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[2016] ZASCA 174
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South African Broadcasting Corporation Soc Limited v Massstores (Pty) Ltd (914/2015) [2016] ZASCA 174 (25 November 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 914/2015
In
the matter between:
SOUTH
AFRICAN BROADCASTING
CORPORATION
SOC LIMITED
Applicant
and
MASSTORES
(PTY) LIMITED
Respondent
Neutral
citation:
SABC
v Masstores
(1221/15)
[2016] ZASCA 174
(25 November 2016)
Coram:
Lewis,
Wallis and Zondi JJA and Schoeman and Schippers AJJA
Heard:
16
November 2016
Delivered:
25
November 2016
Summary:
Meaning
of ‘sell’ in
s 27(4)
of the
Broadcasting Act 4 of 1999
–
whether mere agreement of sale or sale completed by delivery
contemplated – dealer selling television sets to customer
where
goods stored at customer’s premises and delivery not made –
sale not concluded pending customer obtaining requisite
television
licence – no breach of
s 27(4)
– customer not liable for
penalties – application for special leave to appeal refused.
ORDER
On
appeal from:
Gauteng
Local Division of the High Court, Johannesburg (Meyer, Victor and
Wepener JJ sitting as a full court):
1
Condonation
is granted for the late filing of the application for special leave
to appeal.
2
The
application for special leave to appeal is refused with costs,
including the costs of two counsel.
JUDGMENT
Schippers
AJA (Lewis, Wallis and Zondi JJA and Schoeman AJA concurring):
[1]
This
is an application for special leave to appeal referred for oral
argument in terms of
s 17(2)
(d)
of
the
Superior Courts Act 10 of 2013
. The matter concerns the
proper construction of s 27(4) of the Broadcasting Act 4 of 1999 (the
Act). That section provides
for the applicant, the South
African Broadcasting Corporation SOC Ltd (SABC), to recover a penalty
if a retailer sells a television
set to someone who does not have a
licence in terms of the Act. The specific issue is whether the
respondent, Masstores (Pty) Ltd
(Masstores), is liable for penalties
under s 27(4) of the Act because it entered into an agreement with
Plytrade 23 (Pty) Ltd t/a
EduSolutions (EduSolutions) to give it
credit on the sale of 2 500 television sets, before EduSolutions
obtained the requisite
television licence.
[2]
The
SABC also sought condonation for the late filing of the application
for special leave to appeal which was some eight days late.
Masstores
did not oppose the condonation application.
Factual
overview
[3]
The
basic facts are largely common ground. Masstores, through a
subsidiary, owns and operates retail outlets known as ‘Game’
and ‘DionWired.’ In order to ensure that customers
who buy television sets are in possession of valid television
licences, in 2009 Masstores in conjunction with the SABC developed a
unique verification system known as the ‘purchase order
management (POM) system.’
[4]
Briefly,
the POM system works as follows. It is linked to the SABC’s
database of television licence holders and can therefore
verify
whether a customer who wishes to buy a television set has a licence.
The details of the customer are entered into
the system. If it
shows that the customer does not have a licence or is in arrears with
licence payments, the customer has
to purchase a licence or settle
the arrears at the licence counter in the store. If the POM
system finds a record of a valid
licence on the SABC’s
database, the system generates a document recording that fact and the
licence reference number.
The customer then proceeds to the
checkout counter to purchase the television set. At that
counter a barcode entered into
the till by the cashier will alert the
internal point of sale system that a television set is being
purchased. Thereafter
a prompt on the till requests the cashier
to enter the customer’s licence reference number. Only
once that number has
been entered, does the system allow the sale to
be concluded. The licence reference number is then reflected on
the till
slip which constitutes proof of both the sale of the product
and that the customer is in possession of a valid licence. At
the end of each day the system matches the sale of television sets
and their licence reference numbers with the licences recorded
in the
SABC’s database. It then generates a registration file of
all licence registration and payments processed in
the store that
day, which is automatically transferred to the database of the SABC.
[5]
EduSolutions
procures goods for schools run by the provincial Departments of
Education. On 25 February 2011 Masstores furnished
it with a
quotation for the sale of television sets and home theatre systems,
for delivery to schools in the Limpopo Province.
EduSolutions
was advised that before the sale could be concluded, it would have to
produce a valid licence and that it should contact
the SABC to
ascertain the correct licence to be obtained given the bulk nature of
the transaction. It was anticipated that
the requisite licence
would be procured within a few days. That, however, did not
happen.
[6]
On
2 March 2011 EduSolutions wrote to Masstores requesting a credit
facility, as payment to it by the Department of Education in
Limpopo
could be made only on receipt of the goods in terms of the
Public
Finance Management Act 1 of 1999
. That request was granted and
a payment credit facility agreement was signed on 24 March 2011, in
terms of which Masstores
granted EduSolutions a 30-day payment credit
facility in the sum of R9 995 002.50. However, Masstores
could not prepare
the documentation relating to the sale because
EduSolutions had not yet obtained the requisite licence from the
SABC.
[7]
Whilst
Masstores was in the process of doing a credit check on EduSolutions,
on 23 March 2011, Samsung, the supplier, unexpectedly
delivered the
goods to Masstores’ Game store in Polokwane. Game had no
space to store the goods and on 24 March 2011,
they were moved to a
warehouse in Polokwane belonging to EduSolutions. Masstores
took out short-term insurance cover for
the goods because it carried
the risk in respect thereof.
[8]
By
letter dated 8 April 2011, the SABC informed Masstores that 2 500
television sets were released to EduSolutions on 24 March 2011
when
it was not in possession of the prescribed dealer licence; that
Masstores failed to follow the standard procedure in verifying
EduSolutions’ licence prior to completing the sale; and
consequently that Masstores was liable for penalties in the sum of
R
7.5 million (2 500 x R3 000). Masstores’
attorneys replied in a letter dated 13 April 2011 in which they
set
out the facts relating to the transaction and disputed Masstores’
liability for penalties.
[9]
On
10 May 2011 the SABC issued EduSolutions with a dealer licence.
Masstores was then in a position to conclude the sale.
It was
not a cash sale. Therefore Masstores had to install computer
software on its POM system to generate a bulk sale on
credit.
On 12 and 13 May 2011 Masstores processed the order placed by
EduSolutions in two batches, generating two till slips
recording the
sale of the goods. Both till slips reflected the conventional details
in relation to a licence that would be shown
on the till slip of any
other customer of Masstores who purchased a television set.
[10]
On
13 May 2011 Masstores sent two employees to the EduSolutions
warehouse at Polokwane to check the goods. They were found
to
be in good order and delivery notes were then issued which show that
EduSolutions received the goods on 13 May 2011. It
paid
Masstores on 26 May 2011.
[11]
By
30 May 2011 the issue regarding penalties had not been resolved.
Masstores thus applied to the Gauteng Local Division of
the High
Court, Johannesburg for a declaratory order that it did not sell or
alienate the goods to EduSolutions within the meaning
of s 27(4) of
the Act; and that it was not liable for any penalties arising from
the sale of the goods. Mailula J held that
the sale was
concluded sometime before 12 May 2011, and dismissed the application
with costs. That order was reversed on
appeal by a full court
(Meyer, Victor and Wepener JJ). It held that Masstores did not
sell or alienate the goods as envisaged
in s 27(4) of the Act and
that it was not liable for penalties arising from the transaction
with EduSolutions.
Is
Masstores liable for penalties under s 27(4) of the Act?
[12]
Section
27(1) of the Act provides that no person, business, dealer or lessor
may use a television set without a television licence
issued by the
SABC against payment of the prescribed fee for each television set so
used, unless exempted by regulation.
[1]
Masstores is a dealer within the meaning of the Act.
[2]
[13]
A
‘television licence’ is defined as meaning a current and
valid licence issued in terms of the Act for the use of a
television
set. The Act defines ‘use’ as, ‘the use or
possession or permitting any other person to use or possess
a
television set and the words “
user
”
and
“
used
”
are
construed accordingly’.
[14]
Section
27(4) of the Act reads:
‘
A
dealer who sells or alienates a television set to a person who is not
in possession of a television licence and who is not exempted
from
the obligation to be in possession of a television licence, is liable
to pay a penalty of R3 000 or such amount as may be
prescribed, but
such penalty may not exceed R10 000 in respect of each
television set sold or alienated to such person.’
[15]
This
court has said that when interpreting legislation, what must be
considered is the language used; the context in which the relevant
provision appears; the apparent purpose to which it is directed; and
the material known to those responsible for its production.
[3]
[16]
On
its plain language, s 27(1) of the Act proscribes the use of a
television set without a licence. Section 27(4) must be
construed in that context. Thus a dealer who ‘alienates’
a television set by way of a donation, for example,
is liable to pay
the prescribed penalty if the recipient does not have a licence.
This construction is reinforced by three
provisions of s 27: the
penalty provision contained in s 27(3) in terms of which a person who
contravenes s 27(1), in addition
to payment of the licence fee, is
liable to pay double the licence fee; the penalty provision in
s 27(4); and s 27(5) which
provides that any person who fails to
comply with any provision of s 27 is guilty of an offence and liable
on conviction to a fine
not exceeding R500 in relation to each such
offence, or imprisonment, or both. The manifest purpose of s
27, as a whole,
is to ensure that no person uses a television set
without a licence.
[17]
As
to the meaning of ‘sell’ in s 27(4) of the Act, Wessels J
in
Nimmo
v Klinkenberg Estates Co Ltd
,
[4]
noted that the word ‘sale’ has different meanings.
He said (at 314):
‘
Now
the word “sale” is used with various meanings. To lawyers
discussing it from an academic point of view it means
the time when
the parties have arrived at a valid and binding agreement, apart from
any question whether the purchase-price has
been paid or whether
there has been delivery of the article sold. But it is also clear
that in ordinary parlance the word “sale”
is used in a
somewhat wider sense than a mere agreement. In a cash transaction it
means delivery of the property on payment of
the purchase-price, and
a sale is said to fall through when the seller or the purchaser fails
to complete his part of the contract.
In the case of a sale for
credit the word “sale” ordinarily means the actual
transfer of the property.’
[18]
The
term ‘sale’ in a statutory provision has been interpreted
to mean a sale in the wider sense rather than a mere agreement.
In
R
v Nel
,
[5]
Solomon JA held that the word ‘sale’ in the Transvaal
Liquor Licensing Ordinance of 1902 meant a sale in the ordinary
sense, namely a sale completed by delivery,
[6]
in defining a general retail liquor licence, an hotel liquor licence
and other licences where liquor sold is to be consumed on
the
premises.
[19]
Likewise
in
R
v Levy & another
,
[7]
a case in which the accused was charged with selling bread below the
prescribed weight, it was held that the word ‘sale’
as
used in a regulation made under s 48 of the Weights and Measures Act
32 of 1922, was not limited to the mere formation of a
contract of
sale but included delivery of the thing sold: the main obligation of
a seller in a contract of sale.
[8]
[20]
The
word ‘sell’ in s 27(4) must bear the meaning assigned to
it in the scheme of s 27 of the Act, unless another or
narrower
meaning is specifically assigned. In my view the full court
correctly held that it means a sale in the ordinary
sense: not only
the making of the agreement, but its fulfilment by delivery. Two
basic reasons underlie this conclusion.
First, if the purpose
of s 27 is to prohibit the use of a television set without a
licence, and ‘use’ means the
actual use or possession of
a television set, then delivery to the user is an indispensable
requirement before the penalty provision
contained in s 27(4)
may be invoked. Second, this is a sensible and businesslike
construction, which gives effect to
the purpose of s 27.
[9]
Any other construction would produce a manifest absurdity: it would
mean that where there is a mere agreement to buy and
sell a
television set and the customer has not taken delivery of it, a
dealer would immediately be liable to pay the penalty prescribed
in s
27(4). And this even in circumstances where the dealer seeks to
verify whether or not the customer has a licence.
It would also
mean that, contrary to authority in this court, a sale subject to a
suspensive condition that the purchaser obtain
a licence would fall
foul of the section and attract a penalty, despite the fact that no
delivery had been effected.
[10]
Such a construction is at odds with the plain language of s 27(1),
the immediate context of s 27(4) and the overall purpose
of s 27 of
the Act.
[21]
Applying
the meaning of a sale as envisaged in s 27(4) of the Act to the facts
of this case, in my opinion, and contrary to the
SABC’s
assertion, there was no agreement of purchase and sale between
Masstores and EduSolutions on 24 March 2011, let alone
the physical
delivery of the television sets.
[22]
The
POM system was put in place precisely to ensure that Masstores
complies with its obligations under s 27(4) of the Act, and that
the
SABC receives revenue from licences. They had agreed the method by
which television sets would be sold. There can be no suggestion
that
the transaction with EduSolutions was going to take place other than
in accordance with the POM system, the only difference
being that it
was a bulk sale on credit. From the outset EduSolutions
was informed that the sale would not be concluded
unless and until it
was in possession of the requisite licence. That is indeed what
happened. And it is confirmed by
the conduct of the parties and
contemporaneous documentation.
[23]
Thus,
on 6 April 2011, Masstores sent an email to the SABC advising it that
EduSolutions had already contacted the SABC regarding
the licence
requirements; that Masstores was unable to record the sale on its
system because it did not have a licence reference
number from the
SABC; and that the latter had requested the relevant documents from
EduSolutions after which the SABC would furnish
Masstores with the
dealer reference number to enable it to conclude the sale.
[24]
Similarly,
on 7 April 2011 EduSolutions sought clarity on the requisite licence
and informed the SABC that the sale had not yet
been concluded and
that it was storing the goods on behalf of Masstores. Now there
was no reason for EduSolutions to fabricate
this evidence: it was not
in the circumstances liable for any penalty under the Act. The
letter of 7 April 2011 was sent
to the SABC precisely because
Masstores had from the outset made it clear that the sale would not
be concluded without the requisite
licence. And this is
supported by documentation showing the attempts by EduSolutions to
obtain the licence, until it eventually
received a dealer licence
pursuant to a meeting with representatives of the SABC on 10 May
2011.
[25]
Then
there is the insurance cover taken out by Masstores in respect of the
goods, before the sale could be concluded. It insured
the goods
on 24 March 2011 as it retained ownership and the risk. These
facts are confirmed by the manager of the insurance
company who
stated that on 13 May 2011 she was informed that the sale had been
concluded and that the risk had passed to EduSolutions.
Further, absent ownership, Masstores would not have had an insurable
interest in the goods.
[11]
[26]
Apart
from all of this, Masstores could not process a bulk sale of
television sets on credit to EduSolutions on its POM system;
it had
to install special software to do so. The sale was concluded
only after EduSolutions obtained a valid licence on 10
May 2011.
The reference number of that licence was recorded on the relevant
till slips when Masstores processed the sale
in two batches on 12 and
13 May 2011. That is when delivery of the television sets took
place. The facts show that
Game in Polokwane did not have any
storage space pending conclusion of the sale and for this reason the
goods were stored in EduSolutions’
warehouse. So, the
transaction was concluded in accordance with the POM system and the
intention of the parties.
[27]
It
follows that the SABC’s contention that the payment credit
facility agreement entered into between Masstores and EduSolutions
on
24 March 2011 constitutes a sale as contemplated in s 27(4) of the
Act, is quite wrong and insupportable on the evidence.
That
agreement did no more than provide EduSolutions with a 30-day payment
credit facility.
[28]
The
evidence also discloses that throughout the SABC was apprised of the
status of the transaction with EduSolutions. More particularly,
the
SABC was aware of the ongoing attempts to ensure that the requisite
licence was in place before the sale could be concluded.
In the
circumstances, the SABC’s claim for penalties of R7.5 million
was opportunistic and contrived.
[29]
Masstores
is accordingly not liable for penalties under s 27(4) of the Act.
[30]
What
remains are the SABC’s claims that the judgment of the court
below makes its regulatory and revenue collection processes
cumbersome and expensive; and that the POM system would be undermined
at the point of sale if delivery happens at a different date.
These claims, as the POM system demonstrates, are simply unfounded.
The sale of a television set cannot be processed until
a valid
television licence number has been entered and accepted at the till
in a store. Indeed, it is common ground that
from July 2010 to
June 2011 only one out of 327 900 television sets sold by Masstores
had an unresolved television licence query.
[31]
The
SABC has not shown any special circumstances that warrant the grant
of special leave to appeal, and in particular has shown
no reasonable
prospect of success on appeal. In the result, the application for
special leave to appeal must be refused.
[32]
The
following order is issued:
1
Condonation
is granted for the late filing of the application for special leave
to appeal.
2
The
application for special leave to appeal is refused with costs,
including those of two counsel.
___________________
A
Schippers
Acting
Judge of Appeal
Appearances:
For
the Applicant: V Maleka SC (with N
Mayet-Beukes; heads of argument prepared by I Semenya SC and
N
Mayet-Beukes)
Instructed
by: Ningaza Horner Inc, Sandton
Symington
& De Kok, Bloemfontein
For the Respondent:
I Miltz SC (with JF Nicholson)
Instructed
by: Shepstone & Wylie, Johannesburg
Matsepes
Inc, Bloemfontein
[1]
Section
27(1)
(a)
and
(b)
of
the Act.
[2]
The Act
defines a ‘dealer’ as a person who engages in the
business of selling television sets.
[3]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA
13
;
2012 (4) SA 593
(SCA) para 18.
[4]
Nimmo v
Klinkenberg Estates Co Ltd
1904
TH 310
, which was referred to by this court in
Modelay
v Zeeman & others
1968
(4) SA 639
(A) at 643A; and also
Street
v Evans
1977
(3) SA 950
(RA) at 951H-952A.
[5]
R v Nel
1921 AD 341.
[6]
At 342.
[7]
R v Levy &
another
1953
(3) SA 466 (A).
[8]
At 471G-472A.
[9]
Natal
Joint Municipal Pension Fund
(n
2 above) para 18.
[10]
Corondimas
v Badat
1946
AD 548
at 551 and the cases collected and discussed in
Geue
& another v Van der Lith & another
[2003] ZASCA 118
;
2004
(3) SA 333
(SCA) paras 7-12.
[11]
As to which,
see M F B Reinecke, J P van Niekerk & P M Nienaber ‘Insurance’
in 12(1)
Lawsa
2 ed (2012)
para 50.