Shuttleworth loses court bid but scores points with judge

Mark Shuttleworth has failed in his bid to set aside a levy of more than R250m he paid to get some of his assets out of South Africa in 2009, but the South African-born entrepreneur did win some points, according to a report in Business Day

He also failed to persuade the North Gauteng High Court to declare unconstitutional the legal provision providing for the imposition of the levy.

Mr Shuttleworth had assets of more than R4.27bn in South Africa when he emigrated in 2001, but transferred them in 2008 and 2009, each time paying a 10% levy imposed by the Reserve Bank.

However, Mr Shuttleworth obtained an order from the court declaring section 9(3) of the Currency and Exchange Act unconstitutional and invalid. This section allowed the president to suspend in whole or in part, by regulation, any act inconsistent with the provisions of the Currency and Exchanges Act relating to banking, exchange and currencies. The section was struck down, subject to confirmation by the Constitutional Court.

Judge Francis Legodi said the provision should not have been allowed to stay on the statute book for so long. He said the provision had the potential to unravel the healed wounds of the past when laws were changed at the stroke of a pen by individuals.

"This can never again happen in a constitutional and democratic South Africa," Judge Legodi said.

Mr Shuttleworth also succeeded in declaring as unconstitutional and invalid a number of exchange control regulations. The most important of these is regulation 19(1), which allows an official to demand information relating to exchange control and currency matters and which empowers officials to enter homes or business premises to inspect books and documents without a warrant.

However, Judge Legodi suspended the declaration of unconstitutionality of these regulations for 12 months to enable the president, the Reserve Bank and the finance minister to correct the cause of the unconstitutional invalidity.

Webber Wentzel associate Benjamin Cronin said the judgment showed why the Bank and the Treasury would continue to have problems with the empowering provisions for exchange controls.

"While the government has won an important victory, the court has shown that new legislation needs to be developed," Mr Cronin said.

"Both the Currency and Exchanges Act as well as the exchange control regulations, remain potentially fertile terrain for future legal challenges beyond merely those provisions which the court was considering".

Mr Shuttleworth lost his bid to declare unconstitutional the exchange control regulations as a whole. The court also did not declare unconstitutional the Bank’s policy of dealing with the public in respect of exchange control matters only through banks appointed as authorised dealers.

Judge Legodi said issues that were raised were very important and of a constitutional nature, and that all the parties had substantially succeeded.

He ordered that each party pay its own costs.