National Director of Public Prosecutions v Walsh and Others (5201/07) [2008] ZAGPHC 398 (19 November 2008)

IN THE HIGH COURT OF SOUTH AFRICA

(TRANSVAAL PROVINCIAL DIVISION)

CASE NO:5201/07

In the matter between:

THE NATIONAL DIRECTOR OF

PUBLIC PROSECUTIONS Applicant

and

WARWICK WALSH First Defendant

PETER GEORGE BEAUMONT LEMON Second Defendant

EMMANUEL MASARA Third Defendant

STANTON MUSVAMHIRI Fourth Defendant

MARIANNA AUDREY WALSH First Respondent

________________________________________________________________

JUDGMENT

MURPHY J

1. On 14 February 2007 my colleague Southwood J, at the instance of the applicant, the National Director of Public Prosecutions, granted a restraint order in terms of Section 26 of the Prevention of Organised Crime Act 21 of 1998 (“the Act”). The relevant terms of the order are:

“1. That a Restraint Order is made against the dealing with any realisable property of the First Defendant to the Fourth Defendant (“the Defendants”) and the First Respondent and to disclose and surrender such property.

2. That pending further order of this Court, the following Provisional Order is hereby issued with immediate effect:

3. That this Order is returnable on Wednesday 25 April 2007, and a rule nisi is hereby issued calling on the Defendants and the First Respondent to show cause, if any, on the return day why this Order should not be confirmed pending the outcome of the criminal trial against the Defendants or further proceedings for a confiscation order that may follow.

4. That if the Defendants and the First Respondent intend to oppose the confirmation of this Provisional Order on the return day must within 5 (five) court days of the service of the Notice of Motion. Affidavits with Annexure attached thereto (“the application papers”) and this Order on him or her, deliver notice of intention to oppose and furnish an address within 8 kilometres of the office of the Registrar of this Court at which he or she will accept service of all notices, affidavits and other documents in these proceedings; and must deliver his or her answering affidavit, if any, within 15 days of notifying the applicant of his intention to oppose the application.

5. That the Defendants or the First Respondent may make application to anticipate the return day for the purpose of discharging or varying the provisional order on not less than 24 (twenty-four) hours notice on such application to the Applicant.”

2. The balance of the order deals with the realisable property subject to restraint and the consequences and effects of the restraint order, including the appointment, powers and duties of a curator bonis.

3. The rule nisi was extended on numerous occasions by agreement between the parties until eventually on 12 December 2007 an order was made, once again by agreement, postponing the application to the opposed roll on 15 April 2008.

4. At no stage before this did the first defendant, Mr Warwick Walsh, or any of the other defendants or the first respondent ever file an answering affidavit presenting any challenge to the grant of the restraint order. It is common cause that the first defendant has been arrested on a number of charges of a serious nature. The charges relate to the illegal manufacturing and possession of drugs. The State alleges that the defendants were engaged in the manufacture of a scheduled substance and the supply of it to various persons in contravention of the provisions of the Drug and Drugs Trafficking Act 140 of 1992. It is alleged that the first defendant together with the other defendants ran a laboratory for the purpose of manufacturing the drug methamphetamine, known variously as “ice” or “tik”. It is alleged that the defendants produced about 10 kilograms of the drug per week and that the drug is valued at R20 000 per kilogram.

5. In terms of Section 25 read with Section 26 of the Act, a High Court may issue a restraint order prohibiting any person, subject to such conditions and exceptions as may be specified in the order, from dealing in any manner with any property to which the order relates. The High Court may exercise the powers when a prosecution for an offence has been instituted against the defendant concerned; or a confiscation order has been made against that defendant; or it appears to the court that there are reasonable grounds for believing that a confiscation order may be made against the defendant; and the proceedings against the defendant have not been concluded. Likewise, a court may issue a restraint order when it is satisfied that a person is to be charged with an offence; and it appears to the court that there are reasonable grounds for believing that a confiscation order may be made against such person. Confiscation orders are dealt with in part 2 of the Act. Section 18 provides that whenever a defendant is convicted of a offence the court convicting the defendant may, on application of the public prosecutor, enquire into any benefit which the defendant may have derived from the offence of which he has been convicted or any other criminal activity which the court finds to be sufficiently related to the offences and if the court finds that the defendant has so benefited, it may in addition to any punishment which has been imposed in respect of the offence, make an order against the defendant for the payment to the State of any amount it considers appropriate and the court may make any further orders as it may deem fit to ensure the effectiveness and fairness of that order. In sum, therefore, a restraint order has the purpose of restraining the use of any property that might later be subject to confiscation by virtue of it being a benefit derived from the commission of criminal activity.

6. Section 26(3) and (4) have particular relevance. The read as follows:

“(3)(a) A court to which an application is made in terms of subsection (1) may make a provisional restraint order having immediate effect and may simultaneously grant a rule nisi calling upon the defendant upon a day mentioned in the rule to appear and to show cause why the restraint order should not be made final.

(b) If the defendant has been absent during a period of 21 days from his or her usual place of residence and from his or her business, if any, within the Republic, the court may direct that it shall be sufficient service of that rule if a copy thereof is affixed to or near the outer door of the buildings where the court sits and published in the Gazette, or may direct some other mode of service.

(c) Upon application by the defendant, the court may anticipate the return day for the purpose of discharging the provisional restraint order if 24 hours notice of such application has been given to the applicant contemplated in subsection (1).

(4)(a) A restraint order shall provide for notice to be given to persons affected by the order.”

7. Section 26(6) confers powers on the court to provide for the reasonable living expenses of a person against whom the restraint order has been made as well as for his family and his household; and also for the reasonable legal expenses of such person in connection with any proceedings instituted against him in terms of the Act.

8. Section 26(10) reads as follows:

“A High Court which made a restraint order -

(a) may on application by a person affected by that order vary or rescind the restraint order or an order authorising the seizure of the property concerned or other ancillary order if it is satisfied -

(i) that the operation of the order concerned will deprive the applicant of the means to provide for his or her reasonable living expenses and cause undue hardship for the applicant; and

(ii) that the hardship that the applicant will suffer as a result of a order outweighs the risks that the property concerned may be destroyed, lost, damaged, concealed or transferred; and

(b) shall rescind the restraint order when the proceedings against the defendant concerned are concluded.”

9. Section 28 of the Act provides for the appointment of a curator bonis in respect of property subject to a restraint order. Section 28(2) provides that any person affected by an order requiring him to surrender property into the custody of the curator bonis may at any time apply for the variation or rescission of the order; or for the variation of the terms of the appointment of the curator bonis concerned or for the discharge of that curator bonis. Section 28(3) grants the court the power to make such an order.

10. From its terms then it is evident that the order granted by Southwood J on 14 February 2007 and extended repeatedly until 15 April 2008 was an order granted in terms of section 26(3).

11. A few weeks before the return date of 15 April 2008 the applicant discovered that the court file was missing with the result that the matter could not be heard on the set date. There was no appearance on that date and the court made no ruling either confirming, discharging or extending the rule nisi.

12. Two months later, on 10 June 2008, the applicant filed a notice of motion for an order in the following terms:

“1. It is declared that the rule nisi issued by this court on 14 February 2007 has not lapsed.

2. The rule nisi issued by this court on 14 February 2007 is hereby revived.

Alternatively to prayers 1 and 2

3. The applicant is granted leave to renew the application for an order in terms of section 26 of the Prevention of Organised Crime Act on 30 June 2008 on the same papers.”

13. The matter was then set down for 30 June 2008. On that day the defendant opposed the application and the matter was postponed to 17 November 2008 on the opposed roll where it was argued before me.

14. It deserves to be emphasised that the defendant/respondent has not filed any answering affidavit opposing the confirmation of the rule nisi or seeking its discharge on the grounds that the basis upon which it was granted is unsustainable.

15. On 19 August 2008 the defendant brought an application, on an urgent basis, for an order in the following terms:

“2. That a declaratory order is issued that all assets described as realisable property of the Applicant previously attached under provisional Restraint Order granted by the Honourable Mr. Justice Southwood on 14 February 2007 under case number 5201/2007, and amended, in terms of the provisions of Section 26 of the Prevention of Organised Crime Act 121 of 1998 is to be released, restored to and returned to the applicant within 24 hours of this order;

3. That the Applicant shall refrain from dissipating or selling the assets referred to in paragraph 2 without informing the First Respondent in writing at the address of the State Attorney at Pretoria cited in this application of any intention to do so dissipate or sell the assets described as realisable property of the Applicant;”

16. The applicant proceeds primarily with his application seeking either a declaration that the provisional restraint order has never lapsed or for an order reviving the rule nisi, but to cover the contingency that the court might find against him on these issues, he has also brought a cross-application for a restraint order on the same terms as the restraint order granted by Southwood J on 14 February 2007.

17. The parties agreed that all of these applications should be heard simultaneously on 17 November 2008.

18. The defendant’s case is that the rule nisi which was due to be extended again on 15 April 2008, but which was not enrolled by the applicant has lapsed or been discharged by default of appearance by the applicant. The applicant does not dispute that the matter did not come before the court on 15 April 2008, and that such may have been as a result of a measure of negligence on the part of members of his staff, and accordingly that no order was made on that date. The applicant however does contest whether the legal consequence which flowed from this failure was that the restraint order lapsed. He contends that a provisional restraint order issued under section 26 of the Act can only be discharged by order of court. If the applicant is correct in this, then all the other applications can be disposed of on this basis. The first issue then requiring determination is whether the applicant’s submissions are indeed correct in law.

19. The applicant submits that section 26(3)(a) does not impose any obligation on the applicant to bring an application on the return day mentioned in the rule nisi to make the restraint order final or to apply to extend the operation of the provisional order. In his submission, the provision merely confers a right on the defendant concerned to show cause why the order should not be made final. In the absence of the defendant showing why it should not be made final, the applicant is entitled (though not obliged) to apply for the order to be made final. Should the applicant fail to apply for the order to be made final, it is submitted that it continues to operate on a provisional basis, and can be subject to a possible later challenge by the defendant concerned, presumably under section 26(10).

20. The defendant’s case is that where a provisional order has been granted subject to a rule nisi identifying a return day, it operates like a interim interdict granted for a limited period. Consequently, if it is not extended it has no application after the expiry of the period referred to in the rule. The failure of the court to extend or confirm a provisional restraint order has the consequence, so it was submitted, that the restraint order is discharged by default of appearance.

21. The applicant argued that the defendant’s interpretation is wrong in that he mistakenly equates a temporary interdict with a rule nisi. A rule nisi is not in itself an interdict, it is simply an order directed to a particular person or persons calling upon them to appear in court on a certain fixed date to show cause why the rule should not be made absolute or final. In proper cases, usually on application for an urgent interdict, the court may grant interim relief by ordering that the rule nisi shall operate as a temporary interdict - Network Video (Pty) Ltd v Universal City Studios Inc. and Others 1984 (4) SA 379 (C) at 381F. Mr Labuschagne, who appeared for the applicant, submitted that this common practice has given rise to a misconception that the term “rule nisi” itself necessarily implies the grant of an interim interdict. Conceptually, he argued, the rule nisi and the temporary interdict are separate. Thus, in construing section 26(3)(a) one should keep the conceptual distinction uppermost. The first portion of section 26(3)(a) permits a court to “make a provisional restraint order having an immediate effect”. The second portion permits but does not oblige the court simultaneously to grant a “rule nisi” calling upon the defendant on a day mentioned in the rule to appear and show cause why the restraint order should not be made final. Accordingly, so Mr Labuschagne argued, nothing in this provision states or implies that the provisional order shall cease to have effect if, upon the day mentioned in the rule, the National Director of Public Prosecutions fails to appear and/or fails to obtain an order extending the provisional order. The purpose of the return date provided for in a provision, he submitted, is simply to confer upon the defendant an opportunity to show cause why the restraint order should not be made final. If there is no appearance by either party on the return date, the provisional order continues to apply and remains subject to the possibility of the defendant later showing cause why it should not be made final.

22. Mr Labuschagne placed some reliance on section 26(3)(c), as well as sections 26(10) and 28(3). Section 26(3)(c) provides for the court to anticipate a return day on application of the defendant for the purpose of discharging the provisional restraint order provided 24 hours notice of such application has been given. The submission is that this provides an indication that only the court can actively discharge a restraint order by means of a court order. Where a provisional order is not discharged by a court it will continue on a provisional basis rather than a final basis in the event of it not being confirmed. In such a situation, the defendant would not be without a remedy in that it would always be open to him to approach the court in terms of section 26(10) for an order rescinding the restraint order. When no such rescission is granted the order remains operative.

23. While there is much commending this argument from an expedient or practical perspective, I have difficulty accepting it as a correct reflection of the intention of the legislature in enacting these provisions.

24. When one has regard to the provisions of part 3 of the Act, read as a whole, it seems that they have been structured to provide safeguards against their potentially draconian nature. The right of the National Director of Public Prosecutions to approach the court ex parte for an order restraining and prohibiting a person for dealing with his or her property is a drastic measure aimed at protecting, constraining and preserving the property in the public interest until its provenance is judicially determined. Keeping in mind the drastic nature of the power, the potentially irreparable harm that might be caused to the defendant, as well as the concomitant infringement of the fundamental rights involved, the power is required to be strictly circumscribed. That is achieved by introducing a limited operative timeframe, and a co-extensive right for the defendant to counter the ex parte nature of the relief by means of an urgent application on short notice to anticipate the return date. In those respects, the provisional order closely resembles the interim interdict, if not completely then at least mostly. It will be granted on the basis of a prima facie case, even if open to some doubt, because there is usually a well-grounded apprehension of irreparable harm through the potential loss of the assets and the lack of another adequate remedy in the circumstances typically attendant in applications of this kind. Hence the underlying policy reasons for hedging an interim interdict with safeguards apply equally to the provisional restraint order. A limited timeframe or duration for the order’s operation is one of the essential safeguards. The intention is to grant extensive, drastic relief but to restrain provisionally or temporarily until a fuller ventilation of the facts, issues and arguments. The restraint order is an unusual indulgence to the applicant who is permitted exceptionally to condemn the unheard respondent or defendant in his or her absence. Such practice, it hardly needs mention, goes against the general grain of procedural fairness in the judicial process and hence orders of this variety should be strictly temporary and for a limited duration.

25. Section 26(3)(a) read with sections 26(3)(c) and 26(4), when read together, leave little doubt that the legislature intended the provisional restraint order to operate akin to an interim interdict constrained temporally by the timeframe of the rule nisi. And it may be presumed that it did so conscious of the existing practice and common law that an interim interdict coupled with a rule nisi will generally lapse or be discharged by default of appearance by the applicant. In terms of our common law an interim or provisional

order coupled with a rule nisi is an order to which a fixed period of validity has been assigned. Once that period of validity has expired and is not renewed by an order of court, the original order automatically lapses - Fisher v Fisher 1965 (4) SA 644 (W).

26. I do not consider that section 26(10), allowing for variation or rescission, changes that in any significant detail. The remedy there contemplated is one which is available to a person subject to a confirmed or final restraint order who is suffering undue hardship that outweighs the imperatives of restraint and preservation. Were one to accept, as Mr Labuschagne would have me do, the idea of a provisional restraint order enduring indefinitely beyond the return date until variation or rescission, not on the grounds of the order having been erroneously granted in the absence of the defendant, but only if the defendant can show undue hardship or that the proceedings have been concluded in his favour, there would be no remedy for the defendant to challenge the

basis of the order because the return date would have come and gone and hence could no longer be anticipated. The provisional order granted ex parte in the absence of the defendant would become automatically final, rescindable only on the limited grounds stipulated in section 26(10). An interpretation permitting an arrangement along these lines would offend against all principles of fair play and a proper sense of justice.

27. For those reasons then, I am not persuaded that the rule nisi endured beyond the extended return date. Rather, I accept the defendant’s contention that it lapsed and was discharged by

default of the applicant’s appearance on 15 April 2008.

28. In October 1987, perhaps to reverse the effect of the decision in Fisher v Fisher (supra), rule 27(4) was introduced into the rules. It provides:

“After a rule nisi has been discharged by default of appearance by the applicant, the court or a judge may revive a rule and direct that the rule so revived need not be served again.”

29. The applicant, playing safe, in its application filed on 10 June 2008 sought in the alternative an order reviving the rule nisi in the event of the court finding that it had indeed lapsed as a consequence of default of appearance. In passing, I should mention

that the applicant was concerned to have a ruling that the rule nisi had not lapsed because a company in which the defendant is the principal shareholder has in the intervening period been liquidated.

In terms of section 35 of the Act when the estate of a person who holds realisable property is sequestrated the property generally

shall not vest in the Master of the High Court or trustee concerned as the case may be. But if no restraint order exists, it will. I see no difficulty here for the applicant. The defendant’s assets, identified as realisable property, in relation to the

relevant company, are his shares. The property of the company was never subject to restraint. I doubt therefore that the applicant

will be unduly prejudiced by those proceedings, although the exact extent and nature of them does not form part of the evidence before me and I am unable to pronounce definitively upon the implications.

30. Counsel for the defendant has tried to make something of the fact of the liquidation to argue against the revival of the restraint order. As I have just said, the properties in question are the shares held by the defendant and these have not been directly affected by the liquidation proceedings.

31. I am satisfied that the applicant has a strong case for the revival of the rule nisi. The reason the rule nisi lapsed is because the file went missing from the Registrar’s office. The applicant has put up supporting affidavits from the staff of the Registrar’s office in support of that fact. There is no reason why the applicant should be punished for the negligence or disarray in the office of the Registrar. A better approach might have been for the applicant to have sought leave to enroll the matter without the file and to have asked by way of special motion for an extension of the return date for a sufficient period to allow for the reconstruction of the file. As it transpired, the file was found during May 2008. Moreover, if one has regard to the history of this matter it is clear that the applicant took a reasonably accommodating approach towards the defendant and was ready to extend the rule nisi on an ongoing basis at the request and for the convenience of the defendant. As I have mentioned before, the defendant at no stage

either prior to or during this matter has put forward any evidence whatsoever indicating that there is no proper basis for the grant of the restraint order. He has raised no counter allegations regarding his alleged involvement in criminal activity. In fact, there is a statement made by him to a magistrate, either in the form of a confession or a series of admissions, in which he admits certain of the criminal conduct. Consequently, for all of those reasons the lapse of the rule nisi can be condoned as it occurred for an understandable or excusable reason - see Ex parte S & U TV Services: In re S & U TV Services (Pty) Ltd (In provisional liquidation) 1990 (4) SA 88 (W) 90C-E.

32. In the result, therefore, I am inclined to grant the applicant the alternative relief he seeks in his application of 10 June 2008. This has the further consequence that the defendant’s application for the release of his assets falls to be dismissed together with costs as well as the costs of the cross-application.

33. The defendant has requested me to make an order in respect of the costs reserved in certain interlocutory applications before Prinsloo J in February 2007 and Botha J in September 2007. My understanding is that the judges in those instances reserved the costs until the finalisation of the restraint proceedings. As I propose only to revive the rule nisi and the provisional order such proceedings have not yet been finalised and accordingly it would be inappropriate to make any ruling in respect of the costs reserved.

34. In the premises, therefore, the following orders are issued:

1. The rule nisi issued by this court on 14 February 2007 is hereby revived with effect from the date of this order and is returnable on 16 February

2009.

2. The application filed under case number 38102/08 is dismissed.

3. The first defendant is ordered to pay the costs of this application, the costs of the application filed under case number 38102/08, as well as the costs of the cross-application filed under that case number, such costs to include the costs of senior counsel.

JR MURPHY

JUDGE OF THE HIGH COURT

Date Heard: 19 November 2008

For the Applicant: Adv E Labuschagne SC, Pretoria

Instructed By:The State Attorney, Pretoria

For the 1st Respondent: Adv H Klopper, Pretoria

Instructed By: Olivier Cronje & Stiglingh c/o Gerhard de Beer Attorneys, Pretoria