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131.7 There was nothing disproportionate in the Appellants being ordered to pay to the State both the value of the shares (the first benefit) and the value of the dividends used to pay for the same shares (the second benefit). Both constitute direct benefits of the corruption under count 1, and there was no reason for interfering with Justice Squires’ order in this regard.120
E. APPLICABLE LEGAL PRINCIPLES: GENERAL OVERVIEW
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“ 18. Confiscation orders –
(1) Whenever a defendant is convicted of an offence the court convicting the defendant may, on the application of the public prosecutor, enquire into any benefit which the defendant may have received from -
(a) that offence;
(b) any other offence of which the defendant has been convicted at the same trial; and
(c) any criminal activity which the court finds to be sufficiently related to those offences,
and, if the court finds that the defendant has so
benefited, the court may, in addition to any punishment which it may impose in respect of the offence, make an order against the defendant for the payment to the State of any amount it considers appropriate and the Court may make any further orders as it may deem fit to ensure the effectiveness and fairness of that order.”
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134. In an application for a confiscation order, the NDPP bears the onus of establishing the requirements of Section 18 (1), on the civil standard121 and the provisions of POCA must be restrictively interpreted.122
135. The objective of chapter 5 of POCA in general and a confiscation order in particular is not to punish the defendant for his crime, but rather to deprive him of the benefits he has derived from his criminal conduct.123 The objective of POCA and the making of a confiscation order is not to enrich the State.124
136. Although the objective is to deprive the defendant of “ill-gotten gains,” the confiscation order is not an order for the confiscation of the actual benefit, but rather a civil judgment for the payment of an amount of money
determined by the Court.
121 cf Mohunram v NDPP 2007 (4) SA 222 (CC).
122 NDPP v Cook 2004 (2) SACR 208 (SCA) at paras 15-18.
123 Preamble to POCA; NDPP v Rebuzzi 2002 (2) SA 1 SCA at para 2;
NDPP v Phillips & Others 2002 (4) SA 60 (W) at para 42.
124 NDPP v Rebuzzi (supra) at para 19.
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Benefit
137. The Court to which an application for a confiscation order is made is required to determine whether the Defendant has “derived” any “benefit”
from the offence of which the Defendant was convicted, any other offence or from any criminal activity sufficiently related to such offences.
138. The word benefit is not defined, though Section 12 (3) provides that, for the purposes of chapter 5, a person has benefited from unlawful activities if he or she has, at any time, received or retained any “proceeds of unlawful activities.”
139. The words “proceeds of unlawful activity” are defined as follows:
“proceeds of unlawful activities” means any property or any service, advantage, benefit or reward which was derived, received or retained, directly or indirectly, in the Republic or elsewhere, at any time before or after the commencement of this Act, in
connection with or as a result of any unlawful activity carried on by any person, and includes any property representing property so derived.”
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140. “Unlawful activity” is in turn defined to mean any conduct which constitutes a crime or which contravenes any law, whether such conduct occurred before or after the commencement of POCA, and whether such conduct occurred in the Republic of elsewhere. The words “unlawful activity”
therefore mean a crime committed at any time or place.
141. The requirement that a person must have “benefited,” and the fact that such benefit could result in a confiscation order against the defendant, necessarily connotes that some tangible, economic advantage must have been acquired by the defendant.
142. The fact that Section 18 requires the defendant to have benefited, and that a benefit necessarily connotes an economic gain, must necessarily mean that the benefit is a reference to the nett gain derived as a consequence of the offence or related criminal activity. The purpose of POCA is to deprive the defendant of the proceeds of crime and that must mean the benefit that the defendant actually derived from the offence or related criminal activity. The confiscation of gross proceeds is entirely inconsistent with the notion of a “benefit” and a confiscation order can only be made in respect of the actual “benefit”.
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Causation
143. In ordinary civil proceedings, such as those in delict, causation involves two enquiries:
143.1 The first is that of factual causation, which applies the “but for”
test to determine whether the postulated cause can be identified as the causa sine qua non of the event in question. If it is shown that an event would not have ensued but for some act, then that act would qualify as the causa sine qua non of the event in question.
143.2 The second is that of legal causation, which requires consideration of the link between the postulated cause and event, such as whether the event is too remote from the postulated cause.125
125 See, for example, International Shipping Co (Pty) Ltd v Bentley 1990 (1) SA 680 (A) at 700 E.
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144. Section 18 (1) of POCA requires the benefit to have been “derived from”
the offence or related criminal activity. This therefore requires a causal nexus between the offence and the benefit. Furthermore, the fact that the benefit must be “derived from” the offence (or related criminal activity) necessarily connotes that the offence or related criminal activity must be the substantial cause of the benefit, such that there are no other facts or events that either preceded or antedated the offence which on their own have been the substantial cause.
145. Section 18 (1) (a) then requires the Defendant to have derived the benefit from the offence of which he or she was convicted. In other words, for the purpose of Section 18 (1) (a), the State must establish a substantial causal link between the offence and the benefit.
146. Section 18 (1) (c) requires that the benefit must be derived from “any criminal activity which the Court finds to be sufficiently related to those offences.” What the State must therefore establish is the existence of other criminal activity, that is other crimes, which in turn must have a tangible causal relationship with the offences.
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Related criminal activity
147. Section 18 (1) (c) introduces two concepts which are not defined in POCA, namely, that of “criminal activity” and that of “sufficiently related.”
148. The words “any criminal activity” are clearly wider than the word “offence.”
The word “criminal” clearly connotes an offence, and the word “activity” is suggestive of a persistent course of conduct as opposed to a single act.
Accordingly, the words “any criminal activity” can only be interpreted to mean the continuous and persistent commission of multiple offences by the defendant concerned.
149. The criminal activity must then be “sufficiently related” to the offences of which the defendant was convicted. What one then has is the following:
149.1 There is a clear distinction between the related criminal activity and the offence.
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149.2 The State must establish that the defendant has committed other crimes, persistently and continuously, which have a rational connection to the offence.
149.3 That connection must in turn be “sufficient,” that is,
“adequate to satisfy an argument, situation, adequate for a certain purpose.”126
Discretion and the value of a benefit
150. Section 18 (1) affords the Court a wide discretion in determining an application for a confiscation order. Amongst other things, the Court:
150.1 May, in its discretion, decide whether or not to grant a confiscation order.
150.2 If so minded, determine the amount it considers appropriate and make any further orders to ensure the effectiveness and fairness of the confiscation order.
126 The New Shorter Oxford Dictionary meaning of “sufficient.”
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151. That discretion must, no doubt, be exercised judicially and having regard particularly to the defendant’s constitutional rights.
152. The calculation of the value of benefit will necessarily involve an accounting exercise.127
153. If the Court is satisfied that the requirements of Section 18 (1) have been established, then it may make a confiscation order in an amount it
considers appropriate. Section 18 (2), however, limits the amount in respect of which the Court may make a confiscation order. It provides as follows:
“ (2) The amount which a court may order the defendant to pay to the State under subsection (1) –
(a) shall not exceed the value of the defendant’s proceeds of the offences or related criminal activities referred to in that subsection, as determined by the court in accordance with the provision of this Chapter; or
127 NDPP v Rautenbach 2005 (4) SA 603 (SCA) at para 61.
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(b) If the court is satisfied that the amount which might be realised as contemplated in Section 20 (1) is less than the value referred to in paragraph (a), shall not exceed an amount which in the opinion of the Court might be so realised.”
154. Accordingly, the confiscation amount may not exceed the lesser of the value of the benefit the convicted person derived from the offence (or related criminal activity) or the amount which may be realised. In the present matter, the realisation amount is not relevant and therefore the confiscation amount could not exceed the value of the proceeds of the offence or related criminal activity.
155. Section 19 defines the value of the proceeds of unlawful activities. It provides as follows:
“ 19. Value of proceeds of unlawful activities –
(1) Subject to the provisions of subsection (2), the value of a defendant’s proceeds of unlawful activities shall be the sum of the values of the property, services, advantages, benefits or rewards received, retained or derived by him or her at any time, whether before or after the commencement of this Act, in connection with the unlawful activity carried on by him or her or any other person.”
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156. Section 19 (2) deals with where a forfeiture order or confiscation order had previously been made, and therefore finds no application in the present matter.
157. Section 15 (1) deals with the value of property and provides that, for the purposes of chapter 5, the value of property, other than money, in relation to any person holding the property shall be the market value of the
property where it is not encumbered.
158. Section 15 (1) makes it clear that the value of property is the market value of the property concerned. The market value could obviously exceed or be lower than the gross value of the property to the defendant, which
suggests that POCA is not fixated on the gross value of the benefit, as the NDPP seems to suggest.
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159. More fundamentally perhaps, Section 15 (1) deals only with the value of property. A benefit liable to confiscation, however, includes all proceeds of unlawful activities, which in turn is defined to mean “any property or any service, advantages, benefit or reward.”
160. Section 15 (2) relates to the valuation of “a payment or reward.” The relevant part of the section provides that any reference in chapter 5 to the value at a particular time of a payment or reward, shall be construed as a reference to the value of the payment or reward at the time when the recipient received it, as adjusted to take into account subsequent
fluctuations in the value of money. Quite evidently, a payment or reward can only constitute a “benefit” to the extent that it is nett of all of the costs attendant upon acquiring it.
161. Furthermore, Section 15 (2) values the payment or reward at the date that the recipient received it, though requires an adjustment to account for the fluctuations in the value of money. This section too is not concerned with the gross value of the payment and reward and in fact contemplates the value being adjusted to lower than the value at the time of its receipt.
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162. Section 15 (3) distinguishes between “the property” i.e, the actual proceeds, and “property which directly or indirectly represents in his hands…. the property which he …. received” in sub-sections (a) and (b) respectively. In the case of the former, the value is its value at the time the confiscation is applied for, and in the latter the value of the “substitute”
property when the order is applied for.
Proportionality
163. This Court has described the purpose of POCA in the following terms:
“ [14] The Act’s overall purpose can be gathered from its long title and preamble and summarised as follows: The rapid growth of organised crime, money laundering, criminal gang activities and racketeering threatens the rights of all in the Republic, presents a danger to public order, safety and stability, and threatens economic stability. This is also a serious
international problem and has been identified as an international security threat. South African common and statutory law fail to deal adequately with this problem because of its rapid escalation and because it is often impossible to bring the leaders of organised crime to book, in view of the fact that they invariably ensure that they are far removed from the overt criminal activity involved. The
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law has also failed to keep pace with international measures aimed at dealing effectively with organised crime, money laundering and criminal gang activities. Hence the need for the measures embodied in the Act.
[15] It is common cause that conventional criminal penalties are inadequate as the measures of deterrence when organised crime leaders are able to retain the considerable gains derived from organised crime, even on those occasions when they are brought to justice. The above problems make a severe impact on the young South African democracy, where resources are strained to meet urgent and extensive human needs. Various international instruments deal with the problem of international crime in
this regard and it is now widely accepted in the
international community that criminals should be stripped of the proceeds of their crimes, the purpose being to remove the incentive for crime, not to punish them. This approach has similarly been adopted by our Legislature.”128 [Footnotes omitted].
164. As with all legislation, POCA is required to be interpreted through the prism of the Constitution.129
128 NDPP v Mohamed NO 2002 (4) SA 843 (CC) at paras 14-15.
129 The Investigating Directorate: Serious Economic Offences & Others v Hyundai Motor Distributors (Pty) Ltd 2001 (1) SA 545 (CC) at para [21] – [22].
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165. Section 18 (1) affords the Court a wide discretion in determining whether or not to grant a confiscation order and, if so minded, an equally wide discretion in determining the confiscation amount.
166. The application of the provisions of POCA in general, and the grant of a confiscation order in particular, have the potential to limit the rights protected in the Bill of Rights. The safeguard that the Courts have
introduced in the application of the provisions of POCA to avoid a violation of constitutional rights is the principle of proportionality.
167. Proportionality has featured fairly extensively in those cases involving civil forfeiture. There is no reason in law or logic as to why the same principles should be excluded from the application of the provisions of POCA relating to criminal forfeiture under chapter 5.
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168. Although the concept of proportionality is not expressly mentioned in POCA, the Constitutional Court and the Supreme Court of Appeal have accepted that proportionality is a governing principle imposing limits on how the powers granted under POCA may be exercised.130
169. In Mohunram, Sachs J, in a minority judgment, said the following in regard to proportionality within the context of civil forfeiture:
169.1 The fact that civil forfeiture may be constitutional, did not necessarily mean that it was constitutionally permissible, as it could amount to an arbitrary deprivation of property and violate Section 25 of the Constitution.131
130 Prophet v NDPP 2007 (2) BCLR 140 (CC) at para 58;
Mohunram v NDPP (supra);
NDPP v April [2007] 4 All 1183 (C) at para 37
131 At para 141.
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169.2 Facts which may be advanced by a defendant unsuccessfully in opposition to a forfeiture order might be highly relevant in relation to whether or not the deprivation of its property was arbitrary and it is in this setting that the principle of
proportionality becomes all important.132
169.3 By its nature, the proportionality principle requires decisions that are high contextualised and strongly congruent with the
constitutional and other public interests at stake.133
169.4 In considering the question of proportionality, it is necessary to weigh up the purpose of the legislation against the effect of the forfeiture on an affected person.134
132 At para 141.
133 At para 142.
134 At para 143.
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169.5 The purpose of POCA is predominantly deterrent and the closer one gets to the prevention of organised crime, which is the primary rationale underlying POCA, the greater the importance of the purpose becomes.135
169.6 The closer the criminal activities are to the primary objectives of POCA, the more readily should a Court grant a forfeiture order.
Conversely, the more remote the activities are from these objectives, the more compelling must the circumstances be to make such order appropriate.136
169.7 Any determination of proportionality should take into account the extent to which the criminal remedies provided for in the
common law and statutes prove (or threaten to be) inadequate in the circumstances.137
135 At para 144.
136 At para 145.
137 At para 145.
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169.8 The primary purpose of POCA in relation to the instrumentality of an offence is to deter people from using property for crime.
However, that purpose cannot justify the forfeiture of every instrumentality of an offence.138
169.9 Deterrence as a law enforcement objective is constrained by the principle that individuals may not be used in an instrumental manner as examples to others if the deterrence is set at levels beyond what is fair and just to those
individuals. To do otherwise would be to breach the
constitutional principle of dignity.139 In each case, therefore, care needs to be taken to ensure that the purpose of deterrence that the legislation serves does not produce a disproportionate impact on the owner of the forfeited property. It is for this reason that the deterrence purpose of the legislation must be weighed against the effect on the individual owner, in the light of the relevant offence.140
138 At para 146.
139 At para 146.
140 At para 146.
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169.10 POCA was not adopted with a view to providing either a
substitute for or a “top up” of ordinary forms of law enforcement.
It has its own rationale and objectives, which must be jealously guarded.141
169.11If the law provides appropriate ordinary criminal penalties, the use of POCA could result in disproportionality.142
170. In the same case, Moseneke DCJ, also in a minority judgment, said the following in regard to proportionality within the context of civil forfeiture:
170.1 Forfeiture must be weighed against the purpose that it serves and, in order to arrive at an appropriate answer, one has to determine whether the property is closely associated with the commission of the crime, whether the forfeiture will prevent further wrongdoing, the nature and use of the property and the effect of the forfeiture on the owner of the property.143
141 At para 152.
142 At para 154.
143 At para 123.
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170.2 If the forfeiture sought by the State occurs within the context of POCA, additional and countervailing considerations come into the proportionality analysis. The nature of the crime must be probed keeping in mind the predominant purpose of POCA. The forfeiture must advance the purpose that POCA proclaims in order to be proportionate.144
170.3 In deciding whether or not the forfeiture of property would be proportionate, the question whether the instrumentality of the offence is sufficiently connected to the main purpose of POCA, which is to combat organised crime, must be considered.
170.4 The more remote the offence in issue is to the primary purpose of POCA, the more likely it is that forfeiture is
disproportionate.145
144 At para 124.
145 At para 126.