Unlawful proceeds forfeited: Constitution s25 property?

Note: Footnotes omitted and emphasis added

JAFTA J (Madlanga, Mhlantla J, Mogoeng CJ and Theron J concurring):

[100] I have had the pleasure of reading the judgment prepared by my colleague Victor AJ (first judgment). I am indebted to her for the meticulous narration of the facts which I wholeheartedly embrace. I also agree with the order proposed and much of the reasoning.

[101] However, I differ with the first judgment on two major conclusions. These are

• whether the proceeds of unlawful activities we are concerned with here constitute property envisaged in section 25(1) of the Constitution, and
• whether the proportionality analysis that applies to determine the lawfulness of forfeiture of property used as an instrumentality of an offence, applies to the forfeiture of the present proceeds of unlawful activities.

[102] Otherwise I agree with the first judgment that this matter in the main concerns the question whether the forfeiture order should cover the entire value of the renovations effected on Ms Botha’s house and paid for by Trifecta. The reason for this being that the payment of the sum of R1 169 068 by Trifecta constituted proceeds of unlawful activities. I also agree that the amount of R411 000 that was paid to Trifecta by Ms Botha has no bearing in determining the extent of the proceeds which must be forfeited to the state. The Supreme Court of Appeal erred in deducting that amount from the R1 169 068.

[103] But the Supreme Court of Appeal rightly reversed the forfeiture order granted by the High Court. The latter Court had ordered that the entire house of Ms Botha be forfeited to the state. This was not warranted because not the whole house was proceeds of unlawful activities. The order should have been limited to the value of those proceeds. Otherwise the forfeiture of the entire house constituted an arbitrary deprivation of property to the extent that the order went beyond the value of the proceeds of unlawful activities.

Is it necessary to determine whether proceeds of crime constitute property?

[104] The first judgment holds that the proceeds of crime paid by Trifecta for the renovations of Ms Botha’s house constitute property protected by section 25(1) of the Constitution. This conclusion is reached despite accepting the fact that Ms Botha held no legal right or interest in those proceeds. But it is said that notwithstanding the absence of rights in the proceeds, section 25(1) of the Constitution confers upon her a right which she may assert against the state to ensure that the forfeiture order is not arbitrary.

[105] Strictly on this approach it is unnecessary to determine whether the proceeds of crime we are concerned with here amount to property envisaged in section 25(1). All that needs to be done is to enquire into the forfeiture order granted so as to determine whether it was arbitrary. For this determination recourse must be had to the relevant provisions of POCA.

[106] The forfeiture was made in terms of section 50(1) of POCA, which mandates the High Court to order forfeiture of property to the state. In its terms POCA defines what is meant by “property” for purposes of that Act. The money that was paid by Trifecta for renovations, which constitutes proceeds of a crime, is property as defined by POCA.

[107] POCA prescribes an elaborate procedure which must be followed before an order of forfeiture is made. In order to safeguard the rights in the property concerned, section 48 obliges the NDPP to give notice of the application for forfeiture to every person who has recorded in terms of section 39 that they have interest in the property in question. Once served with the papers, such person may appear at the hearing of the application and oppose the order of forfeiture or request that the operation of the order should exclude her interest in the property. She is entitled to adduce evidence at the hearing of the application.

[108] If the person opposing forfeiture persuades the High Court that forfeiture should not be granted, it should not grant the order. Where that person establishes that she has legally acquired interest for consideration in the proceeds of unlawful activities, the Court may exclude such interest in the operation of the forfeiture order.

[109] It is evident from the scheme emerging from sections 48-52 of POCA that proceeds of unlawful activities may be forfeited to the state unless a party opposing forfeiture has legally acquired them for consideration. If the acquisition occurred after January 1999, she must also show that she did not know or had no reasonable grounds to suspect that the property in which she acquired interest was the proceeds of unlawful activities.

[110] The purpose of forfeiture, namely combating serious crimes and removing an incentive to commit such crimes, coupled with the fair procedure prescribed by POCA refute the assertion that forfeiture made in compliance with POCA is arbitrary. In this matter Ms Botha knew that the money paid by Trifecta for renovations constituted proceeds of unlawful activities and she did not acquire those proceeds legally. In other words, she had no right or legally recognised interest in them hence the attempt to disguise them as a loan.

[111] In fact the acquisition by her and her possession of the proceeds in question constituted a criminal offence under POCA. The absence of any legal right in those proceeds and the fact that she committed an offence in acquiring and keeping them removes the legal foundation of any claim to the effect that she had a right to hold onto them, until a forfeiture order was made.

[112] The scheme outlined above illustrates that here it is not necessary to first determine whether the proceeds of crime constitute property as envisaged in section 25 of the Constitution. The arbitrariness of the forfeiture order may be established with reference to POCA as the law of general application and the relevant standard for determining arbitrary deprivation.

In FNB this Court declared:

“[I]t is concluded that a deprivation of property is ‘arbitrary’ as meant by section 25 when the ‘law’ referred to in section 25(1) does not provide sufficient reason for the particular deprivation in question or is procedurally unfair.”

[113] POCA prescribes a fair procedure which must be followed before a forfeiture order is made and it also provides sufficient reasons for deprivation. However, if the issue whether the proceeds amount to property contemplated in section 25 were to be decided, what is said above provides proper context in which the issue must be addressed.

Whether proceeds of crime are property in terms of section 25(1) of the Constitution

[114] Without addressing the contradiction flowing from section 6 of POCA, the first judgment suggests that the proceeds we are dealing with here amount to property protected by section 25 of the Constitution and that—

“[W]hen Ms Botha avails herself of her rights under section 25 of the Constitution she does not do so to found a right to unlawful proceeds; rather, she seeks to assert a right against the State, and to ensure that the actions of the state (the NDPP, and the courts in granting the forfeiture order) are not arbitrary.”

[115] The first difficulty with this proposition is that it suggests that Ms Botha’s criminal conduct in acquiring and keeping the proceeds of unlawful activities triggered the protection of property rights in section 25(1) of the Constitution. She had a right against the state “to ensure that the actions of the state are not arbitrary.” There is a logical difficulty in this proposition. Once it is accepted, as the first judgment does, that Ms Botha had no right in the proceeds in issue and that section 25 did not give her any rights in those proceeds, it is illogical to conclude that she had property that was protected against arbitrary deprivation. The protection against deprivation relates to an individual’s right to property. Here on all accounts Ms Botha had no claim in and to the proceeds to be forfeited.

[116] Section 25 does not itself regulate process in terms of which deprivation of property may occur. What the section requires is that deprivation of property must be effected only in terms of law of general application. But it does not end there, it goes further to declare that the law in question must not authorise arbitrary deprivation. The section states that no law may permit arbitrary deprivation of property. This means that a law that allows arbitrary deprivation would be inconsistent with the section. Here Ms Botha did not contend that POCA, in terms of which the proceeds concerned are to be forfeited to the state, permits arbitrary deprivation.

[117] Therefore, there is no legal basis for concluding that she had a right against the state “to ensure that the actions of the state are not arbitrary.” Forfeiture of the proceeds of crime in the present circumstances cannot constitute arbitrary deprivation of property. This is because Ms Botha had no right in the proceeds, let alone a right that is protected against arbitrary deprivation. In addition, the law in terms of which forfeiture was granted does not authorise arbitrary deprivation.

[118] It is apparent from the text of section 25(1) that deprivation of property rights, regardless of whether it is arbitrary or not, is not permitted under the Constitution unless it is authorised by a law of general application. Even so, the empowering law may not mandate arbitrary deprivation. This is so because the law in question would be invalid for violating the prohibition in section 25(1) and any deprivation that took place under that law would also be invalid.

[119] It is now settled that section 25(1) does not create property rights but protects existing ones.

Indeed in FNB this Court stated:

“The purpose of section 25 has to be seen both as protecting existing private property rights as well as serving the public interest, mainly in the sphere of land reform but not limited thereto, and also as striking a proportionate balance between these two functions.”

[120] In its jurisprudence, this Court has recognised one or the other right in property, before reaching the conclusion that it was dealing with property as contemplated in section 25 of the Constitution. On the contrary, here Ms Botha had no such existing right in the proceeds of unlawful activities. Consequently, there was no right in property that could be protected by section 25(1) against arbitrary deprivation.

[121] Therefore, in present circumstances I hold that proceeds of unlawful activities did not and could not constitute property as envisaged in section 25(1) of the Constitution.

Proportionality

[122] The first judgment concludes that a proportionality exercise applicable to forfeiture of property that was used as an instrumentality of an offence equally applies to forfeiture of proceeds of an unlawful activity. I see the issue differently.

[123] The premise from which the first judgment proceeds is mistaken. It overlooks the genesis of the proportionality analysis, which is the need to interpret and apply the provisions of POCA in a manner that avoids a breach of the right not to be arbitrarily deprived of property.

In Prophet this Court observed:

“While the purpose and object of [chapter] 6 must be considered when a forfeiture order is sought, one should be mindful of the fact that unrestrained application of [chapter] 6 may violate constitutional rights, in particular the protection against arbitrary deprivation of property particularly within the meaning of section 25(1) of the Constitution”.

[124] This approach in the interpretation and implementation of POCA was affirmed in Van der Burg where this Court stated:

“The proportionality requirement is aimed, on the one hand, at balancing the constitutional imperative of law enforcement and combating crime and the seriousness of the offence against, on the other, the right not to be deprived arbitrarily of property.”

[125] This demonstrates that the proportionality analysis is required in cases where property rights would be affected by the forfeiture order.

In Mohunram this Court emphasised –

“the purpose of the proportionality enquiry is to determine whether the grant of a forfeiture order would amount to an arbitrary deprivation of property in contravention of section 25(1) of the Constitution.”

[126] For a number of reasons here the grant of forfeiture will not lead to arbitrary deprivation of property. In the first place, Ms Botha had no right in the money paid by Trifecta for the renovations effected on her house. That money constituted proceeds of an unlawful activity. Therefore, in her case there can be no talk of deprivation of a right in property.

[127] Moreover, while it is true that deprivation as contemplated in section 25(1) does not require a total loss of a right in property, there must be substantial interference with the right in question.

In Mkontwana this Court held —

“[w]hether there has been a deprivation depends on the extent of the interference with or limitation of use, enjoyment or exploitation. It is not necessary in this case to determine precisely what constitutes deprivation. No more need be said than that at the very least, substantial interference or limitation that goes beyond the normal restrictions on property use or enjoyment found in an open and democratic society would amount to deprivation.”

[128] The interference or limitation in question must relate to a legal use or enjoyment of property. If the acquisition of a property is illegal and the person who holds it does not have any legal right in the property concerned, it is inconceivable that in those circumstances it may be said that deprivation as envisaged in section 25(1) of the Constitution has occurred.

[129] But the presence of deprivation alone is not enough for section 25(1) to be contravened. The deprivation must also be arbitrary.

In FNB this Court concluded that in the context of section 25, a deprivation of property is arbitrary if the law authorising it fails to provide sufficient reasons for the deprivation or it is procedurally unfair. POCA satisfies these requirements. It furnishes good reasons for deprivation of proceeds of crime while affording those who forfeit such proceeds procedural fairness.

[130] All of the aforegoing reasons illustrate the inappropriateness of applying the proportionality analysis in the case of a forfeiture of proceeds of a crime in circumstances where the person from whom the proceeds are taken does not have any interest which is lawfully recognised.

[131] As mentioned, I concur in the other reasons contained in the first judgment and those reasons sufficiently support the proposed order.

Section 50(1) of the Prevention of Organised Crime Act 121 of 1998 — forfeiture of unlawful proceeds — proportionality analysis