New Clicks South Africa (Pty) Ltd v Tshabalala-Msimang and Another NNO; Pharmaceutical Society of South Africa and Others v Tshabalala-Msimang and Another NNO 2005 (2) SA 530 (C) is an important case in South African administrative law. However, note that this case went on appeal, first to the Supreme Court of Appeal and thereafter to the Constitutional Court, where the various judgments of Chaskalson, Ngcobo, Sachs, Moseneke and others had far-reaching effects on administrative law in South Africa. This article discusses the first hearing of this matter in the Cape Provincial Division. The final judgment is listed on SAFLII as Minister of Health and Another v New Clicks South Africa (Pty) Ltd and Others (CCT 59/2004) ZACC 14.
Facts The applicants sought the review and setting aside of a recommendation made by the Pricing Committee, and of regulations made pursuant to the Medicines and Related Substances Act.Act 101 of 1965. The regulations dealt with a new pricing system for medicines in South Africa, as well as dispensing fees and wholesale pricing. The Pricing Committee had taken representations on behalf of interested parties. After this process, it made recommendations to the first respondent in the form of draft regulations. These were then published as final regulations.
Judgment The first question before the court was whether or not the conduct of the Pricing Committee constituted administrative action. Yekiso J, for the majority, began his analysis as follows:
For the conduct of the Pricing Committee to constitute an administrative action as against the applicants, there ought to exist an administrative law relationship based on authoritative power. This relationship encompasses an element of subordination on the object of such administrative law relationship which, in the instance of these proceedings, ought to be the applicants. Use of the authoritative power presupposes the administrative law relationship between the organ of state, as the subject of the administrative law relationship and the object, which could either be an individual or a group of individuals as the objects of such relationship.Para 30.Footnote omitted.
Yekiso J then referred to section 33 of the Constitution and the definition section of the Promotion of Administrative Justice Act (PAJA) and continued as follows:
In terms of this definition conduct, in order to constitute administrative action as defined, has to have a direct, external legal effect and has to adversely affect rights of the individual or a group. On the face of it, it would appear that the definition of administrative action in section 1 of the Promotion of Administrative Justice Act limits the scope of administrative action in section 33 of the Constitution. Whether such limitation conforms to the requirements of the limitation clause in section 36 of the Constitution and thus passes muster, does not call for determination in these proceedings. From this definition, the following elements of the term administrative action emerge, namely: * a decision * that is of an administrative nature * made in terms of the empowering provision * that is not specifically excluded by the Act * that adversely affects rights and * that has a direct, external legal effect. For the conduct of the Pricing Committee to be subject to review in terms of section 6 of the Promotion of Administrative Justice Act it has to embody all the elements enumerated in the preceding paragraph failing which the conduct complained of cannot be subject to review in terms of the Promotion of Just Administrative Act. If the conduct of the Pricing Committee does not fall within the ambit of the definition of administrative action contained in section 1 of the Promotion of Administrative Justice Act, the issue which will then call for determination is whether the conduct of the Pricing Committee is beyond judicial review. All these issues will be determined in the course of this judgment. To revert to the Pricing Committee, it will be recalled that it is a committee that was appointed and established in terms of section 22G(1) of the Act. Its mandate was to formulate recommendations which, if accepted, would enable the first respondent to make regulations relating to the introduction of a transparent pricing system for all medicines and Scheduled substances sold in the Republic and, on an appropriate dispensing fee to be charged by a pharmacist or by a person licensed in terms of section 22G(1)(a) of the Act. In line with its mandate the committee did formulate the required recommendations which it submitted to the first respondent for acceptance. It was for the first respondent to either accept or reject the recommendations as formulated. It is these recommendations which are the subject of a challenge by the applicants on the basis that the conduct of the Pricing Committee, in going about fulfilling its functions in the formulation of the recommendations, constitutes an administrative action within the meaning of the term as contemplated in section 1 of the Promotion of Just Administrative Act. For the conduct of the Pricing Committee to constitute an administrative action within the meaning of that term in terms of the Promotion of Administrative Justice Act, not only should it fall within the ambit of that definition, but, at the very least, it will have to contain those elements I have set out in paragraph of this judgment. The most important of these elements are, in my view, that the recommendations should adversely affect rights and should have a direct external legal effect. I venture to suggest at this stage that such conduct or action should affect the rights of the person concerned directly rather than indirectly. Once the recommendations were formulated and submitted to the first respondent for acceptance, at that stage, that is prior to acceptance thereof by the first respondent, they did not affect any one of the applicants' existing rights or legitimate expectations directly. Such recommendations did not have any force or effect on any one of the applicants. These were mere recommendations. They were not binding on the applicants and thus could not be construed as having had any direct, external legal effect. The applicants did not feel any effect of the recommendations. The recommendations, prior to the acceptance thereof by the first respondent, did not impose any burden on the applicants nor did they, at that stage, remove rights from any one of the applicants. Even if one were to accept that the Pricing Committee is an organ of state, in my view, it can hardly be conceivable that the formulation of the recommendations which can only have a final effect once promulgated into regulation could be said to constitute exercise of public power. The direct, legal effect contemplated in the definition of administrative action cannot be conditional, in the sense of pending acceptance by the first respondent. In my view, and on the grounds set out in this and the preceding paragraph alone, the conduct and the activities of the Pricing Committee can hardly be construed as constituting an administrative action nor do such activities fall within the ambit of the definition of administrative action as defined in section 1 of the Promotion of Administrative Justice Act. Furthermore, for the activities of the Pricing Committee to constitute administrative action, such conduct, in terms of the definition of administrative action, should have, in as far as the applicants are concerned, a "direct legal effect." For any action to have a direct effect, it obviously must affect the person concerned directly rather than indirectly. Some writers, in particular, de Ville are of the view that direct effect requires finality in the administration of rights, which would exclude preliminary steps in multi-staged decisions. This would include the making of reports prior to decisions and any conduct preparatory to the taking of a decision. As regards the term legal effect, what this in my view would entail to is that the administrative action or decision must be a legally binding determination of individual rights. In other words, the recommendations, to constitute an administrative action, must either establish, change or withdraw existing rights. The recommendations of the Committee do not have any of these attributes. The principles of administrative justice apply to administrative action only and the Committee's recommendations fall short of this. To the extent that the applicants seek to have the recommendations to be reviewed and set aside in terms of the provisions of the Promotion of Administrative Justice Act, the applicants' challenge on this ground cannot succeed for the simple reason that the conduct of the Committee, culminating in the recommendations, does not constitute an administrative action within the meaning of the Promotion of Administrative Justice Act.Paras 34-43.
Having found, however, that the recommendation could not be reviewed in terms of PAJA, Yekiso J held that the recommendation was nevertheless reviewable in terms of the common law and section 33 of the Constitution.Para 44. He then turned to consider whether the passing of the regulations themselves fell under the definition section of the PAJA:
The making of regulations, which clearly is a legislative administrative action, as against judicial and pure administrative action, is not specifically referred to in the definition of the term "decision" in section 1 of the Promotion of Administrative Justice Act. Could it therefore be said that "rule making" was deliberately left out of the definition of the term "decision" and if so, whether it was the intention of the legislature not to include "rule making" in the definition of administrative action? The making of regulations, the subsequent promulgation and the enforcement of such regulations govern the general administrative law relationship as against the individual administrative law relationship. The former is what would constitute "administrative action affecting the public" as contemplated in section 4 of the Promotion of Administrative Justice Act. This obviously would entail the making and promulgation of such regulation by following the procedure as provided for in section 4(1) of the Promotion of Administrative Justice Act. Following the procedure as laid down in section 4(1) of the Promotion of Administrative Justice Act would obviously be preceded by a decision to follow that procedure. A decision to follow that procedure would constitute a decision taken in terms of section 4(1) of the Promotion of Administrative Justice Act. Now, the taking of a decision or failure to take a decision in terms of section 4(1) has been specifically excluded from the definition of the administrative action. Could it be that the omission to refer to legislative administrative action in the definition of the term "decision" in section 1, and the specific exclusion of taking a decision or failure to take a decision in terms of section 4(1), is a pointer or an indication of an intention to exclude "rule making" from the ambit of administrative action? In my view the legislature could not have intended otherwise. In short, my view is that it was not the intention of the legislature to include rule making in the definition of and in the ambit of administrative action as defined in section 1 of the Promotion of Administrative Justice Act. To the extent that rule making could be construed as the implementation of national legislation as contemplated in section 85(2)(a) of the Constitution, the latter section of the Constitution provides "in implementing national legislation except where the Constitution or an Act of Parliament provides otherwise". In the instance of this matter the Promotion of Administrative Justice Act, which is an Act of Parliament, provides otherwise.