Loss of earnings / earning capacity and "sympathetic employment"

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Medical Law - Loss of earnings / earning capacity and “sympathetic employment”

In the recently decided matter of De Melin v Road Accident Fund 2013 JDR 2656 (GSJ) the South Gauteng High Court was faced with deciding whether loss of earnings / earning capacity can be claimed in instances where a plaintiff is still employed, out of sympathy, and being paid his former salary even though he can no longer perform his work and has effectively been replaced.

The plaintiff, a butchery manager at a large manufacturer of biltong products owned by his wife and her two brothers, was injured in a collision with a motor vehicle. Prior to the collision the plaintiff was healthy, fit and of average mental functioning and he was inter alia tasked with production and spice control, ordering stock and managing staff at the butchery. At the time of the collision the plaintiff was earning R20 000.00 per month.

The plaintiff sustained a significant head injury during the collision and suffered on-going neurocognitive and psychological sequelae as a result. The neurological damage was regarded as permanent and it was agreed between the parties that the plaintiff is no longer employable in the open labour market. The family business, however, kept him on after the accident and paid him the same salary, out of sympathy, despite the fact that he had essentially been replaced by a butcher / production manager and a floor supervisor.

The parties agreed, prior to the matter proceeding to trial, that the Road Accident Fund (hereinafter referred to as “the Fund”) would be liable for 50% of the plaintiff’s proven damages.

The Court accepted that, bearing in mind the fact that that the plaintiff lost his ability to smell and taste, as well as his memory and other cognitive functions, coupled with the fact that he had effectively been replaced by two new employees who were paid a total of R30 000.00 per month, the plaintiff’s employment was sympathetically tolerated within the family business rather than contributing meaningfully thereto.

The two issues in dispute between the parties were as follows:

1. Whether, having regard to the fact that the plaintiff is still receiving his salary, it can be said that he has suffered and will continue to suffer any loss of income or earning capacity.

2. If any calculation in respect of loss of earnings must take into account the contention of the Fund’s industrial psychologist that the plaintiff was being paid more than he was worth prior to the accident because he was employed in the family business.

In respect of the first point of dispute, the plaintiff’s counsel contended that the plaintiff has “sympathetic employment” and that this cannot affect his claim for future loss of earnings / loss of earnings capacity. The Court was referred to the matter of Santam Versekeringsmaatskappy BPK v Byleveldt 1973 (2) SA 146 (A) in which it was held that when an employee was paid purely on compassionate grounds at a time when he could contribute nothing to the business, such salary is not taken into account when dealing with the plaintiff’s claim for loss of earnings.

The Fund’s counsel relied on the Supreme Court of Appeal decision of Rudman v The Road Accident Fund 2003 (2) SA 234 (SCA). The Court, however, found that the facts of the Rudman matter are distinguishable from the facts of the present matter in that in the Rudman matter there was evidence that the company may have suffered a temporary loss but no evidence that this affected the plaintiff’s income. The plaintiff in the Rudman matter was a director, shareholder and trustee and received his income as of right. He was also still capable of performing his real function at the company and it was not shown that he had, personally, suffered any diminution of his patrimony.

The Court accordingly applied the principles set down in the Byleveldt matter bearing in mind the following:

1. The plaintiff in the present matter did not receive his income as of right;

2. His loss had a direct impact on his patrimony;

3. He has, in effect, been replaced and is being paid purely on the basis of sympathetic employment;

4. The plaintiff ran the risk of suffering a loss of earnings in future as it was established during the trial that there might well come a time when the well-being of the business would require the termination of his employment.

In assessing the second point of dispute the Court relied on the factual scenario that, in replacing the plaintiff, the employer had to appoint two employees at a total cost of R30 000.00 per month. The Court accordingly dismissed the contention that the plaintiff was being overpaid.

The Court thus concluded that the plaintiff was sympathetically employed and that the amount that he is earning is not to be taken into account in assessing his loss of earnings / loss of earning capacity. A contingency of 60% was applied in respect of general contingencies such as savings in travelling to and from work and the possibility of loss of income due to illness or unemployment which the plaintiff might have suffered even if the accident had not taken place. The plaintiff was accordingly awarded an amount of R1 284 185.00 in respect of loss of income / earning capacity.

This matter illustrates the factual approach that the Court will take when considering the quantum of a claim in respect of loss of earnings / earning capacity and may well be usefully applied in matters with similar facts in order to establish a claim in respect of loss of earnings.

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