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[2021] ZASCA 28
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National Credit Regulator v Getbucks (Pty) Ltd and Another (140/2020) [2021] ZASCA 28; [2021] 2 All SA 747 (SCA) (26 March 2021)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 140/2020
In the
matter between:
THE
NATIONAL CREDIT REGULATOR
APPELLANT
and
GETBUCKS
(PTY) LTD
FIRST RESPONDENT
MINISTER
OF TRADE
AND
INDUSTRY
SECOND RESPONDENT
Neutral citation:
National
Credit Regulator v Getbucks (Pty) Ltd and Another
(Case
no 140/2020)
[2021] ZASCA 28
(26 March 2021)
Coram:
PETSE
AP, ZONDI and MBATHA JJA and GORVEN and WEINER AJJA
Heard
:
2 March 2021
Delivered
:
This judgment was handed down electronically by circulation to the
parties' representatives by email, publication
on the Supreme Court
of Appeal website and release to SAFLI. The date and time for
hand-down is deemed to be 09h45 on 26 March
2021.
Summary:
Validity – Regulation 44 under the
National Credit
Act 34 of 2005
– invocation of defensive challenge to
deregistration proceedings – period allowed for comment on
proposed regulation
inadequate – promulgation of regulation
non-compliant with
National Credit Act – appellant
not entitled
to rely on regulation in proceedings brought to deregister first
respondent.
ORDER
On
appeal from:
Gauteng Division of the
High Court, Pretoria (Davis J sitting as court of first instance):
The
appeal is dismissed with costs.
JUDGMENT
Gorven
AJA (Petse AP, Zondi and Mbatha JJA and Weiner AJA concurring)
[1]
Regulation 44
(the regulation) promulgated under
the National Credit Act
[1]
(the Act) prescribes maximum monthly service fees.
[2]
These are fees which a credit provider may charge a consumer. The
appellant, the National Credit Regulator, (the NCR) claimed that
the
first respondent, Getbucks (Pty) Ltd, (Getbucks) overcharged fees and
was thus non-compliant with the regulation. It accordingly
approached
the National Credit Tribunal to cancel the registration of Getbucks
under the Act. This prompted Getbucks to approach
the Gauteng
Division of the High Court, Pretoria on application for, primarily,
the following relief:
‘1.
That it be declared that Regulation 44 of the Regulations
GMR489, published
in the Government Gazette of 31 May 2006 . . .
in terms of the
National Credit Act, 34 of 2005
is
ultra vires
and/or void.
2.
Declaring that the [NCR] cannot prosecute [Getbucks] in the Tribunal
for an alleged
contravention of
Regulation 44.
’
The
NCR and the second respondent, the Minister of Trade and Industry,
(the Minister) opposed the application.
[2]
After hearing argument, the court of first
instance, per Davis J, granted the following order:
‘1.
It is declared that the First Respondent is barred from prosecuting
the Applicant
or seeking any relief against it before the National
Consumer Tribunal in respect of any alleged contravention of
Regulation 44
of the National Regulations GMR 489 published
in the Government Gazette of 31 May 2006, prior to its
subsequent
review and amendment.
2.
The Respondents are ordered to pay the Applicant’s costs,
including costs
of two counsel.’
It
is against this order that the NCR appeals, with leave of the court
of first instance. The Minister took no part in the appeal.
[3]
As appears from the order, the regulation was
reviewed and amended prior to the date of judgment. As such, any
defects which might
have existed at the time no longer attend on the
regulation. Since the unamended regulation was operative when the
application
was brought, it remains relevant as to whether Getbucks
is or is not subject to deregistration for non-compliance.
[4]
The relevant part of the regulation reads:
‘The
maximum monthly service fee, prescribed in terms of section 105(1)
of the Act, is R50.’
And
that of s 105(1) of the Act, in terms of which the regulation
was promulgated, reads:
‘(1)
The Minister, after consulting the National Credit Regulator, may
prescribe a method for calculating-
. . .
(b)
the maximum fees
contemplated in this Part,
applicable
to each subsector of the consumer credit market, as determined by the
Minister.’
[5]
The first issue is whether the regulation was
promulgated pursuant to s 171 of the Act or under s 11 of
Schedule 3 to
the Act.
[3]
The significance of this will become apparent below. The NCR
contended that it was promulgated under s 171, while Getbucks
contended that it was promulgated under s 11. If the court of
first instance correctly held that it was promulgated under
s 11,
the NCR submitted that the period of 30 days required under that
section was afforded or, if not, that the shorter period
should have
been condoned by the court.
[6]
Section 171 of the Act provides:
‘(1)
The Minister-
(a)
may make any regulations expressly authorised or contemplated
elsewhere in this Act,
in accordance with subsection (2);
(b)
in consultation with the National Credit Regulator, may make
regulations for matters
relating to the functions of the National
Credit Regulator, including-
(i) forms;
(ii) time periods;
(iii) information required;
(iv) additional definitions applicable to those
regulations;
(v) filing fees;
(vi) access to confidential information; and
(vii) manner and form of participation in National Credit
Regulator procedures;
(c)
in consultation with the Chairperson of the Tribunal, and by notice
in the Gazette, may make regulations for matters
relating to the
functions of the Tribunal and rules for the conduct of matters before
the Tribunal; and
(d)
may make regulations regarding-
(i) any forms required to be used for the purposes of
this Act; and
(ii) in general, any ancillary or incidental matter that
is necessary to prescribe for the proper implementation or
administration of this Act.
(2)
Before making any regulations in terms of subsection (1)
(a)
,
the Minister-
(a)
must publish the proposed regulations for public comment; and
(b)
may consult the National Credit Regulator and provincial regulatory
authorities.
(3)
A regulation in terms of this Act must be made by notice in the
Gazette.’
And
s 11 of Schedule 3 to the Act reads:
‘On
the effective date, and for a period of 60 business days after the
effective date, the Minister may make any regulation
contemplated in
the Act without meeting the procedural requirements set out in
section 171 or elsewhere in this Act, provided the
Minister has
published such proposed regulations in the Gazette, allowing a period
of at least 30 business days for comment.’
[7]
The draft regulation was published along with the
other proposed regulations in General Notice 307 in Government
Gazette No. 28531
on 20 February 2006. The notice indicated
that these were ‘Draft National Credit Regulations to be
published in
terms of the
National Credit Act’ and
were
published for ‘General Public Comment’. The Notice gave
as the ‘[c]losing date for submissions 25 March 2006’.
[8]
The following is the timeline of relevant events.
The proposed regulations were published on 20 February 2006.
The Act
was assented to on 10 March 2006. The advertised closing
date for submissions on the draft regulations was 25 March 2006.
The regulations were published on 31 May 2006. The sections
of the Act relevant to this appeal came into effect on 1 June 2006.
This means that, for purposes of this litigation, the effective date
of the Act was 1 June 2006. Getbucks was initially
registered as a credit provider under the Act on 22 February 2012.
The NCR referred Getbucks to the Tribunal for deregistration
on
26 November 2014.
[9]
It is common cause that the advertised closing
date for submissions was 27 business days after publication. This is
short of the
minimum period of 30 business days specified in s 11.
Regulations made under s 171(1)
(a)
must comply with s 171(2). This requires that they must be
published for public comment. Unlike s 11, s 171(2) does not
specify a minimum period which must be allowed for the submission of
comments. This means that, if the advertised closing date
for
submissions is the date which governs the minimum 30 day period
required for comment under s 11, the regulation could not have
been
validly promulgated under that item. It could only be valid if it had
been promulgated under s 171. On the other hand,
if the
advertised date for submissions was not the date which governed the
30 day period, the regulation could have been validly
promulgated under s 11.
[10]
Section 14 of the Interpretation Act 33 of
1957 provides:
‘Where
a law confers a power-
(a)
to make any
appointment; or
(b)
to make, grant or issue
any instrument, order, warrant, scheme, letters patent, rules,
regulations or by-laws;
or
(c)
to give notices; or
(d)
to prescribe forms; or
(e)
to do any other act or
thing for the purpose of the law,
that power
may, unless the contrary intention appears, be exercised at any time
after the passing of the law so far as may be necessary
for the
purpose of bringing the law into operation at the commencement
thereof: Provided that any instrument, order, warrant, scheme,
letters patent, rules, regulations or by-laws made, granted or issued
under such power shall not, unless the contrary intention
appears in
the law or the contrary is necessary for bringing the law into
operation, come into operation until the law comes into
operation.’
It
is the Act itself which grants the Minister the power to promulgate
regulations. She did so the day before the Act came into
effect on 1
June 2006. This means that she did so when she had not yet been
empowered by the Act to do so. Without the provisions
of s 14 of
the Interpretation Act, the Minister could not have been empowered to
make the regulation because the Act had not
yet come into effect. Her
power to do so, which derives from the Act, had not yet arisen.
However, due to the provisions of s 14
of the Interpretation
Act, it was competent for the Minister to promulgate the regulation
on 31 May 2006. This is so
regardless of whether it was
made under s 171 or under s 11.
[11]
During argument, both parties accepted this. The
reason for this provision is obvious. Machinery required to
administer the Act
had to be in place on the date the Act came into
effect. The Act repealed prior legislation and the bodies which had
administered
it were no longer empowered to do so. But for the
provisions of s 14 of the Interpretation Act, there would have
been a vacuum
with the repealed legislation no longer operative and
the Act lacking regulations to administer it. Section 14
accordingly
allows for a smooth transition where this is necessary.
[12]
As indicated, the regulation came into effect on
1 June 2006, on the same day as the Act. Section 12 of
the Act begins
‘[t]here is hereby established a body to be
known as the National Credit Regulator’. It was accepted during
argument
that this clearly means that, prior to 1 June 2006,
the NCR did not exist. In other words, the NCR came into being at
the
same time as the regulation came into effect.
[13]
It is clear that the regulation dealt with
matters regulated by s 105(1) of the Act. This much was conceded
by the NCR during
argument. The regulation itself makes this plain
when it states that ‘[t]he maximum monthly service fee,
prescribed in terms
of section 105(1) of the Act, is R50’.
And the subject matter falls foursquare under s 105(1) which
prescribes
‘a method for calculating . . .
(b)
the
maximum fees contemplated in this Part’.
[14]
Section 105(1) requires that the regulation
in question be made ‘after consultation with the National
Credit Regulator’.
This is a procedural requirement. In order
for the procedural requirement to have been met, the Minister could
only make the regulation
‘after consultation with’ the
NCR. It has been held that ‘after consultation with’
means that the functionary
must have regard to the views of the other
functionary but is not bound by them,
[4]
or must give serious consideration to their views.
[5]
The obligation to consult does not require exhaustive consultation.
In
Minister of Home Affairs and Others v
Scalabrini Centre and Others
,
[6]
Nugent JA said:
‘[A]n
obligation to consult demands only that the person who is entitled to
be consulted be afforded an adequate opportunity
to exercise that
right. Only if that right is denied is the obligation to consult
breached.’
[15]
This all means that, if the NCR was not
consulted, the obligation to consult in s 105(1) was breached.
In such a case, the
only way the regulation could be valid was if
s 11 was invoked. This allows regulations to be made ‘without
meeting
the procedural requirements set out . . . elsewhere in this
Act, provided the Minister has published such proposed regulations in
the Gazette, allowing a period of at least 30 business days for
comment’. Section 171 does not contain a similar provision
doing away with the need to meet procedural requirements in the Act.
[16]
When confronted during argument with this
proposition, the NCR stood by its contention that the regulation was
promulgated under
s 171. It said that there was indeed prior
consultation. As evidence, it pointed to an affidavit of the Minister
of Trade
and Industry and one delivered on behalf of the NCR in an
interlocutory application. That of the Minister explained that a
Policy
Framework was set up to chart the process leading to the
promulgation of the legislation surrounding the Act. The affidavit
explains
this as follows:
‘Chapter
7 of the Policy Framework highlights that prior to the National
Credit Regulator being formed in terms of section 12
of the Act,
a cluster known as the Micro Finance Regulatory Council (“MFRC”)
was established by the Department of Trade
and Industry, and
subsequently became the institution now known as the National Credit
Regulator.’
In
support of this assertion, the NCR quoted from the Policy Framework:
‘In
recognition of the unique experience and expertise gathered by the
Micro Finance Regulatory Council (MFRC) over the five
years of its
operation, it is proposed that the National Credit Regulator will
absorb the MFRC, but also the national Usury Act
inspection function
within the DTI. The National Credit Regulator will be jointly funded
from credit provider registration fees
and levies, and an annual
transfer from national government.’
In
the affidavit delivered in the interlocutory matter it was asserted:
‘The
MFRC, as is explained by the Minister, was the entity that became the
NCR, as provided for in Section 8, Schedule
3 of the NCA.’
[17]
It was submitted that consultation with the MFRC
was, therefore, consultation with the NCR. This is because it became
the NCR on
1 June 2006. There are a number of difficulties
with this submission, however. First, as mentioned, s 12 of the
Act creates the NCR. Prior to 1 June 2006, it did not exist
and could therefore not have been consulted. Secondly, the
assertions
contained in these affidavits are contradicted by the Policy. The
Policy did not say that the MFRC became the NCR. It
said that the NCR
would ‘absorb the MFRC’. The absorption of one body by
another does not mean a metamorphosis of the
existing body into the
new entity. Thirdly, s 8 of Schedule 3 provides:
‘As
of the effective date—
(a)
the assets, liabilities and employees of a regulatory institution
designated by the Minister in terms of section 15A of the Usury
Act,
1968 (Act No. 73 of 1968), are transferred to and are assets,
liabilities and employees, respectively, of the National Credit
Regulator; and
(b)
any person appointed as an inspector or in any other capacity in
terms of the Usury Act, 1968 (Act No. 73 of 1968), may be transferred
to the National Credit Regulator.’
A
transfer presupposes two different entities. One cannot transfer
assets, liabilities or people to oneself. There is thus simply
no way
around the legal position that, prior to 1 June 2006, the
Minister could not have consulted the NCR in order to
satisfy the
requirements of s 105(1).
[18]
Factually, therefore, the regulation could not
have been made by the Minister ‘after consulting the National
Credit Regulator’.
The procedural requirement of prior
consultation in s 105(1) was thus breached. Section 171(1)
(a)
read with s 172 did not allow the Minister to make regulations
without meeting procedural requirements contained in the Act.
It
could therefore not have been the basis on which the regulation was
promulgated. One is driven to the ineluctable conclusion
that, in
order to do away with the procedural requirement of prior
consultation in s 105(1), the regulation could only have
been
promulgated under s 11.
[19]
The next question is whether s 11 was complied
with. Section 11 carries with it the requirement of ‘allowing a
period of at
least 30 business days for comment’. The
advertised closing date for submissions in the Gazette did not allow
30 business
days but only 27. The NCR contended that, because the
regulation was promulgated 71 business days after publication of
the
Notice, the requirement of a minimum of 30 business days was to
all intents and purposes satisfied. Uncontradicted evidence was
given
that submissions received after the advertised closing date would
have been, and in fact were, taken into account.
[20]
This aspect turns at least partly on the
interpretation of s 11. It allows procedural requirements in the Act
to be overlooked:
‘[P]rovided
the Minister has published such proposed regulations in the Gazette,
allowing a period of at least 30 business
days for comment.’
The
issue resolves itself into whether this proviso requires the Gazette
to indicate that at least 30 business days is allowed for
comment, or
the Minister may allow 30 days despite the Gazette giving only 25
business days.
[21]
The approach to interpretation is
objective:
‘
The “inevitable point of departure is
the language of the provision itself” read in context and
having regard to the
purpose of the provision and the background to
the preparation and production of the document.’
[7]
The
language of the provision talks of ‘allowing’ that
period. On balance, on a grammatical construction, it seems that
it
is the publication which must allow the period. The context of the
provision is that regulations bearing on the operation of
the NCA are
intended to be made. The provision is aimed at persons interested and
affected by those regulations who may wish to
comment. It can
scarcely be contended that all such persons are aware of the 30
business day period specified in s 11. The
clear purpose of the
provision is to inform them of the date by which they should submit
comments if they are to be taken into
consideration. That purpose is
not met if, despite the Gazette advertising a closing date for
submissions, the Minister, unbeknown
to anyone but herself, decides
to allow longer. The language, context and purpose of the proviso
support the interpretation that
the Gazette must allow a minimum of
30 days for the submission of comments.
[22]
As a result, this contention of the NCR simply
cannot succeed. The clear requirement is that interested and affected
persons should
be informed by when their comments should be received.
The fact that the NCR would have considered all comments, whether or
not
made within the advertised period, is of no moment. All of this
means that the Minister did not comply with the proviso to s 11.
[23]
The final submission by the NCR is that, because
the 27 days allowed was a reasonable period, and was just three days
short of the
minimum 30 days specified, the court of first instance
should have condoned this non-compliance. But this is to misconstrue
the
proviso to s 11. Section 11 empowers the Minister to
promulgate regulations without the need to comply with procedural
requirements set out in the Act, ‘provided the Minister has
published such proposed regulations in the Gazette, allowing
a period
of at least 30 business days for comment’. If the Minister does
not do so, she is not empowered by s 11 to
promulgate
regulations without meeting the procedural requirements of the Act.
This power arises only if the Gazette allows a minimum
of 30 business
days for comment.
[24]
To summarise. The regulation could only have been
promulgated under s 11. The requirement was that the Gazette
allow a period
of at least 30 business days for the submission of
comments. This requirement was not complied with. The power of the
Minister
to make the regulation thus did not arise under s 11. The
nett effect of all of this is that the promulgation of the regulation
was
ultra vires
the
power of the Minister.
[8]
The regulation was accordingly not validly promulgated.
[25]
What, then, is the effect of this on the present
matter? In its heads, the NCR said that the application launched by
Getbucks was
one to review and set aside the regulation. The NCR
submitted that, because it was not brought within the requisite
period allowed
under PAJA, it should have been dismissed on this
ground alone. But this is a classic collateral, reactive, or
defensive challenge
to the regulation. It is available when an
attempt is made to coerce an entity by utilising the regulation. The
challenge may use
as a defence the fact that the regulation was not
validly promulgated. The classic exposition of this is found in
Merafong City v Anglogold Ashanti Ltd
,
[9]
where the Constitutional Court held:
‘A
subject at risk of criminal conviction or other coercive action by
the state may indeed raise a reactive or defensive challenge
to the
lawfulness of the administrative act on which the prosecution or
coercion is based.’
[10]
[26]
It is clear that the application in question
sought to raise a reactive challenge. It was therefore not a review
application, whether
under PAJA or the common law. The NCR correctly
did not press this line of argument during the hearing. As such, it
is not necessary
to determine whether the promulgation of the
regulations in question was administrative or legislative in
character. The issue
is one of legality. If the regulation does not
pass muster, the reactive challenge need not be to administrative
action but to
any invalid act:
[11]
‘These provisions imply that a local government may only act
within the powers lawfully conferred upon it. There is nothing
startling in this proposition – it is a fundamental principle
of the rule of law, recognised widely, that the exercise of
public
power is only legitimate where lawful. The rule of law – to the
extent at least that it expresses this principle
of legality –
is generally understood to be a fundamental principle of
constitutional law.’
[27]
It seems to me to be in the nature of this kind
of collateral, or reactive, challenge that it cannot be time-barred
as with an attempt
to review administrative action. This is because
the person raising the reactive challenge might only be subjected to
the coercive
action by an organ of the state based on the impugned
provisions a considerable period of time after they came into effect.
That
is precisely the situation in the present matter. It cannot be
said, accordingly, that the application should have been dismissed
due to the time which had passed since the regulation was made.
[28]
The court of first instance thus correctly found
for Getbucks. It also correctly recognised the challenge raised by
Getbucks as
being a reactive, defensive, or collateral one. The order
granted addressed that coercive action and declared that the
regulation
could not be used against Getbucks.
[29]
In the result, the appeal is dismissed with
costs.
T
R GORVEN
ACTING
JUDGE OF APPEAL
APPEARANCES
For
appellant:
P L Carstensen SC
Instructed by:
Lebethe Attorneys & Associates Incorporated,
Alberton
c/o Matsepes Incorporated, Bloemfontein
For first
respondent: R Michau SC
Instructed by:
Louw Le Roux Incorporated, Pretoria
c/o
Webbers Attorneys, Bloemfontein
[1]
National Credit Act 34 of 2005
.
[2]
The regulation is one of a number promulgated on
31 May 2006 under GN R489/2006 in Government Gazette No. 28864.
I shall
refer to it as the regulation unless it is necessary to
refer to the others promulgated simultaneously. The papers and order
of the court of first instance incorrectly refer to ‘Regulations
GMR 489’, but nothing turns on this.
[3]
Schedule 3 to the Act deals with transitional
arrangements.
[4]
Premier, Western Cape v
President of the Republic of South Africa
[1999] ZACC 2
;
1999 (3) SA 657
;
1999 (4) BCLR 383
(CC) para 85.
[5]
President of the
Republic of South Africa and Others v South African Rugby Football
Union and Others
[1999] ZACC 9
;
1999 (4) SA 147
;
1999 (7) BCLR 725
(CC) para 63.
[6]
Minister of Home Affairs and Others v Scalabrini Centre and
Others
[2013] ZASCA 134
;
2013 (6) SA 421
;
[2013] 4 All SA 571
(SCA) para 43.
[7]
Natal Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
2012 (4) SA 593
(SCA) para 18 (references omitted).
[8]
Fedsure
Life Assurance Ltd and Others v Greater Johannesburg Transitional
Metropolitan Council and Others
[1998] ZACC
17
;
1999 (1) SA 374
;
1998 (12) BCLR 1458
(CC)
para
59,
where it is made clear that these principles remain
operative under the Constitution:
‘There is of course no doubt that the common-law principles
of
ultra vires
remain under the new
constitutional order. However, they are underpinned (and
supplemented where necessary) by a constitutional
principle of
legality. In relation to “administrative action” the
principle of legality is enshrined in section
24(a). In
relation to legislation and to executive acts that do not constitute
“administrative action”, the principle
of legality is
necessarily implicit in the Constitution.’
[9]
Merafong City v Anglogold Ashanti Ltd
[2016] ZACC 35
;
2017
(2) BCLR 182
(CC);
2017 (2) SA 211
(CC).
[10]
Merafong City
para 30.
[11]
Fedsure
para 56. References omitted.