Republic of South Africa

IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)
CASE NO: 11480/11
Before: The Hon. Mr Justice Binns-Ward
In the matter between:
THE MEC FOR HEALTH

and

JUDGMENT DELIVERED: 13 JUNE 2011

BINNS-WARD J:

[1] In December 2005. the Provincial Government of the Western Cape, represented by the Head of the Province's Department of Health, concluded a written agreement with the respondent company in terms of which the latter was appointed by the former to establish and operate a chronic medication dispensing unit. The parties gave the deed of agreement in question the heading. 'Service Level Agreement'. It is convenient to refer to it as 'the SLA.
[2] The duration of the executory period of the contract was five years, which was extended by agreement to the end of July 2011.  The service provided by the respondent in terms of the SLA plays an important role in the efficient dispensing and provision of chronic medication to more than 160 000 patients throughout the Cape Town metropolitan area and the Winelands and West Coast regions of the Province. Now that the end of the contract period is nigh, the Department must provide in one way or another for a continuation of the service. To this end tenders were invited and received. The respondent is one of the parties which competed for the award of the new contract. The new contract was, however, awarded to a third party. The respondent has challenged that award in judicial review proceedings which are currently pending.

[4] The availability of the information on the chronic medication prescnptions in electronic form is essential to the efficient continuation of the service after the termination of the SLA at the end of next month. If the Department is not permitted to obtain the information in electronic format it will be required, if it is not to continue to avail of the services of the respondent, to create its own electronic date base. The expense that would be entailed in that exercise is estimated by the Head of Department to be in the region of R1.5 million. The respondent, on the other hand, points out that in order to provide the information stored on its electronic database in an electronic format that could be used intelligibly by the Department, it would need to manipulate the data to render it compatible with the obviously different software program on which the Department or any alternative service provider would wish to use the data. This would entail time, effort and expense by the respondent.
[5] The respondent concedes that the information on the hard copy scripts is the 'intellectual property' of the applicant. It maintains, however, that the work involved in capturing and encoding the information in a electronic database in a manner that enables its use compatibly with the specially modified software program referred to earlier results in the information in its electronically rendered format being the 'intellectual property' of the respondent. The applicant on the other hand contends that the information on the scripts in whatever format it might be held by the respondent is proprietary to the Department and that the Department is in consequence entitled to access to it. In the context of the special definition of the expression 'intellectual property' in clause 21 of the SLA, it is fortunately not necessary to consider the technical correctness of the use of the term in the given context. Both parties accept that the information on the prescriptions whether in hard copy or stored in an electronic database is 'intellectual property' within the meaning of that expression as it is used in clause 21 1 1 of the SLA.

[6]     Clause 21 of the SLA provides insofar as currently relevant;

21       INTELLECTUAL PROPERTY

21.2.........

[7] The facts and allegations just described provide the essential backdrop to the matter in dispute between the parlies which made the applicant, who is the Member of the Executive Council responsible for health, seek the following substantive relief:
2. Declaring clause 21.1.1 of Service Level Agreement concluded between the Applicant and Respondent, which only entitles the Applicant access to its own intellectual property (being the Applicant's patient scripts) on termination of the contract, and only after payment of all Fees due and owing, in both electronic and hard copy format, within 14 calendar days from the date of termination of the service level agreement, as being contrary to public policy and unenforceable.
3. Compelling the Respondent by no later than 10h00 on Saturday 11 June 2011 to:

3.2. Physically hand over all the hard copy scripts which had been provided to the Respondent subject to a mutually acceptable arrangement relating to scripts which may still be required for the purposes of dispensing of medication by the Respondent until 31 July 2011
[8] The respondent had tendered to provide the applicant with copies of the hard copy scripts before the institution of proceedings. The tender had been made subject to a condition the import of which had been misunderstood by the applicant and therefore regarded by him as unacceptable. In its answering papers the respondent clarified the meaning of the condition attached to its earlier tender and in the context of that explanation unequivocally and unconditionally stated its readiness to make copies of the hard copy scripts available to the applicant. In the replying affidavit, the Head of Department accepted the respondent's unconditional tender to provide the hard scripts. That development, as well as the manner in which the issues were considered and traversed in the course of argument, resulted in the applicant's counsel asking for an order in terms somewhat different from those presaged in the notice of motion. In terms of the draft order which I invited the applicant's counsel to hand in after the conclusion of argument, the substantive relief sought by the applicant is formulated as follows:
1. The Respondent shall allow the Applicant access to all information relating to prescriptions for the Applicant's patients who are recipients of chrontc medication, contained in the Respondent's computer system, to enable the Applicant to extract and copy such information in electronic format.
2. In accordance with the Respondents tender, the Repondent shall deliver to the Applicant all of the hard copy prescriptions for the Applicant's patients who are recipients of chronic medication, in its possession, subject to a mutually acceptable agreement being reached between the parties relating to prescriptions which may still be required for the purposes of the dispensing of medication by the Respondent until 31 July 2011;

[9] There is no realistic prospect that the judicial review application will be heard or determined before the end of July 2011 It thus appears probable that the applicant will be constrained to make interim arrangements in respect of the provision of the service until the disputes about the award of a replacement contract are resolved. The Head of Department candidly admits that the applicant's ability to obtain in electronic format the information held on the respondents electronic database will play an important role in any decision as to the nature of those interim arrangements. He does not deny the averments by the deponent to the respondent's answering affidavit that having regard to the 'extensive set-up costs' entailed, which could be incurred viably only against the opportunity of recovery during a long-term service provision contract, only the respondent or the competing tenderer to whom the replacement contract had been awarded in the tender process impugned in the review proceedings - which had already incurred set-up costs - could be viable contenders in the interim if the applicant were not in a position to furnish the interim service provider with a ready-created electronic database. The Head of Department concedes that a determination of the Department's claim to the right to the information on the respondent's electronic database is sought urgently in order to assist him in deciding the way forward
[10] The respondent contended on the papers that the application did not qualify for consideration and hearing as a matter of urgency. This contention was not pressed with any vigour by the respondent's counsel at the hearing, correctly so in my view. It does not count against the applicant that the Head of Department was engaged for a period of a few weeks in extracurial efforts to settle the disputes before the institution of proceedings. Attempts by parties to settle their differences, thereby also endeavouring to achieve an avoidance of an unnecessary imposition on the court's limited resources, should indeed generally be encouraged as a matter of policy. I also do not accept that there is any merit in the respondent's argument that the Department's right to press its alleged proprietary claim with any urgency is contingent upon a prior, and as yet unmade, decision by the Head of Department as to which service provider should be engaged to provide the service after 31 July 2011.

[11] The expenditure of a not insignificant sum of public funds is entailed in the decision that has to be made by the Department. It is therefore reasonable in the peculiar circumstances that the Head of Department should have certainty as to the existence and extent of the Department's rights to obtain the information electronically stored by the respondent to qualify him to make the decision responsibly. In the context of the dispute between the parties and the resulting exigencies, the Head of Department could not obtain the required determination of rights by litigation conducted in the ordinary course. I am thus satisfied that the applicant is entitled to the procedural relief sought in terms of rule 6(12) so as to be able to prosecute the application as one of urgency.

[14] Having carefully considered the provisions of the SLA read as a whole, albeit subject to the limitations following on the non-availability of the terms of reference and the respondent's proposal of 30 June 2005, I have concluded that the respondent's argument is correct.

[17] The SLA makes provision for a project team' headed by an appointee of the Department and comprised of representatives of both the Department and the respondent. The function of the team is to monitor and review the execution of the contract. The respondent is also required (in terms of clause 27 of the SLA) on notice to provide any person nominated by the Department with access to monitor the respondents performance in respect of the services rendered.

[18] It is striking, in the context of the detailed provision in the SLA for reporting by the respondent to the Department and for monitoring and access by the Department, that there is nothing in the terms of the agreement which provides that the respondent shall be obliged to provide, or the Department entitled to make a copy of its electronic database of prescriptions under administration for the purposes of the contract to the applicant The only circumstances expressed in the SLA in which the Department is given the right to access to information in the possession of the respondent, howsoever obtained, are those related to the monitoring or assistance of the execution of the contract, or for the making by the Department of reports to third parties in the discharge its statutory reporting obligations. There is nothing in the SLA. other than the provisions of clause 21.1.1, that provide that the applicant is entitled to the possession of the information in the hard copy scripts encoded in the respondent's database Clause 21.1.1 specifies the time at which any such entitlement accrues and the condition to which such accrual is subject. (The invocation by the applicant in his founding affidavit of the provisions of clause 14.1.2 of the SLA, which requires the respondent to keep records for a period of five years from the date of dispensing, either in hard copy or electronically, relating to medicines compounded and dispensed by it in theexecution of the contract does not assist him. That provision merely echoes one of the provisions in the 'Rules Relating to Good Pharmacy Practice' made by the South African Pharmacy Council in terms of s 35A(b)(ii) of the Pharmacy Act 53 of 1974 - in particular one of the prescribed 'Minimum Standards Relating Specifically to Institutional Pharmacies'. The provision creates a statutory obligation on the respondent, which clause 14.1.2 of the SLA merely confirms. Clause 14.1.2 does not afford the applicant the right to a copy of the electronic database compiled by the respondent for the purpose of carrying out its contractual obligations.)

[19] The Head of Department candidly confesses that the situation with which he is now confronted, in which it would be convenient for the Department to obtain the electronic database of prescriptions so as to give it a free hand in the appointment of a replacement service provider without having to incur the costs attendant on the creation of an electronic database, was not foreseen or provided for when the SLA was concluded. As mentioned, the applicant seeks to avoid the strictures of clause 21.1.1 by contending that the provision does not detract from the assertion of its proprietary right to the information during the executory period of the contract and. in the alternative, that the effect of the clause, if it is to deny the applicant the right to obtain the information during the executory period of the contract, is so inimical to the public interest that it should not be given legal effect. Both these contentions imply some degree of recognition that the terms of the SLA are of no assistance to the applicant. In my judgment neither of them can be upheld.
[20] The SLA contains a number of provisions in terms of which the respondent is afforded the use of the Department's property for the duration of the contract. The residual rights of access and monitoring retained by the Department in respect of this property are expressly spelled out in the agreement. The Department is not able to exercise vindicatory rights in respect of property that it has contractually given over to a third party, save to the extent that the relevant contract or the common law in the context of the given contract might otherwise provide or imply, as the case might be. The Department's contention that it should have access to the electronic database compiled by the respondent for the purposes of executing the contract so as to be able to copy it runs four square against the provisions of clause 21.1.1. The right of retention against payment of its fees afforded to the respondent in terms of that provision, whatever its purpose might be, would be rendered nugatory if the respondent were obliged, upon request, to make a copy of the 'intellectual property' in the form into which the respondent had rendered it available to the Department. The applicant's contention in respect of the meaning and effect of the clause in the context of the Department's alleged proprietary rights thus cannot be sustained. The applicant did not contend for the existence of any tacit term that would give the Department the right of access it contends for. Having regard to the cost and effort that the respondent avers would be entailed in rendering the electronic database available in intelligible format, it seems unlikely in any event that any contention for the existence of a tacit right could succeed.

[21] The contention that the clause is contrary to public policy cannot succeed because nothing about the provision prevents the Department from rendering the service concerned. Nothing in the clause defeats the Departments ability to retain or access the information that it makes available to the respondent when it gives over the hard copy scripts. There is nothing in the SLA which prevents the Department from retaining a copy of the scripts. The participating facilities, which in all cases are hospitals or clinics administered by the Department, receive a hard copy version of the script from the respondent together with every prescription that is dispensed and distributed by the respondent in terms of the SLA. That much follows from the provisions of clause 15.3.1 of the SLA

[23] The applicant's counsel asked that even if the respondent were successful - as it has been - in avoiding an order requiring it to make the electronic database available, an order should be made directing it to hand over the hard copy scripts in accordance with the unconditional tender to that effect which the applicant has accepted. The respondents counsel did not object to-such an order being made.

[25]   In the result the following order is made:

2. The application is otherwise dismissed with costs, including the costs of two counsel.

				Judge of the High Court