[7]
What has made this application controversial is not only the debate over its ambit, but the timing of the application and the circumstances
that preceded it.
[8]
This complaint referral, with the relief in its present form, was instituted in February 2004. Though
cited as a respondent in the complaint referral Macsteel chose not file any pleadings and adopted, as Harmony’s counsel has
put it, a “supine” response to the litigation. Given this posture, pleadings, discovery and the array of pre-hearing
arrangements were conducted in Macsteel’s absence.
[9]
Macsteel alleges that the reason it did not participate in the complaint proceedings was because
no relief was sought against it. It relies for this on paragraph 8 of the complaint referral which states:
“Macsteel International is cited as a respondent for the interest it may have in this complaint. No relief is sought against Macsteel
International, save for a cost order in the event of opposition”
[10]
It also relies, it says, on a statement made by Mr Unterhalter, the complainants’ counsel, during
his opening address on 15 March 2006.
[11]
We will examine what was said by Mr. Unterhalter later, but prior to the commencement of the hearing, a telephone conversation took place between the respective attorneys of Macsteel and the complainants, on 10 March 2006. The complainants place great reliance on what was allegedly conveyed by them during the course of this conversation, to suggest that
Macsteel ought to have been disturbed from its passivity into defending its interests in this case.
[12]
There is disagreement about what actually transpired. It is however common cause that the initiative
for the call came from Macsteel’s attorney Ms Mendelsohn. She says her client was concerned about the adverse publicity implications
of the impending hearing. She says she discussed two proposals with Ms Meijer, the complainants’ attorney; either that the
complainants would withdraw against Macsteel or Macsteel would consider participating in the proceedings. Told from Ms Meijer’s
point of view, the conversation takes roughly the same course, but she adds that she explained to Mendelsohn why papers had been
served on Macsteel. According to Ms Meijer:
“I advised that the papers had initially been served on Macsteel, not because the complainants sought relief against Macsteel, but
because a possible outcome of the proceedings was the termination of the agreement between Mittal and Macsteel.”
[13]
Thus says Ms Meijer, Macsteel’s attorneys understood that Macsteel’s exclusive relationship
with Mittal was imperilled by prayer C.
[14]
Mendelsohn denies that there was any debate as to “...whether the Complainants’ complaint might result in the termination of the agreement between Mittal and MIHBV.” Nor she says did she seek any guidance from Meijer as to why Macsteel had been cited as a respondent.
[15]
Thus for the complainants the conversation serves to alert Macsteel that prayer C portends doom for its
arrangement with Mittal, and thus by implication, it ought to be on its guard. To Macsteel, nothing has been said to alter what has
been stated in the pleadings cited earlier. Namely, no relief is sought against Macsteel.
[16]
Macsteel says its understanding of the situation was reinforced a few days later, when Mr Unterhalter,
in response to a question from the Tribunal during his opening address, says the following:
“ADV UNTERHALTER: Sorry, I perhaps should have made it clear. The Macsteel arrangement is simply the export channel, which ensures that effectively
arbitrage doesn’t take place. So, what happens is that under the Macsteel joint venture arrangement all exports are done through
that singular channel and consequently it is impacted only because it is an agreement, which ensures that effectively arbitrage can’t
take place.
So, it’s really one of the mechanisms that’s used to ensure market segmentation and the continuance of excessive pricing.
CHAIRPERSON: But then this allegation finds no echo in the remedies that you seek.
ADV UNTERHALTER: No, it doesn’t, and it’s for that reason that we have not … I mean we cited Macsteel, but they have simply indicated
that they will abide the decision. So, we simply use it for evidence. We don’t seek specific remedies to undo that arrangement.”
[17]
This is the last word from the complainants on the subject of the pleadings, until the application for
amendment. The complainants, however, place great reliance on Mr Unterhalter’s cross-examination of Mr Dednam, a Mittal executive,
and its chief witness on its pricing policies. During the course of cross examination Mr Unterhalter discusses the proposed relief
and asks if there would be any problem in having a situation where Mittal can agree any price it liked with any customer provided
it could not tell them what to do with the product. Mr Dednam indicates he would have no objection to that. Mr Unterhalter goes on
to ask:
“ADV UNTERHALTER: So that’s the one stipulation. The other is you can’t have a channel for exporting to get the exports
offshore in the way that you do now. You’ve got to submit to yourself, which as you’ve indicated is not a problem, to
traders competing for your business to place your product abroad. You say both of those are fine.
MR DEDNAM: That happened in the past.
ADV UNTERHALTER: And it could happen again.
MR DEDNAM: It could happen again.”
[18]
Granted the seeds of the amendment contemplated may be read into this line of cross-examination. But
the language of the cross examiner is ambiguous, cautious and insufficient to alert either the witness or Mittal’s legal team
that an amendment of the one now contained in C bis (1) and (2) is being contemplated, namely an attack on the joint venture agreement itself. It is precisely for these reasons we have
pleadings and a procedure for amending them so that both parties to litigation know what case they have to meet and how to respond
to it. The cross examination was not accompanied by any statement that an amendment was forthcoming, and if that was the complainants
thinking at that time, they gave no outward expression of this until the service of the amendment application.
[19]
Thus whatever the truth of the conversation between the attorneys, and despite the subliminal message
allegedly conveyed by the cross-examination, the complainants have both in their pleadings and in counsel’s opening address,
maintained a consistent position; and that is that no relief was being sought specifically to undo the Macsteel arrangement i.e.
the joint venture agreement between Macsteel and Mittal.
[20]
It does not of course follow that prayer C did not pose consequences for Macsteel, simply because it
did not strike at its legal apparatus. The complainants argue that if prayer C was granted, this would have profound consequences
for the business of the joint venture.
[21]
The complainants’ theory of harm in this case is that Mittal is able to sustain excessive prices
because it can segment its customers, between those who get some discount or rebate and those who do not. In order to maintain this
regime of different prices it has to be able to prevent arbitrage between those customers who qualify for better prices and those
who do not. One such mechanism is the arrangement between Mittal and Macsteel. According to the complainants the arrangement serves
both to take excess flat steel out of the domestic market, so as to sustain the allegedly excessive prices, and to ensure that it
does not come back into the domestic market and hence depress prices. Hence the remedy sought in C bis ) and (2) seeks to prohibit Mittal from exporting either itself or through any entity in which it has an interest and secondly to
break the umbilical cord between it and Macsteel by requiring divestiture of its interest in the joint venture.
[22]
The complainants allege that this is not the only method of preventing arbitrage and that there is evidence that customers who get preferential
prices are subject to a regime imposed by contract that prevents them from reselling their steel obtained at more favourable prices
in the domestic market. This would explain the amendment contained in C bis (3) and (4).
[23]
The complainants argue that prayer C, the prayer originally formulated, would have the effect of eliminating
any attempt to segment customers and hence arbitrage. Prayer C bis they argue is all of a piece with its predecessor in working to achieve the same objective. Under C while Mittal could retain its
share in Macsteel and be permitted to export steel through it, it could not engage in price differentiation as to whether the product
is intended for export or not by a customer. Secondly, Mittal cannot enjoy any exclusive arrangement with Macsteel as the only customer to export its flat steel products. This
is because prayer C allows any customer to buy product and then choose to export it or to sell it domestically.
[24]
C bis (1) and (2), the complainants argue, achieves the same end as does C. Prayer C, the complainants argue is aimed at resolving the
segmentation problem by:
“...requiring Mittal to offer product at the factory gate at the same prices to all customers who wish to purchase, regardless of whether
a customer intends to use the product itself or re-sell it domestically or re-sell it into the export market. The remedy in prayer
C therefore undermines Mittal’s current market segmentation and renders it ineffective.”
[25]
In contrast the respondents argue that the amendment has implications for them that prayer C did not have. Under prayer C, Mittal was not obliged
to sell its stake in MIHBV and was not barred from exporting itself or through an entity in which it has an interest.
[26]
The complainants however, carefully step aside from the legal consequences of prayer C, focussing instead
on the market implications of why prayer C would threaten the joint venture agreement. In their founding affidavit they allege:
“But Mittal would not be able to entrench the kind of price differentiation that it currently practices in offering prices to Macsteel
that are vastly different to its offerings to many classes of domestic customers because no commercial consideration relevant to
quality, specification or volume would justify such a differentiation.”
And then:
“The remedy in prayer C sought to ensure that customers could enter into negotiations with Mittal to purchase product from Mittal’s
entire output and then determine for themselves where that product would be resold and how it would be utilised.”
And further:
“However this does not mean that the order sought against Mittal in prayer C has no implications for the manner in which Macsteel buys
products from Mittal. On the contrary, and as I have sought to sketch above, the plain import of prayer C is that Macsteel’s
position as the exclusive purchaser of Mittal product for export comes to an end because any customer, following the imposition of
prayer C, is permitted to buy product for export and the price at which it does so cannot be determined by Mittal merely on the basis
that the product is destined for export.”
[27]
On this score Mittal begs to differ. In its answering affidavit it contends that even under prayer C:
“ In short Prayer C…is not an order against Macsteel, does not “undo the exclusivity that attaches to the relationship between Mittal and the Joint Venture”, either directly or indirectly,
and most importantly, does not prevent Mittal from using the Joint Venture as an exclusive export channel through which to export Mittal’s output in excess
of local demand.” In terms of Prayer C, Mittal could and would continue to sell to Macsteel, on an exclusive basis, at the
same price. The agreement would be unaffected.”
[28]
Mittal goes on to allege that the proposed C bis is undeniably, an order of a fundamentally different kind, predicated upon different allegations and with wholly different consequences,
for both Mittal and Macsteel.
[29]
The question for the Tribunal is why prayer C lends itself to such widely different interpretations.
Despite the fact that it may, in its present formulation, lack precision, the debate is not over its language, but its implications.
In our view the reason for the dispute revolves around the difference between the legal and economic implications of prayer C. Neither
side in this debate made this distinction, since it did not suit them to do so, since an all or nothing approach to the reading,
would lead to C bis’s survival or demise.
[30]
We, however, would not query the respondents’ reading of the clause which was, we suggest, a purely
legal construction of its import. The ordinary language of C does not require what C bis (1) and (2) require, and on that there is no ambiguity. However to suggest that prayer C had no implications for the business of
the joint venture would be to adopt a completely blinkered approach to its impact on the market which the joint venture seeks to
segment, albeit not on the contractual and ownership rights created by the joint venture. That would be to make the error of solely
reading it qua lawyer, and not qua businessperson or economist.
[31]
It is a reasonable economic reading of the original relief that once all customers received product at a factory gate price, the preferred
status of Macsteel was under serious threat. The agreement left Macsteel as a segmented customer, an exporter only, but prayer C
would have made all other customers ‘unsegmented’ i.e. free to dispose of their steel as they saw fit and not subject
to the price disadvantage, previously the result of the present pricing policy regime of Mittal. What Macsteel and Mittal ignore
is that the exclusivity on the complainants theory is buttressed, not by a contract alone, but also by the effective segmentation
of the export and domestic pricing regimes, resulting in Macsteel receiving the lower factory gate price others do not receive. Once
this segmentation is removed it is reasonable to assume that Macsteel’s commercial advantage is seriously threatened. Thus
on this reading, no legal provision required Mittal to prevent its domestic customers from exporting its steel and thus threatening
the joint venture’s exclusive rights. Rather the silence in contract was compensated for by the workings of the Mittal pricing
policy. If Mittal’s customers wanted to export the steel they purchased from it at the higher domestic price, they were free
to do so, provided they could find anyone prepared to pay the higher price. No one was going to, and presumably Mittal and Macsteel understanding this, did not need to provide for this in their agreement.
[32]
We need not at this stage decide, whether this economic theory is correct, indeed it would be undesirable
for us to do so, only if it is a reasonable reading of the possible market outcome of the relief. We find that it is. Having made
this finding the next issue is whether this has consistently been Harmony’s theory of the economic consequences of Prayer C
or whether it has cobbled together a novel one to justify an argument that prayer C bis is not as extensive as the respondents suggest it is. The less novel prayer C bis is the less the respondents can claim prejudice by the amendment and hence the complainants have been at such pains to reduce its
import.
[33]
The complainants we find are correct to contend that prayer C and prayer C bis are similar, insofar as their economic implications for the joint venture. The same cannot be said of the legal implications of the
two prayers, and we examine below why we say this.
[34]
The complainants’ case, as expressed through the pleadings, is that no relief is sought against
Macsteel. This posture is given further support in the statement from Mr. Unterhalter in his opening address. In response to a question
pertinently on this point by the Tribunal Mr. Unterhalter stated that Harmony did not seek specific remedies against the arrangement.
This has remained the complainant’s position throughout the hearing and they gave no indication, until this application was
served that they had changed their mind on this point. That some cross-examination or other evidence might have contemplated this
amendment, does not, absent an express avowal of the adoption of new remedies, avail them. Pleadings are there for a reason and an
amendment procedure is there so that a process is followed to change them. As a result it was reasonable for the respondents to rely,
and in their approach to the case to assume, that the legal edifice of the joint venture was not at the complainants behest, going
to be subject to a proposed remedy.
[35]
The respondents both argue that they are seriously prejudiced by the late amendment. From Macsteel’s
perspective it argues that had it known that the joint venture was the subject of possible relief it would have entered the fray.
Instead, so disabused by the pleadings and the opening address of counsel, it elected to watch the case from the stands. Mittal for
its part argues that if it had been alerted to this relief it would have informed its approach to the case not just on remedies,
but also the merits. Whilst Mittal has not been more specific on this point, arguing it rather at the level of abstraction, it is
nevertheless a reasonable argument to make. We are satisfied that both respondents will be prejudiced by the amendments insofar as
they implicate the legal edifice of the joint venture.
[36]
This is of course not the end of the matter. As the complainants argue the practice in civil courts is
to lean in favour of granting amendments unless there is prejudice to the other party which cannot be cured by an order for costs
or a postponement. The complainants suggest that any prejudice in this case may be cured by allowing the re-opening of evidence on
remedies and for this reason they suggest that we separate a finding on the merits from a finding on remedies.
[37]
The respondents contend that the case itself would need to be re-opened amounting to both considerable
expense and delay with the nightmarish scenario advanced, of further exchange of pleadings, the recall of witnesses and added discovery.
[38]
We are not in a position to assess where the truth lies between the complainants’ optimism that
prejudice occasioned by the amendment effecting the joint venture may be cured by a minor procedure and the respondents more alarmist
caution that it would require major surgery. This is no run of the mill procedure which the Tribunal has daily experience of, such as a court may have in a collision case or
a contractual dispute. The parameters of this type of dispute cannot be predicted on the basis of past experience, and so the respondents
concerns cannot be lightly dismissed, more especially given what is at stake for them commercially.
[39]
It is thus by no means certain that fairness would not dictate that the merits of the case would have
to be re-opened and not just the case on remedies. In civil cases the law is that the onus to establish that the other party will
not be prejudiced rests with the party seeking the amendment. The complainants have not, in our view, discharged the onus of persuading us why, if C
.RTF of original document