THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
CASE NO: 214/04
In the matter between :
MEDSCHEME HOLDINGS (PTY) LIMITED
First Appellant
MEDSCHEME (PTY) LIMITED
Second Appellant
and
YUSUF BHAMJEE
Respondent
_____________________________________________________________
Before:
ZULMAN, CAMERON, NUGENT, CLOETE & JAFTA
JJA
Heard:
3 MAY 2005
Delivered:
27 MAY 2005
Summary:
Contract – whether voidable for duress – economic duress
to be distinguished from hard bargaining.

_____________________________________________________________
J U D G M E N T
_____________________________________________________________
NUGENT JA:
[1] Dr Yusuf Bhamjee – the respondent in this appeal – graduated from
the Medical University of South Africa in 1989. After completing his
internship he joined Dr Karim in general practice in Kinross and two years
later he took over the practice.  Most of Dr Bhamjee’s patients were
employees of Sasol and their dependants, who benefited from one or other
of two medical-aid schemes operated by Sasol. Although his patients were
far from affluent, the practice, said Dr Bhamjee, was very lucrative.
[2] It was because the practice was costing the schemes more than
comparative practices in the area that it came to the attention of Medscheme
(the second appellant, which is a subsidiary of the first appellant, but the
distinction between the two companies is not material) which is an
administrator of medical aid schemes. It administered, amongst others, the
two Sasol schemes, which were once racially divided.  The members of
Oilmed were Sasol’s black, generally lower-earning, employees.  Other
employees belonged to Sasolmed. (The two schemes have since been
combined.) Most of Dr Bhamjee’s patients were beneficiaries of Oilmed.

[3] On two occasions – first on 23 June 1998 and then again on 17
February 2000 – Dr Bhamjee acknowledged himself to be indebted to
Medscheme for the repayment of portion of the moneys that he had claimed
from and been paid by the schemes.  On the first occasion he
acknowledgment himself to be indebted in the sum of R350 000, which he
paid in instalments over about two years. On the second occasion he
acknowledged himself to be indebted in the sum of R588 000. When that
acknowledgment of debt was signed it was anticipated that portion of the
debt would be set off against moneys that Dr Bhamjee had claimed from
but not yet been paid by the schemes, and that the balance would be paid in
instalments, and those terms were incorporated in the document.  It is not
disputed that that acknowledgment of debt, and its related undertaking, was
conditional upon its terms being approved by the schemes, which did not
occur. (The point was overlooked when the present proceedings were
commenced.)
[4] Soon after the second acknowledgment of debt was signed the Sasol
schemes decided that they would no longer accept claims made upon them
directly by Dr Bhamjee. Instead, he would be required to recover his
charges from their members, who would in turn be reimbursed by the

schemes to the extent of prescribed tariffs.  The result was disastrous for Dr
Bhamjee. It seems that most of Dr Bhamjee’s patients preferred to consult
practitioners whose charges were recoverable from the schemes directly and
his practice soon collapsed.
[5] That seems to have been what prompted Dr Bhamjee to dispute the
validity of the two acknowledgments of debt, alleging that they were signed
under duress.  He sued Medscheme in the Pretoria High Court for
declarations that they were void, for recovery of the moneys that he had
paid, and for recovery of the moneys that were retained by Medscheme for
set off against the second acknowledged debt. In addition to resisting Dr
Bhamjee’s claims Medscheme counterclaimed for recovery of the balance of
the second acknowledged debt (after deducting the moneys that were to be
set off). Dr Bhamjee’s claims succeeded and Medscheme’s counterclaim was
dismissed (by Claassen AJ). Medscheme now appeals with the leave of the
court a quo.
[6] In general terms, an undertaking that is extracted by an unlawful or
unconscionable threat of some considerable harm, is voidable.  The harm
with which Dr Bhamjee alleges he was threatened was economic harm, the
nature of which emerges from the relationship that existed between Dr

Bhamjee and the schemes.
[7] A medical aid scheme is an association of its members who contribute
(their contributions might be augmented by contributions from their
employer) to a fund from which their medical expenses are defrayed. Often
the member will pay, or incur liability to pay, the provider of the medical
service, and will be reimbursed by the scheme to the extent of a prescribed
tariff. Or the scheme might choose to accept claims directly from service
providers, which holds out advantages for members and for service
providers alike.  But that entails some risk to the scheme. Clearly the
scheme will be unable in practice to verify each of what will often be
numerous claims. The avoidance of excessive or fraudulent claims will thus
depend largely upon the integrity of the service provider. On the other hand
the discretion to accept claims directly also affords considerable bargaining
power to the scheme when dealing with those service providers who depend
for their economic survival upon their claims being paid by the scheme.
[8] Dr Bhamjee was one such service provider. And it was the assertion
by Medscheme of that bargaining power, so he alleges, that constituted what
he complains of as duress. It occurred in the circumstances that follow.
[9] Medscheme offers to the schemes that it administers, at an additional

cost, what was referred to as a ‘managed health care’ service, which enables
the costs being incurred by the scheme to be monitored and controlled. One
of the techniques that is used to monitor costs is the comparison of a
medical practitioner’s cost-profile against the average cost-profile of
comparable practices. If there are material discrepancies steps will be taken
to investigate and if possible reduce or eliminate the discrepancies, first by
alerting the practitioner to the discrepancies, then by referring the matter to
the practitioner’s professional body, and then by direct discussion with the
practitioner.  Ultimately the scheme might exercise its discretion against
accepting claims from the practitioner directly with the effect that its
members will be discouraged from using the services of that practitioner to
the overall benefit of members.
[10] During 1998 Dr Bhamjee’s claims profile came to the attention of
Medscheme and ultimately a meeting was arranged with him to discuss the
matter.  The meeting was held on 23 June 1998.  Medscheme was
represented by Mr Daylan Moodley, who was employed by Medscheme as a
Senior Manager: Provider Profiling.  (Mr Moodley said that the meeting
was also attended by Mr Deva Moodley but that is not material.)  The
function of Mr Moodley’s department was not directed towards detecting or

investigating fraud or other dishonest abuses (that was the task of another
department) but rather towards monitoring the cost-effectiveness of service
providers and taking steps to contain those costs.
[11] Much of what occurred at the meeting is in dispute. What is not in
dispute is that Mr Moodley had before him Dr Bhamjee’s claims profile for
a period of three months and a comparative profile of the average claims of
comparable practices in the area. Mr Moodley said that his principal
concerns were Dr Bhamjee’s average cost-per-patient, which was
substantially higher (about 50%, or R110 per patient) than the average cost
of comparable practices, and the frequency of repeat consultations. Mr
Moodley calculated that the cost to the schemes of Dr Bhamjee’s practice
over the preceding six months was roughly R400 000 higher than the cost
would have been had the services been provided by the average comparable
practice in the area (calculated at R110 per patient for an average of 600
patients per month) and he told Dr Bhamjee that the schemes were
considering terminating direct payments to him.  He said that Dr Bhamjee
became perturbed and asked whether the schemes would reconsider the
matter if he repayed at least part of the excess.  Mr Moodley told him that
that was a matter for the decision of the schemes.  Dr Bhamjee then signed

the first acknowledgment of debt, which Mr Moodley undertook to put
before the schemes’ trustees.  A day or two later he discussed the matter
with the chairman of the schemes’ trustees who accepted Dr Bhamjee’s
offer.
[12] Dr Bhamjee’s account of the meeting was that Mr Moodley said that
he (Dr Bhamjee) was earning too much, that he was dispensing expensive
medicines, that he had been instructed to demand from Dr Bhamjee
repayment of all his earnings in excess of R150 000 per month for the past
six months, and that if he refused the schemes would terminate direct
payments.  He said that Mr Moodley then calculated his alleged excess
earnings to be about R370 000 but said that, as a favour, he would reduce it
to R350 000.  Dr Bhamjee said that in desperation, and in fear that his
practice would collapse if the threat was carried out, he signed the
acknowledgment of debt.  At the end of the meeting, he said, Mr Moodley
warned him that direct payments to him would be terminated immediately
if he discussed the matter with an attorney.
[13] The learned judge in the court a quo rejected the evidence of Mr
Moodley (as he rejected the evidence of all Medscheme’s principal
witnesses) and accepted that of Dr Bhamjee. His assessment of their

evidence was based on their demeanour, and on what were said to be
discrepancies in their evidence none of which seem to me to be material.
[14] It has been said by this court before, but it bears repeating, that an
assessment of evidence on the basis of demeanour – the application of what
has been referred to disparagingly as the ‘Pinocchio theory’ – without
regard for the wider probabilities, constitutes a misdirection.  Without a
careful evaluation of the evidence that was given (as opposed to the manner
in which it was delivered) against the underlying probabilities, which was
absent in this case, little weight can be attached to the credibility findings of
the court a quo. Indeed, on many issues, the broad credibility findings,
undifferentiated as they were in relation to the various issues, were clearly
incorrect when viewed against the probabilities.
[15] But on the critical issues of fact the discrepancies are in any event not
material. Clearly Dr Bhamjee must have signed the acknowledgment of debt
in the belief that his failure to do so placed the future of his lucrative
practice at risk. Whether his belief was induced by a threat made directly or
only by implication is of no consequence. The question is only whether the
direct or indirect threat constituted duress as it is understood in law.
[16] There can be no quibble with the finding of the learned judge that the

threatened harm was imminent. But his finding that the threat was
unconscionable, and therefore constituted duress, was based on two
interrelated grounds that were both incorrect.
[17] The learned judge said that the situation in which Dr Bhamjee found
himself was ‘not one where [Dr Bhamjee] really gained anything by
conceding to [Medscheme’s] threats’. That is not correct. Dr Bhamjee had
everything to gain: if he agreed to repay the money he would be able to
continue what until then had been a lucrative practice. The learned judge
also said that Dr Bhamjee was simply ‘obtaining what was his in any event’.
That was also incorrect. Dr Bhamjee was not entitled to insist that the
schemes continue supporting his practice by accepting his claims directly. It
was within their discretion to do so or not. (It was suggested in argument
that a contractual right to receive direct payment had accrued to Dr
Bhamjee by past conduct but that takes the matter no further: Even if he
enjoyed such a right it clearly did not extend in perpetuity and was capable
of being terminated by the schemes.)
[18] English and American law both recognise that economic pressure
may, in appropriate cases, constitute duress that allows for the avoidance of
a contract. As pointed out by Van den Heever AJ in Van den Berg & Kie

Rekenkundige Beamptes v Boomprops 1028 BK 1999 (1) SA 780 (T), that
principle has yet to be authoritatively accepted in our law.  While there
would seem to be no principled reason why the threat of economic ruin
should not, in appropriate cases, be recognised as duress, such cases are
likely to be rare. (The point is underlined by the dearth of English cases in
which economic duress was found to have existed.)  For it is not unlawful,
in general, to cause economic harm, or even to cause economic ruin, to
another, nor can it generally be unconscionable to do so in a competitive
economy. In commercial bargaining the exercise of free will (if that can
ever exist in any pure form of the term) is always fettered to some degree
by the expectation of gain or the fear of loss. I agree with Van den Heever
AJ (in Van den Berg & Kie Rekenkundige Beamptes at 795E-796A) that
hard bargaining is not the equivalent of duress, and that is so even where
the bargain is the product of an imbalance in bargaining power.  Something
more – which is absent in this case – would need to exist for economic
bargaining to be illegitimate or unconscionable and thus to constitute
duress.
[19] The bargain in the present case was in any event not a particularly
hard one. The schemes, in the interest of their members, were entitled to

encourage members to consult practitioners whose costs were reasonable,
and to refrain from consulting others. The bargain that they struck with Dr
Bhamjee had the effect merely of demanding, as a condition for the
continuations of their relationship, that Dr Bhamjee’s charges, including
those that had already been incurred, were consistent with those of
comparable practices. Contrary to the finding of the court a quo Dr
Bhamjee had no right to insist that the schemes continue supporting him on
other terms. No doubt Dr Bhamjee made the trade-off – and then paid the
acknowledged debt over the following two years – precisely because he
considered it to be economically worthwhile, even though he would no
doubt have preferred not to have been required to make it.
[20] The second acknowledgment of debt has its origin in a telephone call
that was made to Medscheme about sixteen months later (in October 1999)
by a former associate of Dr Bhamjee with whom he had fallen out.  In a
signed statement the informant told Medscheme, amongst other things, that
Dr Bhamjee had been submitting false and inflated claims to the schemes,
and that he purchased and repackaged medicines that had been stolen from
state hospitals. (After the commencement of the action the informant
retracted the allegations and in giving evidence at the instance of Dr

Bhamjee he repeated that the allegations were untrue.)
[21] Medscheme’s special investigations unit, under the management of
Ms van Zyl, commenced an investigation of Dr Bhamjee’s claims.  An
analysis of his claims for the period 1 January 1998 to 30 September 1999
reflected features that were consistent with the allegation that false claims
had been submitted. Amongst other things it reflected an abnormal number
of consultations, that Dr Bhamjee would have to have seen over 100
patients a day on occasions (and on one day 172 patients), that some of the
procedures that were claimed for were unusual for that type of practice, that
medicines were prescribed more frequently than normal, and that 25
accounts submitted by Dr Bhamjee purported to have been issued before the
treatment was administered. It also reflected that claims for medicines
amounted to R1 289 289 of which R829 599 had been paid by the schemes.
[22] Ms van Zyl reported the findings to the chairman of trustees of the
Sasol schemes and they agreed that a meeting should be held with Dr
Bhamjee. Payment of claims that had been submitted by Dr Bhamjee but
had not yet paid would meanwhile be withheld.
[23] Ms van Zyl (and others) met with Dr Bhamjee on 19 January 2000
and expressed her concerns. Clearly she was not satisfied with his

explanations. When asked for his patient files Dr Bhamjee said that he kept
none. (He said that the only record of patients was the record he had on his
computer.) Dr Bhamjee was also asked to produce the invoices for his
purchase of medicines, which he undertook to do. After the meeting Dr
Bhamjee went in search of the invoices only to discover, so he alleged, that
some of his files were missing from one of his surgeries. (He surmised that
the files must have been stolen about a month earlier.) He nevertheless
submitted to Medscheme those invoices that he had in his possession, which
reflected the purchase of medicines by Dr Bhamjee during 1999 and 2000
for R110 472.
[24] A manual that is issued by the pharmaceutical industry reflects the
recommended wholesale and retail prices of medicines. (The schemes pay
for medicines at the recommended retail price.) The mark-up from the
recommended wholesale price to the recommended retail price is generally
50%. Applying that percentage mark-up, the recommended retail price of
the medicines reflected on Dr Bhamjee’s invoices ought to have been no
more than R165 000. That was about R663 000 short of the amount that
had been paid to Dr Bhamjee for medicines over the relevant period.
[25] At another meeting held on 17 February 2000 Ms van Zyl confronted

Dr Bhamjee with the apparent shortfall, for which he offered various
explanations. The explanations that he offered, either at the meeting or in
his evidence, were that the discrepancy was to be accounted for partly by
the missing invoices, partly by the acquisition of medicines from the estate
of a deceased uncle for which he had no invoices, partly by what he
referred to as ‘deals’ that he was given by pharmaceutical sales
representatives (by which he meant that he was given free medicines which
he dispensed at the recommended retail price), and partly by the acquisition
of generic medicines from wholesalers at far below the recommended
wholesale price with the result that his mark-up (when claiming at the
recommended retail price) was 1 000% or more and not 50%.
[26] Ms van Zyl also confronted Dr Bhamjee with the fact that his claims
reflected that he had seen as many as 172 patients on one day (that number,
as it turned out, ought to have been 167) which Dr Bhamjee explained on
the basis that he worked extremely long hours.
[27] Clearly Ms van Zyl was still not satisfied with Dr Bhamjee’s
explanations, for which there was no independent corroboration, because
she insisted that he repay some of the moneys that had been paid to him.  At
first she wanted him to repay what she believed was an unsubstantiated

charge for medicines (which she calculated, in the manner I have described,
to be about R663 000). Adopting an alternative approach she calculated that
if Dr Bhamjee had seen an average of 40 patients a day – which would have
been be closer to the norm – at an average charge of R150 per patient his
average monthly earnings would have been R126 000 and not R175 000 (a
difference of R49 000 per month). Calculated on either basis she believed
that Dr Bhamjee must have overcharged about R588 000 during the
preceding year and she wanted that amount to be repaid.
[28] Dr Bhamjee’s account of the meeting was that Ms Van Zyl was
adamant that if he failed to pay that amount the schemes would refuse to
continue accepting his claims. Whether Ms van Zyl issued that threat
expressly (which she denied) is again not material. It is clear from the tenor
and the purpose of the meeting that the threat was at least implicit in what
she said. (Dr Bhamjee alleged that there were also other threats but there is
no suggestion that those alleged threats induced him to act as he did and
they are not relevant.) Dr Bhamjee thereupon signed the acknowledgment
of debt, and agreed that portion of the debt could be set off against moneys
that had been claimed but had not yet been paid, and that the balance would
be paid in instalments.

[29] Again the court a quo found that Dr Bhamjee was placed under an
unconscionable threat that amounted to duress. Again I disagree. It is quite
apparent that Ms van Zyl believed that Dr Bhamjee had been cheating the
schemes and it was for that reason that she sought the repayment. Bearing in
mind the allegations that had been made by the informant (which had not
been retracted at that stage and which there was no apparent reason not to
believe), the information that had emerged from the claims analysis (which
tended to support the allegations), and the absence of any independent
corroboration for Dr Bhamjee’s explanations, some of which were
themselves improbable, she had adequate grounds for that belief. There can
be no suggestion, in those circumstances, that Ms van Zyl was overreaching
Dr Bhamjee by attempting to extract moneys from him that she knew were
not due. What resulted was no more than a settlement of the parties’
respective contentions, prompted by legitimate commercial considerations
that fell far short of duress.
[30] But what was overlooked by both parties when the action was tried,
and even when the appeal was argued in this court, is that the evidence
established that the proposal made by Dr Bhamjee was in any event
conditional upon its acceptance by the schemes, which did not occur, and on

those grounds no enforceable obligations came into existence in the first
place. Counsel for Medscheme conceded, correctly, that although that was
not the basis on which the trial was conducted, the matter was fully
explored in the evidence, and Medscheme’s counterclaim must be dismissed
on that ground. But it does not follow that Dr Bhamjee’s claim for payment
ought to have succeeded. Nor ought it to have succeeded even if his
undertakings were void on the grounds of duress. Medscheme was not
obliged to pay the claims that Dr Bhamjee had submitted, and that were to
be set off against the acknowledged debt. Those debts, if they were incurred
at all – which was not established by the evidence – were incurred by Dr
Bhamjee’s patients and not by Medscheme.  No foundation having been laid
for Dr Bhamjee’s claim for payment, either in the pleadings or the
evidence, that claim should properly have been dismissed.
[31] The appeal succeeds with costs including the costs of two counsel.
The order of the court a quo is set aside and the following is substituted:
‘1.
The claims are dismissed with costs.
2.
The counterclaim is dismissed with costs.’
___________________
R W NUGENT
JUDGE OF APPEAL

ZULMAN JA
)
CAMERON JA
)
CONCUR
CLOETE JA
)
JAFTA JA
)
See, for example, Broodryk v Smuts NO 1942 TPD 47 at 53; Arend v Astra Furnishers (Pty) Ltd 1974 (1)
SA 298 (C) 305H-306C.
‘…according to which dishonesty on the part of a witness manifests itself in a fashion that does not appear
on the record but is readily discernible by anyone physically present …’ see AM Gleeson QC ‘Judging the
Judges’ 53 Australian LJ 338 at 344 quoted in Tom Bingham The Business of Judging: Selected Essays
and Speeches (2000) Oxford University Press 10.
See, for example, Body Corporate of Dumbarton Oaks v Faiga 1999 (1) SA 975 (SCA) 979I. See too
President of the Republic of South Africa and Others v South African Rugby Football Union and Others
2000 (1) SA 1 (CC) para 79; Santam Bpk v Biddulph 2004 (5) SA 586 (SCA) para 16; HC Nicholas
‘Credibility of Witnesses’ (1985) 102 SALJ 32, 36-37 and cases there quoted including Arter v Burt 1922
AD 303 at 306; and in a criminal context see S v V  2000 (1) SACR 453 (SCA) 455f-h.
See, for example, Chitty on Contracts Vol 1 paras 7-011 to 7-015; Dimskal Shipping Co. S.A. v
International Transport workers Federation 1992 2 AC 152 (HL) per Lord Goff of Chieveley at 165F-H;
CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714 (CA); Cheshire, Fifoot and Furmston’s
Law of Contract 14th ed by MP Furmston 340-343.
Restatement of the Law (Second) Contracts 2d Vol 1 Paras 175 and 176.
In Malilang v MV Houda Pearl 1986 (2) SA 714 (AD) this court was bound to apply admiralty law as
administered by the English Courts and it considered the English law on economic duress in that context.
In National Education Health & Allied Workers Union v Public Health & Welfare Sectoral Bargaining
Council (2002) 23 ILJ 509 (LC) the court appears to have overlooked the context in which the subject was
considered by this court in Malilang.
See, for example, CTN Cash and Carry v Gallaher, footnote 4, in which a hard bargain was held not to
constitute duress.
See, too, Christie The Law of Contract 4th ed 354.