IN THE H IGH COU R T OF SO U TH AF R ICA
GA U TE NG DIVIS ION , PR ETOR IA
CAS E NO : 134505/2023
( l) REPOR TA BLE: ~ /NO
(2) O F INTEREST TO O THE R JUDG ES: ~ /NO
(3) REVISED .
03 NO VEMBER 2025
SIG NATURE DATE
In the matter between:
COMMISSIONER , SOUTH AFRICAN REVENUE SERVICE Plaintiff/Responden t
and
SASFIN BANK LIMITED Defendant/Excipient
JUDGMENT
LAB U SC HAGNE J
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[1] This is an exception raised by Sasfin Bank Limited against particulars of claim
of the Commissioner for the South African Revenue Service (“SARS”).
[2] SARS instituted an action against Sasfin Bank (“the Bank”) pertaining to 18
clients of the Bank, who are also taxpayers. SARS contends that the 18
taxpayers failed to declare tax for income and supplies for a period from 2013
to 2023 as part of their respective Income Tax and VAT returns.
[3] SARS instituted the claim for damages against the Bank arising out of alleged
conduct of the Bank in assisting the taxpayers in unlawfully exp atriating
undeclared taxable funds abroad in breach of the Bank’s duties and
obligations under an array of Acts of Parliament, generically referred to as
financial sector laws. The amounts involved are significant, totalling R5 333
048 207.58.
THE PARTICULARS OF CLAIM
[4] SARS has formulated two common law claims, with Claim 2 focussing on a
particular taxpayer, Gold Leaf Tobacco Corporation (Pty) Ltd (“GLTC”), who
alone is alleged to have unlawfully expatriated, aided and abetted by the Bank,
an amount of R2 900 935 513.01.
[5] An alternative claim to Claim 1 for a lesser amount is based on statute and is
dealt with later.
[6] The Bank is alleged to have directly or indirectly assisted the taxpayers and
GLTC to unlawfully export the undeclared funds. The Bank is alleged to have
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processed the foreign payment transactions without valid supporting
documents or based on incomplete supporting documents. In certain
instances, the Bank is alleged to have concealed the transactions from SARS
and the South African Reserve Bank by deleting the transactions in question,
not only from the taxpayer and GLTC’s bank statements, but also from the
Bank’s Balance of Payment to Customer reports ( BOPCUS reports). The
BOPCUS reports are mandatory reports generated daily and need to be
submitted to the South African Reserve Bank.
[7] As far as GLTC is concerned, the Bank confirmed in writing to SARS on 31
March 2022 that GLTC’s bank accounts were manipulated and that
transactions had been deleted from GLTC’s bank account. Despite the Bank’s
High Risk Committee flagging GLTC as a potential risk client during
September 2016, the Bank only conducted an internal investigation a year
later during September 2017, into 10 suspicious transactions of 10 of GLTC’s
alleged suppliers, after GLTC had requested a credit line from the Bank.
[8] Internal investigation confirmed on or about 15 September 2017 that one,
more or all of the 10 transactions were fictitious, fraudulent, alternatively were
based on incorrect documentation and information. The internal investigation
recommended that the Bank should exit its relationship with GLTC with
immediate effect, but the Bank delayed by two months, until 21 November
2017 before doing so.
[9] SARS contends for a legal duty by a bank, as an authorised dealer in foreign
exchange, not recognised in law before, namely: “A legal duty not to cause it
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to suffer patrimonial loss by directly or indirectly assisting taxpayers and GLTC
to unlawfully transfer the funds abroad” . In support of the legal duty, SARS
relies on an array of statutory provisions governing the business of the Bank.
[10] These statutory provisions include section 60A of the Banks Act, which
requires a bank to establish an independent compliance function, headed by
a compliance officer. The compliance officer had to comply with the Banks
Act and the regulations published in terms of section 90. The obligations of
the compliance officer included the reporting o f noncompliance, establishing
a culture of compliance within the bank and ensuring that employees are
trained on a continuous basis to ensure technical knowledge of the regulatory
framework applicable.
[11] In terms of Regulation 50(1) of the Bank Regulations, the Bank had a legal
duty to make policies and procedures to guard against the Bank being used
for purposes of financial crime, such as fraud and money laundering, to ensure
that policies and procedures are adequate to ensure compliance with
legislation, to facilitate cooperation with law enforcement agencies, to identify
customers and to recognise suspicious customers and transactions. The
Regulations require the Bank to ensure that its policies and procedures enable
the Bank to maintain high and equal standards, and to maintain records of
transactions.
[12] In terms of the Financial Intelligence Centre Act, 38 of 2001 (“the FICA Act”),
the Bank had to put in place measures to combat money laundering, to keep
records of all transactions and to comply with reporting obligations in terms of
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sections 28, 29 and 31 of the FICA Act. It is also allege d that the Bank had
an obligation to comply with the current Exchange Manual for Authorised
Dealers (“the Authorised Dealer Manual”) also (“the AD Manual”), as required
by the Exchange Control Regulations.
[13] It is pleaded that the Bank had the obligation in terms of the AD Manual to
ensure correct reporting of cross border foreign exchange transactions and to
comply with the provisions of the AD Manual.
[14] SARS identified four Sasfin employees who are alleged to have been
instrumental in Sasfin’s breach of its legal duty to SARS. They are Mr Brendon
Marshall (Head of Trading Desk); Mr Saint Gennaro (Bank Office Manager);
Mr Lulama Kene (a T24 Treasury/Application Specialist and T24 Developer);
and Ms Cheryl Simons (a FinSurv Financial Surveillance Compliance Officer).
[15] SARS contends that the Bank, through the identified Sasfin employees, failed
to comply with the requirements of governing legislation, facilitated the illegal
transfer of the funds abroad by processing foreign payment transactions
without the required supporting documents, some of which documents were
either inadequate or false. It is also alleged that they were involved in deleting
transactions facilitated on the taxpayers and GLTC’s bank accounts in order
to conceal them from the relevant authorities, including SARS.
[16] Claim 1 of the particulars of claim is for an amount of damages based on
undeclared funds of R1 971 392 136.26. A table of the 18 bank customers
and the dates of the transactions of amounts involved are pleaded. SARS
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contends that it for the first time became aware or could reasonably have
become aware of the facts giving rise to the claim in November 2023.
[17] SARS contends that, due to the lapse of time, most of the taxpayers being in
deregistration or being without funds, SARS will not be able to recover the full
amount of tax that is due to be assessed in respect of the undeclared funds.
It is alleged that, due to the Bank’s breach of its legal duty, SARS has suffered
damages in the aforesaid amount of approximately R1 971 392 136.26, being
the total estimated capital tax on the undeclared funds which were unlawfully
exported from South Africa.
[18] In Claim 2 SARS pleaded that on 18 May 2023 SARS raised additional Income
Tax and VAT assessments for GLTC and in terms of the assessments, GLTC
was indebted to SARS in the amount of R4 469 794 323.77, made up of unpaid
Income Tax in the amount of R3 144 433 706.42 and unpaid VAT in an
amount of R1 323 360 617.35.
[19] The aforesaid amounts include the capital amounts of Income Tax and VAT,
and the statement penalties, penalties and interest on underpayment of
Provisional Tax and VAT up to the date of the assessments.
[20] GLTC’s Tax debt remains due and payable to SARS. GLTC’s undeclared
funds are however no longer available in South Africa.
[21] SARS contends that an analysis of the available assets and resources
available in South Africa indicate that GLTC does not have sufficient resources
to settle the Tax debt in full and that a shortfall is expected to be at least to the
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extent of GLTC’s undeclared funds. SARS then pleads that, as a result of the
Bank’s breach of its legal duty, “SARS has suffered damages in the amount
of R2 900 935 513.01, being the total amount unlawfully exported.”
[22] Following an amendment to its particulars of claim, SARS introduced an
alternative claim to Claim 1. The alternative claim is only pursued if SARS
does not succeed in respect of Claim 1 (in respect of 8 specific taxpayers who
are referred to as the alternative taxpayers).
[23] The Financial Sector Regulation Act, 9 of 2017 (“the FSR Act”) came into
effect on 01 April 2018. In terms of section 1 of the Schedule of the FSR Act
the Banks Act and the Banking Regulations constitute financial sector laws.
[24] It is contended that the Bank breached section 278 of the FSR Act and that
SARS has, as a result, suffered a loss in the amount of R478 889 847.16 in
the tax value of undeclared funds of the alternative taxpayer s. SARS also
contends that it for the first time became aware or could reasonably have
become aware of the facts which give rise to the alternative claim in November
2023.
[25] It is alleged that, due to the lapse of time, and most of the alternative taxpayers
being in deregistration, or otherwise being left without funds, SARS will not be
able to recover the full amount of the Tax that is due to be assessed in respect
of the alternative undeclared funds.
THE EXCEPTION TO CLAIMS 1 AND 2
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[26] The legal question is whether Sasfin had a duty to protect SARS as one of the
creditors of some of its clients. The essence of the exception is the following:
26.1 Section 60A of the Banks Act and Regulations 49 and 50 of the Banks
Act do not impose any duty on Sasfin to protect its customers ’
creditors generally or SARS in particular.
26.2 By contrast, the consequences or breaches of the aforesaid
provisions are regulated exhaustively by the Banks Act and the
Financial Sector Regulation Act, 9 of 2017 (“FSRA”).
26.3 The Prudential Authority is the regulator responsible for banks and
may impose administrative penalties for contraventions of the Banks
Act or the Bank Regulations.
26.4 The Bank contends that, in terms of section 60 of the Banks Act, read
with sections 77 and 78 of the Companies Act, 71 of 2008, the
Prudential Authority may hold any director or executive officer of a
bank liable for dereliction of duty. Any net amount recovered by the
Prudential Authority, after deduction of costs, is used for the
repayment of the losses suffered by depositors.
26.5 The Prudential Authority may impose non-financial sanctions, or issue
directives to a bank in terms of section 6 of the Banks Act.
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26.6 The Prudential Authority may cancel or suspend a bank’s registration
in terms of sections 23 to 25 or restrict its activities in terms of section
26 of the Banks Act.
[27] It is contended that the web of statutory remedies leaves no room for a further
common law duty on the Bank to protect the creditors of its customers in
general or SARS in particular.
[28] The Bank contends that SARS’s claim is inconsistent with the broader scheme
and the objects of the Banks Act at the FSRA.
[29] The regime of supervision of banks is by means of the Prudential Authority
and is aimed at promoting the safety and soundness of banks and the banking
system.
[30] To recognise a common law duty to protect the interests of SARS would result
in indeterminate thir d party damages claims which threaten the viability of
banks and the interconnected banking and financial systems of the Banks Act
and the FSRA are concerned. The Bank also pleads that it would undermine
the legislature’s specific vesting of authority to determine the appropriate
sanction for a breach of a financial sector law in the Prudential Authority, as
the expert regulator responsible for maintaining a stable and robust banking
system.
FICA
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[31] The Bank pleads that SARS’s invocation of sections 22, 28, 29 and 31 of the
Financial Intelligence Centre Act, 38 of 2001 (“FICA”) is misplaced, as the
provisions did not impose any duty on Sasfin to protect its customers’ creditors
generally or SARS in particular.
[32] By contrast:
32.1 Breaches of the specific provisions of FICA are regulated by the FICA
Act.
32.2 Breaches of section 22 are subjected to administrative sanctions in
terms of section 47 (read with sections 45C to 45F) and criminal
sanctions in terms of section 48 (read with section 68).
32.3 Breaches of section 28 are subject to administrative sanctions in
terms of section 51(2) (read with sections 45C to 45F) and criminal
sanctions in terms of section 51(1) (read with section 68).
32.4 Breaches of section 29 are subject to administrative sanctions in
terms of sections 52(3) and (4) (read with sections 45C to 45F) and
criminal sanctions in terms of sections 52(1) and (2) (read with section
68).
32.5 Breaches of section 31 are subject to administrative sanctions in
terms of section 56(2) (read with sections 45C to 45F) and criminal
sanctions in terms of section 56(1) (read with section 68).
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32.6 It is contended by the Bank that the sanctions that may be imposed in
terms of FICA for breaches of its provisions are exhaustive.
32.7 FICA provides for internal appeals under section 45D and applications
by the FIC or supervisory body to the High Court under section 45F.
[33] The Bank contends, with reference to the memorandum on the objects of the
Financial Intell igence Centre Bill (P1/2001) that FICA, and the duties and
sanctions it imposes on accountable institutions, are intended to promote the
public interest by ensuring compliance with South Africa’s international
commitments, by combatting money laundering and the financing of terrorists
and related activities. The Bank contends that the purpose of FICA is not to
protect individual persons or entities by affording them claims for damages for
loss caused by breaches of its provisions.
[34] FICA1 is composed of customer due diligence, record-keeping, and reporting
duties designed to detect and disrupt money laundering and related crimes.
SARS’s particulars invoke the record -keeping duty in section 22, the
suspicious-transaction reporting duty in s ection 29, and the duty to report
international funds transfer transactions above a prescribed threshold in
section 31.
[35] They allege that Sasfin’s employees not only failed to report but also
concealed transactions, for instance, by deleting records, so as to keep the
authorities unaware.
[36] Those failures expose accountable institutions and individuals to regulatory
and criminal consequences. But, as a matter of structure, FICA’s obligations
1 Act 38 of 2001.
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are owed to the state through FIC and enforced through the FIC’s
administrative penalty and prosecution machinery. FICA does not confer on
third parties, including SARS, an express civil cause of action for damages
arising from a breach of reporting or record-keeping requirements.
[37] Accordingly, while SARS argues FICA contraventions are highly material in a
regulatory sense, they do not, by themselves, create a statutory duty of care
owed to SARS. In Ross and Another v Nedbank Limited,2 the court held:
“[48] …. The critical question, therefore, is whether the statutory duties under
FICA also give rise to private law duties on the part of a bank to parties
that are not its customers.
[49] The breach of a statutory duty, without more, does not give rise to a legal
duty.
[50] Our courts have, however, recognised that a breach of a statutory duty
could give rise to a legal duty if:
a. on a proper construction of the statutory provision, its breach
imposes an obligation to pay damages for the loss caused by the
breach; or
b. when the statutory provision provides a basis for inferring,
considered together with all the relevant facts and salient
constitutional norms, that a common law duty, actionable in delict,
exists.”
[38] Interpreting the purpose and architecture, the court found that FICA is for the
public good, creating obligations in favour of the State and enforced by FIC
supervisory/administrative sanctions, rather than a private delictual right to
damages for third parties.
2 (10029/2020) [2024] ZAGPJHC 1146 (8 November 2024).
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EXCHANGE CONTROL REGULATIONS AND THE AUTHORISED DEALER
MANUAL
[39] The Bank contends that the provisions of the A uthorised Dealer Manual (the
AD Manual) relied upon by SARS did not impose any duty on Sasfin to protect
its customers’ creditors generally or SARS in particular.
[40] The purpose of the exchange control regulations is to control South Africa’s
foreign exchange reserves and to prevent uncontrolled capital flight. They
“are accordingly, for the public interest and not to protect any private interests”.
This statement is made with reference to Oilwell (Pty) Ltd v Protec
Internation Ltd and Others 2011 (4) SA 394 (SCA) at paragraph [24].
[41] The exchange control regulations vest control over their implementation in the
Minister of Finance. The Minister appointed the South African Reserve Bank
to perform most of the functions of the Treasury under the regulations. The
AD Manual is a guide to banks, in their capacity as authorised dealers acting
under the exchange control regulations. It is in that capacity and for that
purpose that the banks are required to report to the SA Reserve Bank’s
Surveillance Department (FinSurv).
[42] The exchange control regulations include sanctions for breaches thereof:
42.1 Criminal penalties under regulation 22 may be imposed.
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42.2 Attachment and forfeiture and recovery of money by order of Treasury
under regulations 22A to 22C for payment into the National Revenue
Fund, is provided for.
42.3 Under regulation 24, administrative relief and regularisation of
contraventions are provided for. This empowers the treasury or an
authorised person (for example FinSurv) to allow a person who has
contravened the regulations, to disclose the contravention and to
apply for administrative relief. If the applicant complies with the
requirements for regularisation in relati on to a contravention of the
regulations, Treasury must regularise any contravention in respect of
these regulations – see Regulation 24(6 ). Regularisation entails
treasury not pursuing criminal sanctions but imposing a levy or other
conditions in respect of the contraventions.
[43] The Bank contends that these penalties are meant to be exhaustive, and it
would be incongruous to superimpose a common law claim for damages in
delict as a further consequence of a breach of the regulations.
[44] The Bank pleads in the broader context considerations militating against the
recognition of SARS’s claim. This is based on SARS having vast powers for
the implementation and enforcement of Tax Laws under the Tax
Administration Act, 28 of 2011. They include the powers in terms of section
186 to compel taxpayers to repatriate their foreign assets.
[45] The Bank contends that, if SARS’s claim were to be recognised, it would
extend to all the creditors of the Bank’s customers and would expose banks
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to indeterminate liability. This militates against recognising SARS’s common
law claim for damages.
[46] On the issue of factual causation, the Bank contends that SARS has failed to
plead facts that establish factual causation. SARS’s unspoken assumption is
that, if Sasfin had not helped the taxpayers and Gold Leaf to export their
undeclared funds, those funds would still have been available to SARS for
execution today. However, SARS does not plead any facts in support of this
assumption.
[47] The Bank contends that SARS does not explain why it may not still recover its
tax claims against the taxpayers and Gold Leaf by the exercise of its powers
under sections 180, 181, 184 and 186 of the Tax Administration Act.
[48] The Bank further disputes legal causation and contends that SARS’s loss is a
consequence too remote from Sasfin’s alleged wrongdoing.
THE EXCEPTION TO THE ALTERNATIVE CLAIM TO CLAIM 1
[49] The Bank contends that SARS misinterprets section 278 of the FSRA and
contends that the alternative claim does not satisfy the requirements of
wrongfulness or causation (factual or legal).
[50] Section 278, which came into effect on 01 April 2018 reads:
“278. Compensation for contraventions of financial sector laws
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A person, including a financial sector regulator, who suffers loss
because of a contravention of a financial sector law by another
person, may recover the amount of the loss by action in a court of
competent jurisdiction against –
(a) the other person; and
(b) any person who was knowingly involved in the contravention.”
[51] The Bank contends that section 278 does not create liability for losses caused
by contraventions of the Banks Act or the Banking Regulations, as it merely
confers a right of action.
[52] The Banks Act and regulations are financial sector laws. The Bank ho wever
invokes the same exception against the alternative claim based on the
absence of wrongfulness and causation (factual or legal).
[53] The Bank pleads that the invocation of sections 22, 28, 29 and 31 of FICA as
the basis for a common law duty to protect SARS, is misplaced. It is pleaded
that the provisions did not impose any duty on Sasfin to protect its customers’
creditors generally or SARS in particular.
THE TEST ON EXCEPTION
[54] For an exception to succeed, the pleading must be excipiable on every
reasonable interpretation of the facts pleaded ( see Venator Africa (Pty) Ltd
v Watts and Another 2024 (4) SA 539 (SCA) at para [20]). Only the facts
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pleaded and not the conclusions of law are to be accepted as proven (see
Hlumisa Investment Holdings (RF) Ltd and Another v Kirkinis and Others
2020 (5) SA 419 (SCA) at para [22]).
WRONGFULNESS
[55] The plaintiff’s claim is a claim for pure economic loss. Such a claim is not
based on a loss that arises directly from damage to the plaintiff’s personal
property, but rather in consequence of a negligent or intentional act, such as
loss of profit, being put to extra expense, or the diminution of the value of
property (see Telematrix (Pty) Ltd v Advertising Standards Authority SA
2006 (1) SA 461 (SCA) at para [1], page 465B).
[56] In the event of a claim for pure economic loss, wrongfulness is not assumed.
Negligent conduct giving rise to damages is not actional per se. It is only
actionable if the law recognises it as wrongful. Such wrongfulness is s eldom
contentious where a positive act causes physical damage to property or a
person. Such conduct is prima facie wrongful.
[57] The enquiry is more complex in cases of pure economic loss. Brand JA states
the following in Trustees for the Time Being of Two Oceans Aquarium
Trust v Kantey & Templer (Pty) Ltd 2006 (3) SA 138 (SCA) at para [10],
page 144A:
“[10] … Where the element of wrongfulness becomes less straightforward
is with reference to liability for negligent omissions and for negligently
caused pure economic loss (see e .g. Minister of Safety and Security
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v Van Duivenboden 2002 (6) SA 431 (SCA) para 12; Gouda Boerdery
BK v Transnet 2005 (5) SA 490 (SCA) para 12). In these instances,
it is said, wrongfulness depends on the existence of a legal duty not
to act negligently. The imposition of such a legal duty is a matter for
judicial determination involving criteria of public or lega l policy
consistent with constitutional norms (see e .g. Administrateur, Natal v
Trust Bank van Afrika Bpk 1979 (3) SA 824 (A) at 833A; Van
Duivenboden (supra) in para [22] AND Gouda Boerdery BK (supra) in
para [12]).
[11] It is sometimes said that the criterion for the determination of
wrongfulness is ‘a general criterion of reasonableness’, i.e. whether it
would be reasonable to impose a legal duty on the defendant (see e.g.
Government of the Republic of South Africa v Basdeo and Another
1996 (1) SA 355 (A) at 367 E – G; Gouda Boerdery BK (supra) at
para [12]). Where the terminology is employed, however, it is to be
borne in mind that what is meant by reasonableness in the context of
wrongfulness is something differe nt from the reasonableness of the
conduct itself which is an element of negligence. It concerns the
reasonableness of imposing liability on the defendant (see e.g. Anton
Fagan ‘Rethinking wrongfulness in the law of delict’ 2005 SALJ 90 at
109). Likewise, the ‘legal duty’ referred to in this context must not be
confused with the ‘duty of care’ in English Law which straddles both
elements of wrongfulness and negligence (see e.g. Knop v
Johannesburg City Council 1995 (2) SA 1 (A) at 27B – G; Local
Transitional Council of Delmas v Boshoff 2005 (5) SA 514 (SCA) at
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para [20]). In fact, with hindsight, even the reference to ‘a legal duty’
in the context of wrongfulness was somewhat unfortunate. As was
pointed out by Harms JA in Telematrix (Pty) Ltd t/a Matrix Vehicle
Tracking v Advertising Standards Authority SA 2006 (1) SA 461 (SCA)
in para [14], reference to a ‘legal duty’ as criterion for wrongfulness
can lead the unwary astray. To illustrate, he gives the following
example:
‘[T]here is obviously a duty – even a legal duty – on a judicial officer
to adjudicate cases correctly and not negligently. That does not mean
that the judicial officer who fails in the duty because of negligence,
acted wrongfully.’
[12] When we way that a particular omission or conduct causing pure
economic loss is ‘wrongful’ we mean that public or legal policy
considerations require that such conduct, if negligent, is actionable;
that legal liability for the resulting damages should follow. Conversely,
when we say that negligent conduct causing pure economic loss or
consisting of an omission is not wrongful, we intend to convey that
public or legal policy considerations determine that there should be no
liability; that the potential defendant should not be subjected to a claim
for damages, his or her negligence notwithstanding. In such event,
the question of fault does not even arise. The defendant enjoys
immunity against liability for such conduct, whether negligent or not
(see e.g. Telematrix (Pty) Ltd supra at para [14]; Local Transitional
Council of Delmas supra at para [19]; Anton Fagan op cit at 107-109).
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Perhaps it would have been better in the context of wrongfulness to
have referred to a ‘legal duty not to be negligent’, thereby clarifying
that the question being asked is whether in the particular
circumstances negligent conduct is actionable, instead of just to a
‘legal duty’. I say this in passing and without any intention to change
the settled terminology. …
[12] … When a court is requested, in the present context, to accept the
existence of a ‘legal duty’, in the absence of any precedent, it is in
reality asked to extend delictual liability to a situation where none
existed before. The crucial question in that event is whether there are
any con siderations of public or legal policy which require that
extension. And as pointed out in Van Duivenboden (para 21 ) and
endorsed in Telematrix (para 6) in answering that question ‘… what is
called for is not an intuitive reaction to a collection of arbitrary factors
but rather a balancing against one another of identifiable norms’.”
[58] In this matter SARS argues that the legislative framework referred to above
warrants the inference of a legal duty by a bank to SARS not to cause it harm
by assisting its customers to expatriate undeclared taxable income.
[59] In determining the existence of such a legal duty, the Acts in question need to
be interpreted. The first question would be whether the Act itself creates a
legal duty as a matter of proper interpretation and if not, the question is
whether the Act permits a common law legal duty to coexist with the Act.
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[60] Harms JA stated in the SCA judgment of Steenkamp NO v Provincial Tender
Board of the Eastern Cape 2006 (3) SA 151 (SCA) at paras [21] to [22]:
“[21] Whether the existence of an action for damages can be inferred from
the controlling legislation depends on its interpretation and it is
especially necessary to have regard to the object or purpose of the
legislation. This involves a consideration of poli cy factors which, in
the ordinary course, will not differ from those that apply when one
determines whether or not a comm on law duty existed because, as
Lord Hoffman said: ‘If the policy of the Act is not to create a statutory
liability to pay compen sation, the same policy should ordinarily
exclude the existence of a common-law duty of care’.
[22] … It appears to me that if the breach of a statutory duty , on the
conspectus of the statute , can give rise to a damages claim, a
common-law legal duty cannot arise. If the statute points in the other
direction, namely that there is no liability, the common -law cannot
provide relief to the plaintiff because that would be contrary to the
statutory scheme. If no conclusion can be drawn from the statute, it
seems unlikely that policy considerations could weight in f avour of
granting a common-law remedy.”
[61] A similar sentiment was expressed by Wallis JA in MEC, Western Cape
Department of Social Development v BE obo JE 2021 (1) SA 75 (SCA) at
para [12].
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[62] Counsel for SARS, Adv NGD Maritz SC , contends in respect of the primary
claims that the statutes relied upon warrant the inference of a common law
duty to SARS. In respect of the alternative claim, SARS contends that the
statute expressly creates a remedy in section 278 of the FSR Act for breach
of a financial sector law.
[63] In respect of the public policy consideration relevant to the enquiry into
wrongfulness, SARS contends that these are matters for evidence, and the
enquiry is better suited for trial.
[64] In a wrongfulness enquiry, some public policy considerations can be decided
without a detailed factual matrix. This is in contrast to deciding negligence or
causation (see Telematrix supra para [2], page 465G).
[65] To decide whether the determination of a legal duty is a matter for trial or for
exception, there must be more than a notional or remote possibility that
evidence of surrounding circumstances may influence the issue of
wrongfulness. Conjectural and specul ative hypotheses that lack any real
foundation in the pleadings for the obvious facts will be insufficient
(Telematrix, para [3]).
[66] The case for SARS in respect of wrongfulness is based on an interpretation
of the Banks Act, FICA and the Authorised Dealer Manual in the context of
expatriation of capital. There are four considerations advanced by Sasfin as
to why the duty pleaded cannot be established. The duty referred to is the
one pleaded in paragraph 26 of the particulars of claim, which reads:
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“H SASFIN’S LEGAL DUTY
26. At all times relevant hereto, Sasfin owed SARS a legal duty not to
cause it to suffer patrimonial loss by directly or indirectly assisting the
taxpayers and GLTC to unlawfully transfer the funds abroad. The
legal duty arose by virtue of the facts and circumstances set out
below.”
[67] Sasfin contends that the duty contended for cannot be established as:
67.1 The statutes serve the public interest and not of a particular creditor
like SARS.
67.2 Each of the statutes or financial sector laws relied upon provides
statutory remedies for wrongdoing or breaches of statute.
67.3 SARS is not a vulnerable creditor but has powerful remedies at its
disposal, including the right to claim repatriation in terms of section
186 of the Tax Administration Act.
67.4 The imposition of a legal duty creates the risk of indeterminate liability
for Banks.
[68] The countervailing contentions of SARS are:
68.1 That SARS also acts in the public interest in seeking the imposition of
the legal duty.
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68.2 The statutory remedies are not adequate remedies in the hands of
SARS to recoup the losses that are suffered. While it is correct that
SARS has statutory remedies, it is contended that the reliance on the
repatriation of funds remedy in section 186 of the Tax Administration
Act is misplaced as it is not a remedy as far as companies are
concerned and is therefore no remedy at all.
68.3 Lastly, it is contended that there is not a risk of indeterminate liability,
but liability as against SARS as a specified sui generis creditor who
acts for the State and in the public interest in collecting taxes.
DISCUSSION
[69] SARS and National Treas ury are respectively the collector and distributor of
revenue in the fiscus. National Treasury controls the Reserve Bank as the
central bank and the Prudential Authority in the Banks Act oversees the
banking sector and enforces financial sector laws.
[70] The oversight provisions in the Banks Act indicate that the imposition of
prudential dut ies on Banks is to ensure thei r compliance with prescribed
solvency and liquidity requirements. In this way, the Banks Act is designed to
protect the interests of depositors in the public interest.
70.1 The statutory remedies imposed in terms of the Banks Act include the
imposition of administrative sanctions and even personal liability of
directors.
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70.2 The administrative sanctions that the prudential authority may impose
on Banks for breaches of the Banks Act are a powerful tool if the
conduct pleaded by SARS were to be established in proceedings
under the Banks Act.
70.3 The ambit of the loss of undeclared tax arising from the conduct
pleaded against Sasfin Bank would be a relevant consideration in the
imposition of administrative sanctions on the Bank.
[71] SARS contends that Sasfin caused losses to SARS by, inter alia, intentionally
(via the four identified individuals who are accused of wrongdoing) aiding and
abetting the delinquent taxpayers to unlawfully expatriate capital, placing it
beyond the reach of SARS.
[72] If an administrative sanction under the Banks Act in the form of a fine can be
imposed on a delinquent bank , and if the ambit of the fine is affected by the
loss SARS has suffered , then this indicates a legislative intention to deal
exhaustively with breaches of the Banks Act in terms of its provisions. A bank
that faces administrative sanctions in terms of the Banks Act and a common
law liability to SARS for the same conduct is exposed to double jeopardy.
[73] The statutory remedies under the Banks Act are not available to SARS, but it
can be a complainant in proceedings before the prudential authority under the
Banks Act aimed at the imposition of administrative penalties.
Page 26
[74] SARS contends that, different than other creditors, it cannot pursue a tax debt
overseas due to the revenue rule. This is so, but it does not render SARS
vulnerable.
[75] The statutory power to direct a taxpayer to repatriate funds in terms of section
186 of the Tax Administration Act is a remedy aimed at averting the
consequences of the revenue rule, ie the rule that SARS cannot pursue assets
abroad for a tax debt owed to it.
[76] Section 186 of the Tax Administration Act permits a senior SARS official to
apply to the High Court for an order compelling a taxpayer to repatriate assets
located outside of the Republic in order to satisfy a tax debt. This remedy
applies against a taxpayer whether it is a company or a natural person. The
court has additional power s under section 186(3) pertaining to limiting of a
taxpayer’s right to travel, withdrawing the taxpayer’s authorisation to conduct
business, requiring the taxpayer to cease trading or to issue any other order it
deems fit.
[77] Non-compliance with an order of this nature may be followed up with contempt
proceedings.
[78] It is contended on behalf of SARS that the companies in question are dormant,
or in various stages of deregistration, render ing the repatriation of capital
remedy inappropriate. This is a fact specific issue which will fall away if the
companies can be compel led to repatriate funds held abroad. Whether this
can be done in a specific instance or not cannot anchor the legal duty
contended for.
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78.1 A company in deregistration can be reregistered in terms of sec 83(4)
of the Companies Act, 2008 to compel it to repatriate capital – even if
by means of contempt proceedings against the company and its
directors.
[79] The provisions of section 83(4) of the Companies Act, 2008 provide for a
company in deregistration to be reregistered, even if only for purposes of
seeking the liquidation of the company with a view to exercising remedies in
terms of the Insolvency Act or the Companies Act against directors
[80] Since company directors who are involved in fraudulent conduct may be held
liable personally in instances such as those contended for by SARS, it cannot
be accepted that there are no other adequate remedies available.
[81] The utilisation of contempt proceedings against that individual to avoid the
pitfalls of the revenue rule have been recognised in our law (see Hawker Air
(Pty) Limited v Metlika Trading Ltd and Other …). SARS is not a vulnerable
creditor.
[82] The imposition of the duty to SARS will have a chilling effect on banking in
general. It creates a risk of liability when non -existed before. The risk in
question is one in which the Bank has limited control over as it pertains to the
conduct of its customers. Whilst the case pleaded includes complicity on the
part of certain officials on behalf of the bank, the duty pleaded includes
negligent conduct. The consequences of the imposition of a risk of liability in
such circumstances can destabilise the banking industry and imposes the risk
of an increased cost burden that arising from increased re insurance cover.
Page 28
Such costs are ultimately passed on to the customer, making banking more
expensive.
[83] This is an instance where moral indignation in respect of unlawful and even
heinous conduct by a bank would be insufficient to establish a common law
legal duty to SARS.
[84] The legislative intention appearing from the Banks Act points to the remedies
being utilised to exercise oversight over banks. The Banks Act does not grant
an express remedy to SARS , and properly interpreted the legislative regime
seeks to protect the public good in a manner inconsistent with the imposition
of a common law duty on banks to SARS in the terms as pleaded.
[85] The provisions of FICA have the purpose of monitoring and regulating market
conduct. The objects of FICA are to monitor and regulate market conduct with
the specific object of avoiding money laundering and funding of terrorist
activities. The Act has a very specific and limited scope, which is no doubt in
the public interest. FICA provides for its own remedies. SARS does not have
a remedy in terms of FICA. FICA on its own is an insufficient basis to impose
the duty contended for to SARS.
[86] Sasfin’s role in expatriating capital, with reference to the authorised dealer
manual, needs to be scrutinised.
[87] In Oilwell (Pty) Ltd v Protec International Ltd and Others 2011 (4) SA 394
(SCA) Harms JA stated the following:
Page 29
“[24] In search of the elusive intention or meaning expressed in the
Regulations, it is necessary to reiterate that the object of the
Regulations in general is to regulate and control foreign currency and
the object of reg 10(1)(c) in particular is ‘to control f oreign exchange
in the public interest and to prevent the loss of foreign currency
resources through the transfer abroad of capital assets held in South
Africa. The Regulations are, accordingly, for the public interest and
not to protect any private interests. They were adopted for the sake
of the Treasury and not for the sake of disgruntled or disaffected
parties to a contract. This is apparent from the penalty provision. But
more importantly, it appears from regs 22A, 22B and 22C. They
provide that any money or goods in respect of which a contravention
has been committed may be attached by the Treasury; these may be
forfeited to the State; and any shortfall may be recovered by the
Treasury from not only persons involved in the commission of the
offence, but also from anyone enriched or who has benefited as a
result thereof.”
[88] Harms JA argued that, by virtue of the aforesaid considerations, it would not
be correct to v isit an agreement that breaches the exchange control
regulations with nullity as that may amount to overkill (see Ibid).
[89] Consent required by Treasury can be obtained ex post facto and, until
permission is obtained, the agreement may suffer with the defects of an
inchoate or unenforceable contract, which is not per se invalid (see Oilwell
(Pty) Ltd v Protec International Ltd and Others supra at para [25]).
Page 30
[90] The Constitutional Court remarked on the nature of capital exports and its
impact on the economy in South African Reserve Bank and Another v
Shuttleworth and Another 2015 (5) SA 146 (CC) where the following is
stated at para [69]:
“[69] Capital exports have the capacity to drain an economy of its lifeblood,
and so to impact catastrophically on the country’s economic welfare.
The debate about how best to regulate capital movement, whether by
exchange controls, or their absence, is not bef ore us. For present
purposes, capital exports are of such singular concern to the country’s
wellbeing that the Constitution vests special powers in the Reserve
Bank. It stipulates that the ‘Reserve Bank is the central bank of the
Republic’, whose primary object is to ‘protect the value of the currency
in the interest of balanced and sustainable economic growth in the
Republic’. The Constitution requires the Reserve Bank, in pursuit of
this primary object, to perform its functions independently and without
fear, favour and prejudice, though there must be regular consultation
between the bank and the Executive.
[70] That the Constitution affords an express mandate for protecting the
value of the currency demonstrates the exceptional significance of the
issue. Currency moves with lightning speed. Money has long ceased
to be a hand-held commodity of physical article of trade for exchange
purposes. The internet and electronic communications enable it to be
moved from and between locations and jurisdictions almost instantly.
Hence the need for special regulation. Hence also the need for
Page 31
special amplitude of regulatory power. The nature of the power the
Act confers on the President to make regulations in regard to currency
is unusually wide, but its unusual width meets the unusual
circumstance of the subject matter.”
[91] From the aforesaid quotation it is apparent that the protection of the currency
is the constitutional mandate of the Reserve Bank. It is within the powers of
the President to make regulations, and the powers of the prudential authority
in terms of the Banks Act echo the sentiments expressed by the Constitutional
Court regarding the ambit and the need for such wide ranging powers.
[92] All of these wide ranging powers militate against the recognition of a legal duty
as contended for by SARS.
[93] Our law is generally reluctant to recognise pure economic loss claims,
especially where it would constitute an extension of the law of delict.
Wrongfulness must therefore positively be established. In determining
whether wrongfulness has been established, it is necessary to take into
account the risk of liability of an indeterminate amount for an indeterminate
time to an indeterminate class (see Country Cloud Trading CC v MEC,
Department of Infrastructure Development, Gauteng 2015 (1) SA 1 (CC)
at para [24].
[94] The element of wrongfulness provides a check on liability in such
circumstances. The risk of indeterminate liability introduces into the
wrongfulness enquiry the consideration of whether the harm would be
reasonably foreseeable or not in the hands of the particular plaintiff. In this
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sense, the foreseeability of harm (which also features in the question of legal
causation) serves as a check on indeterminate liability.
[95] A defendant’s blameworthiness, and the risk of indeterminate liability do not
per se decide the issue of wrongfulness. They should be weigh ed with all
other considerations in determining whether conduct is wrongful (see Country
Cloud Trading supra at para [42]).
[96] SARS contends that the legal duty it seeks to infer is particular to SARS and
not to creditors as a class.
[97] Having regard to the case as pleaded, I accept for purposes of this judgment
that SARS is correct in this regard. However, when the competing interests
of all role players are considered, I am of the view that it would not be
reasonable to impose a duty o n a Bank which is an authorised dealer for
foreign exchange purposes, to SARS in respect of tax matters of the Bank’s
customers. This would impose a duty on a Bank to vet the veracity of
disclosures by its customers to SARS and to it of tax matters at pain of being
held liable if the information provided to the Bank were untrue.
[98] The reason why it is unreasonable to impose a duty on SARS as contended
for can be summarised as follows:
98.1 It is not possible to infer a legislative policy from the Banks Act, the
FICA Act and the Authorised Dealer Manual that the duties of a Bank
in respect of those three sets of legislation impose a duty on it to act
in the best interests of SARS.
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98.2 By contrast, the legislation concerned creates statutory remedies for
breaches of the particular statutes and those remedies protect the
interests which the specific Acts intend to serve.
98.3 The legislation relied upon by SARS for purposes of inferring the duty
as pleaded does not create remedies in favour of SARS. The interests
sought to be protected are not specific to SARS. The inference is that
the legislative regime does not contemplate a common law liability on
the part of the Bank in addition to the remedies against a delinquent
Bank imposed by the legislation concerned.
98.4 SARS has significant powers in terms of the legislation governing its
activities and the power to direct a taxpayer to repatriate its capital is
an indicator that this was the solution to the revenue rule that the
legislature intended. The adequacy of this remedy for this specific
matter is too fact dependant a consideration to come into play in
considering the generality of the duty pleaded. The necessity to
impose the duty as pleaded must hold good for any client of the bank
in order for it to be reasonable in a delictual sense. The implications
of the contention of SARS are that, where SARS is able to repatriate
funds because the taxpayer is an individual, then no common law duty
as pleaded exist s as it is not required. Conversely, where it is a
company in deregistration, such a duty should be inferred because of
the facts of the matter. Such reasoning militates against the generality
of the boni mores considerations that enter into the consideration of
the wrongfulness enquiry required in this matter. Objective
Page 34
reasonableness implies equal application in all circumstances. That is
clearly not the case.
98.5 A compelling reason not to permit a common law duty to SARS is
section 278 of the FSR Act. It ex tends the right to sue for loss for
breach of a financia l sector law to anyone who has suffered a loss ,
including a regulator like SARS. Although it only came into effect on 1
April 2018, it evidences a legislative intention that holds good at the
time of these proceedings. SARS has a statutory remedy for its loss.
98.6 There is no compelling reason to extend common law delictual liability
given the legislative framework. The FSRA was not included in the
SARS bundle of statutes alleged to give rise to the common law legal
duty. That does not remove it from consideration. It answers the call
for a remedy.
[99] In the premises I find that:
99.1 The conduct imputed to Sasfin would not pass muster in the sense of
it being wrongful in a delictual context. It would be unreasonable to
impose a legal duty o n banks to SARS to avoid the unlawful
expatriation of undeclared taxable income of its customers.
99.2 However, I am not persuaded that the risk of indeterminate liability has
been established. SARS is a sui generis creditor acting in the public
interest. The recognition of the legal duty by a bank to SAR S would
nevertheless open the door for a further extension to other creditors .
Page 35
It is objectively reasonable not to open the door in these
circumstances.
99.3 I am not persuaded that evidence adduced at trial pertaining to the
wrongfulness enquiry will affect the conclusion to which I have come.
In the result, the exception succeeds in respect of the wrongfulness
enquiry in terms of Claims 1 and 2.
EXCEPTION ON CAUSATION
[100] The exception also includes the pleading as far as causation is concerned.
During argument it was conceded by Mr Trengrove (rightly so) that Sasfin
Bank cannot go behind the allegation of factual causation that was pleaded.
He however contends that legal causation had to be pleaded and, as the
remoteness of damages is informed by policy considerations, arguments
similar to the wrongfulness enquiry could be raised in respect of causation.
[101] All that remains then of the exception is the issue of whether it is expressly
required of a plaintiff to set out a basis for legal causation in pleading that
component of a delict.
[102] Causation is dependent on the facts. For purposes of pleading, the factual
causation that has been pleaded would pass muster at exception stage. It is
at trial that a Court could entertain a special defence pertaining to legal
causation. It is in my opinion a matter for trial. This is consistent with the
Page 36
sentiments expressed by Harms JA in Telematrix at para [2]. He there
indicated that wrongfulness of claims for pure economic loss can be decided
at exception stage without a detailed factual matrix. This is however in
contrast to deciding negligence or causation, which are factual enquiries,
better left for trial.
[103] In the premises the exception fails on causation on the main claims and on
the alternative claim as pleaded.
THE ALTERNATIVE CLAIM : SECTION 278 OF THE FINANCIAL
SERVICES REGULATION ACT
[104] Having already disposed of the exception on causation pertaining to the
alternative claim in terms of section 278 of the Financial Services Regulation
Act (FSRA), all that remains is whether an exception as pleaded should be
upheld. The exception is raised on the same grounds as pertains to the
wrongfulness enquiry in Claims 1 and 2.
[105] Section 278 of the FSRA reads as follows:
“278. Compensation for contraventions of financial sector laws
A person, including a financial sector regulator, who suffers loss
because of a contravention of a financial sector law by another
person, may recover the amount of the loss by action in a court of
competent jurisdiction against –
(a) the other person; and
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(b) any person who was knowingly involved in the contravention.”
[106] The statutory claim gives effect to a legislative intention to permit a claim for
damages in terms of sec 278 of the FSR Act for breach of a financial sector
law as from 1 April 2018 . Section 278 furnishes SARS with a statutory
damages remedy independent of the common-law delictual claim. Importantly,
it treats regulators (and any person) as potential plaintiffs if they can
demonstrate a link between their loss and a breach of a financi al sector law.
This reflects a legislative choice to broaden accountabil ity for regulatory
breaches.
[107] The FSR Act, 3 introduced a “Twin Peaks” regulatory model providing for
market conduct oversight of financial services providers on the one hand, and
for prudential oversight of banks on the other. It includes section 278 as a
novel statutory cause of action.
[108] SARS has pleaded its alternative claim to claim 1 based on this provision,
contending that Sasfin’s conduct violated “a financial sector law” and that
SARS thereby suffered loss in the amount of the tax not recoverable. As the
section came into operation on 1 April 2018, the claim only covers claims that
arose thereafter.
[109] As an empowering provision it merely creates a right of action that may result
in liability for damages. The section does not create liability. Liability needs to
3 9 of 2017.
Page 38
be established. Liability however requires the pleading and establishment of a
breach of a financial sector law causing loss.
[110] Akin to section 218(2) of the Companies Act, which requires a specific breach
of a provision of the Companies Act to be pleaded, an essential component is
to plead the breach of a specific financial sector law.
[111] The pleading of the alternative claim does include allegations of a breach of
specific provisions of the Banks Act . In par as [38-40] SARS pleads with
sufficient clarity the breach of obligations under the Banks Act. This suffices
for purposes of the exception . The pleadings read as a whole lead to the
conclusion that SARS has properly pleaded the alternative claim. The
exception to the alternative claim therefore fails.
ORDER
[112] In the premises the following order is made:
1. The exception based on the lack of wrongfulness in respect of claim 1
and claim 2 is upheld.
2. The exception in respect of causation in respect of claims 1 and 2 is
dismissed.
3. The exception to the alternative claim is dismissed on all grounds.
4. Claims 1 and 2 are set aside.
Page 39
5. The plaintiff is granted leave to amend claims 1 and 2 w ithin one month
from date of this order, failing w hich claims 1 and 2 are dismissed.
6. SARS is to pay the costs, including the costs of two counsel on Scale C ,
w here so emp loyed.
BY TH E CO U RT
R EG ISTRAR
LABUSCHAGNE J
JUDG E OF THE H IGH CO U RT
APPEARANCES:
COUNSEL FOR APPLICANT : ADV MARTIZ SC
SNYMAN SC
INSTRUCTED BY : VZLR ATTORNEYS
COUNSEL FOR RESPONDENT : ADV TRENGOVE SC
ADV BLEAZARD
INSTRUCTED BY : EDWARD NATHAN SONNENBERGS INC