Insolvency Amendment Bill; Reinstatement of Enrolment of Certain Legal Practitioners Bill; Prevention of Corruption Bill: briefi

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Justice and Correctional Services

21 April 2002
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Meeting report

JUSTICE AND CONSTITUTIONAL DEVELOPMENT PORTFOLIO COMMITTEE

JUSTICE AND CONSTITUTIONAL DEVELOPMENT PORTFOLIO COMMITTEE
22 FEBRUARY 2002
INSOLVENCY AMENDMENT BILL; REINSTATEMENT OF ENROLMENT OF CERTAIN LEGAL PRACTITIONERS BILL; PREVENTION OF CORRUPTION BILL

Chairperson:
Adv J H De Lange (ANC)

Documents handed out:
Insolvency Amendment Bill
Explanatory Memorandum: Prevention of Corruption Bill, 2002
Reinstatement of Enrolment of Certain Legal Practitioners Bill, 2002
Briefing on Reinstatement of Enrolment of Certain Legal Practitioners Bill [see Appendix]
Prevention of Corruption Bill (.pdf file)

SUMMARY
The Committee heard briefings on the Insolvency Amendment Bill, the Reinstatement of Enrolment of Certain Legal Practitioners Bill and the Prevention of Corruption Bill. The Insolvency Amendment Bill amends s 38 of the Insolvency Bill and makes allowance for contracts of employment to be suspended for a period of 45 days after the appointment of a trustee. The Reinstatement of Enrolment of Certain Legal Practitioners Bill allows for those advocates and attorneys who were struck off the roll of advocates or attorneys, as a result of their opposition to the Apartheid regime, to be reinstated. The Prevention of Corruption Bill is an attempt to combat corruption in South Africa following a global trend. A potentially controversial provision in the Bill is one placing a reverse onus on the accused to prove their innocence.

MINUTES
The Chair remarked that the Committee's trips to the provinces hand gone exceptionally well. The Committee was now awaiting a task list and report back from the department. He had just come from addressing the Home Affairs Committee and had made it known to that Committee that the comments he made were not the official position of the Justice Committee. Regarding the crossing of the floor legislation, he said that briefings on those Bills would only be heard after briefings on other Bills had been completed. The only briefing that would be heard that week would come from the department and noted that the 30th of April was the cut-off date for submissions. He noted that he had received a letter from Shirley Gunn, concerning TRC reparations, asking for a meeting with him. He had declined attending the meeting on the basis that her organisation was currently litigating with the Department and it would be inappropriate to sit in on a meeting that could then be used against the Department in court proceedings. He had also received a letter from Judge Fagan, thanking the Committee for their assistance in passing a Bill that was currently being successfully utilised. He also noted that the Public Protector's position ends in September and that Adv Baqwa had sought the Committee's clearance to begin looking for other work.

Insolvency Amendment Bill

The Chair introduced Mr Cronje and Mr De Lange, legal advisors from the Department, who would brief the Committee on the Insolvency Amendment Bill.

Mr Cronje stated that the Department of Labour had begun in 1999 to review its labour legislation. The Insolvency Amendment Bill proposed a change to s 38 of the Insolvency Act of 1936. In terms of the Insolvency Act, when an employer is sequestrated, all contracts of employment are terminated. This termination of employment was not regarded as a dismissal, as it came about by operation of law, and as a result employees were deprived of the rights of dismissal, such as the right not to be unfairly dismissed in terms of the Labour Relations Act, 1995, and the right to severance pay in terms of the Basic Conditions of Employment Act, 1997. The Amendment currently before parliament proposes that contracts of service be suspended, rather than terminated, upon sequestration of the employer. Effectively, employees will not be required to tender their services to the employer and the employer will not be obliged to remunerate them. The suspension will also result in employees being deemed to be unemployed for purposes of the Unemployment Insurance Act, 1966 and will therefore be entitled to register for unemployment benefits. In terms of existing common law, the trustee may engage the services of the employees in order to continue running the business. Unless otherwise agreed upon between a trustee and an employee, all contracts of service not already terminated terminate 45 days after the appointment of the final trustee.
With the consent of the trustee, creditors may partake in negotiations and submit written proposals. If no agreement can be reached, the contracts will be terminated.

The Chair remarked that he had great difficulty understanding the Bill. The two main concepts that he had picked up were that of suspension and termination. Section 38(1) provided that upon sequestration, all employment contracts were suspended. Sub-section (10) further provided that all suspended contracts would be terminated 45 days after the trustee had been appointed. He did not understand the concept of termination. If the contract was suspended in terms of sub-section (1), how could it be terminated?

Mr Cronje replied that the contracts would be suspended from the date of sequestration, the opportunity would then be given to the trustee to continue the business, in which case the business itself would not be terminated and the employees would continue to be employed. If this did not happen, in terms of s 10 the contracts would then be terminated.

The Chair enquired as to the significance of terminating the contract when the employees would presumably not have a job or be earning a salary.

Mr Cronje responded that the trustee could do one of two things: either choose to terminate the contracts, in which case the employees would not be paid or continue the business, with the intention of selling it as a going concern, in which case the employees would continue to be paid notwithstanding ss (2).

The Chair asked Mr Nel to explain how this was different from the previous position.

Mr Cronje replied that previously the contracts would be terminated immediately upon sequestration. No provision had been made to suspend the contracts and sell the business as a going concern.

The Chair was concerned by the term "deemed to be unemployed" as it was a deeming provision. He raised the question of the employee who obtained another job during the time that his contract was suspended. He enquired as to why ss (4) had not been put at the end of the provision.

Mr Cronje answered that he could look for a better place to put ss (4) but that it referred to something that occurred at the beginning of a sequestration.

The Chair did not feel that this was necessarily the case and moved on to section 2.

Mr Cronje explained that employees would have a preference for severance pay if they were entitled by law, agreement or contract. It was not possible to enter into a contract after sequestration. A maximum of R12 000 could be claimed per employee.

The Chair asked if the provision was referring to s 38(11). Mr Cronje replied that it did and the Chair enquired as to why it did not specifically say so.

Mr Cronje replied that it was because ss 38(11) was the only one which states that employees are entitled to severance pay.

The Chair enquired as to why ss only applies to termination and not suspension.

Mr Cronje replied that that was a policy matter and the view was that it was unfair to have the employer pay.

The Chair replied that both his question and Mr Cronje's answer were wrong. The new provision allowed for contracts to be suspended with a 45 day period to sort things out. The employer would then also have a preferential claim for up to R12 000 and this included a severance benefit. He enquired as to why s 3 allows for a proclamation and if there was anything in the Act that required a proclamation.

Mr Cronje responded that the reason was to give people a warning and to make it known to trustees.

The Chair was of the opinion that trustees would be aware of it and the real problem was that departments never get around to doing the proclamation.

Adv Masuta (ANC) noted that the buzz words of the Act were "suspension" and "termination" but that the end of ss 4 made use of the word "expiration". The statement in ss 4 entitles the parties to compensation but he was not sure as to the meaning of "compensation", if it was linked to ss 2 or to the severance package or monies due prior to suspension. He enquired as to the applicable law - would it be labour law or contract law. If a person suffered consequential damages which law would deal with it?

Mr Cronje believed that contract law was the applicable law and suggested that "compensation" should perhaps be changed to "damages".

Adv Masuta (ANC) suggested that if contract law was the applicable law then surely consequential damages could be claimed as well.

The Chair felt that "compensation" rather than "damages" was the most probable intention.

Adv Masuta (ANC) enquired as to what law would regulate the quantum for compensation.

The Chair replied that it would derive from the common law and therefore from precedents.

Mr Cronje added that the ordinary laws of delict would apply. Also, with regard to unliquidated claims, one would have to prove what compensation one was entitled to - first to the trustee and if the claim did not succeed, then with the court.

Adv Masuta (ANC) felt that it would be useful to see some of the judgments regarding quantum as well as the common law position that was now being codified.

Mr Cronje said that he would try and get some judgments for the Members.

The Chair was of the view that it was probably a case of common practice and that he might have to speak to the Master or trustees to obtain an answer. It was unlikely that there would be court cases except with regard to principles. Regarding suspension and termination, he said that ss (8) and (10) must be read together. The suspension would occur immediately and the clock would start running from the moment that the trustee was appointed.

Ms Camerer (NNP) suggested that the cut-off date be made clearer or the process could go on for a prolonged period of time.

Mr Cronje replied that the 45 day mark was the cut-off period.

The Chair agreed with Ms Camerer that it could be worded more clearly. He recommended that ss (4) and (11) be put together if possible, the possible unintended consequences of ss (10) be looked into and more information obtained regarding ss (4).

Mr Swart (ACDP) commented that although the Bill reflected that there were no financial implications, surely there would be financial implications for the companies or trustees.

Adv Masuta (ANC) asked for more clarity concerning ss (4) regarding compensation upon suspension. He enquired as to what compensation entailed and how it impacted on the process.

The Chair responded that it was important to work out what compensation is.

Mr Cronje was of the opinion that there would be no way for an employee to claim before the cut-off date.

Adv Masuta (ANC) responded that he did not see anything in the Bill to stop a person who was suspended from claiming compensation from the court.
The Chair stated that in terms of the Bill the employee must first go to the trustee and only if the trustee failed to accommodate the claim could he then go to the court. It was however possible for the trustee to make a decision before the 45 day period had expired. He thanked Mr Cronje for his input and adjourned the meeting for lunch.

Reinstatement of Enrolment of Certain Legal Practitioners Bill, 2002
Mr De Lange, legal advisor for the department, introduced Ms Naidoo from the department in Pretoria who had done most of the drafting of the Bill.

Ms Naidoo placed the Bill in context by stating that it had come about as a result of the need to recognise the important contributions made by deceased anti-apartheid lawyers like Bram Fisher and Lewis Baker who were struck off the role for their anti-apartheid activities. The Bill symbolically tries to redress the injustices of the past suffered by these and other anti-apartheid lawyers who have since passed away.

The Bill provides that the name of any deceased person who was removed either from the roll of advocates or the roll of attorneys, prior to 1994, may, on application to the High Court, be reinstated on the roll in question. The Court would have to be satisfied that the conduct that led to the deceased person's name being removed from the roll was directly related to that person's commitment to resisting the apartheid regime and to bringing about political change in South Africa.

Strong support for the Bill had been expressed for the Bill from role-players in the legal profession, in particular, the Natal Law Society, the Law Society of the Northern Provinces and Lawyers for Human Rights. (see appendix for full text)

The Chair praised Ms Naidoo for her briefing and requested her to circulate a copy of it to the Members. He recommended that the preamble be more elaborate and more accurate in stating the intention to reinstate those struck off the role. He also suggested that the reference to "prior to 1994" be given the date of 27 April 1994.
He further suggested that the test of "commitment to resisting the apartheid regime and to bringing political change in South Africa" be adapted to the wording in the previous submission and also be brought in line with the preamble.
He was unhappy with the requirement that the removal from the roll must have been "directly" related to that person's commitment to resisting the apartheid regime.
He felt that the name given to the Bill sounded ugly and asked if something could be done about that .
He asked Ms Naidoo to enquire if there were any submission or public hearings that needed to be held and instructed her to telephone the Bar Council and Law Society to see to they had anything to say so that the hearing could be held as soon as possible.

Prevention of Corruption Bill
The Chair moved on to the Prevention of Corruption Bill. He introduced Mr Gerhard Nel who had drafted a memorandum on the Bill. He stated that although many people had claimed credit for the Bill it had in fact emanated from the Committee. He asked Mr Nel to take the committee step by step through the Bill.

Mr Nel explained that he had prepared a comprehensive memorandum and another document containing commentary from stakeholders, legal opinions on the reverse onus provisions and foreign law, however he had only made 15 copies.

The Chair asked if the inputs had come in before or after the drafting of the Bill.

Mr Nel said that the inputs had come in during the drafting of the Bill. The Bill had not as yet been distributed to any stakeholders. He felt that it was important to look at the comments. Regarding the Bill itself, he said that the present Act was not adequate as it did not allow for extra-territorial jurisdiction to cover acts committed outside the territory. There were currently global and regional initiatives to combat corruption however South Africa lacks an overall anti-corruption strategy. A controversial provision of the Bill was one that changes the burden of proof so as to "compel the potentially corrupt to demonstrate their innocence".
The Chair advised Mr Nel to argue well the constitutionality of that provision.

Mr Nel felt that the provision would remain controversial even if a satisfactory argument as to it constitutionality had been given. He did however feel that the provision was not uncommon and was in fact part of an international development. The content of the Bill followed the recent legislation of other countries.

The Chair remarked that he had noticed a momentum in this area at a recent conference in Durban.

Mr Nel, going through the memorandum, pointed out that the preamble placed a duty on the State and Parliament to protect all the people in South Africa against corrupt practices and related offences. Clause 1 related to definitions and clause 2 to interpretation.

Clause 3 creates the offence of corruptly accepting gratification.

The Chair enquired as to the necessity of specifying "person, …including a public officer".

Mr Nel was of the view that it was important to specifically refer to public officers in order to unbundle corruption. He then read through the definition of "corruptly" and "gratification". The definition of "corruptly" is a important and one that is referred to throughout the Act. It refers to the element of unlawfulness rather than intention. The word "gratification" has been defined to include a wide range of benefits and avoidance of losses. Clause 3(2) makes provision for sentencing and allows for a convicted person to be liable to a fine or to imprisonment for a period not exceeding 15 years, or to a fine and such imprisonment. Mr Nel was of the opinion that courts do not consider corruption as a serious offence as penalties are usually not higher than 5 years.

The Chair suggested, as the sentencing provision was intended more for magistrates courts than High Courts, that the provision apply only to Magistrate's Courts.

Mr Nel proceeded to clause 3(3), which provides for the application of a presumption, subject to strict requirements in line with the Constitution. He then read through clause 4, relating to the offence of corruptly giving gratification, and clause 5, which creates the offence of corruptly accepting by or giving gratification to an agent.

The Chair remarked that clauses 3 and 4 together covered the expected issues concerning those offenders who receive information and those that give information. He asked if these provisions would apply extra-territorially.

Mr Nel said that it did. Clause 1 provides for extra-territorial jurisdiction and this was in line with the German law. He noted that clause 5 also covered corruption committed through an agent.

The Chair enquired as to what would happen if an agent had to give information on behalf of his principle.

Mr Nel replied that this was covered by clause 4, which referred to "any person".

The Chair remarked that clause 4 for covered "any person" however clause 5 created a separate section for agents. He asked Mr Nel to go on to clause 6.

Mr Nel explained that clause 6 prescribed the offence of fraudulent acquisition of private interest by a public servant and was based on Nigerian legislation.

The Chair enquired if provision was made for the private sector.

Ms Camerer (NNP) stated that that was already an offence.

The Chair felt that that Act was too weak. He recommended that those Acts be examined, together with those relating to insider trading, to see what offences exist.

Mr Nel moved on to clause 7, which creates an offence in respect of corrupt practices relating to tenders. The drew the committees attention to the term "public body" for which a definition is provided.

The Chair remarked that he had difficulty reading clause 7 as it referred to other sections, which in turn contemplated completely separate issues.

Mr Nel was of the opinion that it the provision was very clear but agreed with the State law advisors that there was a problem with ss (c).

The Chair suggested that some via media be found to solve the problem.

The PMG monitor left at 4.30pm while the meeting was ongoing. Mr Nel continued to read through the Memorandum up to Clause 14.

Appendix:
NOTES FOR DEPARTMENTAL BRIEFING OF THE PORTFOLIO COMMITTEE ON THE REINSTATEMENT OF ENROLMENT OF CERTAIN LEGAL PRACTITIONERS BILL, 2002

INTRODUCTION:

Mr Chair, the Bill is shod and the Memorandum on the Objects of the Bill sets out what we are trying to achieve. I am consequently going to be very brief.

BACKGROUND:

The Reinstatement of Enrolment of Certain Legal Practitioners Bill came about as a result of the need to recognise the important contributions made by deceased anti-apartheid lawyers like Bram Fisher and Lewis Baker who were struck off the roll for their anti-apartheid activities. The Bill, in a symbolic manner, attempts to redress the injustices of the past suffered by these and other anti-apartheid lawyers who have since passed away.

SUMMARY:

The Bill provides that the name of any deceased person who was removed either from the roll of advocates or the roll of attorneys, prior to 1994, may, on application to the High Court, be reinstated on the roll in question.

The application may be brought by

· a member of the person's family
· the General Council of the Bar of South Africa
· the Bar Council concerned
· the Society of Advocates
· the Law Society of South Africa
· the law society concerned, or
· any other interested person

The Court would have to be satisfied that the conduct that led to the deceased person's name being removed from the roll was directly related to that person's commitment to resisting the apartheid regime and to bringing about political change in South Africa.

If the High Court orders that the name of the person be reinstated to the roll of advocates, the Registrar of the Court must forward a certified copy of the order to the Director-General: Justice and Constitutional Development who must, in turn, cause the particulars of the order to be entered on the roll of advocates. If the Court orders that the name of the person be reinstated to the roll of attorneys, the Registrar of the Court must restore the name of the person to the roll of attorneys.

CONSULTATIONS AND COMMENTS:

The Bill was circulated to various role-players in the legal profession. The persons who responded were generally in favour of the Bill, in particular, the Natal Law Society and the Law Society of the Northern Provinces. Lawyers for Human Rights also expressed strong support for the Bill. In an article in 'The Star" dated 30 November 2001, Lawyers for Human Rights National Director is quoted as saying that the Bill "sets the record straight. It gives recognition where it is long overdue". He went on to say that "idealistic and brave individuals like these need to be remembered in order that we set new yardsticks, new standards for the young, aspiring public-interest lawyers. The article went on to quote political analyst Jackie Potgieter who said that "a lot of pre-1994 history has been engineered to such an extent that few people know what people have done to unite us and to make relationships between different races normal. It is time to give recognition to these people, who played an important role in our history".

The GCB's response was that they have, for several years, supported in principle an appropriate means of restoring the professional status of those deprived of it by virtue of resistance to the apartheid order. They, however, do not agree that the names of deceased practitioners should be placed on the roll. They prefer an approach of an endorsement in every case, reflecting the restoration to professional status or the deletion of the original striking off. They are of the opinion that the Bill creates uncertainty whether the court is vested with discretion, or a power coupled with a duty and that the Bill also fails to outline any procedure. We are of the opinion that the normal procedures relating to applications will apply and that the wording of the Bill gives the Court' a discretion. The intention is to make an endorsement in every case, reflecting the restoration to professional status or the deletion of the original striking off, as suggested by the GCB.

CONCLUSION:

The question may be asked, "Who precisely is the Bill aimed at"? The Department is aware of the following activists, who have since passed away, who were struck off the Roll. Bram Fischer was struck off the roll of advocates while Lewis Baker and Shun Chetty were struck off the roll of attorneys. As a matter of interest it could be mentioned that an attempt was made to strike the names of Joe Slovo and Duma Nokwe off the roll, but they had gone into exile. An application was brought against Nelson Mandela in 1954 by the Transvaal Law Society to strike Nelson Mandela off the roll of attorneys but he successfully defended the application. Judge Ramsbottom, in his judgement, stated that nothing Nelson Mandela had done reflected upon his character or showed him to be unworthy to remain in the ranks of an honourable profession. The Reinstatement of Enrolment of Certain Legal Practitioners Bill will attempt to ensure that the reinstatement of those lawyers, who took a stand against the apartheid regime, and for which we are now reaping the benefits, will in some measure redeem the honour of a profession which we would like to hold in esteem as an honourable profession.

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