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[2006] ZACAC 4
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Community Healthcare Holdings (Pty) Ltd and Another v Competition Tribunal and Others (46/CAC/Mar05) [2006] ZACAC 4; [2006] 2 CPLR 431 (CAC) (18 August 2006)
IN
THE COMPETITION APPEAL COURT
CAC
Case No's: 46/CAC/FEB05 Tribunal Case No's: 105/LM/DEC04
In the matter between:
COMMUNITY
HEALTHCARE HOLDINGS (PTY) LIMITED
First
Applicant
CORNUCOPIA
(PTY) LIMITED
Second
Applicant
and
THE COMPETITION TRIBUNAL
First Respondent
THE COMPETITION COMMISSION
Second Respondent
BUSINESS VENTURE INVESTMENTS NO.. 790 (PTY) LIMITED
["BIDCO"]
Third
Respondent
AFROX
HEALTHCARE LIMITED
["Ahealth"]
Fourth Respondent
BRIMSTONE INVESTMENTS CORPORATION LIMITED
["Brimstone"]
MVELAPHANDA
STRATEGIC INVESTMENTS (PTY) LIMITED
["Mvelaphanda"]
Fifth
Respondent
AFRICAN
OXYGEN LIMITED
["AOL"]
Seventh
Respondent
THE
MINISTER OF TRADE AND INDUSTRY
Eighth
Respondent
2
JUDGMENT
HUSSAIN,
J
:
On 11 March 2005 the applicants brought an urgent
application before me where the following relief was sought:
The applicants apply for an order in terms of section
38(2A)(d) of the Competition Act No, 89 of 1998 (hereinafter referred
to as
"the Acf)
for an order in the following terms:
"1
Suspending the operation and execution of the
following decisions of the Competition Tribunal ('the Tribunal') that
are the subject
of a review and/or an appeal before this Honourable
Court:
11
The decision of the Tribunal taken on
Tuesday 8
th
February
2005 under case number 105/LM/Dec 04, dismissing the applications
that were brought by the First and Second Applicants,
in terms of the
provisions of section 53(1)(c)(v) of the Act, for leave to be
recognised as participants ('the intervention applications')
in the
application in terms of section 16(2) of the Act for the approval of
the Bidco Ahealth merger ('the merger approval application')
that was
brought under the same case number.
12
The decision of the Tribunal taken on
Tuesday 8
th
February
2005, under case number 105/LM/Dec 04, refusing the application
brought by the Applicants to postpone the hearing of the
merger
approval application ('the application for a postponement'),
1.3 The decision of the Tribunal handed down on
Wednesday 2 March 2005 and pursuant whereto the Tribunal decided to
grant the merger
approval application without:
3
131
recognizing the First and/or the Second
Applicants as participants in terms of the provisions of section
53(1)(c)(v) of the Act,
and/or
132
affording the First and/or Second
Applicant the opportunity through their representative to put any
questions to witnesses and/or
to inspect any books, items and
documents presented at the hearing of the merger
2.
Granting the Applicants such further or
alternative relief as this Honourable Court deems appropriate.
3.
Directing that those of the Respondents
who may oppose this application pay the costs thereof, jointly and
severally"
After
hearing counsel, and having read the papers, I granted the following
order:
"
1. The
application is dismissed.
2
The first and second applicants are ordered to pay the costs of
this application, which costs include the costs of
two counsel, on a scale as between attorney and own client"
When I gave the above order it was not possible, in the
circumstances, to give full reasons I indicated to the parties that
my reasons
will be given in due course. What follows herein are my
reasons. In this judgment
"the
respondents"
mean the third to the
seventh respondents The first, second and eighth respondents were not
represented in court and no order was
sought against them. In this
judgment reference to
"the Tribunaf
and
"the Commission"
means
the Competition Tribunal and
the Competition
4
Commission
respectively as defined in the Act, A reference to
"merger approvaf
means the conditional approval handed
down by the Tribunal,
Before dealing with the merits of the application I deem
it necessary to say something about the conduct of the applicants,
The applicants filed their Notice of Motion with the
Registrar of this Court on 3 March 2005, The Notice of Motion did not
stipulate
a date for the hearing, but it nevertheless afforded the
respondents
"10 business days"
to
deliver their answering affidavit, The Registrar was informed, by the
applicants' attorneys, that the urgent application will
proceed and
that arrangements be made with the duty judge, I received a call from
the Judge President of this Court, Mr Justice
Davis, requesting me to
hear the application, I agreed to do so,, On 4 March 2005 the
applicants' attorneys wrote to the respondents'
attorneys seeking an
undertaking that the respondents will not proceed with the merger
that was approved by the Tribunal On 8 March
2005 the respondents'
attorneys wrote to the applicants' attorneys stating that their
instructions were to proceed with the impiementation
of the merger,
In the meantime the Registrar of this Court had set down the hearing
of the applicants' appeal/review for 23 March
2005, This date was
communicated to all the parties, The applicants adopted the view that
the matter was so urgent that it could
not wait until 23 March 2005,
in fact the applicants adopted the attitude that the matter could not
even wait until Monday 14 March
2005,
5
Upon the request of the applicants a hearing date was
arranged before me for 11 March 2005, On the morning of 11 March 2005
I indicated
to counsel that I had read the papers the night before
and that I was ready to hear the matter immediately, Mr Subel SC who
appeared
for the respondents indicated that he and his team were
ready to proceed, Mr Nelson SC who appeared for the applicants asked
that
the matter stand down as
"the
applicant was considering its position".
The
matter stood down and over an hour later I was still waiting in
chambers I then indicated to the parties that I wanted to hear
the
matter and enquired into the delay,
I was then called to court where the applicants
indicated that they wanted to bring an application:
(a)
to compel the
respondents to provide access
to certain documents; and
(b)
to ask that the matter be postponed
The respondents indicated that they will oppose both the
applications, After hearing argument I dismissed both the
applications
and reserved my reasons After I dismissed the
applications counsel for the applicants requested that I should stand
the matter
down until Monday 14 March 2005 This, a dramatic change in
their attitude that they originally adopted namely that the matter
had
to be heard on 11 March 2005, The respondents opposed this and
after hearing more argument I refused to allow the matter to stand
down till Monday
6
The application to compel the respondents to give access
to documents was merely made from the Bar. The applicants did not
prepare
any papers Upon hearing this application, I was not satisfied
that the applicants had made out a case in law to compel the
respondents
to deliver or grant access to the documents the
applicants requested. The applicants could show no clear right to
have access to
these documents The documents related to the merger
that was approved by the Tribunal I was also concerned that the
applicants
were unable to show how these documents could possibly
advance their case against the respondents, nor were they able to
show how
their access to these documents could possibly assist the
Tribunal. I was alive to the fact that all of the documents requested
by the applicants had already been filed with the Commission and the
Tribunal I was accordingly not persuaded to come to the applicants'
assistance.
I was equally not persuaded to grant a postponement The
applicants' reason for the postponement was to enable them to file a
replying
affidavit. I was told by Mr Nelson that they had only
received the respondents' answering affidavit that morning and that
he read
the affidavit
"in the car on the way to court'
The
respondents' attorneys, I was informed, tried to deliver the
answering affidavit to the applicants late on 10 March 2005 They
were
unable to make contact with any of the applicants' legal
representatives, both attorneys and advocates For some reason no
one
was answering their telephones.
7
Again the applicants failed to convince me that the
filing of a replying affidavit will in some way advance their case
The contents
of the respondents' answering affidavit must have
presented no surprises to the applicants On 8 March 2005, in response
to a request
from the applicants for an undertaking from the
respondents to delay implementation of the merger, the respondents'
attorneys wrote
a letter to the applicants' attorneys stating fully
why such an undertaking was being declined I read this letter and it
was clear
to me that the contents of this letter was repeated and
expanded in the respondents' answering affidavit. In fact there was
nothing
new in the respondents' answering affidavit I drew counsel's
attention to this but Mr Nelson insisted that his client needed a
postponement 1 refused the postponement and asked Mr Nelson to
proceed with his client's application. It was at this stage that
Mr
Nelson asked that the matter stand down till Monday 14 March 2005 I
reminded Mr Nelson that it was his clients who insisted
that the
matter was so urgent that it had to be heard on Friday 11 March 2005
Mr Nelson still insisted that he wants the matter
stood down I
refused this request but indicated that I was willing to stand the
matter down till 14h00 I indicated that at 14h00
I will hear the
applicants' application. Mr Nelson accepted this and the matter stood
down till 14h00
At 14h00 Mr Nelson still wanted the matter to stand down
till Monday I refused to do so and asked him to proceed with his
case.
At this point Mr Nelson handed up to me 46 pages of heads of
argument that he had prepared It became quite clear to me that these
heads were, all along, in Mr Nelson's bag and that he was indeed
ready, all along, to argue the matter. At
8
all material times the respondents indicated that they
were ready to proceed and wanted to proceed with the case, they
opposed the
postponement as well as the request to stand the matter
down till Monday
It became abundantly clear to me that the applicants
came to court and tried to manipulate the situation in order to delay
the hearing
of the application, This would have suited their agenda
while possibly causing irreparable harm to the respondents, I
realised
then that the applicants were not litigating with any senous
and
bona fide
competition concerns in mind but rather to cause
delay in the respondents' implementation of the merger,
I took the time and trouble to set these events out
because it is important for practitioners to realise that this kind
of conduct
is frowned upon and should not be encouraged in this Court
The conduct of the applicants and their legal representatives was
unprofessional
and disrespectful to the court as well as to the
respondents,, This kind of gamesmanship will not be tolerated in this
Court This
Court should not hesitate to punish such conduct with
appropriate orders as to costs,
I now deal with the merits of the application:
The factual background
[1] On 13 December 2004 the respondents, under case
number 105/LM/DEC04 applied to the Competition Commission for merger
approval
in terms of Chapter 3 of the Act. This was a large merger
involving the private health care industry.. The merger hearing was
set
down before the Tribunal on 10 February 2005
[2] On 28 January 2005 the applicants launched a formal
application before the Tribunal to be recognised as a participant in
the
said merger proceedings in terms of section 53(c)(v) of the Act
The applicants filed a comprehensive Notice of Motion supported
by a
detailed affidavit. The respondents, the parties to the merger,
opposed the application and filed an answering affidavit.
The
applicants filed a replying affidavit, These papers as well as the
record of the proceedings before the Tribunal were made
available to
me and I read them The applicants' application was set down before
the Tribunal for hearing on 8 February 2005. Counsel
for both sets of
parties prepared heads of argument which were handed to the
Tribunal..
[3] At the hearing of the application the Tribunal
decided, in view of the deficiencies in the applicants' papers, to
allow the
applicants to lead oral evidence To this end the deponent
to the applicants' affidavit, Mr Dempers, was led in evidence by
senior
counsel for the applicants. Having considered the record of
the proceedings before the Tribunal I was satisfied that the
10
applicants were given more than a fair chance to make
out a case for their participation in terms of section 53(c)(v) of
the Act.
[4] After a full and proper hearing the Tribunal
dismissed the applicants' application. The Tribunal found that
principally:
(a)
The applicants had failed to persuade it that it
had an interest in the merger proceedings as contemplated in section
53(c)(v) of
the Act and
(b)
The applicants failed to show that they had
anything to contribute to the hearing which will be of assistance to
the Tribunal in
the discharge of the latter's statutory duties.
Having read the papers and having considered the
Tribunal's reasons, I could find no fault in the Tribunal's findings
and ultimate
order dismissing the application
[5] Once the Tribunal announced its decision the
applicants' counsel did two things, namely:
(a) He immediately noted the applicants' intention to
appeal or review the Tribunal's decision (notwithstanding that the
Tribunal
had not yet furnished its full reasons) and
11
(b) Made application for
an order postponing the scheduled merger hearing,
This application was opposed by the merging parties and
full argument was addressed, The Tribunal refused to grant an order
postponing
the merger hearing, The hearing proceeded on 10 and 11
February 2005,
[6] On 2 March 2005 the Tribunal issued an order
approving the merger in terms of section 16(2)(b) of the Act,, The
applicant, on
3 March 2005 launched an application to review the
Tribunal's merger decision,
[7] The applicants now bring this application in order
to suspend the operation and execution of the Tribunal's orders
pending the
outcome of their appeal/review to the Competition Appeal
Court,
Urgency
[8] The applicants bring this application in terms of
section 38(2A)(d) of the Act, In order for the Judge President of
this Court
to allocate the matter to the duty judge, the applicants
had to make out a case for urgency To this end the applicants were
called
upon to file a supplementary affidavit dealing with urgency,
The applicants filed this affidavit on 9 March 2005 Thereafter I was
directed to hear the matter, Such direction by the Judge President
does not mean that the matter will be treated and heard as an
urgent
application The question of urgency remains an issue to be dealt with
before the duty judge,
12
The respondents indicated that they were challenging the
urgency raised by the applicants. Having read the papers in the
matter
I realised that although the applicants' grounds for urgency
were questionable, this was a matter which both the parties had an
interest in finalising and in addition there was considerable public
interest.. Accordingly I decided that it was in the best interests
of
all the interested parties that I should hear the matter. Before the
hearing commenced I indicated to counsel that I did not
want to waste
time debating urgency and that I will hear the application. Where
urgency is an issue the
onus
remains on the applicant to show
good cause why the matter must be heard immediately and why it could
not be afforded substantial
redress in due course.. The principles
developed in the interpretation and application of Rule 6(12) of the
Uniform Rules of the
High Court are applicable.
The nature of the order
[9] In effect the applicants seek a stay of the merger
proceedings in terms of section 38(2A)(d) of the Act, pending the
outcome
of an appeal and/or review of the Tribunal's decisions
mentioned above and in particular the Tribunal's decision to approve
the
merger The applicants' case before me is firmly anchored to the
review of the Tribunal's merger approval. Clearly but for noting
such
review the applicants will have no case for a stay of the merger
proceedings The applicants' appeal/review of the Tribunal's
decisions
not to recognise them as participants and the Tribunal's refusal to
postpone the merger
herein
does not take the
matter any further
13
Accordingly, in order to make out a proper case for a
stay in these circumstances the applicants will have to persuade me
that there
are reasonable prospects of success in their review
against the Tribunal's decision to approve the merger.
[10] At all material times the respondents took up the
attitude that the Tribunal had given its approval and they intended
to continue
to implement the merger. The respondents, in my view,
were perfectly entitled to proceed with implementation
notwithstanding the
applicants' appeal. Even if the Tribunal's
decision was unlawful it continues to have effect until such time as
it is set aside
by a court In other words the Tribunal's order is:
"Treated as though it is valid until a court pronounces
authoritatively on its validity
See: Hoexter -
The New
Constitutional and Administrative Law
Volume 2 (Juta 2002) 291.
Transnet Bpk N/A Coach
Express v Voorsitter, Nasionale
Vervoerkommissie
1995 (3) SA 844
at 846-847.
This approach is consistent with the principle that
administrative action is rebuttably presumed to be regular
(omnia
praesumuntur rite esse acta)
"Because of the presumption of validity,
all
administrative action remains in effect until such time as it is set
aside or declared invalid by a court of competent jurisdiction
If
the action is not challenged timeously in a court with jurisdiction
by a person with locus standi, or if the person affected
by the
14
action has waived his/her rights, or if a court
refuses to declare it invalid, the act will, in spite of its
technical invalidity,
retain its legal effect"
(my
emphasis)
De Ville J R
Judicial Review of Administrative Action
in South Africa
(Butterworths 2003) 329
Equally, and thankfully, the Act does not provide for
the automatic suspension of an order under review or appeal, The
party seeking
suspension must apply to the Competition Appeal Court
in terms of section 38(2A)(d) of the Act, There are important policy
considerations
behind this, One can imagine, if a notice of appeal
automatically suspended operation of an order of the Tribunal, the
havoc vexatious
litigants could wreak on approved transactions This
is in fact a case in point, As will appear elsewhere in this
judgment, the
applicants' motives for suspending the implementation
of the merger is not grounded in any genuine competition concerns,
but rather
in their own commercial interests,
Section 38(2AMch
[11 ] This section provides as
follows:
"The Judge President, or any other Judge of the
Competition Appeal Court designated by the Judge President, may sit
alone to
consider an
,,,
application
to suspend the operation and execution of an order that is the
subject of a review or appeal"
15
This
Court enjoys a discretion whether to grant a suspension order
See:
Glaxo Wellcome (Pty) Ltd v
Terblanche NO and Others (No 1)
2001 (4)SA901 (CAC)
The discretion must be exercised judicially but
"generally speaking a court will grant a
stay of execution where real and substantial justice requires such a
stay or where
injustice would otherwise be done"
.
See:
Santam Ltd v Norman and Another
1996
(3) SA 502
(C).
In considering an application in terms of section
38(2A)(d) of the Act the presiding judge has to be very careful and
must be alive
to the prospect of abuse based on hidden agenda or
selfish commercial or other interests The presiding judge must
consider ail
of the facts and circumstances very carefully, including
the record of the proceedings before the Tribunal.. An in depth
enquiry
into the motivation for the stay or suspension of the order
must be undertaken The judge must enquire into whether or not the
applicants'
application is grounded in genuine competition related
issues or is merger specific. In this regard the parties have a duty
to
make full disclosure to the court and counsel representing the
parties are under a duty to assist the judge An application in terms
of this section cannot be treated lightly as there is always the
potential for abuse Equally judges hearing applications of this
nature should not hesitate to punish any of the parties, with an
appropriate
16
cost order or otherwise, where such party was found not
to have acted in good faith or had been obstructive in the conduct of
the
proceedings
In this regard I would like to quote, with approval,
what Davis JP stated in the
Glaxo Wellcome
case
(supra):
"The position can be summarised thus: In
exercising its discretion a court must, of necessity, enquire as to
whether there
is a prima facie case that an applicant's rights have
been infringed. Further, the court must locate where the balance of
convenience
lies But that is not all that has to be considered in the
exercise of the discretion to grant such an order: Within the context
of the Act there is the additional consideration that the suspension
of an interim order in terms of section 59 can, if granted
too
easily, subvert the very purpose of an important provision of the Act
which created this kind of order: Hence the court must
exercise its
discretion by means of a careful consideration of the policy
considerations of the Act in the context of the facts
of the case
For this reason a court
must enquire as to whether the applicant can show prima facie that
its order has infringed a right which
the applicant enjoys, further
that the balance of convenience favours the granting of such interim
relief within the context of
the factual matrix of the case and that
the injustice caused by the perpetuation of the order would be
greater than the possibility
of jeopardising the purposes of the Act
promoted by the continuation of the section 59 order itself"
The issues
[12] In order to adjudicate this
application the following must be addressed:
12.1 Does the applicants' review of
the Tribunal's merger approval enjoy
prima facie
prospects of
success?
17
12.2
In whose favour does the balance of convenience
lie?
12.3
Would any injustice caused by the implementation
of the merger outweigh any subversion of the purposes of the Act
caused by a suspension
of the Tribunal's approval of the merger?
The
prospects of success
[13]
The acquisition by the third respondent of the entire issued shared
capital of the fourth respondent was first notified to
the
Competition Commission on 5 December 2003 under case number
2003/DEC/785 The detail of this filing is not relevant to this
judgment and I will not set the facts out. What is relevant is that
the first applicant was recognised by the Tribunal as a participant
in terms of section 53(1)(c)(v) of the Act, Pursuant to a hearing
before the Tribunal the matter was postponed, Thereafter the
merging
parties entered into negotiations to deal with various concerns that
were raised at the hearing (the details of which are
again not
relevant for purposes of this judgment). Thereafter the merging
parties filed another application with the Commission
This was
treated as a new filing and the first applicant was expected to apply
to the Tribunal to be recognised as a participant
in terms of the Act
At the hearing of the application before me the applicants, in
particular the first applicant, made much of
the fact that it was not
allowed to participate by the Tribunal This is cited as grounds for
success in their review I considered
the argument fully and decided
to dismiss it as a red-herring There is no substance in
it due to the fact that the
applicants were
18
afforded a full hearing, including the hearing of oral
evidence, by the Tribunal. The applicants were given every
opportunity to
persuade the Tribunal that they should be recognised
as participants. The Tribunal rejected the applicants' application
and gave
full reasons for its decision I read the record of the
proceedings and I am satisfied that the Tribunal was correct and that
there
is no reasonable prospect of this issue being reversed on
appeal or review. It must be said that the principal reason for the
Tribunal's
decision is that the applicants failed to convince the
Tribunal that they were in a position to make a material contribution
towards
assisting the Tribunal in the discharge of the latter's
statutory mandate.. I was unable to fault this finding.
In any event it must be realised that the applicants'
appeal against the Tribunal's decision to refuse participation and
its refusal
of an application to postpone the merger hearing cannot
found a basis for this application The applicants must show that they
have
prospects of success in the review against the merger approval.
[14] Inasmuch as the Tribunal found that the applicants
would be of no assistance in the merger hearing, the applicants were
now
given another opportunity to present a case as to how their
participation could assist the Tribunal Again the applicants failed
dismally. I could find nothing in the papers presented to me to
persuade me that the applicants had anything relevant or material
to
contribute to the merger hearing The applicants' papers are entirely
lacking in substance The applicants refer and quote extensively
from
relevant legislation without setting out any facts or evidence
19
which triggers the application of such legislation. The
applicants repeatedly set out allegations and sweeping statements
which
look impressive but does not withstand even the slightest
scrutiny, To give a few examples of this:
(a)
Implementation of the merger will have
"catastrophic consequences".
The
applicants did not state what these consequences will be and at best
were vague about them. There is absolutely no reference
in the papers
as to any consequences for competition..
(b)
If the appeal succeeds it will
"no
longer be possible to unscramble the egg".
There
is no reference as to what this means. The applicants conveniently
failed to deal with the question of divestiture and that
it was the
respondents who were at risk
(c)
If the merger proceeds and the appeal succeeds
"the horse wilt have bolted and it will
be impossible to correct the position"
There
is no reference as to what this means
(d)
If the merger proceeds
"the
consequences for the applicants and for all small and medium sized
firms will be dire".
There were no facts
to support this
20
(e)
If the merger proceeds the applicant will
"probably have to exit the market'.
This
is a serious allegation for which no facts in support appear in the
papers.
(f)
"The market for healthcare in South
Africa will be permanently reshaped and the applicants would be
unable to do anything to
protect their right'..
No
facts are presented to support this sweeping allegation, nor do the
applicants explain what
"right
they
will not be able to protect.
(g)
"...
The merging
party attempted to get approval for a transaction that was patently
objectionable"
No facts appear in the
papers to support this. Why the
"transaction"
was
"patently
objectionable"
is not explained.
(h) The applicants have
"legitimate issues".
This, without saying what issues and why they are legitimate
The applicants' papers
were lacking in substance. The applicants failed to set out facts
which demonstrate that their issues are
grounded in genuine
competition concerns or that they are merger specific.
[15] It was abundantly clear to me that the only point
to
"reviewing"
the merger approval is in order to
found jurisdiction for this application. It was equally clear to me
that the purpose of this
application was merely to create
21
delay and frustration in the implementation of the
merger I accept what was decided in the
Glaxo Wellcome
case
(supra)
that it would be improper to grant a stay in
circumstances where the review application formed part of dilatory
tactics
Davis JP said the following:
"The purpose of the Act would be frustrated if
the interim order granted by the Tribunal, after consideration of the
available
facts, were to be suspended in circumstances where the
review application
... was launched
merely to confirm jurisdiction on the court to hear the stay
application and represented
a
dilatory
tactic that amounted to an abuse of the court process
"
(my emphasis)
There is an abuse of the process of the court when a
litigant invokes judicial machinery in an endeavour to achieve an end
or purpose
for which it was not intended
[16] In this case it is clear, on the applicants' own
version, that their desire to participate in the merger proceedings
was motivated,
not by a desire to ensure that the merger would not
substantially prevent or lessen competition, but by an attempt to
protect the
applicants' own commercial interest,, I refer to Dempers'
oral evidence:
"
Mr Dempers
:
I would like to be able to advise my
Board
appropriately and accordingly to what I believe the
future of our organisation is and the only way I can do that is by
being a participant
in these proceedings and make an informed
decision
Adv Subel
Now we
have heard when you motivated today why you want to participate in
these proceedings. The impression that we gained, correct
me if I am
wrong, is that really Community Healthcare Holdings wants to look
after its position and wants to basically assess where
it is in the
market. Is that a correct statement?
Mr
Dempers
: That's correct yes.
22
Adv Subel
: And the
end of your business is really what your concerned about not what
effect the end of your business may have on competition
in the
market?
Mr Dempers
: Sir i
must be quite honest with you, we're not a market leader We're a
small player We're a small empowerment company within the
hospital
industry My first responsibility at this stage is with our
organisation, the staff that works for us and our shareholders
Yes,
so my first consideration is definitely the competitiveness and the
future of our organisation and not necessarily the macro
economics at
play"
The finding made by the Tribunal, which appears in their
reasons, is as follows:
"This, as Mr Subel for the respondents point
out, is not a concern for a genuine interest in terms of the
Competition Act, b
ut is about the first applicant's own commercial
interests"
By their own admission the applicants had an ulterior
motive in seeking to participate in the merger proceedings.
[17] In my view the applicants' review application in
respect of the merger approval has no prospects of success. The
grounds for
review relied on by the applicants amount to nothing more
than a rehashing of the provisions of section 62 of the Promotion of
Administrative Justice Act No. 3 of 2000 (hereinafter referred to as
"PAJA"),
this without stating the facts which
trigger the provisions of PAJA. I will now deal briefly with the
applicants' grounds for review:
17.1
Section 62(a)(i) of PAJA - unauthorised decision
The Tribunal considered the applicants' submissions regarding the
status of the merger proceedings and in particular if the proceedings
were
23
the same or a sequel to the first filing. As 1 have
already stated, the applicants were given a full hearing in an
application to
be recognised as participant The Tribunal properly
dismissed the application Neither in their review nor in this
application do
the applicants suggest that there was anything
improper or unauthorised about the manner in which the Tribunal
reached this decision.
It clearly fell within the Tribunal's powers.
There is no merit in this ground of review.
17.2
Section 62(a)(iii) of PAJA - bias
. This
allegation amounts to nothing more than an unsubstantiated and
scurrilous attack on the chairperson of the Tribunal. The
merger
involved the participation of the Industrial Development Corporation
Ltd
("IDC").
The chairperson of the Tribunal serves
on the Board of the IDC. The chairperson disclosed this at the
commencement of merger proceedings
at a pre-hearing conference This
conference was attended,
inter alia,
by the representatives of
the first applicant No party, having been invited to do so, expressed
any reservations about the chairperson,
What is more the applicants,
in this application, provide absolutely no evidence of actual bias
They cannot rely on merely an alleged
perception of bias on the part
of the chairperson. This ground of review is without merit
24
3
Section 62(2)(c) of PAJA - procedural
unfairness
. This can be disposed of very
quickly This ground of review relates to the Tribunal's exclusion of
the applicants as interveners
and the Tribunal's refusal to postpone
the merger hearing and not to the Tribunal's merger approval, This
ground has no prospect
of success
4
Section 62(d) of PAJA - decision materially
influenced by an error of law
Again according
to the applicants, any error of law which may have occurred, occurred
in relation to the Tribunal's decision to
dismiss the intervention
application and the application to postpone the merger hearing, No
factual and/or legal basis whatsoever
is put up in support of any
error of law in relation to the Tribunal's decision to approve the
merger Thus, the applicants enjoy
no prospect of success on this
ground
,5
Section 62(e)(ii) of PAJA - decision taken for an
ulterior purpose or motive
.. The applicants have put up no facts
or evidence whatsoever of any ulterior motive or purpose on the part
of the Tribunal or any
of its members including the chairperson There
was a vague reference to the Tribunal being motivated by wanting to
expedite the
merger, but this was not supported by any evidence Yet
again, any ulterior purpose which might have been demonstrated (and 1
was
unable to find any) would arise in the context of the Tribunal's
decision to dismiss the application
25
for intervention and the application for a postponement
of the merger hearing and not in the context of the Tribunal's
approval
of the merger. This ground enjoys no merit
17.6
Section 62fe)fiii) of PAJA - irrelevant
considerations taken into account or relevant considerations not
considered
. The applicants' submission in
this regard reveals that the issues here relate to the Tribunal's
dismissal of the intervention
and postponement applications.. This
ground has little or nothing to do with the merger approval. The
applicants state that the
Tribunal took into account irrelevant
considerations in
"deciding to refuse the
intervention application"
Similarly the
allegation that the Tribunal failed to take into account relevant
considerations relates to matters relevant to the
intervention
application and not to the merger approval This ground, insofar as it
relates to the merger approval, enjoys no prospect
of success.
17.7
Section 62(e)(iv) of PAJA - action taken
because of unauthorised or unwarranted dictates of another person or
body
is a reference to the chairperson's
involvement with the IDC I have already dealt with this aspect.
Suffice to say that this ground
can best be described as spurious
26
17.8
Section 62(fl(ift(aa) and (bb) of PAJA - action
not rationally linked to purposes of the Act
. Again, in the
applicants' own terms, this ground of review is solely concerned with
the Tribunal's decision regarding the intervention
application. It
too gives rise to no prospects of success in the review application.
Accordingly I am persuaded that the applicants do not
enjoy any prospects of success insofar as it relates to the review of
the
merger approval.
Balance of convenience
[18] The applicants, in their founding papers, failed to
deal with this requirement adequately. This requirement goes to the
root
of the relief that the applicants seek and yet they dealt with
it in rather vague terms. It must be remembered, at the outset, that
the respondents, in no uncertain terms, informed the applicants that
they were proceeding to implement the merger. At best for
the
applicants, they alleged that they will suffer prejudice if the
merger is implemented This allegation must be weighed in the
context
of the law of competition and in particular in the light of whether,
in the absence of the relief sought in this application,
there is
likely to be a substantial prevention or lessening of competition The
applicants, in my view, made out no such case. It
is plain that the
applicants were not motivated by any of the aims of the Act, but
rather their own commercial interests. The commercial
interests of
and possible prejudice to the applicants is in fact of little or no
consequence in the context of competition law
27
[19] Although the applicants' allege prejudice they say
very little about it Exactly what prejudice will be suffered by them
at
which stage of the implementation of the merger is not dealt with
The applicants on their own submissions deal with prejudice in
the
vaguest of terms, leaving just about everything to speculation.
Instead of presenting credible evidence and facts they chose
to rely
on the
"unscrambling of eggs"
and the
"bolting
of horses"
The applicants allege that if the review succeeds then
it will be impossible to reverse the merger itself. This appears to
be the
applicants' strongest point, Having said this the applicants
failed to deal with the provisions of section 60(1 )(a) of the Act
which provides:
'If a merger is implemented in contravention of
Chapter 3, the Competition Tribunal may
...
order a party to the merger to sell any
shares, interest or other assets it has acquired pursuant to the
merger"
Thus, in a proper case, the Tribunal has the powers to
order divestiture in respect of a merger which was implemented prior
to final
approval In the context of this merger it is the respondents
who run the risk of reversal through divestiture. The respondents
made it very clear that they were willing to accept this risk in
proceeding to implement the merger By the same token the applicants
suffer no risk one way or the other. The applicants did not even
tender an indemnity in their application.
28
[20] As against the paucity of evidence of any genuine
prejudice on the part of the applicants, the respondents disclosed
irremediable
prejudice including the potential loss of the entire
merger transaction. According to the respondents:
20.1 In order to finance the merger transaction certain
hedge instruments were procured An interest rate hedge position must
immediately
be closed out or transferred to the third respondent If
the merger is implemented as planned the hedge position will be
transferred
to the third respondent, carried by the business of the
fourth respondent and closed out at an advantageous time. If this
application
succeeds, however, the hedge position will have to be
closed out on 23 March 2005 and will result in a tangible loss of
between
R20 million and R35 million. This will be extremely
prejudicial to the Black Economic Empowerment entities in particular
20 2 In terms of the funding arrangements any additional
funding needs are to be borne by Bidco's shareholders. The purchase
consideration
payable for the acquisition of the Ahealth shares is
presently escalating at approximately R15 million per month This
means that
Brimstone, Mvelaphanda and others incur additional
financial burdens each month that the mergers implementation is
delayed
29
20 3 The market has acted and will continue to act in
reliance on the public announcements which the respondents have been
obliged
to make, including an announcement advising Aheaith
shareholders of the following salient dates:
20.3.1
11 March 2005 - last date for shareholders to
trade in shares to be eligible to receive the scheme consideration;
20.3.2
14 March 2005 - date on which the listing of
Ahealth's shares on the JSE Securities Exchange will be suspended;
20.3.3
18 March 2005 - date on which shareholders must
be registered as such to receive the Scheme consideration;
20.3.4
22 March 2005 - operative date of the Scheme when
the Scheme consideration will be posted to participants and
20.3.5
23 March 2005 - date on which the listing of
Aheaith shares on the JSE Securities Exchange will be terminated.
30
This information, which is in the public domain, will be
rendered inaccurate by an order suspending the implementation of the
merger,
4
Should there be a further delay in the
implementation of the merger, there is no guarantee that the banks
will agree to an extension
of their existing funding commitments
beyond the end of April 2005, being the date by which the draw down
must take place, Finding
banks willing and able to finance a
transaction of this magnitude is no easy matter, especially not at
short notice, Hence, if
this application is successful the inevitable
delays will imperil the merger itself
5
Should the merger be lost to Bidco due to its
implementation being delayed beyond 30 April 2005:
20,5 1
Costs of approximately R73 million will not be
capable of being recouped
via the conduct of Ahealth's business and will have to be absorbed by
Brimstone and Mvelaphanda
20 5,2 An amount of R1,5 billion injected into Bidco by
its shareholders will be at risk of being lost in the event that
Bidco's
underlying asset (Ahealth) is sold in execution so as to meet
Bidco's debt obligations, These outcomes will
31
have a potentially devastating impact on the wellbeing
of all the effective parties and in particular the Black Economic
Empowerment
entities
The above stated factors were not challenged by the
applicants I must accept that the risks detailed above are very real
and in
particular the potential exists for the loss of the entire
merger transaction. In my opinion this merger represents a sound
Black
Economic Empowerment opportunity within the healthcare sector
of our economy.. It is essential for the long-term sustainability
of
the industry that ownership should reflect the demographics of this
country.
I am satisfied that the balance of convenience clearly
favours the respondents.
Injustice caused by
implementation of merger as against subversion of purposes of the Act
caused by suspension of Tribunal's approval
of merger
[21] This prerequisite for
the grant of relief under section 38(2A)(d) of the Act can
conveniently be considered by reference to
three questions:
21.1 Will any injustice be caused by
the implementation of the merger prior to the determination of the
underlying
review application?
32
21.2
Will any subversion of the purposes of the Act be
caused by the suspension of the Tribunal's approval of the merger
pending the
determination of the underlying review application?
21.3
What bearing do the answers to these enquiries
have on the proper exercise of the court's discretion under section
38(2A)(d) of
the Act?
The
first enquiry
[22] The applicants have presented no evidence of any
such injustice. There is no information provided by the applicants of
any
anti-competitive effects that will be occasioned by
implementation of the merger. As I have already stated the applicants
present
no evidence of any prejudice that they will suffer if the
merger is implemented Equally I found that the applicants enjoy no
prospect
of success in respect of the review application underlying
this application. Finally, on this enquiry, I found that the balance
of convenience favours the respondents.
The second enquiry
[23] Section 2(a) and 2(f) of the Act
provides as follows:
"The purpose of this Act is to promote and
maintain competition in the Republic in order-
33
(a) to promote the
efficiency, adaptability and development of the economy;
(f) to promote a greater spread of ownership, in
particular to increase the ownership states of historically
disadvantaged persons"
The purposes of the Act will certainty be subverted if
this merger is delayed. I accept that a delay in implementation can
potentially
cause the merger to be lost. Section 12(A)(3) of the Act
provides that in considering a proposed merger the Commission or the
Tribunal
must have regard to whether it can be justified on
substantial public interest grounds, including its effect on the
ability of
firms controlled by historically disadvantaged persons to
become competitive.. The Commission pertinently raised this issue in
recommending approval of the merger. The Commission remarked as
follows:
"The Commission
has attempted to indicate that this transaction will result in
significant advantages for public interest According
to the
Commission Mvelaphanda and Brimstone will be able to become
competitors in the private hospital market through ownership
of a
significant shareholding in Bidco, which will
control Ahealth
Furthermore the Commission is confident that this
transaction will facilitate positive growth opportunities in the
public hospital
sector through public private partnership. According
to the Commission Government will be eager to conclude management
agreements
with empowerment firms to transform public hospitals
"
Accordingly I find that there are substantial
considerations which weigh against the grant of the relief sought by
the applicants.
34
The
third enquiry
[24] In my view the responses to the first and second
enquiries must be weighed in the exercise of the court's discretion
in granting
or refusing an order in terms of section 32(2A)(d) of the
Act, Having weighed all of the factors I was persuaded to exercise my
discretion in favour of the respondents.
[25] Finally, I deal with the issue of costs. I came to
the conclusion that the applicants' case in this application was not
grounded
in any competition or merger specific issues. The
applicants, I found, were motivated by their own selfish commercial
interests.
I also concluded that this application was brought merely
to cause delay in the implementation of the merger The applicants, in
my view, abused the processes of this Court. To this end I decided
that a punitive cost order was appropriate.
I
HUSSAIN JUDGE OF THE
COMPETITION APPEAL COURT
COUNSEL FOR APPLICANTS
INSTRUCTED
BY
COUNSEL
FOR RESPONDENTS
ADV
A J NELSON SC ADV ALLAN
COETZEE
ROTHBART
INC
ADV
A
SUBEL
SC ADV
R M
PEARSE
INSTRUCTED BY
EDWARD NATHAN CORPORATE LAW ADVISERS