WORKING DOCUMENT
(As on
30/05/2011)
REPUBLIC OF SOUTH
AFRICA
_______________
STATE LIABILITY AMENDMENT
BILL
_______________
(As introduced in the National Assembly (proposed section 75); explanatory summary of Bill published in Government Gazette No. 33950 of 21 January 2011)
(The English text is the offıcial
text of the Bill)
_______________
(MINISTER OF JUSTICE AND CONSTITUTIONAL
DEVELOPMENT)
[B 2B—2011]
GENERAL EXPLANATORY NOTE:
[ ] Words in bold type in square brackets indicate omissions from existing enactments.
_______ Words underlined with a
solid line indicate insertions in existing enactments.
BILL
To amend the State Liability Act,
1957, so as to regulate the manner in which a final court order sounding in
money against the State must be satisfied; and to provide for matters connected
therewith.
PARLIAMENT of the Republic of
South Africa enacts, as follows:—
Substitution of section 2 of Act 20
of 1957, as amended by section 1 of Act 201 of 1993
"Proceedings to be taken against
[Minister] executive authority of department
concerned
Substitution of section 3 of Act 20
of 1957, as amended by section 36 of Act 9 of 1989 and substituted by section 2
of Act 201 of 1993
(i) within 30 days of the date of the order becoming final; or
(ii) within the time period agreed upon by the judgment creditor and the accounting officer of the department concerned.
(a) the judgment debt is satisfied; or
(b) acceptable arrangements have been made with the judgment creditor for the satisfaction of the judgment debt, should there be inadequate funds available in the vote of the department concerned.
(i) would severely disrupt service delivery, threaten life or put the security of the public at risk; or
(ii) is not in the interests of justice.
(a) make or issue appropriate regulations, instructions, circulars, guidelines and reporting rules;
(b) issue a direction to a department to make a payment in order to satisfy any outstanding final court order;
(c) conduct an investigation, inspection or review into any failure by a department to pay any outstanding final court orders;
(d) issue an instruction to take remedial action or to obtain specified support, where─
(i) there has been non-compliance by a department with the provisions of this section, or regulations, instructions, circulars, guidelines or directions made or issued by the relevant treasury; or
(ii) there is a need for intervention in view of the financial, governance or management situation, condition or failure of a department;
(e) withhold from a department’s voted funds sufficient funds to provide for the satisfaction of any outstanding final court order against a department, which funds may only be released to the department upon the submission of proof acceptable to the relevant treasury that the court order in question has been satisfied;
(f) satisfy any outstanding final court order on behalf of a department, which satisfaction must be recorded and debited against the appropriated budget of the department concerned; or
(g) debit the costs associated with the satisfaction of a final court order provided for in paragraph (f), an administration charge and a penalty from the appropriated budget of the department concerned.
Insertion of section 4A in Act 20 of
1957
"Definitions
'accounting officer' means a person referred to in section 36 of the Public Finance Management Act;
'appropriated budget' means the budget of a department which is appropriated in terms of appropriation legislation in the annual budget or an adjustments budget;
'department' means a national or provincial department;
'executive authority' in relation to—
(a) a national department, means the Cabinet member who is accountable to Parliament for that department; and
(b) a provincial department, means the member of the Executive Council of a province who is accountable to the provincial legislature for that department;
'final court order' means an order—
(a) given or confirmed by a court of final instance; or
(b) given by any other court where the time for noting an appeal against the judgment or order to a higher court has expired and no appeal has been lodged: Provided that where a court thereafter grants condonation for the late lodging of an appeal, an order given or confirmed by the court hearing such appeal;
Public Finance Management Act' means the Public Finance Management Act, 1999 (Act No. 1 of 1999);
'relevant treasury' means—
(a) the National Treasury established by section 5 of the Public Finance Management Act; or
(b) a provincial treasury established by section 17 of the Public Finance Management Act,
as the case may be; and
'Rules of Court' include—
(a) the Uniform Rules of Court published under Government Notice No. R. 48 of 12 January 1965;
(b) the Magistrates' Courts Rules published under Government Notice No. R. 740 of 23 August 2010; and
(c) any other
rule applicable to any other court, established by an Act of
Parliament.".
Transitional
measures
Short title and
commencement
MEMORANDUM ON THE OBJECTS OF THE
STATE LIABILITY AMENDMENT BILL, 2011
1. BACKGROUND
1.1 On 2 June 2008 the
Constitutional Court, in Nyathi v MEC for Department of Health, Gauteng and
Another 2008 (5) SA 94 (CC) (the "Nyathi One case"), declared section
3 of the State Liability Act, 1957 (Act No. 20 of 1957) (the "Act"), which deals
with the satisfaction of judgments against the State, to be inconsistent with
the Constitution of the Republic of South Africa, 1996, "to the extent that it
does not allow for execution or attachment against the State and that it does
not provide for an express procedure for the satisfaction of judgment debts".
The declaration of invalidity was suspended for a period of 12 months in order
to allow Parliament to pass legislation that provides for the effective
enforcement of court orders.
1.2 The Minister of Justice and
Constitutional Development applied for an extension of the period of suspension
of the order of constitutional invalidity made by the Constitutional Court on 2
June 2008 in the Nyathi One case in order to introduce a State Liability
Bill in Parliament, and for Parliament to pass the Bill. On 1 June 2009 the
Constitutional Court, in Minister for Justice and Constitutional Development
v Nyathi and Others, In re: Nyathi v Member of the Executive Council for Health,
Gauteng and Another (Case CCT 53/09) (the "Nyathi Two case"),
extended the period of suspension of invalidity to 31 August 2009, and on 31
August 2009 it was again extended to 31 August 2011.
1.3 On 9 October 2009 the
Constitutional Court handed down judgment in the Nyathi Two case which
provides for an order that will regulate the satisfaction of judgment debts
against the State until 31 August 2011 or until remedial legislation is enacted,
whichever occurs first. The order provides for a tailored attachment and
execution procedure against movable assets of the State.
2. OBJECTS OF THE BILL
2.1 The Bill seeks to give effect
to the Constitutional Court’s judgment in the Nyathi One case and its
order in the Nyathi Two case, to wit, to amend section 3 of the Act
accordingly.
2.2 The objects of the Bill are to
create an effective execution process to be used by successful litigants in
civil actions against the State in cases where the State has failed to comply
with final court orders sounding in money. The provisions of the Bill can be
summarised as follows:
2.2.1 Ad clause 1:
Clause 1 substitutes section 2 of the
Act. The substitution of section 2 of the Act is mainly required as a result of
the insertion of a definition of "executive authority" in the Act (see clause
3). Provision is also made that in any action or other proceedings
instituted by virtue of the provisions of section 1 of the Act, the executive
authority of the department concerned must be cited as nominal defendant or
respondent (see proposed new subsection (1)). In order to ensure that the
State Attorney is, at the initial stages of proceedings against the State,
informed thereof, provision is made that the plaintiff or applicant or his or
her legal representative must, within seven days after a summons or notice
instituting proceedings and in which the executive authority of a department is
cited as nominal defendant or respondent has been issued or given, serve a copy
of that summons or notice on the State Attorney (see proposed new subsection
(2)).
2.2.2 Ad clause 2:
Clause 2 substitutes section 3 of the Act in order to give effect, as far as possible, to the Constitutional Court’s judgment in the Nyathi One case and its order in the Nyathi Two case. Provision is, among others, made for the following:
(a) The proposed new section 3 provides that no execution, attachment or like process for the satisfaction of a final court order sounding in money may be issued against the defendant or respondent in any action or legal proceedings against the State or against any property of the State, except if a final court order sounding in money against the State has not been satisfied in accordance with the remainder of the provisions of that section (see proposed new subsection (1)).
(b) The State Attorney or attorney of record appearing on behalf of the department concerned must, within seven days after a court order sounding in money against a department (national or provincial) becomes final, in writing, inform the executive authority and accounting officer of that department and the relevant treasury (National Treasury or provincial treasury) of the final court order (see proposed new subsection (2)).
(c) A final court order against a department for the payment of money must be satisfied—
(i) within 30 days of the date of the order becoming final; or
(ii) within the time period agreed upon by the judgment creditor and the accounting officer of the department concerned (see proposed new subsection (3)(a)).
(d) The accounting officer of the department concerned must make payment in terms of such final court order within the time periods specified in the proposed new subsection (3)(a), and such payment must be charged against the appropriated budget of the department concerned (see proposed new subsection (3)(b)).
(e) If a final court order against a department for the payment of money is not satisfied within 30 days of the date of the order becoming final or within the time period agreed upon by the judgment creditor and the accounting officer, the judgment creditor may serve the court order in terms of the applicable Rules of Court on the executive authority and accounting officer of the department concerned, the State Attorney or attorney of record appearing on behalf of the department concerned and the relevant treasury (see proposed new subsection (4)).
(f) The relevant treasury must, within 14 days of service of the final court order (as provided for in the proposed new subsection (4)), ensure that─
(i) the judgment debt is satisfied; or
(ii) acceptable arrangements have been made with the judgment creditor for the satisfaction of the judgment debt, should there be inadequate funds available in the vote of the department concerned (see proposed new subsection (5)).
(g) If a final court order against a department for the payment of money is not satisfied or acceptable arrangements have not been made with the judgment creditor for the satisfaction of the judgment debt within the above-mentioned time periods, a writ of execution or a warrant of execution may, upon the written request of the judgment creditor or his or her legal representative, be issued against movable property owned by the State and used by the department concerned (see proposed new subsection (6)).
(h) The sheriff of the court concerned must, pursuant to the writ of execution or the warrant of execution, attach, but not remove, movable property owned by the State and used by the department concerned. The sheriff and the accounting officer of the department concerned, or an official of his or her department designated in writing by him or her, may, in writing, agree on the movable property that may not be attached, removed and sold in execution of the judgment debt because it will severely disrupt service delivery, threaten life or put the security of the public at risk. If no such an agreement is reached, the sheriff may attach any movable property owned by the State and used by the department concerned, the proceeds of the sale of which, in his or her opinion, will be sufficient to satisfy the judgment debt against the department concerned (see proposed new subsection (7)).
(i) In the absence of an application for a stay (see paragraph (k) hereunder), the sheriff may, after the expiration of 30 days from the date of attachment, remove and sell the attached movable property in execution of the judgment debt (see proposed new subsection (8)).
(j) The Rules of Court (which are defined in clause 3) apply to the issuing of a writ of execution or a warrant of execution and the attachment, removal and sale of movable property in execution of a judgment debt against the State (see proposed new subsection (9)).
(k) A party having a direct and material interest may, before the attached movable property is sold in execution of the judgment debt, apply to the court which granted the order, for a stay on grounds that the execution of the attached movable property—
(i) would severely disrupt service delivery, threaten life or put the security of the public at risk; or
(ii) is not in the interests of justice.
If such an application is brought by the department concerned, the application must contain a list of movable property and the location thereof that may be attached and sold in execution of the judgment debt. Notice of such an application must be given to the judgment creditor and the sheriff (see proposed new subsection (10)).
(l) The relevant treasury, in order to comply with its obligations set out in the proposed new subsection (5) (see paragraph (f) above), and in general to ensure that final court orders are satisfied by departments without any delay, may, among others—
(i) make or issue appropriate regulations, instructions, circulars, guidelines and reporting rules;
(ii) withhold from a department’s voted funds sufficient funds to provide for the satisfaction of any outstanding final court order against a department, which funds may only be released to the department upon the submission of proof acceptable to the relevant treasury that the court order in question has been satisfied; and
(iii) satisfy any outstanding final court order on behalf of a department, which satisfaction must be recorded and debited against the appropriated budget of the department concerned (see proposed new subsection (11)).
(m) Should there be insufficient funds available in the appropriated budget of the department concerned for the current financial year, the withholding of funds or the satisfaction of the final court order by the relevant treasury may extend to the appropriated budget of the department for more than one financial year (see proposed new subsection (12)).
(n) Satisfaction of an outstanding final court order on behalf of a department by the relevant treasury will be regarded as the satisfaction thereof by the department concerned, and not by the relevant treasury, for which the accounting officer of the department is responsible, accountable and liable in terms of the Public Finance Management Act, 1999 (Act 1 No. of 1999) (the "Public Finance Management Act"). Such satisfaction does not absolve the accounting officer of liability for financial misconduct in terms of the proposed new subsection (16) (see proposed new subsection (13)).
(o) Satisfaction of a final court order by an accounting officer must be made in accordance with the Public Finance Management Act, and all applicable regulations, instructions, circulars, guidelines and reporting rules which may be made or issued by the relevant treasury. An accounting officer must classify and process the settlement of a final court order, including a final court order satisfied by the relevant treasury. Such classification must indicate the type of expenditure and whether it is unauthorized, irregular, or fruitless or wasteful expenditure. The accounting officer of the department must comply with the requirements relating to the applicable type of expenditure as set out in the Public Finance Management Act and all applicable regulations, instructions, circulars, guidelines and reporting rules which may be made or issued by the relevant treasury (see proposed new subsection (14)).
(p) The accounting officer of a department must put in place appropriate budgeting procedures in accordance with all regulations, instructions, circulars, guidelines and reporting rules which may be made or issued by the relevant treasury, to ensure the timeous satisfaction of final court orders. Such budgeting procedures must include measures for the appropriate identification and recording of potential contingent liabilities which may arise as a result of claims which have been initiated against the department (see proposed new subsection (15)).
(q) An accounting officer
of a department who fails to comply with any provision of the proposed new
section 3 or any applicable regulation, instruction, circular, guideline,
reporting rule or directive made or issued by the relevant treasury in order
to ensure the satisfaction of final court orders and adherence to that
section, constitutes financial misconduct as referred to in the Public Finance
Management Act, and is guilty of an offence provided for in that Act.
The duty to ensure the timeous satisfaction of final court orders in
accordance with the requirements of the proposed new section 3 may not be
assigned by the accounting officer to another official of the department in
terms of the Public Finance Management Act (see proposed new subsection
(16)).
2.2.3 Ad clause 3:
Clause 3 inserts a new section 4A in
the Act containing definitions of various expressions in the Act. Those
definitions are required as a result of the proposed amendments to the Act that
the Bill seeks to effect (see paragraphs 2.2.1 and 2.2.2
above).
2.2.4 Ad clause 4:
Clause 4 provides for transitional
measures in respect of final court orders sounding in money against departments
which were given before the commencement of the State Liability Amendment Act,
2011, and which are not satisfied within 30 days after the commencement of that
Act.
2.2.5 Ad clause 5:
Clause 5 contains the short title of
the Bill and provides for the commencement of the Act.
2.3 As the Constitutional Court
extended the period of suspension of constitutional invalidity of section 3 of
the Act to 31 August 2011, the Bill has to be passed by Parliament and
implemented before that date.
3. DEPARTMENTS/BODIES/PERSONS CONSULTED
3.1 The Bill was prepared in close
conjunction with National Treasury, being the main
role-player.
3.2 On 1 June 2009 a State
Liability Bill, 2009, was published in the Gazette for public comments.
The comments received were accommodated, where appropriate.
4. IMPLICATIONS FOR PROVINCES
The Bill seeks to regulate the manner
in which a final court order sounding in money against a department, including a
provincial department, must be satisfied.
5. FINANCIAL IMPLICATIONS FOR STATE
None.
6. PARLIAMENTARY PROCEDURE
6.1 The State Law Advisers and the
Department of Justice and Constitutional Development are of the opinion that the
Bill must be dealt with in accordance with the procedure established by section
75 of the Constitution since it contains no provision to which the procedure set
out in section 74 or 76 of the Constitution applies.
6.2 The State Law Advisers are of the opinion that it is not necessary to refer this Bill to the National House of Traditional Leaders in terms of section 18(1)(a) of the Traditional Leadership and Governance Framework Act, 2003 (Act No. 41 of 2003), since it does not contain provisions pertaining to customary law or customs of traditional communities.