IN THE SOUTH GAUTENG HIGH COURT (JOHANNESBURG)

APPEAL CASE NO: A5050/10
 SGHC CASE NO: 06/4577
DATE: 08/03/2012
In the matter between:

THE NATIONAL DIRECTOR OF							 Appellant
PUBLIC PROSECUTIONS				(First respondent in the court a quo)

and

MEIR ELRAN 									Respondent
									(Applicant in the Court a quo)

JUDGMENT 

Coram: Masipa J, Mathopo J and Scholtz A J

[1] In this matter the Appellant ("the NDPP") has appealed to a Full Court of the South Gauteng High Court against the judgment of Rosenberg AJ which was delivered on 7 October 2009. The appeal is opposed by the respondent ("Mr EIran"). Leave to appeal was granted by Rosenberg AJ on 15 June 2010.

[2] In the court a quo Mr EIran sought the following orders by way of Notice of Motion dated 15 June 2009 ("the Present Application"):

"1. That the forfeiture application under the above case number be postponed pending the finalisation of this application:
2. That the second respondent make provision for the applicant's reasonable legal expenses in connection with the forfeiture application brought in terms of the Prevention of Organised Crime Act. No. 121 of 1998 in an amount of R243 790 out of the property subject to the Preservation of Property Order, a copy of which is annexed hereto marked "A";
3. That the second respondent make provision for the applicant's reasonable legal expenses in connection with the extradition proceedings brought against him. in an amount of R540 000.00 out of the property subject to the Preservation of Property Order, a copy of which is annexed hereto marked "A";
4. That the second respondent be ordered to pay the aforesaid sums into the trust account of Fluxmans Inc.,
5. That the costs of this application be paid by any of the respondents who oppose same;
6.Further and/or alternative relief."

[3] The second respondent in the matter was Mr T W van den Heever NO ("the Curator"), who had been appointed as the Curator of the property which was the subject of the Preservation of Property Order which had been granted by Satchwell J. on 6 March 2006 ("the Preservation Order"). A copy of the Preservation Order is annex "A" to Mr Elran's founding affidavit in support of the Present Application. The Preservation Order was made pursuant to s 38(2) of the Prevention of Organised Crime Act, No. 121 of 1998, as amended ("POCA"). There are 2 paragraphs numbered 15 in the Preservation Order. All references in this judgment will be to the second paragraph 15. The relevant paragraph reads as follows:

"Living and legal expenses
15.  If any other person holding an interest in the property satisfies the Court that:
15.1. he or she is unable to meet his or her reasonable living expenses or those of his or her family or household, or
15.2 he or she is unable to meet his or her reasonable legal expenses in connection with any proceedings instituted against him or her in terms of the Act or any other related criminal proceedings; and
15.3 he or she cannot meet the expenses concerned out of his or her property that is not subject to this order, the Court may, subsequent to the granting of this order, make appropriate provision for the payment of such expenses as in the Court's determination are reasonable out of the property subject to this order; Provided that no such provision for the payment of such expenses may be made unless the person concerned has disclosed under oath all his or her interest in the property and has provided to the Court a full and sworn written statement of his or her assets and liabilities."

[4] Paragraph 15 of the Preservation Order was made pursuant to s 44 of POCA, which provides:

"44 Provision for Expenses
(1) A preservation of property order may make provision as the High Court deems fit for -
(a) reasonable living expenses of a person holding an interest in property subject to a preservation of property order and his or her family or household; and
(b) reasonable legal expenses of such a person in connection with any proceedings instituted against him or her in terms of this Act or any other related criminal proceedings.
(2) A High Court shall not make provision for any expenses under subsection (1) unless it is satisfied that -
(a) the person cannot meet the expenses concerned out of his or her property which is not subject to the preservation of property order; and
(b) the person has disclosed under oath all his or her interests in the property and has submitted to that Court a sworn and full statement of all his or her assets and liabilities."

[5] The Present Application was opposed by the NDPP, who delivered an answering affidavit. An affidavit was also delivered by the Curator, in which he traversed the averments made by Mr EIran in his founding affidavit. The Curator however abides the court's decision and did not participate in the appeal. Mr EIran delivered areplying affidavit in response to the NDPP's  answering affidavit.

[6] The court a quo made the following orders:

"(1) The Applicant's attorneys . Fluxmans Incorporated, are to submit their invoices in respect of the Applicant's defence in the forfeiture application and the extradition proceedings to the Taxing Master for taxation
(2) Within seven days of the date of taxation, the Second Respondent is to pay over to the Applicant's attorneys. Fluxmans Incorporated, the amount allowed by the Taxing Master upon taxation.
(3) The First Respondent is ordered to pay the costs of this application."

[7] The grounds on which the NDPP appealed against the judgment of the court a quo may be summarised as follows:
(a) the honourable judge erred in finding that Mr EIran was unable to meet his legal expenses out of assets which were not subject to the Preservation Order;
(b) the honourable judge erred in finding that Mr EIran had made full disclosure of all his assets, as he was required to do in order to comply with the provisions of s 44(2)(b) of POCA;
(c) the honourable judge erred in interpreting the phrase "criminal proceedings" to include extradition applications;
(d) the honourable judge erred in ordering the NDPP to pay the costs of Mr Elran's application despite the NDPP being partially successful in his opposition.

[8] The issues before the court have a rather long history, which are summarised in paragraphs 3.1 to 3.12 of the judgment of the court a quo. During the argument on appeal it was common cause between the parties that certain extradition proceedings, which had been initiated against Mr EIran, had been struck from the roll in the Randburg Magistrate's Court on 13 May 2011. It was also common cause that, to the extent that the order of the court a quo related to Mr Elran's legal expenses in the extradition proceedings, such order was no longer applicable.

[9] Accordingly, the issues which remain to be dealt with on appeal are those referred to in [7](a) and (b), insofar as they relate to Mr Elran's legal expenses in the forfeiture proceedings, and the question of costs.

[10] At the outset I need to consider the question of onus. S 37 of POCA provides that, for the purposes of Chapter 6 (under which ss 38 and 44 fail) all proceedings under the Chapter are civil proceedings, and are not criminal proceedings, in Fraser v Absa Bank Ltd (National Director of Public Prosecutions as Amicus Curiae) 2007 (3) SA 484 (CC) the Constitutional Court had occasion to consider s 26(6) of POCA, which falls under Chapter 5. S 13(1) likewise provides that, for the purposes of Chapter 5, proceedings on application for a confiscation order or a restraint order are civil proceedings, and are not criminal proceedings,

[11 ] S 26(6) of POCA provides as follows:

" Without derogating from the generality of the powers conferred by subsection (1), a restraint order may make such provision as the High Court may think fit -
(a) for the reasonable living expenses of a person against whom the restraint order is being made and his or her family or household; and
(b) for the reasonable legal expenses of such person in connection with any proceedings instituted against him or her in terms of this Chapter or any criminal proceedings to which such proceedings may relate, if the court is satisfied that the person whose expenses must be provided for has disclosed under oath all his or her interests in property subject to a restraint order and that the person cannot meet the expenses concerned out of his or her unrestrained property."

[12] The wording of s 26(6) is very similar to the wording of s 44. The facts in Fraser's case are not relevant for present purposes. However, in paragraphs [13], [55] and [72] of the judgment the Constitutional Court made the following statements concerning s 26(6) which to a large extent are also apposite to s 44, These paragraphs read as follows:

"[13] Section 26(6) gives a discretion to the High Court which issues a restraint order to make provision for the reasonable living and legal expenses of the defendant, who (as stated earlier) is also an accused. This case is concerned with that discretion. The Court must be satisfied that the defendant has disclosed all of his or her interests in property subject to the restraint order and that he or she cannot meet the expenses out of property which has not been restrained."
"[55] A defendant who applies to the High Court in terms of s 26(6) to make provision for reasonable living and/or legal expenses must satisfy the Court that he or she has disclosed under oath all his or her interests in property subject to the restraint order and that he or she cannot meet the expenses for which an allowance is sought out of the unrestrained property. If the Court is satisfied in this regard, s 26(6) gives a Court a discretion: it may make such provision as the High Court may think fit' for the reasonable living and/or legal expenses." (my underlining)

"[72] The circumstances of each case have to be considered in order to reach a determination which is fair and just in view of the objects and wording of POCA, together with an accused person's constitutionally protected fair trial rights, existing rules and principles of the law of insolvency and other relevant areas of law. The High Court should seek as best as possible to ensure that a defendant neither benefits unduly from the terms of a restraint order, nor is prejudiced as far as reasonable legal and/or living expenses are concerned. Circumstances to be considered in the case of legal expenses would include: (a) the seriousness and complexity of the charges against the defendant or of the civil proceedings in which he or she may be involved; (b) the conduct of the defendant, preceding, and in, the s 26(6) application proceedings (including whether a full disclosure of all his or her interests in the restraint property has taken place and whether the defendant is attempting to benefit from a restraint order, or has acted fraudulently); (c) the value of his or her assets; (d) the number and amount of known creditors' claims; and (e) the history of the specific claim of the creditor who seeks intervention."

[13] Paragraph [55] of Fraser's case places the onus on the defendant to satisfy the court that he or she has complied with the requirements of s 26(6) of POCA. In my view, s 44(2) of POCA places a similar onus on a person who seeks to have his or her reasonable living or legal expenses paid out of the property which is subject to the preservation order.

The first issue on appeal

[14] There is a dispute between the parties as to whether Mr EIran is possessed of any "property" (as defined in POCA) which is not subject to the Preservation Order. In terms of POCA "property" "means money or any other movable, immovable, corporeal or incorporeal thing and includes any rights, privileges, claims and securities and any interest therein and all proceeds thereof."

[15] In paragraph 9 of Mr Elran's founding affidavit in the Present Application he stated:

"The property subject to the preservation order included the movable and the immovable property set out in the Schedule of Assets attached to the order and any other property held by me whether in my name or not and included "any other property held by [me], whether in [my] ... own name or not, including funds transferred from South Africa to any overseas account" standing to my credit in various bank accounts. (See paragraph 8 of the Schedule of Assets)"

[16] Paragraph 8 of the Schedule of Assets, which comprises Annexure "A" to the Preservation Order, reads as follows:

" Other property
Any other property held by EIran, whether in his own name or not, including funds transferred from South Africa to any overseas account."

[17] Mr EIran contends that, by virtue of the Preservation Order, all his "property" is subject to such order and therefore he is not possessed of any property which is not subject to the order.

[18] On the other hand, the NDPP relies inter alia on the following allegations:
(a) as alleged in paragraph 27 of Mr Elran's founding affidavit, on 13 July 2006 Mr EIran launched an application in this court ("the First Application") in which he sought an order that the Curator pay to him his reasonable monthly living expenses plus an amount of R250 000 as provision for his reasonable legal expenses in connection with the forfeiture proceedings instituted against him in terms of POCA and the related criminal proceedings out of the property subject to the Preservation Order;
(b) in the First Application Mr EIran applied for both legal and living expenses, whereas in the Present Application he has applied only for legal expenses. The NDPP contends that Mr EIran must therefore have other assets which are not subject to the Preservation Order, otherwise he would not have been able to survive in the interim. These averments were made in the following terms in paragraphs 21 - 26 of the NDPP's answering affidavit in the Present Application;

"21. It is further confirmed by the applicant that he has no means left to meet his legal expenses.
22. Despite this, the applicant has been able to meet not only his living but legal expenses as well, since the granting of the preservation order in March 2006 without any assistance from the 2nd respondent.
23. This is only possible if the applicant has an income that allows him to pay for such expenses, especially his living expenses which according to him amount to a conservative R100 000 per month.
24. It is therefore evident that the applicant has a substantial source of income that allows him to support himself and his family for the last 3 years.
25. This source of income is an asset and has not been disclosed by the applicant.
26. More importantly this income is not subject to preservation and in light of the extent of the applicant's monthly expenses, such income is of a substantial nature and should also be adequate to cover his legal expenses as well."

[19] Mr EIran responded to these allegations in paragraphs 41.2 and 67.3 of his replying affidavit as follows:

"41.2. I am not in a position to meet my living and legal expenses and since March 2006 I have lived off loans and charity from my friends and family."
"67.3. I am not seeking living expenses at this juncture due to the fact that I have been able to borrow funds from friends and family for my living expenses, but I am in dire need of provision for legal expenses."

[20] In argument before this court the NDPP's counsel contended that these funds constitute "property", which is not subject to the Preservation Order, and that Mr EIran did not satisfy the court that he could not meet his legal expenses out of his property which is not subject to the Preservation Order.

[21] The NDPP also drew attention to the fact that, in Mr Elran's founding affidavit in the Present Application, he did not deal with the funds which he has been receiving from friends and family to cover his living expenses. This information was provided only in Mr Elran's replying affidavit. Mr Elran did not disclose the names of the friends and family, who have provided these funds, nor did he give any details of the amounts which he has received and the dates when the funds were received.

[22] The NDPP's counsel contended that these averments ought to have been made in Mr Elran's founding affidavit. In Shephard v Tuckers Land and Development Corporation (Pty) Ltd (1) 1978 (1) SA 173 (W) at 177H-178A Nestadt J. stated "This is not however an absolute rule. It is not a law of the Medes and Persians. The Court has a discretion to allow new matter to remain in a replying affidavit, giving the respondent the opportunity to deal with it in a second set of answering affidavits. This indulgence, however, will only be allowed in special or exceptional circumstances."

[23] In the Present Application the NDPP did not apply to strike out the matter referred to Mr Elran's replying affidavit nor did he seek leave to file a supplementary answering affidavit in response thereto. In my view the court is entitled to have regard to the averments made by Mr Elran in his replying affidavit in order to decide whether he is possessed of any property which is not subject to the Preservation Order.

[24] At the hearing of the appeal there was much debate as to whether the funds, which Mr Elran has been receiving from friends and family, comprised “property" which is not subject to the Preservation. Order. In paragraphs 21-26 of the NDPP's affidavit the NDPP made allegations concerning Mr Elran's "income", whereas both paragraph 15 of the Preservation Order and s 44 of POCA require the court to be satisfied that the person concerned cannot meet his reasonable living and legal expenses out of his or her "property", which is not subject to the Preservation Order.

[25] POCA does not define "income". The Concise Oxford Dictionary, 10th ed., defines "income" as "money received, especially on a regular basis, for work or through investments". When POCA was enacted the legislature recognised a distinction between "property", as defined, and the "income" which is received by a person who holds an interest in "property". This is illustrated .by a reference to certain sections in Part 2 of Chapter 5 of POCA, which deals with confiscation orders, which the court may make after the conviction of a defendant. In terms of s 18(1) (which falls under Part 2 of Chapter 5) the court may, on the application of the public prosecutor, enquire into any benefit which the defendant may have derived from the offence in question. S 22(1) provides that;

" For the purposes of determining whether a defendant has derived a benefit in an enquiry under section 18(1), if it is found that the defendant did not at the fixed date, or since the beginning of a period of seven years before the fixed date, have legitimate sources of income sufficient to justify the interests in any property that the defendant holds, the court shall accept this fact as prima facie evidence that such interests form part of such a benefit." (my emphasis)

[26] In my view, section 44 of POCA does not require that the court should be satisfied that the person, who has an interest in the "property", which is subject to a preservation order, cannot meet the expenses concerned out of his "income", rather than out of his "property", which is not subject to the preservation order.

[27] During the argument on appeal Mr Elran's counsel contended that, until the funds referred to by Mr EIran were actually received, they could not have constituted his "property" and that, since the funds were received to cover Mr Elran's living expenses, they must have been paid out as soon as they were received. Mr EIran therefore did not hold any property which is not subject to the Preservation Order.

[28] In Mr Elran's founding affidavit he stated that he had incurred legal costs of about R73 418 with BBM attorneys in connection with the proceedings against him in terms of POCA, that these attorneys had withdrawn from acting for him due to his failure to pay their fees and had exercised a lien over their files until they had been paid. He also stated that he had then engaged Fluxmans Attorneys to represent him and that Fluxmans had advised him that he would be responsible for their fees and that they would withdraw if they were not paid. Fluxmans subsequently withdrew from acting for Mr EIran.

[29] Even if it is correct that the funds, which Mr EIran received from friends and family to meet his living expenses, constitute "property" which is not subject to the Preservation Order, there is nothing on the papers to support a contention that these funds exceed the amount which Mr EIran needs for his legal expenses. In the result, I am satisfied that Mr EIran cannot meet the reasonable legal expenses, which he requires in connection with the proceedings contemplated in section 44(1 )(b) of POCA, out of any property which may not be subject to the Preservation Order.

The second issue on appeal
[30] This issue concerns the question whether Mr EIran duly complied with section 44(2)(b) of POCA, which requires the court to be satisfied that Mr EIran disclosed under oath all his interests in the relevant property, and has submitted to the court a sworn and full statement of all his assets and liabilities.

[31] The NDPP contends that section 44{2)(b) of POCA placed an obligation on Mr EIran to comply with this section at the time when he brought the Present Application and that he had failed to do so.

[32] In paragraphs 16 - 26 of Mr Elran's founding affidavit in the Present Application he set out details of his attorneys' correspondence with the Curator and annexed inter alia copies of the affidavits marked "C" and "G" dated 3 May and 15 June 2006. which he had provided to the Curator relating to his assets and liabilities. In paragraph 94 of Mr Elran's founding affidavit he averred that:

" I respectfully submit that I have disclosed under oath all my interests in the property subject to the preservation order and have provided a sworn written statement of my assets and liabilities. These prerequisites were provided in both annexures "C", "F" and "G" hereto as well as my founding and replying affidavits in the previous application for living and legal expenses." (my emphasis)

[33] In the above paragraph Mr EIran in effect confirmed that, as of the date of the Present Application, his assets and liabilities remained as set out in annexes "C", "F" and "G".

[34] The NDPP's main attack on Mr Elran's application was set out in paragraphs 27-29 of the NDPP's answering affidavit, which read as follows:

"27 The applicant has not fully disclosed all his interest in property.
28 In summary the applicant has not made full disclosure in respect of the following property:
28.1 R5.4 million received by the applicant as part payment of the full purchase price of R12.5 million for the sale of his shares in Mackenna Game Farm.
28.2 Approximately R1.7 million deposited into the account of SA Homestead during the period June 2005 and January 2006, with the applicant being the only signatory on the account.
28.3 Foreign transfers amounting to $22 000, transferred by the applicant to various bank accounts in Israel, one of which is in the name of "Ben Hamo", the original name of the applicant prior to his name change.
28.4 Approximately R1.1 million transferred into the bank account of Daria Bachta's, the applicant's wife.
29 The applicant's has not only failed to disclose his interest in these properties but has also failed to explain the nature and purpose of these transactions."

[35] Mr Elran's responses to these allegations were set out as follows in paragraphs 45-47 of his replying affidavit:
"45 AD PARAGRAPH 27
The Contents hereof are denied. 
46. AD PARAGRAPH 28
46.1. The provisions of section 44(2)(b) and clause 15 of the preservation order require that I submit to the Court a full statement of all my assets and liabilities. Neither the Act nor the provisions of the preservation order require me to provide the above Honourable Court with a detailed history relating to the assets and funds which I possessed prior to the preservation order having been served.
46.2. The first respondent has frozen all bank accounts held by me and by the entities referred to in the preservation order.
46.3. I do not possess any funds other than those standing to my credit In my personal bank accounts which were attached by the first respondent.
46.4. My name is not and never was Ben Hamo.
46.5 I reiterate that I am not possessed of any funds.
46.6 I have, in any event, provided the second respondent with details of receipt of R5.4 million as well as details as to what I have done with the money.
46.7. I respectfully submit that neither the first nor second respondents are entitled to the information sought herein and any failure on my part to provide this information would not constitute grounds for opposing an application for legal expenses.
47 AD PARAGRAPH 29
47 1 The contents hereof are denied.
47,2. The provisions of POCA and of the preservation order do not require me to explain the nature and purpose of transactions. I will deal with these aspects in my answer to the forfeiture application and in evidence in the extradition proceedings insofar as it may become necessary."

[36] I proceed to consider whether the contentions set out in paragraphs 27 - 29 of the NDPP's answering affidavit were justified:
(a) the amount of R5,4 million which Mr Elran allegedly received as part of the purchase price of his shares in Mackenna Game Farm
In paragraph 9 of Mr Elran's supplementary affidavit, which was annex "G" to his founding affidavit in the Present Application, he dealt with the amount of R5,4 million which he had received from the sale of his shares in Mackenna Game Farm (Pty) Ltd. He stated that the details of the payments were reflected in the bank statements, which were in the possession of the Curator. Mr Elran therefore accounted for the money referred to in paragraph 28.1 of the NDPP's answering affidavit.
(b) an amount of approximately R1,7 million deposited into the account of SA Homestead
(i) I agree with Mr Elran's contention in paragraph 46.1 of his replying affidavit. Neither the Preservation Order nor s 44(2) of POCA requires, as a pre-condition to the court making an
order in terms of s 44(1). that Mr Elran should satisfy the court that he has disclosed on oath all his interests in property and all assets and liabilities which he may have had in the past prior to the service of the Preservation Order on him,
(ii) The NDPP alleged that Mr Elran deposited an amount of approximately R1.7 million into the account of SA Homestead during June 2005 and January 2006. These dates preceded the granting of the Preservation Order.
(iii) Paragraph 4 of Annexure A to the Preservation Order listed a specific bank account of SA Homestead (Pty) Ltd with Absa.
The Curator was entitled to recover from Absa whatever credit balance stood in this account.
(iv) Mr EIran therefore provided an adequate response to this issue.
(c) an amount of $22 000 which Mr EIran allegedly transferred to various accounts in Israel
The NDPP's did not specify the dates when Mr EIran allegedly transferred the amount of $22 000 to various bank accounts in Israel, including one in the name of "Ben Hamo", which the NDPP alleged was Mr Elran's original name. It is not clear whether this amount was transferred before or after the service of the Preservation Order. The NDPP has not provided any facts which cause the court not to be satisfied that Mr EIran complied with his obligation under s 44(2){b) of POCA in this regard.
(d) approximately R1.1 million transferred to the bank account of Daria Bachta
(i) Paragraph 5 of Annexure A to the Preservation Order listed 5 specific banks accounts which were held in the name of Daria Bachta. The Curator's Second Report dated 6 July 2009 was annex "TW1" to his affidavit in response to Mr Elran's founding
affidavit in the Present Application. In paragraph 2.2 of this Report the Curator stated that Absa Bank was still to transfer to him the amounts which were held in 2 bank accounts is the name of Daria Bachta. It is not clear why the Curator has not received transfer of these amounts pursuant to the powers conferred on him in the Preservation Order.
(ii) The NDPP has not provided any facts which cause the court not to be satisfied that Mr Elran complied with his obligations under s 44(2)(b) of POCA in this regard.

[37] In the result, I am satisfied that Mr Elran has disclosed to the court under oath all his interests in the property, which is subject to the Preservation Order, and has submitted to the court a sworn and full statement of all his assets and liabilities.

[38] In the course of argument Mr Elran's counsel submitted that the court a quo had a "discretion" to determine whether the information provided by Mr Elran in his affidavits was sufficient compliance with of section 44(2) of POCA and that, since the court had found this information to be sufficient, an appeal court should not differ from the decision of the court a quo. I doubt whether section 44(2) confers on the court the type of discretion contended for by Mr Elran's counsel. However, since I have found that Mr Elran did satisfy the court, as required by section 44(2) of POCA. this question need not be decided.

[39] At the hearing the parties' counsel were in agreement that, if this court decides to uphold orders (1) and (2) of the court a quo, those orders need to be amended to replace the reference to Fluxmans Inc. with a reference to Mr Elran's current attorneys, and also to remove any reference to the extradition proceedings.

Costs
[40] In my view, Mr EIran was substantially successful in the court a quo and has been substantially successful in this appeal.
[41] In the result, I make the following orders:
(a) The NDPP's appeal is dismissed with costs;
(b) The orders of the court a quo are amended to read as follows:

"(i) the Applicant's attorneys, I. Mabunda Attorneys, are to submit their invoices in respect of the Applicant's defence in the forfeiture application to the Taxing Master for taxation;
(ii) within seven days of the date of taxation, the Second Respondent is to pay over to the Applicant's attorneys the amount allowed by the Taxing Master upon taxation;
(iii) The First Respondent is ordered to pay the costs of this application.

 D R SCHOLTZ A J
ACTING JUDGE OF THE HIGH COURT 

I CONCUR
T M MASIPA
JUDGE OF THE HIGH COURT

I CONCUR
 R MATHOPO
JUDGE THE HIGH COURT 

Appeal Case No: A505/10 
SGHC Case No: 06/4577
Heard on: 6 October 2011
For the appellant: Adv. F. Latif
 Instructed by: Asset Forfeiture Unit 
For the respondent; Adv. N P G Redman 
Instructed by: I. Mabunda Attorneys
 Date of judgment: