COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 41/LM/Aug03
In the application to amend the order in the large merger between:
Boart Longyear (a division of Anglo Operations Limited)
and
Huddy (Pty) Ltd and Huddy Rock Tools (Pty) Ltd
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Reasons for decision
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Introduction
1. In December 2003, we approved the parties’ merger subject to conditions.
The parties now seek an amendment to those conditions. On 3 March 2004
we issued an order dismissing the application. Our reasons follow.
Background
2. On the 8 December 2003 the Tribunal conditionally approved the merger
between Boart Longyear, a division of Anglo Operations Limited ( “Boart”)
and Huddy (Pty) Ltd and Huddy Rock Tools (Pty) Ltd (collectively “Huddy”).
3. The conditions were that:
1. Boart Longyear (“Boart”) appoints two independent agents to sell
the Kempe machine, as well as the spare parts for the machine.
The concluded agency agreements must be in force for a period of
not less than three (3) years (“the period”) and must provide that
the following terms apply for the period, at least:
1.1 Boart must supply the agents with the Kempe machines
and the spares.
1.2 Boart must undertake to provide the appointed agents with
consignment stock of the Kempe machines so that each
agent has at least two (2) machines on consignment at all
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times;
1.3 Boart must sell the Kempe machines and the spare parts
to the agents at the standard discount rate it offers to its
agents from time to time, provided that the discount rate
must not be less than15% off the list price applicable at the
time. The list price for 2003 is attached hereto as annexure
“A”. Thereafter the list price for the Kempe and the spares
may escalate annually on 1 December provided, however,
that the increase does not exceed an amount greater than
the consumer price index, excluding mortgage bond rates
(CPIx), for the year immediately prior to the increase 1.
2. Boart must enter into the agreements within three (3) months
of date of this order.
3. The agents must be financially independent of one another and
must conduct business in South Africa.
4. For the period that these conditions are in force, Boart must, within
fourteen(14) days of the conclusion of the agency agreements,
and, the preparation of the annual price list, provide the
Commission, with –
i.Copies of the agreements concluded with each of the
agents; and
ii.The annual price lists reflecting the prices of the Kempe
machine and the spares.
4. The order thus required Boart to enter into the agreements
with the agents, by no later than the 8 March 2004.
The application
5. On the 4 February 2004 the merging parties filed their
application to vary paragraph 2 of the condition.
6. The parties sought to have the words “within three (3)
months of the date of this order ” deleted and replaced with
the words “within three (3) months of the effective date of
the merger .” The parties do not define what the effective
1 By way of example, this means that on 1 December 2004 the prices will be increased by an
amount not exceeding the CPI x for the period 1 December 2003 to 30 November 2004.
2
date means but by implication it appears to be the date on
which the merger is implemented, a date which was still
not ascertainable at the time the application was heard.
7. In the affidavit supporting the application, the parties state
that subsequent to the order being made, it became
apparent, that they would not be able to fulfill the
conditions within the stipulated three months. 2 The
explanation for this apparent difficulty is that the parties
had, after the approval, decided that they would be able to
implement the merger by 1 March 2004. They had also
agreed that Boart would perform a due diligence of
Huddy’s business prior to that date, as the completion of a
satisfactory due diligence was one of the conditions of the
sale. Boart was subsequently informed by its auditors that
they would be unable to complete the due diligence before
the end of March. Boart alleges that until all the conditions
of sale are met it is unable to enter into agreements with
third parties to act as agents for the Kempe range of
machines. Thus they maintain they would be unable to
comply with the condition by 8 March 2004 as required by
the order.
8. The Commission did not oppose the application and
indicated that it would abide the decision of the Tribunal.
The hearing
9. At the hearing counsel for the merging parties argued that
the application was brought in terms of section 66 of the
Act, which corresponds with Rule 42(1) of the Uniform
Rules of Court. 3 This fact was not clear from the papers
themselves which make no mention of which section of
the Act they rely upon for the application. Whilst this
omission on its own is not fatal to the application, if the
merging parties seek to rely on section 66, they must at
the very least lay out the jurisdictional basis this as we
the very least lay out the jurisdictional basis this as we
show later they have failed to do.
10. Section 66 of the Act states that:
2 See paragraph 5 of the affidavit of Mr Carel Stephanus Erasmus Pretorius.
3 See the decision of the appeal court in Mike’s Chicken(Pty) Ltd and others / Astral Foods Limited ,
case no. 32/CAC/Sep03.
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(1) “The Competition Tribunal, or the Appeal Court, acting of its own accord
or on application of a person affected by a decision or order may vary
or rescind a decision or order –
(a) erroneously sought or granted in the absence of a party affected by
it;
(b) in which there is ambiguity, or an obvious error or omission, but
only to the extent of correcting that ambiguity, error or omission; or
(c) made or granted as a result of a mistake common to all the parties
to the proceeding.”
11. The Tribunal therefore has the power to amend its order in
the circumstances as set out in section 66(1).
12. In argument counsel for the merging parties averred that
there was a “patent error” in the order in that it is
impossible for the merging parties to comply with the
order, prior to the effective date of the merger transaction.
He argued that Boart Longyear cannot enter into
agreements with third parties, on behalf of Huddy, until it
actually controls Huddy, that is, until the effective date of
the transaction.
13. Furthermore, he contended that the order was granted as
a result of an error common to all the parties. Although the
parties were given the opportunity to consider the
conditions prior to the order being handed down, they did
not “pick up” that Boart would not be able to comply with
the order within the stipulated three months.
14. Thus, the parties’ application was founded on both sub
sections (b) and (c) of section 66 of the Act.
15. A further argument advanced at the hearing is that the
Tribunal could not have intended the order to read “three
months from the date of this order ”, since the merger had
not yet occurred. According to counsel, the Tribunal
merely intended to give the parties 90 days within which to
enter into the agreements and not to tie this time period to
the date of the approval of the merger.
The Commission’s view
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16. Although it did not oppose the application, the
Commission did not agree with the parties that the order
was made as a result of a mistake common to all parties.
The Commission states that its understanding, at the time
of the merger hearing and when the order was given, was
that Boart would be in a position to comply with the order.
The Commission points out that by agreeing to the terms
of the Tribunal’s order, when they were given the
opportunity to make submissions in respect of the order,
by implication, the parties indicated that they would be
able to comply with the terms of the order.
17. According to the Commission, the papers filed by the
parties appear to indicate that it was only subsequent to
the Tribunal’s order that it became apparent to the parties
that they would not be able to comply with the order, for
whatever reasons.
Our approach
18. It is widely accepted that the general approach of courts to
varying a final order is a conservative one, an approach
aimed at preserving the finality of litigation. The courts
have recognised a limited number of exceptions to this
approach and these are captured in section 66 of the Act. 4
19. In Mike’s Chicken (Pty) Ltd and others / Astral Foods
Limited, the Competition Appeal Court noted that since
section 66(1) was modeled on Rule 42, the principles
developed by the courts, in regard to Rule 42 accordingly
provide guidance in the interpretation of section 66(1).
20. Adopting this approach to the present case, the following
questions arise:
a) is there an obvious error in the order, and
b) was the order made or granted as a result of a mistake common to all
the parties to the proceedings?
Is there an obvious error in the order ?
4 See the Tribunal’s decision in Astral Foods Limited / Mike’s Chicken (Pty) Ltd and others , case no.
69/AM/Dec01, at page 6 where the Tribunal quoted the Firestone South Africa (Pty) Ltd v Genticuro
decision [1977(4) SA (298) (A)].
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21. Rule 42(1) (b) provides for the variation of an order where
there is an ambiguity or a patent error or omission. It is the
equivalent of section 66(1)(b) of the Act.
22. A patent error has been described as “an error as a result
of which the judgment granted does not reflect the
intention of the judicial officer pronouncing it “. 5 In First
National Bank of South Africa Ltd v Jurgens and others
the court reiterated the requirement, for relief under this
subsection of Rule, that the patent error must be
attributable to the court itself. 6 Leveson J held that relief
will only be accorded where the terms of the judgment do
not reflect the true intention of the presiding judge.
23. Thus, to succeed with this line of argument, the parties
must show that a patent error in the order was
engendered by the Tribunal.
24. The merging parties argue that there is a patent error in
the order, on the basis that it is impossible for Boart
Longyear to comply with the order prior to the effective
date of the merger. Although not expressed as such, this
argument seems to suggest that the Tribunal could not
have intended to grant on order, which is impossible to
comply with.
25. We are not persuaded that the wording of paragraph two
of the order is a result of an error made by the Tribunal.
26. Firstly, the parties have not established that it is indeed
impossible to comply with the order. As pointed out by the
panel at the hearing of this matter, nothing precludes
Boart Longyear from entering into agency agreements,
which are conditional on the merger coming into effect. In
other words, the agreements can be entered into now and
the implementation thereof suspended until the merger
transaction is complete. Not only are such agreements an
transaction is complete. Not only are such agreements an
everyday commercial reality, but there is also nothing in
the order indicating that this would not be accepted as
compliance with the merger condition.
5 Erasmus, Superior Court Practice, B1 310.
6 First National Bank of South Africa Ltd v Jurgens and others 1993 (1) SA 245 (W) at 246 F.
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27. Furthermore, Rule 39 of the Competition Commission’s
rules for the conduct of proceedings provides a remedy,
where there is apparent noncompliance with merger
conditions. In terms of Rule 39, if a firm appears to have
breached an obligation that was part of a conditional
approval of its merger, the Commission must deliver a
“Notice of Apparent Breach” to that firm. Within ten days
thereafter, such a firm is entitled to submit to the
Commission a plan to remedy the breach. In response
thereto, the Commission may accept the plan or reject it
and invite the firm to consult with it to establish a more
satisfactory plan.
28. At the hearing, the panel suggested that if indeed it is
impossible for Boart to comply with the merger conditions,
and if it is served with a Notice of Apparent Breach by the
Commission, the route prescribed above is a more
suitable one than that proposed in this application.
29. Secondly, there is nothing in the record to suggest that the
intention of the Tribunal was other than that expressed in
its order of the 8 December 2003. In general merger
conditions are intended to remedy the anticompetitive
effects of the transaction, to achieve this it is imperative
that such conditions are clear, certain and enforceable.
The condition that Boart Longyear enters into the agency
agreements within the stipulated period from the date of
the order is precisely aimed at ensuring certainty and
enforceability.
30. The formulation proffered by the parties – that the
stipulated period be within three months of the ‘effective
date’ of the merger, would render compliance with the
condition dependent upon some unknown date, itself
dependent on extraneous circumstances and subject to
dependent on extraneous circumstances and subject to
change at the will of the parties. The Tribunal could not
have intended to impose a condition on the merger that
would create such uncertainty. Such a condition would not
be effective, instead it would be impossible to enforce.
Was the order made or granted as a result of a mistake common to all the parties
to the proceedings?
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31. This basis is catered for in Rule 42(1)(c), its equivalent
being section 66(1)(c) of the Act.
32. In Tshivase Royal Council and another v Tshivase and
another the Appellate Division held that to succeed on this
ground two broad requirements must be satisfied. 7 Firstly,
there must be a mistake common to both parties. Nestadt
JA stated that:
“ as in the field of contract law, this would occur where both parties
are of one mind and share the same mistake – they are, in this
regard, ad idem” 8
33. It is widely accepted that it is not sufficient if the error is
that of one of parties only, or of the court, or of a legal
representative.9 In the present case, this would entail a
mistake common to the merging parties, the Commission
and the Tribunal. The Commission does not agree with
the parties that the order was based on a mistaken view
that Boart would be in a position to comply with the order.
This clearly indicates that even if such a mistake existed, it
was not common to all the parties.
34. Secondly, there must be a causative link between the
mistake and the grant of the order or judgment. In Seedat
v Arai Eloff J held that this requires that the mistake relate
to and be based on something relevant to the question to
be decided by the court at the time. 10 The principle is that
fresh evidence, not relevant to any issue that had to be
determined when the order was made, cannot
subsequently be used to create a retrospective mistake.
35. At the hearing the representative for the Commission
correctly pointed out that the effective date of the merger
was irrelevant to the consideration of the competitive
impact of the merger. There is no causal link between the
effective date of the merger and the Tribunal’s order as it
7 Tshivase Royal Council and another v Tshivase and another 1992(4) SA 852 (A) at p 864 AB.
8 op.cit.
8 op.cit.
9 Erasmus, Superior Court Practice B1311. See also Groenewald v Gracia Edms Bpk 1985 (3)SA 968
(T) ; Seatle v Protea Assurance Co Ltd 1984(2) SA 537(C) .
10 Seedat v Arai and another 1984 (2) SA 198 (T) at 201D.
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stands.
36. Furthermore, paragraph five (5) of the affidavit in support
of this application states:
“ It has since come to the Applicant’s attention that it will be
impossible for it to fulfill the Kempe agency order within the period
specified, namely by 8 March 2004.”
37. This clearly indicates that it was only subsequent to the
merger hearing and the date of the Tribunal’s order, that
the parties formed the opinion that they would not be able
to comply with the order. This view is reinforced when one
considers that the parties were given an opportunity to
consider the conditions prior to the granting of the order
and that the parties submitted their comments on the draft
conditions to the Tribunal. If it was known to them at that
stage that it would not be possible to comply with the
order, their legal representatives would have stated so.
38. For all of the above reasons we are not persuaded that a
variation of, or an amendment to the order, is warranted.
We find that the parties have not satisfied the
requirements for the order to be amended or varied in
terms of section 66(1) (b) or (c).
Conclusion
39. The application is therefore dismissed.
19 April 2004
N. Manoim Date
Concurring: D. Lewis, T. Orleyn.
For the merging parties: Adv. W Pretorius
Roestoff Venter & Kruse.
For the Commission: Mr M Worsley assisted by Mr M van Hooven.
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