United States: The Difficulties Of Class Action Claims In South Africa

The US is credited with being the home of class action lawsuits. Whereas, in South Africa, class actions were only introduced after 1994. The Bill of Rights, as set out in Chapter 2 of the Constitution of the Republic of South Africa 1996 (the Constitution), entrenches certain fundamental human rights, which include the recognition of a class action.

Section 38(c) of the Constitution provides "...anyone listed in this section has the right to approach a competent court, alleging that a right in the Bill of Rights has been infringed or threatened, and the court may grant appropriate relief, including a declaration of rights. The persons who may approach a court are—... (c) anyone acting as a member of, or in the interest of, a group or class of persons..."

However, the Constitution does not set out the procedure that needs be followed to give effect to section 38(c) of the Constitution. In August 1998, the South African Law Commission (Commission) published a report, entitled "The Recognition of Class Actions and Public Interest Actions in South African Law" in which it (i) discussed the class action procedure as it is in South Africa today, (ii) made recommendations, and (iii) provided a draft bill to assist with the enforcement of the class action procedures in the future.

The Commission's report emphasises the need for a statutory intervention for the formal recognition and regulation of class actions and public interest actions in South African law and proposed a draft bill to give effect thereto. However, we still await the legislature to bring this proposed piece of legislation to fruition.

In the US, in order for a group of claims to proceed as a class action, a class action must be "certified" by the relevant court. Depending on the underlying subject matter, federal or state law would govern the class action. The procedure for certifying a class action in terms of the federal system differs slightly with the different states' rules. However, many states mirror the certification procedure set out in the Federal Rules of Civil Procedure (FRCP) – the certification requirements are set out in rule 23(a) of the FRCP.

It appears that the South African courts have adopted the US's position with respect to certification of class actions. In Children's Resource Centre Trust and Others v. Pioneer Food (Pty) Ltd and Others 2013 (2) SA 213 (SCA) (Children's Resource Centre Trust Case), the court held that it is a requirement for a party seeking to represent a class in a class action to first apply to court for certification. Furthermore, the court held that the following criteria are the core considerations that should be taken into account in a certification inquiry.

  • The class must be defined with enough precision to allow for the objective determination that an individual falls into the class.
  • The cause of action raises a triable issue.
  • The right to relief depends on the determination of issues of law and/or fact that are common to all members of the class.
  • The relief sought or damages claimed flow from the cause of action and are ascertainable and capable of determination.
  • Where the claim is for damages, there is an appropriate procedure for allocating the damages to the members of the class.
  • The representative should not have any conflict of interest with the class and must have the capacity to conduct the litigation properly.
  • The tool of a class action must be the most appropriate procedure to adopt for adjudication of the underlying claims (given the composition of the class and the nature of the proposed action).

The court held that the abovementioned factors must be considered by the courts when dealing with a certification application and must be satisfied that these factors are present before granting certification.

It is against this background of years of legislative inaction in the field of class actions that the judgment in the Children's Resource Centre Trust Case is a welcome step forward.

The criteria for certification set out in the Children's Resource Centre Trust Case were applied in the separate but related matter in Mukaddam and Others v. Pioneer Food (Pty) Ltd and Others 2013 (2) SA 254 (SCA) (Mukaddam SCA Case). In the Mukaddam SCA Case, the court applied the factors set out in the Children's Resource Centre Trust Case. The court spent surprisingly little time on the conceptual nuances of class action claims and the detail of certification requirements.

However, in Mukaddam and Others v. Pioneer Food (Pty) Ltd and Others 2013 (5) SA89 (CC) (Mukaddam CC Case) (i.e. the appeal of the Mukaddam SCA Case), the court (for the most part) also accepted the judicial groundwork set out in the Children's Resource Centre Trust Case.  However, the court focused more on the (i) role and implications of judicial discretion that the courts have, and (ii) inherent power that the courts have to regulate the process by which litigants approach the court, as provided for in section 173 of the Constitution.

The court in the Mukaddam CC Case disagreed with the judgment in the Children's Resource Centre Trust Case which provided that the requirements for prior certification are conditions that must be met in order to succeed in an application for certification. Instead, the court held that the interest of justice standard should guide whether certification should be granted, and a formalistic approach to compliance with the certification requirements (as set out in the Children's Resource Centre Trust Case) should not be adopted. Furthermore, the court held that the requirements listed in the Children's Resource Centre Trust Case are the relevant factors that are to be considered by the courts (when considering a class action certification application), not the requirements in the strict sense of the word. Accordingly, the court held that the courts may permit a claim for certification where one or more of the requirements (listed in the Children's Resource Centre Trust Case) are not met, or may deny a claim for certification even where all the requirements for certification are met, if it is in the interest of justice. However, the court agreed with the Children's Resource Centre Trust Case in that before a class action may be instituted, the representative party must seek certification from the courts before proceeding with it.

In the more recent case of National Union of Metal Workers of South Africa (NUMSA) v. Oosthuizen 2017 (6) JDR 0530 (GJ), the court had to consider whether a class action may be certified after the fact (i.e. where an action has already been instituted without prior certification being granted).

Having considered the judgment in Nkala and Others v. Harmony Gold Mining Co and Others 2016 (5) SA 240 (GJ) (Nkala Case), the court found that the requirement that prior certification be obtained before instituting a class action is not settled law, and the court's interpretation of the Nkala Case is that courts have a discretion as to whether or not to grant certification ex post facto, if it is in the interest of justice. The court held that if the pre-certification requirement only relates to timing, then ex post facto certification cannot be objected, if the interests of justice justify certification – as this requirement would be regarded as a formal and not a substantive law requirement.

In conclusion, although significant ground was made in cases such as the Children's Resource Centre Trust Case in paving the way for class actions in South Africa, there are many aspects of this judgment (and in the other cases discussed above) that require further development and refinement. There is a need for the laws and rules regulating class actions to be more clearly articulated so as to ensure that the fundamental right of access to courts (as provided for in section 38 of the Constitution) is given effect to.

Nonetheless, class action suits are relatively novel in South Africa as there have been no completed trials – in all instances, the parties have settled before the class action conclusion of the trial.

In practice, it appears that in certain circumstances class action processes are abused due to the lack of judicial precedent and clear laws and/or rules governing class actions. Accordingly, it is of paramount importance that South African jurisprudence in this area of the law continues to be developed so as to ensure that the laws and/or rules governing class actions are well documented and are crystallised to ensure that it becomes a viable and effective tool for potential litigants (in the appropriate circumstances).

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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