About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Kwazulu-Natal High Court, Durban
SAFLII
>>
Databases
>>
South Africa: Kwazulu-Natal High Court, Durban
>>
2012
>>
[2012] ZAKZDHC 11
|
|
eThekwini Municipality v Atlas Plastics (Pty) Ltd (8758/06) [2012] ZAKZDHC 11 (8 March 2012)
IN THE KWAZULU-NATAL HIGH COURT, DURBAN
REPUBLIC OF SOUTH AFRICA
Case Number : 8758/06
In the matter between:-
ETHEKWINI MUNICIPALITY
…........................................................
Plaintiff
and
ATLAS PLASTICS (PROPRIETARY) LIMITED
…..............................
Defendant
___________________________________________________________________________
JUDGMENT
___________________________________________________________________________
VAN ZYL, J.:-
The Plaintiff municipality instituted action claiming alleged arrear
regional services levies and regional establishment levies
from the
defendant, claims which the defendant has resisted.
It is common cause that, with effect from 1 March 1991, the Port
Natal-Ebhodwe Joint Services Board was created with powers to
impose
and recover regional services levies, as well as regional
establishment levies within the Port Natal area in terms of
the
KwaZulu and Natal Joint Services Act, No. 84 of 1990 and for
convenience herein after referred to as “the Act”.
Subsequently the Port Natal-Ebhodwe Joint Services Board was
succeeded by the Durban Transitional Metropolitan Council and it
was
in turn succeeded by the Durban Metropolitan Unicity Municipality.
The latter municipality later changed its name to that
of the
eThekwini Municipality, being the plaintiff in these proceedings.
It was further common cause that a joint services board, and thus
the plaintiff, was entitled to impose upon an employer which
employs, or is deemed to employ employees within its region a
regional services levy, as well as upon every person carrying on
or
deemed to be carrying on an enterprise within its region, a regional
establishment levy and that where interest on arrears
could be
levied, the applicable interest rates, as set out in the schedule
contained as annexure “A” to the particulars
of the
plaintiff’s claim, conformed to the definition of the
“prescribed rate” as contained in Section 1 of
the
Income Tax Act, No. 58 of 1982.
The plaintiff alleged, but the defendant denied that, with effect
from July 1991 the latter had been an employer and had carried
on an
enterprise within the plaintiff’s (formerly known as the Port
Natal) region, was thus liable as a levy payer to render
returns and
pay the applicable regional services and establishment levies on a
monthly basis and that it had failed to do so.
The plaintiff alleged, by way of amplification in paragraph 11 of
its particulars of claim, that the defendant had failed to
register
as such with effect from July 1991, or to render returns. It was
further alleged that the defendant had only registered
as a levy
payer on or about 14 January 2002, but that it had nevertheless
commenced rendering returns from June 2001 and had
failed to pay the
applicable levies, as it was obliged to do.
In its plea the defendant admitted that it did not register as a
levy payer prior to 14 January 2002, but it did not allege that
it
did so thereafter and with the exception of specific admissions made
in relation to paragraph 11 of the particulars of the
plaintiff’s
claim, purported to deny the contents thereof. The defendant,
however, admitted not rendering returns for the
period between July
1991 and May 2001, as well as to rendering returns from June 2001 to
January 2006, but denied any legal obligation
to do so, or to have
made any levy payments to the plaintiff.
The plaintiff further alleged that in view of the alleged breach by
the defendant of its obligations to render returns and make
payments, it then estimated the defendant’s liability for the
payment of the arrear levies and interest calculated thereon
and
addressed a notification to this effect (in the form of a duly
completed form ML5 dated 8 February 2002) to the defendant.
The
defendant admitted that such notice was addressed to it and received
at its postal address in Klerksdorp, North West Province
and outside
the plaintiff’s area of jurisdiction, whilst denying the
remaining allegations and in particular any indebtedness
to the
plaintiff.
These pleadings left the areas of dispute as between the parties
somewhat unclear. By and large and with the exception of the
admissions made in the plea, the defendant sought simply to deny the
allegations made and to put the plaintiff to the proof thereof.
Whilst, in its affidavit opposing summary judgment, the defendant
had raised certain defences, such as alleged lack of jurisdiction,
inadequate notice to the defendant of the assessment. Subsequently
and presumably informally it raised the issue of prescription.
The
former defences were not pursued in the plea and the latter,
relating to prescription, was abandoned in paragraph 4 of the
pre-trial minutes.
On the merits and in the affidavit opposing summary judgment, the
defendant purported to admit opening “
a branch office
”
within the plaintiff’s area during 1993 but by reason of its
alleged administrative structuring denied that it constituted
an
enterprise within the meaning of the legislation, which could
attract liability for the payment of levies. It is against this
background that the minutes of the pre-trial conference attended by
the representatives of the parties assume greater significance
and
to which I will revert in due course.
The plaintiff called two witnesses to the stand, the first of which
was its main witness Ms Yvonne Naicker. She had commenced
employment
with the plaintiff with effect from 19 December 1982, but
subsequently left apparently of her own accord at the end
of
February 2009. At the time of giving evidence she was an employee of
the New Shifa Hospital. Whilst in the plaintiff’s
service and
from 1991 she was employed in its business levy section. Her main
functions concerned collecting levies from all
income generating
enterprises within the plaintiff’s jurisdictional area and
during 2002 she served as its administrative
officer in charge of
collections in the levy section.
Relevant to the defendant Ms Naicker conceded that she had no direct
knowledge of is affairs and had not had any direct dealings
with it.
Her involvement at the time, was purely a management function on
behalf of the plaintiff municipality. She explained
in some detail
how the plaintiff’s levy collections at the time operated and
the administrative procedures followed in
the course of registering,
collecting from and dealing with enterprises liable to pay levies to
the plaintiff. According to her
evidence the plaintiff was primarily
reliant upon the information provided by the enterprises concerned
in order to calculate,
verify and/or control the levies recoverable.
Where no or incorrect returns were made, the plaintiff would resort
to estimating the liability of the offending enterprise and
issuing
an assessment in this regard. Ms Naicker was referred to and
identified certain of the documentation comprising the plaintiff’s
bundle of documents. However, she made no claim to any legal
qualifications and declined in cross examination to express any
authoritative views on the applicable legal principles.
In particular Ms Naicker was cross examined in regard to a copy of a
letter dated 15 January 2003 (received in evidence as exhibit
“B”)
and addressed by plaintiff’s attorneys of record to the
defendant’s attorneys of record. This was
some years prior to
the institution of the present action during August 2006 and appears
to have been a letter in the course
of correspondence conducted
between the attorneys at the time in an effort to resolve the
dispute between the parties amicably.
Although the letter was not
marked as being “
without prejudice
”, such marking
is not essential to rendering the document privileged from
disclosure. In this regard Tshabalala JP remarked
in Lynn & Main
Inc v Naidoo and Ano
2006 (1) SA 59
(N) in paragraph 22 at page 65
A-B, as follows:-
“
Now, as a general rule negotiations
between parties, whether oral or written, which are undertaken with a
view to a settlement of
their disputes or differences, are privileged
from disclosure. This is so whether there are express stipulations
that they shall
be without prejudice or not. (See Millward v Glaser
1950 (3) SA 547
(W).)
”
However, since Mr Harcourt who appeared as counsel for the plaintiff
did not seek to invoke privilege or object to the letter (exhibit
“B”) being put to the witness in cross examination by Mr
Crampton, who appeared for the defendant, it becomes necessary
to
consider the evidence elicited in regard thereto.
The relevant portion of exhibit “B” purports to record
that the plaintiff’s attorneys had at the time consulted
with
the witness Ms Naicker before formulating the reply contained in the
letter under consideration. In the course of the letter
it was
stated that “
Ms Naicker concedes that in the light of the
manner of operations and in the light of the fact that all delivery
notes and invoices
emanate from the head office that the Durban
operation will not be responsible for the payment of Regional
Service (sic) Levies
on the turnover.
”. This appears to be
in error and the reference, in context, should rather be to a
regional establishment levy which related
to business turnover and
not to the regional services levy which related to the remuneration
paid to employees of the enterprise.
When the contents of this letter were put to the witness in cross
examination and she was asked whether she recalled “
the
problem
”, she denied any recollection thereof. Given the
passage of almost eight years between the date of the letter and
when
the witness gave evidence, this denial can hardly be
discredited, especially since the letter preceded the institution of
the
present action by some three and a half years. Counsel for the
defendant then put to the witness that the defendant would contend
that its operation was located in a different jurisdiction
(Klerksdorp) and that its liability to pay levies was limited to
that area only. The witness disagreed and responded that according
to the plaintiff’s information at the time the defendant
maintained a manager and staff within the plaintiff’s area and
that this rendered it liable to pay the regional services
levy.
Counsel for the defendant further put it to the witness that the
letter stated that the defendant was liable to the plaintiff
for the
regional services levy, but not for the regional establishment levy.
The witness agreed that such was the meaning of
the letter, but
stressed that she disagreed, based upon the information available at
the time, with its conclusion. She further
stated that she did not
know how the letter came about, but stressed that the provisions of
the Act were decisive of the dispute
and not the contents of the
letter.
It needs to be noted that the letter, having purportedly expressed
the views attributed to the witness and set out above, then
suggested that the matter be resolved on the basis that the
defendant completed fresh declarations setting out the “
actual
”
salaries and wages paid at its “
Durban operation
”
and that the “
Council
” (no doubt a reference to
the plaintiff) then be requested to issue a revised (levies)
assessment in respect of the defendant.
Presumably no agreement
could be reached in regard to the proposal and no compromise
resulted.
In my view it is not possible to draw any clear inferences adverse
to the plaintiff from the letter (exhibit “B”).
Firstly,
when it was produced by counsel for the defendant and tendered in
evidence, this was stated to be on the basis that
the defendant
contended that whilst the letter was what it purported to be and was
sent and received, the correctness of its
contents were not
admitted. Ms Naicker, to whom the letter was put, professed not to
have any knowledge of the circumstances
under which it was written,
but disagreed with its contents and conclusions.
The letter was apparently in reply to specific allegations made in a
preceding letter dated 31 October 2002 by the defendant’s
attorneys to the plaintiff’s attorneys, but which was not
produced in evidence, nor did the defendant lead any evidence
to the
effect that the letter (exhibit “B”) formed part of a
series of communications between the representatives
of the parties
and/or was received as such by its attorneys. Unsupported by any
evidentiary base, I consider that exhibit “B”
has
little, if any, evidentiary value.
Ms Naicker presented as a good, confident and impartial witness. I
have no reason to doubt her honesty and integrity. Allowance
needs
to be made, as already indicated above, for the long period of time
which had elapsed between the occurrence of the events
about which
she gave evidence and the time when she found herself in the witness
box.
The second and final witness for the plaintiff was Mr Suren
Manilall, an employee of the plaintiff in its business levies
department.
He held the post of Debtor’s Clerk and his duties
included dealing with the attorneys retained by the plaintiff
relevant
to outstanding levy matters. The relevance of his evidence
was merely to explain the disappearance of the plaintiff’s
original
file relevant to its claims against the defendant in the
present matter. He said that he was asked to look for the file but
could
not locate its whereabouts. He explained that his section had
moved premises during the year 2007 to Shell House and again during
2008 to its present location in Martin West Building. The suggestion
arising from his evidence was that the relevant file had
been lost
or mislaid in the course of one of these moves. He was not cross
examined, the plaintiff closed its case and the matter
was postponed
for the presentation of the case for the defendant. However, upon
resumption the defendant closed its case without
calling any
witnesses.
Counsel for the plaintiff submitted that the matter was deceptively
simple. This was because the plaintiff had established that
the
defendant was a registered as a levy payer and was required in terms
of the regulations issued in terms of section 16(1)(d)
of the Act by
the Minister of Finance for the Republic under Government Notice 729
of 4 April 1991 (herein called “the
Payment Regulations”)
to render returns and to pay the levies calculated as prescribed.
For the fact of such registration
counsel for the plaintiff relied
upon the evidence of Ms Naicker and her identification of the copy
of the registration form
apparently completed on behalf of the
defendant on 14 January 2002 and comprising pages 1 and 2 of the
plaintiff’s bundle
of documents received as exhibit “A”.
Counsel for the defendant, however, submitted that Ms Naicker was
not competent to give evidence in regard to the authenticity
of this
registration form, completed in manuscript, because she was not
party to its creation, nor to the receipt thereof on
behalf of the
plaintiff. There was, so the argument ran, therefore no evidence
that this form originated from the defendant.
Counsel for the plaintiff, on the other hand, contended that the
evidence of Ms Naicker was not only admissible, but relevant
and
acceptable. In developing his argument counsel submitted that Ms
Naicker was, at all relevant times, in control of the plaintiffs
records and that the assessment of 8 February 2002 was issued under
her supervision as the plaintiff’s administrative officer
in
charge of collections in its levy section. As such she was, so
counsel submitted, in a position where she was able to and
did
acquire the necessary personal knowledge from the records at her
disposal and under her control. In this respect counsel
relied upon
the analogous authority of Kurz v Ainhirn
1995 (2) SA 408
(D) where
Howard JP held that a liquidator could, from the records at his
disposal, gain sufficient personal knowledge of the
affairs of a
company prior to its liquidation in order to depose to an affidavit
in support of an application for summary judgment.
Counsel for the defendant further submitted that, whilst the
accuracy of the plaintiff’s computerised records relating
to
levies imposed upon the defendant had been admitted in the minutes
of the pre-trial conference held between the representatives
of the
parties (see: paragraph 5), the manuscript portion of the
registration form did not form part of such records and was
therefore not admitted by the defendant.
With reference to the pleadings counsel for the defendant drew
attention to the fact that the plaintiff alleged in paragraph
11(b)
of its particulars of claim that the defendant registered as a levy
payer, to which the defendant pleaded in paragraph
5.1 of its plea
that “
Defendant admits that it did not register as a levy
payer prior to 14 January 2002.
”, but in paragraph 5(5) it
denied the remaining averments made by the plaintiff. Consequently
counsel submitted that the
defendant made no express admission that
it registered as a levy payer with the plaintiff.
At the outset it therefore becomes necessary to consider whether the
plaintiff has established that the defendant was registered
with it
as an enterprise for purposes of the Act. During the course of
argument it was not suggested that the plaintiff did not
bear the
duty to establish such registration on a preponderance of
probabilities. It therefore needs to be decided whether the
plaintiff has discharged the onus resting upon it.
It was not put in cross examination to Ms Naicker that the purported
registration document was a forgery, or was created and/or
introduced by or on behalf of the plaintiff in order to falsely
implicate the defendant as a registered enterprise liable to
the
duties of a levy payer. At most it was suggested to her that she
could not, by reason of any personal involvement or contact
with the
defendant, verify such registration.
If regard is had to paragraph 5 of the defendant’s plea then
it becomes necessary also to note that in paragraph 5.2 the
defendant admitted to “
..not furnishing any returns or
paying any levies to the plaintiff between July 1991 and May 2001.
”
and in paragraph 5.3 of its plea that it rendered returns for the
months June 2001 to January 2006, but in paragraph 5.4.2
denies that
it was obliged to render returns or make payments prior to the
latter period. In pargraph 3 of the pre-trial minutes
the parties
recorded that the plaintiff admitted that the defendant had
submitted returns and made levy payments to the plaintiff
since June
2003.
If regard is had to the defendant’s affidavit opposing summary
judgment, then it appears that the affidavit was deposed
to by one
Lategan who claimed to be the defendant’s “
sales and
marketing director
” and who was, at the time, residing in
Durban North. However, according to this affidavit the defendant
established a branch
office at Durban during 1993 but until May 2003
paid all levies to the appropriate authority at the seat of its head
office in
Klerksdorp. But, as a result of pressure brought about by
the plaintiff, from June 2003 onwards it paid levies to the
plaintiff,
an allegation which also finds support in paragraph 3 of
the pre-trial minutes.
The question arising from the aforegoing is how it came about that
the defendant admittedly rendered returns and made levy payments
to
the plaintiff if it had not registered with the latter as an
enterprise liable to do so in terms of the Act. The fact that
levy
payments were made to the plaintiff from June 2003 onwards, strongly
suggests that the defendant must have registered as
a levy payer
with the plaintiff, in order to do so.
It is also significant that the defendant admitted in paragraph 5 of
the pre-trial minutes that the plaintiff’s computerised
records relating to levies imposed upon the defendant were
admissible in evidence. In paragraph 6 of the same minutes it was
admitted that such records included an assessment form (form ML5)
and comprised records of monthly declarations by levy payers,
retrospective historical accounts and levy assessments.
Ms Naicker gave evidence to the effect that the defendant had been
registered as a levy payer in the records of the plaintiff
and is
recorded as such in the computerised records of the latter as is
evident,
inter alia
, with reference to the assessment at page
11 of exhibit “A” to which she referred. This
computerised document, dated
8 February 2002 is stated to be a form
ML5 assessment of arrear levies allegedly payable by the defendant
to the plaintiff for
the period 1 July 1991 to 31 December 2001 and
corresponds with the plaintiff’s allegations as contained in
paragraph 11
of its particulars of claim. It was sent to and
received by the defendant at its Klerksdorp postal address, as
admitted in paragraph
6 of the defendant’s plea.
In the absence of any evidence to the contrary on behalf of the
defendant it appears manifestly clear that the plaintiff has
established that the defendant was in fact registered with it as an
enterprise liable to render returns and pay levies, certainly
as at
8 February 2002. The defendant’s purported denials in this
regard are at best disingenuous. When the calculations
contained in
the assessment of 8 February 2002 (at page 11 of exhibit “A”)
are considered, then it becomes apparent
that they correspond with
the information contained in the disputed registration document
comprising pages 1 and 2 of annexure
“A”.
In all the circumstances there is, in my judgment, sufficient
support and corroboration for the evidence of Ms Naicker that this
document represents the registration document submitted to the
plaintiff on behalf of the defendant and on the strength of which
the plaintiff registered the defendant as a levy payer and
subsequently on 8 February 2002 issued the assessment referred to
above.
At the conclusion of the trial counsel for the plaintiff limited its
claims to those arising from the assessment of 8 February
2002
issued against the defendant. Counsel submitted, with reference
inter alia
to section 16(2)(h) of the Act and paragraph 12(4)
of the Payment Regulations, that once an assessment is issued, then
the levy
payer became obliged to effect payment of the assessed
amount(s) irrespective of any objection and appeal which may have
been
lodged in regard thereto to the special Court referred to in
section 83 of the Income Tax Act, No. 58 of 1962.
In the present instance there is no suggestion that the defendant
sought to appeal against the assessment of 8 February 2002,
so that
counsel for the defendant is probably correct in submitting that the
provisions of paragraph 16 of the Payment Regulations
have no
application to the present matter.
However, as pointed out above, paragraph 12(4) of the Payment
Regulations decrees that the amount(s) stated as owing according
to
an assessment shall be deemed, irrespective of any pending appeal,
to be properly payable under the Act and the relevant authority,
here the plaintiff, becomes entitled to proceed thereon against the
levy payer by way of legal proceedings in order to enforce
payment.
In such proceedings the levy payer is precluded from challenging the
correctness of the assessment. Effectively the
levy payer becomes
required to effect payment of the deemed levies as per the
assessment and to pursue its remedy against liability
thereon
separately in the appeal process.
It follows that the defendant is then liable to the plaintiff for
the levies determined in the assessment of 8 February 2002
which was
deemed to be correct at the time of the issue thereof and in the
absence of any appeal became conclusive, once the
time allowed for
an appeal had expired. By reason of the provisions of paragraph
12(4) of the Payment Regulations it is not open
to the defendant in
the present proceedings to question the correctness of the
assessment. In any event, Ms Naicker on behalf
of the plaintiff had
asserted its correctness and no countervailing evidence was
forthcoming from the defendant.
In the event of it being held that the defendant was indebted to the
plaintiff, the parties were
ad idem
regarding the applicable
interest rates prescribed in section 1 of the Income Tax Act, No. 58
of 1962. These were set out by
the plaintiff in paragraph 14 of the
particulars of claim read with annexure “A” thereto and
duly admitted by the
defendant in its plea. In terms of paragraph
10(1) of the Payment Regulations levies are payable within twenty
days from the
end of the applicable month.
Where a levy payer is deemed to have been liable to pay levies for a
particular month, but failed to furnish a return so that,
at a later
stage, an assessment based on an estimate is issued, then it appears
to me that the levy payer would nevertheless
be liable for interest
on the outstanding amount(s) commencing 21 days after the end of the
applicable month. Were it to be held
otherwise, it would open the
door to malpractice where a levy payer could escape liability for
interest charges by neglecting
to render returns.
However, in the present matter counsel for the plaintiff, during the
course of argument, handed up and sought judgment in terms
of a
draft order which not only limited the capital claimed by the
plaintiff to the amounts reflected in the assessment of 8
February
2002, but also sought interest thereon only with effect from 31
December 2001, being the end of the deemed assessment
period.
There was also, during the course of argument, some debate as to the
plaintiff’s entitlement to costs and if so, whether
those
costs should be on the High Court scale or on the applicable scale
in the Magistrates’ Courts. On reflection I am
satisfied that
the matter was of sufficient complexity and that the plaintiff,
although ultimately obtaining judgment for less
than originally
sought, was still substantially successful, so that the plaintiff
should not be deprived of its costs on the
High Court scale.
In the result I make the following order conforming to the
limitations contained in the draft order handed up by counsel for
the plaintiff, namely:-
a. Judgement is granted in favour of the plaintiff against the
defendant for the payment of;
i. assessed regional services levies in the sum of R21 802-50;
and
ii. assessed regional establishment levies in the sum of R51 300-00.
b. Interest thereon from 31 December 2001 to date of payment at the
rate determined from time to time for the purposes of paragraph
(b)
of the definition of “
prescribed rate
” in section
1 of the Income Tax Act, No. 58 of 1962.
c. Costs of suit.
_____________________
VAN ZYL , J.
APPEARANCES:
For Plaintiff : Adv A W M Harcourt SC
Instructed by Sanan & Watts Inc of Durban (Ref : Mr
Watts/sr/035401).
For First and Second
Defendants : Adv D P Crampton
Instructed by Venn Nemeth & Hart Inc of Pietermaritzburg (Ref: L
Cawcutt/ms/21A092102).
Date argued : 22 October 2010
Delivered : 8 March
2012
Page
15
of
18