Written by: Thomas Murray
In early December 2016, the Supreme Court of Appeal delivered the judgment for the case of The Minister of Justice and Constitutional Development v The SA Restructuring & Insolvency Practitioners Association. This case dealt with the constitutionality of a policy that seeks to regulate the appointment of provisional trustees and liquidators. As this is at heart a very complex legal case, I do not wish to bore you with the technicalities of the appointment of liquidators by the Master of the High Court. See below for a link to the judgment.
The objective of the policy was to ‘promote consistency, fairness, transparency and the achievement of equality for persons previously disadvantaged by unfair discrimination’. The policy was a tool to implement transformation of the insolvency industry. However, the policy was doomed from the start, as it categorised people into certain groups according to age, race and gender and also prescribing a ratio basis of appointments which were to be followed to the letter. The court held this policy to be unconstitutional and irrational, the reason being that the policy amounts to a pure quota system.
Clearly, these grounds are, as the court argues, arbitrary and counterproductive. At no stage do these grounds allow the Master of the High Court to actually ensure that appointees act in the interest of the persons forcibly made dependent on them by South African law.
The main source of my argument that I hold before you today is the addendum that Wallis JA wrote to this judgment. Wallis JA focused on the fact that the process of winding-up an insolvent company is at its essence a creditor-driven process. The jurisprudence behind the creditor-driven process has its roots in English Law, which focuses on the fact that the creditors of an insolvent company have the say on how an insolvent company’s assets should be realised and most importantly, who should be entrusted to take the responsibility. To put it in simple terms, it is their money that is at risk in the insolvency, they are the best judges of their own interest. It is this private interest that I would wish to emphasise. This creditor-driven process is in the opinion of the Minister, the barrier towards transformation.
What the Minister misses is that political interventionism, which aims to achieve transformation through a brute-force approach, is a barrier to the very same economic processes which allow South Africans to generate their own wealth in the first place. Real public interest, in this model, is made to play second fiddle to the short term enrichment of specific persons to the detriment of the broader South African public.
The political goals of transformation, empowerment are in general seen as public interest in post-1994 South Africa, with private interest often taking a backseat. The policy I am discussing today is, in my opinion, one of the most blatant attempts to suffocate private interest by the executive for the furtherance of political objectives. It totally negates the most important factor that needs to be considered in these matters, the factor of substantive merits. Substantive merits include academic knowledge, experience, infrastructure and location considerations. This policy suggests that race, gender and age are the only factors that need to be listed, none of them is, in my opinion, relevant merits. The negative effects of the implementation of a policy that does not take substantive merits into consideration are incalculable, to pinpoint the negative effects to a monetary figure will only be an underestimation.
I wish to end this article by paraphrasing a quote by Adrian Rogers: “You cannot further public interest by suffocating private interest”
Author: Thomas Murray is a final year law student at the University of Pretoria and holds a BCom degree from the same university. He has a keen interest in legal history, tax and corporate law.