UNIVERSITY OF NAMIBIA

FACULTY OF LAW LAW OF EVIDENCE ASSIGNMENT 1

Question:
A client approached you to provide a detailed written legal opinion on the following: Article 12(1)(f) of the Namibian Constitution provides for the right against self-incrimination. In light of this constitutional right, the client is concerned with the provisions of sections 423(3) and 424(8)(iii) of the Companies Act, Act 28 of 2004. In your legal opinion, you are required to carefully analyse the case law and other authorities, including the jurisprudence in developed in respect of section 417(2)(b) of the Companies Act, Act 61 of 1973.

SURNAME & INITIALS STUDENT NO. LECTURE

HAMUKOTO H.T 201055031 MR. NORMAN TJOMBE

DUE DATE: 27 JULY 2012

TABLE OF CONTENT
INTRODUCTION______________________________________________________________________1 THE CONSTITUTIONALITY OF SECTION 417 OF THE COMPANIES ACT 61 OF 1973__________________1 FOREIGN JURISPRUDENCE ON SEC 417(2)(b) OF THE COMPANIES ACT, 1973_______________________________________________________________________________3 LEGAL OPINION ON THE CONSTITUTIONALITY OF Sec 423(3) AND 424(8)(III) OF THE COMPANIES ACT, 2004_______________________________________________________________________________4 CONCLUSION________________________________________________________________________5 REFERENCE LIST______________________________________________________________________6

INTRODUCTION

The Namibian constitution 1 requires that prominence and protection be given to the fundamental rights and freedoms contained in Chapter three thereof. Protection of the fundamental rights and freedoms requires that the State pass national legislation and policy that are specifically consistent with the provisions of chapter three of the constitution. There are a number of controversial questions surrounding the constitutionality of some of the Legislation which the State passes and one of them being section 417 of the Companies Act 61 of 1973 and subsequently section 423(3) and 424(8)(iii) of the Companies Act 28 of 2004. This is an issue that has been long standing under our law, but one to which little attention has been given by our courts so far. The assignment therefore, looks into the constitutionality of the above stated sections. The purpose is to investigate within reasonable limits the discretional power granted to the court and commissioners in s 417 proceedings and its impact on the constitutional rights of the examinees. This is done in relation to Namibian law. However, it has been necessary to regard and borrow from South African law. The consideration of South African law is important because of the legal historical relationship between the two countries and much more because legal developments in the two jurisdiction holds persuasive and in some cases binding authority.
THE CONSTITUTIONALITY OF SECTION 417 OF THE COMPANIES ACT 61 OF 1973

The Namibian Constitution is the Supreme law of Namibia and therefore any law in conflict with the Constitution can be declared unconstitutional and therefore null and void by a competent court 2 . The constitution gives prominence to the catalogue of fundamental rights and freedoms contained in chapter 3 (Article 5 25), and Article 5 therefore requires that the fundamental rights and freedoms enshrined in chapter 3 of the Namibian Constitution shall be respected and upheld by all organs of the state and its agencies as well as by all persons in Namibia, and shall be enforceable by the courts3. Article 12(1)(f) of the Namibian constitution, which is part of chapter 3 thereof, guarantees the right against self-incrimination. It provides that: No person can be compelled to give testimony against themselves. This article proceeds to exclude testimony, which has been induced by coercion or in any unlawful manner. In S v Minnies4 the High Court of Namibia held that this Article is peremptory in its terms so that the Courts must not admit in evidence testimony which has been illegally obtained or obtained in violation of the constitution.

1 2

Act 1 of 1990 Article 1 (6) of the Namibian constitution 3 Article 79 of the Namibian constitution 4 1991 (3) SA 364

Section 417 of the Companies Act 5 deals with the summoning and examination of persons as to the affairs of a company being wind-up. This summoning and examination can take place any time after an order for winding- up of a company (unable to pay its debts) has been issued. In terms of this section: the Master of the High Court may, at any time after the winding-up order has been made, summon before him or it any director or officer of such a company or person known or suspected to have in his possession any property of the company or believed to be indebted to the company, or any such person whom the Master or the Court deems capable of giving information concerning the affairs, trade, dealings or properties of the company. Section 417(2) (b) further provides that: An examinee may be required to answer any question put to him\her not withstanding that the questions might tend to incriminate him\her and that any answer given by the examinee to any question can thereafter be used in evidence against him. This provision seems to have given the Master or the Court the discretion to compel an examinee to answer the questions put to him or her regardless of the fact that the answers might incriminate him or her. The purpose of an examination is to enable the Court or the Master to help the liquidator obtain the truth of the circumstances concerning the affairs of the company in order that he may be able, as effectively as possible, and with little expenses and with as much expedition as possible, to discharge his duties and fulfill his responsibilities as a liquidator of putting the affairs of the company in order and carrying out the liquidation in various aspects. In Leech v Farber 6 Nugent J held that the enquiry which is contemplated by s 417 and s 418 is essentially an interrogation in which information is sought to be pierced together to enable the affairs of the company to be properly woundup. Section 423 of the Companies Act7 is the equivalent to the above stated section in the new Companies Act and is worded in a similar language. There are, however, significant differences between the two sections, namely, Sec 423 of the Companies Act, 2004 does not provide for the use of the examinees answers to any question posed during the examination in evidence against him or her. The second difference is that Sec 423 gives the Master or Court discretion to compel the examinee to answer the questions put to him or her only if the examinee does not have a lawful reason for not doing so. Essentially this implies that the examinee is still obliged and can be compelled to answer the questions put to him regardless of the fact that the answer might be self-incriminating, unless he raises a lawful defence or reason for refusing to do so. In other words, an examinee must provide lawful reasons for not answering the questions put to him/her at the examination otherwise he will be compelled to answer.
5 6

Act No. 61 of 1973 Leech v Faber No 2000 (2) SA 444 (W) 7 Act 28 of 2004

The provisions of Sec 417 of the Companies Act 61 of 1973 seem to be in conflict with the constitutional right to a fair trial, most specifically with Article 12(1)(f) which guarantees the right against self-incrimination. The provision of section 417 of the Companies Act, 1973, most specifically the provisions of ss2 thereof, has been dealt with in a number of cases where it was claimed to infringe upon Article 12(f) of the Namibian constitution, in terms of which the constitution confers a right not to be compelled to give testimony against oneself and\or to incriminate oneself. This provision, although ruled to be inapplicable due to its inconsistence with the constitution in the circumstances by the South African courts, this provision has not yet been declared unconstitutional as such by our Courts8. There are a number of controversial questions surrounding the constitutionality of section 417 of the Companies Act, 1973 and subsequently section 423 of the Companies Act, 2004. This is an issue that has been long standing under our law, but one to which little attention has been given by our courts so far. This issue was raised in Inez Gasesand Others v The Social Security Commission and Other 9 but the court failed to make a ruling on this issue, claiming that it was not obliged, as of necessity, to do so. FOREIGN JURISPRUDENCE ON SEC 417(2)(b) OF THE COMPANIES ACT, 197310 The constitutionality of Sec 417 and 418 of the Companies which permit the summoning and examination of any person as to the affairs of a company being wound up was challenged in the Bernstein v Bester11. The sections permit the imprisonment of anyone failing to comply with the summons and to submit to examination. In a previous decision; Ferreira v Levin NO and Others; Vryenhoek and Others v Powell NO and Others12 the Court had held that the provisions of the Companies Act were unconstitutional only to the extent that the Act permitted compelled self-incriminating answers given at an (ss 417 and 418) examination to be used against such an examinee in subsequent criminal proceedings against him or her. The applicant's attack in the Bernstein case on the Act was much broader and sought to strike down the examination mechanism in its entirety on the grounds that it infringed an examinee's rights to freedom and security of the person, to
8

Inez Gases and Others v The social Security Commission and Others Unreported Judgment delivered on 18 July 2005 9 Supra 10 Act 61 of 1973 11 Bernstein and Others v Bester and Others NNO 1996 (2) SA 751 12 1996 (1) SA 984 (CC) The applicants had applied to the Witwatersrand Local Division of the Supreme Court for interdicts

pending the determination by the Constitutional Court of the constitutionality of section 417(2)(b) of the Companies Act (the Act). The applications were dismissed by Van Schalkwyk J. The appeals of all the applicants to the Full Bench of the Witwatersrand Local Division against such dismissals were upheld with costs, the Full Bench ordering that the costs of the applications in the court of first instance were to be costs in the cause in the matter before the Constitutional Court. Van Schalkwyk J referred five issues to the Constitutional Court in terms of s 102(1) of the Constitution of the Republic of South Africa Act 200 of 1993. The first related to the constitutionality of s 417(2)(b); the other four related to declaratory orders relating to the admissibility of evidence in subsequent criminal and civil proceedings against the applicants and the correct procedures to be followed at enquiries in terms of s 417 of the Act. There was nothing to suggest that the respondents opposed any of these referrals. The Constitutional Court held in Ferreira v Levin NO and others; Vryenhoek and others v Powell NO and others (1) that none of the five issues had been correctly referred but, in the exceptional circumstances of the case, heard the first issue by way of direct access in terms of section 100(2) of the Constitution. The Court declared section 417(2)(b) of the Companies Act invalid to the extent indicated in the order. No order was made as to costs but the parties were afforded an opportunity of pursuing the matter further. The applicants in the Ferreira and Vryenhoek matters duly availed themselves of this opportunity.

personal privacy and freedom from seizure of private possessions, to fair administrative procedures, to fairness in civil litigation and to equality. The Court unanimously rejected each of these arguments. It found that, except for the extent of unconstitutionality identified in Ferreira v Levin, ss 417 and 418 of the Act were not unconstitutional. The constitutionality of these sections was considered in the light of the duty of the Supreme Court to prevent the oppressive, vexatious and unfair use of the examination procedures. The examination mechanism furthered very important public policy objectives, such as the honest conduct of the affairs of a company. Considering first the allegation that the provisions violated the right to freedom, the Court held that the obligation to honour a subpoena was a civic duty recognised in all open and democratic societies and was not an invasion of freedom. The majority of the Court expressed doubt, but did not decide, whether a right to a fair civil trial had been constitutionalised. Even assuming the existence of such a right, the only possible basis for a breach thereof by the challenged provisions of the Act would be an infringement of the right to equality applied to such a civil trial. The Court held that there was no such infringement. The sections of the Act were designed to place the company being wound up on an equal footing with directors, officers, debtors and others against whom the company might be obliged to litigate in order to recover its property, and not to secure an unfair advantage. To the extent that the attack in the present case surpassed the challenge successfully raised in Ferreira v Levin NO, the application was dismissed and the constitutionality of the relevant sections of the Act confirmed. The above statements clearly show how the constitutionality of Sec 417 and 418 was dealt in the South African courts, and how the courts pronounced themselves on the matter.
LEGAL OPINION ON THE CONSTITUTIONALITY OF Sec 423(3) and 424(8)(b) OF THE COMPANIES ACT, 200413

As stated above, the Namibian Constitution is the supreme law of Namibia and therefore any law in conflict with the Constitution can be declared unconstitutional and, therefore, null and void by a competent court14. The constitution gives prominence to the catalogue of fundamental rights and freedoms contained in chapter 3. In respect of any form of legislation, the Bill of Rights is always applied directly and indirectly15. Therefore, if the court is of the opinion that a legislative provision is directly/indirectly inconsistent with the Bill of Rights it will usually invalidate the provision with immediate effect. There are a number of controversial questions surrounding the constitutionality of section 423(3) of the companies Act, 1973. Literally translated and narrowly interpreted, the provisions of section 423(3) of the Companies Act, 1973 seem to be in conflict with the constitutional right to a fair trial.
13 14

Act 28 of 2004 Article 1 (6) of the Namibian Constitution 15 Article 5 of the Namibian Constitution

However, a critical analysis of section 423(3) of the Companies Act reveals that section 423(3) thereof is not in conflict with the constitution since it gives the examinee the discretion to give a lawful reason not to give evidence. The Namibian courts are highly recommended to follow suits of their South African counterparts by declaring the provision invalid. Apart from this unconstitutional provision within the Sec 417 it transpired from the above discussion that nothing else contained in section 417 is in conflict with the fundamental rights and freedoms contained in the Namibian constitution. Properly applied, the mechanism of the section should entail no unfairness. If improper application threatens to do so, the High court can intervene. Apart from section 423(3), nothing else in Sec 424(8)(iii) compelled the Master, Commissioner or the Court to infringe upon fundamental rights. If such rights are infringed upon the proper remedy is to seek review of such actions in the Supreme Court. In the interpretation of section 424(8)(iii) courts must have due regard to the constitutional provisions, including the limitation clause, so that in certain instances rights must yield to the interest of the creditors of the company and the public at large. It must further be noted that the courts has to decide on a case to case basis, having due regard to the issue at hand, the circumstances surrounding such issues and that each case will be judged on its own merits With regard to section 417(2) (b), the coming in force of section 423 of the 2004 Companies Act, interpreted in accordance with the main objectives of the Act as stated in the working document, will have the effect of repealing the unconstitutional provision. Furthermore, the coming in force of this section will give examinees a right to refuse to answer questions posed at the proceedings where they have lawful reasons for not doing so.
CONCLUSION

It is evident from the above discussion that the coming in force of s 423(3) and 424(8)(iii) (the Companies Act 28 of 2004) will radically change the current position with regard to the Sec 417 enquiries. Obviously, answers given at such enquiries would not be used in criminal proceedings against the examinees, unless the court rules otherwise when called upon to state the position with regard to the omitted provision. Moreover, the section has given examinees a right to refuse to answer questions posed at the proceedings where they have lawful reasons. Essentially this would mean that the onus of proof is on the court or the master to prove that a reason given for such a refusal to answer questions is in fact unlawful. Although with its overwhelming benefits, the Companies Act 28 of 2004 is just a legislative reform that has been long outstanding in our legal system. This piece of legislation will have a positive impact on our company law and it is high time such an Act was brought into force in order to provide for the shortcomings and redress the constitutional injustice of the existing Companies legislation. 5

REFERENCE LIST 1. Bernstein v Bester and others NNO 1996 (2) SA 751 (CC) 2. Inez Gases and Others v The social Security Commission and Others Unreported 3. Ferreira v Levin NO and Others; Vryenhoek and Others v Powell NO and Others 1996 (1) SA 984 (CC) 4. Leech v Faber No 2000 (2) SA 444 (W) 5. Companies Act 61 of 1973 6. Companies Act 28 of 2004 7. Constitution of the Republic of Namibia, Act 1 of 1990