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HomeMedico-LegalFormer CEO wins 5-year saga against Selfmed – and keeps R1.3m

Former CEO wins 5-year saga against Selfmed – and keeps R1.3m

After a five-year legal battle between the medical scheme Selfmed and its former CEO, a Cape high court judge this week ruled in favour of Leon Bester, enabling him to keep more than R1.3m in awards and expenses, MedicalBrief reports. Last year his wife Martha Bester also won a case against Selfmed and was awarded R1.19m for accrued leave.

On 2 September 2019, Judge MI Samela dismissed Selmed’s claims for the return of money paid to Bester, and ordered the scheme to pay Bester’s legal costs as well as the qualifying costs of two expert witnesses.

Selfmed medical scheme – which has since become CompCare – instituted legal proceedings in November 2014 to recover more than a dozen payments made to Bester during 2011 and 2012. At the time the medical scheme was governed by the previous board of trustees. The case was heard for periods in November 2017, April to December 2018, and February 2019.

Meanwhile, in August 2018 the Labour Court in Cape Town ordered Selfmed to pay Martha Bester, formerly the national marketing director of Selfmed, R1,189,140 for unpaid accrued leave. She was successful in claiming accrued interest and Selfmed had to pay her legal costs.

According to The Sunday Times, Martha Bester’s payslips showed she had more than 200 days of accrued leave when she left Selfmed in December 2014, but was reimbursed for only 45 days. Judge Anton Steenkamp said Bester was a more credible witness than Selfmed’s representative and the probabilities of leave owed were “overwhelmingly” in her favour.

Selfmed’s case against Leon Bester was an enrichment action based on the contention that payments made to him were in the nature of bonuses and were illegal because they contravened provisions of section 26 (5) of the Medical Scheme Act, 131 of 1988. Section 26 (5) states that medical schemes cannot pay a dividend, rebate or bonus to any person.

Bester admitted that he received the amounts claimed by Selmed, but denied that they constituted a bonus as described under the Act, or that the payments had impoverished Selfmed and enriched him. Rather, the payments constituted costs incurred in carrying out Selfmed’s business as contemplated in section 26 (4) (b) of the Act.

Selfmed originally claimed payment by Bester of 15 amounts, but during the trial the medical scheme abandoned three claims so the court had to determine on 12 claims. The claims included four incentive or long service payments totalling around R1.16 million. Also, more than R200,000 was claimed for business travel and for relocation costs when Bester moved from Johannesburg to Cape Town.

The largest of the ex gratia and incentive payments – R700,000.00 – was paid to Bester following Selfmed’s success in achieving self-administration.

Judge Samela pointed out that Selfmed’s board of trustees approved and authorised all of Bester’s claims. “The defendant in my view received all the payments lawfully in that they were approved by the board of trustees who controlled the scheme.” Bester was not a member of the board of trustees, so he did not authorise and approve payments to himself.

There appears to have been a rupture within Selfmed around 2013. The judgment says the former trustees “were removed from their positions by court order of 16 April 2013”. The case summons was served on 28 November 2014.

The judge regretted that the board of trustees were not co-defendants or called as witnesses. “There is a vacuum in this matter because the court is deprived to know and appreciate the reasons behind authorisation and payment of the said amounts to the defendant.”

It was not in dispute that Selfmed’s books had been audited and approved by external auditors Price Waterhouse Coopers (PWC). Two expert witnesses called by Bester had been useful to the court, said the judge. One was the PWC partner responsible for auditing Selfmed’s books, who testified that all the payments to Bester were reflected in the books as expenses in the carrying on of business.

The judge’s conclusion was that Selfmed failed to prove that the amounts it claimed had been transferred to Bester under an agreement that was “void and unenforceable because it was illegal”.

In his view relocation expenses, contractual incentive payments, a long service award and business travel expenses could not be classified as bonuses. Rather, they constituted costs incurred in conducting business and were legal under the Act.

“Consequently, in the absence of proof that the plaintiff was impoverished and the defendant enriched, the enrichment action must fail too.”

* PA Van Eeden SC represented Selmed and MA Crowie SC represented Bester.

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