Feb 6,2014 / News / Legal Brief

COSTS AND THE COMPETITION AMENDMENT ACT[1]

INTRODUCTION

In December 2013, the Constitutional Court handed down a judgment in the matter of the Competition Commission (“Commission”) versus Pioneer Hi-Bred International Inc and Others (“Pioneer matter”). This judgment concerned the power of the Competition Appeal Court (“CAC”) to order costs against the Commission in terms of the Competition Act (“Act”). The Constitutional Court held that the CAC has no power under the Act to order costs against the Commission in relation to Competition Tribunal (“Tribunal”) proceedings. Therefore it set aside the costs awards made by the CAC in the Pioneer matter.

BACKGROUND FACTS

Pioneer Hi-Bred International Inc (“Pioneer”) and Pannar Seed (Pty) Ltd (“Pannar”) (collectively the “merging parties”) notified the Commission of an intermediate merger in terms of the Act during 2010. The Commission investigated the merger in terms of sections 12A and 14 of the Act and prohibited it on the grounds that it was likely to give rise to a substantial prevention or lessening of competition in the relevant market.

In terms of section 16(1)(b) of the Act, the merging parties filed a request with the Tribunal to reconsider the Commission’s decision. The Tribunal also prohibited the merger on the same grounds as the Commission had done and made no order as to costs.

The merging parties then appealed to the CAC. The CAC upheld the merging parties’ appeal and approved the merger subject to conditions. In addition the CAC, without reason, ordered the Commission to pay the costs of the merging parties in –

  • the CAC proceedings; and
  • the Tribunal proceedings.

The CAC granted the Commission leave to appeal the costs order to the Constitutional Court.

THE CONCEPT OF ‘COSTS’

The concept of ‘costs’ generally signifies the sum of money a court orders one party in proceedings to pay to another party as compensation for the expense of litigation incurred.[2]   A costs order is not intended to be compensation for a risk to which one has been exposed, but a refund of expenses actually incurred.[3]

There are two fundamental rules relating to awards of costs[4]

  • the court generally has an unfettered discretion in awarding costs; and
  • costs usually follow the event, i.e. the successful party should be awarded its costs.

There are very few exceptions to the rule that an award of costs is at the discretion of the court; but there are many factors which may be relevant in depriving a successful litigant of its costs. On the other hand, the circumstances in which a successful litigant may be ordered to pay the costs of its adversary are far more limited.[5]

THE COMMISSION IS NOT AN ORDINARY CIVIL LITIGANT

The Constitutional Court held that the central enquiry in each Tribunal case must be whether, when all factors have been taken into account, it is in accordance with the requirements of the law and fairness to award costs.

However, the Constitutional Court took into account the fact that the Commission was not an ordinary civil litigant and found that the ordinary rule for costs to follow the result is not applicable. It said that when the Commission is litigating in the course of fulfilling its statutory duties, it is undesirable for it to be inhibited in the bona fide fulfilment of its mandate by the threat of an adverse costs award. The Court emphasised that the Commission was not acting as a mere opposing party in civil litigation but rather as a public functionary, “earnestly and with vigour to pursue its mandate when litigating in the course of its functions”.

Furthermore, the Court held that the Tribunal should be alive to any undue financial prejudice that may result from its order, taking into account the inherently limited means of the Commission as a statutory body acting in the public interest, the particularities of the parties before it, and the nature of the proceedings. Even when the Tribunal disagrees with the Commission’s position or finds its actions to be mistaken, this is not necessarily sufficient to justify an adverse costs order. However, the Court did point out that an unreasonable, frivolous or vexatious pursuit of a particular stance may justify an order of costs against the Commission. This will depend on the facts of each case.

THE POWER OF THE CAC TO AWARD COSTS IN RELATION TO TRIBUNAL PROCEEDINGS

Section 61(2) of the Act empowers the CAC to award costs “against any party in the hearing, or against any person who represented a party in the hearing”. In its interpretation, the Constitutional Court held that –

  • a reading of the words “in the hearing” to restrict the CAC’s costs powers to the proceedings in the CAC only, is congruent with the scheme of the Act;
  • having established that the Tribunal has no power to grant costs outside of the exception to the ‘own costs’ rule in section 57(2) of the Act, it would be contrary to the CAC’s position as an appellate court to interpret section 61(2) to include a power to award costs in relation to Tribunal proceedings that the Tribunal itself is not empowered to make; and
  • it would defeat the purpose of the limitation on the Tribunal’s powers to award costs to read section 61(2) as empowering the CAC to do what the Tribunal may not do.

Therefore, insofar as the Tribunal is limited in its powers to award costs, the CAC is similarly limited in its powers to award costs in relation to Tribunal proceedings.

THE CAC’S COSTS AWARD IN PIONEER

In relation to the CAC’s award of costs in the appeal, the Constitutional Court held that the while the CAC had a discretion to award costs, it did not provide reasons for doing so and there is nothing in the judgment that indicates mala fides, irregularity or unreasonable conduct by the Commission. Therefore the inference is inescapable that there was no judicial exercise of the CAC’s discretion.

The Court consequently set aside the CAC’s costs order against the Commission.

CONCLUSION

In light of this judgment, it is clear that the Tribunal does not have the power under the Act to order costs against the Commission unless either section 52(2)(a) or section 52(2)(b) of the Act applies; i.e. in circumstances where the Tribunal has not made a finding against a respondent or where the Tribunal has made a finding against a respondent. And whilst this judgment reaffirms that the CAC has the discretion to order costs against the Commission in appeal proceedings before it, emphasis is placed on the fact that this power is limited by the requirements of law and fairness in terms of section 61(2). Justification of an order of costs against the Commission is therefore dependent upon the facts of each case.

 


[1] 89 of 1998

[2] Cilliers “The Law of Costs” Last updated April 2013, accessed from LexisNexis at para 1.03

[3] Payen Components South Africa Ltd v Bovic Gaskets CC 1999 (2) SA 409 (W) 417D.

[4] Cilliers, op cit at para 1.02

[5] Cilliers, op cit at para 1.02