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[2018] ZAKZPHC 23
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Competition Commission v Wilmar Continental Edible Oils and Fats (Pty) Ltd and Others (13748/16P) [2018] ZAKZPHC 23; [2018] 3 All SA 517 (KZP); 2020 (4) SA 527 (KZP); [2018] 2 CPLR 462 (KZP) (15 June 2018)
Reportable
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
No: 13748/16P
In
the matter between
THE
COMPETITION
COMMISSION
APPLICANT
And
WILMAR
CONTINENTAL EDIBLE
OILS
AND FATS (PTY)
LTD
FIRST
RESPONDENT
D
H BROTHERS INDUSTRIES (PTY) LTD T/A
WILLOWTON
OIL AND CAKE MILLS
SECOND
RESPONDENT
F
R WARING HOLINGS (PTY)
LTD
THIRD
RESPONDENT
AFRICA
SUN OIL REFINERIES (PTY) LTD
FOURTH
RESPONDENT
EPIC FOODS (PTY)
LTD
FIFTH
RESPONDENT
JUDGMENT
MADONDO
DJP:
Introduction
[1]
Both the second and third respondents seek an order under rule 6(12)
(c) of the Uniform Rules of Court granting a reconsideration
and
setting aside the ex parte order this Court issued on 6 December 2016
at the instance of the Competition Commission (the applicant)
in
terms of s 46(1) of the Competition Act 89 of 1998 (the Act) on an
urgent basis.
[2]
At the request of the parties, these two applications have been
enrolled for hearing on the same day. While the two matters
have not
formally been consolidated in the light of the similarities of the
parties’ facts and legal issues involved in both
matters, they
must be heard together as one application.
[3]
Both matters arise from the same ex parte application, under the same
case number and supported by the same founding affidavit,
resulting
in the issuing of the same search warrant. The matters are closely
related in that the granting of the ex parte order
has to be
reconsidered on the same sets of papers (founding affidavit, the
order, answering affidavits of the second and third
respondents and
the applicant`s replying affidavits to both matters). Since the legal
issues involved in both matters are substantially
the same, in order
to avoid inconsistency in the determination of such issues resulting
in conflicting decisions on the same facts
and questions of law, it
is advisable and appropriate that the two matters be heard as one.
Factual
Background
[4]
Following a merger notification between Wilmar Continental Edible
Oils and Fats (Pty) Ltd (Wilmar) and Sea Lake Investments
(Sea Lake)
which the applicant received on 18 July 2016, the applicant
commission on 2 December 2016 initiated a complaint
against the five
respondents
under
s 4(1)(b) of the Act alleging that the five respondents, being
competitors in the market for edible oils, had entered into
an
agreement and/or engaged in a concerted practice to fix prices and/or
trading conditions in the supply of edible oils which
was then
allegedly going on .
[5]
On 6 December 2016, the applicant made two urgent ex parte
applications for the issuing of a warrant in order to conduct a
search and seizure process (a dawn raid) at the premises of the five
companies that were the subject of the complaint. The one application
was brought in KwaZulu-Natal Division of the High Court,
Pietermaritzburg, in relation to the companies within this Court’s
jurisdiction, and the other was brought in the Gauteng Division of
the High Court, Pretoria, in relation to the companies within
such
court’s jurisdiction.
[6]
The ex parte application was lodged under case number 13748/16P in
Pietermaritzburg High Court against the second, third and
fourth
respondents,. However, the fourth respondent objected to its
application being heard together with the applications of the
second
and third respondents as one application.
[7]
In the Pretoria High Court the ex parte application was lodged under
case number 94763/16 against the first and fifth respondents.
[8]
Monyemore AJ granted the application and issued an order, dated 6
December 2016, permitting the dawn raid of the companies within
the
jurisdiction of the Pietermaritzburg High Court. The Pretoria High
Court also granted the order requested by the applicant.
Accordingly,
on 8 and 9 December 2016 respectively, the applicant conducted dawn
raids at the premises of the five respondents.
[9]
In making application for the warrant, the applicant was s fulfilling
its role as an organ of state in terms of s 239 of the
Constitution,
its administrative powers as set out in s 21(1)(c) and its obligation
to investigate anti-competitive conducts.
[10]
The applicant sought and obtained the search warrants based on the
allegation that there was a ‘reasonable belief grounded
on an
information on oath’ that prohibited practices as specified in
s 4(1) (b) of the Act (ie price fixing or the fixing
of trading
conditions that substantially prevented or lessened competition in
the market for manufacture and distribution of refined
edible oils,
baking fats and margarine) were taking place at the premises of the
respondents.
[11]
Each of the five respondents has launched an application to challenge
the lawfulness of the warrants issued in separate applications
for
reconsideration under the same case numbers in accordance with rule
6(12)(c) of the Uniform Rules of Court which provides:
‘
A person against whom an order
was granted in his absence in an urgent application may by notice set
down the matter for reconsideration
of the order.’
[12]
Though the respondents are applicants and
dominus
litis
in the reconsideration application, the applicant in the search
warrant application remains the applicant in as much as it was
the
party that sought and obtained the ex parte order which is sought to
be reconsidered and set aside. The affidavits filed in
support of the
reconsideration application by the first and third respondents, are
the answering affidavits in the reconsideration
proceedings, and are
to be taken as the replying affidavits. For practical reasons the
applicant commission had to present its
case first.
[13]
It is impermissible for the applicant in the ex parte application to
supplement its founding affidavit or attempt in its replying
affidavit in the reconsideration application to introduce new
evidence or facts when the order is being reconsidered. The applicant
is bound by the facts in its founding affidavit.
[14]
Both applications for reconsideration of 6 December 2016 order are
grounded, firstly, on that the applicant failed to
meet the
jurisdictional threshold in s 46 of the Act in that it failed to set
out information on oath or affidavit that there were
reasonable
grounds to believe ‘that a prohibited practice was taking place
or was likely to take place on first and third
respondents` premises
or that anything connected with the applicant`s investigation
was in the possession of/or under the
control of a person on the
respondents’ premises’. Secondly, on the
applicant’s failure to comply
with the requirements of
uberrimae
fides
in its ex parte application and to disclose facts to the court which
might have influenced the court in coming to its decision
to grant
the 6 December 2016 order. According to the first and third
respondents, the 6 December 2016 order falls to be reconsidered
because in obtaining such order, the applicant withheld relevant
information from the court and mischaracterised the true facts.
[15]
In investigating the alleged prohibited practices, the applicant was
acting on behalf of the public and in the public interest.
Also, in
carrying out the search and seizure processes the applicant was
performing its functions under the Act. Once the applicant
has
concluded its investigation it will either refer the matter to the
Competition Tribunal or issue the respondents with the notices
of
non-referral. The applicant alleges that it had reasonable grounds to
believe that ‘anything connected with an investigation
was in
the possession of or under the control of a person on the
respondents’ premises.’
[16]
Following the issue of a search warrant, the applicant conducted a
search and seizure operation at the premises of the second
and third
respondents on 6 and 9 December 2016 respectively. During such
search, it seized documents and electronic records. By
agreement
between the parties, the materials the applicant seized are being
kept under seal pending the determination of this application.
[17]
In terms of rule 6(12) (c) the respondents are entitled to have an
order reconsidered on the presence of two jurisdictional
facts: that
the main application was heard as a matter of urgency; and that the
first order was granted in their absence. The dominant
purpose of the
Uniform Rule is to afford to an aggrieved party a mechanism designed
to redress imbalances in, and injustices and
oppression flowing from
an order granted as a matter of urgency in his absence. See
ISDN
Solutions (Pty) Ltd v CSDN Solutions CC & others
[1996] 4 All
SA 58
(W) at 486H-487B. Read also
Oosthuizen v MIJS
2009 (6)
SA 266
(W) at 268H-I. It is common cause between the parties that the
required jurisdictional facts exist in this matter.
Issues
[18]
Issues for determination in this case are:
(a) Whether the applicant
made out a case for the search warrant to be issued in terms of s 46
of the Act; and
(b) Whether the applicant
disclosed the material facts for it to be granted an order.
[19]
The applicant made an ex parte application to this Court for a search
warrant in terms of s 46(1) (a) and/or (b) of the Act,
which
provides:
‘
A judge of the High Court, a
regional magistrate or a magistrate may issue a warrant to enter and
search any
premises
that are within the jurisdiction of that judge or magistrate, if,
from information on oath or affirmation, there are reasonable
grounds
to believe that-
(a)
A
prohibited
practice
has taken place,
is taking place or is likely to take place on or in those
premises
;
or
(b)
Anything connected with an
investigation in terms of
this
Act is in the possession of, or under the control of, a person who is
on or in those
premises
.’
[20]
In application for reconsideration under rule 6(12) (c) the court
considers the matter
de
novo
.
See
Oosthuizen
above at 269C-D. As in the original application, the commission as
applicant bears the onus to justify the granting of the ex parte
order.
[21]
The first question for decision is whether there was sufficient
information on oath as evidence to justify such investigation,
and
the ultimate issue of a search warrant. Section 46 (1) (b) sets out
that the applicant must demonstrate, on oath, that there
are
reasonable grounds to believe that anything connected with an
investigation in terms of this Act is in the possession of, or
under
the control of, a person who is on or in those premises.
[22]
It is sufficient if the information on oath demonstrates that there
are reasonable grounds to believe that anything connected
with an
investigation of the alleged contravention of s 4(1) in the edible
oils market under the Act is in the possession of or
under the
control of a person on those premises. The applicant referred to the
Sea Lake as the source of the information upon which
it relied for
the warrant it sought and obtained in this matter. According to the
applicant, the Sea Lake was the genesis of the
investigation into
prohibited practice in the refined oils industry, which led to the
granting of an ex parte order on 6 December
2016 and ultimately the
raids on the respondents’ premises.
[23]
Mahomed Rayhaaz Essack (Mr Essack), a businessman and the managing
director of Sea Lake, has deposed to an affidavit on behalf
of Sea
Lake. However, the affidavit does not confirm the allegations by the
applicant in its founding affidavit but, instead,
he places
material information before this Court which contradicts what the
applicant said in its founding affidavit in the
ex parte
application. Mr Essack flatly denies that he said that there was a
collusive arrangement between Sea Lake and its competitors
(first
respondent). Such a suspicion had arisen from the fact that Sea Lake
was allocated the business of Shoprite Checkers in
KwaZulu-Natal. Sea
Lake then discovered that its competitors were trying to entice
Shoprite Checkers away from it and were doing
so on the basis that
Sea Lake would soon cease to exist.
[24]
In turn, Sea Lake lodged a complaint to its attorneys, Stowell &
Company, about this turn of events. According to Mr Essack,
Sea Lake
communicated to its attorneys that incorrect information had been
leaked out to the applicant to its prejudice. The Sea
Lake attorneys
were in fact attempting to express Sea Lake’s outrage at what
its competitors were doing. Its attorneys ought
to have complained
about firms attempting to dominate the market rather than about
horizontal relationships. Sea Lake’s complaint
was about its
competitors muscling in on its business and not about any collusion
amongst its competitors.
[25]
Mr Essack says that the attorneys might have misunderstood what he
was conveying or they got carried away. What was said about
collusion
in “MRE2” was not based on instructions emanating from
Sea Lake. The founding affidavit relies on a suspicion
fundamentally
of a collusive horizontal practice where prices were fixed.
[26]
Towards the end of October 2016 or early November 2016, an
applicant`s investigator approached Mr Essack and intimated
to
him that should he provide the applicant with the evidence
concerning collusive practices within edible oil industry,
the
applicant would offer Sea Lake indemnity. Mr Essack spurned
such offer on the grounds that he could not provide any evidence
in
that regard since as far as he was concerned and aware; there were no
collusive practices within the industry.
[27]
According to the applicant, the information Sea Lake communicated to
it finds corroboration in annexures “MRE1”
and “MRE
2” respectively, “MRE 1” is the letter dated 4
October 2016 that Brian Kurtz of Stowell &
Company addressed to
Dineo of the applicant stating that the Sea Lake, as the clients of
Stowell & Company, were aware of the
fact that there was
collusion in the market which deserved investigations. According to
the letter, they (Sea Lake) were of the
view that there was a
concerted practice between firms in a horizontal relationship
deliberately calculated to lessen competition
by attempting to
marginalise and eliminate Sea Lake as a relatively small supplier
which has a long history of excellent reliable
supply in this market.
Mr Essack denies that was what Sea Lake conveyed to its
attorneys.
[28]
Once again in “MRE 2”, also from Stowell & Company,
Kurtz indicates that there was collusion in the market
for the
manufacture and distribution of refined oils and that there could be
prospects of further collusion. The applicant seeks
to place reliance
on the Kurtz email as justifying the inference that ‘there is
collusion in the market for the manufacture
and distribution of
refined edible oils’. Mr Essack denies all this.
[29]
In his affidavit, Mr Essack attaches “MRE 4” a letter
from Stowell & Company in which Kurtz confirms that the
statement
that there is collusion in the industry was written without
instructions by Sea Lake. According to Mr Essack, the applicant
had
no cause to approach the court in way it did. As a consequence, there
is no confirmatory affidavit either by Mr Essack or Sea
Lake to the
alleged collusive conduct in the refined edible oil market.
[30]
It has been argued on behalf of the respondents that the applicant`s
failure to file a confirmatory affidavit in respect
of the
double hearsay evidence regarding the alleged prohibited practice
means that there is no ‘information on oath’
which could
ground ‘a reasonable belief’ that there were collusive
dealings in the market. At best, the grounds amounted
to conjecture
and speculation. The applicant relied on hearsay evidence which does
not amount to evidence on oath.
[31]
The allegation relating to the prohibited practice is said to be a
double hearsay on the ground that it emanated from an unidentified
source who was not even party to the alleged conversation. The
applicant avers that somebody at Sea Lake apparently told it that
Sea
Lake was aware that the first respondent had called the third
respondent to discuss market shares. It also appears as if an
individual (who is not Mr Essack) recorded negotiations on how to
prize sales with a competitor in respect of a customer. This
recording was relied upon in the application for the search warrant.
[32]
It has been argued on behalf of the applicant that the
evidence falls to be admitted in terms of s 3(1) of the
Law of
Evidence Amendment Act 45 of 1988 (the Evidence Act), though such an
argument has never been raised in the founding affidavit.
The strict
rules on ex parte applications are that the applicant must properly
make its case when it first approaches the court.
However, the court
has, in terms of s 3(1) of the Evidence Act, discretion to decide
whether or not to admit hearsay evidence.
The test for the admission
of hearsay under the section is-
‘
(c) the court, having
regard to—
(i)
the nature of the
proceedings;
(ii)
the nature of the
evidence;
(iii)
the purpose for which the
evidence is tendered;
(iv)
the probative value of
the evidence;
(v)
the reason why the
evidence is not given by the person upon whose credibility the
probative value of such evidence depends;
(vi)
any prejudice to a party
which the admission of such evidence might entail; and
(vii)
any other factor which
should in the opinion of the court be taken into account,
is of the opinion that such
evidence should be admitted in the interests of justice.’
[33]
Before deciding whether or not it is in the interests of justice for
this Court to admit the double hearsay information in
this matter I
propose first to deal with the nature of the proceedings. It has been
the applicant’s contention that the lower
standard of proof in
the civil trial proceedings compels the result that our courts more
easily admit hearsay in such proceedings.
[34]
An order sought to conduct a search on the respondents’
premises centres on the infringement of the respondents’
rights
to privacy. The Supreme Court of Appeal and the Constitutional Court
have made it clear that courts must closely regulate
and scrutinise
the issue and execution of search warrants because they involve a
serious encroachment of rights and amount to an
invasion of privacy,
even when executed on business premises.
[35]
In
Minister
of Justice & others v Desai, NO
1948
(3) SA 395
(A) at 403 Tindall ACJ held that a search warrant
‘constitutes a serious encroachment on the rights of the
individual and
consequently it is the duty of courts of law to
scrutinise most carefully anything done under that section’. In
Goqwana
v Minister of Safety and Security NO
[2016]
1 ALL SA 629
(SCA) para 15 Willis JA quoted such decision with
approval and emphasis on the case scrutiny by the courts. In
Magajane
v Chairperson, North West Gambling Board & others
[2006] ZACC 8
;
2006
(5) SA 250
(CC) para 74, the Constitutional Court held that ‘the
warrant guarantees that the State must justify and support intrusions
upon individuals’ privacy under oath before a neutral officer
of the Court prior to the intrusion’.
[36]
It therefore follows that in the circumstances of this case, the
hearsay information cannot lightly be admitted without scrutiny.
Mr
Motau, for the applicant has argued that the contention that the
information the applicant relied upon in its affidavit is a
double
hearsay is rather a challenge directed at the value of the evidence
presented by the applicant in this regard. Mr Essack
denies the very
existence of the information and hence the evidence on which the
applicant sought to base its alleged belief.
[37]
The reason for the evidence in question not being tendered by Mr
Essack is that he disavows the information he allegedly communicated
to the applicant, and not of non-availability of a person upon whose
credibility the probative value of the evidence in question
depends.
For this double hearsay information to be admitted, the applicant
must have obtained confirmatory affidavits by Mr Essack
and by that
certain individual who allegedly overheard the discussions between
the first and the third respondents, as the persons
upon whose
credibility the probative value of the information/evidence depends.
[38]
Mr Essack’s disavowal of the information is that he could not
provide any evidence of collusive practices and that as
far as he was
concerned and aware; there were no collusive practices or dealings in
the manufacturing and distribution market for
edible oils. Also, Mr
Essack denies that Sea Lake informed the applicant that the first and
second respondents had held a meeting
to discuss their responses to
the applicant’s questionnaire.
[39]
There was no confirmation to the facts Mr Mohlala of the applicant
deposed to in the affidavit on behalf of the applicant.
Since the
facts Mr Mohlala deposed to in the applicant`s founding affidavit
were not within his personal knowledge his evidence
was hearsay and,
it could not therefore constitute an information on oath as the Act
requires.
[40]
In
Von Abo v Government of the Republic of South Africa &
others
2009 (2) SA 526
(T) para 46 Prinsloo J said:
‘
The courts have long and
consistently held that it is impermissible for a deponent to an
affidavit to give evidence on behalf of
another where the latter does
not file a confirmatory affidavit to confirm the evidence. . . . “One
person cannot make an
affidavit on behalf of another.”’
Mohlala,
acting on behalf of the applicant commission, could only depose to
matters in his own knowledge. If the facts were not
within his
personal knowledge there must be a confirmatory affidavit by the
person upon whose credibility the probative of such
facts depended.
It is common cause that no confirmatory affidavit by Mr Essack or any
other person was filed. The facts Mr Hohlala
deposed to with regard
to Mr Essack or Sea Lake are therefore hearsay and inadmissible. See
also
Gerhardt
v State President & others
1989
(2) SA 499
(T) at 504F-H.
[41]
In ex parte applications, the applicant must disclose all material
facts, which might influence the court to grant or refuse
the relief
sought. Failure to do so may result in the setting aside of the order
sought. The non-disclosure or suppression of facts
need not be wilful
or mala fide to incur the penalty of rescission; and the court,
appraised of the true facts, has discretion
to set aside the former
order or to preserve it. See
Schlesinger
v Schlesinger
1979
(4) SA 342
(W) at 349A-B.
[42]
In
Phillips and others v National Director of Public Prosecutions
2003 (6) SA 447
(SCA) para 29, Howie P said:
‘
It is trite that an
ex
parte
applicant must
disclose all material facts that might influence the court in
deciding the application. If the applicant fails in
this regard and
the application is nevertheless granted in provisional form, the
court hearing the matter on the return day has
discretion, when given
the full facts, to set aside the provisional order or confirm it. In
exercising that discretion the later
court will have regard to the
extent of the non-disclosure; the question whether the first court
might have been influenced by
proper disclosure; the reasons for
non-disclosure and the consequences of setting the provisional order
aside.’
[43]
In the present matter, the applicant had a duty to disclose each and
every fact and circumstance which might influence the
court in
deciding to grant or withhold the relief sought. It is not in dispute
that the applicant was aware when it launched this
application that
Sea Lake had disputed that the applicant`s interpretation of the
Kurtz email was correct. According to Mr Essack,
the Kurtz email was
previously aimed at framing Sea Lakes’ concern that its
competitors were targeting its customers and
not that there was
collusion in the market. Secondly, it is not in dispute that in late
October or early November 2016 (ie prior
to the launching of the
applicant`s application), Mr Essack specifically refused an
offer of ‘indemnity’ for
Sea Lake from the applicant in
return for providing evidence of collusive practices in the refined
oils market, that the
applicant seeks to investigate. Such
refusal by Mr Essack was based on the fact that he could not provide
any evidence of
the alleged practices and that as far as he was
concerned and aware; there were no collusive practices or dealings in
the refined
oils market. Thirdly, in its founding affidavit, the
applicant concedes that Sea Lake had intimated to it that it was
denying the
contents of the correspondence from Stowell &
Company. Finally, it is not in dispute that the third respondent is
not a participant
on the ‘manufacturing level’ of the
market. However, the applicant did not disclose any such material
facts to the
court hearing an ex parte application.
[44]
It has been argued on behalf of the respondents that the applicant`s
non-disclosure or suppression of the material facts
pertaining
to the Sea Lake’s interpretation of the Kurtz email; the
Sea Lake’s refusal of indemnity by the applicant;
the
equivocation of Mr Essack on the information he had communicated to
the applicant on behalf of Sea Lake and its lack
of
knowledge as to why the first respondent had called the
managing director of the third respondent breached the duty
of the
utmost good faith which the applicant had when it sought a
search warrant and, that such non-disclosure justifies
the setting
aside of the warrant in its entirety. The applicant maintains that
all the material facts were disclosed. In my judgment,
it has
correctly been argued that the ex parte application was based on a
series of material factual inaccuracies that were, or
should have
been known to the applicant, which should have been drawn to the
attention of the court. In fact, the search warrant
was granted on
incomplete facts or information.
[45]
The first, second, third and fourth respondents, being the
competitors (in horizontal relationship) in the market for the
manufacture and distribution of refined edible oils, are alleged to
have entered into an agreement and/or engaged in a concerted
prohibited practices of price-fixing in the supply of bulk and
packaged edible oils in breach of s 4(1) (b) (i) of the Act.
[46]
Prohibited practices as specified in s 4(1)(b) of the Act are, among
others, price fixing and/or fixing of trading conditions
which have
the effect of substantially lessening or preventing competition in
the market for the manufacture and distribution of
refined oils,
baking fats and margarine, is taking place at particular premises.
[47]
For the applicant to succeed in its application it had to demonstrate
that there were reasonable grounds to believe that a
prohibited
practice had taken place, was taking place or was likely to take
place on the respondents’ premises and/or that
the ‘material
connected with the investigation’ would be found on the
premises of the respondents.
[48]
It is not in dispute that the third respondent is a supplier of crude
oil to the refined oils markets and not a competitor
of the first
respondent in the refined oils market. However, Mr Motau for the
applicant has argued that the point of contention
is that the market
being investigated is not only that of the manufacturing but it
plainly contemplates both horizontal and vertical
planes. In his
argument, he concluded by saying that the claim that the applicant
only targeted firms ‘in horizontal relationships’
is
incorrect. According to the applicant the first respondent has
admitted that it discussed market share information with the
third
respondent regarding the answers to the market share questionnaire to
be forwarded to the applicant commission.
[49]
Section 4(1) (b) of the Act provides:
‘
(1) An agreement between or
concerted practice by, firms, or a decision by an association of
firms, is prohibited if it is between
parties in a horizontal
relationship and if –
(a)
…
(b)
It involves any of the
following restrictive horizontal practices:
(i)
Directly or indirectly fixing a
purchase or selling price or any other trading condition;
(ii)
…
(iii)
…’
[50]
Explicit in the section is that the targeted entities are those in a
horizontal relationship to each other. It is not in dispute
that as
the third respondent is supplying crude oil to the entities involved
in the refined oils market is in vertical relationship
with them and
therefore, not hit by the prohibition. Section 4(1)(b) of the Act is
aimed at preventing companies operating within
a single economic
entity similar to a group of companies, from being accused of
perpetrating restrictive horizontal practices in
consequence of their
interaction with one another as part of the group.
[51]
It has also been argued on behalf of the applicant that the third
respondent is the sole shareholder of Agvestco (Pty) Ltd
(Agvestco),
an investment holding 30 per cent interest in the fourth respondent.
It has been contended on behalf of the applicant
that even if the
third respondent does not have direct control of Africa Sun the
structure of the entities gives the third respondent
material
influence over Africa Sun through its wholly owned subsidiary,
company, Agvestco. According to the applicant, Agvestco
has
considerable influence or control over the fourth respondent. While
Agvestco has a 30 percent minority shareholding, it is
entitled to
appoint three out of six directors of the fourth respondent’s
Board of Directors.
[52]
Mr Trengove, for the third respondent, has correctly argued that
indirect acquisition of a minority shareholding in the fourth
respondent, via Agvestco, does not suggest that the third respondent
itself become a supplier of refined edible oil. The Act does
not
recognise accessory or vicarious liability for a holding company
arising from an alleged action by a company in which it has
an
indirect minority shareholding. If the company in which there is
minority shareholding partakes in prohibited horizontal practices,
then that company that trades in the market is liable, not the
company’s indirect minority shareholder (or even a majority
shareholder).
[53]
It is admitted that the first respondent sought Mr Francis’
assistance (the managing director of the third respondent)
to try to
provide accurate information to the applicant in completing a
standard questionnaire the applicant commission had sent
to the first
respondent, in relation to their merger application with Sea Lake.
When the first respondent sought information about
the market share
of the fourth respondent in KwaZulu-Natal, they approached Mr Francis
and asked him to provide accurate information
to the applicant in
completing a standard questionnaire, in relation to the first
respondent’s merger application with the
Sea Lake. Francis
indicated that he did not have the required information but offered
to guess an estimated figure. However, this
conversation has nothing
to do with any type of collusion in the refined oil market nor that
it had information on its premises
about the collusion between the
third respondent and other respondents. I agree with Trengove that
such a discussion between the
first respondent and Francis would not
only be innocent but it would not give rise to any reasonable belief
that price fixing was
occurring in the refined oils market.
Conclusion
[54]
The applicant failed to make out a case for the issuing of a search
warrant in terms of s 46 of the Act. The absence of Mr
Essack’s
confirmatory affidavit impacted negatively on the existence let alone
the reasonableness of the grounds upon which
the applicant based
its belief that the prohibited act was committed or likely to be
committed and that information connected
to the applicant`s
investigation could be found on the premises of the
respondents. The managing director of Sea Lake, Mr
Essack, who filed
an affidavit on behalf of Sea Lake, denies that Sea Lake had ever
intended to suggest or convey that there was
collusion in the refined
oils market, and states that what he had told the applicant had
nothing to do with price-fixing in the
refined oil market.
[55]
The applicant is guilty of the lack of bona fides in not disclosing
in its founding affidavit the equivocation of Mr Essack
of Sea Lake
on the collusion in the market. Had this information been disclosed
to the court, the mere allegations as to collusion
in the market
could not provide the basis for the granting of the search warrant.
Nor did the applicant disclose to the court that
the third
respondent, as the supplier of raw material to the refined oils
market, is not in horizontal but in vertical relationship
with other
respondents. Implicit in this matter is that the court, in granting
the ex parte application in this regard, acted on
incomplete,
inaccurate and incorrect information.
[56]
The applicant’s allegations as to the alleged prohibited
practice based as they are on the double hearsay, could never
ground
‘reasonable belief’ that there were collusive dealings in
the market. The information contained in the founding
affidavit was
not deposed to by a person with personal knowledge of the purported
infractions. Mr Essack, who allegedly had the
required knowledge, has
instead, filed an affidavit in which he denies what the applicant had
imputed to him or his company (Sea
Lake) in its founding affidavit.
[57]
The applicant’s founding affidavit does not disclose any
evidence at all of any price-fixing between the third respondent
and
any other respondent. First, the email from an attorney (Mr Kurtz)
for Sea Lake does not implicate the third respondent at
all. Second,
it was the conversation between Sea Lake and the first respondent
provided to the applicant by Sea Lake’s own
managing director.
Thirdly, neither the third respondent nor any of its wholly owned
subsidiaries are members of the South African
Oil Processors
Association. In its replying affidavit, the applicant accepts that it
is the fourth respondent that is a member
of South African Oil
Procession Association. Fourthly, the third respondent does not carry
on business as a competitor in the refined
oils market at all.
[58]
The applicant did not disclose any basis upon which it believed that
the third respondent is a competitor in the refined oils
market. The
third respondent is a mere holding company and it does not trade in
any refined oils market at all. Its wholly-owned
subsidiary, the
third respondent, is a commodity trading in bulk (raw) oils which it
supplies to the refined oil manufactures.
The fourth respondent is
thus in a vertical relationship with the other respondents as a
supplier of raw materials (which other
respondents require for
processing and manufacturing refined edible oils).
[59]
The applicant did not tender any evidence to show that the third
respondent engaged in any price-fixing with any of the respondents
save that it relies on the conversation between the first respondent
and Mr Francis, the managing director of the third respondent.
However, the conversation had nothing to do with any type of
collusion in the refined oil market. Therefore, it could not provide
a reasonable basis to believe that the third respondent was involved
in price-fixing in the refined oils market, or that it had
information on its premises about collusion between it and other
respondents.
[60]
The applicant did not adduce any evidence to conclude that the second
and third respondents were engaged in price-fixing with
any of the
other respondents. Nor did it tender any evidence that the
information connected with its investigation was on the premises
of
the respondents. The applicant was also guilty of serious breach of
its duty of good faith to this Court to disclose material
facts in
its ex parte application, as outlined above. Inevitably, I conclude
that the applicant failed to satisfy any of the jurisdictional
requirements of s 46(1)(
a
) and/or (
b
) of the Act for
its application against both respondents.
Order
[61]
I accordingly make the following order:
(a) The search warrant is
set aside in so far as it authorises a search of the premises of the
second and third respondents respectively;
(b) The commission is
ordered to return all materials seized from the second and third
respondents’ premises respectively,
and all copies or recording
of those materials;
(c) The commission is
ordered to pay the second and third respondents’ costs
including the costs of two counsels.
_______________
MADONDO
DJP
Appearances
Date
reserved: 1 March 2018
Date
delivered: 15 June 2018
For
applicant: Adv Motau SC with S. Scott
Instructed
by: Ndzabandzaba Attorneys
c/o
Kwela Attorneys
For
1
st
Respondent:
Instructed
by: Norton Rose Fulbright
c/o
Pencarrow Crescent,
For
2
nd
Respondent: Adv Du Plessis with S. Pudifin-Jones
Instructed
by: Cliffe Dekker Hofmeyr
c/o
Shepstone and Wylie
For
3
rd
Respondent: Adv Trengove SC with A. Coutsoudis
Instructed
by: Cox Yeats
For
4
th
Respondent:
Instructed
by: Shaukat Karim & Co.
c/o
Grant & Swanepoel
For
5
th
Respondent:
Instructed
by: Knowles Hussain Lindsay Inc.