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[1990] ZASCA 2
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Commissioner for Inland Revenue v Insolvent Estate JP Botha t/a Trio Culture (30/89) [1990] ZASCA 2; 1990 (2) SA 548 (AD); [1990] 2 All SA 163 (A) (26 February 1990)
COMMISSIONER FOR INLAND
REVENUE
Appellant
and
INSOLVENT ESTATE J P
BOTHA
Respondent
(Trading as "TRIO KULTURE")
Case No 30/89 - mp
IN THE SUPREME COURT OF SOUTH
AFRICA APPELLATE DIVISION
In the matter between:
COMMISSIONER FOR INLAND
REVENUE
Appellant
and
INSOLVENT ESTATE J P
BOTHA
Respondent
(Trading as "TRIO KULTURE")
CORAM:
HOEXTER, NESTADT,
MILNE, JJA et NICHOLAS, FRIEDMAN, AJJA
HEARD:
16 November 1989
DELIVERED:
26 February 1989
JUDGMENT
HOEXTER, JA
2
HOEXTER, JA
From an office in the Transvaal
town of Brits as well as from agency offices within the
Pretoria-Witwatersrand-Vereeniging area one
J P Botha ("the
insolvent") carried on business from the end of July 1984 to the
beginning of October 1984. During this
short period the business
generated a turnover in excess of thirty million rand. On 15 January
1985 the estate of the insolvent was
finally sequestrated.
The insolvent
carried on his business under the name of "Trio Kulture".
He operated a milk-culture scheme which involved
the recruitment,
from members of the public, of growers of milk-culture. Each grower
("kweker") entered into a written
agreement with Trio
Kulture. In what follows
I
shall
refer to this written agreement as the "kweekkontrak". The
"kweekkontrak" was embodied in a printed form
which was
signed by both parties. Appended
3
to this judgment as Annexure "A"
is a copy of a specimen "kweekkontrak."
In respect of the Trio Kulture
business enterprise the insolvent was not registered as a vendor in
terms of sec 12 of the Sales Tax
Act, 103 of 1978 ("the Act").
On 10 January 1986, and in terms of the Act, the appellant in this
appeal ("the Commissioner")
issued an assessment notice
addressed to the trustee in the insolvent's estate ("the
respondent"). The assessment was in
respect of "Occasional
sales" transacted by Trio Kulture during the period
August/October 1984. The assessment reflected
the said sales as
having a taxable value of R30 587 534. This figure represented an
estimation by the Commissioner of the turnover
of Trio Kulture for
the period August/October 1984.
An objection by the respondent
against the aforesaid assessment was disallowed by the Commissioner,
4
whereupon the respondent in terms
of sec 22 of the Act
appealed to the Income Tax Special
Court for the Transvaal
against the decision of the
Commissioner. The parties put
before the Special Court a written
statement embodying the
agreed facts of the case. It was
common cause that -
"...die aanslae soos deur
die
Kommissaris
uitgereik korrek en verskuldig
is
indien AVB
regtens
betaalbaar is, dit wil s
ê
,
indien
die
app
è
l van die hand gewys sou
word."
The Special Court concluded that
the transactions reflected
in the agreed facts were not
"sales" within the meaning of
the Act and that, in consequence,
they did not attract
sales tax. The Special Court
accordingly upheld the
appeal and referred the assessment
back to the Commissioner
for revision in terms of its
judgment. Pursuant to an
order made by the President of the
Special Court in terms
of sec 86A(5) of the Income Tax
Act, 1962, the Commissioner
appeals to this Court against the
decision of the Special
Court.
The pith of the agreed facts
submitted to the
5
Special Court are thus
conveniently summarised by the
President of the Special Court
(KRIEGLER, J):-
"Die
geskil ontstaan naamlik uit 'n vrotmelkskema wat onder die naam Trio
Kulture oor 'n tydperk van sowat twee-en-'n-half maande
vanaf Julie
tot Oktober 1984 hoofsaaklik in die Transvaal bedryf is. Die skema
het dermate gefloreer dat daar binne daardie kort
tydsbestek
tientalle miljoene rande ge
ï
n
is van diverse lede van die publiek. Die skema het in sy wese daarin
bestaan dat Trio Kulture aan lede van die publiek 'n poeier
verkoop
het die wese waarvan gedroogte vrot melk was. Vir 'n besending van
die poeier, hoogdrawend 'n 'aktiveerder' genoem, het die
koper,'n
'kweker' genoem, R750 betaal. Hy sou dan 25 pakkies aktiveerder
daarvoor kry. Trio Kulture het 'n ooreenkoms opgestel waarluidens
die
kweker
geregtig sou wees
o
m
gekweekte
kultuur wat
hy
by
sy huis dan sal groei
met die gebruik van die oorspronklike poeier en glase melk aan Trio
Kulture terug te verkoop teen R10 per kultuur.
Die ooreenkoms het ook
daarvoor voorsiening gemaak dat Trio Kulture oor 'n termyn van 'n
jaar elke maand 'n honderd aldus gekweekte kulture
terug sou ontvang waarvoor daar dan R10 elk betaal sou word. Dit
beteken dan dat
'n kweker aan die einde van die eerste maand sy
honderd kulture terug lewer waarvoor hy dan R1 000 kry. As die
kontrak sy termyn
vol loop, dan sal hy vir sy aanvanklike beiegging
van R750 in die daaropvolgende jaar R12 000 kan in.
6
Dit is nie verbasend nie dat die
seepbel binne enkele maande gebars het. Die skema was in sy wese net
so verrot soos die melk wat
hy gebruik het. Dit verg nie die wysheid
van nasig om te kan sien dat die skema nooit ooit lewensvatbaar was
nie. Ten eerste was
die produk waarom dit gegaan het, waardeloos. Dit
was niks anders as gedroogte vrot melk nie. Daar is in die
ooreengekome feitestel
opgeteken dat daar by tye deur Trio Kulture
teenoor die publiek hoog . opgegee is as sou die produk verwerk word
in h
gesigroom Feit van die saak is
dat die
produk waardeloos was. Ten tweede,
al kon daar geglo word deur die hoogs liggelowige dat vrot melk tog
een of ander markwaarde het,
is dit nouliks denkbaar dat daar mense
rondloop wat so liggelowig is dat hulle glo dat sulke winste met so
min moeite en so min vaardigheid
of kennis verwerf kan word. Ten
derde, blyk dit uit die ooreengekome feite dat Trio Kulture uit die
staanspoor nooit enige bedoeling
gehad het om selfs die skyn van h
besigheid voor te hou nie. Daar is nie boek gehou nie. Daar is op h
lukrake manier met die geld
gewerk. Groot bedrae kontant het verdwyn
en dit blyk asof die organiserende brein agter Trio Kulture uit die
staanspoor geweet het,
soos hy trouens moes geweet het, dat die
musiek baie gou sou ophou speel. Daar is dus uit die staanspoor
geraap en geskraap om die
kontant wat ingevloei het, so gou as
moontlik te laat verdwyn. Die skema was nooit lewensvatbaar nie."
7
In the Special Court it was
submitted on behalf
of the respondent that the Trio
Kulture scheme constituted
a lottery within the meaning of
sec 1 of the Gambling Act,
51 of 1965 ("the Gambling
Act") and that the transactions
in terms whereof members of the
public bought milk-culture
from Trio Kulture were void
ab
initio.
Having regard to
the agreed facts, and in the light
of decisions such as
Rex v Lew Hoi and Others
1937 AD 215
;
Rex v Gondo
1951(3)
SA 509(A); and
Yannakou v
Apollo Club
1974(1) SA 614(A),
the Court
a quo
examined
the submission so advanced on
behalf of the respondent, and it
concluded that the scheme
was in fact a lottery hit by the
prohibition contained in
sec 2 of the Gambling Act. In this
connection the
President in the course of his
judgment observed:-
"Ons het hier te make gehad
met 'n skema wat geen kommersiële substratum anders dan as h
lotery kon
gehad het nie
Die bedrae wat ek reeds vroeër
genoem het, dui daarop dat Trio Kulture op iedere transaksie reeds
aan die einde van die eerste
maand R250
8
slegter af sou wees as dit werklik
'n koop en verkoop was wat hier plaasgevind het. Die skema was, na my
mening, niks anders as h
redelik behendig vermomde lotery nie. Hy het
sy bestaan daarin gehad dat die organiseerder van Trio Kulture so gou
moontlik van soveel
moontlik lede van die publiek soveel geld moes
in. Die tweede element daarin sou wees dat die aanvanklike kwekers
heel moontlik op
die kort termyn sou baat daarby, maar binne 'n
betreklike kort tyd moes die hele kaartehuis in duie stort en sou
enige latere kwekers
wat hulle R750 per battery aktiveerder betaal
het, bedroë daarvan moes afkom. Dit was, om beeldspraak te
gebruik, 'n mallemeule
wat al hoe vinniger moes draai en diegene wat
betyds opgeklim het, sou miskien h rukkie lank genot daaruit kcm put,
maar die latere
opklimmers sou deur die middelpuntvliedende
ekonomiese kragte van die skema afgesmyt word."
And again:-
"h Mens moet aan die hand van
die voorbeeld wat SCHREINER, AR in
Gondo
gegee het, terugstaan
en objektief kyk na die skema en volgens so h objektiewe betragting
is dit duidelik dat wat hier gebeur het,
die riskering van die R750
was wat met 'n wins verhaal kon word afhangende van die toevalligheid
van hoe vroeg dit betaal is. Dit
was h willekeurige geluk wat die
kweker kon tref as hy betyds op die mallemeule geklim het. Die skema
was in sy wese dan nooit iets
anders as 'n lotery binne die bedoeling
van die omskrywing in Wet 51 van 1965 nie."
9
The Special Court proceeded next
to consider
whether, despite the fact that the
"sales" concluded
between Trio Kulture and the
growers recruited to the
scheme were void
ab initio,
sales tax might not
nevertheless be payable thereon in
terms of the Act.
Pointing out that the definition
in the Act of "goods" as
"corporeal movable things"
would embrace the "vrot poeier"
or activator delivered by Trio
Kulture to the growers, the
Court then embarked upon the
further inquiry whether the
transactions
in
q
uestion
amounted
to
"
sales"
within
the
meaning of the Act. In the
concluding portion of his
judgment the learned President
reasoned thus:-
"Meer spesifiek dan is die
vraag dan of die omskrywing van 'verkoop' in artikel 1 van Wet 103
van 1978 die begrip so wyd rek
dat dit hierdie andersins nietige
transaksies betrek. Daardie omskrywing lui so : 'Verkoop (beteken)
met betrekking tot goed, 'n
ooreenkoms ingevolge waarvan 'n party
daarby ooreenkom om goed aan 'n
ander te verkoop ' Die omskrywing
loop
baie breër, maar daar is niks
in die res van die
10
omskrywing wat na my mening ter
sake is by die uitpluis van die huidige vraag nie. Daar is bepaáld
niks in die res van daardie
omskrywing wat h andersins nietige beding
weer asem inblaas op een of ander statutêre fiksie nie. Ons is
aangewese dan, enkel
en alleen op die omskrywing tot die mate wat ek
dit reeds aangehaal het en waaruit dit blyk dat die sleutelbegrip tog
maar verkoop
in sy gewone sin is.
Die bevinding wat ek reeds gemaak
het, kom daarop neer dat hier geen koop en verkoop in die gewone sin
van die woord was nie. Aangesien
die wetteregtelike omskrywing nie
daardie begrip uitbrei nie, bly die resultaat dan dat daar vir die
doeleindes van Wet 103 van 1978
hier ook geen verkoop transaksies was
nie. Die transaksies het bygevolg nie verkoopbelasting ingevolge
bedoelde Wet ontlok nie."
The Commissioner's notice of
appeal sets forth
the following two grounds of
appeal:-
"1 Dat die Hof gefouteer het
in sy bevinding dat, in ag geneem die feite voor die Hof, die
transaksies
ab initio
nietig was, en in die alternatief,
2. Die Hof moes beslis het dat
ongeag die bevinding dat die ooreenkoms tussen TRIO KULTURE en die
kwekers nietig was,
11
die betrokke transaksies nogtans
'verkope' was soos omskryf in artikel 1 van die Verkoopbelastingwet
van 1978."
Before this Court the argument
advanced on behalf
of the Commissioner was devoted
almost exclusively to the
first ground of appeal. The
alternative contention set
forth in the second ground of
appeal was not, however,
abandoned. Counsel for the
respondent supported the
findings of the Special Court to
the effect (1) that the
"kweekkontrakte" were
illegai and void and (2) that they
did not amount to "sales"
within the meaning of the Act.
As to the Commissioner's first
ground of appeal the
respondent relied upon the
decision of this Court in
Visser en 'n Ander v Rousseau
en Andere NNO 1990 (1 ) SA
139 (A).
To this decision
reference will be made
hereafter as "the
Visser
case". For the respondent it was
conténded that the decision
in the
Visser
case effectively
disposed of the argument
adumbrated in the Commissioner's
12
first ground of appeal. It is
convenient to deal at once with this last contention.
The
Visser
case also had
its origins in a scheme ("the kubus scheme") based upon the
cultivation of a milk-culture with the aid of
an "activator"
sold by a company ("the company") based in the Cape
Province. The scheme operated for ten months
before the company was
liquidated. At the date of liquidation there were many growers who
either had sold units of dried product
to the company for which they
had not yet received payment, or had bought units of activator and
were entitled to offer for sale
to the company units of dried product
at the end of each month in respect of each unit of activator bought.
There were also growers,
who, having received payment for the dried
product, had made a profit from their transactions with the company.
The liquidators of
the company treated
13
the kubus
scheme as a lottery within the meaning of the Gambling Act; and they
refused to recognise claims from growers on any contractual
basis.
However, the liquidators were prepared to repay to growers who had
bought activator the amount of the price pald by them;
but only to
the extent that they had received from the company less than they had
paid to it. The liquidators further contended that
the company was
entitled to recover the excess from the growers whose receipts from
the company had exceeded what they had paid to
it. This last
contention relied upon
secs 26
and
29
of the
Insolvency Act, 24 of
1936
, on the footing that in paying such excess the company had made
dispositions without value. In an action by the liquidators as
plaintiffs
in the Cape of Good Hope Provincial Division ("the
CPD") it was held that the liquidators were entitled to claim
from the
growers whose receipts from the company had exceeded what
they had paid
14
to the
company. The judgment of the CPD is reported
sub
nom
Rousseau and Others NNO v Visser and Another
1989(2)
SA 289(C).
A "Statement of Agreed Facts" was handed in at
the trial
and incorporated in the judgment of the CPD (at
293D-299G).
Paragraph 1.4 of the Statement of Agreed
Facts (see
294B/D) read as follows:-
"Defendants
admit ' that the aforesaid business activity of the company
constituted a lottery as contemplated by s 2(1) of the
Gambling Act
51 of 1965, in that the company could only continue to pay R10 per
unit of 'dried product' to growers by selling more
'activators' to
more growers on an ever-increasing scale. The company's ability to
pay R10 per unit of 'dried product' to growers
was therefore
dependent upon the company's ability to continue to sell more and
more 'activators'."
The
judgment of the CPD was delivered by MUNNIK, JP.
Having
recited the "Statement of Agreed Facts" and having
alluded to
the evidence adduced, the learned Judge-
Presldent
remarked (at 300G/H) -
"From
the evidence as a whole, read with the stated case and the admissions
made by counsel
15
during the course of argument, the
following facts can be taken as proved or common cause:
(a) The kubus scheme amounted to a
lottery as contemplated by s 2(1) of the Gambling Act 51 of 1965.
(b) (c) (d) (e) "
With leave of the CPD the
defendants in that action
appealed to this Court. The
judgment of this Court in the
Visser
case was delivered
by BOTHA, JA. Having recounted
the facts the learned Judge said
the following (at 146 E/G):
"Uit die voorgaande blyk dit
dat dit van geluk afhanklik was of 'n bepaalde kweker wat 'n
aktiveerde gekoop het en die droë
produk aan die maatskappy
gelewer het, die betaling van die prys vir laasgenoemde sou ontvang
al dan nie, na gelang van of die skema
die punt van ineenstorting
verbygegaan het of nie. Op hierdie grondslag is dit gemeensaak tussen
die partye in die huidige geding
dat die skema 'n onwettige lotery
uitgemaak het soos beoog word in artikel 2(1) van die Wet op
Dobbelary 51 van 1965, saamgelees
met die toepaslike woordomskrywings
in art 1 van die Wet. Daaruit volg dit dat die deelnemers aan die
skema, die maatskappy en die
kwekers, hulle skuldig gemaak het aan
misdrywe ingevolge die Wet, as daar by hulle die vereiste
mens rea
16
aanwesig was."
For the sake of completeness
mention may be made of the
fact that in a further action by
the liquidators of the
company against certain growers
(reported
sub nom
Rousseau en Andere v Malan en
'n Ander
1989(2) SA 451(K))
the defendants likewise conceded
(see 458C) -
" dat die maatskappy se
sakebedrywighede 'n
lotery daargestel het soos bedoel
in art 2(1) van die Wet op Dobbelary 51 van 1965."
Regarding the
Visser
case it is clear,
I
think,
that both in the trial action and
on appeal the Court was
invited to deal with the matter on
the footing that it was
common cause that the kubus scheme
amounted to a lottery
within the meaning of sec 2(1) of
the Gambling Act. In
these
circumstances, so
I
consider,
whether or not such a
scheme constitutes a lottery may,
so far as this Court is
concerned, be a question still
open and upon which.
17
perhaps, the last word has not yet
been spoken. For a
number of reasons (only one
whereof need hereafter be briefly mentioned) it seems to me that in
the instant case the correctness of
the finding by the Special Court
that the insolvent's business scheme was a lottery within the meaning
of the Gambling Act, may be
open to some measure of doubt.
What can hardly be open to doubt
is that the insolvent's business scheme was conceived in fraud. The
insolvent knew that Trio Kulture
would be able to meet its
contractual obligations to buy the dried product produced by growers
only for so long as new growers were
recruited at a rate faster than
that at which growers earlier recruited were able to produce the
dried product. It cannot be gainsaid,
furthermore, that reflection
upon the terms of the "kweekkontrak" and a simple
arithmetical calculation should have made
clear at once to any
18
prospective grower of ordinary
intelligence that the scheme was not a viable economic proposition;
and that, sooner or later, it was
doomed to failure. Why then, it may
be asked, did the scheme attract so many investors? The probable
answer is supplied by history
which teaches us that in the human
breast greed and gullibility are often partners. It is on these twin
weaknesses that all confidence-tricksters
trade; and not a few
flourish.
However, neither the palpable
fraudulence of a money-making scheme nor the credulity of its victims
by itself points to a conclusion
that all the statutory elements of a
lottery are present. As indicated by WATERMEYER, AJA in
Rex v Lew
Hoi and Others
(
supra)
at 219, the "gambling element"
must be present for a scheme to be a lottery of the kind which
legislation seeks to prohibit.
In
Lew Hoi's
case this Court
had to consider the provisions of Transvaal Law 7 of 1890. In that
Law the
19
material portion of the definition
of a "lottery" (see 218)
was:-
"Lotery beteekent iedere
lotery in de algemeene en aangenomen betekenis van het woord, waarby
inteekening plaats vindt, en meer
in het byzonder ieder schema,
inrichting, systeem, plan of ontwerp, waarby een prys of pryzen
gewonnen, getrokken of voor geworpen
worden of kunnen worden door het
lot, dobbelsteenen
of andere methode van kans."
(My
emphasis).
Upon a consideration of the
relevant case law WATERMEYER,
AJA (at 220) reached -
"...the conclusion that the
essential characteristics of a lottery under Law 7 of 1890, are (a)
some payment by the participant
in the form of a stake, (b) in return
for this payment or in consequence of it, acquisition by the player
of a right to a prize on
the occurrence of an event, (c)
determination of the occurrence of the event by chance."
In sec 1 of the Gambling Act
"lottery" is defined thus:-
"...'lottery' means any
lottery in the generally accepted meaning of the word, and more
particularly every scheme, arrangement,
system, plan or device by
which any prize is or may be gained, won, drawn, thrown or competed
for by lot, dice or
any other method of chance,
either
20
with or without reference to the
happening of any
uncertain event other than the result of
the
application or use of such lot, dice or
other
method of
chance
and also includes any scheme,
arrangement, system, plan
or device, which the
Minister may from time to time by notice in
the
Gazette declare to be a lottery."
(My
emphasis).
A perusal of the "kweekkontrak"
reveals nothing in its terms which would suggest even remotely to a
prospective grower that
in buying the activator from Trio Kulture he
was hazarding a stake on the possibility of winning a "prize".
However that
may be, and assuming for present purposes the propriety
of regarding payment of money by Trio Kulture to growers as a
"prize",
the following logical difficulty in the way of a
finding of a lottery suggests itself. Can the acquisition of a right
to a "prize"
by a grower under the scheme be said to be
determined by "a
method
of chance"?
Any grower who entered into a
"kweekkontrak" with Trio Kulture became entitled to
payment, as of right, when
21
the grower had produced and
delivered the dried product to Trio Kulture ( "the due date")
in terms of the "kweekkontrak".
Now it is perfectly true
that whether or not the grower would in fact receive payment from
Trio Kulture remained, until the due date,
a matter of uncertainty.
Objectively viewed, however, such uncertainty stemmed from the fact
that the scheme was a fraudulent one
involving (1) the likelihood
that the insolvent might at any stage siphon off money from the
coffers of Trio Kulture and (2) the
inevitability that at some or
other stage funds in Trio Kulture would dry up. In this connection
the problem which arises is the
following. When at the due date a
grower was or was not paid, as the case might be, could it be said
that payment or non-payment
had been determined by a
method
of
chance? It is by no means clear to me that this question is to be
answered affirmatively. Whenever a contract (legal or illegal)
requires A to pay a
22
sum of money to B upon B's
performance of something, actual payment to B on due date in the
ultimate analysis depends upon A's willingness
and ability to pay;
and that uncertainty cannot be finally resol'ved until due date. In
my view there is considerable force in the
contention that the
resolution of this particular imponderable (the ability to pay) which
inheres in so many bilateral transactions,
cannot be viewed as
determination by a
method
of chance; and that in the instant
case the grower's right to payment depended entirely or
overwhelmingly on the predictable behaviour
of the grower (his
production of the dried product by a simple process) rather than upon
the selection of the grower as a lucky winner
by a
method
of
chance.
I
find
it unnecessary, however, to decide whether or not the insolvent's
scheme constituted a lottery. If it was a lottery then the
"kweekkontrakte" were void. In the view which
I
take of
23
the
appeal sales tax was payable in terms of the Act in
respect
of the "kweekkontrakte" whether they were legal and
enforceable or illegal and void. For
purposes of the
appeal, and without so
deciding,
I
shall
assume in favour
of the respondent that the
Special Court was correct in its
finding
that the scheme constituted a lottery within the
meaning
of the Gambling Act; and, accordingly, that the
"kweekkontrakte"
were void
ab initio.
On that assumption,
and for the reasons
which follow, it seems to me that the
"kweekkontrakte"
nevertheless were "sales" within the
meaning
of the Act. In my view the respondent has failed to discharge the
onus
which
he bears (see sec 23 of the
Act) of proving
that the amount in question is not liable to sales tax and that the
decision of the Commissioner in
so
assessing him to sales tax is wrong.
Since a
contract which is forbidden by statute is illegal and void, a Court
is bound to take cognizance of
24
such illegality; and it cannot be
asked to enforce or to
uphold or to ratify such a
contract:
Cape Dairy and
General Livestock Auctioneers v
Sim
1924 AD 167
at 170.
It is sometimes said that any
juristic act' performed i'n
defiance of a statutory
prohibition is not only
ineffective, but further that it
should notionally be
thought away. Thus in
Schierhout
v Minister of Justice
1926 AD 99
, INNES, CJ, having
cited the Code 1.14.5,
remarked at 109:-
"So that what is done
contrary to the prohibition of the law is not only of no effect, but
must be regarded as never having been
done - and that whether the law
giver has expressly so decreed or not; the mere prohibition operates
to nullify the act."
Such general propositions are
useful to stress the concept
that
inter partes
an
illegal jural act is devoid of legal
consequence. But from such
convenient generalisations it
is not to be inferred that because
an agreement is illegal
a Court will in all circumstances
and for all purposes turn
25
a blind eye to its conclusion; or
deny its very existence.
As pointed out by VAN DEN HEEVER,
J in
Van der Westhuizen
v Engelbrecht and Spouse; &
Engelbrecht v Engelbrecht
1942
OPD 191
at 199 -
"When we say a juristic act
is void or voidable,
we pass judgment upon it from various points
of
view, basing our judgment upon the degree or
direction of
its effectiveness "
And at 200 -
"...juristic acts may be
impugned from varying directions and to different degrees."
That the above approach is
jurisprudentially sound is
demonstrated by many everyday
practical situations.
Obvious examples which spring to
mind are sales conducted
on a Sunday in violation of
Provincial Ordinances; and
agreements pertaining to unlawful
dealing in rough or uncut
diamonds or unwrought precious
metals. To the conclusion
of such illegal agreements the law
accords recognition for
particular purposes. That they are
void
inter
26
partes
does not rob them of
all legal result. Por
example, in dealing with a
contravention of sec 142 of
Transvaal Law 15 of 1898, INNES,
CJ in
Rex v Goldflam
1904
TS 794
remarked at 796:-
"The detectives proved, and
Mr
Stallard
does not controvert the point, that there was an
agreement to buy; and that if the transaction had not been forbidden
by sec 141
it would have been an agreement upon which an action could
have been brought. If that be so, it appears to me that there was a
purchase
within the meaning of the section"
Cases in point are not confined to
the criminal law. In
Van der Westhuizen v
Engelbrecht
(
supra)
VAN DEN
HEEVER, J elucidated the logical
distinction with which he
was there concerned by reference
to the facts of
Wilken v
Kohler
1913 AD 135
, in
which case this Court held that in
terms of sec 49 of Ordinance 12 of
1906 of the Orange River
Colony an oral contract for the
sale of land in the Free
State was void. Having mentioned
(at 201) that a party to
such an agreement was (q
ua
contracting party) remediless,
27
VAN DEN HEEVER, J proceeded to
say:-
"In other directions the
contract did have legal effect. It would have been futile for either
party to claim, as against the
tax collector,
that no sale had taken place or
against creditors
(supposing that had been the
object'of the transaction) that no disposition in fraud of creditors
had been committed."
Assuming that the "kweekkontrakte"
are hit by the
prohibition in the Gambling,Act,
the fact of the matter is
that in the instant case the Court
is not being asked to
"enforce" or to "uphold"
or to "ratify" a contract which
the law expressly forbids. The
Court merely looks at the
provisions of the Act in order to
see whether the agreement
contained in the "kweekkontrak"
comes within the literal
language of the Act.
It is common cause that the dried
product
represents "goods" as
defined in the Act. In defining
"sale" sec 1 of the Act
casts the net widely. Omitting
provisos and exceptions not
material to the issue in this
28
appeal, sec 1 decrees that in the
Act, unless the context
otherwise indicates -
"...'
sale
', in
relation to goods, means an agreement whereby a party thereto agrees
to sell, grant, donate or cede goods to another or exchange
goods
with another or otherwise to dispose of goods to another, including
without in any way limiting the scope of this definition
-
(d any other transaction whereby
the ownership of goods passes or is to pass from one person to
another,
wheresoever such agreement or
transaction is entered into or concluded, but does not include -
On behalf of the respondent it was
urged before us that no transfer of ownership in goods was possible
pursuant to a void transaction;
and that in the definition of "sale"
in sec 1 of the Act there was discernible as a common denominator of
the various acts
therein mentioned (sale, donation, cession,
exchange, disposal) the notion of
29
transfer of ownership in goods.
This last submission does
not appear to me to be sound. In
the statutory definition
of "sale" a reference to
the passing of ownership occurs in
sub-para (d). In the f irst place
it is to be noticed,
however, that sub-para (d) deals
with a transaction -
"...whereby the ownership of
goods passes
or is to pass
from one person to another."
(My emphasis).
In the second place sub-para (d)
constitutes, in my
opinion, a discrete element in the
statutory definition to
be read disjunctively from the
introductory portion
thereof. It is
significant,
I
consider,
that the words in
the introductory portion of the
definition postulate no
more than agreement whereby a
party to the agreement agrees
to do something. Fulfilment or
actual performance thereof
is not a requirement of the
definition.
This appeal involves a fiscal
enactment. The
rule of construction in taxing
statutes was enunciated in
30
1869 by LORD CAIRNS in
Partington
v The Attorney-General
21
LT 370
(HL) at 375 in the
following words:-
" as
I
understand the principle of all fiscal
legislation, it
is this: If the person sought to
be
taxed
comes
within the letter
of the law, he
must be taxed, however great the
hardship may appear to the judicial mind to be. On the other hand, if
the Crown, seeking to recover
the tax, cannot bring the subject
within the letter of the law, the subject is free, however apparently
within the law the case might
otherwise appear to be. In other words,
if there be an equitable construction, certainly such a construction
is not admissible in
a taxing statute, where you can simply adhere to
the words of the statute."
The above rule of construction was
endorsed by this Court
in
CIR v Georqe Forest Timber
Co Ltd
1924 AD 516
at 531/2.
In
CIR v Simpson
1949(4) SA
678(A) CENTLIVRES, JA in
dealing with a fiscal definition,
remarked (at 695):-
"In
construing the definition regard must be had
to
the cardinal rule laid down by ROWLATT, J., in
Cape
Brandy Syndicate v Inland Revenue Commissioners
(1921 (1), K B 64
at 71) and approved by SIMON,
V
C, in
Canadian
Eagle Oil Company, Ltd v The King
(1946, A C
119
at
p 140). That rule was as follows:
31
'In a taxing Act one has to look
merely at what is clearly said. There is no equity about a tax. There
is no presumption as to a tax.
Nothing is to be read in, nothing to
be implied.
One can only look fairly at the
language used.'
I
shall
assume that the above rule should be qualified by saying that even in
taxing statutes something may have to be implied by necessity.
Cf.
Randfontein Estates G M Co., Ltd v Randfontein Town Council
(1943, A D 475
, at pp 494, 495) and the cases there cited."
It is trite that a fiscal
ehactment must be expressed in
clear and unambiguous terms. If
the language used raises
a doubt as to the liability of the
taxpayer to tax, the
Court is bound to invoke the rule
of
contra fiscum.
There
are other ancillary aids to
construction. In the course
of argument it was submitted on
behalf of the respondent
that particularly apposite to the
problem of interpretation
in the instant case was the
presumption that a reference in
a statute to a transaction is a
reference to a legally
32
valid transaction. A useful
illustration of reliance on
the said presumption is afforded
by the judgment of this
Court in
Die Staat v Le Grange
1962(3) SA 498(A). That
decision is authoritý for
the view that a persón to whose
possession a State motor vehicle
has been entrusted for
official purposes cannot in terms
of sec 138(2) of
Transvaal Ordinance 18 of 1957
grant permission to himself
to use the vehicle beyond the
limits of the owner's
consent; and if the possessor does
use such vehicle on a
public road for his own purposes,
he is guilty of a
contravention of sec 138(2). In
delivering the judgment
of the Court STEYN, CJ observed
(at 502G-503A):-
"Die uitspraak van die Hof
a
quo
gaan uit van die stelling dat h persoon met wettige toesig
oor h voertuig, volgens art 138(2), ook aan homself toestemming kan
verleen
om die voertuig buite die perke van die eienaar se verlof te
bestuur. Hierdie stelling wil my voorkom onjuis te wees. In die
eerste
plek moet die verwysing na 'toestemming', tensy die teendeel
blyk, geag word 'n verwysing na 'n regsgeldige toestemming te wees.
(Vgl.
Ndhlovu v Mathega,
1960(2) SA 618 (A A) op
33
bl 624). Ek kan weinig vind wat op
die teendeel
dui. Dit is
moeilik om aan te neem dat bv 'n parkeerbeampte, onder wie se toesig
'n voertuig
gelaat is, of 'n polisiebeampte
wat met toesig oor
'n voertuig as
corpus
delicti
belas is, volgens hierdie
sub-artikel kan toestem tot die bestuur daarvan
vir welke doel
ook en deur wie ook al.
'n Toestemming
wat
alle bevoegdhede te buite gaan,
is
regtens geen toestemming nie.
Om by die
toepassing van die sub-artikel 'n wettigende uitwerking te h
ê
,
moet dit,
sou ek meen, 'n bevoegde
toestemming wees."
(My emphasis).
In
Abbot
t
v CIR
1963(4) SA 552(C), a Full Bench of the
Cape Provincial Division commented
upon the limits of the
field of operation of the said
presumption. CORBETT, AJ
(in whose judgment BEYERS, JP and
DIEMONT, J concurred)
remarked as follows (at 556D/F):-
"There is a general
presumption, which is applied as a rule of construction in the
interpretation of statutes, that a reference
in a statute to a
transaction or deed is a reference to a legally valid transaction or
deed (see Steyn,
Die Uitleg van Wette,
2nd ed p 113) and it
might be argued that this supports counsel's submission. Such
presumptions are, however, merely guides to construction
and must
give way where other considerations, such as those of language,
34
context and circumstance, indicate
a contrary intention on the part of the Legislature."
The second sentence in the excerpt
from
Abbott v CIR
(
supra)
quoted above was
cited with approval by RABIE, ACJ
in
Kauluma en Andere v Minister
van Verdediqing en Andere
1987(2) SA 833(A) at 857B/E - in
which case, on the wording
of the statute concerned, it was
held that there was no
room for the application of the
said presumption.
In considering whether or not the
presumption
should be invoked in any
particular case much depends upon
the precise formulation of the
statutory enactment in
question and its true compass. By
way of illustration two
further decisions of this Court
may be contrasted. In De
Kock v Helderberg Ko-op.
Wi
í
nmakerii Bpk.
1962(2) SA
419(A) the presumption was relied
upon to repel an
argument that an Act which allowed
a co-operative society
registered under a previous Act to
carry on with its
activities, permitted even such
activities as were
ultra
35
vires
the society's
regulations. At 427C/D STEYN, CJ
said:-
"Dit kon nouliks die
bedoeling van die Wetgewer gewees het om in art 90(1)(c) onwettige
werksaamhede ingevolge sulke ingeldige
regulasies, onverskillig of
hul strafbare misdrywe uitgemaak het al dan nie, met toekomstige
regmatigheid te beklee. Die bedoeling
was om die voortsetting van h
wettige
status quo
te veroorloof, en nie om onwettigheid en
misdrywe te laat voortduur as geoorloofde bedrywighede slegs omdat
hul by die inwerking-treding
van die Wet reeds in swang was nie."
On the other hand in
Ndhlovu v
Mathega
1960(2) SA 618(A)
it was decided that the mere fact
that the plaintiff had
been conveyed for reward contrary
to the provisions of the
Motor Carrier Transportation Act,
39 of 1930, did not in
itself deprive him of the right of
action created by sec
11(1) of the Motor Vehicle
Insurance Act, 29 of 1942. It
was held that the words "carried
otherwise than for reward"
in para (iii) of sec 11(1) of Act
29 of 1942, and the words
"carried for reward" in
para (iv) should be literally
36
construed and applied; and that
the contemplated carriage
for reward was not confined to
carriage not punishable
under sec 9 of Act 39 of 1930.
In the process of statutory
interpretation it is
the function of the Court to
determine what the Legislature
means from the words it has used.
If the language of an
enactment is unambiguous that is
an end of the matter.
Where meaning is unequivocally
expressed there is neither
need nor room for ancillary aids
to interpretation. As
VAN WINSEN, AJP pointed out in
Parow Municipality v Joyce
and McGreqor (Pty) Ltd
1974(1) SA 161 (C) at 165H - 166A:-
" these rules of statutory
exegesis are
intended as aids in resolving any
doubts as to the legislature's true intention. Where this intention
is proclaimed in clear terms
either expressly or by necessary
implication the assistance of these rules need not be sought."
Had it been Parliament's intention
to ordain that illegal
agreements of sale should not
attract sales tax, nothing
would have been simpler than to
have said so. Here it
37
omitted to do
so. In defining a "sale" sec 1 of the Act uses words of
general and very broad signification. Unless there
is to be noticed
in the Act itself some sound reason for a restrictive interpretation,
the general words of the definition must receive
a general meaning;
and full and fair effect must be given to the language used. In its
ordinary meaning the word "agreement"
signifies an accord
or concurrence of minds. On the face of it, so it seems to me, the
"kweekkontrak" comes squarely within
the letter of the
definition of "sale" in sec 1 of the Act. In the
"kweekkontrak" Trio Kulture agreed to sell
goods to others.
To read "an agreement whereby a party agrees to sell" in
the statutory definition as signifying "an
agreement enforceable
at law whereby a party agrees to sell" involves, so
I
consider, an arbitrary retrenchment of the
ordinary and natural meaning of the word. Is there then to be found
elsewhere in the Act
an indication that
38
the ordinary
and natural meaning must be curtailed or cut down?
I
do not think that there is.
I
have
had the advantage of reading the judgment prepared by my Brother
NESTADT. NESTADT, JA detects in secs 5(2)(a) and 7 of the Act
indications that Parliament contemplated the
payment
of sales tax
by vendors only in respect of
"valid sales". With that appraisal
I
would respectfully disagree. In my judgment
the provisions of the Act cited by my Brother do not in fact conduce
to the conclusion
reached by him.
I
have
been unable, moreover, to find elsewhere in the Act any provision
which betrays such a design on the part of the Legislature.
In my judgment the language of the
statutory definition of "sale", viewed in the contextual
setting of the Act, is sufficiently
clear and unambiguous to obviate
recourse to any of the general presumptions which may be invoked as
guides to the construction of
equivocal
39
statutory enactments.
The conclusion
at which
I
arrive
is that the definition of "sale" in sec 1 of the Act
comprehends agreements of sale whether they be legal or illegal,
This
construction is not,
I
consider,
an unreasonable one. Nor does it produce any obvious repugnance or
inconsistency. In particular (cf. the remarks of STEYN,
CJ in
De
Kock v Helderberq Ko-op
(
supra)
quoted earlier in this judgment) such construction does not in any
way serve to perpetuate any illegality or criminal infraction.
It
seems to me rather to accord both with common sense and sound
commercial principle. Beyond the context of a statute itself any
speculation upon the intention of Parliament in enacting it is
dangerous. Bearing in mind this hazard it is nevertheless difficult
not to be repelled, more particularly perhaps in the case of a fiscal
statute, by the notion of a capricious legislative intent to
40
discriminate in favour of vendors
in illicit sales.
For the
aforegoing reasons
I
consider
that sales tax was payable in respect of the "kweekkontrakte"
and, accordingly, that the assessment was correctly
raised by the
Commissioner. By way of a petition addressed to this Court the
Commissioner seeks condonation of the late filing of
the record of
proceedings with the Registrar of this , Court. The lapse is
satisfactorily explained and the relief sought is not
resisted by the
respondent. The necessary condonation is granted.
The appeal succeeds with costs,
including the costs of two counsel. The order of the Income Tax
Special Court allowing the respondent's
appeal to it, and remitting
the assessment to the Commissioner, is set aside. The following order
is substituted therefor:-
41
"Die app
è
l
teen die Kommissaris se aanslag word afgewys."
G G HOEXTER, JA
NICHOLAS, AJA ) FRIEDMAN, AJA )
Concur
CASE
NO. 30/89
/ccc
IN THE
SUPREME COURT OF SOUTH AFRICA
(APPELLATE
DIVISION)
In the
matter between:
COMMISSIONER
FOR INLAND REVENUE
APPELLANT
and
INSOLVENT
ESTATE J P BOTHA
RESPONDENT
tradinq
as TRIO KULTURË
CORAM
:
HOEXTER, NESTADT, MILNE JJA et NICHOLAS, FRIEDMAN AJJA
DATE
HEARD
: 16 NOVEMBER 1989
DATE
DELIVERED
: 26 FEBRUARY 1990
JUDGMENT
NESTADT,
JA
:
I
have come to a different conclusion. In
my opinion
the special court correctly held that (i) the scheme
was a
lottery within the meaning of Act 51 of 1965 (the Act):
(ii) the
sales in question were ab
initio
void; and (iii) no
2/
2. sales tax in terms of Act 103
of 1978 (the Sales Tax Act) was therefore payable.
In considering
whether the scheme was a lottery ((i) above), the special court
adopted what may be called an objective approach. This
meant that it
mattered not that the growers may not have realised that they were
participating in a lottery (because, for example,
they thought the
powder was of value).
I
agree
with this. Neither the "generally accepted meaning" of a
lottery nor the more specific definition thereof in sec 1
of the Act
in terms requires the subjective element. The indications in our case
law dealing with the meaning of a lottery are rather
to the contrary.
Thus it has been held that in deciding whether a scheme is a lottery
its "substantial object" and "practical
working"
are looked to. (
R vs Cranston
1914 AD 238
;
S vs Midas Novelties (Pty)
Ltd and Another
1966(1) S A 492(A) at
498 in
fin
- 499 A and 500 A; see too
R vs Bertram
Davis
1915 TPD 155
at 159 and LAWSA,
Vol 10, para 427, at p 305-6).
3/
3.
In
R vs Ellis Brown Ltd
1938 AD 98
at 101 a contention that the
scheme there in issue was not a
lottery because it was not
intended to be one was rejected,
apparently on the basis that
this consideration was irrelevant.
To similar effect is what
Lord ALVERSTONE CJ said in
Willis
vs Young and Stembridge
1907(1)
KB 448 at 453-4 viz:
"We are
fully aware of the ingenuity of the gentlemen who originate these
schemes, and pf their advisers, and doubtless this
will not be the
last attempt to devise a scheme to keep outside the statute dealing
with lotteries;
I
do
not say to evade the statute, for a practice is either within a
statute or not."
There
is,
I
think, good
reason for not taking account of the
participants' state of mind. In
many cases these schemes are so
designed as to disguise their true
nature. To require an
awareness on the part of the
participants that the scheme is a
lottery and an intention to gamble
might result in the
prohibition against lotteries and
the legislature's object in
curbing their mischief (as to
which see
Milton
: South African
4/
4.
Criminal Law and Procedure, Vol 3, Part
I,
chap E, p 13) being
frustrated.
In a given case (particularly the present) one
could
have some participants who see the scheme for what it is
whilst
others, being more naive or less perceptive, do not.
Were
their
animus
one of the relevant criteria, a scheme would be
a
lottery as far as the former are concerned but not as regards the
latter. An interpretation of the word lottery which avoids
such
a result is desirable. This is achieved by in each case
looking
to the subject-matter of the scheme. If in fact the
three
essentials of contribution, prize and chance are present,
it
is to be classified as a lottery, irrespective of whether the
parties
intended to gamble.
I
am,
of course, not dealing with
the issue of
criminal liability (created by sec 8). Here,
mens
rea
probably would be required (see
Milton
op cit
p 19-23).
Judged in
the light of what has been stated, the scheme was, in my view, a
lottery. Of course, this does
5/
5.
not expressly appear from the
stated case. But it may (see
Supreme Court Rule 33(3)) and is
to be inferred from the admitted
facts. The R750, being the "price"
of the powder, was the
stake. The prize was the monthly
payment of R1,000 (payable
after delivery of the product).
And the element of chance on
which payment of the prize
depended was also sufficiently
present. BOTHA JA in
Visser en
'n Ander vs Rousseau en Andere
NNO
1990 S A 139(A)
, dealing with
a scheme which was
substantially similar to ours (and
which was regarded as a
lottery), explained the chance
element as follows (at 146 B - E):
"Gevolglik is dit duidelik
dat die skema aan die gang gehou sou kon word slegs vir solank as wat
die Maatskappy daarin kon slaag
om meer en meer nuwe kwekers te
verwerf aan wie aktiveerders verkoop kon word, want dit was slegs uit
die opbrengs van sulke steeds
toenemende verkope dat die Maatskappy
sou kon voorbly om kwekers te betaal wat die droë produk aan die
Maatskappy gelewer het.
Terselfdertyd is dit duidelik dat, heel uit
die staanspoor uit, reeds vanaf die oomblik toe die skema h aanvang
geneem het, dit gedoem
was om vroeër of later in duie te stort.
Die ineenstorting sou kom sodra die verkope van verdere
6/
6.
aktiveerders aan bykomende kwekers
gedaal het tot 'n vlak waarna die maatskappy nie meer in staat sou
wees om uit die opbrengs daarvan
te voldoen aan die eise van kwekers
vir die betaling van die prys van die droë produk wat aan die
maatskappy gelewer is nie.
Wanneer daardie dag sou aanbreek, was nie
moontlik om te voorspel terwyl die skema nog aan die gang was nie.
Uit die voorgaande blyk
dit dat dit van geluk afhanklik was of 'n
bepaalde kweker wat 'n aktiveerder gekoop het en die droë produk
aan die maatskappy
gelewer het, die betaling van die prys vir
laasgenoemde sou ontvang al dan nie, na gelang van of the skema die
punt van ineenstorting
verbygegaan het of nie."
Or, in the more graphic language
of KRIEGLER J:
"Dit was 'n willekeurige
geluk wat die kweker kon tref as hy betyds op die mallemeule geklim
het."
The
underlying principle is,
I
consider,
that referred to by
SCHREINER JA in
R vs Gondo
1951(3) S A 509(A) at 514 E, namely:
"Those prospects (of
receiving a prize) depend to an overwhelming degree on the
unpredictable behaviour of other persons over
whom the holder in
question can exercise no control."
Also apposite is the following
statement of WILSON J in
S vs
Mbonambi
1986(3) S A 839(N)
at 843 G - H:
7/
7.
"(T)his scheme and similar
chain-letter schemes or other schemes depending on an ever-increasing
participation by members of
the public for their successful
completion, are lotteries..."
Is the conclusion that the scheme
was a
lottery negated by the
consideration that the
right
to a prize is
dependent not on chance but on
delivery of the product by the
grower to
Botha?
I
do not
think so. Obviously WATERMEYER AJA
in
R vs Lew Hoi and Others
1937 AD 215
at 220 had, in dealing
with the second characteristic of
a lottery, to refer to the
"acquisition by the player of
a right to a prize on the
occurrence of an event". It
could obviously not be a
requirement that a prize actually
be received. Nevertheless, as
is clear from the rest of the
judgment (and from numerous other
authorities),
it is the chance of
receivinq
a prize
that is one
of the essentials of a lottery.
And for the reasons stated, the
scheme here in issue had this
ingredient. The true prize was the
receipt of R1 000,00 per month,
not merely the right to receive
8/
8.
it.
There was no dispute (in relation
to (ii) above) that, if the scheme was a lottery, the sales by Botha
to members of the public were
void. Plainly, the sales of the powder
were part of and indeed essential to the operation of the scheme. The
powder being worthless,
such sales were each in reality the sale of a
right to participate in the scheme. Such right is recognised, if not
conferred, by
the written contract entered into between Botha and
each of the growers (and which is annexure A to the stated case). In
the light
of the wide def inition of "ticket" in sec 1 of
the Act, annexure A is a ticket. It was these tickets which were
sold.
Such sales are prohibited by sec 2(1)(d) and constituted
offences in terms of sec 8. Applying the principles of
Swart vs
Smuts
1971(1) S A 819(A) at 829 E - F, it is clear that the
legislature intended that they be void (
Yannakou vs Apollo Club
1974(1) S A 614(A) and 622 A; LAWSA, Vol 10, paras 429 and 430, p
308).
9/
9.
The
issue whether, despite the sales being
void
for illegality, sales tax was payable ((iii) above) depends
on
an interpretation of certain provisions of the Sales Tax Act.
The
broad scheme of the Act was analysed by this Court in
Charles
Velkes Mail Order 1973 (Pty) Ltd vs
Commissioner for Inland
Revenue
1987(3) S A 345(A) at 353 G seq. Briefly stated, it
provides
for the payment of a sales tax calculated
at
a given
percentage of the "taxable
value" of a wide-ranging number of
specified
transactions, services and goods (sec 5(1)). That
which
is relevant to the present matter is the "sale of goods"
(see sec 5(1)(a)). "Sale" is
defined in sec 1. It is in far
wider terms
than the ordinary common law meaning of sale. Thus
it
includes the donation and exchange of goods and the provision
of
what would normally be regarded as services. Essential in
each
case, however, is "an agreement" or "any other
transaction
whereby the ownership of goods
passes or is to pass from one
person to
another". The "taxable value" is determined by
10/
10.
reference to "the
consideration accruing to the seller" or (
inter alia
where no consideration is payable) to the cost of the goods or the
market value thereof, whichever is the less (see sec 7 and especially
sub-secs (1), (3) and (6)).
It will be
apparent from what has been said that for sales tax to be payable,
there must be either an agreement or a transaction (of
the kinds
referred to). The meaning of "transaction" (which is not
defined) is somewhat obscure. It seems to be conceptually
different
to "agreement".
I
shall
assume that the tickets (and powder) were "goods" as
defined in sec 1 and that the prohibition against lotteries did
not
affect the passing of ownership thereof from Botha to the growers.
But this cannot avail the Commissioner. Where, as here, agreements
(of sale) were purportedly entered into,
I
am inclined to think that his claim to
sales tax had to be and was based on such agreements rather than on
the sales being "transactions".
In any event, the powder
and therefore the
11/
11 .
tickets had no market value and
accordingly a nil taxable value.
This leaves for consideration the
question
whether the sales in issue
qualified as agreements within the
meaning of the Sales Tax Act. In
my view they did not. A
void contract has been described
as being "devoid of any legal
effect... (I)t is as though no
contract had been made ... It is a
mere nothing ..." (
Wessels
'
Law of Contract in South Africa, vol
1, para 639; see too
De Wet and
Yeats
: Kontraktereg en
Handelsreg, 4th ed, 80-1 and
Christie
: The Law of Contract in
South Africa, 335). As INNES CJ in
Schierhout vs Minister of
Justice
1926 AD 99
at 109
said:
"It is a fundamental
principle of our law that a thing done contrary to the direct
prohibition of the law is void and of no effect.
The rule is thus
stated: 'Ea
quae lege fieri prohibentur, si fuerint facta, non
solum inutilia, sed pro infectis habeantur; licet legislator fieri
prohibuerit
tantum, nec specialiter dixerit inutile esse debere guod
factum est
.' (
Code
1.14.5). So that what is done contrary
to the prohibition of the law is not only of no effect, but must be
regarded as hever having
been done - and that whether the law giver
has expressly so decreed or not; the mere prohibition operates to
nullify the act."
12/
12.
On this basis
no sales capable of attracting sales tax took place. It was
suggested, however, that the principle does not apply here;
that on a
proper interpretation of the Act, tax is payable on both valid and
void sales; more particularly as to the latter, though
the sales did
not give rise to any contractual relations, they had fiscal
consequences. Some support for this is the notion that
a void act may
have legal consequences (see "Void and Voidable Acts" by
C
C Turpin
,
1955 SALJ 58
, especially at
60). Thus in
Estate Phillips vs
Commissioner for Inland Revenue
1942 AD
35
at 52 and
Potter and Another vs Rand
Townships Registrar
1945 AD 277
at
285-7 there is reference to the concept of "relative nullity".
Whatever the scope of this,
I
cannot
agree that it is of application in
casu
.
It is a recognised canon of construction of statutes that any
reference in any law to any action or conduct, is presumed, unless
the contrary intention appears from, the statute itself, to be a
reference to a lawful or valid action or conduct (see
Kauluma
en
13/
13.
Andere vs Minister van
Verdediging en Andere
1987(2) SA 833(A) at 856 H - 857 D and
cases there cited). This presumption can, of course, be rebutted by
other considerations such
as the language and context of the
particular legislation. But that is not the case here. On the
contrary, the indications are that,
differing from the Income Tax
Act, under which income is taxed even if it arises from an illegal
source (
Meyerowitz and Spiro
: Income Tax in South Africa, para
300), Parliament contemplated only valid sales being taxed under the
Sales Tax Act. Thus (by way
of example), in terms of sec 5(2)(a) the
date of conclusion of a sale of goods is deemed to be the date on
which delivery is effected
or the date on which the "consideration
payable" is paid, whichever date is earlier. In sec 7 there are
references to "consideration
accruing to the seller"
(sub-sec l(a)) and "balance owing by the purchaser"
(sub-sec 2(a)). The same applies to the
other agreements and
transactions which give rise to the payment of sales tax. But even if
there was ambiguity,
14/
14.
the
contra fiscum
rule
would apply in favour of the interpretation that sales tax may only
be levied on valid sales.
I
would
dismiss the appeal.
NESTADT, JA
Case No 30/89 /wlb
SUPREME
COURT
O
F
SOUTH
AFRICA APPELLATE DIVISION
In the matter between:
COMMISSIONER FOR INLAND
REVENUE
Appellant
and
INSOLVENT ESTATE J P BOTHA
(Trading as "TRIO
KULTURE")
Respondent
CORAM:
HOEXTER,
NESTADT, MILNE JJA et
NICHOLAS, FRIEDMAN AJJA
DATE OF HEARING:
16
November 1989
DELIVERED:
26 February
1990
JUDGMENT
MILNE JA/
MILNE JA:
I
have
had the privilege of reading the judgments prepared by my Brother
Hoexter and my Brother Nestadt.
I
agree
with Hoexter JA that the appeal must succeed. In my view the
transactions in respect of which the appellant issued the assessment
notice were not part of a lottery and it is accordingly unnecessary
to decide whether, if they were part of a lottery, they attracted
tax
in terms of the Sales Tax Act, No 103 of 1978.
In his
judgment Hoexter JA comes to the conclusion that
the
decision in
Visser en 'n Ander
v Rosseau en Andere NN O
1990(1) SA 139 (A) does not
preclude this Court from holding
that the "sales"
subjected to tax by the appellant were not
part of a
lottery.
I
agree
with that conclusion.
I
was
a party to the decision in that case and the question of
-3-
whether or not the business of the
company constituted a lottery within the meaning of s 2(1) of the
Gambling Act No 51 of 1965 was
not in issue either in the Court
a
guo
or in this Court nor was the point even raised in argument.
It is true that the passage from the judgment of Botha JA, cited by
Hoexter
JA, is capable of being construed as a finding that because
it was dependent on chance whether or not the grower
received
payment of the prize, the scheme constituted a lottery. That was the
basis on which the learned Judge explained what was common cause
-and, indecd, it seemed to me then and still seems to me now, that
that must have been the basis on which the concession was made.
The
record is, however, silent as to the reason for the concession.
Whatever the reason may have been, the important point is that
the
concession was made and any finding as to whether or not the scheme
was a lottery was therefore unnecessary for the decision
of the case.
That decision, is, therefore,
-4-
no bar to a finding that the
transactions in this case were
not part of a lottery.
It is important to bear in mind in
considering this question
that the Court
a quo
did
not and could not f ind that the
growers were part of "'n
bedrieglike kompiot". As the
learned Judge
a quo
rightly
remarked
"in die lig daarvan dat daar
ongeveer 8 000 kwekers was, wat eise ingedien het in die insolvente
boedel van Trio Kulture, is
dit ook 'n onbegonne taak om te bepaal
wie bedrieg is en wie bedrieër was van daardie kwekers."
The case must therefore be decided
on the basis that it was
not established that any of the
growers were knowingly
parties to a simulated
transaction. Hoexter JA advances
what are, to my mind, convincing
reasons for finding that
the transactions with which we are
concerned were not
part of a lottery (but finds it
unnecessary to decide
whether they were because he takes
khe view that even if
-5-
they were they still attract sales
tax). A lottery "in the
generally accepted meaning of the
word" consists
"... in schemes for the
distribution of prizes by the drawing of lots. The prohibition of the
law normally extends to lotteries
in which the participants have
contributed a consideration in order to qualify for a chance to win
the prize".
MILTON
S A Criminal Law and
Procedure
Vol 3 2nd ed Chapter
E1 p 1 . In view, however, of the
wide def inition of the
meaning of "lottery" in
the Gambling Act a number of schemes
or arrangements which one would
not normally think of as
constituting lotteries have been
held to be lotteries within
the meaning of the Act or its
predecessors. See MILTON
supra cit
at p 18. We were
not, however, referred to any
case in which it was held that the
mere fact that receipt of
I
the "prize" is
determined by chance constitutes the
particular scheme or transaction a
lottery. A "prize" is defined in very wide terms in s 1 of
the Gambling Act. It means
"any movable or immovable property".
If the fact that
-6-
the receipt of the "prize"
is dependent on chance constitutes a lottery (assuming the other
elements to be present) it seems
to me that a wide variety of
transactions would be hit by the Gambling Act which the legislature
could never have intended to be
hit. Various forms of investment in
speculative ventures come to mind. If A invests a sum of money in a
development company under
a contract which entitles him to a much
larger sum of money in say, 5 years time, the mere fact that the
company will not be able
to pay A unless certain unpredictable market
forces operate and it is clear that whether or not A receives payment
of the larger'sum
is therefore dependent on chance cannot, in my
view, turn a speculative venture into a lottery.
I
may
add that had
I
not
come to this conclusion
I
would
have been inclined to agree with Nestadt JA for the reasons given by
him that, when the legislature referred to an
-7-
"agreement" in defining
"sale" in the Sales Tax Act No 103
of 1978 it could not have intended
to refer to something that is devoid of any legal effect.
A J MILNE
Judge of Appeal