Volkswagen South Africa v National Consumer Commission (NCT/3913/2012/101(1)(P)CPA) [2013] ZANCT 10 (13 February 2013)

IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN CENTURION

Case number: NCT/3913/2012/101(1)(P)CPA

DATE:13/02/2013

In the matter between:

VOLKSWAGEN SOUTH AFRICA.................................................................APPLICANT

and

THE NATIONAL CONSUMER COMMISSION................................................RESPONDENT

Coram:

Ms D Terblanche – Presiding member

Mr F Sibanda – Member

Mr X May – Member

JUDGMENT AND REASONS

The Applicant in this matter is Volkswagen of South Africa (Pty) Limited (hereinafter referred to as “the Applicant”) with chosen domicilium citandi et executandi at Chris Baker and Associates, 46 Roosevelt Road, Glendinningvale, Port Elizabeth.

The Applicant‘s Founding Affidavit is deposed to by James Chipunza, Legal Advisor of the Applicant.

The Respondent is the National Consumer Commission, an organ of state within the public administration established in terms of Section 85 of the Consumer Protection Act (“the CPA”) with physical address at Berkley Office Park, 08 Bauhinia Street, Highveld Techno Park, Centurion (hereinafter “the Respondent”).

The Applicant was issued and served with a Compliance Notice by the Respondent. The Compliance Notice is dated 30 January 2012.

The Compliance Notice was issued in respect of complaints of alleged contraventions of section 40 and Schedule 2, Part 8 of the CPA brought against the Applicant.

On 03 March 2012, the Applicant filed an application with the Tribunal objecting to the compliance notice and requesting that it be reviewed in terms of Section 101(1) of the CPA and set aside.

Jurisdiction

This National Consumer Tribunal (Tribunal) has jurisdiction to hear this matter in terms of section 101 of the CPA.

This section 101 empowers the Tribunal, to confirm, modify or cancel all or part of a compliance notice.

Preliminary Matters

The Respondent failed to file its answering affidavit within the time allowed for in Rule 13(2) of the Rules for the proceedings of matters before the National Consumer Tribunal (“the Rules”)1

The Respondent purportedly applied for condonation for the late filing of its Answering Affidavit.

This purported condonation application was not brought properly before the Tribunal in that –

It appeared not to have been served on the Applicant as proof of service in terms of the Rules is not attached; and

The application was lodged in the form of Form T.I r34 and is accompanied by an unsigned affidavit

and it was accordingly not considered.

The Hearing

At the hearing the Applicant indicated to the Tribunal that the Respondent agreed to withdraw the Compliance Notice issued. Since the CPA only allows for the Respondent to issue a certificate of compliance after a party has complied with the compliance notice, not for cancellation after it issued same, it is accordingly not competent for the Respondent to withdraw same. It is within the discretion of the Tribunal to cancel a compliance notice issued by Respondent on application for review by the party against whom it is issued. The Applicant accordingly persisted with its application to the Tribunal to have the Compliance Notice set aside.

The matter was heard on 3 August 2012, on a default basis, and on consideration of the Applicant’s pleadings filed of record and oral submissions made by its counsel. Having stated the basis for adjudicating and determining this matter the Tribunal is nevertheless duty bound to consider all relevant and applicable legal principles in determining whether to grant the relief sought by the Applicant or not.

The Applicant based its application for the review of the compliance notice and for it to be set aside on the following basis–

The complaint had been resolved between the parties;

The Compliance Notice was issued without due regard to the Applicant’s version of events;

The Applicant denies any contravention of a repealed law or the Act, which empowers the Respondent to exercise any power in terms of a repealed law or act as provided for in Schedule 2, Item 8(1) of the Act and Section 40 of the Act respectively.

It is not a supplier of any goods or services and as such did not promote or supply the diagnostic or repair services or do so for consideration.

It was not a party to the transaction.

The Applicant’s obligations in terms of the vehicle had expired by the time the Complainant first lodged a complaint relating to the vehicle on 15 February 2010.

Before considering the law and the considerations applied by the Tribunal in coming to its final decision on this matter it is appropriate at this point to set out some background and applicable and relevant chronology of events.

On 19 February 2009 Mr. A. Varachia (hereinafter referred to as “the Complainant”) purchased a used 2005 R5 2.5 Touareg (hereinafter “the vehicle”) from the Barons Dealership Branch of Barloworld Motor (Pty) Limited (hereinafter referred to as “the Dealership”). The Applicant submits that the dealership is a legal entity entirely distinct from the Applicant.

The Applicant issues a manufacturer’s warranty on all new vehicles for a period of three years from the date of first registration of the vehicle or 120 000km, whichever occurs first. The date of first registration of the vehicle was 26 November 2005. As such, the warranty on the vehicle expired on 25 November 2008, whereafter the vehicle was no longer under a manufacturer’s warranty by the Applicant.

New vehicles are also covered by the Applicant’s Automation Plan (hereinafter the “VAP”) which covers the costs of maintenance and certain consumables for a period of 5 (five) years or 100 000km, whichever occurs first. In September 2009 the total distance travelled by the vehicle had exceeded 100 000km. The Applicant’s obligations in terms of the VAP accordingly fell away in September 2009.

The dealership offered additional insurance cover termed a “Mastercars Warranty”. The Complainant purchased this warranty. The Mastercars Warranty is underwritten by an insurer and administered by an independent administrator and is valid for a period of 2 (two) years from the date of being purchased. The “Mastercars Warranty” expired in February 2011.

Applicant submits that it was not a party to the Mastercars Warranty and that it attracts no obligation whatsoever in respect of the Mastercars Warranty. The Applicant submits that it did not supply, provide or promote the Mastercars Warranty, and that the Dealership did not act as the Applicant’s agent when supplying, providing or promoting such additional cover. The Applicant submits that the provision and extension of such additional cover was, in short, a matter entirely domestic to the Complainant and the Dealership.

The underwriting insurer in respect of the Mastercars Warranty was Santam Risk Finance Limited and the administrator was Motorite Insurance Administrators (Pty) Ltd.

The Complainant first lodged a complaint with regard to the vehicle on 15 February 20102. The Applicant submits that its obligations in respect of the vehicle had expired in their entirety by this stage.

Following upon certain initial repairs done by the Dealership it appeared that the vehicle’s cylinder head needed to be replaced. The Dealer estimated the costs of repairs in the vicinity of R146 795.92. On 28 March 2011 the Applicant, as a gesture of goodwill, offered to contribute approximately R90 000.00 towards the cost of the repairs and undertook to further cover the full costs of the parts required for the repairs. On 11 April 2011 the Complainant suggested in writing to the Applicant that his contribution to the costs of repairs should be limited to his budget of R5 000.00 in terms of the labour costs of having the vehicle repaired. On 13 April 2011, the Applicant, after considering the Complainant’s aforesaid correspondence, had a telephonic conversation with the Complainant during which it was agreed that the matter would be resolved on the basis that the Applicant would fund the entire balance of the repair costs save for the Complainant’s contribution of labour costs of R5 000.00.

The vehicle was subsequently repaired and returned to the Applicant on 12 May 2011.

The Applicant was of the view that repairing the motor vehicle on the abovementioned basis concluded the matter between the Applicant and Complainant.

On 23 May 2011 the Applicant received a notice of a complaint from the Respondent. The Applicant alleges in its founding affidavit that on 31 May 2011, it responded to the Commission confirming that an agreement had been reached with the Complainant on 13 April 2011 and that the matter had been resolved.

Applicant received a Notice of Conciliation for 8 August 2011 two days before the date set, and requested it be re-scheduled due to short notice (2 days). The conciliation was re-scheduled for 27 September 2011. The Applicant contacted the Complainant to establish the basis for the complaint and was informed that the complaint had been lodged before the alleged resolution of the matter and that there were no outstanding issues.

On 27 September 2011 the Applicant was advised by the Commission that it had received an email from the Complainant confirming that the matter had been resolved and that the Commission was withdrawing the matter.

Despite the aforementioned events, on 28 September 2011, the Applicant was advised by the Respondent that the Complainant will be pursuing the matter further.

On 29 September 2011 the Applicant addressed a communication to the Respondent stating that its email of the 28 September 2011 was in conflict with its letter of the 27 September 2011; reiterating that the matter was resolved; pointing out that the Applicant’s obligations in terms of the manufacturer’s warranty had expired and requesting that the matter be disposed of without incurring further costs.

A further telephonic conciliation took place on 20 October 2011 where the Applicant provided the conciliator with the details of the interactions it had with the Complainant and the background of the matter. No further interactions took place between the parties.

Subsequent to such conciliation the Commission issued the Applicant with a Compliance Notice, in terms of which the Applicant is requested to refund the Complainant the amount of R5 000.00 that he paid the Applicant towards the repairs.

Application of Law to Facts

The question is whether the complaint was resolved between the parties and whether the Respondent took the Applicant’s version into account as instructed by the options available to the Respondent as contained in section 99 of the CPA.

Section 99 sets out the various functions of the Respondent in executing its enforcement functions. These functions are –

“99 Enforcement functions of the Commission

The Commission is responsible to enforce this Act by-

Promoting informal resolution of any dispute arising in terms of this Act between a consumer and a supplier, but is not responsible to intervene in or directly adjudicate any such dispute;

Receiving complaints concerning alleged prohibited conduct or offences, and dealing with those complaints in accordance with Part B of Chapter 33;

Monitoring-

The consumer market to ensure that prohibited conduct and offences are prevented, or detected and prosecuted; and

The effectiveness of accredited consumer groups, industry codes and alternative dispute resolution schemes, service delivery to

consumers by organs of state, and any regulatory authority exercising jurisdiction over consumer matters within a particular

industry or sector;

Investigating and evaluating alleged prohibited conduct and offences;

Issuing and enforcing compliance notices;

Negotiating and concluding undertakings and consent orders contemplated in section 74;

Referring to the Competition Commission any concerns regarding market share, anti-competitive behaviour or conduct that may be prohibited in terms of the Competition Act, 1998 (Act 89 of 1998);

Referring matters to the Tribunal, and appearing before the Tribunal, as permitted or required by this Act; and

Referring alleged offences in terms of this Act to the National Prosecuting Authority.”

The Respondent may therefore promote informal dispute resolution, but not intervene in or directly adjudicate on a dispute.

A section 99(a) function would typically result in a resolution of a complaint by the Respondent and in the execution of the section 99(a) function parties’ versions would be taken in to account. The latter is driven by the prescripts of the Constitution, PAJA4 and the rules of natural justice.5

It appears from the papers that the Respondent attempted to conciliate the matter and on failure thereof issued the Compliance Notice. An investigation was not embarked upon. Without an investigation a compliance notice cannot be issued. Section 73(1) of the CPA specifically provides that “.. after concluding an investigation into a complaint, the Commission may … (c)… iv)… issue a compliance notice.”

Without an investigation having been conducted the jurisdictional pre-requisites for the Commission to issue a compliance notice was not met. In this regard the Tribunal expressed its view in a number of previous decisions6.

The question is then whether the CPA applies to this pre-existing transaction.

In order to answer the above posed question, it is necessary to consider the specific application and implementation of the CPA. The CPA came into force incrementally. It has an “early effective date” and a “general effective date”7. The early effective date is the date on which Chapters 1 and 5 and Section 120 of the Act came into effect, being 24 April 20108. The general effective date was first set out to be a date 18 months after the date on which the Act was signed by the President9. This date was however deferred until 31 March 2011.10

Item 3 of Schedule 2 of the Act deals with the Transitional Provisions of the Act and provides as follows:

“Application of Act to pre-existing transactions and agreements

Except to the extent expressly set out in this item, this Act does not apply to-

the marketing of any goods or services before the general effective date;

any transaction concluded, or agreement entered into, before the general effective date; or

any goods supplied, or services provided, to a consumer before the general effective date.

(2) The sections of this Act listed in the first column of the following table apply, to the extent indicated in the second column, to a pre-existing agreement between a supplier and a consumer, if the pre-existing agreement –

(a) would have been subject to this Act if this Act had been in effect at the time the agreement was made; and

(b) contemplates that the parties to it will be bound for a fixed term until a date that is on or after the second anniversary of the general effective date…”

As section 40 does not appear from the list of sections which apply to pre-existing transactions and agreements it is evident that the legislature did not intend for Section 40 to have retrospective effect.

In order for the Respondent to rely on the continued application of repealed laws, it must show which law it is relying on, furthermore demonstrate exactly the applicability to the situation and proof of the alleged contraventions to the extent that was required in terms of that law11.

The Respondent contends that the Applicant has breached the Unfair Business Practices Act12 by engaging in an unfair business practice which forms the basis of the complaint. The Respondent needs to make out a proper case for this contention of a possible contravention of the Unfair Business Practices Act as applied in accordance with the provisions of Schedule 2, Item 8(1).

“‘unfair business practice’13 means any business practice which, directly or indirectly, has or is likely to have the effect of-

(a) harming the relations between businesses and consumers;

(b) unreasonably prejudicing any consumer;

(c) deceiving any consumer; or

(d) unfairly affecting any consumer.”

What has to be determined is whether the Applicant’s alleged conduct, forming the basis of the Compliance Notice, can be said to have contravened the provisions of the Unfair Business Practices Act. If so found, it can be said that the Applicant has breached a repealed law in terms of Schedule 2, Item 8 of the Act.

It should be noted that the Respondent does not rely on a specific section of the Unfair Business Practices Act but rather on the definition of ‘unfair business practice’. Neither does the Respondent allege how or in what way the Applicant’s conduct ‘directly or indirectly, has or is likely to have the effect of-

(d) unfairly affecting any consumer.’

The Applicant objects to the steps the Respondent requires of it to take on the basis that it is not competent for the Respondent to require of the Applicant to replace the motor vehicle or refund the Complainant in respect thereof as, apart from the fact that the vehicle was delivered to the Complainant before the effective date of the CPA, the Complainant never sought to return the vehicle within 6 months from the date of delivery.

When the Respondent elects to deal with a complaint in accordance with Part B of Chapter 3 of the Act (as provided for by section 99(b)), it may issue a Compliance Notice which must set out the following information required by Section 100(3) of the CPA:

The person or association to which the conduct applies;

The provisions of the Act that has not been complied with;

Details of the nature and extend of non-compliance;

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

Any penalty that may be imposed in terms of this Act if those steps are not taken.

When considering the content of a Compliance Notice and specifically the steps the Respondent requires of the Applicant to take, and whether the Respondent is entitled to prescribe such steps, one has to consider amongst others, consider the functions and powers of the Respondent and the effect of non-compliance with a Compliance Notice.

The Respondent is responsible to carry out functions and exercise the powers assigned to it by or in terms of this Act or any other national legislation.14

The enforcement15 functions of the Commission are set out in section 99 of the CPA. From the plain reading of the word and the expansion of that the enforcement function entails it is clear to us that the enforcement function does not include a function to order parties to provide redress16 to complainants. This power has been reserved to the courts and to the Tribunal, albeit in the latter instance to a limited extent.

The powers of the Tribunal are similarly circumscribed and do not extend to the Tribunal awarding damages to parties. At its high water mark the CPA empowers the Tribunal to impose an administrative penalty, order refunds of amounts overpaid to consumers and issue a certificate17 of prohibited conduct from the Chairperson of the Tribunal as provided for in Rule 2918 after a finding that prohibited conduct took place, to enable a consumer to approach the high court for damages.

Following on the exposition of the Respondent’s enforcement function in the CPA, the consequences of non-compliance with a compliance notice are set out in section 100(3)(e) in that it lays the basis where it provides for “…any penalty that may be imposed in terms of the CPA if the steps are not taken.” That penalty being an administrative fine imposed by either the Tribunal or a prosecution in terms of section 110(2) by the National Prosecuting Authority19.

It is accordingly an untenable interpretation of the CPA to read into the powers and functions of the Respondent the power to impose a requirement in the compliance notice which in effect amounts to the imposition of an order for damages, refunds or return of goods. The route to achieve redress for a consumer is through prosecution - either for prohibited conduct or by agreement with the transgressor to pay compensation, either through the Tribunal or the Courts.

Furthermore, Section 150 of the National Credit Act, Act 34 of 2005 (the NCA) provides the Tribunal with a mandate to “requiring repayment to the consumer of any excess amount charged, together with interest at the rate set out in the agreement”. No similar provision exists that gives the NCC the right to order repayment. It is evident that such a right should be specifically provided in terms of the Act (as it is awarded to the Tribunal), and therefore, that the Respondent, not being specifically mandated to do so, may not be allowed to order repayment.

It would therefore be beyond the powers of the Respondent to include a step in a Compliance Notice that in fact amounts to the award of damages to a Complainant.

This Tribunal finds that the Commission issued the compliance notice –

Without having conducted an investigation;

That is defective in that it does not set out the basis for asserting that Applicant contravened section 40 or Schedule 2, Part 8 of the CPA;

In respect of the conduct linked to the alleged contravention of a section that does not have retrospective effect to the date of the conduct allegedly in contravention of the CPA;

Within which it prescribed steps to be taken by the Applicant that goes beyond the powers of the Commission to prescribe in terms of the CPA;

and that accordingly the compliance notice stands to be cancelled.

We accordingly make the following order:

The compliance notice issued by the Respondent is hereby cancelled and we make no order as to costs.

DATED AT CENTURION THIS 13 TH DAY OF FEBRUARY 2013.

[signed]

___________________________

DIANE TERBLANCHE

Presiding member

Mr Fungai Sibanda (Member): and Mr Xolela May (Member) concurring

1 Regulations for matters relating to the functions of the Tribunal and Rules for the conduct of matters before the Tribunal, 2007 published under GN 789 in GG 30225 of 28 August 2007 as amended by GenN 428 in GG 34405 of 29 June 2011

2 It appears that this submission refers to a complaint lodged with the Dealership. The complaint was only referred to the Respondent on 12 May 2011.

3 Part B of Section 3 relates to Commission Investigations (ss72-75)

4 The Promotion of Administrative Justice Act 3 of 2000

5 See Section 33 of the Constitution of the Republic of South Africa and Section 3, 5 and 6 of PAJA.

6 City of Johannesburg v National Consumer Commission NCT/2667/2011/101 and - NCT/2081/2011/101 from Par 47; Vodacom Service Provider Company (PTY) Ltd and Vodacom (PTY) LTD v National Consumer Commission NCT/2793/2011/101 from Par 50; Cloete Murray N.O. and Others v National Consumer and Others NCT/4454/2012/101(1) and NCT/4570/2012/101(1) from Par 25

7 Schedule 2 item 1

8 Schedule 2 item 1 and 2(1)

9 Schedule 2 item 2(2)

10 GenN 917 in GG33582 of 23 September 2010

11 The Tribunal has previously dealt with this aspect in City of Johannesburg v National Consumer Commission NCT/2667/2011/101 and NCT/2081/2011/101

12 Act 79 of 1988

13 Section 1 of the Unfair Business practices Act, Act 79 of 1988

14 Section 92(1) of the Consumer Protection Act, Act 68 of 2008

15 “the act of compelling observance of or compliance with a law, rule, or obligation’. http://oxforddictionaries.com/definition/english/enforcement enforce.v (enforces, enforcing, enforced) 1 “make sure a law, rule or duty is obeyed or fulfilled”. 2 (often as adj. enforced) force something to happen Oxford English Dictionary Second Edition at Page 245

16 verb [with object] 1 remedy or set right (an undesirable or unfair situation): the question is how to redress the consequences of racist land policies 2 archaic set upright again: some ambitious Architect being called to redress a leaning Wall noun - remedy or compensation for a wrong or grievance: those seeking redress for an infringement of public law rights http://oxforddictionaries.com/definition/english/redress

16 verb [with object] 1 remedy or set right (an undesirable or unfair situation): the question is how to redress the consequences of racist land policies 2 archaic set upright again: some ambitious Architect being called to redress a leaning Wall

noun - remedy or compensation for a wrong or grievance: those seeking redress for an infringement of public law rights http://oxforddictionaries.com/definition/english/redress

17 Section 115(2)(b) of the Consumer Protection Act, Act 68 of 2008

18 Rule 29 in the Rules for the Conduct of Matters before the National Consumer Tribunal

19 Section 100(6) - Consumer Protection Act, Act 68 of 2008