Limitation of Legal Proceedings Against Govt Institutions; Cross Border Insolvency Bills: discussion

Meeting report

JUSTICE PORTFOLIO COMMITTEE
28 August 2000
LIMITATION OF LEGAL PROCEEDINGS AGAINST GOVERNMENT INSTITUTIONS BILL; CROSS BORDER INSOLVENCY BILL: DISCUSSION

Relevant documents
Working Draft: Proposed Amendments to Limitation of Legal Proceedings against Government Institutions Bill [B65 - 99]
Working Draft: Proposed Amendment to Cross Border Insolvency Bill [B4-2000]
Limitation of Legal Proceedings against Government Institutions Bill [B65 - 99]
Cross Border Insolvency Bill [B4 - 20]
Women's Legal Centre submission (see Appendix 1)

SUMMARY
Cross-border Insolvency Bill
Amendments were made to Clauses 2 (Scope of Application) and 3 (International obligations of Republic).

Limitation of Legal Proceedings against Government Institutions Bill
The definitions in the Bill were considered. The committee looked at the various options prepared as instructed for the definition of ''organ of state'' (which is a possible alternative for ''government institution'' as used in the definition of "creditor" in Clause 1 of the Bill). The various definitions of ''organ of state'' were looked at. The definition which they finally choose will depend on how broadly or narrowly they want the Act to apply.

The Committee also considered the options for definitions of ''debt'' (as it is used in an optional definition of ''creditor'') and "executing authority".

MINUTES
Cross-border Insolvency Bill
Two amendments were effected to the Bill by the Committee:

Clause 2 Scope of Application
The committee agreed to amend Clause 2 so that a foreign State will be a State which is so designated by the Minister. In terms of the amendment the Minister must be satisfied that the State has a similar model law. It does not have to be an exact model law, only a similar one. Parliament must then approve the Minister's decision.

Thus the decision as to which countries would be listed would be an executive decision which will then need to be politically justified when the decision comes through Parliament. This means that there is a test, it is not a blank cheque for the Minister.

Clause 3 International obligations of Republic
The way that clause 3 is currently worded, it means that an agreement with another country which is contrary to this Act, has the effect that the agreement will amend this Act.

The committee decided that the best way for them to deal with this was to reject Clause 3.

Limitations of Legal Proceedings against Government Institutions Bill
The Chairperson referred to the point that the Women's Legal Centre had made about minors in their submission. He said that he had looked at Section 13(1)(a)(i) of the Prescription Act which is the only section dealing with minors and it does not say what the Women's Legal Centre submission seems to think that it says. He asked if there is any Act that says that prescription for a minor only starts running when the minor turns 21.

Mr Cronje (SA Law Commission) said that when the minor becomes a major [and the prescription period is about to expire] the minor ''gets one year'' after the prescription falls away. The Chairperson replied that the courts interpret it thus but it is not drafted like that.

Adv Smit (DP) said that prescription runs against a minor insofar as he has legal guardianship.

The Chairperson said that they should find out the legal position around the situation of minors in this Act and all other Acts as the Women's Legal Centre submission is based on the fact that prescription runs from the age of 21. Mr Cronje said that he will check on this.

Clause 1 Definitions (using Working draft with proposed amendments)
(i) "creditor"
The definition in the Bill reads:
''creditor'' means a person who intends to institute legal proceedings against a government institution for recovery of a debt arising from delict or who has instituted such proceedings, and includes such person's tutor or curator if such person is a minor or mentally ill or under curatorship, as the case may be;''

- The committee examined various definitions of organ of state to choose one as an alternative to government institution.
- The committee then had to define the word debt (as it is used in recovery of a debt).

The definition of ''government institution'' and ''organ of state'' in clause 1
The Committee looked at using 'organ of state'' as a possible alternative to ''government institution'' in clause 1. The terminology that they use will determine how broadly or how narrowly the Act will apply.

Definition of ''government institution''
(iii) ''government institution'' means -
(a) a municipality contemplated in section 151 of the Constitution;
(b) a traditional authority contemplated in section 211(2) of the Constitution;
(c) the South African Roads Board established by section 2 of the South African Road Board Act, 1988 (Act no. 74 of 1988);
(d) the South African National Parks referred to in section 5(1) of the National Parks Act, 1976 (Act no. 57 of 1976);
(e) the Office of the Auditor-General established by section 3 of the Audit Arrangements Act, 1992 (Act no. 122 of 1992);
(f) any department contemplated in Schedule 1 to the Public Service Act, 1994 (Proclamation No. 103 of 1994), and any organisational component contemplated in Schedule 2 to that Act;
(g) any functionary who may be cited as the nominal defendant in any legal proceedings against a body or institution contemplated in paragraphs (a) to (f);
(h) any person for whose actions a body or institution contemplated in paragraphs (a) to (f) is liable in respect of a debt arising from delict.

The Chairperson said that this is an incredibly wide definition.

Definition for ''organ of state''
The Committee looked at the options for defining an ''organ of state'' as provided in the Working Document (LIM 19) to give them an idea of which institutions this definition covers.

Option 1A - The Chairperson said that this was also a very wide definition. It is based on Section 229 of the Constitution. The basis of the definition is that structures which perform a power or a discretion are all included. It refers to government departments on all levels. The Chairperson said that he was worried that the definition was too wide for the application of the Act.

Option 1C - this has only one difference to Option 1A: clause (b) (ii) ''exercising a public power or performing a public function in terms of any legislation'' is left out of the definition. All the three levels of government and their three functionaries are still included. Thus the definition is still very broad.

Option 1D includes the three levels of government as well as anything in terms of legislation. This makes it wider than the previous definition. It does however exclude the nominal defendant.

Option 1E is similar to the definition of "organ of state" in the Open Democracy Bill. It narrowly defines to some extent the power and function.

Option 1F is the schedule option. If they opt for this definition then they will have to draft a schedule.

The Chairperson said that ''organ of state'' is probably the correct term to use. It refers to the Constitution, the Commissioners, the Premiers, Parliament and so on. Therefore it is a better term than ''government institution''.

However there are many different definitions for organ of state. All the options listed by the Department leave the definition very broad. The question they had to ask themselves was how broadly they wanted the Act to apply. How far did they want to extend it? Government departments have been slightly extended. He asked if they wanted to go further than that. Thus, the definition of ''organ of state'' was a big issue.

Option 1C gave them some scope to work with. They decided to put option 1C first on the list of choices without committing themselves to anything yet. This option widens departments and functionaries. At the same time they cannot leave option E out because it is important for the parameters of the Act. The other options are wider.

Schedule 5 in the Working Draft lists the Acts which will be affected by this Act. The notice period will now be applicable to them.

The Chairperson said that the prescription period will now run for three years on almost all of the Acts. However they will create a six month notice period and provision will be made for the courts to extend this notice period if good cause is shown.

In doing this they will extend the rights of people who have a claim but they will also create a certain amount of certainty for institutions (as they will know which cases will be brought against the State).

The Chairperson said that if they choose Option 1C then occupational health will not be included because it does not fall within the ambit of ''organ of state''. The effect of this will be that workmen's compensation will not be covered by the notice period. The Chairperson said that he was worried about this.

Mr Cronje noted that the South African Roads Board, the South African National Parks, and the South African Maritime Safety Authority would also not be included in the definition of organ of state if the committee chose Option 1C. [These bodies are found added to (aa), (bb), and (dd) of option 1B of the definition of an ''organ of state'']

Ms Chohan-Kota (ANC) said that if they use Option 1C then they could have a mechanism whereby the Minister must publish amendments to the list of institutions. Unless the list is published then those bodies are not in.

The Chairperson said that this was a possibility.

Mr Jeffreys (DP) however said that they should avoid a schedule as far as possible. He suggested that they rather adopt a C type option with exclusions. With everything that goes into a schedule they may end up making mistakes.

The Chairperson asked why they should consider adding the South African Roads Board, the South African National Parks, and the South African Maritime Safety Authority.

Mr Cronje said that they were in the previous Act therefore they were included in the Commissioner's recommendation.

The Chairperson said that they should check to see to what extent they must include (aa), (bb), and (dd).

Mr Jeffreys said that if they go beyond Option 1C then they will need proper motivation.

The definition of debt in clause 1
Previously there was a definition of debtor in clause 1. However there is no longer any reference to a ''debtor'' in this clause. The definition of creditor now refers to a ''recovery of a debt'' instead of referring to a debtor. Thus the word ''debt'' in the definition of ''creditor'' has to be defined.

The options for this definition in the Working Draft refer to a debt from any delict. It also covers strict liability (thus the instance of no fault is covered). The Chairperson commented that this clause was broad enough. However he was not sure whether including ''liability without fault'' which had been added would be problematic or not. He asked if there was not perhaps a safer way of doing this. He said that they should make technically sure because by saying ''including'' one is including it [without fault] under the concept of delict.

Dr Delport (DP) then presented a reformulated version which the Committee agreed to incorporate as a further option. The drafter, Mr Labuschagne of the Department, was asked to include this reformulation as an option.

The definition of "executing authority" in clause 1
It was agreed that (f) of the Option is incorrect as a minister is not the executing authority of Parliament nor is the Premier the executing authority of the provincial legislature. The Chairperson said he is worried that in the definition, legislatures are still not covered by the provisions. He said the Department would have to look into that because as an institution created in terms of the Constitution the legislatures and possibly even commissions would not fall into the ambit of the Bill. Mr Labuschagne was asked to investigate who is the executing authorities of the legislatures and then include this into the Option.

The Chairperson asked the Department if they do not have to define "municipality" to which the Department responded that they do not think that is necessary.

The Chairperson questioned the use of "person" because when read in context, the provision can only mean a person in the employ acting in the course and scope of his or her duties. He said "officer" seems to be the better word because it covers one even if they are part time. He did not think sub-contractors should be covered by the provisions of the Bill by requiring that a notice be given to them before they are sued because that would be extending the width of the Bill too far.

The Chairperson said the most important discussion they had today relates to the definition of "creditor" and the rest of the provisions discussed are specific mechanisms to be looked at.

He announced that Mr Moodley from the Master of the High Court in Grahamstown and Mr de Lange of the Department would brief the Committee on 29 August 2000 on the Administration of Estates Amendment Bill and Directorate of Special Operations Bill respectively. The Committee would also continue considering the Limitation of Legal Proceedings against Government Institutions Bill. The meeting was adjourned.

Appendix 1:
LIMITATION OF LEGAL PROCEEDINGS AGAINST GOVERNMENT INSTITUTIONS BILL

Deborah Quenet
Attorney - Violence Against Women's Project
Women's Legal Centre

INTRODUCTION
The Women's Legal Centre congratulates Government for the introduction of the Limitation of Legal Proceedings Against Government Institutions Bill ("Limitation Bill"), which seeks to limit the distinction between claims prescribing when instituting actions against government institutions versus that of claims being instituted against debtors as defined in the Prescription Act 18 of 1943.

SECTION 1 OF THE LIMITATION BILL
The Prescription Act differs from the Limitation Bill in one major respect. The prescriptive period for instituting an action where the creditor is a "person under disability" does not run until such time as the disability ceases. Persons deemed to be under disability include inter alia minors. Accordingly, in terms of the Prescription Act a minor will only be required to institute an action within three years of the minor becoming a major, which is when the disability of being a minor has ceased to exist. Similarly, the Road Accident Fund Act 56 of 1996 does not limit a minors' right to institute an action until such time as the minor becomes a major.

These two Acts therefore protect the rights of minors by ensuring that minors rights to claim damages are not extinguished through the inaction of a minor's parent or guardian.

However, the Limitation Bill does not protect the rights of minors. In terms of Section 1 thereof, if a parent / guardian does not act in the best interests of the minor by instituting a claim against a governmental institution timeously, the right of the minor to institute such an action when s/he becomes a major will be extinguished. This is contrary to our common law and statute law where the rights of minors are protected until such time as they become majors.

Accordingly in terms Section 1 of the Limitation Bill where the claimant is a minor, the tutor or curator is obliged to institute an action on behalf of the minor within two years of the action arising. In the event of a tutor or curator not being appointed or failing to proceed with instituting such proceedings timeously the minors claim will prescribe. It is quite clear that the inclusion of a tutor or curator acting on behalf of minors in this section limits the rights of minors.

SECTION 2(2)(b) OF THE LIMITATION BILL:
Section 2(2)(b) limits the time period in which to give notice of the intention to proceed with a claim to that of six months but does not include specifically the time period in which to institute legal proceedings subsequent to such notification. We submit that this section will need to be amended in order to clearly state whether the time period for instituting such an action is two and a half years or three years subsequent to the notice period.

SECTION 2(3)(b) OF THE LIMITATION BILL:
Section 2(3)(b) of the Limitation Bill states that any claim that has arisen prior to the commencement of the Bill will be deemed to have commenced from the time that the Bill is enacted. Although this section enables minors to institute such a claim within three years of the Bill being enacted, the time period to institute such an action is limited. Even in the event of this section enabling a minor to institute such a claim which may have prescribed but for the Bill, we submit that a minor should only be required to institute such a claim within three years of the minor becoming a major.

SECTION 5 OF THE LIMITATION BILL
Section 5 states that where there is a conflict between Section 2 of the Limitation Bill with any other Act, the Limitation Bill will take precedence. This automatically limits the possible interpretation that Section 1 of the Limitation Bill does not limit a minors claim and that such a claim should only arise once the minor becomes a major read in accordance with the Prescription Act.

CONSTITUTION OF REPUBLIC OF SOUTH AFRICA ACT NO OF 1996

EQUALITY - SECTION 9
In terms of Section 9 (1) of the Bill of Rights, everyone is entitled to be treated equally and have equal benefit before the law. Similarily Section 9(3) prohibits any discrimination on certain grounds, including inter alia, age. This subsection also specifies that legislation must be enacted to prevent such discrimination. It is our submission that the inclusion of minors within the three year period in the Limitation Bill is unconstitutional and discriminates on the basis of age.

FAIR TRIAL - SECTION 34
The limitation on minors being required to institute an action within the requisite three year period infringes on a minors rights in terms of Section 34 of the Constitution. In Section 34 everyone is entitled to have a dispute resolved in a Court or in any other forum. Many people in South Africa do not have access to professional advice, a minor's parent/guardian may be unaware or poorly informed of the minors rights. If the distinction is not made between a minor and a creditor in the Limitation Bill, a minors right to seek an adequate and fair opportunity to judicial redress for wrongs allegedly done to him or her will thus be infringed. Accordingly the Limitation Bill does not treat minors equally before the law and results in the inequality of the Limitation Bill's operation.

This was successfully argued in Mohlomi v Minister of Defence 1996 (12) BCLR (CC) where the court found that the prescription period of six months in the Defence Act 44 of 1957 was deemed to be unconstitutional in that the prescriptive period operating against a government institution versus that of an individual was discriminatory. Here the court used the benchmark of the Prescription Act and is likely to do the same. Accordingly, we submit that Section 1 and Section 2(2)(b) of the Limitation Bill is unconstitutional.

CASE STUDY
The following case that we are currently dealing with at the Women's Legal Centre is an example to demonstrate the impact that the current legislation and the Limitation Bill has on individuals rights.

Our client, a minor, was raped by a school teacher on the schools premises over a period of a month when she was twelve years of age. A criminal charge was laid and it was only three years subsequent to the incidents of rape that the criminal case was finalised and that the perpetrator was convicted of rape.

In terms of the Limitation of Legal Proceedings (Provincial and Local Authorities) Act 94 of 1970 our client's claim has prescribed in that her parents did not institute an action within the requisite two year period from the date of the rapes. Our client is now seventeen years old and has only in the past year begun to realise the extent of the damage, pain and suffering that she has experienced as a result of the rape.

This is a typical example of cases of violence directed against women and children. The impact of that violence on the psychological well being of the complainant within a six month period or two and half year period will often be difficult to determine. During this period the complainant may well be in a period of shock, be in the process of dealing with the criminal case and giving evidence in court and may not have either the inclination, interest or ability to consider instituting a claim against a governmental institution within the requisite time period. In particular it would almost be impossible to determine the impact of the damage on a minor in his or her developmental phase.

Accordingly, when this case goes to court we will argue that Act 94 of 1970 is unconstitutional as it infringes the rights of our client in terms of Section 9 and 34 of the Constitution. In Mohlomi v Minister of Defence 1996 (12) BCLR (CC) the constitutionality of the prescription period of six months in the Defence Act 44 of 1957 was raised and the Court found that this was unconstitutional as it infringed on the rights of the Complainant set out in Section 34 of the Bill of Rights. On the basis of the aforesaid ruling we are confident that the constitutionality of the Act will be successfully challenged. It is in view of the above that we suggest that the following proposed amendments are considered by the Portfolio Committee on Justice.

OUR PROPOSED AMENDMENTS:
Accordingly, in view of the aforesaid we suggest that the following amendments are made to the Bill.

· Section 1:
By the insertion of a new (iii) after (ii) in Section 1 of the Bill to include the definition of a minor.

Section 1:
(iii) "person under disability" means a minor".

· Section 2(2)(b):
Section 2(2)(b) limits the time period in which to give notice of the intention to proceed with a claim to that of six months but does not include the time period in which to institute legal proceedings subsequent to such notification. We submit that this section will need to be amended in order to clearly state whether the time period is two and a half years or three years subsequent to the notice period.

Accordingly, we suggest that this section is amended by the insertion of the time period in which to institute a claim subsequent to the notice period.

· Section 4:
By the insertion of a new Section in the Bill to exclude minors claims from operating against debtors until such time as the disability no longer exists. Accordingly, we suggest that this section is inserted after Section 3 of the Limitation Bill and should read as follows:

"Disability of Creditor
When the Creditor is a person under disability, prescription shall not begin to run until the date on which the disability ceases. "