Tough road ahead for R699 scheme clients
Challenges abound for the R699 car scheme clients who are battling to start a class action suit against the Satinsky group, owned by Albert Venter, and the banks that loaned them money to buy new cars that many now can’t afford, says Angelique Ruzicka.
Port Elizabeth based attorney Duncan Heuer of PCF Attorneys is bringing an application to the courts to have the R699 vehicle owners certified as a class so that the group can bring a class action against Satinsky group and three of South Africa’s major banks (Standard Bank, Absa and Nedbank’s Motor Finance Corporation) that lent them money to buy new cars. The R699 hearing has been postponed to 7 August.
Class action suits have been known to be long, drawn out and costly. Moneybags interviews seasoned litigation lawyer Sue Hayes a director of Edward Nathan Sonnenbergs to find out what challenges the R699 group may face, what is involved in a class action process and asks whether a class action is the right course of action. WesBank also offers its views on what qualifies as reckless lending.
Drawing from experience
Class actions are fairly new to South Africa. However there have been a couple of major constitutional class action suits which the lawyer representing the R699 car scheme group can draw from. These include the bread case where Western Cape bread distributors instituted a class action against Pioneer Foods Group, Tiger Brands and Premier Foods, as well as the class action where gold miners suffering from silicosis are taking on the major mining houses.
Currently lawyers representing Transnet pensioners are also fighting for the right to instigate a class action against the national government. While there are cases to draw from, the challenges don’t end here.
Declaring the R699 clients a class
First Heuer must show that the R699 group can be declared a class and that they have a common claim. Hayes believes that declaring the R699 clients as an easily identified class of people can be easily done: “Unlike the bread consumers, which was a difficult case to test on, you need to have an identifiable class. You also need have a basis for a cause of action whether that’s in contract or delict. There must be commonality; that is: deciding in relation to one decides in relation to all.”
In addition, Heuer has to prove that damages he is claiming for are ascertainable. “He’ll need to show that there is an appropriate procedure to allocating any damages that may be awarded. In the R699 case, it would be appropriate as most would have suffered similar damages. You have to show that the representatives of the class are suitable and that this is the most appropriate means of determining liability against the defendant in favour of the class,” says Hayes.
Financing the suit
But there’s another major stumbling block: money. Class action suits can take a while to resolve and the costs often run into millions. Most of the people being represented by Heuer are already in financial difficulty as a result of the collapse of an alleged deal made with promotional company Blue Lakes Trading and Promotions, which was paying them for sporting advertising on their new cars.
At times, if clients are unable to pay, lawyers can take them on a contingency basis. This generally means that the firm takes on the risk and the costs. “If he is successful and there is an award of damages he is then entitled to take his fees and disbursements whatever they may be. As a rule of thumb [lawyers] can in most cases charge for the amount of time that they have allocated up to a maximum of 20% of the award,” explains Hayes.
However, according to reports, Heuer is looking to recoup the costs from the respondents, i.e. the banks and Satinsky through a cost order if he wins. “At no point will we recover the costs from consumers. We are only there to assist people with having their contracts declared void,” he told Moneyweb.
Experience could be key
Does Heuer’s firm have the financial muscle to take on the banks, their law firms and Satinsky in a class suit, a domain which up until now has been the battle ground of law firm giants and major corporations?
“They [R699 clients] should be getting some kind of indication of his ability to fund the litigation simply because what they don’t want is for the whole thing to start and in a years’ time – bearing in mind how long class action litigations can take – this guy doesn’t have the resources to carry on with it. That’s a risk,” says Hayes.
Heuer is up against some stiff competition: according to a report by Moneyweb Cliffe Dekker Hofmeyer is representing Nedbank while Norton Rose Fulbright says it is ‘very involved’ but has declined to verify which institutions it is representing.
Absa has already heavily defended its position. According to the Herald, the bank has filed papers at the Port Elizabeth High Court this week saying that ‘the proposed class action is based on nothing but malicious gossip’. The Herald’s report added that the court papers hint that the consumers can probably not expect much mercy from the bank, as its preliminary investigations do not support allegations that credit was granted recklessly.
And do Heuer and his firm have the experience? “The one downside of the newness of class actions is that, other than the big firms that have been involved in the big class action law suits here, there is very little experience. But a law suit is not rocket science,” points out Hayes.
A question of time
If the court decides not to award urgency to the case, the R699 scheme members will likely have a long and hard fight ahead of them. “Just to give you an idea the bread case started in 2011 and it went through the Cape High Court, it went on appeal to the Cape High Court, then on appeal to the Supreme Court of Appeal and from there to Constitutional Court. We are now in 2014 and the class is still not certified.
“Similarly, the class action on the silicosis claim started 18 months ago. We aren’t yet close of signing papers because it’s a monster that goes 65 years back to the 1940s and is a case where all the gold miners are against all the mining houses so it just proliferates the disputes.”
Proving reckless lending
Proving that the banks lent money recklessly to the R699 clients will be another challenge. But Rudolf Mahoney head of research at WesBank says that in theory banks could be charged for reckless lending if they contravened any of the following steps: “They must have used all available sources of information at their disposal to verify information such as the application form, credit bureau information, payslips or bank statements. Banks have the responsibility of ensuring that they do not put a person in a position where they were over indebted and they must verify all the information given.”
Hayes says that if reckless lending is proved the R699 clients could argue that the vehicle finance agreement should not be enforced in part or in whole. “But it’s not a ‘get out of jail free card’ because the courts will look at all the circumstances and it’s in the court’s discretion whether to give an order enforcing [the contract] or not. It would certainly give the group great grounds with which to negotiate with the banks. Trust, me none of the banks want reckless credit findings.”
Clients of the R699 scheme have been advised to obtain their initial contract with the bank to verify the information that was sent and to find any evidence of reckless lending. Some of the ‘I have been done in by ‘Drive a New Car From R699 per month’ Facebook group members claim that bank consultants have refused to send the contracts or claim that the contracts have been lost.
But Mahoney says that clients have the right to obtain copies of the original vehicle finance agreements from the banks. The first copy should be free but banks do have the right to charge for further copies. “Banks have to keep the forms for the duration of the loan agreement and for five years after the loan has been settled,” he adds.
A number of clients say that the banks have offered to restructure their vehicle finance loans. Some worry whether they should take up the offer as they have concerns over it affecting their class action claim.
Hayes says her inclination would be to restructure on a practical level. “The law is all very well but then you would have to go through the courts and you end up with a bad credit rating, banks issue summons where you’d have to defend it. It becomes a nightmare.”
Will Venter pay?
The final challenge for the group will be to get payment from Venter if he is found guilty. Hayes says that class actions or the threat of one can sometimes scare a major corporate into awarding an early settlement.
“If you are dealing with a company with deep pockets that doesn’t need this contingent liability on its books and would just like get rid of it they could get a quick settlement. But here I have a concern that the defendant will not be able to pay out even if they are successful. Now this is simply said on what I have read in the public domain. I haven’t looked into the finances of the [Satinsky] companies – it’s just the ‘smell’ of the thing,” she says.
Hayes also points out that the class action in itself won’t bring about any jail time for Venter if he is found guilty. “[This is] because it’s a money judgement. The only time you can get jail time is on a criminal charge of fraud for instance if there is a conviction or a contempt of court charge. You are never in contempt of court for failure to honour a money judgement. The only way you then get [the funds] is through liquidation, tracing assets and through remedies in terms of the companies act holding him personally liable, but this is a long game. They are between the devil and the deep blue sea.”
*Moneybags has contacted Duncan Heuer of PCF Attorneys by phone and by email but has to date not yet received comment.
*If you are unable to get your vehicle finance contracts from the bank or if you have any questions– email the editor at email@example.com.