Van der Merwe and Another v Inspector Taylor and Others

On 13 July 2004, Mr Gary Walter van der Merwe (first applicant) was arrested at Cape Town International Airport carrying €130,000 and US$21,249 in foreign currency. He was arrested for suspected contravention of Exchange Control Regulation 3(1)(a). Mr van der Merwe explained he was carrying the currency on behalf of a group of 12 people (8 adults and 4 children) travelling together to Las Palmas for a yachting vacation. Of the Euros, €20,865 was his personal travel allowance purchased on his Nedbank credit card; the balance was obtained using the permissible travel allowances of other group members who had already departed. The currency was seized by the South African Police Service (SAPS). SARS subsequently issued a section 99 notice of the Income Tax Act appointing the investigating officer as agent and took possession of the currency. The applicants instituted urgent proceedings for return of the currency, initially on the basis of spoliation, later changing to a vindicatory action (rei vindicatio) based on ownership. The High Court dismissed the application. The full court dismissed the appeal, finding the applicants had not proved ownership. No replying affidavits were filed by the applicants.

• Whether the case raises a constitutional matter warranting leave to appeal to the Constitutional Court
• Whether Mr van der Merwe established ownership of the €130,000 seized
• On what legal basis the state seized and continued to hold the foreign currency
• Whether the state was entitled to continue holding the currency pending criminal trial
• Whether the respondents' conduct violated sections 1 and 195 of the Constitution
• Whether Exchange Control Regulation 3(5) permits arbitrary deprivation of property contrary to section 25(1) of the Constitution
• The proper interpretation and application of section 20 and section 31(1)(a) of the Criminal Procedure Act
• The requirements for a successful rei vindicatio claim
• Whether the rei vindicatio is determined by facts at the time proceedings are instituted

Application for leave to appeal granted but appeal dismissed with no order as to costs. The majority held that the applicants established ownership only of €20,865 but that the respondents were entitled to continue holding it pending criminal proceedings as determined by the factual position when the action was instituted on 15 July 2004.

The binding principles established are: (1) A vindicatory action (rei vindicatio) requires proof of ownership, existence and identifiability of the thing, and possession by the defendant at the time proceedings are instituted. (2) A vindicatory action must be determined on the factual situation existing at the time the action is instituted, not on subsequent developments or events. (3) Where an applicant in a vindicatory action makes sworn statements disavowing ownership and asserting he holds property on behalf of others, he cannot later contradict those statements to establish ownership. The applicant must stand or fall by factual averments in founding affidavits. (4) Where property is lawfully seized under section 20 of the Criminal Procedure Act in connection with suspected criminal offences, and criminal proceedings are contemplated, the state is entitled to continue holding the property if it may be required as evidence or for purposes of a court order, as contemplated in section 31(1)(a) of the CPA. (5) The fact that property was purchased with an applicant's own funds does not necessarily establish that the applicant is the owner if the circumstances and conduct indicate an intention that ownership vest in others.

Mokgoro J observed that: (1) Respondents' vacillating positions on the legal basis for seizure created grave legal uncertainty and was contrary to the high standards of ethical, accountable public service required by sections 1 and 195 of the Constitution, though this was not determined as a self-standing cause of action. (2) Section 25(1) protects all rights in relation to property, including ownership, against arbitrary deprivation. (3) Ownership, though the most comprehensive real right, is not absolute and is subject to lawful limitations. O'Regan J observed that: (1) Section 195 of the Constitution is of profound importance but it is unclear whether it gives rise to an independent cause of action or only informs other causes of action. (2) Complex common law issues should ordinarily be determined first by the Supreme Court of Appeal, not by the Constitutional Court as a court of first and final instance. (3) The maxim ex turpi causa non oritur actio may have application where an applicant appears prima facie to be in breach of exchange control regulations. (4) It is an open question whether the scheme of chapter 2 of the CPA (sections 30-36) contemplates that a vindicatory action outside the statutory scheme may be launched for return of articles seized under section 20. Sachs J observed that an accused person "cannot have his cake and eat it" by purporting to carry currency on behalf of others to explain large amounts in his possession, then seeking to backtrack by claiming sole ownership.

This case is significant for: (1) clarifying the requirements for a successful rei vindicatio claim, particularly the burden of proof on ownership; (2) establishing that a vindicatory action must be determined on the basis of facts existing at the time proceedings are instituted, not subsequent developments; (3) addressing the interaction between seizure under section 20 of the CPA and the rei vindicatio remedy; (4) discussing the proper role and standards of conduct expected of state organs under sections 1 and 195 of the Constitution; (5) addressing difficulties in applying the rei vindicatio to money and foreign currency; (6) illustrating the importance of clear and consistent pleadings and the consequences of changing legal bases during litigation; (7) demonstrating the principle that litigants are bound by their choice of remedy and factual averments in their founding affidavits. The case also highlights tensions between property rights protection under section 25(1) and criminal law enforcement powers.