THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable

Case No: 162/2014
In the matter between:
THE ROAD ACCIDENT FUND

Appellant
and
ELIZABETH JEMMA SWEATMAN

Respondent
Neutral Citation: RAF v Sweatman (162/2014) [2015] ZASCA 22 (20 March 2015)
Coram:
Lewis, Maya and Zondi JJA and Dambuza and Mayat AJJA
Heard:
10 March 2015
Delivered:  20 March 2015
Summary: The effect of the amendment to the Road Accident Fund Act 56 of 1996
in 2008 in so far as the limitation on the liability of the Road Accident Fund for loss of
income or support, suffered as a result of a motor vehicle collision, is concerned:
correct approach is to determine the present value of the actual loss suffered, as
actuarially calculated, taking into account all contingencies, including mortality, and
then compare it with the annual loss (the limit or cap) as determined on the date of
the accident.

__________________________________________________________________

ORDER

On appeal from: Western Cape Division of the High Court, Cape Town (Griesel J
sitting as court of first instance)
The appeal is dismissed with costs including those of two counsel.
__________________________________________________________________
JUDGMENT

Lewis JA (Maya and Zondi JJA and Dambuza and Mayat AJJA concurring)
[1] The sole issue to be determined in this appeal is the effect of the amendment
to the Road Accident Fund Act 56 of 1996 in 2008 in so far as the limitation on the
liability of the Road Accident Fund for loss of income or support, suffered as a result
of a motor vehicle collision, is concerned. The Act was amended in 2005 (by Act 19
of 2005) but the relevant amendments came into operation only on 1 August 2008.
Before the amendment a plaintiff (either as the person injured claiming for loss of
income as a result of injuries sustained, or claiming damages for loss of support by a
breadwinner fatally injured in a collision) could claim the full amount of damages
proved from the Fund.

[2] Section 17, as amended, introduces various limitations on the Fund’s liability.
The one in issue in this matter is found in subsec 17(4). The relevant provisions are:
‘17 Liability of Fund and agents
(1) The Fund or an agent shall-
. . . be obliged to compensate any person (the third party) for any loss or damage which
the third party has suffered as a result of any bodily injury to himself or herself or the
death of or any bodily injury to any other person, caused by or arising from the driving of

a motor vehicle by any person at any place within the Republic, if the injury or death is
due to the negligence or other wrongful act of the driver . . . .
. . .
(4) Where a claim for compensation under subsection (1)-
. . .
(b) includes a claim for future loss of income or support, the amount payable by the Fund
or the agent shall be paid by way of a lump sum or in instalments as agreed upon;
(c) includes a claim for loss of income or support, the annual loss, irrespective of the
actual loss, shall be proportionately calculated to an amount not exceeding-
i [Rx] per year in the case of a claim for loss of income; and
ii [Rx] per year, in respect of each deceased breadwinner, in the case of a claim for loss
of support.’ (My emphasis.)

[3] In terms of subsec 17(4A)(a) the amounts referred to in subsections 17(4)(c)i
and ii are determined by notice in the Government Gazette, and adjusted quarterly in
order to counter the effect of inflation. Subsection 17(4)(b) provides that:
‘In respect of any claim for loss of income or support the amounts adjusted in terms of
paragraph (a) shall be the amounts set out in the last notice issued prior to the date on which
the cause of action arose.’

[4] The respondent in this matter, Ms Elizabeth Sweatman, was severely injured
when she was run over by a car in Tokai Road, Cape Town in July 2010. She was
15 years old at the time. Her mother instituted action in the Western Cape Division of
the High Court on her behalf for damages against the Fund the following year. The
amount claimed was some R7 million. When she attained majority Ms Sweatman
was substituted as the plaintiff.

[5] The Fund and Ms Sweatman had agreed all aspects of the claim before the
trial commenced, save for one which they asked the court to determine: that was the
interpretation of s 17(4)(c), read with 17(4A)(b) of the Act as amended. The parties
led only the evidence of actuaries on the meaning of ‘annual loss’ in s 17(4)(c),
having agreed that the Fund was liable for 50 per cent of that amount. Griesel J in
the Western Cape Division accepted the interpretation and the method of
determining the ‘cap’ on damages advanced by the actuary, Mr Ian Morris, who
supported Ms Sweatman’s claim. He ordered the Fund to pay Ms Sweatman R3 358
529. The appeal by the Fund against the order is with the trial court’s leave.

[6] This issue has been determined in different ways by various courts, and I
shall deal with these decisions in due course. Mr Morris, who gave evidence for Ms
Sweatman, explained the conventional method of determining future losses when
establishing a claim for loss of income or support. The matter is not without difficulty,
especially where one is dealing with an injury to a young person or the death of a
young breadwinner. Nicholas JA put the problem as follows in Southern Insurance
Association Ltd v Bailey NO 1984 (1) SA 98 (A) at 113F-114A:
‘Any enquiry into damages for loss of earning capacity is of its nature speculative, because it
involves a prediction as to the future, without the benefit of crystal balls, soothsayers, augurs
or oracles. All that the court can do is to make an estimate, which is often a very rough
estimate, of the present value of the loss.

It has open to it two possible approaches.

One is for the Judge to make a round estimate of an amount which seems to him to
be fair and reasonable. That is entirely a matter of guesswork, a blind plunge into the
unknown.

The other is to try to make an assessment, by way of mathematical calculations, on
the basis of assumptions resting on the evidence. The validity of this approach depends of
course upon the soundness of the assumptions, and these may vary from the strongly
probable to the speculative.

It is manifest that either approach involves guesswork to a greater or lesser extent.
But the Court cannot for this reason adopt a non possumus attitude and make no award. . . .’

[7] This court thus approved the use of actuarial calculations based on whatever
evidence is available. In this matter, following the approach of actuaries over
decades, Mr Morris used the assessments of industrial psychologists as to the
career path likely to have been followed by Ms Sweatman, her probable
remuneration, prospects of promotion, working lifespan, retirement and other factors
that might have affected her income stream over the years. He then calculated the
present estimated value of the future income that she would have earned, taking into
account the net capitalization rate, which in turn has regard to the expected
investment return. From the amount calculated he made deductions on the basis of
future inflation rates, for taxation and likely changes in the rates of taxation, and,
importantly, took into account accepted life tables reflecting mortality rates.

[8] The second step taken was to ascertain what difference the injury and
disability arising from the collision made to Ms Sweatman: to determine the
estimated present value of her future income stream in her injured and disabled
state. Once that calculation had been done the two amounts were adjusted having
regard to the contingencies of life: any factor that would influence her life and
earning capacity – the hazards of life. The amount calculated in respect of the
income stream in the injured state was then deducted from the amount she would
have earned but for the injury, and that represented the estimated present value of
Ms Sweatman’s loss.   The limitation introduced by the amendment was then
compared with the actual loss: if the actual loss was less than the annual loss – the
limit or cap – then the Fund would be liable for the actual loss. If it exceeded the limit
then only the amount which was gazetted before the date of the accident (the annual
loss) would be payable.

[9] The steps taken before the application of the cap were, as Griesel J pointed
out, part of the conventional method of determining the estimated present value of
the loss which the Fund, prior to 2008, would have been liable to pay in full. The
actuary who gave evidence for the Fund, Mr A J Munro, said that that was the
method he too had adopted until the Act was amended and effect had to be given to
the limitation introduced by the amended s 17.

[10] However, the amendment had made Mr Munro rethink the approach to
determining the actual loss, and he adopted a new approach to determining it, and
applied the limitation – the cap – at a different point. The difference in approach of
the respective actuaries – as to how to apply the cap – results in different sums
being determined. Mr Munro’s approach leads to substantially lower awards than
does that of Mr Morris. In this matter, on the Fund’s approach, Ms Sweatman’s
award would be R2 million less (before the apportionment) than she would obtain
using the conventional method subject to the new limitation.

[11] Mr Morris’s evidence was supported by Mr J Schwalb, an actuary who also
testified for Ms Sweatman. He too follows the approach to the calculation of actual
loss, and the application of the limit on that loss, advocated by Mr Morris.

[12] The Morris method, preferred by Griesel J, starts from the text of s 17(4)(c).
That provides that the annual loss must be compared with the actual loss (the
estimated value of the loss), and the lesser sum awarded. The annual loss is that
determined by notice in the Government Gazette. And the quantum of the annual
loss, provides s 17(4A)(b), is that ‘set out in the last notice issued prior to the date on
which the cause of action arose’ – that is, the date of the accident. Accordingly,
following the Morris method, if in each year after the accident the actual loss
exceeds the annual loss determined at the date of the accident, the Fund is liable to
pay only the lesser amount – the annual loss.

[13] Mr Munro, on the other hand, proceeded from a different premiss. He
considered that in order to determine the estimated value of the loss, when
calculating the injury-free career path and future income, and the income stream with
the injury and disability, he had to take into account all contingencies other than
mortality. After the annual loss (the cap amount) for each ensuing year was
established (working on estimated inflated amounts), mortality rates would be
applied. This would result in substantially lesser amounts being awarded to
claimants. The approach advocated by him required working on an inflated cap for

the projected years of the claimant’s life. Furthermore, Mr Munro considered that
mortality rates are different from other contingencies, and ought not to be taken into
account before establishing the actual loss. He also took the view that the actual loss
should be discounted only after the annual loss had been established, thus
introducing a further allowance for general contingencies.

[14] The rationale for this approach was that it was fairer: it brought about gender
equality (mortality rates for women and men are different, women in general having
longer life spans). And it also did not prejudice the very old or the very young
accident victim. Thus the child and the adult approaching retirement would not be
treated differently. But as pointed out by counsel for Ms Sweatman, the entire
process of determining future loss is dependent on gender differentiation: women
have longer life expectancies, and in general have higher claims for future loss of
earnings than men do. The argument that the Morris method discriminates on the
basis of age is equally artificial. There is inevitably a difference in the periods where
income is lost when dealing with very young or older people. The periods of the loss
must be different.

[15] Mr Munro introduces into the calculation of loss the notion of a ‘cap year’: that
there is a different limit on the Fund’s liability for each year in respect of which
predictions are made. But nowhere does the Act suggest that the amount in the last
notice published before the date of the accident must be adjusted each year to take
into account the ravages of inflation. The quarterly adjustments will take care of
problems with inflation for future claimants, but the limit for a particular claimant’s
loss is set at the date of the accident. A reading of s 17, even having regard to its
purpose, does not lend itself to the interpretation that there is a different cap for each
year after the accident.

[16] And, as Sutherland J said in Sil & others v Road Accident Fund 2013 (3) SA
402 (GSJ) paras 13 to 15, the purpose of the cap is to limit the sum to be paid. It is
not intended to interfere in the calculation of the loss. He said: ‘The artificially set

maxima exist to resolve the challenges to the [Fund] in funding demands made on it,
not to prescribe a new methodology of calculating loss . . . .’ He too found that
contingencies had to be taken into account in determining the actual loss. He said
(para 13):
‘In projecting a future actual loss, the exercise contemplates the chances of not achieving
the projected rate of earnings by factoring in predictable risks. Those risks are expressed as
the given contingencies. There is no other place in the calculation process where, sensibly,
the contingencies could be usefully intruded into a calculation of loss, that is to say the net
loss or, more appropriately, the ‘actual loss’.

[17] Sutherland J referred in this regard to Law Society of South Africa & others v
Minister for Transport & another 2011 (1) SA 400 (CC) para 86. There the
constitutionality of the limitations on liability introduced by s 17 was raised.
Moseneke  DCJ, in finding that the reduction of compensation payable for loss of
income or support did not amount to an arbitrary deprivation of property, said that the
amendment ‘properly advances the governmental purpose to make the Fund
financially viable and sustainable and to render the compensation regime more
transparent, predictable and equitable’.

[18] Mr Munro also did not explain satisfactorily why he treated mortality differently
from all other contigencies, taking it into account only after the annual loss had been
determined. As counsel for Ms Sweatman argued, there should be no distinction
between the general hazards of life, and mortality. All have an impact on the income
that a plaintiff would earn in an uninjured and injured state. The only real difference
between mortality and other contingencies is that there is more evidence available in
statistical form to show mortality rates.

[19] The court below in this matter considered that Sil was correct. In the same
division, however, in Jonosky v Road Accident Fund 2013 (5) SA 356 (GSJ), the
court accepted that the cap had to be inflated for each year of the calculation. The
court did not, however, explain how this interpretation was justified by the plain

words in s 17. It also did not deal with an earlier decision (Nhambe v Road Accident
Fund, unreported case 70721/2009, North Gauteng High Court) in the division, which
adopted much the same approach that Sil did: the cap was set at the date of the
accident. The decision of the court below in this matter has been followed in a
subsequent matter in the Eastern Cape Division: Bonesse v Road Accident Fund
2014 JDR 0303 (ECP)).

[20] In my view, there is no cogent reason to depart from the conventional, tried
and tested actuarial approach that this and other courts have accepted over
decades. The Fund argued that that method was not set in stone. That is true. But
since it proceeds from a logical basis and there is no apparent reason to change it,
this court will not suggest any departure from it. Thus the trial court was correct in
finding that Mr Morris’s calculation of Ms Sweatman’s loss, as capped, should be the
basis of the award.  To the extent that Jonosky takes a different stance, it is
incorrect.

[21] The appeal is dismissed with costs including those of two counsel.

_______________________
C H Lewis
Judge of Appeal

APPEARANCES
For Appellant:

M H van Heerden SC (with him D Pillay)
Instructed by:

Nongogo Nuku Inc, Cape Town

E G Cooper Majiedt Inc, Bloemfontein

For Respondent:

K Engers SC (with him D Melunsky)

Instructed by:

Lowe and Petersen, Cape Town
Honey Attorneys, Bloemfontein
SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT
OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

20 March 2015

STATUS

Immediate

Please note that the media summary is intended for the benefit of the
media and does not form part of the judgment of the Supreme Court of
Appeal.

Road Accident Fund v Sweatman [2015] ZASCA 22

In 2005 the Road Accident Fund Act 56 of 1996 was amended to introduce
various limitations on the amounts that could be claimed by people injured in
road accidents. The amendments came into operation in 2008. In this case,
the limitation in issue was in respect of the amount that can be claimed for
loss of future income where the respondent, Ms Sweatman, then a teenager,
was severely injured when she was run over by a car, such that her career
path was impacted upon adversely. She instituted action against the Road
Accident Fund in the Western Cape Division of the High Court claiming
several million rand in damages for loss of income.

Prior to the amendment, damages for loss of income could be claimed in full.
The amended s 17(4) of the Act now provides for a limitation –a cap – on the
award that can be made. That limitation, referred to as the annual loss, is
determined by notice in the Government Gazette: the section makes provision

for the amount to be adjusted on a quarterly basis. (The award made to
dependents claiming for loss of support is subject to the same limitation.)

The question at issue here was the method to be used in the actuarial
calculation to determine the actual loss suffered, and at which stage to apply
the cap. The trial court concluded that the approach of the actuary who gave
evidence for Ms Sweatman was correct: the court must determine the present
value of the actual loss suffered, as actuarially calculated, taking into account
all contingencies, including mortality, and then compare it with the annual loss
as determined on the date of the accident. The lesser of the two amounts
should then be awarded to the claimant.

The actuary for the Fund had argued that, although the calculation of the loss
performed for Ms Sweatman was based on the conventional approach to such
calculations, as accepted by courts over decades, the approach should be
changed. The introduction of the cap had made him reconsider the
conventional approach. His method of calculating the loss and applying the
cap would have the result that substantially lesser sums would be payable to
claimants by the Fund than would be the case on the conventional approach.

The SCA upheld the judgment of the trial court, finding that the purpose of
introducing the cap was to limit the amounts payable and not to change the
method of calculating the actual loss. To the extent that decisions in divisions
of the high court were different, they were incorrect.

------