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[2011] ZASCA 207
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Council for Medical Schemes and Another v Selfmed Medical Scheme and Another (561/2010) [2011] ZASCA 207 (25 November 2011)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 561/2010
In the matter between:
the council for medical schemes
…............................................
First
A
ppellant
THE REGISTRAR OF MEDICAL SCHEMES
….............
Second
Appellant
and
selfmed medical scheme
…......................................................
First
Respondent
LEON BESTER
...................................................................
Second
Respondent
Neutral Citation
:
Council for Medical Schemes
v
Selfmed
(561/2010)
[2011] ZASCA 207
(25
November 2011)
Coram
: Navsa, Van Heerden, Ponnan, Malan JJA and Petse AJA
Heard
: 7 November 2011
Delivered
: 25 November 2011
Summary
:
Defamation – whether
words complained of referred to corporate entity as such –
whether words complained of defamatory
– test of reasonable
reader restated
ORDER
On appeal from:
North Gauteng High Court, Pretoria (Rabie J
sitting as court of first instance):
1. The appeal is upheld with costs.
2. The order of the court below is replaced with the following order:
‘The claims are dismissed with costs.’
3. The cross-appeal is dismissed with costs.
JUDGMENT
VAN HEERDEN JA (NAVSA, PONNAN, MALAN JJA AND PETSE AJA concurring):
In
August 2005, the first appellant, the Council for Medical Schemes
(the Council), published its
Annual
Report 2004/2005
,
as it was obliged to do in terms of s 14 of the Medical Schemes Act
131 of 1998 (the Act). Both the first and second respondents
took
exception to two statements contained in a part of the Report headed
‘Registrar’s Review’, contending
that these
statements were defamatory of them both. The first respondent,
Selfmed Medical Scheme (Selfmed), is a medical scheme
registered as
such in terms of s 24 of the Act. The statements complained of
(which I have italicised) are contained in the following
passage, in
a section dealing with ‘Governance of Medical Schemes’ –
‘
SELFMED
We
have questioned several issues concerning governance at Selfmed,
including
the manner in which the scheme’s chairperson
ostensibly appointed himself the principal officer and CEO.
Also
under scrutiny was the approximately R1 million level of remuneration
awarded to this part-time post and
other dubious appointments of
family members to the scheme’s executive management. This
matter has not yet been resolved.’
The
respondents instituted an action claiming damages for defamation
against both the Council and the second appellant, the Registrar
of
Medical Schemes (the Registrar). The North Gauteng High Court (Rabie
J) agreed with the respondents and awarded each of them
R200 000
in damages (the full amount claimed). The appeal against the
judgment on both the merits and the quantum of the
claim comes
before us with the leave of the court below. Also before us is a
cross-appeal on the question whether the high court
ought to have
made a punitive costs order in favour of the respondents.
The
questions in this appeal are (a) whether the allegedly defamatory
statements refer to the first respondent at all, and (b)
whether
they are defamatory of either or both of the respondents.
The
litigation in the present appeal was preceded by an extraordinary
concatenation of events over a period of about five years
involving,
inter alia, Selfmed. The second respondent, Mr Leon Bester (Bester),
was, at the time the litigation commenced, the
chairperson of the
Board of Trustees of Selfmed (the board), as well as the Chief
Executive Officer of the Scheme (the CEO).
The relevant details of
what happened appear hereafter.
Bester
was a key player in the chain of events. In 1996, Bester was the
managing director of Universal Storage Systems (Universal).
In that
capacity, he appointed Selfmed as the medical scheme for the
employees of Universal. This proved to be a bad mistake
as Selfmed
was at that time in an appalling managerial and administrative
state. It had no reserves at all; there was great member
dissatisfaction and a very large loss of members. In the space of
two years, the scheme went through three administrators and
six
principal officers. Things got so bad that in 2000 the auditors
withheld an opinion and did not furnish even a qualified
auditor’s
report. The following year (2001), the auditors furnished a
qualified report.
At the
beginning of 1999, Bester was approached to become a trustee of the
Selfmed board and, because its precarious position
impacted on the
employees of Universal, he readily agreed. He was elected onto the
board of trustees and, in the second half
of 1999, was voted to the
position of chairperson of the board. He resigned as chairperson of
the board in February 2007 (while
the litigation was still
proceeding), but stayed on as a trustee.
It
soon became clear to the trustees of Selfmed that they would have to
rely on their own skills to save the scheme. Bester’s
business
acumen and experience enabled him quickly to grasp the intricacies
of the medical scheme industry. He took the definite
lead in
ensuring that the trustees started to function cohesively as a
board. Although his monthly honorarium as a trustee was
only R3000,
Mr Bester found himself working between 50 to 60 hours per week on
Selfmed matters, over and above his work at Universal.
At the end of 2001, there was a highly problematic change in
Selfmed’s administrator and, in dealing with the ramifications
of this change, Bester became more and more involved in Selfmed’s
affairs in an executive capacity. He was then approached
by the
other trustees to ascertain whether he would make himself available
for a full-time executive position. Nothing came of
this immediately
but, on 13 August 2002, Bester met with Mr Danie Kolver (Kolver),
the head of registration and accreditation
of the Council, to
discuss various matters. In a subsequent letter to Kolver dated 22
August, Bester stated that –
‘
[I]t
was also discussed that one of the Trustees may be applied in a
permanent executive capacity in view of the strenuous demand
on the
Trustees in fulfilling their duties in the execution of the business
of the medical scheme.’
Bester
did
not
indicate in this letter that the trustee in question
was himself, ie the chairperson of the board. He could not recall
whether
he had mentioned this to Kolver during their meeting. He did
not regard it as important as it was the ‘principle of the
appointment of a trustee in full-time capacity’ that
interested him.
In his reply dated 25 September, Kolver confirmed ‘the
discussions so recorded by you’, but also indicated that he
had at the meeting –
‘
[H]ighlighted
the need to engage the principal officer as Executive and Accounting
Officer of the Scheme in line with the statutory
duties imposed on
him and more particularly, to give effect to decisions taken by the
Board.’
1
According
to Bester, he took this reply from Kolver to mean that, although the
scheme had to make more use of their part-time
principal officer, Mr
Marius Werth (Werth), there was nothing against the appointment of a
trustee to a permanent executive position.
This is what Bester
reported to the board.
2
At Selfmed’s 2002 Annual General Meeting (AGM), held on 11
September 2002, it was noted that –
‘
The Chairman advised that it
may be necessary to appoint a full-time Trustee in order to manage
the Scheme’s affairs. It was
proposed that PE Corporate
Services be consulted to obtain expert opinion on the incumbent’s
remuneration. The hours worked
to be pro-rated according to the
salary recommended.’
Bester did
not disclose to the AGM that he was in fact the trustee who would
possibly be appointed on a full-time basis. The members
agreed to
this proposal. It is clear that, at this stage, Bester was the
primary driver of the process.
Prior
to approaching Bester to take up the post of CEO, the trustees had
asked Werth to become their full-time principal officer,
but he had
declined. They had also approached and interviewed a Mr Rust and a
Mr de Koker with a view to filling the position
of CEO of Selfmed,
but to no avail.
From
30 November to 2 December 2002, at a Selfmed strategic planning
session (‘bosberaad’), attended by, inter alia,
the
trustees under the chairpersonship of Bester, one of the key
objectives identified, with Bester’s participation, was
the
need to employ the chairperson of the board of trustees as CEO of
the scheme.
According
to Bester, he took up his full-time position as CEO on 1 January
2003. Prior to that, he had arranged with the
chairman of Universal
to spend more time on Selfmed affairs, although he retained his
employment at Universal. (It was only at
the end of 2004 that he
resigned from Universal.) The contract of employment between Bester
and Selfmed is dated 11 April 2003.
There are, however, no minutes
(nor any other documentation) in existence reflecting a board
meeting at which the decision to
appoint Bester as the CEO was
taken.
Bester
testified that he had not informed the Council about his appointment
as CEO as he was not accountable to them in this regard.
As far as
he was concerned, the abovementioned meeting with and letter from
Kolver had ‘cleared the principle’ of
a trustee being
appointed in a full-time executive capacity. In the Minutes of the
2004 AGM, for the year ended 31 December 2003,
under the heading
‘Honorariums’, it was noted that ‘the retainer and
daily allowance was waived by the Chairman,
as the Board of Trustees
had appointed him the CEO of the Scheme’. This was ‘proposed’
by Bester himself and
‘seconded’ by one of the members
of the scheme. Although this was not voted upon, nobody at the AGM
raised any objection.
According to Bester, this was ‘a
ratification’ by the members of his appointment. It was done
‘in terms of
transparency’, as the permission of the
members was not required for his appointment as CEO.
At the
abovementioned strategic session held in November/December 2002, the
board had identified as a ‘critical success
factor’ the
need to establish its own marketing infrastructure under the
scheme’s control and separate from the administrator
of the
scheme. Until 2002, the administrator had conducted the marketing
for the scheme, but by the end of 2002, the trustees
had negotiated
with the new administrator to relinquish this aspect from January
2003. Because of a dispute with the trustees,
a certain Mr Tony
Warner (Warner), who had been earmarked to be Selfmed’s
marketing executive, was not appointed to this
post. The scheme thus
found itself with nobody to take care of marketing.
At that time, there were two persons who formally applied for the
advertised marketing position, namely, a certain Mr van Coller
and
Bester’s wife, Ms Marthie Bester. On 14 April 2003, three days
after signing his employment contract with Selfmed,
Bester sent a
most remarkable e-mail to the trustees regarding the appointment of
the marketing executive, urging them to interview
his wife as a
matter of urgency as she had other offers of employment to consider.
He proceeded as follows:
‘
In terms of my fiduciary
duties I must act in the best interest of the scheme, avoid personal
conflict and not pursue personal interest
at the cost of the scheme.
I also do not wish to be accused and found guilty of nepotism. In my
opinion nepotism is unacceptable
when a family member is appointed at
the cost of a better person. If the family member is however the best
and the right person,
then surely one must act in the best interest
of the scheme. Surely there will be gossip and comments, but at best
it can only
be classified as negative and destructive and it will
have to be addressed accordingly. If one has not done anything wrong
one
has not to defend anything.
. . . .
During the course of the day I will fax Tony Warner’s
CV to you. This is a person where we had no problem to offer R700 000
per annum without looking any further. Compare this CV with Marthie’s
CV and make your own conclusion. The one had a record
of
non-performance vs. the other’s record of success upon success.
The one will not be employed by previous employers vs.
the other who
immediately received a favourable counter offer to stay. You make the
decision please.
Although
I will not be in the interview room, I wish to be present outside to
immediately discuss risks, alternatives and solutions
when you have
made a decision (positive or negative).’
According
to Bester, all he was doing was to stress to the other trustees that
the matter had to be dealt with urgently, partly
because Ms Bester
had other offers of employment, but also because of Selfmed’s
non-existing marketing department. In testimony
in the court below,
he stated that he had recused himself from her interview as ‘[t]o
influence them [the board] to appoint
her would be wrong. To
influence them to really get the interviews done, that is my duty.’
As
regards the reference to Mr Warner, Bester denied that he was
clearly trying to advance the appointment of his wife in an improper
manner. His (somewhat disengenuous) explanation was that he was
merely reacting to a previous question from the trustees regarding
the remuneration benchmark for the post and the amount budgeted for
in this regard.
Previously, on 1 April 2003, Bester had visited Mr Evan Theys
(Theys), the head of compliance at the Office of the Registrar.
According to Bester, the purpose of the visit was to ‘clear a
principle’, namely, whether a person who was a family
member
of a trustee could be appointed to the position of Selfmed’s
marketing executive provided that such person was the
best candidate
for the position. In a follow-up letter dated 17 April 2003,
addressed to Theys by Bester, the latter stated –
‘
The situation now is that a
family member of one of the trustees became aware of the vacancy and
has formally applied for the position.
A comprehensive CV has been
submitted. In view of the discrimination grounds incorporated in
labour legislation, this application
cannot be ignored simply because
of the family ties. The person’s CV complies and compares
favourably with the job specification
and there is the possibility
that the person could be successful in the filling of the vacancy. So
could any other applicant. This
will however only be decided during
the recruitment process and conducting interviews with various
applicants. . .
The
problem is should this family member happen to be the best person for
the job and it is decided to disqualify the person to
avoid nepotism
the BOT [Board of Trustees] is failing in its fiduciary duty to act
in the best interest of the scheme by not appointing
the best person.
If the applicant is not appointed although he/she is the best choice,
(to avoid nepotism) this person could have
a valid legal recourse
backed up by the Labour Relations Act in terms of discrimination and
the scheme could be sued.’
It is
noteworthy that Bester pointedly did not inform Theys that he and
his wife were the persons involved in the problem posed
in the
letter. According to Bester, he did not deliberately hold back this
fact from Theys. He simply wanted to ‘clear
a principle’
and ‘if the principle is clear then we feel we have done the
necessary transparency’.
Theys handed Bester’s letter to Mr Craig Burton-Durham
(Burton-Durham), the Council’s head of legal services, for
him
to deal with. Burton-Durham discussed the matter with the Registrar,
Mr Patrick Masobe (Masobe) and, on 23 April 2003, addressed
a letter
to Bester, the relevant parts of which read as follows:
‘
During the course of our
conversation it was pointed out that although it is in the interests
of the scheme that the best candidate
be appointed, there are
potentially a number of governance concerns where such candidate
however is a family member of a trustee.
As you are aware, this
office pays high regard to the conclusion of agreements and
appointments of an arms-length nature, this
not only contributes to
transparent governance but provides objective certainty from the
point of view of outside perception. This
office would accordingly
advise that the consideration of any such appointment be dealt with
circumspectly and with caution.
The decision however falls within the purview of the
Board of Trustees which is required to fully apply its mind, having
regard
to all the factors, which factors must of course take into
account recent developments in the sphere of corporate governance.
To the extent that the family-member application is to
receive consideration, the trustees are advised to inter alia ensure
that:
The process is an open and transparent one;
The proceedings are accurately and properly minuted;
The
family member serving on the board properly recuses [himself or
herself] from
any of the proceedings around
the interview and other processes concerning this matter.’
(Emphasis added.)
Van
Coller and Ms Bester were interviewed by the board on 24 April 2003.
Although there are brief notes, made by one of the trustees,
of the
interviews with both candidates, there are no minutes, either of the
interview proceedings,
3
or the meeting of the board on 24 April 2003.
Bester
did not sit in on his wife’s interview by the board, but did
sit in on Mr Van Coller’s interview and spoke
to the trustees
immediately after his wife’s interview.
4
Three of the trustees, in the absence of Bester, decided that Ms
Bester should be appointed as marketing manager. The fourth
trustee,
Mr Mel Bartlett (Bartlett) abstained from voting because he was
concerned about the repercussions from the Council.
Werth advised
the trustees that they had to inform the Office of the Registrar if
they intended to appoint Ms Bester. The trustees
resolved to do so.
This
resolution prompted apparent dramatic action on the part of Bester
and his wife. On 25 April 2003 at 08h13, Bester sent a
fax to the
other trustees tendering his resignation as trustee with effect from
30 April 2003. Very shortly thereafter, at 08h35,
he sent a further
fax to the trustees, tendering his resignation as CEO with immediate
effect. In the meantime at 08h31, Ms Bester
sent an e-mail to
Bester’s e-mail address, informing the trustees that she
wished to withdraw her application for the position
of Marketing
Director. This flurry of correspondence prompted Mr Aubrey Faber
(Faber), one of the trustees, to send an e-mail
to Bester, calling
for an urgent meeting with the trustees to resolve the issues that
led to Bester’s resignation.
A
special meeting of the board was held on 28 April 2003. The minutes
reflect that it was the unanimous wish of the trustees that
Bester
be persuaded to withdraw his resignation, for the good of the
scheme. According to the minutes, Bester later joined the
meeting
and explained that it seemed to him that his integrity was being
doubted, that he had lost the confidence of the trustees
and that
the only honourable course was to resign. The trustees were
unanimous that it was not their intention to question Bester’s
integrity. In hindsight, they regretted their resolution to inform
the Registrar of their intention to appoint Ms Bester as Marketing
Executive. Bester was eventually persuaded to withdraw his
resignation as CEO of the scheme. According to him, he did so
because
of his fiduciary duty to the members of the scheme. He
indicated that he would give further consideration to his
resignation
as a member of the board of trustees.
After
Bester had left the meeting, the remaining trustees unanimously
resolved that they would offer Ms Bester the post for which
she had
applied. There would appear to have been no further talk of
informing the Office of the Registrar of their intention
to appoint
Ms Bester.
On 29
April 2003, Dr Willem Boshoff (Boshoff), one of the trustees, wrote
to Bester on behalf of the board, informing him of the
decision to
appoint Ms Bester. The very next day, 30 April 2003, Bester withdrew
his resignation from the board of trustees and
re-assumed his
position as chairman.
As stated above, Bester testified that he did not report his
appointment as CEO to the Registrar, as he was not accountable in
that regard. As regards the knowledge which the appellants had
regarding Bester’s appointment, reference was made to an
e-mail dated 13 May 2004 and sent by Mr Paul Bosch (Bosch), the
senior financial analyst of the Council, to Werth. This e-mail
concerned the ‘Selfmed 2003 returns’. One of the queries
posed by Mr Bosch reads as follows –
‘
[T]rustee
remuneration should include remuneration paid to the executive
Chairman, in whatever capacity the remuneration is paid.
Refer to
section 57(8) and Regulation 6(A).’
In response to this query, Bester addressed an e-mail to Bosch dated
3 June 2004, which contained, inter alia, the following
statements –
‘
The
reference to “executive Chairman” is not correct and the
trustees would be much obliged to be informed as to how
the status
was awarded to the scheme by your office. There is a formal
employment contract in place and it definitely does not
refer to
executive chairman. As he is a fulltime employee, he receives no
remuneration in his capacity as trustee. Any entitlement
he may have
had to receive fees in connection with his duties as trustee, was
formally waived. This was officially disclosed to
the members at the
2003 AGM last year and has been minuted. Please take note of the
transparency.’
In
this e-mail, Bester also indicated that the board wanted a fairly
urgent meeting with the Registrar and ‘relevant senior
members’ to discuss their concerns and queries.
In a
further e-mail addressed by Bosch to Werth and Bester, Bosch
requested copies of the employment contracts and job descriptions
of
the Marketing Director and Chief Executive Officer, as also a copy
of the latest evaluation/results of the Marketing Department.
Bosch
indicated that this documentation was requested in view of the
proposed meeting and that, once the documentation had been
received,
a meeting could be arranged.
Selfmed
responded to this e-mail with a letter dated 21 July 2004 addressed
by its attorney to the Registrar stating, inter alia,
that ‘prior
to the appointment of its chief executive officer and its marketing
director, our client discussed their appointment
with and obtained
approvals from the Registrar’s Office’. The attorney
also indicated that Selfmed was perturbed
about the demand for the
documents requested by Bosch as a pre-condition for the meeting
requested by Selfmed.
On the
next day, 22 July 2004, Theys, on behalf of the Registrar,
instructed Selfmed to supply copies of the two employment contracts
within 7 days of the date of that letter. This instruction was given
in terms of s 44(5)
(b
) of the Act.
5
The two contracts were then provided to the Registrar before the end
of July 2004.
Burton-Durham
testified that, in about May 2004, rumours started to circulate at
the Office of the Registrar to the effect that
Mr Bester had been
appointed to the post of CEO/Executive Chairperson, and that Ms
Bester had been appointed to the position
of Marketing Director.
Prior to receipt of the contracts of employment, there had been no
correspondence or communication from
Selfmed to the Council or the
Registrar’s Office which had identified Ms Bester as the
person who had been appointed as
Marketing Director and Mr Bester as
the person who had been appointed as CEO.
On 30 September 2004, Theys sent a letter to Werth, the relevant
part of which read as follows –
‘
This Office has perused the
documents
6
forwarded to it by yourself.
Based on the perusal of these documents this Office deems it
necessary to invite the trustees of the
scheme,
excluding
the chairperson
, to
discuss the appointment by the Board of Trustees of the chairman to
the position of Executive Chair and CEO of the scheme,
as well as of
the remuneration attaching to such position.
Further,
this office also wishes to raise the appointment of the chairperson’s
wife to the position of Marketing Director
of the scheme; what steps
were taken to avoid potential conflicts of interest and whether any
records were kept of the process.’
(Emphasis in
original.)
Once
again, Selfmed reacted through a very lengthy letter addressed to
the Council by their attorney, dated 12 October 2004. The
letter
stated that the Selfmed board did not have a position of ‘executive
chairperson’. As regards the position
of CEO, the letter
stated that the trustees’ decision to appoint a CEO was not
only put to and approved at the annual general
meeting, but was also
discussed with the Registrar’s Office in advance. The success
of the scheme in increasing its reserves
from a zero base in 1999 to
the current R100 million, the rendering of sound financial
statements and other operational successes
indicated that the
trustees’ decision was the correct one. The letter then dealt
with the appointment of Ms Bester to the
position of Marketing
Director and the steps that had allegedly been taken to avoid a
potential conflict of interest.
The
proposed meeting took place on 15 October 2004, attended by
Burton-Durham, Theys, Bosch and Kolver, representing the Council
and
the Office of the Registrar, Selfmed trustees Bartlett, Boshoff and
Mr Gus Gregory, and Mr J Araujo (Selfmed’s attorney).
Burton-Durham kept cryptic notes during the course of this meeting,
some of which were referred to in evidence. There was a debate
concerning the distinction between the role of the board of trustees
and the principal officer as the executive officer of the
medical
scheme. Theys stressed that the principal officer should be the
executive officer, that this was a governance model which
had been
followed all around the world, and that the situation at Selfmed was
a departure from this model. Kolver indicated that
the rules only
provided for a principal officer and not for the position of a CEO.
It is
important to note that, at this meeting, Theys, the head of
compliance of the Office of the Registrar, once again asked
why the
minutes of the meetings at which Bester and Ms Bester had been
appointed had still not been made available to the Registrar,
despite repeated requests.
Burton-Durham
testified that the Registrar’s Office was not satisfied that
the issues raised by Theys
7
had yet been satisfactorily resolved. Although the allegation that
Bester had appointed himself as CEO had never been made expressly
by
anybody at the Office of the Registrar after the meeting of 15
October 2004, there was a definite perception that this is
what had
occurred. As regards Ms Bester’s appointment as Marketing
Director, Burton-Durham stated that, had he known that
the person
being considered for appointment was a wife of one of the trustees,
he would have advised that Selfmed desist from
continuing to
consider such application.
According
to Burton-Durham, at the meeting of 15 October 2004 Boshoff
undertook to furnish the Office of the Registrar with the
outstanding information (particularly the minutes of the relevant
meetings of the board). To his knowledge, such information
was still
outstanding. Burton-Durham was adamant that it could thus not be
said that the meeting of 15 October 2004 had resolved
the issues
raised in Theys’ letter dated 30 September 2004. He
(Burton-Durham) had briefed the Registrar (Masobe) on what
had
happened at the meeting and advised the latter accordingly.
On 13 May 2005, Theys addressed another letter to Werth. The letter
stated that –
‘
[T]his
Office. . . can find no provision in the rules of the scheme for an
executive chairperson. This kind of position also flies
in the face
of the King Report on governance, which advocates a division of the
powers between the chairperson and the principal
officer (CEO). As
neither the rules nor corporate governance model make provision for
the position of an executive chairperson,
there is no basis for the
scheme to have such a position. The creation of this position is
accordingly ultra vires the rules of
the scheme.’
Selfmed’s response, dated 27 May 2005, was vague and
unsatisfactory. Firstly, the board advised Theys that Selfmed had
sought a rule amendment to permit a trustee to also be principal
officer.
8
The board noted the Registrar’s contention that the position
of executive chairperson was ultra vires the rules of the
scheme.
According to the letter –
‘
We are considering addressing
this title. We assume that you are not suggesting that it was ultra
vires for the scheme to conclude
the employment contract with Mr
Bester in terms of which he was appointed chief executive.’
Since the
board must have known that this was exactly what the Registrar was
suggesting, this response appears to be almost deliberately
naive.
The
Registrar, Patrick Masobe (Masobe), also testified. He had filled
the position of Registrar since 2000. Much of his evidence
co-incided with that of Burton-Durham. As far as he was concerned,
neither the appointment of Bester as CEO, nor the appointment
of Ms
Bester as Marketing Director, had been resolved to the satisfaction
of his Office which was thus engaged in a number of
ongoing
enquiries in this regard.
In
late 2005, the Council published its annual report for the 2004/5
year (the annual report), in terms of s 14 of the Act. Publication
of this report was to the relevant Minister and thereafter to the
general public, including brokers, consultants, and other medical
schemes. In addition, the report appeared on the website of the
Council and was further distributed to the public at a press
conference as well as at a so-called ‘roadshow’ held by
the Council. The section of the report headed ‘Registrar’s
Review’ contained the passage set out in para 1 above.
Selfmed and Bester objected to those portions of the passage
highlighted in para 1 above. They responded by instituting a
defamation
action against the Council and the Registrar. According
to the respondents’ particulars of claim, the Registrar had
wrongfully
defamed each of them by uttering and publicising the
abovementioned words which, according to the respondents, had the
following
meaning –
‘
6.1 The first plaintiff is
corruptly and/or dishonestly administered in that:
(a) The second plaintiff appointed himself as the first
plaintiff’s “principal officer and CEO”;
(b) There have been “dubious appointments of
family members to the (first plaintiff’s) executive management”
and
this “matter has not yet been resolved”;
6.2 The second plaintiff is corrupt and/or dishonest in
that:
(a) He appointed himself as the first plaintiff’s
“principal officer and CEO”;
(b) He has been party to the “dubious appointments
of family members to the scheme’s executive management”
and
this “matter has not yet been resolved”;
6.3 There was corporate misgovernance in the
administration of the first plaintiff in that the trustees permitted:
(a) the improper appointment of the chairperson as the
CEO and principal officer of the first plaintiff;
(b) the improper appointments of family members of
trustees and staff of the first plaintiff to executive management
positions in
the first plaintiff.
6.4 The second plaintiff has been party to corporate
misgovernance in the administration of the first plaintiff in that:
(a) acting corruptly and without approval, he appointed
himself as CEO and principal officer of the first plaintiff;
(b)
he permitted the improper appointments of family members to the first
plaintiff’s executive management. . .’
It was
further submitted on behalf of the respondents that, in publishing
this extract, the appellants intended to damage the
respondents and
to injure them in their reputations, and that the respondents had
suffered damages as a result, each in the amount
of R200 000.
In
response, the appellants denied the allegations, in particular the
allegation that the extract was wrongful and defamatory
of the
plaintiffs. The appellants then, inter alia, pleaded specifically as
follows: the annual report was published in the discharge
of a
statutory duty imposed by s 14 of the Act, read with the Act as a
whole; it was a public document which is, inter alia,
tabled in
Parliament; members of the public generally have a right to receive
the contents of the annual report; the contents
of the annual report
relating to the plaintiffs were relevant to the statutory functions
performed by the defendants in terms
of the Act; the annual report
was published in good faith pursuant to the statutory functions
performed by the defendants in
terms of the Act; and that, in the
premises, publication of the annual report occurred on a privileged
occasion and the appellants’
conduct was not unlawful.
9
As stated above, the court below held that the words complained of
in the extract from the Annual Report were defamatory of both
Bester
and of Selfmed as an organisation. As regards the latter, Rabie J
stated that the reader of the report would form the
view that
Selfmed was being corruptly and dishonestly administered in doing
and/or allowing the actions referred to. The court
a quo also held
that –
‘
That
was also clearly the intention of the Registrar when he wrote this
report. He started off by saying that they had “questioned”
the issues mentioned by him and ended off by saying that the matter
“has not yet been resolved”. This would enforce
the view
of any reader to what Selfmed and Mr Bester did was,
inter
alia
, dishonest and
corrupt and generally improper.’
Rabie
J did not uphold either the defence of privilege or the defence of
statutory immunity raised by the appellants and, as indicated
above,
awarded each of the appellants R200 000 as damages for defamation.
He also made a negative credibility finding against
Masobe, holding
that Masobe’s evidence was not only inherently contradictory
and contradictory to the evidence of Burton-Durham,
but also so
improbable that it had to be regarded as untrue. I will return to
this at a later stage.
The
delict of defamation is the unlawful publication,
animo
iniuriandi
, of a defamatory statement concerning the
plaintiff. The plaintiff must therefore allege and prove that the
statement complained
of refers to him or her.
10
The
respondents argued that they had pleaded that the extract from the
Annual Report was ‘of and concerning them’
and that the
appellants had admitted this. So, it was contended, it did not
behove the appellants now to deny that it referred
to Selfmed. In
order to deal with this submission, it is necessary to consider the
pleadings in this regard.
The paragraph in the particulars of claim which the appellants
admitted read as follows –
‘
The
registrar’s review contained a section under the heading
“Governance of Medical Schemes”. This section dealt
with
“Governance Failure within the Schemes”. A number of
examples of corporative misgovernance were given. In this
section,
the defendants published,
of
and concerning
the
plaintiffs, the following extract. . . .’
(Emphasis
added.)
It is
important to consider the admission on its own and then in the
context of the remainder of the relevant parts of the plea.
Clearly,
what was admitted by the appellants was the simple fact that the
passage as a whole had been published and that it referred
to
Selfmed and Bester. It certainly cannot be taken to mean that the
appellants were admitting that the allegedly defamatory
parts of the
statement related to both respondents. Put differently, the passage
as a whole, including the heading, tells the
reader that it deals
with the Regulator’s governance concerns involving, inter
alia, the second respondent (who is not
named). It does not follow
that Selfmed, qua Selfmed, falls within the ambit of the part of the
passages complained of, even
assuming them to be defamatory. This
view of the admission is substantiated by the remaining parts of the
plea, which emphatically
deny the defamatory nature of the comments
in relation to either or both of the respondents.
As regards the question whether the statements complained of
referred to Selfmed as such, the following statement by FDR Brand
is
apposite –
‘
The plaintiff must allege and
prove that the statement complained of refers to him or her. The test
whether the statement refers
to the plaintiff is objective: would the
ordinary reasonable man to whom the statement is published be likely
to understand the
statement in its context to refer to the
plaintiff?’
11
The
statements complained of by the respondents do
not
in fact
refer to Selfmed as such. The statements concern ‘the scheme’s
chairperson’ and ‘dubious appointments
of family members
to the scheme’s executive management’. Properly construed
these statements appear to reflect upon
individual officers of
Selfmed, but not upon Selfmed as an entity in its own right.
Even
if one accepts, for the sake of argument, that the appellants
admitted that the extract was ‘of and concerning them’,
the respondents would nevertheless fail in the absence of a finding
that the statements complained of were in fact defamatory.
The
determination of whether a publication is defamatory and therefore
prima facie wrongful involves a two-stage enquiry. The
first is to
determine the meaning of the publication as a matter of
interpretation and the second whether that meaning is defamatory.
12
In answering the first question –
‘
[A] court has to determine the
natural and ordinary meaning of the publication: how would a
reasonable person of ordinary intelligence
have understood it? The
test is objective. In determining its meaning, the court must take
account not only of what the publication
expressly conveys, but also
of what it implies, ie, what a reasonable person may infer from it.
The implied meaning is not the
same as innuendo, which relates to a
secondary or unusual defamatory meaning that flows from knowledge of
special circumstances.
. .
It
may be accepted that the reasonable person must be contextualised and
that one is not concerned with a purely abstract exercise.
One must
have regard to the nature of the audience.’
13
In
Tsedu v Lekota
2009 (4) SA 372
(SCA) para 13, Nugent JA,
in examining the assumptions that ought to be made when answering
the question of how allegedly defamatory
statements would be
understood in their context by an ordinary reader, cited the
following helpful extract from a judgment of
an English court:
14
‘
The
court should give the article the natural and ordinary meaning which
it would have conveyed to the ordinary reasonable reader
reading the
article once. Hypothetical reasonable readers should not be treated
as either naive or unduly suspicious. They should
be treated as
capable of reading between the lines and engaging in some
loose-thinking, but not as being avid for scandal. The
court should
avoid an over-elaborate analysis of the article, because an ordinary
reader would not analyse the article as a lawyer
or an accountant
would analyse documents or accounts. Judges should have regard to the
impression the article has made upon them
themselves considering what
impact it would have made upon the hypothetical reasonable reader.
The court should certainly not take
a too literal approach to its
task.’
In
this case, the ordinary reasonable reader would not be just any
member of the public. Counsel for both parties agreed that
the
relatively restricted audience would consist of persons such as
brokers, medical scheme administrators, the relevant Minister,
members of medical schemes, including Selfmed, and so on. Moreover,
Bester is not mentioned by name, so that the group of people
who
would have known that he was being referred to, would be even
smaller. As no secondary meaning is relied upon by the respondents,
the question is how a reasonable person of ordinary intelligence
forming part of the abovementioned group would construe the
statements complained of.
It is
also important to look, as the ordinary reader would, at the
statements complained of in the context of the extract as a
whole.
The respondents relied on certain parts of the extract and attempted
to show that these particular parts, excised from
the extract and
standing alone, were defamatory. This kind of selective approach is
not acceptable. The extract commences by
stating that we (the
Registrar) ‘have
questioned
several issues concerning
governance at Selfmed’. (Emphasis added.) One of such issues
was the manner in which the scheme’s
chairperson ostensibly
appointed himself the principal officer and CEO. The word
‘ostensibly’ is important, in that
it means apparently
true, but not necessarily so.
15
This is not set out as a statement of fact, rather as one of the
issues questioned by the Council during the relevant year. The
‘other dubious appointments of family members to the scheme’s
executive management’ was then said to be ‘also
under
scrutiny’. Importantly, it does not state who is responsible
for making the dubious appointments. The word dubious
is also
significant. While its dictionary meaning is (a) hesitating or
doubting or (b) not to be relied upon,
16
the reasonable reader of ordinary intelligence would in my view
understand this as casting some doubt over the appointment of
family
members to the scheme’s executive management, but not with any
finality. Once again, we are not dealing with a statement
of fact,
but rather with an issue that is still under investigation. This
impression is strengthened by the closing words of
the extract,
namely ‘this matter has not yet been resolved’. It
leaves open the very real possibility of rebuttal.
In my
view, the ordinary reader would have understood the statements, read
in the context of the extract as a whole, to mean that
the
appointment of Selfmed’s chairperson as the principal officer
and CEO, as well as the somewhat doubtful appointments
of family
members to Selfmed’s executive management, were matters of
governance being questioned and investigated by the
Council, without
any final conclusion having been reached.
A
publication is defamatory if it has the ‘tendency’ or is
calculated to undermine the status, good name or reputation
of the
plaintiff.
17
The question to be asked is whether the statement concerned is
likely to lower a plaintiff in the estimation of right-thinking
members of society. In my view, the statements complained of by the
respondents, read (as they must be) as part of the whole
extract
indicating an unresolved and ongoing investigation into certain
governance issues at Selfmed, cannot be said to have
been likely to
lower either Selfmed or Bester in the estimation of those
right-thinking members of society who would have read
the
Registrar’s annual report. There were references in the annual
report to governance issues at other medical schemes
of concern to
the appellants. The ordinary reasonable reader would have read the
extract complained of in that light –
a regulator raising
concerns for debate, discussion and resolution with the medical
scheme concerned. Most importantly, the reasonable
reader, whilst
not being overly sensitive or unduly critical, would not have read
the statements selectively as the respondents
did. Read in their
entirety, the reasonable reader would not have read the statements
complained of as assertions of fact. Nor
would he or she have
understood them as undermining the status, good name or reputation
of Bester and Selfmed.
As
indicated above, the court a quo made a negative credibility finding
against Masobe. I do not agree with this assessment of
Masobe’s
evidence. However, even if I were entirely to disregard Masobe’s
evidence, this would not alter my view
as to the natural and
ordinary meaning of the extract and the manner in which a reasonable
person of ordinary intelligence would
understand the words alleged
to be defamatory.
That
is the end of the matter as far as the merits are concerned.
However, having regard to the common cause facts, the evidence,
including the correspondence set out earlier in this judgment, and
the Registrar’s statutory role, if we had been called
upon to
decide the question of qualified privilege, I would probably have
leaned in favour of the appellants. Bureaucrats in
a regulatory role
are often criticised for not fulfilling their statutory duties and
obligations. In this case, in my view, the
bureaucrats concerned
acted commendably, albeit not perfectly.
It
follows from my conclusion on the appeal that the cross appeal must
be dismissed.
In the
event, the following order is made:
The
appeal is upheld with costs.
The
order of the court below is replaced with the following order:
‘
The claims are dismissed with costs’.
3. The cross-appeal is dismissed with costs.
______________________
B j van heerden
JUDGE OF APPEAL
appearances:
appellantS: s budlender
Instructed by Rosin Wright Rosengarten, Johannesburg
Claude Reid Inc, Bloemfontein
respondeNTS: j campbell sc
Instructed by Webber Wentzel Bowens, Johannesburg
Webbers, Bloemfontein
1
In
terms of s 57(4)
(a)
of the Act, the board of trustees is
obliged to appoint a principal officer. There is very little in the
Act dealing with the
role of a principal officer, but it emerged
from the testimony of officials representing the second appellant,
the Registrar
of Medical Schemes (the Registrar) that, in accordance
with international best practice, it is the principal officer to
whom
both regulators and the board of trustees look for
accountability.
2
Bester’s
advice to the board should be viewed against the background of the
fact that, in terms of Selfmed’s Rules,
the principal officer
is disqualified from being a member of the board of trustees. It is
also clear from the Rules that the
duties of the principal officer
are to act as an executive officer of the scheme on the direction
and authority of the board
of trustees. In the
Explanatory
Memorandum
to the
Model Rules for Medical Schemes registered
under the Medical Schemes Act, 1988 (Act No. 131 of 1998)
, it is
stated that, although not legally disqualified, it is advisable that
the principal officer does not become a trustee in
view of the fact
that the board appoints him or her and there could be a conflict of
interest. If provision is made for such
appointment, then the
principal officer should be an
ex officio
member of the
board. Moreover, in the second King Report on Governance in South
Africa in 2002 (‘King II’), Chapter
2, in dealing with
the ‘Role and Function of the Chairperson’, recommended
that there should be a clearly accepted
division of responsibilities
at the head of the company to ensure a balance of power and
authority, so that no one individual
has unfettered powers of
decision-making. The chairperson of the board should preferably be
an independent non-executive director.
Given the strategic
operational role of the chief executive officer, this function
should be separate from that of the chairperson.
3
This
despite the fact that Mr Burton-Durham had emphasised, in his
abovementioned letter to Bester dated 23 April 2003, that the
process of interview should be ‘open and transparent’
and that the proceedings should be ‘accurately and properly
minuted’.
4
This
would also seem to be contrary to the guidelines provided by
Burton-Durham; it certainly cannot be said that Bester recused
himself from ‘any proceedings around the interview and other
processes concerning the matter’.
5
In
terms of s 44(5)
(b)
, the Registrar has the power to direct a
medical scheme to furnish him or her with documents or information
relating to the financial
or other affairs of the medical scheme
within a specified period.
6
The
contracts of employment sent by Werth to Theys in July 2004.
7
See
para 37 above.
8
This
attempt by the board to change the rules of the scheme, was rejected
by the Registrar.
9
In
the alternative to the plea of privilege, the appellants relied on a
limitation of liability contained in s 62 of the
Act. It is
not necessary to go into this in any further detail.
10
FDG
Brand ‘Defamation’ in Joubert (ed)
The Law of Law
Africa
(2 ed) vol 7 paras 234 and 243.
11
Brand
op cit para 243.
12
Brand
op cit para 237.
13
Le
Roux v Dey
(2010) 4 SA 210
(SCA) paras 6-7.
14
Simon
Brown LJ in
Mark v Associated Newspapers Ltd
2002 EMLR 839
para 11.
15
The
Concise Oxford English Dictionary
10 ed (revised).
16
The
Concise Oxford English Dictionary
.
17
Le
Roux v Dey
para 8.