About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2015
>>
[2015] ZAGPPHC 932
|
|
Spectramed Medical Scheme v Registrar of Medical Schemes and Others (61312/2015) [2015] ZAGPPHC 932 (24 August 2015)
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG DIVISION.
PRETORIA
Case number: 61312/2015
DATE: 24 AUGUST 2015
In the matter between:
SPECTRAMED MEDICAL
SCHEME
..................................................................................
Applicant
And
THE REGISTRAR OF MEDICAL
SCHEMES
........................................................
First
Respondent
JAN
SWANEPOEL
..................................................................................................
Second
Respondent
RESOLUTION
HEALTH
..........................................................................................
Third
Respondent
Heard: 19 August 2015
Delivered: 24 August 2015
JUDGMENT
A.A. LOUW J
Introduction
[1] The issue to be determined is
whether the first respondent (the “Registrar”) is
compelled to consider a proposed
amalgamation (which has yet to be
lodged) between the applicant (“Spectramed”) and the
third respondent (“Resolution
Health”) in circumstances
where Spectramed is under investigation for alleged irregularities
and mismanagement of trust funds
and where Resolution Health is in
the process of being liquidated.
The
Medical Schemes Act 131, of 1998
[2] In the long title of this Act (“the
Act”) it is stated that one of the purposes of the Act is
protect the interests
of members of medical schemes. If one has
regard to
section 7(a)
of the Act it is the first listed function of
the council for medical schemes (the Council) to protect the
interests of the beneficiaries
at all times.
[3] It is thus the Council as
represented by its main executive official, the registrar, to at all
times act in the interests of
members of medical schemes and to do so
scrupulously. This duty is of significance as billions of rands are
controlled by medical
schemes in South Africa. Medical aid schemes
are non-profit organisations. All assets of these schemes, whether
fixed assets, reserves
or working capital have been derived from
contributions by members. Thus, in this sense, a medical scheme is
the custodian of public
money.
[4] It is in the light of this
background (briefly sketched as I heard this case in the urgent court
on 19 August and deliver judgment
by 24 August) that I have to
consider whether I should order the registrar to consider the
proposed amalgamation (in respect whereof
the exposition of the
transaction as required by
section 63
of the Act, still has to be
drafted) and furthermore compel him to take such a decision on or
before 10 November 2015.
The urgency
[5] The urgency is alleged to be that
the process of amalgamation has to go through its various steps,
outlined hereunder, and finalized
by the lastmentioned date so that
the new membership contributions and benefits can become operative
from 1 January 2016.
[6] The process of amalgamation is
regulated by
section 63
of the Act. It is necessary to set out the
applicant’s envisaged timetable for complying with the various
requirements of
section 63
as this forms the basis of the alleged
urgency. I therefore quote par 49 of the founding affidavit:
“49. The timetable for hearing
this application has been designed to ensure that the regulatory
processes relating to amalgamations
of medical schemes as set out
above can be completed in time for the amalgamation to proceed with
effect from 1 January 2016. In
this regard:
49.1. Under the Rules of the
amalgamated scheme, members will have one month’s notice to
select their benefit options for
the 2016 calendar and benefit year.
49.2. A final decision by the Registrar
on the amalgamation will accordingly be required by 10 November 2015
for members to be notified
of the decision in time to exercise their
election in respect of benefit options in 2016.
49.3. In terms of subsections (4) and
(5) of
section 63
, the minimum period allowed between lodgement of
the exposition document and scheme voting results with the Registrar
and the Registrar’s
final decision on the amalgamation is 42
days.
49.4. So the exposition document and
scheme election results will have to be lodged with the Registrar by
the end of September 2015.
49.5. The process of appointing an
independent external party to conduct the election on the
amalgamation, printing copies of the
abridged exposition document,
distributing these copies to members with 21 days’ notice of an
election on the proposed amalgamation,
counting the ballots and
preparing a report on the election for the Registrar takes at least
five weeks.
49.6. So if the election is not going
to be an exercise in futility and result in the wasted expenditure of
millions of rands across
both schemes, an order of this Court will be
required by Monday 24 August at the latest. ”
[7] On 18 February 2013, an inspection
was ordered into the affairs of Spectramed including any associated
institutions, its board
of trustees, principal officer and other
officers, in terms of
section 44
of the Act and section 2 of the
Inspection of Financial Institutions Act, 80 of 1998 (“the
Inspection Act”).The inspection
covered the period from January
2009 to February 2013.
[8] The inspection was ordered after
Spectramed’s audit and risk committee was summarily dissolved
and its erstwhile chairman
advised the Regisrar’s office of
alleged irregularities and mismanagement of trust funds at
Spectramed.
[9] The report relating to this
inspection (the first report) was received by the registrar during
May 2015. In the meantime a second
inspection was ordered in November
2014 and January 2015. This related to the procurement of
administration and managed care services.
The second report was
submitted to the registrar’s office on 21 April 2015.
[10] After receipt of these two reports
the registrar sought the advice of senior and junior counsel as to
the most appropriate
regulatory intervention to be pursued based on
those reports. The advice received was to conduct a third inspection
into the corporate
governance of Spectramed since the first
inspection report was dated as it related to the period from 2009 to
February 2013. This
was also considered important given the new
developments that had occurred on or before October 2014, namely, the
establishment
of a new audit committee, the appointed of a new
principal officer, a new chairman and two additional trustees.
[11] Spectramed opposes this third
inspection. It asks in part B of the application (which is not before
me now) that the third
inspection decision be reviewed and set aside
save in so far as it relates to item 3.9 of the appointment letter.
This para refers
to the change of administrators of the scheme.
[12] It seems entirely reasonable to me
that the registrar is entitled to an up to date report in ordered to
take informed decisions
as to its further conduct vis-a-vis
Spectramed. I cannot see how I can find on the papers that the
decision to asks for this further
report is mala fide or that the
registrar deliberately wants to sabotage the amalgamation. As the
regulator of the industry the
registrar is entitled to have a further
investigation done.
[13] On this finding I cannot grant a
declarator that the registrar is to consider the envisaged
application and so much less can
I order it to come to a final
decision by 10 November 2015. As the exposition does not yet exists,
and it is not known what further
information the registrar may call
for, one cannot now speculate as to the amount of time that will be
needed by the registrar
to take a responsible decision. The orders
asked for seem to me to be an unjustified interference with the
duties of the registrar
and a trespassing onto his terrain as
regulator. Of course, I do not mean by this statement that a court
can never interfere in
such an administrative law process, but it is
simply not warranted to do so in the present circumstances.
[14] There is therefore no prima facie
right or urgency to issue the declarator as asked for in prayer 1.2.
Consequently the relief
in prayer 1.3 falls away. That leaves the
relief in prayer 1.4 to be considered.
Prima facie right
[15] The latter prayer is for an
interim interdict pending review namely that pending decision on part
B of the application the
second respondent be prohibited from
proceeding with the inspection under the certificate issued to him on
17 July 2015. Such an
interim interdict is provided for in section
8(1 )(e) of PAJA.
[16] In regard to a prima facie right
the applicant argues as follows in para 69 of its written argument:
“The third inspection decision
constitutes an administrative action in terms of PAJA. The Registrar
took the third inspection
decision as a decision related to the first
and second reports. The purpose was ostensibly to merely update the
information available
to the Registrar. The decision of the Registrar
to direct the third inspection on the overbroad terms in the
appointment certificate
and to take refuge behind such inspection as
a reason not to consider the amalgamation is an unlawful exercise of
public power.
It is irrational and unlawful. The third inspection has
no ostensible relevance to the questions the
Registrar is called upon to consider
when assessing an amalgamation of schemes. The Applicant has
established a prima facie right
to review and set aside the
Registrars decision to again appoint an inspector. This decision
impacts on the rights of the Applicant
in the sense explained by the
SCA in Greys Marine Hout Bay (Pty) Ltd and Others v Minister of
Public Works and Others (supra).”
[17] I do not see how it can be argued
that the registrar takes “refuge” behind the third
inspection as a reason not
to consider the amalgamation. In effect
the applicant asks me to find that the decision to direct a third
inspection is not bona
fide, irrational and unlawful. On the papers I
cannot find that. On the contrary, the decision to me seems
reasonable. I can also
not find that the items to be investigated are
not relevant to assessing an amalgamation of Spectramed with another
scheme. The
applicant has failed to establish a prima facie right.
Thus the relief in prayer 1.4 can also not be granted
[18] Belatedly the applicant, in
argument, relied on a right to privacy in this regard. Whilst I
accept in principle that a corporation
has a right to privacy, it is
so attenuated - put differently, limited in terms of section 36 of
the Constitution - that I doubt
it exists at all in the present
circumstances. Surely the registrar has the right to investigate the
use of public money in the
terms as set out in the mandate to the
second respondent. Were such a right not to be recognised in
circumstances like the present,
any attorney, or chartered accountant
for that matter, can block or frustrate an investigation into their
affairs by the Law Society
or whatever other regulatory authority.
[19] In any event no reliance on such a
right was alleged in the founding papers.
The application is dismissed with
costs, including the costs of two counsel.
A.A. LOUW
Judge of the High Court