The Road Accident Fund v Mabunda Inc and 42 Others (The Law Society of South Africa and Maponya Inc. Intervening Parties)

• Jurisdiction: South Africa
• Judge: N Kollapen J, I Opperman J and C Swanepoel AJ
• Judgment Date: 18 August 2020
• Docket Number: 15876/2020; 17518/2020; 18239/2020
• Hearing Date: 05 August 2020
• Court: Gauteng Division, Pretoria
• Citation: 2020 JDR 1815 (GP)

THE COURT:

INTRODUCTION:

[1]

This is an appeal in terms of section 18 (4) of the Superior Courts Act, 2013 ("the Act"), afforded to the appellants as of right (an automatic appeal), against the carrying into execution of an order of Hughes J in terms of section 18 (3) of the Act. The main protagonist in these three matters before us is the first appellant, the Road Accident Fund ("the RAF") which is a juristic person created in terms of the Road Accident Fund Act, Act 56 of 1996 ("the RAF Act"), with the objective of "the payment of compensation in accordance with the Act for loss or damage wrongfully caused by the driving of motor vehicles". [1] The

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second and third appellants are the Chairperson of the Board of the RAF and the Acting Chief Executive Officer ("ACEO") respectively.

[2]

Mabunda, Fouriefismer, and Diale Mogoshoa, the respondents in this appeal, together with 41 other applicants in the Mabunda application, are all firms of attorneys who have until the end of May 2020 served on the so-called 'RAF panel' ("the panel attorneys"), by virtue of service level agreements ("SLA's") entered into between the panel attorneys and the RAF. The SLA's were entered into between the panel attorneys and the RAF pursuant to a tender process which culminated in the appointment of approximately 103 attorney's firms to act for the RAF in 2014 for a period of five years and were due to expire on 25 November 2019. The panel attorneys have, until recently, represented the RAF in all matters in which summons was issued against it for damages resulting from injuries sustained in motor vehicle accidents. The Law Society of South Africa ("LSSA") has been joined as amicus curiae, and it also opposes this appeal.

BACKGROUND:

[3]

It is no secret that the RAF has been operating on a deficit for a number of years, where the claims and legal costs it was obliged to meet far exceeded its income, and it seems to be common cause that for some time it has been factually insolvent. For that reason, and during or about 2019, the RAF started contemplating an alternative operating model to achieve its statutory objectives within the financial constraints placed upon it. One of the main expenditures of the RAF (although not the largest) is the fees paid to panel attorneys for work

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done on behalf of the RAF. It has been estimated that the RAF pays approximately R 3.4 billion to panel attorneys annually. The RAF has determined that its current operating model is unsustainable. It consequently decided not to renew the services of its panel attorneys, by either settling directly with claimants, or by utilizing the services of inhouse RAF attorneys and that of the state attorney to deal with those matters that cannot be settled. Whether this decision was sound or not is a matter of some debate between the parties, and whilst the RAF is of the view that it can successfully implement the proposed operating model, the respondents argue vehemently that the model cannot succeed.

[4]

Nevertheless, an attempt was made to implement the model. On 25 July 2019 a "hand-over" letter was sent to the panel attorneys reminding them that the SLA's were due to expire on 25 November 2019, and requesting the handover of all unfinalized files. The panel attorneys did not comply with the RAF's instruction. The RAF suspended the hand-over process on 20 September 2019. On 19 November 2019 the RAF advised the panel attorneys that the RAF was willing to extend the SLA's to those attorneys amenable thereto with certain amendments. Eighty Four of the panel attorneys signed the addenda ("the second addendum"), resulting in the validity period of their SLA's being extended to 31 May 2020, evidently in order to afford the RAF sufficient time to implement its new operating model. The second addendum also varied the terms of the SLA's in certain respects. Respondents allege that they were coerced into accepting the extension and variation of the SLA's, and on that basis they attacked the validity of the second addendum in the Court a quo.

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[5]

On 30 November 2019 the RAF published a tender no. RAF/2018/00054 ("the tender"), in which it sought bids for the appointment of a new panel of attorneys for the following five years.

[6]

On 5 December 2019 the interim Board of the RAF was replaced by a permanent Board and on 12 December 2019 the new Board received a presentation which included an overview of the affairs of the RAF, its financial status and challenges, and of the need for the development of a strategic plan for the future. This led to further meetings and on 31 January 2020 the discussions culminated in the Board approving a new strategic plan, and a new operating model. Central to the plan was the need to reduce legal costs, to settle new claims within 120 days, and to reduce the number of old claims.

[7]

On 18 February 2020 the RAF notified its attorneys by letter that they were required to return all open files to the RAF. The letter also set out a schedule of dates by which the files were to be returned. On 20 February 2020, evidently as a result of complaints about the time frames set out in its first letter, the RAF sent out a further letter in which new time frames were determined, and in which attorneys were reminded of their obligation to comply with clause 14.4.7 of the SLA in regard to reporting to the RAF on each matter. This clause requires the panel attorneys to ensure that each file contains an opinion on the merits of the case, an opinion on quantum, an analysis of the areas of dispute, the stage of the pleadings, the current status of the matter, and any recommendations that the attorney may have.

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[8]

On 26 February 2020 the RAF cancelled the tender published on 30 November 2019. The cancellation was conveyed to potential bidders by letter, under the signature of the Acting Chief Financial Officer of the RAF.

[9]

The respondents took the view that the RAF had acted unlawfully in that:

(a)

The decision to terminate the services of the panel attorneys and to demand the return of the open files was irrational and thus liable to be set aside and reviewed;

(b)

The cancellation of the tender on 26 February 2020 was unlawful and liable to be reviewed and set aside;

(b)

The existing panel attorneys should continue to render services to the RAF in accordance with the SLA's.

[10]

These decisions were referred to by the respondents as "the impugned decisions".

THE HISTORY OF THE LITIGATION:

[11]

On 17 March 2020 Mabunda and 41 other attorneys' firms brought an urgent application before Davis J. In Part A, Mabunda sought an interdict restraining the RAF "from implementing and/or giving effect to its notices of handover addressed to the applicants and all panel attorneys ..... dated 18 February 2020 and 20 February 2020 respectively." The LSSA, and the Black Lawyers Association were granted leave to intervene as amicus curiae. The Diale application was later consolidated with the Mabunda application.

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[12]

In Part B of the applications, Mabunda sought the review of the decision to demand a handover of the unfinalized files, and Diale sought a review of the decision to cancel the tender as well as a mandamus that the tender process should continue.

[13]

Davis J relied on the following dictum in Government of South Africa v Thabiso Chemicals[2] to find that the relationship between the RAF and its panel attorneys is governed by contract:

'What remains are observations originating from comments by the court a quo which seem to support the notion that the contractual relationship between the parties may somehow be affected by the principles of administrative law. These comments gave rise to arguments on appeal, for example, as to whether the cancellation process was procedurally fair and whether Thabiso was granted a proper opportunity to address the Tender Board in accordance with the audi alteram partem rule prior to the cancellation. Lest I be understood to agree with these comments by the court a quo, let me clarify: I do not believe that the principles of administrative law have any role to play in the outcome of the dispute. After the tender had been awarded, the relationship between the parties in this case was governed by the principles of contract law"

[14]

Davis J also pointed out that a decision to cancel a tender was an executive act, and not an administrative one, and that it is thus not reviewable in terms of the Promotion of Administrative Justice Act, 2000 ("PAJA"). [3] He held that the setting aside of a decision to cancel a tender can only be based on the

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principle of legality. Part B of the applications attacked the cancellation of the tender on the basis of legality. As Part B was to be heard by another Court, Davis J declined to engage with the decision to cancel the tender. He held that the SLA's were going to terminate on 31 May 2020 by the effluxion of time. In the interim, and until the cancellation was reviewed and set aside, the decision to cancel the tender stood, and, so Davis J held, the RAF was entitled to exercise its contractual right to demand the handover of its files. Therefore, none of Mabunda and Diale's rights had been infringed. In the absence of a prima facie right though open to some doubt, the application for an interdict was dismissed.

[15]

Before the Court a quo three applications were heard simultaneously:

(a)

Part B of the application under case number 15876/2020, the "Mabunda application";

(b)

Part B of the application under case number 17518/2020, the "Fouriefismer application"; and,

(c)

The application under case number 18239/2020, the "Diale application.

[16]

Hughes J summarized the relief sought by the...