By Duncan Wild on 13 August 2014

The case concerns a challenge to an order declaring the first and second appellants (Mr and Mrs Stratford) insolvent, as well as a challenge to the provisions of section 9(4A)(a)(ii) of the Insolvency Act. This section prescribes the manner in which an employee of the debtor is to receive notice of an application for the sequestration of the debtor’s estate. As the law currently stands, this section has been interpreted by the Supreme Court of Appeal to apply only to notice to a debtor’s business employees, however, the appellants claim that it must be interpreted to apply also to a debtor’s domestic employees.  Investec Bank Limited (“Investec“) lent money to Mr Ivor Stratford and Mrs Sheila Stratford (“the Stratfords“). At the time of the application Investec claimed that the Stratfords were indebted to it for an amount of approximately R240 million. The Stratfords did not dispute the claim.

During the sequestration proceedings two aspects of the application were challenged by the Stratfords. The first was that the sequestration would not advantage the creditors of the estate, and the second, was that section 9(4A) should be declared unconstitutional in that it did not make provision for the notification of domestic employees of the debtors. This latter half of the challenge was filed by Mr Clean Ngoma, Mr Eric Dlokolo and Mr Andries Adonis, being domestic employees of the Stratfords.

On the first aspect, the Stratfords argue that they only have assets to the value of R780,000, and given the costs of the sequestration, there would be little if any value remaining to distribute to the creditors, and so there would be no benefit to the creditors. Investec argued that certain transactions entered prior the provisional sequestration of the Stratfords could be challenged and realise further assets, and as a result assets could be found that would benefit creditors. The Stratfords challenge this saying that claims based on those transactions have prescribed. The second, and primary issue, for the Constitutional Court, relates to the constitutional validity of section 9(4A)(a)(ii) of the Insolvency Act. The SCA, in Gungudoo and Another v Hannover Reinsurance Group Africa (Pty) Ltd and Another [2012] (6) SA 537 (SCA), found the term “employees” in this section applied only to business and not domestic employees of the debtor.

The appellants argue that this exclusion infringes the rights to equality, dignity, fair labour practices and the right of access to courts. Investec first argues that it did in fact notify Mr Dlokolo, Mr Adonis and Mr Ngoma of the application and thereby complied with the provision.

Investec and the second respondent (the Minister of Justice and Constitutional Development), also argue that the section does not unjustifiably infringe any constitutional rights. In effect they argue that although the sections do differentiate between business and domestic employees this differentiation does not amount to unfair discrimination.

Investec argues that the differentiation is not based on any listed grounds in the “race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language and birth” and also not on any other characteristics that have the potential to impair fundamental human dignity. In addition, Investec denies that appellants argument that the discrimination is indirectly based on race and gender as the vast majority of domestic employees who we be affected by this provision are black and female.

The Minister of Justice argues that even if the Court finds that there is discrimination based indirectly on race, that discrimination is justifiable. They argue that a domestic employee has other protections under the Labour Relations Act and Basic Conditions of Employment Act. In addition, the trustees of an insolvent estate will attempt to make arrangements during the period before a final sequestration order. Therefore the Minister argues that the additional practical and administrative burden of requiring notification to domestic employees is not warranted, as such notification would serve no useful purpose as domestic employees are afforded sufficient protection in the context of the broader legislative framework.