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[1996] ZACC 2
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Bernstein and Others v Bester NO and Others (CCT23/95) [1996] ZACC 2; 1996 (4) BCLR 449; 1996 (2) SA 751 (27 March 1996)
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IN THE CONSTITUTIONAL COURT OF SOUTH AFRICA
CASE NO CCT 23/95
In the matter
of
Harold Bernstein and
Others
Applicants
v
L. Von Wielligh Bester
NO and Others
Respondents
Heard on: 19 September 1995
Delivered on: 27 March
1996
___________________________________________________________________________
JUDGMENT
___________________________________________________________________________
[1]
ACKERMANN J:
The issues
The case before us is a referral pursuant to the provisions of section 102(1) of
the Constitution of the Republic of South Africa
Act 200 of 1993 (the
Constitution) and arose from a dispute between Mr Bernstein and other
partners and employees
of Kessel Feinstein, a partnership of chartered
accountants (the applicants) and Mr Bester and other liquidators
of Tollgate Holdings Limited (the respondents). The essence of
the dispute between the parties is whether the respondents
are precluded by the
Constitution from continuing with the examination of the applicants in terms of
sections 417 and 418 of the
Companies Act 61 of 1973 (as amended) (the
Act). The parties agreed before Fagan DJP in the Cape Provincial
Division
of the Supreme Court to have the issue whether these sections of the
Act are inconsistent with the Constitution referred to this
Court. On 28 April
1995 Fagan DJP granted a referral order by agreement as
follows:
1. The issue whether sections 417 and 418 of the Companies Act, 61 of 1973 (as
amended) are inconsistent with the Constitution of
South Africa Act, 200 of
1993, and are consequently invalid and of no force and effect is referred to the
Constitutional Court for
determination, in terms of section 102(1) of the
Constitution.
2. The agreed material facts relevant to such determination are those set out in
annexure 'X' hereto.
3. The costs of such referral shall be costs in the proceedings in the
Constitutional Court.
4. Pending the determination of the above proceedings, the application and all
other issues are to stand
over.
[2] Section 102(1) of the Constitution does not empower a Provincial or Local
Division of the Supreme Court to refer a matter by
agreement to the
Constitutional Court, but only when the requirements set forth in the subsection
are met. I am not suggesting that
in the present case Fagan DJP in fact referred
the matter simply by agreement without applying his mind to these requirements.
It
is clear from the reasons furnished by the learned Deputy Judge President
pursuant to the provisions of Constitutional Court Rule
22(2) and (3)(a) that he
did so apply his mind and, therefore, the presence of the words by
agreement in the referral
order is perhaps unfortunate. The impression
should be avoided that referrals can take place simply because parties have
agreed
thereto. In certain referrals to this Court, the conclusion is difficult
to avoid that this is in fact what has happened. Problems
which had arisen in
connection with such referrals were commented on in
S v Vermaas, S v Du
Plessis
[1]
and in
Ferreira v
Levin
[2]
this Court pointed out
that the power and the duty to refer only arises when three conditions are
fulfilled:
(a) there is an issue in the matter before the court in question which may be
decisive for the case;
(b) such issue falls within the exclusive jurisdiction of the Constitutional
Court; and
(c) the court in question considers it to be in the interests of justice
to refer such issue to the Constitutional
Court.
This Court has further held that it is implicit in section 102(1) that there
should be a reasonable prospect that the relevant law
or provision will be held
to be invalid and while this is a
sine qua non
of a referral it is not in
itself a sufficient ground, because it is not always in the interest of justice
to make a referral as
soon as the relevant issue has been
raised.
[3]
I hasten to point out that
when Fagan DJP made the referral in the present matter the judgments in the
above cases had not yet been
delivered. In the present referral these conditions
are all fulfilled and the referral is a proper one in terms of section 102(1),
despite purporting to be by agreement. While Provincial and Local Divisions
might initially have been hesitant to grapple with the
implications and
application of the new Constitution and might have preferred to refer
constitutional issues to this Court, it must
be stressed that, for the proper
development of our law under the Constitution, it is essential that these courts
and indeed all
other courts empowered to do so, play their full role in
developing our post-constitutional law. It would greatly assist the task
of the
Provincial and Local Divisions of the Supreme Court, and in so doing ultimately
the task of this Court, if counsel were called
upon to justify rigorously why it
was contended that the particular provision of the Constitution relied upon
renders the law or
provision in question invalid and why it is necessary or
advisable to refer the issue in question to the Constitutional Court at
that
particular juncture. This would lead to narrower and more closely focused
referrals and enable the Provincial and Local Divisions
to furnish more
comprehensive reasons for any particular referral which would in turn assist the
task of this Court and the development
of our constitutional jurisprudence. Such
an approach would also decrease the risk of wrong referrals and avoid the
unsatisfactory
expedient in such cases of having to try to invoke, at the last
moment, in a forced manner and in unsatisfactory circumstances, the
direct
access procedure provided for in Constitutional Court Rule
17.
[3] Sections 417 and 418 of the Act provide as
follows:
417.
Summoning and examination of persons as to affairs of company
-
(1) In any winding-up of a company unable to pay its debts, the Master or the
Court may, at any time after a winding-up order has
been made, summon before him
or it any director or officer of the 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 person whom the Master or the Court deems capable of
giving
information concerning the trade, dealings, affairs or property of the
company.
(1A) Any person summoned under subsection (1) may be represented at his
attendance before the Master or the Court by an attorney with
or without
counsel.
(2A)(a) The Master or the Court may examine any person summoned under
sub-section (1) on oath or affirmation concerning any matter
referred to in that
subsection, either orally or on written interrogatories, and may reduce his
answers to writing and require him
to sign them.
(b) Any such person may be required to answer any question put to him
at the examination, notwithstanding that the answer might
tend to incriminate
him, and any answer given to any such question may thereafter be used in
evidence against him.
(3) The Master or the Court may require any such person to produce any books
or papers in his custody or under his control relating
to the company but
without prejudice to any lien claimed with regard to any such books or papers,
and the Court shall have power
to determine all questions relating to any such
lien.
(4) If any person who has been duly summoned under subsection (1) and to whom
a reasonable sum for his expenses has been tendered,
fails to attend before the
Master or the Court at the time appointed by the summons without lawful excuse
made known to the Master
or the Court at the time of the sitting and accepted by
the Master or the Court, the Master or the Court may cause him to be apprehended
and brought before him or it for examination.
(5) Any person summoned by the Master under subsection (1) shall be entitled
to such witness fees as he would have been entitled to
if he were a witness in
civil proceedings in a magistrate's court.
(6) Any person who applies for an examination or enquiry in terms of this
section or section 418 shall be liable for the payment of
the costs and expenses
incidental thereto, unless the Master or the Court directs that the whole or any
part of such costs and expenses
shall be paid out of the assets of the company
concerned.
(7) Any examination or enquiry under this section or section 418 and any
application therefore shall be private and confidential,
unless the Master or
the Court, either generally or in respect of any particular person, directs
otherwise.
418.
Examination by Commissioners
-
(1)(a) Every magistrate and every other person appointed for the purpose by
the Master or the Court shall be a Commissioner for the
purpose of taking
evidence or holding any enquiry under this Act in connection with the winding-up
of any company.
(b) The Master or the Court may refer the whole or any part of the
examination of any witness or of any enquiry under this Act
to any such
Commissioner, whether or not he is within the jurisdiction of the Court which
issued the winding-up order.
(c) The Master, if he has not himself been appointed under paragraph (a),
the liquidator or any creditor, member or contributory
of the company may be
represented at such an examination or enquiry by an attorney, with or without
counsel, who shall be entitled
to interrogate any witness: provided that a
Commissioner shall disallow any question which is irrelevant or would in his
opinion
prolong the interrogation unnecessarily.
(d) The provisions of section 417 (1A), (2)(b) and (5) shall apply
mutatis mutandis
in respect of such an examination or enquiry.
(2) A Commissioner shall in any matter referred to him have the same powers
of summoning and examining witnesses and of requiring
the production of
documents, as the Master who or the Court which appointed him, and, if the
Commissioner is a magistrate, of punishing
defaulting or recalcitrant witnesses,
or causing defaulting witnesses to be apprehended, and of determining questions
relating to
any lien with regard to documents, as the Court referred to in
section 417.
(3) If a Commissioner -
(a) has been appointed by the Master, he shall, in such manner as the Master
may direct, report to the Master; or
(b) has been appointed by the Court, he shall, in such manner as the Court
may direct, report to the Master and the Court, on any
examination or enquiry
referred to him.
(4) Any witness who has given evidence before the Master or the
Court under section 417 or before a Commissioner under this section,
shall be
entitled, at his cost, to a copy of the record of his evidence.
(5) Any person who -
(a) has been duly summoned under this section by a Commissioner who is not a
magistrate and who fails, without sufficient cause, to
attend at the time and
place specified in the summons;
or
(b) has been duly summoned under section 417 (1) by the Master or under this
section by a Commissioner who is not a magistrate and
who-
(i) fails, without sufficient cause, to remain in attendance until excused by
the Master or such Commissioner, as the case may be,
from further attendance;
(ii) refuses to be sworn or to affirm as a witness; or
(iii) fails, without sufficient cause -
(aa) to answer fully and satisfactorily any question lawfully put to him in
terms of section 417 (2) or this section; or
(bb) to produce books or papers in his custody or under his control which he
was required to produce in terms of section 417 (3)
or this section,
shall be guilty of an offence.
[4] In
Ferreira v Levin
this Court considered the constitutional validity
of section 417(2)(b) of the Act and declared the provisions of section 417(2)(b)
to be invalid,
to the extent only
that the words 'and any answer given to any such
question may thereafter be used in evidence against him' in section 417(2)(b)
apply
to the use of any such answer against the person who gave such answer, in
criminal proceedings against such person, other than proceedings
where that
person stands trial on a charge relating to the administering or taking of an
oath or the administering or making of an
affirmation or the giving of false
evidence or the making of a false statement in connection with such questions or
answers or a
failure to answer lawful questions fully and
satisfactorily.
[4]
This disposes of an important part of the applicants argument, but
inasmuch as the attack in this case went broader than
in
Ferreira v Levin
and sought the striking down of sections 417 and 418 in their entirety a number
of additional grounds of invalidity have to be considered.
[5] As appears from the order of Fagan DJP the parties also agreed upon certain
facts as being relevant to the enquiry into the constitutional
validity of
sections 417 and 418 of the Companies Act. For present purposes the following
are the salient agreed facts.
[6] Tollgate Holdings Ltd ("the company") was a public investment company listed
on both the Johannesburg and London Stock Exchanges.
The company was placed
under final liquidation on 13 January 1993. This led to one of the largest
corporate collapses in South African
history as the principal subsidiary
companies, indeed most companies forming part of the Tollgate Group (the company
and its subsidiaries),
were also placed under provisional winding-up orders by
the Cape Provincial Division of the Supreme Court. The collapse of the Tollgate
Group left unpaid debts to creditors of almost R400 million. The market
capitalization of Tollgate Holdings at December 1991 was
R222 million comprising
40.5 million shares of R5.50 each. These shares are now
worthless.
[7] The demise of the company seems to have started in February 1988 when the
Duros Group Limited, of which Messrs M Key and G Mackintosh
were controlling
members and directors, acquired control over the Tollgate Group. For the roughly
140 years before the take-over
the company was essentially owned and controlled
by a Cape Town family. The first published financial statements of the Tollgate
Group after the take-over indicated a loss of R45 million for the 18 month
period ending 31 December 1989. At this stage Mr J Claasen
held the position of
chairman of the Duros Group and had become its largest single shareholder. Mr H
Diedericks was also a director
of the Duros Group as well as managing director
and chief executive of Tollgate Holdings. Shortly afterwards, in March of 1990,
the
Duros Group was in turn acquired by a consortium led by Messrs J Askin and H
Bierman and including Messrs Key and Mackintosh. On
21 January 1991 the Duros
Group changed its name to Tollgate Holdings Ltd, with the company originally
bearing that name also changing
its name. Tollgate Holdings was controlled by
this consortium until it was placed under provisional liquidation in December
1992.
Warrants for the arrest of both Messrs Askin and Mackintosh have been
issued in connection with charges of fraud and theft and Mr
Key is presently
facing various criminal charges relating to the collapse of the Tollgate Group.
The respondents are satisfied that
both Messrs Diedericks and Claasen are
indebted to the liquidators of the Tollgate Group for substantial sums arising
from unlawful
acts. An application for the sequestration of Mr Diedericks'
estate has been made and a settlement was reached between Mr Claasen
and the
liquidators of Tollgate Holdings.
[8] Kessel Feinstein were the auditors of the Duros Group when it acquired
control of Tollgate Holdings in February 1988, but only
became the main auditors
of the Tollgate Group after the Askin-led consortium took control in 1990. As
the auditors of the Tollgate
Group, Kessel Feinstein certified, without
qualification, that the consolidated annual financial statement of the Tollgate
Holdings
and its subsidiary companies fairly presented the financial affairs of
the group for the years ended 1990 and 1991. Investigations
have satisfied the
respondents that large scale irregularities by the directors and other officials
of the Tollgate Group had taken
place prior to the group's collapse causing
losses of a very substantial nature to the group.
[9] In March 1993, shortly after Tollgate Holdings was placed under final
liquidation and following an application by the liquidators
of Tollgate Holdings
and other companies in the Tollgate Group, the Cape Provincial Division of the
Supreme Court ordered that a
commission of enquiry be held into the affairs of
certain companies in the group. Adv
B
Hobermann
SC, of the Cape
Bar, was appointed commissioner. The Commission has been in session ever since
and some 55 witnesses have thus far
appeared before the Commission. The
respondents are satisfied by the evidence that the affairs of the Tollgate Group
were mismanaged
and manipulated by certain directors under two successive
corporate administrations. During May of 1993 the commissioner issued summonses
requiring Messrs H Bernstein, R Klotz and D Nicola (the first to third
applicants) to appear before him and to produce documentation
in terms of
sections 417 and 418 of the Companies Act. Prior to the commencement of Mr
Bernstein's examination, the respondents'
attorneys sent the applicants'
attorneys a memorandum with a list of issues which were anticipated to be
canvassed with the Kessel
Feinstein witnesses. However, the respondents did not
inform the applicants that they considered Kessel Feinstein to be civilly liable
in consequence of the manner in which the firm had performed its professional
duties as auditors for the companies in the Tollgate
Group, or that the
examination would be aimed at gathering evidence to support such a claim against
Kessel Feinstein. A material
object in the examination of Mr Bernstein turned
out to be an exploration of this potential liability. This was done by calling
for
explanations and interrogating Mr Bernstein with a view to obtaining
concessions and admissions concerning the applicants' alleged
negligence in the
performance of their duties. On the third day of Mr Bernstein's examination his
legal representatives objected
to the constitutionality of the proceedings. The
examination was then deferred by agreement.
[10] On 31 March 1995 the applicants approached the Cape Provincial Division of
the Supreme Court seeking relief by way of notice
of motion. The applicants
sought to rescind the order given by the Supreme Court two years earlier for the
holding of the enquiry
to the extent that it authorised the partners and
employees of Kessel Feinstein to be summoned before the Commission pursuant to
section 417 and 418 of the Companies Act. The applicants further sought, upon
such rescission, an order to set aside the summonses
served on Mr Bernstein and
other partners and employees of Kessel Feinstein and an order to interdict the
respondents and the commissioner,
Adv
Hobermann
SC, from using or
disposing of or in any way disclosing to others any evidence given or documents
obtained from the applicants. In
the alternative the applicants sought an order
interdicting the respondents from proceeding with the examination of Messrs
Bernstein,
Klotz and Nicola (the first to third applicants) or any partners or
employees of Kessel Feinstein, an order interdicting the respondents
or the
commissioner from using or in any way disposing of or disclosing to others
evidence given or documents obtained from the applicants
and, with a view to
these prayers, an order referring to the Constitutional Court pursuant to
section 102(1) of the Constitution
the issue whether or not sections 417 and 418
of the Companies Act are inconsistent with the Constitution or whether the
manner in
which the rights and powers conferred by these sections have been
exercised, violates the applicants' fundamental rights. Finally,
the applicants
sought an interim interdict to prevent the respondents from proceeding with the
examination of the Kessel Feinstein
partners or employees, pending the final
determination of the relief sought.
[11] The parties then agreed that the Cape Provincial Division of the Supreme
Court should refer the issue whether sections 417 and
418 of the Companies Act
are consistent with the Constitution to the Constitutional Court in terms of
section 102(1) of the Constitution.
This agreement resulted in the order of
Fagan DJP referred to above.
[12] The applicants have attacked the constitutionality of sections 417 and 418
of the Act on four different bases, contending that
they are wholly or in part
inconsistent with various rights in Chapter 3 of the Constitution and that such
violations cannot be justified
in terms of section 33(1) of the Constitution or
cured by interpretation in terms of sections 35(2) or 35(3). The attack is
advanced
on the following grounds:
1. The whole mechanism created under sections 417 and 418 violates a cluster of
inter-related and overlapping constitutional rights,
namely,
(a) the right to freedom and security of the person (section 11(1));
(b) the general right to personal privacy (section 13);
(c) the particular aspect of the right to personal privacy not to be subject to
seizure of private possessions or the violation of
private
communications.
2. The mechanism violates section 24 in that it permits an administrative
interrogation in violation of the provisions of that section.
3. Insofar as section 417(2)(b) deprives witnesses of their privilege against
self-incrimination and renders their self-incriminating
evidence admissible
against them in subsequent criminal proceedings, it violates both the general as
well as particular rights to
a fair trial in terms of section 25(3).
4. Insofar as the mechanism permits the liquidator and the creditors of the
company in liquidation to gain an unfair advantage over
their adversaries in
civil litigation, that they would not have enjoyed but for the liquidation of
the company, it
violates:
(a) an implied constitutional right to fairness in civil litigation, and,
(b) the guarantee of equality in terms of section
8.
[13] The third basis of unconstitutionality has, in effect, already been decided
in the applicants favour (at least partially)
in
Ferreira v Levin
where this Court declared section 417(2)(b) to be inconsistent with the
Constitution to the extent indicated in paragraph 4 above.
Two of the judges
found that the provision was unconstitutional because of its inconsistency with
section 11(1) of the Constitution
[5]
and eight of the judges found it unconstitutional because of its inconsistency
with section 25(3) of the
Constitution.
[6]
[14] Before dealing with the remaining bases of the attack on the
constitutionality of the sections of the Act in question, it is
necessary to
examine the legislative setting in which the attack must be evaluated, the
purpose of the enquiries and the examination
of persons provided for in sections
417 and 418 of the Act and the extent of the control, both constitutional and
non-constitutional,
which the commissioner and the Provincial and Local
Divisions are competent to exercise over the conduct of such enquiries and
examinations.
Many of these matters were extensively dealt with in
Ferreira v
Levin
and it is unnecessary to traverse the same ground here. What follows
is a summary of the conclusions reached in
Ferreira v
Levin
.
[7]
[15] Some of the major statutory duties of the liquidator in any winding up
are:-
(a) to proceed forthwith to recover and reduce into possession all the assets
and property of the company, movable and immovable;
(b) to give the Master such information and generally such aid as may be
requisite for enabling that officer to perform his or her
duties under the
Act;
(c) to examine the affairs and transactions of the company before its winding-up
in order to ascertain
-
(i) whether any of the directors and officers or past directors and officers of
the company have contravened or appear to have contravened
any provision of the
Act or have committed or appear to have committed any other offence; and
(ii) in respect of any of the persons referred to in subparagraph (i), whether
there are or appear to be any grounds for an order
by the court under section
219 of the Act disqualifying a director from office as
such;
(d) except in the case of a members voluntary winding-up, to report to
the general meeting of creditors and contributories
of the company the causes of
the company's failure, if it has failed;
(e) if the liquidator's report contains particulars of contraventions or
offences committed or suspected to have been committed or
of any of the grounds
mentioned in (c) above, the Master must transmit a copy of the report to the
attorney-general.
[8]
[16] The enquiry under sections 417 and 418 has many
objectives.
(a) It is undoubtedly meant to assist liquidators in discharging these
abovementioned duties so that they can determine the most
advantageous course to
adopt in regard to the liquidation of the company.
(b) In particular it is aimed at achieving the primary goal of liquidators,
namely to determine what the assets and liabilities of
the company are, to
recover the assets and to pay the liabilities and to do so in a way which will
best serve the interests of the
company's creditors.
(c) Liquidators have a duty to enquire into the company's affairs.
(d) This is as much one of their functions as reducing the assets of the company
into their possession and dealing with them in the
prescribed manner, and is an
ancillary power in order to recover properly the company's assets.
(e) It is only by conducting such enquiries that liquidators
can:
(i) determine what the assets and who the creditors and contributories of the
company are;
(ii) properly investigate doubtful claims against outsiders before pursuing them
as well as claims against the company before pursuing
them.
(f) It is permissible for the interrogation to be directed exclusively at the
general credibility of an examinee, where the testing
of such person's veracity
is necessary in order to decide whether to embark on a trial to obtain what is
due to the company being
wound up.
(g) Not infrequently the very persons who are responsible for the mismanagement
of and depradations on the company are the only persons
who have knowledge of
the workings of the company prior to liquidation (such as directors, other
officers and certain outsiders working
in collaboration with the former) and
are, for this very reason, reluctant to assist the liquidator voluntarily. In
these circumstances
it is in the interest of creditors and the public generally
to compel such persons to assist.
(h) The interrogation is essential to enable the liquidator, who most frequently
comes into the company with no previous knowledge
and finds that the company's
records are missing or defective, to get sufficient information to reconstitute
the state of knowledge
that the company should possess; such information is not
limited to documents because it is almost inevitable that there will be
transactions which are difficult to discover or understand from the written
materials of the company alone.
(i) The liquidator must, in such circumstances, be enabled to put the affairs of
the company in order and to carry out the liquidation
in all its varying
aspects.
(j) The interrogation may be necessary in order to enable the liquidator, who
thinks that he may be under a duty to recover something
from an officer or
employee of a company, or even from an outsider concerned with the company's
affairs, to discover as swiftly,
easily and inexpensively as possible the facts
surrounding any such possible
claim.
[9]
(k) There is a responsibility on those who use companies to raise money from the
public and to conduct business on the basis of limited
liability to account to
shareholders and creditors for the failure of the business, if the company goes
insolvent. Giving evidence
at a section 417 enquiry is part of this
responsibility. This responsibility is not limited to officers of the company,
in the strict
sense, but extends also to the auditors of the
company.
[10]
[17] Courts in many foreign jurisdictions have recognised the (potentially)
oppressive nature of a section 417 type enquiry, while
at the same time pointing
out that there is a need for a speedy process through which the liquidator is
enabled to obtain the necessary
information about the companys affairs
and dealings, and to trace the whereabouts of assets and possibly recover some
assets
for the financial benefit of creditors. Courts normally exercise control
over the enquiry in two ways. First, courts have scrutinised
applications to
hold the enquiry. It has been held that an application for a private examination
ought not to be granted if it would
be oppressive, vexatious or
unfair
[11]
. Second, courts have
intervened to prevent the oppressive or unfair conduct of proceedings in the
enquiry itself.
[18] More than a century ago the Court of Appeal in England came to the
assistance of an examinee and held that, in the circumstances
of the case, he
could not be summoned to be examined and was not obliged to answer questions. In
In re North Australian Territory Company
Bowen LJ, commenting on the
powers under section 115 of the Companies Act 1862, gave the following
warning:
It is an extraordinary power; it is a power of an inquisitorial kind which
enables the Court to direct to be examined - not merely
before itself, but
before the examiner appointed by the Court - some third person who is no party
to a litigation. That is an inquisitorial
power, which may work with great
severity against third persons, and it seems to me to be obvious that such a
section ought to be
used with the greatest care, so as not unnecessarily to put
in motion the machinery of justice where it is not wanted, or to put
it in
motion at a stage when it is not clear that it is wanted, and certainly not to
put it in motion if unnecessary mischief is
going to be done or hardship
inflicted upon the third person who is called upon to appear and give
information.
[12]
[19] In
Cloverbay Ltd (joint administrators) v Bank of Credit and Commerce
International S.A.
the Court of Appeal outlined the following criteria for
the exercise of the courts discretion whether to order an
examination:
It is clear that in exercising the discretion the court has to balance the
requirements of the liquidator against any possible oppression
to the person to
be examined. Such balancing depends on the relationship between the importance
to the liquidator of obtaining the
information on the one hand and the degree of
oppression to the person sought to be examined on the other. If the information
required
is fundamental to any assessment of whether or not there is a cause of
action and the degree of oppression is small (for example
in the case of
ordering the premature discovery of documents) the balance will manifestly come
down in favour of making the order.
Conversely, if the liquidator is seeking
merely to dot the is and cross the ts of a fairly clear claim by
examining
the proposed defendant to discover his defence, the balance would come
down against making the order. Of course, few cases will be
so clear: it will be
for the judge in each case to reach his own
conclusion.
[13]
[20] The court went on in
Cloverbay
to mention a number of considerations
which should specifically be taken into account in exercising the discretion.
The first consideration
is that the purpose of the provisions is to enable the
liquidator to reconstitute the state of knowledge of the company in order
to
make informed decisions. The purpose is not to place the company in a stronger
position in civil litigation than it would have
enjoyed in the absence of
liquidation. Second, the appropriate standard is not to require proof of the
absolute need for information
before an order for examination will be granted,
but proof of the reasonable requirement of the information. Third, the case for
examination is usually much stronger against officers or former officers of the
company, who owe the company a fiduciary duty, than
it is against third
parties. Fourth, an order for oral examination is much more likely to operate
oppressively against an examinee
than an order for the production of
documents.
[14]
The court is also
likely to treat an application for a holding of a section 417 enquiry from an
office holder, such as the liquidator,
with more sympathy than it would treat a
similar request from a
contributor
[15]
.
[21] In
British and Commonwealth Holdings plc (joint administrators) v
Spicer
[16]
the House of Lords
had occasion to comment on the approach laid down in the
Cloverbay
case.
Hoffmann J had construed the judgment of Browne-Wilkinson V-C in
Cloverbay
as restricting the availability of an order under section 236
to enable a liquidator or an administrator "to get sufficient information
to
reconstitute the state of knowledge that the company should
possess".
[17]
The House of Lords did
not consider that "reading the judgment [in
Cloverbay
] overall such a
limitation to 'reconstituting the company's knowledge' was intended to be laid
down in the
Cloverbay
case and in any event did not think that
such a limitation
existed.
[18]
[22] In this connection Lord Slynn also referred with approval to the following
observations of Jessel MR in
Re Gold Co
(1879) 12 Ch D 77
at 85 in a case
under section 115 of the Companies Act
1862:
... the whole object of the section is to assimilate the practice in winding-up
to the practice in bankruptcy, which was established
in order to enable
assignees, who are now called trustees, in bankruptcy to find out facts before
they brought an action, so as to
avoid incurring the expense of some hundreds of
pounds in bringing an unsuccessful action, when they might, by examining a
witness
or two, have discovered at a trifling expense that an action could not
succeed.
[19]
The following remarks of Chitty J in
Re Imperial Continental Water Corp
(1886) 33 Ch D 314
at 316 were also quoted with
approval:
Those extensive powers are conferred upon the Court for the beneficial
winding-up of the company, for sometimes it happens that the
liquidator is
unable to obtain from unwilling persons the information which he
requires.
[20]
[23] It was also pointed out by Lord Slynn that an application such as the one
in question was not necessarily
unreasonable:
because it is inconvenient for the addressee of the application or causes him a
lot of work or may make him vulnerable to future
claims, or is addressed to a
person who is not an officer or employee of or a contractor with the company in
administration, but
all these will be relevant factors, together no doubt with
many
others.
[21]
The extent and complexity of the company's failure is not an irrelevant
consideration. In this regard Lord Slynn said the
following:
This may well be an exceptional order. The size of the financial crash, however,
gives rise to an exceptional case. Creditors and
investors stood to lose vast
sums. It was the administrator's task to investigate 'what was the true
financial position of Atlantic
at the time of its acquisition and, if it was
different from the way it was represented, how and why the truth was concealed'
(see
[1992] BCLC 314
at 317 per Hoffmann J). They need in this very complex
situation to check the accuracy of the various financial documents and to
know
not only what representations were made but how accurate they
were.
[22]
The following remarks of Hoffmann J in
Re JT Rhodes Ltd
are also apposite
to the present case:
The Victorian cases on ... [the English equivalent of section 417] contain
emotive language which invokes the images of the Inquisition
and the Court of
Star Chamber. This language was used against the background of a company law
which required very little public disclosure
and placed a much higher value than
today on the protection of the privacy of business transactions and a lower
value on the protection
of creditors and shareholders. Today we have no
difficulty with the proposition that persons who have had what was perhaps no
more
than the misfortune to be involved in the affairs of an insolvent company
owe a public duty to assist the liquidator to investigate
the affairs of that
company in the interests of the
creditors.
[23]
[24] Moreover, judicial control over the manner in which the examination is
conducted complements the control which the court exercises
over whether the
examination should take place in the first place. Courts have long recognised
that the examination is open to abuse
and that the proceedings ought to be
watched carefully.
[24]
It has been
held that the judiciary is to ensure that the examination is not made an
instrument of oppression, injustice
or of needless injury to the
individual.
[25]
In one
Australian case,
Mortimer v
Brown
,
[26]
the court held that
even though a witness could rarely be excused from answering a question on the
basis that an answer might incriminate
him, there may be questions so remotely
relevant that the harm done to the individual in compelling him to answer
outweighs any benefit
that the answer may afford.
[25] As Mr
Gauntlett
, on behalf of the respondents, pointed out, the
courts in England have, in determining the permissible bounds of investigation
by
liquidators or administrators under section 236 of the 1986 Insolvency Act,
been influenced by the recent pattern of massive and
unparalleled corporate
collapses and the heavy duty which this places on the liquidators to unravel
the complex affairs of companies
which often form part of large groups or
conglomerates with extensive cross-border activities. As appears from the
discussion in
paragraphs 17 - 24 above, the courts have responded with a
flexible approach in which the reasonable requirements of liquidators
in
carrying out their duties are carefully balanced against the hardship which the
order might cause to the person concerned. The
scale of the financial collapse
may well give rise to an exceptional case which shifts the balance in favour of
the
liquidator.
[27]
[26] In
Bishopsgate Investment Management Ltd v
Maxwell
[28]
the Court of Appeal
held that a director was not entitled to rely on the privilege against
self-incrimination in refusing to answer
questions put to him under sections 235
and 236 of the Insolvency Act 1986. In the course of his judgment Dillon LJ
stressed that
this was justified by the public policy considerations that the
law should be able to deal adequately with dishonesty or malpractice
on the part
of company directors:
It is plain to my mind - and not least from the Cork Report - that part of the
mischief in the old law before the Insolvency Act
1985 was the apparent
inability of the law to deal adequately with dishonesty or malpractice on the
part of bankrupts or company
directors. (I take the words gratefully from the
judgment of Vinelott J.
[29]
) That
was a matter of public concern, and there is a public interest in putting it
right. As steps to that end, Parliament has, by
the 1986 Act, greatly extended
the investigative powers available to office-holders, with the assistance of the
court, and has expressly
placed the officers of the company, and others listed
in s 235(3), under a duty to assist the office-holder. That is a direct parallel
of the duty owed by a bankrupt which is relied on by Lord Eldon LC in
Ex P
Cossets, re Warrell
(1820) Buck 531
for his conclusion that the bankrupt
could not rely on the privilege against self-incrimination so as to refuse to
answer questions
put to him in his bankruptcy.
A company cannot act except by individuals, and, in the particular field of law
with which the Bishopsgate appeals are concerned,
it is illogical that the
directors of a company should be entitled to rely on the privilege against
self-incrimination on a private
examination under s 236, whereas the individual
insolvent is not so entitled on a private examination under s
366.
[30]
[27] In
Re Arrows Ltd (No 4) Hamilton v
Naviede
[31]
the public interest
in successfully pursuing and recovering the fruits of company fraud was
highlighted. Lord Browne-Wilkinson commented
as
follows:
The inevitable effect of a witness in civil proceedings claiming the privilege
against self-incrimination is to deprive the opposite
party and the court of
evidence relevant to the dispute under consideration. Until recently, this has
not given rise to much litigation.
But the recent upsurge of financial fraud,
particularly in relation to companies, has raised in an acute form the conflict
between
the witnesss basic right to rely on the privilege on the one
hand and the public interest in successfully pursuing and recovering
the fruits
of such fraud.
Thus in relation to claims for Mareva injunctions and Anton Piller orders, the
defendant relies on the privilege to refuse disclosure
or discovery of documents
which would enable the assets to be traced. He is entitled to claim the
privilege ... . The serious consequences
flowing from a successful claim to the
privilege has lead Parliament in certain cases to override the privilege but to
substitute
an alternative protection ... .
The primary purpose of an inspection under s 432 of the Companies Act 1985 or an
examination by liquidators under s 236 of the 1986
Act is to enable the true
facts to be elicited from those who know them. Frequently it is suspected fraud
which has given rise to
the investigation or examination. If witnesses in such
proceedings were able to rely on the privilege against self-incrimination,
the
whole investigation could be frustrated by a refusal to answer sensitive
questions. Although the statutes establishing such inquisitorial
rights for the
purpose of discovering the true facts about the conduct of a company are silent
on the question whether the privilege
is to apply, the courts have been ready in
recent years to hold that Parliament has impliedly overridden the ancient
privilege against
self-incrimination... .
This recent erosion of the privilege against self-incrimination in the interests
of aiding the tracing and recovery of property extracted
from companies by fraud
is taken one stage further in this
case.
[32]
In even more trenchant terms Lord Nolan said the following in the same
case:
The type of fraud which lead to the passing of the Criminal Justice Act 1987 is
an exceptionally pernicious form of crime, and those
who commit it tend to be as
devious as they are wicked. It is not in the least surprising or regrettable
that Parliament should have
entrusted the Serious Fraud Office with the power to
call upon a suspected person to come into the open, and to disclose information
which may incriminate
him.
[33]
[28] Because South African and Australian company law share a common ancestry it
is instructive to consider the approach of the Australian
courts to comparable
problems arising out of Australian companies legislation which make provision
for the examination by a liquidator
or administrator of persons who have
knowledge of the affairs of a company.
[29] The comparable Australian legislation is the Corporations Amendment Act,
1990. It has features which are similar to the mechanism
created by sections 417
and 418 of the South African Act. Examination provisions are embodied,
inter
alia
in sections 596 and 597. Section
597(12)
[34]
excludes the privilege
against self-incrimination and section 597(12)(A) provides only a direct use
immunity. Express provision is
made for the use of the examination record
against the examinee in civil
proceedings.
[35]
[30] The judicial development of Australian law relating to examinations is also
to be seen in the context of the large corporate
collapses in that country and a
growing view that directors and others concerned with the management and affairs
of a failed company
owe a duty of accounting to creditors and shareholders. In
Spedly Securities v Bond Corporation Holdings
Ltd
[36]
Rogers CJ said the
following:
I can see considerable justification for an argument that, in particular,
directors, but also others, concerned with the management
and affairs of a
failed company owe a duty to creditors and shareholders to provide a candid,
full and truthful account of their
stewardship. This question was not debated,
but I would ask why, with the number and magnitude of company collapses we are
seeing
daily, the generally uninformative statement of affairs should be all
that is required to be provided? Has the time come when it
should be an implied
contractual term in the appointment of directors and executives of public
companies that in the event of the
company going into liquidation they should
provide, within a limited time, a full and proper account of such matters as are
customarily
extracted, at considerable expense to the creditors, in the course
of s 541
examinations?
[37]
In
Lombard Nash International Pty Ltd v
Berentsen
[38]
Bryson J, after
quoting with approval from the passage just quoted, added the
following:
In my view there is such a duty and as well as being owed to creditors and
shareholders it is owed to the whole community which has
an interest, not only
in attaining civil justice in particular pieces of litigation, but also in the
emergence to public knowledge
of information relating to the affairs of
companies which fail although clothed in privileges by the law, including the
limited liability
of their members.
* * *
In relation to litigation between companies in liquidation and their former
officers there is another significant matter, that is,
that the company has no
mind or brain but its officers, nowhere to resort to for knowledge in human
minds but to them, or to whatever
records they may have left behind; that the
company in a fair sense ought to be thought of as the owner of the knowledge in
their
minds, which should not be available solely to such persons to the
exclusion of the company merely because they are engaged in litigation
with the
company.
[39]
[31] The Australian High Court has held that one of the important public
purposes that the examination procedure under the Corporations
Act is designed
to serve is to enable liquidators to gather information which will assist them
in the winding-up; that involves protecting
the interests of
creditors.
[40]
[32] The Australian courts draw no distinction in principle between the stages
at which the liquidator is entitled to seek information;
whether it is sought in
relation to proceedings merely contemplated or proceedings which the liquidator
has definitely decided to
commence. The relevance of the commencement of
litigation or a decision to embark upon it is that it requires the court
to approach the assessment of the liquidators purpose with greater
caution.
[41]
In
Hamilton v Oades
[42]
Mason
CJ pointed out that the very purpose of the section was to create a system of
discovery which may cause defences to be disclosed
and that to hold otherwise
would, adopting the language of Kitto J in
Mortimer v
Brown
,
[43]
render the
provision relatively valueless in the very cases which call most loudly for
investigation.
[33] In
The Duke Group Ltd v Arthur Young (Reg) & Anor
Perry J,
dealing with analogous examinations under section 541 of the Companies (South
Australia) Code, pointed out that these
examinations:
are designed to enable interested parties to elicit the facts concerning, among
other things, the circumstances giving rise to the
liquidation of a company, in
order to provide a proper basis for consideration of other consequential legal
remedies which thereafter
may be
sought.
[44]
And in
Hong Kong Bank of Australia and Others v Murphy and
Others
[45]
Gleason CJ pointed
out that:
[w]hile the court would not permit a liquidator, or other eligible person, to
abuse its process by using an examination solely for
the purpose of obtaining a
forensic advantage not available from ordinary pre-trial procedures, such as
discovery or inspection,
on the other hand, the possibility that a forensic
advantage will be gained does not mean that the making of an order will not
advance
a purpose intended to be secured by the
legislation.
[46]
The liquidator is entitled to obtain information, not only to ascertain whether
she/he has a cause of action, but also in order to
assess whether the case is
sufficiently strong to justify spending the creditors money in pursuit
of it, and, conversely,
whether there is an adequate defence to a claim against
the company.
[47]
[34] The courts in Australia will come to the assistance of an examinee to
ensure that the provisions of the statute compelling the
testimony are not used
for purposes of oppression or vexation and will use their powers to control and
supervise examinations and
to prevent
injustice.
[48]
This power is not
restricted to defined and closed
categories.
[49]
It is important to
note, in the context of the present case, that in relation to an examination
under section 597(3) of the Australian
corporations law, it has been held that
an examination of a companys auditor was permissible even though it
could lead to
the institution of proceedings against the auditor as a
consequence of information thus
obtained.
[50]
The powers in section
597 may be used to enable a creditor to sue a stranger to a company, that is, a
person who is neither an officer
nor an
employee.
[51]
[35] In South Africa the control which courts normally exercise over the
application for the holding of the enquiry has been effected
by the amendment
of the Companies Act in 1985. Earlier, judges in several divisions of the
Supreme Court pointed out that the section
417 enquiry is the
Courts enquiry.
[52]
Since the amendment, however, the court does not necessarily entertain the
application for the holding of the enquiry. As explained
in
Van der Berg v
Schulte
:
While it may have been correct to describe the enquiry as the Courts
enquiry prior to the amendment to the Act in 1985 I
am of the view that this is
not the case where the inquiry is ordered by the Master. Prior to the amendment
an application for an
inquiry had to be made to the Court. That is no longer
necessary. ...The Court may not come into the picture at all where the Master
acts in terms of s 417. This is made quite clear by the provisions of s 418 (3)
which provide that if a Commissioner has been appointed
by the Master he must
report to the Master and not the Court. ... The Legislature has made a clear
distinction between an inquiry
ordered by the Master on the one hand and one
ordered by the Court on the other and even if the Master be regarded as an
officer
of the Court, he is, in my view, in an inquiry ordered by him and in
which he appoints a Commissioner to conduct it on his behalf,
acting
independently of the
Court.
[53]
It is important to point out, however, that
Van der Berg
's case was
concerned with the question whether a commissioner, who is not a magistrate, has
any power apart from that contained in
section 418(5) of the Act to deal with a
recalcitrant witness. The court held that he did not and, further, that the
court's powers
to deal with such recalcitrant witness other than on the basis of
contempt
in facie curiae
were to be found in sections 30 and 31 of the
Supreme Court Act. The latter sections are only applicable to civil
proceedings
and not to the type of enquiry envisaged by sections 417 and
418 of the Companies Act. It was therefore not for the court to deal
with such
recalcitrant witnesses. The judgment is not authority for the proposition that,
merely because the master of the Supreme
Court orders such an enquiry, the
Supreme Court loses its power to prevent oppressive or otherwise improper
enquiries being instituted
or to prevent enquiries from being conducted in an
oppressive or otherwise improper manner. This cannot be the consequence of the
amendment.
[54]
Whether the order is
made by the master or by a judge, it is still an order issuing from the Supreme
Court.
[55]
Our Supreme Courts have
over many years taken the view, based on the English and other authorities, that
they have the power to prevent
section 417 type enquiries which would result in
oppression
[56]
or intervene where
enquiries are conducted in an oppressive or vexatious
manner
[57]
or result in hardship to
the examinee or where unusual, special or exceptional circumstances are
present.
[58]
In
James v
Magistrate Wynberg and
Others
[59]
Thring J, relying
inter alia
on the relevant English and Australian authorities, pointed to
various ways in which an examinee could be improperly interrogated
in terms of
section 415 of the Act and in respect whereof a Court would have the power to
intervene:
An examinee might be improperly interrogated by a creditor for the purpose of
investigating an issue which did not relate to the
winding-up or to the
financial interests of the creditors of the company in liquidation, but solely
for the improper purpose of obtaining
ammunition for use by that particular
creditor in litigation which the creditor proposed to bring against the
examinee. See
Simon
's case
supra
at 718C-H,
Anderson and Others
v Dickson and Another NNO (Intermenua (Pty) Ltd Intervening)
1985 (1) SA 93
(N) at 111F - H, and the
Hugh J Roberts
case
supra
.
In short, an examinee might be compelled to submit to an examination which was
oppressive or vexatious, inasmuch as the proceedings
might be 'seriously and
unfairly burdensome, prejudicial and damaging' or 'productive of serious and
unjustified trouble and harassment'
(
Spedley Securities Ltd (in liq) v Bond
Corporation Holdings Ltd
(
supra
at 732, 733)). Where this may happen,
the Court has a discretion to intervene to prevent it: see
Re Imperial
Continental Water Corporation
(1886) 33 ChD 314
(CA) at
320-1.
[60]
Although these remarks were made in the context of an enquiry held in terms of
section 415 of the Act, there is no reason why the
court's approach should be
any different in regard to a section 417 enquiry.
[36] The purpose of this brief survey is not to lay down or develop the legal
principles which the Supreme Court in this country
should apply in controlling
section 417 enquiries. It is not the function of this Court, but that of the
Supreme Court, to do so.
The purpose is to point out that the Supreme Court has
the power to prevent the oppressive, vexatious and unfair use of section 417
proceedings, for it is against the background of such power that the applicants'
remaining attack on the unconstitutionality of sections
417 and 418 of the Act
must be considered.
[37] As a prelude to the first basis of attack Mr
Marcus
, on behalf of
the applicants, analysed in his written argument the nature and effect of the
section 417 and 418 mechanisms as applied
to the conduct of the enquiry in the
present case, highlighting the secret nature of the enquiry, the
examinees lack of information
and general inability to prepare for the
interrogation. Before analysing these criticisms further it must be pointed out
that, for
purposes of the present case, the section 417 and 418 mechanisms must
be evaluated in the light of this Courts judgment in
Ferreira v
Levin
and in particular paragraph 2 of its order to the effect
that:
As from the date of this order, no incriminating answer given pursuant to the
provisions of section 417(2)(b) of the Companies Act
on or after 27 April 1994
shall be used against the person who gave such answer, in criminal proceedings
against such person, other
than proceedings excepted in 1.
above.
[61]
[38] Mr
Marcus
pointed to the fact that the mechanisms constituted an
extraordinary and secret mode of obtaining information. The examinee is not
entitled as of right to know what the topics of interrogation will be, whose
conduct is to be the focus of interrogation, whether
allegations or suspicions
of civil or criminal liability are to be investigated and if so, what they are.
The examinee is not entitled
as of right to access to evidence or exhibits of
the Commission and often enters the witness stand wholly unprepared for
interrogation.
[39] Inasmuch as the subject matter of the enquiry is the affairs of the company
taken in the very widest sense,
[62]
the examinee may be interrogated on a very wide range of matters and may be
compelled to disclose any of his books or papers, however
confidential or
incriminating they might be. The mechanism is available, not only against the
directors, officers, employees or agents
of the failed company and against those
suspected of being responsible for its failure, but also against innocent third
parties whose
misfortune it is to know something about the
trade, dealings, affairs or property of the company.
[40] Relying on decisions such as
Cloverbay
[63]
and
Spicer
& Oppenheim
,
[64]
Mr
Marcus
submitted that, whereas English courts generally do not permit a
liquidator to invoke this mechanism when a firm decision has been
taken to
institute proceedings or once they are pending, the position in South
Africa
[65]
is that a person who
might be a witness in a pending civil trial relating to the subject-matter of
the proposed interrogation is
not exempt from interrogation and that the
interrogation might even be conducted at a very late stage in the proceedings
when the
trial was ripe for hearing. The distinction is not, in my view, as
marked as Mr
Marcus
suggested. In
Re Castle New Homes
Ltd
[66]
Slade J, in dealing with
the exercise of a courts discretion to order an examination and with the
balancing of the requirements
of the liquidator or administrator to obtain
information on the one hand against the possible oppression to the person sought
to
be examined on the other, had stated a rather more detailed rule to the
effect,
inter alia
, that
[i]f the evidence shows that the purpose of a liquidator in seeking the
examination is to achieve an advantage beyond that available
to the ordinary
litigant, in litigation which he has already commenced or which he has
definitely decided to commence, the predisposition
of the court may well be to
refuse an immediate order for examination, unless the liquidator can show
special grounds to the
contrary.
[67]
In
Cloverbay
,
[68]
Browne-Wilkinson V-C, commenting on the importance attached by Slade J to the
question whether or not the applicant had reached a
firm decision to sue, said
the following:
The more information there is as to the facts and possible defences to a claim
the better informed will be any decision and the greater
the likelihood of such
decision being correct. It is the function of a liquidator or administrator to
do his best for the creditors.
True he is an officer of the court and must not
act in any improper way but, like the judge, I can see nothing improper in a
liquidator
or administrator seeking to obtain as much information as possible
before committing himself to proceedings. Moreover a test based
on the
subjective state of mind of the liquidator or administrator inevitably leads to
undesirable disputes of fact, such as have
arisen in this case, as to what is
his state of mind. In my judgment therefore the test propounded in
Re Castle
New Homes Ltd
[1979] 1 WLR 1075
has not proved to be satisfactory and should
not in future be applied. Nor do I think that there is any other simple test
that can
be substituted. The words of the Insolvency Act 1986 do not fetter the
courts discretion in any way. Circumstances may vary
infinitely. It is
clear that in exercising the discretion the court has to balance the
requirements of the liquidator against any
possible oppression to the person to
be examined. Such balancing depends on the relationship between the importance
to the liquidator
of obtaining the information on the one hand and the degree of
oppression to the person sought to be examined on the
other.
[69]
This approach was confirmed in the
Spicer & Oppenheim
case.
[70]
[41] It was also pointed out in argument that the liquidator had the additional
benefit of the transcript of the interrogation which
could be used as evidence
against and for purposes of cross-examining the examinee in a subsequent
criminal or civil trial. This
submission must of course now be read subject to
the judgment in
Ferreira v
Levin
[71]
as must the submission
regarding the duty imposed on a liquidator by section 400(1) of the Companies
Act to ascertain whether the
companys directors and officers have been
guilty of any criminal offence.
[42] In regard to the particular circumstances of the present case (as embodied
in the agreed statement of facts) Mr
Marcus
highlighted a number of
features. Since December 1992 the applicants have co-operated fully with and
rendered assistance to the liquidators
and their attorneys and the investigating
accountants. The applicants have furnished them with all their working papers
and such
explanations and further information as they required. At no stage
prior to the commencement of Mr Bernsteins examination
on 2 August 1994
(the first of the applicants to be examined) did the respondents inform
the applicants that they considered
Kessel Feinstein to be civilly liable in
consequence of the manner in which the firm had performed its professional
duties as auditors
of the companies in the Tollgate Group or that the
examination would be aimed
inter alia
at gathering evidence to support a
possible claim against Kessel Feinstein. The liquidators addressed a memorandum
to the applicants
of issues which would be canvassed in their interrogation.
Although they were warned that the list was not exhaustive, there was
no
intimation from the liquidators that the civil liability of Kessel Feinstein
would in any way be canvassed. Yet the liquidators
had, prior to Mr
Bernsteins examination, instructed their investigative accountants to
conduct an investigation into the
potential liability of Kessel Feinstein and
had decided that one of the objects of the interrogation was to explore their
potential
liability and to obtain concessions and admissions concerning their
alleged negligence in the performance of their duties. When Mr
Bernstein came to
be questioned, his interrogation was indeed designed to elicit concessions and
admissions regarding his and the
firms civil liability. The liquidators
were assisted in the interrogation by the very attorneys and investigative
accountants
with whom the applicants had so closely co-operated since 1992. As a
result of rulings by the commissioner which deny Mr Bernstein
access to his
legal representatives during his interrogation and to documentation relevant to
his interrogation, it is contended
that the applicants could not meaningfully
prepare or have the benefit of legal advice on the surprise attack on
themselves.
[43] The mechanism of sections 417 and 418 and its employment in the present
case was accordingly characterised by the applicants
as one whereby innocent
outsiders, who played no part in the management of the company or its demise,
are forced to go to a place
where they do not want to be; are forced to give
evidence by their own oral testimony and by the production of documents by which
they incriminate themselves and which can then be used to vest them with civil
or criminal liability; are forced to reveal confidential
information that they
want to keep private; are forced to produce their private books and documents,
that they want to keep confidential;
are forced to do so without being heard on
the decision to subject them to the mechanism; are forced to do so in
circumstances which
render meaningful and effective legal representation all but
impossible; and are exposed to criminal conviction or civil liability
on their
own evidence extracted under legal compulsion in a process devoid of the normal
checks and balances built into criminal
or civil litigation.
[44] It was against this general background that Mr
Marcus
submitted that
the whole mechanism of sections 417 and 418 violates the cluster of rights
comprising the right to freedom and security
of the person in terms of section
11(1); the right to personal privacy in terms of section 13; and the right not
to be subject to
the seizure of private possessions or the violation of private
communications, as a component of the right to personal privacy in
terms of
section 13.
The attack based on section 11(1)
[45] It is to be borne in mind that the applicants third basis of attack
is focused on section 417(2)(b) of the Act and its
inconsistency with the fair
criminal trial rights embodied in section 25(3) of the Constitution. The present
attack based on section
11(1) is accordingly a much narrower attack than the
section 11(1) attack in
Ferreira v
Levin
,
[72]
for in that case the
section 11(1) attack was also directed at section 417(2)(b) and in particular
the ouster of the privilege against
self-incrimination. Moreover, the present
attack must be considered in the light of the effect which the judgment and
order in
Ferreira v Levin
has on the mechanism of sections 417 and 418,
namely that answers which tend to incriminate the examinee may not be used
against
the examinee in subsequent criminal proceedings (except in those special
cases exempted in the order and which are not relevant to
the present
proceedings).
[46] Mr
Marcus
attack based on section 11(1) (and indeed his
attack based on the other provisions of the Constitution) ignores the fact
that
the provisions of sections 417 and 418 are not, in their application, completely
open-ended. As already indicated, the courts
in this country have (as have the
courts in other countries) developed a considerable body of case law the design
of which is to
prevent the mechanism of sections 417 and 418 (and the mechanisms
of comparable statutory provisions in foreign jurisdictions) being
used
oppressively, vexatiously or unfairly towards the examinee. I have no doubt that
our Supreme Courts will continue to develop
that body of law having due regard
to the spirit, purport and objects of the Constitutions chapter of
fundamental rights.
[73]
It is
accordingly not open to argue that, because the provisions of sections 417 and
418 are general in terms and contain no express
limitations as to their
application, the constitutionality of these sections is to be adjudicated on the
basis that they permit anything
which is not expressly excluded. It is trite law
that a statutory power may only be used for a valid statutory
purpose.
[74]
The constitutionality
of sections 417 and 418 must therefore be assessed in the light of the control
which the Supreme Court exercises
over their implementation.
[47] A large number of Mr
Marcus
complaints (particularly in
regard to Mr Bernsteins actual examination and the circumstances
surrounding it, the
alleged trap that was laid for him, his inability to prepare
and the various other limitations to which he was subjected) relate
to the
manner in which the examination was conducted by the Commissioner and not to any
provision in the sections of the Act under
attack. There is nothing in the
sections which mandates that the examination be conducted in this way. In
respect of all these complaints
the applicants correct remedy was to
approach the Supreme Court for relief on the basis that the examination was
being conducted
in an oppressive, vexatious or unfair manner. I deliberately
refrain from expressing any view as to the validity of any of the complaints
on
this score. The only point I make is that the Supreme Court has jurisdiction to
deal with complaints of this nature. It is a jurisdiction
which (on the facts
and circumstances of this case and in relation to these specific complaints)
should first have been exhausted
before any approach was made to this Court. It
is unnecessary for purposes of this case to express any view as to how this
Court
would deal with an ultimate complaint that the Supreme Courts
interpretation of a statute or its enunciation or development
of the common law
is unconstitutional.
[48] There is accordingly little left of the attack based on section 11(1) of
the Constitution to deal with. In
Ferreira v
Levin
,
[75]
it was only myself
and Sachs J who based our judgments on an infringement of section
11(1).
[76]
The President and five
members of the Court decided the case on the basis of an infringement of section
25(3) but also disagreed
with my broad construction of the section 11(1)
residual right to freedom.
[77]
They
expressed the view that the primary, though not necessarily the only,
purpose of section 11(1) of the Constitution is
to ensure that the physical
integrity of every person is
protected,
[78]
but added
that they could see no objection to accepting provisionally that section
11(1) is not confined to the protection
of physical integrity and that in a
proper case it may be relied upon to support a fundamental freedom that is not
otherwise protected
adequately under Chapter
3.
[79]
[49] The order in
Ferreira v Levin
, and the view of the majority who
found section 417(2)(b) of the Act to be inconsistent with section 25(3) of the
Constitution, does
not assist the applicants in their broader attack on sections
417 and 418 which goes beyond an objection to the use of self-incriminating
answers in subsequent criminal proceedings against the examinee. It is an attack
based, in the first instance, on the section 11(1)
freedom
rights.
[50] It is unnecessary to elaborate any further on what I have already said
concerning the objectives sought to be achieved by the
mechanism embodied in
sections 417 and 418. They are all very important public policy objectives. I
would endorse the following observation
of Windeyer J in
Rees v
Kratzmann
,
[80]
as quoted with
approval by Mason CJ in
Hamilton v
Oades
:
The honest conduct of the affairs of companies is a matter of great public
concern
today.
[81]
This is particularly the case in South Africa at present. Such honest conduct
cannot be ensured unless dishonest conduct, when it
occurs, is exposed and
punished and ill-gotten gains restored to the company. Such exposure cannot, in
its turn, effectively take
place unless the affairs of companies which fail are
thoroughly investigated and reconstructed, an objective which is difficult,
and
often impossible, to achieve without the full co-operation of the directors,
office bearers and auditors of the company who are,
after all, the brains, eyes
and ears of the company. On the obligations resting on such persons, I said the
following in
Ferreira v Levin
:
Companies are used to raise money from the public and to conduct business on the
basis of limited liability. There are obvious advantages
to doing so. But there
are responsibilities which go with it. Part of the responsibility is to account
to shareholders for the way
in which the company conducts its affairs and, if
the company goes insolvent, to account to shareholders and creditors for the
failure
of the business. These responsibilities are well known to all who
participate in the running of public companies. ... Although it
has been held
that an auditor is not an officer of the company within the meaning of that
expression in section 184(1) of the 1926
Act (corresponding to section 423(1) of
the present Act) and it has been suggested that there is no basis for regarding
an auditor
as being an officer of the company for any purpose of the Act, in my
view the same public policy considerations apply to the use
of derivative
evidence of an auditor of the company compelled to testify under section
417(2)(b) of the Act. The auditor has,
inter alia
, many statutory duties
under the Companies Act and the Public Accountants' and Auditors Act, the
purpose of which duties is,
inter alia
, to protect shareholders and
creditors. The knowledge and expertise of the auditor is of particular
importance in reconstructing
the affairs of the company in liquidation and in
achieving the other aims of the section 417 enquiry. An auditor is not obliged
to
become the auditor of a particular company nor to discharge the attendant
duties without remuneration. In accepting appointment as
an auditor of any
particular company the auditor is aware of these
duties.
[82]
It is clear from the authorities cited earlier in this
judgment
[83]
that there are
occasions when these mechanisms are essential in order to obtain information
from complete outsiders. The examinee
in the section 417 enquiry is not so
differently situated from witnesses in any other proceedings, especially in the
light of this
Courts judgment in
Ferreira v Levin
, which in
effect established a direct use immunity in criminal proceedings in respect of
self-incriminating testimony.
[51] Against this background I proceed to deal with the attack based on section
11(1) of the Constitution. I do so on the basis
of the views expressed by the
majority of the Court in
Ferreira v Levin
on the construction of section
11(1), referred to in para 48 above. No good purpose would be served, so soon
after that judgment,
by repeating my arguments for giving section 11(1) a wider
construction. The obligation to respond to a subpoena and to be present
at the
appointed time and place would not, on the majority view, compromise the
physical integrity of the subpoenaed witness. In
all democratic societies the
state has the duty to establish independent tribunals for the resolution of
civil disputes and the prosecution
of persons charged with having committed
crimes. In a constitutional state that obligation is of fundamental importance
and it is
clearly recognised as such in our constitution. Our Constitution is
the supreme law of the land and makes provision in Chapter 7
for the judicial
authority to vest in the courts. The use of subpoenas to require witnesses to
attend courts, to produce documents
and where necessary to give evidence is
essential to the functioning of the court system. It is no doubt possible for
the rule governing
the issuing of subpoenas to be misused. The courts have the
power to set aside subpoenas which have been issued for an improper purpose,
or
which are vexatious in other respects, but in its practical application that
power is limited, and the possibility of the process
of the court being abused
in particular cases cannot be
excluded.
[84]
[52] The fact that the power of subpoena may possibly be abused in a particular
case to the prejudice of the person subjected to
such abuse, does not mean that
the power should, for this reason, be characterised as infringing section 11(1)
of the Constitution.
The law does not sanction such abuse; it merely recognises
that it is difficult to control it and that a clear case of abuse must
be
established in order to secure a discharge from a subpoena. Absent such proof it
is the duty of persons who are subpoenaed to
co-operate with the courts, and to
attend court for the purpose of giving evidence or producing documents when
required to do so.
The fact that the present case is concerned with enquiries
under sections 417 and 418 of the Companies Act, and not with a trial,
does not
affect the characterisation of the obligation to honour a subpoena to attend the
enquiry. It is a civic obligation recognised
in all open and democratic
societies and not an invasion of freedom.
[53] Witnesses who ignore subpoenas or who refuse to answer questions put to
them may be subjected to the sanction of imprisonment.
That is true of all
persons who contravene legislation that has been lawfully passed. The execution
of the sanction implicates the
physical integrity of the person who is
imprisoned for the breach of the law. Section 11(1), which pointedly refers to
detention
without trial, does not include within its scope imprisonment
consequent upon the sentence of a court. Legislation invariably makes
provision
for sanctions, including the possibility of imprisonment, and it could never
have been the intention of the framers of
the Constitution to require all laws
which contain such a sanction to meet the test of necessity prescribed by
section 33(1) for
any limitation of a section 11(1) right.
[54] It is perfectly clear that the sanction of imprisonment properly imposed by
a court in respect of legislation which is otherwise
constitutional, is
justifiable in an open and democratic society. Sanctions are necessary to make
legislation effective, for without
them laws could be broken with impunity.
Thus, even if section 11(1) was to be construed as applying to a statutory
provision authorising
a court to impose a sentence of imprisonment upon a person
convicted of contravening the law, such a provision would almost always
be
justifiable under section 33. There may be cases in which the sanction
authorised or required by the statute is out of proportion
to the offence. But
even then it is doubtful whether section 11(1) would be implicated. Such cases
would more properly be dealt with
under section 11(2) of the Constitution, which
is concerned with excessive punishments, than under Section 11(1). That question
does
not, however, arise in the present case.
[55] The sanction of imprisonment for ignoring, or failing without sufficient
cause to give effect to a subpoena issued under section
417 or 418 of the
Companies Act, is a reasonable and necessary sanction. So too is the power to
cause a person in breach of such
a subpoena to be arrested and brought before
the Master or other person appointed to conduct the enquiry. Imprisonment
follows in
accordance with the normal procedural safeguards, therefore neither
section 11(1) nor section 25 is impaired; and it is not a sanction
which is
disproportionate to the offence, therefore sections 11(1) and 11(2) are not
impaired. The sanctions are necessary to enforce
the legislation, and in so far
as they have to comply with Section 11(1) read with Section 33, they clearly do
so. The same conclusion,
regarding justification under section 33(1), would be
reached on the broad interpretation I placed on the right to freedom under
section 11(1) in
Ferreira v Levin.
The mechanism provided by sections 417
and 418 is absolutely essential, and therefore necessary, to achieve these
important public
policy objectives. They cannot be achieved in any other way
which would impinge less on an examinees right of freedom, particularly
when regard is had to the Supreme Courts power to control an examination
and prevent it from being vexatious, oppressive
or unfair. The limitation of the
examinees right of freedom is also clearly reasonable and justifiable in
an open and democratic
society based on freedom and equality. The duty to
testify is well recognised in such societies whether it be in the context of a
criminal or civil trial or in investigatory proceedings such as inquests or
bankruptcy enquiries. (On the approach favoured by me
in
Ferreira v Levin
I would have found that the statutory compulsion to obey a subpoena infringed
section 11(1) but that this was a limitation manifestly
justified under section
33(1)).
The attack based on the section 13 right to
personal privacy and the right not to be subject to the seizure of private
possessions
or the violation of private communications
[56] As part of their attack on the constitutionality of section 417 and 418 of
the Act the applicants submit that a witnesss
privacy is clearly
invaded when he is forced to disclose his books and documents that he wants to
keep confidential and to reveal
information that he wants to keep to
himself. In addition, the applicants contend that the compulsory
production
of documents under section 417(3) constitute a
seizure within the meaning of the right not to be subject to the
seizure
of private possessions in terms of section 13 of the
Constitution. These are different attacks and will be dealt
with
separately.
[57] Section 13 of the Constitution entrenches the right to privacy as
follows:
Every person shall have the right to his or her personal privacy, which shall
include the right not to be subject to searches of
his or her person, home or
property, the seizure of private possessions or the violation of private
communications.
[58] A distinction must be drawn between the compulsion to respond to a subpoena
and the compulsion to answer particular questions
at a section 417 enquiry in
consequence of responding to the subpoena. The mere compulsion to be physically
present at a particular
place at a particular time in response to a subpoena
cannot in itself be regarded as an intrusion on a persons privacy,
however
widely that concept is defined. It could be examined in relation to
concepts such as freedom or perhaps even dignity, but it cannot
notionally be
categorised as interfering with ones privacy. It may of course be that,
in particular circumstances, the disclosure
of the persons identity
might constitute a breach of the right to privacy, but that does not arise in
this case. It is the
compulsion to respond to particular questions about oneself
and ones activities, for example, which could lead to an infringement
of
ones right to personal privacy. Before this stage is reached a
persons privacy is not compromised.
[59] Before considering whether and to what extent the answering of particular
questions at a section 417 enquiry could constitute
an infringement of an
examinees section 13 right to personal privacy, it is essential to
consider and analyse the source
of such compulsion. This must be done, however,
in the light of two relevant and interrelated provisions of the Constitution.
Section
35(2) provides for the reading
down
[85]
of a
statute
[86]
in the following terms-
No law which limits any of the rights entrenched in this Chapter, shall be
constitutionally invalid solely by reason of the fact
that the wording used
prima facie
exceeds the limits imposed in this Chapter, provided such a
law is reasonably capable of a more restricted interpretation which does
not
exceed such limits, in which event such law shall be construed as having a
meaning in accordance with the said more restricted
interpretation.
[87]
Section 35(3) moreover provides that in the interpretation of any
statute
[88]
and the application and
development of the common law a court shall have due regard to the
spirit, purport and objects of
this Chapter. One of the objects of
Chapter 3, apart from entrenching the fundamental rights it does, is to ensure
through
section 7(4) that any person whose Chapter 3 rights are infringed or
threatened with infringement will have an appropriate
remedy,
without specifying or limiting the nature of such remedy.
[60] I return to the significance of the source of the compulsion to answer
specific questions at the section 417 enquiry. Section
417(2)(b), before it was
declared invalid to the extent indicated in the order of this Court in
Ferreira v Levin,
in express and unequivocal terms compelled an examinee
to answer a question even though this might tend to incriminate the examinee
and
further provided that such incriminating answer could be used thereafter in
evidence against the examinee,
inter alia
in criminal proceedings. On the
clear wording the provision could simply not be read down so as not to exceed
the examinees
Chapter 3 rights. Accordingly, the court could not avoid
declaring the provision in question invalid to the extent indicated in its
order. There is no other provision in section 417 or 418, or for that matter in
any other provision of the Act which expressly or
by necessary implication,
compels the examinee to answer a specific question which, if answered, would
threaten any of the examinees
Chapter 3 rights. It must in my view
follow from this that the provisions of sections 417 and 418 can and must be
construed in such
a way that an examinee is not compelled to answer a question
which would result in the unjustified infringement of any of the
examinees
Chapter 3 rights. Fidelity to section 35(2) of the
Constitution requires such a construction and fidelity to section 35(3) read
with
section 7(4) of the Constitution requires an appropriate remedy; in the
present case that the examinee should not be compelled to
answer a question
which would result in the infringement of a Chapter 3 right.
[61] In this context the provisions of section 418(5)(b)(iii)(aa) of the Act are
important. The subparagraph in question provides
that a person who, having been
duly summoned under section 417 or 418 to the
examination-
fails,
without sufficient cause
... to answer fully and satisfactorily
any question
lawfully
put to him in terms of section 417(2) or this
section ... shall be guilty of an offence. (emphasis
supplied)
Nothing could be clearer, in my view, than this. If the answer to any question
put at such examination would infringe or threaten
to infringe any of the
examinees Chapter 3 rights, this would constitute sufficient
cause, for purposes of
the above provision, for refusing to answer the
question unless such right of the examinee has been limited in a way which
passes
section 33(1) scrutiny. By the same token the question itself would not
be one lawfully put and the examinee would
not, in terms of this
very provision, be obliged to answer it. The answer to this leg of Mr
Marcus
argument is that there is, on a proper construction of
these sections, and in the light of this Courts order in
Ferreira v
Levin
, no provision in section 417 or 418 of the Act which is inconsistent
with the examinees right to privacy in terms of section
13 of the
Constitution now under consideration.
[62] The Constitution has in principle brought about a fundamental change to the
way in which the evidential privileges of a witness
or those of an examinee at
any statutory enquiry (for purposes of the present case it is unnecessary to go
further than this) should
be approached. It is not, however, in the first
instance, the task of this Court to determine what effect such approach will
have
on the law of evidence relating to privilege, save in those cases (of which
section 417(2)(b) is an example) where there is an explicit
statutory provision
which cannot be read down as required by section 35(2) of the Constitution.
[63] In the case of common law privilege which has not been limited by statute
it is the function of all the courts who are empowered
to do so, and in
particular that of the Supreme Court, in execution of the duty imposed on them
by section 35(3) of the Constitution
to have due regard to the spirit,
purport and objects of Chapter 3 in the development of the
common law
of privilege. Such development can consist of the extension
or the limitation of a privilege.
[64] The present attack is in the vaguest terms, namely, an assertion that the
privacy of witnesses are invaded when they are forced
to disclose their books
and documents that they want to keep confidential and to reveal information that
they want to keep to themselves.
No real information is furnished as to the
nature or content of the documents or information in respect whereof the claim
to privacy
is being made. In the present context a claim to privacy can surely
only be founded on the content of the information which the examinee
is being
forced to disclose, not on his desire not to disclose it. It is simply not
possible to pronounce on the issue of privacy
unless the content of the document
or information in respect whereof privacy is claimed is disclosed. Under these
circumstances it
would be most inadvisable, if not in fact impossible, to give a
detailed exposition on the constitutional right to privacy at section
417
proceedings, quite apart from the fact that I am of the view that this is, in
the first instance, an exercise which the Supreme
Courts ought to work out on a
case to case basis. It is sufficient for the disposition of this part of the
case to repeat that there
is no provision in section 417 or section 418 which,
when properly construed in the light of section 35(2) and (3) of the
Constitution,
is inconsistent with such right.
[65] The aforegoing conclusion renders it unnecessary, strictly speaking, to
consider whether the compulsion to answer the questions
which the applicants
complain of do infringe their constitutional right to privacy. It would
nonetheless be appropriate, I believe,
to venture some preliminary observations
on the scope of this right. The concept of privacy is an amorphous and elusive
one which
has been the subject of much scholarly
debate.
[89]
The scope of privacy has
been closely related to the concept of identity and it has been stated that
rights, like the right
to privacy, are not based on a notion of the
unencumbered self, but on the notion of what is necessary to have ones
own autonomous
identity.
[90]
[66] In expanding upon this notion
Forst
[91]
acknowledges that communal
bonds are not to be substituted with abstract relations, but argues beyond this
for a multi-levelled recognition
of identity. Besides the concrete and abstract
realms, this thirdly also pertains to societal
membership
[92]
and fourthly to the
community of humanity
[93]
itself
[67] The relevance of such an integrated approach to the interpretation of the
right to privacy is that this process of creating
context cannot be confined to
any one sphere, and specifically not to an abstract individualistic approach.
The truism that no right
is to be considered absolute, implies that from the
outset of interpretation each right is always already limited by every other
right accruing to another citizen. In the context of privacy this would mean
that it is only the inner sanctum of a person, such
as his/her family life,
sexual preference and home environment, which is shielded from erosion by
conflicting rights of the community.
This implies that community rights and the
rights of fellow members place a corresponding obligation on a citizen, thereby
shaping
the abstract notion of individualism towards identifying a concrete
member of civil society. Privacy is acknowledged in the truly
personal realm,
but as a person moves into communal relations and activities such as business
and social interaction, the scope of
personal space shrinks accordingly.
[68] In South African common law the right to privacy is recognised as
an independent personality right which the courts
have included within the
concept of
dignitas
.
[94]
Privacy is an individual condition of life characterised by seclusion
from the public and publicity. This implies an absence
of acquaintance with the
individual or his personal affairs in this
state.
[95]
In
Financial
Mail (Pty) Ltd v Sage Holdings
Ltd
[96]
it was held that breach
of privacy could occur either by way of an unlawful intrusion upon the personal
privacy of another, or by
way of unlawful disclosure of private facts about a
person. The unlawfulness of a (factual) infringement of privacy is adjudged
in
the light of contemporary
boni mores
and the general sense of
justice of the community as perceived by the
Court.
[97]
[69] Examples of wrongful intrusion and disclosure which have been acknowledged
at common law are entry into a private
residence,
[98]
the reading of
private documents,
[99]
listening in
to private conversations,
[100]
the
shadowing of a person,
[101]
the
disclosure of private facts which have been acquired by a wrongful act of
intrusion,
[102]
and the disclosure
of private facts contrary to the existence of a confidential
relationship.
[103]
These examples
are all clearly related to either the private sphere, or relations of legal
privilege and confidentiality. There is
no indication that it may be extended to
include the carrying on of business activities.
[70] In
S v Naudϑ
[104]
Corbett JA said with regard to the inquisitorial power of a commission of
inquiry that the exercise thereof makes an important
inroad upon the
right of the individual to the tranquil enjoyment of his peace of
mind... and such privacy as the
law allows him. The learned
judge of appeal defined the risk inherent in such proceedings as that of
having aspects
of [ones]
private
[life]
exposed
[105]
(emphasis
added). It is clear that these dicta do not provide any authority for the notion
that the right to privacy extends beyond
the private sphere of an
individuals existence. By qualifying the right as such
privacy
as the law allows him
(emphasis added), Corbett JA
acknowledges that the law as it stands embodies a quantification of diverse
interests, ranging
from that of the individual, to those of his fellow community
members. Such an interpretation would accord with the conceptual analysis
advanced
supra.
Such an approach is also supported by
OKeeffe
s
case.
[106]
Similarly the statement of Macdonald JA in
R v
Parker
[107]
that [t]he
procedure laid down in section 102 is exceptional ... and constitutes an inroad
into the right of privacy possessed
by every member of the public,
should be read in the light of his subsequent statement qualifying the scope
thereof to the
reasonable and proper limits of
privacy.
[108]
[71] Caution must be exercised when attempting to project common law principles
onto the interpretation of fundamental rights and
their limitation; it is
important to keep in mind that at common law the determination of whether an
invasion of privacy has taken
place constitutes a single enquiry, including an
assessment of its unlawfulness. As in the case of other
iniuriae
the
presence of a ground of justification excludes the wrongfulness of an invasion
of privacy.
[109]
In constitutional
adjudication under the Constitution, by contrast, a two-stage approach must be
employed in deciding constitutionality
of a statute.
[72] Article 8(1) of the European Convention on Human Rights provides that
everyone has the right to respect for his private
and family life, his
home and his correspondence. This right is limited by article 8(2) on
the basis that interference may
only occur in accordance with the law, and must
be necessary in a democratic society. It is difficult to distinguish clearly
between
the right to private life on the one hand, and the rights belonging to
the private sphere on the other. The commission has however
held that such a
clear delimitation was unnecessary since a complaint concerning violation of the
private sphere could be based on
the provision as a whole. The difficulty that
remains is the determination of the scope of the provision as a
whole
or as it is commonly called the right to
privacy.
[110]
[73] Use of this term has not been unproblematic, since in terms of a resolution
of the consultative Assembly of the Council of Europe
this right has been
defined as follows:
The right to privacy consists essentially in the right to live ones own
life with a minimum of interference. It concerns
private, family and home life,
physical and moral integrity, honour and reputation, avoidance of being placed
in a false light,
non-revelation of irrelevant and embarrassing facts,
unauthorised publication of private photographs, protection from disclosure of
information given or received by the individual
confidentially.
And in the final conclusions of the Nordic Conference on the Right to Respect
for Privacy of 1967 the following additional elements
of the right to privacy
are listed: the prohibition to use a persons name, identity or
photograph without his/her consent,
the prohibition to spy on a person, respect
for correspondence and the
prohibition to disclose official information
.
The Commission has connected the right to privacy of Article 8 also with the
right to freedom of expression of Article 10 by stating
that the concept
of privacy in Article 8 also includes, to a certain extent, the right to
establish and maintain relations
with other human beings for the fulfilment of
ones personality.
[111]
This expansion of the concept by the European Commission is strongly reminiscent
of Forsts explanation,
supra
, as to his use of the concept of
identity, namely that it refers to the ability of a person to
relate to him or herself
and to be able to relate to others in a meaningful
way.
[74] In
Fayed v the United Kingdom
[112]
the investigation
into the affairs of a public company and the subsequent publication of the
Inspectors report by the Secretary
of State for Trade and Industry in
terms of sections 432(2) and 437(3) of the English Companies Act, was considered
by the European
Court of Human Rights in the light of articles 6(1) and 8 of the
European Convention. Article 6(1) embodies the right to a fair and
public
hearing, while article 8 guarantees the right to respect for private life. The
final report of the Inspectors, containing
findings to the effect that the
Fayeds had made dishonest representations in the course of a takeover bid and in
the investigation
itself, was widely reported in the communication media. The
Fayeds were never prosecuted. One of the claims brought to the European
Court by
the applicants was that publication of the Inspectors report had
unjustifiably interfered with their honour and
reputation, protected as part of
their right to respect for private life under article 8 of the Convention.
Although not directly
in point, the judgment of the court dismissing the
complaint contains instructive dicta on privacy and public policy. The court
gave
little attention to whether there had been a facial infringement of any of
the rights and proceeded almost directly to the second
leg of the enquiry, and,
holding that the result would be the same regardless of whether the complaint
was construed as an infringement
of article 6(1) or the article 8 right to
privacy, tested the legitimacy and proportionality of the infringement. In this
context
the court found that:-
[t]he underlying aim of this system is clearly the furtherance of the public
interest in the proper conduct of the affairs of public
companies whose owners
benefit from limited liability ... The system contributes to safeguarding the
interests of various parties
concerned in the affairs of public companies such
as investors, shareholders, especially small shareholders, creditors, customers,
trading partners and employees, as well as ensuring the
structures.
[113]
Regarding the right to a good reputation, the Court remarked that
:
The individuals interest in full protection of his or her
reputation must, to varying extents, yield to the
requirements
of the communitys interest in independent investigation of the affairs
of large public
companies.
[114]
and, more pertinently for present purposes,
that:
... the limits of acceptable criticism are wider with regard to businessmen
actively involved in the affairs of large public companies
than with regard to
private individuals ... Persons, such as the applicants, who fall into the
former category of businessmen inevitably
and knowingly lay themselves open to
close scrutiny of their acts, not only by the press but also and above all by
bodies representing
the public interest ... .
[115]
As will be seen in the following paragraphs, this echoes to some extent the
approach of the US courts in determining the existence
of a reasonable
expectation of privacy, but it must of course be noted that the above
comment was in regard to the
limitation and not the scope of the right in
question.
[75] The question corresponding to determining the scope of the right to
privacy in United States constitutional
inquiry, is whether a search or
seizure has occurred. The US Supreme Court has defined search to
mean a governmental
invasion of a persons privacy and it
has constructed a two part test to determine whether such an invasion has
occurred.
The party seeking suppression of the evidence must establish both that
he or she has a
subjective expectation
of privacy and that the society
has recognized that expectation as
objectively reasonable
. In determining
whether the individual has lost his/her legitimate expectation of privacy, the
court will consider such factors as
whether the item was exposed to the public,
abandoned, or obtained by
consent.
[116]
It must of course be
remembered that the American constitutional interpretative approach poses only a
single inquiry, and does not
follow the two-stage approach of Canada and South
Africa. Nevertheless it seems to be a sensible approach to say that the scope of
a persons privacy extends
a fortiori
only to those aspects in
regard to which a legitimate expectation of privacy can be
harboured.
[76] The Canadian Charter of Rights and Freedoms does not specifically provide
for the protection of personal privacy. As in the
United States the issue arises
in connection with the protection of persons against unreasonable search and
seizure, which in Canada
is afforded by section 8 of the Charter. In defining
the scope of this protection the Canadian Courts have adopted an approach
similar
to that followed in United States jurisprudence. In
McKinley
Transport Ltd et al v The
Queen
[117]
Wilson J quoted
with approval the following exposition of Dickson J in
Hunter et al v Southam
Inc
:
[118]
The guarantee of security from
unreasonable
search and seizure only
protects a
reasonable
expectation. This limitation on the right
guaranteed by section 8, whether it is expressed negatively as freedom from
unreasonable
search or seizure, or positively as an entitlement
to a reasonable expectation of privacy, indicates that an
assessment
must be made as to whether in a particular situation the
publics interest to be left alone by government must give way to
governments interest in intruding on the individuals privacy in
order to advance its goals, notably those of law
enforcement.
Wilson J pointed out
[119]
that one
of the purposes underlying the section 8 right is the protection of the
individuals reasonable expectation
of privacy. Since an enquiry
into privacy constitutes an important component in determining the scope of an
unreasonable
search or seizure, the courts have had to develop a test to
determine the scope and content of the right to privacy. The reasonable
expectation of privacy test comprises two questions. Firstly there must
at least be a subjective expectation of
privacy
[120]
and, secondly, the
expectation must be recognized as reasonable by
society.
[121]
[77] The German Basic Law does not in express terms entrench a general right to
privacy although isolated aspects of privacy are
protected in, for example, Art
4 (freedom of belief), Art 10 (protection of postal communications) and Art 13
(inviolability of the
home). The protection of a general right to privacy has
been developed by the Federal Constitutional Court (FCC) on a case to case
basis.
[122]
It has held that the
constitutional obligation to respect the sphere of intimacy of individuals is
based on the right to the unfettered
development of personality embodied in Art
2(1) of the Basic Law
[123]
and in
determining the content and ambit of this fundamental right, regard must be had
to the inviolability of dignity in terms of
Art 1(1), which must be respected
and protected by the judicial
system.
[124]
Privacy is also
protected out of respect for dignity and this linking up of Art 2(1) and Art 1
results in the limitation provisions
of Art 2(1) being applied more strictly in
the case of infringement of the right to
privacy.
[125]
A very high level of
protection is given to the individuals intimate personal sphere of life
and the maintenance of its basic
preconditions and there is a final untouchable
sphere of human freedom that is beyond interference from any public
authority.
[126]
So much so that,
in regard to this most intimate core of privacy, no justifiable limitation
thereof can take place.
[127]
But
this most intimate core is narrowly construed. This inviolable core is left
behind once an individual enters into relationships
with persons outside this
closest intimate sphere; the individuals activities then acquire a
social dimension and the right
of privacy in this context becomes subject to
limitation.
[128]
[78] In BVerfGE 34, 238 the FCC was concerned with the objection to the
admissibility of secretly made tape recordings indicating
that the complainant
was guilty of fraud and tax evasion. While upholding the objection, the FCC
pointed out that there were circumstances
in which a tape recording made without
the knowledge of the speaker would fall outside the area of protection afforded
by Art 2(1)
read with Art 1(1) -
Because in these cases it is the general consensus that the right to
ones own words no longer enters the question. For example,
insofar as it
has become common practice in commercial dealings to keep a record of telephone
messages, orders or stock-exchange
reports by means of a tape recording, the
right of the speaker to the unfettered development of the personality will,
generally speaking,
not be affected. In communications of this sort the
objective content of the statement is so much in the foreground that the
personality
of the speaker is almost completely obscured by it and the spoken
word thereby loses its private
character.
[129]
In principle this approach resembles the reasonable expectation of
privacy test, referred to above. In German law
when
insolvents
[130]
are examined on
the causes of their insolvency, they are obliged to answer all questions put,
even though the questions might tend
to incriminate them, but the FCC has
however, in its judgments, crafted a use immunity in respect of such answers if
they are sought
to be used against insolvents in subsequent criminal proceedings
against them.
[131]
The
justification for the compulsion is instructive. The nature and extent of the
Art 2(1) right also depends on whether
and to what extent other people
depend on the information provided by the person in question; in particular
whether the information
belongs to a sphere of duties which the person in
question has taken up
voluntarily.
[132]
The
insolvent is regarded as having specific duties towards the creditors, who have
been harmed by his actions;
[133]
there are not only state or public interests at stake but those of third
parties, who have suffered damage and demand
information.
[134]
[79] The German, European and American approach seems to accord with the
analysis attempted above, namely that the nature of privacy
implicated by the
right to privacy relates only to the most personal aspects of a
persons existence, and
not to every aspect within his/her personal
knowledge and experience. The two-stage approach requires, as the first step, a
definition
of the scope of the relevant right. At this stage already, in
defining the right to privacy, it is necessary to recognise that the
content of
the right is crystallized by mutual limitation. Its scope is already delimited
by the rights of the community as a whole
(including its
members).
[80] The facts operative in the present case concern neither the invasion of
private living space, nor any specific protected relationship.
Against the
background of the approach alluded to above, the relevant core to be considered
appears to be the one defining privacy
as inhering in the person, suggested
above.
[135]
[81] The present judgment has been at pains to point out, in the light of
Ferreira v Levin
, that directors, officers of the company generally,
auditors of the company and certain outsiders, have a duty to assist a section
417 enquiry achieve its objects. This duty has been voluntarily assumed by such
persons entering into their respective relationships
with the
company.
[82] Section 417(2) permits interrogation concerning any matter referred to in
section 417(1). The latter section refers to any
director or officer of
the 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 person whom the
Master or the court deems capable of giving information concerning the trade,
dealings, affairs or property of the company. In effect the section
permits questions to be asked in connection with property,
claims or the
trade, dealings, affairs or property of the company. The scope
of the interrogation in terms of section
417(2) of the Act must, however, be
informed by the purpose of the enquiry. In so far as the purpose is concerned
with the discovery
of information which may be to the financial benefit of the
company and relates to the proper winding-up of the company, as more
fully
analysed above, the scope of the questioning is limited to this
purpose.
[83] Although the phrase information concerning the ... affairs ... of
the company appears to be quite broad facially,
it must be construed in
conformity with the aforementioned purpose of the enquiry. It is difficult to
see how any information which
an individual possesses which is relevant to the
purpose of the enquiry can truly be said to be private. One is after all
concerned
here with the affairs of an artificial person with no mind or other
senses of its own; it depends entirely on the knowledge, senses
and mental
powers of humans for all its activities. In the words of Rogers CJ in
Spedly
Securities v Bond Corporation Holdings Ltd
directors and others concerned
with the management and affairs of a failed company (in which category of
persons I would certainly
include the auditors) owe a duty to creditors
and shareholders to provide a candid, full and truthful account of their
stewardship.
[136]
This
duty arises from the very fact that the company has no mental or sensory
capacities of its own.
[84] In this regard I find the following observation of Bryson J in
Lombard
Nash International Pty Ltd v Berentsen
, when made in relation to precisely
this corporate deficiency, acute, sound and
relevant:
the company in a fair sense ought to be thought of as the owner of the knowledge
in their [the officers of the company]
minds.
[137]
If that is so, and I agree that it is for purposes of present analysis, then it
can hardly be said that the knowledge of the director,
official or auditor
bearing relevantly on the affairs of the company that has failed can be said to
fall within such persons
domain of personal privacy. I would hold the
same in relation to a mere debtor or creditor of the company. If such knowledge
is relevant,
it is relevant because of some legal relationship between such
person and the company, which can hardly be said to be
private.
[85] The establishment of a company as a vehicle for conducting business on the
basis of limited liability is not a private matter.
It draws on a legal
framework endorsed by the community and operates through the mobilization of
funds belonging to members of that
community. Any person engaging in these
activities should expect that the benefits inherent in this creature of statute,
will have
concomitant responsibilities. These include, amongst others, the
statutory obligations of proper disclosure and accountability to
shareholders.
It is clear that any information pertaining to participation in such a public
sphere, cannot rightly be held to be
inhering in the person, and it cannot
consequently be said that in relation to such information a reasonable
expectation of privacy
exists. Nor would such an expectation be recognised by
society as objectively reasonable. This applies also to the auditors and
the
debtors of the company. On the facts of this case the conclusion seems to be
unavoidable that no threat to or infringement of
any of the applicants
right to privacy as protected by section 13 of the Constitution has been
established. The application
of the Constitution to the issue of
sufficient cause in the present context would operate as
follows. The first part
of the enquiry is whether answering the particular
question would infringe the applicants right to privacy. If it would,
this would constitute sufficient cause for declining to answer
the question unless the section 418(5)(b)(iii)(aa)
compulsion to answer the
question would, in all the circumstances, constitute a limitation on the right
to privacy which is justified
under section 33(1) of the
Constitution
[86] The applicants further contended that the compulsion to produce documents
in terms of section 417(3) of the Act constitutes
a seizure of private
possessions within the meaning of section 13 of the Constitution. For
the sake of convenience
section 417(3) of the Act is repeated
here:
The Master or the Court may require any such person to produce any books or
papers in his custody or under his control relating to
the company but without
prejudice to any lien claimed with regard to any such books or papers, and the
Court shall have power to
determine all questions relating to any such
lien.
[87] Reference should in this regard also be made to subparagraph
418(5)(b)(iii)(bb), which provides that any person who has been
duly summoned
under section 417 or 418 to an enquiry and
who:-
Fails, without
sufficient cause
... to produce books or papers in his
custody or under his control which he was required to produce in terms of
section 417(3) or
this section, shall be guilty of an offence. (Emphasis added)
[88] It seems to me that this part of the argument must be disposed of in
exactly the same way as the previous argument based on
the general right to
personal freedom in section 13. Sections 417 and 418, and in particular
subparagraph 418(5)(b)(iii)(bb), are
capable of being read down, and must be
read down, in such a way that they do not compel a person to produce books or
papers which
would result in an infringement of such persons section 13
right not to be subject to ... the seizure of private
possessions.... Similarly, nothing could be clearer, in my view, than
that if the production of any book or paper would
infringe the
producers right not to be subject to the seizure of private possessions,
this would, for purposes of the above
provision, constitute sufficient
cause for refusing to produce such books or papers unless such right of
the producer
is subject to limitation under section 33(1) of the Constitution.
In this regard it is also in my opinion the task of the Supreme
Court, in the
first instance, to develop the concept of the right not be subject to the
seizure of private possessions, its content
and limits.
[89] A few general observations may not, however, be out of place. In the normal
course, the section would hardly be used to compel
examinees to produce
private possessions since such possessions would hardly relate
to company affairs. But, in
so far as private books and papers might relate to
the company, the section is open to an interpretation which would permit the
Master
or the court to compel the production of such documents. The compulsion
to produce such private documentation would also constitute
a
seizure within the meaning of section 13 of the Constitution. As
pointed out by some of the Canadian judges referred
to below, no sound
distinction can be made in theory or practice between compelling a person to
produce documentation and the physical
removal of such documentation from a
person. Again the infringement of section 13 would result as an incidental
effect rather than
the purpose of employing sections 417 and 418. Moreover,
examinees could also approach the courts to control oppressive, vexatious
or
unfair use of the section. It is likewise difficult to see how a document which
was truly relevant to the matters legitimately
being examined, could be said to
be a private document.
[90] Even if it could be established that, in certain circumstances, and despite
a proper construction of sections 417 and 418 of
the Act and proper control of
their implementation by the Supreme Court, the production of private possessions
or private communications
could be compelled under section 417(3) or 418(2) of
the Act, and in particular that they were relevant to the enquiry and the
achievement
of its objects, in the sense that I have outlined in this judgment,
such production would clearly be justifiable in terms of section
33 of the
Constitution. In South Africa, the right not to be subjected to seizure of
private possessions forms part of every persons
right to personal
privacy. The right against seizure must therefore be interpreted in the light of
the general right to personal
privacy. So much is also clear from the
qualification of the right, ie the right against seizure of
private
possessions. I have repeatedly emphasised that privacy concerns are only
remotely implicated through the use of the enquiry. The
publics interest
in ascertaining the truth surrounding the collapse of the company, the
liquidators interest in a
speedy and effective liquidation of the
company and the creditors and contributors financial interests
in the recovery
of company assets must be weighed against this, peripheral,
infringement of the right not to be subjected to seizure of private possessions.
Seen in this light, I have no doubt that sections 417(3) and 418(2) constitute a
legitimate limitation of the right to personal privacy
in terms of section 33 of
the Constitution.
[91] The US Supreme Court has held that corporate officers cannot invoke the
protection which the Fourth Amendment affords against
searches and seizures. In
Hale v Henkel
the Court stated:
Upon the other hand, the corporation is a creature of the State. It is presumed
to be incorporated for the benefit of the public.
It receives certain special
privileges and franchises, and holds them subject to the laws of the State and
the limitations of its
charter. Its powers are limited by law. It can make no
contract not authorized by its charter. Its rights to act as a corporation
are
only preserved to it so longs as it obeys the laws of its creation. There is a
reserved right in the legislature to investigate
its contracts and find out
whether it has exceeded its powers. It would be a strange anomaly to hold that a
State, having chartered
a corporation to make use of certain franchises, could
not in the exercise of its sovereignty inquire how these franchises had been
employed, and whether they had been abused, and demand the production of the
corporate books and papers for that
purpose.
[138]
The Court also held as follows:
We think it quite clear that the search and seizure of the Fourth Amendment was
not intended to interfere with the power of the court
to compel, through a
subpoena duces tecum
, the production, upon a trial in court, of
documentary
evidence.
[139]
[92] It is, as already indicated, notionally possible that under sections 417(3)
and 418(2) of the South African Companies Act the
production of documents which
are not company documents or records in the strict sense might be compelled.
Nevertheless, provided
the documents were relevant to any legitimate enquiry
under section 417, their compelled production would be justified for the very
same reason that the compelled answers to similarly relevant questions would be
justified. Sections 417 and 418 of the Act are accordingly
not inconsistent with
any of the section 13 rights.
The alleged violation of
section 24 of the Constitution
[93] Section 24 of the Constitution reads:
Every person shall have the right to -
(a) lawful administrative action where any of his or her rights or interests is
affected or threatened;
(b) procedurally fair administrative action where any of his or her rights or
legitimate expectations is affected or
threatened;
(c) be furnished with reasons in writing for administrative action which affects
any of his or her rights or interests unless the
reasons for such action have
been made public; and
(d) administrative action which is justifiable in relation to the reasons given
for it where any of his or her rights is affected
or
threatened
It was submitted in this regard that the whole mechanism set up by sections 417
and 418 of the Act violates section 24 in that it
permits an inquiry in
violation of paragraphs (b) and (c) of section 24. Both paragraphs are triggered
when someones rights
are affected by
administrative action. Paragraph (b) is also triggered whenever
someones
rights are threatened or
legitimate expectations are affected or
threatened.
Paragraph (c) is also triggered whenever someones
interests are affected.
[94] There is certainly an argument to be made for the proposition that
enquiries conducted pursuant to the provisions of sections
417 and 418 of the
Act and the performance by Commissioners of their duties to report thereunder
constitute administrative action
within the meaning of section 24 of the
Constitution. The Court of Appeal in England in the
Pergamon Press
case
[140]
a decision relied upon
by Mr
Marcus
, held that enquiries of this kind, although merely
investigative in nature, do adversely impact on the rights and interests of the
witness and accordingly have to be conducted in accordance with the principles
of natural justice. Lord Denning said the following
in this
regard:
It is true, of course, that the inspectors are not a court of law. Their
proceedings are not judicial proceedings: see
Re Grosvenor & West End
Railway Terminus Hotel Co Ltd
(1897) 76 LT 337.
They are not even
quasi-judicial, for they decide nothing; they determine nothing. They only
investigate and report. They sit in
private and are not entitled to admit the
public to their meetings: see
Hearts of Oak Assurance Co Ltd v
Attorney-General
[1932] A.C. 392.
They do not even decide whether there is a
prima facie case, as was done in
Wiseman v Borneman
[1971] A.C.
297.
But this should not lead us to minimise the significance of their task. They
have to make a report which may have wide repercussions.
They may, if they think
fit, make findings of fact which are very damaging to those whom they name. They
may accuse some; they may
condemn others; they may ruin reputations or careers.
Their report may lead to judicial proceedings. It may expose persons to criminal
prosecutions or to civil actions. It may bring about the winding up of the
company, and be used itself as material for the winding
up: see
Re SBA
Properties Ltd
[1967] 1 WLR 799.
Even before the inspectors make their
report, they may inform the Board of Trade of facts which tend to show that an
offence has
been committed: see section 41 of the Act of 1967. When they do make
their report, the Board are bound to send a copy of it to the
company; and the
board may, in their discretion, publish it, if they think fit, to the public at
large.
Seeing that their work and their report may lead to such consequences, I am
clearly of the opinion that the inspectors must act fairly.
This is a duty which
rests on them, as on many other bodies, even though they are not judicial, nor
quasi-judicial, but only administrative:
see
Reg. v Gaming Board for Great
Britain, Ex parte Benaim and Khaida
[1970] 2 QB
417.
[141]
Sachs LJ expressed himself as follows:
The nature of the proceeding, the purposes for which the reports may be used,
the matter which may be found in them and the extent
of the publication being
respectively as described, it seems to me, as well as to Lord Denning MR, very
clear that in the conduct
of the proceedings there must be displayed that
measure of natural justice which Lord Reid in
Ridge v Baldwin
[1964] AC
40
at 65, described as insusceptible of exact definition, but what a
reasonable man would regard as fair procedure in particular
circumstances. . .
. To come to that conclusion it is, as recent decisions have shown, not
necessary to label the proceedings
judicial,
quasi-judicial, administrative or
investigatory: it is
the characteristics of the proceeding that
matter, not the precise compartment or compartments into which it falls - and
one of the
principal characteristics of the proceedings under consideration is
to be found in the inspectors duty, in their statutory
fact-finding
capacity, to produce a report which may be made public and may thus cause severe
injury to an individual by its
findings.
[142]
[95] I have no quarrel with the judgment, as far as it goes. But the problem
which faced the Court of Appeal in the
Pergamon Press
case differs from
the problem confronting us. In that case the issue was whether, at common law,
the inspectors conducting the enquiry
had to act in accordance with the
principles of procedural fairness. For this reason it was unnecessary for the
Pergamon
court to characterize the nature of the proceedings. On Mr
Marcus
argument it is essential for us to do so, for the issue
before us is not the common law one, but the constitutional question
as to
whether paragraphs (b) and (c) of section 24 of the Constitution apply to an
enquiry under sections 417 and 418 of the Act.
They only apply if the nature of
the enquiry is characterized as being administrative action
because it is only in
relation to administrative action that
section 24 rights arise.
[96] I have difficulty in seeing how the enquiry in question can be
characterized as administrative action. It forms an intrinsic
part of the
liquidation of a company, in the present case the liquidation of a company
unable to pay its debts. Cilliers, Benade
et al succinctly describe the role of
winding-up or liquidation as follows:
The existence of a company as a separate legal entity, which commences upon its
incorporation, is terminated by dissolution of the
company. In the course of its
existence, however short, the company may have acquired rights and incurred
liabilities which have
to be dealt with before the companys existence
can be terminated by dissolution. The process of dealing with or administering
a
companys affairs prior to its dissolution by ascertaining and realising
its assets and applying them firstly in the payment
of creditors of the company
according to their order of preference and then by distributing the residue (if
any) among the shareholders
of the company in accordance with their rights, is
known as the winding-up or liquidation of the
company.
[143]
(Footnotes
omitted)
In
Woodley v Guardian Assurance Co of SA
Ltd
[144]
Colman J, commenting
on the similarity between insolvency and liquidation, said the
following:
I would go further and suggest that it is socially desirable that, as far as is
practicable, all the consequences of the liquidation
of an insolvent company
should be similar to those [of] the insolvency of an individual ... The
winding-up of a company unable to
pay its debts is something closely akin to the
winding-up of the estate of an insolvent
individual.
[145]
[97] The enquiry in question is an integral part of the liquidation process
pursuant to a court order and in particular that part
of the process aimed at
ascertaining and realising assets of the company. Creditors have an interest in
their claims being paid and
the enquiry can thus at least in part, be seen as
part of this execution process. I have difficulty in fitting this into the mould
of administrative action. I also have some difficulty in seeing how section
24(c) of the Constitution can be applied to the enquiry,
because it is hard to
envisage an administrative action taken by the Commissioner in
respect whereof it would make
any sense to furnish reasons. The enquiry after
all is to gather information to facilitate the liquidation process. It is not
aimed
at making decisions binding on others.
[98] Section 7(1) of the Constitution provides that Chapter 3 (and thus also
section 24) binds all legislative and executive
organs of state at all
levels of government. I again have difficulty in seeing how a
commissioner, appointed to conduct a
section 417 enquiry, can be described as an
executive organ of state. This observation does not, and is not intended to,
anticipate
the issue of the so-called horizontal application of
Chapter 3 in legal proceedings between individuals, an issue
which is currently
under consideration by this Court.
[99] It is in my view unnecessary, however, in the circumstances of this case,
to provide an answer to the question and to decide
whether section 24, or any
part thereof, applies to section 417 and 418 enquiries and whether it applies to
all such enquiries, whether
conducted by the court, the Master or the
commissioner.
[146]
It is
unnecessary, in my view, because even assuming that the enquiry constitutes
administrative action, this does not assist the
applicants in establishing that
the provisions of sections 417 and 418 are inconsistent with section 24(b) or
(c) of the Constitution.
[100] The applicants say they are entitled to procedural fairness in terms of
section 24(b) of the Constitution. Assuming that to
be so, I can see nothing in
any of the provisions of section 417 or 418 which is inconsistent (either
expressly or by implication)
with such claim. If the applicants are entitled to
procedural fairness and were not accorded such fairness by the commissioner,
their
remedy was to enforce this claim through the ordinary
courts.
[101] The applicants also contend that they should at least have been
afforded:-
(a) disclosure in terms of sections 24(b) and (c) of the reasons why they were
being summonsed, to have enabled them to make meaningful
representations to the
court, the Master or the Commissioner to dispense with their evidence or to test
the decision to summons them
by appeal or review, if need be; and
(b) disclosure in terms of section 24(b) of the information required from them,
to enable them to avoid interrogation by furnishing
the requested information,
requested, or to prepare for their interrogation, if need
be.
Once again I see nothing in the provisions of section 417 or 418 which stands in
the way of this claim (assuming the applicants to
be entitled to this demand)
which they could not have sought to enforce through the ordinary courts. The
position, as I see it, is
simply this: there is nothing in these sections which
is inconsistent with sections 24(b) or (c) of the Constitution or the
applicants
claims. If applicants have a remedy, and I express no opinion
on that question, it lies along another course and in other courts;
it does not
lie in striking down these sections in this Court.
The
attack based on the right to fairness in civil litigation
[102] The applicants contend that the mechanism under section 417 and
particularly the second part of section 417(2)(b), violates
the Constitution to
the extent that it enables the liquidator and creditors of a company in
liquidation, to gain an unfair advantage
over their adversaries in civil
litigation, in violation of an implied constitutional right to fairness in civil
litigation.
[103] The appellants argument proceeds as follows. The right of access
to the courts is constitutionally entrenched. In terms
of section 22 of the
Constitution, every person has the right to have justiciable disputes
settled by a court of law or,
where appropriate, another independent and
impartial forum. Where an infringement of or threat to any entrenched
right is
alleged, the victim is moreover entitled in terms of section 7(4)(a)
to apply to a competent court of law for appropriate
relief ....
These provisions do not expressly provide for a fair trial, but imply it. The
right of access to court cannot
mean simply the right to formally engage in a
judicial process, however unfair it might be. In order to have substance and be
meaningful,
the right of access to court must imply the right of access to a
fair judicial process. Because the parties in civil litigation usually
seek to
enforce claims for payment of money or delivery of some other form of property,
the civil judicial process is used to deprive
an adversary of property despite
its protection by section 28 of the Constitution. Other civil claims requiring
the defendant to
do or refrain from doing something will invariably bring into
play other constitutionally entrenched rights. Consequently, because
civil
litigation is almost invariably directed at intrusion upon the parties
constitutionally protected rights, they are
entitled to demand that the process
by which it is done, be procedurally fair. If not, the deprivation of the
entrenched right is
unconstitutional. The need for civil judicial process to be
fair is emphasised by the Constitutions insistence that the judiciary
be
independent and impartial,
[147]
the prescribed oath of
office,
[148]
and the endorsement
by the General Assembly of the United Nations of the principle that the
judiciary should be independent and
impartial.
[149]
[104] These submissions seem to rest on the far-reaching assumption (to which,
perhaps not surprisingly, no argument was addressed)
that all the rights
entrenched in the Constitution operate directly and immediately on all legal
relationships between private individuals.
This is certainly not the case in
which to pronounce on this contention. I shall assume, purely hypothetically, in
the applicants
favour, that this assumption is sound.
[105] The applicants attack in this regard fails to address the really
crucial issue, namely, whether the Constitution has
constitutionalised civil
procedure, wholly or in part. No-one would dispute that civil procedure ought to
aim at fairness between
contending parties. That is, however, not the issue. The
question is whether the Constitution enacts such a norm as an entrenched
right.
Over the years our courts have consistently adopted the view that words
cannot be read into a statute by implication
unless the implication is a
necessary one in the sense that without it effect cannot be given to the statute
as it stands.
[150]
It must
be necessary in order to realise the ostensible legislative intention or
to make the Act
workable.
[151]
It is also
necessary to bear in mind that we are not construing a Constitution which was
framed centuries ago, but one which came
into force on 27 April 1994. The
Constitution as a whole and section 22 in particular, appears to be workable and
to realise the
ostensible legislative intention, without the implication the
appellants seek to rely upon. When section 22 is read with section
96(2), which
provides that [t]he judiciary shall be independent, impartial and
subject only to this Constitution and the
law, the purpose of section 22
seems to be clear. It is to emphasise and protect generally, but also
specifically for the
protection of the individual, the separation of powers,
particularly the separation of the judiciary from the other arms of the state.
Section 22 achieves this by ensuring that the courts and other fora which settle
justiciable disputes are independent and impartial.
It is a provision
fundamental to the upholding of the rule of law, the constitutional state, the
regstaatidee, for
it prevents legislatures, at whatever level,
from turning themselves by acts of legerdemain into courts. One
recent
notorious example of this was the High Court of Parliament
Act.
[152]
By constitutionalising
the requirements of independence and impartiality the section places the
nature
of the courts or other adjudicating fora beyond debate and avoids
the dangers alluded to by Van den Heever JA in the
Harris
case.
[153]
[106] A provision cannot ordinarily be implied if all the surrounding
circumstances point to the fact that it was deliberately omitted.
That the
framers of the Constitution were alert to issues of constitutionalising rules of
procedural law and justice is evident from
the detailed criminal fair trial
provisions in section 25(3). The internal evidence of the Constitution itself
suggests that the
drafters were well informed regarding provisions in
international, regional and domestic human and fundamental rights instruments.
Section 6 of the European Convention on Human Rights explicitly confers the
right to a fair and public hearing, not only in a criminal
trial, but also in
regard to the determination of civil rights and
obligations.
[154]
Nearer home,
article 12(1)(a) of the Namibian Constitution expressly provides that
[i]n the determination of their civil
rights and obligations ... all
persons shall be entitled to a fair and public hearing by an independent,
impartial and competent
Court or Tribunal established by law .... In
these circumstances an argument could be made out that the framers deliberately
elected not to constitutionalise the right to a fair civil trial. It is,
however, unnecessary for purposes of deciding the present
case to decide this
issue. The only complaint that the applicants have raised on the fair trial
issue is that the provisions of sections
417 and 418 result in their being
treated unequally in respect of subsequent litigation between themselves and the
company. This
in substance raises an equality issue which is best dealt with as
such.
The attack based on the right to equality in terms
of section 8
[107] The applicants submit that the mechanism under section 417 of the Act, and
in particular, that part of section 417(2)(b) which
provides that any answer
given to any question at an enquiry may thereafter be used against the examinee,
violates the Constitution
to the extent that it enables the liquidator and
creditors of a company in liquidation, to gain an unfair advantage over their
adversaries
in civil litigation in violation of the right to equality in terms
of section 8.
[108] In
Ferreira v
Levin
[155]
the abovementioned
part of section 417(2)(b) was declared invalid to the extent that it provided
that an incriminatory answer could
be used in criminal proceedings against the
examinee,
[156]
but the
constitutionality of the use of such answer in civil proceedings against the
examinee was left
open.
[157]
[109] It was submitted on behalf of the applicants that sections 417 and 418 of
the Act permit the liquidator and creditors of the
company in liquidation to
invoke the inquiry mechanism with a view to civil litigation which is
contemplated or even pending and
that they are entitled to do so in order to
decide whether to institute or continue with the litigation. Thus far the
submission
is unexceptionable.
[110] It continues, however, by propounding that the impugned sections enable
the liquidator and creditors to get a complete preview
of their
opponents case and to ensnare the latters witnesses in a
procedure devoid of the normal mechanisms designed
to identify and define
issues, prepare for trial and receive meaningful legal advice on all stages of
the process. In this way, so
the argument continues, the liquidator and
creditors are afforded an overwhelming advantage in civil litigation, that they
would
never have enjoyed but for the companys liquidation, which
inequality offends section 8 of the Constitution.
[111] I would, by way of preliminary observation, point out once again that the
latter part of the submission ignores the supervisory
roll of the Supreme Court
to ensure that the examination is not conducted oppressively, vexatiously or
unfairly to which I have made
reference more than once in this
judgment.
[112] Nevertheless it is true to say that liquidators are by means of this
mechanism, entitled to examine their opponents in civil
litigation (actual or
prospective) or their opponents witnesses or recalcitrant potential
witnesses and to obtain discovery
of documents from such persons at a time and
in a way not open to their opponents or prospective opponents. The question is
whether
this consequence offends section 8 of the
Constitution.
[113] In my opinion the enquiry is concerned with investigating whether the
right to equality before the law in section
8(1) is compromised
by the statutory mechanisms in question. Adopting an approach similar to that of
Didcott J in giving judgment
for this Court in
S v
Ntuli
,
[158]
I consider it
unnecessary for present purposes to consider the question whether subsections
(1) and (2) of section 8 embody separate
rights, or to look at the prohibition
against unfair discrimination which subsection (2) pronounces or to consider
whether the latter
is an independent provision or a corollary or concretization
of the former. I also consider it unnecessary to consider the relationship
between the right to equality before the law and the right to equal protection
of the law in section 8(1).
[114] No example, foreign or otherwise, was cited to us where, by way of
legislation or judicial pronouncement, the use in civil
proceedings of compelled
testimony in interrogation proceedings analogous to those under sections 417 and
418 of the Act, has been
prohibited.
[115] At English common law the privilege against self-incrimination does not
protect witnesses from answering questions which might
have the effect of
exposing them to civil
liability.
[159]
The privilege
against self-incrimination has been specifically abrogated in bankruptcy
proceedings by rule 6.175 of the Insolvency
Rules 1986 which provides that at
public examinations the bankrupt is required to answer all questions put by the
court or which
the court allowed to be put and, by virtue of section 433 of the
Insolvency Act 1986, the written record of a bankrupts public
examination could then be used in evidence in any proceedings against
him.
[160]
[116] In Australia the possible liability of accountants to the company based on
the negligent preparation of a financial report
has been held to be a legitimate
subject of the enquiry and there is no objection in principle to the use of
section 597 of the Australian
Corporations Law to obtain information to be used
in litigation proposed or even
pending.
[161]
[117] In Canada questions concerning the use of forced testimony in civil
proceedings do not really arise. The reason for this is
that the privilege
against self-incrimination has been comprehensively replaced in that country
with a use immunity. There is indeed
very little room for reliance on the
privilege against self-incrimination at all in Canada. Section 5(1) of the
Canada Evidence Act
[162]
makes it very clear that no witness shall be excused from answering any
question on the ground that the answer may tend to
incriminate him, or may tend
to establish his liability to a civil proceeding at the instance of the Crown or
any person.
In exchange, a use immunity in respect of criminal
proceedings is granted by section 5(2). Section 13 of the Charter, similarly,
only confers a use immunity in relation to other proceedings
where there is a possibility of incrimination, ie proceedings
with penal
consequences.
[163]
[118] The position seems to be the same in the United States at least in so far
as a use immunity is conferred on examinees. That
is, the use immunity merely
protects the examinee from use and derivative use in subsequent criminal
proceedings. United States Bankruptcy
matters are regulated by the Bankruptcy
Reform Act of 1978. The Federal Rules of Bankruptcy Procedure, Rule 2004
provides for the
examination of persons with information relating to a
bankruptcy. The scope of the examination is extremely broad and wide-ranging.
The Fifth Amendment privilege applies in respect of the examination, but section
6003 of Title 18 of the United States Code provides
that a court may issue an
order compelling a witness to testify even when the Fifth Amendment privilege
against self-incrimination
is claimed. Part V of Title 18 governs the granting
of immunity to witnesses before Federal tribunals, including administrative and
some independent federal agencies. Section 6002 then provides for immunity from
prosecution in the following way:
... the witness may not refuse to comply with the order on the basis of his
privilege against self-incrimination; but no testimony
or other information
compelled under the order (or any information directly or indirectly derived
from such testimony or other information)
may be used
against the witness in
a criminal case
, except a prosecution for perjury, giving a false statement,
or otherwise failing to comply with the order. (Emphasis
added)
[119] The constitutionality of Title 18 of the US Code was clearly established
by the Supreme Court in
Kastigar et al v United
States
.
[164]
The court, in
considering the constitutionality of the Organized Crime Control Act of 1970, of
which part V of Title 18 is a part,
held that the government may compel
testimony from a witness who invokes the Fifth Amendment by conferring on the
witness use and
derivative use immunity in criminal proceedings
only.
[120] There is accordingly no indication that the use of compelled testimony in
civil proceedings is prohibited or held to be unconstitutional
in other open and
democratic societies based on freedom and equality.
[121] Turning them to principle and the application of section 8(1) of the
Constitution, I fail to see how the applicants
submission can be
sustained. As I have endeavoured to show in this judgment, the very purpose of
the proceedings under sections 417
and 418 of the Act is in order to provide the
company with information about itself, its own affairs, its own claims and its
own
liabilities, which it cannot get from its erstwhile brain
and other sensory organs or other persons
who have a public duty
to furnish such information but are unwilling or reluctant to do so fully and
frankly. I remain alive to the
thrust of the applicants argument that,
as erstwhile auditors of the company, they co-operated fully and were at all
times
prepared to co-operate fully with the liquidators and their legal and
other advisors to supply all relevant information required.
If in the light
hereof it was oppressive, or vexatious or unfair to summons or interrogate the
applicants in the way they were summoned
or interrogated, their remedy was, as I
have repeatedly stated, to approach the Supreme Court. Their alleged harassment
and unfair
treatment would not be in consequence of the substantive content of
the provisions of sections 417 and 418 of the Act, but the result
of their
improper application.
[122] As I see the matter, neither the purpose nor the effect of sections 417 or
418, is to place the company in a better position
than its debtors or creditors.
The purpose is the opposite, namely to place the company in liquidation (because
of its resulting
disabilities) on such a footing that it can litigate on equal
terms with its debtors and creditors. Sections 417 and 418 do not result
in the
applicants being denied the section 8(1) right to equality or the equal
protection of the law or the section 8(2)
right not to be unfairly
discriminated against. These sections are not inconsistent with section 8 and
accordingly the applicants
attack on this ground cannot
succeed.
[123] The applicants discrete and narrow challenge of section 417(2)(b)
on the basis that it authorises the use of compelled
self-incriminating
testimony at the enquiry in subsequent criminal proceedings against the examinee
would, in the light of the judgment
in
Ferreira
v Levin
,
have been successful to the extent found and ordered in that judgment. No point
would be served by repeating that order.
Costs
[124] As far as the question of costs is concerned the applicant is not, for the
same reasons mentioned in
Ferreira v Levin (No
2)
,
[165]
substantially
successful, for the extent to which section 417(2)(b) of the Act is
unconstitutional does not achieve anything for
the applicant in his dispute with
the respondents, for he is obliged to answer all questions otherwise lawfully
put to him even if
the answers thereto might tend to incriminate him. The
respondents, it is true, have successfully opposed all other grounds of attack
on the constitutionality of sections 417 and 418 of the Act. But in this case
too, the respondents did nothing to oppose the referral
of the other issues to
this Court; in fact they consented to the referral. Had the matter been opposed
and full argument addressed
to Fagan DJP, the other issues might not have been
referred.
[166]
Under these
circumstances justice and fairness would also best be served in this case if all
the parties were to pay their own costs.
The order
[125] In the result, the following order is
made:
1. Save to the extent that the provisions of section 417(2)(b) of the Companies
Act 61 of 1973 (as amended) were declared to be
invalid by this Courts
order of 6 December 1995 in
Ferreira v Levin NO and Others, Vryenhoek and
Others v Powell NO and Others
(CCT 5/95), the provisions of sections 417 and
418 of the Companies Act are declared to be not inconsistent with the
Constitution
of the Republic of South Africa Act, 200 of 1993 (as
amended).
2. All the parties are to pay their own
costs.
Chaskalson P, Mahomed DP, Madala J, Langa
J, Mokgoro J, Ngoepe AJ and Sachs J concur in the above judgment of Ackermann
J.
[126]
KRIEGLER J
: I have had the privilege of studying the learned and
comprehensive judgment prepared in this matter by my colleague Ackermann J.
I
concur in the order as formulated by him; I also subscribe to his rejection of
each of the lines of attack on the constitutional
validity of the sections in
question.
[1]
Although I am in
substantial agreement with my colleague, I do wish to reserve my position in
respect of those parts of his reasoning
which I specify
below.
[127]
AD paragraphs [17] to [34]
The differences between our Companies Act and those of the countries reviewed
are so material that I prefer to seek no guidance in
those
quarters.
[2]
In any event
Ackermann J expresses views (in paragraphs [46] and [47] of his judgment)
regarding the power and duty of the Supreme
Court, at common law and now under
Chapter 3 of the Constitution, which in my respectful view are dispositive.
Consequently I prefer
to base my concurrence solely on the reasoning contained
in paragraphs [46] and [47].
[128]
The attack based on section 11(1) of the Constitution
In
Ferreira v Levin
[3]
there was a difference of opinion as between my colleagues regarding the content
and scope of the right to freedom and security
of the person
contained in section 11(1) of the Constitution, as also regarding its
applicability to section 417(2)(b) of
the Companies Act. The line I took
rendered it unnecessary to participate in that debate. The issue arises again in
the present case,
Ackermann J accepting, albeit for the time being, the majority
view in
Ferreira v Levin
. My colleague ORegan J, who had reserved
her position in relation to the purview of section 11(1) in that case, has now
prepared
a judgment in the instant case making plain why, and to what extent,
her perception of the particular part of section 11(1) differs
from that of the
majority in
Ferreira v Levin
. I adhere to the view I expressed in that
case.
[4]
It is only if and
when the production of evidence obtained pursuant to a section 417 enquiry
jeopardizes the fairness of
the trial that the Constitution can be
invoked. That however, does not stand in the way of my endorsing what
Ackermann J
says in paragraphs [51] to [55] of his judgment in this case.
Whatever the scope and content of section 11(1) may be, and whatever
my view on
the standing of an examinee under section 417 to invoke constitutional
protection under section 25(3), I concur with the
reasoning and conclusion of
Ackermann J in relation to the argument advanced on behalf of the applicants
under the rubric of section
11(1).
[129]
The attack based on section 13 of the Constitution
Ackermann J deals with this topic in paragraphs [56] to [92] of his judgment. He
commences with a discussion of the impact of sections
35(2) and 35(3) of the
Constitution on the proper interpretation and application of the sections. This
leads him to the conclusion
(in paragraph [64] of the judgment) that
there is no provision in section 417 or section 418 which, when properly
construed
in the light of sections 35(2) and (3) of the Constitution, is
inconsistent with such right. I agree with that conclusion
and with the
reasoning on which it is based. I also agree with the extension of that
reasoning (in paragraph [92] of the judgment)
to the compulsory production of
documents relevant to a legitimate enquiry under section
417.
[130] In paragraphs [65] to [97], however, my colleague conducts an
investigation of privacy, a concept which he aptly calls amorphous
and
elusive. In the course thereof he also considers the related question,
equally vexing, of seizure of private possessions.
I have no doubt that the
research and analysis he has done will in due course prove invaluable, but at
this juncture I do not consider
it necessary to accompany him. And considering
it unnecessary, it is necessary that I do not do so. I am content to rest with
the
conclusion founded on a proper reading of the sections in the light of the
provisions of sections 35(2) and (3) of the Constitution.
[131]
The attack based on section 24 of the Constitution
My learned colleague addresses this topic in paragraphs [93] to [101] of his
judgment, concluding that there is nothing in the sections
which is inconsistent
with the protection of procedural fairness contained in sections 24(b) or (c) of
the Constitution. I agree
with that conclusion and with the foundational reasons
set out in paragraphs [100] and [101] of the judgment. Properly applied,
the
mechanism of the sections should entail no unfairness; if its improper
application threatens to do so, the Supreme Court can
intervene
prophylactically. I would, however, prefer not to endorse the doubts expressed
by Ackermann J (in paragraphs [96] to [98]
of his judgment) on the question
whether an enquiry under the sections is administrative action
as contemplated by
section 24 of the Constitution. Nor do I wish to commit
myself to agreeing, if only with a doubt, as to whether a commissioner appointed
under section 417 is an executive organ of state. My esteemed colleagues
misgivings may be well founded, but I wish to reserve
my judgment on the two
points for the day when either may be decisive.
[132]
The attack based on section 8 of the Constitution
With regard to this aspect of the case (dealt with in paragraphs [107] to [122]
of the judgment of Ackermann J) my approach is much
the same as it was regarding
the section 11(1) attack. I agree with the conclusion; I agree with the
identification and logical analysis
of the principle involved (in paragraphs
[121] and [122]) but prefer to express no view on the possible lessons to be
learnt from
other jurisdictions. That I do, not because of a disregard for
section 35(1) of the Constitution, nor in a spirit of parochialism.
My reason is
twofold. First, because the subtleties of foreign jurisdictions, their practices
and terminology require more intensive
study than I have been able to conduct.
Even on a superficial view, there seem to me to be differences of such substance
between
the statutory, jurisprudential and societal contexts prevailing in those
countries and in South Africa as to render ostensible analogies
dangerous
without a thorough understanding of the foreign systems. For the present I
cannot claim that degree of proficiency. In
any event the logical analysis by
Ackermann J of the interaction between the sections and the constitutional
provisions sought in
aid is really dispositive of the claim.
[133] The second reason is that I wish to discourage the frequent - and, I
suspect, often facile - resort to foreign authorities.
Far too
often one sees citation by counsel of, for instance, an American judgment in
support of a proposition relating to our Constitution,
without any attempt to
explain why it is said to be in point. Comparative study is always useful,
particularly where courts in exemplary
jurisdictions have grappled with
universal issues confronting us. Likewise, where a provision in our Constitution
is manifestly modelled
on a particular provision in another countrys
constitution, it would be folly not to ascertain how the jurists of that country
have interpreted
their
precedential provision. The prescripts of section
35(1) of the Constitution are also clear: where applicable, public international
law in the field of human rights must be considered, and regard may be had to
comparable foreign case law. But that is a far cry
from blithe adoption of alien
concepts or inapposite precedents. My colleague has been at pains to discern the
principles applied
by comparable courts in foreign jurisdictions, to establish
whether they can be applied here and, if so, to what extent and subject
to what
modifications. That is what section 35(1) of the Constitution enjoins and sound
comparative law study dictates. It is merely
because I have not independently
verified the exercise, that I refrain from concurring.
Didcott J concurs in the above judgment of Kriegler
J.
[134]
OREGAN J:
I have had the opportunity of reading the
judgment of Ackermann J. I concur in the order that he proposes for the reasons
given in
this judgment. The facts in this case are set out in the judgment of
Ackermann J.
[135] The applicants challenge sections 417 and 418 on the grounds that the
procedure authorised by those provisions violates the
right to freedom and
security of the person (section 11(1)); the right to personal privacy (section
13); the right to administrative
justice (section 24); an implied right to
fairness in civil litigation and the equality guarantee (section 8). This
judgment is concerned,
in the main, with the challenge based on
section 11(1).
[136] The applicants pointed to the following aspects of sections 417 and 418
examinations which they argued render such examinations
unconstitutional.
Witnesses before such enquiries may be
Χ forced to go to a place where they do not want to be;
Χ forced to produce private books and documents that they want to keep
confidential;
Χ forced to reveal confidential information that they want to keep
private;
Χ forced to give evidence by the production of documents and by their own
oral testimony, by which they incriminate themselves,
and which can then be used
to vest them with civil liability;
Χ forced to do so without being heard on the decision which subjected them
to the mechanism;
Χ forced to do so in circumstances which render meaningful and effective
legal representation all but impossible; and
Χ exposed to civil liability on their own evidence, extracted under legal
compulsion in a process devoid of the normal checks
and balances built into
litigation.
[137] Section 417 of the Act has already been the subject of constitutional
challenge before this court. In
Ferreira v Levin NO and Others
1996 1
BCLR 1
(CC), this court held that the provisions of section 417(2)(b) of the Act
were invalid to the extent that the words
`and any answer given to any such question may thereafter be used in evidence
against him' in section 417(2)(b) apply to the use
of any such answer against
the person who gave such answer, in criminal proceedings against such person,
other than proceedings where
that person stands trial on a charge relating to
the administering or taking of an oath or the administering or making of an
affirmation
or the giving of false evidence or the making of a false statement
in connection with such questions and answers or a failure to
answer lawful
questions fully and satisfactorily. (At para
157.)
[138] The applicants argued that the obligation placed upon witnesses to go to
an enquiry and give evidence and produce documents
at that enquiry against their
will, which may result in exposing those witnesses to civil liability, was in
breach of section 11(1)
of the Constitution. Section 11(1) of the Constitution
provides that:
Every person shall have the right to freedom and security of the person, which
shall include the right not to be detained without
trial.
[139] In
Ferreira v Levin NO and Others
1996 1 BCLR 1
(CC), two judges of
this court held that the portion of section 417(2)(b) which provided that
incriminating evidence given by a witness
at a section 417 enquiry would be
admissible in a subsequent prosecution of such witness was in breach of section
11(1). Ackermann
J held that freedom as entrenched in section 11(1) should be
interpreted as follows:
Although freedom is indispensable for the protection of dignity, it has an
intrinsic constitutional value of its own. It is likewise
the foundation of many
of the other rights that are specifically entrenched. Viewed from this
perspective, the starting point must
be that an individuals right to
freedom must be defined as widely as possible, consonant with a similar breadth
of freedom
for others. (At para 49.)
Later in the judgment he states that:
Even though the freedom rights in section 11(1) are residual freedom rights,
there is no justification for not giving these residual
freedom rights the broad
and generous interpretation I have suggested. They constitute the residual
rights of individuals (where
such or similar rights are not protected elsewhere
in Chapter 3) not to have obstacles to possible choices and
activities
placed in their way by (for present purposes we need not, as
already indicated, go any further) the State. (At para
69.)
Ackermann J held that the challenged portion of section 417(2)(b) restricted the
choices available to witnesses at a section 417
enquiry in breach of section
11(1). Such limitation he found not to be justifiable in terms of section
33.
[140] Sachs J agreed that the challenged portion of section 417(2)(b) offended
against section 11(1) of the Constitution although
he approached section
11(1) somewhat differently to Ackermann J:
The words of section 11 should then be construed in such a manner as to provide
constitutionally defensible space against invasions
of freedom of a kind
analogous in character and intensity to the imposition of physical restraint.
Legal traditions, both positive
and negative, would help to define what this
analogous or penumbral area would include: legal institutions developed and
applied
in the past with a view to curtailing abusive State action, would
readily fit; similarly, negative memories of past oppressive State
behaviour in
our country and elsewhere, would help define whether or not a freedom issue is
being raised. The first step is to establish
the existence of what is a real or
substantial invasion of freedom, and not a normal regulatory act; only when this
is done should
the need to justify the infringement arise. Once a substantial
breach of this kind has been shown to exist, however, the scrutiny
for
justification required by section 33(1) can be truly stringent. (At para
257.)
Like Ackermann J, Sachs J held that the challenged portion of section 417(2)(b)
constituted an unjustifiable infringement of section
11.
[141] Eight members of the court, however, held that the challenged portion of
section 417(2)(b) was in breach of section 25(3),
the right to a fair
trial, in that it permitted the admission of self incriminating evidence given
by a witness at a section 417
enquiry at a subsequent criminal trial. Seven
members of the court held that the provision was not in breach of section 11(1).
Chaskalson
P, speaking for the majority, took a narrower view of section 11(1)
than that adopted by Ackermann J and Sachs J. This narrow view
was premised upon
the level of justification stipulated for section 11(1) by section 33 of the
Constitution. Chaskalson P stated:
In terms of our Constitution we are enjoined to protect the freedom guaranteed
by section 11(1) against all governmental action
that cannot be justified
as being necessary. If we define freedom in the context of section 11(1) in
sweeping terms we will be called
upon to scrutinise every infringement of
freedom in this broad sense as being necessary. We cannot
regulate this
power by mechanisms of different levels of scrutiny as the courts
of the United States do, nor can we control it through the application
of the
principle that freedom is subject to laws that are consistent with the
principles of fundamental justice,
as the Canadian courts do.
(At para 181.)
Later in his judgment he held:
This does not mean that we must necessarily confine the application of section
11(1) to the protection of physical integrity. Freedom
involves much more than
that, and we should not hesitate to say so if the occasion demands it. But,
because of the detailed provisions
of chapter 3, such occasions are likely to be
rare. If despite the detailed provisions of Chapter 3 a freedom of a
fundamental
nature which calls for protection is identified, and if it cannot
find adequate protection under any of the other provisions in Chapter
3, there
may be a reason to look to section 11(1) to protect such a right. But to secure
such protection, the otherwise unprotected
freedom should at least be
fundamental and of a character appropriate to the strict scrutiny to which all
limitations of section
11 are subjected. (At para
184.)
[142] Mokgoro J also did not accept the approach adopted by Ackermann J. She
stated:
Attributing so broad a meaning to freedom in this section, has
the effect of extending it too far beyond the perimeters
of physical integrity.
That freedom in section 11(1) means freedom in the sense of
physical integrity emerges from
the plain meaning of the text and not from the
narrowing of an all-embracing freedom right. This, however, does not mean that
section
11(1) cannot be given a broad meaning sufficient to provide protection
to an unenumerated right akin to freedom of the person, within
the context of
the rest of Chapter 3. (At para 209.)
She supported the approach taken by Chaskalson P, subject to the reservations
that, in her view, section 11(1) should be restricted
to physical integrity (at
para 210) and that the section could not generally be interpreted to give
protection to unenumerated freedom
rights (at para 212). Like the majority of
the court, I considered section 417(2)(b) to be in breach of section 25(3). I
expressed
no view as to whether section 417(2)(b) was in breach of section 11(1)
(at para 244.)
[143] In this case, it is necessary to determine whether sections 417 and 418
are in breach of section 11(1). Ackermann J, writing
for the majority, has for
the purposes of this case, based his reasoning to a large extent on the approach
approved by the majority
in
Ferreira
s case. My approach to
section 11(1) is different to that adopted by the majority in
Ferreiras
case.
[144] Section 11(1) protects the freedom and security of the person and
specifically provides that no person may be detained without
trial. The specific
prohibition of detention without trial reminds us of the governments
frequent violation of individual
freedom in the years of apartheid. There were
many statutes passed by the former government which authorised detention without
trial.
Those statutes were extensively used and substantial numbers of people
were detained without trial. Fundamental to the new Constitution,
then, is a
rejection of such deprivation of freedom. However, section 11(1) cannot be
confined to the terms of the specific prohibition
of detention without trial.
The section has a greater ambit.
[145] In my view, freedom has two inter-related constitutional aspects: the
first is a procedural aspect which requires that no-one
be deprived of physical
freedom unless fair and lawful procedures have been followed. Requiring
deprivation of freedom to be in accordance
with procedural fairness is a
substantive commitment in the Constitution. The other constitutional aspect of
freedom lies in a recognition
that, in certain circumstances, even when fair and
lawful procedures have been followed, the deprivation of freedom will not be
constitutional,
because the grounds upon which freedom has been curtailed are
unacceptable.
[146] Both these aspects of freedom find recognition in clauses of the
Constitution other than section 11(1). To that extent, section
11(1) is a
residual clause. Section 25 is the principal provision in chapter 3 that
requires procedural fairness when a person is
deprived of physical freedom. It
contains detailed rules which must be followed to protect the rights of persons
who have been detained,
arrested or charged. Section 11(1), which contains no
detailed procedures or rules, other than the prohibition of detention without
trial, is supplementary to section 25. In cases where people are deprived of
physical freedom in circumstances not directly governed
by section 25, section
11(1) will require that fair procedures be followed, as was held in
Coetzee v
Government of the Republic of South Africa
[1995] ZACC 7
;
1995 4 SA 631
(CC);
1996 1
BCLR 1
(CC). Of course, the nature of the fair process required in each case
will depend on a variety of factors including the ground upon
which the
deprivation of freedom is based.
[147] Similarly, the other aspect of freedom finds express recognition in
specific rights clauses such as expression (section 15),
assembly (section 16),
association (section 17), religion (section 14) and others. Section 11(1),
however, will protect a residual
arena of freedom. I do not believe that this
residual scope of the right should be interpreted as broadly and generously as
possible.
To this extent I disagree, respectfully, with Ackermann J. I also
disagree, respectfully, with Mokgoro J that the right to freedom
in section
11(1) should be limited to physical freedom. It is likely, given the clear
entrenchment of freedoms such as expression,
belief and association, that the
residual scope of section 11(1) will largely concern physical freedom, but I am
unconvinced that
it should be limited to physical freedom.
[148] In my view, a purposive interpretation of this right would focus on the
general interpretation provision in chapter 3 - section
35(1). Section 35(1)
states:
In interpreting the provisions of this Chapter a court of law shall promote the
values which underlie an open and democratic society
based on freedom and
equality ....
In interpreting the scope of section 11(1), it will be necessary to identify the
values which underpin an open and democratic society
based on freedom and
equality. In undertaking that exercise, I agree with Ackermann
J
[1]
and Sachs J
[2]
that section 11(1) needs to be
understood in the context of the fundamental commitment to dignity expressed in
our Constitution in
section 10. Our Constitution represents an emphatic
rejection of a past in which human dignity was denied repeatedly by an
authoritarian
and racist government. The Constitution commits our society to a
transition to a new society based on principles of democracy, freedom
and
equality. The recognition of the value of human beings is a cardinal principle
of the Constitution and one which will inform
the interpretation of many of the
specific rights in the Constitution.
[149] However, the rights in chapter 3 need to be interpreted in the
understanding too that a democratic society based on freedom
and equality
remains an aspiration. The freedom and equality which the Constitution values
has not yet been realised for all South
Africans. An enduring legacy of the past
is profound inequality. The poverty in which many of our citizens live
materially compromises
their enjoyment of rights of freedom and equality. There
is much to be done, by the state and citizens, to ensure that the entrenched
rights have meaning in the lives of all South Africans.
[150] In my view, the democratic society contemplated by the Constitution is not
one in which freedom would be interpreted as licence,
in the sense that any
invasion of the capacity of an individual to act is necessarily and inevitably a
breach of that persons
constitutionally entrenched
freedom.
[3]
Such a conception of
freedom fails to recognise that human beings live within a society and are
dependent upon one another. The conception
of freedom underlying the
Constitution must embrace that interdependence without denying the value of
individual autonomy. It must
recognise the important role that the state, and
others, will play in seeking to enhance individual autonomy and dignity and the
enjoyment of rights and freedoms. The preamble to the Constitution
states:
Whereas there is a need to create a new order in which all South Africans will
be entitled to a common South African citizenship
in a sovereign and democratic
constitutional state in which there is equality between men and women and people
of all races so that
all citizens shall be able to enjoy and exercise their
fundamental rights and freedoms.
[151] It acknowledges the need to develop a new society in which all citizens
can exercise their fundamental rights and freedoms.
We know that this will not
be an easy task. The interpretation of the rights in chapter 3 must be in
sympathy with that undertaking.
Accordingly, I agree with the following
statement of Sachs J in
Ferreiras
case:
The reality is that meaningful personal interventions and abstinences in modern
society depend not only on the State refraining from
interfering with individual
choice, but on the State helping to create conditions within which individuals
can effectively make such
choices. Freedom and personal security are thus
achieved both by protecting human autonomy on the one hand, and by acknowledging
human interdependence on the other. (At para
251.)
It does not seem to me that this approach will render all regulatory laws or
criminal prohibitions subject to constitutional challenge
in terms of section
11(1). A purposive approach to section 11(1) recognises that it is aimed not at
rendering constitutionally suspect
all criminal prohibitions or governmental
regulation. Our society, as all others in the late twentieth century, clearly
requires
government regulation in many areas of social life. It requires a
criminal justice system based on the prohibition of criminal conduct.
The need
for effective government which can facilitate the achievement of autonomy and
equality is implicit within the constitutional
framework. Only when it can be
shown that freedom has been limited in a manner hostile to the values of our
Constitution will a breach
of section 11(1) be established.
[152] The approach to the interpretation of section 11(1) that I have proposed
may not necessarily produce a different result to
the construction proposed by
Ackermann J in
Ferreiras
case, although it seems clear that
Ackermann J takes a broader view of the scope of section 11(1) than I do. Nor
will my approach
necessarily produce a different result to that proposed by
Chaskalson P and adopted by the majority in
Ferreiras
case and
this case. In this case, it does not.
[153] The applicants argue that sections 417 and 418 are in breach of section
11(1) for several reasons. First, they state that witnesses
may be compelled to
attend and give evidence at an enquiry without being given an opportunity to be
heard on the question of whether
they should be coerced in this way. This
challenge to the provision is a challenge addressed to procedural fairness. In
my view,
it cannot be said that it is a necessary requirement of an obligation
to give evidence that a potential witness first be given an
opportunity to state
why he or she should not be compelled to give evidence. If it becomes clear in
the course of the witnesss
evidence that he or she knows nothing of the
affairs of the company, no further questions will be put. Or, if it is
established that
a witness has a sufficient excuse not to answer the questions,
as contemplated by section 418, then he or she will be under no obligation
to
answer the questions. Similarly, if it is clear that the purpose of calling the
witness was abusive or oppressive, then appropriate
relief can be sought from
the Supreme Court. Ackermann J has set out in great detail the jurisprudence of,
in particular, the United
Kingdom and Australia, in regard to the obligation
upon judges in those countries to prevent an abuse of procedures similar to the
procedure governed by sections 417 and 418. I am not convinced that this
jurisprudence is directly relevant in the light of
the differences between the
statutory provisions upon which that jurisprudence is based and our own.
Nevertheless, there can be little
doubt that the Supreme Court may grant relief
to prevent the abuse of the procedures provided for in sections 417 and 418.
Accordingly,
there can be no doubt that there are adequate safeguards in our own
legal system to protect witnesses. Beyond these safeguards, the
argument that
section 11(1) requires notice and an opportunity to be heard prior to the giving
of evidence cannot be supported.
[154] The second ground upon which the applicants base their section 11(1)
argument is that sections 417 and 418 impose an obligation
upon witnesses to
attend enquiries and to answer questions and disclose documents to that enquiry.
I cannot accept that a subpoena
which requires compliance in terms of these
provisions can be said to be a breach of freedom as contemplated by section
11(1). All
modern societies require the assistance of members of the community
in facilitating the administration of justice. Inevitably the
obligations thus
placed on witnesses can be inconvenient and, at times, unpleasant. In certain
circumstances, giving evidence to
a court or commission may even put the witness
at the risk of some disadvantage, such as civil liability. The overwhelming
interest
of society is, however, that citizens nevertheless co-operate to
ensure that the administration of justice is not prevented. Such
an interest is
clearly present in the context of section 417 enquiries as well. In this case,
it seems to me that the applicants
have failed to show that section 417 and 418
are in breach of section 11(1).
[155] The applicants also base their objections to sections 417 and 418 on the
right to privacy in section 13 and on an implied right
to a fair civil trial and
the right to equality in section 8. For the reasons given by Ackermann J, I
consider that the applicants
have not established that sections 417 and 418 are
in breach of any of these constitutional provisions. Finally, the applicants
argued
that sections 417 and 418 are in breach of section 24 of the Constitution
which is concerned with administrative justice. I agree
with Ackermann J that
the applicants have not shown sections 417 and 418 to be in breach of section 24
of the Constitution. He expresses
considerable doubts as to whether an enquiry
in terms of sections 417 and 418 is administrative action as contemplated by the
Constitution.
It is not necessary for the purposes of the case to decide this
question, however, and I prefer to express no view at all upon
it.
[156] For the above reasons, I concur in the order proposed by Ackermann J.
Case No: CCT 23/1995
Counsel forthe Applicants: G.J. Marcus
O Rogers
Instructed By: Deneys Reitz
Counsel for the Respondents: JJ Cauntlett S.C.
G.W. Woodland
Instructed By: Fluxman Rabinowitz - Raphaely
Weiner
[1]
[1995] ZACC 5
;
1995 3 SA 292
(CC);
1995 7 BCLR
851
(CC) paras 7 - 12.
[2]
Ferreira v Levin NO and
Others
,
Vryenhoek and Others v Powell NO and Others
1996 1 BCLR 1
(CC) paras 6 - 8.
[3]
S v Mhlungu
[1995] ZACC 4
;
1995 3 SA 867
(CC);
1995 7 BCLR 793
(CC) para 59 and
Ferreira v Levin
supra note 2 para
7.
[4]
Supra note 2 at para 157.
[5]
Id per Ackermann J para 127 and
Sachs J paras 245, 249, 261, 269.
[6]
Id per Chaskalson P paras 168,
186 (Mahomed DP, Didcott J, Langa J, Madala J and Trengove J concurring),
Mokgoro J para 208 and ORegan
J para 244.
[7]
Id paras 122 to 124.
[8]
Id para 122.
[9]
Id paras 123 - 124.
[10]
Id para 151.
[11]
Re Rolls Razor Ltd (No.
2)
[1970]1 Ch 576 at 592 C.
[12]
(1890) 45 Ch 87
at 93.
[13]
[1991] Ch 90
at 102a. See
also
British and Commonwealth Holdings plc (joint administrators) v Spicer
& Oppenheim (a firm)
[1992] 4 All ER 876
(HL). In this case the House of
Lords held at 886G-H that, having regard to the size of the financial crash, the
possible oppression
of the examinees did not outweigh the needs of the
companys administrators, which were held to be reasonable under the
circumstances.
[14]
Cloverbay id
at 102D -
103E.
[15]
Re Embassy Art Products
Ltd
[1987] 3 BCC 292.
See also H Rajak (ed)
Company Liquidations
(1988) 306-7.
[16]
Supra note 13. The appellants
in the case were the auditors of a company ("Atlantic") that had been placed
under administration. A
very wide order to produce books, papers and other
records had been issued against the appellants by the registrar pursuant to
section
236(2) of the Insolvency Act 1986. On an application by the appellants
Hoffmann J discharged the registrars order. The Court
of Appeal (Ralph
Gibson and Woolf LJJ (Norse LJ dissenting)) allowed the appeal and restored the
order of the registrar (see
[1992] 2 All ER 801
,
[1992] Ch 342).
On a further
appeal, the House of Lords affirmed the decision of the Court of Appeal.
[17]
Id 880g.
[18]
Id 883a per Lord Slynn, who
delivered the opinion of the House.
[19]
Id 883d - e.
[20]
Id 883f.
[21]
Id 885e.
[22]
Id 886g - h.
[23]
[1987] BCLC 77
at 80.
[24]
In re London and Northern
Bank Limited
[1902] 2 Ch 73
at 82;
In Re Imperial Continental Water
Corporation
(1886) 33 Ch D 314
at 318 - 319;
In Re British Building Stone
Company Ltd
[1908] 2 Ch 450
at 454;
Re Rolls Razor Ltd (No 2)
[1969]
3 All ER 1386
at 1397;
Re Kimberley Carpet Mills (Aust) Pty Ltd (in liq)
(1979) 4 (Australian Company Law Reports) 50 at 52.
[25]
Per Barwick CJ in
Rees v
Kratzmann
[1966] ALR 3.
Much earlier, in
Re London & Globe Finance
Co.
[1902] (Weekly Notes) 16, the court held that it will disallow questions
which were put merely for the purpose of satisfying personal
spite or
vindictiveness, and not bona fide for the benefit of creditors, contributories
or the public.
[26]
[1972] ALR 723.
[27]
See the passages from Lord
Slynns speech in the
Spicer and Oppenheim
case quoted in
paragraph 23 above.
[28]
[1992] 2 All ER 856
(CA).
[29]
Dillon LJ was referring to
the judgment of Vinelott J in
Re Jeffrey S Levitt Ltd
[1992] 2 All ER
509.
[30]
Id 876d - j.
[31]
[1994] 3 All ER 814
(HL).
[32]
Id 821d - 822c.
[33]
Id 834h.
[34]
Which reads as follows:
A person is not excused from answering a question put to the person at
an examination ... on the ground
that the answer might tend to incriminate the
person or make the person liable to a penalty.
[35]
Sections 597(13) and
597(14).
[36]
1 ACSR (1990) 726 (Supreme
Court of New South Wales - Commercial Division).
[37]
Id 738.
[38]
3 ACSR (1990) 343 (Supreme
Court of New South Wales - Equity Division).
[39]
Id 346.
[40]
Hamilton v Oades
[1989] HCA 21
;
(1988) 15 ACLR 123
(HC) 128.
[41]
Re Rothwells Ltd (Prov Liq
Apptd)
(1989) 15 ACLR 168
(Supreme Court of Western Australia) 181 and see
also
Hamilton v Oades
supra note 40 at 129.
[42]
Supra note 40 at 129.
[43]
[1970] HCA 4
;
(1970) 122 CLR 493
at
496.
[44]
(1991) 9 ACLC 49
(Supreme
Court of South Australia) 53.
[45]
(1992) 8 ACSR 736
(Supreme
Court of New South Wales - Court of Appeal).
[46]
Id 742.
[47]
Re Spedley Securities Ltd:
Ex Parte Potts & Gardiner
(1990) 2 ACSR 152
(Supreme Court of New South
Wales) 155 - 156.
[48]
See, for example,
Hamilton
v Oades
supra note 40 at 129 - 130, 131 - 133 and
Spedley Securities Ltd
v Bond Corporation Holdings Ltd
supra note 36 at 732 - 737.
[49]
Hamilton v Oades
supra
note 40 at 132.
[50]
Whelan v Australian
Securities Commission
[1993] FCA 552
;
(1993) 12 ACSR 239
(Federal Court of Australia) 255
lines 30 - 45.
[51]
Douglas-Brown (The
official liquidator of Woomera Holdings Pty Ltd) (rec and mgr apptd) v
Furzer
(1994) 13 ACSR 184
(Supreme Court of Western Australia) 191 - 193
where the Australian and English authorities are reviewed.
[52]
See
Lok and Others v
Venter NO and Others
1982 1 SA 53
(W) 58A;
Venter v Williams and
Another
1982 2 SA 310
(N) 313E;
Foot NO v Alloyex (Pty) Ltd
1982 3
SA 378
(D & CLD) 383F.
[53]
1990 1 SA 500
(C) 509B.
[54]
See the remarks of Heher J in
the Full Bench judgment in
Ferreira v Levin NO & Others
,
1995 2 SA
813
(W) 843G;
Friedland & Others v The Master & Others
1992 2 SA
370
(W) 379;
Botha v Strydom & Others
1992 2 SA 155
(N) 159 and
Meskin et al
Henochsberg on the Companies Act
Vol I 890.
[55]
See
Re Rolls Razor Ltd.
(No. 2)
supra note 24 at 1395(i) per Megarry J:
"One must remember, too, that what is made is an order of the High Court; and in
that court the judge and the registrar both hold
office. A litigant who moves
from one to the other remains within the court. He is not moving to a different
court, as he would be
if he went to the Court of Appeal. What the order of the
High Court is to be in any case is to be determined by the officer of the
court
who exercises the jurisdiction of the
court."
[56]
Ex
Parte Liquidators Ismail Suliman & Co (Pty) Ltd
1941 WLD 33
34.
[57]
Ex Parte Brivik
1950 3
SA 790
(W) 791G.
[58]
Friedland
s
case supra note 54 at 379D-H.
[59]
1995 1 SA 1
(C).
[60]
Id 16C-E.
[61]
Supra note 2 para 157.
[62]
Yiannoulis v Grobler and
Others
1963 1 SA 599
(T) 601C-D as approved in
Pretorius and Others v
Marais and Others
1981 1 SA 1051
(A) 1063A.
[63]
Supra note 13 .
[64]
Supra note 13.
[65]
Levin v Ensor NO &
Others
1975 2 SA 118
(D) 121;
Corporate Finance Ltd & Another v
Liquidator Two Plus (Pvt) Ltd (in liq) & Another
1978 4 SA 42
(R) 45;
Pretorius v Marais
1981 1 SA 1051
(A) 1063G-H and
Anderson v
Dickson
1985 1 SA 93
(N) 112A-C.
[66]
[1979] 2 All ER 775.
[67]
Id 789a.
[68]
Supra note 13.
[69]
Id 101H - 102A.
[70]
Supra note 13 at 882d -
e.
[71]
Supra note 2.
[72]
Supra note 2.
[73]
Section 35(3) of the
Constitution.
[74]
See for example,
Van Eck
NO and Van Rensburg NO v Etna Stores
1947 2 SA 984
(A) 996 - 1000.
[75]
Supra note 2.
[76]
Id paras 90 and 245
respectively, although we disagreed as to the ambit of the section 11(1)
residual right to freedom.
[77]
Id per Chaskalson P (Mahomed
DP, Didcott J, Langa J, Madala J and Trengove AJ, concurring) paras 169 to 185.
ORegan J, para
244, decided the case with the majority on the basis of
an infringement of section 25(3), but expressed no view on the correct
interpretation
of section 11(1).
[78]
Id per Chaskalson P (the
other members of the Court as supra concurring) para 170.
[79]
Id per Chaskalson P para 185.
Mokgoro J ( with the majority) decided the case para 208, on the basis of an
infringement of section
25(3) but was of the view, at para 209, that
freedom in section 25(3) was limited to freedom in the
sense
of physical integrity.
[80]
[1965] HCA 49
;
(1965) 114 CLR 63
at 80.
[81]
Supra note 40 at 127.
[82]
Supra note 2 para 151
(footnotes omitted).
[83]
Supra
paras 16 (j), 19 - 23, 26 - 27, 32 -
34.
[84]
Sher & Others v
Sadowitz
1970 1 SA 193
(C) 195;
S v Matisonn
1981 3 SA 302
(A) 313.
[85]
See Hogg
Constitutional
Law of Canada
3 ed para 15.7.
[86]
Although the word
law is used in the subsection it is clear from the use of the
word wet in the Afrikaans
text that a statutory provision is
intended.
[87]
The formulation of this
subsection bears a close resemblance to the rule of construction adopted by the
United States Supreme Court
as formulated by Justice Brandeis in
Ashwander et
al v Tennessee Valley Authority et al
[1936] USSC 36
;
297 US 288
(1936) 346 as the seventh
principle enunciated in that case. An analogous rule is employed in Canada. See
Hogg id footnote 20 supra.
A similar rule of construction, known as
verfassungskonforme Auslegung
is employed by the German Federal
Constitutional Court. Where it is reasonably possible to do so the statute will
be construed so
as to save it from unconstitutionality but not where this would
distort its meaning. See BverGE 2, 266 (282); BverGE 18, 97 (111);
BverGE 53,
135 (147) and, generally, v Mangoldt, Klein, Starck
Das Bonner Grungesetz
3ed Art.3 Rdnr.205
et seq
. According to Benda, Maihofer, Vogel
Handbuch des Verfassungsrechts
2ed 34 Rdnr. 53 other European
constitutional courts also apply a similar principle.
[88]
Supra note 73
.
[89]
Scholars such as
Dionisopoulos and Ducat,
The Right to Privacy
(West Publishing Co)
(1976)
as referred to in Barker
Civil Liberties and the
Constitution
6 ed 577
and following, have suggested three cores to
the concept. The first constitutes the place-oriented conceptions of
privacy
defining the right in spacial terms, of which
Olmstead v
US
[1928] USSC 133
;
277 US 438
(1928) would be an illustration. The second the
person-oriented conceptions of privacy, where the emphasis is
shifted
from place or property to the person involved (See
Schmerber v
California
384 US 757
(1966)). The third concept has to do with how the
right inheres in certain relationships such as the marriage
relationship
but not necessarily others (See
Griswold v Connecticut
381
US 479
(1965)).
[90]
Rainer Forst formulated this
statement in reaction to Michael J. Sandels communitarian critique of
the liberal self:
firstly, liberalism is said to rely on the
concept of the atomistic self, individualised prior to communal relations and
constitutive
goods and, secondly, to subsume this individual under universalist
and individualistic notions of right that, despite
their
intention, destroy the real individuality of a communal being, rendering the
unencumbered self to become the
disempowered citizen of the
modern state. (See: Rainer Frost How not to speak about identity: the
concept of the person in
a theory of justice. in
Philosophy and
Social Criticism
1992 Vol 18 No1 and M. Sandel The Procedural
Republic and the Unencumbered Self. in
Political Theory
1984
Vol 12 No 1).
[91]
Id.
[92]
Id. This is, according to
Forst, the third level of political discourse between citizens, where concrete
difference and common equality
are reconciled, and requires an acceptance of
ones obligations towards the right of every member of the polity not to
be
excluded.
[93]
Id. Forst points out that
this community is spoken of by both Kant and Mead, and demands mutual respect as
a universal moral duty
towards persons as
moral persons.
Without this
notion of the moral person fundamental rights are meaningless, just as they are
meaningless if not institutionalized
and secured within a political community.
Fundamental rights, although originating on the level of morality, need to be
sustained
on the level of political discourse and has implications for both the
concrete and the abstract self.
[94]
Neethling Potgieter and
Visser
Law of Delict
2 ed. 333. See also
OKeeffe v Argus
Printing and Publishing Co Ltd
1954 3 SA 244
(C) 247F-249D and
Universiteit van Pretoria v Tommie Meyer Films (Edms) Bpk
1979 1 SA 441
(A) 455H-456H.
[95]
Neethling supra note 15 at
333. This approach accords with that followed by the US Supreme Court in
US v
Dionisio
410 US 1
(1975) 14 and
US v Mara
410 US 19
(1973) 21 and,
where the court held that a person had no reasonable expectation of privacy with
respect to physical characteristics
which he/she exposes to the public on a
daily basis.
[96]
[1993] ZASCA 3
;
1993 2 SA 451
(A) 462F.
[97]
Id 462G.
[98]
S v I
1976 1 SA 781
(RA);
S v Boshoff
1981 1 SA 393
(T) 396.
[99]
Reid-Daly v Hickman
1981 2 SA 315
(ZA) 323.
[100]
S v A
1971 2 SA 293
(T);
Financial Mail
supra note 96 at 463.
[101]
Epstein v Epstein
1906 TH 87.
[102]
Such as the publishing of
information obtained from illegally tapping telephone conversations;
Financial Mail
supra note 96 at 463. See also Neethling
Persoonlikheidsreg
223.
[103]
Neethling
Persoonlikheidsreg
234-238; Neethling Potgieter and Visser
Law of
Delict
334.
[104]
1975 1 SA 681
(A)
704A-B.
[105]
Id 704D.
[106]
Supra note 94 at 249C-D
where Watermeyer AJ followed the American approach which proscribes invasions of
privacy which can
reasonably
be considered offensive to persons of
ordinary sensibilities. This case concerned the unauthorised publication of a
persons
photograph; this has been classified as a wrongful invasion of
privacy in terms of the Nordic Conference on the Right to Respect
for Privacy of
1967.
[107]
1966 2 SA 57
(RA)
58D-E.
[108]
Id 58H.
[109]
Neethling
Persoonlikheidsreg
247 et seq. It is also significant that public interest
in information plays a role in determining whether the publication of private
facts by the media is justified.
Financial Mail (Pty) Ltd v Sage Holdings
(Pty) Ltd
supra note 96 at 462-463.
[110]
Van Dijk and Van Hoof
Theory and Practice of the European Convention on Human Rights
2 ed0 (1990)
368.
[111]
Appl. 8962/80,
X and Y
v Belgium, D & R
28 (1982), p 112 (124); see also Van Dijk 369.
[112]
Series A. No 294 B;
Application No 17101/90
[1994] ECHR 27
; ;
(1994) 18 EHRR 393.
[113]
Id para 69.
[114]
Id para 81.
[115]
Id para 75.
[116]
See
Katz v US
[1967] USSC 262
;
389
US 347
(1967) 361,
Abel v US
[1960] USSC 40
;
362 US 217
(1960) 241.
[117]
[1990] 68 D.L.R. (4th) 568
at 578.
[118]
[1984] 11 D.L.R. (4th) 641
at 652-3.
[119]
In
McKinley
supra
note 119 at 578 a-c.
[120]
R v Wong
(1987) 41
CCC (3d) 163 OntCA.
[121]
James A Fontana
The Law
of Search and Seizure in Canada
3 ed (1992) 19
.
[122]
Von Mηnch/Kunig
Grundgesetz-Kommentar
(4aufl) Band 1, Art 1 Rn 10; Art 2 Rn 30-31.
[123]
See also
Ferreira v
Levin
supra note 2 paras 84-85.
[124]
BVerfGE 27, 344[350].
[125]
Von Mηnch/Kunig supra
note 122, Art 1 Rn 10.
[126]
BVerfGE 54, 148[153];
BVerfGE 6, 32[41].
[127]
BVerfGE 27, 344[351];
BVerfGE 34, 238[245]; BVerfGE 80, 367[373].
[128]
BVerfGE 6, 389[433].
[129]
At 247: ...weil in
diesen Faellen nach allgemeiner Auffassung von einem Recht am eigenen Wort
nicht mehr die Rede sein kann.
Soweit es z. B. im geschaeftlichen Verkehr
ueblich geworden ist, fernmuendliche Durchsagen, Bestellungen oder
Boersennachrichten
mittels eines Tonabnehmers festzuhalten, ist in aller Regel
das Recht auf freie Entfaltung der Persoenlichkeit des Sprechers noch
nicht
betroffen. Bei derartigen Mitteilungen steht der objektive Gehalt des Gesagten
so sehr im Vordergrund, dass die Persoenlichkeit
des Sprechenden nahezu vollends
dahinter zuruecktritt und das gesprochene Wort damit seinen privaten Charakter
einbuesst.
[130]
The German law treats the
insolvency of persons and the liquidation of companies in the same way. German
insolvency law is governed
by the Konkursordnung. The equivalent of section 417
is 75 of the Konkursordnung. Apart from the special provisions in
207
ff of the Konkursordnung, all provisions, including 75 apply
both to natural and to juristic persons. (See G. Robbers
Einfηhrung in
das deutsche Recht
275).
[131]
BVerfGE 56, 37[49-51].
[132]
Id 42: auch davon
abhaengen, ob und inwieweit andere auf die Information der Auskunftsperson
angewiesen sind, ob insbesondere
die Auskunft Teil eines durch eigenen
Willensentschluss uebernommenen Pflichtenkreises ist.
[133]
Id 48.
[134]
Id 50.
[135]
See note 89 above.
[136]
Supra note 36 at 738 and
see also para [30] supra.
[137]
Supra note 38 at 346.
[138]
201 US 43
(1906) 74-5; See
also
US v White
[1944] USSC 109
;
322 US 694
(1944) 698.
[139]
Id 73. See also
White
supra note 138 at 698. Special problems of privacy may be presented by
subpoena of a personal diary. See
Fisher et al v United States et al
[1976] USSC 65
;
425
US 391
1976) at 401 note 7.
[140]
Re Pergamon Press Ltd
[1971] Ch 388
(CA).
[141]
Id 399D - H.
[142]
Id 402G - 403A.
[143]
Corporate Law
2 ed
at 28.01.
[144]
1976 1 SA 758
(W).
[145]
Id 763E-F.
[146]
It is accordingly
unnecessary to consider the correctness of the view expressed in
Jeeva v
Receiver of Revenue, Port Elizabeth
1995 2 SA 433
(SE) 443I where Jones J
held that an enquiry under sections 417 and 418 constituted administrative
action for purposes of section
24 of the Constitution.
[147]
Sections 96(2) and
99(5)(d) of the Constitution.
[148]
In schedule 3 to the
Constitution which requires a commitment from judges to administer
justice to all persons alike without
fear, favour or prejudice.
[149]
By resolutions 40/32 of 29
November 1985 and 40/146 of 13 December 1985, the UN endorsed the Basic
Principles on the Independence
of the Judiciary as adopted by the Seventh United
Nations Congress on the Prevention of Crime and the Treatment of Offenders in
1985.
[150]
Rennie NO v Gordon
NNO
1988 1 SA 1
(A) 21E per Corbett JA.
[151]
Palvie v Motale Bus
Service (Pty) Ltd
[1993] ZASCA 105
;
1993 4 SA 742
(A) 749C per Howie AJA.
[152]
See
Minister of the
Interior v Harris
1952 4 SA 769
(A). Another example is the Soviet
Constitution of 1977 which enacted a wide panoply of individual rights but which
made wholly inadequate
provision for their enforcement through independent
courts. See Henkin
The Rights of Man Today
66 -
70.
[153]
Id 792A-C where the
learned Judge of Appeal said the following:
From the second preamble to the South Africa Act it is clear that the
authors of our constitution had in mind the doctrine
of the
tria politica
and the existence of some judicial power to enforce the constitutional
guarantees. That seems to follow by necessary intendment.
But I do not think the
further inference is justified that they had in contemplation that the judicial
power had for ever to be exercised
by Courts constituted in a manner which
satisfies certain criteria to the end that the independence, competence and
justness of these
tribunals be manifest and secured. I do not think they
intended that Courts should always be of the kind to which they were accustomed.
We have had many kinds of Courts; we have had trial by battle, by fire and by
flood. We have heard of modern peoples
Courts, in which
the standard of justice was perhaps no higher than in the
judicium ferri
candentis
of the Lombards (Gengler,
Germanische R-Denkm≅ler
, p.
759).
[154]
The
principle of equality of arms, implicit in the right to a fair
trial, has not been applied to situations such
as the one we are considering in
the case before us. See, in this regard, Van Dijk and Van Hoof
Theory and
Practice of the European Convention on Human Rights
2 ed (1990) 319 and
Dombo Beheer BV v Netherlands
[1993] ECHR 49
;
18 EHRR 213.
[155]
Supra note 2.
[156]
Id para 157.
[157]
Id para 154.
[158]
Case CCT 17/95 of 8
December 1995 para 18.
[159]
Re Westinghouse
Electric Corporation Uranium Contract Litigation MDL Docket No 235 (No 2)
[1977] 3 All ER 717
(CA) at 721c - h. See also
Blunt v Park Lane Hotel
Limited and Another
[1942] 2 KB 253
and
Halsburys Laws of
England
4 ed (1976) Vol 17 para 240.
[160]
See
R v Kansal
[1992] 3 All ER 844
(CA) 850a - f. See also Schmitthoff (ed)
Palmers
Company Law
vol 2 15222 to 15222/1.
[161]
Supra note 50
at
255 - 256.
[162]
R.S.C. 1985, c. C-5.
[163]
Hogg
Constitutional Law
of Canada
3 ed (1992) 1142.
[164]
[1972] USSC 160
;
406 US 441
(1972) 453.
[165]
Ferreira v Levin NO and
Others, Vryenhoek and Others v Powell NO and Others (No 2)
CCT 5/95, the
judgment on costs delivered on 19 March 1996, paras 5 and
7.
[166]
Ferreira v Levin
(No2)
supra note 2 para 10.
[1]
Sections 417 and 418 of
the Companies Act 61 of 1973, henceforth referred to as the
sections.
[2]
I have in mind particularly
that the sections were amended (by sections 9 and 10 of Act 29 of 1985) so as to
afford the Master extensive
powers in relation to examinations.
[3]
Ferreira v Levin
NO and Others
;
Vryenhoek and Others v Powell NO and Others
1996
(1) BCLR 1
(CC).
[4]
In paragraph [195].
[1]
Ferreira v Levin NO and
others
1996 1 BCLR 1
(CC) at paragraphs 47 - 51.
[2]
Coetzee v Government of
Republic of South Africa
1996 1 SA 631
(CC);
1995 10 BCLR 1382
(CC) at
paragraph 43.
[3]
See R M Dworkin
Taking
Rights Seriously
(1977) 262 -3.