Summary of Judgment

1. Introduction

The proceedings were an appeal to the then Supreme Court of South Africa (Appellate Division) arising from an urgent motion application in which interdictory relief had been sought to restrain officials of the revenue authorities from exercising statutory search and seizure powers.

The parties were Glynn Rudolph (first appellant) and Glynn Rudolph & Co (Pty) Ltd (second appellant) on the one hand, and the Commissioner for Inland Revenue (first respondent) together with seven named revenue officials (second to eighth respondents) on the other. The revenue officials had acted under written authorisations issued in terms of section 74(3) of the Income Tax Act 58 of 1962.

In the court of first instance (the Witwatersrand Local Division), the appellants’ application for interdicts was dismissed with costs by Goldblatt J on 13 May 1994, following earlier urgent procedural directions made by Nugent J on 29 April 1994. The judgment in the court below was reported as Rudolph and Another v Commissioner for Inland Revenue and Others NNO 1994 (3) SA 771 (W). Leave to appeal was refused by the trial court, but granted on petition to the Chief Justice.

The general subject-matter of the dispute concerned the lawfulness and validity of the revenue authorities’ reliance on written section 74(3) authorisations to conduct searches and seize documents relating to the appellants’ tax affairs, and, at the appellate stage, the further question of constitutional jurisdiction and whether issues raised fell within the exclusive jurisdiction of the Constitutional Court.

2. Material Facts

It was common cause, and accepted as the factual context for the litigation, that the first appellant was a businessman who, for the tax years 1988 to 1992, had failed to render proper income tax returns. Despite numerous promises, he did not rectify this position. Information given to the Commissioner indicated that the first appellant’s financial affairs, and those of certain companies and trusts in which he had interests, were in a state of confusion.

On 20 October 1993, Mr C T Prinsloo, described as Chief Director of Administration in the Department of Finance and acting as the head of a special investigations division, issued fourteen written authorisations under section 74(3) to named officials (including the second to eighth respondents). These authorisations empowered them to exercise the statutory powers in relation to the appellants and certain other entities associated with the first appellant.

On 21 October 1993, acting under these authorisations, officials interviewed the first appellant at his house and seized documents. The documents then obtained did not, in the Commissioner’s view, suffice to unravel the first appellant’s affairs.

On 21 April 1994, the Commissioner received information that a large quantity of additional relevant documents was located at the business premises of one of the first appellant’s companies in Parktown, Johannesburg. On 22 April 1994, officials went to those premises and, acting under the original October 1993 written authorisations, searched for and found a substantial quantity of documents. The first appellant was not present but was represented. As a practical arrangement, the documents were placed in a storeroom on the premises while they were listed and while the first appellant could make copies of documents that would be removed.

The litigation was triggered by the culmination of discussions about removal procedures, including that the first appellant was informed the documents would be removed at 17h00 on 28 April 1994, whereafter the appellants launched an urgent application on 29 April 1994 seeking to restrain further exercise of the section 74(3) powers.

The Appellate Division recorded that the appellants’ challenge on appeal focused on what was presented as “common law grounds” of invalidity relating to the authorisations and their use, while also contending that section 74(3) itself was unconstitutional, a point which counsel accepted the Appellate Division could not itself decide.

3. Legal Issues

The central legal questions the court was required to determine did not involve finally deciding the validity of section 74(3) or the authorisations on their merits. Instead, the court had to determine whether, for the purposes of disposing of the appeal, it was necessary to refer constitutional issues to the Constitutional Court in terms of section 102(6) of the Constitution of the Republic of South Africa Act 200 of 1993.

More specifically, the court identified and formulated for referral the questions whether section 74(3) of the Income Tax Act 58 of 1962 was contrary to Chapter 3 of the Constitution and therefore invalid; whether, in light of the Constitution (and in particular section 24 on administrative justice), it was competent for the Appellate Division to adjudicate the so-called common law grounds of invalidity; and what further procedural directions should follow depending on the answer to the jurisdictional issue.

The dispute at this stage was primarily one of law, namely the allocation of constitutional jurisdiction between the Appellate Division and the Constitutional Court, and the implications of constitutional provisions governing the interpretation, protection and enforcement of fundamental rights, particularly where “common law” grounds substantially overlapped with constitutional rights to lawful and procedurally fair administrative action.

4. Court’s Reasoning

The court began from the premise that the appellants’ “common law” attacks on the authorisations and actions taken under them were, in substance, closely connected to constitutional protections in section 24 of Chapter 3 of the Constitution, which guarantees rights to lawful and procedurally fair administrative action where rights, interests, or legitimate expectations are affected or threatened. Counsel for the appellants conceded that, if the common law grounds were well-founded, they could constitute a breach of constitutional rights under section 24.

The judgment then placed the jurisdictional question within the constitutional scheme created by sections 98(2) and 101(5) of the Constitution. Section 98(2) vests the Constitutional Court with jurisdiction as the court of final instance over matters relating to the interpretation, protection and enforcement of the Constitution, including alleged violations or threatened violations of fundamental rights in Chapter 3. Section 101(5) provides that the Appellate Division has no jurisdiction to adjudicate any matter within the jurisdiction of the Constitutional Court.

Against this framework, the court addressed the appellants’ contention that the Appellate Division enjoyed a form of parallel jurisdiction to decide the common law grounds. The court was not satisfied that such parallel common law jurisdiction existed in the circumstances described. In any event, the court held that deciding whether the Appellate Division had jurisdiction in the manner contended for would require the court to interpret the Constitution, which the court considered it was not entitled to do in the given context, having regard to the constitutional allocation of jurisdiction.

The court then applied section 102(6) of the Constitution, which requires referral to the Constitutional Court where it is necessary, for the purposes of disposing of an appeal, for a constitutional issue to be decided. The court reasoned that this requirement was met on the facts because the appeal could not properly be disposed of without determining constitutional issues, including whether the “common law” grounds fell within the exclusive jurisdiction of the Constitutional Court and whether section 74(3) was constitutionally valid.

Finally, the court recorded that the referral was also made with reference to Rule 23(4) read with Rule 22(2) of the Rules of the Constitutional Court, and that it concluded it would be in the interests of justice that the issues, as formulated, be referred for decision.

5. Outcome and Relief

The Appellate Division made an order referring specified issues to the Constitutional Court in terms of section 102(6) of the Constitution read with Rule 23(4) of the Constitutional Court Rules.

The issues referred included the constitutional validity of section 74(3) of the Income Tax Act 58 of 1962; the question whether the Appellate Division could adjudicate the “common law grounds of invalidity” or whether they fell within the exclusive jurisdiction of the Constitutional Court; the directions necessary for disposal of the appeal depending on the answer; and, if exclusive jurisdiction lay with the Constitutional Court, whether the common law grounds were well-founded.

The costs of the hearing before the Appellate Division on 12 March 1996 were ordered to be costs in the cause.

Cases Cited

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

Legislation Cited

Constitution of the Republic of South Africa Act 200 of 1993, section 24.

Constitution of the Republic of South Africa Act 200 of 1993, section 98(2).

Constitution of the Republic of South Africa Act 200 of 1993, section 101(5).

Constitution of the Republic of South Africa Act 200 of 1993, section 102(5).

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

Income Tax Act 58 of 1962, section 3(1).

Income Tax Act 58 of 1962, section 74(3).

Rules of Court Cited

Rules of the Constitutional Court, Rule 22(2).

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

Held

The Appellate Division held that, because the “common law” grounds of invalidity raised by the appellants were covered or also covered by section 24 of the Constitution, and because determining whether the Appellate Division had jurisdiction to decide those grounds would itself require constitutional interpretation, it was necessary for constitutional issues to be determined in order to dispose of the appeal. Accordingly, the matter was referred to the Constitutional Court under section 102(6) of the Constitution, with the costs of the appellate hearing to stand over as costs in the cause.

LEGAL PRINCIPLES

The judgment applied the constitutional principle that where a dispute implicates the interpretation, protection, or enforcement of constitutional rights entrenched in Chapter 3, jurisdictional consequences follow from the constitutional allocation of authority to the Constitutional Court under section 98(2), coupled with the limitation on the Appellate Division’s jurisdiction under section 101(5).

It further applied the principle that challenges framed as common law administrative-law invalidity may nonetheless substantially overlap with, or be “covered or also covered” by, constitutional rights to lawful and procedurally fair administrative action under section 24, thereby raising constitutional issues that may trigger the Constitutional Court’s jurisdiction.

The court also applied the procedural principle embodied in section 102(6) of the Constitution that an appellate court must refer a matter to the Constitutional Court where it is necessary, for the purposes of disposing of an appeal, for a constitutional issue to be decided, and that the referral should be made where it is considered in the interests of justice, with reference to the Constitutional Court’s procedural rules governing referrals.