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[2011] ZASCA 163
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Phodiclinics (Pty) Ltd v Pinehaven Private Hospital (Pty) Ltd and Others (594/2010) [2011] ZASCA 163; [2011] 4 All SA 331 (SCA) (28 September 2011)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 594/2010
In the matter
between:
PHODICLINICS
(PTY) LTD
........................................................................
APPELLANT
and
PINEHAVEN PRIVATE
HOSPITAL (PTY) LTD
.....................
FIRST
RESPONDENT
COMMUNITY
HOSPITAL GROUP (PTY) LTD
..................
SECOND
RESPONDENT
COMMUNITY
INVESTMENT HOLDINGS (PTY)
LTD
.................................................................................................
THIRD
RESPONDENT
GAUTENG
PROVINCIAL GOVERNMENT
........................
FOURTH
RESPONDENT
MEMBER OF THE
EXECUTIVE COUNCIL FOR
HEALTH, GAUTENG
...................................................................
FIFTH
RESPONDENT
THE CHAIRPERSON
OF THE APPEALS
ADVISORY
COMMITTEE OF THE DEPARTMENT
OF HEALTH,
GAUTENG
............................................................
SIXTH
RESPONDENT
THE HEAD OF
DEPARTMENT, GAUTENG
DEPARTMENT OF
HEALTH
...............................................
SEVENTH
RESPONDENT
Neutral citation:
Phodiclinics (Pty) Ltd v Pinehaven Private Hospital (Pty) Ltd
(594/2010)
[2011] ZASCA 163
(28 September 2011)
Coram:
Mthiyane
,
Maya, Cachalia, Bosielo and Seriti JJA
Heard: 22 August
2011
Delivered: 28
September 2011
Summary: Proper
construction of regulations 7 and 55 of the Regulations Governing
Private Hospitals and Unattached Operating Theatres
promulgated in
terms of the Health Act 63 of 1977 ─ Review ─ Orders of
substitution and remittal discussed.
___________________________________________________________
ORDER
On appeal from:
South
Gauteng High Court, Johannesburg (Saldulker J sitting as court of
first instance):
1. The appeal is upheld with
costs, including the costs of two counsel.
2. The order of the high court is
set aside and replaced with the following:
‘
2.1 The
appeal decision of the second respondent dated 28 June 2007, is
reviewed and set aside.
2.2 The matter is remitted to the
second respondent for reconsideration of the fifth respondent’s
appeal.
2.3 The second respondent is
directed to invite the first, second and third applicants, and also
the fifth respondent, to make such
written representations as they
deem appropriate on the appeal. Such submissions shall be sent to the
other parties involved in
the appeal.
2.4 The first, second and third
applicants, jointly and severally, are ordered to pay the costs of
the fifth respondent in the application,
such costs to include the
costs of two counsel.’
___________________________________________________________
JUDGMENT
MTHIYANE JA
(MAYA,
BOSIELO and SERITI JJA CONCURRING):
Introduction
[1] At issue in this appeal is
the proper construction of regulations 7 and 55 of the Regulations
Governing Private Hospitals and
Unattached Operating Theatres (the
regulations).
1
The appeal is from the decision
of the South Gauteng High Court (Saldulker J) in which the court set
aside a decision of the fifth
respondent (the MEC) and his Appeal
Advisory Committee. In his turn the MEC and his appeal body had set
aside a decision of the
Head of Department (the HoD) in which the
latter had approved the applications of the first, second and third
respondents (the
respondents) under regulation 7 to establish a
private hospital in Mogale City and rejected that of the appellant.
The MEC set
aside the decision of the HoD and remitted the matter to
him for the reconsideration of both applications. The appeal is
brought
with leave granted by the high court.
[2] According to regulation
7(2)(i) an applicant who intends to establish a private hospital and
an unattached operating theatre
(a private hospital) is required to
first obtain ‘permission in writing’ from the HoD.
In this matter both applications
were considered by the HoD but he approved the respondents’ and
refused that of the appellant.
[3] In terms of regulation 55 the
appellant lodged an appeal with the MEC who upheld the appeal,
revoked the approval granted to
the respondents and directed that the
parties re-submit their applications to the Department of Health for
the adjudication of
each application. There was no service of the
appeal on the respondents and they were therefore not afforded an
opportunity to
be heard in the proceedings before the MEC and the
appeal body. The process followed by the MEC was procedurally unfair
and the
decision flowing from it fell to be set aside on that ground
alone. The respondents were however not content with the remittal of
the matter to the HoD for re-consideration as ordered by the MEC and
were intent on pressing for the reinstatement of the approval
of
their application by the HoD – in effect an order of
substitution.
The Application in the High
Court
[4] The respondents then
instituted an application in the South Gauteng High Court to review
and set aside the decision of the MEC,
revoking the approval by the
HoD of the respondents’ application to establish a private
hospital and approving the appellant’s
application. As already
indicated, the respondents sought an order of substitution as opposed
to an order remitting the matter
to the HoD for reconsideration. An
order of substitution effectively meant upholding the initial
approval of the respondents’
application.
[5] The review application is
based principally on four grounds. They contend that: (a) it was
incompetent for the appellant to
appeal against the decision
approving the respondents’ application; (b) the MEC and his
appeal body failed to appreciate
that ‘necessity’ is the
sole criterion for the approval of the application to establish a
private hospital under regulation
7; (c) there had to be identified
premises on which the private hospital was to be built; and (d) there
was no ‘lodgement’
of the appeal by the appellant as
required by regulation 56 in the absence of service of the appeal
papers on the respondents.
[6] The appellant conceded that
the decision of the MEC fell to be reviewed and set aside but
submitted that the most appropriate
relief was a remittal of the
matter for the two applications to be considered afresh by the HoD.
The appellant disputed that the
respondents were entitled to a
substitution order. The appellant also submitted that in the event of
the respondents being unsuccessful
its counter-review application
should be granted, setting aside the HoD’s refusal to approve
its application to establish
a private hospital.
[7] Before discussing above
grounds it is as well to briefly set out the broad scheme of the
regulations. Regulations 2 to 6 deal
with the acquisition of a
certificate of registration. In terms of regulation 2, the applicant
(or a ‘prospective proprietor’
as the applicant is
described in the regulations) may not establish a private hospital
unless he or she or it has been registered
and is in possession of a
valid certificate of registration. Certificates of registration must
be reviewed annually.
[8] Regulation 7 (the focal point
of the present appeal) requires a prospective proprietor, before
applying for the registration
certificate, first obtain a certain
‘prior approval in writing’. Only after obtaining such
approval may the prospective
proprietor proceed to apply for a
registration certificate. The relevant provisions of this regulation
will be discussed in detail
later in the judgment.
[9] Regulations 8 to 11 govern an
application for registration by a prospective proprietor who has
received the required ‘prior
approval in writing’.
Regulations 12 to 20 further regulate applications for registration.
Regulations 21 to 50 prescribe
conditions with which private
hospitals must comply. Regulations 50 to 54 provide for inspections.
[10] Regulations 55 to 58 confer
a right of appeal on a proprietor or prospective proprietor and
describe the procedure for pursuing
the appeal.
A discussion of the grounds of
review
[11] Against the above background
I turn to a discussion of the respondents’ grounds of review
which were upheld by the high
court and I do each in turn. Ground
(a), dealing with the competence or otherwise of the appellant to
lodge an appeal against the
decision of the HoD granting approval to
the respondents is based on the assumption that two decisions were
made by the HoD. The
essential disagreement between the respondents
and the appellant is whether the HoD made two decisions in respect of
the two applications
or whether he made one composite decision. The
appellant appealed both against the decision to refuse its
application and against
the decision granting approval to the
respondents. This led directly to the respondents’ approval
being revoked by the appeal
body. The respondents argue that the MEC
and his appeal body were faced with two separate applications for
approval and made two
separate decisions and that it was wrong of the
appellant to assume that it was entitled to appeal against both
decisions, as one
composite decision.
[12] The appellant submits that
the HoD rendered a composite decision in respect of the two
applications for approval and that it
was entitled to appeal against
the decision in so far as it touched on its own application,
as well as against the part of
the decision relating to the awarding of the approval to the
respondents.
[13] The respondents do not
dispute the appellant’s right to appeal to the MEC against the
refusal of its own application
a right which, it submits, is provided
for in regulation 55.
[14] The issue which then falls
to be determined by this court under this ground is whether the
appellant was entitled to appeal
not only against the refusal of its
own application but also against the decision of the HoD granting
approval to the respondents
in terms of regulation 7(2).
2
The answer to this question
depends of course on the proper construction of regulation 55. It
reads as follows:
‘
The
proprietor of prospective proprietor of a private hospital or
unattached operating-theatre unit may appeal in writing to the
Minister against any decision made by the Head of Department in terms
of any provision of these regulations
in
respect of such proprietor or prospective proprietor
,
as the case may be, of a private hospital or unattached
operating-theatre unit.’ (My emphasis.)
[15] The high court concluded
that there were two separate and distinct applications. Two separate
records were kept and both applications
had to be considered on their
own merits with each driven by their own application. The court said
considering them together would
amount to a competitive adjudication
process which was not envisioned in regulation 55.
[16] The high court accepted the
respondents’ submission that the appellant was entitled to
appeal against the decision refusing
its own application but not
against the approval of the respondents’ application. It held
that on a proper analysis of regulation
55 the words in emphasis,
(
in
respect of such proprietor or prospective proprietor
)
are specific,
in the sense
that a ‘proprietor’ may only appeal against his or her
own application. The appellant had its own application
turned down.
The court said, the granting of the respondents’ application
did not establish a direct relationship required
by regulation 55. In
this sense when the HoD had to make a decision in respect of the
appellant, it was not a decision ‘in
respect of a proprietor or
prospective proprietor’,
which
denotes some level of specificity. This is so as there was no ‘direct
effect’ as required by the definition of
administrative action
in the Promotion of Administrative Justice Act (PAJA).
3
Also the granting of the
respondents’ application did not have the capacity to affect
legal rights as no right was implicated
in an application that was
not theirs. For this conclusion the court relied on
Grey’s
Marine Hout Bay (Pty) Ltd v Minister of Public Works
[2005] ZASCA 43
;
2005
(6) SA 313
(SCA) para 23.
[17] The court also held that the
recommendation of the Appeal Advisory Committee and its endorsement
by the MEC was not provided
for in the regulations. In the court’s
view, third parties (such as the court considered the appellant to
be) cannot bring
an appeal, otherwise regulations 55 to 58 would have
read differently. In the light of the above the court set aside the
decision
to revoke the granting of the application to the
respondents. It held that the MEC and the Appeals Advisory Committee
had no authority
to adjudicate the appellant’s appeal as the
latter had no right of appeal against the approval of the
respondents’
application.
[18] In my view the high court
erred in holding that the appellant was not entitled to appeal
against the decision granting the
respondents’ application. It
was incorrect to hold that the HoD rendered two separate decisions
instead of one composite
decision. Nor was it legally sound to hold
that only an original party who was part of the application before
the HoD can appeal
against a decision made by him.
[19] Both applications before the
HoD were evaluated together as is evident from documents emanating
from the Adjudication Committee
of the MEC. For example in the
minutes, the Adjudication Committee evaluates both companies’
BEE scores, track records, social
responsibility commitments together
amongst other matters. A comparative evaluation is also to be found
in the recommendations
of the Adjudication Committee where the
considerations in the minutes were endorsed. A comparative assessment
of both applications
is evident from the rejection letter as well.
Therefore, since it was a composite decision, it was competent for
the appellant
to appeal.
[20] The appellant submits that
it was directly affected by the decision to grant the respondents’
application. I agree. It
is, I think, inconceivable that the negative
impact of the decision, which the high court admitted to be present,
is inconsistent
with a direct impact. During argument our attention
was drawn to the yet unreported judgment of Legodi J in
Limpopo
Mediclinic v MEC for Health and Welfare Limpopo Provincial Government
& others
[2008] ZAGPHC 83
in support of its contention that
it was entitled to appeal. There the learned judge was called upon to
decide the question whether
an unsuccessful applicant who was
affected by a refusal of its application and by the granting of
another’s application,
could appeal not only against the
refusal of its own application but also against the granting of the
other party’s application.
The judge answered the question in
the affirmative and rejected the submission that the applicant
(Mediclinic) in that case ‘only
has an interest in its own
application’ and remarked as follows:
‘
Surely,
if the applicant’s application for extension of its facility by
40 beds was refused and was refused because of the
granting of
permission to the third respondent to establish a new hospital with
200 beds, and the applicant has other grounds to
challenge such a
decision, it could not be said that the applicant’s interest
was purely economical or commercial. In the
light of this, the
applicant should be found to be entitled to challenge the
administrative action on any ground as set out in
section 6 of PAJA.’
I agree with the reasoning of
Legodi J. To the extent that the judgment of the high court is at
odds with the approach in
Mediclinic
,
it erred.
[21] The narrow construction
placed by the high court to the provisions in regulation 55 is not
supportable. In my view the provisions
are susceptible to a wide
interpretation in the sense that the words ‘in respect of’
can indicate a causal relationship,
and
not only a direct one.
4
Also there may be ‘direct
impact’ beyond the parties in this case, for example, in the
case of an existing private hospital
or a prospective proprietor of a
private hospital in the same area who may want a hearing.
[22] Also the interpretation
adopted by the high court is not consistent with the right to a fair
hearing envisioned in PAJA and
ss 33(1)
5
and 34
6
of the Constitution. Parties with
an existing or prospective interest must be heard under regulation
55. This is also required in
terms of s 39(2) of the Constitution.
Therefore even if this court comes to the conclusion that there were
two separate applications
which were considered separately, the
appellant would have been entitled to appeal against both decisions.
For the above reasons
I hold that the HoD rendered one composite
decision in respect of the two applications and it was therefore
competent for the appellant
to lodge and appeal against it.
[23] I turn to ground (b), in
which the respondents argue that the MEC failed to appreciate that
necessity is the sole criterion
for determining whether approval
should be the granted under regulation 7. The point of departure
between the parties is that the
appellant submits that in the
consideration of the application for approval under regulation 7
necessity is not the sole criterion
but other factors had to be
considered,
such as the
provision of health care in all parts of the country, the efficient
use of resources and other competing bids.
[24] Regulation 7 reads as
follows:
‘
(1)
No person shall erect, alter, equip or in any other way prepare
any
premises
for
use
as
a private hospital or unattached operating-theatre unit without the
prior approval in writing of the Head of Department.
(2)(i) Any person
intending to
establish a private hospital
or an unattached operating-theatre unit shall first
obtain permission in writing from the Head of Department, who, after
consultation
with the Director,
shall satisfy
himself as to the necessity or otherwise
for
such a private hospital or unattached operating-theatre unit before
granting or refusing permission.
(ii) Having obtained
such permission, the applicant shall complete Form 1 (Annexure B) and
submit plans for approval by the Head
of Department, together with
the necessary information, and shall supply any additional
information which the Head of Department
may require.
Permission and
approval in terms of regulation 7 are not transferable.’ (My
emphasis.)
[25] The high court held that the
words in the regulation make clear that when the HoD considers
whether not to grant an application,
the HoD’s decision is
based solely on the criterion of necessity. The court said necessity
is also to be considered parallel
to the requirements of regulation
4, which deals with registration. If regulation 7(2)(i) is read in a
way that allows for other
criteria to be considered, then this would
be ultra vires and contrary to s 44(1)(
a
)(vi)
of the Health Act 63 of 1977.
7
Therefore, the court concluded
that the MEC and the appeal body did not give regulation 7(2)(i) the
effect it envisioned when the
respondents’ application was
revoked.
[26] On the question whether the
appellant had met the criterion of necessity as set out in regulation
7(2)(i). The high court took
the view that in respect of the
appellant’s application it was impossible for the Department of
Health to decide that the
requirement of necessity for a private
hospital had been met because the appellant did not identify a
specific site and motivate
why there was a need to establish a
hospital there. In respect of the respondents the court had no such
difficulty in accepting
that the requirement of necessity was to have
been met because they were already in possession of premises, namely
erf 253 Mogale
City, which they identified as the site where the
private hospital was to be erected. Therefore the court held that the
Appeals
Committee failed to appreciate that necessity was the sole
criterion for determining the appeal decision and that the appellant
had not met the threshold requirement. The court appears to have held
that necessity was provable by reference to the possession
by a
particular applicant of a site or premises where the private hospital
is to be erected or established.
[27] The appellant in its turn
accepts that necessity must be considered prior to the granting of
the application, that necessity
is a jurisdictional fact for there to
be an approval, but contends that necessity is not the only criterion
and takes issue with
the assertion that if other criteria were taken
into account s 44(1)(a)(vi) of the Health Act of 1979 would be
contravened and
the department’s action ultra vires. The
appellant argues that this section deals with refusal to register and
not with registration
itself. Registration is not dealt with by
regulation 7. The appellants also submit that its contentions are not
out of sync with
the regulations and s 44(1)(a)(i) of the Health Act.
[28] In my view the high court’s
conclusion that necessity was the sole criterion for determining the
grant of the ‘permission’
as required by regulation
7(2)(i) was correct and should be accepted. However, I do not think
that at the ‘permission’
stage of the application the
applicant is, in terms of the regulation required to identify a
precise location where the hospital
is to be established though when
the applicant does so, it should be considered and such information
should be taken into account.
It follows that the requirement of
necessity is not determined by reference to a defined site or
premises. Even if it were so the
appellant and the respondents were
in precisely the same position at the first phase of the enquiry into
the question whether permission
in writing should be granted. The
appellant did identify an area in Mogale City in which it wished to
establish a private hospital.
[29] Therefore on a proper
reading of regulation 7 it is clear that the fact that the
respondents had lodged an application to establish
a private hospital
first did not mean that the late application by the appellant should
not have been considered by the HoD ─
which is the effect of
the finding of the high court. The appellant argued with some force
that the consequences of this approach
would lead to absurdity. The
appellant imagined a situation where there are two competing
applications to establish a private hospital
within the same area and
there is only a need for one. On the court a quo’s approach the
first application, despite being
granted, would obviate the need for
granting the second one even if the losing party had a substantially
better application and
could establish a better resourced hospital.
[30] In sum I conclude that the
high court was correct in its finding that necessity was the sole
criterion for determining the
grant of ‘permission in writing’
under regulation 7(2)(i). It however erred in concluding that
necessity is determined
by reference to a particular site or
premises.
[31] Ground (c) is based on the
submission that approval can only be granted in respect of an
application that identifies a particular
site. I have to some extent
touched on this subject in the discussion of the requirement of
necessity. Relying on the provisions
of regulation 7 (underlined at
the start of the previous ground of review), the high court held that
since an applicant to establish
a private hospital cannot prepare any
premises for use as a private hospital without the approval of the
HoD, this implicitly requires
premises to be identified before
approval may be granted. It stated that this is unequivocal and makes
commercial sense. It is
impossible, said the court, to assess the
necessity of a private hospital unless a property in a particular
area is identified.
The court held that since the appellant had not
secured a property on which the private hospital is to be located, it
had not complied
properly with the regulations. In its view the
appellant’s application was therefore incomplete and this was
also evidence
of its unpreparedness to establish a private hospital.
Saying as the appellant did, that the hospital property will have 450
parking
bays and will serve the greater Mogale area was, in the
court’s view, not sufficient to comply with regulation 7(1).
[32] In this respect, I think,
the court erred. The obtaining of premises is only to be dealt with
under regulation 4
8
dealing with the registration
process and not the regulation 7 approval process.
[33] The interpretation favoured
by the court a quo does not make commercial sense. A prospective
proprietor can only specify premises
once it has bought it. It would
make no sense to buy premises when there may not even be an approval.
Acquisition should only take
place once there has been approval. I do
not think that it is necessary to specify premises on the
application. Necessity is to
be addressed for the general area in
which the private hospital is to be located. It would stand to reason
that a private hospital
would have to be established in an area that
honours the necessity identified in the application and by the HoD.
[34] Ground (d), is the
conclusion that the appeal was not ‘lodged’ as required
by regulation 56. The complaint here
was that the appellant was
required to serve a copy of its appeal on the respondents and the
failure to do so meant that the appeal
had not been lodged in
accordance with regulation 56. This ground of review was upheld by
the high court.
[35] Regulation 56 provides as
follows:
‘
An
appeal in terms of regulation 55 shall be lodged within seven days of
the decision appealed against having come to the knowledge
of the
proprietor or prospective proprietor, as the case may be, and shall
clearly state ─
against which
decision such appeal is lodged; and
the grounds on
which such appeal is lodged.’
[36] Regulation 57, in turn,
provides as follows:
‘
Any
appeal in terms of these regulations
shall
be lodged with the Head of Department
,
who shall submit it to the Minister together with his reasons for the
decision against which the appeal is being lodged.’
(My
emphasis.)
[37] There is nothing in
regulation 56 and 57 to indicate that, for an appeal to be ‘lodged’,
it must be lodged with
the affected party. On the contrary regulation
57 explicitly provides that an appeal ‘shall be lodged with the
Head of Department’,
thus suggesting the exclusion of any duty
on the appellant to serve on another party.
[38] In truth, the respondents’
complaint is that they were not afforded a fair hearing ─ an
issue that has already
been conceded by the appellant. Because they
were not heard the procedure adopted by the MEC and his Appeal
Advisory Committee
was unfair and the decision fell to be set aside
on that basis.
[39] The appellant however
disputes that this meant that the appeal, had not been validly
‘lodged’. On the plain reading
of regulation 57 the
appeal had to be lodged with the HoD who had to submit it to the
Minister. It follows, I think, that the duty
to ensure fairness
rested on the MEC and his Appeal Advisory Committee to ensure service
on the affected party, namely the respondents
in this case.
9
In the result this ground, too,
should not have been upheld.
The question of substitution
[40] The respondents asked that
the high court should review and set aside the decision of the MEC
and substitute its own decision,
effectively reinstating the initial
approval of their application.
[41] There can be no question
that, if it is accepted that necessity is the only criterion at the
prior approval or ‘permission
in writing’ stage, then the
respondents have at least prima facie met the threshold requirement
and there would be no reason
for the HoD not to consider their
application if the matter is referred back to him for
reconsideration. But, by the same token,
if it is accepted that
necessity is not determined by reference to the acquisition of an
identified premises, the appellant itself
has also established
necessity and there will be no reason for its application not to be
considered when the matter is referred
back to the HoD. All what this
says is that, on the question of necessity the playing field as
between the appellant and the respondents,
is level. No one has an
advantage over the other. Both have met the threshold requirement of
necessity. So the respondents have
not succeeded on the first three
grounds of review and have not achieved any significant success on
the ground of necessity when
their situation is matched against that
of the appellant. The respondents have however succeeded on the
ground of procedural unfairness
which entitles them to a remittal of
the matter to the MEC for the two applications to be considered a
fresh.
[42] I do not think that they are
entitled to an order of substitution. The starting point is PAJA,
which makes it clear that orders
of substitution are only granted ‘in
exceptional cases’.
10
This is consistent with what this
court has said in this regard:
‘
An
administrative functionary that is vested by statute with the power
to consider and approve or reject an application is generally
best
equipped by the variety of its composition, by experience, and its
access to sources of relevant information and expertise
to make the
right decision. The court typically has none of these advantages and
is required to recognise its own limitations.
. . .
That
is why remittal is almost always the prudent and proper course
.
’
11
(My
emphasis.)
[43] The high court considered
that in this case remittal would serve no purpose as the result would
be a foregone conclusion because
the decision makers (HoD/MEC) will
be placed in the same position, with regard to the same set of facts,
as regards the two parties.
12
The appellant takes issue with
this conclusion and contends that the present case involves no
forgone conclusion at all. Relying
on Hoexter as authority it argues
that an administrative functionary is always better equipped than a
court to make the right decision.
The learned author concludes that
‘remittal is almost always the prudent and proper course.
’
13
[44] There is also a further
hurdle facing the respondents in their quest for an order of
substitution. It is the type of relief
that, according to PAJA is
only granted in exceptional circumstances.
14
None have been shown to exist in
this case.
Conditioned Counter Review
application
[45] The appellant’s
counter-review application was conditional upon any of the
respondents’ four grounds of review
succeeding. The respondents
having failed on the grounds relied upon the appellant’s
conditional counter application for
review falls away.
Costs
[46] The assessment of costs in
this matter is something of a conundrum because each of the parties
won and lost something along
the way during the various stages of
this litigation. Any costs order contemplated by this court must of
necessity be tempered
by those vicissitudes in the exercise of its
discretion. What follows is an attempt to examine the respective
positions of the
parties and their entitlement or otherwise to costs.
As to the first, second and third respondents, they were entitled to
be heard
in the internal appeal process before the Appeal Advisory
Committee of the MEC. They were unfairly denied the right to be
heard.
It was common cause between the parties at that stage that the
decision of the MEC and his appeal body could not stand because of
procedural unfairness. However, the respondents’ persistence in
seeking to obtain a substitution order was ill advised as
this
judgment has demonstrated. It follows that they have to bear the
costs incurred by the appellant.
[47] As to the costs of the
appeal to this court, the appellant has succeeded in the main, and
such costs must therefore be borne
by the respondents. Their quest to
obtain an order of substitution was unsuccessful and, in that
respect, the appeal exercise achieved
nothing.
[48] In respect of the appellant,
it was not to blame for the prejudice which the first, second and
third respondents suffered as
a result of the procedural unfairness
meted out to them by the MEC and the Appeal Advisory Committee so the
appellant’s costs
incurred up to the concession should be borne
by the MEC.
[49] In the result the following
order is made.
1. The appeal is upheld with
costs, including the costs of two counsel.
2. The order of the high court is
set aside and replaced with the following:
‘
2.1 The
appeal decision of the second respondent dated 28 June 2007, is
reviewed and set aside.
2.2 The matter is remitted to the
second respondent for reconsideration of the fifth respondent’s
appeal.
2.3 The second respondent is
directed to invite the first, second and third applicants, and also
the fifth respondent to make such
written representations as they
deem appropriate on the appeal. Such submissions shall be sent to the
other parties involved in
the appeal.
2.4 The first, second and third
applicants, jointly and severally, are ordered to pay the costs of
the fifth respondent in the application,
such costs to include the
costs of two counsel.’
___________________
K K MTHIYANE
JUDGE OF APPEAL
Cachalia JA (Maya, Bosielo and
Seriti concurring):
[50] I concur with the order of
Mthiyane JA, but I reach that result through a different path.
[51] This appeal arises out of
applications by the first to third respondents (to whom I shall for
convenience refer to only as
Pinehaven) and the appellant
(Phodiclinics) to the Gauteng Department of Health to establish
private hospitals in the Mogale City
area. These applications were
made in terms of the regulations
15
governing the establishment of
private hospitals. The Head of Department (HOD) approved only
Pinehaven’s application. Phodiclinics
appealed to the Member of
the Executive Council and his Appeals Advisory Committee (the MEC).
He upheld the appeal by revoking
the approval granted to Pinehaven
and withdrew the decision declining the Phodiclinics application. He
also invited the parties
to re-apply to the HOD to adjudicate their
applications afresh.
[52] Pinehaven then launched
review proceedings in the South Gauteng High Court Johannesburg,
before Saldulker J to have the MEC’s
decision reviewed and set
aside. It also sought an order that the MEC’s decision be
substituted with the HOD’s approval
of its application. In
effect it sought an order reinstating the HOD’s decision in its
favour.
[53] When the matter came before
the high court, it was common cause among all the parties that the
MEC’s decision fell to
be reviewed and set aside on the ground
of procedural fairness. This was because the MEC had not heard
Pinehaven before revoking
the HOD’s approval of its
application. The parties also agreed that the order which ordinarily
would follow from the decision
being set aside on this ground was a
remittal to the MEC. However, Pinehaven pressed on with four further
grounds of review because
it was of the view that if the review was
upheld on any of those grounds, this would entitle it to an order of
substitution. Phodiclinics
strenuously contested each of the four
grounds, as it did the prayer of substitution.
[54] The high court upheld all
the contested grounds of review and granted the substitution order
that Pinehaven sought. It also
dismissed a conditional counter-review
application`n by Phodiclinics against the HOD’s initial
decision. Phodiclinics now
appeals against the high court’s
order, with its leave.
[55] The four grounds of review
were: first, Phodiclinics was not competent to appeal to the MEC
against the HOD’s decision
to approve Pinehaven’s
application because the applicable regulation gave it no right to –
in other words the appeal
was invalid; the second ground, which is
advanced as an alternative to the first, was that Phodiclinics did
not ‘lodge’
or serve the appeal on Pinehaven as the
regulations required, thus also rendering the appeal invalid; third,
the regulations specified
that ‘necessity’ was the sole
criterion for determining the grant of an approval for a hospital,
and the MEC failed
to appreciate this when he took other
considerations into account – notably the parties black
economic empowerment credentials
– in arriving at his
decision; and finally, that only Pinehaven’s application to
establish a hospital was valid
because the regulations required an
applicant to identify a particular site or premises for this purpose,
which Pinehaven had done
and Phodiclinics had failed to.
[56] As I have mentioned,
Phodiclinics has already conceded the review on the ground of
procedural fairness and also accepts that
the matter should be
remitted to the MEC to conduct a fair hearing. It seems to me,
therefore, that the essential dispute in this
case is less about
whether there is any merit to any of the review grounds, but rather
about whether substitution is the appropriate
order if Pinehaven
succeeds with any of its further grounds.
[57] The law on this point seems
fairly well settled: The
Promotion of Administrative Justice Act 3 of
2000
makes clear that orders of substitution are only granted ‘in
exceptional cases’.
16
This is consistent with what this
court has said about substitution:
‘
An
administrative functionary that is vested by statute with the power
to consider and approve or reject an application is generally
best
equipped by the variety of its composition, by experience, and its
access to sources of relevant information and expertise
to make the
right decision. The court typically has none of these advantages and
is required to recognise its own limitations .
. .
That
is why remittal is almost always the prudent and proper course.
’
17
(Emphasis
added.)
[58] So, Pinehaven has a high bar
to overcome. Moreover, as Hoexter explains in reviewing the cases,
‘[f]airness to both sides
has always been and will almost
certainly remain an important consideration in this regard’.
18
[59] The crux of the high court’s
reasoning in granting the substitution order was that the result
would be a foregone conclusion
if the matter were referred back to
the MEC. Whether the decision would be a foregone conclusion is
clearly a relevant factor in
determining whether to grant
substitution. And I shall bear this in mind when considering each of
the review grounds.
[60] It is evident that whether
or not substitution is an appropriate order depends upon the basis
upon which a review is upheld.
To cite an obvious example, if a
review is upheld on the ground that a decision-maker had no power to
consider the matter, or was
biased, it would make no sense to refer
the matter back to him to reconsider the matter. On the other hand,
if he had the power
to make the decision but adopted an unfair
procedure in arriving at the decision, or failed to apply his mind
properly, it would
ordinarily be appropriate to remit the decision to
him for reconsideration so that he applies his mind properly and
decides the
matter in accordance with a fair procedure.
[61] In the instant case, if we
were to hold either that the Phodiclinics application to the
Department, or its appeal to the MEC,
was invalid an order for
substitution would follow unavoidably. The reason is, again, obvious:
if its initial application was invalid
the Department would only have
had to consider Pinehaven’s application; if the appeal to the
MEC was invalid because Phodiclinics
was not competent to appeal, the
MEC would not have had the power to entertain the appeal. In either
case a referral back to the
MEC would serve no purpose because the
result would be inevitable – Pinehaven’s approval by the
HOD would have to be
confirmed.
[62] So, subject to what I shall
say about the second ground of review – the ‘lodgement’
point – if the
first two grounds are upheld on the basis that
the appeal was invalid, as Pinehaven contends it was, a substitution
order would
follow. Similarly, if the fourth ground – the
Phodiclinics application did not identify a suitable premises –
is good,
this would also mean that Pinehaven’s application was
the only valid application before the HOD and, again, a substitution
order would have to follow.
[63] I have some difficulty in
understanding why Pinehaven persisted with, and the high court
decided, the third ground of review
– that when the MEC
considered the Phodiclinics appeal, he failed to realise that the
regulations required him to consider
‘necessity’ as the
sole criterion for determining the grant of an approval for a
hospital.
19
Because, once it was conceded,
quite properly, that the appeal proceedings were unfair as Pinehaven
had not been heard, and that
the MEC’s decision fell to be
reviewed and set aside on this ground alone, it did not matter
whether or not the MEC applied
the regulations correctly. The
proceedings were a nullity, and the appropriate order was a remittal
to the MEC, which Pinehaven
conceded before the matter was argued in
the high court. This ground of review therefore falls away.
[64] I revert to the second
ground of review, that Phodiclinics did not ‘lodge’ the
appeal properly in terms of the
relevant regulations because it
failed to serve a copy of the appeal on Pinehaven. As indicated
earlier, this ground was relied
on only as an alternative to the
first ground, the assumption being that if it were to be upheld it
would follow that the Phodiclinics
appeal would have been be invalid.
But this assumption is not correct.
[65] The regulation in question –
reg 57 – requires an appeal to be ‘lodged with the Head
of Department, who shall
submit it to the [MEC] . . . .’
This Phodiclinics did. But, Pinehaven submits that the regulation
ought to be interpreted
in a manner consistent with the right to fair
procedural action, which means that Phodiclinics ought to have served
the appeal
on Pinehaven too. Pinehaven’s real complaint,
therefore, is that it was not notified of the appeal, which means
that the
hearing was conducted unfairly in its absence.
[66] The clear language of the
regulation does not appear to impose any duty on an appellant to
serve the appeal on an interested
party. Rather, it suggests that
this duty rests with the HOD, or perhaps the MEC. For present
purposes I need not decide this question
and shall assume in
Pinehaven’s favour that its interpretation of the regulation is
correct. It, however, does not follow
that because Phodiclinics did
not serve a copy of its appeal to the MEC on Pinehaven that its
appeal was invalid, thus entitling
Pinehaven to an order of
substitution; it means only that the MEC’s decision ought to be
set aside because he did not adhere
to a fair procedure, which has
already been conceded. And, the usual order that follows would be a
remittal to the decision-maker
to conduct a fair hearing, which the
parties agreed would be appropriate in these circumstances.
[67] What remains are the first
and fourth grounds of review, which as I have said earlier would, if
successful, entitle Pinehaven
to an order of substitution. I proceed
to the first ground, whether Phodiclinics was competent to appeal
against the HOD’s
approval of Pinehaven’s application.
This turns on a construction of reg 55, which provides:
‘
The
proprietor or prospective proprietor of a private hospital . . . may
appeal in writing to the [MEC] against any decision made
by the Head
of Department in terms of any provision of these Regulations in
respect of such proprietor or prospective proprietor,
as the case may
be, of a private hospital . . . .’
[68] Phodiclinics submits that
from a plain reading of the regulation its application to establish a
private hospital made it a
‘prospective proprietor of a private
hospital’, and the HOD’s adverse decision against it gave
it a right to
appeal to the MEC against that decision. Pinehaven, on
the other hand, contends that Phodiclinics had a right to appeal only
against
the HOD’s decision refusing its application, but not
the decision to approve Pinehaven’s application. This is so,
the
submission proceeds, because the regulation permits an appeal
against a decision only ‘in respect of such . . . prospective
proprietor’. Seen in this way it is contended that at best for
Phodiclinics, it is a third party or objector – not
a
prospective proprietor – and the regulation gives no right of
appeal either to a third party or to an objector against
the HOD’s
‘prior approval’ of Pinehaven’s application.
[69] However, for Pinehaven to
succeed in its submission it would have to show that the HOD made two
separate decisions, one being
the ‘prior approval’ of
Pinehaven’s application, and the other, the subsequent refusal
of the Phodiclinics application.
It persuaded the high court that
this is in fact what happened. But, I disagree that there were two
distinct decisions. As Mthiyane
JA has pointed out in para 19 of his
judgment there was only one composite decision involving both
applications. I concur with
his reasoning. The effect of this
conclusion is that the decision to grant the approval to Pinehaven
and not to Phodiclinics made
the decision one ‘in respect of’
both Pinehaven and Phodiclinics as prospective proprietors.
Phodiclinics, therefore,
clearly had a right to appeal to the MEC,
and this ground of review must fail.
[70] Pinehaven’s fourth and
final ground of review is that in its application to establish a
hospital, Phodiclinics failed
to identify the particular site or
premises where it intended to establish its proposed hospital. This,
it submitted, was what
regs 7(1) and 7(2)(i) required. Its failure to
comply with a peremptory provision in the regulation, therefore,
invalidated the
Phodiclinics application.
Regulation 7
reads as
follows:
‘
(1)
No
person shall erect, alter, equip or in any other way
prepare
any premises
for
use as a private hospital or unattached operating-theatre unit
without the prior approval in writing of the Head of Department.
(2)(i)
Any
person intending to establish a private hospital or an unattached
operating-theatre unit shall first obtain permission in writing
from
the Head of Department, who, after consultation with the Director,
shall satisfy himself as to the necessity or
otherwise
for such a private hospital or
unattached operating-theatre unit before granting or refusing
permission.
(ii)
Having
obtained such permission, the applicant shall complete Form 1
(Annexure B) and submit plans for approval by the Head of Department,
together with the necessary information, and shall supply any
additional information which the Head of Department may require.
Permission and
approval in terms of
regulation 7
are not transferable.’
(Emphasis added.)
[71] The regulations do not read
easily. There was, however, no attempt before us to impugn them on
the ground of vagueness. So,
some sensible interpretation must be
given to them. It seems, at first blush, that if one reads regs 7(1)
and 7(2)(i) together,
the
permission
relating to the
necessity
for a private hospital in reg 7(2)(i), and the
prior approval
to
prepare any premises for use as a private hospital
in reg
7(1) requires the determination of the necessity for a hospital to
relate to particular premises. This is the construction
the high
court gave to the regulations.
[72] But this interpretation,
with respect, makes little sense because there appears to be no
purpose in linking the determination
of the need for a hospital to
particular premises. Whether a hospital is erected at particular
premises or some nearby premises
can hardly be relevant to the
question of whether or not there is a need for a hospital in some
area or locality. The learned judge
in the high court thought that
the identification of particular premises made commercial sense.
[73] I hold a different view. I
think it makes little commercial sense for an applicant intending to
establish a hospital to first
have to purchase premises or a site
before its application can be approved. It seems that provided the
applicant identifies the
area or locality where it intends
establishing the hospital with sufficient specificity, this would be
sufficient to satisfy the
‘necessity’ requirement in reg
7(2)(i).
[74] A close reading of the
regulations lends support to this construction.
Regulation 4(1)
also
has a bearing on this exercise. It says that a private hospital
cannot be ‘registered’ unless the premises on
which the
private hospital is situated is ‘suitable’. The
suitability of premises is thus a matter dealt with in reg
4, not reg
7. According to reg 7(2)(ii), which is quoted above, it is only after
permission is granted to establish a hospital
under reg 7(2)(i),
that the applicant must complete a form (Form 1) and submit plans for
approval. Form 1 is concerned with
the application for registration
and, it seems, that registration is only possible if the ‘situation’
of the premises
(street, locality, town) is described. The plans for
approval in reg 7(2)(ii) can only refer to the approval in reg
7(1).
[75] The scheme of the
regulations therefore envisages the following process: first, an
applicant for a private hospital must establish
the need or necessity
for such a hospital in a particular area. The area or locality must
be described in the application with
some specificity but need not
identify, at this stage the exact site or premises; second, if
permission is granted, the applicant
applies for registration of the
hospital and for this purpose the situation of the premises, and its
suitability are relevant;
finally if the Department grants the
registration, the applicant may ‘erect’ or in some other
way ‘prepare’
the premises if it obtains the ‘prior
approval’ of the HOD.
[76] The Phodiclinics application
described the area for the intended establishment of a private
hospital, in Mogale City, as having
a population of some 200 000
people, which is located close to freeways, the Hartebeespoort Dam
and other developments in the area.
In my view, this information was
adequate to determine the necessity or need for a hospital in this
area; if the Department deemed
it inadequate, it could have called
for more specific information to narrow down the location. So, I do
not think that Pinehaven
has shown that the Phodiclincs application
was invalid because it did not identify particular premises. It
follows that this ground
of review also has no merit.
[77] In summary only two of the
four grounds of review, namely the competence of the appeal (ground
1) and the invalidity of the
application for failure to specify
premises (ground 4), would, if successful, have resulted in an order
for substitution. There
was no merit in either. Ground 2, in truth,
amounted to no more than the conceded failure by the MEC to adhere to
a fair procedure,
and ground 3 fell away. It follows that the appeal
must succeed.
[78] Because the counter-review
application by Phodiclinics was conditional upon Pinehaven obtaining
a substitution order, which
it has failed to, it is not necessary for
us to entertain this matter any further.
[79] Regarding the costs of the
appeal, the parties agreed that if either party enjoys substantial
success, it would be entitled
to its costs. This Phodiclinics has
achieved and, therefore, should be allowed its costs.
________________
A CACHALIA
JUDGE OF APPEAL
APPEARANCES
For Appellant: GM Budlender SC
(with him S Budlender)
Instructed by:
Werksmans Attorneys, Sandton
Symington & De Kok,
Bloemfontein.
For Respondents: A Freund SC
(with him Ms R Keightley)
Instructed by:
Rothbart Inc, Johannesburg
Rosendorff Reitz Barry,
Bloemfontein
1
The
regulations were promulgated in terms of the Health Act 63 of 1977
and were published under GN R696,
GG
6928,
3 April 1980.
2
This
regulation will be discussed fully when dealing with the second
ground,
of review (ie (b)).
3
See
s 1(b) of the Promotion of Administrative Justice Act 3 of 2000
(PAJA).
4
Greater
Johannesburg Transitional Metropolitan Council v Galloway NO
1997 (1) SA 348
(W) at 356D-G.
5
‘
Everyone
has the right to administrative action that is lawful, reasonable
and procedurally fair.’
6
‘
Everyone
has the right to have any dispute that can be resolved by the
application of law decided in a fair public hearing before
a court
or, where appropriate, another independent and impartial tribunal or
forum.’
7
This
section provides
‘
(1) The
Minister may make regulations ─
(
a
)
in respect of private hospitals, nursing homes, maternity homes or
other similar institutions where nursing is carried on for
the
benefit of patients accommodated therein and where fees are charged
by the owner or lessee of any such hospital, home or
institution in
respect of nursing services rendered to such patients or where
contributions are made by such patients towards
the cost of such
services ─
. . .
(vi)
providing for the refusal to register, or the removal from the
appropriate register of, any such hospital, home or institution
which the Minister or any specified person or class of person may
consider unsatisfactory on specified grounds.’
8
Regulation
4(1) reads:
‘
A
private hospital or unattached operating-theatre unit shall not be
registered as such and no certificate of registration shall
be
issued in respect thereof, unless
─
(1)
the premises on which a private hospital or unattached
operating-theatre unit is or is to be conducted and the equipment
which is used or is intended for use in such private hospital or
unattached operating-theatre unit are suitable and adequate for
the
purposes of the said private hospital or unattached
operating-theatre unit.’
9
Cf
Biowatch Trust v Registrar, Genetic
Resources & others
2009 (6) SA 232
(CC) para 23.
10
Section
8(1)(
c
)(ii)(
aa
)
of PAJA.
11
Gauteng
Gambling Board v Silverstar Development Ltd & others
2005 (4) SA 67
(SCA) para 29.
12
Hoexter
Administrative Law in South Africa
(2007) at 489, relying on
Johannesburg
City Council v Administrator, Transvaal & another
1969 (2) SA 72
(T) at 76D-E.
13
Fn
14.
14
Fn
12.
15
The
regulations were promulgated in terms of the Health Act 63 of 1977
and were published under GN R696,
GG
6928, 3 April 1980.
16
Section
8(1)(c)(ii)(aa) of PAJA.
17
Gauteng
Gambling Board v Silverstar Development Ltd & others
2005
(4) SA 67
(SCA) para 29.
18
Hoexter
Administrative Law in South Africa
(2007) at 489, relying on
Johannesburg City Council v Administrator, Transvaal, &
another
1969 (2) SA 72
(T) at 76D-E.
19
The
regulation in question – reg 7(2)(i) – is quoted at para
70 below.