ATC110602: Report on State Liability Amendment Bill [B2 - 2011]

Justice and Correctional Services

Report of the Portfolio Committee on Justice and Constitutional Development on the State Liability Amendment Bill [B2 - 2011], dated 2 June 2011:

 

The Portfolio Committee on Justice and Constitutional Development, having considered the State Liability Amendment Bill [B2-2011], reports the Bill with amendments [B2A-2011].

 

The Committee further reports as follows:

 

1.       The State Liability Amendment Bill [B2 - 2011] was referred to the Portfolio Committee on Justice and Constitutional Development on 4 February 2011. 

 

2.       The Bill addresses a declaration of constitutional invalidity, which has been suspended until 31 August 2011. Remedial legislation must be finalised and implemented before then. Specifically:

 

2.1.             On 2 June 2008, the Constitutional Court, in Nyathi v Member of the Executive Council of Department of Health, Gauteng and Another 2008 (5) SA 94 (CC), declared section 3 of the State Liability Act 20 of 1957, as amended, unconstitutional to the extent that the section, which prohibits attachment, execution or any similar process against state property for judgment debts sounding in money, did not allow for an express procedure for the satisfaction of judgment debts. The Court, however, suspended the declaration of invalidity for 12 months to allow Parliament to pass legislation providing for the effective enforcement of court orders.

 

2.2.             On 1 June 2009, 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 Constitutional Court extended the period of suspension to 31 August 2009. Then, on 31 August 2009, the Court once again extended this period to 31 August 2011 to allow the Minister to introduce a State Liability Amendment Bill in Parliament and for Parliament to consider it.

 

2.3.             In the meantime, to provide judgment creditors with relief, the Constitutional Court also provided an interim solution to apply where there are final orders against national and provincial departments for the payment of money:

 

2.3.1.        If a final order against a national or provincial department is not satisfied within 30 days, then a judgment creditor can serve the court order on the relevant national or provincial treasury, the accounting officer of the relevant department and on the related executive authority.

2.3.2.        The relevant treasury has fourteen days after the court order is served on it, to settle the debt or make suitable arrangements with the judgment creditor to payoff the debt.

2.3.3.        If, however, the relevant treasury fails to settle the debt or make acceptable arrangements within this time, the creditor can attach the moveable property of the department concerned.

 

3.        The Committee established from the National Treasury that this procedure has been working effectively. Departments have settled their judgment debts and, to date, the National Treasury has not had to satisfy any amounts on behalf of a responsible department. The Committee therefore supported the continuation of this practice and supported amendments to the Bill to this effect.

 

4.        The Committee, however, wishes to emphasise that Treasury’s role is ‘administrative’ – departments should not see the Bill’s provisions as removing their responsibilities towards judgment creditors. Regarding the availability of funds to settle judgment debts, the Committee is of the view that departments should foresee that they may incur such liabilities and budget accordingly.

 

5.       The Bill applies to national and provincial departments, but the Committee is aware that the concept of state is much broader. Furthermore, over the years, other legislation has incorporated the State Liability Act to prevent execution against the property of various state bodies that are not departments. The Committee is of the view that the question of the application of the State Liability Act is complex and requires consultation with stakeholders and the public. The Committee, therefore, requests that the Minister conducts further research on the question of the application of the State Liability Act, consulting with the necessary stakeholders, and reports to Parliament on his findings within 24 months of the adoption of this report by the National Assembly. Although the Committee is aware that the State Liability Act does not apply to local government, it believes that when conducting his research, the Minister should also consider the position of this sphere of government and report to Parliament accordingly.

 

6.       The Committee acknowledges that managing litigation against the state has many challenges but wishes to highlight that the consequences to judgment creditors who are not paid what they are owed can be devastating: The Nyathi case starkly illustrates this.

 

7.       The Committee learnt of several cases where default judgment had been taken as the relevant department was unaware that a summons or notice had been served. The State Attorney then became involved to rescind the judgment. To prevent this, the Committee has inserted an amendment providing that where an executive authority of a department is cited as nominal defendant, the summons or notice must be served on the State Attorney as well.

 

Minority view of the Inkatha Freedom Party (IFP)

 

8.       The Inkatha Freedom Party (IFP) expressed its concern about:

 

8.1.1.        the constitutionality of sub-clauses 11(e), (f) and (g), as they purport to require the relevant treasury to disregard the appropriation law and the constitutional schema of which such law is a part; and

8.1.2.        limiting execution to moveable property only, as the IFP believes that execution of immoveable property would be less disruptive on public service delivery on account of its longer timeframes.

 

Report to be considered