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Cell C (Pty) Ltd v National Consumer Commissioner (NCT/2737/2011/101 (1)(P)) [2012] ZANCT 18 (1 August 2012)

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IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN CENTURION


CASE NUMBER: NCT/2737/2011/101 (1)(P)

DATE:01/08/2012


In the matter between:

CELL C (PTY) LTD …...................................................................................... APPLICANT


and


NATIONAL CONSUMER COMMISSIONER....................................................RESPONDENT


CORAM:


Prof T Woker …...................................................................(PRESIDING MEMBER);

Ms D Terblanche (Chairperson of the NCT) …................(PANEL MEMBER)

Prof J M Maseko..................................................................(PANEL MEMBER)



JUDGEMENT



INTRODUCTION

  1. The Applicant, represented by Messrs G Marcus SC and S Budlender, is Cell C (Pty) Ltd, registration number 1999/007722/07, a private company with limited liability incorporated in South Africa.

  2. The Respondent, represented by Mr. O Thupayatlase, is the National Consumer Commission established in terms of section 85 of the Consumer Protection Act, Act 68 of 2008 (CPA).


  1. The Applicant brought an application to the National Consumer Tribunal (Tribunal) to have a compliance notice issued against it by the Respondent, reviewed and cancelled in terms of section 101(1) of the CPA.


  1. The Tribunal has jurisdiction to hear this matter in terms of section 101(1) of the CPA. This section provides that a person issued with a compliance notice in terms of section 100 may apply to the Tribunal in the prescribed manner and form for its review.


  1. A pre-hearing conference was held on 7 February 2012. At this pre-hearing conference, the Applicant explained that the grounds for review could be divided into two categories. There were preliminary grounds of review which related to the procedure and legality of the compliance notice and substantive grounds of review which relate to the correctness of the substance of the compliance notice. It was agreed that the Tribunal would deal with the procedural issues first as it would serve little purpose to continue into a lengthy hearing on the substance of the compliance notice itself if the Tribunal determined that the compliance notice had not been issued in accordance with the law.


  1. This judgment follows the hearing of this matter on 20 March 2012 and 19 June 2012 at the offices of the Tribunal in Centurion. The judgment is based largely on written submissions by all the parties as well as oral arguments and written heads of argument. In line with the agreement reached at the pre-trial conference, this judgment focuses on the procedural grounds for review and not the merits of the compliance notice itself.

THE FACTS


  1. The facts relating to this matter are generally common cause.1


  1. On 18 April 2011, the Respondent requested copies of the Applicant’s subscriber agreement. The Applicant provided this agreement on 19 April 2011.


  1. On 8 June 2011 the Respondent provided the Applicant with a preliminary analysis of the subscriber agreement and invited the Applicant to a meeting to discuss the analysis.2


  1. The parties met on 1 July 2011 to discuss the findings of the preliminary analysis of the Applicant’s subscriber agreement. The Applicant agreed to make certain changes to its subscriber agreement. The Applicant contends that the only issue which remained in dispute was the wording of clause 6.4.7 of the subscriber agreement. The Applicant did not agree that the clause contravened section 14(3)(b)(ii) and section 63 of the Act. Therefore the Applicant did not agree to amend its contract in accordance with the Respondent’s recommendations.


  1. The Applicant agreed to provide written submissions detailing its position relating to its alleged contravention of sections 14 and 63 of the Act. At the time no date was set for the provision of this submission but the Applicant subsequently agreed to do so by the end of the week ending 15 July 2011.3


  1. The Respondent agreed to revert to the Applicant regarding this email.4


  1. On 15 July 2011, and before the Applicant submitted its response to the issues raised in the analysis, the Respondent sent a consent order, purportedly agreed upon by the Applicant at the meeting of 01 July 2011 between the Applicant and the Respondent, to the Applicant and requested that the Applicant sign the consent order by 18 July 2011. The email did not contain the full consent order and the Respondent advised that it would deliver a complete consent order to the Applicant by Monday 18 July 2011.5


  1. The Applicant responded by stating that it would not sign the consent order because this had not been discussed or agreed upon at the meeting as alleged but that it would, as agreed, make its submission relating to the outstanding matters on that day (15 July 2011).


  1. At 15.57 on 15 July 2011, the Applicant sent its submission in which it dealt with each issue that had been raised in the analysis and discussed at the meeting on 1 July 20116 as well as an amended subscriber agreement which included the wording changes agreed to at the meeting.


  1. The Respondent did not respond to the submissions made by the Applicant.


On 21 July 2011, the Applicant received a letter from the Respondent (dated 19 July 2011) in which the Respondent acknowledged that the subscriber agreement was compliant with the Act in many respects, but not in all respects and that if Applicant “persisted with its refusal to sign a consent order then the NCC will have no option but to consider issuing a compliance notice in terms of section 100 of the Act”.7


  1. On 22 July 2011 the Applicant sent a letter to the Respondent advising that the Applicant had not received a complete copy of the consent order as a result it could not determine whether the changes made by the Applicant had been taken into account.8


  1. On 26 July 2011, the Respondent sent an email to the Applicant inviting the Applicant to a meeting to discuss the consent order. The Applicant responded via email by providing an amended version of the original consent order to the Respondent which amended version, the Applicant contended, did reflect the agreement which the parties had reached at the meeting of 1 July 2011 and which the Applicant was prepared to sign. The Applicant also stated that:


If the consent order is the subject matter of the proposed meeting between Cell C and the NCC and we are in agreement on the marked up version of the consent order, this would obviate the need to have a meeting with the NCC.”9


  1. On 3 August 2011, the Respondent advised, in a letter to the Applicant, that it did not accept the Applicant’s amended version of the consent order and again stated that if the Applicant did not sign the original consent order, a compliance notice would be issued.10


  1. A compliance notice was issued on 24 August 2011. This compliance notice refers to the provisions of the subscriber agreement as they were prior to the amendments which were introduced after the meeting held on 1 July 2011. The compliance notice states that the Respondent consulted with the relevant regulatory authority, which is the Independent Communications Authority of South Africa (ICASA), on 22 August 2011.


ISSUE TO BE DECIDED BY THE TRIBUNAL


  1. The issue which the Tribunal must decide is whether the compliance notice has been issued in accordance with the law. The Respondent is an organ of state within the public administration.11 As stated by Stelzner AJ in Rael Levitt and others v The National Consumer Commission and others12 it must exercise the functions assigned to it in terms of the Act in accordance with the Constitution.

THE LAW

  1. The law relating to this matter has already been discussed extensively by this Tribunal in the case of Vodacom Service Provider (Ltd) v National Consumer Commission13 handed down on 8 June 2012. However for the sake of completeness it will be repeated here.

  2. As stated by Ngcobo CJ in the Constitutional Court decision of Albutt v Centre for the Study of Violence and Reconciliation14 it is by now axiomatic that the exercise of all public power must comply with the Constitution, which is the supreme law, and the doctrine of legality, which is part of the rule of law. The rule of law requires that all of those who exercise public powers do so within the powers which have been conferred upon them and that all their decisions and acts are authorized by law.15

  3. In Fedsure Life Assurance Ltd v Greater Johannesburg Transitional Metropolitan Council,16 Chaskalson P stated that it is “a fundamental principle of the rule of law, recognized widely that the exercise of public power is only legitimate where lawful”17 and that “it is central to the conception of our constitutional order” that public bodies are “constrained by the principle that they may exercise no power and perform no function beyond that conferred on them by law”.18

  4. In S v Mabena19 Nugent J stated that:

The Constitution proclaims the existence of a State that is founded on the rule of law. Under such a regime legitimate State authority exists only within the confines of the law, as it is embodied in the Constitution that created it, and the purported exercise of such authority other than in accordance with the law is a nullity.”


  1. The rule of law embraces a number of different themes but the most fundamental theme is that administrators must exercise their authority according to the law and cannot exercise it arbitrarily. In other words, they cannot be, as Goldstone J stated in Dawnlaan Beleggings (Edms) Bpk v Johannesburg Stock Exchange20 a law unto themselves.21


  1. The Act empowers the Respondent to investigate complaints relating to consumer matters. In terms of section 72, the Commission may on its own initiative decide to investigate a matter22 and it may appoint an investigator to investigate the matter.23 Once the investigation is concluded the Respondent has certain options available to it in terms of section 73. One such option is the issuing of a compliance notice.24


  1. Compliance notices are governed by section 100 of the CPA. This section sets out certain jurisdictional facts which must be satisfied before a compliance notice is issued. These are the following:

  • The compliance notice is issued to a person or association of persons whom the Respondent on reasonable grounds believes has engaged in prohibited conduct; and

  • before the compliance notice is issued,25 the Respondent must consult with the regulatory authority that issued a license to that regulated entity.


  1. A jurisdictional fact is a pre-condition 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).26 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.”

  2. This Tribunal has held in previous decisions that the decision of the Respondent to issue a compliance notice qualifies as administrative action.27 That being so the issuing of a compliance notice is governed by the Promotion of Administrative Justice Act, 3 of 2000 (“PAJA”). Therefore the issuing of a compliance notice must be lawful, reasonable and procedurally fair.


  1. In addition to section 101 of the CPA 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 APPLICANT’S SUBMISSIONS


  1. The Applicant asserted that there were six procedural grounds on which the compliance notice should be reviewed. These are as follows -

  • The Respondent failed to conclude its investigation under section 72 of the Act before issuing the compliance notice;

  • The Respondent did not engage in proper consultation with the relevant regulatory body, ICASA prior to issuing the compliance notice;

  • The Respondent relied on the incorrect version of the Applicant’s subscriber agreement in issuing the compliance notice;

  • The process leading up to the issuing of the compliance notice was procedurally unfair; and

  • The Respondent failed to give adequate reasons for issuing the compliance notice.

Failure to conclude the investigation

  1. The Applicant argued that section 73(1) clearly indicates that before a compliance notice is issued the Respondent must have concluded an investigation and that in this case the investigation could not have been concluded because the Respondent had not yet considered the Applicant’s submissions relating to sections 14 and 63 of the Act. The Respondent sent the Applicant the draft consent order on 15 July 2011 before the Applicant submitted its submission and before the submissions were due.28


  1. Thereafter the Respondent continued to insist that the Applicant sign the draft consent order and at no point did it respond to the Applicant’s submissions.


  1. The Applicant argued that without considering these submissions, the Respondent was not in a position to make a reasonable and informed finding as to whether the Applicant was in violation of the Act, and thus as to whether any further action was required.


  1. The Applicant further argued that it was common cause that the Respondent did not consider these submissions because in answer to the statement regarding this point in the Applicant’s founding affidavit which reads as follows:

The Commission did not apply its mind to the Submissions in deciding whether the Subscriber Agreement contravenes the CPA and its regulations before deciding to issue the compliance notice… The Commission did not consider or respond to the Submissions.”29


The Respondent simply stated:

I deny that the commission issued the notice contrary to the Act”.30


without grappling with the allegation that it had not applied its mind to the Applicant’s submissions


  1. The Applicant argued that this bald denial is critically important and in the light of this exchange on affidavits, it is common cause that the Respondent did not apply its mind to the submissions or consider them before issuing the compliance notice.31 Rule 13 of the Tribunal’s Rules32, requires that the answering affidavit provide grounds for the denial of certain facts or allegations contained in the founding affidavit. Rule 13(5) provides that any fact or allegation in the application or referral which is not specifically denied or admitted in an answering affidavit will be deemed to have been admitted. The Applicant submitted that this rule is simply a codification of the rules for determining factual disputes on affidavit which has already been established by the courts. Applicant further referred to the Supreme Court of Appeal decision in Wightman t/a JW Construction v Headfour (Pty) Ltd33 where the court stated that:

A real, genuine and bona fide dispute of fact can exist only where the court is satisfied that the party who purports to raise the dispute had in his affidavit seriously and unambiguously addressed the fact said to be disputed. There will of course be instances where a bare denial meets the requirement because there is no other way open to the disputing party and nothing more that can be expect of him. And even that may not be sufficient if the fact averred lies purely within the knowledge of the averring party and not basis is laid for disputing the veracity or accuracy of the averment. When the facts averred are such that the disputing party must necessarily possess knowledge of them and be able to provide an answer (or countervailing evidence) if they be not true or accurate but instead of doing so, rests his case on a bare or ambiguous denial the court will generally have difficulty in finding that the test is satisfied.”


Failure to consult with ICASA

  1. The Applicant accepted that the Respondent met with ICASA on 22 August 2011 but argued that this was not meaningful or genuine and therefore did not satisfy the requirement of consultation under the Act. The Applicant referred to a number of decisions where the issue of what constitutes meaningful consultation has been discussed.34


  1. The Applicant argued that in applying the principles from these decided cases it was clear that the Respondent did not enter into a genuine and effective process of consultation with ICASA but instead attempted to satisfy the formalities of consultation superficially. This was so in particular because its submissions to the Commission were not placed before ICASA and the Respondent took ICASA through the original analysis which was, by that stage, outdated. This, the Applicant argued indicated that the very essence and point of consultation was fatally undermined.35


The incorrect subscriber agreement

  1. The compliance notice referred to the original Cell C subscriber agreement and not the amended version incorporating the amendments agreed to by the parties on 1 July 2011. The Respondent explained that it did this because at the time of the issuing of the compliance notice, this was the agreement which the Applicant concluded with customers.36 This, the Applicant pointed out, was incorrect because although the Applicant amended its subscriber agreement in July 2011, it made these amendments retrospective to 1 April 2011.37


  1. The Applicant argued that the provisions of section 100 make it clear that the purpose of a compliance notice is to compel a person to cease any “prohibited conduct’ which is defined as an “act or omission in contravention of the Act”. The compliance notice serves to notify an infringing party of the nature and extent of its non-compliance with the Act and to stipulate the steps which must be taken to cease such conduct and to comply with the Act. Therefore where past infringements have already been remedied such that there is no longer any non-compliance, the compliance notice serves no purpose. Only those provisions which, the Respondent was of the view (denied by the Applicant) continued to contravene the Act should have been the subject of the compliance notice.


  1. The Applicant also argued that the compliance notice had been issued, not because the subscriber agreement was in contravention of the Act, but because the Applicant refused to sign the consent order. The Applicant argued that the Respondent focused on this issue rather than on the relevant issue of non-compliance and that this constituted a misdirection. The Applicant quoted from the compliance notice in paragraph 57 where the following is stated:

Cell C attended all meetings scheduled but failed to accept that its current subscriber agreement contravenes the Act. Despite evidence in the form of analysis conducted by the NCC presented to Cell C, Cell C failed to give the National Consumer Commission a binding undertaking in the form of a consent agreement in terms of section 74 of the Act.

The National Consumer Commission is of the view that refusal by Cell C to commit itself in a binding form to amend its subscriber agreement defeats the purposes of the Act of providing for a consistent accessible and efficient system of consensual resolution of disputes arising from consumer transactions.”


  1. This statement, the Applicant argued, indicates a peculiar understanding by the Respondent of what a consent order is as the section makes it clear that a consent order is something which can only be obtained by agreement and not coercion.38 In addition the Applicant’s refusal to sign a consent order could not justify the issuance of a compliance notice because a compliance notice is issued when one is engaged in prohibited conduct and refusal to sign a consent order does not constitute prohibited conduct. Therefore the issuance of the compliance notice in respect of the original subscriber agreement was ultra vires section 100 and thus unlawful.


  1. The Applicant also argued that issuing the compliance notice based on the original agreement was unreasonable and irrational which gave rise to the potential grounds for review of administrative action as recognized in PAJA. The compliance notice served no rational purpose since the original subscriber agreement was no longer being applied and the decision was based on irrational considerations, namely the Applicant’s refusal to sign a consent order.


The Respondent failed to apply its mind

  1. The Applicant argued that the failure to apply the mind has long been recognized as ground of review under the common law and that although this has not specifically been enumerated as a ground for review in section 6 of PAJA, it is commonly read into other enumerated grounds with which it overlaps. The Applicant referred to Johannesburg Stock Exchange v Witwatersrand Nigel Ltd39 and Bangtoo Brothers v National Transport Commission40 where this was discussed as well as a number of other cases.41


  1. The Applicant argued that in this case it was clear that the Respondent failed to apply its mind properly because it did not consider the Applicant’s submissions. It sent the Applicant the draft consent order on 15 July 2011 before the Applicant had submitted its submissions and before these submissions were due. The Respondent continued to insist on the terms of the draft consent order prior to issuing the compliance notice and at no point did it respond to the Applicant’s submissions. These submissions were of obvious and paramount importance to any decision by the Respondent to take further action.


  1. The Respondent’s failure to consider the Applicant’s submissions before issuing the compliance notice amounted to a failure to apply the mind to the matter which failure rendered the decision unreasonable and unlawful.


THE RESPONDENT’S SUBMISSIONS


General Comments

  1. The Respondent argued that the history of the matter demonstrated that there was a discussion between the parties which reached the point of no agreement. The Respondent argued that:

the Applicant’s founding affidavit from page 3 to 11 is a narration of the three months encounter between the National Consumer Commission and Cell C wherein both parties were having great difficulty convincing each other about the interpretation of the act and whether various clauses of the subscriber agreement are in violation of the Act or not.”42


  1. The Respondent submitted that an investigation was started and disagreements about the applicability of the Act to some of the clauses of the Cell C subscriber agreement arose which could not be resolved through consultation.


  1. The Respondent had formed the view that the subscriber agreement was in contravention of the Act and because the parties could not agree a consent order was proposed. The Applicant refused to sign the consent order and so the Respondent issued a compliance notice. Therefore it is up to the Tribunal to decide whether there has been compliance with the Act or not.

The Investigation

  1. The Respondent denied that it had failed to conduct an investigation and argued that

The investigation was all about whether the subscriber agreement is compliant or not and that is it. The ping pong meetings and letter were just an extra mile that the NCC really needed to take to see if the parties in the spirit of co-operation could not amend the agreement to bring it in line with the Act.”43


  1. Further the Respondent argued that if the process fails, as it did in this case, then the only other forum to deal with such issues, is the Tribunal. Hence a compliance notice was issued.

The compliance notice

  1. The Respondent denied that it had threatened the Applicant with a compliance notice because it had refused to sign the consent agreement. The Respondent stated that after the meeting of 1 July 2011 the Respondent believed that the parties had reached an agreement and so it prepared a consent order which it sent to the Applicant. The Respondent argued that it was entitled to issue the compliance notice in the event of non compliance and if parties are not able to deal with the issues by way of an agreement.44


The incorrect subscriber agreement

  1. As stated above the Respondent explained that it attached to the compliance notice the subscriber agreement which the Applicant concluded with customers at the time the compliance notice was issued.45 The Respondent also argued that in any event this was not problematic because the changes which the Applicant had made to its subscriber agreement did not cure the issues which the Respondent had raised relating to the original subscriber agreement and that this was just a stalling tactic by the Applicant.46 The corner stone of the compliance notice revolved around sections 14 and 63 of the Act and these were still being disputed by the Applicant and to this day remain in dispute.47 The Respondent argued as follows:

Now in the absence of parties being able to agree it means that there is a dispute about the applicability of the Act to various clauses of Cell C subscriber agreement, you are there as the panel, as the Tribunal to assist parties with a way forward. When we issue a compliance notice and bring the matter before you, it is not capricious, it is not malicious, it is a way of saying, assist us, we have reached a deadlock, we are not able to agree. You are there members of the Tribunal to provide the guidance because that was the reasoning for us as the NCC to engage Cell C in the first place.”48


  1. In dealing with the letter which the Applicant argued constituted a threat to issue a compliance notice because the Applicant would not agree to the consent agreement the Respondent argued:


Now this letter it is simply making that point to say if we are not able to agree beyond these points that are remaining we will have no choice but to issue a compliance notice. We are not issuing a compliance notice because you are refusing to sign a consent agreement. By refusal to sign a consent agreement is an indication of the fact that the remaining outstanding issues cannot be dealt with by way of an agreement in the manner that all other issues have been dealt with and has fallen by the wayside. There is nothing malicious in there, there is nothing capricious in that as it is just the process.”49


  1. The Respondent stated that it issued the compliance notice for the “members of the Tribunal it assist us, that is the gist of it.”50



Consultation with ICASA


  1. The Respondent appeared to concede that there may well have been no proper consultation with the regulatory authority51 but argued that the Applicant was incorrect in its view that it should have formed part of the consultation process52 and that the only entity which could state whether there had been proper consultation or not was ICASA.


ANALYSIS OF FACTS AND ARGUMENTS

  1. Taking the above legal principles into consideration, there are a number of issues which warrant 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?”

  • Did the Respondent consult with the Regulatory Authority before issuing the compliance notice?

  • Was the issuing of the compliance notice lawful, reasonable and procedurally fair?


Reasonable belief


  1. The Respondent must on reasonable grounds believe that the Applicant was engaged in prohibited conduct53 before it issues a compliance notice. This is a substantive jurisdictional fact which is a prerequisite before the Respondent can act.

  2. The first and most important point to note is that the belief must be reasonable. When deciding whether or not the belief is reasonable it is important to consider whether it is sufficient that the Respondent itself believed (i.e. is a subjective belief sufficient) or must the belief be based on objective facts. This issue was dealt with by the Appellate Division in Minister of Law and Order v Hurley54 Where the legislature indicates by using words such as “must be satisfied or “in the opinion of” then subjective belief is sufficient and it would be up to the Applicant to show that the Respondent had failed to apply its mind to the matter or that the decision was in bad faith. However, where the legislature indicates that the belief must be reasonable, the belief must be based on objective facts and the Respondent must show that there are objective grounds or facts that gave rise to or formed the basis of the belief. The court (or in this case the Tribunal) is entitled to enquire into the grounds which could reasonably found a belief as required by section 100.


  1. The Tribunal has in a previous matter held that in order to reach a reasonable belief it is necessary to have and conclude an investigation into the matter. In City of Johannesburg v the National Consumer Commission55 the Tribunal concluded that a compliance notice is issued once the Commission has concluded an investigation. The Tribunal reached this conclusion by evaluating those sections of the CPA which deal with investigations by the Commission and compliance notices.56 This issue was extensively canvassed by the Tribunal in the abovementioned City of Johannesburg -matter and so we do not intend to deal with all the issues again. In that judgment that Tribunal explained that a concluded investigation was necessary in order to:

  • establish the facts of the complaint;

  • measure those facts against the CPA in order to reach the belief on reasonable grounds that the person against whom the compliance notice is to be issued was engaged in prohibited conduct;57

  • ensure that the compliance notice complies with the prescribed requirements as set out in section 100 (3). The notice must provide details of the nature and extent of the non-compliance.

  1. The question to be considered by the Tribunal is whether the Respondent, in this matter, concluded an investigation in order to arrive at objective facts on which to found a reasonable belief.


  1. The compliance notice states that the Respondent initiated an investigation in terms of section 72 of the CPA into the ICT sector. In its initial letter to the Applicant dated 18 April 2011, the Respondent stated that it intended to conduct an investigation into the ICT sector with particular emphasis on fixed line contracts and mobile cellular telephone contracts.58 The letter goes on to say that it was currently in the process of collecting and analyzing contracts and that this analysis will serve to inform the Respondent on whether or not to pursue an investigation into the sector. After receiving a subscriber contract from the Applicant, the Respondent conducted an analysis of this contract and submitted an analysis of that contract to the Applicant. The objective of the analysis was to identify clauses in the Applicant’s consumer contract that appeared to be contrary (our emphasis) to the provisions of the Act. The report was also referred to as a preliminary report by the Commissioner in a letter to the Applicant dated 26 June 2011.59 In the first column certain sections of the CPA are set out and in the second column certain Cell C Contract Clauses are set out. The Cell C clauses are clauses which the Respondent is of the view relate to or contravene clauses in the Act. The report concludes with the following statement:

It is evident from the above analysis that the relevant clauses of Cell C Consumer Contract are in contravention of the Consumer Protection Act 69 of 2008.”60


  1. The document merely sets out those clauses which are deemed to be in contravention of the Act. To analyze is defined as “to examine carefully and in detail”.61 The clauses for discussion were identified but they were not analyzed in this document. The Respondent did not provide any reasons in the document as to why it was of the view that the clauses were in contravention of the Act.


  1. A meeting was then held to discuss these clauses on 1 July 2011. This meeting was not recorded, and there are no minutes which give an indication as to the exact decisions which occurred. However the following is clear:

  • The Applicant agreed to make certain amendments to its subscriber agreement;

  • There was no agreement relating to the interpretation of sections 14 and 63 of the Act;

  • At the request of the Respondent the Applicant agreed to supply the Respondent with its written submissions relating to the Respondent’s analysis of the subscriber agreement and in particular their interpretation of section 63 of the Act.


  1. Before the Applicant made these written submissions, the Respondent sent a consent order to the Respondent which it required the Applicant to sign. The Applicant declined to sign this consent order and instead sent an amended version of the consent order which it was prepared to sign to the Respondent. The Respondent declined to sign the amended consent order and issued a compliance notice.

  2. From the above, it is clear that the Respondent had decided on its own initiative to investigate the ICT sector. It identified certain clauses in the Applicant’s contract which it deemed to be problematic and the Applicant agreed to alter some of these clauses. However the Applicant did not agree that it was engaged in prohibited conduct and there is no final report which indicates that the Respondent analyzed the Applicant’s submissions regarding the interpretation of the Act and concluded finally that the clauses did amount to prohibited clauses in terms of the CPA.


  1. Further, a perusal of the compliance notice, as well as other documents, indicates that the amended contract was not taken into consideration when the compliance notice was issued. This notice related to the contract which was initially provided by the Applicant.

  2. The Respondent stated in an undated letter (this letter was a follow up letter to the letter dated 19 July 2011) to the Applicant dealing with the need to sign a consent order62 that “the analysis conducted by the NCC and that revealed contraventions of chapter 2 serves as investigations conducted in term of section 73 of the CPA”. In addition, in his heads of argument Mr. Thupayatlase stated that:

The investigation was all about whether the subscriber agreement is compliant or not and that is it. The ping pong meetings and letter were just an extra mile that the NCC really needed to take to see if the parties in the spirit of co-operation could not amend the agreement to bring it in line with the Act.”63


  1. What is important from the above discussion of the facts, is that the compliance notice was based on the preliminary document in which certain contractual terms were identified as possibly (our emphasis) being in contravention of the Act. The compliance notice was therefore based on a document which was drafted at a very early stage of an investigation into the ICT sector. In addition, although certain clauses were deemed by the Respondent to be in contravention of certain sections of the CPA, no reasons for this interpretation were given and the Applicant’s explanation regarding these clauses was not taken into consideration prior to the issuing of the compliance notice. The Tribunal is not suggesting that the Respondent must agree with the Applicant’s interpretation but it is necessary that the Applicant’s arguments be taken into consideration in order to reach a “reasonable belief” and not a belief that is based on the subjective views of the Respondent. It seems from the evidence presented to the Tribunal that the investigation conducted by the Respondent constituted the preliminary analysis and that once it had formed the view that certain clauses were in contravention of the Act, it held fast to this view without considering any further factors, in particular without considering the views of the Applicant. The preliminary analysis therefore constituted the entire investigation.


  1. It is clear from the documents and evidence before the Tribunal that the Respondent did not conclude its investigation before issuing the compliance notice. A proper investigation would have at least considered the views of the Applicant, especially since it was at the request of the Respondent that the Applicant made these submissions. The Respondent has failed to satisfy the Tribunal that it had a reasonable belief, based on objective facts, reasons or principles that the Applicant was engaged in prohibited conduct. Instead it had formed a subjective opinion about certain clauses and it then issued a compliance notice so that the Tribunal could decide which view was the correct interpretation of the Act. This approach, in the Tribunal’s view is an incorrect approach to the Act.


  1. This Tribunal disagrees with the view of Mr Thupayatlase for the Respondent that it has to guide both sides in this matter. The role of this Tribunal is not one of conciliation or mediation between the parties, but one of adjudication. The adjudication in this instance, is in the form of a review of the Respondent’s administrative act of issuing a compliance notice as provided for in section 101(1) of the CPA.


  1. It seems that the Commission issued the compliance notice because it could not get the Applicant to agree to its point of view, not because it had formed the objective view that the Applicant was engaged in prohibited conduct.


The reason for issuing the compliance notice


  1. A compliance notice is issued when the Respondent believes that a person, in this case the Applicant, has engaged in prohibited conduct. Therefore the compliance notice must be issued in order to ensure that the entity complies with the Act and not for some other purpose. Hoextra explains as follows:64

If a court finds that powers have been used for unauthorized purposes, or purpose not contemplated when the powers were conferred, it will hold that the decision or action is illegal. This will be the result even when the powers are mistakenly used for praiseworthy purposes.”


  1. This situation is now governed by PAJA. Section 6(2) (e) (ii) provides that action may be reviewed if it was taken for an ulterior purpose or motive. There is also an overlap here with section 6(2) (e) (i) which refers to “a reason not authorized by the empowering provision”. Hoextra argues that section 6(2)(e)(vi) which refers to actions taken “arbitrarily or capriciously” could also apply.65


  1. The documents before the Tribunal indicate that the Respondent issued the compliance notice because the Applicant refused to sign the consent order and not because the Applicant was engaged in prohibited conduct. In an undated letter, the Respondent made the following statements:

It would be appreciated if Cell C considers and signs the attached Consent order by 4 August 2011. Failure to sign will result in the NCC issuing Cell C with a compliance notice.”66


  1. The Compliance notice contains the following statements under the heading “Steps taken by the NCC”.

On 1 July 2011 the NCC met with Cell C to discuss the analysis and compliance with the Act

NCC indicated that Cell C would have to sign a consent agreement in terms of section 74 of the Act in order to be bound by its commitment to amend the subscriber agreement.”


  1. The clearest indication of the reason why the compliance notice was issued is to be found in the minutes of the meeting with ICASA held on 22 August 2011 which reads as follows:

The Commissioner further mentioned that written commitment from these entities67 were received to amend their contracts with different time lines. In order to ensure that the commitment is firm and binding the Commission had to ensure that the entities sign consent orders. The entities indicated their lack of willingness to sign consent orders, with exception of Neotel. It is based on this lack of willingness from the entities that the NCC is consulting with the Authority in terms of section 100 before issuing compliance notices.”


  1. Refusing to agree to a consent order does not constitute prohibited conduct under the Act. The Act is clear that the parties sign a consent order when they agree on the terms of that order. The Applicant has indicated that it could not sign the order but it proposed an amended consent order which it was prepared to sign. This amended consent order was rejected by the Respondent and it issued a compliance notice.


  1. As stated in the Vodacom matter, we are of the view that is unlawful for the Respondent to use the threat of a compliance notice in order to force a party to agree to terms which it would not usually agree to.


Consultation with the regulatory authority.

  1. It is a procedural requirement that before the compliance notice is issued the Respondent must consult with the regulatory authority which in this case is ICASA.


  1. The Applicant accepted that a meeting had taken place but it disputed that this amounted to consultation in the true sense of the word. The Applicant argued that this consultation was not meaningful or genuine and thus did not satisfy the requirement of consultation under section 100(2).


  1. The Respondent disputed this and argued that the reason why the Applicant was arguing that there was no consultation was because it (the Applicant) had not been invited to attend the meeting. The Respondent argued that it was not a requirement of the Act for the Applicant to be invited. The Respondent also argued that the only entity which could confirm whether there had been consultation or not was ICASA.


  1. The Tribunal discussed the issue of consultation extensively in the recent decision it handed down in Multichoice Africa (Pty) Ltd v the National Consumer Commission.68 The issue of what constitutes proper consultation was thoroughly canvassed with particular reference to decided cases.


  1. A distinction can be made between this case and the Multichoice case because in the Multichoice case there was only a bare reference to Multichoice whereas in the case of the Applicant, the Respondent set out the clauses which it (the Respondent) regarded as problematic. Nevertheless the extent of the consultation regarding the Applicant’s position still needs to be considered.


  1. Whether or not there has been meaningful consultation must be decided on the facts and on the basis of the law. As stated in the Vodacom decision, this issue cannot be decided by referring to ICASA and whether or not ICASA believed there was meaningful consultation as has been argued by the Respondent.


  1. The meaning and requirements for a genuine consultation have been set out in a number of decided cases including decisions handed down by the Constitutional Court.69 One requirement which is most relevant in this particular matter is that consultation must be in good faith. In Maqoma v Sebe NO70 Pickard J held that the requirement of good faith is one of the cornerstones of any meaningful consultation and that this requirement clearly must exist if proper discussion or debate is to be had.


  1. Although disputed by the Respondent, the facts establish that the Respondent presented ICASA with the initial analysis conducted on the subscriber contract which it had received from the Applicant. The Respondent did not, it seems, present any reasons explaining why it regarded such terms to be in contravention of the Act (or at least there is no indication from the minutes that it provided such details). From the minutes it appears that the Respondent did inform ICASA that the parties were making an attempt to comply with the Respondent’s requests to amend its contracts, but it did not inform ICASA that the Applicant had submitted an amended contract, nor did it present the Applicant’s submissions regarding its interpretation of the Act to ICASA. The Respondent did, however, inform ICASA that it was going to issue compliance notices because the Applicant and others were refusing to sign consent agreements.


The Tribunal is of the view that if the intention of the Respondent was to consult and not just inform ICASA of its decision there would have been meaningful and critical engagement on the issues which had been raised by the Applicant in its submission. The Tribunal pointed out in the Multichoice-matter that consultation is usually understood as a meeting or conference at which discussions take place, ideas are exchanged and advice or guidance is sought and tendered. In addition, as stated in the case of Maqoma v Sebe NO and Another71

The requirement of good faith, a requirement which clearly must exist if proper consultation or debate is to be had, seems to me to be one of the cornerstones of any meaningful consultations. However convinced the empowered party may be at the outset of the wisdom or advisability of the intended course of action he is obliged to constrain his enthusiasm and to extend a genuine invitation to those to be consulted and to inform them adequately of his intention and to keep an open and receptive mind to the extent that he is able to appreciate and understand views expressed by them, to assess the view so expressed and the validity of objections to the proposals and to generally conduct meaningful and free discussion and debate regarding the merits or demerits of the relevant issues.”


  1. In this instance the consulting party (the Respondent) presented an analysis to the regulatory authority which was outdated. It did not inform the regulatory authority that there was an amended contract, nor did it inform ICASA of the Applicant’s submissions regarding its interpretation of the Act. It cannot be said therefore that the Respondent acted in good faith when it consulted with ICASA.


The issuing of the compliance notice must be lawful, reasonable and procedurally fair


  1. As stated above, the issuing of a compliance notice constitutes administrative action and as such the Respondent must act lawfully and reasonably and in a procedurally fair manner. Much of what is said above has bearing on this and it is not necessary to repeat it again. In summary the following facts are of concern to the Tribunal:


  • The parties agreed that the Applicant would make written submissions regarding its interpretation of the Act. The Respondent however issued a draft consent order before these submissions had been submitted and it did not at any stage revert back to the Applicant regarding these submissions. The Respondent’s conduct in this regard was arbitrary and capricious and it cannot be said that it acted in a procedurally fair manner.


  • The Applicant made certain alterations to its existing contract and it submitted this contract to the Respondent. When the Respondent compiled the compliance notice it did not take these amendments into consideration. The letter which the Applicant received dated 21 July 2011, indicates that the Respondent had accepted that the subscriber agreement was compliant with the Act in many respects, although not in all respects. The decision to revert back to an earlier version of the contract, well knowing and accepting that the Applicant had drafted a new version which was CPA compliant in many respects, indicates that the Respondent acted irrationally and failed to take into consideration relevant considerations. In addition, in certain respects the compliance notice served no purpose because it dealt with matters which had already been altered by agreement between the parties.


  • The Respondent drafted the consent order and sought to impose this consent order on the Applicant. As this Tribunal held in the Vodacom- matter72, a consent order is by its very nature an order which is arrived at by consent between the parties. The conduct of the Respondent was therefore arbitrary and capricious.


  1. For all the reasons set out above the Tribunal concludes that:


  • The Respondent did not have a reasonable belief that the Applicant was engaged in prohibited conduct;

  • The compliance notice was issued for a reason not authorized in terms of the CPA;

  • The Respondent did not consult with the Regulatory Authority before issuing the compliance notice; and

  • The issuing of the compliance notice was not lawful, reasonable or procedurally fair.



Accordingly the Tribunal makes the following order:


The compliance notice issued by the Respondent is hereby cancelled.

There is no order as to costs.


DATED THIS 01st DAY OF AUGUST 2012


Signed

________________

Prof T Woker

Presiding Member


Ms D Terblanche (Chairperson of the Tribunal) and Prof J Maseko (Member) concurring.

1It was agreed at the pre-hearing conference that the parties would agree on the facts regarding the procedure followed by the Respondent prior to the issuing of the compliance notice; alternatively the Applicant would prepare a statement of the facts by 21 February 2012 and the Respondent would respond thereto. The statement of agreed facts or alleged facts with the Respondent’s comments would be filed with the Tribunal by 28 February 2012. The Applicant filed a statement of agreed facts with the Tribunal on 28 February 2012.

2See page 78 of the paginated bundle.

3Email 6 July 2011. See page 117 of the paginated bundle

4Ibid.

5Email 15 July 2011. See page 119 of the paginated bundle.

6See page 124 of the paginated bundle.

7See page 152 of the paginated bundle.

8See page 157 of the paginated bundle.

9See page 164 of the documents.

10See page 173 of the documents.

11Section 85 of the Act.

12Western Cape High Court Case No 7708/12 handed down on 18 June 2012.

13 [2012] ZANCT 9

15 See Baxter Administrative Law (1984) 301.

17 At para 56.

18 At para 58.

21 For the most recent discussion of the rule of law and the abovementioned cases see Clur v Keil 2012 (3) SA 50 (ECG).

22 Section 72(1).

23 Section 72(1)(d).

24 Section 73(1)(c)(iv)

25 Section 100(1).

26 C Hoextra Administrative Law in South Africa 2ed (2012) 209.

27 See City of Johannesburg v National Consumer Commission Case [2012] ZANCT 6 and Vodacom Service Provider Company (Pty) Ltd v National Consumer Commission [2012] ZANCT 9 . See also the definition of administrative action under section 1 of PAJA and discussion of administrative action in Hoextra Administrative Law in South Africa. The Commission is established under section 85 of the CPA as “an organ of state within public administration”. It exercises public power and it performs a public function in pursuance of the objects of the CPA. 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 alter the terms of its contracts. Should the Applicant fail to comply with the compliance notice the Respondent has indicated that it intends to seek an administrative penalty of 10% of its annual turnover in the preceding financial year. The Commission itself has recognised that its conduct constitutes administrative action. In its Final Enforcement Guidelines (published under General Notice 492 in Government Gazette 34483 on 25 July 2011) it states that procedural fairness requires that the Commission take into consideration the provisions of PAJA.

28 Para 36 and 37 of the Applicant’s heads of argument.

29 Para 32.1 and 32.2 of the Applicant’s Founding Affidavit

30 Para 34 of the Respondent’s Answering Affidavit

31See Page 25 of the transcript 20 March 2012.

32 Regulations for Matters relating to the functions of the Tribunal and Rules for the Conduct of Matters before the National Consumer Tribunal, 2007 published under GN 789 in GG 30225 of 28 August 2007 as amended by GenN428 in GG 34405 of 29 June 2011.

34 See Applicant’s heads of argument para 45 and the relevant footnotes.

35 See Page 33 of the transcript of 20 March 2012.

36 Answering Affidavit para 16.

37 This was explained in the Applicant’s replying affidavit para 7.3.

38 Page 41 of the transcript of 20 March 2012.

40 1973 (4) SA 667 (N) at 685A-D.

41 See footnote 39 of the Applicant’s heads of argument.

42 Page 3 of the Respondent’s heads of argument.

43 Page 19 of the Respondent’s heads of argument.

44 See page 20 of the Respondent’s heads of argument.

45 Answering Affidavit para 16.

46 See discussion relating to the subscriber agreement on pages 52ff of the transcript of 19 June 2012.

47 Page 26 of the transcript of 19 June 2012.

48Page 27 of the transcript of 19 June 2012.

49 Page 27-28 of the transcript of 19 June 2012.

50 Page 28 of the transcript of 19 June 2012.

51 See page 35 of the transcript of 19 June 2012 where the Respondent stated:

I know it is just but one of the points, the other one I concede, the one that I will deal with right now with regards to the meeting with ICASA that I will deal with on that aspect alone I agree fully that if I am not able to sway you to agree with me that the meeting with ICASA was indeed a consultation, a proper on…”

52 Applicant objected to this and submitted that it never wanted to be part of the meeting but for their views and submissions to be made known to ICASA

53 Section 100(1) of the CPA

55 [2012] ZANCT 6

56 In particular sections 72, 73 and 100.

57 A consumer may have a valid complaint against a supplier, but before a compliance notice is issued, the complaint must constitute prohibited conduct under the Act.

58 It must be noted that this was the same letter which was sent to Vodacom Service Provider discussed in the Tribunal decision Vodacom Service Provider (Ltd) v NCC. [2012] ZANCT 9

59 See page 108 of the paginated bundle.

60 A virtually identical statement appeared in the Vodacom analysis.

61 World Book Dictionary (1981)

62 Page 174 of the documents.

63 Page 19 of the Respondent’s heads of argument.

64 At 309.

65 At 309.

66 Page 175 of the documents

67 That is the major players within the ICT sector including Cell C

68 [2012] ZANCT 4

69 See in particular Joseph v City of Johannesburg 2010 (4) SA 55 (CC); Bengwenyana Minerals (Pty) Ltd v Genorah Resources 2011 (4) SA 113 (CC); Matatiele Municipality v President of South Africa [2006] ZACC 12; 2007 (6) SA 477 (CC) and S v Smit 2008 (1) SA 135 (T).

70 1987 (1) 483 (Ck GD) 483.

71 Para 45.1 of the Applicant’s Heads of Argument

72 [2012] ZANCT 9