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2024
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[2024] ZAECQBHC 19
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Heron Mauritius Limited and Another v Commissioner for the South African Revenue Services (3929/2023) [2024] ZAECQBHC 19 (27 February 2024)
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE
DIVISION, GQEBERHA)
3929/2023
In the matter between:
HERON
MAURITIUS LIMITED
First
Applicant
HERON
MARINE SOUTH AFRICA (PTY) LTD
Second Applicant
and
COMMISSIONER FOR THE
SOUTH AFRICAN
REVENUE
SERVICE
Respondent
JUDGMENT
POTGIETER
J
INTRODUCTION
[1]
The applicants launched urgent proceedings on 14 November 2023
relating to three vessels (tankers) that were utilised as more
fully
set out below in bunkering operations
[1]
in Algoa Bay, namely MT Avatar and MT Vemadignity that were both
detained on 8 April 2023 and MT Vemaharmony that was detained
on 21
June 2023 at the instance of the respondent (“the Commissioner
or SARS”). The detentions were made in terms of
section
88(1)(a)
[2]
of the Customs and
Excise Act, 91 of 1964 (“the Act”) for possible
violations of the Act. In all three instances, it
was initially only
the vessels themselves, excluding their cargo of bunker marine fuel
(bunkers), that were detained. The vessels
were allowed to continue
operating but were prohibited from leaving the Territorial Waters of
the Republic of South Africa.
[2]
The application is being opposed by the respondent.
[3]
At the conclusion of the argument on behalf of the applicants, their
counsel handed up a draft order in terms whereof the following
relief
is being sought:
“
1.
The time-period for notice to the respondent in s 96(1)(a) of
the Customs and Excise Act, 91 of 1964 (as amended) (“the
Act”)
is reduced from one month to ten (10) calendar days in terms of s
96(1)(c) of the Act;
2.
The respondent’s decision on 15 September 2023 in terms of s
88(1)(a) of the Act:
2.1
To amend the detention notices in respect of the vessels MT Avatar,
MT Vemadignity, and
MT Vemaharmony and to issue new detention notices
in respect of the MT Intrepid and MT Sea Emperor; and
2.2
To detain the marine fuel onboard the aforesaid vessels; and
2.3
To impose the terms under paragraph 4 of the detention notices
resulting in the suspension
of the applicants’ bunker fuel
operations in South African waters is reviewed and set aside;
3.
The respondent is directed to withdraw the detention notices of 15
September 2023;
4.
The respondent’s failure to take a decision in respect of the
first applicant’s request in terms of s 93(1) of the
Act to
release the detained marine fuel onboard the MT Avatar, the MT
Vemadignity, and the MT Vemaharmony, is reviewed and set
aside;
5.
The respondent’s failure to take a decision is substituted with
a decision that the marine fuel onboard the MT Avatar,
the MT
Vemadignity and the MT Vemaharmony be released, against the provision
of a guarantee for security in a total amount of R99
756 735.61
(equivalent to the duties, levies and value-added tax on the fuel
detained as contemplated by the respondent in
the notice of
intent pertaining to such fuel of 26 October 2023) on substantially
the same material terms set out in annexure “RA.7”
to the
replying affidavit, pending the adjudication and finalisation of the
dispute between the applicants and the respondent regarding
the
subject matter of the aforesaid notices of intent;
6.
The respondent is ordered to pay the costs of this application on the
scale applicable between attorney and client, including
the costs of
three counsel.”
AMENDED
DETENTION NOTICES
[4]
On 15 September 2023 SARS issued amended detention notices in respect
of the abovesaid three vessels now also detaining,
inter alia
,
their bunkers and also issued new detention notices in respect of two
further vessels, namely MT Intrepid and MT Sea Emperor
.
The
latter two vessels do not feature in these proceedings since MT
Intrepid departed South African waters prior to 15 September
2023 and
MT Sea Emperor is in dry dock for repairs with no cargo on board.
Importantly, the amended notices still allowed the individual
vessels
to operate but ‘
only
if it conducts carriage
of goods within the prescripts and in full compliance with the Act’
.
[5]
It is not in issue that the bunkering operations were terminated
subsequent to receipt of the amended notices. The cause of
the
termination of the operations is in dispute between the parties. The
applicants contended that this resulted from the terms
of the amended
notice which, contrary to the original notices that allowed the
bunkering operations to continue without conditions,
now required
full compliance with the relevant legal prescripts as a pre-condition
for the operations to continue. According to
the applicants this is
impossible to comply with until all the uncertainty surrounding the
regulatory requirements applicable to
their somewhat novel bunkering
operations as well as the other outstanding issues between the
parties such as the applicability
of local tax levying laws, have
been resolved. The applicants submitted that it was the terms of the
amended notices that led to
the operations being shut down. The
respondent pointed out on the other hand that the amended notices
simply required that the
applicants should conduct their operations
lawfully. It was contended that SARS cannot be party to allowing
unlawful business to
be conducted under its jurisdiction and that the
operations were terminated because the applicants were unable to
conduct their
business lawfully. There is no need to decide this
issue in the present proceedings. It is, however, worth noting,
en
passant,
that there does appear to be some uncertainty concerning
the regulation of the specific bunkering operations conducted by the
applicants.
This is apparent from the pre-litigation exchange of
correspondence between the parties. There is a
lacuna
in the
Act and it appears also in the Rules, in that neither covers the type
of operations that were conducted by the applicants.
[6]
In fact, there is replacement legislation to address the shortcomings
of the Act on the statute book notably the Customs Control
Act, 31 of
2014, which has been assented to on 21 July 2014 but its date of
commencement must still be proclaimed. This Act deals
with a novel
customs procedure relating to “
transhipment”
in
Chapter 11. The latter entails “
the transfer of imported
goods at a seaport … from one foreign-going vessel … to
another’
[s 241(2)]
. The customs procedure allows
imported goods ‘
to be transferred at a customs seaport …
from the foreign-going vessel … on which those goods were
imported
to another foreign-going vessel … at that seaport …
on which those goods are to be exported from the Republic …
without complying with any export clearing formalities’
[s
242(1)(a) & (b)]
.
This procedure, if operative, would
arguably have applied to the Applicants’ operations. Needless
to say, there are no comparable
provisions in the current Act. Thus
the
lacuna
.
[7]
The Commissioner himself has on 11 December 2023 prepared draft
amendments to the Rules promulgated under the Act, which were
released for external comment and have yet to be approved. The
amendments deal extensively with bunkering and the processes
applicable
to bunker fuel operators. Bunkering is defined as
‘
supplying distillate fuel to a foreign-going or coasting
vessel for use as ship stores
’. The amendments also deal
with the licensing and other requirements in respect of ‘
sea-based
fuel levy goods special storage warehouses’
which is
defined as a storage warehouse consisting of a storage vessel on
sea. The latter is defined as ‘
a vessel located at a
designated place in relation to a harbour precinct and which is used
as a warehouse for the receipt, storage
and transfer of bulk
distillate fuel for purposes of bunkering.
’ The
purpose of these amendments appears to be aimed at coming to terms
with novel operations like those of the applicants
which utilised
tankers as floating storage facilities for fuel stocks that are sold
to foreign-going vessels and supplied through
STS transfers or
transhipment within ports. However, none of these new provisions is
operative and nothing further needs to be
said thereanent. I now
revert to the matters in issue in the application.
THE
MATTERS IN ISSUE
[8]
The application is aimed at reviewing and setting aside only the
amended detention notices in respect of the three affected
vessels
and their cargoes of bunker fuel, thus in effect accepting the
validity of the original detention notices which stand to
be revived
upon the amended notices being set aside. This part of the
proceedings is referred to as the first review in the applicants’
heads of argument. The second review relates to the first applicant’s
request in terms of section 93(1)
[3]
of the Act made on 10 October 2023 for the release of the marine fuel
and all the vessels referred to in the amended detention
notice of 15
September 2023 (which request peculiarly includes MT Intrepid which
has since left South African waters). Despite
the respondent’s
undertaking of 11 October 2023 to provide a response as soon as
possible, this has as yet not been forthcoming.
The applicants
submitted that, even though no period has been prescribed for a
response, the failure in this instance amounted
to an unreasonable
delay as envisaged in
section 6(3)
of the
Promotion of Administrative
Justice Act, 3 of 2000
, which entitled them to obtain appropriate
relief in these proceedings.
BACKGROUND
[9]
The first applicant (Heron Mauritius) is a company incorporated in
Mauritius, while the second applicant (Heron Marine) is a
local
company having its registered address in Gqeberha, Eastern Cape
Province. The applicants have been conducting bunker marine
fuel
operations in the Port of Ngqura in Algoa Bay, Gqeberha since October
2020.
[10]
Heron Mauritius supplied marine fuel, chemicals and lubricants to
foreign-going vessels at the Port of Ngqura in conjunction
with its
service provider, Heron Marine. Heron Mauritius is the owner of the
marine fuel which it bought from non-South African
sources and stored
aboard foreign vessels or tankers which are chartered by Heron
Marine, together with foreign Masters and crews,
by means of time
charters. The vessels were relocated to Algoa Bay to conduct the
bunkering operations.
[11]
Pursuant to a services agreement concluded by the applicants, Heron
Marine provided comprehensive and independent bunker operations
and
services to Heron Mauritius at a fee. Furthermore, in terms of a
marine fuel supply agreement, Heron Mauritius supplied the
marine
fuel used by the vessels chartered by Heron Marine (self-bunkering).
[12]
Heron Marine conducted the bunker operations and services in
accordance with bunkering licences granted by the National Ports
Authority as approved by the South African Maritime Safety Authority
allowing it to perform such operations,
inter alia,
in the
Ports of Ngqura and Port Elizabeth (Gqeberha).
[13]
Heron Marine provided high-level instructions to the chartered
vessels from time to time to perform the bunker operation services.
Apart from being responsible for supplying marine fuel through
self-bunkering, Heron Marine was also liable for all local costs,
agency fees, superintendent fees and inspection costs.
[14]
It is common cause that the applicants neglected to register the
bunkering operations with the relevant local regulatory and
tax
authorities. They made an
ex post facto
approach to SARS in
2022 (some two years after having commenced the operations) in an
attempt to regularise the operations. SARS
was unaware of the
operations up to that stage. The potential consequences of their
neglect as well as the resultant outstanding
obligations of the
applicants are the subject of ongoing interaction between them and
SARS. This does not require further
attention in these
proceedings which relate, as indicated, to a review of certain
decisions and/or conduct of SARS relating to
the detention of the
vessels and fuel.
[15]
On all accounts the bunkering operations were extensive in scope.
Applicants’ counsel indicated from the bar that it
counted
among the biggest of such operations world-wide. The estimated loss
presently being suffered while the operations are interrupted
is
stated to amount to approximately R300 million per month. SARS has
estimated that the loss of revenue suffered by the fiscus
amounts to
approximately R7 billion. Suffice it is to say that this
unwholesome situation would in all likelihood have been
averted, if
the applicants had approached SARS for clarity and guidance prior to
and not two years after the commencement of the
bunkering operations.
[16]
This matter has, however, been fundamentally affected by events that
occurred shortly before it was heard on 8 February 2024.
On 6
February 2024, the respondent filed a second supplementary affidavit
deposed to by an official Mr Parbhookumar Moodley who
also deposed to
the answering affidavit. The latest affidavit indicated that SARS had
come to the conclusion that the relevant
goods had been irregularly
dealt with and took the decision to seize the three vessels as well
as their cargoes of marine fuel
in terms of section 88(1)(c) of the
Act. Seizure notices to this effect were accordingly issued on 5
February 2024. Copies of such
notices are annexed to the affidavit.
The deponent contended that the detention of the vessels and fuel has
now been superseded
by the seizure. He averred that the detention
notices were thus no longer operative, that the decisions to detain
the vessels and
fuel no longer have any practical effect, and the
amendment of the detention notices was similarly academic. This
raises the issue
of mootness to which I now turn.
MOOTNESS
[17]
It is trite that the issue of mootness arises when a matter no longer
presents an existing or live controversy. The principle
that courts
will ordinarily decline to adjudicate academic issues or matters
where the judgment or order sought will have no practical
effect or
result, is one of long standing.
[4]
The Constitutional Court held that:
‘
A
case is moot and therefore not justiciable if it no longer presents
an existing or live controversy which should exist if the
Court is to
avoid giving advisory opinions on abstract propositions of law.’
[5]
[18]
There are two stages to mootness analysis: first, is the case in fact
‘moot’? and second if so, is it nonetheless
in the
‘interests of justice’ to hear it? It is well settled
that in the context of appeals, mootness does not constitute
an
absolute bar to the justiciability of an issue. Appellate courts have
a discretion conferred by
section 16(2)(a)(i)
of the
Superior Courts
Act, 10 of 2013
, where there are sound reasons for this, to entertain
a matter despite it being moot. This, however, does not apply to a
High Court
or a court of first instance. The Supreme Court of Appeal
(SCA) indicated in
Solidariteit
Helpende Hand NPC v Minister of Cooperative Governance and
Traditional Affairs
[6]
that:
‘
It
must be borne in mind that
s 16(2)(a)(i)
of the
Superior Courts Act
confers
a discretion on a Court of Appeal to hear an appeal
notwithstanding mootness. Therefore, when a court of first instance
has determined
that the subject matter of litigation has ceased to
exist before judgement, it has no jurisdiction to entertain the
merits of the
matter. Only an appeal court has a discretion to hear
an appeal notwithstanding mootness.’
[19]
The same court said in
Minister
of Justice and Correctional Services v Estate Late Stransham-Ford
[7]
that:
“
The
appeal court’s jurisdiction was exercised because ‘a
discrete legal issue of public importance arose that would
affect
matters in the future and on which the adjudication of this court was
required’. The High Court is not vested with
similar powers.
Its function is to determine cases that present live issues for
determination.”
[20]
It follows that the High Court is not vested with a discretion to
hear a matter despite it being moot. Accordingly, the first
issue for
determination in this regard is whether the present application is
moot. If so,
cadit quaestio.
Plainly, this court has no
residual discretion to hear the matter regardless.
[21]
In my view, the seizure notices rendered the present proceedings
relating principally to the amended detention notices, academic
and
therefore moot. I agree with the submission of the respondent that
the seizure notices superseded the amended detention notices
which
have effectively fallen away. Any relief relating to the amended
detention notices will have no practical effect. The seizure
notices
are not being challenged in these proceedings.
[22]
I am fortified in this view by the decision of the SCA in
Commissioner
for the South African Revenue Service & Others v Dragon Freight
(Pty) Ltd & Others
[8]
which dealt with a similar situation where goods were initially
detained in terms of section 88(1)(a) of the Act and subsequently
seized in terms of section 88(1)(c) of the Act. The decision to seize
(the impugned decision) was reviewed and set aside by the
High Court
which ordered the immediate release of the goods. SARS successfully
took the matter on appeal to the SCA. The judgement
of the SCA dealt
as follows with the effect of the seizure on the detention of the
goods:
‘
[41]
The high court reviewed and set aside SARS’ decision not to
release the 19 containers and ordered SARS to immediately
release
those containers and the goods held in them. This order should not
have been granted because
the decision to detain the goods had
been overtaken by the impugned decision
.
…
[44]
The power to detain and the power to seize are discrete
administrative acts, which require two separate decisions. Detention
is a temporary assertion of control over the goods, which does not
necessarily result in any seizure with a view to ultimate forfeiture.
The stated purpose of the power to detain in s 88(1)(a) of the Act,
is to establish whether the goods are liable to forfeiture.
The
provision thus enables SARS to examine or secure the goods, pending
an investigation to establish whether they are liable to
forfeiture,
as happened in this case. It is only once it has subsequently been
established that the goods in question are liable
to forfeiture, that
SARS may then seize the goods. Put differently, seizure flows from
detention if liability for forfeiture is
established.
The decision
to detain the goods is then overtaken by a new decision to seize
.
…
[46]
The high court conflated the decision to detain the goods with the
subsequent impugned decision. In so doing the court failed
to
appreciate that once the impugned decision had been taken,
the
separate issue of detention was rendered moot
. The fate of the
goods then had to be decided with reference to s 88(1)(c) of the Act
and not s 88(1)(a).’
(own emphasis)
[23]
With regard to the issue of mootness referred to in paragraph [46] of
the judgment, the SCA referred with approval to the decision
of the
full bench of the Free State Provincial Division in
The
Commissioner: South African Revenue Service & Another v Joaquim
Alberto Olivera Ferreira Alves
[9]
which also concerned relief relating to the detention of a vehicle
which was subsequently seized and forfeited to the State in
terms of
Section 88 of the Act. That court held as follows:
‘
I
am satisfied that the decision on the merits of the appeal will have
no practical effect and the matter became moot when the Appellants
seized the vehicle as being subject to forfeiture.’
[24]
In the comparable matter of
Clear
Enterprises (Pty) Ltd v The Commissioner for the South African
Revenue Services
[10]
certain vehicles of the appellant were at first detained and later
seized by SARS in terms of Section 88 of the Act. The same vehicles
were subsequently seized by another State entity, namely the
International Trade Administration Commission of South Africa (ITAC).
The appellant brought two applications in the High Court, the first
relating to the detention and the second to the seizure of
the
vehicles by SARS. The primary relief sought related to the return of
the vehicles. The SCA said the following in this regard:
‘
And
yet in all of that time neither the parties nor the court below
appeared to appreciate that the controversy which occupied them
may
not have been an existing or live one. For, plainly, after seizure of
the vehicles by ITAC the primary relief initially sought
by Clear
Enterprises, namely, the return of vehicles, had become
academic.’
[11]
CONCLUSION
[25]
For the above reasons, this application is moot and falls to be
dismissed on this ground. I decline the request of the applicants
to
nonetheless deal with the merits of the matter even if it is found to
be moot. It is in any event not competent as a court of
first
instance to accede to the request in circumstances where the matter
is moot.
[26]
Insofar is the issue of costs is concerned, I take into account that
the respondent has delayed the seizure decision literally
until the
eve of the hearing. At that stage, most of the costs with regard to
the hearing had already been incurred. There is no
explanation why it
was not possible to take the seizure decision earlier at least at a
stage which would have left the applicants
sufficient time to
consider the further conduct of the matter and limit the costs being
incurred. In my view, the applicants cannot
be criticised for the
decision to proceed with the hearing in the circumstances and they
should not be mulcted in costs for having
done so. In any event, the
matter has been disposed of on a preliminary point and it cannot be
said that the applicants were unsuccessful
on the substantive
issues. I am similarly not persuaded by the applicants’
submission that the respondent should be
ordered to pay punitive
costs due to its averred stratagem to sabotage the application by
holding back until the eleventh hour
on issuing the seizure notices.
In my view, neither party should be burdened with the costs of the
application.
ORDER
[27]
In the result the following order is made:
(a)
the application is dismissed;
(b)
each party is ordered to pay its own costs.
______________________
D.O. POTGIETER
JUDGE OF THE HIGH
COURT
APPEARANCES
For
the Applicants:
Adv CE Puckrin SC, Adv PA Swanepoel SC, Adv CA Boonzaaier and Adv MN
Davids, instructed by Cliffe Dekker Hofmeyer Inc., c/o Joubert
Galpin
Searle, 173 Cape Road, Mill Park, Gqeberha
For
the Respondent:
Adv J Peter SC, instructed by MacRobert Incorporated, c/o Goldberg
and De Villiers Inc, 13 Bird Street, Central, Gqeberha
Date
of hearing:
08 February 2024
Date
of delivery of judgment:
27 February 2024
[1]
The
following three concepts are relevant to the operations in question:
‘
bunkering’
refers to the actual sale or supply of
marine fuel also referred to as bunkers. The applicants sold marine
fuel to foreign -going
vessels passing through Algoa Bay on their
onward journeys to foreign destinations. These vessels were
basically re-fueling in
Algoa Bay. The fuel was stored on board
chartered tankers or bunker vessels based in Algoa Bay and was
supplied by the bunker
vessels, in designated areas within the Port
through ship-to-ship (STS) transfers, to the foreign-going vessels
for consumption
in International Waters;
‘
self-bunkering’
is the term used for the situation
where the bunker vessel utilizes some of its cargo of marine fuel
for self-propulsion by transferring
the required volume of bunkers
from its cargo compartments to the bunker compartment in its stern.
‘
resupply’
occurs when the cargo of marine fuel onboard the
chartered bunker vessels is resupplied or replenished in South
African
Waters by foreign-going supply vessels through a STS
transfer either in a Port berthed alongside a pier or in an
anchorage zone.
[2]
The
section provides as follows in relevant part:
“
88.
Seizure
–
(1)
(a) An officer, magistrate or
member of the police force may detain any ship … or goods at
any place for the purpose of
establishing whether that ship, …
or goods are liable to forfeiture under this Act.
…
(c) If such ship …
or goods are liable to forfeiture under this Act the Commissioner
may seize that ship … or goods.”
[3]
The
section provides as follows:
“
93.
Remission or mitigation of penalties and forfeiture.
–
(1) The Commissioner
may, on good cause shown by the owner thereof, direct that any ship,
vehicle container or other transport
equipment, plant, material or
other goods detained or seized or forfeited under this Act be
delivered to such owner, subject
to –
(a) payment of any
duty that may be payable in respect thereof;
(b) payment of any
charges that may have been incurred in connection with the detention
or seizure or forfeiture thereof; and
(c) such conditions
as the Commissioner may determine, including conditions providing
for the payment of an amount not exceeding
the value for duty
purposes of such ship vehicle container or other transport
equipment, plant, material or goods plus any unpaid
duty thereon.”
[4]
In
Geldenhuys
& Neethling v Beuthin
1918
AD 426
at 441 Innes CJ said:
‘
After
all, Courts of Law exist for the settlement of concrete
controversies and actual infringements of rights, not to pronounce
upon abstract questions, or to advise upon differing contentions,
however important.’
[5]
National
Coalition for Gay and Lesbian Equality & Others v Minister of
Home Affairs & Others
2000(2)
SA 1 (CC) para 21.
[6]
(104/2022)
[2023] ZASCA 35
(31 March 2023) para18.
[7]
2017(3)
SA 152 (SCA) para 25.
[8]
[2022]
ZASCA 84
(17 June 2022)
[9]
[2020]
ZAFSHC 123
(dated27 July 2020) para 11.
[10]
(757/10)
[2011] ZASCA 164
(29 September 2011).
[11]
At
para 11.