National Director of Public Prosecutions v Rudman and Others (ECJ 2004/034) [2004] ZAECHC 20 (22 July 2004)

FORM A

FILING SHEET FOR EASTERN CAPE JUDGMENT

ECJ NO : 034/2004

PARTIES:

THE NATIONAL DIRECTOR OF Applicant

PUBLIC PROSECUTIONS

and

ROYDON ROY RUDMAN First Defendant

ADRIAN HENDRICKUS BOTHA Second Defendant

ELRIKA MATTEE First Respondent

SANETTE BOTHA (DE VRIES) Second Respondent

EXTRA DIMENSIONS 1072 C.C. Third Respondent

BLAIZEPOINT TRADING 348 C.C. Fourth Respondent

RERENCE NUMBERS -

Registrar: 15/2004

DATE HEARD: 25 MARCH 2004

DATE DELIVERED: 22 JULY 2004

JUDGE(S): NEPGEN J

LEGAL REPRESENTATIVES -

Appearances:

for the State/Applicant(s)/Appellant(s): MJ DE JAGER & NC NDZENGU

for the accused/respondent(s): HJ VAN DER LINDE SC

Instructing attorneys:

Applicant(s)/Appellant(s): DULLABH & CO.

Respondent(s): NETTELTONS

CASE INFORMATION -

Nature of proceedings : RETURN DAY OF PROVISIONAL ORDER

Topic: RESTRAINT ORDER IN TERMS OF PREVENTION OF ORGANISED CRIME ACT

IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE DIVISION)

Case No.: 15/2004

Date delivered:

In the matter between:

THE NATIONAL DIRECTOR OF Applicant

PUBLIC PROSECUTIONS

ROYDON ROY RUDMAN First Defendant

ADRIAN HENDRICKUS BOTHA Second Defendant

ELRIKA MATTEE First Respondent

SANETTE BOTHA (DE VRIES) Second Respondent

EXTRA DIMENSIONS 1072 C.C. Third Respondent

BLAIZEPOINT TRADING 348 C.C. Fourth Respondent

­­­­­­­­­­­________________________________________________________________

J U D G M E N T

________________________________________________________________

NEPGEN, J:

[1] The applicant is the National Director of Public Prosecutions. On 8 January 2004 Sandi, J granted the applicant a provisional restraint order in terms of the provisions of section 26(3)(a) of the Prevention of Organised Crime Act, No. 121 of 1998 (The Act). At the same time a rule nisi was granted calling upon the defendants and the respondents (to whom I shall refer in more detail hereunder) to show cause on 26 February 2004 why the provisional restraint order should not be confirmed and why they should not be ordered to pay the costs of the application in the event of them opposing the relief sought. The application before Sandi, J was brought ex parte and was heard in camera. By agreement the return day was extended until 25 March 2004 when the matter came before me.

[2] The defendants cited in the application are Roydon Roy Rudman (first defendant) and Adrian Hendrickus Botha (second defendant). The reason why these individuals have been cited as defendants is because they are both going to be charged with 27 charges of fraud, alternatively theft, and thus fall within the definition of “defendant” in section 12 of the Act. First respondent is Elrika Mattee, who is married to first defendant. Second respondent is Sanette Botha, the wife of second defendant. Third respondent is Extra Dimensions 1072 C.C., a close corporation which carries on business as Makana Financial Services. First defendant established third respondent and he alone holds beneficial interests in this close corporation. Fourth respondent is Blaizepoint Trading 348 C.C. This close corporation was established by second defendant and he and first defendant each hold a 50 % interest therein.

[3] The application is opposed by only second defendant and second respondent. Although first defendant gave notice of his intention to oppose the application, he withdrew his notice of opposition. For the sake of completeness it can be mentioned that second defendant and second respondent applied for condonation for the late delivery of their opposing affidavits, which application was not opposed by the applicant. Such condonation was accordingly granted.

[4] Annexed to the founding affidavit is a draft charge sheet. From this it appears that there are four persons who were allegedly defrauded, alternatively from whom money was stolen, by first defendant and second defendant. These four persons have been referred to in the papers as “complainants” and I shall do likewise in this judgment.

[5] Under the heading “THE FACTS IN BROAD OUTLINE” the following averments are made in the founding affidavit:

“23.1 As set out in the draft charge sheet annexed hereto and marked “JGR 1” and also in the supporting affidavit herewith, the complainants were defrauded of R2.697 million in total arising from various instances for a purported “investment scheme” which however did not exist.

23.2 The Defendants requested the complainants to make funds available to the Defendants who were in turn to use the said funds to provide bridging finance to SANDF employees who were on pension but still awaiting their pension money. The SANDF employees were to repay the amounts advanced to them plus 30 % interest and the complainants were to receive their capital and a 10 % interest.

23.3 None of the complainants received any capital or interest as promised on their investments and on or about the 12th of April 2002 both Defendants alleged to the complainants that their invested amounts have been “lost”.”

(The supporting affidavit referred to in paragraph 23.1 of the founding affidavit is the affidavit deposed to by one Brian Claassen, the investigating officer in the case against first and second defendants.)

[6] The allegations made in the founding affidavit in support of the relief sought against the respondents are that first defendant established third respondent and that three of the complainants deposited money into its bank account (paragraph 8 of the founding affidavit); that fourth respondent was established by second defendant and “may have received some affected gifts” (paragraph 9 of the founding affidavit); that the respondents “are cited as persons who probably received affected gifts from the Defendant (sic), who might be holding property on behalf of the Defendants or by operation of law” (paragraph 10 of the founding affidavit); and that any affected gift received by any of the respondents would be subject to restraint in terms of the order sought and that the respondents should therefore be ordered to disclose, by way of affidavit, the “the existence and all relevant details of any affected gifts they have received, either directly or indirectly, from Defendants” (paragraph 33 of the founding affidavit).

[7] The alleged criminal conduct on the part of first defendant and second defendant is referred to in more detail in the affidavit of Claassen. He alleges that first defendant and second defendant worked together in Grahamstown during 2001 and thereafter. Second defendant was well known to the four complainants. During the relevant period the complainants were requested by both defendants to make funds available to them, which funds they would use to provide bridging finance to SANDF employees who were on pension but were still awaiting payment of their pension money. All amounts advanced to such SANDF employees would be repaid by these employees together with interest on such amounts at the rate of 30 %. The complainants were informed that they would be repaid the capital advanced together with 10 % interest thereon. Claassen avers that the defendants convinced the complainants that the aforesaid “scheme” was free of risk, secure and legal; that first defendant had a contact person at the 6th South African Infantry Corps (6 SAI) in Grahamstown who provided him with details of SANDF employees who were to be retrenched or who were to receive severance packages; that first defendant “had legal access” (I assume this is intended to mean that he was entitled to) to approach such employees and offer them bridging finance while they were awaiting payment of the amounts due to them; that “all the documentation was above board and cleared by ABSA bank” and that this gave first defendant the right to deduct electronically from each SANDF employee’s account the amount advanced to him together with the interest referred to above once payment of the amount due had been received; and that both defendants had a list of 200 names reflecting who the SANDF employees in question were, as well as their last dates in the SANDF and the amount of the “packages” they were to receive. It can be mentioned at this stage that the list annexed to Claassen’s affidavit contains only names and identification numbers. Claassen further refers to an affidavit by one Parkins, which affidavit he contends confirms that the names and details appearing on the list are fictitious. The two affidavits deposed to by Parkins and which are annexed to Claassen’s affidavit do not go so far as to confirm that the names and details appearing on the list are fictitious. What these affidavits do indicate, however, is that during the relevant period only 6 SANDF employees, who were based at 6 SAI in Grahamstown, terminated their service contracts and that none of their names appear on the aforesaid list.

[8] Claassen’s affidavit takes the case against the respondents no further. In fact, in his affidavit he only refers to first respondent, stating that she is married to first defendant; and to fourth respondent, stating that it was established by second defendant and that each defendant holds a 50 % interest therein.

[9] The answering affidavit of second defendant and second respondent was deposed to by second defendant. A confirmatory affidavit by second respondent is attached. However, in certain instances the deponent of the answering affidavit would appear to be second respondent. Be that as it may, it is clear that second defendant denies having committed any offence. He has chosen not to set out his version in detail in the answering affidavit, but has referred to what he stated when he made a statement to the police on 18 April 2002 and in two affidavits made by him in opposition to summary judgment applications brought by two of the complainants, namely Michau (in case no. 1519/2002) and Du Plessis (in case no. 1020/2002). It is clear that second defendant admits that he was involved with first defendant in a venture whereby money was obtained from the complainants on the basis that it would be used to provide bridging finance for SANDF employees in the circumstances referred to above, and that the complainants were told that they would receive repayment of their capital together with interest at 10 % once the pension benefits of the SANDF employees were paid into the bank accounts of such employees. It is also clear that second defendant does not dispute that such venture was not a genuine one. In fact, he refers to it in his answering affidavit as a “scam”. Second defendant alleges that first defendant was the instigator of this scheme and that it was he (first defendant) who provided second defendant with the details of how the scheme would operate. According to second defendant he had no reason to mistrust first defendant and honestly believed that the venture was a legitimate one. It is not disputed that he approached the complainants and informed them of the scheme and thereby induced them to make what they considered to be investments. It was only towards the end of March 2002 that second defendant realised that something might be amiss. In summary, thus, second defendant does not dispute his involvement in what was undoubtedly an illegal venture but contends that he did so without any guilty knowledge and because he accepted what he had been told by first defendant. He accordingly denies that he had any intent to defraud the complainants or to steal money from them.

[10] The grounds upon which the granting of a restraint order is opposed are the following:

1. The applicant, as an ex parte applicant, failed to make a full disclosure of facts which it was his duty to disclose.

2. The application should not have been brought on an ex parte basis without notice to second defendant and second respondent as there was no urgency nor any danger of assets being dissipated.

3. There are no reasonable grounds for believing that a confiscation order may be made against second defendant.

[11] The facts which it is alleged the applicant should have disclosed were that second defendant had, on 18 April 2002, made a detailed statement to one Townsend, a captain in the Commercial Branch of the South African Police Services in Humewood, in which he set out fully his version of the relationship between him and first defendant. This is the police statement to which I referred above. In addition, reference is made to the fact that second defendant made the two affidavits, which have also been referred to above, in opposition to summary judgment applications and in which his defence was again set out, the contention being that the investigating officer must have been aware, prior to the application being launched, of the fact that civil proceedings had been instituted against second defendant and that he had made these affidavits. It was submitted that second defendant’s version is such an integral part of the case against him that it should have been disclosed.

[12] The applicant contends that the fact that second defendant made the statements concerned, and the contents thereof, are not material and could not have influenced Sandi, J in any way in deciding whether or not to grant the provisional restraint order.

[13] In Phillips v National Director of Public Prosecutions, 2003 (6) SA 447 (SCA) (for convenience hereinafter referred to as Phillips (SCA)) at 455B [29], Howie, P pointed out that it is trite that an ex parte applicant must disclose all material facts that might influence the court in deciding the application. (See also National Director of Public Prosecutions v Basson, 2002 (1) SA 419 (SCA) at 428 I [21].) In the passage referred to the learned President of the Supreme Court of Appeal dealt with the situation that arises if there has been a material non-disclosure in the following terms:

“If the applicant fails in this regard and the application is nevertheless granted in provisional form, the Court hearing the matter on the return day has a discretion, when given the full facts, to set aside the provisional order or confirm it. In exercising that discretion the later Court will have regard to the extent of the non-disclosure; the question whether the first Court might have been influenced by proper disclosure; the reasons for non-disclosure and the consequences of setting the provisional order aside.”

[14] The first question that must be decided is whether the fact that second defendant made the statements referred to, and the contents of those statements, should have been disclosed. In this regard what must be decided is whether those facts might (not would) have influenced Sandi, J in deciding whether or not to grant a provisional restraint order.

[15] It is not clear to me in what way the aforementioned facts, which were not disclosed, might have influenced the decision of Sandi, J in this matter. It is clear that he must have been satisfied that the jurisdictional facts referred to in section 25(1)(b), namely that he had to be satisfied that second defendant was to be charged with an offence and that it appeared that there were reasonable grounds for believing that a confiscation order may be made against second defendant, had been established. The information referred to would only have indicated that second defendant has consistently denied having been involved in any criminal activity and would have provided details of his defence. This, accordingly, would have given rise to a dispute of fact. It is not appropriate for a court, when considering whether or not to grant a provisional restraint order, or for that matter a final restraint order, to attempt to resolve disputed facts in relation to the guilt or otherwise of a defendant. This will be done by the trial court. Furthermore, the usual rule in motion proceedings’ as set out in Plascon–Evans Paints Limited v Van Riebeek Paints (Pty_ Limited, [1984] ZASCA 51; 1984 (3) SA 623 (AD), does not apply when it comes to determining whether or not reasonable grounds exist for believing that a confiscation order may be made (see National Director of Public Prosecutions v Kyriacou, 2003 (2) SACR 524 (SCA) at 529 f-h [10]). The position may have been different had the applicant been aware of facts which indicated that there was at least a strong probability that second defendant would not be convicted and had failed to disclose such facts. That, however, is not the position in this matter. In the circumstances it is my view that there is no merit in this point taken on behalf of second defendant.

[16] In any event, even if my conclusion should have been that the aforesaid facts should have been disclosed, this does not in itself mean that a final restraint order should not be granted. I still have a discretion, which is to be exercised in the manner referred to in Phillips (SCA). In so far as the extent of the alleged non-disclosure is concerned, I have already pointed out that it relates merely to second defendant’s exculpatory version of the relationship between himself and first defendant. I am unable to conclude that a failure to set out a defendant’s denial of guilt is in itself a matter which should have the result that the application should be dismissed. After all, everyone is presumed to be innocent until a court finds that his guilt has been established beyond reasonable doubt. I have already stated that it is my view that Sandi, J would not have been influenced in making the order which he did make had he been aware of the facts which it is contended should have been referred to in the founding papers. By reason of the applicant’s denial that there was any material non-disclosure no specific reason for not annexing the aforementioned statements to the founding affidavits has been advanced, although the applicant, in reply, annexed a copy of the whole of the police docket, stating that this amounted to “an overburdening of these papers both by way of nature thereof and volume”. In the light of my views on these matters, which in my judgment are not sufficient for me to exercise my discretion in favour of second defendant and set aside the provisional restraint order, it is not necessary to consider the consequences of doing so.

[17] I turn now to consider the submission that the application should not have been granted because of the failure to have given notice to the defendants and the respondents, which was based on the further submission of an alleged lack of urgency as well as a lack of any danger that any of the assets restrained would be dissipated.

[18] Section 26(1) of the Act empowers the applicant to apply ex parte for a restraint order. Its wording is almost identical to that of section 38(1) of the Act, which empowers the applicant to apply ex parte for a preservation of property order. In National Director of Public Prosecutions & Another v Mohamed No & Others, 2003 (4) SA 1 (CC) Ackermann, J, when dealing with the proper construction of section 38 of the Act, said the following at 15 D-F[33]:

“I would at the outset point out that it is not the ex parte nature of the initial application under s 38 that the High Court found to be objectionable, but the fact that on its construction of the section, a High Court is precluded from issuing a rule nisi. The phrase in s 38 ‘(t)he National Director may by way of an ex parte application apply’ means no more than that, if the National Director is desirous of obtaining an order under s 38, she or he may use an ex parte application, in the sense defined in para [27] above. It sanctions a particular initiating procedure to be employed when relief of a particular nature is being sought. An important consequence of this is that an application by the National Director under s 38 can never be dismissed solely on the ground that it has been brought ex parte.”

These remarks must apply equally to section 26 of the Act. This disposes of the argument advanced on behalf of second defendant and second respondent in this regard. I would point out, in any event, that urgency is not a prerequisite for the bringing of an application under section 26(1) of the Act. Similarly, it is not essential that a case be made out that there is a threat that assets will be disposed of (see National Director of Public Prosecutions v Phillips & Others, 2002(4) SA60 (W) (hereinafter referred to as Phillips (WLD)) at 76H-77E).

[19] As has been mentioned, the third ground relied upon for the submission that a final restraint order should not be granted is that there are no reasonable grounds for believing that a confiscation order may be made against second defendant. As such an order can only be granted if second defendant is convicted, what must be considered, therefore, is whether reasonable grounds exist for believing that second defendant may, not will, be convicted and that a confiscation order will thereafter be made. Counsel for second defendant accepted that the approach to be adopted, insofar as the degree of proof is concerned, to be adopted was correctly set out in Phillips (WLD) at 81 D-H. The following was stated in the passage referred to:

“In my view an application for a restraint order is analogous (although not identical) to an application for an interim interdict and attachment pendente lite. Insofar as such relief contains elements of finality, the Legislature could never have intended that it should be defeated by reason of conflicts of fact per se. Nor would a reference to evidence be appropriate: that might well anticipate the enquiry at the criminal trial and impinge on the right of silence. The prima facie case is proof of a reasonable prospect of obtaining both a conviction in respect of the charges levelled against the respondent and a subsequent confiscation order under s 18 (1). It is appropriate in determining whether the onus has been discharged to apply the long accepted test of taking the facts set out by the applicant together with any facts set out by the respondent which the applicant cannot dispute and to consider whether, having regard to the innate probabilities, the applicant should on those facts obtain final relief at a trial (for this purpose, the confiscation hearing). The facts set up in contradiction by the respondent should then be considered and, if serious doubt is thrown upon the applicant’s case, he cannot succeed.”

Of course, at the end of the day, all that is required is evidence that satisfies a court that there are reasonable grounds for believing that a confiscation order will be made by the court convicting the defendant concerned (Kyriacou’s case, supra, at 529 h).

[20] I have already referred to the conduct on the part of second defendant which the applicant alleges constitutes fraud, alternatively theft. Second defendant’s participation in the scheme is not disputed. In fact, it is clear that he played an active part and that he was the person who approached the complainants and furnished them with details of the scheme. It seems clear that it was as a result of the information furnished by second defendant that the complainants were induced to advance money to first defendant. The illegality of the whole venture is also not disputed. In general I agree with the submission made by applicant’s counsel that the papers establish all the elements of fraud or theft, with the exception of knowledge of wrongfulness on the part of second defendant and thus criminal intent. Whether or not there was such knowledge of unlawfulness and criminal intent is something that the court hearing the criminal trial will have to decide. What requires consideration at this stage is whether there are any facts or circumstances which, if accepted by the trial court, could establish knowledge of unlawfulness and criminal intent. In this regard applicant’s counsel referred me to a statement, which is contained in the police docket, made by first defendant and from which it appears that it is his version that second defendant approached him and suggested that they enter into a joint venture which would involve the provision of bridging finance. According to first defendant an initial amount of R160 000,00 was provided by second defendant in order to set up this business. Applicant’s counsel further referred me to a statement in the police docket made by Paulina Da Silva, one of the complainants. In this statement she avers, inter alia, that second defendant contacted her on two occasions during March 2002 and persuaded her to “invest” two amounts of R55 000,00. On the first of these occasions second defendant allegedly told her that he had an amount of R2 million in the business and that he would not have approached her if he thought there would be any problems. Although second defendant has not dealt with what is alleged by Da Silva in her police statement, it can be accepted that her allegation that he had told her that he had R2 million in the business is inconsistent with his version. As I have pointed out, second defendant alleges that first defendant was the instigator or architect of the whole scheme, and what first defendant stated in his statement is therefore also inconsistent with second defendants version. It would be inappropriate to attempt to resolve the aforesaid disputes, something which can in any event not be done on the papers before me. All that need be said about these disputes is that if the versions of first defendant and Da Silva, or the version of one of them, is accepted this may have the result of persuading the trial court that second defendant had the requisite knowledge of unlawfulness and the necessary criminal intent to justify his conviction. I am therefore unable to agree with the submission made on behalf of second defendant that the defence set out by him, as discussed more fully above, cannot be disputed by the applicant and that if one applies the test set out by the High Court in Phillips (WLD) a final restraint order should not be made. It is accordingly my view that there are reasonable grounds for believing that second defendant may be convicted of the offences referred to and that a confiscation order may be made against him.

[21] I turn now to consider the position of second respondent. I have already referred to the allegations made in the founding affidavit in support of the relief sought against the respondents. Dealing specifically with second respondent, the only allegation which is relevant to her is that in paragraph 10 of the founding affidavit, namely that she is a person who probably received affected gifts, or who might be holding property on behalf of second defendant (on the assumption that that was what was intended to be alleged). In the schedule of assets, which is annexed to the provisional restraint order, the only reference to second respondent is to be found in paragraph 3(b)(iv), (which deals with the defendants’ “INTEREST IN ENTITIES”) where there is reference to second defendant having a 50 % interest in Corpclo 822 CC and second respondent having a 50 % interest therein. In the founding affidavit nothing is said about this close corporation. However, when the matter was argued applicant’s counsel relied on the fact that second respondent had a 50 % interest in that close corporation, stating that it was clear from the allegations made in the answering affidavit of second defendant that second respondent had received an affected gift. In this regard it appears from such affidavit that second defendant allegedly lent an amount in excess of R160 000,00 to the close corporation, which amount had been obtained from a total amount of R250 000,00 that second defendant had received from the “scam”.

[22] An affected gift is defined in section 12(1) of the Act as meaning

“……any gift-

made by the defendant concerned not more than seven years before the fixed date; or made by the defendant concerned at any time, if it was a gift-

of property received by that defendant in connection with an offence committed by him or her or any other person; or of property, or any part thereof, which directly or indirectly represented in that defendant’s hands property received by him or her in that connection,

whether any such gift was made before or after the commencement of this Act”.

It remains, however, a gift, subject to the provisions of section 16 of the Act, which provide that for the purposes of chapter 5 of the Act

“……a defendant shall be deemed to have made a gift if he or she has transferred any property to any other person directly or indirectly for a consideration the value of which is significantly less than the value of the consideration supplied by the defendant”.

[23] It is clear from the allegations made by second defendant in the answering affidavit, which are the allegations relied upon by applicant’s counsel in argument before me, that the aforesaid money was not paid to second respondent but to the close corporation. It was also not transferred to the close corporation for a consideration having a value significantly less than the amount of the money advanced. On the basis of what is alleged in the papers before me the money was loaned to the close corporation and was utilised by the close corporation to pay deposits in respect of the purchase of immovable properties and also transfer costs in connection therewith.

There is thus no way that these transactions can be brought within the extended definition of a gift as contained in section 16 of the Act, and even less reason for holding that this means that the money was indirectly transferred to second respondent for a consideration such as that referred to. There is no evidence to suggest that second respondent accepted any of this money in her personal capacity, nor is the fact that she and second defendant are married to each other and that each hold 50 % interest in the close corporation indicative that she did so. In my judgment the position is that the somewhat speculative case, to put it at its highest, made out against second respondent in the founding affidavit is in no way strengthened by the allegations made by second defendant (and second respondent) in the answering affidavit. In my judgment no case has been made out for the grant of any relief against second respondent.

[24] It was not suggested by either counsel that the provisional restraint order should in any way be varied in the event of the rule nisi being confirmed. For the reasons set out above I am of the view that a final restraint order should be granted against second defendant.

Insofar as second respondent is concerned, it is my view that the rule nisi should be discharged.

[25] The only remaining issue relates to costs. Applicant’s counsel requested me to award costs to the applicant in the event of it being successful in obtaining a final restraint order. In my view it would be inappropriate to do so at this stage, and I propose to make an order similar to that made in Phillips (WLD), namely that the costs of this application are reserved for determination by this court after finalisation of the criminal trial and, in the event of both or either of the defendants being convicted, the outcome of any application for a confiscation order. As the applicant has been unsuccessful insofar as second respondent is concerned, it is my view that he should be ordered to pay her costs.

The following order is made:

1. The rule nisi is confirmed against first defendant; second defendant; first respondent; third respondent and fourth respondent.

2. The costs of this application, insofar as they relate to the defendants and respondents referred to in paragraph 1, are reserved for determination by this Court after finalisation of the criminal trial and, in the event of a conviction of first defendant and/or second defendant, the outcome of any subsequent application for a confiscation order.

3. The rule is discharged against second respondent, with costs.

_________________________

J.J. NEPGEN

JUDGE OF THE HIGH COURT