The Prevention of Organised Crime Act empowers the High Court to make an order of forfeiture provided that the property concerned is ‘the proceeds of unlawful activities’

June 1st, 2021
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Bobroff and Another v National Director of Public Prosecutions (SCA) (unreported case no 194/20, 3-5-2021) (Eksteen AJA (Ponnan, Mbha and Molemela JJA and Weiner AJA concurring))

In the Bobroff case, two issues were brought to the Supreme Court of Appeal (SCA), namely –

  • whether the Gauteng Division of the High Court in Pretoria (the High Court) had jurisdiction to make a forfeiture order in terms of s 50(1)(b) of the Prevention of Organised Crime Act 121 of 1998 (the Act) in respect of property situated outside the territory of South Africa (SA) and belonging to persons who are presently in Australia; and if so
  • whether the respondent National Director of Public Prosecutions (NDPP), had established that the property was proceeds of unlawful activities as defined in the Act.

On 28 July 2017, the High Court granted an ex parte application for a preservation order, in terms of s 38 of the Act, in respect of the credit balances and interest accrued and held in two accounts in Israel in the name of the first appellant, Ronald Bobroff (Mr R Bobroff) at the Israel Discount Bank (IDB), and the second appellant, Darren Bobroff (Mr D Bobroff) at the Bank Mizrahi-Tefahot (BMT), respectively. The Bobroffs had been prominent legal practitioners practising as directors at the firm Ronald Bobroff and Partners Inc (the firm) in Johannesburg. Mr R Bobroff became a director of the firm in 2006. He had also been a member of the council of the Law Society of the Northern Provinces (the law society) for many years and was chairperson of the South African Association of Personal Injury Lawyers in 2004.

The firm predominantly dealt with cases in the field of personal injury litigation, often acting on a contingency basis. In 2010, allegations began to surface that the firm, had over the preceding three years, charged clients inflated fees exceeding the maximum permitted in terms of the Contingency Fees Act 66 of 1997. During 2011, a former client of the firm filed a complaint with the law society against Mr D Bobroff alleging that he had been charged inflated fees. The law society commenced a disciplinary inquiry against the Bobroffs in February 2012. The inquiry was protracted by the failure of the Bobroffs to corporate.

In the interim, in October 2012, Bernadine van Wyk, a bookkeeper employed by the firm, deposed to an affidavit pursuant to the Protected Disclosures Act 26 of 2000, in which she made serious allegations of significant financial impropriety by the Bobroffs. This prompted an investigation by the South African Police Services (SAPS). Eventually, on 3 March 2016, the law society filed an application to strike the Bobroffs from the roll of legal practitioners. The application, which eventually led to the disbarment of the Bobroffs, was heard on 14 March 2016. This was the same day the SAPS, as a result of their investigation, issued warrants of arrest for both, Mr R Bobroff and Mr D Bobroff.

However, on 16 March 2016, before the warrants of arrest could be executed, Mr D Bobroff departed for Australia, and Mr R Bobroff followed on 19 March 2016. Neither has returned since. As a result of their sudden departure, the SAPS caused a Red Notice to be circulated through Interpol. On 8 May 2017, the State Attorney in Israel sent a request for assistance in a criminal matter to the Department of Justice and Constitutional Development in SA. The request recorded that the police in Israel were investigating suspected crimes of money laundering, which had allegedly been committed by the Bobroffs in Israel.

The investigation, it said, had arisen out of a suspicious transaction, which had been transmitted by a compliance officer in the BMT on 12 February 2017. The compliance officer had reported that Mr D Bobroff, a non-resident of Israel, maintained a BMT account and had given an instruction to transfer US$ 3 million from his account from the BMT to an account in Australia. The transaction had appeared suspicious and the BMT accordingly declined to execute the transfer. Mr D Bobroff responded with a request to withdraw the entire credit of approximately US$ 7 million, which he held in the BMT account at the time. The action prompted the compliance officer to contact the Israel National Police for instructions.

On 1 March 2017, the Israel National Police had received a report from the compliance officer of IDB regarding an attempt by Mr R Bobroff to withdraw an amount of US$ 830 000 from an account in his name at IDB. The Israel National Police thereafter learnt of the Interpol Red Notice. The accounts were frozen at the instance of the Israel National Police and litigation followed as the Bobroffs sought the release of the funds.

The NDPP contended that credits held in these accounts were proceeds of unlawful activities in SA, in particular theft, fraud, money laundering and transgressions of the South African tax legislation. The SCA firstly considered the question of jurisdiction. The SCA added that the determination of jurisdiction involves a two-stage inquiry, namely –

  • the SCA had to establish whether the court is, as matter of principle, competent to take cognisance of the particular case (that is, whether a recognised jurisdictional ground is present); and
  • if a jurisdictional ground is established, whether an effective judgment can be given.

The SCA said that the NDPP, argued that the Act itself provides for extraterritorial jurisdiction in forfeiture proceedings. Mr Labuschagne on behalf of the NDPP relied largely on the definition in the Act of ‘proceeds of unlawful activities’, which is defined to mean: ‘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’.

Meanwhile, Mr Subel, on behalf of the appellants, contended that neither of the requirements for jurisdiction had been established. He referred to s 21 of the Superior Courts Act 10 of 2013, which provides for the jurisdiction of the High Courts in both civil and criminal matters. The material portion of s 21 provides:

‘(1) A Division has jurisdiction over all persons residing or being in, and in relation to all causes arising and all offences triable within, its area of jurisdiction and all other matters of which it may according to law take cognisance’. Mr Subel contended that it is to the common law that the SCA must look to determine whether a recognised jurisdictional ground is present. He referred the SCA to E Bertelsmann and DE van Loggerenberg Erasmus: Superior Court Practice (Cape Town: Juta 2015) at A2-103 to A2-104, which records:

‘The jurisdictional connecting factors or rationes jurisdictionis recognised by the common law include residence, domicile, the situation of the subject matter of the action within the jurisdiction, cause of action which includes the conclusion or performance of a contract and the commission of a delict within the jurisdiction’. The SCA said that forfeiture proceedings under ch 6 of the Act are not dependent on institutions of criminal proceedings. The focus in such proceedings is not on the wrongdoer, but on the property, which had been used to commit an offence of which constitutes the proceeds of a crime. The SCA pointed out that the proceedings are ‘“in rem” and are civil proceedings’.

The SCA added that the property subject to forfeiture in this matter, being credit balances in a bank account, are incorporeal assets. The SCA said it accepted, for the purpose of the judgment, that at common law, jurisdiction for such an action is determined by the forum rei sitae, which is the place of residence of the debtor. The SCA, however, said jurisdiction of South African courts is not determined solely by s 21 of the Superior Courts Act. The SCA added that generally, the jurisdiction of SA courts has threes sources, namely –

  • statutory;
  • common law; and
  • inherent jurisdiction.

Apart from the Superior Courts Act, the SCA pointed out that matters of jurisdiction are dealt with in numerous statutory provisions. The SCA said that whether the Act provides a statutory jurisdictional ground is a question which requires an interpretation of the Act, and in particular, ch 6 thereof.

The SCA added that the interpretation of documents, including statutes, requires a consideration of the language used, in which the light of the ordinary rules of grammar and syntax, in the context in which the provision appears. The SCA said that the apparent purpose to which it is directed should be considered in the light of all the material known to those responsible for its production. The SCA pointed out that, when more than one meaning is possible, each possibility must be weighed in the light of all factors, and a sensible meaning is to be preferred to one that leads to an insensible or unbusinesslike result.

The SCA said that while forfeiture is a civil matter, it is alleged to arise, in this case, at least in part, from transnational money laundering. The SCA noted that electronic banking has made the transfer of money across borders uncomplicated and instantaneous, and currencies can be changed at the drop of a hat. The SCA pointed out that A Kruger Organised Crime and Proceeds of Crime Law in South Africa 2ed (Durban: LexisNexis 2008) suggests that international crime and terrorism have led to the separation between jurisdiction and sovereignty of states. But rather, treaties are now used to establish suitable jurisdiction. The SCA added that with the increase in organised crime, there has been a growing perception, internationally, that conventional penalties are inadequate as measures of deterrence to crime.

The SCA made reference to National Director of Public Prosecutions and Another v Mohamed NO and Others 2002 (2) SACR 196 (CC), where Ackermann J said:

‘It is common cause that conventional criminal penalties are inadequate as measures of deterrence when organised crime leaders are able to retain the considerable gains derived from organised crime, even on those occasions when they are brought to justice. … Various international instruments deal with the problem of international crime in this regard and it is now widely accepted in the international community that criminals should be stripped of the proceeds of their crimes, the purpose being to remove the incentive for crime, not to punish them. This approach has similarly been adopted by our legislature.’

The SCA pointed out that it was against this background that the Act was promulgated. The SCA added that the preamble to the Act recognises the rapid growth of organised crime and money laundering, nationally and internationally. It records that ‘“no person should benefit from the fruits of unlawful activities”, and that legislation is necessary to provide for a civil remedy for the preservation, seizure and forfeiture of property which is derived from unlawful activities’. The SCA said that ch 5, which applies where there has been a prosecution, and ch 6, which applies even where no prosecution is instituted, provide the mechanism for such forfeiture.

The SCA added that notice to any party is required after the preservation order is made, and such party is afforded an opportunity to enter an appearance to resist the granting of a forfeiture order. The SCA pointed out that the Bobroffs did so. The SCA said while a preservation order is in force, the NDPP may bring an application for the property to be forfeited to the state. The SCA added that s 50 empowers the High Court to make an order of forfeiture, subject to the provisions of s 52, provided it finds on a balance of probabilities that property concerned is the proceeds of unlawful activities.

The SCA said the definition of ‘the proceeds of unlawful activities’ strike at any property ‘derived, received or retained, directly or indirectly, in the Republic or elsewhere’. ‘Property’ is defined in the Act to mean, ‘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’. The SCA added that the purpose of s 50(1) of the Act, as read with the definition of ‘proceeds of unlawful activities’, in the context of the known developments worldwide in relation to transnational crime, is to strip offenders of the proceeds of their crime wherever they may retain it.

The SCA said it was fortified in its conclusion by the provisions of the International Co-operation in Criminal Matters Act 75 of 1996. The SCA pointed out that the NDPP relied on theft, fraud, money laundering and contraventions of the tax legislation. But also, the second pillar of the NDPP’s case rested on the affidavit of Ms van Wyk, who was an experienced legal bookkeeper employed by the firm on 16 September 2010. The allegations by Ms van Wyk spoke to specific instances of widespread theft and fraud involving the Bobroffs from approximately 2008 (in respect of the Discovery files) to 2012.

The SCA, while determining whether there was a crime committed, said the Bobroffs firm dealt with thousands of files per annum and Mr R Bobroff ventured an estimate of at least 6 000 matters in 2013 to 2015. The period of misconduct testified to by Ms van Wyk extended over a period of five years prior to 2012. The SCA pointed out that a simple calculation reveals, on 60 000 files alone, that an amount of R 90 million would have been illegitimately charged to unsuspecting clients on this basis. The SCA held that very substantial sums thereof were moved into accounts of the Bobroffs in 2009 to 2010 on which interest has accrued in the interim.

The SCA said the origin of money is a matter exclusively within the knowledge of the Bobroffs. The SCA added that the Bobroffs had made no attempt to explain it. The SCA concluded that the forfeiture order which it made is not disproportionate to the proceeds received from unlawful activity proved. In the result the SCA made the following order:

‘1. The order of the High Court is amended as follows:

(a) By the addition to para 1.2, after the word ‘Bobroff’ of the following: “save for the amounts of USD 256 217.84 and AUSD 284 785”; and

(b) Paragraph 3 is set aside and replaced with the following:

“The balance of the proceeds in the accounts, as set out in para 1 above, are to be paid into the Criminal Assets Recovery Account established under s 63 of the POCA, number 80303056, at the South African Reserve Bank, Vermeulen Street, Pretoria”.

  1. Save to the extent set out in para 1 above, the appeal is dismissed with costs of two counsel, where so employed’.

Kgomotso Ramotsho Cert Journ (Boston) Cert Photography (Vega) is the news reporter at De Rebus.

This article was first published in De Rebus in 2021 (June) DR 31.

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