Cape Metropolitan Council v Metro Inspection Services (Western Cape) CC and Others

• Jurisdiction: South Africa
• Judge: Hefer ACJ, Marais JA, Streicher JA, Cameron JA and Navsa JA
• Judgment Date: 30 March 2001
• Docket Number: 10/99
• Hearing Date: 01 March 2001
• Counsel: J A van der Westhuizen SC (with A M Breitenbach) for the appellant. J F Joubert SC (with F P Strydom) for the respondents.
• Court: Supreme Court of Appeal

Streicher JA:

[1] In the matter of Metro Inspection Services (Western Cape) CC and Others v Cape Metropolitan Council 1999 (4) SA 1184 (C) D the Cape Provincial Division ('the Court a quo') set aside a decision by the Cape Metropolitan Council ('the appellant') to terminate a contract with Metro Inspection Services (Western Cape) CC ('the first respondent') and reinstated the contract. The Court a quo also ordered the appellant to afford the first respondent or its nominated representative access to the written E information contained in certain documents, to furnish reasons for its decision and to pay the costs of the application. The reference in the Court a quo's order to the second respondent, Metro Inspection Services CC, was erroneous. With the leave of the Court a quo the appellant appeals against these decisions. In respect of the appeal against the setting aside of the appellant's F cancellation of the contract and the order that the appellant should furnish reasons for its decision to cancel the contract, the main issue to be decided is whether such cancellation constituted 'administrative action' within the meaning of that phrase in the Constitution of the Republic of South Africa Act 108 of 1996 ('the Constitution'). The G appeal against the order granting the first respondent access to certain written information turns on the application to the relevant facts of the provisions of s 32 of the Constitution.

[2] The appellant was, by Proc 18 of 1995 (WC), established as a H transitional metropolitan council in terms of the Local Government Transition Act 209 of 1993 ('the LGTA'). As such it is an 'organ of State' as defined in s 239 of the Constitution. It is thus, in terms of s 8 of the Constitution, subject to the provisions of the Bill of Rights in chap 2 of the Constitution. I

[3] In terms of s 7 of Proc 17 of 1995 (WC) the appellant became the successor in law of the Western Cape Regional Services Council within the metropolitan area defined in s 2 thereof and, during the currency of an agency arrangement referred to in s 6(2) of the proclamation, within the region of the Winelands Regional Services Council. All levies payable J

Streicher JA

to the Western Cape Regional Services Council became payable to the appellant and all other rights, powers A and privileges and all liabilities, duties and obligations of the Western Cape Regional Services Council vested in and devolved upon the appellant. As a result the appellant became obliged to levy and claim the regional services and regional establishment levies provided for in s 12 of the Regional Services Councils Act 109 of 1985. B

[4] A metropolitan council may in terms of s 10C(7)(a) of the LGTA enter into an agreement with any other person in terms of which that person undertakes, on behalf of the metropolitan council, to exercise a power or perform a duty which the metropolitan council may exercise or perform, subject to such conditions as may be agreed upon. During 1997 the appellant invited C tenders for the registration of people liable to pay a regional services or regional establishment levy and for the collection of arrear levies. Tenders by the second respondent and SDR Inspection Services CC (SDR) were successful in that each of them received an appointment for a specific area. The original appointment was for the D year 1997 but it was subsequently extended to the end of 1998. At the beginning of 1998 the appellant and the second respondent agreed that the first respondent be substituted for the second respondent.

[5] In terms of its contract with the appellant the first respondent was entitled to a commission in respect of arrear levies collected and also to an amount in respect of each new registration of E a levy payer.

[6] During about August or September 1998 the appellant prepared tender documentation to be released or published on 21 September 1998 with a view to making an appointment for the 1999 year. The first respondent understood the position to be that only one appointment, as opposed to the joint appointment of the first respondent and F SDR, would be made. In the event an invitation to tender was not published in September. At about that time SDR made allegations of irregularities on the part of the first respondent. One Karien du Plessis, who was associated with SDR, wrote to the appellant and made allegations to the effect that Metro had been overpaid by an amount of G approximately R1,4m in commissions. The appellant thereupon launched a full internal investigation, to be conducted by two internal auditors in its employ, of the claims which had been submitted by the first respondent.

[7] On 30 October 1998 the appellant summarily terminated the first respondent's appointment by letter, signed by Dr Fisher, the H chief executive officer of the appellant. The letter read as follows:

'Please take note that your agreement with the Cape Metropolitan Council in respect of the identification of non-paying levy payers and the collection of outstanding levies is terminated with immediate effect. I

This termination is due to your material breach of contract which involves substantial fraudulent claims, the full extent of which is still under investigation.

Please also note that no further payments will be made to yourselves and you are requested to return any property which Council may own.'

[8] On 4 November 1998 Dr Fisher released the following statement:

'Since 1996 the CMC has employed outside levy inspection contractors to J

Streicher JA

assist in the identification of business concerns that are not paying RSC levies to the Council, or who are in arrears with A their levy payments. These contractors are paid a commission based on any additional levy income accruing to the Council.

Around the end of September, allegations were made of possible irregularities in the commission claims of one of the levy inspection contractors. Possible staff complicity in the irregularities was also alleged. B

External forensic auditors were immediately appointed by the chief executive officer to investigate these allegations. This initial investigation substantiated the concerns, and further investigations continue.

Evidence arising from this investigation has resulted in two senior staff members being suspended from duty, pending further possible disciplinary action. In addition, the contractual arrangement with one levy inspection firm was summarily terminated on 30 October owing C to evidence of fraudulent claims for commission.

Further extensive internal and external investigations are continuing, and further action will be taken based on the results thereof. This will include criminal charges, where indicated, the recovery of any moneys that have been fraudulently obtained and severe disciplinary action against any staff member implicated. In the D meantime, control measures have been put in place to prevent any recurrence of this alleged fraud.'

The first respondent thereupon applied for the setting aside of the termination of its appointment on the ground that its 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 such termination. It contended E that the appellant should have made a full disclosure of the case upon which it proposed to act and should have given it a reasonable opportunity to state its case, by way of written or oral representations, before terminating its appointment. The first respondent also applied for an order that it be furnished with written reasons for the appellant's decision to terminate the F agreement; an order...