S v Moringer and Others

• Jurisdiction: South Africa

S v Moringer and Others
1993 (4) SA 452 (W) [*]

1993 (4) SA p452

Citation	1993 (4) SA 452 (W)
Court	Witwatersrand Local Division
Judge	Zulman J
Heard	November 1, 1991
Judgment	November 1, 1991

Flynote : Sleutelwoorde

Exchange control — Offences — Exchange Control Regulations promulgated by Government Notice R1111 published in Government Gazette Extraordinary 123 of 1 December 1961, as amended — Dealing in financial rands in C contravention of reg 14A(1) — Non-resident investor — What constitutes — Investor not limited to one who employs his own funds.

Exchange control — Offences — Exchange Control Regulations promulgated by Government Notice R1111 published in Government Gazette Extraordinary D 123 of 1 December 1961, as amended — Dealing in foreign currency in contravention of reg 2(2)(a) — Not only the authorised dealer who could be convicted of such offences — In terms of s 332(5) of Criminal Procedure Act 51 of 1977 servant of dealer deemed guilty of offence unless proved that he did not take part in commission of offence.

Exchange control — Offences — Exchange Control Regulations promulgated E by Government Notice R1111 published in Government Gazette Extraordinary 123 of 1 December 1961, as amended — Dealing in foreign currency in contravention of reg 2(2)(a) — Use of 'nostro balance' — Where use of such balance was simply the mechanics whereby the investment took place in F manner approved and on conditions set forth by Reserve Bank in its approval, no offence committed.

Criminal law — Fraud — What constitutes — Exchange control regulations — Non-disclosure of information relating to authority for use of financial rands — Interpretation of Reserve Bank authority — Authority G had to be read in context of application for permission to use financial rands — No warrant for giving authority a restrictive interpretation.

Headnote : Kopnota

The accused were charged in a Local Division with fraud, alternatively a contravention of reg 14A(1) read with regs 1, 14A(2) and 22 of the H Exchange Control Regulations promulgated by GN R1111 of 1961 of 1 December of 1961 in terms of s 9 of the Currency and Exchanges Act of 1933. In addition, accused Nos 2 and 3 were charged with a contravention of reg 2(2)(a) read with regs 1 and 22 of the Exchange Control Regulations.

Accused No 1 was the managing director of two companies ('CATIC' and 'CAI'). Accused No 2 was the divisional general manager, international business division, of accused No 3, Allied Bank Ltd ('Allied'). Accused No I 3 had been granted permission to deal in foreign exchange as an authorised dealer and was allowed as such to maintain a foreign bank account in New York, the funds in such account forming part of South African foreign currency reserves and therefore subject to exchange control regulations.

The essential averments of the charge were that on 10 September 1986 accused No 1 submitted an application to the SA Reserve Bank, through Hill J Samuel Bank SA Ltd

1993 (4) SA p453

A (which later became Corbank Ltd) for permission for an Austrian company, Agroprojekt Planungs- und Beratungs GmbH ('Agroprojekt') to invest through the financial rand in CATIC and thereafter made subsequent further applications in respect of the same investment until, on 23 July 1987, permission for an investment in the amount of R5,5 million was granted. It was a condition of the permission that the R5,5 million would be capitalised in ordinary shares in CATIC and that the same be capitalised B on a similar basis in the books of CAI. It was an implied condition that accused No 3's New York bank account would be used for such purposes or on such conditions as approved by the Treasury. Accused No 3 received foreign currency from another bank, viz US$1,6 million, to buy financial rand to the value of R5,5 million. The permission further provided for the purchase by means of the financial rand, of machinery and equipment to the value of R5,5 million from Austria. In all applications Agroprojekt was stated to be the foreign investor. The accused were aware that the capital goods they intended purchasing in Austria would cost only R1,1 million. C Accused Nos 2 and 3 procured a company in Jersey, Holton Holdings Ltd ('Holton Holdings'), as an intermediary between the suppliers of the capital goods and CATIC and made arrangements for two sets of invoices, one reflecting the actual price and the other an inflated value of the goods. Accused Nos 2 and 3 made arrangements for US$1,6 million to be transferred from accused No 3's New York dollar account for the purchase of the R5,5 million which was used to set off the initial US$1,6 million D advance payment in accused No 3's books and for payment of the capital goods, leaving a balance which was applied for the benefit of the accused. At the particular time, R5,5 million, at the commercial rand rate, equalled approximately US$2,7 million.

The evidence revealed that accused No 2 started to work for accused No 3 only on 1 September 1987 and neither he nor accused No 3 had anything to do with the submission of the applications for permission before that date. The approval of the Reserve Bank was sent by telex to Hill Samuel on E 23 July 1987 and read as follows: 'Reply Note that financial rand of R5,5 million will be capitalised in ordinary shares in CATIC and that same will be capitalised on similar basis in books of CAI stop in reply, no objection to introduction of R5,5 million via financial rand for purposes stated stop as exceptional case agreeable to machinery being purchased from parents in view of specialised nature thereof stop branch should view suitable documentary evidence confirming actual expenditure.' The telex F appeared to be a reply to a letter written on 10 June 1987 by accused No 1 on a letterhead of Agroprojekt and addressed to Hill Samuel. This letter notified Hill Samuel of certain changes in the application for the use of financial rand necessitated because of political pressure brought to bear by the Austrian anti-apartheid movement and the fact that Austrian companies were not allowed to make new investments in South Africa. The letter mentioned that the money used to buy the financial rands might come G via Swiss or other channels and that Agroprojekt would not openly hold the investment which would be done through local nominee shareholders. The letter also stated that the investment in CAI would be R5,5 million. The original application was by means of a telex sent to the SA Reserve Bank by Hill Samuel which stated the purpose of the investment to be: 'Not only aimed to establish local South African aviation and avionics industry but to minimise the effect of possible sanctions on the civil aviation field should these eventuate. The funds will be used for: (1) establishing products to take care of design, manufacturing and assembly of aircraft; H (2) taking up of shares in local South African companies in the avionics field; (3) supply venture capital to local SA high-tech projects in the aviation field; (4) to promote exports of aircraft in South Africa.'

The State contended that a proper interpretation of the authority was that: (1) the sole purpose for which the financial rands could be used were to purchase and import machinery and equipment; (2) the authority authorised only Agroprojekt and no other non-resident to invest in the I Ciskei by means of the financial rands; and (3) use could not be made in effecting the investment of the 'nostro balances'. The State argued that after the authority was granted the accused failed to disclose that (a) there was no investor; and/or (b) the value of the capital goods was merely R1,1 million; (c) the suppliers would not be paid more than R1,1 million; (d) accused No 3 would be the de facto investor. At the end of J the State case the accused applied for their discharge on both counts.

1993 (4) SA p454

A Held, that the approval fell to be interpreted in its context and like any other piece of writing which came before a court for interpretation.

Held, further, that it was not for the Court to speculate on what the intention of the person who had drawn up the document but what the Court had to do was to determine what the meaning was of what the person had said.

Held, further, that the terms of the authorisation were plain and unambiguous and amounted to an obvious reply to what was set out in the B letter of 10 June 1987.

Held, further, that it was wrong to place a restrictive interpretation on the authority as contended for by the State: the authority did not refer to capital goods or machinery as it could easily have done and such an interpretation conflicted with the express wording of the application.

Held, further, that the contention that the authority was limited to Agroprojekt could also not be sustained: if one read the approval in its C context it was apparent that the purpose of the application was to grant permission to a non-South African resident.

Held, further, that the alleged non-disclosures, that there was no investor and that accused No 3 was the investor, were mutually destructive but that what the State really meant was that accused No 3 was the investor but was not a non-resident of South Africa.

Held, further, that on the evidence accused No 3 was never the investor: D although it took great care to ensure that it ran no risk concerning the repayment of the loan this did not render it an investor.

Held, further, that the notion of investor envisaged by the State was misconceived: there was no requirement that the investor had to employ his own funds in order to make an investment. That Agroprojekt's own funds were not used to make the investment was irrelevant and was in any event known and accepted by the Reserve Bank.

Held, further, that there was no acceptable evidence that the value of...