By Duncan Wild on 16 March 2014

The case came before the Constitutional Court as an application for the confirmation of a an order by the Western Cape High Court which had found section of the Estate Agency Affairs Act 112 of 1976 (“EAAA“) and the Financial Intelligence Centre Act 38 of 2001 (“FICA“) to be constitutionally invalid. The sections, 32A of the EAAA and 45B of FICA afforded search and seizure powers to regulatory bodies.

The Estate Agency Affairs Board (“the Board“) regulates compliance with EAAA and was a supervisory body responsible for enforcing FICA compliance.  The Board suspected that the respondent, Auction Alliance (Pty) Ltd (“Auction Alliance“) had contravened both the EAAA and FICA and so attempted to conduct a search of Auction Alliance’s premises without a warrant under the challenged sections.  Auction Alliance refused to allow the inspectors from the board access, and instead brought this application, seeking to to prevent the Board from conducting the warrantless search, and to declare the relevant provisions invalid. It was agreed that in the interim the documents sought by the Board would be kept in the possession of KPMG pending the resolution of the litigation. The Board also brought a counter-application seeking that the High Court issue a search warrant allowing a search of Auction Alliance’s premises. 

The powers of the Board under the two acts to conduct routine inspections were not challenged, however, the power to conduct searches based on a specific suspicion of wrong-doing without a warrant, termed “targeted searches” were found to be over-broad and unjustified.  The High Court therefore found the sections invalid to the extent that these targeted searches were permitted. The High Court also refused to allow issue the search warrant.

In the Constitutional Court, the parties agreed that the sections were unconstitutional, but disagreed on the extent of the limitation and the consequences, such as whether it should be made retrospectively or suspended to allow Parliament to re-write the provisions.

The Constitutional Court, in an unanimous judgment written by Cameron J, found the sections unconstitutional as they did not provide any appropriate limitations with regard the place or scope of the possible searches, and the goals of the statute could be achieved through less restrictive means. The Constitutional Court held that the declaration of invalidity would only operate prospectively, and would be suspended for a period of 24 months to allow Parliament to rectify the statutes. Pending such rectification the High Court and Magistrate’s Court are empowered to issue warrants to inspectors from the Board.

In addition, although the Constitutional Court, refused to issue a warrant authorising access to the documents held by KPMG, it did permit the Board to make an application to the High Court for a warrant under the newly read in provisions.

Download the judgment here.