Children's Resource Centre Trust and Others v Pioneer Food (Pty) Ltd and Others

• Jurisdiction: South Africa
• Judge: Nugent JA, Ponnan JA, Malan JA, Tshiqi JA and Wallis JA
• Judgment Date: 29 November 2012
• Citation: 2013 (2) SA 213 (SCA)
• Docket Number: 050/2012 [2012] ZASCA 182
• Hearing Date: 07 November 2012
• Counsel: WH van der Linde SC (with S Budlender and M le Roux) for the appellants, the heads of argument having been prepared by W Trengove SC with Mr Budlender and Ms Le Roux. SF Burger SC (with JPV McNally SC and JA Cassette) for the first respondent. J Dickerson SC (with M O'Sullivan and R Garland) for the second respondent. D Unterhalter SC (with M du Plessis and I Goodman) for the third respondent. T Ngcukaitobi for the amicus curiae, the heads of argument having been prepared by G Budlender SC with Mr Ngcukaitobi.
• Court: Supreme Court of Appeal

Wallis JA (Nugent JA, Ponnan JA, Malan JA and Tshiqi JA C concurring):

[1] When may a class action be brought and what procedural requirements must be satisfied before it is instituted? These two questions confront this court in litigation arising from an investigation by the Competition Commission (the Commission) into the bread-producing D industry, initially in the Western Cape, and later in four other provinces in South Africa. In the light of the outcome of that investigation the appellants applied to the Western Cape High Court for the certification of a class action in which they proposed to pursue a claim for damages against the respondents. That application was dismissed and leave to E appeal was refused. Such leave was granted on petition to this court. The determination of the appeal requires that we address the two questions I have described. To that end we heard detailed argument in this and a related application over two days and were furnished with copious reference materials. That has assisted in illuminating the path for us in this novel area of procedural law and it is appropriate at the outset to F express our gratitude to counsel for their assistance.

Background

[2] A brief sketch of the Commission's investigation and the functioning G of the bread market is necessary to provide the setting for the present litigation. In 2006 the respondents, [1] to whom I will refer as Pioneer, Tiger and Premier respectively, were the three largest bread producers in the Western Cape. At that time and for a considerable period prior to that they, together with Foodcorp, [2] were the four largest bread producers in South Africa. In December 2006 the Commission received H complaints in relation to the apparently co-ordinated implementation of price increases in the Western Cape, in conjunction with apparently co-ordinated changes in the terms upon which the producers dealt with bread distributors, who supplied the informal sector of the bread market. It then commenced an investigation in relation to the Western Cape in terms of the Competition Act 89 of 1998 (the Act). Premier came I forward and disclosed details of anti-competitive conduct in which it had engaged together with the other three bread producers, not only in the

Wallis JA (Nugent JA, Ponnan JA, Malan JA and Tshiqi JA concurring)

A Western Cape but also in other parts of the country. It sought and was granted leniency in terms of the Commission's corporate-leniency policy. [3]

[3] The disclosures by Premier led to the Commission instituting a B further investigation in relation to other parts of the country, which was referred to, somewhat misleadingly, as the national complaint. Tiger entered into a settlement agreement with the Commission in relation to conduct in both the Western Cape and under the national complaint. Foodcorp entered into a similar agreement in relation to the national complaint only. Both settlements were confirmed in orders of the C Competition Tribunal (the Tribunal). They involved the payment of administrative penalties of nearly R99 million in the case of Tiger and about R45 million in the case of Foodcorp. The complaints in respect of Pioneer were referred to the Tribunal for adjudication. At the end of a lengthy hearing it was found to have perpetrated anti-competitive conduct in relation to both the Western Cape and the national D complaint. Administrative penalties totalling nearly R196 million were imposed upon it. It appealed against that decision but the matter was resolved before the hearing of the appeal. We were not told the basis for that resolution.

E [4] The bread producers do not sell bread directly to the public. They determine list prices at a national level. The retail market has three elements. They are the large national supermarket chains, which purchase some 25 to 30 per cent of these bread producers' total production, smaller general retailers, and an informal sector that obtains supplies of bread from resellers, who are distributors who purchase bread for F onward sale to informal retail outlets. Strictly speaking the resellers are wholesalers not retailers. Each producer's list price provides the basis for negotiating the prices at which they supply retailers with bread. With the large national customers these negotiations take place at a national level. With other customers they take place at a regional level, subject to some constraints and a degree of national oversight. The price actually paid by G the retailers is determined on the basis of a discount, expressed as a percentage, of the list price. There is no direct control by the bread producers of the prices at which bread is sold in the retail market.

[5] The following conduct gave rise to the Commission's investigation. H On 6 December 2006 the respondents' representatives in the Western Cape met and informed one another of the increases in the list price of bread determined by their respective national head offices. A date for implementation of the increases was agreed upon. At the same time it was agreed that discounts afforded to distributors would be restricted to 90 cents per loaf in Paarl and 75 cents per loaf in the Cape Peninsula and I that the bread producers would not deal with one another's distributors. The effect of this was, indirectly, to fix the price of bread and trading

Wallis JA (Nugent JA, Ponnan JA, Malan JA and Tshiqi JA concurring)

conditions in contravention of ss 4(1)(b)(i) and (ii) of the Act. The A national complaint was more diffuse and less clear-cut. It involved agreements in terms of which bakeries were sold by one large bread producer to another, resulting in the purchaser achieving dominance in a particular region; meetings on various occasions and at various places where bread prices in relation to particular areas were discussed or B agreed, or the date of increases in bread prices in that region were agreed; and agreements not to poach one another's customers. It is apparent from the description of these meetings in the Tribunal's determination of the Pioneer complaint that these anti-competitive activities were sporadic during a lengthy period; did not always involve all of the bread C producers and were frequently restricted to relatively small regions or even specific places. [4] Like the Western Cape they involved contraventions of ss 4(1)(b)(i) and (ii) of the Act. The determination by the tribunal that these provisions of the Act were contravened provides the foundation for the claims that are sought to be advanced in the proposed class action. D

[6] Three of the appellants are NGOs that work among children, the poor and the disadvantaged, of whom there are so many in our society. The fourth, COSATU, is the largest trade-union federation in South Africa. The other five are individuals who were consumers of bread in the Western Cape at the time of the conduct that gave rise to the E competition complaint. All of these individuals had limited means and would have been adversely affected by any increase in the price of bread. In that sense they are typical of many consumers of bread in both the Western Cape and the country as a whole.

The proposed class action F

[7] Mr Solomon, the Centre Coordinator of the Children's Resource Centre, deposed to the founding affidavit. He alleged that the respondents' unlawful conduct had breached the rights of both bread consumers and bread distributors in the Western Cape, but expressly confined the scope of the application to consumers. [5] In regard to the national G complaint he accepted that the Western Cape court lacked jurisdiction to deal with it. [6] In the result there were no allegations in his affidavit concerning the national complaint, its consequences or the identity of the persons injured by the conduct giving rise to the national complaints. Reverting to the Western Cape he alleged that: H

'Every consumer who bought their products during the period in question suffered damages as a result of the unlawful price fixing and other prohibited practices.'

Wallis JA (Nugent JA, Ponnan JA, Malan JA and Tshiqi JA concurring)

A Mr Solomon said that the proposed class action was to be brought 'on behalf of the consumers for compensation and related relief'. He said that most were not in a position to afford to engage in litigation and that each individual's claim was too small to justify litigation as an individual, but that collectively the claims of consumers were 'for a very large sum B of money'. That is hardly surprising, as he claimed that 'literally millions of bread consumers in the Western Cape' had been affected by the unlawful conduct and that for practical purposes this amounted virtually to the public at large in the Western Cape.

[8] Thus far the proposed action was expressed as one in which the C claims of bread consumers against the respondents would be consolidated and dealt with in a single action with the appellants representing the interests of the consumers. However, there was an important shift in emphasis when Mr Solomon came to deal with the relief to be claimed in the action. He said this:

D 'The damages which each individual bread consumer suffered are of the nature of things, very small. If a global sum of damages was awarded in respect of the unlawful conduct of the respondents, the cost of distributing to each consumer his or her share of those damages would be prohibitive and not viable. The further problem which would arise E would be to establish precisely how much of the respondents' bread each individual consumer bought during the period in question. For this reason, in this class action the applicants will seek class relief, in the form of an order which will require the respondents to pay the unlawful overcharge into a trust or trust or...