Brief Summary

Class Actions — Settlement Approval — Application for approval of a Settlement Agreement following a certified class action for silicosis and tuberculosis claims against mining companies — Applicants, comprising surviving class representatives and settling mining companies, sought certification of four new classes for settlement purposes — Court satisfied with the proposed two-stage procedure for optimal protection of class members' rights — Order granted for the certification of new classes and issuance of a rule nisi for further processes.

Comprehensive Summary

Summary of Judgment

1. Introduction

This judgment concerns an ex parte application in the Gauteng Local Division, Johannesburg, brought at the first stage of an application for judicial approval of a proposed class action settlement agreement. The matter arises as a sequel to the earlier class certification decision in Nkala and Others v Harmony Gold Mining Company Limited and Others (the 2016 certification judgment), in which the court certified class actions relating to occupational lung diseases contracted by gold mineworkers.

The applicants comprised, on the one hand, the surviving class representatives from the previously certified class action (the first to forty-eighth applicants) and, on the other hand, a group of prospective defendant mining companies that had negotiated and concluded a settlement with those representatives (the forty-ninth to sixty-seventh applicants). The settling mining companies had also incorporated a special purpose vehicle (described as the Agent) to represent them for certain purposes connected to the settlement and the associated trust mechanism.

The procedural posture was explicitly staged. The applicants sought, at stage one, the certification of new “Settlement Classes” and the issue of a rule nisi to facilitate notice to class members and interested parties, and to provide for a later return day (stage two) at which the court would consider, after participation and submissions, whether to grant final approval of the settlement agreement and make it an order of court. The judgment addressed only this preliminary procedural and class-definition stage, not the substantive fairness approval of the settlement.

The general subject-matter concerns the proposed resolution, through a settlement structure including a dedicated trust, of claims arising from silicosis and pulmonary tuberculosis allegedly contracted by current and former underground gold mineworkers who performed qualifying risk work on specified mines after 12 March 1965, as well as claims by their dependants where such mineworkers had died.

2. Material Facts

In May 2016, this court certified a class action against a number of mining companies following consolidated applications, and it certified two broad classes (a silicosis class and a pulmonary tuberculosis class) together with identified class representatives and three teams of attorneys as class legal representatives. The 2016 certification order contemplated that any settlement reached would require approval by the court before it could take effect.

After the certification judgment, a number of the certified class representatives died. The present application was accordingly brought by the 48 surviving class representatives, together with 19 mining companies that had reached settlement with them. The judgment identified that there were also non-settling mining companies (eight prospective defendants) that were not parties to the settlement agreement.

Following protracted negotiations, the class representatives and the settling mining companies concluded a Settlement Agreement on 3 May 2018. The settlement contemplated that it would be binding on class members who do not opt out, and that once the opt-out period expired and the settlement became operative, the previously certified class action would terminate as against the settling mining companies. The settlement also provided for the establishment of the Tshiamiso Trust, tasked with identifying and locating beneficiaries, and with assessing, processing, and paying claims by eligible mineworkers and dependants of deceased mineworkers in respect of silicosis and pulmonary tuberculosis.

A central factual premise accepted for purposes of the stage-one application was that there was no established precedent or procedure in South Africa for obtaining judicial approval of settlement agreements intended to bind absent class members. The applicants therefore proposed a two-stage procedure, involving the issue of a rule nisi at stage one to ensure prior notice of the proposed settlement and participation mechanisms, followed by an approval hearing at stage two.

The court’s order, made at this stage, incorporated a detailed draft order agreed by all applicants. It defined four settlement classes (two relating to silicosis and dependants; two relating to tuberculosis and dependants), maintained the surviving class representatives as representatives for the settlement classes, confirmed the class lawyers, directed extensive publication and notice measures, and set procedural steps for participation by class members and other interested parties ahead of the return day.

3. Legal Issues

The primary legal question at this stage was procedural and structural: whether the court should, in the absence of a settled domestic procedural template for class settlement approval, grant stage-one relief comprising the certification of settlement-specific classes and the issue of a rule nisi that would regulate notice and participation, and pave the way for a later hearing on whether the Settlement Agreement should be approved and made an order of court.

The dispute at this stage was predominantly concerned with the application of legal procedure to the management of a class settlement, rather than the determination of contested facts about liability or quantum. It required the court to make an evaluative procedural judgment about whether the proposed staged approach appropriately protected the interests of class members, particularly absent class members whose rights could be affected if the settlement were approved.

The court was not called upon, at this stage, to decide the final substantive question of whether the settlement was reasonable, fair, and adequate; it was asked to decide whether to implement a process (through certification of settlement classes and a rule nisi) that would enable that question to be properly ventilated on the return day.

4. Court’s Reasoning

The court situated the application as a continuation of the 2016 certification proceedings and emphasised that the earlier certification order required that any settlement would only be effective if approved by the court. In the present matter, the applicants therefore approached the court for approval in a manner designed to ensure that class members would receive notice and an opportunity to participate before any binding effect could be imposed.

A key part of the court’s reasoning addressed the procedural mechanism proposed. The court accepted that there was not yet an established South African procedure for class settlement approval that binds absent class members, and it recorded the applicants’ proposal of a two-stage process that mirrors approaches used in other jurisdictions. For purposes of the present decision, the court regarded it as sufficient that the proposed approach was consistent with the rule nisi procedure known to South African practice.

In explaining the nature and utility of a rule nisi, the court referred to SAFCOR Forwarding (Johannesburg) (Pty) Ltd v National Transport Commission and quoted Corbett JA’s description of the rule nisi as a useful procedure, commonly used where interim relief is sought and where a prima facie case is shown. The court treated the rule nisi mechanism in this matter as serving a protective and participatory function: it would ensure that proposed class members and interested parties would have an opportunity to become acquainted with the settlement’s terms, to consider their rights (including opting out), and to raise objections before the court determined whether to approve the settlement.

The court also accepted the structure of the stage-one relief sought, namely that it should define and certify settlement classes and regulate notice, participation, and timing for the later approval hearing. Having considered the application and heard counsel for the applicants, the court stated that it was satisfied, for present purposes, that the relief sought at this stage should be granted. The judgment therefore implemented the agreed draft order as an order of court, leaving the substantive approval of the settlement to be determined at stage two on the return day.

5. Outcome and Relief

The court granted the stage-one relief and made an order in terms of the draft order agreed by all applicants. The order declared the existence of four Settlement Classes, granted leave to the first to forty-eighth applicants to act as class representatives of those classes, and certified the same three teams of attorneys (Richard Spoor Inc, Abrahams Kiewitz Inc, and the Legal Resources Centre) as the joint legal representatives for the settlement classes.

The court issued a rule nisi calling on members of the Settlement Classes and interested parties to show cause on 29 to 31 May 2019 why a final order should not be granted making the Settlement Agreement (including its addenda) an order of court, declaring it binding on class members who do not opt out, and terminating the previously certified class actions against the settling mining companies once the settlement becomes operative.

The order also established a detailed regime for notice and publication, including notice-board publications, newspaper advertisements, radio announcements, website publication, and mechanisms for obtaining the full settlement text, together with deadlines for notices of intention to participate, affidavits, and written argument. It further directed service of the application and rule nisi order on specified parties, including respondents in the 2016 Nkala matter who were not party to the settlement.

As to costs, the order contemplated that costs of publication in the press and over radio would be borne by the Founders (as defined in the order), and it included a provision that parties opposing the relief on the return day (or such of them as the court may determine) could be directed to pay costs on the return day. The judgment itself did not finally determine contested costs liability at this preliminary stage beyond making the agreed procedural order.

Cases Cited

Nkala and Others v Harmony Gold Mining Company Limited and Others (2012/48226, 2012/31324, 2012/31326, 2012/31327, 2012/48226, 2013/08108) [2016] ZAGPJHC 97; [2016] 3 All SA 233 (GJ); 2016 (7) BCLR 881 (GJ); 2016 (5) SA 240 (GJ) (13 May 2016).

SAFCOR Forwarding (Johannesburg) (Pty) Ltd v National Transport Commission 1982 (3) SA 654 (A).

Blom and Others v Anglo American South Africa Ltd (referred to in the definition of the earlier silicosis class; no law report citation provided in the judgment text).

Legislation Cited

No legislation was expressly cited in the judgment text provided.

Rules of Court Cited

No specific rules of court were expressly cited in the judgment text provided. The court referred to the rule nisi procedure as a recognised procedural mechanism in South African practice.

Held

The court held, at the first stage of the settlement approval process, that it was appropriate to grant procedural relief establishing a framework for notice and participation in relation to a proposed class settlement. It accordingly declared four settlement classes for silicosis-related and tuberculosis-related claimants (and their dependants), confirmed the surviving class representatives and class lawyers for purposes of settlement, and issued a rule nisi regulating the steps leading to a return-day hearing at which the court would decide whether to approve the settlement agreement and make it an order of court.

The court further held that, should the settlement not be approved on the return day or should it fail due to a suspensive condition not being met, the certification of the settlement classes would terminate with immediate effect, reflecting the provisional nature of the stage-one certification.

LEGAL PRINCIPLES

Court approval is required before a settlement agreement negotiated in the context of a certified class action may take force and effect in a manner that binds class members, where the certification order so provides.

In the absence of an established domestic precedent for binding class settlement approval procedures, a two-stage approach that provides for prior notice to class members and a subsequent approval hearing may be adopted, provided it is consistent with South African procedural mechanisms.

The rule nisi procedure may be used to structure an interim process that safeguards the interests of affected persons by ensuring notice, an opportunity to consider the settlement’s terms, and an opportunity to participate and raise objections before the court makes a final approval decision.

Ex Parte Nkala and Others (2018/44060) [2018] ZAGPJHC 657 (13 December 2018)