Occupational diseases: now for the class action. Where to next?

It was recently announced that employees and former employees, who allege to have contracted silicosis, have launched an application to court to bring a class action against mines …

In addition to the employees, activist groups are applying to join the application. So, institutions and organisations that suffered no harm, also want to sue. Many of these employees may be HIV positive, and may also have tuberculosis (TB).

TB is a well-known contagious disease. It is not, however, an occupational disease. In South Africa TB is widespread. When it was first identified in the 14th century, it was called consumption as it “consumed” the body, which then wasted away. The more technical name, tuberculosis, came later in 1860.

Being highly contagious, TB is prevalent in areas where people live close together, such as poorer areas in cities. It recently featured in the film Moulin Rouge starring Nicole Kidman, and was represented by Greta Garbo in the 1936 movie Camille.

The disease inspired Verdi’s La Traviata and Puccini’s La Boheme. It also featured in Thomas Mann’s 1924 novel Magic Mountain. For a long time there was no cure, and people who contracted TB were admitted to a sanatorium to be nursed. As such, it features in Chekov’s first play Ivanov.

Tragically, it ended the lives of many artists including Chekov, Chopin, Kafka, Keats and Orwell.

People who have HIV/Aids (which attacks the immune system) are more susceptible to TB. It is not surprising that many persons, who are HIV positive, are suffering from TB, and are also trying to recover from silicosis.

Class actions are a new feature to the South African legal landscape. It is, thus, worth looking at part of this multifaceted matter in greater detail. It is not the first class action in South Africa, nor is it the first within the occupational disease space.

It will be recalled that Gencor was sued to compensate people suffering from asbestosis and reached an out-of-court settlement by setting up two trusts. That settlement was reached so that Gencor could continue with its unbundling programme, however, and not on the merits of the matter.

More instructive class actions were the ones brought against the American tobacco companies in 1998; the details of which were usefully set out by Professor W Kip Viscusi in his 2002 book Smoke-filled Rooms – a post-mortem of the tobacco deal.

One would think that if tobacco companies were to be sued, it would be by those who are ill as a result of smoking, but, as we now see in South Africa, those who are not ill (or the non-injured) also sue.

In the Unites States, the tobacco companies were sued by various states. The tobacco companies decided to settle out of court (as is usually the case in these matters) for US$ 243 billion (about R3,3 trillion).

This demonstrated that the judiciary was totally unnecessary to the process, other than to extort a settlement that could have been achieved by other means. The money went to the states and a large portion went to the lawyers. The smokers, themselves, received nothing.

The money was not paid by the tobacco companies, however. Rather, the costs of these payments are being borne by individuals, such as shareholders and consumers. It is usually argued that smoking causes diseases such as cancer and early death.

People who die from smoking today would have smoked and contracted cancer many years ago. Shareholders have changed over that time. Today’s shareholders were not shareholders during the years when the bulk of the smoking took place.

Those shareholders received the benefits of profits, while today’s shareholders are bearing the cost of the illnesses. Nowadays, shares are largely held by institutions and pension funds, so, the cost is, in fact, being borne by the pensioners of tomorrow.

The other individuals bearing the cost are current smokers. The settlement has done nothing for them. The payments were to be made over a period of time. These future costs are passed on to future smokers in the form of an additional sales tax.

Governments have the power to impose so called “sin” taxes. The cost of the settlement then simply becomes a second sales tax. A court case was not needed to achieve this. The tax could have been increased through the usual government process.

Since the logic of the states suing the tobacco companies was to recover the medical costs incurred, one would think special five-star hospitals should be built for smokers who get ill, since they are, in fact, paying for the treatment. Smokers, however, get nothing for their money. The additional tax also does not appear to deter new people taking up the habit.

As indicated, the states did not suffer the injury; smokers did. The states argued that illnesses suffered by the smokers caused medical costs to increase. The states’ medical costs are, however, paid for out of taxes and there is no basis in law to recover these costs from others.

States cannot levy taxes and then sue taxpayers for the expenses already paid for by those same taxpayers! If that logic is used, then medical costs for motor accidents should be recovered from motor manufacturers; medical costs for domestic violence should be recovered from alcohol manufacturers; medical costs for obesity from fast food manufacturers – and so on.

The tobacco class action case demonstrated a much more important lesson – government departments and institutions could extract and extort billions directly from the private sector without going through the political process, or by involving the judiciary.

They have discovered a way to impose “taxes” directly, outside of parliament and the judiciary. Although, on the face of it, the process is a judicial matter, in the end it was resolved by settlement. The judiciary need not be involved. It is only if the extortion of a settlement from the private sector failed that the judiciary would need to be involved.

The realisation that billions can be extorted out of the private sector, in this way, has spread like wildfire.

A whole host of government agencies have sprung up, all claiming the right to impose arbitrary “fines” outside of the control of the judiciary.

In recent years, the banks alone have paid over US$ 230 billion (about R3,1 trillion) in “fines”. That is more than the gross domestic product of several countries. The world moved rapidly from class action to establishing arbitrary cash-garnering institutions.

Litigation for occupational diseases is totally unnecessary. Legislation should rather be amended to deal with this matter.

Legally Speaking is a regular column by Albert Mushai from the school of Economics and Business Sciences, University of the Witwatersrand. Mushai holds a master’s degree from the City University, London, and was the head of the insurance department at the National University of Science and Technology in Zimbabwe before joining the University of the Witwatersrand as a lecturer in insurance.