JP

Judge President of the High Court

DATE OF HEARING: : 23 AUGUST 2022

DATE OF JUDGMENT : 24 JANUARY 2023

FOR THE APPLICANTS : L L NKOSI

REGUS BUSINESS CENTRE

CORNER FERREIRA & VAN DER MERWE STREET

NELSPRUIT

1200

TEL: 013 754 7775

FAX: 086 541 9563

REF: LLN/RAF001/21

FOR THE DEFENDANT : STATE ATTORNEY

C/O ROAD ACCIDENT FUND

MBOMBELA HIGH COURT BUILDING

MBOMBELA

[1] Section 4(1)(a)-(g) of the Contingency Fee Act