South African Constitutional Court rules on appropriate test for class action relief for damages

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ZA Constitutional Court broadens ambit of class-action relief

As previously reported, the Supreme Court of Appeal (the “SCA”) handed down two judgments, in November 2012, in respect of the certification of a class in respect of a number of class actions against three bread producers arising from an investigation by the Competition Commission into price fixing and market allocation in respect of various bread products. The appeals were brought by a bread distributor in the Western Cape (the “distributor” application) and by a number of organisations in relation to a so-called “consumer” class action for damages after their applications were dismissed by the Western Cape High Court (the “WCHC”).

The distributors and consumers sought, separately and on appeal to the SCA, to certify three classes, one in respect of the distributors and two in relation to the consumer case. The consumers sought a certification of two classes: Class 1 – all persons who purchased the bread of the three Respondents in the Western Cape Province during the period 18 December 2006 to 6 January 2009; and Class 2 – all persons who purchased the bread of the three Respondents in Gauteng, Free State, North – West or Mpumalanga Province during the period 1 September 2999 to 6 January 2009. The respondents in the appeal were three bread producers, namely Pioneer Foods, Tiger Consumer Brands Limited and Premier Foods Limited.

The SCA upheld the appeal only in relation to the certification of consumer Class 1, and dismissed the consumer Class 2 certification application as well as the certification of the distributor’s class. In a landmark decision, the SCA held that class actions should be recognised, not only in respect of constitutional claims, but also in any other case where access to justice in terms of Section 34 of the Constitution recognized that it would be the most appropriate means of litigating the claims of the members of the class. The decision, per Wallis JA, laid down criteria for class action claims (these included certification, a class definition, a cause of action, a triable issue, common issues of fact or law and a representative who did not have a conflict). Furthermore, in highlighting the importance of the certification process, it set out further requirements that should be met in order to succeed with an application for certification of a class.

The distributors subsequently sought leave to appeal the decision of the SCA. Today, on 27 June 2013, the Constitutional Court handed down a judgment upholding the appeal against the SCA’s distributor decision. The majority judgment, written by Jafta J, stated that the standard for determining whether to permit the certification of a class is to determine whether the institution of the class action, while taking account the requirements laid down by Wallis JA, is in the “interests of justice.”  Accordingly, the requirements for seeking class action relief have been diluted somewhat and greater discretion is given to the court which will consider the certification application, as “[a]ccess to courts is fundamentally important to our democratic order.”

The Court admonished trial courts not to limit certification only to those cases in which strictly all factors enunciated in the Bread decisions were present:

“These requirements must serve as factors to be taken into account in determining where the interests of justice lie in a particular case.  They must not be treated as conditions precedent or jurisdictional facts which must be present before an application for certification may succeed. The absence of one or another requirement must not oblige a court to refuse certification where the interests of justice demand otherwise.”

In a separate concurring judgment, Froneman J noted that the development of the common law to make provisions for class actions in non-constitutional matters was a valuable contribution to the law and provided courts with flexible guidelines to apply in applications for the certification of class actions. Froneman J was, however, of the opinion that the test applied by the SCA was too stringent in not recognising opt-in class relief and secondly in finding that the distributor did not have a legally tenable claim due to the pass-on problem in competition matters.

The Constitutional Court, in the distributor case, has also broadened the ambit of class action relief in recognising opt-in class actions (rather than simply the opt-out class actions accepted by the SCA) and by lowering the threshold required for certification more generally.  On the pass-on front, it also viewed the existence of cognisable damages suffered by intermediate bread distributors – and not only end-user consumers – as “potentially plausible” (echoing somewhat the U.S. Supreme Court in Twombly).

All of the above will have ramifications for future competition-law damages actions.

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