Getting payment out of the state is an extreme challenge for creditors at the best of times. But those creditors dealing with public schools as debtor should be even more cautious.

This is in light of the case of BASTIAN FINANCIAL SERVICES (PTY) LTD v GENERAL HENDRIK SCHOEMAN PRIMARY SCHOOL (SCA), the judgment of which was delivered in May 2008 by the Supreme Court of Appeal, the highest court in the country on non-constitutional issues . While there is a minority judge, Hurt JA, who decided that the state was liable for Section 21 school’s contractual liabilities – the majority of the court held that the state WAS NOT liable for the school’s contractual obligations, only their delictual liability.

The bottom line is that you can’t sue the state if you have Section 21 schools not paying for your goods and/or services and you would have to sue the school alone, in it’s capacity as a legal entity in terms of the SA Schools Act, for it’s contractual obligations.

To quote from the judgment:

 “The public school itself, and not the State, is therefore liable for the fulfilment of a public school’s contractual obligations – the other party to the contract cannot, as it were, rely on some sort of ‘warranty’ by the State that the school will perform its obligations under contracts which have been lawfully concluded.”

The court also referred to the 2005 amendments in the SA Schools Act which limits the right of a creditor to attach the assets of a school:

“It is perhaps important to note that, with effect from 26 January 2006, the risk of essential school equipment such as textbooks, classroom furniture, teaching materials, sporting equipment and the like being attached and sold in execution of the school’s judgment debts no longer exists.”

This is in terms of Section 58A(4) of the SA Schools Act which reads: “The assets of a public school may not be attached as a result of any legal action taken against the school”