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[2011] ZAGPPHC 111
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Jim Fung Industrial Limited v National Regulator for Compulsory and Another (21624/09) [2011] ZAGPPHC 111 (27 May 2011)
NOT REPORTABLE
IN THE NORTH GAUTENG HIGH
COURT,
PRETORIA REPUBLIC OF
SOUTH AFRICA
DATE: 27 MAY 2011
CASE NO 21624/09
In
the application between:
JIM
FUNG INDUSTRIAL
LIMITED
................................................................................
Applicant
and
NATIONAL
REGULATOR FOR
COMPULSORY
.............................................
First
Respondent
SPECIFICATIONS
OF SOUTH AFRICA
SCHNEIDER
ELECTRIC SOUTH AFRICA (PTY) LTD
..............................
Second
Respondent
JUDGMENT
LOUWJ,
[1]
On 13 October 2009 the applicant launched an urgent application ("the
urgent application") in this Court for an order
interdicting and
restraining the first respondent from destroying the applicant's
electrical products pending the outcome of a
review application.
[2]
On 22 January 2010, by agreement between the parties, the order
attached at page 292 of the papers was made an order of court
("the
court order").
[3]
On 29 June 2010 the first respondent served an application under the
above case number on the applicant alleging that the applicant
was in
contempt of the court order ("the contempt application").
[4]
Both applications were enrolled for hearing on Monday, 6 December
2010.
[5]
I have to determine:
[5.1]
the costs of the urgent application;
[5.2]
the contempt application. BACKGROUND
[6]
The applicant is a Hong Kong based manufacturer of electronic power
cord sets, electrical plugs and a variety of electrical
socket-outlet
adaptors.
[7]
The first respondent is the National Regulator for Compulsory
Specifications of South Africa, an administrative body and a juristic
person established in terms of section 3(1) of the National Regulator
for Compulsory Specifications Act 5 of 2008 ("the Act").
[8]
The second respondent is Schneider Electric South Africa (Pty) Ltd
("Schneider"). The applicant manufactured a variety
of
electrical adaptors for Schneider. No relief was sought against
Schneider in the urgent application.
THE
URGENT APPLICATION LAUNCHED ON 13 OCTOBER 2009
[9]
On or about 3 August 2009 the first respondent issued a Directive
("the 3 August 2009 Directive"), alleging that the
products
that were listed in the Directive ("the Directive products"),
identified as snapper 2, 3 and 31 electrical products,
were non
compliant with the SABS Compulsory Specification VC8008 Plugs,
socket-outlets and socket-outlet adaptors read with SANS
60884-1:2006
("the Specification").
[10]
The Directive products were manufactured by the applicant.
[11]
The applicant only received the 3 August 2009 Directive on 17
September 2009.
[12]
The 3 August 2009 Directive specified that the first respondent
required that the applicant "obtain a letter from the
Regulator
of the country of its origin within 60 days from the date hereto to
the effect that the above-mentioned consignment or
batch of article
will be accepted by the aforesaid Regulator".
[13]
On 30 September 2009 Edward Nathan Sonnenburgs ("ENS"), the
applicant's attorney of record, requested an extension
until 3
December 2009 to allow the applicant to gather information regarding
the alleged contravention of the compulsory specification
and to make
arrangements for the return of the goods to China. The first
respondent was requested to provide a copy of the SABS
test report on
which the 3 August 2009 Directive was based.
[14]
Notwithstanding the advices to the first respondent that the Hong
Kong Regulatory Authority would not issue any letter of authority
unless it had been provided with the SABS report, and despite the
request for an extension until 3 December 2009 to, inter alia,
obtain
the letter of authority, the NRCS issued a notice on 8 October 2009
in terms of which the first respondent intended to take
the Directive
products into storage on Tuesday, 13 October 2009 for purposes of
destruction.
[15]
On or about 12 October 2009 ENS received a letter from the first
respondent in which the first respondent refused to grant
the
extension sought by the applicant. In addition, the first respondent
refused the applicant access to the test reports upon
which the 3
August 2009 Directive was based.
[16]
The issue of the destruction notice coupled with the first
respondent's refusal to give a written undertaking that it would
not
destroy the products pending the outcome of further investigations by
the applicant and the determination of application proceedings
that
the applicant intended to institute caused the applicant to move for
urgent interim interdictory relief.
[17]
On 12 October 2009 ENS sent a letter notifying the first respondent
that the applicant would immediately proceed with an urgent
application.
[18]
On the evening of 12 October 2009, the first respondent sent a
further facsimile to ENS at 18h58 that evening in which the
first
respondent indicated that it would grant the applicant an extension
on condition, inter alia, that:
[18.1]
the Directive products are removed from Schneider's possession by no
later than close of business on 12 October 2009 and
placed in the
possession of the first respondent;
[18.2]
the applicant paid the costs associated with the removal,
transportation, storage and any other associated costs which might
be
incurred;
[18.3]
the applicant would take all reasonable steps to ensure that the
non-compliant products be returned to China as soon as possible,
failing which the products would be destroyed.
[19]
The applicant was further advised that the Board of the first
respondent would meet on 22 October 2009 to decide on the length
of
the extension that would be afforded to the applicant.
[20]
The applicant's attorney only had sight of this letter after the
urgent application was launched on the morning of 13 October
2009.
[21]The
applicant sought the following order in the urgent application:
[21.1]
interdicting and restraining the first respondent from destroying the
products pending the outcome of an application reviewing
and setting
aside the decision of the first respondent to issue the 8 October
2009 Directive;
[21.2]
Directing the first respondent to provide a copy of the report upon
which the 3 August 2009 Directive is based.
[22]
On 13 October 2009 ENS received a further letter from the first
respondent in which the first respondent sought an undertaking,
inter
alia, that the applicant would not proceed with the urgent
application on 16 October 2009 in light of the contents of the
letter
sent the previous evening.
[23]
ln a letter from ENS dated 13 October 2009 the applicant confirmed
that:
[23.1]
the first respondent had undertaken not to destroy the products
referred to in the 3 August 2009 Directive pending a meeting
of the
NRCS Board on 22 October 2009 at which the first respondent would
motivate for a reasonable extension to be granted to the
applicant in
order for the applicant to obtain the letter from the Chinese
Regulator regarding the return of the products to China
and to
arrange the return accordingly;
[23.2]
the applicant would communicate to the first respondent, before 22
October 2009, the time period required in order for the
applicant to
obtain the letter from the Chinese Regulator;
[23.3]
Schneider had confirmed that the products referred to in the 3 August
2009 Directive would be available for removal by the
NRCS' at second
respondent's head offices on Friday, 16 October 2009;
[23.4]
In the event that the Board failed to grant a reasonable extension,
the applicant would proceed with the urgent application.
[24]
The urgent application was set down for 16 October 2009.
[25]
No answering affidavits were filed in the urgent application due to
the various responses received from the first respondent
after
service of the urgent application on it.
[26]
The urgent application was removed from the roll on 14 October 2009.
[27]
The applicant was provided, for the first time, with a copy of the
SABS test report on which the 3 August 2009 Directive is
alleged to
be based, on 13 October 2009 under cover of a letter from Schneider's
attorneys.
[28]
In the circumstances, the Applicant contends it was necessary, in
light of the first respondent's unreasonable attitude in
refusing to
grant an extension to the applicant to obtain the letter of authority
and in view of the threat that the applicant's
products would be
destroyed, to proceed with the urgent application
THE
REINSTATEMENT OF THE URGENT APPLICATION - 1 DECEMBER 2009
[29]
The Directive products were in Schneiders possession.
[30]
Arrangements were made to transport the Directive products on 16
October 2009 to facilities ear-marked by the first respondent.
The
applicant and Schneider had agreed that Schneider, who was in
possession of the Directive products, would ensure that only
the
products that were listed in the 3 August 2009 Directive would be
transported to the first respondent's facility.
[31]
At the behest of the first respondent, the storage facility was
changed from the Germiston storage facility to a storage facility
at
Access Freight International (Pty) Ltd, 85 Maple Street, Pomona,
Kempton Park ("the Access warehouse").
[32]
On 23 October 2009 the applicant was notified that the Board of the
first respondent agreed to grant the applicant an extension
until 3
December 2009 to obtain the necessary letter of authority from the
Chinese Regulator ("the 23 October 2009 Directive"),
failing which the Directive products would be destroyed.
[33]
Once a count of the products in the Access warehouse had been done,
the applicant concluded, based on the quantity of products
in the
Access warehouse, that Schneider delivered products to the first
respondent that fell outside the terms of the 3 August
2009
Directive. Only products produced before December 2007 fall within
the 3 August 2009 Directive. From the quantity of products
in the
first respondent's possession the applicant concluded that products
that were manufactured after December 2007 were probably
handed over
to the first respondent.
[34]
The applicant made several attempts to obtain a letter of authority
from the Chinese Regulator but without success.
[35]
On 24 November 2009 the applicant obtained a declaration from Henry
Hai Li of Henry and Co law firm in Shenzhen which declares
that:
[35.1]
the CQC (regarded by the first respondent as the Chinese Regulator)
does not have the authority to issue a letter as requested
by the
first respondent;
[35.2]
there was no obstacle to the return of the goods to China.
[36]
On 25 November 2009, ENS addressed a letter to the first respondent:
[36.1]
attaching the Henry Hai Li declaration in compliance with the first
respondent's request for a letter from the Chinese Regulator,
or CQC,
confirming that the products may be returned to China;
[36.2]
confirming that there is no impediment, according to the Henry Hai Li
declaration, to the return of the Directive products
to China;
[36.3]
Affording the first respondent until 17h00 on Friday, 27 November
2009 to indicate whether it intends to destroy the Directive
products
after 3 December 2009.
[37]
Having failed to receive any response to the letter of 25 November
2009, the applicant had no choice but to launch an urgent
application
to prevent the goods from being destroyed. The applicant was of the
view that:
[37.1]
the Henry Hai Li declaration sufficed for purposes of satisfying the
first respondent's request for a letter of authority
and the
applicant was therefore entitled to have the products returned to it;
and that
[37.2]
the products should be tested for compliance with the Specification
pending the outcome of a review application.
[38]
The applicant reinstated the urgent application brought earlier by
supplementing the founding affidavit and amending the notice
of
motion.
[39]
On 1 December 2009, the applicant served the amended urgent
application for an interim interdict in which the applicant sought
the following order:
[39.1]
delivering the products that were in the Access Warehouse to the
applicant; alternatively
[39.2]
Interdicting and restraining the first respondent from destroying the
products in accordance with the 8 October 2009 Directive
as amended
by the 23 October 2009 Directive pending the outcome of a testing of
the products and a review application.
HEARING
ON 3 DECEMBER 2009
[40]
The parties appeared before his Lordship Mr. Justice Webster on 3
December 2009.
[41]
The first respondent did not file an answering affidavit and attacked
the application on the basis of lack of urgency only.
[42]
The question of urgency was argued on 3 December 2009.
[43]
On 17 December 2009 his Lordship Mr. Justice Webster granted a
judgment, in writing, in which he found that the application
was
urgent.
[44]
On 17 December 2009 the honourable Judge Webster made the following
order:
[44.1]
that this matter is urgent and must be heard on an urgent basis;
[44.2]
That pending the finalization of this application the adaptor plugs
referred to in the directive issued by the first respondent
dated 8
October 2009, as amended by the directive issued by the first
respondent dated 23 October 2009, which is annexed to the
Notice of
Motion marked "C" be not destroyed;
[44.3]
Costs be costs in the cause.
[45]
On 23 December 2009 the honourable Judge Webster made the following
order:
[45.1]
The respondents file their answering affidavits within ten days from
the date of the order and the applicants file their
replying
affidavit within ten days from the date of service of the answering
affidavits.
[46]
The first respondent failed to file an answering affidavit within the
time periods determined by his Lordship Mr. Justice Webster.
[47]
On 11 January 2010 the applicant enrolled the application for hearing
on the urgent roll for 19 January 2010.
[48]
The applicant filed short heads of argument and a practice note on 14
January 2010.
[49]
The first respondent filed its answering affidavit on or about 19
January 2010.
[50]
On 22 January 2010, by agreement between the parties, the following
order was made an order of court:
1.
"The products which are the subject of the First Respondent's
Directive dated
3
August 2009 {"the Directive), which consist of all Snapper 2, 3
and 31 products which bear only markings/inscriptions pertaining
to
Clipsal, Snapper and voltage identical to those products that appear
on the photographs on page 4 of the SABS test report ML/103122,
a
copy of which is attached marked "A", and which products
were seized in accordance with the Directive and which are
currently
in the possession of the First Respondent at the Access Warehouse 85
Maple Street, Pomona, Kempton Park ("the warehouse"),
may
forthwith be destroyed by the Applicant, under the direct supervision
of the First Respondent, provided that the resultant
salvage shall
immediately be released to the Applicant in South Africa.
2.
the parties will jointly attend to the sorting of all the products
currently under the control of the First Respondent at the
warehouse
so as to identify the products in paragraph 1.
3.
The Applicant shall be afforded a reasonable opportunity of verifying
that all the products that have been identified and earmarked
for
destruction in terms of paragraph 1 bear only the markings pertaining
to Clipsal, Snapper and voltage that are identical to
those that
appear on Annexure "A".
4.
The products that are to be destroyed by the Applicant shall be
destroyed in such a manner that preserves the plastic components
thereof separately to the non-plastic components in order that the
Applicant may trade with or use the molten plastic, separately
to the
steel components.
5.
The First Respondent shall provide the Applicant with 150 articles of
each of the product categories described in the Directive.
The
Applicant shall not trade with these products in South Africa.
6.
All the products that fall outside the ambit of the Directive that
were seized by the First Respondent and that are currently
held at
the warehouse shall be submitted for testing ("the tests"),
within ten days from the date of this order, for
compliance with
compulsory specification VC8008 plugs, socket out-lets and socket
out-let adapters - coverage per Government Notice
R442 of 3 April
1998,
sub clause 3.1 with reference to clause 28 of SANS 60884-1:2006 -glow
wire test ("the specification"] ("the
untested
products).
7.
the tests shall be conducted by Test Africa at the cost of the
Applicant, provided that Test Africa is SANAS accredited at the
date
of testing. The test results will be final and binding on the
parties.
8.
the samples for testing shall be identified as follows:
8.1.
the untested products will be sorted into batches by the parties
jointly:
8.2.
a batch is defined with reference to each category of product (i.e.
Snapper 2, 3 or
31) and each code variation embossed on each
adaptor;
8.3.
one sample per batch will represent one sample for testing;
8.4
each sample will be selected by the First Respondent.
The
tests shall be conducted in the presence of a representative of each
party ("witness testing").
All
products that are found by Test Africa to be non compliant with the
specification shall be destroyed by the Applicant, under
the direct
supervision of the First Respondent, and in accordance with the
procedure set out in paragraph 3 above, and the salvage
thereof
immediately surrendered to the Applicant.
11.all
products that are found by Test Africa to be compliant with the
specification shall immediately be released to the Applicant.
12.
the costs of the application under the above case number shall be
argued at a later stage during the ordinary course."
COSTS
OF THE URGENT APPLICATION UP TO 22 January 2010
[51]
In exercising my discretion as to the award of costs I highlight the
factors set out hereunder:
[52]
The applicant exported the Directive products to South Africa. These
are the products referred to in paragraph 1 of the court
order of 22
January2010. These goods were, as I was informed on the date of
hearing hereof, destroyed on the previous day (i.e.
on Sunday 5
December 2010). It was for the applicant to ensure that all the
products it exported to South Africa complied with
the South African
Specifications and Standards. The First Respondent did not create the
problem.
[53]
The First Respondent has to perform its statutory duties in terms of
the Act. In terms of section 15(1) of the Act, if the
Chief Executive
Officer of the First Respondent, on reasonable grounds suspects that
a commodity or product or a consignment or
batch of a commodity or
product does not conform to or has not been manufactured in
accordance with a compulsory specification
that applies to it, the
Chief Executive officer may issue a directive to ensure that any
person who is in possession or control
of the commodity or product,
consignment or batch, keeps it in his/her possession or under his/her
control at/on any premises specified
in the directive and does not
tamper with or dispose of it,
[54]
Of importance for present purposes are the provisions of section 15
(3) of the Act in terms of which, if the First Respondent
finds that
a commodity or product does not conform to the compulsory
specification, the First Respondent may;
a)
take action to ensure a recall of the product;
b)
direct in writing that the importer of the consignment returns it to
its country of origin, or
c)
directs that the consignment or batch of the product concerned be
confiscated destroyed or dealt with in such other manner as
the First
Respondent may consider fit.
[55]
It is clear from Annexure A to the amended Notice of Motion that the
First Respondent firstly gave the Applicant the opportunity
to, in
terms of section 15(3)(b) satisfy it that the product could be
returned to China. Only failing such proof, that the goods
had to be
destroyed in terms of section 15(3) (c).
[56]
The Applicant had great difficulty in obtaining the requisite proof
of authorisation to reexport the product. The First
Respondent
did not facilitate this process by refusing, in its letter of 12
October 2009, to grant the applicant access to the
SABS test reports.
In my view, the stance taken by the First Respondent in that letter
to state that the Applicant is not a South
African company and does
not have locus standi, is totally unreasonable. South African
citizens and foreigners are entitled to
due process (i.e.
administrative justice). The First Respondent also refused for no
good reason that I can discern, to accept the
declaration from Henry
Hai Li dated 24 November 2009. That is a very comprehensive letter by
an expert in the field of import and
export stating clearly that
there was no authority in China to issue the letter that the First
Respondent required and furthermore
that there was no obstacle to the
return of the goods to China.
[57]
Thus a lot of litigation could have been avoided had the First
Respondent consented to the return of the goods to China. There
is
nothing on the papers by the First Respondent stating that it is
aware of another competent authority in China and why it did
not
accept the aforesaid declaration. The Applicant was in the
circumstances forced to proceed with the urgent application dated
13
October 2009 as well as the urgent application of 3 December 2009.
The applicant is therefore entitled to its costs up to 3
December
2009. I take note of the fact that in the judgment by Webster J the
costs of 3 December 2009 were ordered to be costs
in the cause. That
contemplated costs in the contemplated review application, which
application became unnecessary. I am therefore
at liberty to
reconsider that order
[58]
On the other hand, in favour of the First Respondent, it is also true
that the confusion which was created by Schneider can
also not be
blamed on the First Respondent. Schneider, engaged in a contractual
dispute with the Applicant, returned directive
as well as
non-directive products. After the goods had been sorted it appears
from the first respondents version that only 266
150 of the 1 358 100
products fell within the ambit of the 3 August 2009 directive and had
to be destroyed. Thus, the first respondent's
was successful in its
initial purpose of having the directive products destroyed.
[59]
The Applicant was not successful in its main relief contained in
paragraph 2 of the Notice of Motion namely to have all the
product
returned to it. It was also not successful in a review application to
set a side the First Respondent's directives referred
to in paragraph
3.3 of that Notice of Motion.
[60]
Taking all the above into account, it is my view that it would be
fair to order the First Respondent to pay the Applicant's
costs in
the main application up to 3 December 2009.
THE
COSTS OF THE CONTEMPT APPLICATION
[61].I
shall refer to the parties in the contempt application on the same
basis as above (i.e. as they are referred to in the main
application).
[62]
The First Respondent did not make out a case for contempt. It is
clear from the answering affidavit in the contempt application
[hat
the applicant acted on legal advice in not having the directive
products destroyed forthwith. Thus, in my view, the applicant
did not
act wilfully and mala fide.
[63]
After the applicant had obtained further legal advice from Senior
Counsel it accepted that it was bound by paragraph 1 of the
court
order although it had until then held the bona fide believe that It
could have the agreement between it and the applicant
which
culminated in paragraph 1 oUhe court order set aside.
[64]
For the purposes of a costs order it is however not decisive whether
there was contempt or not. The applicant had to execute
paragraph 1
of the court order and the F\rst Respondent had to act on the
applicant's raWure to execute it. Thus the First Respondent
was
successful 'n eventually having the directive product destroyed.
[65]
However the First Respondent acted totally unreasonably in not
agreeing to the non-directive products to be re-tested after
it had
become apparent that the tests done by Test Africa on 5 February 2010
were unreliable.
[66]
Already on 12 February 2010 the applicant's attorney wrote a letter
in this regard to the First Respondent's attorney. The
response was
that the test results were final and binding. The applicant
throughout March and April 2010 obtained further proof
of the fact
that Test Africa did not do its tests with reliable test apparatus.
On various occasions the First Respondent's representatives
were
invited to meet with the applicant's representatives and experts, but
these invitations were refused.
[67]
Up to the stage of the bringing of the contempt application the First
Respondent stuck to its view as per its letter of 18
March 2010 that
it was entitled to rely on the test reports by Test Africa as it was
an institution accredited by the South African
National Accreditation
System ("SANAS"). The First Respondent issued its contempt
application at the end of June 2010.
It was only in the replying
affidavit of 18 November 2010 that the First Respondent conceded in
paragraph 8 of that reply that
the testing was not in accordance with
paragraph 6 of the court order of 22 January 2010. The First
Respondent states that it arrived
at that conclusion "having
considered the Respondent's [Jim Fung's] answering papers and having
conducted its own investigations".
It is not clear from the
First Respondent's reply when it so conducted its own investigations
and what had changed its decision.
[68]
It is not in dispute between the parties that an appropriate
institution to do the re-testing is SABS Commercial (Pty) Ltd,
accordingly, to that extent paragraphs 7, 10 and 11 of the court
order have to be amended.
I
accordingly make the following order:
1.
Paragraphs 7,10 and 11 of the order by Rabie J dated 22/01/2010 is
amended by deleting in these paragraphs any reference to Test
Africa
and substituting therefore SABS Commercial (Pty) Ltd;
2.
The First Respondent is ordered to pay the costs of the main
application up to 03/12/2009.After this date each party is to bear
its own costs.
3.
The contempt application is dismissed
4.
In the contempt application each party is to bear its own costs.
JUDGE
OF THE HIGH COURT