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[2009] ZAGPPHC 194
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City of Johannesburg Metropolitan Municipality v Sasol Ltd (30463/2008) [2009] ZAGPPHC 194 (26 May 2009)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT, PRETORIA)
Case
number 30463/2008
DATE:
26/05/2009
In
the matter between:
CITY
OF JOHANNESBURG METROPOLITAN
MUNICIPALITY
….................................................................................
PLAINTIFF
and
SASOL
LIMITED
...................................................................................
DEFENDANT
JUDGMENT
BOTHA
J:
In
this case there are two inter-related matters: an exception and an
application to amend.
On
25 June 2008 the plaintiff, the City of Johannesburg Metropolitan
Municipality, issued a combined summons against the defendant,
Sasol
Ltd, in which it claimed R48 003 836.92 as unpaid Regional Services
Council establishment levies for the years 2000 to 2006.
On
7 August 2008 the respondent filed a notice to remove cause of
complaint and exception in terms of Rule 23(1) and (3).
In
the notice it is stated that the particulars of claim are vague and
embarrassing on six grounds, stated to be causes of complaint.
They
essentially deal with the calculation of the amount claimed.
The
exception proper contains five so-called grounds of complaint.
On
3 November 2008 the plaintiff gave notice of its intention to amend
its particulars of claim. It is common cause that the proposed
amendment would remove the complaints regarding the calculation of
the claim. The defendant opposes the amendment on the basis
that it
still does not contain the averments necessary to sustain a cause of
action.
I
do not intend to deal with the five grounds of complaint. I shall
focus on what I perceive to be the gist of the exception.
The
plaintiff’s case very simply put is that over the years
concerned the defendant understated its income. That had the effect
that there was an underpayment of levies. The plaintiff extracted the
figures of what it contends was the defendant’s true
income
from the defendant’s annual financial statements. It
recalculated the levies on the higher income and claims the
difference between the levies calculated on the higher income and the
levies actually paid.
The
point of the exception, also very simply stated is that the plaintiff
cannot claim levies in a summons, but that it should follow
the
procedure laid down in the Regional Services Councils Act, 1985 (Act
109) of 1985.
In
section 1 of Act 109 of 1985 “regional establishment levy”
is defined as . . a levy calculated . . . and payable
... in the
manner determined by the Minister of Finance under section 12(1 )(b)
at a rate from time to time determined by the council
for that region
with the concurrence of the said Minister and which the said Minister
shall publish by notice in the Gazette ...”
The
defendant is clearly held liable as a person carrying on an
enterprise.
Section
12(1 )(i) of Act 109 of 1985 reads as follows:
“
(1)(a)...
a council shall levy and claim from -
(i)
...
(ii)
Every person carrying on or deemed to be carrying on an enterprise
within its region, a regional establishment levy.”
Section
12(1 )(b) provides that the Minister of Finance may from time to time
by notice in the Gazette determine the manner in which
the regional
establishment levy shall be “calculated and paid”.
Section
12(dA) reads as follows:
“
The
Minister of Finance may in any notice contemplated in subsection (1
)(b) —
(dA)
authorize the Commissioner for Inland Revenue -
(i)
to take such steps as the Commissioner may deem necessary to ensure
that any levy payable under this Act is paid:
(ii)
to conduct audits of the affairs of any person who is or may be
liable for the payment of any such levy;
(iii)
to require any person to produce for examination any books, records
or accounts or any other document which in the opinion
of the said
Commissioner are or may be necessary to determine the liability of
such person or any other person for the payment
of any such levy;
(iv)
to determine or estimate the liability of any person for any such
levy and to direct a council to make an assessment of such
levy; and
(v)
to furnish a council with a ruling or directive on the interpretation
of any provision of this Act or any such notice relating
to the
determination of the liability of any person for the payment of any
such levy, which ruling or directive the council shall
be obliged to
apply;”.
In
Government Notice R340 (R340) published in Government Gazette 10613
of 17 February 1987 the Minister of Finance published a determination
specifying how regional council levies are to be calculated and paid.
Paragraph
9(3) of R340 provides that every payment of a regional establishment
levy shall be accompanied by a return in such form
as the council may
determine. This clearly provides for a system of self assessment.
Paragraph 9(4) provides that levy payers must
submit monthly returns.
Paragraph
1(1) of R340 reads as follows:
“
11.
(1) Where any registered levypayer has failed to furnish any return
referred to in paragraph 9(4) within the relevant period
allowed, the
council concerned may estimate the amount of any levy which, in its
opinion, is probably payable in respect of the
relevant month or
period, and may make an assessment of the amount of the unpaid levy.”
R340
was amended (and amplified) by Government Notice R783 (R783)
published in Government Gazette 11838 of 21 April 1989.
Paragraph
11 (2)(3) and (4) of R340 was amended by the substitution of the
following subparagraphs:
“
(2)
Where the Commissioner has under the provisions of paragraph 13(4)
directed a council to make an assessment of any unpaid levy,
the
council shall make such assessment.
(3)
A council shall give the levypayer concerned written notice of any
assessment made under subparagraph (1) or (2).
(4)
The amount of any unpaid levy shown in any such assessment shall,
subject to the levypayer’s right of objection and appeal
in
accordance with the applicable provisions of this Schedule, be deemed
to be an amount of levy which is properly payable under
the Act, and
may be recovered by the council by way of judicial process in a
competent court, and it shall not be competent for
any levypayer in
any such process to question the correctness of any such assessment,
notwithstanding that objection and appeal
may have been lodged
thereto.”
Paragraph
13 of R340 was amended by the substitution of the following
paragraph:
“
13.
(1) A council shall be responsible for the administration of the
provisions of this Schedule, but shall not be empowered to
require
any person to produce any books, records, accounts or other documents
in relation to any regional services levy and regional
establishment
levy or to require any levypayer to substantiate any return submitted
by him in connection with any such levy.
(2)
Where a council has reason to believe that any levypayer has not paid
in full any levy for which he is liable in terms of the
Act, the
council may submit the matter to the Commissioner for such action as
he deems fit.
(3)
The Commissioner shall conduct such audits of the affairs of any
levypayer as he considers necessary to ensure that the provisions
of
the Act are complied with, and may require any person to produce for
examination any books, records or accounts or any other
documents
which in the opinion of the Commissioner are or may be necessary for
the purpose of determining the liability of such
person or any other
person for the payment of any such levy.
(4)
(a) Where the Commissioner is of the opinion that any levypayer has
not paid in full any such levy for which he is liable, the
Commissioner may, whether or not any person has reacted on a
requisition referred to in subparagraph (3), direct the council
concerned
to make an assessment upon the levypayer in terms of the
provisions of paragraph 11.
(b)
The Commissioner may, for the purposes of any assessment contemplated
in item (a), estimate the amount upon which levy is payable.
The
Commissioner may as and when he deems it expedient, furnish a
council with a ruling or directive on the interpretation of
any
provision of the Act or this Schedule, and in such case the council
shall be obliged to apply such ruling or directive”.
A
paragraph 14 was added to R340. It deals with objections and reads as
follows:
“
14.
(1) Any person who is dissatisfied with any assessment made in
respect of him by a council under the provisions of paragraph
11 or
with the council’s refusal to make a refund under the
provisions of paragraph 12, may lodge an objection thereto with
the
council.
(2)
Every objection shall be in writing and shall specify in detail the
grounds upon which it is made.
(3)
No objection shall be considered by the council which is not
delivered at its office or posted to it in sufficient time to reach
it within 30 days after the date of the notice of assessment or
notice of the council’s refusal to make a refund against
which
the objection it lodged, unless the council is satisfied that
reasonable grounds exist for the delay in lodging the objection.
(4)
After having considered the objection, the council may –
(a)
alter or reduce the assessment; or
(b)
make a refund of any levy or interest paid; or
(c)
refer the objection to the Commissioner, and shall in writing notify
the person who made the objection of such alteration, reduction
or
referral, as the case may be: Provided that where the relevant
assessment or refusal to make a refund is in accordance with
a ruling
or directive issued by the Commissioner, the council shall not alter
or reduce such assessment or make such refund, but
shall refer the
objection to the Commissioner.
(5)
The Commissioner may, after having considered an objection referred
to him by the council under subparagraph (4) –
(a)
direct the council to alter or reduce the assessment; or
(b)
direct the council to make a refund of any levy or interest paid; or
(c)
disallow the objection, and shall send the person who made the
objection written notice of such direction or disallowance, as
the
case may be”.
Lastly
paragraph 15 was added to R340. It deals with appeals. It provides
for appeals from decisions of a council or the Commissioner
to the
Special Income Tax Court and from that Court to the High Court and
the Supreme Court of Appeal. In short, it introduces
the regime of
Act 58 of 1962.
Mr
Subel SC, who with Mr Kilian appeared for the defendant, referred me
to an unreported judgment in the Eastern Cape Division where
Jones J
declared paragraph 11(1) of R340 ultra vires. See Algoa Regional
Services v Neil Buchner case 1150/1994. The court found
that
paragraph 11(1), which authorizes a council to estimate the amount of
a levy was extra vires because section 12(1 )(b) authorizes
the
Minister of Finance to determine the manner in which the regional
services levy shall be calculated.
The
reasoning was that where a council was precluded from gaining access
to the books of a levy payer it would be arbitrary to empower
the
council to estimate the amount of the levy. In an unreported judgment
in City of Tshwane Metropolitan Municipality v Cable
(Pty) Ltd case
34431/2005, Transvaal Provisional Division, Fabricius AJ agreed with
the reasoning of Jones J.
I
am not convinced that paragraph 11(1) is ultra vires. It only deals
with the situation where no return was submitted. It may be
possible
to interpret it so as to render it valid on the basis that the
council may only make an estimate if there is a basis for
an estimate
such as previous returns.
For
the purposes of this exception it does not matter whether paragraph
11(1) of R340 is intra vires or not, because it was common
cause in
argument that it would not, if valid, be applicable because this case
concerns a case where returns were in fact submitted.
Mr
Roux, who appeared for the plaintiff argued that the procedure laid
down in R340 as amended by R783 was optional. He argued that
it was
not necessary for the plaintiff to follow that route where it was in
possession of information with which it could calculate
the liability
of the defendant with mathematical exactitude. He submitted that the
plaintiffs claim was based on delict and that
there was nothing in
Act 109 of 1985 precluding the plaintiff from recovering the amount
of the indebtedness by way of action.
I
cannot agree that the procedure laid down in R340 and R783 as derived
from section 12(1 )(b) is optional.Section 12(1 )(b) provides
that
the Minister may determine the manner in which the regional services
levy and the regional establishment levy “shall
be calculated
and paid”.
That
shows an intention to prescribe the process of collection.
Mr
Roux referred to the word “may” where it occurs in
paragraphs 11 and 13 of R340. in my view the word must be understood
in the sense of conferring a power and imposing a duty. See
Commissioner for Inland Revenue v IHB King, Commissioner for Inland
Revenue v A H King 1947(2) SA 196(AD) at 209 and 210.
It
is also of importance, as Mr Subel pointed out, that nowhere in
section 12 or R340 and R783 is the council empowered to approach
the
court directly.
The
submission that the claim is based on deiict cannot be accepted.
The
fact that the plaintiff may have clothed its claim as one based on
fraud or misrepresentation is irrelevant. Fraud and misrepresentation
is only relevant to the extent that the plaintiff can only recover
unpaid levies that are more than two years old if the levies
were not
paid due to fraud or misrepresentation. When such a levy is claimed
there still has to follow an assessment before there
can be
liability.
In
my view the procedure laid down in R340 as amended by R783 must be
followed. It deals with a situation where a council is not
satisfied
that a full levy had been paid. It provides for the intervention of
the Commissioner of Inland Revenue. It provides for
objection and
appeals. In that whole process the High Court only figures at the
level of an appeal.
The
assessment of tax liability, very much dependant on the determination
of what is income, is a specialist function which the
legislator has
for good reasons entrusted to a specialist agency with special powers
and subject to constraints of confidentiality.
Even at the first
level of appeal a specialist court is prescribed. That is the regime
of Act 58 of 1962 which has been adopted
mutatis mutandis in R340 as
amended by R783.
It
would be contrary to the ethos of our tax legislation if a court
were, as a court of the first instance, to assume the functions
of
the Commissioner of Inland Revenue.
My
conclusion is that the exception is well founded. For that reason the
amendment should be refused, because even though it removes
some
causes of complaint, it still leaves particulars of claim that do not
sustain a cause of action.
The
correct order would therefore be that the amendment is refused and
the exception upheld.
Even
though I cannot visualize how the plaintiff, having done its damnest,
can rectify the matter, I shall follow the invariable
practice of the
courts and grant it an opportunity to amend its particulars of claim.
The
following order is made:
1.
The application for an amendment of the plaintiff’s particulars
of claim is dismissed.
2.
The defendant’s exception against the plaintiff’s
particulars of claim is upheld, and the particulars of claim are
set
aside.
3.
The plaintiff may file amended particulars of claim within 20 days.
4.
The plaintiff must pay the costs of the application for amendment and
the exception, which costs shall include the costs of two
counsel.
C
BOTHA
JUDGE
OF THE HIGH COURT