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 HAMUKOTO H.TSTUDENT NO. 201055031

LECTURE MR. NORMAN TJOMBE

DUE DATE: 27 JULY 2012

TABLE OF CONTENTINTRODUCTION______________________________________________________________________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

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INTRODUCTION

The Namibian constitution 1 requires that prominence and protection be given to thefundamental rights and freedoms contained in Chapter three thereof. Protection of thefundamental rights and freedoms requires that the State pass national legislation andpolicy that are specifically consistent with the provisions of chapter three of theconstitution.

There are a number of controversial questions surrounding the constitutionality of someof the Legislation which the State passes and one of them being section 417 of theCompanies Act 61 of 1973 and subsequently section 423(3) and 424(8)(iii) of theCompanies 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. Thepurpose is to investigate within reasonable limits the discretional power granted to thecourt and commissioners in s 417 proceedings and its impact on the constitutional rightsof the examinees. This is done in relation to Namibian law. However, it has beennecessary to regard and borrow from South African law. The consideration of SouthAfrican law is important because of the legal historical relationship between the twocountries and much more because legal developments in the two jurisdiction holdspersuasive 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 inconflict with the Constitution can be declared unconstitutional and therefore null andvoid by a competent court 2 . The constitution gives prominence to the catalogue offundamental rights and freedoms contained in chapter 3 (Article 5 – 25), and Article 5therefore requires that the fundamental rights and freedoms enshrined in chapter 3 ofthe Namibian Constitution shall be respected and upheld by all organs of the state andits agencies as well as by all persons in Namibia, and shall be enforceable by thecourts3. 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 anyunlawful manner. In S v Minnies4 the High Court of Namibia held that this Article isperemptory in its terms so that the Courts must not admit in evidence testimonywhich has been illegally obtained or obtained in violation of the constitution.

1 Act 1 of 19902 Article 1 (6) of the Namibian constitution3 Article 79 of the Namibian constitution4 1991 (3) SA 364

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Section 417 of the Companies Act 5 deals with the summoning and examination ofpersons as to the affairs of a company being wind-up. This summoning and examinationcan take place any time after an order for winding- up of a company (unable to pay itsdebts) has been issued. In terms of this section:

“the Master of the High Court may, at any time after the winding-up order hasbeen made, summon before him or it any director or officer of such a companyor person known or suspected to have in his possession any property of thecompany or believed to be indebted to the company, or any such person whom theMaster 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 notwithstanding that the questions might tend to incriminate him\her and that anyanswer given by the examinee to any question can thereafter be used inevidence against him”.

This provision seems to have given the Master or the Court the discretion to compel anexaminee to answer the questions put to him or her regardless of the fact that the answersmight incriminate him or her.

The purpose of an examination is to enable the Court or the Master to help the liquidatorobtain the truth of the circumstances concerning the affairs of the company in order thathe may be able, as effectively as possible, and with little expenses and with as muchexpedition as possible, to discharge his duties and fulfill his responsibilities as aliquidator of putting the affairs of the company in order and carrying out the liquidationin various aspects. In Leech v Farber 6 Nugent J held that ‘the enquiry which iscontemplated by s 417 and s 418 is essentially an interrogation in which information issought to be pierced together to enable the affairs of the company to be properly wound-up.

Section 423 of the Companies Act7 is the equivalent to the above stated section in the newCompanies Act and is worded in a similar language. There are, however, significantdifferences between the two sections, namely, Sec 423 of the Companies Act, 2004 doesnot provide for the use of the examinee’s answers to any question posed during theexamination in evidence against him or her. The second difference is that Sec 423 givesthe Master or Court discretion to compel the examinee to answer the questions put tohim 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 answerthe 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, anexaminee must provide lawful reasons for not answering the questions put to him/her atthe examination otherwise he will be compelled to answer.

5 Act No. 61 of 19736 Leech v Faber No 2000 (2) SA 444 (W)7 Act 28 of 2004

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The provisions of Sec 417 of the Companies Act 61 of 1973 seem to be in conflict withthe constitutional right to a fair trial, most specifically with Article 12(1)(f) whichguarantees the right against self-incrimination.

The provision of section 417 of the Companies Act, 1973, most specifically the provisionsof ss2 thereof, has been dealt with in a number of cases where it was claimed to infringeupon Article 12(f) of the Namibian constitution, in terms of which the constitution confersa 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 theconstitution in the circumstances by the South African courts, this provision hasnot yet been declared unconstitutional as such by our Courts8.

There are a number of controversial questions surrounding the constitutionality of section417 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 littleattention has been given by our courts so far. This issue was raised in Inez GasesandOthers v The Social Security Commission and Other9 but the court failed to make aruling 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 summoningand examination of any person as to the affairs of a company being wound up waschallenged in the Bernstein v Bester11. The sections permit the imprisonment of anyonefailing 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 theCourt had held that the provisions of the Companies Act were unconstitutional only to theextent that the Act permitted compelled self-incriminating answers given at an (ss 417 and418) examination to be used against such an examinee in subsequent criminal proceedingsagainst him or her. The applicant's attack in the Bernstein case on the Act was muchbroader and sought to strike down the examination mechanism in its entirety on thegrounds 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 UnreportedJudgment delivered on 18 July 20059 Supra10 Act 61 of 197311 Bernstein and Others v Bester and Others NNO 1996 (2) SA 75112 1996 (1) SA 984 (CC) The applicants had applied to the Witwatersrand Local Division of the Supreme Court for interdictspending the determination by the Constitutional Court of the constitutionality of section 417(2)(b) of the Companies Act (the Act). Theapplications were dismissed by Van Schalkwyk J. The appeals of all the applicants to the Full Bench of the Witwatersrand Local Divisionagainst such dismissals were upheld with costs, the Full Bench ordering that the costs of the applications in the court of first instancewere to be costs in the cause in the matter before the Constitutional Court. Van Schalkwyk J referred five issues to the ConstitutionalCourt 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 ofs 417(2)(b); the other four related to declaratory orders relating to the admissibility of evidence in subsequent criminal and civilproceedings against the applicants and the correct procedures to be followed at enquiries in terms of s 417 of the Act. There wasnothing to suggest that the respondents opposed any of these referrals. The Constitutional Court held in Ferreira v Levin NO andothers; Vryenhoek and others v Powell NO and others (1) that none of the five issues had been correctly referred but, in the exceptionalcircumstances of the case, heard the first issue by way of direct access in terms of section 100(2) of the Constitution. The Courtdeclared section 417(2)(b) of the Companies Act invalid to the extent indicated in the order. No order was made as to costs but theparties were afforded an opportunity of pursuing the matter further. The applicants in the Ferreira and Vryenhoek matters duly availedthemselves of this opportunity.

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personal privacy and freedom from seizure of private possessions, to fair administrativeprocedures, to fairness in civil litigation and to equality.

The Court unanimously rejected each of these arguments. It found that, except for theextent of unconstitutionality identified in Ferreira v Levin, ss 417 and 418 of the Act werenot unconstitutional. The constitutionality of these sections was considered in the light ofthe duty of the Supreme Court to prevent the oppressive, vexatious and unfair use of theexamination procedures. The examination mechanism furthered very important publicpolicy 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 Courtheld that the obligation to honour a subpoena was a civic duty recognised in all open anddemocratic societies and was not an invasion of freedom.

The majority of the Court expressed doubt, but did not decide, whether a right to a faircivil trial had been constitutionalised. Even assuming the existence of such a right, the onlypossible basis for a breach thereof by the challenged provisions of the Act would be aninfringement of the right to equality applied to such a civil trial. The Court held that therewas no such infringement. The sections of the Act were designed to place the companybeing wound up on an equal footing with directors, officers, debtors and others againstwhom the company might be obliged to litigate in order to recover its property, and not tosecure an unfair advantage.

To the extent that the attack in the present case surpassed the challenge successfully raisedin Ferreira v Levin NO, the application was dismissed and the constitutionality of therelevant sections of the Act confirmed.

The above statements clearly show how the constitutionality of Sec 417 and 418 was dealtin 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 COMPANIESACT, 200413

As stated above, the Namibian Constitution is the supreme law of Namibia and thereforeany 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 catalogueof fundamental rights and freedoms contained in chapter 3. In respect of any form oflegislation, the Bill of Rights is always applied directly and indirectly15. Therefore, if thecourt is of the opinion that a legislative provision is directly/indirectly inconsistent with theBill of Rights it will usually invalidate the provision with immediate effect.

There are a number of controversial questions surrounding the constitutionality of section423(3) of the companies Act, 1973. Literally translated and narrowly interpreted, theprovisions of section 423(3) of the Companies Act, 1973 seem to be in conflict with theconstitutional right to a fair trial.

13 Act 28 of 200414 Article 1 (6) of the Namibian Constitution15 Article 5 of the Namibian Constitution

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However, a critical analysis of section 423(3) of the Companies Act reveals that section423(3) thereof is not in conflict with the constitution since it gives the examinee thediscretion to give a lawful reason not to give evidence. The Namibian courts are highlyrecommended to follow suits of their South African counterparts by declaring theprovision invalid. Apart from this unconstitutional provision within the Sec 417 ittranspired from the above discussion that nothing else contained in section 417 is inconflict with the fundamental rights and freedoms contained in the Namibian constitution.Properly applied, the mechanism of the section should entail no unfairness. If improperapplication 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 infringedupon the proper remedy is to seek review of such actions in the Supreme Court. In theinterpretation of section 424(8)(iii) courts must have due regard to the constitutionalprovisions, including the limitation clause, so that in certain instances rights must yield tothe interest of the creditors of the company and the public at large. It must further be notedthat 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 ownmerits

With regard to section 417(2) (b), the coming in force of section 423 of the 2004Companies Act, interpreted in accordance with the main objectives of the Act as stated inthe 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 toanswer questions posed at the proceedings where they have lawful reasons for not doingso.

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 tothe Sec 417 enquiries. Obviously, answers given at such enquiries would not be used incriminal proceedings against the examinees, unless the court rules otherwise when calledupon to state the position with regard to the omitted provision.

Moreover, the section has given examinees a right to refuse to answer questions posed atthe proceedings where they have lawful reasons. Essentially this would mean that the onusof proof is on the court or the master to prove that a reason given for such a refusal toanswer questions is in fact unlawful.

Although with its overwhelming benefits, the Companies Act 28 of 2004 is just alegislative reform that has been long outstanding in our legal system. This piece oflegislation will have a positive impact on our company law and it is high time such an Actwas brought into force in order to provide for the shortcomings and redress theconstitutional injustice of the existing Companies’ legislation.

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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

Unreported3. 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 19736. Companies Act 28 of 20047. Constitution of the Republic of Namibia, Act 1 of 1990