CLASS ACTIONS AND COLLECTIVE REDRESS LITIGATION IN SOUTH
AFRICA
Stes de Necker
Introduction
Class actions, also known as
multiparty litigation or collective redress, is typically brought by a group of
people collectively claiming for similar injuries or damages from the same
organisation or organisations.
Class action litigation is a
relatively new area of law in South Africa. Recent developments have opened the
way for class actions to gain ground in this country. These include the advent
of consumer and environmental protection laws and the Companies Act, 2008, all
providing for class actions, as well as landmark court rulings that have
established a clearer class action framework.
Although class actions per se do
not form part of South Africa’s common law (1), recent legislative reform has
paved the way for a new era in multi-party litigation and has created the
framework for the institution of collective redress law suits in an ever
increasing number of areas of dispute.
This short note draws attention
to some of these.
The Constitution of the Republic of South Africa Act, 108
of 1996 (“Constitution”)
Section 38(c) of the Constitution
provides that any person can act as a member of a class in approaching a court
when alleging that a right in the Bill of Rights has been infringed or
threatened.
In giving effect to this section
of the Constitution, the Supreme Court of Appeal (SCA) held in Permanent
Secretary, Department of Welfare, Eastern Cape v Ngxuza 2001 (4) SA 1184
(SCA) that s 38(c) of the Constitution authorised the use of an American-style
class action. It must be emphasised that the use and recognition of
a class action in terms of the Constitution has application only in
circumstances where a Constitutional right has been infringed or threatened.
(2)
The SCA indicated that the
requirements for a class action contained in Rule 23(a) of the US Federal Rules
of Civil Procedure (the Federal Rules) were applicable in South Africa
(certainly insofar as “Constitutional” based class actions are concerned).
Rule 23(a) of the Federal Rules
provides that one or more members of a class may sue as representative parties
on behalf of all if:
Ø the class is so numerous that joinder of all members is
impracticable;
Ø there are questions of law or fact common to the class;
Ø the claims or defences of the representative parties are
typical of the claims or defences of the class, and
Ø the representative parties will fairly and adequately
protect the interests of the class.
These four requirements are
commonly known as ‘numerosity’, ‘commonality’, ‘typicality’, and ‘adequacy of
representation’.
Apart from the Constitution,
recent legislative reform affords standing to persons to institute actions on
behalf of a class when enforcing rights or seeking certain remedies under that
legislation.
The Companies Act No. 71 of 2008
Section 157(1) of the new
Companies Act which is styled “Extended standing to apply for remedies”
provides:
“When, in terms of this Act, an
application can be made to, or a matter can be brought before, a court, the
Companies Tribunal, the Panel or the Commission, the right to make the
application or bring the matter may be exercised by a person –
a)…;
(b) acting as a member of,
or in the interest of, a group or class of affected persons, or an
association acting in the interests of its members; or
(c) acting in the public
interest, with leave of the court.”
Consumer Protection Act No. 68 of 2008 (“CPA”)
Although not yet in force,
Section 4(1) of the CPA contemplates that “a person acting as a member
of, or in the interest of, a group or class of affected persons” or “a
person acting in the public interest, with leave of the Tribunal or court, as
the case may be” may approach a court, the Tribunal or the Commission alleging
that a consumer’s rights in terms of the CPA have been infringed, impaired or
threatened.
Separately, the CPA also makes
provision for accredited consumer protection groups to initiate actions to
protect the interests of groups of consumers. Such a group may “commence
any act to protect the interests of a consumer individually or of consumers
collectively”.
National Environmental Management Act No. 107 of 1998
(“NEMA”)
NEMA makes provision for
individuals or groups seeking relief in respect of any breach or threatened
breach of any provision of the Act. Section 32 provides:
“Any person or group of persons
may seek appropriate relief in respect of any breach or threatened breach of
any provision of this Act, including a principle contained in Chapter 1, or of
any provision of a specific environmental management Act, or of any other
statutory provision concerned with the protection of the environment or the use
of natural resources –
(a) in that person’s or group of
person’s own interest;
(b)…;
(c) in the interest of or on
behalf of a group or class of persons whose interests are affected;
(d) in the public interest; and
(e) in the interest of protecting
the environment.”
Procedural considerations
It remains to be seen how and in
what form South African jurisprudence will develop to give practical expression
to persons wishing to institute a class action in accordance with the standing
afforded in terms of the above mentioned legislation. Although American style
class actions and the requirements of Federal Rule 23 have been recognised in
South Africa as being apposite in the context of class actions brought under
Section 38(c) of the Constitution, it is not entirely clear whether similar provisions
will also have application to class actions contemplated under the recently
enacted legislation referred to above.
In this context, it is worth
remembering that the South African Law Commission recommended in 1998 that
class actions should be introduced into South African law by means of
legislation and proposed draft “Public Interest and Class Actions Act”
(PICA).
To date no legislation of that
type has been enacted. This notwithstanding, the proposed PICA contains
some important provisions:
Ø A ‘class action’ is defined as an action
‘instituted by a representative on behalf of a class of persons in respect of
whom the relief claimed and the issues involved are substantially similar in
respect of all members of the class’ (clause 1);
Ø No action shall proceed as a class action unless a
court has certified it as such (clause 6(1)). A court may have regard to
the following considerations when considering certification (clause 6(2)):
Ø the existence of an identifiable class of persons;
Ø the existence of a prima facie cause of action;
Ø issues of fact or law which are common to the claims of
the members of the class;
Ø the availability of a suitable representative to
represent the interests of members of the class; and
Ø the interest of justice and whether a class action would
be appropriate in the circumstances.
The court which certifies an
action as a class action is required to appoint a ‘representative’ to represent
the interests of members of the class.
The court may give directions to
the representative with regard to the giving of notice to members of the class
(clause 8). Such directions may require potential members to ‘opt in’ or to
‘opt out’ of the class action.
Judgment in a class action will
generally be binding on all members of the class (clause 10(3)).
The International Trend
In developing procedures for
non-constitutional class action disputes, regard should also be had to
international trends and developments.
Whilst there are no doubt good
arguments to be made that American style class actions should have application,
it is interesting to observe that European and UK collective redress mechanisms
are steering away from the classic American style class action.
The American system of allowing
‘opt out’ class actions (where a representative sues on behalf of class of
unidentified individuals, subject to any member of that class being afforded
the right to ‘opt-out’ of the action) has been criticized on a number of
fronts.
These include that they
contribute to litigation excesses; there are concerns that such actions could
be “hijacked” by law firms or various interest groups; and they may also lead
to defendants being pressured into accepting highly expensive settlements,
regardless of liability.
The European model favours the
‘opt in’ approach which involves the representation of plaintiffs who choose to
be a part of the action. This is akin to a group action in which
all members of the ‘group’ are identified. (3)
Footnotes:
(1) As was recently stated by Traverso DJP
in Firstrand Bank Ltd v Chauncer Publications (Pty) Ltd2008 (2) SA 592
(C), save for constitutional matters, “the South African common law does not
recognise a class action“
(2) In circumstances where there is no allegation
that a constitutional right has been infringed or threatened it is arguable
that the High Court’s inherent jurisdiction to regulate its own process taking
into account the interests of justice would probably enable it to develop class
action procedures.
(3) The Uniform Rules of Court already contain
mechanisms for allowing actions involving a multiplicity of plaintiffs and/or
defendants and/or causes of action (the “joinder” provisions contained in Rule
10). In a similar vein, the Rules also allow plaintiffs in separate actions to
apply for consolidation of actions on the grounds of convenience (Rule 11).
These rules provide a basis for group actions at the very least.
