Heese obo Peters v Road Accident Fund

• Jurisdiction: South Africa
• Citation: 2012 (6) SA 496 (WCC)

Heese obo Peters v Road Accident Fund
2012 (6) SA 496 (WCC)

2012 (6) SA p496

Citation	2012 (6) SA 496 (WCC)
Case No	10009/2004
Court	Western Cape High Court, Cape Town
Judge	Blignault J
Heard	May-November, 2011
Judgment	December 2, 2011
Counsel	MA Crowe SC for the plaintiff.; P Eia for the defendant.

Flynote : Sleutelwoorde D

Damages — Bodily injuries — Loss of earning capacity — Calculation — Effect of tax evasion — Foreigner permanently incapacitated by injury sustained in South Africa — Guilty of fraudulent tax evasion in native country (Germany) E — Constituting continuing offence which enabled survival of business — Had he not been seriously injured claimant would have faced prosecution and lengthy incarceration in Germany — Would have been unable to rebuild business after release — Claimant accordingly having lacked residual earning capacity of any value at time of accident — No loss of earning capacity shown.

Headnote : Kopnota

F One P, a 51-year-old German national, was injured in a motor-vehicle accident in South Africa. The plaintiff, acting in her capacity as P's curatrix ad litem, claimed compensation from the Road Accident Fund for P's damages, who had suffered brain injuries that rendered him unemployable. The damages were initially claimed under various heads, but were disposed of by G agreement except for the claim for the loss of past and future earnings (or earning capacity) in an amount of just less than R10 million.

The issue between the parties was this: what effect should the fact that P was guilty of massive tax evasion and that criminal proceedings were consequently pending against him in Germany, have on the calculation of his claim for loss of earning capacity? It was argued on behalf of P that his tax H evasion, whether in the past or in the future, was irrelevant since there was

2012 (6) SA p497

nothing illegal in his business or the way he ran it: it was a matter between A him and the German tax authorities which did not concern the defendant or P's claim.

Held: P's illegal conduct was not a simple contravention of fiscal legislation, but amounted to common-law fraud, and no evidence was led to suggest that fraud meant something different in German law. P's fraudulent failure to B disclose taxable income was a continuing offence that was significant not because it rendered P's business illegal, but because it ensured the survival of his business by unlawfully concealing the fraud from the German tax authorities. P's scheme had, however, been exposed by the German authorities, and had he not been involved in the accident, the criminal proceedings that had already been instituted against him in Germany would C have resulted in at least 10 years' imprisonment and a concomitant inability to earn any income. Since he would by the time of his release have been in his sixties, and a ruined man with no prospects of rebuilding his business, the plaintiff had failed to prove that P had an earning capacity of any value at the time of the accident, and accordingly that he had suffered a loss of earning capacity as a consequence thereof. (Paragraphs [70] – [71] and [75] – [78] at 511I – 512C and 513B – I.) D

Cases Considered

Annotations:

Case law

Southern Africa E

Dhlamini en 'n Ander v Protea Assurance Co Ltd 1974 (4) SA 906 (A): discussed

Dhlamini v Multilaterale Motorvoertuigongelukkefonds 1992 (1) SA 802 (T): compared

Estate De Wet v De Wet 1924 CPD 341: referred to

International Tobacco Co (SA) Ltd v United Tobacco Cos (South) Ltd F 1953 (3) SA 343 (W): referred to

Lebona v President Versekeringsmaatskappy Bpk 1991 (3) SA 395 (W): compared

Minister of Police, Transkei v Xatula 1994 (2) SA 680 (TkA): compared

Rudman v Road Accident Fund 2003 (2) SA 234 (SCA): dictum in paras [10] – [11] applied G

S v Holshausen 1984 (4) SA 852 (A): referred to

S v Mbokazi 1998 (1) SACR 438 (N): dictum at 445f – g applied

Southern Insurance Association Ltd v Bailey NO 1984 (1) SA 98 (A): referred to. H

England

Subramaniam v Public Prosecutor [1956] 1 WLR 965 (PC): referred to.

Case Information

Action for compensation under the Road Accident Fund Act 56 of 1996. I

MA Crowe SC for the plaintiff.

P Eia for the defendant.

Cur adv vult.

Postea (December 2). J

2012 (6) SA p498

Judgment

Blignault J: A

[1] The plaintiff in this action is Ms Adrè Elizabeth Heese acting in her capacity as curatrix ad litem for Mr Ulrich Hans Peters (Mr Peters). Defendant is the Road Accident Fund. Plaintiff claims compensation from defendant in terms of the provisions of the Road Accident Fund Act 56 of 1996 B for damages suffered by Mr Peters as a result of a motor accident that took place in Cape Town on 11 June 2000.

[2] Mr Peters sustained a serious head injury in the accident, comprising diffuse cerebral and cerebellar trauma and a right focal cerebral injury. C As a result thereof he manifested neurophysical problems, including spastic symptoms and cerebellar dysfunction which affected his balance, coordination and smell, and persisting neuropsychological problems in the form of cognitive abnormalities, memory difficulties, personality changes and altered behaviour. These impairments rendered him completely and permanently unemployable. The curatrix ad litem referred to D above was appointed to conduct this litigation on his behalf.

[3] Prior to the hearing of the matter the parties agreed to separate the determination of defendant's liability from the question of the quantum of the compensation to be awarded to plaintiff. The question of defendant's liability was then determined by way of arbitration. It was settled on the basis that defendant would be liable for the compensation E of 100% of such damage as plaintiff might prove.

[4] Plaintiff claimed damages from defendant under various heads, but they have all been disposed of by agreement, except for the claim for the loss of past and future earnings or earning capacity. Plaintiff's claim F under this head, as finally formulated, amounts to R9 845 562. Defendant's stance is that plaintiff has not proved any claim for damages under this head.

[5] It is trite law that an award of damages for the loss of a claimant's earnings or earning capacity is intended to place him in the financial position he would have been, had it not been for the delict. It is in G general preferable to quantify such an award by way of an actuarial calculation. See Southern Insurance Association Ltd v Bailey NO 1984 (1) SA 98 (A) at 113H – 114F. The object of such a calculation is to arrive at a lump sum which, if utilised by the claimant, would allow him to enjoy financial benefits equal to the quantum of the earnings lost by him. The H typical method (used in this case) is to compute the notional gross income that the claimant would have earned over the relevant period. This amount is then capitalised at a net discount rate which takes into account the rate at which the claimant would probably have invested the lump sum awarded to him and the likely future inflation rate. The effect I of taxation is also taken into account.

[6] During the trial the parties agreed upon a further separation of issues. In the first phase the gross pre-tax notional earnings of Mr Peters, had he not been involved in the accident, would be determined. In the second phase this amount would be adjusted to allow for contingencies, taxation, inflation, an investment rate, and the like. This judgment deals J with the first phase of these proceedings.

2012 (6) SA p499

Blignault J

[7] Plaintiff's claim is formulated in euro (€), the official currency of A Germany. At the time of Mr Peters' accident the official currency of Germany was the German mark (DM). The German mark was converted to euro with effect from 1 January 2002 at a rate of approximately DM2 = €1. In 2000 (the year of the accident) the exchange rate between the German mark and the South African rand was approximately B DM1 = R3,58. According to the South African consumer price index, R1 in 2000 is equivalent to about R1,90 in 2011. It follows that DM1 in 2000 is equivalent to about R6,80 in South Africa at present. The present exchange rate between the euro and the rand is approximately €1 = R11,20. I propose to use these conversion rates in this judgment in order to express the current rand equivalent of some of the amounts C involved.

[8] Plaintiff's case was presented along conventional lines, namely to quantify the total amount of the gross pre-tax earnings that Mr Peters would probably have earned during his lifetime. In one respect, however, D it is not conventional. The case put forward by plaintiff is that Mr Peters evaded the payment of income tax on a massive scale in the years preceding the accident. He did so by submitting false returns to the tax authorities. In order to determine the quantum of his loss, it was contended, one should therefore have regard to his real income and not to the income disclosed to the tax authorities. E

[9] Mr Peters is a German citizen. He was born and grew up in Germany and he was 51 years old at the time of the accident. He carried on the business of selling magazine subscriptions, first as an employee of other companies and then in the name of his own business known as Ulrich Peters Pressevertrieb. As the business was not a separate legal entity F I shall refer to it simply as Mr Peters' business. He was still the owner of this business at the time of the accident. He had previously been married to Katrin whom he divorced on 3 March 1998. In May 1999 he formed a relationship with Ms Adriana Holzmann. They later became engaged. They were together on holiday in South Africa when the accident occurred. She has taken care of him since then. G

[10] The nature of the magazine-subscription sales...