Brief Summary

Constitutional Law — Search and seizure — Validity of authorizations under Income Tax Act — Appellants challenged the constitutionality of section 74(3) of the Income Tax Act 58 of 1962, alleging it violated their rights under the interim Constitution — The appellants' documents were seized under authorizations issued prior to the interim Constitution coming into effect — The Constitutional Court held that the actions taken prior to the Constitution's enactment could not be deemed unlawful retroactively, affirming the validity of the authorizations and the actions taken thereunder.

Comprehensive Summary

Summary of Judgment

1. Introduction

This matter concerned proceedings in the Constitutional Court of South Africa arising from a referral by the Appellate Division of the Supreme Court (as it then was) in terms of section 102(6) of the Constitution of the Republic of South Africa Act 200 of 1993 (the interim Constitution), read with Rule 23(4) of the Rules of the Constitutional Court. The Appellate Division referred four questions to the Constitutional Court for decision, relating to the constitutional validity of section 74(3) of the Income Tax Act 58 of 1962, and to issues of jurisdiction as between the Appellate Division and the Constitutional Court.

The parties were G Rudolph (first appellant) and Glynn Rudolph & Co (Pty) Ltd (second appellant) on the one hand, and the Commissioner for Inland Revenue (first respondent) together with several individual respondents cited in their official capacities (the remaining respondents) on the other hand. The dispute arose from searches and seizures conducted by officials of the revenue authorities, purportedly under written authorisations issued in terms of section 74(3) of the Income Tax Act.

The procedural history reflected that, after searches and seizures in 1993 and 1994, the appellants brought an urgent application in the Witwatersrand Local Division seeking interim relief and, alternatively, constitutional relief impugning the statutory provision, the authorisations, or their execution. That application failed (reported as Rudolph & Another v Commissioner for Inland Revenue and Others NNO 1994 (3) SA 771 (W)). The matter then proceeded to the Appellate Division, which heard argument on the appellants’ “common law grounds of invalidity” attacking the authorisations and their execution, but referred to the Constitutional Court questions concerning constitutionality and jurisdiction.

The general subject-matter of the dispute was the lawfulness of search and seizure measures under revenue legislation, the temporal reach of the interim Constitution’s rights protections, and the allocation of jurisdiction between the Constitutional Court and the Appellate Division in relation to constitutional and common-law challenges to administrative action.

2. Material Facts

It was common cause that, during October 1993, officials acting on behalf of the Commissioner, and acting under written authorisations issued by Mr C T Prinsloo, searched the first appellant’s home and seized documents.

It was also common cause that, on 22 April 1994, various respondents, acting under the same authorisations, searched the business premises of the second appellant in Johannesburg (where the first appellant had an office). They seized a substantial number of documents and placed them in a storeroom on the premises, which they locked and sealed, with one of the respondents retaining the key. The appellants were thereby deprived of access and control over the documents except as permitted under supervision.

On 26 April 1994, the first appellant was afforded an opportunity to copy seized documents under supervision. Later that afternoon, the third respondent indicated that the documents would be removed from the premises immediately. However, due to the lateness of the hour, the volume of documents, the incomplete copying, and the absence of a complete receipt, the documents were again locked in the storeroom, with the third respondent retaining the key.

The interim Constitution came into operation on the following day, after the events described above. The Constitutional Court treated the timing as central because the appellants’ constitutional attack depended on the interim Constitution applying to the complained-of conduct.

On 29 April 1994, the appellants launched an urgent application in the Witwatersrand Local Division for interim relief pending further proceedings challenging the authorisations, and alternatively seeking constitutional relief. A preliminary consent order regulated interim arrangements for the safekeeping of the seized documents, providing that the documents would be transferred to the appellants’ attorney’s offices for safekeeping in a separate strongroom sealed by the respondents, with access for the first appellant under supervision and with a right to copy.

The Constitutional Court recorded that the appellants did not regain possession or control of the documents until after 7 May 1996, when the first respondent caused them to be returned. However, for the legal issue before the Constitutional Court, the decisive factual question was whether the “seizure” (as a completed act) had occurred before the interim Constitution commenced.

Where the court distinguished between disputation and common cause, the key dispute was not about what physically occurred, but about the legal characterisation of those events: specifically, whether seizure was “completed” only once documents were removed, or whether effective deprivation of control (through locking, sealing, and retention of the key) already constituted a completed seizure prior to commencement of the interim Constitution.

3. Legal Issues

The central legal questions referred for determination were, in substance, the following.

First, whether section 74(3) of the Income Tax Act 58 of 1962 was contrary to the provisions of Chapter 3 of the interim Constitution and therefore invalid. Although the referral framed the issue broadly, the appellants confined their constitutional challenge to an alleged inconsistency with section 13 of the interim Constitution, which protected the right not to be subject to searches of home or property and not to have private possessions seized.

Second, whether, given the interim Constitution (and particularly section 24), it was competent for the Appellate Division to adjudicate and determine on appeal the appellants’ common law grounds of invalidity (as formulated in the referral order), or whether those matters fell within the exclusive jurisdiction of the Constitutional Court. This was principally a jurisdictional and constitutional-interpretive question, but its resolution depended on whether the interim Constitution applied to the relevant events at all.

Third, depending on the answer to the jurisdictional question, what directions should be given for disposal of the appeal in the Appellate Division.

Fourth, if the common law grounds did fall within the Constitutional Court’s exclusive jurisdiction, whether any of them were well-founded. This was framed as a contingency, and its relevance depended on whether constitutional jurisdiction was engaged.

In terms of the nature of the dispute, the court treated the determinative issue as one of law (the temporal operation of constitutional rights and jurisdiction), and the application of law to essentially common-cause facts (whether the seizure was completed before commencement of the interim Constitution). The interpretive question of what constitutes “seizure” for these purposes was also treated as part of applying legal meaning to the factual matrix.

4. Court’s Reasoning

Non-retroactivity of the interim Constitution and relevance to section 74(3)

The Constitutional Court held that the appellants’ constitutional attack on section 74(3) could not succeed in the circumstances because the interim Constitution did not operate retroactively so as to render unlawful conduct that was lawful at the time it occurred. The court relied on its prior decisions, delivered after written argument had been filed in the present matter, which were treated as dispositive of the retroactivity point.

The court referred in particular to Du Plessis and Others v De Klerk and Another and Gardener v Whitaker, which established that the interim Constitution did not operate retroactively “in the sense that it enacts that as at a past date the law shall be taken to have been that which it was not”. The court also relied on Key v The Attorney General, Cape of Good Hope Provincial Division and Another, where the court had held that events occurring before the interim Constitution came into force could not constitute breaches of constitutional rights that did not yet exist, and that the subsequent advent of constitutional rights could not render unlawful actions that were lawful when taken.

Given these authorities, the appellants were driven to argue that, even if the search commenced before the interim Constitution, the seizure had not been completed by the time the interim Constitution came into operation, so that a constitutional complaint could still arise.

Meaning of “seizure” and whether seizure had been completed before commencement

The court rejected the contention that seizure was incomplete. It held there was no reason to construe “seizure” in section 13 of the interim Constitution differently from “seize” in section 74(3) of the Income Tax Act or similar legislation, nor to treat constitutional “seizure” as perfected at a later stage than statutory seizure.

To determine when seizure occurs, the court adopted an ordinary-meaning approach, emphasising that seizure is not a term of art. It relied on Green v Commissioner of Customs and Excise 1941 WLD 128, which had held that seizure implies a forcible deprivation of possession, and that the essential feature is the effective deprivation of an owner’s control in the circumstances of each case. The court noted, as in Green, that physical removal from the premises is not indispensable; securing goods by seals and preventing their use could equally dispossess the owner.

Applying those principles, the court concluded that the appellants were effectively deprived of possession, control, and use of the relevant documents on 22 April 1994, when the documents were locked in a storeroom and a respondent retained the key, thereby placing the documents under the effective control of the revenue authorities. On that footing, the “seizure” was complete before the interim Constitution commenced.

The court addressed, and rejected as immaterial, arguments based on subsequent supervised copying and undertakings to permit further copying. It held these arrangements merely reflected the statutory entitlement under section 74(5) of the Income Tax Act to examine and extract documents seized under section 74(3) during office hours under supervision determined by the Commissioner. Such supervised access did not restore possession or control and did not indicate that seizure was incomplete.

The court also rejected reliance on the interim consent order providing for transfer to the appellants’ attorney’s strongroom sealed by the respondents. It reasoned that effective control remained with the respondents because the strongroom was sealed by them and access remained subject to their supervision. The purpose of access was to facilitate the statutory right to copy, not to restore possession or control.

From these considerations, the court held that the question whether section 74(3) was contrary to Chapter 3 was irrelevant to determination of the case before the Appellate Division because the authorisations were issued and executed, and the searches and seizures were completed, before the interim Constitution came into operation. Accordingly, the interim Constitution did not apply to the dispute before the Appellate Division.

Jurisdiction of the Appellate Division over the common law grounds

Because the interim Constitution did not apply to the authorisation, search, or seizure, the court held that the Appellate Division was competent to adjudicate and determine the appellants’ common law grounds of invalidity. It considered it unnecessary to express any view on what the position would have been if the interim Constitution had applied.

Consequently, the Appellate Division could dispose of the appeal according to its own powers and procedures, informed by the Constitutional Court’s answers to the referred questions. The Constitutional Court further held that, in the present case, the common law grounds did not fall within its exclusive jurisdiction; indeed, because the interim Constitution did not apply to the relevant events, the Constitutional Court held it had no jurisdiction at all in respect of the common law grounds of invalidity.

Costs

On costs, the court noted a concession in the respondents’ written argument to the effect that common law grounds for invalidity of administrative action fell within the jurisdiction of the Supreme Court, and that if the Constitutional Court were to hold it had such jurisdiction, one or more common law challenges should succeed. The appellants argued that this concession should result in the respondents bearing the costs in the Constitutional Court proceedings.

The court declined to make a costs order. It reasoned, among other things, that the concession could not simply be treated as a factual concession disposing of the matter in the Appellate Division, and that it was the appellants who had themselves raised an alternative constitutional challenge to section 74(3), which was not abandoned. The court also considered that all parties had erred in assuming that the interim Constitution applied, and that the Appellate Division’s concern about section 24 and jurisdiction may have led to referral regardless of the parties’ contentions. Applying the approach to costs in constitutional litigation articulated in Ferreira v Levin NO and Others; Vryenhoek and Others v Powell NO and Others (No 2), the court found insufficient grounds to burden only one side with costs in the Constitutional Court.

5. Outcome and Relief

The Constitutional Court answered the questions referred by the Appellate Division by holding that the constitutional validity of section 74(3) was irrelevant to the determination of the case because the interim Constitution did not apply to completed pre-commencement acts, including the completed seizure. It held that the Appellate Division was competent to adjudicate the common law grounds of invalidity, that it could dispose of the appeal according to its own procedures, and that the common law grounds did not fall within the Constitutional Court’s exclusive jurisdiction; in fact, the Constitutional Court had no jurisdiction over those common law grounds in the circumstances.

No order was made as to the costs of the proceedings in the Constitutional Court, and the Appellate Division’s earlier order that the costs of the hearing before it would be costs in the cause remained unaffected by the Constitutional Court’s order.

Cases Cited

Du Plessis and Others v De Klerk and Another (CCT 8/95) (15 May 1996) (Constitutional Court) (unreported at the time of this judgment).

Ferreira v Levin NO and Others; Vryenhoek and Others v Powell NO and Others (No 2) [1996] ZACC 27; 1996 (2) SA 621 (CC); 1996 (4) BCLR 441 (CC).

Gardener v Whitaker (CCT 26/94) (15 May 1996) (Constitutional Court) (unreported at the time of this judgment).

Giuliano v Minister of Law and Order 1990 (4) SA 308 (W).

Green v Commissioner of Customs and Excise 1941 WLD 128.

Johnston & Co v Hogg and Others (1883) 10 QBD 432.

Key v The Attorney General, Cape of Good Hope Provincial Division and Another (CCT 21/94) (15 May 1996) (Constitutional Court) (unreported at the time of this judgment).

Owners of the Cargo Lately Laden on Board the MV Menalon v MV Menalon 1995 (3) SA 363 (D).

Robinson Gold Mining Company v Alliance Insurance Company [1904] AC 359.

Rudolph & Another v Commissioner for Inland Revenue and Others NNO 1994 (3) SA 771 (W).

Shewan Tomes and Co Ltd v Commissioner of Customs and Excise 1955 (4) SA 305 (A).

Legislation Cited

Constitution of the Republic of South Africa Act 200 of 1993, including section 13, section 24, and section 102(6).

Criminal Procedure Act 51 of 1977, including section 20.

Income Tax Act 58 of 1962, including section 3(1), section 74(3), and section 74(5).

Investigation of Serious Economic Offences Act 117 of 1991, including section 6.

Customs and Excise legislation referred to as Act 34 of 1940, including section 18(2).

Rules of Court Cited

Rules of the Constitutional Court, including Rule 23(4).

Held

The Constitutional Court held that the interim Constitution did not apply to the challenged authorisations, searches, or seizures because these were completed before the interim Constitution came into operation. On the facts, seizure was complete when the appellants were effectively deprived of possession and control of their documents, which occurred before commencement of the interim Constitution, and later supervised copying rights did not alter that conclusion.

The Constitutional Court further held that, because constitutional rights were not engaged on the temporal facts, the Appellate Division retained competence to adjudicate the appellants’ common law grounds of invalidity, and those grounds did not fall within the exclusive jurisdiction of the Constitutional Court. No costs order was made in the Constitutional Court.

LEGAL PRINCIPLES

The interim Constitution did not operate retroactively so as to render unlawful conduct that was lawful when undertaken, nor to create constitutional-rights breaches in respect of events completed before the interim Constitution came into force.

For purposes of determining whether a “seizure” has occurred, the essential characteristic is the effective deprivation of possession and control, which may be achieved without physical removal of items from the premises; securing items so that the owner cannot exercise control or use may constitute seizure.

Where the interim Constitution does not apply to the impugned conduct because it predates commencement, questions of constitutional invalidity may be irrelevant to the dispute, and jurisdiction over common law challenges to administrative action remains with the ordinary courts (including the Appellate Division in the procedural posture of this case), with the Constitutional Court lacking jurisdiction over such common law grounds in the absence of an applicable constitutional issue.

Rudolph and Another v Commissioner for Inland Revenue and Others (CCT13/96) [1996] ZACC 13; 1996 (7) BCLR 889; 1996 (4) SA 552 (11 June 1996)