The Court held that a newly adopted policy concerning the appointment of insolvency practitioners was unlawful insofar as it fettered the master’s discretion by establishing a rote alphabetical system for the appointment of liquidators. The exercise of all public power, including policy formulation, must conform with the Constitution and the doctrine of legality. Rationality is required in the exercise of all public power, including measures adopted under s 9(2) of the Constitution. The Court held that the master appoints insolvency practitioners and must apply a discretion when making appointments, but the new policy is inconsistent with the Constitution and invalid for the following reasons:
- It did not relate to the purpose for which the power was given as well as the information available to the functionary exercising the power.
- It changed a feature of the industry’s regulatory framework that required a proper match between liquidator / trustee and a particular estate.
- It was unlikely to achieve its objectives.
- It created a rigid and inflexible regime in which the master effectively became a rubber stamp and was compelled to appoint a designated person by rote from fixed lists arranged alphabetically and on race and gender lines.
Saripa v Minister of Justice [2015] 4 BLLR 329 (HC) per Katz AJ [dated 13.01.2015].
Also Reported in:
2015 (4) BCLR 447 (HC)
[2015] JOL 32745 (HC)
Upheld on appeal to SCA
Exercise power only for bestowed purpose
The SCA disallowed the Minister’s appeal against the judgment of Katz AJ in the high court and this is what Wallis JA stated in a concurring judgment:
‘[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’.
Minister of Justice and Constitutional Development and Another v South African Restructuring and Insolvency Practitioners Association and Others (693/15) [2016] ZASCA 196 (2 December 2016) per Mathopo JA (Mpati P, Wallis, Swain and Van der Merwe JJA concurring)