The National Director of Public Prosecutions v Victor N.O. and Others

The Financial Intelligence Centre (FIC) issued a directive on 5 March 2021 freezing funds in bank accounts held by Tariomix (Pty) Ltd and its directors, Mr Louis Petrus Liebenberg and Ms Magdelena Petronella Kleynhans. The NDPP alleged that the respondents operated a fraudulent Ponzi scheme involving diamonds, whereby investors were duped into paying large sums to Tariomix for the purported purchase and selling of diamonds. In reality, no diamonds were purchased and the funds were used by the directors for their own gain. On 18 March 2021, Davis J granted an ex parte preservation order under s 38 of POCA. The respondents launched a reconsideration application under rule 6(12)(c), and on 22 August 2022, the High Court (Mokose J) set aside the preservation order, finding the NDPP had failed to establish the requirements under s 38(2) of POCA. Leave to appeal was granted on 3 July 2023. Meanwhile, Tariomix was provisionally wound up on 23 February 2023, with liquidators appointed in March 2023, and finally wound up in April 2024. The estates of the directors were also sequestrated with trustees appointed. The NDPP failed to file the appeal record timeously (by 3 November 2023), only filing on 20 March 2024, causing the appeal to lapse. After the lapse, the curator bonis paid Tariomix's funds to its liquidators.

• Whether the NDPP should be granted condonation for late filing of the appeal record and whether the lapsed appeal should be reinstated
• Whether the NDPP's preservation order under s 38 of POCA should take precedence over the liquidators' statutory powers to administer the funds for creditors under the Insolvency Act
• Whether depriving investors of their rights to pursue claims through the winding-up process would constitute arbitrary deprivation of property under s 25(1) of the Constitution
• Whether the NDPP established reasonable grounds under s 38(2) of POCA that the property was proceeds of unlawful activities or instrumentalities of offences

The application for condonation and reinstatement of the appeal was dismissed with costs, including those of two counsel.

A preservation order under s 38 of POCA that has lapsed following failure to prosecute an appeal timeously is not automatically revived by noting an appeal, and the forfeiture application also lapses. Where a company subject to a lapsed preservation order has been placed under final winding-up, and investors have legitimate claims against the preserved funds, depriving those investors of their ordinary rights to pursue claims through the winding-up process would amount to arbitrary deprivation of property rights contrary to s 25(1) of the Constitution. There is no good reason to deprive investors of their rights through the liquidation process where this would place unnecessary hurdles in the path of the ongoing winding-up process. Liquidators' statutory powers to administer assets for creditors' benefit should generally take precedence over a lapsed preservation order. The NDPP retains remedies to challenge specific creditor claims through objections at creditor meetings under the Insolvency Act or by invoking POCA against specific payments where a proper factual basis for complicity is established.

The Court observed that factors relevant to condonation applications include a reasonable and full explanation for the delay and prospects of success on appeal, noting that very weak prospects may not offset a full explanation while strong merits may excuse an inadequate explanation to a point. The Court cited Hart v Pinetown Drive-in Cinema regarding the need for applications to contain adequate factual foundations, not mere conclusions: in application proceedings, the petition replaces not only the declaration but also essential evidence that would be led at trial. The Court noted that allegations without particulars or primary facts supporting conclusions are insufficient. Meyer JA indicated approval of Keightley J's reasoning in Prinsloo N.O. v NDPP regarding the relationship between preservation orders and insolvency proceedings involving Ponzi scheme victims.

This case is significant for clarifying the relationship between preservation orders under POCA and the rights of creditors and liquidators under insolvency law. It establishes that where a company involved in alleged unlawful activities has been wound up and the preservation order has lapsed, the liquidators' statutory powers to administer assets for the benefit of creditors should generally take precedence. The judgment affirms that investors' rights to pursue claims through the winding-up process are property rights protected under s 25(1) of the Constitution from arbitrary deprivation. It provides guidance on when preservation orders should not interfere with ordinary insolvency processes, particularly where innocent investors have legitimate claims. The case also reinforces procedural requirements for applications, requiring proper factual foundations rather than bare conclusions. It clarifies that the NDPP retains mechanisms to challenge specific creditor claims through insolvency procedures if evidence of complicity emerges.