IN THE CONSTITUTIONAL COURT OF SOUTH AFRICA HELD IN THE PROVINCE OF GAUTENG
HIGH COURT CASE NO : 3576/01
SUPREME COURT OF APPEAL CASE NO: 173/05 CONSTITUTIONAL COURT CASE NO :
CCT19/0 6
In the matter between;
KUMARNATH MOHUNRAM First Applicant
SHELGATE INVESTMENTS CC Second Applicant
and
THE NATIONAL DIRECTOR OF PUBLIC PROSECUTIONS First Respondent
BOE BANK LIMITED Second Respondent
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HEADS OF ARGUMENT
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INTRODUCTION
1. On 19 October 2001, the First Respondent sought and was granted
a Preservation Order in terms of Section 38(2) of the
Prevention of Organised Crime Act No. 121 of 1998 (POCA).
2. On 2 February 2004, the Preservation Order was set aside and the First Respondent’s Forfeiture Application was dismissed with costs.
3. On 9 December 2004 an application for Leave to Appeal to the Supreme Court of Appeal of South Africa by the First Respondent, was refused.
4. On 18 March 2005, the Supreme Court of Appeal of South Africa granted First Respondent leave to appeal.
5. On 17 March 2006, the Supreme Court of Appeal upheld the appeal and granted inter alia, an order in terms of Section 50(1) of POCA, declaring forfeit to the State, the property in
question.
6. The Applicant thereafter sought leave to appeal to this Court
against this decision and leave was granted on 29 September 2006 to argue the Application and if successful, the merits of the appeal.
THE FACTS
7. The salient facts which are common cause or at least not seriously in dispute between the parties are the following:
7.1 The First Applicant had been employed in the glass business for about twenty years before opening his own business and traded as Newcastle Glass and Aluminum;
7.2 In January 1998 First Applicant decided to
expand his business interests to Vryheid and for this purpose looked for suitable business
premises;
7.3 At the time, his brother-in-law was operating a casino in Vryheid and to the best of First
Applicant’s knowledge, he was operating it
legally;
7.4 First Applicant purchased the premises to conduct his glass business by purchasing the 100% members
interest of his brother-in-law in Second Applicant which owned the premises;
7.5 Initially, First Applicant during the negotiations to purchase the premises, presumed that if and when he purchased shares in the Close Corporation, the slot machines would be removed from the premises;
7.6 After taking occupation of the premises, he partitioned the premises and commenced trading as Vryheid Glass and Aluminum;
7.7 The slot machines had not been removed and his brother-in-law then suggested that he continue to run them as a sideline business. Initially, he
believed that operating the slot machines from the premises was not illegal;
7.8 The premises were not acquired for the purpose of operating slot machines;
7.9 In April 2001, First Applicant was charged for contravening certain provisions of the KwaZulu- Natal Gambling Act and after certain negotiations paid admission of guilt fines totalling R88 500,00.
He also agreed to the confiscation and
destruction of fifty seven of the slot machines and the forfeiture of R2 102,10 which was seized by the police;
7.10 The value of the said machines was in the region of R285 000,00;
7.11 Following upon the removal of the slot machines, First Applicant through his son continued to use the premises for his glass business;
7.12 An amount of R467 042,14 was owing on a
mortgage bond taken out on the premises in favour of NBS Bank.
APPLICATION FOR LEAVE TO APPEAL
8. It is incumbent on the Applicants to satisfy two requirements:
8.1 A constitutional matter must be raised or issues connected with decisions on constitutional matters;
8.2 That it is in the interests of justice for this Honourable Court to grant leave to appeal.
CONSTITUTIONAL MATTERS
9. It has been held by this Court that forfeiture orders as envisaged under Chapter VI of the POCA are inherently intrusive in that
1Section 167(3)(b)of the Constitution of the Republic of South Africa, Act No. 108 of 1996
2Section 167(6) ibid
they may carry dire consequences for the owners or
possessors of properties particularly residential properties and that 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
10. The constitutional matters are:
10.1 the effect of the application of Chapter VI of POCA in the particular circumstances of this case;
10.2 whether in the said particular circumstances, the forfeiture of the property in question is
constitutionally justifiable, especially
3Prophet v National Director of Public Prosecutions
considering:
10.2.1 the penalty already paid by the First Applicant;
10.2.2 there was no direct causal connection between the property sought to be forfeited and the offence upon which the forfeiture application was based;
10.3 the nature of the illicit activity, including that it only occupied a portion of the building in question, whether the forfeiture is
disproportionate to the crime involved;
10.4 whether the Supreme Court of Appeal erred in finding that merely because the First Applicant and Second Applicant enjoyed separate
corporate personalities, they
each had to bear the consequences of the illegal
CC 56/05, paragraph 46
activity;
10.5 whether the Supreme Court of Appeal erred in placing too much emphasis on the definition and contraventions
as set out in the KwaZulu-Natal Gambling Act, Act No. 10 of 1996 (the Gambling Act) and thereby ignored the very clear requirements of Section
50(1)(a) of POCA.
INTERESTS OF JUSTICE
11.
11.1 Section 167(6) of the Constitution enables a litigant to appeal directly to the Constitutional Court from any other Court;
11.2 Rule 18 of the Constitutional Court Rules
requires that such access be in the interests of
4NDPP v Mohunram (2006) SCA 11 (RSA) at paragraph 7
5Ibid, paragraphs 3 and 4
6Section 3(3)(a) and Section 44 of Act 10 of 1996
justice.
12. For the following reasons, it is submitted that it is indeed in the interests of justice for leave to be granted:
12.1 The facts in casu are fundamentally
distinguishable from those of the available
decided cases where forfeiture had been granted in terms of the POCA and brings under the
spotlight whether in the circumstances of this case the property in question was an
instrumentality of the offence and the proportionality of the forfeiture;
12.2 The mischief admitted to by the First Applicant is not the mischief complained of in the preamble to POCA or in its long title;
12.3 The Supreme Court of Appeal erred in failing to consider whether the Legislature intended that a person who engaged in a universally condemned
offence, such as drug dealing, ought to be treated in precisely the same way as far as forfeiture provisions are concerned, as a person who at all times pursued legitimate business interests but committed an offence simply by not having a licence for that particular activity.
13. These matters raise important constitutional issues which need to be determined to resolve whether the forfeiture order should be set aside.
14. Accordingly, it is submitted that the Applicants’ prospects of success on appeal are good.
MERITS OF THE APPEAL
15. Whilst the Applicants have no quarrel with the existence or application of POCA and its chapters for the purposes set out in its preamble and long title, it is the peculiar
circumstances of this case that oblige the Applicants to submit that the application of POCA in these circumstances, jars the constitutional safeguards allegedly accounted for in
the provisions of POCA.
16. In this regard, the fact that the Applicants contravened the Gambling Act does not automatically mean that the
premises were an “instrumentality of the offence”, as found to be the case by the Supreme Court of Appeal. It is
respectfully submitted that the
fundamental flaw in the reasoning of the Supreme Court of Appeal is that it regarded the essence of the crimes for which the Applicants were charged as being the use of the premises (with reference to the definition of the word
“casino” in Section 1 of the Gambling Act and the
prohibition against an owner of a building to allow any other person to conduct gaming activity thereon unless that
person had been duly licenced in terms of Section 3(3)(a) of that Act) and as if it axiomatically followed pronounced that the premises were an instrumentality of the crimes. It is submitted that such an approach is wrong.
17. In the first place, the essence of the crimes relate to the conduct of gaming activity without a valid licence (our emphasis). In the second place, it is submitted that in the circumstances of
this case, the premises were not integral to the commission of the offence. It was held in Cook Properties that the
“words ‘concerned in the commission of an offence’ must ...
be interpreted so that the link
between the crime committed and the property is reasonably direct and that the employment of the property must be
functional to the commission of the crime ... (The) property must play a reasonably direct role in the commission of the offence. In a real or substantial sense the property must facilitate or make possible the commission of the offence.”
18. The particular contravention merely entitled the State to proceed against the Applicants in terms of POCA. To be successful, the State nevertheless had to satisfy the requirements of Chapter VI of POCA. No provision in the Gambling Act excuses the application of any section of POCA.
19. It was common cause that the premises in question were not “the proceeds of unlawful activities”. Hence it remained
7National Director of Public Prosecutions v (1) RO Cook Properties (Pty) Ltd 2004 (8) BCLR 844 (SCA) at paragraph 31
incumbent on
the State to show on a balance of probabilities that the property concerned was an instrumentality of a Gambling Act contravention,
20. This, it is submitted, it failed to do and a perusal of the various relevant decided cases will demonstrate the reasons why.
To find, as the SCA did, that it followed “ineluctably that the premises were an instrumentality of crimes” was an over simplification of the applicable test.
21. Various decisions have highlighted the potentially constitutionally hostile provisions of POCA. All have emphasized that a strict interpretation of the words “instrumentality of the offence” is warranted.
22. The Supreme Court of Appeal emphatically endorsed these views
8Section 50(1) of POCA
9National Director of Public Prosecutions v Carolus &
Others 1999 9(2) SACR 27 (C)
10National Director of Public Prosecutions v R O Cook Properties (Pty) Ltd; National Director of Public
Prosecutions v 37 Gillespie Street, Durban (Pty) Ltd &
Another; National Director of Public Prosecutions v Seevnarayan 2004 (2) SACR 208 SCA
and imposed stringent requirements for the State to meet in passing constitutional muster for this particular test.
23. That the unlawful activity merely took place on the property is insufficient to invoke the invasive provisions of Chapter VI of POCA.
24. Therefore it would appear that the fact that the offence was
committed on the property is only an indication and does not mean that the property has become an “.... instrumentality of the offence”.
25. Clearly some actual and active role and/or participation is envisaged and not merely providing a roof and/or a floor.
26. The Supreme Court of Appeal has endorsed a five point test which
11Ibid, paragraphs 23, 31 - 34
12Stegmann J in NDPP re: Application for Forfeiture of Property in terms of ss48 and 53 of Act 121 of 1998, unreported case number 2000/12886 (WLD), as quoted in National Director of Public Prosecutions v Patterson & Another 2001 (2) SACR 665 (C)
13National Director of Public Prosecutions v Prophet 2003 (2) SACR 287 (C) at Page 296, paragraph 20 - Page 298, paragraph 25
14National Director of Public Prosecutions v Carolus
assesses the involvement of the property in the offence and applying that test, it is submitted, one would be hard pressed in this matter to find sufficient involvement to justify
forfeiture of the property, namely:
26.1 whether the use of the property in the offence was deliberate and planned or merely incidental and fortuitous;
26.2 whether the property was important to the success of the illegal activity;
26.3 the period for which the property was illegally used and the spatial extent of its use;
26.4 whether its illegal use was an isolated event or had been repeated;
26.5 whether the purpose of acquiring, maintaining or using the property was to carry out an offence.
& Others, Ibid, page 39
15Prophet v National Director of Public Prosecutions 2006 (1) SA 38 (SCA) paragraph 27.
United States v Chandler, 36 F 3d 358 (1998)
27. Applying this test to the facts at hand, the following picture emerges:
27.1 The criminal use of the property was not
deliberate or planned but rather fortuitous and incidental to the purpose of property;
27.2 The property was wholly irrelevant to the success of the illegal activity;
27.3 The machines could very well have been placed in a car or amusement park, connected to the building by an extension cord;
27.4 Neither the time duration nor the spatial extent was reliably established, suffice it to say that it can be safely accepted that the illegal activity occupied a smaller section of the building, which primarily was used as a glass and aluminum factory;
16First Respondent’s Opposing Affidavit, Record,
27.5 The activity began during a period when it was legal and continued until the relevant act had been amended to
criminalize the particular activity. Gambling machines such as these had been freely and lawfully operated at the time of the purchase of the property;
27.5 The unchallenged evidence of the First Applicant was that the property was acquired to pursue legitimate business interests and was so used for this purpose during and after the illegal activity.
28. It is submitted therefore that possibly only two of these enquiries can be answered in favour of the State and this can hardly justify forfeiture of the property.
Volume 2, Page 82, paragraph 11
First Respondent’s Opposing Affidavit: Record: Page 81, paragraphs 6 - 11, Page 84, paragraph 25
29. Applying this test to the facts of the Prophet case, unsurprisingly the result is significantly different from the Applicants’ score card in the matter at hand.
30. How then in terms of these interpretations and enquiries, the forfeiture of the building in casu is justifiable, let alone constitutionally vindicable, is an issue that falls to be decided.
31. In our view, the finding of the Supreme Court of Appeal is therefore vulnerable to interference: the gambling machines however clearly satisfy these interpretations and enquiries.
32. In considering this very same issue, in the Prophet case, this Honourable Court found that “... virtually the entire house and garage were used to store or keep chemicals and other equipment ...”. Moreover, the Court found that the property was appointed, arranged, organized, furnished and adapted or equipped to enable to facilitate the illegal activities.
Prophet v National Director of Public Prosecutions CCT 56/05, paragraph 23
Prophet v National Director of Public Prosecutions CCT 56/05, paragraph 57
33. For cogent and persuasive reasons, this Honourable Court found that the property was concerned in the commission of the offence and not
merely incidental thereto: clearly the essential character of the building had changed to accommodate the illegal
activity; this would be a wholly inappropriate description in the matter at hand.
34. Section 50(1)(a) of POCA then, as interpreted by the
abovementioned decisions, plays a vital role in determining the success or otherwise of such an application. Clearly to succeed and regardless of what offence gives rise to this particular enquiry, the property and the offence in question must still enjoy the kind of relationship as described in these decisions.
35. Considering the legislative objectives of POCA, this decision of the Supreme Court of Appeal may create a dangerous precedent which, unless judicially curbed, could well result in the
Ibid paragraphs 57, 64 and 67
smothering of many legitimate business interests, merely because the building is possibly tainted by the presence of a few fruit machines. This is not the organized crime, criminal gang activities and money laundering that POCA was
introduced to combat.
36. It is submitted 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 - weighing the severity of the
interference 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.
37. The proportionality issue raises the rather surprising finding by the Supreme Court of Appeal in this matter, that the forfeiture of the property was not disproportionate to the offence
committed.
Prophet v National Director of Public Prosecutions, ibid, paragraph 58
National Director of Public Prosecutions v Mohunram (2006) SCA 11 (RSA), paragraph 8
38. Considering the facts of this case, this finding hardly appears consistent with the findings of other earlier relevant cases.
39. The finding against the Applicants in this matter in our view appears to be a persuasive example of the “... unrestrained application of
Chapter VI ...” which can very well result in the “... arbitrary deprivation of property ...” as warned against by this
Honourable Court in Prophet’s case.
40. The forfeiture order is thus not only disproportionate (or even significantly disproportionate), to the offence and to the extent of the property’s involvement therein, it is furthermore inconsistent with its own governing preamble and hence the rights as enshrined in the Bill of Rights (Section 25(1)).
41. While POCA provides for Chapter VI enforcement, independent of any criminal prosecution, the unchallenged evidence of the First Applicant was that he received an assurance that, upon
Prophet v National Director of Public Prosecutions,
payment of substantial fines and destruction of the relevant gambling machines, he would face no further penalty.
42.
43.
44. The Second Applicant, Shelgate Investments CC, whose only member was the First Applicant, obviously was not brought to book and to suggest, as does the Supreme Court of Appeal that the Second Applicant therefore escaped punishment, is with respect artificial.
45. If in contravention of the agreement with the First Applicant, the State thereafter seized the property, the First Applicant in those circumstances has justifiably complained of being punished again.
46. Whilst the forfeiture provisions might well enjoy the description of
“civil proceedings” and further that Chapter VI is enforced to remove the incentive for crime and not to punish the person
ibid, paragraph 61
First Respondent’s Founding Affidavit: Record: Page 83, paragraphs 18 - 21
Applicants Founding Affidavit:
Record: Page 140, paragraph 14.3 Page 141, paragraph 15.2
National Director of Public Prosecutions v Mohunram, Ibid, paragraph 7
involved, in these particular circumstances, forfeiture followed a criminal sanction and an agreement with the relevant law enforcement agencies, and hence in these circumstances, might well justify the First Applicant’s complaint in this regard.
47. If it is important to strike a balance between the public interests in crime fighting and the interests of private property owners, then this
Honourable Court, should come to the rescue of the Applicants in this matter.
48. In the premises, it is submitted that the Applicants be granted leave to appeal and that the appeal be upheld with costs.
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APPLICANTS COUNSEL Y.N. MOODLEY SC
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APPLICANTS COUNSEL G.J. LEPPAN
CHAMBERS
PIETERMARITZBURG 13 OCTOBER 2006
TO : THE REGISTRAR OF THE CONSTITUTIONAL
COURT OF SOUTH AFRICA BRAAMPARK FORUM
SECOND FLOOR 33 HOOF STREET BRAAMFONTEIN
AND TO : THE REGISTRAR OF THE SUPREME COURT OF APPEAL
PRESIDENT BRAND STREET BLOEMFONTEIN
AND TO : THE FIRST RESPONDENT
c/o THE STATE ATTORNEY (KWAZULU-NATAL) RESPONDENTS ATTORNEYS
3RD FLOOR, SANGRO HOUSE 417 SMITH STREET
DURBAN
(REF: MR PATRICK KEVAN)
AND TO : SECOND RESPONDENT
BOE BANK LIMITED DURBAN
c/o TOMLINSON MNGUNI JAMES 165 PIETERMARITZ STRE
(REF: MR W.O.N. JAMES ET
Mohunram . Shelgate . Director of Public Prosecutions . HOA
