Numsa v Oosthuizen (36016/2015) [2017] ZAGPJHC 56 (10 March 2017) per WHG van der Linde J.

An employer created an employee share ownership scheme called Mogale Alloys Trust to provide for employees to share in the ownership of the company, mainly for BBBEE (Broad Based Black Economic Empowerment) purposes.  Shares were subscribed for by the trustees and held for their benefit.

Various allegations of malfeasance were made including those relating to the sale of shares but failure to enforce specific performance by the buyer of the shares.  The trade union instituted legal action against the trustees and thereafter applied to certify a class action.

The high court held that such an application had to be brought before instituting proceedings.  It was also held that, unlike proceedings contemplated by the LRA [s 200(1)(b)], the trade union was not entitled to claim on behalf of its members, and to that extent the summons was set aside.   The high court declined an invitation by senior counsel for the trade union to develop the common law to eliminate any such distinction between the jurisdictions of the labour courts and the high court.

Excerpts without footnotes

Introduction

[1]   In this matter the applicant, a trade union, applies for leave to continue, as class representative of all the beneficiaries of the Mogale Alloys Trust, an already pending action as a class action.[1] The action was instituted against the trustees of the trust for their alleged malfeasance.[2] The respondents in the application, and in the pending action, are the three trustees.

[2]   In the pending action, the face of the summons describes the plaintiff as being the applicant on behalf of the “further” plaintiffs identified in a list annexed to the claim particulars as “A”. According to the claim particulars, the persons listed on “A” are all members of the applicant.  But there are also other plaintiffs, and they are listed in “A1” and “A2”.  “A1” is said to list beneficiaries of the trust who are current employees of Mogale Alloys (Pty) Ltd, the employer.  Some of these beneficiaries are also listed on “A”, meaning that some, but not all, of the persons on “A1” are also members of the applicant.  “A2” is said to list beneficiaries of the trust who were employees as of 7 December 2010, but are no longer employees and thus no longer members of the applicant.

[3]   However, during argument counsel for the applicant explained that “A1” actually includes also former employees, and thus represents the aggregate number of beneficiaries of the trust, 249 in all. This was described by the applicant as a closed list,[3] and during the argument it was accordingly accepted by all that those individuals, irrespective of whether some were no longer employees or no longer alive, represented the only beneficiaries of the trust who could potentially benefit from the action.  The size of the class sought to be certified is thus circumscribed at 249.

[4]   A notice in terms of rule 7 was served before the hearing. In consequence powers of attorney were filed, according to a letter[4] received after the hearing, by 82 persons, 81 of whom are identified on “A1”, and 48 of whom are identified on “A”.  Of these 48 persons, one person, Mr Jabulane Nkosi, is not identified on “A1”, and is therefore not a beneficiary of the trust, nor an employee (or ex-employee) of the employer.  His only connection with the litigation is that he is a member of the applicant.  Therefore 81 of 249 potential class members are already plaintiffs proper in the pending action.

[5]   Counsel for the respondents also informed the court from the Bar, and this was accepted by counsel for the applicant, that of the 249 potential class members, 45 were members of the applicant;[5] 61 were members of AMCU, another union; 15 were members of Solidarity, yet another union; and 63 were non-unionised, accounting for 184 in all. Since the beneficiaries aggregate 249, and since they are all either current or past employees of the employer, the difference of 65 remains unexplained as to membership status.[6]

[6]   In the claim particulars it is averred that an application would be made to certify the action as a class action insofar as the trust beneficiaries are not members of the applicant.[7] This application vindicates that promise.

[7]   Apart from the application for certification, there is an application by the respondents under rule 30 for a declaration of the summons as a nullity, on two bases:

  • first, that the applicant cannot, as a matter of law, represent any of the individual plaintiffs in the action, whether they are members of the applicant or not; and
  • second, that the certification of a class action is required to be obtained before, not after, the institution of an action.

[8]   It is proposed to approach the resolution of the two applications along the following topics:

  • a background to class actions in our law;
  • the applicant’s right to act as plaintiff on behalf of its members sans certification;
  • the issue of the timing of the certification application;
  • the requirements for certification; and
  • the conclusion reached on the two applications.

A background to class actions in our law

[9]

“A class action is a collective lawsuit in which an individual person or persons are confirmed by the court to bring and resolve the claims of ‘others similarly situated’ in a single proceeding.”[8] Class actions were first introduced in our law with the advent of constitutionalism, now in s.38 of the Constitution. The South African Law Commission’s Project 88, “The Recognition of Class Actions and Public Interest Actions in South African Law”, thereafter reported in August 1998.  The SALC conducted wide-ranging international research of class actions, examined the need for a general class action in our law, proposed detailed requirements for class actions locally, and produced a bill, “To make provision for the institution of public interest and class actions; and to provide for matters connected therewith”.

[10]   The anticipated legislation did not eventuate. Academics and some leading cases set about whetting lawyers’ collective appetite for an opportunity to persuade a court of appeal jurisdiction to exercise its s.173 inherent power to fashion a generalised class action where the legislature had not. Among the academics the torchbearers included Malan,[9]De Vos,[10] Hurter,[11] and (in his professorial role) Judge Plasket.[12]

[11]   The leading cases in this timeframe included the two judgments, delivered a quo and on appeal, in Permanent Secretary, Department of Welfare, Eastern Cape and another v Ngxuza and others.[13] The case dealt with a class action in the context of the Bill of Rights.

[12]   The cases that first extended recognition of class actions to causes of action founded beyond express constitutional provisions, are Children’s Resource Centre Trust and Others v Pioneer Food (Pty) Ltd and Others[14] and Mukaddam v Pioneer Foods (Pty) Ltd and Others.[15]

In broad terms, what had happened was that bread producers had been found guilty of cartel conduct prohibited under the Competition Act 89 of 1998.  Consumers at two levels alleged prejudice: the distributors, represented by Mr Mukaddam, and the retail consumers, represented by the Trustees of the Children’s Resource Centre.

[13]   Their urgent applications to the Western Cape High Court for class certification were dismissed.

On appeal to the Supreme Court of Appeal, their appeals were argued together before the same bench. Mr Mukaddam lost but the Children’s Resource Centre won.

Mr Mukaddam appealed to the Constitutional Court, and won there.

[14]   It is convenient to begin with Children’s Resource Centre. Wallis, JA for the court arrived at four relevant conclusions.

The first was that the class action entitlement under s.38 of the Constitution was not limited to actions based on an infringement of a right in the Bill of Rights; it would be “irrational” if that were so, the learned judge held.

[15]   Second, the appellants need not have tried to bring their case under s.27(1)(b)(the right, entrenched in the Bill of Rights, to access to sufficient food and water), not only because their cause of action need not have rested on an infringement of a right protected in the Bill of Rights at all, but also because, in any event, in their case they would have no access to the courts were it not by means of a class action. Therefore the right to access to courts entrenched under s.34 was in any event implicated.

[16]   Third, a prospective class representative ought first to apply to court for class certification before s/he would have the right to litigate on behalf of a class. And fourth, the learned judge laid down that, generally, a successful class certification application would have to show:

  • (1) the existence of a class identifiable by objective criteria;[16]
  • (2) a cause of action raising a triable issue;[17]
  • (3) that the right to relief depends on the determination of issues of fact, or  law, or both, common to all members of the class;
  • (4) that the relief sought, or damages claimed, flow from the cause of action and are ascertainable and capable of determination;
  • (5) that where the claim is for damages, there is an appropriate procedure for allocating the damages to the class members;
  • (6) that the proposed representative is suitable to conduct the action and to represent the class;[18] and
  • (7) that, given the composition of the class and the nature of the proposed action, a class action is the most appropriate means of determining the claims of class members.

[17]   When Mr Mukaddam got to the Constitutional Court that court, per Jafta, J stressed that s.173 of the Constitution is constrained by the interests of justice.[19] That being so, class certification too must be constrained and guided by that principle; and so the requirements listed by Children’s Resource Trust are in truth relevant factors, not requirements, and none in itself decisive.

[18]   For the rest, the Constitutional Court decided that, despite the scope for interfering in the procedural discretion of a lower court being as narrow as the discretion itself, in this matter the court was obliged to interfere in the Supreme Court of Appeal’s refusal in Mukaddam to certify the bread distributors’ class.

Jafta, J held that the Supreme Court of Appeal,

“… did not act judicially in exercising its s 173 discretion, or based the exercise of that discretion on wrong principles of law, or a misdirection on the material facts.”[20]

[19]   Since Children’s Resource Centre and Mukaddam a full court of the Gauteng Local Division, presided over by Mojapelo DJP,[21] relying on these principles, has in Nkala and Others v Harmony Gold Mining Co and Others[22] issued a comprehensive certification order in a mammoth class action concerning gold mines’ alleged liability for silicosis and tuberculosis of their employees over a substantial period of time.

[20]   Nkala is a comprehensive judgment;[23] it dealt with most current aspects of class actions and applied them to the facts; and, in addition, developed the common law relating to the transmissibility of general damages for pain and suffering before litis contestatio.

Before Nkala, general damages were not transmissible then; after Nkala it now is.[24] Nkala is now on appeal to the Supreme Court of Appeal.

[21]   The principle of a general class action has therefore been given a clear jurisprudential footing. It is a procedural device, fashioned by the courts under the power conferred by s.173 of the Constitution, and warranted by the need to realise rights founded both directly in the Constitution (access to courts) and indirectly so, in the common law.

[22]   Having established the general class action, the Supreme Court of Appeal and the Constitutional Court also nudged it along its procedural way by leaving it up to the various high courts to decide how best to merge its application with the Uniform Rules of Court and the practice directives of the particular high court division concerned.

[23]   Predictably, the seven factors identified in Children’s Resource Centre form the building blocks of the founding affidavit in this matter. Provided the overarching “interests of justice” lodestar remains the vade mecum, these seven factors are justifiably traversed, and they must be applied to the facts of the present case.

[24]   Before moving on to do that, it is appropriate first to deal with the question whether it is procedurally objectionable for the applicant to have joined as plaintiff in the pending action on behalf of those persons listed in “A”, meaning its members.

Could the applicant have joined in the action as plaintiff on behalf of its members?

. . . . .

[35]   In the present matter the principal plaintiffs are of course actually joined, but in my view that leaves even less legitimate scope for the applicant’s role in the litigation. No case of joinder of the applicant as plaintiff for convenience, equity, the saving of costs or the avoidance of multiplicity of actions is asserted.[1] The applicant’s only stated cause is that of representing its members’ interests.  It seems to me that in those circumstances the principle referred to above applies although, strictly, this may rather be a case of misjoinder.

[36]   In reply, the applicant accepted that the respondents were probably correct in submitting that a union’s power to act on behalf of its members in litigation derives from s 200(1)(b) of the LRA, and so is circumscribed by a labour law context. But it submitted that this court should develop the common law by extending the representation power afforded to a union under the LRA also to matters justiciable at common law.

[37]   It was not submitted that this court should be developing the common law so as to promote any aspect of the spirit, purport and objects of the Bill of Rights.[2] The submission was simply that there was no discernible basis for distinguishing between the two jurisdictions in the context of litigation.

[38]   Assuming, obviously without deciding, that there is no such basis for distinction, I do not believe it would be appropriate to attempt to develop the common law in the manner suggested, for these reasons.

First, the issue was not raised in the founding papers and so it has not been canvassed on the affidavits, nor fully and properly in argument, whether oral or written.  It comes before this court by way of a riposte in reply to an argument that the common law does not permit of the form of procedure adopted by the applicant.   Issues such as whether under s 23(4) or s 38(e) of the Constitution such scope existed were not mentioned much less explored.  Consequently, this court is not equipped properly to embark on the proposed endeavour.

[39]   Second, no parameters were suggested. Would it mean that this court should hold that the common law of representation should be extended only in a workers’ trust context? Why should that be any different, in principle, from claims by mine workers for damages suffered as a result of them contracting silicosis, such as in Nkala?

[40]   Third, as already foreshadowed by the previous point, it seems to me that the court would be transgressing onto the constitutional terrain of the Legislature, offending the principle of separation of powers, if it were to accede to the request.

[41]   And finally, in this context, development of the common law, if it is to occur, must occur incrementally and cautiously,[3] and not as an instinctive alternative defence.

[42]   It follows that in my view the joinder of the applicant in the current action under case number 36016/15 in this court is, outside of a class certification, procedurally objectionable and it must be set aside.  It does not follow that the entire summons falls to the ground; as pointed out above, 81 plaintiff beneficiaries have provided powers of attorney and the action is not objectionable in this sense.

[43]   Whether the cause of action pleaded by them in their own right is bad in law does not arise in the present context. Even if their claim particulars do not disclose a triable action, that impacts only on whether certification should be granted.  There is no exception now before this court, and the test on exception is different from the test to be applied in deciding whether, for the purposes of a certification application, a triable case has been asserted.

[44]  If certification in the extended form referred to in the notice of motion is not granted, a matter to which I return below, it would follow that the summons must be set aside to the extent that persons, including the applicant but excluding those 81 plaintiffs who have filed powers of attorney, are purportedly joined in the action.[4]

The timing of the certification application

. . . . .

[53]   In these circumstances I conclude that prior class certification was required, and that this court cannot now certify an already pending action, ex post facto, as a class action. I conclude too that even if the court had the power to do so, a proper case has not been made out for such certification.

The requirements, or factors, for certification

. . . . .

[60]   The question is whether these factors have directed the interests of justice in a particular direction.  In my view they have.  The twin features of the already representative nature of the pending action, and the at best doubtful suitability of the applicant as a class representative of beneficiaries who are members of other unions, combine to produce unacceptable doubt as to whether the proposed procedure is more preferable than the already pending one.

Conclusion

[61]   It follows, in view of the aforegoing, that in my view the rule 30 application should succeed to the extent indicated below; and that the application for class certification should fail.  In the result I make the following order:

  • The application in terms of rule 30 dated 30 November 2015 succeeds, and it is ordered that the summons issued under case number 36016/2015 in this court is set aside to the extent that persons, including the applicant but excluding those 81 persons who have filed powers of attorney as identified in this judgment, are joined in the action.
  • The said 81 plaintiffs are granted leave to amend their claim particulars in accordance with this order within 15 days of service of this order on their attorneys.
  • The applicant is directed to pay the costs of the rule 30 application, including the costs consequent upon the employment of two counsel.
  • The application for class action certification dated 1 February 2016 is dismissed with costs, including the costs consequent upon the employment of two counsel.