The former manager of a hedge fund that collapsed after incurring a massive loss on a short-sell position has failed to halt his prosecution.
Marc van Veen was the director of Evercrest Capital (Pty) Ltd, which managed the Evercrest Aggressive Fund. In 2007, the fund suffered a significant collapse, losing about R146 million because of a high-leverage strategy of shorting Sanlam’s shares. This bet failed when Sanlam’s shares rose by 17% in April 2007, leading to losses of about two-thirds of the fund’s assets.
Van Veen has contended that the fund’s losses were a result of an ill-timed decision by the fund’s institutional investors to sell off its stock and liquidate it. He said if this had not happened, the investors would eventually have realised a profit.
The Financial Services Board, the predecessor to the Financial Sector Conduct Authority, laid a criminal complaint against Van Veen in March 2014, nearly six years after concluding an investigation into Evercrest and Van Veen.
Five years later, in September 2019, Van Veen made his first appearance in the Specialised Commercial Crime Court (SCCC) in Bellville.
He and Evercrest Capital were indicted on charges of fraud, alternatively various common law offences involving dishonesty. There are other changes based on contraventions of the Financial Institutions (Protection of Funds) Act, the Financial Advisory and Intermediary Services Act, and the Inspection of Financial Institutions Act.
In March 2021, Van Veen was diagnosed with a brain tumour known as a pituitary adenoma.
In February 2022, Van Veen approached the High Court in Cape Town and sought a permanent stay of his prosecution, relying on a report by his psychiatrist.
According to the report, Van Veen sustained permanent damage to his brain resulting from the brain tumour, which caused long-term disabling deficits. The report maintained that although Van Veen could understand the charges against him, he was unable to recall relevant information from 2007 and was unable to convey it logically, to formulate a proper defence and challenge evidence.
Van Veen also submitted that the pre-trial delay caused him irreparable prejudice, and he would not receive a fair trial if he were to stand trial in those circumstances.
The High Court dismissed the application in July 2023. It found that although the delay was unreasonable, Van Veen failed to show material trial-related prejudice. Regarding his medical condition, the court ruled that remedies lay under sections 77 and 79 of the Criminal Procedure Act (CPA), not through a civil application.
Read: ‘Unacceptable’ delay in prosecuting hedge fund manager, judge says
The High Court granted Van Veen leave to appeal to the SCA.
The SCA focused on three key issues. First, whether Veen’s constitutional right to a fair trial had been breached. Under sections 35(3)(d) and 35(3)(i) of the Constitution, every accused person is entitled to a trial without unreasonable delay and the ability to present and challenge evidence. Van Veen argued that the 11-year delay in the prosecution, coupled with a brain tumour diagnosed during that period, undermined these rights.
Second, whether sections 77 and 79 of the CPA (provisions designed to assess an accused person’s ability to understand court proceedings) offered a sufficient solution to address Van Veen’s medical condition.
Third, whether a permanent stay of prosecution could be granted.
Delay and right to a fair trial
The SCA examined whether the delay was linked to Van Veen’s medical condition. He claimed that a speedier process would have concluded his trial before his tumour emerged, potentially allowing him to complete any sentence by now.
However, the court rejected this, stating the delay had no link whatsoever to the onset of Van Veen’s illness.
The SCA further held that a permanent stay of prosecution is an exceptional remedy, which may be granted only where the delay is egregious and has resulted in irreparable trial-related prejudice.
The SCA found there were no facts to support Van Veen’s alleged trial-related prejudice because of the delay and therefore held that the High Court correctly found that despite the unreasonable delay in instituting the prosecution, Van Veen failed to establish that such delay caused him material trial-related prejudice.
Ruling on CPA remedies
Section 77(1) of the CPA establishes that “if it appears to the court at any stage of criminal proceedings that the accused is by reason of mental illness or intellectual disability not capable of understanding the proceedings so as to make a proper defence, the court shall direct that the matter be enquired into”. This inquiry, detailed in section 79, assesses the accused’s capacity to participate in his trial. Section 79(1) assigns this task to the head of a designated health establishment or a delegated psychiatrist for most offences, with a different panel required for serious crimes.
The SCA said that section 77 is tailored to evaluate the accused’s mental state during the criminal trial, focusing on his “triability” – the accused’s ability to follow proceedings and instruct his legal representatives. It said, “there is only one trial contemplated and that is the criminal trial”, highlighting that civil proceedings cannot accommodate this process. The court further explained that ordering an inquiry requires compelling circumstances, a mechanism exclusive to the criminal justice system.
A key advantage of sections 77 and 79 is that all relevant psychiatric reports will be considered by the SCCC. These reports could prompt an inquiry into Van Veen’s mental capacity, ensuring a thorough assessment within the criminal framework.
Van Veen contended that sections 77 and 79 did not offer a permanent solution, because they would not preclude future charges if he recovered. The court found this argument inconsistent with his claim of permanent brain damage.
The SCA affirmed that the processes provided for in sections 77 and 79 apply equally to everyone who is an accused, and where there is a legal basis for their invocation that is consistent with the interests of justice. It concluded that these provisions, not civil proceedings, are the appropriate remedy for Van Veen.
Ruling on stay of prosecution
The SCA said a fair trial balances the rights of the accused with those of the public. This fairness extends to maintaining public confidence in justice, even for non-violent crimes.
The court warned that a stay of prosecution, where it is not warranted, may become an encroachment into the terrain of the prosecutorial powers. In State v Ndlovu, the Constitutional Court emphasised the National Prosecuting Authority’s role, noting: “It is therefore incumbent upon prosecutors to discharge this duty diligently and competently.” The appeal court reinforced that victims, even of financial crimes, have a right to know why prosecutions falter, underlining the state’s duty to act.
Internationally, the court looked to Canadian precedent in R v O’Connor, where a stay is justified only in the “clearest of cases” to protect the justice system’s integrity.
The High Court found the 11-year delay “manifestly inordinate and palpably unreasonable”, a finding the SCA deemed concerning for the prosecution. Extra-curial delays – occurring outside judicial scrutiny – demand thorough explanation and proactive oversight by prosecutors.
Yet, despite the delay, no abuse of state power was evident. Citing Bothma v Els and Others, the court found strong public policy reasons to allow serious charges to proceed to trial.
A permanent stay is an exceptional remedy, requiring proof of egregious delay and irreparable trial prejudice that is “demonstrably clear (definite not speculative)”. Van Veen’s case did not meet this threshold, the SCA found.
