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Court judgement touching on executor’s liability – Yarona Healthcare Network (Pty) Ltd v Medshield Medical Scheme [2017] ZASCA 116; [2017] 4 All SA 705 (SCA); 2018 (1) SA 513 (SCA)

Yarona Healthcare Network (Pty) Ltd v Medshield Medical Scheme [2017] ZASCA 116; [2017] 4 All SA 705 (SCA); 2018 (1) SA 513 (SCA)

In this case a medical scheme paid a service provider in the mistaken belief that the amounts paid were due to the service provider.  In the South African Law of Unjust Enrichment, such amounts may be recovered by the party who have made the payments on condition that the error or mistake must be “excusable”, in that the belief that the money was due must be reasonable.  Sheer gross negligence is excluded by this requirement.  In his discussion of this requirement, the Supreme Court of Appeal (SCA) (Rogers AJA) deals with the exception to this rule applicable to executors.  The exception comes from this passage in The Law of Contract by Sir John Wessels, quoted in the judgement:
‘It seems, however, more reasonable to hold that a person who, like an executor, is acting for the benefit of others, and who in that capacity overpays an heir or legatee under a bona fide mistake as to their legal rights, should not suffer for his mistake . . . .’

This approach was followed by the SCA in a 1997 judgement (Bowman, De Wet and Du Plessis NNO & others v Fidelity Bank Ltd 1997 (2) SA 35 (A)) and is quoted by the court.

In Yarona Rogers AJA criticises this approach in the case of executors on the basis that executors are today mostly professional and can charge substantial fees (par 42), but his remarks are clearly obiter, as is clear from the following passage:

‘For purposes of the present decision it is unnecessary to go beyond the case of a medical scheme.’ (par 43)

The court then proceeds to apply the exception in the case of the trustees of the medical scheme on the basis that half of the trustees of a medical scheme are usually employees’ representatives and as such not professional trustees.  The court rules that the medical scheme is allowed to claim repayment without having to prove that the mistake was excusable.

Executors, especially professionals, should take great care to ensure that payments they are making from an estate go to the person(s) entitled thereto.

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