Prior agreement and the question of onus
187. The Appellants argued before the DCLD and the SCA, as they do before this Court, that prior to any of Zuma’s alleged “interventions” an agreement had already existed in terms of which Nkobi Investments would be a joint venture partner with Thomson (France), and the ADS shares would be acquired by Thomson (Pty), inter alia, for the purpose of affording Nkobi Investments an interest therein. The Appellants therefore derived no
“benefit” from Zuma’s “interventions.”
188. Both the DCLD and the SCA rejected this argument on the basis that the Appellants had failed to prove that they possessed any enforceable contractual rights to the shares (and, by extension, the dividends). The SCA went further to hold that even if the Appellants enjoyed pre-existing contractual rights to the shares, Zuma’s interventions yet had the direct effect of benefiting the Appellants.162
162 Judgment of the SCA, at para 2, Volume 26, page 2477.
_______________________________________________________________________________
189. We respectfully submit that the reasoning of the SCA is flawed both as matters of law and fact.
190. In concluding that the Appellants “did not prove” that they enjoyed any contractual rights, the SCA (and also the DCLD) effectively saddled the Appellants with the onus of proof on an issue that it was necessary for the NDPP to prove, since the existence or non-existence of the agreement went to the requirements for granting a confiscation order. This constituted a material misdirection on the law as this Court has held that it is the State (the NDPP) that bears the onus of proof in proceedings under POCA.163
191. Accordingly, both the DCLD and the SCA misplaced the onus in dealing with the Appellants’ assertion of a binding agreement. The onus was on the NDPP to prove that there was no valid agreement and that the benefits were not derived from legitimate endeavours.
163 Mohunram v NDPP (supra) at paras 75, 130 and 139.
_______________________________________________________________________________
192. In the papers filed on behalf of the NDPP in the confiscation proceedings before the DCLD, the NDPP advanced no evidence to refute the evidence led by the Appellants regarding a prior existing agreement and sought to argue on the Appellants’ version that they (the Appellants) did not
discharge the onus.
193. More fundamentally, both Shaik and Moynot testified in regard to the prior agreement at the criminal proceedings and their evidence in this regard was not at any level challenged by the prosecution under cross-
examination or through the introduction of any countervailing evidence on behalf of the State.
194. The State in fact did not challenge Shaik and Moynot on this when it cross-examined them. We have identified various examples of this in the previous section, though at this point draw attention only to the following:
_______________________________________________________________________________
“MR DOWNER And that takes the agreement between you and – and Thomson’s further. Just refer to that document, 10th of August 1995 at AAA.1 and 2 and that is basically laying the foundation of your agreement with Thomson’s about working with Thomson’s - - - Yes, M’Lord.”164
“MR DOWNER And then I’m referring you to paragraph 5.3.1 at 040028. In 5.3.1, in terms of that paragraph, you stated that a detailed written proposal to Altech should reach you by the end of this week from Paris and you undertook to provide a copy to Mr Shaik and then Mr Shaik and Mr Ramsumer said that Nkobi should be involved - - - should be part of the decision-making process. - - - Yes.
And so that was also a further indication that Nkobi was coming in with Thomson in relation to the ADS deal. - - - Yes. I always said that.”165
“MR DOWNER And this - in this letter to Mr Shaik you said that you were glad to announce that the principal agreement had been reached with Altech with regard to the sale of 50 percent of the ADS business to Thomson … [intervention] - - - Yes.
(Pty) Ltd.
- -
164 Record, page 1636, lines 18-22.
165 Record, page 6042, lines 13-21.
_______________________________________________________________________________
- - - Yes. And so the letter goes on. So this once again - included Nkobi at this date of September 1997- - - Yes.”166
195. In addition, both Shaik and Moynot, representing Nkobi and Thomson respectively, themselves accepted in their evidence that a valid agreement had been in place, that Thomson deliberately breached that agreement and that Nkobi had a valid claim against Thomson arising from that breach. We have earlier identified various portions of the record which substantiate this, and at this point simply repeat Moynot’s evidence under cross-examination:
“MR DOWNER Yes. But would – ja, so you would have resisted it. Did you think you were bound by the references to the fact that Nkobi should be consulted before ADS was acquired? - - - Yes, that is exactly the basis of the claim by Mr Shaik ….
[intervention].
Yes, but did …[intervention] - - - because we didn’t do it.
166 Volume 23, page 2099, lines 1 – 7.
_______________________________________________________________________________
… Yes, but did you think it was correct? Was his claim correct or was it not correct? - - - Well, normally his claim is correct or was correct, but because of the circumstances that were around these acquisitions, we thought that we’d better do it on our own and try to settle later on.”167 (our emphasis)
196. Inasmuch as both Shaik and Moynot accepted that there was an
enforceable and binding agreement in place between the parties, it was clearly incorrect for the lower Courts to have found that the Appellants did not prove such an agreement. But, in any event, the onus was not on the Appellants. We therefore respectfully submit that the NDPP failed to discharge the onus of establishing that the benefits were not derived from a pre-existing agreement or other legitimate endeavours on the part of Shaik and Nkobi. On this basis alone, the appeal against the first and second benefits must prevail.
167 Volume 22, page 2090 (line 13) – 2092 (line 11); Record, pages 6034 (line 13 onwards) – 6036 (up to line 11).
_______________________________________________________________________________
197. In any event, we point out that the undisputed evidence before the lower Courts plainly establishes a pre-existing agreement and that there is simply no other plausible conclusion that may be drawn in the circumstances. We have set out the evidence in some detail in the previous section, though in this context draw attention to the following matters:
197.1 Since early 1995, Shaik and Moynot held discussions in regard to the acquisition of ADS.
197.2 Moynot’s letters to Shaik of 6 August 1995 confirm an
agreement in principle and requested the meeting in Paris to finalise the agreement.
197.3 The meeting in Paris was in fact held with Perrier.
197.4 At that meeting, agreement was reached on a joint venture, and the agreement thereafter finalised.
197.5 Following on that meeting, Perrier directed a letter to Shaik in which he confirmed the prior discussions and the broad terms of the joint venture.
_______________________________________________________________________________
197.6 Perrier requested Shaik to sign the letter in approval of its content, which Shaik did.
197.7 The companies Thomson (Holding) and Thomson (Pty) were formed as a direct consequence of the agreement.
197.8 Nkobi Investments thereafter acquired shares in both Thomson (Holding) and Thomson (Pty). This could only have been pursuant to the agreement.
197.9 Separate shareholders’ agreements were concluded in respect of both Thomson (Holding) and Thomson (Pty). These
agreements recorded, inter alia, that Thomson (France) wished to expand its activities in joint ventures with South African partners through Thomson (Pty). This is a clear confirmation of the prior agreement.
197.10 The joint venture agreement was initiated through the Prodiba project, which Moynot confirmed that Nkobi and Thomsons were
“partners” in.
_______________________________________________________________________________
197.11 At the meeting of 22 November 1996, the acquisition of ADS by Thomson (Pty) was expressly discussed, which is entirely consistent with the prior agreement.
197.12 At the same meeting, Shaik recorded that, since Nkobi had led the acquisition of UEC, Nkobi must be kept informed at all times and consulted prior to any approach to ADS. This was not disputed by any of the other directors and they in fact agreed to this.
197.13 At the meeting of 25 August 1997, the directors and
shareholders of Thomson (Holding) and Thomson (Pty) agreed that Nkobi should be part of the decision making process in regard to the ADS acquisition, even though Nkobi was not as technologically advanced as Thomson.
197.14 At the same meeting, it was resolved that Thomson (Pty) would proceed with the acquisition of ADS, subject, inter alia to the consent of Nkobi. Both Shaik and Moynot testified to the effect that the effect of these events was that ADS would be acquired by Thomson (Pty) and that Nkobi would therefore acquire an interest in ADS.
_______________________________________________________________________________
197.15 In his letter of 22 September 1997, Moynot, acting on behalf of Thomson (Pty), advised Shaik that an agreement had been reached between Thomson (Pty) and Altech in regard to Thomson (Pty)’s acquisition of 50% of the ADS business. Both Shaik and Moynot testified that this amounted to an agreement that the ADS shares would be acquired by Thomson (Pty) and that Nkobi would, through its shareholding in Thomson (Pty), acquire an interest in ADS.
197.16 At the meeting of 9 June 1998, Shaik recorded Nkobi’s position and that the direct acquisition of the ADS shares by Thomson (France) amounted to a breach of the prior agreement. This was not disputed by Thomson’s representative, Thetard.
197.17 In his evidence, Shaik confirmed that notwithstanding the fact that the shareholders’ agreements contained an arbitration clause directing the arbitration to take place in Geneva, he would have instituted legal action to enforce the agreement.
_______________________________________________________________________________
197.18 Moynot, in his evidence, confirmed that Shaik had a valid claim and that Thomson had deliberately breached the agreement with the intention of settling the dispute at a later stage.
197.19 The Frame Agreement concluded between the parties contained a clause to the effect that Nkobi would waive any action, claim or demand which it had against Thomson (France), Thomson (Pty), Altech or Thomson (Holding), any of their affiliates, directors and employees, relating to the direct acquisition of the ADS shares by Thomson (France) instead of Thomson (Holding) or Thomson (Pty). There would have been for this clause had there been no prior agreement.
198. We respectfully submit that the aforesaid evidence is overwhelming and entirely consistent with a pre-existing agreement between the parties.
There would clearly have been no purpose for any of the aforesaid actions or events unless Nkobi and Thomson had concluded the agreement for which the Appellants contend. This Court must consequently accept that there was an enforceable contract prior to any of the interventions relied upon by the NDPP and the appeal must therefore succeed.
_______________________________________________________________________________
The POCA Issues
The central features of the scheme to Chapter 5
199. The SCA described POCA as having as its object “to deprive the convicted person of ill-gotten gains”.168
200. In a later judgment it described the benefit as follows:
“Such an order is directed at confiscating the benefit that accrued to the offender whether or not the offender is still in possession of the particular proceeds. Once it is shown that a material benefit accrued, the offender may be ordered to pay to the State the monetary equivalent of that benefit even if that means that it must be paid from assets that were legitimately
acquired.”169
201. Section 18 of POCA refers to “any benefit which the defendant may have derived from (a) that offence” and certain other offences.
168 National Director of Public Prosecutions v Rebuzzi (supra) at para 19.
169 National Director of Public Prosecutions v Rautenbach (supra) at para 52.
_______________________________________________________________________________
202. An unlawful activity is central to the definition of “proceeds of unlawful activities” and to Chapter 5. Without it one does not even need go any further in the enquiry. Whatever the form of the subject matter of the disputed claim, in the absence of an unlawful activity the claim will fail at this hurdle. This is the first jurisdictional issue.
203. It is also the necessary starting point in an enquiry of this nature to first examine what is the unlawful activity, as all else that follows must be related to the unlawful activity. The relationship that the definition of
“proceeds of unlawful activities” seeks to make between the unlawful activity and the subject matter of the dispute, is that it must be something that is connected with or arises as a result of the unlawful activity.
204. Section 18 requires that relationship to exist at least between one of three different categories of unlawful activity and the subject matter of the dispute. The first is the offence that the defendant is convicted of, the second is other offences that the defendant is convicted of in the same trial and the third is any criminal activity that is sufficiently related to those offences. If this relationship is absent then the claim will fail
notwithstanding the unlawful activity because the subject
_______________________________________________________________________________
matter of the claim does not have the defined relationship with the unlawful activity. This is dealt with later herein as the nexus required between the benefit and the crime. This is the second jurisdictional issue.170
205. The definitions of “proceeds of unlawful activities” and “property” are extremely wide and cover a wide ranging ambit of what would fall within those terms. However in section 18 (1) neither of those terms are used, instead it refers to “benefit”. A benefit is included within the definition of
“proceeds of unlawful activities”. Section 12 (3) attempts to make the meaning of benefit synonymous with the meaning of “proceeds of unlawful activities” for the purposes of Chapter 5. Benefit cannot however be
equated with “proceeds of unlawful activities” because proceeds relates to any unlawful activity whilst section 18 (1) requires a defined relationship to at least one of three specific categories of offences.
170 NDPP v Kyriacou 2004 (1) SA 379 (SCA) at para 11.
_______________________________________________________________________________
206. Although the definition of “proceeds of unlawful activities” is extremely wide, for the purposes of Chapter 5, the actual proceeds itself is not subjected to confiscation. A number of inter-related provisions have to be considered and applied to arrive at a judgment expressed in money that represents the “value of the proceeds of unlawful activities”, a phrase that is defined in section 19. This is dealt with more fully later herein when dealing with the determination of the value of the benefit.
207. There are at least three parts to an enquiry under section 18 (1). The first is concerned with the issue whether there is the defined nexus between the alleged benefit and at least one of the three categories of offences.
The second is concerned with the determination of the value of the benefit.
The third relates to the proportionately of the confiscation order.
208. We propose to deal with each of these in that order.
_______________________________________________________________________________
The nexus required between the benefit and the crime
209. The SCA in Cook applied the rule of interpretation mandated in the Constitution that the Act must be construed consistently with the Constitution. Applying that rule of construction it adopted a restrictive interpretation of the words “instrumentality of an offence” and its definition.
It concluded that a wide interpretation will result in a violation of the rights in section 25 (1) of the Constitution by leading to the arbitrary deprivation of property.171
210. It is respectfully submitted that a similar approach is required when considering whether a benefit has been derived.
211. The nexus that must exist between the benefit and the offence must be a substantial one, and not just an ancillary connection or some allied interest. A benefit attributable to causes unrelated to the offence is not derived from the offence. A restrictive interpretation is necessary to avoid oppressive and unjust results that would arise from a literal interpretation.
171 NDPP v Cook (supra) at para 15- 18.
_______________________________________________________________________________
212. It is submitted that the SCA’s conclusion that the connection between the proceeds and the crime need not be direct, is obiter, in the light of its conclusion that Zuma’s interventions had the direct effect of bringing about the Appellants interests in ADS.172 We have dealt above with the relevant factual background to the acquisition of the shares, and submit that this direct effect was not present. We elaborate later herein on this aspect.
213. If a “but for” test would suffice the consequences would be most unjust. A person who submits fraudulent documents to obtain employment is liable to a confiscation order for the full amount he received by way of salary over the years of his employment. We
believe that the NDPP or DPP in KwaZulu-Natal applied for a confiscation order where similar facts were present and the case was dismissed according to a press report, but the judgment is unreported and we do not have a copy.
172 Vol 26, page 2488, para 27.
_______________________________________________________________________________
214. Squires J accepted that the offence committed must be the effective cause of the benefit.173 He however adopted a test of pure causation disaffected by any other considerations.
215. The nature of the nexus that has been required in the US has varied from a substantial connection between the property and the offence and a nexus that is more then incidental or fortuitous.174 This has been described as an instrumentality standard. Many courts in the US have subsumed this enquiry with the proportionality issue required by the Eighth Amendment that involves other factors –
“Others include balancing the crime committed against the nature and value of the property sought to be forfeited, analysing the difference between the value of the instrumentality sought to be forfeited and the amount needed to
‘effectuate the legitimate remedial purposes of the forfeiture’, and assessing the personal benefit reaped by the defendant, the defendant’s motive and culpability, and the extent that the defendant’s interest and the enterprise itself are tainted by criminal conduct.”175
173 Vol 7, page 658, 1 – 7
174 Kessler, Civil and Criminal Forfeiture, Vol 1, pg 2A-19 to 2A-47
175 Kessler (supra) at pg 2A-20; Prophet v NDPP 2006 (1) SA 38 (SCA) at para 12 - 14.
_______________________________________________________________________________
216. We have dealt above with the antecedent agreement that existed before the two interventions, and that the Third Appellant had a contractual right to acquire an interest in ADS before the interventions. The interventions only served to induce Thomson to withdraw its repudiation, something it was not lawfully entitled to do in any event, therefore the interventions were not what gave rise to the entitlement to its indirect interest. The substantial connection between the interventions and the interest in ADS was therefore not proved by the NDPP.
217. The First Appellant’s intention in seeking the assistance of Zuma was not to acquire an entitlement to an interest in ADS. The entitlement already existed in terms of the antecedent agreement. The claim to this interest was therefore not linked to the First Appellant’s corrupt intention, as he had maintained before the interventions that he had a binding agreement with Thomson and the acquisition of the right to the interest in ADS was not the object of seeking the assistance of Zuma.
_______________________________________________________________________________
218. Simply at the level of causation the two interventions were not the
overriding and substantial cause of the Third Appellant’s indirect rights in the ADS acquisition. There was no cause and effect between the
interventions and the rights.
219. We deal with the issues that pertain to the issue of proportionality later herein.
The determination of the value of the benefit
220. This issue arises if the Court concludes that there is a sufficient nexus between the offence of corruption committed by the Defendants and the interest in ADS.
221. Section 19 (1) states: