SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this
document in compliance with the law and SAFLII Policy
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 1268/2021
In the matter between:
SOUTH AFRICAN RESERVE BANK FIRST APPELLANT
NATIONAL TREASURY SECOND APPELLANT
and
JOHNINE WINSOME ELISIE MADDOCKS N O FIRST RESPONDENT
AMERASAN PILLAY N O SECOND RESPONDENT
Neutral citation: South African Reserve Bank and Another v Johnine Winsome
Elisie Maddocks N O and Another (1268/2021) [ 2023] ZASCA
04 (23 January 2023)
Coram: ZONDI, MOCUMIE and GORVEN and NHLANGULELA AJJA and
BASSON AJJA
Heard: 16 November 2022
Delivered: This judgment was handed down electronically by circulation to the
parties’ representatives by email, publication on the Supreme Court of
Appeal website and release to SAFLII. The date and time for hand -
down is deemed to be 15:00 pm on 23 January 2023.
2
Summary: Exchange Control Regulations of the Currency and Exchanges Act,1933
– Legal consequences of a forfeiture order issued in terms of Regulation 22B after
the winding-up of a company – liquidation does not nullify a prior blocking order in
respect of company’s assets issued in terms of Regulation 22A and/or 22C –
issuance of the blocking order and forfeiture order does not render the South African
Reserve Bank a creditor of the insolvent company – forfeiture order competent.
___________________________________________________________________
ORDER
___________________________________________________________________
On appeal from: KwaZulu-Natal Division of the High Court, Durban (O lsen J, sitting
as court of first instance):
1 The appeal succeeds.
2 The order made by the high court is set aside and replaced with the following
order:
‘The application is dismissed with costs’.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
Zondi JA (Mocumie and Gorven JJA and Nhlangulela and Basson AJJA
concurring):
[1] This appeal is concerned with the legal consequence s of three forfeiture
orders issued by the first appellant, the S outh African Reserve Bank (the Reserve
Bank) in terms of which it declared forfeit ed to the State monies standing to the
credit of Sun Candle Product s (Pty) Limited (Sun Candle) and Xinming Mountain
3
Textile (Pty) Limited (Xinming) (the companies) in various South African b anks. The
Reserve Bank ordered that the monies be paid into the National Revenue Fund. The
forfeiture orders were made after the liquidation of these two companies and
pursuant to the provisions of Regulation 2 2B of the Exchange Control Regu lations
(the Regulations). These were made under s 9 of the Currency and Exchanges Act 9
of 1933 (the Act).
[2] Upon their appointment , the respondents, the liquidat ors of the companies
(the l iquidators), demanded that the forfeited monies be paid to them to be
administered in terms of the insolvency laws. The Reserve Bank refused to accede
to the demand contending that the forfeiture orders were valid ly made pursuant to
blocking orders made prior to the liquidation of the companies. As a result, the
liquidators brought an a pplication in the KwaZulu-Natal Division of the High Court,
Durban (the high court), for an order declaring the forfeiture orders null and void and
directing the National Revenue Fund to pay the forfeited monies int o the liquidators’
bank account.
[3] The high court granted the orders as sought by the liquidators. Aggrieved by
the outcome , the Reserve Ba nk and the second appellant, the National Treasur y,
sought and obtained from the high court l eave to appeal against its judg ment. The
appeal is before this Court with leave granted by the high court.
[4] As I have already state d, the primary issue concerns the legal consequences
of the forfeiture orders made by the Reserve Bank after the liquidation of the two
companies. Before co nsidering the issue, I deem it necessary to set out the
4
applicable statutory framework and thereafter the facts within which the primary
issue must be considered.
[5] The regulations in terms of which the functionaries of the Reserve Bank
issued the blocking and forfeiture orders were promulgated by the President in terms
of s 9 of the Act which, among other things, provides:
‘(1) The [President] may make regulations in regard to any matter directly or indirectly
relating to or affecting or having any bearing upon currency, banking or exchanges.
(2)(a) Such regulations may pr ovide that the [President] may apply any sanctions therein
set forth which he thinks fit to impose, whether civil or criminal.
(b) any regulation contemplated in paragraph (a) may provide for-
(i) the blocking, attachment and obtaining of interdicts for a period referred to in
paragraph (g) by the Treasury and the forfeiture and disposal by the Treasury of any
money or goods referred to or defined in the regulations or determined in terms of the
regulations or any money or goods into which such money or goods have been
transformed by any person, and-
(aa) which are suspected by the Treasury on reasonable grounds to be involved in an
offence or suspected offence against any regulation referred to in this section, or in respect
of which such offence has been committed or so suspected to have been committed;
(bb) which are in the possession of the offender, suspected offender or any other person
or have been obtained by any such person or are due to any such person and which would
not have been in such possession or so obtained or due if such off ence or suspected
offence had not been committed; or
(cc) by which the offender, suspected offender or any other person has been benefited or
enriched as a result of such offence or suspected offence:
Provided that, in the case of any person other than the offender or suspected offender, no
such money or goods shall be blocked, attached, interdicted, forfeited and disposed if such
5
money or goods were acquired by such person bona fide for reasonable cons ideration a
result of a transaction in the ordinary course of business and not in contravention of the
regulations; and
(ii) in general, any matter which the [President] deems necessary for the fulfilment of the
objectives and purposes referred to in subparag ragh (i), including the blocking,
attachment, interdicting, forfeiture and disposal referred to in subparagraph (i) by the
Treasury of any other money or goods belonging to the offender, suspected offender
or any other person in order to recover an amount equal to the value of the money or
goods, recoverable in terms of the regulations referred to in subparagraph (i), but
which can for any reason not be so recovered.
(c) . . .
(d) Any regulation contemplated in paragraph (a) shall provide–
(i) that any person who feels aggrieved by any decision made or action taken by any
person in the execise of his powers under a regulation referred to in paragraph (b)
which has the effect of blocking, attaching, or interdicting any money or goods, may
lodge an application in a competent court for the revision of such decision or action
or any other relief…
(ii) . . .
(iii) That any other person who feels aggrieved by any decision to forfeit and dispose of
such money, within a period prescribed by the r egulations, which shall not be less
than 90 days after the date of the notice in the Gazette and referred to in
subparagraph (ii), institute legal proceedings in a competent court for the setting
aside of such decision, and the court shall not set aside such decision unless it is
satisfied-
(aa) that person who made such decision did not act in accordance with the relevant
provisions of the regulation; or
(bb) that such person did not have grounds to make such decision; or
(cc) that the grounds for the making of such decision no longer exist.
6
(e) . . .
(f) . . .
(g) The period referred to in paragraph (b)(i) shall be a period not exceeding 36 months
or such longer period–
(i) as ends 12 months after the final judgement (including on appeal, if any) in every
prosecution for any contravention of the regulations or any other law in relation to the
money or goods concerned or in which such money or goods are relevant to an y
aspect of such prosection; or
(ii) as may be det ermined by the competent court in relation to the money or goods
concerned on good cause shown by the Treasury.’
[6] The two respondents are the joint liquidators of the companies. The
applications for winding-up were lodged on 13 February 2017. The companies were
provisionally wound up by the high court on 17 February 2017 and finally on 10
March 2017. The concursus creditorum in respect of each company is taken to have
been established on 13 February 2017 when the app lications were lodged with the
high court. In each of these cases the orders were made under s 348 of the
Companies Act 61 of 1973 (Companies Act) on the application of a creditor,
Pathema CC.
[7] On 10 September 2015 and before the liquidation of the companies , Mr
Malherbe, an official in the Financial Intelligence Department of the Reserve Bank,
acting in terms of Regulation 22A and /or Regulation 22C of the Regulations , issued
‘blocking orders ’ in respect of the amounts standing to the credit of each of the
companies in various South African b anks. The accounts were blocked on the
reasonable suspicion that the companies had , in contravention of the Regulations,
7
exported from the Republic large sums of monies without permission of the second
appellant, the National Treasury , and made advance payments for imported goods
without submitting proof of importation of goods into the Republic to the authorized
dealer. The effect of such orders is that ‘no pe rson may withdraw or cause the
withdrawal of funds together with the interest thereon and/or accrual thereto in
accounts held at the banks.’
[8] As required by the Act, during May 2016 and December 2016 the Reserve
Bank sent letters to the companies and to the atto rney representing them, advising
them of the issue of the blocking orders and informing them that the funds in the
blocked banking accounts could be forfeited to the State. The Reserve Bank invited
them to make representations as to why a ll or any of the monies should not be
forfeited. Responses were sent to the Reserve Bank, but they failed to provide valid
reasons as to why the amounts s tanding to the credit of the blocked banking
accounts should not be declared forfeited to the State. The liquidators confirmed that
they were unable to gainsay or dispute that no satisfactory explaination was given by
the directors of the companies or thei r attorney, but contended that forfeiture could
not validly take place after the winding-up of the companies.
[9] The cause for issuing blocking orders was that the Reserve Bank had
reasonable grounds to suspect that the companies committed, or were each party to,
certain acts or omissions which constituted contraventions of the Exchange Control
Regulations. The Regulations the two companies were reasonably suspected to
have contravened, are Regulations 10(1)(c), 12(1) and 22.
8
[10] Regulation 10 deals with restrictions on export of capital. Regulation 10(1) (c)
provides:
‘No person shall, except with permission granted by the Treasury and in accordance with
such conditions as the Treasury may impose:
. . .
Enter into any transaction w hereby capital or any right to capital is directly or indirectly
exported from the Republic.’
[11] Regulation 12 deals with goods purchased outside the Republic. Regulation
12(1) provides:
‘Whenever a person in the Republic has purchased goods from any country outside the
Republic and has paid for or made a payment on account of such goods, but the said goods
have not been consigned to the Republic within four months from the date on which s uch
payment was made, such person shall within fourteen days from the date of expiry of the
said of four months report in writing to the Treasury or to an authorized dealer that the goods
have not been consigned to the Republic and the Treasury may thereup on order such
person to assign to the Treasury or to a person authorized by the Treas ury his right to the
said goods.’
Regulation 22 provides that a contravention of the Regulations is an offence
punishable with either a fine or a term of imprisonment, or both.’
[12] The Treasury may, under prescribed conditions, attach money and goods
involved in any such contravention (Reg 22A). The money or goods attached may be
forfeited to the State (Reg 22B) and the Treasury may recover certain ‘shortfalls’
upon the realisation of the money or goods forfeited (Reg 22C).1
1 South African Reserve Bank v Torwood Properties (Pty) Ltd [1996] ZASCA 104; [1996] 4 All SA 494
(A) at 497.
9
[13] Subsequent to the issue of the blocking orders and after the liquidation of the
companies, Mr K Naidoo, the Deputy Governor of the Reserve Bank, exe rcising the
power delegated to him by the Minister of Finance, issued three forfeiture orders in
terms of Regulation 22B in respect of the monies standing to the credit of the
banking accounts of each of the companies as identified in each of the forfeiture
orders. The first forfeiture order w as issued on 19 June 2017 in respect of funds
standing to the credit of Xinming in the banking accounts held with the banks , the
particulars of which were set out in the order. It was published in the Government
Gazette on 14 July 2017, on which date the m onies specified in the forfeiture order
became forfeited to the Sate and were deposited into the National Revenue Fund.
[14] A second forfeiture order was issued on 16 August 2018 in respect of the
amount of R 329 794, together with any interest standing to the c redit of Xinming in
account number 7444 5892 918 held with First Rand Bank Limited. This forfeiture
order was published in the Government Gazette on 31 August 2018, on which date
the money specified therein was forfeited to the State and was deposited in to the
National Revenue Fund. The third forfeiture order issued in respect of the monies
standing to the credit of Sun Candle in the banks specified in the order , was
published in the Government Gazette on 31 August 2018.
[15] Upon their appointment , the liquidators of the companies demanded that the
monies that were declared forfeited to the State be paid to them. They asserted that
by virtue of the winding -up and the establishment of the concurus creditorum on 13
February 2017, the monies held in the bank accounts to the credit of the companies
fell into the insolvent estates and are subject to the provisions of s 391 and s 342 of
10
the Companies Act. The Reserve Bank refused to accede to the demand,
contending that the forfeiture orders were validly made as the accounts were subject
to valid blocking orders issued in terms of either Regulation 22A or 22C.
[16] As a result of the Reserve Bank’s refusal to accede to their demand, the
liquidators, on 4 October 2019 approached the high court seeking the following relief:
‘1. That the following forfeiture orders are declared null and void and are hereby set aside
namely:
(a) notice 515 of 2018 which is annexure “JM6” annexed to the founding affidavit;
(b) notice 527 of 2017 which is annexure “JM9” annexed to the founding affidavit;
(c) notice 514 of 2018 which is annexure “JM11” annexed to the founding affidavit.
2. That the First Respondent, alternatively, the Second Respondent is directed to pay the
amounts set forth in the aforementioned forfeiture orders together with interest thereon in the
Applicants’ banking account, particulars of which follows-
Name of account- First Financial Business Rescue and Insolvency Practioners
Bank- Nedbank
Branch code- 1[…]
Account number-1[…]
3. That the Respondents are directed to file any claim or claims they may have against Sun
Candle Products (Pty) Ltd and Xinming Mountain Textile (Pty) Ltd with the Applic ants within
20 days of the date of the granting of this order whereupon the Applicants shall conve ne a
special creditors’ meeting for the purpose of the respondents proving such claims as they
may have.’
[17] The basis upon which the liquidators sought the order is summari sed as
follows in their founding affidavit:
‘ I submit:
11
(a) that by virtue of the winding-up and the establishment of the concursus creditorum on 13
February 2017 the monies held in the bank accounts to the credit of Sun Candle and
Xinming fall into the insolvent estates and are subject to the provisions of section 91 , 391
and section 342 of the (old) Companies Act.
(b) that the Applicants in their capacity as liquidators are under statutory duty to take
possession of these assets;
(c) that the first respondent does not have any superior right to these funds in preference to
the rights of proved creditors and, in particular, the South African Revenue Service,
which has proved claims as set forth in annexures “JM18”;
(d) that the first respondent mistakenly believes that it is not bound by the aforementioned
proviosions of the Companies Act and that it can act in disregard of the statutory duties
of the applicants…’
[18] At the hearing before the high court, the liquidators in the alternative sought
an order declaring that the monies referred to in the forfeiture orders vest in them.
They contended that the liquidation of the two companies had the legal effect of
vesting monies standing to the credit of the banking accounts in them and that ,
therefore, the issue of forfeiture orders in terms of Regulation 22B ceased to be
legally competent. The liquidators asserted fu rther that the publication of the
forfeiture order after 13 February 2017 was a nullity because they had already been
empowered to take control of the assets of the two companies . They further
contended that after the commencement of concursus creditorum, and certainly after
the granting of the final order for liquidation, the Reserve Bank could not take steps
to execute forfeiture orders in terms of the R egulations because by doing so it would
interfere with their ability to carry out their statutorily entrenched functions in terms of
the provisions of the Companies Act and the Insolvency Act 24 of 1936.
12
[19] The Reserve Bank contended that, notwithstanding the commen cement of
the winding-up of the two companies, the blocking orders remained in force , and that
the liquidators could not , by reason of the liquidation , acquire any greater rights to
claim payment of the funds standing to the credit of the banking accounts, than the
companies themselves had immediately prior to the commencement of the wind ing-
up. The fact that upon liquidation, proceeded the argument, the liquidators were
obliged to take possession of the assets of the companies, did not in law have the
consequence, as contended by the liquidators, that a forfeiture of those rights was
no longer competent or permissible.
[20] In addition to resisting the liquidators’ application on the merits, the National
Treasury also raised two preliminary objections. It argued, first, that the high court
lacked jurisdiction to hear the matter. It contended that its principal place of business
is in Pretoria, Gauteng and that therefore it should have been sued in the Gauteng
Division of the High Court, Pretoria and not in the KwaZulu-Natal Division of the High
Court, Durban (jurisdiction point) . Secondly, the National Treasury contended that
the application was defective in that there is no prayer in the notice of motion for the
review and setting aside of the Reserve Bank’s decision to issue the forfeiture
orders. It accordingly argued that in the absence of a review either under the
Promotion of Administrative Justice Act 3 of 2000 ( PAJA) or in terms of the principle
of legality the just and equitable remedy of substitution could not be made. This
submission was based on the contention that the Reserve Bank’s decision to issue
forfeiture orders constitutes ‘administrative action’ which is reviewable under PAJA.
13
[21] In my view, the National Treasury’s jurisdiction point should fail for the simple
reason that it is clear from the prayers in the notice of motion that the effect of the
liquidators’ application was to have declared null and void the forfeiture decisions
issued by the Reserve Bank after the liquidation of the two companies on the basis
that it was no longer legally competent for it to make them, following the winding-up
of the two companies. Properly construed, the effect of the application , although not
labeled as such, was a review based on either PAJA or the principle of legality, and
that being the case , in terms of s 1 of PAJA , the liquidators could bring the
application before a court within whose jurisdiction the administrative action occurred
or the party, whose rights were affected, is domiciled or ordinarily resident. The bank
accounts in respect of which the forfeiture orders were issued, were held with the
banks located in Durban and accordingly t he high court had the requisite jurisdiction
to entertain the application. The lack of jurisdiction point was correctly rejected by the
high court.
[22] As I see it, the thrust of the liquidators’ case in the high court was that after
the commencement of the winding -up, it was no longer legally permissible for the
Reserve Bank to exercise a power under Regulation 22B to order the forfeiture of the
assets of the companies in liquidation and that the purpo rted forfeiture orders were
ultra vires . The factual basis for this contention was that the Reserve Bank, after
issuing the blocking orders in respect of the monies standing to the credit of the
companies, became the ir creditor. It was required to participate in the concurus
creditorum, and could therefore not validly deal with the assets of the companies in
liquidation by the issue of forfeiture orders, which prejudiced other creditors.
14
[23] The liquidators’ contentions found favour with the high court. It granted orders
declaring the three forfeiture orders null and void and directing the National Treasury
to pay the amounts referred to in the forfeiture orders together with interest, to the
liquidators. It ordered the Reserve Bank and the National Treasury, jointly and
severally, to pay the liquidators’ costs, including costs of two counsel.
[24] Central to the high court’s conclusion were the following findings:
(a) The effect of the forfeiture orders was that the Reserve Bank became a
creditor of each of the companies, its claim being to the contractual right each
company had against each of the affected banks.
(b) The Reserve Bank was already a creditor at the time of the commencement of
the winding-up as blocking orders were already in place. ‘Whether the claims against
the banks for the money in question wou ld be lost to the companies depended on a
condition, namely a decision by the Reserve Bank that the claim should be forfeited.
The Reserve Bank qualified as a creditor with a conditional claim on the date of the
winding-up’.
(c) If insolvency law applies, the liquidators were entitled to take possession of
and assert the companies’ rights to claim the amounts standing to the credit of the
various bank accounts in which the companies had made deposits, and to deal with
the proceeds in discharge of their duties under s 391 of the Companies Act.
(d) The intervention of the winding -up of the companies rendered unlawful the
issue of forfeiture orders which made it mandatory for the banks to ignore the
companies’ claims, and pay the amounts in question into the National Revenue
Fund.
15
[25] It was contended by the Reserve Bank and the National Treasury that the high
court erred in finding that the forfeiture orders rendered the Reserve Bank a creditor
of the respective companies with a conditional claim on the date of the winding -up of
the two companies. They argued that the funds targeted by the forfeiture orders
belonged neither to the insolvent companies, nor t he liquidators. In relation to these
funds, proceeded the argument, the Reserve Bank wa s not a mere creditor and the
forfeiture orders it sought to enforce, were in no way nullified by the liquidation of the
insolvent companies. The Reserve Bank, so it was argued, was entitled to enforce
the orders and seize the impugned funds.
[26] Arguing in support of the high court’s judgment, counsel for the liquidators
submitted that the reasoning and the findings of the high court c ould not be faulted.
He argued that there wa s no warrant or justification for the proposition that the
regulations trump insolvency law, which he submitted was well established and that
being the case, proceeded his argument, the high court was correct when it held t hat
there did not appear to be a dispute about the rights of the Reserve Bank to
participate in the insolvent estates. Counsel’s submission is based on authority of
Walker v Syfret 1911 AD 141 in which it was held at 160:
‘The effect of a winding -up order is to establish a concursus creditorum , and nothing can
thereafter be allowed to be done by any of the creditors to alter the rights of the other
creditors.’
[27] The Constitutional Court in Chisuse and Others v Director -General2 at para 47,
reiterated that in ‘interpreting statutory provisions, recourse is first had to the plain,
2 Chisuse and Others v Director-General, Department of Home Affairs and Another [2020] ZACC 20;
2020 (10) BCLR 1173 (CC).
16
ordinary, grammatical meaning of the words in question .’ In addition principles of
interpretation require that (a) the statutory provisions should always be interpreted
purposively; (b) the relevant statutory provision must be properly contextualised; and
(c) all statements must be construed consistently with the Constitution.
[28] This Court in South African Reserve Bank v Leathern N O and Others 3
(Leathern) held that the purpose of the regulations is three -fold. First, it is to prevent
loss of foreign currency resources through the transfer abroad of financial capital
assets held in South Africa. Secondly, to ensure effective control of the movement of
financial and real assets into and out of South Africa; and thirdly, to avoid
interference with the efficient operations of the commercial, industrial and financial
system of the country. The court added that as part of the context within which the
purpose of the regulations must be considered is the mischief at which the
regulations are aimed namely, ‘the prevention of illicit flow and influx of foreign
capital from the country…’.4
[29] This Court made the following findings which are relevant to this appeal:
‘[T]he purpose of a blocking or attachment order in terms of the regulations is to secure
assets which may be liable to forfeiture in terms of the regulations. This adds to the general
context of the regulations in that a blocking order is provisional only and the final position
can only be determined if the Reserve Bank seeks a forfeiture order. Context includes,
amongst others, the mischief which the regulations are aimed at, that is, the prevention of
illicit flow and influx of foreign ca pital from the country risk of damage to the economy of the
country as a result.
3 South African Reserve Bank v Leathern N O and Others [2021] ZASCA 102; 2021 (5) SA 543
(SCA).
4 Ibid para 36.
17
[37] A blocking or attachment is therefore a prerequisite for a valid forfeiture of the funds
to the State. If a blocking order is terminated by the grant of a subseque nt sequestration
order, the forfeiture of the assets used in the contravention of the regulations might never be
realised. The effect would be that assets which legitimately ought to be forfeited to the State
in terms of the regulations, would vest in the insolvent estate and be subject to distribution
by the trustees. The remedy of forfeiture, a sanction of public law imposed to protect the
currency and the economy, would be lost by operation of the law of insolvency. That is an
absurdity so glaring that the legislature could not have contemplated it.
[38] Just as a solvent person must suffer the lawful attachment of funds in his or her
bank account, with the possible imposition of forfeiture in due course, the trustees of the
insolvent estate of that person can be in no better position. Seen in this context, the reach of
the regulations is such that a sequestration order must yield to a blocking order. This
interpretation is consistent with s 224 of Constitution, in terms of which the primary object of
the Reserve Bank is to protect the value of the currency “in the interest of balanced and
sustainable economic growth in the Republic. ” The regulations constitute mechanisms,
among others, to assist the Reserve Bank to execute its Constitutional mandate.’5
Counsel for the Reserve Bank and the National Treasury relied on these findings
and submitted that they were applicable in this case. I agree with their submission.
[30] The high court erred in declaring the forfeiture orders null and void and
ordering the National Revenue Fund to pay to the liquidators the monies reflected in
the forfeiture orders on the basis of the reasoning that the intervention of the
winding-up of the companies rendered them unlawful to the extent that they made it
mandatory for the banks to ignore the companies’ claims .
5 Ibid paras 36-38
18
[31] The conclusion of the high court that the intervention of the winding -up of the
two companies rendered unlawful the issue of the forfeiture orders undermines the
purpose which the Regulations seek to achieve. The enabling legislation – the Act –
empowers the President to make regulations providing for the blocking and forfeiture
orders to be made in respect of any money or goods which are suspected by the
Treasury on reasonable grounds to be involved in the commission of an offence. The
fact that the f orfeiture orders issued in terms of Regulation 22B provided for the
targeted funds to be forfeited to the State and for such monies to be paid into the
National Revenue Fund, rather than to the liquidators, did not render such orders
unlawful. It must be r emembered that the companies in issue were already subject
to the blocking orders long before their liquidation. The operation of the blocking
orders did not result in the creation of a debtor -creditor relationship between the
companies and the Reserve Ba nk. The Act and the Regulations must be interpreted
purposively.
[32] Havin g regard to the context and purpose of the R egulations, it seems to me
that as the blocking orders were still extant at the time of the winding -up of the
companies, it was compet ent for the Reserve Bank to issue the relevant forfeiture
orders. As has been mentioned, in Leathern this Court decided that blocking orders
are not affected by the subsequent insolvency of the person in question. Such a
finding would be rendered nugatory if forfeiture orders could not follow. The effect of
the blocking orders was that whilst they existed , the companies , pending
investigation as to whether the funds should be declared forfeited to the State, were
prevented from drawing funds from the bank accounts to which the blocking orders
related. The subsequent liquidation of the companies could not affect the validity
19
and the existence of the blocking orders , which means that whilst they existed the
Reserve Bank could make an order declaring the funds subject to the blocking
orders forfeited to the State . That much is apparent from the provisions of s
9(2)(b)(ii) of the Act which authorises the President to make any regulations which
may provide for any matter he or she deems necessary for the fulfilment of the
objectives and purposes referred to in subparagraph (i) including forfeiture and
disposal by the Treasury of any money or goods belonging to the offender,
suspected offender or any other person.
[33] To apply the Regulations in the manner contended for by the liquidators’
counsel in the factual context of this matter would be incongruent with and inimical to
the Act and the entire regulatory framework relating to curren cy, banking or
exchanges. It would defeat the entire purpose of a blocking order if a forfeiture order,
made pursuant to the blocking order , fell away upon the winding -up of the
companies. If a forfeiture order is terminated by the grant of a subsequent winding -
up order, the forfeiture of the assets used in the contravention of the regulations
might never be realized, and the effect would be that the assets which legitimately
ought to be forfeited to the S tate in terms of the regulations, would vest in the
insolvent estate and be subject to distribution by the liquidators. Companies such as
the two companies in issue , in order to defeat the purpose the forfeiture orders ,
could simply commence winding -up pro ceedings to prevent the forfeiture of funds
held in an account that had been made subject to a blocking order. The winding -up
of the two companies cannot retrospectively terminate the legal effect of the blocking
orders.
20
[34] The liquidators’ reliance o n Commissioner, South African Revenue Service v
Van der Merwe and Others (Van der Merwe )6 is misplaced. The facts of this case
are distinguishable from those in Van der Merwe . The question in Van der Merwe
was whether the Customs and Excise Act 91 of 1964 and the Value Added Tax Act
89 of 1991 precluded the Commissioner of the South Afri can Revenue Service
(SARS) from releasing imported equipment to liquidators without the liquidator s first
having to pay dut y and Value Added T ax on the equipment. Unlike the purpose of
forfeiture orders, the purpose of the Customs and Excise Act is to ensure the duties
are collected on goods which are imported into South Africa. Unlike the Reserve
Bank, the powers exercised by the Commissioner when claiming duties due to SARS
in respect of property under the Customs and Excise Act are indeed powers
exercised as a ‘creditor’ and the insolvent company is a debtor in relation of unpaid
customs and duties . SARS may be considered a ‘lienholder’ in respect of the
property which is held in terms of the Act where duties are unpaid.
[35] To sum up, the liquidation of the two companies did not nullify the blocking
order which was in existence at the time. As a blocking order was not nullified, it was
competent for the Reserve Bank after the liquidation of the companies to issue the
forfeiture orders w hich made it mandatory for the banks which held the accounts in
which monies were kept, to pay such monies into the National Revenue Fund. The
forfeiture orders issued after the liquidation of the companies were not affected by
the liquidation and the moni es which were declared forfeited to the State did not fall
into the estates of the insolvent companies. The liquidators were therefore not
entitled to demand that the funds be paid out to them for distribution.
6 Commissioner, South African Revenue Service v Van der Merwe N O and Others [2017] ZASCA
138; 2017 (3) SA 34 (SCA).
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[36] In the result I make the following order:
1 The appeal succeeds.
2 The order made by the high court is set aside and replaced with the following
order:
‘The application is dismissed with costs’.
_________________
D H ZONDI
JUDGE OF APPEAL
APPEARANCES
For first appellant: N.G.D Maritz SC
Instructed by: Gildenhuys Malatji Inc, Pretoria
Honey Attorneys, Bloemfontein
For second appellant: M Stubbs
Instructed by: State Attorney, Pretoria
State Attorney, Bloemfontein
For respondent: O.A Moosa SC and D. Dheoduth
Instructed by: Maistry & Motsime Attorneys, Durban
Webbers Attorneys, Bloemfontein
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