Construction Law – Governance of the architectural professions as a whole and the legislative framework determining inter alia architects’ scope of practice and registration requirements

1. In terms of the Council for the Built Environment Act, 43 of 2000 (hereinafter referred to as “the Built Environment Act”), a “registered person” means a person registered in terms of any of the professions’ Acts. These professions’ Acts are defined as the following:

1.1 The Architectural Profession Act, 2000.

1.2 The Project and Construction Management Professions Act, 2000.

1.3 The Engineering Profession Act, 2000.

1.4 The Landscape Architectural Profession Act, 2000.

1.5 The Property Valuers Profession Act, 2000.

1.6 The Quantity Surveying Profession Act, 2000.

2. The Council for the Built Environment thus to a certain extent oversees the architectural, engineering, landscape architectural, project & construction management, property valuators and quantity surveying professions. Each of these professions also have their own professional council and legislation governing them.

3. In terms of section 20(1) of the Built Environment Act:

The council must, after receipt of the recommendations of the councils for the professions submitted to it in terms of the professions’ Acts, and before liaising with the Competition Commission in terms of section 4(q) –

(a) Determine policy with regard to the identification of work for the different categories of registered persons;
(b) Consult with any person, body or industry that may be affected by the identification of work in terms of this section.”

4. In terms of section 20(2) of the Built Environment Act, “the council must, after consultation with the Competition Commission, and in consultation with the councils for the professions, identify the scope of work for every category of registered persons”.

5. The Council for the Built Environment is thus responsible for determining scope / identification of work for each of the professions overseen by it. This will, however, be done based on inter alia the submissions of each of the professional councils in respect of what work persons registered with them may do.

6. The Architectural Profession Act, No 44 of 2000 (hereinafter referred to as “the Architects Act”) provides in section 18(1) that the categories in which a person may register in the architectural profession are as follows:

6.1 Professional architect;

6.2 Professional Senior Architectural Technologist;

6.3 Professional Architectural Technologist; or

6.4 Professional Architectural Draughtsperson.

7. The section also provides for candidates that may be registered in each of the mentioned categories, who must perform work in the architectural profession only under the supervision and control of a professional registered in a specific category.

8. In terms of section 18(2) “a person may not [our emphasis added] practise in any of the categories contemplated in subsection (1), unless he or she is registered in that category”.

9. It is an offence for a person to perform architectural work if he or she is not registered in the appropriate category.

10. In terms of section 26(1):

The council must consult with –
(a) All voluntary associations;
(b) Any person;
(c) Any body; or
(d) Any industry

That may be affected by any laws regulating the built environment professions regarding the identification of the type of architectural work which may be performed by persons registered in any of the categories referred to in section 18, including work which may fall within the scope of any other profession regulated by the professions’ Acts referred to in the Council for the Built Environment Act, 2000.”

11. In terms of section 26(2), “after the process of consultation the council must submit recommendations to the CBE regarding the work identified in terms of subsection (1), for its consideration and identification in terms of section 20 of the Council for the Built Environment Act, 2000”.

12. In terms of section 26(3)(a), “a person who is not registered in terms of this Act, may not perform any kind of work identified for any category of registered persons”.

13. In terms of section 26(4), “subsection 3(a) may not be construed as prohibiting any person from performing work identified in terms of this section, if such work is performed in the service of or by order of and under the direction, control, supervision of or in association with a registered person entitled to perform the work identified and who must assume responsibility for any work so performed”.

14. A person may thus perform work falling within the identification of work of a specific professional under the direction, control and supervision of that registered professional but only if that registered professional assumes the ultimate liability and responsibility for any work so performed.

15. In terms of section 41(1), “a person contravening section 18(2) [our emphasis added], 23, 25(8) or 31(8)(a), (b), (e) or (f) is guilty of an offence”.

16. In terms of section 41(3), “a person convicted of an offence in terms of section 18(2), may be liable to a fine equal to double the remuneration received by him or her for work done in contravention of section 18(2) or to a fine equal to the fine calculated according to the ratio determined for three years imprisonment in terms of the Adjustment of Fines Act, 1991”.

17. In terms of the definitions contained in the Code of Conduct published under the Architectural Act, members of closely allied professions are once again defined as persons registered in terms of the following:

17.1 The Architectural Act;

17.2 The Engineering Profession Act No 46 of 2000;

17.3 The Landscape Architectural Profession Act No 45 of 2000;

17.4 The Project and Construction Management Professions Act No 48 of 2000;

17.5 The Quantity Surveying Profession Act No 49 of 2000;

17.6 The Planning Professions Act No 36 of 2002;

17.7 The Property Valuers Profession Act No 47 of 2000.

18. In terms Rule 2.1 of the Code of Conduct published under the Architectural Act, “a registered person shall only undertake architectural work which is identified for the category of registration in which he/she is registered in terms of section 18 of the Act and in accordance with the registration categories in force”.

19. Practising outside a registration category is thus not only an offence in terms of the Architectural Act but may also form the subject of disciplinary action by the Council.

20. Each of the Acts listed in paragraphs 17.2 – 17.7 contain substantively similar provisions to those of the Architectural Act as discussed above i.e.:

20.1 There are specific categories of registration.

20.2  A person may not practise in any of these categories unless he / she is registered and it is an offence to practice without being properly registered.

20.3 The council must make submissions w.r.t identification of work to the Council for the Built Environment.

20.4 A person who is not registered in terms of the specific Act may not perform any kind of work identified for any of its categories of registered persons, unless such work is performed under the direction, control and supervision of a registered person entitled to perform the work identified. It is imperative that such registered person must assume responsibility and liability for any work so performed.

20.5 A person who practices in a category without being registered may be liable to a fine.

21. Similarly, each of the Codes of Conduct published under the Acts listed in paragraphs 17.2 – 17.7 contain some manner of provision stating that registered persons shall undertake only work which falls within their applicable registration category and failure to comply therewith may result in disciplinary action.

22. In terms of an Interim Policy on the Identification of Work for the Architectural Profession, published by the South African Council for the Architectural Profession and dated 12 June 2013, the following:

22.1 Regulation 2.1 provides that “no person who is registered in any category referred to in Section 18 of the Act, may undertake architectural work unless such work is demarcated for the relevant category of registration in accordance with Schedules 1 and 2, provided that a person registered in any particular category may perform the work demarcated for any lower category. Where work is not specified in the schedules, SACAP should be consulted”.

22.2 Regulation 2.3 provides that “subject to Section 26(4) of the Act, any person who undertakes identified architectural work without being registered with SACAP, is contravening the Act and is guilty of an offence”.

22.3 In terms of Regulation 3(b), “work which falls within the scope of a profession regulated by the different Built Environment Acts and which may be performed by a person registered in terms of section 18(1)(a) of the Architectural Profession Act will be recorded in the applicable CBE Board Notice after it has been confirmed by the relevant council. This will include for aspects of work common to more than one Council and / or discipline, where recognised requisite skill and competence permit the professional within one Council to undertake work demarcated within the scope of work of another Council, without need for dual registrations”.

22.4 Schedule 1 contains a “demarcation of architectural work matrix”, Schedule 2 sets out “specialised services” and Schedule 3 sets out the “definition of architectural work and competencies”.

23. It is thus important for registered persons to familiarise themselves with the identification of work in order to ensure that they are performing work which falls within that of their registration category.

24. In terms of a draft Board Notice published by the Council for the Built Environment during November 2011:

24.1 Section 11(1) states that “a person registered as a professional architect in terms of the Architectural Profession Act, principal consultant or principal agent may perform the scope of services or any one or combination of the services determined in Annexure B which falls within the scope of services of the project and construction management professions regulated by the Project and Construction Management Professions Act, 2000 (Act No. 48 of 2000) if the qualification, training and experience of that person have specifically rendered him or her competent to perform those services and the services are performed within the framework of architectural work”. Annexure B is, however, marked as “to be completed” and no work is listed there as yet.

24.2 Section 11(2) states that “a person registered in a category of registration in terms of the Architectural Profession Act may perform the scope of services relating to costing determined in Annexure C which falls within the scope of services of the quantity surveying profession regulated by the Quantity Surveying Profession Act, 2000 (Act No. 46 of 2000), if the qualification, training and experience of that person have specifically rendered him or her competent to perform those services and the services are performed within the framework of architectural work”. Annexure C is, however, marked as “to be completed” and no work is listed there as yet.

24.3 Section 12 states that “a person registered in a category of registration may perform the scope of work determined in Annexure D which falls within the scope of the engineering profession regulated by the Engineering Profession Act, 2000 (Act 46 of 2000), if the qualification, training and experience of that person have specifically rendered him or her competent to perform that work and the work is performed within the framework of architectural work”. Annexure D does, however, not list any such work.

25. Bearing in mind that the Board Notice mentioned in paragraph 24 supra is only a “draft”, it is not of legal force and effect as yet. It appears that the process of identifying overlapping areas of work is still ongoing. There are, however, not such identified areas as yet and members of the architectural profession would be best serve by adhering to their identification of work.

26. There appear to be similar identifications of work and board notices published by and in respect of the councils for the various associated professions, some of which deal in more detail with inter-council overlap of work and the work that those registered persons may perform although it may be regarded as part of other registered persons’ identification of work. This does, however, not apply to architectural professionals and will not be discussed in more detail here.

27. In conclusion, the following:

27.1 The Council for the Built Environment has a mandate to assess identification of work of the various registration categories of the various professions regulated by the Act set out in paragraph 17.1 – 17.7 supra.

27.2 There may potentially be an overlap in respect of the various professions’ scope / identification of work but this has not been dealt with in so far as the architectural profession is concerned.

27.3 Architectural professionals may thus perform the work identified in their identification of work policy. Work falling within the identification of work of any other professional (such as engineers, quantity surveyors etc.) must be done by said professional, who must assume the responsibility therefor.

27.4 Architects performing work for which they are not registered (whether in the architectural profession or in one of the associated professions) may be found guilty of an offence and may be liable for fines / disciplinary action in respect thereof.

27.5 In addition, any assumption of liability / responsibility for work which falls to be performed by another professional in terms of identification of work will be contrary to legislative provisions and as such unlawful and may therefore be uninsurable.

Contract Law – Our Courts’ approach to exemption clauses and the potential impact of the Consumer Protection Act thereon

Introduction:

1. Exemption clauses are provisions in a contract in terms of which a party is protected from certain claims in respect of damages, loss, negligence, non-performance etc. An example of an exemption clause is the following:

“The buyer shall not have or acquire any claim against the seller, nor shall the seller be liable in contract or delict for any general, special or consequential damages sustained by the buyer or any third party flowing directly or indirectly from this contract whether due to acts, omissions or otherwise of the seller or its employees or agents or any other person for whom the seller may be held liable, and the buyer hereby indemnifies the seller and holds it harmless against any such claim as aforesaid.”

2. Such clauses can obviously have onerous implications for the non-benefitting party as they have the effect of excluding or limiting liability on the part of one of the contracting parties. Our Courts have, on a number of occasions, been tasked with assessing whether or not such clauses can be enforced. Recent cases in this regard will be discussed below, in order that our Courts’ historic approach to exemption clauses may be illustrated.

3. Since these decisions were handed down, the Consumer Protection Act, Act 68 of 2008, (hereinafter referred to as “the Act”) has come into force. This Act deals extensively with exemption clauses and the relevant provisions thereof will also be discussed below as this will have an impact on how our Courts approach such exemption clauses in future.

Case law dealing with enforcement of exemption clauses prior to the Act coming into force:

4. The matter of Afrox Healthcare Bpk v Strydom 2002 (6) SA 21 (SCA) may be considered as one of the most well-known and controversial decisions dealing with the enforcement of exemption clauses.

The facts of the matter are briefly as follows:

4.1 The respondent was admitted for an operation and post-operative medical treatment at the appellant’s hospital facilities.

4.2 After the respondent had undergone the operation, a nurse in the employ of the appellant negligently caused him injury by applying a bandage too tightly, cutting off the blood supply to a part of his body.

4.3 The respondent then instituted a claim against the appellant, who denied liability based on an exemption clause contained in the admission agreement. The court a quo held that the exemption clause could not be enforced and the matter was taken on appeal.

4.4 The exemption clause which the appellant sought to have enforced read as follows:

“I absolve the hospital and / or its employees and / or agents from all responsibility and indemnify them from any claim instituted by any person (including a dependant of the patient) for damages or loss of whatever nature (including consequential damages or special damages of any nature) flowing directly or indirectly from any injury (including fatal injury) suffered by or damage caused to the patient or any illness (including terminal illness) contracted by the patient, whatever the causes are, except only with the exclusion of intentional omission by the hospital, its employees or agents.”

4.5 The respondent argued that he should not be bound by the exemption clause as the same was against public policy for the following reasons:

4.5.1 There was an unequal position between the parties concluding the agreement, with the hospital being in a stronger bargaining position;

4.5.2 The exemption clause had the effect of exempting the hospital and its employees from properly carrying out their duties;

4.5.3 The clause exempted hospital personnel from gross negligence; and

4.5.4 The exemption clause conflicted with the constitutional right of access to healthcare.

4.6 In the alternative to his argument that the exemption clause was contrary to public policy, the respondent argued that the clause was unenforceable for being unreasonable, unfair and contrary to the principles of good faith which underlie our law of contract.

4.7 In the further alternative, the respondent argued that his attention should have been drawn to the clause and the appellant’s failure to do so constituted a breach of a legal duty owed to the respondent.

4.8 In its consideration of the matter, the Supreme Court of Appeal expressed the view that an exemption clause excluding the appellant from gross negligence would indeed be contrary to public policy. In this case, however, the Court found that gross negligence had not been alleged by the respondent and, as such, this consideration did not find application in the matter.

4.9 The Court held that:

4.9.1 Clauses of this nature are the norm not the exception, are sound business practice and not contrary to public policy.

4.9.2 There was no evidence that the respondent was in a weaker bargaining position than the appellant.

4.9.3 There are sufficient sanctions by professional bodies and legislation to ensure that medical professionals perform their duties properly in compliance with their professional rules.

4.9.4 The clause does not conflict with the Constitution as contractual freedom is also a constitutionally enshrined right.

4.9.5 While the principle of good faith is one of the foundations of our law of contract, it is not a rule of law based on which the exemption clause can be set aside.

4.9.6 There was no duty on the appellant’s clerk to explain the clause to the respondent nor could the respondent allege that he did not expect such a clause bearing in mind that such clauses have become the norm instead of the exception.

4.10 The exemption clause was, accordingly, upheld by the Supreme Court of Appeal.

5. In the matter of Mercurius Motors v Lopez 2008 (3) SA 572 (SCA) the Court dealt with exemption clauses that undermine the very essence of a contract The facts of the matter are briefly as follows:

5.1 The respondent delivered a vehicle that he was leasing to the appellant for a service and certain minor repairs. The vehicle was stolen while on the premises.

5.2 The respondent instituted action based on his contract of deposit with the appellant. The appellant denied that the loss of the vehicle was due to any negligence on its part and relied on exemption clauses in the contract of deposit, one of which appeared on the reverse side of the repair order form (under a carbon copy which had to be detached to reveal the terms and conditions) and read as follows:

“I/we acknowledge that Mercurius shall not be liable in any way whatsoever or be responsible for any loss or damages sustained from fire and / or burglary and / or unlawful acts (including gross negligence) of their representatives, agents or employees.”

5.3 The court a quo held that the exemption clauses were printed in such a manner so as not to draw the reader’s attention thereto and, as such, the respondent had been misled and the clauses could not be upheld. The Court a quo further found that the appellant had not taken reasonable steps to secure the vehicle as there were inter alia not adequate processes in place to ensure that the keys were not left in the vehicle overnight.

5.4 The respondent’s claim was awarded with costs.

5.5 On appeal, the Supreme Court of Appeal held that a person delivering a motor vehicle to be serviced or repaired would ordinarily rightly expect that the depositary would take reasonable care in relation to the safekeeping of the vehicle entrusted to him or her. An exemption clause such as the one relied upon by the appellant, that undermines the very essence of the contract of deposit, should be clearly and pertinently brought to the attention of the customer who signed a standard-form contract, not by way of an inconspicuous and barely legible clause that referred to the conditions on the reverse side of the page in question. The exemption clause was thus not upheld.

5.6 The Supreme Court of Appeal further held that, by not safeguarding the keys to the vehicle, the employees of the appellant did not act as a reasonable person in their circumstances would have acted.

5.7 The appeal was thus dismissed with costs.

6. In the more recent matter of Naidoo v Birchwood Hotel 2012 (6) SA 170 (GSJ), the Court held a different view on the enforcement of an exemption clause.  The facts of the matter are briefly as follows:

6.1 The plaintiff was a guest at the Birchwood Hotel (hereinafter referred to as “the hotel” and wanted to exit the hotel premises.

6.2 He found that the gate to one of the entrances of the hotel was closed and waited for a security guard to open the gate. When realising that the gate was still not opening, the plaintiff alighted from his vehicle and walked towards the gate himself.

6.3 The gate had jammed and the wheels had come off the rails. The gate fell on the plaintiff as he approached and caused serious bodily injuries.

6.4 The plaintiff sought to recover damages from the hotel based on his assertions that the hotel had been negligent and could have prevented the harm from occurring had it:

6.4.1 Properly maintained the gate;

6.4.2 Ensured that the gate was safe for public usage; and

6.4.3 Warned the public of the potential danger created by the state of disrepair of the gate.

6.5 The hotel denied negligence and relied on an exemption clause on the back of the hotel registration card, which stated that:

“The guest hereby agrees on behalf of himself and the members of his party that it is a condition of his / their occupation of the Hotel that the Hotel shall not be responsible for any injury to, or death of any person or the loss or destruction of or damage to any property on the premises, whether arising from fire, theft, or any cause and by whomsoever caused or arising from the negligence (gross or otherwise) or wrongful acts of any person in the employment of the Hotel.”

6.6 Guests were directed to the exemption clause by an instruction on the registration card which read “Please read terms and conditions on reverse!”

6.7 The Court found that the security guard had failed to take reasonable steps to prevent the accident by warning the plaintiff to keep at a distance. The Court further found that reasonable steps on the part of the hotel would entail regular checks to ensure that every gate was well maintained and functioning properly at all times. If a gate was not functioning well, the hotel should have warned the public of the potential danger posed by the gate.

6.8 Turning to deal with whether or not the exemption clause was binding on the plaintiff and if it was not against public policy the Court applied the test formulated in Barkhuizen v Napier 2007 (5) SA 323 (CC) in which it was stated that, when challenging a contractual term, the question of public policy inevitably arises. But that this was no longer difficult to determine because:

“Public policy represents the legal convictions of the community; it represents those values that are held most dear by the society. Determining the content of public policy was once fraught with difficulties. That is no longer the case. Since the advent of our constitutional democracy, public policy is now deeply rooted in our Constitution and the values that underlie it. Indeed, the founding provisions of our Constitution make it plain, our Constitutional democracy is founded on, among other values, the values of human dignity, the achievement of equality and the advancement of human rights and freedoms, and the rule of law. And the Bill of Rights, as the Constitution proclaims, is a cornerstone of that democracy, it enshrines the rights of all people in our country and affirms the democratic [founding] values of human dignity, equality and freedom.

… Thus a term in a contract that is inimical to the values enshrined in our Constitution is contrary to public policy and is, therefore, unenforceable.”

6.9 The Court stated that, according to the two-stage enquiry espoused in the Barkhuizen case, it may first examine whether a term in a contract is objectively reasonable. If it finds that it is, the next enquiry is whether it should be enforced in the particular circumstances. The Court expressed the view that exemption clauses that exclude liability for bodily harm in hotels and other public places have the effect, generally, of denying a claimant judicial redress.

6.10 The Court thus held that a guest in a hotel does not take his life in his hands when he exits through the hotel gates. To deny him judicial redress for injuries he suffered in doing so, which came about as a result of the negligent conduct of the hotel, offends against notions of justice and fairness.

6.11 The plaintiff’s claim thus succeeded.

The provisions of the Act which may impact the enforcement of exemption clauses

7. The above decisions are somewhat divergent when it comes to upholding exemption clauses.

8. The position has, however, been clarified to a certain extent by the Act, which came into effect on 01 April 2011 and which sets the promotion and advancement of the economic welfare of consumers in South Africa as its primary purpose. The Act seeks to protect vulnerable consumers and, at present, the Act applies to consumers with an annual turnover not exceeding R2 000 000.00 (two million rand), subject to further exemptions / exclusions which may apply (as set out in section 5 of the Act).

9. The Act prescribes certain fundamental “consumer rights” of which the right to “fair, just and reasonable contract terms” may significantly impact the validity and enforceability of exemption clauses as terms that do not comply with the requirements of the Act may be declared unlawful and set aside by the Court.

10. Section 48 of the Act contains a general prohibition on unfair, unreasonable and unjust contract terms and also prohibits any agreement that requires a consumer to waive any rights, assume any obligations or waive any liability of a supplier on terms that are unfair, unreasonable or unjust or if such terms are imposed as a condition of entering into an agreement. The section also lists criteria in order to determine whether a condition of a contract is unfair, unreasonable or unjust terms, which include the following:

10.1 Terms that are “excessively one-sided in favour of any person other than the consumer or other person to whom goods or services are to be supplied”.

10.2 Terms which are “so adverse to the consumer as to be inequitable”.

10.3 If the consumer relied upon a false, misleading or deceptive representation or statement of opinion provided by or on behalf of the supplier, to the detriment of the consumer.

11. Section 48(2) of the Act also requires that, if the agreement is subject to a term, condition or notice that may be unfair, unreasonable, unjust or unconscionable in terms of the criteria listed above, the fact, nature and effect of that term, condition or notice must specifically be drawn to the attention of the consumer in a manner and form that satisfies the formal requirements set out by the Act. If this provision is not complied with the Court may set aside the specific terms and conditions that were not drawn to the attention of the consumer.

12. Section 49(1) of the Act states that provisions in consumer agreements must be drawn to the consumers’ attention if such provisions:

12.1 In any way limit the risk or liability of the supplier or any other person.

12.2 Constitute an assumption of risk or liability by the consumer.

12.3 Impose an obligation on the consumer to indemnify the supplier or any other person for any cause.

12.4 Are an acknowledgement of any fact by the consumer.

13. In addition to the above, section 49(2) states that, if a provision or notice concerns any activity or facility which is subject to risks, the supplier must specifically draw the fact, nature and potential effect of those risks to the consumer’s attention. The consumer must agree thereto by signing or initialling or otherwise indicating acknowledgment thereof. This is required for any risks:

13.1 That are of an unusual character or nature.

13.2 The presence of which the consumer could not reasonably be expected to be aware of or notice, which an ordinarily alert consumer could not reasonably be expected to notice or contemplate in the circumstances.

13.3 That could result in serious injury or death.

14. Section 49(3) and 49(4), read together with section 22, states that any such provisions, conditions or notices must be written in plain language and must be drawn to the attention of the consumer in a conspicuous manner and form likely to attract the attention of an ordinarily alert consumer having regard to the circumstances. Furthermore, this must be done before the consumer:

14.1 Enters into the agreement,

14.2 Begins to engage in the activity;

14.3 Enters or gains access to the facility; or

14.4 Is required or expected to pay for the transaction.

15. In terms of section 49(5), the consumer must be given adequate opportunity in the circumstances to receive and comprehend the provision or notice.

16. Section 51 of the Act further contains certain outright prohibitions on the terms that can appear in contracts and states inter alia the following:

“A supplier must not make a transaction or agreement subject to any term or condition if –

(b) it directly or indirectly purports to –
(i) waive or deprive a consumer of a right in terms of this Act;
 (ii) avoid a supplier’s obligation or duty in terms of this Act;
 (iii) set aside or override the effect of any provision of this Act; or
 (iv) authorise the supplier to –
  (aa) do anything that is unlawful in terms of this Act; or
  (bb) fail to do anything that is required in terms of this Act …”

17. Section 51(1)(c)(i) of the Act further specifically prohibits terms that purport to “limit or exempt a supplier of goods or services from any liability for a loss directly or indirectly attributable to the gross negligence of the supplier or any person action for or controlled by the supplier …”.

18. Section 51(1)(c)(i) accords with the Court’s decision in the Afrox case in which it was held that the exclusion of gross negligence in an exemption clause is contrary to public policy.

19. In terms of section 52 of the Act, if the Court determines that provision was (in whole or in part) unconscionable, unjust, unreasonable or unfair, the Court may make a declaration to that effect and make any order that it deems just and reasonable in the circumstances. This includes an order to compensate the consumer for losses and expenses.

Conclusion

20. It is clear that the Act does not preclude a party form including an exemption clause in an agreement. The Act does, however, offer a more clear recourse to a non-benefitting party who seeks to impugn the enforceability of such a clause.

21. There seems to be an argument to be made that, had the Act been in force when the Afrox matter was decided, the outcome may have been different, specifically with regard to the obligation to draw the patient’s attention to the exemption clause. The decisions in the Mercurius Motors and Naidoo matters seems to be more in line with the provisions of the Act.

22. The Act does, however, not have retrospective effect and the provisions can only be relied on in respect of agreements entered into after 01 April 2011. The manner in which our Courts will approach the provisions of the Act remains to be seen as there has not been reported case law on the subject as yet.

23. It will be of particular interest how the Court will approach the question whether or not an exemption clause is so adverse as to be inequitable. It may well be that the test laid down in the Naidoo matter may find application, i.e. that a clause will be found to be inequitable if it has the effect of denying judicial redress to such an extent that it offends against notions of justice and fairness.

24. For a further discussion on the effect of the Act on product liability claims, please refer to an article by the same author titled “Our Courts’ approach to product liability claims and the impact of the Consumer Protection Act thereon, with specific reference to manufacturers’ and suppliers’ liability”.

Product Liability – Our Courts’ approach to product liability claims and the impact of the Consumer Protection Act thereon, with specific reference to manufacturers’ and suppliers’ liability

Prior to the Consumer Protection Act, Act 68 of 2008, (hereinafter referred to as “the Act”) coming into force, a person seeking to recover damages from a supplier in respect of defective goods could rely on either contractual remedies or the common law warranty against latent defects. A person seeking to recover damages from a manufacturer in respect of defective goods was, in the absence of a contractual relationship with said manufacturer, required to claim in delict. This last-mentioned claim, due to its very nature, necessitated inter alia that negligence on the part of the manufacturer be alleged and proved in order for the claim to succeed.

This position was confirmed in the matter of CIBA-GEIGY (Pty) Ltd v Lushof Farms (Pty) Ltd and Another 2002 (2) SA 447 (SCA). The facts of the matter are briefly as follows:

1. A farmer purchased pesticide, on recommendation from the supplier, for purposes of combatting weeds in his pear orchards.

2. The pesticide caused physical damage to the farmer’s pear trees, which resulted in crop failure.

3. The farmer instituted a claim against the supplier, based on a breach of the common law warranty against latent defects, and against the manufacturer, based on delict.

4. The supplier, in turn, claimed indemnification from the manufacturer in respect of any of the farmer’s damages for which it was held liable.

5. The court a quo upheld the farmer’s claims against both the manufacturer and the supplier as well as the supplier’s claim against the manufacturer. The manufacturer appealed this decision.

The Supreme Court of Appeal (hereinafter referred to as “the Court”) confirmed that the court a quo had been correct in upholding the farmer’s claim against the supplier and in upholding the supplier’s claim for indemnification from the manufacturer.

Turning to deal with the farmer’s claim against the manufacturer, the Court summarised the claim as follows:

1. The claim is delictual in nature, based on the manufacturer’s alleged negligence in manufacturing and marketing a product intended inter alia for use on pear trees without conducting sufficient tests of the product on such pear trees, while the application of the product in the recommended manner could potentially be harmful.

2. In so far as the farmer had not purchased the product directly from the manufacturer, its alleged liability comes down to what is sometimes known as “product liability”.

The manufacturer’s defences to the farmer’s claim were two-fold, namely that the court a quo did not make any finding in its judgment as to what its duty of care to the farmer would supposedly be and that the farmer did not prove that it had been negligent in any way.

With reference to the duty of care aspect, the manufacturer argued that this can only be founded on an agreement and, since it had no agreement with the farmer, there was thus no wrongfulness in this instance. According to the Court, although the historical origin of the manufacturer’s liability is an agreement between the manufacturer and the distributor, the liability extends via the other contracting party to any third party who utilises the product in the prescribed manner and suffers damage as a result thereof. The Court further found that it follows as a matter of course that a manufacturer who distributes a product commercially, which, in the course of its intended use, and as the result of a defect, causes damage to the consumer thereof, acts wrongfully and thus unlawfully according to the legal convictions of the community.

With reference to the negligence aspect, the Court stated that the farmer did not require so-called strict liability (i.e. liability without proof of negligence) to be imposed on the manufacturer but rather that any liability on the part of the manufacturer would require proof of negligence. According to the Court, this accorded with the positive law which applied at the hearing of the matter.

The Court held that if a manufacturer produces and markets a product without conclusive prior tests, when the utilisation thereof in the recommended manner is potentially hazardous to the consumer, such negligence on the part of the manufacturer may expose him to delictual liability to the consumer. The Court concluded that the farmer had succeeded in proving that the manufacturer had not performed conclusive tests in respect of specifically pear trees’ sensitivity to the product in question prior to the commercial release thereof for use on such trees. The Court accordingly found that the manufacturer was negligent and delictually liable to the farmer. The appeal was dismissed.

The position as outlined in the above matter has, however, been changed by section 61(1) of the Act, which introduces strict liability of inter alia manufacturers and suppliers and which reads as follows:

“(1)  Except to the extent contemplated in subsection (4), the producer or importer, distributor or retailer of any goods is liable for any harm, as described in subsection (5), caused wholly or partially as a consequence of –

(a) Supplying any unsafe goods; or

(b) A product failure, defect or hazard in any goods; or

(c) Inadequate instructions or warnings provided to the consumer pertaining to any hazard arising from or associated with the use of any goods.
irrespective of whether the harm resulted from any negligence on the part of the producer, importer, distributor, or retailer, as the case may be.”

In terms of section 61(4), liability of a particular person in terms of the section will not arise if:

(a) The unsafe product characteristic, failure, defect, or hazard that results in harm is wholly attributable to compliance with any public regulation;

(b) The alleged unsafe product characteristic, failure, defect or hazard –

(i) Did not exist in the goods at the time it was supplied by that person to another person alleged to be liable; or

(ii) Was wholly attributable to compliance by that person with instructions provided by the person who supplied the goods to that person, in which case subparagraph (i) does not apply;

(c) It is unreasonable to expect the distributor or retailer to have discovered the unsafe product characteristic, failure, defect or hazard, having regard to that person’s role in marketing the goods to consumers;

(d) The claim for damages is brought more than three years after the –

(i) Death or injury of any natural person;

(ii) Earliest time at which a person had knowledge of the material facts about any illness of any natural person;

(iii) Earliest time at which a person with an interest in any property had knowledge of the material facts about the loss of or physical damage to that property (whether it is movable or immovable);

(iv) Latest date on which a person suffered any economic loss that results from harm contemplated in paragraphs (i) to (iii) above.

While the Act has limited application in terms of section 5 thereof, section 5(5) specifically states that:

 “If any goods are supplied within the Republic to any person in terms of a transaction that is exempt from the application of this Act, those goods, and the importer or producer, distributor and retailer of those goods, are nevertheless subject to section 60 and 61.”

The Act has thus introduced the concept of strict liability when it comes to damages suffered as a result of defective products, in terms of which manufacturers and suppliers, amongst others, may be held liable. This strict liability may be applied even to transactions which would normally be exempt from the application of the Act, provided that the parties to the transaction acted in the ordinary course of business (as per the Act’s definition of a “transaction”).

The manner in which our Courts will approach the strict liability provisions of the Act remains to be seen as there has not been reported case law on the subject as yet.

Medical Law – Requirements for valid surrogacy agreements and the sanctions that medical practitioners may face if these requirements are not complied with

Medical practitioners involved in artificial fertilisation or involved in rendering assistance in artificial fertilisation in respect of surrogacy should familiarise themselves with the relevant provisions of the Children’s Act 38 of 2005 (hereinafter referred to as “the Act”) or face possible criminal sanctions in respect of a contravention of the Act.

Prior to the Act coming into operation, South Africa did not have enacted legislation dealing specifically with surrogacy and surrogacy agreements. The Act changed this position and surrogate motherhood in South Africa is now regulated by Chapter 19 of the Act, which Chapter came into operation on 01 April 2010.

Chapter 19 of the Act limits surrogacy agreements to competent and suitable persons who are domiciled in South Africa and sets certain requirements and stipulations in respect of surrogacy agreements. These requirements include that:

• The agreement must be in writing and signed by all parties thereto.
• The agreement must be concluded in South Africa.
• The commissioning parent(s) must be domiciled in South Africa at the time of the conclusion of the agreement.
• The surrogate must be domiciled in South Africa at the time of the conclusion of the agreement. The Court may, however, on good cause shown dispose with this requirement.
• The consent of the husband, wife or partner of the commissioning parent and the surrogate must be provided in writing and such husband, wife or partner must become a party to the agreement. Should this consent be unreasonably withheld the Court may confirm the agreement without such consent.
• The commissioning parents must be unable to give birth to a child and the condition must be permanent and irreversible, and the surrogates must have had at least one healthy (still living) child prior to the surrogacy agreement being concluded.
• At least one of the potential commissioning parent(s)’ gametes must be used in the process of artificial fertilisation.
• The agreement may not to be entered into for financial gain, and any such commercial surrogacy agreements are illegal. The only compensation which may be exchanged is for the reasonable expenses incurred as a result of the in vitro treatment, the pregnancy and post-delivery care.

The agreement must be confirmed by the High Court prior to the surrogate mother being artificially fertilised in order for the agreement to be valid and enforceable. The Court will be tasked with determining whether all of the requirements imposed by the Act have been met and whether the agreement will be in the best interests of the child (once born). The interests of the child are of paramount importance in such cases. A few recent cases illustrate the Court’s approach in this regard.

In the matter of In Re Confirmation of Three Surrogate Motherhood Agreements 2011 (6) SA 22 (GSJ ) the South Gauteng High Court held that when it is presented with an application to confirm a surrogate motherhood agreement it is, as the upper guardian of all children, duty-bound to ensure that the interests of the child (once born) are best served by the contents of the agreement. The applicants will thus be required to supply proper and full details regarding themselves in order that the Court may determine whether the commissioning parents are indeed fit and proper to be entrusted with full parental responsibilities. The Court requires detail as to who the commissioning parents are, what their financial position is, what support systems (if any) they have in place, what their living conditions are and how the child will be taken care of. According to the Court, further good practice would be following the requirements for adoptions, where expert assessment reports from social workers are required together with a police clearance certificate to demonstrate the suitability of the adoptive parents. An expert report can also be obtained to address the suitability of the surrogate.

In the matter of Ex Parte WH and Others 2011 (6) SA 514 (GNP) the North Gauteng High Court dealt further with the information that the Court will require before confirming the agreement. The Court held that the applicants’ affidavit should contain:

• All the factors set out by the Act together with documentary proof thereof where applicable;
• Details of any previous applications for surrogacy;
• Reports by a clinical psychologist in respect of the commissioning parents and the surrogate;
• Medical report in respect of the surrogate;
• Details and proof of payment of any compensation for services rendered;
• All agreements between the surrogate and any intermediary;
• Full particulars if any agency was involved; and
• Whether any of the commissioning parents have been charged with or convicted of a violent crime or crime of a sexual nature.

As a general rule, the surrogacy agreement must be concluded and confirmed by the Court prior to the artificial fertilisation taking place. It has, however, recently been held in the matter of Ex Parte MS and Others 2014 (3) SA 415 (GP) that the conclusion and confirmation of the agreement may take place retrospectively, i.e. after the artificial fertilisation of the surrogate, provided that it is in the interests of the unborn child. In such an instance, the applicants would have to explain why the confirmation is being sought at a late stage and would have to satisfy the Court that the application is not aimed at (or will have the effect of) circumventing the objectives of the statutory regime. For example, post-fertilisation applications should be refused if the pregnancy was not the result of artificial fertilisation and the real object is to allow the commissioning parents to circumvent the adoption process.

The Court, however, pointed out that the fact that the conclusion and confirmation of the agreement may take place retrospectively does not mean that the parties are free to ignore the general requirement that surrogacy agreements must be confirmed by a Court before artificial fertilisation takes place. Generally, the Court’s discretion to confirm such agreements retrospectively will only be exercised in exceptional circumstances and when the best interests of the child demand confirmation. The window-period for such confirmation exists only during the period before the child is born. At birth, the child is deemed to be the child of the surrogate mother and the parties will have to explore other available options such as adoption, a parental rights-and-responsibilities agreement under section 22 of the Act or an application for guardianship of the child under section 24 of the Act.

The Court further pointed out that it is important to bear in mind that it remains an offence for any person to artificially fertilise a woman in the execution of a surrogate motherhood agreement or to render assistance in such artificial fertilisation without authorisation from a Court. Medical practitioners involved in the pre-confirmation fertilisation may thus remain open to criminal prosecution, notwithstanding that the relevant surrogacy agreement may have been confirmed by a Court subsequent to the fertilisation. Medical practitioners should thus insist on authorisation from a Court before agreeing to assist the parties in the artificial fertilisation process. A practitioner found guilty of contravening the Act may be liable to a fine or to imprisonment for a period not exceeding ten years, or to both a fine and such imprisonment.

In the event that the agreement is confirmed by the Court, and subject to the agreement not being validly terminated, the child born from the agreement is considered to be the child of the commissioning parent(s) from the moment of birth and the commissioning parents have full parental rights and responsibilities in respect of the child. The surrogate is obliged to hand the child over to the commissioning parent(s) as soon as is reasonably possible after birth and neither the surrogate nor her husband, partner or relatives have any parental rights in respect of the child.

It is clear from what has been stated above that Chapter 19 of the Act sets stringent requirements and stipulations in respect of surrogacy agreements. Commissioning parents and / or surrogates would be well served by obtaining legal advice prior to concluding a surrogacy agreement while medical practitioners dealing with aspects of artificial fertilisation would be well served by familiarising themselves with the salient provisions of the Act in order to avoid unwittingly participating in contraventions thereof which may result in serious implications for the medical practitioner.

Medical Law – Loss of earnings / earning capacity and “sympathetic employment”

In the recently decided matter of De Melin v Road Accident Fund 2013 JDR 2656 (GSJ) the South Gauteng High Court was faced with deciding whether loss of earnings / earning capacity can be claimed in instances where a plaintiff is still employed, out of sympathy, and being paid his former salary even though he can no longer perform his work and has effectively been replaced.

The plaintiff, a butchery manager at a large manufacturer of biltong products owned by his wife and her two brothers, was injured in a collision with a motor vehicle. Prior to the collision the plaintiff was healthy, fit and of average mental functioning and he was inter alia tasked with production and spice control, ordering stock and managing staff at the butchery. At the time of the collision the plaintiff was earning R20 000.00 per month.

The plaintiff sustained a significant head injury during the collision and suffered on-going neurocognitive and psychological sequelae as a result. The neurological damage was regarded as permanent and it was agreed between the parties that the plaintiff is no longer employable in the open labour market. The family business, however, kept him on after the accident and paid him the same salary, out of sympathy, despite the fact that he had essentially been replaced by a butcher / production manager and a floor supervisor.

The parties agreed, prior to the matter proceeding to trial, that the Road Accident Fund (hereinafter referred to as “the Fund”) would be liable for 50% of the plaintiff’s proven damages.

The Court accepted that, bearing in mind the fact that that the plaintiff lost his ability to smell and taste, as well as his memory and other cognitive functions, coupled with the fact that he had effectively been replaced by two new employees who were paid a total of R30 000.00 per month, the plaintiff’s employment was sympathetically tolerated within the family business rather than contributing meaningfully thereto.

The two issues in dispute between the parties were as follows:

1. Whether, having regard to the fact that the plaintiff is still receiving his salary, it can be said that he has suffered and will continue to suffer any loss of income or earning capacity.

2. If any calculation in respect of loss of earnings must take into account the contention of the Fund’s industrial psychologist that the plaintiff was being paid more than he was worth prior to the accident because he was employed in the family business.

In respect of the first point of dispute, the plaintiff’s counsel contended that the plaintiff has “sympathetic employment” and that this cannot affect his claim for future loss of earnings / loss of earnings capacity. The Court was referred to the matter of Santam Versekeringsmaatskappy BPK v Byleveldt 1973 (2) SA 146 (A) in which it was held that when an employee was paid purely on compassionate grounds at a time when he could contribute nothing to the business, such salary is not taken into account when dealing with the plaintiff’s claim for loss of earnings.

The Fund’s counsel relied on the Supreme Court of Appeal decision of Rudman v The Road Accident Fund 2003 (2) SA 234 (SCA). The Court, however, found that the facts of the Rudman matter are distinguishable from the facts of the present matter in that in the Rudman matter there was evidence that the company may have suffered a temporary loss but no evidence that this affected the plaintiff’s income. The plaintiff in the Rudman matter was a director, shareholder and trustee and received his income as of right. He was also still capable of performing his real function at the company and it was not shown that he had, personally, suffered any diminution of his patrimony.

The Court accordingly applied the principles set down in the Byleveldt matter bearing in mind the following:

1. The plaintiff in the present matter did not receive his income as of right;

2. His loss had a direct impact on his patrimony;

3. He has, in effect, been replaced and is being paid purely on the basis of sympathetic employment;

4. The plaintiff ran the risk of suffering a loss of earnings in future as it was established during the trial that there might well come a time when the well-being of the business would require the termination of his employment.

In assessing the second point of dispute the Court relied on the factual scenario that, in replacing the plaintiff, the employer had to appoint two employees at a total cost of R30 000.00 per month. The Court accordingly dismissed the contention that the plaintiff was being overpaid.

The Court thus concluded that the plaintiff was sympathetically employed and that the amount that he is earning is not to be taken into account in assessing his loss of earnings / loss of earning capacity. A contingency of 60% was applied in respect of general contingencies such as savings in travelling to and from work and the possibility of loss of income due to illness or unemployment which the plaintiff might have suffered even if the accident had not taken place. The plaintiff was accordingly awarded an amount of R1 284 185.00 in respect of loss of income / earning capacity.

This matter illustrates the factual approach that the Court will take when considering the quantum of a claim in respect of loss of earnings / earning capacity and may well be usefully applied in matters with similar facts in order to establish a claim in respect of loss of earnings.

Medical Law – Medical Practitioners and fees charged for services rendered: The HPCSA has set the deadline for Practitioners’ comments on its proposed Guideline Tariffs for 18 November 2013

The period for commentary on the HPCSA’s Guideline Tariffs lapses on 18 November 2013.  As these tariffs will be used by the HPCSA to adjudicate complaints pertaining to overcharging, we recommend that practitioners partake in this process.  The proposed process for commentary can be found on the HPCSA’s website.

The Health Professions Act 56 of 1974 stipulates that a medical practitioner registered as such under the Act shall, unless it is impossible for him to do so “…before rendering any professional services inform the person to whom the services are to be rendered or any person responsible for the maintenance of such person of the fee which he or she intends to charge for such services when so requested by the person concerned”. The Act further obliges practitioners to inform patients when a fee is going to exceed the usual fee charged for such services, and what the usual fee for such services would be.

In addition to this, the Consumer Protection Act 68 of 2008, which came into effect in 2011, stipulates that a supplier (or in this case a practitioner) may not offer to supply, supply or enter into an agreement to supply any goods or services at a price that is “unfair, unreasonable or unjust”. The Act further provides that practitioners have to inform their patients of the costs of services before said services are rendered. The latter provision is also a requirement of the National Health Act 61 of 2003.

It is clear from the above that there are strict provisions in place relating to the manner in which practitioners are to deal with the fees charged for specific services. However, none of the above-mentioned Acts set out legally determined tariffs which may be applied by practitioners in relation to specific services rendered. Attempts have been made to determine such tariffs but the Health Professions Council of South Africa (“the HPCSA”) scrapped its ethical tariffs during 2008 and the Department of Health’s reference price list was declared invalid by the North Gauteng High Court during July 2010. This lacuna as to pricing has caused much uncertainty in the medical community as a whole regarding what fees would be considered fair, reasonable and just.

In a press release dated 07 August 2012, the HPCSA attempted to clarify this uncertainty by announcing its publication of fees to be used as a norm in the determination of complaints relating to overcharging by healthcare practitioners. These fees, known as the Guideline Tariffs, were aimed at providing practitioners with clarity and criteria for determining fair and reasonable fees for the services that they render and were intended to serve as a guide to practitioners on what they can expect to charge for their professional services. 

In deciding these fees, the HPCSA used the 2006 National Health Reference Price List as a baseline and added an inflator of 46.66% until 2012. The HPCSA stipulated that practitioners could charge above the Guideline Tariffs provided that they obtained an informed consent from the patient or the patient’s next of kin.

The publication of these Guideline Tariffs was, however, met with strong opposition from the medical community as a whole as it was felt that the HPCSA disregarded the input of the relevant role players in the medical community in determining these fees.  The HPCSA has, accordingly, postponed the publication of these Guideline Tariffs in order that interested persons may make presentations to Council regarding what they considered appropriate fees for specific services rendered.

Practitioners should take note that interested persons may only comment on the proposed fees until close of business on Monday 18 November 2013. Having regard to the fact that these guideline fees, once published, will be used in determining complaints relating to overcharging we suggest that practitioners partake in the presentations made to Council. We further suggest that all practitioners familiarise themselves with the Guideline Tariffs once they are published on the HPCSA’s website.

Medical Law – HPCSA Guidelines on the Keeping of Patient Records

THE IMPORTANCE OF KEEPING PROPER PATIENT RECORDS

The Health Professions Council of South Africa places “health care practitioners” – i.e. persons registered with the HPCSA – under an obligation to keep proper medical records. The HPCSA has published Guidelines on the Keeping of Patient Records (HPCSA) Pretoria (2008), and compliance with these Guidelines is critical for both continuity of patient care and for defending complaints or negligence claims.

A health record is defined as “any relevant record made by a health care practitioner at the time of or subsequent to a consultation and / or examination or the application of health management”, and contains the information about the health of an identifiable individual recorded by a health care professional, either personally or at his or her direction.

The following documents are regarded as the essential components of a health record, depending on the nature of the individual case:

· Hand-written contemporaneous notes taken by the health care practitioner;

· Notes taken by previous practitioners attending to health care or other health care practitioners, including a typed patient discharge summary or summaries;

· Referral letters to and from other health care practitioners;

· Laboratory reports and other laboratory evidence such as histology sections, cytology slides and printouts from automated analysers, X-ray films and reports, ECG traces, etc;

· Audiovisual records such as photographs, videos and tape-recordings;

· Clinical research forms and clinical trial data;

· Other forms completed during the health interaction such as insurance forms, disability assessments and documentation of injury on duty;

· Death certificates and autopsy reports.

The HPCSA requires that the following minimum information be included in a patient’s medical record:

· Personal (identifying) particulars of the patient;

· The biological, psychological and social history of the patient, including allergies and idiosyncrasies;

· The time, date and place of every consultation;

· The assessment of the patient’s condition;

· The proposed clinical management of the patient;

· The medication and dosage prescribed;

· Details of referrals to specialists, if any;

· The patient’s reaction to treatment or medication, including adverse effects;

· Test results;

· Imaging investigation results;

· Information on the times that the patient was booked off from work and the relevant reasons;

· Written proof of informed consent, where applicable.

Medical records must be objective recordings of what a health care practitioner has been told or discovered through investigation or examination, must be clear and legible, made contemporaneously and signed and dated. The records should be stored securely for a period of not less than six (6) years from the date on which they become dormant.

The HPCSA further requires that records should be complete, but concise. Self-serving or disapproving comments should be avoided in patient records (facts and drawn conclusions which are essential for patient care should be recorded).

Adherence to the Guidelines can make all the difference with regard to a clinical negligence claim being successfully defended, and all health care practitioners should ensure that they are familiar with the contents of the Guidelines.

Medical Law – Requirements for dispensing doctors

Prior to 01 April 1966 the authority of medical practitioners to dispense or compound medicines was governed by section 52 of the Health Professions Act.

Under this act, a medical practitioner who desired to dispense medicines simply had to inform the HPCSA of his intention to dispense medicines. The HPCSA had a discretion to then enter the name of such medical practitioner in the register of medical practitioners who were allowed to dispense medicines. A medical practitioner whose name had been entered in the register then became entitled personally to dispense medicines prescribed by him or her or by any medical practitioner with whom he was in partnership or with whom he was “associated as principal or associate or locum tenens”.

When the Medicines and Related Substances Act 101 of 1965 (“the Act”) came into operation on 01 April 1966, the position was changed dramatically. Section 22C of the Act now required a doctor wishing to dispense medicine to patients to apply to the Department of Health for a dispensing licence. Certain conditions for the granting of a dispensing licence were prescribed in the regulations to the Act. It also became a requirement that the applicant complete a supplementary dispensing course.

The conditions for the granting of a dispensing licence are set out in regulation 18 to the Act. The application has to be submitted to the Director-General of the Department of Health (“the Director-General”) and regulation 18 requires the application to contain at least the following information:

• The name, residential and business addresses (both physical and postal) of the applicant;

• The exact location of the premises where the dispensing will be carried out;

• Proof of completion of the prescribed supplementary course;

• Telephone and fax numbers of the applicant;

• Proof of registration with a statutory council such as the Health Professions Council of South Africa;

• A copy of the required notice to other health facilities in terms of sub-regulation 4;

• Motivation as to the need for a dispensing licence in a particular area; and

• Any other information that the Director-General may require.

Sub-regulation 18(4) has been the subject of much debate in the medical community since the Regulations came into effect. It directs that the Director-General is obliged to consider the existence of other licensed health facilities in the vicinity of the premises from where the applicant intends to carry out the dispensing. The Department of Health (with reference to this regulation) adopted a self-made rule that doctors not be allowed to dispense within a 5 km radius of any pharmacy. This position was obviously met with extreme opposition from the medical community as a whole.

The matter finally got the attention of the Constitutional Court in the matter of The Affordable Medicines Trust and Others v Minister of Health and Another (CCT27/04) [2005] ZACC 3. The matter was heard on 11 November 2004 and decided on 11 March 2005.

The Applicants challenged inter alia the powers of the Director-General to prescribe conditions upon which dispensing licences may be issued, the “coupling” of a licence to dispense medicines to particular premises and the factors which the Director-General is required to consider when reviewing an application for a licence.

The arguments put forth by the Applicants were, in broad terms, the following:

 • The power given to the Director-General to prescribe conditions upon which dispensing licences may be issued is too broad and may have the effect of giving the Director-General arbitrary legislative powers.

• The “coupling” of a licence to dispense medicines with specified premises is not authorised by the Act and therefore the Minister exceeded her powers when making the regulation giving the Director-General this right. In the alternative, the requirement of this “coupling” falls outside the authority to regulate the practice of the medical profession.

• The regulations, in their entirety, are vague and as such gives the Director General powers to make arbitrary decisions.

The Constitutional Court held that the provisions of the Act and its Regulations had to be considered in the light of the government’s stated objective to increase the public’s access to safe medicines. When considered with this objective in mind, the provisions of both the Act and the Regulations, although conferring many powers on the Minister and the Director-General, could not be regarded as unconstitutional.

The Court also held that the statutory framework giving rise to the Regulations provided sufficient guidance to enable the Director-General to adequately determine conditions upon which to issue licences and also limited the power of the Director-General to prescribe conditions by the context in which these powers are to be exercised.

Regarding the “coupling” of the dispensing licence to particular premises, the Constitutional Court (in agreement with the High Court) found that the “coupling” facilitates regular inspection and held that if the public is to have access to safe medicines, the dispensing of medicines cannot be separate from the premises where dispensing takes place.

It was held that Regulation 18 does not expressly require the licence to dispense medicines to be linked to specific premises. However, the Regulation contemplates that health-care providers who wish to dispense medicines will do so from the premises where the medical practitioner practises from (as principal or as associate, assistant or locum tenens with another practitioner).

The Court held that in the case of a medical practitioner who practices as an assistant, the licence will reflect the premises of the principal, these being the premises from which such medical practitioner will dispense medicines. Similarly, a locum tenens will dispense medicines from the premises of the principal who holds a dispensing licence. Since a locum tenens may work under various principals, the licence may be issued subject to the condition that he may only dispense medicines from premises of principals who have been issued with dispensing licences.

The Court further held that a medical practitioner with satellite practices will be issued with a single licence listing all the premises from which medicines will be dispensed. Whenever a medical practitioner wishes to expand his practice to other premises, application has to be made for the addition of the new premises to the licence.

The Constitutional Court also held that the Regulations providing that medical practitioners are not permitted to dispense where there is a pharmacy within a 5 km radius had the effect of protecting pharmacies from competition with medical practitioners. The Court held that was not the purpose of the Act and Regulations 18(5)(a), (c), (d) and (e) were declared unconstitutional and invalid.

Medical practitioners who fail to comply with the provisions of the Act may face removal from the HPCSA’s register, effectively suspending them from practice. It seems that there are still practitioners who are unaware of the current requirements relating to dispensing licences and these practitioners are putting their careers at stake.

Medical Law – The Medical Schemes Act and Direct Payment to Service Providers

Section 59 of the Medical Schemes Act, Act 131 of 1998, provides inter alia that:

1)    “A supplier of a service who has rendered any service to a beneficiary in terms of which an account has been rendered, shall, notwithstanding the provisions of any other law, furnish to the member concerned an account or statement reflecting such particulars as may be prescribed;
2)    A medical scheme shall, in the case where an account has been rendered, subject to the provisions of this Act and the rules of the medical scheme concerned, pay to a member or supplier of service, any benefit owing to that member or supplier of service within 30 days after the day on which the claim in respect of such benefit was received by the medical scheme”.

The question arises whether this section merely allows medical schemes to pay service providers directly or whether it in actual fact creates an obligation on medical schemes to make payments directly to service providers, as has been argued by service providers.

The Supreme Court of Appeal, in Medscheme Holdings (Pty) Ltd and Another v Bhamjee [2005] ALL SA 16 (SCA), found that Mr Bhamjee, a medical practitioner, had no basis upon which to demand that Medscheme (a registered medical scheme) pay him directly.

In this decision, the Court appeared to recognise that although section 59(2) creates a basis upon which medical schemes are allowed to discharge obligations owed to members by reimbursing service providers directly, the section does not oblige a medical scheme to do so where the provider had lodged an account with the medical scheme.

This view was confirmed in the recently decided and reportable matter of Tshwane Pharmacy (Pty) Ltd v GEMS which was heard by the North Gauteng High Court under case number 28532/11.

In this matter the Applicant (a service provider) applied to Court on an urgent basis for an order directing that the Respondent (a registered medical scheme) make payment to them directly, and not to their members.

The Applicant argued that the key phrase in section 59(2) of the Act is “benefit owing to the member or provider of the service” and that on a common sense interpretation of the section it means that where a member has not paid the supplier of the service the medical scheme has no discretion but is obliged to pay the supplier.

The Court did not agree with this argument, and held that section 59(2) must be interpreted in context. Subsection (1) provides that a supplier of a service who has rendered a service is obliged to furnish the member concerned with an account containing prescribed particulars. Subsection (2) then provides that when such an account has been rendered the medical scheme may pay to the member or the supplier of the service the benefit owing to that member or supplier of the service.

The Court also held that, in the context of the section, the benefit owing must refer to the amount owing by the member to the supplier for the service rendered. The Court stated that it is irrelevant that the benefit becomes owing to the member by virtue of the agreement between the member and the medical scheme and, to the supplier, by virtue of the agreement between the member and the supplier. The subsection does not create an obligation on the medical scheme to pay the supplier.

Furthermore, the Court held that the subsection clearly provides that payment is subject to the rules of the medical scheme, and in the case of the Respondent its rules stated unambiguously that the Respondent has the right to pay either the member or the supplier of the service.

Accordingly, the Court found no basis for an obligation on the Respondent to pay the Applicant directly and dismissed the application with costs.

From the above it is clear that in order to ensure payment for services rendered service providers must either claim payment directly from their patients, or ensure that they have contractual agreements with the medical schemes. For now, our Courts seem unwilling to impose a statutory obligation on medical schemes to make payment directly to service providers in the absence of such a contractual arrangement.

Construction Law – The Legal Principles underlying the Builder’s Lien

In terms of common law a builder has a right of retention over the building or structure (site) or portion thereof that he has constructed, enhanced or repaired to secure payment of the contract price, by means of retaining physical control of the site, until such time as his claim has been satisfied or the contractor has been provided with appropriate alternative security in respect of his claim.

The following general requirements must be satisfied in order for a valid builder’s lien to arise and be enforceable by the contractor:

•    The owner of the property must be enriched and the amounts owing to the contractor must be due to him (and not merely owing or accrued). It was held in FHP Management (Pty) Ltd v Theron and Another 2004 (3) SA 392 (C) that the purported expenditure must in fact have been incurred and the improvements must have been necessary or useful, or must have maintained or enhanced the market value of the property.

•    The contractor must be and remain in possession of the site or the section thereof forming the subject matter of the builder’s lien. Such possession is made up of two elements: the contractor’s physical control or occupation of the site and the contractor’s intention to hold and exercise that possession over the site so as to secure some benefit for himself against the owner. The lien does not automatically revive if the contractor relinquishes its possession and subsequently regains it. The only exception to this rule would be if the contractor is deprived of his possession by force, the threat of force or as a result of fraud.

The contractor must be mindful of the fact that it is not enough for him to contend symbolic possession in that he has employees and/or a security guard on site or that he has stored materials and equipment belonging to him on site, although on the facts of the case this might well be sufficient evidence of natural possession. Rather, it is necessary for the contractor to prove that the site (or the relevant sections of the site) over which the builder’s lien is asserted is occupied and under the control of the contractor at all material times. A temporary absence, as occurs at the end of a working day, will not interrupt the lien provided that the contractor remains engaged in the work and in his assertion of his occupation of the site.

Possession need not be exclusive to one person. Where the employer engages several independent contractors to complete different sections of the work, whether as principals or as subcontractors, each one of them may enjoy a lien over the whole or a severable part of the structure, provided each retains possession and asserts his right thereto against the employer or owner as seen in Beetge v Drenka Investments (Isando) (Pty) Ltd 1964 4 SA 62 (W).

In Wightman v Headfour (Pty) Ltd 2008 (3) SA 371 SCA the Supreme Court of Appeal held that possession is not ipso facto lost where a contractor exercising a lien over a property allows the owner of the property access for limited purposes. In such instances the court will consider both the giving and receiving of access in context to determine if the physical possession was actually given up.

According to the Court, in the event that the contractor comes to an agreement with the owner in terms of which he allows the owner access to the property physical possession will only be lost if the contractor intends to abandon the control which he had hitherto exercised exclusively.

In this case the contractor delivered a duplicate set of keys to the owner because he had come to an agreement with the owner in terms of which he would allow the owner access to the property. At no stage did the contractor intend to relinquish control to the owner, and the owner had ostensibly received the keys on the same basis.

However, the owner then used the duplicate keys to obtain entry and in doing so manifested a state of mind to possess the premises despite the terms of the agreement. This was done by giving access to his own contractors and causing entry to be refused to the contractor.

The Court held that there was no doubt that the owner’s true intention was withheld from the contractor in order to gain control of the premises and that the owner accordingly took occupation without the contractor’s knowledge. The Court further held that this constituted spoliation and the owner was ordered to provide the contractor with satisfactory security or alternatively restore possession of the property to the contractor.

Accordingly, it can be seen from the above that the intention to maintain possession of the site will be of tantamount importance when the Court considers the existence of a builder’s lien.

Medical Law – The Interpretation of “Pay in Full” in terms of the Medical Schemes Act

In the recent matter of Board of Healthcare Funders of Southern Africa v Council For Medical Schemes 2011 JDR 1471 (GNP), the first and second applicants approached the Court with a request to issue a declaratory order regarding the interpretation of the words “pay in full” in regulation 8(1) of the General Regulations made pursuant to the Medical Schemes Act, 131 of 1998.

The applicants contended that the Court had to decide three issues, namely:
1.    The first applicant’s entitlement to institute proceedings for declaratory relief;
2.    The interest and locus standi of the intervening respondents in opposing the relief sought by the applicants; and
3.    The meaning of the words “pay in full” in regulation 8(1) of the General Regulations which were promulgated in terms of section 67 of the Act.

Regulation 8 has been in force since 1 January 2000. According to the applicants, the current problem came into existence on 11 November 2008 when the Appeal Board decided two cases on appeal which was referred by the Appeal Committee in terms of section 50 of the Act. The Appeal Committee and the Appeal Board had, pursuant to these two decisions, interpreted the words “pay in full” in regulation 8 to mean that the medical scheme must make full payment of a service providers’ invoice in respect of the costs of providing health care services for Prescribed Minimum Benefits without taking the rules of the medical scheme into consideration in dealing with any complaints.

It was the applicants’ contention that “pay in full” means payment according to the rules of the Medical Scheme, while according to the respondents, the decisions by the Appeal Board have not been challenged as yet and presently medical aid schemes are bound to this authority and have to pay service providers’ invoices in full.

The main complaint by the respondents was that the first applicant had no direct and substantial interest in the application as the judgment would not have an impact on it. Although the first applicant contended that it represented 75 registered medical aid schemes and therefore had locus standi, the Court found this not to be the case. This was due to the fact that the first applicant saw fit to have the second applicant, who is a registered medical aid scheme, joined. Furthermore, only 15 registered medical schemes, in the founding and supplementary founding affidavits, confirmed that a declaratory order should be sought.

The Court held that had the first applicant been so sure that it represented all 75 medical aid schemes it would not have been necessary to join the second applicant or to obtain affidavits and signatures of 15 members of the first applicant. The Court concluded from this that the first applicant did not in fact represent 75 members, but only the 15 members mentioned in the papers.

The non-joinder of all the medical schemes rendered the application fatally defective as the Court could not find that the first applicant, as a general representative of the medical schemes, would be prejudicially affected by a judgment, but found that its members may all be prejudicially affected and accordingly, all the members should have jointly instituted the application for a declaratory order.

The Court found that the first applicant did not have locus standi for the following reasons:
1.    The matter was one that could be classified as a representative matter, but not all the medical schemes had been joined and it had not been launched as a representative matter due to the fact that the first applicant did not have any mandate to litigate on behalf of all 75 of its members;

2.    In order to institute action in terms of Section 38 of the Constitution, a litigant needs to show that a right enshrined in the Bill of Rights has been encroached upon as well as sufficient interest in the relief sought. The first applicant did not explicitly aver any such infringement and the Court found that the First Plaintiff would not be directly influenced by the judgment and did not have a sufficient interest in the relief sought.

With regard to the second applicant the court held that it could not succeed in the application on its own, as none of the other medical aid schemes or administrators had been joined.

As a result the court dismissed the application without deciding the meaning of the words “pay in full”.