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[2021] ZAWCHC 220
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Stellenbosch University Law Clinic and Others v Lifestyle Direct Group International (Pty) Ltd and Others (16262/2019) [2021] ZAWCHC 220 (3 November 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
REPORTABLE
CASE NO:
16262/2019
In the matter between:
STELLENBOSCH
UNIVERSITY LAW CLINIC
First Applicant
ADELE
ROTHMANN
Second Applicant
IGNATIUS MICHAEL
HEYNS
Third Applicant
DERRICK FERREIRA
DOS SANTOS
Fourth Applicant
RONALD ABRAHAM
ARTHUR ESBACH
Fifth Applicant
NICOLENE
ELS
Sixth Applicant
ALICIA
PELSER
Fifth Applicant
VANESSA
VENTER
Seventh Applicant
CASSIEM
HALLIDAY
Eighth Applicant
And
LIFESTYLE DIRECT GROUP
INTERNATIONAL
(PTY)
LTD
First Respondent
CAPITAL LIFESTYLE
SOLUTIONS (PTY) LTD
t/a LIFESTYLE
LEGAL
Second Respondent
LOAN TRACKER SA
(PTY) LTD
Third Respondent
LOAN SPOTTER SA
(PTY)
LTD
Fourth Respondent
LOAN MATCH SA
(PTY)
LTD
Fifth Respondent
LOAN CHOICE SA
(PTY)
LTD
Sixth Respondent
LOAN QUEST SA
(PTY) LTD
Seventh Respondent
LOAN CONNECTOR SA
(PTY) LTD
Eighth Respondent
LOAN HUB SA (PTY)
LTD
Ninth Respondent
LOAN ZONE SA (PTY)
LTD
Tenth Respondent
LOAN LOCATOR SA
(PTY)
LTD
Eleventh Respondent
LOAN SCOUT SA
(PTY)
LTD
Twelfth Respondent
LOAN TRACER SA
(PTY)
LTD
Thirteenth Respondent
LOAN DETECTOR SA
(PTY) LTD
Fourteenth Respondent
LIFESTYLE LEGAL
(PTY)
LTD
Fifteenth Respondent
LIFESTYLE
ATTORNEYS (PTY)
LTD
Sixteenth Respondent
ALL WHEEL AUTO
(PTY) LTD
Seventeenth Respondent
DAMIAN
MALANDER
Eighteenth Respondent
NANDIE
PAICH
Nineteenth Respondent
Bench: P.A.L. Gamble, J
Heard: 22 October 2021
Delivered: 3 November 2021
This judgment was handed down electronically by circulation to the
parties' representatives via email and release to SAFLII. The
date
and time for hand-down is deemed to be 10h00 on Wednesday 3 November
2021
JUDGMENT
– LEAVE TO APPEAL
GAMBLE, J:
INTRODUCTION
1.
On 21 July 2021 this Court handed down
judgment in an application granting the applicants leave to proceed
against the respondents
by way of a class action. The basis of the
applicants’ claims against the respondents, broadly speaking,
is the recovery
of losses allegedly suffered by them as a consequence
of a fraudulent on-line scheme initiated by the respondents to lure
unsuspecting
members of the public into believing they were applying
for loans from the respondents, when in fact they were not.
2.
After certain patent errors in the judgment
were brought to the Court’s attention by the parties, a revised
judgment was handed
down on 6 August 2021. The revision related only
to limited typographical errors in the original judgment and did not
vary the
ratio
thereof. The respondents then delivered an application for leave to
appeal the judgment to the Supreme Court of Appeal (“SCA”)
on 17 August 2021.
3.
By agreement that application was argued
virtually on Friday 22 October 2021 when Advs. P-S. Bothma and F.A.
Ferreira represented
the erstwhile respondents (the applicants for
leave to appeal) and Adv.L.Kelly appeared on behalf of the erstwhile
applicants.
[1]
The Court is indebted to counsel for their detailed heads of argument
and bundles of authorities filed in this application for
leave.
ISSUES TO BE CONSIDERED IN THE APPLICATION FOR LEAVE TO APPEAL
4.
The application for leave to appeal raises
three issues.
(i)
Firstly, there is a dispute as to whether the judgment is appealable.
(ii)
Secondly, the issue is whether, if the judgment is appealable, the
respondents have
brought the application within the ambit of s
17(1)(a) of the Superior Courts Act, 10 of 2013 (“the SC Act”);
and
(iii) Thirdly,
in deciding the issue raised under (ii) above, the enquiry is limited
to determining
whether there is a reasonable prospect of the SCA
holding that this Court erred in exercising its discretion in
certifying the
class action. The only dispute on that point is
whether the Court was correct in holding that the consideration of
commonality,
as a prerequisite for such certification, had been
established by the applicants.
IS THE ORDER APPEALABLE?
5.
In arguing that the order was appealable,
Mr. Bothma relied on the Full Bench decision in this Division in
Obiang
[2]
,
submitting that the certification granted here was a judgment which
was final in effect because, at the least, it included an
order
confirming
locus standi
on the part of the applicants to proceed by way of a class action.
Obiang
, in
which one of the issues was
locus
standi, was in turn based on
Zweni
[3]
,
the leading judgment in the SCA on this point in which Harms AJA
listed some nine considerations to be taken into account in deciding
whether a judgment was final in effect or not.
6.
In opposing this point, Mr. Kelly
adopted the stance that a judgment in an application for the
certification of a class action was
essentially procedural in nature
and thus not capable of appeal. He referred the Court to the
unreported decision of the Full Bench
in Gauteng in an application
for leave to appeal the certification of the class action in
Nkala
[4]
where the Court found that such orders were
per
se
not appealable. The Full Bench
expressed its view as follows.
“
[9] As
far as the first issue is concerned, we hold that a certification of
a class action is not appealable, for the following
reasons:
(i) It is
interlocutory in nature;
(ii) It does not dispose of any
of the relief sought in the class action that was certified;
(iii) It is not dispositive of
any of the rights of any of the parties to the class action.”
7.
Mr. Bothma urged the Court to find that
this ruling on the part of the Full Bench was wrong and that it was
open to the Court to
hold otherwise. In the course of argument it
emerged that after leave had been refused by the court
a
quo
in
Nkala
,
the SCA had granted leave on application to it. As is the custom, no
reasons were given for that order. Furthermore,
Nkala
was evidently settled before the appeal was heard and so there is no
clarity on the question of the non-appealability of class
actions
per
se.
8.
Mr. Kelly submitted, with reference to one
of the leading text books on the topic,
Class
Action Litigation in South Africa
[5]
at p41
et seq,
that
the refusal to certify a class action is appealable. That much is
apparent from the judgment of the Constitutional Court in
Mukaddam
(CC)
[6]
.
However, counsel submitted that the issue is rather different in
relation to an appeal against the certification of a class action
and
in that regard he relied on the aforementioned
dictum
of the Full Bench in
Nkala
.
9.
However, the authors in
Class
Action Litigation
point out that the
SCA expressly refrained from deciding the issue of appealabilty in
Children’s Resource Centre
[7]
because that matter, too, involved an appeal against a refusal to
certify. The authors go on to suggest that the hitherto customary
approach in matters such as
Zweni
of examining whether the order is final in effect and not susceptible
to alteration by the court of first instance has been overtaken
by
the interests-of-justice considerations that one finds in cases such
as
Nova Property
[8]
,
OUTA
[9]
and
SCAW
[10]
.
10.
Having considered the matter, I believe the
following passage in
Class Action
Litigation
is applicable to the
circumstances of this case.
“
Since
certification procedures are still being developed, one cannot
predict with certainty the approach that will be taken, but
we see no
reason why a court, having granted a certification order, would take
the view that the order was capable of alteration.
It seems more
likely that the order would be considered final. In principle, a
decision to certify is final in effect at least
in so far as the
question of whether the matter may proceed by way of class action.
Even though the certification would not determine
any of the
substantive outcomes in the class action itself, given the nature of
the procedure, the mere fact that litigants have
the ability to
proceed by way of class action may have significant implications for
the rights of the defendants and the rights
of the class members, who
would be bound by the certification decision.”
11.
In the result, I shall assume, without
finally deciding, that the order granted in this matter is
appealable.
APPLICATION OF S17(1)(a)(i) OF THE SC ACT
12.
In order to succeed in this application, it
is common cause that the respondents must clear the hurdle set by
s17(1)(a) of the SC
Act. That sub-section provides that leave to
appeal may only be granted if the court
a
quo
considers that –
“
(i)
the appeal would have a reasonable prospect of success; or
(ii) there is some other
compelling reason why the appeal should be heard including
conflicting judgments on the matter under consideration.”
13.
Various High Court decisions have suggested
that s17(1)(a) now sets a higher threshold for an applicant for leave
to appeal than
under the previous act.
[11]
The correct approach was recently clarified by the SCA in
Ramakatsa
[12]
.
“
[10]
Turning the focus to the relevant provisions of the
Superior Courts
Act (the
SC Act), leave to appeal may only be granted where the
judges concerned are of the opinion that the appeal would have a
reasonable
prospect of success or there are compelling reasons which
exist why the appeal should be heard such as the interests of
justice.
This Court in Caratco
[13]
,
pointed out that if the court is unpersuaded that there are prospects
of success, it must still enquire into whether there is
a compelling
reason to entertain the appeal. Compelling reason would of course
include an important question of law or a discreet
issue of public
importance that will have an effect on future disputes. However, this
Court correctly added that ‘but here
too the merits remain
vitally important and are often decisive’. I am mindful of the
decisions at high court level debating
whether the use of the word
‘would’ as opposed to ‘could’ possibly means
that the threshold for granting
the appeal has been raised. If a
reasonable prospect of success is established, leave to appeal should
be granted. Similarly, if
there are some other compelling reasons why
the appeal should be heard, leave to appeal should be granted. The
test of reasonable
prospects of success postulates a dispassionate
decision based on the facts and the law that a court of appeal could
reasonably
arrive at a conclusion different to that of the trial
court. In other words, the appellants in this matter need to convince
this
Court on proper grounds that they have prospects of success on
appeal. Those prospects of success must not be remote, but there
must
exist a reasonable chance of succeeding. A sound rational basis for
the conclusion that there are prospects of success must
be shown to
exist.”
Accordingly, the test remains as before: whether there are reasonable
prospects of success on appeal or not.
REASONABLE PROSPECTS
14.
Mr. Bothma did not submit that there was
any compelling reason under s17(1)(a)(ii) of the SC Act which
warranted the granting of
leave to appeal. Rather, he addressed the
Court on the reasonable prospects of success on appeal under
s17(1)(a)(i). In that regard
counsel further focused on the
consideration of commonality as it has been applied in our law in the
certification of class actions.
It was submitted that the
determination of causation in respect of the applicants’ claims
against the respondents was problematic
from the point of
commonality, the argument being that there was likely to be an
absence of uniformity in that regard. This, it
was said, was a
consideration which suggested a lack of commonality in the
applicants’ claims.
15.
The argument advanced by the respondents at
the certification hearing and again in this application for leave to
appeal proceeds
as follows. The applicants’ claims are founded
on material misrepresentations in the various websites operated by
the respondents.
The principle misrepresentation is that persons
clicking on the appropriate banner on the website in question would
be misled into
believing that they were applying for a loan (or a
so-called “loan-finding service”). In addition to the
banner, each
website contained a “click box” where the
participants certified that they had read the terms and conditions
contained
in the fine print on the website. That fine print, in turn,
contained confirmation that the participants had read the terms and
conditions on the website, which incorporated a statement that the
participants were aware of the fact that they were subscribing
to
legal services allegedly to be provided by the company.
16.
There can be no debate that those
participants who thought they were applying for a loan (or
“loan-seeking service”)
when they clicked on the banner
and did not read further when they ticked the “click box”,
are likely to have been
misled by the loan allegations. Mr. Bothma
fairly conceded that there was, at least at a prima facie level, the
prospect of causation
being established in such circumstances. But,
he submitted, there may well be cases where participants had read the
fine print
and actually intended to subscribe to the alleged legal
services. In that event, it was contended, there would be no causal
link
between the misrepresentation on the website for a loan and the
legal services subscribed for – ultimately, “they got
what they asked for and have no cause for complaint”, as it
were.
17.
Developing the argument further, Mr. Bothma
submitted that the case would require an individual assessment of the
nature and extent
to which each applicant was misled. This meant that
there was a wide range of differing circumstances which constituted
the causation
in respect of each applicant’s claim, and this
was antithetical to the communality consideration in the
certification of
class actions, said counsel.
18.
Mr. Kelly submitted that the case for the
applicants had been misconceived by the respondents. He said that the
applicants’
case was that the respondents had operated a scheme
which had, as its very purpose, the intention to mislead customers.
That scheme
operated through a series of websites designed to lure
consumers to conclude a binding agreement for the deduction of a
debit order
on the consumer’s bank account under the guise of a
loan or “loan-finding service”.
19.
The applicants’ causes of action are
summarized in [44] – [47] of the main judgment and need not be
repeated herein.
Claim 1 is said to be founded on ss 40, 41 and 48 of
the Consumer Protection Act, 68 of 2008 (“CPA”) and so,
it is
argued, the question as to whether the conduct of the
respondents’ conduct allegedly falls foul thereof will be
adjudicated
upon an objective basis without the need for causation to
be shown.
20.
In respect of claim 2 (which is a common
law claim advanced in the alternative), the argument is that the
cause of action is premised
upon a declaratory order that the scheme
itself was fraudulent – the primary aim was to obtain the
participants’ bank
details so that unlawful deductions could be
made therefrom. Accordingly, it is said that the question of
individual assessment
of each applicant’s reliance on the
scheme is not required. An overall objective assessment of the scheme
would be conclusive.
21.
With regard to claim 3, it was argued that
the cause of action was based on s40 of the CPA, alternatively the
common law, and seeks
declaratory relief that the respondents’
scheme was unconscionable. Mr. Kelly submitted that this similarly
required an objective
determination by the trial court and individual
causation need not be established. He suggested that if the
respondents’
conduct is found to have been unconscionable, the
trial court would be entitled to make an order to desist under
s52(3)(b)(iii)
of the CPA or issue a prohibitory interdict at common
law. In the result, it was submitted, there is no need for an
individualized
assessment of causation in regard to claim 3.
22.
Lastly, there is claim 4 which is aimed at
fixing personal liability on the part of the actors allegedly seeking
the protection
of the corporate veil. This was similarly said not to
involve an individual assessment of a consumers’ response and
thus
it is claimed that causation is irrelevant.
23.
In the result Mr. Kelly argued that the
Court’s findings at [56] of the judgment were not assailable on
appeal and that leave
should thus be refused. I am inclined to agree
with counsel on that score.
24.
In the alternative, and with reference to
Mukaddam (CC)
at [42], Mr. Kelly argued that, in any event, the power which a court
exercises in certifying a class action is the exercise of
a
discretion. This in turn means that a court of appeal would exercise
restraint in setting aside the lawful exercise of such a
discretion,
as the following
dictum
of
Jafta J in that matter makes clear.
“
[43]
The institution of a class action amounts to a procedural matter of
choosing a process suitable to a particular case, like
instituting an
individual action or a joint action, both of which are regulated by
the Uniform Rules. In order to avoid interfering
unduly with the
exercise of the power to certify a class action, a court of appeal
must exercise restraint when determining an
appeal against the
exercise of that power. Consistent with the approach, in
S
v Basson
[2013
(1) SA 1
(CC)] this Court rejected the argument that that it should
overturn the trial court’s ruling, in terms of which evidence
was excluded, on the basis that the ruling was wrong. This Court
said:
‘
Even
if a discretion is not a discretion in the strict sense, there may be
circumstances in which a court will nevertheless adopt
an approach on
appeal which will overturn the lower court’s decision only if
it has not been judicially made, or based on
incorrect principles of
law or a misappreciation of the facts. It is necessary to consider
now the nature of the discretion at
issue in relation to the
exclusion of the bail record by the trial court.
Under our
constitutional order, a trial court may exclude otherwise admissible
evidence on the basis that it may render the trial
unfair in order to
protect the right to a fair trial. There can be no doubt that is the
duty of the trial court to ensure that
the trial is fair in substance
and the trial court is obliged to give content to this notion. In
considering the approach to the
exercise of discretion to exclude
otherwise admissible evidence in order to ensure a fair trial upon
appeal, it should be borne
in mind that trial judges must be given
freedom to exercise this discretion fairly on their understanding of
the case before them.
Courts must be slow to adopt rules which would
straight-jacket a trial judge in the exercise of that discretion.’
[Footnotes
omitted]
[44] This was the approach
adopted by this court in relation to the exercise of a similar power
by the Supreme Court of Appeal in
South African Broadcasting Corp
Ltd v National Director of Public Prosecutions and others
[2006] ZACC 15
;
[2007
(1) SA 523
(CC)]. This Court stated:
“
Where
the discretion is a discretion in the strict sense, in that the Court
had a range of legal choices open to it, an appellate
Court will
ordinarily interfere with the exercise of that discretion only in
narrow circumstances. However, this court has also
recognized that
there will be occasions where a decision made by another Court, which
does not involve the exercise of a discretion
in the strict sense,
will also be interfered with only in narrow circumstances. Relevant
considerations in these cases will be
the need for the exercise of
judgment by the Court to determine whether the fairness of the
proceedings before it is under threat.
That judgment will often have
to be exercised in the light of a range of complex factors, as this
Court observed in relation to
a different but related question in
Basson:
‘
When
a trial court assesses the question whether the admission of evidence
would render the trial unfair, it has to consider a range
of factors:
the nature of the evidence in question, and how much of it is of
advantage to the parties; the need to be fair not
only to the accused
but also to the prosecution, in the interests of the broader
community; the need to ensure that the trial can
run efficiently and
reasonably quickly; and the reasons underlying the fact that the
admission of the evidence may render the trial
unfair. These are
complex factors which may well pull in different directions.’
[Footnotes
omitted]
.”
25.
Finally, on the question of the exercise of
a discretion, Jafta J remarked, as follows –
“
[48]
As was observed by this Court in
South
African Broadcasting Corporation
,
the proper approach on appeal in the present case is not whether the
decision to refuse certification was correct but whether
the High
Court
‘
did
not act judicially in exercising its section 173 discretion, or based
the exercise of that discretion on the wrong principles
of law, or a
misdirection of material facts.’ ”
26.
As
Mukaddam
(CC)
highlights, the certification of a
class action involves the weighing up of a number relevant
considerations, and there is no prescribed
check list to be adhered
to: the interests-of-justice consideration is paramount.
“
[35]
In
Children’s
Resource Centre supra
,
the Supreme Court of Appeal laid down requirements for certification.
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.
[36] Our courts are familiar
with an evaluation of factors with the view to determine where the
interests of justice lie in a given
case. For example, this court
undertakes a similar examination in determining where it will be in
the interests of justice to grant
leave to appeal. This is not to
mean that the factors relevant to the inquiry are not important. But
none of them is decisive of
the issue. The High court may follow a
similar approach in determining applications for certification.”
27.
Accordingly, the fact that the commonality
consideration might not be as strong, for example, as the suitability
consideration does
not mean that the class action must not be
certified in the event that the interests of justice favour
certification.
28.
In argument, Mr. Bothma did not point to
any misdirection by the Court in the exercising of the discretion to
certify the class
action nor did he demonstrate that this court
failed to exercise its discretion judicially. Rather, he fairly
submitted that there
were divergences in approach upon which two
lawyers might reasonably differ. As the judgment of Jafta J in
Mukaddam (CC)
makes clear, a court on appeal will require something more than just
such a reasonable difference, given the fact that this court
exercised a strict discretion where there is limited room for
interference on appeal.
29.
If I am wrong in my assessment of the
claims and causation is indeed material, I consider that the
advantages of a class action
(which are fully set out in the
certification judgment) far outweigh any potential prejudice to the
respondents. If there are consumers
who genuinely signed up for legal
services and were supplied same, the respondents should have little
difficulty adducing such
evidence from their records. On the other
hand, the trial court can be asked to consider the bulk of the
evidence presented on
behalf of the applicants and to draw reasonable
inferences therefrom.
30.
In conclusion on this aspect of the
application, I do not believe that the interests-of-justice
consideration which underpins s173
of the Constitution has been
undermined by this Court’s certification. On the contrary, the
refusal of the application would
have severely impacted on the
ability of persons with relatively limited means, scattered around
the country, to achieve some measure
of success against the alleged
fraud of the respondents.
CONCLUSION
31.
In the light of the aforegoing, I consider
that the respondents have failed to show that they have reasonable
prospects on appeal
of persuading another court to set aside the
certification of the applicants’ class action. It follows that
the application
must fail.
ORDER OF COURT
The application for leave to appeal is dismissed with costs.
GAMBLE, J
APPEARANCES
For the applicants –
Adv. L. Kelly
Instructed by Stellenbosch University Law Clinic,
Stellenbosch.
For the respondents –
Adv. P-S. Bothma and
Adv. F.A. Ferreira
Instructed by Abrahams and Gross Attorneys,
Cape Town.
[1]
For the sake of convenience the parties will be
referred to herein as they were in the main application.
[2]
Obiang v Janse van Rensburg
[2019] 4 All SA 287 (WCC)
[3]
Zweni v Minister of Law and Order
1993 (1) SA 523 (A)
[4]
Nkala and others v Harmony Gold Mining Company
Ltd and others
[2016] ZAGPJHC 175 (24
June 2016)
[5]
Edited by Max du Plessis, John Oxenham, Isabel Goodman, Sarah
Pudifin-Jones and Mr Kelly himself
[6]
Mukaddam v Pioneer Foods (Pty) Ltd and others
2013 (5) SA 89
(CC)
[7]
Children’s Resource Centre Trust v Pioneer Foods Ltd
2013 (2) SA 213
(SCA) at [25]
[8]
Nova Property Group Holdings Ltd and others v
Cobbett and another
2016 (4) SA 317
(SCA) at [8]-[9]
[9]
National Treasury and others v Opposition to
Urban Tolling Alliance and others
2012
(6) SA 223
(CC) at [22]-[30]
[10]
International Trade Administration Commission
v SCAW South Africa (Pty) Ltd
2012 (4)
SA 618
(CC)
[11]
See, for example,
Mont Chevaux Trust v Goosen and others
[2014] ZALCC 20
(3 November 2014);
Valley of the Kings Thaba
Motswere (Pty) Ltd and another v Al Mayya International
[2016]
ZAECGHC 139 (10 November 2016);
Magashule v Ramaphosa and others
[2021] ZAGPJHC 405 (13 September 2021).
[12]
Ramakatsa and others v African National Congress and another
[2021] ZASCA 31
(31 March 2021)
[13]
Caratco (Pty) Ltd v Independent Advisory (Pty)
Ltd
2020 (5) SA 35
(SCA).