Fraser v Absa Bank Ltd (National Director of Public Prosecutions as Amicus Curiae)

• Jurisdiction: South Africa
• Judge: Langa CJ, Moseneke DCJ, Madala J, O'Regan J, Sachs J, Skweyiya J, Van Der Westhuizen J and Yacoob J
• Judgment Date: 15 December 2006
• Citation: 2007 (3) SA 484 (CC)
• Docket Number: CCT 66/05
• Hearing Date: 23 May 2006
• Counsel: M Pillemer SC (with A Annandale) for the applicant. R S van Riet SC (with P de B Vivier) for the respondent. W Trengove SC (with G M Ameer) for the amicus curiae.
• Court: Constitutional Court

Van der Westhuizen J:

[1] The Prevention of Organised Crime Act 121 of 1998 (POCA) was introduced to combat organised crime, money laundering and criminal gang activities, to prohibit racketeering and to provide for a range of related measures. [1] One of its aims is to prevent criminals benefiting from F the proceeds of their crimes. Consistent with that objective, ch 5 of POCA provides for the restraint, [2] confiscation [3] and realisation [4] of property.

[2] The National Director of Public Prosecutions (NDPP) may apply on an ex parte [5] basis for a restraint order against the property of a J

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defendant', who would be an accused in criminal proceedings. [6] The question central to this application is whether a A creditor of a defendant may join the proceedings when the defendant applies to a Court to provide in a restraint order for reasonable legal expenses connected to his criminal trial. The Durban High Court ruled against intervention by a creditor. The Supreme Court of Appeal interpreted POCA differently and ruled in favour of the intervention. The applicant's primary contention is that the B interpretation adopted by the Supreme Court of Appeal violates his right to a fair trial as protected in ss 35(3)(d), (f) and (h) of the Constitution of the Republic of South Africa, 1996.

Factual background C

[3] The applicant is Mr Trent Gore Fraser, a businessman who is currently incarcerated without bail as a trial-awaiting prisoner. He was arrested on 16 November 2003 and has since been indicted on several counts related to racketeering and money laundering in terms of POCA. [7] He also faces seven charges under the Drugs and Drug D Trafficking Act 140 of 1992. Under the sentencing provisions of POCA [8] the applicant is potentially liable to a fine not exceeding R1 000 million, or to imprisonment for life.

[4] The applicant is the owner of the entire membership interest in a close corporation called Portion 3 Lavianto CC (the CC). E The history of the CC is somewhat dubious: in 2001 the applicant inherited in excess of R1,8 million from a family trust and used the money to acquire immovable residential property in Johannesburg. In 2002 he registered the CC and arranged that it acquire the immovable property. The applicant then arranged for his erstwhile fiancée, Ms Lisa Nicole Zeeman, to hold the membership interest in the CC on his F behalf. The record suggests that Mr Fraser devised this scheme so that the property would not fall into the hands of his creditors. In July 2004 the applicant sought an order in the Johannesburg High Court directing Ms Zeeman to transfer - amongst other things - the membership interest in the CC to him on the basis that the original transfer of the membership interest to her was G a simulated transaction. Ms Zeeman eventually consented to the order and her membership interest in the CC was transferred to the applicant.

[5] On 26 November 2004 in the High Court, the NDPP obtained a provisional restraint order on the applicant's interest in the CC and the immovable property as well as the other movable property H in terms of

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s 26 of POCA. [9] In terms of the order the applicant's property was placed A in the hands of a curator bonis. The provisional restraint order was returnable on 27 January 2005.

[6] On 3 December 2004 the applicant lodged an application for legal expenses in the High Court in terms of s 26(6) of POCA. The applicant sought an order directing the curator to sell the property and pay the proceeds to his attorneys for expenses relating to B his criminal trial.

[7] The respondent in this application is Absa Bank Ltd (Absa), a creditor of the applicant. It had obtained a default judgment in the Cape High Court against the applicant as surety for a debt of R673 281,09 in July 2000. That amount with accumulated interest had grown to R1 028 214,25 by 11 December 2004. The debt is not C secured and as a concurrent creditor Absa enjoys no preference under the Insolvency Act 24 of 1936, or any other law, and has no claim against the CC or its assets. Absa cannot execute against the applicant's membership interest in the CC by reason of the restraint order. [10] D

[8] On 20 December 2004 Absa lodged an application to intervene in the High Court in order to oppose Mr Fraser's application for legal expenses. Absa's application was based upon the default judgment in its favour. Absa argued that if Mr Fraser were permitted to deplete the proceeds of the restrained property to pay legal expenses, it would be unable to recover its judgment debt - which E Absa would ordinarily have been able to do, absent the restraint order, by writ of execution.

[9] Mr Fraser opposed Absa's application to intervene. The NDPP opposed Mr Fraser's application for legal expenses. In order to understand the rulings of the High Court and the Supreme Court of Appeal thereafter, it is necessary to look at the structure and some of F the contents of POCA.

The structure and contents of POCA

[10] According to its preamble, the purpose of POCA is to combat the G rapid growth of organised crime, money laundering and criminal gang activities and to ensure that persons who take part in those activities do not benefit from the proceeds of their crimes. Chapter 2 of POCA outlines offences relating to racketeering activities and sets forth penalties for persons convicted of those crimes. [11] H Chapter 3 describes the offences relating to the proceeds of unlawful activities and the penalties associated therewith [12] and ch 4 deals with the offences and penalties associated with criminal gang activities. [13]

[11] Chapter 5 of POCA, the subject of this application, contains a mechanism for the confiscation by the State of proceeds derived from J

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criminal activity. Part 1 of ch 5 deals with the application of the chapter and includes definitions of key A concepts. [14] Part 2 of ch 5 provides for a confiscation order against a defendant, who has been convicted of an offence, when the convicting Court suspects that the defendant has derived some benefit from criminal or criminal-related activity. [15] Part 3 deals with restraint orders in relation to property which might later be B confiscated. [16] Sections 25 and 26 authorise the High Court to issue an order prohibiting a person who has, or will be, charged with an offence [17] from dealing in any manner with any property to which the order relates. Section 26 states as follows:

'(1) The National Director may by way of an ex parte application apply to a competent High Court for an order prohibiting C any person, subject to such conditions and exceptions as may be specified in the order, from dealing in any manner with any property to which the order relates.

. . .

(6) Without derogating from the generality of the powers conferred by ss (1), a restraint order may make such provision as the High Court may think fit - D

(a)

for the reasonable living expenses of a person against whom the restraint order is being made and his or her family or household; and

(b)

for the reasonable legal expenses of such person in connection with any proceedings instituted against him or her in terms of this Chapter or any criminal proceedings to which such proceedings may relate, E

if the Court is satisfied that the person whose expenses must be provided for has disclosed under oath all his or her interests in property subject to a restraint order and that the person cannot meet the expenses concerned out of his or her unrestrained property.

. . .

(10) A High Court which made a restraint order - F

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(a)

may on application by a person affected by that order vary or rescind the restraint order or an order authorising the A seizure of the property concerned or other ancillary order if it is satisfied -

(i)

that the operation of the order concerned will deprive the applicant of the means to provide for his or her reasonable living expenses and cause undue hardship for the applicant; and

(ii)

that the hardship that the applicant will suffer as a result of the order outweighs the risk that the property concerned may be B destroyed, lost, damaged, concealed or transferred; and

(b)

shall rescind the restraint order when the proceedings against the defendant concerned are concluded.'

[12] The effect of a restraint order is to place the defendant's property beyond his or her control and into the hands C of a curator bonis pending the outcome of the criminal proceedings. [18] All property held by the defendant may be subject to restraint, in addition to property transferred to him or her after the restraint order is imposed.

[13] Section 26(6) gives a discretion to the High Court which issues a restraint order to make provision for the reasonable living D and legal expenses of the defendant, who (as stated earlier) is also an accused. This case is concerned with that discretion. The Court must be satisfied that the defendant has disclosed all of his or her interests in property subject to the restraint order and that he or she cannot meet the expenses out of property which has not been E restrained.

[14] Part 4 of ch 5 is concerned with the realisation of property for the purposes of satisfying the confiscation order. [19] Section 30(2) authorises the High Court to direct the curator to realise and confiscate the defendant's F property. Sections 30(3) and (4) ensure that those who have an interest in the realisable property, who are likely to be affected by the confiscation order, and who have suffered injury as a result of the defendant's criminal activity are provided an opportunity to make representations in connection with the realisation of the property. [20]...