C
REPORTABLE
CASE
NO.: SA 16/2008
IN
THE SUPREME COURT OF NAMIBIA
In
the matter between
THE
PERMANENT SECRETARY OF THE
MINISTRY
OF FINANCE FIRST APPELLANT
THE
MINISTER OF FINANCE SECOND APPELLANT
THE
PRIME MINISTER OF THE REPUBLIC
OF
NAMIBIA THIRD APPELLANT
And
DR.
CORNELIUS MARTHINUS
JOHANNES
WARD RESPONDENT
Coram: Shivute, CJ,
Strydom, AJA et
Chomba, AJA.
Heard on: 2008/10/24
Delivered on: 2009/03/17
APPEAL JUDGMENT
STRYDOM, AJA:
The respondent is a
medical practitioner who practised at KATIMA MULILO, in the Caprivi
Region, for his own account. On or about the 10th
of May 2004 he entered into a written agreement with the second
appellant, represented by the first appellant, to become a service
provider to the Public Service Employees’ Medical Aid Scheme
(PSEMAS). PSEMAS is the medical aid scheme, set up by the third
appellant under the control of the first appellant, for employees of
the Government.
The scheme provided for
by the agreement is that a service provider will render his
professional services to members of PSEMAS at a prescribed
professional tariff for which services the service provider shall
then be remunerated by the administrator of the scheme on behalf of
the second appellant. (Clause 3 of the agreement).
Clause 2.2.10 of the
agreement further provides that a professional tariff means the
agreed tariff calculated by the Ministry based on the tariffs of the
Namibian Association of Medical Aid Funds, less a levy of 5% part
payment by the member of PSEMAS.
The effect of this is
that, apart from the levy of 5%, which the service provider must
collect from the patient, payment of his account was virtually
guaranteed by the second appellant. In contrast thereto a medical
practitioner who was not a service provider contracted with PSEMAS,
was dependent for payment of his fee on the patient who could only
then claim 95% of his account from the medical scheme.
By letter dated the 13th
May 2005 the respondent was informed by the first appellant that his
agreement as a service provider to PSEMAS was terminated in terms of
clause 11.5 of the agreement. This occurred after a report was
received from the administrator of the scheme concerning the
practice of the respondent. It seems that on certain days the
respondent saw and treated as many as 99 patients a day. It was
also reported that the accounts sent in by the respondent did not
comply with what was undertaken by him in terms of his agreement.
There can be little doubt that a scheme, where service providers are
contracted, is open to abuse by all role-players involved and for
that reason the service provider also undertakes to act as a
gatekeeper to prevent, as far as possible, instances of fraud and
theft. The report also charged the respondent with not fulfilling
his duties in this regard.
As a result of the
letter of 13th
May various consultations between the first appellant and the
respondent, and the legal representatives of the parties, took
place. This was further followed up with correspondence between the
parties.
During one of the
meetings it was pointed out that in terms of clause 11.5 the first
appellant was not able to terminate the agreement summarily and that
it could only do so after a further investigation by the Ministry
was launched and if such investigation confirmed a breach or
breaches of the contract. The clause, however, provided for an
automatic suspension of the service provider pending the outcome of
the second investigation. The termination of the agreement was then
changed to one of suspension of the respondent and further
negotiations took place. In my opinion nothing turns on this issue.
Both parties accepted the situation and acted in terms thereof and
no reliance was placed on this issue by counsel for the respondent
in this Court or in the Court a
quo.
This was also accepted by the Court a
quo.
Subsequent to the
suspension of the respondent the same private firm, namely Pinnacle
Management Consultants (Pty) Ltd. which was involved in the first
investigation, was appointed by the first appellant to launch the
investigation. A Ms. Du Toit, together with an official of the
Ministry, Mr. Coetzee, visited the respondent and conducted an
investigation.
A report was duly filed
by Pinnacle Management Consultants which was in line with the
findings previously concluded, and on the 6th
September 2005 the respondent was informed in writing that his
agreement as a service provider with PSEMAS was cancelled.
The letter of
termination stated that the agreement was cancelled in terms of the
provisions of clause 11.5 thereof and on the grounds that he
committed fraud and/or dishonesty and/or that he had engaged in a
dishonest business practice.
It seems that the
investigations into the practice of the respondent were sparked off
by the claims for payment submitted by the respondent to the
administrator of the scheme. It is common cause that for the period
January 2004 to December 2004 a total amount of N$ 7,058,589.64 was
claimed. This amount represented claims for medicine dispensed as
well as consultations.
The respondent denied
that he had committed fraud or that he had acted in any dishonest
way in compiling and claiming the fees.
Faced with this final
decision the respondent launched, by Notice of Motion and as a
matter of urgency, an application for relief by way of an interdict
pending the review of the decision taken by the first appellant to
cancel the agreement. The two applications were rolled into one and
in respect of the interdict the Court was asked to issue a Rule nisi
with
certain paragraphs operating as an interim interdict.
The application for an
interdict heard by the Court a
quo (Mtambanengwe,
AJ) and was dismissed by the learned Judge on the basis that it did
not comply with the requisites necessary for an interdict. Nothing
further turns on these proceedings.
In regard to the review
proceedings the respondent claimed as follows:
"1. Reviewing
and correcting or setting aside the decision taken by the First
and/or Second Respondents on 13 May 2005, “terminating”
(suspending) the agreement with the Applicant in terms whereof the
Applicant was appointed as Service Provider to the Public Service
Employees’ Medial (sic) Aid Scheme with effect from 20 May 2005.
2. Reviewing
and correcting or setting aside the decision taken by the First
and/or Second Respondents on 6 September 2005, terminating the
agreement with the Applicant in terms whereof the Applicant was
appointed as Service Provider to the Public Service Employee’s
(sic) Medical Aid Scheme with immediate effect.
3. Declaring
the aforesaid decisions unconstitutional and in conflict with
Articles 12 and 18 of the Constitution and/or null and void.
Ordering
the First and/or Second Respondents to pay the costs of this
application.
5. Granting
such further and or alternative relief as this Honourable Court deems
fit.”
In the affidavit
supporting the Notice of Motion the respondent has set out the
grounds on which the review was based which, to a certain extent,
widened the scope as foreseen in the Notice of Motion.
The application for
review was heard in the normal course of the Courts business.
After the interdict was dismissed the parties further exchanged
affidavits dealing with the review application. Then, after the
appellants replying affidavits were filed, the respondent filed an
amended notice of motion in the following terms:
"1. Reviewing
and correcting or setting aside the decision taken by the First
Respondent on 13 May 2005 to terminate the agreement in terms whereof
Applicant was appointed as Service Provider to the Public Service
Employees’ Medical Aid Scheme (PSEMAS), with effect from 20 May
2005.
2. Reviewing
and setting aside the decision taken by the First Respondent on 30
May 2005 to alter the termination
to suspension of the agreement in terms whereof Applicant was
appointed Service Provider to PSEMAS.
3. Reviewing
and correcting or setting aside the decision by the First Respondent
on 6 September 2005 to terminate
the Service Provider agreement dated 10 May 2004 with the Applicant
with immediate effect.
4. Reviewing
and correcting or setting aside the decision by the First Respondent
on 6 September to demand repayment of N$5,773,886.31 (as amended)
from Applicant.
5. Reviewing
and setting aside the decision of the first Respondent to withhold
payment in amount of N$1,323,181.39 due and owing to Applicant in
respect of professional services rendered in terms of the Service
Provider agreement against an amount allegedly owing by Applicant to
PSEMAS.
6. Declaring
the aforesaid decisions of First Respondent unconstitutional and/or
null and void.
7. Ordering
the First Respondent to pay the Applicant his arrear claims for
professional services in terms of the Service Provider agreement
until 20 May 2005 amount to N$1,323,181.39, plus interest a
tempore morae,
as well as the applicant’s claims subsequent to 20 May 2005 until 6
September 2006.
8. Ordering
the Respondents to pay the costs of the applicant.
9. Granting
such further and/or alternative relief as the Honourable Court deems
fit.”
In his amended Notice
of Motion the respondent now also asked that the decision of the
first appellant to re-claim from him an amount of N$ 5,773,886.31
be reviewed and set aside as well as the decision of the first
appellant not to pay the amount, due to the respondent, namely
N$1,323,181.39. The former amount was claimed by the first
appellant on the basis that the dispensing of medicine by the
respondent was illegal as a result whereof the first appellant
denied that the amount of N$ 5,773,886.31 is owed to the
respondent. In addition the respondent now also claims payment of
amounts which he alleged are fees and payment for medicine
dispensed from the period 20 May 2005 till 6 September 2005.
The respondent was
successful in the Court a
quo
and the prayers set out in his amended Notice of Motion were
substantially granted by the Court. As a result the first and
second appellants now appeal against the entire judgment and orders
handed down by the Court a
quo.
Mr. Smuts appeared for
the appellants and Mr. Oosthuizen for the respondent. The Court
wishes to express its appreciation for the full and interesting
arguments presented by both counsel.
A most important issue,
which was raised by the first appellant in his affidavit, was the
denial by the first appellant that his decision to cancel the
agreement between the parties was reviewable. First appellant said
that he acted purely in terms of the agreement between the parties
and that in the circumstances the cancellation thereof was the
exercise of a contractual right which was not reviewable.
I therefore agree with
the learned Judge a
quo
that the question whether the decision by the first appellant to
cancel the agreement was reviewable or not goes to the crux of the
main dispute between the parties. The basis on which this
distinction is drawn depends on whether the functionary's decision
amounts to administrative action or, as was alleged in this
instance, he acted purely in terms of his contractual rights. To
decide whether a decision by a functionary amounts to
administrative action is not always easy and a reading of the cases
on this issue bears out this difficulty. Certain guidelines have
crystallized out of judgments of the Courts in Namibia, and also in
South Africa, but it is clear that the Courts are careful not to
lay down hard and fast rules and each case must be judged on its
own facts and circumstances. There is also no doubt that in
deciding the issue Courts must have regard to constitutional
provisions which, in certain instances, have broadened the scope of
reviewable action.
In regard to Namibia
Article 18 of the Constitution deals with administrative action.
The Article provides as follows:
"Article
18 Administrative Justice.
Administrative
bodies and administrative officials shall act fairly and reasonably
and comply with the requirements imposed upon such bodies and
officials by common law and any relevant legislation, and persons
aggrieved by the exercise of such acts and decisions shall have the
right to seek redress before a competent Court or Tribunal."
Article 18 is not open
ended and does not affect every act by administrative bodies and
administrative officials. Apart from the subject with which the
Article is dealing, namely administrative justice by administrative
bodies and administrative officials, the words “such acts”
refer, in the context of the Article, to decisions taken and
compliance by such bodies and officials in terms of the common law
and relevant legislation and in my opinion denotes administrative
acts.
The Article incorporated
the common law principles of administrative law which have
crystallized over many years but are not necessarily limited to
those principles. (See Minister
of Health and Social Services v Lisse,
2006 (2) NR 739 (SC).)
Also in the Namibian
context the Constitution distinguishes between the introducing of
statutes, the implementation thereof, policy matters and executive
action, which is a clear indication that Article 18 therefore deals
with decisions taken by officials or administrative bodies
exercising administrative action.
The duty of
administrative bodies and administrative officials to act fairly and
reasonably, when exercising these functions, is, in terms of the
provisions of Article 18, now constitutionally guaranteed.
It was further laid down
by this Court that the words which enjoin officials and
administrative bodies to “act fairly and reasonably” are not
restricted to procedure only but also apply to the substance of the
decision. (See Minister
of Health and Social Services, supra, at
para. [25] p. 772).
In order to determine
whether the first appellant, when he cancelled the agreement with
the respondent, did so purely in terms of the agreement or whether
it was an administrative act, is, as was previously stated, not
always easy. The cases suggested various guidelines and principles
which, applied on their own or cumulatively with other guidelines
and/or principles, may determine on which side of the dividing line
a particular decision or action may fall.
In the case of President
of the Republic of South Africa v South African Rugby Football
Union, 2000
(1) SA (CC) (the Sarfu case) it was stated what matters was not the
functionary but the function performed by him or her. In the same
case it was stated that the implementation of legislation would
ordinarily constitute administrative action in contrast to policy
matters which would ordinarily not be administrative action.
Although this was said in connection with sec. 33 of the South
African Constitution the same would also apply to Article 18 of our
Constitution.
To distinguish between
policy matters and implementation of legislation regard should be
had to the source of the power, the subject matter thereof and
whether it involves the exercise of a public duty. (See in this
regard also Pharmaceutical
Manufacturers of South Africa: In Re Ex Parte President of the
Republic of South Africa,
2000 (2) SA 674 (CC); Cape
Metropolitan Council v Metro Inspection Services CC, 2001
(3) SA 1913 (SCA) and Chirwa
v Transnet Limited and Others, 2008
(3) BCLR 251 (CC)).
In the Chirwa-case,
supra,
Paragraph
[186], Nqcobo, J, stated in regard to whether a function or duty was
public as follows:
“[186]
Determining whether a power or function is “public” is a
notoriously difficult exercise. There is no simple definition or
clear test to be applied. Instead, it is a question that has to be
answered with regard to all the relevant factors, including (a) the
relationship of coercion of power that the actor has in its capacity
as a public institution. (b) the impact of the decision on the
public; (c) the source of the power; and (d) whether there is a need
for the decision to be exercised in the public interest. None of
these factors will necessarily be determinative, instead, a court
must exercise its discretion considering their relative weight in the
context.”
(See
also Grey’s
Marine Hout Bay (Pty) Ltd. v Minister of Public Works, 2005
(6) SA 313 (SCA)).
It further seems that
decisions taken in regard to tenders and disciplinary matters are
ordinarily regarded as administrative acts which would attract the
constitutional principles set out in Article 18. (See in this
regard Administrator,
Transvaal, and Others v Zenzile and Others, 1991
(1) SA 21 (AD) and Logbro
Properties v Bedderson NO and Others, 2003
(2) SA 460 (SCA).)
The application of these
principles, set out above, is also not free from difficulty. For
instance the source of power acted upon by a functionary can almost
always be traced back to some statutory enactment which, in
practical terms, and if applied indiscriminately, will mean that
every decision or act by a functionary could be classified as
administrative action. If that was correct the burden on the State
would be tremendous and would put naught to the State’s freedom to
enter into contracts like any private individual.
This dilemma was
recognised by the learned Judge-President in the case of Open
Learning Group v Secretary, Ministry of Finance,
2006 (1) NR 275 HC where he succinctly stated in para. [114] as
follows:
“[114]
Reading the cases and the literature it becomes very clear that it
is important to appreciate the need for the State to be allowed
sufficient space (what is sometimes referred to as the ‘freedom of
play in the joints of the executive’) to operate in the business
environment and to be governed by the ordinary rules of contract and
private law generally, assuming the risks and enjoying the benefits
available in private law.”
Mr. Smuts referred the
Court to the cases set out hereinbefore and submitted that the
cancellation of the agreement by the first appellant was a purely
commercial act which did not amount to administrative action.
Counsel analysed the agreement between the parties and submitted
that the termination of the agreement did not amount to the exercise
of public power. However, with reference to the Chirwa-case,
supra,
counsel pointed out that even if the Court should find that the
first appellant, in this instance, exercised a public duty, it does
not follow that the action whereby the agreement was cancelled
amounted to administrative action.
In regard to the money
claims, belatedly formulated and claimed by the respondent at the
time when he filed his replying affidavit, counsel first of all
submitted that those claims did not constitute administrative action
which could be granted in terms of review proceedings. Counsel
furthermore submitted that because of the time of its filing, the
appellants had no opportunity to reply thereto. In any event, so
counsel submitted, these claims are disputed, as was also found by
the Court
a quo,
and the granting of those prayers was therefore not in order.
Mr. Oosthuizen, in turn,
submitted that because all service providers were required to sign
the same agreement this amounted to administrative regulation.
Counsel also analysed the agreement and submitted that in terms of
its provisions payment of claims can be withheld under certain
circumstances. I understood this to mean that the parties, when
they entered into the agreement, did not do so on an equal basis but
that the first appellant acted from a position of superiority in
regard to his position as a public authority.
Counsel further
submitted that the agreement between the parties was an
administrative agreement and thus the first appellant, when he
cancelled the agreement, was enforcing a public duty. The
cancellation in terms of clause 11.5 was wrong and unwarranted as
the tenets of natural justice applied as a result whereof the first
appellant should have acted fairly, as required by Article 18 of the
Constitution, and should have given the respondent an opportunity to
be heard. He should also have informed him of any prejudicial
information in his possession.
Mr. Oosthuizen also
argued that the common law principles of contract, particularly
where the State is concerned, are subject to various articles of the
Constitution such as Articles 5, 12, 18 and 25. According to
counsel clause 11.5 of the agreement is contra
bonos mores because
it ousted the jurisdiction of the Courts. This must be seen
together with the denial by the first appellant that Articles 12 and
18 are applicable in the present instance.
I will immediately deal
with the submission that clause 11.5 ousted the jurisdiction of the
Courts. This submission is without substance. If Mr. Oosthuizen is
correct and the cancellation of the agreement constituted
administrative action then the respondent was entitled to take the
decision of the first appellant on review. This was in fact done by
respondent. If the decision did not constitute administrative
action then the respondent is entitled to his remedies in terms of
the common law of contract. Clause 11.5 is therefore also not
contra
bonos mores.
The statutory source of
PSEMAS is the Public Service Act, Act 13 of 1995 (the Act). Sec.
34(1) of the Act, dealing with the mandating of regulations by the
Prime Minister, provides in sub. sec. (d) for “the establishment
and management of and control over a medical aid scheme for the
Public Service.”
Regulations under the
Act were promulgated under Government Notice No. 211 published in
the Government Gazette of 1 November 1995 No. 1187. Reg. 26 of the
regulations provides that the Ministry of Finance shall manage the
medical aid scheme and that its objective shall be to make provision
for the granting of assistance to members in defraying expenditure
incurred by them in regard to various instances connected with
medical care. It did not specifically provide for agreements with
service providers or contracts to be concluded, nor did it prescribe
in any way how the scheme was to be set up.
The medical aid scheme
was set up in terms of rules published under Chapter DIX which in
turn was issued in terms of sec 35 of the Act. Paragraph 9(5)
thereof provided for the following payment options open to members:
“(a) The
contracted service provider claims from PSEMAS at 95% of the agreed
tariff.
(b) The
member settles the account with a non contracted-in service provider
and with proof of receipt claims 95% of the agreed tariff from
PSEMAS.
(c)
…”
The above rules applied
to and bound members of the medical scheme who are public service
employees. The choice whether to become a service provider or not
was that of the respondent. I accept that there was some coercion
to enter into the agreement but this coercion, to a great extent in
my opinion, stemmed from the fact that it would have been extremely
beneficial to medical practitioners to enter into such an agreement.
Patients would choose a medical practitioner who is a service
provider over one who is not because they only needed to pay 5% up
front of the fees charged. Compare that with the instance where a
medical practitioner is not a contracted-in service provider and a
patient has to pay 95% of the fees charged. Seen from the side of
the service provider all accounts go to one institution, the
Administrator of the scheme, who, in terms of the agreement, must
pay within 30 days, instead of sending accounts to all patients
individually and then having to wait until they decide to pay. Last
but not least the medical practitioner, who is a service provider,
only looks to one institution for payment, namely the Administrator
of the scheme who in turn is backed by the Ministry of Finance. All
this enabled the respondent to have an income in excess of N$ 7
million for the year 2004, seemingly without bad debts. The
respondent himself stated that he could not afford to practise any
other way.
Those instances where
the agreement required of the respondent to perform certain duties
such as to determine whether the patient was a member of PSEMAS and
to ensure that the patient was issued with a membership card and to
determine the identity of the patient were mostly, if not all,
measures necessary to combat fraudulent or dishonest claims. Strict
compliance with these duties was therefore as much in the interest
of the respondent as it was in the interest of the PSEMAS. PSEMAS,
disavowed specifically liability for claims based on the fraudulent
or dishonest use of membership cards by its members or third
parties.
The agreement also deals
with the processing of claims, the validity of claims, fees, the
change in the status of the service provider and membership cards.
All these subjects contain measures to combat fraud and dishonesty
and in my view contain nothing that is out of the ordinary. In my
opinion it does not contain anything which would not have formed
part of similar agreements if concluded with a private medical
scheme.
Clause 11 provides for
investigations, suspensions and related matters and clause 11.5 is
the clause under which the respondent’s agreement was suspended
and finally cancelled. The grounds on which suspension and
cancellation could follow are fraud, dishonesty, false
representations and engagement in dishonest business practice.
These are all common law grounds for cancellation of an agreement
and which could, in any commercial agreement between private
individuals, lead to cancellation of the contract summarily and that
without being a specific term of such agreement.
In general the provision
of suspension may not form part of normal commercial agreements
between private individuals, but even that is to the benefit of the
service provider, as it allows for a time span during which
negotiations could take place, as was indeed the case in this
instance.
For these reasons I am
therefore of the opinion that at most it is doubtful whether the
respondent, when he concluded the agreement, acted from an inferior
position and, bearing in mind what was said in the Chirwa-case,
supra,
pa.
[180], the relative weight of this principle against the overall
picture cannot be of great importance.
Mr. Oosthuizen’s
further submission that other medical practitioners were required to
sign similar agreements and that that is an indication that the
first appellant acted from a position of authority is not valid in
the particular circumstances. That is so because the subject matter
of the agreements is in each instance the same, calling for the same
measures and terms to be implemented. Furthermore the agreements
are concluded with members of the same profession who provide
services related to their profession.
In order to determine
whether a particular action amounts to administrative action, the
following was stated in the Cape
Metropolitan-case,
supra,
at para. [17], namely:
“[17]
It follows that whether or not conduct is ‘administrative action’
would depend on the nature of the power being exercised (SARFU
at para. [141]) Other considerations which may be relevant are the
source of the power, the subject matter, whether it involves the
exercise of a public duty and how closely related it is to the
implementation of legislation (SARFU
at
para. [143]).
The facts in the Cape
Metropolitan-case,
in my view, closely resemble the facts in this appeal. In that
matter the first respondent was successful in the Cape Provincial
Division which set aside a decision by the Metropolitan Council to
terminate a contract between the parties. On appeal the decision of
the High Court was reversed. The Metropolitan Council was an Organ
of State created by Statute. In terms of its statute it was
empowered to enter into agreements with any person in terms of which
that person undertook to exercise certain powers, on behalf of the
Metropolitan Council, as agreed to between the parties.
In terms of the
agreement between the parties the first respondent was to register
people liable to pay regional services levies and to collect arrear
levies. The respondent was paid a commission for its work. After
allegations of fraudulent claims were brought to the attention of
the Metropolitan Council an investigation was launched by it after
which the agreement was summarily cancelled. In the letter of
cancellation the first respondent was informed that the cancellation
was based on a material breach of the agreement.
Before the High Court
and the Supreme Court of Appeal the argument was that the
cancellation amounted to administrative action. The argument raised
by the first respondent was very similar to the argument raised
before our High Court and before this Court in the appeal now before
us.
In the Cape
Metropolitan-case,
it was contended that the decision to terminate the agreement should
be set aside on the grounds that the first respondent’s
constitutional right to lawful, procedurally fair administrative
action and administrative action which was justifiable in relation
to the reasons given for it, was violated by the summarily
termination of the agreement. As is the case in the appeal before
us, the first respondent contended that there should have been full
disclosure of the reasons on which the termination was based and
that it should have been given a reasonable opportunity to be heard,
either orally or in writing.
Also in that case the
Court a
quo concluded
that the issue was not whether the appellant had sufficient reason
to terminate the agreement but rather whether the procedure adopted
by the appellant in terminating the agreement was correct.
Dealing with these
issues the Court of Appeal concluded as follows:
“[18]
The appellant is a public authority and, although it derived its
power to enter into the contract with the first respondent from
statute, it derived its power to cancel the contract from the terms
of the contract and the common law. These terms were not prescribed
by statute and could not be dictated by the appellant by virtue of
its position as a public authority. They were agreed to by the
respondent, a very substantial commercial undertaking. The
appellant, when it concluded the contract, was therefore not acting
from a position of superiority or authority by virtue of its being a
public authority, and in respect of the cancellation, did not, by
virtue of being a public authority, find itself in a stronger
position than the position it would have been in had it been a
private institution. When it purported to cancel the contract it was
not performing a public duty or implementing legislation; it was
purporting to exercise a contractual right founded on the consensus
of
the parties in respect of a commercial contract. In all these
circumstances it cannot be said that the appellant was exercising a
public power.”
In the present instance
there can be no doubt that the first appellant is a public authority
and that the power to enter into the agreement was derived form
statute. However, the terms of the agreement are not statutorily
prescribed, in fact nowhere is there even any direct mention of an
agreement. Clause 11.5, in terms whereof the first appellant had
cancelled the agreement, contained only common law grounds on which
the agreement could be cancelled. Correctly, in my view, the
respondent did not deny the right of the first appellant to cancel
the agreement if such grounds in fact existed. These grounds
existed in the common law and the fact that they were contained in
the agreement did not alter that fact. These were therefore not
terms which the first appellant imposed by virtue of one or other
superior position in which he found himself vis-à-vis the
respondent. In canceling the agreement the first appellant was also
not implementing legislation.
Furthermore the
subject-matter of the agreement between the parties was the
rendering of medical services to members of the medical aid scheme.
Seen in this context the subject matter of the agreement was a
service agreement and purely commercial.
For the above reasons I
conclude that the first appellant, when he cancelled the agreement,
was not performing a public duty or implementing legislation but was
acting in terms of the agreement entered into by the parties and
that it could not be said that the first appellant, in doing so, was
exercising a public power.
In the Chirwa-case,
supra,
and notwithstanding the fact that the Court concluded, (Nqcobo, J,
at paras. [138] to [142]), that Transnet was exercising public
powers when it terminated the contract of its employee, that that
finding was not decisive to determine that the termination of the
contract was administrative action. In this regard the learned
Judge stated in para. [142] as follows:
“[142]
The subject-matter of the power involved here is the termination of
a contract of employment for poor work performance. The source of
the power is the employment contract between the applicant and
Transnet. The nature of the power involved here is therefore
contractual. The fact that Transnet is a creature of statute does
not detract from the fact that in terminating the applicant’s
contract of employment, it was exercising its contractual power. It
does not involve the implementation of legislation which constitutes
administrative action. The conduct of Transnet in terminating the
employment contract does not in my view constitute administration.
It is more concerned with labour and employment action. The mere
fact that Transnet is an organ of State which exercises public power
does not transform its conduct in terminating the applicant's
employment contract into administrative action.”
The Cape
Metropolitan-case
was criticised in an article which appeared in the SA Law Journal,
vol 121. Part 3, p 595, titled Contracts
in Administrative Law: Life after Formalism,
by Prof. Cora Hoexter, and in the Logbro-case,
also relied upon by Mr. Oosthuizen, it was distinguished on certain
grounds. However, in the Chirwa-case
the Constitutional Court seems to me to have confirmed the reasoning
in the Cape
Metropolitan-case.
(See the excerpt referred to in para. [62] above and see also the
judgment of Langa, CJ, in the same case paras. [185] to [189]. (The
judgment of the learned Chief Justice differed from that of the
majority in that he found that Transnet did not exercise a public
power when it terminated its contract with its employee).
It was pointed out by
Prof. Hoexter, in regard to the Cape
Metropolitan-case,
that legislation, applicable to the contractual relationship of the
parties, provided for cancellation of the contract, inter
alia, on
the grounds of fraud or bad faith on the part of the other party to
the agreement and that it was therefore possible to find that the
source of the cancellation was statutory, which would have meant
administrative action. The Court (Streicher, JA, whose judgment was
concurred in by Hefer, ACJ, Marais, JA, Cameron, JA and Navsa, JA)
also considered the legislation and stated that if the contract were
cancelled in terms of the statutory provisions he would not have
hesitated to find that it constituted administrative action. (See
sec. 22(1) of the Financial Regulations for Regional Services
Councils R1524 of 28 June 1991). In regard to the appeal before us
I could not find any such or similar regulations in Namibia, nor was
any reliance placed by Mr. Oosthuizen on the existence of any such
regulations, which could have been considered in deciding whether
the first appellant’s action was administrative.
A reading of the above
cases shows that each case must be determined on its own facts. In
this regard the Court a
quo referred
to the 0pen
Learning-case
and applied the principles set out in that case. I have no problem
with that. It is the application of those principles to the
particular facts of the case that is problematic and in that regard
I am of the opinion that the facts of this appeal differ from those
in the Open
Learning-case
and that application of the same principles may lead to a different
conclusion.
The Open
Learning-case
was argued on appeal and judgment must still be given. However, Mr.
Smuts submitted that the case is distinguishable from the present
case because the Court found that the agreement in that matter was
cancelled in terms of the statutory provisions which governed the
relationship and not in terms of the provisions of the agreement
concluded between the parties. I agree with Mr. Smuts. It is clear
that the functionary in that case by letter cancelled the agreement
and stated that he did so on the strength of the statutory
provisions applicable. The functionary later on disavowed his
reliance on the statutory provisions and stated instead that he
acted in terms of the contract of the parties. However, the Court
did not accept this change of attitude and kept the functionary to
what was stated in the letter of cancellation.
There is a further
significant difference between the two cases in that the Court in
the Open
Learning-case
found that the agreement between the parties “also constitutes the
vehicle through which NAMFISA was to ‘regulate’ the applicant
(i.e. Open Learning). That much is clear from an analysis of the
agreement in para. [20] of this judgment. NAMFISA’s regulatory
powers are therefore incorporated in it.” ( para. [120] of the
Court’s judgment).
NAMFISA is the
supervisory authority of financial institutions of Namibia. In the
present instance this did not happen and the agreement did not
subject the respondent to the regulatory powers of NAMFISA, a
statutory body.
A further difference is
that because of the above findings it was not necessary for the
learned Judge-President in the Open
Learning-case
to consider the effect where cancellation of the agreement was based
on the terms of the contract or, as in the present matter, on common
law grounds.
I therefore agree with
Mr. Smuts that the power to cancel, which was vested in the
functionary in that matter, was purportedly derived from statute and
not from contract. I also agree that, for the reasons set out
above, the same cannot be said of the power of the first appellant
to cancel the agreement in the present appeal.
The issue in the present
appeal is whether the termination of the agreement by the first
appellant was administrative action which would have entitled the
respondent to claim application of Article 18 of the Constitution
which requires fair and reasonable action by administrative bodies
and administrative officials. Once it is found, as I have, that the
termination of the agreement did not constitute administrative
action, Article 18 does not apply. Reference to cases such as
Minister
of Education v Syfrets Trust Ltd NO,
2006 (4) SA 205 (CPD) and Napier
v Barkhuizen, 2006
(4) SA 1 (SCA) may be relevant, as the facts showed, to the
particular contractual relationship in which the parties stood in
those cases. It does however not deal with administrative action
and the application of an Article such as Article 18 of the
Constitution. Mr. Oosthuizen nevertheless relied on these cases.
The application of the
values of the Constitution, without more, to contractual
relationships is not self-evident and in the Napier-
case, supra,
the
Court pointed out that it is not immediately obvious how values of
human dignity, the achievement of equality and the advancement of
human rights and freedoms may affect particular contractual
outcomes. It also warned that the fact that a term of a contract is
unfair may not by itself lead to the conclusion that it offends
against constitutional principles. (paras. [12] and[14]). The Court
here clearly dealt with the effect of the values of the Constitution
generally on contracts and did not deal with the issue on the basis
of a review as was the case made out for the respondent. To apply
these cases willy nilly to a different Constitution which does not
contain articles similar to sec. 8(3) and 39(2) of the Constitution
of South Africa, 1996, whereby the Courts of South Africa are
mandated to develop the common law according to the values of that
Constitution is not permissible. No argument was presented to us in
what way the values of our Constitution should apply to the common
law and this is therefore an issue which will have to stand over
until proper argument is heard. The warning given by Kriegler, J.
in the case of Bernstein
and Others v Bester NO and Others, 1996
(2) SA 751 (CC) at para. [133] is also apposite to our situation,
namely-
“Far
too often one sees citation by counsel of, for instance, an American
judgment in support of a proposition relating to our Constitution,
without any attempt to explain why it is said to be in point.
Comparative study is always useful, particularly where Courts in
exemplary jurisdictions have grappled with universal issues
confronting us… But that is a far cry from blithe adoption of
alien concepts or inappropriate precedents”
In applying precedents
to our Constitution, based on a different Constitution, due regard
must be had to any difference in language or context which may exist
between the Statutes.
I further agree with Mr.
Smuts that the Logbro-case
is distinguishable from the present appeal. As was pointed out by
counsel it relates to a tender process which has consistently been
held by Courts in South Africa and Namibia to constitute
administrative action. So too in regard to disciplinary proceedings
in employment contracts. (See Administrator,
Transvaal and Others v Zenzile and Others, 1991
(1) SA 21 (AD)).
In regard to the
financial claims of the parties, which were granted by the Court a
quo, I
am of the opinion that these constitute ordinary claims, enforceable
in the normal way by action procedure. No administrative action was
involved. (See Smith
v Kwanonquobela Town Council,
1999 (4) SA 947 (SCA).)
In the case of Eastern
Metropolitan Substructure v Peter Klein Investments, 2001
(4) SA 661 (WLD) the defences raised by special pleas were that the
defendant was not afforded a fair hearing before summons was issued
and secondly that the common law principles based on natural justice
and the constitutional right to administrative justice in terms of
sec. 33 of the Constitution of the Republic of South Africa was not
complied with. Exception was taken to these defences and the Court
rejected the defences raised by the defendant. In regard to the
first the Court found that the issue of summons does not
prejudicially impact on any of the defendant’s rights. (See para
[9].) The reference here to the rights of the plaintiff is clearly
a misstatement).
In regard to the second
defence the Court concluded that the issue of summons was not an
administrative act but was procedural. In the course of its
judgment the Court stated that the decision to recover payment is a
preliminary or interlocutory step having no determinate effect on
the parties’ rights. (Para [14].) I respectfully agree with
these findings.
I have therefore come to
the conclusion that the respondent’s application for review was
the wrong remedy in all the circumstances. His remedy lies in
contract and he should either have enforced the contract or claim
damages. I want however to make it clear that this judgment did not
decide the issues of fraud and/ or whether the cancellation of the
contract was in all the circumstances justifiable. Those are issues
which can only be decided when there is proper ventilation thereof
in court proceedings, if so advised.
For the reasons set out
above the appeal must succeed and consequently the following orders
are made:
1. The appeal succeeds
with costs, such costs to include the costs of one instructing and
one instructed counsel.
The orders of the Court
a quo
are set aside and the following order is substituted therefor:
“The
application for review is dismissed with costs.”
________________________
STRYDOM,
AJA
I
agree.
________________________
SHIVUTE,
CJ
I
agree.
________________________
CHOMBA,
AJA
COUNSEL
ON BEHALF OF THE
APPELLANT: MR.
D.F. SMUTS, S.C.
Instructed
by: The Government Attorney
COUNSEL
ON BEHALF OF THE
RESPONDENT: MR.
G.H. OOSTHUIZEN
Instructed
by: Engling, Stritter & Part.
Permanent Secretary of Ministry of Finance and Others v Ward (SA 16/2008) [2009] NASC 3 (17 March 2009);