Michael Hermann Armbruster and Another v The Minister of Finance and Others

On 18 June 2004, Mr Armbruster was found in possession of foreign currency valued at R102,675.65 at OR Tambo Airport's international departure section. The currency was seized by a SARS customs official under the Exchange Control Regulations. Armbruster claimed he intended to use the money to expand his business in the UAE. He admitted he had purchased foreign currency from German tourists rather than through authorized dealers because it was time-consuming and expensive to do so officially. He claimed ignorance of the proper procedures. After representations, the Treasury (fourth respondent) decided not to refund the seized currency, citing contraventions of Exchange Control Regulations 2(1), 3(1)(a), and 10(1)(c). The applicants challenged this decision in the High Court, which dismissed their application. They then sought leave to appeal directly to the Constitutional Court.

• When and how does forfeiture of foreign currency occur under Regulation 3(5)?
• What is the nature of the discretion conferred on the Treasury official by Regulation 3(5)?
• Does Regulation 3(5) constitute criminal punishment or civil forfeiture?
• Does Regulation 3(5) violate the right of access to courts under section 34 of the Constitution?
• Does Regulation 3(5) violate the principle of separation of powers under section 165 of the Constitution?
• Does Regulation 3(5) constitute arbitrary deprivation of property in violation of section 25(1) of the Constitution?
• Does the absence of guidelines for the exercise of discretion under Regulation 3(5) render it unconstitutional?

Application for leave to appeal granted. Appeal dismissed. No order as to costs.

Forfeiture of foreign currency under Regulation 3(5) of the Exchange Control Regulations does not occur automatically upon seizure under Regulation 3(3), but only after the Treasury has exercised its discretion to decide whether to return the seized currency, and only after the affected person has been afforded a fair opportunity to make representations. The discretion is aimed at avoiding undue hardship or injustice. The forfeiture is civil in nature with a punitive element but does not constitute criminal punishment. Regulation 3(5) does not violate section 34 (access to courts) because the Treasury's decision constitutes administrative action subject to judicial review. It does not violate section 165 (judicial authority) because the Treasury exercises an administrative, not judicial, function. Regulation 3(5) does not constitute arbitrary deprivation of property under section 25(1). The broad discretion conferred is justified given the numerous and varied factors relevant to the decision, and administrative decisions are subject to procedural fairness requirements and substantive judicial review on reasonableness grounds. While guidelines would be prudent, their absence does not render the Regulation unconstitutional.

Mokgoro J observed that it would be prudent for the appropriate authority to formulate guidelines to assist officials in exercising the discretion under Regulation 3(5), even though the absence of such guidelines is not fatal to the constitutionality of the Regulation. The Court emphasized that officials are constitutionally bound to observe the rule of law and promote the spirit, purport and objects of the Bill of Rights in their daily operations. The public administration must be governed by democratic values and principles enshrined in the Constitution, and services must be provided impartially, fairly, equitably and without bias. The Court also noted that the purposes of forfeiture under Regulation 3(5) are threefold: (1) deterrence (sending a strong message to the person concerned and the public that unlawfully exported currency will be forfeited); (2) ensuring foreign currency is available as evidence in any criminal charge; and (3) avoiding unlawful possession being granted to anyone not entitled to it.

This judgment clarifies critical aspects of the Exchange Control Regulations regarding forfeiture of foreign currency: (1) It establishes that forfeiture is not automatic upon seizure but requires an administrative decision by the Treasury after affording the affected person a fair hearing. (2) It confirms that such forfeiture is civil (not criminal) in nature despite having punitive elements. (3) It demonstrates the limits of sections 34 and 165 of the Constitution, confirming that administrative decisions subject to judicial review satisfy constitutional requirements. (4) It provides important guidance on what constitutes arbitrary deprivation of property under section 25(1), applying the First National Bank test. (5) It clarifies that broad administrative discretions may be constitutionally valid where factors are too numerous and varied to identify in advance, provided the decision is subject to procedural fairness and substantive judicial review. The case resolved conflicting High Court decisions on the interpretation of Regulation 3(5) and provides important guidance on the intersection of administrative law, property rights, and constitutional protections.