Municipality and government employees proportionately liable for finance management laws breach

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Patrick Bracher | Partner | Norton Rose Fulbright South Africamail me |


Pikitup Johannesburg SOC Limited v Nair

Where a former managing director of a municipal entity was sued by that entity for alleged breach of the Municipal Finance Management Act 2003 (MFMA) it was held that she was entitled to join 19 other municipal officials on the ground that they were allegedly joint wrongdoers and equally liable to the municipality if she herself was liable for breach of various responsibilities whilst she was in office.

The claim of R2,969,489 was founded on section 176(2) of the MFMA. Section 176(2) creates a statutory remedy that entitles a municipality to recover from political office bearers or officials any loss or damage caused by the deliberate or negligent unlawful actions of that person when performing a function of office, unless done in good faith.

The section provides a statutory remedy independent of the common law of delict or contract or any other statutory remedy. All the functionaries who are guilty of unlawful action which results in the loss claimed can be held liable as joint wrongdoers in respect of the claim if they acted unlawfully and contributed to the loss. A joint wrongdoer who is sued for the full amount of the plaintiff’s loss may recover a contribution from all fellow joint wrongdoers. This right of contribution also relates to the statutory claim.

Permitting the defendant to claim a contribution from other joint wrongdoers rather than allowing those joint wrongdoers to be shielded from a claim serves the objects and purposes of the MFMA. If the municipality were allowed to single out one individual for pursuit under section 176(2) this decision would be subject to review. There is no good reason why the municipality should be allowed to choose a single official with the result that other officials equally culpable can escape scot-free as a consequence. The court therefore allowed the defendant to continue with her claim for a contribution from the other alleged joint wrongdoers.

A similar principle should apply to other statutory liabilities such as liability under section 218(2) of the Companies Act.


 

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