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
>>
2012
>>
[2012] ZAGPPHC 142
|
|
Barloworld Medical Scheme and Others v Registrar of Medical Schemes and Others (47707/11) [2012] ZAGPPHC 142 (1 August 2012)
NOT
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT. PRETORIA
(REPUBLIC
OF SOUTH AFRICA)
Case
number: 47707/11
Date:
01/08/2012
In
the matter between:
BARLOWORLD
MEDICAL
SCHEME
..................................................................
Applicant
ALEXANDRA
AITKEN
SMITH
...............................................................................
Applicant
FREEWORLD
COATINGS GLOBAL (PTY)
LTD
…............................................
Applicant
and
THE
REGISTRAR OF MEDICAL
SCHEMES
....................................................
First Respondent
GOLDBLATT,
LEWIS
N.O
. …..............................................................................
Second
Respondent
BAQWA,
SELBY
N.O
............................................................................................
Third
Respondent
TERBLANCHE,
DIANE
N.O
.................................................................................
Fourth
Respondent
JUDGMENT
Pretorius
J
This
is an application for a review and setting aside of the approval by
the first respondent on 1 March 2010 of the revised definition
of
"employer" in the rules of the applicant and reviewing and
setting aside the decision of the second to the fourth
respondents
dated 1 October 2010 dismissing the appeal of the applicant's in
respect of the proposed amendment of the definition
of "employer"
in the rules of the first applicant.
The
respondents indicated in court that the respondents did not oppose
the application for an order in terms of
section 9
of the
Promotion
of Administrative Justice Act 3 of 2000
extending the time period for
the filing of the application to the date on which it was actually
filed.
The
applicants further seek an order directing the first respondent to
approve and register the amended definition of the term "employer"
in
rule 4
of the first applicant's rules.
The
second part of the relief sought in
part 2
of prayer 5 falls away as
rules 12.6
and
30A
of the first applicant's rules were registered on
30 December 2011.
The
applicants and the respondents were ad idem that the crisp issue the
court has to decide is whether or not the proposed amendment
to
Rule
4
of its Rules by the first respondent will render the Rules of the
medical scheme inconsistent with Act 131 of 1998 as is provided
in
section 31 (3) of the Act.
The
court has first to decide what the correct interpretation of the
definition of "a restricted membership scheme" in
section
1, read with section 29 (3) of the Act is.
The
second issue the court has to decide is what the effect and potential
consequences of the proposed amendment will have on the
interpretation of "a restricted membership scheme". The
definition of a restricted membership scheme is:
"'restricted
membership scheme' means a medical scheme, the rules of which
restrict the eligibility for membership by reference
tola) employment
or former employment or both employment or former employment in a
profession, trade, industry or calling;
(b)
employment or former employment or both employment or former
employment by a particular employer, or by an employer included
in a
particular class of employers;
(c)
membership or former membership or both membership or former
membership of a particular profession, professional association
or
union; or
(d)
any other prescribed matter;"
This
definition must be interpreted with reference to section 29 (3) (a)
and (b) of Act 131 of 1998 which reads:
"(3)
A medical scheme shall not provide in its rules-fa) for the exclusion
of any applicant or a dependant of an applicant,
subject to the
conditions as may be prescribed, from membership except for a
restricted membership scheme as provided for in this
Act;
(b)
for the exclusion of any applicant or a dependant of an applicant who
would otherwise be eligible for membership to a restricted
membership
scheme;"
There
is no definition of an open medical scheme. The provisions in section
29 (3) are peremptory. According to these provisions
an open medical
scheme may not in its rules provide for the exclusion of any
applicant, whilst a restricted scheme may not in its
rules provide
for the exclusion of any eligible applicant.
The
proposed amendment to Rule 4 of the first applicant's Rules will
amend the
definition
of "employer" in the Rules of the Scheme to read:
"the
Company [Barloworld] or any subsidiary, associated or affiliated
company, organization or division which has been admitted
to
participating in the Scheme, including any such employer which the
Board permits to continue to participate in the Scheme after
it
ceases to be so related to the Company for any reason (whether such
relationship ceases, without limiting the generality of
the
following, from a change in shareholding or a disposal of assets or
of the whole or part of a division or business) provided
that the
discretion of the Board to allow continued participation must be
exercised at or about the time of and in respect of the
relevant
event" (Court emphasis)
This
amendment must be tested having regard to section 31 (3) (a) of the
Act which provides:
"(3)
On receipt of a written notice from a medical scheme setting out the
particulars of any amendment or rescission of its
rules, certified by
the principal officer, the chairperson and one other member of the
board of trustees as having been adopted
in accordance with the
provisions of the rules of the medical scheme, the Registrar shall-
(a)
if he or she is satisfied that the amendment or rescission of the
rules will not be unfair to members or will not render the
rules of
the medical scheme inconsistent with this Act, register the amendment
or the rescission of the rules and return it to
the medical scheme
with the date of registration endorsed thereon; (court's emphasis)
The
factual background is that the third applicant had previously been an
unincorporated division of Barloworld Limited that is
the principal
employer participating in the Barloworld Medical Scheme.
The
third applicant was unbundled from the first applicant in November
2007. The third applicant is therefore no longer a subsidiary
or
associated company of the first applicant. There is no relationship
at all between Barloworld and the third applicants.
The
third applicant informed the board of the first applicant that it
would wish to remain a participating employer in the Barloworld
Medical Scheme after the unbundling in the interests of the third
applicants and of its present and former employees who were members
of the Scheme. The current Rules of the Scheme are limited to include
only "the Company (Barloworld) and any associated or
affiliated
company or organization" (Court's emphasis). This caused the
first applicant to have to amend the Rules to facilitate
the ongoing
participation in the Scheme by the third applicant.
The
board considered the amendment and concluded that the continued
participation of such employers may be advantageous to the Scheme
and
its members.
These
proposed amendments to the Rules were submitted to the Registrar of
Medical Schemes on 25 October 2007 for approval in terms
of section
31 of the Act to enable the Board to decide whether to keep the third
applicant's employees as members of the first
applicant.
In
August 2008 the Registrar rejected the proposed amendments. During
September 2008 the Scheme appealed this rejection to the Council
of
Medical Schemes. The Council dismissed the appeal regarding the
proposed "employer" definition on 4 June 2009.
An
appeal was lodged to the Appeal Board on 3 August 2009 against the
Council's ruling in terms of section 50 of the Act. The appeal
against the "employer" definition was dismissed. Thus the
current application. The court has to decide whether the proposed
definition of "employer" accords with the provisions of the
Act as is envisaged by section 31 (3) of the Act.
It
is clear from the wording of the proposed Rule 4 that the Scheme's
board will have a discretion to allow or disallow a previous
employer, who is neither an associated nor an affiliated company to
Barloworld, to participate in the Scheme or to exclude it from
participation in the Scheme.
The
question arises what is meant by "a particular employer" or
"a particular class of employers."
In
Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 [2]
ANSA 262 (SCA) at para 18 Wallis JA held:
"The
present state of the law can be expressed as follows. Interpretation
is the process of attributing meaning to the words
used in a
document, be it legislation, some other statutory instrument, or
contract, having regard to the context provided by reading
the
particular provision or provisions in the light of the document as a
whole and the circumstances attendant upon its coming
into existence.
Whatever the nature of the document, consideration must be given to
the language used in the light of the ordinary
rules of grammar and
syntax; the context in which the provision appears; the apparent
purpose to which it is directed and the material
known to those
responsible for its production. Where more than one meaning is
possible each possibility must be weighed in the
light of all these
factors. The process is objective not subjective. A sensible meaning
is to be preferred to one that leads to
insensible or unbusinesslike
results or undermines the apparent purpose of the document."
(Court's emphasis)
The
Board will have the discretion whether to include or exclude an
employer after it has ceased to be an associated or affiliated
company of Barloworld. There will thus be no fixed criteria. Should
the Board be allowed to exercise such discretion then it may
become
an open scheme and would be in conflict with section 29(3) of the
Actwhere it is prohibited for a Medical Scheme to provide
in its
rules for the exclusion of any applicant if it is not a restricted
membership scheme.
The
third applicant will no longer be an employer as envisaged by the
definition of "a restricted membership scheme" in
the Act,
being neither a particular employer nor a particular class of
employers as there is no link at all between first and third
applicants.
Rule
6.1 of the Scheme's rule provide: "6.1 Eligibility
6.1.1
Subject to rule 8, membership of the Scheme shall be compulsory for
all employees for whom membership is a condition of employment
and
shall be restricted to -
6.1.1.1
persons in the employment of the employer;
6.1.1.2
persons who have retired from the employment of the employer or its
predecessor in title as defined in these rules;
6.1.1.3
persons in the former employment of the employer and who comply with
rule 6.1.2 provided that membership shall not be compulsory
for an
employee who by virtue of previous employment is a continuation
member of his previous medical scheme;
provided
further the Board may at any time exempt any employee from membership
on sufficient evidence being submitted to the satisfaction
of the
Board that such employee has been or shall be registered as a
dependant on such other scheme.
6.1.2
An employee who resigns from the service of the employer or who is
retrenched by the employer may remain as a member of the
Scheme
provided that -
6.1.2.1
he resigns or is retrenched after the age of 53 years; and
6.1.2.2
he has been a member of the Scheme for at least 10 years at the time
of resignation or retrenchment."
6.1.3
A former employee who remains as a member of the Scheme in terms of
rule 6.1.2 shall be deemed to become a continuation member
on
attaining the age of 63 years."
If
Rule 6.1 is read with the proposed amendment of the definition of
"employer" it will be possible for the Board to exclude
employees eligible under rule 6.1 should the Board in its discretion
decide not to admit continual participation of the employer.
This
will be in direct contradiction of the provisions of section 29 (3)
(b) which prohibits the exclusion of any applicant otherwise
eligible.
Objective
criteria should be used to determine which employers and employees
will be eligible to participate in the first applicant's
scheme. This
will result in clarity and will not be determined by a decision by
the Board in its discretion to include or exclude
certain employers
as it deems fit. It will enable employers and employees to know
whether they are entitled to participate in the
restricted Scheme,
without first referring to a decision by the Board.
The
first applicant set out the intention of the Board as:
"The
purpose of this proposed amendment was to facilitate the continued
participation in the Scheme, at the discretion of the
Board, by
subsidiaries, associated and affiliated companies, and organisations
and divisions of Barloworld (such as Freeworld),
whose employees
already participated in the Scheme, but which ceased to be so related
to Barloworld as a result of an unbundling
or otherwise. The Board
sought thereby to protect and preserve the interests of the Scheme,
whose active membership and risk-pool
might otherwise be negatively
affected by one or more such restructuring events." (Court's
emphasis)
It
is thus clear that the interests of the Scheme, and not the members
will be of paramount importance. The court agrees with the
argument
of Mr. Maritz, for the respondent, that the Board will be inclined to
exercise its discretion in favour of a group which
would be the most
financially advantageous to the Scheme. A scenario can develop where
two divisions are unbundled simultaneously,
with the first division
having a much better risk profile than the second and therefore a
board will obviously, in the interests
of the Scheme, choose the more
favourable division.
It
is thus made very clear that it will be a decision by the Board at
the discretion of the Board who will be included or excluded.
This is
directly in conflict with section 29 (3) (a) of the Act. I am
therefore satisfied that the decision by the second to fourth
respondents are correct and that the proposed amendment to the
definition "employer" in Rule 4 of the registered Rules
of
the first applicant should not be allowed as it will be in direct
conflict with the provisions of section 31(3) of the Act.
The Appeal
Board was correct to uphold the Registrar's decision.
The
following order is made:
1.
The time period for the filing of this application is extended until
the date of the filing of the application;
2.
It is declared that the decision of the definition of "employer"
in Rule 4 of the first applicant's rules which was
erroneously
granted on 1 March 2010 is null and void;
3.
The decision of the second to fourth respondents, dated 1 October
2010 dismissing the applicants' appeal against the ruling of
the
Council for Medical Schemes dated 4 July 2009 in respect of the first
respondent's refusal to register the proposed amendment
to the
definition of "employer" in Rule 4 of the registered rules
of the first applicant, is hereby reviewed and confirmed;
4.
The applicants' appeal against the ruling of the Council for Medical
Schemes dated 4 June 2009 is dismissed.
5.
The applicants are ordered to pay the costs jointly and severally,
the one paying the other to be absolved, including the cost
consequent upon the employment of 2 counsel.
C
PRETORIUS
JUDGE
OF THE HIGH COURT
Case
number: 47707/2011
Heard
on : 24 July 2012
For
the Applicant / Plaintiff: Adv M van der Nest SC
Instructed
by : Bowman Gilfillan
For
the Respondent : Adv MC Maritz SC
Instructed
by : Maponya
Date
of Judgment : 1 August 2012