The Road Accident Fund v Elizabeth Jemma Sweatman

Elizabeth Jemma Sweatman, aged 15 at the time, was severely injured when she was run over by a car in Tokai Road, Cape Town in July 2010. Her mother initially instituted action on her behalf against the Road Accident Fund for damages of approximately R7 million. When she attained majority, Ms Sweatman was substituted as the plaintiff. The parties agreed all aspects of the claim except one: the correct interpretation of section 17(4)(c), read with section 17(4A)(b) of the Road Accident Fund Act 56 of 1996 as amended in 2008. The Western Cape Division accepted the interpretation advanced by Ms Sweatman's actuary (Mr Morris) and ordered the Fund to pay R3,358,529 (being 50% of the actual loss as agreed). The Fund appealed to the Supreme Court of Appeal.

• The correct interpretation of section 17(4)(c) read with section 17(4A)(b) of the Road Accident Fund Act 56 of 1996 as amended in 2008
• The proper method of calculating the 'annual loss' cap on the Fund's liability for loss of income or support
• Whether mortality rates should be factored into the calculation of 'actual loss' before comparing with the statutory cap
• Whether the statutory cap should be inflated annually or remain fixed at the amount gazetted before the date of the accident
• The appropriate actuarial methodology for determining future loss of income subject to the statutory limitations

The appeal was dismissed with costs including those of two counsel. The decision of the Western Cape Division awarding Ms Sweatman R3,358,529 was upheld.

When determining the liability of the Road Accident Fund for loss of income or support under section 17(4)(c) of the Road Accident Fund Act 56 of 1996 as amended in 2008, the correct approach is: (1) to determine the present value of the actual loss suffered, as actuarially calculated using conventional actuarial methodology, taking into account all contingencies including mortality rates; (2) to then compare that actual loss with the annual loss (the statutory cap) as determined by the amount set out in the last Government Gazette notice issued prior to the date of the accident; and (3) the lesser of these two amounts is payable by the Fund. The statutory cap is fixed at the date of the accident and is not to be inflated annually for each projected year. Mortality rates are to be treated the same as other contingencies and factored into the calculation of actual loss before applying the cap. The purpose of the statutory limitation is to cap liability, not to prescribe a new methodology for calculating loss.

Lewis JA observed that the conventional actuarial method has been tried and tested over decades and accepted by courts, noting that while it is not 'set in stone,' there is no cogent reason to depart from it where it proceeds from a logical basis. The court quoted with approval the dictum of Nicholas JA in Southern Insurance Association Ltd v Bailey NO regarding the inherently speculative nature of damages inquiries for loss of earning capacity and the two possible approaches available to courts. The court also quoted with approval Moseneke DCJ's observations in Law Society of South Africa v Minister for Transport that the 2008 amendments properly advance the governmental purpose to make the Fund financially viable and sustainable and render the compensation regime more transparent, predictable and equitable. Lewis JA noted that the entire process of determining future loss is dependent on gender differentiation (women generally have longer life expectancies) and age differentiation (periods of loss inevitably differ for young versus older claimants), rejecting the argument that the Morris method improperly discriminates on these bases.

This judgment authoritatively settled a conflict in the High Courts regarding the interpretation of the 2008 amendments to the Road Accident Fund Act. It confirms that the conventional actuarial methodology for calculating loss of income or support, developed over decades and approved by courts, remains applicable after the 2008 amendments. The judgment provides crucial guidance on how to apply the statutory cap on RAF liability, confirming that: (1) all contingencies including mortality must be factored into the calculation of actual loss before comparing with the cap; (2) the cap is fixed at the amount gazetted before the date of the accident, not inflated annually; and (3) the purpose of the cap is to limit liability, not to change the methodology of calculating loss. The decision promotes consistency, predictability and transparency in RAF claims. It approved the decisions in Sil v Road Accident Fund and disapproved of the contrary approach in Jonosky v Road Accident Fund.