The Supreme Court of Appeal (SCA) has upheld a decision by the High Court that KeyHealth Medical Scheme was not entitled to revoke its agreement with healthcare brokerage Glopin (Pty) Ltd.
In October 2004, Glopin concluded an agreement with Munimed Medical Scheme. In terms of the agreement, Glopin was authorised, with effect from the commencement date, to submit to Munimed, on behalf of Glopin’s clients, applications for the medical scheme’s products and to provide ongoing broker services.
Munimed assigned the agreement to KeyHealth in October 2011.
In February 2017, KeyHealth’s attorneys sent a letter to Glopin terminating the agreement, citing Glopin’s failure to comply with legislation, service levels and the code of conduct as stated in clause 4.3 of the agreement, which KeyHealth viewed as constituting a serious breach.
Glopin regarded this as a repudiation of the agreement, which it did not accept.
In March 2017, KeyHealth’s attorneys addressed a letter to Glopin abandoning the notice of termination. The letter, however, also notified Glopin of KeyHealth’s intention to revoke its authority under the agreement, with effect from 1 July 2017.
Following this letter, Glopin instituted an action in the High Court in Pretoria, seeking a declaratory order that the agreement between the parties was of full force and effect, and that the purported cancellation in February 2017, as well as the subsequent purported revocation of Glopin’s authority under the agreement, were unlawful and invalid.
The trial court considered that the contract constituted a mandate, but that KeyHealth’s revocation was unlawful and invalid.
With the leave of the trial court, the matter went before a full bench of the High Court.
Although the full bench endorsed the decision of the trial court, it found that the agreement was not a mandate simpliciter, but a contract that created obligations between the parties, and which could be terminated only if clause 4 of the agreement was triggered.
Grounds for appeal
In its appeal to the SCA, KeyHealth contended that the agreement between the parties amounted to a contract of mandate and, as a result, either party was free to revoke it at any time. Therefore, it was entitled to revoke Glopin’s mandate as it did in March 2017. To advance this argument, KeyHealth contended that the services provided for in the Service Level Agreement were provided on KeyHealth’s behalf and not on behalf of the members of the medical scheme per se.
Use of the word ‘authority’
The SCA found that KeyHealth failed to show that the mandate it contended for was the kind of mandatory authority in respect of which the irrevocability clause could not apply.
KeyHealth seemed to base its argument purely on the use of the word “authority” in the agreement and ignored other clauses that gave rise to the context of the use of the expression. By KeyHealth’s own admission, and as stated in the agreement, Glopin was not an empowered agent. It did not have the authority to conclude juristic acts on KeyHealth’s behalf.
The SCA further held that, even assuming that a contract of mandate existed, KeyHealth’s predecessor, Munimed, had bound itself, in terms of clause 4, to the duration of the agreement and how it would have been terminated.
In terms of clause 4, the parties agreed that the agreement would continue for the period of Glopin’s accreditation by the Council for Medical Schemes, and it could be terminated by either party in terms of the legislation. The agreement could also be automatically terminated if any of the events stipulated therein occurred.
The SCA found that none of the events stipulated in clause 4 for triggering the termination of the agreement had taken place. The SCA held that KeyHealth was, therefore, not permitted to revoke the contract at will.
The appeal was dismissed with costs, including the costs of two counsel.
