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[2017] ZASCA 142
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National Director of Public Prosecutions v Kalmar Industries SA (Pty) Ltd (1146/2017) [2017] ZASCA 142; 2017 (2) SACR 593 (SCA) (2 October 2017)
THE SUPREME
COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 1146/2017
In the matter between:
NATIONAL DIRECTOR OF
PUBLIC
PROSECUTIONS
APPELLANT
and
KALMAR
INDUSTRIES SA (PTY) LTD
RESPONDENT
Neutral citation:
National Director of Public Prosecutions v
Kalmar Industries SA (Pty) Ltd
(62/17)
[2017]
ZASCA 142
(2 October 2017)
Coram:
Navsa ADP, Leach and Majiedt JJA and Ploos van Amstel
and Schippers AJJA
Heard
:
17 August 2017 and
27 September 2017
Delivered:
2 October 2017
Summary:
Forfeiture of property :
Section 50(1)
of the
Prevention of Organised Crime Act 121 of 1998
: whether property, a
lifting platform and equipment alleged to have been stolen,
susceptible to seizure : whether NDPP ought to
have become involved
in commercial dispute.
ORDER
On appeal
from: Eastern Cape Local Division of the High Court, Port Elizabeth
(Plasket J sitting as court of first instance):
The following
order is made:
1 The appeal
is dismissed with costs.
2 The wasted
costs occasioned by the respondent’s failure to appear at the
hearing of the appeal on 17 August 2017 shall be
paid by the
appellant’s Bloemfontein and Johannesburg attorneys, jointly
and severally; and shall not be recovered from the
respondent.
JUDGMENT
Schippers
AJA (
Navsa ADP, Leach and Majiedt
JJA and Ploos van Amstel
AJA
concurring):
[1]
The principal issue in
this appeal is whether a Swift 001 purpose-built lifting platform
(the platform) and certain tools, equipment
and other items (the
equipment) were firstly, susceptible to a preservation of property
order under s 38 of the Prevention of Organised
Crime Act 121 of 1998
(POCA) and consequently, to a forfeiture order in terms of the
provisions of s 48 read with s 50 of POCA.
The court a quo found that
they were not, and held that the appellant (the NDPP) had not met the
jurisdictional requirements for
the grant of both a preservation of
property order and a forfeiture order.
Factual
background
[2]
The background to the
forfeiture application can be shortly stated. The respondent (Kalmar)
is a wholly-owned subsidiary of Cargotec
Corporation (Cargotec), a
company incorporated in Helsinki, Finland, which carries on business
as a manufacturer and supplier of
port lifting equipment. In 2008
Kalmar concluded a written agreement with Transnet Ltd (Transnet) to
supply and deliver inter alia,
22 rubber tyred gantry cranes (RTGs)
to Transnet at the Port of Ngqura (the harbour). In terms of the
contract, the warranty period
on the painting of each RTG was seven
years after the delivery date.
[3]
In 2010 an inspection
of the RTGs revealed that they were corroded and Kalmar accepted a
warranty claim to refurbish them. Kalmar
agreed with Transnet that
the warranty work on all 22 RTGs would commence in October 2012 and
be completed in 18 months, ie by
April 2014. Kalmar then engaged the
services of Q6 Management Projects Africa (Pty) Ltd (Q6) as a
subcontractor, to provide a solution
to the refurbishment of the
RTGs, referred to in the papers as ‘the rust project’.
[4]
Mr Douglas Reed (Reed),
a shareholder of Q6 and the manager of the rust project, said that Q6
had agreed to do the project at an
estimated cost of R1.24 million
plus VAT per RTG and to that end, designed and commissioned the
platform. Reed said that the platform
was built for Q6 by Storm
Engineering at a cost of some R2.4 million. Q6 claimed that it was
the owner of the platform and that
it had paid all the costs relating
to the research, design and fabrication thereof, save for one payment
of R229 824, that the
parties had agreed Kalmar would pay and which
was a bridging funding arrangement only.
[5]
The platform is a
utility vehicle which is more effective than scaffolding. It is
essentially a lifting platform secured by guard
rails which is
assembled, moved into position and secured to a RTG. Workmen are then
lifted on the platform to those sections of
the RTG which require
refurbishment. The platform was designed in compliance with national
legislation governing occupational health
and safety, more
specifically, the regulations relating to lifting machines and
lifting tackle. The Department of Labour approved
the use of the
platform in the harbour on certain conditions, inter alia, that it
could only be operated by trained and certified
platform drivers; and
that moving or supporting of persons in suspension on the platform
had to be done under supervision of Q6,
Transnet or Kalmar. The
platform was moved to an area in the harbour designated by Transnet
for the rust project (the site), which,
Reed said, was fenced and
secured at the instance of Q6, and the project commenced around
August 2012.
[6]
In December 2012 Q6
completed the refurbishment of RTG No 19, which was handed to Kalmar
and returned to Transnet. The next RTG
(No 20) was completed in
February 2013. However, on 8 February 2013 Q6 informed Mr Anton
Burchell (Burchell), the Managing Director
of Kalmar, that it was
exercising a lien over RTG No 20, as a result of a dispute about
payment to Q6 by Kalmar. Reed said that
on 23 February 2013 RTG No 20
had been illegally removed from the site, but that Transnet had
returned it to the site later that
night. On 28 February 2013
Burchell and a Kalmar employee returned to the site and demanded that
RTG No 20 be released, which was
refused.
[7]
Reed claimed that on 8
April 2013 the locks and fence to the site were cut and that Kalmar’s
employees removed RTG No 20.
Q6 laid a criminal charge of theft
with the police, apparently because RTG No 20 was subject to a lien
by Q6. On the same day Transnet
informed Q6 that its access to the
harbour had been withdrawn and it was forced to leave the site. Reed
claimed that Kalmar continued
using the platform and other equipment
belonging to Q6 in the rust project. Q6 laid a second charge of theft
in respect of the
platform and the equipment. Reed alleged that
Kalmar stole Q6’s property and used it as its own. Both theft
charges were
laid in September 2014. Mr Vicus Luyt (Luyt), a director
of Q6, stated that when the platform and equipment were taken by
Kalmar,
he approached a mediator to resolve the dispute, which
yielded no results; and that Q6 then ‘followed a criminal path
in
order to expedite recovery of [its] clearly stolen property’.
[8]
Burchell denied the
theft charges and that Q6 owned the platform. Kalmar’s
opposition to the forfeiture application may be
summarised as
follows. The costs of refurbishing the first RTG had not been
finalised between the parties due to Q6’s failure
to furnish
supporting documentation of its costs to Kalmar. Reed had undertaken
to finalise the pricing of the remaining RTGs by
7 January 2013,
which he failed to do. Kalmar did not sign-off on RTG No 19, because
the work was defective and documentation relating
to, inter alia, the
warranty on paintwork was outstanding. Despite this, Kalmar
paid Q6 what was owing to it in respect of
RTG No 19. Kalmar
subsequently cancelled the subcontract with Q6. There was no
agreement entitling Q6 to exercise a lien over Transnet’s
property. Transnet, and not Kalmar, had removed RTG No 20 on 8 April
2013 to a new site in the harbour, allocated by Transnet to
Kalmar to
continue with the rust project.
[9]
According to Burchell,
Kalmar did not use the platform after Q6 had been removed from the
site by Transnet. The subcontractor who
succeeded Q6 had used it for
a brief period, but was asked by Transnet to cease doing so. Burchell
alleged that Kalmar paid all
the costs in relation to the manufacture
and commissioning of the platform and that it was agreed between him
and Reed that Kalmar
owned it. According to Burchell, the value of
the platform is R229 824 - the amount Kalmar had paid to Storm
Engineering.
[10]
In February 2015 the
sheriff of the court, together with Reed and other employees of Q6,
went to the site where the rust project
was being continued,
dismantled the platform and removed it. On 10 February 2015 the NDPP
obtained a preservation of property order,
ex parte, in respect of
the platform and equipment, and launched the forfeiture application
on 6 February 2015.
The
applications under POCA should never have been brought
[11]
Section 38(1) of POCA
authorises the NDPP to apply to a high court, ex parte, for a
preservation of property order; and s 38(2)
enjoins the court to make
such an order if there are reasonable grounds to believe that the
property concerned is an instrumentality
of an offence referred to in
Schedule 1 to POCA, or the proceeds of unlawful activities.
[12]
Section 48(1) provides
that if a preservation of property order is in force, the NDPP may
apply to a high court for an order forfeiting
to the State the
property subject to the preservation order. Section 50(1) of POCA, in
material part, reads:
‘
The High Court
shall, subject to section 52, make an order applied for under section
48(1) if the Court finds on a balance of probabilities
that the
property concerned-
(a)
is
an instrumentality of an offence referred to in Schedule 1;
(b)
is
the proceeds of unlawful activities . . . .’
[13]
The first question that
arises is why did the NDPP apply on the strength of these provisions
to the court a quo for preservation
and forfeiture orders under POCA?
The documents available to the NDPP, even before the preservation
application was launched on
10 February 2015, all pointed to a
commercial dispute between two contracting parties: Q6 and Kalmar,
not to the commission of
a crime.
[14]
Thus, in his affidavit
annexed to the founding papers in the preservation application, Luyt
referred to correspondence sent on behalf
of Q6 to Cargotec in
September 2014, relating to the need to redress Q6’s rights to
recovery of its property (the platform
and equipment) and the
outstanding issues surrounding the agreement. Likewise, Reed’s
affidavit makes it clear that the dispute
between the parties was
commercial. Q6 claimed ownership of the platform and equipment, and
payment for work done under the rust
project; and it alleged that the
parties had agreed in July 2012 that the refurbishment would cost
Kalmar R1.24 million for each
RTG. Kalmar, on the other hand, claimed
that Q6 did not comply with the agreement: Q6 failed to present
invoices showing the costs
of refurbishment or warranty certificates
from the paint supplier relating to the first RTG (No 19); and that
Reed had not made
good on his promises since November 2012 to furnish
evidence of Q6’s actual costing. Burchell claimed that Kalmar
had paid
for the assets on site. Burchell denied that Q6 had any lien
in respect of RTG No 20, and proposed that Kalmar pay Q6 the sum of
R434 873.40 by 8 February 2013 for its release.
[15]
In addition, Burchell’s
warning statement on behalf of Kalmar dated 20 January 2015, relating
to the theft charges, placed
it beyond doubt that the dispute between
Q6 and Kalmar was purely commercial. That statement essentially
contains Kalmar’s
version set out above. In the statement
Burchell said that Kalmar had agreed to pay all start-up costs to Q6
or the various suppliers
directly; and that Transnet had removed RTG
No 20 and the equipment from Q6’s possession and returned them
to Kalmar, after
various meetings between Transnet, Kalmar and Q6 and
threats of civil action. Burchell went on to say that Q6 failed to
take legal
action for the delivery of the platform (it had threatened
to approach the high court for that relief on more than one
occasion);
neither did Q6 take any action against Transnet.
[16]
Even the facts upon
which the NDPP relied for the contention that the platform and
equipment were instrumentalities of an offence
(and for the claim
that they constituted the proceeds of unlawful activities),
underscored the commercial nature of the dispute.
The founding
affidavit stated that Kalmar caused Q6 to be ejected from the site
when it refused to pay for the work Q6 had done
and disregarded its
lien over a refurbished RTG (No 20). Kalmar then ‘unlawfully
appropriated to itself’ the platform
and equipment and used
them for the further refurbishment of Transnet’s RTGs. Despite
demand, Kalmar refused to restore the
property to its owners.
[17]
But the contention that
Kalmar had unlawfully appropriated the platform and equipment was
unsustainable on the evidence: there were
real disputes of fact as to
whether Kalmar had stolen the platform and equipment and whether they
were instrumentalities of an
offence or the proceeds of crime.
Kalmar’s version was that the costs of refurbishment had not
finally been agreed upon,
so there could be no lien over RTG No 20
and no theft, and further that Transnet had removed the RTG (the
first theft charge).
Kalmar alleged that it had paid all the start-up
costs in relation to the rust project, including those relating to
the platform
and the equipment and that it was the owner thereof (the
second theft charge). The court a quo proceeded on the assumption
that
the platform and equipment had been stolen, but made it clear
that theft was in dispute and had not been proved. And having regard
to the commercial nature of the dispute between Q6 and Kalmar, it
could hardly have been contemplated that such theft could be
proved.
[18]
Furthermore, the NDPP
knew or must have known that there were numerous, genuine disputes of
fact which could never have been resolved
on the papers. Those
disputes related to the terms of the agreement between Kalmar and Q6;
ownership of the platform and equipment;
the return of RTG No 20 to
Transnet; the circumstances under which Q6 was ejected from the site;
and the use of the platform and
equipment by Kalmar thereafter. The
caution by this Court that motion proceedings ‘are all about
the resolution of legal
issues based on common cause facts’,
was simply ignored.
[1]
The disputes had to be determined on Kalmar’s version: its
denial of the allegations by Q6 could not be said to be far-fetched
or clearly untenable.
[2]
So, for example, on Q6’s own version, the costs of
refurbishment of the RTGs had never been finalised and warranties
relating
to the paintwork were outstanding, and it resorted to
criminal proceedings when mediation to resolve the contractual
disputes had
failed.
[19]
But more fundamentally,
the commercial dispute between Q6 and Kalmar was far removed from the
objectives of POCA, which according
to its long title, was enacted,
inter alia, to combat organised crime, money laundering and criminal
gang activities; and to prohibit
certain acts relating to
racketeering activities.
[3]
And the dispute had nothing to do with the purposes of civil
forfeiture of property under Chapter 6 of POCA, which include
removing
incentives for crime; deterring persons from using or
allowing their property to be used in crime; eliminating or
incapacitating
the means by which crime may be committed; and
advancing the ends of justice by depriving those involved in crime of
the property
concerned.
[4]
[20]
On this basis alone,
the appeal falls to be dismissed. Given the commercial dispute, it is
hardly surprising that since Q6 laid
charges of theft some three
years ago, the NDPP has still not decided whether to institute
criminal proceedings against Kalmar
or Burchell. Instead, scarce
public resources and valuable time were wasted on an application for
a preservation order; and thereafter
a forfeiture order, both of
which were doomed to failure from the outset, because the platform
and equipment were neither instrumentalities
of crime, nor the
proceeds of unlawful activities.
[21]
An ‘instrumentality
of an offence’ is defined in POCA as
‘
. . . any
property which is concerned in the commission or suspected commission
of an offence at any time before or after commencement
of this Act,
whether committed within the Republic or elsewhere.’
[22]
This Court has held
that in giving meaning to the term, ‘instrumentality of an
offence’, the focus is not on the wrongdoer,
but on the role
the property plays in the commission of the crime. The question is
whether a functional relation between property
and crime has been
established.
[5]
The property must play a part, in a reasonably direct sense, in those
acts which constitute the actual commission of the crime
in
question.
[6]
The word ‘instrumentality’ itself suggests that the
property must be instrumental in and not merely incidental to the
commission of the offence.
[7]
[23]
In
Cook
Properties
,
[8]
Mpati DP and Cameron JA said that the
words ‘concerned in the commission of an offence’,
must
‘
be interpreted
so that the link between the crime committed and the property is
reasonably direct, and that the employment of the
property must be
functional to the commission of the crime. . . . In a real or
substantial sense the property must facilitate or
make possible the
commission of the offence.’
[24]
Thus, the courts have
held that the following were instrumentalities of offences: a
houseboat with particular attractions to lure
minors into falling
prey to sexual offences;
[9]
a ski-boat and diving equipment used to harvest perlemoen unlawfully
and the vehicle used to convey that perlemoen;
[10]
a house specially adapted and equipped to manufacture or conduct a
trade in drugs;
[11]
and a house used to sell liquor unlawfully.
[12]
[25]
The facts upon which
the NDPP relied for the contention that the platform and equipment
were instrumentalities of the crime of theft
- that Kalmar caused Q6
to be ejected from the site when it refused to pay for the work Q6
had done; that Kalmar disregarded Q6’s
lien over RTG No 20 and
used the platform and equipment for the further refurbishment of
Transnet’s RTGs; and that Kalmar
refused to restore them to Q6
- did not establish that the platform or the equipment had been used
to commit any offence, let alone
theft. The term ‘instrumentality’
denotes that the property concerned must serve as an instrument or
means to achieve
a particular end - the commission of an offence.
That is the only sense in which the concept ‘instrumentality of
an offence’
is employed in POCA, and why forfeiture under POCA
constitutes civil
in
rem
proceedings: it
is the property itself that is proceeded against as if it were living
and not inanimate.
[13]
Put differently, instrumentalities are treated as a form of ‘guilty
property’.
[14]
[26]
In this case the
platform and equipment were not instrumentalities of the crime of
theft, but the very things alleged to have been
stolen, as the court
a quo correctly held. In other words, the platform and equipment were
the objects of the alleged theft: they
were not used as a means to
commit or facilitate the crime of theft.
[27]
The NDPP did not meet
the jurisdictional requirement in s 50(1)
(a)
of POCA for the grant of a forfeiture order, and the court a quo
rightly dismissed that application and discharged the preservation
order.
[28]
Neither were the
platform and equipment the ‘proceeds of unlawful activities’,
which, POCA states,
‘
means any
property or any service, advantage, benefit or reward which was
derived, received or retained, directly or indirectly,
in the
Republic or elsewhere, at any time before or after the commencement
of this Act, in connection with or as a result of any
unlawful
activity carried on by any person, and includes any property
representing property so derived.’
[29]
POCA defines ‘unlawful
activity’ as meaning
‘
. . . conduct
which constitutes a crime or which contravenes any law whether such
conduct occurred before or after the commencement
of this Act and
whether such conduct occurred in the Republic or elsewhere.
’
[30]
The definition
‘proceeds of unlawful activities’ essentially requires
that the property in question be ‘derived,
received or
retained’ in connection with or as a result of an unlawful
activity.
[15]
The accrual of property, advantage or reward must, directly or
indirectly, flow from the unlawful activity in some way.
[16]
[31]
The NDPP’s claim
that the platform and equipment constituted the proceeds of crime is
absurd. First, the NDPP failed to establish,
on a balance of
probabilities, any criminal conduct on the part of Kalmar or
Burchell. In this regard there are genuine disputes
of fact, as
outlined above. Second, the platform and equipment did not constitute
property or an advantage or benefit derived,
received or retained as
a result of crime. They were not returns accrued from any unlawful
activity. On the contrary, the platform
was built by Storm
Engineering and the equipment was brought to the site pursuant to the
subcontracting agreement between Kalmar
and Q6.
[32]
The NDPP did not meet
the jurisdictional requirement in s 50(1)
(b)
of POCA either. It follows that on this ground also, the application
for a forfeiture order had to fail.
[33]
What all of this shows,
is that the applications for a preservation of property order and a
forfeiture order, were ill-conceived
and should never have been
brought by the NDPP. They were far removed from the main purpose of
POCA: to give effect to South Africa’s
international obligation
to ensure that criminals do not benefit from their crimes.
[17]
In the result, limited public resources have been wasted, and the
costs of the abortive POCA applications as well as the costs
of this
appeal will ultimately be borne by taxpayers. The NDPP’s
decision to apply in this case for preservation and forfeiture
orders
under POCA, is inexplicable, irrational, and must be severely
deprecated.
Costs
[34]
What remains is
liability for the wasted costs occasioned by the respondent’s
failure to appear at the hearing of the appeal
on 17 August 2017.
When the appeal was called that day, only the NDPP was represented
and the appeal had to be postponed and costs
reserved. Pursuant to
this Court’s directive, the respondent’s attorneys filed
affidavits to explain what had occurred.
It is common ground that on
13 June 2017 Mr Philip Botha (Botha) of JG Botha Attorneys, Kalmar’s
local attorneys, received
the notice of set down of the appeal. Botha
has stated on oath that on 15 June 2017, he sent the notice of set
down via email to
Mr Warren Sundstrom (Sundstrom) of McClarens,
Kalmar’s attorneys in Johannesburg, but was unable to explain
why Sundstrom
had not received that email. He stated that he had
searched the email inbox on his computer for any indication of a
failed transmission
message regarding the email sent to Sundstrom on
15 June 2017, but found none; and that it appeared impossible to
trace the route
of that email as his email service was hosted by
Google in the United States.
[35]
Sundstrom, in his
affidavit, stated that he did not receive the notice of set down via
email from Botha on 15 June 2017. Had he
received it, Kalmar would
have been represented at the hearing of the appeal on 17 August 2017.
McLarens appointed Mr Mogamat Nassiep
(Nassiep), an information and
communication technology expert, to conduct an independent enquiry on
the relevant server to establish
whether McLarens received the email
of 15 June 2017, to which was attached the notice of set down of the
appeal. In his affidavit
Nassiep confirmed that McLarens did not
receive the email sent by Botha.
[36]
On the facts before us,
we are not in a position to determine which firm of attorneys was
responsible for the respondent’s
failure to appear at the
hearing on 17 August 2017. What is clear, however, is that neither
the NDPP nor Kalmar should be held
responsible for the wasted costs
incurred in relation to the proceedings of 17 August 2017. In the
circumstances, fairness dictates
that the appellant’s
Bloemfontein and Johannesburg attorneys should be held liable jointly
and severally for the wasted costs
of 17 August 2017.
[37]
The following order is
made:
1 The appeal
is dismissed with costs.
2 The
wasted costs occasioned by the respondent’s failure to appear
at the hearing of the appeal on 17 August 2017, shall
be paid by the
appellant’s Bloemfontein and Johannesburg attorneys, jointly
and severally; and shall not be recovered from
the respondent.
_________________
A Schippers
Acting Judge of Appeal
Appearances
For Appellant:
H J Van
Der Linde SC
Instructed
by:
State
Attorney, Port Elizabeth
State
Attorney, Bloemfontein
For
Respondent:
C B Garvey
Instructed by:
McLarens Attorneys, Johannesburg
J G Botha Attorneys, Bloemfontein
[1]
National Director of Public Prosecutions v Zuma
[2009] ZASCA
1
;
2009 (2) SA 277
(SCA) para 26.
[2]
Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984
(3) SA 623
(A) at 634E-635C.
[3]
National Director of Public Prosecutions &
another v Mohamed NO & others
[2002] ZACC 9
;
2002
(2) SACR 196
(CC);
2002 (4) SA 843
(CC) para 14.
[4]
National Director of Public Prosecutions v RO
Cook Properties (Pty) Ltd; National Director of Public Prosecutions
v 37 Gillespie
Street Durban (Pty) Ltd & another; National
Director of Public Prosecutions v Seevnarayan
2004 (2) SACR 208
(SCA) para 18.
[5]
Cook Properties
fn 4
para 21;
NDPP
v Mohamed
fn 3 para 17.
[6]
Cook Properties
fn 4 para 32.
[7]
Cook Properties
fn 4 para 31.
[8]
Ibid, affirmed in
Prophet v National Director of Public
Prosecutions
[2006] ZACC 17
;
2006 (2) SACR 525
(CC);
2007 (6) SA 169
(CC) para
56.
[9]
DPP (NSW) v King
[2000] NSWSC 394
para 22, cited in
Cook
Properties
fn 4 para 34.
[10]
National Director of Public Prosecutions v Engels
2005 (1)
SACR 99
(C) paras 39-40.
[11]
Prophet v National Director of Public Prosecutions
2005 (2)
SACR 670
(SCA) paras 28-29;
National Director
of Public Prosecutions v Parker
2006
(1) SACR 284
(SCA) paras 20-23 and paras 39-43.
[12]
Van der Burg & another v National Director
of Public Prosecutions & another
[2012]
ZACC 12
;
2012 (2) SACR 331
(CC) para 31.
[13]
Brooks & another v National Director of Public Prosecutions
[2017] ZASCA 42
; 2017 (1) SACR para 16.
[14]
United States v Bajakajian
[1998] USSC 75
;
524 US 321
(1998) at II.
[15]
Cook Properties
fn 4 para 64.
[16]
Cook Properties
fn 4 paras 71-72.
[17]
NDPP v Mohamed
fn 3 para 16.