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[2016] ZAGPPHC 251
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Commissioner for the South African Revenue Services v Bachir and Others (87306/2014) [2016] ZAGPPHC 251 (22 April 2016)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(GAUTENG DIVISION,
PRETORIA)
22/4/16
CASE NO: 87306/2014
Not reportable
Not of interest to other
judges
In the matter between:
COMMISIONER FOR THE
SOUTH
AFRICAN REVENUE
SERVICES APPLICANT
and
BACHIR,
VM 1
st
RESPONDENT
EXECELLENCE TRADE
SEVEN CC 2
ND
RESPONDENT
AZGAR
RAIDEN 3
RD
RESPONDENT
FJ AUTO PARTS
CC 4
TH
RESPONDENT
CC TRADE 496
CC 5
TH
RESPONDENT
POPAT,
RS 6
TH
RESPONDENT
POPAT,
SS 7
TH
RESPONDENT
POPAT,
S 8
TH
RESPONDENT
JUDGMENT
KUBUSHI, J
INTRODUCTION
[1] This is an
application in terms of s 163 of the Tax Administration Act 28 of
2011 ("the Act"). In terms thereof, the
applicant seeks an
order for seizure, preservation and safeguarding of the respondents'
assets in order to prevent any such assets
from being disposed of or
removed ("the preservation order''), thereby frustrating the
collection of the full amount of tax
that is either due and payable
or that the applicant on reasonable grounds is satisfied may be due
or payable. The applicant also
seeks certain orders that are
ancillary to the preservation order, like for instance, the
appointment of a
curator bonis.
[2] When the application
was launched there were eight respondents in this matter. However,
when the parties appeared before me
only three respondents, that is,
second, third and eighth respondents were represented. The other
respondents together with the
applicant put in place alternative
arrangements, the agreement of which was made an order of court.
Presently, before me, only
the second, third and eighth respondents
are opposing the application.
[3] The applicant is
represented by Ngcongwane SC and the three respondents by Bhana SC. I
shall, in this judgment, refer to the
respondents individually as
second respondent, third respondent and eighth respondent. I shall
refer to them collectively as the
respondents.
THE PARTIES
[4] The applicant, in
this instance, is the Commissioner for the South African Revenue
Services.
[5] The second respondent
is a close corporation registered in South Africa and its principal
place of business is situated in Komatipoort,
Mpumalanga. Komatipoort
is situated on the border between South Africa and Mozambique. The
second respondent operates as a business
that sells and exports
goods, mainly in the form of perishable items, to its customers in
South Africa, Mozambique and other countries
outside South Africa.
[6] The third respondent
is the sole member of the second respondent. He is a Mozambican
national. He holds a Mozambican passport
and a South African
passport. He also has a South African identity document. He is
registered for tax purposes in South Africa
under the Income Tax Act.
He lives in Komatipoort, Mpumalanga and is the husband of the eighth
respondent.
[7] The eighth respondent
is the wife to the third respondent and resides with him in
Komatipoort, Mpumalanga. She is a Mozambican
national. She holds six
Mozambican passports. She is an employee of the second
respondent. She is also a director in
and holds 25% membership
in Flamarall CC a close corporation registered in South Africa.
She is registered as a tax payer
in South Africa as well. The eighth
respondent has two banking accounts with ABSA and FNB, respectively.
Her sole source of income
during the years of assessment in this
regard is a salary she earns from the second respondent. Her only
movable asset is a Nissan
motor vehicle.
FACTUAL BACKGROUND
[8] On 10 December 2014,
the applicant obtained,
ex parte
and in camera, a provisional
preservation order ("the Order) in terms of s 163 of the Act.
[9] In terms of paragraph
4 of the said Order, a
rule nisi
was issued calling upon the
respondents to show cause why the preservation order should not be
made final on the return day of 11
February 2015. After the Order was
granted, the applicant's attorneys of record failed to ensure that
the Order was served timeously
on the respondents. This was
occasioned by the fact that the applicant's attorney of record
received instructions from the
curator bonis
to proceed with
the service of the Order on the respondents only on 10 February 2015.
The applicant's attorneys of record received
the said instructions
only a day before the return day of 11 February 2015. It meant,
therefore, that the applicant did not have
adequate time within which
to serve the Order and to enrol the matter properly. Accordingly, the
applicant allowed the Order to
lapse by failing to appear in court on
the return day. Despite the fact that the Order lapsed on 11 February
2015, the third respondent
was served with a copy of that Order on 10
February 2015.
[10] It is alleged that
on receipt of the Order, and in a letter dated 20 February 2015, the
third respondent, through his attorneys
of record, made enquiries
from the applicant's attorneys of record about the status of the
matter. In the said letter the applicant's
attorneys of record were
informed that they should not proceed by
ex parte
application
in the light of the fact that the respondents were not dissipating
their assets and have no intention to flee South
Africa. The
attorneys of record of the respondent further requested that copies
of any further proceedings against the respondents
be served on their
offices.
[11] The applicant
launched another
ex parte
application to revive the lapsed
interim order without serving the application on the respondents. The
revival order was granted
on 18 March 2015. Once the interim order
was revived, it was served on the respondents again, placing all the
respondents' respective
estates under preservation and in the control
of the
curator bonis,
Mitesh Patel.
[12] Pursuant to the
preservation order the second respondent's assets (the assets include
trading stock which primarily consisted
of consignment stock) were
attached and placed under preservation. In order to enable the second
respondent to continue trading,
an agreement was reached between the
respondents and the
curator bonis
that the second respondent
should continue to trade and the proceeds of the sale of the trading
stock be deposited in the trust
account of the respondents' attorneys
of record.
ABUSE OF PROCESS
[13] The respondents in
opposing the application are raising a number of criticisms on the
merits of the application and also raise
a point
in limine.
I
shall deal first with the point
in limine
as it might be
dispositive of the matter.
[14] The contention by
the respondents is that the preservation order should not be
confirmed on the basis that the applicant in
its revival application
breached its duty of good faith, which is an essential requirement of
ex parte
applications. It is alleged in the respondents'
papers that the applicant failed to disclose material facts to the
court hearing
the revival application. The material not so disclosed
is alleged to include, but not limited to, the fact that despite the
Order
having been served on the respondents on 10 February 2015, the
respondents did not flee South Africa as the applicant alluded in
its
founding affidavit; neither did the respondents attempt to dissipate
any of their assets in order to frustrate the purpose
of the Order;
and further that the respondents' attorneys of record addressed a
letter to the applicant's attorneys of record enquiring
about the
status of the matter and also informing them about the respondents'
situation.
[15] The crux of the
submission, as argued before me, is that the appellant failed to
disclose the letter of 20 February 2015 written
by the respondents'
attorneys of record to the appellant's attorneys of record, to the
court during the hearing of the revival
application.
[16] The applicant in its
replying affidavit responded by denying that there were any grounds
on which the respondents could lend
credence to the suggestion that
the applicant did not act in good faith when it obtained the order
reviving the interim Order.
According to the applicant, there is no
requirement that any further information on the facts should be
placed before court at
the time of bringing the revival application.
In any event, it is contended, the content of the letter of 20
February 2015 from
the respondents is the subject of a dispute,
relevant for the hearing whether or not the final preservation order
is required against
the respondents. At the time of the
ex parte
application, so it is argued, in any event, the applicant was
able to show that the provisional preservation order was required to
secure the collection of tax.
ANALYSIS OF EVIDENCE
[17] In this instance, I
have to deal with a revival application that was obtained on
ex
parte
and
in camera.
I am not aware of any considered
judgment where such an application was the subject matter. Neither
did counsel provide me with
any authority in that respect. It is my
view that the fact that it was actually a revival application that
served before the court
should not detract from the fact that the
application was an
ex parte
application and ought to be
treated as such.
[18] Uniform rule 27 (4)
provides, thus:
'(4) After a
rule nisi
has been discharged by default of appearance by the applicant,
the court or judge may revive the rule and direct that the rule so
revived need not be served again.'
[19] It has been held
that whilst the sub rule does permit the court or a judge to revive a
rule
nisi
that
has been discharged by default of appearance by the applicant, the
subrule does not override or detract from the rights of
the opposing
party in the litigation or of third party, nor does it diminish the
need to care for such interests.
[1]
[20] At the time the
revival application was launched the applicant was aware that the
respondents were represented and had indicated
by a letter through
their attorneys of record that they be served copies of any further
proceedings that the applicant may institute
against the respondents.
The applicant failed to serve the revival application on the
respondents and failed to disclose the letter
to the court, whilst it
already knew, having been informed in the said letter of 20 February
2015, that the respondents were not
dissipating their assets and had
no intention to flee South Africa.
[21] Consequently, I do
not agree with the argument by the applicant's counsel that the
applicant failed to attach the letter, and
as such failed to disclose
it to the court, because there is no requirement that any further
information on the facts should be
placed before court at the time of
bringing the revival application. The applicant seems to have lost
sight of the fact that this
was not an ordinary revival application,
but, an
ex parte
application to revive the interim order that
had lapsed. The application should as such not be handled normally,
but, must comply
with all the requirements of an
ex parte
application. One such requirement is full disclosure.
[22] As it has been held,
an
ex
parte
application
is a serious departure from the ordinary principles applicable to
civil proceedings to seek an order in the absence
of notice to the
respondent party. As
per
normal
court practice an
ex
parte
procedure
should be invoked only where there is good cause or reason for the
procedure such as when the giving of notice would defeat
the very
object for which the order is sought. It is, therefore, our law that
an applicant in an
ex
parte
application
bears a duty of utmost good faith in placing before the court all the
relevant material facts that might influence a
court in coming to a
decision. Only facts that are material and which are within the
applicant's knowledge should be disclosed.
[2]
[23] I am in alignment
with what was said by Fabricius J in the unreported judgment of this
court in
Commissioner for the South African Revenue Service v
Sunflower Distributors
CC 2015 JDR 2546 GP, when dealing with the
issue of good faith in
ex parte
applications:
'Section 163 provides for
an
ex parte
application under certain specific circumstances.
I would also interpret the section, in the context of the clear
discretion granted
to a Court, in the light of the principle that the
State is obliged to - and entitled to collect taxes, as its very
existence is
dependent on it. This must also be done swiftly, but, I
must add, at all times lawfully, and in the context of a preservation
order
sought
ex parte,
it must be done with circumspection,
keeping in mind that the utmost good faith required, and the fact
that s 163 allows a procedure
for preserving assets. It is not, and
should not be used, as an execution mechanism as Rogers J said in
par. 73 of the Tradex decision,
supra [Commissioner, South African
Revenue Service v Tradex (Pfy) Ltd and Others
2015 (3) SA 596
WCC
para 72].'
He states further at para
11 of the same judgment that:
'Good faith is a
sine
qua non
in
ex parte
applications. If any material facts
are not disclosed, whether they be fully suppressed or negligently
omitted, the Court may on
that ground alone dismiss an
ex parte
application. The court will also not hold itself bound by an
order obtained under the misapprehension of the true position. Among
the factors which the Court will take into account in the exercise of
its discretion to grant or deny relief to a litigant who
has been
remiss in his duty to disclose are at least:
1. The extent to which
the rule has been breached;
2. The reasons for the
non-disclosure;
3. The extent to which
the first Court might have been influenced by proper disclosure;
4. The consequences from
the point of doing justice between the parties.
See: Superior Court
Practice, Erasmus, Vol. 2 at 01-61 to 01-62.'
[24] Ordinarily, the
effect of uniform rule 27 (4) would be the same as if the
rule
nisi
had
not been discharged. This of course would be were matters are still
res
integra.
However,
it is said that where there is adequate room for a probability that
matters are no longer
res
integra,
the
rule
nisi
should
not be revived without notice to the respondent.
[3]
[25] In
Ex Parle S
&
U TV Services (Pty) Ltd: In re S
&
U TV Services (pty)
Ltd (in provisional liquidation)
above, the court refused an
application for the revival of a provisional order of winding up of a
company where it was brought three
weeks after the discharge of the
provisional order by reason of there being no appearance on the
return day on behalf of the applicant.
The court took into account
the probability that, because of the lapse of three weeks, matters
were no longer
res integra
in that it was possible that
respondents in the application may have heard of the discharge and
acted accordingly.
[26] In this instance,
the
rule nisi
was discharged on 11 February 2015 and revived
on 18 March 2015. Approximately four weeks had lapsed at the time the
order to revive
the
rule nisi
was granted. I would opine,
therefore, that probabilities are that should the letter have been
disclosed to the court that heard
the revival application, that court
would most probably have been influenced not to grant the order and
directed service upon the
respondents.
[27] Besides, the letter
itself would have informed the court that matters are no longer
res
integra.
Some of the reasons why the applicant is seeking a
preservation order is, as alleged by the applicant in its papers,
that the respondents
are disseminating their assets; and that, the
respondents may flee to Mozambique. If the court had sight of the
letter it would
have known that it might not be so. This would be so
because, the respondents informed the appellants in that letter that
they
are not disposing their assets, nor do they intend to flee South
Africa. Most probably, the court would have revived the discharged
rule nisi.
[28] Failure by the
applicant to disclose this letter is to me a material non
disclosure and the applicant's contention that
it found it not
necessary to attach the letter to its founding affidavit does not
hold water. As it was said in the
Sunrise
judgment above
at para 11, 'the deponent cannot act as judge in her own case and
decide which facts to include and which not to
include,' that should
be left to the court to decide.
[29] In court the
applicant's counsel submitted that the letter could not be disclosed
because of the confidentiality of the matter.
The explanation is not
satisfactory as well. The confidentiality of the matter, in my
opinion, was done away with when the Order
was served on the third
respondent. At the time the revival application served before court,
the respondents' attorneys of record
were already in possession of
the Order served on the third respondent. The attorneys of record of
the respondents in the letter
of 20 February 2015 advised the
applicant's attorneys of record to serve a copy of any further
proceedings against the respondents
at their offices. This must have
been on instruction of their clients, the respondents.
[30]
If material facts are not disclosed in an
ex
parte
application
or the facts are deliberately misrepresented to the court the order
will be erroneously granted.
[4]
COSTS
[31] The respondents'
counsel requests an order for costs on an attorney and client scale
in the event the judgment favours the
respondents. The submission by
the respondent's counsel is that the application instituted against
them is vexatious in that the
applicant purposefully misinterpreted
the provisions of s 163 of the Act.
[32] I do not think that
the circumstances of this matter warrant costs on an attorney and
client scale. As it is the matter has
been decided in favour of the
respondents on a technical issue.
[33] Counsel also asks
for costs of postponement occasioned by the applicant on the first
day of trial. According to counsel half
a day was wasted awaiting the
applicant to finalise the negotiations with the other respondents. I
am not inclined to accede to
this request as in my understanding the
matter was postponed
per
agreement between the parties.
ORDER
[34] In the premises I
would make the following order:
1. The application before
me is dismissed with costs, including the costs of two counsel.
2. The provisional
preservation order is not confirmed.
___________________
E.M. KUBUSHI
JUDGE OF THE HIGH
COURT
APPEARANCES:
HEARD ON
THE :
22 March 2016
DATE OF
JUDGMENT :
21 APRIL 2016
APPLICANT'S
COUNSEL :
ADV. NGCONGWANE SC
APPLICANT'S
ATTORNEYS :
MAPONYA INCORPORATED
2
nd
, 3
rd
& 8
th
RESPONDENTS' COUNSEL :
ADV. BHANA SC
2
nd
, 3
rd
,
& 8
TH
RESPONDENTS' ATTORNEY :
GATTOO
ATTORNEYS
[1]
See S & U TV Services (Pty) Ltd: In re S & U TV Services
(Pty) Ltd) (in provisional liquidation)
1990 (4) SA 88(w)
at 90H -
J.
[2]
See Powell and others v Van der Merwe and Others
2005 (5) SA 62
(SCA) para [42].
[3]
See Ex Parte S & U TV Services (Pty) Ltd: In re S & U TV
Services (Pty) Ltd (in provisional liquidation) above at 91
B-C.
[4]
See Naidoo v Matlala NO
2012 (1) SA 143
(GNP) at 153C - E.