Prescription of debts arising from unlawful administrative actions

In SA Broadcasting Corporation (SOC) Ltd and Another v Motsoeneng and Others (A2022/046784) [2024] ZAGPJHC 688 (30 July 2024), the High Court has cleared the confusion regarding prescription of debts arising from an unlawful administrative action. Significantly, in this matter, the Court was called upon to decide the question of when does a debt arising from an unlawful administrative act falls due? Is it when an organ of state forms the subjective opinion that the act was unlawful? or is it when a court sets aside the act, having been persuaded of its unlawfulness?

Briefly, the facts of this case were that, the SABC interim board under the leadership of the erstwhile COO, Mr. Hlaudi Motsoeneg, devised and implemented a scheme called “Mzansi Music Legends scheme”. The scheme was paying gratuities to music legends who were historically denied financial reward because of racially discriminatory practices. The payments which amount to R2.425 million were made between October 2016 and February 2017. A new interim board was appointed in March 2017, and it ordered forensic investigation in August 2017, and the forensic report was released on 3 August 2017. The forensic report provided that the Mzansi Music Legends scheme was irregular, and unlawfully adopted and implemented.

Following that report, the SABC and the SIU applied to the Special Tribunal to review and set the scheme aside. Wilson J noted that although the decision to implement the music legends scheme was an administrative action under PAJA, the SABC was not entitled to review its own decision in terms of that statute. This is because PAJA gives effect to section 33 of the Constitution, which affords private parties, and not the state, the right to just administrative action, together with the right to review unjust administrative action under PAJA. It followed from this that, notwithstanding the fact that the decision to implement the scheme constituted administrative action, the route to reviewing and setting the decision aside had to be through section 1 (c) of the Constitution.

The Special Tribunal delivered its ruling on 7 July 2020, and it declared the scheme unlawful for want of compliance with the SABC’s internal governance processes. However, the Special Tribunal refused to grant the relief that the R2.425 million that had been paid out under the unlawful scheme, had to be repaid. The reason for the refusal was that any repayment claim had prescribed because the debt fell due in August 2017 when the SABC received a forensic report identifying irregularities in the adoption of the scheme. The SABC appealed to the High Court, persisting with its repayment claim.

Wilson J held that, an unlawful administrative act stands as a fact and has legal consequences until it is set aside, then its setting aside must be one of the things that “must have happened” before the creditor can pursue their claim. The Court remarked that a party wishing to recover a debt that would be due but for an unlawful administrative act must first set that act aside before the debt can be claimed. The learned judge continued to say, the knowledge that the SABC had to acquire before the repayment claim fell due under section 12 (3) of the Prescription Act 68 of 1969 was not that the Mzansi Music Legends scheme was unlawful, but that it had been set aside. It follows that the setting aside of the administrative act is also a “fact” of which a creditor must be aware before a debt that would be payable but for the unlawful act falls due. The learned judge went on to say that the repayment claim did not fall due when the SABC formed the subjective view that the Mzansi Music Legends scheme was unlawful. It would only have fallen due once the decisions to make payments under the scheme had been set aside. The Court held that the Special Tribunal was accordingly mistaken when it held that the SABC’s repayment claim had prescribed.

The court refused to direct the respondents to repay the R2.425 million on the basis that the respondents did not personally benefit from the Mzansi Music Legends scheme, it is also not suggested that the scheme was adopted in bad faith or for some ulterior purpose. In the circumstances the Court held that the repayment relief is not just and equitable.

The presidential effect of this judgement is that debts arising from an unlawful administration action fall due only when the courts set aside the act, having been persuaded of its unlawfulness, and not when the organ of state forms the subjective opinion that the act was unlawful.