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[2017] ZASCA 132
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Advertising Standards Authority v Herbex (Pty) Ltd (902/2016) [2017] ZASCA 132; 2017 (6) SA 354 (SCA); 2017 BIP 205 (SCA) (29 September 2017)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 902/2016
In
the matter between:
THE
ADVERTISING STANDARDS
AUTHORITY
APPELLANT
and
HERBEX
(PTY)
LTD
RESPONDENT
Neutral
Citation:
The
Advertising Standards Authority v Herbex (Pty) Ltd
(902/16)
[2017] ZASCA 132
(29 September 2017)
Coram:
Navsa ADP and Mathopo JA, Plasket,
Rogers and Schippers AJJA
Heard:
22 August 2017
Delivered:
29 September 2017
Summary:
Jurisdiction –
voluntary association – self-regulation of advertising industry
– no jurisdiction over non-members
– costs on appeal –
discretion – agreement on substituted order.
ORDER
On
appeal from
: The
Gauteng Division of the High Court, Johannesburg (Du Plessis AJ)
sitting as court of first instance):
The
following order is made:
1
The parties having agreed thereto, the appeal is upheld to the extent
reflected
in the substituted order set out below.
2
Save for paragraph 90.8, the order of the court a quo is set aside
and substituted
as follows:
‘
1
It is declared that:
1.1
the Advertising Standards Authority of South Africa (the ASA) has no
jurisdiction over any
person or entity who is not a member of the ASA
and that the ASA may not, in the absence of a submission to its
jurisdiction, require
non-members to participate in its processes,
issue any instruction, order or ruling against the non-member or
sanction it;
1.2
the ASA may consider and issue a ruling to its members (which is not
binding on non-members) on
any advertisement regardless of by whom it
is published to determine, on behalf of its members, whether its
members should accept
any advertisement before it is published or
should withdraw any advertisement if it has been published.
2
The ASA is directed
to include in its standard letter of complaint the contents
of
paragraph 1 and that a non-member is not obliged to participate in
any ASA process, but that should it not participate, the
ASA may
still consider the complaint, for the purposes set out in paragraph
1.2.’
3
Each party shall bear its own costs of appeal.
JUDGMENT
Mathopo
JA (Navsa ADP and Plasket, Rogers and Schippers AJJA) concurring):
[1]
The central issue in this appeal is whether
the appellant, the Advertising Authority of South Africa (the ASA),
has jurisdiction
over persons who are not its members and who have
not consented to its jurisdiction. The respondent (Herbex), which
carries on
business marketing complementary medicines, is not a
member of the ASA. Herbex launched an application in the Gauteng
Local Division
of the High Court and obtained, inter alia, a
declaratory order that the ASA has no jurisdiction over non-members
and that all
its rulings against Herbex are void. The appeal is with
the leave of the high court.
[2]
During the hearing of the appeal the
parties reached agreement in relation to the merits and the order
that should issue. They could
not agree on who should bear the costs
of the appeal and the costs in the court a quo. They asked this
court, having regard to
the agreed order and the record of
proceedings, to determine liability for costs in the court a quo and
this Court. In order to
engage in that exercise, it is necessary to
briefly set out the background to this matter.
[3]
The ASA is a voluntary association
incorporated in terms of the Companies Act 61 of 1973. It is an
independent, industry-funded
body that serves the purpose of
self-regulation on behalf of the advertising industry. Its purpose,
as a watchdog in the industry,
is to ensure that advertising is
informative, factual, honest, decent, legal and that advertisements
are prepared with a sense
of responsibility to the consumer.
[4]
The ASA serves this purpose, on behalf of
its members, through two primary methods. First, the ASA has
developed standards for the
industry, contained in the Advertising
Code (the Code). The Code is a contract entered into between the
participants in the advertising
industry, for the purpose of
self-regulation. Second, the ASA has created a mechanism to enforce
these industry standards, including
the adjudication of consumer
complaints and disputes between competitors.
[5]
The ASA adjudicates complaints on behalf of
its members, who agree to adhere to the Code and abide by the ASA’s
rulings. The
Code applies to all commercial and non-commercial
advertising. This includes advertising by advertisers who are not
members of
the ASA, such as Herbex, but who seek to have their
advertisements published by members of the ASA. The ASA’s
Directorate
is responsible for receiving and adjudicating complaints
concerning advertising in order to ensure compliance with the Code.
Any
party who feels aggrieved by a ruling of the Directorate may
appeal the ruling to the Advertising Standards Committee (in respect
of consumer complaints) or to the Advertising Industry Tribunal (in
respect of competitor complaints). The appellant is required
to pay a
fee to cover the costs of the appeal. A further appeal lies to a
Final Appeal Committee, also on payment of a fee.
[6]
The rulings of the ASA are published on its
website which is accessible to members and the media. Rulings
are not legally
enforceable against non-members. The only consequence
of a non-member’s refusal to comply with an ASA ruling is that
the
members of the ASA will decline to accept advertising from that
non-member. If a respondent ignores reasonable requests for
co-operation,
the ASA may issue an Ad-Alert to its members. The
effect of an Ad-Alert is that none of the ASA’s members will
publish any
advertisement of the offending advertiser in any medium.
[7]
Herbex challenged the ASA’s
jurisdiction in the court a quo essentially on the following grounds.
The ASA is a private company
which has no jurisdiction over
non-members. Herbex was induced by misleading statements and
non-disclosures in the ASA’s
standard letter sent to
advertisers, pursuant to receipt of a complaint by a member of the
public, to respond to complaints and
to participate and defend itself
in hearings conducted by or under the auspices of the ASA.
Consequently, the ASA issued rulings
against Herbex, published them
on its website and extracted appeal fees from Herbex. The ASA was
acting unconstitutionally, in
violation of the rights of Herbex to
freedom of expression and trade, and the ASA’s rulings against
Herbex adversely affected
its reputation and damaged its business.
[8]
In the court a quo and before us the ASA
conceded that the Code binds only its members; that non-members such
as Herbex are legally
entitled to ignore the rulings and procedures
of the ASA; and that Herbex would be affected by a ruling of the ASA
only if it wished
to place an advertisement with a member of the ASA
which has bound itself to comply with the ASA’s rulings
(something which
on the evidence Herbex has never sought to do). The
ASA denied that Herbex was misled into believing that the ASA is a
governmental
body, that it exercises statutory powers and that its
letters were in any way misleading. The ASA also denied any
infringement
of Herbex’s fundamental rights in the enforcement
of the Code.
[9]
Herbex succeeded in the court a quo which
made the following order:
‘
[90.1]
It is declared that the respondent [the ASA] has no jurisdiction over
any person or entity who is not a member of the respondent
and that
the respondent may, in the absence of a submission to its
jurisdiction, not require the applicant [Herbex] to participate
in
its processes, issue any instruction, order or ruling against the
applicant or sanction it;
[90.2]
It is declared that all rulings issued by the respondent against the
applicant are void;
[90.3]
The respondent is directed to remove from its website and other
official publications all rulings issued in respect
of the applicant;
[90.4]
The respondent is interdicted, in the absence of a submission to its
jurisdiction, from issuing any further rulings
or adjudicating any
further complaint against the applicant;
[90.5]
The respondent is directed to include in it standard letters of
complaint to non-members a reference to the fact that,
in the absence
of a submission to his jurisdiction, it has no jurisdiction to
adjudicate the complaint and that such a non-member
is not bound to
participate in its processes;
[90.6]
It is declared that there is no lawful basis for the respondent to
unilaterally impose appeal fees on the applicant
as a non-member of
the respondent in the absence of a contractual service agreement
between the applicant and the respondent;
[90.7]
The respondent is directed to repay the appeal fees in the amount of
R79 800.00 and R89 718.00 to the applicant, together
with interest at
the prescribed rate
a tempore morae
;
[90.8]
The respondent is to pay the costs of the application, including the
costs consequent upon the employment of two counsel.’
[10]
Before agreement was reached in this court
on the form of the order, the dispute between the parties related
mainly to the question
whether paragraph 90.1 of the order of the
court a quo was overbroad, and the content of the ASA’s
standard letter sent to
advertisers on receipt of a complaint. It was
submitted on behalf of the ASA that paragraph 90.1 of the order of
the court a quo
was extraordinarily wide and curtailed the ASA’s
ability to perform its function of self-regulation of the advertising
industry
in the public interest. More specifically, paragraph 90.1
precluded the ASA from considering any complaint whatsoever in
respect
of a non-member, without a submission to its jurisdiction, in
three categories: (a) advertisements of a non-member published in
media owned by a member of the ASA; (b) advertisements published by
non-members of the ASA, and which are not published by a member
of
the ASA; and (c) advertisements of a non-member broadcast by a
broadcast service licensee under the Electronic Communications
Act 36
of 2005 (the ECA).
[11]
The
ASA contended that it is entitled to consider complaints under
category (a) because the publisher, a member of the ASA or one
of the
industry bodies that is a member of the ASA, has agreed to abide by
the Code, which prevents members from accepting advertising
that
conflicts with the Code. The ASA was also entitled to consider
complaints under category (b) on behalf of its members, so
that they
could make an election, if approached in the future by the
advertiser, whether or not they wish to publish an advertisement
by
an advertiser who breaches the Code. The ASA could also consider
complaints under category (c) because s 55(1) of the ECA
requires all broadcasting service licensees to adhere to the Code and
s 55(2) envisages that the ASA will, in respect of its members,
adjudicate complaints concerning alleged breaches of the Code.
[1]
[12]
Although the ASA contended that there was
nothing misleading about its standard letter of complaint, it
accepted that the content
could be improved to make it clear to a
non-member that it is not obliged to participate in the proceedings
of the ASA, but that
if it does not participate in those proceedings,
the ASA may still consider the complaint, so as to determine whether
its members
should accept an advertisement by that non-member for
publication.
[13]
Before us the parties also agreed that
paragraph 90.4 of the court a quo’s order was superfluous since
it was covered by paragraph
90.1 of the order. Given that the issues
between the parties were confined and there was a real prospect that
the case could be
settled, the Court adjourned to give the parties an
opportunity to consider settlement and prepare a draft order
acceptable to
both sides.
[14]
When the hearing resumed the parties
presented a draft order which counsel explained and which was finally
agreed upon in the form
set out in paragraphs 1.1 and 1.2 of the
order below. The orders relating to previous rulings and appeal fees
(paragraphs 90.2,
90.3, 90.6 and 90.7) of the order of the court a
quo fell away, by virtue of the order by agreement. Thus the only
outstanding
issue was costs, on which the parties could not agree.
[15]
Mr Marcus who with Mr Ferreira appeared for
the ASA (the appellant), submitted that Herbex was successful in the
court a quo, and
that the ASA was substantially successful on appeal.
For practical purposes therefore, the two orders should be set off
against
each other, and there should be no order as to costs in
either court. Mr Subel with Ms Stein for Herbex, submitted that the
ASA
persisted with its stance that it had jurisdiction over
non-members, both in the court a quo and this Court. Accordingly, so
it
was submitted, Herbex was within its rights to defend the orders
of the court a quo, the ASA was not substantially successful and
Herbex was thus entitled to costs on appeal.
[16]
The power to interfere with costs on appeal
is limited to cases where the court vested with the discretion did
not exercise it judicially,
ie the court of first instance exercised
the power conferred on it capriciously, or upon a wrong principle, or
did not bring an
unbiased judgment to bear on the question, or did
not act for substantial reasons (
Manong
and Associates (Pty) Ltd v City of Cape Town & another
2011 (2) SA 90
(SCA) para 92). In the court a quo a substantial part
of the case was spent on what the ASA could or could not do. The
focus of
the argument was on the outer limit of its jurisdiction.
The court a quo was undoubtedly correct in holding
that in the absence of a submission to its jurisdiction, the ASA has
no jurisdiction
over non-members and could not require them to
participate in its processes. The respondent was substantially
successful and consequently,
there is no basis to interfere with the
court a quo’s order directing the ASA to pay the costs of that
application, which
include the costs of two counsel.
[17]
The ASA is a body set up to ensure that the
system of self-regulation of the advertising industry works, and the
main purpose of
the Code is to protect consumers and ensure fair play
among advertisers (
Telematrix (Pty Ltd
t/a Matrix Vehicle Tracking v Advertising Standards Authority SA
2006 (1) SA 461
(SCA) para 4). For these reasons, in my view, the ASA
had to approach this Court to reverse the wide-ranging effect of
paragraph
90.1 of the court a quo’s order, particularly as
regards the prohibition on the ASA from determining whether any
advertisement
breaches the Code, so as to enable the ASA to
determine, on behalf of its members, whether they should accept an
advertisement
for publication or withdraw the advertisement if it has
been published. Accordingly, the parties agreed to the orders in
paragraphs
1.1 and 1.2 below. The substituted order reflects a
measure of success achieved by each of the parties. In my view
therefore, in
the exercise of a discretion, it would be just and
equitable for each party to bear its own costs in the appeal.
[18]
The following order is made:
1
The parties having agreed thereto, the appeal is upheld to the extent
reflected
in the substituted orders set out below.
2
Save for paragraph 90.8, the order of the court a quo is set aside
and substituted
as follows:
‘
1
It is declared that:
1.1
the Advertising Standards Authority of South Africa (the ASA) has no
jurisdiction over any
person or entity who is not a member of the ASA
and that the ASA may not, in the absence of a submission to its
jurisdiction, require
non-members to participate in its processes,
issue any instruction, order or ruling against the non-member or
sanction it;
1.2
the ASA may consider and issue a ruling to its members (which is not
binding on non-members) on
any advertisement regardless of by whom it
is published to determine, on behalf of its members, whether its
members should accept
any advertisement before it is published or
should withdraw any advertisement if it has been published.
2
The ASA is directed
to include in its standard letter of complaint the contents
of
paragraph 1 and that a non-member is not obliged to participate in
any ASA process, but that should it not participate, the
ASA may
still consider the complaint, for the purposes set out in paragraph
1.2.’
3
Each party shall bear its own costs of appeal.
________________________
R
S Mathopo
Judge
of Appeal
APPEARANCES:
For
appellant:
G J Marcus SC
N
Ferreira
Instructed
by:
Willem
de Klerk Attorneys, Johannesburg
Rossouws
Attorneys, Bloemfontein
For
respondent: A Subel SC
S
Stein SC
D
Watson
C
Tabata
Instructed
by:
Fluxmans
Inc, Johannesburg
Lovius
Block, Bloemfontein
[1]
Section 55 of the ECA, in relevant part, reads:
‘
Control
over advertisements
(1)
All broadcasting service licensees must adhere to the Code of
Advertising Practice (in this section referred
to as the Code) as
from time to time determined and administered by the Advertising
Standards Authority of South Africa and to
any advertising
regulations prescribed by the Authority in respect of scheduling of
adverts, infomercials and programme sponsorships.
(2)
The Complaints and Compliance Committee must adjudicate complaints
concerning alleged breaches of the Code
by broadcasting service
licensees who are not members of the Advertising Standards Authority
of South Africa, in accordance with
section 17C of the ICASA Act, as
well as complaints concerning alleged breaches of the advertising
regulations.’