Schoeman and Others v National Director of Public Prosecutions and Another (1890/2011, 5217/2010, 20738/2008) [2014] ZAWCHC 111; 2015 (1) SACR 451 (WCC) (23 July 2014)

Key Facts

Tax Type

Issues

• The applicants argued that POCA permits asset restraint without proof of guilt, infringing property rights and the presumption of innocence. The court rejected this collateral constitutional challenge, affirming that higher courts (e.g., Kyriacou, Van Staden) had already validated POCA's threshold test ('there might be a conviction'). It emphasized that the applicants were bound by these precedents and could not collaterally attack the statute's constitutionality in this proceeding.
• The court addressed whether it could rescind restraint orders under common law grounds, despite the applicants' reliance on section 26(10) and 28(3) of POCA. The judgment clarified that while the SCA's interpretation of POCA's statutory provisions (26(10)) is binding, the common law jurisdiction to rescind orders procured by fraud remains available. The court emphasized that the applicants did not need to rely on common law as their case was based on statutory grounds, but the analysis confirmed the existence of common law power in exceptional fraud cases.
• The applicants alleged that the first respondent (NDPP) committed fraud by using misleading statements and failing to disclose relevant information during the ex parte application for restraint orders. The court evaluated claims such as the use of terms like 'channelling' and 'irregular' to imply wrongdoing, the failure to disclose prior clean VAT audits, and the NDPP's handling of evidence. It concluded that the allegations did not establish subjective intent to mislead, noting the applicants' conscious decision to abide the orders despite access to the contested information.

Tax Years

• 2005
• 2007
• 2006
• 2008

Holdings

• The court held that the applicants' procedural complaints regarding the ex parte application and confirmation of the restraint order were not grounds for rescission, as the affected parties had elected not to oppose the orders and had benefited from the discretion exercised by the courts.
• The court found that the applicants' alternative application for variation of the restraint order was not justified, as the existing order already permitted payment of legal fees under specified conditions, and the applicants had not demonstrated new grounds for relief.
• The court dismissed the applicants' constitutional challenge to POCA's provisions, noting that prior judicial decisions had upheld the threshold test for restraint orders, and no direct constitutional challenge was properly advanced in this case.
• The court refused to order the immediate release of expenses upon appeal, citing section 29A of POCA, which mandates that such variations or rescissions are suspended pending the outcome of an appeal.
• The court dismissed the application for rescission of the restraint order, finding that the applicants failed to satisfy the jurisdictional requirements under section 26(10) of POCA, including demonstrating undue hardship and that the hardship outweighed the risk of asset dissipation. The judge also concluded that the applicants did not establish fraud or dishonesty by the first respondent sufficient to warrant rescission under common law principles.

Remedies

Tax Issue Category

Legal Principles

• The court has an inherent jurisdiction under common law to rescind restraint orders obtained by fraud, as recognized in Phillips (2) and other authorities. This power exists outside the statutory provisions of POCA and allows courts to set aside orders when they are procured through fraudulent means.
• Rule 42 of the Uniform Rules of Court allows for the rescission or variation of orders if they were erroneously granted, but the errors in this case do not meet the threshold for such relief. The judge found that the procedural errors did not warrant rescission under Rule 42.
• The National Director of Public Prosecutions (NDPP) has a duty of utmost good faith in ex parte applications, including disclosing all relevant information, both favorable and unfavorable, to the court. Failure to do so may justify rescission of the order.

Disputed Tax Amount

Precedent Name

• National Director of Public Prosecutions v Kyriacou
• National Director of Public Prosecutions v Van Staden
• Schlesinger v Schlesinger
• Phillips v National Director of Public Prosecutions
• Phillips and Others v National Director of Public Prosecutions
• National Director of Public Prosecutions v Phillips
• Colyn v Tiger Food Industries Ltd

Cited Statute

• Prevention of Organised Crime Act, 1998
• Value Added Tax Act, 89 of 1991
• Uniform Rules of Court
• Constitution of South Africa

Judge Name

Passage Text

• I am inclined to agree that the expression 'channelling' can have a stigma and that in the context of this matter (particularly when asserted in the context of 'irregular' payments) it was prone to carry a negative connotation. However, I agree that the basic facts were disclosed and it must have been clear to the Court that the payments were made in the first instance by SARS itself.
• The application is dismissed with costs on the scale as between attorney and client, such costs to be payable by the applicants jointly and severally, and to include the costs of two counsel, and are further to include all costs reserved by previous orders in this matter.
• The label 'facilitation', suggesting that both Van Staden and Schoeman saw Schoeman as deserving the payments because he was facilitating something, is possibly an indication of its causa. But the mere completion of VAT forms and making available the bank accounts of the S&D entities strikes me as unlikely to have been the extent of Schoeman's 'facilitation', given the very large remuneration.