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[2002] ZAWCHC 17
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Ferucci & 13 Others v Commissioner for the South African Revenue Service and Another (627/2001, 6958/2001) [2002] ZAWCHC 17; 65 SATC 47; 2002 (6) SA 219 (C) (12 April 2002)
IN THE HIGH
COURT OF SOUTH AFRICA
CAPE OF
GOOD HOPE PROVINCIAL DIVISION
CASE NO:
7627/2001
6958/2001
In the
matter between:
FERUCCIO
FERUCCI & 13 OTHERS
Applicants
and
THE
COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE
SERVICE AND ANOTHER
Respondents
JUDGMENT
OOSTHUIZEN
A.J.:
BACKGROUND
This
is an application relating to a search and seizure warrant issued at
the behest of the First Respondent, the Commissioner of
the South
African Revenue Service (â
the
Commissioner
â),
in terms of Section 74D of the Income Tax Act, No 58 of 1962 as
amended (â
the
Income Tax Act
â)
and Section 57D of the Value-Added Tax Act, No 89 of 1991 as amended
(â
the
VAT Act
â).
The
First Applicant, Ferrucio Ferucci, is married to the Second
Applicant. The Third to Thirteenth Applicants are companies, close
corporations and, in the case of the Fifth Applicant, a trust. In
all of these the First Applicant or his family hold an interest
as
members or beneficiaries. The companies, close corporations and
trust are to all intents and purposes controlled by the First
Applicant. Various of the business interests of the Ferucci family,
which include farming and property owning activities, are conducted
through the companies, close corporations and trust.
The
First Respondent is charged with the administration of the Income Tax
Act and the VAT Act. On 14 August 2001 the First Respondent
applied
for a warrant for search and seizure in terms of Section 74D of the
Income Tax Act and Section 57D of the VAT Act. A sworn
declaration
by one Nico Venter, an investigator at the Bellville office of the
South African Revenue Service, was used in support
of such
application. Pursuant to such application, the warrant sought was
granted by Van Reenen J. The terms of the warrant will
be analysed
in greater detail below. The warrant was executed at various premises
on Wednesday, 15 August 2001. A considerable number
of items were
seized by officials of the SA Revenue Service, and are currently
retained by it in a number of boxes, which boxes are
under the
control of the First Respondent.
On
20 August 2001 an application was brought as a matter of urgency for
an order directing that the boxes of documentation and other
items
which the First Respondent had seized not be opened pending the final
resolution of a further application to be brought for
an order
setting aside the warrant or portions thereof and ordering the return
of all or alternatively some of the said documentation.
This
application is hereinafter referred to as â
the
interim application
â.
A further application (hereinafter referred to as â
the
main application
â)
was launched on 29 August 2001 for the setting aside of the warrant
and for an order directing that the information, documents
and things
seized pursuant thereto be returned to the Applicants. Certain
alternative relief was sought in the main application
regarding,
inter
alia
,
the furnishing of certain information to the Applicants.
THE
APPLICABLE LEGISLATIVE DISPENSATION
Both
the Income Tax Act and the VAT Act impose obligations on the parties
liable to effect payment of the taxes levied thereunder
to furnish
information to the SA Revenue Service (â
SARS
â)
regarding matters relevant to the calculation and payment of such
taxes. Such information is used by SARS
inter
alia
to assess the tax payable by taxpayers. A situation which no doubt
frequently arises is that information furnished by taxpayers is
incomplete, inaccurate and sometimes misleading. Both Acts
accordingly contain extensive provisions which vest in the
Commissioner
a wide range of powers in regard to the obtaining and
verifying of information.
Section
74A of the Income Tax Act states that the Commissioner or any officer
authorised thereto may, for the purpose of the administration
of the
Income Tax Act in relation to any taxpayer, require such taxpayer to
furnish such information, documents or things as the
Commissioner or
the authorised officer may require. Section 74B empowers the
Commissioner or an officer named by him in an authorisation
letter to
require a taxpayer or other person, on reasonable prior notice, to
furnish any such information, documentation or things
as the
Commissioner or such other officer may require to inspect, audit,
examine or obtain. The Commissioner or such authorised
officer is
moreover empowered to call on any person at any premises, during such
personâs normal dwelling hours, save that the
Commissioner may not
enter a dwelling house or domestic premises without the consent of
the occupant. The authorised officer shall,
when exercising any
power under this section, on demand produce the authorisation letter
issued to him. It is immediately apparent
that the powers vesting in
the Commissioner under Section 74B are more extensive than those
entrusted to him under Section 74A and
include the power to inspect
and audit documentation and to attend upon the premises of any
person, where this is necessary for purposes
of the investigation.
Section
74C vests in the Commissioner even more comprehensive investigatory
powers. Under that section the Commissioner or his authorised
representative may apply to a judge for an order designating a
presiding officer before whom an enquiry is to be held. The
application
to such judge must be supported by information supplied
under oath or solemn declaration, establishing the facts on which the
application
is based. The judge is entitled to grant the order if
satisfied that there are reasonable grounds to believe:
(a)
that there has been non-compliance by any person of his obligations
in terms of the Income Tax Act or that an offence in terms
of the
Income Tax Act has been committed by any person.
(b)
that information, documents or things are likely to be revealed
which may afford proof of such non-compliance or of the commission
of
such offence;
(c)
that the enquiry which is sought is likely to reveal such
information, documents and things.
The
order issued by the judge must name the presiding officer, refer to
the alleged non-compliance or offence, identify the perpetrator
thereof and be reasonably specific as to the ambit of the enquiry.
The presiding officer thus appointed thereafter conducts the
enquiry,
utilising such procedure as he thinks fit. He has the same powers to
enforce the attendance of witnesses, and compel them
to give evidence
and produce evidentiary material, as are vested in the President of
the Special Court contemplated in Section 83
of the Income Tax Act.
The person whose affairs are being investigated is entitled to be
present during such enquiry, and has the
right to be assisted at such
enquiry by legal representatives. The enquiry shall be private and
confidential. The provisions of
Section 4 of the Income Tax Act
regarding the preservation of secrecy apply to the questioning of any
person at such enquiry. Those
giving evidence at the enquiry must do
so under oath or solemn declaration, and may not refuse to answer any
question during the
enquiry on the ground that the answer may
incriminate that person. Subject to certain limitations, however, no
incriminating evidence
given at an enquiry by any person shall be
admissible in subsequent criminal proceedings against such person.
Section
74D of the Income Tax Act is the section of immediate relevance to
the instant application. Section 74D(1) stipulates that
a judge may,
on the application of the Commissioner or a person authorised by him,
issue a warrant authorising the officer or officers
specified therein
without prior notice and at any time to:
(i)
Enter and search any premises; and
(ii)
Search any person present on such premises, provided that such
search is conducted by an officer of the same gender as the person
being searched
for
information, documents or things which may afford evidence as to the
non-compliance of any taxpayer of his obligations in terms
of the
Income Tax Act, and to seize any documents or things authorised by
the warrant.
Section
74D(2) requires that an application to the judge for the issue of
such warrant shall be supported by information supplied
under oath or
solemn declaration â
establishing
the facts on which the application is based
â.
The judge may issue the warrant requested if he is satisfied that
there are reasonable grounds to believe:
(1)
that there has been non-compliance by any person with his
obligations in terms of the Income Tax Act or that an offence in
terms
of the Income Tax Act has been committed by any person;
(2)
that information, documents or things are likely to be found which
may afford evidence of such non-compliance or the commission
of such
offence; and
(3)
that the premises specified in the application are likely to contain
such information, documents or things.
Section
74D(4) sets out certain requirements with which such a warrant must
comply. It reads as follows:
â
(4)
A warrant issued under subsection (1) shall -
(a)
refer to the alleged non-compliance or offence in relation to which
it is issued;
(b)
identify the premises to be searched;
(c)
identify the person alleged to have failed to comply with the
provisions of the Act or to have committed the offence; and
(d)
be reasonably specific as to any information, documentation or
things to be searched for and seized.
â
Section
74D(5) and 74D(6) afford certain additional powers of search and
seizure to the officers executing the warrant. Those sections
provide as follows:
â
(5)
Where the officer named in the warrant has reasonable grounds to
believe that-
(a)
such information, documents or things are -
(i) at
any premises not identified in such warrant; and
(ii)
about to be removed or destroyed; and
(b) a
warrant cannot be obtained timeously to prevent such removal or
destruction,
such
officer may search such premises and further exercise all the powers
granted by this section, as if such premises had been identified
in a
warrant.
(6)
Any officer who executes a warrant may seize, in addition to the
information, documents or things referred to in the warrant,
any
other information, documents or things that such officer believes on
reasonable grounds afford evidence of the non-compliance
with the
relevant obligations or the committing of an offence in terms of this
Act.
â
Section
74D(7) requires the officer exercising any power under Section 74D to
produce the warrant on demand. Section 74D(8) stipulates
that the
Commissioner must take reasonable care to preserve and retain all
information, documents or things seized pursuant to the
warrant until
the conclusion of any investigation into the non-compliance or
offence in relation to which such information, documents
or things
were seized, or until they are required for use for the purpose of
any legal proceedings under the Act.
Section
74D therefore contains measures which are more drastic and far
reaching than those contained in the preceding Sections 74A,
B and C.
Both Sections 74C and 74D require that the mechanisms created
thereunder can only be utilised once an appropriate order
has been
obtained from a judge. The sections set out the information that
must be placed before such judge and the aspects on which
he must be
satisfied, before issuing an order in terms of the relevant section.
Sections
57A, 57B, 57C and 57D of the VAT Act contain provisions substantially
identical to those found in Sections 74A, 74B, 74C
and 74D of the
Income Tax Act, save that the former would obviously be utilised in
relation to any matter pertaining to the payment
of VAT, and the
latter in relation to any income tax matter.
THE
MAIN APPLICATION AND THE COURTâS POWER IN RELATION THERETO
Section
74D(9) of the Income Tax Act and Section 57D(9) of the VAT Act are
identically worded They read as follows:
â
(a)
Any person may apply to the relevant division of the High Court for
the return of any information, documents or things seized
under this
section.
(b) The
court hearing such application may, on good cause shown, make such
order as it deems fit.â
In
Ferela
& Others v Commissioner for Inland Revenue
,
1998 (4) SA 275
(T)
Botha J said the following concerning the Courtâs power under
Section 74D(9) of the Income Tax Act:
â
It
confers on the Court, not Judge, a wide discretion to order the
return of any information, documents or things seized under a
warrant.
In effect it empowers the Court to reverse the effect of a
warrant in toto. It also empowers the Court on hearing such an
application
to make such an order as it deems fit. It therefore
empowers the Court to grant such further relief as may be
appropriate, which
would obviously include an order for costs. It
could of course order other relief as well, such as the retention of
copies by the
Commissioner. It is not necessary for me to speculate
on all the types of grounds on which section 74D(9) could be invoked.
Grounds
that spring to mind are: if a party concerned needs any
documents that have been seized; if the documents seized do not have
any
bearing on the affairs of a taxpayer; if the documents seized are
not covered by the warrant and also if the warrant is deficient
or if
it should not have been obtained.
â
I
am in agreement with the view expressed in the aforesaid
dictum
of
Botha J. It is perhaps necessary to elaborate on the one aspect
raised by him, namely that a warrant can, in appropriate
circumstances,
be set aside on the grounds that it should not have
been obtained. It must be borne in mind that a warrant is issued as
part of
an investigation against the taxpayer which will frequently
result in criminal or civil proceedings. The taxpayer may, in
seeking
to have the effect of a warrant reversed in terms of Section
74D(9), or the equivalent provision in the VAT Act, raise all manner
of exculpatory and other explanations in regard to the material which
has been put up by the Commissioner, when applying for the
warrant.
A number of factual disputes may be created in relation to the
averments raised by the Commissioner. It cannot be the
function of
the Court, when determining an application for the setting aside of a
warrant under section 74D(9) or an application
for the return of
documentation, to decide on the correctness or otherwise of such
factual issues. That is a task reserved for the
Court dealing in due
course with the criminal or civil proceedings which may be instituted
against the taxpayer. The Court dealing
with an application under
section 74D(9) need do no more than satisfy itself, as does the judge
issuing the warrant, that there are
reasonable grounds for believing
that there has been a non-compliance by any person of his obligations
or an offence committed under
the Act, and that information,
documents or things affording evidence of such non-compliance or
offence are likely to be found at
the premises specified in the
warrant. If it is not so satisfied, that may constitute a ground for
setting aside the warrant.
In
order to decide an application such the instant one, the court is not
confined only to a consideration of the facts put up by the
Commissioner when applying for the warrant. Firstly, no such
limitation is to be found in Section 74D(9) of the Income Tax Act or
the equivalent provision of the VAT Act. Secondly, one can readily
conceive of various instances where facts not contained in the
initial warrant application are highly relevant to the question of
whether the taxpayer is entitled to have the warrant set aside
or be
granted other relief relating thereto. That the Court does not
confine itself simply to the facts contained in the warrant
application appears,
inter
alia
,
from the unreported decision of the Supreme Court of Appeal in
Shelton
v Commissioner for the South African Revenue Service
where the court considered and analysed certain allegations put up by
the taxpayer, when applying for an order in terms of Section
74D(9).
Similarly, in the unreported decision of
Oberholzer
& Others v Commission for the South African Revenue Services
(CPD Case No 8714/98
)
Blignault J, in determining an application in terms of Section 74D(9)
did not confine himself to the facts contained in the original
warrant application. I am therefore of the view that, in order to
decide the application now before us, regard may be had to the
affidavit filed in support of the warrant application as well as all
the other affidavits put up in the instant proceedings.
THE
TERMS OF THE WARRANT
Section
74D(4) of the Income Tax Act and Section 57D(4) of the VAT Act
require the warrant to â
refer
to the alleged non-compliance or offence in relation to which it is
issued
â.
This requirement is imposed,
inter
alia
,
to assist the functionaries executing the warrant by delineating the
documents liable to be seized thereunder with reference to
the
offence or omission in question; and also to afford the party against
whom the warrant is issued an indication of the offence
or
non-compliance under investigation, and the ambit of documents that
may permissibly be seized under the warrant. Both the VAT
and Income
Tax Acts provide that the executing functionary shall, on demand,
produce the relevant warrant.
The
aforesaid requirements in the two Acts regarding the contents of the
warrant and the information to be placed before the issuing
judge
serve as an important constitutional safeguard. As was said in
Investigating
Director: Serious Economic Offences & Others v Hyundai Motor
Distributors (Pty) Ltd & Others: In re Hyundai
Motor Distributors
(Pty) Ltd & Others v Smit NO & Others
,
[2000] ZACC 12
;
2001 (1) SA 545
CC
at
567
I - 568 C
:
â
There
is no doubt that search and seizure provisions, in the context of a
preparatory investigation, serve an important purpose in
the fight
against crime. That the State has a pressing interest which involves
the security and freedom of the community as a whole
is beyond
question. It is an objective which is sufficiently important to
justify the limitation of the right to privacy of an individual
in
certain circumstances. The right is not meant to shield criminal
activity or to conceal evidence of crime from the criminal justice
process. On the other hand, State officials are not entitled without
good cause to invade the premises of persons for purposes of
searching and seizing property; there would otherwise be little
content left to the right to privacy. A balance must therefore be
struck between the interests of the individual and that of the State,
a task that lies at the heart of the inquiry into the limitation
of
rights. On a proper interpretation of the sections concerned, the
investigating directorate is required to place before a judicial
officer an adequate and objective basis to justify the infringement
of the important right to privacy. The legislation sets up an
objective standard that must be met prior to the violation of the
right, thus ensuring that search and seizure powers will only be
exercised where there are sufficient reasons for doing so. These
provisions thus strike a balance between the need for search and
seizure powers and the right to privacy of individuals.
â
In
order to meet the objective standards imposed by the legislature, it
is necessary for a warrant to set out the offence or non-compliance
which led to the issue thereof in sufficient detail. The degree of
particularity need not be that contained in a charge sheet commencing
criminal proceedings. On the other hand, the safeguards which the
legislature sought to achieve when promulgating Section 74D and
Section 57D would not be met by simply referring to certain sections
of the Act, without further elaboration. The applicable legislative
provisions require not that the warrants must specify that they are
issued in terms of, respectively, the Income Tax or VAT Acts,
but
that they should refer to something more specific, namely the alleged
non-compliance or offence in relation to which it is issued.
That
requires a setting out of the facts relating to the non-disclosure or
offence, in sufficient detail to enable the party against
whom the
warrant is executed to be adequately informed as to the purpose and
ambit of the search. To suggest that it is sufficient
for the warrant
to simply identify specific sections of the Income Tax Act or the VAT
Act, without any further particularising of
the alleged offence or
non-compliance, would be to render Section 74D(4)(a) of the Income
Tax Act and Section 57D(4)(a) of the VAT
Act largely meaningless, and
would fall far short of providing the necessary constitutional
balance and protection referred to in
the
Hyundai
Motor Distributors
case,
supra.
The
warrant in the instant case refers to the offences in respect whereof
the warrant was issued in the following terms:
â
Ferccio
(
sic)
Ferucci has committed an offence under Section 104 and Section 75 of
the Income Tax Act, No 58 of 1962, and Section 59 of the Value
Added
Tax Act, No 89 of 1991, in his private capacity and/or his capacity
as trustee, director, shareholder, member of the following
entities
.
.. [the Third to Thirteenth Applicants are then listed as the
entities to which reference is made].â
This
is followed by an allegation that the Second Applicant â
has
committed an offence under Section 104 and Section 75 of the Income
Tax Act, No 85 of 1962, and Section 59 of the Value Added
Tax Act, No
89 of 1991
",
allegedly also in her private capacity or her capacity as trustee,
director or shareholder of the Ferucci Family Trust, Boland
Travel
Paarl (Pty) Ltd and Ferucci Finance Co (Pty) Ltd.
No
further details are provided regarding the conduct said to constitute
the offences themselves.
Section
75 of the Income Tax Act creates no less than thirteen distinct
offences as diverse as the failure to file tax returns and
impersonating an income tax officer.
Section
59 of the VAT Act and Section 104 of the Income Tax Act make
provision for a number of additional offences. Section 59(1)
of the
VAT Act provides as follows:
â
59.
Offences and penalties in regard to tax evasion
.
- (1) Any person who with intent to evade the payment of tax levied
under this Act or to obtain any refund of tax under this Act
to which
such person is not entitled or with intent to assist any other person
to evade the payment of tax payable by such other
person under this
Act or to obtain any refund of tax under this Act to which such other
person is not entitled -
(a)
makes or causes or allows to be made any false statement or entry in
any return rendered in terms of this Act, or signs any statements
or
return so rendered without reasonable grounds for believing the same
to be true; or
(b)
gives any false answer, whether verbally or in writing, to any
request for information made under this Act by the Commissioner
or
any person duly authorized by the Commissioner or any officer
referred to in section 5(1); or
(c)
prepares or maintains or authorizes the preparation or maintenance
of any false books of account or other records or authorizes
the
falsifications of any books of account or other records; or
(d)
makes use of any fraud, art or contrivance whatsoever, or authorizes
the use of such fraud, art or contrivance; or
(e)
makes any false statement for the purposes of obtaining any refund
of or exemption from tax; or
(f)
receives, acquires possession of or deals with any goods or accepts
the supply of any service, knowing or having reason to believe
that
the tax on the supply of the goods or services has been or will be
evaded; or
(g)
knowingly issues any tax invoice, credit note or debit note required
under this Act which is in any material respect erroneous
or
incomplete; or
(h)
knowingly issues any tax invoice showing an amount charged as tax
where the supply in respect of which the tax is charged will
not take
place; or
(i) for
the purpose of section 16(2), fabricates, produces, furnishes or
makes use of any tax invoice, debit note, credit note, bill
of entry
or other document contemplated in that section knowing the same to be
false,
shall
be guilty of an offence and liable on conviction to a fine or to
imprisonment for a period not exceeding 60 months.
â
Section
104(1) of the Income Tax Act creates, in respect of income tax
assessments or taxations, the same offences as are specified
in
sections 59(1)(a), (b), (c) and (d) of the VAT Act.
The
warrant in the instant matter does not specify which of the various
offences referred to in Sections 75 and 104 of the Income
Tax Act and
Section 59 of the Value Added Tax Act have allegedly been committed.
There is no particularity whatsoever as to what
conduct on the part
of the First or Second Applicants constituted such offence or
offences. The warrant does no more than list,
without elaboration,
various sections of the two Acts. That does not constitute
sufficient compliance with Section 74D(4)(b) of
the Income Tax Act or
Section 57D(4)(a) of the VAT Act.
Both
the Income Tax Act and the VAT Act require that the warrant issued
should â
be
reasonably specific as to any information, documents or things to be
searched for and seized
â.
Here, too, the need to apply Section 74D and Section 57D in such a
way as to provide sufficient safeguards against an unwarranted
invasion of the right to privacy must be recognised. In this regard,
there is much to be said for the approach adopted in
R
v McAvoy
,
(1971) 12 CRNS 56
(NWT) at 65
where Morrow J said:
â
To
avoid search warrants becoming an instrument of abuse it has long
been understood that if a search warrant ... fails to give an
accurate description of the articles to be seized then it will be
invalid.
â
This
approach was endorsed in
Re
a Search Warrant issued by Bench JP: Schumiatcher v Attorney General
of Sask & Others
,
(1960) CCC 270
(Sask. Q.B.)
where Hall CJ said:
â
I do
not think it was every contemplated by parliament that ... those
executing the warrant would have carte blanche to open and read
the
private papers of clients and of partners in the hope of finding
something therein that might in the sole judgment of those searching
have evidentiary value relevant to the charges made against
Schumiatcher
.â
The
aforesaid approach must obviously take account of practical
realities. Given the tremendous volume of documentation of which a
taxpayer might be possessed, and the fact that the authorities may
still be in an investigatory stage of proceedings and therefore
may
not be able to precisely identify the things they are looking for
with precision, one could not expect a warrant to always individually
itemise each of the documents sought. (
Re
Lubell and the Queen
,
(1973) 11 CCC (2d) 188
at
199
).
The description of the documents in the warrant should, as was held
in
R
v Trottier
,
(1966) 4 CCC 321
(Que. CA)
be adequate if the person charge with executing the warrant can, by
referring to the warrant, ascertain with reasonable accuracy
what is
to be seized. The person against whom the warrant is executed should
similarly be able to ascertain from the warrant itself
what it is
that he is obliged to surrender. The warrant should moreover
indicate some nexus between the documents to be seized and
the
offence or non-compliance in respect whereof the warrant was issued.
In
Mistry
v Interim Medical & Dental Council of South Africa
,
1998
(4) SA 1127
(CC)
the Constitutional Court emphasised the dangers inherent in any
legislative enactment which leaves it up to the functionary, normally
not a judicial officer, to determine the precise framework within
which a search can be carried out. Commenting on certain provisions
of the Medicine and Related Substances Control Act, No 101 of 1965
which authorised inspectors to enter and search premises, Sachs
J
said the following at
1147
D - 1148 B
:
â
Inspectors,
like any other persons exercising power on behalf of the State, are
as entitled as the public to know the precise framework
within which
they can lawfully and effectively carry out their functions. The
statute gives hardly any guidance. All is left to
the discretion of
the inspectors and their superiors. The fact that the Medicines Act
is manifestly in the public interest in no
way diminishes the need
for the powers of inspection to be exercised according to
constitutionally valid criteria and procedures.
Lord Actonâs
famous statement about all power tending to corrupt and absolute
power corrupting absolutely was made in the context
of power being
exercised by the most worthy people, not the least.
â
(See,
too
Janse
van Rensburg NO v Minister van Handel & Nywerheid
,
1999 (2) BCLR 204
(T)
at
220C
- F
).
Any
warrant which leaves it to the person executing such warrant to
determine the extent or ambit of the search creates a number of
potential problems. The function of laying down the perimeters
within which the search is to occur should be left to the judicial
officer issuing the warrant and not to the person executing it.
The
warrant in the instant matter authorises those executing it to enter
upon no less than eleven premises, being primarily the places
of
business or residence of the various Applicants, and to search for
twenty four categories of documentation as well as for â
any
other financial documents or records and/or other relevant
information, documents or things that may afford evidence as to the
failure to comply with the provisions of the Value Added Tax Act 89
of 1991 and/or the Income Tax Act 58 of 1962 (hereinafter referred
to
as âthe Actsâ) alternatively the committing of offences in terms
of the Acts
â
by the First and Second Applicants in their private capacities or
their capacities as members, shareholders, directors or trustees
of
the other Applicants. Some of the categories of documents mentioned
are so broad as to render them virtually meaningless. Thus,
for
example, the warrant authorises the seizure of â
contracts
and agreements
â
with no attempt to delineate which type of contracts may be seized,
save for the aforestated proviso that such contracts should
be
capable of affording evidence as to the failure to comply with the
provisions of the Income Tax and VAT Acts or the commission
of an
offence under these Acts. The warrant authorises the seizure of
â
related
correspondence
â,
without indicating what it is to which such correspondence should be
related. The same comment can be made of the categories
â
information
on fixed and current assets
â,
â
diaries,
minute books and office memos
â
and â
cash
and cash books
â.
There is no indication in the warrant as to the time periods to
which the documents to be seized should relate.
The
warrant also authorises the search of all persons found on the
various premises, without distinguishing between persons who could
reasonably be thought to be in possession of relevant documents or
things, and others who happen to fortuitously be on the premises.
A
warrant in such terms exposes persons who have no connection
whatsoever to the offence or non-compliance, save that they happen
to
be present at certain premises when a search is conducted, to the
risk of a search which would constitute a wholly unwarranted
invasion
of their privacy. From an overall perspective, the warrant is unclear
to such an extent that it is by and large left to
those executing it
to determine what may or may not be taken thereunder. This, for
reasons already dealt with, is not constitutionally
justifiable.
A
further point of concern arises from the fact that the Respondent
applied for authorisation to search eleven different premises,
for
the seizure of books and documents pertaining to all thirteen
Applicants. It is of course readily understandable that the
Commissioner
may wish to conduct a search at the premises of a
specific taxpayer and the premises of certain corporate entities
controlled by
him. It is equally understandable that the
Commissioner may have reason to believe that documentation related to
the object of the
search may be held at different premises. The
point requiring emphasis, however, is that the Commissioner should at
least make out
a cogent case as to why he requires the search to be
conducted at all such premises and/or documentation relating to
various such
corporate entities to be seized. He should not rely on
unsupported and speculative averments such as those found in
paragraph 11
of Mr Venterâs affidavit in support of the warrant,
where Mr Venter states as follows:
â
In
view of the tax evasion of the taxpayer as demonstrated above, it is
submitted that it is probable that other incidences of tax
evasion or
failure to comply with the obligations imposed upon the tax payer, eg
customs duty in terms of the Customs and Excise
Act, No 91 of 1964,
is also a possibility and information, documents or things showing
this are therefore likely to be found at the
relevant premises.
â
In
similar vein, Mr Venter says the following in his answering affidavit
in the main application:
â
I was
informed by the Cape Metropolitan District Council that Paarl Poultry
Enterprises CC has been massively in arrears on its regional
council
levies. My experiences shows that large-scale default on such levies
is often associated with a broader pattern of income
tax evasion,
although this is by no means invariably the case.
â
Mr
Venter appears to suggest that because information reveals the
commission of certain offences, it is also likely that the taxpayer
in question has committed other offences, possibly under wholly
different statutory provisions and that the Commissioner should
therefore
be authorised to search for and seize documentation which
might reveal â
a
possibility
â
of such other offences even though the Commissioner has no facts
indicating that any such other offences had been committed.
When
applying for a warrant under Section 74D of the Income Tax Act or its
equivalent in the VAT Act, the Commissioner is required
inter
alia
to carefully set out the reasons why a warrant is required, and
explain the terms which the Commissioner suggests should be
applicable
to such warrant. Unfounded speculation of the kind
contained in the passages quoted above is of no assistance in
achieving this
objective.
Mr
Heunis who, together with Mr Osborne, appeared for the Respondent
referred us to certain Canadian authorities dealing with the
adequacy
of search warrants. The first of these was the case of
Regina
v Carrier
36 CRR (2d) 310 Lata. C.A.
.
That was an appeal against an accusedâs conviction on charges of
cultivating marijuana, and of possession of marijuana for purposes
of
trafficking. One of the issues which arose was whether evidence
obtained pursuant to a search warrant had properly been admitted.
In
that context, the Court considered whether there were grounds for
quashing the search warrant. The Court accepted that there were
deficiencies in the information relied on in applying for the warrant
and, in particular, no information as to the reliability of
the
source of information relied on by the prosecuting authority, and no
express mention that the plants which the accused was suspected
of
cultivating on the premises were marijuana. The Court held, however,
that although the warrant application left out some details,
the
flaws were purely procedural and the information presented was
sufficient to enable the issuing judge to draw reasonable inferences
therefrom. The primary problem which arises in the instant matter,
namely that the terms of the warrant were unclear and unacceptably
broad did not arise for consideration in the
Carrier
case.
In
Euro-Can-Am
Trading Incorporated, Gladwin & Gladwin v Attorney General of
Ontario
,
45 CRR (2d) 67 (Ont. C.A.)
the Court had occasion to consider a warrant which was defective in
two respects. Firstly, it did not name the officer who was to
execute it. That complaint does not arise in the instant matter.
Secondly, the warrant did not state the nature of the offence
that
was committed or suspected. The Court found, however, that all of the
missing particulars were contained in the information
or its
appendices, which were available to the parties against whom the
warrant was executed, and there was no suggestion that any
prejudice
had been caused by the lack of the particularity. The same comment
cannot be made in regard to the warrant in the instant
matter. The
failure to specify the nature of the offence or non-compliance
necessitating the issue of the warrant is not, in my view,
remedied
by the allegations contained in the warrant application.
Respondentâs
counsel referred thirdly to
R
v Wong
(1997) 45 CRR (2d) D1
.
The warrant issued in that case authorised the search of twenty six
residences and vehicles. The police did not know what evidence
would
be found at which location, but demonstrated as a probability that
evidence would be found by a simultaneous search of all
locations.
The facts put up in the instant case demonstrate no such probability,
and this case, too, is of little assistance to Respondents.
Upon
a consideration of the various defects in the warrant Mr Heunis
conceded, in my view correctly, that the warrant was too wide.
He
contended, however, that the bad portions therefore could be severed
from the rest and that the warrant as whole could thereby
be saved.
Mr Heunis relied, in this regard, on
Divisional
Commissioner of SA Police, Witwatersrand Area v SAAN
,
1966 (2) 503 (A)
and on
Cine
Films (Pty) Ltd v Commissioner of Police
,
1972 (2) SA 254
(A)
.
In both those cases the warrant issued dealt with a number of items.
In respect of certain of them, the Court accepted that the
items
complained of were so clearly severable from the other items that,
were they to be declared invalid, this would be affect the
rest of
the warrant. Similar considerations do not apply in the instant
case. The various difficulties flowing from the terms and
contents
of the warrant, which are dealt with above, permeate the warrant as a
whole and lead, in my view, to the conclusion that
the defects in the
warrant cannot be cured by severing specified portions thereof.
There
is further factor which weighs against any suggestion that the
warrant can be saved by excising parts thereof. As pointed out
above, Sections 74A to 74D of the Income Tax Act, and the equivalent
provisions of the VAT Act, create a hierarchy of mechanisms
which the
Commissioner can use to obtain and verify information, each more
drastic than the provisions preceding it. The Applicants
contend
that the constitutional validity of the search and seizure authorised
by a warrant is to be judged
inter
alia
with regard to the limitations imposed in Section 36 of the
Constitution. Section 36 stipulates that the fundamental rights
contained
in the Bill of Rights may be limited only to the extent
that such limitation is reasonable and justifiable having regard,
inter
alia
,
to the availability of less restrictive means to achieve the purpose
in question. The Applicants contend that, where less restrictive
means are available to the Commissioner for the obtaining of
information sought by him, it is inappropriate to have regard to the
drastic remedies which he enjoys under Section 74D of the Income Tax
Act and Section 57D of the VAT Act.
In
the instant case the Applicants point out that many of the queries
raised by the Commissioner in the papers are readily capable
of being
answered. The Applicants also rely on the fact that in approximately
1995 SA Revenue Services performed an audit at Rosendal
Farm for a
period of approximately three weeks. As far as First Applicant can
recall, no problems were raised by SA Revenue Services
on that
occasion. The Applicants suggest that a similar exercise could again
be done in regard to any discrepancies or difficulties
which
currently present themselves regarding tax or VAT information
furnished by the Applicants.
In
my view, the contention that a search and seizure should not be
permitted where the objective sought to be achieved thereby could
be
attained by other less drastic means is, generally speaking, correct.
The decision of the Supreme Court of Canada in
Araujo
& Others v The Queen
,
79 CRR (2d) 1 (SCC)
is of some assistance on this issue. The Court there considered the
requirements to be met when the prosecuting authorities seek
authorisation for the electronic interception of private
communications. Delivering judgment LeBel J said the following:
â
Thus,
the authorizing judge stands as the guardian of the law and of the
constitutional principles protecting privacy interests.
The judge
should not view himself or herself as a mere rubber stamp, but should
take a close look at the material submitted by the
applicant. He or
she should not be reluctant to ask questions from the applicant, to
discuss or to require more information or to
narrow down the
authorization requested if it seems too wide or too vague. The
authorizing judge should grant the authorization
only as far as need
is demonstrated by the material submitted by the applicant. The judge
should remember that the citizens of his
country must be protected
against unwanted fishing expeditions by the State and its law
enforcement agencies. Parliament and other
courts have indeed
recognised that the interception of private communications is a
serious matter, to be considered only for the
investigation of
serious offences, in the presence of probable grounds ... There must
be, practically speaking, no other reasonable
alternative method of
investigation, in the circumstances of the particular criminal
inquiry.
â
The
criterion laid down in the
Araujo
case, namely that there should be no other reasonable alternative
method of investigation may perhaps be too stringent, and I refrain
from expressing an opinion as to whether that exact formulation
should be adopted by our courts. What is, in my view, clear is that
the judge issuing the warrant in terms of Section 74D of the Income
Tax Act or Section 57D of the VAT Act should consider whether
one of
the less drastic mechanisms contained in those Acts could not be
utilised in order to attain the objective sought. Appropriate
facts
dealing with this question should be placed before the issuing judge
who may also make whatever enquiries he deems necessary
on the
question of why less drastic remedies are not utilised. In the
instant case, this was not done at the time that the Respondents
applied for the warrant. For this further reason the warrant should,
in my view, not have been issued.
For
the aforegoing reason, I am of the view that the warrant should be
set aside.
THE
ORDER GRANTED
In
my view, therefore, the main application should succeed. In regard
to the interim application the relief therein sought has become
academic. I am of the view, however, that the costs in that
application should follows the result in the main application and
that
the Respondents should be ordered to pay the costs of the
interim application, such to include the costs consequent upon the
employment
of two counsel.
The
following order is made:
A.
In case number 7627/2001, an order is granted:
Setting
aside the warrants of search and seizure issued by the Second
Respondent on 14 August 2002 under case number 6958/2001;
Directing
that any information, document or object seized by the First
Respondent pursuant to the said warrant be returned to the
Applicants forthwith;
Directing
that the Respondents pay the Applicantsâ costs, such to include
the costs consequent upon the employment of two counsel.
B.
In case number 6958/2001, an order is granted directing the
Respondents to pay the Applicantsâ costs, such to include the costs
consequent upon the employment of two counsel.
AC
OOSTHUIZEN A.J.
I
agree
NEL J.