Malherbe v The State

The appellant was a managing director at Eskom and was seconded to serve as the MD of PN Energy Services (Pty) Ltd (PNES), a joint venture company in which Eskom held shares. PNES provided electricity services to Khayelitsha in Cape Town. During January 2009, Eskom decided to 'decorporatise' PNES and outsource its core and non-core services during integration. The appellant acquired Energy Utility Services (Pty) Ltd (EUS) on 3 December 2008, and was at all relevant times the 100% shareholder and sole director. On 14 January 2009, the PNES board met to consider awarding contracts to EUS. The appellant declared his interest and recused himself from deliberations. The board resolved to award both contracts to EUS on the same day. These contracts, executed from 1 February 2009 to 11 February 2010, resulted in approximately R10.2 million profit to EUS. The regional court convicted the appellant of one count of fraud on the basis that he misrepresented the BEE status of EUS to the PNES board, causing prejudice to Eskom of over R10 million in lost profits, and one count of money laundering. He was sentenced to an effective 15 years' imprisonment. The regional court and high court refused leave to appeal, leading to this application for special leave.

• Whether the high court correctly refused leave to appeal to the appellant in terms of section 309C of the Criminal Procedure Act 51 of 1977
• Whether there were reasonable prospects of success on appeal against the convictions for fraud and money laundering
• Whether the state proved beyond reasonable doubt that the appellant made misrepresentations regarding the BEE status of EUS with the necessary intention to commit fraud
• Whether there were reasonable prospects of success on appeal against the sentence imposed

The appeal was upheld. The order of the high court refusing the appellant's petition for leave to appeal against his convictions and sentence in terms of section 309C of the Criminal Procedure Act 51 of 1977 was set aside and replaced with an order granting the applicant leave to appeal against his convictions and sentence to the Western Cape Division, Cape Town.

Reasonable prospects of success on appeal exist where a sound, rational basis exists for the conclusion that the appellant has prospects of success. When considering leave to appeal, the court considers whether leave should have been granted, not whether the appeal ought to succeed on the merits. Material contradictions in the evidence of a key state witness, particularly on a crucial element of the offence charged (in this case whether a misrepresentation was made with the necessary fraudulent intent), may establish reasonable prospects of success sufficient to warrant granting leave to appeal. Where a trial court finds substantial and compelling circumstances justifying deviation from prescribed minimum sentences under the Minimum Sentences Act, but imposes a sentence that does not in effect reflect such deviation, this constitutes grounds for reasonable prospects of success on appeal against sentence. A refusal of leave to appeal on petition in terms of section 309C of the CPA by two judges of a high court is appealable to the Supreme Court of Appeal with special leave.

The court noted that when granting leave to appeal, it should be careful not to influence the outcome of the appeal, and for this reason it is curtailed in dealing with the merits to only the limited extent necessary to explain its reasoning for granting leave to appeal. The court observed that the key issue centered around whether the appellant misrepresented the BEE status of EUS to the other members of the PNES board, and that another court may find that the state did not prove guilt beyond reasonable doubt on both counts. While these observations indicate the court's view of potential weaknesses in the prosecution's case, they are stated tentatively and are not binding determinations of the substantive issues that will be decided on appeal.

This case clarifies and reinforces the test for granting leave to appeal in criminal matters under section 309C of the Criminal Procedure Act. It confirms the principle established in S v Khoasasa that a refusal of leave to appeal on petition by two judges of a high court constitutes a judgment or order appealable to the Supreme Court of Appeal with special leave. The case emphasizes that the test is whether there are reasonable prospects of success, not whether the appeal ought to succeed on the merits. It demonstrates that material contradictions in key witness testimony may establish reasonable prospects of success sufficient to warrant leave to appeal. The judgment also highlights the importance of ensuring that when substantial and compelling circumstances justify deviation from prescribed minimum sentences, the actual sentence imposed should reflect such deviation. The case serves as an important precedent on the appellate court's limited role when granting leave to appeal – it should avoid influencing the outcome of the substantive appeal and should deal with the merits only to the extent necessary to explain its reasoning for granting leave.