Legislative reform is a key area of concern for corporates, and risk managers should be aware of the potential for legal change to fundamentally alter the risks that they face, as Max Ebrahim and David Wynn, of Clyde and Co, discuss.

Legal systems are subject to political, social, and economic pressures, and once a need for change is identified, the pace of that change – and the impact it can cause – can move very quickly.

South Africa is a case in point. Constitutional reform triggered the class action brought by gold miners suffering from silicosis, currently progressing through the South African legal system. The claimants are seeing what is estimated to be in the region of $3.25bn in damages, a potentially catastrophic figure for the gold mining sector. This is the first class action of this nature and the nature of its progress through the legal system, and the eventual outcome, will set a precedent for future class actions. Observers from across the Sub Saharan region and further afield are watching the progress of the case keenly.

On 13 May 2016, the High Court in Johannesburg certified a class action that paved the way for between 17,000 and 500,000 mineworkers and former mineworkers suffering from silicosis and tuberculosis to unite to claim compensation from their former employers. The decision certifying the class action set the stage for protracted proceedings covering cases dating back decades in the largest class action suits in South Africa. Six of the mining companies sought leave to appeal the certification judgment in the Supreme Court of Appeal. On 20 September 2016, the Judge President issued a directive granting the application for leave to appeal. That directive triggered the process requiring the mines to file the necessary records in support of the appeal, as prescribed in the Rules of Court. The appellant mines subsequently requested an extension to file their records in support of the appeal. Once all records are filed, the Supreme Court will determine the appeal of the certification judgment. A date has not yet been set but it is most likely to be heard by the end of 2017.

While the decision to certify the class action was expected, more surprisingly the majority decided that general damages for pain and suffering could be transferred to the mineworkers’ estate even after litis contestatio (close of pleadings). The mineworkers argued that the common law rule infringed a number of provisions in the South African Bill of Rights, including the right to equality, by “setting apart and discriminating against those who have succumbed to their illnesses pre-litis contestatio, from those who had been fortunate enough not to have succumbed to their illnesses pre-litis contestatio”, which is both unfair and irrational. The court considered other jurisdictions, including the UK, and ruled that a “huge injustice” would result if the common law was not appropriately developed.

If and when the class action is heard, it is destined to send more tremors through the industry and to further impact fundamentally on the development of South African jurisprudence. More than anything else, the case already demonstrates, through the cooperation between claimant bars and the influence of international jurisprudence, how legal systems and claimant cultures can be exported.

Compensation in the UK

In the UK, there has been a shift in attitudes to compensation during the past decade. Relaxation of the laws governing advertising has seen claimant law firms marketing their services. Cold-calling to detect accident victims and promotion of entitlement to compensation funds (eg those set aside by the banks to cover payment protection insurance misselling), have quickly seen the UK develop the most claimant-friendly environment in Europe.

The UK government was seeking to address the growing whiplash claims by changing the small claims process to take the smaller claims out of the legal system; however this reform has now been effectively shelved by the forthcoming general election.

Global issues such as the VW emissions scandal have the potential to trigger similar claims in different jurisdictions; and it is to be expected that in the future, evidence, expertise and often claimant lawyers, will be exported cross-border to address similar claims wherever they may arise.

Social media and technology also play a significant role; improved communications to remote areas and a global change in how information is shared are supportive of the spread and export of claims cultures. Technology and access to mobile phones in particular can facilitate widespread ‘claims farming’, as it becomes easier for claimant lawyers to access potential claimants.

Legal reform is moving across borders. The outcome of the silicosis case will have an impact far beyond South Africa, and globalisation and the pace of change should not be underestimated. Change is the new normal.

Published in Commercial Risk Africa 16th May 2017: http://www.commercialriskonline.com/change-new-normal/