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[2022] ZAKZPHC 53
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Commissioner for The South African Revenue Services v Porrit N.O. and Others (9260/2013) [2022] ZAKZPHC 53 (16 September 2022)
IN THE HIGH COURT OF
SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
CASE
No: 9260/2013
In
the matter between:
THE
COMMISSIONER FOR THE
SOUTH
AFRICAN REVENUE SERVICES PLAINTIFF
and
GARY
PATRICK PORRIT N.O. FIRST
DEFENDANT
SUSAN
HILLARY BENNET N.O. SECOND
DEFENDANT
SYNERGY
MANAGEMENT (PTY) LTD THIRD
DEFENDANT
LAMAX
(PTY) LTD (IN LIQUIDATION) FOURTH
DEFENDANT
JOHN
DOUGLAS MICHAU FIFTH
DEFENDANT
MARK
WILLIAM LYN SIXTH
DEFENDANT
THE
MASTER OF THE HIGH COURT SEVENTH
DEFENDANT
ORDER
In
the premises the following order is made:
1. The plaintiff’s
amendment is granted.
2. Costs are
reserved for determination by the trial court.
JUDGMENT
Mathenjwa
AJ
[1]
This is an opposed application to amend the particulars
of claim of the plaintiff in terms of Uniform rule 28(4).
On 19 July
2021, the plaintiff served a notice to amend prayer 3 of its
particulars of claim in terms of the provisions of rule
28. On 2
August 2021 the first, second and third defendants served a notice of
objection to the proposed amendment. The proposed
amendment sought to
substitute prayer 3 in the particulars of claim with the following
prayer:
‘
3. That the fifth
and sixth defendants be ordered to reflect the third defendant in the
winding- up of the fourth defendant as a
creditor in respect of the
amount referred to in paragraph 13’
.
The
original prayer 3 reads:
‘
3. That fifth and
sixth defendants are ordered to pay any dividend to SARS that is
payable to third defendant in the winding-up
of fourth defendant.’
[2]
The first, second and third defendants objection to the
amendment is based on the grounds that the amendment seeks
to abandon
the plaintiff’s claim for payment and intends to now substitute
same with a claim that is tantamount to declaratory
relief in that:
(a)
Plaintiff initially claimed payment of a dividend due to the third
defendant in the winding up of the fourth
defendant to be made by
fifth and sixth defendants to it.
(b) The
proposed amendment seeks to now direct the fifth and sixth defendants
to reflect the third defendant as
a ‘creditor’ in the
winding-up of the fourth defendant. Firstly, the plaintiff has
previously written off its claim
as admitted in its replication; the
proposed amendment will therefore render the relief sought becoming
academic and having no
practical effect as the plaintiff will not be
paid any monies as consequence of the claim; the amendment will thus
render the plaintiff’s
particulars of claim expiable. Secondly,
the plaintiff by writing off its claim had thus ‘elected’
via the doctrine
of election to no longer enforce its claim against
the relevant defendants. Therefore, by operation of the legal
doctrine of election
the plaintiff is disentitled to seek any relief
based on such claim. Thirdly, the proposed amendment will render the
particulars
of claim becoming vague and embarrassing and will fail to
sustain a cause of action.
[3]
The plaintiff in its founding affidavit explains the
reason for the amendment sought being that prayer 3 of the
particulars of claim, in its current form, does not concern the
dispute embodied in the particulars of claim. The particulars of
claim concerns the validity of the cession. If the cession is
invalid, it will follow that the third defendant should be reflected
as creditor in respect of the amount claimed.
[4]
For a proper understanding of the context within which
the amendment is sought, it is appropriate to briefly explain
the
factual matrix to the cause of action. The fourth defendant is a
company in liquidation and the first and second defendants
are co-
trustees of the Surety Development Trust, IT 7537/93 (the Trust). The
third defendant is a company which is allegedly indebted
to the
plaintiff (SARS) in respect of outstanding income tax. The fifth and
sixth defendants are appointed liquidators of the fourth
defendant.
At a meeting of creditors of the fourth defendant, third defendant
lodged a claim which was accepted by the fifth and
sixth defendants.
In an amended second liquidation, distribution and contribution
account the fifth and sixth defendants recorded
that payment of a
dividend to the third defendant was envisaged. The Trust alleged in a
letter, objecting to the amended second
liquidation distribution and
contribution account that third defendant’s claim against
fourth defendant was ceded to
it in terms of a deed of cession and
pledge. The plaintiff contends that the deed of cession and pledge
and the cession agreement
were fraudulently created in order to avoid
payment to the plaintiff of the dividend owing to the third defendant
in the winding-up
of the fourth defendant, and that third defendant’s
claim against fourth defendant was not ceded to the Trust. In
paragraph
17.4.2 in the particulars of claim the plaintiff avers that
it is entitled to an order directing the fifth and sixth defendants
to reflect the third defendant in the winding-up of the fourth
defendant as the creditor in respect of the amount claimed.
[5]
Uniform rule 28(3) provides that: ‘An objection to a proposed
amendment shall clearly and concisely
state the grounds upon which
the objection is founded’. Both counsels for the plaintiff and
defendants referred this court
to case law in support of their own
and against each other’s propositions. Defendants’
counsel referred this court
to a case summary in
Consolidated
Ltd t/a Consol Glass v Twee Jonge Gezellen (Pty) Ltd,
[1]
where it was held that:
‘
A proposed
amendment to a pleading may be refused on the basis that it does not
raise a triable issue. A triable issue is one which,
if it can be
proved by the evidence foreshadowed in the application for the
amendment, will be viable or relevant, or which, as
a matter of
probability, will be proved by the evidence so foreshadowed.’
Counsel
for the plaintiff referred this court to
Moolman
v Estate Moolman
,
[2]
where it was held that:
‘
the practical rule
adopted seems to be that amendments will always be allowed unless the
application to amend is mala fide or unless
such amendment would
cause an injustice to the other side which cannot be compensated by
costs, or in other words unless the parties
cannot be put back for
the purposes of justice in the same position as they were when the
pleading which it is sought to amend
was filed’.
[6]
The court has a discretion to allow an amendment which
introduces a new cause of action only if no prejudice is
occasioned
thereby.
[3]
In
Tomassini
v Dos Remendos
,
[4]
it was held that if the ‘amendments are of such a kind that the
scope of inquiry is not unduly enlarged’ and the main
issue
remains the same, such amendments should be allowed. The court would
exercise its discretion and allow amendments of orders
prayed for, if
the addition of a new prayer is not based upon allegations different
from those on which the original relief was
claimed.
[5]
In exercising a judicial discretion whether or not to grant the
amendment, first and foremost I am guided by provisions of rule
28(3)
to consider the grounds upon which the opposition is premised in the
notice for objection. In their heads of argument the
defendants raise
additional grounds of objection to the amendment that there has been
unreasonable delay for eight years on the
plaintiff in seeking the
amendment and that the application for amendment was one day out of
time. Therefore, it is defective because
there is no application for
condonation for such delay. These additional grounds are not
contained in the notice of objection nor
in the respondents answering
affidavit to the application. In the result this judgment is confined
to the grounds of objection
raised by the respondents in their notice
of objection and answering affidavits.
[7]
The main grounds for objecting to the amendment is that
the plaintiff has admitted in its replication that it has
written off
the debt, therefore, it follows that the claim is unenforceable and
the proposed amendment renders the particulars
of claim expiable. I
am unable to agree with the respondents’ contention. In ‘Ad
Paragraphs’ 4, 6, and 7 of the
plaintiff’s replication of
first and second defendants’ plea and to paragraph 3 of the
replication to the third defendant’s
plea, the plaintiff
disputes that the tax debt owing was permanently written off, but
contends that it was temporarily written
off. The plaintiff’s
counsel referred this court to Part 2 of the Regulations prescribing
the circumstances under which the
commissioner may write off any
amount of debt.
[6]
Regulation
4(2) reads ‘A decision by the Commissioner to temporarily write
off an amount of tax debt does not absolve the
debtor from the
liability of that tax debt’. Accordingly it is not correct that
the writing off of the tax debt is admitted.
That issue is still
alive between the parties for adjudication by the trial court. It is
further apparent from the pleadings that
the proposed amendment does
not introduce a new cause of action. The prayer sought to be
introduced is grounded in the particulars
of claim where the
plaintiff averred that it is entitled to an order ordering the fifth
and sixth defendants to reflect the third
defendant in the winding-up
of the fourth defendant as the creditor in respect of the amount
claimed. In this regard the amendment
is required to reflect an
appropriate relief for an issue that is already canvassed in the
pleadings. There is no reason to conclude
that the proposed amendment
is mala fide, or will cause prejudice to the defendants since the
parties remain the same and the cause
of action remains the same,
such amendment would not unduly enlarge the scope of the inquiry.
[8]
With regards to costs the plaintiff’s counsel
contends that the defendants should bear the costs including
the
costs of senior and junior counsel because their opposition to the
proposed amendment was frivolous. The defendants’
counsel
contends that the plaintiff should bear costs of the application
because the amendment is an indulgence. I am of the view
that the
issue of costs should be appropriately determined by the trial court.
[9]
In the premises the following order is made:
1. The
plaintiff’s amendment is granted.
2.
Costs are reserved for determination by the trial court.
Mathenjwa
AJ
Date
of hearing: 13 September 2022
Date
of judgment: 16 September 2022
Appearances:
Counsel
for plaintiff: Adv. BH
Swart SC
Assisted
by: Adv.
J Kiare
Instructed
by: Mathopho
Moshiane
Mulangaphuma Incorporated
Illovo, Johannesburg
Email:
candice@dm5.co.za
Counsel
for defendants: Adv. S Nankan
Instructed
by: Carlos
Miranda
Attorneys
Pietermaritzburg
Email:
cmiranda@sai.co.za
Judgment
duly delivered electronically
[1]
Consol
Ltd t/a Consol Glass v Twee Jonge Gezellen (Pty) Ltd and another
(2)
2005 (6) SA 23
(C) at 23H, see the headnote.
[2]
Moolman
v Estate Moolman
1927
CPD 27
at 29.
[3]
See
MacDonald,
Forman and Co. v Van Aswegen
1963 (2) SA 150
(O) at 153D.
[4]
Tomassini
v Dos Remandos and another
1961
(1) SA226 (W) 228D-E.
[5]
See
Bestenbier
v Goodwood Municipality
1955 (2) SA 692
(C) 697H-698E.
[6]
‘Regulations issued under section 91A of the Income Tax Act 58
of 1962, prescribing the circumstances under which the commissioner
may write-off or compromise any amount of tax, duty, levy, charge,
interest, penalty or other amount’, GN 316,
GG
29788 of 13 April 2007.