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Telkom South Africa Ltd v National Consumer Commissioner (NCT/2791/2011/101(1)(P), NCT/3222/2011/101(1)() [2013] ZANCT 9 (15 April 2013)

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IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN CENTURION

CASE NUMBERS: NCT/2791/2011/101(1)(P) AND NCT/3222/2011/101(1)(P)

DATE:15/04/2013

IN THE MATTER BETWEEN:


TELKOM SOUTH AFRICA LTD …..............................................APPLICANT


AND


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


CORAM:

PROF. B. DUMISA (PRESIDING)

PROF. T. WOKER (MEMBER)

MS. P. BECK (MEMBER)


Date of Hearing: 22 February 2013



REASONS FOR JUDGMENT



INTRODUCTION


  1. The Applicant, represented by Mr N Ferreira is Telkom South Africa LTD, a public company with limited liability incorporated in South Africa (“the Applicant”).


  1. The Respondent is the National Consumer Commission established in terms of section 85 of the Consumer Protection Act, Act 68 of 2009 (“CPA”) (“the Respondent”).


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


  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. This judgment follows the hearing of this matter on 22 February 2013 at the offices of the Tribunal in Centurion. The judgment is based largely on written submissions as well as oral arguments and written heads of argument by the Applicant. The Respondent did not oppose the application.


THE FACTS


  1. On 19 April 2011, the Respondent informed the Applicant that it intended to conduct an investigation into the information and technology sector.2


  1. On 21 April 2011 the Applicant provided its fixed line and mobile service contracts to the Respondent and informed the Respondent that it was in the process of reviewing and revising all its consumer agreements to bring them into line with the CPA.3


  1. During June 2011 the Respondent sent an analysis report to the Applicant in which it requested a meeting to discuss the Applicant’s consumer contracts.4


  1. The parties met on 24 June 2011 to discuss the findings of the preliminary analysis of the Applicant’s subscriber agreement. At no stage in the meeting were the representatives of the Applicant informed that a formal investigation have been initiated by the Respondent in terms of section 71 of the CPA, nor were the representatives asked to consider signing a consent order.5


  1. On 28 June 2011 the Applicant sent a letter to the Respondent confirming the meeting and undertaking to review and amend its consumer’s agreements to ensure compliance with the Act within 3 months.6


  1. On 15 July 2011 the Respondent sent a draft consent order to the Applicant.


  1. The Applicant responded on 21 July 2011 and informed the Respondent that it was not prepared to sign the consent order because inter alia, it had never been notified that any compliant or investigation against it had been initiated.7


  1. Two compliance notices were issued on 25 August 2011.


SECTIONS IN THE ACTS


  1. The following sections of the CPA are applicable to this matter:


14.1 Section 72


72 Investigations by Commission

  1. Upon initiating or receiving a complaint in terms of this Act, the Commission may –

  1. Issue a notice of non-referral to the complainant in the prescribed form, if the complaint –

  1. Appears to be frivolous or vexatious ;

  2. Does not allege any facts which, if true, would constitute grounds for a remedy under this Act; or

  3. Is prevented, in terms of section 116, from being referred to the Tribunal ;

  1. Refer the complaint to an alternative dispute resolution agent, a provincial consumer protection authority or a consumer court for the purposes of assisting the parties to attempt to resolve the dispute in terms of section 70, unless the parties have previously and unsuccessfully attempted to resolve the dispute in that manner ;

  2. Refer the complaint to another regulatory authority with jurisdiction over the matter for investigation; or

  3. Direct an inspector to investigate the complaint as quickly as practicable, in any other case.

  1. At any time during an investigation, the Commission may designate one or more persons to assist the inspector conducting the investigation contemplated in subsection (1).


14.2 Section 73


73 Outcome of the investigation

  1. After concluding an investigation into a complaint the Commission may-

  1. Issue a notice of non-referral to the complainant in the prescribed form ;

  2. Refer the matter to the National Prosecuting Authority, if the Commission alleges that a person has committed an offence in terms of this Act ; or

  3. If the Commission believes that a person has engaged in prohibited conduct –

  1. Refer the matter to the equality court, as contemplated in section 10, if the complaint involves a matter in terms of Part A of Chapter 2 ;

  2. Propose a draft consent order in terms of 74 ;

  3. Make a referral in accordance with subsection (2) ;

  4. Issue a compliance notice in terms of section 100…”


14.3 Section 100


100 Compliance Notices

  1. Subject to subsection (2), the Commission may issue a compliance notice in the prescribed form to a person or association of persons whom the Commission on reasonable grounds believes has engaged in prohibited conduct.

  2. Before issuing a notice in terms of subsection (1) to a regulated entity, the Commission must consult with the regulatory authority that issues a licence to that regulated entity.

  3. A compliance notice contemplated in subsection (1) must set out –

  1. The person or association to whom the notice applies ;

  2. The provisions of this Act that has not been complied with ;

  3. Details of the nature and extent of the non-compliance ;

  4. Any steps that are required to be taken and the period within which those steps must be taken ; and

  5. Any penalty that may be imposed in terms of this act if those steps are not taken…”

14.4 Section 101

101 Objection to notices

  1. Any person issued with a notice in terms of section 100 may apply to the Tribunal in the prescribed manner and form to review that notice…”


PROCESS AT THE HEARING


  1. Although the Respondent initially indicated that it did intend to oppose the application for cancellation of the compliance notices,8 the Respondent has never filed a replying affidavit, nor did the Respondent attend the hearing. As the matter has never been opposed by the Respondent, the Applicant’s allegations must be regarded as common cause.9


ISSUE TO BE DECIDED BY THE TRIBUNAL


  1. The issue which the Tribunal must decide is whether the compliance notices have been issued in accordance with the law. The Respondent is an organ of state within the public administration.10 As stated by Stelzner AJ in Rael Levitt and others v The National Consumer Commission and others11 it must exercise the functions assigned to it in terms of the Act in accordance with the Constitution.


APPLICANT’S SUBMISSIONS


  1. The Applicant submits that the compliance notices are invalid and fall to be cancelled because:

    1. The Respondent failed to conclude its investigation under section 72 of the Act before issuing the compliance notice. In particular the Respondent failed:

      1. To assign an inspector to investigate the complaint as per section 72 (1) (d) of the Act:

      2. To advise the Applicant that it was under investigation;

      3. To specify the nature of the complaint against the Applicant; and

      4. To afford the Applicant the opportunity of putting its case before the Respondent and to respond to the allegation that it had breached the Act.


  1. The Respondent failed to demonstrate that it conducted any meaningful consultation with the Independent Communications Authority of South Africa (ICASA) prior to issuing the compliance notice, as is mandatory under the Act. The Applicant did not dispute that it was a regulated entity but submitted than any consultation conducted by the Respondent with ICASA was not meaningful or genuine and thus did not satisfy the requirement of consultation under section 100 (2). The Applicant referred to a number of decisions where the issue of what constitutes meaningful consultation has been discussed12 and pointed out that this Tribunal in Multichoice Africa (Pty) Ltd v NCC13 endorsed these principles.


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 Commission and Cell C v National Consumer Commission14. 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 Reconciliation15 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.16

  3. In Fedsure Life Assurance Ltd v Greater Johannesburg Transitional Metropolitan Council,17 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”18 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”.19

  4. In S v Mabena20 Nugent J stated as follows:

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 Exchange21 a law unto themselves.22

  2. The Act empowers the Respondent to investigate complaints relating to consumer matters. In terms of section 72, the Respondent may on its own initiative decide to investigate a matter23 and it may appoint an investigator to investigate the matter.24 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.25

  3. 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:

    1. 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

    2. before the compliance notice is issued,26 the Respondent must consult with the regulatory authority that issued a license to that regulated entity.

  4. 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).27 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.”

  5. This Tribunal has held in previous decisions that the decision of the Respondent to issue a compliance notice qualifies as administrative action.28 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.

  6. 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.


ANALYSIS OF FACTS AND LAW

  1. The Applicant has asserted that the Respondent did not conduct an investigation prior to issuing a compliance notice and that it did not engage with ICASA in meaningful consultation as required by the Act. These facts have not been disputed by the Respondent and therefore the Applicant’s version must be accepted. The question which must then be answered is whether these procedural irregularities are fatal to the compliance notices.

  2. As stated above, the actions of the Respondent qualify as administrative action. That being so the serving of compliance notices must be lawful, reasonable and procedurally fair. In the recent Supreme Court of Appeal decision of DA v Ethekwini Municipality29 the Court held (at 160D) that a fundamental principal derived from the rule of law itself, is that the exercise of all public power, be it legislative, executive or administrative is only legitimate when it is lawful. “This tenet of constitutional law which admits no exception, has become known as the principle of legality” (Per Brand JA) which is discussed above. The principle of legality requires that decisions must satisfy all legal requirements and procedures and should not be arbitrary or irrational.


Failure to conduct an investigation

  1. In City of Johannesburg v the National Consumer Commission30 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 Act which deal with investigations by the Commission and compliance notices.31 This issue was extensively canvassed by the Tribunal in the Johannesburg City Council 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:

    1. establish the facts of the complaint;

    2. 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;32

    3. 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.

  2. In this matter the Respondent did not conclude an investigation before issuing the compliance notices.

Consultation with the regulatory authority.

  1. It is a procedural requirement (jurisdictional fact) 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). The Respondent has not disputed this


CONCLUSION


  1. The Tribunal concludes that the Respondent’s conduct in issuing the compliance notices was unlawful because did not follow the procedures as required by the Act. In particular the Respondent did not

35.1 conclude an investigation before issuing the compliance notices; nor

35.2 did it consult with the Regulatory Authority, ICASA.



ORDER


36 Accordingly the Tribunal makes the following order:

36.1 The compliance notices issued by the Respondent are hereby cancelled.

36.2 There is no order as to costs.



DATED THIS 15th DAY OF APRIL 2013



[signed]

________________

Prof T Woker

Tribunal Member.


Prof B Dumisa (Presiding Member) and Ms. P. Beck (Member) concurring.

1 Two compliance notices were issued by the respondent to the applicant on 24 August 2011. The first compliance notice was issued in respect of the terms and conditions of Telkom’s 8ta contract (case number NCT/2791/2011/101(1)(P) and the second was issued in respect of Telkom’s fixed line agreement (case number NCT/3222/2011/101(1)(P). The Applicant initially launched separate applications to review the compliance notices. The Tribunal consolidated the two applications on 24 January 2013 (see page 494 of the paginated papers).

2 Page 276 of the paginated papers.

3 Page 278 of the paginated papers.

4 Page 279 of the paginated papers.

5 Page 258 of the paginated papers.

6 Page 282 of the paginated papers.

7 Page 286.of the paginated papers

8 See for example page 128 of the paginated papers which contains a letter from the Respondent’s legal representatives appointed initially by the Respondent to deal with the matter.

9 Regulation 13 of the Tribunal’s Rules, requires that an answering affidavit provide grounds for the denial of certain facts or allegations contained in the founding affidavit. Regulation 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. This regulation is a codification of the rules for determining factual disputes on affidavit which has already been established by the courts and referred to the Supreme Court of Appeal decision in Wightman t/a JW Construction v Headfour (Pty) Ltd 2008 (3) SA 381 (SCA) where the court stated as follows:

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.”

10 Section 85 of the Act.

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

12 See Applicant’s heads of argument para 29.

13 NCT/3220/2011/101(1)(P)[2012] ZANCT4

14 NCT/2793/2011/101(1)(P) [2012] ZANCT 9 and NCT/2737/2011/101(1)(P) [2012] ZANCT 18

16 See Baxter Administrative Law (1984) 301.

18 At para 56.

19 At para 58.

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

23 Section 72 (1).

24 Section 72 (1) (d).

25 Section 73 (1) (c) (iv)

26 Section 100 (1).

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

28 See City of Johannesburg v National Consumer Commission Case No NCT/2667/2011/101(1)(P) and NCT/2081/2011/101(1)(P) [2012] ZANCT 6; Vodacom Service Provider Company (Pty) Ltd v National Consumer Commission Case No NCT/2793/2011/101(1)(P) [2012] ZANCT 9 and Cell C Pty Ltd v National Consumer Commissioner Case No NCT/2737/2011/101(1)(P) [2012] ZANCT 18. See also the 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 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.

30 NCT/2667/2011/101(1)(P) and NCT/2081/2011/101(1)(P) [2012] ZANCT 6)

31In particular sections 72, 73 and 100.