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[2014] ZAWCHC 94
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Staffmed CC v MEC for Health (Western Cape) and Another (6352/14) [2014] ZAWCHC 94 (23 June 2014)
Republic of South
Africa
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN CAPE
DIVISION)
Case
No.6352/14
DATE:
23 JUNE 2014
Before: The Hon.
Mr Justice Binns-Ward
In the matter
between:
STAFFMED
CC
..............................................................................................
Applicant
And
THE MEC FOR
HEALTH (WESTERN CAPE)
.............................
First
Respondent
THE WESTERN CAPE
DEPARTMENT OF HEALTH
............
Second
Respondent
JUDGMENT
DELIVERED: 23
JUNE 2014
BINNS-WARD J:
[1] The applicant
was contracted by the provincial department of health to provide
appropriately qualified persons to undertake
locum duties at
hospitals administered by the department. It was required to verify
the identity and qualifications of the persons
it made available in
terms of the contract. It transpired that one of the persons it made
available, and whose services were used
by the department as a
stand-in medical doctor, was, in fact, not the person he had
represented himself to be and was not registered
with health
professions council. When this information came to light the
department informed the applicant that it was suspending
its use of
the applicant’s services pending an investigation into the
matter. The department also issued instructions that
none of the
hospitals or facilities under its administration was to avail of the
applicant’s services. The applicant considered
that the action
taken by the department was unwarranted. An exchange of
correspondence having failed to resolve matters, the applicant
then
instituted proceedings as a matter of urgency for an interdict
directing the department to continue to use its services pending
the
determination of the investigation.
[2] The department
opposed the application. The matter was adjourned for hearing in the
Fourth Division on 18 June. The relief
sought by the applicant in
terms of its notice of motion was thereafter overtaken by events when
the applicant gave notice that
it was cancelling the contract on the
grounds of the applicant’s material breach when it provided an
unqualified doctor for
locum service. The applicant thereupon filed
a notice of intention to amend its notice of motion to claim interim
performance
of the contract pending the determination of an
application to be instituted for the review and setting aside of the
department’s
decision to cancel it. The department objected to
the amendment.
[3] The notice of
objection set up three grounds for resisting the amendment: the first
was that no basis for the relief sought
in terms of the proposed
amended notice of motion had been laid in the founding papers, and
the department had already answered
the case it had originally been
asked to meet; the second was that the department would be prejudiced
by not having had the opportunity
to deal with the allegations in
support of the amended relief that had been founded for the first
time in averments made in the
applicant’s replying affidavit;
and the third was that the replying affidavit did not provide grounds
for the contemplated
review and that in the circumstances no basis
had been provided for the interim relief to be sought in terms of the
proposed amended
notice of motion. In the result only the
application for the amendment was argued when the matter was called
on 18 June because
counsel for the applicant realistically conceded
that were the amendment to be allowed, the applicant would wish to
supplement
its papers and the department would have to be afforded an
opportunity to answer the new case.
[4] Counsel for the
department argued that no point would be served by allowing the
amendment because the review that the applicant
appears to wish to
institute is misconceived in law. For the purpose of his argument
the respondent’s counsel assumed that
the basis of the
contemplated review is an alleged breach of the procedural fairness
requirements in terms of s 3 of the Promotion
of Administrative
Justice Act 3 of 2000 (PAJA). This was a reasonable approach in the
context of the only indication of the nature
and basis of the review
given in the applicant’s papers being the averments in
paragraph 6 of its replying affidavit. The
tenor of the applicant’s
counsel submissions confirmed that, at least as currently advised,
the applicant is indeed going
to contend that the cancellation of the
contract manifested the exercise of public power, and that public, as
distinct from purely
private, law principles were implicated in any
act of cancellation of the contract. An applicant seeking a judicial
review should
set out its grounds clearly, including specifically
identifying any statutory grounds upon which it relies. That much
has been
reiterated by the courts in relation to PAJA-based reviews
in a number of judgments; see especially Bato Star Fishing (Pty) Ltd
v Minister of Environment Affairs
[2004] ZACC 15
;
2004 (4) SA 490
(CC), at para 27
and Cele v South African Social Security Agency and 22 Related Cases
2009 (5) SA 145
(D), at para 45 and consider generally Hoexter,
Administrative Law in South Africa, Second Edition, at 517-518. This
requirement
should also be satisfied in papers in which interim
relief is sought pending the determination of a contemplated review;
for a
court needs to be properly informed in such a context of the
precise nature and basis of the contemplated review in order to be
able to properly assess, as best as it is able, the applicant’s
prospects in the review. That, after all, is the basis upon
which
the strength or weakness of the right which the applicant seeks to
protect by interim interdictal relief falls to be determined;
cf.
e.g. Ferreira v Levin NO and Others; Vryenhoek and Others v Powell NO
and Others
1995 (2) SA 813
(W), at 832I-833B; Ladychin Investments
(Pty) Ltd v South African National Roads Agency Ltd and Others,
2001(3) SA 344 (N) at 357C-E;
Van der Westhuizen and Others v Butler
and Others
2009 (6) SA 174
(C), at 182C-E; Camps Bay Residents
Ratepayers Association and Others v Augoustides and Others
2009 (6)
SA 190
(WCC), at para 10, and Capstone 556 (Pty) Ltd v Commissioner,
South African Revenue Services and Another, Kluh Investments (Pty)
Ltd v Commissioner, South African Revenue Services and Another
2011
(6) SA 65
(WCC) at para 53. The applicant’s papers notably
fell short of compliance with the exhortations in Bato Star and other
judgments.
[5] Paragraph 6 of
the replying affidavit, which, as mentioned, affords the only
indication in the applicant’s papers of the
nature of the
contemplated review, reads as follows:
I was in fact
informed for the first time that the Applicant’s agreement with
the Respondents has been cancelled when reading
the Answering
Affidavit herein. I am not provided with the courtesy of being
informed as to when this decision was made and by
whom. I can
however say that I was not informed and/or involved in any form of
process in this regards whereby I was provided
with an opportunity to
advance reasons to why the agreement not be cancelled. Mention is
made in the Respondents’ Answering
Affidavit that written
correspondence will be provided to the Applicant pertaining to the
cancellation. No such documentation
has been received by Applicant.
[6] Counsel for the
department submitted that the weight of authority is against the
notion that public law is implicated in the
cancellation by an organ
of state of a contract with a private party when the organ of state
acts in terms of common law contractual
principles, rather than in
terms of a statutory provision. Counsel submitted that by cancelling
the contract in reaction to a
material breach by the applicant the
department was acting in terms of generally applicable contractual
principles. He found support
for his argument in para 18 of the
appeal court’s judgment in Government of the Republic of South
Africa v Thabiso Chemicals
(Pty) Ltd
[2008] ZASCA 112
;
2009 (1) SA 163
(SCA), in which
it was held as follows:
What remains are
observations originating from comments by the court a quo which seem
to support the notion that the contractual
relationship between the
parties may somehow be affected by the principles of administrative
law. These comments gave rise to arguments
on appeal, for example, as
to whether the cancellation process was procedurally fair and whether
Thabiso was granted a proper opportunity
to address the tender board
in accordance with the audi alteram partem rule prior to the
cancellation. Lest I be understood to
agree with these comments by
the court a quo, let me clarify: I do not believe that the principles
of administrative law have any
role to play in the outcome of the
dispute. After the tender had been awarded, the relationship between
the parties in this case
was governed by the principles of contract
law (see eg Cape Metropolitan Council v Metro Inspection Services
(Western Cape) CC
and Others
2001 (3) SA 1013
(SCA)
(2001 (10) BCLR
1026)
at para 18; Steenkamp NO v Provincial Tender Board, Eastern
Cape
2006 (3) SA 151
(SCA) ([2006]
1 All SA 478)
at paras 11 and 12).
The fact that the tender board relied on authority derived from a
statutory provision (ie s 4(1)(eA) of the
State Tender Board Act) to
cancel the contract on behalf of the government, does not detract
from this principle. Nor does the
fact that the grounds of
cancellation on which the tender board relied were, inter alia,
reflected in a regulation. All that happened,
in my view, is that the
provisions of the regulations - like the provisions of ST36 - became
part of the contract through incorporation
by reference.
[7] I have
difficulty in reconciling the dicta in para 18 of Thabiso Chemicals
with the court’s judgment in Metro Inspection
Services. In the
latter case the court held that the fact that the conclusion of the
contract in question was regulated by statute
- as are all
procurement contracts by organs of state - did not mean that the
organ of state was exercising a public power when
it subsequently
cancelled the contract on common law contractual principles. The
court also held, however, that the position in
that matter would have
been different if the cancellation had been effected in terms of a
regulatory provision that had been equally
available. The court
treated of this at para 20 of its judgment as follows:
Counsel for the
first respondent submitted that in the light of the provisions of reg
22(1) of the Financial Regulations for Regional
Services Councils
R1524 of 28 June 1991 the contract was not a purely commercial
contract and that the cancellation thereof, therefore,
constituted
'administrative action'. Regulation 22(1) provides as follows: '22(1)
If the council is satisfied that any person,
firm or company -
(a) is executing a
contract with the council unsatisfactorily;
(b) has offered,
promised or given a bribe or other remuneration to the chairman, a
council member, an official or an employee of
the council in
connection with the obtaining or execution of a contract;
(c) has acted in a
fraudulent manner or in bad faith or in any other unsatisfactory
manner in obtaining or executing a contract
with any Government
department, provincial administration, public body, company or
person, or that he or it has managed his or
its affairs in such a way
that he or it has in consequence been found guilty of an offence;
(d) has approached a
chairman, council member, an official or an employee before or after
tenders have been invited for the purpose
of influencing the award of
the contract in his favour;
(e) has withdrawn or
amended his tender after the specified date and hour;
(f) when advised
that his tender has been accepted, has given notice of his inability
to execute the contract or fails to execute
or sign the contract or
fails to execute or sign the contract to furnish the security
required,
the council may, in
addition to any claim which it may have in terms of reg 20 and in
addition to any other legal recourse, decide
that any contract
between the council and such person, firm or company shall be
cancelled and that no tender from such person,
firm or company shall
be considered for a specified period.'
In my view, there
can be no question that, had the appellant purported to cancel the
contract in terms of the provisions of reg
22(1), it would have been
exercising a public power which would have constituted
'administrative action' in respect of which a
fair procedure in terms
of s 33 of the Constitution would have required compliance with the
audi rule. That would have been the
case even if the provisions had
been incorporated into the contract (see Zenzile at 36G - I).
However, the appellant did not purport
to cancel the contract on any
of the grounds referred to in reg 22. It purported to cancel the
contract, not on the ground of being
satisfied of the existence of
any of the circumstances referred to in reg 22, but on the ground
that substantial fraudulent claims
had actually been submitted and
that such fraudulent claims constituted a material breach of contract
entitling the appellant to
cancel in terms of the law of contract.
The view expressed
in the last section of paragraph 20 of the judgment in Metro
Inspection Services, after the quotation of regulation
22, appears,
on the face of it, to be in direct conflict with the import of
paragraph 18 of the court’s judgment in Thabiso
Chemicals.
[8] The judgment in
Thabiso Chemicals is also remarkable for the absence of any mention,
in relation to the matter dealt with at
para 18 thereof, of the
court’s earlier judgment in Logbro Properties CC v Bedderson NO
and Others
2003 (2) SA 460
(SCA), which significantly qualified the
purely private law contractual approach reflected in the Metro
Inspection Services judgment.
In The quest for clarity: An
examination of the law governing public contracts
2011 (128) SALJ
172
, Calli Ferreira suggests that ‘In failing to even mention
Logbro or its rulings in its judgment, the SCA's decision in Thabiso
Chemicals represents a return to a ‘purely contractual’
approach which completely sidelines the role of administrative
law
after a contract has been validly concluded. Its failure to refer to
Logbro, a decision of the same court and one which importantly
interpreted Cape Metropolitan Council, which was relied on by the
court, is peculiar and seems to be a rejection of the approach
taken
in Logbro.’
1
The writer proceeded ‘The contradictory approaches taken by the
courts leave the law unclear and the application of administrative
law to the exercise by the government of its private law rights
remains controversial’.
[9] I am unconvinced
that the judgment in Thabiso Chemicals does indeed imply a considered
rejection of the approach in Logbro.
As apparent from the passage
quoted above, the court did refer to Steenkamp NO v Provincial Tender
Board at paras 11 and 12.
The latter judgment contains an apparently
approving footnote reference to Logbro at para 12. The footnote was
appended to the
following statement by Harms JA at the end of para 12
of the judgment in Steenkamp: ‘Once the tender is awarded, the
relationship
of the parties is that of ordinary contracting parties,
although in particular circumstances the requirements of
administrative
justice may have an impact on the contractual
relationship’. In my view there can be no quibble, however,
with the observation
by Ferreira that the appeal court’s
judgments, taken together, leave the current state of the law in this
area unclear.
2
[10] What may be
distilled with some measure of certainty from the jurisprudence, I
think, is that rules of procedural fairness
may be applicable to the
cancellation of by state bodies of contracts concluded with private
persons in certain circumstances.
I am not called upon in determining
the application to amend the notice of motion to decide whether the
cancellation at issue in
the current case would qualify as such. It
is inappropriate that I should express any views in that regard at
this stage, particularly
in the context of the applicant’s
counsel’s indication that the matter should be postponed so
that the applicant’s
papers can be supplemented in respect of
the new basis for the application and to afford the department the
opportunity to answer
the reformulated application. I am, however,
satisfied that there might in principle be scope for the applicant to
advance an
arguable case in the contemplated review and that it would
therefore be inappropriate to refuse the amendment on the grounds
that
the reformulated application is absolutely untenable in law.
3
Notwithstanding what was said in the passage in Thabiso Chemicals
relied on by the department, the High Court appears to have
space to
manoeuvre in the context of contradictory judgments in the Supreme
Court of Appeal; see R v Sillas
1959 (4) SA 305
(A), at 311A and
Makambi v MEC for Education, Eastern Cape
[2008] ZASCA 61
;
2008 (5) SA 449
(SCA);
[2008] 4 All SA 57
, at para 28.
[11] It remains to
be considered, however, whether the court’s discretion should
be exercised in favour of the applicant by
allowing the amendment in
the context of the case that the applicant now wishes to pursue not
having been founded in the founding
papers. The vague and
unsatisfactory formulation in its replying affidavit of the new
course that the applicant wishes to take
is a factor to be taken into
account in such consideration.
[12] Counsel for the
department submitted that the applicant should have commenced with a
fresh application when it became apparent
that the relief sought in
terms of the notice of motion in the current proceedings had been
rendered redundant by the altered factual
situation. In my view
there is much to commend that approach. The only question that
remains relevant in respect of the application
originally launched is
that of costs. Had the applicant acted as counsel for the department
contends it should have, there would
have been no need for a replying
affidavit, or a notice of amendment. The outstanding issue of costs
in the current application
could have been consolidated for
determination in a fresh application brought on the grounds that the
applicant currently wishes
to pursue. The opposed amendment
application heard on 18 June would have been unnecessary. The course
instead adopted by the
applicant had the inherent disadvantage that a
postponement of the matter on 18 June was unavoidable because of the
need for it
to supplement its papers even if the amendment were
granted and the need for the respondent to be afforded the
opportunity to answer
the new case – an answer to which the
applicant may no doubt wish to reply. All in all, if the amendment
were granted the
matter would probably not become ripe for hearing
until after the exchange of at least six sets of affidavits; and in
circumstances
in which a material portion of the content of the first
three sets of those affidavits had been rendered irrelevant, save as
to
costs.
[13] It is not
interests of the efficient administration of justice, or, indeed, of
the parties, for the matter to proceed on the
basis that granting the
application for the amendment would involve. There is nothing to
prevent the applicant from instituting
the new application it wishes
to pursue on fresh papers, if so advised, and to request the court in
that application to determine
the costs of the current application,
which it would otherwise seek to withdraw. Whether it would be
viable to adopt such a course
having regard to the remaining
executory period of the contract in issue
4
and the time frames that would be inherent in a review application
conducted even on an expedited timetable is obviously something
for
the applicant to consider. The time frame considerations would in
any event have applied even were the amendment to have been
allowed.
[14] In the
circumstances the following order is made:
The application to
amend the notice of motion is dismissed with costs.
A.G. BINNS-WARD
Judge of the High
Court
1
At
p. 188.
2
See
also Geo Quinot in
'Toward
effective judicial review of state commercial activity
'
(2009) 3 TSAR 436
, at 439, where the writer noted ‘South
African law has probably gone further than most other common law
systems in accepting
generally that the adjudication and award of
all public tenders amount to administrative action subject to
judicial review. However,
judicial review remains controversial in
South Africa in relation to other state commercial decisions, e.g.
the cancellation
of a contract’, and the discussion, with
reference to other Supreme Court of Appeal and Constitutional Court
jurisprudence,
in Hoexter (op cit supra at para 4) at
pp.447-451, where reference is made to ‘[t]he ambivalence
exhibited in the
Supreme Court of Appeal’.
3
There
might also be scope for a party in the applicant’s position to
argue, on the basis of
dicta
in judgments such as
Barkhuizen
v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC) and
Breedenkamp and Others v
Standard Bank Ltd
2009 (5) SA 304
(GSJ), for the implication of
rules of reasonableness and fairness in the private law context,
even though the applicant does
not appear, thus far, to have
considered such an approach.
4
The
contract would have expired at the end of December 2014, in just
over six months’ time.