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[2005] ZACAC 3
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Community Healthcare Holdings (Pty) Ltd and Another v Competition Tribunal and Others (44/CAC/Feb05) [2005] ZACAC 3; [2005] 1 CPLR 38 (CAC); 2005 (5) SA 175 (CAC) (26 April 2005)
IN THE
COMPETITION APPEAL COURT
Case No.
44/CAC/Feb05
In the matter between:
COMMUNITY HEALTHCARE
HOLDINGS (PTY) LTD First Appellant
CORNUCOPIA (PTY) LTD
Second
Appellant
And
THE COMPETITION
TRIBUNAL First
Respondent
THE COMPETITION
COMMISSION Second
Respondent
BUSINESS VENTURE
INVESTMENTS NO.790 (PTY) Third Respondent
LTD.
AFROX HEALTHCARE
LIMITED Fourth
Respondent
BRIMSTONE
INVESTMENTS CORPORATION LIMITED Fifth Respondent
MVELAPHANDA
STRATEGIC INVESTMENTS (PTY) Sixth Respondent
LTD
AFRICAN OXYGEN
LIMITED Seventh
Respondent
THE MINISTER OF
TRADE AND INDUSTRY Eighth Respondent
JUDGMENT
DAVIS JP
Introduction.
[1] On 8 February 2005 the Competition Tribunal (âthe Tribunalâ)
dismissed applications that were brought by the first and second
appellants in terms of the provisions of section 53(1)(c)(v) of the
Competition Act No. 89 of 1998 (âthe Actâ) for leave to be
recognized as participants in a merger between the third and fourth
respondents (âthe mergerâ).
[2] On the same day the
Tribunal refused an application brought by appellants to postpone the
hearing of the merger pending the determination
of an appeal and or
review against the Tribunalâs decision in the intervention
application. On 2 March 2005 the Tribunal approved
the merger
subject to certain conditions.
[3] On 21 February 2005
appellants noted an appeal against the decision of the Tribunal to
refuse the intervention application. On
28 February 2005 appellants
filed an application to review the decision of the Tribunal in the
intervention application and in the
postponement application. On 3
March 2005 appellants filed an application to review the Tribunalâs
decision to approve the merger.
[4] Appellants then
made strenuous efforts for an expedited hearing before this Court on
the basis of urgency. Upon consideration,
the Judge President I came
to the view that the appeal that had been launched on 18 February
2005 could be set down for hearing on
23 March 2005.
[5] When the further
review applications were received by the Registrar of this Court on 3
March 2005, a letter was sent on 10 March
2005 to the parties in
which the Registrar stated the following:
âThe parties have
indicated to the Registrar that it made sense to hear the remaining
two review applications at the same time
as the appeal set down for
23 March 2005. The Registrar has conveyed to the parties the
direction from the Judge President that
the court will only hear
matters if parties submissions to the court, by agreement between
them, are made timeously and the matter
was ripe for hearing; else
each application would run its course until it is ripe for hearing
Further directions from the Judge-President
are that the court will
only hear the review application on 23 March 2005 if it receives a
complete record and the appellantsâ
heads of argument by Monday 14
March 2005; and respondentsâ heads of argument by Wednesday 16
March 2005. The court will not accept
any further submissions from
the parties beyond these dates.â
[6] On 18 March 2005
appellants served a notice for a consolidation of the appeal against
the Tribunalâs decision, as well as the
two review appellants.
Notwithstanding competing versions of events leading up to and
subsequent to this consolidation application
by the appellants and
third to seventh respondents, it was common cause that there had been
no proper compliance as to instructions
contained in the Registrarâs
letter of 11 March 2005.
[7] The court was in no
position to hear the two review applications on 23 March 2005. Mr
Nelson, who appeared together with Mr Coetzee
on behalf of
appellants, contended that, given the clear overlapping of issues in
the appeal and review applications, it was necessary
to postpone the
entire hearing for the various proceedings be properly consolidated
and heard on an appropriate day. Mr Subel, who
appeared on behalf of
third to seventh respondents submitted that, although there was some
overlap between the applications to review
the Tribunalâs decision
to refuse the intervention application, and the appeal the latter was
ripe for hearing. Appellants had
been intent on providing an
expedited hearing, initially in respect of the appeal alone. The
instructions of the court with regard
to the timetable had been known
to the parties well in advance of the consolidated application. In
his view, a consolidation of the
application would not avoid a
multiplicity of applications. In addition, a postponement would have
important consequences for costs.
[8] After
consideration of the arguments placed before this court by counsel,
the court decided to hear the appeal separately and
accordingly
argument then proceeded in respect of the merits of the appeal
alone.
The Tribunalâs Reasoning.
[9] In dismissing the application for intervention, the Tribunal
considered the three essential grounds upon which appellants based
their case for intervention. Appellants submitted that the
proceedings before the Tribunal were essentially a continuation of an
earlier merger proceeding, which hearing had commenced on 14 July
2004.
[10] At this hearing
the Tribunal was enjoined to consider a large merger filed in terms
of which a consortium of firms purchased
the entire share capital are
third respondent. Appellants had been recognized as intervenors in
these proceedings. In these proceedings,
the main issue for the
intervenors appeared to be the role of Medi Clinic, which was a major
competitor of third respondent and
along with Nedcare, was one of the
three major hospital groups in the country. In this transaction Medi
Clinic was to hold a twenty
five per cent. shareholding in Bidco,
the purchaser of third respondent. Medi Clinic will be responsible
for much of the financial
risk in the transaction. Medi Clinic had
entered into a related transaction with Bidco, in terms of which the
latter agreed to sell
2500 of third respondentâs beds to it. These
proceedings were adjourned in August 2004.
During the period of
adjournment various negotiations ensued. Eventually the relevant
parties decide to reconstitute the shareholding
in Bidco. Of
particular significance was the removal of Medi Clinic as a
shareholder in Bidco.
[11] The changes in the transaction notwithstanding, appellants
contended that these proceedings were not fresh proceedings but a
continuation of the earlier proceeding. The earlier proceeding had
never been withdrawn and in terms thereof appellants had been
admitted as intervenors.
[12] The Tribunal
rejected this argument and found that there had been a new filing of
a merger transaction, a fresh fee of R250
000 had been paid, and a
new case number had been assigned to the matter. The Competition
Commissioner investigated the filing and
prepared a new
recommendation for the Tribunal. The Tribunal held that the present
filings were not a continuation of the prior
merger and accordingly
the appellants were required to apply afresh for intervention.
[13] The second ground
from which appellants based their argument was a related submission,
namely that, in respect of the first appellant,
the proceedings were
but a sequel to the prior proceedings. To this argument the Tribunal
said âThe fact that the current proceedings
have a history in the
prior proceedings does not obviate the need for the first appellant
to make out a case for intervention in
terms of section 53(1)(c)(v).
It would appear that it is precisely because the applicantâs case
for intervention is so weak that
they have relied on the first
applicantâs alleged inherited right as laid out in these first two
grounds for interventionâ.
[14] The appellants
argued, as a third ground for intervention, that they were entitled
to be recognized as participants in terms
of section 53(1)(c)(v) of
the Act.
[15] Section
53(1)(c)(v) provides âThe following persons may participate in a
hearing, in person or through a representative, and
may put questions
to witnesses and inspect any books, documents or items presented at
the hearing:
(c) if the hearing is
in terms of Chapter 3 â
(v) any other person
whom the Tribunal recognized as a participant.
[16] After analyzing
the case made out by appellants, the Tribunal in exercising its
discretion to refuse intervention, concluded:
âThe applicants have not made out a case why they should be
recognized as participants. If we were to recognize them it would
not be on the basis that they would prove of assistance but only that
per chance they might discover some gem that has thus far eluded
all
others. This is not a sufficient basis to allow the application
especially when weighed against the prejudice to the respondents
who
on the eve of their hearing have an expectation that it will
proceedâ.
Appellantsâ Case.
[17] Mr Nelson submitted that the Tribunal had ignored the history
of the matter in the manner in which it exercised the discretion
to
recognize participants in terms of section 53(1)(c)(v) of the Act.
In support of his submission that the prior proceedings and
the
present proceedings could not be separated into discrete
transactions, Mr Nelson referred to Rule 34 of the Competition
Commission
Rules which provides âThe primary acquiring firm may
notify the Commission in Form CC6 that it has abandoned the intended
merger
transaction and has no intention to implement it.â
Mr Nelson submitted that no evidence was placed before the Tribunal
concerning the alleged withdrawal of the prior pleadings. There
was
also no evidence that a notice had ever been filed in terms of Form
CT8. There was thus no basis from which the Tribunal could
have
found that the âprior proceedings had been abandoned and with them
any right of participationâ.
[18] Mr Nelson then proceeded to attack the reasoning employed by the
Tribunal in refusing to recognize appellants in terms of section
53(1)(c)(v) of the Act. He referred to the manner in which the
Tribunal had interpreted this section in the light of Rule 46 of
the
Tribunal Rules and in particular Rule 46(1) which provides âAt any
time that the initiating document is filed with the Tribunal,
any
person who has a
material interest in the relevant matter
may
apply to intervene in the Tribunal proceedings by filing a notice of
motion in Form CT6 which must (a) include a concise statement
of the
nature of the personâs interest in the proceedings and the matters
in respect of which the person will make representations;
and
(b) be served on every other participant in the proceedingsâ (my
emphasis).
[19] Mr Nelson submitted that the Tribunal should have held that Rule
46 cannot be employed to interpret or limit the clear wording
of
section 53(1)(c)(v) of the Act which does not require that a person,
seeking the right to participate in large merger proceedings,
must
show âa material interest in a relevant matterâ. In this regard
Mr Nelson referred to the judgment of
Jali JA
in
Anglo SA
Capital (Pty) Ltd. Industrial Development Corporation of South Africa
and Another
2004 (6) SA 196(CAC)
at 16: âThe language of the
statute is clear. There is no reference to interest at all. The mere
requirement is that the party
must be recognized by the Tribunal as a
participant. The recognition could be on the basis of some other
grounds, other than an
interest in the matter as stipulated in the
common law. Even if it were to be argued that the party must have an
interest, such
interest is not qualified. In other words, there is
no threshold for the interest for a party to participate. In the
absence of
specified criteria for participation this Court should be
reluctant to read in a test such as âsubstantial and material
interest.
Where the legislature had sought to set out express
criteria for participation in the statute it had done soâ.
[20] Mr Nelson contended that the overriding concern in the present
case was whether a large merger could be justified on substantial
public interest grounds. The Tribunal accordingly had to use every
resource at its disposal to ensure that it arrived at an informed
decision on this critical issue. In his view, appellants could have
brought a unique and distinct prospectiveâ to the proceedings
in
that, as black empowered businesses, appellants could have provided
the Tribunal with evidence which would have contributed
to informed
decision regarding the substantial public interest grounds in the
present case. Accordingly, the Tribunal had failed
to exercise a
proper discretion in considering the basis for intervention by
applicant.
Evaluation.
[21]
The Nature of the Proceedings.
Mr Subel
contended that appellantâs arguments that the original merger
filing endured and that they were already participants in
the
proceedings was in direct conflict with the uncontested evidence
placed before this Court. In an answering affidavit on behalf
of
third to seventh respondent. Mr Hogben, the managing director of
seventh respondent stated:
âThe Commission adopted the view that the restructuring of the
proposed transaction resulted in a new merger for competition law
purposes. Without conceding the correctness of this view, the
merging parties prepared a complete merger file in respect of the
new
arrangementsâ¦.The new filing was lodged with the Commission on 11
December 2004. The second merger filing fee in the amount
of R250 000
(+ VAT) was paid by the merging parties to the Commission. A new
case numberâ¦. was allocated to the matter. When the
Commission made
its recommendation to the Tribunal on 20 January 2005 the Tribunal
similarly allocated a new case numberâ¦to the
matter.â
[22] Mr Hogben then continues:
âI am advised that, during its investigation of the new filing the
Commission contacted the deponent to the applicantsâ founding
affidavit to enquire whether he wished to make submissions regarding
the new filing. Save for a request for access to the merger
filing
(which was denied on the basis that it comprised ârestricted
informationâ in terms of the
Competition Act and
its Rules) neither
the deponent nor any other representative of either of the applicants
availed himself or herself of the opportunity
too make submissions to
the Commission as regards the new filingâ.
[23] These averments remained uncontested. As Mr Subel correctly
observed, the definition of party to a merger in
section 1(1)(xviii)
and acquiring firm in section 1(1)(i) of the Act required that there
be a new filing, having regard to the change in the composition
of
the shareholders of Bidco. Respondentsâ evidence, which was
uncontested by appellants, revealed that both, in terms of legal
form
and substance, a new application had been made to the Competition
authorities based upon a significantly different shareholding
in
Bidco. There was no evidential basis for the submissions of
appellants that the second proceedings were not a continuation of
the
first proceedings or that appellants were in any way led to believe
by way of the conduct of the Tribunal that they had an expectation
to
be admitted (or remain) as intervenors in the new proceedings.
The Application of
Section 53(1)(c)(v).
[24]
The
evaluation of appellants contentions with regard to the application
of s 53(1)(c)(v) requires an examination of the section as
well as
the judgment which analysed the scope thereof, namely
Anglo SA
,
supra. In his judgment in
Anglo SA Capital, supra
at 17,
Jali
JA
said
âIt is clear that Rule 46 sets out a higher threshold than the one
which is required in terms of the Act for a party to be able
to
participate. The threshold is the common law test which is relied
upon by the appellantsâ¦.In any event regulations or (rules
in this
case) which have been drafted by the legislature cannot be treated
together with the Act as a single piece of legislation,
nor can
these regulations be employed as an aid to the interpretation of the
Actâ¦.Thus, rule 46 cannot be used to interpret provisions
of the
Act and in particular, section 53(1) and to restrict express
provision of section 53(1)(c)â.
[25] The Court held that the discretion given to the Tribunal in
terms of section 53(1)(c)(v) could not be restricted to a decision
as
to whether an applicant had âa material interestâ in the matter.
The Court did not restrict its analysis to this point.
It held
further that the granting of leave to a party to participate might be
discretionary but that such discretion could not be
unfettered. It
had to be exercised in a judicial manner (at 21).
[26] In giving guidance
to the Tribunal and the exercise of its discretion, the Court said
the following:
âThe Tribunal (and the Commission where applicable) are the
critical bodies enjoined to regulate competition matters with a view
to discouraging restrictive practices, abusive dominance and
controlling mergers and thus promote the purposes of the Act as set
out in section 2. In seeking to achieve this goal they might even
institute their own investigation and call for their own evidence.
In so doing, the Tribunal is not confined to submissions or evidence
placed before it by the parties to the merger or people who
have âan
interestâ in the merger. In particular, the various consideration
which the Tribunal can take into account in assessing
whether a
merger is justified on public interest grounds in terms of section 12
A (3) make it clear that the Tribunal might admit
persons beyond
those persons or bodies who are directly or indirectly involved in
the mergerâ. at 17-18.
[27] In applying these considerations to the application by the
Industrial Development Corporation
to be admitted as an
intervenor, the Court said
âFirst respondent seeks the right to participate in the proceedings
based on the provisions of the Act, which seems to set out
criteria,
which do not necessarily limit access to persons having material or
substantial interest in the matter. For example, it
is apparent from
the Act that the Minister or a trade union may be notified of a
merger although they are not party to the merger
proceedings. They
may seek to participate even if they do not have a substantial
material interest contemplated in the cases referred
to above The
purpose thereof is to ensure that the objectives of the Act are
achievedâ. at 18.
[28] The approach adopted by this Court in
Anglo SA
, supra
can be summarized thus:
28.1. The requirement of material and substantial interest, which is
manifestly the appropriate test for ordinary litigation, was
too
restrictive a test to be applied by the Tribunal in the exercise of
its discretion in terms of section 53(1)(c)(v).
28.2 A party who is
able to ensure a material and substantial interest would fall within
the class of parties who may be admitted
upon the exercise of their
judicial discretion by the Tribunal.
28.3 A party who is
unable to show a material substantial interest in the matter may well
be admitted if it is able to provide evidence
of its ability to
assist the Tribunal in the latterâs consideration of the
application of the various purposes of the Act as contained
in
section 1 thereof to the relevant merger transaction.
[29] Significantly in both the
Anglo SA
, supra case as well
as the decision of the Tribunal in
Healthbridge (Pty) Ltd
. v
Digital Health Care Solutions (Pty) Ltd
: in re
Digital
Health Care Solutions (Pty) Ltd v Competition Commission and Another
2003
[1] CTLR 187(CT)] at 192-193, the applicants for
intervention set out in their founding affidavits the matters upon
which they sought
to make representations. They identified their
interests and specified the scope and nature of their proposed
participation. In
Anglo SA
, supra case, the applicant for
intervention provided a report by expert economists aimed at
disputing certain views expressed in
an economists report furnished
on behalf of the merging parties. The intervening applicants sought
to highlight material inadequacies
in this report.
[30] By contrast, in
the present case, appellants failed to provide the Tribunal or this
Court with any details as to the contribution
it might make to
proceedings before the Tribunal, were they to have been admitted as
intervenors. In the founding affidavit deposed
on behalf of
appellants by Mr Dewald Dempers, chief executive officer of first
appellant, he states with regard to first appellant
that it was
incorporated in 2000 as a subsidiary of Community Investment Holdings
and that it is a significant black owned health
care provider in the
private hospital market. He then states that âone of its guiding
principles is to establish the biggest active
operating BEE companies
(sic) in the healthcare sector and therefore it is seeking to expand
its infrastructure in the South African
Healthcare arena.â.
[31] Mr Dempers averred that first appellant âhas a valuable
perspective to present to the Tribunal being both a small participant
in the private hospital market in South Africa as well as being a BEE
participant in the market. Community Health Care therefore
has a
direct interest in the merger which, in its view amounts to the
acquisition by another BEE entrant with no prior expertise
in the
hospital industry of a shareholding in another of its competitorsâ.
Turning to second applicant Mr Dempers stated that
âTo the extent
that it is also a shareholder within the healthcare industry [second
appellant] shares the identical concerns with
those of the First
Applicant but as a shareholder, has certain further defined concerns
which have been addressed by both to the
First Respondent and to the
attorneys who represent all the other Respondentsâ¦â
[32] An examination of
the case made out by appellants reveals the following:
32.1. Appellants concrete concerns with the proposed merger, were
set out in a letter of 12 March 2004 by Mr A Norton, acting
on
behalf of appellants. Indeed Mr Dempers claims that this letter
summarized the âpreliminary concernsâ of first appellant.
An
examination of this letter reveals that each and every concern
specified therein is based on a transaction in which Medi-Clinic
would participate as a shareholder in Bidco. As already noted, the
restructured agreement provided for the acquisition by respondents
from Medi-Clinic of all the shares in Bidco previously earmarked for
Medi-Clinic with effect from 30 November 2004. Accordingly
Medi-Clinic would not be a shareholder in Bidco. Thus, the basis,
upon which the concerns set out in the letter of 12 March 2004
were
predicated, were no longer relevant to appellants, application for
intervention in the proceedings.
32.2. Mr Dempers asserts that the second appellant which was a quoted
company was also a shareholder within the Health Care industry,
that
it shared the identical concerns with those of first appellant but
âas a shareholder, has certain further defined concerns.â
An
examination of the letter addressed to the first appellant and to the
attorneys who represent respondents reveals no further
indication as
to what case second appellant sought to put before the Tribunal.
32.3 The Tribunal found
appellantsâ papers wanting, in that no information was provided to
the Tribunal as to what contribution
appellants could make to the
proceedings. The Tribunal found the founding affidavit to be vague
and the replying affidavit quite
unsatisfactory, in that âit did
nothing to address the serious criticisms raised by the respondents
in their answering affidavitâ
32.4 Significantly, the
Tribunal afforded Mr Dempers an opportunity to testify at the
hearing. After an evaluation thereof, it concluded
âMr Dempersâ
evidence in no way bolstered the application; rather it demonstrated
that when sweeping claims were probed the applicants
can offer no
more than speculationâ. The following passage of Mr Dempers own
evidence is instructive. Mr Dempers was asked by
Mr Subel, acting on
behalf of the respondents âAnd when you say that you have serious
concerns that this would give rise to substantial
prevention and
lessening of competition in the market, in what way?â He replied
âthe statement that I have just made, our concerns
have been shown
in the previous Tribunal hearing. Thatâs why your clients have gone
and re-engineered and restructured this whole
transaction. (sic) But
at this stage I still believe that it is exactly the same strategy as
what was on the table during the course
of the previous proceedingsâ.
32.5 Mr Dempers was
then pressed further by Mr Subel to be more specific. He stated âI
would like to know and see what the terms
and arrangements are as far
as those rights are concerned. Because if those rights entitles the
role players at the top structure
of First Rand Bank to have a
significant influence over the business of Bidco, the same players
have got a significant influence
over the business of Medi-Clinic.
It lays the ground for possible working togetherâ. Mr Subel then
asked: âReally what this
is about is you want access to information
so that you can personally access whether there is or isnât a
threat to competition,
to which Mr Dempers replied âI would like
access to information (sic) to be able to determine whether this
transaction is going
to influence us in a negative way, the way it
could possibly do going forward. Yes, you are 100% correct.â
[33] Although invited to specify what contribution appellants could
make to the proceedings, Mr Dempersâ testimony before the Tribunal
provided no indication as to how appellants sought to assist the
Tribunal in discharging its statutory duties. Mr Dempers was also
not able to provide evidence of any substantial material interest
which the appellants might have had in the proceedings, which were
designed with the objective of assessing whether the merger would
substantially prevent or lessen competition. Rather, Mr Dempers
conceded that the entire motivation for appellants application to
intervene was to protect their own commercial interests. Mr Dempers
said so specifically: âYes so my first consideration is definitely
the competitiveness and the future of our organization and not
necessarily the macro economics at playâ.
[34] For these reasons,
the Tribunal was correct to conclude that the set of considerations
presented by appellants as the basis for
their application were not
concerns which represented a genuine interest in terms of the
objectives of the
Competition Act. Assertions
about the first
appellants own commercial interest were insufficient to bring the
application within the scope of s 53(1)(c)(v)
of the Act. Nowhere in
the papers did appellants provide any indication of evidence it could
or would lead before the Tribunal.
Conclusion.
[35] When appellants case is carefully analysed, it amounts to the
following:
1. They wished to protect their own commercial interest,
notwithstanding that there was no indication on their papers as to
how the
merger would affect any of the objectives sought to be
promoted in terms of the Act.
2. Appellants sought to
contend that as, black economic empowerment companies, they could
make a contribution to the Tribunalâs
deliberations.
Notwithstanding countless invitations made for them to elucidate
thereon, they were unable to specify on what basis
such a
contribution could be made nor the content thereof.
[36] In my view, given the skeletal nature of their justification for
intervention, the Tribunal was more than justified in refusing
the
application. In coming to this conclusion it carefully evaluated the
evidence set out above and exercised its discretion in
a judicial
manner.
[37] There is a further
matter with which I need to deal. On 29 March, 2005, 5 days after
the hearing, a replying affidavit deposed
to by Ms Lisa Campbell was
received. It is a prolix document and whether it deserves
consideration, having been filed in so extraordinary
circumstances is
doubtful. Suffice to say it seeks to justify appellants conduct in
persisting with the consolidation application.
The short response is
that nowhere is a satisfactory reason given for why the appellants
acted in a manner clearly contrary to the
Registrarâs letter of 11
March 2005. The dispute about whether the Registrarâs letter was
of 10 or 11 March 2005 plainly being
irrelevant. Much of Ms
Campbellâs affidavit turns on allegations that third to seventh
respondents were uncooperative. The point
however, is that
directions were given to the parties by the Registrar on behalf of
the Judge President. There is an unacceptable
practice among some who
appear in this Court to treat these directions in a rather cavalier
fashion. Private dealings which seek
to circumvent directions are
unacceptable and cannot be counternanced.
[38] For these reasons,
the application is dismissed with costs, including the costs of two
counsel where two counsel were employed.
[39] Given the finding
of this Court that the consolidation application was brought
prematurely and in violation of the specific instructions
of the
Registrar in terms of the letter 11 March 2005, the consolidation
application is dismissed with costs which are to be paid
by the
applicants on an attorney and client scale, including the costs of
two counsel where two counsel were employed.
_____________
DAVIS J.P.
JALI J A & MALAN AJA concurred
Counsel for Appellants: AJ Nelson SC
and RM Pearse
Instructed by: Rothbart
Inc
Counsel for 3
rd
to 7
th
Respondents: A subel SC and Allan Coetzee
Instructed by: Edward
Nathan