IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

CASE NO: 20738/2008
IN THE RESTRAINT APPLICATION

THE NATIONAL DIRECTOR OF 
PUBLIC PROSECUTIONS						APPLICANT

and

THE DEFENDANTS

JOHANNES ERASMUS VAN STADEN				First defendant 
GERHARD PHILIP BOTHA					          Second defendant 
MARC SHOEMAN 							Third defendant 
CAREL BRAAM DE VRIES 						Fourth defendant 
S & D CONSULTING SOMERSET 
WEST CA (SA) (PTY) LTD 						Fifth defendant 

THE RESPONDENTS

JOHANNES ERASMUS VAN STADEN 
IN HIS CAPACITY AS A TRUSTEE OF 

MARIA NAOMI VAN STADEN NO 
IN HER CAPACITY AS A TRUSTEE 

MARC SHOEMAN N O IN HIS CAPACITY AS A 

PETER GABRIEL VAN STADEN HEREIN 
REPRESENTED BY HIS MOTHER AND LEGAL 

RYNO ENGELBRECHT N O IN HIS CAPACITY 
AS LIQUIDATOR OF INDO-ATLANTIC GROUP 

BRIAN SHAW N O IN HIS CAPACITY AS 
LIQUIDATOR OF INDO-ATLANTIC 
SEAFOODS (PTY) LTD t/a SOUTHERN 

CHRIS VAN ZYL N O IN HIS CAPACITY AS 
LIQUIDATOR OF INDO-ATLANTIC SHIPPING 

IN THE LEGAL AND LIVING EXPENSES APPLICATION

S & D CONSULTING SOMERSET 

and

JUDGMENT DELIVERED ON 9 MARCH 2011

[1] This judgment concerns two related opposed applications brought in terms of the provisions of the Prevention of Organised Crime Act 121 of 1998 ("POCA") that were heard together.
[2] In the first application ("the restraint application") the applicant is the National Director of Public Prosecutions ("the NDPP"). The principal defendant (as defined in POCA) is Mr Johannes Erasmus van Staden ("Mr van Staden'). The object of this application is the confirmation of a provisional restraint order in terms of section 26(3)(a) of POCA. It is defended by Mr van Staden.

[3] The second application ("the legal and living expenses application") was brought by Mr van Staden and some of his family members against the NDPP for the provision of reasonable legal and living expenses in terms of the provisions of section 26(6) of POCA. It is defended by the NDPP.

The word "defendant" is defined in Chapter 5 of POCA as follows:

The relevant part of section 25 of POCA read as follows:

"25     Cases in which restraint orders may be made
(1)     A High Court may exercise the powers conferred on it by section 26 (1)-

(a)     when-

(i)      a prosecution for an offence has been instituted against the defendant concerned;

(b)     when-

(i)     that court is satisfied that a person is to be charged with an offence; and

(ii) it appears to the court that there are reasonable grounds for believing that a confiscation order may be made against such person."

The relevant parts of section 26 read as follow:

(1) The National Director may by way of an ex parte application apply to a competent High Court for an 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.

…..........................

(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)     when-

(6)     Without derogating from the generality of the powers confened by subsection (1), a restraint order may make such provision as the High Court may think fit-fa)     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."

[6] The provisional restraint order has already been confirmed against the other defendants except for Mr van Staden It has also been confirmed against the respondents who have defences to the application, save Mr Gary Newmark (the fifth respondent) and persons and entities that are related to Mr van Staden. Fifth respondent did not raise any substantial defence to the application and is not opposing the application. The restraint order against Mr Newmark, said counsel for the NDPP, can now be confirmed. The only substantive defendant at this stage is therefore Mr van Staden.

[7] I propose to deal with the restraint application first. The NDPP's founding affidavit was made by Mr J K Rossouw. a Deputy Director of Public Prosecutions. He contended that the NDPP will provide proof at the criminal trial that a systematic value added tax ("VAT") fraud was committed over the period from 2005 to 2008 by three companies in the Indo-Atlantic group of companies, namely Indo-Atlantic Seafoods (Pty) Ltd ("Indo Seafoods"), Indo-
Atlantic Shipping (Pty) Ltd flndo Shipping") and Indo-Atlantic Group Holdings (Pty) Ltd ("Indo Holdings") in an amount of at least R246 million. Mr van Staden was the majority shareholder, director and chief executive officer of the companies in that group. Mr Rossouw contended that Mr van Staden;

[8] It is apparent from the provisions of section 25(1) of POCA that the NDPP must show at this stage that there are reasonable grounds for believing that a confiscation order may be made against Mr van Staden at the conclusion of the criminal trial. Such a confiscation order may be made rf the trial court finds that Mr van Staden has benefitted from any offences of which he is convicted, or any other offence which the court finds to be sufficiently related.

[9] In the founding affidavit Mr Rossouw provided an overview of the VAT fraud allegedly committed by the three companies. Inasmuch as Mr van Staden does not seriously dispute the existence of a fraudulent scheme (he claims that he has no knowledge of it and that he was not involved in it) it is not necessary to describe the nature of the scheme in detail. It is based on the feature of the VAT legislation that VAT is not payable on goods sold and exported. The fraud was committed by way of four methods. Firstly false invoices were generated in order to make false input claims.   Secondly, invoices were used as if they had been paid whereas they had not been paid. Thirdly genuine invoices were used to make input VAT claims where no payment had been made. Fourthly the company fraudulently inflated its export figures.

[11] The South African Revenue Service ("SARS") has established that an amount of at least R246 499 372,99 was obtained by means of fraudulent information in the VAT returns. AH VAT payments to the three companies over the relevant period were made to S D Consulting (Pty) Ltd, a company of which Mr Marc Schoeman (third defendant) is the sole director and shareholder and Schoeman CC. a close corporation of which Mr Schoeman has a controlling interest. These two entities paid the funds received from SARS to Indo Holdings or other companies in the group but they retained an amount of at least R37 million.

[14] The NDPP also relied upon particular instances of Mr van Staden's alleged involvement in the fraud. On 20 January 2006, for example, SARS received an instruction signed by Mr van Staden on behalf of Indo Holdings that VAT refunds were in future to be paid to the account of Indo Holdings. This instruction was carried out but Mr Schoeman objected to this manner of payment. A dispute ensued and Mr van Staden allegedly took sides with Mr

[15] Mr Rossouw also relied on an e-mail sent by Mr van Staden to Mr Schoeman and Ms Botha at a time when SARS was calling for supporting documentation in respect of certain invoices. The e-mail concluded by stating: "It is time to stand together now and get this submitted tomorrow and approved". Included in this e-mail was an incomplete invoice on the letterhead of Isotherm, purportedly dated 4 August 2003

[17] The founding affidavit contained a number of references to Mr C B de Vries, the former chief financial officer of the group of companies. He is the fourth defendant in the restraint application and a co-accused in the criminal trial  Mr Rossouw said that Mr de Vries, after consulting his attorney, agreed to co-operate with the NDPP and consulted with them. Mr Rossouw's founding affidavit was supported by an affidavit made by Mr Francois Petrus Scholtz, an investigator in the Criminal Investigation Section of SARS. In para 26 of this affidavit Mr Scholtz described this meeting with Mr de Vries as follows:

[18]   Mr Rossouw referred to the same meeting and said the following:

"In the circumstances, although we rely in this application on information provided by de Vries to me and Scholtz, he has not yet completed the affidavit that he had undertaken to furnish to us'
[19] Mr van Staden defended the main application on behalf of himself and second, seventh, eighth, ninth, tenth and eleventh respondents. He said at the outset that in preparing his affidavit he had no access to the relevant files, records, documentation and computers as they had been seized by the NDPP or the South African Police Service. That made it difficult for him to recall the relevant facts. Mr van Staden's answering affidavit is a lengthy document. It is not necessary to analyse it in detail. The tenor of his affidavit is that he had not knowledge of any fraud but if there was a fraudulent scheme, others, in particular Mr de Vries, would have been responsible. He repeated his objection a number of times to the unsworn hearsay evidence of De Vries on which the NDPP relied a number of times.

[20] Mr van Staden provided a description of his functions as the chief executive officer of the companies in the group. These included the negotiating of agreements, the marketing of the company and their products, the acquisition of fishing rights and fishing vessels and the development of processing facilities. He said that he had little to do with the financial management and nothing to do with statutory obligations, SARS matters and VAT claims because he had a well qualified financial director in the person of Mr de Vries. He (Mr van Staden) was only a nominal signatory involved in tax matters. He had no financial training or understanding. He said that he cannot be made accountable for the mistakes or fraud of Mr de Vries. He employed what he regarded as competent persons. Mr van Staden summarised his evidence in this regard by stating that his function was to grow rather than micro manage the business. The companies, he said, "were my life"

[22] Mr van Staden contended that the NDPP should not in its founding papers have placed any reliance on the informal unsworn oral averments attributed to Mr de Vries, He said that he had, by then, 17 August 2010, not received the De Vries affidavit which De Vries undertook to provide to the NDPP. Mr de Vries was an accomplice and had a motive and the knowledge to fabricate evidence against him He again referred to the seriously deteriorating relationship between him and De Vries.  His evidence should have been treated with caution and it should not have been presented in an informal unsworn manner.

[23] Mr Rossouw filed a replying affidavit on behalf of the NDPP. In regard to Mr van Staden's complaints in regard to the hearsay evidence of Mr de Vries. he said the following:

"26 Van Staden makes two complaints in respect of the NDPPs introduction in the founding papers of information obtained from De Vries:
26.1. First, he alleges that the NDPP based its case on information obtained from De Vries. which he alleges is unreliable
26.2. Second, he complains that such infonnation was not given on oath, and alleges that the NDPP undertook to provide a sworn statement by De Vries on oath but has not done so.

Reliance on De Vries
27. The NDPPs application for a restraint was only partly based on information obtained from De Vries. At paragraphs 20 to 30 of Scholtz s affidavit, he sets out an overview of the investigation on which his conclusions are based These make abundantly clear that infonvation obtained from De Vnes was not the only, or even the most important, source on which the NDPP's case was based.
28. De Vries is an accused in the criminal case and information obtained from him must be treated with the appropriate caution. Nevertheless, far from exculpating Van Staden. the subsequent investigation has largely borne out the infonnation provided by De Vries.
29. I must also point out that Van Staden's version of the importance of De Vries in the Financial affairs of the Indo Atlantic group of companies only strengthens the case for relying on information provided by him.

Information given by De Vries was not on oath
30. The NDPP disclosed to the Court that a sworn statement had not yet been obtained from De Vries, and presented the Court with the tenor of the information obtained from him on an informal basis.
31. This was the best evidence available to the NDPP at the time the restraint order was sought. I submit the NDPP was entitled to rely thereon. The weight to be attached to the evidence lay in the Court's discretion when it made the restrain order.
32. I submit the case made out by the NDPP at the time the restraint was sought was sufficient for this Court to grant it the relief it sought This will be addressed further in argument.
33. Van Staden is incorrect in alleging that the NDPP undertook to place De Vries' statement before this Court. As appears clearly from paragraphs 54 of my affidavit in the founding papers and paragraph 26 of Scholtz's affidavit in the founding papers, it was De Vries who undertook to provide the prosecution team with a sworn statement. De Vries did so on 8 September 2009.
34. Van Staden personally collected a CD containing alt statements, including that of De Vries. from me on 29 Aphl 2010. I therefore do not understand how he can allege, under oath, that he has not received the statement.
35. I do not attach the statement here out of concern for the fairness of the trial of Van Staden and his co-accused. These papers are a matter of public record and I fear that witnesses may be tainted if De Vries' statement becomes available to them before they are called to give evidence. The statement will be made available to the Court at the hearing of this matter, and a copy will again be provided to Van Staden on request.
[24] Mr van Staden deposed to a rebuttal affidavit. He admitted that a CD was handed to him. It contained 7000 unindexed papers. He was told that the CD emanated from Advocate Geyser who is the prosecutor in the criminal case. He assumed that it pertained to the criminal case and not the civil case. He said that he had not always had access to a computer and so had not opened or presented documents. Mr van Staden said that at a pre-trial conference in the criminal trial Advocate Geyser was ordered by the Judge President to make the CD available for all accused who requested it. He was then informed by Advocate Geyser that he had to provide 8000 blank pages before hard copies would be provided to him.

[29] It seems to me in any event that there was an implied undertaking in Mr Rossouw's founding affidavit that the NDPP would file and serve Mr de Vries' affidavit as soon as it was practically possible.

[30] It is against this background that I intend to consider the treatment by the NDPP of Mr de Vries' statement in this matter. To that end I propose to list the statements made in paras 26 to 36 of Mr Rossouw's replying affidavit (see para [23] above) and comment upon them in turn.

Mr de Vries' evidence was not the only, or even the most important, source on which the NDPP's case was based.

Comment

The requirements of fairness and disclosure to the court apply to each and every item of material evidence placed before a court, not only to the "most important sources". In any event, it was unequivocally stated in the founding statement that the case against Mr van Staden was, inter alia, based on evidence obtained from Mr de Vries.

The subsequent investigation has largely borne out the information provided by Mr de Vries.

The importance of Mr de Vries in the Indo-Atlantic group of companies only strengthens the case for relying upon him.

Comment

The NDPP disclosed to the court that an affidavit had not yet been obtained from Mr de Vries.

Comment

This statement is correct but the disclosure to the court contained at least an implied undertaking to place the affidavit in the court file and to serve it upon Mr van Staden or, if the affidavit was not received or was inconsistent with the tenor of the information on which the NDPP decided to launch the application, to inform the court and Mr van Staden accordingly.

The NDPP presented the court with the tenor of the information on an informal basis.

Comment

The hearsay evidence was the best evidence available to the NDPP.
Comment

This statement is not correct. The best evidence was an affidavit obtained from Mr de Vries. It should not have taken more than say two days to get it. Mr de Vries was accompanied by an attorney and, on the face of it, did not deal with complex matters.

The weight to be attached to the evidence lay in the court's discretion.

Comment

The court could not have judged the weight to be attached to the hearsay evidence because the evidence was not identified

The case made out by the NDPP was sufficiently strong to obtain the relief sought.

Comment

This statement is unfortunately worded. It tends to suggest that Mr van Staden could be treated with a lesser degree of fairness because the case against him was very strong. In the founding affidavit it was in any event stated that the NDPP relied upon Mr de Vries' information

The NDPP did not undertake to place Mr de Vries' affidavit before the court. Mr de Vries undertook to furnish the NDPP with an affidavit.

Comment

Mr van Staden personally collected a CD containing all the documents, including Mr de Vries' statement.

Comment

This form of service, namely the delivery of a CD with 7000 unindexed pages of documents and leaving it to Mr van Staden to search for Mr de Vries' statement, is in conflict with every rule of practice and every principle of fairness.
Witnesses may be tainted if Mr de Vries' statement is made available to the public.

Comment

This reason is not persuasive. Mr de Vries' statement should have formed part of the founding affidavit or be disclosed to the court and Mr van Staden thereafter. The CD with the statement was in any event made available to Mr van Staden without any condition of confidentiality.

Mr de Vries supplied his affidavit to the NDPP on 8 September 2009.
Comment

This statement raises important questions. Why did it take some ten months before this statement was received by the NDPP? Why were the delay and the reasons for it, never disclosed to the court or to Mr van Staden?
Mr de Vries' statement will be made available at the hearing of the application.

Comment

I do not know whether Mr de Vries' statement was available at the hearing of the application. It was not presented or offered to me. Counsel did not refer to its contents in argument. It would in any event have been impractical for the NDPP to make it available at that stage of the proceedings. It would have given rise to further postponements, further affidavits and further argument. The papers in this matter, I may mention, already comprised more than 4000 pages. The nett result, I may add, is that I never saw Mr de Vries' affidavit.

29:

[47] In the present case I have considered the nature and extent of the NDPP's failure to observe the two rules in question. Having regard to their importance, their cumulative effect and the prejudice caused to Mr van Staden, I am of the view that the provisional restraint order falls to be discharged. Put differently, the NDPP's application for the confirmation of the provisional restraint order falls to be refused

[48] It is therefore not necessary for me to consider the merits of the application for the confirmation of a final restraint order.

[49] Upon the discharge of the restraint order, the application for living and legal expenses falls away. It is therefore not necessary to make any order in that application.

[50] Mr van Staden was successful in the restraint application and the NDPP should pay his costs. The living and legal expenses application was brought as a direct result of the restraint order which has now been discharged. The NDPP should therefore also pay Mr van Staden's costs in that application.

[51]   In the result I make the following orders:

(a) The provisional restraint order granted by this court against Mr Johannes Erasmus van Staden on 12 December 2008, is hereby discharged.
(b) The NDPP's application for the confirmation of the provisional restraint order, is hereby dismissed.
(c) The NDPP is ordered to pay Mr van Staden's costs in the restraint application and in the application for the payment of living and legal expenses.