Class-action lawsuits remain a relatively new legal mechanism in SA. Yet every so often cases are announced where it is unclear whether real harm has occurred or whether any genuine complainants have even come forward.
These types of announcements raise a fundamental question: who is really behind them? Consumers who believe they’ve suffered harm or lawyers and their financiers seeking investment returns?
In some cases the harm is clear. SA victims of the world’s largest recorded listeriosis outbreak in 2017/18, caused by contaminated polony, experienced severe suffering and in some cases death. Families and survivors are part of a class-action lawsuit seeking compensation, with a confidential settlement having been proposed to some claimants in April.
But not all cases present such a clear picture. Take the class action announced in March by a local lawyer involving Depo-Provera, a widely used injectable contraceptive. The drug has recently been linked to a slightly increased risk of developing (usually) noncancerous tumours called meningiomas.
However, SA drug regulator the SA Health Products Regulatory Authority (Sahpra) has confirmed that there are no known cases in the country. Globally, just 32 cases linked to Depo were reported between 2004 and 2024 — fewer than two a year. Sahpra maintains that the absolute risk of being afflicted with such a tumour is thus extremely low.
Despite this, and even though the health regulator is not aware of a single local patient with a tumour linked to the injection in SA, a class action has been announced.
Depo-Provera is used by millions of women to prevent pregnancies, which themselves carry medical and socioeconomic risks. This raises the question: is the legal action truly in the public interest or is it being driven by other motives? Are lawyers now searching for claimants or are actual victims coming forward? And, with only a handful of cases reported globally over two decades, how successful could this litigation really be?
It highlights a broader issue — whether class actions are being driven by those who have suffered harm or by an emerging legal industry and its financial backers that depend on new cases to sustain their business models.
A major driver of class-action lawsuits globally is third-party litigation funding. Hedge funds, investment firms and even pension funds can bankroll lawsuits in exchange for a cut of any eventual payout. While such funding can help level the legal playing field — especially for plaintiffs who cannot afford to litigate — it carries real risks. Among these are reduced compensation for victims and a financial incentive to prolong litigation in pursuit of larger settlements rather than seek quicker, mediated resolutions or use arbitration instead of the courts.
Funders are naturally incentivised to prioritise high-value cases. In extreme scenarios this can encourage speculative or even frivolous claims. One case that illustrates the potential for drawn-out litigation is the 16-year legal battle involving Vodacom and a third-party backer, in which former employee Nkosana Makate alleged he had invented the “Please call me” service, which was launched after a rival had launched a similar service. Despite years in court and a generous settlement offer to Makate of R47m, the matter remains unresolved.
In the US, where litigation finance has grown rapidly since 2010, the state of Florida now requires funders to disclose their identities and origins. The move was prompted by concerns that commercial backers could exploit the system — gaining access to sensitive intellectual property information or fund lawsuits to weaken competitors. Foreign funders are barred entirely on national security grounds.
Balance is required. If litigation funding is gaining traction in SA, is there a case for regulation?
Florida is not alone. Thirty-four US states are tabling bills that deal with funding litigation, in many cases requiring the disclosure of funders. In April, Kansas passed a law forcing the disclosure of funders from foreign countries labelled “countries of concern”, including China, Iran and Russia.
While litigation funding can offer vital access to justice, it also carries the potential to distort the legal process. There is no doubt that some cases deserve to be heard. Victims of the listeriosis outbreak, many of whom live with long-term medical needs, have already received partial compensation for medical care, even as their case remains before the courts. Legal teams have played a crucial role in securing justice for these families.
But balance is required. If litigation funding is gaining traction in SA, is there a case for regulation? Should funders be required to disclose their involvement and fees? Should class actions proceed only where a clear group of harmed consumers has already been identified — rather than being initiated by lawyers in search of a case?
In Australia, where the rise of litigation funding coincided with increased class actions from about 2013, regulations have been introduced requiring funders to hold an Australian financial services licence and comply with requirements for managed investment schemes, adding a layer of transparency and financial fairness to the process.
Canada adopts a similar approach, with courts overseeing funding agreements to ensure they do not undermine the claimant’s control over the case or compromise the lawyer-client relationship.
In Ireland, litigation funding remains prohibited if the funder has no legal interest in the case. However, there’s growing momentum globally to reconsider such third-party financing bans as part of efforts to improve access to justice for those who truly need it.
In SA, where the legal financing industry threatens to mushroom, policymakers and legal experts may soon be forced to confront a need for regulation to ensure genuinely harmed consumers are not taken advantage of by financiers’ fees and cases do not drag on for years longer than necessary.
• Kudo, an attorney who has advised corporate clients including financial institutions, mining companies, property groups, retailers, the scrap metal industry and wine and golf estates over a 20-year career, is a regular guest lecturer at the University of Cape Town’s department of private law.
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