East Rand Member District of Chartered Accountants v IRBA [2023] ZASCA 81
ADMINISTRATIVE – Review – Ultra vires – Mandatory Audit Firm Rotation Rule – Imposed by Independent Regulatory Board for Auditors – Limiting tenure of audit firms – Purpose to address cause of accounting scandals – Act confining rule making power to prescription of standards in respect of defined functional areas – Promulgation of the rule was ultra vires the Act – Reviewed and set aside – Auditing Professions Act 26 of 2005.
Facts: The auditing industry has been marred both locally and globally by accounting scandals. The Independent Regulatory Board for Auditors (IRBA) attributes the genesis of the problem to the long tenure of audit firms, which have in some instances endured for 80 to 114 years. It introduced a Mandatory Audit Firm Rotation Rule (MAFR) which placed restrictions on the tenure of audit firms. The applicants requested reasons and then launched an application for review.
Appeal: Against the dismissal of their application to review and set aside the MAFR.
Discussion: That the primary complaint involves the IRBA’s power to promulgate the MAFR and whether the exercise of that power was ultra vires the Auditing Professions Act 26 of 2005; the delay in bringing the review and section 7(1) of the Promotion of Administrative Justice Act 3 of 2000; that the MAFR was only to take effect five years after the institution of the review and that there was no unreasonable delay; and that the IRBA may not exercise a power not conferred on it by its founding legislation nor can it act in a manner that is inconsistent with the Act.
Findings: The Act confines the IRBA’s rule making power to the prescription of standards in respect of defined functional areas. The MAFR is not a standard of competence or a professional standard. It instead imposes a broad restriction on companies, audit committees and their current and future shareholders from appointing an audit firm of their choice. The promulgation of the MAFR is ultra vires the Act and falls to be set aside.
Order: The appeal is upheld and the order of the High Court replaced with one reviewing and setting aside the MAFR.
SIWENDU AJA (PONNAN JA, NICHOLLS JA, MABINDLA-BOQWANA JA and WEINER JA concurring)
* Note at para [20] the court’s displeasure at the size of the record, which was awash with reports and unnecessary material, not required for the adjudication of the matter.
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Media 24 v Nhleko [2023] ZASCA 77
CIVIL PROCEDURE – Plea – Amendment – Media company sued for defamation – High Court paying scant regard to purpose of pleadings in dismissing application to amend plea – Not article itself which has to be justified, but the defamatory statements that are alleged – Facta probanda that must be pleaded, not the facta probantia – Appeal upheld.
Facts: Media 24 published an article in 2016 stating that Mr Nhleko, who was the Minister of Police at the time, had been implicated for signing off millions of rands for work done by his love interest and for going all out to reinstate charges against Ipid head Robert McBride. The love interest was a reference to his partner, Dr Mthembu, who according to the article, scored more than R30 million for providing services which the police ministry officials claim that they could have received for free. Mr Nhleko and Dr Mthembu sued for defamation, claiming R15 million each.
Appeal: Against the High Court’s dismissal of Media 24’s application to amend a plea. This had been brought in response to Mr Nhleko and Dr Mthembu filing a Uniform Rule 30A notice objecting to the plea on the grounds that it constituted a bare denial, it was evasive, and did not clearly and concisely state the material facts on which Media 24 relied for its defence.
Discussion: The High Court’s finding that the case was premised on two points, namely the role, if any, played by Mr Nhleko in regard to the payment of more than R30 million, and the payment itself; that in granting leave to appeal the High Court stated that the substantive issue was whether Media 24 could plead a bare denial in a defamation case involving an admitted publication of an alleged payment in the first page headline of a leading Sunday paper; that the High Court misunderstood what a defendant in a defamation action is required to plead; and that it is not the article itself which has to be justified, but the defamatory statements that are alleged.
Findings: In coming to its conclusion to refuse the application for amendment, the High Court paid scant regard to the purpose of pleadings, which is to define the issues between the parties. The sole requirement of the application for amendment was to ensure that the plea advanced encapsulates the defence to the particulars of claim, not to the article itself. It is the facta probanda that must be pleaded, not the facta probantia. A litigant is not required to prove its case in the pleadings, nor to describe the evidence to be led, but to state the material facts on which it relies and which it intends to prove at the trial.
Order: The appeal is upheld and the order of the High Court replaced with one granting the applicant leave to amend its plea.
NICHOLLS JA (GORVEN JA, HUGHES JA, GOOSEN JA and UNTERHALTER AJA concurring)
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Arena Holdings ta Financial Mail v SARS [2023] ZACC 13
PAIA – Tax records – Absolute prohibition – Public interest override – Journalist seeking access to Jacob Zuma’s tax records – Right to access to information, freedom of expression and privacy – Section 36 of the Constitution – Serious criminality undermines values of Constitution – Promotion of Access to Information Act 2 of 2000, ss 35 and 46 – Tax Administration Act 28 of 2011, ss 67 and 69 – Declaration of invalidity confirmed.
Facts: A financial journalist was employed by Arena and in 2019 made an application to SARS in terms of the Promotion of Access to Information Act 2 of 2000 (PAIA) to gain access to Mr Zuma’s tax records. The application was premised on allegations that were made by Jacques Pauw in his book The President’s Keepers. It was averred that there was “credible evidence” that, while he was President, Mr Zuma was not tax compliant. An internal appeal followed the refusal by SARS. The applicants approached the High Court on the dismissal of that appeal.
Confirmation: The High Court found that the blanket prohibitions of disclosure of taxpayer information contained in section 35 of PAIA and section 69 of the Tax Administration Act 28 of 2011 (TAA) unjustifiably limit the right of access to information provided for in section 32 of the Constitution. The High Court declared the impugned provisions invalid and unconstitutional. The applicants now approach the Constitutional Court to confirm the declaration of invalidity.
Discussion: The right to privacy under section 14 of the Constitution; the Marcel principle and the contention by SARS that the relief sought would enable a PAIA requester to freely disseminate tax information; and that SARS contended that the regime created by the TAA and PAIA was established after extensive consultation and careful consideration of other tax regimes, and it strikes a fair and reasonable balance between the right to privacy and the right of access to information.
Findings: In a rules-based society, serious criminality undermines the values of the Constitution, just as a serious and imminent environmental or health risk poses a high level of threat to the populace. These considerations are, objectively, sufficiently serious in the public interest to warrant lifting the cloak of confidentiality that would otherwise vest in information worthy of protection by virtue of private or public considerations. If high-profile public figures more often find themselves the subject of requests to invoke the “public-interest override”, that would not be because they are subject to a different test than other members of the public, but because their conduct might more readily meet the high standard set by section 46 of PAIA for the override.
Order: The orders of constitutional invalidity of the High Court of sections 35 and 46 of PAIA and of sections 67 and 69 of the TAA are confirmed. Interim provisions are provided pending any measures Parliament might take to address the constitutional invalidity. The request under PAIA for access to the individual tax returns of Mr Zuma for the 2010 to 2018 tax years is referred to SARS for consideration afresh in the light of this order.
KOLLAPEN J (BAQWA AJ, MAJIEDT J, MATHOPO J and ROGERS J concurring)
MHLANTLA J (MADLANGA J, MBATHA AJ and TSHIQI J concurring) would have dismissed the confirmation application.
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