1
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: CR
162Oct15/ARI187Dec16
In an application to compel between
:
WBHO CONSTRUCTION LIMITED
Applicant
And
THE COMPETITION COM
M
ISSION
First
Respondent
GROUP FIVE
CONSTRUCTION LIMITED
Second Respondent
In
re:
The Complaint referral
between:
THE COMPETITION COMISSION
Applicant
And
WBHO CONSTRUCTION LIMITED
First Respondent
GROUP FIVE
CONSTRUCTION LIMITED
Second Respondent
Panel
:
A
ndreas
Wessels
(Presiding Member)
: M
ondo
Mazwai
(Tribunal Member)
: E
nver
Daniels
(Tribunal Member)
Heard on
:
9 March 2017
Order Issued on
:
8
August 2017
Reasons Issued on
:
8
August 2017
REASONS FOR DECISION
Introduction
[1]
This is
an interlocutory application
by WBHO Construction Limited (“WBHO”)
against the Competition Commission (“the Commission”) and Group Five
Construction Limited (“Group Five”)
for an order declaring that certain documents
produced by Group Five, and
claimed as
legally privileged by the Commission are
not so and should be discovered.
2
[2]
In the main matter, WBHO and Group Five are all
eged to have been involved in
cartel
conduct
.
[3]
We have decided to d
ismiss
the
application
. Our reasons follow.
Background
[4]
On 1 September 2009, the Commission initiated a complaint against a number of
named
firms in the
c
onstruction industry, among which were
Group Five
and
WBHO
.
Not only are Group Five and WBHO mentioned in the Commission’s
complaint initiation, but the type
of conduct being investigated against them is also
mentioned.
[5]
Shortly afterwards,
on 2
3
November 2009,
Group Five
applied for leniency in terms
of the Commission’s Corporate Leniency Policy
(“CLP”) for conduct mentioned by
the Commission in its initiatio
n
. Thereafter
Group Five, in its capacity as a
corporate leniency applicant met with the Commission on 18 March 2010.
[6]
Following
Group Five
’s leniency application
and further investigation
, the
Commission,
o
n
26 October 2015, filed a complaint referral
with the Competition
Tribunal (“the Tribunal”)
against
Group Five
and WBHO
.
1
Given
Group Five
’s
role
as the corporate leniency applicant,
t
he Commission only
sought a
n administrative
penalty against WBHO.
[7]
In the complaint referral
WBHO stands accused of
contravening section
s
4(1)(b)(i
)
and (iii),
of the Competition Act 89 of 1998 (
”
the Act
”
) by
allegedly entering into a
collusive agreement with
Group Five
to fix the trading conditions for an N17 Project
in response to a
tender
issued by
the South African
National Road Agency
(“SANRAL”).
[8]
On 17 February 2016, WBHO filed its answering affidavit. The Commission did not
file a reply and thus pleadings closed on 17
February 2016. Following the c
lose of
1
Competition Tribunal Case No.: CR162Oct16.
3
pleadings the parties exchanged a number of discovery affid
avits.
Both t
he
Commission and
WBHO filed
their
discovery affidavit
s
on 18 July 2016
. WBHO
filed
its supplementary discovery affidavit on 19 August 2016. The Commission
filed its first, second, and third supplementary discovery affidavits on 2 August
2016,
20 September 2016
,
and 9 November 2016 respectively.
[9]
In part 2 of the schedule to the Commission’s
supplementary
discovery affidavit,
filed on 9 November 2016, the Commission listed
five
documents which it
considered to be legally privileged
or restrict
ed
.
In t
he index presented below
, we
set out only the documents relevant to the dispute between the Commission and
WBHO
.
Table 1
[10]
Following a
directive issued by the
Tribunal at a pre
-
hearing on 11 November
2016, the Commission provided an index of the annexures
to
Group Five
’s CLP
application (item 1
i
n the above schedule)
. The index lists
the following
documents
relevant to the dispute before us
:
Table 2
4
[11]
It bears mention that the leniency application itself has been claimed
by the
Commission
as legally privileged, which WBHO accepts
.
[12]
On 9 December 2016, WBHO launched the
present
application
before us
in which
it
essentially
ask
ed
the Tribunal to
:
12.1.
Declar
e
the annexures (to the CLP)
listed in Table 2 above,
not legally
privileged
;
and
12.2.
Declar
e
the transcript of the first meeting between the Commission and
Group
Five
as the CLP applicant (listed as item
s 2
in Table 1 above), not
legally privileged
.
2
[13]
The
Commission o
pposes the application, having filed
an answering affidavit
on 9
February 2017
in which it
alleges
that the documents requested are legally
privileged
.
Group Five
did not file an answer.
WBHO
submitted a reply on 17
February
2017
and the matter
was
heard on 09 March 2017.
[14]
The question that thus falls to us to determine is whether i) the annexures to
the
CLP application
listed
in Table 2 above
are, in fact, legally privileged and ii) whether
the transcript of
the
interview between the Commissio
n and
Group Five
(item 2 in
Table 1 above)
as the
leniency
applicant also falls under such legal privilege.
[15]
It is common cause that the case is concerned only with litigation privilege on the
basis of ‘contemplated litigation’, not for purposes of
obtaining or giving advice
between a client and his or her attorney.
Litigation Privilege over C
orporate
Leniency
Applications
[16]
This Tribunal, the Competition Appeal Court (“CAC”) and the Supreme Court of
Appeal (“SCA”) have had the opportunity to
consider the attachment of litigation
privilege to Cor
porate Leniency Applications
in cartel matters
. In
the
case of
2
WBHO also sought delivery of the relevant documents, if found not to be privileged, within two days
of the Tribunal’s order, as well as costs against the Commission.
5
Arcelormittal
South Africa
,
3
the SCA
,
having heard
a matter that had been
considered in both the Tribunal and CAC
decided that
:
“
[28] The
inquiry into whether litigation privilege attaches to the leniency application is
fact
-
bound. In this case that inquiry must focus on the facts set out in the Commission's
answering affidavits in response to the respondents' discovery applications. The
Com
mission says that the CLP is founded upon an expectation of litigation. The
commencement of discussions with a leniency applicant is always with a view to
instituting prosecutions against cartelists. And the grant of immunity flows from the
process. Put si
mply the grant of immunity, to secure the cooperation of a cartelist, is
inseparable from the litigation process itself. This much is clear from the Tribunal's
characterisation of the purpose of the CLP in the
Pioneer Foods
case:
“
[38] The very purpose
of the CLP . . . is for firms who have been part of a
cartel to come forward with the carrot of immunity offered in return for
information and cooperation. But that is not an end in itself. The information
obtained from immunity applicants under the CLP is
intended for the purpose
of litigation against the remaining firms alleged to be part of the cartel. The
informants furnish the Commission with the information which forms the basis
of its decision to refer a complaint. The extract from the CLP that we ci
ted above
clearly obliges applicants to cooperate with the Commission until the
Commission's investigations are finalised and the subsequent proceedings
in
the Tribunal are completed.”
[39] That in the process an ancillary outcome, the award of indemnity
is
afforded, does not detract from the fact that the Commission's central object is
to use the information to conduct litigation in the Tribunal against such
members of the alleged cartel as contest proceedings. Thus the inescapable
conclusion is that inhe
rent in this process is t
conclusion is that inhe
rent in this process is t
he contemplation of litigation.
”
[29] It emerges from the Commission's affidavits that it contemplated litigation as a
result of its investigation into the steel industry. Scaw became aware of the
investigation and applied to the
Commission for a marker, which was granted. The
Commission then requested Scaw to file a leniency application, which contained
certain specific information. Scaw did so on 9 July 2008. Of importance in this regard
is that the Commission pertinently says t
hat the leniency application was prepared for
its use, even though it would be of a benefit to Scaw. And it was made clear to Scaw
from the outset of its engagement with the Commission that the information contained
in the leniency application was required
so that a complaint could be initiated against
the respondents. Moreover, the Commission's in
-
house and external legal advisors
were involved throughout this process, including providing advice on the leniency
application.
[30] There is no reason to dou
bt that explanation. Moreover, our courts have held that,
subject to certain limited exceptions:
"the statements in the affidavits of documents are conclusive with regard to the
documents that are in the possession . . . of a party giving the discovery .
. . as
to the grounds stated in support of a claim of privilege from production for
inspection".
3
The Competition Com
mission of South Africa v Arcelormittal
South Africa [2013] 1 CPLR 1
(SCA).
6
A court will, therefore, not lightly go behind averments in an affidavit to the effect that
the likelihood of litigation was contemplated
when the document was procured.”
4
[17]
Both
Mr
Trengove
for WBHO
and Mr Ndzabandzaba who appeared for the
Commission, concurred that whether litigation privilege attaches to a leniency
application is ultimately a question of fact.
They differed on whether the
Commission
ha
d
sufficiently justified its claims for privilege
in this case
.
[18]
As mentioned, t
here is no dispute between the parties that the leniency application
itself
is legally privileged.
[19]
In respect of the annexures, t
he
Commission
indicates
in
its
answering affidavit
that
,
over and above the fact that the annexures are not severable from the
leniency application,
“
the annexures were internal discussions within
Group Five
in preparation of the drafting of the leniency app
lication and therefore are
subject
to litigation privilege.
”
5
[20]
WBHO
argued that the Commission’s claim of litigation privilege as set out in its
answer was bald and unsubstantiated
,
since
it does not follow
that litigation wa
s
contemplated as likely simply
because a leniency application ha
d
been filed.
[21]
Mr
Trengove
attempted to differentiate the facts of
Arcelormittal
from the matter
before us by introducing a temporal element.
He argued firstly
that, on the facts of
this matter,
the annexures to
Group Fiv
e
’s
leniency application
were written
before
Group Five
applied for leniency and thus, the
C
ommission did not contemplate
litigation
to be a likelihood
at the point in time
when
the documents were generated,
since it did not even have the leniency
application
.
6
[22]
We are not persuaded by th
is
argument
.
Firstly, no argument was lead as to how
the CLP annexures
were
severable from the leniency application itself
merely
the CLP annexures
were
severable from the leniency application itself
merely
because they were generated before the leniency application
was filed by Group
Five
with the Commission.
4
Arcelormittal
, s
upra, para 28
-
30.
5
Respondent’s Answering Affidavit, para 7, page 178 of hearing bundle.
6
Applicant
’s Heads of Argument,
page 10, paragraph 19.
7
[23]
The Commission states on affidavit that the annexures
form part and parcel of the
leniency application. They
were
generated “
in
preparation for the drafting of the
leniency application
and therefore
are subject to litigation privilege”.
It goes on
further to state that the annexures
were
“
produced for use by the Commi
ssion in
contemplation of litigation”.
The Commission
further states
that
:
“The central object
of producing the CLP application is to us
e information contained therein to conduct
litigation in the Tribunal against such members of the alleged cartel that contest
proceedings.”
[24]
We have no reason to doubt the explanation in the Commission’s affidavit
,
particularly given the proximity of the
dates of the
annexures
to the filing of the
leniency application
.
T
he
documents
were generated on
29 September 2009
, 9
October 2009
and 6 November 2009 respectively, and the leniency application was
filed on 23 November 2009.
It is not improbable, as alleg
ed by the Commission in
its answering affidavit, that they were produced in preparation for the leniency
application for use by the Commission in contemplation of litigation.
[25]
As
noted by the SCA in
Arcelormittal
, courts will not lightly go beyond claims
on
affidavit to the effect that litigation was contemplated when the document was
procured.
[26]
Secondly, the argument as presented by
Mr
Trengove
places
undue
emphasis on
the
generation of the annexures
and their author
.
As mentioned, h
e submitted that
the Commission could not
have contemplated
litigation
when the annexures were
generated since it did not have the leniency application before it.
[27]
However, a
s held by t
he SCA in
Arcelormittal
,
“
T
he purpose of the document is not to be ascertained by reference to its author,
either
at the time at which the document was prepared or at the time it is handed over to the
litigant
litigant
or the litigant’s legal representative. Instead, the purpose
of the docum
ent is to
be determined by reference to “the person or authority under whose direction, whether
particular or general, it was produced or brought into existence”. In that case it is the
intention of the person who procured the docume
nt, not the author’s i
ntent
ion,
that is
8
relevant for ascertaining the document’s purpose. The author need not even know of
possible litigation when the document was prepared.”
7
[28]
The CLP has been developed and published in the Government Gazette by the
Commission in the exercise
of its authority as a statutory body responsible,
inter
alia
, for prosecuting cartels before the Tribunal. By their nature, leniency
applications are brought under the direction of the Commission to aid in eradicating
cartels.
The High Court, in
Allens Me
shco
8
comprehensively set out the process
for leniency applications. As mentioned in the
CLP
itself (and observed by the High
Court in
Allens Meshco
), a leniency application may
be brought before or after the
Commission has initiated its own investigation. It
may
or may not be preceded by
a marker.
[29]
M
r Trengove
placed much emphasis on the fact that in
Arcelormittal
the leniency
application was filed at the behest of the Commission
. He
tried to
distinguish the
facts of this case from
Arcelormittal
on the basis that in the latter
, the leniency
application was not
‘cold’ off the street, but happened at the behest of the
Commission when the Commission had already initiated an investiga
tion which
was far down the line and therefore litigation was contemplated
.
9
[30]
However,
the
characterisation of WBHO’s application as a ‘cold’ application is
factually
inaccurate.
The simple facts of the matter are that the Commission
had
already
initiated
a complaint against the construction industry
on 1 September
2009
against named firms, including WBHO
. In the course of the Commission’s
investigation,
Group Five
applied for leniency
on 23 November 2009
(having
generated
the
annexures
in question
)
.
Th
ese
facts are no different to the facts
in
Arcelormittal
.
[31]
It transpired during the hearing that Group Five had filed a marker on 8 October
2009, prior to submitting its leniency application. The Commission
had not
2009, prior to submitting its leniency application. The Commission
had not
discovered the marker as it claimed it was
privileged
.
Mr
Trengove did not seek to
7
Arcelormittal, supra, para 27.
8
Case No.31044/13, as yet unreported, 17 July
2015.
9
Tribunal
Transcript
of Proceedings, 9 March 2017
, page 8
,
lines 1
-
15
;
see also
page 11, lines 10
-
20.
9
make much of this since he submitted correctly that
the case before us
wa
s not to
determine the defective procedure followed by the Commission, but to determine
whether the documents in question
we
re legally privileg
ed.
10
[32]
On the facts of this case, there is no dispute that the CLP is privileged. The
Commission’s explanation of the annexures to the CLP, from its answering
affidavit, is that they were generated for its use in contemplation of litigation. Even
though th
ey were generated before the CLP, given their proximity to the filing of
the CLP, we have no reason to doubt the Commission’s explanation.
Moreover, as
the SCA held, privilege attaches to the person under whose authority the document
is produced, not its a
uthor.
11
The annexures, even though produced before the
filing of the CLP
by Group Five,
are privileged in the hands of the Commission
since they were produced for the Commission’s use.
[33]
Moreover,
contr
ary to Mr Trengove’s characteris
ation
of the Commission’
s
application a
s a ‘cold’ application, it was in fact filed after the Commission had
initiated its investigation, following a marker.
The Commission does not rely on the
existence of the marker for its claim of privilege. We are satisfie
d, nevertheless on
the explanations given, that the annexures are privileged and there is no basis to
sever the
m
from the application.
Put differently, we are not persuaded by WBHO’s
reasons for severing the annexures from the CLP, particularly where they
accept
that the CLP itself is privileged.
[34]
We thus find no reason to sever the annexures of the leniency application in this
matter from the
leniency
application itself.
[35]
T
urning then to the transcript of the meeting between WBHO and
Group Five
on
18 Mar
ch 2010
.
T
he Commission submits in its answering affidavit that
the
transcript thereof was
generated in contemplation of the litigation against WBHO.
It states
further
that
“the
generated in contemplation of the litigation against WBHO.
It states
further
that
“the
transcript was produced in relation to litigation that had
10
Tribunal Transcript of Proceedings
,
9 March 2017
,
page 79, lines 9
-
13.
11
Arcelormittal
, supra, para 27.
10
not only commenced, but that the Commission fully expected to pursue.”
Agai
n,
we have no reason to question this explanation.
[36]
The a
pplicants argue that because the meeting was h
eld
in 2010 and th
e referral
only made in 2015, it could not be said that litigation was contemplated
as a
lik
e
lihood
at the time of the meeting and thus the transcript could not b
e considered
legally privileged.
12
[37]
We find such an argument to be unsustainable.
To assert th
at
,
because there has
been a
passage of time between the first meeting with a leniency applicant and
the
referral
of a complaint as
a result of such meeting
indicates that litigation was never
contemplated
at the time of the first meeting
is un
persuasive
.
There may be many
factors delaying the eventual referral of a matter
. This does not detract from the
fact that litigation was contemplated as likely well before the matter is heard.
[38]
The fact that the Commission also invited firms to settl
e any contraven
tions they
may have been involved in
, which
may
also account for some of the delay,
does
not mean that
the contemplation of litigation ceased. It
is a matter of public record
that settlement negotiations were
entered into
to expedite the conclusion of an
i
ndustry wide investigation
.
13
[39]
We find that t
he transcript of the meeting between the Commission and
Group Five
was
generated in contemplation of litigation and thus the Commission is within its
right to claim privilege over the document.
Docket
P
rivil
ege
[40]
The Applicants argued, at some length in both their heads of argument and in oral
argument that the Commission’s claim of legal privilege over the documents
in
question
amounts to the outlawed and outdated claim of ‘docket privilege.’
12
Applicant
’s
Heads of Argument page 9
-
10, para 17
-
18.
Tribunal Transcript of Proceedings, 9 March
2017
, pages 5
-
10.
-
10, para 17
-
18.
Tribunal Transcript of Proceedings, 9 March
2017
, pages 5
-
10.
13
WBHO itself concluded a settlement agreement with the Commission regarding its involvement in
cartel activity, and according to WBHO its settlement w
ith the Commission includes the N17 Project
which is the subject matter of the Commission’s referral in the main matter. This however has no bearing
on the privilege dispute before us as it will be decided in the main hearing.
11
Although the issue of litigation privilege reached the SCA in the
Arcelormittal
matter, docket privilege is not raised by the SCA.
[41]
Adv. Treng
ove implored us to
utilise
our discretionary power in terms of
Competition T
ribunal Rule 55(1) to interpret litiga
tion privilege with
the
principle of
fairness
followed by the Constitutional Court in
Shabalala v Attorney General,
Transvaal
,
14
which
required
organisations assuming a prosecutorial role
to
provide
full disclosure of the docket.
[42]
Whilst we appreciate tha
t
Mr
Trengove was advancing a more nuanced line than
that which was dealt with succinctly by the CAC in the
Federal Mogul
,
15
where
Davis JP held that “
The proceedings in the Tribunal, which eventually lead
to the
imposition of an
administrative penalty are civil and not criminal in nature
”, we
disagree with his submissions.
[43]
In the
Pioneer Foods
matter, the CAC held that:
“
The Supreme court of Appeal has recently said in passing that administrative
penalties imposed by the Tribu
nal bear a close resemblance to criminal penalties.
This should not be taken as detracting from the decision by this court that proceedings
before the
T
ribunal are not criminal proceedings for the purposes of the Constitution,
but is merely a reflection of
the fact that in their amount, their intended deterrent
purpose
and undoubted punitive effect and the fact that they are paid into the
consolidated revenue fund, they bear a resemblance to fines as reflected in the
language of section 59(4).”
16
[44]
In
Group
Five
Ltd v The Competition Commission of South Africa
,
17
this Tribunal
found that:
14
1996(1) SA 725 (CC)
.
15
Federal Mogul Aftermarket Southern Africa (Pty) Ltd v Competition Commi
ssi
on and Another [2005]
1
CPLR 50 (CAC).
16
Competition Commission v Pioneer Foods (Pty) Ltd [2010] 2 CPLR 195 (CAC),
para 8
.
17
Group Five
L
para 8
.
17
Group Five
L
td
v Competition Commission; in re: Competition Commission v
Group Five
Ltd and
others
[
2016
]
1 CPLR 359 (CT)
.
12
Complaint referral proceedings are not criminal proceedings, nor have our courts
recognis
ed rights that would avail a criminal accused to a firm in administrative law
proceedings where the individual’s right
to liberty is not in question.
18
[45]
The
CAC and
Tribunal
, in our view,
ha
ve thus already decided on the
line of
argument
presented by
Mr
Trengove
, long after the
Shabalala
decision
. In
light of
the fact that any firm b
efore the Tribunal is not at risk of losing its liberty
in a
finding
by the Tribunal, the principles determining fairness in criminal proceedings cannot
be said to be applicable to the determination of fairness before the Tribunal.
We
see no reason t
o diff
er in our conclusion from the decisions that have come before
on this issue
.
[46]
Of course there is nothing stopping the Commission from making a policy choice
to give access to its entire docket despite its claim of privilege over some
documents in the
docket, but t
here is no legal obligation on it to do so.
18
Supra
,
para 71.
13
O
rder
The following order
is
made:
1.
The application is dismissed
2.
No order is made as to costs.
8
August 2017
M
s
Mondo Mazwai
Date
Andreas Wessels and Enver Daniels concurring
Tribunal Researcher
:
Alistair Dey
-
v
an Heerden
For the Applicant:
Adv. W Trengove SC assisted by Adv. G Marriot
t
Instructed by
Nortons Inc.
For the
Commission
:
Mr A. N
d
zaban
d
zaba of Nzabanzaba Attorneys Inc.