Soulever Well CC t/a Bellabaci v National Consumer Commission (NCT/159598/2020/101(1)) [2021] ZANCT 16 (30 May 2021)

IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN CENTURION

Case Number: NCT/159598/2020/101(1)

In the matter between:

SOULEVER WELL CC t/a BELLABACI APPLICANT

AND

NATIONAL CONSUMER COMMISSION RESPONDENT

Coram:

Dr L. Best: Presiding Tribunal member

Adv F. Manamela: Tribunal Member

Mr A Potwana: Tribunal Member

Date of hearing: 27 May 2021 via Teams electronic platform

JUDGMENT AND REASONS

APPLICANT

1. The Applicant is Soulever Wellness CC trading as Bellabaci (the “Applicant,”) a private company duly registered and incorporated in terms of the company laws of South Africa with company registration 2003/023861/23 with its principal place of business at 7 Marinus Road, Beacon Business Park, Unit 8, Marconi Beam, Cape Town, South Africa.

2. Mr Herbert, an attorney, represented the Applicant at the hearing.

RESPONDENT

3. The Respondent is the National Consumer Commission (the “NCC”) an organ of state established in terms of section 85(1) of the Consumer Protection Act 68 of 2008 (the "CPA") having its registered address at SABS Offices, 1 Dr Lategan Road, Groenkloof, Pretoria, (hereinafter the “Respondent” or the “NCC”.)

4. Mr Biyana, a Senior Legal Advisor in the employ of the NCC represented the Respondent at the hearing, joined by Mr Joseph Selolo, the Acting Commissioner of the NCC.

APPLICATION TYPE AND JURISDICTION

5. This is an application to the National Consumer Tribunal (the “Tribunal”) in terms of section 101(1) of the CPA, for an order to review or set aside a Compliance Notice issued by the NCC in terms of section 100, read with Regulation 42 of the CPA. The said Compliance Notice is dated 17 April 2020.

6. The application was filed on 4 May 2020 with the Tribunal’s Registrar (the “Registrar”) using Form TI.r30A and Form 60(3) & 101 CPA. The documents were served on the Respondent by email on the same day, with requisite consent to service by email.

7. In terms of section 27(a)(i) of the National Credit Act 34 of 2005 (NCA) the Tribunal has jurisdiction.

BACKGROUND

8. The Respondent received notification that a certain consignment that was being imported on or about 25 February 2020 through the Cape Town Port of Entry was detained by the Customs Department of the South African Revenue Services (“SARS”). The detention was on behalf of the Respondent in terms of section 113(8) of the Customs and Excise Act 91 of 1964.

9. The consignment contained 5000 shopping bags, each bag containing a label stating that they are made in South Africa. The basis of the detention was that the goods do not comply with the labelling requirements of Regulation 6 as published in Gazette number 293 of 1 April 2011 (the Regulations) published in terms of Section 120 (1) of the CPA.

10. The shopping bags do not comply with the CPA in the following manner:

10.1.The trade description applied to the goods states that the goods were made in South Africa which is likely to mislead consumers. This is a contravention of section 24(2)(a) read with section 110(1) of the CPA.

10.2. The goods do not conform to the South African national standards for fibre content and care labelling as required in terms of the provisions of Government Notice No. 2410 of 2000, published in the Government Gazette of 30 June 2000.

11. The Respondent directed Inspector Ntsako Khoza to investigate the Applicant’s activities in relation to the consignment. The Inspector found that the Applicant contravened provisions of the CPA relating to product labelling and trade descriptions, and recommended that enforcement action be taken against the Applicant.

12. Accordingly, on 17 April 2020 the Respondent issued a Compliance Notice to the Applicant which stated that the contents of the Applicant’s consignment does not comply with section 3(1)( e) and section 24(2)(a) read with Regulation 6(1)(b) of the CPA.

13. The Compliance Notice further detailed out the steps the Applicant was required to take in order to satisfy the notice, in that the Applicant is required to:

13.1. remove the goods to their country of origin at its own cost within 15 business days of receipt of the Compliance Notice; alternatively;

13.2. destroy the goods locally at an accredited destruction at its own cost within 15 business days of receipt of the Compliance Notice; and

13.3. refrain from importing goods, into the Republic of South Africa, in contravention of the following provisions of the CPA:

Section 3(1)( e); and

Section 24(2)(a) read with Regulation 6(1)(b)

THE APPLICANT’S SUBMISSIONS

14. Amy Opperman, the Applicant’s General Manager in charge of exports, deposed to the Applicant's founding affidavit, setting out the Applicant's case. In its affidavit the Applicant indicated that it manufactures health and beauty products and that all the products that the Applicant sells are made in South Africa. A large percentage of products are exported. The Applicant exhibits all its products at international Beauty Exhibitions and Expo’s hosted by the Department of Trade and Industry. The bags that are the subject of the Compliance Notice, were sourced with the sole intention to be used as give-aways as promotional material to customers outside of South Africa, on purchase of the Applicant’s products. The Applicant had no intention of selling the bags. The bags were not intended to be distributed to consumers in South Africa.

15. The Applicant selected a manufacturer in China and placed an order for the importation of 5000 branded shopping bags. This was the first time that the Applicant was doing business with this manufacturer. The Applicant confirmed that there was no principal and agent relationship between the Applicant and the manufacturer. The true nature of the contract between the two parties was simply one of letting and hiring of services (locatio conductio operis).

16. The Applicant requested the manufacturer to place a label inside the bag reflecting the Applicant’s contact details and that all the Applicant’s beauty products are made in South Africa.

17. The Applicant only became aware that the information on the label was incorrect when SARS advised the Applicant that the bags would not be released to the Applicant due to compliance concerns. The bags were found to contain a label stating “Made in South Africa”.

18. The Applicant at no point instructed the manufacturer that the label should state that the bags were manufactured in South Africa. The Applicant had no intention of having such a label in the bags, or stating anything about the nature of the bag itself. The Applicant did not knowingly cause the label to state that the bags were made in South Africa. The bags were not intended to be sham goods or illegal in any way and all was done honestly and in an upfront manner.

19. The Applicant was at pains to explain that it is a small and hard-working business contributing to the country’s economy, but is experiencing financial strain. Destroying or returning the bags to the manufacturer would cause the Applicant to suffer losses that it cannot afford and that would negatively affect business viability.

20. The Applicant seeks an order setting aside the compliance notice; alternatively to modify it such that the Applicant can rectify the situation by removing the labels in the bags at a suitable facility acceptable to the Respondent; whereafter the bags are released to the Applicant.

THE RESPONDENT’S SUBMISSIONS

21. The Respondent opposed the Applicant’s review application on the basis that the Applicant does not establish valid grounds for the review of the Compliance Notice.

22. The Respondent contends that the Compliance Notice may only be reviewed on two main grounds, namely:

22.1. Where the Compliance Notice does not comply with any or all of the requirements of Section 100 of the CPA; and

22.2. Where the Compliance Notice does not comply with the Promotion of Administrative Justice Act (“PAJA”), and on the grounds mentioned in Section 6(2) of PAJA.

23. The Respondent submits that a Compliance Notice does not comply with any or all of the requirements of Section 100 of the CPA if:

23.1. The Compliance Notice was issued without an investigation being conducted;

23.2. In respect of a conduct where the CPA does not apply;

23.3. The Compliance Notice is addressed to a wrong party;

23.4. The Compliance Notice lacks details of the nature and extent of the alleged prohibited conduct; or

23.5. Where the Compliance Notice has been issued for an ultra vires purpose.

24. The Respondent contends that the Compliance Notice issued complies with all of the requirements of section 100, as follows:

24.1. The Respondent caused an investigation to be conducted upon receipt of a notification from SARS that the consignment of bags imported by the Applicant was being held due to concerns regarding compliance with the CPA. The Respondent views the SARS notification as a complaint. The Inspector’s report is part of the record that the Respondent uses to compile a case and can be availed if so directed by the Tribunal; and

24.2. The Compliance Notice is correctly issued to the Applicant and pointedly details the contraventions of the Act, namely section 3(1)( e) and section 24(2)(a) read with Regulation 6(1)(b). This indicates that the CPA clearly applies.

25. The Respondent thus avers that the Compliance Notice issued complies, in all material respects, with the requirements of section 100 of the CPA and there is thus no valid grounds for review on the basis of non-compliance.

26. The Respondent avers that the Applicant does not allege non-compliance with PAJA and therefore does not establish valid grounds for review of the Compliance Notice in this regard.

27. The Respondent submits that section 73(1) of the CPA makes provision for issuing a Compliance Notice in circumstances where, as is the case in this matter, after concluding an investigation, the Commission believes that a person is engaged in prohibited conduct. After concluding the investigation, the Inspector made findings of prohibited conduct on the part of the Applicant and the Respondent was therefore empowered to issue a Compliance Notice.

28. The Respondent avers that the manufacturer, acting on behalf of the Applicant, applied a trade description stating that the bags were made in South Africa, knowing fully well that they were not made in South Africa. The Respondent submits that there is a principal and agent relationship between the Applicant and the manufacturer. Therefore the Applicant can be held vicariously liable for the actions of the manufacturer as envisaged under section 113 of the CPA.

29. The Respondent submits that Regulation 6(2) makes it clear that the goods imported for marketing purposes are not excluded from labelling requirements. It is also clear that the labels attached to the goods are misleading. In the circumstances of this matter, the Respondent submits that it is empowered to issue the Compliance Notice and the steps required of the Applicant are justified.

30. The Respondent argued that the Applicant’s intention to rectify the non-compliance by removing the labels in the bags is problematic as this would require completion of the import of the goods, which would be in contravention of the CPA.

31. The Respondent avers that the Applicant’s grounds for review of a Compliance Notice cannot stand in law because they do not constitute valid grounds for the review or setting aside of a Compliance Notice. The Respondent asks the Tribunal to dismiss the Applicant’s grounds for the review application and that the Compliance Notice be confirmed and the Applicant be ordered to comply therewith.

THE LAW

32. Section 3(1)( e) of the CPA states:

“The purposes of this Act are to promote and advance the social and economic welfare of consumers in South Africa by improving consumer awareness and information and encouraging responsible and informed consumer choice and behaviour.”

33. Section 24(2)(a) of the CPA states:

“A person must not knowingly apply to any goods a trade description that is likely to mislead the consumer as to any matter implied or expressed in that trade description.”

34. Section 71(2)(b)(ii) of the CPA states:

“The Commission may directly initiate a complaint concerning any alleged prohibited conduct on its own motion, or on the request of another regulatory authority.”

35. Section 101(2) of the CPA states: –

After considering any representations by the applicant and any other relevant information, the Tribunal may confirm, modify or cancel all or part of a notice.

36. Section 113(1) of the CPA states: –

“If an employee or agent of a person is liable in terms of this Act for anything done or omitted in the course of that person’s employment or activities on behalf of their principal, the employer or principal is jointly and severally liable with that person.”

37. Regulation 6(1)(b) of the CPA Regulations states: –

“In order to assist consumers in making informed decisions or choices, for purposes of subsections (4) and (5) of section 24 of the Act and subject to subregulation (2), the importation into or the sale in the Republic of the goods specified in Annexure “D”, irrespective of whether such goods were manufactured or adapted in the Republic or elsewhere, is prohibited unless such goods conform to the South African national standards for the fibre content and care labelling in accordance with the provisions of Government Notice 2410 of 2000, published in the Gazette of 30 June 2000.”

ANALYSIS

38. The Respondent received notification from SARS as envisaged under Regulation 35(1)(a), alleging prohibited conduct on the part of the Applicant through contraventions of the CPA, specifically section 24(2)(a) read with Regulation 6(1)(b).

39. The Respondent initiated an investigation. The investigation report confirmed the Applicant’s non-compliance with the CPA and the Respondent resultantly issued the Compliance Notice.

40. Section 3(1)( e) of the CPA is listed in the Compliance Notice as one of the provisions of the CPA with which the Applicant did not comply. The Tribunal has considered that this provision explicitly states that, “The purposes of this Act are to promote and advance the social and economic welfare of consumers in South Africa[1] by improving consumer awareness and information and encouraging responsible and informed consumer choices and behaviour.” In addition, the Tribunal has considered that Regulation 6(1) states that “In order to assist consumers make informed decisions or choices…” In view of the fact that the bags were not intended for the South African consumer but for the export market as promotional material – which the Respondent did not deny - the Tribunal is of the view that these legal provisions do not apply to the facts in this case.

41. Section 24(2)(a) states unequivocally that a person “may not knowingly apply to any goods a trade description that is likely to mislead the consumer as to any matter implied or expressed in that trade description.” [own emphasis]. The Collins English Dictionary[2] explains the meaning of knowingly as: “If you knowingly do something wrong, you do it even though you know it is wrong. Synonyms for knowingly are: deliberately, purposely, consciously, intentionally.”

42. There are no facts to suggest that the Applicant requested the manufacturer to attach a label stating that the bags were “Made in South Africa”; or that the manufacturer attached the label on behalf of the Applicant. The Applicant submitted that the first it knew about the incorrect label was when its goods were not released by SARS and the Applicant then received the Compliance Notice from the Respondent. The Tribunal is satisfied that that there was no intent on the part of the Applicant to deliberately and purposely apply a non-compliant trade description.

43. In its answering affidavit, the Respondent does not dispute the Applicant’s version that the manufacturer erroneously applied the incorrect label on the bags. In fact, in paragraph 8.1 of its answering affidavit, the Respondent stated that it did not know “the circumstances under which the non-compliant label was attached” to the bags. Nothing in the parties’ submissions indicates that the Applicant personally knew that the manufacturer would apply incorrect labelling. Instead, during the hearing, Mr Biyana argued that the Applicant should be held vicariously liable for the actions of the manufacturer.

44. It is clear that the relationship between the Applicant and the manufacturer was that of service provision, and not one in which a principal bestows upon an agent the authority to perform legal, contractual, or juristic acts on behalf of the principal, concerning third parties. Accordingly, there is no principal and agent relationship between the Applicant and the manufacturer. It is further common cause that there was no employer – employee relationship either. The Applicant can therefore not be held vicariously liable for the actions of the manufacturer as envisaged under section 113 of the CPA.

CONCLUSION

45. As stated in paragraph 40 above, the provisions of section 3(e) and regulation 6 of the CPA do not apply to the facts of this case. Further, there is no evidence that the Applicant knowingly contravened section 24(2)(a) of the CPA.

ORDER

46. After considering all the submissions made by the parties, the Tribunal makes the following order:

46.1The Compliance Notice is cancelled and set aside; and

46.2 No order is made regarding costs.

DATED ON THIS 30th DAY OF MAY 2021

DR L. BEST

PRESIDING MEMBER

Adv F. Manamela (Tribunal Member) and Mr A. Potwana (Tribunal Member) concurring.

[1] Emphasis added.

[2] https://www.collinsdictionary.com/dictionary/english/knowingly [accessed 30 May 2021]