Will the RAF have to fulfil its obligation to its panel of attorneys?

July 1st, 2020
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FourieFismer Inc and Others v Road Accident Fund and Others; Mabunda Inc and Others v Road Accident Fund; Diale Mogashoa Inc v Road Accident Fund (GP) (unreported case no 17518/2020, 15876/2020, 18239/2020, 1-6-2020)
(Hughes J)

Attorneys contracted to the Road Accident Fund (the RAF), commonly known as panel attorneys initiated the three review applications, which served before the Gauteng Division of the High Court, Pretoria (the court) for determination. Panel attorneys are selected after the adjudication of a tender procurement process in terms of s 217 of the Constitution, which must be fair, equitable, transparent, competitive and cost-effective. Those suitably qualified panel attorneys selected, form a panel contracted to the RAF for a period of five years. The RAF from time to time would select an attorney from the panel to provide specialist litigation services in the various courts. The role of the panel attorneys is, therefore, to assist the RAF to duly perform its statutory mandate.

In this case, the court pointed out that for ease of reference, the review applications would be referred to as the FourieFismer review, Mabunda review and Diale review.

These review proceedings were intercepted by an interlocutory application by Maponya Inc, who was party to the Mabunda review, but withdrew to intervene in the FourieFismer review. The court said that the interlocutory application was subsequently withdrawn and the RAF accepted such withdrawal. ‘At this juncture the Maponya intervention application is not opposed and is premised on the relief sought by FourieFismer, that the status quo of the panel of attorneys remains until a new panel is appointed or alternatively, if the review is not successful, Maponya seeks assurance from the RAF that their calculated fees and disbursements be paid by the RAF contrary to clause 14 of the service level agreement (SLA) between the parties’.

The court said since the matter was of urgency and dispensing with the rules in terms of r 6(12), it was imperative to highlight that all the litigants in the proceedings conceded that the proceedings were urgent, primarily so, because their contracts with the RAF would have come to an end on 31 May. The proceedings warranted an endorsement as being urgent. The court pointed out that collectively the panel was seeking that the –

  • decisions of 18 and 20 February, calling on the panel attorneys to handover their files, which were not finalised, be reviewed and set aside as constitutionality invalid;
  • cancellation of tender RAF/2018/ 00054 on 26 and 28 February be reviewed and set aside and declared unconstitutional and invalid;
  • decision of the RAF to dispense with the services of the panel attorneys from 1 June be reviewed and set aside as constitutionally invalid; and
  • panel attorneys continue to service the RAF until 30 June or until the RAF has appointed a panel of attorneys in terms of tender RAF/2018/00054 or until appointments are made arising from a fresh tender process.

The court said that in the Mabunda review the litigant was additionally seeking the withdrawal of the handover notices and withdrawal of the cancellation of tender notices. While, in the Diale review the additional relief sought is that the RAF adjudicates tender RAF/2018/00054. The court added that Diale was further seeking that the second addendum to the SLA of 21 November 2019 be reviewed and set aside. The court pointed out that on the other hand, Maponya as the intervening party to the FourieFismer review, seeks not to review the handover notices, but rather requests an undertaking from the RAF, if the reviews fail, to be paid their calculated fees and disbursements contrary to clause 14 of the SLA.

The court added that the current 103 attorneys on the panel, contracted with the RAF pursuant to a procurement tender of 2014, to provide the RAF with specialist litigation services for a period of five years. The court noted that the SLA duly concluded between the panel attorneys and the RAF, would lapse with the effluxion of time on 29 November 2019. Hence, on 30 November 2018 tender RAF/2010/00054 was published with the closing date recorded two addendums were made to the SLA. This resulted in an extension in the contract period between the panel attorneys and the RAF, which would culminate on 31 May.

The court pointed out that on 5 December 2019 the Minister of Transport appointed and inducted a permanent Board. According to the induction message of the Minister of Transport, he pressed on the Board to ‘bring stability at leadership level and enable management, with your guidance to turn the tide’. Further, that serious attention of the Board would be required to build internal capacity of the RAF, which ‘may involve in-sourcing legal work and directly employ[ing] attorneys to process the case load’. This he believed would save the RAF R 2,9 billion per annum.

The court said that according to the RAF the issue of in-sourcing versus outsourcing of legal specialist services was an issue that the interim Board as far back as 22 October 2019 had resolved that the RAF was to investigate. The Acting Chief Executive Officer (ACEO) stated in an affidavit that ‘this was the genesis of the decision to dispense with the use of panel attorneys’. In addition to the above, on 22 October 2019 management sought approval from the interim Board to extend the SLA of the panel attorneys for a further six months as the conclusion date of November 2019 was looming.

The court said that a meeting was convened with the management of the RAF and after the management of the RAF made submissions, the interim Board extended the panel attorney’s SLA for a further six months ending on 31 May. On 28 January the Board held its first quarterly meeting for the year. The court added that the Board resolved at that meeting that a working group be formed, duly selected from its members. This working group would meet management on 30 January to finalise the draft Strategic Plan 2020-2025 and Annual Performance Plan 2020/2021, prior to its approval by round robin resolution.

The court pointed out that according to the ACEO the meeting did take place on 30 January, however, no minutes were available for that meeting. According to the ACEO, management presented a detailed business strategy where the reduction of legal costs was interrogated by the Board members of the working group. The next meeting of the Board took place on 27 February. At that meeting, the ACEO stated he had ‘indicated that the fund was incurring unnecessary legal costs within its claims litigation’.

According to the resolution taken by the Board at the meeting of 27 February, certified as such on 11 March, management was tasked to prepare a detailed handover plan, which could be substantiated and implemented. The court pointed out that the Board actually resolved that the handing over of files from panel attorneys would be per extract:

‘1. The Board would write a letter to the Law Society of South Africa and request a meeting.
2. Management was requested to prepare a detailed handover plan, which could be substantiated and implemented.
3. The Board delegated the oversight of the implementation of the detailed plan to the OPSIT Committee. The Chairperson of the OPSIT Committee would serve as liaison with management.
4. Reporting should take place on a weekly basis.
5. Should there be failure in terms of the implementation of this particular plan there will be consequences movement.’

The court noted that on 18 February the panel attorneys received correspondence from the Chief Operations Officer (COO), Lindelwa Xingwana-Jabavu, titled: ‘Notification of handover pursuant to clause 14 of the service level agreement with RAF panel attorneys’.  This notification set out the handover schedule to be adopted by panel attorneys and condition thereto. However, on 20 February the initial notification was retracted and replaced, which differed and there were additional conditions in respect to handing over files.

The court said that on 21 February the COO requested the Acting General Manager: Supply Chain Management, John Modisa, to facilitate the cancellation of the tender for panel attorneys RAF/2018/00054, as it was unaffordable and there were changed business circumstances in the RAF, which tender was advertised in November 2018. The services of panel attorneys in respect of the 2014 tender would expire on 29 November 2019, but an extension of a further six months was granted. The reason for the cancelation was that the RAF had decided to adopt a new litigation model where litigation would be facilitated in-house and as such there would be no need for legal representation by panel attorneys. Hence, the tender was no longer required.

The court added that the notification of 26 February was withdrawn and this time the Chief Financial Officer advised the bidders the reasons for the cancellation. The court found it prudent to set out two new reasons advanced:

‘(a) The RAF’s dire financial situation has necessitated a review of its operating model, which resulted in a conclusion that there is no need to have the panel of attorneys. Consequently, the RAF no longer requires the services, which were specified in the invitation.

(b) In addition to (a) above, the RAF’s financial situation which continues to worsen on a daily basis has rendered the funds no longer available to cover the total envisaged expenditure.’

The court said that it was mindful of the fact that the RAF derives its ability to procure services from the panel attorneys in terms of s 217 of the Constitution. The court added that the SLA is merely the instrument used to facilitate the services so procured. The court pointed out that this was confirmed by clause 3.6 of the SLA: ‘This Service Level Agreement serves to record the Service Level Agreement between the parties and to regulate all aspects of the Services to be supplied by the Firm and the general business relationship between the Parties.’

The court pointed out that the RAF argued that the notices for the handover were issued in accordance with clause 14.1 of the extended SLA. The court added, furthermore, that in issuing these notices the RAF was exercising a private power and not a public power. Clause 14.1 of the extended SLA reads as follows:

‘At least one month before the expiry of this Service Level Agreement (as amended), the Fund’s Panel Manager shall deliver to the firm in writing, a Notice of Handover advising the firm to start to prepare all unfinalised files in its possession for the handover process and logistics thereof. The Notice of Handover will stipulate the handover procedure to be [followed]. The Fund reserves the right in its sole discretion, to waive the obligation to hand over files to the Fund’.

The court then turned to the conduct of the Board on issuing of the notification of handover to the panel attorneys. The court said during the course of the Board seeking legal assistance it made certain disclosure to its legal representatives. The court pointed out that the Board admitted that it was not informed nor had the COO prior to addressing these handover notices to the panel attorneys consulted it. The court asked, how then did the COO have the authority and mandate to issue the handover notifications? The court added that it is only the Board, subject to the powers of the minister, who has the power of authority and control over the RAF’s management, financial position and operation.

The court said the powers of the minister referred to are those in s 9(1) of the Road Accident Fund Act 56 of 1996, where the minister on recommendation of the Board may enter into agreements with private and public institutions. The court added that the minister has no power when making managerial decisions; it is only the Board who may do so. Thus, if the Board was not consulted in managerial decisions such as the issuing of notices prior to them being issued, the COO did not have necessary authority nor mandated to issue the notifications to the panel.

The court pointed out that in their answering affidavit and in argument the RAF did not deny the fact that the Board was not informed, but argued instead that when they issued the notifications they were exercising their private contractual powers, in terms of clause 14 of the SLA. The court said that the RAF as it had dictated the terms of the SLA, in this case clause 14, it was clearly acting from a position of power, standing instead of the state. As such the RAF was burdened with its public duty of fairness and transparency in exercising the powers it derived from the contract.

Hughes J said that in his view, the decision to issue the notices is susceptible to review. As the Board was not aware of the issuing of these notifications, their dissemination to the panel attorneys was unauthorised and as such are not valid. The court pointed out that the cancellation of the tender had the effect of dispensing with the services of the panel attorneys. The court added that the decision to cancel the tender was taken by the Bid Adjudication Committee. Both the RAF and the Board concede that this is so. The court said the minister also supported the decision that the RAF took to cancel the tender. Though the Board did not take the decision to cancel the tender it accepted management’s decision to do so. All were on-board with the decision, but for, the affected parties, being the panel attorneys.

The court pointed out that both notices to cancel the tender were invalid. The court said that the first notice did not display the reason for termination and the second notification indicated that the financial position is no longer as it was to entertain the tender and, the circumstances of the RAF have changed. The court added the RAF raised reg 13(1)(a) and (b) of the Preferential Procurement Regulations, 2017. The onus was on the RAF to show that indeed this was the case.

The court said that in the circumstances of this case, it found it necessary to apply s 172(1)(b) of the Constitution. The court added that the RAF requires a period to reconsider its position for the sake of the general public of South Africa. The court pointed out that nothing precludes the RAF from implementing its proposed strategic plan in a manner that accords with legality. The court said that the facts of the case permit it to resort to imposing an order not sort by the parties, in order to ensure just and equitability in the circumstances that prevail.

The court pointed out that the case was an exceptional case and a constitutional crisis looms. The court added that this could have grave effects for claimants and thus it must be averted to protect their rights. The court said it was, therefore, necessary to retain the status quo for at least six months with the panel attorneys’ present contractual relationship. The court added that this will enable the RAF to reconsider its position and retain the social responsibility set in place protecting the public.

Hughes J ordered the following:

‘1. The forms, service and time period prescribed by the Uniform Rules of Court are dispensed with and the applications are heard as one of urgency in terms of Rule 6(12) of the Uniform Rules of Court.
2. The Intervening Party is joined as the Fourth Applicant in the FourieFismer review application.
3. The panel attorneys on the RAF’s panel as at the date of the launch of the FourieFismer review application shall continue to serve on the RAF panel of attorneys.
4. The RAF shall fulfil all of its obligations to such attorneys in terms of the existing Service Level Agreement.
5. This order shall operate for a period of six months from this order.
6. The Respondents are ordered to pay the costs of the review applications on a party and party scale, jointly and severally.
7. Such costs are to include the costs of two counsel for each legal team where so employed.’

Kgomotso Ramotsho Cert Journ (Boston) Cert Photography (Vega) is the news reporter at De Rebus.

This article was first published in De Rebus in 2020 (July) DR 36.