Brief Summary

Delict — Road Accident Fund — Claim for loss of earnings — Plaintiff, as mother and guardian, claimed R9 370 000 for injuries sustained by minor child in a pedestrian accident — Defendant admitted liability for 100% of proven damages but contested future loss of earnings — Expert reports presented conflicting views on child’s pre- and post-accident cognitive abilities and employability — Court determined future loss of earnings based on expert evaluations, concluding that the accident significantly impaired the child’s earning potential and educational progression, resulting in a calculated loss of earnings of R7 725 400.

Comprehensive Summary

Summary of Judgment

Introduction

This was an action for damages against the Road Accident Fund, arising from a motor vehicle accident in which a minor child, A S M, sustained injuries while a pedestrian. The proceedings were brought by S N M, acting in her representative capacity as the biological mother and natural guardian of the minor child, against the Road Accident Fund as defendant.

The summons was issued on 20 March 2018, initially claiming R1 870 000 for injuries sustained by the child. On 13 February 2023, the plaintiff amended the pleadings in terms of Rule 28, increasing the claimed amount to R9 370 000.

The merits (liability) were settled on the basis that the defendant would pay 100% of the plaintiff’s proven or agreed damages flowing from the injuries. The defendant also furnished (or was required to furnish) an undertaking in terms of section 17(4)(a) of the governing statute. The court record reflects that issues including general damages, loss of income, and past and future medical expenses were to be postponed, while the matter proceeded on a discrete issue.

At the hearing, although the defendant had been properly served with a notice of set-down, it failed to appear, and was unrepresented. The plaintiff tendered evidence in terms of Rule 38(2) and contended that it was in the interests of justice for the court to proceed. The judgment ultimately addressed future loss of earnings and the contingency deduction applicable to that claim.

Material Facts

On the undisputed factual narrative drawn from hospital records, the minor child was a pedestrian who was run over by a vehicle on 6 August 2017. He was admitted to Vryheid Hospital on the date of the accident and discharged on 16 August 2017. The clinical records recorded neurological observation and treatment of a scalp wound, including theatre intervention for debridement and secondary suturing, followed by wound dressing and antibiotic therapy.

The child was four years old at the time of the accident. His post-accident schooling trajectory, as described in the evidence relied upon, included that he commenced school in 2018 (Grade R) and subsequently experienced repeated grades, including failing Grade 1 in 2019 and failing Grade 3 in 2022, with the result that he was repeating Grade 3 at the time relevant to the experts’ reports. The judgment also referred to the child repeating a grade and passing certain grades during the pandemic period, and relied on this scholastic history as part of the overall evaluation of educational functioning.

The court relied on the expert medico-legal material to establish the child’s sequelae and their impact on future earnings. There was broad agreement between the parties’ neurosurgical experts that the child sustained a mild traumatic brain injury/concussion with ongoing neurocognitive consequences. The plaintiff’s neurosurgeon described residual neurocognitive abnormalities and personality changes, and recorded ongoing headaches. The defendant’s neurosurgeon similarly recorded a concussion (as a subset of mild injury) with prolonged neurocognitive impairments and a severe long-term mental or behavioural impairment.

The expert evidence on education and pre-morbid potential reflected areas of dispute. The plaintiff’s educational psychologist recorded physical, cognitive, and emotional changes (including enuresis, headaches, forgetfulness, and aggression), and recommended alternative placement, describing the child as a candidate for a pre-vocational programme in a special school setting. The defendant’s educational psychologist considered the child’s pre-morbid cognitive function to have been below average and expressed the view that even without the accident he would likely have developed learning disabilities, while accepting that the accident exacerbated his learning potential and that he would likely struggle in mainstream education and require placement in a special school.

The occupational therapy reports similarly addressed functional impact and employability. The plaintiff’s occupational therapist associated recurrent headaches and emotional/behavioural features with compromised scholastic functioning and reduced competitiveness in the labour market, while still considering open labour market employment possible albeit compromised. The defendant’s occupational therapist found no physical limitations at the evaluation, suggested continued schooling with appropriate interventions, and opined that future work would depend mainly on education, with no anticipated physical restrictions and competitiveness in the open labour market.

On industrial psychology, both parties’ experts accepted that the accident had hindered scholastic abilities and affected optimal functioning and competitiveness. The plaintiff’s industrial psychologist adopted a higher pre-accident trajectory (matric with a diploma leading to semi-skilled employment and later progression), while post-accident opining likely unskilled, insecure work with limited growth. The defendant’s industrial psychologist opined a pre-accident trajectory of matric and a certificate, while accepting post-accident reduced competitiveness and recommending that an appropriate post-accident contingency be applied, noting that contingencies are for the court and for negotiation.

An actuary (Munro Forensic Actuary) calculated the loss of earnings on the post-accident scenario described to it, noting that as a minor the claimant had no past loss of earnings. Based on the information used, and without applying contingencies, the actuary calculated a total loss of earnings of R7 725 400.

Legal Issues

The central issue for determination was the quantification of the minor child’s future loss of earnings (loss of earning capacity), specifically the appropriate contingency deduction to apply in calculating the monetary value of that loss.

The dispute primarily concerned the application of legal principles to expert-driven factual projections, and the exercise of a value judgment/discretion in selecting an appropriate contingency percentage in circumstances where future earnings assessments are inherently uncertain and speculative. The court was required to evaluate competing pre-morbid and post-morbid educational and vocational scenarios and then determine a fair contingency deduction consistent with the evidence it accepted.

Court’s Reasoning

The court located the claim for loss of earning capacity within the traditional delictual framework, referring to the principle that under the lex Aquilia the defendant must make good the difference between the value of the plaintiff’s estate after the delict and what it would have been but for the delict, with the capacity to earn money forming part of a person’s estate. On that approach, impairment of earning capacity constitutes a compensable loss if it diminishes the estate.

In quantifying future loss, the court relied on the approach that the enquiry requires a comparison between the earnings the claimant would probably have received had the accident not occurred and the earnings the claimant is likely to receive after the accident, with the compensable loss being the difference between the two. The judgment emphasised (with reference to authority) that this is not capable of exact calculation and is inherently speculative, requiring the court to make an estimate of the present value of the loss, often only a rough estimate.

The court accepted that actuarial calculations are commonly used to assist in estimating loss, but that they depend on the factual assumptions provided by witnesses and experts. The judgment explained that because of the unknown hazards of life, courts apply contingency deductions. It further recognised that the risks associated with the pre- and post-morbid career paths may differ, which may justify different contingencies for each scenario, and that contingency selection is arbitrary and subjective to a degree, falling within the trial court’s wide discretion.

In addressing contingencies, the court referred to general considerations, including the claimant’s age. It reasoned that younger claimants have a longer period in which to be affected by vicissitudes such as economic downturn, retrenchment, unemployment, ill health, and other imponderables; accordingly, higher pre-morbid contingencies are often applied for young claimants, subject to the particular facts and evidence.

The court also referred to the approach in which contingencies may be assessed using a sliding scale (expressed in authority as a percentage per year to retirement in the “but for” scenario), and noted that the Road Accident Fund frequently agrees to “normal contingencies” in certain contexts. However, the court treated contingency selection as case-specific, dependent on the evidence placed before it.

On the evidence, and after considering the child’s scholastic history and the expert material on educational and vocational potential, the court formed the view that but for the accident the minor child would have attained a National certificate. On that basis, the court determined that a 25% contingency was the most appropriate deduction when calculating the loss of earnings. The amount awarded corresponded with applying that contingency to the actuary’s unadjusted calculation.

Outcome and Relief

The court granted judgment in favour of the plaintiff for loss of earnings in the amount of R5 794 050, payable by the defendant to the plaintiff in her representative capacity as the minor child’s natural guardian.

The court ordered that the capital amount would not bear interest unless the defendant failed to pay within 180 days of the order, in which event interest would accrue at 7.75% per annum from the day after expiry of the 180-day period to date of payment.

Payment was directed to the plaintiff’s attorneys’ trust account, and the court ordered that R300 000 be paid in advance from the amount stipulated to the mother of the minor child to meet the child’s immediate needs.

The plaintiff’s attorneys were directed to establish a trust in favour of the minor child within three months of payment of the capital, and the defendant was ordered to furnish an undertaking in terms of section 17(4)(a) for, among other things, the costs of administration of the proposed trust and specified future treatment-related costs (as described in the order) after such costs are incurred and on proof.

The claim for general damages was separated in terms of Rule 33(4) and postponed sine die.

The defendant was ordered to pay the plaintiff’s taxed or agreed party-and-party costs on the High Court scale up to date of judgment, subject to the taxing master’s discretion and with provisions governing taxation, time periods for payment, and interest on costs at 7.75% if not timeously paid. The costs order included, among other things, counsel’s fees, the costs of medico-legal reports and expert preparation/qualifying costs (as allowed), and related litigation attendances and consultations described in the order. The order also recorded that there was no contingency fee agreement between attorney and client.

Cases Cited

Dippenaar v Shield Insurance Co Ltd 1979 (2) SA 904 (A) at 97.

Road Accident Fund v Kerridge 2019 (2) SA 233 (SCA) paragraphs 40–44.

P obo LP v Road Accident Fund (1675/19) (2022) ZAGPJHC 1001 (7 December 2022).

Goodall v President Insurance 1978 (1) SA 389 (W).

Legislation Cited

Road Accident Fund Act No. 56 of 1966, section 17(4)(a).

Rules of Court Cited

Uniform Rule 28.

Uniform Rule 38(2).

Uniform Rule 33(4).

Uniform Rule 36(9)(a) and Rule 36(9)(b).

Held

The court held that the plaintiff had established an entitlement to compensation for the minor child’s future loss of earnings, and that the quantification required selection of an appropriate contingency deduction in light of the evidence and the inherent uncertainty of projecting future earning capacity.

On the evidence accepted, the court found that, but for the accident, the child would have attained a National certificate, and that a 25% contingency deduction was appropriate in computing the loss. Applying that deduction to the actuarial computation before the court yielded an award of R5 794 050 for loss of earnings.

The court further held that the defendant was liable for costs on the High Court scale (taxed or agreed), and made ancillary protective and administrative orders concerning payment, an advance for immediate needs, the establishment of a trust for the minor, and a section 17(4)(a) undertaking.

LEGAL PRINCIPLES

Loss of earning capacity is compensable in delict because the capacity to earn money forms part of a person’s estate; impairment of that capacity constitutes loss if it diminishes the estate, measured by the difference between the estate’s value after the delict and what it would have been but for the delict.

A claim for future loss of earning capacity requires a comparison between probable earnings in the hypothetical “but for the accident” scenario and probable earnings in the post-accident scenario. The enquiry is inherently speculative and cannot be reduced to an exact mathematical calculation; the court must make a reasonable estimate of the present value of the loss.

Actuarial calculations may assist the court, but their utility depends on the reliability of the factual assumptions underlying them. To account for uncertainties and “vicissitudes of life,” courts apply contingency deductions, and may apply different contingencies to pre- and post-morbid scenarios where their respective risks differ.

The determination of contingencies is case-specific and involves a value judgment in which the trial court exercises a wide discretion. Age is a relevant consideration because a younger claimant is exposed to a longer period of potential adverse contingencies affecting employment and earnings.

The court may, where appropriate, separate issues for later determination under Rule 33(4), and may receive evidence by affidavit or otherwise under Rule 38(2) where the interests of justice permit, particularly in circumstances such as a party’s failure to appear after proper notice.

S.N.M obo A.S.M v Road Accident Fund [2023] ZAGPPHC 448; 21179/2018 (31 May 2023)