The second respondent (pension fund) obtained judgment against the first respondent (municipality) for payment of R4,267,920.96 plus interest and costs on 18 July 2001. A writ for attachment and execution was issued and an execution sale of virtually all the municipality's movable assets was scheduled for 26 September 2001. The pension fund's claim arose from the municipality's failure to pay over pension contributions that had been deducted from employees' monthly salaries. The appellant, a resident and property owner in Parys (within the municipality's jurisdiction), intervened and applied to the Free State Provincial Division to stop the execution sale and set aside the writ of execution. He argued that no such execution sale could take place given the provisions of section 3 of the State Liability Act 20 of 1957. He obtained an interim order to this effect on 20 September 2001 pending final adjudication. Acting Judge Knoetze ruled against the appellant and lifted the interim order with costs. The appellant appealed with leave from the Supreme Court of Appeal.
The appeal was dismissed with costs. The Registrar of the Supreme Court of Appeal was requested to refer the appeal record and judgment to the Director of Public Prosecutions in light of the observations made in paragraph 4 concerning the municipality's failure to pay over pension contributions (which constituted a criminal offence).
A municipality does not fall within the concept of 'State' in the State Liability Act 20 of 1957, and its assets and property are susceptible to attachment and execution sale. The essential provisions of the State Liability Act (sections 1, 2 and 3) indicate that the state liability dealt with by the Act is the liability of central or provincial government only. The liability of municipalities is not mentioned regarding the causes of action, as possible defendants, or as the paying party, and is therefore excluded by necessary implication. The Act makes no provision, unlike for central or provincial government, from which source a municipality's liability must be satisfied - a clear indication that the legislature never contemplated the satisfaction of municipal debts in the Act.
The Court observed that where the wording of legislation is clear and leaves no room for doubt, an interpretation that would bring municipalities within the protection of section 3 would amount to legislative amendment rather than interpretation, which a court has no power to do in cases where the constitutionality of the statutory provision is not in dispute. The Court also noted with concern the municipality's conduct in deducting pension contributions from employees' salaries but failing to pay these over to the pension fund and using them for 'other purposes', which constituted a criminal offence under section 37(a) and (i) of the Pension Funds Act 24 of 1956. This concern led to the direction that the matter be referred to the Director of Public Prosecutions.
This case authoritatively establishes that municipalities do not fall within the definition of 'State' for purposes of the State Liability Act 20 of 1957. It clarifies that municipal assets and property are subject to attachment and execution, unlike assets of the central or provincial government. The judgment is important for understanding the distinct legal status of municipalities as a sphere of government and the limitations on the protection afforded by the State Liability Act. It has significant implications for creditors seeking to enforce judgments against municipalities and for municipal financial management.