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[2016] ZAGPPHC 125
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National Credit Regulator v Capitec Bank Ltd and Another (A440/2014) [2016] ZAGPPHC 125 (23 March 2016)

REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(GAUTENG DIVISION,
PRETORIA)
CASE NO: A440/2014
DATE: 23/3/2016
Reportable
Of interest to other judges
Revised
In the matter between
THE NATIONAL CREDIT
REGULATOR
APPELLANT
and
CAPITEC BANK
LTD                                                                        FIRST

RESPONDENT
THE NATIONAL CONSUMER
TRIBUNAL                                   SECOND

RESPONDENT
JUDGMENT
VAN O
OSTEN
J:
[1] At issue in this
appeal are the powers and duties of the appellant, the National
Credit Regulator (the NCR), under the provisions
of the National
Credit Act 34 of 2005 (the NCA).
[2] In 2011 the NCR
‘initiated’ a complaint against the first respondent,
Capitec Bank (Capitec) followed by an investigation
into its
activities as credit provider, through the agency of Gobodo Forensic
and Investigative Accounting (Pty) Ltd (Gobodo).
Capitec was engaged
and co-operated in the investigation. Gobodo eventually submitted a
report to the NCR in which certain contraventions
of the Act and the
Regulations were identified, which the NCR referred to the second
respondent, the National Consumer Tribunal
(the tribunal), in terms
of s 140(1) and (2) of the NCA. The relief sought in the referral was
for a declarator that Capitec had
engaged in ‘prohibited
conduct’, an interdict to restrain Capitec from continuing
‘such conduct’, the imposition
of an administrative fine,
as contemplated in s 151 of the NCA, and costs. A full set of
affidavits was filed in which both the
validity of the referral and
the merits of the charges were extensively canvassed and dealt with.
At the hearing of the matter
before the tribunal both these aspects
were addressed in argument. The tribunal, in a judgment handed down
on 22 May 2014, upheld
Capitec’s challenge to the validity of
the referral and concluded that it was therefore unable to consider
the merits of
the charges. An order was added that ‘The
application for a finding that the respondent engaged in prohibited
conduct and
all other ancillary relief is denied’. No order as
to costs was made.
[3] The NCR appeals
against the judgment and order of the tribunal, in terms of s
148(2)(b) of the NCA. The tribunal has not entered
the fray and
abides the decision of this court.
[4] Before dealing with
the merits of the appeal it is necessary to briefly dispose of an
argument, advanced by counsel for Capitec,
which is that the tribunal
in making the order I have referred to, effectively dismissed the
NCR’s application on the merits
with the result that the appeal
can only succeed
in toto
if this court holds that the tribunal
should have found in favour of the NCR on the merits. I do not agree
with this argument.
The finding of the tribunal that the referral was
invalid in effect ousted its jurisdiction to adjudicate the merits of
the charges.
As much is conveyed in the finding that, because of the
invalid referral, the tribunal was unable to consider the merits of
the
charges. The order that followed, albeit somewhat tautologous,
simply means that due to an absence of jurisdiction the application

on the merits could not be heard. This court, accordingly, is
confined to a consideration of the validity of the referral, which

lies at the heart of the appeal.
[5] I turn now to the
merits of the appeal. The point of departure is first, to examine the
NCR’s initiation of the complaint
against Capitec and then to
analyse the nature of the investigation that followed. Against that
background the validity of the
referral will be considered.
[6] It is at the outset
necessary to refer to the statutory framework within which the NCR
operates in the initiation, investigation
and referral of complaints.
It is the NCR’s case is that it ‘initiated’ a
complaint against Capitec, in terms
of s 136 (2). Section 36 provides
for a complaints procedure (ss (1)), on the one hand, and the
initiation of a complaint by the
NCR, in its own name (ss (2)), on
the other. Only the latter is relevant for present purposes. Upon
initiation of the complaint
the NCR is empowered, in terms of s
139(1)(c), to direct an inspector to investigate the complaint in
respect of which the powers
and procedures provided for in ss (3) to
(6) apply. After completion of the investigation into the complaint
the NCR may
inter alia
refer the matter to the tribunal (s
140(1) and (2)(b)). The hearing before the tribunal and aspects
relating thereto are governed
by s 142 to 147 in Part D.
[7] The NCA does not
define the concept of ‘initiation’. Nor is there any
authority directly on all fours on the interpretation
of the word
used in the NCA. Useful assistance and guidance are to be derived
from the judgment of the Supreme Court of Appeal
in
Woodlands
Dairy (Pty) Ltd and Another v Competition Commission
2010 (6) SA
108
(SCA), which was confirmed and qualified in
Competition
Commission v Yara
(SA) (Pty) Ltd and Others
2013 (6) SA
404
(SCA). Both judgments were extensively dealt with by the tribunal
and relied on in argument in this court. It must be borne in mind

that the SCA in both cases was concerned with the interpretation and
application of the Competition Act 89 of 1998 (the CA) containing

similar provisions and on which the NCA was modelled. Of relevance,
for purposes of the present matter, is the parallel use of
the
concept of initiation, a power exclusively conferred on the
commissioner under s 49B(1) of the CA. The question Harms DP, writing

for the court in
Woodlands
, posed was whether there were any
jurisdictional requirements for the initiation of a complaint by the
commissioner. The question
likewise arises in the circumstances of
this case. The complaint referral by the commission, Harms DP held,
‘is (subject
to s 51) a jurisdictional fact for the exercise of
the tribunal’s powers in respect of prohibited practices’,
and continued
(para [13]:
‘
A complaint has to be
‘initiated’. The commissioner has exclusive jurisdiction
to initiate a complaint under s 49B(1).
The question then arises
whether there are any jurisdictional requirements for the initiation
of a complaint by the commissioner.
I would have thought, as a matter
of principle, that the commissioner must at the very least have been
in possession of information
‘concerning an alleged practice’
which, objectively speaking, could give rise to a reasonable
suspicion of the existence
of a prohibited practice. Without such
information there could not be a rational exercise of the power. This
is consonant with
the provisions of s 49B(2)(a) which permit anyone
to provide the commission with information concerning a prohibited
practice without
submitting a formal complaint.’
[8] In
Yara
,
Brand JA, writing for the court, with reference to
Woodlands
,
confirmed that there can be no investigation in terms of the CA
without a complaint submitted by a complainant or initiated by
the
commission against an alleged prohibited practice and that a
complaint can only be initiated by the commission on the basis
of a
reasonable suspicion. The learned judge of Appeal referred to ‘loose
statements’ in
Woodlands
which
he cautioned ought not be subjected to the formal process of
interpretation, and concluded:
‘
On the other hand, this
judgment should not be understood to authorise a formal investigation
without a complaint initiation, nor
the initiation of a complaint
without reasonable grounds, nor to absolve the commission of its
obligation to provide those grounds
when challenged to do so.’
[9]
It has accordingly become firmly established, at least as for
initiation of a complaint in terms of the CA, that a reasonable

suspicion is a jurisdictional requirement for the validity of the
ensuing investigation and referral. Only a valid complaint triggers

an investigation and determines the scope thereof. In my view, the
self-same principles apply, with equal force, in respect of
the NCR’s
initiation of a complaint. I do not consider it necessary to attempt
to define the nature and contents of the reasonable
suspicion
requirement. It is true, as pointed out by counsel for the NCR, that
the nature of the reasonable suspicion was refined,
or perhaps
qualified in
Yara
to include a tacit complaint and that it was
held that initiation constitutes a preliminary step in a process that
does not affect
the rights of the suspect (
Yara,
para 24)
which does not require a strict correlation between the complaint and
the referral (para 28 of the judgment). In the present
matter the
crucial issue for determination is whether the NCR’s initiation
was based on any suspicion at all in initiating
the complaint, which
obviates the need to have regard to the further considerations
referred to in
Yara
. What remains as the common golden thread
in both judgments of the SCA, is that the initiation must be based on
a reasonable suspicion.
[10]
The NCR in initiating a complaint exercises a public power which must
comply with the Constitution, which is the supreme law
and the
doctrine of legality, which is part of that law (
Pharmaceutical
Manufacturers Association of SA and Another: In re Ex parte President
of the Republic of South Africa and Others
2000 (2) SQA 674 (CC)
(2000 (3) BCLR 241
;
[2000] ZACC 1)
para 20). The NCR accordingly
cannot arbitrarily, without a reasonable suspicion, initiate a
complaint, generally, against what
it perceives to constitute a
prohibited practice. The sanctioning thereof will widely open the
doors to all kinds of abuse.
[11]
It
is clear from the provisions of s 136 of the NCA that a complaint
must be initiated against ‘an alleged prohibited practice’.
The
investigation by the NCR following upon the initiation of a complaint
must be focussed on the complaint in respect of which
a reasonable
suspicion is held or relate to the information available to the NCR
in respect of which a reasonable suspicion exists.
It is that
complaint which will be referred to the tribunal. As is the case with
the Commission, the NCR’s far reaching powers
may not be
abused:
‘
[F]or
purposes of a fishing expedition without first having initiated a
valid complaint based on a reasonable suspicion. It would
otherwise
mean that the exercise of power would be unrestricted because there
is no prior judicial scrutiny as is the case with
a search warrant.’
(
per
Harms DP in
Woodlands
, para 20, with reference to
Sappi
Fine Paper (Pty) Ltd v Competition Commission and Another
[2003]
2 CPLR 272
(CAC) ([2003] ZACAC 5) paras 35 and 39).
[12]
This brings me to the complaint which is the subject matter of this
appeal. In its founding papers the NCR made no attempt
at all to
either refer to or deal with the reasonable suspicion requirement.
The validity of the initiation was challenged in Capitec’s

answering affidavit. In reply thereto the NCR did not avail itself of
the opportunity of elaborating on the information in its
possession,
if any, or the reasons for having a suspicion but contented itself
with merely reiterating that it initiated the complaint
in its own
name and in referring to the mandate for the investigation given to
Gobodo. The mandate notably was not signed by the
NCR, but by the
manager and senior inspector of investigations and enforcement at
Gobodo. Three inspectors were appointed by the
NCR, in terms of s 25
of the Act. Each certificate of appointment reflects that the
inspector’s ‘appointment is for
the investigation of the
activities of Capitec Bank’. In the background section of the
mandate, where it plainly should have
set out and dealt with the
complaint, it is merely stated that ‘Concerns have been raised
relating to the provision of unsecured
credit and short term loans by
Capitec Bank’. In the NCR’s replying affidavit this
sentence is referred to as the basis
and reason for the investigation
but nothing more is added thereto. It is immediately and without more
ado, abundantly clear that
the statement does not, even by the
wildest stretch of imagination, comply with the requirement of a
reasonable suspicion or, any
suspicion for that matter. Nor were any
facts set out, either in the mandate read as a whole or in the NCR’s
affidavits,
from which a reasonable suspicion can be inferred. On the
contrary, the facts alluded to by the NCR show beyond all doubt that
it intended nothing other than a fishing expedition.
[13]
The terms of reference attached to the mandate letter, authorises
Gobodo to conduct an investigation which ‘is aimed
at
establishing whether Capitec Bank complies with the correct
procedures and processes in terms of the NCA in respect of the
granting of credit, pre-agreement disclosure and credit marketing
practices’. It is significant that the mandate is couched
in
the widest possible terms manifestly absent any reference to a
complaint. The further powers given to Gobodo in the proposed

investigation underscores as much: it is instructed to ‘interview
various senior staff members/managers and get from them
a detailed
description of policies and procedures relating to the granting of
credit, pre-agreement disclosure, credit marketing
practices and
related matters’ and ‘to obtain, if available, a copy of
Capitec Bank’s policies and procedures
relating to the granting
of credit, pre-agreement disclosure, credit marketing practices and
related matters’. The mandate
then extensively and in
considerable detail sets out the methodology to be employed by Gobodo
in the investigation, once more in
the widest possible terms.
Finally, any doubt that may have existed in regard to the scope of
the investigation, finally dissolves
in the concluding sentence of
the mandate, informing Gobodo that ‘you are not limited to the
above and may inspect and report
on any contraventions of the NCA
that you may come across’. Further, dispelling any suggestion
to the contrary, is Gobodo’s
express confirmation in its
report, submitted to the NCR after conclusion of the investigation,
that ‘the NCR did not supply
us with any specific complaints
regarding Capitec’.
[14]
The facts of this matter accordingly do not show that a complaint
existed which could have triggered an initiation and investigation.

The initiation by the NCR in terms of s 136(2) of the NCA was not in
respect of a complaint therefore rendering it invalid. The

investigation that followed was not an investigation into ‘the
complaint’ as is required by s 139(1)(c) of the NCA
and it,
likewise, suffers the same fate. So too does the referral.
[15]
The second leg of the enquiry concerns the fairness of the
investigation once the NCR’s report was made available.

Prior thereto Capitec co-operated with and assisted Gobodo in its
investigation. Capitec offered to assist the NCR but was confronted

with a rigid and uncompromising attitude insisting that Capitec
enters into a consent agreement in terms of s 138(1)(b) of the
NCA.
Capitec then requested further particulars to the charges. The NCR
however, did not respond and pressed on to have the matter
heard by
the tribunal.
[16]
In argument before us counsel for the appellant sough to criticise
Capitec for having asked further particulars to the charges
‘as
if this were a civil trial’. I do not think the criticism is
justified. The NCR was established in terms of s 12
of the NCA. Its
independency is confirmed in ss (1)(c) ‘subject only to the
Constitution and the law’. The NCR further
‘must be
impartial’ and is required to perform its functions ‘in
as transparent a manner as is appropriate having
regard to the nature
of the specific function’ and ‘without fear or favour’
(ss (f) and (g)). In addition as
I have already briefly referred to,
the NCR exercises a public power in regard to which the principle of
rationality applies: the
exercise of power and performance of the
function to initiate, investigate and refer a complaint to the
tribunal must be rationally
related to the purpose sought to be
achieved by the exercise of it (
Albutt v Centre for the Study of
Violence and Reconciliation and Others
2010 (3) SA 293
(CC) para
49;
Democratic Alliance v President of the RSA and Others
2013
(1) SA 248
(CC) para 27). The purpose sought to be achieved is to be
found in s 3 of the NCA. In summary, and of relevance for present
purposes
is that the NCR acts as a watchdog in order to promote
equity in the credit market. In doing so the NCR exercises a
discretion
requiring the balancing of the rights and responsibilities
of credit providers as well as consumers. Within this framework the
NCR is required, as far as reasonably possible, to achieve the
correction of non-compliance with the provisions of the NCA by credit

providers, impartially, while at all times observing
audi alteram
partem
up to the stage that the unresolved issues inevitably are
to be referred to the tribunal. A unilateral fault finding mission
with
the sole purpose of securing a hearing by the tribunal, as has
happened in this case, is at odds with Constitutional values and

principles and is therefore to be deprecated. I have no doubt that
had the perceived transgressions by Capitec, that were discovered
in
Gobodo’s investigation, been addressed by mutual co-operation
and in the spirit of bettering the interest of the credit
consumer
industry as a whole (as articulated in s 3(a) of the NCA), a hearing
before the tribunal could have been averted.
[17]
One last aspect needs to be addressed. The question arises whether
ex
post facto
the entire process, including the referral to the
tribunal, ought to be set aside in view of the fact that the merits
of the charges
were fully dealt with both in the papers and in
argument before the tribunal. Counsel for the NCR, rather belatedly
in reply, relying
on s 140(1)(b) of the NCA, submitted that it
contains the only jurisdictional requirement in respect of the
hearing by the tribunal.
That would merely require the NCR, after
completion of an investigation, to believe ‘that a person has
engaged in prohibited
conduct’. The argument is short-lived and
flounders in its premise. The requirement of a valid complaint for
initiating the
complaint, as counsel for Capitec correctly pointed
out, constitutes a pre-condition for the legality of all procedures
in consequence
thereof, including the referral to the tribunal. I
should add that this court in any event will not approve a procedural
step which
flows from an unlawful premise.
[18]
It remains to deal with one aspect concerning the costs of the
appeal. Counsel for Capitec has asked for the costs of three
counsel.
I am not satisfied that the matter is of sufficient complexity to
justify the appointment of three counsel.
[19]
In the result the following order is made:
1.
The appeal is dismissed.
2.
The appellant is ordered to pay the costs of the appeal, including
the costs consequent upon the employment of two counsel.
_________________________
FHD VAN OOSTEN
JUDGE OF THE HIGH
COURT
Concur:
DS MOLEFE
JUDGE OF THE HIGH
COURT
MM JANSEN
JUDGE OF THE HIGH
COURT
COUNSEL FOR
APPELLANT                                    ADV

CDA LOXTON SC
ADV
A GOVENDER
APPELLANT’S
ATTORNEYS                                     GILDENHUYS

MALATJI INC
COUNSEL FOR FIRST
RESPONDENT                      ADV

WH TRENGOVE SC
ADV
A BREYTENBACH SC
ADV
C CILLIERS
FIRST RESPONDENT’S
ATTORNEYS                       VANDERSPUY
ANDREA
RAE ATTORNEY
DATE OF
HEARING                                            24

FEBRUARY 2016
DATE OF
JUDGMENT                                         23

MARCH 2016