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[2014] ZAWCHC 111
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Schoeman and Others v National Director of Public Prosecutions and Another (1890/2011, 5217/2010, 20738/2008) [2014] ZAWCHC 111; 2015 (1) SACR 451 (WCC) (23 July 2014)
HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
Case No: 1890/2011
In conjunction with Case No: 5217/2010
And in conjunction with Case No: 20738/2008
DATE: 23 JULY 2014
In the matter between:
MARC
SCHOEMAN
.........................................................................................
First
Applicant
MARC SCHOEMAN N.O. TRUSTEE THE 52
TRUST
..................................
Second
Applicant
CASPER JOHAN SCHOEMAN N.O. TRUSTEE THE 52
TRUST
...................
Third Applicant
MARK DAWSON N.O. TRUSTEE THE 52
TRUST
.......................................
Fourth
Applicant
S&D CONSULTING SOMERSET WEST CA (PTY)
LTD
.................................
Fifth
Applicant
S&D CONSULTING
CC
.................................................................................
Sixth
Applicant
HELDERSPRUIT ESTATES (PTY)
LTD
.....................................................
Seventh
Applicant
And
THE NATIONAL DIRECTOR OF PUBLIC
PROSECUTIONS
...................
First
Respondent
LEON KNOETZE N.O. Second Respondent
Heard: 21 May and 23 June 2014
Delivered: 23 July 2014
JUDGMENT
BUTLER, AJ:
1. This is an application for the rescission of certain orders
granted by this Court in terms of the provisions of the Prevention
of
Organised Crime Act, 121 of 1998 (“POCA”). The orders
attacked by the applicants are a provisional restraint order
granted
in terms of section 26(3) of POCA, the confirmation of that order on
the return day, the amendment and amplification of
the order, and the
dismissal of an application brought by the applicants for the
variation of the order.
2. The factual background of the matter is complex. Briefly, it
stems from the affairs of companies that formed part of the
Indo-Atlantic
group of companies. Two in particular are mentioned,
Indo-Atlantic Seafoods (Pty) Ltd, and Indo-Atlantic Shipping (Pty)
Ltd. A
third entity, Isotherm Fishing (Pty) Ltd (“Isotherm”)
also plays a role. I refer below to the Indo-Atlantic group as
“Indo-Atlantic”, unless specific reference is needed to
an individual company.
3. Johan Erasmus van Staden (“Van Staden”) was the
chief executive officer of the Indo-Atlantic group. Carel Braam de
Vries (“De Vries”) and Gerhard Botha (“Botha”),
an accountant, were among the employees of either Van Staden
or
entities within Indo-Atlantic.
4. The first applicant (“Schoeman”) is an accountant
and auditor by profession. Entities associated with him, in the
sense that he was either a director, shareholder or otherwise closely
connected to them, included the 52 Trust (represented by
the second
to fourth applicants before me), S&D Consulting Somerset West
(Pty) Ltd (the fifth applicant – referred to
below as “S&D
(Pty) Ltd”), S&D Consulting CC (the sixth applicant –
referred to below as “S&D
CC”), Marc Schoeman and
Associates CC (‘Schoeman CC’) and Helderspruit Estates
(Pty) Ltd (the seventh applicant).
Schoeman was the sole director of
S&D (Pty) Ltd, and the sole member of S&D CC and of Schoeman
CC.
5. During 2005 to 2008 Schoeman or one of his entities provided
accounting services to, and was the auditor of, at least 10 of the
entities in the Indo-Atlantic group. In his papers Schoeman uses the
acronym S&D, not necessarily indicating which of the
entities
controlled by him was involved in the events in question; for the
purposes of this judgment it does not matter which specific
entity
was so involved.
6. The first respondent alleges, and the essence of the
allegations is not denied by Schoeman, that Indo-Atlantic and Van
Staden
were parties to a fraudulent scheme involving transactions
that were governed by, among other statutes, the Value Added Tax Act,
89 of 1991 (“the VAT Act”). Two companies in the
Indo-Atlantic group were registered as VAT vendors under the VAT
Act.
The VAT fraud alleged by the first respondent involved the filing by
the two companies concerned of VAT returns containing
false
information. Both companies claimed that they had paid input VAT
when this had not occurred; and the export figures of one
of the
companies were vastly inflated. Because the output figures that
would otherwise have attracted output VAT debits were in
respect of
exports, such exports qualified for zero rating under the VAT Act.
The returns thus gave rise to substantial net credits,
and
consequential claims for refunds of VAT from the South African
Revenue Services (“SARS”). Despite three audits
of the
affairs of the companies being carried out by SARS, nothing amiss was
detected. In the years in question, approximately
R248 million was
paid by SARS in respect of the VAT refund claims submitted on behalf
of the companies.
7. Most of the VAT fraud was committed through transactions
claimed to have been concluded between two Indo-Atlantic companies on
the one hand, and Isotherm on the other. The first respondent
alleges, and this is also not denied by Schoeman, that the
transactions
in issue never took place. The two Indo-Atlantic
companies claimed to have made payments to Isotherm for the purchase
of frozen
fish. In fact, no such payments were ever made. The
claimed transactions with Isotherm were used to substantiate the VAT
input
credits that gave rise to the refund claims. Isotherm, it
turns out, was in fact dormant. Its offices had been vacated in
March
2006.
8. It is also not in dispute that Isotherm invoices, bearing the
dates March to August 2006, and August 2008, were found in Schoeman’s
study during a search and seizure operation carried out on 27
November 2008. The invoices implied that Isotherm fell under the
Oceana group of entities. Oceana’s company secretary has
stated on oath that no company with the name of Isotherm ever formed
part of the Oceana group.
9. It is alleged by the first respondent, and admitted by
Schoeman, that in the years in question all but one of the VAT refund
payments were paid by SARS into the bank accounts of S&D (Pty)
Ltd and Schoeman CC, and that those entities retained or received
R37
million as “facilitation fees” payable by Van Staden or
the Indo-Atlantic group, in relation to the VAT refunds
that were
procured.
10. It is further contended by the first respondent, and disputed
by Schoeman, that he and/or the entities controlled by him, were
parties to the fraud and benefited from the fraud in the extent of
the facilitation fees referred to above.
11. SARS eventually became suspicious and set in motion a search
and seizure operation that was carried out on 27 November 2008 at
Schoeman’s offices. Schoeman was apparently overseas at the
time that the operation was carried.
12. Extensive litigation ensued. Because of its significance to
the issues that follow, it is necessary to set it out briefly:
12.1. Following the search and seizure operation on 27 November
2008 the first respondent moved, ex parte, an application for a
provisional restraint order in terms of section 26(3)(a) of POCA.
The provisional order was granted by Traverso DJP, in chambers,
on 12
December 2008.
12.2. The attachment of assets pursuant to the provisional
restraint order occurred on 17 December 2008.
12.3. Schoeman was arrested, and released on bail, respectively on
17 and 19 December 2008.
12.4. On the return day of the provisional restraint order, 29
April 2009, the provisional order was confirmed by Meer J. There
was
no opposition by Schoeman or the entities related to him.
12.5. On 12 March 2010 Schoeman launched an application for the
release of funds held by the second respondent (“the curator”)
for legal expenses. Schoeman also complained that assets in excess
of what had been authorised by the restraint order had been
attached
and the release of those assets was sought.
12.6. On 18 May 2010 the first respondent delivered a counter
application to Schoeman’s application for legal expenses. The
counter application sought the variation of the restraint order to
increase the value of assets permissibly attached, and joining
the 52
Trust and S&D CC as respondents.
12.7. There were delays in the filing of papers for the purposes
of Schoeman’s main application. In the interim, the first
respondent set down and moved the counter application. The counter
application was granted, without opposition, on 25 August 2010,
by
Allie J.
12.8. Schoeman’s main application was heard by Steyn J in
November 2010. On 10 December 2010 she handed down her judgment
dismissing the main application.
12.9. Schoeman’s co-accused in criminal proceedings which
have since been instituted, Van Staden, successfully challenged the
grant of the restraint order. On 25 November 2011 Blignault J handed
down judgment rescinding the restraint order insofar as it
related to
Van Staden and the entities connected with him. Blignault J
criticised the conduct of the first respondent in procuring
the
restraint order, a finding that the first respondent sought to
challenge. An application for leave to appeal was refused by
Blignault J.
12.10. The first respondent successfully sought leave from the
Supreme Court of Appeal (“the SCA”) to appeal, and
Blignault
J’s judgment was set aside on 28 November 2012 by the
SCA: National Director of Public Prosecutions v Van Staden and Others
(730/2011)
[2012] ZASCA 171
(28 November 2012).
12.11. In the interim, Schoeman had launched his own application
for the rescission of the restraint order (“the first
rescission
application”). The first rescission application was
withdrawn on 13 February 2013. This was about two and a half months
after the judgment by the SCA in Van Staden’s case was handed
down.
12.12. On 19 March 2013 the Constitutional Court refused Van
Staden’s application for leave to appeal against the SCA
decision.
12.13. This application was launched on 27 May 2013.
13. Against that background the following relief is sought by the
applicants:
“1. That the provisional restraint order granted in favour
of the First Respondent against the Applicants in case number
20738/2008
on 12 December 2008 and confirmed on 25 August 2010 under
case number 5217/2010, in conjunction with case number 30738/2008, be
rescinded and set aside.
2. That the First Respondent and Second Respondent be ordered to
immediately restore all seized and/or attached property to First
to
Seventh Applicants.
3. That in the event that rescission is declined the restraint
order be varied to allow the First Applicant living expenses in the
amount of R1.32 million per annum as well as legal expenses in the
amount of R4.723 million for his criminal trial.
4. That in the event that rescission is declined the restraint
order be varied so as to grant the curator bonis power to agree and
approve the following without requiring the applicant to apply to
Court for relief:
4.1 Pay further legal and living expenses;
4.2 Make asset disposals or acquisitions in agreement with
applicant;
4.3 Pay the sum of R2 205 000.00 to First Applicant for past asset
maintenance costs incurred to date and to pay future asset
maintenance
costs as incurred.
5. That in the event that Rescission and or Legal or Living
Expenses or a variation awarded is appealed then Legal and or Living
Expenses in the sum prayed be released with immediate effect.
6. That the First Respondent be ordered to pay the costs of this
application.
7. Further and or alternative relief.”
The conditional counter application by the first respondent has by
agreement between the parties stood over, pending the outcome
of this
judgment.
14. It will be apparent from the brief chronology above that this
application was launched more than four years after the original
provisional restraint order was granted, about four years after the
confirmation of the restraint order, and respectively three
years and
a half and three years after the orders of Allie J and Steyn J were
handed down. Schoeman and his associated entities
did not oppose the
confirmation of the provisional restraint order, nor did they oppose
the amendment and amplification of the
restraint order, subsequently
granted by Allie J. A further unusual feature is that this
application was brought after a similar
application (the first
rescission application) was withdrawn.
15. As discussed below, Schoeman’s attacks on the four
orders focus on the manner in which they were obtained, and in
particular
makes allegations of fraud and dishonesty against the
officials of the first respondent in procuring the orders.
16. It is convenient to begin the analysis by considering what the
jurisdiction of this Court is to grant a rescission or variation
of
the orders sought to be impugned, in the circumstances.
Jurisdiction
17. The remedies of a respondent faced with a provisional order
that was granted against the respondent ex parte are extensive.
The
respondent may set the matter down for reconsideration under rule
6(12)(c). Or the respondent may persuade the court on the
return day
as to why the provisional order should be discharged. In that
instance the respondent has the election, in terms of
rule 6(8), to
anticipate the return day on not less than 24 hours’ notice to
the applicant, and can elect whether to file
papers or to argue the
matter without answering papers. On the return day the respondent
has the additional string to the bow
in that, apart from the merits
of the matter, the respondent may point out any breach of the duty of
utmost good faith that the
applicant may have committed, and have the
rule discharged for that reason alone, if the court in its discretion
so orders: Schlesinger
v Schlesinger
1979 (4) SA 342
(W); M V Rizcun
Trader v Manley Appledore Shipping Ltd
2000 (3) SA 766
(C) at 794.
No such advantages avail a respondent in opposed motion proceedings:
Trakman NO v Livshitz
1995 (1) SA 282
(A) at 288E-F.
18. If the order is confirmed, the respondent may seek to appeal
its confirmation: Phillips v National Director of Public Prosecutions
2003 (6) SA 447
(SCA) (“Phillips (1)”).
19. Once the order is confirmed, the remedies of the respondent
are more limited. Apart from consent (as to which see the judgment
of Thring J in Vilvanathan and Another v Louw NO
2010 (5) SA 1
(WCC)
at 23J to 31G) the remedies of the respondent are limited to those
under the common law and rule 42 of the Uniform Rules
of Court.
20. In the context of restraint orders under POCA, the court’s
powers of rescission include those under section 26(10), section
28(2)(a), section 28(3), and section 28(7). I revert below to the
question whether those provisions are the exclusive repository
of a
court’s jurisdiction in respect of proceedings under POCA.
The procedural complaints
21. I deal with the first group of complaints raised by the
applicants. Schoeman asserts that in seeking the provisional
restraint
order on 12 December 2008 the first respondent ought not to
have proceeded, and the court ought not to have permitted the first
respondent to proceed, ex parte, urgently, and in camera. Moreover,
no record of what transpired in chambers exists, which is
alleged to
constitute a further procedural deficiency.
22. Assuming that there may be merit to these complaints (and I do
not necessarily accept that there is), the point is that a court
has
permitted, in its discretion, the application to be moved as it was.
The applicants must have been aware of the suggested
irregularity,
and Schoeman elected not to oppose the confirmation of the
provisional order that was sought on the return day.
I was informed
by Mr Stransham-Ford, who appeared for the applicants, that Mr
Schoeman was advised by senior counsel and an attorney
at the time.
23. This Court does not have jurisdiction to rescind any of the
orders sought to be impugned, at this stage, on this basis alone.
In
permitting the original application to be brought ex parte, urgently
and in camera, Traverso DJP was entitled, in her discretion,
to do
so. There was no error as contemplated by rule 42(1)(a): see Lodhi
Property Investements CC and Another v Bondev Developments
(Pty) Ltd
2007 (6) SA 87
(SCA) at [25]. Furthermore, the parties affected by
the orders elected not to oppose the confirmation of the provisional
order,
and have abided the terms of the order for several years
thereafter. In these circumstances they should not complain about the
alleged procedural irregularities: see Schmidlin v Multisound (Pty)
Ltd
1991 (2) SA 143
(C) at 155C – 156E, and Abrahams v RK
Komputer SDN BHD
2009 (4) SA 201
(C) at 210 D-F.
24. In argument Mr Stransham-Ford sought to contend that in moving
ex parte and urgently the first respondent had acted fraudulently
and
dishonesty. This was, however, not the case made out in the first
part of the founding affidavit. Mr Stransham-Ford conceded
this, and
also accepted that no jurisdiction to interfere with the order
exists, on this basis alone.
Error of law or fact
25. The second basis asserted by the applicants, and emphasised in
argument, was that POCA impermissibly conflates civil and criminal
proceedings. The thrust of the argument is that section 26 of POCA
provides for a false dichotomy. It permits a restraint to
be placed
on assets another than upon proof of actual guilt on the part of the
respondent concerned. This, it was argued (apart
from the
constitutional point that I deal with more fully below), was
incorrect. No basis, accordingly, was made out for the restraint
that was sought.
26. Insofar as this argument asserts that the court granting the
provisional restraint committed an error of law, or one of fact
and
law, I have numerous difficulties with it. There is ample precedent,
binding on this Court, dealing with the onus that the
first
respondent was required to discharge when seeking a restraint order
under section 26 of POCA: see National Director of Public
Prosecutions v Kyriacou
2004 (1) SA 379
(SCA) at [10]; National
Director of Public Prosecutions v Rautenbach and Others
2005 (4) SA
603
(SCA) at [25] to [27]; National Director of Public Prosecutions v
Van Staden (supra) at [10]. This Court, when granting the Orders
in
question, was bound by that authority. Furthermore, Schoeman and his
related entities did not oppose the confirmation of the
provisional
order, nor did they seek to appeal the order of Steyn J. If an error
was committed, their remedy lay in an appeal,
if appropriate, and not
in application for rescission.
27. I revert to the broader constitutional argument, developed
along the same lines, below.
Fraudulent misleading of the court
28. This brings one to the heart of this case.
29. Schoeman asserts that when presenting the application for the
provisional restraint order to the court, as well as when seeking
its
confirmation, its variation and amplification, and when resisting the
application for legal expenses, the first respondent
relied upon a
fraud. The fraud was committed when the original provisional
restraint order was sought. At that stage the duty
of utmost good
faith rested upon the first respondent to disclose facts not only
favourable to the first respondent’s case,
but also which might
have influenced the court in coming to its conclusion. The relevant
authorities have been referred to above.
Schoeman asserts that the
first respondent failed to discharge that duty. The application is
not limited to aspects of suggested
non-disclosure. It goes further
to allege that the founding papers contain positive falsehoods, as
well as innuendoes and implications
of wrongdoing that were
unsustainable on the facts available to the first respondent at the
time. In all of those instances, Schoeman
alleges, the first
respondent’s representatives acted dishonestly, fraudulently,
and mala fide. Some 55 pages of the founding
affidavit are dedicated
to allegations of fraud and dishonesty on the part of the first
respondent.
30. Those allegations are disputed by the first respondent. The
disputes generated voluminous papers, running to about 1 800 pages
of
affidavits and annexures.
31. Before dealing with the merits of those allegations, it is
necessary to revisit the question of jurisdiction relied upon by the
applicants.
Section 28(2) and (3), and section 26(10) of POCA
32. In the founding affidavit two bases are referred to, being
sections 28(2) and 28(3) of POCA, and section 26(10) of the same Act.
33. Subsections 28(1) to 28(3) of POCA provide as follows:
“(1) where a High Court has made a restraint order, that
court may at any time—
(a) Appoint a curator bonis to do, subject to the directions of
that court, any one or more of the following on behalf of the person
against whom the restraint order has been made, namely—
(i) To perform any particular act in respect of any of or all the
property to which the restraint order relates;
(ii) To take care of the said property;
(iii) To administer the said property; and
(iv) Where the said property is a business or undertaking, to
carry on, with due regard to any law which may be applicable, the
business or undertaking;
(b) Order the person against whom the restraint order has been
made to surrender forthwith, or within such period as that court may
determine, any property in respect of which a curator bonis has been
appointed under paragraph (a), into the custody of that curator
bonis.
(2) Any person affected by an order contemplated in subsection (1)
(b) may at any time apply—
(a) for the variation or rescission of the order; or
(b) for the variation of the terms of the appointment of the
curator bonis concerned or for the discharge of that curator bonis.
(3) The High Court which made an order contemplated in subsection
(1) (b)—
(a) May at any time—
(i) Vary or rescind the order; or
(ii) Vary the terms of the appointment of the curator bonis
concerned or discharge that curator bonis;
(b) Shall rescind the order and discharge the curator bonis
concerned if the relevant restraint order is rescinded;
(c) May make such order relating to the fees and expenditure of
the curator bonis as it deems fit, including an order for the payment
of the fees of the curator bonis—
(i) From the confiscated proceeds if a confiscation order is made;
or
(ii) By the State if no confiscation order is made.”
34. Those sections do not confer an unlimited power to rescind a
restraint order. The power is limited to an order granted under
section 28(1) (b), being an order for the appointment of a curator.
It is clear from the preamble to subsection 28(1) that section
28(1)
(b) contemplates an order additional to a restraint order otherwise
granted under section 26(3). See, in this regard, Phillips
and
Others v National Director of Public Prosecutions
[2005] ZACC 15
;
2006 (1) SA 505
(CC) (“Phillips (3)”) at [26]. It is therefore clear that
the jurisdiction granted under subsection 28(3) is limited
to the
additional order made under subsection 28(1).
35. That is, however, not the relief that the applicants seek in
this matter. They seek the rescission of the restraint order (as
well as of the orders of Allie J and Steyn J) in toto. The reliance
on section 28(3) is therefore in my view misguided.
36. For completeness, I should say that even if only rescission of
the additional order appointing the curator ad litem were sought,
I
am not persuaded that it is justified on the facts of this matter.
It would have the effect that there would be no curator appointed
to
safeguard the assets under attachment, a result that would hardly be
in the interests of the applicants themselves.
37. The alternative basis relied upon is section 26(10) of POCA.
It provides:
“(10) A High Court which made a restraint order—
(a) may on application by a person affected by that order vary or
rescind the restraint order or an order authorising the seizure
of
the property concerned or other ancillary order if it is satisfied—
(i) that the operation of the order concerned will deprive the
applicant of the means to provide for his or her reasonable living
expenses and cause undue hardship for the applicant; and
(ii) that the hardship that the applicant will suffer as a result
of the order outweighs the risk that the property concerned may
be
destroyed, lost, damaged, concealed or transferred; and
(b) shall rescind the restraint order when the proceedings against
the defendant concerned are concluded.”
38. Two jurisdictional requirements must satisfied: (i) that the
operation of the order will deprive the applicant of the means
to
provide for his or her reasonable living expenses and cause undue
hardship for the applicant; and (ii) that the hardship outweighs
the
risk that the property concerned may be destroyed, lost, damaged,
concealed or transferred. See further Cameron J’s
judgment in
Naidoo and Others v National Director of Public Prosecutions and
Another, CCT 112/10;
[2011] ZACC 24
at
[20]
.
39. The jurisdictional requirements can be disposed of briefly.
40. In the first instance, there is no case made out by Schoeman
that the restraint order has, or will, deprive him of his livelihood.
In the answering papers the first respondent asserts that Schoeman
is able to continue his practice as an accountant. He points
out
further that in papers filed in relation to a bail application,
Schoeman stated that he was able to obtain funding, by raising
the
necessary finance. In argument, Mr Stransham-Ford indicated that the
application insofar as it related to living expenses
was not
persisted with. I am therefore not satisfied the applicants have
satisfied the requirements of section 26(10)(a)(i).
41. Second, it is apparent from the judgment of Steyn J (which I
deal with more fully below) that Schoeman has been less than candid
with the curator in respect of assets potentially falling under the
restraint order, and in having, on one instance at least, attempted
to alienate assets. It was open to Schoeman, if he was so advised,
to have challenged those findings. He has not done so. His
case in
response is not impressive. I am therefore not persuaded that the
applicants have satisfied the pre-requisites of subsection
26(10)(a)(ii) either.
42. A further consideration is that in the heads of argument filed
for the applicants no reliance was placed upon section 26(10).
The
only section relied upon in argument was section 28(3).
Common law?
43. At the outset of argument I invited counsel for the applicants
to address me on the question of the ambit of my jurisdiction
to
rescind an order in these circumstances. Counsel indicated that the
applicants would wish to rely on such a jurisdiction outside
of
section 26(10) and section 28(3), but as I understood him, considered
that the judgment in Phillips (with reference, I suspect,
to Phillips
(3)) precluded reliance on such a ground.
44. The passages in Phillips (3) that counsel may have had in mind
were those at paras [35] to [37] of the judgment. There the
Constitutional Court stated:
“[35] Both in their heads of argument and before this Court,
counsel for the applicants submitted that section 26(10)(a) is
capable of two possible constructions, with one being
constitutionally compliant and the other not. They contend that the
section
is capable of a construction that allows the High Court, in
the exercise of its inherent power, to set aside a restraint order
made under the Act on common law grounds, and indeed this was the
interpretation adopted by the High Court. The High Court took
the
view that it was empowered under common law (without the need to
refer to section 173 of the Constitution) to set aside the
restraint
order on grounds other than those listed in the Act. This is the
interpretation favoured by the applicants who contend
that it is in
line with and does not do violence to the inherent power vested in
the high courts by section 173 of the Constitution.
[36] The second interpretation is one which holds that the grounds
for rescission provided by the Act constitute a closed list and
that
a high court is not empowered to rescind a restraint order on grounds
other than those specified in the Act. This is the interpretation
which was adopted by the SCA which, it is contended, is not one that
advances the values enshrined in the Bill of Rights.
[37] I do not think that section 26(10) is capable of the
construction proffered by the applicants. It is not only about
standing;
it carefully regulates the substantive circumstances in
which rescission of a restraint order made under the Act may be
sought.
It may be that on the construction adopted by the SCA it is
inconsistent with the Constitution, but that case has not been made
on the applicants’ papers and cannot be decided here. I cannot
therefore, in these proceedings, fault the approach of the
SCA to
section 26(10) of the Act and, given that there is no constitutional
challenge to section 26(10), the SCA interpretation
must stand.”
45. At first blush, the passage above does appear to exclude the
possibility of a jurisdiction for rescission existing outside of
those expressly catered for under POCA. The passage above however
needs to be read in context. For present purposes the Phillips
cases
began with the SCA judgment in Phillips (1). There, the first
question was whether the restraint order was appealable under
the
principles in Zweni v Minister of Law and Order
1993 (1) SA 523
(A).
To decide that question, it was necessary to consider whether the
first of the three Zweni requirements (that the judgment
be final in
effect, final meaning that it is unalterable by the court whose
judgment or order it is) was met. Relevant to that
issue was the
question of the court’s power to rescind or vary its own order.
In dealing with that question, Howie J stated:
“[12] A restraint order has only temporary duration. It
operates pending the outcome of later events. In terms of s 26(10)(b)
it must be rescinded by the High Court when the proceedings against
the defendant are concluded. Conclusion, says s 17, occurs
on
acquittal (whether at trial or on review or appeal) or if no
confiscation order is made despite conviction, or if the confiscation
order is satisfied.
[13] Apart from rescission in those instances the Act makes
provision for variation or rescission by the High Court of restraint
orders and related orders in other circumstances. In terms of s
26(10)(a) the Court may vary or rescind a restraint, seizure or
other
ancillary order on the application of any person affected, provided
it is satisfied on each of two particular grounds. The
first is that
the operation of the order will deprive the applicant of the means to
provide for his reasonable living expenses
and cause him undue
hardship. The second is that such hardship outweighs the risk that
the restrained assets may be destroyed,
lost, damaged, concealed or
transferred.
…
[20] Counsel for the respondent is right, in my view, in
submitting that a restraint order is only of interim operation and
that,
like interim interdicts and attachment orders pending trial, it
has no definitive or dispositive effect as envisaged in Zweni.
Plainly, a restraint order decides nothing final as to the
defendant's guilt or benefit from crime, or as to the propriety of a
confiscation order or its amount. The crucial question, however, is
whether a restraint order has final effect because it is unalterable
by the Court that grants it. In this regard counsel for respondent
argued that the provisions of s 26(10)(a) deprived a restraint
order
of the finality required for appealability because it permitted
variation and even rescission.
[21] Orders respectively appointing curators, requiring surrender
of property and burdening title deeds are all rescindable at any
time. Presumably the unstated requirement is that sufficient cause
must be shown but otherwise, unlike the case of s 26(10)(a),
no
limits are placed on their susceptibility to rescission. And in the
case of a common-law interim interdict or attachment pendente
lite
there is no reason why, for sufficient cause, they would not,
generally, be open to variation, if not rescission.
[22] Absent the requirements for variation or rescission laid down
in s 26(10)(a) (and leaving aside the presently irrelevant case
of an
order obtained by fraud or in error) a restraint order is not capable
of being changed. The defendant is stripped of the
restrained assets
and any control or use of them. Pending the conclusion of the trial
or the confiscation proceedings he is remediless.
That unalterable
situation is, in my opinion, final in the sense required by the case
law for appealability.” (emphasis added)
46. The question of a possible challenge on the basis of fraud or
error was thus expressly left open.
47. In National Director of Public Prosecutions v Phillips
2005
(5) SA 265
(SCA) (“Phillips (2)”) the SCA heard an appeal
from the High Court in which the High Court had held that it has an
inherent jurisdiction to rescind the restraint order granted under
section 26 of POCA. (See the SCA judgment at [13] and [17].)
After
careful analysis of the relevant provisions, Scott JA referred to the
passages from Phillips (1) (see the judgment at [18]).
At paragraphs
[21] and [25] Scott JA summarised:
“[21] It accordingly concluded that a restraint order can be
varied or rescinded if good cause is shown and that good cause
includes, among other things, the impossibility of performance by a
curator bonis appointed under the Act. It granted the order
sought by
Mr Phillips and the other applicants and rescinded the restraint
order that it had previously made.
[25] The SCA reasoned that the restraint order is not one that may
be granted at common law. It is authorised by the Act and so is
the
power to vary or rescind it. If there had been no provision for its
variation or rescission in the Act, the order would stand
until set
aside either because the person was not charged, or when the
proceedings against the person/s concerned were concluded.”
48. It is clear from the above that in concluding that the High
Court does not have inherent jurisdiction to rescind an order granted
under section 26 of POCA, the SCA accepted that the court does have
the power to rescind an order granted under section 26, under
the
common law.
49. Reverting to the judgment of Skweyiya J in Phillips (3), the
only question before the Constitutional Court was whether the High
Court had been correct in reasoning that it had an inherent
jurisdiction to rescind the order under section 26 of POCA. In
argument
before the Constitutional Court the appellant (the original
applicant) persisted with the contention that the court had an
inherent
jurisdiction: see Phillips (3) at [35]. It should thus be
noted that both in the High Court and in the SCA the appellant had
limited
its submissions to the proposition that the court had an
inherent jurisdiction.
50. The statement in Phillips (3) at [36] that the “second
interpretation” is to be preferred, which entails the
conclusion
that “the grounds for rescission provided by the Act
constitute a closed list and that a High Court is not empowered to
rescind
a restraint order on grounds other than those specified in
the Act” the Constitutional Court was dealing with the
contention
that an inherent jurisdiction to rescind the order
existed. This was, after all, the only contention relied upon by the
appellant.
This statement, although broadly framed, did not refer to
the finding of the SCA in Phillips (2) to the effect that the common
law jurisdiction was also available. Had this been intended by the
Constitutional Court it would surely have said so. This is
reinforced by the concluding sentence of para [37] where Skweyiya J
said:
“I cannot, therefore in these proceedings, fault the
approach of the SCA to s 26(10) of the Act and, given that there is
no
constitutional challenge to s 26(10), the SCA interpretation must
stand.”
51. It is hardly likely that Skweyiya J would have said that had
the intention being to divert from the SCA ruling that the common
law
jurisdiction was available.
52. In Phillips (2) Scott JA stated that:
“It is a well established principle that a court may always
set aside its own final judgment in certain circumstances. These
include situations where the judgment is founded upon fraud …”.
53. Were the jurisdiction to rescind the restraint order to be
limited strictly to the requirements of section 26(10) of POCA, it
would have the consequence that a respondent with financial means
(and therefore unable to satisfy the requirement of section
26(10)(a)(i)) would have to abide the drastic consequences of a
restraint order even where it was procured by fraud. It would make
the court the servant of a dishonest litigant. Such an anomalous
consequence is unlikely to have escaped Skweyiya J.
54. I respectfully accept, therefore, that the Constitutional
Court in Phillips (3) did not intend to qualify what was mooted by
Howie P in Phillips (1), and held by Scott JA in Phillips (2), and
accept therefore that I do have the jurisdiction, in my discretion,
to rescind a restraint order procured by fraud.
55. In proceeding as I do below, I am mindful of the fact that the
applicants did not, expressly in their founding papers, make
reference to the common law as a basis for the jurisdiction to
rescind. The court, however, may, in certain circumstances, permit
an applicant to present the case on a further legal basis, provided
that a sufficient factual basis is set out in the papers, and
provided no prejudice is caused to the opposing party (Minister van
Wet en Orde v Matshoba
1990 (1) SA 180
(A) at 285E-I).
56. In this matter fraud is extensively alleged, and is dealt with
on its merits by the respondents. No substantial prejudice is
caused
to the respondents to permit the argument to proceed on this basis.
Moreover, the applicants seek to protect very significant
interests,
partly in reliance on provisions of the Constitution. I consider
that the interests of justice require that this aspect
also be
considered, lest it appear that it was overlooked, to the detriment
of the applicants.
The case for fraud and dishonesty
57. In the presentation of the application for the restraint order
to Traverso DJP, and for the confirmation of the order by Meer
J the
first respondent relied, among other material, on the affidavits of
two witnesses, Scholtz and Rossouw. Those form the focus
of
Schoeman’s attacks. A third affidavit, by Venter, was also
attacked. The first respondent has however pointed out that
Venter’s
affidavit did not form part of the papers before Traverso DJP (and
therefore consequentially also not before Meer
J).
58. The statements that are said to have been dishonestly advanced
are extensive. It is convenient to deal with them in five groups.
(i) The first group
59. The first group of statements are accepted in isolation not to
be offensive, but are said to be obnoxious when allied with the
failure to have informed the court of other relevant matters. There
are essentially three sets of allegations in this regard.
It is
stated in the affidavits that the frauds alleged were committed by
Van Staden and the Indo-Atlantic group while Schoeman
was the auditor
of the group, when this was incorrect. Next, while the affidavits
refer to facts giving rise to the suggested
fraud, they fail to
disclose that in the three years preceding the discovery of the
fraud, clean VAT audit had been derived by
the Indo-Atlantic group.
The third set of complaints concern evidence obtained from De Vries
who, at the time that the provisional
restraint order was sought, had
been interviewed, but from whom a statement had not been obtained.
It is alleged that the first
respondent was remiss in not pointing
out to the court that De Vries was by then essentially a State
witness, and was bias against
the respondents in the application.
60. I find the logic in this aspect of the complaint tenuous.
While there is no reference in the founding papers (apparently) to
the proposition that it is not the duty of an auditor to satisfy
himself as to the fundamental correctness of the facts presented
to
the auditor, this appears to be a statement of law which I suggest
would probably have been clear to the court considering the
matter.
(See also the judgment of Howie P in Phillips (1) at [33]). The
failure to have disclosed that there had been three clean
VAT audits
preceding the discovery of the fraud strikes me as irrelevant. It is
the case of the first respondent that there was
fraud. Fraud implies
a deception. The SCA was unimpressed by this argument in Van Staden
(supra) at [22]. The failure to have
disclosed that De Vries was
biased also has no merit. It is clear from the papers that it was
disclosed that De Vries was a potential
accused. This was
sufficient, in my view, to warn the court hearing the application
that information from De
Vries would have to be treated with caution.
(ii) The second group
61. The second category of dishonesty relied by Schoeman concerns
statements that were positively false. Ones that were particularly
identified were the contention that Botha was the financial director
of the Indo-Atlantic group, and the assertion that Schoeman
was the
auditor of the whole group. The correct facts appear to be that
Botha was an accountant employed either by Van Staden
or some of the
entities, and that Schoeman was the auditor of only about 10
companies in the group. The materiality of these errors
is unclear
to me.
(iii) The third group
62. The third group of allegations formed the main part of the
argument before me. They amount to assertions made by the first
respondent using inappropriate labels for conduct, conveying by
innuendo or implication that Schoeman had conducted himself
irregularly
or inappropriately, and failing to set the facts out
neutrally and correctly. Chief among these allegations was the
contention
in the papers that funds had been “channelled”
through the accounts of S&D, and had further been paid not to the
respective VAT vendors, but to other entities in the Indo-Atlantic
group. This process of payment was contended to be irregular.
The
system so set up was suggested to have been done with “great
care”. The facts which Schoeman says were known
to the first
respondent included that the designation of the S&D bank account
as the recipient of the VAT refunds was one approved
by SARS, that
SARS would have appreciated that the VAT vendor was an entity other
than the recipient of the refunds, and that it
were clear therefore
that the process of payments was not only disclosed to SARS, but also
approved by it.
63. In argument Mr Budlender, who appeared with Ms Saller for the
first respondent, resisted the suggested that the expression
channelling
has a negative connotation. In the alternative he argued
that the facts were placed before the Court, and that from the facts
it
was clear that the payments were made to Schoeman’s
entities, to the knowledge of SARS, SASR after all was the payer of
the
funds. I am inclined to agree that the expression ‘channelling’
can have a stigma and that in the context of this matter
(particularly when asserted in the context of ‘irregular’
payments) it was prone to carry a negative connotation. However,
I
agree that the basic facts were disclosed and it must have been clear
to the Court that the payments were made in the first instance
by
SARS itself.
64. A further allegation relied upon in the third category was the
contention that Schoeman had “countersigned” certain
VAT
forms, whereas Schoeman had only signed them confirming the details
of the owner of the bank account. The word “countersign”
is suggested to have conveyed the innuendo that Schoeman was
confirming the facts inserted in the VAT forms. While I accept that
there may be some merit to this contention, its materiality strikes
me as limited. As a fact, Schoeman did sign the VAT forms.
The VAT
forms were placed before the court as annexures. While the word
“countersigned” may have been too broad,
I doubt that
there was any great import in this error.
65. The next area of complaint under the third category was the
reference to the failure by the Indo-Atlantic group to have paid
PAYE. Schoeman alleges that the failure to pay was simply a timing
error, rather than a contravention of the Act. The non-payment
of
PAYE formed such a small element of the papers that I doubt that it
had any material bearing on the judge’s discretion
when
granting a provisional restraint order or confirming it.
(iv) The fourth group
66. The fourth category of complaints falls under the description
of facts that were alleged by the first respondent whereas Schoeman
and his entities had a defence to the contentions. Examples of these
include the statement that 7 000 to 8 000 documents had come
into the
possession of the NDPP which it had not yet considered, while
Schoeman says that the documents in fact do not incriminate
him.
Another example is the reliance on a fax sent by Van Staden, which
Schoeman claims he had no knowledge of. Then there is
the failure to
have disclosed that Schoeman was not involved in ensuring compliance
with the Income Tax Act insofar as it related
to PAYE. In my view
these allegations are unsupportable. It was not incumbent on the
first respondent to speculate what Schoeman
would raise in the form
of denials. Nor do I consider that the statements in isolation or
together are misleading.
(v) The fifth category
67. Finally, Schoeman complains extensively that the NDPP delayed
in obtaining a statement from De Vries, That statement, it was
argued, ought to have been obtained prior to the provisional restrain
order being sought.
68. It is unclear how this averment can sustain a case for fraud
or dishonesty. In his papers the first respondent explains the steps
that were taken to obtain De Vries’s statement. If there was an
error, it appears to have been bona fide rather than deliberate.
Moreover, this point was argued before the SCA in Van Staden, on what
appears to have been the same or very similar facts, and
rejected by
that Court.
69. To sum up, I am prepared to accept, for the purpose of this
application, that in certain instances the averments made by the
first respondent strayed beyond what was appropriate in ex parte
motion proceedings. In particular, this includes the use of the
expressions “channelling” and “irregular” in
relation to the manner of payment of the VAT refunds. (I
stress that
I do not find that, on the basis of evidence subsequently obtained,
that those descriptions are necessarily incorrect.)
70. The issue in this matter is however not whether the NDPP erred
by reference to the principles applying to the disclosure of
information in ex parte proceedings. The question is whether the
applicants have made out a basis for the rescission within the
exceptional jurisdiction accepted by Scott JA in Phillips (2). To
succeed, it was necessary to prove, as they alleged, fraud and
dishonesty. This is not a light onus. It requires evidence not only
of an incorrect or misleading statement, but of a subjective
intention on the part of the first respondent to mislead the court.
71. I do not believe that the papers reveal such an intention.
Apart from the possibility that these allegations might in fact have
been correct (to which I revert below), the statements in question
strike me as overzealous argument rather than fundamentally
misleading facts. Further, a curious aspect of Schoeman’s
challenge lies in his response to the application after the
provisional
order was served on him. On the advice of counsel and an
attorney, he elected not to oppose the return day. He must have read
the papers, and he consulted, by his admission, his counsel and
attorney, who would also have studied the papers. Had Schoeman
genuinely felt that the averments were false (and a fortiori
fraudulent and dishonest) I have no doubt that he would have said
this to his counsel. And had he revealed to his counsel that the
statements were false and in his view dishonest, this would have
presented them with an obvious basis to seek discharge of the
provisional order. Inexplicably, Schoeman elected to abide the
confirmation of the provisional order.
72. The same comments apply to the proceedings when the amendment
and amplification of the order was sought before Allie J. There,
again, an opportunity presented itself for Schoeman to have
challenged the correctness of the basis upon which the application
was moved, and also to assert the suggested fraud and dishonesty on
the part of the first respondent. Further, in the proceedings
before
Steyn J, a competent basis (on the applicants’ argument) for
seeking the rescission, and not merely the variation,
of the order
presented itself. Again, inexplicably, these averments were not
raised.
73. The facts, in my view, suggest strongly that Schoeman and his
associated entities made conscious and informed decisions to abide
those orders. Their conduct, under the circumstances, amount to
acquiescence: see Abrahams (supra).
Rule 42?
74. Having concluded that no basis in terms of the common law is
made out, it remains to consider briefly whether Rule 42 might assist
the applicants. In Phillips (2) the question whether Rule 42 might
avail a respondent confronted with a restraint order under section
26
of POCA was not raised. I will assume in favour of the applicants
that, insofar as Rule 42 restates the common law, the Rule
may be
relied on in cases of fraud.
75. The ambit of the Rule was discussed in Colyn v Tiger Food
Industries Ltd t/a Meadow Feed Mills (Cape)
2003 (6) SA 1
(SCA) at
[6] ff:
“[6] Not every mistake or irregularity may be corrected in
terms of the Rule. It is, for the most part at any rate, a
restatement
of the common law. It does not purport to amend or extend
the common law. That is why the common law is the proper context for
its interpretation. Because it is a Rule of Court its ambit is
entirely procedural.
[7] Rule 42 is confined by its wording and context to the
rescission or variation of an ambiguous order or an order containing
a
patent error or omission (Rule 42(1)(b)); or an order resulting
from a mistake common to the parties (Rule 42(1)(c)); or 'an order
erroneously sought or erroneously granted in the absence of a party
affected thereby' (Rule 42(1)(a)). In the present case the
application was, as far the Rule is concerned, only based on Rule
42(1)(a) and the crisp question is whether the judgment was
erroneously granted.
[8] The trend of the Courts over the years is not to give a more
extended application to the Rule to include all kinds of mistakes
or
irregularities. …”
76. Streicher JA further considered the ambit of the Rule, where a
party is in default of appearance, in Lodhi (supra) at para [17]
and
following:
“[17] In any event, a judgment granted against a party in
his absence cannot be considered to have been granted erroneously
because of the existence of a defence on the merits which had not
been disclosed to the Judge who granted the judgment. …
[25] … a judgment to which a party is procedurally
entitled cannot be considered to have been granted erroneously by
reason
of facts of which the Judge who granted the judgment, as he
was entitled to do, was unaware, ….”
77. Given the findings that I have made above under the common law
grounds, Rule 42(1) cannot avail the applicants. Traverso DJP,
Meer J
and Allie J were all procedurally entitled to proceed as they did.
Schoeman and his entities elected not to oppose the confirmation
of
the provisional order sought before Meer J and the amplification of
the order sought before Allie J. And the errors in the papers
relied
on by Schoeman do not in my view constitute errors that would qualify
as such for the purposes of Rule 42(1)(a).
Discretion
78. In case I am incorrect in my assessment of the errors in the
papers and the motive on the part of the first respondent in moving
the orders sought to be impugned, and accepting for the purposes of
argument that the first respondent might have been motivated
by
zealousness or otherwise to assert facts known to be incorrect, or
did so negligently as contended by the applicants’
counsel in
the alternative, the question arises how I should exercise a
discretion to rescind the orders sought to be impugned.
It is trite
that I would have such a discretion if fraud as contemplated in
Phillips (1) and Phillips (2) were established. In
Phillips (1)
Howie P expressed the discretion, in respect of the return day, at
[29] as follows:
“If the applicant fails in this regard and the application
is nevertheless granted in provisional form, the Court hearing the
matter on the return day has a discretion, when given the full facts,
to set aside the provisional order or confirm it. In exercising
that
discretion the latest Court will have regard to the extent of the
nondisclosure; the question whether the first court might
have been
influenced by proper disclosure; the reasons for the nondisclosure
and the consequences of setting the provisional order
aside.”
See also the judgment of Nel J in Gardener v Walters NNO (In re Ex
p Walters NNO)
2002 (5) SA 796
(C) at 808F – 809A.
79. I would also have a discretion to rescind the order even if an
error were to have been committed as contemplated under Rule 42
(see
Colyn (supra) at [5], Tshivhase Royal Council v Tshivhase; Tshivhase
v Tshivhase
[1992] ZASCA 185
;
1992 (4) SA 852
(A) at 862G – 863A).
80. The background facts, relating to the fraud by Van Staden and
the Indo-Atlantic group, have been discussed above. Insofar as
they
relate to Van Staden and the group, they are not challenged by
Schoeman. Schoeman assets his own innocence, rather than the
innocence of Van Staden and his group. In Van Staden the SCA noted
(at para [25]) that Van Staden did not deny that De Vries and
Botha
had committed fraud. The SCA however also found that Van Staden
could not have been ignorant of the source of such a large
amount of
money. It further found (at [28]) that there is a probability that
Van Staden benefited from the fraud to the extent
of R100 million.
81. It is not in issue before me that Schoeman’s firms were
paid R37 million as “facilitation fees” in the three
years in question, in relation to the VAT refunds. Those payments
were made over and above fees for work done as the accountant
and
auditor. The question arises why Indo-Atlantic would pay such a
large amount of money to Schoeman’s entities in these
circumstances.
82. The facts show that the VAT refunds were paid into the
accounts of the S&D entities. After deduction by the S&D
entities
of the facilitation fee percent (between 10% and 15%) the
balance was on-paid as designated by Van Staden. But only about R180
million of the R248 million was paid to one of the supposed VAT
vendors, Indo-Atlantic Shipping. The balance was paid to
Indo-Atlantic
Holdings (Pty) Ltd, to creditors, to Van Staden
personally and to Van Staden’s minor son. Schoeman makes the
point that
the on-payments were made as instructed by Van Staden, and
they are not in themselves an indication for any wrongdoing.
83. The case for the first respondent however goes further.
Invoices from Isotherm for the period June to August 2006 reflect a
Mauritian delivery address. Invoices for August 2008 do not do so.
Email exchanges between Schoeman, Van Staden and Botha in July
2008
reflect that Shoeman asked Van Staden to:
“please email the turnover invoices; need to remove the
delivery address as the current invoices should be zero rated”
a request that was later added to by saying:
“[s]orry need purchase invoices from Isotherm”.
84. The first respondent asserts that the emails make no sense. If
Indo Seafoods had in fact bought fish from Isotherm and had delivered
it to Mauritius, there ought to have been no input VAT reflected on
the invoice. The sequence above shows, it is argued, that Schoeman
was a party to the fabrication of the invoices.
85. The first respondent also points to the fact that when audit
queries were raised Schoeman attended to them himself. A VAT control
account was maintained by staff at Indo-Atlantic. Botha’s
assistant, Claudia Mannel compiled a list of legitimate VAT input
and
output transactions for August 2008, and sent it to Botha. The total
input VAT on the spreadsheet is R58 875.09. The content
of that
spreadsheet was carried over into the VAT control account submitted
to SARS. The VAT control account however includes five
additional
entries referring to transactions with Isotherm. Those additional
five entries raise the VAT input claimed to almost
R11 million. Two
of the invoices used to claim the additional five entries were found
in Schoeman’s study.
86. As far as can be ascertained, it is Schoeman’s case that
the facilitation fee was simply paid for the paperwork completed
by
Schoeman. Schoeman seeks to exculpate himself from the preparation
of misleading and dishonest documentation by illustrating
how little
involvement he had in the affairs of the Indo-Atlantic group and in
the underlying facts. He states that he has ‘no
knowledge of
the affairs of the Indo-Atlantic group’, that he had ‘no
insight into the Indo business’ and that
he never saw any VAT
documentation after Indo took over the processing” (of the VAT
documentation, it seems).
87. Three emails in particular appear to cast further doubt on
Schoeman’s version. One, dated 24 June 2008, from Botha to
Schoeman reveals that Botha was ‘starting to feel very
uncomfortable with the whole VAT situation’ and asked whether
Schoeman had had any further discussions with Johan (presumably Van
Staden) about the situation. Botha continued:
“I want to know from you should something go wrong what my
liability will be because I handed these things in/prepared them.
I surely don’t want to gain any liability for something that
I had no direct gain in.”
88. In a second and third email from Van Staden to Schoeman and
Botha, both on 16 November 2009, Van Staden requested assistance
in
providing information in response to queries raised by SARS. The tone
of the emails reflects anxiety. Van Staden urged that
“It is
time to stand together now ...”.
89. Those mails, together with July 2008 correspondence and the
documentation found at Schoeman’s study, all seen in context,
cast doubt on Schoeman’s claimed lack of knowledge of, and
involvement in, the underlying facts.
90. Then there is the payment of R37 million facilitation fees to
Schoeman’s entities. On Schoeman’s version those fees
are difficult to fathom. Counsel for Schoeman described them as a
“windfall”, and pointed out that the facilitation
fee had
been agreed in a letter dated 28 June 2005. However, no sensible
commercial rationale for the Indo-Atlantic group giving
up 10 to 15%
of cash which (on Schoeman’s version) it had paid out as VAT
and reflected in the declared VAT inputs. I find
the suggestion by
Schoeman that Van Staden agreed to pay such vast sums for little
discernible contribution by Schoeman improbable.
The label
‘facilitation’, suggesting that both Van Staden and
Schoeman saw Schoeman as deserving the payments because
he was
facilitating something, is possibly an indication of its causa. But
the mere completion of VAT forms and making available
the bank
accounts of the S&D entities strikes me as unlikely to have been
the extent of Schoeman’s ‘facilitation’,
given the
very large remuneration. It reinforces, I think, the contention that
Schoeman was more involved than he admits.
91. Schoeman’s case is not assisted by his conduct in the
proceedings before Steyn J. I deal below with the findings made
by
Steyn J, but note for present purposes that she found Schoeman not to
be a credible source of information (see Steyn J’s
judgment at
[31], [32], [35] and [36]).
92. I accept that Schoeman may in due course be vindicated in his
claims. However, the threshold requirement for a restraint under
section 26(3) of POCA was restated in Rautenbach and quoted in Van
Staden as follows:
“It is plain from the language of the Act that the court is
not required to satisfy itself that the defendant is probably guilty
of an offence, and that he or she has probably benefited from the
offence or some other unlawful activity. What is required is
only
that it must appear to the court, on reasonable grounds that there
might be a conviction at a confiscation order. While the
court, in
order to make that assessment, must be apprised of at least the
nature and tenor of the available evidence, and cannot
rely merely
upon the appellant’s opinion … it is nevertheless not
called upon to decide upon the veracity of the evidence.
It need ask
only whether there is evidence that might reasonably support a
conviction and a consequent confiscation order (even
if all the
evidence has not been placed before it) and whether that evidence
might reasonably be believed.” (my emphasis)
93. In my view, on that statement of the test the facts before me
justify the grant of the restraint orders, on the merits.
94. Dealing with the alleged wrongdoing by the first respondent in
seeking the orders, the explanation offered by the first respondent
is detailed. The suggested dishonest and fraudulent statements
relied upon by Schoeman are traversed in some detail in the papers.
95. A further consideration are the findings made by Steyn J. The
curator had pointed out that since August 2010 Schoeman attempted
to
dissipate assets. Steyn J found that Schoeman had failed to make a
full and frank disclosure of property that was subject to
the
restraint order. She also found that, unbeknown to the curator,
Schoeman had paid an amount of about R597 000 to one Lipman
in the
period from April to June 2009 in highly suspicious circumstances,
Schoeman had put vehicles up for sale in wilful contravention
of the
amended restraint order. She also found that the court could not rely
on information provided by Schoeman.
96. I would not have been prepared to exercise my discretion in
favour of the applicants, taking into account all of the
considerations
above.
The execution of the order
97. This brings one to the complaints made about the manner in
which the restraint order was put into effect.
98. Schoeman complains about a number of matters in this regard.
He points out that, contrary to the requirements of the order,
it was
not served by the sheriff. He asserts that an attempt was made to
procure his waiver of rights when the order was executed.
It is
pointed out that property in excess of the value prescribed by the
provisional restraint order was attached, a defect only
cured by the
later amplification of the order by Allie J. He further complains
that the assets have not been valued. Finally,
he complains that the
affidavit promised by the first respondent in respect of De Vries was
only furnished 10 months later.
99. All of these complaints are dealt with comprehensively in the
answering papers, and one of them is dealt with in the SCA judgment
in Van Staden (see judgment at [4] to [19]).
100. Whatever merit there may be in these complaints, it is clear
from the authorities that I do not have a discretion to rescind
the
orders based on them: see Phillips (1) [35]-[36] and Phillips (2) at
[21].
Variation
101. As noted above, in the alternative to the claim for
rescission, Schoeman and the other applicants seek a variation of the
various
orders as prayed in the notice of motion.
102. In argument before me Mr Stransham-Ford indicated that the
application for variation is persisted with, but no longer in
relation
to living expenses, nor in relation to future legal
expenses. The application is only sought in respect of past legal
expenses.
103. The jurisdiction to vary the order is given under section
26(10) and subsections 28(2) and (3). They have been discussed
above.
For the reasons given, I am not persuaded that I should
exercise the powers under those sections as prayed.
104. An additional consideration is that the restraint order
already caters for the possibility of the payment of legal fees.
This
is contained in paragraph 1.4.1 of the order, which mirrors
section 26(6) of POCA. They contain unobjectionable inbuilt
mechanisms
which in turn was made subject to the respondent complying
with certain pre-requisites. The effect of the variation sought in
this matter would be to permit the payment of monies without
qualification (see para 3 of the notice of motion), which would in
my
view be inappropriate.
105. A further fundamental difficulty with the application is that
it follows the preceding application dismissed by Steyn J. In
that
matter it is clear that Schoeman was given fair opportunities to
place material before her to persuade her to exercise her
discretion
to release funds. She made extensive findings adverse to Schoeman.
She refused the application. Schoeman’s
argument that Steyn J
misinterpreted the restraint order is not impressive. There was no
appeal from Steyn J’s order and
it accordingly stands.
106. Schoeman’s obvious remedy was to comply with the
requirements of the order, and to explain his prior conduct in this
matter, particularly the failure to disclose his assets and his
attempts to evade the effect of the order. The first respondent
has
pointed out that in the disclosure before me, Schoeman has made the
same disclosure as he made before Steyn J. Schoeman concedes
this in
reply. It is therefore clear that he has gone no further than the
material placed before Steyn J.
107. Insofar as the request extends to past legal expenses, these
have not been articulated before me, apart from the difficulties
mentioned above.
108. I am accordingly not satisfied that a basis for this aspect
of the relief has been made out.
Appeal
109. The last aspect of the relief sought concerns paragraph 5 of
the notice of motion, which is to the effect that I should order
that
in the event of an appeal from this judgment the payment of expenses
should be made with immediate effect. Apart from the
obvious
difficulties with this prayer in the light of what I have said above,
it would also appear to be in conflict with the provisions
of section
29A of POCA, which provides:
“Variation and rescission of certain orders suspended by
appeal - the noting of an appeal against a decision to vary or
rescind
any order referred to in sections 26(10), 28(3) and 29(7)
shall suspend such a variation or rescission pending the outcome of
the
appeal.”
110. I do not have any power to deviate from the prescripts of
section 29A.
The constitutional argument
111. As noted above, emphasis was placed by Mr Stransham-Ford on
an argument that asserted the unconstitutionality of the provisions
of POCA. By reference to statues in other countries and overseas
authority, he argued that threshold test under POCA, and as accepted
by our courts, is impermissibly light. It permits a restraint to be
placed on assets (and thus impair a respondent’s right
to
property), merely when a court considers that “there might be a
conviction and a confiscation order”. The test,
he argued,
should be a heavier one. It should require that there be grounds for
the court to find that there permissibly may be
a conviction and a
confiscation order. The introduction of the underlined words would
require proof beyond a reasonable doubt.
The current regime, he
argued, leads to a supposition of guilt on tenuous grounds which not
only infringes unconstitutionally
a respondent’s right to
property, but also infringes the right to be presumed innocent.
112. Implicit in this argument is the acceptance that higher
courts have approved the threshold test as formulated (see Kyriacou,
Rautenbach and Van Staden at [10]). I am therefore bound by those
decisions.
113. The argument before me is at best a collateral constitutional
challenge, as contemplated by Skweyiya J in Phillips (3) at [43].
This is not permissible. Before me, there is no direct challenge to
the constitutional validity of the provisions of POCA. This
was
required had it been the applicants’ intention to impugn the
provisions on this basis: see Phillips (3) at [37]-[45].
114. This this argument thus does not need to entertain me any
further.
Valuation
115. There is one last matter that has arisen.
116. Schoeman has complained that the curator has not valued the
assets as required under the POCA regulations, an allegation that
the
curator admits. Before me Mr Marcus, who represented the curator,
indicated that the curator has no difficulty with valuing
the assets.
He pointed out that this is likely to be a costly exercise, and
understands that Schoeman is reluctant to bear the
costs of such a
valuation since (on Mr Schoeman’s argument he is the victim of
his assets having been restrained improperly).
117. It is no doubt cognisant of these sorts of difficulties that
Skweyiya J in Phillips (3) said at [55]:
“A final comment should be made. Given the limited powers
of variation and rescission provided for in s 26(10) of the Act,
courts making restraint orders should take care to ensure that their
terms are sufficiently flexible to ensure that the preservation
of
property subject to restraint orders is not imperilled by the terms
of the restraint order. The NDPP, too, in formulating draft
orders
should bear these considerations in mind.”
118. Although referring to the preservation of assets, those
comments are equally apposite to discharge of duties under the POCA
regulations.
119. Mr Budlender accepted that the assets should be valued, but
submitted that the costs should be paid by the second respondent,
out
of his fees. Unfortunately this point was raised belatedly in the
matter, and no prayer for relief was sought based on it.
Mr Marcus
was also not present when the matter was argued on 23 June. In the
circumstances I do not consider that I should intervene
to grant an
order in this regard.
Costs
120. There is no reason for costs not to follow the result. This
matter is substantial, and the costs of two counsel have been
justified.
121. The matter is unusual in a number of respects. As indicated
above, Schoeman has set about making extensive allegations of fraud
and dishonesty against public officials. These officials, I am
satisfied, sought to discharge their public duties. I found that
the
allegations of fraud and dishonesty are unjustified. I have not lost
sight of the fact Schoeman was perhaps buoyed by the
judgment of
Blignault J in Van Staden in the court a quo, where Blignault J
accepted that the first respondent had acted improperly
in seeking
the restraint order. However, prior to the launch of this
application on 7 May 2013, the SCA judgment in Van Staden
was handed
down. It is not apparent from the papers before me that any
cognisable effort was made to take into account what the
SCA found,
when reversing Blignault J’s judgment.
122. Schoeman must have appreciated that in a case of this nature
the stakes are raised, at his instance. Having cast his bread
on the
water by making repeated allegations of fraud and dishonesty, he must
bear the consequences. While I appreciate that in
Phillips (1) Howie
J was “only just” minded not to make a punitive costs
order (see the judgment at [45]), the conduct
of Schoeman in this
case in my view merits such an order. The allegations have been
extensive, and there was no apparent attempt
made to temper the
allegations given the finding of the SCA in Van Staden.
123. There one further aspect of the matter. Although in his main
argument Mr Stransham-Ford withdrew allegations made by him against
the first respondent’s counsel, in his heads filed in reply he
stated this:
“4.6. Mr Schoeman’s case for rescission is based on
malfeasance and dishonesty in the representations made to the ex
parte Judge as well as the conduct before, during and after restraint
and seizure.
4.7. ...
4.8. There was an admitted failure of the ex parte judge to
interrogate the propositions put by the Applicant or his counsel.
4.9. There was an admitted failure by counsel in the ex parte
application to make full disclosure and properly represent the
interest
of the defendant as he was bound to do.
4.10. In the result the order sought was rubberstamped.” (my
emphasis)
If the words underlined were intended to refer to the first
respondent’s counsel, the submissions were inappropriate. No
such
case was advanced in the papers.
124. In the circumstances, I make the following order:
The application is dismissed with costs on the scale as between
attorney and client, such costs to be payable by the applicants
jointly and severally, and to include the costs of two counsel, and
are further to include all costs reserved by previous orders
in this
matter.
BUTLER, AJ
Appearances:
For the applicants: Adv. R J Stransham-Ford
Instructed by: Willem Jacobs & Associates
For the first respondent: Adv. G Budlender SC & Adv. K
Saller
Instructed by: The State Attorney
For the second respondent: Mr R Marcus, Cliffe Dekker Hofmeyr