Pretoria - Advocate Boyce Mkhize will have to pay back the R1.6 million golden handshake he received two years ago when he resigned as a trustee of the Liberty Medical Scheme.
This followed a Pretoria High Court judgment by Judge Fayeeza Kathree-Setiloane after an application by the Council for Medical Schemes claiming Mkhize wasn’t entitled to this special payment.
The judge set aside the agreement concluded between Mkhize and the Liberty scheme.
She made it clear that the rules of the scheme didn’t provide for resignation, “loss opportunity” or restraint payments. According to her ruling any such payments would be beyond the powers of the scheme’s rules. She said the payments made to Mkhize were clearly impermissible.
Mkhize who, until recently, served as the chief executive of the National Nuclear Regulator and a former executive of the Health Professions Council of South Africa, agreed to resign as a trustee of the scheme’s board in May 2011. This was after the board entered into a special arrangement with him in terms of which he would resign, as there were too many board members at the time. It occurred at the time when Liberty Health and Medicover Medical amalgamated.
His resignation was in exchange for a golden handshake “clothed” in the form of a payment of R962 500 as consideration for his resignation. He was also given a payment of R700 000 as consideration for a restraint of trade covenant.
The Council for Medical Schemes was adamant that these payments were not authorised and that the board went beyond its powers in making them.
Defending the matter, the board said the agreement was concluded under very special circumstances and that Mkhize was deserving of this money as he was highly qualified and experienced. The scheme said it also paid him to “avoid further litigation and ensure harmonious relations on the board”.
They also wanted to prevent Mkhize from disclosing the scheme’s confidential information to its competitors, since his duties as a trustee gave him access to financial information and know-how which could be used by competitors.
The board said the fear was there that Mkhize, if left unrestrained, could tender his services to competitors.
Mkhize justified the payments to him on the basis that when the agreement was concluded, there was no obligation on him to resign as a trustee. According to him, the amalgamation would not have run smoothly if he had not stepped down.
He said he found nothing legally or morally wrong with the arrangement, because if he stayed on, he would have received a monthly payment as a trustee.
Judge Kathree-Setiloane said the scheme was obliged to hold a ballot when it became clear that Mkhize was not willing to resign voluntarily, but instead it disregarded the rules in favour of a special arrangement.
She also said payment to a trustee under the rules was linked to performance of a trustee’s duties. “No performance, no professional fees.”
She said the explanation of “damaging litigation” was not convincing, as there was nothing to sue for and the board, according to its rules, could terminate Mkhize’s membership.
“The board allowed itself to be held to ransom by Mkhize. There was nothing to settle or compromise between Mkhize and the scheme.”
The judge added that “Mkhize’s insistence that he would never have resigned on terms more disadvantageous, sadly revealed his misunderstanding of his fiduciary duties to the scheme and its beneficiaries”.
She questioned why the board deemed it fit to keep Mkhize loyal, but did nothing to keep the then chairman, Larry Jacques, who was also made redundant, happy. She said Jacques was also privy to confidential information pertaining to the scheme.
“He was allowed to walk away without a restraint of trade in place. This begs the question ‘was there need for a restraint payment to Mkhize at all?” she said.
Pretoria News