National Director of Public Prosecutions v Seevnarayan (6972/2001) [2003] ZAWCHC 1; [2003] 1 All SA 240 (C) (3 January 2003)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2003
>>
[2003] ZAWCHC 1
|

|

National Director of Public Prosecutions v Seevnarayan (6972/2001) [2003] ZAWCHC 1; [2003] 1 All SA 240 (C); 2003 (2) SA 178 (C); 2003 (1) SACR 260 (C); 2003 (7) BCLR 766 (C); 66 SATC 15 (3 January 2003)

IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
Case
No.: 6972/2001
REPORTABLE
In
the matter between:
THE
NATIONAL DIRECTOR OF PUBLIC

Applicant
PROSECUTIONS
and
MOTHIELALL
SEEVNARAYAN

Respondent
JUDGMENT:
DELIVERED 3 JANUARY 2003
GRIESEL
J:
1]
This is an application by the National Director of Public
Prosecutions (
NDPP
) for civil forfeiture, brought under sec
48(1) of the Prevention of Organised Crime Act (
POCA
), 121 of
1998 (
the Act
). A preservation order in terms of sec 38(2) of
the Act was granted by DESAI J on 14 August 2001, preserving R3 202
455,83 invested
with Sanlam Life Insurance Limited (‘Sanlam’)
in the name of Aboobaker Paruk (‘
the Paruk investment’
),
R913 282,75 invested with Sanlam in the name of Pat Oliver (‘
the
Oliver investment
’) and interest on those amounts, all of
which comprised the proceeds of the repurchase of unit trust
investments placed with
Sanlam under the fictitious names of Paruk
and Oliver. In addition, a curator
bonis
was appointed to
assume control of the aforementioned property and to take it into his
custody.
2]
Pursuant to the aforementioned preservation order, the applicant now
applies
for an order declaring the property concerned forfeit to the
State and for ancillary relief.
3]
The respondent entered an appearance to oppose the application and in
due course
delivered answering affidavits. The applicant subsequently
delivered supplementary affidavits, to which the respondent, by
agreement
between the parties, delivered supplementary answering
affidavits, to which the applicant in due course replied.
4]
Although voluminous papers have been filed on behalf of both sides,
most of the
material facts were eventually common cause and, as will
appear below, they fall within a narrow ambit. However, before
examining
the facts in greater detail, it is necessary to refer
briefly to the statutory framework of the present application.
Statutory
Framework
5]
The present application involves Chapter 6 of the Act, of which secs
48 and 50
form part, and which provides for ‘
civil
forfeiture’
,
as opposed to ‘
criminal
forfeiture
,’
which is, in turn, regulated by Chapter 5. The provisions of Chapter
6 may, in other words, be invoked even when there
is no criminal
prosecution of the individual or individuals concerned. The essential
features of the Act, and more particularly
of Chapter 6 thereof, have
been examined in a number of recent judgments of our courts.
[1]
It is, accordingly, unnecessary to repeat that exercise herein, save
for the following few brief introductory remarks.
6]
In addition to an introduction (
Part 1
, sec 37) and certain
general provisions (
Part 4
, secs 58  62), Chapter 6 is
divided into two main parts:
Part 2
(secs 38  47)
provides for orders for the preservation and seizure of property as
an interim measure pending an application
for the forfeiture of such
property. The purpose of such orders is to prevent property
‘targeted’ for forfeiture from
being disposed of, removed
or destroyed pending the determination of an application for its
forfeiture.
Part 3
(secs 48-57) provides for forfeiture
orders, that is, orders for the forfeiture of property subject to
preservation and seizure
orders.
7]
The Chapter provides for preservation, seizure and forfeiture of the
following
assets:
a)
the ‘
instrumentality
of an offence referred to in Schedule 1
’.
[2]
An ‘
instrumentality
of an offence
’
is defined as ‘
any
property which is concerned in the commission or suspected commission
of an offence…
’.
[3]
Schedule 1 lists certain common law as well as statutory offences of
a more serious nature, culminating in a catch­all provision
in
Item 33, targeting ‘
any
offence the punishment wherefor may be a period of imprisonment
exceeding one year without the option of a fine
’;
b)
the ‘
proceeds
of unlawful activities
’,
[4]
that is, ‘
any
property or any service, advantage, benefit or reward which was
derived, received or retained, directly or indirectly ... in

connection with or as a result of any unlawful activity carried on by
any person, and includes any property representing property
so
derived
’.
[5]
An ‘
unlawful
activity
’,
in turn, means ‘
conduct
which constitutes a crime or which contravenes any law ...
’.
[6]
8]
These mechanisms may only be invoked by order of the High Court. The
proceedings
under Chapter 6 are deemed to be civil proceedings
governed by the rules of evidence and procedure applicable to
proceedings of
that kind.
[7]
If
a preservation order is in force, the NDPP may apply to the High
Court for forfeiture of ‘
all
or any of the property
’,
[8]
which is what happened with the launching of the present application.
9]
In terms of sec 50(1), the High Court ‘
shall
’
grant the forfeiture order applied for by the NDPP if it finds on a
balance of probabilities that the property is an instrumentality
of
an offence referred to in Schedule 1 or the proceeds of unlawful
activities.
Factual
Background
10]
Turning to the facts, it appears from the evidence that the
respondent is a businessman
from Durban. He and his wife, to whom he
is married in community of property, are the sole shareholders and
directors of a furniture
company,
Confurn Sales (Pty) Limited
,
trading as
Imperial Furniture
. During the period 1993 to 1999
the respondent conducted numerous transactions with Sanlam at its
Durban offices. In the main,
his dealings were conducted through his
broker, one Ashwin Singh (
Singh
), who is also his
brother­in­law. Apart from various policies of insurance, he
also made certain investments in Sanlam
unit trusts.
11]
The
Paruk
and
Oliver
investments, which form the
subject matter of the present proceedings, were the last in a long
series of rolling investments in
Sanlam products, made under a
variety of different names, mostly fictitious. The sequence of
transactions was reconstructed and
described as follows in the
answering affidavits by one Dr W A A Gouws (
Gouws
), the
respondent’s tax advisor:
a)
On 7 July 1994, an amount of R1 028 675,01 was paid from the account
of the
N A Savings Club
at Nedbank, Mobeni Branch, Durban, to
Sanlam for investment in unit trusts in the fictitious name of N
Singh (‘the first
investment’). (The respondent was the
owner of the funds in the said account and at all relevant times had
full control over
such funds.) On 26 September 1994, the first
investment was repurchased for R1 090 417,93 and the money was
deposited at the ABC
branch of the Standard Bank, Durban, into an
account held at the New Republic Bank.
b)
On 14 October 1994, a cheque for an amount of R1 094 689,98 drawn on
that account
in favour of
D Singh
was presented to Sanlam for
the purposes of a unit trust investment in that name (‘the
second investment’). The name
D Singh was also fictitious. On
26 March 1996, the second investment was repurchased for R1 337
634,25 and the money was deposited
at the New Republic Bank in Durban
in the name of D Singh.
c)
On 8 April 1997, R990 000,77 of the proceeds of the second investment
was used
to make a third investment in Sanlam unit trusts in the
fictitious name of
N
Singh
.
[9]
On 30 December 1997 the third investment was repurchased and R 995
946,12 of the proceeds was invested in a Sanlam policy in the
name of
N Singh
.
d)
On 6 January 1998, R1 million of the proceeds of the policy purchased
with the
third investment was used to make a fourth investment in
Sanlam unit trusts in the fictitious name of
S Singh
. On 31
March 1998, the fourth investment was repurchased for R1 447 618,86.
e)
Also on 31 March 1998, R1 128 379,44 was paid to Sanlam (on the
respondent’s
instructions) by way of a Trust Bank cheque to
make an investment in Sanlam unit trusts in the fictitious name of
N
Singh
. On 7 April 1998, the amount of R1 447 618,86, being the
proceeds of the fourth investment, was used to make a further
investment
in Sanlam unit trusts, also in the name of
N Singh
(the
‘fifth investment’). On 15 May 1998, the fifth investment
was repurchased and an amount of R2 584 627,40 was paid
into a Sanlam
policy in the name of
N Singh
.
f)
On 19 May 1998, R2 594 261,90 from this Sanlam policy was used to
make
a sixth investment in Sanlam unit trusts in the fictitious name
of A Singh. Exactly a year later, on 19 May 1999, the sixth
investment
was repurchased for R2 719 642,28 and the proceeds were
invested in a Sanlam policy in the name of
A Singh
.
g)
On 26 May 1999, the Sanlam policy referred to in the preceding para­
graph
was paid out in the form of two cheques drawn in favour of A
Singh, one for the sum of R1,4 million and the other for the sum of

R1 317 642,28. The respondent handed these cheques to his attorney,
one Yusuf Essack (
Essack
), who deposited them into accounts in
the name of A Singh at First National Bank and NBS Bank respectively.
h)
On 23 July 1999, Essack obtained from NBS Bank a bank cheque for R1
319 642,28 payable
to Sanlam, which on 29 July 1999 was used by Singh
(the respondent’s broker) to make an investment in Sanlam unit
trusts
in the fictitious name of
A Paruk
. On 11 September
1999, Essack obtained from First National Bank a bank cheque for R1,4
million payable to Sanlam, which on 13 September
1999 was used by
Singh to make a further investment in Sanlam unit trusts in the
fictitious name of A
Paruk
.
i)
With regard to the
Oliver
investment, the respondent explained
that during the early part of October 1999, he informed Singh that he
had ‘further funds’,
which he wished to invest with
Sanlam in unit trusts. On 15 October 1999, he caused a cheque to be
drawn in favour of Sanlam in
the sum of R779 499,54. This was a bank
cheque (the drawer being Nedbank) and was withdrawn from an account
styled
Furnbea Savings Club
. He personally handed the
aforesaid cheque, together with cash in the sum of R20 500,46, to
Sanlam at its Durban branch. In the
result, an investment in the sum
of R800 000 was made on 22 October 1999 with Sanlam, ostensibly in
the name of one
P Oliver
.
12]
On 22 December 1999, apprehensive of the potential impact of the Y2K
phenomenon, the respondent
instructed Singh to obtain repayment of
the Paruk and Oliver investments from Sanlam. Singh instructed Sanlam
to liquidate the
investments and to pay the proceeds to Essack.
Sanlam indicated, however, that it was not prepared to pay the money
to Essack,
but would pay Paruk and Oliver upon presentation of their
identity documents.
13]
In early January 2000, Essack wrote a letter to a Sanlam employee,
stating that he (Essack)
acted for Paruk and Oliver and that ‘
my
clients require the full proceeds of their investments with your
company to be paid into my trust account
’.
14]
Also in early January 2000, Singh went to see one Fred Hohls,
Sanlam’s General Manager
for KwaZulu­Natal, and told him
that the respondent was the ‘
true investor
’. Hohls
reported the matter to Eugene Louw (
Louw
) of Sanlam’s
forensic division.
15]
On 11 January 2000, Singh made an affidavit in which he stated that
he had created the fictitious
names to ‘
protect [the
respondent’s] anonymity
’.
16]
On 24 January 2000, Singh and the respondent attended a meeting at
Sanlam’s Bellville
offices with,
inter alia
, Louw and
Captain Wiehardt of the SAPS commercial crime unit. During this
meeting Singh allegedly admitted that the money had been
invested on
behalf of the respondent under fictitious names in order to evade
tax.
17]
On 11 February 2000, Gouws and the respondent attended a further
meeting at Sanlam’s
Bellville offices with,
inter alia
,
Louw and representatives of the South African Revenue Service (
the
SARS
). This meeting was followed by correspondence between Sanlam
and Gouws, the upshot of which was that Sanlam declined to pay over

the proceeds of the Paruk and Oliver investments to the respondent
without an order of this court declaring that he was entitled
to the
money.
18]
On 5 September 2000, the respondent accordingly instituted
proceedings in this court against
Sanlam (as First Respondent) and
the Commissioner for the SARS (as Second Respondent) for an order
that he be ‘
declared to be lawfully entitled to the funds
presently invested with [Sanlam] under the investor names of A Paruk
and P Oliver
.’
19]
In the meanwhile, Gouws on behalf of the respondent had been
negotiating with the SARS in
connection with the respondent’s
liability to the SARS for additional tax. In this regard, an
additional assessment in an
amount of some R2,5 million was issued by
the SARS during October 2000. This amount represents income tax, as
well as additional
tax and interest in respect of the amounts of
income not declared by the respondent. On 29 March 2001 the SARS and
the respondent
reached agreement as to part of the respondent’s
tax liability in an amount of R817 369,75. It was further agreed that
the
dispute about the balance (R1 709 149,80) would in due course be
resolved by the Special Income Tax Court.
20]
This is how matters stood on 8 August 2001, when the present
application was launched, resulting
in the granting of the
aforementioned preservation order on 14 August 2001. It was
subsequently agreed between Sanlam and the respondent
that the Sanlam
application would await the outcome of the present matter.
21]
It appears, therefore, that the respondent is now faced by an
onslaught on at least two
fronts: in the present application, the
applicant seeks forfeiture of the full investment of some R4,1
million, while the SARS
are claiming additional tax amounting to some
R2,5 million, irrespective of the outcome of the present application.
The
Issues
22]
In order to succeed in the present application, the applicant has to
prove on a balance
of probabilities 
a)
that the property concerned is ‘
an instrumentality of an
offence referred to in Schedule 1 to the Act
’, as
contemplated by sec 50(1) (a) of the Act;
b)
alternatively, that the property concerned is the ‘
proceeds
of unlawful activities’
, as contemplated by sec 50(1)(b) of
the Act.
23]
The ‘
offences/unlawful activities
’ on which the
applicant relies are (a) fraud on the SARS; (b) contravention of sec
104(1) of the Income Tax Act; and (c)
fraud on Sanlam. It was common
cause during argument that all of these offences fall within the
ambit of Schedule 1 to the Act.
I now turn to a discussion of these
offences.
Fraud
on the SARS and contravening the Income Tax Act
24]
Although the respondent initially denied having perpetrated any fraud
on the SARS, or having
evaded income tax, and put up various
exculpatory explanations as to the origin of the funds that
ultimately became the Paruk and
Oliver investments, it was eventually
conceded in the heads of argument filed on behalf of the respondent
herein that the monies
in question had in fact been invested at the
instance of the respondent under fictitious names with the motive of
not disclosing
such monies as income for purposes of taxation.
25]
From the evidence as a whole it appears probable that Singh’s
modus operandi
was designed to achieve two goals. The first –
evidenced by the use of fictitious names – was to assist the
respondent
by obscuring the identity of the true owner of the funds
in order to avoid the payment of income tax, both in respect of the
amounts
initially invested and on the taxable income earned from the
investments. Singh’s second goal – evidenced by the
repetitive
nature of the investments and the consequent payment to
Singh of repeat commissions and Singh’s qualifying for
incentive
prizes – was to be rewarded for facilitating the
respondent’s tax avoidance scheme.
26]
On the evidence as a whole and for purposes of the present
application, it must be accepted,
therefore, that the respondent had
indeed committed various contraventions of the provisions of sec
104(1) of the Income Tax Act
insofar as it relates to his personal
income tax in respect of the tax years from 1995 to 1999.
Furthermore, by submitting false
returns in respect of these years to
the SARS, the respondent had also committed a fraud on the SARS.
Fraud
on Sanlam
27]
The applicant avers further that the respondent had, in addition,
committed a fraud on Sanlam
which entailed Singh’s making
misrepresentations to Sanlam as to the identity of the Paruk and
Oliver investors so as to
(a) induce Sanlam to pay R22 480 for a
skiing trip in Austria for Singh and his spouse, and (b) to preclude
Sanlam from making
proper returns and furnishing proper information
and documents to the SARS.
28]
As to (a), it appears from the evidence that, by virtue of the
business generated by Singh,
he was able to claim from Sanlam the
incentive prize of an all­expenses­paid skiing trip to
Austria, thereby allegedly
causing Sanlam to act to its actual or
potential detriment. By the time the fraud was discovered, Sanlam had
actually announced
that Singh had qualified for the incentive prize
of the skiing trip to Austria and that he was the only broker in
KwaZulu/Natal
to have so qualified. The bookings were made by early
December 1999, the cost to Sanlam being R22 480 for Singh and his
spouse.
Singh’s trip was cancelled when, on 11 January 2000,
Singh admitted to Hohls that the names Paruk and Oliver were
fictitious.
29]
The further actual or potential prejudice allegedly suffered by
Sanlam arose from its inability
to furnish to the SARS proper and
accurate returns of dividends paid to unit trust holders and taxable
as interest because of the
use by Singh of fictitious names, and, for
the same reason, its inability (if called upon by the SARS) to
furnish proper and correct
information and documents relating to the
investments in question. This second kind of prejudice is evidenced
by consequent confusion
of the SARS as to taxability immediately
following the discovery of the fictitious investments.
30]
It was denied on behalf of the respondent that any fraud involving
Sanlam had been committed.
Although this denial is not without merit,
in the view that I take of the matter, it is not necessary for me to
make any definite
finding in this regard. I am prepared to accept in
favour of the applicant, without deciding the matter, that the
respondent’s
conduct vis­à­vis Sanlam amounted
to fraud in one form or another.
An
instrumentality of an offence
31]
This clears the way for a consideration of the first issue mentioned
above, viz whether
the property concerned is an ‘
instrumentality
of an offence’
. In this regard, it was submitted on behalf
of the applicant that the Paruk and Oliver investments fell within
the ambit of such
definition, in the sense of being ‘
property
which is concerned in the commission … of an offence’
.
32]
The respondent contended, on the other hand, that the expression must
be given a narrow
interpretation. It was submitted in this regard
that the words ‘
property which is concerned in the
commission … of an offence
’ in the definition of
‘
instrumentality of an offence
’ in sec 1 denote ‘
a
means by which the offence is committed
’ e.g. a truck used
to convey protected game in contravention of a statute or provincial
ordinance;
not
‘
property in connection with which an
offence is committed
’ e.g. funds in a bank account in
relation to the ownership of which a misrepresentation is made in
circumstances not amounting
to money­laundering.
33]
Support for the respondent’s interpretation is to be found in
two recent decisions in this
Division, viz
NDPP
v Carolus
[10]
and
NDPP
v Patterson
.
[11]
34]
In the Carolus case BLIGNAULT J considered the definition of
‘instrumentality’
and the lack of clarity as to the
meaning of the words ‘which is concerned in’ in the
definition. He stated the following
in this regard:
‘
An
instrumentality of an offence, according to the definition, means any
property which is concerned in the commission or suspected
com­
mission of an offence. The meaning of the words “which is
concerned” is not very clear. In the Afrikaans version
of the
Act the words “betrokke by” were used. That fits in with
a meaning of “concerned in” in the sense
of “involved
in”. To the extent that the meaning of the definition is vague,
I am, in view of the far­reaching
effect of the provisions of
Chapter 6, of the view that a restrictive interpretation of this
definition is called for.
It seems to me,
therefore, that a property would only qualify as an instrumentality
where it has been used as a means or instrument
in the commission of
the offence, or where it is otherwise involved in the commission of
the offence.’
[12]
35]
In the
Patterson
matter FOXCROFT J referred with approval to
the aforementioned judgment and stated the following with regard to
the definition
of ‘
instrumentality
’ of an offence:
‘
The phrase
“instrumentality of an offence” is at first sight
somewhat clumsy, particularly when one has regard to the
definition
section which defines it as “any property which is concerned in
the commission or suspected commission of an offence.”
This
apparent clumsiness is only because the word “instrumentality”
normally means an agency or means of doing something,
and would not
normally be used to describe something like property. …When
one
reads the closing paragraphs of the preamble to the Act, the meaning
becomes clear.… It is clear, therefore, that the
word
“instrumentality” was used in its ordinary English
meaning as
a
means by which the offence is  committed
.
’
[13]
(my emphasis)
36]
Counsel have not attempted to persuade me that the interpretation
adopted in these two cases
was palpably wrong, nor am I so persuaded;
on the contrary, I am satisfied that such interpretation is clearly
correct and therefore
binding on me. The above interpretation is
furthermore in line with the Afrikaans version of ‘
instrumentality
of an offence’
, viz ‘
misdaadsinstrument’
.
It is further supported by the reference in the long title of the
Act, where the aim of the statute is stated to be
inter alia
to provide for ‘
the civil forfeiture of criminal assets that
have been used to commit an offence’
.
37]
This raises the question whether or not the property in question can
properly be described
as the means by which the offences were
committed. I think not. Adopting the aforementioned interpretation,
as I am bound to do,
it would, in my view, be straining the language
of the Act unduly and, moreover, be contrary to the purpose of the
Act if one were
to describe the property in question, viz the
investments of some R4 million with Sanlam, as the means by which the
alleged offences
of fraud and contravention of sec 104 of the Income
Tax Act were committed. After all, fraud is not committed
by means
of
money or other property, but by means of intentional
misrepresentations. Likewise, tax evasion in contravention of sec 104
of the
Income Tax Act is not committed
by means of
undeclared
income  the undeclared income forms the subject matter of the
offence.
38]
If the wide interpretation of ‘
instrumentality’
,
as proposed by the applicant were to be adopted, it could well result
in the unconstitutionality of the provision in question,
as was
argued on behalf of the respondent. It is not, however, necessary for
me to engage any further with the constitutional arguments
raised in
this regard. Apart from the fact that the interpretation propounded
on behalf of the respondent is supported by direct
and binding
authority, I am satisfied that such interpretation is also called for
in view of the approach laid down by the Constitutional
Court to the
effect that, where a statutory provision is capable of more than one
reasonable construction, one of which would lead
to constitutional
invalidity and the other not, a court ought to favour the
construction which avoids constitutional invalidity,
provided such
interpretation is not unduly strained.
[14]
39]I
conclude, therefore, as far as this aspect is concerned, that the
applicant has failed to discharge the onus of proving, on
a balance
of probabilities, that the property concerned was an instrumentality
of an offence, as contemplated by the Act. In the
circumstances, the
constitutional point raised on behalf of the respondent does not
arise.
The
Proceeds of Unlawful Activities
40]I
now turn to consider the next crucial issue, namely whether or not
the applicant has proved on a balance of probabilities ‘
that
the property concerned … is the proceeds of unlawful
activities’
.
41]
Although strong criticism has been levelled at the respondent for his
failure adequately
to explain the source and origin of the funds in
question, the applicant, on whom the onus rests, has not attempted to
prove that
the property concerned represents ill­gotten gains
derived from the kind of unlawful activities normally associated with
‘organised’
crime, e.g. drug smuggling, gunrunning, bank
robbery, or whatever. It must therefore be accepted for purposes of
the present enquiry
(a) that the only ‘
unlawful activities
’
that are in issue are the above­mentioned frauds on the SARS and
Sanlam, as well as the contravention of sec 104(1)
of the Income Tax
Act; and (b) that the funds in question constitute undeclared income
derived from legitimate sources
; in other words, that the
respondent had legitimately earned that money. What he had failed to
do, was to declare such income to
the SARS and to pay the income tax
that was due, as he was obliged to do. Instead, he submitted false
returns to the SARS, omitting
any reference to such income or to the
existence of the investments derived from such income.
42]
In terms of sec 48(1), as I have indicated above,
[15]
the NDPP ‘
may
’
apply to a High Court for an order forfeiting to the State ‘
all
or any of the property that is subject to the preservation of
property order
’.
The ‘property’ in the present context refers, of course,
to the
total
proceeds
of what used to be the Paruk and Oliver investments, i.e. an amount
of some R4,1 million, together with accrued interest. In
casu
the applicant has seen fit to apply for the forfeiture of ‘
all
’
such property. He must, therefore, discharge the onus of proving that
‘
all
’
such property is the proceeds of unlawful activities. It is important
to note in this regard that the court has no power
in terms of sec
50(1) to ‘pare down’ the order asked for. I shall return
to this aspect in more detail below.
[16]
43]
Can it be found in these circumstances that ‘
(all)
the property concerned
’
is the proceeds of the unlawful activities relied upon by the
applicant in the instant case? Counsel for the applicant submitted
in
this regard, with reference to the definitions of ‘
proceeds
of unlawful activities
’
and ‘
unlawful
activity
’
in sec 1 of the Act,
[17]
that,
subsequent to the commission of the frauds on the SARS and on Sanlam,
(as set out above), the funds became the proceeds of
the frauds, in
the sense that it was then ‘
property
derived, received or retained …in connection with or as a
result of any unlawful activity
’.
44]
Although the definition in question is ‘
about
as wide as can be’
,
[18]
I cannot accept this argument. The fallacy, to my mind, is that it
loses sight of the fact, as I have accepted above, that the
‘
property
concerned
’
had been legitimately ‘
derived
(or) received
’
by the respondent. On the facts before me, he did not go out and
steal it, nor did he obtain it by means of fraud or any
other
unlawful activity. It cannot therefore be regarded as ‘
property
derived (or) received
’
from unlawful activities, for the simple reason that the property was
‘
derived
(or) received
’
before
any unlawful activity had taken place.
45]
In the
Carolus
matter
[19]
BLIGNAULT J held as
follows with regard to the ‘
proceeds
of unlawful activities
’
in the context of sec 38(2)(b) of the Act:
‘
In order to be
able to rely on subpara (b), that is the “proceeds of unlawful
activities”, it is clear that the applicant
must establish a
connection or link between the alleged unlawful activity and the
property concerned. In terms of the definition
there must be evidence
that the property was derived, received or retained, directly or
indirectly, in connection with or as a
result of the unlawful
activity carried out by any person.’
Van
der Walt
[20]
makes the same
point, stating thus:
‘
There should,
consequently, be a reasonable connection between blameworthiness for
a crime and the property that is forfeited; if
not, the forfeiture
should be open to constitutional review.’
46]
For the reasons set out above, I am of the view that the applicant
has failed to establish
a connection or link between the alleged
unlawful activity and the
derivation
or
receipt
of the
property concerned.
47]
This raises the further question as to whether it can perhaps be said
that the property
concerned was ‘
retained
…
as a result of any unlawful activity
’ (my emphasis).
Bearing in mind that the property represents undeclared income and
the growth thereon (in the form of inter
alia interest) , it must
follow, in my view, that the ‘
property … retained
’
as a result of unlawful activity
can only refer to that
portion of the property that would otherwise (i.e. had no unlawful
activity taken place) have been subject
to income tax. If this is so,
then, at best for the applicant, only some 40% of the property
concerned could conceivably represent
‘
proceeds
’
of the ‘
unlawful activity
’ in question. Even if
the respondent had committed none of the unlawful activity in
question, he would have been able (legitimately)
to retain and
utilise the balance of the property concerned. This being so, the
NDPP was not, in my view, entitled to apply for,
nor the court to
grant, forfeiture of ‘
all
’ the property concerned.
48]
It is important to bear in mind in this regard, as I have indicated
above,
[21]
that the court does
not, in terms of sec 50(1) of the Act, have a discretion to ‘pare
down’ the order asked for by
the NDPP by issuing a partial
forfeiture order. Significantly, the NDPP, on the other hand, does
have a discretion, in terms of
sec 48(1), to apply for partial
forfeiture only (‘
all
or any of the property
’).
The fact that the applicant in the present application is seeking
forfeiture of ‘
all
of the property
’,
leads ineluctably to the conclusion that it involves a choice between
all or nothing. I have concluded that the applicant
is not entitled
to ‘
all
’.
It follows, therefore, that in these proceedings it is not entitled
to anything.
49]
The situation in this respect is (to a certain extent) similar to
that in
Carolus’s
case,
[22]
where it was held:
‘
Even if it is
assumed that respondent derived some income from dealing in drugs,
then, given the fact that applicant is not able
to dispute
respondent's averments about his lawful activities and the other
legitimate ways in which he and his family earned income
over the
relevant period, it seems to me that in this case it is practically
impossible to come to a belief that any of the properties
were
derived, received or obtained [sic - retained] from the alleged
unlawful activity, and not perhaps from other activities.’
50]
In the circumstances, I conclude that the applicant has not
discharged the onus of proving
on a balance of probabilities that the
property which forms the subject of the current application (i.e. the
total proceeds of
what used to be the Paruk and Oliver investments)
is the ‘
proceeds of unlawful activities’
.
51]
However, if I were to err in coming to this conclusion, I am of the
view that the application
cannot, in any event, succeed. Having
regard to the very wide definition of ‘
proceeds
of unlawful activities’
,
[23]
it could lead to absurd and grossly inequitable consequences unless a
restrictive interpretation were applied to the provisions
in
question. The present case may serve as an example. As pointed out
above,
[24]
the applicant
claims forfeiture of the full amount of some R4,1 million in terms of
sec 48(1) of the Act, arising from the unlawful
activities referred
to above. In addition, the SARS claims to be entitled to additional
tax, amounting to some R2,5 million, arising
from the
same
unlawful activities. Moreover, the SAPS are investigating fraud
charges against the respondent. Should the respondent be charged
and
convicted (which, on the available evidence, does not seem
improbable), he may be exposed to further punishment by way of fines,

with or without imprisonment. (I leave out of the reckoning, for
present purposes, the possibility of a civil claim for damages
by
Sanlam, arising from the fraud allegedly committed against it.)
52]
A further complication that arises in the present case relates to the
fact that the respondent
and his wife are married in community of
property. She must, therefore, be regarded as the owner of an
undivided one­half share
in the property concerned. There has
been no suggestion that she had been a party to the alleged unlawful
activities. In fact,
she has not even been joined as a party to this
application. Even although this fact, by itself, would, in view of
the provisions
of sec 50(3) of the Act, probably not preclude the
court from granting a forfeiture order affecting her, I take into
account, nonetheless,
that this is a further aspect adding to the
harshness of a possible forfeiture order herein.
53]
The cumulative effect of all these potential sanctions is, in my
considered opinion, totally
disproportionate to the nature and extent
of the ‘
unlawful activities’
in question. Such a
result could not have been intended by Parliament.
54]
The obvious way in which to avoid such potentially disproportionate
and in­ equitable
results would be to grant to the courts the
power to submit an application for forfeiture to ‘
proportionality
review’
.
[25]
The present Act, however, does not make provision for a
proportionality test of any kind, nor does the court in terms of sec
50(1)
have any discretion in the matter. Counsel were agreed in this
regard that the word ‘
shall
’
in this context denotes a mandatory forfeiture and cannot be read as
‘
may
’.
55]
After the conclusion of argument before me, I raised the question
with counsel whether the
provisions of sec 50(2) of the Act might not
be employed so as to ameliorate to some extent the potentially harsh
consequences
of a literal application of sec 50(1). Sec 50(2)
provides as follows:
‘
The High Court
may, when it makes a forfeiture order or at any time thereafter, make
any ancillary orders that it considers appropriate,
including orders
for and with respect to facilitating the transfer to the State of
property forfeited to the State under such order.’
More
particularly, I asked counsel whether it would be possible, should a
forfeiture order be issued, for the court to order in
terms of this
sub­section that portion of the money so forfeited be paid by the
curator to the SARS in satisfaction of the
respondent’s tax
liability, once same has been determined.
56]
For reasons that need not presently be spelt out in detail, counsel,
in their supplementary
written submissions, were
ad idem
that
this would not be a permissible approach. I accept, therefore, that
it is not competent to order that the respondent’s
indebtedness
to the SARS be satisfied from any amount that may be declared
forfeited to the State in terms of sec 50(1).
57]
The only means, in my view, to avoid the potentially disproportionate
results of a forfeiture
order in the present instance, is to apply a
restrictive interpretation to the statutory provisions in question.
In my view, the
key to such a restrictive approach is to be found in
the provisions of the short title, the long title as well as the
preamble
to the Act.
58]
It was submitted on behalf of the applicant that it was not
permissible to have regard to
the preamble unless the provisions of
the Act are ambiguous. Reliance was placed in this context on cases
such as
R
v Associated Trade Supplies Ltd and Another
;
[26]
Jaga v
Dönges
NO;
[27]
and
Green
v Minister of the Interior
.
[28]
In my view, however, this represents an antiquated approach to the
process of statutory interpretation. As pointed out by Du
Plessis,
[29]
‘
One issue in
respect of which the law of statutory interpretation as it stands
today differs most markedly from the law as it stood
prior to 27
April 1994 is the admissibility and manner of invoking preambles as
interpretive aids. …The more unqualified
use of preambles in
constitutional interpretation has met with response in statutory
interpretation too. …Generally speaking
courts other than the
Constitutional court, namely the Supreme Court of Appeal and high
courts, have shown a readiness to invoke
preambles to legislative
instruments irrespective of the perceived clarity and/or ambiguity of
the language of individual provisions
that stand to be construed.’
59]
The short title of the Act already holds a clue as to the mischief
aimed at by the Legislature:
it is directed at the prevention of
‘
organised’
crime. Not by the wildest stretch of
the imagination could the evasion of personal income tax by a single
individual be categorised
as ‘
organised crime’
,
even where it may have been perpetrated over a few successive tax
years.
60]
This conclusion is reinforced when regard is had to the long title:
the Act is intended
to combat ‘
organised crime, money
laundering and criminal gang activities
’. This triad of
social evils forms a recurrent theme throughout the Act. Although it
was submitted somewhat tentatively on
behalf of the applicant that
the respondent’s conduct with regard to the rolling investments
described above ‘
amounts to money­laundering, or at
least closely resembles money­laundering’
, this was not
the basis on which the application has been presented. I am in any
event satisfied that the unlawful activities in
question fall outside
the ambit of the above categorisation.
61]
With reference to the preamble, one reads
inter alia
the
following:
‘…
And
whereas there is a rapid growth of organised crime, money laundering
and criminal gang activities nationally and internationally
and since
organised crime has internationally been identified as an
international security threat;
…
And whereas
the South African common law and statutory law fail to deal
effectively with organised crime, money laundering and criminal
gang
activities, and also fail to keep pace with international measures
aimed at dealing effectively with organised crime, money
laundering
and criminal gang activities; …’
These,
as well as other statements in the preamble in similar vein, convey
the clear impression that the Act was never intended
to be applied in
situations such as the present. Not only is there no apparent trace
of ‘
organised
crime, money laundering and criminal gang activities
’
in the present scenario; but tax evasion and tax fraud is one area
where South African statutory law actually
does
manage to deal quite ‘
effectively’
with offenders through elaborate provisions and severe penalties in
the Income Tax Act.
[30]
62]
In any event, as I have tried to show above, a literal application of
the definition of
‘
proceeds of unlawful activities
’
to the facts of the present matter would lead to absurd and grossly
inequitable results. In these circumstances, the court
would be
entitled – even on the ‘traditional’ approach, as
advocated on behalf of the applicant – to have
regard to the
preamble, leading to the same conclusion, namely that the present Act
was not intended to be applied in a situation
such as the present.
63]
I accordingly conclude that, upon a proper construction of the Act,
the property concerned
does not constitute the proceeds of unlawful
activities. This conclusion should not, in my view, cause any undue
hardship to the
applicant. It is still open to it, if so advised, to
prosecute the respondent and, upon conviction, to invoke the
provisions of
sec 18 of the Act in relation to ‘confiscation
orders’, in which event the court may exercise a discretion,
having
regard to all relevant considerations. In that way, the
applicant can effectively get a ‘second bite at the cherry’.
Concluding
remarks
64]
Having come to the aforementioned conclusion, it follows that the
present application cannot
succeed. In view of the arguments
addressed to me on behalf of the applicant, I feel duty­bound
nonetheless to record certain
reservations regarding the particular
statutory provisions in question. Counsel for the applicant submitted
in their written heads
of argument ‘
that s 50(1) of the Act
contains the significant safeguard that a forfeiture order may only
be made by a High Court – as distinct
from, say, an
administrative agency – and then only if it finds on the
probabilities that the property concerned is an instrumentality
of an
offence referred to in Schedule 1 or is the proceeds of unlawful
activities’
.
65]
In my view, this is cold comfort indeed. The fact of the matter is
that the NDPP is given
a wide and untrammelled discretion to decide
whether or not to apply for a seizure order, a preservation order, or
a forfeiture
order, whether in whole or in part. The High Court, by
contrast, does not enjoy a similar discretion. Once the
jurisdictional facts
have been established, the court ‘
shall
’
make an order. Indeed, the role of the High Court in the context of
sec 50(1) of the Act has been reduced to little more
than a
rubber­stamp. Nothing argued to the contrary on behalf of the
applicant has persuaded me that these provisions, as they
stand at
the moment, were introduced with any other motive than to lend a
façade of respectability to a process of civil
forfeiture
controlled by the prosecuting authorities.
66]
The complete absence of any discretion of the High Court in terms of
sec 50(1) of the Act
may be contrasted with the provisions of Chapter
5 of the same Act, where the court is in fact granted some discretion
in relation
to ‘
confiscation
orders’
(sec 18) and ‘
restraint
orders’
(secs 25 and 26). Given my conclusion with regard to the court’s
inability to grant a partial forfeiture order, it is interesting
to
compare, for example, the provisions of sec 18(2)(a), whereby the
court is given a discretion to order a ‘defendant’
to pay
to the State an amount ‘
as
determined by the court in accordance with the provisions of this
Chapter’
.
It is ironic that the court should have such discretionary powers in
the context of criminal forfeiture (more particularly, sec
18) where
the guilt of a ‘defendant’ has already been proved beyond
reasonable doubt,
[31]
while
not having any discretion in a situation where no prosecution has
taken place or is even pending.
67]A
further defect in this regard that was pointed out on behalf of the
respondent refers to the fact that the Act lays down no
guidelines
for the exercise of such discretion by the NDPP or his delegates. In
Dawood,
Shalabi and Thomas v Minister of Home Affairs and others
[32]
the Constitutional Court said the following, with reference to the
discretion conferred upon certain officials in terms of the
Aliens
Control Act, 96 of 1991:
‘
There is,
however, a difference between requiring a court or tribunal in
exercising a discretion to interpret legislation in a manner
that is
consistent with the Constitution and conferring a broad discretion
upon an official, who may be quite untrained in law
and
constitutional interpretation, and expecting that official, in the
absence of direct guidance, to exercise the discretion in
a manner
consistent with the provision of the Bill of Rights.’
68]
In attempting to distinguish Dawood’s case from the present
one, counsel for the applicant
submitted that the situation with
regard to the NDPP was vastly different. After all, so the argument
went, the NDPP is a very
senior public official, who, by definition,
is a legally trained person. The NDPP, like all other organs of
state, is bound to
respect, protect and promote the Constitution,
including the rights in the Bill of Rights.
[33]
Moreover, his power must be exercised subject to the constitutional
principle of legality as well as the minimum threshold that
all
exercises of public power be rational.
[34]
In any event, so it was submitted, there is no warrant for assuming
that the applicant would abuse his discretion. After all, in
the
words of counsel, ‘
someone
has to be trusted
’;
the unexpressed implication being that the ‘
someone’
should be the NDPP.
69]
Lord Denning proposed a different solution to the same dilemma. In a
famous aphorism, he
put it thus: ‘
Someone
must be trusted. Let it be the Judges
.’
[35]
This ought to be so, according to the learned author, because ‘
(t)he
judges are the guardians of our Constitution here, just as they are
in the United States’
.
[36]
70]
I unhesitatingly prefer the approach proposed by Lord Denning.
Against the foregoing background,
it is disquieting to note that, in
a young democracy such as ours, Parliament has seen fit to entrust an
untrammelled discretion
to the nation’s chief prosecutor (and
his delegates) to exercise the wide and sweeping powers contained in
Chapter 6 of the
Act under consideration, while withholding it from
the judges. Again, I draw attention to the contrast with Chapter 5 of
the Act.
One can only express the hope that this obvious defect in
Chapter 6 will be remedied by Parliament by returning to the High
Court
the discretion that it presently lacks in this regard.
Conclusion
71]
Before concluding this judgment, I wish to express my appreciation
and pay tribute to counsel
on both sides for the very full and
helpful heads of argument, as well as supplementary heads of
argument, submitted by them in
this matter. This was followed by oral
arguments of the same standard. It represented advocacy of the
highest order, which assisted
the court enormously in its task.
72]
For the reasons set out above, I conclude, therefore, that the
applicant is not entitled
to the order which it seeks.
It is
accordingly ordered that the application be dismissed with costs,
such costs to include the costs of two counsel.
73]
74]
B
M GRIESEL
JUDGE
[1]
See eg
NDPP
v Meyer
[1999] 4 All SA 263
(D) 272h – 276g;
NDPP
v Carolus and others
2000 (1) SA 1127
(SCA) paras [9] – [30];
NDPP
v Mohamed NO and others
[2002] ZACC 9
;
2002 (4) SA 843
(CC) paras [14] – [22]. See also A J Van der
Walt
Civil
Forfeiture of Instrumentalities and Proceeds of Crime and the
Constitutional Property Clause
(2000) 16 SAJHR 1
at 34
et
seq
.
[2]
secs 38(2)(a) and 50(1)(a).
[3]
sec 1(1), as substituted by sec 3(b) of Act 24 of 1999 and by sec
1(
a
)
of Act 38 of 1999
s.v.’instrumentality
of an offence’
[4]
secs 38(2)(b) and 50(1)(b)
[5]
sec 1(1) as amended by sec 3(c) of Act 24 of 1999 and substituted by
sec 1(b) of Act 38 of 1999 s.v. ‘
proceeds
of unlawful activities
’
[6]
sec 1(1) as inserted by sec 1(c) of Act 38 of 1999 s.v. ‘
unlawful
activity
’
[7]
sec 37
[8]
sec 48(1)
[9]
The respondent does not explain what happened to the balance of
R347 633,48.
[10]
1999 (2) SACR 27
(C); also reported in
[1999] 2 All SA 607.
Confirmed on appeal by the SCA in
NDPP
v Carolus
2000 (1) SA 1127
(SCA)
[11]
[2001] 4 All SA 525 (C)
[12]
at 39g-j ; 618g-h
[13]
at 527b-d
[14]
De Beer
NO v North­Central Local Council and South­Central Local
Council and others (Umhlatuzana Civic Association intervening)
[2001] ZACC 9
;
2002 (1) SA 429
(CC) 443E-F par [24] and authorities referred to in
footnote 26. See also
NDPP
v Mohamed NO and others
,
n1 above, at par [33] and authorities referred to in footnote 19.
[15]
par [8] above
[16]
par [49] below
[17]
par [7] above
[18]
NDPP v
Meyer
n 1 above at 276d
[19]
n 10 above at 39c
[20]
n 1 above at 37
[21]
par [43]
[22]
n 10 above at 39d-e; 618d-f
[23]
see par [7] above
[24]
par [21]
[25]
Compare in this regard the very useful article by A J van der Walt
(n 1 above), especially at 35
et
seq
[26]
1945 AD 611
at 615
[27]
1950 (4) SA 653 (A) 664H
[28]
1968 (4) SA 321
(A) 327C­D
[29]
LAWSA Vol 25 Part 1 (first reissue) par 349 (footnotes omitted); see
also Du Plessis
Re­Interpretation
of Statutes
(2002) 239 – 244
[30]
Compare in this regard the case of
NDPP
v Mohamed NO
n1 above, where the Constitutional Court, at paras [14] and [15],
specifically referred to the preamble to the Act presently
under
consideration.
[31]
Compare
NDPP
v Mohamed NO
n1 above paras [16] and [17]
[32]
[2000] ZACC 8
;
2000 (3) SA 936
(CC) par [46] at 966D
[33]
secs 2 and 7(2) of the Constitution
[34]
Fedsure
Life Assurance Ltd and Others v Greater Johannesburg Transitional
Metropolitan Council and Others
[1998] ZACC 17
;
1999 (1) SA 374
(CC) par 56­59;
Pharmaceutical
Manufacturers Association of South Africa
[2000] ZACC 1
;
2000
(2) SA 674
(CC) par 17;
South
Africa Association of Personal Injury Lawyers v Heath and Others
[2000] ZACC 22
;
2001
(1) SA 883
(CC) par 20 and 63
[35]
What
Next in the Law
(Butterworths, 1982) 330
[36]
ibid
318