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[2016] ZAECPEHC 17
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Commissioner for the South African Revenue Services v Brown (561/2016) [2016] ZAECPEHC 17; 78 SATC 255 (5 May 2016)
IN THE HIGH COURT OF
SOUTH AFRICA
EASTERN
CAPE DIVISION – Port Elizabeth
Case
no: 561/2016
Case
Heard: 14/04/2016
Date
Delivered: 05/05/2016
In
the matter between:
COMMISSIONER
FOR THE SOUTH AFRICAN REVENUE
APPLICANT
SERVICES
and
JULIAN
BROWN
RESPONDENT
JUDGMENT
SMITH
J:
Introduction
[1]
The
applicant launched proceedings on a semi-urgent basis for an order,
inter
alia,
directing
the respondent to comply with section 46(4) of the Tax Administration
Act, 28 of 2011 (“the Act”) by submitting
his response to
a Lifestyle Questionnaire (“the questionnaire”) served on
him on 19 October 2015.
[2]
The
applicant is the Commissioner for the South African Revenue Services.
The founding affidavit was deposed to by one Keith Hendrickse,
a
Senior Manager in the National Projects Department for the Western
Cape Region of the South African Revenue Services (“SARS”).
Hendrickse averred that he had been duly authorised by the applicant
in terms of section 11(1) of the Act to institute the proceedings.
[3]
The
respondent is Julian Brown, an adult male residing at 7 Rhone Place,
Lorraine, Port Elizabeth. It is common cause that the respondent
is
not a registered taxpayer, nor has he ever submitted any tax returns.
He opposes the application on the ground that he has shown
just cause
for his refusal to respond to the questionnaire.
Points
in
limine
:
urgency and Hendrickse’s authority
[4]
Before
I deal with the merits of the application, I must first consider the
two points
in
limine
taken on behalf of the respondent, namely that the applicant has
failed to establish sufficient urgency to justify the truncation
of
the time periods prescribed in the Uniform Rules of Court; and that
Hendrickse has not established that he had been properly
authorised
to institute the proceedings.
[5]
Regarding
the issue of urgency, the following facts are relevant. The
application was launched on 23 February 2016 and the papers
were
served on the respondent on the same day. The notice of motion called
upon the respondent to file notice to oppose, if any,
at or before
16h30 on 2 March 2016, and answering affidavits on or before 12h00 on
Friday 11 March 2016.
[6]
The
notice of motion further stated that if no such notice to oppose were
filed, the matter would be enrolled on an unopposed basis
on Tuesday
29 March 2016, otherwise it would be enrolled for hearing on an
opposed basis on 31 March 2016.
[7]
It
is common cause that the parties subsequently agreed that the matter
would be enrolled for hearing on 14 April 2016, in order
to allow the
respondent more time to file his answering affidavit.
[8]
The
respondent filed his notice to oppose on 2 March 2016 and his
answering affidavit on 18 March 2016, some 18 days after the
application papers were served on him. The applicant’s replying
affidavit was filed and served on 7 April 2016.
[9]
When
I gave directives for the enrolment of the matter in terms the
Practice Rules, I requested counsel to prepare written heads
of
argument for the assistance of the court. I stated, however, that the
heads of argument may be handed up during argument. The
applicant’s
heads were nevertheless served on the respondent’s attorneys at
16h24 on Friday 8 April 2016.
[10]
In
his founding affidavit Hendrickse relied on the following grounds for
his contention that the matter was semi-urgent:
(a)
the
object and purpose of the Act is to facilitate the swift
investigation of taxpayers’ tax affairs and to this end, to
empower SARS to gather relevant information to enable it to enforce
compliance with tax legislation;
(b)
if
the respondent were to be allowed to defer his response to the
questionnaire over an extended period of time pending the hearing
of
this application in the normal course, the effective and efficient
tax administration of the respondent’s affairs would
be
undermined and the fiscus would be prejudiced; and
(c)
if
the matter is to be heard in the normal course and placed on the
standard opposed motion roll, many months may pass before it
will be
heard.
[11]
Mr
Williams
,
who together with Mr
Erasmus
,
appeared for the respondent, submitted that the applicant failed to
establish a factual basis for the assertion that SARS will
suffer
prejudice if the matter is to be enrolled in the ordinary course. He
argued furthermore that the respondent has been prejudiced
by the
fact that the applicant’s replying affidavit, which for the
first time averred that the respondent is not a registered
taxpayer
and has not been submitting tax returns, has only been filed four
days before the hearing. He accordingly submitted that
the matter
should be struck off the roll, with costs.
[12]
It
is trite that an applicant who wants to have a matter enrolled and
heard as one of urgency in terms of the Uniform Rules of Court,
must
satisfy the court that the extent of the modification or relaxation
of the Rules is not any greater than the exigencies of
the case
demand. (
Caledon
Street Restaurant CC v D’Aveira
[1998]
JOL 1832
(SE)).
[13]
It
must have been abundantly evident from the foregoing that the extent
of the deviation, if any, from the time periods prescribed
by the
Court Rules, is negligible. In fact, the respondent had longer to
file his answering affidavit than he would ordinarily
have been
allowed if the matter were enrolled in the ordinary course. The
respondent’s complaint regarding the allegations
in respect of
his status as taxpayer is also a red herring. As mentioned before,
those averments (which are contended to constitute
new matter) are in
fact common cause.
[14]
Unsurprisingly
therefore, the respondent has not been able to show any prejudice
resulting from the enrolment and hearing of the
matter on a
semi-urgent basis. In my view the applicant has been more than
reasonable in specifying the extent of the truncation
of the time
limits in his notice of motion, and has in the event been amenable to
agree to further opportunity for the respondent
to file his answering
papers. I am accordingly of the view that the extent of the
modification of the Rules was justified by the
circumstances of the
case and the factual bases provided in Hendrickse’s founding
affidavit. This point
in
limine
can accordingly not be upheld.
[15]
The
respondent also challenged Hendrickse’s authority to institute
the proceedings. In reply to Hendrikse’s assertion
that he had
been authorised in terms of section 11(1) of the Act, he denied any
knowledge of that fact and put Hendrickse to the
proof thereof.
[16]
In
response to that assertion Hendrikse annexed a document to his
replying affidavit which he contended was proof of his authority
to
institute the proceedings. That document, which is titled “AUTHORITY
TO EXERCISE POWERS AND DUTIES REQUIRED BY THE TAX
ADMINISTATION ACT,
NO 28 of 2011, AND TO BE EXERCISED BY A SENIOR SARS OFFICIAL”,
includes a declaration by the applicant
that he authorises:
“…
under
the powers granted to me in terms of section 6(3) of the Tax
Administration Act, no 28 of 2011 (“the Act”) SARS
officials occupying the posts designated in “
Annexure
A”
to exercise the powers and duties in respect of the sections of the
Act in the corresponding entry of the first column of the annexure.”
The
signature on the document is illegible and appears to be preceded by
the word “
for”.
[17]
The
annexure to the document, which appears to have been accidentally
truncated during copying, was subsequently (with the leave
of the
court) substituted for a proper copy. The heading of the substituted
annexure reads as follows:
“
AUTHORITY
TO INSTITUTE OR DEFEND CIVIL PROCEEDINGS ON BEHALF OF THE
COMMISSIONER IN TERMS OF SECTION 11(1)OF THE
TAX ADMINISTRATION ACT,
NO 28 of 2011
.”
The
document is dated 19 October 2012 and is unsigned.
[18]
In
respect of ”Dispute Resolution” the following is stated
therein:
“
Group
Executive
Senior
Managers
Tax Court
High Court
Senior
Specialist:
Revenue Litigation
High Court
Manager
:
Tax Court
Specialist:
Tax Court
High Court”
[19]
The
relevant portions of section 11 of the Act read as follows:
“
11
Legal Proceedings involving Commissioner
(1) No SARS official may institute
or defend civil proceedings on behalf of the Commissioner unless
authorised to do so under this
Act or by the Commissioner or by the
person delegated by the Commissioner under section 6(2).
(2) For purposes
of subsection (1), a SARS official who, on behalf of the
Commissioner, institutes litigation, or performs acts
which are
relied upon by the Commissioner in litigation, is regarded as duly
authorised until proven to the contrary.”
[20]
Mr
Erasmus
argued that the document, being nearly 4 years old, and, in his
submission, of uncertain validity, was not signed by the Commissioner
himself. It does therefore not comply with section 10(1)(b) of the
Act and does accordingly not authorise Hendrickse to compel
the
completion of a generic Lifestyle Questionnaire.
[21]
Section
11(2) of the Act provides that where a SARS official institutes legal
action on behalf of the Commissioner, it must be presumed
that that
official has been duly authorised in terms of section 11(1), unless
the contrary is proven. That section thus explicitly
puts the onus on
the party challenging the official’s authority. And Ms
Williams
SC
,
who appeared for the applicant, correctly argued that section 11(1)
does not require that the authority must be in writing, since
it is
not a delegation of the Commissioner’s powers contemplated in
terms of section 6. The provisions of subsections 10(a)
and (b) of
the Act, which require a delegation to be in writing and signed by
the Commissioner before it becomes effective, are
thus not of
application. For the purpose of establishing whether or not
Hendrickse had been duly authorized to institute the proceedings,
the
fact that the document may or may not have been signed by the
Commissioner is accordingly of no consequence.
[22]
The
respondent has not established any factual basis for his assertion
that Hendrickse has not been duly authorised. What he has
done was
merely to disavow any knowledge of that fact and put Hendrickse to
the proof thereof. Such an approach can never be sufficient
to rebut
a fact deemed by statute. In the event, it is abundantly clear from a
reasonable reading of the document that the intention
was indeed to
authorise Senior Managers to institute legal proceedings on behalf on
the Commissioner.
[23]
Furthermore,
in the absence of any evidence to the contrary, I am constrained to
assume that the document constitutes a proper delegation
of the
Commissioner’s powers under the Act. In terms of the legal
principle
omnia
praesumuntur rite esse acta
official acts are presumed to comply with the relevant statutory
formalities, and the persons who performed them are presumed to
have
been duly authorized. I must accordingly assume that whoever signed
the document on behalf of the Commissioner had been duly
authorized
to do so. That presumption can only be rebutted by proof on a
preponderance of probabilities and not by a bald denial
of the nature
proffered by the respondent in this case. I am accordingly satisfied
that the document constitutes a proper delegation
of the
Commissioner’s powers in terms of section 6(3), read with
section 10 of the Act, and that Hendricse was accordingly
duly
authorized to issue the questionnaire and to institute these
proceedings. This point
in
limine
must
accordingly also fail. I now turn to deal with the merits of the
application.
The
facts
[24]
SARS
delivered the questionnaire to the respondent on 19 October 2015 and
he was expected to return the completed questionnaire
to the SARS
offices at 22 Hans Strydom Avenue, Cape Town, within 21 business
days. The letter accompanying the questionnaire was
signed by
Hendrikse and one Mbuyisela Mayezana, an Operational Specialist. The
letter also stated,
inter
alia
,
that the period of investigation is the 2011 to 2015 tax years; that
SARS was in the process of reviewing his tax file; and that
the
information was requested in terms of section 46(1) of the Act.
[25]
The
questionnaire comprises some 26 pages, and the first page draws the
taxpayer’s attention to the provisions of section
72(1) of the
Act. That section provides that a taxpayer may not refuse to complete
and file a return on the basis that to do so
might incriminate him or
her. The information sought from the respondent relates,
inter
alia
,
to his and his spouse’s personal particulars and circumstances;
personal and private investments and assets; properties
owned by him
and his spouse; income received during the period under review; and
expenses.
[26]
On
the same day SARS also caused a letter to be served on the respondent
wherein he was given notice that:
(a)
SARS
intended to commence an investigation into his tax affairs; and
(b)
the
investigation was based on confidential and statutorily protected
third party information which suggests that certain income
had not
been disclosed; that expenses had been incorrectly claimed for tax
purposes; and that declarations made to SARS by other
taxpayers
suggest a tax risk.
[27]
The
respondent’s attorneys Strombeck Pieterse Attorneys (“SPA”)
replied to the above-mentioned letter on 5 November
2015. In addition
to reminding SARS of its statutory obligations towards taxpayers,
they stated that they had been instructed to
fully cooperate with
SARS in respect of “
any
lawful audit, gathering of information or questionnaire,
investigations and/or order”.
They,
however, required confirmation that SARS will keep the respondent
informed of the progress and findings of any audits, and
that he will
be given reasonable opportunity to respond to the findings. They also
required the following information before the
respondent would reply
to the questionnaire:
(a)
in
terms of which sections of which law the respondent was obliged to
submit the relevant material;
(b)
if
this is for the administration of any tax law, the relevant
subsection of that definition in section 3(2) of the Act, must be
quoted, supported by the underlying facts and circumstances that make
the enquiry foreseeably relevant with the reasonable specificity
as
required by the Act;
(c)
adequate
reasons for the questionnaire, investigation and audit and why it is
being conducted, including the underlying risk analysis
for the
industry the taxpayer is in, on which this audit is based; and
(d)
copies
of the SARS id’s and letters of authority issued to the SARS
assessors, as well as the line manager involved in the
matter.
[28]
They also stated that the respondent will submit a formal request for
the abovementioned information under the Promotion of
Access to
Information Act, 2 of 2000 (“PAIA”). A copy of the
request was annexed to the letter.
[29]
SARS replied to that letter on 9 November 2015, reminding SPA about
the respondent’s statutory obligation to pay the
prescribed
fee, and stating that the request would not be processed until such
time that the fee had been paid.
[30]
On 10 December 2015, the attorneys appointed to act on behalf of
SARS, Joubert Galpin Searle (“JGS”) wrote to SPA
stating,
inter
alia,
that
it was impermissible for the respondent to make his response to the
questionnaire conditional upon the furnishing of the information
requested in terms of the PAIA. They also reminded them of the
respondent’s statutory obligation to pay the standard
prescribed
fee of R35 (unless he earned less than R14 7120), and
that unless that amount was paid by 15 December 2015, SARS would
accept
the failure as “
an
abandonment”
of the request under PAIA.
[32]
JGS again wrote to SPA on 21 December 2015 pointing out that the
respondent is under a statutory obligation, in terms of section
46(1)
of the Act, to respond to the questionnaire, and that a failure to do
so by 15 January 2016 would result in SARS seeking
“
appropriate
remedy against the respondent together with a punitive costs order”.
[33]
On 11 February 2016 JGS wrote to SPA stating that since the
prescribed fee had not been paid by the stipulated date, namely
15
December 2015, SARS will assume that his PAIA request had been
abandoned. SPA responded on the same day, claimed that they had
already replied to the previous correspondence on 25 February and
annexed a copy of that letter. In that letter SPA stated that:
the
request to submit the questionnaire constituted administrative action
and is subject to the principle of legality; the respondent
has just
cause not to respond to the request; because the requested
information has not been provided the respondent was
entitled to
assume that the exercise of the power in terms of section 46 of the
Act has not been properly authorised and he was
therefore entitled to
ignore the request; SARS is obliged to give reasons for its decision
to issue the questionnaire; and that
a new PAIA application would be
submitted requesting “
new
and additional information”
;
and pending the outcome of the complaint to the Tax Ombudsman, any
action taken by SARS would be premature.
[34]
Pursuant to that letter SPA again submitted a request for information
under PAIA on 25 January 2016, enclosing proof of payment
and
requesting the following information:
(a)
copies
of all participating SARS official id’s and letters of
authority giving them the express authority to request the lifestyle
questionnaire;
(b)
a
complete copy of the information-gathering file of the SARS officials
pertaining to the selection of the taxpayer as target for
a lifestyle
questionnaire;
(c)
minutes
of any internal SARS meetings identifying a reason why the taxpayer
was selected as a lifestyle questionnaire target;
(d)
a
copy of the internal audit manual of SARS regulating (within SARS)
the procedures to be followed by SARS officials in initiating
any
information request from taxpayers;
(e)
any
and all information identifying why the taxpayer was selected for a
Lifestyle Questionnaire by virtue of information obtained
from third
parties – without disclosing the identity of the third parties;
and
(f)
any
and all internal information manuals regulating the initiation of the
lifestyle questionnaire imposed on taxpayers.
[35]
On 15 February 2016 JGS again wrote to SPA and, although denying that
they ever received the letter of 25 January 2015, nevertheless
responded to the assertions contained therein, and in addition stated
that unless the completed questionnaire was returned to SARS
on 22
February 2016, they would seek “appropriate relief”.
[36]
It is common cause that the respondent failed to submit the completed
questionnaire, and has in fact asserted his constitutional
and
statutory right to comply only once the information requested in
terms of PAIA had been provided by SARS.
[37]
SARS responded to the second request for information in terms of PAIA
on 10 February 2016, granting the request for copies
of the
identification cards, but refusing access to the remainder of the
records and information. That request was refused on the
basis that
the disclosure of the information would “
jeopardise
the effectiveness of SARS auditing procedures and methods used by
SARS to identify taxpayers”
,
and could frustrate the deliberative process in SARS by inhibiting
candid communication of opinions, advise and reports. The respondent
thereafter lodged an internal appeal on 16 March 2016 which was
dismissed on 5 April 2016 for the same reasons.
The
applicant’s contentions
[28]
The
applicant contends that:
(a)
the
provisions of section 46 of the Act are peremptory, and where a
taxpayer is required to submit “relevant material”
to
SARS under that section, he or she “
must
submit the relevant material to SARS at the place and within the time
specified in the request”
;
(b)
the
information which the respondent is required to provide by virtue of
the questionnaire constitute “
relevant
material”
as
defined by section 1 of the Act. That section defines relevant
material as “
any
information, document or thing that in the opinion of SARS is
foreseeably relevant for the administration of the Tax Act as
referred to in section 3”
;
(c)
insofar
as section 46 provides that SARS may only require a taxpayer to
submit relevant material “
for
purposes of the administration of a tax Act in relation to a
taxpayer”,
the
stated objective of the questionnaire is clearly covered by the
definition of the term “administration of a tax Act”.
That definition includes the obtaining of information in relation to
“(a)
(i)
anything that may affect the liability of a person for tax in respect
of a previous, current or future tax period; (ii) a taxable
event; or
(iii) the obligation of a person (whether personally or on behalf of
another person) to comply with a tax Act”
;
(d)
in
as much as the respondent would have been entitled to reasons for the
delivery of the questionnaire, those reasons provided by
SARS are
sufficient for purposes of the Act. SARS is precluded by the
provisions of chapter 6 of the Act from providing the further
particularity requested by the respondent since it would offend the
general prohibition against disclosure of “SARS confidential
information”. Section 68 defines “confidential
information” as,
inter
alia,
“information
that was supplied in confidence by a third party to SARS the
disclosure of which could be reasonably expected
to prejudice the
future supply of similar information, or information from the same
source”; and
(e)
even
though he contends that the decision to issue the questionnaire does
not constitute administrative action, the applicant has
in any event
established a sound basis for that decision. The information provided
to SARS by the third parties, coupled with the
fact that the
respondent has not registered as a taxpayer or submitted tax returns,
constitute a rational and justifiable basis
for the request in terms
of section 46 of the Act.
The
respondent’s contentions
[38]
In addition to raising the abovementioned points in
limine
and
asserting that the applicant failed to establish the prerequisite for
an interdict, the respondent contends that:
(a)
the request for him to complete a Lifestyle Questionnaire is an
unlawful “fishing expedition”
which infringes on his
constitutional and statutory rights;
(c)
he
is, by virtue of section 33 of the Constitution and the provisions of
the Promotion of Administrative Justice Act, 3 of 2000,
(“PAJA”),
or the principle of legality, entitled to expect fair, reasonable and
lawful conduct on the part of SARS.;
(d)
he
is furthermore entitled to protection of his dignity and privacy in
terms of sections 10 and 14 of the Constitution, and not
to be
subjected to any form of harassment or unnecessary invasive conduct
by SARS;
(e)
the
applicant has failed to provide substantive justification for the
deviation from the above-mentioned constitutional provisions,
and the
questionnaire thus constitutes an infringement of his fundamental
constitutional rights set out in the Bill of Rights;
(f)
SARS
is required to be transparent in its dealings with him in respect of
information held by it, and he is accordingly not under
any
obligation to respond to the questionnaire until such time as his
internal appeal had been finalized or, the Tax Ombudsman
has ruled on
his complaint;
(g)
until
such time as the applicant provides him with adequate reasons for the
decision to issue the questionnaire, he is not obliged
to respond to
it. Although he is not interested in the names of persons who may
have provided information to the applicant, he
is entitled to details
of those allegations in order to have a fair opportunity to address
them. In the absence of the requested
information, the reasons
provided by the applicant are vague and arbitrary; and
(h)
the
information sought in the questionnaire is not specific, but general
and wide ranging. The questionnaire is thus arbitrary and
capricious,
and the information sought therein is not “relevant material”
as required in terms of section 46 of the
Act. The applicant has thus
failed to satisfy the jurisdictional requirements necessary to that
section.
Discussion
[39]
There can be little doubt, having regard to the “language used
in the light of ordinary rules of grammar and syntax,
the context in
which the provision appears and the apparent purpose of the Act”,
that the provisions of section 46 are peremptory.
The explicit and
unambiguous wording of the section simply does not allow for any
other interpretation. (
Natal
Joint Municipal Pension Fund v Endumeni Munucipality
[2012]
2 All SA 262
(SCA), at paragraph 18)
[40]
It is in my view similarly manifest that the information sought in
the questionnaire constitutes “relevant material”
since
it pertains to the respondent’s assets, liabilities and
expenses. Furthermore, the questionnaire could hardly have
been more
specific regarding the information which the respondent is required
to provide, and I am accordingly satisfied that adequate
specificity
has been provided as required by the Act.
[41]
There can also be little doubt that the issuing of the questionnaire
was done in the course of the “administration of
a tax Act”
since the information sought therein manifestly relate to “the
liability of a person or persons for tax
in respect of a previous,
current or future tax year.” (section 3(a)(i).
[42]
I am accordingly of the view that the applicant has established all
the requisite jurisdictional facts mentioned in section
46. The
respondent’s contention that the issuing of the questionnaire
was a “fishing expedition” is thus untenable.
The
questionnaire was issued against the background of information to the
effect that there may have been non-disclosure of relevant
information by the respondent, coupled with the fact that he did not
register as a taxpayer or submit tax returns. In my view these
factors constituted a sound basis for the issuing of the
questionnaire and cannot by any stretch of the imagination be
regarded
as “a fishing expedition”.
[43]
Mr
Erasmus
argued
that the provisions of the Act do not authorise SARS to enforce a
section 46 request by virtue of a mandatory interdict.
According to
him the only remedy available to SARS in such a case is that provided
for in section 234 of the Act. That section
makes it a criminal
offence for any person to wilfully and “
without
just cause”
furnish,
produce or make available any information document or thing,
excluding information requested under section 46(8). SARS
was thus
constrained to institute criminal charges against the respondent
instead of moving court for a mandatory interdict, or
so he argued.
[44]
He argued furthermore that the only types of litigation authorised by
the Act are those referred to in section 12, read with
sections 50 to
58 of the Act, which provides for
ex
parte
proceedings
to institute inquiries; applications for search and seizure warrants
provided for in sections 59 to 60 of the
Act; proceedings
relating to dispute resolution mentioned in Chapter 9; filing of
civil judgments for tax debts (sections 172 and
176); institution of
sequestration, liquidation or winding up proceedings (sections 177
and 178); recovery of debts from other
persons (section 184); and
recovery of taxes on behalf of foreign governments (section 185 and
186).
[45]
In my view this argument is not supportable. The above-mentioned
proceedings all have some unusual or
sui
generis
elements, and are clearly intended to bestow upon SARS extraordinary
powers in order to facilitate the efficient and expeditious
collection of taxes. The right to institute civil action to enforce
compliance with a request for relevant material, on the other
hand,
is ancillary to the powers bestowed on SARS in relation to the
administration of a tax Act, including the power to request
relevant
material in terms of section 46 of the Act. That remedy is
accordingly available to SARS in terms of the common law and
does not
require specific statutory sanction. There is nothing in the Act that
suggests the contrary; neither has Mr
Erasmus
been
able to refer me to any authority in support of his contention.
[46]
In respect of the respondent’s contention that the decision to
issue the questionnaire constitutes administrative action,
Mr
Erasmus
made
the following submissions. He argued that the request is an invasion
of the taxpayer’s privacy in that he or she is compelled
to
produce confidential information to a SARS official. A failure to
comply with such a request renders the taxpayer liable to
criminal
prosecution. That decision is also not subject to the normal appeal
processes in terms of the Act and a taxpayer must
accordingly be
furnished with adequate reasons in terms of PAJA. The applicant has
failed to provide such reasons and the decision
is accordingly
subject to judicial review. He submitted in addition, that until such
time as the reasons had been provided and
the tax ombudsman ruled on
his complaint, the respondent has shown just cause for his failure to
furnish the requested information.
[47]
Administrative action is defined by the PAJA as: “any decision
or failure to take a decision by an organ of state (i)
exercising a
power in terms of the Constitution or a Provincial Constitution; or
(ii) exercising a public power or performing a
public function in
terms of any legislation, which adversely affects the rights of any
person and which has a direct, external
legal effect.”
[48]
The test to determine whether or not a decision constitutes
administrative action has been explained as follows by Oliver JA
in
Transnet Ltd v Goodman Brothers (Pty) Ltd
[2000] ZASCA 151
;
2001 (1) SA 853
(SCA), at paragraph 34:
(a)
Administrative
Law is an incident of the separation of powers under which courts
regulate and control the exercise of public power
by other branches
of government;
(b)
the
question relevant to section 33 of the Constitution is not whether
the action is performed by a member of the executive arm
of
government, but whether the task itself is administrative or not, and
the answer to this is to be found by an analysis of the
nature of the
power being exercised; and
(c)
what
fall to be considered in this regard are,
inter
alia,
the
source of the power exercised, the nature of such power, the subject
matter, whether it involves the exercise of a public duty,
and how
closely it is related, on the one hand, to policy matters which are
not administrative, and on the hand, to the implementation
of
legislation, which is.
[49]
In
Calibre Clinical Consultants (Pty) Ltd and Another v National
Bargaining Council for the Road Freight Industry and Another
2010 (5)
SA 457
(SCA)
, at paragraph 39, Nugent JA said the following
regarding the meaning of the term public in nature:
“
Powers or
functions that are public in nature, in the ordinary meaning of the
word, contemplate that it pertains to the people as
whole or that
they are exercised or performed by on behalf of the community as a
whole. (or at least a group or class of the public
as a whole) which
is pre-eminently the terrain of government.”
[50]
Ms
Williams
has
in my view correctly pointed out that the request for information in
terms of section 46 is a preliminary investigation by SARS
which may
or may not lead to a more formal audit or inquiry under the Act. It
is only when SARS has been placed in possession of
the requested
information that it will be able to determine whether or not there
are indeed grounds for a further inquiry or an
audit. It is at that
stage that the principles of administrative justice must be observed.
[51]
The request can accordingly not adversely affect any of the
respondent’s rights. In the event, our courts have found
that
an investigation of this nature does not constitute administrative
action. In
Competition
Commission v Yara (SA) (Pty) Ltd and Others
2013
(6) SA 404
(SCA) the Supreme Court of Appeal (per Brand JA) held that
the initiation of a complaint by the Competition Commission or a
private
person in terms of the
Competition Act, 89 of 1998
is a
preliminary step that does not affect a person’s rights, and
the Commission was thus not obliged to engage with a suspect
on the
question of whether its suspicions are justified. The learned judge
held, at paragraph 24, that “
[t]he
principles of administrative justice are observed in the referral and
the hearing before the tribunal. That is when the suspect
firm
becomes entitled to put its case
”.
[52]
In the event, in my view, the applicant has provided sound reasons
for its decision to issue the questionnaire. The third party
information, which suggests that there may not have been full
disclosure of income by the respondent, coupled with the fact that
he
has not registered as a taxpayer or submitted tax returns, constitute
a rational basis for the issuing of the questionnaire.
The
respondent’s contention that the applicant has failed to
observe the principle of legality can accordingly also not be
upheld.
[53]
Insofar as the respondent contends that he is entitled to the
additional information sought in his second PAIA request, I am
satisfied that the applicant’s objection to the disclosure of
the information on the basis that it constitutes “SARS
confidential information”, protected in terms of section 68 of
the Act, is justified under the circumstances. Even though
the
respondent contends that he does not require the applicant to name
names, Ms
Williams
has correctly argued that it would be relatively easy for him to
infer the identities of the third parties if the additional
particularity
sought in his second PAIA request is disclosed.
[54]
Insofar as the respondent’s right to privacy, guaranteed in
terms of section 14 of the Constitution, may have been infringed
by
the issuing of the questionnaire, I am satisfied that the provisions
of section 46 of the Act constitute a justifiable limitation
to that
right as envisaged in section 36 of the Constitution. In the event,
there has not been any challenge to the constitutionality
of that
section.
[55]
Mr
Erasmus
also
argued that the information sought by SARS does not relate to his
business affairs, but is personal information which is protected
in
terms of his constitutional right to privacy. This argument is also
untenable. All that SARS is required to show is that the
information
sought is “relevant material” necessary for the
administration of a tax Act. For the reasons mentioned
above, the
information sought by virtue of the questionnaire is manifestly
relevant for that purpose.
[56]
As mentioned above, the respondent’s internal appeal against
the refusal to provide the additional information sought
in his
second PAIA request, had been dismissed. And for the reasons stated
above, his contention that that refusal constitutes
just cause for
his own failure to respond to the questionnaire accordingly has no
merit. So too is his contention that he is not
obliged to respond
until such time as the Tax Ombudsman has ruled on his complaint. He
has also not been able to establish any
legal basis for the latter
contention.
[57]
I am accordingly of the view that the applicant has established a
clear right and a reasonable apprehension of harm. I am also
satisfied that he has no other satisfactory remedy available. Ms
Williams
has
correctly argued that the other more invasive procedures, which were
rather ironically suggested by the respondent, are not
justified
under the circumstances, neither would the institution of criminal
proceedings assists SARS with its stated objective,
namely the
expeditious acquisition of the relevant material. In the event the
respondent cannot prescribe to SARS which legal remedy
it must
pursue.
[58]
I am accordingly of the view that the application must succeed.
Order
[59]
In the result the following order issues:
1.
The
respondent is directed to comply with
section 46
of the
Tax
Administration Act, 28 of 2011
, by submitting his response to the
Lifestyle Questionnaire, a copy of which is appended to the founding
affidavit, within two weeks
of the granting of this order.
2.
If
the respondent fails to submit his response to the Lifestyle
Questionnaires as aforesaid, either timeously or at all, the
applicant
may apply on the same papers, duly amplified if necessary,
on 48 hours written notice the respondent, for an order in the
following
terms:
2.1
that the respondent be held in contempt of court;
3.2
committing the respondent to imprisonment until such time as he
complies with the court order.
3.
The respondent is ordered to pay the applicant’s tax costs of
suit on the party and party scale,
such costs to include the costs
attendant upon the employment of two counsel.
_________________________
J.E
SMITH
JUDGE
OF THE HIGH COURT
Appearances
Counsel
for the Applicant :
Advocate Williams SC
Assisted
by
: Advocate Witten
Attorney
for the Applicant :
Joubert Galpin and Searl
173
Cape Road
Port
Elizabeth
Ref:
Mr M C Botha/pw/SOU12/0003
Counsel
for the Respondent :
Advocate Erasmus
Assisted
by
: Advocate Williams
Attorney
for the Respondent : Strombeck
Peterse Attorneys
7
Bird Street
Port
Elizabeth
Ref:
SWPP/Lw/SW0636
Date
Heard
: 14 April 2016
Date
Delivered
:
05 May 2016