REPORTABLE
CASE NO.: SA 41/2011
IN
SUPREME COURT OF NAMIBIA
In
the matter between
|
NAMIBIAN
COMPETITION COMMISSION
|
FIRST
APPELLANT
|
|
MINISTER OF
TRADE AND INDUSTRY
|
SECOND
APPELLANT
|
|
and
|
|
|
WAL-MART
STORES INCORPORATED
|
RESPONDENT
|
CORAM:
Shivute CJ, Maritz JA et
O’Regan AJA
Heard
on: 18/10/2011
Delivered
on: 4/11/2011
APPEAL
JUDGMENT
O’REGAN
AJA:
This
is an appeal against two declaratory orders made by the High Court.
The first order declared invalid paragraph (a) of Notice 75 of
2010,
issued by the Minister of Trade and Industry (the second appellant)
and the second declared invalid four conditions imposed by the
Namibian Competition Commission (the first appellant) in its
approval of a proposed merger between Wal-Mart Stores Incorporated
(the respondent) and Massmart Holdings Ltd, a South African company
that has five Namibian subsidiaries.
Factual
Background
Wal-Mart
Stores Incorporated is a company incorporated in the state of
Arkansas in the United States of America. It is apparently the
world’s largest company, in terms of revenue, with annual
revenue estimated at US$408 billion, larger than the gross domestic
product of most of the countries in the world. Wal-Mart is in the
process of purchasing the majority shareholding in Massmart Holdings
Ltd, a retailer and wholesaler of groceries, liquor and general
merchandise. Massmart has holdings in several different southern
African countries and the proposed merger required approval by
competition regulators in South Africa, Namibia, Tanzania, Malawi,
Swaziland and Zambia. Approval was obtained from the last four
national regulators by the end of 2010. The merger will affect five
Namibian companies, all subsidiaries of Massmart. Two of them are
dormant. The active three are Game Discount World (Namibia) (Pty)
Ltd, Windhoek Cash and Carry (Pty) Ltd and CCW Namibia Properties
(Pty) Ltd. The merger is to be effected by way of a scheme of
arrangement in terms of section 311 of the South African Companies
Act, 61 of 1973. The material term of the scheme is that Wal-Mart
has offered to acquire 51% of Massmart’s ordinary share
capital.
It
is common cause between the parties that the merger requires
approval of the Namibian Competition Commission. Accordingly, on 26
November 2010, Wal-Mart and Massmart informed the Commission of the
proposed merger in terms of section 44(1) of the Competition Act, 2
of 2003 (the Act).
On 9 February 2011, the Chairperson of the Namibian Competition
Commission informed Wal-Mart and Massmart that the Commission had
approved the proposed merger subject to four conditions. The four
conditions were set out in a notice entitled “Notice of
Determination by the Commission” in relation to Proposed
Merger. The conditions were that:
the
merger should allow for local participation in accordance with
section 2(f) of the Competition Act 2003, in order to promote a
greater spread of ownership, in particular to increase the ownership
stakes of historically disadvantaged people;
there
should be no employment losses as a result of the merger;
the
merger should not create harmful effects on competition that may
give rise to the risk of the market becoming foreclosed to
competitors, especially small and medium enterprises; and
the
approval of the Minister of Trade and Industry is required in terms
of section 3(4) of the Foreign Investment Act, 1990 (Act No 27 of
1990).
[4] In addition to their application
to the Competition Commission for approval of the proposed merger,
Wal-Mart’s legal representatives wrote to the Permanent
Secretary of the Ministry of Trade and Industry on 15 December 2010.
In that letter, they requested confirmation from the Ministry that
the proposed merger transaction between Wal-Mart and Massmart did not
require the approval of the Minister of Trade and Industry in terms
of Notice 75 of 2010.
That Notice was issued by the Minister in terms of section 3(4) of
the Foreign Investment Act, 27 of 1990 and provides that “a
foreign national who intends setting up any form of retailing
business of any size in Namibia” must first seek and obtain the
permission of the Minister of Trade and Industry. No reply was
received to this letter but it will be noted that the fourth
condition stipulated by the Competition Commission was a condition
that the Minister’s approval in terms of section 3(4) of the
Foreign Investment Act was required.
Nearly
a month after receiving the conditional approval of the merger from
the Competition Commission, Wal-Mart applied to the Minister of
Trade and Industry on 8 March 2011 to review the Commission’s
decision in terms of section 49 of the Act.
Section 49(1) of the Act provides that parties to a merger that
have received a determination by the Commission in terms of section
47(7) of the Act may, within 30 days of the date of the
determination, apply to the Minister to review the Commission’s
decision. Section 49(2) provides that within 30 days of receiving
the application for review, the Minister must by notice in the
Gazette
give notice of the application for a review and invite interested
parties to make submissions within the time stipulated in the
notice. Section 49(3) then provides that the Minister must, within
four months of the date upon which the application for review was
made, make a determination of the review by confirming the
Commission’s decision, or by overturning it, or by amending it
by ordering restrictions or including conditions.
Wal-Mart
urged the Minister to amend the Commission’s decision by
deleting the four conditions attached to the merger approval on the
grounds that they were vague, unlawful and/or irrational, and
therefore invalid. They also noted that the conditions had not been
canvassed with the merging parties before they were imposed and
asserted that if the merging parties had been given an opportunity
to respond to the proposed conditions, they would have pointed out
that the vague terms of the conditions would lead to difficulties
that should be avoided.
The
application for review also informed the Minister that, as the South
African Competition Tribunal was expected to approve the merger by 8
April 2011 at the latest, the merging parties would have to consider
further legal remedies in Namibia, if the Minister did not conclude
the review process by 18 March 2011. The consequence of the merger
being approved in South Africa, but not yet having been finalized in
Namibia, would, according to Wal-Mart, preclude the merging parties
from implementing the transaction, which would “have a variety
of contractual and other ramifications” according to the
review application.
On
11 March 2011, the Permanent Secretary to the Ministry wrote to
Wal-Mart’s legal practitioners acknowledging receipt of the
application for review but stating that, given the process
stipulated in section 49 of the Act, the request that the Minister
complete the review within ten days was “unreasonable”.
On 14 March, Wal-Mart’s legal representatives responded to
this letter and stated that the application for ministerial review
was (somewhat mysteriously) “not confined to section 49 of
that Act, which was a reference our office unfortunately by error
inserted without instructions into our letter”. They
continued by saying that a decision of the South African authorities
was expected by 8 April, and that the “matter unfortunately
cannot await a determination stretching beyond that date”.
Nevertheless the letter concluded by stating that they persisted in
the application for review as lodged.
Four
days later, Wal-Mart instituted these proceedings in the High Court
on an urgent basis. They sought an order declaring Notice 75 to be
unauthorized by law and invalid and an order that the four
conditions attached to the approval of the merger by the Commission
were also unlawful and invalid. Respondents were given a week to
lodge answering affidavits, if they opposed the application. The
Minister and the Commission both opposed the application. In its
answering affidavit, the Commission indicated that the truncated
time periods had prevented it from preparing and filing a record of
its decision and it requested time to complete the record, and if
necessary lodge a supplementary answering affidavit. This request
was again repeated at the hearing of the urgent application.
Wal-Mart opposed the request on the basis that it had not proceeded
by way of Rule 53, and that, as applicant, it was entitled to waive
its right to the record. In the event, the High Court proceeded
without the record of the Commission’s decision.
The
Commission raised two preliminary points in opposition. It argued
that Wal-Mart had not established a basis to proceed by way of
urgency; and it argued that the application was premature as
Wal-Mart had not exhausted its internal remedies, in particular the
section 49 review. The Minister raised the same two points, and
added two others, which were abandoned in the High Court. The first
of these was non-joinder, on the basis that the five Namibian
subsidiaries had not been joined in the proceedings. Letters were
produced in reply from each of the companies indicating they did not
wish to be joined. The second was a challenge to the authority of
the deponent who made the founding affidavit but this too was
addressed in reply. Neither the Commission nor the Minister pleaded
over on the merits, though they did assert that many of the
substantive issues raised by the application were legal issues that
would be addressed in argument.
The application was heard by the High
Court on 6 April 2011 and judgment was handed down on 28 April.
High Court judgment
The
High Court granted condonation to the applicant to bring the
application by way of urgency. In reaching this conclusion, it
reasoned that if the application had been enrolled in the ordinary
course, it would not have been heard till the last term of 2011 or
early 2012, which would have left the status of the merger
uncertain, once the merger had been approved in South Africa. The
High Court found that Wal-Mart had not unduly delayed in launching
the application and that the Minister and Commission had not been
prejudiced by the expedited proceedings.
The
High Court then considered whether Wal-Mart had brought the
application prematurely. The key issue here was whether Wal-Mart
had been bound to pursue the section 49 ministerial review, prior to
instituting legal proceedings. The High Court, relying on National
Union of Namibian Workers v Naholo,
held that where a statute created an internal remedy, it was a
matter of statutory interpretation as to whether that remedy had
first to be exhausted before recourse could be had to a court.
The mere fact that a statute creates an internal remedy does not
imply that access to court is prohibited pending the exhaustion of
that remedy. Tötemeyer AJ in Naholo
identified two criteria relevant to determining whether the remedy
needed to be exhausted. The first relates to the language of the
statutory provision, and the second to the time that the internal
remedy will take to pursue and whether, given the time that it might
take, it would, in effect, deprive an applicant of a remedy as a
result of delay.
The
High Court held that both the criteria identified in Naholo
were of application to this case.
It held accordingly that section 49 did not require the Wal-Mart to
exhaust the ministerial review process before approaching the Court
for relief. It observed that section 49 states that merger parties
“may make application to the Minister” to review the
decision of the Commission. This, the High Court reasoned, was
language that did not suggest the ouster of the jurisdiction of the
Court. The Judge also noted the time that the review would take (the
statute sets an upper limit of four months) might deprive Wal-Mart
of effective relief and observed in this regard that the failure of
the Minister to institute the review promptly also suggested that
the review would not be an effective remedy in the circumstances.
Further considerations that the High Court considered to weigh in
favour of dismissing the objection that Wal-Mart had not exhausted
its remedies were the fact that one of the issues that the Minister
would have to consider would be the validity of Notice 75, a notice
that the Minister himself had issued
as well as the fact that most of the issues raised by Wal-Mart were
legal questions.
The
Court then considered the merits of the application. It found that
Notice 75 was invalid on two grounds: first, that in paragraph (a)
of the Notice, the Minister conferred upon himself the power to
permit foreign nationals to engage in the retail industry, a
“dispensing” power that was ultra
vires the powers granted
him by section 3(4) of the Foreign Investment Act; and secondly,
that the retail industry is not an industry engaged “in the
provision of services or the production of goods” within the
meaning of section 3(4) of the Act which are the only industries in
respect of which the Minister may issue a notice. The Court added
that, in any event, the proposed merger did not fall within the
prohibition of Notice 75, as in purchasing the shares in Massmart,
Wal-Mart did not “become engaged in businesses” within
the meaning of the prohibition. The High Court also noted that
because paragraph (a) of Notice 75 was invalid, the fourth condition
imposed by the Commission was also invalid, in that it required
Wal-Mart to obtain the permission of the Minister to engage in the
retail business.
The
High Court then considered the validity of the other three
conditions imposed by the Commission. It declared each of them to be
invalid. It held that the first condition which required the merger
to “allow for local participation in accordance with section
2(f) of the Act” was in conflict with section 3(3) of the
Foreign Investment Act, which provides that no foreign national
“shall be required to provide for the participation of the
Government or any Namibian as shareholder or as partner in such
business, or for the transfer of such business to the Government or
any Namibian”. The Court held in addition that the condition
was arbitrary and vague in its formulation. It also noted that
because the merging parties had not been given notice of the
Commission’s intention to impose the condition the fairness of
the procedure followed by the Commission was flawed.
With
regard to the second condition, that the merger should not result in
job losses, it held that there was no rational connection between
the reason given for the condition and the terms of the condition
and that it was accordingly invalid. With regard to the third
condition, that the merger should not create harmful effects on
small and medium enterprises especially, the Court held that the
condition was gain not rationally related to the reasons given for
it. The Court also held that the terms of the condition were
impermissibly vague.
The
High Court accordingly declared both Notice 75 and the four
conditions imposed by the Commission in respect of its approval of
the proposed merger to be invalid. It is against these orders that
appellants now appeal. One further event needs to be noted. On 9
June, Wal-Mart successfully applied to the High Court on an urgent
basis for an order declaring that the noting of the appeal would not
suspend the operation and execution of the judgment delivered by the
High Court on 28 April 2011. In addition to granting the relief
sought by Wal-Mart, the High Court made an adverse costs order
against the appellants, ordering them to pay the costs of Wal-Mart
on the scale as between attorney and client.
Proceedings
in this Court: application to augment appeal record
On
1 June 2011, the Commission and the Minister noted appeals against
the judgment and orders of the High Court. After the appeals had
been noted, Wal-Mart undertook to arrange the preparation of the
appeal record in order to ensure the matter be dealt with
expeditiously. A pre-appeal hearing with the registrar was held on
13 July at which both the appellants and the respondent were
represented. The signed minutes of that meeting disclose that all
the parties were content with the appeal record that had been
lodged.
Despite
that agreement, on 10 October 2011, just over a week before the
appeals were due to be argued in this Court, the Commission lodged
an application to supplement the appeal record. It wished to lodge
the papers filed in the interlocutory application brought by
Wal-Mart on 9 June for an order that the judgment of the High Court
would not be suspended, pending this appeal. The Commission also
sought condonation for the late institution of the application.
Wal-Mart opposed the application, and lodged both an answering
affidavit and heads of argument in support of that opposition. Soon
after the commencement of the appeal hearing on 18 October 2011, the
Commission’s counsel abandoned the application to augment the
appeal record, in my view correctly. The only issue that remains
therefore is the question of costs in this regard. I shall deal with
that question at the end of this judgment but it should be noted for
purposes of taxation that the hearing on this issue did not exceed
half an hour.
Issues
on appeal
There
were two substantive issues before the High Court: the first
concerned the validity of Notice 75, and the second concerned the
validity of the four conditions imposed by the Competition
Commission. This judgment deals first with the validity of Notice
75. Before considering the second substantive issue, the validity
of the conditions imposed by the Commission, this Court must
consider whether the High Court was correct in determining that
issue despite the fact that the section 49 review of the
Commission’s decision had not run its course. Only if this
Court concludes that the High Court was correct in determining the
validity of the conditions despite the fact that the review had not
run its course, will this Court then consider whether the conditions
imposed by the Court were correctly set aside by the High Court.
It
should be noted at this stage that the Minister did not lodge either
written or oral argument on the validity of the conditions. He did
not do so because, in his view, he is seized with the review under
section 49 of the Act, which will require a consideration of the
merits of the conditions. In the view of the Minister, his
performance of that review function might well be tainted were he to
have tendered argument on the validity of the conditions in these
proceedings.
The
final issue that the Court will have to consider will be the
appropriate relief, including costs.
Relevant
legal provisions
Section
2 of the Act provides as follows:
“Purpose
of the Act
The
purpose of the Act is to enhance the promotion and safeguarding of
competition in Namibia in order to –
(a)
promote the efficiency, adaptability and development of the Namibian
economy;
(b)
provide consumers with competitive prices and product choices;
(c)
promote employment and advance the social and economic welfare of
Namibians;
(d)
expand opportunities for Namibian participation in world markets
while recognizing the role of foreign competition in Namibia;
(e)
ensuring that small undertakings have an equitable opportunity to
participate in the Namibian economy; and
(f)
promote a greater spread of ownership, in particular to increase
ownership stakes of historically disadvantaged persons.”
Section
47(2) of the Act provides that:
“The
Commission may base its determination of a proposed merger on any
criteria which it considers relevant to the circumstances involved in
the proposed merger, including –
(a)
the extent to which the proposed merger would be likely to prevent
or lessen competition or to restrict trade or the provision of any
service or to endanger the continuity of supplies or services;
(b)
the extent to which the proposed merger would be likely to result in
any undertaking, including an undertaking not involved as a party in
the proposed merger, acquiring a dominant position in a market or
strengthening a dominant position in a market;
(c)
the extent to which the proposed merger would be likely to result in
a benefit to the public which would outweigh any detriment which
would be likely to result from any undertaking, including an
undertaking not involved as a party in the proposed merger, acquiring
a dominant position in a market or strengthening a dominant position
in a market;
(d)
the extent to which the proposed merger would be likely to affect a
particular industrial sector or region;
(e)
the extent to which the proposed merger would be likely to affect
employment;
(f)
the extent to which the proposed merger would be likely to affect the
ability of small undertakings, in particular small undertakings owned
or controlled by historically disadvantaged persons, to gain access
to or to be competitive in any market;
(g)
the extent to which the proposed merger would be likely to affect the
ability of national industries to compete in international markets;
(h)
any benefits likely to be derived from the proposed merger relating
to research and development, technical efficiency, increased
production, efficient distribution of goods or provision of services
and access to markets.”
Section
49 of the Act reads as follows:
“Review
of decisions of Commission on mergers by Minister
(1)
Not later than 30 days after notice is given by the Commission in
the Gazette
in terms of section 47(7) of the determination made by the Commission
in relation to a proposed merger, a party to the merger may make
application to the Minister, in the form determined by the Minister,
to review the Commission’s decision.
(2)
Within 3 days after receiving an application in terms of subsection
(1), the Minister must by notice in the Gazette
–
(a)
give notice of the application for a review; and
(b)
invite interested parties to make submissions to the Minister in
regard to any matter to be reviewed within the time and manner
stipulated in the notice.
(3)
Within 4 months after the date that an application for review was
made, the Minister must make a determination either –
(a)
overturning the decision of the Commission;
(b)
amending the decision of the Commission by ordering restrictions or
including conditions; or
(c)
confirming the decision of the Commission.
(4)
The Minister must –
(a)
give notice of the determination made by the Minister in relation to
the review –
(i) to
the Commission and to the parties involved in the proposed merger, in
writing; and
(ii)
by notice in the Gazette;
and
(b)
issue written reasons for that determination to the Commission and
the parties involved.
(5)
The Minister may determine the procedure for a review in terms of
this section.”
Section
3(1) of the Foreign Investment Act, 1990 provides as follows:
“Subject
to the provisions of this section and the compliance with any
formalities or requirements prescribed by any law in relation to the
relevant business activity, a foreign national may invest and engage
in any business activity in Namibia, which any Namibian may
undertake.”
And section 3(4) of the same Act
reads:
“The
Minister may, by notice in the Gazette specify any business or
category of business which in the Minister’s opinion is engaged
primarily in the provision of services or the production of goods
which can be provided or produced adequately by Namibians and, with
effect from the date of such notice, no foreign national shall,
subject to the provisions of section 7(3), through the investment of
foreign assets become engaged in or be permitted to become engaged in
any business so specified or falling within any category of business
so specified.”
Notice
75
The
first substantive issue that arises for decision is whether Notice
75 is invalid. Although the appellants argued that this issue
should not be dealt with until the ministerial review process under
section 49 of the Act was complete, this argument cannot be
sustained for two reasons. First, the validity of Notice 75 is not
an issue that can be determined by the ministerial review process
under the Competition Act. The Notice was issued in terms of the
Foreign Investment Act and its validity is governed by that Act not
the Competition Act. Although the Commission stipulated that the
merger parties should obtain permission within the terms of Notice
75 as a condition of its approval of the merger, the question of its
validity and application of Notice 75 arises separately from the
approval of the merger proceedings. Even if the condition stipulated
by the Commission were to be removed, the question still arises for
the merger parties whether Notice 75 is valid and of application.
Moreover, the validity of Notice 75 is a legal issue that only a
court may determine authoritatively.
Secondly,
Wal-Mart approached the Minister on 15 December 2010 to ask whether
the Minister considered Notice 75 to affect the merger transaction,
but they received no response to this enquiry. If the Minister had
informed them, at that stage or at any time since, that he did not
consider Notice 75 to be of application to the merger transaction,
Wal-Mart would not have needed to seek declaratory relief to
determine the legal validity of Notice 75. But the Minister did not
do so. Wal-Mart therefore was entitled in the light of the
Minister’s failure to respond to their letter of 15 December
2010 to seek declaratory relief concerning the validity of Notice
75. The appellants’ argument that Wal-Mart acted prematurely
in seeking declaratory relief concerning Notice 75 cannot therefore
be sustained.
The
High Court found that paragraph (a) of Notice 75 was ultra
vires the terms of section
3(4) of the Foreign Investment Act and invalid for two reasons. The
first was that the Minister had conferred upon himself the power to
permit departures from the prohibition he himself had issued,
although this “dispensing” power was not expressly
conferred by section 3(4) of the Act. Secondly, the High Court
found that retail businesses do not fall within the ambit of “the
provision of services or the production of goods” as specified
in section 3(4) of the Foreign Investment Act.
It
seems logical to address the second question first. For, if section
3(4) does not embrace the retail sector, then the Minister was not
permitted to issue any notice in relation to the retail sector under
section 3(4). The question that arises in this regard is whether the
prohibition contained in paragraph (a) of Notice 75, the only
paragraph in Notice 75 that is of application in this case, does
fall within the ambit of section 3(4) of the Foreign Investment Act.
Section 3(4) empowers the Minister to “specify any business or
category of business which in the Minister’s opinion, is
engaged primarily in the provision of services or the production of
goods” which can be adequately provided by Namibians and to
declare that from a particular date no foreign national shall become
engaged in that business.
In
interpreting section 3(4), it is necessary to consider its statutory
context. The long title of the Foreign Investment Act is “to
make provision for the promotion of foreign investments in Namibia”.
Consistent with the purpose identified in the long title, section
3(1) of the Act provides that “a foreign national may invest
and engage in any business activity in Namibia which any Namibian
may undertake,”
subject to the other provisions of section 3.
Section
3(4) thus provides for an exception to the principle in section 3(1)
that foreign nationals may invest and engage in business in Namibia.
The scope of the exception contained in section 3(2) relates to
those businesses engaged “primarily in the provision of
services or the production of goods”. When section 3(4) refers
to businesses engaged in “the provision of services or the
production of goods” does it refer to the retail industry?
The
retail industry is by definition engaged in the sale of goods to the
general public. Retailers do not produce goods and so cannot be
considered to fall within the category of business that is engaged
in the production of goods. The question is whether retailers
“provide services” within the meaning of section 3(4).
The appellants argue that selling goods to the public constitutes
the provision of a service. They argue, relying on the dictionary
definition of services, that to provide services is to serve, help
or benefit others or to supply the needs of others. As selling
goods to the public benefits the public and supplies its needs,
retailing is the provision of a service, they argue.
If
the definition suggested by the appellants were to be accepted, the
phrase “provision of services” would have a very broad
import. Arguably every business is aimed at supplying the needs of
consumers or citizens, which would mean that the Minister has the
power to prohibit foreign nationals engaging in nearly any category
of business. Such an outcome does not fit easily with the text and
context of section 3 for at least three reasons.
First, and most importantly, it is at
odds with the long title of the Act and with section 3(1) which
establishes the principle that foreign nationals may invest and
engage in business in Namibia. Section 3(1) is subject to the
exception established in section 3(4). But attributing a meaning to
the “provision of services” in section 3(4) which would
permit the Minister to prohibit foreign nationals from engaging in
any business that “supplies the needs of others” would
have the effect that nearly all businesses might fall within the
terms of section 3(4) and thus limit, if not destroy, the ambit of
the principle established in section 3(1).
Secondly, an ample reading of “the
provision of services” as suggested by the appellants could
arguably include within its scope “the production of goods,”
as goods are ordinarily produced to supply the needs of others. Yet,
it is clear that section 3(4) considers the “provision of
services” and “the production of goods” to refer
to two different types of business.
A third difficulty with the
interpretation proposed by the appellants, arises from the fact that
the Act qualifies those businesses that may be specified by the
Minister as those “primarily” engaged in the provision
of services or the production of goods. The use of the adverb
“primarily” makes clear that although a business may do
different things (including the provision of services as a secondary
or ancillary activity), it is the primary activity of the business
that must fall within the exemption. If the provision of services
covered nearly every form of business activity, it would be hard to
see what ancillary or secondary activities could arise. Moreover,
as will be discussed in the next paragraph, the primary activity of
retailers is not the provision of services but rather the sale of
goods to the public.
A
narrower meaning for the “provision of services” than
that proposed by the appellants would thus fit the legislative
context more neatly. What is that narrower meaning? At common law,
as counsel for Wal-Mart argued, the legal contract for the sale of
goods is different to the contract for the performance of services.
When suing for payment of a purchase price owing in respect of a
contract of sale (emptio),
one pleads that the money is due as a result of “goods sold”.
When suing for the remuneration due in respect of a contract of
services (locatio conductio
operis), one sues for
“services rendered”. This established legal distinction
between the sale of goods and the provision of services is clear and
is also consistent with the framework of the Act.
The
view that selling goods does not constitute the provision of
services has been endorsed in another context, the area of trade
mark protection. In Miele
et Cie GmbH & Co v Euro Electrical (Pty) Ltd, the
South African Appellate Division was concerned with an application
by Miele to interdict the respondent from using its registered trade
mark.
The respondent argued that its use of the Miele trade mark related
to the provision of services, not goods, and as the trade mark was
registered only in relation to goods, it was not an infringement of
Miele’s registered trade mark.
Corbett JA, rejected this argument as follows:
“Repairing is, of course, a
service, but in the context of Euro Electrical’s business it is
merely ancillary to the main activity of selling goods. And, in my
view, it is artificial and incorrect to regard the selling of goods,
even if they all emanate from a single manufacturing source, as the
provision of services.”
Although this dictum
relates to a context different to the one under consideration in this
case, it is clear that a distinction is being drawn between the
selling of goods and the provision of services. It is the distinction
that underlies the common law contractual distinction referred to
above and it is a distinction consistent with the language and
purpose of section 3(4) of the Foreign Investments Act.
For
all the above reasons, it seems to me that the phrase “provision
of services” in section 3(4) of the Foreign Investment Act
cannot be interpreted as the appellants suggest to include any
business that supplies the needs of others, including retail
businesses. The “provision of services” therefore does
not include within its scope those businesses that are engaged in
the business of selling goods as opposed to rendering services.
Accordingly, paragraph (a) of Notice 75 is ultra
vires the terms of its
empowering section, and the order of invalidity made by the High
Court in this regard must stand. In the light of this conclusion, it
is not necessary to consider the other bases upon which Wal-Mart
argued that Notice 75 was invalid.
The
second substantive issue is whether the conditions imposed by the
Commission were invalid. Before considering that issue, it is
necessary to consider the argument raised by the appellants that it
is premature for a court to consider this question given that the
ministerial review contemplated in section 49 of the Act has not run
its course. It is to this preliminary issue that this judgment now
turns.
Exhaustion
of internal remedies
Was
the High Court correct in deciding that Wal-Mart could seek to have
the conditions imposed by the Commission set aside without first
letting the ministerial review provided for in section 49, which
Wal-Mart itself had instituted, run its course? Both appellants
argued that the High Court erred by permitting Wal-Mart to obtain
relief before the ministerial review in terms of section 49 had run
its course. On behalf of Wal-Mart, it was argued that the effect of
requiring Wal-Mart to exhaust the ministerial review process would
be to “oust” the jurisdiction of the courts, something
it is presumed the legislature does not intend to do. Counsel for
the Minister responded that requiring Wal-Mart to pursue the section
49 review process before approaching a court would not oust the
jurisdiction of the Court but merely defer its jurisdiction till the
review process was complete.
Counsel
for Wal-Mart argued that section 49 was not an effective remedy to
it for essentially three reasons: because it was time-consuming,
because the Minister, especially in relation to the condition
relating to Notice 75, would be a judge in his own cause, and
because the Minister had expressed his contempt for Wal-Mart’s
position in his affidavit that indicated that he was not able to
approach the matter in a fair way.
Ordinarily,
the question whether an applicant will be required to exhaust
internal remedies before approaching a court for relief, turns on
the interpretation of the relevant statute (or contract, though that
does not arise in this case). At times, a statute may expressly
provide that an internal remedy must be exhausted before approaching
a court. More commonly, though, the statute does not expressly
insist that an applicant exhaust the internal remedy it provides
before approaching a court. The question is whether the statute
implicitly requires exhaustion of the internal remedy. The mere
fact that a statute has provided an internal remedy is not generally
sufficient to establish that it intended to insist that the internal
remedy be exhausted before a court is approached for relief.
More is required.
In
National Union of Namibian
Workers v Naholo,
Tötemeyer AJ identified two considerations relevant to the
determination of whether internal remedies should be exhausted. The
first is the wording of the relevant statutory provision; and the
second is whether the internal remedy would be sufficient to afford
practical relief in the circumstances. In Naholo’s
case, Mr Naholo, the Acting General Secretary of the National Union
of Namibian Workers, had been dismissed by the Union. A clause of
the Union’s constitution provided that Mr Naholo would have
the right to appeal to the next national congress of the Union.
Tötemeyer AJ observed that national congresses only occurred
every four years and that if Mr Naholo had to wait years to
prosecute an appeal, he would be ”virtually remediless”.
This consideration persuaded the Court that the internal remedy
provided by the Union’s constitution would not provide
effective relief and therefore did not need to be exhausted before
Mr Naholo approached the Court.
The requirement that the internal
remedy provide effective redress is one that has been acknowledged
by South African courts as well.
Determining whether an internal remedy provides effective redress
requires a careful examination of the remedy provided in the statute
in the light of the relief sought in the litigation. Here, the
relevant relief sought is a declaration that the four conditions
imposed by the Commission on its approval of the merger were
invalid. The nature of this relief will be relevant to determining
whether Wal-Mart should have exhausted the ministerial review
process before approaching the High Court.
The
first question that arises is whether section 49 expressly
prevents parties dissatisfied with the decision of the Commission
from approaching a court in all circumstances, until the ministerial
review provided for in the section has been exhausted. Section 49
provides that a party to the merger “may” make
application to the Minister for a review of the Commission’s
decision.
In my view, the language of the section cannot be said expressly
to prohibit access to court for in terms it does not state that no
party may approach a court for relief until the review has been
completed. It simply states that the parties may approach the
Minister for review.
The
next question that arises is whether section 49 implicitly prohibits
a party from approaching the court until the review is complete. To
answer this question, it is necessary to undertake a careful
analysis of the review procedure and powers set out in the section.
Section 49 contemplates an important role for the Minister in
determining whether mergers should be permitted or prohibited. Four
aspects of the review mechanism are of particular relevance. First,
there is the fact that it is the Minister of Trade and Industry who
is responsible for deciding the review. As the member of the
Cabinet charged with the responsibility of administering and
executing the functions of government with respect to trade and
industry,
which requires him to direct, co-ordinate and supervise the Ministry
of Trade and Industry,
the Minister bears great responsibility. Moreover, he is directly
accountable to the President and Parliament for the performance of
these duties.
The review power has thus been entrusted to a democratically
accountable and senior member of government.
Secondly,
section 49(2) requires the Minister to publish by notice in the
Gazette
the fact of the review and invite interested parties to make
submissions on the matter. This process provides an important
opportunity for interested members of the public to make relevant
submissions to the Minister on the proposed merger. This
opportunity is all the more important, given that the Commission is
not compelled to afford interested parties notice of the application
for merger permission or to provide interested parties with an
opportunity to submit comments to it.
Thirdly,
section 49(3) makes plain that the Minister is not only empowered to
confirm or overturn the decision of the Commission but is also
empowered to amend the decision of the Commission by ordering
restrictions or including conditions to the approval of the proposed
merger. The Minister therefore has extensive powers to alter the
decision of the Commission in the light of the information he
receives, which a court reviewing the Commission’s decision
does not. In making his decision on the proposed merger, the
Minister, like the Commission will have to take into account the
considerations set out in section 2 of the Act,
as well as those set out in section 47(2).
Fourthly,
the range of considerations set out in both section 2 and section
47(2) make plain that the decision whether to approve a proposed
merger involves questions relating to the promotion and safeguarding
of competition in Namibia, as the title of the Act suggests, but
also other public interest considerations relating to the promotion
of employment opportunities, the protection and promotion of small
and medium-sized enterprises and the expansion of the participation
of historically disadvantaged people in the Namibian economy. The
decision is one that requires “an equilibrium to be struck
between a range of competing interests or considerations.”
Precisely how these differing goals should be balanced within the
framework of the Act in relation to each proposed merger is a
question that both the Commission and the Minister will have to
address in the exercise of their statutory powers. This is a
decision that the Act specifically assigns first to the Commission
and then to the Minister. As the Commission is an institution
specially constituted to consider competition matters, and the
Minister bears both constitutional and democratic responsibility for
trade and industry, these are assignments that should not lightly be
bypassed.
These
four factors all suggest that the ministerial review process will
often provide effective relief, and relief more extensive than that
which a reviewing court may provide. Accordingly, a court will
rarely permit a party to approach it for relief before the review
contemplated in section 49 is completed. The question in each case
will be whether the review process will provide effective relief.
Two situations can be mentioned here. The first will arise where the
nub of the complaint raised goes to the manner in which the balance
between the competing concerns set out in section 2 and 47(2) of the
Act has been struck by the Commission. The task of balancing the
competing interests in the Act is not a task for which a court has
any special competence. Nor is it one that in the scheme of the Act
is assigned to a court. It is a task reserved by the legislation
first for the Commission and then for the Minister. Moreover, the
Act confers the power upon the Minister to overturn or vary the
decision of the Commission, a power that will not ordinarily be
exercised by a court. In the circumstances, where the complaint
raises the manner in which the considerations mentioned in section 2
and section 47(7) of the Act have been balanced in the decision, a
court will require the ministerial review process to be exhausted
before it will consider an application for relief. Secondly, a
court will rarely permit a party to approach it for relief where the
complaint is one that the Minister is empowered to resolve during
the ministerial review process. The Act affords the Minister ample
powers to alter the decision taken by the Commission in the light of
the information placed before the Minister and ordinarily a court
will require that the review process run its course.
On
the other hand, if the complaint does not relate to the manner in
which the balancing exercise has been struck, and is one that the
ministerial review cannot correct, then it may be an issue that a
court will entertain before the review process is complete. The
question in each case will be whether the ministerial review process
provides effective relief to the litigant.
One
of the considerations as to whether the ministerial review is an
effective remedy relates to the time that the ministerial review
process will take. In this regard, it should be noted that the time
periods set out in section 49 of the Act are maxima, not minima.
The Minister must publish notice of the review in the Gazette
within 30 days of
receiving the review application. He may of course do it in a
shorter period. Similarly, the Minister must determine the review
within four months of the application having been lodged, but he may
determine the review more quickly. Moreover, it is the Minister who
determines the time limits within which interested parties must
lodge their comments. These time limits are not set in the Act. In
determining the appropriate time limit in each case, the Minister
will take into account the statutory requirement that the review be
determined within four months of the review application having been
lodged, but also other considerations, including the question
whether the relevant merger is one that requires an expeditious
decision.
I
turn now to apply these principles to the facts of this case. Is the
relief sought a quo
in relation to the conditions attached by the Commission to its
approval of the merger premature, in that Wal-Mart should first have
exhausted the review process provided for in section 49 of the Act?
In what follows, I consider the challenges to the first three
conditions imposed by the Commission. Given the conclusion reached
above in relation to the validity of Notice 75, it is not necessary
to consider the fourth condition further.
Wal-Mart
argued that the first condition, that the merger allow for local
participation in accordance with section 2(f) of the Act, was
unlawful on the ground that it was in conflict with section 3(3) of
the Foreign Investment Act, and also on the grounds that it was
vague, arbitrary and irrational. Section 3(3) of the Foreign
Investment Act provides that a foreigner engaged in business
activities in Namibia, shall not be required “to provide for
the participation” of the Namibian government or any Namibian
citizen as a shareholder or partner in such business.
The Commission responded that section 2(f) of the Act which
provides that one of the purposes of the Act is “to promote a
greater spread of ownership, in particular to increase ownership
stakes of historically disadvantaged persons” authorizes the
terms of the condition.
Wal-Mart
challenged the second condition, which required there be no
employment losses as a result of the merger, on the ground that it
was irrational and disproportionate. And it challenged the third
condition, that there be no harmful effects on competition, on the
basis that it was irrational, vague and ultra
vires the powers of the
Commission.
It
is clear that these three conditions seek to address one or other of
the statutory purposes set out in section 2 and section 47. The
first condition addresses the goal set out in section 2(f) of the
Act, the second, the goal set out in section 2(c), and the
considerations identified in section 47(2)(e); and the third, the
goal in section 2(e) and the considerations in section 47(2)(f).
Whether the conditions formulated by the Commission promote these
concerns in a rational and appropriate fashion is a question, in the
first place, for the Minister. It is for the Minister to decide how
the competing purposes identified in the Act should best be
achieved. It may be that there is merit in the claims of Wal-Mart
that the conditions are not as precisely formulated as they should
be, or not closely connected to the reasons provided by the
Commission, but these are matters we need not, and do not, decide in
this judgment. For even if Wal-Mart is correct in these
submissions, it does not follow that it is appropriate for Wal-Mart
to bypass the section 49 procedure where these very issues can be
considered by the Minister.
To
permit Wal-Mart to challenge these conditions imposed by the
Commission when it approved the merger transaction without first
letting the section 49 review process run its course, would be to
undermine the statutory scheme that empowers the Minister to review
the Commission’s decision on the merger. If, once the
Minister has concluded the review, Wal-Mart considers that any
conditions that have been stipulated are irrational or vague or
unlawful, it may then challenge those conditions. It may well be,
however, that any complaints Wal-Mart has about the imposed
conditions are resolved during the review process.
Counsel
for Wal-Mart argued that the time that the review would take means
that the review would not be an effective remedy, as contemplated in
Naholo.
As mentioned in para 31 above, in Naholo
the internal remedy was a review by a national conference which only
takes place every four years, a very different time frame to that
provided in section 49. Moreover, the time periods provided in
section 49 are maximum time periods, which may be shortened by the
Minister where circumstances require. Wal-Mart originally requested
the Minister to complete the process within ten days. Given the
provisions of section 49(2) of the Act, which require the Minister
to give interested parties an opportunity to comment on the proposed
merger, ten days was indeed an impractically short period. However,
it may well be that the Minister could seek to finalise the review
in a shorter period than the four months set as the limit for the
review by the Act. The review could be concluded within two months,
for example. This could be achieved by publication in the Gazette
within two weeks of the
date of the judgment, followed by a two week period for interested
parties to comment on the proposed merger. The Minister would then
have a month within which to prepare his decision and reasons. Given
the complex considerations at play, as well as the fact that the
maximum time period for the review is four months, and that it may
take place more quickly than that, it cannot be said that the time
period renders the section 49 review process “ineffective”.
It may be as Wal-Mart noted that
competition authorities in other southern African countries approved
the merger transaction more quickly than has happened in Namibia and
South Africa. The fact that other authorities have determined the
case more quickly does not mean that the Namibian procedure is not
an effective procedure. As the Competition Act makes plain, mergers
can have many public policy implications that need to be considered
prior to their being approved. In addition, there may be a range of
interested parties who may wish to be heard on the implications of
the merger. Parties to proposed merger transactions need to accept
that compliance with national competition processes is required. It
should be noted that at the time of writing this judgment, the South
African approval that Wal-Mart expected to be finalized by May 2010,
has still not finally been obtained.
Wal-Mart’s
final argument was that, in the light of the Minister’s
conduct before and during the litigation, they considered that he
was biased and would not bring an open mind to bear on the proposed
merger transaction. In making this submission, the respondent relied
on the decision of this Court in Minister
of Health and Social Services v Lisse
in which the Court held that it would not remit a decision to a
Minister for several reasons. The first was that on the record, the
consideration afforded by the Minister to the decision has been
biased and arbitrary.
The other reasons for the non-remittal included the substantial
prejudice that would be suffered by Dr Lisse.
In that case, the relevant Minister had refused to issue written
authorization to Dr Lisse to use the facilities of the Windhoek
State Hospital for his private patients as required by section 17 of
the Hospitals and Health Facilities Act, 36 of 1994. The Court was
of the view that the result of the application was a foregone
conclusion and that the manner in which Dr Lisse’s application
had been dealt with was a “travesty of justice”.
It accordingly refused to remit the matter to the Minister and
ordered that the authorization be granted.
The
evidence relied upon by the respondent to support their allegation
of bias was a passage in the answering affidavit. In that passage,
the Minister stated that Wal-Mart’s suggestion that it would
have been impossible to conduct the ministerial review in the 10-day
period proposed by Wal-Mart. He continued that any “suggestion
by the applicant to the contrary should be dismissed with the
contempt it deserves”. We have found earlier in this judgment
that the 10-day period proposed by Wal-Mart was impracticable. It
may be that the language of the answering affidavit was more
emphatic than required, but it is by no means evidence that the
Minister will approach the review with a closed mind. Wal-Mart also
pointed to the fact that the Minister had not responded to their
letter concerning Notice 75 dated 15 December 2010. The letter of
15 December was addressed to the Permanent Secretary in the
Ministry, not the Minister. The failure of the Permanent Secretary
to respond to this letter may well have been unfortunate and
discourteous. Nevertheless it was not a letter addressed to the
Minister, and does not establish that the Minister will not approach
the review with an open mind. The evidence pointed to by the
respondent to suggest that the Minister was biased is flimsy, at
best, and goes no way to establishing the assertion of bias. It
cannot be said that a reasonable person who considered these facts
would conclude that the Minister would not act impartially in
deciding the review. The submission relating to the Minister, in
this regard, must thus be rejected.
At
this point, I pause to observe that although counsel must have
considerable latitude in making submissions to the Court on behalf
of those they represent, when doing so, disparaging statements not
grounded in the record should be avoided. In this case, in oral
argument, the suggestion by counsel for the respondent that the
Commission was, amongst other things, “illiterate”,
apparently based on grammatical errors in the reasons furnished by
the Commission for its decision, in our view, may arguably have
reached the limits of that latitude.
In
conclusion, the appellants’ argument that Wal-Mart should have
exhausted the section 49 ministerial review procedure before seeking
an order that the conditions imposed by the Commission when it
approved the merger succeeds. The order made by the High Court
declaring the conditions to be unlawful and invalid will therefore
be set aside. The ministerial review should therefore proceed.
Because of the time that this litigation has taken, the time limits
stipulated in section 40 of the Act have expired, and it will be
appropriate for this Court to declare that the review will be deemed
to have been launched on the date that judgment is handed down in
this matter.
Costs
The appellants have succeeded in
their appeal against the order of the High Court to a significant
extent. The High Court’s order declaring invalid the
conditions imposed by the Commission when it approved the merger
transaction must be set aside. But the appellants have not
succeeded in their appeal against the order of invalidity relating
to Notice 75. At the hearing, counsel for the Minister suggested
that if this were to be the outcome, a costs order in their favour
in the proportion 75:25 might be appropriate as it would acknowledge
that the focus of the litigation has always been the conditions
imposed by the Commission when it approved the merger transaction.
Counsel for Wal-Mart did not suggest otherwise in reply. The two
issues are by and large severable, the only connection between them
being the fact that the Commission required approval in terms of
Notice 75 as a condition of its approval of the merger. The net
effect of the proposed apportionment would require the respondent to
pay approximately half the appellants’ costs both on appeal
and a quo. I
consider such a result both reasonable and fair in the
circumstances.
In
considering the appropriate costs order, one of the considerations
aired at the hearing was the fact that Wal-Mart had successfully
obtained an order from the High Court implementing the order made by
the High Court pending the appeal.
This order will, of course, now fall away. It was accompanied by a
special costs order against the appellants. No appeal has been
lodged against either the order implementing pending appeal, or the
costs order attached to it. Indeed, appeals against such orders
will be entertained only in exceptional circumstances.
At the hearing, appellants did not seek to have the costs order in
those proceedings set aside, it is not necessary to consider whether
this Court would have the jurisdiction to do so. Answering that
question would require a consideration of both the rules of this
Court, the empowering legislation and this Court’s inherent
powers in respect of matters interlocutory to appeals before it.
Whatever the answer to that question may be, it will be a salutary
practice, and one in accordance with justice, for the High Court
when granting applications to implement orders pending appeal,
either to reserve the costs of such applications for decision by
this Court, or to order that the costs be costs in the appeal.
Order
Accordingly,
we make the following order.
1. The appeal succeeds in part and
fails in part.
2. Paragraph 2 of the order made by
the High Court in Case No A 61/2010 on 29 April 2010, declaring
paragraph (a) of Notice 75 of 2010, published in Government Gazette
No 4460 on 29 March 2010 invalid and striking it down, is confirmed.
3. Paragraphs 3 and 4 of the order
made by the High Court in Case No A 61/2010 on 29 April 2010, are set
aside and the following orders are substituted for them:
“3. The
relief sought in paragraph 3 of the Notice of Motion for an order
declaring the conditions subject to which the second respondent
approved the proposed merger between the applicant and the fourth
respondent invalid is refused;
4. The
applicant is ordered to pay 50% of the costs of the first and third
respondents, such costs, in relation to each respondent, to include
the costs of one instructing and one instructed counsel.”
4. The respondent’s application
to the second appellant to review the decision of the first appellant
in terms of section 49 of the Competition Act 2003 shall, for the
purposes of the time limits stipulated in that section, be deemed to
have been lodged on the date of this judgment.
5. Subject to paragraph 6 below, the
respondent is ordered to pay 50% of the costs of the first and second
appellants on appeal, which include the costs, in relation to each
appellant, of two instructed and one instructing counsel.
6. The first appellant is ordered to
pay the respondent’s costs of opposition to its application to
augment the appeal record in this Court, such costs to include the
costs of one instructing and two instructed counsel.
________________
O’ REGAN AJA
I agree.
_______________
SHIVUTE CJ
I agree.
_______________
MARITZ JA
|
Counsel
on behalf of the 1st
Appellant:
|
Mr.
A. Rafik Bhana SC
|
|
Assisted
by:
|
Mr.
J.J. Meiring
|
|
Instructed
by:
|
Hengari,
Kangueehi & Kavendjii
|
|
|
|
|
Counsel
on behalf of the 2nd
Appellant:
|
Mr.
G. Budlender SC
|
|
Assisted
by:
|
Mr.
J. Brickhill
|
|
Instructed
by:
|
Government
Attorney
|
|
|
|
|
Counsel
on behalf of the Respondent:
|
Mr.
J.J. Gauntlett SC
|
|
Assisted
by:
|
Mr.
F.B. Pelser
|
|
Instructed
by:
|
Engling,
Stritter & Partners
|
Namibian Competition Commission and Another v Wal-Mart Stores Incorporated (SA 41/2011) [2011] NASC 11 (04 November 2011);