High Court orders RAF CEO to pay legal costs ‘out of his own pocket’
Road Accident Fund (RAF) CEO Collins Letsoalo and the fund’s board have been ordered in a High Court judgment to jointly and severally “pay out of their own pockets” the costs associated with the late settlement of two claims lodged with the fund.
Mpumalanga Judge President Frans Legodi, with Deputy Judge President Sheila Mphahlele and Judge Brian Mashile concurring, were highly critical of Letsoalo and the RAF board in the judgment handed down on Tuesday to an inquiry into the late settlement of two claims lodged against the fund by Dumisani Elvis Hlatswayo and Mzwandile Modcay Masilela.
Legodi criticised the late settlement of RAF claims, or the settlement of claims on the dates of trial, when enormous costs of litigation were already incurred and not preventable.
The judgment also revealed the chaos at the RAF, particularly since the fund instructed its panel of attorneys to return their files as part of a shift to an in-sourcing model at the fund.
Legodi said the cost order against Letsoalo and the RAF Board shall include the costs to date connected to or associated with these inquiry proceedings and the costs of two counsel, where applicable, that resulted from or were connected to the late settlements.
He also ordered Letsoalo to bring this judgment to the attention of Minister of Transport Fikile Mbalula and the RAF board by no later than 26 January 2023 and confirm to the registrar of the Mpumalanga High Court that this has been done by no later than 27 January 2023.
Masilela’s attorneys lodged his claim with the RAF on 11 January 2018.
The case was certified trial ready on 25 January 2022 without the RAF participating in pre-trial and/or case management conferences despite notice for these conferences being served on the fund.
It was enrolled for trial on 14 March 2022 and the RAF claims handler, after initially asking for further information, then obtained a mandate for the merits, future medical expenses and general damages of the claim.
This resulted in a tender being made on 9 March 2022, with this offer accepted on the same day.
Hlatswayo’s claim was lodged with the RAF on 26 March 2018. The matter was on trial on 7 March 2022 when it was settled in its entirety.
The system implemented by the RAF after the disposal of the panel of attorneys from June 2020 created challenges for claim handlers, who stated that on some days they could have more than 20 trials to attend to on a single day.
Legodi said most claim handlers were said to have more than 100 matters that they must attend to in their respective portfolios.
He said that for the RAF to allow matters capable of being settled to reach the stage of trial and then only to be settled on the dates of trial or later, defeats the Act’s object to investigate, settle and pay compensation.
Legodi said this has a huge negative impact on the use of the monies of the fund and quoted from an affidavit in which Letsoalo said there were 185 773 claims in 2005, which resulted in R941 million in legal costs.
There were only 92 101 claims in 2018 but the legal costs rocketed to R88 billion.
“In 2019 the legal costs increased to R10.6 billion. This ballooning of legal costs can only be attributed to not enforcing and or complying with the law as provided for… [in] the Act.
“The buck stops with the CEO, his management and the board. Spending so much money on legal costs can only be described as a failure to manage and utilise the money of the fund for the purposes of the Act,” he said.
Legodi said Letsoalo, the fund’s management and board were fully aware that before the return of the many files from the panel attorneys on pending matters in the courts, a solution had to be found first and much more time was needed to find workable and effective solution.
“The real question therefore is what did the RAF do to ensure that our courts are not brought to a stand-still at a great prejudice not only to the administration of justice affecting the claimants or litigants but also to the RAF itself,” he said.
Legodi said it is clear in Letsoalo’s affidavit the problems faced by the RAF were largely due to its counterproductive legal strategy in terms of which only 2% of the claims were settled within 120 days and 98% through litigation.
The RAF then decided to adopt a different model, and to reduce legal costs.
The intention was to settle 98% of claims within 120 days and only litigate on 2% – and to immediately settle the majority of cases that were already on the roll from June 2020 onwards.
“This [Letsoalo] concession is telling and if this dream was realistic, achievable and had come true, we would not have been in these proceedings and dealing with an inquiry to determine who must be held liable in the form of costs order arising from late settlement of the two cases,” he said.
Legodi said an attempt to try and blame the panel attorneys for not having returned the files in time has no merit and is not based on any factual basis because, as of 1 June 2020, there was nothing in place to absorb the many files from the panel attorneys for the matters pending in the courts.
The RAF, represented by the CEO and the Board “are to be blamed” for this system in dealing with trial matters, he said.
Legodi added that ordering the claim handlers to refer every matter pending in court to the State Attorney’s Office for pre-trial and judicial case management conferences while knowing that a system has not been put in place in the State Attorney Office for such matters to be efficiently and effectively dealt with “is not acting in good faith to deserve a protection in terms of section 15(3) of the Act”.
He rejected argument that there are no facts to show the late settlements are connected to the conduct of the CEO and the board.
The Masilela case was settled too close to the date of trial and the Hlatswayo matter was settled in its entirety on the date of trial.
“The claim officers who had deposed to the affidavits in these matters all pointed to a bus that had no direction.
“But, all overwhelmed by a chaotic situation created by the management steered by the CEO and the fund’s Board,” he said.
Legodi described the failure of the RAF, CEO and board to observe the Mpumalanga Division’s Practice Directive rules in the present two cases as “inexcusable”.
Responding to Letsoalo’s contention that he was not a party to either of the two cases and had not received notice of any relief to be sought against him personally, Legodi said “the buck stops with the CEO as to what happens to those members of the staff and the conditions of their employment”.
Legodi referred to the “weapon” the courts have in the form of cost orders, which are intended to avoid the costs of protracted litigation, when the rules of the court are not complied with.
He said intervention through a judicial case management process also allows the court to have an oversight and to refuse to certify matters trial ready unless satisfied that the matter is indeed ready for trial.
“The courts are required to take charge of the pace of litigation and not only [be] dictated by the parties. The pro-activeness of the courts is required,” he said.