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[2015] ZACAC 6
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Council for Medical Schemes and Another v South African Medical Association and Others [2015] ZACAC 6; [2015] 2 CPLR 376 (CAC) (11 December 2015)
REPUBLIC
OF
SOUTH AFRICA
IN THE COMPETITION APPEAL COURT
HELD AT CAPE TOWN
COUNCIL
FOR MEDICAL
SCHEMES
First
Appellant
REGISTRAR
OF MEDICAL SCHEMES
Second
Appellant
And
SOUTH
AFRICAN MEDICAL ASSOCIATION
First
Respondent
SOUTH
AFRICAN PAEDIATRIC ASSOCIATION
Second
Respondent
SOCIETY
FOR CARDIOTHORACIC SURGEONS
Third
Respondent
J U D G M E N T
VICTOR, AJA, MOCUMIE,
AJA (and DAVIS JP) concurring
[1] The appellant (‘CMS’) appeals the decision of the
Competition Tribunal to grant the respondents (‘SAMA’)
a
stay of proceedings pending the outcome of review proceedings
instituted in the Gauteng High Court.
[2] CMS lodged a complaint initially with the Competition Commission
(‘the Commission’) alleging that SAMA had engaged
in
price fixing in relation to medical services provided to the public.
It was alleged that this conduct contravened the
prohibition
against restrictive horizontal practices in terms of
section 4(1)(b)(i) of the Competition Act No 89 of
1998 (‘the
Act’). CMS alleged that SAMA had adopted billing guidelines
which had been approved by second and third
respondents who were in
horizontal relationships. CMS contends that this resulted in fixing
purchase or selling prices to the public.
The Commission issued a
notice of non-referral. Thereafter CMS lodged the same complaint with
the Tribunal.
[3]
The Commission issued a notice of non-referral on the basis that it
had embarked upon a Healthcare Market Inquiry to focus on
the rising
costs of health care in South Africa in general. The Commission
indicated that the complaint gave rise to a likely contravention
of
s4 (1) (b) (i) of the Act. The Commission did not consider the merits
but the usual proforma document indicated that CMS was
free to
exercise its rights in terms of s51 (1) of the Act
[1]
and
self-refer the matter to the Tribunal, which it did.
[4] SAMA thereafter launched an application in the Gauteng Division
of the High Court to review and set aside the decision made
by CMS to
submit complaints to the Commission and thereafter to self-refer the
complaints to the Tribunal after the Commission
issued a certificate
of non-referral.
[5] SAMA applied to the Tribunal to stay the proceedings in respect
of the complaints pending the outcome of the High Court review.
The Tribunal granted the stay. It is this decision which is subject
of this appeal.
The Tribunal
[6]
In granting the stay the Tribunal considered the arguments raised in
the review application: the decision by SAMA to enforce
the
competition matter was ultra vires the Medical Schemes Act 131 of
1998 (the
Medical Schemes Act), that
an organ of state could not be a
complainant in terms of s1 (1) (iv) of the Act, the review action was
in terms of PAJA alternatively
the doctrine of legality. The Tribunal
also considered the fact that the Commission had commenced an enquiry
into the health sector.
This was referred to as a
quasi
lis pendens
issue. SAMA contends that
no legitimate purpose would be served in proceeding with the
complaints only to have them subsequently
set aside by the High Court
if the review succeeds.
[7]
The Tribunal also considered the question of its own jurisdiction to
interpret the
Medical Schemes Act. Ultimately
the Tribunal found that
the review application traversed public law issues which were within
the jurisdiction of the High Court
and not the Tribunal. The Tribunal
in deciding to grant a stay of the proceedings applied the three
principles in
Novartis SA Pty Ltd and
Others vs Main Street 2 (Pty) Ltd and Others
(CAC)[2001]
ZACAC
2002 CPLR 74
CAC (14 June 2001) (
Novartis)
:
(a) whether there are reasonable prospects of success in the High
Court review, (b) whether it is in the interests of justice
to stay
the proceedings and (c) the balance of convenience. The Tribunal
found that SAMA had satisfied all three requisites.
[8]
The Tribunal also considered that, should the review in the High
Court fail and if the matter was to be remitted back to it.
The
investigation by the Commission be incomplete, the
quasi
lis pendens
point would not necessarily
prevent it from investigating the alleged harm to beneficiaries as
that would be an ongoing problem.
The Appeal
[9]
CMS submits that SAMA in launching the High Court review has embarked
upon preliminary litigation which is to be discouraged.
See
National
Director of Public Prosecutions v King
2010
(2) SACR 146
(SCA). CMS asserts that entities facing allegations of
cartel behaviour have little inclination to cooperate in the
process.
Once cartel behaviour is investigated it is to the
obvious advantage of hard pressed consumers that these cases be
determined as
expeditiously as possible.
[2]
In
addition, CMS asserts that the review application does not go to the
merits of the complaint against it but rather deals with
technical
aspects. In assessing whether SAMA has embarked on dilatory tactics
and whether the High Court application will result
in prejudice to
consumers, it is necessary to consider the matter as a whole and
within the context of the time line, so it contends.
[10]
A timeline demonstrates that on 21 May 2012 CMS lodged two complaints
with the Commission. One of the complaints also dealt
with the
conduct of the South African Paediatric Society, the second
respondent, and the conduct of the Society for Cardiothoracic
Surgeons, the third respondent. On 31 May 2013 the Commission
issued a notice of non-referral in respect of both complaints.
In early July 2013, although out of time, CMS referred both
complaints directly to the Tribunal. On 11 December 2013 SAMA lodged
the review application in the High Court to review and set aside the
two decisions made by CMS. On 17 April 2014 SAMA launched
the
stay application to the Tribunal. On 1 December 2014 the Tribunal
issued the order and reasons staying the investigation. On
9 December
2014 a notice of appeal was noted. Nothing
ex
facie
that time line suggests of
unnecessary delay on the part of SAMA.
[11] The central question to be addressed in this appeal is whether
the Tribunal’s decision is appealable to this court.
[12]
Section 37(1)
of the
Competition Act provides
:
’
The Competition Appeal Court may –
(a)
review
any decision of the Competition Tribunal; or
(b)
consider
an appeal arising from the Competition Tribunal in respect of:
(i)
any
of its final decisions other than a consent order made in terms of
section 63
; or
(ii) any of its interim
or interlocutory decisions that may in terms of the Act be taken
on
appeal’.
[13]
In
Allen’s Meschco (Pty) Ltd and
Others v Competition Commission and Others
(Case
Number 135/CAC/January 15) this court held that the Tribunal’s
refusal of the stay is not a final decision as contemplated
in
s37(1)(b)(i), but an interim or interlocutory decision as that phrase
is used in section 37(b)(ii). Rogers AJA held,
in
Allen’s
Meschco, supra
, that an order refusing
a postponement of proceedings did not have any of the attributes of a
‘judgment or order’ in
that, upon further consideration,
a judge might grant a postponement. The possibility of
revisiting a stay was emphasised
throughout the judgment of Rogers
AJA
[14]
CMS contends that
Allen’s
Meschco
did
not make a determination on the converse, namely, whether the grant
of a stay may be considered a final decision. In applying
the
principles in
Zweni
v Minister of Law and Order
1993
(1) SA 523
(A) Harms AJA stated ‘A 'judgment or order' is
a decision which, as a general principle, has three attributes,
first,
the decision must be final in effect and not susceptible of
alteration by the Court of first instance; second, it must be
definitive
of the rights of the parties; and, third, it must have the
effect of disposing of at least a substantial portion of the relief
claimed in the main proceedings’. In determining whether the
grant of a stay is a final decision, the ambit of
s37(1)(b)
(ii) of
the
Competition Act must
also be considered -
any
of its interim or interlocutory decisions that may
in
terms of the Act
be
taken on appeal
.(Own
emphasis)
[15]
In applying the
Zweni
test
to the facts of
Allen Mescho
,
the court came to the decision that the facts did not support the
test and as indicated the appeal failed.
[16]
In
Clipsal
Australia
(Pty) Ltd and Others v Gap Distributors and Others
2010
(2) SA 289
(SCA) the grant of a stay of contempt proceedings pending
the outcome of review proceedings were found to be appealable.
In this case the court held at para 15 that:
‘
It
should be borne in mind that it is the application for a stay of the
contempt application and not the contempt application itself
which
constitutes the main proceedings. The questions are whether the order
by the court a quo is definitive of the rights of the
parties in
respect of the application to stay the contempt proceedings, and
whether it disposes of at least a substantial portion
of the relief
claimed in that application. The answer to those two questions is
clearly in the affirmative. It follows that the
order by the court
below is appealable.‘
[17]
In
Law Society of the Cape of Good Hope
v Randall
2013 (3) SA 437
(SCA) at [34]
the court held:
‘
Before
concluding, I would like to refer to a further point made by the
respondent's counsel during argument. Counsel submitted
that the
application for a stay of the striking-off proceedings was
interlocutory and therefore not appealable. The argument is
without
merit. The order by Smith J to stay the application to strike off was
final in effect, in that it disposed of all the issues
relevant to
the said application.’
[18]
See also
National Treasury v Opposition
to Urban Tolling Alliance
2012 (6) SA
223
(CC) at para 24-25 where the ‘interests of justice’
are emphasised as extremely important in the determination of whether
an interim order is appealable.
[19]
In considering the appealability of an interim or interlocutory
decision in terms of the
Competition Act, the
test in
Zweni
has
to be considered against a further jurisdictional fact set out in s37
(1) (b)(ii) of the Act .i.e the context and purpose of
the Act. This
follows upon account being taken of the
Competition Act which
provides that when considering
an
appeal arising from the Competition Tribunal in respect of any of its
interim or interlocutory decisions that
may,
in terms of the Act
,
be taken on appeal,
the
enquiry becomes wider than that required in
Zweni.
[20]
The grant of a stay sought by CMS pending the outcome of the
High Court review means that a potential restrictive horizontal
practice relating to fixing purchase or selling prices of medical
services to the public may continue while the High Court and
possible
further appeal procedures on the point may take years to complete.
Appealability must also be considered within the context
and
framework of
s2
(b) of the
Competition Act which
provides: ‘the
purpose of the Act is to promote and maintain competition in the
Republic in order to provide consumers with
competitive prices and
product choices.’ The effect of granting a stay may well have
the effect of undermining the purpose
of the Act. It is thus evident
that, in determining the question of appealability, the context and
purpose of the Act must be one
of the jurisdictional features. It is
these considerations that dictate that the decision in
Allen
Mescho
supra is not applicable to the
present dispute.
[21]
The
Zweni
test
relates to the question whether the Tribunal will be able to revisit
the question of the stay of proceedings. In the reasons
given by the
Tribunal, this question was foreshadowed by the reference that,
should the review application fail, CMS may seek to
pursue its case
for investigation by the Tribunal, notwithstanding the
quasi
lis pendens
issue of the Commission’s
enquiry into the Health Care industry. However, it could never
re-visit the stay proceedings
as they appear presently. In my view,
upon a proper application of the principles in
Zweni
and considering the appeal within the context of
the
Competition Act, the
grant of a stay in these circumstances is
final in effect and disposes of the stay matter in its entirety.
Should the review application
fail and the matter come before the
Tribunal for a further stay an entirely different set of facts will
arise.
[22] It follows that when this court considers its jurisdictional
powers in terms of s37 (1) (b) (ii) of the Act, a fact sensitive
enquiry is necessary. All the above considerations are necessary. For
these reasons I find that the grant of a stay application
is
therefore appealable. Once that is so, then the merits of the appeal
need to be considered.
Was the stay correctly granted?
[23]
It is necessary to consider whether the Tribunal applied the three
principles in the
Novartis
test as set out above correctly. The Tribunal
found that a grant of stay was the appropriate order. CMS submits
that the Tribunal
failed to properly address the prospects of success
test and addressed the interests of justice and the balance of
convenience
test as a single enquiry.
[24] In the enquiry, prospects of success in the review application
become a central consideration. CMS contends that, in considering
the
review grounds SAMA raised, there are no reasonable prospects of
success. SAMA employed several arguments in the review application
relating to the decisions by CMS to refer the complaints as being
ultra vires the
Competition Act and
the
Medical Schemes Act, a
violation of s41 (1) (g) of the Constitution and being procedurally
unfair.
[25]
The Tribunal’s adjudicative role is emphasized in
Simelane
and Others NNO v Seven-Eleven Corporation SA (Pty) Ltd and Another
2003 (3) SA 64
(SCA)
where the court
held:
‘
[12]
Both the commission and the tribunal are creatures of statute, the
statute being the Act. Both bodies must exercise their functions
in accordance with the Act (s 19(1)
(c)
and
s 26(1)
(d)
).
The commission consists of a Commissioner and one or more Deputy
Commissioners as may be necessary, appointed by the Minister
of Trade
and Industry (s 19(2)). It must be independent and impartial and must
perform its functions without fear, favour,
or prejudice (s
20(1)). Among its functions are the investigation and evaluation
of alleged contraventions of chap 2 (in which
is contained ss 4 to 9)
and the referral, where appropriate, of complaints to the tribunal
(ss 21(1)
(c)
and
(g)
).
’
[26] This means that in assessing the grant of a stay application,
the Tribunal should not avoid considering the prospects of success
because it believes it cannot deal with public law issues. All it has
to do is consider whether SAMA has reasonable prospects of
success on
the public law issues. In so doing, it is not usurping the High Court
jurisdiction or making a final determination on
the public law
issues. This assessment, which is part of the requisite threshold
enquiry, should nevertheless be an integral part
of its consideration
when adjudicating the question of a stay.
[27]
Section 7
of the
Medical Schemes Act provides
that one of the
functions of CMS is to protect the interests of the beneficiaries at
all times. The Tribunal, in considering whether
CMS’ conduct is
ultra vires
the
Medical Schemes Act, needed
to consider whether this point has any
prospects of success in the High Court without pre-empting any
decision by the High Court.
In my view, the ambit of
s7
is extremely
wide. It is difficult to understand how allegations of price
fixing in contravention of s 4(1)(b)(i) of the
Act do not affect the
interest of beneficiaries. For this reason, there
is, in my view, little prospect of success
of an application for
review based on an argument that CMS acted outside its designated
powers.
[28]
The Tribunal, within the context of considering the stay application,
was not precluded from considering the prospects of success
of the
cooperative governance issue. CMS submits that it did not breach
principles of cooperative governance. Section 41(1) (g)
of Chapter 3
of the Constitution states that all spheres of government and all
organs of state within each sphere must –
‘
exercise
their powers and perform their functions in a manner that does not
encroach on the geographical, functional or institutional
integrity
of government in another sphere.
”
[29]
CMS contends that in making the complaint and self referral it could
not encroach on geographical, functional or institutional
integrity
of government in another sphere. This encroachment must occur
between different spheres of government. In
Premier
Western Cape v President of the Republic of South Africa
[1999] ZACC 2
;
1999 (3) SA 657
(CC) where the principle of
cooperative governance was dealt with by Chaskalson P with reference
to s41 (1) (g) of the Constitution:
‘
Although
the circumstances in which section 41(1)(g) can be invoked to defeat
the exercise of a lawful power are not entirely clear.
The purpose of
the section seems to be to prevent one sphere of government using its
powers in ways which would undermine other
spheres of government and
prevent them from functioning effectively. The functional and
institutional integrity of the different
spheres of government must
however be determined with due regard to their place in the
constitutional order, their powers and functions
under the
Constitution, and the countervailing powers of other spheres of
government.’
[30] CMS argued that the Commission is an organ of state within the
same national sphere of government and thus the provisions
of s 41(1)
(g) of the Constitution do not apply. In addition CMS submits
that the complaint to the Tribunal does not encroach
on the
functional integrity of the Commission. By self-referring its
complaint to the Tribunal after the Commission issued
a notice of
non-referral, the Commission could still pursue its chosen approach
of a market inquiry on private health.
[31] SAMA submits that organs of state cannot sue each other and, if
the legislative scheme involves consultation, CMS should rather
do
this than become involved in litigation because one organ of
government should not become embroiled in the legislative machinery
of the other. By taking a further step to self-refer the matter to
the Tribunal, SAMA contends that CMS is second guessing the
Commission’s decision as the designated regulator and intrudes
on its domain. SAMA submits that upon a proper interpretation
of s40
and 41 of the Constitution of the Republic of South Africa Act, 1996
(the Constitution) CMS cannot take the steps it did
in lodging a
complaint. It could not become a complainant because it is not a
private person.
[32]
CMS submits that
Government of South
Africa supra
no longer remains good law
as in
Ex parte Chairperson of the
Constitutional Assembly: In re Certification of the Constitution of
the Republic of South Africa,
[1996] ZACC 26
;
1996
1996
(4) SA 744
(CC) it was held that ‘
The
contention advanced on behalf of one of the objectors that litigation
between organs of State is not competent … is clearly
wrong’
.
CMS submits further that s41(3) of the Constitution,
while making provision for mechanisms and procedures for
organs
of state to settle disputes, the same organs of state may still turn
to courts to resolve a dispute. CMS also makes
the point that,
in any event, the court in
Government of
South Africa
supra
did
not preclude the right of an aggrieved organ of state to go to court
to protect its interests.
[33]
SAMA cites Woolman
et al
Constitutional Law of South Africa Vol I
at 14-8 in support of its argument, presumably the
following passage:
‘
One
sphere of government or one organ of state may not use its powers in
such a way as to undermine the effective functioning of
another
sphere or organ of state. The actual integrity of each sphere
of government and organ of state must be understood
in light of the
powers and the purpose of that entity.’
Later
in the same work, the learned authors submit that the so-called
Chapter 9 institutions fall outside this principle (at 14-13).
It is highly unlikely that the Commission should be treated
differently. See, in this connection
IEC
v Langeberg Municipality
[2001] ZACC 23
;
2001 (3) SA
925
(CC) at para 31 where, in referring to the
IEC
the court said:
‘
The
very reason the Constitution created the Commission – and the
other chap 9 bodies – was so that they should be and
manifestly
be seen to be outside government. The Commission is not an
organ of State within the national sphere of government.
The
dispute between Stilbaai and the Commission cannot therefore be
classified as an intergovernmental dispute.
’
In my view, the same reasoning is applicable to the present dispute.
Does the laying of a complaint amount to the initiation of
litigation?
[34]
Against this background, the laying of a complaint to a statutory
body such as the Commission does not amount to the initiation
of
litigation. Such a step is a preliminary or investigative step as
described in
Telkom
above.
The second step taken by CMS to self-refer the complaint to the
Tribunal does also not amount to the initiation of litigation.
CMS in
self-referring a complaint to the Tribunal is requesting the Tribunal
to investigate and consider whether SAMA has breached
a potential
restrictive horizontal practice relating to fixing purchase or
selling prices of medical services to the public.
The stage of
the initiation of litigation has not been reached.
[35] The
Tribunal is in a unique position as an adjudicatory structure .These
elements ‘specifically frees the Tribunal from
some of the more
constraining elements of high court rules as regards the preparation
of pleadings and the admissibility of evidence,’
which is
intended to enhance the effectiveness,
[3]
of the
Tribunal as an instrument of competition policy. This indicates that
the investigative process of the Tribunal can never
be regarded as
the initiation of litigation. Section
49B
specifically makes provision for the initiation of complaint. The
section makes it clear that ‘upon initiating
or
receiving a complaint in terms of this section, the Commissioner must
direct an inspector to investigate the complaint as quickly
as
practicable.’ There is no reference to this stage serving as an
initiation of litigation or words to that effect.
[36]
Lastly, for the sake of completeness, a consideration must be given
to whether the PAJA argument can succeed. This argument
can be
disposed of by reference to have regard to the ratio in
Competition
Commission of South Africa v Telkom
2009
ZASCA 155
at para
[10]
where the court found that a decision of the
Commission to refer a complaint to the tribunal does not constitute
administrative
action:
‘
[10] Care must
be taken here not to conflate two different aspects of the definition
of administrative action
in PAJA namely the requirement that a
decision be one of an administrative nature and the separate
requirements that it must have
had the capacity to affect legal
rights. The decision to refer is of an investigative nature and
not an administrative act.
’
[37]
Having considered all the relevant facts of this case, the approach
expounded in
Zweni
as
expanded in
Novartis
in
the area of competition law and the additional jurisdictional factors
provided for in s s37 (1)(b)(ii), I am ineluctably led
to conclude
the following: The Tribunal could have taken into consideration all
these aspects when considering whether there were
any prospects of
success of the review application. In balancing the urgency of this
type of complaint against the prolonged litigation
in the High Court
and the further appeal processes which might follow, it would be in
the interests of justice and more convenient
for all parties and the
benefit of the public at large to have continued the process rather
than grant a stay.
[38]
The purpose of the
Competition Act is
that matters before the
competition authorities should be resolved as expeditiously as
possible. The CAC acknowledged this in
Woodlands
,
where it commented that ‘cartel conduct requires expedition as
once it is investigated it is to the advantage of consumers
that
these cases be determined as soon as possible.’ Prolonged
disputes on procedural grounds prevent the speedy resolution
of
prohibited practice cases, delaying relief for consumers; which
undoubtedly hampers the full realisation of the
Competition Act’s
objectives.
In the result, the appeal succeeds and the following order is
granted:
The appeal is upheld with costs including the costs of two counsel.
__________________________________________
M VICTOR
ACTING JUSTICE OF APPEAL
COMPETITION
APPEAL COURT, CAPE TOWN
I concur:
__________________________________________
DENNIS DAVIS
JUDGE PRESIDENT
COMPETITION
APPEAL COURT, CAPE TOWN
I concur:
__________________________________________
CONNIE MOCUMI
ACTING JUSTICE OF APPEAL
COMPETITION
APPEAL COURT, CAPE TOWN
Appearances
:
Counsel
for Applicant : Adv Stephen Budlender
Instructed
by
: Norton Rose Fulbright
South Africa Inc.
Telephone
: (011)
686 - 8941
Reference
:
Ms
Roselyn Lake
Counsel
for Respondent : Adv. Shem Symon SC
Instructed
by
: Werkmans Attorneys
Telephone
: (011) 535
- 8000
Reference
:
Mr. D Arteiro
Date
of Hearing:
15 June 2015
Date
of Judgement: 11
December 2015
[1]
Section 51(1)
of the
Competition Act 89 of 1998
provides: If the
Competition Commission issues a notice of non-referral in response
to a complaint, the complainant concerned
may refer the matter
directly to the Competition Tribunal…’
[2]
See
Woodlands
Dairy (Pty) Ltd v Competition Commission
Case
Number 88/CAC March 09.
[3]
Fourteen
Years later: An assessment of the realisation of the objectives of
the
Competition Act no 89 of 1998
. Jessica Staples associate at
Bowman Gillfillan and Magali Masamba Bowman Gillfillan