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Constitutional Court rules that class actions are not limited to constitutional claims

9th July 2013

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A Constitutional Court judgement handed down recently confirms that class actions are no longer limited to constitutional claims.

In its judgment handed down on 27 June 2013, the Constitutional Court confirmed this development of the common law by the Supreme Court of Appeal (SCA) in the Children’s Resource Trust case.

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Sha’ista Kazee, senior associate at pan-African law firm Bowman Gilfillan noted that while the SCA in Children’s Resource Trust had previously held that certification of a class was required prior to the institution of all class actions, the Constitutional Court ruled that certification is not a requirement when a claim is instituted to enforce a right in the Bill of Rights against the State.

“This could have great implications for state-owned entities. The question whether prior certification is required for the institution of a class action to enforce a right in the Bill of Rights against a private litigant was expressly left open by the Court. In addition, the use of the ‘opt-in’ class action procedure could be used in all circumstances and it was not only confined to exceptional circumstances as was previously held by the SCA.

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“However, the Constitutional Court also introduced a fair amount of uncertainty in the process, stating that the requirements laid down by the SCA must serve as factors to be taken into account in determining where the interests of justice lie in a particular case. The factors are not to be treated as conditions precedent or jurisdictional facts and the list is not exhaustive,” said Ms Kazee.

In addition, the court held that the standard to be applied when assessing the requirements is that of interests of justice as set out in section 173 of the Constitution, and that a court of appeal must exercise restraint when determining an appeal against the certification of a class.

The SCA held that it was “simply untenable” to think a claim by distributors to “reap the rewards” of prohibited anti-competitive conduct should be recognised.  The Constitutional Court overturned this aspect of the SCA judgment, instead holding that the policy-laden questions regarding pure economic loss and the maximisation of profits cannot be determined at the certification stage.

The significance of the SCA’s ruling in November last year in Children’s Resource Trust v Pioneer Foods was that the probability of bringing a class action in our law was less remote.

The Pioneer Foods case stemmed from the Competition Commission investigation into price-fixing by bread producers. Following the conclusion of the Competition Commission’s investigation, a number of NGOs together with COSATU sought to bring a class action against the producers on behalf of consumers. After it suffered a set-back in the High Court, the Supreme Court of Appeal breathed new life into the litigation by allowing the class action to proceed, while simultaneously laying down much needed procedural rules.

According to Lerato Zikalala, associate attorney at Bowman Gilfillan: “In essence, claims that would have never been brought because litigating them was too costly for the ordinary person can now be brought on behalf a class of affected people, thus increasing the likelihood of litigation and the potential legal risk faced by companies. As illustrated in Pioneer Foods, small individual claims when amalgamated into a class action escalate into big-time litigation for possibly millions of rands.”

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