Gammatek SA (Pty) Ltd v Acting Chief Executive Officer of the National Regulator for Compulsory Specifications and Others (43585/2017) [2017] ZAGPPHC 644 (23 August 2017)

IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

Case No: 43585/2017

Date: 23/08/2017

In the matter between:

GAMMATEK SA (PTY) LTD

Applicant

and

THE ACTING CHIEF EXECUTIVE OFFICER

OF THE NATIONAL REGULATOR FOR

COMPULSORY SPECIFICATIONS

First Respondent

THE NATIONAL REGULATOR FOR COMPULSARY

SPECIFICATIONS

Second Respondent

THE COMMISSIONER FOR THE SOUTH AFRICAN

REVENUE SERVICE N.O.

Third Respondent

THE MINISTER OF TRADE AND INDUSTRY N.O .

Fourth Respondent

JUDGMENT

D S FOURIE, J:

[1] This is an urgent application in terms whereof the applicant ("Gammatek") seeks a declaratory order to the effect that Gammatek's Power Bank products do not fall within the scope of a certain Compulsory Specification and that Gammatek was therefore not required to obtain pre­ approval from the second respondent ("the NRCS") for the importation and sale of the products in South Africa. Gammatek also seeks an order setting aside the NRCS' detention of the products and the subsequent releasing thereof under embargo.

[2] There is also an application by Gammatek to strike out paragraph 37 of the answering affidavit (as well as the annexure thereto) on the basis that both constitute inadmissible hearsay evidence. Gammatek also relies in its founding affidavit on “the constitutionally protected right to receive equal treatment” to that afforded to other importers of products. During argument it was indicated by counsel acting for Gammatek that he will not proceed with the application to strike out, neither will his client rely on any constitutional issue. In opposing the application, the NRCS has raised (regardless of the merits) a preliminary and self-standing objection, viz that Gammatek's application amounts to an impermissible review of the NRCS' decision to detain its products and the subsequent release thereof subject to embargo..

BACKGROUND

[3] Gammatek is a distributor of branded technology accessories in South Africa. The products that Gammatek distributes are imported by it from suppliers that are situated in East Asia, including Hong Kong and the People's Republic of China. The products in question are Power Bank products which are portable batteries incorporating the latest lithium polymer technology that are used to charge or power electronic devices such as tablets and smart phones.

[4] The Power Bank products were shipped in a container from Hong Kong to Durban, arriving on 18 May 2017. On 23 May 2017 the NRCS inspected the Power Bank products and then decided to detain these products for purposes of testing them according to certain safety standards. Later the NRCS agreed to release the Power Bank products under embargo. A release under embargo means that the Power Bank products may not be sold. The main issue on the merits relates to the question whether, on a proper interpretation of the Compulsory Specification for electrical and electronic apparatus, the Power Bank products fall within the scope of this specification.

THE STATUTORY FRAMEWORK

[5] The NRCS was established on 1 September 2008 as an agency of the Department of Trade and Industry and emerged as an independent organisation from the original regulatory division of the South African Bureau of Standards. In order to enable the NRCS to effectively undertake its duties, the National Regulator for Compulsory Specifications Act, No 5 of 2008 and the Legal Metrology Act, No 9 of 2014 were promulgated. These two Acts define the mandate of the NRCS and furthermore provide the scope and authority for the work of the NRCS. As the National Regulator, its broad mandate is to protect public health, safety environment and promote fair trade through the enforcement of Compulsory Specifications and technical regulations. In terms of the Public Finance Management Act, No 1 of 1993 the NRCS is also a National Public Entity (Part A of Schedule 3).

[6] The Compulsory Specification in question is "VC 8055" published by Government Notice No R89 of 16 February 2009. This is the Compulsory Specification for electrical and electronic apparatus. It seeks to regulate the safety of electrical and electronic products that have a rated voltage of not more than 500V AC (alternating current) or DC (direct current). The effect of VC 8055 in terms of section 14 of the NRCS Act, is that all products that are within the scope of the Compulsory Specification shall not be imported, sold or supplied in South Africa unless these products comply with the requirements of the Compulsory Specification.

As a result, all products that are within the scope of the Compulsory Specification must be pre-approved by the NRCS.

NATURE OF THE APPLICATION AND RELIEF SOUGHT

[7] As already pointed out above, the relief sought by the applicant is, first, that of a declaratory order (that the Power Bank products do not fall within the scope of the Compulsory Specification) and, second, that the detention of the Power Bank products be set aside and these products be released without embargo. The relief sought is therefore of a final nature.

[8] It is common cause that on 23 May 2017 the NRCS's inspection team inspected the Power Bank products in the container. Consequent upon this inspection the NRCS detained the Power Bank products. Later these products were released under embargo which means that they may not be sold by Gammatek.

[9] According to the deponent on behalf of the NRCS their inspection team detained various containers that they suspected to contain products that are regulated in terms of the NRCS Act, including the Power Bank products. In a letter dated 9 June 2017 and addressed to Gammatek's attorneys the NRCS explained the reasons why it held the view that the Power Bank products fall within the scope of the Compulsory Specification and why Gammatek required a letter of authorisation from the NRCS. According to Gammatek the detention of the Power Bank products is unlawful as these products do not fall within the scope of the Compulsory Specification. Therefore, so it is contended, the NRCS has no valid reason or basis in law to detain these products and should be ordered to release them without embargo.

[10] It has been contended in the answering affidavit, having regard to the above mentioned facts and circumstances,

that this is an incompetent and impermissible review application in which Gammatek has failed to plead its case properly

in terms of the Promotion of Administrative Justice Act, No 3 of 2000 ("PAJA"). In answer thereto Gammatek points out in its replying affidavit that the relief sought in the notice of motion speaks for itself and " this application is not a review application".

DISCUSSION

[11] Administrative action may be performed by an organ of State when exercising any power in terms of the Constitution (or a Provincial

Constitution) or when exercising public powers or performing public functions in terms of legislation (section 239 of the Constitution).

By contrast, natural or juristic persons may perform administrative action whenever they exercise public powers or functions in terms of an empowering provision (section 1 of PAJA).

[12] The NRCS has been established by section 3(1) of the National Regulator for Compulsory Specifications Act, No 5 of 2008 and in terms of sub-section (2) it is a juristic person. It is also a National Public Entity (par 5 supra). In terms of section 5 of the said Act the objects of this entity are, amongst others, to administer and maintain Compulsory Specifications and also to enforce compliance with those Compulsory Specifications. It is therefore exercising public powers and performing public functions in terms of legislation. Taking into account these considerations, it appears to me that the NRCS is an organ of State within the meaning of sec 239 of the Constitution and sec 1 of PAJA.

[13] It can hardly be disputed that the detention notice and subsequent release under embargo of the products in question pre-suppose and clearly imply that a decision(s) by representatives of the NRCS had been taken in this regard. Furthermore, the declaratory relief and the order sought to release the products without embargo are interlinked. Put differently, the order sought that the products be released without embargo are dependent upon a declaratory order that the products do not fall within the scope of the Compulsory Specification. For such an order to be granted, I have to conclude that the decision(s) of the NRCS to detain these products and later to release them under embargo, was unlawful as contended for by Gammatek.

[14] Was the decision to detain the products in question and to release them under embargo an

administrative action? The definition of " administrativeaction" in PAJA (insofar it is relevant) refers to any decision taken by an organ of State when exercising a public power or performing a public function in terms of any legislation which adversely affects the rights of any person and which has a direct and external legal effect. Both these requirements, i.e. "which adversely affects the rights" and "direct (and) external legal effect" have been explained as follows by Nugent JA in Grey's Marine Hout Bay (Pty) Ltd v Minister of Public Works [2005] ZASCA 43; 2005 (6) SA 313 (SCA) at par 23:

"The qualification, particularly when seen in conjunction with the requirements that it must have a 'direct and external legal effect', was probably intended rather to convey that administrative action is action that has the capacity to affect legal rights, the two qualifications in tandem serving to emphasise that administrative action impacts directly and immediately on individuals".

[15] The decision to detain the products in question and to release them under embargo has not only the capacity to affect legal rights, but in this case those rights have indeed been affected. This decision(s) has direct and immediate consequences for the business of Gammatek. It has been pointed out on behalf of Gammatek that for so long as it is unable to sell the Power Bank products, Gammatek is unable to gainfully profit from the high demand for these products. I therefore conclude that the NRCS's decision(s) to detain the goods and to release them under embargo amounts to administrative action within the meaning of PAJA. The provisions of PAJA therefore apply.

[16] The next question to be considered is whether a litigant is entitled to avoid instituting review proceedings under PAJA when PAJA is applicable? In Sita v Gijima Holdings 2017 (2) SA 63 (SCA) one of the parties also applied for declaratory relief without relying on the provisions of PAJA. In that case the parties entered into a settlement agreement in terms of which they agreed that Gimija would render certain services to the Department of Defence. Later, in response to Gijima's claim for payment, Sita pleaded that the agreement was invalid and unenforceable for want of compliance with section 217 of the Constitution. Sita then applied for a declaration of invalidity, but the application was dismissed on the ground that Sita ought to have proceeded under PAJA, rather than relying directly on the constitutional principle of legality. On appeal Cachalia JA said the following (in par 32) in this regard:

"It is important to bear in mind that Sita did not institute review proceedings by using Uniform Rule 53 either under PAJA or directly under the Constitution on the ground of legality. If it had, it would have had to have made the complete record available to Gijima and the Court ... Instead it applied for declaratory relief, which in substance is a legality review ... ".

[17] It was then pointed out (in par 33) by the learned Judge of Appeal that it is necessary to distinguish between a PAJA review, on the one hand and a legality review, on the other. PAJA was enacted to give effect to the right to lawful administrative action in section 33 of the Constitution. The Court then continued as follows:

"So, PAJA covers administrative action while private (contractual) power remains reviewable at common law. In short, if

the unlawful administrative action falls within PAJA's remit there is no alternative

pathway to review through the common law".

[18] It was also emphasized in that judgment (par 36) that if a litigant or a Court could simply avoid having to conduct the sometimes testing analytical enquiry into whether the action complained of amounts to administrative action, the consequence of this would be that the principle of legality would become the preferred choice of litigants and the Courts, as a result whereof PAJA would fall into desuetude (par 37 of the judgment). It was then concluded (in par 38) that:

"... the proper place for the principle of legality in our Jaw is for it to act as a safety net or a measure of last resort when the law allows no other avenues to challenge the unlawful exercise of public power."

[19] The facts of the case before me and the relief sought by Gammatek clearly demonstrate why Gammatek should not be allowed to bypass PAJA. It has been contended in the founding affidavit that the detention of the Power Bank products was unlawful as these products do not fall within the scope of the compulsory specification and "because the second respondent has no other valid reason or basis in Jaw to detain the same". The same argument has been raised with regard to the alleged unlawful releasing of the Power Bank products under embargo. This, in my view, is another way of saying that the employees of the NRCS acted ultra vires an empowering provision or by reason of a functionary exceeding his or her powers to detain the goods in question and by releasing them later under embargo. This is a legality challenge under the guise of an application for declaratory relief.

[20] Gammatek did not institute review proceedings by using Rule 53 either under PAJA or even under the Constitution on the ground of legality, bearing in mind the latter procedure is only available as a measure of last resort as explained in Sita vs Gijima Holdings, supra. Gammatek ought to have instituted review proceedings under PAJA, rather than relying on the principle of legality styled as an application for declaratory relief (cf also Minister of Health vs New Clicks SA (Pty) Ltd 2006 (2) SA 311 (CC) par 96 and 97). The application can therefore not succeed. In view of this conclusion , it is not necessary (or even competent) for me to decide the merits of the application or any of the other issues (save for the one referred to herein below).

[21] There still remains the issue with regard to costs which have been reserved on 25 July 2017. The background is, briefly stated, on that date this application was referred to a special Court as the papers exceeded the maximum of 500 pages in the urgent court, which is the limit in terms of the Practice Directive of this Division. I do not think it is possible to determine who is to be blamed for the fact that this matter had to be referred to a special Court. Under the circumstances I am of the view that no order should be made with regard to the costs reserved on 25 July 2017.

ORDER

In the result I make the following order:

1. The application is dismissed with costs, including the costs consequent upon the employment of two counsel where so employed;

2. With regard to the costs reserved on 25 July 2017, there shall be no order for costs.

____________________________

D S FOURIE

JUDGE OF THE HIGH COURT

PRETORIA

Date: 23 August 2017

GAMMATEK