Section 27 of the Insolvency Act 24 of 1936 as a Violation of the Equality Clause of the Constitution of South Africa: A Critical Analysis

Abstract

The Constitution of the Republic of South Africa, 1996, is regarded as one of the most progressive constitutions in the world. As the supreme law in South Africa, it applies to all law and conduct. All South African laws must be consistent with the Constitution. Where there is an alleged violation of constitutional provisions, that law or conduct must be evaluated to establish whether or not it is consistent with the values of an open and democratic society based on fundamental human rights such as human dignity and the right to equality.

The Insolvency Act and section 27 in particular which is the focus of this paper must be consistent with the Constitution. Section 27(1) provides:

"No immediate benefit under a duly registered antenuptial contract given in good faith by a man to his wife or any child to be born of the marriage shall be set aside as a disposition without value, unless that man's estate was sequestrated within two years of the registration of that antenuptial contract."

This section protects benefits arising from an antenuptial contract and given by a man to his wife or to a child born of their marriage, from being set aside as dispositions without value during sequestration proceedings. The same protection is not afforded however, to benefits given by the wife under an antenuptial contract. This also excludes benefits given by those in a same sex marriage, and limits the benefits available to children born of that form of marriage.

As the right to equality in section 9 of the Constitution seeks to provide equal benefits before the law to persons in the same or similar positions by prohibiting unfair discrimination, the limitations in section 27 render it vulnerable to constitutional review.

As the Insolvency Act has not been amended as a whole to accommodate the equality provisions in the Constitution, in its current form, section 27 seems to violate section 9(3) of the Constitution on the grounds of sexual orientation, marital status and birth.

However, certain proposals have been made in the report by the South African Law Reform Commission on the Review of the Law of Insolvency to develop section 27 to comply with the Constitution. Further developments have been proposed by the Department of Justice and Constitutional Developments in its presentations to the Labour Market Chamber in 2003 and 2006.

This paper examines section 27 of the Insolvency Act as it currently reads, within the context of the right to equality in section 9 of the Constitution. Current developments in respect of section 27 will be considered to illustrate progress made in reforming the section and whether the reform measures proposed will protect all those affected by the discrimination arising from section 27.

The discussion opens with a consideration of the current dispensation and the question whether section 27 violates section 9(3) of the Constitution. Current developments will then be discussed in the light of the current proposals.