Brief Summary

Damages — Loss of support — Payments received from German fund — Whether payments deductible from damages under Assessment of Damages Act 9 of 1969 — Plaintiff received payments from German social security fund following husband's death in South Africa — Court held that payments constituted a "pension" as defined in the Act and were not deductible from damages awarded for loss of support.

Comprehensive Summary

Summary of Judgment

Introduction

The proceedings were an appeal to the Supreme Court of Appeal concerning the deductibility, from a dependant’s damages for loss of support, of certain payments received by the dependant in Germany after the death of her husband in South Africa.

The appellant was Santam Limited, cited as the defendant in the court of first instance in its capacity as the appointed agent under the Multilateral Motor Vehicle Accidents Fund Act 93 of 1989 in relation to the respondent’s claim. The respondent was Christians Gerdes, the plaintiff and surviving spouse of the deceased.

The matter originated in the Durban and Coastal Local Division, where the parties requested that two issues be determined by Shearer J on the basis of a statement of agreed facts. The first issue concerned whether damages should be assessed under German or South African law. The court a quo held that South African law applied, and there was no appeal on that determination. The appeal before the Supreme Court of Appeal was confined to the second issue, namely whether specified payments received in Germany were to be brought into account to reduce the respondent’s loss-of-support damages, or whether they were protected from deduction under section 1(1) of the Assessment of Damages Act 9 of 1969.

The general subject matter of the dispute was the interpretation and application of section 1 of the Assessment of Damages Act, particularly the meaning of “pension” (and, potentially, “insurance money”) in the context of foreign statutory or social-security-type payments made to a dependant following a work-related death.

Material Facts

It was common cause that the respondent resided in Germany. Her husband, Gerd Janssen Gerdes, was resident and domiciled in Germany and was employed there as a master shipbuilder. At the relevant time he had been temporarily assigned by his employer to South Africa for approximately four months to assist with a specific boat-building project.

On 10 September 1990, while in Durban, the deceased was knocked down by a motor vehicle while on his way from work and died as a result of the injuries sustained. The appellant, as the appointed agent under the applicable motor vehicle accidents scheme, accepted liability for such damages as the respondent might prove, leaving the dispute confined to the assessment of quantum and, in particular, whether certain collateral receipts were deductible.

It was also common cause that, after the deceased’s death, the respondent received payments in Germany from two sources administered there. One payment was DM 41 278,88 from the Seekasse, described as a pension insurance institution. The second set of payments, which formed the sole subject of the appeal, totalled DM 671 535,17 from the Norddeutsche Metall-Berufsgenossenschaft (“the BG”). This BG amount comprised a death grant of DM 6 400,90, periodical payments between September 1990 and June 1995 totalling DM 186 194,62, and a final settlement amount of DM 478 757,65.

The agreed facts described the main features of the BG fund. The deceased made no contributions to it, and as an employee he was neither obliged nor entitled to do so. The fund was financed wholly by compulsory contributions by employers, and employers could also make voluntary contributions to secure benefits for themselves. The fund was administered and controlled by the BG, a public corporation that also investigated work-related accidents and imposed workplace safety rules. Coverage extended to employees in Germany (irrespective of sex, nationality, or age) where an accident was work-related, including accidents on the way to or from work. The deceased’s death was treated as work-related on that basis. The payments received by the respondent were termed “hinterbliebenenrenten”, translated as a “survivor’s pension”, calculated (as reflected in annexures to the agreed facts) with reference to a percentage of the deceased’s last gross earnings and subject to reduction in certain circumstances (for example, where the surviving spouse had other income above a threshold). The scheme also permitted, on application and under certain conditions, payment of a lump sum (“Abfindung”) instead of the survivor’s pension.

No material factual dispute was identified by the Supreme Court of Appeal; the determinative question was the proper legal characterisation of the BG receipts under South African law for purposes of section 1(1) of the Assessment of Damages Act.

Legal Issues

The central legal question before the Supreme Court of Appeal was whether the BG payments received by the respondent in Germany fell within the category of a “pension” as contemplated in section 1(1) of the Assessment of Damages Act 9 of 1969, with the result that they could not be taken into account in assessing damages for loss of support.

Although argument was also directed at whether the payments might constitute “insurance money”, the court’s resolution of the matter on the basis that the payments were a pension rendered it unnecessary to determine whether they also qualified as insurance money within the meaning of the Act.

The dispute was primarily one of law, namely the interpretation of statutory language (“pension”) in section 1(1), informed by the purpose of the Act, and the application of that interpretation to an agreed set of facts describing a foreign statutory compensation or pension-like scheme.

Court’s Reasoning

The court situated the interpretive exercise in the historical context of the Assessment of Damages Act. Prior to the Act, the common-law approach was that benefits such as accelerated pension receipts or insurance proceeds triggered by the deceased’s death were generally deductible from a dependant’s loss-of-support claim, because the dependant’s position was to be restored to what it would have been had the death not occurred. The court referred to authority describing that common-law approach and noted the consequence that a wrongdoer could benefit from the deceased’s prudence in making provision for dependants. The Act altered that position by providing that specified categories of receipts “shall [not] be taken into account” when damages are assessed for loss of support.

Against that backdrop, the court treated the “narrow question” as whether the BG payments were of the kind covered by section 1(1), so that they were exempt from deduction. The court observed that, unlike “benefit,” the terms “pension” and “insurance money” were not defined in the Act, and approached the matter on the basis that, applying the primary principle of construction, “pension” should be given its ordinary grammatical meaning. The court therefore examined the nature and features of the BG scheme in order to characterise the payments accurately.

On the agreed facts, the court considered and rejected two principal arguments advanced for the appellant. The first was that the availability of a final lump-sum settlement meant that the payments could not be characterised as a pension. The court reasoned that an option to commute periodical payments into a lump sum did not detract from the scheme’s character as a pension arrangement and might be explained by practical considerations such as administrative efficiency.

The second argument was that the payments lacked the essential attributes of a pension because they were not sufficiently correlated with services rendered (given that significant payments could be due even if an employee died shortly after beginning work) and because the employee made no contributions, the fund being employer-funded. The court addressed these points by reference to examples of statutory pension schemes where there may be neither the asserted correlation nor employee monetary contributions, including schemes under the Military Pensions Act 84 of 1976 and related legislation, and also the later Special Pensions Act 69 of 1996, enacted pursuant to section 189 of the Constitution of the Republic of South Africa Act 200 of 1993, where the “contribution” is not monetary. The court considered it implausible that the legislature intended pensions under such schemes to fall outside section 1(1) merely because they were not structured around direct employee monetary contributions or a strict service-to-benefit correlation.

The court further indicated that attempting to insist on a requirement of employee contribution (and particularly a direct monetary contribution) would introduce difficult and potentially unworkable distinctions, including whether an employee’s contribution could be indirect (for example, reflected in remuneration arrangements) and how sufficiency of contribution would be measured. In this connection, the court noted that employees may take into account, when accepting remuneration, that an employer contributes on their behalf to such funds.

In determining the ordinary meaning of “pension,” the court accepted commonly cited descriptions indicating that a pension usually implies payment in respect of services rendered, often by periodic sums, and typically after termination of service, as reflected in Leyds v Commissioner for Inland Revenue 1929 TPD 148 and S v Commissioner of Taxes 1959 (3) SA 455 (SR). However, the court held that these descriptions did not support the appellant’s additional contentions that a pension must be dependent on the particular correlation asserted or must be funded by employee monetary contributions. The court emphasised that pensions can take different forms, and found that the BG payments, identified as a “survivor’s pension” and structured as an annuity or periodical payments (with possible commutation), aligned with the ordinary meaning of a pension, a meaning also consistent with dictionary usage cited in the judgment.

Having regard to the objective of the Act, the nature of the BG scheme, and the ordinary meaning of “pension,” the court concluded that the BG payments constituted pension payments within the meaning of section 1(1) and therefore were not deductible from the respondent’s loss-of-support damages. Because the matter could be decided on that basis, the court found it unnecessary to decide whether the payments also constituted “insurance money.”

Outcome and Relief

The Supreme Court of Appeal held that the payments made to the respondent under the BG scheme were a “pension” contemplated in section 1(1) of the Assessment of Damages Act 9 of 1969 and accordingly could not be taken into account to reduce the damages payable for loss of support.

The appeal, which concerned only the BG payments (and not the Seekasse payments), was dismissed with costs.

Cases Cited

Legal Insurance Company Ltd v Botes 1963 (1) SA 608 (A)

Groenewald v Snyders 1966 (3) SA 237 (A)

Leyds v Commissioner for Inland Revenue 1929 TPD 148

S v Commissioner of Taxes 1959 (3) SA 455 (SR)

Legislation Cited

Multilateral Motor Vehicle Accidents Fund Act 93 of 1989

Assessment of Damages Act 9 of 1969

Military Pensions Act 84 of 1976

War Special Pensions Act 35 of 1962

War Pensions Act 82 of 1967

Constitution of the Republic of South Africa Act 200 of 1993 (section 189)

Special Pensions Act 69 of 1996

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The Supreme Court of Appeal held that the German BG payments received by the respondent as “hinterbliebenenrenten” (survivor’s pension), including periodical payments and a commuted lump-sum settlement, constituted a pension for purposes of section 1(1) of the Assessment of Damages Act 9 of 1969. As a result, those payments were not to be deducted or taken into account when assessing the respondent’s damages for loss of support arising from the deceased’s death. The appeal was dismissed with costs.

LEGAL PRINCIPLES

Section 1(1) of the Assessment of Damages Act 9 of 1969 excludes from consideration, in the assessment of damages for loss of support, specified categories of receipts arising from the death, including pensions, with the statutory objective of preventing the reduction of dependants’ awards by benefits that would otherwise have been deductible at common law.

Where a term used in section 1(1), such as “pension,” is not defined, it must be interpreted according to its ordinary grammatical meaning, considered in the context of the statute’s purpose. The character of a payment as a pension is not negated merely because the scheme is employer-funded, because the beneficiary made no direct monetary contributions, or because the scheme permits commutation of periodic pension payments into a lump sum under certain conditions.

In applying the ordinary meaning of “pension,” the court accepted that pensions commonly relate to past services and are often periodic payments, but it treated pension schemes as capable of taking different forms; the absence of a strict correlation between length of service and amount payable, or the absence of employee contributions, does not necessarily place such payments outside the concept of a pension for purposes of section 1(1).

Santam Ltd. v Gerdes (515/96) [1998] ZASCA 90; 1999 (1) SA 693 (SCA); [1998] 4 All SA 440 (A) (29 September 1998)