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[2012] ZACAC 1
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Arcelormittal South Africa Ltd and Another v Competition Commission and Others, Arcelormittal South Africa Ltd v Manoim NO and Others (103/CAC/Sep10) [2012] ZACAC 1 (2 April 2012)
REPUBLIC OF SOUTH AFRICA
IN THE COMPETITION
APPEAL COURT OF SOUTH AFRICA
HELD IN CAPE TOWN
Case No.: 103/CAC/Sep10
In the appeal between:
ARCELORMITTAL SOUTH
AFRICA LIMITED
…..............................................
.
First
Appellant
CAPE GATE (PTY)
LIMITED
….....................................................................
Second
Appellant
And
COMPETITION COMMISSION
…...................................................................
First
Respondent
SCAW SOUTH AFRICA
(PTY) LIMITED
…...............................................
Second
Respondent
CAPE TOWN IRON AND
STEEL WORKS
(PTY) LIMITED
…...........................................................................................
Third
Respondent
SOUTH AFRICAN IRON AND
STEEL INSTITUTE
….................................
Fourth
Respondent
--------------------------------------------------
In the review between:
ARCELORMITTAL SOUTH
AFRICA LIMITED
….......................................................
Applicant
And
NORMAN MANOIM N.O
….............................................................................
First
Respondent
COMPETITION COMMISSION
…..............................................................
Second
Respondent
SCAW SOUTH AFRICA
(PTY) LIMITED
…...................................................
Third
Respondent
CAPE GATE (PTY) LTD
…..........................................................................
Fourth
Respondent
CAPE TOWN IRON AND
STEEL WORKS
(PTY) LIMITED
…............................................................................................
Fifth
Respondent
SOUTH AFRICAN IRON AND
STEEL INSTITUTE
…...................................
Sixth Respondent
JUDGMENT: 02 April 2012
DAVIS JP
Introduction
[1] The two appellants in
this case sought the production of certain documents from second
respondent (‘the Commission’).
Both appellants are
respondents in complaint referral proceedings which have been brought
against them and three other parties
by first respondent in which it
is alleged that they, together with other firms, contravened s
4(1)(b)(i) and/or (iii) of the Competition
Act 89 of 1998 (‘the
Act’) by engaging in various forms of price fixing, information
sharing and market division in
respect of certain long steel and flat
steel products.
[2] Of particular
relevance to these proceedings are paragraphs 8.7 to 8.10 of the
referral affidavit which provide thus:
“
8.7
On 21 July 2008 Scaw applied for leniency in terms of the
Commission’s CLP for price fixing and market allocation in
relation to rebar, wire rod, sections (including rounds, squares,
angles and profiles).
8.8 Scaw confirmed in
the application for leniency that there has been a long standing
culture of cooperation amongst the steel
mills regarding the prices
to be charged, and discounts to be offered, for their steel products
such as rebar, wire rod, sections
(including rounds and squares,
angles and profiles). The cooperation extended to arrangements on
market division.
8.9 In addition to
information submitted by Scaw in its leniency application, the
Commission conducted its own investigations which
largely confirmed
the allegations made by Scaw and provided further evidence of
anticompetitive practices in contravention of section
4(1)(b) of the
Act – involving both price fixing and market division.
8.10 It is a
consequence of information contained in the Scaw application for
leniency and that obtained from the Commission’s
investigations
that this referral is made.
”
[3] It appears that,
after first respondent delivered its founding affidavit in this
complaint referral, first appellant requested
access to documents,
invoking the Commission’s rules (‘the CC rules’) in
particular CC Rule 15 read together
with Rule 14 and the Uniform
Rules of the High Court; in particular Rules 35 (12) and (14). Access
to the majority of these documents
was refused, as a result of which
first appellant applied to the Tribunal for the necessary access. The
Tribunal granted first
appellant access to three further documents
but dismissed with costs its application for access to the other
documents which it
had so requested. It is against this decision that
first appellant now appeals.
[4] First appellant has
also sought to review the Tribunal’s decision. It contends
that, if this court finds that it has jurisdiction
to hear and uphold
the appeal, the review will not be necessary. First appellant
contends that the Tribunal erred in its interpretation
application of
CC Rule 15 (1), CC Rule 14 (1)(c)(i) read together with CC Rule 14
(1)(e) and with s 37 (1)(b) of the Promotion
of Access to
Administrative Justice Act 3 of 2000 (‘PAJA’).
[5] Second appellant
applied for an order compelling first respondent to make discovery of
those documents which comprised the leniency
application of second
respondent (‘Scaw’). In making this application, second
appellant relied on narrower grounds
than had been invoked by first
appellant namely, it relied solely upon the principles which underpin
Rule 35 (12) of the Uniform
Rules of the High Court, namely that any
document to which reference is made in an opponent’s pleadings
must, if requested,
be produced for inspection and copying. This
application was also dismissed by the Tribunal, as a result of which,
second appellant
has appealed to this court against the decision of
the Tribunal.
Factual background
[6] On 22 April 2008, the
Commission initiated a complaint in terms of s 49 B (1) of the Act
against various South African producers
of long and flat steel
products. At this stage, it was not alleged that there had been a
possible contravention of s 4 (1)(b) of
the Act by the producers of
long steel products.
[7] Paragraph 3 of the
initiation statement contained a description of the conduct which
first respondent intended to investigate:
“
STATEMENT
OF CONDUCT
The information set
out in paragraph 2.1 above establishes reason to believe that
Trident, MacSteel, Robor, Pro-Roof and Kulungile
might be engaged in
fixing of trading conditions and prices of carbon steel products
(i.e. HRC, HDC and CRC) through inter alia
the following conduct:
Agreeing and/or
arranging to maintain high margins for carbon steel products such as
HRC, HDG and CRC;
The information set
out in paragraph 2.1 above establishes reason to believe that
Trident, MacSteel, Robor, Pro-Roof and Kulungile
might be engaged in
fixing of prices of structural steel product through inter alia the
following conduct:
Agreeing and/or
arranging to increase/maintain high prices for structural steel
products such as reinforcement steel or rebar;
The information set
out in paragraph 2.2 above establishes reason to believe that the
five steel mills, Mittal, Scaw, Highveld,
Cape Gate and CISCO might
be involved in exclusive dealing with the steel merchants; Trident,
MacSteel, Robor and Kulungile in
contravention of section 5(1) of the
Act, through inter alia the following conduct:
Concluding and
implementing an exclusive agreement that has the effect of
substantially preventing or lessening competition in the
steel
traders market, in that it prevents steel merchants from importing
steel and results in consumers paying higher prices for
carbon steel
products.
I therefore initiate a
complaint in terms of section 49(B)(1) of the Act, against Mittal,
Highveld, Scaw, Cape Gate, trident, MacSteel,
Robor, Pro-Roof and
Kulungile.
”
[8] From this initiation
statement it appears that the central allegation concerned
contraventions of s 4 (1) (b) by various steel
merchants, namely
Trident, Macsteel, Robor, Pro-Roof and Kulungile. In paragraph 2.1 of
the initiation statement, first respondent
avers as follows:
“
The
First to Fifth Respondents are steel merchants competing in the
national market for the processing, distributing and trading
in
carbon steel plate and sheet products and heavy , medium and light
structural carbon steel (‘the steel traders market’).
The
steel producers also sell to end consumers directly in competition
with the steel traders. The Commission suspects that the
steel
traders may be involved in fixing of trading conditions and prices of
carbon steel products and structural carbon steel products
in
contravention of section 4(1)(b)(i) of the Act in that
:”
Thus, the Commission’s
investigation at this stage of the process concentrated on the steel
traders, as opposed to the steel
producers.
[9] On 5 June 2008, a
further Form CC 1 was generated by first respondent, the purpose of
which was to include the South African
Iron and Steel Institute
(‘SAISI’) as a respondent in the investigation. On 19
June 2008, the Commission, acting in
terms of s 46 of the Act, raided
the premises of Highveld Steel and Vanadium Corporation Limited,
Cisco and SAISI.
[10] On 27 June 2008,
SCAW ‘submitted a marker application’ in terms of the
Commission’s Corporate Leniency Policy
(‘CLP’) in
relation to alleged agreements in contravention of ss 4 (1)(i) and
(ii) of the Act concluded between it,
Cape Gate, Mittal and Cisco. On
9 July 2008, SCAW filed a formal application for leniency under the
CLP and was granted conditional
leniency on 17 July 2008.
[11] On 1 September 2009
first respondent filed a complaint referral in terms of s 50 (1) of
the Act which cited first and second
appellants together with fourth
respondents and seventh and eight respondents. In the compliant
referral, the Commission alleged
that the producers of long steel
products had entered into various agreements and/or arrangements
involving the fixing of prices
of long steel products as well as a
division of markets in contravention of s 4 (1)(b) (i) and (ii) of
the Act. On 10 September
2009, Cape Gate filed a notice, couched in
the form of the Rule 35 (12) of the Uniform Rules of the High Court,
in terms of which
it called upon the Commission to make the leniency
application, including annexures to the application, available for
inspection
and copying. On 18 September 2009, first appellant’s
attorneys requested the Commission to provide it with the record in
its possession, this application being based in terms of CC Rules 14
and 15.
[12] On 5 October 2009
the Commission replied to first appellant, rejecting the former’s
view that Rule 35 (12) and (14) of
the Uniform Rules of the High
Court ‘assisted your client’. The letter concluded:
“
a.
Kindly indicate when your client’s answering affidavit will be
filed.
b. The Commission
reserves all its rights to amplify what is stated in this letter
should it become necessary to do so
.”
In respect of the request
by second appellant, the Commission’s reply on 5 October 2009
stated, inter alia, that the leniency
application was subject to
litigation privilege. Notwithstanding further correspondence, first
respondent insisted that the documents
sought by the appellants could
not be so provided.
[13] Before proceeding to
analyse the arguments which were raised on appeal, it is necessary to
describe the documents which have
been sought by the two appellants,
as the two requests differ.
[14] First appellant
seeks documents which were listed in AM1 to its Rule 35 (12) and (14)
notice. It persists only in respect of
the following documents:
Item
No. in “AMI”
Referral Affidavit
Paragraph
Documents
referred to
1
8.2
Preliminary
research
2
8.6
to 8.10
The
marker and leniency application filed by Scaw South Africa (Pty)
Ltd (“Scaw”); the leniency agreement concluded
between
the Commission and Scaw.
3
9.1
read with 9.1.1
Correspondence,
including e-mails through which prices were exchanged and/or
discussed.
4
9.1
read with 9.1.2
Correspondence,
including emails through which discount structures were exchanged
and/or discussed.
5
9.1
read with 9.1.3
Correspondence,
including emails through which the agreements, arrangements and
understandings were reached.
10
and 11
10.6
Mittal’s
export customer lists.
16
13
Correspondence
through which the steel mills agreed the percentages by which the
prices would be increased.
17
16
Correspondence
and other evidence of discussions and meetings on which the
Commission intends to rely in support of its allegations
of
alleged agreements or practices in contravention of the Act.
18
19.2
Correspondence
amongst the steel mills in 2000 which confirms the collusive
conduct amongst the steel mills.
23
21.7
A
document setting out the revised pricing sent through on 11
December 2002
27
24.1
Communications
by emails “and so forth” through which the steel mills
discussed prices and reached understandings,
arrangements and/or
agreements.
28
24.3
Price
lists exchanged amongst the steels mills. Notifications sent by
AMSA to the other steel mills.
29
24.3
“
Price
lists or price increases” sent by Venter
42
36.1
to 36.3
An
exchange of emails amongst the steel mills referred to in 35.3
from which an agreement, arrangement or understanding is
evident.
In its view, each of
these documents was referred to by the Commission in the referral
affidavit.
[15] The Commission
concedes that it referred to item 2, that is, the marker application
and the leniency application, but does
not admit that it referred to
the other documents as described. First appellant contends that, on a
review of each of the paragraphs
in the list, the Commission referred
to specific documents in its possession and these are documents that
the Commission can so
identify.
[16] Second appellant’s
case is expressed in simple terms. It refers to its notice of motion,
which it contends, contained
but a single prayer, that is, it asked
the Tribunal to grant an order directing first respondent to make
‘the third respondent’s
(Scaw) corporate leniency
application available for inspection and copying.’
[17] Accordingly, it is
second appellant’s case that what it requires is the documents
submitted to first respondent, in which
leniency was sought by Scaw;
that is all documents including letters, faxes, emails and other
forms of correspondence, notes, tape
recordings electronic data as
well as minutes of meetings that were annexed to the leniency
application and /or submitted by Scaw
in support of its request for
leniency.
The Appeal
[18] The sole basis upon
which the Tribunal refused access to the Commission’s record
was in terms of the provisions s 37(1)
(b) of PAIA as they were
adopted by CC Rule 14 (1)(e). Accordingly, the Tribunal found the
entire record to be restricted information.
[19] The relevant
portions of CC Rule 14 (1), for the purpose of this dispute, provide:
“
For
the purpose of this part, the following five classes of information
are restricted –
Information –
that has been
determined to be confidential information…
that, in terms of s
45(3), must be treated as confidential information;
(b) …
(c) Information that
has been received by the Commission in a particular matter, other
than that referred to in paragraphs (a) and
(b), as follows:
(i) the Description of
Conduct attached to a complaint, and any other information received
by the Commission during its investigation
of the complaint, is
restricted information
until Competition Commission issues a
referral or notice of non-referral
…
…
an application and
any information received by the Commission during its consideration
of the application, or revocation of an
exemption granted to the
applicant, is restricted information only to the extent that is
restricted in terms of paragraph (a).
(d) …
(e) Any other document
to which a public body would be required or entitled to restrict
access in terms of PAIA.
[20] Section 37 (1)(b) of
PAIA provides:
‘
Subject
to subsection (2), the information officer of a public body –
(b) may refuse a
request for access to a record of the body if the record consists of
information that was supplied in confidence
by a third party -
(i) the disclosure of
which could reasonably be expected to prejudice the future supply of
similar information, or information from
the same source; and
(ii) if it is in the
public interest that similar information or information from the same
source should continue to be supplied.
”
[21] Following upon these
provisions, the Tribunal held that the documents sought by both
appellants ‘remain susceptible to
being claimed as restricted
information in terms of Rule 14(1)(e) of the Commission’s
Rules. The Commission exercised a discretion
to withhold these
documents in terms of the discretion afforded to it by s 37 (1)(b) of
PAIA and has done so on reasonable grounds,
thus making them
restricted information. In the circumstances, AMSA’s
application for the documents to be disclosed in terms
of Commission
Rule 50 (1) is dismissed.”
[22] Mr van der Nest, who
appeared together with Mr Turner on behalf of first appellants,
submitted that the problem with this form
of reasoning was that the
use of the word ‘other’ in CC Rule 14 (1) (e)
distinguished documents contemplated under
this Rule from the
categories of information which are set out in sub-paragraph (a) –
(d). Where a document falls within
one of these categories, Rule 14
(1) (e) does not apply. Section 14 (1) (c) (ii) contemplates an
application, such as an application
for leniency. It confirms that
the restriction on such an application is limited to a claim of
confidentiality. In Mr van der Nests’
view, it is not necessary
or appropriate for a second layer of restriction to be applied in
terms of Rule 14 (1) (e). Furthermore,
when the request for the
record was made, second respondent did not rely on s 37(1)(b) of
PAIA. No allegation was made on the papers
that any steps were so
taken by the information officer of the Commission, who is the
Competition Commissioner. For these reasons,
first appellant contends
that the jurisdictional facts necessary to rely on the section were
missing on the papers and, accordingly,
the Tribunal should not have
enforced this provision.
[23] In order for this
section to be invoked, the Commission was required to establish, on
the probabilities that, if the information
was so disclosed,
prejudice could reasonably be expected to occur. In
Transnet Ltd
and another v SA Metal Machinery CA
(Pty) Ltd 2006 (6) SA (285)
(SCA) at paras 38 – 41, Howie P examined, albeit within the
context of s 36 of PAIA, the meaning
of the words ‘could
reasonably be expected’. He concluded that “
what can
be expected is accordingly the contemplation of something that will,
not might, happen. If we say we are expecting someone
this evening we
mean that we think that person will be coming, not merely might be
.”
Accordingly, to invoke s 37(1) (b) PAIA, it followed that first
respondent was required to establish, on a balance of probabilities,
that, if the requested information was disclosed, prejudice to a
future supply of information would probably occur.
[24] Mr Maenetje, who
appeared with Mr Jele on behalf of the Commission, submitted that
there were a number of considerations which
justified why an
applicant for immunity under the CLP ought not to be exposed to the
risk of premature disclosure of its full and
frank communications
with the Commission during the CLP process. In his view, the very
purpose of CLP is to provide an incentive
for a member of a cartel to
come forward and expose the existence of the cartel, particularly in
situations where the Commission
could not have been aware of the
existence of the cartel, or had insufficient information for an
investigation to have been initiated.
The process is thus undertaken
on a confidential basis. Disclosure of any information submitted by
an applicant, prior to immunity
being granted, but during the process
can be made with the consent of the applicant, provided that the
consent will not unreasonably
be withheld by the applicant. Thus
premature disclosure would act as a deterrent to a party to come
forward and participate in
the CLP process.
[25] In support of this
submission Mr Maenetje referred to the position in the European Union
as outlined by Richard Whish
Competition Law
(6ed) at 278:
“
The
Commission acknowledges in the introduction to the Leniency Notice
that the making of corporate statements ought not to expose
undertakings to risks in civil litigation not experienced by
undertakings that do not cooperate with it. …
The Leniency Notice
discussed how corporate statements may be made, and makes specific
provision for such statements to be oral
rather than written. The
reason for this is the fear that, if a corporate were to make a
written corporate statement, this might
be discoverable in the event
of a treble damages action in the US: this might deter the
undertaking from blowing the whistle at
all, in which case the cartel
might go undetected. As it is not a document of the whistle-blower it
cannot be discovered from it;
and any attempt by a US court to demand
that the Commission should hand its own document over would probably
fail on public interest
grounds.
”
[26] An answer to these
justifications is that a leniency applicant cannot expect that any of
the information or evidence or documents
submitted to the Commission
will continue to remain secret and protected from disclosure to
respondents in a cartel complaint.
Indeed, Scaw confirmed in its
answering affidavit to these proceedings, that it was told and
understood that it would be required
to disclose all of this
material:
“
Leniency
is premised on compliance by the applicant with a number of
obligations including ‘the applicant must honestly provide
the
Commission with complete and truthful disclosure of all evidence,
information and documents in its possession or under its
control
relating to any cartel activity’ and ‘the applicant must
offer full and expeditious co-operation to the Commission
concerning
the reported cartel activity. Such co-operation should be
continuously offered until the Commission’s investigations
are
finalised and the subsequent proceedings in the Tribunal or Appeal
Court are completed
”.
The question which thus
stands to be determined in the present dispute is whether, if the
information requested is disclosed, it
would create the reasonable
expectation envisaged in s 37 of PAIA. It is thus necessary to
interrogate appellant’s requests.
What first appellant
requires to be disclosed?
[27] In first appellant’s
founding affidavit in support of its application to inspect documents
in the possession of the Commission,
Mr Benedict Chite, the internal
legal counsel of first appellant, set out first appellant’s
case thus:
“
AMSA
wishes to deal properly and pertinently with the allegations made
against it in the referral affidavit. At the moment, without
proper
particularity of any alleged prohibited practice after April or June
2005, AMSA is not in a position to do so. One way in
which
particularity may be obtained is to obtain the documents referred to
by the Commission and relied upon by it in the referral
affidavit
.”
[28] Somewhat later in
his affidavit, Mr Chite claims the following:
“
The
documents specified in the schedule attached marked ‘AM1’,
are documents referred to in the founding affidavit and
annexures
thereto, alternatively documents that must have been available to the
Commission when the referral affidavit was prepared
.”
This passage of the
affidavit appears to extend the application for disclosure beyond the
referral affidavit and the annexures thereto.
In other words, if
first appellant wishes to ‘deal properly and pertinently with
the allegations made against it in the referral
affidavit, first
appellant contends that it stands to reason that it may well require
not only the referral affidavit but all the
documents which have also
been referred to in the Commission’s referral affidavit and
those that must have been so available.
In brief, it contends that
the very purpose of this application is to enable first appellant to
formulate a proper response to
the allegations made in the referral
affidavit. To the extent that it requires the referral affidavit and
the annexures thereto,
documents, which were relied upon by the
Commission in its referral as is evident from the referral affidavit,
first appellant
is entitled thereto, in the light that no case has
been made out beyond speculation which would show, on the
probabilities, as
to why disclosure falls within s 37 of PAIA.
Second appellant’s
case
[29] Second appellant
requires the document submitted to the Commission in which leniency
was sought by Scaw and all documents that
were annexed to that
leniency application and/or submitted by Scaw in support of its
request for leniency. In other words, what
second appellant required
were the constituent elements of a single corporate leniency
application that Scaw had submitted to the
Commission. Its case was
that the corporate leniency application of Scaw was not a single
document but a set of documents, which
made up the total leniency
application
[30] Second respondent
relied for its request on High Court Rule 35 (12) which provides as
follows:
“
Any
party to any proceeding may at any time before the hearing thereof
deliver a notice as near as may be in accordance with Form
15 in the
First Schedule to any other party
in
whose pleadings or affidavits reference is made to any document
or
tape recording to produce such document or tape recording for his
inspection and to permit him to make a copy or transcription
thereof.
Any party failing to comply with such notice shall not, save with the
leave of the court, use such document or tape recording
in such
proceeding provided that any other party may use such document or
tape recording
.”
(Emphasis added)
[31] The purpose of this
rule has been confirmed in a number of judgments. See, for example,
Erasmus v Slomowitz
(2)
1938 TPD 243
at 248, where it was held
that a party is entitled to the production of documents referred to
in the pleadings or affidavits ‘with
the specific purpose of
considering its position. See also
Uniliver plc v Pologric (Pty)
Ltd
2001 (2) SA 392
(C) at 336.
[32] In
Allens Meshco
and others v the Competition Commission
(Case No: 63/CR/Sep09) at
para 8 the Tribunal set out two principles in relation to the
provision of documents in the case such
as the present one. In
particular, it held that ‘where a document is relied on to
support a relevant allegation in the pleadings,
it should be
provided, usually by way of attachment as an annexure to the pleading
although for practical purposes this may not
always be possible.
Typically if one quotes from a document it should be provided.
However a document may also be provided without
being expressly
quoted, and in these circumstances it should be provided as well’.
(at para 8)
[33] The second principle
which the Tribunal set out was ‘the inference of the existence
of a document is not sufficient to
create an obligation to disclose
such a document.’ Later in its determination the Tribunal
appeared to have suggested a third
principle, namely, the document
issued should/must be required by the applicant in order to plead to
the allegations.
[34] Mr Campbell, who
appeared together with Mr Gotz on behalf of the second appellant,
cited the case of
Erasmus
supra
at 244 to the effect
that Rule 35(12) did not require that a document be quoted or
summarised in the pleadings. All that was required
was a reference by
an opponent in her pleading or affidavit to the document whereof such
production is required, ‘but the
terms of the Rule do not
require a detailed or descriptive reference to such documents’.
Erasmus v Slomowitz
at 244.
[35] Second appellant
contends that the Commission’s referral affidavit clearly
referred to Scaw’s corporate leniency
application and that
accordingly, in terms of Rule 35 (12) it was entitled to the
documents which formed part of that application.
The relevant portion
of this affidavit reads thus:
“
8.7
On 21 July 2008 Scaw applied for leniency in terms of the
Commission’s CLP for price fixing and market allocation in
relation to rebar, wire rod, sections (including rounds, squares,
angles and profiles).
8.8 Scaw confirmed in
the application for leniency that there has been a long standing
culture of cooperation amongst the steel
mills regarding the prices
to be charged, and discounts to be offered, for their steel products
such as rebar, wire rod, sections
(including rounds and squares,
angles and profiles.) The cooperation extended to arrangements on
market division.
8.9 In addition to
information submitted by Scaw in its leniency application, the
Commission conducted its own investigations which
largely confirmed
the allegations made by Scaw and provided further evidence of
anticompetitive practices in contravention of section
4(1)(b) of the
Act – involving both price fixing and market division.
8.10 It is as a
consequence of information contained in the Scaw application for
leniency and that obtained from the Commission’s
investigations
that this referral is made.”
This portion of the
referral affidavit clearly refers not only to the formal leniency
application form but to documentation which
formed part of that
application. Accordingly, the Tribunal ought to have accepted that,
once a reference was made in the referral
affidavit to these
documents, nothing more was required to be shown by an applicant in
order to have that document made available
for the purposes of a
response to the allegations set out in the referral affidavit.
[36] In my view, second
appellant has made out a case that it requires the documents to
assess its position and understand the case
made out against it
before delivering its answering affidavit within the framework of
Rule 35 (12) and the interpretation thereof
as set out in the
decisions cited in this judgment.
[37] That, however, is
not the end of the matter. The Commission also raised the question of
litigation privilege and Scaw has also
raised the question of
confidentiality in terms of s 44 and 45 of the Act. I therefore turn
to deal first with the question of
litigation privilege.
Litigation privilege
[38] The Commission
contended that the documents required by appellants fell within the
scope of litigation privilege. In particular,
it argued that it had
met the requirements that litigation privilege should apply to these
documents because the documents were
generated in contemplation of
litigation. The leniency application documents were compiled for the
dominant purpose of litigation
before the Tribunal in contested
complaint proceedings and to place it before its legal advisors for
advice in respect of such
litigation.
[39] The Commission
contended further that litigation arises when litigation is ‘in
prospect or pending’. The CLP was
established for the purpose
of gathering information from cartel participants in order to
prosecute the remaining members of the
cartel in exchange for
immunity from prosecution for the applicant. Accordingly, this whole
purpose of the system was that of litigation
before the Tribunal.
Regardless of whether the Commission has already commenced an
investigation prior to an application for leniency,
information from
a CLP is always furnished in a context when litigation is in prospect
or anticipated. Whatever the motive of the
leniency applicant, its
intention was to provide the Commission with evidence which could be
used to litigate against the remaining
cartel members.
[40] By contrast,
appellants contended that while any communications between the
Commission and its legal advisors in relation to
the complaint
referral would be privileged, the present dispute did not involve
these communications. It involved rather a document
that was brought
into existence by or on behalf of Scaw, an independent third party
and provided to the Commission for the purpose
of obtaining leniency.
[41] In
United Tobaco
Companies (South) Ltd v International Tobacco Company of South Africa
Limited
1953 (1) SA 66
(T) at 68 E, Clayden J citing Ross
The
Law of Discovery
at 221 held that where communications passed not
between a party and his or her lawyers but between a party and a
third party,
they were not privileged unless made:
(1) For the purpose of
litigation existing or contemplated; and
(2) In answer to
enquiries made by the party as the agent for or at the request or
suggestion of his legal advisor, and though there
have been no
requests for the purpose of being laid before the legal advisor with
the view to obtaining his/her advice or to enable
him or her to
conduct the action; that is to prepare the brief.
[42] Zeffertt and Paizes
The South African Law of Evidence
(2
nd
ed) at 682
contend on the basis of this judgment that there is a clear
difference between two forms of privilege; that is privilege
between
a party and a legal advisor and privilege in respect of
communications from independent third parties, in which case the
scope of the privileged is narrower. Although, as Mr Campbell
correctly observed, these passages in Zeffertt and Paizes are not
entirely clear, there is clarity to the extent that the information
for which privilege is claimed must have been made in contemplation
of litigation.
[43] In this case, the
leniency application was prepared by Scaw to secure leniency in terms
of the CLP. It was, in other words,
an application contemplated in
terms of CC Rule 14 (1)(c) (ii). Accordingly, Scaw acted as an
independent third party seeking leniency
under the policy. The
leniency application which had been prepared had not been submitted
to a legal advisor in order to enable
the latter to advise Scaw. It
was made expressly and exclusively for the purposes of applying for
leniency, knowing that at some
point the Commission could use the
material for purposes of litigation.
[44] The different
requirements for litigation privilege concerning documents generated
by a third party include:
“
First,
that the information had to be obtained for the purpose of submission
to a legal advisor for legal advice and, second, that
litigation had
to be pending or contemplated. These requirements, taken from the
English law, apply without difficulty to the standard
situations
relating to communications from non-professional agents and to
independent third parties (that is to so–called
witness
statements) made for the purpose of submission to a legal adviser
.”
Zeffert and Paizes at 674
Murphy
On Evidence
(12 ed) at 498 brings greater clarity to the meaning of ‘for
the purposes of litigation’ within the context of third
party
documents. He writes as follows:
“
At
common law, communications passing between lawyer and client and
materials prepared for the purpose of litigation are privileged.
The
term ‘legal professional privilege’, which is not
entirely satisfactory, is used to describe two distinct rules.
The
first is the rule that communications between lawyer and client, made
in the course of seeking and giving advice within the
normal scope of
legal practice, are privileged in all cases, at the instance of the
client. The second is the rule that communications
passing between a
client or his legal adviser and third parties in contemplation of
actual litigation are privileged, provided
that use for the purpose
of litigation is at least the dominant purpose of the communications;
in this case too, the privileged
is that of the client. In both
cases, it is immaterial whether the communication is with advisers or
third parties in England or
elsewhere, or whether the contemplated
litigation may take place in England or elsewhere.”
Regarding communications
with third parties, Murphy submits at 506:
“
Communications
made between a party (or his legal adviser on his behalf) and a third
party are privileged at the instance of the
party if, but only if,
they are made for the specific purpose of pending or contemplated
litigation.
The requirement that
the communication be made for the purpose of pending or contemplated
litigation is one which limits very considerably
the material which
is so privilege, and represents an important distinction between this
and the case of communications between
client and legal adviser
.”
[45] When the CLP was
completed on 9 July 2008, there was no litigation which was pending
or anticipated. Appellants therefore contend
that litigation only
commenced in the Tribunal when the complaint referral was filed. The
fact that the Commission may have requested
that Scaw file an
application for leniency by 9 July 2008 did not mean that the
Commission had requested the application for the
purposes of
litigation. In its answering affidavit, the Commission states:
“
When
it made the initiation the Commission as a corporate body and as an
investigator knew at the outset that litigation before
the Tribunal
would result in investigation
.”
However, this averment
does not accord with the background to the documents prepared by Scaw
and the express purpose of Scaw when
it completed these documents.
When the Commission issued its initiation statement, there was, as
has been noted above, no allegation
of a contravention of s 4(1) (b)
of the Act against producers of long steel products. Paragraph 3 of
this statement shows that
the Commission was not in fact
investigating allegations of a contravention of section 4(1)(b) of
the Act against Mittal, Scaw,
Cape Gate and Cisco. The initiation
statement only contained allegations of possible contraventions of
section 4(1) (b) by the
steel merchants. On 22 April 2008 with the
initiation of the complaint by the Commission, there could not be
said to be a probability
or likelihood that Scaw would be involved in
litigation. By 27 June 2008, when Scaw submitted its marker
application and after
the aCC1 form had been issued for SAISA, the
possibility of litigation may have arisen. However, only after the
leniency application
was submitted, could it be said that litigation
was probable, in that the Commission was now appraised of the
necessary information
to initiate the relevant litigation. In any
event, the leniency application was not submitted to the Commission
for the purpose
of the latter commencing litigation against Scaw.
[46] For these reasons,
appellant have raised persuasive arguments that the concept of
litigation privilege, as developed in South
African law, may not
extend to documents which were provided by Scaw as part of its
interaction with the Commission to secure leniency
in terms of CLP,
and only after which a probability of the complaint referral against
appellant arose. However, for reasons that
follow, the resolution of
this specific issue is strictly unnecessary in order to adjudicate
this particular case.
The claim of
confidentiality
[47] Mr Butler, who
appeared together with Ms Hofmeyr, on behalf of Scaw contended that
documents submitted by Scaw had been made
subject to claims of
confidentiality. Accordingly, the Commission was bound to treat the
information as confidential in terms of
s 44 (2) of the Act and
appellants ought to have applied to the Tribunal in terms of s 45 (1)
of the Act, read with Tribunal Rule
13, for access to these
documents. No such application had been made, in particular by first
appellant. Therefore the Commission
was bound to treat these
documents as confidential and to refuse appellant’s access
thereto.
[48] In short, Scaw’s
submission was that first appellant’s application in terms of
Rule 14 and 15 was premature and
it ought to have sought a ruling by
the Tribunal in respect of the confidentiality of these documents.
Furthermore, Scaw contended
in respect of second appellant’s
case that it did not follow that Rule 35 of the Rules of the High
Court trumped ss 44 and
45 of the Act. It therefore follows that if
Scaw’s argument is correct, appellants cannot obtain access to
the requested
documents, until they have successfully applied to the
Tribunal in terms of s 45 (1) of the Act.
[49] The careful crafting
of s 44 set out a procedure which required the following steps to be
followed.
1. A party submits
confidential information to the Commission must identify the
information which it claims to be confidential.
2. The Commission is
bound by such a claim.
3. A person who seeks
access to information, that is subject to a claim that is
confidential, may apply to the Tribunal in prescribed
manner and
form.
4. The Tribunal may
determine whether the information is confidential, and if it is make
an appropriate order concerning to access
of information.
5. Pending the resolution
of any dispute, the Commission must continue to treat the information
as confidential.
[50] By contrast, Rule 35
required a party, without more, to make documents available to its
opponent save for certain restricted
exceptions. Once documents are
discovered they are used in court and therefore can form part of a
public record. Accordingly, there
were clear inconsistencies between
the regime set out ss 44 and 45 of the Act and that provided for in
Rule 35. In the light of
such a conflict, a Rule could not supplant
the express provision of the Act which is set out in procedure for
accessing documents
which had been claimed as confidential.
[51] First appellant
complained that Scaw had not attached a copy of the CC 7 form which
it claimed confidentiality of the documents
submitted to the
Commissioner on 9 July 2008. This was finally made available to
appellant’s representatives at the hearing.
It does appear,
however, that, whatever the nature and merits of this complaint, a
form was submitted with the leniency application
on 9 July 2008 in
which confidentiality was claimed.
[52] Correctly Mr van der
Nest acknowledged in a further note, which was produced at the
request of this Court, that, when the Tribunal
dismissed the
application which resulted in this appeal, it denied access to the
documents without determining the confidentiality
of any documents.
The basis of its refusal was that the documents were subjected to
legal privilege and restricted from disclosure
by reason of CC Rule
14 (1)(e) read together with s 37 (1)(d) of PAIA. In other words, the
Tribunal did not decide on the issue
of confidentiality pursuant to s
45 (1) of the Act. Thus this issue was not on appeal before this
court.
[53] It must be accepted
that in the notice of motion before the Tribunal there was a prayer
that, if the Tribunal determined any
information to be confidential,
that information should be provided subject to conditions and
restrictions regarding access. But
the issue of confidentiality,
certainly in terms of s 45, was not dealt with by the Tribunal. Aware
of these difficulties, first
appellant submits that a sensible and
practical approach would be to accept that the documents claimed by
Scaw remain confidential
in terms s 44 (2) but to permit access along
restricted lines. See in this connection the summary of the law
relating to access
as capital in Sutherland et al
Competition Law
of South Africa
at para 11.7.3.
[54] The difficulty with
this proposal is that it overlooks the specific provision of s 45 (1)
and the prescribed procedure, namely
that a person who seeks access
to confidential information must apply to the Tribunal. It is at the
Tribunal that a range of arguments
relating to confidentiality can be
best considered and, if necessary, the Tribunal is empowered to
provide such information, subject
to conditions that it deems meet.
It does not follow that this court has original power in, terms of
the provisions of the Act
in general, and s 45 in particular, and
thereby ‘short circuit’ the process as set out in the
Act.
Conclusion
[55] To summarise, it is
important to emphasise the narrow scope of this case. It deals
specifically with whether a party is entitled
to documents which form
part of a leniency application and which are clearly referred to by
the Commission in its complaint. This
court has found that there is
no merit in the finding of the Tribunal that documents that were
provided by Scaw pursuant to the
CLP are restricted from disclosure
by reason of CC Rule 14 (1)(e), read together with s 37 (1)(b) PAIA.
In addition, the Tribunal
failed to appreciate the principles
underpinning High Court Rule 35, in particular Rule 35 (12) and its
application, namely that
once the Commission had referred to the
leniency application of Scaw, which by implication would include all
the documents that
formed part of that leniency application, second
appellant was entitled in terms of Rule 35 (12) of the High Court
Rules to insist
that such documents, to which reference had been made
must, if requested, be produced for inspection and copying. Further,
unlike
Rule 35 (1) this entitlement did not arise only after the
close of pleadings in a trial action or after both answering and
replying
affidavits had been filed in motion proceedings, but arose
as soon as reference was made to the document in the pleading and
affidavit
in issue. See
Protea Insurance Co Ltd and another v
Waverley Agencies CC and others
1994 (3) SA 247
(C) at 249. The
Court also finds that, although appellants’ arguments
concerning legal privilege appear to have merit, it
is unnecessary to
make a definitive finding thereon. Irrespective of the merit of these
claims, they would be trumped by a successful
application brought by
applicants in terms of s 45(1) of the Act.
[56] Thus, to the extent
that Scaw claimed confidentiality in respect of documents in its
leniency application to the Commission,
the position is governed by
ss 44 and 45 of the Act. It follows that, until such time as the
appellants make a proper application
in terms of s 45 for access to
these documents, the claim of confidentiality must be respected.
[57] Accordingly, the
only option which is available to this court is to remit the matter
to the Tribunal to decide the issues relating
to the confidentiality
claim in terms of which the Tribunal will be able to take account of
all relevant facts in so assessing
an application in terms of s 45
(1). To the extent that this issue was only raised by Scaw, the
latter should be awarded its costs,
it being accepted that it raised
the issue timeously and properly.
The order
The order of the
Competition Tribunal of 3 September 2010 CT Case No: 61/CR/Sep06 is
set aside and replaced with the following
order:
1.1 The information
claimed to be confidential by Scaw as set out in Form CC 7 dated 9
July 2008 is remitted to the Competition
Tribunal for a determination
as to whether or not the information is confidential information as
defined and, further, if the Tribunal
so determines that the
information is confidential, to consider making any appropriate order
concerning access to that confidential
information.
First and second
appellant jointly and severally, the one paying the other to be
absolved, are ordered to pay the costs of Scaw,
including the costs
of two counsel.
________________
DAVIS JP
MAILULA & DAMBUZA
JJA concurred