## Facts

- Jürgen Harksen was sequestrated as an insolvent debtor, and Michael John Lane (N.O.) was appointed as trustee of the insolvent estate.
- Jeanette Harksen, married to Jürgen Harksen out of community of property, claimed that various assets taken into the sequestrated estate belonged solely to her as the solvent spouse.
- By operation of Insolvency Act 24 of 1936 § 21, property of the solvent spouse vested in the Master and then in the trustee upon sequestration, subject to later release if the spouse proved separate ownership and that the property was not available to satisfy the insolvent estate’s debts.
- Jeanette Harksen’s property (alleged to exceed R 6 million) was attached under § 21 as part of the administration of the insolvent estate.
- In terms of Insolvency Act §§ 64(2) and 65(1), she was summoned to a creditors’ meeting and examined about the “business, affairs and property” of the insolvent and the spouse.
- She challenged the constitutionality of § 21 and parts of §§ 64(2) and 65(1) under the Interim Constitution, arguing that the scheme treated solvent spouses differently and infringed constitutional rights.
- The High Court referred the constitutional questions to the Constitutional Court for determination.

## Issues

1. Whether Insolvency Act § 21 unfairly discriminates against a solvent spouse (and married persons) under the Interim Constitution’s equality clause by automatically vesting the solvent spouse’s property in the trustee upon the other spouse’s sequestration.
2. Whether the temporary vesting of a solvent spouse’s property under § 21 amounts to “expropriation” without compensation contrary to the Interim Constitution’s property protection.
3. Whether the power to summon and examine a spouse (and others) under Insolvency Act §§ 64(2) and 65(1) unjustifiably limits the rights to privacy and to freedom and security of the person under the Interim Constitution.
4. Whether the High Court’s referral was procedurally improper because other non-constitutional avenues of relief had not first been exhausted.

## Decision

- The Constitutional Court dismissed the challenge and upheld the constitutional validity of Insolvency Act § 21 and the challenged portions of §§ 64(2) and 65(1).
- The Court held that § 21’s vesting mechanism is a temporary statutory deprivation designed to preserve assets for proper insolvency administration and does not constitute “expropriation” requiring compensation.
- Applying a structured approach to equality, the majority concluded that although § 21 differentiates on a ground linked to marital status/spousal relationship, the discrimination was not unfair in light of the provision’s aim (protecting creditors and preventing collusion) and the statutory mechanisms for release and judicial relief.
- The Court held that §§ 64(2) and 65(1) do not, on their terms, authorize unconstitutional invasions of privacy or violations of freedom and security of the person, given their insolvency-administration function and the limits that apply to questioning.
- The Court rejected a rigid rule that non-constitutional remedies must always be exhausted before a constitutional referral, and found the referral appropriate on the facts.

## Legal Principles

- Equality analysis proceeds in stages: (1) whether there is differentiation and whether it is rationally connected to a legitimate governmental purpose; (2) whether the differentiation amounts to discrimination (automatically if on a listed ground, otherwise if based on attributes that can impair dignity in a comparable way); and (3) whether the discrimination is unfair, assessed by factors including the complainant’s social position, the purpose of the measure, and the seriousness of its impact.
- Discrimination is unconstitutional only if it is unfair; where unfairness is established, the measure must then be justified under the applicable limitations analysis.
- “Expropriation” in constitutional property law generally entails acquisition of property rights by the state (or a public authority) for a public purpose; a temporary vesting scheme aimed at safeguarding administration of an insolvent estate, coupled with procedures for recovery, may amount to deprivation rather than expropriation.
- Insolvency inquiry powers that require attendance and answering relevant questions may be constitutionally permissible where used for the administration of the estate and constrained by ordinary legal protections and constitutional limits.
- A High Court may refer constitutional questions to the Constitutional Court without an absolute requirement that every alternative remedy be exhausted first; procedural suitability depends on the nature of the dispute and the centrality of the constitutional issue.

## Conclusion

In *Harksen v. Lane*, the Constitutional Court upheld Insolvency Act provisions that temporarily vested a solvent spouse’s property in the trustee and authorized examination at creditors’ meetings, finding no expropriation and no unfair discrimination under the Interim Constitution, and confirming a structured method for assessing discrimination and unfairness even though the judges differed on applying it to the solvent-spouse vesting rule.


Harksen v. Lane, 1998 (1) SA 300 (CC)