Guardrisk Insurance Company Ltd. v Registrar of the Medical Schemes (168/07) [2008] ZASCA 39; [2008] 3 All SA 431 (SCA); 2008 (4) SA 620 (SCA) (28 March 2008)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2008
>>
[2008] ZASCA 39
|

|

Guardrisk Insurance Company Ltd. v Registrar of the Medical Schemes (168/07) [2008] ZASCA 39; [2008] 3 All SA 431 (SCA); 2008 (4) SA 620 (SCA) (28 March 2008)

Links to summary

THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Case No: 168/07
REPORTABLE
In
the matter between:
GUARDRISK INSURANCE COMPANY LIMITED
...
Appellant
and
REGISTRAR OF MEDICAL SCHEMES ... First
Respondent
COUNCIL FOR MEDICAL SCHEMES ... Second
Respondent
Coram:
HOWIE
P, HEHER, PONNAN JJA, SNYDERS AND KGOMO AJJA
Heard:
19
FEBRUARY 2008
Delivered:
28
MARCH 2008
Summary:
Interpretation
of ‘business of a medical scheme’ in the
Medical Schemes Act 131
of 1998
and ‘accident and health policy’ in the Short Term
Insurance Act 53 of 1998 – ascertainment of whether selling certain
policies
constitutes the business of a medical scheme.
Neutral Cititation:
This
judgment may be referred to as
Guardrisk
Insurance Company Ltd v Registrar of Medical Schemes
(168/07)
[2008] ZASCA 39
(28 MARCH 2008)
J U D G M E N T
SNYDERS AJA/
SNYDERS AJA:
[1] The appellant
is a registered short term insurer in terms of the Short Term
Insurance Act 53 of 1998 (the STI Act). The respondents
are
respectively the Registrar and Council for Medical Schemes duly
established and appointed in terms of the Medical Schemes Act
131 of
1998 (the MS Act).
[2] In the
Johannesburg High Court the respondents sought and obtained an
interdict before Goldblatt J against the appellant who now
appeals
that order with the leave of the court a quo.
[3] The interdict
prohibits the appellant from marketing and selling two of its
policies named AdmedGap and AdmedPulse. The interdict
was obtained on
the basis that the sale of these policies constituted the ‘business
of a medical scheme’
1
and as the
appellant is not registered
2
in terms of the MS
Act, should be prohibited from marketing and selling same.
[4] The ‘defined
events’ insured against by both policies are the necessity for an
insured to be confined to hospital and having
to undergo medical,
surgical or treatment procedures whilst in hospital, chemotherapy,
radiotherapy or kidney dialysis on an out-patient
basis or any other
out-patient treatment as agreed to by the insurer. The benefits in
terms of the policies are the cost of the service
for a registered
medical practitioner less the rate for that service as listed by the
National Health Reference Price List (NHRPL),
limited to three and a
half times the NHRPL rates and an annual maximum specified in the
policy. The differences between the cost
of the medical service and
the NHRPL are likely to be significant because of the nature of the
defined events. The benefits are paid
to the insured with no
prescription as to how they are to be utilised.
[5] In the court a
quo the case was argued and decided on the interpretation of the
definition of ‘business of a medical scheme’
in s 1 of the MS Act
and the definition of ‘accident and health policy’ in the STI
Act. That is also the case on appeal. The
respondents contended that
the appellant’s activities fell within the ambit of the ‘business
of a medical scheme’, whereas
the appellant contended that its
activities fell within the scope of an ‘accident and health policy’
but did not constitute the
‘business of a medical scheme’ in
contravention of the MS Act.
[6] In terms of the
MS Act ‘
“
business
of a medical scheme” means the business of undertaking liability in
return for a premium or contribution-
to make provision for
the obtaining of any relevant health service;
to grant assistance in
defraying expenditure incurred in connection with the rendering of
any relevant health service; and
where applicable, to
render a relevant health service, either by the medical scheme
itself, or by any supplier or group of suppliers
of a relevant
health service or by any person, in association with or in terms of
an agreement with a medical scheme’.
[7] An ‘accident
and health policy’ is included in the definition of ‘short-term
policy’ in the STI Act and the first is defined
as
‘
a
contract in terms of which a person, in return for a premium,
undertakes to provide policy benefits if a –
disability event;
health event; or
death event,
contemplated in the
contract as a risk, occurs, but excluding any contract –
of which the
contemplated policy benefits –
(i) are something other
than a stated sum of money;
are to be provided upon
a person having incurred, and to defray, expenditure in respect of
any health service obtained as a result
of the health event
concerned; and
are to be provided to
any provider of a health service in return for the provision of such
service; or
(e) (i) of which the
policyholder is a medical scheme registered under the Medical Schemes
Act, 1967 (Act 72 of 1967);
(ii) which relates to a
particular member of the scheme or to the beneficiaries of such
member; and
(iii)
which is entered into by the scheme to fund in whole or in part its
liability to such member or beneficiaries in terms of its
rules; and
includes a reinsurance policy in respect of such a policy’.
[8] The court below
decided that:
‘
[15]
If
(a), (b) and (c) in the definition of a medical scheme are to be read
conjunctively, it would, in my view, lead to results which
clearly
could not have been the intention of the Legislature. If a person
made provision for the obtaining of a relevant health service
then
such person would not have to grant assistance in defraying
expenditure incurred in connection with the rendering of such health
service as no expenditure would be incurred. Thus (a) and (b) of the
definition would be in conflict with each other if they were
to be
read conjunctively. However, if (a) and (b) were separated by
“and/or” it would make sense and would give effect and meaning
to
the definition. Similar meaning must be given to the word “and”
between (b) and (c) to make sense of the definition. If the
scheme
itself rendered health services or got a supplier or group of
suppliers to render health services then similarly it would
not need
to grant assistance in defraying expenditure incurred in the
rendering of such health service.
[16] I
am strengthened in my view of a consideration of exclusion (d) in the
definition of an “accident and health policy” in
the STI Act. If
(d)(i), (ii) and (iii) are to be read conjunctively they make no
sense as (ii) and (iii) are in conflict and cannot
be read together
unless the word “and” is read as “and/or”. . . . .
[17]
If the exclusions are to be read disjunctively i.e. separated by
“and/or” then if an insurer provides any of the benefits
the
exclusion is operative and it would preclude an insurer from
providing benefits which constitute the carrying on of the business
of a medical scheme in terms of the MS Act. This would have the
intended effect of rendering the MS Act and the STI Act compatible.
[18] I am accordingly
satisfied that (a), (b) and (c) in the definition of the business of
a medical scheme in the MS Act are to be
read as separate and
distinct activities any of which will result in the undertaker of the
business carrying on the business of a
medical scheme if the activity
is in return for “a premium or contribution”. The word “premium”
is clearly used to cover
an insurance policy providing one or all of
the listed activities.’
[9] The legal
principle
3
that has evolved
regarding the interpretation of the words ‘and’ and ‘or’ in
statutes is clear. In
Ngcobo
v Salimba CC; Ngcobo v Van Rensburg
1999
(2) SA 1057
(SCA) at 1067J-1068B Olivier JA stated:
‘
It
is unfortunately true that the words “and” and “or” are
sometimes inaccurately used by the Legislature and there are many
cases in which one of them has been held to be the equivalent of the
other. . . Although much depends on the context and the
subject-matter.
. . it seems to me that there must be compelling
reasons why the words used by the Legislature should be replaced; . .
. The words
should be given their ordinary meaning “. . . unless
the context shows or furnishes very strong grounds for presuming that
the
Legislature really intended” that the word not used is the
correct one. . . .’
[10] The definition
of ‘accident and health policy’ lists some exclusions in subsecs
(d) and (e). The word ‘or’ used between
subsecs (d) and (e)
indicates that the Legislature was conscious of the difference
between the words ‘and’ and ‘or’ by specifically
using ‘or’
as a link in the one instance and ‘and’ as a connector of the
subparagraphs in subsecs (d) and (e). Hence a contract
that falls
within the ambit of subsec (d) or within the ambit of subsec (e)
would fall within the exclusion provided for. Between
subsecs (d)(ii)
and (d)(iii) the word ‘and’ is used. This differentiation in the
use of ‘and’ and ‘or’ within the same
definition suggests the
ordinary, literal meaning of the words and therefore that the
subsections should be interpreted conjunctively.
That usage has the
effect that only a contract which contains all the elements in
subparagraphs (i), (ii) and (iii) of subsec (d)
will be excluded from
the ambit of a ‘short term policy’.
[11] Such an
interpretation does not create any conflicts within subsec (d), as
the subsection lists different aspects of benefits
of a policy that
falls within the exception. First, the nature of the benefit is dealt
with, namely that it is to be ‘something
other than a stated sum of
money’. Second, the event which triggers the benefit, namely the
insured having incurred the expenditure,
and the purpose of the
benefit, namely the defraying of expenditure consequent upon the
event are both identified. Third, the entity
to whom the benefits are
to be paid is dealt with, ie the service provider. When these three
aspects are all included in a contract
which would otherwise fall
within the definition of an ‘accident and health policy’ that
policy is excluded from the operation
of the STI Act.
[12] It therefore
appears that the Legislature indeed intended the three subparagraphs
of subsec (d) to be read conjunctively and
for the word ‘and’ to
be given its ordinary, literal meaning in order to fully describe the
policy benefit that falls within
the exclusion. There are no
compelling reasons to deviate from the literal meaning of the words
used.
[13] The AdmedGap
and AdmedPulse policies do not provide benefits which fall within
subparagraphs (i) and (iii) of subsec (d) of the
definition. They are
consequently not excluded from it.
[14] Section 2(1)
of the MS Act provides that
‘
if
any conflict, relating to the matters dealt with in this Act, arises
between this Act and the provisions of any other law save
the
Constitution or any Act expressly amending this Act, the provisions
of this Act shall prevail.’
[15] The wording of
the definition of ‘business of a medical scheme’ in the MS Act is
cumbersome. If the word ‘and’ is given
its ordinary, literal
meaning, it suggests that subsecs (a) and (b) are to be read
conjunctively, and with subsec (c), unless subsec
(c) is not
applicable as it is introduced by the words ‘where applicable’.
The use of the words ‘where applicable’ suggests
that what
precedes it is to be read conjunctively, otherwise those words would
have been superfluous. The result of a conjunctive
interpretation is
that any business which undertakes liability in return for a premium
or contribution for all the elements of (a)
and (b), and (c) where
applicable, carries on the ‘business of a medical scheme’ and is
subject to all the provisions of the
MS Act.
[16] This
interpretation does not give rise to a conflict between the
provisions of subsecs (a) and (b). To make provision for obtaining
a
medical service is not the same as defraying expenses incurred in
respect of the rendering of a medical service. Conceivably, ‘to
make provision for the obtaining of any relevant health service’
could mean undertaking to the service provider to make payment
for
all or part of such health service before it is undertaken, which is
quite different to actually assisting in defraying the expenditure
incurred in connection with the rendering of a health service.
[17] In the
predecessor to the MS Act
4
the Legislature
used the word ‘or’ in the corresponding definition of ‘medical
scheme’, which read:
‘
. .
. .
a
scheme established with the object of making provision for –
the obtaining by members
thereof and by dependants of such members, of any service;
the granting of
assistance to members thereof in defraying expenditure incurred by
them in connection with the rendering of any
service; or
the rendering of a
service to members thereof or to dependants of such members, either
by the scheme itself or by any supplier of
a service or group of
suppliers of a service in association with or in terms of an
agreement with the scheme’.
Replacing
‘
or’ in the old
Act with ‘and’ in the MS Act, together with the use of the
introductory words ‘where applicable’ in subsec
(c) indicate that
the Legislature was mindful of the different meanings of ‘and’
and ‘or’.
[18] When the
relevant definitions in the STI Act and the MS Act are read
conjunctively in terms of the ordinary, literal sense of
the words
‘and’ and ‘or’, there is no conflict between them. To
interpret the two definitions in this way honours the ‘well
recognised rule of statutory construction’ which was formulated in
Chotabhai
v Union Government (Minister of Justice) and Registrar of Asiatics
5
and relied upon in
Shaik
v Minister of Justice and Constitutional Development
[2003] ZACC 24
;
2004 (3) SA 599
(CC) at 609 fn14:
‘
(E)very
part of a statute should be so construed as to be consistent, so far
as possible, with every part of that statute, and with
every other
unrepealed statute enacted by the same Legislature.’
[19] The
respondents advanced the argument that the purpose and aim of the MS
Act will be undermined in the event of a literal interpretation
of
the two relevant definitions. In support of this contention the
respondents suggested in the founding affidavit that the appellant’s
policies would encourage younger and healthier members of a medical
scheme to choose to subscribe only to minimum benefits of the
scheme
and supplement their benefits by subscribing to the appellant’s
cheaper policy. As such the viability of a medical scheme
could be
reduced.
[20] This
contention loses sight of several aspects. First, there is no
evidence of an analysis of cost in relation to benefits of
the
appellant’s products compared to cost of membership and benefits
from a medical scheme. Second, the suggestion is vehemently
challenged by the appellant on the ground of absence of factual
support and relevance. Third, although the STI Act does not contain
a
provision similar to s 29(1)(n)
6
of the MS Act, the
appellant is obliged not to ‘unfairly discriminate directly or
indirectly against anyone on one or more grounds,
including race,
gender, sex, pregnancy, marital status, ethnic or social origin,
colour, sexual orientation, age, disability, religion,
conscience,
belief, culture, language and birth”
7
.
[21] Although the
provisions of the MS Act fundamentally changed the operation of
medical schemes in that membership of a medical
scheme and, through
that, access to core health and medical services
8
were made
accessible to a broader spectrum of people, as discriminatory
considerations based on age, sex and health status are no
longer
permissible and differentiation between members may only occur on the
basis of income and number of dependants
9
,
there is no factual indication before us that the policies of the
appellant are undermining or would undermine the MS Act, or would
in
any way affect the viability of medical schemes in general.
[22] Practical
reality has shown that there exists a need for this type of insurance
and there seems to be no reason why it should
not be permitted.
[23] The appeal must succeed. The
parties were agreed that the costs of two counsel were appropriately
incurred in both courts. Consequently
the following order is made:
(1)
The appeal is
upheld with costs, including the costs of two counsel;
(2) The order of the court below is
replaced with the following:
‘
The application
is dismissed with costs, including the costs of two counsel.’
______________________
S SNYDERS
ACTING JUDGE OF APPEAL
AGREE:
HOWIE
P
HEHER
JA
PONNAN
JA
KGOMO
AJA
1
See
the definition of ‘business of a medical scheme’ in s1 of the MS
Act quoted in para 6.
2
Section
20(1) of the MS Act: ‘No person shall carry on the business of a
medical scheme unless that person is registered as a
medical scheme
under section 24.’
3
The
authorities relied upon in the court below are
R
v La Joyce (Pty) Ltd
1957
(2) SA 113
(T) at 116A;
Federated
Timbers Ltd v Bosman
1990
(3) SA 149
(W) at 151F-G and
Binda
v Binda
1993
(2) SA 123
(W) at 125B-126G.
4
The
Medical Schemes Act 72 of 1967 as amended by Act 59 of 1984 and Act
23 of 1993.
5
1911
AD 13
at 24.
6
Section
29(1)(n): ‘The Registrar shall not register a medical scheme under
section 24, and no medical scheme shall carry on any
business,
unless provision is made in its rules for the following matters:…(n)
The terms and conditions applicable to the admission
of a person as
a member and his or her dependants, which terms and conditions shall
provide for the determination of contributions
on the basis of
income or the number of dependants or both the income and the number
of dependants, and shall not provide for any
other grounds,
including age, sex, past or present state of health, of the
applicant or one or more of the applicant’s dependants,
the
frequency of rendering of relevant health services to an applicant
or one or more of the applicant’s dependants other than
for the
provisions as prescribed.’ This section is to be compared with the
previous MS Act 72 of 1967, particularly s 20 thereof
which
contained no similar exclusion of these discriminatory grounds.
7
Sections
9(3) and (4) of the Constitution of the Republic of South Africa 108
of 1996.
8
Section
29(1)(o) and (p):
‘
The
Registrar shall not register a medical scheme under section 24, and
no medical scheme shall carry on any business, unless provision
is
made in its rules for the following matters:…(o) The scope and
level of minimum benefits that are to be available to beneficiaries
as may be prescribed. (p) No limitation shall apply to the
reimbursement of any relevant health service obtained by a member
from
a public hospital where this service complies with the general
scope and level as contemplated in paragraph (o) and may not be

different from the entitlement in terms of a service available to a
public hospital patient.’
Section
20 of Act 72 of 1967, the predecessor to the current MS Act, did not
contain similar provisions.
9
Section
29(1)(n).