Nyhonyha N O and Others v NDPP [2024] ZASCA 113
The main question that arose in this appeal was whether assets held in trust of which the beneficiaries of corrupt and unlawful transactions were trustees and beneficiaries fell within the scope of the term “realisable property” in terms of section 14 of the Prevention of Organised Crime Act, 121 of 1998 (POCA). After an interim restraint order under POCA was initially granted over the property, the order was lifted on the return date. The National Director of Public Prosecutions (NDPP) successfully appealed against this lifting of the interim restraint order to a full bench of the Gauteng High Court (Keightley and Adams JJ and Randera AJ). In turn the appellants (trustees of the trusts) then appealed to the Supreme Court of Appeal (SCA) against the decision of the full court.
N and P were directors of Regiments Capital (Pty) Ltd (Regiments), a company implicated in state capture and a corrupt deal involving locomotives for Transnet. Both of them are alleged to have benefited from the proceeds of these alleged crimes. Both of them formed family trusts in which “their” respective shareholdings in Regiments were kept. After the NDPP’s appeal to the full court of the Gauteng High Court, that court held that N’s and P’s, and the appellant’s assets are subject to a restraint order under section 14(1) of POCA. All were refused leave to appeal to the SCA by the full court, but special leave was then granted to the appellants (not to N and P) by the SCA. The appellants argued that the trust property in both trusts were beyond the scope of a restraint order under POCA as the property in both trusts were not exclusively controlled by, or for the benefit of, N and P. They argued that, for a restraint order to be competent, it had to be shown that these trusts were “abused” by N and P and that the “veil” could therefore be pierced. The NDPP argued that exclusive control was not necessary and that the piercing of the veil was also not required for a restraint order. It would be only at the end of the forthcoming criminal proceedings about the alleged corruption that the trial court would be called upon to determine whether, taking all the proved facts into consideration, a forfeiture order should be granted in favour of the state.
The SCA (Molefe JA, with Nicholls and Weiner JJA, Coppin and Smith AJJA concurring) held that to require proof of exclusive control or benefit, or abuse of the trust form and hence piercing of the veil, would frustrate the purpose of POCA, i.e. the prevention of enjoyment of proceeds of criminal behaviour by the perpetrators of a crime. On the evidence the court also found that in both cases N and P in fact benefited substantially from the assets of the trusts. The appeals were dismissed with costs and the order of the full court confirmed.
Comment:
Practitioners should always advise clients that, although trusts are very good structures for asset protection, no structure can protect assets when those assets have been obtained by fraud or, in general, in an illegal way. See also in this regard our summary of Botha N.O. v Leboko-Radebe and Others [2022] ZAGPJHC 724