COMPETITION TRIBUNAL OF SOUTH AFRICA
(HELD IN PRETORIA)
Case No: 22/X/Mar11
In the matter between:
MONSANTO SOUTH AFRICA (PTY) LTD First Applicant
MONSANTO INTERNATIONAL, SARL Second Applicant
and
BOWMAN GILFILLAN First Respondent
PIONEER HI-BRED INTERNATIONAL INC Second Respondent
PANNAR SEED (PTY) LTD Third Respondent
Panel : Norman Manoim
: Yasmin Carrim
: Takalani Madima
Heard on : 01 June 2011
Reasons and Order issued on : 09 June 2011
REASONS FOR DECISION AND ORDER
1
Introduction
1] This is an application to stay merger proceedings presently before us, pending a High
Court application to have the merging parties’ firms of attorneys barred from acting for
them in the merger, on the ground that they have a conflict of interest and that there is a
risk of disclosure of confidential information. The application is brought by an erstwhile
client of the firm of attorneys, a rival firm of the merging parties. The first and second
respondent oppose the application, the third respondent will abide by the decision of the
Tribunal.
Background
2] The applicants are Monsanto South Africa (Pty) Ltd and Monsanto International, SARL.
For convenience, like everyone else in the proceedings we will refer to both from now on
in the singular, as Monsanto; nothing turns on the distinction.
3] Monsanto is a large international chemical firm. In this decision the aspect of its business
that is relevant is its involvement in the hybrid maize seed industry.
4] Monsanto conducts business in South Africa. For the past twelve years it has utilised the
first respondent, the law firm Bowman Gilfillan (‘Bowmans’) as its attorneys. Bowmans
has provided a range of legal advice over the time to Monsanto, including competition law
and intellectual property. This according to Monsanto involved matters of a sensitive
nature that have the potential to affect its business interests. During this period Monsanto
also made use of other firms of attorneys. Despite this it says it considered Bowmans its
“preferred counsel in South Africa”.1
5] In January 2009 Natalia Voruz, Monsanto’s associate general counsel wrote to Bowmans
seeking advice on a certain matter. The issues on which the advice was sought were
outlined in the letter which has been heavily redacted in our version in the record, but it
appears to relate to legal issues involving both competition law and intellectual property. 2
Mentioned in the letter are the names of the second and third respondents. Llewellyn
Mentioned in the letter are the names of the second and third respondents. Llewellyn
Parker, the attorney concerned at Bowmans to whom this was addressed, wrote back the
same day to say that he had consulted his competition department partners and was
advised the firm was unable to take on the instruction due to a potential conflict of
1 Applicants founding affidavit in the stay application, record page 15.
2 Record page 184, annexure NV 5.
interest. Voruz wrote back to him asking for details about the nature of the conflict.
Parker wrote back to say that firm policy prevented him from divulging any further
information.
6] We now know what that conflict was. Pioneer Hi-Bred International Inc. (‘Pioneer’) the
second respondent, a large US corporation, also, inter alia, engaged in the hybrid maize
seed industry in South Africa, had instructed Bowmans to represent it in a proposed
merger with a South African firm called Pannar Seed (Pty) Ltd (‘Pannar’), the third
respondent. Pannar too, is a rival of Monsanto in the South African market. Pioneer had
been referred to Bowmans by its US attorneys.
7] Bowmans commenced working on this instruction in mid-2008. Monsanto meanwhile, and
apparently ignorant of this instruction from its rival, Pioneer, continued to instruct
Bowmans on licencing and employment related matters, but not competition. Monsanto
has never given its consent for Bowmans to act in the merger. This is not in dispute, but
Bowmans contends that such consent was not required and that it was free to act as it
did.
8] At some time in 2010, it is not clear exactly when, Monsanto instructed attorneys Nortons
Inc to respond to questions from the Competition Commission who were now seized with
the present merger between Pannar Seeds and Pioneer.3
9] In terms of the Competition Act, 89 of 1998, (the ‘Act’), this was an intermediate merger.
This means that the merger was notifiable to, and determined by, the Competition
Commission in terms of its process. 4 In making its determination the Commission adopts
administrative procedures as opposed to the adjudicative procedures adopted by the
Tribunal for mergers. The Commission decided to prohibit the merger on 7 December
2010. The merging parties instructed Bowmans to lodge an appeal against this decision
on 20 December 2010. In terms of the Act this appeal process is referred to as a
on 20 December 2010. In terms of the Act this appeal process is referred to as a
consideration and it is wider than an appeal in the conventional sense. The relevance of
this for present purposes is that the record before the Tribunal is not limited to what was
before the Commission. As part of its case the merging parties have brought Monsanto’s
3 It seems that this was not the first instruction that Nortons had received from Monsanto in respect of a
competition law issue. Bowmans relies on this to suggest that Monsanto was not bringing it competition
work at this time.
4 Sections 13A, 13B and 14.
3
activities in the market to the fore of their competition analysis, essentially arguing that
the merger will serve as a useful antidote to Monsanto’s alleged monopoly position.
Monsanto objects to this characterisation which it maintains is untrue. However,
Monsanto is not opposed to the merger and has declared that it does not intend to
intervene in the Tribunal consideration proceedings.
10] Monsanto claims that whilst it was aware of the notification of the merger and subsequent
application for a consideration, it only became aware that Bowmans was acting for the
merging parties, when a candidate attorney who attended the first pre-hearing before the
Tribunal, as an observer, noted this fact and informed Nortons, her firm.5
11] Thereafter discussions followed between Nortons attorneys, now representing Monsanto,
and Bowmans, to discuss whether the latter should withdraw as attorneys in the merger.
Bowmans refused to do so.
12] Bowmans maintains that no confidential information was imparted to the Commission and
such information that was, came from the merging parties own market knowledge or
public sources. Further, as Monsanto has not intervened in the process, no conflict of
interest has emerged and that in any event since Monsanto wrote to them in April 2011
withdrawing all instructions from the firm, they can no longer be regarded as Monsanto’s
attorneys. Much is made in the papers by all the parties as to whether the Bowmans
attorneys regularly doing Monsanto’s work, were involved in working on the present
merger to any great extent, and the efficacy of the firm’s so called ‘Chinese Walls’. We for
reasons that follow do not need to consider these issues for the purpose of deciding the
stay.
13] On 15 March 2011 Monsanto brought an application before the High Court (the ‘main
matter’) in which it sought the following relief as its main prayer:
“.. to interdict the first respondent [Bowmans] from continuing to act or advise or
“.. to interdict the first respondent [Bowmans] from continuing to act or advise or
otherwise assist the second [Pioneer] and third respondents [Pannar], in
connection with any merger or proposed merger between them, including but not
limited to the proceedings before the Competition Tribunal under Case
81/AM/Dec10”.
14] The application was not brought on an urgent basis and filing of papers was only
5 The pre-hearing was convened to manage procedural issues that arose in the consideration process.
completed on 26 May 2011.6 It has yet to be set down for hearing.
15] After the interdict application was launched, Bowmans instituted an internal investigation
into the allegations, performed by partners of the firm and came to the conclusions that
there had been no breach of confidentiality, there was no conflict of interest in the firm
representing the merging parties and hence the firm could continue to represent them.
This internal enquiry has remained confidential and does not form part of the record.
Monsanto has criticised Bowmans for not having the inquiry conducted by an
independent person.
16] The application for the stay of the Tribunal proceedings was brought on 28 March 2011.
17] The result of this choice of forum by Monsanto means that the main matter is to be heard
in the High Court whilst the stay is to be heard in the Tribunal. This leads to undesirable
complications that we refer to below.
18] Whilst Monsanto is concerned that its former attorneys now represent its rivals in a
merger proceeding, the merging parties are concerned that if Bowmans withdraws as its
attorneys their merger already set down by the Tribunal for hearing and completion in
September 2011, will be delayed. They contend that it is not clear how long the merger
hearing would be delayed if it is stayed pending the conclusion of this litigation. They
assert they would be prejudiced in the merger hearing if Bowmans withdrew now as its
attorneys, given the work carried out already in the matter, its complexity and the
proximity of the hearing dates. For this reason both Bowmans and Pioneer vigorously
opposed the granting of the stay.
19] The issues we have to decide in this matter are:
1) whether, as argued by the respondents, the matter is not properly before the
High Court as the relief sought in that forum is within our exclusive jurisdiction;
2) what the nature of the relief sought in the stay is. It is argued by Monsanto that
2) what the nature of the relief sought in the stay is. It is argued by Monsanto that
the stay constitutes a form of interim relief; the respondents contend that it
constitutes final relief.
20] Our approach to the merits is thus determined by the answers to these two prior
6 Although there was correspondence with the Deputy Judge President to secure an expedited basis and
this was explored further at the commencement of our hearing nothing has come of it.
5
questions.
Exclusive jurisdiction
21] The respondents have argued that the form of relief in this matter relates to merger
proceedings and mergers and their procedures are matters reserved for the exclusive
jurisdiction of the Competition Tribunal and the Competition Appeal Court (CAC) in terms
of section 62(1) of the Act which states:
1) The Competition Tribunal and Competition Appeal Court share exclusive
jurisdiction in respect of the following matters:
a) Interpretation and application of Chapters 2, 3 and 5, other than –
i) a question or matter referred to in subsection (2); or
ii) a review of a certificate issued by the Minister of Finance in terms of
section 18(2); and
b) the functions referred to in sections 21(1), 27(1) and 37, other than a question
or matter referred to in subsection (2).
22] Chapter 3 regulates mergers and merger proceedings. Chapter 5 regulates proceedings
more generally. It follows, the respondents argue, that if the matter falls within this
exclusive jurisdiction, the main matter should have been brought to the Tribunal and not
the High Court and thus is doomed to fail. If the High Court application is in the wrong
forum then the stay on which its success is predicated should not be granted. Monsanto
in turn argued that this was a matter on which both the Tribunal and the High Court
enjoyed concurrent jurisdiction and that since the merits related to the proper conduct of
officers of the court, the High Court, as their guardian, was the appropriate forum.7
23] We do not agree with the respondents on this point. Although the relief sought in this
matter has an impact on our procedures it is an indirect one. The High Court is not being
asked to determine our proceedings for us. To the extent that the resolution of this matter
may have an impact on our processes it is incidental. Furthermore High Courts do not
readily consider their jurisdiction ousted.8
readily consider their jurisdiction ousted.8
7 Relying on Paper, Printing, Wood and Allied Workers’ Union v Pioneer NO and Others 1993 (4) SA 621
(A).
8 See PPWAWU supra.
24] We therefore find that the Tribunal and High Court have concurrent jurisdiction in respect
of the relief sought in the main matter and accordingly we have jurisdiction to consider the
stay.
The appropriate test
25] The debate between the parties is whether the appropriate test is one for an interim or
final interdict. It is easy to see why the different stance is taken. Monsanto argues for an
interim interdict as it says a stay is akin to an interim interdict. In an interim interdict the
test is proof of a prima facie right, even if open to some doubt, a consideration of the
balance of convenience and the likely prejudice. That formulation is weaker than the clear
right required in a final interdict. But Monsanto goes further. It argues that not only should
we adopt the less stringent interim relief standard for the stay, but we should prefer to
adopt it in its least stringent formulation that laid down in the well known American
Cyanamid case that “ ... the claim is not a frivolous and vexatious; in other words, that
there is a serious question to be tried.” 9
26] Since the matters raised are not frivolous or vexatious Monsanto considers that it has
crossed this first hurdle. Prejudice to them occurs as long as the matter is ongoing whilst
the balance of convenience favours them as the matter can be determined without much
inconvenience to the future management of the merger hearing.
27] It is on the latter point, the future management of the merger case, where the respective
approaches of Monsanto and the respondents diverge. Not only do the respondents have
a different view of this on the facts, but this factual difference leads a different conclusion
on the appropriate legal test.
28] The respondents argue that it is unlikely that the main matter in the High Court will be
resolved before the September 2011 dates allocated for hearing this merger in the
Tribunal. No dates have been given for the main matter yet, nor is there certainty that
Tribunal. No dates have been given for the main matter yet, nor is there certainty that
even if determined prior to September, that Monsanto will not appeal an adverse
decision. Mergers are generally time sensitive and there are reasons why on the facts of
this case time is a particularly sensitive issue. The end result they say is that if the stay is
granted the merging parties, in order to preserve their hearing dates, would be forced to
hire new attorneys. Not only would this be prejudicial but would make the relief final in
9 The language of ‘frivolous or vexatious’ comes from American Cyanamid Co v Ethicon Ltd [1975] 1 All
ER 504 at page 510.
7
effect. If the relief has final effect then the stay amounts to a final interdict and must be
judged according to that standard. On this test they argue that Monsanto fails at the first
hurdle having failed to make out a clear right.
29] We have not been persuaded to depart from earlier decisions in which we set out the
basis for a stay when the matter was proceeding in another forum. In Novartis10 we held
that the test comprised three requirements:
1) whether the applicant has reasonable prospects of success in the High Court; and
2) whether it is in the interests of justice to stay the proceedings; and
3) convenience.
30] Monsanto’s prospects of success depend on how high the standard is set for the duty
owed by a law firm to a former client. It is common cause that no breach of confidence by
Bowmans is evident from the papers before us. It is also common cause that the adverse
interest that Monsanto has is commercial not legal. Monsanto is not a party to the merger
consideration and has no intention of becoming one. Monsanto relies on an English case
where the question was whether a firm of attorneys with a longstanding history of
representing a client could act for a consortium that was mounting a takeover bid for its
client. Although at that stage it was not clear whether the takeover bid was going to be
hostile, the court restrained the firm, Freshfields, from representing the consortium on the
basis that its past history of representing the client, which was the target firm, had
afforded it with access to its confidential information which could lead to an apprehension
of a potential conflict.11
31] We have not however been referred to a South African decision in which the potential
conflict of interest is a commercial rather than a legal one. Indeed Mr Gauntlett for
Monsanto conceded that this matter raised issues of public policy because it seeks to
determine how far a law firm must go to avoid a conflict of interest.
determine how far a law firm must go to avoid a conflict of interest.
32] Given that the legal policy issues raised in this application will be novel for a South
African court, prospects for success are by no means certain. This is not the familiar kind
of conflict case where the legal representative crosses the floor to represent a party with
10 Novartis SA (Pty) Ltd v Main Street 2 (Pty Ltd (2) [2001-2002] CPLR 470 (CT).
11 Marks & Spencer Group PLC v Freshfields Bruckhaus Deringer [2004] EWHC 1337 (Ch).
an adverse legal interest to its former client. Monsanto may have commercial concerns
for not liking the merger, if ultimately approved, but that is not an adverse legal interest of
the sort our courts have in the past recognised. We have no view on whether the bar
should be set higher – we only consider that the outcome of this debate is not a certainty
and hence this aspect of our consideration does not weigh in favour of the applicant.
33] Nor do the requirements of justice favour Monsanto. No satisfactory explanation has been
given for why the application, given its nature, was not brought to the High Court on an
urgent basis. Monsanto would have been aware of the fact that the merger hearing had
been set down for September 2011 and that merger cases, given their nature, require
expedition. Even allowing for time for consultations between the respective attorneys to
take place before commencing the main application, once that route had been embarked
on it should have been done expeditiously; even more so when it was proceeded in a
forum other than the one where the matter was being heard so that the latter institution
was unable to control the timely resolution of the dispute. The Tribunal had set the
hearing dates in February 2011 thus prior to the launch of the main matter.
34] The fact that an applicant in the position of Monsanto can choose to go to a forum other
than the one in which the legal question arose does not mean that it is not under a duty to
expedite the matter in the other forum so that the matter is not unduly delayed in the
primary forum where the disputed matter is to be heard. Were the main matter brought to
the Tribunal, we would be in a position to regulate its hearing, whilst having due regard
for the respondents’ rights to have the merger hearing dates respected should they
prevail. The Tribunal has no right to tell the High Court when and how to hear this matter.
prevail. The Tribunal has no right to tell the High Court when and how to hear this matter.
For that reason Monsanto ought to have approached this application as one of urgency in
that forum so as not to prejudice proceedings in this one. Had the High Court elected not
to hear the matter on an urgent basis or stayed these proceedings until it could entertain
the main application that would have been another matter. It was never given the choice.
35] Secondly, the harm likely to be apprehended is not made out strongly in the papers.
Bowmans has already represented the merging parties throughout the intermediate
merger process before the Commission. In intermediate mergers the Commission is the
body tasked with clearing the merger. It is therefore highly probable that Bowmans made
the fullest submissions on behalf of the merging parties during that process – there would
have been no reason to hold back on any relevant information concerning Monsanto
9
because the Commission was also the arbiter, not just an investigator. To the extent that
confidential information was improperly disclosed this would either already be apparent or
be too late to protect and hence other remedies, not an interdict, would seem more
appropriate. In relation to the former point there is no evidence that confidential
information was disclosed during this Commission process. Monsanto has had access to
the Commission’s reasons for its decision.
36] On the other hand if the matter were stayed there would be substantial prejudice to
Pioneer. It would be almost certain that the hearing would not continue on the present
dates and no one has any certainty as to when the matter might proceed. Given that
Monsanto might appeal an adverse decision to a higher court it is impossible to be certain
when the merger could be heard. This would almost certainly force the merging parties to
instruct a new firm of attorneys rendering the interdict academic. The parties have a right
to be represented by legal representatives of their choice. Bowmans has represented the
merging parties for some time in this matter, including throughout the Commission’s
process. A change of attorneys now, when the matter has reached this stage, would be
prejudicial.
37] Although in Agriwire we granted a stay pending a matter being heard in the High Court
that case can be distinguished. First, the matter had already been set down for hearing in
the High Court in the week following the stay application. Second, the matter involved a
prohibited practice case which does not involve as compelling considerations of urgency
as does a merger case.12
38] In our view after considering the prospects of success of the case and the interests of
justice and convenience , the case for a granting a stay has not been sufficiently made
out. The case is accordingly dismissed.
39] The applicants jointly and severally must pay the respondents costs, including the costs
of two counsel.
of two counsel.
________________ 09 June 2011
Norman Manoim DATE
12 Agri Wire (Pty) Ltd & Another v Competition Commission & Others, Case NO.:63/CR/Sep09.
Tribunal Member
Yasmin Carrim and Takalani Madima concurring.
Tribunal Researcher : I Selaledi
For Monsanto : J Gauntlett (SC), M du Plessis and A Coutsoudis
instructed by Nortons Inc.
For Bowman Gilfillan : M. van der Nest (SC) and N.J. Graves (SC)
For Pioneer : D.N. Unterhalter (SC), C.E. Watt-Pringle (SC) and M.M
Le Roux instructed by Edward Nathan Sonnenbergs Inc.
11