Road Accident Fund v Guedes (611/04) [2006] ZASCA 19; 2006 (5) SA 583 (SCA) (20 March 2006)

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[2006] ZASCA 19
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Road Accident Fund v Guedes (611/04) [2006] ZASCA 19; 2006 (5) SA 583 (SCA) (20 March 2006)

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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Reportable
CASE NO 611/2004
In
the matter between
ROAD ACCIDENT FUND Appellant
and
G S O GUEDES Respondent
Coram: Zulman, Mthiyane and Lewis JJA
Heard: 20 February 2006
Delivered: 20
March 2006
Summary
:
Damages in respect of future loss of earnings.
Misdirection by a court
a quo
and the approach of an appeal
court in consequence thereof.
Neutral
citation: This judgment may be referred to as Road Accident Fund v G
S O Guedes [2006] SCA 18 (RSA)
___________________________________________________________
JUDGMENT
___________________________________________________________
ZULMAN JA
[1] This appeal concerns an award to the
respondent by the Johannesburg High Court (Boruchowitz J) of R3 119
048 in respect of future
loss of income or earning capacity suffered
as a result of a motor vehicle accident. The appeal is brought with
the leave of the
court
a quo
.
[2] The respondent, a magazine editor, was born on 20
February 1978. She sustained bodily injuries in a motor vehicle
accident on
12 November 2000 and claimed damages resulting
therefrom from the appellant. The appellant conceded the merits of
the respondent’s
claim. On appeal the appellant has put in issue
only the award made in respect of future loss of earning capacity of
the respondent.
[3] The award by the High Court was based upon an
actuarial calculation prepared for the respondent and accepted by the
appellant,
save in respect of the contingency deductions suggested.
The appeal turns on whether the contingency deductions made by the
court
were justifiable. Briefly, the actuary had calculated (on the
basis of various assumptions) that but for the accident the
respondent
would have earned R7 954 150 before retirement. Having
regard to the accident, his calculation, based also on various
assumptions,
was that she would earn only R5 770 981. The actuary had
suggested that a deduction be made from both sums to take into
account
unforeseen contingencies – the vicissitudes of life, such
as illness, unemployment, life expectancy, early retirement and other
unforeseen factors. He had suggested deducting 10 per cent from the
value of what she would have earned but for the accident (the
commonly termed ‘but for scenario’) and 40 per cent from the
amount that she would have earned having regard to the accident
(the
‘having regard to scenario’). The High Court considered the
deduction of 10 per cent to be correct (I shall deal with this
in
more detail later in the judgment) but deducted only 30 per cent from
the amount that was calculated having regard to the accident.
The
amount awarded was thus based upon actuarial calculations, deducting
10 per cent on the ‘but for scenario’ and 30 per cent
on the
‘having regard to scenario’. On this basis the court awarded to
the respondent the sum of R3 119 048.
[4] The appellant contends that the respondent is
entitled only to R155 544 because the judge below erred in deducting
the percentages
that he did. The figure arrived at is based on the
contention that in the ‘but for scenario’ the deduction should
have been 40
per cent, and in the ‘having regard to scenario’ the
deduction should be 20 per cent.
[5] It is clear that a court of appeal in
this type of matter, where one is working with various imponderables
and must speculate
about the future, should interfere only where
there has been a material misdirection by the court below, or where
the amount awarded
is strikingly different from what the appeal court
would award. In essence the trial court exercises a discretion, and
attempts to
achieve the best estimate of a plaintiff’s loss:
Southern Insurance Association v Bailey
NO.
1
The appellant in this matter argues both for misdirections, and for
striking disparity. Before dealing with these I shall turn to
the
factual findings.
[6] Based largely on undisputed expert
evidence, the court
a quo
found that the respondent had
sustained a whiplash injury to her cervical spine, as well as a
thoracic sprain and a mild T-7 vertebral
compression fracture. The
uncontested evidence of the respondent was that until the accident
she had never injured her back nor had
she suffered pain emanating
from the back. After January 2003 the respondent had resumed work on
a part-time basis, attending two
or three full days per week and
working the remaining two to three days per week on a half-day basis.
On these occasions she would
feel herself unable to perform her
duties. The whiplash injury has been the main cause of her pain and
suffering and discomfort.
The respondent is troubled by a stiff and
painful neck, pain tends to radiate across the dorsal aspect of the
shoulder and down between
the shoulder blades. These symptoms are
aggravated by a sustained posture, such as sitting in front of a
computer, which her position
as an editor requires her to do. The
respondent suffers from headaches which may last up to three days at
a time. She is thus not
able to perform her work adequately, and the
chances of her gaining promotion in her field are limited. This would
not have been
the case had she not been injured.
[7] The appellant submits that:
(a) The finding that the respondent would have been
promoted and received an income on the highest level is questionable.
(b) The finding that she would not be promoted to any
level further than the one which she presently occupies is also
questionable.
(c) The correct approach should have been to find that
the respondent would have been promoted to the same level pre- and
post- accident
and subtracted a higher contingency from the ‘having
regard to scenario’ than that for the ‘but for scenario,’ or to
follow
the approach of the court
a quo
and subtract a very
high contingency in the ‘but for scenario’ and a low contingency
in the ‘having regard to scenario’.
(d) If the deductions contended for by the appellant
are made this would result in a nett amount of R155 705 in respect of
loss
of future earning capacity.
[8] It is trite that a person is entitled to be
compensated to the extent that the person’s patrimony has been
diminished in consequence
of another’s negligence. Such damages
include loss of future earning capacity (see for example
President
Insurance Co Ltd v Mathews
2
).
The calculation of the quantum of a future amount, such as loss of
earning capacity, is not, as I have already indicated, a matter
of
exact mathematical calculation. By its nature such an enquiry is
speculative and a court can therefore only make an estimate of
the
present value of the loss which is often a very rough estimate (see
for example
Southern Insurance Association Ltd v Bailey NO
.
3
The court necessarily exercises a wide discretion when it assesses
the quantum of damages due to loss of earning capacity and has
a
large discretion to award what it considers right. Courts have
adopted the approach that in order to assist in such a calculation,
an actuarial computation is a useful basis for establishing the
quantum of damages. Even then, the trial court has a wide discretion
to award what it believes is just (see for example the
Bailey
case
4
and
Van der Plaats v South African Mutual Fire and General
Insurance Co Ltd.
5
As pointed out by the learned authors Erasmus and Gauntlett
6
with reference to a number of reported cases, the proper approach of
an appeal court in appeals against awards of damages has often
been
set out, and the principles have been stated in different ways, some
appearing to favour appellants, others respondents. Some
of these
principles which are of application in this matter are well
summarised, again with reference to reported cases, by the learned
authors in these succinct terms:
‘
(c) Where the amount of damages is a matter of
estimation and discretion, the appeal court is generally slow to
interfere with the
award of the trial court – an appellate tribunal
cannot simply substitute its own award for that of the trial court.
However, once
it has concluded that interference is justified in
terms of the principles set out in (d) below, the appeal court is
entitled
and obliged
to interfere.
(d) The appeal court will interfere with the award of
the trial court:
(i) where there has been an irregularity or
misdirection (for example, the court considered irrelevant facts or
ignored relevant
ones; the court was too generous in making a
contingency allowance; the decision was based on totally inadequate
facts);
(ii) where the appeal court is of the opinion that no
sound basis exists for the award made by the trial court;
(iii) where there is a substantial variation or a
striking disparity between the award made by the trial court and the
award which
the appeal court considers ought to have been made. In
order to determine whether the award is excessive or inadequate, the
appeal
court must make its own assessment of the damages. If upon
comparison with the award made by the trial court there appears to be
a “substantial variation” or a “striking disparity”, the
appeal court will interfere.’
7
[9] Counsel for the appellant in an able argument
submitted that the court
a quo
was guilty of various
misdirections in the contingency deductions that it made. He stressed
two of these bearing on the ‘but for
scenario’. First he drew
attention to the following passage in the judgment of Boruchowitz J:
‘
Counsel for the plaintiff submits that the norm for
“but for” contingencies is approximately 10% for a person of the
plaintiff’s
age group. He relies in this regard on what is stated
in the
Quantum Yearbook
, 2004 by R Koch, at page 106. The
defendant’s attorney does not suggest that a contingency deduction
of 10% would be wrong or
inappropriate, and there is no reason for
me not to apply that percentage.’
The author Koch describes his work as ‘a publication
of financial and statistical information relevant to the assessment
of damages
for personal injury or death’.
8
The page in question is headed ‘General Contingencies’. It states
that when ‘assessing damages for loss of earnings or support
it is
usual for a deduction to be made for general contingencies for which
no explicit allowance has been made in the actuarial calculation.
The
deduction is the prerogative of the Court; . . . There are no fixed
rules as regards general contingencies. The following guidelines
can
be helpful.’ Then follows what is termed a ‘sliding scale’ and
the following is stated:
‘
Sliding Scale
: ½ per cent for year to
retirement age, ie 25 per cent for a child, 20 per cent for a youth
and 10% in middle age (see
Goodall v President Insurance
1978
(1) SA 389
(W) . . .’ .
In the
Goodall
case which is relied upon by Koch
for a suggested deduction of 10 per cent the plaintiff was aged 45
whereas the plaintiff in this
matter was only 26 at the relevant
time. An application of the author’s sliding scale to this matter
would have led to a contingency
deduction of 19.5 per cent. It is
true that immediately after referring to the passage in Koch,
Boruchowitz J said:
‘
Having regard to the relevant facts, the plaintiff’s
age and station in life, I am of the view that in the “but for”
scenario
a contingency deduction of 10% would be fair and
reasonable.’
[10] Nevertheless one cannot avoid concluding that the
learned judge was inadvertently influenced by, or at least drew
comfort from,
what he incorrectly understood Koch had stated, namely
a 10 per cent contingency deduction for a person aged 26. The fact
that the
defendant’s attorney did not suggest that a contingency
deduction of 10 per cent would be wrong or inappropriate does not
necessarily
mean that the appellant consented to such a deduction. It
is to be noted that the record regrettably reveals a singular lack of
competence
on the part of the defendant’s attorney in the conduct
of the defendant’s defence. This only served to increase the burden
placed
on the learned judge. I accordingly believe, even if one reads
the remarks of the court
a quo
in their full context, that the
court
a quo
misdirected itself by exercising its discretion
upon a wrong guideline in making the deduction of 10 per cent.
[12] The second respect in which the court below is
argued to have erred is in accepting the evidence that but for the
accident the
respondent would have risen rapidly to the top in her
field. I do not, however, believe that the appellant is correct in
contending
that the court
a quo
was wrong to ‘fast track’
as it were the plaintiff’s income to the highest level. The
evidence in this regard was not disputed
by the appellant in the
court
a quo
. The evidence reveals that the respondent only had
two levels of promotion to attain in the publishing field. In the
specialised
field in which she works such as Information Technology
(IT) it is not unusual for outstanding or even merely competent young
people
to make rapid progress, sometimes even meteoric progress.
Indeed the evidence reveals that the respondent was also not left at
virtually
the lowest level but was left at the level which she is at
present, that of an editor. This is already a management level that
she
had reached in only five years from entering the profession as a
journalist. She was particularly successful when compared with her
peers in that she had progressed to the level of editor in a
comparatively short space of time. I accordingly believe that the
court
a quo
was correct in finding that she would in all
probability have been promoted to a publisher. This probability flows
from the uncontested
evidence of the respondent herself and her
employer, Regasek, combined with her track record, and taking into
account her intelligence
and personality traits. Regasek furthermore
testified that the skills that the respondent has are scare in the
industry so that when
the opportunity presented itself to employ her,
he did so although he did not have a suitable position for her at the
time. He had
hired her nonetheless on the basis that he was ‘making
an investment in her’. The conclusion of the court
a quo
that the respondent, had it not been for the injuries sustained by
her as a result of the accident, would have been promoted is a
reasonable one on the facts which were presented to the court.
[13] The third alleged misdirection stressed by the
appellant’s counsel related to the ‘having regard to scenario’.
Counsel
submitted that the court
a quo
was too pessimistic in
regard thereto and that a far too high contingency deduction (30 per
cent) was made. More particularly, it
was argued that the court
a
quo
did not give sufficient weight to the evidence of Dr Shevel,
a specialist psychiatrist called by the respondent. Dr Shevel
expressed
the opinion that with adequate psychiatric treatment, the
respondent should be able to return to her pre-accident level of
functioning
both socially and occupationally within the limitations
set by her physical injuries. He indicated that any adverse effects
of her
injuries ought to be strictly due to her spinal injuries.
[14] Yet Dr Scher, an orthopaedic surgeon, expressed the
view in a medico legal report that the respondent’s residual spinal
disability
may have compromised her work output or productivity to a
limited extent which may have a bearing on the potential earnings and
that
she ‘will probably benefit from future management . . .’.
The respondent had testified, however, that it was difficult to find
the time while working to get medical treatment such as
physiotherapy, and that she could not use painkillers or medication
that
might alleviate her discomfort because they had an adverse
effect on her stomach. This was confirmed by a gastroenterologist, Dr
Strimling, in a medico-legal report (the parties agreed that the
reports of the respective experts would serve as evidence and that
the court was to attach such weight thereto as was necessary).
Strimling expressed the opinion that:
‘
Assuming that her present gastrointestinal complaint
is due to a peptic ulcer, NSAID gastropathy or gastro oesophageal
reflux, I would
expect complete symptom resolution with appropriate
treatment such as Proton Pump Inhibitor therapy. If however her
complaint is
due to non-ulcer dyspepsia, this condition can run an
unpredictable course with prolonged periods of abdominal pain in
spite of treatment.
In view of the uncertainty as to the exact nature
of the complaint, it would be reasonable to allow for a potential
loss of earning
ability.’
[15] The argument that Dr Shevel’s opinion that she
could be helped with psychiatric treatment was not given sufficient
weight is
not in my view correct. It disregards the uncontested
evidence of the respondent’s employer Mr Regasek that the
respondent did
not seem to have sufficient energy to do her work
adequately, this despite her natural skill and competence. It is fair
to conclude
that it is at least questionable as to how much of the
respondent’s lack of energy, stress levels and difficulty in coping
are
as a result of her physical problems and how much as a result of
psychological problems. It is noteworthy that the respondent said
in
her evidence that when she was on holiday she experienced virtually
no pain, but there is nothing to suggest whether that was
because she
was in a less stressful environment or because she was not working on
a computer.
[16] At present the respondent suffers pain daily. Her
future as a journalist is precarious. Regasek testified that he had
been compelled
to appoint two people to take over the revenue driving
and networking portion of her position and so put more resources into
the
magazine that she works for than he would have done otherwise. An
industrial psychologist, Mr Schmidt, who gave evidence, expressed
the
opinion that if the respondent is unable to comply with all her
responsibilities it is unlikely that she would be able to further
progress in regard to promotion. Again the evidence of Mr Schmidt was
not contested by the appellant. There was thus no misdirection
in
this regard.
[17] Thus in my view there is no substance in the
appellant’s argument that the court
a quo’s
contingency
deduction of 30 per cent in the ‘having regard to scenario’ was
incorrect. The uncontested evidence of the respondent’s
employer,
and that of the medical experts, was that her working capacity, and
therefore her earning capacity, had been severely compromised
by her
injuries and their consequences. The possibility that increased
psychological intervention and further medical treatment might
assist
appears to me to have been taken into account in making the
contingency deduction of 30 per cent rather than the 40 per cent
suggested by the actuary.
[18] In the light of the misdirection in the ‘but for
scenario’ it becomes unnecessary to consider the other alleged
misdirections
referred to by the appellant’s counsel in regard to
the contingency deduction of 10 per cent in the ‘but for scenario’.
In
the circumstances this court is bound and indeed obliged to
intervene and to correct the contingency deduction made by the court
a quo
in the ‘but for scenario’ and to make a deduction
that it considers appropriate (
Hulley v Cox
,
9
Legal Insurance Co Ltd v Botes
10
and
Swart v Provincial Insurance Co Ltd
.
11
In my view having regard to all of the relevant factors, a
contingency deduction of 20 per cent and not 10 per cent in the ‘but
for scenario’ of the value of the respondent’s income of R7 954
150, is appropriate, namely R1 590 830.
[19] Although the award made by the court
a
quo
is undoubtedly high I do not believe, if proper regard is
had to all of the relevant factors, and if a correct contingency
deduction
is made in the ‘but for scenario’, that there remains a
substantial variation or striking disparity between the award made by
the trial court in the exercise of its discretion and the award which
this court considers ought to have been made entitling this
court to
interfere upon that basis alone (cf
Protea Assurance Co Ltd v
Lamb
12
and
Road Accident Fund v Marunga
13
).
[20] In the result I would allow the appeal to the
extent of altering the contingency deduction in the ‘but for
scenario’ from
R795 415 to R1 590 830. This would result
in the respondent being entitled to R2 323 633 in respect
of her net
prospective loss of future earning capacity arrived at as
follows:
Value of income but for accident R7 954 150
20 per cent contingency deduction
R1
590 830
R6 363 320
Value of income having regard to accident R5 770 981
30 per cent contingency deduction
R1
731 294
Total
R4 039 687
[21] The appeal is allowed with costs, including the
costs of two counsel. Paragraph (a) 3 of the order of the court below
is replaced
with the following:
‘
(a)…
3 R2 323 633 in respect of future loss of income or
earning capacity.’
_____________________
R H ZULMAN
JUDGE OF APPEAL
CONCUR: ) MTHIYANE JA
) LEWIS JA
1
1984 (1) SA 98
(A).
2
1992 (1) SA 1
(A) at 5C-E.
3
Supra.
4
Supra at 116G-117A.
5
1980 (3) SA 105
(A) 114F-115D.
6
In the title on Damages 7 LAWSA (2 ed) para 117
pp 90-101.
7
Supra p 100.
8
Cover page.
9
1923 AD 234
at 246.
10
1963 (1) SA 608
(A) at 618C-D.
11
1963 (2) SA 630
(A) at 633A-C.
12
1971 (1) SA 530
(A) at 535A-B.
13
2003 (5) 164 (SCA) para 23.