RedForce loses bid to block Sankwasa’s directive

Renthia Kaimbi

The High Court has ruled that urban and rural development minister James Sankwasa did not direct the municipality of Walvis Bay to terminate its RedForce Debt Management contract by 30 September, striking the company’s urgent application from the roll after finding that it had failed to establish urgency.

In a judgment delivered on 20 October, acting judge James Devittie said Sankwasa’s letter of 10 September instructed the council to act in accordance with the Attorney General’s legal opinion by the end of September, but did not expressly require the immediate cancellation of the five-year debt collection agreement.

The ruling leaves RedForce’s substantive challenge to the minister’s directive unresolved and places the focus back on the Walvis Bay council.

The judge ordered RedForce to pay the minister’s legal costs, including those of one instructing and one instructed legal practitioner.

“The applicant has failed to establish that the matter is urgent,” Devittie ruled.

RedForce had approached the court seeking an order declaring Sankwasa’s directive unlawful insofar as it required the termination, cancellation, suspension or cessation of the agreement.

It also sought an interdict preventing the municipality and its chief executive officer from implementing the directive.

The company argued that the minister’s letter effectively required the council to terminate the contract by 30 September, threatening its operations, employees and financial commitments before the court could consider the legality of the directive.

However, the judge found that the wording of the letter did not support that interpretation.

“In my view, it does not. The minister directed the Council to act in accordance with the Attorney-General’s legal opinion on or before 30 September 2026. He did not expressly direct the Council to terminate the agreement,” the judgment states.

Devittie further found that the Attorney General’s opinion did not recommend that the agreement be terminated immediately.

Instead, he said it concluded that the contract remained valid and binding on the municipality, despite irregularities in how it had been executed.

The opinion found that the agreement had not been co-signed by the chairperson of the management committee as required by Section 31A of the Local Authorities Act.

However, it concluded that the contract remained binding under the common-law Turquand rule, which allows an outsider dealing with an organisation in good faith to assume that its internal procedures have been followed.

“The Attorney-General did not direct the municipality to terminate the agreement. He merely expressed an opinion on the circumstances in which the municipality would be entitled to do so,” Devittie said.

The judge noted that the Attorney General had advised the municipality that it could invoke Section 63 of the Public Procurement Act to terminate the agreement if it could establish that continuing the contract was no longer in the public interest.

The opinion also addressed changes made to the contractual termination notice period after the procurement award, finding that post-award negotiations had contravened Section 55(2) of the Public Procurement Act because there was no indication that the minister had determined special circumstances permitting the negotiations.

Despite these concerns, the Attorney General concluded that the municipality was bound by the agreement and could terminate it only if the statutory requirements were met.

Devittie also pointed to clause 12 of the contract addendum, which provides for 180 business days’ written notice of termination and reimbursement of expenses incurred in performing the agreement.

“Even if the minister’s letter were construed as a direction to consider termination, it would not follow that the agreement was required to be terminated by 30 September 2026,” the judge ruled.

“This contractual framework contradicts the contention that the letter created an immediate threat of termination.”

The ruling follows a long-running dispute between RedForce and the municipality over the debt collection agreement, which was awarded to the company in July 2023 after a competitive procurement process.

The contract provides for a five-year term and a commission of 12%, plus value-added tax, on amounts recovered from defaulting debtor accounts.

The arrangement previously faced resistance from residents who complained about additional debt collection charges, while the council attempted to terminate the contract in April 2024.

RedForce challenged that termination, and the High Court blockedits implementation. The parties subsequently reached a settlement in September 2024, which was made an order of court and restored the agreement on its existing terms.

Sankwasa’s September directive renewed the dispute, raising concerns about the contract’s execution, additional charges imposed on residents and the conduct of councillors and municipal officials who defended the arrangement. The minister also called for a forensic investigation into the municipality’s affairs.

RedForce, however, argued that the minister lacked the legal authority to compel the council to cancel the agreement and that it had not been given an opportunity to respond before the directive was issued.

The company further maintained that its commission structure did not amount to doubling residents’ debts and warned that an abrupt termination would expose it to substantial financial losses and put jobs at risk.

The court did not determine the substantive legality of Sankwasa’s directive, nor did it finally decide the validity of the agreement or whether the municipality could terminate it.

The application was struck from the roll because the urgency requirements had not been met.

The judgment therefore leaves the parties to pursue the substantive dispute through the appropriate legal processes, while the municipality remains responsible for deciding how to proceed with the contract in accordance with the applicable law and contractual provisions.

The council announced on Thursday that RedForce had been reinstated following a different court ruling on Monday that temporarily blocked the termination of the contract.