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[2013] ZAECPEHC 46
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Randell v Eybers NO and Others (154/2010) [2013] ZAECPEHC 46; [2014] 1 All SA 107 (ECP); 2014 (1) SACR 629 (ECP) (19 September 2013)
IN THE HIGH COURT OF SOUTH AFRICA
EASTERN CAPE, PORT ELIZABETH
CASE NO: 154/2010
Date heard: 27
th
& 28
th
August 2013
Order granted: 30 August 2013
Reasons furnished: 19 September 2013
REPORTABLE
In the matter between:
MICHAEL WHARTON RANDELL
.................................................................
Applicant
and
JACQUES EYBERS N.O.
.................................................................
First
Respondent
THE NATIONAL DIRECTOR
OF PUBLIC PROSECUTIONS
....................................................
Second
Respondent
GREENWOOD PRIMARY SCHOOL
.....................................
Intervening Respondent
GARY DEAN PIKE N.O
JENNIFER HAYSOM N.O.
MICHAEL EDWIN NURSE N.O.
obo
GREENWOOD PROPERTY
TRUST
.....................................
Intervening Respondent
JUDGMENT
GOOSEN, J.
Introduction
On 30 August 2013, following full
argument on an opposed urgent application for the release of funds
for legal expenses, brought
in terms of section 26(6) of the
Prevention of Organised Crime Act, Act 121 of 1998 (hereinafter
referred to as “POCA”),
I made an order in the following
terms, indicating that my reasons for doing so would be furnished in
due course:
Ad the application to
intervene in the proceedings
:
The applicants are
granted leave to intervene and oppose the relief sought.
The first respondent
(the applicant in the main application) is ordered to pay the costs
of the application.
Ad the main
application
:
The application is
dismissed.
The applicant is ordered
to pay the costs of the application.
These are my reasons.
The applicant is an attorney who
served as a trustee of the Greenwood Property Trust. The Greenwood
Primary School was the beneficiary
of the Trust. It is alleged that
the applicant, together with the then-trustees improperly benefited
from a property transaction
undertaken by the trust and
misappropriated funds to be held for the benefit of the School. A
restraint order was granted in
terms of section 26 of POCA. This
application concerns the release of funds presently restrained in
terms of that restraint order.
The application was brought as an
interlocutory application citing only the first and second
respondents. It was set down to
be heard on 22 August 2013. Upon
being alerted to the application the Greenwood Primary School,
represented by its School Governing
Body and the Greenwood Property
Trust, represented by its three Trustees applied for leave to
intervene in the proceedings and
to oppose the release of the
restrained funds. All of the parties were
ad idem
that the
matter required urgent adjudication prior to the commencement of the
criminal proceedings which were scheduled to commence
on Monday 2
September 2013. It was agreed that once all of the parties had filed
papers in the matter I would hear the matter
on 27 August 2013 and
issue an appropriate order prior to the commencement of the pending
criminal proceedings. The matter was
argued on 27
th
and
28
th
August and, as indicated, I made an order on 30
August.
In order to avoid confusion regarding
the parties I shall refer to them as cited in the main application.
I shall refer to the
parties seeking leave to intervene as ‘the
School’ and ‘the Trust’ respectively and, where
appropriate,
as ‘the intervening parties’.
The School and the Trust seek leave
to intervene and oppose the main application on the basis that they
are either direct or indirect
victims of the alleged criminal
conduct which is the subject matter of the charges brought against
the applicant; that they accordingly
have a material interest in
opposing the application for the release of funds to cover legal
expenses and ought to be joined
as respondents to the main
application. Their application to intervene is supported by the
second respondent. The application
is opposed by the applicant on
the basis that the School and the Trust have no interest in the
proceedings; are not creditors
of the applicant and that this court
has no discretion to permit the intervention of parties other than
creditors. In respect
of the School it is also alleged that the
School’s conduct in seeking to intervene in these proceedings
is
ultra vires
the South African Schools Act.
The central issues to be decided are
the following:
5.1. whether a
court has a discretion to allow an alleged victim of criminal conduct
to intervene in proceedings relating to the
release of property
subject to a restraint order made in terms of POCA;
5.2. if so, whether
leave to intervene should be granted to the School and / or the
Trust;
5.3. whether the
applicant has complied with the jurisdictional requirements provided
for in section 26(6) of POCA; and
5.4. If so, whether
this court should exercise its discretion in regard to the release of
funds for the payment of legal expenses
in favour of the applicant.
The answer to these questions
necessarily involves a close analysis of the provisions of POCA and
the authorities that have addressed
the interpretation of those
provisions. Before embarking upon that analysis is necessary to
briefly sketch some background to
the matter.
The applicant is an attorney of this
Division who, for a number of years, served on the governing body of
the Greenwood Primary
School. During 2009 allegations of alleged
impropriety on the part of the applicant, the then headmaster of the
School and one
other person were made. At the time the applicant and
the two other persons served as trustees of the Greenwood Property
Trust,
a trust established as a vehicle to hold certain property
interests in favour of the Trust beneficiary, namely the School. The
allegations of impropriety in respect of the Trust property gave
rise to criminal charges being laid against the applicant and
the
other trustees. It is these criminal charges that are presently
pending against the applicant.
1
On 26 January 2010 Tokota AJ granted
a provisional restraint order in terms of section 26 of POCA. The
provisional order was made
final by Sangoni JP on 2 March 2010. The
property which the applicant was required to surrender in terms of
the order included
certain specified property set out in a schedule
annexed to the order as well as all other property held by him at
the time of
granting the order or subsequently and any property held
by a legal representative on his behalf. As a consequence of the
order
the first respondent was authorised to take into his
possession the property and to administer the realisable property.
According
to the first respondent’s first interim report dated
22 February 2010 the applicant’s restrained assets had an
expected
realisation value of R813 293.61.
The applicant now applies for the
release of R500 000.00, or such lesser amount as may be
allowed, from the restrained assets
to meet his reasonable legal
expenses in the criminal trial.
The application to intervene
As indicated the School and the Trust
seek leave to join the proceedings as respondents opposing the
relief sought. The application
is based upon this court’s
inherent jurisdiction at common law to order the joinder of further
respondents so as to ensure
that persons interested in the subject
matter of the dispute and whose rights may be affected by the order
are before the court.
In this regard the interest relied upon is the
fact, given the nature of the criminal charges preferred against the
applicant
and the facts upon which same are based, that the Trust is
the direct victim of the alleged criminal conduct and the School is
the indirect victim. By virtue of this it is alleged that the rights
and interests of the Trust and the School may be adversely
affected
by an order permitting the release of the restrained funds.
It is further alleged that the
intervention is also competent by virtue of the provisions of POCA
which seek
inter alia
to protect the rights and interests of
victims of alleged criminal conduct. It is submitted that this court
is vested with a
discretion to grant leave to a victim to intervene
in proceedings and that the circumstances warrant the exercise of
the discretion
in favour of the School and Trust.
The applicant opposes the
intervention on the basis that neither the School nor the Trust has
the necessary
locus standi
.
In respect of the School it is submitted that the School is acting
ultra vires
the
terms of South African Schools Act
2
(hereinafter
SASA) in seeking to join. In respect of both the School and the
Trust it is submitted that in any event neither fall
within the
category of creditors and that, to the extent that the court has a
discretion to admit a creditor to these proceedings,
such discretion
does not extend to a victim of the alleged crime who is not a
creditor.
The challenge to the School’s
locus standi
It was submitted by counsel for the
applicant that the governance of the School vests in its school
governing body by virtue of
section 16(1) of SASA. That section
provides that a governing body may perform only those functions and
obligations and exercise
such rights as are prescribed by the Act.
These functions are enumerated in section 20(1) of SASA and, so it
was submitted, do
not include the power to intervene in proceedings
such as the present. It was also argued that the provisions of SASA
provide
that a school’s funds may only be used for educational
purposes and for no other purpose. On this basis it was submitted
that the governing body had acted
ultra vires
its powers in
seeking leave to intervene.
Mr Rorke, on behalf of the School,
submitted that there is no merit in the attack on the School’s
locus standi
by reason of the fact that the governing body is
plainly obliged, by section 20(1) of SASA, to promote the best
interests of
the School. In seeking to protect the interests of the
School as a beneficiary of the Trust in circumstances where the
Trust
was the direct victim and the School the indirect victim of
the alleged criminal conduct of the applicant, the School was
clearly
acting in its best interests.
I agree. Section 20(1)(a) indeed
establishes an obligation on the School Governing Body to act
in
the best interests
of the School. It is striking that section 20
does not stipulate that the governing body may institute or defend
legal proceedings
on behalf of the School. To suggest that on this
basis the School has no
locus standi
(which is the effect of
the argument) is untenable. It is after all common cause that the
School is a juristic person. Ordinarily
this means that the School
has full legal capacity to protect its interests by either
instituting or defending legal proceedings.
It was argued that section 37(6) of
SASA restricts the use to which school funds may be put. On this
basis it was argued that
the employment of school funds for the
payment of legal fees, alternatively the exposure of the school to a
possible adverse
costs order, does not constitute use of school
funds for educational purposes and that therefore the decision to
enter what was
described as “commercial” litigation is
contrary to the provisions of SASA. The argument, in my view, loses
sight
of section 37(6)(c) of SASA. That section permits the use of
school funds for “the performance of the functions of the
School Governing Body”. It is perhaps appropriate to note that
the law reports are replete with judgments in which school
governing
bodies have litigated on a broad range of matters in the interests
of the schools they serve. I am not aware that it
has been suggested
in any of those matters that the litigation is
ultra vires
because the litigation involves use of resources other than for
educational purposes. Having come to the conclusion that the
application
to intervene (a) is competent by virtue of the School’s
status as a juristic person; and (b) falls within the ambit of the
obligation to act in the best interests of the School, I conclude
that the employment of school funds for this purpose is indeed
authorised by section 37(6)(c). It follows that the challenge to the
School’s
locus standi
on this basis cannot succeed.
I turn now to consider the question
whether the School and the Trust ought to be permitted to intervene
in these proceedings.
The first aspect to consider is whether this
court is vested with a discretion to permit the intervening parties,
as victims
of the alleged criminal conduct, to intervene.
In
Fraser
v Absa Bank Limited
3
(referred to hereafter as
Fraser
(CC)
) it was held that a
court has a discretion to grant
a
creditor
leave to
intervene in proceedings in terms of section 26(6) of POCA for the
release of funds under restraint. In that matter Absa
Bank had
instituted action for recovery of monies advanced to Fraser in terms
of certain credit agreements. Absa obtained judgment
against Fraser
and sought to execute upon its judgment but could not do so by
virtue of the preservation order obtained restraining
Fraser’s
assets. When an application was made by Fraser for the release of
certain funds to cover legal expenses Absa sought
leave to
intervene. The High Court refused leave to intervene. On appeal the
Supreme Court of Appeal, on a careful analysis if
the provisions of
POCA, found that the court has a discretion to permit a creditor to
intervene.
4
The SCA accordingly upheld the
appeal, granted Absa leave to intervene and issued certain further
orders relating to the protection
of the funds Absa sought to claim.
The matter then came before the Constitutional Court which endorsed
the SCA’s findings
in respect of the existence of the
discretion but disagreed in respect of the further orders made.
It was argued, on behalf of the
applicant, that the finding that the Court has a discretion to
permit a creditor to intervene
in section 26(6) proceedings is
confined to creditors. Such discretion does not extend to permitting
victims (whether direct
or indirect) to intervene in the
proceedings.
In the light of this argument it is
necessary to consider carefully the effect of the judgment in
Fraser
(CC).
I begin first by examining the overall legislative scheme
of POCA and the approach that has been adopted in respect of the
protection
of the interests of victims.
The purpose of POCA is to foster the
prevention of crime by striking at the heart of the incentive for
criminal activity, namely
the gain of the criminal. As noted by the
Constitutional Court in
National
Director of Public Prosecutions v Elran
5
the provisions of POCA provide a
framework for a strategy for the combating of modern organised
criminal activity. The purpose
is achieved, in part, by ensuring
that the proceeds of criminal activity and those assets utilised as
an instrumentality of crime
can be wrested from the control of the
alleged criminal and, following a process of forfeiture to the
state, be utilised for
combating crime. This broad scheme, in terms
of which assets may be seized, preserved and ultimately confiscated,
is however
not intended merely to enrich or benefit the state. On
the contrary the seizure and forfeiture of assets is subject to a
range
of checks and safeguards designed to balance the interest of
the state in the restrained or preserved assets and those of third
parties who may have an interest in such assets. On the one hand the
process of seizure and restraint or preservation has built
into it
mechanisms by which the rights and interests of persons affected by
a restraint or preservation order can be protected.
These ‘affected
persons” include not only persons who have an interest in the
property restrained (i.e. the defendant
or any other party who holds
an interest in the property which is the subject matter of the
restraint or preservation order)
but also victims of the alleged
criminal conduct (i.e. persons who have suffered a loss of damage to
property).
Persons who may be affected by any
order made in restraint or preservation proceedings are also given
procedural and substantive
protection by those provisions which
require notice or publication of the restraint / preservation
orders. It is also for this
reason that POCA specifically accords
protection at the stage of the realisation of property after a
confiscation order is sanctioned
by a court. At this stage of the
proceedings POCA permits persons who, by virtue of the defendant’s
obligations, have an
interest in the restrained property to
participate.
In
National
Director of Public Prosecutions v Mcasa and Another
6
the court was faced with an argument
that Chapter 5 of POCA was not intended to apply to situations where
there is a clearly identifiable
victim. The argument was advanced on
the premise that the legislature could not have intended to
prejudice the rights of identifiable
victims by declaring forfeit to
the state assets of the criminal equal in value to the victims
claim. The court dismissed the
argument, accepting that section
30(4) and (5) provide protection for the rights and interests of
victims. The court came to
the conclusion that a possible forfeiture
order is not at odds with the victim’s right to recover.
7
The protection of the interests of
third parties and / or victims is to be seen in a number of
provisions. By way of example,
section 20(1) provides that the
amount which may be realised at the time of making a forfeiture
order shall be the amount equal
to the value of all realisable
property and / or affected gifts less the sum of all obligations of
the defendant having priority
and which may be recognised for this
purpose. Of particular significance for present purposes is section
20(5) which states that:
(
5) A court
shall
not determine
the amounts which might be
realised as contemplated in subsection (1)
unless
it has afforded
all persons
holding any interest in the property concerned an opportunity to make
representations to it
in connection with the
realisation of that property.
(Emphasis added)
These provisions are mirrored in
section 30 which deals with the realisation of property. Subsection
(2)(b) authorises a High
Court to authorise a
curator bonis
to realise any realisable property. Subsections (3) and (4) in turn
provide:
(3) A High Court
shall
not exercise its powers
under subsection
(2)(b)
unless it has afforded all persons
known to have any interest in the property concerned
an
opportunity to make representations to it in connection with the
realisation of that property.
(4) If the court referred
to in subsection (2) is satisfied that a person –
(a) is likely to be
directly affected by the confiscation order, or
(b) has suffered damage
to or loss of property or injury as a result of an offence or related
criminal activity referred to in section
18(1) which was caused by
the defendant,
the court
may allow
that person to make representations
in connection with the
realisation of that property.
(Emphasis added)
A few observations are appropriate in
respect of these provisions. The first is that the legislature
plainly intended to ensure
that the interests of any and all persons
who
may
be affected by a confiscation order are properly
protected. This intention is consonant with the overall purpose of
POCA which
is to ensure that criminals do not benefit from their
criminal activity
and
to ensure that victims of criminal
conduct are afforded an opportunity to recover that which may be due
to them in consequence
of such criminal conduct.
The second aspect of significance is
that POCA recognises a broad category of persons “holding
any
interest in the property” (s 20(5)). The reach of the category
of
potentially
interested persons is restricted only by the
exercise of the court’s discretion. Thus section 30(4) refers
to all persons
known
to have any interest who, it appears,
are entitled as matter of
right
to be heard (the court “shall
not make” … “unless”..), whereas section
30(5) refers to persons
“likely to be affected” or
persons who have suffered loss or injury as a result of the criminal
conduct.
The judgment of the Constitutional
Court in
Fraser (CC)
does not state that the court only has a
discretion to permit a creditor to intervene in section 26(6)
proceedings. It will be
remembered that the court in
Fraser (CC)
was dealing with a judgment creditor who had obtained judgment prior
to the restraint order being made. There is no suggestion
that the
creditor was in any way a person who had suffered or was likely to
suffer loss as a result of the alleged criminal conduct.
The Constitutional Court in
Fraser
(CC)
endorsed the Supreme Court of Appeal’s careful
analysis of the provisions of POCA and its finding that the High
Court has
a discretion. At para 56 the Court stated that:
‘
The
Supreme Court of Appeal is correct in its criticism of the High
Court's construction of s 33(1) and in concluding that a claim
such
as Absa's does not fall to be 'left out of account'. An obligation to
satisfy a judgment debt is a relevant consideration
to be taken into
account in the exercise of the s 26(6) discretion and s 33(1) is no
warrant for the contrary proposition. Section
33(1) comes into
consideration primarily when property is being realised. Section
30(5) supports a conclusion that concurrent debts
are not irrelevant
to what constitutes realisable property, and therefore s 26(6) should
not be interpreted as impeding the exercise
of the discretion by a
Court.’
The Constitutional Court itself
considered the basis upon which a creditor would seek to intervene,
noting (at para 62) that:
‘
When
a defendant's estate is under a restraint order and thus beyond the
reach of creditors, it remains in their interest that as
much of the
estate as possible be preserved, because part or all of it might
still become available to them for the satisfaction
of their claims.
If the defendant is paid a living and/or legal expense allowance from
his or her estate while it is under restraint,
the effect is to
dissipate the estate and so reduce or even destroy creditors'
prospects of recovery. It is accordingly usually
in their interest to
oppose any application in terms of s 26(6) to persuade the Court not
to allow the defendant to draw a legal
expense allowance.’
The court then concluded (at para 63)
that:
‘
It
is therefore clear that on the wording of POCA the High Court has a
discretion to allow a creditor to intervene. This interpretation
is
not at odds with the obligation to promote the spirit, purport and
objects of the Bill of Rights.’
The only respect in which the
Constitutional Court appears to have qualified the interpretation of
the relevant provisions of
POCA by the SCA lies in the following
dictum (at para 57) where the court said:
‘
However,
the relevant provisions of POCA cannot mean that all concurrent
creditors must under all circumstances be allowed to intervene.
Nor
even if permitted to intervene, may they automatically be treated as
if they were preferential creditors, in a manner that
prevents a
defendant from using his or her funds for reasonable legal expenses
in the criminal trial or in forfeiture proceedings
in terms of POCA.’
The latter statement in the quoted
paragraph is consistent with the Court’s finding (at para 78)
that the SCA erred in assuming
that an applicant (in terms of
s26(6)) bears an onus to justify reasonable expenses over the claims
of concurrent creditors.
It is to this extent only that the Court
differed with the approach of the SCA in regard to the matter.
Accordingly the judgment
of the SCA on the meaning and effect of the
relevant provisions of POCA is authoritative.
Of particular relevance for present
purposes are the following passages from the SCA judgment
8
:
[15] Properly construed,
s 31(1) empowers a High Court to apply s 26 with a view to making
available the current value of realisable
property to satisfy a
confiscation order. In this context the purpose of a restraint order
is, therefore, to preserve a defendant's
property to facilitate the
satisfaction of, amongst others, a confiscation order.
[20] But it does not
follow that claims of concurrent (unsecured) creditors are thereby
simply left out of account. The Act provides
a mechanism for them to
be taken into account, subject to the approval of the Court at the
time of the realisation of the defendant's
property, but before
satisfaction of a confiscation order. In this regard, s 30(5)
expressly authorises the High Court to delay
the realisation of the
property so as to enable a victim of the defendant's crimes to obtain
a judgment and to satisfy that
judgment
from the defendant's property before the property is realised.
[21] Once the property
has been realised, s 31(1) authorises the High Court to direct that
'payments' be made from the realised
proceeds of the defendant's
property before the State's claim is satisfied. Clearly, the
'payments' that are contemplated by that
section include payments in
discharge of the defendant's concurrent obligations.
[22] I can fathom no
reason for this provision, other than that it is intended to provide
persons with an 'indirect interest' in
the restrained property, such
as the defendant's concurrent creditors, to bring their claims to the
Court's attention, to be taken
into account for payment, should the
Court be satisfied of their validity, before satisfaction of the
confiscation order. This,
in my view, can mean only that the High
Court retains the power to entertain applications by persons or
entities with claims, concurrent
or otherwise, in the restrained
property.
It is clear from these passages that
the SCA, whilst dealing with the particular claim of a judgment
creditor, did not consider
that intervention was to be confined
only
to judgment creditors. On the
contrary, the SCA recognised and accepted, in my view, that the
discretion to permit intervention
is one which, in appropriate
circumstances, extends to ‘third parties’. That this is
so is to be gleaned from the
express finding of the SCA that the
ambit of the discretion (provided for in POCA) is consistent with
the “exercise of
[the court’s] general powers to hear
any person who has an interest in the proceedings”.
9
This common law power is not excluded
by POCA. The Constitutional Court judgment does not differ with the
SCA’s interpretation
of the ambit of the discretion and must,
in my view, be taken to have approved it.
It follows that the submission by
applicant’s counsel that this court does not have a discretion
to permit a victim (who
may not yet be a creditor or who may only be
a contingent creditor) to intervene in proceedings in terms of
section 26(6) cannot
be supported. Such discretion is plainly not
excluded by the provisions of POCA. At common law a court enjoys a
wide discretion
to permit a party to intervene in proceedings if the
court is satisfied,
prima facie
, that the party has a
sufficient interest in the subject matter of the dispute. The
legislative scheme provided by POCA, rather
than serving to limit
the ambit, suggests that a court faced with an application to
intervene in section 26(6) proceedings will
be astute not to exclude
hearing a potentially interested victim of crime.
I turn now to consider whether in the
exercise of the discretion I should permit the School and the Trust
to intervene. The first
point to consider here is that
intervention
is essentially directed to the
process of adjudication
i.e.
it is by its nature concerned with a preliminary issue regarding the
assertion of a right or entitlement to be heard in
relation to the
subject matter of the dispute. Intervention is therefore concerned
with placing before the court relevant facts
or submissions as seek
to persuade the court as to an appropriate outcome in the matter.
In
Hutton
& Pearson NNO v Hitzeroth and Others
10
a full bench on appeal was concerned
with the effect of a decision to grant leave to certain respondents
to be heard, a circumstance
akin to intervention. It was said that
the court
a quo
“
did no more than decide what
evidence could be tendered for a decision on the merits” and
that the decision “was similar
to and of no greater effect
than a ruling that certain evidence is admissible”.
11
The court went on to state:
As already shown the
issue before Addelson AJ was whether the respondents were entitled to
be heard. That involved merely a finding
prima
facie
. It is quite clear from the decisions
in
Elliot v Bax
1923
WLD 228
, and
Ex parte Marshall: In re
Insolvent Estate Brown
1951 (2) SA 129
(N),
that
prima facie proof of interest is all that
is required to give a right to intervene.
(Emphasis added)
If regard is had to the judgment of
Addelson AJ (as he then was)
12
,
it will be noted that it was accepted that the discretion to grant
leave to intervene is wider than where joinder of another
is
demanded as of right. The court said:
13
It
appears from the decisions cited in
Marais
and Others v Pangola Sugar Milling Co. Ltd. and Others, supra
at p. 702, that the Court has a discretion where a party seeks leave
to intervene; but that 'even in those cases where the Court
has a
discretion where the matter of joinder of a party is raised, it must
be shown that that party is a necessary party in the
sense that he is
directly and substantially interested in the issues raised in the
proceedings before the Court and that his rights
may be affected by
the judgment of the Court.'
I respectfully agree with
the approach just stated and I proceed to consider whether the
respondents fall within the ambit of that
approach.
In
Amalgamated
Engineering Union v Minister of Labour
,
1949
(3) SA 637
(AD)
at
p. 659, it was held by FAGAN, J.A., that the Court would not
determine issues in which a third party may have a direct and
substantial
interest without being satisfied that the rights of such
third party would not be prejudicially affected by its judgment. In
Henri
Viljoen (Pty.) Ltd v Awerbuch Brothers, supra
,
HORWITZ, A.J.P., at p. 167, interpreted 'the direct interest'
referred to, as
'an
interest in the right which is the subject matter of the litigation
and is not merely a financial interest which is only an
indirect
interest in such litigation'.
See
also
Abrahamse
and Others v Cape Town City Council
,
1953
(3) SA 855 (C)
.
It
will be observed that the use of the word 'may' by FAGAN, J.A.,
indicates, as was held in
Abrahamse's
case,
supra
at p. 859,
'that
it suffices if there exists the possibility of such an interest. It
is not necessary for the Court to determine that it in
fact exists'.
14
In this matter the interest that the
School and the Trust seek to protect is the interest in the
potential recovery of the value
of the property which, but for the
alleged criminal conduct, would have vested in the Trust for the
benefit of the School. It
is common cause that the Trust has
instituted action against the applicant. The Trust is accordingly at
least in the position
of a prospective or contingent creditor who is
also, upon the facts alleged to found the criminal charges against
the applicant,
a victim of the alleged conduct. It is also common
cause that the Trust has been divested of all funds. This too, it is
contended,
is a direct consequence of the alleged criminal conduct.
These circumstances of the Trust bear upon the position of the
School
which, it is common cause, is a beneficiary of the Trust.
Whilst there may be some debate concerning whether or not the School
enjoys any separate enforceable claim against the applicant, it
cannot be disputed that the School has at least indirectly suffered
loss or potential loss. Having regard to the fact, recognised in
Fraser
CC
15
,
that an order releasing funds in terms of section 26(6) necessarily
will have the effect of reducing the value of restrained
property
and that such reduction may impact upon the potential for recovery
should a confiscation order be made, the School and
the Trust, have,
in my view, at least established their interest in the subject
matter of the application on a
prima
facie
basis. They should
therefore be permitted to intervene. I should add that allowing the
School and the Trust as alleged victims
of the alleged criminal
conduct an opportunity to be heard accords not only with the scheme
of interest protection provided by
POCA but also with the principle
of fairness that animates the common rules relating to intervention
of parties. It accords too
with the spirit, purport and objects of
the Bill of Rights inasmuch as it fosters fair and open adjudication
in the public interest.
Allowing a party to intervene upon
the exercise of this court’s discretion is not to be confused
with the exercise of the
discretion in terms of section 26(6). The
latter discretion is one which concerns whether or not to grant an
order releasing
funds under restraint for the purposes of meeting
either reasonable legal expenses or living expenses. That discretion
only arises
once a court has found that the jurisdictional
requirements set by section 26(6) have been met, namely once the
court is satisfied
that the applicant has made full disclosure in
terms of the section
and
that the applicant cannot meet his /
her reasonable legal expenses from unrestrained assets.
16
The section 26(6) discretion is not
concerned with whether or not to permit a party to intervene in the
proceedings. The existence
of the discretion to permit intervention
is founded upon a proper interpretation of the provisions of POCA as
a whole as read
with the common law. This much, as I have
demonstrated, is apparent from a proper reading of the
Fraser
CC
judgment.
Having found that the applications of
the School and the Trust to intervene succeed I turn now to consider
the merits of the application.
The application to release funds
in terms of section 26(6)
Section 26 provides that:
The National Director
may by way of an
ex parte
application apply to a competent
High Court for an order prohibiting any person, subject to such
conditions and exceptions
as may be specified in the order, from
dealing in any manner with any property to which the order relates.
…
.
Without derogating from
the generality of the powers conferred by sub-section (1), a
restraint order may make such provision
as the High Court may think
fit –
for the reasonable
living expenses of a person against whom the restraint order is
being made and his or her family or household;
and
for the reasonable
legal expenses of such person in connection with any proceedings
instituted against him or her in terms
of this Chapter or any
criminal proceedings to which such proceedings may relate;
if the court is satisfied
that the person whose expenses must be provided for has disclosed
under oath all his or her interests
in property subject to a
restraint order and that the person cannot meet the expenses
concerned out of his or her unrestrained
property.
Although the Constitutional Court was
concerned in
Fraser
with the question as to whether a
creditor may be granted leave to intervene in section 26(6)
proceedings, it nevertheless provided
guidance as to the proper
application of the section. The court stated at paragraph 55 that:
A defendant who applies
to the High Court in terms of section 26(6) to make provision for
reasonable living and / or legal expenses
must satisfy the Court that
he or she has disclosed under oath all his or her interest in
property subject to the restraint order
and that he or she cannot
meet the expenses for which an allowance is sought out of the
unrestrained property. If the Court is
satisfied in this regard,
section 26(6) gives the Court a discretion: it may “make such
provision as the High Court may think
fit” for the reasonable
living and / or legal expenses.
An applicant must therefore meet both
of the threshold requirements before a court is entitled to exercise
its discretion in his
or her favour.
17
It follows therefore that in order to
succeed in this application the applicant must establish compliance
with these requirements.
The requirement of full disclosure
The section requires that the
applicant should satisfy the court that he has made a full
disclosure under oath of all of his interests
in the restrained
property. It was argued on behalf of the applicant that in
determining this issue the court would be guided
by the evidence
presented by the first respondent who has expressed himself as
satisfied in his Interim Report, confirmed under
oath in this
application, that the applicant has made a full disclosure. Counsel
for the applicant argued that section 26(6)
does not require that
the applicant must disclose the origin of his interests in the
restrained property, it being sufficient
to state that he has
disclosed all of his assets, a fact affirmed by the first
respondent. Reliance was placed on the fact that
the applicant had,
pursuant to the terms of the retraining order issued in 2010, made a
declaration under oath to the first respondent
of his assets and
that this was accepted by the first respondent as constituting a
full disclosure.
In my view the argument advanced on
behalf of the applicant loses sight of the plain wording of section
26(6) which requires the
applicant to satisfy the court that he has
disclosed all of his interests in the restrained property under
oath.
Mr Scott relied on the fact that the
applicant had, pursuant to the restraining order deposed to a
statement under oath in which
he disclosed his assets to the
curator. In that statement the applicant stated the following:
‘
This
statement is made in terms of paragraph 2.36 of the order granted by
the High Court, Eastern Cape (case no 154/2010) on 26
January 2010
and constitutes a full disclosure of all assets relating to the
determination of the value of realisable property
held by me.
Paragraph 2.36 of the order reads as
follows:
In terms of section 26(7)
of the POCA, the Defendants is (
sic)
hereby ordered to
disclose to the
curator bonis
on affidavit in such form as the
curator bonis
may determine forthwith, and in any event by no
later than within 10 days of service of this order, a description and
the whereabouts
of:
2.36.1. all the property
(as defined in section 1 read with section 12(2) of the POCA), which
has not been physically surrendered
into the possession or otherwise
placed under the effective control of the
curator bonis
immediately upon the service of this order;
2.36.2. all the property
which, according to the present knowledge of the Defendants and
respondents is to be transferred to the
Defendants at any time;
2.36.3. any and all
affected gifts as defined in sections 12(1) and 16 of the POCA, made
by any of the Defendants, together with
the name and address of the
donee;
The statement was made shortly after
the restraining order was issued by this court. Even if it is
accepted that the disclosure
at that stage was a full disclosure,
and there is no reason to doubt the assertion of the first
respondent that it was, it is
plain that the disclosure was not one
in relation to “interests in” the restrained property as
contemplated by section
26(6).
Mr Scott argued however that the
applicant has now disclosed that his interest in the bulk of the
restrained property, namely
R565000.00 held on his behalf by his
attorneys is a “cash” interest, thus disclosing
ownership sufficient for the
purposes of section 26(6). In this
regard he relied on a passage from the judgement of Zondo J in
Elran
18
where the learned judge, dealing with
the reasons for requiring disclosure of interests in property, said:
The reason for requiring
the person to disclose all his or her interests in the preserved
property is obvious. The court needs to
know whether his or her
interest covers the whole of the property or whether it covers only
part of the property. In the latter
event, the court would also need
to know the extent of the part of the property that is covered by his
or her interest or interests.
The reason for this is that, in
considering whether or not to provide for the expenses and how much
provision it should authorise
for such expenses, the court should
know the precise extent of his or her interest in the property.
On the basis of this passage it was
suggested that all that need be disclosed is the extent of the
interest and that since we
are here dealing with a cash ownership
interest this constitutes sufficient disclosure of the ‘extent’
of the interest.
In the first instance, I am not
persuaded that the requirement in section 26(6) relating to full
disclosure is met by the mere
assertion, even under oath, that the
applicant has made a full disclosure of his assets to the curator
pursuant to the restraining
order. If that were what was
contemplated the wording of section 26(6) would no doubt have simply
referred to such a disclosure.
Instead the section specifically
refers to disclosure of interests. Nor am I persuaded that such
disclosure is confined to a
statement of the ‘extent’ of
the interest. That is certainly a relevant factor but cannot suffice
in all instances.
The very purpose of the requirement is to enable
the court to determine whether it should exercise a discretion in
favour of
the applicant. In my view it must follow, as a matter of
logic, that the court should be apprised of the nature of the
property,
the origin of the interest in such property, the extent of
such interest where relevant and, perhaps most importantly, what, if
any, competing interests in said property exist.
19
In this instance the bulk of the
restrained assets derive from the transaction involving the Echo
Edge property. It is this very
transaction which the prosecution
alleges constitutes the proceeds of the alleged criminal activity on
the part of the applicant.
It does not avail the applicant to
merely state that his interest is one of ownership of cash without
fully disclosing the origin
of the asset which is subject to
restraint. Lest it be thought that it is here suggested that the
applicant is required to make
a disclosure which is adverse to him
in relation to the criminal charges preferred against him, this is
not so.
20
But, in the light of the premium
attached to a full and frank disclosure the least that may be
expected is that the applicant
should disclose that the particular
funds now restrained and which he seeks to have released to him are
those funds which it
is alleged constitute the particular proceeds
of the alleged criminal conduct.
In this regard the applicant is
silent. In my view this silence does not constitute a full
disclosure such as required by section
26(6).
Even if I am wrong in so finding the
applicant faces the further difficulty of establishing that he is
unable to meet his reasonable
legal expenses from his unrestrained
property.
The requirement of establishing an
inability to meet expenses out of unrestrained property
The evidence presented by the
applicant in this regard consists of financial statements of his
practice for the year ending 28
February 2013 and for his personal
estate for the year ending 29 February 2012. No other evidence as to
the state of his finances
in the period between the date of these
financial statements and the launching of this application was
provided.
It was argued on behalf of both the
second respondent and the intervening parties that the applicant’s
mere assertion that
he is unable to fund his legal expenses from
current income is plainly insufficient to meet the requirements of
section 26(6).
I agree. What is required of an
applicant who seeks to have restrained assets released for the
purpose of meeting living or legal
expenses is to place facts before
the court which (a) establish on balance that he is unable to meet
his reasonable expenses
from unrestrained assets or income and (b)
place the court in a position to exercise its discretion in regard
to the release
of such funds. This the applicant has not done. The
applicant has placed no evidence before this court as to current
financial
position of his legal practice, nor as to his own income.
The financial position of the practice in the intervening period
between
February 2013 and when the application was launched is not
explained. It is apparent from that evidence which has been
presented
that the applicant derives his day to day income from
drawings made against the legal practice. In the previous financial
year
he drew in excess of R900 000 from the practice. Quite
apart from there being no evidence as to what he has drawn since
February 2013, there is also no evidence as to what these drawings
were expended on and what, if any, provision has been made to
meet
his ongoing legal expenses.
The remarks made in
Mcasa
regarding the failure by
the applicant in that matter to meet the threshold requirement
regarding his inability to meet expenses
out of unrestrained assets
are apposite to this matter. There it was said that
21
:
There must be clear
evidence which sufficiently demonstrates that there are no other
assets available out of which such expenses
may be met (cf
A
v C
[1981] 2 All ER 126
; also see
Courtney
(op cit
at 88
et seq
)
and the authorities cited therein). On the available evidence the
hotel business continues to generate an income. …. It
is not
sufficiently clear to us that living and legal expenses cannot be met
out of such funds and any other funds the business
may have generated
subsequently.
The first respondent does
make the bald assertion that there are no other available assets to
meet living, legal and other related
expenses. He must go further
than that. He must, for example, indicate what the turnover of the
hotel business is at present, what
the running expenses are and what
the nett profit is. It may very well be that the funds are available
from that business for whatever
use by the first respondent and his
family.
Similarly in this case, the applicant
has not presented evidence as to the income currently generated by
his legal practice; he
has also not set out what his running
expenses are and what the net profit is. Mr Rorke submitted that the
applicant ought to
have been in a position to present such evidence
since he is required by the restraint order to present monthly
management accounts
to the first respondent.
I do not consider that it is
necessary to undertake an analysis of such financial statements as
the applicant has produced. It
is for the applicant to establish
that he is, on a balance of probabilities, unable to meet his
reasonable legal expenses from
unrestrained property and his
available income. This he has not done. I am therefore unable to
conclude that the applicant has
met the threshold requirements
stipulated by section 26(6) for the release of funds to cover his
legal expenses. In these circumstances
the question of the exercise
of the discretion conferred by section 26(6) does not arise and the
application must fail.
Costs
I was urged, by Mr Rorke, to consider
a punitive costs order against the applicant on the basis that the
applicant has failed
to comply with the terms of the restraint order
requiring him to make disclosure of his monthly income and
expenditure to the
first respondent. It was also argued that I
should take into consideration the delay in the bringing of this
application and
find that it was so delayed in order to bring about
a delay in the criminal trial which was scheduled to commence of 2
September.
I am unable to agree with these
submissions. Even if it is assumed that the applicant’s
alleged non-compliance with the
restraint order is relevant to the
question of costs in this application, which is doubtful, it is not
established that the applicant
has in fact not complied with the
terms of the restraint order. The first respondent is silent about
this and, it must be accepted,
would no doubt have said as much if
that were so. Also I cannot find that the applicant was motivated by
some ulterior purpose
in bringing the application at this stage.
There is no basis for such an adverse finding.
In my view there is no reason not to
deal with the question of costs on the basis of the ordinary rule.
The applicant has been
unsuccessful in his application and should
accordingly be ordered to pay the costs of the application.
For these reasons I granted the order
set out above.
G. GOOSEN
JUDGE OF THE HIGH COURT
APPEARANCES: For the Applicant
Mr. P.W.A Scott SC,
Assisted by Mr. A. Moorhouse
Instructed by Randell Attorneys
For the Second Respondent
Mr. T de Jager
National Director of Public
Prosecutions
For the Intervening Respondents
Mr. S. Rorke SC
Instructed by Mike Nurse Attorneys
1
The
criminal proceedings initially involved two accused persons, namely
Shelver and Randell. In January 2013 the trial proceeded
against
both accused. During the conduct of the proceedings Shelver changed
his plea from one of not guilty to a plea of guilty
to an
alternative charge. As a consequence the trial of Shelver was
separated from that of Randell and the latter proceedings
were
postponed to be commenced before another magistrate de novo. It is
these latter proceedings which were scheduled to commence
on 2
September 2013.
2
Act
84 of 1996
3
[2006] ZACC 24
;
2007
(3) SA 484
(CC)
4
Absa
Bank Ltd v Fraser and Another
2006
(2) SACR 158
(SCA);
[2006] 2 All SA 1
(SCA) (
Fraser
SCA)
5
2013
(1) SACR 429
(CC)
6
2000
(1) SACR 263
(TkH)
7
Mcasa
,
supra,
at
para 67. This approach is illustrated in a recent judgment in this
court (
National
Director of Public Prosecutions v Tango Wordsworth Nqini
,
case no 4190/12, unreported, 16 August 2013) where Plasket J, in
granting a forfeiture order ordered that a motor vehicle which
had
been purchased with the proceeds of the alleged criminal activity be
sold by public auction and the proceeds, together with
a further
cash amount which also formed part of the preserved property, be
paid to the victim of the criminal conduct.
8
Fraser
SCA
para 15, 20, 21, 22
9
Fraser
SCA
para 29.
10
1967
(1) SA 111
(ECD)
11
At
114 – 115I
12
Ex
Parte Pearson and Hutton, NN.O
.
1967 (1) SA 103
(E)
13
At
107B-D
14
cf
United Watch & Diamond Company v
Disa Hotels
1972 (4) SA 409
(C) at
416A-C
15
Fraser
CC
at
para 62
16
See
Elran
at
para 77 - 79
17
S
ee
in this regard
Fraser
CC
at
para 55;
Naidoo
and Others v National Director of Public Prosecutions and Another
2012
(1) SACR 358
(CC) at para 30 where Cameron J describes the
requirements as preconditions for the exercise of the discretion;
the majority
judgment in
Elran
at
para 77 -79 as also the judgment of Zondo J in
Elran
(with
which the majority concurred) in which he draws a distinction
between the discretion conferred by section 26(6) and the
lack of
such discretion in section 44.
18
Elran
at
para 112
19
See
in this regard
Mcasa
at
para 82 (p287e-g)
20
cf
Mcasa
p.287a
21
Mcasa
para
85 - 86