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[2009] ZASCA 174
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Minister of Finance v Golden Arrow Bus Services (Pty) Ltd (115/09) [2009] ZASCA 174; 2010 (4) BCLR 338 (SCA) ; [2010] 2 All SA 237 (SCA) (4 December 2009)
THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case number: 115/09
In the matter between:
THE MINISTER OF FINANCE APPELLANT
and
GOLDEN ARROW BUS SERVICES (PTY) LTD RESPONDENT
Neutral citation:
The Minister of
Finance v Golden Arrow Bus Services
(115/2008)
[2009] ZASCA 174
(4 December 2009)
CORAM: Mpati P, Snyders, Mhlantla, Bosielo JJA
et
Leach AJA
HEARD: 3 November 2009
DELIVERED: 4 December 2009
SUMMARY
: Constitutional law
â actions against State â satisfaction of orders of courts
sounding in money â whether
s 3
of the
State Liability Act 20
of 1957
provides for satisfaction of judgment debt as direct charge
against the National Revenue Fund.
ORDER
On appeal from
: Cape
Provincial Division (Binns-Ward AJ sitting as court of first
instance).
1. The appeal succeeds. Paragraphs 4 and 5 of the order
of the court a quo are set aside.
2. Paragraph 6 of the order of the court a quo is
amended to the extent that the words 'second respondent' are replaced
with the
words 'first respondent'.
JUDGMENT
MPATI P
(Snyders,
Mhlantla, Bosielo JJA
et
Leach AJA concurring):
[1] This appeal concerns the question whether the
provisions of
s 3
of the
State Liability Act
1
('the
Act') may be construed as an appropriation by an Act of
Parliament in terms of which money may be withdrawn from the National
Revenue
Fund (âthe Fundâ), or as providing for a direct charge
against the Fund, as contemplated by s 213(2) of the Constitution,
2
for purposes of satisfying court orders against the State sounding in
money.
[2] The respondent is a bus company which operates a
commuter passenger transport business for the public in the urban and
suburban
areas of the Cape Metropolitan area. In terms of an
agreement concluded between the respondent and the State as
represented, amongst
others, by the Minister of Transport, the State
undertook to assist commuters financially by way of a passenger
subsidy paid to
the respondent. The subsidy agreement was concluded
in or about March 1997.
[3] It is not in dispute that by January 2009 an amount
of R94 505 098.24 was due to the respondent in terms of the
agreement.
On 15 January 2009 the respondent, as applicant, obtained
an order in the Cape High Court, by agreement between it and the
Minister
of Transport, the present appellant, the Government of the
Republic of South Africa and the Member of the Executive Council for
the Department of Public Transport, Roads and Works for the Western
Cape Province (MEC) as first, second, third and fourth respondents
respectively. The order declared, in paragraph 3, that â
'The Third Respondent,
represented by the First Respondent, is in law liable to make funds
available in the aforesaid amounts to
the Fourth Respondent for
payment to the Applicant . . . subject to compliance by the Applicant
with its obligations in terms of
the contract.'
It appears that due to lack of funds in the Department
of Transport the moneys admittedly owed to the respondent in terms of
the
court order were not paid.
[4] On 23 January 2009 the respondent instituted motion
proceedings against the same parties, seeking, inter alia, the
following
order:
'1. . . .
2. That the amount of
R94 505 098.24 . . . forthwith and in any event before
16h00 on Friday 30 January 2009 be paid to
the Applicant by the First
and/or Second and/or Third Respondent, jointly and severally, from
the National Revenue Fund, in accordance
with the provisions of
section 3
of the
State Liability Act
. . ..
3. . . .
4. Directing the Second
Respondent [the present appellant], insofar as he may be requested to
do so by the First and/or Third Respondent
to forthwith and
immediately pay, alternatively, to forthwith and immediately do what
is necessary to effect payment of the said
amount referred to in
paragraph 2 above from the National Revenue Fund in order to satisfy
the Court Order.
. . . .'
In an affidavit filed in response to the respondent's
claim, Ms Mpumi Mpofu, on behalf of the Minister of Transport and the
Government
of the Republic of South Africa, supported the respondent
and stated that 'the amounts payable in terms of the Order (of 15
January
2009) have to be paid out of the National Revenue Fund'. The
deponent, who was the Director-General of the Department of
Transport,
also averred that the Minister of Transport 'does not have
funds available to pay over to the [MEC] with which to pay the
[respondent]
and is unable to move funds within his budget in order
to make funds available to pay the [respondent]'.
[5] The Cape High Court (Binns-Ward AJ) granted judgment
in favour of the respondent against the Minister of Transport in the
amount
claimed.
3
In addition, the court ordered as follows:
'4. It is declared that the
[appellant] is not prohibited by the provisions of s 213(2) of the
Constitution or
s 15(1)(a)
of the
Public Finance Management Act 1 of
1999
from effecting immediate payment of the judgment debt . . . from
the National Revenue Fund upon the request of the [respondent]
and/or
the [Minister of Transport].
5. In the event of payment of
the aforementioned judgment debt not being effected promptly upon
request, the [respondent] is granted
leave to apply for such further
relief as it might be advised to seek upon the same papers duly
supplemented and upon appropriate
notice to the affected parties.
6. The [appellant] is ordered to
pay the [respondent's] costs of suit, including the costs of two
counsel.'
The appellant now appeals against paragraphs 4, 5 and 6
of that order with leave of the court below.
[6] The respondent has taken no part in this appeal.
Counsel for the appellant informed us, during argument, that the
judgment debt
has been settled in full. That the respondent did not
oppose the appeal is, therefore, not surprising. For these reasons
and by
reason of the latest judgment of the Constitutional Court in
Minister for Justice and Constitutional
Development v Nyathi
4
(
Nyathi 2)
it
was enquired of counsel whether the issue in this appeal had not
become moot.
5
Counsel urged upon us that we should hear the appeal because of the
possibility of other judgment creditors of the State, on the
authority of the order of the court below, seeking satisfaction of
their judgment debts against the State directly from the Fund
in
future. In addition, counsel submitted that in the court below the
appellant, although conceding that he was a party to the
consent
order of 15 January 2009, denied that he consented to be liable to
any payments of moneys in terms of the court order.
In granting the
order sought by the respondent, however, the court below did not deal
with the appellant's objection. In this court,
counsel persisted with
that issue. I shall assume, without deciding, that the citing of the
appellant in the proceedings in the
court below was in order.
[7]
Section 3
of the
State Liability Act provides
that:
'No execution, attachment or
like process shall be issued against the defendant or respondent in
any such action or proceedings
or against any property of the State,
but the amount, if any, which may be required to satisfy any judgment
or order given or made
against the nominal defendant or respondent in
any such action or proceedings may be paid out of the National
Revenue Fund or Provincial
Revenue Fund, as the case may be.'
The Fund, established in terms of s 213(1) of the
Constitution, is a fund into which all money received by the national
government
must be paid, except money reasonably excluded by an Act
of Parliament. Section 213(2) reads:
'Money may be withdrawn from the
National Revenue Fund only â
(a) in terms of an appropriation
by an Act of Parliament; or
(b) as a direct charge against
the National Revenue Fund, when it is provided for in the
Constitution or an Act of Parliament.'
I do not intend to analyse the judgment of the court a
quo in depth, but, despite the disadvantage of this court not having
had
the benefit of argument from the respondent, I endorse the
finding that s 3 of the Act, although it identifies the Fund 'as
a source from which the State's judgment debts may be paid . . .
contains nothing having the effect of an appropriation of funds
for
that purpose'.
6
Section 3, therefore, does not qualify as 'an appropriation by an Act
of Parliament' as envisaged in s 213(2)(a) of the Constitution.
[8] The Fund is administered and controlled by the
National Treasury, which, in terms of the
Public Finance Management
Act (PFMA
),
7
'must enforce compliance with the provisions of Section 213 of the
Constitution' (s 11(1)). National Treasury consists of
the
appellant, as head of Treasury, and his department or departments
responsible for financial and fiscal matters (s 5(1)).
(It was
perhaps for this reason, ie for the reason that the appellant is head
of Treasury, and the fact that the respondent sought
satisfaction of
the judgment debt as a direct charge against the Fund, that the
appellant was cited as a respondent in the court
below.)
[9] Section 15 of the PFMA is in the following terms:
'Withdrawals and Investments
from National Revenue Fund
(1) Only the National Treasury
may withdraw money from the National Revenue Fund, and may do so only
â
(a) to provide funds that have
been authorised â
(i) in terms of an
appropriation by an Act of Parliament; or
(ii) as a direct charge against
the National Revenue Fund provided for in the Constitution or this
Act, or in any other Act of
Parliament provided the direct charge in
such a case is listed in Schedule 5;
(b) to refund money invested by
a province in the National Revenue Fund; or
(c) to refund money incorrectly
paid into, or which is not due to, the National Revenue Fund.
(2) A payment in terms of
subsection 1(b) or (c) is a direct charge against the National
Revenue Fund
(3) . . ..'
Four Acts of Parliament are listed in Schedule 5 to the
PFMA. The schedule provides that payments in terms of those Acts (or
certain
of their provisions) are direct charges against the Fund. The
Act is not one of them.
[10] I agree, therefore, with the following statement by
the court a quo:
'The PFMA does not contain
within itself any provision that justifies the characterisation of
judgment debts against the State as
direct charges against the [Fund]
and the
State Liability Act is
not an Act listed in Schedule 5 to the
[PFMA].'
8
The court went further and said that (a) in the absence
of a constitutional challenge to the proviso to
s 15(1)(a)(ii)
of the PFMA, a judgment debt 'might only be regarded as a direct
charge against the [Fund] if it is provided for in the
Constitution';
9
(b) it does not follow that the label 'direct charge' must be
expressly attached in the text of the Constitution for provision
of a
debt of the State of that nature to arise by virtue of the
Constitution;
10
and (c) absent special provisions identifying an alternative source
of payment in respect of such debts, the funding for the satisfaction
of the State's creditors must be the Fund.
11
In respect of the proposition in (c) the court found the basis for it
in the provisions of s 165(5) of the Constitution, which
read:
'An order or decision issued by
a court binds all persons to whom and organs of State to which it
applies.'
The court said the following in this regard:
'Judgments sounding in money
obviously fall within the ambit of orders or decisions referred to in
s 165(5). If such orders or decisions
were not to form a direct
charge on government funds, the authority of the courts, established
in terms of s 165 of the Constitution,
would be undermined and if the
efficacy of the courts' decisions in regard to judgments sounding in
money against the State were
rendered subject to permissive authority
by another arm of government, namely the legislature, by the adoption
of appropriating
legislation, the separation of powers between the
judicial, legislative and executive arms of government, which is part
of the
basic Constitutional framework of government in South Africa,
would be contradicted.'
12
[11] I share the concerns expressed by the learned judge
that the provisions of s 165(5) of the Constitution would be
rendered
nugatory if the binding nature of orders or decisions of
courts did not denote an obligation on all those to whom they are
directed,
to comply with them. And it is because of this concern that
the Constitutional Court has, by a majority, held s 3 of the Act
to be inconsistent with the Constitution to the extent that it does
not allow for execution or attachment against the State and
'
does
not provide for an express procedure for the satisfaction of judgment
debts
'.
13
(My emphasis.) It is true that in
Nyathi 1
the
Constitutional Court did not deal directly with the question whether
or not s 3 of the Act makes provision for satisfaction
of court
orders sounding in money. The court dealt with the issue of the
constitutionality of s 3 in the context of its direction
that no
execution or attachment shall be issued against State property.
[12] But certain observations in the majority judgment
of Madala J are of significance. With regard to the proper
interpretation
of s 3 Madala J said:
'Section 3 of the Act prevents
attachment of State assets but provides for claims to be made against
the funds. In regard to claiming
from the funds, there are various
procedures in the PFMA and Treasury Regulations which are supposedly
designed to assist a judgment
creditor in claiming from the funds.'
14
(The 'funds' referred to are the National and Provincial
Revenue Funds.) The court then refers to s 76(1)(h) of the PFMA,
which
enjoins National Treasury to make regulations or issue
instructions, to be applicable to all departments, concerning 'the
settlement
of claims by or against the State'
15
and concludes that (a) the section does not contain any procedures
relating to how orders of courts are to be settled and (b) that
the
legislature must set out the procedures required for the
implementation of the State's obligations, as dictated by the
Constitution.
16
[13] The 'obligations' referred to are obviously those
envisaged by S 165(5) of the Constitution, viz that court orders
must
be respected and given effect to. That, in my view, is the
import of the stipulation that an order or decision issued by a court
binds all persons
. It
is thus clear from the decision of the Constitutional Court in
Nyathi
1
that although s 3 of the Act might
provide for claims to be made against the Fund for payment of
judgment debts, no procedures
exist for the processing of such
claims. In this regard Madala J concluded thus:
'[I]t is my view that the
legislature should be allowed to introduce mechanisms that would
enable a judgment creditor to execute
against the funds. The
legislature is in the best position to make this decision and also to
integrate any policy changes that
would then have to be made. The
separation of powers doctrine needs to be respected and due deference
afforded to the other arms
of government, especially when the matter
relates to complex procedures beyond the expertise of this court.'
17
The effect of the declarator by the court a quo in
paragraph 4 of its order, that the appellant is not prohibited by
s 213(2)
of the Constitution, or s 15(1)(a) of the PFMA,
from effecting immediate payment of the judgment debt owing to the
respondent
goes squarely against what was said by Madala J in
Nyathi
1.
It must be remembered that the
Constitution does not make provision for the manner in which the Fund
is to be administered. The
PFMA does â it was enacted for that
purpose.
18
One can only imagine the difficulties which would be encountered in
the proper management and control of the Fund were effect to
be given
to the order of the court a quo without there being mechanisms and
procedures in place so as to enable judgment creditors
of the State
to claim satisfaction of their judgment debts from the Fund. It
follows that the orders in paragraphs 4 and 5 of the
order of the
court a quo cannot stand.
[14] I have come to this conclusion without having given
consideration to the correctness or otherwise of the basis upon which
the
court a quo found that court orders or decisions are a direct
charge against the Fund. I am reluctant to attempt to deal with that
issue when argument from only one side was presented before us. I may
mention, however, that I find it difficult to understand
how the
court a quo, after having made the observation that 'but for the
provisions of the PFMA s 3 of the [Act] would undoubtedly
by
itself have given rise to the characterisation of judgments sounding
in money being direct charges on the [fund],'
19
could still find, via s 165(5) of the Constitution, which has
nothing to do with the characterisation of court orders, that
judgments sounding in money are direct charges against the Fund. It
seems to me that in the absence of any challenge to the
constitutionality
of the proviso to s 15(1)(a)(ii) of the PFMA,
which restricts direct charges against the Fund to those provided for
in other
Acts of Parliament listed in Schedule 5 to the PFMA, s 3
of the Act does not qualify as providing for a direct charge against
the Fund.
[15] Moreover, the Constitution itself (s 213(2)(b))
states emphatically that money may be withdrawn from the Fund only as
a direct charge against it 'when it is provided for in the
Constitution or an Act of Parliament'. The Constitution then makes
provision,
in a number of sections, for what constitutes a direct
charge against the Fund and Provincial Revenue Fund.
20
It would be quite strange if the drafters of the Constitution had
intended, under s 165(5), for orders or decisions of courts
sounding in money to be paid as a direct charge against the Fund not
to have said so.
[16] As I have mentioned above, the respondent took no
part in this appeal. It consequently incurred no costs on appeal. As
to the
costs in the court below, the respondent, which was in a
desperate situation of facing insolvency as a result of a failure, on
the part of the State, to pay what was admittedly owed to it, merely
sought to enforce its rights. Whether or not it should have
cited the
appellant is of no consequence, in my view. The appellant was part of
Government and head of National Treasury, which
is responsible for
the management and control of the Fund, from which the respondent
believed he should have been paid. I do not
consider that it would be
fair to burden it with the appellant's costs in those circumstances.
[17] In the result, the following order is made:
1. The appeal succeeds. Paragraphs 4 and 5 of the order
of the court a quo are set aside.
2. Paragraph 6 of the order of the court a quo is
amended to the extent that the words 'second respondent' are replaced
with the
words 'first respondent'.
â¦â¦â¦â¦â¦â¦â¦
..
L MPATI P
JUDGE OF APPEAL
Counsel for Appellant: I A M Semenya
A L Platt
Instructed by: The State Attorney
Johannesburg
Correspondents: The State Attorney
Bloemfontein
Counsel for Respondent: No appearance
1
20 of 1957.
2
The Constitution of the Republic of South Africa,
108 of 1996.
3
3
The judgment is reported sub-nom
Golden Arrow Bus Services (Pty) Ltd v
Minister of
Transport
and others
2009 (5) SA 322
(C).
4
[2009] ZACC 29.
5
The
Nyathi
2
judgment has crafted certain procedures
to ensure that judgment debts against the State are enforced.
6
Above n 3 para 13.
7
1 of 1999.
8
At para 17.
9
Ibid.
10
At para 18.
11
At para 22.
12
At para 24.
13
Nyathi v MEC for Department of Health, Gauteng
2008 (5) SA 94
(CC). (
Nyathi 1
)
14
At para 53.
15
At para 55.
16
At para 56.
17
At para 88.
18
See the preamble to the PFMA which reads: 'To
regulate financial management in the National Government; to ensure
that all revenue,
expenditure, assets and liabilities of that
government are managed efficiently and effectively; to provide for
the responsibilities
of persons entrusted with financial management
in that government; and to provide for matters connected therewith.'
19
At para 26.
20
See sections 58(3), 71(3), 77(1)(d), 117(3),
120(1)(d), 120(2)(d), 213(3), 226(3) and 226(4)(a).