Brief Summary

Medical Schemes — Membership termination — Non-disclosure of medical history — Appellant terminated first respondent's membership due to alleged failure to disclose gastritis and hip arthroscopy — First respondent's appeals against decisions of medical scheme authorities dismissed — Legal issue of whether non-disclosure constituted material non-disclosure affecting risk assessment — Court upheld findings of medical scheme authorities, confirming that non-disclosure was material and justified termination of membership.

Comprehensive Summary

Summary of Judgment

Introduction

The proceedings were an appeal to the High Court (Western Cape Division, Cape Town), sitting as a full court, against a decision of the court of first instance (the court a quo) in review proceedings. The appellate court described the matter as “an appeal, about a review”, noting that the review had seemingly been dealt with as an “appeal” by the court a quo. Leave to appeal had been granted by the court a quo.

The appellant was Profmed Medical Scheme (the medical scheme that terminated membership). The first respondent was Ms Mignon Adelia Steyn (the former principal member whose membership was terminated). The second respondent was the Registrar for Medical Schemes, the third respondent the Council for Medical Schemes, and the fourth respondent the Appeal Board established under section 50 of the Medical Schemes Act 131 of 1998.

The procedural history was layered and sequential. After the scheme retrospectively terminated the first respondent’s membership, a complaint was lodged with the Registrar, who ruled in favour of the scheme. An appeal to the Council for Medical Schemes failed. A further appeal to the Appeal Board (fourth respondent) also failed. The first respondent then launched a judicial review in the High Court against the decisions of the Registrar, the Council, and the Appeal Board, invoking both PAJA and purported common-law review grounds. The court a quo granted relief to the first respondent (leading to this appeal). The present appeal therefore concerned whether the court a quo was correct to set aside the administrative outcomes.

The general subject-matter of the dispute was whether the first respondent’s non-disclosures in her medical scheme application (notably relating to gastritis and hip arthroscopy) were material, and whether the administrative appeal proceedings (culminating in the Appeal Board decision) were reviewably defective on grounds such as procedural unfairness, error of law, and reliance on irrelevant considerations.

Material Facts

The first respondent applied for membership of the appellant medical scheme in November 2015, and her membership commenced on 1 January 2016 as the principal member. On 7 November 2016, the appellant retrospectively terminated her membership. The scheme’s reasons were communicated in a detailed letter (the judgment treated the termination decision and the reasons for it as part of the factual matrix giving rise to the ensuing statutory complaint and appeal process).

It was common cause that the first respondent did not disclose gastritis in her application form. The fourth respondent (Appeal Board) treated the non-disclosure of gastritis as material, including because it prevented the appellant from applying a condition-specific waiting period as part of risk assessment and risk management.

A core aspect of the dispute concerned the gastric-related medical history preceding the application. The Registrar found, in substance, that the first respondent had undergone a gastroscopy and colonoscopy on 4 March 2015 for a gastric ulcer, that she did not disclose this in the medical questionnaire, and that the omission was relevant to the scheme’s risk assessment (including the potential imposition of a waiting period). In later appeal papers, the first respondent conceded she underwent the procedures but asserted that she had been diagnosed with gastritis, not a gastric ulcer. The Council nonetheless concluded that the non-disclosure of gastritis was a material non-disclosure.

During the interim period, the first respondent applied to join an alternative medical scheme. In that later application, she disclosed various pre-existing conditions, including references to gastric issues (including a “gastric ulcer” and related descriptions) and hip arthroscopy. At the hearing before the Council, the appellant sought to rely on these “new” disclosures, and the first respondent’s legal team objected that this constituted “trial by ambush”. The Council dismissed the appeal. On further appeal, the Appeal Board held, amongst other things, that the first respondent’s failure to disclose gastritis was materially relevant, and it also considered the relevance of the hip arthroscopy non-disclosure within the appeal framework.

The Appeal Board found that the failure to disclose hip arthroscopy was also a material non-disclosure, although it stated that, given its other findings, it was unnecessary to decide whether failures to disclose a possible heart murmur and kidney stones (occurring more than 12 months before the application) amounted to material non-disclosures.

In the review proceedings, the first respondent challenged the decisions of the statutory functionaries and the Appeal Board, contending that the process and outcomes were procedurally unfair and infected by legal error and improper consideration of relevant/irrelevant factors. The appellate court treated the material factual platform for its decision as including the common-cause non-disclosure of gastritis and the manner in which the hip arthroscopy information came before the administrators.

Legal Issues

The central legal questions the court was required to determine concerned reviewability, rather than a re-hearing on the merits. The court had to decide whether the court a quo was correct to interfere with the Appeal Board’s decision (and the underlying administrative decisions) on the asserted grounds of procedural unfairness, error of law, and consideration of irrelevant considerations or failure to consider relevant considerations.

A further legal issue concerned the proper source and structure of judicial review in South African law: the first respondent had pleaded reliance on both PAJA and “common law” review grounds. The appellate court identified a procedural and conceptual problem with that approach, emphasising that judicial review of administrative action has its genesis in PAJA rather than in freestanding common-law review, and that no “election” lay open to the first respondent in that respect.

The dispute primarily involved the application of legal standards to largely common-cause facts, particularly the test for materiality of a non-disclosure in the context of medical scheme membership and underwriting/risk-management mechanisms such as waiting periods. It also raised issues involving evaluative judgment about whether the administrative process was fair and whether the decision-maker permissibly considered information placed before it, given the nature of administrative proceedings and the statutory appeal structure.

Court’s Reasoning

The appellate court began by locating the review within the constitutional and statutory framework. It held that judicial review of administrative action is rooted in PAJA, and not in the common law, and that the first respondent could not treat review as a matter of election between PAJA and common-law grounds. In this respect the court referred to authority indicating that PAJA is the central instrument giving effect to the right to administrative justice, and that review must be approached accordingly.

On the asserted grounds of procedural unfairness, the court reasoned that the first respondent’s complaints did not establish unfairness in the conduct of the administrative proceedings. It noted that the first respondent did not contend that the prescribed procedure was not followed or that the Appeal Board failed to adhere to the required process. The court considered it difficult, on the facts, to see how the unfolding administrative processes were administratively unfair to her.

A key aspect of the procedural unfairness complaint concerned the hip arthroscopy information. The appellate court emphasised that the facts about the hip arthroscopy were introduced by the first respondent herself by way of an affidavit filed before the Council hearing. It further noted that, on appeal to the Appeal Board, the first respondent had legal assistance and was represented by counsel, and despite preparation and notice of the hearing she did not seek a postponement or apply to adduce further evidence. Against that background, the court rejected the notion that she had been denied a fair opportunity to make representations regarding the hip arthroscopy.

The appellate court stressed that it was for the chairperson of the Appeal Board to determine the procedure, subject to the rules of natural justice. It rejected the idea that a party is automatically entitled to a further opportunity to lead unspecified evidence merely because their submissions were not accepted, particularly where the relevance of additional evidence is unclear. The court further reiterated that administrative bodies are generally not required to comply strictly with the rules of evidence and that concepts such as the incidence of proof are not automatically transposed into non-judicial enquiries, relying in this regard on the approach articulated in Lambert v Director of Census.

Turning to the substantive question of materiality, the appellate court characterised the “only core issue” before the Appeal Board as whether the non-disclosures related to material information. It endorsed an objective test framed in the judgment as whether a reasonable and prudent person would have considered the omitted information reasonably relevant to the risk and its assessment. The court held that this would have been readily apparent from the detail required in the application form.

Applying that standard, the court reasoned that the gastric condition was sufficiently serious in context: it involved an emergency hospital visit and a gastroscopy to establish whether there was a gastric ulcer. In those circumstances, the court considered it logical that a reasonable person would regard such information as relevant to risk assessment by the scheme. The court concluded that there was no judicial administrative error in the Appeal Board’s finding that the failure to disclose gastritis was material, particularly because the non-disclosure prevented the scheme from applying a condition-specific waiting period as a risk-management measure.

The court also addressed the approach of the court a quo in setting aside the Appeal Board decision. It held that the court a quo erred in finding that irrelevant considerations were considered and relevant considerations ignored, because the evidence complained of was relevant and properly taken into account. The appellate court emphasised that the hip arthroscopy information was not absent due to any improper ambush but rather because of the first respondent’s initial non-disclosure, and in any event the information had been introduced at her instance.

The appellate court further held that the court a quo failed to maintain the distinction between an appeal and a review. It found that the court a quo had effectively reconsidered the merits and appropriateness of the termination decision, rather than limiting itself to the legislated grounds of review. The appellate court stressed that substitution of an administrative decision is exceptional and that the usual remedy (where review succeeds) is remission. It highlighted that the administrative respondents were specialist bodies with specific knowledge of the medical schemes industry and were well placed to determine the materiality of non-disclosure, and that there was no suggestion of bias or malice that might justify exceptional intervention.

Finally, the appellate court observed that the Appeal Board did not treat “materiality” as depending on whether the condition was a prescribed minimum benefit condition; it did not equate those enquiries. The appellate court regarded that as the correct approach and rejected the suggestion that materiality should be determined by reference to prescribed minimum benefit status.

Outcome and Relief

The appellate court upheld the appeal, set aside the order of the court a quo, and dismissed the first respondent’s review application. This had the effect that the administrative outcomes, including the Appeal Board’s dismissal of the first respondent’s appeal and its conclusions on material non-disclosure, remained undisturbed.

The first respondent was ordered to pay the appellant’s costs, including the costs of two counsel where so employed, on the party-and-party scale (taxed or agreed).

Cases Cited

Transnet Ltd and Others v Chirwa 2007 (2) SA 198 (SCA).

Minister of Health and another v New Clicks South Africa (Pty) Ltd and others 2006 (2) SA 311 (CC).

Mohamed v Genesis Medical Scheme (17351/2010) [2010] ZAWCHC 475 (15 September 2010).

Lambert v Director of Census 1956 (3) SA 452 (T).

Legislation Cited

Medical Schemes Act 131 of 1998 (including section 29(2)(e) and section 50).

Promotion of Administrative Justice Act 3 of 2000.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that the court a quo erred by interfering with the Appeal Board’s decision on review. On the common-cause facts, the Appeal Board’s conclusion that the first respondent’s non-disclosure of gastritis was material was not vitiated by procedural unfairness, error of law, arbitrariness, or reliance on irrelevant considerations.

The court held that the administrative proceedings were not shown to be procedurally unfair, particularly where the hip arthroscopy information had been introduced by the first respondent herself and where she had legal representation and did not seek a postponement or formally seek to adduce additional evidence before the Appeal Board.

The court further held that the court a quo impermissibly blurred the line between review and appeal by re-engaging the merits rather than confining itself to review grounds, and that there were no exceptional circumstances justifying judicial substitution of the administrative decision.

LEGAL PRINCIPLES

The judgment applied the principle that judicial review of administrative action is grounded in PAJA, and that litigants cannot treat review as a matter of election between PAJA and the common law when challenging administrative action.

The judgment applied an objective standard for materiality of non-disclosure in this context, framed as whether a reasonable and prudent person would consider the omitted information reasonably relevant to the risk and its assessment by the medical scheme. The court endorsed the Appeal Board’s approach that materiality is not determined by whether the condition is a prescribed minimum benefit condition.

The judgment reaffirmed that administrative bodies are generally not bound by strict rules of evidence applicable in judicial proceedings, and that evidentiary concepts such as the incidence of proof do not automatically apply unless the statute creates express or implied presumptions.

The judgment applied the principle that a reviewing court must maintain the distinction between appeal and review, confining itself to recognised grounds of review rather than substituting its own view of the merits. It further applied the principle that substitution of an administrative decision is an exceptional remedy, with remittal ordinarily being the appropriate course where a review succeeds.

Profmed Medical Scheme v Steyn and Others (A171/2021; 23378 / 2018) [2022] ZAWCHC 60 (26 April 2022)