Brief Summary

Constitutional Law — Right against self-incrimination — Section 417(2)(b) of the Companies Act — Applicants challenged the constitutionality of the provision compelling them to answer self-incriminating questions at an enquiry — Court declared the provision invalid to the extent that it allowed such evidence to be used in criminal proceedings — However, applicants remained obliged to answer questions at the enquiry, as the ruling did not affect their obligations in that context — Applicants not entitled to costs as they were not successful in substance against the respondents.

Comprehensive Summary

Summary of Judgment

Introduction

This judgment concerns costs following earlier constitutional proceedings in which the Constitutional Court declared section 417(2)(b) of the Companies Act invalid to a limited extent. The present decision does not revisit the merits of the constitutional challenge; it determines whether any party should be awarded costs in the Constitutional Court proceedings and clarifies the position regarding an attempted late “withdrawal” of a costs claim.

The proceedings arose from two linked matters, namely Ferreira v Levin NO and Others and Vryenhoek and Others v Powell NO and Others, in which the applicants challenged the constitutionality of compelled questioning under section 417 enquiries and, in particular, the use of self-incriminating answers in later proceedings. The respondents included office-holders and other interested parties connected to liquidation-related enquiries (including provisional liquidators and the Master of the Supreme Court), who sought to interrogate the applicants under section 417.

Procedurally, the applicants initially approached the Witwatersrand Local Division for interim interdicts pending the Constitutional Court’s determination of constitutionality. Those interdict applications were dismissed, but appeals to the Full Bench succeeded with costs, and the Full Bench directed that the costs of the first-instance interdict applications would be “costs in the cause” in the matter before the Constitutional Court. The Constitutional Court thereafter declared section 417(2)(b) invalid to the extent set out in its earlier order, made no costs order at that time, and allowed the parties an opportunity to pursue the costs issue further. Only the applicants in the Ferreira and Vryenhoek matters took up that opportunity, leading to the present costs judgment.

The general subject-matter of the dispute in this phase is the proper costs outcome in constitutional litigation involving private parties, in circumstances where the applicants achieved a measure of constitutional success but where the Court assessed whether that success translated into “substantial success” in the real dispute between the litigants and whether fairness justified any costs shifting.

Material Facts

The applicants brought interdict proceedings in the Witwatersrand Local Division seeking to restrain questioning or compel procedural protections pending the Constitutional Court’s determination of the constitutionality of section 417(2)(b). Those interdict applications were dismissed at first instance, and the applicants appealed.

On appeal to the Full Bench of the Witwatersrand Local Division, the applicants were successful and were awarded costs, with the Full Bench additionally directing that the costs of the applications in the court of first instance would be costs in the cause in the matter before the Constitutional Court. That costs direction meant that the ultimate disposition of those costs depended on the Constitutional Court’s costs order.

In the Constitutional Court, the applicants’ central practical concern was to avoid answering questions at a section 417 enquiry that might incriminate them, particularly because section 417(2)(b) compelled answers and, as framed, allowed the subsequent use of self-incriminating evidence in proceedings against them. The High Court (Van Schalkwyk J) referred five issues to the Constitutional Court under section 102(1) of the Interim Constitution, including the constitutionality of section 417(2)(b) and four further issues relating to declaratory relief on admissibility and procedure. The respondents did not oppose the referrals, or at least there was nothing suggesting that they did.

The Constitutional Court held that none of the matters had been correctly referred. Nonetheless, in exceptional circumstances, it entertained the section 417(2)(b) issue by way of direct access in terms of section 100(2) of the Interim Constitution. In its earlier merits decision, the Court declared section 417(2)(b) invalid to a limited extent (as reflected in the earlier order), but it did not then make a costs order, inviting further argument on costs if pursued.

After being informed that judgment on costs would be delivered, the attorneys for the applicant in the Ferreira matter lodged a document purporting to be a “Notice of Withdrawal” indicating that the costs application against the second respondent had been settled. The document did not indicate service on the other parties, nor did it comply with the requirements for withdrawal under Constitutional Court Rule 30.

Legal Issues

The central legal questions were whether, in the exercise of the Constitutional Court’s discretion on costs, the applicants should be awarded their costs against the respondents given that the Court had upheld their constitutional challenge to a limited extent, and conversely whether the respondents—having in substance resisted aspects of the relief—should be awarded their costs against the applicants.

These questions primarily concerned the application of established costs principles to the particular circumstances of constitutional litigation, rather than the resolution of contested facts. The Court was required to make an evaluative assessment of substantial success, the real nature of the dispute between the parties, the causal connection between any opposition and any costs incurred, and considerations of fairness arising from the manner in which the matter came before the Court (including the incorrect referral).

A further procedural issue arose as to whether a costs claim could validly be “withdrawn” at that stage through a unilateral notice, or whether withdrawal required compliance with Rule 30.

Court’s Reasoning

The Court approached the costs issue by reference to the Supreme Court’s established but flexible principles governing costs, emphasising two foundational propositions. First, unless legislation provides otherwise, an award of costs lies in the discretion of the presiding judicial officer. Second, the general rule is that the successful party should receive costs, although that general rule yields to the discretionary nature of costs and to recognised exceptions. The Court explained that the established approach is sufficiently flexible to accommodate constitutional litigation, and that any adaptation of costs rules should occur incrementally on a case-by-case basis rather than through a comprehensive codification at that stage.

In assessing whether the applicants were entitled to costs, the Court focused on the substance of the dispute between the applicants and the respondents at the section 417 enquiry. Although the applicants had succeeded in obtaining an order limiting the use of compelled self-incriminating answers in subsequent criminal proceedings, the Court held that this did not resolve the real dispute between the parties to the enquiry. The respondents’ objective was to obtain the applicants’ evidence at the enquiry, and the applicants’ objective was to avoid answering incriminating questions. The Constitutional Court’s earlier order did not relieve the applicants of the obligation to answer; they remained compelled to respond to questions at the enquiry as they would have been even if the constitutional challenge had not been brought. On this analysis, the Court treated the applicants’ constitutional success as not amounting to success in the substantive controversy between the applicants and these respondents.

The Court also reasoned that the effect of the earlier constitutional order—excluding use of compelled self-incriminating evidence in subsequent criminal proceedings—was not something that affected the conduct of the enquiry itself or a matter over which the respondents had control. The Court characterised that consequence as one that would arise, if at all, in a later dispute between the applicants and the Attorney-General should criminal proceedings be instituted and such evidence tendered. On this reasoning, the Court considered it inappropriate to order the respondents to bear costs for a result that did not concern their interest in, or power over, the section 417 process.

The applicants relied on Canadian authorities in support of a costs award in constitutional litigation, including cases addressing the potential deterrent effect of adverse costs on constitutional claimants. The Court held that those authorities did not assist because the factual and procedural contexts were not comparable to the present case, and because the cited decisions did not support a general proposition that would justify a costs award here on these facts.

A further factor was that the applicants would in any event have had to approach the Constitutional Court to obtain the relief they did obtain, even if the respondents had not opposed, because the striking down of an Act of Parliament fell within the Court’s exclusive jurisdiction under section 98(2)(c) of the Interim Constitution. The Court considered it likely that it would still have required full argument, admitted amici, and solicited memoranda, and it was not shown that the applicants incurred additional costs because of opposition by the respondents. The Court also noted the procedural irregularity that none of the issues had been properly referred and that the Court had only entertained the constitutional issue by way of direct access as an indulgence given the exceptional circumstances, which weighed against awarding costs to the applicants.

Turning to whether the respondents should receive costs, the Court acknowledged that the general principle that a successful party is entitled to costs could be a point of departure because the respondents had in substance been successful in opposing the relief sought by the applicants. However, the Court took into account the impression that the respondents were also eager to obtain a definitive ruling on the issues referred and that they had not meaningfully opposed the referrals, including the question whether the matters met the section 102(1) threshold for referral. The Court stressed that parties, and respondents in particular, should not be encouraged to acquiesce in incorrect referrals and then claim costs in the Constitutional Court when the applicant fails to achieve substantial success. It reaffirmed the three conditions for a section 102(1) referral and indicated that inappropriate referrals should be opposed at the time they are sought rather than raised for the first time in the Constitutional Court.

The Court briefly addressed the “chilling effect” argument regarding adverse costs orders on private individuals seeking to vindicate constitutional rights against the state, describing it as an important policy issue, but held that it did not arise on the facts and should be left for an appropriate case. The Court further indicated that any such policy considerations would not necessarily translate in the same way to litigation between private parties.

On the attempted “Notice of Withdrawal”, the Court held that, absent compliance with Constitutional Court Rule 30—which requires an agreement in writing lodged by all parties specifying costs terms and payment of any registrar’s fees—and absent service on other parties, a matter in the Constitutional Court cannot validly be withdrawn. The Court regarded the late lodging of the purported withdrawal, without proper explanation and without earlier notification to the Court, as a discourtesy.

Ultimately, the Court concluded that justice and fairness would best be served by an order that each party pays its own costs, aligning this with the approach that would be adopted in the Supreme Court. It also observed that it was unnecessary to make a separate explicit order regarding the costs dealt with by the Full Bench, because those costs were ordered to be costs in the cause and would follow the Constitutional Court’s costs order.

Outcome and Relief

The Court ordered that all parties are to pay their own costs in the Constitutional Court proceedings.

No party was awarded costs against any other, and the costs orders made by the Full Bench (including the direction that certain costs were costs in the cause) were left to follow automatically from the Constitutional Court’s costs disposition.

The Court further held that the purported late “Notice of Withdrawal” did not amount to a valid withdrawal in the absence of compliance with Constitutional Court Rule 30 and proper service, and criticised the manner in which the document was lodged after notice of imminent judgment.

Cases Cited

Ferreira v Levin NO and Others; Vryenhoek and Others v Powell NO and Others (CT5/95) [1996] ZACC 27; 1996 (2) SA 621 (CC); 1996 (4) BCLR 441 (CC)

Ferreira v Levin NO and Others, Vryenhoek and Others v Powell NO and Others 1996 (1) BCLR 1 (CC)

Ferreira v Levin NO and Others, Vryenhoek and Others v Powell NO and Others 1995 (2) SA 813 (W)

Kruger Bros. and Wasserman v Ruskin 1918 AD 63

Fripp v Gibbon & Co 1913 AD 354

Merber v Merber 1948 (1) SA 446 (A)

Union Government (Minister of Railways and Harbours) v Heiberg 1919 AD 477

Mofokeng v General Accident Versekering Beperk 1990 (2) SA 712 (W)

Giuliani v Diesel Pump Injector Services (Pvt) Ltd 1966 (3) SA 451 (R)

Regina v Big M Drug Mart Ltd [1985] 18 DLR (4th) 321

Operation Dismantle Inc et al v The Queen et al [1985] 18 DLR (4th) 481

Retail, Wholesale & Department Store Union, Local 580 et al v Dolphin Delivery Ltd [1986] 33 DLR (4th) 174

Re Lavigne & Ontario Public Service Employees Union et al (No 2) [1987] 41 DLR (4th) 86

S v Mhlungu [1995] ZACC 4; 1995 (3) SA 867 (CC); 1995 (7) BCLR 793 (CC)

S v Vermaas; S v Du Plessis [1995] ZACC 5; 1995 (3) SA 292 (CC); 1995 (7) BCLR 851 (CC)

Isaacs v Minister van Wet en Orde [1995] ZASCA 152; [1996] 1 All SA 343 (A)

Legislation Cited

Companies Act, section 417 and section 417(2)(b)

Constitution of the Republic of South Africa Act 200 of 1993 (as amended), sections 98(2)(c), 100(2), 101(6), and 102(1)

Rules of Court Cited

Constitutional Court Rule 30

Held

The Court held that, despite the earlier declaration of invalidity in relation to section 417(2)(b), the applicants were not successful in substance in the dispute as between themselves and the respondents at the section 417 enquiry, because they remained obliged to answer self-incriminating questions and the declared limitation chiefly affected a potential later dispute about admissibility in criminal proceedings.

The Court held further that the respondents, although in substance successful in resisting aspects of the applicants’ sought relief, should not automatically obtain costs where they had not been sufficiently astute to prevent an incorrect referral under section 102(1), and where fairness considerations supported a neutral costs outcome.

The Court held that a purported unilateral notice filed after notice of imminent judgment did not constitute a valid withdrawal in the absence of compliance with Rule 30 and service on other parties, and that the manner of filing was discourteous.

The Court held that justice and fairness required that each party pay its own costs.

LEGAL PRINCIPLES

Costs are generally a matter within the discretion of the presiding judicial officer, and the general rule that the successful party should recover costs is subject to that discretion and to recognised exceptions based on fairness, the nature of proceedings, and the conduct of parties.

In assessing “success” for costs purposes, the Court may examine the substance of the dispute between the litigants rather than treating formal constitutional success as determinative, particularly where the relief obtained does not alter the practical position as between the parties before the Court.

Where relief falls within the Constitutional Court’s exclusive jurisdiction (including the striking down of an Act of Parliament under the Interim Constitution), an applicant may be required to approach the Court irrespective of opposition; in such circumstances a party seeking costs should demonstrate that opposition materially increased costs or that fairness otherwise supports a costs award.

For a referral under section 102(1) of the Interim Constitution to be competent, the Court reaffirmed that three conditions must be satisfied, namely that the issue may be decisive, that it falls within the exclusive jurisdiction of the Constitutional Court, and that it is in the interests of justice to refer it (including a reasonable prospect of invalidity and appropriateness of timing). Parties should oppose inappropriate referrals when sought, rather than acquiescing and later seeking costs consequences.

A withdrawal in the Constitutional Court requires compliance with Constitutional Court Rule 30, including a written agreement by all parties dealing with costs; absent such compliance and proper service, a purported unilateral withdrawal is ineffective.

Ferreira v Levin NO and Others; Vryenhoek and Others v Powell NO and Others (CT5/95) [1996] ZACC 27; 1996 (2) SA 621 (CC); 1996 (4) BCLR 441 (CC) (19 March 1996)