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[2010] ZAGPPHC 170
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Commissioner for the South African Revenue Service v Metlika Trading Limited and Others (20827/2002) [2010] ZAGPPHC 170; 72 SATC 241 (5 August 2010)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT, PRETORIA)
CASE
NO: 20827/2002
DATE:
05/08/2010
In
the matter between:
THE
COMMISSIONER FOR THE SOUTH AFRICAN REVENUE
SERVICE
..................................................................................................
Plaintiff
And
METLIKA
TRADING
LIMITED
..............................................................
First
Defendant
BEN
NEVIS HOLDINGS
LIMITED
......................................................
Second
Defendant
TALACAR
HOLDINGS (PROPRIETARY) LIMITED
.........................
Third
Defendant
DAVID
CUNNINGHAM
KING
................................................................
Fourth
Defendant
HAWKER
AIR SERVICES (PROPRIETARY) LIMITED
....................
Fifth
Defendant
CARMEL
TRADING COMPANY
LIMITED
...........................................
Sixth
Defendant
JUDGMENT
LEDWABA,
J
[1]
This judgment is in respect of the issues which will be dealt with
hereunder which involve the plaintiff (SARS) and the first
and second
defendants (Metlika and Ben Nevis). The remaining defendants in this
action are not parties to the issues to be decided
which involve
SARS, Metlika and Ben Nevis.
[2]
In the action against proceedings the third defendant who was
represented by Mr. Slomowitz SC, who also represented Metlika
and Ben
Nevis, the parties agreed that proceedings would be stayed and
separated from the issues to be decided.
[3]
Regarding the fourth defendant, on 28 May 2000 the court made the
following order:
"1.
The proceedings in relation to the issues arising from paragraphs 3,
7,
8,
9, 13.1 and 13.3 in so far as this refers to the 4
th
defendant of the particulars of claim read with prayers 2 to 4 of the
particulars of claim and the corresponding paragraphs of
the
defendants plea be stayed and postponed sine die until the
proceedings relating to the remaining issues arising from the
pleadings
have been disposed of."
[4]
Regarding the action proceedings against the fifth and sixth
defendants a draft order which the other parties did not object
to
the contents thereof was made an order of the court, on 2 June 2008.
The contents of the said order read as follows:
"1.
The separate corporate personality of the sixth defendant be
disregarded and that it be decided that the partnership interest
held
by the sixth defendant in the Hawker Aviation Services Partnership,
and all claims of the sixth defendant against the said
partnership,
should be regarded to be assets of the fifth defendant;
2.
There
exists a loan claim against the Hawker Aviation Services Partnership
in the amount ofr167, 843, 024;
3.
The
aforesaid loan account belongs to the fifth defendant."
[6]
The sixth defendant was not represented in court and was not a party
in the issues involving SARS, Metlika and Ben Nevis to
be decided
herein.
[7]
Before the trial could start the court had to first deal with some
interlocutory applications. When the trial commenced, 12
files
containing about 5200 pages were handed to the court, by agreement as
the trial bundles. Mr. Van der Meerwe SC representing
the plaintiff
and Mr. Slomowitz SC agreed that the contents of the documents in the
files are to be regarded as:
(i)
authentic
and that they are what they purport to be,
(ii)
insofar
as they bear dates, such dates were brought into being on the said
dates,
(iii)
insofar
as they are correspondence or file notes, they were written by the
persons who purported to write them,
(iv)
insofar
as they are correspondence were sent on the dates that they purport
to bear and were received in the ordinary course,
(v)
Insofar
as they purport to be agreements or resolutions, were entered into or
taken on the dates, which they purport to bear.
(vi)
insofar
as they purport to be the minutes of meetings they are of the
meetings which were held on the dates which they purport to
bear, and
(vii)
they
are not proof of the truth of the contents.
[7]
It was further agreed that any party may at any time, whether in the
course of evidence or during argument, refer to any document
contained in the trial bundles and not objected to as aforesaid even
though it has not been identified or otherwise referred to
by any
witness.
[8]
SARS's case was based on the documentation in the trial bundles and
it did not call on any witnesses to testify under oath.
Plaintiff
closed its case after addressing the court logically and in detail
regarding the contents of the documents. The defendants
called one
witness, Mr. David John Mahoney, (Mahoney), to testify and thereafter
they closed their case.
[9]
It is common cause that during December 2000 and January 2001 Ben
Nevis transferred most of its assets to Metlika.
[10]
SARS submitted that the alleged transfer was done with the intention
common to Metlika and Ben Nevis of dissipating the assets
of Ben
Nevis to defraud SARS who is the creditor of Ben Nevis. The order
sought by SARS is the lifting of the corporate veil of
Metlika or
alternatively the reversal of the transfers in terms of the
actio
Pauiiana.
BACKGROUND
[11]
It is important to briefly set out the factual background in this
matter which is common cause to the parties for the proper
understanding of the issues and the adjudication of this matter. I
will start with the
curricuium
vitae
of
the fourth defendant.
[12]
David Cunningham King (King) was born in Scotland. He studied in
Scotland and became a fellow of the Financial Management Institute.
He came to South Africa in 1987 and thereafter started his own
financial risk management consultancy business. His business was
one
of the top risk management consultancy in South Africa and it advised
treasuries of big companies like Anglo America and parastatals
like
Telkom. In 1990 he created, Republic Rating (Pty) Ltd, a rating
agency to report on credit worthiness of companies. The said
company
was one of the assets of Ben Nevis. Suffice to state that the manner
in which King formed various companies, structured
then and sold
their shares is a clear indication that he had in-depth knowledge in
the formation of companies and in risk management
of companies.
[13]
On the advice of A & R Corporation Finance CC, King restructured
his financial affairs and in 1993 created an offshore
trust in
Guernsey, viz Caledonian Trust. Ben Nevis was registered in the
British Virgin Island in 1993, it was owned by Caledonian
Trust and
it was designed to have several subsidiary companies. It was
incorporated by Bermuda Trust Company Limited at the request
of
Bermuda Trust. Ben Nevis was administered by Bermuda Trust which
conducted trusteeship of Caledonian Trust.
[14]
The Trust Deed stated that the forum for the administration of
Caledonian Trust is the Island of Guernsey. The person who
established the trust who is referred to in the Trust Deed as a
'settlor
1
is King's mother. Mahoney in his testimony said trustees in
performing their duties could consider what is said in a so-called
'Letter of Wishes' and could ask for guidance from the beneficiaries.
The trust only held 100% shares and loan account in Ben Nevis.
The
discretionary beneficiaries of Caledonian Trust were King, his wife,
his children and his mother. The trustees of Caledonian
Trust were
Bermuda Trust.
[15]
Another similar trust that was formed by King in September 1996 in
Guernsey is Glenco Investments Trust. The company that owned
all its
assets was Rossenfield Holding Limited. The trustees of Glenco
Investments Trust were Fairburn Reads Trust Company Limited,
see
Bundle 11 page 196 and Bundle 9 page 425.
[16]
King established various companies in South Africa as subsidiaries of
Ben Nevis. One of the said subsidiaries was a company
known as
Specialised Outsourcing Limited (SOL) which was listed on the JSE on
29 October 1997, transactions and events thereof
will be dealt with
latter.
[17]
King was authorised by Ben Nevis in + 1997 to list SOL on the JSE in
South Africa on its behalf. Ben Nevis was a 71% shareholder.
Share
prices of SOL was listed at R1. 20 and within one year the share
price increased to R80.
[18]
In February 1998 King requested a mandate from the directors of Ben
Nevis to sell 1.8 million shares, part of SOL's shares,
for R22 500
000 even though he had already signed the sale document which,
according to him, would be acceptable in South Africa
since the Ben
Nevis was regarded as his company. See Bundle 11 page 236.
[19]
From March 1998 King marketed and sold the bulk of SOL shareholding
of the Ben Nevis at a profit exceeding R1 billion.
Ex
facie
the
documents in the trial bundles, officials of Bermuda Trust knew or
should have known that King was selling shares in SOL because
they
received some millions of rands from the share brokers in South
Africa and King further instructed/indicated to them how the
funds
were to be invested. Interestingly, some of the proceeds of sale of
SOL shares of the Ben Nevis were banked in a personal
account of
King's in South Africa. The money in King's account was also used to
buy personal assets like cars, paintings and immovable
properties.
Two of the stands were registered in the name of a company known as
Talacor (Pty) Ltd (the third defendant) a subsidiary
of Ben Nevis.
[20]
In February 2000, Mahoney received information regarding the
transactions made by King with the proceeds of the sale of the
shares. According to the affidavit of Mahoney in the application to
the Tax court, King was not satisfied with the services rendered
by
Bermuda Trustees and he instructed Bermuda Trustees to transfer
assets of Caledonian Trust to Glenco Trust Investments. Bermuda
Trust
resolved to act upon the said request. See Bundle 9 pages 242-245.
[21]
In February 2000, the trustees of Glenco Trust, Fairburn Read Trust
Company Limited, took over assets of Caledonian Trust which
included
shareholding in Ben Nevis. On instructions of King, Caledonian Trust
was liquidated and the liquidation thereof was finalised
by the end
of February 2000.
[22]
Bermuda Trust managed to convince and persuade King to instruct them
again for the management of Glenco Trust which now owned
Ben Nevis
concomitantly the control of Rossenfeld Holding Limited was also
under Bermuda Trust.
[23]
The structure in a document, viz The DK Structure, discovered by the
defendant on page 1 of Bundle 11 shows the structure of
the Glenco
Trust and other subsidiary companies related to it.
[24]
In November 2000, SARS official directed some enquiries to King in
respect of the profits made by Ben Nevis on the sale of
SOL's shares
and also in respect of King's assets purchased with the funds
originating from the sale of Ben Nevis's shares in SOL
which assets
were registered in King's name and in the names of companies which
were subsidiaries of Ben Nevis. Some letters were
exchanged between
SARS and King on the aforesaid issues. SARS was not content with the
responses and information furnished by King.
[25]
In September 2000, SARS informed King that Ben Nevis was registered
as a taxpayer and it should submit its returns for the
years 1998,
1999 and 2000. At the same time King was informed by SARS that he was
appointed as the representative taxpayer for
Ben Nevis.
[26]
On the 18 October 2000 when King enquired from the officials of
Bermuda Trust if Caledonian trust was 'dead' he was told that
it was
'dead'. He further wanted to know exactly what each entity held as
the South African tax man was looking into his holdings
in Ben Nevis.
It is clear from the trial bundle his intention was to get rid of Ben
Nevis and have all the assets transferred to
Rossenfeld, see file
note of Bermuda Trust in Bundle 12 page 401.
[27]
Bermuda Trust on about 6 November 2000 informed King that they are
prepared and willing to comply with his request to transfer
the
assets of Ben Nevis into another entity however, an independent tax
advice was required (See: Bundle 12 page 409).
[28]
Two senior officials of Bermuda Trust came to visit King in South
Africa on 21 November 2000, in order to discuss with him
the
restructuring of the Glencoe trust. King, at that occasion, was
advised by these officials rather to transfer the Ben Nevis
assets
into a new entity and not into the other existing subsidiary company
of the Glencoe Trust, being Rossenfeld (which was by
then the owner
of a large quantity of shares in a company listed on the JSE by now,
known as Specialised Insourcing, previously
known as Legacy Ventures
- being the new company of which King became the CEO after resigning
from SOL).
[29]
On or about 7 December 2000 Bermuda Trust purchased a shelf company
registered in the British Virgin Islands for Glencoe Trust,
for the
purpose of being the new entity into which the Ben Nevis subsidiaries
in South Africa should be transferred. The shelf
company was
ultimately registered as Metlika Trading Limited, the first defendant
herein.
[30]
King insisted that the assets of Ben Nevis should be transferred to
the new entity before the end of December 2000 as a delay
in doing
this would cause it to be a pointless exercise.
[31]
During December 2000 instructions were given by Bermuda Trust to the
auditor of the South African subsidiary companies of Ben
Nevis to
transfer its shareholdings in those companies to Metlika as a matter
of urgency.
[32]
During December 2000 steps were also taken by Bermuda Trust to
arrange for the transfer of other assets of Ben Nevis (not held
in
South Africa) to Metlika, including a house in Scotland registered in
the name of Ben Nevis and in which house King's mother
resided free
of charge.
[33]
Officials of Bermuda Trust were instructed by their top management to
report back to King (who was on holiday in Plettenberg
Bay) during
December 2000 as to the progress being made with the "very very"
urgent transfer of the assets out of Ben
Nevis. King was updated on
22 December 2000, by Mr Bourgourd.
[34]
On the 15 January 2001 the auditor appointed by Ben Nevis to transfer
the assets of Ben Nevis to Metlika, Mr Jensen of RW Irish
Alliot
auditors, informed SARS that the South African subsidiaries of which
he was the auditor were owned by Ben Nevis, despite
him having had
instructions for quite some time from Bermuda Trust to transfer the
assets urgently into the name of Metlika.
[35]
The assets listed in paragraph 5 of the particulars of claim,
excluding the asset in 5.6, were transferred to Metlika on 16
January
2001 when Jensen entered the transfers in the share registers. Blair
Atholl Farm (Pty) Ltd had a different auditor and
was not dealt with
on that date.
[36]
During the beginning of 2001 further assets of Ben Nevis (held in
foreign countries) were transferred from Ben Nevis to Metiika.
[37]
In some instances Bermuda Trust stated to third parties involved in
the transfers, that the transfers are without compensation,
that the
beneficial owner remains the same and that it is a transfer of
ownership
"only
in name".
In
one case, it was stated that the principal beneficiary of the trust
which is the common shareholder, is King.
[38]
Various assets including those not held in South Africa and those in
paragraph 5 of plaintiffs particular's of claim, except
assets in
paragraph 5.6 were transferred to Metiika by Bermuda Trust.
[39]
On 1
st
November 2001 SARS informed King that an enquiry in terms of
section
74(c) of the Income Tax Act 58 of 1962
to
investigate his affairs had to be held. The enquiry took place on
28
th
,
29
th
and 30
th
January 2002.
[40]
At the aforesaid inquiry in terms of section 74C, which took place on
28, 29 and 30 January 2002, King testified about
inter
alia,
the
circumstances and intentions with which SOL shares were acquired and
sold by Ben Nevis, as well as the relationship between
Ben Nevis,
King and the Caledonia Trust. Kind did not give SARS a true picture
of the other offshore structures.
[41]
SARS issued assessments against Ben Nevis in February 2002 and it
could not use the opportunities available to it in law, it
to recover
monies due to it by Ben Nevis.
EVALUATION
OF THE MATTER
[42]
Based on the trial bundles, evidence of Mahoney and submissions by
the parties' counsel the court should now determine if the
transfer
of assets from Ben Nevis to Metlika was done with dishonesty or
improper motive to frustrate SARS from getting tax monies
due by Ben
Nevis and to determine if the relief sought by SARS is justified.
[43]
During arguments, Mr. Slomowitz SC submitted that in December 2002
Ben Nevis had assets in excess of £96 million. It
was therefore
not necessary for SARS to pursue the relief sought.
[44]
Mahoney testified that the transfer was done in good faith and it
was not gratuitous. In my view, whether the transfer was
gratuitous
or not should not detract the main issue being whether the transfer
was made dishonestly and with the aim to hamper
SARS from claiming
tax from Ben Nevis.
[45]
SARS should prove on the balance of probabilities that it is
entitled to the relief it seeks.
[46]
Mr. Slomowitz SC further submitted in the defendants heads of
argument that Bermuda Trust and its employees had no idea whatsoever
in December 2000 that in February 2002 SARS would seek to raise tax
assessment against Ben Nevis. He further argued that Ben Nevis
was
incorporated in the British Virgin Islands which is a tax-free
jurisdiction, there was therefore no reason for the trustees
to think
that Ben Nevis was to pay SARS any tax. However, he conceded that the
officials of Bermuda Trust should have investigated
if Ben Nevis was
a tax payer in South Africa. He further argued that because of their
failure or negligence, the officials should
not be regarded as being
knave. However, Mr. Mahoney testified that Bermuda Trust appreciated
that Ben Nevis's subsidiary companies
which operated businesses in
South Africa would be liable to pay tax in South Africa.
[47]
I think the officials of Bermuda trust knew or should have known
that there were tax liabilities for the assets of Ben Nevis
situated
in other countries. They were informed by King about the issue of tax
on Ben Nevis before Ben Nevis assets were transferred
to Metlika.
[48]
The defendants used the contents of the letter of Mr. Charles Steward
to support their submission that they did not know that
Ben Nevis was
liable to pay tax in South Africa see bundle 12 page 478. However, in
my view, the letter of Charle's Steward does
not assist the
defendants because he
clearly
stated that: "..
.it
wiii enable us to identify
more
precisely
the tax liability of those assets in the jurisdiction where they are
situated."
own
underlining. Of importance is also that the letter was typed after
the transfer of assets from Ben Nevis to Metlika had commenced.
[49]
On careful analysis of the trial bundles compared to the evidence of
Mahoney, officials of Bermuda Trust allowed King to be
involved in
matters involving Ben Nevis and to a great extent complied with his
instructions on activities of Ben Nevis. Furthermore,
there was no
proper financial accounting on Ben Nevis, see Bundle 11, page 40.
[50]
During the arguments, it was submitted on behalf of Ben Nevis that
Bermuda Trust did not have full control over Ben Nevis.
However, it
is, in my view, clear from the documents in the trial bundle that
Bermuda Trust agreed and condoned that King could
act as a director
of Ben Nevis, see Bundle 11, pages 188-190.
[51]
The transfer of assets of Ben Nevis to Metlika, on King's
instruction, on urgent basis was in my view, to create a 'blind
alley'. King knew SARS was investigating Ben Nevis for tax. Mahoney's
testimony that one of the reasons why Ben Nevis assets were
transferred was to reduce a risk that SARS could attract assets on
Ben Nevis for King's debts is, in my view, not convincing and
on the
contrary it is an indication that Bermuda Trust knew that SARS was
investigating Ben Nevis for tax. Bermuda Trust allowed
King to meddle
with the affairs of Ben Nevis so that taxation could be evaded.
[52]
Of importance, in Bundle 12 on page 522 in the email from Mr. Steve
Bougard to Mr. Adrian Fairbourn dated 9 March 2001 it is
recorded:
.we
are re-structuring Ben Nevis, to stop the South African taxman in his
tracks. To "kill two birds with one stone",
we are also
liquidating ail investments, as he wishes to take stock, consolidate
his position and think thru' his strategy going
forward. What are we
doing is selling ail investments in the name Ben Nevis,...
As
investments are sold, they are transferred back up to the Glencoe
Trust and transferred back down to a subsidiary company Metiika,
this
making a clean break in Ben Nevis. The other assets namely a property
and shares Murray Sport are being re-registered in the
name of
Metiika. Once the process is complete, Ben Nevis will be allowed
lapse."
[53]
The aforesaid in my view, clearly show that the transfer of assets
was to stop SARS from tracing and attaching assets of Ben
Nevis for
tax purposes.
[54]
Bermuda Trust knew that Ben Nevis sold its shares in South Africa and
made a profit of about R1,2 billion. It is also trite
that Ben Nevis
further purchased numerous shares on the Johannesburg Stock Exchange
and sold them for profits and this happened
over a period of about
two years. Bermuda Trust knew that the aforesaid transactions were
done in South Africa and Ben Nevis made
huge profits. The evidence of
Mahoney why Bermuda Trust thought was not liable to pay tax is not
convincing.
[55]
Knowledge of Bermuda Trust about the reason for the
transfer
of Ben Nevis assets is clear from the contents of a Memorandum from
Steve Bougourd to Dave Hewitson dated 15 November 2000
with the
heading "David King-overview of structure (in preparation for
meeting scheduled for 21 November in South Africa)."
See bundle
12, page 422 paragraphs 1-3 thereof read as follows:
"With
Glencoe Investment Trust at the "head", the Trust wholly
owns two underlying companies, Ben Nevis and Rossenfeld
(BVI
companies). The attached schedule and fax to DK summarises the assets
held and the difficulties the company has faced in maintaining
accurate records. In short, we believe that DK on behalf of Ben
Nevis, and without authority has "purchased" assets,
which
include a vineyard, a plane, game ranches and probably more. Clearly,
we need to establish what assets are held in the name
of Ben Nevis,
any other assets held within the structure procure supporting
documentation. Depending on the nature of the documentation,
we can
on a case by case basis, prepare minutes authorising DK to sign on
behalf of Ben Nevis, and/or provide Nominee Agreements
(declaring
that DK "purchased" for and on behalf of the Company).
Where necessary we may need to seek legal advice.
Apparently
DK wishes to "dismantle" current structure and transfer the
assets of Ben Nevis into a new Company, as the
lax authorities are
chasing him". To do that, we obviously need to ascertain the
assets held and to ensure that ownership
is properly formalised.
Secondly, we would require tax advice in support of the proposed
structure.
DK
is either reluctant or simply oblivious to the implications of
relinquishing control over the assets. From his point of view
maintaining the integrity of the structure should be paramount,
keeping management and control at arms length will only safeguard
his
interests. From Bob's perspective, we are not protecting the
interests of the directors nor are we satisfying our fiduciary
obligations as Trustees. The risks are clear and it should be
strongly emphasised to DK that we have to put our house in order
before we move forward."
[56]
Furthermore, in page 427 of bundle 12 in the recorded
'summary
of the meeting' with King, the following was also noted:
"With
regards to Ben Nevis, DK still wants this to be closed and the assets
'transferred' to a new company. At our suggestion
he agreed that
Rossenfeld Holdings Limited should be used purely as a vehicle for
holding shares in Legacy Ventures (shortly to
be re-named financial
Insourcing). Rossenfeld owns 49,712,544 shares of Legacy through BOE
in two accounts - Rossenfeld itself
and a Rossenfeld 'consortium'
account. Contact Vanessa Soal at BOE (27113776415) to get
confirmation.
DK
will provide statements on the Old mutual portfolios and asks that we
have these held through the new underlying company rather
than direct
by the Trust.
DK
advised that the various assets bought by Ben Nevis were funded by
Ben Nevis bank accounts in S.A. which DK had signing powers
on.
Query: Do we know where these accounts were/are and have we got
statements? If not DK should provide these, and they should
be
requested.
DK
has no tax adviser but is happy there is no problem from his point of
view in closing the Ben Nevis company. His intention is
just to
present a blind alley to any revenue investigation. HRC advised him
Ben Nevis will probably need legal advice as to how
best to
'transfer' its assets. DK is happy to pay for this work but needs a
proposal from us as to what the cost will be prior
to work being
done. He would like to have this ail done before 8/12/00 when he goes
away on holiday (back on 15/1/01).
Overall
the meeting was extremely useful. DK acknowledges that as directors
and Trustees we have had inadequate control and knowledge
of 'his'
affairs but that this suited him at the time; He also commented that
prior to Dave Mahoney no-one seemed interested. We
assured him we are
now very interested and are looking to establish a close working
relationship with him. It was agreed we will
meet again in
February.
At this time the new structure will be in place together with new
agreed fees.
Arrange
incorporation of new company and 'transfer' of Ben Nevis assets. This
must be at least underway by 8/12/00 or at best complete.
Can Charles
Stewart advise on how best to achieve this? Share/Asset swap?"
[57]
The aforesaid is another clear indication that Bermuda Trust did not
do the transfer of assets of Ben Nevis in good faith.
[58]
In
Cape
Pacific Ltd v Lubner Controlling Investments (Pty) Ltd
[1995] ZASCA 53
;
1995 (4) SA
790
AD (Cape Pacific Ltd case)
on
page
803G-804A the court said:
"It
is undoubtedly a salutary principle that our Courts should not
lightly disregard a company's separate personality, but
should strive
to give effect to and uphold it. To do otherwise would negate or
undermine the policy and principles that underpin
the concept of
separate corporate personality and the legal consequences that attach
to it. But where fraud, dishonesty or the
improper conduct (and I
confine myself to such situations) is found to be present, other
considerations will come into play. The
need to preserve the separate
corporate identity would in such circumstances have to be balanced
against policy considerations
which arise in favour of piercing the
corporate veil (cf Domanski 'Piercing the corporate Veil-A New
Direction'
(1986) 103 SALJ 224).
And a court would then be entitled
to look to substance rather than form in order to arrive at the true
facts, and if there has
been a misuse of corporate personality, to
disregard it and attribute liability where it should rightly lie.
Each would obviously
have to be considered on its own merits."
[59]
Bermuda Trust allowed King for too long, about seven
years,
to have a say and to instruct them how to operate Ben Nevis. Their
conduct of the affairs of Ben Nevis was undoubtedly improper,
to say
the least.
[60]
The trial bundle clearly show that Bermuda Trust was not concerned
about how King meddled with the affairs of Ben Nevis. They
wanted to
satisfy King's demands and to earn fees, see Bundle 13, pages
522-527.
[61]
In my view, Metlika was based as a facade to hide the tax liability
of Ben Nevis from SARS, see
Cape
Pacific Ltd case
on
page 804 paragraphs
C-E.
[62]
Mr. Slomowitz further argued that Ben Nevis had assets worth about
£96 million and it was not necessary for the court
to pierce
the corporate veil. The said submission cannot be correct. In the
Cape
Pacific Ltd case
page
805 the court correctly said the following:
"
In principle, I see no reason why piercing of the corporate veil
should necessarily be precluded if another remedy exists.
As a
general rule, if a person has more than one legal remedy at his
disposal, he can select any one of them; he is not obliged
to pursue
one rather than another (although there may be instances where once
he has made an election he will be bound by it).
If the facts of a
particular case otherwise justify piercing of the corporate veil, the
existence of another remedy, should not
in principle serve as an
absolute bar to a court granting consequential relief The existence
of another remedy, or the failure
to pursue one that was available,
may be a relevant factor when policy
considerations
come into play, but it cannot be of overriding importance."
[63]
This court is aware that there is an appeal pending in the appeal
tax court of the liability of Ben Nevis. In my view, the
facts, of
this case justify the piercing of the corporate veil of Metiika as
far as tax liability of Ben Nevis to SARS is concerned.
[64]
The plaintiff did not call any witnesses to testify under oath. The
defendant called on witness, Mr. Mahoney. The defendant
at the
commencement of the trial said they were not calling King as their
witness. Mr. Maritz SC submitted that Mr. Stewart attended
the trial
however, he was not called as a witness.
[65]
The parties agreed that the contents of the trial bundle are what
they purport to be. In my view, the evidence of Mahoney
did not
advance the defendants case. The case is therefore, decided mainly on
the contents of the trial bundle. I find that the
plaintiff proved
its case against the defendants on the balance of probabilities.
[66]
This is a complex matter and it involves important legal issues. The
duration of the trial and the number of documents involved,
in my
view, justifies the participation of two senior counsel.
[67]
I
therefore, make the following order:
(i)
The
transfer of assets referred to in paragraph
5
from
Ben Nevis to Metlika is set aside.
(ii)
It
is declared that the assets in paragraph
5
are
owned by Ben Nevis.
(iii)
It
is declared that the assets referred to in paragraph
5
above,
insofar, as the liability of Ben Nevis for income tax is recoverable
or as it becomes recoverable may be attached and be
sold in execution
to satisfy in whole, or in part, the liability of Ben Nevis to SARS.
(iv)
The
first and second defendants are jointly and severally liable to pay
plaintiff's costs which costs include service of two senior
counsel
and two junior counsel.
A.
P. LEDWABA
JUDGE
OF THE HIGH COURT