Contracting out of legislative protection

Donald Dinnie, Norton Rose Fulbright

The law obliges medical schemes to pay the costs of treating prescribed minimum benefit conditions in full. The Supreme Court of Appeal in The Council for Medical Schemes v Genesis Medical Scheme provides a useful reminder of when a party may waive rights conferred by law for their benefit.

The Medical Schemes Act does not expressly provide that scheme members may not waive rights conferred by the Act upon them.

The medical scheme argued that the member, by accepting to be bound by its rules, had contracted out of the obligations imposed on the medical scheme under the statute.

There is a general rule that a person may waive rights conferred by law solely for their benefit. But the rule does not apply where both public as well as individual interests are concerned. It has been established since 1905 that where public as well as individual interests are concerned, public policy requires observance of the statute and the benefits of the provisions cannot be waived by the individual.

The Medical Schemes Act has as its goal the obligation of a medical scheme to provide a prescribed level of treatment for all its members suffering from prescribed minimum benefit conditions, whether obtained from the private or public sector. That, said the court, is clearly a matter involving the public interest and in respect of which public policy requires compliance by medical schemes.

he court approved of the approach adopted by the Supreme Court of England in saying that it can no longer be treated as axiomatic that in the absence of explicit language the courts will permit contracting out of the provisions of an act of parliament where the act, although silent as to the possibility of contracting out, nevertheless has manifestly been passed for the protection of a class of persons who do not negotiate from a position of equal strength, and for whose well-being there is a public as well as private interest.

The relationship between a medical scheme and its members is not governed solely by the scheme’s rules but primarily by the obligations imposed by statute upon medical schemes. Those obligations cannot be evaded by a medical scheme purporting to contract with its members and prescribing rules that have a contrary effect.

Recent legislation such as the Consumer Protection Act and the Protection of Personal Information Act now expressly prohibits the contracting out of or waiver of certain consumer protection under that legislation.

First published by: Financial Institutions Legal Snapshot