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[2012] ZANCT 16
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Matjokana v National Credit Regulator (NCT/2636/2011/56(1)(P)) [2012] ZANCT 16 (30 July 2012)
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IN THE NATIONAL CONSUMER TRIBUNAL
HELD IN CENTURION
CASE No: NCT/2636/2011/56(1)(P)
DATE:30/07/2012
In the matter between:
Nyiko Reginald Matjokana....................................................................................APPLICANT
and
National Credit Regulator......................................................................................RESPONDENT
Coram:
Ms D Terblanche (Chairperson of the Tribunal) - Presiding member
Prof T Woker - Member
Prof J Maseko - Member
Judgment and Reasons
The Applicant is Mr. Nyiko Reginald Matjokana (Applicant), an adult male registered as debt counsellor with the Respondent. Mr TC Mashile from Ngwenya Attorneys represented the Applicant.
The Respondent is the National Credit Regulator (Respondent), established in terms of section 12 of the National Credit Act, Act 34 of 2005 (the Act). Mr Arno Bosch, legal advisor of the Respondent, represented the Respondent.
The Applicant brought an application to the National Consumer Tribunal (the Tribunal) to review a Compliance Notice issued against him by the Respondent.
The Compliance Notice was issued on 8 July 2011 in terms of section 55(1) of the Act and served on the Applicant on or about 8 July 2011.
The Respondent, after conducting an investigation into the business of the Applicant during the period from 2009 to 2010, found that the Applicant has failed to comply with the provisions of the Act and/or conditions of his registration and accordingly issued a compliance notice to the Applicant in order to address the areas of alleged non-compliance (“the first compliance notice”) on 26 April 2010 (“first compliance notice”). That compliance notice was set aside by the Tribunal on 7 October 2011. The decision was based on the Tribunal’s findings that the Compliance Notice did not comply with the provisions of section 55 of the National Credit Act.
On 14 July 2010 the Respondent allegedly instructed a Mr. Russell Willoughby to launch an investigation into the Applicant’s conduct of his debt counseling practice. This followed upon allegations by a certain Ms. Sweke, the Applicant’s past landlord, that the Applicant’s offices had been abandoned and further alleging that she found numerous client files of the Applicant at the abandoned premises.
The investigation was conducted during the period from 14 July 2010 to 17 November 2010. During this investigation, Mr. Willoughby made copies of 51 debt review files of clients of the Applicant’s Benoni Offices.
Resulting from this investigation the Respondent proceeded to have a compliance notice issued against the Applicant on 08 July 2011 (“second compliance notice”). Subsequent to the issuance of the second compliance notice the Applicant addressed correspondence to the Respondent to resolve the issues he identified with the compliance notice. Copies of the correspondence and the responses thereto are annexed to the Founding Affidavit. The parties also eventually met on 04 August 2011 in an attempt to have the matter resolved.
The parties were unable to resolve the issues addressed in such compliance notice and this application was accordingly brought before the Tribunal on 29 August 2011.
Both parties brought condonation applications to the Tribunal - Applicant for the late fling of the Application and the Respondent for the late filing of the answering affidavit. Both applications for condonation were granted by the Tribunal, and the parties were issued with the orders granting condonation and the reasons therefore on the day of the hearing.
At the hearing of the matter Applicant submitted that the compliance notice does not comply with the provisions of the Act. The Applicant submitted that the compliance notice is ambiguous, vague, and embarrassing in that the Regulator failed to set out the nature and extent of non-compliance, the steps to be taken by the Applicant to become compliant and the penalty that may be imposed. Applicant specifically raised in limine that the compliance notice does not set out -
The details of the nature and extent of the non-compliance as set out in Section 53(3)(c) of the Act which provides that “a compliance notice contemplated in subsection (1) must set out details of the nature and extent of the non-compliance”. In support of this contention Applicant submitted that the Respondent merely lists examples of files without pointing out the specific transgressions of the Act;
The steps the Applicant has to take to be compliant as required by the Act. The Applicant submits that the steps required to be taken are of a general nature and do not meet the requirements for a compliance notice as set out in section 55(3); and
The penalties that might be imposed on Applicant should the compliance notice not be adhered to.
The Applicant, in his Replying affidavit, raised res judicata in limine. At the hearing he abandoned the point conceding that the matter is not res judicata because the merits were not entertained in a prior hearing.
The Applicant submitted further that the investigation by the Respondent did not afford the Applicant an opportunity to show good cause and to explain the alleged contraventions.
The Applicant conceded that Chapter 4, Part D of the Act clearly states the administrative periods within which each step in the debt counseling process must be finalized.
The Applicant stated in paragraph 2 of its Founding Affidavit that “The fact that these steps were not adhered to is overtly not in dispute in the Compliance Notice and as such they are not in question.”
Respondent submitted that -
The Applicant raises the exact same points in limine he raised when he applied to the Tribunal to set aside the first compliance notice in his current application to set aside the second compliance notice.
The Respondent drafted the compliance notice mindful of the Tribunal’s previous judgment and findings referring to certain flaws with regard to the first compliance notice;
The Applicant’s points in limine are without merit due to the fact that the errors in the first compliance notice were corrected and the second notice was issued;
The notice being challenged in this application is clear and unambiguous and that it sets out –
The provisions of the Act and the conditions of registration the Applicant had not complied with;
Details of the Applicant’s non-compliance;
Steps that are required to be taken by the Applicant and the period within which those steps must be taken;
The 18 files referred to, to indicate non-compliance by the Applicant during the years 2008, 2009 and 2010. These files are mere examples of the Applicant’s contraventions and the remainder of the Benoni branch files were not attached in order to curtail the volumes of papers filed;
The Applicant was granted ample opportunity to discuss the compliance notice and to show that he was indeed compliant;
The Applicant has not provided the Tribunal with any explanation of or defence against the contraventions stated in the compliance notice; and
The Applicant’s replying affidavit is indicative of the Applicant’s attitude to debt counselling.
Section 55 of the Act governs the issuance of compliance notices. Section 55(1), (2) and (3) set out the jurisdictional facts to be satisfied before a compliance notice is issued.
A jurisdictional fact is a pre-requisite, which must exist prior to the exercise of administrative power (known as a substantive jurisdictional fact) or a procedure that must be followed when exercising the power (known as a procedural jurisdictional fact).1 According to Hoextra:
“The point about jurisdictional facts is that the exercise of power depends on their existence or observance, as the case may be. If the jurisdictional facts are not present or observed…. then the exercise of the power will, as a general rule, be unlawful.”
The decision of the Respondent to issue a compliance notice qualifies as administrative action.2 That being so the issuing of a compliance notice is governed by the Promotion of Administrative Justice (PAJA) Act 3 of 2000. Therefore the issuing of a compliance notice must be lawful, reasonable and procedurally fair.
In addition to section 56(1) of the Act, which provides for the review of a compliance notice by the Tribunal, section 6 of PAJA provides that any person may institute proceedings in a court or a tribunal for the judicial review of an administrative action. A court or tribunal has the power to judicially review administrative action on a number of grounds set out in section 6 (2) of PAJA
The jurisdictional pre-requisites which must be satisfied before a compliance notice is issued in terms of the Act are –
That the Regulator has reasonable grounds for its view that the registrant is non-compliant with the provisions of the Act, or acting in a manner that is inconsistent with this Act; or did not comply with his conditions of registration;3; and
The notice itself contains the required information as set out in section 55(3).
Section 55 of the Act provides that:
“(1) Subject to subsection (2), the National Credit Regulator may issue a compliance notice in the prescribed form to-
(a) a person or association of persons whom the National Credit Regulator on reasonable grounds believes-
(i) has failed to comply with a provision of this Act; or
(ii) is engaging in an activity in a manner that is inconsistent with this Act; or
(b) a registrant whom the National Credit Regulator believes has failed to comply with a condition of its registration.
(3) A compliance notice contemplated in subsection (1) must set out-
(a) the person or association to whom the notice applies;
(b) the provision, or condition, that has not been complied with;
(c) details of the nature and extent of the non-compliance;
(d) any steps that are required to be taken and the period within which those steps must be taken; and
(e) any penalty that may be imposed in terms of this Act if those steps are not taken.”
Section 56(1) of the Act provides that a person issued with a notice in terms of the section may apply to the Tribunal to review the notice within 15 (fifteen) business days after receiving the notice.
Taking the above legal principles and the bases for review put forward by the Applicant, there are a number of issues for consideration by the Tribunal. These include:
Did the Respondent have a reasonable belief that the Applicant was engaged in prohibited conduct?
Was the issuance of the notice driven by reasons not sanctioned by the Act as a basis for issuing compliance notices?”
Was the issuing of the compliance notice lawful, reasonable and procedurally fair?
Did the compliance notice contain the information as required in terms of section 55(3) of the Act?
The Tribunal carefully considered the above grounds which the Applicant had put forward as the basis for its contention that the Compliance Notice is invalid / irregular.
The Tribunal dismissed Applicant’s points in limine at the hearing and indicated that it may provide full and further reasons to those stated at the hearing for dismissing the Applicants contentions. These are set out in the paragraphs below. Regarding Applicant’s assertion that -
The nature and extent of the non-compliance have not been set out -
On the Tribunal’s reading of the compliance notice the nature and extent of the non-compliance have been extensively set out in the compliance notice with reference to sample files. Applicant takes issue with the Respondent’s references to ‘sample’ files to draw the Tribunal’s attention to instances of non-compliance with the Act and the regulations. Applicant did not point out to the Tribunal where and if he was in fact compliant; contrary to the Respondent’s assertions. It is common cause in this matter that the Applicant did not - in respect of many of his clients - comply with Section 86(4)(b) read with regulation 24(2) (that is a form 17.1); section 86(6) read with regulation 24(6) with regards to necessary determination in terms of debt review; section 86(6) read with regulation 24(10) which relates to the issuing of the form 17.2; and section 86(7) with regards to the necessary application or referral to the Magistrate’s Court.
The steps that are required to be taken and the period within which those steps must be taken and future action –
On plain reading of the compliance notice, the steps the Applicant is required to take have been set out in detail in the compliance notice as well as the period within which the steps must be taken in respect of each and every allegation of non compliance put forward by the Respondent. It sets these out with due cognisance of the fact that in some instances even where Applicant was non-compliant in the past; there are no steps that can be prescribed to the Applicant to cure the non-compliance - save for requiring of Applicant to ensure future compliance in relation to the same requirements. This is the appropriate regulatory step to take - as in future; should the Applicant not comply with the same sections of the Act; the Respondent could take that into account in enforcement action against the Applicant.
The penalty that may be imposed in terms of the Act, if the steps are not taken, are not set out –
Quite correctly the amount of the penalty was not and in fact could not be set out by the Respondent. Section 150(c) of the Act empowers the Tribunal, not the Respondent, to impose administrative penalties and prescribes to the Tribunal in section 151, and not to the Respondent, what factors to take into account in determining the amount of the penalty it deems appropriate to impose. The Respondent, quite appropriately in the view of this Tribunal, sets out in its Compliance Notice that:
“As required in terms of section 55(3)(e) we would like to bring to your attention that the following orders may be made and penalties imposed if the required steps are not taken. The Tribunal can be approached for an order declaring conduct to be prohibited; interdicting such conduct; and suspending or cancelling the Applicant’s registration”.
(This is a submission of the Respondent it cannot be said any clearer).
The Respondent is constrained to issuing compliance notices only to a person whom it; on reasonable grounds; believes has failed to comply with, act inconsistent with the Act or contrary to his conditions of registration under the Act.
The Applicant at no stage demonstrated that he was indeed compliant with, did not act contrary to the Act or his conditions of registration.
The Respondent pointed out that the Applicant’s replying affidavit is indicative of the Applicant’s attitude to debt counselling. He stated in his replying affidavit that:
“… I submit that timelines are there as guidelines provided there are no impediments to adherence thereto as prescribed times are largely dependent on the availability of information and cooperation by stakeholders.”
This Tribunal believes that this attitude is wholly inconsistent with the provisions and the spirit of the Act. The timelines set out in the Act and the regulations promulgated thereunder are not merely guidelines; they are prescripts and have to be strictly adhered to.
Applicant appears to suggest that there is a possibility of condonation for non-compliance with the Act. This is indicated by his statement that:
“Despite any provision in law, timelines may be influenced by circumstances beyond human control and same may not suggest non-compliance that it can be condoned under circumstances and conditions”.
The Act does not condone non-compliance with the timeframes set for the debt counseling procedures. The specific reason for this is that in the event that a debt counselor doesn’t comply with the timeframes; the prejudice falls squarely on the shoulders of the consumer.
A debt counselor must at all times comply with the Act. Non-compliance cannot be condoned. In the event that there are circumstances outside the control of the debt counselor; the Act makes provision to ensure compliance. Such an instance, as pointed out by the Regulator, is where for example; a credit provider does not provide a certificate of balance (“COB”) within the prescribed timeframe. The Act states that if the COB is not provided by the credit provider, the debt counselor may accept information given to him by the consumer to ensure that timeframes are not compromised.
For the reasons above the Tribunal therefore finds that Applicant has not made out a case that the compliance notice has been issued contrary to the provisions of the Act.
The Tribunal therefore orders that -
The Application to set aside the compliance notice issued by the Respondent against the Applicant is refused;
The Applicant is ordered to implement the terms of the compliance notice failing which the Respondent may approach the Tribunal to cancel the registration of the Applicant or to impose an administrative fine on the Applicant not exceeding R1m or 10% of its turnover for its previous financial year; and
No order is made as to costs.
Dated on this the 30th day of July 2012.
[signed]
_____________________________________
Ms D Terblanche
Presiding Member
Prof. J Maseko and Prof. T. Woker concurring
1 C Hoextra Administrative Law in South Africa 2ed (2012) 209.
2 See definition of administrative action under section 1 of the Promotion of Administrative Justice Act 3 of 2000 and discussion of administrative action in Hoextra Administrative Law in South Africa. The National Credit Regulator is established under section 12 of the Act as an entity that “is independent and subject only to the constitution and the law”. It exercises public power and it performs a public function in pursuance of the objects of the Act. The issuing of a compliance notice adversely affects the rights of the Applicant and it has a direct, external and legal effect in that the compliance notice compels the Applicant to comply with the terms thereof, failing which the Applicant may be subject to deregistration or the imposition of an administrative penalty of up to 10% of its annual turnover in the preceding financial year.
3 Section 55(1) of the Act