State Liability Amendment Bill: Deliberations

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Justice and Correctional Services

23 May 2011
Chairperson: Mr L Landers (ANC)
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Meeting Summary

The Portfolio Committee on Justice and Constitutional Development continued its deliberations on the State Liability Amendment Bill (the Bill). The Committee discussed at length the definition of court order, but eventually decided that no definition should be included, as this would be a new introduction to the Bill that would then require the hearing of public submissions, for which there was no time. Members also considered the implications of the phrase ‘final order’ and particularly whether it took into account review proceedings, and whether the lower courts could be regarded as courts “of final instance”. The Members decided that the definition of a final court order should remain as it was, and the question of the circumstances in which suspension of attachment proceedings could happen would stand over for later deliberation. The definition and implications of ‘state’ was also discussed extensively. The IFP Member asserted that there were problems, because ‘the state’ including its various organs, was broadly defined in Section 239 of the Constitution, and a DA Member pointed out that different interpretations were also given in other sections of the Constitution. It seemed that the current State Liability Act and the current Bill would apply to many organs of state, including small bodies that may not have executive authorities strictly in compliance with the Public Finance Management Act or Treasury requirements.

Clause 11 was the subject of much debate, since an IFP Member suggested that this clause would allow Treasury to
bypass the Constitution and amend, unilaterally, the provisions contained in the Appropriation Acts. He proposed that this clause should be removed and replaced with something requiring a Treasury to take appropriate measures, where a department had not complied with a court order and had also failed to budget for court expenses, to submit an Appropriation Adjustment Bill to Parliament. He stressed that it was not possible to create legal obligations for Treasury through this Bill that might conflict with the powers of Parliament. The Accountant General answered that
the Public Finance Management Act allowed for funds already committed to be used for unforeseen circumstances, and provided that this must be tabled in the subsequent budget. The Constitutional Court judgment had essentially provided for a judgment creditor to be paid, whatever the department had budgeted, but the point was made that clause 11 was meant to force a department to comply with its obligations, and Treasury would step in only as the last resort. The Committee satisfied itself that Treasury was not being given new powers other than the “last resort” provision, and was generally satisfied with this clause.

The Department of Justice briefly outlined its legislative programme and the progress of the other bills under consideration by the Committee.

Meeting report

State Liability Amendment Bill (the Bill) Working Draft deliberations
Mr Johan Labuschagne, Principal State Law Advisor: Legislative Development, Department of Justice & Constitutional Development (DOJ&CD) was asked by the Chairperson to take the Committee through the Working Draft.

Clause 2
Mr Labuschagne said that Clause 2(1) now provided for the request by the Committee, during the previous meeting, that at the onset of proceedings against the State, there should be communication with the State Attorney.

Ms D Schafer (DA) and said that in one paragraph of clause 2(1) the word ‘Minister’ was replaced with ‘executive authority’ and yet in another paragraph ‘Minister’ was used again without any replacements. She enquired which term should be used.

Mr Labuschagne replied that the part where ‘Minister’ was used without there being an indication that it should be replaced with ‘executive authority’ was meant to be deleted.

Mr S Swart (ACDP) said that the use of the word ‘judgment creditor’ was inappropriate because at this stage the plaintiff would not have been deemed to be a judgment creditor. The appropriate term would be ‘applicant’ or ‘plaintiff’ at the point of the institution of proceedings.

Mr Labuschagne said that he would look into the matter raised by Mr Swart.

Mr J Jeffery (ANC) said that he would prefer for this matter to be resolved now, given the time constraints that the Committee faced. He agreed that the correct term must surely be ‘plaintiff’ rather than ‘applicant’.

Mr William Wilken, Deputy State Attorney, said that there was nothing wrong with the use of either‘plaintiff’ or ‘applicant’.

Clause 3
Mr Labuschagne indicated that in Clause 3(1) the word ‘shall’ had been substituted with ‘must’.

Mr Jeffery asked if the Committee was satisfied that ‘final court order’ should be used under this clause. He noted that the Committee could return to this when considering the situation where an appeal had been lodged after a court order has been issued.

Mr Labuschagne replied that the definition of ‘final court order’ in the Working Draft, at page 11, covered the issue raised by Mr Jeffery. A court order could not be regarded when an appeal had been lodged.

Mr Jeffery asked if instances where a court order was taken on review was also covered.

Mr Labuschagne replied that during previous discussions it was eventually decided that review would be included in the definition of a final court order. If there was a review, there could not be an order given or confirmed by a court of final instance; this could only happen after the review had been dealt with.

Mr Jeffery said that it seemed odd that there was no mention of ‘review’ in the definition of a court order.

Ms Schafer recalled that in the previous discussion it was mentioned that since the periods for review were not strict, but were open ended, it was not feasible to include review proceedings under this definition. 

Mr Jeffery commented that there had to be a final court order before review proceedings could be instituted. He suggested that there may be a need to insert a clause to cover the situation where, for instance, a government department instituted review proceedings during the sale of execution. Perhaps this suggestion did not, however, fall squarely under clause 3, which dealt with attachment proceedings.

Ms Schafer said that this might be worth looking at. The main concern was that government departments might abuse the clause being suggested either to frustrate or delay proceedings.

Mr Jeffery said that the repercussions of such actions by a government department would be that cost orders would be given against them. The proposed clause was intended to cover genuine cases, to prevent unintended consequences.

Dr Oriani-Ambrosini (IFP) said that what Mr Jeffery was saying was technically correct, but it was something that was generally provided for in law. Its inclusion in this Bill might prompt officials to take the avenue of review proceedings as yet another step to delay the process.

Mr Neville Gawula, Director: Office of the Chief Litigation Officer, DOJ &CD, said that the definition of a final court order, as currently contained in the Bill, presupposed that all necessary proceedings had already been instituted and completed. The officials had looked into the question of civil appeals, from higher and lower Courts. There were no time specifications for review proceedings, especially under Rule 53 of the Rules of the High Court.

Mr Jeffery said that he was not asking that reviews should be included under the definition of a final court order. The point he was raising related to the institution of review proceedings that would result in the suspension of attachments.

Dr Oriani-Ambrosini said that the Committee should be wary of creating a separate category of orders that could be executed against the State, but different from those relating to private disputes.

Ms Schafer said that the State had no need of further protection. Execution only took place after all other court processes had been concluded, and this presupposed that the department concerned would have received notification, in which case it would have had the opportunity already to review the matter.

Mr Jeffery commented on the definition of ‘final court order’, particularly (b). A magistrate’s court was not a court of final instance. He suggested that the definition of a final court order should remain, and that the question of grounds for suspending the attachment proceedings could be debated later.

The Chairperson agreed.

Dr Oriani-Ambrosini said that the Bill would apply to “the State”, which had organs, defined in Section 239 of the Constitution, as anything established under law or the Constitution exercising public powers. This Bill would therefore apply to many organs of state, which might include something like a National Sharks Board. Many of the organs of state did not have an executive authority, as required by the Public Finance Management Act or treasuries, and this was problematic.

The Committee pointed out to Dr Oriani-Ambrosini that there was a definition of state on page 12.

Dr Oriani-Ambrosini asked about the other organs that were not included in the definition on page 12. He said that the Committee could not overrule Section 259 of the Constitution.

Mr Deon Rudman, Deputy Director General Legislative Development, DOJ&CD, said that the Department had found a number of Acts of Parliament that created structures, institutions and organs of the kind referred to by Dr Oriani-Ambrosini. In these Acts it had been specifically stated that the State Liability Act would be applicable. Any amendments to the State Liability Act would therefore also apply to the these organs of state. The Department would be proposing an amendment that would cater for the substitution of ‘Minister’ with ‘Executive authority’ wherever applicable, in those Acts that created structures and organs.

Mr Gawula said that there was a need to isolate all the Acts that referred to the State Liability Act. He then suggested that the words ‘appearing on behalf of the department’ should be removed from Clause 3(2). It was tautologous, because an attorney of record always appeared on behalf of a department.

Mr Jeffery said that the point of Clause3 (2) was to make a distinction between a State Attorney and a private attorney. It was possible, as an alternative, for the words “any other attorney appearing on behalf of the department concerned” to be added. 

Mr Gawula said that ‘attorney of record’ covered private attorneys who may appear on behalf of the State as well.

Mr Jeffery said that the wording was not problematic, as it clarified the situation where a private attorney may be appearing on behalf of the State.

Mr Jeffery expressed his concern that the Bill was imposing responsibilities on the National or a Provincial Treasury (Treasury). The elaborate procedure created by the amendment was not intended for other bodies, and he questioned for what reason provincial and national treasuries should be concerned if a small museum in a town did not pay its debts, and got a cost order against it.

Dr Oriani-Ambrosini said that he concurred with Mr Jeffery. An application provision could be the solution.

The Chairperson said that the Committee would have to apply its mind to this issue.

Mr Gawula pointed out that the Constitutional Court had decided only that Section 3 of the existing State Liability Act was deemed unconstitutional, so the rest of the Act was still applicable. He drew Members’ attention to section 4, reading: “Nothing contained in this Act shall affect any provision of any law which (a) limits the liability of the state or national government or provincial government or any department thereof in respect of any act or omission.”

Ms Schafer said that if changes would be made to the Bill then this would raise problems around public participation. The organs of state were of the view that they did not have to worry about the Bill because they were already subject to provisions around liability. If the Committee were now to exclude them, they should have the opportunity to present comment to the Committee.

Mr Jeffery said that he did not share Ms Schafer’s concerns. This was an amendment Bill. Anyone currently affected by the State Liability Act knew that they had an interest. The Committee had inserted the definition of ‘state’, which had not been in the original Act.

The Chairperson asked how many “organs of state” bodies there were.

Mr Labuschagne said that he was not sure. They did include bodies such as the South African Human Rights Commission, Office of the Public Protector and the Special Investigating Unit.

Ms Schafer said that Mr Jeffery’s argument in fact supported her view. When the Bill was published and public comments were requested, there had been no limitation of the definition of ‘state’. If the Committee was now going to place limitations on the current understanding of ‘state, in line with the Constitutional definition, this did have the potential to negatively affect other organs of state.

Ms D Smuts (DA) said that the concept of the ‘state’ appeared in many ways in the Constitution and just because the Committee was seized with formulating a concept of ‘organ of state’ for the purposes of this Bill did not mean that it was the only interpretation. The concept was treated differently in different chapters of the Constitution.

Mr Rudman suggested that Treasury and the State Law Advisors could discuss this further.

Clauses 3 and 4
There were no further discussion or proposed changes on these clauses.

Clause 5
Dr Oriani-Ambrosini thought that it was a mistake to not include the attachment of immovable property in the Bill.

Clause 6
There were no discussions or proposed changes

Clause 7
Mr Labuschagne clarified for the Committee that the principle in Clause 7(b) and (c) was that the Sheriff could attach anything, provided that there was agreement on this reached with the accounting officer. Even if there was no agreement, then the Sheriff could still attach, but a party with an interest in the attached property could apply for a stay of execution. This would include the department.

Clauses 8 to 10
There was no discussion on these clauses.

Clause 11
Ms Schafer asked if Treasury had competence under the Constitution to withhold funds under Clause 11(e).

Dr Oriani-Ambrosini referred to Clauses 11(e), (f) and (g). In regard to the statement that Treasury could withhold ‘voted funds’, it should be kept in mind that such funds were approved by Parliament for the purposes of a specific programme for a department. Clause 11(e), (f) and (g) would effectively allow Treasury to bypass the Constitution and amend, unilaterally, the provisions contained in the Appropriation Act. He therefore recommended that these provisions should be removed, and replaced with something along the lines that Treasury should take appropriate measures to address a situation where a department had not compiled with a court order, and submit to Parliament an Appropriation Adjustment Bill.

Mr Freeman Nomvalo, Accountant General, National Treasury, said that if a department did not set aside funds to settle an impending court order against it, there was a provision in the Public Finance Management Act (PFMA) that allowed for funds already committed to be used for “unforeseen circumstances”. This provision of the PFMA further specified that this had to be tabled in subsequent budgets. Clause 11 allowed for a judgment creditor to be paid, whatever the circumstances. This was what was requested in the Constitutional Court judgment by Judge Mokgoro. Treasury could not take funds from one department to pay for the expenses of another department. This clause was meant to force a department to pay. Treasury would only step in as a last resort. However, he answered Dr Oriani-Ambrosini’s point by saying that Treasury was not bypassing any Appropriation Act. Instead, it was a department who failed to fulfil its obligations, which led to the necessity of a court order, that was falling foul of the law.

Dr Oriani-Ambrosini reiterated that a department was allocated funds, by Parliament, for certain defined purposes. A department should budget for an impending court judgment. If it had not, but then used contingent funds, this would not be a problem. However, if a department had not budgeted for a potential court order against it, and wants to use funds other than its own for this, then Treasury would have to come to Parliament with an Adjustment Appropriation Bill. Only Parliament could allocate funds and approve their use, not Treasury or any other organ of state.

Mr Jeffery asked if Treasury was, under clause 11, being given powers in addition to those that it currently held.

Mr Swart said that the crisp issue was whether or not departments were budgeting for litigation. It seemed that the answer was that they were not. There was a need to protect Treasury. Given the current budgetary constraints, there was the danger that departments could just think that there was no necessity to build this in to the adjustment appropriation, as they would assume that they would get additional funds. However, they could not be allowed to rely on this.

Ms Schafer said that Section 216 of the Constitution provided that Treasury must enforce measures and compliance, and may stop the transfer of funds to an organ of state if that organ of state committed a serious and persistent material breach of those measures.

Mr Jeffery said Ms Schafer seemed to be suggesting that Treasury did already have that power. However, he asked for further input from Treasury.

Dr Oriani-Ambrosini said that Clause 11 provided for powers that Treasury had in fact, but not in law. There would be a Constitutional problem if this Committee attempted to give Treasury a legal power. Section 216 did not override the allocations given by Parliament, and did not apply in this situation.

Mr Nomvalo said that the real issue that the Bill was addressing was the situation where a department failed to honour an obligation, which then resulted in the judgment creditor seeking assistance from the courts in ensuring that the obligation was honoured. In the Nyathi case, a service should have been provided, was not, and eventually the department was forced by order of court to honour its obligations. Clause 15(b) in fact reflected Treasury’s recognition of processes that regulated money and how it was given. He cited an example where a police official might, through negligence, kill a citizen. Treasury would not automatically commit funds for paying whatever court order may result from the court case on the negligence. If the department failed to pay, this would be regarded as a serious offence, in terms of section 216 of the Constitution. A judgment debt that was paid, but not budgeted for, would be regarded as unauthorised expenditure, and this matter would then be referred to the Standing Committee on Public Accounts (SCOPA) for either ratification or questioning of the matter.

Adv B Holomisa (ANC) said that the Committee was debating something that was already permissible. The mere fact that a Constitutional Court order had allowed for the attachment and sale of state property was indicative of this. 

Dr Oriani-Ambrosini said that the Committee may need to consult with somebody from SCOPA or the Appropriations Committee on this matter. The process that involved SCOPA was followed by the Appropriations Adjustment Act, which ensured that everything was authorised by Parliament.

The Chairperson asked Dr Oriani-Ambrosini if he was saying that if a department wanted to satisfy a judgment debt it should ask Parliament for permission first.

Dr Oriani-Ambrosini replied in the affirmative.

Mr Jeffery said that he was not sure what the Committee would need to discuss with SCOPA. It would appear from Mr Nomvalo’s response that Treasury would not be given powers in excess of those that it already had. It did not seem that this could be taken further. However, the Committee should be cautioned against giving Treasury new powers.

Mr Nomvalo said that if Treasury had to pay on behalf of a department, this might be problematic, because it did not currently have the power to do this.

Mr Jeffery said that this was precisely the power that Treasury should have, according to the Constitutional Court order.

Clause 11 – 14
The Committee did not propose any changes to clauses 11 to 14.

Clause 15
Mr Swart said that it would be difficult to budget for attorneys’ and advocates’ fees, which could run into several thousand rands, and which were likely to be included in the Order of Court. This would be a challenge.

 Mr Gawula said that the difficulty for the Office of the State Attorney was that government departments whom it represented often did not pay. This resulted in qualified audits in relation to the contingency liability funds. The DOJ&CD would process the appropriate payments, but this would result in it going into overdraft, which was not supposed to happen under the PFMA. He pointed out that litigation was often protracted. If the matter went, for example, right through to the Constitutional Court, legal fees could run into millions, and this had the potential to take up the entire budget of a small state organ.

Mr Swart said that the provisions in the Bill would help alleviate this problem, as departments would now be forced to budget properly for litigation.

Ms Schafer agreed and said that this came down to proper management.

Mr Jeffery commented that the matter under discussion was not relevant.

Definitions section
Mr Jeffery said that the definition of ‘state’ should be removed, following the debate that the Committee had had. This would mean that the previous regime would stay, whereby ‘state’ was not defined. If the question arose then the courts would have to give a ruling as to the application of the Act.

Dr Oriani-Ambrosini said that since the current Act was passed, there had been a burgeoning of the numbers of organs of state. In addition, section 139 of the Constitution had also expanded the notion of an organ of state. The Committee was now also changing the situation by allowing national and provincial treasuries to be responsible, where departments failed. Notwithstanding the Constitutional Court judgment, the Committee had to consider the rationale behind excluding local government from the application of the Bill.

Mr Jeffery said that the Committee was not going to do a perfect job on this Bill, as it had limited time. Local government was already covered, so there was no need to include it in this Bill, even though it was specifically also excluded in the Constitutional Court judgment. Given the time pressures that the Committee faced, it was preferable not to have a closed list, since those excluded would want the opportunity to give their input to the Committee, and there was simply no time to hear such input.

Dr Oriani-Ambrosini said that there would be a need to define national and provincial departments and expand on the definitions.

Mr Jeffery said that departments were contemplated.

Other business: Department of Justice Legislative programme
Mr Rudman addressed the Committee on the legislative programme. He noted that the amendments to the Protection of Personal Information Bill had been drafted in line with the requirements of the Technical Committee. Further research was being done on the issues raised by the Technical Committee and the Department would be ready to present by next week. There was a working draft that dealt with the amendments required by the sub-Committee on the Prevention and Combating of Trafficking in Persons Bill, and these would also be ready for presentation in the following week. The working draft of the Protection from Harassment Bill was ready for presentation. The Superior Courts Bill and Constitutional Amendment Bill would be tabled either today or tomorrow. The Judicial Matters Amendment Bill was on the verge of being introduced.

The meeting was adjourned.


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