RAF liability: Reconsidering supplier claims

April 1st, 2024
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Picture source: Getty/iStock

Payment of suppliers (such as hospitals and medical practitioners) as separate claims (separate from third party’s s 17(1) personal claim) in terms of s 17(5) of the Road Accident Fund Act 56 of 1996, has been an accepted Road Accident Fund (RAF) practice since 2000. Section 17(5) was subjected to judicial scrutiny but unfortunately, no definitive clarity of the real scope and application of s 17(5) was established. The RAF’s precarious financial situation predicates reconsideration of what seems to be a burgeoning liability. In this article, the validity and application of existing judicial interpretation of s 17(5) is critically evaluated, and the administrative and financial consequences of the current interpretation highlighted (for comprehensive discussions of s 17(5) see H Klopper The Law of Third Party Compensation 4ed (Durban: LexisNexis 2020) at 62; H Klopper ‘Supplier’s claims in terms of section 17(5) of the Road Accident Fund Act 56 of 1996’ (2007) 70 THRHR 469; H Klopper ‘Supplier’s claims against the Road Accident Fund’ 2008 (Jan/Feb) DR 59; R Ahmed ‘Defining and Bringing Clarity to Suppliers’ Claims in MVA Matters’ (2010) 73 THRHR 307).

Separate suppliers’ claim authorised by s 17(5)?
  • Historical background

Suppliers’ claims can be traced to s 12 of the Motor Vehicle Insurance Act 29 of 1942 (MVA Act). This section empowered a supplier to, without cession of action, recover its account direct from an authorised insurer. Section 12 was replaced by s 26 of the Compulsory Motor Vehicle Insurance Act 56 of 1972 (CMVI Act of 1972). Section 26 differs from s 12 of the MVA Act in one respect: the word ‘obligation’ in subs 3(c) was changed to ‘liability’. It is significant that s 26(1)(a) allowing a supplier to be paid directly, only arose after the amount of compensation (either by agreement or judgment) was determined. Where the amount of compensation was not established, the supplier could recover its claim directly from the relevant insurance company. This right to institute action specifically sanctioned by s 26(1)(b), was independent from the third party’s claim. Certain suppliers who had relationships with hospitals were excluded from lodging suppliers’ claims.

The repeal of the CMVI Act of 1972 and promulgation of the Motor Vehicle Accidents Act 84 of 1986 (MVA Act of 1986) substantially affected suppliers’ claims. The independent statutory right of action of a supplier of s 26(1)(b) of the CMVI Act of 1972 was omitted from s 8(6). Section 8(6) was repeated in art 44 of the Multilateral Motor Vehicle Accidents Fund Act 93 of 1989. In turn art 44 was carried over in s 17(5) of the RAF Act 56 of 1996.

  • Judicial interpretation

Van der Merwe v Road Accident Fund 2007 (6) SA 283 (SCA) at paras 7 and 9 decided that a supplier’s claim is not an independent but an accessory claim but creates confusion by deviating from the actual wording of s 17(5) by finding that a supplier has a claim when a third party is ‘entitled to claim’ while s 17(5) unambiguously states that such claim can only arise when a third party is ‘entitled to compensation’.

In Road Accident Fund v Abdool-Carrim and Others 2008 (3) SA 579 (SCA) the court interpreted s 17(5) to apply when a third party is entitled to a claim and/or entitled to claim compensation despite the clear wording of s 17(5): ‘Where a third party is entitled to compensation in terms of this section …’ (my italics). ‘This section’ is a clear reference to s 17(1) – the only section in the Act that establishes RAF liability. The court also construes the section to be of indirect benefit to a third party because the section was enacted to protect a claimant from being sued by a supplier. Road Accident Fund v Podbielski Mhlambi Attorneys and the Sheriff, Pretoria East (T) (unreported case no 18082/08) at para 9 held that the section was for benefit of suppliers. The Abdool-Carrim judgment caused Musi J in Free State Provincial Administration v Road Accident Fund (FB) (unreported case no A47/07, 21-1-2010) (Musi J) (notwithstanding the clear wording of s 17(5)) to conclude that a supplier will have a claim for costs in terms of the repealed s 17(2) if a third party is entitled to claim and/or entitled to claim compensation. It is mystifying why judges in Van der Merwe, Abdool-Carrim and Free State Provincial Administration deviated from the actual wording of s 17(5) and also why the contrary correct judgment of Du Plessis J in Department of Health and Social Development, Limpopo v Road Accident Fund (T) (unreported case no 16177/2008) (Du Plessis J) was never noted by Musi J.

Comment
  • Classification and nature of suppliers’ claim

Ostensibly Van der Merwe presumed that a supplier’s claim is delictual. A doctor (or any other supplier) who treats an injured third party has no direct delictual claim against the wrongdoing driver for the professional services he renders to an injured or deceased third party. That relationship to a third party is strictly and undeniably contractual. A claim in terms of s 17(1) is clearly delictual (see s 19(a); Klopper 2020 (op cit) at 62; Klopper 2007 (op cit); Klopper 2008 (op cit); Ahmed (op cit)). A s 17(1) claim is unitary. Separate individual claims for heads of damage constituting a s 17(1) claim does not exist. Thus a claim for medical costs (be it by a third party or a supplier) cannot be an independent claim recoverable in terms of the Act from the RAF (Regering van die Republiek van SA v Santam Versekeringsmaatskappy Bpk 1970 (2) SA 41 (NC); Potgieter v Sustein (Edms) Bpk 1990 (2) SA 15 (T); Road Accident Fund v Mothupi [2000] 3 All SA 181 (A), 2000 (4) SA 38 (SCA); Lampert-Zakiewicz v Marine and Trade Insurance Co Ltd 1975 (4) SA 597 (C); Smith v Road Accident Fund 2006 (4) SA 590 (SCA); Engelbrecht v Road Accident Fund and Another 2007 (6) SA 96 (CC); Duduzile v Road Accident Fund [2007] 4 All SA 1241 (W); Mntambo v Road Accident Fund 2008 (1) SA 313 (W) at 318I–319D).

  • True meaning

The current interpretations of s 17(5) inexplicably deviate from its actual wording and true meaning. Section 17(5) empowers a supplier to make use of
s 17(5) and have his claim paid out of the proceeds of a third party’s compensation on finalisation of such claim or to enforce his personal claim for services rendered against the third party. The notion (Abdool-Carrim) that s 17(5) protects a third party against claims of suppliers is entirely unjustified. Nothing contained in the Act prohibits suppliers to at any time enforce their personal claim against a third party for medical services and goods rendered. Moreover, 17(6) allows a third party after the RAF has conceded liability, to apply for an interim payment of medical expenses. This does not apply to a supplier which is an indication that the current distorted judicial interpretation of
s 17(5) is incorrect.

  • ‘Third party’ excludes supplier

The Act is for the sole benefit of the third party (Aetna Insurance Co v Minister of Justice 1960 (3) SA 273 (A); Smith v Road Accident Fund 2006 (4) SA 590 (SCA)). A supplier’s claim only exists if a claim for services and accommodation is recoverable by a third party (Daniels and Others v Road Accident Fund and Others (WCC) (unreported case no 8853/2010, 28-4-2011) (Binns-Ward J)). A third party is: ‘… the third party referred to in section 17(1)’ (s 1). The RAF is liable (s 17(1)) where there has been injury or death due to the unlawful and negligent driving of a motor vehicle or other unlawful act. No mention is made in the Act of any other entity having a claim against the RAF.

  • Statutory cession

Van der Merwe postulates a statutory cession of that portion of a third party claim claimed by the supplier. This construction is negated by the fact that a third party has an indivisible unitary claim, which cannot be legally ceded (see Regering van die Republiek van SA). Moreover, the predecessors to and s 17(5) did and does not include the
s 26(1)(b) direct right of action without cession of action of the CMVI Act of 1972.

  • Entitled’ and ‘compensation’

The phrase ‘entitled to’ in s 17(5) means that the third party claimant must be ‘entitled to compensation’ in terms of s 17(1) of the Act. ‘Entitled’ denotes a completed action (contrary to Podbielski Mhlambi Attorneys and the Sheriff, Pretoria East at para 9) and is not merely a right to compensation or a right to claim compensation (Van der Merwe; Abdool-Carrim). The ordinary grammatical meaning of ‘entitle’ is ‘a. [to] give (a person etc) a just claim. b. [to] give (a person etc) a right’, ‘to furnish with a right title or claim’ (Klopper The Law of Third Party Compensation 64). ‘Compensation’ denotes a fixed, due, and payable amount (AA Mutual Insurance Association Ltd v Administrateur, Transvaal 1961 (2) SA 796 (A) at 805-806; Nieuwenhuizen, NO v Union and National Insurance Co Ltd [1962] 1 All SA 365 (W)) in respect of damages recoverable in terms of s 17(1) of the Act.

  • Exclusion of liability

For the RAF to be liable, a claimant must be entitled to claim from a wrongdoer (s 19(a)). Clearly, an owner or driver of a motor vehicle injuring or killing a person has no obligation whatsoever to compensate a supplier.

Consequences of incorrect interpretation

  • Multiplicity of actions and increased liability

In AA Mutual Insurance Association Ltd at 797F–G, it was stated that ‘if a supplier is entitled to bring a separate action, an insurance company may be vexed with a multiplicity of actions and anomalies arise’ such as suppliers not being subject to the same principles and constraints as third parties and suppliers’ claims being paid out in full when there was no entitlement to compensation of the third party or where the claim should have been subjected to the provisions of the Apportionment of Damages Act 34 of 1956 (Klopper 2007 (op cit)).

A survey of suppliers’ claims reported in RAF annual reports (2006-2020) shows that suppliers’ claims have risen from 57 054 in 2006 to 201 609 in 2020 (a 253% increase) and are currently nearly double the number of personal claims lodged. The average suppliers’ claim is about R 6 000. During this 13-year period the RAF paid out some R 11 billion to suppliers. The RAF has over the same period accumulated 107 000 arrear suppliers’ claims which (based on the average claim) is a contingent liability of approximately R 1,1 billion.

Due to the limited information given in the Form 2 Supplier Claim Form, establishing liability and quantum of medical costs is difficult and may result in unsubstantiated liability. The average suppliers’ claim of R 6 000 creates the danger of merit and quantum of such claim not being properly investigated. This is less likely to occur if the suppliers’ claim is dealt simultaneously with the main claim. In Daniels the RAF settled suppliers’ claims to the value of
R 171 182,10 even before the claimant had submitted her personal claim. The admitted suppliers’ claim liability resulted in the RAF liability for the claimant’s personal claim.

  • Suppliers’ claims v medical payments to claimants

Suppliers’ payments outstrip claimant’s medical costs payments. According to RAF annual reports (2006-2020) compensation paid to claimants for medical expenses amounted to an average of
R 8,36 billion. For the same period (based on averages) the RAF paid approximately R11 billion to suppliers. The discrepancy could indicate that suppliers are being paid where the (as required by s 17(5)) personal s 17(1) claim was not lodged and/or the third party was not entitled to compensation.

Conclusion

Section 17(5) does not authorise a separate suppliers’ claim or payment of suppliers’ claims in the absence of a valid and finalised claim in terms of s 17(1) nor is a separate independent suppliers claim legally tenable. The current judicial interpretation and application of this section ignores the historical development, the unambiguous/clear wording of s 17(5) and the provisions and legal principles that apply to a claim in terms of s 17(1) of the Act. The erroneous interpretation of s 17(5) has caused a multiplicity of claims with the possibility of anomalies and a considerable increased administrative and financial RAF burden. It is suggested that the administration of suppliers’ claims be urgently reviewed to ensure that the provisions and intention of the legislator is given effect, RAF funds are not allocated to payments not sanctioned by the Act and the ability of the RAF to comply with its constitutional duty to third party claimants, is enhanced.

Professor Hennie Klopper BA LLD (UFS) is an Emeritus Professor at the University of Pretoria and legal practitioner at HB Klopper in Pretoria.

This article was first published in De Rebus in 2024 (April) DR 12.

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