Kirland Investment (Pty) Ltd t/a Eye & Lazer Institute v MEC for Health, Province of Eastern Cape NO and Others (870/09) [2011] ZAECGHC 78 (15 December 2011)

IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE HIGH COURT, GRAHAMSTOWN)

CASE NO: 870/09

Heard on: 3 February 2011

Delivered on: 15 December 2011

In the matter between:

KIRLAND INVESTMENTS (PTY) LTD t/a EYE &

LAZER INSTITUTE …............................................................................APPLICANT

and

THE HONOURABLE MEMBER OF THE EXECUTIVE

COUNCIL FOR HEALTH, PROVINCE OF THE EASTERN

CAPE NO …............................................................................FIRST RESPONDENT

THE SUPERINTENDENT-GENERAL FOR

HEALTH-EASTERN CAPE PROVINCE NO ….................SECOND RESPONDENT

DIRECTOR-GENERAL OF THE DEPARTMENT

OF HEALTH-EASTERN CAPE PROVINCE …......................THIRD RESPONDENT

JUDGMENT

Makaula J:

A. Introduction:

[1] This is an application for the review of a decision taken by the first and second respondents (the respondents). The order sought in terms of the notice of motion reads as follows:

“1. That the decision of the First Respondent taken on 16 October 2008 (received on 20 October 2008) to uphold the prior decision of Second Respondent of 20 June 2008, in terms whereof the Second Respondent withdrew the decision of the Acting Superintendent-General of 23 October 2007 approving Applicants’ applications for private hospitals in Port Elizabeth and Jeffrey’s Bay, be reviewed and set aside;

2. That the decision of the Second Respondent of 20 June 2008 (received on 16 July 2008) purporting to withdraw the Acting Superintendent-General’s

decision of 23 October 2007 is, insofar as may be necessary, reviewed and set aside;

3. Insofar as may be necessary, that the purported alleged decision of the Second Respondent of 9 October 2007, purportedly refusing Applicants’ hospital applications, be reviewed and set aside;

4. Substituting the decision of this Honourable Court for the decision of the First Respondent, and insofar as may be necessary for the decisions of the Second Respondent with an order that the Acting Superintendent-General’s decision of 23 October 2007 be confirmed;

5. Alternatively to paragraph 4 above, that the matter be referred back to the First and/or Second Respondents as may be appropriate for a further decision;

6. That the First and Second Respondents, together with Third Respondent in the event that Third Respondent should oppose this application, pay the costs of this application, the one paying the other to be absolved, such costs to include the costs of two Counsel;

7. Further and/or alternative relief.”

B. The Parties:

[2] The applicant is Kirland Investments (Pty) Ltd at all times material hereto t/a Eye & Lazer Institute, a company with limited liability registered in accordance with the laws of the Republic of South Africa with its main place of business and registered head office at 205 Cape Road, Mill Park, Port Elizabeth, also doing business at Jeffrey’s Bay, Uitenhage, Graaff Reinet, Cradock and Grahamstown.

[3] The first respondent is The Member of the Executive Council for Health of the Province of the Eastern Cape, nominee officio, of the Government Buildings, Bhisho (hereinafter referred to as the “MEC”).

[4] The second respondent is The Superintendent-General for Health, Eastern Cape Province, nominee officio, of Government Buildings, Bhisho, 5th Floor, Dukumbana Building, Independence Avenue (hereinafter referred to as the SG). The second respondent is cited in his capacity as Head of the Department of Health, Eastern Cape Province, in terms of the provisions of the Health Act No 66 of 1977 (“the Act”), the Health Act having been assigned to the Province by Proclamation Number R152 of 1994, the second respondent being thereby the assigned Head of Department referred to in the Act and its regulations.

[5] The third respondent is the Director-General for Health, Eastern Cape Province, of Government Buildings, Bhisho, 5th Floor, Dukumbana Building, Independence Avenue (hereinafter referred to as DG).

B. Background facts:

[6] This application concerns two applications by the applicant to the second respondent for the establishment of a private hospital consisting of 120 beds in Port Elizabeth and a hospital consisting of 20 beds and an unattached-operating theatre in Jeffrey’s Bay. The applications were submitted on 11 July 2006 and 15 May 2007 respectively. The SG on 9 October 2007 considered and rejected the applications by the applicant basing that on the recommendations of the Advisory Committee on Licensing of Private Hospitals (the committee). He tasked the Secretariat to the committee to inform amongst others, the applicant of the decision to reject the applications. Unfortunately that was not done because the only member of the committee was on extended leave. However the letter of refusal had been typed but neither signed nor later despatched to the applicant. On 11 October 2007 the SG was involved in an accident and was on sick leave for six weeks. That necessitated for the appointed of an Acting Superintendent General (ASG). On 23 October 2007 the ASG penned a letter to the applicant approving the applications. She claimed that she approved the applications because she received direct instructions from the first respondent to approve them in spite of her knowledge of the refusal by the SG. On 20 June 2008 the SG withdrew the approval by the ASG of the applications. The relevant portion of the letter reads:

“I regret to inform you that the Department has withdrawn the approval. I point out that on 9 October 2007 and after I had considered all applications, I decided to refuse the application because Port Elizabeth is over serviced with private health facilities.”

[7] The applicant lodged an internal appeal which was refused on 16 October 2008 by the first respondent.

C. Applicant’s case:

[8] In a nutshell, the applicant seeks a review of four decisions taken (a) the SG’s decision of 9 October 2007 refusing the establishment applications (the refusal); (b) the ASG’s decision of 23 October 2007 approving the establishment application (the approval); (c) the SG’s decision of 20 June 2008 withdrawing the approval (the withdrawal) and (d) the first respondent’s decision of 16 October 2008 dismissing the applicant’s appeal against the withdrawal (the dismissal).

[9] Mr Rose-Innes, counsel for the applicant, succinctly summarised the argument by the applicant in his heads as follows:

The refusal did not constitute a final decision, as it did not amount to an actual exercise of the power in terms of Regulation 7, in contradistinction to the subsequent approval in writing by the same authority. The authority was therefore not precluded from granting approval.

Upon the approval, the authority therefore became functus officio, rendering both the withdrawal and dismissal invalid. Their invalidity cannot be cured by the alleged flaws of the approval.

The withdrawal (and dismissal) constitute administrative action which is to be set aside on certain review grounds, including that the authority had no power to withdraw the approval, that it was procedurally unfair and that it was influenced by errors of law.

The refusal is to be set aside on certain review grounds, including that it was procedurally unfair and grounds relating to unreasonableness, irrationality, taking into account irrelevant considerations and mistaken facts.

[10] In substantiation of the latter aspect, Mr Rose-Innes submitted that the refusal was a decision made unreasonably, irrationally, without taking into account relevant considerations and by relying on mistaken facts which he articulated as follows:

The decision was based on substantially outdated and consequently inaccurate population figures;

The drainage areas of the Metropol and Jeffrey’s Bay (“the two centres”) respectively were disregarded;

An unfounded and inadequate ratio of 1 bed per 1000 of the population was used in respect of public and private hospitals combined.

[11] In amplification the applicant made the following submissions in arguing the irrational and unreasonableness of the SG’s decision to accept the recommendations by the committee;

The Committee’s rationale for disregarding drainage population is its allegation that it is very difficult to determine such area and its population. That, however, can never warrant its complete disregard.

Moreover, in their applications both Applicant (record 98) and another applicant (“Phodiso”) (record 115 par. 1.4) address the drainage factor and its determination.

Once again an expert such as Simkins could readily have assisted the Committee with the necessary estimates, as he had done in his report (based on figures which had been available at the time of the Committee’s meeting).

The Committee had regard to the Service Transformation Plan of July 2007 (“the STP”). The STP itself (record 250-1) contains norms in respect of drainage, with reference to travel time to a hospital.

In the circumstances the Committee’s complete disregard of drainage area population is irrational and amounts to an intentional disregard of a highly relevant consideration.

D. Respondents’ case:

[12] The respondents opposed the application on the basis that (a) the SG’s decision to refuse the applicant’s application was properly taken, (b) the ASG could not, under the circumstances take a contrary decision and (c) there is no merit in the application.

[13] The respondents submitted that the decision to refuse the application should be considered against this background.

The Provincial Department has created a designated advisory committee to make recommendations to the Superintendent-General who is required, ultimately, to approve or refuse the applications.

The advisory committee, in turn, develop norms and standards against which to measure and consider applications.

These norms and standards had, in turn, their origin in norms and standards prepared at national level after an in depth consultative process.

In short a rational and carefully considered policy was applied to the receipt of and consideration of applications.

It is trite law, under such circumstances, the courts will not, usually, attribute to themselves, superior wisdom in relation to matters entrusted to other branches of government, more particularly where decisions have to be taken requiring special expertise and experience and where competing interests are involved. The leading judgement is of course Bato Star (Pty) Ltd v Minister of Environmental Affairs [2004] ZACC 15; 2004 (4) SA 490 (CC) at paragraph [48]. See also Administrative Law in South Africa – Cora Hoekster at 142 ff.

[14] Mr Buchanan, counsel for the respondents, submitted in his heads of argument that the policy was carefully considered having taken into account the broader interests of both the public, and the private and public health sectors. He submitted that the Department has set out in some detail the correct population figures and the correct number of beds and suggested that the policy was not inflexibly or mathematically applied. He further submitted that even if different figures were used, as is the case with the applicant’s contention, the end result would have been the same. He argued that the basic and accepted requirements contained in Promotion of Administrative to Justice Act, No 3 of 2000 (PAJA) for setting aside such administrative decisions are not present in this matter because the decision maker did not act capriciously, irrationally or unlawfully.

[15] Mr Buchanan further argued that the decision by the first respondent to influence the award was unlawful and improper and the ASG carried out an unlawful and improper instruction without applying her mind to the requirements of the underlying statutory and regulatory regime with the full knowledge that a prior contrary decision had been taken by the SG. He therefore, submitted that the award itself was patently unlawful and improper and thus cannot be clothed with legal efficacy because that would be absurd. He argued that no court would grant an order as sought by the applicant setting aside a patently unlawful and improper decision. He further argued that the decision by the ASG was specifically taken to render the decision of the SG nugatory. He submitted that there was no need for any court to set aside the decision by the ASG, it would suffice if it could just be disregarded. He argued that a void decision is a nullity whether or not anyone (such as the applicant) was prejudiced thereby.

[16] He submitted that the refusal was made 3 years before and that any decision I may take would affect the present situation regarding private beds in the Port Elizabeth and Jeffrey’s Bay areas because the position presently is not before me.

[17] He argued in the alternative that in the event I grant the relief and set aside the SG’s decision, then I should not act in terms of Section 8 (1) (c) (ii) (aa) of PAJA by substituting or varying the administrative action or correct a defect resulting from the administrative action. He submitted that exceptional circumstances do not exist for me to do so.

E. Analysis;

[18] Section 1 (1) of PAJA defines an administrative action as follows:

“any decision taken, or any failure to take a decision, by –

an organ of state, when -

exercising a power in terms of the Constitution or a provincial

constitution; or

exercising a public power or performing a public function in terms of

any legislation; or

a natural or juristic person, other than an organ of state, when exercising a public power or performing a public function in terms of an empowering provision, which adversely affects the rights of any person and which has a direct, external legal effect. . . .” (My underlining)

[19] It is clear from the facts at hand that the second respondent is an organ of state which exercised a public power in terms of the enabling legislation. The other leg to the definition is that it must be an administrative action “which adversely affects the rights of any person and which has a direct, external legal effect.”1

[20] Furthermore, the relevant provision in sub-section 2 of Regulation 7 stipulates that;

“(i) Any person intending to establish a private hospital or an unattached operating-theatre shall first obtain permission in writing from the Head of Department, who, after consultation with the Director, shall satisfy himself as to the necessity or otherwise for such a private hospital or unattached operating-theatre unit before granting or refusing permission.

(ii) Having obtained such permission, the applicant shall complete Form I (Annexure B) and submit plans for approval by the Head of Department, together with the necessary information, and shall supply any additional information which the Head of Department may require.”2

[21] It is common cause that the refusal was never communicated to the applicant at any stage until when the SG purported to withdraw the approval. It is further common cause, or else not disputed by the respondents, that when the decision to refuse was taken by the SG, he had regard to the recommendations of the Advisory Committee. It appears, ex facie the papers, that he signed off the memorandum dated 5 October 2007 endorsing the recommendations thus refusing the applications by

the applicant. What remained was the despatch of the letter communicating such refusal as stated above. It is my finding that the

failure to communicate the decision by the SG flouted the provisions of Regulation 7 which required that a written permission (by implication written refusal) to operate a private hospital or an unattached operating theatre be obtained from the Head of Department i.e. the SG or ASG for that matter. It was neither a reviewable administrative action in terms of PAJA because such a decision did not adversely affect applicant’s rights nor had direct external legal effects on the applicant. It is therefore not necessary for me to determine whether the refusal should be set aside on the basis of procedural unfairness and grounds relating to unreasonableness, irrationality etc, referred to in paragraphs 11, 13 and 14 above.

[22] Before I proceed to determine the approval and withdrawal of the applications, it is apposite that I should first deal with the argument proffered by Mr Rose-Innes with regard to whether the decision to approve the applications or not attaches to the office of the SG or to the SG solely. Regulation 7 stipulates that “Any person . . . shall first obtain permission in writing from the Head of Department, . . .” The Head of Department in this instance is the SG. The refusal was made by the SG whereas the approval was decided by the ASG who was the incumbent at the time. A question therefore, that presents itself is whether the ASG had the same powers as the SG when she approved the applications. It stands to reason that the ASG when taking decisions as such, did so in the same capacity as the SG. Her decisions as an incumbent, have the same legal effect as those taken by the SG for the reason that the powers to take such a decision are attached to the office and not the incumbent. I do not understand the argument by Mr Buchanan to be the contrary. What Mr Buchanan argued is that the instructions by the first respondent to the ASG to approve the applications were improper and unlawful, more so that the ASG had been aware that the SG did not approve them. He argued that the SG had all the reasons to ignore it by confirming the refusal.

[23] It is not doubted that when the ASG made the decision to approve the applications, she did so by virtue of being the Head of the Department of Health. The decision she made was communicated in writing to the applicant with all its legal effects. That to me was a valid decision which falls squarely within the definition of an administrative action and which was in full compliance with the provisions of Regulation 7. The actions of the SG by withdrawing the approval amounted to its revocation. The respondents have not been able to refer me to any provision in the regulations or any applicable legislation which granted them such power to revoke the approval. The respondents, further did not establish that by so acting, the ASG acted ultra vires her powers. The respondents failed to prove that the approval was either obtained fraudulently or that it was prejudiced thereby.3 It falls to reason therefore, that once the ASG made the decision to approve, as the Head of the Department, the SG became functus officio and could not revisit that decision.4

[24] I agree with the principle highlighted by Mr Rose-Innes that where a power is conferred on the holder of an office, a particular incumbent can render the office functus officio, irrespective of the fact that the office may later be held by a different person. The decisions by different incumbents remain decisions by the same authority. See: Holden v Minister of The Interior5 where Millin J held at 103G-H;

“It is, of course, a purely fortuitous and irrelevant circumstance that in the history of this case different persons were clothed at material times with the office of the Minister of the Interior. I am of opinion that, whether the act of Mr. Lawrence is regarded as an exemption under sec. 25 (1) or a revocation or annulment of the deeming order made by Mr, Clarkson, the Minister of the Interior,

whoever he might be thereafter, was functus officio so far as the appellant’s position under sec. 4 (1) (a) is concerned.”

[25] Section 10 (2) of the Interpretation Act 33 of 1957 provides as follows;

“Where a law confers a power, jurisdiction or right, or imposes a duty on the holder of an office as such, then, unless the contrary intention appears, the power, jurisdiction or right may be exercised and the duty shall be performed from time to time by the holder for the time being of the office or by the person lawfully acting in the capacity of such holder.”

[26] Mr Rose-Innes, correctly in my view, submitted that even if the respondents had some authority to revoke the approval, the respondents failed to follow the procedural requirements of Section 3 (2) (b) of PAJA. Section 3 (1) of PAJA requires that any administrative action which affects the rights of a person should be procedurally fair. Section 3 (2) (b) requires that in order to give effect to the right to procedurally fair administrative action, an administrator must give a person (a) adequate notice of the nature and purpose of the proposed administrative action, (b) a reasonable opportunity to make representation, (c) a clear statement of the administrative action, (d) adequate notice of any right of review or internal appeal where applicable, and (e) adequate notice of the right to request reasons for such an administrative action. The respondents did not comply with any of these requirements when it decided to withdraw the approval. Having found that the act of withdrawal of the approval constituted an administrative action, the inevitable conclusion I have to arrive at, is that the procedure followed in withdrawing the approval has not been fair.6 It is my finding that the withdrawal of the approval stands to be set aside as being procedurally unfair in terms of Section 6 (2) (c) of PAJA.

[27] Mr Buchanan, correctly in my view submitted that the decision of the ASG to approve stands to be reviewed and set aside. This is so because the following is clear from the facts (a) that the SG had made a determination based on the recommendations of the committee to refuse the application even though that was not communicated to the applicants, a fact of which the ASG was aware of; (b) that she did not use her discretion properly when she took the decision to approve the applications because of the influence and pressure exerted by the first respondent on her at the time she considered the applications. Having regard to these facts and others referred to, I am of the view that the approval by the ASG stands to be reviewed and set aside.

[28] To me it appears that the decision by the first respondent to dismiss the appeal amounts to an administrative decision because as correctly submitted by Mr Rose-Innes, the consideration of the appeal is based squarely on the administrative action taken by the second respondent to withdraw the approval. If I am correct in that finding, it follows that the dismissal stands to be reviewed in terms of Section 6 (2) (d) of PAJA. Section 6 (2)(d) provides that:

“2. A court or tribunal has the power to judicially review an administrative action if –

.

The action was materially influenced by an error of law;”

[29] In deciding to dismiss the appeal, the MEC found inter alia that;

(a) (In respect of the refusal) The proper functionary had already taken a proper decision at the time when the Acting Superintendent General took a contradictory decision;

(b) It is clear from the above that the Superintendent-General did not withdraw his own decision. He withdrew the decision of the Acting Superintendent General which could and should not have been taken under the above circumstances. With respect, your contention that the Superintendent General was functus officio is based on a wrong premise. In my view the SG was within his right to withdraw the ASG’s decision.

(c) Regarding paragraph 20.4 of your client’s grounds of appeal, I point out that when it came to the attention of the SG that his decision had been altered for no apparent reason, he had to act. He decided to withdraw a decision that should never have been taken. A hearing to you at that stage would not have made any difference to the decision made by the SG. In any event, I have now considered all your grounds of appeal.”

[30] If regard is had to the discussions above, it is apparent from the excerpts that the first respondent’s reasons to dismiss the appeal are errors of law. I therefore find that even the dismissal of the appeal stands to be reviewed and set aside.

Consequently, I make the following order:

1. That the decision of the Acting Superintendent-General dated 23 October 2007 approving the applicant’s applications for private hospitals and unattached-operating theatres in the Port Elizabeth and Jeffrey’s Bay is reviewed and set aside;

2. That the decision of the second respondent of 20 June 2008 withdrawing the Acting Superintendent-General’s decision of 23 October 2007 is reviewed and set aside;

3. That the decision of the first respondent taken on 16 October 2008 to uphold the prior decision of second respondent of 20 June 2008, in terms whereof the second respondent withdrew the decision of the Acting Superintendent-General dated 23 October 2007 approving applicant’s applications for private hospitals in Port Elizabeth and Jeffrey’s Bay, is reviewed and set aside;

4. That the applicant’s applications for establishment of private hospitals and unattached-operating theatres in Port Elizabeth and Jeffrey’s Bay are remitted to the second respondent for reconsideration;

5. That the first and second respondents are directed to pay the costs of this application, the one paying the other to be absolved.

_________________________

M MAKAULA

JUDGE OF THE HIGH COURT

Counsel for the Applicant: Adv Rose-Innes SC

Adv Du Toit

Attorneys for the Applicant: Whitesides Attorneys

53 African Street

GRAHAMSTOWN

Counsel for the Respondents: Adv Buchanan SC

Adv Bloem SC

Attorneys for the respondents: Wheeldon Rushmere & Cole Attorneys

119 High Street

1De Ville: Judicial Review of Administrative Action in South Africa p 55-58

2(Updated) Regulations Governing Private Hospitals and Unattached Operating Theatre Units published under Government Notice No R158 of 1 February 1980 as amended by Government Notice No R696 of 3 April 1980 Government Notice No R2687 of 16 November 1990; Government Notice No R434 of 19 March 1993

3Bronkhorstspruit Liquor Licensing Board v Rayton Bottle Store (Pty) Ltd & Another 1950 (3) SA 598, (T) at pp 601 to 602

4See also: Thompson t/a Maharaj & Sons v Chief Constable, Durban 1965 (4) SA 662 (D) at 668 D-E

51952 (1) SA 98 (T) 103 G-H

6Maleka v Health Professions Council of South Africa & Another [2005] 4 ALL SA 72 (E); Magingxa v National Commissioner, South African Police Service & Others 2003 (4) SA 101 (Tk)