State Liability Amendment Bill: Legal Opinion by the Office of the Chief State Law Advisor & deliberations

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Justice and Correctional Services

18 April 2011
Chairperson: Mr L Landers (ANC)
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Meeting Summary

The Office of the Chief State Law Advisor (OCSLA) briefed the Committee on the State Liability Amendment Bill (the bill), covering whether the Bill provided an adequate procedure for the satisfaction of judgment debts against the State, as required by the Constitutional Court. It was noted that the proposed amendments to Section 3 of the State Liability Act (the principal Act) expanded extensively on the Act’s Section 3, which had lacked any process for the satisfaction of judgment debts against the state. The new clause provided a step-by-step process to ensure that the claim of a judgment creditor was ultimately satisfied, including the possibility of attaching assets of the State. For this reason, OCSLA believed that the Bill did adequately address the question of adequate satisfaction of judgment debts, and provided an express procedure for this. The briefing also examined the right to equality, and the rights of citizens to obtain, and therefore the obligation of the State to provide, basic services to its citizens. Both of these rights had to be balanced against each other, when reaching a determination of whether property of a State department could be attached, and whether immovable property could also be subject to attachment. OCSLA pointed out that attachment of immovable property could result in large-scale disruptions to public service delivery, which meant that a balance would have to be reached between, on the one hand, the right of a judgment creditor to attach and sell State property to satisfy a judgment debt, and the rights of other individuals to realise their right to have service delivery through that property. The Constitutional Court, in the Nyathi judgment, did not address whether the state’s immovable property could be attached. However, the exclusion, in the Bill, in respect of attachment of immovable property was justifiable, and would not render the Bill unconstitutional.

Members discussed what would happen should immovable property not be able to be attached, if there was a shortfall after sale of movable property, and if there was in fact an obligation to provide for the attachment of immovable property. Members commented that it was unfortunate that National Treasury was not present at the meeting, as its input was vital, especially on alternative mechanisms to be provided if immovable property was excluded. They further commented that departments should be budgeting for legal liability, and possibly ringfencing funds.

The Department of Justice and Constitutional Development (the Department) outlined those cases where the State, either through national or provincial departments, had been involved in civil litigation, highlighting problems and challenges. In some, the judgment creditor had not complied with the requirements set out in the Nyathi judgment, or did not serve on the Office of the State Attorney, and applications for rescission had been lodged. In at least one matter, the Clerk of the Court failed to advise the Office of the State Attorney of the set-down. Some cases involving garnishee orders had been forwarded directly to the employing department of the individuals involved, and one resulted from because it was sent to the finance section of those departments as they affected the employees themselves. One case was a labour matter in which a settlement had been reached, but the department paid the costs. Members commented that that the whole process would have to be carefully examined, since many of the problems arose from the fact that the Office of the State Attorney was not made aware of the cases, and also expressed their concern that Clerks of the Court did not appear to know the correct procedures. Members asked what the Department was doing to ensure that presiding officers and court officials were informed of the Nyathi judgment and its implications. They also questioned the role of national and provincial Treasury, and asked for a full report-back on the Labour Court matter.

The Department of Justice tabled, and took Members through the first part of its document providing responses to issues raised during the public hearings on the Bill. In response to questions as to how a judgment creditor would know what property may be executed against, the Department had prepared revised wording placing the responsibility on the Accounting Officer of the department to identify which property would disrupt service delivery if attached, and which could be attached. Members discussed whether this was sufficiently precise, and made the point that the identification must be objective and reasonable. They also discussed the possibility that property may be identified, and if necessary attached, but not removed or sold, that the court should be the final arbiter on the point about service delivery, discussed suitable wording around stays of sales in execution, and raised the need to discuss the phrase “the interests of justice” further.

Meeting report

Office of the Chief State Law Advisor (OCSLA): Legal opinion Office
Ms Carin Booyse, Deputy Chief State Law Advisor, Office of the Chief State Law Advisor, said that the opinion presented to the Committee commented on the Constitutional Court judgment in the Nyathi case. The question that had to be considered was whether the State Liability Amendment Bill (the Bill) now provided a sufficient procedure for the satisfaction of judgment debts against the State. The proposed amendments to Section 3 of the State Liability Act (the principal Act) introduced a new procedure that enabled a judgment creditor to enforce a final court order against the State should the State fail to pay within the stipulated time frame. Clauses 3(4), (5) and (6) of the Bill set out the procedure for this. Clause 3 of the State Liability Amendment Bill had improved the situation. Furthermore this clause now specified that the State Attorney or attorney of record (appointed by the State Attorney) would be responsible for informing the Accounting Officer of a State department about the final court order against that department. The proposed amendments to Section 3 of the principal Act expanded extensively on the original Section 3 of the Act, which lacked any process for the satisfaction of judgment debts against the State, as they now provided a step-by-step process to ensure that the claim of a judgment creditor was ultimately satisfied. The Office of the Chief State Law Advisor (OCSLA) was of the opinion that the provisions of the Bill sufficiently addressed the need to set out a procedure that would enable a judgment creditor to obtain satisfaction of judgment debts against the State.

The issue of the right to equality was also explored. Ms Booyse noted that this right was fundamental, but not absolute, so it could be limited under Section 36 of the Constitution. It was also important to note that Sections 26 and 27 of the Constitution mandated the State to provide basic services. Therefore these two rights had to be balanced against each other when determining which property of a department could be attached, and whether or not immovable property should be included in the Bill. OCSLA was of the view that the attachment of immovable property could result in large-scale disruptions. For this reason, a balance was required between the right of an individual to attach and execute State property in satisfaction of a judgment granted in his or her favour, and the rights of other individuals to realise their service delivery rights as contained in the Constitution.

The Constitutional Court (CC), in the Nyathi judgment, did not address the question whether the State’s immovable property may be attached. Ms Booyse said that the Bill did do so, and that she believed that this exclusion was justifiable and did not render the Bill unconstitutional.

Discussion
Ms D Schafer (DA) said that there must be instances in the private sector where essential services were being delivered, such as private hospitals, and questioned if such institutions could also challenge an attachment on the basis that they were providing an essential service.

Ms Booyse said that it was important to not disrupt government services, and distinguished the two by saying that this Bill dealt with the State’s obligation to ensure that people’s rights were satisfied.

Ms Schafer followed up by saying that surely there would be some immovable property, for instance housing, that would not result in the disruption of services if it were to be attached.

Mr J Jeffery (ANC) said that the private hospital analogy was not a good example, because people had a choice whether to go to a public or private hospital. The issue was whether the legislators, in this Bill, were under an obligation to provide for the attachment of immovable property, and the response from the State Law Advisors was that the Committee did not have such an obligation. Therefore, it was up to the Committee to make a political decision whether it wished to make provision for the attachment of immovable property. From a policy point of view, he believed that immovable property should be excluded from being attached.

Ms L Adams (COPE) asked what would happen if immovable property were excluded, yet the movable property that could be attached was insufficient to satisfy the judgment debt. She thought that the Committee needed to make provision for this, and not assume that it would never happen.

Ms M Smuts (DA) said that she was satisfied with limiting the operation of the Bill to movable property. This had also been the position in the interim procedure that was arranged in the Nyathi  matter.


The Chairperson said that the question raised by Ms Adams was relevant. However, should immovable property be included, it could raise other concerns and a rush of attachments.

Mr Neville Gawula, Director: Office of the Chief Litigation Officer, Department of Justice and Constitutional Development, agreed that it was necessary to make provisions for instances where, for example, a judgment debtor had to take recourse against a particular hospital, but was denied the opportunity of having assets sold because all the assets were deemed critical for its operations.

The Chairperson said that this was the issue he had asked the Accountant General to address at the last meeting, but it had been treated somewhat “flippantly”. He agreed that it was necessary to avoid a situation where a judgment debtor was told, by the Accounting Officer (AO) of the Department, that this was not budgeted for. If a department set aside funds and ring fenced them for satisfaction of legal obligations, then there would be provision for judgments and attachments. In practice, what happened was that departments could pursue appeals and then say that there was no budget at the end.

Mr Jeffery agreed that the point raised by Ms Adams had to be taken into account, especially when considering the procedure to be followed. This matter should be flagged for further consideration. It was unfortunate that National Treasury was not present. The Constitutional Court ruling made by Judge Mokgoro did not find favour with National Treasury (NT) but there was sympathy for this from Members of the Committee. If NT failed to attend the meeting on the following day then the Committee must simply finalise the Bill without NT input.

Ms Smuts said that no self-respecting public entity would fail to consider a provision and not cater for the possibility of having a ruling against it. Government departments could do exactly what the Chairperson had suggested, and budget for cases and ring fence funding, or learn to behave better.

The Chairperson summarised that the Committee would discuss the issue of immovable property further.

Mr Johan Labuschagne, Principal State Law Advisor: Department of Justice and Constitutional Development, said that it was unfortunate that NT representatives were not present, as their input was vital, particularly since the Committee was inclined to exclude immovable property. NT would need to come up with an alternative mechanism to deal with the concerns raised.

Report on the civil litigation against the State: Department of Justice and Constitutional Development
Mr Gawula gave a briefing outlining a series of civil cases against the State, and highlighting problems and challenges. The first cases explored were in Mafikeng. In the case of SS Mothupi vs North West Department of Public Works, Roads and Transport, it had taken the State almost one year to effect payment to the judgment debtor, from the date on which the court order was made. He explained that most of the cases involved state departments having contracted for particular services, and a dispute had arisen in relation to the performance of the contract, leading to the state department being unwilling to pay, claiming that the other party had not performed satisfactorily or completely. The other party would then issue summons. The State Attorney would then act for the state department.

He noted that, in the first instance, it would be very difficult for the State Attorneys to tell the AO of a department whether the department should satisfy the debt, when they were not involved in the mechanics of the matter. The T&T Roofing vs MEC for the Department of Education case was a clear example of this. In West Transvaal Security Services vs Minister of Home Affairs the client department sent the summons to the Office of the Chief Litigation Officer, DOJ & CD, after the judgment had been recorded against it. The judgment creditor had issued a warrant of execution, before the expiry of the 30-day period, but had not complied with the other requirements of the Nyathi judgment. For that reason, an application for the rescission of the judgment had been brought by the state.

In Buitenhof Boedery vs MEC for Transport the Clerk of the Court failed to forward the notice to the Office of the State Attorney, and default judgment was taken. When the State Attorney became aware of the default judgment, the client department was immediately notified, and said that it would process the payment.

The cases in Bloemfontein were all garnishee orders. There was no way that the State Attorneys could have known about the garnishee orders because these were sent to the finance section of the departments concerned, and affected the employees of those departments themselves.

In the case of J Tyro v Minister of Safety and Security, judgment was given against the South African Police Services (SAPS) for damages arising out of a motor vehicle accident. There was a delay by the client department in the payment of the judgment debt. The plaintiff’s attorney gave notice of intention to follow the execution procedures laid down in the Nyathi judgment. The amount was duly paid, but the plaintiff had not submitted a bill of costs. SAPS had been urged to settle these kinds of cases as the law was very clear as to who was on the wrong. Sometimes, when judgments arising from these types of cases went unpaid, the judgment creditor charged interest from the date on which the amount was due. In the case of P W Owunezi vs Minister of Home Affairs,  the applicant claimed R1 million for wrongful arrest and detention. Judgment was granted for R90 000.

Mr Gawula noted that when the plaintiff instituted the procedures, in the Nyathi matter, the notice should have been sent to the Office of the State Attorney, but was instead sent to the client department. The client department failed to inform the State Attorneys and the sheriff returned to attach certain computers. The Office of the State Attorney then brought an application for the rescission of the judgment. The court order was suspended, pending the finalisation of the application for rescission.

The Cape Town case of Small vs MEC Department of Health was a labour matter. The applicant applied for a post in the department, but one of the requirements for the post was that it was necessary to have a driver’s license. The applicant was unable to obtain such a licence, as he suffered from a visual impairment. He then sought an order, in the Labour Court, to the effect that he was unfairly discriminated against. The matter was settled and the province agreed to pay his taxed costs, which were duly paid.

Discussion
Mr Jeffery referred to the Bloemfontein cases. He noted that a garnishee order was a personal matter, and asked how and why the State had become involved.

Mr William Wilken, Deputy State Attorney, explained that a court would ordinarily issue a garnishee order, which would then have the effect of attaching the emoluments due to the judgment debtor, and require the employer to pay those amounts to the judgment creditor. If the employer did not comply with the order, then the judgment creditor could apply for a warrant and instead attach the employer’s assets to satisfy the order. This was what had happened in the Bloemfontein case.

Mr Jeffery said that the whole process would have to be carefully examined. A lot of the problems seem to be emanating from the fact that the State Attorneys did not even know about the cases. The Office of the State Attorney should be involved from the beginning, at least at a provincial level.

The Chairperson agreed that a particular department’s head office would not always necessarily be aware of a summons that had been served, particularly where it was served at a remote office.

Mr Labuschagne said that some of the submissions made during the public hearings did touch on this matter. He suggested that it would be necessary to create a process in which summons had to be brought to the attention of the Office of the State Attorney.

Mr Jeffery said that the relevant parties could be cited in the original application, but agreed that summons also had to be served, at the very least, on the provincial Office of the State Attorney.

Ms Schafer also agreed that the Office of the State Attorney should be involved from the beginning, especially in light of the recurring problems that were apparent in the cases mentioned in Mr Gawula’s presentation.

Mr Jeffery said that it had come as a surprise to him to hear that in some cases the Clerks of Court were at fault as well, as was clearly the case in the Buitenhof Boedery vs MEC for Transport matter.

Mr Gawula said that this all came down to how the State managed litigation against it, and the issues being raised were some of the challenges faced by State Attorneys. The Clerks of the Court made errors on a regular basis.

The Chairperson asked if the magistrates were aware that there were certain procedures that had to be followed, as set out in Judge Mokgoro’s judgment in the Nyathi matter.

Mr Gawula replied that the current interim order that had been set out in that judgment was the current law that operated, until the Bill was finalised. The magistrates were aware of the order.

Mr Wilken said that it was quite possible that the Clerks of the Court would not be aware of the provisions of the order.

Mr Jeffery said that the Chairperson’s question hinged more on the question of why the magistrates were issuing writs when there was no certificate from the Registrar, in line with the Nyathi judgment.

Mr Jeffery asked what the time frames were for a rescission of judgment.

Mr Wilken said that it was not the magistrates, but the Clerks of the Court who were charged with the issuing of warrants, and reiterated that not all those Clerks would be aware of the Nyathi judgment.

Mr Jeffery asked what steps the Department of Justice and Constitutional Development had taken to inform Clerks of Court of the Nyathi judgment.

Mr Gawula said that all client departments and courts had to be aware of the procedure laid down in Nyathi. 

Mr Jeffery then referred to the case of Small vs MEC Department of Health and asked why there was a settlement, as the applicant clearly did not meet the advertised requirements for the position.

Mr Wilken replied that the matter was settled and the case was withdrawn. The applicant received another, higher post with the Department of Justice. Only his costs were paid.

Mr Jeffery said that the paying of his costs seemed to suggest that there had been some merit in the applicant’s case.

Mr Wilken said that he could not comment on the merits of the case.

Mr Jeffery requested a report on this matter, as it seemed pretty straightforward.

Mr Wilken said that the decision to have the costs paid by the department could have been turned on the merits of the case, or it could have been for economic reasons.

Mr Jeffery questioned what “economic reasons” might mean.

Mr Wilken said that in some instances it was easier to pay the costs than to continue with litigation.

Mr Gawula said that he would obtain the full facts of the case, as well as the basis on which the costs order was made.

Mr Jeffery said that there was no role that national or provincial Treasury seemed to have played in the cases reported by Mr Gawula, and asked why this was so.

Mr Gawula said that the involvement of the Office of the State Attorneys Office had been geared towards attempting to curtail costs. However, the question of payment was eventually settled with assistance from provincial and national Treasury.

Department of Justice and Constitutional Development responses to the submissions made during the public hearings
Mr Labuschagne tabled a document setting out the submissions made at the public hearings on the Bill, together with the responses of the DOJ & CD.

He noted that the Cape Bar Council questioned how a citizen would know which property may or may not be attached in execution. He noted that he had prepared an amendment to the original wording of the Bill, which indicated that when a Sheriff arrived at the premises of a department, the Accounting Officer or his/her representative must point out what could or could not be attached. This would mean that the Sheriff did not have carte blanche to attach whatever he or she could identify.

Ms Schafer said that the proposed amendment was in fact giving carte blanche to the AO to decide what should be attached or not, and this was also not an ideal situation. She said that this still did not answer the question of what would happen if the AO claimed that everything was necessary for the department to achieve service delivery.

Mr Jeffery said that the amendment was a good start. However, the next step would be to deal with the question of what would happen if the property identified was not enough to cover the judgment debt. He thought that the AO should be allowed to identify property. However, if the AO did not identify property that would sufficiently cover the judgment debt, then the Sheriff should be allowed to proceed with then attaching whatever else needed to be attached to cover the debt, in order to remedy the insufficient identification of property. Another solution could be to provide that anything was subject to being attached, but that if the AO was of the opinion that certain assets should not be attached and sold, then removal of those assets could be contested in court at a later stage. Another alternative could be to provide that anything could be attached, but that it could not be removed, and to place the onus on the department to contest and have the matter decided by a court, before any removal took place.

Ms Schafer said that she liked the suggestion in theory that anything could be attached but not removed. However, it was not ideal in practice for individuals to have to go backwards and forwards to court all the time. She suggested that if there were insufficient funds or a shortfall in saleable property, perhaps Treasury could step in.

The Chairperson said that there would be nothing stopping an AO from only identifying an old coffee machine or old vehicle, if the AO was given carte blanche to identify.

Mr Jeffery said that this provision could be tightened up, so that the identification had to be done in relation to what was reasonable and objective, as opposed to subjective and wholly dependent on the discretion of the accounting officer. He commented on Ms Schafer’s suggestion, saying that he did not believe that Treasury would be willing to pay in the event that there was a shortfall. The only arbitrator who could decide whether property was necessary for service delivery was the court. He pointed out that property in other offices that fell under a particular department could be attached.

Mr Labuschagne reminded Members that there was a provision in the Bill allowing a department to apply for a stay in execution of the judgment. The Committee would have to create a mechanism to cater for the situation where no property was identified, or where there was a shortfall after property was attached and removed 

Mr Jeffery asked who currently was given the discretion to decide whether property should not be attached on the basis that it would threaten life or severely disrupt service delivery.

Mr Labuschagne said that at the moment that discretion lay with the Sheriff.

Mr Jeffery asked for the meaning of the phrase ‘interests of justice’  in clause 7(8). He did not think that it was correct to give the Sheriff the discretion to decide what could be deemed as property that was necessary to, or would threaten life or severely disrupt service delivery. He suggested that one solution might be for the Bill to allow the attachment of any movable property, but then, under clause 7, to amplify the ‘interests of justice’ to include a statement that the execution should not threaten life or severely disrupt service delivery. This would allow for free attachment, but in the event of a dispute, the onus would then be on the department to approach the court to decide the matter.

Ms Schafer asked what time frames were envisaged in Mr Jeffery’s proposal. She also asked what would follow if the court agreed that the property should not have been attached.

Mr Jeffery said that he did not see any other solution, as there had to be provision for property that was necessary for service delivery to be free from being attached. Failing agreement on this point between the Sheriff and department, only the court could rule on whether property was necessary for service delivery, or whether executing against that property would threaten life.

Mr Gawula said that, in terms of the Magistrate’s Court Rules, it was possible to make provision for the identification of property at the stage where the Sheriff compiled his inventory of property being placed under administration. At that stage, and before attachment, the AO could identify the property.

Ms Schafer then turned to the question of budgeting for litigation. She held the view that all departments should make financial provision for litigation against them, as this would be classed as a contingent liability.

Mr Jeffery said that it could not be written into legislation that there should be adequate money in a contingency liability fund. It would be better perhaps to required a national or provincial Treasury to explain to a court what steps were being taken to satisfy the judgment debt against a department. The idea expressed by Mr Gawula was plausible and ideal.

Mr Wilken suggested that the 30-day period should be deleted, to allow for an application to be brought at any time, as there may be good reasons to do so.

Mr Labuschagne said that a potential problem could be that the Sheriff may have already removed and sold the property.

Mr Wilken pointed out that there was a period that had to lapse between the attachment and the sale.

Mr Jeffery pointed out that the current wording prevented this, but asked for what reason a person should not be permitted to bring an application after the 30-day period had elapsed, before the property was sold by the Sheriff or removed. He agreed with the point raised by Mr Wilken. He agreed that provision should be made that an application could be brought even after the 30-day period, if the Sheriff had not already sold the property.

Mr Labuschagne said that if an application for a stay in execution could be brought at any stage, then there was no particular reason why there needed also to be a provision that the Sheriff could attach, but not remove.

Mr Jeffery said that this was to allow the departments some breathing space. The provision for a 30-day period was both important and adequate. However, it would be a small addition to say that  at any time before the sale of the property, an application for a stay in execution could be made.

Mr Gawula said that this would help the State Attorneys. A department would have ample time, between the attachment and removal, to bring an application for a stay in execution.

Mr Labuschagne said that, the Committee having agreed to this, he would then make the necessary amendments.

Mr Jeffrey said that he was still concerned about the ‘interests of justice’ phrase. However, in the meantime, the Bill’s wording should be amended, so that the disruption of service delivery could be one of the bases on which an application for a stay of execution could be made, so that the department could contest the attachment on property that had already been removed by the Sheriff.

Mr Labuschagne indicated that in one of the footnotes to the document, he had set out some cases where the concept  of the ‘interests of justice’ was explored. This also included a definition of public interest. In one of the submissions it was suggested that ‘interests of justice’ could be substituted with the concept of “public interest”. 

Ms Schafer asked why the term ‘interests of justice’ was included in the first place.

Mr Wilken said that one possible reason might include where fraud had been committed in obtaining the judgment against the State, which would then be the basis for setting aside the judgment.

Ms Schafer requested that the phrase ‘interests of justice’ issue should not be changed until the Committee had had a chance to discuss the proposals that dealt with it.

The Chairperson noted that in the afternoon session, the committee would continue to go through the document prepared by Mr Labuschagne, summarising the public submissions, and would consider the working draft of the Bill, dated 19 April, and the options set out.

The morning session was adjourned.



 

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