Collins Letsoalo, acting CEO of the Road Accident Fund. Photo: Andrew Mkhondo/Netwerk24
  • The Road Accident Fund is battling the legal fraternity, after it decided to scrap a panel of 85 law firms which are supposed to handle victims' claims on its behalf. 
  • Lawyers earned R10.6 billion from the fund in the past year, and the insolvent fund can't afford these fees.
  • Instead, it now wants to handle claims in-house.
  • For more articles, go to www.BusinessInsider.co.za.

­­The Road Accident Fund has accused 85 law firms – which it fired - of refusing to hand back 183,842 files with victims’ claims.

The fund, which pays compensation to road accident victims, is technically insolvent and government’s second-largest contingent liability after Eskom. The RAF faces claims of more than R273 billion.

The RAF is mainly funded by a fuel levy (currently around R2 per litre), which brought in around R43 billion in the past year. But R10.6 billion of that money ended up going to legal costs and attorneys. In total, R17 billion of the RAF’s income is now spent on administrative costs.

Of the cases that involve its attorneys, it takes on average five years to reach a conclusion. Only 5% of cases ended up in front of a judge - the vast majority of cases are settled on the doorstep of the courts, said Collins Letsoalo, acting RAF chief executive, at a media briefing on Monday.

The fund therefore decided at the start of the year to change its operating model: it scrapped the legal panel of 84 law firms which are contracted to handle claims on its behalf.

Instead, the fund will now handle claims in-house, and will channel claims according to “simple” cases (according to Letsoalo, these would typically include claims for pedestrians and cyclists, for example) for speedy resolution, and those that are more complex. It wants to resolve claims within 120 days.

The fund then requested that the law firms hand back files of all cases that are not finalised. However, the RAF has only received 6,200 of the files, while 183,842 still remain with the attorneys, says Letsoalo.

The legal firms - who are facing a billions in lost income - took the matter to court, but Judge Norman Davis ruled in March that they have to hand back the files.

Still, they are refusing, as they await three appeals against recent rulings, including the judgment by Davis.

There has also been a ruling against the RAF’s decision to scrap the panel, with Judge Wendy Hughes ordering the RAF to retain the panel for at least the next six months.

The RAF is quite entitled to change its operating model if it does so lawfully, says Lizette Burger, senior professional affairs manager of the Law Society of South Africa (LSSA).

But, she says, “The issue is first and foremost one of how the RAF conducts itself. When exercising public power, the RAF is required to do so in a manner that is lawful and rational. However, and as was found by the Honourable Madam Justice Hughes, it has not done so in any manner which could be labeled rational or lawful.

“If the RAF insists on the handover of files in an irrational fashion, the public, the courts, and the RAF will suffer through unnecessary postponements, clogging of the court rolls, delays, default judgments being taken against the RAF, costs orders being given against the RAF, and the RAF over-settling matters because they are not adequately represented. This is already happening, as has been detailed in the various court proceedings.”

Kruger says it does not make sense to return the files while the appeals process unfolds, only for the RAF to ultimately be directed to return them again. "It makes no sense to demand return of a matter when it is before court on trial. (It also) has consistently been shown in the court proceedings that the RAF does not in fact need its physical files while these issues are resolved, because panel attorneys are required to upload their files on to the RAF's online filing system.”

On Monday, Letsoalo warned that Covid-19 has worsened the RAF’s financial position, with R15 billion in revenue expected to be lost this financial year. Fuel sales have been slumping as South Africans are forced to stay home, hitting the fuel levy income.

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