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[2018] ZAWCHC 82
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Registrar of Medical Schemes v Samwumed Medical Scheme (1306/2018) [2018] ZAWCHC 82 (3 May 2018)
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
REPORTABLE
Case
Numbers: 1306/2018
In
the matter between:
THE
REGISTRAR OF MEDICAL
SCHEMES
Applicant
and
SAMWUMED
MEDICAL
SCHEME
Respondent
JUDGMENT
Andrews
AJ
Introduction
[1]
This is an opposed application launched on a
semi-urgent basis in terms of which the Applicant seeks to place the
Respondent under
provisional curatorship as contemplated by the
provisions of Section 56(1) of the Medical Schemes Act 131 of 1998
(“the MS
Act”) and Section 5(1) and (2) of the Financial
Institutions (Protection of Funds) Act 28 of 2001 (“the FI
Act”),
pending the return date of a rule
nisi
.
[2]
The application was heard on 17 April 2018. For
the Applicant appeared Adv Maritz (SC) who was assisted by Adv
Seseane. Adv Fruend
(SC) appeared on behalf of the Respondent, and
was assisted by Adv Mayosi.
Preamble
[3]
The South African Municipal Workers Union
(“SAMWU” or “the Union”) established its own
retirement fund and
medical scheme during mid-1990. The Respondent
was formally established in 1998 and in March 2001 it was registered
as a national
medical scheme in terms of the MS Act (“the
Scheme”). The Respondent is also regulated by the MS Act. It is
common
cause that the Respondent and the Union would operate
independently and be able to accept members from other trade unions
as well
as non-affiliated employees. Also common cause is that it
Respondent would be financially independent from the Union.
[4]
Since 2001, the Respondent operated as a
restricted scheme in accordance with the MS Act within the local
government sphere. In
terms of chapter 5 of the MS Act, a medical
scheme is regulated and governed by its rules once they have been
duly registered by
the Registrar. Section 29(1)(a) requires the rules
to provide for the appointment and election of a Board of
Trustees(“BOT”)
consisting of persons who are fit and
proper to manage the business contemplated by the medical scheme. The
latest approved and
registered scheme rules deal with the Scheme’s
governance under rule 21 which makes the following provisions
regarding the
governance and role of the BOT:
(a)
The board consists of not more than 19 persons
who must govern the affairs of the Scheme.
(b)
The trustees are appointed in the following
manner:
(i)
The Union’s Central Executive Committee
(“CEC”) “
shall appoint”
nine of these trustees, who are required to
be members of the Scheme.
(ii)
Nine member-elected trustees “
shall
be elected from amongst
the
Scheme’s members at the Annual General Meeting”
(AGM)
.
(iii)
The member-elected trustees “
shall
at all times”
constitute 50% of the
total composition of the Board.
(iv)
A single pensioner trustee shall be elected at
the AGM from amongst the pensioner members of the Scheme.
(c)
All
trustees “
shall
serve a
term of office of three years”
and
shall be eligible for re-election.
[1]
(d)
Should a
Union-appointed trustee “
vacate
office; the Union shall appoint a replacement trustee within a
reasonable period”.
[2]
(e)
Should a member-elected trustee or pensioner
trustee “
vacate office”
during his or her term, the Board “
may
appoint”
a trustee from amongst the
members in good standing of the Scheme.
(f)
Ten trustees shall constitute a
quorum
at meetings of the Board.
(g)
Matters requiring decision-making by the Board
are to be determined by a majority vote, with the Chairperson having
a casting vote
in the event of a deadlock.
Factual
Background
[5]
The Respondent is closely associated with SAMWU.
Since 2016 internal strife arose within SAMWU between two factions
known as the
Molalenyane and the Tshililo factions, respectively,
that spilled over to the Respondent since approximately May 2016.
[6]
The genesis of the strife was ostensibly borne
out of disputes regarding control of the KwaZulu-Natal provincial
SAMWU structure.
This purportedly cascaded to disputes regarding
control over the national (Central Executive Committee “CEC”)
SAMWU
structure. As a result of the uncertainty regarding which
faction to engage, the City of Johannesburg lodged a declaratory
application
to the Labour Court. On 14 December 2016, the Labour
Court declared that the members of the Molalenyane faction are the
legitimately
elected and appointed national CEC office bearers of
SAMWU. Additionally, the Labour Court declared the meetings called by
the
two factions on 19 May 2016 to be illegal, the consequence of
which is that the decision of the Molalenyane faction to replace the
5 trustees on 19 May 2016 was illegal. The Tshililo faction appealed
the decision of the Labour Court.
[7]
On 4 May 2016, a letter directed to Respondent
from the Molalenyane faction, penned by Simon Mathe who described
himself as SAMWU’s
general secretary, notified the Respondent
that SAMWU had terminated the membership of five CEC appointed
trustees. On 5 May 2016
and 12 May 2016 respectively, the Respondent
responded to the Molalenyane faction and indicated its refusal to
remove the trustees
for the following reasons:
(a)
The trustees are entitled to serve a three year
period;
(b)
SAMWU cannot arbitrarily remove appointed
trustees; and
(c)
Due process to remove the trustees had not been
followed.
[8]
Consequently, the Respondent requested reasons
for the purported removal of the five appointed trustees together
with proof that
that due process had been followed. On 25 May 2016,
the Tshililo faction directed a letter to the Respondent, which was
penned
by Thebeitsile Mkoto (“Mkoto”), who also described
himself as the general secretary of SAMWU. The letter notified the
Respondent of the reconfirmation of the trustees as per the
resolution of the CEC. This list differed to the list in Mathe’s
letter as four of the trustees’ names listed in Mathe’s
letter as no longer being trustees appear on Mkoto’s
letter.
In response, Mathe, in a letter dated 26 May 2016 stated that the CEC
had resolved to recall the CEC appointed trustees
because they had
been expelled from SAMWU and provided the Respondent with names of
five replacement trustees.
[9]
On 30 May 2016, the Respondent addressed
correspondence to the Applicant, indicating that it refused to agree
to the replacement
of the SAMWU CEC appointed trustees who had been
removed. The Respondent requested a directive from the
Applicant as to how
best to deal with the position of the CEC
appointees. At a Board of Trustees (“BOT”) meeting held
on 6 and 7 September
2016, the trustees resolved to amend the scheme
rules, subject to the Applicant’s approval. There was an
objection
to the proposed scheme changes from SAMWU. In the interim
certain union members were expelled and other members were dismissed
resulting in five trustees being unable to represent the scheme on
the BOT. It also came to light that four of the five trustees,
who
were no longer representatives of the Union, participated in the
BOT’s decision to change the scheme name. This resulted
in the
BOT not being properly constituted.
[10]
The Applicant indicated its refusal to register
the proposed changes to the scheme rules on the basis that the
decision to amend
was taken at a BOT that was not properly
constituted because of the five persons who ceased to be CEC
appointed trustees being
present at the meeting. The Respondent
has refused to remove the five trustees on the basis that the Labour
Court decision
is being appealed against.
[11]
The Applicant’s decision to refuse the name
change and the amendment in terms of Rule 21.1 was subsequently
appealed against,
which appeal failed.
Applicant’s
Principal Submissions
[12]
The Applicant submitted that material
irregularities have occurred as a consequence of internal strife
between the two factions
which paralysed SAMWU’s management
including its ability to hold meetings. The Applicant argued that the
Molalenyane faction
has been unable to exercise control over the
Respondent with the resultant effect that it has been drawn into the
SAMWU factional
strife.
[13]
The Applicant avers that despite the termination
of the appointment of the trustees on 4 May 2016, they have continued
to participate
in all the BOT decisions, with the resultant effect
that the Respondent has been managed unlawfully for approximately 20
months.
The Applicant argued that not only does the Tshililo faction
exercise control over the scheme, it is also attempting to unlawfully
do away with SAMWU’s control of the scheme.
[14]
According to the Applicant, the scheme rules do
not provide for the Scheme to function with 14 trustees. It is the
Applicant’s
contention that after the removal of the five
trustees, they had to be replaced in order for the Scheme to be
lawfully managed.
The Applicant argued that this irregularity has
exposed the Scheme to financial risk as proper financial governance
may be compromised
by the two factions fighting for control of the
scheme.
[15]
The Applicant pointed out that SAMWU has long
historical ties to the Scheme and that the Scheme bears SAMWU’s
name. Consequently,
according to the Applicant, the Scheme owes its
very existence to SAMWU and without proper process being engaged to
remove SAMWU’s
influence, which process may be fundamentally
prejudicial to the Scheme. According to the Applicant, the
continuance of the management
of the present BOT would entail the
Scheme’s continued improper management as the BOT is invalid.
[16]
Additionally, the Applicant contended that for
the last 20 months, the BOT has allowed the scheme’s resources
to be used to
advance the Tshililo faction’s agenda which is
reflective of the Respondent’s lack of fitness and proprietary
of all
the trustees. The Applicant submitted that the Scheme’s
trust funds are at risk as there is a danger of the said funds being
misappropriated.
[17]
Furthermore, the Applicant contended that the
appointment of a curator would be in the interest of the
beneficiaries of the Scheme
because of the material irregularities.
It also avers that they have succeeded in showing good cause for the
appointment of a curator.
In this regard, a curator, once appointed,
will be in a position to take control of and manage the affairs of
the Scheme. Moreover,
the Applicant contended that the only way of
rectifying the invalid BOT is for a curator to facilitate the
election of a new BOT
as an invalid BOT is unable to take valid
decisions.
Respondent’s
Principal Submissions
[18]
The Respondent’s main grounds for opposing
the granting of the relief sought are that:
(a)
The Applicant has failed to demonstrate any
irregularities in the Scheme, material or otherwise, that justify the
appointment of
a curator nor has he established that good cause
exists for such appointment;
(b)
The Applicant has failed to join the South
African Municipal Workers Union which is fatal to the application;
(c)
The application is not urgent.
[19]
The Respondent contended that the Applicant has
failed to identify any problems with the management of the Scheme
upon which his
opinion that there are material irregularities in the
Scheme is based. As a consequence, it contends, there are no
objective facts
before this Court to justify the appointment of a
curator. Consequently, the Respondent argued that it can neither be
desirable
nor in the interest of the beneficiaries of the Scheme to
appoint a curator for it.
[20]
Additionally
the Respondent, referring to
Executive
Officer of the Financial Services Board v Dynamic Health Ltd and
Others,
[3]
submitted that the Applicant has failed to identify any problems in
the business of the Scheme that require curatorship. Moreover,
the
Respondent contended that there is an alternative which is preferable
to the appointment of a curator for resolving the Applicant’s
difficulties with the composition of the Scheme’s BOT. In
this regard, the Respondent argued that various rule amendments
were
adopted by the Board at its meeting held on 6 and 7 September 2016
which included,
inter
alia
:
(a)
A revision of the main body of the Scheme’s
rules, so as to bring them into line with model rules published by
the Council.
(b)
The establishment of revised annual benefit
contribution rates for the 2017 year.
(c)
An amendment changing the Scheme’s name
from SAMWU National Medical Scheme (SAMWUMED) to the neutral
Municipal Medical Scheme
(M-Med).
(d)
An amendment to the governance structure to
ensure 100% member election to the Board. If approved by the
Registrar, this would have
removed the Union’s right to appoint
representatives to serve as trustees on the Scheme’s board.
[21]
According to the Respondent, it was further
resolved at the said meeting that the existing board would remain in
office until the
next elective AGM scheduled to take place on 18 June
2018. The Respondent conceded that whilst there may be room for
debate as
to whether four of the Union-appointed trustees remained
validly appointed trustees, the BOT took the considered view that all
of the trustees present at the meeting of 6 September 2016 were
to be regarded as duly appointed trustees and that it was
accordingly
lawfully constituted and capable of taking decisions in the name of
the Scheme. The Respondent contended that it has
tendered certain
undertakings which in its view, meets all of the concerns raised by
the Registrar. The Respondent furthermore
argued that the future BOT
would be at liberty to confirm or rescind any decision taken by the
Scheme’s BOT as it existed
between 5 May 2016 and the date of
the conclusion of the AGM scheduled for 18 June 2018.
[22]
According to the Respondent, the BOT as it is
currently constituted complies with the Scheme’s rules and the
provisions of
the MS Act. The Respondent submitted that the Scheme’s
unwillingness to follow the instruction until legal certainty could
be obtained as to which of the two competing factions constituted the
lawfully appointed leadership of the Union does not constitute
an
irregularity, and certainly not an irregularity justifying placing
the Scheme under curatorship. Moreover, the Respondent contended
that
the appointment of a curator in terms of section 56 would not be able
to do more than what the Scheme has already tendered
to do.
[23]
Turning to the requirement of irreparable harm,
the Respondent contended that it is incumbent on the Applicant to
show that irreparable
harm will be suffered should the application
not be granted. In this regard, it was argued that the Applicant
failed to prove that
it is in the interest of the Scheme to grant the
relief sought or that the Scheme’s members will be
adversely affected
should the relief not be granted.
[24]
The Respondent argued that the Scheme is in
excellent financial health and remains one of the most sustainable
schemes in the country
thus posing no risk to the members or their
reserves. In this regard, it was argued that the Scheme was never in
the past subjected
to remedial action. It also highlighted they there
has been strict adherence to the highly regulated accounting
requirements prescribed
by Section 26 of the MS Act. Additionally,
the Respondent contended that the Applicant has never had cause to
raise any material
complaints in respect of the Scheme’s
financial affairs.
[25]
According to the Respondent empirical
substantiation that the Scheme’s Management Accounts for the
period ending 28 February
2018 show that:
(a)
The Scheme continues to generate favourable
monthly surplus;
(b)
The Scheme’s reserves under investment have
increased by over R130 million year on year;
(c)
The Scheme’s solvency ratio has increased
to 93.26%, in comparison with the requirement of 25% set by the MS
Act Regulations;
(d)
The Scheme’s liquidity ratio has increased
to 9.58; and
(e)
The Scheme has extremely low administration cost
of 5.5% compared to the industry target of 10%.
Issues
to be determined
[26]
The crisp issues for determination is whether:
(a)
the current BOT of the Respondent is legitimately
constituted;
(b)
Whether the Applicant has established that there
is good cause to warrant the appointment of a curator.
Legal
Principles
[27]
The purpose
of the Medical Scheme’s Act as it appears from the long title
of the Act, is
inter
alia
to
“
protect
the interests of member of medical schemes”.
Section 7 of the MSA enjoins the Council (Applicant) to protect the
interest of beneficiaries. The Registrar is empowered through
Section
56 of the MSA and Section 5 of the FI Act to apply for the
appointment of a curator in certain circumstances. Section 56
of the
MS Act permits the Applicant to,
inter
alia,
in the interest of beneficiaries or because material irregularities
have come to its notice, to apply to the High Court for the
appointment of a curator to take control of, and to manage the
business of that medical scheme. The test is based on the opinion
of
the Registrar, which is a subjective opinion but which must be held
on objective grounds.
[4]
Furthermore, Section 5 of the FI Act provides that an application for
the appointment of a curator is to be done on good cause
shown by the
Registrar.
[28]
Executive
Officer of the Financial Services Board v Dynamic Health
[5]
deals with the
requirement of “good cause” where it was held that:
“
[4] The registrar must
therefore satisfy the court that that there is good cause to appoint
a curator. Reading ss (1) together with
ss (4), that means that the
court must be satisfied on the basis of the evidence placed before it
that it is desirable to appoint
a curator. Something is desirable if
it is ‘worth having, or wishing for’. The court must
assess whether curatorship
is required in order to address identified
problems in the business of the financial institution. It assesses
this in the light
of the interests of actual or potential investors
in the financial institution, or investors who have entrusted or may
entrust
the management of their investments to it. It must determine
whether appointing a curator will address those problems and have
beneficial consequences for investors. It must also consider whether
there are preferable alternative
s
to resolve the problems.
Ultimately what will constitute good cause in any particular case
will depend upon the facts of that case.
I take heed of what Innes CJ
said in regard to any attempt to define the content of the expression
‘good cause’, that:
‘
In the nature
of things it is hardly possible, and certainly undesirable, for the
court to attempt to do so. No general rule which
the wit of man could
devise would be likely to cover all the varying circumstances which
may arise in applications of this nature.
We can only deal with each
application on its merits, and decide in each case whether good cause
has been shown’.
[6] … [T]he inability or
unwillingness of the institution to comply with regulatory
requirements applicable to protect funds
itself provides a reason for
appointing a curator… When dealing with the investment of
funds of the public, where considerable
hardship will be suffered by
ordinary people if things go wrong, the Registrar cannot be expected
to resolve factual disputes by
litigation before obtaining an order
appointing a curator. Provided the court is satisfied that the
Registrar’s concerns
are legitimate and that the appointment of
a curator will assist in resolving those concerns, it will ordinarily
be appropriate
to grant an order.”
[29]
The
Registrar’s “opinion” is a subjective one which
must be held on objective grounds. In
Barnard
v Registrar of Medical Schemes
[6]
Fourie AJA held that ‘
[t]he
test under s 56(1) of the MSA is the opinion held by the registrar,
that it is in the interest of the beneficiaries of the
scheme that a
curator be appointed to the scheme, or that it is desirable to do so,
because of the medical scheme is not in sound
financial condition…the
opinion is the subjective opinion of the registrar which must be held
on objective grounds.’
[7]
[30]
Medical
Schemes are governed by a BOT in terms of Section 57(1). The BOT
governs and manages the affairs of the medical scheme in
accordance
with the official approved scheme rules. It is trite that the rules
constitute a contract between the scheme and its
members.
[8]
Section 32 of the MSA essentially provides that the rules of a
medical scheme shall be binding on the medical scheme and its
members.
Additionally, the rules of the scheme prescribe the powers
and authority of the BOT. Furthermore, the rules serve to safeguard
the interests of members of the scheme.
[31]
Rule 21 states that “
[s]hould
the Union-appointed Trustee as provided for in Rule 21.1.2.1 vacate
office, the Union shall appoint a replacement Trustee
within a
reasonable period.”
Discussion
[32]
The Applicant holds the view that the BOT must at
all times be composed of 19 trustees and that the Scheme’s
failure to maintain
these numbers renders the BOT invalidly
constituted. The Respondent contends that this view is incorrect as
Rule 21.1.1 provided
that the BOT is to consist of “
no
more than nineteen (19) persons
” and
does not state that the BOT is to comprise of “
at
least
” 19 trustees. The break-down of
the composition of 19 trustees appear to be peremptory and repeatedly
use the word “
shall
”,
yet, provision is made for the method in which replacements of
trustees are to occur which arise before the expiration
of the three
year term. The Respondent argued that this implies that there is no
obligation on the Scheme to retain a full complement
of trustees save
that:
(a)
It must
meet the quorum requirement of 10 trustees;
[9]
and
(b)
The BOT must ensure that member trustees “
at
all times constitute fifty percent of the total composition of the
Board
.”
[33]
It is common cause that two of the
Union-appointed Trustees have resigned and have not been replaced.
Also common cause is that
a further two trustees were removed in
accordance with Rule 21.12.6 who were similarly not replaced. It is
also common cause that
the appointments of three of the five
remaining Union-trustees were terminated, after their expulsion as
shop stewards of the Union.
This termination was and is contested by
a competing faction of the Union.
[34]
Although Rule 21.1.1 provides for a BOT
consisting of “
not more than nineteen
(19) persons
”, Rule 21.1.2 is couched
in peremptory terms uses the words “
shall
”.
The Applicant contended that this means that the BOT is to at all
times consist of a full complement of 19 persons, which
interpretation it submits is borne out by Rules 21.4 and 21.5 which
provide for the replacement of trustees within set time frames.
[35]
The Respondent acknowledged that the trustees
have not been replaced despite the Union’s obligation to do so.
The Respondent’s
contention is that this failure does not
invalidate the BOT. The Respondent furthermore contended that it
still meets the quorum
requirement as well as the “
at
least 50%”
requirement for the member
trustees notwithstanding the failure to replace trustees. Moreover,
the Respondent argued that the BOT
is not obliged to fill a vacancy
as the wording used is “
may
”
which connotes that it has the option to do so.
[36]
Inasmuch as
direction is being sought as to the validity of the composition of
the BOT, the ultimate question to be answered is
whether the trustees
endangered trust property by their acts or omissions. The Applicant
contended that the proposed section 46
process
[10]
is not a solution to the current impasse as it will entail the
removal of all the trustees because they are all, according to the
Applicant, aligned with the unlawful management of the scheme and
would leave the scheme without any management if all the trustees
are
removed. Even if the trustees are removed, the Applicant
predicts that it would take a further two years if they appeal
their
removal, hypothetically speaking. In the meantime, the unlawful
management of the Scheme will be perpetuated.
Conclusion
[37]
According to the Applicant, the BOT has over a
long period of time been unwilling to address the mismanagement of
the Scheme, despite
the Applicant requesting the Scheme since 27
October 2016 to rectify the unlawful composition of the BOT. The
Scheme is unwilling,
according to the Applicant, to comply with
regulatory requirements.
[38]
The two factions remain at loggerheads despite
various court cases and interventions by the Applicant. It is
apparent that the Tshililo
faction has not relinquished control over
the Scheme despite the decision of the Labour Court. As is pellucid,
the proposed AGM
will in my view not be the answer especially as the
legitimacy of the currently constituted BOT has not been resolve. The
legitimacy
of the AGM process will in any event be compromised in
view of the uncertainty
apropos
the legitimacy of the composition of the current BOT.
[39]
Even if the BOT in its current form is able to
make valid, lawful and binding decisions, there are a number of
anomalies in the
scheme rules that require revisiting such as the
reference in Rule 21.12.7 to “
participating
employer
”, and whether the BOT can
function with less than 19 trustees. It is my view that a ruling of
this Court on these issues
will not resolve issues which should
ultimately be decided at an AGM. It would require amendments to the
scheme rules, which have
already been proposed and should follow due
process. I agree with the Applicant that a curator will be obliged to
take all steps
necessary to convene a special general meeting of the
Respondent at which a new board of trustees who are fit and proper
for this
purpose can be elected. Moreover the curator would be able
to engage SAMWU in relation to the replacement and removal of
trustees.
[40]
On an interpretation of Rule 21.12.7 a trustee
ceases to hold office if he or she ceases to be an appointee of the
CEC. Currently
the BOT consists of 10 trustees instead of 19,
and instead of the Union having nine appointees, they only have two.
At least three
removed trustees have been participating in
deliberations and decisions at the BOT meetings. Even if the
terminations of the appointments
are in dispute, the uncertainty and
legitimacy of the BOT decisions impact on the proper governance of
the Scheme. Herein lies
the pivotal irregularity as decisions taken
by an improper and irregularly composed BOT could be rendered null
and void.
I agree that the impasse has dire consequences for
the Scheme’s members / beneficiaries.
[41]
The reality is that the Scheme, at the time of
launching these proceedings, had approximately 80 000
beneficiaries of which
approximately 36 000 were members and the
remainder were dependants. Its annual contribution income was in
excess of R1.2
Billion and at 31 December 2016 it had reserves of
approximately R1 Billion. The BOT has a fiduciary duty to act in
accordance
with the Trust Deed, in the interest of the beneficiaries.
[42]
It bears mentioning that on the Respondent’s
own version, it continues to lose members and states that the BOT
believes that
this is attributable to the reputational damage which
has arisen from its perceived association with the Union.
[43]
Although Alexander Forbes reported that the
Scheme has consistently generated healthy surpluses before and after
investment income
and maintained a healthy financial profile despite
the negative impact of the loss of members, the reality is that an
improperly
constituted BOT cannot make decisions on behalf of the
Scheme to the potential prejudice of the Scheme’s members and
beneficiaries.
Against this backdrop, it must be borne in mind that
the BOT controls more than R1 Billon of public money. What is
clear is
that the state in which the BOT is currently functioning is
not conducive and restoration of proper governance of the scheme in
compliance with the provisions of the Trust Deed and its regulatory
framework is of primary importance. I am therefore satisfied
that
there are sufficient grounds for the appointment of a curator and
that there is no satisfactory alternative or less intrusive
or less
drastic remedy available to protect the interest of the
beneficiaries.
[44]
I echo what
Fourie AJA stated in
Barnard
v Registrar of Medical Schemes
[11]
that “
[i]t
has to be reiterated that the interest of the beneficiaries of the
scheme is paramount when considering whether a curator should
be
appointed to the scheme”.
I therefore conclude that in view of the material irregularities
detailed above, it is in the interest of the beneficiaries of
the
Scheme and desirable to appoint a curator to the scheme. I am
satisfied that the Registrar has shown that he has objective
grounds
to believe that it is desirable to appoint a curator.
[45]
Despite the Respondent’s contention that
this matter is not urgent, I am of the view that this matter is
sufficiently urgent
to warrant a provisional order and a departure
from the ordinary rules of Court.
[46]
Although the Respondent argued that it was
incumbent upon the Registrar to have joined the Union as well as both
factions embroiled
in the union leadership dispute, I am of the view
that the joinder of these interest groups may still be applied for
using the
appropriate procedures prior to the confirmation of the
rule
nisi
. The
non-joinder at this stage is not prejudicial in light of the interim
nature of this order. I am however of the view that it
will be
imperative for them to be notified of this order.
[47]
In the result
,
the
following order is made:
1.
The Respondent is placed under provisional
curatorship as contemplated by the provisions of
Section 56(1)
of the
Medical Schemes Act 131 of 1998
and
Section 5(1)
and (2) of the
Financial Institutions (Protection of Funds) Act 28 of 2001
, pending
the outcome of the return date of the rule
nisi
.
2.
Royal Aldorance Khosana is appointed as
provisional curator of the Respondent, pending the outcome of the
return date of the rule
nisi
,
in terms of the provisions of
Section 56(1)
of the
Medical Schemes
Act 131 of 1998
and in terms of the provisions of
Section 5(1)
and
(2) of the Financial Institutions (Protection of Funds) Act 28 of
2001.
3.
Pending the outcome of the return date of the
rule
nisi
, and subject
to the control of the Applicant, the provisional curator be and is
hereby-
3.1
authorised to take immediate control of, and in
the place of the board of trustees, manage the business and
operations of, and concerning,
the Respondent, together with all
assets and interests relating to the business of the Respondent, in
accordance with the provisions
of the MS Act and Respondent’s
rules;
3.2
vested with all powers of control and management
which would ordinarily be vested in and exercised by the board of
trustees or principal
officer of the Respondent, whether by law or in
terms of the rules of the Respondent;
3.3
directed to give consideration to the best
interests of the members of the Respondent;
3.4
directed to exercise the powers vested in her
with the view to conserving the business of the Respondent and not
without the leave
of the Applicant to alienate or dispose of any of
the property of the Respondent, save to the extent and for the
purposes set out
hereunder;
3.5
directed to take control of the cash, cash
investments, shares and other securities, as well as of all other
assets owned, held
or administered by or on behalf of the Respondent;
3.6
authorise to incur such reasonable expenses and
costs as may be necessary or expedient for the curatorship and
control of the business
and operations of the Respondent, and to pay
same from the assets owned, administered or held by or on behalf of
the Respondent;
3.7
authorised to pay claims or other benefits to the
Respondent’s members, having regard to the rules of the
Respondent and its
financial position;
3.8
permitted to engage such assistance of a legal,
accounting, actuarial, administrative or other professional nature,
as she may reasonably
deem necessary for the performance of her
duties in terms of this order, and to defray reasonable charges and
expenses thus incurred
from the assets owned, administered or held by
or on behalf of the Respondent;
3.9
authorised to institute or prosecute any legal
proceedings on behalf of the Respondent and to defend any action
against the Respondent;
3.10
authorised to invest such funds as are not
required for the immediate purposes of the business, with an
institution or financial
instrument as she may regard financially
sound and appropriate;
3.11
authorised to take control of and to operate or
close existing banking accounts of the Respondent whether conducted
in South Africa
or off-shore, and to open and operate any new banking
accounts for the purposes of the curatorship;
3.12
authorised to investigate allegations of
financial and governance irregularities and to recommend appropriate
action to be taken
to address same and where necessary, recommend
action to be taken against any person who may be guilty of misconduct
or crime;
3.13
authorised, at any time during her term of
office, to apply on 48 hours’ notice or on an
ex
parte
basis for any amendment or
amplification of the powers granted to her in terms of hereof in the
event that it is necessary to amend
or amplify such powers for the
effective exercise of her powers and responsibilities; and
3.14
authorised to be entitled to reasonable
remuneration and disbursements, as might be allowed by agreement with
the Applicant, alternatively;
failing such agreement as may be
determined later by this Court, and that such remuneration shall be
paid by the Respondent and
shall be a first charge upon the
Respondent’s assets.
4.
That a rule
nisi
is issued calling upon the Respondent and other interested persons to
show cause, if any on
30 July 2018
at 10:00 or so soon thereafter as Counsel may be heard, why an Order
should not be made in the following terms:
4.1
confirming the curatorship of the Respondent as
contemplated by the provisions of Section 56(1) of the MS Act and the
provisions
of Section 5(1) and (2) of the FI Act;
4.2
confirming the appointment of Royal Aldorance
Khosana as curator (“the Curator”) of the Respondent, in
terms of the
provisions of Section 56(1) of the MS Act and in terms
of the provisions of Section 5(1) and (2) of the FI Act;
4.3
confirming the powers and mandate of the curator,
and subject to the control of the Applicant, order that she is-
4.3.1
authorised to take immediate control of, and in
the place of the board of trustees, manage the business and
operations of and concerning
the Respondent, together with all assets
and interests relating to the business of the Respondent, whether by
law or in terms of
the rules of the Respondent
4.3.2
vested with all powers of control and management
which would ordinarily be vested in and exercised by the board of
trustees or principal
officer of the Respondent, whether by law or in
terms of the rules of the Respondent;
4.3.3
directed to give consideration to the best
interest of the members of the Respondent;
4.3.4
directed to exercise the powers vested in her
with the view to conserving the business of the Respondent and not
without the leave
of the Applicant to alienate or dispose of any of
the property of the Respondent, save to the extent and for the
purposes set out
hereunder;
4.3.5
directed to take control of the cash, cash
investments, shares and other securities, as well as of all other
assets owned, held
or administered by or on behalf of the Respondent;
4.3.6
authorised to incur such reasonable expenses and
costs as may be necessary or expedient for the curatorship and
control of the business
and operations of the Respondent, and to pay
same from the assets owned, administered or held by or on behalf of
the Respondent;
4.3.7
authorised to pay claims or other benefits to the
Respondent’s members, having regard to the rules of the
Respondent and its
financial position;
4.3.8
permitted to engage such assistance of a legal,
accounting, actuarial, administrative or other professional nature,
as she may reasonably
deem necessary for the performance of her
duties in terms of this order, and to defray reasonable charges and
expenses thus uncured
from the assets owned, administered or held by
or on behalf of the Respondent;
4.3.9
authorised to institute or prosecute any legal
proceedings on behalf of the Respondent and to defend any action
against the Respondent;
4.3.10
authorised to invest such funds as are not
required for the immediate purposes of the business, with an
institution or financial
instruments as she may regard financially
sound and appropriate;
4.3.11
authorised to take control of and to operate or
close existing banking accounts of the Respondent whether conducted
in South Africa
or off-shore, and to open and operate any new banking
accounts for the purposes of the curatorship;
4.3.12
authorised to investigate allegations of
financial and governance irregularities and to recommend the
appropriate action to be taken
to address same and where necessary,
recommend action to be taken against any person who may be guilty of
misconduct or a crime;
4.3.13
authorised, at any time during her term of
office, to apply on 48 hours’ notice or on an
ex
parte
basis for any amendment or
amplification of the powers granted to her in terms hereof in the
event that it is necessary to amend
or amplify such powers for the
effective exercise of her powers and responsibilities; and
4.3.14
authorised to be entitled to reasonable
remuneration and disbursements, as might be allowed by agreement with
the Applicant, alternatively,
failing such agreement as may be
determined later by this Court, and that such remuneration shall be
paid by the Respondent and
shall be a first charge upon the
Respondent’s assets;
4.4
The curator shall report on her curatorship to
the Applicant and the Respondent within twelve (12) months from the
date of this
order and to include in her report a statement of her
findings and recommendations concerning the Respondent’s
affairs and
the continuation if necessary, of the curatorship;
4.5
The curator shall report on the Respondent’s
affairs to the Applicant on a monthly basis during the aforesaid
period of twelve
(12) months; and
4.6
The curator shall take all steps which are
necessary to convene a special general meeting of the Respondent at
which trustees who
are fit and proper for this purpose shall be
elected in the stead of the currently elected trustees, and trustees
otherwise be
appointed in accordance with the rules of the Scheme,
and report thereon within the twelve (12) month period referred to
herein.
5.
It
is directed that a copy of this order be served on:
(a)
The South African Municipal Workers Union and all
other unions that have an interest in Respondent;
(b)
all the trustees serving on the Respondent’s
Board of Trustees;
6.
Costs are to stand over for later determination.
________________________
P
ANDREWS, AJ
Acting
Judge of the High Court
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
REPORTABLE
Case no:
1306/2018
In the matter between:
THE REGISTRAR OF
MEDICAL
SCHEMES
Applicant
and
SAMWEMED MEDICAL
SCHEMES
Respondent
CIVIL
JUDGMENT
-
provisional curatorship as contemplated
by the provisions of
Section 56(1)
of the
Medical Schemes Act 131 of
1998
and
Section 5(1)
and (2) of the
Financial Institutions
(Protection of Funds) Act 28 of 2001
JUDGE:
Andrews AJ
JUGDMENT
DELIVERED BY:
Andrews AJ
For
Applicant:
Adv. Maritz SC assisted by
Adv. Seseane
INSTRUCTED
BY:
Bisset Boehmke McBlain Attorneys
For
Defendant:
Adv. Freund SC
assisted by Adv. Mayosi
INSTRUCTED
BY:
Norton Rose Attorneys
DATES
OF HEARING:
17 April 2018
DATE
OF JUDGMENT:
03 May 2018
(Amended
on
14 May 2018
in
terms of rule
42(1)(b)
to correct reference
of SAMWU(South African Municipal Workers Union) where it appeared on
the papers as South African Metal Worker’s
Union.)
[1]
Rule 21.3.
[2]
Rule 21.4.
[3]
2012 (1) SA
453 (SCA).
[4]
Barnard & Others v
Registrar of Medical Schemes
2015 (3) SA 204
(SCA ) at paras 12 and 41.
[5]
2012 (1) SA 453
(SCA) at para 4.
[6]
2015(3) SA
204 (SCA) at para 12.
[7]
See also
Barnard and Others v
Registrar of Medical Schemes
(628/13)
[2014] ZASCA 111
;
2015 (3) SA 204
(SCA) (16 September 2014)
at para 12.
[8]
Pennington v Friedgood &
Others
2002 (1) SA 251
(CPD) at 262 (para 36) and
Meaker
NO v Roup, Wacks, Caminer & Kriger & Another
,
1987 (2) SA 54
(CPD) at 61G-H.
[9]
Rule 21.7.
[10]
AGM
scheduled for 38 June 2018.
[11]
(supra)
at 214B.