THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Case no: 235/09

In the matter between:

THE SOUTH AFRICAN RESERVE BANK

Appellant

and

MZILIKAZI GODFREY KHUMALO

First Respondent
MAWENZI RESOURCES AND FINANCE
COMPANY (PTY) LTD

Second Respondent

Neutral citation:  The South African Reserve Bank v M G Khumalo
(235/09) [2010] ZASCA 53 (31 March 2010)

Coram:
HARMS DP, NUGENT, LEACH JJA, HURT and MAJIEDT AJJA
Heard:
24 February 2010
Delivered:
31 March 2010
Summary:    Exchange Control Regulations – Regulation 22C(1) is not invalid
for failing to incorporate a time period not exceeding that laid down in s 9(2)(g)
of the Currency and Exchanges Act 9 of 1933

______________________________________________________________

ORDER
______________________________________________________________

On appeal from: North Gauteng High Court (Pretoria) (B R Southwood, J R
Murphy and T J Raulinga JJ sitting as a court of first instance).

1.
The appeal succeeds with costs, including the costs of two counsel.
2.
The order of the court a quo is set aside and is replaced by the
following:
‘The application is dismissed with costs, including the costs of two counsel.’
______________________________________________________________

JUDGMENT
______________________________________________________________

LEACH JA (HARMS DP, NUGENT JA, HURT et MAJIEDT AJJA concurring):

[1] This appeal concerns the validity of a notice of attachment issued by
the appellant, the South African Reserve Bank, under r 22C(1) of the
Exchange Control Regulations1 (‘the regulations’) promulgated under the
Currency and Exchanges Act 9 of 1933 (‘the Act’). For purposes of this
judgment it can be accepted that references to ‘the Treasury’ in both the Act
and the regulations are to be construed as referring to the appellant.

[2] The first respondent is a businessman and a director of various
companies, including the second respondent. From August 2002, the
appellant held discussions with the two respondents in regard to whether
various transactions had contravened the regulations. On 12 August 2008 the
appellant, unpersuaded that the transactions in question did not amount to
contraventions, issued the disputed notice purporting to attach various assets
of the respondents which it alleged were ‘moneys or goods’ contemplated by r
22C.

1 Promulgated under section 9 of the Currency and Exchanges Act 9 of 1933 in Government
Notice R 1111 of 1961and amended up to Government Notice R 855 in Government Gazette
no 20299 of 23 July 1999.

[3] This led to the respondents seeking urgent interim relief, including
orders declaring the notice to be invalid and interdicting the appellant from
giving effect to the notice pending the outcome of a review application that
was yet to be brought, in which additional relief would be sought. The
application came before a full bench of the North Gauteng High Court
(Southwood, Murphy and Raulinga JJ). One of the grounds upon which it was
said by the respondents that the notice was invalid was that r 22C(1) under
which the notice was issued was said itself to be invalid because it was not in
conformity with the authorizing statute. In the course of argument in the court
below counsel for both parties agreed that, if the court were to uphold the
respondents’ contention in that respect, then a final order should be made that
the notice was invalid. Having found in their favour the court below made an
order accordingly and the prayer for interim relief became superfluous. With
the leave of that court that appellant now appeals against that order.

[4] An appeal lies against an order that is made by a court and not against
its reasons for making the order. It follows that on appeal a respondent is
entitled to support the order on any relevant ground and is not confined to
supporting it only for the reasons given by the court below.2 In this court, the
respondent did not seek to support the order on any ground than that given by
the court below, which was that the regulation under which it was made did
not conform with the authorising statute and was thus invalid, subject to one
subsidiary issue that I will come to. This means that the principal issue on
which the appeal turns is whether the full bench was correct in its conclusion
on the invalidity of r 22(C)(1) for the reasons that it gave. If the respondent
fails on that issue, and on the subsidiary issue that I referred to, then the order
that it made falls to be set aside, and the challenge to the validity of the order
falls to be dismissed. The remainder of the notice of motion did no more that
foreshadow a review application that was yet to be brought and need not
concern us.

2 Per Trollip JA in Sentrale Kunsmis Korporasie (Edms) Bpk v N.K.P. Kunsmisverspreiders
(Edms) Bpk 1970 (3) SA 367 (A) at 395G-396A.

[5] The regulations were made under the powers extended to the
Governor- General (later the State President and now the President) by s 9 of
the Act which inter alia provides:
‘(1) The (President) may make regulations in regard to any matter directly or
indirectly relating to or affecting or having any bearing upon currency, banking or
exchanges.
(2)(a) Such regulations may provide that the (President) may apply any sanctions
therein set forth which he thinks fit to impose, whether civil or criminal.
(b)  Any regulation contemplated in paragraph (a) may provide for-

(i)
the blocking, attachment and obtaining of interdicts for a period referred to in
paragraph (g) by the Treasury and the forfeiture and disposal by the Treasury of any
money or goods referred to or defined in the regulations or determined in terms of the
regulations or any money or goods into which such money or goods have been
transformed by any person, and-
(aa)
which are suspected by the Treasury on reasonable grounds to be involved in
an offence or suspected offence against any regulation referred to in this section, or
in respect of which such offence has been committed or so suspected to have been
committed;
(bb)
which are in the possession of the offender, suspected offender or any other
person or have been obtained by any such person or are due to any such person and
which would not have been in such possession or so obtained or due if such offence
or suspected offence had not been committed; or
(cc)
by which the offender, suspected offender or any other person has been
benefited or enriched as a result of such offence or suspected offence -
Provided that, in the case of any person other than the offender or suspected
offender, no such money or goods shall be blocked, attached, interdicted, forfeited
and disposed of if such money or goods were acquired by such person bona fide for
reasonable consideration as a result of a transaction in the ordinary course of
business and not in contravention of the regulations; and
(ii)
in general, any matter which the (President) deems necessary for the
fulfilment of the objectives and purposes referred to in subparagraph (i), including the
blocking, attachment, interdicting, forfeiture and disposal referred to in subparagraph
(i) by the Treasury of any other money or goods belonging to the offender, suspected
offender or any other person in order to recover an amount equal to the value of the
money or goods, recoverable in terms of the regulations referred to in subparagraph

(i), but which can for any reason not be so recovered.
(c)  . . .
(d) Any regulation contemplated in paragraph (a) shall provide-
(i)
that any person who feels aggrieved by any decision made or action taken by
any person in the exercise of his powers under a regulation referred to in paragraph
(b) which has the effect of blocking, attaching or interdicting any money or goods,
may lodge an application in a competent court for the revision of such decision or
action or for any other relief . . .
(ii)   . . .
(iii)   that any person who feels aggrieved by any decision to forfeit and dispose of
such money or goods may, within a period prescribed by the regulations, which shall
not be less than 90 days after the date of the notice published in the Gazette and
referred to in subparagraph (ii), institute legal proceedings in a competent court for
the setting aside of such decision, and the court shall not set aside such decision
unless it is satisfied-
(aa)
that the person who made such decision did not act in accordance with the
relevant provisions of the regulation; or
(bb)
that such person did not have grounds to make such decision; or
(cc)
that the grounds for the making of such decision no longer exist.
(e)   . . .
(f)   . . .
(g) The period referred to in paragraph (b) (i) shall be a period not exceeding 36
months or such longer period-
(i)
as ends 12 months after the final judgment (including on appeal, if any) in
every prosecution for any contravention of the regulations or any other law in relation
to the money or goods concerned or in which such money or goods are relevant to
any aspect of such prosecution; or
(ii)
as may be determined by a competent court in relation to the money or goods
concerned on good cause shown by the Treasury.’

[6] As appears from this, a distinction is drawn between money and goods
involved or suspected of having been involved in any contravention of the
regulations (sometimes referred to as ‘tainted’ money or goods) and other
money and goods (which may be described as ‘untainted’). The President is
empowered by s 9(2)(b)(i) to make regulations relating to the attachment,
freezing and forfeiture of tainted money and goods for a period referred to in s

9(2)(g) and by s 9(2)(b)(ii) to make regulations in general in respect of any
matter which he ‘deems necessary for fulfilment of the objectives and
purposes referred to’ in s 9(2)(b)(i) including the attachment and freezing of
untainted money and goods. Although no specific reference is made to 9(2)(g)
in s 9(2)(b)(ii), the reference in that subparagraph to an attachment or freezing
‘referred to in subparagraph (i)’ leads to the reasonable conclusion that the
legislature intended the prescribed time limit to also apply to the attachment
and freezing of untainted money and goods.

[7] Regulations 22A, 22B and 22C of the regulations made by the
President provide for the blocking of accounts, the attachment of money and
goods, and the forfeiture and disposal of money or goods as envisaged by s
9(2)(b). In South African Reserve Bank v Torwood Properties (Pty) Ltd3
Harms JA, after describing these regulations as being both ‘lengthy and
convoluted’4 – a fitting description for s 9 as well – went on to explain their
effect in broad terms as follows:5
‘What is contemplated by the regulation, in very general terms, seems (by way of an
example) to be this: A contravention of the regulations is committed. The amount
involved is Rx. That amount may be recovered by the Treasury. It may recover by
attaching and declaring forfeit, for example, the money “involved” in the
contravention. If that Rx cannot be found, the shortfall may be recovered by the
attachment of “other” (untainted) money or goods from the persons mentioned in
subpara (i) to (iv) of reg 22C(1).’

[8] For present purposes it suffices to record the following in regard to the
regulations:
 Regulation r 22A deals with the tainted goods and money, with r
22A(1)(a) providing for the attachment of tainted money and goods and
r 22A(1)(b) and (c)  providing for the prohibition of withdrawals out of
accounts into which tainted money is reasonably suspected of having
been deposited and the prohibition of the use of tainted goods (this

3 1997(2) SA 169 (A).
4 At 176 C-D.
5 At 178C-D. A similar explanation is to be found in Francis George Hill Family Trust v South
African Reserve Bank & others 1990 (3) SA 704 (T) at 711D-F.

may loosely be described as the ‘freezing’ of such money and goods).
Regulation 22A(3) provides that if attached tainted money and goods
are not forfeited under r 22B within ‘the period referred to in paragraph
(g) of section 9(2) of the Act’, they are to be returned.
 Regulation 22C, on the other hand, deals with untainted money and
goods, with r 22C(1) providing for the attachment of untainted money
and goods and r 22C(2) providing for the issue of an order freezing
untainted money and goods. Importantly, while r 22C(3)(b) provides for
the provisions of 22A(3) to apply mutatis mutandis to a freezing order
under r 22C(2), no specific provision is made for a similar time period
to apply to  attachments under r 22C(1).
  Regulation 22B deals with the procedures necessary to obtain
forfeiture of both tainted and untainted moneys and goods.

[9] The President’s failure to provide a time limit on the duration of an
attachment of untainted money and goods formed the cornerstone of the full
bench’s finding that r 22C(1) is invalid. It found that s 9(2) rendered it
mandatory for the President to stipulate a time period not exceeding that
prescribed by s 9(2)(g) for the attachment of such assets. It also held that the
omission of a reference to r 22C(1) in r 22C(3)(b) had to be regarded as
intentional and excluded the operation of a time limit. It therefore concluded
that an attachment for an unlimited period was intentionally envisaged by r
22C(1), a provision which is in conflict with the provisions of the Act and
therefore invalid.6

[10] The first question to be considered is whether the legislature intended s
9(2) to prescribe the form in which the regulations were to be drawn (by
directing that they had to state, or at least refer to, a period for which the
attachment or freezing was to remain in force) or simply intended to prescribe
a limit, as an objective matter of law, to the period for which such attachment
or freezing could endure. In my view, all the indications in the section are in
favour of the latter intention.

6 That r 22C(1) was invalid for this reason is also the view expressed by Prof A N Oelofse
Suid-Afrikaanse Valutabeheer-wetgewing at 109 (quoted with the approval by the full bench.).

[11] The provisions of s 9(2)(g) contemplate three different situations. The
first is the basic situation where an attachment or freezing is to be effected ─
it may remain in force for a period of at most 36 months. The second is where
there is a prosecution for an offence in which the affected assets have been
involved or are owned by a person contemplated in ss 9(2)(b)(ii) ─ the
attachment or freezing will be effective until the expiry of 12 months after a
final judgment. The third contemplates an application to court for an extension
of the period on good cause shown by the Treasury. In my view, if the
legislature had intended that this comparatively complicated formulation had
to be spelt out in the regulations, it would have said so. It follows that the
more reasonable conclusion is that the intention behind s 9(2)(g) was to set a
statutory time limit for the duration of an attachment or freezing of money or
goods and was not intended to prescribe the content of the regulations and to
require the President to determine a time limit in the regulations. All it means
is that these orders may not last longer than the prescribed limit.

[12] The next question is whether the regulation, by omitting any reference
to a time limit, means that the President sought to give a power to the
Treasury that is not limited in time. I think not. The regulations are not to be
read in isolation. Where possible, they are to be construed consistently with
the empowering Act under which they were made.7 No matter how clear and
unequivocal regulations may appear to be, ‘their interpretation and validity are
dependent upon the empowering provisions which authorise them.’8 The
regulations must therefore be read in the light of the provisions of s 9(2) and
its purpose and objectives ─ including that the attachment of money and
goods may not be for a period longer than that prescribed in the Act. It
therefore cannot be argued that merely because no mention of the time
limitation contained in s 9(2)(g) is made in the regulations, it does not apply to
an attachment made under the regulations.

7 Minister of Health v New Clicks SA (Pty) Ltd 2006 (2) SA 311 (CC) at para 211.
8 Per Smalberger J in Singapi & others v Maku & others 1982 (2) SA 515 (S) at 517C-D.

[13] In my view, the full bench therefore erred in its conclusion that s 9
required the President to stipulate a time period in the regulations for the
attachment and freezing of untainted money and goods. The plain meaning of
s 9(2) is that while the President is empowered to make regulations under
which money and goods may be attached and frozen, no such attachment or
freezing is to last for longer than the prescribed period. The section does not
require that period to be reiterated in the regulations. In addition, the fact that
no such time limit is specified in the regulation does not mean that an
attachment under r 22C(1) can last indefinitely. It can only endure as long as
the maximum period prescribed by s 9(2)(g). The fact that the President
unnecessarily referred to the period in s 9(2)(g) in certain other regulations
does not mean that his failure to also do so in respect of attached untainted
goods and money renders r 22C(1) invalid.

[14] The subsidiary issue that next arises is whether the notice was invalid
because it did not contain a time limit. In my view it was not required of
Treasury to set a time limit in the notice. If it omits to do so, as it did in this
case, the default position is regulated by statute and the notice lapses after
three years.

[15] The full bench consequently erred in concluding that r 22C(1) was
invalid and in setting aside the warrants. The appeal must therefore succeed.
The parties were correctly agreed that costs should follow the event and that
the employment if two counsel was justified.

[16] In the result I order as follows:
1.
The appeal succeeds with costs, including the costs of two counsel;
2.
The order of the full bench is set aside and is replaced with the
following:
‘The application is dismissed with costs, including the costs of two counsel.’

_______________

L E LEACH

JUDGE OF APPEAL

APPEARANCES

APPELLANT:

P G Ginsburg SC (with him K W Lüderitz)

Instructed by Newtons Inc, Pretoria

Symington & De Kok, Bloemfontein

RESPONDENTS:

A Bhana SC

Instructed by Cliffe Dekker Hofmeyr Inc, Sandown

Matsepes Inc, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal

Date:
31 March 2010

Status:
Immediate

Please note that the media summary is intended for the benefit of the media and
does not form part of the judgment of the Supreme Court of Appeal

THE SOUTH AFRICAN RESERVE BANK

versus

M G KHUMALO &

MAWENZI RESOURCES AND FINANCE COMPANY (PTY) LTD

The South African Reserve Bank, the appellant, issued a notice under r 22C(1) of
the Exchange Control Regulations promulgated under the Currency and Exchanges
Act 9 of 1933 attaching certain assets of Mr M G Khumalo, the first respondent, and
a company of which he is a director, the second respondent, whom it alleged had
committed contraventions of the Exchange Control Regulations. The respondents
applied to the North Gauteng High Court for an order setting aside the attachment.
The high court ruled that the notice of attachment was invalid as r 22C(1) under
which it had been issued was itself invalid as not being in conformity with the
empowering statute.
The South African Reserve Bank appealed to the Supreme Court of Appeal which
today upheld the appeal. It concluded that r 22C(1) was not invalid and that, as the
validity of that regulation was the sole issue upon which the appeal fell to be

determined, the high court had erred in setting aside the notice of attachment. The
appeal was therefore upheld and the order of the high court altered to one
dismissing the respondent’s application with costs.