On February 18th 2020, Collins Letsoalo (acting Chief Executive of the Road Accident Fund) shook the personal injury world when he sent letters to panel attorneys requesting them to hand over files of all unfinalised cases.
An extract from the letter reads: “You are required to provide the fund a list of all open matters by close of business on February 20”. It is believed that the RAF no longer wanted to make use of the private law firms it had contracted to handle claims and going forward wants to use its own in-house lawyers to cut costs. This revised litigation model has no doubt caught panel attorneys off guard, many of whom have been defending the RAF for decades.
The past 3-months have been underpinned by rampant uncertainty as defendant firms demanded that the RAF not only withdraw the letter in which it was demanding the files back, but that the decision to cancel their services be reviewed and set aside.
The lawyers approached the high court sitting in Pretoria to compel the fund to continue with a tender to appoint law firms like them — and to withdraw the notice that all the law firms should return incomplete cases.
In papers filed at the high court, the first applicant, Pritzman Mabunda, stated that the RAF’s decision to cancel a tender process for the appointment of a new panel of lawyers was irrational and could cause substantial harm to the administration of justice and the public purse.
Judge Norman Davis, in turning down their application on 27 March 2020, said he appreciated that the panel of lawyers had built their practices around the work received by the RAF and their concerns for the public. But, he added, “in the end it still appears to be about the retention of their lucrative practices”.
The judge said that each passing day the present litigation model continued to exist, the deeper the RAF’s financial outlook would sink.
“The deeper the RAF sinks, the less it is in a position to satisfy claims. All this impacts on the public purse and on the pockets of the fuel-using public . Any, and I stress any, reduction of the R10bn costs expense, be it a saving in costs paid due to early settlement or saving having done away with the panel, far outweighs the individual applicants’ (lawyers’) private convenience,” the judge said.
He ordered that the lawyers had to hand over the case files, as requested by the RAF.
The timing of these events could not be worse as COVID-19, termed by many as the once- in- a- generation black swan event, has simultaneously wreaked havoc across the globe.
Hundreds of Road Accident Fund cases, which were enrolled in courts, have not be able to proceed as the country’s largest public insurance scheme was not declared an essential service and therefore failed to operate under level four of the lockdown regulations. This, despite the Association for the Protection of Road Accident Victims (APRAV) calling on the government to declare the RAF as an essential service during this time.
Business model pivot
Taurus Capital, specialist funder and partner to the legal fraternity, recognise that there are 103 law firms facing the challenge of pivoting their business models to accommodate the shifting landscape. Specifically, it has built a R300 million capital pool which is exclusively available to the legal sector during this unprecedented time.
“We have begun working with a number of RAF panel attorneys to discount their outstanding costs. By discounting future revenues, firms can access the immediate funds required to strategically navigate these difficult times without having to make panicked decisions.”, says Elad Smadja, CEO of Taurus Capital.
“We understand the inner workings of all types of law firms because our business was built on an appreciation of the commercial intricacies applicable to this sector. This allows us to consider value which traditional lenders overlook. Our solutions are tailored to each firm’s needs, with facilities from R250,000 to R30 million available to firms ranging in size from boutique to large multi-partner firms.”
Unlike traditional lenders, Taurus Capital assigns value to intangible assets such as book debts, mandate and fee agreements, invoices, court orders and taxed bills of costs. As experts in the business of law, they recognise that law firm income is cyclical and therefore match repayment expectations with the cashflow cycles of the firms they partner with.
About Taurus Capital
Taurus Capital delivers multi-faceted investment and financial solutions that drive sustainable business optimisation for law firms.
Legal firms need to mitigate risk and cost in the context of the unpredictable, lengthy and often illiquid nature of their work. Financing is often hampered by cumbersome processes which deters growth opportunities.
Taurus Capital specialist services include law firm finance, litigation funding and wealth and investment solutions for law firms. Each is delivered after an extensive consulting process.
For enquiries, visit www.tauruscapital.co.za