Judgement Date: 26 March 2020
Post Judgment Media Summary
On Thursday, 26 March 2020 at 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against part of the judgment and order of the Supreme Court of Appeal (SCA) regarding the forfeiture of property in terms of the Prevention of Organised Crime Act 121 of 1998 (POCA). The applicant, the National Director of Public Prosecutions, appealed a decision of the SCA, which largely confirmed the findings of the High Court of South Africa, Northern Cape Division, Kimberley (High Court). The High Court made an adverse finding against the estate of Ms Botha declaring immovable property and certain shares forfeited to the state. On appeal, the SCA reduced the total amount to be forfeited.
The first respondent is cited in her capacity as executrix of the estate of the late Yolanda Rachel Botha (Ms Botha), who passed away during the criminal trial on 28 December 2014.
Ms Botha was the Head of Department (HOD) of the Northern Cape Department of Social Services and Population Development. She was accused of receiving kickbacks from a company known as Trifecta Investment Holdings (Trifecta). The High Court had made adverse findings against her in relation to these kickbacks which she received for assigning tenders worth billions of rands. Trifecta, paid for renovations on her property worth R1 169 068.49 as a gratification for her influence in granting the leases. Trifecta did not record the funds borrowed in their books of account, instead it entered the funds as expenses for an unrelated project.
Ms Botha resigned from her position as HOD in 2010, to become a Member of Parliament (MP). When she became an MP, an investigation was led by the Parliament Joint Committee on Ethics and Members’ Interests. When the enquiry began, Trifecta made an entry in their books of account reflecting an amount of R500 000 as a loan for the renovations. The committee found that the renovation of Ms Botha’s home was a benefit accrued from an improper or generally corrupt relationship between her and Trifecta. She was also found guilty of wilfully misleading the committee by submitting a false loan agreement in terms of which Trifecta supposedly loaned her R500 000 to pay for the renovations. The non-disclosure of the correct amount of the loan and the recipient of the money itself was found to be obfuscation. After the enquiry, Ms Botha paid R411 056.66 of her pension money to Trifecta as repayment of the loan.
Ms Botha, together with others, were charged by the state with offences under sections 4 and 13 of POCA. The High Court held that POCA was enacted in pursuit of a legitimate and important government purpose namely combatting the serious effects of organised crime and preventing criminals from benefiting from the proceeds of their crimes. The High Court ordered, amongst other things, forfeiture of immovable property in favour of the state, in terms of POCA, and further provided directions for the sale of the property. Although the High Court made adverse findings against her, it did not pronounce on her guilt as she had passed away.
On appeal, the SCA agreed that a forfeiture order should be imposed against the estate of Ms Botha, but overturned the judgment of the High Court as the forfeited amount was disproportionate. The SCA reasoned that a proper application of the proportionality analysis weighs the forfeiture and its effect on the owner concerned against the purposes that forfeiture under POCA serves. It interpreted the primary purpose of forfeiture as not only to punish offenders, but also to remove the incentives for crime. The SCA considered that the amount of R411 056.66 that was repaid by Ms Botha should be taken into account. As a result, the SCA ordered the first respondent to pay the reduced amount of R758 014.83 to the state.
In this Court, the applicant argued that the forfeiture should not result in unlawful deprivation of property and that matters regarding such forfeiture in terms of POCA should be decided on a case by case basis. In so doing, the applicant submitted that the SCA misdirected itself by deducting the R411 054.66 paid by Ms Botha, as such funds were paid from clear proceeds of corruption and money laundering. The proportionality analysis used in these cases must be applied purposively to include proceeds. The applicant argues that property envisaged in section 25(1) of the Constitution does not extend to property acquired through unlawful activities referred to in POCA.
The respondents in turn argued that civil forfeiture has the potential to produce unjust and arbitrary consequences, and that a proportionality requirement has developed under the Constitution to mitigate against such consequences. Furthermore, the respondents argued that there was no reason why parties who despite benefiting from such proceeds, should be deprived of the protection afforded by section 25(1) of the Constitution, which provides that “no one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property”. It was further submitted that if such protection were to be denied, the state could simply deprive innocent parties of property without following the requirements provided for in the Constitution.
The minority judgment penned by Victor AJ (Froneman J and Khampepe J concurring) held that unlawful proceeds within the meaning of section 50(1)(a) of POCA, do indeed fall within the scope of section 25(1) of the Constitution for the following reasons: Firstly, the minority held that to protect only lawfully acquired property would go against the textual grain of section 25. It held that there is no a priori requirement of lawfulness for determining whether the property in question is protected by section 25(1). The provenance of the enjoyment of the right is not a prerequisite for the enjoyment of the legal protection of non-arbitariness which section 25(1) confers. Secondly, to claim that the Constitution does not protect unlawful proceeds against arbitrary deprivation, one would have to accept that there is a difference between, on the one hand, unlawfully acquired property (which does not benefit from the protection of section 25(1) of the Constitution) and, on the other, property which is lawfully acquired but put to an unlawful use. Thirdly, the minority notes that this Court’s decisions in Prophet and Mohunram do not distinguish between forfeiture orders under section 50(1)(a) and section 50(1)(b) of POCA. Both Prophet and Mohunram require a proportionality analysis to temper the “unrestrained application of Chapter 6 of POCA which may violate constitutional rights, without differentiating between section 50(1)(a) and section 50(1)(b). Finally, it notes on the strength of this Court’s decisions in FNB and Shoprite Checkers which held that in light of our history, property in section 25(1) of the Constitution should be given a wide meaning which may incorporate various forms of interests in various categories of property.
The minority judgment notes further that section 25(1) does not confer the right to property in and of itself, it rather protects one from arbitrary state interference. In relying on section 25(1) of the Constitution, Ms Botha did not do so to found a right to unlawful proceeds, she rather seeks to assert a right against the state, and to ensure that the actions of the state are not arbitrary.
The minority judgment notes however, that this should not be understood to mean that unlawfully acquired property will enjoy the same degree of protection under the prism of section 25(1) as lawfully acquired property. By virtue of its provenance, unlawful proceeds enjoy a limited degree of protection in respect of arbitrary deprivation.
The minority judgment held that the established line of authority in respect of section 50(1)(a) of POCA from this Court requires that once the threshold of establishing that the property is an instrumentality of an offence has been met, a court is required to carry out a proportionality analysis to determine whether the forfeiture would be disproportionate. It would be artificial and technical to have a separate approach to the forfeiture of property characterised as proceeds and property characterised as the instruments of an offence.
The minority held that section 25(1) of the Constitution inexorably leads to a balancing act, which compares the ends (the statutory goal of preventing an individual from benefitting from corruption) and the means (the forfeiture of property). A forfeiture order that is disproportionate will be arbitrary.
The minority judgment held further that the default position is therefore that unlawful proceeds are to be forfeited and that the discretion be a narrow one which focuses on whether the purpose of POCA is legitimately advanced by the forfeiture of proceeds. The judgment notes that there is no legal presumption in favour of forfeiture, rather, it is the nature of what is being forfeited, which means it will usually be difficult for an individual to show that forfeiture would be disproportionate.
The minority judgment found the facts of the present case did not constitute an exceptional case in which full forfeiture of the R1 169 068.49 would be disproportionate to ensuring the aims of POCA are achieved. The minority judgment accordingly found that the forfeiture of the entire R1 169 068.49 was proportionate and the appeal should therefore succeed.
A majority judgment penned by Jafta J (Mogoeng CJ, Madlanga J, Mhlantla J and Theron J concurring), agrees with the order and some of the reasoning in the minority judgment. The majority judgment differs from the first on two issues. These are whether proceeds of unlawful activities constitute property envisaged in section 25(1) of the Constitution, and whether the proportionality analysis that applies to determine the lawfulness of forfeiture of property used as an instrumentality of an offence, applies to the forfeiture of the present proceeds of unlawful activities.
The majority judgment held that it is unnecessary to determine whether the proceeds of crime in this matter amount to property envisaged in section 25(1). It further held that all that needs to be done is to enquire into the forfeiture order granted so as to determine whether it was arbitrary, which could be done by looking at relevant provisions of POCA. The majority further held that POCA prescribes a fair procedure which must be followed before a forfeiture order is made and that it also provides sufficient reasons for deprivation. It held that this illustrates that forfeiture under POCA does not constitute arbitrary deprivation.
The majority held that once it is accepted that Ms Botha had no right in the proceeds in issue and that section 25 did not give her any rights in those proceeds, it is illogical to conclude that she had property that was protected against arbitrary deprivation. On the issue of proportionality, the majority judgment held that it is inappropriate to apply the proportionality analysis in the case of a forfeiture of proceeds of a crime in circumstances where the person from whom the proceeds are taken does not have any interest which is lawfully recognised.