Novartis SA (Pty) Ltd and Others v Mainstreet 2 (Pty) Ltd and Others (CAC) [2001] ZACAC 1; [2001-2002] CPLR 74 (CAC) (14 June 2001)

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[2001] ZACAC 1
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Novartis SA (Pty) Ltd and Others v Mainstreet 2 (Pty) Ltd and Others (CAC) [2001] ZACAC 1; [2001-2002] CPLR 74 (CAC) (14 June 2001)

COMPETITION
APPEAL COURT OF THE REPUBLIC OF SOUTH AFRICA
CASE
NO. 07/CAC/DEC00
In
the matter between:
NOVARTIS
SA (PTY) LTD
1
st
Appellant
ROCHE
PRODUCTS (PTY) LTD
2
nd
Appellant
BOEHRINGER
INGELHEIM (PTY) LTD
3
rd
Appellant
BRISTIOL
MYERS SQUIBB (PTY) LTD
4
th
Appellant
SCHERING-BERLIN
(PTY) LTD t/a BERLIMED
5
th
Appellant
BAYER
(PTY) LTD
6
th
Appellant
ROLAB
(PTY) LTD
7
th
Appellant
HOECHST
MARION ROUSSEL LTD
8
th
Appellant
INTERNATIONAL
HEALTHCARE DISTRIBUTORS
(PTY)
LTD
9
th
Appellant
and
NEW
UNITED PHARMACEUTICAL
DISTRIBUTORS
(PTY) LTD (UPD) (FORMERLY
MAINSTREET
2 (PTY) LTD)
1
st
Respondent
NATAL
WHOLESALE CHEMISTS (PTY) LTD t/a
ALPHA
PHARM DURBAN
2
nd
Respondent
MIDLANDS
WHOLESALE CHEMISTS (PTY) LTD
T/a
ALPHA PHARM PIETERMARITZBURG
3
rd
Respondent
EAST
CAPE PHARMACEUTICALS LTD t/a
ALPHA
PHARM EASTERN CAPE
4
th
Respondent
FREE
STATE BUYING ASSOCIATION LTD t/a
ALPHA
PHARM BLOEMFONTEIN (KEMCO)
5
th
Respondent
PHARMED
PHARMACEUTICALS LIMITED
6
th
Respondent
L’ETANGS
WHOLESALE CHEMIST CC
t/a
L’ETANGS
8
th
Respondent
RESEPKOR
(PROPRIETARY) LIMITED
t/a
RESKOR
9
th
Respondent
JUDGMENT
: DELIVERED JUNE 2001
________________________________________________________________
DAVIS
J.P.
On
11 October 1999 respondents brought an application for interim relief
against appellants in terms of section 59 of the Competition
Act 89
of 1998 (the Act) on 20 December 1999. On 17 February 2000 the
Competition Commission accepted respondents’ complaint.
However
appellants applied to the Competition Tribunal (‘Tribunal’) to
dismiss the application on the basis that respondents
lacked
locus
standi
at
the time of the launching of the application.
The
Tribunal found that acceptance by the Competition Commission was a
pre-requisite for a valid complaint in terms of section 59
and that
accordingly the fact that the Competition Commission had not
accepted the complaint at the time that the application was
launched
by respondents was in itself fatal to the application. Having held
that the respondents did not have the
locus
standi
to
bring the application it dismissed the application.
Pursuant
thereto the Tribunal made the following cost order:
“
1. The respondents who were parties
to the dismissal application (the first, second, third, fourth,
sixth, ninth, twelfth, thirteenth
and fourteenth) are awarded costs
of that application as follows –
In
the case of the sixth respondent the costs of one attorney
In
the case of the other respondents the costs of two representatives
is authorised provided that the fees of the additional
representative
may not exceed one half of the first representative.
The
costs of the main application are reserved to be determined at the
same time as the costs of the renewed interim relief application
are
determined provided that –
The
applicants file and serve the renewed application by no later than
31 January 2001; and
If
they do not the respondents will be entitled to approach the
registrar to have this matter set down to determine costs
If
any respondent to the present main application is not cited as a
respondent in the renewed application such respondent may also
approach the registrar to have the matter set down to determine its
costs.”
The
fifth appellant then appealed to this Court against the Tribunal’s
order that respondents were not liable to pay fifth appellants
costs
in the main application.
The
respondents then cross-appealed against the decision of Tribunal on
the basis that the Tribunal had erred in finding that acceptance
by
the Competition Commission was a pre-requisite for an applicant to
have
locus standi
to apply for interim relief in terms of section 59 of the Act.
THE
APPEAL.
Mr
Eiser, who appeared on behalf of fifth appellant, submitted that the
decision of Tribunal in dismissing the main application on
the
grounds that the appellant had not complied with section 59 read with
section 44 of the Act was a final decision based upon the
‘selfstandige en afdoende verweer’ See
Masuku
and Another v Mdlose and Another
1998(1)
SA 1 (SCA) at 11 H-I. He further submitted that it was not competent
for the Tribunal to order another tribunal which would
hear a renewed
application to decide the costs of the main application. As the
Tribunal is a creature of statute and its powers
were sourced in the
statute, it could not decide
mero
motu
and outside the
powers granted to it in terms of the Act to make such an order.
Mr
Nelson, who appeared together with Mr van Dorsten on behalf of
respondents, submitted that the cost order made by the Tribunal
was
justified in law. He referred to section 57(1) of the Act which
provides that, subject to sub-section (2) and the Tribunal’s
rules
of procedure, ‘each party participating in the hearing must bear
its own costs.’ Section 57(2) of the Act did not alter
this
principle in the context of the present dispute, because it provides
the Tribunal with a discretionary power to award costs
in hearings
consequent upon a referral of the complaint in terms of section
51(1). Accordingly the Tribunal is empowered with a
discretion to
make a costs order which must be exercised judicially after
consideration of all the relevant facts. As
Van
Niekerk J
said in
Ganlan
Investments (Pty) Ltd and Another v Trilion Ltd and Another
1996(3)
SA 692(C) at 700 ‘It is trite law that an award of costs is a
matter wholly within the discretion of the trial court and
it must be
exercised judicially under consideration of the facts of each case’.
Mr
Nelson also referred to the reasoning employed by the Tribunal in
arriving at its decision. It found
inter
alia
that the
regulations of the Competition Commission may well be
ultra
vires
that is in the
interests of the parties to deal with the matter, and further that
the requirement for acceptance by the Commission
appeared to escape
all the parties and not merely the respondents, who had they been
alerted, may well have corrected the defect
before further costs were
incurred. Accordingly the Tribunal concluded: “We believe that the
interest of justice would not be
served by making a costs award in
respect of the main application at this stage and costs in this
respect should be reserved”.
The
reasoning employed by the Tribunal reflected both a careful
consideration of all the facts and a judicial exercise of its
discretion
in coming to ia decision not to award costs in respect of
the main application. Mr Nelson also referred to Rule 58(1) of the
Tribunal
Rules which do not place any limitations on the Tribunal’s
discretionary power to make an order for costs. Accordingly if a
renewed
application was heard there would be nothing to prevent the
Tribunal seized with that application from allocating costs based on
the evidence at its disposal. If the question of costs in the main
application were to arise, the Tribunal would, have the jurisdiction
to order costs because the first application would be closely
associated with the renewed application.
As
Price AJA
said
in
Sonia (Pty) Ltd v Wheeler
1958(1) SA 555 (A) at 562:
“Mr Lazarus argued that even if the Eastern Districts Court has
jurisdiction to order cancellation of
the contract, its jurisdiction
does not extend to the money claimed for a refund of the price paid
and costs. He contends that the
claim for the cancellation of the
sale cannot be used as a stepping stone to the money claimed so as to
give the court extra jurisdiction.
It is argued that if the money
claims stood alone and there was no claim for cancellation, the Court
would not have jurisdiction.
Assuming this to be so, assuming that
the Eastern Districts Court could not
entertain a claim for a
refund of the purchase price if that claim stood alone it
nevertheless seems to me that every consideration
of convenience and
common sense indicates that were such a money claim if so closely
associated with the claim for cancellation of
the contract, as in
this case, and is a consequential claim, following on the
cancellation, the same Court which has jurisdiction
to decree
cancellation should have jurisdiction to hear the money claim for a
refund of the purchase price, and to order costs.
A claim for costs
is no less a money claim than the claim for refund of the price. A
claim for costs does not differ from any other
claim sounding in
money”.
In
the present dispute, the costs of appellants’ incurred in the
dismissal of respondent’s application on the basis that it lacked
locus standi
to so bring it, were awarded against respondent.
The
only dispute insofar as costs are concerned, turns on costs relating
to the main application. Viewed in this context it is clear
that the
Tribunal envisaged that the main application would be resuscitated by
a fresh application brought by respondents on the
basis that the
Competition Commission accepted the complaint. In the event that such
an application was not brought, the Tribunal’s
order afforded an
opportunity to the successful party to approach the registrar to have
the matter set down to determine the costs
of the ‘decided
application’.
The
order made by the Tribunal was not a final order. It envisaged the
determination of a costs order insofar as the main application
was
concerned after a renewed application had been brought. The general
rule that costs follow the event is subject to the overriding
principle that all costs are in the discretion of the court provided
the discretion is exercised judicially (see
The
Laws of South Africa
vol. 3
at 292 and the cases collected therein).
In
my view, there is no merit in the argument that the Tribunal
exercised its discretion in judicially or that the order was of a
final nature which precluded appellant from claiming costs at the
later stage.
The
Cross Appeal
.
The
basis of the cross-appeal can only be understood after an examination
of the reasoning employed by the Tribunal. At the time
of the
application, section 59 provided: ‘At any time, whether or not a
hearing has commenced into an alleged prohibited practice,
‘a
person referred to in section 44 may apply to the Competition
Tribunal for an interim order in respect of that alleged practice,
and the Tribunal may grant such an order if……’
Section
44 provides: ‘A complaint against a prohibited practice by a firm
may be initiated by the Commissioner, or submitted to
the Competition
Commission by any person in the prescribed manner.
In
determining what was meant by ‘submitted in the prescribed manner’,
the Tribunal referred to the Rules of the Competition Commission.
In
particular, Rule 2(f)(ii) defines a complaint as a matter that has
been submitted to the Commission in terms of section 44 and
accepted
by the Commission in terms of Rule 17.
Rule
17(1) provides ‘A person other than the Commissioner by filing a
completed Form CC 1, may submit a matter to the Commission,
if
if
the matter concerns a practice that meets both of the tests set out
in Rule 16(a) & (b);
the
submission is not frivolous; and
the
Commissioner has not initiated or accepted a complaint in respect of
that practice.
Rule
17(2) provides ‘upon receiving a submission in terms of sub-rule
(1), the Commission must either
accept
the submission as a complaint in terms of section 44; or
(b) notify the person who made the
submission that the Commission has rejected the submission as a
complaint, and provide a brief
written explanation for that decision.
The
Tribunal found that Rule 17(2) read with Rule 2(f)(ii) supported the
conclusion that a complaint was only submitted to the Competition
Commission as defined once it had been duly accepted by the
Commission. For this reason the phrase in section 59 “a person
referred
to in section 44” meant a person who had lodged a
complaint with the Commission which had then been accepted by the
Commission
and thus had become a complaint as defined. As the
Tribunal said in its determination [t]he statute ‘mandates the use
of regulation
to provide the procedure for the manner of submission
of complaints’. Thus ‘on an interpretation of the rules,
acceptance by
the Commission is a pre-requisite for a valid complaint
and that the application was launched prematurely’.
Mr
Nelson submitted that there were two bases in terms of which this
finding of the Tribunal should be rejected, namely that it had
failed
to properly interpret the words, “submitted in the prescribed
manner” as contained in section 44 and that the Competition
Second
Amendment Act 39 2000 (‘the Amendment Act’) which came into
effect on 1 February 2001 retrospectively amended the provisions
of
section 59 read together with section 44 so that, as the
retrospective position now applied, the cross-appeal must succeed.
THE
MEANING OF SUBMITTED IN THE PRESCRIBED MANNER.
Mr
Nelson submitted that the word ‘prescribed’ was defined in
section 1 as meaning ‘prescribed from time to time by regulation
in
terms of section 78.’ Section 78 provides that the Minister, by
notice in the Gazette may make regulations that are required
to give
effect to the purposes of the Act. The rules of the Competition
Commission were promulgated in terms of section 21(4) and
section 78
of the Act and therefore he argued it was not proper to give meaning
to the phrase ‘in the prescribed manner’ in
section 44 by
reference to rules which were not part of the definition of
‘prescribed’ in terms of section 1.
The
logic of this argument would lead to a rejection of a reference to
rules promulgated under any section other than s 78 which prescribe
any procedures. But s 21(4) does precisely that. It provides that the
Minister may, in consultation with the Commissioner, and by
notice in
the Gazette
prescribe
regulations
for matters
relating to the functions of the Commission including (a) forms (b)
time periods (c) information required (d) additional
definitions (e)
filing fees (f) access to confidential information (g) manner and
form of participation in Commission procedures;
and (h)
procedures
.
To the extent that section 1 does not refer to section 21(4), it can
only be concluded that this was an omission on the part of
the
legislation. While the court should be reluctant to come to the
conclusion that there is a clear omission in the Act rather
than
seeking another possible plausible interpretation, in this context it
is clear that s 1 should have referred to the two sections
in trms of
which regulations can be prescribed. When the phrase ‘in the
prescribed manner’ was employed in section 44 it was
intended that
the complaint be lodged in terms of a procedure set out in rules
promulgated by the Minister (in this case in terms
of section 21(4)).
For this reason I can find no merit in respondents argument.
Mr
Nelson further submitted that were the Tribunal’s reasoning to be
employed, it would result in only one complainant being able
to bring
an application for interim relief in terms of section 59. The person
referred to in section 44 would be a person who had
brought a
complaint which had been submitted as defined to the Commission. In
terms of Rule 17(1)(c), a person, other than the Commissioner
by
filing a completed form CC 1 may submit a matter to the Commission…if
the Commission has not initiated or
accepted
a complaint in respect of that practice.
(my emphasis).
Mr
Nelson submitted that if the Commissioner had accepted a complaint in
respect of
that
practice
by complainant A, all other complainants would be precluded from
bringing an application in terms of section 59 in that their
complaint could never be accepted in terms of the Rules.
As
Mr Puckran, who appeared together with Mr Meyer on behalf of first to
fourth and sixth to ninth appellants, submitted this result
would not
necessarily be capricious in that as the Tribunal found, to hold
otherwise would lead to the danger that the complaint
is an incohate
fact until acceptance by the Commission. An applicant whose
submissions still awaited acceptance by the Commission
could proceed
and possibly obtain interim relief from the Tribunal only to discover
subsequently that the Commission had refused
to accept the complaint
thereby nullifying it. This possibility gives meaning to the Rule
regarding acceptance of the complaint,
the absence of which could
undermine the certainty of the proceedings. As long as acceptance of
the complaint is a requisite for
a valid complaint, acceptance must
take place before a valid complaint can be said to exist.
While
it must be conceded that the Amendment Act has altered the position
and hence is indicative that the legislature has changed
its policy
in this regard, as Mr Puckran submitted this did not make the initial
interpretation of the provisions as contained in
the Act capricious
or unfair. They were clothed in the logic that there should be not
dichotomy between the decision of the Commission
and that of the
Tribunal. Furthermore as Mr Eiser correctly submitted, the rule only
precluded another litigant from making application
in terms of
section 59 in respect of the same practice, There does not appear to
be a bar to other litigants being joined in the
matter nor could the
rule be interpreted to preclude another litigant from making a
complaint where there were differences in the
alleged practice which
had motivated the initial application in terms of section 59.
For
this reason it is difficult to accept the argument of Mr Nelson that
the Tribunal’s decision was in contravention of section
34 of the
Republic of South Africa Constitution Act 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, another independent
and impartial
tribunal or forum. In this case the dispute would have been decided
in terms of the Act and before an independent
tribunal, to which
other interested parties would not necessarily be barred.
Were
there to be any additional issue raised in the complaint of the
second complainant, such a person would have an entitlement to
bring
an application in terms of section 59. Furthermore this
interpretation is congruent with the words employed in section 44
namely
‘submission in the prescribed manner’ as opposed to
submission ‘lodged or delivered’ in the prescribed manner which
would
have been words far more in keeping with the interpretation
urged upon this court by Mr Nelson.
RETROSPECTIVITY.
Section 23(5) of the Amendment Act provides: ‘Any
proceedings that were pending before the Competition Commission,
Competition Tribunal
or Competition Appeal Court before the date of
commencement of this Act must be proceeded with in terms of the
Principle Act as amended,
except to the extent that the regulation
under section 21(4)of 27(2) of the Principle Act as amended, or a
rule of the Competition
Appeal Court, provides otherwise.’
In
terms of section 49 C(1) of the Act (as amended by the Amendment Act)
‘at any time, whether or not a hearing has commenced into
the
alleged prohibited practice, the complainant may apply to the
Competition Tribunal for an interim order in respect of the alleged
practice’.
In
terms of section 49 B(2) of the Act as amended, any person may
submit
information concerning an alleged prohibited practice to the
Competition Commission, in any manner or form; or
submit
a complaint against an alleged prohibited practice to the
Competition Commission in the prescribed form. In terms of Rule
3(4)(g) of the Competition Rules which replace Rule (2)(f)(2) of the
old Rules, a complaint is defined as:
a
matter initiated by the Commission in terms of section 49(b)(1); or
a
matter that has been submitted to the Commission in terms of section
49 B(2)(b).
Accordingly
the requirement of acceptance by the Commission is no longer part of
the legal dispensation which pertains after the passing
of the
Amendment Act.
For
this reason Mr Nelson correctly submitted that were the Amendment Act
to apply to these proceedings, the determination of the
Tribunal
would stand to be set aside.
This
argument therefore confronts the strong presumption entrenched in any
argument retrospectivity. As
Kentridge
AJ
said is
S
v Mhlungu and Others
1995(3)
SA 867(CC) at para 65-67 [t]here is a strong presumption that new
legislation is not intended to be retroactive. By retroactive
legislation is meant legislation which invalidates what was
previously valid, or
vice
versa
, i.e. which
affects transactions completed before the new statute came into
operation…..It is legislation which enacts that ‘as
at a past
date the law should be taken to have been that which it was
not’…There is also a presumption against reading legislation
as
being retrospective in the sense that, while it takes effect only
from its date of commencement, it impairs existing rights and
obligations, e.g. by invalidating current contracts or impairing
existing property rights…The general rule therefore was that a
statutory is as far as possible to be construed as operating only on
facts which come into existence after its passing. There is
a
different presumption where a new law affects changes of procedure.
It is presumed that such a law will apply to every case subsequently
tried, ‘no matter when such case began or when the course of action
arose'…It is, however, not always easy to decide whether
a new
statutory provision is purely procedural or whether it also affects
substantive rights. Rather than categorising new procedures
in this
way, it has been suggested, one should simply ask whether or not they
would affect vested rights if applied retrospectively…There
is also
another well established rule of construction namely, that even if a
new statute is intended to be retrospective insofar
as it affects
vested rights and obligations, it is nonetheless presumed not to
affect matters which are the subject of pending legal
proceedings’.
It
must be conceded that the drafting of section 23(5) of the Amendment
Act leaves much to be desired. In the context of our constitutional
state, great care must be taken in the drafting of legislation to
prevent the sloppy use of words to undermining the legal certainty
required by a rechtstaat.
To
the extent that there is any ambiguity in the legislation, section
23(5) must be interpreted to be congruent with the fundamental
principles as outlined by
Kentridge
AJ
in
Mhlungu
supra.
The use of the
words ‘any proceedings that were pending’ coupled with the words,
‘must be proceeded with’ would appear
to mean that the
procedures which must be employed in any matter which is pending at
the time that the Amendment Act came into effect,
are those contained
in the Amendment Act. The preamble to the Amendment Act provides that
the purpose of the Act is
inter
alia
‘to further
regulate investigation and adjudication procedures and enforcement
of decisions, judgments and orders of the Competition
Commission and
Competition Tribunal and Competition Appeal Court; regulate the
relationship between the Competition Commission and
other agencies
and to provide for concurrent jurisdiction’.
The
Amendment Act therefore contains a range of new procedures. It was
clearly the intention of the legislature to ensure that these
new
procedures would apply to all proceedings which were pending at the
time the legislation came into effect. The Commission, Tribunal
and
the Court were thus mandated to dispose of matters which had been
initiated in terms of the new procedures. The question which
then
arises is whether any matter of substance which had been disposed of
by the Tribunal under existing law, that is law prior to
the
Amendment Act, should now be adjudicated in terms of the Amendment
Act.
In
S v Mhlungu and Others
supra,
Mahomed
J
(as he then was) said at
para 41 ‘The remaining category concerns appeals arising from
trials which were commenced and were completed
before the
Constitution came into operation. In my view, such appeals must be
disposed of without applying chapter 3 of the Constitution,
because
an appeal inherently contains the complaint that the Court
a
quo
had erred in terms
of the law which was then of application to it and not in terms of
the law which subsequently came into operation.
There should
therefore also be no ‘dislocation’ arising from this category of
appeals. There is nothing in the wording of s
241(8) which, on my
interpretation, will entitle an appellant on appeal to rely on chap 3
if the proceedings against them had been
concluded before the
commencement of the Constitution. Such an appellant would have to
confine himself to the substantive law which
applied during his
trial.’ See also
S v
Thomas and Another
1978(1)
SA 329 (A) at 334.
The
term ‘pending’ in relation to proceedings can have different
connotations depending upon the context in which the word is
used.
Conventionally, proceedings pending in this context mean ‘they have
begun but not yet finished’
Mhlungu
supra
at para 51. However
in
Noah v Union National
South British Insurance Company Ltd
1979(1)
SA 330(T) 332
Eloff J
found
that ‘pending’ in relation to proceedings can mean an action
which has not been instituted but is about to be so instituted.
In
the present dispute, section 23(5) mandates the adoption of
procedures contained in the Amendment Act for all cases which are
already
located in the legal pipeline created by the Act. But if the
legislature wished to go further and provide that the substance of
the law pertaining to dispute on appeal from the Tribunal to the
Court before the Amendment Act became law is to be governed by a
provision of the Amendment Act it would have been required to employ
an express provision to that effect.
The
radical consequence of deciding an appeal on the basis of a law which
did not apply when the initial decision was taken runs completely
contrary to the
dictum
of the majority in
Mhlungu.
Such a change cannot be easily read into an Act by way of
interpretation. In my view the cross appeal must be decided in terms
of the law which existed when the Tribunal made its determination.
The
appeal was initiated by fifth appellant only and to that extent costs
can only be awarded against fifth appellant who was the
unsuccessful
party. The cross appeal was opposed by all appellants and save for
fifth appellant, two counsel were employed. Clearly
the manner in
which this dispute has been decided creates a problem of
quantification of costs to be apportioned between the appeal
and the
cross appeal both of which were heard at the same hearing and the
arguments of which were contained in the one set of heads
of
argument.
In
terms of Rule 33(2) of the Rules of this Court the Registrar may
perform the functions and duties of a taxing master or appoint
any
person as taxing master who, in the Registrar’s opinion, is fit to
perform the functions of duties assigned to or imposed on
a taxing
master by these rules. It would therefore be appropriate in this
case for the quantification of the costs to be determined
either by
the Registrar acting as a taxing master or a person to be appointed
by him.
ORDER
.
For
the reasons given,
The
appeal is dismissed, with costs including costs occasioned by the
employment of two counsel to be paid by fifth appellant only.
The
cross appeal is dismissed with costs including costs occasioned by
the employment of two counsel.
The
Registrar is empowered to determine the quantification of the costs
referred to in paragraphs 1 and 2.
_________________
DAVIS J P
I agree
_______________
MAILULA AJA
I agree
___________
JALI AJA