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REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
Case Number: 40232/2017
In the matter between:
ROSEMARY BOTHA Plaintiff
and
ROAD ACCIDENT FUND Defendant
Delivered: This judgment was prepared and authored by the Judge whose name is
reflected and is handed down electronically by circulation to the parties/their legal
representatives by e -mail and by uploading it to the electronic file of this matter on
Caselines . The date and fo r hand -down is deemed to be 29 April 2025 .
Summary: Loss of earning capacity – loss of business profits attributable to the
owner of the business. The Court is not compelled to accept the valuation of the
loss made by an expert. The Court is empowered to award damages that are fair
and reasonable tak ing into account the applicable contingencies. Held: (1) A
reasonable and fair amount of loss of earning capacity awarded.
(1) REPORTABLE: NO
(2) OF INTEREST TO OTHER JUDGES: NO
(3) REVISED: YES
______________ ____ ____________
DATE SIGNATURE
29 April 2025
Type text here
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JUDGMENT
MOSHOANA, J
Introduction
[1] This is an action for delictual damages suffered by the plaintiff Mrs Rosemary
Botha . The action came before Court as an undefended one. An order was made
by this Court dealing with other aspects of the present claim. A judgment on the
claim of loss of income claim was reserved. Accordingly, the singular issue to be
considered in this judgment is that of loss of earning capacity. As at 15 April 2025,
the plaintiff amended her particulars of claim and claimed an amount of
R6 000 000.00 for loss of income against th e Road Accident Fund (RAF).
[2] This Court admitted into evidence reports of various experts in terms of rule 38(2)
of the Uniform Rules of this Court. This Court was not satisfied with the
conclusions reached by one Mr Kyle Stemmett (Mr Stemmett) and ordered that
he should in addition deliver oral evidence before Court. The calculations made
by one Mr Johan Sauer (Mr Sauer) in respect of loss of earnings were entirely
predicated on the conclusions reached by Mr Stemmett. Mr Sauer presented to
this Court two scenarios. The first postulate d 5 years early retirement and
presented a loss of R5 579 626.00. The second postulated 10 years early
retirement and presented a similar loss.
[3] Mr Stemmett evaluated the loss of earning capacity by deducting the salary
expenses of three and later two staff members that the plaintiff’s business
engaged to assist it owing to the limitations suffered by the plaintiff as a
consequence of the accident.
Brief factual exposition
[4] In view of the remaining issue for determination, it is unnecessary for this
judgment to provide a full rendition of the factual exposition appertaining this
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action. It suffices to state that the plaintiff was involved in a motor vehicle accident
as a result of which she sustained serious bodily injuries.
[5] At the time of the accident, the plaintif f was one of the members of a registered
close corporation. According to the plaintiff, the other member of the corporation
is her mother, who is not actively involved although she helped out in some
instances . As such, she takes 100% of the corporation ’s profits. Prior to the
accident, the plaintiff actively managed the business of the corporation, which
was involved in cooking and catering food for functions. She did all of the cooking
and managed catering function s on her own.
[6] Post the accident, she had to hire two kitchen staff at a monthly salary of R6000
each in order to assist with the cooking. Also, she had to hire a manager and had
to pay approximately R20 000 a month to that manager. She could not stand due
to the injuries sustained in the accident. She returned to the business in January
2017. Her salary that she drew from the business was never affected. During the
Covid19 lockdown the business slowed down. This resulted in the manager
leaving the business with the two k itchen staff employees remaining. As at 11
February 2025, when she was interviewed by Mr Stemmett, the two kitchen staff
members were still employed.
[7] Mr Stemmett is a Chartered Accountant (CA) by profession. In order to conduct
an evaluation of the loss of earning capacity of the plaintiff, he was furnished with
financial records for the business for the period 2014 t o 2024 for analysis
purposes. He was also furnished with payslips of the plaintiff for the period 2019 -
2025. He was however not furnished with IRP5s of the additional employees to
verify the alleged salaries of R20 000 and R6 000 respectively. He calculated t he
loss of earning capacity by ta king the alleged salaries and multiplied them by 12
months and increased them by inflationary growth year -on-year. He apportioned
the additional employee costs since the business was closed for approximately
83 days during the Covid19 lockdown.
[8] Ultimately he valued the lost earning capacity of the plaintiff as follows; (a) past
loss-business’ profits (100%) = R1 550, 895; and (b) total injured business profits
at R40,057 a month. In his oral testimony he testified that he deducted the
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additional employees’ salaries from the possible dividends or profits that the
plaintiff would have drawn from the business. On his analysis of the financials,
he could not find any evidence of dividends drawn other than a loan account of
the plaintiff .
[9] Based on the valuations achieved by Mr Stemmett, Mr Sauer arrived at the loss
mentioned at the dawn of this judgment after applying 10% and 30%
contingencies on the past and future loss respectively.
Evaluation
[10] Before the merits of this action are considered, it is apposite to first and foremost
affirm that admission of evidence in terms of rule 38(2) does not transmute into
automatic acceptance of such evidence. The purpose of this rule is to regulate
admission of evidence in other for ms other than the customary viva voice form.
The default position is that evidence must be delivered orally. Evidence admitted
in the form contemplated in the rule, still req uires evaluation and assessment to
ensure compliance with rule 39 (1) of the Uniform R uIes. The onus to prove loss
of earning capacity remains with the plaintiff. S/he who alleges is sadd led with
the onus of proof .
[11] Involved herein is an alleged loss of earning capacity as opposed to loss of
income. After the accident, the plaintiff did not lose any of her salaries she earned
from the business entity. She continued to earn the same way she earned p re
and post the accident. According to Mr Stemmett, the loss that was suffered is
the loss to the business. Put differently, the business had to incur additional
expenses which ate up into the profits of the business and ultimately affected the
100% divide nds due to the plain tiff. The plaintiff’s case is that owing to the
injuries, she could no longer perform optimally in order to assist the business to
achieve profitability. As such in order to maintain the profitability of the business
she had to replace her performance with a salary expense of approximately
R32 000.00 for a certain period and thereafter R12 000.00.
[12] Accordingly , the said business expense amounts to her loss of earning capacity.
The legal question to be addressed herein is whether the loss suffered by the
alter ego of the plaintiff, the business , could be attributable to a loss of earning
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capacity or not. As a departure point the RAF legislation is aimed at
compensating for bodily injuries. At first blush this alleged loss of business profits
does not appear to be connected to the bodily injuries. Despite her bodily injuries,
the plaintiff continued to earn her income. Accordingly, there is no case made for
loss of income.
[13] For the purposes of this judgment, this Court finds it befitting to deal with the
esoteric distinction between loss of income and loss of earning capacity. A loss
of earning capacity is an award based on the recognition that the plaintiff’s
capacity to earn money was an asset which has been taken away. It is the value
of the loss of earning capa city, a capital asset, for which the RAF must pay
compensation for. On the other hand, loss of earnings simply entails the money
that a plaintiff loses as opposed to the capacity to make, as it were, that money.
In the present instance, there is no evidence to demons trate that the plaintiff did
lose any income.
[14] In an instance where loss of earning capacity is involved, firstly, there must be
proof of a loss of earning capacity before there can be any future loss of earnings.
The actual loss of earnings is then a manifestation of the inability of a person to
earn the same income as before because of the damage -causing event.
Secondly, once it has been establishe d that there is, in fact, a definite loss of
earning capacity, an amount must be attached to the incapacity. Effectively,
earning capacity is a diminution o f a claimant’s ability to generate income.
[15] It is by now trite that there a two methods that a Court may employ, to calculate
the amount to be attached to an incapacity . However , before the Court reaches
there, there must be evidence that there was indeed loss of earning capacity. In
the absence of any evidence to the contrary, this Court accepts that the accident
injuries did in fact affect the earning capacity of the plaintiff. T hey key question is
what value is to be attached to such a loss. The value of a particular plaintiff’s
capacity to earn is equivalent to the value of earnings she or he would have
received over time had the delict not been committed. In Arthur Robinson
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(Grafton) Pty Ltd v Carter (Carter )1, Barwick CJ expressed himself in the
following terms:
“The respondent is not to be compensated for loss of earnings but for loss of
earning capacity. However much the valuation of the loss of earning capacity
involves the consideration of what moneys could have been produced by the
exercise of the respondent’ s former earning capacity, it is the loss of capacity,
and not the failure to receive wages for the future , which is to be the subject
of fair compensation…”
[16] In Medlin v SGIC (Medlin )2, McHugh J stated the following:
“Earning capacity is an intangible asset. Its value depends on what it is capable
of producing. Earnings are evidence of the value of earning capacity but they
are not synonymous with its value.”
[17] Based on the above legal expo sitions, which this Court accepts with less
hesitation , this Court has a difficulty in accepting the valuation of Mr Stemmett. It
is not based on what the asset is capable of producing but it is based on what
the business lost due to the alleged absence of the capacity of the plaintiff.
Nevertheless, t here was no cogent evidence to support that indeed R20 000 and
R12 000 respectively was expended for the additional staff. Most importantly,
there was no evidence that the alleged R32 000 equates the lost asset. When
regard i s had to the report of Mr Sauer, the calculations were based on the
earnings of the plaintiff from 2017 to 2024. As indicated in Carter the
compensation is not based on lost earnings but on loss of earning capacity. This
case is d istinguished from the case of Rowe v Bobell Express Ltd (Rowe )3, where
the Court of Appeal of British Columbia awarded an amount for loss of earning
capacity in respect of loss of business profits.
[18] Briefly, the facts in Rowe are that in October 2005 , Mr Rowe , a business man
was seriously injured in a motor vehicle accident. Due to his ailment as a
consequence of t he accident, he was unable to look after the interests of his
1 (1968) 122 C.L.R 649 at 658, [1968] H.C.A 9
2 (1995) 69 ALJR 118 at 126 .
3 2005 BCCA 141 (CanLII)
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business . He had to raise a loan from one o f his companies , in order to , inject
profitability in the other. Mr Rowe claimed back that which he injected into the
ailing company as loss of earning capacity. In dealing with such a claim, the Court
of Appeal under the hand of the Honourable Mr Justice Smith, expressed itself
in the following terms:
“[38] I agree with Mr Rowe that this loan is more properly considered a
reasonable attempt by him to mitigate his loss of earning capacity. By injecting
the monies into the business, he was attempting to return the company to
profitability in order that, a mongst other things, it could resume its payments to
him. In my view, the loss of this money therefore reflects his loss of earning
capacity.”
[19] In the present matter, the additional salary expense was not incurred in order to
return the company to the situation where the business could resume its
payments to the plaintiff. She continued to earn her salary. There is no evidence
that the additional expenses would amount to dividends or profits. A dividend is
a sum of money paid regularly by a company to its shareholders out of its profits
or reserves. A profit is a financial g ain comprised by the difference between the
amount earned and the amount sp ent. A salary is not a business gain but an
expense. Accordingly, this Court is unable to agree with the valuation that turns
business expense into a profit. Notionally, if the three employees were not
employed, the business would not have attracted a sala ry expense and as such
its financial gain would not be affected.
[20] As indicated , this Court does accept that the plaintiff’s work ability was
compromised. In the absence of proper evidence as to what the monetary value
of that lost c apacity is, this Court must award what is a fair and reasonable
compensation. The plaintiff was incapacitated for a period of time and this Court
does accept that his patrimony , indeed , suffered during the period of
incapacitation . In Sandler v Wholesale Coal Suppliers (Sandler )4, the Court
remarked as follows:
4 1941 AD 194.
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“When the owner of a business of this nature, who works in it in the ordinary
way in which the appellant worked, is confined to hospital for four months and
unable to do work which he previously did, the business as a profit -earning
concern must necessaril y suffer. It seems reasonable to assume that the
appellant’s skill and energy and his activities in the affairs of the business
were a source of some profit to the business.
[21] The Court in Sandler went further and stated that:
“I considering that question it must be recognised that although the law
attempts to repair the wrong done to the sufferer who has received personal
injuries in an accident by compensating him money, yet there are no scales by
which pain and suffering can be measured, and there is no relationship
between pain and money which makes it possible to express the one in terms
of the other with any approach of certainty. The amount to be awarded as
compensation can only be determined by the broadest general consid erations
and the figure arrived at must necessarily be uncertain, depending upon the
judge’s view of what is fair in all the circumstances of the case.
[22] Therefore , taking into account all the circumstances , and that the plaintiff was
hands -on prior to the accident , a globular amount of R2 000 000 would be fair
and reasonable to compensate for the loss of the work she could have produced
had she been capacitated . This Court is not satisfied with the mathematical
valuation and calcu lations provided to it. These calculations appear to be overly
inflated, unfair and unreasonable. In Gillbanks v Sigournay (Gillbanks )5, the
Court expressed itself in the following terms:
“Actuarial expert evidence is in such cases always of considerable assistance,
but the Court is not bound by such evidence ; it retains its discretion and
its assessment of contingencies is still necessary…”
[23] As indicated above, this Court is unable to observe logic and acceptability in the
proposed method. Contingencies ought to be applied to this amount taking into
account the vicissitudes of life. In the circumstances an overall 30%
contingencies must apply to both pre and post morbid situations.
5 1959 2 SA 11 (N)
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[24] In the premises, the following award is to be made by this Court:
Loss of earning capacity R2 000 000.00
Less 30% contingencies R600 000.00
Total award R1 400 000.00
[25] On account of all the above reasons, I make the following order :
Order
1. The plaintiff is to be compensated by the Road Accident Fund with
an amount of R1 400 000.00 in respect of the loss for earning
capacity.
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G N MOSHOANA
JUDGE OF THE HIGH COURT
GAUTENG DIVISION, PRETORIA
APPEARANCES:
For the Plaintiff : Ms L Mastoroudes
Instructed by: VZLR Inc, Pretoria
Date of the hearing: 22 and 24 April 2025
Date of judgment : 29 April 2025