Anglo South Africa Capital (Pty) Ltd and Others v Industrial Development Corporation of South Africa and Another (26/CAC/Dec02) [2003] ZACAC 2; [2003] 1 CPLR 10 (CAC) (28 March 2003)

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Anglo South Africa Capital (Pty) Ltd and Others v Industrial Development Corporation of South Africa and Another (26/CAC/Dec02) [2003] ZACAC 2; [2003] 1 CPLR 10 (CAC) (28 March 2003)

IN THE COMPETITION APPEAL COURT OF SOUTH AFRICA


                                                               CAC Case No.:
                                                               26/CAC/Dec02

                                                               Tribunal Case Nos.:
                                                               45/LM/Jun02 and
                                                               46/LM/Jun02.

In the matter between :

ANGLO SOUTH AFRICA CAPITAL [PTY] LTD.    1^st Appellant

ANGLOVAAL MINING LIMITED                                    2^nd Appellant

ANGLO AMERICAN HOLDINGS LIMITED          3^rd Appellant

KUMBA RESOURCES LIMITED                            4^th Appellant

and

INDUSTRIAL DEVELOPMENT CORPORATION
OF SOUTH AFRICA                                              1^st Respondent

THE COMPETITION COMMISSION OF
SOUTH AFRICA     LIMITED                                             2^nd Respondent

J U D G E M E N T

JALI J A.

INTRODUCTION :

This is an appeal against the decision of the Competition Tribunal (“the Tribunal”) handed down on the 24^th December 2002. The Competition Tribunal gave the First Respondent leave to participate in the two large merger proceedings between the First Appellant and the Second Appellant (“the Anglovaal merger”)and also between the Third Appellant and the Fourth Appellant (“the Kumba merger”). The Tribunal also decided on the scope of the second respondent’s participation, and granted access to all the confidential documents relating to these mergers. Costs were reserved for determination at the merger hearing or at a time agreed upon by the parties.

The Appellants have appealed against this Order. In their appeal, they have challenged the Tribunal’s finding that the Respondents have shown “good cause” to participate in the aforesaid merger proceedings.

FACTUAL BACKGROUND:

On the 20^th June 2002, the Appellants notified the Competition Commission (“the Commission”) of the two large mergers. Notice was given of a proposed Anglovaal merger. On the same day another merger notification was filed regarding the proposed Kumba merger. In both of these mergers, first and third appellants were to acquire a material interest over the second and fourth appellants respectively. The Commission conducted an investigation in accordance with its statutory duties in terms of section 12A of the Competition Act No. 89 of 1998, as amended. (“the Act”). The Commission concluded that both the Anglovaal merger and the Kumba merger should be approved unconditionally by the Tribunal.

On the 6^th September 2002, the Commission submitted its written recommendations to the Tribunal in terms of section 14A(1)(b) of the Act.

On the 18^th September 2002, the First Respondent filed an application for leave to participate in merger proceedings. On the 20^th September 2002, the Tribunal granted the First Respondent leave to participate in these merger proceedings. On the 18^th October 2002, the Tribunal made a decision in delineating the scope of the First Respondent’s participation in the merger proceedings.

The Appellants appealed these decisions to this Court. On the 15^th November 2002, this Court granted an order in which the two decisions of the 20^th September and 18^th October 2002, were set aside. This Court’s order was to the effect that the aforesaid decisions should not have been granted by a single member of the Tribunal but by a full panel of the Tribunal. Accordingly, the matter was referred back to the Tribunal.

A full panel of the Tribunal was constituted. It considered the application to intervene by the First Respondent in the mergers. It is the decision of the newly constituted panel, which is the subject matter of this appeal.

APPLICATION TO AMEND:

The original application to intervene was lodged by the First Respondent in terms of Tribunal Rule 46(1)(a). However, after the hearing of the 15^th November 2002, before this Court, the application was amended. On the 22^nd November 2002, the First Respondent filed a new application under Rule 42 of the Tribunal Rules as well as an amendment of the original application. The original application was substituted in its entirety and the First Respondent applied to participate under Rule 42. In the alternative, and only in the event of the Tribunal finding that the Rule 42 was not the correct prescribed procedure, an application was brought in terms of Rule 46(1)(a).

At the Tribunal hearing, the Appellants objected to the amendment submitting that there was no proper basis for the amendment to be allowed. The amendment would have caused substantial prejudice to the Appellants. The Tribunal considered the submissions and exercised its discretion in favour of allowing the amendment. The Tribunal based its decision on the provisions of section 27(1)(d) and section 53(1)(c) of the Act.

Before this Court, Mr Gauntlett who appeared together with Messrs Unterhalter, Fagan and Gotz on behalf of the appellants, attacked the Tribunal’s decision to grant the First Respondent’s leave to amend its notice of motion, as set out above. In particular, the Appellants were of the view that the Tribunal misdirected itself in deciding that the “precise juristic niche” into which to place the application for such participation or a precise form of the application is not essential. In this regard, the Tribunal was of the view that the First Respondent showed good cause for such an amendment.

This Court cannot fault the Tribunal’s finding with regards to the granting of the amendment. I am not aware and we have not been referred to any authority which suggests that once a matter has been referred back to a court a quo for hearing de novo by a court of appeal, a party cannot amend the pleadings in the matter. Indeed there is an authority that a party can amend its pleadings at any stage of the proceedings, subject to the normal considerations of prejudice and whether it would facilitate the proper ventilation of the dispute between the parties so that justice may be done (See Morgan and Ramsay v Cornelius and Hollis 1910 N.P.D. 262 at 264; Rishton v Rishton 1912 TPD 718 at 719 and Trans-Drakensberg Bank Ltd. (under judicial management) v Combined Engineering (Pty) Ltd. and Another 1967 (3) S.A. 632 (D) at 638 A and 642 H). On the general object of pleadings (see Robinson v Randfontein Estates G.M. Co. Ltd. 1925 A.D. 173 at 198); Shill v Milner 1937 A.D. 101 at 105 and Van Mentz v Provident Assurance Corporation of Africa Limited 1961(1) S.A. 115 (AD) at 122).

The Tribunal has the discretion to make the necessary Order as provided for in section 27(1)(d) of the Act, so long as it does so judicially. There has been no indication that the Tribunal did not exercise its discretion properly or that the First Respondent acted mala fide. The mere delay in bringing the application for leave to amend is not per se a ground for refusal of an application for amendment. (See also Commercial Union Assurance Co. Ltd. v Waymark N.O. 1995 (2) S.A. 73 (TK) at 77). The Tribunal correctly decided, that there was a good cause for the amendment. The amendment finds support in the First Respondent’s founding affidavit to the notice of motion. Accordingly, the Tribunal’s ruling in this regard is confirmed.

APPLICATION TO PARTICIPATE:

The Appellants case is that the First Respondent does not have the substantial or material interest for it to be granted leave to intervene in the merger proceedings. In the premises, the Tribunal erred in firstly, “reading down” the explicit requirement of material interest in Tribunal Rule 46 and in finding that it had “unfettered discretion” to allow intervention under that rule. Secondly, it erred in determining the scope of the intervention in wide and vague terms. Thirdly, it erred in allowing the First Respondent to have access to confidential information.

On the other hand, the First Respondent ‘s case is that the Tribunal was correct in giving leave to participate in the merger proceedings and access to confidential information. In its submissions, it relied on section 53(c)(v) of the Act, read together with Tribunal Rule 42. In the alternative, it relied on Rule 46(1) of the Tribunal Rules. Furthermore, the first respondent submitted that it is entitled to fair administrative justice as anticipated in section 36 of the Promotion of Access to Information Act 2 of 2000 (“the Pai Act”).

Section 53 of the Act, provides that:

“53. Right to participate in hearing

(1)

The following persons may participate in a hearing, in person or through a representative, or may put questions to witnesses and inspect any books, documents or items presented at the hearing;

(a) If the hearings in terms of Part C –

(i)

the Commissioner, or any person appointed by the Commissioner;

(ii)

the complainant, if –

(aa)

the complainant referred the complaint to the Competition Tribunal; or

(bb)

in the opinion of the presiding member of the Competition Tribunal, the complainant’s interest is not adequately represented by another participant, and then only to the extent required for the complainant’s interest to be adequately represented;

(iii)

the respondent; and

(iv)

any other person who has a material interest in the hearing, unless, in the opinion of the presiding member of the Competition Tribunal, that interest is adequately represented by another participant, but only to the extent required for the complainant’s interest to be adequately represented;

(b)

If the hearing is in terms of section 10 or Schedule 1-

(i)

the applicant for an exemption;

(ii)

the Competition Commission;

(iii)

the appellant, if the appellant is not the applicant for an exemption;

(iv)

an interested person contemplated in section 10(8) who submitted a representation to the Competition Commission, unless, in the opinion of the presiding member of the Competition Tribunal, that person’s interest is adequately represented by another participant, but only to the extent required for the person’s interest to be adequately represented; and

(v)

the Minister or member of the Executive Council if consulted in terms of Schedule 1;

(c)

if the hearing is in terms of Chapter 3 –

(i)

any party to the merger;

(ii)

the Competition Commission;

(iii)

any person who was entitled to receive a notice in terms of section 13A(2) and who indicated to the Commission an intention to participate, in the prescribed form;

(iv)

the Minister, if the Minister has indicated an intention to participate; and

(v)

any other person whom the Competition Tribunal recognized as a participant. (Own emphasis).

Rule 42 of the Tribunal Rules stipulates that::

42. Initiating other proceedings

(1) Any proceedings not otherwise provided for in these Rules

may be initiated only by filing a Notice of Motion in Form CT6 and supporting affidavit setting out the facts on which the application is based.

(2)

The applicant must serve a copy of the Notice of Motion and affidavit on each respondent named in the Notice within 5 business days after filing it.

(3)

A Notice of Motion in terms of this Rule must –

(a)

indicate the basis of the application; or

(b)

depending on the context –

(i)

set out the Commission’s decision that is being appealed or reviewed;

(ii)

set out the decision of the Tribunal that the applicant seeks to have varied or rescinded;

(iii)

set out the Tribunal or Commission Rule in respect of which the applicant seeks condonation;

(iv)

allege conduct referred to in –

(aa)

section 59(1)(c) in respect of which the

Commission seeks an administrative

fine; or

(bb)

section 60(1) in respect of which the

Commission seeks an order of

divestiture;

(c)

indicate the order sought; and

(d)

state the name and address of each person in respect of whom an order is sought.

Rule 46 of the Tribunal Rules also provides:

46.

Intervenors

(1)

At any time that the initiating document is filed with the Tribunal, any person who has a material interest in the relevant matter may apply to intervene in the Tribunal proceedings by filing a notice of motion in form CT6, which must: -

(a)

include a concise statement of the nature of the person’s interest in the proceedings and the matters in respect of which the person will make representations; and

(b)

be served on every other participant in the proceedings; (own emphasis).

Section 53 deals with three distinct circumstances in which a party may seek leave to participate in hearings. Section 53(1)(a) deals with hearings in terms of Part C of Chapter 5, that is, complaints against an alleged prohibited practice. Section 53(1)(b) deals with hearings in terms of Section 10 or Schedule 1, that is, application for exemptions from the application of Chapter 2 (Restrictive Practices) or exemption of professional rules. Section 53(1)(c) deals with merger hearings. (Chapter 3 Hearings). Section 53(1)(c) is the applicable or relevant sub-section in this matter.

In dealing with mergers, Section 53(1)(c)(v) makes no reference to interest, whether material or substantial. The reference to a person with a material interest is to be found in Section 53(1)(a)(iv) and Rule 46 of the Tribunal Rules. In Section 53(1)(b) the interested person must be as contemplated in Section 10(8). In other words, that interest is qualified or defined, by Section 10(8) which makes reference to a person with a “substantial financial interest.”

Mr Gauntlett submitted that, whilst section 53(1)(c)(v) says nothing about interest, it does not mean that no interest at all is required for a party to be entitled to participate. In support of this submission, he contended that interventions and merger proceedings are hardly envisaged in terms of the Act. He also sought support from the common law test for standing; that is, for a party to intervene it must have a material interest in the proceedings.

I agree with Mr Gauntlett’s submission with regard to the common law test for intervening in proceedings where the ground relied upon is an interest in the matter. Various authorities dealing with interventions under common law support the proposition that an intervening party must have a substantial and material interest in the subject matter of the litigation is the decisive criteria, and the granting of leave is discretionary. See Amalgamated Engineering Union v Minister of Labour 1949 (3) S.A. 637 (AD)at 659; Henri Viljoen (Pty) Ltd. v Awerbuch Brothers 1953(2) S.A.151(O); United Watch and Diamond Co. (Pty) Ltd. v Disa Hotels Limited 1972 (4) SA 409 (C) at 416; Wynne v Divisional Commissioner of Police and Others 1973 (2) SA 770 (E); Minister of Local Government and Land Tenure and Another v Sizwe Development and Others: In Re Sizwe Development v Flagstaff Municipality 1991 (1) SA 677 (TK) at 678 – 679 and Vandenhende v Minister of Agriculture, Planning and Tourism, Western Cape and Others 2000 (4) S.A. 681 (C) at 689 A).

However, these cases are distinguishable from this case. This Court cannot ignore the ordinary grammatical meaning of the provisions of section 53(1)(c)(v) of the Act and also the purpose of the Competition Act as set out in Section 1(2)(a) of the Act. (See Public Carriers Association and Others v Toll Road Concessionaries (Pty) Ltd. 1990 (1) SA 925 (A) at 943C-944A and also Standard Bank Investment Corporation Ltd. v Competition Commission and Others 2000 (2) SA 797 (SCA) at 811I-812A.

The language of the statute is clear. There is no reference to interest at all. The mere requirement is that a party must be recognized by the Tribunal as a participant. The recognition could be on the basis of some other grounds, other than an interest in the matter as stipulated in the common law. Even if it were to be argued that the party must have an interest, such interest is not qualified. In other words, there is no threshold for the interest for a party to participate. In the absence of specified criteria for participation this court should be reluctant to read in a test such as “substantial and material interest”. Where the legislature had sought to set out an express criteria for participation in the statute it had done so. For example, “material interest” is required in hearings in terms of Part C of Chapter 5 of the Act (see section 53(1)(a)(iv)) and a “substantial financial interest” is required in hearings in terms of Section 10 or Schedule 1 of the Act (see Section 53(1)(b)(iv) and Section 10(8)). Clearly different criteria are set for participation in the different hearings. Yet no such qualifications appear in the case of Section 53(1)(c)(v).

Section 78 of the Act empowers the Minister of Trade and Industry (“the Minister”), by notice in the Gazette, to make regulations that are required to give effect to the purpose of the Act. Section 27(2) empowers the Minister to prescribe regulations for matters relating to the functions of the Tribunal, including manner and form of participation in the Tribunal procedures and other procedures.

On 1^st February 2001, the Minister, in consultation with the Chairperson of the Tribunal, published the rules for the conduct of proceedings in the Tribunal. (see Government Notice No. 22025 in Government Gazette No. 428 dated 1^st February 2001).

Mr Gauntlett submitted that Rule 42 is a general Rule which has nothing to do with the recognition of participants in merger proceedings, whilst Rule 46 is lex specialis. It deals with intervention and should be the applicable Rule. Rule 41 is analogous to Rule 18 of the Uniform Rules of Court (High Court Rules).

The respondents sought to rely upon Rule 42 and Rule 46 only in the alternative. The Tribunal was of the view that both Rules apply in this matter.

It is common cause that Rule 42 does not specify criteria for the interest which must be there for one to be able to participate, whereas Rule 46 calls for a “material interest.”

It is clear that Rule 46 sets out a higher threshold than the one which is required in terms of the Act for a party to be able to participate. The threshold is the common law test which is relied upon by the appellants.

I have some difficulties with the appellants’ approach that Rule 46 is of application and that accordingly the test for intervention in the present dispute is the existence of material or substantial interest. Firstly, Rule 46 cannot introduce a threshold which the legislature never introduced in the Act. If Rule 46 is applicable in this case, the question arises as to its application in terms of the other sub-sections of Section 53(1) where a criteria has expressly been set for participation; for example, substantial financial interest in Section 53(1)(b) above. Furthermore, what if participation is being sought on the basis of “convenience”? Convenience has been recognized in our Courts as another ground on which joinder is competent. (See Rabinowitz and Another NNO v Ned-Equity Insurance Co. Limited and Another 1980 (3) S.A. 415 (W) at 419 D – F). Intervention is closely linked with joinder and is often treated as a particular facet of joinder (United Watch and Diamond Co. (Pty) Ltd. (Supra) at 415C).

In any event regulations (or Rules in this case) which have not been drafted by the legislature cannot be treated together with the Act as a single piece of legislation nor can these Regulations be employed as an aid to the interpretation of the Act. (See Moodley v Minister of Education and Culture, House of Delegates 1989 (3) SA 221 (AD) at 233 E – F). Thus, Rule 46 cannot be used to interpret the provisions of the Act and in particular, Section 53(1) and to restrict the express provision of Section 53(1)(c).

Furthermore,“manner”, “form” and “procedures” of participation, referred to in Section 27(2) of the Act, do not include actual thresholds or grounds for participation.

Secondly, merger proceedings are not to be equated with ordinary litigation. Mr Gauntlett acknowledged that people do not participate in merger proceedings as litigants. There is no plaintiff and no defendant disputing competing rights and obligations, nor are the merging parties prosecuted. The Tribunal, for its part, does not act as an adjudicator between rivals. Large merger proceedings are not adversarial. The Tribunal’s responsibility is to evaluate the merger in terms of section 12(A) of the Act.

The Tribunal (and the Commission where applicable) are the critical bodies enjoined to, regulate competition matters with the view to discouraging restrictive practices, abuse of dominance and controlling mergers and thus promote the purposes of the Act as set out in Section 2. In seeking to achieve this goal they might even institute their own investigation and call for their own evidence. In so doing, the Tribunal is not confined to submissions or evidence placed before it by the parties to the merger or people who have “an interest” in the merger. In particular, the various considerations which the Tribunal can take into account in assessing whether a merger is justified on public interest grounds in terms of Section 12A(3) make it clear that the Tribunal might admit persons beyond those persons or bodies who are directly or indirectly involved in the merger.

Thirdly, the shortcoming in the appellant’s argument is best illustrated by the dictum in Henri Viljoen (Pty) Ltd. v Awerbuch Brothers (supra) 169 H :

“The above authorities at least point in the same direction as the English cases referred to, namely, that “the direct interest” required by the Appellate Division decision must be an interest in the right which is the subject-matter of the litigation and is not merely a financial interest which is only an indirect interest in such litigation.”

Horwitz A J P went on to state at 170 H :

“If I am correct in interpreting “direct and substantial interest” as used by the Appellate Division as a legal interest in the subject-matter of the litigation and as excluding an indirect, commercial interest only, then the order asked for could be granted without reference to Samba or any other buy-aid organization.” (Own emphasis).

Clearly, the test propagated by the appellants is a test which is appropriate for litigation and it is not sufficient for the interest concerned to be merely a financial or commercial interest. This is contrary to the express provisions of the Competition Act where a substantial financial interest is the interest which, in certain circumstances, should be considered.

The requirement of “material and substantial interest” is manifestly the appropriate test for litigation matters because firstly, in litigation there may be an issue in dispute, which is not the case in mergers. The dispute may even be clearly defined and it may be easy for the Court to decide whether the applicant who seeks leave to intervene has an interest in the matter or not. Secondly, parties who are involved in litigation, would not want anybody to intervene and be party to the proceedings because by the very nature of litigation there are serious cost implications. Thus, a person cannot be party to litigation unless he has a material and substantial interest in the right, which is the subject matter of such proceedings. That is not the case with merger proceedings.

In the present dispute, the first respondent seeks the right to participate in the proceedings based on the provisions of the Act, which seems to set out criteria, which do not necessarily limit access to persons having a material or substantial interest in the matter. For example, it is apparent from the Act that the Minister or a trade union may be notified of a merger while they are not party to the merger proceedings. They may seek to participate even if they do not have a substantial and material interest, as contemplated in the cases referred to above. The purpose thereof is to ensure that the objectives of the Act are achieved.

In the light thereof, I cannot agree with appellants that the common law test for participation in merger proceedings is appropriate. There is no cogent reason for adopting a narrow approach as suggested by the appellants, to the issue of participation in merger proceedings.

Mr Nelson, who appeared together with Mr van Dorsten, for the first respondent, submitted that given the facts of this case, the uncertainty as to the precise nature of the test, that should be applied to determine the threshold for locus standi in large merger proceedings, is academic as the first respondent clearly has locus standi irrespective of which test is found to be applicable.

The first respondent has contended that it relies upon four grounds to seek the right to participate in these proceedings,being the first respondents statutory duties. Its involvement and current role in the industries in question, its role in the industry’s future development; and its minority shareholding in the fourth appellant, Iscor Limited and Duferco Steel Processing (Pty) Limited.

I will firstly turn to deal with the first respondent’s statutory duties. Mr Nelson submitted that because of its statutory duty, the first respondent has a direct interest in the merger proceedings. In this regard, he sought to rely upon the provisions of section 3 of the Industrial Development Corporation Act No. 22 of 1940, as amended by Act 49 of 2001. Section 3 of the Industrial Development Corporation Act reads as follows:

“The objects of the Corporation shall be:

(a)

with the approval of the Minister to establish and conduct any industrial undertaking;

(b)

to facilitate, promote, guide and assist in the financing of-

(i)

new industries and industrial, or ancillary or

related economic, undertakings; and

(ii)

schemes for the expansion, better organization and modernisation of and the more efficient carrying out of operations in existing industries and industrial, or ancillary or related economic, undertakings, to the end that the economic requirements of the Republic may be met and industrial development within the Republic, the Southern African region and the rest of Africa may be planned, expedited and conducted on sound business principles;

(c)

to promote the economic empowerment of the

historically disadvantaged communities and persons;

(d)

to foster the development of small and medium

enterprises and co-operatives;

(e)

to promote employment-creating activities, particularly

in underdeveloped areas;

(f) to leverage foreign direct investment in South Africa,
the Southern African region and the rest of Africa
through the use of its international network and presence;
(g) to encourage the creation of new knowledge-based
industries and services and the establishment and
growth of new technology-based firms; and

(h) to enhance corporate governance so as to achieve
business excellence.”

The first respondent has a responsibility to promote economic empowerment of previously disadvantaged people and to foster development of small and medium enterprises. The intention is to spread wealth so that it is not concentrated in the hands of a few South Africans.

The preamble to the Act recognizes that past laws and practices in South Africa resulted in, inter alia, excessive concentrations of ownership and control within the national economy and unjust restrictions on full and free participation in the economy by all South Africans. It also recognizes the need for the economy to be open to greater ownership by a greater number of South Africans.

In section 1 of the Competition Act, the purpose of the Act is stipulated as “to promote and maintain competition in the Republic in order:

(a)

to promote the efficiency, adaptability and development of the economy;

(b)

to provide consumers with competitive prices and product choices;

(c)

to promote employment and advance the social and economic quality of South Africans;

(d)

to expand opportunities for South African participation in the world markets and recognize the role of foreign competition in the Republic;