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[2012] ZASCA 183
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Mukaddam and Others v Pioneer Food (Pty) Ltd and Others (49/12) [2012] ZASCA 183; 2013 (2) SA 254 (SCA) (29 November 2012)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 49/12
Reportable
In the matter between:
IMRAAHN ISMAIL MUKADDAM
...............................................
1
st
Appellant
W E M DISTRIBUTORS CC
.........................................................
2
nd
Appellant
ABDUL KARIEM EBRAHIM
.......................................................
3
rd
Appellant
and
PIONEER FOOD (PTY) LTD
(Registration Number:
1988/004036/07)
.....................................
1st
Respondent
TIGER CONSUMER BRANDS LTD
(Registration Number:
1972/006590/06)
.....................................
2
nd
Respondent
PREMIER FOODS LTD
(Registration Number:
1968/002379/06)
....................................
3
rd
Respondent
Neutral citation:
Mukaddam
v Pioneer Food
(49/12)
[2012] ZASCA 183
(29 November 2012)
Coram:
NUGENT, PONNAN,
MALAN, TSHIQI and WALLIS JJA
Heard:
6 NOVEMBER 2012
Delivered: 29 NOVEMBER 2012
Summary: Class action –
whether ‘opt in’ action allowed – whether ‘legally
tenable’ cause of
action shown.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from Western Cape High
Court, Cape Town (Van Zyl AJ sitting as court of first instance):
The appeal is dismissed.
______________________________________________________________
JUDGMENT
______________________________________________________________
NUGENT JA (PONNAN, MALAN, TSHIQI
and WALLIS JJA CONCURRING)
[1] Mr Mukkadam, the appellant,
is a purveyor of bread. So is Mr Williams, who trades through the
medium of W.E.M. Distributors
CC, and Mr Ebrahim, who were applicants
together with Mr Mukkadam in the court below, but who are not parties
to this appeal. They
all conduct business in the Western Cape. They
purchase their bread from one or other of the respondents, who are
major producers,
add their margins, and distribute mainly to informal
traders, through whom it reaches consumers.
[2] For some time in the Western
Cape the respondents engaged in practices prohibited by the
Competition Act 89 of 1998
. Essentially, they engaged in co-ordinated
fixing of prices, fixing of discounts that were given to distributors
such as the appellants,
and agreed not to deal with one another’s
distributors. The nature of their anti-competitive conduct, its
effect, and the
consequences for each of them when subjected to
investigation by the competition authorities, is dealt with fully by
Wallis JA
in the related appeal of
Trustees
for the time being of the Childrens’ Resource Centre Trust and
others v Tiger Consumer Brands Ltd and others,
1
and I need not repeat what was
said in that judgment.
[3] The appellants allege that
they and about 100 other distributors in the Western Cape suffered
financial loss as a result of
the prohibited conduct, particularly
the fixing of discounts they would receive, and the appellants wish
to pursue claims for damages
in a class action. They applied to the
Western Cape High Court to certify the institution of a class action
on behalf of themselves
and other affected distributors for recovery
of their losses. The application was dismissed by Van Zyl AJ and they
now appeal with
the leave of this court.
[4] I have already joined with
Wallis JA in the appeal in the
Trustees’
case in recognising
class actions as a permitted procedural device for pursuing claims,
where the case calls for it, so as to permit
those who are wronged to
have access to a court. I need not repeat what will need to be shown
for such a class action to be certified.
I need say only that
included amongst them the applicants for certification will need to
satisfy a court, where a novel cause of
action is sought to be
established, that the claim is at least legally tenable, albeit that
the court is not called upon to make
a final determination as to the
merits of the claim, and that a class action is the most appropriate
means for the claims to be
pursued. Failing that, the certification
of a class action holds the potential only to be oppressive to the
proposed defendants.
[5] The claims that the
appellants wish to advance are claims for recovery of damages.
Although not fully expressed in the founding
affidavit the damages
they claim are explained as follows in the appellant’s heads of
argument:
‘
All
bread distributors would have directly suffered a reduction in gross
profit margin as a result of the respondents’ unlawful
conduct
and to this extent suffered a common fate in the reduction of gross
profit. It is further submitted that damages in price
fixing cases of
this nature fall to be calculated as being the difference between the
actual price and the “but for”
price, that is, the price
that would have been charged “but for” the unlawful price
fixing conspiracy …’.
[6] Before us their counsel found
himself confined, in view of the form in which the case was presented
in the founding affidavit,
to advancing the claim as one founded upon
breach of
s 22
of the Bill of Rights, though that was sought to be
linked to rights that are said to flow from the
Competition Act. For
present purposes, in favour of the appellants, I will not confine
myself in the same way, and I approach the matter on the basis
that
they need show a legally tenable claim founded either upon s 22 of
the Constitution, read together with the
Competition Act, or
under
the common law. In my view any such claims are indeed untenable and I
need deal with the issue only briefly. At the outset
I should observe
that there is no evidence that prices to distributors would indeed
have been lower but for the unlawful conduct
but I will assume that
that would indeed have been so.
[7]
Section 22
of the Bill of
Rights guarantees to all citizens the right to freely choose his or
her trade, profession or occupation. While on
its face the right is
expressed to be one to enter a trade, profession or occupation, it
was submitted that once the trade, profession
or occupation has been
entered the section extends to protecting the practise of that trade,
profession or occupation.
[8] I do not find it necessary in
this case to examine in any detail the contents of that right. It is
sufficient to say that there
are considerable hurdles to be overcome
in establishing a claim on that basis. The first is that the right is
guaranteed only to
citizens and it is by no means clear that the
individuals on behalf of whom the class action is to be advanced are
indeed citizens.
The second is that, on the face of it, the right is
accorded to individuals and it seems that some, if not most, of the
proposed
claimants will be juristic persons. But if those hurdles are
indeed overcome I think there is a further hurdle that altogether
blocks the way. For once having entered the trade, profession or
occupation, I find no basis for finding that
s 22
also guarantees the
outcome of having done so. Indeed, that would be inconsistent with
competition, which necessarily entails that
enterprises might be
unprofitable and fail. Far from supporting the appellants’
constitutional claims, the
Competition Act, which
the appellants find
themselves linking to their constitutional claim, altogether
undermines it.
[9] The
Competition Act does
not
purport to protect the profits that an enterprise will make. On the
contrary, at least so far as the distribution of bread
is concerned,
it is designed to protect consumers against excessive prices
emanating from anti-competitive behaviour. The effect
of the
appellants’ claims is to assert that it was they, instead of
the producers, who were entitled to reap the rewards
of the
prohibited conduct. They assert a right to transfer to themselves the
profits that the producers made, which in my view
is simply
untenable.
[10] Reliance upon delictual
claims takes the matter no further. It can be taken now to be well
established that the recognition
of claims for pure economic loss is
heavily policy laden.
2
Nothing was advanced on behalf of
the appellants to suggest that public policy calls for recognition of
a claim to maximise profits
from the sale of bread, least of all to
reap the rewards of price fixing. The fact alone that the fixing of
prices for bread is
prohibited is sufficient to dispose of any
suggestion that policy requires a claim to be recognised for the
recovery of profits
from the practice. Indeed, the corollary of our
finding in the
Trustees’
case that a claim by consumers is
potentially plausible is destructive of the distributors’ case.
[11] But there is a further
ground upon which the claim for certification by the distributors
must in any event fail. The justification
for recognising class
actions is that without that procedural device claimants will be
denied access to the courts. The class action
the appellants wish to
commence in this case is one that is sometimes called an ‘opt-in’
action. By that is meant that
the class to be represented in the
action is confined to claimants who come forward and identify
themselves as claimants –
in this case by written notification
to the appellants’ attorney.
[12] Once the class is confined
to claimants who choose positively to advance their claims, and are
required to come forward for
that purpose, I can see no reason why
they are not capable of doing so in their own names, and they need no
representative to do
so on their behalf. Rule 10 of the Uniform Rules
expressly allows multiple plaintiffs to join in one action if
‘
the
right to relief of the persons proposing to join as plaintiffs
depends upon the determination of substantially the same question
of
law or fact which, if separate actions were to be instituted, would
arise on such action’.
[13] Claims that have sufficient
commonality to qualify for a class action will necessarily qualify
for a joint action under that
rule, and the converse also applies.
That the plaintiffs might be numerous – in this case it is said
that there might be
100, although there is no reason to think that
all will join – is in itself no reason to preclude a joint
action.
3
Perhaps there will be more paper
– though even that is not necessarily true – but that is
no more than administrative
inconvenience. In both a class and a
joint action the plaintiffs will necessarily be represented by the
same legal representatives
and are in no worse position than they
would be in a class action. I might add that even administrative
inconvenience of a joint
action under Rule 10 might be overcome if
the claims were all ceded to a single plaintiff, which is a further
reason why a class
action is not called for to advance their claims.
[14] The only advantage that was
advanced on the appellants’ behalf for proceeding by way of a
class action in such cases,
instead of a joint action or one that is
brought in reliance upon a cession of claims, was that an action
brought through representation
would immunise them against personal
liability for costs. That does not seem to me to be a good reason for
allowing a class action.
On the contrary, the potential for personal
liability for costs will often serve as a salutary restraint upon
frivolous actions
that are brought oppressively for the purpose of
inducing defendants into financial settlements, which is one of the
dangers to
be avoided in certifying class actions. Indeed, the court
that becomes seized of the case has a wide discretion to determine
where
the costs should fall, taking account the merit of the claim
and the conduct of the litigation, and is better placed to do so than
a certifying court. Although I do not close the door to an ‘opt
in’ class action in my view the circumstances would
need to be
exceptional before one would be allowed, and nothing exceptional has
been shown in this case.
[15] On both grounds the claim to
certification in this case must fail and the appeal must be
dismissed. In view of the novelty
of the claim, and its close
association with the
Trustee’s
case in which the main points
were in any event argued on behalf of the respondents, I think it
would be just if each party were
to pay its own costs.
[16] The appeal is dismissed.
__________________
R W NUGENT
JUDGE OF APPEAL
APPEARANCES:
For appellant: R P Hoffman SC
C D Shone
Instructed by:
Knowles Husain Lindsay Inc,
Bellville
Honey Attorneys, Bloemfontein
For 1
st
respondents: S
Burger SC
P McNally SC
J Cassette
Instructed by:
Cliffe Dekker Hofmeyr Inc,
Sandton
Symington & De Kok,
Bloemfontein
For 2
nd
respondents: J
Dickerson SC
M O'Sullivan
R Garland
Instructed by:
Edward Nathan Sonnenbergs, Cape
Town
Matsepes Inc, Bloemfontein
For 3
rd
respondents: D
Unterhalter SC
M du Plessis
I Goodman
Instructed by:
Nortons Inc, Sandton
McIntyre & Van der Post,
Bloemfontein
1
Trustees
for the time being of the Childrens’ Resource Centre Trust and
others v Tiger Consumer Brands Ltd and others
Appeal Case No.
050/2012 (ZASCA182).
2
Minister
of Safety and Security v Van Duivenboden
2002
(6) SA 431
(SCA) para 22;
Telematrix
(Pty) Ltd t/a Matrix Vehicle Tracking v Advertising Standards
Authority SA
2006 (1)
SA 461
(SCA) para 3;
Trustees,
Two Oceans Aquarium Trust v Kantey & Templer (Pty) Ltd
2006 (3) SA 138
(SCA) paras 10
and 11.
3
In
the United States a class action is not competent if all the
claimants can be joined. Rule 23(a) of the Federal Rules of Civil
Procedure require a party seeking certification to demonstrate,
amongst other things, that ‘the class is so numerous that
joinder of all members is impracticable’.