Should it survive in its existing form, Section 157 of the
Companies Bill will bring the class action into mainstream
corporate and commercial activity in South Africa. To date the
class action has been a seldom-used procedure, restricted in
its application to matters involving actual or threatened
infringement of rights protected in the Bill of Rights.
Section 157 will change all of that when, in terms of the
Act, an application can be made to, or a matter can be brought
before, a court, the Companies' Ombud, the Take-over Panel
or the Commission, that right can be exercised by a person who
directly contemplated in the particular provision of the
acting on behalf of such a person who cannot act in their
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
acting in the public interest, with leave of the
The formulation follows the wording used in Section 38 of
the Constitution so that there is precedent available as to how
a class action ought to work in practice. Judge Cameron in the
SCA judgment of Ngxuza (the Eastern Cape Welfare
benefits saga) described the process as follows:
"In the type of class action at issue in this
case, one or more claimants litigate against a defendant not
only on their own behalf but on behalf of all other similar
claimants. The most important feature of the class action is
that other members of the class, although not formally and
individually joined, benefit from, and are bound by, the
outcome of the litigation unless they invoke prescribed
procedures to opt out of it."
The court or office before whom the action is brought
establishes the procedure to be followed in pursuing the class
The Companies Bill establishes many specific actionable
wrongs that would give rise to civil liability on the part of
directors and officers of companies. Section 218(2) removes any
doubt as to the existence of civil remedies. It provides
"Any person who contravenes any provision of this
Act is liable to any other person for any loss or damage
suffered by that person as a result of that
One of the first questions asked by insurers considering
entry into the D&O market in South Africa is whether class
actions are allowed. The fact that they have now arrived will
require this market to be re-rated in recognition of the
One needs only to think of the failed attempts to create a
group claim on behalf of the victims of the Masterbond group to
recognise the relevance of this newly established right. Up to
now it has been liquidators who have sought to obtain redress
on behalf of creditors and shareholders of failed corporations.
Frequently these actions have been complicated by competing
interests of major creditors. The class action opens the door
to shareholder and creditor action against directors and
officers independently of liquidators and without the
constraints of the legislation dealing with corporate
Yet another reason for carefully considering that
appointment as a company director!
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
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