Van der Merwe and Another v Taylor NO and Others

• Jurisdiction: South Africa
• Judge: Langa CJ, Moseneke DCJ, Madala J, Mokgoro J, Nkabinde J, Sachs J, O'Regan J, Van Der Westhuizen J, Yacoob J, Kondile AJ and Van Heerden AJ
• Judgment Date: 14 September 2007
• Citation: 2008 (1) SA 1 (CC)
• Docket Number: Case No CCT45/06
• Hearing Date: 21 November 2006
• Counsel: PB Hodes SC (with A Katz) for the applicants A de V La Grange SC for the respondents
• Court: Constitutional Court

Mokgoro J: [*]

Introduction G

[1] This case concerns the right to claim the return of property, in the light of the Constitution, following its seizure by the State. Specifically, the case is about the seizure of a large sum of foreign currency by State officials and a claim for its return. It is an application for leave to appeal against the decision of the full court in the Cape High Court. [1] H

The parties

[2] The application is brought by Mr Gary Walter van der Merwe (the first applicant), together with Zonnekus Mansions (Pty) Ltd (the second applicant), a company owned by a family trust of which the first I

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applicant is a trustee and sole director. Inspector Taylor, [2] an officer in the South African Police Service (the SAPS) A is the first respondent; the Minister of Safety and Security (the Minister) is the second respondent; the Director of Public Prosecutions (the DPP) is the third respondent; and the Commissioner for the South African Revenue Service (the Commissioner or SARS) is the fourth respondent. B

Background

[3] On 13 July 2004 Mr Van der Merwe was set to depart from Cape Town International Airport to travel to Las Palmas via London intending, as he said to join his family and friends for an extended yachting vacation in Europe. After he had passed through the security C checkpoint at the airport and before passing through passport control, a customs official requested him to complete a customs declaration form. [3] Once he had done so, his hand luggage was searched with his consent and an amount of 130 000 and US$21 249 which, according to the exchange rate at the D time, [4] together amounted to approximately R1,2 million, was found in his possession.

[4] Not certain which law Mr Van der Merwe had contravened, the customs officials let him proceed to the aircraft. They let him board the plane. Before his departure, however, coming to believe that reg 3(1)(a) [5] E

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was being contravened, the SAPS removed him from the aircraft and arrested him. The foreign currency was confiscated. They, however, A called the SAPS advising them of Mr Van der Merwe's imminent departure with a substantial amount of foreign currency. The customs officials handed the matter over to the SAPS. Mr Van der Merwe's explanation, on inquiry, was that the foreign currency was the total allowance permissible for a group of people, [6] B consisting of eight adults and four children who, except for himself, had already left for Las Palmas two days earlier. According to him, he was carrying the foreign currency on their behalf and his personal travel allowance was included. The 130 000 he was carrying, he explained, included 20 865 issued to him as his own allowance which he had purchased on his credit card account held at C Nedbank. For each of his two minor daughters, he had bought an amount of 7 800 per child. The money had been sourced from: funds acquired from the sale of immovable property owned by the second applicant, [7] gambling winnings, redemption at a casino, first applicant's children's savings account, and the available amount on his credit card. The US Dollars, he said, belonged to a friend, Mr D Allison.

[5] The matter was thereafter referred to the commercial branch of the SAPS who detained Mr Van der Merwe overnight at the Bellville Police E

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Station, releasing him on bail the following day. [8] The currency was recorded in the SAPS register, placed in A a bag, and tagged.

[6] On the day of Mr Van der Merwe's release, SARS issued Inspector Taylor with a notice under s 99 [9] of the Income Tax Act [10] (the s 99 notice). Section 99 permits the Commissioner to appoint someone as agent for a person with tax obligations to SARS B to ensure those obligations are met. The s 99 notice appointed Inspector Taylor, the investigating officer in the case, as agent of Mr Van der Merwe and a company referred to only as Wellness International Network (Pty) Ltd (Wellness). Neither Mr Van der Merwe nor Wellness had any outstanding tax obligations established on the record. On 19 July 2004 Inspector Taylor handed over the currency to SARS in terms of C the s 99 notice.

[7] During oral argument before this court we were told that SARS had since handed over the currency to the South African Reserve Bank (the SARB) [11] for it to hold pending Mr Van der Merwe's criminal trial. The transfer apparently followed the High Court ruling that SARS had no legal claim to the currency. However, this transfer occurred D without Mr Van der Merwe's knowledge as no notice was given to him. It was never formally mentioned in the affidavits and Mr Van der Merwe never had an opportunity to respond to that transfer. Mr Snyman of SARS who had received the currency from Inspector Taylor at the police station indemnified the SAPS with regard to the holding of the foreign E currency and issued Inspector Taylor with a receipt. The indemnity purported to be issued in respect of property referred to in s 31(1)(a) of the Criminal Procedure Act 51 of 1977 (CPA), [12] giving reasonable indication that the CPA was being invoked as the basis for the seizure of the foreign currency. F

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[8] Shortly after his release, the applicants instituted action on an urgent basis in the High Court for the return of the foreign A currency. The application was dismissed with costs. An appeal to the full court was similarly dismissed.

Proceedings in the Cape High Court B

[9] The applicants originally sought to spoliate the seized currency as well as an order granting Mr Van der Merwe permission to leave South Africa with the foreign currency. [13] They argued that the amount seized was within the total permissible allowance for foreign travel for members of the group. At the hearing, however, they claimed the return of the currency under the C rei vindicatio on the basis that Mr Van der Merwe was the owner. Unable to prove ownership of the US Dollars, Mr Van der Merwe sought only the return of the 130 000 for which he had tendered documentary proof. [14] He conceded that he was carrying the US Dollars on behalf of Mr Allison. [15] D

[10] The High Court was confronted with the question whether SARS acted lawfully by appointing Inspector Taylor as agent under s 99 of the Income Tax Act without proving or even alleging the existence of tax obligations on the part of Mr Van der Merwe or any of his companies. E

[11] The court dismissed the application, and although it held that SARS had not established any legal entitlement to hold the currency under s 99, it concluded that the currency had nevertheless been legitimately forfeited to the National Revenue Fund under reg 3(5) [16] and that accordingly the respondents had shown a statutory right to hold the money. [17] F

Before the full court of the High Court

[12] On appeal to the full court, Mr Van der Merwe argued that he was the owner of the 130 000, that it remained his property and for those reasons he was entitled to its return. [18] G The court held that Mr Van der Merwe had failed to establish ownership and could therefore not succeed.

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in his vindicatory action. The court declined to decide on what legal basis the State held the currency. A

In this court

[13] Under the impression that the currency was still in the possession of SARS, the applicants contend that the only real issue for determination by this court was whether SARS was legally entitled B to hold the foreign currency. In their submission, respondents had relied solely on s 99 of the Income Tax Act as the basis for the holding of the currency. The applicants contended that should the court not accept that s 99 formed a legal basis for the respondents to hold the currency, the appeal must succeed. The applicants argue C that the respondents were not entitled to hold the currency under s 99. The applicants submit to respondents' oral argument before court that the currency was seized under s 20 of the CPA, [19] making reg 3(5) inapplicable. In the alternative they submit, if the court finds that s 20 is not applicable and the currency had been seized under reg 3(5), that reg is unconstitutional D because it permits the automatic forfeiture of property, thereby violating Mr Van der Merwe's property rights under s 25(1) of the Constitution. The applicants further submit that reg 3(5) also violates s 34 of the Constitution. E

[14] The applicants attack reg 3(5) on the basis that it affords Treasury the discretion to forfeit without any guidelines. This, they submit, is unconstitutional. They also contend that even if the money was seized under s 20 of the CPA it is no longer held under that provision. Contending that once SARS returned the money to the SAPS, the defence advanced by the respondents in the High Court, namely F that the foreign currency had been paid over to SARS pursuant to the s 99 notice, can no longer hold. In those circumstances, the money should have been returned to them as the lawful owners. G

[15] The respondents' conduct as organs of State, the applicants further submit, conflicts with their duties under the Constitution, in particular ss 1 and 195. They have acted contrary to the basic values governing public administration contained in s 195 of the Constitution. These provisions require, among others things, a high standard of H

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professional and ethical conduct and accountability with which the respondents have failed to A comply. [20] The State, they submit, did not lead by example. [21]

[16] The respondents argued that the criminal trial has not yet been concluded and a possibility still exists that an acquittal might lead to a refund of the currency. For this reason, they contend, B the SAPS could not return the currency at this stage. In order to...