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[2015] ZAKZDHC 82
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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)
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IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, DURBAN
Case
no: 6927/2014
DATE:
21 OCTOBER 2015
REPORTABLE
In
the matter between:
THE
COMMISSIONER FOR THE
SOUTH
AFRICAN REVENUE
SERVICE
......................................................................
APPLICANT
And
JACQUES
SASSIN
..................................................................................................
1
ST
RESPONDENT
(ID
73………….)
TROJIN
FEEDS (PTY)
LTD
.................................................................................
2
ND
RESPONDENT
(Registration
number 2013/020344/07)
FRANCOISE
JANE
SASSIN
.................................................................................
3
RD
RESPONDENT
(ID
75……………)
THE
TRUSTEES FOR THE TIME BEING OF THE
GLOBAL
TRUST (IT
1049/2012)
..........................................................................
4
TH
RESPONDENT
Being
JACQUES
SASSIN
And
JOSE
ALBERTO DELGADO (ID 70……….)
As
nominee of IPROTECT TRUSTEES (PTY) LTD
THE
TRUSTEES FOR THE TIME BEING OF THE
FIRST
TRUST (IT
1261/2009),
..............................................................................
5
TH
RESPONDENT
Being
JACQUES
SASSIN
(ID
73……………)
JOSE
ALBERTO DELGADO
Representing
THE BEST TRUST COMPANY
(WESTERN
CAPE) (PTY) LTD
(Registration
Number 2001/018739/07)
THE
TRUSTEES FOR THE TIME BEING OF
THE
........................................
6
TH
RESPONDENT
THIRD
TRUST (IT 2180/2008)
Being
FRANCOIE
JANE SASSIN;
JAQUES
SASSIN
and
JOSE
ALBERTO DELGADO
THE
TRUSTEES FOR THE TIME BEING OF
THE
........................................
7
TH
RESPONDENT
HOME
TRUST (IT 2761/2009)
Being
FRANCOISE
JANE SASSIN;
JACQUES
SASSIN
and
GUY
EMILE THOMAS
THE
TRUSTEES FOR THE TIME BEING OF
THE
........................................
8
TH
RESPONDENT
DUAL
TRUST [IT 298/2013 (DBN)],
Being
JACQUES
SASSIN
and
JOSE
ALBERTO DELGADO
representing
IPROTECT TRUSTEES (PTY) LTD
THE
TRUSTEES FOR THE TIME BEING OF THE
FRENCH
TRUST (IT
2763/2009),
.........................................................................
9
TH
RESPONDENT
Being
FRANCOISE
JANE SASSIN;
JACQUES
SASSIN
and
THE
BEST TRUST COMPANY (WESTERN CAPE)
(PTY)
LTD
(Registration
Number: 2001/018739/07)
represented
by
JOSE
ALBERTO DELGADO
THE
TRUSTEES FOR THE TIME BEING OF
THE
......................................
10
TH
RESPONDENT
SECOND
TRUST (IT 2181/2008)
Being
JACQUES
SASSIN
And
THE
BEST TRUST COMPANY (WESTERN CAPE)
(PTY)
LTD
(Registration
Number 2001/018739/07)
represented
by
JOSE
ALBERTO DELGADO
THE
TRUSTEES FOR THE TIME BEING OF THE
PROPERTY
TRUST [IT 1050/2012
(DBN)]
.......................................................
11
TH
RESPONDENT
Being
JACQUES
SASSIN
And
JOSE
ALBERTO DELGADO
As
a nominee of IPROTECT TRUSTEES (PTY) LTD
THE
TRUSTEES FOR THE TIME BEING OF
THE
......................................
12
TH
RESPONDENT
TRIO
TRUST [IT 300/2013 (DBN)]
Being
JACQUES
SASSIN
And
JOSE
ALBERTO DELGADO
as
nominee of IPROTECT TRUSTEES (PTY) LTD
THE
TRUSTEES FOR THE TIME BEING OF
THE
......................................
13
TH
RESPONDENT
RETIREMENT
TRUST [IT 718/2013 (DBN)]
Being
JACQUES
SASSIN
And
JOSE
ALBERTO DELGADO
as
a nominee of IPROTECT TRUSTEES (PTY) LTD
ORDER
(a)
The parties are ordered to trial.
(b)
The Notice of Motion shall stand as a summons with the applicant to
file its declaration within one (1) month from date
of delivery of
this judgment.
(c)
The respondents are directed to file their plea (or any other
pleading) within 20 days after delivery of the applicant’s
declaration.
(d)
The applicant is ordered to pay the respondents’ costs of the
application including the costs of the argument on
27 August 2015,
such costs to include the costs consequent upon the employment of two
counsel.
JUDGMENT
SEEGOBIN
J:
INTRODUCTION
[1]
This is without doubt an extraordinary matter. It arises out of
VAT fraud committed on a grand scale against the South
African
Revenue Service (SARS) causing it to suffer a huge loss. It is
common cause that the fraud was perpetrated (rather
shamelessly I may
add) by a certain Petrus Johannes Uys Badenhorst (‘Badenhorst’)
who, at all material times, traded
as SA Global Trading (‘SA
Global’). Badenhorst is not a party to these proceedings
and as such no relief is being
sought against him in spite of the
fact that he is indebted to SARS in an amount exceeding R800
million. He is currently
insolvent and there is no hope of SARS
recovering any amount from him.
[2]
In the present motion proceedings, the applicant, being the
Commissioner for the South African Revenue Services,
seeks judgment
in an amount of R41 253 533.50 against the first
respondent, a Mr Jacques Sassin (Mr Sassin) and the second
respondent, Trojin Feeds (Pty) Ltd (Trojin Feeds) of which Mr Sassin
was the sole director. The applicant further seeks a
declaratory order against Mr Sassin and also seeks certain ancillary
relief against the third to thirteenth respondents.
The third
respondent, Ms Francois Jane Sassin
(Mrs Sassin), is the wife of
Mr Sassin. The fourth to thirteenth respondents are all trusts
of which Mr Sassin and a Mr Jose
Alberto Delgado (Mr Delgado) are
trustees. The claims against Mrs Sassin and the other
respondents are for certain specified
amounts paid to them by Mr
Sassin allegedly from the ill-gotten gains received by him from
Badenhorst as a consequence of the fraud.
[3]
The declaratory relief sought against Mr Sassin is to hold him liable
as a co-wrongdoer for the total amount of
the damage caused to the
applicant as a result of the fraudulent scheme perpetrated by
Badenhorst and to which Mr Sassin was allegedly
a party. The
total liability that was required to be fixed in this regard was said
to be an astronomical R370 million. However,
at the hearing of the
application the applicant was content not to have an amount specified
in the event of such an order being
granted. A draft order to
this effect was handed up.
[4]
To complete the picture as far as the parties are concerned, it
should be mentioned that Mr Sassin was also a director
and employee
of a company known as Benietha Veevoere (Pty) Ltd (Benietha) until 7
August 2013.
Mr Sassin held a 30% share in Benietha.
The balance of 70% was held by a
Mr and Mrs van der Westhuizen
(the van der Westhuizens). The latter were said to be
semi-retired but nonetheless still took
a keen interest in Benietha.
Mr Sassin’s shareholding in Benietha was held through a
trust.
FULL
EXTENT OF RELIEF SOUGHT
[5]
The full extent of the relief sought in the notice of motion
[1]
is in the following terms:
“
1.
The first and second respondents are ordered to pay the amount of
R41,253,533.50 jointly and severally, the one to pay
the other to be
absolved, to the applicant, together with interest thereon at the
mora
rate
of 15.5% per annum reckoned from 1 August 2013 to date of payment.
2.
The Third respondent is declared to be
liable to the applicant in the amount of R400,000.00 in so far as the
applicant is unable
to recover the amount of R41 million aforesaid
from the first and/or second respondents.
The
fourth respondent, the Global Trust (IT 1049/2012), is declared to be
liable to the applicant in the amount of R37,455,203.00
in so far as
the applicant cannot recover the R41 million mentioned above form
first and/or second respondents.
3.
The fifth respondent, the First Trust
(IT2761/2009), is declared to be liable to the applicant in the
amount of R37,452,635.00 in
so far as the applicant cannot recover
the R41 million mentioned above from first and/or second
respondents. This liability
is not cumulative to the liability
of the Global Trust, and accordingly in so far as the one pays, the
other of them will be absolved
from liability.
4.
The sixth respondent, the Third Trust
(IT2180/2008), is declared to be liable to the applicant in the
amount of R5,017,215.00 in
so far as the applicant cannot recover the
R41 million mentioned above from first and/or second respondents.
This liability
is not cumulative to the liabilities of the Global
Trust or the First Trust, and accordingly in so far as the one pays,
the other
of them will be absolved from liability.
5.
The seventh respondent, the Home Trust (IT
1276/2009), is declared to be liable to the applicant in the amount
of R1,149,331.35
in so far as the applicant cannot recover the R41
million mentioned above from first and/or second respondents.
This liability
is not cumulative to the liabilities of the Global
Trust or the First Trust, and accordingly in so far as the one pays,
the other
of them will be absolved from liability.
6.
The eighth respondent, the Dual Trust (IT
298/2013 (DBN)), is declared to be liable to the applicant in the
amount of R3,983,076.81
in so far as the applicant cannot recover the
R41 million mentioned above from first and/or second respondents.
This liability
is not cumulative to the liabilities of the Global
Trust or the First Trust, and accordingly in so far as the one pays,
the other
of them will be absolved from liability.
7.
The ninth respondent, the French Trust (IT
2763/2009), is declared to be liable to the applicant in the amount
of R1,491,339.90
in so far as the applicant cannot recover the R41
million mentioned above from first and/or second respondents.
This liability
is not cumulative to the liabilities of the Global
Trust or the First Trust, and accordingly in so far as the one pays,
the other
of them will be absolved from liability.
8.
The tenth respondent, the Second Trust (IT
2181/2008), is declared to be liable to the applicant in the amount
of R7,149,680.00
in so far as the applicant cannot recover the R41
million mentioned above from first and/or second respondents.
This liability
is not cumulative to the liabilities of the Global
Trust or the First Trust, and accordingly in so far as the one pays,
the other
of them will be absolved from liability.
9.
The eleventh respondent, the Property Trust
(IT 1050/2012 (DBN)), is declared to be liable to the applicant in
the amount of R1,219,623.00
in so far as the applicant cannot recover
the R41 million mentioned above from first and/or second
respondents. This liability
is not cumulative to the
liabilities of the Global Trust or the First Trust, and accordingly
in so far as the one pays, the other
of them will be absolved from
liability.
10.
The twelfth respondent, the Trio Trust (IT
300/2013 (DBN)), is declared to be liable to the applicant in the
amount of R3,305,875.00
in so far as the applicant cannot recover the
R41 million mentioned above from first and/or second respondents.
This liability
is not cumulative to the liabilities of the Global
Trust or the First Trust, and accordingly in so far as the one pays,
the other
of them will be absolved from liability.
11.
The thirteenth respondent, the Retirement
Trust (IT 718/2013 (DBN)), is declared to be liable to the applicant
in the amount of
R11,955.74 in so far as the applicant cannot recover
the R41 million mentioned above from first and/or second
respondents.
This liability is not cumulative to the
liabilities of the Global Trust or the First Trust, and accordingly
in so far as the one
pays, the other of them will be absolved from
liability.
12.
The fourteenth respondent, the China Trust
(IT 716/2013 (DBN)), is declared to be liable to the applicant in the
amount of R978,020.27
in so far as the applicant cannot recover the
R41 million mentioned above from first and/or second respondents.
This liability
is not cumulative to the liabilities of the
Global Trust or the First Trust, and accordingly in so far as the one
pays, the other
of them will be absolved from liability.
13.
An order declaring that Mr Sassin as
co-wrongdoer is liable for the total amount of the damage caused to
the applicant as a result
of the fraudulent scheme conducted by the
said Mr PJU Badenhorst and the first respondent and which liability
is fixed in an amount
of R370 million.
14.
The first respondent is ordered to pay the
amount of R370 million to the applicant, together with interest
thereon at the
mora
rate of 15.5% per annum reckoned from
1 August 2013 to date of
payment thereof.
15.
Costs of suit against the first and second
respondents jointly and severally and as against such other
respondents as may oppose
this application.
16.
Further and/or alternative relief.
”
[6]
As I understand the applicant’s claim for a monetary judgment
against the respondents (claim 1) it seems to
be premised on three
alternative bases: the
first
,
is that they constitute ‘secret profits’ paid to Mr
Sassin and/or his nominees; these claims are brought in terms
of a
written cession given by Benietha to the applicant; the
second
,
appears to be based on s190(5) of the Tax Administration Act 28 of
2011 (‘the TA Act’); and the
third
,
seems to be made on the basis of a ceded claim from Badenhorst to the
Commissioner; this claim is for enrichment based on the
condictio
ob turpem vel iniustam causam
for which
the applicant seeks a relaxation of the
in
pari delictum
rule.
[7]
Regarding the claim for a declarator (claim 2), this seems to be
premised on the fact that Mr Sassin was a joint
wrongdoer in respect
of the fraudulent scheme conducted by Badenhorst.
MAIN
ISSUE
[8]
While it is common cause that Badenhorst was integrally involved in
the VAT fraud, the main issue to be determined
herein is whether,
from all the available evidence, Mr Sassin can also be held liable
and to what extent. A finding on this
issue of necessity
involves a finding that
Mr Sassin was fully aware of the fraud
being perpetrated by Badenhorst against SARS and that he was a party
to it.
THE
PAPERS
[9]
The papers in this application are voluminous. Apart from the
affidavits delivered on behalf of the parties,
the papers comprise
numerous annexures amongst which are certain portions of the
transcript of proceedings which emanate from an
inquiry (the inquiry)
held in terms of s50 of the TA Act. This inquiry was held
towards the end of 2013.
[10]
At the opposed hearing of this matter on 27 August 2015, the
applicant was represented by Mr
van der
Merwe
SC and Ms
Kilmartin
while the respondents were represented by Mr
Limberis
SC and Mr
Maastenbroek
.
I am indebted to counsel for their detailed heads of argument and
helpful submissions.
LEGISLATIVE
CONTENT
[11]
The applicable legislation are the relevant provisions of the Value
Added Tax Act 89 of 1991 and the
Tax Administration Act 28 of 2011
.
RELEVANT
BACKGROUND AND SARS CASE
[12]
To place matters in perspective it is necessary to highlight at the
outset that at the centre of the fraud committed
against SARS is a
certificate commonly known as a VAT 103 certificate, which Badenhorst
possessed and which he used to full advantage
in his fraudulent
scheme against SARS. A VAT 103 certificate entitles the
possessor thereof to obtain certain goods at a
zero VAT rate.
As in the present matter, an enterprise that purchases feed for
animals could register with SARS to purchase
animal feed at a zero
VAT rate. However, (according to SARS) the certificate
restricts the use thereof to purchases for specified
purposes namely,
the feeding by the purchaser of its own animals. Trading with
the feed is not such a purpose
[2]
.
At all times
Mr Sassin has maintained that he was not aware of
how the VAT 103 certificate worked. Nor was he aware that
Badenhorst was
using the VAT 103 certificate in his fraudulent scheme
against SARS.
[13]
According to the applicant, until 7 August 2013, Mr Sassin, as a
director of and minority shareholder in Benietha,
was actively
involved in the management of the affairs of this company, and, as
employee, was an active so-called ‘trader’.
In
other words, he bought and sold animal feed products for and in the
name of Benietha and earned commission from Benietha on
such
transactions. Benietha was an established and successful trader
in animal feed with a good reputation in the industry
and with SARS.
[14]
Over a number of years, Benietha from time to time purchased feed
from Badenhorst’s company, namely, SA Global
Trading. It
also turned out that on occasion Benietha sold animal feed to SA
Global. This trade between dealers is
not altogether strange.
Although dealers usually purchase trading stock from importers or
producers, they sometimes buy from
other dealers if they experience a
shortfall of supply. SA Global was a very small one man
enterprise in this competitive
industry. The volume of trade
between SA Global and Benietha was, until 2012, extremely low.
[15]
Things changed in 2012. This was mainly due to the fact that
during or about September 2012 a meeting took
place between Mr Sassin
and Badenhorst. This meeting did not take place on the premises
of Benietha, nor did it take place
on the premises of SA Global.
The meeting took place at a nearby restaurant. Shortly after
this meeting the volume
of trade between the two entities escalated.
The trade consisted of both dealers buying and selling the same
quantities of
animal feed from each other during the same periods.
According to the applicant, this trade was strange for two reasons:
first
,
Benietha sold the animal feed to SA Global and thereafter bought it
back at a lower price, causing SA Global to make a certain
loss on
the trade between the two dealers; and
second
,
Benietha bought the animal feed at a 14% VAT rate from SA Global but
SA Global bought the animal feed from Benietha at a zero
VAT rate in
terms of its VAT 103 certificate referred to above. This
difference of 14% caused Benietha to be able to claim
14% VAT from
SARS on the total volume of the trade between the two dealers.
[16]
These pay-outs by SARS ended up being huge VAT refunds to Benietha
which consisted of 14% calculated on the artificial
volumes generated
by the exchange of VAT invoices between the two traders. The
huge amounts received by Benietha in this
way were for the most part
being paid over by Benietha to SA Global. Benietha merely
subtracted the ‘discount’
that SA Global granted to it.
In this way hundreds of millions of rand’s ended up with
Badenhorst. On receipt
thereof Badenhorst would immediately pay
over a sizeable reward to Mr Sassin. This reward was allegedly
for arranging that
Benietha would engage in this roundabout.
The reward was to be kept secret from the van der Westhuizens.
For that reason
the funds were paid over by Badenhorst into the
account of Trojin Feeds, the company belonging to
Mr Sassin.
[17]
In later phases Mr Sassin would order excessive amounts of feed from
importers and then after the loop with SA
Global cancel 90% of the
order. He made use of a trade usage called ‘wash out’.
This trade usage is generally
utilised to protect a purchaser that
orders feed so that if he cannot dispose of everything he can resell
the unrequired portion
at a small discount to the seller. In
these circumstances the purchaser is not saddled with feed that he
cannot dispose of.
According to SARS, Mr Sassin abused
this by ‘washing-out’ 90% of the purchase immediately
after the exchange
of invoices with SA Global. This enabled
Benietha to increase the volumes of trade with SA Global to extreme
heights.
[18]
Since approximately April 2013 this ‘trade’ rose sharply
and eventually reached proportions that were
so high that neither of
the two trading partners would be able to handle the volumes if
physical delivery would have taken place.
Delivery, however,
was not necessary because the transactions between these two dealers
cancelled themselves out.
[19]
By the beginning of July 2013, SARS began to suspect that something
was amiss. It wrote a letter to Benietha
on 4 July 2013.
In this letter SARS adopted the stance that SA Global was not
entitled to purchase animal feed at a zero
rating because it utilised
the feed for trading purposes and not for feeding its animals.
SARS then informed Benietha that
it intended to disallow the VAT
claims of Benietha on this basis and to this extent i.e. to adjust
Benietha’s return to take
purchases off SA Global at a 14% VAT
rate.
[20]
Benietha’s attorney, Mr Retief, responded to SARS on 18 July
2013. He stated that it was not for a
vendor to identify for
what purposes their customers would utilise products as purchased
from them. The letter went on to
state that to the best of
Benietha’s knowledge SA Global has a valid certificate and
“there are no facts to supply
the conclusion raised by SARS
that the supplies to SA Global should be standard rated. In
addition, SARS penalises our client
knowingly that there is no onus
on the Tax payer to verify that it is selling goods to farmer
clients, who hold a VAT 103 registration
certificate”.
[21]
The said letter further stated that non-payment by SARS of the VAT
claims based on the SA Global transactions at
that stage caused
Benietha to trade at a R25 million deficit and would lead to Benietha
having to cease trading with job losses.
The SARS officials
dealing with this matter at that stage were persuaded and allowed a
further payment to be made to Benietha by
the end of July 2013 in an
amount of R94 866 019.75, more than was properly due to
Benietha. Immediately on receipt
of these funds, Benietha paid
the bulk of it over to Badenhorst and Badenhorst in turn paid Mr
Sassin his share.
[22]
By 2 August 2013 and on several occasions thereafter, SARS arranged a
series of meetings with Badenhorst and his
team of advisors as well
as with Mr and Mrs van der Westhuizen. It was Ms Hanlie Janse
van Rensburg (aka Ms Ungerer –
an advisor to Badenhorst) who
informed SARS and the van der Westhuizens about the secret payments
made to Mr Sassin. It was
alleged that these payments amounted
to about R73 million. Badenhorst said that he would co-operate
and would pay back as
much as he could to SARS. On 7 August
2013, the van der Westhuizens and the team of advisors of Badenhorst,
including Badenhorst’s
advocate, Mr Cloete, confronted Mr
Sassin in Durban at the offices of Benietha. This occurred at a
stage when Mr Sassin was
still busy arranging further transactions
with SA Global.
[23]
At the meeting of 7 August 2013, Mr Sassin agreed to repay the
amounts received from Badenhorst in order for SARS
to collect them
from Badenhorst. Mr Sassin also settled with the van der
Westhuizens on that basis and agreed to resign his
directorship from
Benietha and to transfer his shareholding to the van der
Westhuizens. Mr Sassin thereafter paid an amount
of
R19 164 999.00 back to Badenhorst on 7 August 2013 and a
further amount of R5 million on
8 August 2013. This
amounted to R24 164 999.00. However, when
Mr
Sassin attempted to pay further amounts back to Badenhorst he found
that his accounts had already been frozen.
[24]
The amount which has been verified by SARS as representing payments
made by Badenhorst to Mr Sassin is the sum
of R65 418 532.50.
In these proceedings SARS claims an amount of R41 253 533.50
from Mr Sassin and Trojin
Feeds (claim 1). This amount
represents the balance of the amount of R65 418 532.50 that
was secretly paid to Mr
Sassin and/or his nominee (Trojin Feeds) by
Badenhorst, after deducting the repayment by Mr Sassin of
R24 164 999.00
as set out above.
THE
s50
INQUIRY
[25]
On 30 October 2013 the North Gauteng High Court sanctioned the
holding of an inquiry in terms of s50 of the TA
Act. This was
done in terms of an
ex parte
order obtained by SARS. Despite a request by their attorneys,
the respondents were not favoured with a copy of the
ex
parte
application nor were they
provided with a copy of the full order as granted on 30 October
2013. What appears in the papers
is an edited version of the
court order, a copy of which is annexure “AA3” to the
answering affidavit.
[26]
As appears from annexure “AA3”, the inquiry was
authorised to inquire into certain non-compliances
or contraventions
committed by Badenhorst, Benietha, Mr Sassin, Trojin Feeds and Ms H
Janse van Rensburg, within the provisions
of the VAT Act, the Income
Tax Act 58 of 1962 and the TA Act in the period 1 March 2008 to 31
July 2013. The inquiry was
further authorised to inquire into
certain alleged offences committed by these persons as provided for
in these Acts. One
of the alleged offences that the inquiry was
to investigate was whether Badenorst/SA Global and Mr Sassin had made
use of fraud,
art or contrivance in order to obtain a refund under a
Tax Act. The present application flows from the evidence
gathered
by SARS in the s50 inquiry.
BASIS
OF SARS CLAIM FOR PAYMENT OF R41 253 533.50
[27]
SARS avers that the van der Westhuizens were never informed about the
way in which the trade took place.
It was only at a later stage
that they received some information but they were never informed that
Badenhorst would make huge secret
payments to Mr Sassin or his
nominee (Trojin Feeds). SARS contends that these payments were
made to reward Mr Sassin for
involving Benietha in this trade
relationship. The payments were made into the account of Trojin
Feeds to make it more difficult
for the van der Westhuizens to
discover. On this basis SARS submits that Mr Sassin’s
conduct constituted a fraud against
the van der Westhuizens and
Benietha.
[28]
SARS further contends that Mr Sassin disguised his fraud against
Benietha and the van der Westhuizens by,
inter
alia
,
splitting the huge transactions into a number of smaller
transactions. On this basis it submits that the money so
received
by Mr Sassin from Badenhorst was not received in terms of a
valid agreement as it was paid so that Benietha could be defrauded by
Mr Sassin. The payment of R65 million, according to SARS, was
made and received
contra
bonos mores
.
These payments amount to secret profits and are claimable in law
[3]
.
[29]
As I pointed out earlier
[4]
,
SARS relies on a cession of Benietha’s claim against Mr Sassin
for payment of the amount claimed in prayer 1.
Alternatively
,
it relies on the cession of the claim of Badenhorst based on the fact
that the agreement in terms of which the payments were made
was void
because of its illegality with reliance being placed on the
condictio
ob turpe vel iniustam causam
.
SARS submits that, in any event, in its own right it has an
enrichment claim against Mr Sassin as Badenhorst used funds
originating from SARS to pay Mr Sassin without a valid cause.
Since it cannot recover the full amount from Badenhorst, it
seeks to
do so from Mr Sassin.
BASIS
OF SARS CLAIM AGAINST MRS SASSIN
[30]
SARS contends that where Mr Sassin admits that he received some of
the funds either directly or indirectly i.e.
from Trojin Feeds, he
was in a position to advance the funds to Mrs Sassin as a result of
the funds he earned illegitimately.
It was submitted that Mrs
Sassin would have foreseen that the funds donated to her originated
from fraud.
BASIS
OF SARS CLAIMS AGAINST OTHER RESPONDENTS
[31]
SARS contends that the other respondents received proceeds of the
money paid to Mr Sassin for their participation
in the scheme as a
secret reward. It was submitted that since these moneys were
obtained illegally, there can be no defence
to the claim by SARS.
BASIS
OF DECLARING MR SASSIN TO BE A CO-WRONGDOER
[32]
SARS contends that a strong case has been made out against
Mr
Sassin on the papers and that he failed to explain the number of
prima facie
inexplicable facts showing that he was a
co-wrongdoer with Badenhorst. It averred that Mr Sassin
knowingly took part in three
frauds, viz:
[32.1]
he knew that Benietha could not issue invoices to SA Global at a zero
VAT rate;
[32.2]
he also knew that the transactions between SA Global and Benietha
during the period April 2013 onwards
was artificial; and
[32.3]
he also knew during this period that Badenhorst did not intend to pay
VAT as reflected on his invoices
issued to Benietha but intended to
distribute the VAT collected from Benietha between himself and Mr
Sassin.
[33]
In support of its claim for the above relief, SARS relies on
information obtained in the s50 inquiry as well as
from various other
affidavits. It submits that there can be no dispute on the evidence
it presents on the papers. On the
basis of established
authorities
[5]
it submits that
there is no genuine dispute of fact and that Mr Sassin’s
version is so far-fetched and clearly untenable
that it warrants a
rejection on the papers.
MR
SASSIN’S (AND THE OTHER RESPONDENTS) ANSWER TO SARS CLAIM
[34]
What is Mr Sassin’s (and the other respondents) response to the
claims made by SARS in this application?
Both in their
answering affidavit and in argument before me, the respondents raised
several preliminary challenges to the claims
made by SARS. The
main thrust of their challenge is that this application is bad in law
and that it constitutes an abuse
of the process of court. They
base their contentions in this regard on the following grounds:
[34.1]
the
first
is that neither the Commissioner nor the main deponent to the
founding papers, viz Pieter Willem Posthumus (Posthumus), has the
authority (or capacity) to bring this application under the TA Act
since the application does not relate to the administration
of a tax
Act nor does it relate to the collection of a tax due by any of the
respondents.
[34.2]
the
second
is that the Commissioner is precluded, in these
proceedings, from using and relying upon incomplete, hearsay,
uncertified and untested
evidence obtained at the s50 inquiry.
Mr Sassin avers that such evidence was obtained from various
witnesses who testified
in the absence of himself and his wife and
without providing them (i.e. him and his wife) with an opportunity to
cross-examine
these witnesses. The respondents further contend
that even the evidence of Mr Sassin and his wife given at the inquiry
are
inadmissible against him.
[34.3]
the
third
relates to the lack of admissible evidence in the
founding papers. This contention was advanced on the ground
that SARS failed
to put up affidavits by the witnesses whose evidence
it sought to rely upon in which they dealt with the material facts,
including
documents. SARS relies instead on an affidavit
deposed to by Posthumus who the respondents claim has no knowledge of
the
‘facts’. They aver that Posthumus relies on
selected, untested and inadmissible oral and documentary hearsay
evidence obtained at the secret s50 inquiry. The respondents
aver that Posthumus says nothing in the founding affidavit regarding
the admissibility and authenticity of the s50 inquiry. SARS’
right to use such evidence was pertinently raised by the
respondents
in their answering affidavit. In reply Posthumus states, for
the first time, that SARS was entitled to rely on
the s50 evidence by
virtue of s56(4) of the TA Act.
[34.4]
the
fourth
is that the founding affidavit lacks averments
necessary to sustain a cause of action against the respondents in
respect of the
secret profits allegedly received by Mr Sassin from
Badenhorst. They contend that there was no need for SARS to
bring this
application for the relief sought in claim 1. In
this regard they draw attention to the ‘prejudice offer’
made
to SARS to repay the remaining available funds which emanated
from the alleged fraudulent scheme conducted by Badenhorst and which
SARS by its conduct has refused to accept. They aver that this
offer still stands. They contend that the true reason
for this
application is for SARS to try and get judgment on the fraud claim in
motion proceedings in the face of irresoluble disputes
of fact.
[34.5]
the
fifth
is that motion proceedings are inappropriate for
determining claims based on fraud and as such the application is an
abuse of the
process of court. As far as his conduct is
concerned, Mr Sassin has categorically denied being a party to the
fraudulent
scheme perpetrated by Badenhorst. Mr Sassin avers
that at all material times he was not aware that Badenhorst was not
entitled
to use his VAT 103 certificate to purchase goods at a zero
VAT rate. Nor was he aware that Badenhorst did not account to
SARS for VAT which he raised with Benietha.
[35]
Ultimately the respondents contend that the fraud claim (claim 2) is
destructive of all the other claims.
In other words, judgment
cannot be given on claim 1 in the absence of a determination on claim
2. They argue that there are
irresoluble disputes of fact on
the papers in relation to claim 1 (i.e. insofar as it is based on the
ceded claim for secret profits
and the ceded claim based on the
condictio
,
as well as the claim against the third respondent, Mrs Sassin, for
payment of R400 000.00) and claim 2 which is based entirely
on
fraud.
[36]
In light of the manner in which the applicant approached the court
for relief in this matter, Mr
Limberis
(on behalf of the respondents) contended strongly for a dismissal of
the application on any one or more of the defences outlined
above.
As a worst case scenario he submitted that the matter should go to
trial on certain conditions. Mr
van
der Merwe
, on the other hand, persisted
for the relief sought, except perhaps for the relief against Mrs
Sassin. He submitted, however,
that in the event of my finding
that Mr Sassin’s version is not as far-fetched and clearly
untenable as to be rejected on
the papers as they stand, then in that
event the matter should be referred for the hearing of oral evidence
on certain defined
issues. These issues would turn on Mr
Sassin’s state of mind at the time and his knowledge or
otherwise of Badenhorst’s
fraudulent scheme.
[37]
Against the above background and the myriad of submissions advanced
on behalf of both parties, I turn to consider
whether the applicant
has made out a proper case for the relief claimed. For the
purposes of this judgment, I accept for
the moment that SARS, and
Posthumus for that matter, have the necessary
locus
standi
to bring this application.
For the reasons set out hereunder, I consider that the applicant has
far greater difficulties
to overcome in this application than the
issue of
locus standi.
FINDINGS
A.
MOTION PROCEEDINGS
[38]
It is well established that motion proceedings, unless concerned with
interim relief, are all about the resolution
of legal issues based on
common cause facts. Unless the circumstances are special they
cannot be used to resolve factual
issues because they are not
designed to determine probabilities
[6]
.
Corbett JA in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[7]
set out the approach to be taken when factual disputes arise in
application proceedings, as follows:
“
It
is correct that, where in proceedings on notice of motion disputes
of fact have arisen on the affidavits, a final order,
whether it
be an interdict or some other form of relief, may be granted if those
facts averred in the applicant's affidavits which
have been admitted
by the respondent, together with the facts alleged by the respondent,
justify such an order. The power of the
Court to give such final
relief on the papers before it is, however, not confined to such
a situation. In certain instances
the denial by respondent of a fact
alleged by the applicant may not be such as to raise a real, genuine
or
bona
fide
dispute of fact. . . . If in such a case the respondent has not
availed himself of his right to apply for the deponents concerned
to
be called for cross-examination under Rule 6(5)
(g)
of the Uniform Rules of Court . . . and the Court is satisfied as to
the inherent credibility of the applicant's factual averment,
it may
proceed on the basis of the correctness thereof and include this fact
among those upon which it determines whether the applicant
is
entitled to the final relief which he seeks. . . . Moreover, there
may be exceptions to this general rule, as, for example,
where the
allegations or denials of the respondent are so far-fetched or
clearly untenable that the Court is justified in rejecting
them
merely on the
papers. . . .
”
[39]
The manner in which courts should consider the adequacy of a
respondent’s denial in motion proceedings for
the purpose of
determining whether a real, genuine or
bona
fide
dispute of fact had been raised was dealt with by Heher JA in
Wightman
t/a JW Construction v Headfour (Pty) Ltd and Another
[8]
,
as follows:
“
[12]
Recognising that the truth almost always lies beyond mere linguistic
determination the courts have said that an applicant who
seeks
final relief on motion must, in the event of conflict, accept
the version set up by his opponent unless the latter's
allegations
are, in the opinion of the court, not such as to raise a real,
genuine or bona fide dispute of fact or are so far-fetched
or clearly
untenable that the court is justified in rejecting them merely on the
papers. . . .
[13]
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. A litigant may not
necessarily recognise or understand the
nuances of a bare or general
denial as against a real attempt to grapple with all relevant factual
allegations made by the other
party. But when he signs the answering
affidavit, he commits himself to its contents, inadequate as they may
be, and will only
in exceptional circumstances be permitted to
disavow them. There is thus a serious duty imposed upon a legal
adviser who settles
an answering affidavit to ascertain and engage
with facts which his client disputes and to reflect such
disputes fully and
accurately in the answering affidavit. If that
does not happen it should come as no surprise that the court takes a
robust view
of the matter.
”
[40]
In
National
Scrap Metal (Cape Town) v Murray & Roberts Ltd and others
[9]
it
was held as follows:
“
[21]
These factors — particularly collectively — do cast a
measure of doubt on the appellants' version, which is
certainly
improbable in a number of respects. However, as the high court was
called on to decide the matter without the benefit
of oral evidence,
it had to accept the facts alleged by the appellants (as respondents
below), unless they were 'so far-fetched
or clearly untenable that
the court is justified in rejecting them merely on the papers'.
An attempt to evaluate the
competing versions of either side is thus
both inadvisable and unnecessary as the issue is not which version is
the more probable
but whether that of the appellants is so
far-fetched and improbable that it can be rejected without evidence.
[22]
As was recently remarked in this court, the test in that regard is
'a stringent one not easily satisfied'. In considering
whether it has been satisfied in this case, it is necessary to bear
in mind that, all too often, after evidence has been led and
tested
by cross-examination, things turn out differently from the way they
might have appeared at first blush.
4
As
Megarry J observed in a well-known dictum in
John
v Rees and Others; Martin and Another v Davis and Others;
Rees
and Another v John
[1970]
1 Ch 345
([1969]
2 All ER 274
(Ch)) at 402 (Ch) and 309F
(All ER):
'As
everybody who has anything to do with the law well knows, the path of
the law is strewn with examples of open and shut cases
which,
somehow, were not; of unanswerable charges which, in the event,
were completely answered; of inexplicable conduct which
was
fully explained; of fixed and unalterable determinations that, by
discussion, suffered a change.'
”
[footnotes
omitted]
[41]
A similar view was expressed by Leon J in
Sewmungal
and Another NNO v Regent Cinema
[10]
at 819 A-C, as follows:
“
In
approaching this particular type of problem, it is not wrong for a
Court at the outset to have some regard to the realities of
litigation. What appears to be a good case on paper may become less
impressive after the deponents to the affidavits have been
cross-examined. Conversely, what appears to be an improbable
case on the affidavits, may turn out to be less improbable or
even
probable in relation to a particular witness after he has been seen
and heard by a Court. An incautious answer in cross-examination
may
change the whole complexion of a case. Considerations such as these
may have influenced SCHREINER, J., when he observed
in
Butterworth
v Butterworth
,
1943 W.L.D. 127
at p. 131, that –
‘
in
litigation as in less serious forms of adventure one may have a
reasonable chance of winning though the odds may be against one’.”
[42]
As I have already mentioned, Mr Sassin has emphatically denied any
wrongdoing on his part. In paragraphs
68 and 69 of the
respondents’ answering affidavit
[11]
he states the following:
“
68
My evidence (if found to be admissible in these proceedings)
is before this Court. It is contained
at “
SARS1”/108
- 213
and “
SARS2”/214
– 250.
That evidence is
true. It is, moreover, uncontradicted. I did not know
that Badenhorst did not intend to pay
VAT to SARS (see for example
“
SARS1”/197 – 199; 206
and 208 – 212; “SARS3”/249)
.
69
I was not a party to any (alleged) fraud which may have been
perpetrated by Badenhorst against SARS.
There is no basis for
an Order to declare me jointly and severally liable with Badenhorst
for any damage he may have caused to
SARS. If this Court finds
that there may be a case for me to answer then I say that, that case
must be properly pleaded and
decided at a fair trial where all the
witnesses including me testify and are cross-examined.”
[43]
I agree with the submissions made on behalf of the respondents to the
effect that this is not one of those rare
cases where the disputed
statements made on affidavit are so manifestly untrue so as to
justify their rejection on the papers.
It falls rather into the
category of seemingly unanswerable charges which might be completely
answered (see
Sewmungal
and Another NNO, supra
,
as well as the remarks by Megarry J in
John
v Rees and Others, supra
).
In this regard the role played by Badenhorst, as the mastermind
behind the fraud, is crucial, so too is the role played
by Ms Hanlie
Janse van Rensburg. The papers reveal that she purported to be
a SARS official when in actual fact she was employed
as an advisor to
Badenhorst. She clearly lied that she was a SARS official.
Both she and Badenhorst said a lot to Mr
Sassin in the period when
SARS became suspicious and raised concerns regarding the huge VAT
refunds that were due to Benietha.
She in particular made Mr
Sassin believe that it was SARS that was acting unfairly in the
matter. Badenhorst and Ms Janse
van Rensburg also said much to
Mr Sassin and the van der Westhuizens to make them believe that
Badenhorst had fully accounted to
SARS for VAT and there was nothing
to worry about. The van der Westhuizens themselves seemingly
believed that everything
was above board
[12]
.
[44]
The above factors all persuade me that the dispute raised by
Mr
Sassin regarding his knowledge of the fraudulent VAT scheme conducted
by Badenhorst cannot be rejected on the papers as being
‘far-fetched
and clearly untenable’. I consider that a genuine factual
dispute arises on these papers which cannot
be resolved without
resort to
viva voce
evidence. There is, however, a
further compelling reason why this matter cannot be decided on the
papers. I deal with
this aspect hereunder.
FINDINGS
OF FRAUD IN MOTION PROCEEDINGS
[45]
It is well-established that motion proceedings are by their very
nature generally inappropriate for the purpose
of making findings of
fraud
[13]
. Fraud is a
serious allegation that carries serious consequences. It is an
offence that affects a person’s good
name and reputation and
could have serious consequences for him/her, particularly in the
business world. In matters in which
charges of criminal or
immoral conduct are made, it is a requirement that such charges must
be proved by the “clearest”
evidence, or “clear and
satisfactory” evidence or some similar phrase
[14]
.
Moreover, fraud will not lightly be inferred because as explained in
Gates
v Gates,
supra
:
“…
There
is not, however, in truth any variation in the standard of proof
required in such cases. The requirement is still proof
sufficient to carry conviction to a reasonable mind, but the
reasonable mind is not so easily convinced in such cases because in
a
civilised community there are moral and legal sanctions against
immoral and criminal conduct and consequently probabilities against
such conduct are stronger than they are against conduct which is not
immoral or criminal
.”
[46]
The approach that application proceedings are inappropriate for the
resolution of matters where fraud is alleged,
is in my view, correct
since it is undesirable to resolve disputed issues on paper which are
largely dependent on considerations
not only of probability but also
of credibility.
[47]
Our courts have consistently held that it would be unwise to decide a
disputed issue of whether fraud was committed
on motion proceedings
without the benefits inherent in the hearing of oral evidence,
including discovery of documents, cross-examination
of witnesses, and
so forth. The logic behind this is to be found in the reasoning
of Brand JA in
Prinsloo
NO and others v Goldex (Pty) Ltd
[15]
in which he states the following:
“
[16]
The appellants' argument that the application of issue estoppel
in these proceedings would result in unfairness and inequity
derives from two hypotheses. First, that it was not necessary for
Webster J to arrive at any final decision as to whether or not
Prinsloo committed fraud in order to dismiss the trust's application
to compel specific performance. Secondly, that Webster J could
not
and should not have decided the disputed issue of whether fraud
was committed on motion proceedings without the benefits
inherent in
the hearing of oral evidence, including discovery of documents,
cross-examination of witnesses, and so forth.
[17]
I think both these propositions are well supported by authority. As
to the first, the trite position is that, as a general
rule and save
in exceptional circumstances, disputes of fact arising on
affidavit cannot be finally determined on the papers.
The concomitant
rule is that, in the event of material factual disputes arising on
affidavit in motion proceedings, the applicant
can only succeed in
those exceptional circumstances where the respondent's version of the
disputed facts can safely be rejected
on the papers as far-fetched or
untenable (see eg the oft-quoted passage in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty)
Ltd
[1984] ZASCA 51
;
1984
(3) SA 623
(A)
at
634E–635C).
The dispute of fact that arose in the motion proceedings before
Webster J fell outside the ambit of the exceptional
circumstances
envisaged by the authorities. The allegations of fraud against
Prinsloo, which Goldex raised in answer to the application
by the
trust, could hardly be described as so far-fetched or untenable that
they could be rejected on the papers, and it was not
suggested that
they should. The application for final relief by the trust was
therefore doomed to fail. On that basis and that
basis alone Webster
J was bound to dismiss the application with costs. That is obviously
also why this court refused the trust's
application for leave to
appeal. Appeals are not aimed at the reasoning but at the order
of the lower court. Whether or not
the court of appeal agrees with
the lower court's reasoning is therefore of no consequence, if the
result would remain the same
(see eg
Western
Johannesburg Rent Board and Another v Ursula Mansions (Pty) Ltd
1948
(3) SA 353 (A)
at
355).
[18]
This brings me to the appellants' second proposition: that it
was inappropriate and unwise for Webster J to find Prinsloo
guilty of fraud purely on the basis of allegations against him on
affidavit, which he disputed on feasible grounds. This proposition
emanates from the same considerations as the previous one. The
appellants were also entitled to have their version approached with
caution on the basis that it could only be rejected if it were
clearly untenable, which it was not. What rendered a final rejection
of the appellants' version in principle even more unwise and
inappropriate was, of course, that, as the respondents' version could
not be rejected out of hand, the application was in any event bound
to fail.
[19]
I therefore agree with the appellants' contention that Webster J
should not have made a finding of fraud against Prinsloo on
the basis
of untested allegations against him on motion papers that were denied
on grounds that could not be described as far-fetched
or untenable.
The reasons why he should not have done so derive not only from
common sense, but from many years of collective
judicial
experience. They were thus formulated in
Sewmungal
and Another, NNO v Regent
Cinema
1977
(1) SA 814 (N)
at 819A–C:
'In
approaching this particular type of problem [of factual disputes
arising on affidavit] it is not wrong for a court at the outset
to
have some regard to the realities of litigation. What appears to be a
good case on paper may become less impressive after
the
deponents to the affidavits have been cross-examined. Conversely,
what appears to be an improbable case on the affidavits,
may turn out
to be less improbable or even probable in relation to a particular
witness after he had been seen and heard by a court.
An incautious
answer in cross-examination may change the whole complexion of a
case.'
”
[48]
Fraud cannot be inferred, particularly in motion proceedings, from a
mere error, a misunderstanding or an oversight,
however unreasonable
such might be
[16]
. Where
the basis of an allegation of fraud is the knowledge of a particular
fact, our courts tend to distinguish between
knowledge and belief of
that fact. Although knowledge of a fact can generally be
inferred from evidence, a belief of that
fact only leads to an
inference of knowledge where the party would have some justification
for that belief, and the means of establishing
it
[17]
.
[49]
Knowledge of a fact can be inferred where it results from what was
referred to in
Rex
v Meyers
[18]
as a ‘fraudulent diligence in ignorance’, which like
fraud, is very difficult to prove
[19]
.
As Greenberg JA said in
Meyers,
supra,
at page 382, quoting Halsbury’s Laws of England (2
nd
edition, volume 23):
“
…
a
belief is not honest [and is therefore fraudulent] which ‘though
in fact entertained by the representer may have been itself
the
outcome of fraudulent diligence in ignorance – that is, of a
wilful abstention from all sources of information which
might lead to
suspicion, and a sedulous avoidance of all possible avenues to the
truth, for the express purpose of not having any
doubt thrown on what
he desires and is determined to, and afterwards does (in a sense)
believe’.”
[50]
Following from the above the learned Judge went on to state the
following:
“
It
appears to me to follow that, in English law, proof of negligence in
making enquiries as to the facts which are represented,
even though
it be of so extreme a degree as to merit the epithet of ‘gross’,
can never in itself amount to proof of
absence of an honest belief,
and the same applies to an absence of reasonable grounds for the
belief (see
Derry v Peek (supra,
at
pp 361, 363, 369 and 375) and of
Bassner
v Trigger
(1946 AD 83
at p 106).
But, as is pointed out in both these cases, absence of reasonable
grounds for belief in the truth of what is stated
may provide cogent
evidence that there was in fact no such belief.”
[51]
In the circumstances and based on the legal principles set out above,
I am of the view that no matter how strongly
SARS may feel about Mr
Sassin’s involvement with Badenhorst and whether this amounts
to fraud, is a matter that cannot be
decided on these papers.
The position adopted by SARS in these proceedings is that a finding
of fraud must be made against
Mr Sassin based on so-called ‘evidence’
gathered by it, without affording Mr Sassin an opportunity to
cross-examine
his accusers and/or to give oral evidence in order to
clear his name. In my view, no court, acting reasonably, should
be
prepared to make such a finding on paper.
[52]
From what I have said thus far regarding the difficulties facing the
applicant in motion proceedings, it is clear
that this application
has no prospect of succeeding as it stands. The applicant’s
difficulties are compounded even
further by its failure to prove the
authenticity of the s50 inquiry evidence. I deal with this
aspect herebelow.
APPLICANT’S
FAILURE TO PROVE THE AUTHENTICITY OF THE s50 EVIDENCE
[53]
In attempting to show that Mr Sassin was aware of the fraudulent
scheme conducted by Badenhorst and that he was
a party to it, the
applicant relies on the evidence that was gathered at the s50
inquiry. There are several difficulties
with this which I
highlight hereunder.
[53.1]
The
first
is that the applicant simply failed to prove the authenticity of that
evidence in its founding papers
[20]
.
This point was raised pertinently by the respondents in their
answering affidavit. This was conceded by the applicant
in
reply. In order to ameliorate the situation, the applicant then
put up certain affidavits, notably by the van der Westhuizens
and a
Mr van Driel, in which they merely confirm that they have read their
evidence given at the inquiry and that they confirm
the correctness
thereof. Additionally, the applicant put up a transcriber’s
certificate which it avers was ‘inadvertently’
not
annexed to the founding affidavit.
[53.2]
The transcriber’s certificate
[21]
referred to above has some curious features to it:
firstly
,
it is not signed by the transcriber concerned;
secondly
,
the inquiry seems to have a heading, viz: ‘South African
Revenue Services v PJV Badenhorst and Others,’ …
thirdly
,
the transcriber indicates that although he/she is not a qualified
translator, he/she translated the Afrikaans sections to be of
assistance;
fourthly
,
he/she inserted headings (on the transcript) as a ‘possible
helpful tool to the reader of the aforegoing’, and
fifthly
,
indicates that 10 digital files were recorded and the number of pages
amount to 244. No affidavit was put up by the transcriber
concerned confirming any of the above. While the number of
pages has been given as 244, in truth and in fact, the selected
portions put up by the applicant in these proceedings far exceed
244. In my view, no reliance can be placed on the transcriber’s
certificate.
[53.3]
The
second
is that the transcript put up by the applicant is incomplete.
The applicant has elected to use only those portions which
it seeks
to rely on for a finding against Mr Sassin. None of the
documentary evidence referred to by those who testified
at the
inquiry (including Mr and Mrs Sassin) have been put up. The
applicant adopts the view that the respondents are not
entitled
either to the full transcript or to the documents referred to in the
evidence at the inquiry. This, in my view,
is not only
fundamentally wrong, it is unfair.
[53.4]
The
third
is that the evidence given by witnesses (in the
absence of Mr and Mrs Sassin) at the inquiry was never tested under
cross-examination.
That evidence in my view, amounts to hearsay.
[54]
In spite of all of this, Posthumus, the main deponent to the
applicant’s founding affidavit not only freely
refers to
selective portions of this evidence but goes on to draw inferences
therefrom and expresses opinions on the veracity of
such evidence and
the probabilities. All this is done in an effort to persuade
the court that Mr Sassin acted fraudulently.
He also does this
well knowing that such evidence of SARS witnesses as well as that of
Mr and Mrs Sassin, even if held to be admissible,
merely proves that
that was what they said at the inquiry and not that what they said
was true
[22]
.
[55]
Before I leave this aspect I consider it necessary to comment about
the manner in which the founding affidavit
was drafted. It goes
without saying that in application proceedings the affidavits
constitute not only the evidence but also
the pleadings
[23]
.
While it is not necessary that the affidavits ‘should set out a
formal declaration or [an answering] affidavit set
out a formal plea,
these documents should contain, in the evidence they set out, all
that would have been necessary in a trial’
[24]
.
In
Hart
v Pinetown Drive-in Cinema (Pty) Ltd
[25]
,
it was pointed out by Miller J that:
“
.
. .w
here proceedings
are brought by way of application, the petition is not the equivalent
of the declaration in proceedings by way
of action. What might be
sufficient in a declaration to foil an exception, would not
necessarily, in a petition, be sufficient
to resist an objection that
a case has not been adequately made out. The petition takes the
place not only of the declaration
but also of the essential evidence
which would be led at a trial and if there are absent from the
petition such facts as would
be necessary for determination of the
issue in the petitioner's favour, an objection that it does not
support the relief claimed
is sound.
”
[56]
It follows that an application not only takes the place of a
declaration in an action but also of essential evidence
to be led at
trial. An application is therefore required to include all
facts which are necessary for determination of the
issue in the
applicants favour
[26]
.
[57]
In the present matter the founding affidavit has been drafted in a
most unusual manner. In relying on the
body of evidence
procured at the s50 inquiry, Posthumus makes reference to this
evidence by way of footnotes. This requires
of a reader, at
every step of the way, to trawl through pages upon pages of documents
to make sense of what the deponent seeks
to convey. I consider
this approach by the applicant to be highly improper and an abuse of
the court process. If this
is a kind of practice that is now
developing amongst practitioners, it is to be deprecated. This
is certainly not how an
applicant is required to place its case
before a court let alone expect a respondent to provide a meaningful
response thereto.
WHETHER
THE TA ACT PERMITS THE USE OF EVIDENCE GIVEN AT A s50 INQUIRY IN THIS
APPLICATION
[58]
I have already shown that the evidence obtained by SARS at the s50
inquiry and which it seeks to rely upon in these
proceedings was
never authenticated or proved. Posthumus has said nothing about
the admissibility of such evidence in the
founding affidavit.
The applicant’s right to use such evidence was specifically
challenged by the respondent’s
in their answering affidavit.
In reply Posthumus avers (again, for the first time) that SARS was
entitled to rely on the
s50 inquiry evidence by virtue of s56(4) of
the TA Act
[27]
. In light
of this it becomes necessary to examine the provisions of s56(4).
[59]
It would seem to me that s56(4) falls to be interpreted having regard
to its language, context and purpose.
The correct approach to
interpretation in this regard is that set out by the SCA in
KPMG
Chartered Accountants (SA) v Securefin Ltd
[28]
which was followed more recently in the matter of
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[29]
,
as follows:
“
Over
the last century there have been significant developments in the
law relating to the interpretation of documents, both
in this country
and in others that follow similar rules to our own.
13
It
is unnecessary to add unduly to the burden of annotations by trawling
through the case law on the construction of documents in
order to
trace those developments. The relevant authorities are collected and
summarised in
Bastian
Financial Services (Pty) Ltd v General Hendrik Schoeman Primary
School.
14
The
present state of the law can be expressed as follows: Interpretation
is the process of attributing meaning to the words used
in a
document, be it legislation, some other statutory instrument, or
contract, having regard to the context provided by reading
the
particular provision or provisions in the light of the document as a
whole and the circumstances attendant upon its coming
into existence.
Whatever the nature of the document, consideration must be given
to the language used in the light of
the ordinary rules of
grammar and syntax; the context in which the provision appears; the
apparent purpose to which it is directed
and the material known to
those responsible for its production. Where more than one meaning is
possible each possibility must be
weighed in the light of all these
factors.
15
The
process is objective, not subjective. A sensible meaning is to
be preferred to one that leads to insensible or unbusinesslike
results or undermines the apparent purpose of the document. Judges
must be alert to, and guard against, the temptation to substitute
what they regard as reasonable, sensible or businesslike for the
words actually used. To do so in regard to a statute or statutory
instrument is to cross the divide between interpretation and
legislation; in a contractual context it is to make a contract
for
the parties other than the one they in fact made. The 'inevitable
point of departure is the language of the provision itself',
16
read
in context and having regard to the purpose of the provision and the
background to the preparation and production of the
document.
”
[footnotes
omitted]
[60]
I consider that part of that context would require that it be
construed against the backdrop of the Constitution
[30]
.
This requires that all legislation, and the rules of court, must be
interpreted where this is reasonably possible in a way
that would
render the statute (or the rule in question) constitutional.
Additionally, where two interpretations are possible,
both of which
are constitutionally compatible, s39(2) of the Constitution requires
a court to adopt an interpretation that better
promotes the spirit,
purport and objects of the Bill of Rights
[31]
.
The applicable provisions of the Constitution in this regard are the
following:
[60.1]
s59(1), which provides that:
“
Everyone
is equal before the law and has the right to equal protection and
benefit of the law.”
[60.2]
s9(2), which provides that:
“
Equality
includes the full and equal enjoyment of all rights and freedoms.”
[60.3]
s34, which provides that:
“
Everyone
has the right to have any dispute that can be resolved by the
application of law decided in a fair public hearing before
a court of
law.
”
[61]
Ponnan JA in
Legal
Aid Board v S and Others
[32]
,
pointed
out that:
“
The
adversarial system that prevails in this country assumes a forensic
contest that is more or less evenly matched. The sad
reality is
all too frequently it is not.”
[62]
The above was stated in the context of criminal proceedings. In
my view, the same holds true for civil proceedings
as well. I
agree with counsel for the respondents that “a certain measure
of equality of arms” must prevail.
And so it should.
Anything short of this would render proceedings (such as this) or a
trial unfair thus resulting in a failure
of justice.
[63]
In the matter of
Nyathi
v MEC for Department of Health, Gauteng and Another
[33]
,
the Constitutional Court held that s3 of the State Liability Act,
which prevented execution of a judgment debt against the State,
was
inconsistent with s9(1) of the Constitution, not only because it “
… places the State above the law …”
[34]
but also because it did not give a private litigant who obtained a
judgment against the State the same protection that a judgment
creditor enjoys against a private litigant
[35]
.
[64]
It therefore seems to me that SARS powers (on the assumption that it
is entitled to bring this application in this
fashion) ought not to
be interpreted so as to permit it to enjoy an advantage which a
private litigant does not have particularly
where, as in the present
case, SARS sues (on claim 1) as a cessionary of common law claims
from private cedents such as Badenhorst
and Benietha.
[65]
I turn to examine the provisions of s56(4) within its context in the
TA Act. The following provisions seem
to be relevant:
[65.1]
Section 11 deals with ‘legal proceedings’ and provides in
s11(1) that:
“
No
SARS official other than the Commissioner or a SARS official duly
authorised by the Commissioner may institute or defend civil
proceedings on behalf of the Commissioner
.”
[65.2]
Part C of Chapter 5 of the TA Act (i.e. s52-58) deals with
inquiries. S52 provides:
“
52
Inquiry proceedings (2) The presiding officer must ensure that the
recording of the proceedings and evidence at the inquiry is
of a
standard that would meet the standard required for the proceedings
and evidence to be used in a court of law.
”
[65.3]
S56 provides as follows:
“
56
Confidentiality of proceedings –
(1)
An inquiry under this part is private and
confidential.
(2)
The presiding officer may, on request,
exclude a person from the inquiry of the person’s attendance is
prejudicial to the
inquiry.
(3)
Section 69 applies with the necessary
changes to persons present at the questioning of a person, including
the person being questioned.
(4)
Subject to section 57(2), SARS may use
evidence given by a person under oath or solemn declaration at an
inquiry in subsequent
proceedings involving the person or
another person.
”
[65,4]
S57(2) provides that a person may not refuse to answer a question
during the inquiry on the grounds that it may
incriminate him.
S57(3) stipulates that incriminating evidence obtained at the inquiry
‘is not admissible in criminal
proceedings against the person
giving the evidence’ except where the proceedings relate to
perjury.
[65.5]
S58 provides:
“
58
Inquiry not suspended by civil or criminal proceedings:- unless a
court orders otherwise, an inquiry relating to a person referred
to
in section 51(1)(a) must proceed despite the fact that a civil or
criminal proceeding is pending or contemplated against or
involves
the person, a witness or potential witness in the inquiry, or another
person whose affairs may be investigated in the
course of the
inquiry.
”
[65.6]
S69 Provides:
“
69
Secrecy of taxpayer information and general disclosure:-
(1)
A person who is a current or former SARS
official must preserve the secrecy of taxpayer information and may
not disclose taxpayer
information to a person who is not a SARS
official.
”
[65.7]
Chapter 8 deals with assessments. Chapter 9 deals with dispute
resolution. This includes proceedings to
dispute an assessment
(s104 – 106); proceedings for an appeal against an assessment
or decision before a tax board (s107–114);
proceedings for an
appeal to a tax court (s115-132); proceedings for an appeal against a
decision of a tax court (s133-137); proceedings
for an appeal to the
SCA (s138-139); proceedings for the settlement of disputes
(s142-150). SARS also has the power to institute
liquidation
and sequestration proceedings. In terms of s163 it is also
entitled to apply for a preservation order (without
notice to the
taxpayer).
[66]
S56(4), as pointed out by counsel for the respondents, is nested
within the section entitled ‘Confidentiality of Proceedings’
in Part C of the TA Act which deals essentially with inquiry
proceedings. This suggests strongly that where s56(4) speaks
of
‘proceedings’ as opposed to ‘civil proceedings’
or ‘legal proceedings’ or ‘civil or
criminal
proceedings’, as it does elsewhere in the TA Act, this must be
interpreted in its context to mean inquiry proceedings
or in its
widest permissible sense, to proceedings under Chapter 9 of the TA
Act which are confidential.
[67]
It would seem to me that the above is a correct interpretation for
the reason that s56(4) does not legislate for the use of
evidence
“against a person”, which is the usual pointer to the use
in civil or criminal proceedings, but rather for
its use in
proceedings “involving the person or another person”.
Moreover, s56(3), read with s69, confirms that
the evidence taken at
the inquiry must be kept confidential.
[68]
Whilst I have no difficulty in principle regarding the important
public function that SARS is required to perform in the collection
of
taxes in order to enable government to comply with its constitutional
duties, I do have a difficulty when SARS sets out to achieve
its aims
in an unfair, unconstitutional and prejudicial manner, as it seeks to
do in the present matter. Admittedly, SARS
has extraordinary
and wide-ranging powers in terms of the TA Act as well as the South
African Revenue Act, Act 34 of 1997 (the
SARS Act), in order to carry
out its duties. I do not believe, however, that our courts
should sanction any conduct on the
part of SARS and/or its officials
which fall foul of the Constitution and the Bill of Rights.
[69]
I accordingly find that there is some substance in the argument
advanced on behalf of the respondents to the effect that to
permit
the use of evidence compelled at a s50 inquiry in subsequent civil
proceedings against any person, would mean that SARS
would enjoy an
unfair advantage against such person (in this case Mr Sassin) for at
least two reasons: the
first
is that it could compel a person to put up his/her version under oath
and to then use that version against him/her; and the
second
is that it would render the compelled hearsay evidence of other
witnesses against such a person to be admissible against him/her
in
the absence of an application under
s3
of the
Law of Evidence
Amendment Act 45 of 1988
[36]
.
OTHER
MATTERS
[70]
In light of the conclusion I have reached in this matter, I do not
consider it necessary to address the further defences raised
by the
respondents to this application.
COURT’S
DISCRETION
[71]
It is well-established that where, at the hearing of application
proceedings (as in this case), a dispute of fact arises on
the
affidavits and cannot be decided without the hearing of oral
evidence, the court has a discretion as to the future course of
the
proceedings, and may (i) dismiss the application with costs; (ii)
order that oral evidence be heard in terms of the rules of
court, or
(iii) order the parties to trial
[37]
.
[72]
Rule 6(5)(g) of the Uniform Rules provides as follows:
“
Where
an application cannot properly be decided on affidavit the court may
dismiss the application or make such order as to it seems
meet with a
view to ensuring a just and expeditious decision. In particular, but
without affecting the generality of the aforegoing,
it may direct
that oral evidence be heard on specified issues with a view to
resolving any dispute of fact and to that end may
order any deponent
to appear personally or grant leave for him or any other person to be
subpoenaed to appear and be examined and
cross-examined as a witness
or it may refer the matter to trial with appropriate directions as to
pleadings or definition of issues,
or otherwise.
”
REFERRAL
TO TRIAL
[73]
As I mentioned earlier on, I was urged by counsel for the respondents
to either dismiss the application with costs
or to refer it to trial
in the event of my finding that a real, genuine and
bona
fide
dispute of fact is to be found on the papers. I am not inclined
to dismiss the application, nor am I inclined to simply order
that
oral evidence be heard on certain defined issues as proposed by Mr
van der Merwe. In my view the factual dispute which
arises in
this matter raises a number of wide-ranging factual enquiries which
involve real and substantial questions of fact which
will involve
issues of credibility. Moreover, these factual enquiries would
require an examination of the roles played not
only of Badenhorst and
Mr Sassin but also of Ms Janse van Rensburg as well as the van der
Westhuizens. They would also
involve the role played by
SARS itself which continued to make refunds to Benietha in the face
of an admitted fraud on the part
of Badenhorst/SA Global. I do
not believe that the procedure envisaged by Rule 6(5)(g) was intended
for all these purposes
[38]
.
In these circumstances, it would be more appropriate to order the
parties to trial on certain conditions which will be set
out in the
order which is to follow herebelow.
COSTS
[74]
The question of costs remain. I see no reason why the applicant
should not bear the costs of this application including
the costs of
the argument on 27 August 2015. Quite clearly its choice of
procedure was incorrect. In my view, the applicant
acted rather
presumptuously by approaching the court in this fashion.
Additionally, and in any event, I consider that the
respondents’
have achieved substantial success in the preliminary arguments dealt
with by me herein.
ORDER
[75]
In the result, I make the following order:
(a)
The parties are ordered to trial.
(b)
The Notice of Motion shall stand as a summons with the applicant to
file its declaration within one (1) month from date
of delivery of
this judgment.
(c)
The respondents are directed to file their plea (or any other
pleading) within 20 days after delivery of the applicant’s
declaration.
(d)
The applicant is ordered to pay the respondents’ costs of the
application including the costs of the argument on
27 August 2015,
such costs to include the costs consequent upon the employment of two
counsel.
JUDGMENT
RESERVED: 27 AUGUST 2015
JUDGMENT
HANDED DOWN: 21 OCTOBER 2015
COUNSEL
FOR APPLCIANT: J L VAN DER MERWE SC
L
G KILMARTIN
Instructed
by: LEDWABA MAZWAI INC. REF- SAR143/C/Slogrove
COUNSEL
FOR RESPONDENTS: E L LIMBERIS SC
R
MASTENBROEK
Instructed
by: CUZEN RANDEREE REF- LC/LR/S807
[1]
Notice
of Motion, pages 1-14.
[2]
This
is provided for in s11(1)(g) of the VAT Act read with provisions of
Part 1 of Schedule 2 of the said Act.
[3]
See
Volvo
(Southern Africa) (Pty) Ltd v Yssel
2009(6)
SA 531 (SCA).
[4]
See
par [6] above.
[5]
Room
Hire Co. (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd
1949(3)
SA 1155 (T) at 1163;
Plascon-Evans
Paints Ltd v Van Riebeck Paints (Pty) Ltd
1984(3)
SA 623 (A) at 634H-635B;
Fakie
NO v CC 11 Systems (Pty) Ltd
2006(1) SA at 347H;
Pennello
v Pennello
[2004] 1 All SA 32
(SCA) paras [37] to [40].
[6]
National
Director of Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA) par 26.
[7]
[1984] ZASCA 51
;
1984
(3) SA 623
(A) 634H – 635C.
[8]
[2008] ZASCA 6
;
2008
(3) SA 371
(SCA);
[2008] 2 All SA 512
paras 12-13.
[9]
2012
(5) SA 300 (SCA).
[10]
1977
(1) SA 814 (NPD).
[11]
Respondents’
answering affidavit, page 975.
[12]
Annexure
SARS 1/139-141. 143. 146-147; Annexure SARS 6/482-484/43-48.
502/102-107; Annexure SARS 7/605; Annexure SARS 8/713-714,
727.
[13]
Korff
v Scheepers en Andere
1962
(3) SA 83
(W) at 85;
Baart
v Malan
1990
(2) SA 862
(E);
BAG
Industrial Roofing CC v Cromhout and Others
[2000] JOL 7072
(W) at 8.
[14]
Gates
v Gates
1939 AD 150
at 155; See also:
Motswai
v Road Accident Fund
2014 (6) 360 (SCA) at [46].
[15]
2014
(5) SA 297
(SCA) at 303-305; See also the remarks by Cachalia JA in
Odendaal
v Ferraris
2009(4) SA 313 (SCA) at page 326, par [42].
[16]
Loomcraft
Fabrics CC v Nedbank Ltd and Another
[1995] ZASCA 127
;
1996
(1) SA 812
(A) at 822.
[17]
Minister
of Finance v Gore NO
2007 (1) SA 111
(SCA) para 22.
[18]
1948
(1) SA 375
(A) at 382. See also: RH Christies & GB Bradfield:
Christies Law of Contract in South Africa, 6
th
Ed pages 305-306.
[19]
Road
Accident Fund v Shabangu and Another
2005 (1) SA 265
(SCA) para 18.
[20]
Rex
v Klisser and Rosenberg
1949 (3) SA 807
(W) at 813-814;
Du
Plessis NO v Oosthuizen; Du Plessis NO v
Van Zyl
1995
(3) SA 604
(OPA) at 609.
[21]
This
appears as Annexure ‘SARS R5’ at page 1237 of the
papers.
[22]
Du
Plessis NO v Oosthuizen en ‘n Ander
1999 (2) SA 191
(OPA) at 206 D-E;
African
Guarantee and Indemnity Co. Ltd v Moni
1916 AD 524
at 532.
[23]
Transnet
Ltd v Rubenstein
2006 (1) SA 591
(SCA) at 600, referring to previous decisions;
Minister
of Land Affairs and Agriculture and others v D & F Wevell Trust
and others
2008 (2) SA 184
(SCA) at 200.
[24]
Per
Millin J in
SA
Diamond Workers’ Union v Master Diamond Cutters’
Association of SA
1948
(2) PH A83 (T) at 283; see also,
Saunders
Valve Co. Ltd v Insamcor (Pty) Ltd
1985(1)
SA 146 (T) at 149 (C).
[25]
1972
(1) SA 464
(D) at 469 C-E.
[26]
Total
South Africa (Pty)Limited v Nedcor Bank Limited
[1997] 3 All SA 562
(W) at 567.
[27]
Applicant’s
replying affidavit, page 1064, para 19.
[28]
2009(4)
SA 399 (SCA) para [39].
[29]
2012(4)
SA 593 (SCA) para [18].
[30]
Constitution
of the Republic of South Africa 1996.
[31]
De
Beer NO v North Central Local Council and South Central Local
Council and Others
2011)11) BCLR (CC) at [11];
Investigating
Directorate: Serious Economic Offences v Hyundai Motor Distributors
v Smit NO
2001(1) SA 545 (CC) at [22] and [23];
Wary
Holdings (Pty) Ltd v Stalwo (Pty) Ltd and Another
2009(1)
SA 337 (CC) at [46], [84] and [107].
[32]
[2011]
1 All SA 378
(SCA) at [1].
[33]
2008(5)
SA 94 (CC).
[34]
At
para [44].
[35]
At
para [40].
[36]
O’Shea
NO v Van Zyl and Others NNO
2012(1)
SA 90 (SCA) at 95D-96F.
[37]
Room
Hire Co. (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd
,
supra, at 1162, 1168;
Joosab
v Shah
1972(4) SA 298 (R);
Cullen
v Haupt
1988(4) SA 39 (C) at 40F-41C;
Pressma
Services v Schuttler
1990(2) SA 411 (c) at 419 C-I. See also the comments by the
learned authors Cilliers, Loots and Nel of The Civil Practice
of
High Courts of South Africa (Herbstein & van Winsen), 5
th
Edition, pages 459-468.
[38]
Less
and Another v Bornstein and Another
1948(4) SA 333 (C) at 337.