Court name
Supreme Court
Case number
SA 16 of 2008
Title

Permanent Secretary of Ministry of Finance and Others v Ward (SA 16 of 2008) [2009] NASC 3 (17 March 2009);

Media neutral citation
[2009] NASC 3





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:




  1. The respondent is a
    medical practitioner who practised at KATIMA MULILO, in the Caprivi
    Region, for his own account. On or about the 10
    th
    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.









  1. 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).









  1. 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.









  1. 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.









  1. 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.









  1. As a result of the
    letter of 13
    th
    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.









  1. 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.









  1. 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.









  1. A report was duly filed
    by Pinnacle Management Consultants which was in line with the
    findings previously concluded, and on the 6
    th
    September 2005 the respondent was informed in writing that his
    agreement as a service provider with PSEMAS was cancelled.









  1. 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.









  1. 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.









  1. The respondent denied
    that he had committed fraud or that he had acted in any dishonest
    way in compiling and claiming the fees.









  1. 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.









  1. 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.









  1. 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.








  1. 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.”













    1. 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.











    1. 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.”









    1. 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.











    1. 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.











    1. 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.











    1. 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.











    1. 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.











    1. 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."












  1. 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.









  1. 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).)









  1. 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.









  1. 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.









  1. 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).









  1. 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.









  1. 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.









  1. 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)).









  1. 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)).











  1. 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).)









  1. 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.









  1. 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.”













  1. 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.









  1. 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.









  1. 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.









  1. 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.









  1. 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.









  1. 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.









  1. 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.”









  1. 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.









  1. 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)
…”










  1. 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.









  1. 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.









  1. 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.









  1. 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.









  1. 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.









  1. 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.









  1. 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.









  1. 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]).











  1. 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.









  1. 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.









  1. 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.









  1. 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.









  1. 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.









  1. 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.”













  1. 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.









  1. 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.









  1. 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.









  1. 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.”








  1. 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).









  1. 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.









  1. 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.









  1. 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.









  1. 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).









  1. 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.









  1. 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.









  1. 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.









  1. 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.









  1. 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”












  1. 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.









  1. 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)).









  1. 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).)









  1. 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).









  1. 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.









  1. 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.









  1. 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.








  1. 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.