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[2016] ZASCA 109
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Wingate-Pearse v Commissioner of the South African Revenue Service (830/2015) [2016] ZASCA 109; 2017 (1) SA 542 (SCA); 78 SATC 360 (1 September 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 830/2015
In
the matter between:
MARTIN
FRASER
WINGATE-PEARSE APPELLANT
and
THE
COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE
SERVICE RESPONDENT
Neutral
citation:
Wingate-Pearse v
CSARS
(830/2015)
[2016] ZASCA 109
(1
September 2016)
Coram:
LEWIS, CACHALIA, TSHIQI, THERON and WALLIS JJA.
Heard
:
26 August 2016
Delivered
:
1 September 2016
Summary:
Appeal from Tax Court – s 133(1)
of
Tax Administration Act 28 of 2011
– only decisions under
ss
129
and
130
appealable – interlocutory ruling on onus and duty
to begin not a decision in terms of
s 129(1)
and (2) –
ruling not appealable.
ORDER
On
appeal from:
Tax Court, Johannesburg
(Khumalo J sitting at first instance):
(a)
The appeal is struck off the roll.
(b)
The appellant is ordered to pay the
respondent’s costs, such costs to include those consequent upon
the employment of two
counsel.
JUDGMENT
Wallis
JA (Lewis, Cachalia, Tshiqi and Theron JJA concurring)
[1]
At the outset of this appeal we heard
argument from the parties on the question whether the decision of the
Tax Court was appealable.
Thereafter the appeal was struck from the
roll and the appellant ordered to pay the costs of the respondent
Commissioner, South
African Revenue Services (SARS) including the
costs of two counsel. The court intimated that reasons for that
decision would be
handed down later. These are those reasons.
Background
[2]
The appellant taxpayer, Mr Martin
Wingate-Pearce, submitted returns of income for the tax years ending
on the last day of February
from 1998 to 2005. In April 2006, SARS
issued revised assessments for each of those years. Once interest and
penalties were taken
into account, these amounted cumulatively to
some R41 million. Mr Wingate-Pearce objected to the revised
assessments and further
revised assessments were issued reducing his
tax liability to slightly less than R23 million. Dissatisfied
with these, he
lodged an appeal with the Tax Court in terms of s 83
of the Income Tax Act 58 of 1962 (the Tax Act). That was on 1 August
2007. This prompted further consideration of his objections to the
assessments and some downward adjustment in the form of further
revised assessments, but the accrual of interest substantially
increased his overall liability.
[3]
For reasons that are unexplained it took
until 9 February 2015 for the appeal to be set down in the Tax
Court before Khumalo
J. In the meantime a number of sections of the
Tax Act having a bearing on the issues in this appeal were repealed
and replaced
by provisions in the Tax Administration Act 28 of 2011
(the Administration Act). In terms of s 270(2)
(d)
of the Administration Act the appeal had to be continued and
determined under that Act. Prior to the hearing the parties held a
pre-trial conference at which they agreed that, while there was some
dispute over where the onus lay, the taxpayer would commence
by
leading his evidence. However, at the commencement of the hearing Mr
Wingate-Pearse’s counsel sought leave to argue a
point
in
limine
concerning the onus of proof and
the duty to commence leading evidence. The purpose underlying this
argument was to secure a situation
where SARS would have to commence
the appeal by leading its evidence.
[4]
Notwithstanding opposition by SARS, the Tax
Court permitted argument to proceed on the point
in
limine
, reserved judgment and in April
2015 handed down the following ruling:
‘
1.
The initial burden of proof lies with the Appellant to discharge the
onus that [lies] upon him in terms of s 102(1) to show that
the
decision of the Respondent against which he is appealing is wrong,
consequently the onus to establish that the return or information
he
submitted to the Respondent was correct and/or adequate remained with
Appellant;
2.
Appellant therefore has the onus to begin to adduce evidence cast
upon him as a result of the onus as in 1; he will therefore
commence
the proceedings;
3.
The burden of proof on the reasonableness of the estimate under s 95
or facts upon which the imposition of the understatement
penalty is
imposed is cast upon the Respondent. Further Respondent has the onus
to prove the requirements of s 76(1) and s 67 and
carries the
evidentiary burden in terms thereof that will follow.
4.
The Plaintiff also carries the onus and evidential burden to prove
that he did not have the intent to evade tax and therefore
the onus
to prove that the 200% additional tax should, either in part or as a
whole be remitted.’
Thereafter,
on 26 August 2015, the Tax Court granted leave to appeal to this
court in terms of ss 134 and 135 of the Administration
Act.
Appealability
[5]
SARS submitted in its heads of argument
that the decision of the Tax Court was not appealable. Initially Mr
Wingate-Pearse’s
heads of argument did not deal with the issue.
He was invited by the court to make submissions and SARS was afforded
the opportunity
to supplement its existing submissions in the light
of those furnished on his behalf.
[6]
The Tax Court is constituted in terms of
the Administration Act. As such the scope of its jurisdiction, its
powers and the ambit
of any right of appeal from its decisions are
defined in the Administration Act. It is therefore to its provisions
that we must
look to determine whether the Tax Court’s ruling
on the onus and the duty to begin to lead evidence was appealable and
not
to the statutory provisions that ordinarily govern appeals to
this court. That is clear from the provisions of s 2(3) of the
Superior Courts Act 10 of 1913.
[7]
In
terms of s 107(1) of the Administration Act a taxpayer objecting
to an assessment or a ‘decision’
[1]
is entitled to appeal to the Tax Court. The expression ‘decision’
is defined in s 101 as meaning a decision referred
to in
s 104(2) of the Administration Act. Three decisions are referred
to in that section, namely a decision not to extend
the period for
lodging an objection; a decision not to extend the period for lodging
an appeal; and any other decision that may
be objected to or appealed
against under any tax statute. None of these applied to Mr
Wingate-Pearce’s appeal, which was
an appeal against the
revised assessments issued to him.
[8]
The Tax Court’s jurisdiction is set
out in s 117 of the Administration Act. It has jurisdiction over
tax appeals lodged
under s 107 and, in terms of s 117(3), may
hear any interlocutory application, or any application in a
procedural matter relating
to a dispute under Chapter 9 of the
Administration Act, which is the chapter dealing with disputes and
appeals. Its powers in regard
to an assessment or ‘decision’
under appeal or in relation to an application in a procedural matter
referred to in
s 117(3) are set out in s 129(2), which
reads as follows:
‘
(2)
In the case of an assessment or “decision” under appeal
or an application in a procedural matter referred to in
section
117 (3), the tax court may—
(a)
confirm the assessment or “decision”;
(b)
order the assessment or “decision” to
be altered; or
(c)
refer the assessment back to SARS for further
examination and assessment.’
Conspicuously
absent from s 129(2) is any provision dealing with the Tax
Court’s powers when dealing with an interlocutory
matter under
s 117(3). No doubt this is because these involve a range of
largely procedural issues that it is commonplace
for courts to
dispose of in the course of litigation to secure the expeditious
disposal of the cases before them. There is no need
to make special
provision for a court’s powers in disposing of such procedural
issues. The absence of such an express provision
is, however, highly
relevant to the question whether any decision on an interlocutory
issue is appealable.
[9]
The right to appeal from a decision of the
Tax Court is dealt with in s 133(1) of the Administration Act,
which provides that:
‘
The
taxpayer or SARS may in the manner provided for in this Act appeal
against a decision of the tax court under sections 129 and
130.’
Section
130 deals with orders for costs and has no bearing on this case. The
issue of appealability in this case was therefore whether
the
decision by the Tax Court on the point
in limine
was a
decision in terms of s 129 of the Administration Act. If it was,
then it was appealable in terms of s 130. If not,
then it was
not appealable at all. An inability to appeal at this stage of
proceedings would not have prejudiced the taxpayer.
Any interlocutory
decision adverse to the taxpayer, will be remediable on appeal once
the Tax Court had delivered judgment and
made one or other of the
orders contemplated in s 129(2) of the Administration Act.
[10]
The argument on behalf of Mr Wingate-Pearse
was that because s 117(3) of the Administration Act provides
that the Tax Court
has the jurisdiction to deal with an interlocutory
application, and s 129(2) contemplates a decision by the Tax
Court in terms
of s 117(3), the decision by the tax Court on the
question of onus and the duty to begin was appealable.
[11]
The difficulty with that argument was that
it started at the wrong point and asked the wrong question. The
correct question was
whether the decision by the Tax Court on the
question of onus and the duty to begin was a decision in terms of
s 129 of the
Administration Act. In order to answer that
question the provisions of s 129 must be examined. In terms of
s 129(1) the
Tax Court must decide any appeal after hearing the
appellant’s appeal against an assessment or ‘decision’.
In
both instances, s 129(1) is concerned with a decision by the
Tax Court that finally resolves the point in issue, that is, the
correctness of the assessment or the ‘decision’ as the
case may be. It is not concerned with decisions on interlocutory
matters. That is a clear indication that the right of appeal may only
arise once the appeal on the merits has been finalised.
[12]
The
point is put beyond debate by a consideration of s 129(2), which
is quoted in paragraph 8 of this judgment. The section
refers to
decisions by the Tax Court in three circumstances only. These are
decisions on, firstly, an appeal in respect of an assessment;
secondly, an appeal against a ‘decision’ of the type
referred to in paragraph 7 above; and, thirdly, an application
in a
procedural matter referred to in s 117(3). A decision on
questions of onus and the duty to begin is none of these. That
it is
not a decision under s 129 is further reinforced by considering
the nature of the decisions that may be made by the
Tax Court under
s 129. These are spelled out in s 129(2) as being a
decision confirming an assessment or ‘decision’;
a
decision ordering that an assessment or ‘decision’ be
altered; or a decision referring an assessment or a ‘decision’
back to SARS for further examination and assessment.
[2]
Once again a decision on questions of onus and the duty to begin is
none of these.
[13]
Counsel for the taxpayer sought to overcome
these difficulties by treating a decision by the Tax Court on an
interlocutory matter
on the same footing as a decision on an
application in a procedural matter referred to in s 117(3). But
s 129(2) expressly
includes the latter and excludes the former.
That this is deliberate is apparent from viewing the history of these
two sections.
When the Administration Act was first enacted it
provided in s 117(3) that:
‘
The
court may hear an interlocutory application relating to an objection
or appeal and may decide on a procedural matter as provided
for in
the “rules”.’
The
reference to the ‘rules’ was a reference to the rules for
dispute resolution made in terms of s 103 of the
Administration
Act. So there were two decisions that could be made under s 117(3),
namely a decision in an interlocutory application
and a decision on a
procedural matter as provided in the ‘rules’. Section
129(2) made no reference to s 117(3).
Therefore no appeal lay
against either kind of decision under s 117(3).
[14]
The Tax Administration Laws Amendment Act
39 of 2013 amended both s 117(3) and s 129(2). While the reference to
interlocutory applications
in s 117(3) was unaltered, the
reference to deciding procedural matters in terms of the dispute
resolution rules was replaced
by the following:
‘…
an
application in a procedural matter relating to a dispute under this
Chapter as provided in the “rules”’.
At
the same time the same wording was inserted in s 129(2), thereby
rendering a decision on such an application appealable.
The probable
reason was to clarify that decisions made by the Tax Court in
resolving disputes arising under the dispute resolution
rules would
be subject to appeal. However, it left untouched the position in
respect of interlocutory applications, which was that
decisions in
such cases were not appealable. The endeavour by counsel to elide
interlocutory applications and procedural applications
under the
dispute resolution rules cannot therefore succeed.
[15]
We
were referred in the supplementary written argument on behalf of SARS
to the judgment of this court in
Sprigg
Investment
[3]
in support of the proposition that in appropriate circumstance a
decision by the Tax Court in both an interlocutory application
and an
application relating to a dispute under chapter 9 of the
Administration Act may be appealable. In my view that is incorrect
and, when the point was raised with him, counsel for SARS accepted
that this was so. That case involved a decision as to the
appealability
under s 86A of the Tax Act of an order made in an
application for the furnishing by SARS of proper reasons for issuing
certain
assessments. There the question of appealability depended on
whether that order was a ‘decision’ by the Tax Court and
the question was resolved by the application of the well-established
distinction between orders that are final and definitive of
the
rights of the parties and purely interlocutory orders.
[4]
While that reasoning remains relevant to understanding the meaning of
a ‘decision’ in terms of s 133(1) of the
Administration Act, the need to resort thereto may be limited in view
of the description in s 129(2) of the decisions that
a Tax Court
may make in considering an appeal. It may only be of relevance to the
question whether a particular order by the Tax
Court in an
application in a procedural matter referred to in s 117(3) is
appealable. But it is unnecessary to be definitive
in that regard as
the order in this case was one in an interlocutory matter in an
appeal and did not fall within the ambit of a
decision under s 129.
[16]
The
decision by the Tax Court was accordingly not appealable in terms of
the Administration Act. In any event it would not have
been
appealable if the conventional criteria for identifying decisions
that are subject to an appeal were applied.
[5]
The reason is that such decisions must be final decisions
incapable of being altered during the course of the proceedings.
If
the judge may alter a decision it lacks the necessary requirement of
finality and cannot dispose of any issue in the case. That
the
decision in this case on the onus of proof and the duty to begin was
alterable is apparent from the fact that it was made in
terms of
Uniform Rule 39(11), which reads:
‘
Either
party may apply at the opening of the trial for a ruling by the court
upon the onus of adducing evidence, and the court after
hearing
argument may give a ruling as to the party upon whom such onus lies:
Provided that such ruling may thereafter be altered
to prevent
injustice.’
The
judge quoted this rule in her judgment, but crucially omitted the
proviso. That makes it clear that her order was susceptible
of
alteration. Accordingly it was not an appealable order on
conventional principles.
[17]
For those reasons therefore, after hearing
argument on the point of appealability the court ordered that:
(a)
The appeal is struck from the roll;
(b)
The appellant is ordered to pay the
respondent’s costs, such costs to include those consequent upon
the employment of two
counsel.
________________________
M J D WALLIS
JUDGE
OF APPEAL
Appearances
For
appellant: A Katz SC (with him D West)
Instructed
by: KWP Attorneys, Randburg,
Symington
& De Kok, Bloemfontein
For
respondent: J J Gauntlett SC (with him H G A Snyman SC)
Instructed
by: Mahlangu Attorneys, Pretoria,
Lovius
Block, Bloemfontein.
[1]
In
the Administration Act the word ‘decision’ is enclosed
in inverted commas when it is referring to the type of decision
that
is defined in s 104(2) and I will follow that usage in this
judgment.
[2]
There
may be a
lacuna
in
this provision in that it fails to make provision for an order where
the appeal concerns an application in a procedural matter
referred
to in s 117(3), but that does not affect the present case.
Inferentially the Tax Court must be able to make an
appropriate
decision in such matters.
[3]
Commissioner,
South African Revenue Service v Sprigg Investment 117 CC t/a Global
Investment
[2010]
ZASCA 172; 2011 (4) SA 551 (SCA).
[4]
Hassim
v Commissioner, South African Revenue Service
[2002]
ZASCA 40
;
2003 (2) SA 246
(SCA) paras 10 and 11.
[5]
Reference
need only be made to the criteria stated in
Zweni
v Minister of Law and Order
[1992]
ZASCA 197
;
1993 (1) SA 523
(A) at 535G-J and
Grancy
Property Ltd and Another v Seena Marena Investment (Pty) Ltd and
Others
[2014]
ZASCA 50
;
[2014] 3 All SA 123
(SCA) paras 12-16. See also
s 17(1)
of the
Superior Courts Act 10 of 2013
.