(Number 93 – December 2015)
WE WISH YOU A VERY HAPPY XMAS
AND A PROSPEROUS NEW YEAR
|CAP determination July 2015:||R234 366|
|CPI year-on-year October 2015||4,7%|
|RSA long bond yield December 2015:||8,6%|
|Real rate of return (8,6 less 4,7):||3,9%|
|ABSA Property Index July 2015||6,1%|
|Houses less than 140 square meters||5,4%|
Medical expenses net capitalisation rate: A recent survey shows that of the 16 actuaries approached 5 capitalised at 2½% per year, 7 at 1½% per year, one at 1% per year, one at 0% per year, and the remaining at 2% and 1,89%.
The survey should also have listed the rate used by the same actuary to capitalise a claim for loss of earnings or support. It would have provided a useful comparison.
The important point about the above rates is that they are only relevant to limited classes of “future medical expenses”, if at all. The cost of an attendant are earnings, not medical expenses. The fees of the surgeon and anaesthetist are also earnings which would have been capitalised at 2½% had the medical expert claimed for loss of earnings due to being injured. The costs of physiotherapy and occupation therapy are earnings.
The future net capitalisation rate is not determinable by scientific inquiry. It is a matter of convention and beliefs as to the future. The use of the same rate for all future claims ensures equity between different claimants. Such South African rulings as there are on net capitalisation rates are instructive, but not binding, for subsequent courts (eg Oberholzer v NEG Insurance1988 4 QOD A3-1 (C) (1% per year); Gallie NO v NEG Insurance 1992 2 SA 731 (C) (1,5% per year); Dusterwald v Santam Insurance 1990 4 QOD A3-45 (C) 60-4 (1% per year); Ngubane v SATS 1991 1 SA 756 (A) 781E (3% per year)).
Division of matrimonial assets subject to accrual: The “accrual” of assets in terms of The Matrimonial Property Act presumes that the assets of each spouse will increase over the years at least in line with the Consumer Price Index. This does not always happen. How is the “accrual” calculated if the actual asset values have depreciated relative to inflation. Is there a sharing of losses, or do the parties go their separate ways with the assets they have? If the accrual system is an enlightened way of sharing gains and losses then it seems that the normal CPI calculations should be done to ascertain the “accrued loss” of each spouse. The spouse with the lesser loss then shares their “advantage” by a transfer to the other spouse?
“Gratuitous” payments of support: The mother of the deceased had adopted his illegitimate child prior to his death. Notwithstanding the adoption and its formal severing of all legal bonds between parent and child the deceased had continued to provide regular support for the child. The RAF argued that the deceased had not been legally bound to provide support for his child. In Taljaard v RAF 2015 1 SA 609 (GJ) the Court ordered the RAF to pay compensation for the loss of support suffered by reason of the death of the child’s biological father. The Court noted that the deceased had “agreed” to provide support thereby providing a causa for the payment of support. In addition a court is empowered by the adoption legislation to vary the statutory terms of adoption if this will achieve a just result.
Deduction for inheritance of bond debt: A correctly drawn liquidation and distribution account will show the house inherited under the assets and the bond debt separately under the liabilities. Frequently the bond debt is paid off by life insurance. The amount of the life insurance should be shown along with other life insurances under the assets. Some L&D accounts make the error of showing only the residual benefit after the bond has been paid off. The Assessment of Damages Act 9 of 1969 lays down that life insurances should be ignored when assessing damages for loss of support. The failure to disclose the full life insurance benefit prevents giving effect to the Act. Of course one can always follow Mohan v RAF 2008 (5) SA 305 (D) and just ignore family home and the associated bond debt. However in Snyders v Groenewald 1966 3 SA 785 (C) deduction was ordered for the advantage of having a whole house instead of a shared house. In Maasberg v Hunt, Leuchars & Hepburn Ltd 1944 WLD 2 the inheritance of the family home was ignored.
Mora interest: The RAF Act prohibits the running of mora interest until 14 days after the date of settlement or court award. This affects so many claims for loss of earnings and support that it is commonly forgotten that for non-RAF claims mora interest may be claimed on past loss of earnings or past loss of support. The capital sum for future loss is usually discounted for interest to the date of trial or settlement. The award for general damages has regard to rand values at the date of trial or settlement. For such components of the award it is unjust to allow mora interest until after date of trial or settlement. The courts have, however, been somewhat cavalier about such niceties. Thus in Du Plooy v Venter Joubert Inc 2013 2 SA 522 (NCK) mora interest was awarded at the very high rate of 15½% per year on a professional negligence claim from the date that the letter of demand should have been served on the minister. This seems punitive. In Zealand v Minister of Justice  JOL 23423 (SE) mora interest was allowed on an award that was purely general damages. Once again punitive overtones, this time against the poor payer who had to foot the bill. The Prescribed Rate of Interest Act gives the court a wide discretion. I express the hope that such discretion will be exercised wisely and with due regard for the subtleties.