The Road Accident Fund’s reliance on a judgment against Discovery Health has again failed to convince the High Court in Cape Town that the RAF is not liable for a medical scheme member’s hospital and medical expenses.
The judgment, which was handed down on Friday, is the latest in a series of decisions by the Western Cape Division against the RAF – notwithstanding the majority decision by the Full Bench of the High Court in Pretoria in December last year.
The majority decision was the outcome of an application by Discovery Health for a declarator that the RAF was in breach of an order handed down in October 2022. In that order, Judge Mandla Mbongwe declared unlawful a directive issued in August 2022 in which the RAF instructed its employees not to make any payments to claimants if their medical scheme had already paid for their medical expenses arising from a road accident.
The medical scheme administrator also sought a declarator that the RAF’s reliance on two directives it issued subsequent to Judge Mbongwe’s order perpetuated its breach of that order.
The majority decision – by Judge Dunstan Mlambo, the Judge President of the Gauteng Division of the High Court, and Judge Noluntu Bam – found no evidence that the RAF’s directives constituted a breach of Judge Mbongwe’s order.
In a dissenting judgment, Judge Ingrid Opperman said the RAF violated its constitutional obligations by failing to comply with Judge Mbongwe’s order.
Read: Discovery to appeal ‘far-reaching’ judgment in favour of RAF
Recent judgments by the Cape Town courts in similar matters have held that the majority decision did not overturn Judge Mbongwe’s findings.
Read: Court orders RAF to pay medical scheme members’ claims
Discovery has been granted leave to appeal the decision in the Supreme Court of Appeal (SCA).
Contested medical expenses
In the application that came before Acting Judge Mohamed Salie, Lisa Basson sought compensation from the RAF for medical expenses following a motor vehicle accident in March 2019.
Basson’s total medical expenses amounted to R265 609.97, with R60 756.63 undisputed and R204 853.34 contested. The contested amount, paid by Discovery Health Medical Scheme (DHMS), was categorised as Prescribed Minimum Benefits (PMBs) and Emergency Medical Conditions (EMCs) under the Medical Schemes Act (MSA).
Basson argued that section 17 of the RAF Act obliged the Fund to cover her past medical and hospital expenses, even though these were initially paid by Discovery Health.
Basson relied on Judge Opperman’s minority decision and cited several judgments by the Western Cape Division that have found the RAF liable despite the majority decision.
RAF: Discovery has a statutory obligation to pay
The RAF disputed its liability for the contested amount, arguing that the MSA requires medical schemes such as Discovery to cover such expenses, stating, “a medical aid scheme is compelled to pay certain expenses incurred by its members and is consequently unable to contract out of such obligation”.
The RAF further contended that Basson’s agreement to reimburse Discovery was invalid under the Act, because it attempted to circumvent the scheme’s statutory duty.
The Fund asserted that because Discovery was obliged to pay the PMB and EMC expenses, Basson suffered no loss, and so the RAF was not liable.
Additionally, the RAF invoked section 19(d)(i) of the RAF Act, arguing that the reimbursement agreement fell within its exclusionary provisions and was outside the principle of subrogation, because it involved a medical scheme, not an insurer.
The RAF also relied on the majority judgment by the Full Bench.
Court endorses the minority decision
In his decision, Salie AJ said DHMS paid Basson’s medical expenses under a contractual arrangement, which was binding only between the plaintiff and the scheme, not the RAF.
He said the majority judgment clarified that DHMS is a medical scheme, not an insurer, governed by its own rules applicable only to its members.
However, Salie AJ endorsed the minority judgment by Judge Opperman, who argued that the RAF’s statutory obligation to pay claims remains unaffected by whether a medical scheme’s payment is contractual or statutory. She rejected excluding PMB and EMC costs from the RAF’s liability, advocating for a harmonious interpretation of the RAF Act and the MSA.
The court also referred to Road Accident Fund v Lechner (2011), where the SCA treated benefits from a German insurance scheme as collateral, not reducing the RAF’s liability, because there was no risk of double compensation.
Salie AJ rejected the RAF’s argument that Basson suffered no loss because of Discovery’s statutory obligation to pay PMB and EMC expenses, citing Judge Mbongwe’s settled ruling that plaintiffs were entitled to claim medical expenses, the nature of the contractual relationship, and the compensatory purpose of the RAF Act taking precedence over the regulatory role of the MSA.
RAF’s argument in terms of section 19 of the RAF Act
The RAF contended that section 19(d)(i) of the FAF Act excluded its liability because Basson’s agreement to reimburse DHMS for expenses paid to service providers fell within the sub-section’s exclusionary provisions.
Salie AJ turned to Fookwe v Road Accident Fund (2024), which addressed a similar issue. In Fookwe, the High Court in Cape Town stated: “The RAF’s argument in relation to section 19(d)(i) is that because the plaintiffs, as members of their medical aid schemes, agreed to reimburse such scheme any amounts paid over by the scheme to service providers, this amounts to an agreement falling within the exclusionary provision of that sub-section.”
Citing Road Accident Fund v Abdool-Carrim and Others (2008), the Fookwe judgment rejected this interpretation, noting that substituting “supplier” for “third party” in section 19(d) contradicts the purpose of the RAF Act. It further explained: “For if a third party’s claim is valid and enforceable and the supplier’s is not, the Fund would still be liable to compensate the third party, who in turn remains contractually liable to the supplier.”
The Fookwe judgment clarified that section 19(d) aims to protect third parties, particularly indigent ones, from champertous agreements, but it does not restrict the contractual freedom of suppliers such as medical schemes. (Champerty is a type of agreement where a third party finances a legal action in exchange for a share of any proceeds.)
Salie AJ endorsed this view, stating that sections 19(c) and (d) of the RAF Act, read together, prevent non-attorneys from profiting from third-party claims, but Basson’s contract with DHMS was “contractually and legally valid and enforceable”.
He upheld Basson’s claim for past medical expenses and ruled that DHMS was entitled to reimbursement from her under their contractual agreement.
He ordered the RAF to pay R265 609.97 into her attorney’s trust account.
Salie AJ said Basson was entitled to costs on the attorney-and-client scale in light of the RAF’s “misconceived arguments”.