Case CCT 336/22
[2024] ZACC 23
Ordered Date: 14 March 2023
Judgement Date: 09 October 2024
Post Judgment Media Summary
The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.
On 9 October 2024 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against the judgment and order of the Full Court of the High Court of South Africa, Western Cape Division, Cape Town (Full Court).
The original applicant was Ms Mignon Adelia Steyn. Ms Steyn passed away on 12 January 2023. Mr Carlo Swanepoel, Ms Steyn’s attorney and the executor of her estate, consequently brought a substitution application before this Court to replace Ms Steyn as the applicant following her passing. The respondent is Profmed Medical Scheme (Profmed), a medical scheme established under the Medical Schemes Act 131 of 1998 (MSA). Profmed opposed the leave to appeal application and opposed the substitution application, and argued that Ms Steyn’s death was crucial to the leave to appeal application and that continuing the proceedings would have resulted in prejudice to Profmed.
Ms Steyn had applied for medical aid insurance with Profmed in November 2015. In her application, Ms Steyn stated that she had not suffered or received treatment, advice or medication for any afflictions of the digestive system, despite having undergone a gastroscopy and colonoscopy which had resulted in a diagnosis of gastritis. Ms Steyn was subsequently accepted as a member along with her dependents from 1 January 2016. Throughout 2016, Ms Steyn and her dependants had undergone various medical procedures, collectively amounting to R400 000. The claims for these procedures were submitted to Profmed for reimbursement. In November 2016, Profmed terminated Ms Steyn’s medical aid retrospectively based on the alleged non-disclosure of specific medical conditions.
Ms Steyn lodged a complaint with the Registrar for Medical Schemes (Registrar), contesting Profmed’s termination of her membership under section 47 of the MSA for a ruling that the termination of her membership was unlawful and that Profmed be ordered to honour its commitments to her and her dependants under the policy. Profmed argued that its termination was based on Ms Steyn’s failure to disclose an MRI lumbar spine scan, breast aspiration, and a gastroscopy and colonoscopy for a gastric ulcer but with a final diagnosis of gastritis. The Registrar found in Profmed’s favour. It held that Profmed’s decision to terminate the membership was justified as any reasonable person in Ms Steyn’s position would have known to disclose these procedures. The Registrar further noted that the failure to provide this information hindered Profmed’s ability to perform a comprehensive risk assessment on Ms Steyn’s application, potentially resulting in the imposition of a waiting period had the information been properly disclosed.
Ms Steyn appealed against the Registrar’s decision to the Council for Medical Schemes (Council). She presented defences to the three termination grounds raised by Profmed and included in her affidavit her application form to Momentum Medical Scheme (Momentum Form). During argument before the Council, Profmed raised new termination grounds based on the Momentum Form, including Ms Steyn’s non-disclosure of a hip arthroscopy, heart murmur, kidney stones, and fibromyalgia. Ms Steyn submitted that she was prejudiced by Profmed’s reliance on new grounds as she had not been given the opportunity to make submissions related to the Momentum Form. The Council found in Profmed’s favour and concluded that the non-disclosures of gastritis, gastric ulcer and hip arthroscopy were material. It said that materiality of the non-disclosure lies in the fact that the scheme was denied the opportunity to make an accurate assessment and mitigate its risk by imposing a statutorily empowered condition-specific waiting period if it had been aware of a pre-existing medical condition.
Ms Steyn appealed against the Council’s decision to the Appeal Board in accordance with section 50(3) of the MSA, which upheld the decision of the Council, and held that the non-disclosure of gastritis and a hip arthroscopy were material non-disclosures. In its decision, it had noted that section 29A(2)(a) of the MSA entitles medical schemes to impose a waiting period for conditions not covered within the prescribed minimum benefits (PMBs). Thus, according to the Appeal Board, Profmed had been prevented from imposing a waiting period where it had been entitled to and non-disclosure was consequently material.
Ms Steyn brought a review application in the High Court challenging the decisions of the Registrar, Council and Appeal Board (Appeal Bodies). Ms Steyn had argued that the Appeal Bodies had erred by, firstly, relying on the new termination grounds raised by Profmed before the Council and, secondly, by deeming gastritis a material condition. The High Court found in Ms Steyn’s favour. First, it held that the Appeal Board’s decision had been procedurally unfair because Ms Steyn had been called to answer a case during the hearing of the matter which had not been pleaded, and had been confronted with a finding that had adversely affected her based on facts that had not been properly presented and ventilated before the Appeal Bodies. Second, it held that the Appeal Board had erred in deeming gastritis material as it had employed a flawed test for materiality, thereby making an error of law, and had done so without sufficient evidence. Third, having found in favour of Ms Steyn, the High Court elected not to remit the matter to the Appeal Board, because it reasoned that the matter had already been adjudicated upon in multiple forums and remitting the matter to the Appeal Board would have been of no consequence. It concluded that remittal would simply have resulted in further costs and the delay of justice. The High Court thus set aside the Appeal Board’s decision, declared Profmed’s termination of Ms Steyn’s membership unlawful, set it aside and ordered Profmed to honour the contractual commitments under Ms Steyn’s policy.
Profmed appealed to the Full Court. The Full Court found the proceedings before the Appeal Board to be procedurally fair as Ms Steyn had an opportunity to set out her argument and the grounds for her appeal, and she had manifestly failed to do so. The Full Court further found that the Appeal Board had not made an error of law and upheld its finding that the non-disclosure of gastritis was material. The Full Court further held that the High Court had failed to have due regard to the distinction between appeal and review and it had erroneously delved into the merits. The Full Court also held that there were no exceptional grounds for the High Court’s substitution of the Appeal Board’s decision. It thus upheld Profmed’s appeal and set aside the High Court’s decision.
Ms Steyn applied to the Supreme Court of Appeal for special leave to appeal against the Full Court’s decision, but her application was dismissed. She then applied for the reconsideration of this dismissal, which reconsideration was also dismissed. Ms Steyn then sought leave to appeal in this Court.
Before this Court, Ms Steyn argued that the matter engaged this Court’s constitutional jurisdiction as the case involved just administrative action. She also contended that this Court’s general jurisdiction was engaged as an arguable point of law of general public importance had been raised, namely the test for materiality of the non-disclosure of a medical condition. Ms Steyn submitted that the appeal had reasonable prospects of success as there were conflicting judgments from the lower courts and a lack of precedent on non-disclosure in the context of medical schemes. Profmed argued that the application for leave to appeal did not fall within this Court’s jurisdiction; that the application for leave to appeal concerned findings of fact by the Appeal Board, lacked a case against the Full Court for the alleged constitutional rights violation, and did not present an issue of general public importance.
On the merits, Ms Steyn submitted that the Appeal Board’s decision fell short of the requirements under the Promotion of Administrative Justice Act 3 of 2000 (PAJA) in that it had made errors of law, had considered irrelevant factors, had acted arbitrarily, and that its decision had lacked a rational connection to evidence or reasons given. As to the hip arthroscopy, Ms Steyn submitted that a hip arthroscopy is merely a diagnostic tool which an insured could not have been expected to disclose. The procedural unfairness lay in Profmed later relying on additional termination grounds without allowing Ms Steyn the opportunity to have presented evidence on this matter. As to gastritis, Ms Steyn submitted that the Appeal Board had applied the wrong test for materiality and that Profmed had presented no evidence that gastritis gives rise to a material risk.
Profmed submitted that the Full Court was correct to find that the Appeal Board made no reviewable irregularity. The core issue for the Appeal Board to determine was whether the non-disclosure was related to material information. It was apparent from the detail required in the application form that the information regarding the gastric condition was “reasonably relevant to the risk and its assessment by an insurer”. A reasonable person would have considered a “gastric condition” relevant to their risk of assessment especially when considering the facts surrounding Ms Steyn’s condition (i.e. the suspicion of a gastric ulcer, the hospital visit, and the gastroscopy). Further, Ms Steyn had admitted that she had not disclosed that she suffered from gastritis.
In a unanimous judgment penned by Majiedt J (Zondo CJ; Madlanga ADCJ; Bilchitz AJ; Chaskalson AJ; Dodson AJ; Mathopo J; Theron J; and Tshiqi J concurring), this Court first granted the substitution application brought by Mr Swanepoel. The Court held that Ms Steyn’s personal claim was transmissible to her deceased estate as the estate had a financial interest in the outcome of the review. Further, the decision of the Appeal Board constituted just administrative action as, in terms of the definition of administrative action in PAJA, the Appeal Board’s decision constituted one made by an organ of state which exercised public powers and performed public functions under legislation.
This Court further held that its jurisdiction was engaged by virtue of the finding that the review claim was transmissible from Ms Steyn to the deceased estate. The issue relating to standing bore on section 38 of the Constitution and that of judicial review implicated section 33 of the Constitution. The procedural unfairness component of the review also raised a constitutional issue. The question whether the materiality of a non-disclosure on the objective common law test constituted an adequate ground for a medical aid to terminate membership also raised an arguable point of law of general public importance, because it would govern all cases where a medical aid sought to terminate membership on grounds of non-disclosure. It was furthermore in the interests of justice that leave to appeal be granted, so that clarity could be provided regarding the issue of the materiality of the non-disclosure of medical conditions in respect of membership of medical aids which provide a gateway for many in South Africa to have access to health care services.
On the merits, the Court found that the proceedings before the Appeal Board were procedurally unfair. Profmed had initially raised, then abandoned, the issue of Ms Steyn’s alleged non-disclosure of her hip arthroscopy, but had later reintroduced it during oral argument without admissible and properly adduced evidence. Ms Steyn had thus been denied the opportunity to present evidence in response. This had violated the right to a fair hearing under PAJA.
The Court also found that Profmed had failed to prove that Ms Steyn’s non-disclosures were material to the insurance contract. Specifically, the hip arthroscopy was a diagnostic procedure, not a material condition which had required disclosure. The prejudice that Ms Steyn suffered was manifest – not only had Ms Steyn faced an unpleaded case, but she had been denied her express request to be granted an opportunity to adduce evidence to meet the new unpleaded averments regarding her alleged non-disclosure of hip problems.
Similarly, the gastritis had been misclassified as a serious condition when it was not. Profmed had no evidence that these issues had posed a significant risk or had justified a claim of non-disclosure. Profmed bore the onus of proving not only the materiality of non-disclosure, but also that it had been induced to conclude the agreement. In this instance, Profmed’s rules that referred to material non-disclosure as a ground for the cancellation of membership did not outline the standard to be applied in determining whether information was material. However, Profmed’s application form did define material information as relating to disclosure of medical conditions. This Court agreed with the applicant that a mere diagnostic medical procedure which had not resulted in a material diagnosis of a condition could not be classified as a material non-disclosure, and subsequently a prudent and reasonable person would not have regarded it as such. A reasonable person in Ms Steyn’s position could not have considered that gastritis should have been disclosed and this Court thus found that its non-disclosure was immaterial.
With regard to remedy, in considering what was just and equitable, this Court took the view that this was one of those exceptional cases where this Court would not usurp the functions of the decision maker, the Appeal Board, and that substitution was warranted. A remittal would only run up costs unnecessarily for the deceased estate and would cause further delay. The matter had already been before the three Appeal Bodies, and this was the fourth court that had been seized with the case (including the Supreme Court of Appeal).
The Constitutional Court thus held that the substitution application should succeed; leave to appeal ought to be granted; the appeal must be upheld with costs; and the costs of two counsel was warranted.
The Court made the following order:
1. The late filing of the application for leave to appeal is condoned.
2. The application for substitution is granted and the executor of the deceased estate, Mr Carlo Swanepoel, is substituted for Ms Mignon Adelia Steyn as applicant.
3. Leave to appeal is granted.
4. The appeal is upheld.
5. The order of the Full Court is set aside and substituted with the following: “The appeal is dismissed with costs, including costs of two counsel where so employed."
6. The respondent must pay the costs, including costs of two counsel.
The Full judgment here
