---

IN THE HIGH COURT OF SOUTH AFRICA

(TRANSVAAL PROVINCIAL DIVISION)

Date: 2009-02-19

Case Number: 50711/08

REPORTABLE

In the matter between:

MZILIKAZI GODFREY KHUMALO First Applicant

MAWENZI RESOURCES AND FINANCE COMPANY

(PTY) LTD Second Applicant

and

THE SOUTH AFRICAN RESERVE BANK First Respondent

THE MINISTER OF FINANCE Second Respondent

JUDGMENT

SOUTHWOOD J

[1] This application is concerned with the validity of a Notice of Attachment (‘the notice’) issued by a designated official of the South African Reserve Bank (‘SARB’) (the first respondent) in terms of Regulation 22C(1) of the Exchange Control Regulations (‘the regulations’) made under section 9 of the Currency and Exchanges Act, 9 of 1933 (‘the Act’). On 12 August 2008 the SARB official issued the notice and on 2 September 2008 it was served on the applicants. In terms of the notice a large number of assets, mainly shares in companies controlled by the first applicant were attached, apparently with a view to declaring them forfeit in terms of Regulation 22B of the regulations. The applicants seek to have the notice set aside.

[2] On 29 October 2008 the applicants launched an urgent application seeking a declaration that the notice is invalid, an order interdicting the SARB from implementing or giving effect to the notice and an order directing that the applicants may continue to exercise their rights of ownership in respect of the assets pending the finalisation of the application for final relief: i.e. orders declaring regulations 22B-22D unconstitutional and therefore invalid alternatively an order reviewing and setting aside the notice and ancillary relief. After papers were filed the matter came before Murphy J who, in terms of section 13(1)(b) of the Supreme Court Act, 59 of 1959, referred the matter to a full court and intimated to the parties’ representatives that the full court would deal with the constitutional issues raised in the application after there had been compliance with Rule 16A of the Uniform Rules. Notice was duly given in accordance with Rule 16A and no-one has sought to be admitted as animus curiae in the application.

[3] In the founding affidavit the applicants rely on numerous grounds for attacking the validity of the provisions of Regulations 22B-D. With specific reference to Regulation 22C(1) they contend that it is ultra vires and that the SARB’s reliance on the regulation was misconceived and that the jurisdictional facts for the regulation to be utilised were not present. With regard to regulations 22B-D they contend, for many reasons, that the regulations are inconsistent with the Constitution and are therefore invalid. The parties filed heads of argument dealing with all these issues but at the hearing the argument was, for the most part, confined to whether regulation 22C(1) is ultra vires the Act and whether the applicants’ application in terms of Regulation 22D would succeed for the reasons referred to. Notwithstanding the formulation of the relief in the notice of motion and the formulation of the causa in the founding affidavit the parties agreed that the relevant facts are before this court, that there are no real disputes of fact and that if the court were to uphold the applicants’ contentions regarding ultra vires and/or the Regulation 22D review, the court should simply grant a final order declaring the notice invalid. That is obviously the real relief which the applicants seek in this application. In my view that is the appropriate course for this court to follow. If the court were to find that the notice is invalid on either ground it would serve no useful purpose to grant interim relief – see Fourie v Olivier 1971 (3) 274 (T) at 284G-285H.

[4] In the view I take of the matter it is not necessary to deal with any other argument than the ultra vires argument as I consider that it is well- founded.

[5] The ultra vires argument is very simple. Section 9 of the Act provides that regulations may be made inter alia for the attachment of money and goods and expressly provides that an attachment shall be for a period not exceeding 36 months (subject to a qualification not presently relevant). Regulation 22C(1) provides for the attachment of money and goods and is silent as to whether the attachment is to be for a limited period. The applicants contend that the regulation is therefore ultra vires and invalid. SARB’s answer is that properly interpreted that is what the regulation provides: that the attachment can last for no more than the period stipulated in the regulations and the Act. SARB also argues that the court must read in the missing qualification to achieve this. SARB did deal with the alternative argument in its answering affidavit and the words to be read were not identified.

[6] The relevant provisions of section 9 of the Act read as follows:

‘(1) The Governor-General may make regulations in regard to any matter directly or indirectly relating to or affecting or having any bearing upon currency, banking or exchanges.

(2) (a) Such regulations may provide that the Governor- General may apply any sanctions therein set forth which he thinks fit to impose, whether civil or criminal.

(b) Any regulation contemplated in paragraph (a) may provide for –

(i) the blocking, attachment and obtaining of interdicts for a period referred to in paragraph (g) by the Treasury and the forfeiture and disposal by the Treasury of any money or goods referred to or defined in the regulations or determined in terms of the regulations or any money or goods into which such money or goods have been transformed by any person, and …

(c) …

(d) …

(e) …

(f) …

(g) The period referred to in paragraph (b)(i) shall be for a period not exceeding 36 months or such longer period –

(i) as ends 12 months after the final judgment (including on appeal, if any) in every prosecution for any contravention of the regulations or any other law in relation to the money or goods concerned or in which such money or goods are relevant to any aspect of such prosecution; or

(ii) as may be determined by a competent court in relation to the money or goods concerned on good cause shown by the Treasury.’

Regulation 22C reads as follows:

‘RECOVERY OF CERTAIN AMOUNTS BY TREASURY

22C(1) When the Treasury has, under regulation 22B, forfeited to the State money or goods referred to in paragraph (a), (b) or (c) of regulation 22A(1) and such money and the proceeds of the realisation of such goods, if any, are less than amount equal to an amount –

(a) in respect of which a contravention or failure to act or omission referred to in subparagraph (i) of regulation 22A(1)(a) has been committed;

(b) which was involved in a contravention or failure or act or omission referred to in subparagraph (ii)(aa) of that regulation;

(c) which has been obtained by any person or is due to him as referred to in subparagraph (ii)(bb) of that regulation;

(d) by which any person has been benefited or enriched as referred to in subparagraph (ii)(cc) of that regulation,

or when no money or goods have been for forfeited for the State under the said regulation 22B, the Treasury may recover an amount equal to the difference between the last-mentioned amount and the first-mentioned amount of money and proceeds or an amount equal to the last-mentioned amount, as the case may be –

(i) from the person who committed the contravention or failure or act or omission in question;

(ii) from the person who the Treasury on reasonable grounds suspects to have committed the contravention or failure or act or omission in question;

(iii) from the person benefited or enriched as a result of the contravention or failure or act or omission in question;

(iv) if more persons have committed the contravention or failure or act or omission in question or if the Treasury on reasonable grounds suspects that more persons have committed any such contravention or failure or act or omission or if more persons have been benefited or enriched as a result of the contravention or failure or act or omission in question, separately and jointly from those persons,

by attaching in such manner as it may deem fit any other money, including money in a blocked account referred to in regulation 4, or other goods of the person or persons concerned.

(2) The Treasury may, if it on reasonable grounds suspects that it will be necessary in due course to recover under subregulation (1) any amount from the person or the persons concerned, at any time on or after the date on which money or goods referred to in paragraph (a) of regulation 22A(1) have or could have been attached, issue or make an order in such manner as it may deem fit or by which any person is prohibited –

(a) to withdraw or cause to be withdrawn any money held in any account or not more than an amount of it determined in its discretion by the Treasury, with due regard to the amount which in the opinion of the Treasury will in due course be recovered, or to appropriate in any manner any credit or balance in that account;

(b) to deal in any manner as may be determined by the Treasury with any goods as may be determined by the Treasury of the person or persons concerned,

without the permission of the Treasury and in accordance with such conditions (if any) as may be imposed by the Treasury.

(3) The provisions of –

(a) subregulations (1) and (3) of regulation 22B shall apply mutatis mutandis to any money or goods referred to in subregulations (1) and (2) of this regulation as if such money or goods were money or goods referred to in regulation 22A;

(b) subregulation (3) of regulation 22A shall apply mutatis mutandis to an order issued or made under subregulation (2) of this regulation.’

[7] It is clear that subregulation 22C(3)(a) expressly makes the provisions of subregulations 22B(1) and (3) (which deal with forfeiture) applicable to money or goods referred to in subregulations 22C(1) and (2) and that subregulation 22C(3)(b) expressly makes the time limitation applicable to subregulation 22C(2) only. Obviously the maker of the regulations pertinently considered the matter and there is no casus omissus. Subregulation 22C(3)(b) demonstrates a clear intention to exclude the operation of the time period referred to in regulation 22A(3) and s 9(2)(g) of the Act where an attachment is made under regulation 22C(1).

[8] Notwithstanding the intention of the Act that any attachment of money or goods in terms of the regulations must be of limited duration it is not possible to interpret regulation 22C(1) read with regulation 22C(3) as providing for such an attachment. The wording of the regulation is too clear. In Suid-Afrikaanse Valutabeheerwetgewing the author, Professor Oelofse, trenchantly makes the point as follows:

‘Regulasie 22C(3)(b) vertoon ‘n ernstige gebrek. Daarvolgens geld die beperking in reg. 22A(3) op die tydsduur van ‘n beslaglegging of “bevriesing” slegs vir geld of goed wat ingevolge reg. 22C(2) “bevries” is, maar nie vir geld of goed waarop ingevolge reg. 22C(1) beslag gelê is. ‘n Mens het dus die uiters anomaliese situasie dat geld of goed waarop ingevolge reg. 22C(1) beslag gelê is, teoreties vir ‘n onbepaalde tydperk onder beslaglegging kan bly sonder dat dit verbeurd verklaar word. So ‘n resultaat is egter duidelik ultra vires die magtigende wet.’

[9] As far as ‘reading-in’ the limitation referred to in section 9(2)(g) of the Act is concerned SARB’s counsel did not refer to any authority for a reading-in in the present circumstances. In Minister of Health v New Clicks SA (Pty) Ltd 2006 (2) SA 311 (CC) some members of the court found that some of the contentious regulations were in conflict with the enabling act and that they could be saved by reading in certain words (see e.g. paras 13 and 281) but that other regulations were not authorised by the enabling act and were accordingly invalid (see e.g. paras 416-419). In my view the author of the regulations clearly intended something which was not authorised by the Act and the regulation is therefore ultra vires. The notice issued under that regulation is accordingly invalid.

Order

[10] I The notice of attachment issued by the South African Reserve Bank on 12 August 2008 in terms of regulation 22C(1) of the Exchange Control Regulations, annexure MGK1 to the founding affidavit, is declared to be invalid;

II The first respondent is ordered to pay the costs of the application including the costs consequent upon the employment of two counsel.

__________________________

B.R. SOUTHWOOD

JUDGE OF THE HIGH COURT

I agree

__________________________

J.R. MURPHY

JUDGE OF THE HIGH COURT

I agree

__________________________

T.J. RAULINGA

JUDGE OF THE HIGH COURT

CASE NO: 50711/08

HEARD ON: 11 February 2009

FOR THE APPLICANTS: ADV. A.R. BHANA SC

ADV. A. COCKRELL

INSTRUCTED BY: Mr D. Bernstein of Rudolph Bernstein & Associates

FOR THE FIRST RESPONDENT: ADV. G.C. PRETORIUS SC

ADV. K.W. LÜDERITZ

INSTRUCTED BY: Dr. D.H. Botha of Newtons Inc.

DATE OF JUDGMENT: 19 February 2009

---