With the new amendments to the Institution of Legal Proceedings Against Certain Organs of State Act, it seems creditors will have to gear themselves for more delays in recoveries against the State.
Litigation against the State can be a tedious time consuming process. As Attorneys who specialise, inter alia, in Insurance law and specifically recoveries for insurers we understand that “turnaround time” on claims is a very important issue. It is all part and parcel of client satisfaction and the “Treating Client’s fairly” standards to which the insurer must account.
Unfortunately recoveries against the State is not so simple and usually take much longer than normal recoveries. This causes massive frustration for the Attorney, who has to account to the insurer (Attorneys’ client) but also in turn causes frustration for the insurer who has to account to the broker and the broker who in turn has to account to the insured.
In order to minimise this chain of frustration it is important to take note of the provisions of Act 40 of 2002 and the new amendments to the act, which might cause even further delays in these types of recoveries.
Notice in terms of Act 40 of 2002:
Commonly referred to as the “Section 3 Notice” – this notice is a Letter of Demand in which the creditor will state the facts on which it bases the claim against the state, why the state is liable for it and how much the state owes the creditor.
In order to avoid delays after litigation it is imperative to note that the Act specifically states that this Notice MUST be served on the relevant state department within 6 months of the incident which gives rise to the creditor’s claim. In Insurance motor vehicle recovery matters this will typically be 6 months after the motor vehicle collision occurred.
If this notice is not delivered within 6 months, the creditor may apply to Court to condone the late filing of this notice. This causes a massive delay in the recovery process. It is not a simple application to be taken lightly, it is a substantive application in which the applicant must persuade the court to grant it leave to proceed with the matter. The application may also be opposed by the State Attorney.
In the very recent matter of HL v MEC for Health of the Freestate Provincial Government  1 All SA 522 (FB) the court was asked by the Applicant to condone the late filing of her “Section 3” Letter of demand. It is interesting to note that in this matter the notice was served on the State after legal proceedings were already instituted and some 2 years after the incident. The Applicant was claiming from the MEC for Health in her capacity as mother and legal guardian of her minor son. She claimed that her son had suffered substantial brain damage due to her prolonged labour and the MEC’s employees’ failure to give her proper medical attention. The application for condonation for the late filing of the Section 3 Letter of demand was brought at the day of the trial. The State Attorney wrote to the Attorney for the applicant before the proceedings to indicate that the application will not be opposed. It seems on the day of the hearing the State Attorney received instructions to indeed oppose the application.
The Court was thus asked to decide whether the State Attorney was entitled to withdraw from its undertaking and whether the condonation application should be heard on an unopposed basis. Secondly if the Court found that it was entitled to oppose the application then, was a proper case made out for the condonation.
On the first issue Murray AJ held that the letter from the State Attorney did not create an agreement from which the respondent could not withdraw. The application thus proceeded on an opposed basis.
When considering the merits of the application and the question whether a proper case was made out for the condonation to be granted the Court exercised its discretion, but held that its discretion is “not unfettered”. Section 3(4)(b) allows the Court to grant condonation when it is satisfied that:
- The Applicant has established that the debt has not been extinguished by prescription;
- That good cause exists for the failure by the creditor and
- The organ of state was not unreasonably prejudiced by the failure.
The first question is a factual question which is easily established, however the second and third factors are not as uncomplicated.
The Court referred to the matter of Premier, Western Cape Provincial Government NO v BL  1 aLL sa 465 (SCA) where the Court found that the applicant’s socio-economic background and the difficulties she faced in ascertaining the facts on which her case is based is a good consideration of “good cause” which exists for the failure to give the notice. Interesting on this issue that it seems to move away from the stringent mind-set that “ignorance of the law is not a defence in law”.
With regards to the final consideration to be made by the Court the Court held that the Prejudice suffered by the State was not so unreasonable that the applicant and her minor child should be penalised for that by depriving them of the opportunity to state their case in Court. Condonation was thus granted as prayed for.
It is thus confirmed by the above case law that it is possible for a Claimant to bring an application for condonation even in circumstances where no notice was served prior to litigation commencing. I think, though, that litigants must be wary to make this the norm rather than the exception especially in order to avoid delays and costly applications.
Important new amendments to Act 40 of 2002 to take note of:
There has been two further amendments to Act 40 of 2002 which must be noted:
- Section 5(2) of the Act prior to amendment, barred a Plaintiff from issuing a Summons within 30 days after the Section 3 Letter of Demand was delivered to the relevant organ of state. The new amendment to Section 5(2) bars a Plaintiff for 60 days, unless if the Organ of State repudiates the Claim or denies liability in writing before expiry of the 60 days, then the Plaintiff may proceed with the Summons before expiry of the 60 days. Effectively thus after the Section 3 Letter of demand was served on the relevant state organ a Plaintiff must wait 2 months before it issues the Summons.
- Prior to the amendments to Act 40 of 2002 a Plaintiff could, as allowed by the Court Rules, issue a Summons in the jurisdiction either:
- Where the course of action arose or
- The Defendant has its principal place of business.
The Amendments to the Act however now included a Section 5(4) to the Act which bars a Plaintiff from issuing a Summons anywhere other than where the course of action arose, unless if the State Attorney consents to another jurisdiction in writing.
So in order to comply with the provisions of Act 40 of 2002 and in order to avoid unnecessary delays one must:
- Serve a letter of demand on the relevant state department within 6 months of the incident occurring;
- Wait for 60 days before you issue the Summons, if the state does not deny liability before the expiry of the 60 days;
- Ensure that you issue the Summons out of the Court with jurisdiction over the course of action.
By Marguerite Kirchner