Botha v South African Resrve Bank and Others (35436/2005) [2008] ZAGPHC 365 (20 June 2008)

IN THE HIGH COURT OF SOUTH AFRICA

(TRANSVAALSE PROVISIONAL DIVISION)

In the matter between:

BOTHA. DR WILLEM ALBERTUS Applicant

and

THE SOUTH AFRICAN RESRVE BANK First Respondent

PLENDERLEITH, IAN Second Respondent

DELPORT, PETRUS JACOBUS Third Respondent

JUDGMENT

PRETORIUS J.

The applicant launched a review application requesting the reviewing and setting aside of blocking orders of accounts which were blocked in terms of Regulation 22 A and/or 22 C of the Regulations made under the Currency and Exchanges Act no 9 of 1933 and an order in terms of which certain amounts standing to the credit of the applicant were forfeited to the State. In the alternative the applicant is requesting an order compelling the first respondent to provide written reasons for the issue of the blocking and forfeiture orders in terms of section 33 of the Constitution

This application was filed on 4 November 2004 at Court and served on the first respondent during November 2004.

Dr D H Botha, attorney of Newtons Inc. acting on behalf of the Exchange Control Department of the first respondent, telephoned the

applicant's attorney of record and advised him that the designated functionaries had not been joined and afforded the applicant's

attorney an opportunity to amend the applicant's papers. The applicant's attorney replied that the respondent must raise this point in the answering affidavit. This was done by the respondent:

"As set out more fully below, none of the orders concerned were made by or on behalf of the SARB. but by a designated functionary of the Minister of Finance."

The applicant did not identify the respondent in the founding affidavit and did not set out in the founding affidavit in which capacity the respondents were being cited.

The first respondent raised the question of mis-joinder of the first, second and third respondents and the non-joinder of the Minister of Finance and Standard Bank.

Thereafter an application for joinder of second and third respondents was launched and the following order granted:

"That the second and third respondents are joined as second and third

respondents"

Mr Maritz, for the respondent, dealt with the question of joinder of second and third respondents and indicated that they were correctly

joined as delegates of the Department of Treasury The delegation relied on, in this instance, is the delegation of 23 March 1992 by the Minister of Finance, in which the Reserve Bank is delegated to perform certain functions, but makes it clear that

"Al die funksies en/of bevoegdhede wat by die Deviesebeheerregulasies aan die Tesourie toegewys is, asook al die pligte daarkragtens aan die Tesouhe opgelè met die uitsondering van die funksies en/of bevoegdhede wat by regulasies 22A(1) (a), 22A(1) (c), 22A(2), 22A(3), 22B, 22C(1), 22C(2) (b), 22C(3) en 22 D, aan die Tesourie toegewys is"

Enige beampte van die Bank wat, ingevolge die interne reels of regulasies van die Departement Deviesebeheer van die Bank, n gemagtigde

tekenpligtige beampte van die Departement Deviesebeheer van die Bank is "

The Treasury has thus delegated the powers, functions and/or duties conferred upon the Treasury to authorized functionaries of the first respondent as delegates of the Treasury

The forfeiture order, which the applicant seeks to set aside, was issued by the second respondent as the Deputy - Governor of the first respondent in his capacity as the delegated functionary of the Treasury

The background to this application is that during February 1999 the first respondent submitted an application through First National Bank to the Exchange Control Department of the first respondent, on behalf of the Azaliah College of Further and Higher Education, for permission to invest in an offshore entity. This would entail that US $40 000 per month, for 20 months, must be paid to Preston University in the United States of America, totaling US $ 800 000.

Mr Jones, on behalf of the Exchange Control Department was not satisfied that the intended investment of 20% in an offshore educational entity would afford the South African company substantial benefit and the application was declined. The applicant took this failed application no further

During March 2002 Standard Bank made a report to the Exchange Control Department of the first respondent regarding monetary transfers which various persons had done in terms of section B5 (B) (ii) of the Rulings These transfers were effected from the bank account of Education Facilitators (Pty) Ltd. which was trading as Azaliah College, at the request of the applicant

Standard Bank enclosed the internal audit report by the bank, as well as several loan agreements between the applicant and certain

individuals, in which the loan were in respect of money that was transferred abroad at the behest of the applicant.

These so-called loan agreements had been signed by the applicant, but not by the other parties to these agreements. Some of these agreements were undated

These "loans" were transferred from the account of Education Facilitators (Pty) Ltd to the account of Azaliah University in the United States of America.

The audit report of Standard bank reveals that the relationship manager was concerned that Education Facilitators (Pty) Ltd had been transmitting funds overseas, using passports and tax clearance certificates of other people. The finding by Standard Bank:

"On investigating the transfer of funds abroad, it has been established that Dr Botha has apparently taken 10 year. Interest Free, loans from the Company, and then on-lent these funds to private people, ranging in ages from 24 to 85 years old. and who may be family / relatives. These loans are once again for 10 years, with no fixed repayments, and are interest free.

It is of concern that the funds do not appear to be invested in these person's names abroad, but were credited to accounts in Albeuquerque.

that appear to be controlled by Dr. Botha."

These allegations by Standard Bank are admitted. The applicant, however, contends in relation to Standard Bank: "It is further noteworthy that:

the report submitted by Standard Bank, a copy of which is annexed to Delport's affidavit as "PJD11" has never previously been made available to me: Standard Bank, in its capacity as an Authorised Dealer and agent of the Respondent processed these transactions and transferred the funds without raising any difficulty with me in this regard:

I was advised by the representatives of Standard Bank as to how the applicants should be processed and followed their advice in this regard:"

In Henri Viljoen (Pty) Ltd v Awerbuch Bros 1953 (2) SA 151 (O) at p 168 -

170 the test was set out to determine whether a party has a "direct and substantial" interest in the matter and may be affected prejudicially by the judgment of the court.

In Amalgated Engineering Union v Minister of Labour 1949 (3) SA 637 (A)

at p 659 the rule was set out by Fagan AJA that any person is a necessary party and should be joined if such person has a direct and substantial interest in any order the court might make.

In this instance the second and third respondents are correctly before court, in their capacity as delegated employees of Treasury in terms of sections 22 (A) (1) (a). 22 A (1)(c). 22 A (2). 22 (A) (3). 22 (A) (3), 22 B. 22 C (1), 22 C (2) (b). 22 C (3) and 22 D.

The third respondent declares in the answering affidavit

7 am. and have at all relevant times been, an authorised signatory in the Exchange Control Department of the SARB, as contemplated in paragraph 2.4 of the delegation, and therefore included in the said delegation

I, in my aforesaid capacity, took the decisions to make the blocking orders in terms of regulation 22C of the Regulations, which are the subject of this application."

The forfeiture order which the applicant seeks to set aside in these proceedings, was issued by mr I Plenderleilh. a Deputy Governor of the SARB. in his aforesaid capacity."

The applicant however, does not request any relief against the second and third respondents, but only against the first respondent.

The forfeiture order, which the applicant seeks to set aside, was issued by the second respondent as the Deputy-Governor of the first respondent, in his capacity as the delegated functionary of the Treasury

Mr Maritz, on behalf of the respondent, invited the applicant to admit, during argument that the second and third respondents were before court in their capacity as delegated functionaries of the Treasury, The applicant did not respond, but argued that the first respondent was cited correctly.

This poses a problem as to what effect any order made will have, should the court decide in favour of the applicant The forfeiture order as published in the Government Gazette 1400 of 2005 reads as follows:

"1. The Minister of Finance has, by virtue of the provisions of

Regulation 22E of the Exchange Control Regulations delegated all the functions and/or powers conferred upon the Treasury by the provisions of the Exchange Control Regulations [with the exception of the functions and/or powers conferred upon the Treasury by Regulations 3(5) and (8). 16. 20 and 22. but which exception does not include the functions and/or powers under Exchange Control Regulations 22A. 22B. 22C and 22D]. and assigned the duties imposed thereunder on the Treasury, to the Governor or the Deputy Governor of the South African Reserve Bank.

2 By virtue of the functions, powers and/or duties vested in the

Deputy Governor of the South African Reserve Bank in terms of the delegation and assignment of the functions, powers and/or duties referred to in 1 above. I hereby give notice of a decision to forfeit to the State the following money and/or goods and I hereby declare and order forfeited to the State the following money and/or goods, namely

2.1 The amount of Rand 34 573-08 being capital

standing to the credit of the Respondent in account number 201698943 held at The Standard Bank of South Africa Limited; Rand 3 016-00 being capital standing to the credit of the Respondent in account number 9097353429 held at ABSA Bank Limited in the name of Education

Facilitators (Pty) Ltd and Rand 564 494-88 being capital standing to the credit of the Respondent in account number 16979816X2 (also known as policy 16979816X2) held at Sanlam Limited, together with interest on and/or other accrual to such capital." (my emphasis)

II is quite clear that this Notice and Order of Forfeiture. Notice 1400 of 2005 refers to the Minister of Finance and not the Reserve Bank The second respondent, mr Plenderleith. Deputy-Governor of the first respondent, issued and signed this notice and order on 4 August 2005 as set out. by virtue of the functions, powers and/or duties vested in him in terms of the delegation regarding Exchange Control Regulations. He did not act as a functionary of the first respondent, but as a delegated functionary of the Treasury and the Minister of Finance

Mr Hodes' submission was that the correct parties were before Court and that third party notices had been sent to Standard Bank and the Minister of Finance, who had not responded thereto He admitted during argument that he second and third respondents acted in their official capacities as delegated functionaries, but reiterated that no relief was sought against them. In New Garden Cities Incorporated Assoc not for gain v Adhikarie 1998 (3) SA 626 CPD at p 630 par 9 Rose Innes AJ found:

"The right which the respondent in this case has to demand that another person be joined as a party to the proceedings is a limited one It is confined to situations where the person sought to be joined either has a joint proprietary interest with one or other of the existing parties or where he may have a direct and substantial interest in the Court's order"

In Henri Viljoen (Pty) Ltd v Awerbuch Brothers (supra) at p 169 H Horwitz AJP found:

"The above authorities at least point in the same direction as the English cases referred to. namely, that 'the direct interest' required by the Appellate Division decision must be an interest in the right which is the subject-matter of the litigation and is not merely a financial interest which is only an indirect interest in such litigation "

In United Watch and Diamond Co v Disa Hotels 1972 (4) SA 409 CPD

Corbett J held at p 415 E - F

"It is settled law that the right of a defendant to demand the joinder of another party and the duty of the Court to order such joinder or to ensure that there is waiver of the night to be joined (and this right and this duty appear to be co- extensive) are limited to cases of joint owners, joint contractors and partners and where the other party has a direct and substantial interest in the issues involved and the order which the Court might make"

and 415 H:

"and it is generally accepted that what is required is a legal interest in the subject-matter of the action which could be prejudicially affected by the judgment of the Court"

In Bowring NO v Vredendorp Properties CC and Another 2007 (5) SA 391 (SCA) where Brand JA held at p 398 par 21

"The substantial test is whether the party that is alleged to be a necessary party for purposes of joinder has a legal interest in the subject-matter of the litigation, which may be affected prejudicially by the judgment of the Court in the proceedings concerned"

It is quite clear the that the Reserve Bank is not delegated in terms of Regulations 22 A. B. C and D as acting on behalf of the Treasury The

Reserve Bank did not make the blocking or forfeiture order, but it was made by the second and third respondents on behalf of Treasury and the Minister of Finance. Furthermore, the money was not forfeited to the Reserve Bank, but to the State. The applicant made it clear that the second and third respondents did not act in their personal capacity, but that they acted at all times within the course and scope of their employment by virtue of their official designated capacities

In Francis George Hill Family Trust v South African Reserve Bank and Others 1990 (3) SA 709 (TPD), to which Mr Hodes referred the Court, McCreath J found at p 709:

"It is accordingly not necessary for me to consider the argument advanced on behalf of the first respondent that such contentions could not be raised in the absence of the joinder of the Minister of Finance as a party to the proceedings, who, so it was argued, had a substantial interest in the matter."

The decision does not support the applicant's case that the first respondent is cited correctly.

I have considered the point in limine regarding the non-joinder of the Minister of Finance carefully, considering all the arguments by counsel and reading all the relevant documents thoroughly, the second and third respondent's are employed by the first respondent in the normal structures of the Exchange Control Department of first respondent, but in this instance they acted as functionaries of the Minister of Finance

Mr Maritz argued that Standard Bank of South Africa Limited should also be joined as it has a material interest in the matter. I cannot agree because if the test is applied whether Standard Bank has a "direct and substantial interest" in the judicial proceedings and whether any order the Court might make cannot be sustained or carried into effect without affecting Standard Bank, the answer must be negative. Standard Bank will, in my opinion, not be affected prejudicially by the judgment of the Court

It is plain that the applicant argued the matter from the point of view that the correct party is before court and that the Court should hear the matter in its entirety Although the matter was argued. I cannot but agree that the non-joiner of the Minister of Finance is fatal to the applicant's case for the reasons set out above. The applicant proceeded in total disregard to the concerns expressed by the attorney for the respondents and the warning issued to the applicant regarding the non-joiner of the Minister of Finance. There is no explanation from the applicant as to why the Minister of Finance was not joined at the same time as second and third respondents Therefore this Court has to find that the correct party is not before court and that the application should be dismissed.

In the result the following order is made:

1. The application is dismissed with costs such costs to include the costs consequent upon the employment of two counsel.

C Pretorius

Judge of the High Court

Case number: 35436/2005

Heard on: 9 June 2008

For the Applicant / Applicant: Adv Hodes

Instructed by : Assenmacher.For the Respondent / Respondent: Adv DunnInstructed by Newtons

Date of Judgment 20 June 2008