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[2010] ZAGPJHC 31
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Muller NNO v Community Medical Aid Scheme (09/549) [2010] ZAGPJHC 31 (30 April 2010)
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IN THE
SOUTH GAUTENG HIGH COURT
(JOHANNESBURG)
CASE NO: 09/549
In the matter between:
MULLER N.O., JOHANNES ZACHARIAS HUMAN
First
Applicant
LUTCHMAN N.O., RALPH FARREL
Second
Applicant
and
COMMUNITY MEDICAL AID SCHEME
Respondent
J U D G M
E N T
BLIEDEN, J
:
[1] The Applicants are the joint
liquidators of Humanity Medical Scheme (HMS) which was finally wound
up on 26 September 2008, with
effect from 23 September 2008.
[2] On 26 September 2008 two
payments, in the amounts of R1 850 000 and R5 272 566.80 respectively
were made to the respondent out
of HMS’ bank account by its
administrators, Allcare Administrators (Pty) Ltd (Allcare). On 29
September 2008 the Respondent
received a further payment from
Allcare, again out of a HMS’ bank account, in the amount of R1
150 000. The Applicants are
reclaiming these three payments.
[3] In terms of section 53(1) of
the Medical Schemes Act, 131 of 1998 (the
Medical Schemes Act),
chapter
xiv of the Companies Act, 61 of 1973 (the Companies Act)
applies to the winding up of a medical scheme such as HMS. In
particular
sections 337 to 426 of the Companies Act are applicable in
the present matter.
[4] On behalf of the applicants
the position in regard to estate assets upon insolvency generally was
referred to. It is summarised
in Bertelsmann et al, Mars, The Law of
Insolvency in South Africa 9
th
edition page 171 as follows:
“
The sequestration of a
debtor’s estate establishes a concurses creditorum. Thereafter
nothing may be done by any of the creditors
to alter the rights of
other creditors.
The sequestration order
crystallises the insolvent’s position; the hand of the law is
laid upon the estate, and at once the
rights of the general body of
creditors have to be taken into consideration. No transaction can
thereafter be entered into with
regard to estate matters via a single
creditor to the prejudice of the general body. The claim of each
creditor must be dealt
with as it existed at the time of the issue of
the order
.” See
also Walker v Syfret N.O.
1911 AD 141
at 160 and 166; Ward v Barrett
N.O. and Another N.O.
1963 (2) SA 546
(A) at 552 C - G; Incledon
(Welkom) (Pty) Ltd v Qwaqwa Development Corporation Limited
[1990] ZASCA 85
;
1990 (4)
SA 798
(A) at 803 G – J.
[5] The legal position as described
above is encapsulated statutorily by sections 361 and 391 of the
Companies Act. In terms of
section 361(1), where there is a winding
up by a court “
all
the
property
of the company concerned shall be deemed to be in the custody and
under the control of the Master until a provisional liquidator
has
been appointed and has assumed office.”
This provision has been interpreted by the courts as indicating that
the
property
on liquidation is “
deemed
to be in the custody or control of the Master or the liquidator”
(
Secretary for
Customs and Excise v Millman N.O.
1975 (3) SA 540
A at 552 H
).
According to Blackman, Jooste and Everingham; Commentary on the
Companies Act (Volume 3 page 14 – 251), “
although
subsections 1 and 2 of section 361 do not specially place the
property
of the company in the custody and under the control of the
liquidator, they do so by implication.”
[6] Section 391 of the Companies
Act obliges a liquidator “
forthwith
to recover and reduce into possession all the assets and
property
of the company, movable
and immovable”
and
to
“apply the same
so far as they extend in satisfaction of the costs of the winding up
and claims of the creditors”,
and
to
“distribute the
balance among those who are entitled thereto”.
Reading
section 361 and 391 together the court in
Syfrets Bank Limited
and Others v Sheriff of the Supreme Court, Durban Central and
Another, Schoerie N.O v Syfrets Bank Limited
and Others
1997 (1) SA
764
D
held that when liquidation
ensued, custody and control of the
property
in question “
passed
to the Master (in terms of the deeming provision of section 361(1) of
the Companies Act) and after his appointment to the
liquidator, who
is required by section 391 of the Companies Act to take possession
and control of the
property
”
(at 782 E – F
).
I have underlined the word “
property
”
in these two paragraphs for emphasis.
[7] It is the applicants’
case that the payments in question were made out of HMS’ estate
assets in preference to those
of its other creditors. They should
not have been made: the applicant’s were obliged, upon their
appointment as liquidators,
to take control of all HMS’ assets
and in due course to make payment to creditors in accordance with
their ranking and pro-rata
to the amounts of their claims. It is in
pursuance of that legal obligation that the present application is
being brought.
[8] The respondent has raised a
number of defences to the applicants’ claim. However in my
view only one defence is of relevance
and that is that the amounts
paid to the respondent by Allcare on behalf of HMS, which are the
subject matter of the present application,
did not at any stage
become the property of HMS and are therefore not subject to
appropriation by the applicants.
[9] In regard to this defence the
applicants’ case is that it is common cause that the monies
paid to the respondent by Allcare
were paid out of HMS’ bank
account. It is apparent from the bank statements that, after each of
the payments had been made,
a significant credit balance remained in
HMS’ bank account. The September contributions by HMS’
members were clearly
not kept separately in an account earmarked for
repayment to members or for payment to the respondent. In the event,
the contributions
were commixed in the bank account with HMS’
other funds. They therefore became part of HMS’ funds (in the
legal sense
that HMS was a creditor of the bank in the total amount
of the funds held in its bank account from time to time.) Once money
that
has been paid becomes unidentifiable as a result of
commixtio,
any rights to it vest in the possessor. (See Willie’s
Principles of South African Law 9
th
edition page 508.)
[10] The following facts are common
cause or are not seriously disputed by the parties.
10.1. Prior to September 2008 HMS
had realised that it could no longer continue to conduct business as
a medical aid scheme because
of its deteriorating financial position
which would preclude it from performing its statutory functions for
the month of September
2008. These functions to its members are
defined in the Medical Schemes Act, 31 of 1988 (the Medical Schemes
Act) where the business
of a medical scheme
vis
a vis
its members is
defined in section 1 as follows:
“
The business of
undertaking liability in return for a premium or contribution –
a. to make provision for the obtaining of any relevant health
service;
to grant assistance in defraying the expenditure incurred in
connection with the rendering of any relevant health service;
where applicable to render the relevant health service, either
by the medical scheme itself, or by any supplier or group of
suppliers
of a relevant health scheme or by any person in
association with or in terms of an agreement with a medical aid
scheme.”
10.2 At all relevant times HMS had
some 21 000 people who were affected by it, either by being principal
members or the dependants
of such members.
10.3 In order to safeguard the
interests of its members and their dependants for the month of
September 2008 it had been in communication
with the respondent in
order to arrange for the latter to take transfer of them in terms of
the Medical Schemes Act. A provisional
agreement to this effect had
been arrived at. However before such an agreement could be given
effect to, it needed the approval
of the Council for Medical Schemes
(the CMS).
After having discussed the matter
with various officials of the CMS, on 21 August 2008 HMS addressed
a letter to it confirming
the discussions which had taken place.
On 22 August 2008 CMS replied to HMS’ letter of the previous
day in which the following was stated:
“
We confirm our approval
of the scheme’s proposal as contained in your letter under
reply to transfer members of the scheme
to COMMED [the respondent].
In order to effect the transfer of the members as proposed, you are
required to urgently make an application
not later than Tuesday 26
August 2008, to the Council in terms of section 8(h) of the Medical
Schemes Act 131 of 1998 (“the
Act”), for an exemption
from the provisions of section 63 of the Act, setting out inter alia
in detail the following:
The circumstances resulting in the transfer i.e. the financial
status of the scheme;
The urgency in needing to speedily effect the transfer of
members and the consequences for the members if this is not done;
The reasons why the time periods as well as the requirements
prescribed in section 63 of the Act would result in prejudice to
the scheme and its members; and finally
Why the circumstances described are exceptional.”
This letter was reproduced in the papers as VM4.
On 25 August 2008 HMS responded
to VM4 in a letter which provided the information required in VM4
by the CMS. This letter is
VM5 in the papers. It contains the
following statement to the CMS justifying the application:
“
The Board of Trustees are
acutely aware of their fiduciary responsibilities towards the
members. It is therefore crucial that members
are not prejudiced in
any way whatsoever, by ensuring continuous medical cover without a
possible “break” in cover,
as from 1 September 2008.
Should members not be migrated on 1 September 2008, the distinct
possibility exists that claims with service dates in September and
submitted for payment in October (for example hospital accounts) will
not be paid.
In all likelihood, members would have no cover for September and
probably October as well, at which stage application for membership
of alternative Schemes will only be effected on 1 November 2008. The
members, being adversely affected by the insolvent position
of the
Scheme, during this period, would have to obtain medical services
from State Hospitals.
With the very high incidence of chronic conditions, specially in
relation to the Comprehensive Option members, the lack of cover
could
have life threatening implications to Scheme members.
Whilst we are awaiting final decisions the negative solvency of
the Scheme is increasing month to month.
With this as background there is
no doubt that the speedy transfer of members to Commed is of the
highest priority.”
On 3 September 2008 the CMS wrote
a letter approving of the transfer of the members as requested.
This approval was backdated
to 1 September 2008. On the same date,
3 September 2008 the members of HMS were informed in writing of
what had occurred.
This was contained in a circular dated 3
September 2008 which is VM7 in the papers. It was only on 5
September 2008 that
the transfer was in fact completed in the books
of the respondent.
In terms of the agreement between
HMS and its members all payments to it by members were to be made
monthly in advance and such
payments were to be made on or before
the 3
rd
of each month. By the time the notice of transfer of the members
to the respondent was communicated to HMS’ members
their
September contributions had already become due and payable and had
to a large measure been made by the members.
It was common cause between HMS,
the respondent and CMS that HMS was not in a position to comply
with its obligations to its
members and their dependants from 1
September 2008. The only way these obligations could be met was by
the respondent performing
them. This is in fact is what occurred
during the month of September 2008.
[11] Although nothing is said about
this in the affidavits filed, it must be accepted that the funds
received by HMS for the payment
of the September contributions were
received by it as a custodian on behalf of the respondent, which in
effect was entitled to
be paid for the services it rendered as a
medical aid fund to the former members of HMS for the month
concerned.
[12] HMS made no claim to the
monies paid to it in this way, and in fact it was Allcare, acting on
its behalf, which made the payments
which are the subject matter of
the present application to the respondent. Accepting the facts as
stated above it is plain that
the members of HMS made their September
payments to HMS in the justifiable belief that they were obliged to
do so in order to retain
their rights to medical aid. It is clear
that HMS received these payments on the basis set out in [11] above.
[13] Of importance in this case is
the classification of the nature of the payments made by its members
to HMS and thereafter the
payments made by Allcare to the respondent.
In
Nissan South Africa (Pty) Ltd v Marnitz N.O. and Others
2005(1) SA 441 at 448G to 449 D
,
Streicher JA speaking for the full bench of the SCA said:
“
[24]…
Payment
is a bilateral juristic act requiring the meeting of two minds (Burg
Trailers SA (Pty) Ltd v Another v Absa Bank Ltd and
Others 2004(1) SA
284 (SCA) at 289B). Where A hands over money to B, mistakenly
believing that the money is due to B, B, if he
is aware of the
mistake, is not entitled to appropriate the money. Ownership of the
money does not pass from A to B. Should N,
in these circumstances,
appropriate the money, such appropriation would constitute theft (R v
Oelsen 1950 (2) PH H198; and S v
Graham
1975 (3) SA 569
(A) at 573
E-H). In S v Graham, it was held that, if A, mistakenly thinking
that an amount is due to B, gives B a cheque in payment
of that
amount and B, knowing that the amount is not due, deposits the
cheque, B commits theft of money although he has not appropriated
money in the corporeal sense. It is B’s claim to be entitled
to be credited with the amount of the cheque that constitutes
the
theft. This Court was aware that its decision may not be strictly
according to Roman-Dutch law but stated that the Roman-Dutch
law was
a living system adaptable to modern conditions. As a result of the
fact that ownership in specific coins no longer exists
where resort
is made to the modern system of banking and paying by cheque or
kindred process, this Court came to regard money as
being stolen even
where it is not corporeal cash but is represented by a credit entry
in books of account.
[25] The position can be no different where A, instead of paying
by cheque, deposits the amount into the bank account of B. Just
as B
is not entitled to claim entitlement to be credited with the proceeds
of a cheque mistakenly handed to him, he is not entitled
to claim
entitlement to a credit because of an amount mistakenly transferred,
ie should he withdraw the amount so credited, not
to repay it to the
transferor but to use it for his own purposes, well knowing that it
is not due to him, he is equally guilty
of theft.”
[14]
The
facts in the Nissan case are accurately summed up in the head note to
that case and are to the following effect:
“
On
its customer's (the appellant's) instructions, Firstrand Bank Ltd
(FNB) (the third respondent) transferred an amount in excess
of R12
million from the appellant's account to an account held by one of the
appellant's creditors, TSW, at the Standard Bank of
SA Ltd. The
appellant had, however, provided FNB with the incorrect details of
TSW's account, with the result that the funds were
transferred to the
incorrect payee. The appellant did not owe the payee any amount and
had no intention of paying the payee any
amount. Immediately upon
receipt of the funds, the payee realised that the transfer had been
made in error but it withdrew the
funds from the account nonetheless
and was thereafter liquidated. The appellant proceeded to bring an
application in the High Court
for an order declaring that it,
alternatively, FNB, was entitled to payment of the funds. The
liquidators of the insolvent estate
(the first and second
respondents) claimed that they were entitled to the funds as falling
into the payee's insolvent estate.”
[15] The Supreme Court of Appeal in
the Nissan case held that the payee had not been entitled to the
funds erroneously credited
to its account as these had not at any
stage become part of its property. There had been at no time any
agreement between the
party making the payment and payee that such
funds were for the latter’s benefit. In effect the Supreme
Court of Appeal
held against the liquidators and ordered them to
release the funds to Nissan, the appellant.
[16] In the present case the
payments concerned were correctly made by the members of HMS in the
belief that they were due to that
fund, when in fact unknown to them
at that time the fund was unable to render the services for which
such payments were being made
and the respondent had undertaken the
obligations of HMS. In my view what was paid to HMS could not be
classified as its property.
To say that the money became the
property of HMS by
commixtio
as was submitted by
counsel for the applicant is in my view an over simplification.
[17] As was made plain in the
passage from the Nissan case quoted in par [13] above the principle
that Roman-Dutch law is a living
system adaptable to modern
conditions is part of our law. Although one is not dealing with
stolen money in the present case, one
is dealing with credits
reflected in its bank account which the recipient was aware were not
its property and which it had every
intention to pay to the party to
whom such money was due. Had HMS utilised the funds received from
its members for September 2008
for its own purposes, there is little
question that this would have constituted theft on its part, if one
applies the reasoning
in the Nissan case (
supra
).
[18] As was made clear in the
Nissan case (
supra
)
payment requires an
animus
solvendi
on the part of
both the debtor or the creditor. Saambou-Nasionale Bouvereniging v
Friedman
1979 (3) SA 978
(A) at 993 A- B; Vereins-Und Westbank AG v
Veren Investments
2002 (4) SA 421
at 437 I – 438 E (par 38).
In the latter case it was held that in order for effective payment to
occur, the payee must,
in the absence of a contrary agreement,
acquire the “
unfettered
or unrestricted right to the immediate use of the funds in question
”,
otherwise the payment is inchoate
.
(Verreins-Und Westbank
AG (
supra
)
at 429 B – E (par 11).
[19] The payments were made by the
former members of HMS for September and were transferred to it on
that basis. HMS had no difficulty
in identifying the payments
concerned nor would any third party have any difficulty in this
regard.
[20] There was no necessity for a
special trust account to be opened. There is also no suggestion that
HMS did not know what was
being paid to it by its members. To this
extent these funds were earmarked payments and for this reason as
well the monies so
paid cannot be classified as being HMS’
property by
commixtio.
HMS was merely acting as a conduit for the monies received as a
consequence of circumstances which had nothing to do with the
fault
of either the respondent or the members of HMS. The payments could
not have been made in any other way by HMS’ members
because of
circumstances beyond their control.
[21] Counsel for the applicants
sought to distinguish the principles referred to in the passage
quoted from the Nissan case (
supra
)
on the basis that that case concerns money paid in error, which is
not the situation in the present case. In my view there is
no merit
in this submission. The money that was paid was correctly paid, but
was paid at a time when the members concerned were
ignorant of the
fact that HMS could not honour its obligations to them for the month
of September, and that a third party, being
the respondent, had
undertaken and did in fact honour such obligations.
[22] As has already been said HMS
accepted the money in the full knowledge that it was not its money,
and as a result of this fact
Allcare paid it over to the respondent
as it was obliged to do. At no stage did the money concerned become
the property of HMS
and in the circumstances the applicants have no
right to claim it from the respondent, for the reasons stated above.
The principles
relating to impeachable transactions on which the
applicants rely is irrelevant when one is dealing with property which
at no stage
belonged to the insolvent company.
[23] Counsel at the hearing agreed
that the present case warrants the costs of two counsel, I agree.
The following order is made:
“1. The applicants’ claim is dismissed;
The applicants are ordered to pay
the respondent’s costs, such costs to include the costs of two
counsel.
_________________________
P BLIEDEN
JUDGE OF THE HIGH COURT
COUNSEL FOR THE APPLICANT: Adv. E.
Fagan (SC)
INSTRUCTED BY: Eversheds
COUNSEL FOR THE RESPONDENT: Adv.
J.J. Brett (SC)
Adv. E. Mokutu
INSTRUCTED BY: Savage Jooste
Inc.
DATE OF HEARING: 14 April 2010