Mark Shuttleworth loses R250 million legal battle with SA Reserve Bank

South African-born tech entrepreneur Mark Shuttleworth has lost his battle in his landmark case against South Africa’s Reserve Bank.

In a judgement handed down today by the Constitutional Court, Shuttleworth was told that the Reserve Bank has the right to hold onto his R250 million and he will have to pay his own legal costs.

The only good news for Shuttleworth is that he won’t have to pay the legal costs for the Reserve Bank.

In October last year, South Africa’s Reserve Bank was ordered by the Supreme Court of Appeal (SCOA) to pay back R250 million to Shuttleworth, which the Bank deducted from Shuttleworth’s R2.5 billion fortune when he took his last remaining funds out of the country. The basis upon which Shuttleworth won the appeal was that the exit charge on repatriating his money amounted to an illegal tax, improperly regulated for and contravened the constitutional principle of ‘no taxation without representation’ – which SCOA agreed with, although it said that just because Shuttleworth had won it didn’t mean others automatically won the right to claim money back, mainly as Shuttleworth’s case was launched so long ago.

Taking umbrage with the judgement, the South African Reserve Bank escalated the case to the Constitutional Court in March this year, making arguments to seek leave for appeal to fight the judgement that saw Shuttleworth’s funds being returned to him. The right to appeal was eventually granted.

The Reserve Bank was asking the Constitutional Court to allow them to contest the Supreme Court of Appeals judgement. “This is an application by the Second Appellant, the Minister of Finance (“the Minister”), for leave to appeal against a judgement of the Supreme Court of Appeal (“the SCA”) handed down on 1 October 2014 under case number 864/2013,” its stated in the Reserve Bank’s heads of arguments.

In today’s judgement, the Constitutional Court both granted leave to appeal to both the Reserve Bank and Shuttleworth, who counter appealed. The following orders were made:

To put it more succinctly, the Court found entirely in the Reserve Bank’s favour, but didn’t award it costs. The irony is that the exit charge at the heart of the matter is no longer levied on transfers going out of the country.

“In the majority judgement written by Moseneke DCJ, (Mogoeng CJ, Cameron J, Jappie AJ, Khampepe J, Molemela AJ, Nkabinde J, Theron AJ and Tshiqi AJ concurring),” the Court said in its summary, arguing that the finding of the SCOA that this judgement wouldn’t affect future claims to be flawed.

“The Court granted leave to appeal in the main appeal, finding that even though the exit charge is no longer imposed, the matter is not moot because the state could be exposed to approximately R2.9 billion in potential claims if it is found that the imposition was unlawful.

“The Court further found that the exit charge was not inconsistent with the Constitution. The dominant purpose of the exit charge was not to raise revenue but rather to regulate conduct by discouraging the export of capital to protect the domestic economy.”

One judge – Justice Froneman – dissented from the majority, submitting an alternative summary in which he states that his opinion is that Shuttleworth’s claim was valid and that the appeal should have been dismissed without costs.

Ultimately, however, this is likely to be the final word on the matter. When he won the initial appeal last year, Shuttleworth had promised to use the money to set up a legal fund for cash-strapped appellants to the Constitutional Court, something which it’s assumed will no longer happen.

Shuttleworth has yet to comment on the issue.

[Image CC by 2.0/Alexandre Prokoudine]

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