Monday, 13 February 2017

Consumer Protection: Cancelling a Future Reservation, Order or Booking

Whether you are a supplier of goods or services, or a consumer entering into a transaction to receive goods or services, it is likely you will need to deal with the cancellation of an advanced reservation, order or booking at some stage.

For the most part, the legal position is now regulated by section 17 of the Consumer Protection Act No. 68 of 2008 (‘CPA’) – in summary, a consumer is free to cancel any advanced reservation, order or booking subject to the imposition of a reasonable cancellation fee.  This section does not apply to “special-order” goods (such as one-off, custom order goods) and does not apply to franchise agreements.  Moreover, a supplier may not impose any cancellation fee if the reservation, order or booking is missed due to death or hospitalisation.

Crucially, the apparently normal practice of including a “non-refundable” deposit for future services is not sustainable – a supplier should rather protect their interests by including a cancellation fee, which includes a sliding scale indicating how much of the fee will be refunded in the event of cancellation.  It may well be that a supplier is entitled to more than the deposit amount in any event, particularly if they are given unreasonably short notice and cannot replace the consumer.  Suppliers who persist with non-refundable deposits, particularly where they cannot reasonably justify the amount charged, will likely come off second best in the National Consumer Commission (or a competent court).

By way of example, the wedding industry is instructive.  According to the Ombud for Consumer Goods and Services, around 190 000 marriages take place in South Africa every year – shockingly, it is estimated that between 10 and 15% of these marriages are postponed or cancelled every year. Therefore, the statistics suggest that most suppliers in the wedding industry will face cancellation or postponement at least once every calendar year. 

Using one of the many wedding cancellations as an example, a consumer is entitled to cancel the agreement for future services (notwithstanding what the agreement may say).  The supplier has the corresponding right to charge a reasonable cancellation fee (a supplier may also ask for a reasonable deposit or booking fee to secure the future date).

The key issue appears to be the interpretation of a reasonable cancellation fee.  The following factors should be considered: nature of the service, length of notice, possibility of replacing the consumer and industry norms.

According to Advocate Melville of the Consumer Goods and Services Ombud, the idea should be compensation, not punishment of the couple.  A competent court or the National Consumer Commission will essentially be weighing up two competing interests: on the one hand, the consumer may feel it is their right to receive back their money for a service they did not receive – i.e.: they do not want to pay, or want to pay as little as possible.  On the other hand, the service provider may have to turn down other jobs (and perform a substantial amount of work before the actual day, as well as incurring operational costs). Further, in the wedding industry in particular, the replacement of a consumer on anything less than six or seven months’ notice may be difficult or improbable – i.e.: the service provider wants to charge as close to 100% of the fee as possible.
In the absence of clear industry guidelines, or authoritative legal precedent, the best answer is to attempt to deal with this fairly and transparently in your service level agreement (or your standard terms and conditions).

It is suggested that a sliding scale is employed as a guideline (the unique circumstances of every matter will have to be considered, and each matter is decided on a case-by-case basis).  The scale can be adjusted to take account of the particular service offering, industry and its norms - for example, in the wedding industry, services are typically booked more than 9 months in advance, sometimes more than 18 months in advance…

Therefore, a sliding scale in this industry will operate differently from one used in another industry.  For example, one could base the cancellation fee (as a guideline) on the length of time given and the likely ability of the supplier to replace the consumer.  If a supplier is only given one months notice, it is likely they will not be able to replace the consumer and can justify operational expenses, marketing, research etc. and validly claim a large proportion of the contract price. 

Conversely, a supplier given 11 months’ notice should be able to re-book the date and will likely have incurred little to no costs – therefore, the refund should be as close to full as possible.

All of this will depend on the service offering and particular facts of the situation, particularly with an area of law that is as new as this one.  Suppliers would be wise to ensure their agreements deal with cancellation, spell out a reasonable penalty, and are fully CPA compliant – reputational risk and long legal battles are often not worth a few thousand Rand…




Monday, 6 February 2017

Naming and shaming on Facebook and social media

A recent Pretoria High Court judgment has vividly illustrated the dangers of naming and shaming on Facebook.

In Hechter v Benade [full judgment - PDF], decided on 5 December 2016, the court ordered the defendant to pay R350 000.00 in damages for defamation, plus legal costs and interest.  

The dispute centered around two neighbours, briefly, the facts are as follows: the plaintiff complained to the body corporate of the Centurion estate they both lived in, alleging that his neighbour and her husband were keeping chickens and rabbits that smelt and made a noise.  The plaintiff is alleged to have taken several photographs of the conditions the animals were being kept under.

As a result of the complaints (and photos), the defendant retaliated in typical 21st century style – an expletive-filled rant on social media (Facebook in this matter).  The Defendant took a photograph of the plaintiff and posted it on Facebook calling him a ‘perverse neighbour, an idiot and an ugly piece of shit’ – also insinuating that the plaintiff was a ‘peeping-tom’.

As a result, and in addition to the damage to his reputation and dignity, the plaintiff claims to have lost business, had his life threatened, suffered from depression and incurred unnecessary costs (including legal fees and moving expenses. He moved to another unit in the same estate, but in an ironic twist of fate, the defendant moved right next door to him again, and it appears from the full judgment that they are - or were at the time of hearing - still neighbours).

The court ultimately found in the plaintiffs favour; it once again confirmed the basic principles relating to defamation – the plaintiff need only prove, judged by a reasonable person, that the offending material was published, referred to him (the plaintiff), was defamatory (towards the plaintiff) and caused harm (reputation and dignity).

Of course, there are several defences open to the defendant -  truth for the public benefit (published material must be true and in the publics’ interest to receive this material), fair comment (i.e.: editorial comment or a satirical piece) and privilege (i.e.: where there is a moral or social duty to publish the defamatory matter, and the recipient has a similar interest or duty in receiving it). Additionally, if the defendant is a news publication then it has an additional defence – the publication must be reasonable in the circumstances.

None of these defences appear to be applicable to the matter and the defendant’s rant looks to have cost her at least R350,000.00.

How can you avoid this happening to you?  Think three or four times before naming and shaming on Facebook.  There are a plethora of groups and communities on social media where sensitive information is often posted without thought, and naming and shaming takes place on a weekly basis.  Keyboard warriors ought to be careful, and this judgment merely confirms that.

Some basic advice:

  • Do not post rants on social media when angry and emotional.  Most important, avoid posting anything controversial when intoxicated;

  • Where giving reviews or commenting critically about others, stick to the facts – be objective and neutral.  Freedom of speech is important in our law, but it is not absolute. Is what you are saying true?  Is it in the interests of others to receive this information?

  • Do not post personal information about others on Facebook without their consent – it may be defamatory, and arguably, it may be in breach of the Protection of Personal Information Act;

  • Once you are comfortable posting the critique, rant or negative comment on Facebook, before you post it, think this – would I be happy to say this to a stadium full of people?  If the answer is still yes, then it may be appropriate to post it – that said, it may still land you in trouble, so often the best advice is to stay off social media when in a dispute with someone – resolve it using the traditional channels and means where possible or consult with an attorney.

Wednesday, 2 November 2016

The State of Capture – important findings and where to next…

Former Public Protector Thuli Madonsela’s report on #StateCapture reveals deplorable conduct and shocking corruption – but where to from here?

Arguably the most important part of the entire report is found towards the last of the 355 pages under the heading Remedial Action.  It reads as follows:
  • Within 30 days, a commission of enquiry must be appointed.  It will be headed by a Judge appointed by the Chief Justice;
  • The National Treasury is to ensure the commission is appropriately funded, and the Judge appointed will have the power to appoint any necessary staff;
  • The commission will have wide-ranging investigate powers and authority;
  • The commission must wrap up within 180 days;
  • The Executive Members’ Ethics Act and whistleblowing process must be reviewed;
  • The Public Protector must notify the National Prosecution Authority of all matters identified in the #StateCapture report where it appears crimes have been committed.

It seems only a matter of time before President Zuma resigns or is forced out, although the latter appears more likely.  The #StateCaptureReport, together with the outstanding 783 criminal charges, makes his position untenable.

The South African democracy is flawed in many respects, but it deserves better than this.  The next six months will certainly be interesting, particularly given the recent decision in the Nkandla saga (Economic Freedom Fighters v Speaker of the National Assembly and Others; Democratic Alliance v Speaker of the National Assembly and Others 2016 (3) SA 580 (CC)) where the Constitutional Court held that the power of the Public Protector to take appropriate remedial action has legal effect and is binding.

The next few months is a tipping point in South African’s fledgling constitutional democracy – one can only hope that together with the remedial steps (and criminal charges) above, the ANC’s integrity commission takes action, something according to secretary general Gwede Mantashe it has failed to do thus far.