Bread finding opens door for class actions

In the latest instalment in the years-long bread price saga, a landmark ruling by the Supreme Court of Appeal (SCA) could open the way to an upswing in the number of class actions.

Following an application lodged against three major Western Cape bread makers, this week’s SCA judgment by a panel of five judges for the first time sets out guidelines for the requirements for a class action.

Photo: Simphiwe Mbokazi. Credit: inlsa

In 2010, four NGOs and five consumers launched a class action, using the constitutional right to food as a basis, against the bread producers – Pioneer Foods, Premier Foods and Tiger Consumer Brands.

This followed a 2007 Competition Commission finding that the companies were guilty of being part of a cartel which fixed the price of bread for 12 years.

After the commission’s finding, Tiger Brands was fined R98 million and Pioneer Foods R195.7m, while Premier Foods was granted leniency for co-operating with the investigation, sparked after Cape Town shopkeeper and co-ordinator of the National Consumer Forum (NCF), Imraahn Mukaddam, blew the whistle.

However, an application for a class action certification, which would give them the go-ahead to launch such a class action, was brought before the action could be formally instituted.

The five consumers and the NGOs, the Children’s Resource Centre, the Black Sash Trust, Cosatu and the NCF, applied to the Western Cape High Court for a class certification.

At that time, there were no legislative or procedural rules for how to bring such a class action.

Class actions were narrowly restricted to breach of or threatened violation of constitutional rights.

In the past, class actions were restricted to constitutional claims.

In November 2010 the High Court dismissed their application, prompting them to turn to the SCA for relief.

In Thursday’s judgment, the panel of five SCA judges set out guidelines for the launching of a class action, which include that a court must first satisfy itself that there is an objectively identifiable class, a cause of action raising a triable issue, and common issues that can appropriately be dealt with in the interests of all members of the class.

The court should also be satisfied that there are appropriate procedures for distributing damages to the members of the class, and that the representatives are suitable to conduct the litigation on behalf of the class.

If satisfied, the court issues a class certificate and, only then, can the action be formally instituted.

The court also extended the right to bring class actions in the case of non-constitutional rights matters, provided they are brought in line with the guidelines.

The court referred the matter back to the High Court where the applicants can apply for such a certificate, using the new guidelines, and gave them two months to supplement their court papers.

The bread producers will then have a month to respond.

Attorney Charles Abrahams said at a press conference yesterday that the SCA’s decision was a “huge development in South African law”, which meant that consumers, such as those who use prepaid electricity meters and banking facilities, could also lodge class actions to protect their rights where breaches occur.

He said his clients hoped to get a court date next year and, if they were successful in obtaining a class certificate, hoped to formally lodge the class action in 2014.

Mukaddam echoed Abrahams’s sentiments, saying their victory this week has opened the door for other class actions, stemming from a number of social issues.

He added that the constitutional right to access to court was also given credence through the judgment.

“The playing fields are now much more level than they were before this judgment,” he said.

The applicants yesterday also appealed to South Africans to come forward with their stories of how they had been affected by the high bread prices.

They also called on the business sector to condemn the practice of collusion and challenge the three bread producers to lower their prices.

A final appeal was made to President Jacob Zuma to announce the implementation date of the Competition Amendment Act, which will enforce strict penalties on the directors of companies found guilty of collusion.