Case CCT 13/17 
[2018] ZACC 20
Hearing Date: 02 December  2017

Judgement Date: 05 July 2018

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On 5 July 2018 at 10h00 the Constitutional Court handed down a judgment in an application by the Minister of Justice and Constitutional Development (Minister) and the Chief Master of the High Court of South Africa (Chief Master) for leave to appeal against an order of the Supreme Court of Appeal (SCA). The order of the SCA confirmed a decision of the Western Cape High Court (High Court) which declared the Policy on the Appointment of Insolvency Practitioners (Policy), promulgated by the Minister on 7 February 2014, unconstitutional in that it fails to meet the requirements of a restitutionary measure under section 9(2) of the Constitution and is irrational.

The High Court held that the policy unlawfully fettered the discretion of a Master to appoint a provisional insolvency practitioner to an estate. This was because the relevant Master had to appoint the next-in-line practitioner with no regard to the practitioner’s relevant skills in relation to the complexity of the estate in question. The Policy was also found to be irrational for a number of reasons, including the failure of the Minister to have regard to the current underlying demographics of insolvency practitioners and how such demographics would impact the realisation of the goals of the Policy. The High Court also held that the Minister did not have the power to promulgate the Policy.

On appeal, the SCA found the Policy to be irrational. The SCA agreed with the High Court that the Minister did not have the power to promulgate the Policy and that the Policy failed to meet the requirements of a restitutionary measure under section 9(2) of the Constitution. The SCA held that the Policy did not unlawfully fetter a Master’s discretion regarding the appointment of an insolvency practitioner.

In a majority judgment, penned by Jafta J (Zondo ACJ, Cameron J, Kathree-Setiloane AJ, Kollapen AJ, Mhlantla J, Theron J and Zondi AJ concurring), the Constitutional Court found that the Policy removes the Master’s discretion to appoint insolvency practitioners in certain cases. This majority found that, while the Policy targets persons who were disadvantaged by unfair discrimination, it does not appear from the information on record that the Policy is likely to transform the insolvency industry. It concludes that the failure to prove that the policy is reasonably likely to achieve equality must mean that there is no proof of a rational link between the Policy and the purpose sought to be achieved.

The majority reasoned that the most serious defect in the Policy is to be found in a particular category from which practitioners are to be appointed in alphabetical order. The problematic category (category D) is the largest category in the Policy and includes white male practitioners but also practitioners from other races if they became citizens on or after 27 April 1994. The majority found that appointing practitioners in alphabetical order from category D is unlikely to achieve equality in the future. Doing so only entrenches the status quo. Since white males are in the majority, most appointments would go to them. Moreover, the category impermissibly discriminates against other races on the ground that they became citizens on or after 27 April 1994. By placing all those who became citizens on or after 27 April 1994 in category D, the Policy effectively punishes all young practitioners who were born on or after that date. This undermines in a serious manner the progressive realisation of equality which the other parts of the Policy are designed to achieve. The arbitrariness of the Policy is apparent from the failure by the Minister to provide reasons justifying why disadvantaged people should be treated differently, on account of the date on which they became citizens.

In the result, the majority granted leave to appeal but dismissed the appeal with costs.

In a minority judgment, Madlanga J (Froneman J concurring) holds that the appointment process in terms of the Policy should not be compartmentalised into discrete components but rather that what must be considered is what the policy seeks to achieve and whether the process as a whole is consonant with that. Therefore, the minority judgment holds, there is no need to read Clauses 7.1 and 7.3 separately in order to determine whether the Master may exercise a discretion in the appointment process. The minority judgment argues that if all the practitioners on Masters’ lists are suitably qualified, there is no need for the Master to be able to exercise a discretion to not appoint a practitioner who is suitably qualified and is next-in-line to be appointed. For these reasons, the minority judgment holds that the Minister did have the power to promulgate the Policy and that it is not inconsistent with section 18 of the Insolvency Act.

With regard to the majority’s view that the Policy is not reasonably capable of achieving equality due to the paucity of information regarding its implementation, the minority judgment holds that the information on record plainly shows that if properly applied, the Policy will afford significant advantage to section 9(2) beneficiaries and that will in turn uplift those beneficiaries and transform the insolvency industry. In any event, the minority judgment holds, it is not a requirement under the Van Heerden test that a remedial measure must be able to predict its future outcomes with precision.

The minority judgment holds that there is no irrationality in the Policy’s distribution of work according to South Africa’s demographics in order to promote equality. The minority judgment also holds that because of the continued dominance of white practitioners – particularly white men – in the insolvency industry, using the current demographic make-up of the profession would perpetuate the very imbalance that the policy seeks to remedy. It therefore holds that the Policy bears a rational connection to the achievement of equality and that the differentiation of categories of persons affected by the policy is not one that was arrived at irrationally.

Finally, the minority judgment agrees with the majority that the placement of practitioners who became citizens on or after 27 April 1994 in category D is arbitrary and constitutionally invalid. However, it finds that this invalidity does not affect the Policy as a whole.

In the result, the minority would have granted leave and upheld the appeal except insofar as the policy places practitioners who became citizens on or after 27 April 1994 in category D. The minority would have invalidated the Policy to the extent of that placement.

The Full judgment here.