Brief Summary

Competition Law — Costs — Applicants seeking costs following withdrawal of complaint and interim relief application by Respondents — Tribunal determining that Rule 50(3) allows for costs to be awarded despite general rule in Section 57 of the Competition Act — Respondents' argument that Tribunal lacks jurisdiction to award costs rejected — Tribunal awarding costs to Applicants as Respondents did not tender costs upon withdrawal.

Comprehensive Summary

Summary of Judgment

1. Introduction

This decision concerns an application for a costs order brought in the Competition Tribunal of South Africa under Rule 50(3) of the Tribunal Rules, following the withdrawal by the opposing parties of both a direct complaint referral and a related interim relief application.

The Applicants (who were the respondents in the withdrawn substantive proceedings) were Invensys PLC, Invensys Systems (UK) Limited, and Eurotherm Limited. The First to Third Respondents (who had been the applicants/complainants in the withdrawn substantive proceedings) were Protea Technology (Pty) Ltd, Protea Automation Solutions (Pty) Limited, and Protea Electronics (Pty) Limited. EOH Holdings Limited was cited as the Fourth Respondent only because it had potential interests in the matter, but it was not the focus of the costs dispute.

The procedural history was central. The Protea entities lodged a complaint with the Competition Commission on 11 April 2011, together with an interim relief application on the same date. After the Commission issued a notice of non-referral on 05 August 2011, the Protea entities filed a direct referral on 02 September 2011. The Invensys entities then filed an exception on 24 October 2011. On 29 November 2011, the Protea entities delivered a notice of withdrawal of both the interim relief application and the direct referral, without tendering costs. The Invensys entities then brought the present costs application.

The dispute arose in the context of a commercial relationship in which the Protea entities were formerly distributors of the Applicants’ products in South Africa, and the Protea entities alleged that the termination of that distributorship involved abuse of dominance under the Competition Act. The decision, however, did not determine the merits of those competition allegations; it dealt only with the Tribunal’s power to award costs and the appropriate exercise of that power after withdrawal.

2. Material Facts

The Tribunal accepted as background that the Applicants formed part of an international group manufacturing and supplying control and automation componentry branded under the Eurotherm name, and that the Respondents formed part of a South African group engaged in marketing, installing, and maintaining equipment and providing electronic communications solutions across various sectors.

It was material and common cause (in the sense that it was relied on by the Tribunal as the setting for the litigation) that the Respondents were former distributors of the Applicants’ products in South Africa, and that they were aggrieved by the termination of that distributorship. The Respondents alleged that the termination constituted an abuse of dominance and a contravention of the Competition Act. The Tribunal did not resolve whether the termination was lawful or unlawful under competition law, as that issue did not arise for decision in the costs proceedings.

The key procedural facts relied upon by the Tribunal were chronological and undisputed. The Respondents lodged a complaint with the Commission on 11 April 2011 and brought an interim relief application on the same date. The Applicants filed an answering affidavit in the interim relief application on 10 May 2011. The Respondents filed no replying affidavit and took no steps to set the interim relief matter down.

After the Commission’s preliminary investigation, a notice of non-referral issued on 05 August 2011. The Respondents then pursued the statutory mechanism of a direct referral to the Tribunal on 02 September 2011. The Applicants reacted by filing an exception on 24 October 2011. The Respondents thereafter withdrew both the interim relief application and the direct referral by notice dated 29 November 2011, and did not tender costs in that notice.

A further fact that arose at the hearing (and which the Tribunal considered only for its potential relevance to the costs discretion) was that the Respondents had filed a fresh complaint with the Commission and had initiated fresh interim relief proceedings based on conduct following the termination of the distributorship.

The Respondents also had High Court proceedings against the Applicants based on unlawful competition arising from the termination of the distribution arrangements. The Tribunal treated this as contextual background and did not treat it as determinative of the costs question before it.

3. Legal Issues

The central legal questions were whether, and on what basis, the Tribunal had the power to grant a costs order against private litigants following the withdrawal of proceedings, specifically in relation to both (a) a direct referral under section 51(1) of the Competition Act and (b) an interim relief application under section 49C.

This raised a question primarily of law, namely the interpretation and interaction between section 57 of the Competition Act (which sets out the general approach to costs in Tribunal proceedings) and Rule 50(3) of the Tribunal Rules (which regulates costs consequences where a matter is withdrawn without a tender of costs). A further issue concerned the exercise of discretion: even if costs were competent, whether the Tribunal should grant costs in the circumstances, including whether any special circumstances justified refusing costs.

A subsidiary issue, advanced by the Respondents, was whether the Tribunal was jurisdictionally barred from awarding costs in relation to the withdrawn interim relief proceedings because interim relief is not itself a proceeding “in terms of section 51(1).” This again was treated as a legal issue regarding jurisdiction and statutory/rule construction, rather than a factual dispute.

4. Court’s Reasoning

The Tribunal began with the statutory and rules framework. It identified section 57 of the Competition Act as the only provision in the Act expressly dealing with costs, including the general rule that each party bears its own costs, subject to the exceptions in section 57(2) and subject also to the Tribunal’s rules of procedure. It then identified Rule 50(3) as the specific rule addressing withdrawals, which permits a notice of withdrawal to include a consent to pay costs and, if no consent is included, permits the other party to apply to the Tribunal for an “appropriate order of costs.”

The Respondents’ principal legal contention was that section 57 limited costs awards to the circumstances in section 57(2), which expressly refers to complaints referred in terms of section 51(1); because interim relief under section 49C is not a section 51(1) proceeding, the Respondents argued that costs for the interim relief withdrawal could not be ordered. The Tribunal rejected this contention as inconsistent with the established interpretation of section 57 read with the Tribunal Rules.

In rejecting the jurisdictional argument, the Tribunal relied on prior authority from both the Competition Appeal Court and the Tribunal. It referred to Omnia Fertilizer Ltd v The Competition Commission (CAC case no. 77/CAC/Jul08), where the Competition Appeal Court held that section 57(1) is subject to two limitations: the express exception in section 57(2) and the Tribunal’s rules. The Tribunal treated Omnia as confirming that the Tribunal’s authority to award costs is not confined to section 57(2) and that costs may be awarded under Rule 50(3).

The Tribunal also referred to Mainstreet 2 Limited & Others v Novartis Limited & Others (Competition Tribunal case no. 25/IR/A/Dec99) for the proposition that, once an application has been withdrawn, that discrete litigation has been finally disposed of and the other side is entitled to have costs determined in relation to that withdrawn proceeding, rather than deferring the costs question to some later stage. The Tribunal treated the withdrawal as terminating the relevant item of litigation for costs purposes.

The Tribunal further referred to Londoloza v Bonheur 50 General Trading (Pty) Ltd & Others (Competition Tribunal case no. 80/AM/Oct04), where the meaning of the words in section 57(1) making the costs rule subject to the Tribunal’s rules had been considered, and where it was accepted (in line with Omnia) that the Tribunal’s rules could expand the circumstances in which costs may be awarded beyond the section 51(1) stipulation in section 57(2). Although Londoloza arose in a merger context and Omnia in a restrictive practice context, the Tribunal saw no reason in principle to treat interim relief proceedings differently for this purpose and indicated there was precedent for awarding costs in withdrawn interim relief matters.

The Tribunal also relied on Hayley Ann Cassim and other v Virgin Active SA (Pty) Ltd (Competition Tribunal case no. 57/IR/Oct01) as demonstrating that costs may be awarded in interim relief-related circumstances and that litigants who choose to use interim relief must be mindful of potential costs consequences. The Tribunal understood Cassim to allow for the possibility of “special circumstances” justifying a refusal of costs, but held that such circumstances were not present here.

Applying these principles to the facts, the Tribunal emphasised that the Applicants had been required to incur costs in responding to litigation that had been initiated and then withdrawn. It referred to the Applicants’ work in preparing and filing an exception in the direct referral proceedings and preparing and filing a considered answering affidavit in the interim relief proceedings. These steps were treated as justified responses to proceedings that required attention and legal representation.

The Tribunal considered whether the Respondents’ subsequent filing of a fresh complaint and fresh interim relief proceedings could constitute special circumstances justifying refusal of costs on the withdrawn matters, on the basis that the same underlying dispute might still be moving through the statutory system. It rejected that as a special circumstance in this context. The Tribunal reasoned that the costs order was directed at the costs incurred in dealing with the withdrawn complaint and interim relief as discrete litigation events, and that those costs remained incurred and justified regardless of later litigation.

The Respondents also suggested that withdrawal was prompted by alleged misrepresentations by the Applicants in submissions to the Commission and in the answering affidavit to the interim relief application. The Tribunal did not treat that contention as a basis for refusing costs in the withdrawn matters, noting instead that the Respondents would have an opportunity, if they proceeded with diligence in the fresh litigation, to attempt to prove their case through the new interim relief application or through a new complaint process that might reach the Tribunal again.

Finally, on the discretionary aspect, the Tribunal did not accept the Respondents’ submission that the Applicants’ alleged conduct regarding the distributorship termination should cause the Tribunal to refuse to exercise its discretion in favour of costs. It treated the question as one of compensating the party put to expense by proceedings that were withdrawn without a costs tender, in circumstances where the applicable legal framework permitted a costs order.

5. Outcome and Relief

The Tribunal granted the costs application. It ordered that the First, Second and Third Respondents, jointly and severally, pay the Applicants’ costs on the party and party scale in relation to the withdrawn complaint referral under section 51(1), the withdrawn interim relief application under section 49C, and the costs of the costs application itself.

The costs award was ordered to include the costs of one counsel.

Cases Cited

Omnia Fertilizer Ltd v The Competition Commission (Competition Appeal Court case no. 77/CAC/Jul08).

Mainstreet 2 Limited & Others v Novartis Limited & Others (Competition Tribunal case no. 25/IR/A/Dec99).

Londoloza v Bonheur 50 General Trading (Pty) Ltd & Others (Competition Tribunal case no. 80/AM/Oct04).

Hayley Ann Cassim and other v Virgin Active SA (Pty) Ltd (Competition Tribunal case no. 57/IR/Oct01).

Legislation Cited

Competition Act, 1998 (with particular reference to section 57, section 51(1), and section 49C).

Rules of Court Cited

Competition Tribunal Rules, Rule 50(3).

Competition Tribunal prescribed form referenced: Form CT 6.

Held

The Tribunal held that it was not jurisdictionally barred from ordering costs in respect of the withdrawn interim relief application, and that section 57(1) of the Competition Act does not confine the Tribunal’s costs power only to the circumstances in section 57(2), because section 57(1) is expressly subject to the Tribunal Rules.

It further held that Rule 50(3) permits a party, where the opponent withdraws without a costs tender, to seek an appropriate costs order, and that the withdrawal of both the direct referral and the interim relief application rendered those proceedings finally disposed of for the purpose of determining costs.

The Tribunal held that the subsequent filing of a fresh complaint and fresh interim relief proceedings did not constitute special circumstances justifying refusal of costs in relation to the withdrawn matters, and that the Applicants were entitled to recover the costs incurred in responding to proceedings that the Respondents withdrew without tendering costs.

LEGAL PRINCIPLES

The general principle under section 57(1) of the Competition Act that each party bears its own costs is expressly subject to both section 57(2) and the Competition Tribunal’s rules of procedure, meaning that the Tribunal’s costs jurisdiction is not limited only to the circumstances enumerated in section 57(2).

Under Rule 50(3) of the Competition Tribunal Rules, where a matter is withdrawn without a consent to pay costs, the other party may apply to the Tribunal for an appropriate costs order, and the Tribunal may grant such an order where justified.

The withdrawal of a complaint referral or interim relief application is treated as terminating that item of litigation for purposes of costs, such that costs may be determined with reference to the withdrawn proceeding as a discrete matter, without being deferred on the basis that related disputes may be litigated in future proceedings.

While the Tribunal may consider whether special circumstances justify refraining from an adverse costs award in interim relief-related contexts, the existence of later or renewed litigation based on similar underlying facts does not, without more, constitute such special circumstances where costs have already been incurred in responding to proceedings that were withdrawn.

Invensys PLC and Others v Protea Technology (Pty) Ltd and Others (31/IR/Apr11) [2012] ZACT 97 (21 November 2012)