The Consumer Protection Act and Government Services (with a word about property and the voetstoots clause)

The liability of government under the Consumer Protection Act arise mainly from three important provisions:

1. The application of the CPA extends to a matter irrespective of whether the supplier is an organ of state, an entity owned or directed by an organ of state, a person contracted or licensed with an organ of state to offer or supply any goods or services, or is a public-private partnership.

2. The CPA applies to every transaction occurring in the Republic in the ordinary course of a business continually carried. The supply or potential supply of any goods or services must be in exchange for a consideration. A consideration is anything of value given or accepted in exchange for goods or services and has the widest possible meaning. It also does not generally matter whether the supplier is operating for profit or not. Thus, any organ of state (that includes a department of the state itself) is a supplier of goods and services governed by the CPA when it enters into a transaction with a protected consumer for a consideration.

3. The consumer can only be any individual person and any small business (assets or annual turnover less than R2million).

General services provided by the state in exchange for taxes, rates or other government levies are not provided in terms of a transaction in the sense used in the CPA. Where however the state charges for the provision of a particular service (municipal, electricity, gas, water, refuse removal contracts are good examples), there is a transaction and quality goods and quality service delivered on time will have to be supplied by government in all its forms.

Thus, the duty to build roads paid for by state revenue is not a transaction. But a toll road where you pay for the right to use a certain stretch of road is a transaction.

The law does recognise that everything that the government does cannot be perfect for everyone all the time. The state has to manage its resources in a rational fashion. Therefore, not much purpose will be served by the Commission ordering the state to pay a penalty that goes into the state revenue funds. Other remedies will have to be found by the Commission and the Tribunal. If things are declared not to comply with the CPA, it is hoped that the state will take those orders seriously and see that they do comply.

Immovable property transactions

There is an extraordinary consequence of the implied warranty of quality pertaining to the supply of goods by means of the sale of immovable property.

Bear in mind that this does not include private sales between individuals. It must be a sale by someone such as a property developer in the course of a business continually carried on. The CPA provides for the return of defective goods within six months of delivery of the goods including a right in immovable property.

It appears to have been overlooked that delivery of immovable property is a transfer in the deeds office and not a transfer of possession. Only after the transfer in the deeds office has been registered does the six-month period start running. If there is a material defect found by the purchaser after that, they can demand a refund and return the property without penalty and at the seller’s risk and expense. Transactions in the deeds office may have to be unbundled long after the transfer has taken place. This will cause major disputes and some financing difficulties for developers who have to give the money back and pay the re-transfer costs.