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[2007] ZAWCHC 89
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Lategan v S (A84/2006) [2007] ZAWCHC 89 (24 August 2007)
IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
CASE
NO:
A84/2006
DATE: 24
AUGUST 2007
In
the matter between:
JACK
CHRISTOFFEL KROG LATEGAN APPLICANT
versus
THE
STATE RESPONDENT
JUDGMENT
DAVIS,
J
The
appellant was convicted on 10 October 2005 in the regional court,
George, on two counts of fraud and one of issuing of false
documentation.
On
11 October 2005 he was sentenced thus: on the first count of fraud,
together with the issuing of false documentation, a term
of
imprisonment of five years in terms of
section 276(1)(l)
of the
Criminal Procedure Act 51 of 1977
; and on the second count of fraud
a term of imprisonment of three years, which was totally suspended
for a period of four years
on certain conditions.
The
appellant has now come to this court on appeal, both against
conviction and sentence. Notwithstanding the lack of clarity
with
regard to the notice of appeal, the hearing before this Court took
place on the basis that both conviction and sentence
should be
examined.
The
case against appellant was based essentially on evidence of a
complainant, Mr Jacobus van Antwerp and a representative of
the
local Receiver of Revenue, Mr Wickus Groenewald.
Mr
Van Antwerp testified that the appellant had acted as his bookkeeper
for a welding business. During August 1998 he reached
an agreement
with appellant regarding the purchase of steel. The purchase was
designed to produce a profit for both parties upon
the sale of the
purchased steel. According to Van Antwerp's testimony, the only cash
requirement demanded of appellant in order
to secure the acquisition
of steel for the proposed transaction was that Van Antwerp should
pay an amount of R257 171,61 which
appellant claimed was required
for the purposes of the VAT liability pursuant to the purchase of
the steel. The cheque was made
out on 13 August 1998 to J J
Beleggings BK a cEose corporation of which appellant was the member.
Mr
Van Antwerp was asked about a 8TW201 form dated 28 September 1998
which reflected an input tax credit in the amount of some
R253 000
in favour of his business (the exact sum was blurred on the document
which was made available to the Court), Mr Van
Antwerp testified
that he could not understand the contents of this document.
Nevertheless, after a reconciliation of liabilities
with the
Receiver of Revenue, an amount of some R80 000,00 was paid by the
Receiver into his account, that is presumably after
a reduction of
VAT already owed by Van Antwerp to the Receiver prior to the
"conclusion" of the steel transaction.
Later, the
Receiver, having investigated the steel transaction, demanded a
repayment of VAT from Van Antwerp. Accordingly Van
Antwerp was
required to pay an amount of more than R300 000, which represented
an accrued VAT liability after the impugned transaction
was
reconsidered and the input tax credit pursuant thereto reversed,
together with interest on that liability.
Van
Antwerp also testified about the transaction of the purchase of the
steel. He told the Court:-
"Ek
kan nie se dat dit was
(
n
egte transaksie nie. Ek dra geen insae daarvan nie. Ek het geen
insae gehad met die mense wat gekontak was of daar mense gekontak
was nie. So ek kan nie se nie. Ek net geen kennis daarvan nie."
Mr
Wickus Groenewaid then testified. He worked for the Receiver of
Revenue, George, and dealt with VAT audits. His suspicion about
the
impugned steel transaction was raised when he examined the VAT201
form dated 28 January 1999 submitted by appellant on behalf
of Jack
en Jane Seleggings BK, which reflected a VAT liability of some
R268,57 on a transaction of more than two million rand.
As he stated
in his testimony:
"Hoekom
gaan 'n ou oor die twee miljoen rand se transaksie doen om R2 000
wins maak op die ou einde van die dag? So wat ek
hierna gedoen net,
ek het bewyse gevra, want as JJ Befeggings 8K staa! verkoop, dan
moes hy dit tog ten eerste aangekoop het
voor hy dit kan verkoop/'
Upon
examination of the range of invoices supplied by appellant, it
became clear to Groenewafd, after investigation, that each
of these
supplies, none of the transactions claimed by appellant actually had
taken place. As he told the Court:
"Van
daardie stadium het ons besef - okay, aangesien
daardie transaksies nooit plaasgevind het nie, kon JJ
Beleggings nie
staal gelewer aan mnr Van Antwerp nie. So die geld wat aan mnr Van
Antwerp wat toegestaan is van R262 000 is 'n
fiktiewe transaksie en
daardie geld is terugbetaai en op daardie stadium het mnr Van
Antwerp vir ons geld verskuld."
Mr
Groenewald investigated all the aliegations made by appellant with
regard to purchases of steel, which had been set out En
a letter
generated from appellant's attorneys, Raubenheimer, on 28 October
1998. In this letter the writer said,
inter
alia:
"Ons
bevestig voorts namens mnr Lategan volgens instruksies dat 80% van
die staal alreeds namens die verkopers aan ander
staalverskaffers, Suid Kaap ... verkoop is, wat 10% wins insluit."
AEI
this proved to be false after GroenewaEd's investigation by way of
contact with the various steel manufacturers in question.
The
essential basis of appellant's testimony was that Van Antwerp had
encountered difficulties with regard to his tax liability,
both for
income tax and VAT. Appellant was the bookkeeper for complainant's
business and he therefore testified that he consulted
with the
chartered accountant, Mr Jan Verkuil, whom he claimed was an expert
on these matters and who advised him that in order
to deal with this
VAT problem, appellant should advise his client, Van Antwerp, to
purchase a considerable amount of steel, presumably
in order to then
obtain a large input tax credit. The exact fashion as to how this
was to solve the problem of an accrued liability
was never properly
explained by appellant. When I put this point to Mr De Villiers, who
represented the appellant in court this
morning, he properly
conceded that the only way in which this transaction could have come
to the aid of Van Antwerp's VAT liability
was by way of an illegal
transaction. There would appear to be no basis by which this kind of
transaction could have solved an
earlier problem of an accrued VAT
liability insofar as Van Antwerp's business was concerned.
Pursuant,
however, to the advice which he claimed to have received, appellant
testified that he came into contact with a Mr Kia
Strydom and Mr
Gavin Brown. He negotiated with these two gentlemen in order to
effect a purchase and then almost simultaneous
sale of steel in
order to obtain a profit of some 10% on the purchase price. As
appellant testified:
"Ek
net my bestellings telefonies by hulle geplaas en het gese ek soek
1, 8 miljoen rand staal, waarna hulle vir my gese
het, "Ek het
dit. Kom kry jou fakture en kom dat ons die fynere detail rondom die
kommissie en die affewering en waarborge
in detail kan bespreek
hier."
He
insisted that the amount of R257 000 which he received from Van
Antwerp was a deposit which was required for the acquisition
of the
1, 8 milfion rand ofsteef.
In
analysing the various transactions, the magistrate postulated three
particular scenarios which could be gleaned from the facts:
"Drie
scenario's is moontlik as ek moet spekuleer dat die beskuldigde as
boekhouer aangebied het om mnr Van Antwerp te help
met sy probleme
rondom BTW tekort deur middel van staal te koop en die verkoop teen
4
n
wins en ontvang die aanvanklike bedrag vanaf mnr Van Antwerp hetsy
as BTW of as 'n deposito of as kommissie, maar dat hy daarna
deur
betrokke agente mislei was. Dit is 'n moontlikheid wat ondersoek
moet word. In die lig van die getuienis in geheel is die
Hof egter
van oordeel dat daar nie so
J
n
misleiding deur agente kon gewees het nie en dat dit nie 'n redelike
moontlikheld is nie. Daar is die moontlikheid dat die beskuldigde
en
mnr Van Antwerp ooreengekom het om
c
n
fiktiewe transaksie te skep ten einde mnr Van Antwerp uit sy
verknorsing by die Ontvanger te bring. Hier kom mnr Van Antwerp
die
betrokke insit terugeis, hy self sou niks verloor het nie en die
beskuldigde kon, volgens mnr Groenewald, nie die transaksie
verklaar
het nie en dit kon stil-stil in die niet verdwyn net, en dat toe die
Ontvanger wel snuf in die neus kry en mnr Van Antwerp
aanspreek, hy
besluit het om weer op sy beurt die skuld op die beskuldigde te
plaas en dit is 'n moontlikheid. In die verband,
is die skrywes wat
die beskuldigde en sy prokureur aan mnr Van Antwerp bestel het
vreemd, maar is daar sekere aanduidings waarom
dit te gedoen kon
gewees het, selfs in hierdie scenario. En laaste scenario is soos
reeds gese, daar mag seker meer bestaan waar
die beskuldigde vir Van
Antwerp en die Ontvanger bedrieg, nooit bedoel om staal aan te koop
nie. Hier staan die beskuldigde 'n
wins te maak van R257000 ongeveer
en daar kon later 'n rede uitgedink word of die staal verkoop is
teen 'n wins of nie, selfs
as hierdie aangewend word en as 'n
persentasie van wins aangebied word, dan daar is nog steeds oor R100
000,00 of altans *n bedrag
van
c
n
hele paar duisend rand te maak deur n persoon wat op hierdie wyse
homself kon verryk. Hoe dit ook al sy, in al hierdie scenario's
blyk
die beskuldigde die persoon te wees wat die meeste baat sou vind."
In
argument, Mr De Villiers submitted that, although the appellant
conceded that he knew that the input tax credit claimed on
behalf of
Van Antwerp had been effected with false invoices pursuant to a
faEse VAT claim and pursuant to a false VAT210 form
on 20 January
1999, these actions had not been taken with the intention to defraud
the Receiver. Mr De Villiers submitted that
the appellant, upon the
advice of Verkuil, had attempted to conclude a second transaction
with Iscor in order to resolve the
problem after he had discovered
that his contacts, Strydom and Brown, had failed to live up to their
alleged promise. Appellant
had been assured, according to his
testimony, by Verkuil, that this transaction was lawful.
He
testified further that JJ Beleggings operated on a six month invoice
basis for VAT purposes. Appellant testified further that
the false
invoices could have been rectified were the Iscor transaction to
have been concluded. This, according to appellant,
is the basis of
the advice that he had received from Verkuil, a man who never
testified in the case.
I
should also add that there was no evidence of any kind, other than
the say-so of the appellant, that an Iscor transaction had
been
contemplated as being a substitute for the earlier transaction with
Strydom and Brown.
It
was therefore submitted that when the input tax credit being claimed
on behalf of Van Antwerp, appellant acted on the basis
that there
had been a
bona
fide
transaction
concluded by Strydom and it had never been an intention on the part
of appellant to defraud the Revenue. He sought
to classify this case
as an action of a good Samaritan who sought to help his friend out
of a VAT difficulty.
With
regard to the two VAT charges, it is clear that on examining the
respective VAT201 forms, the one completed by appellant
on 28
January 1999 in particular {relating to charge 2), this purports to
represent that there had been a sale on the previous
purchase of
steel products. This state of affairs was manifestly incorrect.
Knowing full well that this transaction was a fictitious
one, the
originator of the transaction perpetrated a fraud upon the revenue.
Similarly, by the completion of the VAT form
201 on behalf of
Van Antwerp, appellant created a situation whereby there would have
been an immediate loss of some R253 000,00
In revenue as a result of
an input tax credit to which Van Antwerp was not entitled for the
transaction had never taken place
and appellant knew that full well.
In
my view, the magistrate correctly rejected appellant's version. It
was patently absurd. The initial transactions as set out
in the
invoices were a fiction. Verkuif was never called as a witness,
there was never any substantiation of the so-called advice
which he
had given. On no reasonable inference could there be, because the
transactions as proposed could never have been legal.
The
representations made about the sale of steel was therefore a
fictitious creation on behalf of the appellant. There is no
way in
which a further transaction of steel as outlined by the appellant
could have resolved the claim difficulty with regard
to VAT as
allegedly encountered by Van Antwerp. It would indeed have been
interesting as to how the so-called expert, Verkuil,
would have
testified in the legal basis transaction had he been called as a
witness.
The
irresistible inference to be drawn from the evidence is that
appellant obtained a cheque from Van Antwerp which he had intended
to pocketing. Van Antwerp would have been placed in a neutral
position were he to have secured the input tax credit, would have
been perhaps none the wiser. The magistrate was therefore correct in
rejecting the version put up appellant as being completely
improbable. On both counts it is clear that the forms had been
filled in on the basis of a transaction which the appellant knew
would not have taken place.
The
various invoices and other documentation which appellant was forced
to produce in order to substantiate the transactions after
inquiry
by Groenewald were also clearly false documentation, because there
is no evidence to suggest that the transaction indeed
was concluded.
Mr
De Viliiers also submitted that there had been a duplication of
charges and that it was common cause that there had been one
transaction to purchase steel or at least a fictitious one. It was
clear from the evidence of Mr Groenewald that fictitious invoices
had been generated long after the completion of the VAT201 (Exhibit
I). An offence of generating fictitious documentation certainly
took
certainty from the initial claim of an input tax credit in order to
defraud the Revenue. The two charges themselves took
place at
separate times. Charge 2 had to do with a VAT claim in respect of
the appellant's business. Charge 3 had to do with
the attempt to
gain an input tax credit on behalf of Van Antwerp, In my view, these
three charges stood separately and independently
of each other in
terms of the test for duplication, and accordingly that particular
argument on the part of Mr De Vitliers stands
to be rejected.
Turning
to the question of punishment, Mr De Villiers submitted that a
charge of fraud of the kind of which appellant had been
convicted
would be more appropriate to punishment in terms of
section
276(1)(h)
of the
Criminal Procedure Act 51 of 1977
, or alternatively
a suspended term of imprisonment. I disagree.
VAT
fraud appears to be an increasing phenomenon, certainly
given the number of cases which now have come before this
Court.
This set of transactions is a calculated attempt by appellant to
utilise the VAT system for his own personal gain. VAT
is a system
which, although simple in its conception, does depend on taxpayers
revealing a significant of integrity in order
to ensure that the
system continues to generate the revenue much needed by the State.
This kind of crime deserves a strict censure.
The manner in which
the magistrate sentenced the accused does not stand to be interfered
with on the basis that it stands test
for interference by an
appellate court. That is, there is no justification for a triaf
court to impose a sentence either
properly
or unreasonably. To the contrary, in my view it is an appropriate
sentence, given the circumstances of this case.
Accordingly,
I would
DISMISS
the appeal on both conviction and sentence.
I
agree
MOTALA,
J
It
is so ordered.
DAVIS,
J