CONSTITUTIONAL COURT OF SOUTH AFRICA
Case CCT 280/2018 In the matter between:
The National Director of Public Prosecutions APPLICANT
And
Gesiena Maria Botha N.O. FIRST RESPONDENT
Angelique Botha N.O. SECOND RESPONDENT
In re: Erf 3432 Kimberley also known as 12 Jawno Street, Kimberley
APPLICANT’S HEADS OF ARGUMENT
INTRODUCTION
1 The Honourable Court issued a directive dated 27 March 2019 for written submissions to be submitted on:
1.1 Whether a proportionality enquiry (analysis) applies to forfeiture of proceeds of unlawful activities (proceeds) under section 50 of the Prevention of Organised Crime Act 121 of 1998 (POCA);
1.2 The approach to whether property subject to a preservation order should be forfeited under section 50(1)(b) of POCA; and
1.3 Whether any payments made by the late Ms Yolanda Rachel Botha (the corruptee) under the ostensible loan agreement (the
‘loan’) should be considered in determining the proceeds to be forfeited under section 50 of POCA, and if so, on what basis.
2 Below, the Applicant’s submissions are set out.
BACKGROUND
3 On 11 October 2018, the Supreme Court of Appeal (SCA) delivered a not reportable judgment1 to the effect that:
3.1 The most plausible and readily apparent inference to be drawn from the facts, in particular the corruptee’s conduct in favouring Trifecta Group of Companies (the corruptor), is that the renovations worth R1 169 069.49 to her property situated at Erf 3432 Kimberley also known as 12 Jawno Street, Kimberley (the property) constituted gratification for her role in ensuring that the leases were awarded to the corruptor;2
3.2 The Court a quo3 was correct in finding that the costs of the renovations to the property, which were hidden in the corruptor’s books were proceeds i.e. of corruption and money laundering;4 3.3 There was no loan agreement entered into between the corruptee
and the corruptor;5
3.4 The Applicant sought forfeiture for R1 169 069.49;6
1 Gesiena Maria Botha N.O. & another v the NDPP (920/2017) [2018] ZASCA 146 (11 October 2018).
2 At par 38.
3 See Judgment attached.
4 At par 39.
5 At par 44.
3.5 The corruptee paid R411 054.66 to the corruptor as part of the costs expended on the renovations;7 and
3.6 Relying of the proportionality analysis, the R411 054.66 has to be deducted from R1 169 069.49.
LEGAL FRAMEWORK MATRIX
4 South African Courts are enjoined by section 39(2) of the Constitution to:
4.1
Interpret any legislation (such as POCA) in a manner that promotes the spirit, purport and objects of the Bill of Rights; and4.2
Ensure that its provisions are constitutionally justifiable.5 Section 25 of the Constitution is prohibits arbitrary deprivation of property.
6 It is submitted that the word ‘property’ in section 25 of the Constitution does not include proceeds. Once property is found to be proceeds, it always remain proceeds until it is forfeited or confiscated.
7 Deprivation of property is arbitrary when the statute in question does not provide sufficient reason for it or is procedurally unfair.
8 Chapter 6 of POCA targets the recovery of proceeds, where the guilt of the wrongdoer is not relevant.
6 At par 43.
7 At par 44.
9 This follows the so-called in rem proceedings wherein the “asset, which has committed a crime” is preserved and thereafter forfeited to the State. This procedure is similar to the US forfeiture provisions.
10 In the POCA Preamble, it is stated that no person should benefit from the fruits of unlawful activities. In casu, the R1 169 069.49 is such fruits, which are always liable to forfeiture to the State in the scheme of POCA.
11 Where the Applicant can make out a proper case for the forfeiture of an entire immovable property, she is enjoined to do so.
12 This Trifecta matter is about organised crimes of corruption8 and money laundering – on a grand scale.
13 Money laundering carries a sanction of a fine not exceeding R100 million or to imprisonment for a period not exceeding 30 years.9 It has therefore been singled out for severe punishment.
14 Corruption is a global problem10 that:
14.1 Is reciprocal;11
14.2 Affects all sectors in society and impacts most directly on the poor;
8 See Shaik and Others v State case no CCT 86/2006, a Constitutional Court judgment delivered on 2 October 2007; S v Selebi 2012 1 SA 487 (SCA); S v Moosagie [2012] ZAECPEHC (17 May 2012).
9 Section 8 of chapter 3 of POCA.
10 Or phenomenon; See State v Shaik & Others 2007 1 SACR (SCA) at par 223;
SA Association Personal Injury Lawyers v Heath and Others 2001 1 SA 883 (CC) at 891 par 4; State v Yengeni 2006 1 SACR 405 (T) at 427 b to c;
11 Shaik and Others v State case no CCT 86/2006, a Constitutional Court judgment delivered on 2 October 2007 at par 45.
14.3 Corrodes the national culture and ethos of democracy and good governance at all levels and sectors of society;
14.4 Depletes scarce resources of both government and civil society needed to ensure economic prosperity, equality and better life for all;
14.5 Is blight on society caused by worship of self and chronic greed;
and
14.6 Manifests itself, amongst others, in the abuse of position of authority or violation of duty, bribery, tender – fraud and payment or receipt of kickbacks, as in casu.
PRESERVATION AND FORFEITURE ORDERS
15 The High Court shall make a Preservation Order if there are reasonable grounds to believe that the specified property is the proceeds.12 In this matter, the Applicant succeeded to do so.
16 The purpose of the Preservation Order is to ensure that the property is preserved pending an application for a Forfeiture Order, which application must be brought within 90 days of the publication of a notice of such Order in the Government Gazette.13
17 The High Court is empowered to grant a Forfeiture Order in terms of section 50(1) (b) of POCA, if the Court finds on a balance of probabilities
12 Section 38(2) (b) of POCA.
13 Section 40 of POCA.
that property is the proceeds as defined in POCA. The Applicant succeeded in this regard too.
18 In casu, the SCA found that the R1 169 069.49 is proceeds, therefore forfeitable and it is respectfully submitted that the SCA ought to have forfeited it, in its entirety to the State, as it would be proportionate to do so.
19 This is the proper approach, where the Applicant chose to claim only the corrupt amount hidden/invested in the property.
THE R411 054.66
20 The corruptee used her pension proceeds to part pay the ‘loan’, as a post facto failed attempt to cover up corruption.
21 On 11 October 2018, the SCA correctly invalidated the ‘loan’.
22 This, it is submitted opened an opportunity for the Respondents to institute civil recovery action against the corruptor to refund the R411 054.66 to the corruptee’s estate, provided it could be proved that the corruptee was not part of the cover up. If she was, she forever lost the R411 054.66 on 11 October 2018, the date of invalidation
23 It is on this basis that it is the Applicant’s case that the payment to the corruptor of the R411 054.66 should never form part of the consideration in determining the forfeitable proceeds i.e. R1 169 069.49.
24 The R411 054.66 is part of the misrepresentation to mislead the public and investigators, in the face of the Parliamentary enquiry and police investigation.
25 The R1 169 069.49 was never acquired by the corruptee legally and she knew or had reasonable grounds to suspect14 that it was indeed proceeds, thus allowing no set offs or deductions from it.
26 It is respectfully submitted that the SCA misdirected itself by deducting the R411 054.66 from clear proceeds of corruption and money laundering.
THE PROPOPORTIONALITY ANALYSIS
27 It is respectfully submitted that the SCA erred in relying on the proportionality analysis in deducting the R411 054.66 from clear proceeds of corruption and money laundering.
28 Simply put, the proportionality analysis is a mechanism used as a balancing act in reconciling conflicting or divergent interests. These interests are crime combating on one-hand and property rights of the corruptee on the other; it is thus a rights analysis, which emanates from the Constitution.
29 In recent years, the issue of proportionality analysis was thoroughly discussed in numerous judgments as well as in the Honourable Court.
Proportional analysis has avoidance of causing an imbalance between the adverse and beneficial effects of an administrative action as its primary purpose. It encourages consideration of the need for the action and the possibility of using less drastic or oppressive means to accomplish the desired end.15
14 See section 52 of POCA.
15 NDPP v Kleinbooi – a reportable judgment of the CPD Case number 9651/2004 delivered on 3/12/2007 at 13 where Hoexter Administration Law in South Africa 2007 at 309 was quoted.
30 It is settled law16 that civil forfeiture is a serious matter because it makes significant inroads into well-entrenched civil protection against arbitrary deprivation of property and may amount to excessive punishment and arbitrary confiscation of property. It has the potential of producing arbitrary and unjust consequences.
31 In Prophet,17 Nkabinde J, writing for a unanimous Court, reiterated this:
Asset forfeiture orders as envisaged under Chapter 6 of the POCA are inherently intrusive in that they may carry dire consequences for the owners or possessors of properties particularly residential properties.18 Courts are therefore enjoined by section 39(2) of the Constitution to interpret legislation such as the POCA in a manner that ‘promote[s] the spirit, purport and objects of the Bill of Rights’, to ensure that its provisions are constitutionally justifiable, particularly in the light of the property clause enshrined in terms of section 25 of the Constitution.
32 In Mohunram proportional analysis was used to dismiss an application for forfeiture of an immovable property, which the majority judgment found to be an instrumentality.
33 The Honourable Court19 found that: the proper application of a proportionality analysis weighs the forfeiture and in particular, its effect on the owner concerned, on the one hand, against the purpose the forfeiture serves, on the other hand.20
16 NDPP v RO Cook Properties 2004 2 SACR 208 (SCA); 2004 2 All SA 491 and 2004 8 BCLR 844 (SCA) at par 17; Mohunram and Another v NDPP and Others 2007 6 BCLR 575 (C); 2007 4 SA 222 (CC) at par 118; Cole par 15; Van Staden par 4.
17 Par 46; See also Mohunram par 9; RO Cook Properties par 23; Brennan 14.
18 Own emphasis.
19 Mohunram v NDPP 2007 2 SACR 145 (CC).
20 Mohunram supra par 57.
34 The Court went further and established what facts have to be taken into account during a proportionality analysis:
Removing the incentives for crime;
Deterring persons from using or allowing their properties to be used in crime;
Eliminating or incapacitating some of the means by which crime may be committed; and
Advancing the ends of justice by depriving those involved in crime of the property concerned.21
35 The SCA indicated in RO Cook22 that it is less likely that the forfeiture of benefits derived, received or retained in connection with or as a result of unlawful activity (i.e. the proceeds) would fail rationally to advance the above objectives.
36 It is submitted that the Court a quo correctly found that the granting of the forfeiture order in casu would not be disproportionate to the purpose, which POCA aims to achieve.23
37 When considering the issue of proportionality the Court in Prophet found that:
The general approach to forfeiture once the threshold of establishing that the property is an instrumentality of an offence has been met is to embark upon a proportionality enquiry –
21 Ibid.
22 At par 66.
23 Judgement of court, par 21.
weighing the severity of the inference with individual rights to property against the extent to which the property was used for the purposes of the commission of the offence, bearing in mind the nature of the offence.24
38 In Prophet25 the Court referred to the judgment in NDPP v Cole and others26 where the Court found “any proportionality analysis would have to weigh the impact of the forfeiture on a respondent, not only against the severity of his crime but also against the public interest in the prevention of crime.”27 With respect, the Court a quo did exactly that in casu.
39 The Court in Cole also found that the proportionality analysis is “inherently imprecise” and that a mere sense of judicial discomfort with a consequence is insufficient to render the forfeiture disproportional.28
40 In Geyser29 the Court held that: “…The courts must ensure that forfeiture does not amount to arbitrary and therefore unconstitutional deprivation of property. They must be satisfied that the consequences of a forfeiture order are proportionate to the purpose for which it is made. They therefore have a discretion to decline forfeiture, despite section 50(1), if the impact of the deprivation would be out of proportion to that purpose.”30
24 Prophet supra at par 58.
25 NDPP v Prophet 2005(2) SACR 670 (SCA).
26 NDPP v Cole and others [2004] 3 All 745.
27 Cole supra par 13.
28 Cole supra par 15.
29 NDPP v Geyser 2008 (2) SACR 103 (SCA).
30 Geyser supra par 19.
41 Judge Howie found that the question that needs to be answered in a proportionality analysis is: “would forfeiture have more than the necessary remedial effect?”31
42 It is trite law that each case has to be decided on its own facts. Of importance in casu is that the proportionality analysis jurisprudence referred to above relate to instrumentalities of offences.
THE APPLICATION OF PROPOPORTIONALITY ANALYSIS TO PROCEEDS
43 The matter of NDPP v Salie held32 that since the Courts held that chapter 6 of POCA, which deals with both proceeds of unlawful activities and instrumentalities, must be interpreted purposively and consistently with the Constitution, there was support that the proportionality analysis should also be applicable to proceeds.33
44 It is respectively submitted that this is obiter. The Court ultimately found, after analysing the facts, that it would not be disproportionate to forfeit the proceeds.
45 The Court reasoned that in applying the proportionality analysis to proceeds, the Court faced with a forfeiture application must make an overall assessment of the appropriateness of declaring forfeited to the State an asset with the value of the property, which the NDPP has targeted.
31 Ibid par 31.
32 At par 112 and 137.
33 At par 120.
46 This, the Court continued, entails the comparison between, on the one hand, the value of the property or the interest of the owner in it, if someone else, e.g. a financial institution with real security, also has an interest, which reduces the economic value of the owner’s interest, and, on the other hand, the value of the total benefit from the unlawful activity. The comparison is relevant because the wide definition of ‘proceeds of unlawful activities’ may have the result that a very valuable property is susceptible to forfeiture even if, for example, it was retained by using the direct profits of crimes to make relatively modest repayments to a lender with real security over the property.
47 The Court added that there is however at least one other matter not mentioned in S v Shaik, which must be considered in the proportionality enquiry. It is the use to which the property is being put. If, for example, a criminal uses some of the profits of his crimes to build and endow a crèche in a deprived area, the forfeiture of the building and the endowment will not advance the purpose of confiscating the proceeds of crime. S v Shaik is a criminal forfeiture case.
48 This is a novel and extraordinary introduction in South Africa of the proportionality analysis to be applicable over proceeds. The Applicant did not appeal the decision since the matter was determined in her favour.
49 Both the SCA and the Honourable Court never had an opportunity to adjudicate on this extension.
50 The SCA in casu made no mention of the Salie decision.
51 It suffices to state that with the proportionality analyses already in place in respect of instrumentalities of offences, the effect thereof is to limit the forfeitability of such instrumentalities.
52 The latest extension of the proportionality analysis to proceeds is likely to have a far more stricter limiting effect on clearly tainted forfeitable property.
It is respectfully submitted that it is an unjustified extension, which the Honourable Court ought not to countenance in relation to the R1 169 069.49.
53 The converse would truncate the POCA objectives and purposes and crime would pay.
54 It is the Applicant’s case that the proportionality analysis ought not to apply to forfeiture of proceeds.
55 There is equally no justifiable rationale in declaring forfeit only a portion of the proceeds.
CRIMINAL FORFEITURE OR CHAPTER 5 OF POCA
56 Criminal forfeiture is not applicable in this matter. The Court in Salie undertook a comparative analysis between criminal and civil forfeitures.
57 It is the Applicant’s case that there is no need for a proportionality analysis in the criminal forfeiture context, since there is provision for discretion in making a confiscation order.
58 In addition, where the actual benefit is determined, in cases where no reliance is placed on presumptions, there will be very little justification to forfeit only a portion of proceeds.
CONCLUDING SUBMISSION
59 It is submitted that the Honourable Court ought to hold that:
59.1 Leave to appeal is upheld;
59.2 The proportionality analysis is inapplicable to proceeds;
59.3 The SCA misdirected itself in deducting the R411 054.66 from the R1 169 069.49;
59.4 The Respondents be and are directed to deposit forthwith the sum of R1 169 069.49 into the Criminal Assets Recovery Account number 803 03 056 held at the Reserve Bank; and
59.5 The Respondents be and are hereby ordered to pay the costs of Appeal.
______________________________
H. Van der Linde SC COUNSEL FOR THE APPLICANT
LIST OF AUTHORITIES
1 Shaik and Others v State case no CCT 86/2006, a Constitutional Court judgment delivered on 2 October 2007.
2 S v Selebi 2012 1 SA 487 (SCA).
3 S v Moosagie [2012] ZAECPEHC (17 May 2012).
4 NDPP v Cole and others [2004] 3 All 745.
5 NDPP v Geyser 2008 (2) SACR 103 (SCA).
6 NDPP v Prophet 2005(2) SACR 670 (SCA).
7 Mazibuko and another v NDPP [2009] 3 All SA 548 (SCA).
8 NDPP v Kleinbooi – a reportable judgment of the CPD Case number 9651/2004 delivered on 3/12/2007.
9 Prophet v NDPP 2006 2 SACR 525 (CC).
10 Mohunram and Another v NDPP and Others 2007 6 BCLR 575 (C); 2007 4 SA 222 (CC).
11 NDPP v RO Cook Properties 2004 2 SACR 208 (SCA); 2004 2 All SA 491 and 2004 8 BCLR 844 (SCA).
12 State v Shaik & Others 2007 1 SACR (SCA).
13 SA Association Personal Injury Lawyers v Heath and Others 2001 1 SA 883 (CC).
14 State v Yengeni 2006 1 SACR 405 (T).
15 NDPP v Salie and Another (384/2012) [2014] ZAWCHC 40; [2014]
2 All SA 688 (WCC); 2015 1 SACR 121 (WCC).
