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[2018] ZACAC 9
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Continental Tyres South Africa (Pty) Ltd and Another v Competition Commission of South Africa and Others (157/CAC/Nov 2017) [2018] ZACAC 9; [2018] 2 CPLR 476 (CAC) (11 October 2018)
THE
COMPETITION APPEAL COURT OF SOUTH AFRICA
Case
No: 157/CAC/Nov 2017
2018
– 10 - 12
In
the matter between:
CONTINTNENTAL
TYRES SOUTH AFRICA (PTY) LTD 1
st
Appellant
GOODYEAR
SOUTH AFRICA (PTY) LTD 2
nd
Appellant
and
THE
COMPETITION COMMISSION OF SOUTH AFRICA 1st
Respondent
APOLLO
TYRES SOUTH AFRICA (PTY) LTD 2nd
Respondent
BRIDGESTONE
SOUTH AFRICA (PTY) LTD 3th
Respondent
SOUTH
AFRICAN TYRE MANUFACTURERS 4th
Respondent
CONFERENCE(PTY)LTD
JUDGMENT
UNTERHALTER
J INTRODUCTION
1.
The appellants before us, Continental Tyres
South Africa (Pty) Ltd ("Continental") and Goodyear South
Africa (Pty) Ltd
("Goodyear") are respondents in a
complaint that the Competition Commission ("the Commission ")
has referred
to the Competition Tribunal. The complaint alleges that
Continental and Goodyear, with others, have engaged in price fixing.
2.
Continental sought the production by the
Commission of its record of investigation. Goodyear sought discovery
from the Commission.
The Commission disclosed the documents sought,
save for three classes of documents: certain correspondence between
the Commission
and the complainant, Parsons Transport (Pty) Ltd;
transcripts of certain interrogations conducted by the Commission in
the course
of its investigation; and certain correspondence between
the Commission and Bridgestone South Africa (Ply) Ltd, the leniency
applicant.
3.
Continental and Goodyear made application
to the Competition Tribunal
("the
Tribunal")
to compel
production
of
the
documents
the Commission had declined to disclose.
The Commission opposed on the basis that the documents were either
protected from disclosure
by litigation privilege, alternatively, the
documents constitute restricted information in terms of Commission
Rule 14, and, for
this reason, may not be disclosed.
4.
The Tribunal, save for granting Goodyear
access to the transcript of Mr Wustmann, since it had already been
disclosed to Continental,
dismissed the applications. Continental and
Goodyear appeal to this Court. Continental does so on the more
limited basis that ii
seeks only the transcripts. Goodyear persists
in seeking the production of the documents
in all three classes.
5.
Since both Continental and Goodyear appeal
the Tribunal's dismissal of their applications for the production of
the transcripts,
I deal firstly with this issue. I then consider the
remaining issues raised by Goodyear's appeal: the production of the
correspondence
with the complainant and the leniency applicant.
THE
TRANSCRIPTS
6.
The transcripts, to which Continental and
Goodyear seek access, record interrogations conducted by the
Commission with a number
of persons
who
were
issued
with
a
summons
in
terms
of
49A
of
the Competition Act 89 of 1998 ("the
Act"). These interrogations took place at different times in the
period 5 May 2009
-11
September
2009.
7.
The
Commission contends in the first place that the transcripts are
protected by litigation privilege. The Supreme Court of Appeal
in
Arcelormittal
[1]
set
out the requirements that must be met for a litigant to claim
litigation privilege. First, the privilege protects communications
between a litigant or her legal advisor and a third party that come
about for the purpose of a litigant's submission of the communication
to a legal advisor for legal advice. Second, at the time that the
communication takes place, litigation must be pending or contemplated
as likely,
8.
Other
features of the privilege have been emphasized.
[2]
The
privilege is not assumed, it must be established. The privilege is a
right to withhold from disclosure evidence that might otherwise
be of
value and require production. The privilege protects important values
that underpin the litigation process. But the privilege
also
restricts the production of evidence, and evidence is the lifeblood
of the duty of a Tribunal or Court to find the facts.
Accordingly, a
litigant who claims the privilege must prove the facts that establish
the right asserted.
9.
The Commission, in its answering affidavits
to the compelling applications, could not have adopted a more
perfunctory approach to
its assertion of litigation privilege. It
contented itself with the following averment:
"Both
the correspondence and the transcripts to which Continental seeks
access were obtained for the purpose of pending or
anticipated
litigation against the respondent parties to the referral."
[3]
10.
This averment fails to state facts. It
simply asserts, in truncated form, the requirements that would need
to be established by
facts in order to claim the privilege. Elsewhere
in the answering affidavits, the Commission simply claims that the
documents sought
are protected by the privilege. But a claim does not
afford proof.
11.
In order to overcome this absence of proof,
the Tribunal, and now the Commission before us, sought to rely on
what are described
as inferences that may be drawn from common cause
facts on the papers. This is not a warranted approach. When a person
asserts
litigation privilege, they must clearly adduce the evidence
they rely upon to establish the privilege and make that plain in the
answering affidavit so that the applicants who seek disclosure
understand the case that is sought to be made out to resist the
disclosure of documents. It will not suffice to trawl the record to
find common cause facts from which inferences might be drawn.
That is
a case neither pleaded nor intelligible from the papers, but an
exercise of
ex post
reconstruction.
12.
The Commission simply failed to adduce
evidence to make out a case for the privilege. And that ends the
Commission's claim that
it is entitled to resist disclosure on the
basis of an assertion of privilege.
13.
However, even reliance on inference from
common cause facts, a flawed approach, renders ambiguous outcomes
that fail to establish
the privilege.
14.
There were three actions taken by the
Commission, reflected in the papers, that are consistent with the
contemplation of litigation
by the Commission. First, the Commission
executed a warrant of search and seizure on 4 April 2008 under powers
granted under section
46 of the Act. Second, on 24 April 2009, the
Commission initiated its own complaint. Third, in May 2009 the
Commission issued summonses
pursuant to its powers in section 49A to
interrogate various persons. It was the exercise of these powers that
gave rise to the
interrogations, and
in
turn,
the
transcripts
that
are
sought
by
Continental
and Goodyear.
15.
On 11 September 2009, Bridgestone filed a
marker and thereafter a leniency application. I return to the
significance of this conduct.
But given the timing of Bridgestone's
marker, the Tribunal appeared to accept, correctly, that this was not
a fact relevant to
whether the Commission already contemplated
litigation as likely during the period 5 May 2009 -
11 September 2009 when it conducted the
interrogations at issue in this case.
16.
The Tribunal considered that the execution
of the search warrant, reflected in a letter attached to the papers,
permitted of the
reasonable inference that the Commission then
contemplated litigation as likely. This inferential reasoning is
flawed. A warrant
can be
obtained
not only when the Commission has
information that a prohibited practice has taken place or is likely.
It is also competent to issue
a warrant under section 46 if there are
reasonable grounds for the judge or magistrate to believe that
anything connected to an
investigation is in the possession or under
the control of a person in the premises. A warrant may be issued in
the course of an
investigation and without any affirmative belief on
the part of the Commission that a prohibited practice has taken
place. The
warrant may be issued to assist the Commission to find
evidence of the
complaint
under investigation. No evidence may be forthcoming. The mere fact
that a warrant is obtained and executed
does not establish
that the Commission
had
sufficient
evidence so as to contemplate litigation as likely.
17.
Since the Commission failed to state in its
affidavits on what basis it obtained the search warrants, the mere
execution of the
warrants does not give rise to the inference that
its investigation had proceeded to the point that the Commission had
secured
evidence sufficient to consider litigation likely. The
execution of the warrants is consistent with the contemplation of
litigation.
But consistency is not the same as proof that the
Commission contemplated litigation as likely.
18.
The initiation of the Commission's own
complaint on 24 April 2009, without more, provides no better basis
for drawing the required
inference.
19.
The
complaint is attached to the papers.
[4]
The initiation statement references what it describes as allegations
of price fixing. The allegations, it is said, may amount to
an
infringement of section 4(1)(a) or (b) of the Act. The complaint is
said to be required so as to broaden the scope of the investigation.
20.
The initiation statement, unsurprisingly,
does not state whether litigation is likely. Its purpose is to frame
the scope of the
investigation. The statement can say no more than
that the allegations may amount to an infringement of the Act. The
initiation
of the complaint does not anticipate the outcome of the
investigation. Whether there is ultimately sufficient evidence of an
infringement
is the purpose of the investigation.
21.
It follows that the initiation of the
investigation by the Commission. without more, does not establish
whether the Commission contemplated
litigation as likely. It may have
done, but the Commission was required to put up the facts as to what
the investigation had yielded
to that point and whether litigation
was considered likely or not as a result. This the Commission failed
to do.
22.
That the Commission issued summonses in
order to interrogate various persons takes the case for the asserted
privilege no further.
Section 49A provides that the Commission may
summon any person to furnish information on the subject of the
investigation. The
power is widely framed precisely because the
Commission should not have to exercise the power only in
circumstances where it already
has sufficient evidence to contemplate
litigation as likely. The power of summons may be exercised to secure
such evidence. But
the issue of the summons is simply equivocal as to
what evidence the Commission has
already
found and hence whether litigation is likely.
23.
Accordingly, the Commission cannot
establish, based on inference from the facts relied upon,
that it
considered
litigation
at
the relevant time
to
be
likely.
Hence,
the
Commission's
assertion
of
litigation privilege must fail.
24.
I make two further observations on this
aspect of the matter. First, it
is
the failure of the Commission to put up the facts that gives rise to
the conclusion that the case for the privilege has not been
made out.
It is not that such evidence, if it exists, is difficult to adduce.
It simply requires that the Commission references
what the Commission
knew at the relevant time that made litigation likely. Second, if a
court is too ready to assume without proper
proof that litigation was
contemplated by the Commission, similar reasoning will have to apply
to those persons who are subject
to investigation, permitting them to
claim privilege on the same slender assumption that the receipt of a
summons entails the likelihood
of litigation. That would protect the
communications of persons whose communications would otherwise be
open to investigative scrutiny
by the Commission -
an undesirable limitation upon the
investigative remit of the Commission.
25.
Finally,
Mr
Gotz,
who
appeared with
Ms
Lewis and Mr Nyangiwe
for
Goodyear, made an ambitious and important submission that the
Commission could not assert litigation privilege as might an ordinary
litigant because the Commission exercises investigative powers akin
to police powers and the fruits of its investigations are subject
to
production
as
a matter
of
fairness.
The
argument
invoked by way
of
analogical authority the constitutional principles applied in
Shabalala.
[5]
There
is no need to determine this issue because the Commission has not
established its right to claim the privilege, and hence
the
attenuation of that right does not arise for consideration.
26.
The Commission contended before the
Tribunal, and does so again before us, that quite apart from its
reliance on litigation privilege,
the transcripts are immune from
production as restricted information as provided for in Commission
Rule 14(1)(d)(ii)(bb) ("the
rule"). The Tribunal upheld
this contention. The Tribunal found that the rule affords the
Commission even more generous protection
than does litigation
privilege as a necessary adjunct to the discharge by the Commission
of its investigative functions.
27.
Goodyear and Continental contest the
Tribunal's findings on various grounds, including the Commission's
failure squarely to invoke
the rule in its affidavit or adduce facts
in support of the rule's application.
28.
The threshold question however is this: is
the rule available to the Commission when documents are sought from
it by a litigant
against whom the Commission has referred a complaint
to the Tribunal?
29.
The rule must be read together with
Commission Rule 15. Rule 15(1) permits any person to inspect or copy
any Commission record,
subject to the restrictions
set out in this rule.
30.
Plainly
any person is a very wide class, and might seem to include persons
who are respondents in the referral of a complaint by
the Commission
to the Tribunal. Certain of the sub-rules in Rule 14 may lend support
to this construction because there are types
of restricted
information that remain restricted only to the point of referral or
non referral by the Commission.
[6]
31.
However, this is not the correct
construction of Rule 15.
It
is precisely because the class of "any persons" is so wide
that the regime of exclusion that is set out in Rule 14
cannot be of
application to the class of persons constituting litigants who are
respondents in a referral brought against them
by the Commission. The
Commission has duties of disclosure to respondents that ii does not
have to the public at large. The Commission
is engaged upon
adversarial litigation with respondents in proceedings of great
consequence for the public and the respondents.
Such litigation must
be fair. One aspect of fairness is disclosure. The Commission is
given large powers to conduct investigations.
The yield of that
investigation must be disclosed to respondents,
unless it is privileged, and subjected to
an appropriate confidentiality regime.
32.
The matter may be tested in this way. If
the Commission obtained an exculpatory statement from a witness in a
consultation with
that witness recorded in a minute, and this minute
formed part of the record on the basis of which the Commission
decided to refer
a complaint to the Tribunal: could the Commission
avoid production of this minute under Rule 14(1)(d)(i)(cc)? Plainly
not. The
duty to give exculpatory statements to a respondent is an
attribute of fairness.
33.
The
majority of the Constitutional Court has recently held that
a
public body subject to judicial review has a duty to disclose the
record of its decision that is not co-extensive with its duty
to make
disclosures of information to the public under PAIA
[7]
34.
For like reasons, Rule 15 cannot be
interpreted expansively to be of application to respondents in
referral proceedings because
the Commission has a duty to disclose
all relevant documents (absent a valid claim of privilege) so as
promote truth finding and
fairness. A regime of restriction of
application to respondents that was wider than the protection already
given by privilege would
damage the fairness of proceedings.
That is not an interpretation of Rule 15
that should lightly be countenanced.
35.
Rather,
Rule 15 should be understood to create a regime of access by the
public to information held by the Commission. This Court
has held
Rule 15 to be a rule of public access,
[8]
and
we affirm that position.
36.
A respondent secures disclosure as a
litigant under the powers conferred on the Tribunal by Sections 52
(1) read with Tribunal Rule
22 (1)(c)(v). It is the Tribunal that
determines the duty of litigants to make discovery. Rule 15 of the
Commission Rules cannot
be read as a derogation from the Tribunal's
powers to stipulate for a regime of disclosure that ensures a fair
and effective hearing
for the litigants.
37.
If Rule 15 is read to apply to litigants
then it would create a restrictive regime of disclosure, favouring
the Commission -
one
of the litigants before it
That
could not have been the intention behind Rule 15.
38.
find that Rule 15 read with the rule is not of application when a
litigant seeks discovery of documents. Accordingly, the Commission
could not rely upon the rule to resist production of the transcripts.
39.
In any event, in so far as the Commission
sought to rely on the rule, it had to set out the facts as to how
disclosure would frustrate
its deliberative process. This it has
failed to do. And for this reason also, the Tribunal fell into error
in finding that the
rule could be invoked to prevent production of
the transcripts.
40.
Goodyear has been at pains to point out
that it never sought the disclosure of a Commission record under Rule
15. Rather it sought
discovery. That is accepted by the Commission. I
have found that Rule 15 does not restrict the disclosure of documents
to a litigant
who seeks discovery.
41.
Continental did seek the record under Rule
15. But it did not do so as a member of the public but as a litigant.
As such, it sought
what is in effect discovery, and no different
result is warranted in its case.
42.
In the result, the Commission has failed to
provide a defensible basis for resisting disclosure of the
transcripts: it has not established
litigation privilege; the rule is
not of application when a litigant seeks discovery; and even if it
was, the Commission has failed
to set out facts that permit of the
rule's application.
THE
CORRESPONDENCE
43.
Goodyear appeals the Tribunal's decision to
refuse it access to the correspondence that took place between the
Commission and the
complainant, as also between the Commission and
the leniency applicant.
44.
I consider first the correspondence between
the leniency applicant and the Commission. The Tribunal found that
the Commission could
permissibly resist disclosure of these documents
both on the grounds of litigation privilege and upon an application
of the rule.
45.
Goodyear submitted that neither ground was
properly pleaded or proven by the Commission. For reasons already
stated above, these
criticisms are warranted.
46.
However, it may be argued that whenever a
leniency application is made its contents (including correspondence)
constitutes privileged
material in the hands of the Commission. The
Tribunal considered this to be the holding of the Supreme Court of
Appeal ("SCA'')
in
Arcelormittal.
47.
A
careful reading of the case does not bear this out. The SCA
emphasized that establishing privilege is a fact bound exercise.
[9]
In that case it was the facts put up in the Commission's answering
affidavit which made out the case for the privilege. In particular,
the leniency application was the result of discussions with the
Commission and its lawyers. It was made at the request of the
Commission and contained information for the purposes of prosecuting
a complaint against firms in the steel industry.
[10]
There were specific factual averments made in the affidavit of the
Commission that established the privilege.
48.
That was not done by the Commission in the
case before us.
49.
Might it nevertheless be held that since
the purpose of a leniency application is to obtain leniency in
exchange for information
and co operation that assists the
Commission to prosecute other firms, an application for leniency must
axiomatically be privileged
in the hands of the Commission? This does
not follow. A leniency applicant may make an application with
insufficient information
to place the Commission in a position to
consider litigation likely. Of course to obtain conditional leniency,
an
applicant
will
seek
to
put
up
information
of value
to
the Commission. But it is for the
Commission to assess that information and determine whether to grant
conditional leniency and,
in the context of privilege, state on oath
whether, at the time the leniency application was made, litigation
was contemplated
as likely. A successful leniency application will
usually support this conclusion. But it is for the Commission to
explain what
it thought as to the likelihood of litigation in the
light of the information that it had available. The mere making of an
application
for leniency, without more, does not establish the
privilege.
50.
It follows that the paucity of facts
offered by the Commission simply fails to establish the privilege
claimed by the Commission.
Even accepting that an application for
leniency was made, this fact alone says nothing as to what the
application contained and
what effect it had on the Commission's
contemplation of litigation.
51.
The claim of privilege must fail. And so
too, for reasons already explained, the reliance that the Commission
has placed on the
rule is unavailing against a litigant seeking the
production of documents.
52.1 deal finally, and
briefly, with the last category of documents sought: correspondence
between the Commission and the Complainant.
Little is known of what
these documents consist of, or even the dates on which they were
written or received. The Commission does
not say. Without a date, it
is impossible to know what facts, if any, might be relevant to the
contemplation of litigation by the
Commission.
53.
The Tribunal rightly did not decide this
aspect of the matter on the basis of privilege. It did however apply
the rule. For reasons
set out above, I do not find the rule to be of
application.
CONCLUSION
54.
It follows that the Tribunal's decision
dismissing Continental and Goodyear's application for disclosure by
the Commission of the
three categories of documents cannot be allowed
to stand. The Tribunal found that the Commission enjoyed a privilege
it had not
established. The Tribunal inferred the privilege from
facts that do not support this inference. And finally, the Tribunal
allowed
for the application to litigants of a rule of restriction,
wider than litigation privilege, that is simply a public access rule.
In this the Tribunal erred.
In
the result the following orders are made:
(a)
The appeals are upheld:
(b)
The orders made by the Tribunal are set
aside and replaced with the following:
(i)
The
Commission is ordered to disclose to Continental Tyres South Africa
(Pty) Ltd and Goodyear South Africa (Pty) Ltd the transcripts
listed
in paragraph 95 of the Tribunal's decision;
(ii)
The
Commission is ordered to disclose to Goodyear South Africa (Ply) Ltd
the correspondence between the Commission and Bridgestone
South
Africa (Pty) Ltd, as identified in the revised schedule of the
Competition Commission annexed to the founding affidavit as
"CT6"
( "the revised schedule").
(iii)
The
Commission is ordered to disclose to Goodyear South Africa (Ply) Ltd
the correspondence between the Commission and Parsons Transport
(Ply)
Ltd, as identified in the revised schedule.
(c)
The Commission is to pay the costs of
the appeals, including the costs consequent upon the employment of
two counsel.
David
Unterhalter
Acting
Justice of the Competition Appeal Court
Appearances:
For
the 1st
Appellant:
Adv.
JPV McNally SC and MJ Engelbrecht
Instructed
by:
Bowman
Gilfillan
Inc.
For
the 2
nd
Appellant:
Adv.
A Gotz, Adv.
N
Lewis
and Adv. L Nyangiwe
Instructed
by:
Judin
Combrinck
Inc.
For
the 1
st
Respondent:
Daniel
Berger SS and Sha'ista Kazee
Instructed
by:
Competition
Commission of
South Africa
Heard:
29 June 2018
Delivered:11
October 2018
[1]
Competition
Commission v Arcelormittal South Africa Ltd and Others 2013 (5) SA
538 (SCA).
[2]
Arcelormfttal
id. R on the application of Prudential Pie & Ano) (appellants) v
Special Commissioner of Income Tax & Ano
(respondents)
[2013]
UKSC 1
at para 18 (Lord Neuberger). Euroshipping Corporation of
Monrovia v Minister of Agricultural Economics and Marketing and
Others
1979 (1) SA 637
(C) at 643 I - J. Comfort Hotels Ltd v
Wembley Stadium Ltd
[1988] 3 All ER 53
at page 57 H- J, United
Tabacco Companies /South) Ltd v International Tabacco Company of SA
Ltd
1953 (1) SA 66
(T) at 68F. General Accident, Fire & Life
Assurance Corporation Ltd v Goldberg
1912 TPD 494
at 504. Bagwandeen
and Others v City of Pietermaritzburg
1977 (3) SA 727
(N) at 733C.
[3]
Para
5 Answering Affidavit, identical words are used in para 5 of the
Answering Affidavit to Goodyear.
[4]
Annexure
NS 2 vol 6 546.
[5]
Shabalala
and Others v Attorney-General of the Transvaal and Another 1996 (1)
SA 725 (CC).
[6]
See
Rule 14 (1)(c)(i).
[7]
Helen Suzman Foundation v Judicial Service Commission 2018 (4) SA
(1) CC.
[8]
'Group
Five Ltd v Competition Commission (139/CACI Feb 2016) [2016] ZACAC
1( 23 June
2016).
[9]
Competition
Commission v Arcelormittal South Africa Ltd and Others
2013 (5) SA
538
(SCA) para 28.
[10]
See
Arcelormittal id where it was held at 29:
"It
emerges from the commission's affidavits that it contemplated
litigation as a result of its investigation into the steel
industry.
Scaw became aware of the investigation and applied to the commission
for a marker, which was granted. The commission
then requested Scaw
to file a leniency application, which contained certain specific
information. Scaw did so on 9 July 2008.
Of importance in this
regard is that the commission pertinently says that the leniency
application was prepared for its use,
even though it would be of
benefit to Scaw. And it was made clear to Scaw from the outset of
its engagement with the commission
that the information contained in
the leniency application was required so that a complaint could be
initialed against the respondents.
Moreover, the commission's
in-house and external legal advisors were involved throughout this
process, including providing advice
on the leniency application."
And
at 31 where it was held:
"I
therefore consider that the circumstances under which Scaw created
the document and the commission obtained it are inseparable.
The
document came into existence at the instance of the commission for
the purpose of prosecuting firms alleged to be part of
a cartel. And
the fact that there was, in the process, to borrow from the
tribunal's phraseology ln the Pioneer Foods case, 1an
ancillary
outcome . . . of indemnity' does not detract from this purpose.
Furthermore. the accepted facts support the commission's
averment
that litigation was likely when the document was procured, that its
lawyers were involved in the process - including
advising on the
leniency application - and that the purpose for the preparation of
the leniency application was to support the
envisaged litigation.
The leniency application was, in substance, Scaw's witness statement
in the contemplated litigation. The
document was therefore
privileged in the hands of the commission."