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SCA provides procedures for certification of class actions

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SCA provides procedures for certification of class actions

25th March 2013

By: Creamer Media Reporter

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While class actions are expressly and constitutionally recognised in our law, no steps have been taken to regulate these actions.

Background

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A class action is a device that a single plaintiff may use to pursue an action on behalf of all persons with a common interest in the subject matter of the action; and with the ruling of the Court being binding upon all class members.

In 1996 the South African Law Commission (SALC) recommended that the principles underlying class actions should be introduced into law by way of an Act of Parliament. Moreover, it felt that the rules of court would have to be amplified to provide procedures for dealing with class actions.

Although the SALC recommendations were not implemented, the new Companies Act, No. 71 of 2008 opened the door for class actions under Section 157(1), which provides:

"When, in terms of this Act, an application can be made to, or 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."

The Children's Resource Centre Trust case

While the Supreme Court of Appeal (SCA) recently recognised the need to protect and regulate the process and to develop procedural requirements that must be satisfied to bring a class action in the case of Trustees for the Time Being of the Children's Resource Centre Trust and others v Pioneer Food (Pty) Ltd1 (the Children's Resource Centre Trust case), the SCA held that it was only willing to determine the broad parameters within which class actions may be pursued.

The SCA held that it was the legislature's role to make the policy decisions in determining the structure of such actions. The SCA was not in a position to make such decisions for fear of encroaching upon the domain of the legislature, which the doctrine of separation of powers does not permit.

The SCA laid down the following procedural requirements for a class action in the Children's Resource Centre Trust case:

  • certification is required, which involves the applicants applying to a court for the certification of a "class";
  • a certification application should define/ identify the class with sufficient precision so that a particular membership can be determined objectively with reference to the class definition;
  • a certification application must prove the existence of a cause of action raising a "triable" issue (i.e. the case should have a reasonable prospect of success);
  • there must be an issue of fact or law, or both, that are common to all members of the class that can appropriately be determined in one action;
  • the proposed representative must have no conflict of interests with those that he/ she intend(s) to represent; and
  • The proposed representative must have the capacity to conduct the litigation properly on behalf of the class which he/ she intend(s) to represent.

Conclusion

Despite the SCA thus having delineated the broad parameters within which class actions may be pursued, there is still no certainty as to how future class actions will be decided until such time as the legislature regulates the policy decisions.

Hopefully the courts will reach certainty on the procedural requirements of a class action, whereafter we will be able to comment further in respect to the implication this procedure has on claims made against directors under the Companies Act, No. 71 of 2008 and the cover afforded to them under their D&O Policies.

Notes:
1 (25302/10, 25353/10) [2011] ZAWCHC 102 (7 April 2011)

By Cameron Staude, senior associate, and Hannes Marais, candidate attorney, Webber Wentzel.

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