Brief Summary

Preservation of property — Application for preservation order under section 38 of the Prevention of Organised Crime Act 121 of 1998 — Applicant sought to preserve two immovable properties believed to be instrumentalities of an offence — Respondents raised points in limine challenging the procedure and evidence — Court found no merit in the objections and dismissed all points in limine — Respondents ordered to pay costs.

Comprehensive Summary

Summary of Judgment

1. Introduction

This matter concerned an opposed application by the National Director of Public Prosecutions (the NDPP) for a preservation of property order in terms of section 38(1) of the Prevention of Organised Crime Act 121 of 1998 (POCA). The application related to two immovable properties in Woodstock, Cape Town, situated at 12 Devon Street and 43 Devon Street.

The applicant was the NDPP. The respondents were Mogamat Sadeka Madatt (first respondent) and Johann Hartzenberg (second respondent), each being the owner (or alleged beneficial owner, in the case of 43 Devon Street) of the properties targeted for preservation.

The procedural history reflected that the court had already, on 22 May 2007, issued an order calling upon the respondents to show cause why a preservation order should not be granted. The respondents thereafter delivered a notice on 3 July 2007 indicating an intention to anticipate the return day and filed opposing affidavits. On 6 July 2007 the matter was postponed to 20 November 2007, and the judgment was delivered on what was described as the extended return day.

The general subject-matter of the dispute was whether there were reasonable grounds to believe that the two properties were instrumentalities of offences referred to in Schedule 1 to POCA, on the basis that the properties were allegedly used as sites for ongoing drug-related activities. The respondents opposed the confirmation of the preservation order and initially raised several points in limine directed at the propriety of the NDPP’s procedure and evidence.

2. Material Facts

The court treated certain foundational facts as common cause. It was common cause that the two properties were owned (in the registered sense at least) by the respondents. The property at 12 Devon Street, Woodstock was registered on 13 August 2003 in the name of the second respondent (Hartzenberg). The property at 43 Devon Street, Woodstock was registered on 29 March 2003 in the name of Mark Robert Williams, who, according to the judgment, acted on behalf of the first respondent (Madatt) and the first respondent made bond payments; the property was only registered in the first respondent’s name on 21 July 2006.

The court also proceeded on the basis that the police had given notices in 2003 to both respondents informing them of alleged drug dealings being conducted at their respective properties. This feature was treated as relevant context for whether the properties were being used in a manner that could qualify them as instrumentalities of offences.

The NDPP relied on a pattern of drug-related incidents associated with each property over an extended period. In relation to 12 Devon Street, the judgment recorded that between 27 March 2003 and 11 May 2007, an analysis of drug-related arrests and seizures indicated 24 incidents, and that police intelligence reports revealed ongoing drug sales at the property. In relation to 43 Devon Street, between 22 February 2003 and 11 May 2007, arrests and seizures analysis revealed 20 incidents, again with police intelligence indicating ongoing drug sales.

The NDPP’s case, as summarised by the court, was that these properties operated as “drug houses” and were used for the storage, purchase, and consumption of drugs, and that there was no evidence that they were used for any other purpose.

The respondents’ opposition, as recorded, included the contention that the properties were used for habitation and that the respondents could not reasonably be expected to control activities in the properties given that arrests and seizures were allegedly sporadic. The respondents also sought, in argument, further opportunity to file affidavits based on the consequences of being deprived of their properties, but the court noted that they had already been afforded an opportunity to file supplementary affidavits in terms of the 6 July 2007 order and had not done so.

In addition, the respondents raised points in limine challenging the ex parte procedure, attestations, and the use of affidavits and annexures. The court considered those objections on the papers and after hearing argument, found them to lack substance and dismissed them, with a costs order against the respondents. Those preliminary matters formed part of the procedural and evidentiary setting but did not alter the court’s ultimate conclusion on the statutory threshold.

3. Legal Issues

The central legal question was whether the statutory threshold in section 38 of POCA had been met, namely whether there were reasonable grounds to believe that the two immovable properties were either instrumentalities of an offence referred to in Schedule 1 to POCA, or the proceeds of unlawful activities. On the facts and reasoning reflected in the judgment, the case turned on the “instrumentality” leg rather than on proof that the properties were proceeds.

A related legal issue concerned the proper interpretation of the phrase “reasonable grounds to believe” (and cognate formulations such as “reason to believe”), and whether the NDPP’s material placed before the court established an objective factual basis for the belief, as opposed to a purely subjective assertion.

The dispute predominantly concerned the application of law to fact. The legal framework (the meaning of “reasonable grounds to believe” and “instrumentality of an offence,” and the two-stage structure of POCA Chapter 6) was not seriously contested in principle, but the parties differed on whether the facts as presented justified the conclusion that the properties were sufficiently connected to scheduled drug offences so as to qualify as instrumentalities and warrant preservation. The court also referred to a discretionary component in the making of preservation orders, exercised through a proportionality enquiry, although the reasoning in this judgment ultimately focused on the threshold of reasonable grounds and the lack of persuasive opposition.

4. Court’s Reasoning

The court located the application within the statutory scheme of POCA Chapter 6, describing it as the first stage of a two-stage civil forfeiture process: preservation (first stage) followed by forfeiture (second stage). It relied on Constitutional Court authority indicating that Chapter 6 proceedings are property-focused rather than culpability-focused, meaning that the guilt or wrongdoing of the owner or possessor is “not primarily relevant” to the preservation proceedings.

In addressing section 38, the court explained that once the court is satisfied that there are reasonable grounds to believe the property is an instrumentality of a Schedule 1 offence (or proceeds), the court “shall” make the order. However, it also accepted, by reference to authority, that the court retains a discretion in granting preservation relief, exercised through proportionality. The judgment’s application of this concept was brief and did not involve an extended balancing exercise; instead, the court emphasised that the statutory grounds were met and that it could find no justification to refuse the order sought.

A substantial portion of the reasoning set out the interpretive approach to “reasonable grounds to believe.” Drawing on earlier case law (some outside the POCA context), the court endorsed an objective approach: “reason to believe” requires a belief based upon reason and must be supported by a factual foundation. The court stated that the NDPP must adduce facts from which the court can conclude that there is reason to believe the statutory jurisdictional facts exist. At the same time, the court indicated that the threshold does not require the court to be “satisfied” on a balance of probabilities that the underlying facts are finally established; rather, the applicant’s facts must be rational, reasonable, and connected to the relief sought.

The court then considered the concept of an “instrumentality of an offence” as defined in section 1 of POCA and as interpreted in appellate authority. It accepted that an instrumentality is not limited to property used directly in the commission of an offence but may include property that furthers the commission of the offence, while excluding cases where the property’s involvement is merely incidental or fortuitous (the judgment illustrated this distinction by referring to an example of a taxi used without the driver’s knowledge).

Applying these principles to the facts, the court treated the number and persistence of drug-related arrests and seizures associated with each property, together with police intelligence indicating ongoing drug sales, as providing the necessary objective factual basis for the conclusion that the properties were being used as “drug houses.” The court accepted the NDPP’s contention that the properties were used for drug-related purposes, including storage, purchase, and consumption of drugs, and that the pattern suggested continuing criminal use rather than isolated or accidental association.

The respondents’ contention that the properties were merely habitations and that they could not control the activities was rejected as unpersuasive on the papers as they stood. The court placed weight on the fact that respondents had been afforded an opportunity to supplement their affidavits but did not do so, and it did not accept the argument that they should be afforded a further opportunity at that stage.

The court concluded that it could find no justification for opposing the relief and held that there were reasonable grounds to believe that both properties were instrumentalities of offences referred to in Schedule 1. That conclusion triggered the granting of the preservation order and the ancillary administrative measures needed to preserve and manage the properties pending forfeiture proceedings.

5. Outcome and Relief

The court granted a final preservation order in respect of the two immovable properties, described as Erf 11639, Cape Town (12 Devon Street, Woodstock) and Erf 133692, Cape Town (43 Devon Street, Woodstock), as well as “the property or property representing such property.”

The order prohibited all persons with knowledge of it, subject to stated permissions, from dealing with the properties in specified ways (including disposing of them, encumbering them further, attaching them, selling them in execution, dissipating them, diminishing their value, or dealing with them in any other manner). The order further required persons with financial obligations in respect of the properties to continue fulfilling those obligations pending finalisation of forfeiture proceedings, including obligations relating to rental, mortgage bonds, rates and taxes, utilities, and interest.

A curator bonis was appointed under section 42 of POCA, namely Calvin Isaacs of KPMG Administrators (Pty) Ltd, with powers to assume control, care for, and administer the properties for preservation purposes. The curator was authorised to determine lawful occupants and collect rental where applicable, and was given limited powers to dispose of property in defined circumstances (including where obligations were not being met after notice, or by agreement with all interested parties to defray administration costs). Provision was made for endorsement of title deeds to reflect restrictions and for reporting obligations by the curator to the registrar of the court.

The order addressed the curator’s fees and expenditure in accordance with section 42(2) of POCA, providing that such costs would be paid from forfeited property if forfeiture were ultimately granted, and otherwise by the State, with interest at the prime lending rate.

The order also contained a mechanism for any respondent or interested person to apply, on specified disclosures, for provision to be made for reasonable living expenses or reasonable legal expenses from the preserved property, where they could not meet such expenses from unrestrained property.

Directions were given regarding service of the order (including on the respondents and identified banks) and publication in the Government Gazette as required by section 39 of POCA, as well as directions regarding entry of appearance to oppose forfeiture or seek exclusion of interests.

As to costs, the court ordered that the respondents pay the costs of the application. Earlier in the proceedings, the court had also dismissed the respondents’ points in limine and ordered the respondents, jointly and severally, to pay the applicant’s costs in relation to those preliminary objections.

Cases Cited

National Director of Public Prosecutions v Mohamed N O and Others [2002] ZACC 9; 2002 (4) SA 843 (CC).

Mohunram and Another v National Director of Public Prosecutions (Law Review Project as Amicus Curiae) [2006] ZASCA 12; 2007 (4) SA 222 (CC).

Liversidge v Anderson [1941] UKHL 1; (1942) AC 206 (HL).

Hurley and Another v Minister of Law and Order 1985 (4) SA 709 (D).

Nakkuda Ali v Jayaratne (1951) AC 66.

Secretary of State for Education and Science v Metropolitan Borough of Tameside (1977) AC 1014 (HL).

R v Inland Revenue Commissions, ex parte Rossiminster Ltd (1980) 3 SA 212 (N).

Minister of Law and Order v Hurley and Another 1986 (3) 549 (A).

United Democratic Front and Another v Acting Chief Magistrate, Johannesburg 1987 (1) SA 413 (W).

Vumba Intertrade CC v Geometric Intertrade CC 2001 (2) SA 1068 (W).

National Director of Public Prosecutors v R O Cook Properties 2004 (2) SACR 208 (SCA).

Legislation Cited

Prevention of Organised Crime Act 121 of 1998, including sections 1, 38, 39, 42, 48, and 49, and Schedule 1.

Administration of Estates Act 66 of 1965.

Internal Security Act 74 of 1982 (referred to in the discussion of interpretive case law).

Rules of Court Cited

No specific rules of court were cited in the judgment.

Held

The court held that the NDPP placed before it facts providing reasonable grounds to believe, on an objective basis, that the properties at 12 Devon Street and 43 Devon Street, Woodstock were instrumentalities of Schedule 1 offences under POCA, in light of repeated drug-related arrests and seizures connected to the properties and intelligence indicating ongoing drug sales.

It further held that the respondents’ opposition, including their arguments that the properties were merely used for habitation and that they could not control the activities, did not provide a sustainable basis on the papers to refuse preservation, particularly where respondents had been afforded an opportunity to file supplementary affidavits and did not do so.

Accordingly, the court granted the preservation order with ancillary relief, appointed a curator bonis under section 42 of POCA, directed service and publication, and ordered the respondents to pay the costs.

LEGAL PRINCIPLES

The judgment applied the principle that POCA Chapter 6 preservation proceedings are civil and property-directed, forming part of a two-stage mechanism culminating in forfeiture, and that the guilt or wrongdoing of owners or possessors is not primarily determinative at the preservation stage.

It applied an objective interpretation of the statutory threshold “reasonable grounds to believe”, holding that such belief must be based on facts that provide a rational and reasonable foundation for the belief, and that the applicant bears the onus to place those facts before the court. The threshold does not require final proof on a balance of probabilities at the preservation stage, but it requires more than subjective assertion.

The court applied the definition and interpretive approach to “instrumentality of an offence” under POCA, recognising that property may qualify if it is concerned in, used directly in, or used to further the commission of an offence, while excluding cases where the property’s connection is merely incidental or fortuitous.

The judgment also proceeded on the footing that, despite the peremptory language of section 38, the court’s granting of preservation relief entails a discretionary component exercised through proportionality, although on the facts before it the court considered there to be no basis to refuse the statutory relief once the reasonable-grounds threshold was met.

National Director of Public Prosecutions v Madatt and Others (6488/2007) [2008] ZAWCHC 5 (25 January 2008)