In December 2013, the Constitutional Court resolved a contentious debate that centred around a topic close to litigants’ hearts, and even closer to their wallets: costs.  The essential question to be resolved was whether or not the Competition Commission’s unsuccessful pursuit of a matter ought to attract an adverse costs order against it.  At the heart of the debate was the Commission’s status as a litigant in proceedings before the Competition Tribunal and the Competition Appeal Court – ordinary civil litigant or something different? 

This was the matter of the Competition Commission of South Africa v Pioneer Hi-Bred International Inc and Others. A brief background to the case before the Constitutional Court is as follows: a proposed merger between Pioneer and Pannar Seed was prohibited first by the Commission, and subsequently by the Tribunal. The merging parties appealed the Tribunal’s decision to the Appeal Court, which upheld their appeal, and approved the merger subject to conditions. In addition, the Appeal Court ordered the Commission to pay the costs of the merging parties in the Tribunal proceedings, and in the Appeal Court proceedings. The Commission sought leave to appeal this decision to the Supreme Court of Appeal, where the application was dismissed. The Commission then approached the Constitutional Court for relief. 

Before the Constitutional Court, the Commission challenged only the costs order, arguing that the Appeal Court did not have the power to award costs against the Commission in Tribunal proceedings. In addition, the Commission argued that while the Appeal Court may have that discretion in its own proceedings, such discretion was wrongly exercised in this instance.

Upon assessing the power of the Appeal Court to award costs against the Commission in proceedings before it, the Constitutional Court examined various sections of the Competition Act, No. 89 of 1998 (as amended). The Constitutional Court held that section 61(2) clearly states that the Appeal Court has the power to award costs “against any party in the hearing”. On a plain language reading of this section, the Constitutional Court held that it is clear that the Appeal Court may make costs orders against the Commission where it is a party before it, as there is no reason to exclude the Commission from the meaning of “party”. Where the Appeal Court may have overreached itself, according to the Constitutional Court, was in the application of its discretion in this particular instance. Section 61(2) provides that the Appeal Court may make a costs order “according to the requirements of the law and fairness”. The Constitutional Court held that this must be interpreted in the context of the Competition Act, and in light of the specific functions of the Commission. The Commission plays a vital role in the defence of public interest, and in aiding the Appeal Court by providing it with a balanced perspective of the matters before it. A principle has developed in similar situations involving bodies with institutional roles, where the usual rule of costs following the result is not ordinarily applied to these state actors. The Constitutional Court confirmed that this principle should inform the Appeal Court’s exercise of discretion, as it is “undesirable for [the Commission] to be inhibited in the bona fide fulfilment of its mandate by the threat of an adverse costs award”. This principle, the Constitutional Court held, fell within “the requirements of the law” as provided for in the Competition Act. As such, it should have guided the Appeal Court’s discretion in this case. The Constitutional Court held that while “unreasonable, frivolous or vexatious pursuit of a particular stance” may justify a costs order against the Commission, a mere “zealous defence” of its position is no basis for an adverse costs order. As such, the Constitutional Court held that in awarding costs against the Commission in the proceedings before the Appeal Court, the Appeal Court had erred in the application of its discretion.

Turning then to the costs order made by the Appeal Court in terms of the proceedings before the Tribunal, the Constitutional Court held that, as a general rule, section 57 of the Competition Act prescribes that each party in Tribunal proceedings should pay their own costs. Once more, the Constitutional Court found no reason to exclude the Commission from the term “party”. As a result, it was held that the Tribunal itself has no power to award costs against the Commission in proceedings before it. Consequently, the Constitutional Court held that the Appeal Court could not, as an appellate court, be empowered to award costs in Tribunal proceedings where the Tribunal itself is not empowered to do so. This is in line with section 61(2) which empowers the Appeal Court to award costs “against any party in the hearing”. Section 61(2) was interpreted to restrict the Appeal Court’s power to award costs in its own proceedings only.

The costs order against the Commission in relation to the Tribunal proceedings was therefore set aside; as was the costs order in relation to the Appeal Court proceedings. While the first was set aside as the Appeal Court had no authority to award such costs, the second was due to a misapplication of judicial discretion.

The Constitutional Court has, through this case, highlighted the importance of the role played by the Commission in giving effect to the aims of the Competition Act, and has indicated a willingness to protect that role from interference, and from threats of pecuniary punishment - where justified. While frivolous or unreasonable litigation by the Commission will continue to attract the possibility of adverse costs orders, the Constitutional Court’s decision will undoubtedly embolden the Commission in the pursuit of its mandate “without fear, favour, or prejudice”.