About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: South Gauteng High Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: South Gauteng High Court, Johannesburg
>>
2010
>>
[2010] ZAGPJHC 131
|
|
V Medical Administrators (Pty) Ltd and Another v Jacques and Others (2010/46241) [2010] ZAGPJHC 131 (9 December 2010)
REPORTABLE
IN THE SOUTH GAUTENG HIGH
COURT (JOHANNESBURG)
Case Number: 2010/46241
DATE: 09/12/2010
In the matter between:
V MEDICAL
ADMINISTRATORS (PTY) LTD
.....................
First
Applicant
V MEDICAL
SOLUTIONS (PTY) LTD
.................................
Second
Applicant
a
nd
LARRY
JACQUES
..................................................................
First
Respondent
DANIEL
PIENAAR
................................................................
Second
Respondent
LIBERTY
MEDICAL SCHEME
..........................................
Third
Respondent
COUNCIL
FOR MEDICAL SCHEMES
............................
Fourth
Respondent
_______________________________________________________________
JUDGMENT
_______________________________________________________________
C. J.
CLAASSEN J
:
In this
application the first and second applicants seek
a final interdict to restrain the first, second and third
respondents from interfering with three contracts concluded between
the applicants and the third respondent. The application was brought
on an urgent basis. The relief sought in the notice of motion
is as
follows:
“
2. Interdicting and
restraining the first and second respondents from participating at
any meetings of the third respondent’s
board of trustees at
which is discussed any issue relating to the services provided by the
applicants to the third respondent in
terms of the administration
agreement, the managed care administration agreement and the sales,
distribution and marketing services
agreement concluded between the
applicants and the third respondent on 10 March 2009, 30 November
2009 and 11 January 2010 respectively.
3.
Interdicting
and restraining the third respondent from implementing its resolution
to reduce the services which the first applicant
is required to
provide to the third respondent in terms of the managed care
administration agreement concluded between the first
applicant and
the third respondent on 30 November 2009.
4.
In
the alternative to prayer 2 above, pending the finalisation of the
regulatory processes or enquiries instituted by the fourth
respondent
against the first and second respondents (pursuant to the complaint
filed by the first applicant with the fourth respondent
against the
first and second respondents), interdicting and restraining the first
and second respondents from participating at
any meetings of the
third respondent’s board of trustees at which is discussed any
issue relating to the services provided
by the applicants to the
third respondent in terms of the administration agreement, the
managed care administration agreement and
the sales, distribution and
marketing services agreement concluded between the applicants and the
third respondent on 10 March
2009, 30 November 2009 and 11 January
2010 respectively.
5.
That
the costs of this application be paid by the first, second, and third
respondents jointly and severally, the one paying the
others to be
absolved.”
BACKGROUND FACTS
The three agreements concluded
are as follows:
An administration agreement
concluded between the third respondent and the first applicant on 10
March 2009. A copy of this agreement
is attached to the founding
affidavit as annexure “FA2”.
A
managed care administration agreement was concluded between the
third respondent and the first applicant on 30 November 2009.
A copy
of this agreement is attached to the founding affidavit as annexure
“FA3”.
The sales, distribution and
marketing services agreement was concluded between the third
respondent and the second applicant on
11 January 2010. A copy of
this agreement is attached to the founding affidavit as annexure
“FA4”.
The
dramatis
personae
in this litigation are Mr Peter Botha (“Botha”) who is
the chief executive officer of Liberty Health Holdings Ltd
(“Liberty
Health”) who in turn is the holding company of the first and
second applicants. The first respondent is
Mr Larry Jacques
(“Jacques”) who is the chairperson of the third
respondent’s board of trustees. The second
respondent is Mr
Dan Pienaar who is a trustee on the board of trustees of the third
respondent. The third respondent is Liberty
Medical Scheme (“LMS”).
The fourth respondent is the Council for Medical Schemes (“the
Council”). The
fourth respondent has abided the decision of
this court. The real battle lines are drawn between Botha
representing the two applicants
on the one side and Jacques, Pienaar
and LMS on the other.
During the
course of 2010, the first applicant played a leading role in
facilitating negotiations surrounding a proposed merger
between the
third respondent and Spectramed Medical Scheme. After a number of
meetings the board of trustees of the third respondent
took a
unanimous decision on 15 June 2010 to terminate all further
discussions relating to the merger. Because of this decision,
Botha
became concerned that the third respondent intended to terminate its
administration agreement which they had concluded.
Subsequently
Botha engaged in discussions with a certain Mr Daan van Rensburg and
the respondents with the view of reviving the
proposed amalgamation
discussions between the third respondent and Spectramed. These
discussions proved to be fruitless.
On 1 October
2010 in a letter drafted by the applicant’s attorneys of
record, Botha laid a complaint with the fourth respondent
against
the conduct of Jacques and Pienaar. A copy of the letter is attached
to the founding affidavit as annexure “FA6”.
Attached to
that letter is a lengthy confidential report prepared by Botha
setting out the alleged misconduct of Jacques and
Pienaar the
details whereof are not relevant.
In the founding affidavit, the
case made out by Botha can be summarised as follows:
Van Rensburg threatened that he
would arrange for the administration agreement between the first
applicant and the third respondent
to be terminated.
Van Rensburg
proposed that a new marketing company be established for the third
respondent and that the shareholders thereof are
Liberty Health, the
first and second respondents and Pharmacy Direct (Pty) Ltd, a
company ran by Van Rensburg and Willem Brits
in competition with the
third respondent.
In return for a fee Van
Rensburg would (a) ensure that the administration agreement between
the first applicant and the third
respondent is not terminated; (b)
resuscitate the amalgamation negotiations between the third
respondent and Spectramed; and
(c) manage the third respondent’s
board of trustees.
Van Rensburg also required
Botha to issue a letter confirming Liberty Health’s agreement
to the proposals made by him which
letter was not issued.
When Liberty Health failed to
issue the letter, Van Rensburg again threatened to cause the
administration agreement to be terminated.
Botha
believed that Van Rensburg colluded with Jacques and Pienaar to
establish a marketing company for the third respondent and
terminate
the marketing contract which the third respondent had with the
applicants. He regarded the conduct of Jacques and Pienaar
as
improper and reported them to the fourth respondent for
investigation and, if need be, the imposition of disciplinary
measures.
In this regard the following is stated in the founding
affidavit:
“
41 I
submitted my report/complaint to the fourth respondent and the fourth
respondent has requested the third respondent to respond
to the
contents thereof.
The
first and second respondents cannot be happy about the fact that I
have reported them to the fourth respondent who might take
action
against them, including their removal from the office as trustees on
the basis that they are not fit and proper to hold
such office. This
has clearly resulted in a conflict between the applicants’
interests and those of the first and second
respondents.
42
As
a result of all the foregoing circumstances, the applicants have a
reasonable apprehension that the first and second respondents
will do
everything in their power to cause the termination of the agreements
between the applicants and the third respondent. Even
if they might
not cause the termination of the agreements, there is a reasonable
apprehension that they might act against the applicants
in
circumstances in which they would not have done so had I not reported
them to the fourth respondent. In addition, the applicants
fear
and have a reasonable apprehension that the first and second
respondents will be biased against them in the event that they
have
to participate in meetings at which any issue relating to the
agreements is discussed.
43 The fact that I, as Chief
Executive Officer of Liberty Health, the applicants’ holding
company, have reported the first
and second respondent to the fourth
respondent as aforesaid has on its own created a conflict between the
first and second respondent,
Liberty Health and the applicants. This
conflict will continue to exist regardless of the outcome of any
regulatory processes which
may be instituted by the fourth respondent
against the first and second respondents. In fact, the fact that the
fourth respondent
may institute proceedings to remove the first and
second respondents from office as a result of what is contained in my
report/complaint
is enough to justify the relief which the applicants
seek against the first and second respondents.
44 Insofar as
the first and second respondents may at any time have to deal with
matters relating to the agreements, I respectfully
submit that they
will be conflicted and will be biased against the applicants. It is
for this reason that the applicants seek a
final
interdict
against the first and second respondents.
45
The
participation of the first and second respondents in the discussion
and resolution of matters relating to the agreements will
be unlawful
in that it will be in violation of section 57(6)(c) of the Act which
requires that the first and second respondents
shall at all times
avoid conflicts of interest. In terms of section 66 of the Act, a
contravention of any provision of the Act
is a criminal offence. Such
participation will also be unlawful in that it will be in
contravention of Rule 20.3 which similarly
requires the first and
second respondents to avoid conflicts of interest.
46
Furthermore,
the first and second respondents’ participation aforesaid will
also amount to an unlawful interference in the
contractual
relationship between the applicants and the third respondent insofar
as their intention is to terminate such contractual
relationships and
cause the conclusion of new similar agreements between the third
respondent and Medscheme (and the envisaged
marketing company).”
(Emphasis added)
The
reference in the quoted paragraph 45
above to section 57(6)(c) is a reference to that section as
contained in the
Medical Schemes Act 131 of 1998
. This sub-section
provides:
“
57(6)
The Board of Trustees shall --
(c) take all
reasonable steps to avoid conflicts of interest;”
The reference to
Rule 20.3
in
the quoted paragraph 45 above is a reference to Liberty Medical
Scheme Rules a copy whereof is attached to the founding affidavit
as
annexure “FA5”. Rule 20.3 provides:
“
20.3 Members of the Board
shall avoid conflicts of interest, and shall declare any interest
they may have in any particular matter
serving before the Board.”
THE ISSUES
At the
outset of argument, Mr Brett for the applicants moved for the
inclusion of a further set of affidavits by four members
of the
third respondent’s board of trustees. I disallowed the
introduction of these affidavits because of the fact that
the
respondents have raised legal points
in
limine
which, if successful, would make the reference to such affidavits
unnecessary.
Both Mr
Redman, for the first and second respondents, and Mr Wasserman, for
the third respondent raised the defence
in
limine
that the applicants had no
locus
standi
to launch this application and that no cause of action is disclosed
in the founding papers. Because of these preliminary points
I ruled
that these should be argued first whereupon I would give judgment in
regard thereto.
LOCUS STANDI
It is common
cause that the applicants are not represented on the board of
trustees of the third respondent. The board of trustees
consists of
eight members
duly appointed/elected as such in terms of the rules of the third
respondent. A
quorum
is established by the presence of four trustees at any meeting of
the Board of Trustees.
The nub of
the applicants’ concern is the possible negative attitude
towards them which the first and second respondent
may have at any
meeting of the board of trustees, in particular where the
applicants’ contracts with the third respondent
are discussed.
They allege that there is a conflict of interest because Botha laid
a complaint against the first and second respondents.
I fail to
understand how that concern entitles the applicants to seek the
relief contained in the notice of motion. Even if it
is accepted
that Jacques and Pienaar are unhappy about Botha’s conduct in
laying a complaint against them with the fourth
respondent, such
circumstances do not lead to an entitlement to interfere with the
functioning of the board of trustees. In any
event, there are eight
members on the board of trustees. I fail to see how any negative
attitude toward the applicants harboured
by two trustees will
necessarily affect the decisions and work of the board of trustees
vis-a-vis the applicants. No authority
was cited by Mr Brett for
this startling submission that the applicants have
locus
standi
to interfere with the decision making process of the third
respondent.
The conflict
of interest relied upon by the applicants is not one between the
trustees and the third respondent, but at best between
two of the
trustees and an outside third party. The applicants’ reliance
on section 57(6)(c) of the Act and Rule 20.3 is,
therefore,
misconceived. What these statutory provisions provide for is to
prohibit conflict of interest between the trustees
and the work
and/or interests of the third respondents. The provisions do not
intend to affect any ill feeling between trustees
and outside
parties. The applicants can therefore not rely on those provisions
to substantiate their claims. Hence, reliance
on the criminalising
provisions of section 66 is also inapposite.
The duty to
avoid conflict of interest is a duty owed by the trustees to the
third respondent and its members. It is not a duty
owed to the
applicants as outside parties. The applicants are not subject to the
rules of the third respondent and therefore
had no legal enforceable
right to interfere in the board of trustees’ daily activities.
If the applicants were to be afforded
locus
standi
in this litigation, it would mean that outsiders not properly
appointed and/or elected to the board of trustees will be entitled
to influence the rights and obligations of the third respondent and
its members. This cannot be countenanced. It would be akin
to a
party which is contracted to a company attempting to prevent a
director from participating in decisions relating to that
contract.
There is no basis in law or fact for such a proposition.
It is on the
papers, in any event, common cause that the dealings which the first
and second respondents had with Van Rensburg
are well known to the
other trustees. To the extent that there may have been a conflict of
interest between the first and second
respondents on the one hand
and the other trustees and the third respondent on the other, full
disclosure has been made. That
being the case there was no
contravention of either the Act or the Rules prohibiting conflicts
of interest.
It should
also be remembered that not every interest necessarily constitutes a
conflict of interest. Regard must be had to the
particular
circumstances in each case. Any issue regarding a conflict of
interest must be approached on a common sense basis.
1
To my mind, common sense dictates that the conduct of Jacques and
Pienaar in negotiating with Van Rensburg can in no way establish
a
conflict of interest as commonly understood in every day parlance.
Whatever fruits the negotiations may have spawned, such
are still
subject to the approval or rejection of the Board of Trustees.
For all of
the above reasons I rule that the applicants failed to establish
locus
standi
to seek the relief against the first, second and third respondents
applied for in the notice of motion.
CAUSE OF ACTION
The
applicants’ application is premature. No decision has yet been
taken by the board of trustees to the detriment of the
applicants.
The applicants’ case is based on speculation and conjecture
that the Board
might
decide to terminate the contracts with the applicants. They are
basically saying, “if a resolution is taken in future by
the
board of trustees which may affect our position, we want the court
to issue an interdict in advance restraining them to do
so”.
But the clauses in the contracts entitle the third respondent to
terminate the agreements with the applicants. The
board of trustees
may do so without any regard to the rules of natural justice. It may
terminate the contracts with the applicants
for any reason. If the
applicants feel aggrieved by such action, the applicants will be
entitled to their normal contractual
remedies if it can be
established that such termination constitutes an unlawful breach of
the contracts. In such event, the applicants’
cause of action
will be derived from the contracts they concluded with the third
respondent irrespective of any conduct on the
part of the first and
second respondents.
In any
event, in terms of clause 16.1.4 of the managed care administration
agreement notice to remedy any breach within 30 days,
is to be given
by the applicants to the third respondent before it may institute
any action. It is common cause that this was
not done. Thus the
application is premature on that score as well. A similar provision
is also to be found in clause 15.1.4 of
the administration agreement
and clause 12.1.1 in the sales, distribution and marketing services
agreement.
In effect,
the applicants’ are attempting to prevent the third respondent
by way of an interdict from terminating the contracts
lawfully.
There is no law against the third respondent terminating the
contracts lawfully and neither can such action on the
part of the
board of trustees be interdicted.
CONCLUSION
For the
reasons set out above, I have come to the conclusion that the points
in
limine
raised
by the respondents are well taken and should be upheld. The
application cannot, therefore, succeed. The following order
is made:
The application is dismissed
with costs which costs are to include the costs of two counsel.
DATED THE 9
TH
DECEMBER 2010 AT JOHANNESBURG
___________________________
C. J. CLAASSEN
JUDGE OF THE HIGH COURT
Counsel for the Applicants:Adv
J. J. Brett SC
…
...........................................
Adv
K. Tsatsawane
Counsel for the First and Second
Respondents:Adv N. P. G. Redman
Counsel for the Third
Respondent:Adv J. C. Wasserman SC
…
......................................................
Adv
D. van Zyl
Attorney for the
Applicants: Webber Wentzel
Attorney for the First and
Second Respondents:
..
Majavu Incorporated
Attorney for the Third
Respondent:Wertheim Bekker Incorporated
Attorney for the Fourth
Respondent: Savage Jooste & Adams Inc
The matter
was argued on
..
08
th
December 2010
Date of
Judgment:
...............
09
th
December 2010
1
See
Atlas Organic
Fertiliser (Pty) Ltd v Pikkewyn Guano (Pty) Ltd
1981 (2) SA 173
(T) at 198H