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CONSTITUTIONAL COURT OF SOUTH AFRICA
Case CCT 45/06
GARY WALTER VAN DER MERWE First applicant
ZONNEKUS MANSION (PTY) LTD Second applicant
versus
INSPECTOR TAYLOR First respondent
THE MINISTER OF SAFETY AND SECURITY Second respondent
THE DIRECTOR OF PUBLIC PROSECUTIONS Third respondent
THE COMMISSIONER FOR
THE SOUTH AFRICAN REVENUE SERVICE Fourth respondent
Heard on : 21 November 2006
Decided on : 14 September 2007
JUDGMENT
MOKGORO J:
Introduction
[1] This case concerns the right to claim the return of property, in the light of the Constitution, following its seizure by the State. Specifically, the case is about the seizure of a large sum of foreign currency by State officials and a claim for its return. It is an application for leave to appeal against the decision of the full court in the Cape High Court.[1]
The parties
[2] The application is brought by Mr Gary Walter van der Merwe (the first applicant), together with Zonnekus Mansion (Pty) Ltd (the second applicant), a company owned by a family trust of which the first applicant is a trustee and sole director. Inspector Taylor,[2] an officer in the South African Police Service (the SAPS) is the first respondent; the Minister of Safety and Security (the Minister) is the second respondent; the Director of Public Prosecutions (the DPP) is the third respondent; and the Commissioner for the South African Revenue Service (the Commissioner or SARS) is the fourth respondent.
Background
[3] On 13 July 2004 Mr van der Merwe was set to depart from Cape Town International Airport to travel to Las Palmas via London intending as he said, to join his family and friends for an extended yachting vacation in Europe. After he had passed through the security checkpoint at the airport and before passing through passport control, a customs official requested him to complete a customs declaration form.[3] Once he had done so, his hand luggage was searched with his consent and an amount of €130 000 and US$21 249 which, according to the exchange rate at the time,[4] together amounted to approximately R1,2 million, was found in his possession.
[4] Not certain which law Mr van der Merwe had contravened, the customs officials let him proceed to the aircraft. They let him board the plane. Before his departure, however, coming to believe that Regulation 3(1)(a)[5] was being contravened, the SAPS removed him from the aircraft and arrested him. The foreign currency was confiscated. They, however, called the SAPS advising them of Mr van der Merwe’s imminent departure with a substantial amount of foreign currency. The customs officials handed the matter over to the SAPS. Mr van der Merwe’s explanation, on inquiry, was that the foreign currency was the total allowance permissible for a group of people,[6] consisting of eight adults and four children who, except for himself, had already left for Las Palmas two days earlier. According to him, he was carrying the foreign currency on their behalf and his personal travel allowance was included. The €130 000 he was carrying, he explained, included €20 865 issued to him as his own allowance which he had purchased on his credit card account held at Nedbank. For each of his two minor daughters, he had bought an amount of €7 800 per child. The money had been sourced from: funds acquired from the sale of immovable property owned by the second applicant,[7] gambling winnings, redemption at a casino, first applicant’s children’s savings account, and the available amount on his credit card. The US Dollars, he said, belonged to a friend, Mr Allison.
[5] The matter was thereafter referred to the commercial branch of the SAPS who detained Mr van der Merwe overnight at the Bellville Police Station, releasing him on bail the following day.[8] The currency was recorded in the SAPS register, placed in a bag, and tagged.
[6] On the day of Mr van der Merwe’s release, SARS issued Inspector Taylor with a notice under section 99[9] of the Income Tax Act[10] (the section 99 notice). Section 99 permits the Commissioner to appoint someone as agent for a person with tax obligations to SARS to ensure those obligations are met. The section 99 notice appointed Inspector Taylor, the investigating officer in the case, as agent of Mr van der Merwe and a company referred to only as Wellness International Network (Pty) Ltd (Wellness). Neither Mr van der Merwe nor Wellness had any outstanding tax obligations established on the record. On 19 July 2004 Inspector Taylor handed over the currency to SARS in terms of the section 99 notice.
[7] During oral argument before this Court we were told that SARS had since handed over the currency to the South African Reserve Bank (the SARB)[11] for it to hold, pending Mr van der Merwe’s criminal trial. The transfer apparently followed the High Court ruling that SARS had no legal claim to the currency. However, this transfer occurred without Mr van der Merwe’s knowledge as no notice was given to him. It was never formally mentioned in the affidavits and Mr van der Merwe never had an opportunity to respond to that transfer. Mr Snyman of SARS who had received the currency from Inspector Taylor at the police station indemnified the SAPS with regard to the holding of the foreign currency and issued Inspector Taylor with a receipt. The indemnity purported to be issued in respect of property referred to in section 31(1)(a) of the Criminal Procedure Act 51 of 1977 (CPA),[12] giving reasonable indication that the CPA was being invoked as the basis for the seizure of the foreign currency.
[8] Shortly after his release, the applicants instituted action on an urgent basis in the High Court for the return of the foreign currency. The application was dismissed with costs. An appeal to the full court was similarly dismissed.
Proceedings in the Cape High Court
[9] The applicants originally sought to spoliate the seized currency as well as an order granting Mr van der Merwe permission to leave South Africa with the foreign currency.[13] They argued that the amount seized was within the total permissible allowance for foreign travel for members of the group. At the hearing, however, they claimed the return of the currency under the rei vindicatio on the basis that Mr van der Merwe was the owner. Unable to prove ownership of the US Dollars, Mr van der Merwe sought only the return of the €130 000 for which he had tendered documentary proof.[14] He conceded that he was carrying the US Dollars on behalf of Mr Allison.[15]
[10] The High Court was confronted with the question whether SARS acted lawfully by appointing Inspector Taylor as agent under section 99 of the Income Tax Act without proving or even alleging the existence of tax obligations on the part of Mr van der Merwe or any of his companies.
[11] The court dismissed the application, although it held that SARS had not established any legal entitlement to hold the currency under section 99, it concluded that the currency had nevertheless been legitimately forfeited to the National Revenue Fund under Regulation 3(5)[16] and that accordingly the respondents had shown a statutory right to hold the money.[17]
Before the full court of the High Court
[12] On appeal to the full court, Mr van der Merwe argued that he was the owner of the €130 000, that it remained his property and for those reasons he was entitled to its return.[18] The court held that Mr van der Merwe had failed to establish ownership and could therefore not succeed in his vindicatory action. The court declined to decide on what legal basis the State held the currency.
In this Court
[13] Under the impression that the currency was still in the possession of SARS, the applicants contend that the only real issue for determination by this Court was whether SARS was legally entitled to hold the foreign currency. In their submission, respondents had relied solely on section 99 of the Income Tax Act as the basis for the holding of the currency. The applicants contended that should the Court not accept that section 99 formed a legal basis for the respondents to hold the currency, the appeal must succeed. The applicants argue that the respondents were not entitled to hold the currency under section 99. The applicants submit to respondents’ oral argument before Court that the currency was seized under section 20 of the CPA,[19] making Regulation 3(5) inapplicable. In the alternative they submit, if the Court finds that section 20 is not applicable and the currency had been seized under Regulation 3(5), that regulation is unconstitutional because it permits the automatic forfeiture of property, thereby violating Mr van der Merwe’s property rights under section 25(1) of the Constitution. The applicants further submit that Regulation 3(5) also violates section 34 of the Constitution.
[14] The applicants attack Regulation 3(5) on the basis that it affords Treasury the discretion to forfeit without any guidelines. This, they submit, is unconstitutional. They also contend that even if the money was seized under section 20 of the CPA it is no longer held under that provision. Contending that once SARS returned the money to the SAPS, the defence advanced by the respondents in the High Court, namely, that the foreign currency had been paid over to SARS pursuant to the section 99 notice, can no longer hold. In those circumstances, the money should have been returned to them as the lawful owners.
[15] The respondents’ conduct as organs of State, the applicants further submit, conflicts with their duties under the Constitution, in particular sections 1 and 195. They have acted contrary to the basic values governing public administration contained in section 195 of the Constitution. These provisions require, among others things, a high standard of professional and ethical conduct and accountability with which the respondents have failed to comply.[20] The State, they submit, did not lead by example.[21]
[16] The respondents argued that the criminal trial has not yet been concluded and a possibility still exists that an acquittal might lead to a refund of the currency. For this reason, they contend, the SAPS could not return the currency at this stage. In order to succeed in a claim for the return of the currency under the rei vindicatio, Mr van der Merwe, they further contend, must establish that he is the owner of the foreign currency. If he cannot, no further enquiry is necessary. The full court dismissed the applicants’ claim on the basis that they had failed to prove ownership of the currency. That, the respondents assert, is independently decisive of the appeal. Besides, they further contend, the question of applicants’ ownership is not a constitutional matter nor is it an issue connected with a constitutional matter. Additionally, there exists no reasonable prospect that this Court would come to a conclusion different from that reached by the full court. Consequently, they argue that the application should be dismissed.
Legal basis for seizure and holding of the foreign currency
Application for leave to appeal to this Court
[19] Leave will be granted only if the applicants raise a constitutional matter or an issue connected with a decision on a constitutional matter and when it is in the interests of justice to grant leave.[22]
[20] Once the State seizes private property as it did in this case, and the legal basis for the seizure and holding is in dispute, the question of arbitrary deprivation of property under section 25(1) of the Constitution is clearly implicated, making the matter intrinsically a constitutional one. In that context, the High Court decisions regarding the legal basis on which the respondents seized and are holding the foreign currency, as well as the question whether applicants have proven ownership of the currency, are issues connected with a decision on a constitutional matter. It is not in all cases that this Court will consider a constitutional matter once it is raised.[23] The interests of justice in the circumstances of a case will determine whether a constitutional matter raised in an application will be heard. In the circumstances of this case, in particular against the background of the conflicting decisions of the High Court[24] and the vacillation of the respondents regarding the legal basis for the seizure and holding of the currency, it is in the interests of justice that the matter be heard. The application for leave to appeal is granted.
Whether Mr van der Merwe is owner of the foreign currency
[21] The total amount of foreign currency seized by the respondents was in two denominations – €130 000 and US$21 249. Applicants claim the return of the €130 000 on the basis that Mr van der Merwe is the owner. From the outset, Mr van der Merwe had stated that the US$21 249 found in his possession belonged not to him but to Mr Allison, on whose behalf he was carrying it. His action, based on the rei vindicatio, is therefore confined to the return of the €130 000. He does not claim the return of the US$21 249. That is common cause between the parties.
[22] An action based on the rei vindicatio is available to an owner[25] who has been deprived of his or her property without consent and who wishes to recover it from the one who retains possession.[26] In order to succeed with any vindicatory action, generally in addition to ownership, the applicant also has to prove that the property was in possession of the respondent at the beginning of the proceedings, that the property in question is still in existence and is clearly identifiable.[27]
[23] In this Court, the key questions are whether Mr van der Merwe is the owner of the foreign currency he claims must be returned to him under the rei vindicatio, and if so, whether the State is entitled to hold it pending the trial. The full court found that he had failed to prove ownership of the €130 000 and was therefore, not entitled to its return. It is against that finding that the applicants appeal.
[24] Mr van der Merwe does not claim that the seizure of his foreign currency constituted arbitrary deprivation of property in terms of section 25(1) of the Constitution. On the contrary, he concedes that the seizure, pursuant to section 20 of the CPA, was lawful. He comes to this Court claiming the return under the rei vindicatio of the €130 000 seized in terms of section 20 of the CPA on the basis that he is the owner and that the State has no authority to hold the currency. Further, he does not question the constitutionality of section 20.
[25] It is necessary to approach these two key questions in the light of section 25(1) of the Constitution, which also protects the right of ownership. Section 25(1) of the Constitution provides:
“No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property.”
Under this provision no one, including those accused of contraventions of the law as in this case, may be deprived of property except in terms of a law of general application. That law, however, may not permit the deprivation of property in an arbitrary manner. Section 25(1) generally protects all rights held in relation to property, including ownership.[28]
[26] Ownership potentially confers upon the owner the most complete or comprehensive right in or control over a thing.[29] In Gien v Gien,[30] ownership was defined as—
“. . . the most comprehensive real right that a person can have in respect of a thing. The point of departure is that a person can, in respect of immovable property, do with and on his property as he pleases. This apparently unfettered freedom is, however, a half-truth. The absolute power of an owner is limited by the restrictions imposed thereupon by the law . . . .”[31]
The most comprehensive control over the property does not imply unfettered freedom to do with the thing as one pleases. However comprehensive, and although protected against arbitrary deprivation under section 25(1), ownership like any other right, is not absolute.
[27] In First National Bank of SA Ltd t/a Wesbank v Commissioner, South African Revenue Service and Another; First National Bank of SA Ltd t/a Wesbank v Minister of Finance (FNB) this Court held:
“In its context ‘arbitrary’, as used in section 25, is not limited to non-rational deprivations, in the sense of there being no rational connection between means and ends. It refers to a wider concept and a broader controlling principle that is more demanding than an enquiry into mere rationality. At the same time it is a narrower and less intrusive concept than that of the proportionality evaluation required by the limitation provisions of section 36. This is so because the standard set in section 36 is ‘reasonableness’ and ‘justifiability’, whilst the standard set in section 25 is ‘arbitrariness’. This distinction must be kept in mind when interpreting and applying the two sections.”[32]
[28] The deprivation, the Court held further, will be arbitrary within the meaning of section 25 where the law does not provide sufficient reason for the deprivation in question or if it is procedurally unfair.[33] This dictum was followed and the principle further established in Mkontwana.[34]
“In any event, before the appellant can succeed with the rei vindicatio he needs to satisfy the court that he is in fact the owner of the foreign currency seized . . . [t]his founding affidavit does not support first appellant’s contention that he is in fact the owner of the 130 000 Euros seized. The first appellant, under oath, states that the foreign currency belongs to Zonnekus and himself . . . . He then states that he was merely carrying the foreign currency for others in the group . . . and adds that he was doing so for reasons of safety . . . . Counsel for the appellants was at pains to explain that although the appellants claim that the South African monies utilised to purchase the foreign currency did not only belong to the first appellant, the fact that those monies were deposited into the first appellant’s banking account made him the owner of the South African monies. This may be true but once the first appellant obtained the foreign currency and did not regard this as his own but recognised that it was owned by others as reflected in his affidavit, it cannot be said that he is the owner of it, notwithstanding that he may have purchased the foreign currency from his own funds.”[35]
[30] The €130 000 found in Mr van der Merwe’s possession at the airport included €20 865 which he had bought for himself. As the record shows, the currency had been issued to him personally on 7 July 2004, as his own travel allowance. This fact was not disputed. On the contrary, it was indirectly acknowledged by Mr Wright[36] who made it the basis of a denial that Mr van der Merwe was entitled to purchase any further foreign currency as he had exhausted his permissible annual travel allowance for the calendar year. Mr van der Merwe submitted that the source of the funds included the proceeds of the sale of property owned by Zonnekus Mansions, which in turn is wholly owned by the family trust named Eagles Trust of which he is a trustee and his children sole beneficiaries, entitling him to claim under the rei vindicatio.[37] This too was not in dispute. Applicants asserted in the alternative that at the very least, Mr van der Merwe was the owner of the €20 865 issued to him personally. None of the respondents disputed this assertion. Under these circumstances it could not be gainsaid that Mr van der Merwe is indeed the owner of the €20 865.[38] The full court overlooked this important distinction, which formed the basis of the applicants’ alternative argument in that court. It therefore erred in its finding that Mr van der Merwe did not prove ownership of the foreign currency.
[32] The question is whether Mr van der Merwe also owned the balance of the Euros, amounting to €109 135 which he purchased as travel allowance, in the names of eight members of the travelling group which included himself, his wife, his children and his mother.[39]
[33] Before the full court, applicants argued that all the funds utilised for the purchase of the foreign currency, including the proceeds from the sale of properties which belonged to second applicant and which were deposited into his credit card account made him owner thereof. Assuming that that may be true, Waglay J however concluded, that once Mr van der Merwe had purchased the foreign currency and did not regard it as his own but recognised that it was owned by others as reflected in his affidavit, it cannot be said that he is the owner, notwithstanding that he may have purchased it from his own funds.[40]
[34] In this Court, the applicants fiercely contended that the money with which the foreign currency had been purchased, which included proceeds from the sale of second applicant’s property, belonged to Mr van der Merwe. The money was paid into his Nedbank credit card account they argued,[41] and the account was debited with the amount of €130 000, obtained by using the permissible travel allowance of foreign currency[42] for those members of his entourage, including himself.
[35] According to his submissions, Mr van der Merwe had arranged to obtain that large amount of Euros because cash, as opposed to traveller’s cheques or a bank draft, was preferred. The idea, he further contended, was to facilitate payment to the crew in cash, given the absence of efficient banking facilities during the voyage. Respondents did not refute these contentions.
[36] The method used to obtain the maximum amount of foreign currency from the bank enabled him to service the financial needs of the voyage, for which he was solely responsible, and to provide sufficient finance to sustain the European holiday, he submitted. In this context therefore, the purchase of the foreign currency in the names of members of his group, with his own money, was only nominal. Having obtained the foreign currency in their names, he was carrying it as their travel allowance.
[37] Mr van der Merwe bought the Euros from Nedbank which is authorised to dispense foreign currency. In that regard, the purchase of the Euros was authorised and not illegal. However, the method he used to obtain the maximum amount of Euros in cash, purchasing most of it by utilising the foreign currency travel allowance of members of his group and exceeding his own foreign currency travelling allowance, may have been unlawful; a trial in that regard is still pending. Even if his actions were unlawful, that by itself, outside of the forfeiture process, should not divest him of ownership of his foreign currency.
[38] Under the rei vindicatio, once a claimant establishes ownership in the thing in issue, where the respondent is in possession at the commencement of the action, the thing shall be immediately returnable, unless the respondent can show cause why the property shall not revert to the owner.[43] Mr van der Merwe based his action for the return of the foreign currency on the rei vindicatio. It was the contention of the respondents that once he failed to establish ownership, as the full court found, it was correct to hold that the foreign currency should not revert to him. Accordingly, if Mr van der Merwe is able to establish in this Court that he remained the owner of the foreign currency, it stands to reason that the currency must be returned to him.
[39] The question whether the money utilised to purchase the foreign currency belonged to Mr van der Merwe is not in dispute before this Court, the full court having made an assumption to that effect. I will therefore proceed on the basis of that assumption. What is in issue, however, is whether the foreign currency purchased by Mr van der Merwe with that money,[44] and obtained by him utilising the permissible travel allowance of individual members of the travelling group and purchased in their names, and which remained in Mr van der Merwe’s possession, belongs to him or not.
Transfer of ownership
[40] At common law, ownership of property passes from one person to another when the following general requirements, amongst others, are met. First, the transferor must be capable of transferring ownership.[45] Second, the transferee must be capable of acquiring ownership.[46] Third, the transferor must have the intention to transfer ownership and the transferee the intention to receive ownership.[47] Fourth, with regard to movables, transfer of ownership is completed by delivery of the thing.[48]
[41] The third requirement is the focus of the dispute between the parties. Important is the question whether having bought the currency in the names of those members, as he did, and carrying it as foreign exchange allowance Mr van der Merwe intended to transfer ownership from himself to those members.
[42] In Trust Bank van Afrika Bpk v Western Bank Bpk en Andere NNO,[49] it was held that in terms of common law, ownership of movable property passes when the owner delivers it to another person, with the intention of transferring ownership, and the other takes the thing with the intention of acquiring ownership. As a result, in the absence of a clear intention between parties, it being a state of mind which must manifest itself from an express agreement between the parties or an agreement inferred from their conduct, ownership does not pass.
[43] In Bank Windhoek Bpk v Rajie en ’n Ander[50] transfer of ownership was held to require an agreement which clearly manifested a change of intention on the part of the transferor. The court found that where the agreed method of delivery is ineffective and inappropriate and absent an agreement in practical terms as to delivery, the question was whether the remaining evidence was capable of sustaining an inference that constitutum possessorium had been orally or tacitly agreed upon. The court further held that, on the evidence before it, the intention of the transferor had never changed and that the transferor had throughout held goods in his possession as owner. The transfer of ownership, the court concluded, was not proved.
[44] The requirement of intention as the mental element which must be established by evidence derived from the circumstances of each case was succinctly articulated by Van der Westhuizen AJ in Unimark[51] although there, the case was concerned with the acquisition of ownership by accessio.[52] After examining the nature of the thing annexed and the manner of its annexation Van der Westhuizen AJ concluded that these factors were not independent of intention.[53] He held further that:
“It would still seem as if cases are to be decided on their own facts and that common sense and reasonableness play a prominent role. If someone builds on a piece of land or annexes something to some immovable property, there is ownership of the annexed thing or material involved, as well as conscious human conduct. . . . The owner of the material or thing, or the person who annexes it, is likely to have something in mind, also with regard to ownership. The intention of this person cannot be irrelevant or of little importance . . . the intention has to be determined and judged within the context of all the relevant facts. . . . In other words, one of the factors to be taken into account when an intention as to the annexation of items is formed, or later determined, is how other people are likely to interpret the situation on the basis of factual evidence. An intention which is totally insulated from and devoid of reality cannot be recognised and given effect to in law.”[54]
[45] In the circumstances of this case there is no evidence that Mr van der Merwe had formed an intention to transfer ownership of the relevant amount of foreign currency to those members of his travelling group. There is also no evidence from which that intention can be inferred nor is there evidence that those members considered themselves owners. Indeed, as counsel for applicants emphasised during oral argument, none of the members of the travelling group could have taken legal steps compelling the applicants to hand over the currency to them.
[46] In my view, Mr van der Merwe at no stage lost ownership of his money. He bought the €130 000 with his money and his credit card account was debited with that amount.[55] Having the currency issued in the names of members of his group was therefore only nominal. In view of the importance of the protection of the right to ownership in our Constitution and in the circumstances of this case, it would require more than a nominal purchase for him to relinquish ownership. Without an intention to pass ownership to members of his group and their corresponding intention to accept ownership, Mr van der Merwe retains ownership of his money.
[48] I have already found that Mr van der Merwe is the owner of the €20 865 which he bought for himself as his own travel allowance.[56] I have also found that he is the owner of the €109 135 he bought with his money in the names of specified members of his group. He has therefore shown ownership of a total of €130 000. That is the amount of Euros found in his possession at the time of seizure.
Whether the State is entitled to hold the foreign currency
[49] Based on Mr van der Merwe’s arrest under Regulation 3(1)(a),[57] the respondents contended before trial court and the full court that the seizure of the foreign currency had been effected under Regulation 3(3).[58] Before the full court, following the finding of the trial court, the respondents contended that money seized under Regulation 3(3) is automatically forfeited to the NRF in terms of Regulation 3(5). On appeal the full court did not determine this question and noted that seizure of articles following an arrest under Regulation 3(1)(a) as had occurred in this case does not necessarily have to be in terms of Regulation 3(3) but may also be under section 20(a) of the CPA. Waglay J concluded:
“In so far as it may be necessary to determine whether or not the foreign currency seized from the first appellant was seized in terms of reg 3(3) or s 20(a) of the CPA, I believe, having regard to the fact that the monies were paid over to SARS after a notice in terms of s 99 of the Income Tax Act was issued points more to the foreign currency being seized in terms of s 20 of the CPA rather than reg 3(3).”[59]
[50] In this Court, respondents acknowledged that the currency had been seized and was being held under section 20 of the CPA. As pointed out earlier, Mr Snyman of SARS, to whom Inspector Taylor handed the currency on 19 July 2004, signed a SAPS 136 form entitled “indemnity by person”, which stated that the money was received as “seized property” as contemplated by section 31(1)(a) of the CPA.
“If no criminal proceedings are instituted in connection with any article referred to in section 30(c) or if it appears that such article is not required at the trial for purposes of evidence or for purposes of an order of court, the article shall be returned to the person from whom it was seized, if such person may lawfully possess such article, or, if such person may not lawfully possess such article, to the person who may lawfully possess it.”
Section 31(1)(a) thus operates where no criminal proceedings are instituted or where criminal proceedings are instituted but it appears that the seized article would not be required at the trial for purposes of evidence or for purposes of an order of court the article shall be returned to the person from whom it was seized.[60] Section 31(1)(a) therefore provides two grounds upon which an applicant may claim the return of an article seized under section 20. The party making an allegation that the article will not be needed or may be needed for purposes of a subsequent trial shall on a balance of probabilities give evidence to sustain such a claim.[61] If the article is not returnable, it shall be retained in identifiable form and made available at subsequent criminal proceedings.[62]
[52] Section 30 of the CPA reads:
“A police official who seizes any article referred to in section 20 or to whom any such article is under the provisions of this Chapter delivered—
(a) may, if the article is perishable, with due regard to the interests of the persons concerned, dispose of the article in such manner as the circumstances may require; or
(b) may, if the article is stolen property or property suspected to be stolen, with the consent of the person from whom it was seized, deliver the article to the person from whom, in the opinion of such police official, such article was stolen, and shall warn such person to hold such article available for production at any resultant criminal proceedings, if required to do so; or
(c) shall, if the article is not disposed of or delivered under the provisions of paragraph (a) or (b), give it a distinctive identification mark and retain it in police custody or make such other arrangements with regard to the custody thereof as the circumstances may require.”
[53] Section 20 provides as follows:
“The State may, in accordance with the provisions of this Chapter, seize anything (in this Chapter referred to as an article)—
(a) which is concerned in or on reasonable grounds believed to be concerned in the commission or suspected commission of an offence whether within the Republic or elsewhere;
(b) which may afford evidence of the commission or suspected commission of an offence whether within the Republic or elsewhere; or
(c) which is intended to be used or is on reasonable grounds believed to be intended to be used in the commission of an offence.”
[54] Section 20 authorises the seizure of “anything” concerned with the commission or suspected commission of an offence. In the circumstances of this case, the contravention of the regulations is an offence with which the foreign currency “is concerned” and constitutes, as the full court held, “anything which is concerned or believed to be concerned in the commission or suspected commission of an offence.”[63] There is therefore no legal impediment to unauthorised foreign currency being seized under section 20 of the CPA. I therefore conclude that the currency was seized under this provision.
[55] In circumstances where a criminal trial is pending, an application for the return of the article may be premature as it may be required for purposes of the trial.[64] In this case, the applicants applied for the return of the foreign currency while the trial relating to the currency seized under section 20 is pending. In view of the pending trial the State may however be entitled to hold it subject to the requirements of section 31(1)(a) of the CPA and/or any other justification.[65]
[56] Applicants argued that when the respondents handed the currency over to SARS in terms of the section 99 notice, in aid of a purported settlement of tax obligations they could not have envisaged that they were to use the currency as evidence or for purposes of a court order, as required under section 31(1)(a) of the CPA, suggesting that respondents did not intend to do so. Respondents did not refute this argument. Besides, there is merit in applicants’ contention because the inference drawn by applicants is a reasonable one. It was only after the trial court had found that SARS had no entitlement to the currency that it was returned to the SAPS.[66] On its return the SAPS transferred it to the SARB. Doing so they said, was for reasons of security having been hesitant to keep that large amount of currency in their custody.
[57] Even if an assumption may be drawn in favour of the respondents, that holding the currency as they did was for purposes of evidence when the trial resumes, in view of the trial which has been pending since 13 July 2004, where there is no information on record as to progress made in that regard and there is no justification by respondents for the long delay in finalising the trial, it is an assumption which can barely hold.
[58] The return of an article under section 31(1)(a) prior to the completion of criminal proceedings may, as indicated earlier, be prejudicial to the trial. For that reason the burden is on applicants who seek its return to show on a balance of probabilities that the requirements of section 31(1)(a) have not been met and the State is therefore not entitled to hold the article.[67]
[59] However, in this case Mr van der Merwe claims the return of his Euros in terms of the rei vindicatio and not under section 31(1)(a) of the CPA. Once Mr van der Merwe proves ownership the burden, unlike in section 31(1)(a), is on respondents to show why the currency should not be returned forthwith. The respondents have not met this burden. They have failed to show that the currency would be used as evidence or for purposes of a court order as required by section 31(1)(a). If they had done so the burden of proof under the rei vindicatio might have been met. Further, considering the broader scope of the rei vindicatio, they have not shown any other justification and I do not find any. Consequently, respondents are not entitled to hold the currency pending the trial.
Whether Mr van der Merwe may legally possess the foreign currency
[60] Once an article is seized from a person under section 20 of the CPA and it is not to be used for the purposes required by section 31(1)(a),[68] the article shall be returned to the person from whom it was seized, but only if she or he can have lawful possession.[69] Simply, if the person cannot have lawful possession of the article when returned, the article shall not revert to her or him.[70] Section 31(1)(a) does not require ownership to be proved for the article to be returned. All it requires is that the person to whom the article is to be returned (who is usually the person from whom the article was seized) shall have lawful possession.
[61] Where the person from whom the article had been seized cannot possess it lawfully on its return, it shall be placed in the possession of another person who can possess it lawfully. Should this alternative not be feasible in that no person who may possess the article lawfully can reasonably be found, then and only then, shall the article be forfeited to the State.[71]
[62] In this matter, seizure of the foreign currency was based on the contravention of Regulation 3(3). The contravention itself was based on Mr van der Merwe’s possession of an amount of foreign currency for purposes of travel outside of South Africa at the time.
[63] According to the Exchange Control Manual,[72] the main purpose of exchange control in general, is to ensure that there is timeous repatriation of certain foreign currency obtained by South African residents into the banking system. This is the case whether the currency had been obtained through transactions of a current or capital nature. It is also to prevent the loss of foreign currency resources through the transfer abroad of real or financial capital assets which are held in the country. Importantly, as the Exchange Control Manual provides, the purpose is to control the balance of the country’s foreign exchange reserves which are mainly utilised for the payment of goods and services imported into the country and for servicing South Africa’s foreign debt. These foreign exchange reserves, it says, are necessary for any country. As the manual states, a lack thereof prevents international trade for effective economic development. The relevant part of the manual reads:
“Exchange control, therefore, constitutes an effective system of control to these ends by monitoring the movements of financial and real assets (money and goods) into and out of South Africa, while at the same time avoiding interference with efficient operation of the commercial, industrial and financial systems of the country.” [73]
[64] More specifically, the purpose of Regulation 3(3)[74] in the context of the general purpose of exchange control is to prohibit people from leaving the country with unauthorised foreign currency. As a result, a customs official may request any person about to leave the country to declare and produce currency in their possession. It is travelling outside of the country with unauthorised foreign currency which will therefore be unlawful.
[65] Once Mr van der Merwe no longer requires the foreign currency for purposes of travel outside of the country and the currency is authorised to be returned to him by an order of this Court, it would be expedient if not legally required, to return to him the equivalent of the Rand value of the €109 135. To return the Euros may not be practical and legally permissible under the Regulations.[75] If the Rand value of the seized Euros is returned to Mr van der Merwe, the likelihood of unlawful possession is avoided.
[66] Besides, under the rei vindicatio, if the actual thing is not returnable to the owner who successfully vindicates it, the equivalent value shall be returned.[76] The equivalent value of the Rand must be determined at the Rand to Euro exchange rate applicable as at the date of the seizure of the Euros. That is the value of the currency seized from him and that is what must be returned to him.
Applicants’ alternative argument: infringement of section 25(1)
[67] The full court decided that there had been no automatic forfeiture. However, applicants proceeded to argue that if this Court should find that the foreign currency was seized under Regulation 3(5) and not under section 20 of the CPA, they would contend that Regulation 3(5) infringes section 25(1) of the Constitution. The basis of their argument would be that because the regulation permits automatic forfeiture following seizure under Regulation 3(5),[77] it results in arbitrary deprivation of property in violation of section 25(1) of the Constitution.
[68] I have found that the seizure of the currency was effected under section 20 of the CPA. I have also found that the State holds the currency under section 20. Following this finding, I have further held that the disposal of the foreign currency must be determined, not under Regulation 3(5) but in terms of the provisions of the CPA, in particular section 31(1)(a) which regulates the disposal of articles seized under section 20 of the CPA.[78] Regulation 3(5) for this reason has no relevance for the disposal of the currency. Applicants’ alternative claim based on the unconstitutionality of Regulation 3(5) has therefore become unnecessary to decide. I refrain from doing so.
[69] Next to be determined is whether respondents as organs of State, by failing to provide Mr van der Merwe with the necessary information and certainty as regards the legal basis for the seizure and holding of the foreign currency, as described earlier in this judgment,[79] acted in conflict with their public service duties under the Constitution, in particular sections 1 and 195.
Whether respondents have acted contrary to sections 1 and 195 of the Constitution
[70] Although the seizure of the foreign currency was lawful and was a justified basis for Mr van der Merwe’s arrest, the conduct of the respondents, described earlier in this judgment,[80] created circumstances of grave legal uncertainty with regard to the seizure of a large amount of his money which compelled Mr van der Merwe to seek answers from the courts. Further, respondents’ constant vacillation with regard to the legal basis for the seizure and holding of a substantial amount of foreign currency, made it difficult for applicants to formulate their case before the courts with the necessary precision.
[71] Section 1 of the Constitution, read with section 195, indeed sets high standards of professional public service as applicants submit. It requires ethical, open and accountable conduct towards the public by all organs of State.[81] These are basic values for achieving a public service envisaged by our Constitution, which requires the State to lead by example.[82] In this case, the State has failed to do so.
[72] The remissness on the part of the respondents should not be countenanced. Correctly so, none of the respondents attempted to defend it. In this constitutional era, where the Constitution envisages a public administration which is efficient, equitable, ethical, caring, accountable and respectful of fundamental rights, the execution of public power is subject to constitutional values.[83] Section 195 reinforces these constitutional ideals. It contemplates a public service in the broader context of transformation as envisaged in the Constitution and aims to reverse the disregard, disdain and indignity with which the public in general had been treated by administrators in the past.[84] Section 195 envisions that a public service reminiscent of that era has no place in our constitutional democracy. The remissness on the part of the respondents is not conducive to the current efforts of public service transformation.[85] It must certainly be discouraged. In that context the conduct of the respondents is indeed contrary to sections 1 and 195 of the Constitution, as the applicants submit.[86] Although the applicants submitted that the respondents’ conduct was inconsistent with sections 1 and 195 of the Constitution, they did not claim that it constitutes a basis for a self-standing cause of action. I will therefore not determine that question.
[73] In my view, despite the difficulties created by the respondents, Mr van der Merwe has been successful in proving his ownership of the foreign currency. I would accordingly order that the application for leave to appeal be granted and costs should follow the result. In the result I would set aside the order of the full court in the Cape High Court and replace it with the following order:
(a) the respondents return to Mr van der Merwe forthwith the foreign currency in the amount of €130 000 seized from him following his arrest on 13 July 2004;
(b) the foreign currency be converted to the equivalent of South African Rands according to the Rand to Euro exchange rate at 13 July 2004;
(c) the respondents be ordered jointly and severally to pay the applicants’ costs of suit in the application for leave to appeal to this Court;
(d) the respondents be ordered jointly and severally to pay applicants’ costs in the trial court; and
(e) the respondents pay the applicants’ costs jointly and severally in the application for leave to appeal to the full court and the application for special leave to appeal to the Supreme Court of Appeal.
SACHS J:
[74] I agree with the judgment of Mokgoro J in part, and with the majority judgment in part.
[75] The reality of the situation, in my view, is that Mr van der Merwe used his own funds to get all the foreign exchange allocations. He bumped up the amounts considerably by getting foreign currency based on allocations that could legitimately be attributed to other members of the group with whom he proposed travelling. The evidence points to the fact that he always intended to control the funds, dishing them out as and when he pleased. Yet he cannot have his cake and eat it. He purported to carry the foreign exchange on behalf of the others, and could not lawfully backtrack on that. Accordingly, I agree with the majority that he cannot get these extra allocations back.
[76] As far as his own quota is concerned, however, I agree with O’Regan J that the issue of the date to which the rei vindicatio action would apply where section 20 of the Criminal Procedure Act[1] (the CPA) is involved, was not well-ventilated on the papers. It was not considered in the High Court. Nor was it argued before us. The onus was on the defendant, in this case the State, to make its reliance on section 20 of the CPA clear in its pleadings. If it had done so, the applicant would have been in a position to consider amending his claim to bring it under section 31(1)(a) of the CPA.[2]
[77] In these circumstances I do not think it appropriate for this Court to subject the matter to a procedural re-run. What we know for certain is that the money was seized but not forfeited. Years have passed, and there is nothing before us to suggest that the money is needed for purposes of the prosecution. In my view, Mr Van der Merwe should get his own quota back. To this extent I agree with the judgment of Mokgoro J, and support the order she would make.
O’REGAN J:
[78] I have had the opportunity of reading the judgments prepared in this matter by Mokgoro J, Moseneke DCJ and Nkabinde J, as well as Sachs J. I am unable to agree
with the orders proposed in all these judgments as, in my view the application for leave to appeal should be dismissed because it is not in the interests of justice to hear it.
[79] The applicants seek to vindicate an amount of €130 000 in foreign bank notes (the currency) from the respondents. The currency was seized from the first applicant at the Cape Town International Airport on 13 July 2004. In addition to the €130 000, an amount of US$21 249 was also seized. The applicants have abandoned their claim for the US Dollars and that claim needs no further consideration.
[80] The first issue is whether the case raises a constitutional matter. The case concerns a claim by the applicants for the return of the currency seized by the state. Although the applicants no longer dispute the lawfulness of the original seizure, they assert that as owners of the currency they are now entitled to its return. For the purposes of this question, I shall assume, but not finally decide, that the applicants have established that they are owners of at least a portion of the currency. To the extent that the applicants have established ownership of all or a portion of the currency, they have established that they have been deprived of the currency by the state. The question of whether that deprivation is arbitrary or not raises a constitutional issue. The next question that arises is whether it is in the interests of justice for this Court to hear the appeal.
[81] In written argument counsel for the applicants point to three reasons why they assert that it is in the interests of justice for this Court to grant the application for leave to appeal. The first relates to the differing interpretations of the exchange control regulations[1] adopted by the Pretoria High Court in Action Engineering and Fencing (Pty) Ltd v Moyses NO and Others[2] and the full court of the Cape High Court in this case.[3] The second relates to the conduct of the respondents and, in particular, the conflicting arguments that the respondents have raised in opposing the relief sought by the applicants. The applicants argue that this is in conflict with the respondents’ constitutional duties in terms of section 195[4] and section 1[5] of the Constitution. The third is the applicants’ prospects of success.
[82] I turn now to consider the first reason. Throughout the litigation, there has been some doubt as to the legal basis upon which the currency was seized by the police. It is clear that the first applicant was arrested on the ground that he was suspected to have committed an offence in terms of regulation 3(1)(a) of the exchange control regulations.[6] At first instance, Allie J held that the currency was seized in terms of regulation 3(3) of the exchange control regulations[7] and then automatically forfeited in terms of regulation 3(5) of the same regulations.[8] She accordingly held that the applicants were not entitled to the return of the currency.
[83] The full court, however, disagreed with Allie J that regulation 3(5) permits an automatic forfeiture of currency seized in terms of regulation 3(5). It therefore disagreed with the judgment of the Pretoria High Court in Action Engineering and Fencing[9] as to whether forfeiture of currency follows automatically upon seizure. The full court also disagreed with Allie J that where a person is arrested in terms of regulation 3(1)(a), any seizure of currency which accompanies the arrest must take place in terms of regulation 3(3). The full court held that a seizure accompanying such an arrest could take place in terms of either regulation 3(3) or section 20 of the Criminal Procedure Act 51 of 1977 (the Criminal Procedure Act). The full court did not finally need to decide the question, however, as it held that the applicants had not established ownership of the currency and the vindicatory relief sought by the applicants was refused on that basis.
[84] It is clear therefore that there is a difference of opinion between the full court of the Cape High Court and the Pretoria High Court as to the proper interpretation and effect of regulation 3(5) of the exchange control regulations. The proper interpretation of regulation 3(5) does raise a constitutional matter. Indeed, its interpretation was raised in the case of Armbruster and Another v Minister of Finance and Others,[10] a case heard on the same day as the present case, in which judgment is to be delivered shortly. However, it became clear during oral argument in the present case, that neither party was contending that the currency was seized in terms of regulation 3(3) of the exchange control regulations. Both parties accepted that the seizure took place in terms of section 20 of the Criminal Procedure Act.
[85] Accordingly, given the acceptance by both parties that the exchange control regulations are not in issue in this case, the difference of opinion between the full court of the Cape High Court and the Pretoria High Court in relation to the proper interpretation of those regulations no longer arises for consideration in this case. It is a matter which arises for decision in Armbruster. It accordingly cannot render it in the interests of justice for the Court to consider this application for leave to appeal.
[86] The second reason advanced by the applicants’ counsel is based on section 195 of the Constitution which sets out the basic values and principles that govern public administration. The applicants argue that the conduct of the respondents, first in transferring the currency to the Commissioner of the South African Revenue Service (SARS) on 19 July 2004, without informing the applicants thereof; and secondly, in the transfer of the currency by SARS to the Reserve Bank on 1 March 2005, is disquieting. They argue that it showed an intention by the respondents to hold onto the funds “at all costs”.
[87] It is clear that the respondents have been uncertain as to the legal basis upon which they continue to hold the currency. Of equal importance, however, is the fact that it is common cause between the parties that the currency was lawfully seized by the respondents on 13 July 2004; and that it is undisputed that when Mr van der Merwe applied for foreign currency in July 2004, he had already exceeded his foreign currency limit for 2004.
[88] There can be no doubt that section 195 of the Constitution is a provision of profound importance in our constitutional order. Public administration must be ethical, accountable and fair. What is less clear is whether section 195 gives rise to an independent cause of action or only informs other causes of action. Although during the litigation the respondents were less than clear as to the basis upon which they continued to hold the foreign currency, their attitude at all times was that Mr van der Merwe was arrested at the airport on grounds of having committed an offence in terms of the exchange control regulations and that the money was lawfully seized on that basis. Moreover, as has been set out above, Mr van der Merwe does not dispute in these proceedings that when he applied for the currency, he had already exhausted his foreign exchange allowance for the year. In my view, whatever cause of action may arise from section 195, it cannot be said that in the circumstances of this case, section 195 would independently result in an order by this Court requiring the respondents to return the currency to Mr van der Merwe which appears to be the only relief, save for a special costs order, which the applicants seek in respect of section 195. In the circumstances, therefore, I am not persuaded that this is an appropriate case to explore the full implications of section 195. Accordingly, it contributes no weight to the determination of whether it is in the interests of justice that the application for leave to appeal be granted.
[89] The third factor to which the applicants refer, in seeking to establish that it is in the interests of justice to grant the application for leave to appeal, is their prospects of success on appeal. As it happens, the majority of the Court has dismissed the appeal, but in my view, even if that result is left out of account, there are other considerations which weigh against this Court granting leave to appeal.
[90] The application was launched as a matter of urgency in the Cape High Court on the basis of the mandament van spolie. The applicants sought the return of the currency on the basis that the currency in Mr van der Merwe’s possession was within his lawful allowance, and that his arrest and the seizure of the currency were unlawful. The applicants abandoned this argument when the matter was heard by the Cape High Court. There they accepted that the