Medical band-aid: It is not every payment made in error that entitles the mistaken party to recover payment

Feb 26, 2018 | 2018, News

The Supreme Court of Appeal has upheld a High Court judgment in Gauteng ordering a service provider to repay Medshield Medical Scheme over R6 million wrongly paid to it by Medshield in the mistaken belief that it was owing.

  • Payments by Medshield over a period of two years to a service provider Yarona Healthcare Network totalling over R6 million were said to have been made in the reasonable but mistaken belief that they were owing. But not every mistake is excusable and entitles the mistaken party to recover. The mistaken payments will not be excusable if based on “gross negligence”, or so “slack”, “heedless” or “far-fetched” that they do not deserve the protection of the law.
  • The trial judge was found to have been correct in deciding that the payments were made as a result of excusable error.
  • The appeal court also took into account questions of public policy in reaching its decision. It looked at the persons in who’s interests a medical scheme acts:

“Healthcare is a matter of fundamental importance to everyone. Medical schemes provide a way of ensuring as far as possible that people have access to adequate healthcare, often by a system in which contributions are made by members from their earnings and by employers for the benefit of members. Medical schemes are closely regulated to ensure that their assets are prudently administered for the attainment of the sole object of conducting the medical scheme business.”

“One of the primary duties of a scheme’s board is to take all reasonable steps to ensure that the interest of beneficiaries in terms of the rules and the Act are protected at all times.”

“Members of medical schemes are particularly vulnerable to abuse. Many of them earn modestly. If the funds which should be administered for their benefit are abused, they stand not only to lose moneys deducted from their earnings but to have their access to healthcare jeopardised.”

  • The scheme exists for the benefit of its members. It is administered by persons who owe a fiduciary duty to them. The persons charged with the administration of the scheme can be viewed as representatives standing in a similar position to executives, trustees and liquidators.
  • The fact that the mistaken payments by the scheme administrators were excusable and that they were entitled to re-payment, did not take away any rights which the scheme or its members might have against delinquent office bearers for errors made by them.

Yarona Healthcare Network (Pty) Ltd v Medshield Medical Scheme 2018 (1) SA 513 (SCA).