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[2016] ZASCA 196
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Minister of Justice and Constitutional Development and Another v South African Restructuring and Insolvency Practitioners Association and Others (693/15) [2016] ZASCA 196; [2017] 1 All SA 331 (SCA); 2017 (3) SA 95 (SCA) (2 December 2016)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 693/15
In
the matter between:
THE MINISTER OF
JUSTICE AND
CONSTITUTIONAL
DEVELOPMENT
FIRST APPELLANT
CHIEF MASTER OF THE
HIGH COURT OF
SOUTH
AFRICA
SECOND APPELLANT
and
THE SOUTH AFRICAN
RESTRUCTURING AND
INSOLVENCY
PRACTITIONERS ASSOCIATION
FIRST RESPONDENT
THE CONCERNED
INSOLVENCY
PRACTITIONERS
ASSOCIATION
SECOND RESPONDENT
NATIONAL ASSOCIATION
OF
THIRD RESPONDENT
MANAGING
AGENTS
SOLIDARITY
FOURTH RESPONDENT
VERENIGING VAN REGSLUI
VIR AFRIKAANS
FIFTH RESPONDENT
Neutral
Citation:
Minister
of Justice v The SA Restructuring & Insolvency Practitioners
Association
(693/15)
[2016] ZASCA 196
(2 December 2016)
Coram:
Mpati P, Wallis, Swain, Mathopo and Van der Merwe
JJA
Heard:
13 September 2016
Delivered:
2 December 2016
Summary:
Constitutional law: Equality and
affirmative action measures: the ambit of the test for equality.
Insolvency
law:
Insolvency Act 24 of 1936
s 18(1)
– policy issued by
Minister in terms of
s 18(1)
– policy also applicable to
appointments of liquidators in terms of
ss 368
and
374
of
Companies Act 61 of 1973 – aim to transform the insolvency
industry to make it more accessible to previously disadvantaged
insolvency practitioners – policy unconstitutional and
irrational – policy declared unlawful and invalid.
ORDER
On
appeal from the Western Cape Division of the High Court, Cape Town
(Katz AJ sitting as court of first instance): judgment reported
sub
nom SA Restructuring and Insolvency Practitioners Association v
Minister of Justice and Constitutional Development & others,
and
another application
2015 (2) SA 430
(WCC).
1.
The appeal is dismissed with costs, such
costs to include the costs of two counsel.
JUDGMENT
Mathopo
JA (Mpati P, Wallis, Swain and Van der Merwe JJA concurring):
[1]
This appeal concerns the constitutionality of a policy that seeks to
regulate the appointment of insolvency practitioners, primarily
as
provisional trustees and liquidators, but also as co-trustees and
co-liquidators, as well as appointments to certain other comparable
positions under various statutes. In this judgment I will deal with
the policy as if it applied only to appointments of trustees
on
insolvency, but it must be read mutatis mutandis as applying to and
including all the appointments that are the subject of the
policy.
Where I refer expressly to liquidators, as opposed to trustees, I am
referring to liquidators, either provisional or final,
appointed in
terms of the Companies Act 61 of 1973, as amended, or under the
Close
Corporations Act 69 of 1984
.
[2]
The policy was determined by the Minister of Justice and
Constitutional Development pursuant to his powers in terms of
s 158(2)
[1]
of
the Insolvency Act 24 of 1936 (the Act), and was to come into
operation on 31 March 2014. Insofar as it related to appointments
under other statutes the promulgation of the policy occurred in terms
of corresponding powers.
[2]
The
first respondent challenged the policy by way of an application in
two parts; part A being an interim interdict restraining
its
implementation, and part B review proceedings directed at having it
set aside. In the Western Cape Division of the High Court,
Gamble J
dealt with the urgent application in respect of Part A and
interdicted the appellants from implementing the policy. The
review
application in Part B came before Katz AJ in which the policy was
challenged on four bases. These were that it infringed
the right to
equality provided for in s 9 of the Constitution; it unlawfully
fettered the discretion of the Master; is ultra
vires the Act; and
was irrational.
[3]
Acting in terms of s 172(1)
(a)
of the Constitution, the high court declared the policy inconsistent
with the Constitution and invalid. An application for leave
to appeal
was refused. This appeal is with the leave of this court.
Litigation
history
[4]
The appellants are the Minister of Justice and Constitutional
Development (the Minister) and the Chief Master of the High Court
of
South Africa (the Chief Master).
[3]
The
respondents are The South African Restructuring and Insolvency
Practitioners Association (SARIPA), The Concerned Insolvency
Practitioners Association (CIPA), the National Association of
Managing Agents (NAMA), Solidarity and the Vereniging van Regslui
vir
Afrikaans. Originally there were two applications; the first one
being that referred to in [2] above brought by SARIPA against
the
Minister and the Master. The second was brought by CIPA in the
Gauteng Division, Pretoria of the High Court to declare the
policy to
be unconstitutional. That application and the present application by
agreement were heard together by the court a quo.
[4]
NAMA
and Solidarity were granted leave to intervene by the high court, and
the Vereniging van Regslui vir Afrikaans was joined as
a party. The
respondents represent various interested groups of persons who are
involved, either as insolvency practitioners, legal
practitioners and
academics, creditors and employees, in the sequestration or
liquidation of insolvent estates.
Background
The
appointment of insolvency practitioners prior to the impugned policy
[5]
The background relating to the history of the impugned policy was
described comprehensively by the court a quo. The administration
of
insolvent estates was originally regulated by the Insolvency Act 32
of 1916. This placed the responsibility for appointing provisional
trustees on the court. With the advent of the Insolvency Act 24 of
1936 (the Act) that duty and power was transferred to the Master.
Before the Act was amended, in 2004, the Master’s power of
appointment of a provisional trustee or liquidator was entirely
discretionary.
[5]
Currently,
in terms of s 18(1) of the Act, the Master may, after an estate
has been sequestrated, in accordance with the Policy
determined by
the Minister, appoint a provisional trustee. The Minister exercises
his powers in terms of s 158 of the Act when
determining the policy
envisaged in s 18. It is the Master who, in terms of this policy,
appoints the provisional trustee, once
a provisional sequestration
order has been granted. The provisional trustee will administer and
control the estate until such time
that the trustee is appointed at
the first meeting of creditors. The Master may still, however, be
involved inasmuch as he or she
is empowered by s 57(5) of the
Act, whenever they consider it desirable, to appoint a co-trustee.
[6]
It appears that the present policy is the first of its kind
promulgated under s 158 of the Act. Previous policies and directives
were issued by the Minister, during 1998 and 2001, aimed at making
the insolvency industry accessible to previously disadvantaged
persons. However, these policies were not policies promulgated in
terms of any specific provision of the Act. The 2001 Policy made
provision for a previously disadvantaged person to be appointed as a
co-provisional trustee in every estate. The main rationale
behind
appointing a previously disadvantaged individual was that he or she
could learn from the experienced trustee how properly
to administer
an estate, in order to gain sufficient experience and exposure in the
industry. The Master, in accordance with the
2001 policy, created a
separate panel of names for this category of practitioner.
[7]
The 2001 policy was implemented as follows. Creditors, on becoming
aware of an application for the provisional sequestration
of an
estate, would indicate their support for a provisional trustee by
filing a requisition which indicated the extent of their
claims
against the estate, and their provisional trustee of choice. The
Master’s office would review the requisitions and,
once
satisfied that they were in order, ordinarily appoint a provisional
trustee using the following as guidelines: i) the candidate
nominated
by the creditors who held the majority in value of claims; ii) the
candidate nominated by the creditors who held the
majority in number
of claims; iii) the candidate who enjoyed the support of the
employees or trade union In addition a previously
disadvantaged
individual or individuals would be appointed from a list held by the
Master. All the individuals identified as suitable
candidates to be
appointed in that estate, would then be informed that they should
immediately lodge with the Master bonds of security
for the estimated
value of the assets of the estate involved. Thereafter, the Master
would issue certificates of appointment as
provisional trustees. The
provisional trustee would then take charge of the estate and
immediately administer the estate until
the first meeting of
creditors. At the first meeting, creditors who had proved their
claims against the estate were entitled to
elect trustees and the
person receiving a majority of the votes, by number and value of
claims, would be elected as trustee. If
one person gained a majority
in number, and another a majority in value, they would both be
elected. The Master would then ordinarily
[6]
confirm
those who had been elected and would also confirm the appointment of
the previously disadvantaged individual, if that person
was not
elected as trustee by the creditors. This system, known as the
requisition or referral system, has according to the Minister,
not
achieved its purpose of including previously disadvantaged persons in
the appointment of insolvency practitioners. That proposition
is
hotly disputed by both SARIPA and CIPA.
[8]
As noted above the
Judicial Matters Amendment Act 16 of 2003
, made
provision for the appointment of a Chief Master of the High Courts
who serves as the executive officer of all the Masters’
offices
and exercises control, direction and supervision over all the
Masters. The Minister’s power to determine policy for
the
appointment of practitioners was also provided for in the
Judicial
Matters Amendment Act, which
conferred the power to lay down policy
in relation to the appointment of insolvency practitioners.
[9]
Subsequent to the promulgation of the
Judicial Matters Amendment Act,
the
Chief Master revoked the ‘Lategan Document’, a
document issued by a Deputy Master in the High Court in Pretoria,
which
purported to deal with the appointment of practitioners. In
surveys conducted over the period 2011 to 2013 by the Chief Master,
the picture appeared to be a bleak one for the advancement of
previously disadvantaged practitioners. The numbers showed that far
fewer previously disadvantaged practitioners were appointed, than was
reflected on the list of active insolvency practitioners.
In 2013,
the national statistics, which only focused on race and gender,
showed that the workload amongst insolvency practitioners
was
unevenly distributed: White males received approximately 43%; White
females received approximately 10%; African, Coloured,
Indian and
Chinese females received approximately 4% and African, Coloured,
Indian and Chinese males received approximately 30%.
I leave aside
the fact that this is significantly short of 100%, which is
unexplained.
[10]
The impugned policy was formulated against the backdrop of what has
been set out above. It went through various phases, which
included
consultations meetings and comments from interested parties.
[7]
For
the purpose of this judgment we need not detain ourselves with these
phases, save to mention that the policy was published in
the
Government Gazette by the Minister on 7 February 2014.
[8]
The
Chief Master has also issued several directives in terms of the
policy to deal with its implementation.
The
Policy
[11]
At the heart of the dispute between the parties lie clauses 6 and 7
of the policy. According to the appellants, the objective
of the
policy is to ‘promote consistency, fairness, transparency and
the achievement of equality for persons previously disadvantaged
by
unfair discrimination’ and it is intended to form the basis for
the transformation of the insolvency industry. The policy
replaces
all previous policies and guidelines, in relation to the appointment
of insolvency practitioners, used in the Masters’
offices. It
applies amongst others, not only to the appointment of provisional
trustees by the Master in terms of s 18(1) of the
Act but also to a
range of other appointments. The policy sets out the procedure to be
followed by Masters when making a discretionary
appointment and their
power to do so.
[12]
In terms of clause 6.1 of the policy, every Master’s List must
be divided into various categories. Clause 6 reads:
‘
Insolvency
practitioners on every Master’s List must be divided into the
following categories:
‘
Category
A: African, Coloured, Indian and Chinese females
who became South African citizens before 27 April 1994;
Category
B: African, Coloured, Indian and Chinese
males who became South African citizens before 27 April
1994;
Category
C: White females who became South African
citizens before 27 April 1994;
Category
D: African, Coloured, Indian and Chinese
females and males, and White females, who became South
Africa
citizens on or after 27 April 1994 and White males who are South
African citizens,
and
within each category be arranged in alphabetical order according to
their surnames and, in the event of similar surnames, their
first
names. Insolvency practitioners added to the list after the
compilation thereof must be added at the end of the relevant
category.
6.2
A Master’s List must distinguish between “senior
practitioners”, being
insolvency practitioners who have been
appointed at least once every year within the last five years and
“junior practitioners”,
being insolvency practitioners
who have not been appointed as such at least once every year within
the last five years but who
satisfy the Master that they have
sufficient infrastructure and experience to be appointed alone.
The
senior and junior practitioners must be arranged where they fit
alphabetically in Category A to D on the same Master’s
List.’
[13]
The appointment process is then set out in clause 7 which reads as
follows:
‘
7.
Appointment of insolvency practitioners by Masters of High Courts
7.1
Insolvency practitioners must be appointed consecutively in the ratio
A4: B3: C2: D1, where-
"A"
represents African, Coloured, Indian and Chinese females who became
South African citizens before 27 April 1994;
"B"
represents African, Coloured, Indian and Chinese males who became
South African citizens before 27 April 1994;
"C"
represents White females who became South African citizens before 27
April 1994;
"D"
represents African, Coloured, Indian and Chinese females and males,
and White females, who have become South African
citizens on or after
27 April 1994 and White males who are South African citizens,
and
the numbers 4: 3: 2: 1 represent the number of insolvency
practitioners that must be appointed in that sequence in respect of
each such category.
7.2
Within the different categories on a Master's List, insolvency
practitioners must, subject to paragraph 7.3, be appointed in
alphabetical order.
7.3
The Master may, having regard to the complexity of the matter and the
suitability of the next-in-line insolvency practitioner
but subject
to any applicable law, appoint a senior practitioner jointly with the
junior or senior practitioner appointed in alphabetical
order. If the
Master makes such a joint appointment, the Master must record the
reason therefor and, on request, provide the other
insolvency
practitioner therewith.
.
. . ‘
This
means that the Master must appoint insolvency practitioners
consecutively in the ratio A4:B3:C2:D1 across all classes of
appointments.
In other words, the Master must appoint four
practitioners from category A, then three from category B, then two
from category
C and finally one from category D, before returning to
category A to appoint another four practitioners. When appointing
within
a category, the Master must proceed down the alphabetical list
until the end is reached and then start again at the top. There is
no
power to depart from this, but the Master may in the circumstances
set out in clause 7.3 appoint an additional trustee. A great
amount
of the argument before us was addressed to the extent of the
discretion that this clause gives to Masters.
[14]
It is common cause that the policy is aimed at the discretionary
appointments, in terms of the Act, of insolvency practitioners
by the
Master. The policy further obliges the Chief Master to issue
directives to be used by all Masters in order to implement
and
monitor the application of the policy. The Chief Master issued three
such directives in 2014.
[15]
The policy principally implicates the provisions of the Act that deal
with the appointment of provisional trustees and co-trustees.
The
relevant legislative provisions governing the appointment of
provisional trustees are as follows. Section 18 of the Act states:
‘
(1)
As soon as an estate has been sequestrated (whether provisionally or
finally) or when a
person appointed as trustee ceases to be trustee
or to function as such, the Master may, in accordance with policy
determined by
the Minister, appoint a provisional trustee to the
estate in question who shall give security to the satisfaction of the
Master
for the proper performance of his or her duties as provisional
trustee and shall hold office until the appointment of a trustee.
(2)
At any time before the meeting of the creditors of an insolvent
estate in terms of
section
forty
, the Master may, subject to
the provisions of subsection (3) of this section, give such
directions to the provisional trustee as
could be given to a trustee
by the creditors at a meeting of creditors.
(3)
A provisional trustee shall have the powers and the duties of a
trustee, as provided
in this Act, except that without the authority
of the court or for the purpose of obtaining such authority he shall
not bring or
defend any legal proceedings and that without the
authority of the court or Master he shall not sell any property
belonging to
the estate in question. Such sale shall furthermore be
after such notices and subject to such conditions as the Master may
direct.
.
. . .’
[16]
According to the above section the power to appoint provisional
trustees resides with the Master, and the Master’s discretion
is to be exercised in accordance with the policy determined by the
Minister in terms of s 158(2) of the Act. As noted earlier
in
this judgment the Minister is also empowered, in terms of s 10(1A)
(a)
of
the Close Corporations Acts 69 of 1984,
[9]
and
s 368 of the old Companies Act 61 of 1973,
[10]
to
determine the policy for the appointment of liquidators and
provisional liquidators. The policy thus applies to these
appointments
as well.
[17]
It is apparent that provisional trustees and provisional liquidators
play a significant role in the liquidation of an estate
and the
winding-up of a company or close corporation. They are appointed to
control and administer the estate or the property of
the company
until a trustee or liquidator has been appointed. Only persons
included on a Master’s list of insolvency practitioners
may be
appointed as provisional trustees or liquidators, and their
appointment must be done in accordance with the procedures set
out in
clauses six and seven of the policy. Unlike a final trustee appointed
at the first meeting of creditors, the provisional
trustee takes
instructions from the Master, who stands in the position of the
creditors (s 18(2) of the Act). They may be
authorised by the
Master or the court to sell property belonging to the estate.
Experience in the high court suggests that this
authority is
frequently sought and granted.
[18]
The policy replaces all previous policies and guidelines relating to
the appointment of insolvency practitioners and envisages
that only
persons included on the Master’s list may be appointed. It is
one of the policy considerations that the Master's
list must be
revised before the policy is implemented. To be included on the list
an interested person must have applied, supported
by an affidavit.
Among the requirements for appointments include, that the appellant
must have sufficient infrastructure within
the area of jurisdiction
of the Master in question. They must also be appropriately qualified
in the field of law or commerce and
hold a four years’
bachelor’s degree, or have five years suitable experience in
administration and winding-up of an
insolvent estate, at the time
when the policy comes into effect.
[19]
The policy empowers the Master to appoint provisional trustees on a
rotational basis in line with the categories set out in
clauses 6 and
7 which are based on race and gender. The policy does not provide for
the wishes of creditors to be taken into account
in these
discretionary appointments.
The
High Court
[20]
The high court agreed with the respondents and found that the policy
puts in place a rigid regime in which the Master becomes
a
rubberstamp, compelled to appoint designated persons by rote from the
Master’s list, which is arranged alphabetically on
a race and
gender basis. It also found that the policy constituted an unlawful
fettering of his discretion. The high court adopted
an approach that,
in so far as the policy aimed to transform and make the insolvency
industry accessible to previously disadvantaged
individuals, it
needed to do more than increase numbers. The policy had to ensure
that there was a correlation between the individual’s
skill set
and the requirements for the role, within the system provided for by
the legislation. The policy failed, as a remedial
measure, to provide
clear timelines or targets to determine whether it was likely to
achieve its intended objective. As a result
of this the high court
concluded that there was insufficient evidence to support the notion
that the policy was likely to achieve
its aim of transforming the
industry within a specific period, or at all. It also took issue with
what it found to be a mechanical
application of the policy which
failed to appreciate and provide any scope allowing the Master to
take into account the skills,
knowledge, expertise and experience of
the practitioner when appointing a trustee. As a result, it held that
the policy could not
pass constitutional muster and declared the
policy inconsistent with the Constitution and invalid.
Equality
submissions
[21]
The mainstay of the appellant’s argument was that the policy
was intended to form the basis of transformation of the
insolvency
industry. The respondents accept that the object of the policy was to
promote consistency, fairness, transparency and
the achievement of
equality for insolvency practitioners previously disadvantaged by
unfair discrimination. SARIPA contended that
the policy will not
achieve these objectives and that it would undermine the
transformation already achieved in the industry mainly
by detracting
materially from the business of skilled previously disadvantaged
practitioners.
[22]
The appellants argued that the policy was a measure contemplated by
s 9(2) of the Constitution in that it promotes the
achievement
of equality and was designed to protect and advance persons (and
categories of persons) previously disadvantaged by
unfair
discrimination. The purpose of the policy was to protect and develop
previously disadvantaged insolvency practitioners who
had suffered
unfair discrimination because of past injustices. These past
injustices were being preserved by the requisition system
of
appointment of provisional trustees or liquidators, which system was
creditor driven. The appellants attacked the requisition
system as
reducing previously disadvantaged insolvency practitioners to mere
beggars and submitted that it perpetuated the myth
that previously
disadvantaged insolvency practitioners are incompetent. During oral
submissions before us, they submitted that
if properly applied, the
policy would help to eradicate the socially constructed barriers
inhibiting entry, by previously disadvantaged
practitioners, into the
insolvency industry. It would also root out systemic or
institutionalised racism prevalent in the current
practice of the
requisition system. We were urged to incline to the view that the
current system for the appointment of provisional
trustees or
liquidators was skewed in favour of previously advantaged
practitioners who obtained knowledge and skills at the expense
of the
disadvantaged practitioners, as a result of the oppressive and
discriminatory practices which existed in the past.
[23]
In support of their submissions, the appellants relied on the three
pronged test espoused in
Minister of Finance & another v Van
Heerden
[2004] ZACC 3
;
2004 (6) SA 121
(CC) para 37 where Moseneke J said the
following:
‘
When
a measure is challenged as violating the equality provision, its
defender may meet the claim by showing that the measure is
contemplated by s 9(2) in that it promotes the achievement of
equality and is designed to protect and advance persons disadvantaged
by unfair discrimination. It seems to me that to determine whether a
measure falls within s 9(2) the enquiry is threefold.
The first
yardstick relates to whether the measure targets persons or
categories of persons who have been disadvantaged by unfair
discrimination; the second is whether the measure is designed to
protect or advance such persons or categories of persons; and
the
third requirement is whether the measure promotes the achievement of
equality.’
[24]
The appellants contended that the policy met all three requirements
and that it was neither unfair, nor presumed to be unfair.
It was
submitted that it would facilitate access to the industry and restore
the previously disadvantaged insolvency practitioners’
rights
to equality, dignity and would also realise their right to follow
their trade, profession or occupation – which was
previously
denied and was now being curtailed by the requisition system. In
essence we were urged to accept that the measures proposed
in the
policy will ameliorate the imbalances of the past.
[25]
As regards the requisition system the argument advanced is that this
system adds to the social barriers to entry and perpetuated
the
imbalances of the past, because it allows creditors to determine and
dictate who should be appointed in the provisional phase.
The
requisition system was inimical to s 9(2) of the Constitution
and was not a measure which promoted the achievement of
equality. It
was urged upon us that the policy appointment had two benefits: (a)
first, that disadvantaged persons from the categories
identified
would be appointed to larger estates by virtue of being the
next-in-line practitioner and (b) second, that they would
benefit
when they were appointed as co-practitioners.
[26]
The respondents, however, submitted that the transformation which had
been attained in the insolvency industry would be undermined.
Previously disadvantaged individuals would lose work currently
assigned to them because of their skill and expertise. Under the
current system previously disadvantaged individuals are appointed as
co-provisional trustees in every insolvent estate. The crux
of the
respondents’ submission is that the mechanical process of
appointments contemplated in the policy will do more harm
than good,
because some of the previously disadvantaged insolvency practitioners
will not be allocated the same amount of work,
owing to the roster
system.
[27]
It was contended by SARIPA that the policy discriminated against
white males, white females and African, Indian, Chinese or
Coloured
males, in varying degrees. They also submitted that it discriminated
against African, Indian, Coloured and Chinese persons
who became
South African citizens after 27 April 1994. Having regard to the test
in
Van Heerden
,
the policy was almost an absolute barrier to white males, who would
be assigned no more than 10% of the available work, even though
many
of them were active in the profession. They submitted that the
‘rigid race and gender-based’ categories
and ratios
amounted to the imposition of quotas as opposed to numerical targets,
rendering the policy constitutionally impermissible.
[28]
Under the requisition system, employees and trade unions have a say
in the appointment of insolvency practitioners, a factor
which
Solidarity as a trade union, appreciates. Their submission was that
the policy’s exclusion of the employees’
or trade union’s
voice from the appointment resulted in the policy lacking a rational
connection to its objective. Solidarity’s
argument that the
policy fails to take the role of trade unions and employees into
account cannot be disputed. The approach by
both the Minister and the
Chief Master was that this was irrelevant, as was the exclusion of
any role for creditors in regard to
provisional appointments.
[29]
Affirmative action measures are designed to ensure that suitably
qualified people, who were previously disadvantaged, have
access to
equal opportunities and are equitably represented in all occupation
categories and levels.
[11]
They
must be suitably qualified in order not to compromise efficiency at
the altar of remedial employment. Due to our country’s
history
and the constitutional obligation, post democracy, to redress the
past injustices, measures directed at affirmative action
may in some
instances embody preferential treatment and numerical goals, but
cannot amount to quotas. In advancing employment equity
and
transformation, flexibility and inclusiveness is required. Remedial
measures must operate in a progressive manner assisting
those who, in
the past, were deprived of the opportunity to access the relevant
requirements necessary to enter the insolvency
profession, but such
remedial measures must not trump the rights of previously advantaged
insolvency practitioners. Rigidity in
the application of the policy
or which has the effect of establishing a barrier to the future
advancement of such previously advantaged
insolvency practitioners,
is frowned upon and runs contrary to s 9(2) of the Constitution.
These principles emerge from the
decisions of the Constitutional
Court to be referred to below.
[30]
The essence of the parties’ contentions on the equality leg is
this. They agree that the policy is designed to be a remedial
measure
within the meaning of s 9(2) of the Constitution and implicates
the right of every citizen to pursue their career
of choice, trade
and profession, a right afforded in s 21 of the Constitution. The
respondents, however, submit that the policy
was rigid in its
application and calculated to establish a barrier to the future
advancement of affected people, contrary to s 9(2)
of the
Constitution.
[31]
It was stated by Moseneke ACJ in
South African Police Service v
Solidarity OBO Barnard
[2014] ZACC 23
;
2014 (6) SA 123
(CC) that:
‘
[32]
Remedial measures must be implemented in a way that advances the
position of people who have suffered past discrimination.
Equally,
they must not unduly invade the human dignity of those affected by
them, if we are truly to achieve a non-racial, non-sexist
and
socially inclusive society.
[33]
We must remind ourselves that restitution measures, important as they
are, cannot do all the work to advance social equity.
A socially
inclusive society idealised by the Constitution is a function of a
good democratic state, for the one part, and the
individual and
collective agency of its citizenry, for the other. Our state must
direct reasonable public resources to achieve
substantive equality
“for full and equal enjoyment of all rights and freedoms”.
It must take reasonable, prompt and
effective measures to realise the
socio-economic needs of all, especially the vulnerable. In the words
of our Preamble the state
must help “improve the quality of
life of all citizens and free the potential of each person”.
That ideal would be
within grasp only through governance that is
effective, transparent, accountable and responsive. Our public
representatives will
also do well to place a premium on an honest,
efficient and economic use of public resources.’
[32]
Remedial measures must therefore operate in a progressive manner
assisting those who, in the past, were deprived, in one way
or
another, of the opportunity to practise in the insolvency profession.
Such remedial measures must not, however, encroach, in
an
unjustifiable manner, upon the human dignity of those affected by
them. In particular, as stressed by Moseneke J in para 41
of
Van
Heerden,
when
dealing with remedial measures, it is not sufficient that they may
work to the benefit of the previously disadvantaged. They
must not be
arbitrary, capricious or display naked preference. If they do they
can hardly be said to achieve the constitutionally
authorised end.
One form of arbitrariness, caprice or naked preference is the
implementation of a quota system, or one so rigid
as to be
substantially indistinguishable from a quota. This explains why
s 15(3)
of the
Employment Equity Act 55 of 1998
, permits
preferential treatment and numerical goals, but disallows quotas.
[12]
Counsel
for the Minister and the Chief Master accepted that if the policy
imposed a quota or rigid system for the appointment of
insolvency
practitioners as trustees it would infringe these principles and
would have to be struck down.
[33]
The policy embodied in clause 7.1 embodies a strict allocation of
appointments in accordance with race and gender. Insolvency
practitioners are for this purpose divided into four groups
stratified by race, gender and age. Appointments are to be made from
these groups in strict order from group A to group B and thence to
group C, and finally group D. Within each group allocations
are to be
made alphabetically. The Chief Master’s directives served to
establish committees to monitor compliance by Masters
with the
policy. The clause contains none of the flexibility and all of the
rigidity that the Constitutional Court has said is
impermissible.
[34]
In an endeavour to overcome the rigidity of clause 7.1 counsel for
the Minister and Chief Master argued that the requisite
flexibility
was to be found in the Master’s powers under clause 7.3. She
submitted that this vested the Master with a discretion
in every
case. I disagree. Clause 7.3 does not permit a departure from the
appointment process prescribed in clause 7.1 of the
policy. It
provides the Master with a mechanism, in an ill-defined range of
cases, to compensate to some degree for the fact that
the policy
dictates the appointment of someone not qualified to undertake the
task, either because of its complexity, or because
of their
unsuitability – the two are not mutually exclusive. This power
of appointment does not resolve the fact that clause
7.1 requires the
Master to make an appointment in accordance with a rigid quota. After
all the unqualified person is still to be
appointed and to have their
share in the fees accruing from the administration of the estate,
even though the reason for invoking
clause 7.3 is that they are not
qualified or unsuitable to perform that task. The Master’s
ability to insert a backstop into
the process does not detract from
the need in every case to comply with clause 7.1. The system is
arbitrary and capricious.
[35]
In its recent decision in
Solidarity v
Department of Correctional Services
,
the Constitutional Court was divided over whether the Department of
Correctional Services’ policy regarding appointments
embodied a
quota. The difference between the two judgments (Zondo J and Nugent
AJ) was that Zondo J held that the power of the
National Commissioner
to depart from the strict numerical categorisation by race and gender
in the policy – which was almost
identical to the policy in the
present case – saved it from being an impermissible quota. Here
there is no such general discretion.
The policy is entirely dependent
on a strict racial and gender allocation of appointments and is
arbitrary with no saving discretion.
The Master has a remedial power
that does not avoid the result of the policy being applied. That is
not the kind of general discretion
that Zondo J held saved the policy
before the Constitutional Court.
[36]
The rigid and unavoidable appointment process prescribed by clause
7.1 is arbitrary. It is also in my view capricious because
it has
been formulated with no reference to its impact when applied in
reality. One illustration of how capricious the system is
arises from
a consideration of the fact that it has no regard to the relative
number of insolvency practitioners falling in each
category. The
Chief Master’s statistics and schedules, although contested,
reveal that the majority of insolvency practitioners
at present are
White males, followed by African, Indian, Coloured and Chinese males,
White females and African, Indian, Coloured
and Chinese females. The
4 appointments in category A will benefit persons in that category –
Black, Indian, Coloured and
Chinese women – to a far greater
extent than the ratio 4:3:2:1 might suggest. Because this is the
smallest group of practitioners,
the turn of members of the group to
be appointed will come round relatively rapidly (4 in every 10
appointments), while that of
White males and insolvency practitioners
of every race and gender born after 27 April 1994 (1 in every 10 from
among a far larger
group) will come round but rarely.
[13]
The
prejudice to young Black men and women who have recently completed
their studies, are well qualified and wishing to enter practice
as an
insolvency practitioner, is obvious. There is no evidence either that
this was considered by the Minister when formulating
the policy.
[37]
Nor is there any evidence that the implementation of the policy is
even practical at present given the disproportion in numbers
between
the four groups. The policy makes no allowance for a practitioner to
refuse an appointment or for what the Master is to
do in that case.
In a small largely rural area there may be only a handful of
insolvency practitioners falling into category A,
yet they are to be
appointed in forty percent of cases. It is unclear what is to happen
if they are too busy to undertake more
work. The Master has no
discretion to appoint someone from Category B without departing from
the policy. But even if this is viewed
as an extreme case and the
priority given to people in category A prompts more people in that
category to enter the business of
an insolvency practitioner, that
will not matter if they were born after 27 April 1994. Why young
people should be discriminated
against in this fashion escapes me.
The disproportionate treatment of the different groups is obvious and
no rational reason has
been advanced therefor. The likely effect will
be to force many insolvency practitioners in category D, or category
C, out of the
profession and deter others, especially the young, from
entering it.
[38]
For those reasons I agree with the high court that the policy fails
to meet the test in
Van Heerden
, and is thus unconstitutional.
Ordinarily, such a finding would be the end of the dispute, but I
agree with the high court’s
approach in para 67 of its
judgment:
‘
Not
all the parties have requested that I deal with all the challenges
and some have been argued in the alternative. However, the
respondents have requested that if I conclude that the Policy is
unlawful, unconstitutional and invalid on any of the grounds,
I
nevertheless make findings in respect of the other challenges. This
approach conforms with Constitutional Court guidance provided
by
Ngcobo J . . . in
S v Jordan &
others (Sex Workers Education and Advocacy Task Force and others as
Amici Curiae)
[2002] ZACC 22
;
2002 (6) SA 642
(CC) para
21. I intend to follow it.’
Fettering
the Master’s discretion
[39]
The relevant parts of clause 7 of the policy are set out in para 13
above. The case of the appellants is that the Master retains
his
discretion to appoint insolvency practitioners who are on the
Master’s list because the list has been categorised into
senior
and junior practitioners. The argument advanced was that before an
appointment was made the Master would consider issues
such as the
complexity of the matter, and whether the next-in-line practitioner
has the infrastructure to deal with complex insolvent
estates.
According to the appellants this would entail an exercise of
discretion to ascertain whether the next-in-line practitioner
was
suitable. In assessing the suitability of a practitioner, we were
urged to accept that the Master would also consider issues
such as
race, gender, years of experience, as well as his or her specific
knowledge and expertise. The argument continued that,
in the exercise
of the discretion, junior insolvency practitioners who had no skills
would benefit when they were co-appointed
to handle complex estates
with senior practitioners, in terms of clause 7.3 of the policy. The
nub of the appellants’ argument
was that the exercise of this
discretion dispelled the notion that the Master is shackled by the
policy.
[40]
SARIPA’s submissions on this score were in essence, that the
policy goes beyond providing a guideline to the Master,
but served to
predetermine the outcome of the exercise of the Master’s
powers, thus binding his decision-making powers inflexibly.
Their
view is that the Master would, under the policy, not retain the
ability to make decisions based on his own appreciation of
all the
facts before him. Because the policy requires the Master to appoint
the next-in-line practitioner, the Master was debarred
from
considering each individual estate and applying his mind, having
regard to the relevant factors.
[41]
CIPA’s submissions with regards to the discretion of the Master
were essentially that except for clause 7.3, the Master
was given no
discretion in terms of the policy. No allowance was made for the
aptitudes pertinent to the industry, and the wishes
of the creditors
and other persons of interest were not catered for. They are joined
in this submission by NAMA who contended that
by excluding creditors,
from the decision about who to appoint as provisional trustees or
liquidators, creditors were potentially
prejudiced. The policy took
away any discretion the Master might have, and reduced the Master’s
function to one of rubberstamping.
[42]
Solidarity pointed out that under the policy, the Master would
disregard all other factors and allocate work on the basis of
race
and gender. This, they contended, deprives the Master of exercising
an appropriate discretion and was accordingly inconsistent
with
section 9(2) of the Constitution.
[43]
The high court agreed with the appellants’ contention that
clause 7.3 does provide for a discretion by the Master. In
terms of
clause 7.3 the Master was at large to appoint any suitable
practitioner jointly with a senior or junior practitioner appointed
in alphabetical order, having regard to the complexity of the matter
and the suitability of the next-in-line practitioner. The
high court
accordingly held that the discretion of the Master was unfettered in
this regard.
[44]
In my view the arguments under this head proceeded from a
misconception as to the scope of the Master’s powers of
appointment.
The argument proceeded from the premise that the Master
had an unfettered discretion to appoint a provisional trustee and
contended
that the policy dictated by the Minister improperly
fettered that discretion. In my view the premise is faulty. Section
18(1) confers
on the Master a power to make appointments of
provisional trustees ‘in accordance with policy determined by
the Minister’.
The Master does not have an unfettered
discretion. That may have been the case in the past before the
amendments to the Act brought
about in 2003,
[14]
but
it is no longer the case. The Master’s discretion is now to
make appointments in accordance with the policy. So the existence
of
the policy cannot be taken as unduly fettering the Master’s
discretion, because the Master only has a discretion to exercise
in
accordance with the policy. (This is a different matter from whether
the policy imposes an unduly rigid system of, or akin,
to a quota.)
[45]
I accept for the purposes of argument that the provisions of s 18
do not mean that the Minister is entitled to remove
all discretion
from the Master. It merely means that the Minister may circumscribe
the parameters within which the Master exercises
the discretion.
Viewed in that light there is a considerable restriction imposed by
clause 7.1, but some discretion remains in
terms of clause 7.3. If
the Master decides that an estate is a complex estate, or that the
next in line practitioner is unsuitable,
they are accorded the power
to exercise their discretion by making an additional appointment of a
senior practitioner to supplement
the appointment made in terms of
clause 7.1. In doing so the Master is not bound by the requirements
of clause 7.1 and may simply
appoint a senior practitioner who the
Master believes will remedy the deficiency. The Master is left to
determine what is a complex
estate and may exercise judgment in
regard to the capabilities of different insolvency practitioners.
There is a limited residual
discretion left for the Master to
exercise in making these appointments. That suffices to hold that the
Master’s discretion
is not improperly fettered.
Irrationality
[46] It is desirable to
deal briefly with this argument. Rationality is not a high hurdle to
surmount. What needs to be shown is
that the policy lacks a rational
connection to the objectives it is directed at achieving. The problem
here is that there is no
explanation in the affidavit of the Chief
Master, who also spoke for the Minister, as to the basis upon which
the policy was formulated.
The explanation of the 4:3:2:1 ratio and
how it was derived was that:
‘
The
percentages were arrived at by taking numbers which can work with
ease in practice (4:3:2:1) and give approximately the same
result
(70%) as the target of 75% for non-whites used when work is allocated
by the State to lawyers.’
[15]
No
reliable figures were put forward by the Chief Master to show the
number of practitioners in each category
[16]
so
that it is impossible to say that those falling in the different
categories are indeed not receiving their fair share of the
work of
insolvency practitioners. It does not suffice for the Chief Master to
say that White males receive 43% of appointments
and African, Indian,
coloured and Chinese males 30%, unless we have an appreciation of the
relative proportions of people falling
in these categories in the
profession as a whole. If White males constitute 65% of insolvency
practitioners and African, Indian,
coloured and Chinese males only
20% then the distribution of appointments under the current system
may be demonstrating a rapid
advancement of the latter group at the
expense of the former.
[47]
The real problem is that in the absence of proper information about
the basis upon which the policy was formulated, and proper
information concerning the current demographics of insolvency
practitioners, one cannot say that the policy was formulated, on
a
rational basis properly directed at the legitimate goal of removing
the effects of past discrimination and furthering the advancement
of
persons from previously disadvantaged groups. The absence of any
explanation at all for its manifestly discriminatory impact
on young
people is telling. The impression is given that the ratio is
arbitrary and cobbled together with no apparent justificatory
basis.
[48]
That difficulty is compounded by the many aspects of the policy that
are unexplained. For example, there is no explanation
proffered by
the appellants as to what constituted a complex estate or an
unsuitable practitioner. In assessing what is a complex
estate
important factors such as:
(i)
knowledge, skill and locality of the insolvency practitioners;
(ii)
value of the assets in the insolvent estate;
(iii)
nature of the insolvent business and its assets;
(iv)
requisitions by creditors and trade unions
are
to be excluded from the list.
[49]
Another weakness is to be found in the Master's definition of a
senior practitioner which is a person who has received at least
one
appointment per annum over the preceding five years. It matters not
whether the appointment involved winding up a few small
estates
created by voluntary surrenders, or five major liquidations of
companies. This does not suggest any consideration of the
skills and
expertise necessary to deal with an insolvent estate. There is no
rational basis for this distinction and it undermines
the rationality
of the policy as a whole.
[50]
The fact that the policy requires the Master to appoint the
next-in-line practitioner in each case is itself irrational. It
fails
to take into account factors such as the nature of the individual
estate, and the industry specific knowledge, expertise
or seniority
of the practitioner concerned. What this means is that absent
consideration of these factors, which are not exhaustive,
the Master
does so mechanically as per the roster. The policy negates what was
described by Bertelsmann J in
Ex Parte
The Master of the High Court South Africa (North Gauteng)
2011
(5) SA 311
(GNP) para 26
,
as
the ‘institutional knowledge and expertise’ of the Master
to assess the ability and integrity of the trustees and
liquidators,
and decide whether they are qualified to be appointed to a specific
estate.
Costs
[51]
I now turn briefly to deal with the argument relating to costs. In
the high court, CIPA, Solidarity and the appellants requested
that no
order as to costs be made. SARIPA and NAMA submitted that costs
should follow the result. The high court awarded no costs
against the
appellants. However, as regards the costs of this appeal there are no
reasons for costs not to be awarded against the
appellants.
[52]
In the result the following order is made:
1.
The appeal is dismissed with costs, such costs to include the costs
of two counsel.
________________________
R
S Mathopo
Judge
of Appeal
Wallis
JA (Mpati P, Swain and Mathopo JA concurring)
[53]
I have had the pleasure of reading the judgment of Mathopo JA with
which I am in entire agreement.
I write this addendum to his judgment
to deal with my concern that in formulating and publishing the policy
the Minister has disregarded
a significant constraint on his powers
and thereby infringed the principle of legality or, as it was said in
the past, acted ultra
vires.
[54]
My starting point is that we are dealing with the legislation that
governs the liquidation of insolvent estates and the winding
up of
companies and close corporations. Noticeably missing from the
submissions on behalf of the Minister and the Chief Master
was any
argument addressed to that fact. A brief resumé of the law in
this regard and the purpose of this legislation is
therefore called
for. I start with the statement in
Walker
v Syfret NO
,
[17]
where
Innes J said that the effect of a sequestration order is to bring
about a
concursus
creditorum
which
has the effect that:
‘
[T]he
hand of the law is laid upon the estate, and at once the rights of
the general body of creditors have to be taken into consideration.
No
transaction can thereafter be entered into with regard to estate
matters by a single creditor to the prejudice of the general
body.
The claim of each creditor must be dealt with as it existed at the
issue of the order.’
Nothing
can be done thereafter to affect the rights and obligations of
creditors in the insolvent estate.
[18]
What
was true in 1911 remains true over a century later.
[19]
[55]
This passage highlights the fundamental purpose of insolvency
legislation, which is to secure the realisation of the remaining
assets of the insolvent and the distribution of the resulting amounts
among creditors in accordance with the order of preference
laid down
by law. Although the Master plays a vital role in overseeing the
process of winding-up an estate,
[20]
the
process is nonetheless creditor-driven. It is the majority of
creditors in number or value of claims that have the right to
elect
trustees or nominate liquidators. They have the right to take
decisions in respect of the manner in which the assets falling
into
the estate, or constituting property of the corporate body, in
winding-up are to be dealt with.
[21]
The
logic of this is obvious. It is the creditors who stand to lose as a
result of the insolvency. They are the best judges of their
own
interests and they are the people best situated to instruct the
trustee or liquidator how to go about the process of liquidation
or
winding-up. They are the people who can judge whether it is desirable
to borrow more money in order to complete a building project
in the
hope of a substantial payment, or to commence litigation with a view
to recovering amounts owing to the estate, to give
but two examples.
It is after all their money that is being spent on this and their
money that is at risk.
[56]
While there have been changes to our company law, with the enactment
of the new
Companies Act 107 of 2008
, which replaces the old system
of judicial management with the new system of business rescue, the
focus of the statutes on the
interest of creditors has not altered.
The interests of employees are now looked after but primarily from
the perspective of their
role as creditors. It remains the position
that their contracts of employment are terminated by a liquidation or
sequestration
order. Although the judge in the high court devoted a
portion of his judgment
[22]
to
the proposition that there is a changing role of insolvency in
society, nothing that he said detracts from the fundamental principle
that the purpose of a sequestration or liquidation order is to bring
the estate of the insolvent or the affairs, of the corporate
body,
under the jurisdiction of the law to be administered with a view to
realisation to best advantage in the interests of creditors.
[57]
Once it is recognised that the purpose of the
Insolvency Act, and
the
provisions in the
Companies Act, dealing
with the liquidation of
companies are designed to be driven by creditors in their own
interests, that necessarily affects the basis
upon which trustees and
liquidators are to be appointed. The primary consideration must be
the interests of the creditors and serving
those interests. If the
appointment of trustees and liquidators occurred speedily as
contemplated by the relevant statutes this
understanding of the
situation would be even clearer, because there might not even be a
need for the appointment of a provisional
trustee or liquidator.
Neither statute requires such an appointment to be made and both
contemplate that the first meeting of creditors
will be speedily
convened. Thus the
Insolvency Act provides
in
s 40(1)
that on
receipt of an order of the court sequestrating an estate finally the
Master shall immediately convene a first meeting of
creditors.
[23]
Furthermore
the Master has only a limited basis for refusing to appoint the
person chosen by the creditors as trustee or liquidator.
[58]
Provisional appointments have become more significant because of
delays in progressing from a provisional to a final sequestration
or
winding-up order and because of delays in the various Masters’
offices. The evidence tendered by CIPA indicated that the
average
delay in Gauteng is some seven months. Under the requisition system,
where creditors were able to play a significant role
in the selection
of the provisional trustee or liquidator, this mattered less and
there was usually a smooth transition from provisional
to final
liquidation or winding-up, with the provisional trustee or liquidator
being elected or nominated for final appointment.
But the system
envisaged by the policy deliberately sets out to remove the voice of
the creditors from the process of appointment.
The Chief Master said
this explicitly in his answering affidavit:
‘
I
deny that the law provides that the Master’s discretion has to
take into account creditors’ directives at the provisional
appointment phase.’
[59]
While that stance may be technically correct, in that there is
nothing in the relevant statutes that expressly obliges the
Master to
pay heed to creditors’ wishes when making provisional
appointments, it is beside the point. The statutes make it
clear that
they exist to serve the interests of creditors. Nothing in the
statutes empowers the Master to disregard the interests
of creditors
and to appoint on a roster basis persons who, in terms of the policy,
the Master may regard, either because of the
complexity of the estate
or because they are unsuitable, as unqualified for such appointment.
In other words it is not open to
the Master to act in a manner that
disregards or is in conflict with the interests of creditors.
[60]
The Chief Master annexed to his answering affidavit a document
explaining the policy. It said that:
‘
To
determine the persons to be appointed in a particular matter is no
doubt the most critical aspect of insolvency appointments
…’
I
agree. The reason is that in view of the delays in reaching the stage
of final sequestration or winding-up and the delays in convening
the
first meeting of creditors, an increasing proportion of the work of
liquidation or winding-up is undertaken by the provisional
trustee or
liquidator. Under the policy they are able to do this without any
directions from the creditors and solely on the basis
of the
directions of the Master.
[61]
The problems with this approach are manifest. If the matter is in the
hands of creditors they will follow the maxim of horses
for courses
and select as trustees or liquidators persons with knowledge of the
area of business in which the insolvency has occurred.
With the
roster the next-in-line will be appointed even though what is
involved is a mine or a farm or some other business requiring
specialised knowledge, such as a chain of pharmacies or a major
retailer. The creditors must tolerate the appointment even though
there is a substantial risk that the steps the appointee takes in the
course of liquidation or winding-up are inimical to their
interests.
All they can do is ask the Master to exercise the discretion under
clause 7.3 of the policy. But the sale of an asset
at an under price,
or at a time that is not propitious for realising maximum value, is
beyond their powers to prevent.
[62]
There can be no objection to the broad purpose of consistency,
fairness, transparency and the elimination of the impact of
past
discrimination. Nor can there be any objection to the elimination of
certain undesirable features of the appointment process,
ranging from
importuning to solicitation to outright dishonesty, that the Chief
Master claims were endemic under the old system.
But in my view it
remains a requirement that any policy that is put in place for the
appointment of trustees and liquidators must
be consistent with the
purpose of our insolvency legislation and be directed at serving the
interests of creditors. In formulating
this policy their interests
have quite deliberately been disregarded at any stage prior to the
first meeting of creditors. That
is what the explanatory document
said and it was echoed in the affidavit of the Chief Master.
[63]
In my view that was impermissible. Given the purpose of the
legislation with which we are concerned, it seems to me that the
actions of the Minister in determining the policy under s 158 of
the Act, and the actions that the Master must undertake in
terms of
that policy, must be in accordance with the interests of creditors in
the liquidation of the estate or the winding-up
of the company or
close corporation. As the policy was formulated on the basis that
those interests were irrelevant, and on its
face it does not
recognise or serve those interests it was in my view outside the
legitimate powers vested in the Minister and
its promulgation
involved a breach of the principle of legality.
[64]
There is a fundamental principle that must be observed in this
regard. It was summarised in
Gauteng
Gambling Board
[24]
where
Navsa JA, speaking for a unanimous court said:
‘
More
than six decades ago this court in
Van
Eck NO and Van
Rensburg
NO v Etna Stores
1947
(2) SA 984 (A)
said
the following:
“
For
to profess to make use of a power which has been given by statute for
one purpose only, while in fact using it for a different
purpose, is
to act
in fraudem legis
,
construing that term in the more restricted manner adopted by the
majority of this Court in the case of
Dadoo
Ltd v Krugersdorp Municipal Council
(1920 AD 530).
. . Such a use is a mere
simulatio
or pretext. . . . And I should add that, of course, if the person
exercising the power avowedly uses it for some purpose other
than
that for which alone it has been given, he acts simply
contra
legem
: where, however, he professes to
use it for its legitimate purpose, while in fact using it for
another, he acts
in fraudem legis.
”
In
present-day jurisprudence acting with an ulterior motive or purpose
is subsumed under the principle of legality.’
[65]
In my opinion it is precisely that type of breach of the principle of
legality that has occurred here. In their legitimate
desire to
address past discrimination and disadvantage, the Minister and the
Chief Master have overlooked the fundamental purpose
of the
legislation that governs the sequestration of estates and the
winding-up of companies and close corporations, which is to
serve the
interests of creditors as conceived by the creditors themselves. The
policy that has been promulgated is not directed
at that purpose and
disavows the need for the process of appointment that it governs to
have regard to the views or interests of
creditors. That is an
exercise of power for a purpose other than any for which it was
bestowed. It should not be difficult for
the Minister and the Chief
Master to devise a policy that serves both purposes instead of trying
to serve one at the expense of
the other.
[66]
For that further reason as well as those set out in his judgment I
concur in the order proposed by Mathopo JA.
________________
M
J D Wallis
Judge
of Appeal
APPEARANCES:
For
appellants:
R T
Williams SC
A L
Platt SC
Instructed
by:
The
State Attorney, Cape Town
The
State Attorney, Bloemfontein
For
first respondent:
B Manca SC
E van
Huyssteen
M
Adhikari
Instructed
by:
De
Klerk & Van Gend Inc, Cape Town
McIntyre
& Van der Post, Bloemfontein
For
second respondent: M S M Brassey SC
M J
Engelbrecht
Instructed
by:
Tintingers
Inc c/o Werksmans Attorneys, Cape Town
Symington
& De Kok, Bloemfontein
For
third respondent: M J
Engelbrecht
Instructed
by:
Stuart
Van der Merwe Inc, Arcadia
Honey
Attorneys, Bloemfontein
[1]
This
subsection reads as follows:
‘
The
Minister may determine policy for the appointment of a
curator
bonis
, trustee, provisional trustee or
co-trustee by the Master in order to promote consistency, fairness,
transparency and the achievement
of equality for persons previously
disadvantaged by unfair discrimination.’
[2]
Section 10(1A)
(a)
of the
Close Corporations Acts 69 of 1984 and s 368 of the old Companies
Act 61 of 1973.
[3]
The
office of the Chief Master as the executive officer of all Masters’
offices was introduced by the promulgation of the
Judicial Matters
Amendment Act 16 of 2003
which came into effect on 9 July 2004.
Section 2
(a)
(i)
of the
Administration of Estates Act 66 of 1965
makes provision for
the appointment of a Chief Master of the High Court and a Master of
each High Court.
[4]
Presumably an order was made in terms of s 27(1)
(b)
of the
Superior Courts Act removing the application by CIPA from the
Gauteng Division, Pretoria to the Western Cape Division.
[5]
Prior to its amendment, s 18(1) read:
‘
As
soon as an estate has been sequestrated (whether provisionally or
finally) or when a person appointed as trustee ceases to
be a
trustee or to function as such, the Master may appoint a provisional
trustee to the estate in question who shall give security
to the
satisfaction of the Master for the proper performance of his duties
as provisional trustee and shall hold office until
the appointment
of a trustee.
[6]
The master has a discretion under s 57(1) of the Act in certain
circumstances not to appoint a person elected as trustee
at a first
meeting of creditors, but this occurs fairly infrequently and does
not affect the discussion in the body of the judgment.
[7]
The
extent of these consultations is in dispute.
[8]
Department of Justice and Constitutional Development Regulations, GN
R77,
GG
37287,
7 February 2014. Clauses 6 and 7 of the Policy were amended with
effect from 17 October 2014, and the notice was gazette
by
Department of Justice and Constitutional Development Regulations, GN
R789,
GG
38088,
17 October 2014.
[9]
This
section reads:
‘
The
Minister may determine policy for the appointment of a liquidator by
the Master in order to promote consistency, fairness,
transparency
and the achievement of equality for persons previously disadvantaged
by unfair discrimination.’
[10]
The
section provides that:
‘
As
soon as a winding-up order has been made in relation to a company,
or a special resolution for a voluntary winding-up of a
company has
been registered in terms of section 200, the Master may, in
accordance with policy determined by the Minister, appoint
any
suitable person as provisional liquidator of the company concerned,
who shall give security to the satisfaction of the Master
for the
proper performance of his or her duties as provisional liquidator
and who shall hold office until the appointment of
a liquidator.’
[11]
This
is recognised in terms of s 9(2) of the Constitution which
states: ‘Equality includes the full and equal enjoyment
of all
rights and freedoms. To promote the achievement of equality,
legislative and other measures designed to protect or advance
persons, or categories of persons, disadvantaged by unfair
discrimination may be taken.’
[12]
South
African Police Service v Solidarity (obo Barnard)
2014
(6) SA 123
(CC) para 42;
Solidarity
v Department of Correctional Services
2016
(5) SA 594
(CC) paras 51 and 103-109.
[13]
An early analysis, when the categories were differently composed,
indicated that White males would get fewer than 4% of all
appointments.
[14]
Hartley
NO v The Master
1921
AD 403
at 412;
Lipschitz
v Wattrus NO
1980
(1) SA 662
(T) at 671G.
[15]
Vol 2, p 197. This is taken from the explanation for the policy
annexed to the Chief master’s answering affidavit.
[16]
The explanation of the policy said that these figures would only
emerge after the various Masters’ lists had been cleaned
up.
[17]
Walker
v Syfret NO
1911
AD 141
at 166.
[18]
Ward v
Barrett NO and Another
1963
(2) SA 546
(A) at 552E-G.
[19]
Gainsford
and Others NNO v Tanzer Transport (Pty) Ltd
2014
(3) SA 468
(SCA) para 1.
[20]
Ex
parte v Master of the High Court South Africa (North Gauteng)
2011
(5) SA 311
(GNP) para 19.
[21]
Ibid
para
28;
Geduldt
v The Master
2005
(4) SA 460
(C) at 466A-C.
[22]
Paras 23-29.
[23]
Section 364(1) of the Companies Act 61 of 1973 is to like effect. In
a members voluntary winding-up the Master is obliged to
appoint the
person nominated by the company as liquidator subject only to their
not being disqualified from appointment. See
s 369(1).
[24]
Gauteng
Gambling Board and Another v MEC for Economic Development, Gauteng
2013
(5) SA 24
(SCA) paras 46 and 47.