Are class actions a part of the South African legal landscape?
Source: Nick Alp and Nicola Hodkins of Webber Wentzel Attorneys
Although class actions per se do not form part of South Africa’s common law1, 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 threatened2.
In giving effect to this section of the Constitution, the Supreme Court of Appeal (SCA) held inPermanent 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.
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:
- the class is so numerous that joinder of all members is impracticable;
- there are questions of law or fact common to the class;
- the claims or defences of the representative parties are typical of the claims or defences of the class, and
- 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 –
(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;
(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.”
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:
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);
- 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)):
- the existence of an identifiable class of persons;
- the existence of a prima facie cause of action;
- issues of fact or law which are common to the claims of the members of the class;
- the availability of a suitable representative to represent the interests of members of the class; and
- 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 identified3.
1As 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“
2In 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.
3The 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.