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[2000] ZACAC 1
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Glaxo Wellcome (Pty) Ltd and Others v Terblanche N.O.and Others [2000] ZACAC 1; 2001 (4) SA 891 (CAC) (11 October 2000)
1
IN THE
COMPETITION APPEAL COURT
CASE
NUMBER
: 02/CAC/SEPTOO
DATE:
13 OCTOBER 2000
In the
matter between:
GLAXO WELLCOME (PROPRIETARY)
LIMITED
First Appellant
PFIZER LABORATORIES
(PROPRIETARY)
LIMITED
Second Appellant
PHARMACARE LIMITED
Third Appellant
SMITHKLINE BEECHAM PHARMACEUTICALS
(PROPRIETARY) LIMITED
Fourth Appellant
WARNER LAMBERT SA (PROPRIETARY LIMITED
Fifth Appellant
SYNERGISTIC ALLIANCE
INVESTMENTS
(PROPRIETARY) LIMITED
Sixth Appellant
DRUGGIST DISTRIBUTORS
([PROPRIETARY
LIMITED
Seventh Appellant
and
TERBLANCHE, DIANE, N.O.
First Respondent
FOURIE, FREDERICK, N.0.
Second Respondent
HOLDEN, MERLE, N.O.
Third Respondent
THE COMPETITION TRIBUNAL
Fourth Respondent
NATIONAL ASSOCIATION
OF PHARMACEUTICAL
WHOLESALERS
Fifth Respondent
NATIONAL WHOLESALE
CHEMISTS
(PROPRIETARY) LIMITED
Sixth Respondent
MIDLANDS WHOLESALE
CHEMISTS
(PROPRIETARY) LIMITED, t/a PHARM
PIETERMARITZBURG
Seventh Respondent
EAST CAPE
PHARMACEUTICALS LIMITED
t/a ALPHA PHARM EASTERN CAPE
Eighth Respondent
FREE STATE BUYING
ASSOCIATION
LIMITED, t/a ALPHA PHARM BLOEMFONTEIN
(KEMCO)
Ninth Respondent
PHARMED PHARMACEUTICALS LIMITED
Tenth Respondent
L'ETANGS WHOLESALE
CHEMIST CC,
t/a L'ETANGS
Eleventh Respondent
RESEPKOR (PROPRIETARY)
LIMITED
t/a RESKOR
Twelfth Respondent
PHARMACEUTICAL
WHOLESALERS
MAINSTREET 2 (PROPRIETARY) LIMITED,
t/a NEW UNITED PHARMACEUTICAL
DISTRIBUTORS
Thirteenth Respondent
J
U D G M E N T DELIVERED ON 13 OCTOBER 2000
DAVIS JP
:
1.
INTRODUCTION
On 28 August 2000 the
Competition Tribunal, acting in terms of section 59(1) of the
Competition Act, 89 of 1998 ("the Act"),
granted an order
of interim relief to the 5th to 13th respondents against appellants,
of whom the 1st to 5th appellants are pharmaceutical
manufacturers
and importers who have established a joint exclusive distribution
agreement for their products, the 6th appellant
is a company formed
by these manufacturers to establish a distribution agency and the 7th
appellant is the distribution agency.
In
granting an order the Tribunal justified its decision thus:
"We
find that an interim order is necessary in this case to prevent the
purposes of the Act from being frustrated. The main
purpose of the
Act is to promote and maintain competition. The effect of the
prohibited practice found in this case is to lessen
competition in
the distribution of pharmaceutical products. It is our view that it
is reasonably necessary for us to give the interim
relief order, as
failure to do so will be allow (sic) the continuous frustration of
the purposes of the Act. If we do not grant
the interim order and the
claimants subsequently get a final order the competitive process and
structure for the distribution of
the respondents' manufacturers
products will have been so skewed in favour of DD (7th appellant in
the present appeal) and the
respondents, that a final order may not
be able to adequately address the effects of DD's conversion on the
nature of competition
in the distribution market."
Accordingly the Tribunal
made the following order:
1. The claimants' application for interim relief in
terms of
section 59
of the
Competition Act 89 0f
1998 is granted in
respect of the respondents' alleged contraventions of section 4(1)(a)
of the Act.
Respondents supply their products directly
to the claimants and other wholesalers on term and conditions
similar to those that
apply to transactions between them and the
claimants and other
wholesalers immediately before the conversion
of DD to a joint exclusive distribution agency for their products.
The order is to remain in force until the
earlier of ;
conclusion of the hearing into the prohibited practices
alleged by the claimants to have been committed by the respondents;
or
(ii)
the date that is six months after the date of the issue of the
order.
The appellants have now
launched an urgent application to suspend the operation and execution
of this order pending the final determination
of an application for
review and the setting aside of the Tribunal's decision and order in
that matter and an appeal against such
decision and order.
APPELLANTS' CASE
Mr
Loxton
, who appeared
together with Mr
Unterhalter
and Mr
Wilson
, on behalf of
appellants, submitted that this Court has a power to suspend the
operation and execution of any decision of the Tribunal.
In his view
this would be consistent with the inherent jurisdiction of the High
Court to stay the execution of a judicial order
pending review or
appeal proceedings. As
Corbett JA
(as he then was) stated in
SAFCOR FORWARDING (PTY) LTD v
NATIONAL TRANSPORT COMMISSION
1982(3) SA 654 (A) at 675C-E:
“
The
decisions of public bodies or officialdom sometimes bear hard on the
individual. The impact thereof may be sudden and devastating.
Therefore, as in the case of many other types of litigation,
applications for the review of such decisions may require urgent
handling and in proper circumstances the grant of interim relief."
Mr
Loxton
submitted that the
High Court will grant interim relief in circumstances where (a) the
applicant can show
prima facie
that its rights have been
infringed and (b) the balance of convenience favours the granting of
such interim relief. See
SAFCOR FORWARDING (PTY) LTDsupra
at
674-675;
SOUTH CAPE CORPORATION (PTY) LTD v ENGINEERING MANAGEMENT
SERVICES (PTY) LTD
1977(3) SA 534 (A) at 545.
He thus contended that
the same considerations should be applied in the present dispute to
suspend the decision of
the Tribunal. The Tribunal's decision
should be suspended on the grounds that appellants have a
prima
facie
right to the setting aside of the Tribunal's decision and
order on review and or on appeal and that the balance of convenience
favours
the suspension of the Tribunal's order.
Before it is possible to
canvass the merits of these submissions and hence the substantive
justification for the appeal, it is necessary
to examine a
jurisdictional argument which was raised by respondents.
THE JURISDICTION OF
THIS COURT IN SUSPENDING THE OPERATION OF AN ORDER IN TERMS OF
SECTION 59(1)
Mr
Nelson
, who appeared
together with Mr
Van Dorsten
on behalf of respondents, referred
to section 38(2)(A)(d) of the Act which provides that 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
(my emphasis). Accordingly the Tribunal's interim order must
be subject to either a review or an appeal before the Competition
Appeal
Court may consider the application to suspend the operation
and execution of the order.
When the application for a
suspension of the Tribunal's order was launched by way of notice of
motion, it was common cause that
no application had been made to
review the order of the Tribunal. An appeal however had been
launched.
Accordingly, Mr
Nelson
referred to section
37(1) (b) of the Act which provides that the Competition Appeal Court
may consider an appeal arising from the
Competition Tribunal in
respect of
(i)
any of its
final decisions other than a consent order made in terms of section
63; or
(ii) any of its interim
or interlocutory orders that may, in terms of the Act, be taken on
appeal.
Section
58 of the Act which sets out the right of appeal to the Competition
Appeal Court,makes
no mention of any interlocutory or interim decision which may be
taken on appeal.
Thus there is no express provision which recognises an appeal of an
order granted by the
Tribunal in terms of section 59.
Mr
Nelson's
contention that a
decision of the Tribunal in terms of section 59 is not appealable is
supported by a decision of
Lewis P
on behalf of the Tribunal in
SOUTH AFRICAN RAISINS (PTY) LTD v SAD HOLDINGS LTD
(Case No:
16/IR/DEC 99). In deciding that a section 59 decision was not
appealable,
Lewis P
said:
"The
statute clearly does not accord a right of appeal to the Competition
Appeal Court in respect of Section 59 hearings. The
claimants are
correct in submitting that neither section 17 nor section 58 - or,
for that matter, any other provision in the Act
- provides for an
appeal against an order of the Tribunal for interim relief. Moreover,
the claimant's contention that the common
law and High Court
treatment of interim relief supports their interpretation of the Act,
is well-founded. In fact, it would appear
that the legislature
intended section 59 to provide a remedy similar to a simple
interlocutory interdict, which at common law is
not appealable, as
opposed to an order that finally and definitively disposes of the
matter."
In adopting this approach,
Lewis P
attempted to reconcile the provisions of the Act with established
common law as articulated by
Howie JA
in
GUARDIAN NATIONAL
INSURANCE COMPANY LTD v SEARLE NO
1999(3) SA 296 (SCA) at 301-302,
namely:
"Where
this approach has been relaxed (the right to appeal the interim
order) it has been because the judicial decisions in
question,
whether referred to as judgments, orders, rulings or declarations had
three attributes. First they were final in effect
and not susceptible
of alteration by the court of first instance. Secondly they were
definitive of the rights of the parties, for
example, because they
granted a definitive and distinct relief. Thirdly, they had the
effect of disposing of at least a substantial
portion of the relief
claimed."
An order granted by the Tribunal in
terms of section 59 does not represent a final order because it
enures only for for a limited
period. Furthermore where a person
complains against a prohibited practice, or where the complaint is
initiated by the Commissioner
in terms of section 44, an inquiry
which follows an investigation in terms of section 45 and which would
then proceed in terms
of sections of 50 or 51 will have to canvass
the same issues which were examined by the Tribunal when it awarded
interim relief
in terms of section 59. On the basis of this
legislative scheme the order granted by the Tribunal does not meet
with the three
fundamental attributes to which
Howie JA
in the
GUARDIAN NATIONAL INSURANCE
case,
supra
had made reference.
Mr
Loxton
submitted that although not all interim orders
under section 59 are appealable, the words "interim or
interlocutory decisions
that may, in terms of this Act, be taken on
appeal" should be
interpreted to be congruent with the common law. Hence
interpretative guidance should be obtained from the test set out in
ZWENI v MINISTER OF LAW AND ORDER
1983(1) SA 523 (A) at 533
that judgments and orders are appealable which have the following
attributes:
"first
a decision must be final in effect and not susceptible of alteration
by the court of first instance; second, it must
be definitive of the
rights of the parties; and third, it must have the effect of
disposing of at least a substantial portion of
the relief claimed in
the main proceedings."
Mr
Loxton
contended that an interim order in terms of section 59
complied with all these requirements. It was final in effect and was
not
susceptible of alteration by the Tribunal. Unlike an interim
interdict granted in terms of the common law, a section 59 order
could
not be altered by the Tribunal on application by either of the
parties or
mero motu
before the end of the six-month period prescribed in terms of
section 59 or a hearing by the Tribunal which would flow from a
section
44 complaint, whichever is the earlier.
As the
section 59 order was not capable of anticipation nor was there any
guarantee either that the Competition Commissioner would
refer the
complaint made in terms of section 44 to the Tribunal, or that the
complaint would be referred on the same basis as the
grounds upon
which the Tribunal granted the interim order in terms of section 59 ,
it could not be contended that such an order
effectively functioned
in the same fashion as an interim order granted in terms of the
common law.
A section 59 order granted a distinct
and definitive relief and accordingly the second element of the test
was met. Mr
Loxton
was
constrained to argue that the third element of the
ZWENI
test was not applicable to section 59 proceedings as in effect
a section 59 order was a parallel procedure to that initiated in
terms of the complaint under section 44. Accordingly the
consideration of "expense and convenience" that lie at the
root
of this third requirement, do not apply in respect of section 59
proceedings and for this reason Mr
Loxton
submitted that this element was not applicable in
proceedings
governed by section 59.
Mr
Loxton
attempted to bolster this argument by reference to section 34
of the Constitution of the Republic of South Africa 108 of 1996,
namely
that everyone has the right to have any dispute that can be
resolved by the application of law decided in a fair public hearing
before a court or where appropriate an independent and impartial
Tribunal or forum. Thus when the empowering statute is unclear
to
whether a right to appeal lies to a court of law, he contended that
the Constitution obliges a court which is vested with judicial
scrutiny of an administrative organ to hear appeals from decisions of
that organ. The determination of this question does depend
upon an
examination of the architecture of the Act. Once a complaint is
initiated in terms of section 44, an investigation takes
place
pursuant to section 45
et seq
. In terms of section 50, the
Competition Commission can refer the dispute to the Tribunal or issue
a notice of non referral in
terms of section 50 of the Act. If a
decision is taken not to refer, the complainant can refer the matter
in terms of section
51. Then a determination as to whether a
prohibited practice has been established will be examined by the
Tribunal. To this extent
thus the hearing by the Tribunal will
dispose of the substance of the complaint which was initially
canvassed in terms of section
59. For this reason it is my view that
the
ZWENI
test is
inapplicable to the order granted under section 59. The matter will
be canvassed again by the Tribunal save in a case where
the
complainant does not want to take the matter further (in the event of
non referrral) .For reasons which I shall set out presently,
the
ambiguity, if any, should be resolved in favour of respondents.
In
so far as the recourse to section 34 of the Constitution is
concerned, appellants have already had a right to have the dispute
resolved by an independent and impartial Tribunal, the Competition
Tribunal, which has been set up under the Act for the precise
purpose
of dealing with matters, such as the granting of orders in terms of
section 59 of the Act. The members of the Tribunal
were appointed for
their expertise in the field of competition law and the very purpose
of the Tribunal was to ensure an impartial
adjudicatory process
particularly regarding decisions of the applicable administrative
body , being the Competition Commission.
To extend a constitutional right to a right of appeal
in the context of the scheme of interim orders set out in the Act
would do
far greater violence to the architecture of the Act than to
any right of the
appellants to subvert the purpose of an interim order
by an attempt to wrench a right of appeal from the provisions of
section 34.
In short section 34 of the Constitution would trump any
legislative attempt
to eradicate an appeal in a dispute for which an
appeal is appropriate as opposed to an interim order which does not
meet the test
for an appeal.
In order to justify these
conclusions it is necessary to
examine, albeit briefly, the purposes of section 59.
Lewis
P
provides a crisp outline thereof in the
SOUTH AFRICAN RAISINS
(PTY) LTD
case
supra
,
"Our
conclusion that an interim relief order in terms of section 59 is not
appealable, serves to avoid an outcome that would
frustrate the whole
purpose of providing an interim relief remedy in competition matters.
If the granting of an interim order in
terms of section 59 were
appealable and the interim order stayed, as is argued by the
respondents, this would destroy the main
object of section 59 -to
provide interim relief pending final determination of the complaint
following a full investigation by
the Commission."
In short, the purpose of
section 59 is to ensure that serious and irreparable harm to a
complainant would be prevented and that
the very purposes of the Act
would not be frustrated by the perpetuation of a prohibited practice
prior to the section 44 complaint
running its legislative
course.
En passant, the
Competition Second Amendment Bill 2000 which was before Parliament
when this matter was argued provides for a right
of appeal against a
section 59 order (section 49C in the Bill) ‘ that has a final
or irreversible effect.’ The explanatory
memorandum cryptically
states that ‘the Act does not clearly address whether an
interim relief order may be appealed. The
proposals clarify this
point.’
In terms of section 1(2) the Act must
be interpreted in a manner that is consistent with the Constitution
and which gives effect
to the purposes set out in section (2).
Section (2) makes clear that the purpose of the Act is to promote and
maintain competition
in the Republic in order,
inter alia
, to
promote the efficiency, adaptability and development of the economy
and to provide consumers with competitive prices and product
choices.
Were an act, which on clear evidence has been found to constitute a
prohibited practice, be allowed to continue until
a final
determination takes place the very purpose of the Act itself would be
undermined. Accordingly, to the extent that there
may be any
ambiguity in the Act, this would justify the conclusion to which I
have come.
The question then arises
to the reason for a right to appeal when the order in terms of
section 59 is subject to a review; that
is the reason as to why a
different conclusion holds in the case of an application for a review
of a section 59 order. The Constitution
establishes a new regime of
legality in South Africa. Consequently it is understandable that an
application for a review of a decision
in terms of section 59 could
give rise to an appeal to this Court to suspend the section 59 order
of the Tribunal. Were the Tribunal
to have acted in a manner which
would justify a review, that is a decision that could be questioned
on any number of review grounds
based on the principle of legality,
it would be legally proper to consider a suspension of such an order.
An order which is not
congruent with our newly established principle
of legality should not be allowed to stand, no matter that its
purpose is to protect
a clear interest recognised by the Act during
an interim, defined period.
The question therefore arises to the
meaning of ‘subject to a review’ . Mr
Unterhalter
,
who argued this aspect of the case on behalf of appellants, submitted
that once there was a right to a review, then it could be
said that
the application to suspend the operation in execution of an order in
terms of section 59 was the subject of a review
or appeal in terms of
section 38(2)(A)(d). This cannot be correct. As Mr
Unterhalter
correctly submitted, were the Act to have denied a
party a right to have such a decision reviewed, that provision in the
Act would
be unconstitutional. In short, all such decisions must
inherently be subject to a right of review. As such Mr
Unterhalter's
reading of section 38(2)(A)(d) would amount to an
unnecessary tautology. The section however makes sense when it is
read to mean
that
a
review has been launched ; that is a
specific review proceeding against an order in terms of section 59
.This would then give rise
to specific review proceedings, as opposed
to a general constitutional or common law right of review.
At the time that the
proceedings were launched, no such application for review had been
brought. After the hearing was over, appellants
launched an
application on 15 September 2000 to review the Tribunal's order.
Accordingly appellants now argued that to the extent
that the
launching of review proceedings was a prerequisite to this Court
being able to exercise jurisdiction in terms of section
38(2)(A)(d)
to suspend the operation in execution of the decision pending review
proceedings, that requirement had been satisfied
Owing to this development after judgement had been
reserved , I instructed the Registrar of the Court to advise the
parties that
they had a further week within which to file additional
heads of argument which pertained to this defined issue. Both sides
took
advantage of this opportunity and the Court is indebted to
counsel on both sides for their considerable assistance.
THE SUBSEQUENT REVIEW APLICATION AND ITS EFFECT ON PROCEEDINGS
Mr
Loxton
submitted in his
supplementary heads that, to the extent that section 38(2)(A)(d)
requires an applicant to re-launch review proceedings
the defect
could be cured by a later application. In this he relied on
SMITH
v KWANONQUBELA TOWN COUNCIL
1999(4) SA 947 (SCA) at 954D where
Harms,JA said,
"Apart
from making perfectly good sense and being practical, it is legally
sound. A party to litigation does not have the right
to prevent the
other party from rectifying a procedural defect. Were it otherwise
one party would for instance not be entitled
to amend a pleading,
especially not after the filing of a valid exception. The
ratification in the present instance does not affect
any substantive
rights…"
Smith's
case dealt with the
question of the validity of a resolution authorising a person to
institute legal proceedings on behalf of a
council. Thus this case
dealt , inter alia, with the issue of whether a person who wrongly
believed that he had the necessary authority
to act on behalf of a
town council and so intended to act had the necessary
locus standi
if such actions were ratified with retrospective effect. Of
particular relevance was the question to whether reliance could be
placed upon a ratification which took place after the objection to
the necessary authority had been taken. The judgement then deals
with
the issue of ratificationn
ex post facto
the objection . Harms
JA summarised the position thus at 954 F-G,
“In
SOUTH
AFRICAN MILLING
... the matter was also approached from a
procedural point, namely that a party is not entitled to make out a
case in reply and
that a ratification relied upon in reply infringes
this rule. This part of the
ratio
is strictly speaking not
apposite to the present case because the issue here was decided upon
a stated case which did not this court...
in
MOOSA AND CASSIM
NNO
has clearly adopted, as correct, the refutation in
BAECK &
CO
... of the approach and to state that I fully subscribe to that
view."
This is a different problem from that
confronting this court. In the present case the question arises to
whether it is competent
for this Court to grant an order suspending
the operation of an order of the Tribunal. The court's jurisdiction
in this regard
is dependent upon whether the initial order of the
Tribunal is subject to a review. When appellants came before this
Court it had
not launched a review. The papers were not drawn on the
basis of a review; respondents were never given an opportunity to
answer
the case as to whether a
prima facie
case for success in
an application for review had been made in that the very application
for review came after the court had reserved
judgment on the initial
application. For this reason the decision in
SMITH's
case
regarding ratification of authority which in turn relates to
questions of the law of agency cannot be extended to provide
authority for the submission urged by Mr
Loxton
, namely that
the time of the launching of the application for a review of the
Tribunal’s order is irrelevant to the problem
of
jurisdiction.The improper basis upon which appellants initially
approached this Court is clearly evident in the initial founding
affidavit of Mr Randall, the financial director of second applicant.
Notwithstanding that no application for review of the Tribunal's
order had been launched when he made his affidavit, he sets out
inter
alia
,
"The
grounds on which the applicants seek to review and set aside the
Tribunal's order."
Only on 15 September 2000
was an affidavit deposed to by Mr Randall in which he set out the
precise reasons for the relief sought,
that is a review. It is so
that the initial founding affidavit appeared to conflate an
application toappeal and one to review without
ever applying for a
review of the Tribunal’s action taken in terms of section 59 of
the Act. But the point of principle is
this: when a party comes
to court without launching an application for a review and the case
is then argued by both parties
on the basis of an absence of an
application for a review and judgement is then reserved on that
basis, it would work substantial
prejudice if the decision is then to
be taken on the grounds of a later application for a review, the very
merits of which could
have a significant bearing upon the outcome of
the decision reagrding the application to appeal the section 59
order.
Without a proper application for
review before the Court coupled with the necessary papers, it is
difficult to conceive how a court
can reasonably be expected to
decide the matter on the basis of the very same test set out by Mr
Loxton
as to whether it would be competent to suspend the
initial order on the basis of balance of convenience.It is for this
reason that
the dictum of Potgieter JA in
Thermo RadiantOven Sales
(Pty)Ltd v Nelspruit Bakeries (Pty)Ltd
1969 (2) SA 295(A)
at 310
is applicable, ’’ .. the crucial time for determining the
jurisdiction of a court to entertain an action is
at the time of the
commencement of the action.” The test is whether the court had
jurisdiction when the proceedings commenced.
Coin Security Group
(Pty)Ltd v Smit NO andOthers
1992(3)SA 333(A) at 340A-B.
In view of the conclusion
to which I have come regarding the lack of jurisdiction to hear such
an appeal, it is unnecessary for
me to express any view on the merits
of the substantive case as set out by appellants.
ORDER
For the reasons given,
the application to suspend the operation in execution of the
Tribunal's order (under Case No 68/IR/JUN00
dated 28 August 2000) is
dismissed with costs, including costs of two counsel.
DAVIS, JP