THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No: 677/15
Not reportable

In the matter between:

THE NATIONAL DIRECTOR OF PUBLIC PROSECUTIONS
APPELLANT

and

ISHWARLALL RAMLUTCHMAN
RESPONDENT

Neutral Citation:
NDPP v Ramlutchman (677/15) [2016] ZASCA 202
(9 December 2016)
Coram:
Bosielo, Mathopo and Van der Merwe JJA
Heard:
22 November 2016
Delivered:
9 December 2016
Summary:
Prevention of Organised Crime Act 121 of 1998 (POCA) –
confiscation order – locus standi of accused person whose estate was
sequestrated ─ s 18(2) of POCA – misdirection by regional court – matter
referred back to conduct enquiry in terms of s 18(6) of POCA.

______________________________________________________________

ORDER
______________________________________________________________

On appeal from: the KwaZulu-Natal Division of the High Court,
Pietermaritzburg (Madam Justice Pillay & Bezuidenhout AJ) sitting as court of
appeal):
1 The application for the substitution of the respondent is dismissed with
costs.
2 The appeal succeeds to the extent that the order of the high court is set
aside and replaced with the following:
‘The matter is remitted to the Durban Regional Court sitting as Special
Commercial Crimes Court to conduct an enquiry in terms of s 18(6) of the
Prevention of Organised Crime, Act 121 of 1998.’
3 There is no order as to costs of the appeal.
______________________________________________________________

JUDGMENT
______________________________________________________________

Mathopo JA (Bosielo and Van der Merwe JJA concurring):

[1] The respondent, Ishwarlall Ramlutchman was convicted in the Durban
Regional Court sitting as the Special Commercial Crimes Court (the regional
court) of 21 counts of fraud and one count of corruption. The fraud charges
were taken together for the purposes of sentence and he was fined R500 000
or ten years imprisonment. A further five years imprisonment was imposed
and suspended for five years. In respect of the corruption charge, the
respondent was sentenced to five years imprisonment which was suspended
for five years.

[2] The common cause facts giving rise to the convictions and sentences
as gleaned from the statement in terms of s 112(1) of the Criminal Procedure
Act 51 of 1977 handed in by the respondent at the regional court can be
summarised as follows: In 2006 the respondent became aware of

opportunities available through registration with the Construction Industry
Development Board (CIDB) and decided to apply for a CIDB grading in order
to tender for projects advertised by the Department of Public Works KwaZulu-
Natal (DPW KZN). By operation of law, it was necessary for contractors
tendering for DPW KZN contracts to register with the CIDB and obtain a
grading. The CIDB grading awarded to a contractor determines the size and
value of the DPW KZN contracts for which he could qualify.
As the respondent sought the assistance of a person who had previously
obtained a CIDB grading or who had assisted contractors in obtaining a CIDB
grading in this regard, he approached Pat Singh, an accountant and Sandile
Ntuli of Sinamandia, a construction company.
The respondent then requested the above persons to make the necessary
arrangements to obtain a grading of 7GD or 7CE for him, which would entitle
him to tender for large projects. When the respondent made this request he
knew that neither he, nor his alter ego AC Industrials Sales & Service (AC),
met the requirements for a 7GB or 7CE grading in that he did not have the
required track record, nor did he have any qualified professionals in his
employ. It is undisputed that the respondent knew that his conduct was
unlawful, and that but for the higher grading he would not have qualified for
large tender contracts. As a result of this fraudulent grading, the respondent
succeeded in securing sixteen construction contracts in respect of which the
total amount of R52 190 224.88 was paid to the respondent.

[3] As a result of the respondent’s convictions and sentences the National
Director of Public Prosecutions (NDPP) applied to the regional court to
confiscate the amount of R52 million in terms of s 18 of the Prevention of
Organised Crime Act 121 of 1998 (POCA). Section 18(1)(a) deals with
circumstances under which a court may grant the confiscation order. It
provides as follows:
‘(1) Whenever a defendant is convicted of an offence the court convicting the
defendant may, on the application of the public prosecutor, enquire into any benefit
which the defendant may have derived from –
(a) that offence;
(b) . . .

(c) . . .
and, if the court finds that the defendant has so benefited, the court may, in addition
to any punishment which it may impose 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.’

[4] In brief the section provides that after convicting a person of an
offence, a court may on application by a public prosecutor enquire into
whether a benefit has been derived from that offence or from related criminal
activity and if the court finds that a benefit has risen it may make an order for
the payment to the State of any amount it considers appropriate.

[5] Acting in terms of s 18(3) of POCA the regional magistrate initiated an
enquiry into the question whether the respondent has received a benefit from
the offences of which he had been convicted. The purpose of the enquiry,
which is twofold, is that the court first has to determine whether to make an
order against the defendant for the payment to the State of an amount of
money it considers appropriate. And secondly, it must determine the
appropriate amount to be paid. A confiscation order is a civil judgment for
payment to the State of an amount of money determined by the court and is
made by the court in addition to a criminal sentence. The order that a court
may make in terms of chapter 5 is not for the confiscation of a specific object,
but an order for the payment of an amount of money to the State.

[6] Section 12(3) of POCA provides that for the purposes of chapter 5, ‘a
person has benefited from unlawful activities if he or she at any time, whether
before or after the commencement of POCA, received or retained any
proceeds of unlawful activities’. ‘Proceeds of unlawful activities’ are in turn
broadly defined in s 1 of POCA as:
‘. . . any property or any service, advantage, benefit or reward which was derived,
received or retained, directly or indirectly, in the Republic or elsewhere, at any time
before or after the commencement of this Act, in connection with or as a result of any

unlawful activity carried on by any person, and includes any property representing
property so derived.’

[7] In the exercise of its discretion to make a confiscation order a court
must have regard to the main objects of the legislation, which is to strip
criminals of the proceeds of their criminal conduct. To this end the legislature
has, in chapter 5 of POCA, provided an elaborate scheme to facilitate such
stripping. This chapter deals with the making of confiscation orders by a
criminal court at the end of a criminal trial. The purpose of chapter 5 is to
ensure that no person can benefit from his or her wrongdoing. This court in
National Director of Public Prosecutions v Rebuzzi (94/2000) [2001] ZASCA
127 (23 November 2001) held that the primary object of a confiscation order is
not to enrich the State, but rather to deprive the convicted person of ill-gotten
gains. The function of the court in this scheme is to determine the benefit from
the scheme, its value in monetary terms and the amount to be confiscated.

[8] As a result of the application for the confiscation order the NDPP and
the respondent agreed to a draft order before the regional magistrate
regulating further conduct of the application for the confiscation order. The
prosecutor filed written statements in terms of s 18(6)(a)(iii) read with
s 21(1)(a) of POCA, dealing with information relating to the ‘determination of
the value of a defendant’s proceeds of unlawful activities’. On the other hand
the respondent agreed in terms of s 18(6)(a)(iv) read with s 21(3) of POCA to
tender to the court a statement in writing under oath or affirmation by him
relevant to the court’s determination of the amount which may be realised.
The prosecutor filed a reply to the respondent’s answer. In addition the parties
agreed to give notice to interested persons who may have an interest in the
property sought to be realised, to allow such person/s to make
representations to the court in connection with the realisation of that property
in terms of s 20(5) of POCA. These statements formed part of the record
before the high court and are also part of the record before us.

[9] It is not in dispute that the respondent has benefited from the offences
that he has been convicted of and also that his criminal activity is sufficiently

linked to these offences. What is in dispute is the amount of the benefit to be
confiscated. In this regard various competing arguments were advanced by
the parties as to the approach to be adopted in determining what constitutes a
benefit in terms of the POCA.

[10] It was the appellant’s case that the value of the respondent’s proceeds
of unlawful activities amounted to R52 190 224.88 and this amount, it
contended, was a benefit which in terms of s 12(3) of POCA was liable to be
confiscated.

[11] The respondent contended that only the nett proceeds constitute a
benefit under POCA and that since the appellant had failed to establish the
precise amount of the nett proceeds an order for the confiscation was
incompetent. The regional court agreed with the respondent's contentions and
dismissed the application. Aggrieved by that decision the appellant appealed
to the high court and relied principally on the same arguments which it
advanced before the regional court.

The high court
[12] The high court agreed with the respondent and upheld the regional
magistrate’s findings and concluded that the entire contract amount received
by the respondent as proceeds of unlawful activities, could not be regarded as
a benefit because it was not exclusively a gain or profit. In other words it held
that the costs of the construction component of the proceeds could not
rationally be equal to a gain or benefit. The high court adopted an approach
that to treat the gross proceeds as a benefit would result in the State being
unjustly enriched at the expense of the respondent and this would be
disproportionate and result in the respondent paying more than the amount
which he benefited from and which is prohibited under s 18(2) of POCA. The
high court reasoned that it is absurd to seek an order for the full value of the
sum total of the contract sums, knowing fully well that the projects were
completed and that ownership of the buildings had been transferred to the
DPW KZN and that the latter was enjoying its use and not the respondent.

[13] Dissatisfied with what it considered to be the insufficient evidence
regarding the exact amount of the benefit sought to be confiscated, the high
court dismissed the appellant's appeal. This appeal is with the special leave of
this court.

The issues on appeal
[14] The estate of the respondent was finally sequestrated on 2 July 2015.
The appellant gave notice to the trustees of his estate of the intention to
continue with these proceedings in terms of s 75(1) of the Insolvency Act 24
of 1936. The trustees elected to abide the decision of this court. Thus, there is
no need to join the trustees as parties to these proceedings. The appellant,
however, filed an application in this court for an order that the trustees be
substituted for the respondent. This application was based on the proposition
that, as a result of his sequestration, the respondent has no locus standi in
this matter.

[15] The preliminary issue in this appeal is therefore whether the
respondent
has locus
standi to
participate in
these proceedings,
notwithstanding the fact that his insolvent estate has been sequestrated. The
main issue on the merits is whether the benefit envisaged by sections 12(3)
and 18(1) of POCA in the context of this matter is the gross contract value of
R52 190 224.88 or the fruits of the unlawful activity which accrued to the
respondent. Allied to this issue is whether the value of the respondent's
benefit was sufficiently established and whether the regional court was
precluded by the provisions of s 18(2) of POCA from making a confiscation
order.

Locus standi of the respondent
[16] The NDPP argued that on the appointment of his trustees the
respondent was precluded from further participating in this appeal. The
contention advanced was that his estate had been taken out of his control and

now vested in the trustees and therefore the only persons competent to deal
with his estate, to administer it, to sue in respect of it or to defend action
concerning it are the trustees and not the respondent (insolvent). The
argument advanced by the NDPP is that because the trustees elected to
abide the decision of this court the respondent has no locus standi to bring or
defend actions connected with his estate in the absence of any irregularity on
the part of the trustees. Dissatisfied with the stance adopted by the trustees
the respondent argued that he retained locus standi because his interests
were not protected.

[17] It was correctly submitted on behalf of the respondent that his legal
disability (insolvency) does not divest him of his right to deal with matters
connected to his estate where the trustees, as in the instant case, have
expressed a reluctance to participate in the proceedings. In my opinion he has
a reversionary interest in the estate. The argument advanced is that because
he is the person enumerated in s 18 of POCA against whom the order of
confiscation may be granted if the court is satisfied, he should be afforded an
opportunity to deal with the order contemplated in s 18 of POCA in so far as it
affects him.

[18] The respondent’s argument relates to the trustees’ reluctance to
participate in the proceedings. It is unconscionable that the respondent, with a
direct and substantial interest in the outcome of this litigation, would be denied
an opportunity to safeguard his interests. In terms of s 34 of the Constitution
he has a right to have his dispute resolved before a court. I agree with the
respondent that an insolvent always possesses a residuary interest in his
estate and does not have to show irregularity or illegality to enforce or protect
his rights. It is sufficient if the respondent has a direct and substantial interest
in the outcome of these proceedings (see Zulu & others v Ethekwini
Municipality & others [2014] ZACC 17; 2014 (4) SA 590 (CC) at para 16-23). It
is undisputed that if the respondent is successful in this appeal his estate will
dramatically change because his liabilities will be greatly reduced and his
prospects of applying for rehabilitation will be enhanced. For the

aforementioned reasons the application of the NDPP has no merit and falls to
be dismissed.

The proper approach on appeal to the exercise of the discretion by a
regional court in terms of s 18 of POCA
[19] I now turn to consider whether the regional court exercised a proper
discretion in terms of s 18(1) of POCA when refusing the confiscation order.

[20] In view of the fact that there is a close connection between the criminal
conviction and the confiscation order, the discretion conferred upon a court by
s 18 is a discretion to determine the amount that it should order a defendant
to pay. That determination is made once the court has convicted the
defendant of a criminal offence and at the same time imposes a sentence
upon such a person. The presiding officer upon whom the discretion is
conferred by statute is normally the presiding officer who has presided over
the criminal trial and had sentenced the accused. Such a judicial officer would
have heard all the evidence and the arguments in the criminal trial and would,
in the circumstances, have been appraised of all the issues in the case.
Consequently the discretion to deal with the confiscation order is analogous to
the discretion to determine the proper sentence to be imposed in criminal
proceedings (see National Director of Public Prosecutions v Gardener &
another [2011] ZASCA 25; 2011 (1) SACR 612 (SCA)). With that in mind the
legislature sought to ensure that it would be that court which would determine
the appropriate amount to be confiscated. It is only in instances where the
presiding officer who convicted the defendant is absent or for any reason not
available that another judicial officer may be appointed in his stead in terms of
s 18(4) of POCA.

[21] In approaching this question a court will bear in mind that the enquiry
as to whether the proceeds should be confiscated is not the same enquiry to
be undertaken when resolving disputes of facts in motion proceedings.  The
purpose of confiscating proceeds of crime is to ensure that criminals realise
that they cannot benefit from the ill-gotten gains and that crime does not pay.

When considering the amount to be confiscated a court must have regard to
the extent to which the property to be confiscated derived directly from the
criminal activities. In certain instances, as in the present case, where the
entire contract amount was not retained by the respondent, a balancing act
must be done by a court in the exercise of its discretion to determine the
precise amount to be confiscated.

[22] In this court the NDPP argued that because the contract value was
R52 million, it is that gross value which is a benefit which falls to be
confiscated in terms of s 18(1) read with s 12(3) of POCA. The case for the
NDPP is that the said sum is a benefit as defined in terms of s 1 of POCA.
According to the Oxford English Dictionary the word ‘benefit’ means an
‘advantage or profit gained from something’. In support of its argument the
NDPP relied on S v Shaik & others 2008 (2) SACR 165 (CC), where the court
dealing with the interpretation of the word ‘benefit’ as in this case held that a
person will have benefitted from unlawful activities if he or she has received or
retained any proceeds of unlawful activities (see s 12(3) of POCA). It is thus
clear that the word ‘benefit’ cannot be interpreted in isolation from the
proceeds or unlawful activities. I agree with the appellant that in Shaik’s case
the section was interpreted to mean that a confiscation order may be made in
respect of any property that falls within the broader definition and is not limited
to the nett amount. I agree, therefore, that the amount of R52 million paid to
the respondent falls within the wide meaning of benefit. Both the regional
court and the high court erred in this regard. Whether it was appropriate in the
circumstances of this matter to make a confiscation order in that amount, is of
course another matter.

[23] It is common cause and was rightly conceded by the NDPP that the
respondent had utilised approximately 90 per cent of the sum of R52 million to
construct the buildings which on completion he handed over to the DPW KZN.
It is thus clear that if the entire amount is declared confiscated there would be
no rational connection between the amount R52 million and the confiscation
order. In the circumstances it would be unjust to grant a confiscation order for
the full amount of the contract. As a matter of fact the projects were

completed by the respondent and ownership of the building now vests with
the DPW KZN. It cannot be denied that the DPW KZN is utilising and enjoying
the benefits of the buildings completed by the respondent. It would seem to
me that the cost of the construction component of the proceeds received is, in
the circumstances of this case, a materially relevant factor to the exercise of
the discretion in respect of a confiscation order. The respondent, in his
answering affidavit, stated that his capital outlay was more than 90 per cent
and his profits less than 10 per cent. This was not disputed by the NDPP.

[24] What constituted the appropriate amount for confiscation, is the
primary issue in this appeal. The regional court and the high court were not
persuaded that sufficient evidence had been placed before them to make an
appropriate confiscation order.

[25] Before us, the submission of the appellant was that the regional court
should have made a confiscation order in the amount of R5,7 million or R5,2
million. In the alternative the submission made on behalf of the appellant was
that the jurisdictional requirements of s 18(6) of POCA requires a judicial
officer to direct and control the enquiry in such a manner so as to enable him
or her to determine the appropriate amount of confiscation. The contention
advanced was that having regard to the common cause facts that (a) the
proceeds of the contracts were approximately R52 million; (b) the curator
valued the realisable assets at approximately R5.7 million which valuation
was not disputed; (c) that the respondent had made a profit; (d) on the
respondent's version the profit was between 0 per cent - 10 per cent, it was
incumbent upon the regional magistrate to call for such evidence as may be
necessary to assist her in determining the precise amount to be confiscated.
In this regard the appellant persisted with its argument that the magistrate
should have directed the State and the defendant (respondent) to tender
statements in connection with any matter relating to the enquiry into the
benefits and also to ensure that all persons holding any interests in the
realisable property be given an opportunity to make representations in
connection with the realisation of the property.

[26] The respondent, on the other hand argued that because the appellant
had the machinery to place the necessary evidence before the regional court,
the regional magistrate cannot be criticised for the appellant’s ineptitude and
urged upon us to uphold the findings of the regional court which were
endorsed by the high court.

[27] It is clear to me that such an enquiry was not performed by the regional
magistrate. Instead she approached the enquiry as if it were similar to an
application under the Uniform Rules of the Court. Section 18(2) sets two
bases for calculating the upper limit of the amount that may be confiscated.
The first which is relevant for the purpose of this case is the amount ordered
to be confiscated may not exceed the value of the proceeds of the offences or
related criminal activities as calculated in accordance with chapter 5 of POCA.
This calculation is obviously based on the definition of the proceeds of
unlawful activities as set out in POCA. Section 19(1) of POCA is also relevant
in assisting a court in calculating the value of the proceeds to be confiscated.
It provides:
‘Subject to the provisions of subsection (2), the value of a defendant’s proceeds of
unlawful activities shall be the sum of the values of the property, services,
advantages, benefits or rewards received, retained or derived by him or her at any
time, whether before or after the commencement of this Act, in connection with the
unlawful activity carried on by him or her or any other person.’

[28] The regional magistrate paid lip service to the provisions of the above
section when she dismissed the appellant's claim and lost sight of the fact that
the purpose of the enquiry is twofold: first, the court has to decide whether to
make an order against the defendant for payment to the State of an amount of
money; and, secondly, it must determine the appropriate amount to be paid.
The enquiry under s 18(1) does not impose an onus on the appellant. An
enquiry in terms of s 18(1) should be contrasted from an application for a
forfeiture order in terms of Part 3 of Chapter 6 of POCA. In the latter case the
prescribed procedure is akin to a civil application (s 48) and it is specifically
provided the application should only be granted on proof of a balance of
probabilities (s 50). To the extent that it was found in York Timbers (Pty) Ltd v

National Director of Public Prosecutions 2015 (3) SA 122 (GP) para 53 that
s 18(1) places a true onus on the State, I respectfully disagree.   What the
section provides is that the presiding officer must have regard to all the
evidence and facts placed before him or her before making an appropriate
order. If the presiding officer is not satisfied with the evidence placed before
him (as the regional magistrate was), to make a confiscation order, he or she
is entitled to call such further evidence as may be necessary to assist him or
her. In the present matter the regional magistrate did not do so. There was
clearly insufficient information to make a determination and this is borne out
by the fact that the appellant’s forensic investigator, Mr Akbar Ally (Ally) in the
replying affidavit stated as follows:
‘I have no knowledge that 90% of the contract price was for material, labour and
costs and that 10% of the contract price was the Defendant’s profit. I am aware that
investigations are being conducted in this regard. I intend to supplement this
averment once such investigation is completed.
I submit that it is irrelevant (in determining the value of the proceeds of the
Defendant’s unlawful activities) whether the payment of R52 million was for re-
imbursements for materials, labour and costs or whether the said payment was
towards the defendant's profit.’
Ally provided no assistance to the court. It is abundantly clear that by the time
the confiscation enquiry was held he had not conducted investigations into the
capital outlay and/or profit. A court can only determine whether the proposed
confiscation order exceeds the value of the defendant’s proceeds if it knows
the value of the proceeds. It is only when all the relevant facts are before the
court that it will be in a position to do so. Absent any determination the
regional court was in the dark about the precise amount that was sought to be
confiscated.

[29] There is no doubt that what was placed before the regional magistrate
was insufficient for a proper determination. It must be borne in mind that the
respondent contended that his profit for the considerable time and effort,
which he invested in the project, was less than 10 per cent of the total amount
paid to him. The profit margin falls peculiarly within the knowledge of the
respondent and he appears to be deliberately vague in this regard. On the

other hand the appellant conceded that the capital outlay was approximately
90 per cent. There was clearly lack of unanimity regarding the amount sought
to be confiscated. In terms of s 18(6) it behoved the regional magistrate to
adjourn the proceedings on such terms as she deems fit and call for additional
evidence. It is plain to me that the regional magistrate did not apply the
provisions of the latter section fully. Once the magistrate was of the view that
no clear evidence was presented as to the exact amount of the profit, she
ought to have adopted a more robust approach and invoked the provisions of
s 18(6)(b) of POCA and sought additional evidence. Instead she adopted a
supine attitude and dismissed the case on the basis that the appellant failed
to discharge an onus.

[30] The regional magistrate materially misdirected herself by placing an
onus on the appellant and by failing to call for additional evidence in terms of
s 18(6) of POCA. Therefore no proper enquiry was conducted prior to the
dismissal of the application. These misdirections entitled this court to interfere
with the regional court’s exercise of its discretion. In the circumstances it will
be proper if the matter is remitted to the regional court to conduct an enquiry
in terms of s 18(6) of POCA.

Costs
[31] Both parties achieved a measure of success on appeal. In my view it is
fair and just that no order be made in respect of the costs of the appeal.

[32] I therefore make the following order:
1 The application for the substitution of the respondent is dismissed with
costs.
2 The appeal succeeds to the extent that the order of the high court is set
aside and replaced with the following:
‘The matter is remitted to the Durban Regional Court sitting as Special
Commercial Crimes Court to conduct an enquiry in terms of s 18(6) of the
Prevention of Organised Crime, Act 121 of 1998.’

3 There is no order as to costs of the appeal.

________________________
R S MATHOPO
JUDGE OF APPEAL

APPEARANCES:

For appellant:
M Gavindasamy SC

R Naidoo

Instructed by:

The State Attorney, Durban

The State Attorney, Bloemfontein

For respondent:
V Gajoo SC

J Howse

Instructed by:

Garlicke & Bousfield Inc., La Lucia

Symington & De Kok, Bloemfontein