Road Accident Fund v P F Cloete NO

Dr Els Thomas, a Belgian medical practitioner, was seriously injured in a motor vehicle collision near Cape Town on 8 October 1996 while on vacation in South Africa. The injuries prevented her from practicing medicine and being employed. A curator ad litem was appointed for her and action was instituted against the Road Accident Fund (RAF). The matter settled on the basis of 70% liability on the RAF's part. Quantum was referred to arbitration. Dr Thomas was entitled to social security benefits from Belgian compulsory social security schemes administered by the Onafhankelijk Ziekenfonds. Under Belgian law, she would receive benefits in anticipation of damages from the wrongdoer, but her entitlement to benefits would fall away once she received compensation from the RAF. The Belgian insurance institution could not recover from the RAF as South Africa does not recognize such rights. Dr Thomas gave an undertaking to refund to the Belgian institution any benefits she receives from the RAF for the same loss. The RAF argued that Belgian social security benefits should be deducted from damages, relying on the principle against double compensation. The claimants resisted, relying on Zysset v Santam Limited 1996 (1) SA 273 (C), where a similar arrangement with Swiss insurance schemes was upheld. The RAF asked the arbitrator to state questions of law under s 20(1) of the Arbitration Act 42 of 1965 regarding the deductibility of various Belgian benefits. The arbitrator declined to state the questions as formulated but instead stated a question asking whether Zysset was correctly decided on its facts. The RAF applied to the High Court to compel the arbitrator to state the original questions or, alternatively, to determine the issue as formulated by the arbitrator.

• Whether the High Court had jurisdiction to determine a question stated by an arbitrator under s 20(1) of the Arbitration Act 42 of 1965 where the question was not one requested by either party
• Whether the question stated (i.e., whether Zysset was correctly decided on its facts) was a question of law capable of being stated under s 20(1)
• Whether the High Court properly exercised its discretion in deciding to furnish an opinion on the question stated by the arbitrator
• The scope of an arbitrator's discretion to state questions of law under s 20(1) and the factors governing such discretion
• The scope of the court's discretion to determine questions stated by an arbitrator under s 20(1)
• Whether it is appropriate to use s 20(1) to seek reconsideration of binding precedent in the course of arbitration proceedings
• Whether benefits received from foreign compulsory social security schemes are deductible from damages where the claimant has undertaken to repay those benefits to the scheme once compensation is received

1. The appeal was dismissed with costs. 2. The cross-appeal was upheld with costs. 3. The costs included costs of two counsel. 4. The order of the High Court was set aside and substituted with: 'The application is dismissed with costs, including the costs of two counsel, where so employed.'

The binding principles established are: (1) Section 20(1) of the Arbitration Act 42 of 1965 confers a broad, unrestricted discretion on arbitrators to state questions of law; the Halfdan Grieg criteria are important factors but not definitive or mandatory requirements. (2) Courts have a discretion whether to furnish an opinion on questions stated by arbitrators under s 20(1); they are not obliged to answer every question stated. (3) The court's powers under s 20(1) should be exercised sparingly, as s 20 constitutes an exception to the general principle that arbitrators finally decide all matters referred to them, including questions of law. This is out of deference to the principle of party autonomy. (4) It is inappropriate to use s 20(1) to seek judicial reconsideration of existing binding precedents in the same division where there are no conflicting authorities; parties who agree to arbitration must be taken to have agreed their dispute will be decided according to prevailing South African law. (5) Courts should decline to answer questions under s 20(1) that: (a) are of questionable relevance to the actual issues in the arbitration; (b) are academic or hypothetical; (c) would hamper rather than promote finality in dispute resolution; or (d) are premature because primary facts have not yet been determined. (6) A question stated under s 20(1) must be a genuine question of law; questions that are essentially value judgments or policy determinations (such as questions about deductibility of collateral benefits, which depend on normative considerations of fairness and policy) are not questions of law for purposes of s 20(1). (7) Questions of law must be stated before the making of a final award; once a final award has been made and satisfied without reservation of rights, the court lacks jurisdiction to entertain applications under s 20(1).

Griesel AJA made several non-binding observations: (1) He expressed doubt (without deciding) whether the question stated by the arbitrator met the jurisdictional threshold of being a 'question of law', noting it required examination of the facts in Zysset rather than examination of underlying legal principles, and noting that questions about deductibility of collateral benefits cannot be answered by a single juridical test but depend on policy considerations of fairness which are normative in nature. (2) He suggested (without deciding) that the matter may have become moot given that the final award had been made in September 2006, payment in full had been made by the RAF in October 2006 without reservation of rights, the RAF did not hold back any amount, and the RAF failed to exercise its right to appeal against the award - the payment might be analogous to payment after an appealable judgment which, absent reservation of rights, amounts to peremption. (3) He noted that guidance on factors to consider before exercising powers under s 20(1) can be found in s 45 of the English Arbitration Act 1996, which requires that the determination of the question would likely produce substantial savings in costs and that the application be made without delay. (4) He observed it would be contrary to principle for courts to give opinions on assumptions or academic/hypothetical questions under s 20(1), and it would normally be premature to state questions until primary facts have been determined. (5) He invoked the public policy principle of finality in litigation (interest rei publicae ut sit finis litium) noting that in this case the collision occurred thirteen years before and no finality had been reached, and following the High Court's procedure would prolong the process and delay finalization indefinitely. Harms DP observed that Scott J in Zysset did not purport to lay down a generally applicable rule in isolation from the facts, but based his conclusion on the specific facts of that case.

This case is significant in South African arbitration law for clarifying the scope and limits of s 20(1) of the Arbitration Act 42 of 1965. It establishes that: (1) Courts should exercise their powers under s 20(1) sparingly, out of respect for party autonomy and the principle that arbitrators are chosen to decide matters finally; (2) The Halfdan Grieg test (previously applied in South African courts) does not create mandatory obligations but only provides factors to consider; arbitrators have broad discretion under s 20(1); (3) Section 20(1) should not be used as a mechanism to challenge binding precedents in the course of arbitration - parties who choose arbitration are presumed to accept that their dispute will be decided according to prevailing law; (4) Questions stated must be genuine questions of law, not value judgments or questions dependent on policy considerations; (5) Courts should decline to answer questions that are academic, hypothetical, or of questionable relevance to the actual dispute; (6) The procedure should promote rather than hinder finality in dispute resolution; (7) Questions must be stated before final award and payment. The case reinforces the pro-arbitration policy in South African law and limits judicial intervention in arbitration proceedings. It also illustrates the principle that questions about deductibility of collateral benefits involve normative policy judgments rather than pure legal questions.