Tag Archive | Damages

Tax evasion extinguishes loss of earning capacity claim – IAC Newsletter 38/2013, (November 2013)

Dear Reader,

Welcome to the 38th edition of Independent Actuaries & Consultant’s (IAC’s) monthly newsletter.

Tax evasion extinguishes loss of earning capacity claim – Heese N.O. v RAF, Western Cape High Court, case no: A586/2012

Hans Ulrich Peters (‘Peters’), a German businessman, was seriously injured in a motor car accident in Cape Town on 10 June 2000. The appellant, an advocate, was appointed as his curator ad litem (‘the plaintiff’) for purposes of pursuing a claim against the respondent (‘the RAF’). The curator issued summons against the RAF in October 2004. The merits were referred to arbitration. In June 2007 the arbitrator determined that the RAF was fully liable for any damages suffered by Peters.

The determination of damages went to trial in the high court and the only aspect that remained in issue was Peters’ alleged diminution of earning capacity. The parties agreed at the beginning of the trial that the determination of damages in respect of Peters’ earning capacity would be divided into two phases.

In the first phase the trial judge would be asked to determine the gross pre-tax income that Peters would have earned but for the accident. The second phase would address questions of tax.
The curator contended, on behalf of Peters, that his historic profits as a businessman over the period 1991 to 2001, as reflected in his financial statements and tax returns, was not a safe guide to his likely post-accident profits because he had dishonestly evaded tax in Germany by understating his income and overstating his expenditure.

Blignault J dismissed the plaintiff’s claim, finding that Peters had no post-accident earning capacity to which a value could be ascribed. The trial judge based his conclusion on two lines of reasoning.

The first line was the following. The judge accepted that Peters’ business (the selling of magazine subscriptions) was not unlawful. The capacity to earn money from such a business could legitimately be the subject of compensation. However, Peters could not lawfully have continued to conduct the business without disclosing to the German tax authorities that he had evaded tax. If Peters could only earn future income by dishonestly refraining from making such a disclosure, it would be contrary to policy to award him compensation for the loss of the future earnings. And if he did make the necessary disclosure, this would have caused the sterilisation of his earning capacity by virtue of harsh criminal sanctions.

The trial judge’s second line of reasoning was that the German tax authorities were in any event closing in on Peters and that he would probably have been arrested if he had not made voluntary disclosure.

The claimant appealed against the judgement.

The appeal court did not accept that the court a quo’s reasoning was wrong. If it appears from evidence that a claimant’s supposed earning capacity would as likely as not have been sterilised and rendered worthless by some or other event over the future period covered by the claim, the court could properly conclude that a claim of diminution in earning capacity has not been established.

In short the appeal court found that the tax evasion in itself did not cause the claimant to fail in its claim, however in casu the tax evasion led to imminent criminal prosecution which precluded the claimant to return to his homeland to continue his business. Thus, it was as a results of the tax evasion that the claimants earning capacity was extinguished and not as a result of the sequlae of the motor vehicle accident.

As observed in Rudman v Road Accident Fund 2003 (2) SA 234 (SCA) paras 11 and 16) para 11, the fact that a physical disability which impacts upon earning capacity also reduces the patrimony of the injured person may follow readily in some cases but it did not follow in all cases, including this one.

Sending us an Instruction

Our dedicated full time professional team receive instructions by any of the following means:

• Email : damagesclaims@iac.co.za, or
• Fax : 086 616 8308

Now for some inspiration –
“If you don’t value your time, neither will others. Stop giving away your time and talents. Value what you know & start charging for it.”
Kim Garst

RAF 4 – The 60 Day Period Rejected

writing on form

Van Loggerenberg v RAF

In this case the plaintiff submitted a serious injury assessment form i.t.o. reg 3(3)(a) describing her injuries as a serious long term impairment or loss of a body function. The Dr’s handwritten notes stated that she had lost ¾ of her left index finger.

The defendant rejected her RAF 4 form 5 days before trial informing her that her injury does not constitute a 30% WPI as required i.t.o. the AMA guides and further that her RAF 4 form establishes no basis that the four elements of the narrative test has been satisfied.

The letter continued stating that if the plaintiff wishes to dispute the rejection she can do so by following the procedure set out in Reg 3(4) and 3(13).

Subsequently a special plea was raised that the plaintiff cannot claim general damages unless she complies with the act. The plaintiff did not respond, instead the plaintiff relied on the Louw matter, stating that the Fund had to reject the RAF 4 within 60 days of receiving it, failing which the claim for general damages is a valid claim.

The judge disagreed stating that neither the act not the regulations stated a time period within which the fund had to reject the plaintiff’s RAF 4 form.

The judge further stated that he is of the opinion that there should be a distinction between a claim for pecuniary and non-pecuniary loss in regards to the provisions of Sec 17(1)(b) of the act.

The judge went on to distinguish this case from the Louw matter on the grounds that in the latter case evidence was presented to the court in respect of the seriousness of the plaintiff’s injuries.

In closing the judge stated that the RAF 4 form should deal with the effects of the injury in detail where the narrative test is employed.

The special plea was upheld.

Conceding Merits – The Scope of Liability

Dear Reader,

Welcome to the twenty sixth edition of Independent Actuarial Consultant’s (IAC’s) monthly newsletter.

Have your say, build your practice with the IAC Blog.  This newsletter goes out to more than 1 000 MVA attorneys, advocates and claims handlers across South Africa.

If you want to build your practice, ask a question, get an opinion or simply speak your mind, the IAC Blog is the right forum.

We will publish interesting articles from practitioners from time to time.  Should you with to have your own article published, please email same to me at roelf.nel@iac.co.za


CONCEDING MERITS – THE SCOPE OF LIABILITY – Gusha v The Road Accident Fund (158/2011) [2011] SCA 242

Red yield sign

On 14 February 2006 the appellant was a passenger in a motor vehicle when it swerved off the road to avoid an oncoming unidentified motor vehicle being driven on the incorrect side of the road. The vehicle capsized and the appellant sustained severe injuries which left him paralysed.

The appellant sued the respondent for R6,7 million in damages alleging that the accident had been due to the negligence of the driver of the unidentified motor vehicle.
Before the issue of summons the parties came to an agreement wherein the respondent accepted “liability for the damages still to be proven, which the (appellant) has suffered as a result of the bodily injuries he sustained in the accident”.

At the trial of the matter the court was asked to decide whether, on a proper construction of the agreement, it was still open to the respondent to apply to amend its pleadings to allege that there should be an apportionment due to the appellant’s contributory negligence by not wearing a seatbelt.

The parties agreed to separate this issue for adjudication.

After hearing the parties, the high court concluded that the terms of the agreement did not prohibit the respondent to amend its plea. The appellant appealed to the SCA.

Both parties accepted that the concession of ‘the merits’ meant no more than that the driver of the unidentified motor vehicle had been negligent.

However, the respondent also accepted ‘liability for the damages, still to be proven, which the Plaintiff has suffered’.

The respondent argued that it had thereby intended to do no more than to accept liability for the damage caused by the negligence of the driver and, if the appellant had not been wearing a seatbelt and his failure to do so contributed to his injuries, the respondent had not undertaken to be held liable for that harm. The acceptance of ‘liability’ had therefore been limited.

The SCA rejected the respondent’s argument. In interpreting the agreement, the correct approach is to have regard to the normal grammatical meaning of the relevant words, the context and the background circumstances.

At the time the respondent was facing a claim for damages it had accepted that the driver of the unidentified motor vehicle had been negligent. The respondent clearly gave no thought at the time to the possibility of any contributory negligence on the part of the appellant. In these circumstances the respondent accepted liability without qualification.

The appeal succeeded with costs.

Sending us an Instruction

Our dedicated full time professional team receive instructions by any of the following means:

• Email : damagesclaims@iac.co.za, or
• Post : PO Box 1172, Cape Town, 8000
• Fax : 086 616 8308

 Now for some fun –

The car wreck.
A doctor and a lawyer got into a car accident, on a small country road. The lawyer had figured that nobody else would be on the road, and had raced through a stop sign. The doctor, on a cross street, had no time to react and couldn’t have missed the lawyer if he had tried. Fortunately, neither driver was hurt.
The lawyer, seeing that the doctor was a little shaken up, helped him from his battered car and offered him a drink from a hip flask.The doctor accepted, took a deep drink, and handed the flask back to the lawyer. The lawyer held the flask for a minute or two, and gave it to the doctor again. The doctor took another swig. He again returned the flask to the lawyer, who closed it and put it away.
“Aren’t you going to have a drink yourself?” asked the doctor.
“Not now,” answered the lawyer. “I’ll have something after the police leave.”

Scale of costs – High court or not

Dear Reader,

Welcome to the twelfth edition of Independent Actuarial Consultant’s (IAC) monthly newsletter. Via this newsletter we will keep you updated of all the latest case law relating to motor vehicle accidents and the quantification of damages relating to personal injury claims.

We will also keep you updated of IAC developments, events and training seminars and lighten up your day with a joke or inspirational quote.


I am excited to announce that IAC will again be presenting training on the calculation of simple loss of income and loss of support calculations. The training is aimed at attorneys in order to equip them to give better instructions,
have a better understanding of the actuarial calculation process and to aid in settlement of matters.

Same will be taking place on the following dates:

Durban 13 July 2010
Johannesburg 15 July 2010
Pretoria 15 July 2010
Cape Town 28 July 2010
Port Elizabeth 29 July 2010



Pedestrian crossing street with cars


The Plaintiff instituted action against the Defendant for payment in the amount of R124 919, 24 for damages suffered as a result of motor vehicle accident.

The Plaintiff chose the High Court as appropriate forum to institute proceedings.

The Plaintiff abandoned the whole amount of R100 000 for general damages and subsequently the merits and quantum of damages were settled in the amount of R24 919,24 being special damages. The Defendant tendered party and party costs on Magistrates Court scale and increased advocates fees.

Counsel for the Plaintiff argued that the Defendant never objected to the High Court’s jurisdiction before trial even when Defendant had ample opportunity to do so during the R37 conference. It was also argued that Defendant had sufficient time to settle the matter before the trial date and all the costs could have been prevented.

Counsel for Defendant argued that proper investigation had to be done by Defendant to consider the claim and that Defendant had indeed tried to settle the claim.

From the beginning it was clear that Plaintiff’s claim would be limited.

The court held that the general rule that costs follow the event is subject to the overriding principle that the court has a judicial discretion in awarding costs.

The court further held that the fact that the Plaintiff claimed more than she succeeded in recovering is insufficient ground for refusing her costs or to justify the court in depriving her of costs. The claim must be excessive, or grossly disproportionate to the amount awarded, before that would be done.

Plaintiff’s injuries were described as:

“minor bodily injuries to the head as well as fairly severe injuries to the chest which include laceration
of the left side of the face and fracture of the left ‘scapula’”.

The purpose of an award of cost to a successful party is to indemnify him for the expense to which he has been put by having unjustly been compelled to initiate or defend litigation.

The cost order is not intended to be compensation for a risk to which a litigant has been exposed, but a refund of expenses actually incurred PAYEN COMPONENTS SA LTD v BOVIC GASKETS CC 1999 (2) SA 409 (W) 417. The award of costs is a judicial discretion and must be exercise on grounds upon which a reasonable person could have come to the conclusion arrived at.

After due consideration of the facts the court held that the matter did not “present considerable difficulties in fact or law” as was indicated in the BARNARD v SA MUTUAL FIRE & GENERAL INSURANCE CO LTD 1979 (2) SA 1012 ( SE) case.

The Plaintiff had been over optimistic in regard to the amount she claimed as damages.

The court ordered that the cost’s is to be taxed on a scale applicable in the Magistrate’s Court.

Sending us an Instruction

Our dedicated full time professional team receive instructions by any of the following means:

• Email : damagesclaims@iac.co.za, or
• Post : PO Box 1172, Cape Town, 8000
• Fax : 086 616 8308

When does a physical disability reduce earning capacity?


Broken Arm
On 11 August 2005 the appellant, an inspector in the South African Police Services, sustained bodily injuries in the course of a collision between two motor vehicles.  The driver of the other vehicle was entirely to blame. The appellant claimed damages for past and future medical expenses, compensation for loss of earning capacity in the future, and general damages.

The matter was set down for trial on 4 November 2008. After hearing evidence the learned judge made an award of R120 000-00 for general damages but held that the appellant had not discharged the onus of proving that her disability gave rise to reduced earning capacity, and he dismissed her claim for compensation under that head.

The appellant now appeals to this Court. It is apparent from the judgment a quo that the appellant’s injuries gave rise to permanent disability which justified a substantial award for general damages.  Her case was that the same disability gives rise to a claim for future loss of income. She was a member of the South African Police Services when she sustained her injuries. She held the rank of inspector. On the facts, she suffered soft tissue injuries to the lumbar spine, which have resulted in permanent disability and impairment to perform many physical activities that are part of her work.

The correctness of the actuarial calculations was admitted. The appellant sought to discharge the onus of proving the factual allegations giving rise to the claim for a reduction of earning capacity primarily on the expert opinion of the industrial psychologist, Dr Holmes, read in the light of an agreement between the medical experts to which I shall later refer.

It was Dr Holmes’s opinion that but for the injuries and the ensuing disability the appellant would have been promoted to the rank of captain and superintendent, that she will not be able to accommodate to the restrictions of the sedentary employment to which she must be confined in the future, and that this will inevitably result in emotional trauma, frustration and stagnation in the workplace, and an inability  to proceed beyond the rank of inspector.  The combined effect of this will probably ultimately compel her to take early retirement.

The agreement between the medical experts, Dr Keeley, the neuro-surgeon, who was to be called by the appellant, and Dr De Jonge, the orthopaedic surgeon who was to be called by the Fund stated:

“. . . that the appellant would work until normal retirement age with the provision that she is promoted
to only office work, accommodated in an ergonomically friendly environment and never is required to
attend physical courses or training sessions; . .”

This eliminated the issue of retirement prior to the normal retirement of 60 years as the basis of  thereduction of earning capacity, by reason, at any rate, of the physical disability.

Mr Pretorius argued for the appellant that the court should have accepted Dr Holmes’s opinion that the appellant will in fact retire early despite the medical agreement. The Court held that there is no doubt that her disability impairs the continued performance of these physically demanding duties.

Mr Pretorius argued that the appellant’s condition constitutes an impairment of her capacity to earn an income – she can no longer do what she does best (the physical attributes of her employment) – and that this in turn must result in the production of a lesser income in the future.

The learned judge found that on the evidence the appellant had failed to prove that her injury had a cognizable effect on her earning capacity, and, in that event, her damage was indeed nil.

The fallacy in Mr Pretorius’s criticism is that it assumes that the appellant suffers loss once he proves that his physical disabilities bring about a reduction in his earning capacity; thereafter all that remains is to quantify the loss. This assumption cannot be made.  A physical disability which impacts upon capacity to earn does not necessarily reduce the estate or patrimony of the person injured. It may in some cases follow quite readily that it does, but not on the facts of this case. There must be proof that the reduction in earning capacity indeed gives rise to pecuniary loss.

In essence, the learned trial judge found that although the appellant had proved that she had suffered injuries which physically impaired her ability to perform certain kinds of police work and which prevented further advancement in the police force in those lines of work, she had not proved that she was unable to continue in her employment in the police force in other lines of work, or that she had been deprived of promotional prospects which she would in fact otherwise have had. He held in effect that on the acceptable evidence the appellant would probably not have been promoted above the rank of inspector even if she had not been injured; that she will probably continue in her employment in the police force until normal retirement age without any reduction in salary; and that she has therefore not shown that she has suffered loss.

In the light of the agreement between the doctors, the trial judge’s conclusion that the appellant did not discharge the onus of proving that she suffered a loss or reduction of her earning capacity must remain undisturbed.
In the result the appeal is dismissed with costs.

Sending us an Instruction
Our dedicated full time professional team receive instructions by any of the following means:

• Email : damagesclaims@iac.co.za, or
• Post : PO Box 1172, Cape Town, 8000Independent Actuarial Consultants (Pty) Ltd. Page 3
• Fax : 086 616 8308

And for some inspiration –
“The true measure of a man is how he treats someone who can do him absolutely no good.”
– Ann Landers

The appropriate scale of costs to be awarded to counsel in the Magistrate’s court

Dear Reader,

Welcome to the seventh edition of Independent Actuarial Consultant’s (IAC) monthly newsletter. Via
this newsletter we will keep you updated of all the latest case law relating to motor vehicle accidents
and the quantification of damages relating to personal injury claims.

We will also keep you updated of IAC developments, events and training seminars and lighten up your
day with a joke or inspirational quote.

Please take note of our new fax to e-mail number 086 616 8308.


This is an appeal against a cost order granted by a Magistrate in a trial action.  On 4 February 2005 the appellant – plaintiff in the court a quo – sustained bodily injuries in a motor collision.  The appellant had abandoned a portion thereof to bring it within the jurisdiction of the magistrate’s court.
The matter was set down for trial on 8 August 2008 on both merits and quantum.  The appellant’s attorney, however, pursued an application for a separation of the issues and the application was granted.  The magistrate’s judgment did not, however, deal with the question of costs.  Immediately thereafter an 80/20 settlement in favor of the plaintiff was reached and the costs of the day would be
reserved for determination by the trial court adjudicating the issue of quantum.
The matter was set down again for hearing on 6 February 2009. On that day, and prior to evidence being led, the issue of quantum was settled.  General damages would be fixed at R50 000,00, an undertaking would be furnished for future medical expenses and the respondent would pay the appellant’s taxed party and party costs.

Two issues of costs were then argued by the parties before the magistrate:

(a) the liability for the costs which had been reserved on 8 August 2008;
(b) whether the fees of counsel who represented the appellant should be limited to the tariff set out in Part IV of Annexure 2 to the magistrate’s court Rules1 or whether the magistrate should allow higher fees.

After hearing argument the magistrate gave judgment granting the appellant her taxed party and party costs, but limited counsel’s fees to those stipulated in the tariff. He omitted to deal with the costs which were reserved on 8 August 2008. In his further reasons for judgment, however, the magistrate recorded an order that the “wasted costs” of 8 August 2008 be paid by the appellant.

The appellant, sought orders from this court:
(a) setting aside the magistrate’s order and substituting therefor an order allowing counsel’s fees in an amount three times the amount set out in the tariff;
(b) an order that the costs of the hearing on 8 August 2008 be paid by the respondent.

Counsel were agreed, and correctly so, that the following principles were applicable. An order for costs falls within the discretion of the trial court. An appellate tribunal will not readily interfere with the exercise by a trial court of such discretion. It will only do so where the trial court exercised its discretion, not judicially, but capriciously or upon a wrong principle or where the order is incompetent.
See eg. Cronje v Pelser 1967 (2) SA 589 (A) at 592H-593A; Merber v Merber 1948 (1) SA 446 (A) at

In his judgment the magistrate recorded that he had been referred to two unreported decisions in this Division: Road Accident Fund v Forbes (Case No CA 197/05, 28 September 2006) and van Zyl v Road Accident Fund (Case No CA 243/07, 19 October 2008). Both decisions were given in appeals against costs orders made by a magistrate in matters of the same nature as the present.

In the first matter Jones J inter alia upheld the magistrate’s order allowing counsel’s fees at three times the amount set out on
the tariff. In the second matter Jones J set aside a magistrate’s refusal to allow counsel’s fees at a rate and ordered that the defendant pay the costs of counsel’s fees in an amount not exceeding three times the amount set out in the tariff. The magistrate, however, sought to distinguish these two decisions.

The first basis on which a distinction was drawn was that in the two earlier cases expert evidence was led on the issue of the quantum to be awarded, whereas in the present matter the quantum was settled without any evidence being led. The distinction is without merit. As recorded earlier, the settlement of the quantum was reached only on the day the matter was set down for hearing. The appellant, and her legal team, had therefore perforce to prepare themselves on the issue of quantum in order to be in a position to lead the necessary evidence.
The second basis of distinction was that in van Zyl the defendant had conceded that there was no contributory negligence on the part of the plaintiff, whereas in the instant matter the appellant had accepted that her contributory negligence be fixed at 20%. Again, the magistrate proceeded on a wrong principle: the appellant had achieved success in the action and to base the refusal to make an order in terms of Note (b) referred to above on the fact of the apportionment of liability was not a judicial exercise of the discretion.
Referring to the fact that the parties had reached agreement on the issues the magistrate again stated that no expert witnesses had been called; hence, there was nothing justifying the court finding that “this is a matter which warrants an advocate as such” in that it was a case which the court dealt with on a daily basis.
Suffice it is to say that the magistrate’s approach can clearly not be endorsed. The restriction of the engagement of counsel to “special cases” enjoys no foundation in the rules of the magistrate’s court nor in the practice followed in that court, and is clearly unacceptable.
With reference to the circumstance that the appellant abandoned a portion of her claim to bring it within the jurisdiction of the magistrate’s court the magistrate’s further reasons contain the following paragraphs:
“Though someone may argue that the matter has been brought to district court because of expenses I strongly feel that a irregardless (sic) of that argument a High Court matter deserve to be taken to High Court otherwise we will find ourselves in a situation where a Mini High Court is created by practice in the District Court.  I do not think this is the intention of our legislature.”
Suffice it to say that this reasoning is difficult to follow and that to the extent that this approach contributed to the magistrate’s coming to the conclusion reached by him, it is clear that a wrong principle was adopted. The court held that where a plaintiff is awarded an amount that falls within the jurisdiction of the magistrate’s court it does not lie within the mouth of that plaintiff, in an attempt to secure an order for costs on a higher scale, to point to the fact that it was alleged that the claim was in an amount in excess of that jurisdiction, but that the claim was reduced to the limit of that jurisdiction.
The issue of the costs of the hearing on 8 August 2008 remains. The magistrate was not entitled in his further reasons to supplement the orders made in his judgment by the addition of a further order. In any event he did not motivate his finding that the costs in question were “wasted costs” nor his ruling that same should be paid by the appellant. Neither can be supported.
The appeal succeeds. The costs order issued by the magistrate is set aside and for it is substituted with the following:
“The defendant will pay the plaintiff’s taxed party and party costs, such costs to include:
1. the costs of the hearing on 6 August 2008;
2. counsel’s fees in amounts not exceeding double the amounts set out in the relevant tariff contained in Part IV of Annexure 2 to
the Rules.”

Sending us an Instruction

Our dedicated full time professional team receive instructions by any of the following means:
• Fax : (021) 422 4378,
• Email : damagesclaims@iac.co.za, or
• Post : PO Box 1172, Cape Town, 8000
• Fax 2 e-mail : 086 616 8308

And to lighten up your day here’s your joke –
NASA was interviewing professionals to be sent to Mars. Only one could go — and couldn’t return to Earth.  The first applicant, an engineer, was asked how much he wanted to be paid for going. “A million dollars,” he answered, “because I want to donate it to M.I.T.”

The next applicant, a doctor, was asked the same question. He asked for $2 million. “I want to give a million to my family,” he explained, “and leave the other million for the advancement of medical research.”
The last applicant was a lawyer. When asked how much money he wanted, he whispered in the interviewer’s ear, “Three million dollars.” “Why so much more than the others?” asked the interviewer.
The lawyer replied, “If you give me $3 million, I’ll give you $1 million, I’ll keep $1 million, and we’ll send the engineer to Mars.”