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IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE DIVISION, BHISHO)

CASE NO:  466/2016

NOT REPORTABLE

 

In the matter between

 

DYNAMIC EMERGENCY MEDICAL
SERVICES CC	Applicant
and
GOVERNMENT EMPLOYEES MEDICAL
SCHEME	First Respondent
THE PRINCIPAL OFFICER: GEMS	Second Respondent
THE TRUSTEES OF THE BOARD: GEMS	Third Respondent
THE MINISTER OF HEALTH	Fourth Respondent

 

JUDGMENT

 

HARTLE J

 

1.       The applicant, an ambulance and medical rescue emergency services provider, launched an urgent application in which temporary interlocutory relief was sought against the respondents as follows:

 

“1.1.1  The first respondent is hereby directed to forthwith take all necessary steps to restore and reinstate the applicant onto the first respondent’s web dispatch system (“web dispatch system”) for (certain service areas in the Eastern Cape Province);

 

1.1.2    The first respondent is hereby forthwith interdicted and restrained from preventing the applicant from utilizing the web dispatch facilities for the service areas;

 

1.2.3    The first respondent is hereby interdicted and restrained from preventing the applicant from performing its obligations as a service provider to the first respondent in terms of the agreement dated 7 March 2013 marked annexures “A1 – A 13” to the founding affidavit (“The network agreement”).

 

1.2       Any party opposing the proceedings is directed to pay costs;

 

1.3       Further and/or alternative relief.” 

 

2.       It was intended that paragraphs 1.1.1 and 1.1.2 of the prayers above would operate as an interim order, assuming that the relief sought on the basis of urgency was granted, pending proceedings to be instituted within thirty days.[1] 

 

3.       On a closer scrutiny of the applicant’s founding affidavit, its primary remedy is for a mandamentum van spolie, based on the allegations that:

 

3.1     it had exercised a right of access to a web dispatch system provided under the network agreement; and

 

3.2     that its removal by the first respondent from that system is unlawful and wrongful because, inter alia, no valid termination of the network agreement had occurred. 

 

In the alternative to the spoliatory relief claimed by the applicant, it seeks the interdictory relief as set forth in the notice of motion, alleging that it has “more than a prima facie right” to be reinstated to the web dispatch system and to perform in terms of the network agreement as a service provider to the first respondent on the basis of the flawed cancellation which it seeks to challenge on review.

 

4.       The issue of whether or not the matter is urgent has become academic given the length of time which has elapsed since the application was first issued and set down on the basis of urgency, except for the question of costs.[2]  Initially the first, second and third respondents (“the respondents”), who oppose the application, sought an order striking the matter from the roll on the basis that the matter was not urgent, but have since relented because they desire that the merits of the application be disposed of. 

 

5.       I mention that the application was presently enrolled at the behest of the respondents after the applicant ostensibly failed to prosecute the matter further upon the delivery of their answering and confirmatory affidavits.  The respondents sought such enrollment on 14 December 2016.  The applicant delivered its replying affidavit only thereafter, on 28 February 2017.  The respondents’ stance in this respect is that, whilst the replying affidavit is “hopelessly out of time”, they take no issue with the late filing thereof with a view to bringing the matter to finality. 

 

6.       Mr. Maniklall, who appeared on its behalf, submitted in argument that although the applicant had originally approached the court for a rule nisi with interim relief, it would be appropriate, given the manner in which the parties ‘arguments have developed over time, for final relief to be granted.  I agree that it is superfluous for a rule nisi to issue in such applications where relief is sought pending the determination of a tandem review application.  The interdict is either granted or it is not.  As for the spoliatory claim, it is trite law that such an order is a final determination of the immediate right to possession : it is the last word on the restoration of possession ante omnia.[3]

 

7.       The following facts relevant for present purposes are either common cause or not disputed:

 

7.1 the first respondent is a medical aid scheme (“The Scheme”) registered under section 24(1) of the Medical Schemes Act, No. 131 of 1998 (“MSA”), carrying on business as such;

 

7.2 the applicant concluded a written agreement with the first respondent on 7 March 2016 for the rendition of emergency medical services in specified service areas in the province as a “participating Emergency Medical Services Provider”, which also conferred on it the status of member of the GEMS Emergency Services Network;

 

7.3 the contractual relationship was preceded by an earlier such relationship between the applicant and the first respondent;

 

7.4 the network agreement provides that an emergency medical services dispatch centre, a facility contracted to the first respondent (by Europe Assistance (“EA”) according to the respondents), orders, mobilizes or assigns emergency medical resources (such as are provided by the applicant and other service providers thereunder) to cases for the benefit of its beneficiaries under the Scheme on a non-exclusive basis.  This service appears vital to enable providers to participate in respect of such cases arising as a willing provider in meeting the requirements of the network, albeit no guarantee is furnished that they will necessarily procure services from the dispatch system.  (This member entitlement under the network agreement is self-evidently what the applicant calls the “web dispatch system”, its exclusion from which it presently seeks to remedy.);

 

7.5 the new agreement was to endure indefinitely until terminated in accordance with its provisions.  Clause 13 provides for cancellation on written notice in the event of the breach of a material term of the agreement.  Clause 5.2 provides (somewhat ambiguously in relation to what is provided for in clause 13) that a party may terminate the agreement by giving the other party at least thirty days’ prior written notice.  (The first respondent contends for a no cause termination on the basis of clause 5.2, whereas the applicant submits that there should be cause therefor.);

 

7.6 clause 19 of the Rules of the Scheme (Annexure “B”), provides for how the business of the scheme[4] is to be managed by its board, through a complement of fit and properly appointed trustees.  It mirrors the provisions of section 57 of the MSA concerning the governance of schemes.[5]  Decisions of the board appear to be required to be taken by resolution in writing signed by at least seven trustees, if not taken at a meeting of the board duly called and constituted.[6]  Power is vested in the board, in terms of its rules, to “appoint, contract with and compensate any accredited managed health care organization in the prescribed manner”;[7]

 

7.7 both parties exercised their rights under the contract after its commencement until the impugned cancellation thereof;

 

7.8 on 16 May 2016 the applicant received an unsigned letter bearing the first respondent’s letterhead and containing the title “Notice to Terminate Agreement”.  It continues as follows:

 

“We refer to the Emergency Medical Network Services Agreement concluded by the Government Employees Medical Scheme (“GEMS”) and Dynamic Emergency Medical Services CC on 8 March 2016.  (sic)

 

Kindly be advised that GEMS hereby tenders notice in terms of clause 5.2 of the aforesaid agreement to terminate the agreement in 30 (thirty) days.”

 

7.9 the letter purports to have been written under the hand of the “GEMS EMS Networks Management”.  According to the respondents EA provides this service; and

 

7.10       in June 2016 the first respondent took the applicant off its web dispatch system and stopped referring cases and beneficiaries to it for purposes of rendering its services under the agreement which it had by then terminated after the written notice had run its course.

 

8.       In order to obtain a spoliation order, two allegations must be made and proved, namely:

 

8.1     that the applicant was in possession of the property; and

 

8.2     that the respondent deprived him of his possession forcibly or wrongfully against his consent.[8]

 

9.       The requirements which an applicant for an interlocutory interdict pending certain proceedings has to satisfy are (1) a prima facie right to the final relief which it seeks in the contemplated separated action or application; (2) a well-grounded apprehension of irreparable harm if the interim relief is not granted and the ultimate relief is eventually granted; (3) a balance of convenience in favour of the granting of the interim relief; and (4) the absence of any other satisfactory remedy.[9]

 

10.       There are two components (which I regard as interrelated) underpinning the applicant’s claims in the matter.  The first is its supposed right of access to the web dispatch system of which it claims to have been despoiled, and the second is its alleged entitlement to exercise its rights under the agreement (including its membership of the dispatch system) which it maintains was not validly cancelled.  In the latter respect it does not rely primarily in its pleaded case on a contractual remedy but asserts instead that its rights to fair and just administrative action have been assailed by both the manner and fact of the impugned cancellation.

 

11.       The applicant’s use of or access to the web dispatch system depends in my view on the validity of the network agreement itself.  It is not a possessory right which can exist in a vacuum.  It arises upon the network agreement. 

 

12.       It is necessary therefore to first determine whether the applicant’s claim that the termination was invalid or a nullity under the circumstances holds any water.

 

13.       The applicant relies for success in this regard on the premise that:

 

13.1       the first respondent is an administrator as contemplated under the provisions of the Promotion of Administrative Justice Act, No. 3 of 2000 (“PAJA”), it being an organ of state exercising a public power or exercising a public function in terms of legislation, alternatively a juristic person exercising a public power or performing a public function in terms of an empowering provision;

 

13.2       that it has taken administrative action as defined in section 1 of PAJA in terminating the network agreement; and

 

13.3       that it is entitled to review this action utilizing the prescripts thereof. 

 

14.       The applicant asserts that the conclusion of the network agreement and its implementation was further subject to certain fundamental underlying principles agreed to by the parties “expressly, impliedly or tacitly”, including that:

 

14.1          there would be no unfair discrimination against it;

 

14.2          that the first respondent would not conduct itself in an arbitrary manner and would not be allowed to terminate the agreement arbitrarily or capriciously;

 

14.3          that the applicant would be entitled to just administrative action and decisions by the first respondent that would be rational and justifiable;

 

14.4          that the first respondent would deal with and treat the applicant in an equitable, fair and rational manner without causing prejudice to it, regard being had to the significant investment made by it in meeting the first respondent’s requirements as its service provider under the network agreement; and

 

14.5          that it would be entitled to a right to be heard prior to the first respondent taking and implementing any decision to terminate the agreement.

 

15.       The first respondent for obvious reasons submits, correctly so in my view, that the terms the applicant seeks to incorporate on this basis fly in the face of the express terms of the agreement and therefore cannot exist.[10]  Reading between the lines, however, what the applicant hopes to assert in my view is that the termination has to be scrutinized against the backdrop of or under the prism of the principles of legality and/or the prescripts of PAJA in any event (regardless of what the express terms of the contract provide for) because of the fact that the Scheme was exercising a public function in the peculiar circumstances alluded to.

 

16.       The respondents oppose the application on the basis that the cause of action asserted by the applicant that the notice of cancellation is invalid or a nullity is not recognizable in law because the first respondent is (or was not in the relevant context) an administrator as contemplated under the provisions of PAJA and that its complaints are thus not susceptible to review utilizing the prescript of PAJA.  This is because, so they contend, the parties’ relationship was one which was founded upon the privity of contract in terms of which they bound themselves by the provision that either of them could terminate without cause, provided only that proper notice (i.e. thirty days’ prior written notice) was given of such intention.

 

17.       In seeking to persuade me that the termination by the first respondent without cause in terms of the agreement is not conduct justifiable under PAJA, Mr. Ioulianou, who appeared for the first respondent, referred me to the following passage of Brand JA in Government of the Republic of South Africa v Thabiso Chemical[11] as authority in support of his submission that the parties’ rights and obligation in casu are to be assessed with reference exclusively to the terms of their contract and not the public or administrative law obligation of the first respondent:

 

“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.”

 

18.       For this reason, so he submitted, the applicant’s approach is misconceived, thus justifying the dismissal of the interim interdictory relief proposed by it in the notice of motion.

 

19.       It may well be, on the basis of this authority and the “purely contractual” approach adopted by our courts in challenges of a similar nature that the court should adopt a “PAJA hands off” approach where the organ of state or entity exercising a public power has been exercising a contractual right and not a statutory power, but such reasoning can be “formalistic and unconvincing”, especially where there are features of the impugned action which do entail the exercise of public power.[12]  In this instance, whilst I agree that the act of cancelling must be determined solely with reference to the terms of the contract, the manner in which the first respondent is required to give effect to its contractual right of cancellation is however a public power provided for in the empowering provisions, namely the Rules of the Scheme, read together with the provision of section 57 of the MSA in relation to aspects of the governance of schemes, and the regulations promulgated thereunder.  The public objects of the scheme, and the fact that it is under a statutory duty to act in the public interest when conducting its business, must also not be overlooked. [13]

 

20.       The manner in which the first respondent therefore makes (and, by necessary implication cancels) contracts must be exercised in accordance with these provisions and its public law obligations in mind.  In this respect “how”, “not why,” it purported to cancel cannot in my view escape PAJA scrutiny. 

 

21.       Prima facie there is substance in the applicant’s complaint that the cancellation was not lawfully effected in accordance with the first respondent’s rules, and having regard to the provisions and purport of the MSA and the regulations promulgated thereunder.  Its challenge, on the basis of the averments in its founding affidavit could be brought one on or more of the bases provided for in sections 6(2)(a)(i) and (ii); (b); (d), (e)(ii) or (iv), (v) or (vi) or (f)(i) and (ii)(bb) of PAJA.  Even if I am wrong in this respect, however, section 1(1) of the Constitution, read together with section 8(1) and (2) thereof, provides a basis in itself to challenge the illegality complained of. 

 

22.       It is therefore necessary to separate out this aspect from all the other complaints made by the applicant, i.e. the manner in which the first respondent exercised its right of cancellation, and to consider whether, under these circumstances the applicant might succeed in a PAJA or legality review.  On this issue, the applicant alleges that the notice of termination is unlawful, invalid, alternatively amounts to a nullity because:

 

22.1       there is no resolution by  the first respondent’s board of trustees in existence to support the termination of the agreement;

 

22.2       no authorized person has taken steps for the termination of the agreement by the first respondent;

 

22.3       the notice is not signed by any authorized person of the first respondent; and

 

22.4       the purported decision to terminate the agreement is arbitrary and capricious and bears no justification.

 

23.       The applicant also alleges that the right was exercised because of the unauthorized or unwarranted dictates of Carl de Montille, who it suggests was responsible for galvanizing the termination. 

 

24.       These grounds, appear to me to prima facie provide a valid basis to test the manner under which the scheme exercised its right to cancel the agreement according to the prescripts of PAJA, especially when regard is had to the respondents’ version.[14]

 

25.       In this respect, there is no written resolution or minutes confirming the proper exercise of the first respondent’s contractual right to cancel under the circumstances, neither was any assurance given to this court that it had exercised its right to cancel strictly in accordance with the Scheme’s Rules and/or the relevant provisions of the MSA on governance including the regulations promulgated thereunder.  Its principal officer, Mr. Goolab, who deposed to the respondents’ answering affidavit, appears to have glossed over the fact that the first respondent, in conducting its business, including cancelling agreements with service providers, might be under a statutory duty to act in the public interest.   

 

26.       It is further notable in my view that the Mr. Goolab fails to explain the circumstances under which Carl de Montille (who is the dispatch Network Manager ostensibly under the network agreement, but contracted to EA and obviously therefore not in the first respondent’s employ), came to be involved in issuing the notice to the applicant which foreshadowed the termination of the agreement.  There is no denial by the respondents that he was in fact behind it.  Indeed the notice bears de Montille’s title and there is little room for doubt that he was somehow involved in bringing about the termination.   

 

27.       Mr. Goolab purported to justify the propriety of the notice by (1) adopting and ratifying its contents ex post facto; and (2) claiming to have delegated the authority to dispatch the notice to someone completely different, namely the first respondent’s Executive: Contracts and Operations, Ms. Bella Mfenyana.  This purported explanation appears to me to be fatuous.  Firstly, why ratify the notice if on the first respondent’s version there was a proper delegation in the first place?  Secondly, where is the indication in the notice that Ms Mfenyana penned the letter or authorized its dispatch?  (There is incidentally no confirmatory affidavit from her, but rather from de Montille who is neither employee nor agent of the first respondent.) 

 

28.       Mr. Goolab also failed to explain from whence he derived his authority to terminate the network agreement and, in turn, to delegate same.  One expects that such a vital decision should, in accordance with the rules of the Scheme, have been taken openly and recorded by the third respondent in a minute or a resolution, especially if the principal officer had delegated his supposed authority to cancel on behalf of the Scheme to another officer.

29.       Section 57(3)(b) of the MSA behooves the principal officer to ensure that proper registers, books and records of all the operations of the scheme, and the minutes of resolutions passed by the board are kept and sub-section (3), that “proper control systems” are employed by or on behalf of the Scheme.  Self-evidently this is to ensure the transparency and accountability of the first respondent’s affairs.  It would have been the easiest thing in my view for the respondents to have taken the court through the expected chain of events commencing with the point at which the scheme took the decision to exercise its contractual right to terminate the agreement if it was not so focused on distancing itself from any scrutiny by virtue of the “purely contractual” argument contended for.

 

30.       Mr. de Montille’s role in the termination also requires some explanation.  The first respondent refutes any suggestion that it and EA, who evidently employs de Montille, are not operating at arm’s length.  This alleged lack of commonality in shareholding and/or directorship between the EA and the first respondent renders it even more critical however for it to explain de Montille’s comity with it in the impugned termination.  Surely an outsider cannot dictate to the first respondent how it should exercise its contractual right to cancel the network agreement, much less give effect to such decisions on its behalf.  This failure on the part of the Scheme to disclose how the termination was effected is certainly grist to the mill having regard to the applicant’s contention that the decision to terminate may have been based on de Montille’s unwarranted dictates.

 

31.       In conclusion, I am satisfied that the applicant has prima facie established prospects of success and that it might succeed in due course in a PAJA or legality review, albeit only in the limited respect I have outlined above.

 

32.       On the requirement of irreparable harm, I accept for present purposes that the applicant has notionally made out a case in the founding affidavit that it would suffer harm (at least at the time of the launch of the application) if the interdict were not granted and the ultimate relief is eventually granted.  The losses described by it are quite tangible, but there is more to it than just this.

 

33.       Concerning the requirement of balance of convenience, the court is expected to weigh the prejudice to the applicant if the interdict is refused against the prejudice to the respondents if it is granted.  Whilst the prospects of success in the review application which the applicant proposes to issue is a vital consideration, I am not convinced that the balance still tilts in the applicant’s favour, however, given the substantial lapse of time it has taken to get on with the issue of whatever litigation was then contemplated to vindicate its position resulting from the supposed invalid cancellation of the contract. 

 

34.       It is trite that an interlocutory interdict may be refused if the applicant has delayed long before applying for it.  Whilst it was relatively swift in the launch of an urgent application,[15] it appeared however to have lost interest in pursuing such relief until the respondents forced their hand by enrolling the matter for hearing.  It also backed down on the strength of its case made out in the founding affidavit, adopting the best fallback position it could once the respondents had made known the basis for their opposition, almost acquiescing as it were in their contention that it had no case, and appearing reticent to prosecute the matter further.

 

35.       An application for an interim interdict pendente lite in its very nature requires maximum expedition from an applicant, who may forfeit the right to temporary relief if he delays unduly in bringing the interim proceedings to finality.[16]  This failure or undue delay on the applicant’s part to press on with the matter, which perhaps only occurred to them upon receipt of the respondents’ answering affidavit, is in my view a material factor that militates against granting the remedy of interim relief at this late stage.  Whilst I am appreciative of the losses which the applicant alleged it would suffer as a result of the termination under circumstances which probably fall to be reviewed under the prescripts of PAJA and which might be set aside on such review, the applicant has only itself to blame for not redressing the situation with more alacrity.

 

36.       This bring me to the last requirement for the grant of an interdict, namely that there is no other satisfactory remedy.  I may well have been the position at the time of the issue of the present application that the applicant was between a rock and a hard place, but that is no longer the case.  In the event of the termination being set aside in subsequent proceedings, the applicant can pursue a claim for damages, if not the remedy posited by section 8(1)(ii)(bb) of PAJA, assuming it succeeds in the review. 

 

37.         I return briefly to deal with the applicant’s possessory claim.  As I indicated above, its right of access to the web dispatch system was an incident of its network agreement with the first respondent.  To consider this right without regard to the underlying contract authorizing its conditional use of or access to the web dispatch system would simply be illogical.  Its possessory right stands or falls in my view by the validity or invalidity of the agreement, which has yet to be tested on review.  It is a personal right arising from that agreement. 

 

38.       An order for mandament van spolie under the circumstances would essentially entail an attempt, under the guise of that remedy, to resolve a contractual dispute and to effect the reinstatement of a contract which the first respondent was well within its contractual rights to cancel.  As indicated by Jones AJA in Telkom SA Ltd v Xsinet (Pty) Ltd,[17] this abuse of the relief has never been allowed under the mandament van spolie and there is no authority for the extension of the remedy under such circumstances.

 

39.       Further, accepting the first respondent’s version (as I must) that clause 5.2 of the agreement gave it the right to terminate with no cause (provided the requisite written notice was given), such termination could under these circumstances then hardly have operated against the applicant’s consent. 

 

40.       Additionally, the fact that the applicant may succeed in the review application to prove that the termination was invalid, upon which eventuality it might be set aside,  does not establish the requisite that the applicant was deprived of its possession wrongfully.  In this respect when an applicant seeks a spoliation order it is not sufficient for him to make out a prima facie case therefor.  He must prove the facts necessary to justify a final order.[18]  Whether the termination was valid or not cannot be established on these papers at this present time. 

 

41.       There is the further consideration.  The mandament van spolie was designed as a “speedy remedy”.  For the same reasons I have indicated above, the applicant simply failed to act with reasonable haste in seeking the spoliatory relief it hoped for.

 

42.       In the premises the applicant has failed to make out a case for the relief sought on either basis.  The costs occasioned on urgency, the application itself and those which were reserved by Lowe J on 30 August 2016 must in my view follow the unfortunate result.  I am not in agreement however that costs on the punitive scale are warranted.  The application would probably have fallen by the wayside but for the respondents’ insistence on enrolling it for hearing.

 

43.       In the result I issue the following order:

 

1.    The application is dismissed with costs, limited to the scale of party and party; and

 

2.    The costs referred to in prayer 1 are to include the reserved costs of 30 August 2016.

 

B   HARTLE

JUDGE OF THE HIGH COURT

 

DATE OF HEARING   :         7 September 2017

DATE OF JUDGMENT:        17 October 2017

 

Appearances:
For the applicant :	Mr. R Maniklal of Ravindra Maniklal & Company
	c/o Hutton & Cook,
	King William’s Town
	(ref. Mrs. Ravalla).
For the respondents :	Mr. K Ioulianou
Instructed by	Gildenhuys Malatji Inc. .
	c/o Squire Smith Laurie Inc.,
	King William’s Town,
	(ref. Mrs. Friderichs).

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