Republic of South Africa In the Western Cape High Court of South Africa

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Republic of South Africa

In the Western Cape High Court of South Africa

In the consolidated matters between:

Case No: 4850/2012




Judgment delivered 21 June 2012


[1] The applicant company conducts business as an auctioneer at premises in Cape Town (where its head office is situated), Johannesburg and Durban. By reason of its activities, the applicant falls under the definition of an 'estate agent' in the Estate Agency Affairs Act, 112 of 1976 (the EAAA) and is also an 'accountable institution' as defined in the Financial Intelligence Centre Act, 38 of 2001 (the FICA).

[2] The first respondent is the Estate Agency Affairs Board (the Board). The second respondent is the Minister of Trade and Industry and is the minister responsible for the administration of the EAAA. The third respondent is the Minister of Finance and is the minister responsible for the administration of the FICA. (I shall refer herein to the second and third respondents as the Ministers).
[3] The applicant has since January 2012 received a large amount of negative publicity in the South African press regarding the manner in which the applicant is alleged to have conducted its business. After receiving documents from the producers of the current affairs television show Carte Blanche, the Board instituted a targeted investigation into the affairs of the applicant. As part of the investigation inspectors of the Board, armed only with a certificate signed by the acting chief executive officer of the Board, authorising them to conduct searches of the applicant's premises in terms of the provisions of S 32A of the EAAA and S 45B of the FICA, arrived without a warrant and unannounced at the applicant's premises in Cape Town, Johannesburg and Durban. When the inspectors sought entry to the premises to search and seize, the applicant refused them entry and launched an application for both interim relief to prevent the Board from conducting the warrantless search and seizure operation (the interim application) and for final relief in the form of a constitutional challenge to s 32A of the EAAA and s 45 B of the FICA (the impugned provisions).
[4] The Board and the second and third respondents oppose the application and in response to the main application, the Board brought a counter application for a warrant to search the applicant's premises. The basis for the counter application is that there is a reasonable belief that the applicant and/or some of its employees may have committed serious violations of the EAAA and the FICA.
[5] Before the launch of the main application, the parties agreed that KPMG, an independent firm of accountants, would make a mirror image of the data on the applicant's computer servers for safekeeping pending the outcome of these proceedings. The Board has undertaken that it will not proceed to search the applicant's premises pending the outcome of the application. This has rendered the interim relief unnecessary.
[6] When the applications were called on 28 May 2012, Mr Hellens on behalf of the Board drew attention to the fact that the applicant had not complied with Rule 16A (1) by giving due notice to the registrar that it was raising a constitutional issue in the main application. After some debate on whether there had not been substantial compliance, ruled that in the absence of proper compliance with Rule 16 A (1) the main application cannot proceed and it was postponed sine die. Both Mr Hellens on behalf of the Board and Mr Gauntlett on behalf of the Ministers urged that I should nevertheless hear and decide the Board's counter application for a warrant to be issued. After hearing Mr Katz on behalf of the applicant who opposed the hearing of the counter application at that stage, I ruled that the Board may proceed with the counter application.
[7] The issue to decide is therefore whether this court may and should issue a warrant to the Board to search the applicant's premises.
[8] The applicant's principal contention is that there is no legal authority for the warrant sought by the Board: sections 32 A of the EAAA and 45 B of the FICA do not provide in express terms for the issue of a warrant and cannot be interpreted and 'read in' or 'read down' to enable the court to issue a warrant to the Board.
[9] Under the EAAA, the Board is the Industry Regulator responsible for the estate agency industry and is required to maintain and promote the standards of conduct of estate agents and to regulate their activities. Under the FICA the Board as a 'supervisory body' is required to supervise and enforce compliance with the FICA and to combat money laundering and the financing of terrorist and related activities. As an 'estate agent' and 'accountable institution, the applicant is subject to a large number of obligations under the EAAA and the FICA. It is required, inter alia, to keep an accurate record of its business relationships and activities and a failure to do so is an offence. Under the code of conduct published under s 8 (b) of the EAAA, the applicant is required at all times to protect the interests of its clients to the best of its ability with due regard to the interests of other parties concerned and not to make any false statement knowing it to be false and not to prepare or maintain any false books of account or any other records.
[10] To enable the Board to fulfil its regulatory function the EAAA and the FICA confer on the Board the power to conduct inspections and searches. The empowering provisions are:

1. Section 32 A of the EAAA provides in general terms and without reference to a warrant requirement that an inspector furnished with inspection authority by the Board may conduct an investigation to determine whether the provisions of the EAAA are being or have been complied with and the inspector may for that purpose, without giving prior notice, at all reasonable times enter any place at which he has reason to believe any person is performing an act as an estate agent, is connected with the performance of such an act or there are books, records or documents to which the provisions of the act are applicable.

  1. Section 45 B of the FICA provides that an inspector appointed in terms of s 45 (1) may at any time and on reasonable notice enter and inspect any premises at which the Centre or the supervisory institution reasonably believes that the business of an accountable institution is being conducted. While section 45 B (7) of the FICA provides that no warrant is required for the purposes of an inspection in terms of that section, section 45 B (7) does not expressly preclude the obtaining of a warrant before the Board conducts such an inspection.

  2. Both s 32 A of the EAAA and 45 B of the FICA grant inspectors various powers of search and seizure over estate agents and accountable institutions respectively.

[11] Save that in terms of section 45 B (6) of the FICA non-routine inspections by the inspector of a supervisory body may only be conducted after consultation with the Financial Intelligence Centre (the Centre), the empowering provisions do not draw a distinction between random regulatory inspections of which the Board carries out approximately 2000 every year and specific targeted inspections the Board carries out on the basis of specific complaints or a reasonable suspicion of wrongdoing or statutory violations.

[12] The information underlying the Board's application for a warrant is set out in the answering affidavit filed on behalf of the Board. The allegations are for purposes of the main and counter applications not answered by the applicant and must for present purposes be accepted as accurate. The material consists of email exchanges between employees of the applicant and between persons in senior management positions within the applicant and extracts from the applicant's books of account and constitute prima facie evidence of serious breaches of the EAAA and the FICA on the part of the applicant and some of its employees, including its former CEO, Rael Levitt. The evidence is sufficient to justify a reasonable suspicion of wrong-doing on the part of the applicant.
[13] The Board contends that the court has the power and competence to grant a warrant on two alternative bases:
1. The provisions of the EAAA and the FICA, interpreted in the light of the Constitution are reasonably capable of bearing the meaning that random compliance inspections may be carried out without a warrant (something to which the applicant does not raise an objection) but that a warrant is required for targeted inspections.

2. The court has the inherent power to create remedies governing the preservation of and access to evidence even where there is no express statutory authority to do so.

[14] Having reconsidered the matter, I am of the view that the issue of whether the empowering provisions of the two acts are open to the interpretation that it affords the court a power to issue the Board with a warrant to enter the applicant's premises and there to search for and seize documents and records, is in itself a constitutional issue which should not be determined separately from the main constitutional challenge brought by the applicant. The hearing of the latter issue was postponed sine die to allow for proper compliance on the Rule 16 A. I do not think that the issue of the constitutional interpretation of the sections in question should be decided separately and on a piece meal basis. In my view, that issue should also stand over for determination together with the principal constitutional challenge to the impugned provisions.
[15] That leaves the second basis upon which the Board contends this court has the power to issue a warrant namely that the court has the inherent power to create a procedural remedy to preserve and grant access to evidence.
[16] In Shoba v Officer Commanding, Temporary Police Camp. Waqendrift Dam and Anor; Maphanqa v Officer Commanding, South African Police Murder and Robbery Unit. Pietermaritzburq and Others 1995 (4) SA 1 (AD) at 15 G, the Appellate Division held that the absence of express statutory authority was no bar to the acceptance of Anton Piller orders as part of the court's judicial practice and that the court has the discretion whether to grant an Anton Piller order or not, and if so, on what terms (at 16 B). Corbett, CJ (at 8 G - 9 D) dealing with the proposition that South African Courts do not have the jurisdiction to grant an order for the attachment of documents and other things to which no right is claimed except that they should be preserved for and produced as evidence in an intending court case between the parties, cited and referred with approval to the following obiter passages from his judgment in the Appellate Division in Universal City Studios Inc v Network Video 1986 (2) SA 734 (AD) at 754 EF and 755 A - E.
'Now, I am by no means convinced that in appropriate circumstances the Court does not have the power to grant ex parte and without notice to the other party, i.e. the respondent (and even, if necessary, in camera) an order designed pendente lite to preserve evidence in the possession of the respondent. It is probably correct, as so cogently reasoned by the Court in the Cerebos Food case supra, that there is no authority for such a procedure in our common law. But, of course, the remedies devised in the Anton Piller case supra and other subsequent cases for the preservation of evidence are essentially modern legal remedies devised to cater for modern problems in the prosecution of commercial suits.'
There is no doubt that the Supreme Court possesses an inherent reservoir of power to regulate its procedures in the interests of the proper administration of justice, [citations omitted]. It is probably true that, as remarked in the Cerebos Food case (at 173 E), the court does not have an inherent power to create substantive law, but the dividing line between substantive and adjectival law is not always an easy one to draw (some citations omitted). Salmond Jurisprudence, 11th Ed at 504 states that 'Substantive Law is concerned with the ends which the administration of justice seeks: procedural law deals with the means and instruments by which those ends are to be obtained'.

In a case where the applicant can establish prima facie that he has a cause of action against the respondent which he intends to pursue, that the respondent has in his possession specific documents or things which constitute vital evidence in substantiation of the applicant's cause of action (but in respect of which the applicant can claim no real or personal right), that there is a real and well-founded apprehension that this evidence may be hidden or destroyed or in some manner spirited away by the time the case comes to trial, or at any rate to the stage of discovery, and the applicant asks the Court to make an order designed to preserve the evidence in some way, is the Court obliged to adopt a non possumus attitude? Especially if there is no feasible alternative? I am inclined to think not. It would certainly expose a grave defect in our system of justice if it were to be found that in circumstances such as these the Court were powerless to act. Fortunately I am not persuaded that it would be. An order whereby the evidence was in some way recorded, eg by copying documents or photographing things or even by placing them temporarily, i.e. pendente lite, in the custody of a third party would not, in my view, be beyond the inherent powers of the Court. Nor do I perceive any difficulty in permitting such an order to be applied for ex parte and without notice and in camera, provided that the applicant can show the real possibility that the evidence will be lost to him if the respondent gets wind of the application.' (emphasis supplied)

[17] These dicta which relate to the court's inherent power to develop procedural remedies have been cited with approval by the Constitutional Court. In National Director of Public Prosecutions and Another v Mohamed NO and Others 2003 <4) SA 1 (CC) at paras 30-32 with reference to section 173 of the Constitution which provides that
‘The Constitutional Court, the Supreme Court of Appeal and High Courts have the inherent power to protect and regulate their own process, and to develop the common law, taking into account the interest of justice'.
[18] Mr Hellens on behalf of the Board submitted that these cases show that our courts have inherent jurisdiction to create procedures which govern access to evidence in a way that balances the privacy interests of those being searched with the public necessity of effective law enforcement and legislation.
[19] During the course of argument the issue arose whether the provisions of section 45 F (3) could be invoked by the Board to bolster its argument in support of its application for a warrant. Section 45 F reads as follows:
'45F Application to court

(1) (a) The Centre, in respect of any accountable institution regulated

or supervised by a supervisory body in terms of this Act or any
other law, may institute proceedings in accordance with this section
only if a supervisory body failed to institute proceedings despite any
recommendation of the Centre made in terms of section 44 (b) or
failed to institute proceedings within the period recommended by
the Centre.

(b) A supervisory body may institute proceedings in accordance with this section only after consultation with the Centre on that application to court.

(2) Subject to subsection (1), the Centre or any supervisory body may
institute proceedings in the High Court having jurisdiction against
any accountable institution, reporting institution or person to whom
this Act applies, to-

  1. discharge any obligation imposed on the Centre or supervisory body in terms of this Act;

  2. compel that institution or person to comply with any provision of this Act or to cease contravening a provision of this Act;

  3. compel that institution or person to comply with a directive issued by the Centre or supervisory body under this Act; or

(d) obtain a declaratory order against that institution or person on any point of law relating to any provision of this Act or any order, determination or directive made in terms of this Act (3) Subject to subsection (1), if the Centre or a supervisory body has reason to believe that an institution or person is not complying with this Act or any order, determination or directive made in terms of this Act, it may, if it appears that prejudice has occurred or might occur as a result of such non-compliance, apply to a court having jurisdiction for-

  1. an order restraining that institution or person from continuing business pending an application to court by the Centre or supervisory body as contemplated in subsection (2); or

  2. any other legal remedy available to the Centre or supervisory body

[20] At the end of the oral argument the parties were permitted to file written submissions on the applicability of section 45 F (3) of the FICA and whether it empowers the Board and/or the Centre to apply to court for the issue of a warrant. Counsel on both sides of the case filed written submission for which I thank them.

[21] In their joint submissions on behalf of the Board and the Ministers counsel contended that the effect of section 45 F (3)(b) is to empower the Centre or the Board (as supervisory body), once the jurisdictional requirements set by 45 F (3) are met, to make application to a court for any legal remedy that is available to them and that the section implicitly empowers a court to grant a legal remedy so applied for. The section in effect provides the 'statutory lift off for the application for a warrant by the Centre or the Board, it is contended.
[22] The applicant's counsel in their written submissions submitted that there are a number of reasons why the Board's reliance on section 45 F (3) should not be entertained. First, it is pointed out that since section 45 F is not mentioned in the proposed warrant and in the Board's 'founding' and replying affidavits, the Board is not entitled to rely on the section and that, in any event, the Board has not explicitly brought the application for relief in terms of section 45 F (3). Further it is contended that there is no evidence of compliance with the jurisdictional facts required in section 45 F (1) (b) for granting relief under section 45 F (3) (b), namely that the Board had first consulted with the Centre on the application. Further that section 45 F (3) is limited to interim relief pending the outcome of an application for the relief set out in section 45 F (2). In view of the conclusion to which I have come in regard to a further point raised by the applicant's counsel, it is not necessary to deal with these contentions and the answers to the points raised by counsel for the Board and the Ministers in their joint written submissions.
[23] In my view section 45 F (3) (b) does not take the matter any further because the section only permits the court to grant a remedy (assuming the issue of a warrant to be such a remedy) if it has the power to do so. The applicant contends that the court has no inherent jurisdiction to issue a warrant and that the court can only issue a warrant if it has the necessary statutory authority to do so (Min of Safety and Security v Mohamed 2012 (1) SACR 321 (SCA) at 329 par [20]; 331 par [24]). Whether the impugned provisions do sanction the issue of a warrant by the court depends on whether words to that effect may be read into the statutes and can only happen once the sections as they stand are declared to be constitutionally invalid. The application regarding those issues has been postponed for decision after compliance with Rule 16 A. The Board and the Ministers contend however that the court does indeed have the inherent jurisdiction to consider and grant the application for a warrant and that this constitutes an existing legal remedy for which the Board is entitled to apply under section 45 F (3) [24] The issue therefore remains whether the order being sought by the Board may be made by the High Court in the absence of direct statutory authority for such an order. The respondents contend that the Appellate Division has held that an order pertaining to the preservation of and access to evidence, being procedural in nature, falls within the inherent jurisdiction of the High Court. In addition, section 173 of the Constitution entrenches the inherent power of the High Courts to regulate its own process.
[25] As I understand the judgments of the Appellate Division relied upon by the Board and the Ministers, the inherent power described therein is limited to the regulation of High Court's own process in regard to pending or intended litigation before that court. In Universal Studios it was made clear that orders that went beyond orders designed merely to preserve specific evidence for trial but that are designed to give authority for a search for and attachment of, evidence in order to found a cause or causes of action, was not a procedure to which the Appellate Division could or should give its approval and that if such a remedy should be necessary, it should be sought in appropriate legislation and/or the amendment to the Rules of Court (at 754 CD; 755 H -J). In my view the relief sought by the Board is not concerned with the inherent power of the High Court to regulate its own process. There is no pending or intended litigation in the High Court in respect of which it is necessary to preserve evidence in the possession of the applicant. The Board is not seeking to enforce a cause of action through intended litigation in the High Court. The Acting Executive Manager of Enforcement and Compliance Department of the Board states that the sole purpose of the intended inspection of the applicant's premises was to determine whether there was information which demonstrated a failure by the applicant to comply with the provisions of the EAAA and the FICA. The exact manner in which the Board would seek to enforce compliance with the Acts would depend on what was discovered in the course of the investigation.
[26] In my view the Board has not made out a case for the issue of a warrant on the basis that the High Court has the inherent jurisdiction to do so in a case like the present. The relief sought by the Board can therefore not be granted by this court on the basis of this court's inherent jurisdiction.
[27] Whether the Board is entitled to proceed with its targeted search and seize operations without a warrant or whether this court is empowered by the impugned provisions to issue the Board with a warrant are matter which in my judgment should be heard together and stand over for determination when the main constitutional challenge is heard by this court. It follows that the following order is made:

  1. The counter application by the Board for a warrant is postponed sine die to be heard together with the applicant's application challenging the constitutional validity of the impugned provisions.

  1. The costs of this application are to stand over for determination at the postponed hearing.



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