Mohunram and Another v National Director of Public Prosecutions and Another (Law Review Project as Amicus Curiae) (CCT19/06) [2007] ZACC 4 (26 March 2007)

VAN HEERDEN AJ:

Introduction

This is an application for leave to appeal against a judgment of the Supreme Court of Appeal,¹ upholding an appeal from a judgment of the Pietermaritzburg High Court and replacing the order of that court with an order declaring an immovable property forfeit to the state in terms of the Prevention of Organised Crime Act 121 of 1998 (“POCA”). The property in question is registered in the name of the second applicant, Shelgate Investments CC (“Shelgate”). The first applicant, Mr Kumarnath Mohunram, holds a 100 percent member’s interest in Shelgate. The forfeiture order was granted on the basis that such property was an “instrumentality” of an offence under the KwaZulu Natal Gambling Act 10 of 1996 (“the KZN Gambling Act”).

On 19 October 2001, the Pietermaritzburg High Court granted a preservation order in terms of section 38(2) of POCA. The order related to a sectional title unit in a scheme known as the Malapin Centre together with an undivided share in the common property (“the property”). The National Director of Public Prosecutions (“NDPP”), the first respondent before this Court, in due course applied to the High Court under section 48 of POCA for a forfeiture order in terms of section 50. A mortgage bond is registered over the property in favour of NBS, one of the operating divisions of BOE Bank Limited (“BOE”), nominally the second respondent before this Court but which does not oppose any of the relief sought by the applicants. BOE filed a notice in terms of section 39(3) of POCA as a party with an interest in the property. It did not oppose the application for a forfeiture order, but merely sought to retain its interest in the property through the mortgage bond registered in favour of NBS, more particularly its rights as a secured creditor in terms of section 43(3)(a) of POCA.

The High Court dismissed the NDPP’s application for a forfeiture order, concluding that the property had not been shown to be an instrumentality of an offence. The NDPP appealed to the Supreme Court of Appeal, which upheld the appeal and granted the forfeiture order. It is that judgment against which the applicants now seek leave to appeal to this Court. They also apply for condonation for the late filing of the record. As the explanation given by them for the delay is satisfactory and the NDPP consented to the late filing of the record, the condonation application should be granted.

This Court has allowed the Law Review Project (“LRP”) to intervene in this matter as amicus curiae. Written as well as oral argument was addressed to the Court on behalf of the LRP.

Factual background

In 1998, Mr Mohunram purchased the 100 percent member’s interest in Shelgate. He took occupation of the premises, partitioned the building and commenced trading as Vryheid Glass and Aluminium. However, along with the legitimate glass and aluminium business, Mr Mohunram also operated up to 57 gaming machines on the premises. This was done in contravention of section 44 of the KZN Gambling Act, which provides that no person may operate a casino² unless validly licensed.³ In terms of section 3(3)(a) of the same Act, the owner of a building may not allow any other person to conduct any gambling activity therein or thereon unless that person has been duly licensed.⁴ Shelgate as owner acted in contravention of this section, “allowing” its sole member, Mr Mohunram, to conduct the illegal casino. Mr Mohunram also contravened section 95(2), read together with section 55, of the Act by being in possession of unregistered gaming machines without a permit for the storage of these machines. Finally, by employing people to work in his unlicensed casino, Mr Mohunram contravened section 3(4)(b) of the Act, which prohibits such employment.⁵

In April 2001, Mr Mohunram was arrested in connection with his illegal casino operation. He was subsequently charged with 57 counts of contravening section 95(2) of the KZN Gambling Act (being in possession of 57 unregistered gaming machines without the requisite permits), as well as with three counts of contravening section 3(4)(b)⁶ (employing three people in his unlicensed casino). He paid admission of guilt fines of R1 500 each in respect of counts one to 57 (R85 500 in total) and of R1 000 each in respect of counts 58 to 60 (R3 000 in total). In addition, under the provisions of the KZN Gambling Act, he forfeited about R2 100, being monies that were found and seized on the premises during a police raid. His 57 gaming machines (which he valued at approximately R285 000 in total) were also seized and destroyed in terms of the same legislation.⁷ Shelgate was not charged.

Subsequently, the NDPP launched the proceedings that ultimately led to the forfeiture order in respect of the property and culminated in the present application.

Application for leave to appeal

Before leave to appeal to this Court can be granted, it is incumbent on the applicants to satisfy two requirements: (a) the application must raise a constitutional matter or issues connected with decisions on constitutional matters;⁸ and (b) it must be in the interests of justice that leave be granted.⁹

In the light of the recent judgment of this Court in Prophet v National Director of Public Prosecutions,¹⁰ it must be accepted that the application for leave to appeal does indeed raise a constitutional issue. In Prophet, Nkabinde J, writing for a unanimous Court, held as follows:

“Asset forfeiture orders as envisaged under Chapter 6 of the POCA are inherently intrusive in that they may carry dire consequences for the owners or possessors of properties particularly residential properties. Courts are therefore enjoined by section 39(2) of the Constitution to interpret legislation such as the POCA in a manner that ‘promote[s] the spirit, purport and objects of the Bill of Rights’, to ensure that its provisions are constitutionally justifiable, particularly in the light of the property clause enshrined in terms of section 25 of the Constitution.”¹¹ (Footnotes omitted.)

The applicants contended that it is also in the interests of justice to grant leave to appeal. According to them, the facts of this case are fundamentally distinguishable from those of previously decided cases where forfeiture orders in terms of POCA have been granted. The applicants submitted that this appeal highlights the questions whether, in the particular circumstances of this case, the property in question was indeed an “instrumentality of an offence” for the purposes of POCA and, if so, whether the forfeiture was “proportional”. It was further argued that the mischief admitted to by Mr Mohunram is not the mischief envisaged in the long title of, or the preamble to, POCA. The Supreme Court of Appeal thus erred in failing to consider whether the legislature intended that a person who engaged in what the applicants called “a universally condemned offence, such as drug dealing” ought to be treated in precisely the same way, as regards the forfeiture provisions, as a person who “at all times pursued legitimate business interests” on the property in question and “committed an offence simply by not having a licence for that particular activity”.

As indicated above, BOE did not oppose the application for leave to appeal and abides the decision of this Court. The NDPP conceded that the application for leave to appeal does raise a constitutional matter. It submitted, however, that it is not in the interests of justice to grant leave to appeal because the applicants do not have reasonable prospects of success.¹² This Court should thus dismiss the application for leave to appeal or, alternatively, dismiss the appeal itself.

The amicus curiae, the LRP, made it clear that it raised no challenge to the constitutionality of POCA. It submitted, however, that this case raises a constitutional issue because the Supreme Court of Appeal interpreted the relevant provisions of the KZN Gambling Act and of POCA in the light of the text and the overall structure of the latter statute without proper regard to the Constitution, with the consequence that the forfeiture which it upheld in this case constituted: (i) an unlawful and arbitrary deprivation of property and thus an infringement of section 25 of the Constitution;¹³ and/or (ii) a penal deprivation of property that is grossly disproportionate, arbitrary and irrational and so infringed the “cruel and unusual punishment clause” in the Constitution.¹⁴ The grounds relied on by the LRP for these conclusions will be considered in greater detail below.

In my view, it is in the interests of justice that the applicants be granted leave to appeal on the issues raised by them. As stated in Prophet:

“This issue [the forfeiture of the applicant’s property] entails both what constitutes an instrumentality of an offence, and the proportionality of the forfeiture under Chapter 6. Both these questions raise important constitutional issues of substance and need to be determined to resolve the key complaint of the applicant: the question whether the order declaring his property forfeit should be set aside.”¹⁵

The applicants contended that the facts in this present matter are fundamentally distinguishable from those of any of the decided cases in which civil forfeiture under POCA has been granted and requires a fresh examination of both the issues of instrumentality of an offence and of proportionality of a forfeiture order. This being so, it is in the interests of justice that the applicants be granted leave to appeal on the issues raised by them.

Issues

As Harms JA pointed out in the Supreme Court of Appeal judgment in this case:

“There are usually three main issues in a case such as this to decide and they are (a) whether the property concerned was an instrumentality; (b) whether any interests should be excluded from the forfeiture order; and (c) whether the forfeiture sought would be disproportionate.”¹⁶

In the present application, as before the Supreme Court of Appeal, the second issue does not arise, but the other issues both remain in dispute. Before dealing with these issues, however, it is necessary to consider several of the points raised (the first in considerable detail) by the LRP.

The meaning of “offence” in the context of Chapter 6 of POCA

The LRP submitted that POCA was construed by the Supreme Court of Appeal in a manner that improperly brought gambling per se within the compass of the Act and that, in consequence, the forfeiture provisions of POCA were incorrectly brought to bear on Shelgate’s property. According to the LRP, the offences for which forfeiture is potentially competent are limited to those “created” by POCA, that is, racketeering under Chapter 2, money laundering under Chapter 3 and criminal gang activities under Chapter 4. The LRP collectively terms these offences “organised crime offences”. Since unlicensed gambling, without more, is not an organised crime offence, no order of forfeiture can, it was contended, competently be made under POCA on the basis of the provisions authorising the forfeiture of the instrumentalities of this offence.

The LRP argued that, in proceedings before the courts which have considered the relevant provisions of POCA, an “assumption” has been made that, provided an offence falls within the ambit of Schedule 1 to POCA, forfeiture is competent. Underlying this assumption is an acceptance of the proposition that the “offence” contemplated in the phrase “instrumentality of an offence referred to in Schedule 1”, as it appears in sections 38 and 50(1), includes every offence listed in the Schedule, whatever its nature. According to the LRP, this assumption is unfounded, as POCA makes a clear distinction between “offences”, on the one hand, and “crimes” and “unlawful activities”, on the other. The “proceeds of unlawful activities”, which by virtue of its definition includes crimes, can be declared forfeit whatever the nature of the unlawful activity or crime, giving expression to the ancient doctrine that no one should be permitted to profit from his or her wrongdoing. By contrast, so contended the LRP, before the instrumentalities of wrongdoing can be declared forfeit, the act or omission must be “an organised crime offence” as contemplated in POCA and, in addition, the “offence” must be one referred to in Schedule 1. Thus, the reference to Schedule 1 simply limits the ambit of the offences under POCA that can provide the basis for the grant of the forfeiture order. Were it otherwise, the legislature could have been expected to incorporate the reference to Schedule 1 in the definition of “instrumentality of an offence” in section 1.

The effect of this approach, the LRP submitted, is that wrongdoing that fails to satisfy both these requirements cannot provide a basis for the grant of a forfeiture order under POCA. The LRP accepted that gambling without a licence falls within the compass of Schedule 1 and that gambling can, in circumstances where it is also an organised crime offence, constitute an offence within the contemplation of POCA. Gambling may therefore be the basis or infrastructure of an offence contemplated by POCA, but it must in addition be shown that the statutory requirements of systematic racketeering, criminal gang activity or money laundering are present. Thus, according to the LRP, if only one of the two requirements is satisfied, no forfeiture is competent, as in this case where there was no proof of the second requirement.

The LRP found support for this construction of POCA in what it regarded as the purpose and object of POCA, as reflected in the short and long titles and the preamble – namely to prevent organised crime. It also relied for its submissions in this regard on the actual text of POCA, contending that throughout POCA, the word “offence”, when used without qualification, refers exclusively to “organised crime offences”. The LRP sought to illustrate this contention by referring in particular to section 18. This section provides for the making of a confiscation order in respect of the “proceeds of offences or related criminal activities” when a defendant is convicted of an “offence” and empowers the trial court to enquire into any benefit that the defendant may have derived from “that offence” and from “any other offence of which the defendant has been convicted at the same trial”.¹⁷ The import of this distinction between two kinds of offences, so submitted the LRP, is to differentiate between offences under POCA (“organised crime offences”) and all other crimes (“ordinary crimes”).

The LRP argued further that, under the scheme of POCA, section 19(2) makes it clear that property forfeited on the basis that it constitutes the proceeds of crime must be brought into account by a criminal court in determining the quantum of a confiscation order it proposes to make.¹⁸ No equivalent provision is made for the court to take into account property that has been declared forfeit on the grounds that it is an instrumentality of the crime in question. According to the LRP, the legislature might conceivably have thought that it would be just and fitting to ignore relevant forfeiture orders in this way on the basis that the crime in question constituted an “organised crime offence”. It could, however, never have contemplated that every declaration of forfeiture of property arising out of any crime listed in Schedule 1 would be left out of account by a criminal court making a confiscation order simply because the property forfeited constituted an instrumentality of the relevant crime.

According to the LRP, the courts have consistently recognised that the forfeiture of the instrumentalities of any crime embraced by Schedule 1 can produce arbitrary and unjust consequences. In an effort to moderate the problem, they have been forced to reconstruct the statute by interpreting the word “shall” in section 50(1) as “may”.¹⁹ Only in this way have the courts been able to create a discretion, which they have said is to be exercised by reference to the principles of proportionality. The LRP acknowledged that this reconstruction of the statute may be conceptually justified in order to give due weight to the provisions of the Bill of Rights. It nevertheless contended that there is no denying that the legislature intended the forfeiture to be obligatory once the requirements of section 50 were satisfied. Parliament could never have harboured such an intention, the LRP submitted, unless it envisaged that the only offences for which an order of forfeiture based on instrumentality would be competent would be those offences created by POCA itself. The legislature might have been willing to countenance obligatory forfeiture in respect of offences as harmful to society as organised crime offences, but it could hardly have had the same intention in respect of all the offences referred to in Schedule 1.

These submissions are not convincing. First, it is important to note that, subsequent to the judgment of the Cape High Court in National Director of Public Prosecutions v Carolus and Others,²⁰ in which Blignault J held that Chapter 6 of POCA²¹ (as it was then) was not retrospective in effect,²² the Act was amended by the Prevention of Organised Crime Second Amendment Act 38 of 1999,²³ (“Act 38 of 1999”) “so as to make it clear that the provisions of Chapters 3, 5 and 6 are applicable in respect of instrumentalities of offences and proceeds of unlawful activities where such offences or unlawful activities occurred before the commencement of the Act”,²⁴ that is, that these provisions do operate retrospectively.

The definition of “instrumentality of an offence” in section 1(1) of POCA was substituted so as to mean:

“any property which is concerned in the commission or suspected commission of an offence at any time before or after the commencement of this Act, whether committed within the Republic or elsewhere”. (Emphasis added.)

The definition of “proceeds of unlawful activity” was also substituted to mean:

“. . . 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.”²⁵ (Emphasis added.)

The point of the amending legislation was driven home most pertinently by the insertion of a new section 1(5) into POCA in the following terms:

“Nothing in this Act or in any other law, shall be construed so as to exclude the application of any provision of Chapter 5 or 6 on account of the fact that –

(a) any offence or unlawful activity concerned occurred; or

(b) any proceeds of unlawful activities were derived, received or retained, before the commencement of this Act.” (Emphasis added.)

This being so, the contention of the LRP to the effect that the offences for which forfeiture under Chapter 6 of POCA is potentially competent are limited to the offences “created” by Chapters 2, 3 and 4 of POCA (what the LRP calls “organised crime offences”) cannot be correct. A reading of POCA, as amended, makes it clear that it applies to offences committed before and after the commencement of the Act and accordingly has a wider ambit than that of offences that were “created” by POCA, and which thus only existed from its date of commencement in January 1999.

It is certainly true that POCA, even as amended, is not a model of legislative clarity and coherence. The short title refers only to the prevention of “organised crime”, while the first two phrases of the long title state that the Act is “to introduce measures to combat organised crime, money laundering and criminal gang activities” and “to prohibit certain activities relating to racketeering activities”. As pointed out by Griesel J in National Director of Public Prosecutions v Seevnarayan, the organised crime leitmotif forms “a recurrent theme throughout the Act”.²⁶ Notwithstanding this recurrent theme, the wording of POCA as a whole makes it clear that its ambit is not in fact limited to so-called “organised crime offences”, so that the initial impression created by the short and long titles, as well as by most of the paragraphs of the preamble, is incorrect. This is misleading and more than a little unfortunate. However, as pointed out by the NDPP, arguments along the lines of that advanced by the LRP in this regard have been considered and rejected by the Supreme Court of Appeal on two prior occasions. In Cook Properties, the court held that such an interpretation of POCA:

“. . . radically truncates the scope of the Act. It leaves out portions of the long title, as well as the ninth paragraph of the preamble. These show that the statute is designed to reach far beyond ‘organised crime, money laundering and criminal gang activities’. The Act clearly applies to cases of individual wrong-doing.”²⁷

In the recent case of National Director of Public Prosecutions v Van Staden and Others,²⁸ the Supreme Court of Appeal reiterated that the provisions of POCA “are designed to reach far beyond organised crime and apply also to cases of individual wrongdoing”.²⁹ It is not correct (as the LRP would have it) that these judgments have simply made an “assumption” that, provided an offence falls within the ambit of Schedule 1, forfeiture is competent. On the contrary, the interpretation of the relevant provisions of POCA by the Supreme Court of Appeal in these cases was based on the wording of the Act and formed part of the ratio decidendi of the judgments.

So too in Prophet, although the offence in question was drug-manufacturing, there would appear to have been no evidence before the court to link the “backyard laboratory” conducted by Mr Prophet with racketeering, money laundering or criminal gang activities. On the contrary, as was expressly acknowledged by Mpati DP in the Supreme Court of Appeal judgment in that case:

“[w]hether the appellant was manufacturing drugs for sale or for personal use is unknown. But drug trafficking and drug abuse are a scourge in any society and are viewed in a very serious light. The penalties provided for drug offences in the Drugs Act are testimony to this.”³⁰

The LRP also contended that the structure of POCA “suggests that the regime for the forfeiture of the instrumentalities of an offence was added almost as an afterthought” and that this regime was “plainly designed to be ancillary and to play a mere supportive role”. However, as pointed out by the NDPP, this Court stated in National Director of Public Prosecutions and Another v Mohamed NO and Others³¹ that POCA (and particularly Chapters 5 and 6 thereof),

“. . . represents the culmination of a protracted process of law reform which has sought to give effect to South Africa’s international obligation and domestic interest to ensure that criminals do not benefit from their crimes”.³²

Paragraph 9 of the preamble to POCA in its original form read as follows:

“AND WHEREAS persons should not benefit from the fruits of organised crime and money laundering, legislation is necessary for the preservation and forfeiture of property which is concerned in the commission or suspected commission of an offence”.

This paragraph was substituted in terms of section 13 of Act 38 of 1999 with the following paragraphs:

“AND WHEREAS no person convicted of an offence should benefit from the fruits of that or any related offence, whether such offence took place before or after the commencement of this Act, legislation is necessary to provide for a civil remedy for the restraint and seizure, and confiscation of property which forms the benefits derived from such offence;

AND WHEREAS no person should benefit from the fruits of unlawful activities, nor is any person entitled to use property for the commission of any offence, whether such activities or offence took place before or after the commencement of this Act, legislation is necessary to provide for a civil remedy for the preservation and seizure, and forfeiture of property which is derived from unlawful activities or is concerned in the commission or suspected commission of an offence”.

The change of wording, read together with the other provisions of Act 38 of 1999 discussed above, illustrates the intention of the legislature to make it quite clear that the civil forfeiture provisions of POCA reach beyond the categories of organised crime created by the Act. The applicants did not attack the constitutionality of the provisions of POCA dealing with civil forfeiture of the instrumentalities of offences on the basis that, if these provisions are interpreted so as to apply to offences other than “organised crime offences”,³³ then they are unconstitutional and invalid. Neither did they challenge the constitutionality of the amendments to POCA by Act 38 of 1999. Not surprisingly, as an amicus curiae, the LRP did not seek to raise any challenge to the constitutionality of POCA itself, but confined its arguments to the matters as pleaded by the parties, in the manner set out above. Like the applicants, it too made no attempt to show that the judgments of the Supreme Court of Appeal in either Cook Properties³⁴ or Van Staden,³⁵ as regards the ambit of POCA, were wrong.

Had there been a proper constitutional challenge by one of the parties, then in terms of Rule 5 of the Constitutional Court Rules,³⁶ the Minister of Justice would have had to be joined as a party to the proceedings. Furthermore, the NDPP and the Minister would then have had the opportunity to place before the Court information and arguments relating to justification in terms of section 36³⁷ of the Constitution.³⁸ If the NDPP were to be required in an application for a preservation order or for a forfeiture order under POCA, to show that the offence in question, in addition to being one of the Schedule 1 offences, also constitutes (or at the least is rationally connected to) racketeering, money laundering or criminal gang activities, this might unduly hamper the achievement of the objects of POCA. This possibility might have to be considered by this Court in an appropriate future matter. I refrain from expressing a view one way or the other in this regard. The fact of the matter is that, because of the manner in which the papers in this case were framed and the proceedings conducted, neither the NDPP nor the Minister had any opportunity to place information of this kind before the Court.

In Prince v President, Cape Law Society, and Others, this Court stated the following:

“Parties who challenge the constitutionality of a provision in a statute must raise the constitutionality of the provisions sought to be challenged at the time they institute legal proceedings. In addition, a party must place before the Court information relevant to the determination of the constitutionality of the impugned provisions. Similarly, a party seeking to justify a limitation of a constitutional right must place before the Court information relevant to the issue of justification. I would emphasise that all this information must be placed before the Court of first instance. The placing of the relevant information is necessary to warn the other party of the case it will have to meet, so as to allow it the opportunity to present factual material and legal argument to meet that case. It is not sufficient for a party to raise the constitutionality of a statute only in the heads of argument, without laying a proper foundation for such a challenge in the papers or the pleadings. The other party must be left in no doubt as to the nature of the case it has to meet and the relief that is sought. Nor can parties hope to supplement and make their case on appeal.”^³⁹ (Footnote omitted.)

In the absence of any constitutional challenge to either the relevant provisions of Act 38 of 1999 or to the interpretation of the provisions of POCA relating to civil forfeiture of the instrumentality of an offence as extending beyond “organised crime offences” to cover cases of individual wrongdoing, it would, in my view, be wrong for this Court to enquire into and pronounce upon these issues in the present case. Any such enquiry would have to await a proper constitutional challenge if such a challenge were to be brought at some stage in the future.

In conclusion on this point, I remain unconvinced by the LRP’s contention that Chapter 6 of POCA can reasonably be interpreted so as to apply only to so-called “organised crime offences”.

No adequate proof that the casino was operating on Shelgate’s property

The LRP contended that there was no adequate proof on the papers that the illegal casino was in fact operated on Shelgate’s property. It annexed a schedule by means of which it purported to demonstrate that there was no clarity as to the true physical address of the casino and no certainty on whether the casino was operated on the property registered in Shelgate’s name.

These contentions do not withstand scrutiny. Section 37 of POCA makes it clear that proceedings under Chapter 6 are civil proceedings in every sense.⁴⁰ The NDPP applied for, and was granted, a preservation order in respect of section 2 in the scheme known as Malapin Centre (as shown and more fully described on sectional plan number SS 577/96) and an undivided share in the common property in the scheme. The NDPP applied for a forfeiture order in respect of the same property and the order granted by the SCA on appeal related to this property. In the High Court proceedings, the applicants filed two answering affidavits in which they admitted that the property was used to conduct an unlawful casino. Moreover, in their application for leave to appeal to this Court, the applicants did not suggest that there was any dispute regarding the fact that the property had been used to conduct a casino.

The operation of the casino on Shelgate’s property is common cause on the papers and it follows that there is no merit in the LRP’s contention that it has not been shown that Shelgate’s property was used by Mr Mohunram to conduct the illegal casino.

Forfeiture provisions of the KZN Gambling Act

The LRP submitted that, in framing the provisions of the KZN Gambling Act, the legislature made specific provision for forfeiture in section 94(4) and, in so doing, signified an intention that the forfeiture regime so created would suffice to meet the mischief sought to be cured by the enactment. Gambling equipment and machines fall within the compass of section 94(4), but the premises on which a casino is operated do not. Thus, it was contended, POCA cannot have been intended to apply to gambling offences covered by the Act.

I do not agree with this submission. First, the relevant section of the KZN Gambling Act creates a further criminal sanction for the offence, whereas Chapter 6 of POCA deals specifically with civil forfeiture. Second, the KZN Gambling Act provides for the forfeiture of the immediate means of the offence, such as gaming machines and money, whereas in appropriate circumstances POCA has a much broader application, as “instrumentality” can extend to include property (such as a house or a factory) which is shown to have been involved in the commission of the offence.

By way of comparison, section 25(1) of the Drugs and Drug Trafficking Act 140 of 1992 (“the Drugs Act”) provides as follows:

“Whenever any person is convicted of an offence under this Act, the court convicting him shall, in addition to any punishment which that court may impose in respect of the offence, declare –

(a) any scheduled substance, drug or property –

(i) by means of which the offence was committed;

(ii) which was used in the commission of the offence; or

(iii) which was found in the possession of the convicted person;

(b) any animal, vehicle, vessel, aircraft, container or other article which was used –

(i) for the purpose of or in connection with the commission of the offence; or

(ii) for the storage, conveyance, removal or concealment of any scheduled substance, drug or property by means of which the offence was committed or which was used in the commission of the offence;

(c) in the case of an offence referred to in section 13(e) or (f),⁴¹ any immovable property which was used for the purpose of or in connection with the commission of that offence,

and which was seized under section 11(1)(g) or is in the possession or custody or under the control of the convicted person, to be forfeited to the State.” (Footnote inserted.)

A criminal prosecution, followed by a conviction, sentence and even a criminal forfeiture, is no bar to the invocation of the civil forfeiture provisions of Chapter 6 of POCA and conversely, as is evident from the Prophet case,⁴² the invocation of these provisions is not contingent upon a conviction.⁴³ A declaration of criminal forfeiture under section 25 of the Drugs Act does not eliminate the possibility of civil forfeiture, in terms of Chapter 6 of POCA, of the instrumentalities of offences referred to in section 13 of the Drugs Act⁴⁴ in appropriate circumstances. The same reasoning applies to the relationship between a criminal forfeiture of property in terms of section 94(1) of the KZN Gambling Act in respect of an offence under that Act and a possible civil forfeiture under POCA of property constituting the instrumentality of the same offence.⁴⁵

POCA is national legislation and the KZN Gambling Act is a provincial Act. As casinos are an area of concurrent national and provincial competence in terms of Schedule 4 of the Constitution, the statutes must operate concurrently. However, as will be discussed further below, civil forfeiture under POCA, although it does have remedial objectives, also has palpably punitive or penal effects.⁴⁶ For this reason, in assessing the proportionality of a forfeiture order, criminal penalties (including forfeitures) already incurred must be taken into consideration.

Instrumentality of an offence

I turn now to the first of the two issues identified above.⁴⁷ The correct interpretation and application of the concept “instrumentality of an offence” in the context of POCA were recently, and fully, considered by this Court in Prophet.⁴⁸ It is accordingly not necessary for purposes of this judgment to repeat the analysis that was performed in that case.

In considering the meaning of the phrase “an instrumentality of an offence referred to in Schedule 1”,⁴⁹ this Court adopted the interpretation accepted by the Supreme Court of Appeal in a trilogy of cases.⁵⁰ In the first of those cases, Cook Properties, Mpati DP and Cameron JA⁵¹ said that “[i]t is clear that in adopting this definition the Legislature sought to give the phrase a very wide meaning.”⁵² They held, however, that in order to ensure that application of the forfeiture provision does not constitute arbitrary deprivation of property in violation of section 25(1) of the Constitution:

“. . . the words ‘concerned in the commission of an offence’ must . . . be interpreted so that the link between the crime committed and the property is reasonably direct, and that the employment of the property must be functional to the commission of the crime. By this we mean that the property must play a reasonably direct role in the commission of the offence. In a real or substantial sense the property must facilitate or make possible the commission of the offence. As the term ‘instrumentality’ itself suggests . . . the property must be instrumental in, and not merely incidental to, the commission of the offence. For otherwise there is no rational connection between the deprivation of property and the objective of the Act: the deprivation will constitute merely an additional penalty in relation to the crime, but without the constitutional safeguards that are a prerequisite for the imposition of criminal penalties.”⁵³

In other words, the determining question is:

“. . . whether there is a sufficiently close link between the property and its criminal use, and whether the property has a close enough relationship to the actual commission of the offence to render it an instrumentality.”⁵⁴

The applicants in this Court did not challenge this interpretation. Instead, they sought to distinguish the present case on the facts from Prophet,⁵⁵ arguing that there was not sufficient involvement of the property in the offences to justify its forfeiture; thus, that it did not constitute an instrumentality for the purposes of POCA. According to the applicants, the essence of their offences was in fact the conduct of gaming activity without a valid licence and the property was not integral to the commission of the offences. The fact that the unlawful activity took place on the property was, in itself, not sufficient to invoke the invasive provisions of Chapter 6 of POCA. As held by Stegmann J in National Director of Public Prosecutions: In re Application for Forfeiture of Property in terms of sections 48 and 53 of the Prevention of Organised Crime Act, 1998 (Act No 121 of 1998):

“The mere fact that a particular offence was committed on a particular property would not necessarily entail the consequence that the property was ‘concerned in the commission’ of the offence, or that the property had become an ‘instrumentality of an offence’. It seems to me that evidence 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.”⁵⁶

The applicants also submitted that there was no direct causal connection between the property sought to be forfeited and the offences upon which the forfeiture application was founded. They based this submission on, inter alia, the following allegations: the criminal use of the property was not deliberate or planned, but rather fortuitous and incidental to the purpose of the property; it was acquired to pursue legitimate business interests and was used for this purpose during and after the illegal activity; the property was wholly irrelevant to the success of the illegal activity; the illegal activity commenced in 1998, during a period when it was legal and it was only later, in February 2000, that the KZN Gambling Act was amended⁵⁷ to criminalise this activity; neither the time duration nor the spatial extent of the illegal activity was reliably established, but it could be safely accepted that the illegal activity occupied a smaller section of the building, which primarily was used as a glass and aluminium factory.

These contentions do not bear scrutiny. The present application concerns an unlawful casino.⁵⁸ It is common cause that Mr Mohunram used the property – and that Shelgate “allowed” him to do so – for the purposes of operating a casino while neither he nor Shelgate had the requisite licence in terms of the KZN Gambling Act. In operating this casino,⁵⁹ Shelgate and Mr Mohunram, respectively, contravened sections 3(3)(a) and 44 of the KZN Gambling Act. Both offences are listed in Schedule 1 of POCA.⁶⁰

Section 3(3)(a) prohibits the owner of premises from using or allowing another person to use any premises for gambling activities without a licence. Section 44, read with the definition of “casino” in section 1, also prohibits the use of any premises for operating a casino without a licence.⁶¹ In short, the essence of both section 3(3)(a) and section 44 is directed at the manner in which premises are used. As pointed out by the NDPP, the legislature has chosen to prohibit the use of premises for gambling purposes rather than the activity of gambling itself, which is regulated by other statutory provisions.

It follows that the use, or allowing the use, of the property was a necessary part of the offences the applicants committed. It was not possible to commit the offences without using the property. In the language of Cook Properties, the property was “employed . . . to make possible or facilitate the commission of the offence”.⁶² Thus, the causal connection between the property and the offences was certainly a direct one. The offences themselves pivoted on the use of the property for gambling purposes. It is common cause that neither applicant had the requisite licence. That was, however, not the essence of their crimes. The essence was that the applicants used the property or allowed it to be used as an illegal casino. The property was thus integral to the commission of the relevant offences.

Even if an exclusive emphasis on the wording of the statutory provisions creating the offences in question is regarded as unduly formalistic, it can easily still be said that the property in this case was the instrumentality of the offences committed. The property was specifically adapted in various ways to operate as a casino. Mr Mohunram had partitioned the property for this use. The windows of the building housing the casino had been tinted in order to make it difficult to see into the building from the outside. It contained 57 gambling machines, arranged in rows, and a cashier’s booth had been constructed on the property to facilitate gambling activities. To use the words of Nkabinde J in the Prophet case, the property had been “appointed, arranged, organised, furnished and adapted or equipped to enable or facilitate the applicant’s illegal activities.”^⁶³

The property was also used to commit a series of offences over an extended period of time. This is another indicator of instrumentality. As was stated by the Cape High Court in National Director of Public Prosecutions v Engels:

“In order to prove this point [that the property is an instrumentality of an offence], the NDPP cannot be confined to an isolated incident of criminal conduct; on the contrary, the more such incidents that can be established, the more easily the inference may be drawn that the property in question is indeed an instrumentality of an offence.”⁶⁴

In National Director of Public Prosecutions v Parker,⁶⁵ the Supreme Court of Appeal held that repeated use of immovable property for criminal purposes may serve to render that property an “instrumentality of an offence” even if it has not been adapted specifically for criminal purposes. In the present case, as in Parker, there is “a pattern of sustained activity that reveals the use to which the premises were put and their instrumental character in the crimes committed there.”⁶⁶ On the applicants’ own version, the property was used as an illegal casino over an extended period of time. There is accordingly no merit in the applicants’ contention that the criminal use of the property was fortuitous and incidental to the purpose of the property. On the contrary, it was deliberate and planned.

On the specific meaning of “instrumentality of an offence” for the purposes of POCA, the LRP submitted that property can come within this concept only if it is “criminal property” within the contemplation of the preamble to the Act. Thus, property could only be the instrumentality of an offence if it is inherently tainted with the quality of crime and cannot be used for any lawful purpose. According to the LRP, Shelgate’s property does not have this quality.

If this argument were accepted, almost no property would qualify for forfeiture (which could hardly have been the intention of the legislature). Many things that are used for unlawful purposes can and very often do have a lawful use. The interpretation contended for by the LRP would mean that any item of property that might notionally be used for lawful purposes would not be susceptible to forfeiture, even though it had in fact been used for unlawful purposes. Not only would this interpretation give rise to glaring absurdities, it would also totally undermine the purpose of the Act. The fact that the property can be, and perhaps is, used for a lawful purpose does of course weigh in the proportionality enquiry.

To conclude on this issue, in the light of the circumstances discussed in detail above, I am satisfied that the Supreme Court of Appeal was quite correct in its finding that Shelgate’s property was indeed an instrumentality of the offences committed by it and by Mr Mohunram.

Proportionality

Turning now to the question of proportionality, the purpose of the proportionality enquiry is to determine whether the grant of a forfeiture order would amount to an arbitrary deprivation of property in contravention of section 25(1) of the Constitution. The interpretation of POCA (and more particularly of “instrumentality of an offence”) as reaching beyond the ambit of “organised crime” and applying to cases of individual wrongdoing⁶⁷ could result in situations of clearly disproportionate (and hence constitutionally unacceptable) forfeiture, and courts must always be sensitive to and on their guard against this.⁶⁸

The proper application of a proportionality analysis weighs the forfeiture and, in particular, its effect on the owner concerned, on the one hand, against the purposes the forfeiture serves, on the other. The broader societal purposes served by civil forfeiture under Chapter 6 of POCA have been held to include:

removing incentives for crime;⁶⁹

deterring persons from using or allowing their properties to be used in crime;

eliminating or incapacitating some of the means by which crime may be committed; and

advancing the ends of justice by depriving those involved in crime of the property concerned.⁷⁰

As was stated by the Supreme Court of Appeal in Cook Properties:

“We agree that property owners cannot be supine. In particular, we endorse the notion that the State is constitutionally permitted to use forfeiture, in addition to the criminal law, to induce members of the public to act vigilantly in relation to goods they own or possess so as to inhibit crime. In a constitutional State law-abiding property-owners and possessors must, where reasonably possible, take steps to discourage criminal conduct and to refrain from implicating themselves or their possessions in its ambit. And the State is entitled to use criminal sanctions and civil forfeitures to encourage this. Here constitutional principle recognises individual moral agency and encourages citizens to embrace the responsibilities that flow from it.

We therefore agree that the Act requires property owners to exercise responsibility for their property and to account for their stewardship of it in relation to its possible criminal utilisation. But the pursuit of those statutory objectives cannot exceed what is constitutionally permissible. Forfeitures that do not rationally advance the interrelated purposes of Chapter 6 are unconstitutional.”⁷¹ (Footnote omitted.)

There are of course limits as to how far the “deterrence element” of civil forfeiture may go. But it is important to remember that behind this deterrence element is a message that is clearly justifiable from a constitutional, moral and social point of view. Section 25, the “property clause” in the Constitution, must be interpreted and applied in a manner which:

“seeks to establish a balance between the need to protect private property, on the one hand, and to ensure that property serves the public interest, on the other.

. . . .

In approaching the property clause we must therefore recognise the constitutional value of property, and the importance of protecting it, while recognising that it is not absolute.”⁷²

One’s right to property carries with it important duties to use, manage or look after it in a responsible manner. The recognition of these duties is one of the ways in which the common law notion of property is rendered compatible with the values underpinning a Constitution that promotes the rule of law and other values of social significance. In the words of Professor AJ van der Walt:

“[T]o say that section 25 protects property does not mean that the protection of private property is the main or the only purpose of the property clause, or that it entrenches existing property rights in the sense of insulating them from any state interference, or in the sense of ‘freezing’ the status quo as far as existing property holdings are concerned, or that it enables the courts to frustrate legitimate state limitation of property through unjustified substantive second-guessing of government policy. The spirit and values of the Bill of Rights indicate that this cannot be the case and that the aim of section 25 is to establish a just and equitable balance between the protection of private property and the promotion of the public interest. In other words, it is argued here that section 25 can be seen as a property guarantee without necessarily falling foul of the typically libertarian view that the main function of the Bill of Rights is to insulate private property from state interferences and transformation programs, and also without making the error of opening the door on unjustified and purely obstructive judicial activism. The assumption in this book is that section 25 does protect and indeed guarantee property, but then in a way that is characteristic of the new constitutional order in general and of the Bill of Rights in particular.”⁷³

This Court has held in Prophet that the proportionality enquiry requires a general approach of:

“. . . weighing the severity of the interference with individual rights to property against the extent to which the property was used for the purposes of the commission of the offence, bearing in mind the nature of the offence.”⁷⁴

In Prophet, reference was made to the judgment of Ackermann J, writing for a unanimous Court, 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.⁷⁵ In that case, Ackermann J held that a deprivation of property is “arbitrary” within the meaning of section 25(1) when the “law of general application” referred to in that section does not provide sufficient reason for the particular deprivation in question or is procedurally unfair.⁷⁶ For the validity of a deprivation, the Court held that:

“. . . there must be an appropriate relationship between means and ends, between the sacrifice the individual is asked to make and the public purpose this is intended to serve. It is one that is not limited to an enquiry into mere rationality, but is less strict than a full and exacting proportionality examination.”⁷⁷

Ackermann J listed a number of factors which are relevant to establishing “sufficient reason” for the deprivation in question.⁷⁸ Importantly for purposes of the present case, he held that:

“Generally speaking, where the property in question is ownership of land or a corporeal movable, a more compelling purpose will have to be established in order for the depriving law to constitute sufficient reason for the deprivation than in the case when the property is something different . . .”⁷⁹

The proportionality enquiry in respect of the forfeiture of immovable property will often pose particular challenges, not only because of the value of such property and of its often indivisible nature, but because of the fact that it may be “home” to a number of people.⁸⁰

In the Prophet case, whilst acknowledging that the standard for establishing arbitrariness is different to the standard of proportionality, Nkabinde J nonetheless adopted the following factors as some of those which would be relevant to the proportionality enquiry:

whether the property is integral to the commission of the crime;
whether the forfeiture would prevent the further commission of the offence and its social consequences;
whether the “innocent owner” defence would be available to the respondent;
the nature and use of the property;⁸¹ and
the effect on the respondent of the forfeiture of the property.⁸²

As indicated above, the nature and extent of any other penalties, including criminal penalties, which have already been meted out to the respondent should also be taken into consideration. Moreover, the fact that the legislature has made provision for a range of penalties for a specific offence, while clearly not dispositive, is certainly a significant factor to be taken into consideration in the proportionality exercise.

Turning to the facts of the matter at hand, the applicants did not raise proportionality as an issue in their affidavits, at the hearing in the High Court or in their heads of argument in the Supreme Court of Appeal “as was their duty”.⁸³ The matter was, however, properly argued before the Supreme Court of Appeal which dealt with this issue, concluding that “there does not appear to be any merit in the argument that forfeiture would have been disproportionate to the crimes involved.”⁸⁴ Counsel for the NDPP pointed out that the applicants, in their heads of argument before this Court, have now for the first time pertinently raised the issue of proportionality. The NDPP objected to this course of conduct, contending that as a result of the applicants’ failure to plead their complaint about proportionality when they should have done so, the NDPP has not had an opportunity to adduce evidence on the issue. To allow the applicants to raise their complaint at this late stage, argued the NDPP, will deprive it of its fundamental right to be afforded a fair opportunity to present its side of the case. In view of the conclusion to which I have come with regard to the issue of proportionality, it is not necessary to deal with this objection any further.

Significant disproportionality?

Before considering the proportionality of the forfeiture on the facts of this case, I consider it desirable to attempt to clarify some confusion that has emerged in recent judgments on the “standard of proportionality” applicable to the assessment of the relationship between the nature and value of the property subject to forfeiture, the nature and gravity of the crime involved and the role the property played in the commission of the crime.

In the majority judgment of the Supreme Court of Appeal in Prophet, Mpati DP held that:

“A mere sense of disproportionality should not lead to a refusal of the [forfeiture] order sought. To ensure that the purpose of the law is not undermined, a standard of ‘significant disproportionality’ ought to be applied for a court to hold that a deprivation of property is ‘arbitrary’ and thus unconstitutional, and consequently refuse to grant a forfeiture order. And it is for the owner to place the necessary material for a proportionality analysis before the court.”⁸⁵

According to the majority, this approach was needed to “guard against the danger of frustrating the lawmaker’s purpose for introducing the forfeiture procedure in the Act”, namely:

“ . . . the realisation by the Legislature that there was rapid growth, both nationally and internationally, of organised criminal activity and the desire to combat these criminal activities by, inter alia, depriving those who use property for the commission of an offence of such property.”⁸⁶

In a minority judgment, Ponnan JA rejected the benchmark of “significant disproportionality” as being “too strict an evaluative norm”,⁸⁷ and held that “[t]he draconian effect of the Act would be exacerbated . . . were the elevated benchmark ‘significantly disproportionate’ to be applied.”⁸⁸ As the learned judge pointed out:

“It is for a court, in the exercise of its discretion, against the backdrop of the full factual matrix of the case, to determine whether there is an appropriate relationship between means and end. The imposition of a higher minimum threshold tips the scales in favour of the former, unduly fetters the discretion of the court that has to undertake the enquiry and disturbs the equilibrium sought to be achieved by the exercise. Courts should be vigilant to ensure that the statutory provisions in question are not used in terrorem and that that there has been no overreaching and abuse.”⁸⁹

On appeal in Prophet,⁹⁰ this Court found it unnecessary to decide whether there is a material difference between the test formulated by the majority in the Supreme Court of Appeal and that formulated by Ponnan JA. The question of the incidence of the onus as regards the proportionality issue was also left open by this Court in Prophet.⁹¹

The approach of the majority of the Supreme Court of Appeal in Prophet⁹² may lead to unnecessary complexity. In the subsequent judgment of that court in Van Staden, where the offence under discussion was drunken driving, Nugent JA⁹³ referred to the majority view in Prophet and stated the following:

“Incursions upon conventional liberties that are justified by the particular difficulties encountered in the detection and successful prosecution of organised crime are not similarly justified in cases of ordinary crime that do not present those difficulties. I do not think that it is permissible to look to one threat that the Act aims at combating (the threat posed by organised crime) in order to justify its application in relation to a quite different threat (the threat that is posed, for example, by drunken driving) that does not present the same challenges. It must be borne in mind that drunken driving, which does not ordinarily result from organised illicit activity, and presents no special difficulties to detect and prosecute, can attract substantial penalties, and the ordinary criminal law ought to be the first port of call to combat the evil. For the Act exists to supplement criminal remedies in appropriate cases and not merely as a more convenient substitute.”⁹⁴

I agree that it would be wrong for POCA to be utilised in a manner which blurs the distinction between the purposes and the methods of criminal law enforcement, on the one hand, and those of civil law, on the other. There is no justification for resorting to the remedy of civil forfeiture under POCA as a substitute for the effective and resolute enforcement of “ordinary” criminal remedies. In addition to the factors listed by this Court in Prophet⁹⁵ – the nature and gravity of the offence in question, the extent to which ordinary criminal law measures (when properly enforced) are effective in dealing with it, its public impact and potential for widespread social harm and disruption – are all factors that should also weigh in the enquiry as to whether a forfeiture order would be unconstitutionally disproportionate.

However, the learned judge in Van Staden goes on to state that:

“. . . I do not think that in cases of drunken driving there is justification for imposing the higher standard of ‘significant’ disproportionality referred to in Prophet. To avoid an order for forfeiture in such cases being arbitrary, and thus unconstitutional, a court must be satisfied that the deprivation is not disproportionate to the ends that the deprivation seeks to achieve. In making that determination the extent to which the deprivation is likely to afford a remedy for the ill sought to be countered, rather than merely being penal, will necessarily come to the fore, bearing in mind that the ordinary criminal sanctions are capable of serving the latter function.”⁹⁶

As pointed out above, it may be very difficult to draw a clear distinction in many cases between “organised crimes”, on the one hand, and “ordinary crimes”, on the other. This being so, it is potentially problematic to link a yardstick of “significant disproportionality” with the former type of crime and that of “disproportionality simpliciter” with the latter type. To my mind, there should be only one evaluative standard applicable to all the offences that fall within the ambit of the forfeiture provisions of POCA. That standard simply involves asking the question whether the forfeiture of the property concerned is, in all the circumstances of the case (including the nature and seriousness of the offence), disproportionate in the sense discussed above. Adding labels and qualifiers to the degree of “disproportionality” required can only give rise to unnecessary confusion. The organised crime element, while significant in assessing whether a forfeiture order should be made in a particular case, is not necessarily decisive. The criminal activities of an efficient and energetic individual miscreant may well have a more extensive reach and a greater negative social impact. So, for example, an individual drug dealer selling “tik” (the drug being manufactured in Prophet⁹⁷) through city schools may well have a larger client base and more outlets than a drug syndicate.

It is the task of the court to ensure that the deprivation of property that will result from a forfeiture order is not arbitrary. The proportionality assessment is a legal one, based on an evaluation of all the relevant factors in the full factual matrix of the particular case. The onus of establishing that all the requirements for a forfeiture order in terms of section 50 of POCA – including that of proportionality – have been met, rests on the NDPP throughout. However, as some of the factual material relevant to the proportionality analysis will often be peculiarly within the knowledge of the owner of the property concerned, the owner who is faced with a prima facie case established by the NDPP would in the usual course be well-advised to place this material before the court.⁹⁸ This does not, however, shift the onus of proof to the owner in question; it merely places on the owner an evidentiary burden or, as it is sometimes called, a burden of adducing evidence in rebuttal.⁹⁹

Was the forfeiture of Shelgate’s property disproportionate?

The main argument advanced by the applicants in respect of proportionality is that the forfeiture order made is disproportionate and hence not constitutionally justifiable considering the following circumstances: the nature and gravity of the offences in question;¹⁰⁰ the fine paid by Mr Mohunram and the forfeiture by him of monies found on the premises and of the gaming machines; the absence of any direct causal connection between the property and the offences on which the forfeiture application was based; and the fact that the illicit activity only occupied a portion of the premises in question.

The strict regulation of gambling activities is, in part, a legislative recognition of the fact that gambling can have a major negative public and social impact. Illegal gambling is a serious offence. This is made clear by the sanctions envisaged in section 94 of the KZN Gambling Act. As first-time offenders, Mr Mohunram was liable to a maximum period of ten years’ imprisonment without the option of a fine,¹⁰¹ or to a fine not exceeding R2 million or a period not exceeding ten years’ imprisonment,¹⁰² while Shelgate risked a fine of R2 million.¹⁰³ The penalties provided for may be imposed in addition to “any competent forfeiture contemplated in” section 94(4).¹⁰⁴

The potentially harmful social and economic consequences of gambling and the necessity of regulation to protect the public was acknowledged by this Court in Magajane v Chairperson, North West Gambling Board and Others, where Van der Westhuizen J, writing for a unanimous Court, stated the following:

“The Preamble of the Act [the North West Gambling Act] makes clear that the Act aims to protect the public confidence and trust and the health, safety, general welfare and good order of the inhabitants of the province through the strict regulation of institutions and individuals involved in the gambling industry. The importance of this general purpose is beyond question . . . . gambling is an activity that could pose a threat to individuals’ psychological, financial and even physical health, as well as those of their families and communities. Regulation is essential to protect participants in the gambling industry and the general public. The gambling industry is a pervasively regulated industry. Schedule 4 Part A of the Constitution of the Republic of South Africa, 1996 lists gambling as a functional area of concurrent national and provincial legislative competence, and the provisions of the National Gambling Act 7 of 2004 and the North West Gambling Act show that both national and provincial legislation regulate the industry. The preambles of both statutes proclaim the necessity of regulation to safeguard the public.”^¹⁰⁵ (Footnotes omitted.)

According to the preamble to the National Gambling Act 7 of 2004:

“It is desirable to establish certain uniform norms and standards, which will safeguard people participating in gambling and their communities against the adverse effect of gambling, applying generally throughout the Republic with regard to casinos, racing, gambling and wagering, so that –

gambling activities are effectively regulated, licenced, controlled and policed;

members of the public who participate in any licenced gambling activity are protected;
society and the economy are protected against over-stimulation of the latent demand for gambling; and
the licensing of gambling activities is transparent, fair and equitable.”

A perusal of this Act and of the KZN Gambling Act makes it clear that there are very stringent requirements for the issue of a casino license and equally stringent controls once a license is issued. This is not surprising. Prior to the promulgation of the National Gambling Act, a Lotteries and Gambling Board was created in terms of the Lotteries and Gambling Board Act 210 of 1993 and mandated to investigate the gambling industry in South Africa and, in particular, the manner in which gambling activities should be regulated. As stated by Selikowitz J in Soundprop 1239 CC t/a 777 Casino v Minister of Safety and Security and Others:

“[I]t is significant to note that the Board, after an extensive examination both here and abroad, concluded that in an open and democratic society there was room for gambling provided that such gambling be strictly controlled. The controls are needed for the protection of the gamblers, for the protection of society and in order to properly regulate the industry. In the report of what is known – after its chairperson – as the Wiehahn Committee, there is a detailed examination of the types of controls that are needed and recommendations for the implementation of such controls.”¹⁰⁶

These recommendations¹⁰⁷ gave rise to the promulgation of the National Gambling Act which came into operation on 1 November 2004.

It is significant that, among the reasons for the necessity of controlling the gambling industry given, in Soundprop, by the Minister responsible for the control of gambling were:

“. . . that one must be aware of the fact that the cash flow generated by gambling lends itself to money laundering and to targeting by crime syndicates . . .”¹⁰⁸

This is in accordance with international experience. So, for example, various royal commissions and enquiries in Australia “have revealed that there are strong connections between organised crime and illegal gambling in Australia” and have also “documented connections between illegal casinos and money laundering”.¹⁰⁹ Similarly, close links between illegal gambling operations and organised crime have been documented in the United States of America.¹¹⁰

Looking at the circumstances of this case as a whole, the crimes committed on the property involved the conducting of an illegal casino for profit. As discussed above, these are serious offences which can have very negative social, economic and other impacts. Thus, measures which serve effectively to deter people from using or allowing their property to be used for the commission of these offences certainly promote the interests of justice. It has already been pointed out that the property was integral to the commission of the offences under the KZN Gambling Act; it is not a case where the property could be said to be “incidental” to the criminal endeavour. The use of the property in the commission of the offences was not a once-off thing; on the contrary, it was a continuous sustained use for more than a year subsequent to the casino operation becoming illegal.

In addition, as pointed out by the Supreme Court of Appeal in its judgment,¹¹¹ the subject of the forfeiture application is property belonging to Shelgate, not to Mr Mohunram. Mr Mohunram has paid admission of guilt fines totalling R88 500 and has suffered forfeiture or loss of monies and equipment amounting to approximately R287 000, but Shelgate has to date lost nothing due to its illegal activities. While Mr Mohunram is admittedly the sole member of Shelgate, that does not alter the fact that Shelgate has a separate corporate personality. Mr Mohunram and Shelgate have enjoyed the advantages of their separate legal personalities and must also bear the consequences thereof.

The admission of guilt fines paid by Mr Mohunram related to his contravention of section 95(2) and of section 3(4)(b) of the KZN Gambling Act.¹¹² He does not appear to have been charged with a contravention of section 44, although it was common cause on the papers before us that he had indeed contravened that section by operating his casino without the requisite licence. This offence would seem to fall under section 94(2) of the KZN Gambling Act so that, had Mr Mohunram been charged with and convicted of this offence, he would have been liable to imprisonment for a maximum period of 10 years without the option of a fine.¹¹³ We do not know why he was not charged with a contravention of section 44, nor do we know why Shelgate was not charged with a contravention of section 3(3)(a).¹¹⁴

One possible reason why we do not have this information on record is that, as already pointed out, the proportionality point was not raised by the applicants in any of their affidavits, in the hearing before the High Court or in their heads of argument in the Supreme Court of Appeal. So we are faced with a situation where neither Mr Mohunram has been penalised for his contravention of section 44 of the KZN Gambling Act, nor has Shelgate been penalised for its contravention of section 3(3)(a). Because of the manner in which the proceedings were conducted, it cannot be said with any degree of confidence that the effect of the forfeiture order in the present matter would indeed be to give the NDPP “a second bite at the cherry”, to use the words of Sachs J in his judgment in this case, or that the forfeiture of the property would amount to a “duplication of punishment” for the same offence(s).

As pointed out by Van der Walt:

“[T]he property rights of those who were actually involved in crime may be lost through forfeiture, but by and large this is not necessarily unjust or unreasonable, as such loss would mostly be justifiable in the normal way by describing the forfeiture as an exercise of the police power that merely has to satisfy the requirements in section 25(1) in establishing a proper balance between the public purpose of the deprivation and the interests of the affected person.”¹¹⁵

It appears from the evidence that Mr Mohunram’s profit from the casino amounted to approximately R30 000 per month. From February 2000 at the latest to April 2001, the casino operated illegally, thus producing an illicit income for Mr Mohunram totalling about R420 000. Thus, even if one were notionally to disregard Shelgate’s separate legal personality and take into consideration the fact that Mr Mohunram has incurred criminal penalties amounting to about R365 000, the applicants are still left with “net illicit profits” of approximately R55 000. This must obviously also be borne in mind when determining the question of proportionality in this case.

As for the effect of forfeiture on the applicants, the property is owned by Shelgate and is its only asset. Mr Mohunram has a 100 percent member’s interest in Shelgate. Since the property is not used for residential purposes, its forfeiture will have no effect on the living arrangements of the applicants. It will merely deprive them of an asset that has some financial value to them. According to the NDPP’s calculations, which were not really gainsaid by the applicants, the loss which they will suffer is as follows. The property was bonded in favour of NBS Bank in an amount of R600 000. The balance outstanding on the bond was approximately R477 000 at the time of the preservation order proceedings. In other words, the applicants have paid off approximately R123 000 of the capital amount of the bond. If a forfeiture order were to be granted, the proceeds of the sale of the property would be used in the first instance to settle the indebtedness under the bond. What the applicants will “lose”, therefore, is the amount (if any) by which the value of the property exceeds the value of the bond.

The applicants did not adduce any evidence regarding the value of the property, save to state that “it is unlikely that the value of the outstanding bond will be realised should the state elect to sell the property”. The figures are in dispute, the respondent believing that there is value for the state in a forfeiture order while the applicants disagree. According to Mr Mohunram, the property market in Vryheid at the relevant time was “severely depressed” and he thought that it was unlikely that the outstanding bond would be realised should the property be sold. What this means is that, on the applicants’ own version, the value of the property is less than R477 000. It follows that, if forfeiture were to be ordered, the applicants would not “lose” anything in the form of a notional amount by which the value of the property exceeds the value of the bond. They would simply lose the R123 000 that they have already paid off on the capital amount of the bond. It should be noted that Mr Mohunram’s affidavits dealing with this point were deposed to in 2001 and the position with regard to the value of the property may well have changed since then.

As indicated above, the evidence shows that the profits from the casino amounted to some R30 000 per month. The illicit income from the gambling operation would accordingly have totalled about R420 000 during the 14 months (February 2000 to April 2001) when Mr Mohunram continued to run the operation after an amendment to the KZN Gambling Act that made it clearly illegal. Therefore, according to the NDPP, the applicants have earned more from the illegal casino than they stand to lose if the property is forfeited. In the circumstances of this case, the NDPP submits, there is no disproportionality (far less “significant disproportionality”).

If the financial effect of the criminal penalties incurred by Mr Mohunram is also taken into consideration as part of the proportionality enquiry,¹¹⁶ then the overall effect on the applicants of a forfeiture of the property is an immediate financial loss of about R68 000, viz less than the admission of guilt fines paid by Mr Mohunram. In addition to this financial loss, however, other premises will have to be found for the legitimate glass and aluminium business being conducted on the property and this will obviously have considerable financial implications. It must also be borne in mind that Mr Mohunram stood surety vis-à-vis NBS Bank for Shelgate’s liability under the bond so that, if a sale of property does not realise the outstanding bond amount, then Mr Mohunram as surety could possibly be held liable by NBS Bank for the shortfall.

A note of caution must be sounded. It is certainly not necessary for a court, in considering whether or not a forfeiture order applied for will be disproportionate, to undertake the kind of “financial exercise” set out in the four preceding paragraphs. However, as the figures were available in this case and were referred to by the applicants and the NDPP, it is useful to take them into consideration in the present matter.

The applicants further contended that forfeiture of the property would be disproportionate since the illegal casino only occupied a portion of the building in question. They point out that a portion of the property was used for conducting a glass and aluminium business.

It is clearly not a requirement for the grant of a forfeiture order that the whole of the property must have been used as the instrumentality of an offence. As the Supreme Court of Appeal pointed out in its judgment in this case,¹¹⁷ “property” is defined in section 1 of POCA:

“to include any ‘immovable’ thing and immovable property is identified with reference to its cadastral description, ie it is the property described in the deeds office. It is highly unlikely that the whole of an immovable property can ever be used in the commission of a crime and the restriction would make the provision meaningless.” (Footnote omitted.)

The relevant question for purposes of the proportionality enquiry is therefore not whether the whole of the property was used in furtherance of the crime. It is whether forfeiture of the whole property would be disproportionate to the seriousness of the crimes committed and the benefits derived from those crimes. In this regard, it has to be borne in mind that the total area of the sectional title property is 542 square metres. Although Mr Mohunram did conduct a legitimate business on part of the property, there is no evidence before us as to the respective sizes of the two areas. However, as pointed out by the Supreme Court of Appeal, bearing in mind that the illegal casino had 57 gaming machines and a cashier’s booth, the area occupied by the casino operation could not have been insignificant. This is borne out by the fact that, after the casino was closed down, Mr Mohunram subdivided the casino area and let out the two separate portions.

The NDPP pointed out that, in any event, it would not be feasible to order forfeiture of part of the property. In National Director of Public Prosecutions v Cole and Others,¹¹⁸ Willis J held that it is not possible to order forfeiture of part of immovable property unless there is evidence that subdivision is feasible:

“The intractable difficulty is that immovable property, unlike various other kinds of assets of which money is perhaps the best example, is usually indivisible. Subdivision of this immovable property would, in any event, require the approval of the local municipality which is not a party to these proceedings. Besides, nothing was put before me to suggest that this solution would be desirable, and, if so, possible.”

A similar difficulty exists in the present circumstances, where the forfeiture involves a sectional title unit.¹¹⁹ The applicants have not adduced any evidence to establish that it would be possible to order forfeiture of part of the sectional title unit.

In their written submissions, the applicants state that “[n]either the time duration nor the spatial extent [of the illegal activities] was reliably established”. In my view, however, there was enough evidence to show that a substantial portion of the property was used as an illegal casino for an extended period of time. The applicants’ contentions to the contrary are not convincing.

The applicants alleged that Mr Mohunram was given an assurance that upon payment of substantial fines and destruction of the relevant gambling machines, he would face no further penalty. They contended that the forfeiture application was launched in contravention of the agreement with the first applicant. In support of this contention, the applicants refer to certain passages in their affidavits, but these passages fall well short of proving an assurance that Mr Mohunram would pay no further penalty. The only entity who could have given such an assurance (or who could have entered into such an agreement) was the office of the NDPP, and the applicants do not suggest that it did so. There is thus no factual basis for the applicants’ complaint that the forfeiture application was launched in violation of an assurance or undertaking that the matter had been brought to finality when the admission of guilt fine was paid. The contentions of the applicants in this regard are without merit.

On the question of proportionality, the LRP submitted that the forfeiture provisions of POCA are intended to be preventive, not punitive. According to the LRP, the forfeiture of the instrumentalities of an offence can tenably have a place in civil law only in order to prevent the repetition of the offence by the use of that property. In consequence, property can only be declared forfeit if the NDPP shows that it will probably be used to repeat the crime which will follow only if it is property that, like “tik”, can never have a lawful use, or that can have no lawful use in the hands of the lawbreaker (like, for example, gaming machines in the hands of a person who has no licence to use them). The forfeiture of the Shelgate premises does not satisfy this test.

As illustrated above, the LRP’s interpretation is inconsistent with the jurisprudence of this Court and of the Supreme Court of Appeal. It would require the NDPP to “show” that the property will be used to repeat the crime. To impose such an onus of proof on the NDPP would undermine the purpose of POCA and might render it an unworkable instrument in the fight against crime.

In conclusion, it should be emphasised that, while the forfeiture of the property in this case will undeniably have a punitive effect on the applicants, it will also serve the very important purpose of deterring both the applicants and other people from using or allowing their property to be used for illegal gambling, with all its potentially harmful consequences.

In view of the above, I conclude that there is no merit in the applicants’ contention that the forfeiture order is disproportionate. The appeal must therefore be dismissed.

Costs

As regards costs, it must be borne in mind that, until Prophet was decided in September 2006, the issues of constitutional principle raised by the applicants had, by and large, not been addressed by this Court. It would have made little sense for the applicants not to proceed with their application after this Court’s decision in Prophet. Thus, although the NDPP has asked for costs on appeal, I am of the view that it would not be appropriate to accede to this request.

The NDPP also submitted that, as the LRP had in several respects made common cause with the applicants in these proceedings, the LRP should be ordered to pay the NDPP’s costs occasioned by its intervention as amicus curiae.

Rule 10(10) of the Constitutional Court Rules provides that “an order of Court dealing with costs may make provision for the payment of costs incurred by or as a result of the intervention of an amicus curiae.” As has been poi

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South Africa: Constitutional Court

Mohunram and Another v National Director of Public Prosecutions and Another (Law Review Project as Amicus Curiae) (CCT19/06) [2007] ZACC 4 (26 March 2007)