Van Schalkwyk and Others v Mkiva and Others ((2009) 30 ILJ 1266 (O)) [2007] ZAFSHC 151; [2007] ZAFSHC 69 (5 July 2007)

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[2007] ZAFSHC 151
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Van Schalkwyk and Others v Mkiva and Others ((2009) 30 ILJ 1266 (O)) [2007] ZAFSHC 151; [2007] ZAFSHC 69 (5 July 2007)
IN THE HIGH COURT
OF SOUTH AFRICA
(ORANGE
FREE STATE PROVINCIAL DIVISION)
Case No. : 1570/2007
In
the matter between:
PATRICIA
VAN SCHALKWYK
Applicants
AND
48 OTHER APPLICANTS
and
NP
MKIVA
(in her capacity as
THE
1
st
Respondent
CHIEF
FINANCIAL OFFICER: THE
PROVINCIAL
TREASURY, FREE
STATE PROVINCE
)
DR
BARLOW
(in her capacity as the
CEO
2
nd
Respondent
OF
THE DEPARTMENT OF FINANCE AND
EXPENDITURE, FREE
STATE PROVINCE
)
PHI
MAKGOE
(in his capacity as
MEC:
3
rd
Respondent
DEPARTMENT
FINANCE AND
EXPENDITURE,
FREE STATE PROVINCE
)
CORAM:
EBRAHIM
J
JUGDMENT:
EBRAHIM
J
HEARD ON:
24
MAY 2007
DELIVERED ON:
5
JULY 2007
BACKGROUND
[1] The applicants are
employees of the Department of Finance in the Provincial Government
of the Free State which is represented
in these proceedings by the
1
st
,
2
nd
and 3
rd
respondents. I shall refer in this judgment to the three respondents
conjunctively as “the Department”.
[2] During
2001 the Department underwent a restructuring process as a result of
which the salary levels of employees including that
of the applicants
was upgraded. In terms of the new structure posts which were
upgraded were accompanied by the appropriate salary
increases as
approved in October 2001 by the then MEC for Finance, one Dingane,
who is no longer in the employ of the Department.
Dingane not only
approved the increase in salaries but made the said increases
retrospective to 1 November 2001.
[3] The new salary
structures were implemented in December 2002 alternatively June 2003,
when in addition to receiving the new scale
salary in accordance with
the upgraded job descriptions, affected employees including the
applicants were paid the lump sum payment
due to them for the period
1 November 2001 to December 2002, colloquially known in the
Department as “back pay”.
[4] As is customary, a
standard letter informing the applicants of the upgrading and the
relevant accompanying increase in salary
in each case was sent to
each of them on 6 December 2002 by the Department. In the letter
their attention was drawn to the fact
that it was possible that
mistakes could have been made in the upgrading of posts and in the
event that this was discovered to be
the case, the Department would
rectify those mistakes and recover any excess amounts which may have
been paid to the applicants.
These facts were supported in evidence
by way of a copy of that letter annexed to the papers as “NMP1”.
[5] In 2003, during an
audit proceeding of the Department’s accounts by the Auditor
General for the 2002/2003 financial year, it
was discovered that the
retrospective payments of the salary increases made to the applicants
as part of the general body of those
employees affected by the
upgrading process, had been made in contravention of the relevant
Public Service Regulations. Pursuant
to this discovery in October
2003 a request was made to the National Minister of Public Service
and Administration, Mrs. Fraser-Moleketi,
for authority to condone
the breach of the said regulations. She however declined to do so in
a written response dated 15 September
2004 and instructed the
Department to reverse the retrospective payments and reclaim monies
already paid to affected employees including
the applicants in terms
of the provisions of section 38 of the Public Service Act 1994
(Proclamation 103/94) which provides the legal
machinery for the
recovery by State Departments of wrongly paid remuneration.
[6] On the papers before
me all of the above was common cause as too was the fact that the
Promotion of Administrative Justice Act
(PAJA) 2000 (Act 3 of 2000)
obliged the Department as an organ of State, to ensure that the
implementation of the decision to recover
the said remuneration was
effected in a manner which was procedurally fair namely since such a
decision affected the interests of
the applicants adversely, they
would have to be given a hearing before the salary overpayments were
recovered by the Department.
To that end they were invited by the
Department to make representations by way of a General Circular
(Circular 49 dated 25 October
2005) which was annexed to the papers
as exhibit “NPM3”. Subsequently various letters were exchanged
between the applicants
and the Department and discussions were held
by representatives of both parties. The applicants also consulted
their union and meetings
between the union representatives and
representatives of the Department took place during 2006. There are
numerous disputes on the
papers as to precisely what matters were
discussed and agreed between the parties during those meetings and
eventually, as a result
of continuous deadlock, the Department
addressed the applicants directly on 18 December 2006 calling upon
each of them to make individual
representations on the proposed
salary deductions within 30 days of the date of that letter, failing
which it would proceed to deduct
on a monthly basis, at the rate of
25% per month, the amount of the overpayment until the full amount
due and owing to the Department
had been settled in the case of each
applicant (annexure “J” and “NMP8”).
[7] During January 2007
the applicants each addressed a letter to the Department denying
liability for the debt and alleging that
the overpayment was made as
a result of a decision approved by the Department (through Dingane)
and accordingly they do not consent
to any deductions being made off
their monthly salary in reduction of such overpayment. On 29 March
2007, the Department by way
of letter to each of the applicants,
informed them of its decision to deduct an amount of R200,00 per
month in reduction of the debt
from their monthly salary, commencing
15 April 2007.
The
applicants thereafter lodged an application in this court on 13 April
2007 for a declaratory order interdicting the Department
from
utilising the provisions of section 38 of the Public Servants Act
1994 to deduct the amount allegedly wrongly paid to the applicants.

Although the application was initially brought on an urgent basis I
was asked not to adjudicate the question of urgency in the interest
of finality of this matter and in view of its importance to State
Departments. I shall accordingly confine myself in this judgment
to
the issues on the merits.
[8] THE PRINCIPLE
OF LEGALITY
8.1 There appears to be
no serious dispute on the papers that Dingane in authorising and
approving the new salary structures with
retrospective effect was
acting as a public functionary in exercising a public power or
performing a public function. This is so
despite obvious
contradictory allegations in respondents’ own answering papers,
that, he was acting as a mere executing authority.
No more need
therefore be said about this and I have accepted that it is common
cause between the parties that Dingane’s actions
fell foursquare
within the ambit of the definition of administrative action in
section 1(i) of PAJA which provides as follows:
“Any
decision taken or any failure to take a decision by
an organ of State when
exercising a power in terms of the
Constitution or a Provincial Constitution or
exercising a public power or
performing a public function in terms of any legislation; or
a natural or juristic person other
than an organ of State, when exercising a public power or performing
a public function in terms
of an empowering provision, which
adversely affects the rights of any person and which has a direct
external legal affect.”
8.2 It is trite that a
public authority taking administrative action must be authorised to
do so. If there is no authorisation for
the action in some or other
way the action taken will be unlawful. In
FEDSURE
LIFE ASSURANCE LTD AND OTHERS v GREATER JOHANNESBURG TRANSITIONAL
METROPOLITAN COUNCIL AND OTHERS
1998 (12) BCLR 1458
(Constitutional Court)
[1998] ZACC 17
; ;
1999 (1) SA 374
(CC) the
principle of legality was expressed as follows:
“
It is a fundamental principle of
the rule of law, recognised widely, that the exercise of public power
is only legitimate where lawful.
The rule of law – to the extent
at least that it expresses the principle of legality – is generally
understood to be a fundamental
principle of constitutional law. It
seems central to the conception of our constitutional order that the
Legislature and Executive
in every sphere are constrained by the
principle that they may exercise no power and perform no function
beyond that conferred upon
them by law. At least in this sense then,
the principle of legality is implied within the terms of the interim
constitution.”
See also
PHARMACEUTICAL
MANUFACTURERS ASSOCIATION OF SOUTH AFRICA AND ANOTHER IN RE EX PARTE
PRESIDENT OF THE REPUBLIC OF SOUTH AFRICA AND
OTHERS
[2000] ZACC 1
;
2000 (3) BCLR 241
(CC).
Legislation
is the most important source of authority. Section 6(2)(f)(i) of
PAJA provides as follows:
“
6 Judicial
review of administrative action
(2) A court or tribunal has the power
to judicially review an administrative action if-
(f) the action itself-
(i) contravenes a law or is not
authorised by the empowering provision;”
Consequently, not only
must a functionary exercise powers/take administrative action which
he is expressly authorised to take but
he must also only take such
action within the limits provided for in that source of authority.
Applying this principle
of legality to the facts of the present case, Dingane, in approving
the increase, was exercising powers
he was authorised to exercise
in terms of Regulation VC7 to the Public Service Act which
provides:
“
The
absorption of the incumbent employee in the higher graded post as
provided under regulation V.C.6 shall take effect on the first
day of
the month following during which the executing authority approves
that absorption.”
This Dingane was clearly
empowered to do. Unfortunately however in authorising the increases
to operate with retrospective effect,
he embarked on a course falling
outside the boundaries prescribed by the said Regulations and his
actions were clearly unlawful and
invalid and fell foul of the
constitutional requirement of just administrative action contained in
section 33 of the Republic of
South Africa Constitution Act 103 of
1996.
[9]
THE
ISSUES RAISED
Against this background
of unlawfulness and illegality the question which arises is whether
Dingane’s actions constitute grounds
for review, as contended for
by the applicants. The applicants have premised their quest for
relief in these proceedings on three
principal grounds:
9.1 that Dingane in
approving the salary increases with retrospective effect became
functus
officio
and therefore his actions could only be reversed on judicial review
and not unilaterally by the Department invoking the provisions
of
section 38 of the Public Service Act of 1994;
9.2 that principles of
fairness and equity dictated that the Department should not be
allowed to reverse the benefit; and
9.3 that the Department’s
right to reclaim the benefit had, in any event, prescribed.
I propose to deal with
these grounds
seriatim
.
AD 9.1 : THE
QUESTION OF JUDICIAL REVIEW
As authority for the
proposition that Dingane’s invalid administrative act could only be
set aside by a court of law in proceedings
for judicial review as he
was
functus officio
,
Mr. Daffue who appeared for the
applicants, referred me to the decision in
OUDEKRAAL ESTATES
(PTY) LTD v CITY OF CAPE TOWN AND OTHERS
2004 (6) SA 222
(SCA). It is necessary to give a synopsis of the facts of this case
in order that they may be clearly distinguished from those of
the
present case. The issue in the
OUDEKRAAL
-case was
whether and in what circumstances an unlawful administrative act
might simply be ignored and on what basis the law might
give
recognition to such an act. This issue arose against the following
factual background. The appellant was the owner of undeveloped
land
in respect of which the approval of the then Provincial Administrator
was required to establish a township. Such approval was
obtained and
the appellant thereafter took steps to develop the township. However
certain other requirements in terms of the Townships
Ordinance 33 of
34 relating to the lodging of a general plan of the proposed township
for the approval of the Surveyor General and
of the lodgement of the
approved general plan with the Registrar of Deeds had not been
complied with. This had to be done within
a prescribed period.
Extensions of time were granted by the Administrator only after the
expiry of the prescribed period. On this
basis the Cape Town
Metropolitan Council contended that the Administrator’s grant of
permission for the laying out of the township
had lapsed and any
extensions of time for compliance by the Administrator outside of the
prescribed period were
ultra vires
the Ordinance. On appeal,
the court confined itself in deciding the issue to the question
whether the administrator’s permission
for the establishment of the
township was lawful. In deciding that his approval was unlawful and
invalid at the outset for reasons
not necessary to set out here, the
court held that until such approval and any consequences flowing
there from, was set aside by
court in proceedings for judicial
review, it existed in fact and it had legally valid consequences
which could not simply be overlooked
and ignored. These would
continue to operate as long as the unlawful and invalid act was not
set aside.
In the present case
there can be no debate about the fact that Dingane on making the
salary increases retrospective in operation
became
functus
officio
. That is the reason why the Minister was approached to
condone and authorise the deviation from the regulations which she
declined
to do and instructed that the monies be recovered using the
provisions of section 38 of the Public Service Act 1994. The issue
at
hand is therefore a completely different one. It is whether the
Department was entitled to use a lawful measure in the form of
enacted
legislation to recover monies incorrectly paid as a result of
the functionary’s unlawful and invalid act. This legislation was
enacted to deal with precisely the kind of invalid administrative
action complained of. Section 38 of the Public Service Act of
1994
provides as follows:
“Wrongly granted
remunerations:-
1) If an incorrect salary
or scale of salary on appointment, transfer or promotion, or an
incorrect advancement of salary within the
limits of the scale of
salary applicable to his / her grading, was awarded or granted to an
officer or employee, or was awarded or
granted at the correct notch
or scale but at the time when or in circumstances under which it
should not have been awarded or granted
to him / her, the Head of the
Department in which that officer or employees is employed, shall
correct his / her salary or scale
of salary with effect from the date
on which the incorrect salary, scale of salary advancement
commenced, notwithstanding the provision
of Section 14 (3) paragraph
(a) and notwithstanding the fact that the officer or employee
concerned was unaware that an error had
been made in the case where
the correction amounts to a reduction of his / her scale of salary or
salary.
2) If an officer or
employee contemplated in subsection (1) has in respect of his / her
salary, including any portion of any allowance
or any other
remuneration or any other benefits calculated on his / her basic
salary or scale of salary or awarded to him / her by
reason of his /
her basic salary- ...
(b) been overpaid or
received any such other benefits not due to him / her:-
(i) an amount equal to
the amount of the overpayment shall be recovered from him / her by
way of the deduction from his / her salary
of such instalments as the
Head of the Department, with the approval of the Treasury, may
determine if he / she is in the service
of the State, or, if he / she
is not in the service, by way of deducting any monies owing to him /
her by the State, or by way of
legal proceedings, or partly in the
former manner or partly in the latter manner.”
One can only imagine the
chaos which would result in the everyday discharge of duties in State
Departments where quite naturally
errors can and do occur with
frequent regularity in regard to matters relating to salaries and
scales of salaries payable to individual
employees, if on each
occasion the error could only be rectified by a court of law in
review proceedings. In addition, if this was
the case, the situation
would reach untenable proportions for the State in the form of
serious financial losses being incurred by
the
fiscus
as it is
arguable that employees who benefited by incorrect salary payments
would not be overzealous in approaching the courts in
review
proceedings. The State would have to embark on litigation in every
single case claiming monies from employees who were unjustly
and
incorrectly enriched by State error. Undoubtedly this would mulct
the
fiscus
in unnecessary costs and would not be a practical
and sensible solution to the problem. It would effectively amount to
being “penny
wise and pound foolish”. The only possible solution
to assist the State to guard itself against such financial losses
would be
to enact suitable and proper legislation. Section 38 of the
Public Service Act of 1994 provides such a solution and to my mind
there
is no conceivable reason why its provisions should not be
invoked in the present case nor have the applicants advanced any such
reasons.
The applicants have clearly misconceived the decision in
OUDEKRAAL
as authority for the proposition that every
invalid administrative act can only be set aside in proceedings for
judicial review.
That is certainly not the ratio of that decision.
In addition the applicants have not advanced any other reasons
grounded in law
as to why the respondents should be prohibited from
using the legal machinery available to them in the form of section 38
to recover
the monies allegedly wrongly paid to them. In the
circumstances the application cannot be sustained on this ground.
9.2
AD : THE
PRINCIPLE OF FAIRNESS AND EQUITY
This ground is two
pronged:
9.2.1 The applicant
contends that to reverse the benefit would affect them adversely in
the calculation of annual performance bonuses
for the year 2001/2002.
This appears to be short-sighted and without foundation. Mr.
Modise, on behalf of the Department, informed
the court that the
Department has agreed not to interfere with or reduce any incremental
benefits which applicants received as a
result of their salaries
being increased from 1 November 2001. Such benefits will not then be
reclaimed and all deductions from
the applicants’ salaries will be
applied only in reduction of the lump sum “back pay”. I have no
reason to doubt that this
is in fact the case which therefore puts to
rest Mr. Daffue’s submissions of unfairness in this regard.
The second prong of
the fairness argument appears to raise questions surrounding the
Doctrine of Legitimate Expectation. In
this regard Mr. Daffue
submitted to this court that, in view of the length of time which
had elapsed, (five years) it would
be unfair and inequitable for
the Department to reclaim the overpayment as the applicants had
relied on the representation
that their salaries would be
increased and that such increase would operate retrospectively and
in so doing had harboured a
legitimate expectation that the monies
was theirs to spend and in fact did spend it. Two issues are
raised by this submission.
Firstly, does the doctrine apply in
the circumstances of this case and secondly, can it be used to
confer substantive protection
or grant substantive relief?
AD 9.2.2 : THE
DOCTRINE OF LEGITIMATE EXPECTATION
The doctrine of
legitimate expectation derives from English law and was first
introduced into South Africa in the case of
ADMINISTRATOR,
TRANSVAAL, AND OTHERS v TRAUB AND OTHERS
[1989] ZASCA 90
;
1989 (4) SA 731
(A).
It is now settled law in
this country that “a legitimate expectation could relate to
substantive benefits or advantage or privilege
which the person
concerned could reasonably expect to acquire or retain and which it
would be unfair to deny such a person without
prior consultation or a
prior hearing”. See
ADMINISTRATOR, TRANSVAAL, AND OTHERS v
TRAUB AND OTHERS
,
supra
. In this case Corbett CJ held
that it could also be described as an
“
expectation to be
accorded a hearing before some decision adverse to the interest of
the person concerned is taken”.
A legitimate expectation
is usually said to arise from an express promise or undertaking on
the part of a public authority or from
a regular practice which the
claimant can reasonably expect to continue. See
TETTEY AND
ANOTHER v MINISTER OF HOME AFFAIRS AND ANOTHER
1999 (1) BCLR
68
A - D;
PRESIDENT OF THE
REPUBLIC OF SOUTH AFRICA AND OTHERS v SOUTH AFRICAN RUGBY FOOTBALL
UNION AND OTHERS
2000 (1) SA 1
(CC);
1999 (10) BCLR 1059
(par. 229) (CC);
CLAUDE NEON LTD v
GERMISTON CITY COUNCIL AND ANOTHER
1995 (3) SA 710
(W).
In the circumstances of
this case the applicants wish to employ the doctrine in order to
generate substantive rather than procedural
rights. This aspect of
the doctrine appears not to have found favour in South African law.
See
SA VETERINARY COUNCIL AND ANOTHER v SZYMANSKI
2003
(4) BCLR 378
(SCA) at 382;
MEYER v ISCOR
PENSION FUND
2003 (1) ALL SA at 40 (SCA).
But even if I were to
assume for the purposes of this case in the applicants’ favour that
such substantive protection was available
to them, the application
must nevertheless fail as the requirements which have to be satisfied
for the legitimacy of the so-called
expectation have not been met.
In
NATIONAL DIRECTOR PUBLIC PROSECUTIONS v PHILLIPS AND OTHERS
2002 (1) BCLR 41
(W) Hehr J (as he then was) succinctly summarised
the requirements which have to be satisfied before an expectation can
be said to
be legitimate. At p. 77 of the judgment par. 27 he
states:
“A legitimate
expectation:
arises ‘where a person
responsible for taking a decision has induced in someone who may be
affected by the decision, a reasonable
expectation that he will
receive or attain a benefit or that he will be granted a hearing
before the decision is taken’”.
And further down that
such an expectation may arise
“
...
even from an express promise given on or behalf of a public authority
or from the existence of a regular practice which the claimants
can
reasonably expect to continue.”
At par. 28 of the
judgment the following is said:
“
The
law does not protect every expectation but only those which are
legitimate. The requirements for legitimacy of the expectation
include the following:
The representation
underlying the expectation must be
‘
clear,
unambiguous and devoid of relevant qualification’. ... The
requirement is a sensible one. It accords with the principle
of
fairness in public administration, fairness both to the
administration and the subject. It protects public officials against
the risk that the unwitting unambiguous statements may create
legitimate expectations. It is also not fair to those who choose to
rely on such statements. It is always open to them to seek
clarification before they do so, failing which they act at their
peril.
The expectation must be
reasonable.
The representation must
have been induced by the decision maker; and
The representation must
be one which was competent and lawful for the decisionmaker to make
without which the reliance cannot be
legitimate.”
The question then arises:
Does the representation on which the applicants rely that their
salary increases would operate retrospectively
meet these
requirements. Whilst in my view they do meet requirements 1 and 3,
the representation falls far short of the fourth requirement,
in
that, the promise of retrospective payment was clearly beyond the
scope and limit of the powers granted to Dingane in terms of
Regulation VC7. That being so that promise/representation was
incompetent and unlawful and invalid and that is the end of the
applicants’
case as their reliance upon that unlawful
representation cannot be and was not legitimate. Consequently their
expectation cannot
be legitimate. It is no defence to this bar for
the applicants to raise the argument that they were not aware of the
unlawfulness
of the representation/promise. That argument is
pertinent to the requirement of the reasonableness of the expectation
and not to
the legality of the representation and, in light of the
view I have taken on the question of the legitimacy of the
expectation it
is not necessary to decide the question of the
reasonableness thereof. The doctrine of legitimate expectation
cannot be applied
to prevent a public functionary from carrying out
his public duties lawfully. To accept such an expectation as being
legitimate
would in effect amount to a reliance on the functionary’s
dereliction of duty as being legitimate. See
PHILLIPS
-case
p. 78 at par. H.
Consequently on this
ground too, that is on the principle of fairness and equity, the
application cannot succeed.
AD 9.3 : HAVE THE
RESPONDENTS’ RIGHT TO RECLAIM THE BENEFIT PRESCRIBED?
The applicants contend
that on the undisputed facts any right which the respondents may have
had to revoke and reclaim the benefit
would have prescribed in
November 2005, alternatively in June 2006, depending on whether the
debt is taken to have fallen due at
the time the decision to increase
the salaries and make them retrospective was communicated to the
applicants, that is December 2002
or as at July 2003 when the report
of the Auditor General revealed for the first time the breach of
Regulation CV7. However, this
contention fails to take into account
the audi principle, which is the applicants’ rights to be heard
which was accorded to them
subsequent to these dates. It was only
once it became clear that the process of peaceful resolution through
representation had been
investigated and completed and no out of
court solution was possible did the Department acquire a complete
cause of action. See
SANTAM LTD v ETHWAR
[1998] ZASCA 102
;
1999 (2) SA
244
(SCA). The finalisation of the hearings only occurred in January
2007. The precise outcome of the hearings is not relevant for the
purpose of deciding the issue of prescription. What is important is
that the Department only acquired a complete cause of action
in
January 2007 when it became aware that the applicants did not consent
to the deductions being made off their salaries. That is
when the
debt to the Department became due. Consequently I hold that the
Department’s claim has not prescribed.
[10] The conclusion I
have come to is that the applicants’ case is unsustainable on all
of the grounds they have raised. As the
applicants are claiming
final relief they must demonstrate that they have a clear right to
the relief they seek. They have not done
so. The application is
accordingly dismissed with costs.
_____________
S. EBRAHIM, J
On
behalf of applicants: Adv. J.P. Daffue
Instructed
by:
Lovius
Block
BLOEMFONTEIN
On
behalf of respondents: Adv. Modise Khoza SC
Instructed
by:
State
Attorney
BLOEMFONTEIN
/sp