INSIGHTS

In an action for damages against the Road Accident Fund for personal injuries, as with all delictual matters, a person may claim for both patrimonial damages and non-patrimonial damages suffered as a result of the collision. In respect of patrimonial loss, the claimant will claim for the monetary value that he or she sustained in the form of loss of earnings and medical expenses. In respect of non-patrimonial loss, where there is no actual correlation between the injury and the claimed monetary value, the claimant will claim for general damages to compensate for the ‘pain and suffering’ that he or she sustained.

In Road Accident Fund (RAF) matters in particular, compensation is claimed for general damages, loss of earnings, past medical expenses and future medical expenses.

When a person is involved in a motor vehicle collision, it is not uncommon that they sustain a head injury or a brain injury with serious sequalae. When such a person lodges a claim against the RAF, the attorneys for the claimant will ensure that he or she is assessed by the necessary experts in order to evaluate the severity of the injuries sustained, so that a proper assessment can be made in order to quantify the claim.

With head injuries, the claimant may be seen by neurosurgeons, neuropsychologist/clinical psychologists and psychiatrists, depending on the findings of the original medical assessment.

What we note, as attorneys, is that a severe head injury can frequently impact the claimant negatively. A claimant who was functionally “normal” in his or her everyday living prior to the collision is now, post-collision, unable to manage their financial affairs in a responsible manner.

When it has been established that such a claimant will be unable to manage his or her financial affairs due to the injuries sustained in the collision, it becomes prudent to establish a trust to manage their financial affairs.

Similarly, when a minor is involved in a motor vehicle collision, they do not have the legal capacity to manage their financial affairs and, depending on the sum of money awarded to the minor, it becomes necessary for the court to intervene to protect the minor.

If the claimant is successful and it is found that the RAF is liable to compensate them for their patrimonial and non-patrimonial damages, the experts appointed by the claimant will advise the court on whether such funds should be protected by means of a trust in the best interests of the claimant.

This aspect was highlighted in the matter of Protection of Certain Personal Injury Awards (Pretoria Society of Advocates and Others, Amici Curiae), where the High Court confirmed that the creation of a trust as a protective mechanism is legally tenable. Trusts created in this manner are, in essence, sui generis as they are created solely to protect awards and are referred to as protective trusts.

The purpose of the court is therefore to ensure that the claimant’s interests are protected. This was emphasized by the court in Master of the High Court: In Re Van Rooyen 35182/2016 (20 May 2022):

There are certain categories of cases in which the court retains a legal oversight role in ensuring that damages awards are protected. These are cases in which minors are recipients of damages awards, or where an adult plaintiff suffers some incapacity which inhibits her ability properly to manage the financial sum awarded. Many of the latter cases occur where the accident or other act of negligence caused a traumatic brain injury (TBI) to the plaintiff. TBI’s vary in degree and in their neurocognitive effect. Not everyone who has suffered a TBI will require the protection of her damages post-award. One of the functions of the court is to make a determination as to whether such protection is necessary, and if so, what form of protection would be appropriate [para 3].

In this matter the Court acknowledged that the damages awarded in such matters can be substantial, often exceeding R1 million in RAF cases. These damages are awarded on the basis that the amount will compensate the plaintiff for the salary he or she would have earned but for their injury. In principle, therefore, the damages award should be available as an ongoing source of financial support for the remainder of the plaintiff’s lifetime (Van Rooyen [para 1]).

The intention of the court, in this instance, is to ensure that the compensation will place the plaintiff in the position they would have been in had the accident not occurred.

The monetary value for loss of earnings is calculated by an actuary, who considers the plaintiff’s age at the time of the collision, his or her retirement age, educational background and earning potential.

This monetary award is in essence the income that would have sustained the plaintiff for their expected life span.

The court therefore, in protecting these funds, will take a stringent approach to the establishment of the trust that will administer the funds.

In Van Rooyen the court also highlighted that the purpose of the trust is to ensure that the protected funds are used for the plaintiff’s maintenance, care and needs. For this reason, the fiduciary duties entrusted to the trustee are subject to the supervision of both the Master of the High Court and the court itself.

By doing so, the court emphasized that, for a trust to be established correctly, the court order needs to contain certain provisions, in the absence of which the trust is not considered properly established. These inclusions ensure that there is no abuse of funds by the trustees in terms of their duties and responsibilities, but also protect the trustees against allegations of misappropriation. The court in Van Rooyen set out these provisions as follows:

1. Parties are not allowed to make provision for trustee fees to be equivalent to that of a curator bonis in terms of the Estates Act. Instead, the court order must set out in detail how trustees are to be remunerated in terms of fees and costs [para 71(d)];

2. Trustees’ remuneration and administration costs must be set out explicitly and comprehensively in the trust deed/court order [para 78];

3. The method and basis of calculation of the trustees’ remuneration and admin costs must be set out clearly, unambiguously and comprehensively in the trust deed [para 80]; 

4. The draft order must expressly state that the costs of the trustee are to be recovered in terms of the s17 Undertaking by the RAF to pay future medical expenses [para 85];

5. The basis of the calculation and remuneration for “out of pocket” expenses must be set out in the draft order/trust deed. Amongst others this relates to premiums for security bonds; accounting fees in relation to audited financial statements; costs incurred in employing expert assistance, such as financial or medical experts; and resources required to ensure that there is proper care and maintenance of the beneficiary [paras 89-90];

6. The trust deed must expressly state that any amendment thereof shall be subject to the approval of the High Court [paras 94; 166];

7. The objectives of the trust deed must be clear, for example, if it is to operate as a trust for a minor, this must be expressly stated [para 121];

8. The trust deed and draft order must make express provision for termination of the trust by order of court by a plaintiff that regains capacity. The draft order and trust deed must make express provision for this right [para 126].

It should also be noted that the court permits a plaintiff to approach it at any stage after the conclusion of the matter, notwithstanding an existing court order, for a reconsideration of the establishment of the trust. If the plaintiff can adduce evidence which proves that they are in a position to manage their own financial affairs, the court can revise the existing order and terminate the trust.

A trust is a widely used construct and, as this article illustrates, it is an instrument which is frequently used for the protection of funds in matters concerning personal injuries. No claimant will willingly want their award for damages to be administered by, or in the control of, another, but as we can see, the purpose of such a trust is not to withhold funds from a claimant, but rather to ensure that they are financially secure for the future.