South African Municipal Workers' Union National Medical Scheme (SAMWUMED) v City of Ekurhuleni and Others

SAMWUMED is a self-administered medical scheme registered under the Medical Schemes Act 131 of 1998. In September 2015, the South African Local Government Association (SALGA) concluded a collective agreement with trade unions. Clause 9 of the collective agreement required the South African Local Government Bargaining Council (SALGBC) to annually accredit medical schemes qualifying for employer contributions. Clause 15.3.2 permitted accredited medical schemes to market their schemes annually during October-November (the window period). SAMWUMED had been accredited by SALGBC for a number of years, including September 2020, along with four other medical schemes. SAMWUMED had marketed its scheme through its own consultants prior to January 2020. In January 2020, the City of Ekurhuleni (COE) informed SAMWUMED it had appointed Alexander Forbes Health (Pty) Ltd (AFH) as broker service consultants, later replaced by Moso Consulting Services (Pty) Ltd (Moso). COE required SAMWUMED to rescind all existing brokerage contracts, stipulated no other consultants would be allowed to service COE employees, and demanded payment of broker fees to Moso. SAMWUMED had concluded a written broker agreement with Moso on 5 April 2019, appointing Moso on a non-exclusive basis to market SAMWUMED's products and services within a defined territory - the City of Johannesburg and its municipal entities. This territory did not include the COE (the territorial limitation). SAMWUMED refused to accept Moso's appointment by COE and sought relief from the high court.

• Whether SAMWUMED was a party to the collective agreement and could enforce it directly
• Whether accredited medical schemes derive rights from their agreement with SALGBC arising from accreditation
• Whether COE's conduct constituted unlawful and intentional interference with SAMWUMED's contractual relations with SALGBC
• Whether the territorial limitation in the broker agreement between SAMWUMED and Moso offends against section 65 of the Medical Schemes Act 131 of 1998 and Regulation 28
• Whether the territorial limitation is unenforceable on grounds of public policy
• Whether SAMWUMED waived the territorial limitation

The appeal was upheld. The high court's order was set aside and substituted with the following: 1. COE must accept member application forms and communications directly from SAMWUMED and duly process them, for as long as SAMWUMED remains accredited. 2. Declaration that Moso is not entitled to payment of broker fees in respect of COE employees in the absence of a written broker agreement with SAMWUMED and actual rendering of services. 3. COE and Moso are interdicted from: - Preventing or hindering SAMWUMED from marketing its scheme and rendering services through its own consultants or appointed brokers; - Holding out Moso as exclusive broker for accredited schemes; - Refusing to accept and process applications from SAMWUMED; - Insisting applications be submitted to Moso instead of COE; - Insisting on payment of broker fees to Moso without a written agreement or actual services; - Approaching SAMWUMED members to execute service notes in favor of Moso without a written agreement or actual services. 4. COE and Moso jointly ordered to pay costs of the application and appeal.

1. Collective agreements under the LRA bind only parties as defined in sections 213 and 23 of the LRA. Medical schemes cannot be parties to collective agreements as defined, and therefore cannot enforce such agreements directly, even if provisions are designed to benefit them. 2. Accreditation of a medical scheme by a bargaining council, pursuant to powers under section 28(1)(g) of the LRA, constitutes an agreement between the bargaining council and the accredited medical scheme that confers enforceable rights to market the scheme and service members. 3. The delict of unlawful and intentional interference with contractual relations can be established where: (a) there is a contractual relationship; (b) the defendant interferes with that relationship; (c) the interference is unlawful (not confined to inducing breach, but based on the duty not to cause harm and to respect rights); and (d) the defendant acted with intent (including dolus eventualis). 4. Section 65 of the Medical Schemes Act 131 of 1998 and Regulation 28 do not prohibit territorial limitations in broker agreements. The regulatory scheme permits medical schemes to determine whether to appoint brokers, how many, in what areas and on what terms. Regulation 28(7) allows members to refuse broker services but does not entitle members to dictate broker appointments or terms to medical schemes. 5. A territorial limitation in a broker agreement does not offend public policy where no constitutional right or value is infringed and no demonstrable harm to service quality or competitive alternatives is shown. The value of honoring voluntarily entered obligations supports enforcement in such circumstances.

1. The Court noted that the degree of fault may be relevant to the inquiry as to unlawfulness in the delict of interference with contractual relations, and that negligence may potentially suffice (in addition to dolus eventualis). 2. The Court observed that considerable complexity would arise if Regulation 28 sought to provide for member-driven broker plurality, requiring detailed provisions that are not found in the Regulation. 3. The Court commented on the logic underlying the regulatory scheme: it is for medical schemes to decide how to win members and service their needs, and if schemes make bad choices, members will switch to competing schemes. This reflects a market-based regulatory philosophy rather than one of mandated broker plurality. 4. The Court noted that it was unnecessary to resolve the factual dispute about whether SAMWUMED had permitted Moso to operate in Tshwane, given the non-waiver and variation clauses in the broker agreement. This suggests the importance of properly drafted contractual provisions protecting parties from implied variations or waivers. 5. While not deciding Moso's counter-application (as it was not appealed), the Court's reasoning on the territorial limitation effectively determines the outcome of that application.

This case is significant in South African law for: 1. Clarifying the statutory nature and binding effects of collective agreements under the LRA - only parties as defined in the LRA can be bound to or enforce collective agreements, excluding third-party beneficiary principles from common law. 2. Establishing that accreditation by a bargaining council can constitute an independent agreement conferring enforceable rights upon the accredited entity. 3. Applying the delict of unlawful and intentional interference with contractual relations to protect medical schemes from employer conduct that undermines their accreditation rights. 4. Interpreting the regulatory scheme for medical scheme brokers under the Medical Schemes Act 131 of 1998 and Regulation 28, confirming that medical schemes retain autonomy to determine how to deploy brokers, including through territorial limitations. 5. Confirming that territorial limitations in broker agreements do not offend public policy or constitutional values where no demonstrable harm to service quality or competition is shown. 6. Protecting the freedom of medical schemes to use their own internal consultants rather than being forced to engage external brokers. 7. Limiting the scope of member choice in broker appointments - members can refuse broker services but cannot compel medical schemes to appoint brokers or dictate the terms of such appointments.