Yarona Healthcare Network (Pty) Ltd v Medshield Medical Scheme

• Jurisdiction: South Africa
• Judge: Navsa ADP, Petse JA, Mathopo JA, Mbatha AJA and Rogers AJA
• Judgment Date: 22 September 2017
• Citation: 2018 (1) SA 513 (SCA)
• Docket Number: 1108/2016 [2017] ZASCA 116
• Hearing Date: 22 September 2017
• Counsel: MC Maritz SC (with DR van Zyl) for the appellant. D Berger SC (with K Millard) for the respondent.
• Court: Supreme Court of Appeal

Rogers AJA (Navsa ADP, Mathopo JA, Petse JA and Mbatha AJA H concurring):

Introduction

[1] The appellant (Yarona) and the respondent (Medshield) were the I defendant and plaintiff, respectively, in the court a quo. Medshield, a medical scheme registered in terms of the Medical Schemes Act 131 of 1998 (the Act), sued Yarona for R6 110 237, being the sum of various payments made to Yarona over the period 6 August 2007 to 17 July 2009. Medshield alleged that the payments were made in the bona fide and reasonable but mistaken belief that they were owing, whereas in truth they were not, and that Yarona was unjustifiably enriched by the J

Rogers AJA (Navsa ADP, Mathopo JA, Petse JA and Mbatha AJA concurring)

payments A and Medshield correspondingly impoverished. The summons was served on 9 June 2011.

[2] Yarona defended the action, pleading that the payments were made for services rendered in terms of an agreement concluded during June 2007. Yarona counterclaimed for additional amounts allegedly owing B under the agreement. There was also a special plea of prescription in respect of the payments made prior to 7 June 2008 — Yarona alleged that Medshield had the requisite knowledge, or could, by exercising reasonable care, have acquired the requisite knowledge, by the date of each payment, alternatively by 7 June 2008 at the latest. In its replication C Medshield denied the existence of the alleged agreement.

[3] A separation order was made for the determination, in advance of other issues, of the question whether the service agreement had been concluded. The separated issue was enrolled for trial on 2 March 2015. On 26 February 2015 Yarona's attorneys wrote to Medshield's attorneys stating that during their client's trial preparation it had become evident D that Yarona would not be able to prove that the persons who purported to represent Medshield in concluding the agreement had the authority to do so and that Yarona thus conceded the separated issue. An order to this effect, including a dismissal of Yarona's counterclaim, was made.

[4] The trial of the remaining issues was conducted before Molefe J in E April 2016. Prior to the commencement of evidence, Yarona's counsel clarified that Yarona's concession that no valid service agreement was concluded did not entail an admission that Yarona had not performed work for Medshield's benefit or that such work could be left out of account in assessing Medshield's claim of unjustified enrichment. Apart F from this reservation, the main issues were whether recovery was barred because of inexcusable slackness on Medshield's part and the date by which Medshield could, through the exercise of reasonable care, have acquired knowledge of the facts giving rise to Yarona's alleged indebtedness.

[5] G Medshield called five witnesses. Yarona closed its case without adducing evidence. On 5 July 2016 Molefe J granted judgment in Medshield's favour. She gave leave to appeal to this court.

Factual background

[6] In what follows I shall, after their first mention, refer to individuals by H their surnames. Medshield had four benefit options, the Access, Bonus, Value and Plus options. In 2006 Medshield concluded an agreement with Calabash Health Solutions (Pty) Ltd (Calabash) in terms of which Calabash was to provide managed care services in relation to the Access option for which it was entitled to a capitation fee (ie a specified amount I per member subscribing to the Access option). Yarona in turn had an agreement with Calabash for the supply of network management services, namely the establishment and maintenance of networks of health practitioners who agreed to render services at negotiated rates. According to Ms Melani Coetsee, one of Medshield's witnesses, there was a corporate connection between Calabash and Yarona — they both formed J part of what she called the Bathabile group of companies.

Rogers AJA (Navsa ADP, Mathopo JA, Petse JA and Mbatha AJA concurring)

[7] With effect from 1 April 2007 Old Mutual Healthcare (Pty) Ltd A (OMHC) replaced Medscheme as Medshield's administrator. OMHC had an office in Randburg dedicated to Medshield's administration. Medshield's only employees at that time were its principal officer and his secretary. Until mid-2007 the principal officer was Mr Welcome Mboniso. When he resigned on account of ill health, he was replaced by Mr Clinton Alley. There was a short period of overlap between them. B Alley's secretary was Ms Joselyn Baatjies.

[8] Yarona, which had an indirect involvement in Medshield's Access option via its contract with Calabash, wanted to extend its involvement to Medshield's other benefit options. There were discussions along these C lines with representatives of OMHC, including a workshop in late May 2007. Yarona's managing director was Mr Bradley Soll. Alley, who was at this time a trustee and the principal-officer-in-waiting, was aware of the discussions. At Soll's request, Alley facilitated the obtaining of a letter dated 31 May 2007, purportedly signed by Mboniso, in which Medshield requested OMHC to provide Yarona with such information D as Yarona needed to undertake 'an exercise on their risk sharing models and reimbursement strategies'. Mboniso testified that he had not signed or known about this letter but said that his secretary and Baatjies had access to his electronic signature for urgent documents.

[9] For its contention that there was a binding agreement, Yarona relied E on this letter and on a draft service agreement with an effective date of 1 June 2007. Yarona's case (until it conceded the issue) was that Medshield had accepted the terms in the draft. The draft, which purported to have been signed by Soll on Yarona's behalf on 1 June 2007, made provision for Medshield to pay Yarona a monthly fee of R250 000 plus VAT. In fact, the draft agreement was not submitted to F Medshield's board of trustees for approval and Medshield did not conclude a contract with Yarona.

[10] Notwithstanding this state of affairs, Medshield began to make monthly payments to Yarona. The first was on 6 August 2007 in the amount of R279 300 (R245 000 plus VAT). Although Medshield could G not locate any documents relating to the first four payments, Yarona's documentation shows that it began invoicing Medshield in June 2007. Since the first payment for which Medshield had records was for an invoice in respect of services supposedly rendered in November 2007, the first four payments probably related to invoices covering July to H October 2007. Yarona continued to issue monthly invoices well into 2009. Each invoice was for R279 300. Over the period 6 August 2007 to 17 July 2009 Medshield made 20 payments in this amount or multiples thereof. According to Medshield's records, these covered monthly invoices up to January 2009. There was no payment for April 2008, but the invoice for I June 2008 was paid twice and the invoice for August 2008 thrice. In each invoice the services rendered were described as 'Healthcare provider Research & geo mapping'.

[11] Medshield also paid Yarona an amount of R15 092 on 27 March 2008. According to Yarona's invoice, this was for flights and accommodation for Soll and Alley in respect of a 'Medshield roadshow' in March J

Rogers AJA (Navsa ADP, Mathopo JA, Petse JA and Mbatha AJA concurring)

2008. A Furthermore, on 26 June 2009 Medshield paid Yarona an amount of R229 845 which, if it was owing at all, was due to Calabash, not Yarona. These further payments, together with the payments in respect of the monthly invoices, make up Medshield's claim of R6 110 237.

[12] In April 2008, and despite the absence of valid contracts, Ms Angela Blackburn, B at that time employed by OMHC at the Randburg office as the Medshield claims manager, loaded Yarona 'baskets' onto OMHC's system in respect of the Value, Bonus and Plus options. These 'baskets' contained details of Yarona's health practitioner networks. Claims for services provided to Medshield members by health practitioners belonging C to these networks were paid at the rates negotiated by Yarona. Blackburn testified that she loaded the baskets on Alley's instructions. She said that April 2008 was when 'we went live with the Yarona network'. This accords with internal Yarona documents stating that the implementation date of the 'reimbursement model' for Medshield's Bonus, Plus and Value options was 1 April 2008. The Yarona baskets D were operative for the rest of the year. Blackburn accepted in cross-examination that over the period April to December 2008 OMHC processed thousands of Medshield claims for these options, some of which were from practitioners on the Yarona network who would have been remunerated in accordance with Yarona's discounted rates.

[13] E During May 2008 Calabash defaulted on its obligations in respect of the Access option. After May 2008 Medshield paid Access claims directly. The Calabash agreement formally terminated in October 2008, though for several months there was a winding-down period during which Calabash performed certain administrative functions for which it was paid an administration fee of around R230 000 per month.

[14] F During August 2008 Medshield's board decided to terminate its administration agreement with OMHC. Preparation for self-administration took some months. In anticipation of self-administration, Blackburn resigned from OMHC and began employment with Medshield as from 1 October 2008 as General Manager: Operations. Ms Melani Coetsee, G who served as a trustee from July 2007 to November 2008, was engaged as Medshield's chief operating officer as from January 2009. By 1 March 2009, when self-administration began, Medshield had over 100 employees. One of these was Ms Nawaal Davids, a former OMHC accountant who was appointed as Medshield's bookkeeper.

[15] H In early January 2009...