East Rand Member District of Chartered Accountants and Another v Independent Regulatory Board for Auditors and Others

• Jurisdiction: South Africa
• Judge: Janse Van Nieuwenhuizen J
• Judgment Date: 11 April 2022
• Docket Number: 64848/19 and 46298/20
• Hearing Date: 02 March 2022
• Court: Gauteng Division, Pretoria
• Citation: 2022 JDR 0959 (GP)

Janse Van Nieuwenhuizen J:

1.

The applicants brought two applications for the review and setting aside of certain fees prescribed by the first respondent, the Independent Regulatory Board ("IRBA") in terms of the provisions of the Auditing Profession Act, 26 of 2005 ("the Act'). The review is based on the Promotion of Administrative Justice Act, 3 of 2000 (PAJA) alternatively on the constitutional doctrine of legality.

2.

The 2019 application ("2019 review") seeks the review and setting aside of the decisions in respect of the following five categories of new fees or fee increases for the 2020 financial year:

2.1

the payment of so-called "assurance fees" by registered auditors doing so-called Category C assurance work ("the Category C assurance fees");

2.2

the payment of three categories of fees connected to registered auditors' selection of IRBA as their "recognised controlling body" ("RCB") as tax practitioners ("the tax practitioner fees");

2.3

the imposition of penalties for two categories of transgressions of IRBA's regime regarding assurance fees ("the penalties");

2.4

the increase of two categories of existing fees by more than consumer price inflation ("CPI"), being increases of 35% in respect

2022 JDR 0959 p3

Janse Van Nieuwenhuizen J

of registration renewal and 50% in respect of the re-registration ("the drastic increases in existing fees"); and

2.5

the removal of the concession to registered auditors over the age of 65 in the form of a 50% discount on their annual fees ("the removal of the fee concession").

3.

The 2020 application ("the 2020 review") concerns the same five categories of fees in respect of the 2021 financial year and is sought on the basis, primarily, that:

3.1

the decisions to prescribe these five categories display the same infirmities as in the 2019 application; and

3.2

the relevant fee decisions are premised (and thus dependent) on the validity of the decisions in respect of the 2020 financial year.

PARTIES:

4.

The first applicant is East Rand Member District of Chartered Accounts, a voluntary association with approximately 1 600 members. The members of the first applicant are "registered auditors" in terms of the Act.

5.

The second applicant passed away prior to the hearing of the matter and the executor of his deceased estate indicated that the estate does not wish to persist with the application.

6.

In the result, the first applicant will be referred to as "the applicant".

2022 JDR 0959 p4

Janse Van Nieuwenhuizen J

7.

The first defendant, IRBA, is a juristic person established in terms of section 3 of the Act and must, in terms of section 3(1)(a), exercise its functions in accordance with the Act and any other relevant law.

OPPOSITION:

8.

In opposing the relief claimed by the applicant, IRBA:

8.1

raised three points in limine;

8.2

alleged that the impugned decisions are not administrative action as envisaged in PAJA;

8.3

alleged that the 2019 review was launched outside the 180 days prescribed in terms of PAJA, and

8.4

maintained that no grounds exist for the review and setting aside of the impugned decisions.

POINTS IN LIMINE:

9.

IRBA raised the following points in limine:

9.1

lis pendens;

9.2

impermissible incorporation; and

9.3

non-compliance with rule 16A.

2022 JDR 0959 p5

Janse Van Nieuwenhuizen J

10.

At the commencement of the hearing IRBA indicated that it will only proceed with the non-compliance with rule 16A point, which point is only raised in respect of the notice in the 2020 review.

Rule 16A notice

11.

Rule 16A(1)(a) of the Uniform rules of court compels any person who raises a constitutional point in an application to give notice thereof to the registrar.

12.

It is common cause that the applicant issued a notice in compliance with the provisions of rule 16A(1)(a).

13.

IRBA, however, maintains that the contents of the notice do not comply with rule 16A(1)(b) due to the fact that it lacks particularity. Rule 16A(1)(b) reads as follows:

"Such notice shall contain a clear and succinct description of the constitutional issue concerned."

14.

The introductory paragraph of the 2020 notice reads as follows:

"TAKE NOTICE THAT the first and second applicants' notice of motion and founding affidavit in the above matter raise the following constitutional issues:

Whether the following decisions taken by the first respondent ("IRBA") ought to be reviewed and set aside pursuant to the Promotion of Access to

2022 JDR 0959 p6

Janse Van Nieuwenhuizen J

Administrative Justice Act, 2000 (Act 3 of 2000) ("PAJA"), alternatively the constitutional doctrine of legality:"

15.

Although the words "Access to" do not appear in PAJA, the number of the Act makes it clear that the applicant is relying on PAJA.

16.

The introduction is followed by a full description of the various decisions that form the subject matter of the 2020 review.

17.

Both parties relied on Shaik v Minister of Justice and Constitutional Development 2004 (3) SA 599 CC in which the Constitutional Court held at para 24, that:

"The purpose of the Rule is to bring to the attention of persons (who may be affected by or have a legitimate interest in the case) the particularity of the constitutional challenge, in order that they may take steps to protect their interests."

18.

The first enquiry entails establishing who "the persons who may be affected or have a legitimate interest in the case" are. In casu it is the persons who may have a legitimate interest in the 2020 review are "registered auditors" as defined in the Act.

19.

Secondly, the notice must contain "the particularity of the constitutional challenge, in order (for registered auditors to) take steps to protect their interests."

2022 JDR 0959 p7

Janse Van Nieuwenhuizen J

20.

The constitutional challenge is specified to be the right to administrative action that is just and fair. This right is enshrined in section 33 of the Constitution and given effect to by the provisions of PAJA.

21.

It is clear from the notice that the applicant in the alternative relies on the constitutional doctrine of legality.

22.

The decisions forming the subject matter of the constitutional challenge is, furthermore, set out in detail in the notice.

23.

Having regard to the purpose of a Rule 16A notice, I am satisfied that the notice contains sufficient particularity to enable a reasonable registered auditor to assess the impact of the challenge on his/her interests. The point in limine is, accordingly, dismissed.

DO THE DECISIONS CONSTITUTE ADMINISTRATIVE ACTION UNDER PAJA?

24.

"Administrative action" is defined in section 1 of PAJA as follows:

"…means any decision taken, or failure to take a decision, by –

(a)

an organ of state, when

(i)

exercising a power in terms of the Constitution or a provincial constitution; or

(ii)

exercising a public power or performing a public function in terms of legislation; or

(b)

….

2022 JDR 0959 p8

Janse Van Nieuwenhuizen J

which adversely affects the rights of any person and which has a direct, external effect, but does not include-"

A list of nine categories that are excluded from the definition follows. IRBA does not fall within one of the stated categories.

25.

IRBA does not deny that it is an organ of State and that the impugned decisions adversely affect the rights of registered auditors and has a direct, external effect.

26.

IRBA, however, maintains that in making the impugned decisions it formulated policy and/or that the decisions are at least "policy-laden or polycentric" as defined in Minister of Transport NO v Prodiba (Pty) Ltd [2015] ZASCA 38 ("Prodiba") and therefore not administrative action. [Also see: Shokela and Others v MEC for Agricultural and Environmental Affairs (KwaZulu-Natal) and Others 2010 (5) SA 574 KZP para 61]. I pause to mention that the subject matter of the dispute in Prodiba was the validity of a contract entered into consequent to a policy decision by Cabinet to migrate from old drivers' licences to a new card system. The policy decision was not translated into legislation.

27.

At para [26] of the Prodiba judgment, the Supreme Court of Appeal held as:

[26] …The decision to migrate to new technology on the scale envisaged in the agreement in question is typically a policy-laden or polycentric decision. The Constitutional Court and this court have recognised the importance of appreciating the proper role and functions of the legislature, the executive and the judiciary within the Constitution. In this regards see Bato Star

2022 JDR 0959 p9

Janse Van Nieuwenhuizen J

Fishing (Pty) Ltd v Minister of Environmental Affairs [2004] ZACC 15; 2004 (4) SA 490 (CC) paras 46–48, Logbro Properties CC v Bedderson NO and 2003 (2) SA 460 (SCA) para 20 and also Cora Hoexter 'The future of Judicial review in South African administrative law' (2000) SALJ 484 at 501. See also Minister of Home Affairs v Scalabrini Centre 2013 (6) SA 421 (SCA) paras 57-59. Policy making is traditionally primarily the task of the highest ranking officials in government, namely, the Cabinet or its constituent Ministers or, at provincial level, the executive council or its individual members."

28.

Although the Supreme Court of Appeal stated in Prodiba that policy normally falls within the functions of the Executive, the court emphasised in Motala v Master, North Gauteng Court 2019 (6) SA 68 SCA, at para [67], that a case to case approach should be followed:

"[67] There is no simple litmus test to determine when an action or decision is of an 'administrative nature'. It is therefore necessary, in the light of the facts of each particular case, to embark on 'a close analysis of the nature of the power or function and its source or purpose' — per Wallis J in...