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[2009] ZAGPPHC 76
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Congress of South African Trade Unions v Telkom SA Ltd and Others (26557/09) [2009] ZAGPPHC 76 (17 May 2009)
IN THE HIGH COURT OF SOUTH AFRICA
(NORTH GAUTENG HIGH COURT PRETORIA)
CASE NO: 26557/09
DATE: 2009-05-17
DATE REVISED: 2009-05-21
In the matter between
CONGRESS OF SOUTH AFRICAN TRADE
UNIONS
...........................................
Plaintiff
and
TELKOM S.A. LTD AND
OTHERS
..........................................................................
Defendant
JUDGMENT
MURPHY, J: This, as I have said during the course of today, is
a matter of considerable national importance.
As I indicated when I adjourned the proceedings
earlier today, I am not in a position to hand down a fully reasoned
judgment. The
papers, which I received only this morning, extend to
some 800 pages or more and I have in addition had the benefit of the
submissions
of no less than seven senior counsel.
I have nonetheless been able to reach a decision.
As I have also said, the public interest in this
matter may require me to give a fully reasoned judgment in the full
course of
time. Accordingly, in view of the difficulties, I propose
only to set out brief reasons now, to make an order and to reserve
the
right to hand down fuller reasons at a later stage, should that
be required.
The application brought by COSATU and ICASA is for
an urgent interim interdict seeking to restrain the second, fourth,
fifth,
sixth and seventh respondents, to whom I shall refer as "the
commercial respondents", from taking any further steps in
the
implementation of the Vodacom share transaction. These respondents
are the commercial entities involved, namely Telkom, Vodafone
and
Vodacom. The third respondent is the Minister of Communications. They
all oppose the application.
The seventh respondent, Vodacom (Pty) Limited, is
the holder of a telecommunications licence. The shares in it are
held by Telkom,
the second respondent, and Vodafone PLC, the fourth
respondent, as to 50% each.
Through the Vodacom share transaction it is
intended that Telkom will sell 15% of the issued share capital of
Vodacom Group (Pty)
Limited, the sixth respondent, to the fourth
respondent, that is, Vodafone Group PLC. Vodacom will then be listed
on the Johannesburg
Stock Exchange and the remaining 35% of the
shares held by Telkom in Vodacom will be transferred by way of a
dividend in specie
to the Telkom shareholders.
On 5 May 2009 the COSATU filed an application to
review a decision taken on 16 April 2009 by ICASA, who is the first
respondent
in that application. In terms of that decision ICASA
accepted a notification it had received from Vodacom and elected not
to require
Vodacom to seek ICASA's approval in respect of the
transaction. The respondents are ad idem in their view that no
approval was
required for the transaction and accordingly proceeded
with the transaction on that basis. The listing is set to go ahead on
the
Johannesburg Stock Exchange tomorrow morning.
COSATU maintains that after the transaction
Vodafone PLC, through its subsidiaries, will hold 65% of the voting
shares in the Vodacom
Group which will then hold 93,7% of the shares
in the licensee. COSATU contends that this is a contravention of
paragraph 19 of
the relevant licence conditions which were preserved
in terms of Decision 15 in a so-called section 93 notice issued by
ICASA on
16 January 2009. Paragraph 19.1 of the licence requires the
prior written approval of ICASA for any transfer of shares which will
result in the direct or indirect ownership of 25% of the issued
voting share capital of the licensee changing hands.
On 5 February 2009, Vodacom wrote to ICASA
notifying it that it had concluded certain agreements, effectively
those making up what
I have referred to as the Vodacom share
transaction, It informed Vodacom of the contents of the transaction
and stated that it
was merely notifying it of the transaction.
ICASA replied to the letter on the 15th of April.
In its letter it referred to several correspondences and engagements
between
the parties and stated that it was of the view, in the light
of the documentation place before it, that Vodacom did not need the
approval of the authority to effect the transaction. It also informed
Vodacom that it would inform the public of the nature of
the
transaction and the reasons for not proceeding with an approval
process.
This letter, as I have said, was written after
various engagements which took place between the commercial
respondents and ICASA
after ICASA had taken legal advice. In keeping
with the undertaking expressed in the letter, ICASA then went ahead
and issued
a public media statement on 16 April 2009 announcing that
it agreed with Vodacom that no approval was required in respect of
the
transaction. This announcement prompted the main application
which was filed by COSATU three weeks later on 5 May 2009.
After considering COSATU's application, ICASA then
changed its mind on 14 May and on Friday last, 15 May, it issued a
notice described
as "an urgent public notice to all
stakeholders" in which it declared that it was no longer of the
opinion that approval
was not required. Making reference to the court
proceedings, that is the main application, it stated that it
believed that a transaction
of this nature should take place in an
environment conducive to regulatory certainty and that it now
preferred to proceed in the
interests of transparency with an
approval process that would include public participation in the form
of public hearings which
would take place some time in June this
year.
As a consequence of this public announcement,
COSATU brought the present urgent application. It did so on the basis
that its hope
of participation had now concretised into a right, in
that it was now clear that ICASA believed that there should be a
public participation
process and on behalf of its members and
stakeholders COSATU had the right to make a contribution in that
process. Consequently,
it considered that urgent relief was required
preventing and restraining the respondents from proceeding with the
listing process
on the Johannesburg Stock Exchange tomorrow morning.
There is some difference of opinion on the papers
about the extent to which the transaction has proceeded. The
respondents allege,
and their version must be accepted in accordance
with the principles governing disputes of fact in motion proceedings,
that the
shares have already been transferred and paid for, that the
in species dividends have already been declared in favour of the
Telkom
shareholders, vesting in them vested rights, and the
Johannesburg Stock Exchange listing, as I have already said, is
scheduled
for tomorrow morning.
While ICASA is the first respondent in the main
application, it has joined COSATU as the second applicant in the
urgent application.
Its position is that the question of whether or
not approval is required falls to be decided by a court of law and
that there
are conflicting opinions on the question. It does not,
however, unequivocally state that approval is required. It is of the
view
that if a court considers approval necessary, the process would
benefit from a process of public participation.
The respondents in the urgent application stick to their guns that
no approval is required.
The respondents have addressed to me the
preliminary argument that the matter is not urgent, because of self
created urgency on
the part of COSATU who should have sought urgent
relief shortly after the media announcement on 16 April or in the
form of ancillary
relief when it filed its main application on 5 May
2009. I tend to agree, but that does not exclude the second
applicant, ICASA,
for whom the matter became urgent only once it
changed its mind on 14 May 2009. That is on Thursday last. The
predictable answer
to that finding is that ICASA was
functus
officio
and should be non suited on that ground.
There is also a challenge to the
locus standi
of COSATU.
I am prepared to assume for present purposes, and
if need be I shall canvass the matters more fully at a later stage,
that both
applicants do indeed have
locus standi
and the
matter is in fact urgent in that - or at least I am prepared to
assume this for the purposes of argument - ICASA was not
functus
officio
; and it is therefore in the interests of justice to
consider whether the requirements of an interdict have been met.
Mr Tuchten and Mr Freund, who appeared for COSATU, argued
strenuously on two bases that a clear right exists in the form of the
requirement for approval in the licence conditions and the
regulations, and COSATU's right to seek to influence that approval in
the contemplated public hearings.
Mr Beckerling, on behalf of Vodacom, disputed whether non-compliance
with the regulatory requirements necessarily resulted in
void
transfers, and also whether the right to participate in possible
future public hearings, for the purpose of considering and
determining the grant of approval, was sufficiently clear to sustain
or justify the grant of a final interdict. Added to that,
of course,
is the contested view about whether or not approval is required in
the first place, as well as the submissions made
by Mr Celliers, on
behalf of the Minister, that the relevant licence conditions may in
fact not have been renewed when they were
re-enacted resulting in the
approval requirement of paragraph 19 not being reinstated in the
final version of the licence.
I agree that it is at least debatable whether or
not a transfer contrary to the provisions of a licence condition,
albeit tainted
perhaps by illegality, will necessarily have the
consequence of voidness. It is also doubtful whether approval under
the regulations
is required, because the transfer to Vodafone might
not in fact have resulted in the transfer of a control interest in
the licensee
from Telkom to Vodafone.
In the result, therefore, I am not persuaded that the applicants
have established a clear right entitling them to a final interdict.
I do though accept that the licence conditions and
the ownership and control regulations may be such that the applicants
at least
have a
prima facie
right, albeit open to some doubt.
Regulation 8 of GNR 105 of 16 January 2003 provides for voidness in
certain circumstances which
may or may not be applicable. That being
so the inquiry before me then resolves into a consideration of the
prospects of success
and the balance of convenience.
The prospects of success of the applicants in the
main application in view of what I have just said are by no means
overwhelming.
1 need therefore to weigh the prejudice facing the
applicants if the interdict is refused against the prejudice facing
the respondents
if it is granted.
The respondents have proceeded on the premise that
Government fully supports the transaction and that regulatory
approval was not
required. They nevertheless have been fully
transparent in their dealings, have engaged appropriately with the
regulator, and were
led to believe that no approval was required.
More importantly, the following considerations should be kept in
mind.
The respondents have incurred expenditure of more
than R10 million in establishing the infrastructure for the listing
and anticipate
that they will lose more than R6 million per day for
each day the listing is delayed.
The listing is one of the last phases in a series of commercial
transactions which has already run its course and which the
respondents
maintain cannot now be unscrambled without severely
injuring the financial standing and reputations of the respondents
and the
Government. They have proceeded in good faith on the basis
of a clear representation by ICASA, the regulator, that they could do
as they are doing.
Neither applicant has offered, nor for that matter is able to offer,
any indemnity against damages that the respondents may suffer
if the
allegation of illegality is found to be wrong or inconsequential.
Telkom's shareholders, as I have mentioned, have
already acquired vested rights to the dividends in species.
The anticipation of the listing has also resulted
in a significant upsurge in the trading of Telkom shares on the
Johannesburg
Stock Exchange in recent days to nine times the average
trade. An interdict will therefore have adverse implications for
share
values and presumably there is the risk of contagion running
through to other areas in the market.
Since the price of the shares, more than R20 billion, was financed
by the import of foreign currency, the imposition of any restraint
at
this late stage most probably will have an unwelcome impact on the
exchange rate as well.
Moreover, Government is legitimately concerned, as
are the other respondents, about the impact of an order on the
regulatory environment
and the country's reputation as an investment
destination.
The inconvenience facing COSATU is that it may be
denied the right to participate in a pre-approval hearing and the
opportunity
to influence the outcome of any change of ownership. It
also warns of the possible commercial dislocation should it be found
at
a later stage that the transactions and the transfers are in fact
unlawful.
These are indeed real concerns. But after anxious
deliberation I am persuaded that regulatory mechanisms are in place
that can
be effectively deployed in the future to ensure commercial
coherence and the resolution of any regulatory illegality in a manner
less prejudicial than interdicting the listing at this late stage.
Given the nature of the judicial discretion I am
bound to exercise, equitable and social factors such as these can
appropriately
be taken into account as legitimate considerations in
determining the balance of convenience.
In the result then, I find that the balance of convenience
favours the respondents, and for that reason I am not prepared to
issue the interdict.
Accordingly the application is dismissed with
costs; such costs to include the costs of two counsel, and where
applicable the costs
of two senior counsel.