CRIMLAW ASSIGNMENT S38 POCA
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Transcript of CRIMLAW ASSIGNMENT S38 POCA
A DISCUSSION OF SECTION 38 OF THE PREVENTION OF ORGANISED CRIME ACT 121 OF
1998 WITH REFERENCE TO CASE LAW.
by
SARVESH NAIR
ASSIGNMENT
Submitted in partial fulfilment of the requirements for the subject
Advanced Criminal Law
for the degree
MAGISTER LEGUM
in
LAW
in the
FACULTY OF LAW
at the
NELSON MANDELA METROPOLITAN UNIVERSITY
March 2015
1
Declaration by student:
I hereby declare the following:
This is my own work and I have not copied any parts thereof from anyone else; I have referenced all direct quotations and paraphrased explanations of
another’s work I understand that plagiarism is a violation of the university disciplinary code and
that should I be guilty thereof that I will be subject to any disciplinary steps that the university may institute against me,
Student’s name: Sarvesh Nair
2
Table of contents
1 Introduction……………………………………………………...….…………….....4
2 Confiscation and Forfeiture..............…………....................................……...4-7
3 Preservation order…………….……………..........….….…….........…................7
3 1 Instrumentality of an offence …………….……………...……...........8-10
3 2 Proceeds of unlawful activities …………….……………................10-11
4 Conclusion…….…….……………………….….…………........….............….…12
5 Bibliography…….………………………………......………………......……..13-14
3
1 Introduction
In the past, the punishment imposed by the criminal justice system failed to strip convicted
persons of the profits of their crimes.1 Huge fines and the forfeiture of illegal goods to the
State still left economic offenders with substantial amounts of illicit profits. Even after
spending years in jail, criminals would still be able to enjoy the proceeds of their crimes
when they were released with some re-investing ill-gotten gains into new criminal
activities.2 Newspapers in South Africa ran stories for instance relating to a supposed
“police officer who managed on his R15,000-a-month salary to drive his Lamborghini to
work every day from his R17 million Durban North mansion.”3
While section 25 of the Constitution of the Republic of South Africa 1996, guarantees
everyone the right to property4, this right is by no means absolute and may be limited by a
law of general application in favour of a public purpose or public interest.5 In terms of
section 38 of the Prevention of Organised Crime Act 121 of 1998 (hereafter referred to as
POCA), the court may issue a preservation order if there are reasonable grounds to believe
that the property concerned is the instrumentality of the offence or the proceeds of unlawful
activities.6 What follows is a discussion on the application of the above requirements with
reference to recent case law.
2 Confiscation and ForfeiturePOCA introduces a civil forfeiture procedure and is a result of national and international
efforts to combat drug trafficking, terrorism, organised crime and economic offences.7
Proceedings for forfeiture are argued to be in rem8 rather than in personam9 and therefore
neither a criminal conviction nor pending charges are prerequisites for forfeiture.10
1 de Koker KPMG Money Laundering Control Service Butterworths, Durban 1999 at Com 5 3. 2 de Koker KPMG Money Laundering Control Service Butterworths, Durban 1999 at Com 5 3. 3 Moore “The Rise and Fall of Shauwn and S’bu Mpisane, Durban’s Teflon Couple” (2013-02-11) Daily Maverick 3; Shauwn Mpisane a “model police officer” and sole director of Zikhulise Cleaning, Maintenance and Transport, was awarded multi-million rand tenders for the construction of RDP houses. The Daily Maverick newspaper established that the council had paid a total of R219 million to the company during 2009, and that the last payment of R4,785,720 had been made on 14 December 2009, two weeks before the Mpisanes threw a New Year’s Eve party featuring golden thrones for the couple, the unveiling of their new Rolls Royce Silver Ghost, valued at R10 million, and unlimited whisky and champagne for their political connections. 4 S 25 of The Constitution of the Republic of South Africa, 1996 (the Constitution); Govindjee and Vranken (eds) Introduction to Human Rights Law (2009) ch 22; see also Currie and De Waal The Bill of Rights Handbook 6ed (2014) 531.5 Currie and De Waal The Bill of Rights Handbook 6ed (2014) 531.6 Section 38 of the Prevention of Organised Crime Act 121 of 1998 (hereafter referred to as POCA)7 de Koker KPMG Money Laundering Control Service Butterworths, Durban 1999 at Com 5 3. 8 In other words against the thing.9 Or in other words against the person.10 National Director of Public Prosecution v Mohammed 2002 SA 843 (CC) 2002 (2) SACR
4
At the outset, one must clearly distinguish between a criminal confiscation or forfeiture11
and a civil forfeiture procedure. Criminal confiscation focuses on the criminal benefit
obtained through unlawful activities, whist civil forfeiture in addition allows for the forfeiture
of property that aided the commission of an offence.12 Criminal forfeiture follows upon the
conviction of a person for an offence giving rise to a criminal benefit while no conviction or
even prosecution is required for tainted property to be forfeited.13 A successful criminal
confiscation procedure results in a court order requiring the accused to pay a specified
amount to the State, whilst a successful civil forfeiture results in an order forfeiting the
specific property to the State.14
In South Africa, a specialised Assets Forfeiture Unit was created in terms of the National
Prosecuting Authority Act.15 This unit is headed by a special director, who was given the
mandate to develop detail policy guidelines for forfeiture proceedings, to institute such
proceedings and to co-ordinate the management of assets subject to restraint orders.
POCA “gives effect to South Africa’s international obligation to ensure that criminals do not
benefit from their crimes. [POCA] uses two mechanisms to ensure that property derived
from crime or used in the commission of crime is forfeited to the state.”16 These
mechanisms are set forth in Chapter 5 and Chapter 6. “Chapter 5 provides for the forfeiture
of the benefits derived from crime but its confiscation machinery may only be invoked when
the ‘defendant’ is convicted of an offence.”17 “Chapter 6 provides for forfeiture of the
proceeds of and instrumentalities used in crime, but are not conviction based; it may be
invoked even when there is no prosecution.”18
In terms of Section 18 of POCA confiscation orders may be issued after a conviction has
been obtained against a defendant. In terms of section 2619 the National Director of Public
11 Chapter 5 of POCA; The criminal confiscation procedure may only be instituted once a person is convicted of an offence. The purpose of the enquiry is to determine the benefit which the offender has derived from the offence of which he or she is convicted, as well as from other related unlawful activities. This enables the court to order the confiscation of property to the value of the benefit through issuing a confiscation order. The confiscation order is similar to a judgment for the payment of a sum of money and is made in addition to any other sentence that the court may impose12 de Koker KPMG Money Laundering Control Service Butterworths, Durban 1999 at Com 5 3. 13 See chapter 5 of POCA.14 de Koker KPMG Money Laundering Control Service Butterworths, Durban 1999 at Com 5 3. 15 32 of 1998.16 National Director of Public Prosecution v Mohammed 2002 SA 843 (CC) 2002 (2) SACR at par (c).17 Section 18(1) of POCA; National Director of Public Prosecution v Mohammed 2002 SA 843 (CC) 2002 (2) SACR par (d).18 Sections 48(1) and 50(1), read with section 38; National Director of Public Prosecution v Mohammed 2002 SA 843 (CC) 2002 (2) SACR par (d).19 Of the POCA.
5
Prosecutions may apply for a restraint order prohibiting any person from dealing in any
manner with property to which the order relates.
Section 38 entitled “[p]reservation of property orders” reads as follows:
(1) The National Director may by way of an ex parte application apply to a High Court for an order prohibiting any person, subject to such conditions and exceptions as may be specified in the order, from dealing in any manner with any property.
(2) The High Court shall make an order referred to in subsection (1) if there are reasonable grounds to believe that the property concerned— (a) is an instrumentality of an offence referred to in Schedule 1; or (b) is the proceeds of unlawful activities.
(3) A High Court making a preservation of property order shall at the same time make an order authorising the seizure of the property concerned by a police official, and any other ancillary orders that the court considers appropriate for the proper, fair and effective execution of the order.
In terms of Section 3820 a preservation of property order may be issued by the High court
on application of the National Director of Public Prosecutions. The order may be issued if
reasonable grounds exist that the property concerned is an instrumentality in a Schedule 1
offence or is the proceeds of unlawful activities.21 “Section 38 forms part of a complex, two-
stage procedure whereby property which is the instrumentality of a criminal offence or the
proceeds of unlawful activities is forfeited.”22 Chapter 6 provides for forfeiture in
circumstances where it is established, on a balance of probabilities, that property has been
used to commit an offence, or constitutes the proceeds of unlawful activities.23 In terms of
section 4824, application may be made for an order forfeiting assets, subject to a
preservation order to the State.
3 Preservation order
“The forfeiture process...commences when the National Director applies ex parte in terms
of section 38 of [POCA]...for a preservation order.”25 There is no specific provision for a rule
nisi.26 Once the preservation order is granted, notice must be given to “all persons known
20 Of the POCA.21 S 38 of POCA.22 The procedure referred to in S 38 is set out in great detail in sections 37 to 62, which form chapter 6 of POCA; See also National Director of Public Prosecution v Mohammed 2002 SA 843 (CC) 2002 (2) SACR par (d).23 National Director of Public Prosecution v Mohammed 2002 SA 843 (CC) 2002 (2) SACR par (d).24 Of POCA.25 National Director of Public Prosecution v Mohammed 2002 SA 843 (CC) 2002 (2) SACR at par (f).26 A rule nisi is an interim order granted by a court, often in the absence of the person against whom the relief is being sought, calling upon the person to give reasons on (or before) a date specified why a final order, as
6
to the National Director to have an interest in the property”27 and a notice of the
preservation order must be published in the Gazette.28 Within 14 days of notice of the
order, an affected party who wishes to oppose the grant of a final forfeiture order must
enter an appearance of his or her intention to oppose that order.29 The National Director
must then within 90 days of the granting of the preservation order apply for the forfeiture of
the property. At that stage, affected parties are entitled to a full hearing to determine
whether the property should be forfeited or not.30
A person who is affected by a preservation order made in respect of immovable property
may apply for the order to be rescinded and the High Court shall rescind the order “if it
deems it necessary in the interests of justice”31 to do so. In respect of movable property, a
High Court may, on the application of an affected party, vary or rescind the preservation
order “if it is satisfied” that the order will “deprive the applicant of ... reasonable living
expenses and cause undue hardship for the applicant; and ... the hardship ... outweighs the
risk that the property concerned may be destroyed, lost, damaged, concealed or
transferred.”32
3 1 Instrumentality of an offence
In terms of section 50 of POCA, the High Court shall make an order that was applied for by
the National Director if the court finds on a balance of probabilities that the property is an
instrumentality of an offence referred to in Schedule 1.33 Where one deals with civil
forfeiture, POCA34 is focused on the property that has been used to commit an offence or
which constitutes the proceeds of crime and not on the guilt of the wrongdoers.35 The guilt
specified in the rule nisi, should not be granted. Rule nisis are often used in urgent applications, for example, interdicts.27 S 39(1) of POCA. 28 S 39(1) of POCA. 29 S 39(3) of POCA. 30 National Director of Public Prosecution v Mohammed 2002 SA 843 (CC) 2002 (2) SACR at par (c).31 S 37 (3)(b)(i) of POCA. 32 S 47(1) POCA; National Director of Public Prosecution v Mohammed 2002 SA 843 (CC) 2002 (2) SACR at par (c).33 S 50 of POCA; Schedule 10 of POCA; Or if the property is associated with terrorist and related activities for that matter; Note that the absence of a person whose interest in property may be affected by a forfeiture order does not prevent the High Court from making the order. The validity of a confiscation order is not affected by the outcome of criminal proceedings, or of an investigation with a view to institute such proceedings, in respect of an offence with which the property concerned is in some way associated.34 In Chapter 6 of POCA for instance.35 See in general National Director of Public Prosecution v Mohammed 2002 SA 843 (CC) 2002 (2) SACR par (d).
7
or wrongdoing of the owner’s possessions is not primarily relevant to proceedings however
POCA does make provision for an innocent owner defence.36
To establish instrumentality, a scheduled offence must be involved.37 POCA contains a list
of serious offences under schedule 138 and defines instrumentality of an offence as “any
property which is concerned in the commission or suspected commission of an offence at
any time before or after the commencement of [POCA], whether committed within the
Republic or elsewhere.”39
There must be reasonable grounds to believe that the property concerned is the
instrumentality of an offence.40 In National Director of Public Prosecutions v Carolus41
(hereafter referred to as Carolus) the applicants (National Director of Public Prosecutions)
sought to demonstrate that property in casu fell either within the definition of instrumentality
of an offence or proceeds of unlawful activity. (The proceeds of unlawful activity will be
discussed separately infra.) In short, the NDPP contended that the respondent was
extensively engaged in dealing in drugs in the six properties in question. The respondent
disputed the allegations and stated that he had engaged in lawful activities, from which he
had derived a legitimate income. The court held that the words “which is concerned” in the
definition of “instrumentality of an offence” were not very clear. The court called for a
restrictive interpretation of this definition in view of the far reaching effect of the provisions
of Chapter 6. Property would therefore only qualify as an instrumentality where it had been
used as a means to commit an offence.42 In casu there was no reasonable ground from
which the inference could be drawn that any of the properties fell within the definition of
proceeds of unlawful activity. It was accordingly held on the facts that the property did not
constitute an instrumentality of an offence as the applicant failed to establish a connection
or link between the alleged unlawful activity and the property.43
36 Burchell Principles of Criminal Law (2005) 1001-1002; Burchell Principles of Criminal Law 4ed (2013) ch 71; See also National Director of Public Prosecution v Mohammed 2002 SA 843 (CC) 2002 (2) SACR par (d).37 Burchell Principles of Criminal Law 4ed (2013) Juta & Co CapeTown 905.38 Schedule 1 lists a number of serious offences and includes reference to any offence the punishment wherefore may be a period of imprisonment exceeding one year without the option of a fine.39 S 1 Definition and Interpretation of POCA.40 Burchell Principles of Criminal Law 4ed (2013) Juta & Co CapeTown 905.41 1999 (2) SACR 27.42 Burchell Principles of Criminal Law 906.43 Burchell Principles of Criminal Law 906.
8
Similarly, in National Director of Public Prosecutions v Patterson44 the court faced similar
facts to that of Carolus in that the applicant alleged that the premises in question was used
for the purposes of selling drugs. In essence, Foxcroft J referred to foreign case law and
concluded that there is by no means any settled law in America as to the method to be
adopted to ascertain whether a property has indeed been an instrumentality or instrument
of an offence.45 In its judgement the court held that the mere fact that a particular offence
was committed on a particular property would not necessarily entail that the property was
concerned in the commission of the offence, or that the property had become an
instrumentality of an offence; evidence of some closer connection would ordinarily be
required.46 The court concluded that there was a good deal of evidence to suggest that the
entire neighbourhood was riddled with drug dealers, the mere fact that one smoked a
prohibited substance on a property did not make the property instrumental in the smoking.47
The applicant was unable to provide evidence from any person who had actually bought or
sold any drugs on the property.48 The application was accordingly dismissed.
In the National Director of Public Prosecutions v Prophet49 the applicant sought a forfeiture
order and alleged that the respondent was using the property in question to manufacture,
deal in and possess a schedule 2 drug under the Drugs and Drug Trafficking Act.50The
applicant argued that the property was instrumental in the commission drug related
offences.
Erasmus J was of the view that a number of recent judgements have examined the term
instrumentality of an offence.51 The court confirmed that “[e]vidence of some closer
connection than mere presence on the property would ordinarily be required in order to
establish that the property had been concerned in the commission of the offence.”52 The
court noted that the Oxford English Dictionary defines the word "concerned" as "involved,
interested" suggesting the need for a direct connection to the offence.53
44 2001 (2) SACR 665 (C).45 National Director of Public Prosecutions v Patterson and Another 2001 (2) SACR 665-669.46 National Director of Public Prosecutions v Patterson and Another 2001 (2) SACR 665-669.47 National Director of Public Prosecutions v Patterson and Another 2001 (2) SACR 665-669.48 National Director of Public Prosecutions v Patterson and Another 2001 (2) SACR 665-669.49 2003 (8) BCLR 906 (C).50 140 of 1992.51 Such as National Director of Public Prosecutions v Carolus1999 (2) SACR 27.52 National Director of Public Prosecutions v Prophet 2003 (8) BCLR 911-915.53 National Director of Public Prosecutions v Prophet 2003 (8) BCLR 911-915.
9
The American and Australian approach provided guidance to the court in determining the
type of relationship that needs to exist, between the property to be forfeited, and the crime
in question.54 The essential element that was required to return a successful outcome was
a `nexus' connecting the property to the unlawful use and consequently "tainting" it.55
The court concluded that the property was a place to store the chemicals and rooms were
used to process, refrigerate and synthesise chemicals. The court concluded that in the light
of the evidence and on a balance of probabilities the property was concerned in the
commission of the offences.56 In terms of section 50 of POCA the property which was
subjected to a preservation of property order was forfeited to the State.
Therefore, in determining the ambit of instrumentality of an offence the focus is not on the
state of mind of the owner, but on the role the property plays in the commission of a
crime.57 It would be insufficient to rely merely on the property being indispensible to the
commission of the offence, one would also need to allege that a sufficiently close
connection existed between the property and the crime.58
3 2 Proceeds of unlawful activitiesAs reiterated supra, in terms of section 50 of POCA, the High Court shall make an order
that was applied for by the National Director if the court finds on a balance of probabilities
that the property is the proceeds of unlawful activities.59
Proceeds of unlawful activities are defined in POCA as “...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[.]”60
54 Generally the United States courts have adopted either the "instrumentality test" or the proportionality test or one that combines both of these. In terms of the instrumentality test the forfeited property must have a sufficiently close relationship to the illegal activity.55 National Director of Public Prosecutions v Prophet 2003 (8) BCLR 911-915.56 National Director of Public Prosecutions v Prophet 2003 (8) BCLR 911-915.57 Burchell Principles of Criminal Law 907.58 Burchell Principles of Criminal Law 907; Burchell contends that both factual (i.e the property is indispensible to the crime) and legal causation (a sufficiently close connection between the property and the crime) will need to be established.59 See heading 3 supra; See also S 50 of POCA; Or if the property is associated with terrorist and related activities for that matter.60 S 1 Definition and Interpretation of POCA.
10
Unlawful activity is further defined by POCA as “... any conduct which constitutes a crime or
which contravenes any law whether such conduct occurred before or after the
commencement of this Act and whether such conduct occurred in the Republic or
elsewhere.”61
In National Director of Public Prosecutions v Seevnarayan62 (hereafter referred to as
Seevnarayan) the respondent made a long series of rolling investments in Sanlam products
under a variety of mostly fictitious names. The investments were allegedly in order to evade
tax. A preservation order in terms of section 38(2) of POCA was granted and the applicant
applied for an order in terms of section 48(1)63 declaring forfeited to the state the property
preserved under the preservation order. The unlawful activities the applicant relied upon
included (i) fraud on the South African Revenue Service (SARS); (ii) contravention of
s104(1) of the Income Tax Act 58 of 1962 and (iii) fraud on Sanlam.
The court held that it would be contrary to the purpose of the POCA if one were to describe
the property in question as the means by which the alleged offences were committed.
Fraud was not committed by means of money or other property, but by means of intentional
misrepresentation. Tax evasion was not committed by means of undeclared income - the
undeclared income formed the subject matter of the offence. The court held further that the
applicant had failed to establish a connection between the alleged unlawful activity and the
receipt of the property concerned.
The court concluded that a literal interpretation of proceeds of unlawful activities could lead
to absurd and grossly inequitable consequences unless a restrictive interpretation was
applied to the provision in question.64 The property concerned did not constitute the
proceeds of unlawful activities and the application was dismissed. Incidentally, the court in
Seevnarayan concluded that POCA was designed to cover organised crime and not a
crime by a single individual.65 The SCA however has held that POCA clearly applies to
cases of individual wrongdoing with the court even proposing that the definition of
“proceeds of criminal activities” should be given its full ambit limited only to where
necessary, the words “in connection with” are used.66
61 S 1 Definition and Interpretation of POCA.62 2003 (1) SACR 260 (C).63 Of POCA.64 Burchell Principles of Criminal Law 909.65 Burchell Principles of Criminal Law 909.66 National Director of Public Prosecutions v RO Cook Properties (Pty) Ltd; 37 Gillespie Street Durban (Pty) Ltd; Seevnarayan 2004 (2) SACR 208 (SCA).
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5 Conclusion
Forfeiture is important. It seems obvious that the state should do its best to ensure
that crime does not pay. Asset forfeiture is often portrayed simply as a means of
reclaiming what has been wrongfully gained by criminals.67 In this sense, it is merely
the state claiming the fruits of crime on behalf of society. Put in this light, it is hard
to understand the objections raised to asset forfeiture.68 Nonetheless, under a
benevolent government, South African asset forfeiture laws appear to incorporate
sufficient checks and balances. In a society that has a robust constitution, an active
economy and ingenious tenderpreneurs,69 one can’t help but marvel at the police
officer referred to in the introduction supra acquiring a Lamborghini and a R17
million mansion while earning a salary of R15 000 per month.70
67 Redpath “Forfeiting Rights? Assessing South Africa's Asset Forfeiture Laws” 2000 9 ASR 5/6.68 Redpath “Forfeiting Rights? Assessing South Africa's Asset Forfeiture Laws” 2000 9 ASR 5/6.69 The word tenderpreneur is a portmanteau of "tendering" and "entrepreneur” and is a South African term for a person, often in government, who abuses their political power and influence to secure government tenders and contracts. 70 Moore “The Rise and Fall of Shauwn and S’bu Mpisane, Durban’s Teflon Couple” (2013-02-11) Daily Maverick 3; Shauwn and S’bu Mpisane were the recipients of tenders in excess of R 200 million for construction work of RDP houses which transpired to be substandard.
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6 BIBLIOGRAPHY
LEGISLATION
The Constitution of the Republic of South Africa, 1996
Drugs and Drug Trafficking Act 140 of 1992
Prevention of Organised Crime Act 121 of 1998
National Prosecuting Authority Act 32 of 1998
Income Tax Act 58 of 1962
BOOKS
Burchell Principles of Criminal Law (2005) Juta & Co CapeTown
Burchell Principles of Criminal Law 4ed (2013) Juta & Co CapeTown
Currie and De Waal The Bill of Rights Handbook 6ed (2014) Juta & Co Cape Town
Govindjee and Vranken (eds) Introduction to Human Rights Law (2009) LexisNexis
Durban
Martin and Law A Dictionary of Law 5ed (2002) Oxford New York
JOURNAL ARTICLES
de Koker “KPMG Money Laundering Control Service” Butterworths Durban 1999 Com 5
Redpath “Forfeiting Rights? Assessing South Africa's Asset Forfeiture Laws” 2000 9 ASR 5/6
TABLE OF CASES
National Director of Public Prosecutions v Carolus 1999 (2) SACR 27
National Director of Public Prosecution v Mohammed 2002 SA 843 (CC) 2002 (2) SACR
National Director of Public Prosecutions v Patterson and Another 2001 (2) SACR 665 (C)
National Director of Public Prosecutions v Prophet 2003 (8) BCLR 906 (C)
13
National Director of Public Prosecutions v Seevnarayan 2003 (1) SACR 260 (C)
National Director of Public Prosecutions v RO Cook Properties (Pty) Ltd; 37 Gillespie Street Durban (Pty) Ltd; Seevnarayan 2004 (2) SACR 208 (SCA).
NEWSPAPERS
Moore “The Rise and Fall of Shauwn and S’bu Mpisane, Durban’s Teflon Couple” (2013-02-11) Daily Maverick 3.
WEBSITES
South African Legal Information Institute http://www.saflii.org (accessed 2015-04-10)
Marais and Dennison “Prevention of Organised Crime Act – Reasonable Grounds to Forfeit Assets” April 2012 http://www.polity.org.za/article/prevention-of-organised-crime-act-reasonable-grounds-to-forfeit-assets-2012-04-11 (accessed 2015-15-04)
De Voss “Changing the Constitution? Probably Not” January 2014 http://constitutionallyspeaking.co.za/category/constitution/# (accessed 2015-15-04)
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