Class action against Steinhoff dismissed
Steinhoff International got some respite on Friday as the Gauteng High Court (Johannesburg) dismissed a local class action suit brought against the global retailer after an accounting crisis in late 2017 caused its share price to collapse.
A BusinessLIVE report says the application – by a retired pensioner who had bought shares for R80 000 between 2013 and 2016 – is one of various mass action suits planned against the company.
In 2018, several SA businesses, representing clients that held about 20% of Steinhoff’s stock before the uncovering of the accounting irregularities, joined a class action by Dutch law firm BarentsKrans NV.
‘I am aware that this conclusion will disappoint the expectations of Steinhoff shareholders that the law must be able to compensate them for their losses,’ Judge David Unterhalter said.
‘This does not mean that the shareholders are without remedy. It is for the Steinhoff companies to hold the Steinhoff directors and Deloitte liable for any breach of duty.’
The action was thwarted by a 177-year-old ruling in an English case, which set a precedent in corporate law.
According to a Moneyweb report, a retired pensioner, Anthea de Bruyn, was hoping the court would grant her the authority to represent thousands of individual Steinhoff shareholders in a class action against the parties alleged to have contributed to the ‘accounting irregularities’.
De Bruyn’s lawyers, who are being financed by parties who will be paid a percentage of any funds recovered, opted to use section 218(2) and section 20(6) of the Companies Act.
The former section reads: ‘Any person who contravenes any provision of this Act is liable to any other person for any loss or damage suffered by that person as a result of that contravention.’
Section 20(6) also encourages the view that individual shareholders have claims against directors. It reads: ‘Each shareholder of a company has a claim for damages against any person who intentionally, fraudulently or due to gross negligence causes the company to do anything inconsistent with this Act.’
However, the court found that the ruling in the English case trumped her arguments.
‘That shareholders should seek redress, given the scale of their losses, is unsurprising,’ said Judge David Unterhalter. ‘That this is sought to be done by way of a class action entails some novelty. The premise of the application for certification is that many retail investors, who have suffered losses important to them, will not be able to bring their cases to court, if these claims are brought by each shareholder. Like Ms De Bruyn, their claims are too modest to justify the cost of complex litigation. A class action, however, would secure access to the courts and the prospect of redress for thousands of individual shareholders who lack the resources of institutional investors,’ said Unterhalter on page six of his 100-page ruling.
Ninety-three pages later, notes Moneyweb, the judge confirms De Bruyn does not have a ‘triable’ case.
The rule that dictated that De Bruyn’s case was not ‘triable’ was set all the way back in England in 1843 in the Foss v Harbottle matter. The essence of that ruling was that the shareholders suffered losses because the company was wronged by its directors, therefore it was only the company that was able to sue the directors.
Moneyweb quotes a lawyer as saying: ‘If politicians want shareholders to be able to hold directors to account they will have to change the law.’
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