CC Clover

The judgment

The court's own file

JUDGMENT 1 IN THE HIGH COURT OF SOUTH AFRICA (CAPE OF GOOD HOPE PROVINCIAL DIVISION) CASE NO: 78/CAC/JUL08 & 103/CR/DEC2006 DATE: 17/11/2008 In the matter between: 5 CLOVER INDUSTRIES (PTY) LTD 1 ST APPELLANT CLOVER SA (PTY) LTD 2 ND APPELLANT LADISMITH CHEESE (PTY) LTD 3 RD APPELLANT And THE COMPETITION COMMISSION 1 ST RESPONDENT 10 PARMALAT (PTY) LIMITED 2 ND RESPONDENT WOODLANDS DAIRY (PTY) LIMITED 3 RD RESPONDENT LACNEWOOD (PTY) LIMITED 4 TH RESPONDENT NESTLE SA (PTY) LIMITED 5 TH RESPONDENT MILKWOOD DAIRY (PTY) LIMITED 6 TH RESPONDENT 15 And in the matter between: CLOVER INDUSTRIES LIMITED 1 ST APPELLANT CLOVER SA (PTY) LTD 2 ND APPELLANT And 20 DAVID LEWIS , N.O. 1 st RESPONDENT ____________________________________________________ JUDGMENT (Application for Leave to Appeal) ____________________________________________________ 25 JUDGMENT 2 DAVIS, JP: This is an application for leave to appeal against an order of this Court of 19 September 2007, in which, given the urgency 5 of the proceedings, an order was made against appellants, without the provision of reasons. Reasons were then handed down on 12 November 2008 . However, already in September 2008, this court received 10 an application for leave to appeal . Argument on this application was heard this morning. There are, in essence, two separate questions which are the subject of the appeal. 15 The first turns on the question as to whether a letter from a dairy farmer, Mrs Malherbe, constituted a complaint in terms of section 49B(2) of the Competition Act 89 of 1998 ( ‘the Act’), and if so, whether the complaint had been investigated within 20 the prescribed period of one year, as stipulated in terms of section 50(1) of the Act. The second issue is an application for leave to appeal against a review which was brought by the first and second appellan ts, 25 JUDGMENT 3 which turns on the proceedings which the Competition Tribunal (‘Tribunal’) is due to hear and which hearing flows out of a corporate leniency agreement concluded between the Competition Commission (‘the Commission’) and first appellant on 3 February 2006, the details of which are set out in the 5 principal judgment. There is, at the outset, the question of the proper approach to be adopted to an application for leave to appeal from a decision of this court. It is important to emphasise that the 10 scheme of the Act was to ensure expedition in the resolution of disputes. In the very nature of disputes which arise from the Act, it is important that these be resolved fairly, but with due expedition. As a result, Parliament created an architecture in which appeals from the Tribunal would be heard by this court, 15 which , in essence ,would be the final court for all matters contained in the Act; that is save for matters contained in s62(2). Unfortunately, the drafters of the Act omitted to consider the 20 provisions of section 168(3) of the Constitution; in particular whether the Supreme Court of Appeal could be excluded, especially from matters set out in section 62(1) of the Act, read together with section 62(3) of the Act. These provisions of the Act were subjected to the scrutiny of the Supreme Court 25 JUDGMENT 4 of Appeal in American Natural Soda Ash Corporation v Competition Commission, 2005(6) SA 158 (SCA ). The Court found that the appellate jurisdiction of the Supreme Court of Appeal could not be excluded by the Act. 5 The Supreme Court of Appeal , by way of the judgment of Cameron and Nugent, J J A , further held that:- “Leave to appeal from the Supreme Court of Appeal is required before an appeal may be prosecuted 10 from the competition appeal court on the matters set out in section 62(1) of the Act, and special leave must be sought accordingly.” Mr Rogers, who appeared on behalf of the second respondent, 15 produced extremely helpful and thoughtful argument with regard to the implications of these findings. In his view, where a matter falls within section 62(2) of the Act, leave to appeal must be sought in the first instance from this court in terms of section 62(4). On the other hand, if a matter falls 20 within section 62(1) of the Act (that is the section which was subject to the forensic examination by the Supreme Court of Appeal to which I have already made reference) leave must be sought directly from the Supreme Court of Appeal . In such a case special leave will be the test. 25 JUDGMENT 5 In Mr Rogers’s view, the question in this particular case regarding the complaint in terms of section 49B turned on whether the Tribunal had jurisdiction to entertain a complaint, in that the complaint allegedly had not been timeously referred 5 to it as required by section 50(2) of the Act. Accordingly, this matter fell within section 62(2) and the ordinary test for leave to appeal should apply. . 10 The key question which vexed the Court in this case was whether the so-called Malherbe letter constituted a ‘complaint’ as opposed to the provision of ‘information’ by a third party, in this case Ms Malherbe. 15 The basis of the Court’s judgment was that a distinction had to be drawn between section 49B(2)( a), where a person submits information concerning an alleged prohibited practice to the Commission and ( b) where there is a submission of a 20 complaint against an alleged prohibited practice in the prescribed form. There must be significance in the legislative distinction drawn between a complaint and the submission of information, 25 JUDGMENT 6 otherwise part of the section is redundant. T ry as the appellants might by way of reference to previous case law, it is impossible to blur this distinction to the extent that any submission of information to the C ommission will always constitutes a complaint. This legislative distinction informed 5 the basis of this Court’s finding. The Court determined that Ms Malherbe was not a complainant. If she was not a complainant, there was no complaint. If there was no complaint, then section 49B(2)(b) would not apply. The logic may be simple, but in my view, to an ordinary reader it is 10 compelling. This dispute may have appeared to involve an interpretive question. But , if there is distinction between a complaint and the submission of information, and if the architecture of 15 section 49B is to be maintained as this Court determined, that leads to the key question for determination : whether the letter from Ms Malherbe , factually determined, constituted a complaint. 20 In Glaxo Welcome and Other s v National Association of Pharmaceutical Wholesalers , this Court, in the case of a complaint which had clearly been intended to be a complaint, adopted a generous approach to whether the complaint had to be produced in a prescribed form. It held:- 25 JUDGMENT 7 “While the complaint need not be drafted with precision or even a reference to the Act, the allegations of the conduct and the complaint must be cognisably linked to particular prohibited 5 conduct or practice, there must be a rational recognisable link between the complaint re ferred to in a complaint and the prohibitions in the Act, otherwise it would not be possible to say what the complaint is about and what should be 10 investigated.” The Court, in effect, identified the document as a complaint and waived the requirement for the document to be produced in the prescribed form. So is this an appeal about the 15 interpretation of s49B or its proper application in terms of the facts. Mr Rogers sought to pull his argument from the boot straps so as to attain his sought after principled elevation of the case by 20 means of a submission that this dispute constituted a vitally important jurisprudential point which was manifestly in the public interest; that is to determine whether section 49B of the Act must be interpreted in the man ner decided upon by the Court. Hence, only upon such an initial decision would the 25 JUDGMENT 8 further, factual determination be necessary. But, in my view, the question for determination turns primarily on a factual issue: did Ms Malherbe initiate a complaint or did she not? Thus, the key issue which has to be determined is : what was her intention in generating the letter? 5 Furthermore, were this Court to blur the distinction, as urged on the strength of the Glaxo Welcome case as interpreted by Mr Pretorius who appeared on behalf of first and second appellants , there would be no distinction between information 10 provided to the Commission and a complaint. That would certainly work to the disadvantage of the Commission in investigating anti-competitive behaviour, for the Act would then refuse to recognise an informant who was not a complainant. If this case turns essentially on an application of the 15 distinction in s49B of the Act and hence whether Ms Malherbe was a complainant, the matter may well need to be appealed directly to the SCA for consideration, on the test of special leave. If this court declines the invitation of Mr Bhana, who appeared with Mr Coetzee and Mr Dalrymple th at 20 this court should also apply a test of special leave in such case, as it is before us and then, assuming an application on the ordinary test of reasonable prospects of success , I consider that, in this case, there is no basis to grant the application for leave to appeal. Simply stated, Mrs Malherbe 25 JUDGMENT 9 was not a complainant as defined. As such ,s49(2) (a) applies .If this is a case that should not give rise to another conclusion , then it follows that , this is not the case should proceed purely to deal with the potential dispute about questions of the forum to apply for leave in an appeal based 5 upon s62(1) read with s62(3) of the Act. The second issue is far more problematic to the future of competition litigation and the irritation shown by this Court this morning is reflective of comments that I wish to make after due consideration. 10 In very useful heads of argument , Mr Bhana contended that this was a case in which special leave is required as this is a case that the Act intended should be settled by this court. I did not take Mr Pretorius to object to that position. Again, the 15 result should not be any different to an application of the ordinary test, and for the reasons already articulated, we have considered both situations. Briefly speaking, appellants were faced with a choice . They 20 knew what an immunity entailed, what was required, if the leniency agreement was signed and what the leniency policy entailed in this case. The agreement was signed on 3 February 2006, some six weeks after being advised by this Commission of the conditions under which appellants would be 25 JUDGMENT 10 granted conditional immunity and , after being advised in respect of which conduct conditional immunity would and would not be granted. There was no compulsion to enter into the leniency agreement and first and second appellants have no entitlement to leniency, knowing that the Commission, 5 intended to investigate a possible abuse of dominance by appellants, based on the sale of C quota milk. Nonetheless they entered into that agreement. It is abundantly clear from the agreement and the analysis 10 thereof undertaken by the Court that the Commission regarded the conduct underlying the third complaint as separate and distinct from the conduct underlying the sixth complaint. There can be no doubt that appellants were aware thereof. When appellants entered into the agreement they were also aware 15 that they might find themselves in a position of having to co - operate with the Commission on one complaint referral and face prosecution on another. That possibility is foreseen by a reading of the agreement. Throughout the process they were represented by an impressive , highly skilled legal team. They 20 were faced with a choice: take the immunity in respect of the surplus removal scheme and risk prosecution on the C quota milk and assume the consequences that flow therefrom, or decline the immunity and defend all charges brought. It must have been a hard choice, but one which they were legitimately 25 JUDGMENT 11 entitled to make on a voluntary basis. Having elected to take the immunity in respect of t he surplus milk scheme, the consequences of having to co -operate with the Commission on one complaint and being immune from the other, flowed from these actions. That was also the basis of the finding of the 5 Court. That of course leaves open the questio n as to whether it is a matter which is appropriate for leave in the first place, given that, notwithstanding all of the protestations over lack of 10 fairness and sudden discovery of constitutional obstacles , as was set out eloquently by my brother, Patel, J A in the main judgment, it is difficult to know what consequences as to fairness will flow until the substantive matter is heard by the Tribunal. 15 In my view, there can be no prospect of success, neither because the dispute is of great importance to the parties, because of, the arguably .interlocutory nature of the appeal, and secondly because this question is not of great public 20 importance to the public, save, that the prosecution of cartel behaviour is of great public importance . But even on the ordinary test for leave, the agreement is clear and speculation about fairness is not required for immediate determination . That therefore leads me reluctantly to make the following 25 JUDGMENT 12 remarks. The most egregious form of anti-competitive behaviour is cartel behaviour. Whatever the differences between the Chicago and the ordo-liberal schools of competition law , on 5 one issue there is unanimity : the prohibition of cartel behaviour and price-fixing. Price-fixing must be rooted out. In a country such as South Af rica, where food prices have risen at an alarming rate, and where mal -distribution of wealth continues to be blight on this nation, such behaviour is 10 unconscionable. That a party enters into a leniency agreement , admits certain egregious uncompetitive behaviour and accep ts the consequences thereof, but later seeks effectively to resile 15 therefrom by way of a range of technical arguments, should not be countenanced , particularly having been advised by experienced lawyers in the first place. There is a more general problem affecting the South African 20 legal system at present, which is that all too many cases are run in every single available court on the basis of all manner of conceivable technical argument s that a lawyer can imagine so as to ensure that matters are never brought to finality. 25 JUDGMENT 13 The entire dispute of which the agreement is but a part is a case that requires determination by the Tribunal. Of course, I do not opine on the merits of the case before the Tribunal. But there has been an agreemen t and certain admissions have been made. An attempt is now made effectively to circumvent 5 this agreement. This approach raises a problem upon which this Court should comment. Competition law must be prosecuted in this country with fairness but also with expedition. The legal community, which appears both in this court and the Tribunal, owe their clients a paramount duty, but 10 they also owe, as officers of the Court a duty to the integrity of the legal system. There needs to be a debate in the legal profession of South Africa as to the role of lawyers in relation to balancing the interests of clients and duty as officers of the court enjoined to uphold the integrity of the system without 15 which there can be no rule of law. Given the conclusions of the Court, there is no need to deal with the qu estion of the right of the ‘late comer appellants’, to joint the fray at this stage. 20 For all of these reasons, the application for leave to appeal is DISMISSED WITH COSTS, INCLUDING COSTS OF TWO COUNSELS . 25 JUDGMENT 14 _______________________ DAVIS, JP 5 ____________________ MAILULA, JA and PATEL, JA agreed.