Applicants' Heads of Argument-15823.pdf

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IN THE CONSTITUTIONAL COURT

CASE NO: CCT 67/10 In the matter between:

ANELE MVUMVU First Applicant

LOUISE PEDRO Second Applicant

BIANCA SMITH Third Applicant

And

MINISTER OF TRANSPORT First Respondent

ROAD ACCIDENT FUND Second Respondent

________________________________________________________________

APPLICANTS’ HEADS OF ARGUMENT

________________________________________________________________

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The issue 3

THE ISSUE

1. Until 1 August 2008, the Road Accident Fund Act 56 of 1996 discriminated against road accident victims who had been passengers in the “offending” vehicle.

2. All other road accident victims were entitled to full compensation for their injuries, in accordance with the provisions of the Act. This included the driver of the “innocent” vehicle, the passengers in the “innocent”

vehicle, and pedestrians. However, passengers in the “offending” vehicle were singled out for special treatment: they were entitled only to maximum compensation of R25 000.

3. The Road Accident Fund Commission (the Satchwell Commission) found that this system was not only unfair, but was also racially biased:

The profile of those who are classified in the limited liability category reflect a racial bias. There are proportionally far fewer Whites affected than other groups … This is likely to reflect a bias of African passengers travelling in mini bus taxis … The group impacted on by the R25 000 cut- off contains proportionally more African people than the whole sample.¹

1 Mvumvu 1/22 para 56; AM5 1/52 para 12.3. [References in these heads are first to volume and then to page number.]

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4. Parliament recognised this inequity hence it enacted the Road Accident Fund Amendment Act 19 of 2005. The Amendment Act removed this R25 000 cap on the claims by the passengers in “offending” vehicles.

This section of the Amendment Act came into effect on 1 August 2008.

5. In the Explanatory Memorandum accompanying the Amendment Bill, the Department of Transport acknowledged the unfairness of the existing system:

It is believed to be unfair to have a specific limitation on such claims and that such claims should be treated the same as any other claim.²

6. The three Applicants have been caught in the toils of the slow process of changing this inequitable system. Each suffered a serious injury, before 1 August 2008, in a road accident when he or she was a passenger in the

‘offending’ vehicle. The result is that their claims are limited to R25 000.

Ms Mvumvu, whose life has been destroyed by the accident from both a financial and a social perspective,³ will receive no cash compensation at all, because the Fund has already paid medical claims arising which fully cover its maximum liability of R25 000.⁴

2 Mvumvu 1/24 para 61.1; AM6 1/54 para 8.

3 Mvumvu 1/16 para 25.

4 Mvumvu para 1/14 para 26.

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7. The applicants challenge the constitutional validity of sections 18(1)(a)(i), 18(1)(b) and 18(2) of the Road Accident Fund Act 56 of 1996 as they stood prior to 1 August 2008.

8. At the hearing in the High Court, the respondents did not defend the constitutionality of these sections. The High Court found that they were inconsistent with the Constitution and invalid. The respondents do not challenge this finding in this appeal.⁵

9. The validity of the equivalent provision of the predecessor Act, the Multilateral Motor Vehicle Accidents Fund Act 93 of 1989, had been challenged in Tsotsetsi v Mutual & Federal Insurance Co Ltd

5 First respondent 3/260 lines 6-10; Second respondent 3/265 line 6 – 3/266 line 2.

1997 (1) SA 585 (CC), which was heard by this Court on 29 August 1995. Mr Tsotetsi’s claim arose from injuries which he had sustained in a motor accident on 25 February 1991, before the interim Constitution had come into force. The Court held that the liability of the respondent to pay damages had been fixed at the time of the accident, and could not subsequently have been expanded by the interim Constitution. Mr Tsotetsi was accordingly not entitled to rely on the Constitution to challenge the validity of the relevant parts of the Act.

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10. The government was thus made aware of this issue by 1995 at the latest.

However, this unconstitutional state of affairs continued for 14 years after the interim Constitution came into force. It was finally brought to an end on 1 August 2008.

11. But for the admittedly unconstitutional provisions of the Act, each of the applicants would have a right to substantial compensation. The effect of those provisions is that they will receive only token compensation.

12. The applicants seek a declaration of the invalidity of these provisions.

This would have the result that they will receive the same compensation as other road accident victims who suffered injury before the Act was amended.

13. The High Court attempted to moderate the effect of a declaration of invalidity, by ordering that the applicants would be entitled only to the compensation which is now available to road accident victims under the Road Accident Fund Act since its amendment.⁶

14. The attitude of the respondents is the following: not only should the applicants not receive the full compensation to which other road accident

6 For reasons which we set out below, the manner in which this was done gives rise to unintended anomalies and difficulties.

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victims were entitled before the amendment of the Act, but they should also not be entitled to the compensation which is now available to passengers such as them. The applicants should receive no relief at all.

The respondents thus ask that the order of invalidity be suspended until the time when the Amendment Act came into operation.

15. The power to suspend a declaration of invalidity creates an exception to the principle of legality. It allows an unlawful condition to exist.

16. Section 172(1)(b)(ii) of the Constitution indicates the usual purpose of such a suspension: it is “to allow the competent authority to correct the defect”. In other cases, the retrospective effect of an order is limited in order to ensure that the order does not unsettle that which has already been settled: in other words, to promote certainty and stability.

17. The authorities do not suggest that they wish to “correct the defect”.

They do not suggest that limiting the retrospective effect is necessary to promote certainty and create stability. The only purpose they seek to achieve is to save money.

18. We are not aware of any case in which this Court has suspended a declaration of invalidity for this reason.

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19. The default position is that invalidity operates from the time when the Constitution came into operation, because that is when the provision in question became constitutionally inconsistent.⁷

20. It is not the respondents’ case that there is a justifiable limitation of the right to equality. Their case is that the impugned provisions are indeed inconsistent with the Constitution, and have been since 1994, but nothing should be done about it. The applicants should receive no relief at all, not even the more limited relief proposed by the High Court, for the breach of their rights. The only reason for this is that any relief would cost money.

We submit that a compelling case must be made for this default position to be disturbed, and for a condition of illegality to be allowed to exist notwithstanding the provisions of the Constitution. No such case has been made. All the respondents wish to do is to save money which the Constitution requires them to spend – and which, we show below, they can afford to spend.

21. We submit below that:

21.1 The R25 000 cap is inconsistent with the Constitution and invalid.

21.2 No order of suspension should be made.

7 Ferreira v Levin NO and others; Vryenhoek and others v Powell NO and others 1996 (1) SA 984 (CC) para [29] – [30]

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21.3 To the extent that this might lead to a financial shortfall at the Fund, the evidence shows that government has consistently in the past made good any such shortfalls. There is no evidence that it would be unable or unwilling to do so in this instance.

21.4 In any event, the increased claims on the Fund will, by the time an order of invalidity is made, already have been more than wiped out by the savings brought about by the Amendment Act. The declaration of invalidity will not bring about a shortfall.

21.5 The Court should therefore make a declaration of invalidity which applies to all claims against the Fund which have not yet been finally settled.

21.6 If however the Court is minded to follow a “via media” of the kind ordered by the High Court, the applicants should be entitled to the benefits which are now available to road accident victims under the amended Act, but this should be done in a manner which does not deprive them of benefits which they had under the pre-amendment Act. The order should expand, and not reduce, the benefits to which they were entitled under the pre-amendment Act.

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THE PERSONAL CIRCUMSTANCES OF THE APPLICANTS

22. On 14 February 2005, the First Applicant, Ms Mvumvu, was travelling in a minibus taxi from the Eastern Cape to Cape Town.

The First Applicant

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23. Ms Mvumvu was seriously injured and taken by helicopter from the scene of the accident to Groote Schuur Hospital. She remained there for two months while undergoing a number of operations. Her right foot had to be partially amputated. She now walks with a limp, cannot walk for long distances or over uneven ground, and cannot climb upstairs unless she pulls herself up by the banisters.

She had been in the Eastern Cape to attend the funeral of her sister. On the road between Beaufort West and Laingsburg, the driver lost control of the vehicle, which then rolled. There were no other vehicles involved in the accident.

The driver was fatally injured in the accident.

24. She has made various attempts to obtain employment, but has been unable to retain employment because of her injury. She lives in a shack

8 The facts set out below are from Mvumvu 1/12-14 para 15-25.

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in an informal settlement with her mother, her brother, two children of her deceased sister, and her own two children.

25. The only income of the household is a disability grant which she receives, and child support grants. When her disability grant was stopped, and one of the child support grants was also stopped, she was not even able to afford the cost of transport to see the state doctor to have her disability grant reinstated – it was only when her attorney lent her some money that she was able to do so. Ms Mvumvu summarises the consequences of the accident as follows: “The accident has destroyed my life from both a financial and a social perspective.”

26. The Fund has admitted its liability to compensate Ms Mvumvu.⁹

9 AM2 1/35.

However, it has pointed out that because she was a passenger in the taxi, the impugned sections limit her claim to a maximum of R25 000. As the Fund has already paid medical claims from the Tygerberg Hospital and Beaufort West Hospital which fully cover this liability of R25 000, Ms Mvumvu has no claim against the Fund for compensation for the injuries which she suffered in the accident.

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27. On 7 June 2007 the Second Applicant, Ms Pedro, was travelling in a minibus taxi on the N7 between Citrusdal and Clanwilliam, on her way to Cape Town. The driver of the taxi lost control of the vehicle, and crashed into rocks on the right hand side of the road.

The Second Applicant

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28. Ms Pedro was seriously injured and was taken to Citrusdal Hospital by ambulance. From there she was transferred to Paarl Hospital, where she remained until 29 June 2007.

29. Ms Pedro broke her left arm, her right arm and her ankle. She had a screw inserted in her right arm and a plate in her left arm. As a result of the injuries which she suffered, in particular her fractured ankle which has still not healed completely and which causes her daily pain, she has suffered a reduction in her ability to function effectively. She cannot, for example, walk far because her leg is not stable.

30. Ms Pedro would be entitled to substantial compensation from the Fund if it were not for the R25 000 limit which is imposed by the impugned provisions of the Act.

10 Mvumvu 1/15-16 para 30-33; Pedro 1/58 para 2-3.

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31. On 24 May 2007 the Third Applicant, Ms Smith, was travelling in the course of her employment, as a passenger in a vehicle owned by her employer. The driver lost control of the vehicle as a result of his driving too fast, and having incorrectly packed the load of building materials which was being carried on the vehicle. The vehicle left the road and rolled. The driver was fatally injured.

The Third Applicant

32. Ms Smith suffered a minor head injury and severe injuries to her back, left shoulder and left knee. She underwent surgery for the latter three injuries, and remained in hospital for two months.

33. Section 18(2) of the Act limits Ms Smith’s claim to the difference between a maximum of R25 000, and any lesser amounts which she can claim under COIDA. In terms of COIDA, more than R25 000 will be paid for her hospitalisation and other medical treatment. The result is that she has no claim at all against the Fund. She will receive no compensation whatsoever from the Fund.¹¹

11 Mvumvu 1/16-18 para 35-37; Smith 1/60 para 2-3.

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THE CONSTITUTIONAL CHALLENGE

34. At the relevant times, section 17(1) of the Act stated that the Fund was:

The impugned sections

obliged to compensate any person (the third party) for any loss or damage which the third party has suffered

35. Sections 18(1) and (2), however, provided that this comprehensive right to compensation did not apply to passengers in the offending vehicle.

The sections which are impugned in this case are the following:

as a result of any bodily injury to himself or herself or the death of or any bodily injury to any other person, caused by or arising from the driving of a motor vehicle by any person at any place within the Republic, if the injury or death is due to the negligence or other wrongful act of the driver or of the owner of the motor vehicle or of his or her employee in the performance of the employee’s duties as employee. (emphasis added)

18. (1) The liability of the Fund or an agent to compensate a third party for any loss or damage contemplated in section 17 which is the result of any bodily injury to or the death of any person who, at the time of the occurrence which caused that injury or death, was being conveyed in or on the motor vehicle concerned, shall, in connection with any one

occurrence, be limited, excluding the cost of recovering the said compensation,…

(a) to the sum of R25000 in respect of any bodily injury or death of any one such person who at the time of the occurrence which

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(i) for reward; or ….

(b) in the case of a person who was being conveyed in or on the motor vehicle concerned under circumstances other than those referred to in paragraph (a), to the sum of R25000 in respect of loss of income or of support and the costs of accommodation in a hospital or nursing home, treatment, the rendering of a service and the supplying of goods resulting from bodily injury to or the death of any one such person, excluding the payment of

compensation in respect of any other loss or damage.

(2) Without derogating from any liability of the Fund or an agent to pay costs awarded against it or such agent in any legal proceedings, where the loss or damage contemplated in section 17 is suffered as a result of bodily injury to or death of any person who, at the time of the occurrence which caused that injury or death, was being conveyed in or on the motor vehicle concerned and who was an employee of the driver or owner of that motor vehicle and the third party is entitled to compensation under the Compensation for Occupational Injuries and Diseases Act, 1993 (Act No. 130 of 1993), in respect of such injury or death-

(a) the liability of the Fund or such agent, in respect of the bodily injury to or death of any one such employee, shall be limited in total to the amount representing the difference between the

amount which that third party could, but for this paragraph, have claimed from the Fund or such agent, or the amount of R25000 (whichever is the lesser) and any lesser amount to which that third party is entitled by way of compensation under the said Act; and (b) the Fund or such agent shall not be liable under the said Act for the amount of the compensation to which any such third party is entitled thereunder…

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36. Section 18(1) thus imposes a limit of R25 000 on the liability of the Fund to compensate a third party who was a passenger in the offending vehicle.

37. Section 18(2) deals with road accident victims who are entitled to compensation under the Compensation for Occupational Injuries and Diseases Act, 1993 (“COIDA”). It limits claims against the Fund by such persons to a maximum of R25 000.

38. Ms Mvumvu asserts that the impugned provisions are in breach of the following provisions of the Bill of Rights:

The impugned sections are inconsistent with the Constitution

38.1 the right to equality;¹²

38.2 the right to dignity;¹³

38.3 the right to security of the person and an effective remedy;¹⁴

38.4 the right to healthcare and social security.

and

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12 Mvumvu 1/27-29 para 62-69.

13 Mvumvu 1/28 para 70-73.

14 Mvumvu 1/29-30 para 74-78.

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39. In these heads of argument, we focus on the right to equality. We submit that this disposes of the matter, and therefore we do not address the other rights which are implicated. However, we submit that the impugned sections are also inconsistent with the Constitution and invalid because they are in breach of those other fundamental rights.

40. In

The right to equality

Harksen v Lane, this Court set out the now well-established approach when an attack is made on a provision, relying on the equality clause of the Constitution.¹⁶

(a) Does the provision differentiate between people or categories of people? If so, does the differentiation bear a rational connection to a legitimate government purpose? If it does not then there is a violation of s 8(1). Even it does bear a rational connection, it might nevertheless amount to discrimination.

Goldstone J held that the stages of enquiry were the following:

(b) Does the differentiation amount to unfair discrimination? This requires a two-stage analysis:

(i) Firstly, does the differentiation amount to ‘discrimination’?

If it is on a specified ground, then discrimination will have been established. If it is not on a specified ground, then

15 Mvumvu 1/30-34 para 79-86.

16 Harksen v Lane N.O. and Others 1998 (1) SA 300 (CC) at [54]. That judgment deals with section 8 of the interim Constitution. For present purposes, there is no material difference between section 8 of the interim Constitution, and section 9 of the Final Constitution.

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18 whether or not there is discrimination will depend upon whether, objectively, the ground is based on attributes and characteristics which have the potential to impair the fundamental human dignity of persons as human beings or to affect them adversely in a comparably serious manner.

(ii) If the differentiation amounts to ‘discrimination’, does it amount to ‘unfair discrimination’? If it has been found to have been on a specified ground, then unfairness will be presumed. If on an unspecified ground, unfairness will have to be established by the complainant. The test of unfairness focuses primarily on the impact of the discrimination on the complainant and others in his or her situation.

If, at the end of this stage of the enquiry, the differentiation is found not to be unfair, then there will be no violation of s 8(2).

(c) If the discrimination is found to be unfair, then a determination will have to be made as to whether the provision can be justified under the limitations clause (s 33 of the interim Constitution).¹⁷

41. In the affidavit filed on his behalf, the Minister put up a somewhat hesitant defence of the impugned sections. He did not pursue it in argument. The Fund did not attempt a defence. Both now state that they do not challenge the High Court’s declaration of invalidity.¹⁸

42. We now apply the

Harksen

17 Section 36 of the final Constitution.

test to section 18.

18 First respondent 3/260 lines 6-10; Second respondent 3/265 line 6 – 3/266 line 2.

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43. The Act distinguishes between two broad categories of people, and treats them differently: on the one hand the passengers in the offending vehicle, and on the other hand, pedestrians and the occupiers (including passengers) in the “innocent” vehicle.

The Act differentiates

44. In order to pass the first test in

The differentiation bears no rational connection to a legitimate government purpose

Harksen

45.

, the differentiation between different groups of road accident victims must bear a rational connection to a legitimate government purpose. The Minister offered two explanations.

First, his representative stated that the funding of the Fund is not designed to compensate all victims for all the losses they might suffer as a result of motor vehicle collisions. If it were otherwise, the Fund would long have been bankrupt.¹⁹

46. This is of course no explanation at all for differentiating between classes of innocent road accident victims. At best, it explains that it is not

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possible to provide full compensation to all such victims. That does not explain why the claims of some victims have been singled out for very little compensation, whereas others are to receive full compensation.

47. Secondly

complex policy choice, apparently resolved along the following lines. A pedestrian, or occupant of another vehicle, has no choice in ‘choosing’ the driver or owner of the offending vehicle. The same is not necessarily so in respect of a passenger in an offending vehicle.

, the Minister’s representative stated that the decision as to what the limitations ought to be was a

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48. She did not actually say what the justification was for this unequal treatment. All she was willing to say was that it was “apparently”

resolved on the lines set out in her affidavit. That explanation, however, does not stand up to analysis:

48.1 A person in a taxi queue does not “choose” the driver of the taxi which he or she will board. He or she has no knowledge of the competence of the driver or the roadworthiness of the vehicle.

Similarly, an employee does not “choose” an employer on the basis that the employer will only hire reliable drivers, who will drive only fully roadworthy vehicles.

19 Koorts 2/129-130 para 13- 14.

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48.2 In any event, even if a passenger does “choose”, this does not explain what rational government purpose is served by treating him or her differently from other people who are also innocent victims of road accidents. No attempt is made to explain this.

49. As we have pointed out, the Department itself stated in the Explanatory Memorandum accompanying the Amendment Bill, that the distinction was “unfair”.

50. The differentiation thus falls at the first hurdle explained in Harksen – it is in violation of section 9(1). There is therefore no need to proceed to the other stages of the enquiry. For completeness, we do so briefly.

51. The differentiation amounts to “discrimination” because it is on a specified ground, namely race.

The differentiation is discrimination

52. The Applicants assert, and neither of the Respondents denies, that:

52.1 the people who are affected by these provisions of section 18 are overwhelmingly poor and black;

20 Koorts 2/132-133 para 19.

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52.2 generally, poor people do not have their own means of transport, and are obliged to make use of public transport;

52.3 poverty is racially distributed in South Africa. The vast majority of poor people are Black, in disproportion to the number of Black people in the country. A measure which impacts disproportionately on poor people therefore also impacts disproportionately on Black people.²¹

53. As the differentiation is on the specified ground of race, discrimination has been established.

54. The differentiation is also on the analogous ground of class: section 18(2) discriminates against road accident victims who are travelling in their employers' motor vehicles in the course of their employment. This discriminates against working class people. This too is alleged in terms, and not denied by either of the Respondents.²²

21 Mvumvu 1/20-21 para 48-51. See also Victoria and Alfred Waterfront (Pty) Ltd v Police Commissioner, Western Cape 2004 (4) SA 444 (C) at 448G.

22 Mvumvu 1/16 para 66.

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55. Discrimination is on the specified ground of race is per se unfair. The discrimination on the ground of class is unfair in accordance with the test in

The discrimination is unfair

Harksen.

56. The Minister's representative asserts that if these provisions do limit the rights on which the Applicants rely, this is reasonable and justifiable in terms of section 36 of the Constitution.

No justified limitation of rights has been shown

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It is difficult to conceive of any scheme, except one that offers full compensation to all victims, that will not be subject to the nature of the attacks the Applicants make against the scheme that was in place prior to its amendment on 1 August 2008. Some categories of victims will inevitably be treated on a more favourable basis at one level or another.

No explanation is given why such discrimination is justified. No facts are alleged in support of any such claim. The closest the Minister comes to this is in the assertion that:

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57. This assertion is, with respect, difficult to understand:

23 Koorts 2/136 para 27.

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57.1 First, if the intention is to save money, this could be achieved by treating all road accident victims on an equal basis, and limiting all claims. No explanation is offered as to why a particular class of victims should be singled out for disadvantageous treatment.

57.2 To the extent that it is necessary to distinguish between classes of claimants, this could be done on a basis which was not unfairly discriminatory. The Minister's representative does not explain why this is not possible.

58. The statement by the Minister's representative is contradicted by the amending Act which does

59. We submit that the impugned sections are plainly unfairly discriminatory, in breach of the constitutional guarantee of equality.

restrict the claims which road accident victims may make. The amended Act differentiates between different classes of victims, depending on the nature of the injuries which they have suffered.

60. The final, if somewhat belated, termination of this unfair discrimination by the 2005 Amendment Act is to be welcomed. It is, with due respect, unfortunate that an attempt was made to defend it.

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61. Section 172 of the Constitution provides (emphasis added):

REMEDY: INTRODUCTION

(1) When deciding a constitutional matter within its power, a court - (a) must

(b) may make any order that is just and equitable, including - declare that any law or conduct that is inconsistent with the Constitution is invalid to the extent of its inconsistency;

and

(i) an order limiting the retrospective effect of the declaration of invalidity; and

(ii) an order suspending the declaration of invalidity for any period and on any conditions, to allow the competent authority to correct the defect.

62. The starting point for the enquiry into remedy was explained as follows by Moseneke DCJ in the Steenkamp case:²⁵

[29] It goes without saying that every improper performance of an administrative function would implicate the Constitution and entitle the aggrieved party to appropriate relief. In each case the remedy must fit the injury. The remedy must be fair to those affected by it and yet vindicate effectively the right violated.

63. The Respondents assert that any declaration of invalidity should be suspended:

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63.1 The Fund proposed that it be suspended for a period of 12 months, in order to allow for the Amendment Act to come into force.²⁶

63.2 The Minister signed his affidavit after the commencement of the Amendment Act. He proposed that it should be suspended to 1 August 2008,²⁷

64. This would mean that although the impugned provisions of the Act were unconstitutional, and had been so since 1994, there would be no remedy for this. The Applicants and others similarly situated would receive no relief whatsoever, notwithstanding the sustained breach of their rights, in a situation where the state was clearly aware it was breaching their rights.

the date when the Amendment Act commenced.

65. This would be in breach of the fundamental principle that the Constitution requires effective relief. In Fose, Ackermann J held:²⁸

Given the historical context in which the interim Constitution was adopted and the extensive violation of fundamental rights which had preceded it, I have no doubt that this Court has a particular duty to ensure that, within the bounds of the Constitution, effective relief be granted for the infringement of any of the rights entrenched in it. In our

25 Steenkamp N.O. v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC).

26 Modise 1/79 para 44 and 46.

28 Fose v Minister of Safety and Security 1997 (3) SA 786 (CC), para [69].

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27 context an appropriate remedy must mean an effective remedy, for without effective remedies for breach, the values underlying and the rights entrenched in the Constitution cannot properly be upheld or enhanced.

66. It is for this reason that the leading text points out that

(t)here is always a presumption against suspension. In the absence of any of the factors discussed above,²⁹ suspension will not be granted.³⁰

67. We submit that the extraordinary remedy of suspension would not be a proper remedy in this matter. There are ordinarily two factors which may persuade a court to make an order of suspension: they are explained as follows by Bishop:³¹

68. The

first

The most common and obvious use for a suspension order is when an immediate order of invalidity will create a lacuna in the law that would create uncertainty, administrative confusion or potential hardship.

is the following:

69. There is no such risk here. There will be no lacuna in the law. The declaration of invalidity will not create any uncertainty, administrative confusion or potential hardship.

29 To which we refer below.

30 Bishop “Remedies” in Woolman and Others (Eds) Constitutional Law of South Africa (2 ed) 9-121.

31 Ibid at 9-116 to 9-121.

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70. The second

where multiple legislative cures to the constitutional defect exist. This rationale is based on the separation of powers doctrine. It is for the legislature, not the judiciary, to make policy decisions where the Final Constitution does not require a particular outcome.

reason for suspension is

71. Parliament has made the policy decision, and has decided what legislative cure is appropriate in future for the constitutional defect. Its solution is the 2005 Amendment Act, which abolished the discriminatory provisions of section 18(1) and (2).

72. The only reason which is advanced by the respondents for suspending the order of invalidity, is the cost of not doing so.

The relevance of resources

73. It is important to identify a principled starting-point for consideration of the relevance of resources. In the USA, the following was said on behalf of the Supreme Court:

… it is obvious that vindication of conceded constitutional rights cannot be made dependent on any theory that it is less expensive to deny them than to afford them.³²

32 Watson v City of Memphis 373 US 528 (1063) at 537.

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74. We submit that where a breach of the Constitution has been proved, and a justified limitation has not been shown, it is only in the most extreme circumstances that a court might hold that the government is excused from complying with the Constitution because it would cost money for it to do so. To take this approach would make the government’s duty to comply with the Constitution dependent on its decision as to what funds should be allocated to a particular function. This would fundamentally undermine the Constitution.

75. This is not such an extreme case. As we show below, the facts in the pleadings demonstrate that the remedy is in fact affordable.

76. After the Applicants had filed their heads of argument in the High Court, making this point, the Fund filed a further affidavit in an attempt to show that the remedy was unaffordable.³³

33 The Record is somewhat misleading in this regard. The second respondent’s supplementary affidavit appears in the Record before the applicants’ replying affidavit. This may create the impression that it was filed before the replying affidavit. In addition, the Index shows the date of the second respondent’s supplementary affidavit as ‘18.07.08’. In fact, it was signed on 24 May 2010: 3/124. The hearing in the High Court took place on 1 June 2010.

For the reasons set out below, we submit that this attempt, too, was not successful.

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77. In this section of these heads, we address the evidence in the original pleadings. In the next section, we address the late supplementary affidavit.

ON THE ORIGINAL PLEADINGS, AN UNSUSPENDED DECLARATION OF INVALIDITY IS NOT UNAFFORDABLE

78. It is important to distinguish between two aspects of the RAF’s operations: its cash flow requirements, and its “liability”.

Understanding the “liability” or “deficit” of the RAF

79. The RAF is not a commercial insurer. It is a statutory compensation fund which is funded and in practice guaranteed by the State through levies and appropriations. Unlike an insurer, it is not obliged to hold assets or reinsurance policies which either cover or provide a guarantee of cover in respect of its future liabilities. It operates on a cash flow basis. Its operations require that each year its expenditure, including compensation paid and all other costs, should not exceed its income.³⁴

34 Munro 2/157 para 4.

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80. The “deficit” is not an amount which the RAF is obliged to pay today. It is a calculation which is a contingency provision for claims which have been or will be lodged, but which are not yet due for payment.

81. The National Treasury has accepted that it is government’s responsibility to ensure that the RAF’s cash flow requirements are met. It has chosen to do so not by placing funds to cover the future liability (contingency funds) under the management of the RAF, but rather by ensuring that the cash needs of the RAF are met as and when they actually arise.

The Government has always acted as guarantor, and still does so

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82. The Fund’s primary source of revenue is the fuel levy. It has happened in the past that the fuel levy on its own has been inadequate to meet the claims on the Fund. The evidence shows that it has been the practice of the government in the past to make appropriations to the Fund when the fuel levy has not been adequate to meet its needs.³⁶

35 Donaldson quoted in Kruger 1/146-147 para 18; Kruger 1/147 para 19.

The government has always accepted, and continues to accept, that it has an obligation to

36 Kruger 1/148 para 23.

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ensure that the RAF is in a position to meet its financial obligations. It has consistently done so in the past.³⁷

83. Examples of such past payments are the following:

83.1 In 2005/2006, the Fund had a cash flow crisis and was unable to pay claimants. The reason for this was that the fuel levy was insufficient to provide the funds which the Fund required in order to perform its functions. The Treasury made a payment of R2.7 billion in order to assist the RAF to meet its obligations. This was an outright appropriation or grant, and not a loan.³⁸

83.2 Similarly, on 21 October 2008, the Minister of Finance announced an additional appropriation of R2.5 billion to enable the RAF to meet its obligations.³⁹

84. When the National Treasury made its presentation to the National Assembly's Portfolio Committee in March 2008, the presentation referred to the outstanding liability of the Fund. Treasury accepted that it was the

38 Kruger 2/149 para 24; MK5 3/195-196.

39 Kruger 2/149 para 25; MK6 3/197.

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government's responsibility to enable the Fund to make payment of such claims. The presentation stated that the liability would

need to be addressed when the Road Accident Benefit Scheme legislation is promulgated, and it may require direct funding from the fiscus, fuel levy increases or a special government bond to underwrite accumulated liabilities.⁴⁰

85. This approach is consistent with the past practice of government. It shows that government accepts that it has to “top up” shortfalls in the Fund, and that it will continue to do so. Neither of the respondents even attempted to make a case that the government would be unable or unwilling to meet any shortfall in the Fund which might result from the declaration of invalidity.

86. We submit below that there will not in fact be such a shortfall. We stress however that there is however no suggestion anywhere in the papers that if a declaration of invalidity leads to a shortfall, the government will not continue to act as it has in the past, namely as a guarantor of the obligations of the Fund to meet claims under the Act.

87. Accordingly, even if suspension could be appropriate to save money, no basis was laid for it at all.

40 Kruger 2/147-148 para 20; MK3 3/193.

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88. If however it is found that the government cannot or will not supplement the Fund in order to meet additional needs created by a declaration of invalidity, this will in any event not create any material difficulty for the Fund. This is because the 2005 amendments have very substantially reduced the claims which road accident victims may make on the Fund.

They are already producing substantial and continuing savings, far in excess of the limited and short-term costs which will be brought about by a declaration of invalidity.

A declaration of invalidity will not cause a material problem for the Fund

89. By the time this application is heard, the Amendment Act will have been in operation for more than two years. If a declaration of invalidity is made, the Amendment Act - and the savings it brings about - will by then have been in operation for substantially over two years. The evidence shows that within that period, the savings created by the Amendment Act will already have more than wiped out any additional claims which will be brought about by the declaration of invalidity.

90. The financial implications of an order of invalidity are set out in the affidavits of Mr Schwalb and Mr Munro. They show the following.

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Area A

The additional costs which will be brought about by an order of invalidity

91. Mr Schwalb estimated the effect of removing the R25 000 cap on claims arising from accidents since 1 April 1997 that had already been settled by 31 March 2008. He estimated this at in excess of R3.62 billion.⁴¹

92. The Applicants do not ask for an order reviving claims that had been settled by 31 March 2008. They accept that in the interests of certainty and finality, an order of invalidity should not apply to any claim which has been finally settled in its entirety.

He referred to this as “Area A”.

93. Accordingly, if an order of invalidity is made as proposed by the Applicants, the additional claims in “Area A” will not materialise. They can therefore be entirely disregarded.

Area B

94. Mr Schwalb's Area B covers claims where the cause of action arose before 31 March 2008, and the claim had not yet been settled by 31

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March 2008. This includes claims which had not been “reported on”

(made) by that date. Mr Schwalb estimated that in respect of these claims, the removal of the R25 000 cap would produce an additional liability for the Fund of about R3.34 billion.⁴²

94.1 It includes provision for claims which had not been lodged by 31 March 2008. It is inevitable that some of those claims were in the event not lodged, and will have prescribed.

This figure of R3.34 billion is, in the nature of things, an over-estimate, for three reasons:

94.2 More than two years have now passed since Mr Schwalb's cut-off date of 31 March 2008. It is inevitable that a significant number of the claims which were lodged, have been settled in the past two years. They would therefore not be affected by the order of invalidity which the Applicants seek, because that order would apply only to claims which have not yet been finally settled.

94.3 The order which the applicants seek does not cover all of the circumstances in which the R25 000 cap was applicable.

41 Schwalb 1/86-87 para 19-22.

42 Schwalb 1/87-88 para 23-26.

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95. It follows logically that the R3.34 billion estimate by Mr Schwalb is an over-estimate, to a significant extent. We submit below that even if that were not the case, and the full liability of R3.34 billion were incurred, this would not provide a basis for excluding these claims from the scope of the order of invalidity.

Area C

96. Mr Schwalb's Area C covers claims where the cause of action arose after 31 March 2008. He estimates that the removal of the R25 000 cap will produce an additional liability for the Fund of R1.5 billion per year.⁴³

97. The Amendment Act, which came into effect on 1 August 2008, removed the R25 000 cap. It follows that the only additional cost in “Area C”

which would be produced by an order of invalidity, is in respect of accidents arising between 1 April and 31 July 2008, i.e. a period of four months (one-third of a year). From this it follows that if Mr Schwalb's estimates are correct, the additional liability in respect of Area C which would be created by an order of invalidity is one-third of R1.5 billion, or R0.5 billion.⁴⁴

43 Schwalb 1/88-89 para 27-30.

44 Munro 2/160 para 9-10.

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98. It follows that to put matters at the very highest, the total additional liability which will be created by an order of invalidity is R3.34 billion (Area B) plus R0.5 billion (Area C), i.e. R3.84 billion.⁴⁵

99. The report by Mr Schwalb and Mr Potgieter estimated the savings which will be brought about by the limitations on claims which were introduced in the Amendment Act. They estimated that the combined saving will be between 31.9% and 35.6% of claims.

The savings brought about by the Amendment Act

46

100. Mr Schwalb estimated that the total present value of payments in respect of accidents that occurred during the financial year ending 31 March 2008 was R9.213 billion.⁴⁷

101. The lower level of the savings which the Fund will make as a result of the amendments is 31.9% of R9.213 billion, namely R2.939 billion.

102. The upper limit of the savings which Mr Schwalb anticipates, is 35.6% of R9.213 billion, namely R3.280 billion.

45 Munro 2/160 para 9-11.

46 2/95 lines 20-22.

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103. These are annual savings. The savings commenced on 1 August 2008, when the Amendment Act came into operation. If the order of invalidity is confirmed by this Court, the Amendment Act will probably have been in operation for about two and a half years. On this basis, the Fund will already have saved between R7.3 billion and R8.2 billion by the time the order of invalidity is confirmed and comes into effect

104. We submit that when one compares the continuing annual saving (which is already in operation) with the cost of the additional claims which will in future be incurred by the removal of the R25 000 cap – namely, a total of (at most) R3.84 billion – it cannot seriously be contended that a declaration of invalidity of the R25 000 cap will threaten the financial viability of the Fund.

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47 Schwalb 1/89 para 29.

48 Munro 2/170 para 34.2 and 34.3.

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105. The supplementary affidavit, filed after the Applicants had filed their heads of argument making the arguments above, provides more recent financial information about the Fund. It in fact shows that by that time, the Amendment Act was already having a visible effect.

THE SAVINGS ARE ALREADY HAVING A VISIBLE EFFECT

106. The “accumulated deficit” (or contingent liability) of the RAF at the end of the 2007/2008 financial year (31 March 2008) was in excess of R27 billion.⁴⁹

107. At the end of the 2008/2009 year (i.e. on 31 March 2009), that “deficit”

had grown by almost 50%, to R40 billion.⁵⁰

108. In October 2008, the government had made a payment of R2.5 billion to enable the RAF to meet its obligations.⁵¹

109. The Amendment Act came into effect during that year, on 1 August 2008.

From this it follows that without this payment, the “deficit” would have been R42.5 billion.

49 Modise 1/77 para 23.

50 Modise 2/120 para 7.1.

51 Kruger 2/149 para 25; Modise 2/121 para 9.2.

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110. The supplementary affidavit states that at the end of the 2009/2010 financial year (31 March 2010), the “deficit” (ie contingent liability) was R41 billion.⁵²

111. The amendment Act was therefore already having an impact on the real deficit (liability) – ie the liability without special subventions. Not only was the “deficit” no longer increasing: in fact, the real “deficit” had already decreased by 3%-4%.

The government did not make any special payment to the RAF during that year.

112. To the extent that it might be contended that there is however a potential cash flow problem, this is addressed by the evidence of Mr Munro.

Cash flow

113. Mr Munro calculated the changes to the Fund’s cash flow requirements on the assumption that if a final order of invalidity is made, this will be in about mid-2011. Accordingly, the additional cash payments which the RAF is required to make as a result of an order of invalidity would commence around the middle of 2011.⁵³

52 Modise 2/120 para 7.2.

53 Munro 2/161 para 12.

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114. Mr Munro estimated the additional call on the RAF’s funds, on a year-by- year basis. His detailed analysis⁵⁴

115. Mr Munro also analysed the cash flow impact of the

shows that the impact of the removal of the R25 000 cap would reach its peak in 2013. Thereafter it would decline and tail off.

savings

116. We have already pointed out that when the savings are fully realised (by 2012-2013), they will be R3.19 billion to R3.56 billion

brought about by the amendment Act. They too would reach their peak in the 2013 year. They would thereafter continue permanently.

every year in 31 March 2009 terms. The total

117. By 2013, the RAF will already have achieved savings for five years since the Amendment Act came into effect. While those savings will not yet be maximal, they will be significant – as is shown by the fact that already in 2009/2010, there was a reduction in the real “deficit”.

value of additional payments which would be brought about by an order of invalidity is R3.84 billion.

118. There is therefore no basis for a finding that an order of invalidity will give rise to a cash flow problem.

54 Summarised at Munro 2/167-168 para 25.

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119. The High Court found that just and equitable relief would be achieved by an order which entitled the applicants (and others similarly situated) to the same compensation as post-amendment Act road accident victims.

A VIA MEDIA?

120. We submit that this finding was not correct, and that there is no good reason why the applicants should not receive the same compensation as other pre-August 2008 road accident victims. That would give effect to the Constitutional mandate of equality.

121. If however the applicants’ claims are to be limited along the lines proposed by the High Court, the order should not deprive them of rights which they had under the pre-amendment Act. The High Court’s formulation of its order has the unfortunate, and plainly unintended, result that the applicants and other affected passengers might actually lose rights as a result of the successful constitutional challenge.

122. Paragraph 4 of the Order provides that affected passengers “shall qualify for no greater compensation than that which would accrue under the

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provisions of the Road Accident Fund Amendment Act, 19 of 2005, as it stood on 1 August 2008”.⁵⁵

123. It seems that the intention of the High Court was to raise the cap on claims which affected passengers could make against the Fund (R25 000) to the new cap introduced by the Amendment Act.

124. However, the formulation also appears to make affected passengers subject to other provisions of the Amendment Act. If this is the result, the order will retrospectively reduce the benefits which affected passengers were entitled. This is so for three reasons.

125. First

126. The Amendment Act abolished, for the future, the common law right of action against the wrongdoer. It may be argued that the formulation of : Under the pre-amendment Act – and at the time of the accidents in question – affected passengers had a common law right of action against the wrongdoer for compensation in excess of that provided by the Fund.

If they did not receive full compensation from the Fund, they had a right of action against the wrongdoer for the balance.

55 Order 3/242 para 4.

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the High Court order has the result that affected passengers would also lose their common law claims against the wrongdoer.

127. If so, this has a very material consequence. If an affected passenger (including one of the applicants) does not receive full compensation from the Fund under the formula in the amended Act, the order will then deprive him or her of the cause of action against the wrongdoers. This would not be just and equitable: the paradoxical consequence of the applicants’ bringing a successful challenge to the validity of the statute would be to reduce the compensation which they are able to obtain.

128. This would be a widespread problem. Many affected passengers were passengers in buses owned by companies which had insurance to cover their common law liability. In such cases, the passenger typically claims compensation from the Fund for R25 000 (the statutory cap), and compensation from the bus owner for the balance of his or her damages.

The additional compensation is paid by the insurance company. If however the order has the effect of incorporating the post-2008 abolition of the common law claim, the paradoxical result is to reduce (retrospectively) the compensation which passengers may obtain.⁵⁶ This does not achieve any saving for the Fund: the beneficiary is the insurance

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company, which has received payment of premiums, but is relieved of any liability.

129. In many instances, the claim against the Fund is quickly settled at the sum of R25 000, and the claim against the owner of the vehicle is then pursued. If the common law claim of affected passengers is now abolished, those who have claims pending against third parties (for example against a wealthy driver who caused the accident) will now retrospectively have been deprived of their rights.⁵⁷

130. We submit that if the “via media” is to be followed, the order should make clear that it does not abolish the liability of parties which at the time of the accident were liable under the common law.

Again, we submit that this could not be just and equitable. Again, the only beneficiary is the guilty third party or its insurer.

131. Second

132. Under the pre-amendment Act, road accident victims had a claim to full compensation for the medical and hospital expenses which they incurred.

: It is not clear whether the order governs the tariff applicable to claims for medical and hospital care arising from the accident.

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Under the Amendment Act, those expenses are limited to a fee tariff which applies in public hospitals, the Uniform Patient Fee Schedule (UPFS). This is very substantially lower than the tariff at which private practitioners are willing to provide services.

133. Again, if the order makes those tariffs applicable to claims which arose before the 2008 Amendment Act came into operation, its effect is to reduce retrospectively the benefits which affected passengers could claim. This too would not be just and equitable.

134. Third: Under the pre-amendment Act, affected passengers were able to obtain compensation, including in respect of general damages

135. The unintended consequence of the order is that therefore that affected passengers who suffered limited injuries, and had a right to compensation for general damages to a maximum of R25 000, will have this right removed. Again, this is not just and equitable. Affected passengers should not suffer a further and new disadvantage because the impugned sections are inconsistent with the Constitution.

, to a maximum of R25 000. Under the post-Amendment Act, victims have no right to compensation for general damages unless they have suffered

“serious injury” as defined.

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136. A final difficulty with the order of the High Court is that in making the compensation provisions of the post-Amendment Act applicable, it did not deal with the procedures prescribed under that Act for the lodging of claims, and in particular the procedure and time limits for lodging proof of “serious injury”. The result is that it will by now be impossible for some affected passengers to comply with the new procedures. This too would need to be addressed by any “via media” order.

137. For the reasons set out above, the Applicants submit:

CONCLUSION

137.1 Sections 18(1)(a)(i), 18(1)(b) and 18(2) of the Road Accident Fund Act as they stood prior to 1 August 2008 were inconsistent with the Constitution.

137.2 They should accordingly obliged be declared inconsistent and invalid.

137.3 No basis has been shown for a suspension of the order of invalidity.

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137.4 The order of invalidity should be made applicable to all claims against the Fund which have not yet been finally settled.⁵⁸

137.5 If however the Court is minded to make an order that the claims of affected passengers are to be limited by the Road Accident Fund Amendment Act of 2005, it should also order that this will not

137.5.1 remove the liability of any party other than the Fund;

or

137.5.2 reduce or abolish any right which an affected passenger had under the Act before it was amended.

138. The Applicants seek an order accordingly, and an order for costs.

GEOFF BUDLENDER SC COUNSEL FOR APPLICANTS CHAMBERS

CAPE TOWN

26 SEPTEMBER 2010

58 Engelbrecht v Road Accident Fund and Another 2007 (6) SA 96 (CC)

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AUTHORITIES CITED

Tsotsetsi v Mutual & Federal Insurance Co Ltd 1997 (1) SA 585 (CC)

Ferreira v Levin NO and others; Vryenhoek and others v Powell NO and others 1996 (1) SA 984 (CC)

Harksen v Lane N.O. and Others 1998 (1) SA 300 (CC)

Victoria and Alfred Waterfront (Pty) Ltd v Police Commissioner, Western Cape 2004 (4) SA 444 (C)

Steenkamp N.O. v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC)

Fose v Minister of Safety and Security 1997 (3) SA 786 (CC) Watson v City of Memphis 373 US 528 (1063)

Engelbrecht v Road Accident Fund and Another 2007 (6) SA 96 (CC)

Bishop “Remedies” in Woolman and Others (Eds) Constitutional Law of South Africa (2 ed)