Kapia V The State (cc 09-2008) [2015] nahcmd 195

REPUBLIC OF NAMIBIA REPORTABLE



HIGH COURT OF NAMIBIA MAIN DIVISION, WINDHOEK
RULING

Case no: CC 09/2008

In the matter between:
PAULUS ILONGA KAPIA 1^ST Accused

INES GASES 2^nd Accused

OTNIEL PODEWILTZ 3^rd Accused

SHARON LYNETTE BLAAUW 4^th Accused

RALPH PATRICK BLAAUW 5^th Accused

MATHIAS SHIWEDA 6^th Accused

NICOLAAS CORNELIUS JOSEA 7^th Accused
and
THE STATE

Neutral citation: Kapia v The State (CC 09-2008) [2015] NAHCMD 195 (21 August 2015)
Coram: LIEBENBERG J

Heard: 16 – 18; 24 – 25 June 2015

Delivered: 21 August 2015
Flynote: Criminal procedure – Application in terms of s 174 of the Criminal Procedure Act, 51 of 1977 – Discharge of accused at close of State case – Charges – Fraud alternatively theft and multiple counts under Companies Act 61 of 1973 – Accused charged in personal capacity – Test – whether there is prima farcie evidence on which a reasonable court can convict – Court may also draw inference from the proven facts – Application partially granted and partially dismissed.
Criminal procedure – Charges – Application of s 332(5) of the CPA – Deeming provision to hold directors of a juristic body liable for acts committed in their official capacity – Accused employed as directors of Avid but charged in their personal capacity – Avid, the corporate body not held liable to create legal basis on which a director could be held personally liable for corporate crimes committed in the course of its corporate activities – No allegations that the accused were directors acting in their official capacities – Absent such allegation, the State cannot rely on s 332(5) in order to secure a conviction.
Criminal Procedure – Amendment of charges – Amendment sought to insert the deeming provision of s 332(5) of the CPA – Essentials of a charge is to inform the accused in clear and unambiguous language of the case to be met – Amendment must fall within the ambit of s 86(1) of the CPA - Amendment sought would only be allowed if the accused will not be prejudiced in his/her defence – Amendment would change the basis and capacity in which the accused persons are charged and have pleaded and is therefore a substitution in the guise of an amendment – Prejudice to the accused persons evident – Right to a fair trial includes transparency in the charges levelled. Amendment refused.
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ORDER

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Count 1: Main and alternative counts:
Accused no’s 1 – 5: The application in respect of each accused is dismissed.

Accused no 6: The application is granted.

Accused no 7: The application is granted only in respect of the main count (Fraud), on the alternative counts (Theft) it is dismissed.
Count 2
Accused no’s 1 – 7: The application in respect of each accused is dismissed.
Counts 3 – 8
Accused no’s 1 – 4: The application in respect of each accused is granted.
Count 9
Accused no’s 1 – 7: The application in respect of each accused is granted.
Counts 10 and 11
Accused no 3: The application is granted.
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JUDGMENT

(Application in terms of s 174 of Act 51 of 1977)

______________________________________________________________
LIEBENBERG J:

[1] In this application the accused persons at the close of the State case applied in terms of s 174 of the Criminal Procedure Act 51 of 1977 (hereinafter ‘the CPA’), to be discharged on all counts preferred against them. While there are counts in which all the accused persons are indicted, there are others in which only some accused stand charged. The alleged involvement by each accused in the commission of the alleged offences will become apparent during the course of the judgment.

[2] Mr Marondedze, assisted by Mr Lutibezi, representing the State, opposes the applications made.

Introduction

[3] On 26 January 2005 the amount of N$30 million, the property of the Social Security Commission (hereinafter ‘the SSC’), was invested with Avid Investment Corporation (Pty) Ltd (hereinafter ‘Avid’) following the latter’s successful bid to obtain the investment. It is common cause that the allocation of funds was facilitated by Messrs Gideon Mulder as Manager: Corporate Finance; Avril Green the General Manager: Finance, and approved by Shilikunye Hiveluah, the Chief Executive Officer (CEO). It is not disputed that the funds invested with Avid went missing and that the SSC suffered a substantial loss.

[4] The applicable test in an application in terms of s 174 of the CPA is that the court, at the close of the State case, may return a verdict of not guilty if it is of the opinion that there is no evidence upon which a reasonable court, acting carefully, may convict. The credibility of State witnesses is a factor that could be taken into consideration but at this stage, plays a very limited role. Only if the evidence is of such poor quality that it cannot be accepted by a reasonable court, would it support an application for discharge at this early stage of the trial.¹

[5] From the indictment it is evident that accused no’s 1 – 4 were charged in their private capacity and not as directors of Avid while accused no’s 5 and 6, so it is alleged, associated themselves with Avid. Accused no 7, the Managing Director and/or Chairman of Namangol Investment (Pty) Ltd (hereinafter ‘Namangol’), allegedly associated himself with the late Lazarus Kandara, the CEO of Avid at the relevant time. It is common cause that accused no 2, during that period, acted as Chairperson of Avid.

[6] With regard to the manner in which the prosecution formulated the charges against the accused, counsel for accused no’s 1 – 4 took issue with the fact that they were charged and pleaded to crimes allegedly committed in their private capacity and not as directors of Avid at the relevant time. Accused no 1 in his s 115 plea explanation pertinently pointed this fact out and stated that he prepared his defence on that basis and continued doing so throughout the trial. Though the other accused in their respective plea explanations were less specific about the capacity in which they were charged and pleaded, it is evident, from the manner in which the counts are drawn, that the accused are charged in their private capacity, while Avid as a legal entity was not charged. In not one of the counts is it stated or alleged that the prosecution relies on the provisions of s 332 (5) of the CPA which provides for vicarious liability in the following terms:

‘(5) When an offence has been committed, whether by the performance of any act or by the failure to perform any act, for which any corporate body is or was liable to prosecution, any person who was, at the time of the commission of the offence, a director or servant of the corporate body shall be deemed to be guilty of the said offence, unless it is proved that he did not take part in the commission of the offence and that he could not have prevented it, and shall be liable to prosecution therefor, either jointly with the corporate body or apart therefrom, and shall on conviction be personally liable to punishment therefor.’

[7] It is settled law that an accused person is entitled to be informed by the charge(s) what the case is that must be met. This is especially true of an indictment alleging fraudulent conduct by the accused.² In the instant matter the accused who were directors of Avid at the relevant time were thus entitled to accept that they were prosecuted in their personal capacity, according to which they had to prepare their defence on that basis.
[8] It has been the prosecution’s intention throughout the trial to charge all the accused in their personal capacity and it was only after submissions by the defence had been made that argument was raised by the State that it, in the alternative, sought an amendment of the charge on count 1 to invoke the provisions of s 332 (5) of the CPA. For the reasons set out below, the application to amend was strenuously opposed. It would appear to me convenient to first decide the question as to whether or not s 332 (5) finds application on the current charges and, if not, only thereafter consider the application to amend in the manner sought.
[9] What is clear from the heads of argument filed by the prosecution is that the application sought by the State refers only to count 1 and does not include those counts for which the accused are charged in contravention of various sections under the Companies Act 61 of 1973. In support of the application it was argued that the summary of substantial facts disclosed to the defence in addition to the indictment, adequately contain the necessary facts to bring s 332 (5) into operation. Furthermore, whereas the accused persons had earlier challenged the constitutionality of s 332 (5) in the Supreme Court prior to the commencement of trial proceedings, they must have been mindful of the possibility that the presumption provided for in subsection (5) would be invoked during the trial.³ It was also argued by the State that the accused persons only having raised the defence that they were acting on behalf of Avid ‘at the eleventh hour’, tends to show that they are ‘ducking and diving from the inevitable consequences of their personal actions’ as it was never put to any of the witnesses in cross-examination that the accused at the relevant time acted on behalf of Avid. This argument is clearly premised on the assumption that the accused had a duty to raise their objection to the manner in which the charges are drawn.
[10] It was further argued in the alternative that if the court was not satisfied that the indictment in its current form sufficiently informed the accused persons that the State would invoke the provisions of s 332 (5) in respect of count 1, then it would be in the interest of justice to grant leave to the State to amend the first count in terms of s 86 of the CPA on the basis that words and particulars that ought to have been inserted in the charge, were omitted. The argument went on to say that, given the manner in which the accused persons conducted their defence, they will not be prejudiced in any way if the charge were to be amended as it essentially would remain one of fraud.
The charge
[11] The requirements of a charge are set out in s 84 (1) of the CPA in the following terms:
‘84 Essentials of charge

(1) Subject to the provisions of this Act and of any other law relating to any particular offence, a charge shall set forth the relevant offence in such manner and with such particulars as to the time and place at which the offence is alleged to have been committed and the person, if any, against whom and the property, if any, in respect of which the offence is alleged to have been committed, as may be reasonably sufficient to inform the accused of the nature of the charge.’

It is settled law that what is required in a charge is to inform the accused in clear and unambiguous language of the case the State wants to advance against the accused. Pertaining to a charge of fraud the court in S v Hugo⁴ stated the following at 504E-G:
‘An accused person is entitled to require that he be informed by the charge with precision, or at least with a reasonable degree of clarity, what the case is that he has to meet and this is especially true of an indictment in which fraud by misrepresentation is alleged. (Cf. R. v Alexander and Others, 1936 AD 445 at p. 457; S v Heller and Another, 1964 (1) SA 524 (T) at p. 535H). It is of vital importance to such an accused to know what he is alleged fraudulently to have said or done and he ought not to be left to speculate as to the true nature of the misrepresentations laid to his charge, nor to spell out of the charge possible misrepresentations upon which the State might have intended to rely but which it did not reasonably clearly describe. And when the State clearly specifies the misrepresentations upon which it relies the accused is entitled to regard them as exhaustive and to prepare his defence in respect of those representations and no other.’
I respectfully endorse these sentiments.
[12] It was argued on behalf of the State that, in view of what has been stated in S v Deal Enterprises (Pty) Ltd and Others⁵ failure by the State to specifically refer to the statutory provision in the charge, will not preclude the State from relying on the provisions of s 332 (5) of the CPA. In view of the present facts, I do not consider the Deal case to be of any assistance to the State as the facts in that case are clearly distinguishable from the present. Contrary to the accused in the instant matter having been charged in their personal capacity, the indictment in Deal alleged that the corporate body Deal committed the offences charged and furthermore, that at the times of the commission of the offences, certain accused identified in the indictment were either servants or directors of the body corporate. Therefore, it was said, they could not have been taken by surprise. In the instant matter it had not been alleged that the offences charged were committed by Avid, neither that the accused at the relevant time were directors of the company. That the intention was to charge them in their personal capacity is evident from the fact that all the accused were jointly charged with fraud in the same count (count 1), irrespective as to whether or not they were directors of Avid or private persons. Accordingly, I find no support in the Deal case for counsel’s contention that the omission to refer to s 332 (5) in the charge, is not without consequence.
[13] In R v Limbada and Another⁶ the court was concerned with s 381 (7) of the earlier CPA (56 of 1955) and at 486D-E Steyn JA said:
‘In each case in which its provisions are invoked, the accused would, if found guilty, have to be convicted of such other offence and not of a contravention of this subsection. That does not mean that the matters required to be proved before reliance can be placed upon it, need not be averred in the indictment or charge. If the prosecution rests its case upon the subsection, the accused is, I think, entitled to be informed of that fact, just as much as he is entitled to other details necessary to acquaint him with the nature of the case he has to meet.’ (My emphasis)
Although reference in that case was made to subsection (7) which refers to associations, the principle, in my view, remains the same and equally finds application to subsection (5) of the CPA relating to corporate bodies. To this end, the accused at the stage of pleading were entitled to be informed that the State’s case rests on s 332 (5) of the CPA if that were to be the case.
[14] In as much as the State now criticises the defence for not having been alive to the fact that the provisions of s 332 (5) could still be invoked, the same level of criticism could be levelled against the prosecution for having omitted to mention in the charge that the State is relying on the deeming provision in s 332 (5) of the CPA.
[15] Contrary to the position in South Africa where the provisions of s 332 (5) had been found unconstitutional⁷, the section remains applicable in this Jurisdiction. In Attorney-General of Namibia v Minister of Justice and Others (supra) at 846B-D the Supreme Court in this regard said the following:
‘It is my considered view that the subsection does not derogate from the presumption of innocence provided for in art 12(1)(d) of the Constitution, because, as Kentridge AJ [in the Erasmus case] convincingly reasoned, the state is still required to prove the offence by the corporate body beyond reasonable doubt without the aid of the presumption before the accused may be called upon to establish, on a balance of probabilities, a defence or excuse. As Kentridge AJ rightly observed, if an accused is convicted under s 332 it will be because all the elements required by s 332(5) in order to give rise to that liability have been proved beyond a reasonable doubt and because the excuse provided for by the subsection has not been established.’
In conclusion the court had found s 332 (5) to be constitutional in respect of those persons in control of corporations (directors), but not as far as it extended deemed liability for corporate crimes to mere servants of the corporation; that part of the section having been found ‘impermissibly overbroad’.
[16] What is clear from the above is that it was open to the prosecution to charge Avid as legal entity and invoke the provisions of s 332 (5) in respect of those accused who had been directors of the company at the time the alleged offences were committed. In fact, it appears to me that the said subsection is the only legal basis on which a director of a corporation could be held personally liable for corporate crimes committed in the course of its corporate activities. Thus, it would appear to me that if the evidence procured at the trial proves that an offence was committed by the corporate entity (in this instance Avid), then a director, having acted within his/her mandate or powers when representing the corporate entity, cannot be convicted when charged in criminal proceedings in his/her personal capacity.
[17] In the light of the s 115 plea explanation in amplification of the plea of not guilty on all the counts given by accused no 1, it is surprising that this did not timeously alert the prosecution. Accused no 1 could hardly have been more specific when he stated the following in par 2 of his s 115 statement:
‘2. It is significant and not without fatal consequences to the State that I have been indicted and have pleaded to the charges in my personal capacity and not in my official capacity as a then Avid director. I have accordingly prepared on that basis. There was no direct relationship between me personally and the Social Security Commission. I at all times acted in the representative and official capacity as a director of Avid.’
This notwithstanding, the State did not charge the company as a juristic person and rely on the provisions of s 332 (5) of the CPA in respect of its directors, but persisted in prosecuting the accused persons in their personal capacity.
[18] In Hiemstra’s Criminal Procedure⁸, the learned author states that when the State intends to establish personal liability and relies on the provisions of s 332 (5) ‘it is an essential factum probandum and an essential allegation in the charge sheet that the individual was at the time of the commission of the offence a director …’
[19] From a reading of the main and alternative charges contained in count 1 it is clear that, in respect thereof, none of the accused persons are cited as directors of Avid but only in their personal capacity. In S v Freeman⁹ the appellant was a director of a company which carried on a restaurant business where liquor was unlawfully sold by the company in that it was not in possession of the necessary licence to sell intoxicating liquor. The question arose on appeal as to whether the appellant, in view of the fact that he was charged in his personal capacity (and not as a director of the company), and without any reference in the charge being made to the provisions of s 381 (5) of the CPA (the present s 332 (5)), could have been properly convicted. The following appears at 701C-E:
‘In my view, the absence of any reference in the charge to the liability of the appellant by virtue of his directorship disentitled the State from invoking the provisions of sec. 381 (5) of the Criminal Code in order to secure a conviction. This, I think, is in accordance with the law as is stated in R v Limbada and Another, 1958 (2) SA 481 (AD) at p. 486C, and particularly also from the case of R v Hoshalia and Others, 1959 (2) P.H. H268. In the last-mentioned case, the full Bench of this Court expressly held that sec. 381 (5) of the Criminal Code can only be relied upon by the prosecution if it is conveyed to the accused in the charge that vicarious liability is relied upon, with particulars thereof. As I have indicated, there is nothing to that effect in the charge in the present case. The appellant was therefore entitled to an acquittal.’ (My emphasis)
[20] In the absence of any facts showing otherwise, I do not agree with State counsel’s contention that the State is entitled to rely on s 332 (5) even if no reference thereof has been made in the charge itself. The fact that reference had been made in the summary of substantial facts about accused no’s 1 – 4 becoming directors of Avid, in my view, still does not cure the defect in the charge as far as it concerns vicarious liability. In the summary it is stated that ‘(t)he accused persons jointly and or separately and or through their appointed representatives made a series of misrepresentations. . . ’ without any reference being made to those accused who were directors to have acted in that capacity. (My emphasis) Section 144 of the CPA makes a clear distinction between the indictment and the summary of the substantial facts of the case and should therefore not be regarded as an integral part of the indictment. Contrary to the indictment itself, the State in its summary of substantial facts is not bound by the contents. In this regard the court in S v Mpetha (1)¹⁰ at 808C-E said:
‘The summary is not an integral part of the indictment. It is a statement of the material facts of the case. Additional facts may become known to the State after the service of the indictment. Those facts may not necessitate any amendment of the indictment. They may simply fortify the existing allegations in the indictment. In such a case, I see no reason why the State, as dominus litis, may not supplement unilaterally the summary of facts which it has provided. The fact that the Attorney-General is vested with a discretion as to how much information shall be disclosed in such a summary seems to me to be consistent with the view I have taken. The Attorney-General has, of course, no such discretion in regard to the contents of an indictment. An indictment must satisfy objective criteria which it is the Court's province to judge. An indictment may not be amended without the sanction of the Court once objection has been taken to it, or issue has been joined in the trial. But I have difficulty in seeing how the Court can prohibit the Attorney-General from expanding a summary which he has furnished. Indeed, the provisions of sub-para (1) of s 144 (3) (a) make it plain that the Attorney-General is not bound by the contents of the summary. In other words, he may lead evidence at the trial of facts which are not in the summary.’ (My emphasis)
[21] For the foregoing reasons I have come to the conclusion that the State, on the current formulation of count 1, read together with the summary of substantial facts of the case, cannot rely on the provisions of s 332 (5) of the CPA in order to prove its case on count 1 in the main, or in the alternative. Avid as a corporate entity had not been charged and whereas the State chose to prosecute the accused, (accused no’s 1, 2 and 4 at the relevant time being directors of the company), in their personal capacity, the deeming provision under s 332 (5), in my view, finds no application.
Application to amend count 1
[22] I turn next to consider the State’s application to amend the charge and, as argued by the prosecution, it would be in the interest of justice to grant leave to allow an amendment of count 1 by inserting the provisions of s 332 (5) of the CPA in the charge. Defence counsel, for obvious reasons, oppose the application brought under s 86 of the CPA.
[23] Section 86 (1) provides for an amendment of the charge at any time before judgment if the court considers that the making of the relevant amendment will not prejudice the accused in his defence. Whereas judgment had not been passed, the State is entitled to bring the application even after the closing of the State’s case.¹¹ The section makes plain that an amendment of the charge is aimed at curing any defect in the charge and not to substitute charges or persons, and will only be ordered once the court is satisfied that the accused will not be prejudiced in his defence. I am in agreement that an amendment of the indictment as sought by the State, in principle, would not change the charges of fraud and theft preferred against the accused, but what it will do is to substitute the capacity in which the accused were charged and pleaded. In fact, it will substantially change the basis of the charges brought against those accused who had been directors at the time the offences were committed, and clearly has the making of a substitution in the guise of an amendment. In my view, and contrary to what has been argued, the amendment sought falls outside the ambit of possible amendments provided for in s 86 (1) and exceeds the mere insertion of words and particulars that ought to have been included in the charge. Further, I do not agree with the submission that, given the manner in which the accused persons have conducted their defence, they would not be prejudiced if the amendment were to be allowed.
[24] Bearing in mind that counsel for the defence on numerous occasions during cross-examination made it clear that its angle of cross-examination was aimed at and limited to the accused having been charged in their personal capacity and not as directors of Avid, it seems to me inescapable to come to the conclusion that, had the accused been at risk of being convicted on the basis of vicarious liability, the nature and extent of cross-examination of State witnesses would have been significantly different. In this respect there is a real possibility that the accused would be prejudiced in their defence if leave to amend were to be granted. Furthermore, the accused persons being directors at the relevant time would, in all probability, have given different plea explanations had the amendment been made before they pleaded, for now the onus would be on them to show on a balance of probabilities that they did not take part in the commission of the offence, or that they could not have prevented it (s 332 (5)). Whereas the application to amend is only brought after the close of the State’s case, the court, with the benefit of hindsight, has before it all the evidence the State intends relying on in order to prove the charges, as well as the manner in which the cross-examination was conducted. This greatly assists the court in determining whether or not the accused will be prejudiced by the amendment sought.
[25] Where the provisions of s 332 (5) had not been invoked in the charge and the evidence proves the commission of offences for which the company would be liable, the accused would be entitled to raise a defence that they did not commit any offence in their personal capacity, but had acted in their official capacity as directors of the company. In such instance they would be entitled to be discharged on that basis alone. In this regard see R v Smith & Others¹² where the following appears in the Headnote:
‘Where the Crown endeavours to fasten vicarious liability on directors or servants of a company by virtue of the provisions of section 381 (5) of Act 56 of 1955 it would probably be sufficient, so as not to make an indictment excipiable as disclosing no offence, if the Crown were to make it clear in such indictment by referring to section 381 (5) of Act 56 of 1955 that it intended to allege vicarious liability, but that does not mean that the accused is not entitled to be told that the pre-requisites for invoking the presumption created by section 381 (5) will be proved; he may very well require particulars of such pre-requisites for the purpose of preparing his defence, in which case such particulars will have to be given; the Crown should in framing the indictment endeavour to reduce the accused's embarrassment to a minimum.’ (My emphasis)
[26] Article 12 (1)(a) of the Namibian Constitution guarantees all persons a fair trial and the courts are under a duty to ensure that the accused’s right to a fair trial is fulfilled. I am in agreement that principles of fair trial procedure embodied in the Constitution include elements of transparency as far as it concerns the State’s duty to disclose in criminal proceedings both in respect of the particulars of the charge, as well as the evidence relied upon. In this regard the court in S v Nassar¹³ at 257A-C said:
‘The point of departure in a criminal case is that the accused is presumed innocent until proven guilty. (Article 12(1)(d).) To do justice to this fundamental right it is a prerequisite that an accused is put in the position whereby he knows what case he has to face so that he can properly and fully prepare his defence. I respectfully refer again to the words of Sopinka J in R v Stinchcombe (supra at 9):

“The right to make full answer and defence is one of the pillars of criminal justice on which we heavily depend to ensure that the innocent are not convicted.” ’ (My emphasis)

[27] With regard to the manner in which the charges in count 1 are framed, considered together with the way in which the defence has conducted the cross-examination of State witnesses, and the late stage at which the application is made to have the charge amended, I have come to the conclusion that by allowing the amendment, the accused persons (at least those accused who were directors at the relevant time) would be prejudiced in their defence and will not receive a fair trial as guaranteed in the Constitution. Consequently, the application to have count 1 amended is refused.
Piercing the corporate veil
[28] It was also argued on behalf of the State that the transaction during which N$30 million was invested with Avid was induced by fraudulent representations that were made by the accused persons to the SSC’s management, for which they now want to hide behind the corporate veil.
[29] For purposes of this judgment I do not find it necessary to dwell unnecessarily on the rule known as piercing the corporate veil, suffice it to repeat the remarks made by Smalberger JA in Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd and Others¹⁴ at 803A-804A:
‘Whatever the position, it is probably fair to say that a court has no general discretion simply to disregard a company's separate legal personality whenever it considers it just to do so (Botha v Van Niekerk en 'n Ander 1983 (3) SA 513 (W) at 524A; Gower's The Principles of Modern Company Law 5th ed. at 133). Much of what is considered to be the current law on the subject is set out in the judgment at 815H-821C. I do not deem it necessary or advisable in the present appeal to attempt to formulate any general principles with regard to when the corporate veil may be pierced. I propose to do no more than apply what I conceive to be the appropriate legal principles to the facts of the present matter. The principle of a company's separate juristic personality was first asserted in the House of Lords in Aron Salomon v A Salomon and Co Ltd [1897] AC 22. There already it appears to have been recognised that proof of fraud or dishonesty might justify the separate corporate personality of a company being disregarded. (See, in this regard, the speeches of Lord Halsbury at 33 and Lord Macnaghten at 52-3.) And over the years it has come to be accepted that fraud, dishonesty or improper conduct could provide grounds for piercing the corporate veil. Recently this was confirmed in The Shipping Corporation of India Ltd v Evdomon Corporation and Another 1994 (1) SA 550 (A) where Corbett CJ expressed himself as follows at 566C-F:
“It seems to me that, generally, it is of cardinal importance to keep distinct the property rights of a company and those of its shareholders, even where the latter is a single entity, and that the only permissible deviation from this rule known to our law occurs in those (in practice) rare cases where the circumstances justify "piercing" or "lifting" the corporate veil. And in this regard it should not make any difference whether the shares be held by a holding company or by a Government. I do not find it necessary to consider, or attempt to define, the circumstances under which the Court will pierce the corporate veil. Suffice it to say that they would generally have to include an element of fraud or other improper conduct in the establishment or use of the company or the conduct of its affairs. In this connection the words "device", "stratagem", "cloak" and "sham" have been used. . . .”
Two matters arising from the quoted passage merit further comment. First, reference is made to “those (in practice) rare cases where the circumstances justify "piercing" or "lifting" the corporate veil”. It is undoubtedly a salutary principle that our Courts should not lightly disregard a company's separate personality, but should strive to give effect to and uphold it. To do otherwise would negate or undermine the policy and principles that underpin the concept of separate corporate personality and the legal consequences that attach to it. But where fraud, dishonesty or other improper conduct (and I confine myself to such situations) is found to be present, other considerations will come into play. The need to preserve the separate corporate identity would in such circumstances have to be balanced against policy considerations which arise in favour of piercing the corporate veil (cf. Domanski 'Piercing the Corporate Veil-A New Direction' (1986) 103 SALJ 224). And a court would then be entitled to look to substance rather than form in order to arrive at the true facts, and if there has been a misuse of corporate personality, to disregard it and attribute liability where it should rightly lie. Each case would obviously have to be considered on its own merits.’ (My emphasis)
[30] I have not been referred by counsel to any case where the rule of piercing found application in criminal proceedings; neither have I been able to find any cases myself. The reason for this might be, as counsel for accused no 1 argued, that there would be no need for the rule as s 332 (5) of the CPA specifically makes provision for directors of a corporate body to be liable in person when an offence had been committed for which a corporate body is or was liable to prosecution. The submission, in my view, is not without merit as the application of that section in criminal proceedings would yield the same result ie to prevent directors of a corporate body from hiding behind the corporate personality of a company and to hold them personally liable for offences to have been committed by the company, as ‘a corporation is an artificial person that “has no body to be kicked or soul to be damned” [as] the directors are its controlling minds’.¹⁵
[31] But what is the position in criminal proceedings where a director of a corporate entity is not charged in his official capacity but in his personal capacity, as the court is faced with in the present instance? Does that mean that where there is misuse of the corporate personality or where fraud, dishonesty and improper conduct is present, a director of such entity can claim absolution on the basis that he was acting in his official capacity thereby escaping conviction? It seems to me that where the evidence proves that a director is found to have exceeded the powers vested in him in his official capacity when knowingly making false representations, or acts recklessly and carelessly as to whether a presentation is true or false and the misrepresentation involves some risk of prejudice, that there is no reason in law why such person cannot be found liable in his personal capacity, even if he at the time claims to have represented the company in corporate dealings. It would appear to me that the reason for coming to this conclusion is that, as a director, he would have no general powers to make any misrepresentation on behalf of the company and by so doing, legally exceeds the powers vested in him in his official capacity. The safer option for the prosecution where fraud, dishonesty and other improper conduct is present, would be to charge both the company (relying on s 332 (5) of the CPA) and (depending on the facts) the accused in person, thereby avoiding the situation where a director acting recklessly and making misrepresentations falling outside the ambit of, or exceeds, his official powers as director, wants to hide behind the company as a legal entity and avoid conviction. To this end, so it seems to me, his position would be no different to that of any other person charged in his personal capacity.
The culpability of the accused
[32] Whereas the then directors of Avid as well as non-directors have been charged in their personal capacity, it was contended on their behalf that the tenor and thrust of the evidence led by the State was clearly aimed at proving that when the alleged offences were committed, they were acting in their capacity as directors in the performance of their corporate activities ie furthering and in pursuance of the interests of Avid. It was further contended that, because of the manner in which the accused were indicted without any reference being made in the charge to the provisions of s 332 (5) of the CPA, therefore, they cannot be convicted.
[33] The subject matter leading up to the arrest and prosecution of the accused persons is an investment of N$30 million made by SSC with Avid and the role each accused played in securing the investment so made. The greater part of the evidence presented described the circumstances leading up to the approval of the investment awarded to Avid, being the evidence of Messrs Mulder, Green and Hiveluah, which will be dealt with in more detail below.
[34] It is common cause that during 2004 Avid tendered by way of a quote for an investment of N$60 million with the SSC, which was not met with success. Subsequent thereto, accused no 1 enquired from Mr Hiveluah about their proposal, but instead was referred to Mr Mulder, the Manager Corporate Finance.
[35] Mr Green, in turn, was approached by accused no 5 on the 3^rd of January 2005 to enlighten him about Avid as a potential investment company. He introduced himself as a Member of Parliament and said that he had been sent by ‘high authority’ to approach Green and speak to him about future investments to be made by the SSC. Though stating that he did not hold any official position within Avid, he claimed to be representing the company. He further told Green that the SWAPO Youth League (SPYL) was the major shareholder in Avid and held 80% of the shares. As regards the company directors, he mentioned the names of accused no’s 1, 2, 3, 4 and 6. He further stated that the interest rates offered were between 15 and 20%. Green then explained to him the procedures that had to be followed when investments from the SSC were sought. The next day Green and accused no 5 went to the Swapo head office where he was introduced to accused no 1. According to Green the purpose of this visit was because SPYL was the major shareholder and accused no 1 had been involved in SPYL. Accused no 1 questioned Green as to why the SSC did not want to invest with Avid and Green again explained the procedure that had to be followed. This visit was followed up by a letter from accused no 2 as the Chairperson of the Board of Directors of Avid dated 04 January 2005, re a placement proposal for an investment of N$60 million which was delivered to Mulder by accused no 5. Mr Mulder thereafter obtained further quotes from prospective investors.
[36] I pause here to observe that the information conveyed to Mr Green by accused no 5 on this occasion, was factually incorrect in more than one way.
[37] According to Mr Mulder he was subsequently given by accused no 5 the company profile of Avid (Exh ‘L’), portraying accused no’s 1 – 4 as company directors. This is clearly incorrect as accused no 3 by then was no longer a director and had already resigned in November 2004. Those within the company responsible for investments were identified in the portfolio being Inez Gases; Lazarus Sawab and Justin Rentzke. From the evidence adduced it is clear that in the end none of these persons dealt with the SSC investment in any form or manner. Messrs Mulder and Green testified about a visit by accused no’s 2 and 6 (Shigweda) on the 19^th of January 2005 to their office and although Mulder was unable to give any detail as to what had been discussed between them, Green testified that they had gone through the profile document and mostly concentrated on how the money would be invested, and discussed risk management in respect of the investment if Avid were to be the successful bidder. The presentation was mainly done by accused no 2, with accused no 6 not actively taking part in the presentation. In a follow-up letter dated 20 January 2005 (written by accused no 2), Avid undertook to furnish the SSC with a financial guarantee bond within seven working days after placement of the funds; monthly reports of the investment and performance would be submitted; that funds would be kept in a scroll account with Standard Chartered Bank; and that same would not be moved either by Avid or its traders. Pertaining to the shareholders, the names of six persons and/or companies and/or trusts were listed. From the evidence of the liquidator, Mr Knouwds, this was not a true reflection of the company’s profile as none of these persons or entities at that stage were actual shareholders of Avid. The only registered shareholder on 20 January 2005 was Nadiema Izolda Eberenz. Understandably the company profile contained material information for the investor as regards the company its money would be invested in.
[38] What is clear from the evidence of Mulder is that he did not shortlist Avid during June 2004 as a potential investor as they, after having considered their company profile, did not qualify. Mulder’s evidence as to what made him change his mind about Avid appears at p. 162 of the record:
‘So to me when I look at my first evaluation in 2004 I did not know the directors. I was just evaluating according to point(s), on certain points the experience as management etcetera. So according to that they did not make it. Now that I am being introduced to the people I am starting to see that there is credibility to this company so from my point, my view, I was not then really concerned about integrity of Avid Investment Company at that particular point in time’. (My emphasis)
Another factor which clearly carried weight with Mulder was when he heard via Green and accused no 5 that the State President was ‘also involved and a shareholder’ in Avid.
[39] This information conveyed to Mr Mulder culminated in Avid in the end scoring the highest point in the evaluation of potential investing companies and during a meeting of the financial managers of the SSC held on 20 January 2005, it was decided to place N$30 million with Avid and which was approved by Mr Hiveluah the following day. Avid was accordingly informed by letter dated 21 January 2005 and were instructed to invest the funds in a four months fixed interest bearing call account and to issue a letter of confirmation and monthly statements as agreed (Exh ‘P’). The letter was handed to accused no 5 who personally came to collect it.
[40] Prior to the transfer of funds certain information about Avid had reached Mr Green where after he expressed his dissatisfaction with the guarantee that would be issued. Accused no’s 1 and 5 were in view thereof informed that the transfer of funds had been cancelled. At this juncture the name of Lazarus Kandara and his alleged involvement in Avid became known. This culminated in a meeting held with accused no 1 on the morning of 24 January 2005 during which various concerns were raised with him. This concerned the contact persons at Avid, shareholders and parties with an interest in Avid, and key people dealing with the SSC investment. Mr Green testified that Mr Hiveluah during the meeting made it clear to accused no 1 that if the late Kandara was involved in Avid, then the SSC would have no further dealings with them to which accused no 1 denied Kandara’s involvement in the company. Mr Green’s evidence on this point is corroborated by Mr Hiveluah.
[41] Arising from the issues raised with accused no1 on the 24th, a letter dated 25 January 2005 (Exh ‘R-1’) was sent to the SSC in which the remaining concerns raised were addressed. I shall return to these later.

[42] It is common cause that Mr Mulder went to Johannesburg, South Africa, on the 26^th of January where he met with a certain Wayne van der Westhuizen in connection with the investment. Upon his return he prepared a memorandum (Exh ‘Q’) in which he explained the safety of the assets regarding the investment they were to make. It was reported that a financial guarantee bond would be issued, the validity of which to be confirmed in writing. The bond would be issued by either the World Bank or by the IMF as confirmation of the investment placed with the Standard Charter Bank and which were to be given to the SSC. This however never materialised. A copy of a document purporting to be a financial guarantee bond, issued by Alan Rosenberg Investment Banking dated 07 February 2005 to the effect that the amount of N$30 million was received from Avid, was produced as proof of the investment. However, this document turned out to be a fake.

[43] Despite the earlier concerns of the SSC managers, these were in the end laid to rest and on 27 January 2005 the transfer of funds to Avid was authorised. The only unresolved issue was the bond guarantee that had to be issued in favour of the SSC. Though there was some differences between the parties as to who the custodian of the guarantee would be (Avid or the SSC), it is evident that the SSC managers were in the end obliged to accept that it remained with Avid and awaited the maturity of the investment which was due in May 2005. However, by then the financial managers and CEO, Mr Hiveluah, were no longer in the employ of the SSC in that their departure came as a direct consequence of the ill-fated investment made with Avid.
[44] As for the SSC managers, although they claimed to have acted in good faith and had the necessary authorisation to make the investment with Avid, evidence led in that regard tends to show otherwise. Though neither one of them testified that they were influenced in any manner not to comply with the investment policies of the SSC in place at the relevant time, it is the State’s case that the investment so made with Avid came as a direct consequence of a series of misrepresentations made by the accused to the SSC officials, influencing the final decision to invest with Avid.
[45] Before coming to the alleged fraudulent presentations, it seems necessary to briefly deal with defence counsel’s contention that the Avid managers had no powers to make the investment and therefore had acted unlawfully. The core of the argument lies therein that the administration of funds is government by the provisions of 16 (3) of the Social Security Act 34 of 1994 (the Act), which provides as follows:
‘(3) The Commission may, after consultation with the Minister, invest such moneys of any fund administered by it which are not required to meet administrative expenses or the payment of benefits under this Act-

(a) with any financial institution (as defined in section 1);

(b) ….;

(c) with such other institution approved by the Minister;

(d) in any shares, securities, stocks, property or commercial enterprise approved by the Minister.’ (My emphasis)
[46] The Act makes plain that the SSC could only have invested moneys in Avid being ‘any other institution’ (other than investing with an acknowledged financial institution or the post office), if and when the Minister had been consulted and approved such institution for purposes of the proposed investment. It is clear from the evidence of the Minister, the Honourable Mungunda, that she had neither been consulted in that regard, nor had she approved Avid as a suitable institution for purposes of investing SSC funds. Her evidence further laid to rest the ill-conceived perception of the financial managers that the mere attendance by the Permanent Secretary of meetings of the Investment Steering Committee (during which it was resolved that the financial managers could directly invest with financial institutions), annulled approval by the Minister as regards other institutions. The approach followed by the managers by adopting a procedure for investments not provided for in the Act, was unfortunate, and they simply continued with the Avid investment despite the SSC’s legal advisor, Ms Keramen, having pointed out to them that the proposed investment with Avid did not satisfy statutory requirements.
[47] It is against this background that counsel contended that the investment made by the managers resulted in an illegality as the investment contract was entered into in violation of explicit and peremptory requirements as set out in s 16 (3) of the Act.¹⁶ In view of the managers having contracted a transaction that was unlawful and therefore ultra vires, counsel further contended that they (the managers) had no right to prescribe their own requirements in order to override the legal requirements contained in the Act; neither could the non-compliance with these ‘self-created requirements’ be relied upon to protect the illegality of their actions.
[48] Although I did not hear counsel argue that, because the SSC managers’ decision to invest with Avid was an illegality and they therefore could not have been defrauded, it came close thereto. It was submitted that it mattered not whatever misrepresentation the accused might have made to them, as they were not the competent and legal functionaries to decide when, how and with whom to invest. The fact that the transaction between the SSC and Avid was unlawful and therefore ultra vires, in my view, does not per se negate any fraudulent conduct on the part of the accused if it is proved that the SSC managers were induced through misrepresentations made to do the said investment. By analogy, under criminal law someone stealing from a thief would equally be guilty of theft, whilst a thief can also be defrauded to part with moneys even if it does not lawfully belong to him, or over which he has no lawful control. Thus, even if the investment transaction was an illegality, fraudulent conduct inducing a person to part with money arising therefrom, would constitute the offence of fraud. The elements of the offence of fraud as per CR Snyman¹⁷ are the following: (a) a misrepresentation; (b) prejudice or potential prejudice; (c) unlawfulness and (d) intention. Thus, even if the managers had no authority to go about the investment as they did, the accused, save all other defences, could still be guilty of the offence of fraud if the evidence satisfies the above requirements.
[49] It was further argued that even if it were to be accepted that the directors of Avid, when acting on behalf of the company, made certain false representations, the nature thereof cannot in the ordinary commercial course attract criminal liability in the form of fraud, as the requirement that the representation must have been material, is lacking. A material misrepresentation was described in Karroo & Eastern Board of Executors & Trust Co. v Farr & Others¹⁸ at 420 as one which was ‘of such a nature as would be likely to induce a person to enter into the contract’.
[50] On count 1 all the accused stand charged with the offence of fraud in that they between the period extending from December 2004 to the 31^st of August 2005, jointly and acting in common purpose, wrongfully and falsely with intent to defraud gave out and/or pretended to the Social Security Commission or its management and/or Tuli Hiveluah; and/or Avril Green and/or Gideon Mulder, that (in summary): Avid was an established investment company with a proven investment track record; that its established shareholders were prominent Namibians; that Avid’s investment would be invested in a fixed interest bearing call account at a specific interest rate; the SSC would be furnished with a Financial Guarantee Bond issued by either the World Bank or International Monetary Fund within 7 days of placement; that Avid was connected to a host of investment corporations and traders in the RSA who would issue Government Bonds as security; that Paulus Kapia (accused no 1) and Inez Gases (accused no 2) would solely handle the SSC investment; that Lazarus Kandara was not involved in the affairs of Avid; that if SSC were to cancel the deal it would be penalised in the amount of N$6 million; and lastly, that the investment of N$30 million would yield more than N$1.4 million on the maturity date namely, 24 May 2005.
[51] Bearing in mind the period for which the accused are charged, it should be noted that Othniel Podewiltz, accused no 3, had already resigned as a director from Avid in November 2004, whilst accused no 1 resigned on the 20^th of March 2005. This means that by the time the SSC investment was made, accused no 3 was no longer a director of Avid. The resignation of the two directors had not been challenged and is common cause. It is settled law that the resignation of both directors became effective when it was communicated to the board of Avid, at which stage their duties and responsibility towards the company seized to exist. As directors they could thus only be linked to the company for the period they had served on the board of Avid, and not beyond.
[52] With regard to the alleged misrepresentations made which induced the managers to invest with Avid, it is important to note that already on 21 January 2005 a letter, signed by Messrs Green and Mulder, was addressed to Avid stating that their investment quotation for a fixed-interest rate of 14.65% was successful. From a reading of the letter it would appear that already by the 21^st the SSC was satisfied that the moneys may be invested with Avid and it is on this basis that Mr Namandje argues that, whatever misrepresentation was made thereafter, this could not have induced the financial managers of the SSC to enter into the investment agreement as it would have been ex post facto. It is common cause that although the transfer of funds to Avid was not immediately done but only effected on the 27^th of January 2005, this came about due to certain issues that arose and which the managers first had to clarify with Avid’s directors. At no stage was the agreement cancelled during this period, though there was some talk of doing so. It should however be borne in mind that the alleged misrepresentations as embodied in count 1 are not limited to the concluding of the investment agreement, but also includes presentations made thereafter, prior to the transfer of funds and beyond.
[53] I now return to the misrepresentations allegedly made by each of the accused persons in his or her personal capacity contained in count 1 and intend dealing with same in chronological order.