MUNANGATI-MANONGWA
J:
The
applicant, a business entity, applied for leave to institute a Class
Action in terms of s3 of the Class Actions Act [Chapter 8:17]
(hereinafter referred to as “the Act”) against the respondent.
The respondent is a bank which inter alia is in the business of
lending money.
The
class of persons for which leave is sought by the applicant comprises
persons who, after paying the respondent in advance, an amount
calculated as a percentage of the value of the loan in their
contract, received a loan amount much less than that stipulated in
the loan contract.
The
application was vehemently opposed by the respondent on the basis
that it has no merit.
The
applicant has put the facts of the matter giving rise to the
application at hand as follows:
On
18 March 2013 the applicant and respondent entered into a loan
contract wherein the respondent granted a short term loan facility to
the applicant in the sum of US$160,000. The loan was meant to finance
the applicant's business activities. The loan was conditional upon
the applicant paying an advance amount equivalent to 4.5% of the
value of the loan. The applicant alleges that despite meeting its own
obligations the respondent failed to advance the agreed amount but
only advanced US$49,237-00. As a result, the applicant suffered
damages as the failure to secure the loan adversely affected its
operations. It is out of this whole scenario, that the applicant's
application arises.
The
applicant seeks leave to institute a class action to force the
respondent to pay damages for breach of the loan contract or
alternatively to have respondent pay pro rata refunds of facility
fees.
It
is applicant's case that the respondent is making huge profits from
demanding facility fees based on an amount it never intends to avail
to the borrower, and that, such injustice can be corrected through a
class action which will determine once and for all the legality of
such an approach to banking.
The
respondent on the other hand indicates that the total amount
available to be accessed by the applicant under the 2013 facility was
US$160,000-00 (including the short term loan of US$40,000-00). The
US$40,000-00 was however immediately utilised to settle a 2012
facility which was still outstanding on the applicant's account.
Further, respondent states that the applicant was obliged to pay
management fees of 3% of the total limit of the 2013 facility which
amount was not refundable. However, Applicant failed to deposit a
minimum of US$45,000-00 into its bank account held with the
respondent which has been termed “the deposit covenant.” The
respondent further stated that the parties had entered into an
'uncommitted' facility which was subject to the availability of
funds which aspect the applicant was aware of. In that regard, the
respondent argued that the applicant had no cause of action and also
the application failed to satisfy the requirements for instituting a
class action as set out in s 3 of the Act and should thus fail.
When
the matter was initially entertained representatives of both parties
agreed that there is not much in terms of precedence vis class
actions and they agreed that a legal practitioner be identified by
the registrar to assist the court. Ultimately Mr Mpofu to whom the
court is greatly indebted, filed heads of arguments which were served
on both parties and form part of the record.
On
the day of hearing Mr. Madhuku sought to urge the court to disregard
the heads of argument filed by the amicus curiae on the basis that
they did not assist the court on points of law but were rather an
opinion from the bar.
The
court reminded Mr. Madhuku that this was an arrangement agreed to by
the parties with his participation and in any case, the amicus
curiae's opinion is the very thing that the court was seeking.
Whilst the court was not bound by Mr. Mpofu's submissions, it was
free to consider them.
It
is imperative to note that the applicant had prior to instituting
this application issued summons on 13 July 2015 against the
respondent seeking damages arising out of breach of the loan
contract.
The
case is pending in this court and it became an issue during the
consideration of this application on whether applicant could make
this application in the light of that pending case.
The
Act is clear regarding what the court considers in dealing with an
application for leave to institute a class action. Section 3 states
as follows:
“3
Application for leave to institute class action
(1)
Subject to this section, the High Court may on application grant
leave for the institution of a class action on behalf of any class of
persons.
(2)
An application for the institution of a class action -
(a)
may be made by any person, whether or not he is a member of the class
of persons concerned; and
(b)
shall be made in the form and manner prescribed in rules of court.
(3)
The High Court shall grant leave in terms of subsection (1) if it
considers that in all the circumstances of the case a class action is
appropriate, and in determining whether or not this is so the court
shall take into account -
(a)
whether or not a prima facie cause of action exists; and
(b)
the issues of fact or law which are likely to be common to the claims
of individual members of the class of persons concerned; and
(c)
the existence and nature of the class of persons concerned, having
regard to -
(i)
its potential size; and
(ii)
the general level of education and financial standing of its members;
and
(iii)
the difficulties likely to be encountered by the members enforcing
their claims individually; and
(d)
the extent to which the members of the class of persons concerned may
be prejudiced by being bound by any judgment given in the class
action; and
(e)
the nature of the relief claimed in the class action, including the
amount or type of relief that each member of the class of persons
concerned might claim individually; and (f) the availability of a
suitable person to represent the class of persons concerned; and (g)
any other relevant factor.
(4)
The High Court may grant leave of subsection (1) notwithstanding that
-
(a)
the claims of individual members of the class of persons concerned
involve different issues of fact or law; or
(b)
the relief sought by individual members of the class of persons
concerned may require individual determination; or
(c)
members of the class of persons concerned seek different forms of
relief.”
Given
the above stated requirements, it is not this court's duty to
substantively make a finding for any of the litigants regarding the
merits of the damages case as what the applicant seeks is leave to
institute a class action against the respondent. The furthest this
court can go is to consider whether given the facts of the matter,
the applicant has a prima facie case as it is one of the
considerations in such applications. The rest of the requirements are
in my opinion mostly factual, the information of which must come from
the applicant to enable the court to make a value judgment.
Whilst
it is from the facts that the basis of the class action arises, in my
view the applicant must then fill in the court with information that
will cater for the requirements stated in the section like the
potential size of claimants, level of education and financial
standing, the effect of the judgment on those bound by it especially
the extent of prejudice if any and any information which gives the
court foresight into the repercussions of granting leave.
Similar
sentiments were projected by Mtshiya J in the matter of Zimbabwe
Tobacco Association v Reserve Bank of Zimbabwe1.
Mr.
Madhuku for the applicant argued that the fact that the applicant had
a pending case was no bar to it instituting this application as the
Act provided that any person could make this application; Further, he
argued that the Act does not state that access has to be denied to
those that have instituted action; that in any case, the fact that
the Act even allows those outside the class to still apply for leave
buttresses the point. Since the Act was silent on that aspect the
court was at liberty to then give directions regarding what has to
happen to the pending case.
The
applicant made it clear in its affidavit that it had issued summons
out of abundance of caution to arrest the running of prescription and
could not be penalized for that in the absence of such provision. To
thus deny applicant leave on the basis of the pending action would in
essence be taking a narrow view which is not supportive of the whole
purpose meant to be served by the Act.
Whilst
Mr. Madhuku dwelt much on the issue of whether the fact that the
applicant already had a case before the court was a bar to these
proceedings, which in fact was a crucial point, the respondent in its
submissions did not adequately cover the issue so as to assist the
court in reaching a decision. The respondent's thrust was more on
the merits of the application itself, arguing that the applicant
wanted people who have never complained to be brought into the
action, and dwelt on the inadequacy of the application in so far as
it did not satisfy the requirements of section 3 of the Act.
Mr.
Mpofu's stance on this particular issue, as reflected in his
written submissions, was that the applicant could not be allowed to
proceed with the application in light of the pending action he had
instituted. For to allow it to do so would be to improperly sanction
a joinder of parties. He further submitted that this application was
not an application to condone proceedings which had already been
instituted, therefore the applicant should not be entertained.
It
is the court's view that this issue certainly has to be decided
first before getting into the merits of the application because a
finding on whether the pending case is a bar to these proceedings
would determine the fate of the application.
The
essence of a class action or the reasons behind this provision of the
law is pertinent in deciding this issue.
Clearly
the Act facilitates justice where any member of society feels there
is injustice, that is why the act provides that it does not matter
whether you are a member of that class or not. It gives room to “good
samaritans” to fight others' causes although they have to satisfy
the court at the first instance that indeed there is a cause and a
class which needs to be protected. Herbstein & Van Winsen the
authors of The Civil Practice in South Africa hailed Zimbabwe as
being progressive by having promulgated the Act.2
This is so because in South Africa class actions are limited to
matters concerning the infringement of constitutional rights whilst
there is no such limitation provided in this country's legislation,
which means consumer class actions can be instituted as in casu.
The
procedure to institute a class action is detailed and provides for
the manner in which it has to be done as is apparent from s 3 of the
Act. Is it therefore available to a party who has already instituted
proceedings for a similar cause as in casu?
The
applicant is already before the court and has challenged the
respondent's banking practice. To allow him to institute class
action would be to accede to a wish to join potential litigants to a
matter, who at the time are unknown and have not been identified with
specificity apart from being referred to as “respondent's clients
who received a loan amount much less than that stipulated in the loan
contract” and the “class of persons exists and is big.”
The
court is alive to Mr. Madhuku's argument that, as the legislature
is silent on this aspect the court can then decide on what has to be
done with the initially instituted claim. Taking such a position
cannot be correct because the applicant herein is the one that
instituted the earlier proceedings to protect its interests. It
should have occurred to the applicant that it is not the only one in
this predicament and not proceeded on its own. Alternatively,
withdrawal of proceedings may have been ideal if it then intended to
apply for class action. The applicant is the driver of that process.
The applicant has to decide what it is it wants. The applicant's
initial case is in limbo whilst it chases other persons' interests.
Indeed,
the law allows the good and concerned to institute class actions but
given the applicant's circumstances, it is not the court's view
that applicant can be allowed another bite at the cherry. It seems
the applicant by making this application wants to draw others to its
cause. This in other words would be an attempt at joinder proceedings
via the back door. The courts cannot be clogged by matters by the
same entity pertaining to the same respondent on a similar matter
where a decision can clarify an issue and put end to the legal point.
The applicant's case pertaining to breach of contract by the
respondent is still before the court. In my view the decision that
the court will make will be binding in similar cases where the facts
point to breach of contract arising out of failure to provide loan
amounts agreed to despite paying the requisite facility fees. Thus if
the applicant succeeds in its initial claim, those that the applicant
seeks to protect would derive legal benefit from the precedence set.
It
lies within the court's discretion to grant leave sought.
I
am not satisfied that the applicant's circumstances warrant the
granting of leave sought. It is due to the aforegoing reasons that
leave to institute class action is denied.
The
respondent had called for dismissal of the application with costs on
a client attorney scale.
I
am not convinced that the application is abuse of court process.
The
damning predicament which the applicant found itself in, arose out of
the need to protect its claim against prescription and at the same
time pursuing a cause which it firmly believed is grounded on the
law. The outcome may have been different had the applicant not found
itself in that predicament. A full ventilation of the application on
the merits would certainly have brought up very interesting legal
points beneficial to the legal profession, moreso given the drought
in precedence vis class actions. At present there are hardly any
considerable decisions in this jurisdiction which deal with class
actions. Suffice to note that whilst the case of Zimbabwe Tobacco
Association v Reserve Bank of Zimbabwe (cited supra) considered to
some extent the provisions of section 3 of the Act, the ultimate
decision rested on the fact that the applicants had taken the wrong
party to court. Incidentally in Petho v Minister of Home Affairs &
Anor3
where class action was in issue, the decision rested upon whether
applicant was a suitable representative of all the members of the
class of persons concerned. The applicant's pursuit cannot
therefore be said to have been vexatious, frivolous, or reckless so
as to warrant award of costs on a higher scale.
Accordingly
it is ordered that:
1.
The application be and is hereby dismissed.
2.
The applicant to pay respondent's costs.
Mundia
& Mudhara, applicant's legal practitioners
Gill,
Godlonton & Gerrans, respondent's legal practitioners
1.
HH77/13
2.
Volume 1 fifth edition p199
3.
2002 (2) ZLR 436 (S)
