Nyhonyha N O and Others v National Director of Public Prosecutions

The NDPP sought restraint orders under sections 25 and 26 of POCA against property held by the appellants, alleging they held property on behalf of defendants Dr Eric Anthony Wood, Mr Magandheran Pillay, and Mr Litha Mveliso Nyhonyha (the Regiments directors). The defendants were indicted on charges of corruption, money laundering, and fraud relating to services provided by the Regiments Group to Transnet and the Transnet Second Defined Benefit Fund. The Regiments Group received over R1 billion from alleged corrupt activities. The appellants included: Mrs Magdeline Sekgopi Nyhonyha (trustee of the Nyhonyha Family Trust); Mr Pillay (trustee of the Pillay Family Trust) and Ergold Properties No 8 CC (sole member: Pillay Family Trust); and three companies - Ash Brook Investments 15 (Pty) Ltd, Coral Lagoon Investments 194 (Pty) Ltd, and Kgoro Consortium (Pty) Ltd - which were subsidiaries holding assets connected to the Regiments directors. A provisional restraint order was granted by Wright J on 18 November 2019, discharged by Mahalelo J on 26 October 2020, but then reinstated by a full court on 3 May 2022, which held that the appellants' property constituted 'realisable property' under section 14(1) of POCA.

• Whether the appellants hold 'realisable property' within the meaning of section 14(1) of POCA on behalf of the defendants Mr Nyhonyha and Mr Pillay
• What constitutes 'holding' property for purposes of a restraint order under POCA
• Whether the interposition of family trusts and corporate entities prevents property from being 'held' by defendants within the meaning of POCA
• The test for determining when property formally owned by third parties is 'held' by a defendant
• Whether the liquidation of Regiments Capital affects the restraint of subsidiary company assets
• The rights of minority shareholders in entities subject to restraint orders

All three appeals (case numbers 972/2022, 973/2022, and 974/2022) were dismissed with costs, including costs of two counsel where so employed.

A defendant 'holds' property within the meaning of section 14(1) of POCA, read with section 12(2)(a), when the defendant has 'any interest' in the property, which includes situations where: (i) the defendant exercises control over the disposal of the property; (ii) has exclusive use or control over it; (iii) is the real beneficiary of the income or proceeds; or (iv) treats the property as their own - even if formal legal ownership vests in a third party such as a trust or company. The interposition of family trusts or corporate entities does not prevent property from constituting 'realisable property' where the defendant in substance controls and benefits from the property. The focus is on the functional reality of control and beneficial enjoyment, not formal legal title. For restraint order applications under POCA, the NDPP need only establish a prima facie case that property is 'held' by the defendant. Disputed factual issues are to be determined at the confiscation enquiry under section 18 of POCA following conviction, not at the interim restraint stage. The test is contextual and must be determined having regard to the totality of the circumstances, consistent with POCA's broad purpose of ensuring criminals cannot benefit from proceeds of crime through clever restructuring of their affairs.

The Court made several non-binding observations: 1. The potential misuse of family trust structures was noted, referencing Land and Agriculture Bank v Parker where Cameron JA observed that the essential notion of trust law - that enjoyment and control should be functionally separate - is frequently lacking in family trusts designed to protect property. 2. It is not necessary to demonstrate that a corporate veil should be lifted or that there has been an abuse to establish that a defendant 'holds' property under POCA. It is sufficient to show the defendant is in substance the person who controls or enjoys the property. 3. Most defendants will dispute that property they formally own is 'held' on their behalf, as will the third party who holds it. This is why POCA provides for the confiscation enquiry to be undertaken after conviction when all evidence has been heard. 4. The Court noted that sophisticated criminals will rarely permit benefits to be linked directly to them or hold realisable assets in their own names, which is why POCA deliberately casts its net widely. 5. The Court observed that one major evil POCA contemplates is the concealment by criminals of their interest in proceeds of crime, suggesting 'holding' should be given a meaning wide enough to neutralize that evil. 6. The Court commented that if legislation did not provide for preservation of assets through restraint orders, the key purpose of Chapter 5 of POCA - to ensure no person benefits from wrongdoing - could not be achieved.

This case clarifies and reinforces the broad interpretation of 'realisable property' and 'holding' property under POCA. It establishes that: 1. The use of family trusts and corporate entities does not automatically shield property from restraint orders if the defendant exercises control, use and beneficial enjoyment of the assets. 2. Formal ownership is not determinative - the focus is on substance over form, examining who actually controls and benefits from the property. 3. The Phillips test is not a closed, prescriptive list but provides guidance on factors indicating when property is 'held' by a defendant, including: control over disposal, exclusive use, being the real beneficiary, and treating property as one's own. 4. The NDPP need only establish a prima facie case for a restraint order; disputed factual issues are properly determined at the confiscation enquiry after conviction, not at the restraint stage. 5. The wide definition of 'any interest' in property under section 12(2)(a) of POCA is purposive and designed to prevent sophisticated criminals from evading forfeiture through complex structures. 6. Minority shareholders' interests are not ignored but protected through section 30(3) of POCA, which provides procedural safeguards at the realization stage. The judgment reinforces that POCA's purpose - to strip criminals of proceeds of crime - cannot be defeated by formal legal structures where the defendant retains substantive control and benefit. This is particularly important in State Capture and organized crime contexts where sophisticated financial engineering is used to hide criminal proceeds.