Member Article

The recent Constitutional Court judgment inNational Director of Public Prosecutions v Botha N.O. and Anotherconsidered the issue of whether a proportionality analysis is required for the forfeiture of unlawful proceeds in terms of section 50(1)(b) of the Prevention of Organised Crime Act, 1998 (“POCA”).

Yolanda Botha, now deceased, was employed as the Head of Department at the Northern Cape Department of Social Services and Population Development for approximately nine years. During her employment, she awarded corrupt tenders relating to lease agreements to Trifecta Investment Holdings. In exchange, Trifecta carried out renovations to Ms Botha’s residential property to the value of ZAR1 169 068.49. In early 2010, and after the award of the tenders, Ms Botha and Trifecta entered into a loan agreement to the value of ZAR500 000.

Subsequently, Ms Botha was elected to parliament, and did not declare the renovations as was required by the Code of Ethical Conduct for Members of Parliament. Following media reports, a parliamentary inquiry was launched in 2011. The parliamentary committee found Ms Botha guilty and concluded that she had misled parliament regarding the true cost of the renovations with the “sham loan agreement”. During the course of the inquiry, Botha repaid ZAR411 054.66 to Trifecta.

Following the parliamentary inquiry, the National Director of Public Prosecutions (“NDPP”) charged Ms Botha with tender corruption and other offences of corruption. In addition, the NDPP sought a civil forfeiture order in terms of POCA.

The court a quo held that the renovations were, on a balance of probabilities, the proceeds of unlawful activities in terms of section 50(1)(b) of POCA. The High Court ordered the forfeiture of Ms Botha’s entire residential property. On appeal, the Supreme Court of Appeal (“SCA”) agreed that the renovations were, on a balance of probabilities, the proceeds of corrupt activities. However, after conducting a proportionality assessment, the SCA held that it was wrong to order the forfeiture of the entire property. The SCA took into account the amount repaid by Ms Botha and ordered the forfeiture of only the balance, being ZAR758 014.83. The NDPP appealed against the SCA judgment to the Constitutional Court.

The critical issue before the Constitutional Court was whether the doctrine of proportionality applies to both the instrumentality and to the proceeds of unlawful activity in terms of section 50 of POCA, ie, should the proportionality analysis applicable to forfeiture of instruments of crime under section 50(1)(a) of POCA, also apply to the forfeiture of proceeds of crime under section 50(1)(b) of POCA?

POCA establishes a civil mechanism for the forfeiture of property gained through wrongful means. This mechanism comprises two steps: firstly, an application to the High Court for a preservation order in terms of section 48 of POCA, and secondly, an application for a forfeiture order for the property, which is the subject of the preservation order. A forfeiture order can be granted for two types of property, namely property in terms of section 50(1)(a), being property that is used to commit an offence (instrumentality forfeiture orders) and property in terms of section 50(1)(b), which relates to the proceeds of unlawful activities.

Instrumentality, forfeiture orders require a proportionality analysis to determine whether the forfeiture would amount to an arbitrary deprivation of property in violation of section 25 of the Constitution. The respondents argued that proceeds of unlawful activity should be granted the same protection under section 25 of the Constitution, whereas the NDPP argued that “property” as contemplated by section 25 of the Constitution does not include the proceeds of unlawful activities.

The Constitutional Court held that the value of the forfeiture should be the entire ZAR1 169 068.49 and that the SCA had erred in deducting ZAR411 054.66 from the forfeiture order. However, the forfeiture of Botha’s entire property was not warranted, as the order should be limited to the value of the proceeds of unlawful activity, and any amount over and above the sum of ZAR1 169 068.49 would amount to an arbitrary deprivation of property.

The majority reasoned that it was not necessary to determine whether the proceeds fell into the definition of property in terms of section 25 of the Constitution, as “property” is defined in POCA for its purposes, and the money paid by Trifecta for the renovations fits squarely into that definition, ie, as being the proceeds of a crime. Furthermore, POCA’s purpose and processes make it clear that a forfeiture in accordance with its provisions would not equate to an arbitrary deprivation of property.

In essence, it was held that Ms Botha had no rights to the proceeds, let alone the protection against arbitrary deprivation of property in terms of section 25 of the Constitution. The Constitutional Court emphasised that it is trite law that section 25 of the Constitution protects existing property rights, rather than creating them. It would therefore be inappropriate to apply a proportionality analysis to the proceeds of unlawful activity.

This judgment makes it clear that wrongdoers cannot rely on the Constitutional right to protection from arbitrary deprivation of property when it comes to the proceeds of unlawful activities, and such amounts can rightfully be forfeited to the State.

Aslam MoosajeeExecutive Dispute Resolution+27 82 461 5917[email protected]

Vishana MakanAssociate Dispute Resolution+27 66 493 2372[email protected]