The South African Constitutional Court has found a policy aimed at increasing diversity amongst insolvency practitioners to be unconstitutional in that it failed to meet the requirements of a restitutionary measure under section 9(2) of the Constitution and was irrational. Section 9(2) of the South African Constitution is one of the provisions that authorises the adoption of remedial measures to address inequality and advance persons who were disadvantaged by unfair discrimination.
In 2014, the Minister for Justice in South Africa introduced a new affirmative action policy on the appointment of insolvency practitioners to administer insolvent estates. The policy gave the Master of the High Court the power to appoint a ‘previously disadvantaged individual’ as a co-trustee alongside an experienced practitioner in order to learn how to administer an estate. Prior to this, the Master had discretion in the appointment of practitioners, however this had led to a high proportion of white male practitioners.
The policy was challenged on a number of grounds, including that it violated the right to equality, and that it was arbitrary and irrational.
The Court applied the Van Heerden test which is used to assess whether affirmative action measures are deemed constitutional. The test stipulates that for measures to comply with section 9(2) it must target persons disadvantaged by unfair discrimination, be designed to protect and advance such people, and promote the achievement of equality. The Court found that while the policy was targeted at those who were disadvantaged by discrimination, there was no indication that it was reasonably likely to achieve equality. It also found that there was no rational link between the policy and the transformation of the insolvency industry.
The Court’s finding were primarily in light of a provision whereby practitioners would be appointed alphabetically. It also took issue with the distinction between those who were citizens before 1994 and those who were citizens after that date.
Click here for the judgement in Minister of Constitutional Development and Another v South African Restructuring and Insolvency Practitioners Association and Others.