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Gold mines settle workers' claims in class action - Moneyweb

Monday, 29 July 2019

High Court approves the settlement of billions as 'fair and reasonable' towards all parties.

The Gauteng division of the High Court this week approved a settlement in SA’s first class action in which a group of workers and former workers in gold mines sued for damages due to unsafe, dusty working conditions that caused severe cases of silicosis and tuberculosis. Four years of negotiations between lawyers for the mineworkers and those for the gold mines resulted in a settlement worth billions of rand. The exact amount is unknown.

The settlement agreement determines that gold mining companies’ liability for damages is unlimited.

The six gold mining companies that are party to the settlement agreed to furnish guarantees to the amount of R5 billion for the payment of benefits to mineworkers or the dependants of mineworkers who have died of silicosis or pulmonary tuberculosis.

Class actions are largely unknown in SA and when the possibility of a class action for mineworkers was first mentioned more than 10 years ago, it was met with resistance and scepticism. The Constitutional Court first had to consider whether a class action could be permitted in SA. The case started after such a ruling in 2011.

US class action procedures followed

The claim for damages followed the procedure of US class actions, in which a few cases are tried before a court and the outcome is used as precedent to determine damages applicable to every member of the class action. According to court documents, the case between the mineworkers and the gold mines and the subsequent negotiations to settle claims relied heavily in US procedures due to inadequacies in SA law pertaining to class actions.

The case was brought on behalf of 68 mineworkers and accepted by the court as a class action in May 2016. Negotiations to settle claims started quickly and by May 2018 the parties signed a settlement agreement which had to be approved by the High Court.

The court approved the settlement on Friday (July 26) and the court’s ratification stands as an official court order. The court ruled that the settlement is “fair, reasonable, adequate and that it protects the interests of the class”.

Compensate 'as many as possible, as quickly as possible'

The terms of the settlement are such that it seeks to extend financial benefits to as many affected workers as possible as quickly as possible.

As soon as the settlement was reached, in order to seek out retired mineworkers, the parties established a call centre in collaboration with the Compensation Commissioner for Occupational Diseases (CCOD). It provided a toll-free number and also replied to 'Please call me' messages.

The terms of the settlement were translated into 12 different languages and published in newspapers and broadcast by dozens of radio stations as far afield as Swaziland, Malawi and Mozambique.

The settlement calls for the establishment of a trust that will administer the settlement of claims. The responsibilities of the trust include finding affected mineworkers, assessing their claims and paying damages according to a scale of benefits.

The court ruled that "the aim of the settlement agreement is to provide compensation to beneficiaries in addition to – and, in most instances, in excess of – the compensation available under the Occupational Diseases in Mines and Works Act (Odimwa)". It is noteworthy that the mining industry also funds Odimwa payments.

Making good

The Tshiamiso Trust (meaning 'to make good') will be funded by cash and guarantees to the tune of R5 billion by the gold mining companies that are party to the settlement.

They are African Rainbow Minerals, Anglo American, AngloGold Ashanti, Gold Fields, Harmony and Sibanye. (Some other gold mining companies withdrew from the proceedings and did not agree to the settlement.)

The gold mining companies will also pay the trust's operating costs, as well as all the parties' legal costs over the last 10 years to ensure that the benefits agreed to in the settlement reach the beneficiaries.

The Tshiamiso Trust will work closely with the compensation scheme governed by the Odimwa and facilitated by the Medical Bureau for Occupational Diseases (MBOD). Any similar claim registered with the latter will be referred to the trust to be assessed as well.

Benefits are paid according to the severity of the injury to a worker’s lung function.

Class One silicosis is defined as sufferers with 'mild' impairment of less than 10% of lung function. These workers will receive a R70 000 benefit from the trust. Odimwa does not compensate for silicosis of this nature.

Those suffering from Class Two silicosis, defined as a lung capacity impairment of between 10% and 40%, will receive R150 000 from the trust in addition to the R63 100 they are entitled to under Odimwa.

Benefits payable in terms of the class action settlement

  Lung impairment Odimwa payment Trust settlement Total 
Silicosis Class 1 Less than 10% R0 R70 000 R70 000
Silicosis Class 2 10-40% R63 100 R150 000 R213 100
Silicosis Class 3 More than 40% R140 506 R250 000 R390 506
Tuberculosis 1st degree   R63 100 R50 000 R113 100
Tuberculosis 2nd degree   R140 506 R100 000 R240 506

The parties to the settlement agreed that the trust will pay all claims in a once-off lump sum. The reasoning was that regular payments over longer periods will add to administrative costs, which might impact on benefits. A lot of the claimants are also elderly and some have already passed on.

Responsible compensation

The trustees are required to offer a financial literacy programme to help claimants manage their money responsibly. The trust must also take steps to prevent fraud.

In terms of the settlement, the gold mining companies will immediately pay R5 million to establish the trust and will provide further payments of up to R845 million towards administrative costs over the next 12 years.

The trust will operate for 12 years – firstly to ensure that it has enough time to trace all the affected mineworkers, and secondly to ensure a long enough incubation period in cases where mineworkers were exposed to silica dust but are still healthy.

Dr Deborah Budlender, an independent policy researcher employed by the plaintiffs for the mineworkers, explained to court that the 12-year period takes into account the latency period for the possible contracting of silicosis.

Collectively, the mining companies will make an initial contribution of R1.4 billion to fund payment to beneficiaries during the first two years, and will also fund any shortfall in that period. Thereafter, the trustees will determine contributions payable by the mining companies on an annual basis.

Court documents show that the gold mining companies that decided to settle quickly have already started a process to settle claims.

The documents note that these companies have already assisted the MBOD and CCOD in improving their operations. They have contributed more than R121 million to date to open rural offices, employ more staff and buy more equipment.

Formula used to calculate damages

The High Court has hailed the agreement as a breakthrough. It found that the procedure used to calculate damages – a formula taking into account the number of years worked and the level of damage – to be fair.

The court agreed with the parties' submissions that "the alternative approach, apportioning liability on the basis of the actual dust levels or scientifically estimating dust levels, would have been highly complex, extremely costly and very cumbersome".

All the participants noted that the case was extremely difficult. For instance, workers were placed at different mines for different periods. In the case of the tuberculosis action, there are also other environmental factors that can cause lung damage.

To determine damages on the basis of loss of income would have been unfair to claimants, as some earn as little as R1 000 per month, if employed at all.

Damages based on loss of income would have been a pittance.

The agreement covers and binds all mineworkers since 1965. However, workers who are not satisfied with the awards for damages can opt out of the agreement. Some affected mineworkers might elect to pursue their own individual legal claims for damage.

Class action without tarnish

There was a lot of scepticism when the case was first mooted in 2009, the biggest argument being that it was nothing more than a way for US lawyers to make money from rich gold mines and gullible workers. The settlement agreement proves otherwise.

The court took a hard look at the fees negotiated between the gold mines and the different lawyers. It noted that these were fair, even on the low side.

Richard Spoor Incorporated and Motley Rice were paid R191.7 million in legal fees, which the high court judges found to be reasonable given the amount of legal work done over the last 10 years. In fact, the court found that the fee was R69 million lower than what attorneys would normally charge.

Abrahams Kiewitz Inc and its US counterpart Hausfeld earned R163.3 million. The Legal Resources Centre, as a public interest law clinic that does not charge its clients fees or seek to generate profit from legal proceedings, tallied up a bill of just more than R12 million and the mines offered to pay R15 million.

Just above High Court Judge L Windell’s signature on the court order, the judges conclude that the negotiations yielded the best possible settlement terms that the parties and stakeholders could find in the circumstances.

The only criticism was that a few gold mining companies decided to withdraw from the proceedings and refused to agree to the settlement, most notably DRD Gold. High Court Judge J Vally penned a summary of the case, in which he admonishes DRD Gold and the other smaller companies for their reasons for spurning the settlement.

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