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[2016] ZAGPPHC 263
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Malema v Commissioner for the South African Revenue Service (76306/2015) [2016] ZAGPPHC 263; 78 SATC 279 (29 April 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
29/4/2016
CASE
NO. 76306/2015
Not reportable
Not of interest to
other judges
Revised
In
the matter between:
JULIUS
SELLO
MALEMA
Applicant
and
THE
COMMISSIONER FOR THE
SOUTH
AFRICAN REVENUE
SERVICES
Respondent
JUDGMENT
JANSEN
J
[1]
In
this application the applicant seeks a declaratory order to the
effect that SARS is bound to a compromise agreement entered into
by
the applicant with SARS on 26 May 2014 in terms of the Tax
Administration Act 28 of 2014 (the “
TAA
”).
[2]
The
crisp issue to be decided is whether SARS, as a result of alleged
non-disclosures and misstatements made by the applicant, who
expressly warranted the truth of the facts furnished by him, is no
longer bound by the compromise agreement in terms of section 205(a)
to (c) of the
TAA
.
[3]
It is
common cause that the applicant had been assessed to pay income tax,
with interest, on the amount of R 18 192 295.36
by May
2014. This amount was payable in respect of the 2005 to 2011
tax years.
[4]
The
applicant objected to the assessment on the basis that the amounts to
which SARS assessed him were donations or dividends in
respect of
which the applicant declared he could not be assessed to tax.
[5]
The
applicant addressed four requests for a compromise to SARS. The
first request for a compromise was made on 31 October
2012 and a Mr
Ravele, on behalf of SARS, was handed the request by the applicant
for pre-vetting purposes. Mr Ravele returned
an edited version
to the applicant, which created the impression on the part of the
applicant, on his version, that the request
as amended had been
approved.
[6]
It is
important to mention that once the applicant entered into a
compromise agreement with SARS, he could no longer dispute his
tax
debt, in terms of section 194 of the TAA. The applicant was thus in
the unenviable position of electing to deny his tax debt
and appeal
the dispute the assessed taxes or to attempt to enter into a
compromise. By choosing the latter route the applicant
forfeited the
right to appeal against the dismissal of his objection to his tax
debt.
[1]
[7]
As a
result, the applicant made a second request (incorporating Mr
Ravele’s amendments) dated 1 November 2012, which was rejected
by SARS during January 2012. It was rejected because the
applicant had allegedly failed to make full and frank disclosure
of
his tax affairs. SARS failed to give instances of such alleged
failures to make disclosure and the court has thus not
been informed
of what had allegedly not been disclosed. Apparently SARS was
aware of further facts obtained from sources
other than the
applicant. This fact becomes important when assessing the alleged
non-disclosure by the applicant of dealings pertaining
to Erf 662,
Bendor Township, Limpopo, to which I refer below (“
the
Bendor Property
”).
[8]
On 29
January 2013, almost immediately after rejecting the second
settlement agreement, SARS issued sequestration proceedings against
the applicant and he was provisionally sequestrated on 11 February
2014. SARS also took judgment against the applicant for the
disputed
tax on 11 September 2012 by filing a statement as provided for by
section 172 of the TAA.
[9]
On 14
May 2014, the applicant made a third request for a compromise, which
request was similarly rejected by SARS. It was of great
importance
for him not to be sequestrated as he had taken up a seat in
Parliament.
[10]
During
this period SARS launched various investigations and enquiries into
the applicant’s tax affairs as well as into the
affairs of
persons as entities linked to him. An interrogation of the
applicant was also conducted in terms of section 163
of the
TAA
.
It is the applicant’s version that at this juncture SARS
knew more about the affairs of his estate than he did. It
was
submitted on behalf of the applicant that, on the facts available to
him, he made full disclosure of his assets and liabilities.
Mr
Murray, his
curator
bonis
,
also investigated his affairs.
[2]
[11]
The
main reason for the rejection of the third request was because it was
contingent upon a R4 million donation to be made to the
applicant in
order to enable him to finance a part of the compromise amount. The
applicant failed to identify the donor and
failed to address the
payment of donation tax. As a result, the applicant
supplemented his request and submitted a fourth
request to SARS. In
this request the applicant identified the donor who would pay the
donation tax, failing which the applicant
would be jointly liable for
the payment thereof.
[12]
The
fourth request, dated 21 May 2014, was successful and resulted in the
compromise agreement being entered into. The compromise
agreement included an undertaking by the applicant to make full and
frank disclosure of all material facts and to keep his tax
affairs
current and included an express guarantee that the facts advanced
were true.
[13]
It
bears mention that the applicant was provisionally sequestrated on 10
February 2014. The return day of the sequestration
order was
initially set for 26 May 2014. It was, from time to time,
extended.
[14]
The
third request for a compromise dated 14 May 2014, was submitted when
the applicant was under provisional sequestration.
[15]
R4
million was allegedly partially funded by a Mr Martin, another part
with funds held by the applicant’s
curator
bonis,
and the balance with six instalments of R30 000.00 paid from his
salary as a member of parliament.
[16]
SARS
commenced making enquiries about the agreement during October and
November 2014 and SARS’ officials and Mr Malema’s
attorneys exchanged correspondence during these months. The
final date for compliance with the compromise agreement was 30
November 2014.
[17]
By 1
December 2014, the applicant had paid the amount of R7 259 953.79
to SARS (in tranches), as stipulated in the compromise
agreement.
The applicant thus complied fully with all his payment
obligations in terms of the compromise agreement.
[18]
On 13
March 2015, SARS contended that it was no longer bound by the
compromise agreement as set out in an affidavit of Mr Engelbrecht,
a
senior SARS official (as contemplated in section 6(3) of the TAA).
[19]
At the
stage when the compromise agreement was entered into, the applicant
also stated that should the “
anticipated
assessments be levied as anticipated
”
in respect of the 2011 and 2012 tax years, he would pay them as well
utilising payments of R30 000.00 from his salary.
The 2011
assessment was anticipated to be R1 493 117.05 at that
stage and the 2012 assessment R10 567 110.00.
These
amounts were assessed, respectively, as R1 569 492.35 on 26
July 2014 and R11 985 248.72 during
August 2014 for the
years 2011 and 2012 respectively. In terms of clause 3.5
of the compromise agreement it was agreed
that these assessments
would be dealt with in the normal course.
[20]
In
paragraph 4.7.1 of the fourth request it was stated by the applicant
that during the 2013 year of assessments, donations in the
amount of
R2.4 million were paid to the applicant’s firm of
attorneys, Brian Kahn. The applicant could not identify
the
donors and acknowledged that he might have to pay donations tax in
the event that the identities of the donors could not be
established.
Hence, SARS was, at that stage, fully aware of the fact that an
amount of R2.4 million had been paid to Brain
Kahn Attorneys. (SARS’
complaint is that the applicant did not pay any donation tax and did
not declare the donations in
his tax return.)
[21]
Most
importantly, in terms of clause 2.2. of the compromise agreement, the
applicant warranted that the information provided to
SARS was
accurate,
verifiable
and complete. (The use of the term “verifiable”
would indicate that SARS was in a position to assess the accuracy
of
the information provided by the applicant.) Clearly SARS’
role is not to adopt a
non
possumus
attitude. Section 200 of
TTA
authorises a senior SARS official to authorise a compromise but only
if the purpose thereof is to secure the highest net return
from the
recovery of the tax debt and only when the compromise is consistent
with considerations of good management of the tax
system and
administrative efficacy.
[22]
The
compromise agreement includes the provisions of section 205 of
the
TTA
in that clause 7.1 thereof stipulated that SARS would not be bound
thereby: —
If
the applicant failed to make a full, verifiable and complete
disclosure of all material facts to which the compromise relates;
If
he supplied materially incorrect information to which the compromise
relates;
If
he failed to comply with any provision or condition contained in the
compromise agreement, or was guilty of breach of contract;
or
His
estate was finally sequestrated prior to full compliance with the
compromise agreement.
[23]
The
compromise agreement also stipulates that in the event of a breach,
SARS could cancel the agreement and claim the full tax debt
owing
before the compromise agreement was entered into, or claim specific
performance of the compromise agreement.
The
alleged breaches of the compromise agreement
:
[24]
SARS
ascertained that Mr Martin never donated the R4 million referred
to above. A meeting was held with the applicant
who promised to
furnish the name of the donor and proof of the payment of donations
tax by or on 17 November 2014. The information
was not
forthcoming and the matter was referred to a committee, and the
applicant was informed accordingly. On 25 November
2014, SARS
provisionally informed the applicant that it considered itself no
longer bound by the compromise agreement, subject
to representations
to be made by the applicant by 15 January 2015.
[25]
On 26
January 2015, the applicant disclosed that the first R1 million
paid to SARS in terms of the compromise agreement was
indeed not
financed with a donation. He now contended that the amount was
sourced from a certain Kyle Phillips by way of
a loan. In essence,
SARS is stating that his applicant misrepresented the identity of the
donor. The applicant contends that the
identity of the donor was
never elevated to a warrantee, and that at the time he identified Mr
Martin as a donor, he stated the
facts as he knew them at the time.
The applicant also states that the identity of the donor is of
no consequence to SARS.
However, SARS’ complaint seems to
be that it would not receive the anticipated donation tax of R800 000
as no
tax was payable on a loan.
[26]
The
Julius Sello Malema Trust allegedly paid the remaining R3 million by
way of R500 000.00 instalments. The Trust was
allegedly
created to assist the applicant with the payments of his taxes. SARS
adopted the attitude that because the applicant
did not comply with
his undertaking to furnish the name of a donor and to provide proof
of donation tax, the compromise agreement
had been breached.
Donation tax was indeed not paid and would not be paid.
[27]
In
other words, SARS adopted the attitude that the compromise agreement
had to be complied with to the letter.
[28]
The
argument developed by SARS is that SARS is a creature of statute with
a strict mandate in terms of section 193(1) of the
TTA
,
to assess and collect all taxes and not to forego any tax debts. It
was emphasised that prior to the enactment of section 205,
SARS
had no power to compromise a tax debt and when it did, the provisions
of section 205 had to be met.
[29]
The
applicant argued that he had entered into a horizontal, common law
agreement with SARS, with the result that issues such as
misrepresentations and breach of the contract came into play, as they
would in the case of contracts at common law. It was
further
argued that an agreement entered into with an organ of state is
imbued with constitutional values as was held by Cameron
J in the
matter of
Allpay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer, SASSA and Others
2014
(1) SA 604
(CC)
.
[30]
SARS
argued that the use of the word “material” within the
context of section 205 rendered that which the applicant
did not
disclose, material. It was argued that SARS was entitled to
full and accurate information in order to exercise its
mandate as
envisaged in section 193(1). According to SARS’
argument, the intention of a tax payer (let alone
dolus
)
did not form part of the enquiry. To use an analogy –
SARS contended that the information furnished in terms of section 205
was either accurate or inaccurate, as though the applicant were
writing a mathematics examination, and once answers were incorrect,
or not furnished, the applicant immediately scored nought. However,
this scenario does not even hold true in the case of
a mathematics
examination. Depending on the percentage of incorrect answers
or answers not furnished, one can still pass
or even receive a
distinction. Even at common law, a breach of an agreement has
to go to the root of the contrast before
it gives rise to a right to
cancel an agreement.
[31]
When
SARS’ argument is followed to its logical conclusion the use of
the word “material” in section 205 is otiose
– any
form of non-compliance with a compromise agreement, however
insignificant, would result in a breach thereof. Whether
an
omission or misrepresentation caused SARS to enter into the
compromise agreement, would, according to the argument put forward
on
behalf of SARS, be wholly irrelevant. Such an argument appears
to overlook the use of the word “material”
as used in the
section. The word “material”, properly construed within
section 205, appears to convey that the
misrepresentation or
omission has, to a significant extent, to induce SARS to enter into a
compromise agreement or to reject it.
Based on the information
furnished, SARS, when entering into a compromise agreement, must be
of the opinion that it is fulfilling
its mandate not to forego the
payment of taxes, where possible.
[32]
Clearly
SARS has to analyse the information provided to reach a conclusion as
to whether it should enforce payment of all taxes
due and payable or
forego any tax debts. On the information provided by the
applicant, SARS deemed it prudent, and a fulfilment
of its mandate in
terms of section 183, to forego certain taxes. SARS may
only do so “
if
it would be to the best advantage to the State
”.
Hence it appears that to argue that causal effect is not a
factor is not feasible. The information provided
either induces
SARS to forego a debt or, in the alternative, to enforce it. Only
when the information provided is materially inaccurate
or incomplete
will SARS be induced to forego a debt when it would not have done so
had the information furnished been materially
different.
[33]
The
information furnished dictates the route which SARS will follow in
the exercise of its discretion. SARS ensures that it
obtains
accurate information by requesting a tax payer to warrant that the
information is “
accurate,
verifiable
and complete
”
(emphasis added). The question arises as to the consequences
for a tax payer who is unaware of certain facts and only
ascertains
them after an agreement of compromise has been entered into. One
can understand a situation where the tax payer
intentionally or
negligently induces SARS to enter into a compromise agreement. On
the face of it one could not expect SARS
to be bound by such a
compromise agreement. However, where the taxpayer is unaware of
certain facts, the consequences may
be different. SARS argues
for absolute liability, whatsoever the circumstances.
[34]
It was
a term of the compromise agreement that once the terms thereof had
been complied with, SARS would request that the provisional
sequestration order be discharged.
[35]
As
reflected in the supplementary affidavit of 13 March 2015, deposed to
by Mr Engelbrecht on behalf of SARS in the sequestration
application,
SARS made it clear that it was of the view that it was no longer
bound by the compromise agreement on the following
grounds, namely
that the applicant had failed: —
to
identify the donor and to see that donations tax was declared and
paid resulting from the compromise amount being allegedly
paid by
donations;
to
keep his tax affairs current and paid up to date as set out in
paragraph 3.8 of the compromise agreement, in that he, inter
alia
failed
to see to it that the donations tax resulting from part of the
compromise amount being paid by donations was paid. He
did not
only accept liability for this, but he was in fact liable in terms
of the provisions of the Income Tax Act; and
failed
to make payment of the previously acknowledged liability for the
(additional) 2011 and 2012 assessments, and in fact subsequently
proceeded to object against the assessments and failed to declare
the donations received by attorney Brian Khan (which the applicant
contends were paid to settle fees and disbursements).
He
had made further misstatements in the request for the compromise:
for instance, that he was a beneficiary of the JSM Trust
and that
the Trust was formed to assist him to pay his tax liability,
although that was not the case. It was also alleged that
the JSM
Trust had failed to keep its tax affairs in order.
[36]
A
fifth ground was later added namely that Mr Malema did not disclose
his interest in the Bendor Property.
[37]
As a
result, SARS informed the applicant that it would seek the
confirmation of the provisional sequestration order on 16 March
2015,
based on the entire amount payable by then as well as on the further
assessments in a total of R32 934 232.28.
(16 March
2015 was after the date when the compromise agreement had to be
complied with in full by the applicant.)
[38]
The
above grounds for cancellation are disputed. The issue of the
identity of the donor has been dealt with above. In terms
of
clause 3.5 of the compromise agreement the 2011 and 2012 assessments
would be dealt with in the normal course. It was argued
by SARS that
the applicant had unequivocally accepted liability for these
assessment which the applicant disputed and, in any event
stated that
the amounts were not taxable as income in his hands as they were
dividends or donations.
[39]
Interestingly,
SARS alleged, that the applicant had been negligent in under
declaring of his income, which the applicant denied.
SARS knew of the
payments to Brian Kahn and makes it clear that this court is not to
determine this issue for present purposes.
[40]
Regarding
the JSM Trust’s tax affairs, it is common cause that although
initially it was not the case, the Trust did, to the
satisfaction of
SARS, regularise its tax affairs. The applicant contends that he
issue whether the JSM Trust’s tax affairs
were regularised or
otherwise, has nothing to do with his rights and obligations under
the compromise agreements.
[41]
The
return date of the provisional sequestration order was extended in
order to allow the applicant to file an answering affidavit.
The
applicant also filed an application akin to the current application
as a counter-application. On the return date,
namely 1 June
2015, the application served before Wright J. By then, the Economic
Freedom Front (“
the
EFF
”)
and the JSM Trust had launched applications to intervene in the
sequestration application and the applicant had filed a
counter-application seeking an order declaring the compromise
agreement valid. Both applications were struck from the roll
due to lack of urgency and the sequestration application and counter
application were withdrawn and SARS agreed to pay the applicant’s
costs.
[42]
As a
result, when the applicant wished to re-enrol the current application
it was met with a procedural challenge by SARS. The
Deputy
Judge President directed that a (new) self-standing declaratory
application be launched, which is the application dealt
with in this
judgment.
[43]
It is
the applicant’s contention that SARS’ decision that it is
no longer bound by the compromise agreement is unlawful.
It was
contended on behalf of the applicant that the matter could have been
treated as unlawful administrative action but
that it elected to
treat it as one of private and not public law. It was contended
by the applicant that SARS, as an organ
of state, however played a
special role and had to conform with the prescripts of the
Constitution. It was argued on behalf
of the applicant that the
applicant’s rights to human dignity, freedom of trade,
occupation and profession, property and
administrative action, had to
be complied with by SARS.
The
fans et origo
of the tax dispute:
[44]
It is
common cause that Mr Malema received donations from donors and
dividends from a company during the period 2005 to 2012.
[45]
The
real dispute between the applicant and SARS is how these donations
and dividends should be classified. These donations
and
dividends were classified by SARS as income in Malema’s hands;
and SARS raised the assessments mentioned above. The
applicant
contends that it is not taxable income. It is the applicant’s
contentions that the donations were made out
of generosity or
disinterested benevolence and that dividends received by the
applicant during that period were not taxable.
[46]
SARS
alleged that these payments were not made out of pure liberality but
with the motivation of self-interest or at least an expectation
of a
quid
pro quo
.
That this is not a dispute which can be resolved on affidavit is
self-evident.
[47]
The
dispute between the applicant and SARS seems to be purely factual –
were the monies indeed donations and/or dividends.
That
politicians routinely do receive donations cannot be denied.
[48]
After
obtaining a provisional sequestration order against the applicant on
11 February 2014, SARS took judgment against the applicant.
On
4 March 2014, SARS obtained a preservation order against the
applicant in terms of section 163 and a Mr Murray was
appointed
as his
curator
bonis
.
Mr Murray was authorised to collect all the applicant’s
assets and convert them into cash and to pay the proceeds
to SARS,
which he did during 2013.
[49]
The
compromise agreement provided that: —
“
Once
the terms contained in the compromise agreement have been complied
with: —
3.4.1. SARS
will request that the provisional sequestration order… be
discharged.
”
[50]
However,
as set out above, after the applicant had paid the entire amount
owing in terms of the compromise agreement, SARS decided
that it was
no longer bound by the compromise agreement.
[51]
The
high water mark of SARS’ case seems to be the allegations that
the applicant did not make full and frank disclosure and
failed to
keep his tax affairs current. As set out below, these allegations are
in dispute. The latter reference relates in part
to the R120,000 paid
in respect of Municipal rates in respect of the Bendor property. It
should be self-evident that these statements
are difficult to assess
on the evidence provided.
[52]
As set
out above, due to certain developments on the return day of the
sequestration application including the filing of a
counter-application
by the applicant to declare the proceedings an
abuse of process and a declaration that the compromise agreement was
valid and binding,
SARS withdrew the sequestration agreement.
However, it then contended that it was no longer bound by the
compromise agreement.
Chapter
14 of the Tax Administration Act
:
[53]
In
terms of section 192 of the
TAA
,
a compromise of a debt can only take place when the liability to pay
the debt is not disputed by the debtor. The applicant
contends
that there is a difference between “not disputing” a debt
and “admitting” a debt. Although,
semantically,
there might be a difference, in practice, there is none.
[54]
One of
the pitfalls of a compromise for a tax payer is that he/she loses
his/her right to object to a debt and the right to appeal
an
assessment. Hence, SARS cannot be allowed to enter into a
compromise with a taxpayer only to deny its validity based on
unwarranted grounds. An onus lies on SARS as well, to secure
the highest net income from a tax debt and to enter into compromises
on an informed basis. Thus section 100(4) of the
TTA
entitles senior SARS officials to require that an application for
compromise be supplemented by further information.
[55]
A SARS
official entering into a compromise has all the obligations set out
in section 202 of the
TTA
,
for example, that the debt will be collected at an earlier date and
yield a greater amount. In terms of section 203(b)
of the
TTA
when a debtor’s tax affairs are not up to date, no senior SARS
official may compromise a tax debt. SARS was auditing
aspects
of the 2011 and 2012 tax years and apparently kept the on-going
assessments outside the ambit of the compromise agreement.
[56]
In
terms of section 200(4) of the
TTA
,
once a senior SARS official and a debtor has signed a compromise
agreement setting out the amount to be paid in full satisfaction
of
the debt, SARS must give an undertaking that it will not pursue the
recovery of the balance of the tax debt.
[57]
The
only circumstances when SARS is not bound by a compromise are set out
in section 205 which have been referred to above.
[58]
Whether
a term is material to a contract may be gauged as to how “vital”
the terms is, as was held in
O’Connell
v Flischman
1948 4 SA 191
(T)
.
[59]
Regarding
the non-disclosure of the Bendor Property, SARS claims that the
applicant intentionally did not disclose his interest.
Such
fraud will always be material. Regarding the other four grounds
relied upon by SARS to state that it is no longer
bound by the
compromise agreement, SARS does not contend that the applicant
intentionally misled SARS. As pointed out above negligence
was
alleged on the part of the applicant in respect of the R2,4 million
paid to Brian Kahn attorneys. In any event, SARS states
in its heads
of argument that it is not for this court to decide this issue.
[60]
What
is apparent, though, is that SARS alleges that any misstatement or
failure to make a disclosure is automatically material.
As
stated, it is then not understood why the word “material”
is necessary or used in section 205.
[61]
In
fact, in its preamble, the compromise agreement states the
following: —
“
SARS
has determined
a)
that
it would be in the best interest of the State and the Debtor that the
debt be compromised;
b)
the
compromise complies with the requirements of section 204;
c)
the
purpose of the ‘compromise’ is to secure the highest net
return for the recovery of a tax debt; and
d)
the
‘compromise’ is consistent with considerations of good
management of the tax system and administrative efficiency.
”
[62]
Regarding
the Bendor Property, it is common cause that the applicant made an
offer to purchase it for the amount of R373 000.00
on 30
November 2009 According to the affidavit of attorney Rafique Satar
Essa (the transferring attorney) the Polokwane Local Municipality
was
represented by Ms Nare, Essa alleges that when the offer for purchase
of the Bendor property was made, the applicant allegedly
knew in 2012
that the property had been paid for and also knew that the property
was transferred to him in 2014. Whether
attorney Essa is
telling the truth is in dispute, as well as his “attesting”
to certain “affidavits” signed
by the applicant, years
after he had signed them. It appears as though Ms Nare’s
“signature” on “an affidavit”,
relied upon by
Mr Essa, is not authentic as stated by her in an affidavit.
[63]
The
applicant’s Ratanang Family Trust, paid the pro forma transfer
costs of R10 500.00 on 29 April 2010. The purchase
price was
payable within a year, from 30 November 2010, failing which the
agreement would lapse. The applicant never paid
the purchase
price. However, he had to pay municipal charges from the time
he signed the offer to purchase. Unbeknown
to him, on the
applicant’s version, a company by the name of On-Point
Engineering (Pty) Ltd, on behalf of Gwama Properties
(apparently at
the behest of a Mr Gwangwa) paid a large part of the purchase price
on 25 May 2011.
[3]
Attorney
Essa alleges that he informed the applicant about this fact because
the cheque was returned, which the applicant
denies. SARS,
relying on Mr Essa’s affidavit contends the contrary.
[64]
When
he made his first request for a compromise, the applicant informed
SARS of the existence of the Bendor property. In paragraph
15.1
of the first request, the applicant states the following: —
“
A deed
of sale was signed by me in 2009 for a municipal property to be
purchased in Polokwane for the sum of R373 000-00. To
date, no payments have been made for the property and transfer has
not taken place to me.
”
[65]
In
fact, when the applicant made this statement, Attorney Essa alleges
that the purchase price had been fully paid by the first
week of
December 2012. This allegation cannot be accurate as the deposit and
an amount of R340,000 only was paid leaving R22 500
short.
Furthermore, there was no payment of disbursements or fees in respect
of the property.
[66]
Thus
SARS knew about the offer to purchase yet nonetheless deemed it fit
to enter into a compromise agreement with the applicant.
[67]
When
the applicant was experiencing a turbulent time, the Municipality
claimed payment of services rendered in respect of the property.
On
the applicant’s version, he simply paid an amount of R70 000.00
on 14 May 2014 claimed by the Municipality
of Polokwane with the
intention of sorting out the demand for payment at a later stage. On
14 September 2014 2014 he paid
another R50 000 to the
Municipality of Polokwane. He was in the process of becoming a
member of Parliament and did not
wish to be blacklisted by a
Municipality. SARS denies that the applicant would have paid these
amounts in order not to be embarrassed
by political opponents but
rather because he had full knowledge of the fact that he owned the
property.
[68]
Only
after the applicant had made the last payment in terms of the
compromise agreement, was the applicant’s attorney, Mr
Molokwane, informed that the Bendor Property had been transferred
into the applicant’s name on 3 December 2014. A transfer,
by necessity, has tax implications, which the applicant would have
had to disclose to SARS.
[69]
Mr
Essa, the transferring attorney, “attested” to
“affidavits”, documents which had been signed by the
applicant and Ms Nare years before. These backdated documents raise
serious doubt regarding Mr Essa’s credibility. (Even Ms
Nare’s
signature is suspect as set out above.)
[70]
The
applicant contends that he is absolutely truthful in contending that
he had all but forgotten about the Bendor Property mentioned
in his
first request for a compromise. SARS states that he would not have
“forgotten” a property with a current value
of
approximately R800,000.
Referral
to trial:
[71]
At the
hearing, the applicant’s advocate requested that not only the
issue of the Bendor Property, but the entire application
be referred
to trial because of the factual disputes in the application.
[72]
In
addition to the issue of the Bendor Property, which this court is not
in a position to decide on affidavit, the other issues,
which gave
rise to SARS declaring that it is no longer bound by the compromise
agreement, are equally difficult to decide on the
conflicting
versions set out in the affidavits. Even though SARS seeks to
argue that it is merely a matter of interpretation
it cannot be
discounted that the information available to the parties and the
reasons and facts upon which they entered into the
compromise
agreement may be relevant. In this regard reference is made to
the case of
Natal
Joint Municipal Pension Fund v Endumeni Municipality
(920/2010)
[2012]
ZASCA 13
;
[2012] 2 All SA 262
(SCA);
2012 (4) SA 593
(SCA) (16 March
2012)
.
[73]
In
this matter, at p 604
et.
seq.
Wallis JA embarked on an in-depth analysis of the rules of
construction of written instruments and emphasised the importance,
from the outset, to read words used in the context of the document as
a whole and in the light of all relevant circumstances such
as the
background to the preparation and production of the document. Wallis
JA emphasised that most words can bear several different
meanings or
shades of meaning and to try to ascertain their meaning in the
abstract, divorced from the broad context of the case,
is an
unhelpful exercise. In order to decide on the correct meaning of
words, the apparent purpose of the provision and the context
in which
it occurs will be important guides to the correct interpretation. One
must also take into consideration the material known
to those
responsible for the production of the written instrument. Judges must
guard against the temptation to substitute what
they regard as
reasonable, sensible or business-like for the words actually used but
must prefer a sensible meaning.
[4]
[74]
The
less said about the correct legal interpretation of section 205,
at this stage, the better. Whether the respondent’s
or
the applicant’s interpretation of the compromise agreement is
correct, cross-examination in respect of the parties’
knowledge
of the facts and the circumstances attendant upon the compromise
being entered into will bring clarity to matters of
great importance
to all the parties. Cross-examination may even demonstrate that
SARS would in any event have entered into
the compromise agreement
had it been aware of all the facts which SARS contends the applicant
did not disclose or disclosed inaccurately
or incompletely – or
prove the exact opposite.
[75]
There
is also the troublesome fact that Mr van Loggerenberg, who was
originally in charge of the investigations against the applicant,
was
subjected to an enquiry (the so-called Sikhakhane enquiry) and had to
resign from SARS. There is a further aspect to
be borne in mind
namely that should the applicant be sequestrated, he can no longer
serve as a member of Parliament. The
applicant alleges that the
attempt by SARS to set aside the 2014 compromise is the result of
political interference – which
species of interference he had
witnessed personally in the affairs of President Mbeki and Mr Zuma
(as he then was).
[76]
According
to Mr Malema, the disgraced Mr van Loggerenberg acted illegally in
establishing a so-called “van Loggerenberg Unit”
which
was a secret information gathering unit within SARS. In the
Sikhakhane report it was unequivocally stated that SARS may not
establish and operate such a unit. The applicant also contends that
Mr Engelbrecht, who deposed to the affidavit on behalf of SARS
setting out the reasons why SARS was allegedly no longer bound by the
compromise agreement, had a close relationship with Mr van
Loggerenberg. During the hearing it was suggested that there was
“political skulduggery” on the part of SARS to which
SARS’ counsel strongly objected.
[77]
To
reach a conclusion on the facts set out in the affidavits may very
well lead to an incorrect conclusion. The use of the
word
“material” in section 205 must be given some meaning
and whether facts are to be termed “material”
does not,
necessarily, merely entail an objective test. The facts which
persuaded SARS to enter into the compromise agreement
and,
thereafter, to adopt the stance that it is no longer bound thereby
will contextualise the said agreement and give rise to
fertile
grounds for cross-examination as may the knowledge on the part of the
applicant when he entered into the compromise agreement
and furnished
(or failed to furnish) certain facts.
[78]
As
stated, it was argued on behalf of the applicant that genuine,
disputes of fact had arisen which warranted a referral of the
application to trial, particularly in respect of the Bendor Property,
but also in relation to the other grounds relied upon by
SARS. When
regard is had to the evidence before the court it is a veritable
quagmire.
[79]
The
applicant has seriously engaged with the factual allegations it seeks
to challenge and has furnished not only an answer but
also
countervailing evidence, where such facts fall within his personal
knowledge.
[5]
[6]
[80]
Motion
proceedings, unless concerned with interim relief are about the
resolution of legal issues based on common cause facts. Factual
issues cannot be resolved to establish probabilities. In
circumstances where the applicant’s version cannot be rejected
as being clearly without merit, the only way in which the factual
issues can be resolved is by way of
viva
voce
evidence.
[81]
In the
matter of
Wightman
t/a J W Construction v Headfour (Pty) Ltd and Another
(66/2007)
[2008]
ZASCA 6
;
[2008] 2 All SA 512
(SCA);
2008 (3) SA 371
(SCA) (10 March
2008)
it
was held at paragraph [12] that the truth almost always lies beyond
mere linguistic determination. At par [13] the following
was held: —
“
A real
genuine and bona fide dispute of fact can exist only where the court
is satisfied that the party who purports to raise the
dispute has in
his affidavit seriously and unambiguously addressed the fact said to
be disputed. There will of course be instances
where a bare denial
meets the requirement because there is no other way open to the
disputing party and nothing more can therefore
be expected of him.
But even that may not be sufficient if the fact averred lies purely
within the knowledge of the averring party
and no basis is laid for
disputing the veracity or accuracy of the averment. When the facts
averred are such that the disputing
party must necessarily possess
knowledge of them and be able to provide an answer (or countervailing
evidence) if they be not true
or accurate but, instead of doing so,
rests his case on a bare or ambiguous denial the court will generally
have difficulty in
finding that the test is satisfied. I say
‘generally’ because factual averments seldom stand apart
from a broader matrix
of circumstances all of which needs to be borne
in mind when arriving at a decision.
”
[82]
To
what extent the alleged flaws in the facts provided to SARS can be
attributed to intent on the part of the applicant, and to
which
extent they can be termed material to allow SARS to assert that it is
no longer bound by the compromise agreement, are issues
which SARS
wishes to have resolved on affidavit. Put simply, the only
conclusion that can be drawn for SARS’ argument
is that any
non-compliance with the terms of the compromise agreement is
material. Logic dictates that this is not the case
but depends
on the facts attendant upon the compromise agreement being entered
into.
[83]
In any
event, fraud cannot be decided on affidavits as it was aptly put in
the matter of
Commissioner
for the South African Revenue Services v Sassin and Others
(6927/2014)
[2015] ZAKZDHC 82;
[2015] 4 All SA 756
(KZD) (21 October 2015)
.
[84]
SARS
is careful not to allege fraud in relation to the other four grounds
which caused it to adopt the attitude that it is no longer
bound by
the compromise agreement.
[85]
The
court was referred to the matter of
AllPay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer, South African Social Security Agency and
Others
2014 (1) SA 604
(CC)
for
the proposition that, in assessing the term “material”
within the context of alleged administrative irregularities,
what has
to be determined is whether the purpose which the administrative
actions (in that case tender requirements) was intended
to serve, had
substantially been achieved.
[86]
To a
large extent, the applicant’s argument is akin to the argument
in
AllPay
Consolidated
– he states that any non-disclosures and alleged inaccurate
facts were inconsequential. SARS contends the contrary,
but its
contention is based on its legal interpretation of section 205
to the effect that any inaccurate fact or non-disclosure
is
substantial, and no regard should be had to the consequences of such
inaccurate facts or non-disclosures.
[87]
It
does not avail SARS to state that it matters not whether the
non-disclosures and inaccuracies were intentional. Adopting
this stance SARS is seeking to force the matter to be heard on the
affidavits. Given the fact that the fifth ground advanced
by
SARS is, in any event, fraud, this issue has to be referred to trial.
All the issues, as was submitted by counsel for
the applicant,
should then be referred to trial in order to obtain clarity regarding
the correct facts upon which the matter should
be adjudicated.
Should the conduct of the applicant have been fraudulent in all
respects, then SARS will have no difficulty
in persuading a court
that it is not bound by the compromise agreement.
[88]
For
this reason, and in an exercise of the court’s discretion, the
matter is referred to trial.
[89]
Sight
is not lost of the fact that it was the applicant who sought a
declarator, but its understanding was that fault on the part
of the
applicant in conveying or failing to convey facts to SARS played a
cardinal role. In any event, the applicant opined
that he had
complied with the compromise agreement. It was only in argument
that SARS at the hearing adopted the argument
that it does not matter
whether there was fault on the part of the applicant or otherwise.
The bold statement is made in the answering
affidavit that “in
view of the material breaches, nondisclosures and misstatements SARS
is of the view that it is not bound
by the compromise agreement.”
It is never precisely explained in which respects the aforesaid
breaches etc. are material.
It is left for the court to speculate or
make deductions, which it is unable to do on the conflicting facts
presented.
[90]
This
court does not wish to bind the court hearing the trial and does not
express an opinion on which interpretation of section 205
of the
TTA
is accurate. These issues will be clarified when evidence is
led regarding the rationale for SARS entering into a compromise
agreement and later adopting the stance that it is not bound by it.
[91]
In the
premises, the following order is made: —
Order
1.
The
matter is referred to trial.
2.
The
Applicant’s notice of motion stands as the simple summons and
the Respondent’s notice of intention to oppose stands
as a
notice of intention to defend.
3.
The
Applicant is directed to file his declaration within 30 days of this
court order.
4.
Thereafter
the Uniform Rules of Court regarding the filing of pleadings and all
processes and procedures shall apply.
5.
The
costs incurred to date are costs in the action, which costs include
the costs consequent upon the employment of two counsel.
MM
JANSEN J
JUDGE
OF THE HIGH COURT
Counsel
for the applicant:
P
F Louw SC
Instructed
by:
Tumi
Mokwena Inc.
Counsel
for the respondent:
JJ
Gauntlett SC, HGA Snyman SC
Instructed
by:
Mahlangu
Attorneys Inc
[1]
It is pointed out by SARS that
the applicant only requested a compromise on 31 October 2012 and he
had only until 26 October 2012
to submit an appeal which he failed
to do. It is unclear why he failed to submit an appeal.
[2]
I revert to the appointment of
Mr Murray as
curator
bonis
below.
[3]
Many of the dates relied upon by
the applicant and SARS are different. In a chronology of events
furnished by SARS the date of
this payment is stated to be 25 May
2011.
[4]
Spigelman CJ describes this as a
shift from text to context. See 'From Text to Context: Contemporary
Contractual Interpretation',
an address to the Risky Business
Conference in Sydney, 21 March 2007, published in Spigelman
Speeches
of a Chief Justice 1998
–
2008
,
239 at 240. The shift is apparent from a comparison between the
first edition of Lewison
The
Interpretation of Contracts
and
the current fifth edition. So much has changed that the
author, now a judge in the court of appeal in England, has
introduced a new opening chapter summarising the background to and a
summary of the modern approach to interpretation that has
to a great
extent been driven by Lord Hoffmann.
[5]
Minister of Land Affairs
and Agriculture & Others v D&F Wevell Trust
2008 (2) SA 184
(SCA)
paragraph
[56]
.
[6]
Wightman t/a JW
Construction v Headfour (Pty) Ltd & Another
[2008] ZASCA 6
;
2008
(3) SA 371
(SCA)
paragraph
[13]
.