Judgment on Setting Aside Admin Decision in SA Competition Law: Commission's Role & Exempt, Exams of Law

Download Judgment on Setting Aside Admin Decision in SA Competition Law: Commission's Role & Exempt and more Exams Law in PDF only on Docsity! 1 THE SUPREME COURT OF APPEAL OF SOUTH AFRICA Reportable CASE NO: 350/2001 THE COMMISSIONER OF THE COMPETITION COMMISSION APPELLANT AND THE GENERAL COUNCIL OF THE BAR SOUTH AFRICA 1ST RESPONDENT THE SOCIETY OF ADVOCATES (WITWATERSRAND LOCAL DIVISION) 2ND RESPONDENT THE PRETORIA SOCIETY OF ADVOCATES 3RD RESPONDENT THE CAPE BAR 4TH RESPONDENT THE SOCIETY OF ADVOCATES OF KWAZULU-NATAL 5TH RESPONDENT THE SOCIETY OF ADVOCATES, FREE STATE 6TH RESPONDENT THE EASTERN CAPE SOCIETY OF ADVOCATES 7TH RESPONDENT SOCIETY OF ADVOCATES TRANSKEI 8TH RESPONDENT BISHO SOCIETY OF ADVOCATES 9TH RESPONDENT NORTH-WEST BAR ASSOCIATION 10TH RESPONDENT NORTHERN CAPE SOCIETY OF ADVOCATES 11TH RESPONDENT CORAM: HEFER AP, HOWIE, HARMS, SCOTT, MPATI JJA SUMMARY: Administrative Law – setting aside of administrative decision – remittal to administrative authority – Competition Act 89 of 1998 - exemption HEARD: 15 August 2002 DELIVERED: 6 September 2002 JUDGMENT HEFER AP 2 HEFER AP: [1] Each of the second to eleventh respondents is an association of advocates practising in one of the Divisions of the High Court. Representatives of these associations constitute the first respondent, the General Council of the Bar of South Africa (the “GCB”). The GCB maintains a code of conduct which was intended to regulate the professional conduct of the members of all the associations after adoption by the latter. But, because every association has not adopted every rule in the same form, each association still operates under its own rules. [2] Suspecting towards the end of 1999 that some of their rules might offend against s 4 of the Competition Act 89 of 1998, the respondents submitted a joint application to the Competition Commission for exemption from the application of Part A of Chapter 2 of the Act.1 For reasons which will soon emerge they were not satisfied with the Commission’s decision sent to them about a year later and they promptly brought review proceedings on notice of motion in the Transvaal High Court. In the answering affidavit it was conceded on behalf of the Commission that the decision had to be set aside for lack of compliance with the audi alteram partem principle. This left the question whether the matter ought to be remitted to the Commission as the main bone of contention. Eventually Roos J 1 Sec 4(1)(b)(i) prohibited restrictive horizontal practices directly or indirectly fixing trade conditions but, until it was deleted by Act 39 of 2000, s 3(1)(c) expressly provided that the Act would not apply to the rules of professional associations to the extent that they were exempted by the Commission under Schedule 1.These rules may still be exempted under Schedule 1 despite the deletion of s 3(1)(c) but counsel were in agreement that the appeal has to be decided in terms of the unamended version of the Act. 5 6 no conditions 7 10 by the Commission. I will refer to it as the “Meyer report”. [8] Nothing came of the undertaking to disclose the full reasons in the answering affidavit. That document was deposed to by the Commissioner5 who claimed that the application for exemption had been considered under Schedule 1 (and not in terms of s 10)6 and had been refused as far as the rules in dispute are concerned. He also alleged that the Minister had been properly consulted and that the Adraft response@ had in fact been signed by the Minister and contained his official comments. Conceding, however, that the contents of the document had not been revealed to the respondent and that the Commission’s decision was impugnable for this reason, he requested the court to remit the application for exemption to the Commission for reconsideration. [9] Presumably as a result of the information in the answering affidavit and the Meyer report (which the respondents did not have when they prepared their application for review), there is no longer a dispute about the status of the Adraft response@ and the appeal was argued on the basis that it contains the Minister’s official comments. In addition the respondents did not try to persuade us that the Commission had in fact considered and decided the application in terms of s 10, or that the result in fact was that the application had been granted subject to 5 The Commission then consisted, so we were told, of a Commissioner and one Deputy Commissioner. 6 The reference to s 10 in the exemption certificate, he said, was an error. 11 unauthorised conditions as alleged in the founding affidavit7. However, as will be seen later, their contention is that the confusion about the nature of the decision and the provision of the Act in terms of which it was taken, still has a bearing on the question we have to decide. [10] Because it figured prominently in the argument on both sides I intend to deal at some length with the Meyer report but, in order to follow the reasoning, it is appropriate to examine Schedule 1 to the Act first. At the relevant time items 1 and 2 of Part A of the Schedule read as follows: “1. A professional association may apply in the prescribed manner to the Competition Commission to have all or part of its rules exempted from the provisions of Part A of Chapter 2 of this Act, provided - (a) the rules do not contain any restriction that has the effect of substantially preventing or lessening competition in a market; or (b) if the rules do contain a restriction contemplated in paragraph (a), that restriction, having regard to internationally applied norms, is reasonably required to maintain - (i) professional standards; or (ii) the ordinary function of the profession. 2. Upon receipt of an application in terms of item 1, the Competition Commission may exempt the rules concerned after it has - (a) given notice of the application in the Gazette; (b) allowed interested parties 30 days from the date of that notice to make representations concerning the application; 7The Meyer report demonstrates that this is not what had happened. 12 and (c) consulted the responsible Minister, or member of the Executive Council.” Read together, items 1(a) and (b) plainly required a two-stage enquiry: first the Commission had to determine the category into which a particular application for exemption fell. This depended on whether the rule or rules in question contained a restriction of the kind mentioned in item 1(a). If the enquiry produced a positive result, ie if the application was found to be of the (b) category, the remaining question was whether, having regard to internationally applied norms, the restriction was reasonably required to maintain professional standards or the ordinary function of the profession8. [11] In his report Mr Meyer dealt in detail with competition matters like the market in which advocates practise their profession, the supply and demand sides of the market and international and South African anti-trust experience relating to the legal profession, and came to the conclusion that some of the respondents’ rules contained restrictions substantially preventing or lessening competition in the legal services market. The enquiry should then have been whether, having regard to internationally accepted norms, the restrictions were reasonably required for the maintenance of professional standards or the ordinary function of the profession. But, although Mr Meyer repeatedly stated that the application had to be considered and decided under Schedule 1, there is no indication in the report that he ever 8 Internationally applied norms had to be taken into account but were obviously not definitive. 15 way in which Mr Meyer handled the Minister’s comments. As mentioned earlier, his modus operandi in evaluating each rule was to contrast the respondents’ contention with that of the Minister. Invariably he came down on the latter’s side. The report abounds with lengthy quotations from the Minister’s comments but what does not appear from the report is an appreciation of the fact that at that very time the Minister was set upon a radical transformation of the entire legal profession. In this regard Mr Meyer said: “The Minister of Justice has pointed out that his Department is in the process of drafting a Legal Practice Bill, which will regulate the practice of law in accordance with section 22 of the Constitution of the Republic of South Africa. The premise underlying this legislation is that regulation of a profession is justified only in so far as it is necessary to protect the public interest. The Bill does not perpetuate the statutory recognition of the distinction between advocates and attorneys ... In order to deal with the effect of the De Freitas and Van der Spuy decisions, the Bill also provides that ANo legal practitioner shall be barred from taking instructions directly from a member of the public, provided that he or she complies with the provisions of the Act ...” (Emphasis added.)10 It appears from this passage and other parts of the Minister’s commentary that he commented on the respondents’ rules in the wider context of the general transformation of the profession and that he did so from the point of view of the public interest, and not by enquiring into the need of any rule for the maintenance of standards or the ordinary function of the profession. This, and the fact that the Commission’s allotted task under item 1(b) of Schedule was quite different, Mr 10 In Society of Advocates of Natal v De Freitas and Another 1997 (4) SA 1134 (N) and General Council of the Bar of South Africa v Van der Spuy 1999 (1) SA 577(T) the Full Courts in Kwazulu-Natal and Gauteng held the referral rule to be in accordance with the common law of South Africa. 16 Meyer failed to address. The result was that much was said about the social impact of the rules but nothing concerning the question whether they were reasonably necessary for the prescribed purpose. [12] For the simple reason that it has adopted the report as the essence of its reasons these flaws in the Meyer report must also affect the proceedings of the Commission. Thus the statement in the answering affidavit that the Commission had applied the test contemplated in Schedule 1 has been shown to be wrong. Like the Minister and like Mr Meyer it, understandably, concerned itself with the protection of those who use the services of advocates and with the promotion of the public interest, 11 but failed to enquire whether those objectives were not best served by the respondents’ rules. There can be no doubt that, by blandly accepting the Minister’s comments, the Commission became embroiled in the wider debate about the transformation of the legal profession and lost sight of the real question it had to resolve under item 1(b). [13] It was submitted on the respondents’ behalf that the Meyer report and the answering affidavit reveal that the Commission lacked understanding of its functions and that this, coupled with other features of the case (like the fact that the Commission did not reveal the Minister’s commentary to them, the way in which the Commission treated the judgments in De Freitas and Van der Spuy12 and the 11 The Commissioner said eg: [The Commission’s] concern is to promote the interests of those who use the services offered by “advocates, to maintain and if possible enhance the standards that the profession currently sets, and to protect and promote the interests of the public at large.” 12 In the answering affidavit the Commissioner brushed both judgments aside by saying that the cases had not been decided “with reference to any aspect of competition law” and that ‘it is 17 confusion surrounding the nature of the Commission’s decision and the provision of the Act in terms of which it was taken) provided sufficient reason to the Court a quo to decline a remittal to the Commission. [14] It is not necessary to deal at length with a reviewing court’s power to substitute its own decision for that of an administrative authority.13 Suffice it to say that the remark in Johannesburg City Council v Administrator, Transvaal and Another 14 that “the court is slow to assume a discretion which has by statute been entrusted to another tribunal or functionary” does not tell the whole story. For, in order to give full effect to the right which everyone has to lawful, reasonable and procedurally fair administrative action, considerations of fairness also enter the picture. There will accordingly be no remittal to the administrative authority in cases where such a step will operate procedurally unfairly to both parties. As Holmes AJA observed in Livestock and Meat Industries Control Board v Garda15 “ ... the Court has a discretion, to be exercised judicially upon a consideration of the facts of each case, and ... although the matter will be sent back if there is no reason for not doing so, in essence it is a question of fairness to both sides.”16 [15] I do not accept a submission for the respondents to the effect that the Court a arguable that, if the [Commission] ... should decide that [the referral] rule is not required for the maintenance of professional standards for the functioning of the profession, then the common law will be required to bend in order to acknowledge this.” 13 Act 3 of 2000 did not apply at the time and in any event takes the matter no further. 14 1969(2) SA 72 (T) at 76D-E. 15 1961 (1) SA 342 (A) at 349G. 16 See also Erf One Six Seven Orchards CC v Greater Johannesburg Metropolitan Council (Johannesburg Administration) and Another 1999 (1) SA 104 (SCA) at 109F-G. 20 proper treatment if it were to be remitted are not good. [18] On the other hand, I have grave doubt about the ability of the Court a quo (and of this Court, for that matter) to decide the application for exemption in respect of all the rules of the respondents on the papers. It is all very well to say (as the respondents’ counsel said in their written heads of argument) that the GCB’s professional standards and the functioning of the profession fall squarely within the purview, knowledge and competence of a court, and that the expertise and experience of a court to understand what is required to maintain legal professional standards and institutional integrity are indeed greater than that of the Commission. I agree that a judge’s knowledge and experience of the profession do indeed qualify him or her to form and express views on the practical necessity of at least some of the rules. In De Freitas,21 for example, Thirion J said that the referral rule “reflects an existing practice of long standing and on the strength of which Court procedure has been arranged and on the strength of which the Legislature has made a distinction between the positions of advocate and attorney. This is in itself good reason for sustaining it. The rule is one that is justifiable in the interests of the legal profession and of the public. It is not unreasonable. It should be retained.” 21 Supra at 1171B-C. But, in the context of the Competition Act, this type of reasoning cannot be taken too far and cannot in all cases provide the final answer in an enquiry under item 21 1(b). In the normal course it is for the Commission to judge the reasonableness of the need for the restriction under consideration; and, in doing so, it may take account of a range of economic and social factors. In effect it has to weigh the benefits derived from the restriction against the harm it may cause, not only to members of the profession, but to others as well. If a court of law were to assume the task, factors may well have to be considered which are no longer within the ambit of its experience and expertise; and in that case exemption cannot be granted unless the available evidence justifies such a step. In saying this I have not lost sight of the respondents’ submission that the enquiry under item 1(b) is not a competition debate. The premise on which the submission is based is that “in [the enquiry under item 1(b)] the effect of the professional rule upon competition is a given”. This is so, but it does not follow that the effect of the rule upon competition becomes irrelevant to the enquiry into the question whether it is reasonably required for the maintenance of professional standards or the ordinary function of the profession. On the contrary, as I have shown, a balancing exercise is required to determine whether its benefits outweigh its anti-competition effect. This does not mean, however, that the court must shirk its responsibility where it is indeed in a position to do such an exercise. [19] In the present case Roos J exempted the referral rule and two others from the 22 application of the Act.22 I have no doubt that his decision relating to the referral rule was correct. The judgment in De Freitas was confirmed on appeal23 and the effect of the judgment of this Court is that our law recognizes a divided profession coupled with a referral system. This is the law of the land and the Commission was not entitled to “bend” it24 by refusing exemption. After all, the power to develop the common law vests in the courts – not in the Commission – and any attempt by the latter to do so would be ultra vires . It was not contended for the Commission that the common law in this regard should be developed by this Court as envisaged in s 39 (2) of the Constitution and no case for development of that kind was made out on the papers. The law must be applied as it stands. But the same cannot be said of the other two rules which Roos J exempted. Both of them plainly serve a measure of good but I know too little of their economic and other effects to be able to say that either of them is reasonably required to 22 The first of these precludes members of the Associations from accepting briefs with non-members. The other one in effect precludes them from accepting briefs on a contingency basis without the consent of the Bar Council. 23 In a judgment reported in 2001(3) SA 750 (SCA).