The membership of the new board of trustees of Pro Sano Medical Scheme has been challenged in court, and the board’s decisions are being challenged in an appeal to the Council for Medical Schemes.
These problems have arisen just months after the curatorship of the scheme was lifted in a High Court order in October last year. Pro Sano was placed under curatorship in 2007 after the board of trustees was found to be dysfunctional.
Pro Sano had 31 500 members at the end of 2009.
Joe Seoloane, the court-appointed curator, was instructed to unwind certain transactions that Pro Sano had entered into and to oversee the appointment of a new board of trustees.
During his term of office, Seoloane oversaw a change in the scheme’s rules that was designed to improve the governance of Pro Sano. In terms of the amended rules, the scheme is run by a board of six elected trustees and three independent trustees selected by the elected trustees.
Members of the scheme elected six trustees in September last year, and the trustees were due to take office on November 1. The outcome of the election was certified by KPMG, the scheme’s auditors, on September 23.
However, Seoloane received an objection to the election of one of the trustees, Derick Elbrecht, on the grounds that he made a material misrepresentation when he was nominated, a judgment by Judge Dumisani Zondi in the Cape High Court in June this year says.
Elbrecht’s alleged misrepresentation was to fail to disclose that he had served as an alternate trustee for the scheme’s previous board of trustees, the judgment says.
The rules of the scheme preclude any person who was, or who was purported in any court proceedings to have been, a trustee when Pro Sano was put under curatorship from being eligible for election, the ruling says.
The curator also received information on a material misrepresentation by a second trustee, Freddie Hunter, regarding his criminal record, the judgment says.
It says that Seoloane informed Elbrecht and Hunter on October 14 that they could not become trustees and that the two people who had received the next-most votes would instead be made trustees. Seoloane informed Dr Monwabisi Gantsho, the Registrar of Medical Schemes, of his decision on October 15.
On October 27, the Cape High Court lifted the curatorship order and put the board of trustees (including Elbrecht and Hunter), as certified by KPMG, in charge of Pro Sano from November 1.
In February this year, Elbrecht and Hunter lodged an application in the Cape High Court objecting to their removal as trustees. This resulted in Zondi’s judgment, which was delivered in June.
Elbrecht and Hunter argued that neither the scheme, its principal officer, the other members of the board nor the Registrar of Medical Schemes attempted to undo the effect of the October 27 court order that lifted the curatorship and confirmed them as trustees based on the auditor’s certification.
Elbrecht had tried to attend board meetings but had been denied access by Aglaak Mahmood, Pro Sano’s principal officer, and the other trustees, who have appointed three independent trustees.
The registrar’s office says the board referred Elbrecht’s appeal to the scheme’s dispute resolution committee for adjudication, and the outcome is awaited.
Elbrecht and Hunter alleged in their application that denying them access to meetings amounted to contempt of the October 27 court order.
They also argued that the rule upon which Seoloane relied to remove them as trustees requires that a full and proper investigation be conducted before a trustee is removed and that no such inquiry was held.
They say the auditors should not have entertained the objection anyway, because it was lodged after the time period provided for objections in terms of the rules of the scheme.
According to Zondi’s judgment, Pro Sano argued that it was not necessary to change the court order that lifted the curatorship, because before the date on the which the order was granted Seoloane had found that Elbrecht and Hunter had made material misrepresentations during the nomination process and at that point they had, in terms of the scheme’s rules, ceased to be trustees.
But Zondi says in his judgment that an order of court stands until it is set aside by a court of competent jurisdiction.
Gantsho stated in his founding affidavit of the application to lift the curatorship of Pro Sano that there had been a successful election of a board of trustees, Zondi says.
Seoloane had confirmed the correctness of the registrar’s comments to the court, and on that basis the court granted the order to lift the curatorship of Pro Sano.
It is not explained why Seoloane allowed the cancellation of the curatorship to proceed if he was aware that there had been irregularities in the nomination process, Zondi says in his judgment.
The respondents cannot contend that the court order did not install Elbrecht and Hunter as trustees, because the scheme’s rules provide for some kind of fact-finding process to be undertaken before trustees can be removed, Zondi says.
He therefore ordered Pro Sano to allow Elbrecht and Hunter to take office with immediate effect.
However, Elbrecht is now questioning the decisions taken by the board that excluded him and Hunter.
On July 19, Gantsho issued a directive in terms of the Medical Schemes Act directing that any decisions taken by the trustees since the curatorship was lifted are deemed to have force and effect.
Elbrecht has appealed to the Council for Medical Schemes against the registrar’s directive. He says he may also pursue a case of contempt of court against Pro Sano.
Gantsho’s directive notes that the scheme’s solvency level (its reserves as a percentage of contribution income) has declined to below the legal limit of 25 percent and the scheme has an aging membership.
It also notes that the registrar has initiated an inspection of Pro Sano to recover documents about the scheme’s finances that have not been submitted to his office.
Gantsho says that his office had to step in again at Pro Sano, “as litigation by the two Pro Sano ex-trustees has a negative impact on the stability, perceptions and governance of the scheme”.