THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case No: 1108/2016
In the matter between

YARONA HEALTHCARE NETWORK (PTY)
LTD
APPELLANT

and

MEDSHIELD MEDICAL SCHEME
RESPONDENT

Neutral Citation: Yarona Heathcare Network v Medshield (1108/2016) [2017]
ZASCA 116 (22 September 2017)

Coram:
Navsa ADP, Petse & Mathopo JJA & Mbatha & Rogers AJJA
Heard:
29 August 2017
Delivered:
22 September 2017
Summary:
Condictio indebiti: respondent’s mistakes in making payments
inexcusably slack: excusability not a requirement where claimant a medical scheme:
respondent proved its impoverishment: if respondent enriched by services provided
by appellant, latter should have counterclaimed with condictio indebiti.
Prescription: actual or constructive knowledge necessary for prescription to start
running that of board of trustees: appellant failed to prove that board had actual or
constructive knowledge by relevant date.

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from: The Gauteng Division of the High Court, Pretoria (Molefe J sitting
as court of first instance).
The appeal is dismissed with costs including the costs of two counsel.

JUDGMENT
___________________________________________________________________

Rogers AJA (Navsa ADP, Mathopo and Petse JJA & Mbatha AJA concurring)
Introduction
[1] The appellant (Yarona) and the respondent (Medshield) were the 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 payments 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 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
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 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 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 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] 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 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 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 part of what she called the Bathabile group of companies.
[7] With effect from 1 April 2007 Old Mutual Healthcare (Pty) Ltd (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.
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 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 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 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
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 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 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 June 2008 was paid twice and the invoice for August 2008
thrice. In each invoice the services rendered were described as ‘healthcare provider
research and 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 2008. 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, 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 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 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] 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] 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, 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 a hundred employees. One of these was Ms Nawaal Davids, a former OMHC
accountant who was appointed as Medshield’s bookkeeper.
[15] In early January 2009 Blackburn asked Coetsee whether she should load the
Yarona baskets for 2009. Coetsee testified that she did not know what Blackburn
was talking about. She was aware of Yarona’s involvement with the Access option
via the Calabash agreement but knew that the Calabash agreement had terminated
in October 2008. Coetsee instructed Blackburn not to load the Yarona baskets.
[16] I have mentioned that Medshield’s last payment to Yarona was on 17 July
2009 (a delayed but duplicate payment for services supposedly rendered in June
2008) and that the last month of purported services for which payment was made
was January 2009 (this payment was made on 20 February 2009).

[17] During
September
2009
Medshield’s
financial
department
detected
suspicious payments made from Medshield’s bank account, apparently for Alley’s
personal benefit. Following preliminary investigation Alley was suspended. Soll, in
the meanwhile, was claiming that Yarona had a valid contract with Medshield and
was demanding ongoing payment. When Mr Clive Stuart, Medshield’s acting
principal officer, asked Coetsee whether she knew anything about payments due to
Yarona, she told him that Medshield’s contract with Calabash had ended in 2008
and that there was no contract with Yarona. Subsequent investigation revealed the
payments which became the subject of Medshield’s claim. Coetsee testified that
Alley had instructed OMHC to allocate the payments to ‘marketing fees’, a single
globular amount in the accounts which included payments to other service providers
as well, with the result that the monthly payments to Yarona were not detected.
Coetsee testified that it was only in January 2010 that Medshield discovered the full
extent of the unlawful payments to Yarona. Following a disciplinary hearing in
January 2010 Alley was dismissed. Neither Alley nor Soll testified.
The payment procedure in general
[18] Coetsee, who was a trustee from July 2007 to November 2008 and thereafter
Medshield’s Chief Operating Officer, testified that only the board could authorise the
conclusion of contracts. There was no delegated authority. Once a contract was duly
concluded, the principal officer was responsible for authorising payment in terms of
the contract. She said that there was a procurement policy in place but could not
recall its content. No such document was produced by Medshield in discovery.
[19] From the evidence of Coetsee and Davids it emerges that the procedure for
payment during the Alley era was as follows: Alley received the invoice and
approved or declined it. If he approved it, he signed it. He gave the approved invoice
to Baatjies who wrote it in her payment instruction book. Alley signed the instruction.
Every few days an OMHC driver collected documents from Medshield, including
invoices and accompanying payment instructions. On receipt of these documents,
Davids checked that the instruction accorded with the invoice (both of which were
meant to bear Alley’s signature) and asked a clerk to prepare an electronic funds
transfer (EFT) requisition. If the EFT requisition accorded with the invoice, Davids
authorised it. The payment instruction was then loaded onto the electronic banking

system. Davids thereafter sought a payment release authority from two of the
signatories authorised to operate on Medshield’s bank account. Usually the
signatories would be Alley and an OMHC manager. Coetsee testified that a senior
OMHC manager could sign in place of the principal officer. Normally, the authorised
EFT signatories were presented with batches of EFT requisitions for signature.
Davids testified that she never queried an instruction to pay, whether to Yarona or
anyone else. Her role was limited to checking that the payment instruction and EFT
requisition accorded with the invoice.
[20] It seems that when Medshield began self-administration in March 2009 the
payment procedure carried on as before, save that the roles previously played by
the OMHC employees were now performed by corresponding Medshield
employees.
The payment documentation in this case
[21] As I have said, Medshield was not able to locate any documentation relating
to the first four payments (relating to the July-October 2007 invoices). One thus
does not know to what extent the procedure described by Coetsee and Davids was
faithfully observed. In respect of the November and December 2007 invoices,
Medshield located the EFT requisition but not the invoices and payment instructions.
The EFT requisition for the payment of these two invoices bears Alley’s signature,
though not in the place provided for the signature of the EFT signatories. The
requisition was not signed by a second signatory. In respect of all but one of the
subsequent payments there are payment instructions bearing Alley’s signature.
Where Medshield was able to locate the invoices, they generally bore Alley’s
signature though again there are exceptions. The EFT requisitions routinely
contained the signature of only one authorised EFT signatory, presumably that of an
authorised OMHC manager. Alley did not sign them. No EFT requisitions were
discovered in respect of the payments of 27 March 2008 (R15 091,67 for the
‘roadshow’), 12 February 2009  (R279 300 for Yarona’s July 2008 invoice) and 20
February 2009 (R558 600 for Yarona’s December 2008 and January 2009 invoices)
and the related invoices did not bear Alley’s signature (which may be because the
copies in the record are Yarona’s file copies).

[22] In respect of the four payments made to Yarona after self-administration
began in March 2009, two of the EFT requisitions were signed by two authorised
signatories, being Alley and Coetsee. In the case of the other two payments the EFT
requisitions in the record only contain Alley’s signature.
Error and excusability
[23] Medshield’s pleaded case was the condictio indebiti. The payments were said
to have been made in the reasonable but mistaken belief that they were owing. It is
not every mistake which entitles the mistaken party to recover payment. Our courts
have approved statements in the old authorities to the effect that the mistake should
have been ‘neither heedless nor far-fetched’; that it should not have been based on
‘gross ignorance’; that it should have been ‘neither slack nor studied’.1 In Willis
Faber Enthoven (Pty) Ltd v Receiver of Revenue & another2  Hefer JA said the
following:
‘It is not possible nor would it be prudent to define the circumstances in which an error of
law can be said to be excusable or, conversely, to supply a compendium of instances where
it is not. All that need be said is that, if the payer’s conduct is so slack that he does not in
the Court’s view deserve the protection of the law, he should, as a matter of policy, not
receive it. There can obviously be no rules of thumb; conduct regarded as inexcusably slack
in one case need not necessarily be so regarded in others, and vice versa. Much will
depend on the relationship between the parties; on the conduct of the defendant who may
or may not have been aware that there was no debitum and whose conduct may or may not
have contributed to the plaintiff’s decision to pay; and on the plaintiff’s state of mind and the
culpability of his ignorance in making the payment.’
Although this passage is formulated with reference to errors of law, it is equally
applicable to errors of fact. As Hefer JA observed at an earlier point in his
judgment,3 there is no logic in the distinction between mistake of fact and mistakes
of law in the context of the condictio indebiti.

1 Union Government v National Bank of South Africa Ltd 1921 AD 121 at 126; Rahim v Minister of
Justice 1964 (4) SA 630 (A) at 634A-C; Willis Faber Enthoven (Pty) Ltd v Receiver of Revenue &
another 1992 (4) SA 202 (A) at 223I-224B.
2 See previous fn, at 224E-G.
3 At 220H.

[24] The onus rests on the claimant to prove the excusability of the error.4 In
Affirmative Portfolios CC v Transnet Ltd t/a Metrorail5 a contractor implemented an
increase in the rates payable for its services. The court found that the contractor had
not been entitled to charge the increased rates. The employer, Transnet, sought to
recover the amounts overpaid over a six-month period. The trial court found that
Transnet’s mistake was excusable but this court disagreed. Boruchowitz AJA said
that although the nature of Transnet’s mistake was clear the reason for the mistake
was not. Transnet failed to explain why the mistake occurred and why it occurred
repeatedly over a six-month period. The written agreement was readily accessible to
its officials. Their failure to detect the unauthorized increase and to check the rates
stipulated in the invoices against the agreement could only be attributed to extreme
slackness or negligence on their part.6
[25] In the present case Medshield submitted that the trial judge was right to find
that the payments were made as a result of excusable error. In the alternative it
argued that this court should hold that in the circumstances of this case excusability
was not a requirement. We were asked to build on the exception recognised in
relation to executors in Wessels The Law of Contract7  and extended by analogy to
liquidators and trustees in Bowman, De Wet and Du Plessis NNO & others v Fidelity
Bank Ltd.8
Payments pre-dating self-administration
[26] I start with the payments which occurred before Medshield’s self-
administration began in March 2009. Because a medical scheme is a corporate
body,9 it is necessary – in order to assess excusability – to identify the individuals
who represented Medshield in making the payments. Medshield did not plead their
identity. The evidence was that there were several authorised signatories on the
bank account and that an EFT had to be authorised by two of them. The two

4 Willis Faber fn 2 above at 224I-225A; Affirmative Portfolios CC v Transnet Ltd t/a Metrorail 2009 (1)
SA 196 (SCA) para 29.
5 See previous fn.
6 Paras 34-35.
7 2 Ed para 999.
8 Bowman, De Wet and Du Plessis NNO & others v Fidelity Bank Ltd 1997 (2) SA 35 (A) at 44H-45G.
9 Section 26 of the Act.

signatories would thus be the persons who represented Medshield in respect of any
particular payment.
[27] Both sides focused their submissions on the responsibilities of the board of
trustees and finance committee. In my view those submissions were misdirected.
The board and finance committee were not involved in making the payments. The
question is not whether these bodies were slack in failing to detect that unlawful
payments had been made (though this may be relevant to prescription). Excusability
is concerned with the mistakes made by those persons who actually effected
payment, in this case the authorised signatories. It may be that if the board had
established better systems of control, OMHC’s authorised signatories would have
been more careful. There is insufficient evidence to make a finding to this effect but I
do not think it matters. The fact remains that the board was ignorant of, and thus not
privy to, the making of the payments. The board was not the functionary which
mistakenly made the payments and it thus makes no sense to enquire whether the
board’s ‘mistake’ was excusable.
[28] As I have said, the EFT requisitions generally bore the signature of only one
person, being an OMHC manager. They should also have been signed by Alley or
by a second senior OMHC manager. Since Alley’s signature usually appeared on
one or both of the payment instruction and invoice, it may be that OMHC, not
unreasonably, regarded this as a sufficient signed authority from him to proceed with
the payment without obtaining his separate signature on the EFT requisitions. On
that basis, excusability would on the face of it need to focus on the conduct of Alley
and the relevant OMHC signatory.
[29] Medshield’s case was conducted on the basis that Alley knew that the
payments were not owing to Yarona. It is difficult to avoid that conclusion.
Medshield’s counsel argued (albeit in relation to prescription) that Alley’s knowledge
should not be attributed to Medshield, invoking the rule that where an agent in the
course of his employment defrauds his principal the latter is not charged with
constructive knowledge of the transaction.10 If Alley had acted alone in causing

10 As to this principle, see R v Kritzinger 1971 (2) SA 57 (A) at 59H-60D; NBS Bank Ltd v Cape
Produce Company (Pty Ltd & others [2002] 2 All SA 262 (A) para 34.

Medshield to make the payments, Medshield could not have brought its enrichment
claim as a condictio indebiti because Alley did not mistakenly believe that the money
was owing.11 However Alley did not act alone. In such circumstances I consider (and
the contrary was not argued) that the condictio indebiti is available if the second
person, without whose participation the payment could not have been made,
mistakenly believed the money was owing, provided of course the mistake was
excusable.
[30] The difficulty confronting Medshield is that there is no evidence as to who
signed the EFT requisitions as authorised EFT signatories or what their thinking
was. Davids testified that the authorised OMHC signatories were Ms Nikita Sigaba
and Mr Regan van Heerden. For eight of the payments which occurred before self-
administration, no signed EFT requisitions were located so one does not know
which OMHC official authorised them. For one payment the EFT requisition does not
contain an OMHC signature. For the other nine payments the OMHC signatures are
indecipherable but appear to come from three different people. Assuming two of
them were Sigaba and Van Heerden, the identity of the third is unknown. Sigaba
and Van Heerden did not testify. One thus does not know what went on in their
minds when they authorised the EFTs or what steps, if any, they took to satisfy
themselves that the payments were owing.
[31] In the absence of evidence, the furthest one might go in making assumptions
in favour of the OMHC signatories is that they relied, without more, on Alley’s
approval for the payment of the invoices. In my view this was inexcusably slack.
OMHC was a professional administrator. In accordance with good corporate
governance, Medshield’s rules required the board to ensure that proper control
systems were employed and expressly specified that payments from its bank
account had to be authorised under the joint signature of at least two persons
authorised by the board. In order to obtain accreditation as an administrator, OMHC
would have had to satisfy the Registrar that its own systems of financial control were
adequate.12 The OMHC signatories must have known that the purpose of requiring

11 Absa Bank Ltd v Leech & others NNO 2001 (4) SA 132 (SCA) para 8.
12 Regulation 17(2)(d) of the regulations promulgated in terms of the Act (GNR 1262, 20 October
1999, as amended).

two signatories was to neutralise as far as possible the dangers inherent in reposing
complete confidence in one person. The advantage of the second signatory would
entirely disappear if such signatory could rely solely on representations made by the
first signatory. One has no evidence as to what knowledge the OMHC signatories
had of Alley’s credentials. One knows that the payments started very shortly after he
assumed office. The payments were substantial and took place virtually every
month. As administrator OMHC could be expected to have been placed in
possession of all material contracts concluded by Medshield. If not, OMHC ought to
have demanded that they be made available. As a most basic precaution, the
OMHC signatories should, when the payments started, have ascertained whether
they were in accordance with a contract concluded by Medshield. One does not
know that they even asked Alley or anyone else whether a contract existed.13
[32] In the passage quoted earlier from Willis Faber Hefer JA said that relevant
considerations in assessing excusability included whether the defendant’s conduct
induced the plaintiff’s mistake and whether the defendant knew that the money was
not owing. Medshield argued that there was an improper relationship between Alley
and Soll. In their heads of argument Medshield’s counsel submitted that Alley and
Soll actively deceived OMHC and Medshield’s board. I do not think it is open to
Medshield to advance that case insofar as Soll and Yarona are concerned. During
the course of the trial Yarona’s counsel objected to evidence designed to show that
Yarona acted fraudulently and on the second occasion on which this occurred the
judge disallowed the line of questioning. Yarona’s counsel, in motivating the
objection, submitted that fraud should be pleaded, an established principle recently
reiterated by this court in Home Talk Developments (Pty) Ltd & others v Ekurhuleni
Metropolitan Municipality.14
[33] If Medshield wanted to prove that Yarona acted in cahoots with Alley, the
obvious claim would been one based on fraud or theft. I do not say that in such
circumstances the condictio indebiti would not have been available as an

13 See Greyling v ISCOR [1984] ZASCA 156 (unreported judgment in Case 233/83) where the
defendant’s counter-claim based on the condictio indebiti failed because the defendant failed to
adduce evidence from the official or officials who caused payment of unowed sick leave to be paid to
the plaintiff.
14 Home Talk Developments (Pty) Ltd & others v Ekurhuleni Metropolitan Municipality [2017] ZASCA
77; [2017] 3 All SA 382 (SCA) paras 29-31.

alternative.15 But if Medshield wished to rely on Yarona’s alleged fraud as a factor
excusing Medshield’s mistake, it was required to plead it. Yarona’s concession that
no valid agreement existed was not a concession that it knew there was no
agreement when it invoiced Medshield and received the payments. Although there
are emails between Alley and Soll which might be thought suspicious, it is difficult to
assess their import in the absence of evidence from Alley and Soll. If Medshield had
pleaded fraud, Yarona might have been constrained to call Soll as a witness. For the
rest it seems to me that the OMHC signatories probably relied not on Yarona’s
conduct in issuing the invoices but, improperly, on Alley’s conduct in approving
them.
Payments post-dating self-administration
[34] Coetsee co-signed two of the four EFT requisitions post-dating self-
administration. The first was a payment of R279 300 on 17 April 2009 for Yarona’s
October 2008 invoice. Coetsee appended her signature to the invoice and EFT
requisition on 16 April 2009, about a month and a half after self-administration
began. She testified that Alley came to her office and told her that Medshield had
reneged on its agreement with Calabash in respect of the Access option, that the
outstanding invoice related to Access services rendered for October 2008 and that if
Medshield did not pay it might be taken to court. She did not find it strange that the
invoice was in Yarona’s name – she saw Calabash and Yarona as the same thing
and assumed Medshield would be making payment in terms of its agreement with
Calabash. Although the Calabash agreement had terminated, Alley told her that the
invoice related to October 2008. She knew that Calabash was entitled to a wind-
down fee until the end of 2008. She continued:
‘We were still in the process of setting, or starting the self-administration and he actually
misled me into believing this was an outstanding payment which it was not. I did not have
the ability to check the financials or question Mr Alley because he is the accounting officer
of the scheme and he would have known what we had paid and not paid, he had been the
accounting officer since 2007 so I did not question him. I trusted him and I signed the
invoice.’

15 Cf Diamond Fields Advertiser v Colonial Government Buch App Cases (1910-1911) 8.

[35] Coetsee’s view that Alley could not be questioned was unreasonable. It was
also unacceptable for her to assume that it made no difference whether the recipient
of the payment was Calabash or Yarona. Her co-signing of this EFT requisition was
inexcusably slack.
[36] The second payment which Coetsee authorised was an amount of R229 845
on 26 June 2009. Unlike the first payment, this was in fact a payment arising from
Medshield’s contractual relationship with Calabash. Coetsee testified that Alley
approached her to say that there was still a balance owing to Calabash in respect of
the period ending December 2008. She was shown a spreadsheet listing all invoices
and payments. The figures on the spreadsheet are not fully legible. Be that as it
may, Alley’s proposal was that Medshield settle with Calabash by paying 50 per cent
of the allegedly outstanding amount. Alley told her he had confirmed with
Calabash’s managing director, Mr Martin Rimmer, that this would be acceptable.
Coetsee understood that 50 percent totalled R229 845. It was on this basis that she
co-signed the EFT requisition. The requisition reflected Calabash as the supplier but
contained Yarona’s bank details. There is nothing to show that the money was not in
fact owed to Calabash. Coetsee’s error was to sign a requisition which resulted in
the money going to Yarona instead of Calabash. She may not even have noticed
that the bank details were those of Yarona. I think her explanation in this instance
just passes muster though in the light of what follows this is not a matter of great
moment.
[37] In respect of the other two payments made after self-administration began,
the EFT requisitions do not contain Coetsee’s signature. And only one of them
contains Alley’s signature. The one payment was a third payment of Yarona’s
August 2008 invoice and the other a second payment of Yarona’s June 2008
invoice. In the absence of evidence as to who (apart from Alley) caused these
payments to be made, Medshield did not discharge the onus of proving excusable
error.

Is excusability a requirement in this case?
[38] In his work The Law Of Contract16 Sir John Wessels dealt with the question
whether an executor who paid heirs or legatees with full knowledge of the facts but
under a mistaken belief as to their legal rights could recover the money by way of
the condictio indebiti. After observing that the decision in Rooth v The State17 stood
in the way of such a conclusion, he continued (citation of authority omitted):
‘It seems, however, more reasonable to hold that a person who, like an executor, is acting
for the benefit of others, and who in that capacity overpays an heir or legatee under a bona
fide mistake as to their legal rights, should not suffer for his mistake . . . .’
[39] Although the focus of this passage was whether the executor could, contrary
to the general rule then prevailing, rely on an error of law, this court in Bowman18
understood Wessel’s proposal as entailing the further proposition that excusability
was not a requirement in the circumstances contemplated by the author.19 In that
case Harms JA said that Wessels’ proposal seemed ‘eminently sensible’. In support
of this view Harms JA said that a creditor could by way of the condictio indebiti
recover from an heir money improperly paid to him by the executor without having to
prove that the executor’s mistake was excusable. That being so, there was no
reason why, if the executor himself instituted the condictio, he had to prove that his
mistake was excusable. In Bowman this view was applied by analogy to liquidators
and trustees who had paid more than was owing to a secured creditor. Their error, I
should add, was one of fact.
[40] Medshield’s counsel argued that we should extend this exception to errors
made in the administration of a medical scheme’s affairs. While recognising that a
medical scheme is a separate juristic person, Medshield submitted that the Act
requires medical schemes to be administered in the interests of members and
beneficiaries and that those charged with its administration can be seen to be acting
in a representative capacity similar to executors, liquidators and trustees.

16 Fn 7 above.
17 Rooth v The State (1888) 2 SAR 259.
18 Bowman Fn 8 above.
19 44H-45G.

[41] Yarona’s counsel argued that the rationale for the exception recognised in
Bowman was the undesirability of holding the representative liable to the heir or
creditor for his mistake. That did not apply here where the medical scheme itself as
a corporate body made the payments. The members of the scheme would not have
a claim against the medical scheme for negligent payments. There might be a claim
for negligence against the trustees or principal officer but there was no reason in
policy why they should not bear the consequences of their inexcusable slackness.
[42] Wessel’s justification for the exception is unconvincing, at least under our
modern system for administering deceased and insolvent estates. In insolvency
cases, and in many deceased estates, the persons appointed as liquidators,
trustees and executors are professionals who earn substantial fees and carry
professional indemnity insurance. There is no compelling reason of policy from their
perspective to make an exception to the excusability requirement. In Bowman
Harms JA appears to have been swayed not so much by the need to protect
executors and insolvency practitioners but by authority supporting the view that
where an heir or creditor proceeds directly against the recipient of an unowed
payment, the heir or creditor need not prove that the executor’s mistake was
excusable. It would be illogical in those circumstances to say that if the claim was
instituted by the executor or liquidator rather than heir or creditor, the executor or
liquidator has to prove excusable error.
[43] In my opinion, the more powerful considerations of policy (and policy is a
relevant factor, as the passage I earlier quoted from Wills Faber shows) are those
which focus on the persons in whose interests the representative is meant to act.
For purposes of the present decision it is unnecessary to go beyond the case of a
medical scheme. 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 interests of beneficiaries in terms of the rules and the Act

are protected at all times.20 The board must consist of persons who are fit and
proper to manage the scheme’s business.21 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 health care
jeopardised.
[44] In deciding whether to extend the protection recognised in Bowman, I do not
think it matters that a medical scheme is a juristic person. The important feature is
that the scheme exists for the benefit of its members, often vulnerable people, and is
administered by persons who owe a fiduciary duty to them. In that sense the
persons charged with the administration of the scheme can be viewed as
representatives standing in a similar position to executors, trustees and liquidators.
Indeed, in the case of a company in liquidation its assets and liabilities do not vest in
the liquidator. The liquidator succeeds to the administration of the company in the
place of its directors.22 A similar view was taken by a full court in Grant Thornton
Capital Umbrella Fund v Da Silva23 where the condictio was brought by a provident
fund (also a juristic person). While it is unnecessary to decide whether the
requirement of excusability should be relaxed in the case of provident funds, the full
court was right not to regard the juristic personality of the fund as a bar to extending
Bowman by analogy to other situations.
[45] In regard to Yarona’s contention that there is no reason to shield a scheme’s
board and principal officer from liability for their negligence, I have already indicated
that in my view the focus should be on the vulnerability of the members rather than
the need to protect the office bearers. This said, there are important differences
between the trustees of a medical scheme on the one hand and executors and
insolvency practitioners on the other.  At least half of a scheme’s board must be
elected from among members of the scheme.24 Often a fund’s rules require (as in
Medshield’s case) that the remaining members of the board are to be elected from

20 Section 57(6)(a).
21 Section 57(1).
22 Leigh v Nungu Trading 353 (Pty) Ltd & another 2008 (2) SA 1 (SCA).
23 Grant Thornton Capital Umbrella Fund v Da Silva [2013] ZAGPJHC 231.
24 Section 57(2).

persons nominated by the employers. The trustees are not professional
administrators. Furthermore, a remedy against them may be inadequate. They may
not have the resources to meet claims. Litigation against them might be costly and
protracted. An exception to the excusability requirement would not, I must
emphasise, take away any rights which the scheme or members might have against
delinquent office bearers; it would simply mean that the scheme can, in the interests
of members, recover unowed payments even though its office bearers acted with
inexcusable slackness. That said, I cannot stress enough that this is not an invitation
to slackness on the part of office bearers who might face other sanctions for such
conduct.
[46] I thus conclude that although Medshield has failed, in respect of all but one of
the payments, to prove that such payments were made as a result of excusable
error, Medshield’s right to recover them by way of the condictio indebiti is not barred.
Impoverishment
[47] Yarona contends that Medshield was required to prove not only that Yarona
was enriched by the amounts claimed but also that such enrichment occurred at
Medshield’s expense, ie that Medshield was impoverished by the amounts
claimed.25 Since Yarona received unowed moneys, its enrichment was presumed
and it bore the onus to plead and prove loss of enrichment which it did not do.26
Yarona argued, however, that Medshield failed to prove its impoverishment. This
argument was based on Blackburn’s evidence that the Yarona baskets were loaded
onto Medshield’s system in April 2008 and were used in meeting claims over the
period April to December 2008. Simply put, the argument is that Medshield received
value from the use of the baskets.
[48] I do not think that this argument can be upheld. It is as well to begin by
emphasising that Medshield’s claim was not a claim for restitutio in integrum. That is
a special remedy accorded by our law where voidable contracts are rescinded on

25 For this requirement, see McCarthy Retail Ltd v Shortdistance Carriers CC 2001 (3) SA 482 (SCA)
para 19 per Schutz JA and para 2 per Harms JA; Kudu Granite Operations (Pty) Ltd v Caterna Ltd
2003 (5) SA 193 (SCA) para 17.
26 African Diamond Exporters (Pty) Ltd v Barclays Bank International Ltd 1978 (3) SA 699 (A) at 713
in fine.

certain recognised grounds. A party seeking rescission and restitutio in integrum
must generally be willing and able to restore what he has received and should
tender such restoration when claiming.27 Restitutio in integrum does not find
application in a case such as the present, where no contract came into existence.
Medshield’s claim was thus correctly the condictio indebiti. In Davidson v Bonafede
Marais J referred with approval to Prof de Vos’ warning against the tendency to
confuse restitutio in integrum, which is not an enrichment action, with the
condictiones.28
[49] There is no clear authority that a party who institutes a condictio indebiti in
respect of performance made under a putative contract must tender to return what
he received from the defendant;29 still less that he must prove the value of what he
received. Prof de Vos’ view is that no such tender is needed.30 He also makes the
point31 that even in cases of restitutio in integrum the plaintiff need not make a
tender where what he received was a factum (a service).32
[50] The authors of the chapter on enrichment in Lawsa33 state that a party who
uses the condictio indebiti to recover a transfer of value made under an
unenforceable contract must tender to restore what he received. They cite four
cases,34 all dealing with unenforceable oral agreements for the sale of land. The first
three (Wepener, Van der Berg and Bushney) were rei vindicationes by sellers.
Wepener and Van der Berg do not support the proposition. Although Bushney does,
the court incorrectly based its statement on the two earlier case and incorrectly
described the plaintiff’s claim as one for restitutio in integrum. The fourth case,
Mattheus, was a condictio by the purchaser and does not deal with the question of

27 Feinstein v Niggli & another 1981 (2) SA 684 (A) at 700F-701C; Davidson v Bonafede 1981 (2) SA
501 (C) at 509D-511H. Cf Van der Merwe et al Contract: General Principles 4 ed at 116-118.
28 Fn 27 above, at 510B, with reference to De Vos Verrykingsaanspreeklikheid 2 ed at 144.
29 See Du Plessis The South African Law of Unjustified Enrichment (2012) at 161; Visser Unjustified
Enrichment (2008) at 164 and fn 30.
30 De Vos Verrykingsaanspreeklikheid in die Suid-Afrikaanse Reg  3 ed at 166-167.
31 Loc cit.
32 See, eg, Hall-Thermotank Natal (Pty) Ltd v Hardman 1968 (4) SA 818 (D) at 830G-831C.
33 Lotz & Brand Lawsa 2 ed vol 9 para 213 and fn 12.
34 Wepener v Schraader 1903 TS 629; Van der Berg v Shaw NO 1933 TPD 242; Bushney v Joliffe
1953 (4) SA 273 (W) at 276H-277A; Mattheus v Stratford & another 1946 TPD 498.

tender. In regard to the seller’s rei vindicatio, there is more recent authority that no
tender is required by the seller in such cases.35
[51] This is not to deny that the seller is legally obliged to repay the purchase
price. To say that no tender is needed merely acknowledges that the seller’s rei
vindicatio is independent of any claim which the buyer may have against him for
unjustified enrichment. The purchaser’s condictio indebiti could be adjudicated
simultaneously with the buyer’s rei vindicatio, which is what this court envisaged in
Menqa & another v Markom & another.36
[52] To return to Yarona’s contention that Medshield failed to prove its
impoverishment, the requirement of impoverishment in the condictio indebiti is
concerned with whether the plaintiff suffered a loss in the act of making the payment
or performance giving rise to the condictio. Issues of non-impoverishment typically
arise in tripartite situations where on analysis it emerges that the loss was in truth
suffered by a third party or where the claimant was shielded from loss by an
indemnity or the like.37
[53] In the present case there were no circumstances prevailing at the time of
each payment which would justify a conclusion that Yarona’s enrichment did not
occur
at
Medshield’s expense
and
cause
an
immediate
corresponding
impoverishment. Medshield did not have a contractual arrangement with a third
party which shielded it from the impoverishment. Whatever Yarona may have
thought, there was in fact no contract between Medshield and Yarona. A non-
existent contract cannot be used to forge a causal link between one or more of the
unowed payments which Medshield made to Yarona and the benefit which Yarona
supposedly conferred on Medshield by way of the loaded baskets.
[54] I have no quibble with the proposition that in cases of bilateral performances
by P and D under non-existent or unenforceable contracts our law of unjustified
enrichment would be lacking if the end result were not, at least generally, a netting-

35 See Vogel NO v Volkersz 1977 (1) SA 537 (T), a full court judgment, at 554H-555C; Hartland
Implemente (Edms) Bpk v Enal Eiendomme BK & andere 2002 (3) SA 653 (NC) at 663I-664H.
36 Menqa & another v Markom & others 2008 (2) SA 120 (SCA) para 25.
37 See, eg, Visser op cit (fn 27 above) at 360 and 366; Gouws v Jester Pools (Pty) Ltd 1968 (3) SA
563 (T). And cf Kudu Granite fn 25 above para 23.

off of gains but the question is how one reaches this result. The correct solution in
my view is that P and D should each use the condictio indebiti to recover from each
other. If this were done in the same proceedings, the end result would be set-off
pursuant to the procedure provided for in rule 22(4) of the Uniform Rules. The party
with the higher enrichment liability would have to pay the difference to the party with
the lower enrichment liability.
[55] It might be argued that there is another solution, one which flows from the
rebuttable presumption of enrichment which arises when an indebitum is transferred
and the related right of the recipient to plead loss of enrichment as a defence.38 The
fallacy in this argument, so it seems to me, is the assumption that D’s transfer of
value to P results in an irreversible diminution of D’s patrimony (ie a loss of
enrichment). If D has the right to recover what he has transferred, a defence of loss
of enrichment is not available. In the case of a putative contract, D has the same
right which P has to reclaim, by the condictio indebiti, his unowed transfers of value.
[56] The defence of loss of enrichment is also unsatisfactory in bilateral cases for
other reasons. Other than in a simultaneous exchange of performances, D would
usually have transferred value to P because of a mistaken belief that he had a
contractual obligation to do so rather than because of any particular payment
received from P. Furthermore the rules which determine whether and in what
amount D has a condictio against P are not the same as the rules which determine
whether D can raise loss of enrichment as a defence and the quantum of the
permissible reduction. In a condictio by way of counterclaim, D would be limited to
the lower of P’s enrichment and D’s impoverishment whereas a defence of loss of
enrichment would entitle D to deduct the full extent of his own impoverishment, even
though P may have derived no benefit from D’s performance.
[57] I do not wish to be understood as elevating formality above substance. If a
defendant were to plead loss of enrichment in circumstances where a condictio
indebiti by way of counterclaim was technically the correct remedy, a court would
not be precluded from awarding the plaintiff a net amount if all the issues relevant to

38 African Diamond Exporters fn 26 above.

a pleaded counterclaim had been canvassed at the trial. However the net position
should be the one flowing from reciprocal condictiones indebiti.
[58] It is surprising that this situation is not the subject of clear authority. The
question how to unwind void mutual contracts has engendered lively academic
discussion.39 Prof Visser and Prof Sonnekus in their respective works on unjustified
enrichment40 appear to approve the solution I have proposed – they do so with
reference to this court’s decision in Rubin v Botha41 though the procedural
methodology was not worked out in that case. In Dugas42 the applicant sued for the
return of payments he had made under an invalid hire-purchase agreement for the
purchase of a car. The respondent contended that it would be unjust to allow the
applicant to recover his payments without taking into account the benefit he had
enjoyed by having the use of the car for 21 months. Without discussing the
procedural aspects, Henochsberg J said that it was for the respondent to establish
the applicant’s unjustified enrichment.43 This was also the view of the appeal court in
the Scottish case of Haggarty.44
[59] In German law45 the initial approach to the problem was the one I have
proposed, known in German as the Zweikondiktionentheorie (the two-claims theory).
This theory was subsequently thought to produce potentially unfair results where
one of the parties but not the other was able to raise a defence of loss of
enrichment. This led to the emergence of the Saldotheorie (the balance theory). In
terms of this approach P’s claim is reduced by the amount of any enrichment that he
has lost, even if the loss of enrichment was without fault on his part. Even so,

39 See, eg, Peter Birks ‘No Consideration: Restitution after Void Contracts’ (1993) 23 Western
Australian Law Review 195-234; Phillip Hellwege ‘Unwinding Mutual Contracts: Restitutio in Integrum
v. the Defence of Change of Position’ in Unjustified Enrichment: Key Issues in Comparative
Perspective Eds David Johnston and Reinhard Zimmermann (Cambridge University Press, 2012)
pp 243-286; Sonja Meier ‘Unwinding Failed Contracts: New European Developments’ (2017) 21
Edinburgh Law Review 1-29.
40 Visser op cit (fn 27 above) at 612 and fn 264; Sonnekus Unjustified Enrichment in South African
Law (2008) at 50-51 and fn 40.
41 Rubin v Botha 1911 AD 568.
42 Dugas v Kempster Sedgwick (Pty) Ltd 1961 (1) SA 784 (D).
43 At 793A. I express no opinion on the learned judge's further statement that use of the vehicle could
not constitute unjust enrichment within the meaning of the law (793B).
44 Haggarty v Scottish TGWU [1954] ScotCS CSIH 6; 1955 SC 109.
45 As to which, see Visser op cit (fn 27 above) at 102-106 and 498-501; Du Plessis op cit (fn 27
above) at 387-388.

German law still used the two-claims theory in certain cases of voidable contracts –
for example where the recipient was in bad faith or the contract was voidable by
reason of fraud, duress or immorality. The balance theory has also been thought to
have its weaknesses with the result that the modifizierte Zweikondiktionentheorie
(the modified two-claims theory) has gained traction. In terms of this theory P and D
should each sue each other by way of the condictio but neither can plead loss of
enrichment.
[60] It is unnecessary in this case to decide what modifications if any to the
normal rules should be made where parties to a putative or void contract make
cross-claims for enrichment against each other. They are best worked out on the
facts of specific cases. The simple point is that Yarona did not institute a condictio
against Medshield by way of a counterclaim and did not raise Medshield’s supposed
enrichment or its own impoverishment in any other way on the pleadings.
Prescription
[61] The final issue is prescription. The onus rested on Yarona to establish the
date by which Medshield acquired, or could by exercising reasonable care have
acquired, knowledge of the facts giving rise to the claim.46 In the absence of
evidence that the authority to litigate was delegated, the requisite actual or
constructive knowledge would have to be that of the board of trustees.47
[62] Yarona pleaded that Medshield had or could have acquired the requisite
knowledge by the date of each payment and at any rate by not later than 7 June
2008 (ie three years before service of summons). There is no evidence that the
board had actual knowledge before January 2010 or that the board by 7 June 2008
had knowledge of circumstances which should have caused it to investigate. The
board was entitled, in the absence of warning signs, to assume that the principal
officer and OMHC were administering the scheme properly and in accordance with
concluded contracts.

46 Gericke v Sack 1978 (1) SA 821 (A) at 826B-828C.
47 Cf PricewaterhouseCoopers Inc & others v National Potato Cooperative Ltd & another [2015]
ZASCA 2; [2015] 2 All SA 403 (SCA) paras 148-149.

[63] Medshield’s financial year-end was 31 December. Coetsee testified that the
board would receive the audited financial statements for approval the following April.
It may thus be assumed that as at 7 June 2008 the board had seen the financial
statements for the year ended 31 December 2007. Those financial statements
mentioned the contract with Calabash but made no reference to Yarona. The
investigations undertaken in the latter part of 2009 revealed that the payments to
Yarona were included in the line item ‘marketing fees’ which was in turn part of
‘administration expenses’. For the year ended 31 December 2007 the administration
expenses were R191 465 000 and the marketing fees R14 467 000. The latter figure
probably included R1 396 500 in respect of payments to Yarona (being the
payments for Yarona’s invoices for July to December 2007) but this would not have
been apparent to a reader of the financial statements.
[64] Included in the trial bundle were the management accounts for December
2008. According to Coetsee the monthly management accounts were prepared by
OMHC and considered by the finance committee. The December 2008 accounts run
to 31 pages and contain fairly dense financial information. Page 6 contained the
income statement. The line item ‘Marketing Fees and Promotions’ was R1 555 023
as against a budgeted figure of R850 996. On page 7 a breakdown was provided of
administration costs per line item. In regard to ‘Marketing Fees and Promotions’, the
expenditure was said to comprise inter alia a marketing research fee of R1 275 261
and ‘R279 300 Healthcare provider Research & Geo mapping supplied by Yarona
Network’. It was noted that an identical amount had been paid to Yarona in the
preceding month. Coetsee testified that the finance committee, whose members
were drawn from the board, submitted reports to the board.
[65] If the above information had been reported to the board, there can be little
doubt that the board could by the exercise of reasonable care have ascertained that
unowed payments were being made. The board members would have known that
they had not approved a contract with Yarona. The difficulty is that there is no
evidence that the management accounts for earlier periods contained the same
references to Yarona. One might expect that they would, but there is no explanation
as to why, if that were so, the earlier management accounts were not adduced to
support a contention that the finance committee, and potentially by implication the

board, knew or could reasonably have ascertained that unowed payments were
being made. When Coetsee was asked whether other management accounts
contained a similar breakdown of administration expenses, she said she did not
know because she was not a member of the finance committee. There was also no
explanation as to why the finance committee’s reports to the board were not
adduced. Coetsee was not asked in cross-examination what, if anything, those
reports said regarding Yarona. It was not put to her that, as a trustee, she knew of
the payments to Yarona.
[66] I do not think we would be justified, in the circumstances, in finding on a
balance of probability that the management accounts which served before the
finance committee prior to June 2008 explicitly referred to payments made to
Yarona. In the circumstances it is unnecessary to decide whether, if it had been
proved that the finance committee had the requisite knowledge by June 2008, such
knowledge could have been imputed to the board.
Conclusion
[67] The following order is made:
The appeal is dismissed with costs including the costs of two counsel.

_____ _________________
OL Rogers
Acting Judge of Appeal

Appearances

For the Appellant
Mr MC Maritz SC (and with him Mr DR van Zyl

Instructed by

Gildenhuys Malatji Inc, Pretoria, c/o Honey
Attorneys, Bloemfontein

For the Respondent
Mr D Berger SC (with him Ms K Millard)

Instructed by

Hogan Lovells, Sandton, c/o McIntyre van der
Post, Bloemfontein
SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT
OF APPEAL

FROM
The Registrar, Supreme Court of Appeal
DATE
22 September 2017
STATUS
Immediate

Yarona Healthcare Network (Pty) Ltd v Medshield Medical Scheme
(1108/2016) [2017] ZASCA 116

Please note that the media summary is intended for the benefit of the media
and does not form part of the judgment of the Supreme Court of Appeal.

The Supreme Court of Appeal (SCA) today dismissed an appeal against a
judgment of the Gauteng Division of the High Court, Pretoria, in which that
court had granted judgment in favour of Medshield for payment by Yarona
Healthcare Network (Yarona) of R6 110 237 plus costs.

Medshield’s claim was based on unjustified enrichment, more specifically the
condictio indebiti. Medshield alleged that over the period August 2007 to July
2009 it had made payments to Yarona totalling R6 110 237 in the genuine
and reasonable but mistaken belief that they were owing whereas they were
not. It was common cause that there had been discussions about a contract
between Medshield and Yarona for the provision of services by the latter to
the former but that no contract was ever concluded.

The first issue before the SCA was whether Medshield’s mistakes in making
the payments were excusable, which is ordinarily a requirement of the
condictio indebiti. The SCA held that in all but one instance Medshield’s
mistakes had been inexcusably slack. Medshield argued in the alternative that
the requirement of excusability should be relaxed in the case of medical
schemes. The SCA upheld this argument. Excusability is a policy-based
element of the condictio indebiti. In the case of medical schemes, which are
closely regulated by statute and whose members are usually a vulnerable
class, the scheme and thus its members should not be prejudiced by the slack
conduct of the representatives whose fiduciary duty it is to administer the
scheme in the members’ best interests.

The second issue was whether Medshield had established that it was
impoverished to the extent of R6 110 237. Yarona argued that Medshield had
benefited from services provided by Yarona, that such benefits reduced
Medshield’s impoverishment, and that Medshield’s claim should fail because it
had failed to prove the value of the benefits and thus the extent of its
impoverishment. The SCA rejected this argument, finding that when each
mistaken payment was made Medshield was impoverished by the amount in
question. If Yarona considered that Medshield was enriched by services
supplied by Yarona, it was for Yarona to allege and prove the value of such
benefit, which it could have done by instituting its own condictio indebiti by
way of counterclaim.

The final issue was whether Medshield’s claim in respect of the mistaken
payments made prior to June 2008 had prescribed. The SCA found that
Yarona had failed to establish that by June 2008 Medshield’s board had
knowledge of the mistaken payments or could by exercising reasonable care
have acquired such knowledge.

~~ ends~~