Court rejects Avid bid

A BID by former and serving directors of Avid Investment Corporation to stall a High Court enquiry into a N$30 million Social Security Commission investment was yesterday dismissed by the High Court.

The SSC entrusted N$30 million to Avid in late January to be invested for four months. Avid, which has been provisionally wound up, has been unable to repay millions in Namibian welfare money for two months The stern stand Acting Judge Raymond Heathcote took last week on corporate governance and holding company directors accountable, continued with yesterday’s ruling, in which he dismissed an application to put on hold a Companies Act enquiry into the SSC’s N$30 million investment through Avid.That enquiry is now set to proceed on Monday next week.People called to give evidence at the enquiry will be required to answer potentially incriminating questions.However, if incriminating evidence is gained, it is highly doubtful that any court would in future allow that evidence to be used against the people who had provided the information, the Acting Judge ruled.According to the SSC, it invested the money after political pressure had been put on it to channel the investment through Avid, a company in which the Swapo Party Youth League is reported to have a majority stake and which had operated for only about half a year at that stage.Avid undertook to keep the money in an account with Standard Chartered Bank in South Africa and to secure it with a financial guarantee bond.The investment was supposed to mature by May 24, when N$31,47 million was supposed to be returned to the SSC.That never happened, though, and on Tuesday last week the SSC went to the High Court to get an order placing Avid in provisional liquidation because the company was unable to repay that N$30 million-plus debt.’PLEASE EXPLAIN’ When he granted that winding-up order, Acting Judge Heathcote also decided to direct that an enquiry be held under section 417 of the Companies Act to determine what had happened with the money that the SSC entrusted to Avid.He ordered that subpoenas be served on a list of people who would be called to provide information to the enquiry.That list includes the Secretary of the Swapo Party Youth League and Deputy Minister of Works, Transport and Communications, Paulus Kapia, who is a former Avid director, Avid’s former Managing Director, Inez /Gâses, another former director, Otniël Podewiltz, and a current director, Sharon Blaauw.The four responded to the subpoenas by asking the High Court to order a stay in the enquiry.They informed the court on Thursday last week that they wanted the enquiry put on hold because they wanted to launch a constitutional challenge against the legality of the section of the Companies Act under which the enquiry is to be held.The four claim that part of section 417 would require them to answer incriminating questions at the intended enquiry, and that this would violate their constitutional right not to be compelled to give evidence against themselves.While stating that any person summoned to an enquiry into the affairs of a company that is being wound up may be required to answer incriminating questions, part of section 417 also states that incriminating answers that may result from such questions may thereafter be used in evidence against the person who had given the answer.That latter part of section 417, but definitely not the whole section, would indeed in all probability be found to be unconstitutional, Acting Judge Heathcote agreed in his ruling on the request for a stay in proceedings yesterday.The South African Constitutional Court had already done so in respect of the South African version of the Companies Act in late 1995, the Acting Judge noted.ACCOUNTABILITY He also noted that requiring a company director to give evidence at a section 417 enquiry is one of the responsibilities that a director has to shoulder when he or she takes up such a post in a company.Acting Judge Heathcote quoted from the Constitutional Court case in which section 417’s constitutionality was weighed to back up his point: “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 the 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.(…) Giving evidence at a s 417 enquiry is part of the responsibility to account.”He also quoted from another Constitutional Court judgement: “The honest conduct of the affairs of companies is a matter of great public concern today.(…) 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.”The purpose of the section 417 proceedings is to assist Avid’s liquidators to establish where the N$30 million was, Acting Judge Heathcote remarked, restating once again that these are public funds.He added a comment that the object of the exercise by Kapia, /Gâses, Podewiltz and Blaauw appeared to be to force a stay of the section 417 proceedings “at all costs”.”Not because incriminating answers might one day be used against the applicants in a criminal trial, but rather, not to answer any question at all,” he stated.The four “cannot be allowed, through tactical manoeuvring, to delay the section 417 enquiry”, the Acting Judge remarked.All questions lawfully put to them at the enquiry, even if the answers might be incriminating, would have to be answered, Acting Judge Heathcote directed, once more quoting the SA Constitutional Court: “Indeed, it would be ironical if crooked directors were more able to avoid submitting themselves to enquiry than honest ones.”While dismissing the application by the four, he also ordered them to pay the SSC’s legal costs.* In a report on the SSC-Avid court case in yesterday’s edition of The Namibian, reference was mistakenly made to an enquiry being conducted under section 419 of the Companies Act.It should, of course, have been a reference to section 417.Avid, which has been provisionally wound up, has been unable to repay millions in Namibian welfare money for two months The stern stand Acting Judge Raymond Heathcote took last week on corporate governance and holding company directors accountable, continued with yesterday’s ruling, in which he dismissed an application to put on hold a Companies Act enquiry into the SSC’s N$30 million investment through Avid.That enquiry is now set to proceed on Monday next week.People called to give evidence at the enquiry will be required to answer potentially incriminating questions.However, if incriminating evidence is gained, it is highly doubtful that any court would in future allow that evidence to be used against the people who had provided the information, the Acting Judge ruled.According to the SSC, it invested the money after political pressure had been put on it to channel the investment through Avid, a company in which the Swapo Party Youth League is reported to have a majority stake and which had operated for only about half a year at that stage.Avid undertook to keep the money in an account with Standard Chartered Bank in South Africa and to secure it with a financial guarantee bond.The investment was supposed to mature by May 24, when N$31,47 million was supposed to be returned to the SSC.That never happened, though, and on Tuesday last week the SSC went to the High Court to get an order placing Avid in provisional liquidation because the company was unable to repay that N$30 million-plus debt.’PLEASE EXPLAIN’ When he granted
that winding-up order, Acting Judge Heathcote also decided to direct that an enquiry be held under section 417 of the Companies Act to determine what had happened with the money that the SSC entrusted to Avid.He ordered that subpoenas be served on a list of people who would be called to provide information to the enquiry.That list includes the Secretary of the Swapo Party Youth League and Deputy Minister of Works, Transport and Communications, Paulus Kapia, who is a former Avid director, Avid’s former Managing Director, Inez /Gâses, another former director, Otniël Podewiltz, and a current director, Sharon Blaauw.The four responded to the subpoenas by asking the High Court to order a stay in the enquiry.They informed the court on Thursday last week that they wanted the enquiry put on hold because they wanted to launch a constitutional challenge against the legality of the section of the Companies Act under which the enquiry is to be held.The four claim that part of section 417 would require them to answer incriminating questions at the intended enquiry, and that this would violate their constitutional right not to be compelled to give evidence against themselves.While stating that any person summoned to an enquiry into the affairs of a company that is being wound up may be required to answer incriminating questions, part of section 417 also states that incriminating answers that may result from such questions may thereafter be used in evidence against the person who had given the answer.That latter part of section 417, but definitely not the whole section, would indeed in all probability be found to be unconstitutional, Acting Judge Heathcote agreed in his ruling on the request for a stay in proceedings yesterday.The South African Constitutional Court had already done so in respect of the South African version of the Companies Act in late 1995, the Acting Judge noted.ACCOUNTABILITY He also noted that requiring a company director to give evidence at a section 417 enquiry is one of the responsibilities that a director has to shoulder when he or she takes up such a post in a company.Acting Judge Heathcote quoted from the Constitutional Court case in which section 417’s constitutionality was weighed to back up his point: “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 the 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.(…) Giving evidence at a s 417 enquiry is part of the responsibility to account.”He also quoted from another Constitutional Court judgement: “The honest conduct of the affairs of companies is a matter of great public concern today.(…) 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.”The purpose of the section 417 proceedings is to assist Avid’s liquidators to establish where the N$30 million was, Acting Judge Heathcote remarked, restating once again that these are public funds.He added a comment that the object of the exercise by Kapia, /Gâses, Podewiltz and Blaauw appeared to be to force a stay of the section 417 proceedings “at all costs”.”Not because incriminating answers might one day be used against the applicants in a criminal trial, but rather, not to answer any question at all,” he stated.The four “cannot be allowed, through tactical manoeuvring, to delay the section 417 enquiry”, the Acting Judge remarked.All questions lawfully put to them at the enquiry, even if the answers might be incriminating, would have to be answered, Acting Judge Heathcote directed, once more quoting the SA Constitutional Court: “Indeed, it would be ironical if crooked directors were more able to avoid submitting themselves to enquiry than honest ones.”While dismissing the application by the four, he also ordered them to pay the SSC’s legal costs.* In a report on the SSC-Avid court case in yesterday’s edition of The Namibian, reference was mistakenly made to an enquiry being conducted under section 419 of the Companies Act.It should, of course, have been a reference to section 417.