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[2014] ZASCA 111
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Barnard and Others v Registrar of Medical Schemes (628/13) [2014] ZASCA 111; 2015 (3) SA 204 (SCA) (16 September 2014)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 628/13
Reportable
In
the matter between:
FRANCOIS
BARNARD
.......................................................................................
FIRST
APPELLANT
THABO
PANDLETON
MABETA
..................................................................
SECOND
APPELLANT
BISNATH
(JAY)
SINGH
.....................................................................................
THIRD
APPELLANT
GAVIN
JOHN
GRIFFEN
................................................................................
FOURTH
APPELLANT
MICHAEL
WRIGHT
...........................................................................................
FIFTH
APPELLANT
MARK
DAWSON
.................................................................................................
SIXTH
APPELLANT
AMELIA
HOLLAND
....................................................................................
SEVENTH
APPELLANT
EBEN
LOFTY VAN
WYK
...............................................................................
EIGHTH
APPELLANT
PETRUS
JOHANNES
KRIEL
...........................................................................
NINTH
APPELLANT
FRANCOIS
ALBERT
PIETERSE
....................................................................
TENTH
APPELLANT
and
THE
REGISTRAR OF MEDICAL
SCHEMES
.........................................................
RESPONDENT
Neutral
citation:
Barnard & others v
The Registrar of Medical Schemes
(628/13)
[2014] ZASCA 111
(16 September 2014)
Coram:
Mpati P, Lewis, Pillay JJA, Schoeman
and Fourie AJJA
Heard:
20 August 2014
Delivered:
16 September 2014
Summary:
Medical scheme ─ Placing under curatorship ─
Medical Schemes Act 131 of 1998
─
Financial Institutions
(Protection of Funds) Act 28 of 2001
─ Test ─ Material
irregularities justifying appointment of curator in the interest of
the beneficiaries of the scheme
─ No preferable alternative
available.
ORDER
On
appeal from:
North
Gauteng High Court, Pretoria (Murphy J) sitting as court of first
instance:
The
appeal is dismissed with costs, including the costs of two counsel,
where employed.
JUDGMENT
Fourie
AJA (Mpati P, Lewis, Pillay JJA and Schoeman AJA concurring):
[1]
The appellants (the trustees) are the elected trustees constituting
the Board of Trustees (the BOT) of Medshield Medical Scheme
(the
scheme), registered as such in terms of the Medical Schemes Act 131
of 1998 (the MS Act). The respondent is the Registrar
of Medical
Schemes (the registrar), appointed as such in terms of s18(2) of the
MS Act to manage the affairs of the Council for
Medical Schemes (the
council).
[2]
The council, established in terms of s 3 of the MS Act, controls and
co-ordinates the functioning of medical schemes, with the
registrar
as its chief executive officer. The scheme is registered as an open
medical scheme, which means that it is open to any
member of the
public. It is the fourth largest medical scheme in South Africa, with
approximately 207 000 beneficiaries.
[3]
On 2 October 2012, the registrar approached the North Gauteng High
Court, Pretoria, on an urgent basis, ex parte and in camera,
for an
order placing the scheme under provisional curatorship. An order was
granted by Van Der Merwe DJP, appointing a provisional
curator, with
a
rule nisi
calling upon the scheme and other interested parties to show cause
why a final order of curatorship should not be granted.
[4]
The trustees anticipated the return day of the
rule
nisi
and filed opposing papers. Prior
to the hearing of the application, the provisional curator filed an
interim report in which he
raised concerns regarding the
administration and governance of the scheme. This prompted the
registrar, in his replying affidavit,
to extend the grounds in
support of the application for the appointment of a final curator to
the scheme. Upon being authorised
to do so, the trustees filed
supplementary affidavits, in which they dealt with the new matter
raised by the registrar in reply.
[5]
The return day of the
rule nisi
was extended to 15 November 2012, when the matter was heard by Murphy
J. After hearing argument, the learned judge confirmed the
rule
nisi
and granted a final order of
curatorship. The trustees, as intervening parties, were ordered to
pay the costs of the application,
jointly and severally, on the scale
as between attorney and client.
[6]
The trustees appeal, with the leave of the court below, against the
whole of the judgment and the orders made. For that reason
Murphy J
revived and extended the orders made by Van Der Merwe DJP, pending
the final outcome of the appeal.
[7]
The registrar brought the application in the high court, with the
concurrence of the council, in terms of s 56 of the MS Act
and under
s 5(1) and (2) of the Financial Institutions (Protection of Funds)
Act 28 of 2001 (the FI Act).
[8]
The circumstances in which the registrar may apply for the
appointment of a curator to a medical scheme pursuant to the
provisions
of the MS Act, are stated as follows in s 56(1):
‘
(1)
‘The Registrar may, notwithstanding the provisions of section
52 and 53, if he or she is of the opinion that it is in
the interest
of beneficiaries or that it is desirable to do so, because material
irregularities have come to his or her notice,
or because a medical
scheme is not in sound financial condition or as a result of an
inspection of the affairs of a medical scheme,
apply, with the
concurrence of the Council, to the High Court, for the appointment of
a curator to take control of and to manage
the business of that
medical scheme.’
[9]
Sections 52 and 53 of the MS Act deal with judicial management and
winding up of medical schemes and do not find application
in the
instant matter. I should also add that it is common cause that the
scheme has at all relevant times been, and still is,
in a sound
financial condition.
[10]
In terms of s 5(1) and (2) of the FI Act, the ‘registrar’
may, on good cause shown, apply to the High Court having
jurisdiction
for the appointment of a curator to take control of, and to manage
the whole or any part of, the business of an institution.
In s 1 the
‘registrar’ is defined as including the registrar of
medical schemes, referred to in s 1 of the MS Act.
Section 1 of the
FI Act further defines an ‘institution’ for purposes of s
5, as including,
inter alia
,
a ‘financial institution’ which is, in turn, defined as
including any medical scheme contemplated in s 1 of the MS
Act.
[11]
It follows from the above, that the registrar is empowered to bring
an application such as the present, both in terms of s
56(1) of the
MS Act or in terms of s 5(1) of the FI Act. I am in agreement with
the approach of the high court, in construing the
registrar’s
application as seeking relief in the alternative. That he was doing
so is made plain in the papers before the
court. Therefore, a curator
should be appointed to the scheme if either the pre-conditions of s
56(1) of the MS Act are established,
or good cause, as contemplated
in s 5(1) of the FI Act, is shown.
[12]
The test under s 56(1) of the MS Act 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 material irregularities that
have come
to his or her notice or because the medical scheme is not in sound
financial condition. As was correctly submitted on
behalf of the
registrar, the opinion is the subjective opinion of the registrar
which must be held on objective grounds.
[13]
The test under the FI Act is different. In
Executive Officer FSB v
Dynamic Wealth Ltd and others
2012 (1) SA 453
(SCA) para 4, this
court stated the test under s 5(1) of the FI Act, as follows:
‘
The
registrar must therefore satisfy the court that there is good cause
to appoint a curator…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 must
determine whether appointing a curator will address those
problems
and have beneficial consequences for investors. It must also consider
whether there are preferable alternatives to resolve
the problems.
Ultimately what will constitute good cause in any particular case
will depend on the facts of that case.’
[14]
In this matter, as I shall show, the respective statutory tests are
both satisfied. The various grounds relied upon by the
registrar for
the appointment of a curator to the scheme are dealt with
comprehensively and exhaustively in the judgment of the
court
a
quo
. There is no need to repeat this
extensive exercise and I shall concentrate on the following main
grounds relied upon by the registrar,
as identified in the judgment
of the court below.
The
trustees’ disregard of the provisions of the MS Act and the
rules of the scheme
Broker
management and marketing agreements
[15]
In and during 2008, the scheme concluded a broker management
agreement with Medshield Broker (Pty) Ltd (MB). This agreement
came
about as the scheme did not directly contract with brokers rendering
services to members of the scheme, but rather interposed
MB as an
intermediary to manage its relationship with the brokers. This
resulted in substantial amounts being paid to MB, which
it either
retained or paid to individuals who were not accredited brokers under
the MS Act. It constituted a contravention of s
65(6) of the MS Act,
which provides that a broker may not be directly or indirectly
compensated for providing broker services by
any person other than a
medical scheme, or a member of a medical scheme or employer of such
member or a broker employing such broker.
[16]
The agreement with MB did not only result in unlawful payments being
made to unaccredited brokers, but also caused the scheme
to
relinquish control over the brokers in favour of MB. All of this was
not disputed by the BOT. On the contrary, in response to
written
directives addressed to it by the council, the BOT terminated the
contract with MB.
[17]
Apart from the contractual arrangement with MB, the scheme had also
concluded a contract with Traffic Integrated Marketing
CC (TIM)
during 2008, appointing TIM as its marketing agency. This contract
made provision for integrated advertising and marketing
services in
the form of business strategy, public relations, media liaison,
research and the like, to be provided by TIM. The contentious
feature
of this contractual arrangement was the payment of ‘research
fees’ by the scheme via TIM, through a second
entity, Medshield
Distribution Services (Pty) Ltd (MDS), to brokers.
[18]
The research fees were ostensibly to serve as the consideration to
brokers for research performed by them on potential members.
TIM did
not have direct access to brokers and therefore contracted MDS to use
its network of brokers to collect the research data.
Although the
scheme did not pay the brokers, it paid TIM which paid MDS which, in
turn, paid the brokers. The BOT maintained that
the scheme benefited
by this ‘research’, but the registrar was of the opinion
that the payments were simply a ruse
to pay brokers more than their
prescribed limited fees, in order to motivate them to sign up young
members with a more favourable
risk profile.
[19]
The payment of the research fees resulted in brokers being
compensated in excess of the permissible maximum fee of R65 per
member per month, prescribed in terms of the regulations promulgated
under s 65(2) of the MS Act. It is common cause that research
fees of
some R28 million were paid to brokers in this fashion. As it is
common cause that the scheme did not make use of the research,
the
registrar justifiably contended that this was unlawful wasted
expenditure incurred by the scheme.
[20]
Upon being directed by the council to terminate the contract with
TIM, the BOT advised that the research would no longer be
pursued and
that no more research fees were to be paid to TIM. The BOT also
undertook to take action to recover the research fees
paid to
brokers, where it would prove legally competent to do so. However,
the BOT was reluctant to, and did in fact not cancel
the contract
with TIM, as TIM had also contracted to provide other services to the
scheme. In essence, therefore, the BOT failed
to comply with this
directive of the council.
Membership
of the BOT and transgression of governance principles
[21]
This brings me to the alleged disregard of the rules of the scheme by
the BOT. Firstly, the registrar pointed to the fact that
Mr Mabeta
(Mabeta), the chairperson of the BOT, was not a member of the scheme
at the time he was first elected to the BOT in June
2008. This
constituted a transgression of scheme rule 18.1.1, which provides for
the election of board members by the members of
the scheme at the
annual general meeting, from amongst their number.
[22]
The BOT conceded that Mabeta was not a member of the scheme in June
2008, as he had only become a member in November 2008.
However, it
contended that, in terms of the then existing rules, it was
permissible for Mabeta to be elected as a trustee in his
capacity as
an employer-nominated representative. Strangely enough, the deponent
to the opposing affidavit of the BOT, Mr PJ Barnard
(Barnard), failed
to identify the employer Mabeta supposedly represented. Mabeta
deposed to an affidavit, confirming the content
of Barnard’s
affidavit insofar as it referred to him. However, Mabeta also failed
to identify the employer he allegedly represented.
[23]
In a report annexed to the founding papers a council-appointed
inspector, Mr Mahlangu (Mahlangu), recorded that Mabeta
informed
him that he (Mabeta) was not a member of the scheme when he was
appointed trustee and was not nominated as an employer
representative. The registrar referred to this aspect in his replying
affidavit, but in the supplementary duplicating affidavit,
Barnard
(and not Mabeta) denied that Mabeta advised Mahlangu that he was not
nominated as an employer representative. Curiously,
however, at no
stage was any attempt made to identify the alleged employer. No
documentation was annexed to the affidavit, nor
was counsel during
argument in the court below able to shed any light on the identity of
the alleged employer.
[24]
In view of this, I cannot fault the conclusion of the court below,
that, on the probabilities, the rules of the scheme were
indeed
disregarded and Mabeta was appointed to the BOT while he was not
eligible for election. He therefore served on the BOT unlawfully
from
June 2008 until his re-election in 2011.
[25]
Apart from the aforesaid, the BOT appointed Mabeta as the chief
executive officer (CEO) of the scheme for the period September
2011
to February 2012 at a monthly salary of R99 290.00, for a
three-day workweek. The registrar convincingly contended that
the
dual roles of chairperson of the BOT and CEO of the scheme are
incompatible from a governance perspective. The industry practice
is
for the principal officer of a medical scheme to be its CEO. This
practice is underscored by scheme rule 21.2, which provides
that the
principal officer is the executive officer of the scheme. Section
29(1) of the MS Act requires the appointment of a principal
officer
by the BOT prior to the registration of a medical scheme. Scheme rule
18.8.4 provides that the principal officer is disqualified
from
serving as a trustee. The court
a quo
correctly concluded that the appointment of Mabeta as CEO was
ultra
vires
the scheme rules and therefore
null and void.
The
MDS and Sapling contracts
[26]
MDS and the scheme concluded an agreement, which commenced on 1
January 2009, for a period of three years. This was a distribution
agreement in terms of which MDS undertook to render distribution
services to the scheme, which included the provision of office
facilities and services with regard to broker management, regional
support, scheme requirements and scheme reporting. In return
for the
rendering of the agreed services, MDS was remunerated by the scheme
at the rate of R45 per member per month. It was established
by
Mahlangu that, during the period July 2009 to October 2011, MDS
received a total remuneration of some R105 million.
[27]
Mahlangu concluded that the services rendered by MDS pursuant to its
contract with the scheme did not add value to the scheme,
as the
services could either have been rendered by the brokers or in terms
of existing contracts, or could have been fulfilled
by the scheme or
its administrator. This led to the registrar taking the view that the
contract with MDS ought to be terminated.
On 17 January 2012, the
scheme’s attorneys advised the registrar that the contract with
MDS had, in any event, upon its expiry
on 31 December 2011, been
replaced by a contract between the scheme and Sapling Trade and
Invest 41 (Pty) Ltd (Sapling), which
would expire on 31 December
2014.
[28]
The services rendered by Sapling in terms of this agreement, are
essentially the same distribution services previously performed
by
MDS. Sapling effectively stepped into the shoes of MDS and even has
the same chief executive officer that MDS had, namely Mr
J le Roux.
During the period January to June 2012, Sapling earned R22 million
for distribution services rendered in terms
of this contract.
Sapling’s interest in the continued existence of this contract
is thus in the order of some R44 million
per year (R132 million
over the three year term of the contract).
[29]
Mahlangu and the registrar were concerned that the services rendered
by Sapling, are not of any real value to the scheme and
therefore not
in the interest of the beneficiaries. This concern was compounded by
the fact that, in its affidavits, the BOT was
rather vague about the
actual nature and extent of the services rendered in terms of the MDS
and Sapling agreements. The court
a quo justifiably concluded that
the BOT failed adequately to address the essential criticism that
these agreements amount to a
duplication of services, because such
services are already rendered by others or can be provided more cost
effectively.
[30]
In view of these concerns, the registrar issued a directive on 15
June 2012, requiring the scheme, inter alia, to terminate
its
contractual relationship with Sapling. The registrar’s concern
was that the funds of the scheme were utilised for the
improper
advantage of Sapling and its shareholders, to the prejudice of scheme
beneficiaries. Fuel was added to the fire by the
Mahlangu report
pointing out that there were a number of interlocking directorships
on the boards of MDS, MB and Sapling. The scheme
refused to comply
with the registrar’s directive of 15 June 2012, to terminate
the Sapling contract and, instead, lodged
an appeal in terms of s
49(1) of the MS Act, against the decision of the registrar to issue
this directive. The appeal did not
proceed as the registrar then
decided to bring the application for the appointment of a provisional
curator to the scheme.
The
election of trustees on 28 June 2012
[31]
The provisional curator, Mr T Langa, appointed pursuant to the
rule
nisi
issued by the court a quo, filed a
report on 29 October 2012, in which he raised concerns regarding the
election of trustees to
the BOT at the annual general meeting of the
scheme (the AGM), held on 28 June 2012.
[32]
At the AGM (which was held less than two weeks after the registrar’s
directive to terminate the Sapling contract), five
trustees were
elected to the BOT by means of a large number of proxies held by Le
Roux (the CEO of Sapling) and three other representatives
of Sapling.
They utilised these proxies to vote for the first, seventh, eighth,
ninth and tenth appellants (the Sapling trustees).
The AGM was
attended by only 38 members of the scheme in person, while 1, 354
proxies were in favour of the four Sapling representatives.
The
Sapling trustees received between 1,166 and 1,419 votes each, which
shows that the Sapling representatives used their proxies
en
masse
to vote for the Sapling trustees.
[33]
The provisional curator and the registrar have expressed their
concern regarding the legitimacy of this election, and in respect
of
the validity of the proxies obtained by the Sapling representatives.
These are issues which require further investigation and
no final
answer can be given at this stage. However, what is abundantly clear,
is that the election process had been successfully
orchestrated by
the Sapling representatives to ensure the selection of the Sapling
trustees to the BOT. This gives rise to the
perception that Sapling
had thereby acquired indirect control of the BOT for the purpose of
advancing its own interests.
[34]
The perception is strengthened by the fact that the five Sapling
trustees had only joined the scheme shortly before the AGM.
The ninth
appellant became a member on 1 May 2012, while the remaining four
Sapling trustees joined the scheme as late as 1 June
2012. There is
no logical explanation why all of them would suddenly decide to join
the scheme shortly before the election of the
trustees, particularly
where they had been members of other medical schemes for several
years. And, but for one of them, their
dependants remained members of
their former medical schemes.
[35]
There is also no acceptable explanation as to why the five Sapling
trustees decided, soon after joining the scheme, to make
themselves
available for appointment as trustees of a medical scheme to which
they had not previously belonged. Unconvincing explanations
were
tendered by two of the Sapling trustees, namely that they were made
aware of the election by friends, while the rest proffered
no
explanation at all. The first appellant’s allegation that he
made himself available for election as a trustee of this
medical
scheme, in which he had no interest, because, as an attorney, his
legal experience and management skills would be of benefit
to the
scheme and its members, is not only unconvincing, but highly
improbable.
[36]
Another disconcerting feature, that became known subsequently, is
that Sapling has indemnified the trustees (the nine appellants)
against any costs or liability to be incurred by them in opposing the
application brought by the registrar. It is certainly strange
that
Sapling, a service provider of the scheme, would see fit to accept
responsibility for the trustees’ legal costs. At
the very
least, it strengthens the registrar’s perception that the BOT
is compromised and beholden to Sapling. Viewed objectively,
it is
difficult to see how the compromised trustees will, in these
circumstances, be able to avoid a conflict of interest particularly
with regard to the Sapling contract, as they are required to do in
terms of s 57(6) of the MS Act. As submitted on behalf of the
registrar, a reasonable inference may justifiably be drawn that the
Sapling trustees will do Sapling’s bidding and not act
in the
best interests of the scheme.
Failure
to comply with regulatory demands
[37]
The evidence shows that, during the period of regulatory interaction,
the relationship between the registrar and the BOT was
strained. They
blame each other for this state of affairs, but if the undisputed
evidence is viewed objectively, there is no doubt
that Murphy J was
correct in concluding that ‘viewed across the entire period of
the regulatory interaction, I am persuaded
that the scheme was
unwilling to acquiesce properly to regulatory intervention and
scrutinising, and instead resorted to posturing,
with the result
firstly of frustrating the investigation and later of delaying it’.
[38]
In particular, during an inspection ordered by the registrar in terms
of the provisions of the MS Act, the BOT adopted a confrontational
stance by refusing the inspectors access to the premises; failing to
furnish them with documentation and denying them the opportunity
to
consult with employees of the scheme. The chairperson of the BOT
insisted on the right to dictate the terms of reference of
the
inspection and sought political interference to put a stop to the
inspection. Although the BOT may be correct in accusing the
registrar
of sometimes acting in a rather high-handed manner in dealing with
the scheme, it remains a concern that the conduct
of the BOT, and in
particular that of its chairperson, portrayed a degree of
unwillingness to comply with the regulatory requirements
of the MS
Act. In this regard, one should bear in mind the warning sounded in
Dynamic Wealth
,
para 6, that the inability or unwillingness of a financial
institution to comply with regulatory requirements applicable to
protected
funds, normally will provide a reason for appointing a
curator.
[39]
In addition, the scheme has persisted in its refusal to terminate the
Sapling contract and has failed to take adequate steps
to recover
payments which were made to unaccredited brokers. In fact, the BOT
has made it clear that they do not wish to co-operate
with the
registrar in resolving the governance issues which have given rise to
this litigation. In argument, counsel for appellants
suggested that
the registrar has an ulterior motive in bringing the application for
the appointment of a curator and that his actions
constitute an abuse
of power. In the duplicating affidavit deposed to by Barnard, the
following is said with regard to the report
of the provisional
curator:
‘
The
true purpose of the report is obvious, namely to provide the
applicant [the registrar] with a further straw to clutch at in
its
attempt to discredit the trustees, and thereby simultaneously
increasing the prospect of him being finally appointed. I
respectfully
submit that the provisional curator’s report
simply constitutes a further witch-hunt against the trustees.’
[40]
If regard is had to the facts underlying the application, it is clear
that there is no justification for allegations of this
nature to be
levelled against the registrar and the provisional curator. The
relevant facts, discussed above, raise serious concerns
regarding the
well-being of the scheme and its members and the registrar would be
shirking his statutory duties if he merely ignored
these concerns.
[41]
What ultimately has to be decided is whether the aforesaid grounds,
viewed objectively, constitute material irregularities
justifying, in
the interest of the beneficiaries, the appointment of a curator to
the scheme. Put differently, it has to be determined
whether these
grounds show that it is desirable to appoint a curator to address
these concerns for the benefit of the members of
the scheme. It also
has to be considered whether there are preferable alternatives to
resolve the concerns.
[42]
In my view, the grounds of concern raised by the registrar,
particularly when viewed cumulatively, constitute material
irregularities
which have to be addressed urgently, to avoid possible
prejudice to the members of the scheme. The evidence paints an
alarming
picture of contracts being concluded which do not appear to
add value to the scheme, but rather benefit third parties. The
contractual
arrangements with MB, TIM, MDS and Sapling bear testimony
to this. Millions of rand have been diverted to these third parties,
to the financial detriment of the beneficiaries of the scheme. In the
process, provisions of the MS Act were breached.
[43]
Particularly disconcerting is the current contract with Sapling, in
terms of which Sapling stands to gain R132 million
over the
three year life of the contract. The registrar’s directive to
terminate this contract has fallen on deaf ears. The
way in which the
Sapling trustees have been elected to the BOT, and the fact that
Sapling has undertaken to pay the trustees’
legal costs, leave
scant hope that the BOT will be able objectively to deal with the
Sapling contract and its consequences in an
unbiased manner. In this
regard, I share the concern of the registrar that the BOT has been
compromised and will be unable to execute
its statutory mandate in
terms of s 57(6) of the MS Act, to ensure that the interests of the
beneficiaries are protected at all
times; to act in good faith and to
take all reasonable steps to avoid conflicts of interest.
Less
intrusive steps
[44]
It was submitted on behalf of the trustees, that the registrar ought
to have taken less intrusive steps to allay his concerns
regarding
the well-being of the scheme. It was argued that it ought to have
been found that there were insufficient grounds for
the appointment
of a curator, both at the hearing of the ex parte application and
when the
rule nisi
was confirmed. In this regard the appellants’ counsel pointed
to an exchange of correspondence between the scheme and the
registrar, which, in their submission, supported the view that the
scheme had done its best to co-operate with the registrar.
[45]
The only alternative remedy suggested by the appellants’
counsel is the procedure for the removal of a member of the
BOT under
s 46 of the MS Act. This section provides that the council may, by
notice in writing, remove from office a member of
the BOT if it has
sufficient reason to believe that the person concerned is not a fit
and proper person to hold the office concerned.
The procedure
prescribed provides for the council to furnish the person with full
details of all the information concerning his
or her alleged
unfitness to be a member of the BOT, whereupon the person is allowed
a period of 30 days to comment on the allegations.
The decision of
the council in this regard is appealable by the person concerned in
terms of s 50(3) of the MS Act, within
a period of 60 days after
the date on which such decision is given.
[46]
It is clear from this, that it is a time-consuming process, which is
aimed at the removal of an individual member of the BOT.
It does not
provide an effective alternative remedy in a case, such as the
present, where all the members of the BOT are implicated.
Not only
does it not provide for swift action to be taken to safeguard the
interest of the beneficiaries of the scheme, but if
this procedure
were to be utilised to remove all the members of the BOT, it would
leave the scheme rudderless and unable to manage
its affairs, to the
detriment of the beneficiaries. An immediate problem which would
present itself if all the trustees were to
be removed in terms of s
46, is that there would be no BOT to oversee the election of a new
BOT, as required by the rules of the
scheme. The day to day business
of the scheme would grind to a halt.
[47]
It 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. And it must be borne in mind that the
aspects raised in the report of the provisional curator
do not only
paint an alarming picture with regard to the conduct of the business
of the scheme by the BOT, but show that there
are various matters
that should be investigated without delay. The only practical
solution that presents itself is the appointment
of a curator to the
scheme.
[48]
In view of the above, I am satisfied that there were sufficient
grounds for the appointment of a curator to the scheme, both
at the
hearing of the ex parte application and when the
rule
nisi
was confirmed. With regard to the
ex parte procedure followed by the registrar in launching the
application, it should be borne
in mind that s 5(1) of the FI Act
permits this course to be followed. In any event, no prejudice
resulted to the trustees who had
more than ample opportunity, which
they utilised, to file opposing affidavits.
[49]
I should add that I have paid particular attention to the exchange of
correspondence to which we have been referred by appellants’
counsel, but my reading thereof rather strengthens the view that the
BOT was not only unwilling to allow a proper investigation
of the
affairs of the scheme, but unjustifiably regarded the attempts of the
council in relation thereto with suspicion and distrust.
[50]
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. The
registrar has also shown that he has objective grounds to believe
that it is desirable to appoint a curator. In the result Murphy J
correctly exercised his discretion in confirming the
rule
nisi
and granting a final order of
curatorship.
[51]
As far as the costs of the appeal are concerned, this is a matter
which justified the employment of two counsel.
[52]
The following order is made:
The appeal is
dismissed with costs, including the costs of two counsel, where
employed.
___________________
P B Fourie
Acting
Judge of Appeal
APPEARANCES:
For
the Appellant: R du Plessis SC (with him K Grundlingh)
Instructed
by:
Geyser
Van Rooyen Attorneys, Pretoria
Webbers,
Bloemfontein
For
the Respondent: M C Maritz SC
Instructed
by:
Savage
Jooste & Adams Inc, Pretoria
Phatsoane
Henney Attorneys, Bloemfontein