The Department of Justice and Constitutional Development (the Department) tabled a revised summary of submissions made at the public hearings, with comments, and a revised version of the State Liability Amendment Bill (the Bill). The Accountant-General and Director from Legal Services, National Treasury, representatives from the Office of the State Attorney, the Litigation division of the Department and the Office of the Chief State Law Advisor also gave input on the Bill. Members noted the content of the judgment and order given by the
It was stressed throughout that an accounting officer who had failed to ensure payment within 30 days would in any event already have breached the Public Finance Management Act and Treasury requirements. Members noted that departments should already be budgeting for legal claims. They were in favour of departments being obliged to report on debts not satisfied, as well as Treasuries providing reasons to the Accounting Officer, Standing Committee on Public Accounts and Auditor-General for deciding not to pay a debt but to ask the judgment creditor to attach property.
Members also discussed, at some length, who should be responsible for ensuring that the order was notified to the State Attorney, Accounting Officer of the department, executive authority and National or Provincial Treasury. The
Members had already agreed that the Bill would apply to provincial and national departments only, but not to State Owned Enterprises or parastatals, and that execution would be permitted only against movable property judgment debts. They agreed that it would not be necessary to include a definition of “final order”, nor to have a certificate that no appeals, reviews or applications for rescission were pending, and discussed the application of the Court Rules to advertisement for sale. They agreed to insert further definitions to clarify the position around Rules of Court, Courts and the clerk or registrar of the Courts. National Treasury clarified issues relating to the time periods, and its procedures and wording. The various entities would compare their suggested wording and attempt to present a comprehensive document that answered all concerns on the following day.
Mr Johan Labuschagne, Principal State Law Advisor, Department of Justice, noted that he had grouped certain comments together in a new document, dated 20 April 2011.
Mr J Jeffery (ANC) asked if the National Treasury had seen the outline of cases and the explanation of the difficulties experienced by the State Attorney. He also asked whether National Treasury had played a role in civil cases against the State, after the
Ms Jannine Bednar-Giyose, Director: Fiscal and Intergovernmental Legislation, National Treasury, noted that after the Mokgoro judgment National Treasury had received notification of a number of orders of court making awards against departments, which had not been settled, and National Treasury (NT) had then followed up with the relevant departments to ensure that payment was effected. Although she had not had personal experience of this, her colleagues advised that where there as a potential threat of attachment of State property, the departments usually paid.
Mr Neville Gawula, Litigation Officer, Department of Justice and Constitutional Development, pointed out that whilst the judgments had eventually been satisfied, it had nonetheless taken up to a year to do so. He asked whether any mechanism, apart from notification to the client department, would be put in place by the NT to ensure that judgments would be settled within a reasonable time.
The Chairperson pointed out that in most cases of non-payment, the amounts had not even been particularly large. The case that had taken a year to pay was for only R19 000, and the Committee had also wondered what the legal fees in those cases had been. The Accountant General could clearly not speak for client departments, but the Mokgoro judgment could not be ignored.
Mr J Jeffery (ANC) said that when the Committee had met a month ago, if had asked National Treasury and the Department of Justice and Constitutional Development (DOJ) to give a report on implementation of the Mokgoro judgment. The Mokgoro judgment had been explicit in naming National Treasury as one of the parties to implement the judgment, but the Bill’s wording was different. No report had yet been received from National Treasury and he had the impression that this Committee was not being taken seriously enough.
Mr Freeman Nomvalo, Accountant General, National Treasury, said that he would, before the end of this meeting, provide a list of the cases referred to the National Treasury. NT did not play a role in certifying, but once that certification was given, NT would communicate with the national departments. Every one of the orders had been met.
Mr Jeffery said that he still did not think that was adequate. The Committee had asked for a full report one month ago.
The Chairperson reminded National Treasury that Parliament had been ordered, by the
Mr Labuschagne noted that on the previous day many issues needing input from National Treasury were raised, and he asked if these could be addressed.
Mr Gawula said that it was necessary to find a framework that would ultimately give effect to the Mokgoro judgment, which had placed responsibility on National Treasury. He would be interested to hear National Treasury’s responses, from a policy perspective, and to hear of any practical problems.
Mr Nomvalo said that he could give an indication of National Treasury’s attitude, but he had not been able to table the written responses because these had not yet been signed off by the Minister. NT agreed that there must be effective satisfaction of orders, but believed that that responsibility should lie with the department concerned. NT was therefore trying to achieve what the Mokgoro judgment proposed, but it did not want NT to be the “payer of last resort”. The Minister was therefore considering draft proposals that any order against a client department should be a charge against the appropriated budget of that department. If the Accounting Officer (AO) of a department did not satisfy the judgment debt within a period (which, hopefully, could be extended from that suggested by the Mokgoro judgment), then NT wished to be able to withhold further payments to the department until that department could satisfy NT that it had paid the amount of the court order. It was possible that the Minister might add further perspectives. He pointed out that the Public Finance Management Act (PFMA) required that payments should be made within 30 days, and if an AO failed to comply with this, this was in any event deemed to be financial misconduct.
Ms D Schafer (DA) felt that this was indicative of progress. She asked why the money had not been paid straight away, in the cases mentioned. She also pointed out that apparently no action had been taken against the accounting officers concerned. There would not be a problem if people were doing their jobs properly. She wondered if, through legislation, departments could be required either to provide for a general contingency fund or to budget for the possible amount of liability as soon as summons was received.
Mr Nomvalo noted that some of the claims noted by the State Attorney may not have been referred to NT, but reiterated that those received were settled. He would provide a full reconciliation. He noted that there was nothing prohibiting any department from budgeting for a contingent claim, and in fact departments should already being doing so, at the very least in relation to the legal costs. As to whether a department could be forced to budget, he pointed out that NT could not legislate for inefficiencies. Where accounting officers were not doing what they were supposed to, then the executive authorities should be taking them to task. Most of government’s challenges resulted from failure to take action against those employees departing from the expected norms or failing to comply with legislation. PFMA made provision for payment, and the process of enforcement was already in place. He reiterated NT’s suggestion that money be withheld until evidence was given by a defaulting department that the debts had been paid.
Mr Gawula noted that NT could only provide for actions to be taken against defaulters, and said that the State Attorney also often struggled to get responses and instructions from client departments. He wondered if NT had given any consideration to setting up a different framework for payment, pointing out that when the State Attorney acted on behalf of client departments, it would pay legal practitioners and then recover both the principal debt and legal costs from the departments.
Mr Nomvalo appreciated the sentiment but said that the debt owed by client departments to the State Attorney was substantial and it was likely to increase. Another framework would not solve that problem but would merely shift the liability to a different place in government.
The Chairperson said that it would solve the problem of satisfying citizens, whereafter it would be up to the State departments to argue liability. However, if Mr Gawula’s suggestion were followed the total State budget would be reduced if a department failed to pay.
Mr Nomvalo said that the Constitution asked every executive authority to be accountable to the people for every activity. If the Mokgoro judgment was followed, then this principle would be diluted. In practice, accountability was failing, and the very reason for the Nyathi case was the failure of those entrusted with responsibility to carry it out. A change of attitude, showing full respect for the law and Constitution, was required. He said that the portfolio committees and Standing Committee on Public Accounts (SCOPA) could question why payments were not made on due date, and the direct accountable lines under the Constitution should not be broken.
The Chairperson noted that Judge Mokgoro seemed to have held a different view.
Prof L Ndabandaba (ANC) asked whether it would not be possible to request the Minister to sign the proposals and forward them to the Committee immediately.
Mr Nomvalo said that he was expecting the Minister to sign the proposals as soon as he was out of the Cabinet meeting.
Mr Jeffery commented that this still put the Committee in a difficult position. He said that NT had said that it did not wish to be the accountable entity, yet the judgment seemed to indicate that in fact this route had come from the (former) Minister of Finance; the judgment summarised that when a final judgment order was given, NT could pay and then recoup the money from the departments. This Committee, however, must come up with a fully workable system that would ensure responsible government. Mr Gawula had indicated, on the previous day, that there were still disputes around some court orders, and he would not like provincial legislatures to end up paying for something that was not appropriate.
Mr Jeffery then summarised the process set out in the Mokgoro judgment. After a final order was given, the department should pay, within 30 days. If that judgment was not satisfied in 30 days, then the order, together with a certificate by the Registrar that there was no appeal, review or rescission pending, and the National or Provincial Treasury would then have a set number of days to satisfy the order, after which the judgment creditor could proceed with attachment. The Committee had discussed the certificate, and had decided that this was not a good idea, because it essentially amounted to a party serving a notice on itself. However, the Committee still wished to hear about the role of the State Attorney, although the State Attorney would clearly not have the money to settle the debts itself.
The Chairperson indicated that the payment in satisfaction would come from NT.
Mr Jeffery noted that money was usually “compartmentalised”. The Committee would need to look at the penalties contained in the PFMA, and consider what could be strengthened. He reiterated that the Mokgoro judgment provided for a judgment creditor to approach the relevant Treasury in the event of non-payment, and that Treasury would then pay and recoup from the department. If this did not happen, an attachment could follow. He had some reservations as to what would happen in the case of inappropriate demands, and felt that the State Attorney should be able to raise objections, for instance where a rescission would be appropriate. Under the procedure envisaged by the Mokgoro judgment, the judgment creditor was more likely to obtain his money. He asked if there was a way to ensure responsibility by the AO. He was now inclining in favour of the view that NT should pay, after consultation with the State Attorney.
The Chairperson said that if there was no objection to Mr Gawula’s proposal, and in light of the commitment by the former Minister to the Constitutional Court, NT may have to pay. However, the present Minister seemed to be having second thoughts on the issue.
Mr Jeffery said that there was merit in the concern about maintaining the line of responsibility of the AO, but clearly a judgment creditor should not be made to suffer. He wondered if a penalty might be included, so that, for instance, the payment should be made within 30 days, but if the AO did not pay within the first 14 of those 30 days, then NT would pay in the following 14 days, but the AO would then be criminally sanctioned.
Mr Jeffery noted that the first case after the Mokgoro judgment was a
Ms M Smuts (DA) said that NT, having made the proposal to the
Ms Schafer was in favour of the proposal that the State Attorney should make the payments, because if was involved in the litigation and would have a good idea of a reasonable award. Its budget was a problem, but she asked if it was not possible to make arrangements with NT, or whether the State Attorney could not create a budget for specific claims, and a general budget for the likely claims to be received in each year. She agreed with the need to serve notice on and get reports from the State Attorney, and suggested that this could replace a requirement to serve the documents on the AO of a department. The State Attorney would then pay and claim back from the departments, with the assistance of NT.
Mr Gawula stated that “the State” had an obligation to comply with orders, no matter how this was done. Paragraph 38 of the Mokgoro judgment noted that an order was to be served, together with a certificate of validity, and NT must cause the debt to be settled, settle it itself, or make arrangements with the judgment creditor for settlement. Paragraph 53 noted that it would be sound to obtain the views of provincial treasuries. He pointed out that Mr Nyathi had died without receiving any of the amounts awarded for medical expenses. It was possible to deal with all orders, other than garnishee orders where the State Attorney would not accept responsibility.
The Chairperson asked that both the State Attorney and Accountant General respond to the proposals of Mr Jeffery. The Committee would need to look to the accountability of the AO and department. He pointed out that many cases did not seem to come to the attention of the relevant parties until it was too late.
Mr Jeffery said, in answer to Ms Schafer’s proposal, that he would be opposed to the State Attorney paying. Firstly, there would be practical problems around the budget. Secondly, he pointed out that if an attorney in the private sector followed a particular route without getting agreement from the instructing client, the client would be justified in raising objections. In his constituency there was disagreement on a land claim, where the State Attorney had accepted an offer without consulting with the Department of Rural Development and Land Reform. He was of the view that the State Attorney should deal only with legal issues, and should not act as accountant or paymaster. However, he did agree that the State Attorney should be consulted by NT, in view of its knowledge about the case and the merits.
Mr Jeffery then outlined his reconsidered view, that the Mokgoro judgment principles should be accepted. However, they should be worded in a slightly different way, to emphasise the lines of accountability, listing the entities who needed to be served, in order, as the AO of the relevant department, the executive authority, and provincial or national Treasury. He did not think it was necessary to have a certificate. NT must then cause the debt to be settled. He reminded Members that there was no reference to a 14-day period in the Mokgoro judgment, and he was not sure that this should be inserted, or whether wording should be included to require the department to settle, failing which NT’s obligation to do so would ensue.
He then noted that the party’s ability to approach the court presently only applied in the case of stopping an attachment. If there was a mistake, the State would be able to apply for rescission, and there was no need to legislate for this. The proposal that AOs should be held responsible did not excuse NT from paying. The failure of the previous systems had caused the harm in the Nyathi case and others. He reiterated that NT would not always be obliged to pay but could refuse and require the judgment creditor to attach the department’s assets. Perhaps there needed to be a rethink of the wording, including a requirement that NT should provide Parliament with reasons in cases where it did not pay.
Mr Gawula noted these suggestions, but reiterated that there should be a framework to ensure compliance with the Constitutional obligations of the State. He agreed that penal provisions were often in place already, but implementation was a problem. After the first order in the Nyathi case, the State Attorney had identified more than 200 cases of non-payment of court orders, and therefore wrote to all those AOs calling for payment, but even when the second order was given, some remained unpaid. If no mechanism were found to give proper weight and enforceability of the rights of citizens to claim from the State, then the Nyathi situation would continue to happen. He added that in some instance the State Attorney was not involved directly. Applications to compel the State to fulfil an obligation were costly and it would be preferable to have a framework around management of all State litigation in all client departments. He reiterated that in some instances the State Attorney battled to get instructions from the client departments, and there were issues around how litigation was handled.
The Chairperson asked what would be done if a State Attorney official settled without getting instructions.
Mr Gawula said that this was unethical behaviour and it would be reported to the Law Society, and the client could dispute the fee. The State Attorney would make good on the settlement obligations but would then take action against those responsible.
Mr Nomvalo agreed that it might be possible to have a framework. He also agreed with Mr Gawula that the State must avoid repetition of the Nyathi issues, but stressed that it was necessary to identify exactly where the problem lay, in order to reach the correct solution. He reiterated that it was not possible to legislate against inefficiency, but the State was often placed in this position because people acted as if they were above the law and were not being held accountable. The fact that ordinary citizens suffered must be addressed. He said that, whether or not the Committee finally agreed with Mr Jeffery’s proposal, this proposal would provide for finality and for full settlement being made to the judgment creditor. Mr Jeffery had correctly identified that the ultimate responsibility rested with the department, so that even if NT effected the payment, this must be seen not as a charge against the National Revenue Fund, but against the allocation of the department. This was necessary so that the responsibility of the AO would not be diluted. He said that NT or the provincial treasury would be placed at the centre of the process, as they transmitted the money to departments. He explained that there was a difference between NT actually effecting the payment itself, and NT withholding transmission of amounts to the department until the judgment debt had been satisfied.
Mr Nomvalo added that the NT submission to the
Mr Nomvalo said that NT had not looked into whether every debt must be subject to this procedure. If there was no settlement, then attachment would follow. This raised other questions around immovable assets. In principle, there was a need for finality, a need to ensure that accountability remained with the department, by debiting its vote, and a need to ensure that withholding of funds by a Treasury must be reported to the relevant legislature. There was already a requirement that all legal costs must be disclosed. He reiterated that it was vital to enforce accountability, and if anything was paid by NT, then the AO would have to answer for having breached the PFMA, and should be charged under Section 85.
The Chairperson said that the Committee had already agreed that it did not wish to allow for attachment of immovable property. It also wished to hold AOs and relevant departments accountable. If NT was required to pay, sourcing the funds could be problematic. Parliamentary committees would hear of non-payment only after the event, but this did not preclude the AO from being held accountable then. He agreed that it would be useful for NT to provide reasons, to the AO, SCOPA and the Auditor-General, if NT refused to pay and assets were attached.
Mr Nomvalo reiterated that NT would offset amounts paid against the budget vote of the department. The AO of National Treasury was not responsible for the debt and therefore the NT vote should not be affected.
Mr Jeffery noted that in the part of the judgment summarising the submissions of the Minister of Finance, it was noted that there would be a set-off. However, in the final order, Judge Mokgoro had not gone into the finer points of payment, merely saying that the relevant Treasury must settle or cause settlement of the amounts owing. She had clearly taken the view that any State organ was “the State”. Although the original version of the Bill did not refer to NT, it noted that a payment “shall be charged against the expenditure account or expenditure of the department”. He asked for some guidance on the wording that NT thought would be suitable, and how the Director General of National Treasury should be given authority to pay. He questioned if NT could directly debit a department’s account, or whether set-off would apply against the current or future allocations.
Ms Smuts asked if the payment would be made against draw-downs.
Mr S Holomisa (ANC) shared Mr Nomvalo’s concerns around legislating for inefficiency. At some point NT would need to be cited. He suggested that AOs should also be asked to tell the Committee why it was necessary for this Committee to try to compensate for their inefficiency.
The Chairperson mentioned that the Committee had agreed, on the previous day, that the existing provisions of the PFMA were probably sufficient.
Mr Jeffery agreed that it should be unnecessary to attach State property, but in effect this Committee had to legislate for inefficiency, to cover State debts not being paid when due.
Mr Nomvalo explained what offsetting would mean in practical terms. NT managed the main account of government, the National Revenue Fund, in terms of Section 213 of the Constitution. This Fund had sub-accounts for departments. Departments were required to estimate their expenditure on a monthly basis and then would “draw down” against the yearly budget allocations. If there was an unsatisfied judgment debt, NT should stop the draw-downs until the Department proved that the money owed had been paid. If Mr Jeffery’s suggestion was followed, NT would pay up front to the judgment creditor. Although the Director General of NT could only sign for money appropriated, this legislation would effectively be creating a secondary appropriation, which would have the same effect, of redirecting funds to NT, by way of moving the money owed by departments back to NT, to the books of NT. A report would then be made to SCOPA and Parliament.
The Chairperson asked in which cycle that would occur.
Mr Nomvalo said that if the debt was payable in March, and the only amount still left for draw-down related to staff salaries for that month, then only a portion of the judgment debt could be satisfied immediately. In such a case, NT would arrange that a certain portion of the debt would be honoured in one financial year, and the remainder in the next financial year.
Mr Jeffery said that there seemed to be general agreement that NT should pay and then recover, and asked that a first draft of this could be provided to the Committee on the following day. He summarised what the main differences in the Bill and the Mokgoro judgment had been. The Bill had stipulated that the State Attorney or attorney of record must, within 7 days, inform the Department. The final order must be settled within 30 days, and the AO must make the payment, to be charged against its own expenditure, failing which there would be an attachment. The Mokgoro judgment said that if the final order was not satisfied with 30 days, then the court order should be served, by the judgment creditor, on the relevant department and Treasury. He was not sure why this was required. The Committee had agreed that the certificate mentioned in the Mokgoro judgment was not necessary. If NT failed to settle the debt, the matter would proceed to execution.
Mr Jeffery said that it was necessary to have agreement on the steps to be followed. He thought that it was important that, in terms of the revised subsection (2), the State Attorney should notify the department. If, within 30 days (or the amendment suggested by Mr Labuschagne of “a reasonable time”), the AO did not pay, then NT must pay. He asked that NT must provide the Committee with appropriate wording for set-off. New wording around reporting mechanisms would need to be inserted in the Bill. He noted that the Bill had not incorporated part (b) of the Mokgoro order, around the certificate (because the Committee did not think it necessary) and service of the order in terms of Rules 4 or 9. He asked why the point about the State Attorney informing the AO or NT had been left out of the Bill.
Mr William Wilken, Deputy State Attorney, said he was not sure why this was not in the Bill. The reason for service of the court order was to ensure that no matters slipped through the cracks, such as default judgments.
The Chairperson asked at what point NT would be informed, and who would inform it of the judgment.
Ms Bednar-Giyose said that, in terms of the Nyathi order, the judgment creditor would submit the certified order to the Treasury, when the judgment debt had not been satisfied.
Mr Labuschagne responded that it was possible to divide the period within which the judgment debt must be settled, to note that if the AO did not pay with a certain number of days, then NT must do so. He thought that the requirement for the judgment creditor to serve the order on the State Attorney, who would then need to inform the AO of the department and Treasury, was more cumbersome for the creditor, but it would certainly help the State, as it was possible that the State Attorney might be unaware of judgments, particularly default judgments. He could not give an immediate answer on why this had not been included in the Bill.
Ms Schafer wondered why the order should not be served immediately it was obtained, to preclude an AO claiming not to be aware of it. Some public submissions also questioned what would happen if the State Attorney did not inform the AO.
Mr Gawula said that ideally the State Attorney should be informed of the granting of the order, immediately by the Clerk of the Court or the judgment creditor, as it was clearly in the latter’s’ interest to have the judgment satisfied soon.
Mr Jeffery said that the Committee had been told of problems with the clerks of courts, and it was possible for the private or State Attorneys to make a mistake. He believed that the onus of informing of the order should lie on the judgment creditor (Note: this suggestion was later withdrawn). Ms Schafer’s point on when the order must be served must be discussed. The Mokgoro judgment had suggested that the creditor would need to wait for 30 days to elapse, then only serve the order, but he questioned why it could not be served immediately. Whilst it would seem to make sense that this be done immediately, it would place a further onus on the creditor, who could otherwise hope that the judgment would be settled within the 30-day period.
Mr Gawula understood the challenges around the clerks and registrars, but said that reference was made to Rules 4 and 9, the normal processes followed. The State Attorney would, when it received notification, bring the existence of the order to the attention of the AO of the department.
Mr Nomvalo believed that service should take place as soon as the court order was issued. Chapter 12 of the PFMA required court orders to be paid within 30 days. If NT was made aware of this immediately, it could put processes in place at an early stage to try to avoid the necessity for set-off.
Mr Jeffery took his point, and said that although the onus should still remain with the judgment creditor, he saw no reason why the order should not be served immediately.
Mr Jeffery then raised the issue of what a “final judgment” was. If an AO decided to apply for rescission then the whole process would need to be stopped. There seemed to be no certainty as to the stage at which a judgment would be regarded as “final”.
Mr Wilken said that this would be the benefit of only serving notice after the 30-day period.
Mr Jeffery agreed that a 30-day time limit applied to lodgement of appeals, but said that applications for rescission did not have this time limit.
Mr Wilken responded that rescissions were unusual.
Mr Jeffery thought that service on the State Attorney might obviate the need for many rescissions, but took Mr Gawula’s point that a number of incorrect judgments were given, especially relating to garnishee orders or liability.
Mr Labuschagne said that his immediate answer would be to look at the order itself.
Mr Jeffery said that the requirement was for a certificate, and the Committee was not in support of this.
Mr Schafer suggested that there might be merit in looking again at the definition of “final order”, to include the expiry of the time period for an appeal.
Mr Jeffery thought that every order must be regarded as final, unless challenged.
Mr Gawula illustrated that in the Nyathi matter, the former Chief Justice had refused to proceed until proof of payment was given, and the interim order effectively gave the other party the opportunity to do something.
Mr Jeffery said that he understood the difference between an interim and final order, in relation to actions, but this was speaking to a debt, which he thought became final when the court pronouncement was made, until taken on appeal or review, or until application for rescission was made.
Mr Wilken said that a final order represented the final settlement of all issues between the parties. A certification that there was no appeal or review would strengthen this point. He thought that there would be no harm in including a definition.
Mr Gawula questioned how that would distinguish orders in interlocutory applications.
Mr Jeffery thought that the word “final” could be used, but there should be no requirement for certification.
Ms Schafer thought that perhaps the Bill could refer to a final order, but not define it, and whilst the certificate would also not be needed, perhaps the Bill should specify that no warrant of execution could be issued if there was an appeal or review pending. The only party who would be applying for appeal, review or rescission would be the State. Most interim orders were interdicts.
Mr Gawula said that he would be in support of this.
Mr Mongameli Kwela, Senior State Law Advisor, Office of the Chief State Law Advisor, said that the reason for having a definition was to clarify matters for ordinary citizens. For this reason, he thought that a definition should not only remain, but also perhaps be expanded upon, by adding a reference that if there were appeals, reviews or rescission applications pending, no warrant could be issued. This would not conflict with anything in the Bill.
Ms Schafer noted that the Members themselves had questioned the scope, but if the definition was kept in, then she suggested that the original wording should be followed.
Mr Labuschagne clarified that he had sent the working documents and summary of comments to NT, and had also indicated where the DOJ wished to hear the response of NT.
The Chairperson noted that the Committee had also agreed that the Bill would be restricted in its application to national and provincial departments, and would not cover State Owned Enterprises or parastatals.
Mr Nomvalo said that he wanted to raise one issue on the wording of section 216(2) of the Constitution. This noted that NT should enforce compliance with the matters set out in section 216(1), and may stop transfer of funds to an organ of State that committed a serious or persistent breach of standards (as set out in section 216(1)(c). However, the Constitution did not specify that NT could then use the withheld funds to pay someone else, and he asked if there was any danger that this might be challenged as unconstitutional.
Dr M Oriani-Ambrosini (IFP) thought that this was not necessarily related. There was an internal mechanism that would not affect third parties. The basic principle was that the State was a legal entity, and a judgment creditor would have to find the State where he could. He reminded the Committee that if a creditor had a claim against a company or group of companies, he could proceed against any asset of the company. If every department was to be regarded as a separate legal entity, then he thought that this might conflict with the section of the Constitution allowing a person to recover from the State, but the interpretation of the Constitution applied not only to taking an order, but also to enforcing that order against the State.
Ms Schafer expressed the opinion that even if funds could be withheld under one provision, the Committee would not be precluded from legislating specifically for another instance, provided there was no inconsistency.
Mr Gawula said that the question was rather whether it was “permissible”. NT had the responsibility to compel performance, in line with the Constitutional requirements, and he did not think that this section posed any problem.
Mr Kwela concurred with this view.
Mr Nomvalo agreed that withholding funds did fall within section 216, but was questioning the authority to pay over to another account.
Dr Oriani-Ambrosini said that one possible concern was the reference to “persistent” conduct, which seemed to indicate a situation as opposed to an action.
The Chairperson responded that the section spoke also to “serious breach”.
Mr Jeffery said that the
The Chairperson asked that NT, the Department of Justice drafters, the State Attorney and State Law Advisors should discuss the issues to try to reach wording that would satisfy all.
Mr Labuschagne mentioned the Constitution 18th Bill, which was circulated later, but there were no further discussions on it.
Mr Labuschagne then asked that NT should respond on certain issues, as outlined in the Summary of Comments dated 20 April. There was a proposal, during the public hearings, that the 30-day period should run only from the date on which the notice was served on the AO and Minister. He asked if this would conflict with the PFMA requirements.
Mr Nomvalo said that the 30 days, as crafted in this Bill, would tie in with the PFMA, but the proposal that the 30 days run from date of notification would not. However, if that was the direction the Committee wished to take, it was possible to engage on a change of the NT Regulations.
Mr Labuschagne then referred to the submissions outlined on page 8 and asked if a provision that debtor and creditor could agree on a longer period for payment would conflict with the PFMA.
Mr Nomvalo replied that the Treasury regulations already referred to payment within 30 days, unless there was an agreement to the contrary. Contracts with service providers often contained other specific terms. The Mokgoro judgment also envisaged that arrangements for settlement could be made.
Mr Labuschagne further noted the points raised on page 10, arising from the public hearings, around withdrawal from a provincial revenue fund.
Mr Nomvalo said that once a department was aware of an obligation it must budget for it, and if something unforeseen or unavoidable arose, this could be dealt with in the adjustment budget, either by reprioritisation or by NT being asked to accelerate some of the transfers.
Mr Jeffery asked whether this obligation by departments should be legislated for, or whether it would need to be in NT guidelines.
Mr Nomvalo said the necessity to budget was stated in general terms in the NT regulations around budgeting, but he would be reluctant to add a list of specific contingent liabilities.
Ms Smuts added that it was a fairly easy process to make further NT regulations, if necessary.
Mr Nomvalo clarified that the clause dealing with fulfilment of judgment debts could stress that AOs were expected to budget for these.
Ms Schafer asked for clarity whether there was already provision for provincial departments’ budgeting.
Mr Nomvalo confirmed that this was in the PFMA, Budget Rules and Treasury Regulations.
Mr Labuschagne referred to page 10, and asked Members whether there should be a definition of “appropriation account”.
Mr Nomvalo said that in the new section 3(b)(2) NT would suggest that the words “appropriation account” be replaced with the more consistent term “appropriation budget”, and this proposed wording would be forwarded to the Committee.
Mr Labuschagne referred to submissions set out on page 16, and enquired if State departments would require longer periods to satisfy the debts.
Mr Jeffery said that since the PFMA provided for settlement within 30 days, and this Committee had no basis to change that. The Bill was not intending to provide for more time, but to regulate attachment of State assets, in the event of non-payment.
Mr Nomvalo pointed out that by the time this point was reached, the department had already failed to comply with its obligation to pay within 30 days and he thought it was not necessary to drag it out further.
Mr Jeffery wondered what would happen if the judgment creditor did not notify the department within 30 days.
The Chairperson said that this was up to the judgment creditor.
Mr Labuschagne then highlighted some aspects for the Members. In regard to the transitional provisions, he asked whether the transitional arrangement suggested by the Law Society, as set out in the submissions document, needed to be considered, or whether there would be reliance on the Mokgoro judgment until the Bill was operational.
The Chairperson said that there was reluctance to legislate retrospectively.
Mr Jeffery added that different cases would be at different stages when the Bill came into effect and the Bill would apply only to matters where the final order for payment of the debt was given after the date of commencement of the Bill.
Ms Schafer asked if there was a need to refer to “transitional” as this was not dealing with the usual sense of retrospective matters.
Mr Jeffery argued that it would govern processes where the judgment was given prior to the Bill coming into operation, but where payment had not been made, so it was similar.
Members agreed that there was no harm in retaining the clause dealing with transitional provisions.
Mr Labuschagne then asked the Committee to consider whether the wording of the new Section 3(2) would need to change, if the judgment creditor was required to give notice.
Mr Jeffery said that if the judgment creditor should serve the notice, then there was a question what would happen if the creditor failed to serve, or served late. He had now reconsidered his earlier views as to whether the judgment creditor could serve the notice immediately that judgment was obtained, or should only serve after 30 days had expired without payment being made. This was what had been set out in the Mokgoro judgment. It would address the issue of late service, and would also circumvent any problems on the final order. If the judgment creditor did not serve the notice, then it would be up to thee State Attorney or State’s instructed attorney to inform the AO and relevant creditor. He now wished to withdraw his previous suggestion that the onus would lie on the judgment creditor to serve the notice, although the creditor may do so.
Mr Labuschagne noted that in that case another procedure must be formulated around who must inform the State Attorney, pointing out that the State Attorney would not attend to every case itself.
The Chairperson pointed out that attorneys of record must keep the State Attorney advised.
Mr Labuschagne still thought there had to be an onus on someone to inform the State Attorney. He would have thought it was correct to place that onus on the judgment creditor.
Mr Jeffery said that the reason for requiring service on the State Attorney was to avoid the situation (which had occurred in the past) where service of the summons might be effected by pinning it to the door of a building that was vacant. The State Attorney would either have handled the matters itself, or would have instructed other attorneys. They would advise of the date of set-down, and should similarly advise of the judgment.
Mr Wilken noted that there had been a problem with default judgments being taken where a department had been unaware of the matter, and the Rules of Court already provided that service may be made on the State Attorney.
Mr Jeffery stressed that in future any summons would have to be served on the State Attorney, to make that body aware of every matter, and the original wording of the Bill, that required service on the executive authority, would be expanded also to require that the State Attorney “must” be served.
Mr Wilken noted that sometimes the Clerk of Court failed to send out notices of set down.
Mr Jeffery appreciated that this could be a problem, but noted that this would be a valid reason to halt a sale in execution.
Mr Gawula appreciated the placing of responsibility on the State Attorney but said that Rule 9 of the Magistrate’s Court Rules set out the process, and that the plaintiff in a matter could effect service himself or instruct the Sheriff to effect the service.
Mr Jeffery reiterated that the inclusion of the State Attorney had not been raised as problematic by the State Attorney and such service would address the inadequacy of the current procedure.
Mr Labuschagne noted that where a judgment was given, the creditor would serve the order on day 31, and the process of payment and execution would then follow and he wondered whether this was not extending the process too far.
Mr Jeffery pointed out that the Bill was not lessening the primary responsibility of departments to pay within 30 days. If this was not done, NT would take on the responsibility of ensuring payment, failing which there would be attachment. The purpose was to give the State the opportunity to pay, in cases where it may have been unaware of the court order. What had been stated in the first paragraph of the Mokgoro order was not new law, was already in practice and was working. The Bill was addressing the procedure for attachment, which could start on day 31.
Ms Schafer said that it must be made clear in the Bill whether the warrant of execution could be issued until after the 14 days had expired.
Mr Jeffery said he had essentially suggested a combination of the original wording in the Bill, and the Mokgoro judgment.
Mr Jeffery then noted that on page 3, option 1 should apply to sub-paragraph (4), but that the words after “by the department concerned”, at the bottom of the page, should be deleted. Then on page 5 the references to the Sheriff should include something to the effect that any movable property could be attached, unless there was agreement between the parties that attachment might cause loss of life, and then, under sub-paragraph (8), the words relating to the defendant’s ability to raise an objection that the removal of the property would affect service delivery, could be inserted. Disputes would be dealt with at this point.
Ms Schafer noted that sub-paragraph (6) did not clarify whether the sale could be advertised within the 30 days. Although the wording referred to the inability to “remove and sell” it did not say anything about advertising during that time, which would then allow the sale to be effected on day 31.
Mr Jeffery agreed that the sale could be advertised during the 30 days, and the property could then be removed and sold on day 31.
Ms L Adams (COPE) wondered if the advertising would be sufficient to “persuade” a department to pay.
Mr Jeffery said that the proceedings had been tightened so that everyone would be aware of the action. He said that there would be plenty of time for the department to attend to the matter, and that NT would also play its part.
Ms Adams said that it was necessary to ensure that the procedures were consistent with what was happening between non-State parties.
Mr Wilken thought that it was not necessary to deal with matters in the Bill if they were already covered in the Rules of Court.
Members agreed that it was only necessary to provide, in the Bill, that the property could not be removed for sale within the 30 days.
Mr Labuschagne reiterated that execution, attachment and sale were provided for in the Rules of Court, and that was why page 5 of the Bill made reference to the Rules.
Mr Kwela noted that Mr Labuschagne’s proposal to keep the references to the Uniform Rules would cover the concerns.
Ms Schafer agreed that the Rules of Court would apply, but it was still necessary for the legislator to make it clear what would apply in respect of advertising. Execution was a separate process. She asked if the Rules of Court specified whether advertisement could take place during the notice period.
Mr Wilken responded that the Sheriff would do an inventory, but the goods must not be removed by the creditor. The Rules simply provided that the Sheriff could, after consultation, prepare the notice of sale, provided that this was done ten days prior to the sale.
Mr Labuschagne noted the two options in relation to the references to the Rules of Court, but said that Option 2 had been framed more widely, to cover the possibility of a judgment by a
Ms Schafer said that this was slightly different from what had been discussed the previous day. She agreed that a broader application was needed, because the Uniform Rules did not cover the
Mr Jeffery thought that option 2 was sufficiently broad to cover everything.
Ms Schafer asked if the references to “clerk” or “registrar” were applicable to all courts.
Mr Wilken believed these would cover all courts.
Mr Labuschagne referred Members to the new draft of sub-paragraph (8) and noted a proposal, during the public hearings, that the word “State” should be substituted for “party having a direct and material interest”. He would not support that, as it could exclude private individuals or other bodies but requested instructions from the Committee.
Members agreed with Mr Labuschagne.
Mr Labuschagne asked if the definition of “final court order” was to be retained.
Members agreed that it would.
Ms Bednar-Giyose wished to make a proposal on the wording that related to the Treasury causing settlement of the judgment debt and briefly read out her proposal.
The Chairperson asked that she should discuss this with the other drafters, to try to reach a position that would satisfy all departments. This would not preclude any of the individual departments from raising other suggestions to the Committee on the following day as well.
Ms Schafer thought it would be useful to include a definition for “clerk or registrar”, to note that this would mean the relevant official in any court.
Mr Jeffery agreed, and said that a definition could also be included for the “Rules of Court” to obviate listing the different sets of rules, and that “court” could also be defined as any court established in terms of any Act of Parliament.
The Chairperson asked Mr Labuschagne, the State Attorney, National Treasury and the State Law Advisors to discuss possible wording and circulate their drafts between each other for comment, prior to the next day, when a new draft should be presented to the Committee.
The meeting was adjourned.
- We don't have attendance info for this committee meeting