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SCA finds racial quotas for liquidators unlawful

December 5, 2016

Bloemfontein – The Supreme Court of Appeal this week found that a racial quota policy implemented for the appointment of liquidators was unlawful and invalid.

The SCA ruled on Friday that an appeal against a finding of its unconstitutionality be “dismissed with costs,” upholding the high court’s finding of the policy as “unconstitutional and irrational” as well as “unlawful and invalid”.

The policy in question came into operation on March 31, 2014. However an urgent interdict against its implementation was brought by various associations of insolvency practitioners, as well as other interested parties.

The high court in Cape Town subsequently declared the policy inconsistent with the Constitution and thus invalid.

An application by the justice minister and chief master of the high court of South Africa, for leave to appeal this decision was refused – with them eventually then turning to the Supreme Court of Appeal.

Previously, in 2001, a policy made provision for previously disadvantaged people 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.”

‘Unlawful fettering’

However, the actual outcomes of this policy created a “bleak [picture] for the advancement of previously disadvantaged practitioners”.

According to facts put before the court, 43% of the workload went to white males and 10% to white females.  Those classified under apartheid as African, coloured, Indian and Chinese females received 4%, while their male equivalents received about 30%.

The judgement noted that it was not explained how these proportions did not add up to 100%

The new policy drawn up for implementation in 2014, then changed the structuring of appointments creating four categories among those with the relevant qualifications and experience.

Category A represented African, coloured, Indian and Chinese females who became SA citizens before April 27, 1994; B represented their male equivalents; C represented white females who were SA citizens before April 27, 1994 and D represented anyone who became a SA citizen on or after April 27, 1994, as well as white males.

There were a set structure as to how these individuals would be appointed according to a ratio of A:4 B:3, C:2, D:1.  The names of those on the list would be alphabetical and it is in this order that they would be selected.

The master of the high court of South Africa was then obliged to appoint insolvency practitioners according to this ratio across all classes of appointment – as well as no longer taking into account the desires of creditors.

“The high court… 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… arranged alphabetically on a race and gender basis,” noted the SCA.

The court ruled that this policy was an “unlawful fettering of his discretion”.

‘Flexibility and inclusiveness’

Furthermore the high court suggested that making the insolvency industry accessible to those disadvantaged under apartheid needed “to do more than increase numbers”.

The appellants appealed on the basis that the policy would help shape transformation.

However the respondents, while accepting this objective, suggested that in practice it would not achieve this aim and furthermore would take away business from those who were previously disadvantaged and had the correct skill set.

The SCA’s judgement was based on an understanding that “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”.

The court found that while “measures directed at affirmative action may in some instances embody preferential treatment and numeral goals,” it “cannot amount to quotas”.

The judgement suggested that in advancing transformation, “flexibility and inclusiveness is required” as “measures must not, however, encroach, in an unjustifiable way, upon the human dignity of those affected by them,” which would be unconstitutional.

The court also suggested that the policy was prejudiced to young black men and women who had recently qualified.

On Sunday, Solidarity trade union, which was one of the respondents, said that it welcomed the judgment as it showed up the policy as one that “highlights the absurdity of government’s racial classification system”.

“There is no regard for skills; only race is taken into account,” it said.

SOURCE: NEWS24: http://www.news24.com/SouthAfrica/News/sca-finds-racial-quotas-for-liquidators-unlawful-20161204?isapp=true: REFERENCED: 05/12/2016

IMAGE REFERENCE: High court. (Duncan Alfreds, News24)