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[2010] ZASCA 117
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Falk and Another v National Director of Public Prosecutions (689/09) [2010] ZASCA 117; 2011 (1) SACR 105 (SCA) ; [2011] 1 All SA 354 (SCA) (23 September 2010)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case No: 689/09
In the matter between:
ALEXANDER
GERHARD FALK
...................................................
First
Appellant
FALK REAL ESTATE SA (PTY) LTD
...........................................
Second
Appellant
and
NATIONAL
DIRECTOR OF PUBLIC PROSECUTIONS
.................
Respondent
Neutral citation:
Falk v NDPP
(689/09)
[2010] ZASCA 117
(23 September
2010).
Coram:
MPATI P, CLOETE, CACHALIA, BOSIELO and
TSHIQI JJA
Heard:
9 September 2010
Delivered:
23 September 2010
Summary:
International Co-operation in Criminal
Matters Act 75 of 1966;
Prevention of Organised Crime Act 121 of
1998
; effect of foreign restraint order registered in South Africa.
______________________________________________________________
ORDER
______________________________________________________________
On appeal from:
Western Cape High Court (Cape
Town) (Louw J sitting as court of first instance):
The appeal is dismissed with costs. The costs shall
include the costs of two counsel and the costs occasioned by the
applications
by both sides to place further evidence before this
court.
______________________________________________________________
JUDGMENT
______________________________________________________________
CLOETE JA (MPATI P, CLOETE, CACHALIA, BOSIELO and TSHIQI
JJA concurring):
[1] This appeal concerns the
interface between two statutes, the International Co-operation in
Criminal Matters Act
1
(the ICCMA) and the
Prevention of
Organised Crime Act
2
(POCA
). The first and second
appellants are respectively Mr Alexander Gerhard Falk and Falk Real
Estate SA (Pty) Ltd (FRS). The respondent
is the National Director of
Public Prosecutions (NDPP). The appellants appeal against the
dismissal by Louw J in the Western Cape
High Court of their
application for the setting aside of:
(a) the registration on 13 September 2004 of a foreign
restraint order against Falk by the registrar of the Western Cape
High Court
in terms of
s 24
of the ICCMA; and
(b) interdicts granted on 16 August 2005 by Veldhuizen J
at the suit of the NDPP against Falk and FRS in terms of chapter 5 of
POCA.
The appeal is with the leave of the court a quo.
[2] The essential facts are uncomplicated and common
cause. Falk was arrested in Germany on 6 June 2003 on various
charges. The
charges include allegations that he had manipulated the
share price of a German corporation by making intentional
misstatements,
with a view to obtaining an unlawful gain for himself
and others to the detriment of third parties who purchased shares in
the
corporation. On 25 August 2004 the Hamburg Regional Court
(Landgericht) issued an order authorising the attachment of assets in
Falk's estate to the value of at least €31 635 413,34. The
purpose of the attachment was to secure this amount against
the
eventuality of Falk being convicted of the crimes with which he was
charged and the court ordering forfeiture of the amount
specified.
The German authorities requested assistance in enforcing the order.
Pursuant to this request the Director-General: Justice
lodged a copy
of the order with the registrar of the Western Cape High Court and it
was registered in that court on 13 September
2004 in terms of the
provisions of
s 24
of the ICCMA. It is against the registration
of this order that the first part of the leave sought by the
appellants is directed.
[3] The relevant sections of the ICCMA are the
following:
'
24.
Registration of foreign restraint order
(1) When the Director-General
receives a request for assistance in enforcing a foreign restraint
order in the Republic, he or she
may lodge with the registrar of a
division of the Supreme Court a certified copy of such order if he or
she is satisfied that the
order is not subject to any review or
appeal.
(2) The registrar with whom a
certified copy of a foreign restraint order is lodged in terms of
subsection (1), shall register such
order in respect of the property
which is specified therein.
(3) The registrar registering a
foreign restraint order shall forthwith give notice in writing to the
person against whom the order
has been made─
(a) that the order has been
registered at the division of the Supreme Court concerned; and
(b) that the said person may
within the prescribed period and in terms of the rules of court apply
to that court for the setting
aside of the registration of the order.
(4)(a) Where the person against
whom the foreign restraint order has been made is present in the
Republic, the notice contemplated
in subsection (3) shall be served
on such person in the prescribed manner.
(b) Where the said person is not
present in the Republic, he or she shall in the prescribed manner be
informed of the registration
of the foreign restraint order.’
'Restraint order’ is defined in
s 1
of the
ICCMA as 'a restraint order or preservation of property order made
under’ POCA. A restraint order as envisaged in
POCA would be
issued under the criminal forfeiture provisions of chapter 5 and a
preservation of property order, under the civil
forfeiture provisions
of chapter 6. The present case falls under chapter 5.
‘
25.
Effect of registration of foreign restraint order
When any foreign restraint order
has been registered in terms of
section 24
, that order shall have the
effect of a restraint order made by the division of the Supreme Court
at which it has been registered.
26. Setting aside of
registration of foreign restraint order
(1) The registration of a
foreign restraint order in terms of
section 24
shall, on the
application of the person against whom the order has been made, be
set aside if the court at which the order was
registered is
satisfied─
(a) that the order was
registered contrary to a provision of this Act;
(b) that the court of the
requesting State had no jurisdiction in the matter;
(c) that the order is subject to
review or appeal;
(d) that the enforcement of the
order would be contrary to the interests of justice; or
(e) that the sentence or order
in support of which the foreign restraint order was made, has been
satisfied in full.
(2) The court hearing an
application referred to in subsection (1) may at any time postpone
the hearing of the application to such
date as it may determine.'
[4] On 16 August 2006 Veldhuizen J in the Western Cape
High Court granted interdicts at the suit of the NDPP against Falk
and FRS.
Falk was interdicted from dealing in any way with his shares
in FRS (which by then were being held in trust by an attorney in Cape
Town); and both Falk and FRS were interdicted from dealing with the
sum of €5,22 million held in a bank account, and
from
dealing in any way, other than in the ordinary course of business,
with any of the other assets of FRS. It is against the
refusal by the
court a quo to set aside these interdicts that the second part of
this appeal is directed.
[5] It is convenient at this stage, before continuing
with the chronology of relevant facts, to deal with an argument
advanced on
behalf of the appellants in regard to the interdicts
granted by Veldhuizen J which I have just mentioned. It was common
cause in
the court a quo that in granting the interdicts, the learned
judge acted under the 'ancillary orders' provision in s 26(8)
of
POCA. That section provides:
'A High Court making a restraint
order shall at the same time make an order authorising the seizure of
all movable property concerned
by a police official, and any other
ancillary orders that the court considers appropriate for the proper,
fair and effective execution
of the order.'
The appellants' counsel submitted on appeal, however,
that an order in terms of s 26(8) was not competent in law
inasmuch as
there was no restraint order against FRS ─ the
order of the German court related only to the property of Falk.
[6] I reject this argument. Falk is the sole shareholder
of FRS. The founding affidavit of the NDPP put before Veldhuizen J
contained
the following paragraph:
'The Applicant [the NDPP] also
applies in terms of section 26(8) of the POCA for an order
interdicting the Second Respondent [FRS]
from dealing in any way with
the 5 220 000 Euros currently in the Standard Bank's
nostro
account
of the Standard Bank of South Africa pursuant to the SWIFT transfers
to the Second Respondent [by Falk and a German company
controlled by
him] on 5 June 2003 and interdicting the Second Respondent from
dealing in any way, other than any ordinary course
of business, with
any of its other assets. These orders are sought to preserve the
value of the underlying assets held by the First
Respondent [Falk]
through his shareholding in the Second Respondent pending the final
determination of the proceedings in Germany,
which I submit the South
African authorities are clearly entitled and obliged to do pursuant
to the registration of the foreign
restraint order. The Respondents'
efforts in the recent past to gain access to the money, coupled with
the earlier payments out
of the nostro account at the instance of Mr
Louw [the general manager of FRS], show that the Applicant reasonably
apprehends that
if the interdict is not granted the underlying assets
held by the Second Respondent may be dissipated.'
In my view it was competent in the light of these
allegations for Veldhuizen J to have granted the interdicts against
FRS which
he did in terms of the 'ancillary orders' provision of
s 26(8) of POCA.
[7] I continue with the chronology. Falk's criminal
trial commenced in the Hamburg Regional Court on 3 December 2004.
Some three-and-a-half
years later, on 9 May 2008, that court found
Falk guilty of conspiracy to attempt to commit fraud, of conspiracy
to misrepresent
the financial position of a corporation and of
misstating information of a corporation in its annual financial
statements. Falk
was sentenced to imprisonment for four years and
(together with the other defendants) he was ordered to pay the costs
of the proceedings.
But the court refused to grant the forfeiture
order against Falk that had been sought by the Hamburg prosecutors.
Both the latter
and Falk noted appeals to the Federal Court
(Bundesgerichtshof). The prosecutors contended inter alia that Falk
should have been
convicted of fraud and that in any event a
forfeiture order should have been granted against him; and Falk
contended that he had
been wrongly convicted.
[8] According to the undisputed evidence of Dr Winter, a
public prosecutor who is the head of the Financial Investigations
Unit
of the Public Prosecutors Department in Hamburg, the noting of
the appeals against the order of the regional court automatically
suspended its operation. Furthermore, according to Dr Winter:
'The Federal Court has a wide
discretion to grant relief on appeal. It may overturn the judgment of
the Regional Court in its entirety
or it may interfere with specific
findings, for example relating to the severity of the sentence
imposed. However, wherever possible
the Federal Court will remit the
matter to the Regional Court for further determination rather than
substituting its decision for
that of the Regional Court. If the
Federal Court makes a finding that a conviction for fraud is
supported by the evidence, or if
the Federal Court makes a finding
that forfeiture is appropriate in the circumstances, it will remit
the matter to a different
chamber of the Regional Court for
re-assessment. It is only in rare instances that the Federal Court
imposes a harsher or lighter
sentence without remitting the matter to
the Regional Court.'
[9] Further evidence was tendered on
appeal by both sides as to the outcome of the appeal before the
German Federal Court which
made an order on 29 July this year, ie
after the present appeal had been set down for hearing by this court.
The evidence was admitted
provisionally. In view of the conclusion I
have reached, it is not necessary to have regard thereto. It suffices
to say that it
is common cause between the parties that the order of
the German Federal Court does not mean that the order sought in this
appeal
will have no practical effect or result, as contemplated in
s 21A of the Supreme Court Act.
3
I accordingly decline to admit the
evidence tendered; but it would be fair if the costs incurred on both
sides in the applications
to adduce such evidence on appeal were to
be treated as costs in the appeal. I shall accordingly deal with the
appeal on the basis
of the factual situation which prevailed when the
matter was adjudicated upon by the court a quo, ie that it was
possible for the
German Federal Court to refer the matter back to the
Hamburg Regional Court to decide whether to make a forfeiture order
against
Falk.
[10] The court quo in refusing the relief sought by the
appellants relied on s 24A of POCA, which provides:
'
24A
Order to remain in force pending appeal
─
A
restraint order and an order authorising the seizure of the property
concerned or other ancillary order which is in force at the
time of
any decision by the court in relation to the making of a confiscation
order, shall remain in force pending the outcome
of any appeal
against the decision concerned.’
The court reasoned:
‘
In my
view the decision by a trial court, in this case the Hamburg Regional
Court, not to make a confiscation order pursuant to
the conviction of
a defendant is indeed one of the decisions the legislator had in mind
when it referred in wide terms to
any
decision by the court in relation to the making of a confiscation
order
.
The decision in this case not to make a confiscation order which
order was specifically requested by the Hamburg prosecutors certainly
is in my view a decision in relation to the making of a confiscation
order. There is no reason to read the wide words
"any
decision in relation to the making of a confiscation order"
to be
confined to decisions in regard to the making or orders ancillary the
confiscation order. In my view the legislator had intended
the
status
quo
regarding
the restraint to continue pending the outcome of an appeal against
the refusal to make the order of confiscation. To do
otherwise might
very well render the outcome of the appeal, if successful, nugatory.'
(Emphasis in the original judgment.)
[11] The principal submission of the appellants' counsel
on appeal was that in terms of s 26(10)(b) of POCA a high court
which
made a restraint order is obliged to rescind the order when the
proceedings against the defendant concerned are concluded; that
it is
s 17 (which together with s 26(10) forms part of chapter 5
of POCA) that prescribes when proceedings against a
defendant are
concluded for the purposes of s 26(10)(b); and that this matter
falls within s 17(b) because the Hamburg
Regional Court did not
make a confiscation order against Falk. It is convenient to quote
ss 26(10) and 17 in full at this
juncture:
'26(10) A High Court which made
a restraint order─
(a) may on application by a
person affected by that order vary or rescind the restraint order or
an order authorising the seizure
of the property concerned or other
ancillary order if it is satisfied─
(i) that the operation of the
order concerned will deprive the applicant of the means to provide
for his or her reasonable living
expenses and cause undue hardship
for the applicant; and
(ii) that the hardship that the
applicant will suffer as a result of the order outweighs the risk
that the property concerned may
be destroyed, lost, damaged,
concealed or transferred; and
(b) shall rescind the restraint
order when the proceedings against the defendant concerned are
concluded.'
'17. For the purposes of this
Chapter, the proceedings contemplated in terms of this Chapter
against a defendant shall be concluded
when─
(a) the defendant is acquitted
or found not guilty of an offence;
(b) subject to section 18(2),
the court convicting the defendant of an offence, sentences the
defendant without making a confiscation
order against him or her;
(c) the conviction in respect of
an offence is set aside on review or appeal; or
(d) the defendant satisfies the
confiscation order made against him or her.'
[12] I shall have to deal in more detail with the
argument by the appellants' counsel at a later stage in the judgment
as it arises
in a different context. In the present context, the
argument falls to be rejected because it rests upon the same
fundamental fallacy
as the judgment of the court a quo. The fallacy
is this. Section 25 of the ICCMA, in providing that a foreign
restraint order shall
have the effect of a restraint order made by
the division of the high court at which it has been registered, does
not convert the
foreign restraint order into an order of the South
African High Court. It remains a foreign order and not all of the
provisions
of chapter 5 of POCA apply to it. Section 26(8) applies,
with the necessary changes, so that the introductory words 'a high
court
making a restraint order shall at the same time make an order
authorising the seizure of all moveable property concerned' must be
read as meaning ‘the registration of a foreign restraint order
under the ICCMA requires the high court at which it is registered
to
make an order authorising the seizure' etc. Obviously, the making of
such an order would be triggered by an application brought
by the
NDPP.
[13] On the other hand, it is incorrect to interpret
s 24A, the section on which the court a quo relied, as meaning
that a
foreign restraint order which is in force at the time of any
decision by a foreign court in relation to a confiscation order,
shall
remain in force pending the outcome of any appeal in the
foreign jurisdiction in relation to the confiscation order. The
position
is not governed by s 24A of POCA but by s 26 of
the ICCMA. If an appeal is pending or could still be noted in a
foreign
court against the grant or refusal of a confiscation order, a
South African court hearing an application for the setting aside of
the registration of the foreign restraint order in terms of s 26
of the ICCMA might well have regard to the terms of subsection
(2)
and postpone the hearing until the fate of the appeal in the foreign
court became known.
[14] Section 26(10)(b), the section relied upon by the
appellants' counsel, also does not apply to a registered foreign
restraint
order. A South African high court cannot, in the terms of
the section, 'rescind the restraint order when the proceedings
against
the defendant concerned are concluded' for the simple reason
that a domestic court lacks jurisdiction to rescind the order of a
foreign court. What a South African high court can do in terms of
POCA is to vary or rescind the seizure order or the ancillary
order
made by it in terms of s 26(8), in the circumstances set out in
s 26(10)(a); but if a defendant wishes to undo
the effect of the
registered foreign restraint order altogether, the remedy lies not in
POCA but in s 26 of the ICCMA. That
section is definitive of the
grounds upon which the registration of a restraint order can be set
aside. I should perhaps emphasise
that the fact that s 24(3)(b)
of the ICCMA contemplates a period within which a person against whom
a foreign restraint order
has been made, may apply for the setting
aside of the registration of the order, must not be interpreted as
preventing the making
of such an application after the prescribed
period, if the application is based on facts or circumstances which
arose after that
period: the provisions of s 26(1)(e) militate
against such an interpretation, and in any event the provisions of
s 26(1)(d)
must, in the circumstances postulated, continue to be
available to the person concerned. The principal argument advanced on
behalf
of the appellants must therefore fail.
[15] The appellants' counsel sought in the alternative
to mount an attack based on s 26(1)(d) of the ICCMA, which
obliges a
South African high court to set the registration of the
foreign restraint order aside at the suit of the person against whom
it
has been made, if the enforcement of the order would be contrary
to the interests of justice. The submission was that because in
South
Africa, POCA (in s 26(10)(b) read with s 17(b)) requires a
restraint order to be set aside if the court convicting
the defendant
─ which counsel submitted meant only the court of first
instance ─ sentences the defendant without making
a
confiscation order against him or her, the South African legislature
has determined what the interests of justice require; and
therefore,
so the submission went, because the Hamburg Regional Court did indeed
sentence Falk without making a confiscation order,
the registration
of the German restraint order has to be set aside. What may happen on
appeal, submitted counsel, was irrelevant;
it was the submission that
the legislature must be taken as having intended that the draconian
effects of a restraint order and
the impairment of the defendant's
constitutional right to property would endure only until the trial
court exercised the discretion
whether or not to grant a confiscation
order.
[16] There are two answers to this
argument. The first is that it does not follow that because South
African municipal law would
require a South African restraint order
to be discharged by a South African court in given circumstances, the
continued registration
of a foreign restraint order would in those
same circumstances necessarily be contrary to the interests of
justice. The essential
question ─ what would be contrary to the
interests of justice ─ requires a broader enquiry. But in any
event, the interpretation
of s 17(b) of POCA advanced by counsel
leads to an absurdity. The whole purpose of a restraint order is to
preserve property
pending the possible making of a confiscation
order.
There is simply
no warrant for interpreting the phrase ‘the court convicting
the defendant of an offence’ in s 17(b)
as meaning a court
of first instance only. An appeal by the NDPP is possible ─
according to s 13(1) of POCA,
4
proceedings for a confiscation order
are civil proceedings; in civil proceedings, either party may appeal
with the necessary leave;
and there is no indication in the Act why
the ordinary position should not obtain. In this latter regard I
reject the argument
by the appellants' counsel that ss 17(a) and
(c) require s 17(b) to be interpreted as excluding an appeal by
the NDPP
against the refusal of a confiscation order. If such an
appeal were to be upheld, the order of the court a quo would be set
aside
and replaced with the order that the appellate court considers
should have been given in the first place, and that order would
become the order of the court a quo. On counsel's argument, if the
NDPP were to appeal against the refusal of a confiscation order,
the
protection afforded by the restraint order would be lost ─ no
matter how egregious the refusal of the court of first
instance to
grant a confiscation order might have been and irrespective of the
prospects of success on appeal. That simply cannot
be the law. The
appellants’ argument based on s 26(d) of the ICCMA is
accordingly rejected.
[17] Cost of two counsel were sought by the respondent.
There was no opposition on behalf of the appellants. In my view the
issues
raised were of sufficient complexity and importance to warrant
the briefing of two counsel.
[18] The following order is made:
The appeal is dismissed with costs. The costs shall
include the costs of two counsel and the costs occasioned by the
applications
by both sides to place further evidence before this
court.
_______________
T D CLOETE
JUDGE OF APPEAL
APPEARANCES:
APPELLANTS: R S van Riet SC
Instructed by Van der Spuy & Partners, Cape Town
Naudes Inc, Bloemfontein
RESPONDENTS: A Breitenbach SC (with him Ms K S Saller)
Instructed by The State Attorney, Cape Town
1
75
of 1996.
2
121
of 1998.
3
59
of 1959: '21A(1) When at the hearing of any civil appeal to the
Appellate Division or any Provincial or Local Division of the
Supreme Court the issues are of such a nature that the judgment or
order sought will have no practical effect or result, the
appeal may
be dismissed on this ground alone.'
4
'13(1)
For the purposes of this Chapter proceedings on application for a
confiscation order or a restraint order are civil proceedings,
and
are not criminal proceedings.'