Optivest Health Services (Pty) Ltd v The Council for Medical Schemes and Others

Optivest Health Services (Pty) Ltd (Optivest) is accredited as a broker by the Council for Medical Schemes (the Council) in terms of section 1, read with section 65 of the Medical Schemes Act 131 of 1998 (the Act) and its regulations. In May 2019, the Council received an anonymous tip-off from a former employee of Optivest alleging that Optivest was charging service fees to members who had resigned from medical schemes but were still being debited, without members' knowledge or consent, for over ten thousand "orphan" service fee profiles. The Council's Compliance and Investigation Unit formed the view that the allegations warranted further investigation. On 30 August 2019, the Registrar appointed Open Water Advanced Risk Solutions (Pty) Ltd (Open Water) in terms of section 44(2) of the Act, read with section 134(1), 129(2) and (3) of the Financial Sector Regulation Act 9 of 2017 (FSR Act), to conduct an inspection into Optivest's affairs. The inspection was conducted on 21-22 October 2019 and continued on 14 November 2019. Optivest initially cooperated but then withdrew cooperation and challenged the Council's authority. Open Water produced a second draft investigation report dated 29 November 2019 containing preliminary findings against Optivest. On 10 December 2020, Optivest instituted review proceedings seeking to set aside the decisions to initiate the investigation, appoint Open Water, and the draft report itself.

• Whether section 44(4) of the Medical Schemes Act 131 of 1998 enables the Council and Registrar of Medical Schemes to investigate the conduct of a broker, as opposed to only medical schemes
• Whether the Council was obliged to utilize the mechanisms of section 47 of the Act (providing a copy of the complaint to the party complained against) before conducting an investigation
• Whether the Council's decision to investigate was lawful and within its powers (intra vires)
• Whether the Council's conduct was procedurally fair
• Whether the decision to investigate was rationally connected to the purpose of the Act

The appeal was dismissed with costs, including the costs of two counsel. The high court order upholding the Council's authority to investigate Optivest was confirmed.

The binding legal principle established by the majority is that: 1. Section 44(4) of the Medical Schemes Act 131 of 1998, when read with sections 129, 134, and 135 of the Financial Sector Regulation Act 9 of 2017, empowers the Council for Medical Schemes (acting through the Registrar) to conduct investigative inspections into the affairs of accredited brokers, not just medical schemes. 2. The phrase "any person" in section 44(4)(a) must be interpreted to include brokers accredited under section 65 of the Act. This interpretation follows from: a. The ordinary grammatical meaning of the words; b. A contextual and purposive interpretation of the Act read as a whole; c. The principle of implied ancillary powers - the power to accredit brokers (section 65) and to suspend or withdraw accreditation (Regulation 28C) necessarily implies the ancillary power to investigate compliance; d. The Council's broad functions under sections 7 and 8 of the Act to protect beneficiaries and take any steps necessary or expedient to perform its functions. 3. The maxim ex accessorio aius, de quo verba loquuntur applies: where a principal power is granted (accreditation), accessory powers (investigation) are also granted or implied. 4. Section 44 operates independently of section 47 (the complaints procedure). The investigative power in section 44(4)(a) can be exercised without first affording audi under section 47, particularly where there is suspicion of fraud or irregularities that could be concealed if notice was given. 5. An inspection under section 44(4)(a) is purely investigative in nature and does not determine or affect rights, therefore procedural fairness requirements are limited. The right to respond to findings is adequately protected by the opportunity to respond to the draft investigation report.

Non-binding observations made by the court include: 1. Weiner JA observed that without the element of surprise, the effectiveness of investigative powers would be lost or severely undermined, particularly where irregularities or fraud are suspected (citing Bonitas Medical Fund v The Council for Medical Schemes). 2. The Court noted that the preliminary findings in the draft report were "damning" and indicated serious non-compliance by Optivest, including: charging service fees without proper agreements; failing to explain fees were optional; continuing to charge fees after members left medical schemes; and collecting fees that may constitute proceeds of unlawful transactions. 3. The majority commented on the interrelationship between the Medical Schemes Act and its regulations, noting that regulations provide remedies for dealing with non-compliant brokers (particularly Regulation 28(9) concerning refunds for misrepresentation or unlawful conduct). 4. The Court observed that the "mischief" addressed by the Act is non-compliance with provisions of the Act and regulations, and statutes must be construed against the background of the perceived mischief they address. DISSENTING OBITER (Goosen JA): 5. Goosen JA observed that if accreditation placed brokers under Council supervision, it would create considerable regulatory conflict and inefficiency, as brokers are already subject to supervision by the Financial Sector Conduct Authority under the FAIS Act. 6. The dissent noted that accreditation is not equivalent to licensing - it merely permits or authorizes provision of advice in relation to a particular product, and does not place the broker under supervisory control of the Council. 7. Goosen JA commented that the regulatory and supervisory power of the FSCA over brokers is based on the nature of the service (advisory/intermediary), not the content of the service or the type of financial product involved.

This case is significant in South African law as it clarifies the regulatory powers of the Council for Medical Schemes, particularly: 1. It confirms that the Council has the power to investigate accredited brokers under section 44(4) of the Medical Schemes Act, not just medical schemes themselves. 2. It establishes that the phrase "any person" in section 44(4) must be interpreted broadly and purposively, consistent with the Council's functions to protect beneficiaries. 3. It demonstrates the application of the principle of implied ancillary powers in administrative law - where a primary power is granted (to accredit brokers), an ancillary power to investigate compliance is implied. 4. It clarifies the relationship between the Medical Schemes Act and the Financial Sector Regulation Act 9 of 2017, and how these statutes must be read together. 5. It confirms that section 44 investigative inspections are "purely investigative" in nature and can proceed without prior notice where there is suspicion of irregularities or fraud. 6. It addresses the interplay between different complaint mechanisms (section 47) and investigative powers (section 44) available to the Council. The case has implications for the regulatory framework governing medical scheme brokers and the extent of the Council's supervisory jurisdiction over entities within the medical schemes industry. The strong dissent indicates ongoing jurisprudential debate about the proper scope of regulatory powers and statutory interpretation in the financial services sector.