21 May 2014,

Background

This summary follows on from a summary released by SECTION27 on Tuesday 20 May in a press statement attempting to capture the first day of the Netcare v KPMG hearing. You can access this statement here.

The importance of the law

Netcare resumed argument on the second morning by continuing to detail facts about the interaction between KPMG employees, Netcare and the Competition Commission. It aimed to emphasise the degree of harm that Netcare is exposed to in the absence of the enforcement of the order it yesterday argued for that the Court must enforce. In sum Netcare committed less than an hour of a day and a half of argument to the law pertaining to conflicts of interest and other legal principles applicable to the case.

Strangely, Doctor QC on behalf of Netcare then sought to pre-emptively rebut much of KPMG’s legal argument, which had yet to be presented to the Court, by diminishing the significance of their legal argument and the law. Submissions of this nature included jibes such as “your lordship will be troubled with interesting points of law”, KPMG will stress “we’ve got legal arguments! We’ve got legal arguments” and “we’re going to be subjected to legal arguments”. In a court of law, as an officer of the Court, Doctor QC appeared to show disdain for the law.

The framing of the case

Trengove SC, representing KPMG began by emphasising that Netcare had framed the case inaccurately and peculiarly. Trengove SC stressed that, when filed, this case had had nothing to do with KPMG’s compliance with the October 2013 Consent Order. Trengove SC explained that since the filing of the case, Netcare had introduced two additional notices of motion and filed additional affidavits with “abandon” (8 in total) without requesting permission from the Court to do so, as is required by the Rules of the Court. The result was that the case that Netcare had initially presented, based on the law of conflict of interest, now appeared, impermissibly to have morphed into a case framed as one in which Netcare simply requests that the Court enforce the October 2013 consent order.

Trengove SC then emphasised that this seemed to be in keeping with Netcare’s intention which appears, from the outset, to have been to “delay, disrupt and disqualify” KPMG from employment with the Commission thereby delaying and disrupting the Commission’s private health inquiry, an important exercise of the Commission’s constitutional functions. To prove this, Trengove SC made extensive reference to correspondence between Netcare and KPMG’s respective legal representatives.

Trengove SC concluded that Netcare has approached the Court without “one iota of evidence” of any harm to Netcare. For example, it has not even claimed that any confidential information has in fact been leaked to anyone. This strategy of Netcare’s has necessitated a case in which twelve advocates, at great expense, had to argue in front of a Court for three days with the exercise being aimed only at Netcare avoiding the risk of the “leakage of the truth”.

The significance of the Constitution

Trengove SC responded to arguments made yesterday by Unterhalter SC on behalf of Netcare with regard to the constitutional duties of both the Commission and, in turn, KPMG as a functionary of the Commission. Trengove SC stressed that Netcare had misinterpreted the Constitutional Court’s Allpay judgment. This was because it could not be argued that KPMG, hired as consultants to the Commission, were in any way comparable to Cash Paymaster who in the context of Allpay had been awarded a tender to undertake countrywide payment of social grants, which about 15 million people depend upon for their livelihood. Trengove SC then argued that in any event, Netcare had not pleaded or argued the case on a constitutional basis in the first place and that if KPMG was indeed in violation of a court order, nothing in the Constitution would make obeying this order any less or more important.

Conflict of interest

Accepting that KPMG, whether it is a public functionary or not, is required to accede to the highest of ethical standards in its operations, Trengove SC argued that the real question in this case was whether KPMG has in fact met the ethical and legal standards required by South African law, including compliance with court orders.

Trengove SC began with the former contract between KPMG and Netcare and highlighted a provision, which explicitly states that KPMG was permitted to work for other employers with which Netcare may have conflicting interests except to the extent that it is prohibited by law. Judge Matojane interjected, questioning, “but is the Commission a conflicted party”? Trengove SC answered “no” and proceeded to detail why this is so in terms of the law of conflict of interests.

In detailing the existing South African and English case law on the issue, Trengove SC noted that higher South African courts, to which the High Court is bound, have concluded that the law on conflict of interest does not extend beyond application to lawyers acting in the context of litigation. The rule on conflict of interest was therefore a “special remedy” pertaining to only lawyers. This is justified by the role of lawyers as officers of the court and by the role of the courts as guardians of the administration of justice.

Even were KPMG’s employees to be performing the function of lawyers, Trengove argued that courts have required more than a mere apparent potential conflict to bar professionals from representing clients whose interests are conflicted with former clients. To illustrate this, Trengove pointed out that Unterhalter SC, Netcare’s legal representative and a lawyer of unquestionable ethics, was acting for Netcare in opposition to the Commission in this matter, despite having represented the Commission itself on several occasions in the past. Trengove SC concluded that not only was the South African law of conflict of interest clearly only applicable to legal representatives for the purposes of litigation, but that Netcare hadn’t even attempted to prove that such a conflict did, in fact, exist.

Did KPMG violate the consent order?

Trengove SC then turned to leading detailed evidence that KPMG has scrupulously complied with the consent order. He used correspondence between Netcare and KPMG to illustrate that this had also been Netcare’s understanding of the facts until the end of 2013, well after it had filed its initial court application. Trengove SC then led further evidence that in terms of the court order, KPMG had not been responsible for identifying confidential information that it had in its own possession and that it had fully co-operated with the external consultant Stroz Friedberg’s requests and investigations by “allowing strangers into their systems, strangers into their laptops and strangers onto their cellphones.” The gist of Trengove’s submissions was that the only mistake that KPMG had made in this process was “to believe that Netcare was really interested in the protection of its information”.

Conclusion

The constitutional obligations that rest on organs of state, including the Competition Commission, are significant.  All organs of state must take reasonable measures to progressively realise the right of access to health care services, which includes addressing the factors that may make health care more expensive than it should be or act as barriers to access to health care. The existence of obstructions to access to health care is in any event violations of the constitutional right to health.

SECTION27 agrees with Trengove SC’s assessment that in a balancing of constitutional values, the market inquiry into the private health sector must have a higher priority than protecting the seemingly small risk of Netcare’s information being improperly revealed in the context of the market inquiry.  Netcare’s rights to protect its information should be seen in the context of the Commission’s powers to subpoena any information from any player in the private health care market, a point that the judge raised yesterday in court. There is no indication that the Commission has any intention of acting improperly.

All parties, whether they are organs of state or not, should meet a high standard of ethics, particularly where constitutional rights are at stake.  We expect that all parties who engage in the market inquiry will comply with the spirit of the inquiry, and will not take a formalistic or combative approach to the Competition Commission and its processes, as increasingly appears to be the case with the launching of these proceedings.

SECTION27 notes with particular concern the disdain displayed by Netcare’s legal representative for the all-important legal and constitutional principles, which will be at the heart of the Commission’s market inquiry into the private health care sector.

For more information contact:

Umunyana Rugege (SECTION27): rugege@section27.org.za 0834585677

Tim Fish Hodgson (SECTION27): fish@section27.org.za 0828719905