THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 728/2022
In the matter between:
LUEVEN METALS (PTY) LTD APPELLANT
and
COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE SERVICE RESPONDENT
Neutral citation: Lueven Metals (Pty) Ltd v Commissioner for the South African
Revenue Service (Case no 728/2022 ) [2023] ZASCA 144 (8
November 2023)
Coram: MOLEMELA P and PONNAN and MEYER JJA and KEIGHTLEY
and MALI AJJA
Heard: 31 August 2023
Delivered: 8 November 2023
Summary: Tax law – declaratory order – whether appropriate not considered by
high court – narrow basis for entertaining application for declaratory relief in tax
matters.
2
___________________________________________________________________
ORDER
___________________________________________________________________
On appeal from: Gauteng Division of the High Court, Pretoria (N Davis J, sitting as
court of first instance):
The appeal is dismissed with costs including those of two counsel.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
Ponnan JA (Meyer JA and Keightley and Mali AJJA concurring):
[1] This is an appeal against a judgment of the Gauteng Division of the High Court,
Pretoria (per Davis J) (the high court) , dismissing an application for declaratory relief
pertaining to s 11(1)(f) of the Value Added Tax Act 89 of 1991 (the VAT Act).1
[2] The appellant, Lueven Metals (Proprietary) Limited, is engaged in the business
of the trade and refining of precious metals, such as gold, as well as the silver by -
product derived from the gold refining process. It is a registered Category C vendor in
terms of the VAT Act. 2 The appellant purchases lesser purity gold in manufactured
form (such as scrap jewellery) or in unwrought form (such as gold bars) (described as
gold-containing material) from certain preapproved suppliers. The gold sourced by the
appellant is invariably of a lesser purity than pure gold because the latter is usually too
soft, susceptible to scratches and thus not suited for everyday use as jewellery. Hence,
gold is alloyed with other metals to manufacture je wellery. The alloying of gold with
other metals (such as copper and silver) reduces the special characteristics and
quality of gold – the colour changes and the density and purity reduces.
1 Section 11(1)(f) provides: ‘Where, but for the provisions of this secti on, a supply of goods would be
charged with tax under section 7(1) (a), such supply of goods shall, subject to compliance with
subsection (3) of this section, be charged with tax at the rate of zero per cent where the supply is to the
South African Reserve Bank, the South African Mint Company (Proprietary) Limited or any deposit -
taking institution registered under the Deposit-taking Institutions Act, 1990 (Act No. 94 of 1990), of gold
in the form of bars, ingots, buttons, wire, plate or granules or in soluti on, which has not undergone any
manufacturing process other than the refining thereof or the manufacture or production of such bars,
ingots, buttons, wire, plates, granules or solution.’
2 Category C means the category of v endors whose tax periods are peri ods of one month ending on
the last day of each of the 12 months of the calendar year.
3
[3] The appellant has contracted with Absa Bank Limited, a bank registered under
the Banks Act 94 of 1990 (Absa), to supply pure gold bars, after such gold has been
refined to a purity level of at least 99.5%, namely pure or fine gold. According to the
appellant, the gold-containing material sourced by it (in its lesser state of purity) is not
acceptable to Absa, who requires pure (fine) gold refined by a refinery accredited by
the London Bullion Market Association (LBMA). The gold -containing material is
therefore melted and refined on behalf of the appellant for supply to Absa.
[4] As the appellant is not accredited to refine the gold-containing material to meet
the standards of the LBMA required by Absa, the appellant deposits its lesser purity
gold bars with Rand Refinery, who is so accredited. All gold -containing mat erial
deposited with Rand Refinery for further refining must comply with certain
specifications. Where these specifications are not met, Rand Refinery will either reject
the deposit or impose penalties or additional fees. The appellant therefore refines and
processes all gold -containing material in -house to remove deleterious elements to
enable it to deposit the gold with Rand Refinery in bar form. The appellant generally
refines the gold-containing material to a purity level of between 80 to 90%, to maximise
the yield and minimise the penalties or additional fees.
[5] The lesser purity gold bars (refined and produced by the appellant from the
gold-containing material) are transported from the appellant’s premises to Rand
Refinery, where they are deposited. Rand Refinery requires large quantities to operate
effectively and efficiently, which no single depositor can satisfy. When Rand Refinery
receives the appellant’s lesser purity gold bars, they are melted and refined together
with (co-mingled with) the gol d of other depositors. Rand Refinery refines the gold
received from the various depositors to a purity level of at least 99.5% to produce gold
bars that meet the minimum LBMA standard in conformity with Absa’s requirements.
Rand Refinery thereafter delivers the gold bars to Absa.
[6] During the appellant’s 2018 to 2020 tax periods, it supplied gold bars to Absa
and zero-rated such supplies in terms of s 11(1) (f) of the VAT Act. As matters then
stood, according to the appellant, ref unds in the total amount of R51 036 867.34,
together with interest thereon, was due to it by the respondent, the Commissioner for
the South African Revenue Service (SARS). On 27 March 2020, SARS, acting in terms
4
of s 40 of the Tax Administration Act 28 of 2011 (the TAA), notified the appellant of a
VAT verification for the relevant period pursuant to s 46. After an exchange of
correspondence, on 19 June 2020, SARS notified the appellant of a VAT and Income
Tax audit. SARS then requested the appellant to submit relevant material in terms of
s 46. On 10 March 2021, the appellant was requested to attend in person on 18 March
2021 in terms of s 47 of the TAA, to enable SARS to obtain further clarification and to
expedite the audit. Following the interview, on 30 March 2021, SARS sought an
extension until 8 April 2021 for the issuance of a letter of audit findings.
[7] On 8 April 2021, SARS issued an ‘outcome of the audit conducted as envisaged
in terms of section 42(2)(b) of the [TAA]’ (the letter of audit findings). SARS indicated
that the audit findings do not concern the 2019 tax period and that further findings in
that regard would issue in due course. According to SARS, the VAT declarations and
tax invoices provided by the appellant reflected that, in total, zero-rated supplies of
R4 059 018 550 had been made to Absa and Rand Refinery. SARS stated that it had
reviewed the nature of the goods provided by suppliers to the appellant and
determined that the gold purchased by it had previously been subjected to a
manufacturing process.
[8] SARS took the view that s 11(1)(f) of the VAT Act prohibits the supply at a zero-
rate to the South African Reserve Bank (SARB), the South African Mint Company (Pty)
Ltd (Mintco) or any Bank registered under the Banks Act, of gold in any form that has
undergone any manufacturing process ‘other than the refining thereof or production of
such bars’. SARS accordingly expressed an intention to re -classify the zero -rated
sales to Absa as standard-rated sales with VAT of 15% in terms of s 7(1)(a), read with
s 11(1) and s 64 of the VAT Act. SARS also intimated that it was considering imposing
an understatement penalty and raising interest on the appellant’s outstanding VAT
liability.
[9] On 2 June 2021, the appellant responded to SARS’ letter of audit findings (the
appellant’s response). The appellant’s response stated:
‘14.1. S 9(1) of the TAA provides that:
“A decision made by a SARS official or a notice to a specific person issued by SARS under a
tax Act, excluding a decision given effect to in an assessment or a notice of assessment that
5
is subject to objection and appeal, may in the discretion of a SARS official described in
paragraph (a), (b) or (c) or at the request of the relevant person , be withdrawn or amended
by-
(a) the SARS official;
(b) a SARS official to whom the SARS official reports; or
(c) a senior SARS official.” (Emphasis added)
14.2. With reference to the taxpayer’s contentions set out in this response letter, the taxpayer
hereby requests in terms of s 9(1) of the TAA that SARS forthwith:
14.2.1. reconsiders its intention in terms of the letter of audit findings to negatively assess the
taxpayer;
14.2.2. withdraws its decision to raise assessments and to reclassify the taxpayer’s zero-rated
sales to standard rated sales; and
14.2.3. to pay the taxpayer its outstanding VAT refunds in the amount of R51, 036, 867.34
plus interest.’
[10] It concluded:
‘In the premises, the taxpayer’s gold sales to ABSA during the relevant tax periods were
correctly zero rated in terms of s 11(1)(f) of the VAT Act and, accordingly, the intended VAT
assessments should not be raised. As no VAT liability will arise in this regard, penalties,
interest and/or understatement penalties cannot validly be imposed by SARS. Should SARS
decide to impose understatement penalties despite the contentions advanced herein, SARS
is requested to state the facts on which it bases the imposition thereof, as contemplated in
s 102(2) of the TAA.’
[11] The appellant’s response was dated 2 June 2021. So too, its notice in terms of
s 11(4) of the TAA of an intention to institute legal proceedings against SARS. The
appellant issued the application, which forms the subject of this appeal, out of the high
court on 24 June 2021. It sought the following relief:
‘1. Directing (in terms of section 105 of the Tax Administration Act, 28 of 2011 (as
amended)), insofar as it may be required, that the dispute between the parties (as set forth in
this application) be adjudicated by this Court;
2. That a declaratory order be issued in terms whereof it be declared that:
2.1. The word “gold” in section 11(1)(f) of the Value -Added Tax Act, 89 of 1991 (as
amended) (“the VAT Act”) refers to, and only applies to: gold (in any of the eight unwrought
forms permitted in the subsection) refined to the grade of purity required for acquisition by the
6
South African Reserve Bank (“SARB”), the South African Mint Company (Proprietary) Limited
(“Mintco”), or any bank registered under the Bank Act, 1990 (Act No. 94 of 1990) (“bank”);
2.2. “Gold” in the form of “bars” supplied to the SARB, Mintco or a bank, in terms of section
11(1)(f) of the VAT Act, refers to gold of a purity equal to or greater than 99.5%;
2.3. The phrase “which has not undergone any manufacturing process other than the
refining thereof or the manufacture or production of” in section 11(1)(f) of the VAT Act,
precludes the zero rating of a supply of gold:
(i) not being in one of the eight unwrought forms identified in the subsection; and
(ii) that has undergone further manufacturing or production processes once it has reached
the state of purity required for acquisition by SARB, Mintco or a bank;
2.4. The phrase “which has not undergone any manufacturing process other than the
refining thereof or the manufacture or production of” in section 11(1)(f) of the VAT Act, refers
to any manufacturing process(es) carried out by the vendor supplying gold to the SARB,
Mintco or a bank, and does not refer to any process(es) to which gold may have been
subjected historically, prior to being re fined to the grade of purity required for acquisition by
the SARB, Mintco or a bank.’
The application failed before the high court. Davis J dismissed it with costs, but granted
leave to the appellant to appeal to this Court.
[12] Section 21(1)(c) of the Superior Courts Act 10 of 2013 provides a statutory
basis for the grant of declaratory orders without removing the common law jurisdiction
of courts to do so. It is a discretionary remedy. The question whether or not relief
should be granted under this section has to be examined in two stages. In the first
place, the jurisdictional facts have to be established. When this has been done, the
court must decide whether the case is a proper one for the exercise of its discretion.3
Thus, even if the jurisdictional requirements are met, an applicant does not have an
entitlement to an order. It is for such applicant to show that the circumstances justify
the grant of an order. I am by no means satisfied that those circumstances are present
in this matte r. Quite the contrary, there are several considerations that suggest that
the high court ought to have exercised its discretion against the hearing of the
application.
3 See Family Benefit Friendly Society v Commissioner for Inland Revenue and Another 1995 (4) SA
120 (T) at 124E-F (Family Benefit Friendly Society) and the cases there cited.
7
[13] At the outset of the hearing of the appeal, Counsel were required to address
whether absent a directive in terms of s 105 of the TAA, 4 the high court could enter
into and pronounce on the merits of the application for declaratory relief. This, in the
light of the relief sought in prayer 1 of the Notice of Motion. At the bar in this Court, the
argument advanced by both counsel was that as there was neither an ‘assessment’
nor a ‘deci sion as described in s 104’ , and as the nature of the relief sought was a
declaration of rights, the default rule that a taxpayer may only dispute an assessment
by the objection and appeal procedure under the TAA, did not find application.
[14] The legislative scheme is designed to ensure that the objection and appeal
process and the resolution of tax disputes by means of alternative dispute resolution
and then the tax board or the tax court be exhausted , before the high court can be
approached. It also contemplates that in the ordinary course the tax court deal with
the dispute, by way of a trial, as the court of first instance before the high court can be
approached. Nowhere is this clearer than from the language, context, history and
purpose of s 105, which makes it plain that a taxpayer may only dispute an assessment
by the objection and appeal procedure under the TAA, unless a high court directs
otherwise (Commissioner for the South African Revenue Service v Rappa Resources
(Pty) Ltd).5
[15] What Counsel’s argument boiled down to was not that s 105 did not find
application at all in circumstances where declaratory relief was sought; but, properly
construed, reduced itself essentially to one of timing. There seemed to be an
acceptance that if the appellant had approached the high court for precisely the same
relief after an assessment had issued, then s 105 would apply. However, because an
assessment had n ot yet issued, but only a notice of inte ntion to assess, the section
did not apply . Why the one taxpayer would be better placed, when both sought
precisely the same relief, could not be explained. The illogicality of such a
differentiation appears to be co mpounded when one considers that a taxpayer (such
as the appellant) on the receiving end of a decision that is capable of revision and
4 Section 105 provides: ‘A taxpayer may only dispute an assessment or ‘decision’ as described in
section 104 in proceedings under this Chapter, unless a High Court otherwise directs.’
5 Commissioner for the South African Revenue Service v Rappa Resources (Pty) Ltd [2023] ZASCA
28; 2023 (4) SA 488 (SCA).
8
reconsideration would have a lower bar to surpass as opposed to one with a final
decision in the form of an assessment. The latter would have to establish exceptional
circumstances for a high court to authorise a departure from the default rule.
[16] It is contended that authority for granting declaratory orders in tax matters is
clearly established. In particular, much store was sought to be placed on two recent
judgments of this Court, namely Commissioner for the South African Revenue Service
v Langh olm Farms (Pty) Ltd (Langholm Farms ),6 and Commissioner for the South
African Revenue Service v United Manganese of Kalahari (Pty) Ltd,7 which followed
it. The argument being, to borrow from Langholm Farms, ‘that is exactly the situation
for which declarat ory orders are made and seeking one in the context of a taxing
statute was endorsed by the Constitutional Court in Metcash’.8
[17] In Metcash Trading Limited v Commissioner for the South African Revenue
Service (Metcash), Kriegler J had this to say:
‘Indeed, it has for many years been settled law that the Supreme Court has jurisdiction to hear
and determine income tax cases turning on legal issues. Thus in Friedman and Others NNO
v Commissioner for Inland Revenue: In re Phillip Frame Will Trust v Commissioner for Inland
Revenue McCreath J was asked to resolve the legal question whether a testamentary trust
was a person within the meaning of the Income Tax Act. Having referred to half a dozen
reported cases, four of them in the Appellate Division, where the existence of such jurisdiction
was accepted without discussion, and one Prentice Hall report where the point was specifically
considered, McCreath J concluded as follows as to his competence to determine the case:
“I am in agreement with the finding of the Court in that case that where the dispute involved
no question of fact and is simply one of law the Commissioner and the Special court are not
only competent authorities to decide the issue – at any rate when a declaratory order such as
that in the present case is being sought.”’9 (Footnotes omitted)
[18] As Kriegler J acknowledged in Metcash, in many of the earlier cases there was
an acceptance without discussion of the existence of the jurisdiction of the high court
6 Commissioner for the South African Revenue Service v Langholm Farms (Pty) Ltd [2019] ZASCA 163
(Langholm Farms).
7 Commissioner, South African Revenue Service v United Manganese of Kalahari (Pty) Ltd [2020]
ZASCA 16; 2020 (4) SA 428 (SCA).
8 Langholm Farms fn 6 above para 10.
9 Metcash Trading Limited v Commissioner for the South African Revenue Service and Another [2000]
ZACC 21; 2001 (1) SA 1109 (CC); 2001 (1) BCLR 1 (CC) para 44 (Metcash).
9
to hear and determine income tax cases turning on legal issues. In what is referred to
in Metcash as the ‘one Prentice Hall report’, Emary NO v CIR , a point in limine was
taken that the applicants should have submitted the returns demanded of them and
that it was for the Commissioner to determine whether or not the applicants are liable
for and should be assessed to tax, leaving to them their remedy by way of objection
and appeal in terms of the Act. It was accordingly submitted that the court had no
jurisdiction to hear and decide the application. In dismissing the point in limine ,
Harcourt AJ held: ‘where the dispute involves no question of fact and the question is
simply one of law the Commissioner and the Special Court are not the only competent
authorities.’10 In that, reference was made by the learned Judge to the following
reported decisions: Whitfield v Phillips ;11 Gillbanks v Sigournay ;12 Bailey v
Commissioner for Inland Revenue ;13 Commissioner for Inland Revenue v Delfos;14
Parekh v Receiver of Revenue;15 R v Kruger;16 R v Sachs;17 AG, Natal v Johnstone &
Co. Ltd;18 and, British Chemicals & Biologicals v SA Pharmacy Board.19
[19] Of the nine cited references in Emary NO v CIR, the point appears not to have
been touched on in Bailey v Commissioner for Inland Revenue, Commissioner for
Inland Revenue v Delfos, Parekh v Receiver of Revenue & Another or R v Kruger,
whilst Attorney-General of Natal v Johnstone & Co Ltd, British Chemicals & Biologicals
v SA Pharmacy Board and R v Sachs , were concerned with the competency of the
Court to grant a declaratory order that would have the effect of ensuring an applicant
against successful prosecution was recognised. Thus, none of those d ecisions are
directly on point. That leaves Whitefield v Phillips and Gillbanks v S igournay: In the
former, Steyn JA said:
‘In dealing with the question whether the award is for income tax purposes to be regarded as
a capital accrual or as income, the very first difficulty which would be encountered would be
that by Act of Parliament the determination of the merits of that question, as distinct from a
10 Emary NO and Another v CIR 1959 (2) PH T 16 (D).
11 Whitfield v Phillips & Another 1957 (3) SA 318 at 345 (AD) (Whitfield).
12 Gillbanks v Sigournay 1959 (2) SA 11 at 18-19 (N) (Gillbanks).
13 Bailey v Commissioner for Inland Revenue 1933 AD 204 at 226.
14 Commissioner for Inland Revenue v Delfos 1933 AD 243 at 252.
15 Parekh v Receiver of Revenue & Another 1948 (4) SA at 954 (N).
16 R v Kruger 1958 (2) SA 673 (C).
17 R v Sachs 1953 (1) SA 392 (A) at 410.
18 AG, Natal v Johnstone & Co Ltd 1946 AD 256 at 261-2.
19British Chemicals & Biologicals v SA Pharmacy Board 1955 (1) SA 184 (A) at 192.
10
question of law, has been entrusted entirely to the Commissioner for Inland Revenue and, on
appeal from his decision, to the Special Court for hearing income tax appeals. Another court
cannot usurp that function.’20
In the latter, Henochsberg J expressed his disagreement with Steyn JA in these terms:
‘I find myself, with very great respect, in a difficulty in trying to appreciate the reasoning of the
learned Judge of Appeal. It seems to me that the question as to whether, in a case such as
this, an award of damages for personal injuries in respect of loss of earning capacity is to be
regarded as a capital accrual or as income, is purely one of law and therefore a matter which
is competent for any Court to determine.’21
[20] As this survey of the authorities illustrates; that the high court has jurisdiction to
hear and determine income tax cases turning on legal issues , can, so it would seem,
be traced back to the unreasoned conclusion of Henochsberg J in Gillbanks v
Sigournay, which found uncritical acceptance in Emary NO v CIR and thereafter
appears to have taken root In re Phillip Frame Will Trust v Commissioner for Inland
Revenue.
[21] That aside, it is important to recognise that the legislative landscape has
changed significantly since the decision of the Constitutional Court in Metcash.22 Prior
to the amendment of s 105, the taxpayer could elect to take an assessment on review
to the high court instead of following the pres cribed procedure. That is no longer the
case. The amendment was meant to make clear that the default rule is that a taxpayer
had to follow the prescribed procedure, unless a high court directs otherwise. For the
present, it suffices to say that the judgments relied upon appear to have far too readily
and uncritically accepted that a taxpayer could, in general and without more, approach
a high court for declaratory relief. Importantly, those judgments do not lay down that
where declaratory orders are sought in tax matters, different principles apply.23 In fact
the question whether a declaratory order was appropriate was not considered by the
high court in this case.
20 Whitfield fn 11 above at 345.
21 Gillbanks fn 12 above at 19.
22 Metcash fn 9 above.
23 Family Benefit Friendly Society fn 3 above at 126F.
11
[22] Thus, even on the acceptance of Counsel’s primary contention that s 105 was
not implicated because there was neither an ‘assessment’ nor a ‘decision as described
in s 104’, the purpose of s 105 (which was an innovation introduced by the TAA from
1 October 2011 and narrowed down by an amendment made in 2015) and, which
accords with the overall scheme of the TAA, was not wholly irrelevant. At the very
least, it represented an important pointer to legislative intent and, read together with
the other provisions in the TAA, set the overall contextual scene. It was thus not a n
wholly irrelevant consideration in the determination of whether or not the
circumstances were such that relief in the form of a declaratory order was appropriate.
The enquiry was far more nuanced than one may at first blush apprehend. After all, a
declaratory order is not appropriate if there are other specific statutory remedies
available.24
[23] This is not to suggest that there will never be tax disputes for which declaratory
orders can rightly be sought and made. However, their occurrence, in my view, is likely
to be rare and their circumstances exceptional or at least unusual. In general, and
without attempting to lay down any hard and fast rules, the exercise of what after all is
a purely discretionary power, should be regarded as a reserve or occasio nal
expedient. No doubt, each case would have to be judged on its own facts and
circumstances. I have expressly refrained from formulating a test as I believe that each
such case can confidently be left to the good sense of the judge concerned in the
exercise of his or her broad general discretion. On any reckoning, this is certainly not
such a case.
[24] In responding to the letter of audit findings, the appellant seems to have simply
gone through the motions. It did not thereafter afford SARS the opportu nity to
reconsider or alter the proposed assessments in the light of the response. Having
responded to SARS’ notice of assessment with fairly detailed representations, the
appellant then pre-empted a reconsideration by or reply from SARS by giving notice
and launching the application for declaratory relief. On the very day that the appellant
had written to SARS, with a view to persuading it (SARS) to reconsider its position,
24 Director of Public Prosecutions v Mohamed NO and Others [2003] ZACC 4; 2003 (1) SACR 56; 2003
(5) BCLR 476; 2003 (4) SA 1 (CC) para 56.
12
the appellant gave the requisite notice in terms of s 11(4) of its intention to ins titute
proceedings before the high court and some three weeks thereafter proceeded to do
so. That the appellant genuinely sought to engage with SARS seems doubtful;
because the giving of notice without allowing a reasonable time for a reply, and
meaningful engagement, were mutually incompatible. In simply ignoring the emphasis
placed by the TAA on alternative dispute resolution and in disregarding the need to
exhaust its internal remedies, the high court became the appellant’s first port of call.
The danger with such an approach is that high courts could potentially be flooded with
like matters. There is little to commend an approach by a taxpayer to the high court,
without awaiting a response from SARS, including perhaps one that may well be
favourable. SARS would be placed in an invidious position if it were forced on a regular
basis to defend such matters before the high court.
[25] This is not a matter where ‘there is a set of clear, sufficient, uncontested,
facts’.25 On the appellant’s own showing, the parties had adopted divergent views not
only in relation to the law but also the facts. The appellant’s response addressed a
range of issues, including: the requirements of s 11(1) (f), the relevant principles of
statutory interpretation and the application of international law; what constitutes gold
and the gold supply chain; the manufacturing process; the definition of refining and the
refining process; the distinction between manufacturing and production; co -mingling
and a relevant class ruling; the reasonable care standard and understatement
penalties; and, lawful, reasonable and procedurally fair administrative action. All of
those were, in truth, matters for adjudication in accordance with the special machinery
created by the TAA.26 Nowhere is this more clearly illustrated than in the relief sought.
From the range of orders sought in this matter it is clear that unlike, for example In re
Phillip Frame Will Trust v Commissioner for Inland Revenue, the dispute in this matter
is not simply one of law but also involves questions of fact. The orders sought are all
thus inextricably linked to the facts.
[26] The circumstances here certainly did not favour a piecemeal consideration of
the case and, as it transpires, failed to lead to a reasonably prompt re solution of any
25Mobile Telephone Networks (Pty) Ltd v Commissioner for the South African Revenue Service [2022]
ZASCA 142; [2023] (1) All SA 330 (SCA); 2023 (1) SA 420 (SCA); 85 SATC 235 para 27
26 Ibid para 12.
13
of the real issues between the parties. If anything, the approach adopted opened ‘the
door to the “fractional disposal” of actions and the “piecemeal hearing of appeals”’ .27
In Consolidated News Agencies (Pty) Ltd (in liquidation) v Mobile Telephone Networks
(Pty) Ltd & another, this court said the following:
‘Before concluding we are constrained to make the comments that follow. Piecemeal litigation
is not to be encouraged. Sometimes it is desirable to have a single issue decided separately,
either by way of a stated case or otherwise. If a decision on a discrete issue disposes of a
major part of a case, or will in some way lead to expedition, it might well be desirable to have
that issue decided first.
This court has warned that in many cases, once properly considered, issues initially thought
to be discrete are found to be inextricably linked. And even where the issues are discrete, the
expeditious disposal of the litigation is often best served by ventilating all the issues at one
hearing. A trial court must be satisfied that it is convenient and proper to try an issue
separately.’28 (Footnotes omitted.)
[27] Likewise, it is generally considered inappropriate to allow an appeal when the
entire dispute between the parties has yet to be resolved by the court of first instance.29
In Guardian National Insurance Co Ltd v Searle NO, the following was stated:
‘As previous decisions of this Court indicate, there are still sound grounds for a basic approach
which avoids the piecemeal appellate disp osal of the issues in litigation. It is unnecessarily
expensive and generally it is desirable, for obvious reasons, that such issues be resolved by
the same Court and at one and the same time.’30
In this regard, it is important to emphasise that the business of a court, and in particular
an appellate court such as this, is generally retrospective; it deals with situations or
problems that have already ripened or crystallised and not with prospective or
hypothetical ones.31 No doubt, if a declaratory application avails the appellant now, it
will still avail the appellant after the issues have crystallised.
27 Levco Investments (Pty) Ltd v Standard Bank of SA Ltd 1983 (4) SA 921 (A) at 928H.
28 Consolidated News Agencies (Pty) Ltd (in liquidation) v Mobile Telephone Networks (Pty) Ltd &
another [2009] ZASCA 130; [2010] 2 All SA 9 (SCA); 2010 (3) SA 382 (SCA) paras 89 and 90.
29 Health Professions Council of South Africa and Another v Emergency Medical Supplies and Training
CC t/a EMS [2010] ZASCA 65 2010 (6) SA 469 (SCA); [2010] 4 All SA 175 (SCA) at para 16 (Health
Professions Council of South Africa).
30 Guardian National Insurance Co Ltd v Searle NO [1999] ZASCA 3; [1999] 2 All SA 151 (A); 1999 (3)
SA 296 (SCA) at 301A-C; see also Health Professions Council of South Africa fn 29 above para 16.
31 Ferreira v Levin NO & others; Vryenhoek v Powell NO & others 1996 (1) SA 984 (CC) para 199; see
also Clear Enterprises (Pty) Ltd v Commissioner for South African Revenue Services and Others [2011]
ZASCA 164 paras 17 and 18.
14
[28] In Luzon Investments (Pty) Ltd v Strand Municipality ,32 the full court (per
Friedman J (Howie J and Conradie J conc urring)) referred to an article by Prof AH
Hudson entitled ‘Declaratory Judgments in Theoretical Cases: The Reality of the
Dispute’ (that was approved by the Supreme Court of Canada in Solosky v The
Queen),33 where the learned author stated:
‘The declaratory action is discretionary and two factors which will influence the Court in the
exercise of its discretion are the utility of the remedy, if granted, and whether, if it is granted,
it will settle the questions at issue between the parties.’34
Here, the declarator fails both tests – it lacks utility and fails to settle the questions at
issue between the parties.
[29] In any event, we may well be precluded from entering into the substantive
merits of the appeal. This is so because the matter was approached as if an appeal
lies against the reasons for judgment. It does not. Rather, an appeal lies against the
substantive order made by a court. 35 The order in this case reads: ‘the application is
dismissed with costs, including the costs of senior and junior counsel’. The high court
was called upon to resolve the competing contentions of the parties in respect of s
11(1)(f) of the VAT Act, and although it evidently inclined against the appellant on that
score, absent a counter application by SARS, it could do no more than dismiss the
appellant’s application with costs.
[30] The cumulative consequence of all of the factors that I have alluded to is that
an application for declaratory relief was not appropriate in this matter. The nature of
the dispute more properly lent itself to resolution by use of the special machinery of
the TAA set up for that purpose. Thus, although the high court incorrectly entertained
an application for declaratory relief, it was correct in dismissing it. I may add, that this
Court could not interfere with the exercise of the high court’s discretion to deal or not
32 Luzon Investments (Pty) Ltd v Strand Municipality and Another 1990 (1) SA 215 (C) at 229I–230A.
33 Solosky v The Queen 105 DLR (3d) 745 at 754.
34 A H Hudson ‘Declaratory Judgments in Theoretical Cases: The Reality of the Dispute’ (1976-77) 3
Dalhousie Law Review 706 at 708.
35 Western Johannesburg Rent Board & another v Ursula Mansions (Pty) Ltd 1948 (3) SA 353 (A) at
355; Absa Bank Ltd v Mkhize and Another, Absa Bank Ltd v Chetty, Absa Bank Ltd v Mlipha [2013]
ZASCA 139; [2014] 1 All SA 1 (SCA); 2014 (5) SA 16 (SCA) para 64.
15
deal with a matter (as should have happened here), unless ther e was a failure to
exercise a judicial discretion.36
[31] In the result, the appeal is dismissed with costs including those of two counsel.
________________
V M PONNAN
JUDGE OF APPEAL
Molemela P
[32] I have read the judgment of my brother, Ponnan JA (the majority judgment).
Although I to o conclude that the appeal must be dismissed, I however respectfully
disagree with the majority judgment’s finding that the high court incorrectly entertained
the application for declaratory relief.
[33] The facts of this matter have been comprehensively set out in the majority
judgment and it is therefore not necessary to rehearse them in this section of the
judgment. It is trite that every case must be judged on its own facts and circumstances.
As correctly set out in the majority judgment, s 105 of the TAA makes it plain that a
taxpayer may only dispute an assessment by the objection and appeal procedure to
the Tax Court under the TAA , unless a high court directs otherwise . The term
‘assessment’ means ‘t he determination of the amount of a tax liability or refund, by
way of self-assessment by the taxpayer or assessment by SARS’,37 while ‘decision’ is
defined as ‘a decision referred to in s 104(2)’38 of the TAA, which includes the decision
not to extend the period for lodging the objection, or a decision not to extend the period
for the lodging of the appeal.
[34] In this matter, the appellant specifically pleaded in its founding affidavit that its
application was not intended to dispute an assessment or deci sion as contemplated
36 D Harms Civil Procedure in the Superior Courts Service Issue 77 (August 2023) at A4.18.
37 Section 1 of the TAA.
38 Section 101 of the TAA.
16
in s 104 of the TAA and went on to assert that the jurisdiction of the high court was
consequently not ousted by the absence of a directive as contemplated in of s 105 of
the TAA. SARS took no issue with that assertion in its answering affidavit. It is worth
noting that both counsel confirmed that by the time the application was heard, SARS
had still not issued any assessments. Having taken the pleadings and all the
circumstances of this case into account, I am satisfied that there was neither an
assessment nor decision within the contemplation of s 104 of the TAA. That being the
case, s 105 was not implicated. Put differently, on the facts of this case, the s 105
directive did not find application. Rappa is clearly distinguishable on the facts because
in that matter, an assessment had already been issued by SARS whereas no
assessment had been issued in the matter under consideration; furthermore, the
applicant in that matter had instituted a review application and not sought a declarator
as is the case here.
[35] In terms of s 21(1)(c) of the Superior Courts Act the court has the power, in its
discretion and at the instance of any interested person, to grant declaratory relief. It is
trite that two main considerations occupy the presiding judge’s mind when adjudicating
an application in which declaratory relief is sought, namely ( a) whether an applicant
has an interest in an existing, future or contingent right or obligation and, if so, ( b)
whether the order ought to be granted, 39 all things considered. During the first leg of
this two -stage enquiry the court focuses on the necessary condition precedent,
namely, whether the applicant has shown an ‘existing, future or contingent right or
obligation’.40 This is the jurisdictional requi rement. If the court is satisfied that the
existence of such conditions has been proven, the second leg of the enquiry is the
consideration, within the court’s discretion, whether to refuse or grant the order
sought.41
[36] Given the common cause fact that an assessment or decision had not been
made by SARS and that the narrow issue presented to the high court for determination
was the interpretation of s 11(1) (f), a fortiori, no directive was required from the high
39 Cordiant Trading CC v Daimler Chrysler Financial Services (Pty) Ltd [2005] ZASCA 50; [2006] 1 All
SA 103 (SCA); 2005 (6) SA 205 (SCA) para 16.
40In terms of s 21(1)(c) of the Superior Courts Act, the court has the power:
‘In its discretion and at the instance of any interested person, to enquire into and determine any existing,
future or contingent right or obligation, notwithstanding that such a person cannot claim any relief
consequential upon the determination.’
41 Ibid para 18.
17
court for it to exercise its jurisdiction under s 21(1)(c) of the Superior Courts Act. In a
nutshell, nothing barred the high court from entertaining the appellant’s application for
the declaratory relief. In coming to this conclusion, I am fortified by two judgments of
this Court in which t he bringing of an application for a declarator in respect of the
interpretation of legislation pertaining to tax matters came up for consideration.
[37] In Commissioner for South African Revenue Service v Langholm Farms (Pty)
Ltd42, Langholm Farms had submitted diesel refund claims to SARS, which prompted
SARS to perform an audit. Based on SARS’ interpretation of s 75(1C) (a)(iii) of the
Customs and Excise Act 91 of 1964 (CEA), SARS subsequently issued a notice of
intention to issue a revised assess ment disallowing Langholm Farms ’ claim on the
basis that the diesel refund claims were excessive. Langholm Farms was invited to
submit representations. Instead of responding to SARS’ notice of intent, Langholm
Farms approached the high court for a declarat ory order concerning the correct
interpretation of s 75(1C)(a)(iii) of the CEA and obtained declaratory relief. On appeal,
this Court remarked as follows:
‘…SARS expressed a clear view as to the proper construction of s 75(1C) (a)(iii). Langholm
disagreed and responded with the application, in an effort to resolve the dispute. It is true that
Langholm could have waited and provided SARS with the documents it required for a revised
assessment, and then challenged such an assessment, and argued the point of law at that
stage. The issue is whether it was obliged to do so. In my view there was nothing objectionable
in Langholm seeking clarity on an issue of statutory interpretation that would clearly influence
the outcome of SARS’ audit …There was little point in Langholm entering into a debate or
providing further information when none of it would be at all relevant given SARS’ legal view.
That is exactly the situation for which declaratory orders are made and seeking one in the
context of a taxing statute was endorsed by the Constitutional Court in Metcash.’ 43
[38] It is clear from the dictum above that t his Court’s approval for a taxpayer
approaching a high court for declaratory relief in tax matters in the circumscribed
circumstances of seeking clarity on a statutory interpretation was unequivocal. Given
that Metcash held that a court would have jurisdiction to grant declaratory relief to a
vendor if it were to be alleged that the Commissioner had inter alia misapplied the law
42 Commissioner for South African Revenue Service v Langholm Farms (Pty) Ltd [2019] ZASCA 163.
43 Ibid para 10.
18
in holding a particular transaction to be liable to VAT or failed to apply the proper legal
test to a particular set of facts,44 this Court’s reliance on Metcash was apposite.
[39] In Commissioner for the South African Revenue Service v United Manganese
of Kalahari (Pty) Ltd45 (UMK), UMK had approached the high court for a declaratory
order in circumstances where SARS had differed from UMK on the correct manner of
calculation based on s 6 of the Mineral and Petroleum Resources Royalty Act 28 of
2008. The audit process had not yet been finalised. The circumstances in which UMK
approached the high court are similar to those in the matter unde r consideration. On
appeal, the appellant decried the granting of a declaratory order by the high court and
contended that the respondent should have awaited the outcome of the audit process
and exhausted internal remedies under the TAA. Once this Court ha d brought the
parties’ attention to the Langholm Farms judgment, SARS abandoned the above
contentions and confined its arguments to the legal issue concerning the proper
interpretation of the relevant legislation. 46 Significantly, these two judgments were
delivered well after the 2015 amendment pertaining to s 105 of the TAA. It must be
accepted that this Court’s remarks as quoted in the preceding paragraph were made
in the context of an awareness about the 2015 amendment to s 105 of the TAA.
Clearly, this Court did not consider t he dictum in Metcash to have been impacted by
the 2015 amendment.
[40] It is evident from these two judgments 47 that this Court considered the
interpretation of legislative provisions to be within the realm of disputes of a legal
nature in respect of which a high court could grant a declarator in tax matters. It follows
44 Metcash para 71.
45 Commissioner for the South African Revenue Service v United Manganese of Kalahari (Pty) Ltd
Commissioner, South African Revenue Service v United Manganese of Kalahari (Pty) Ltd [2020]
ZASCA 16; 2020 (4) SA 428 (SCA).
46 That this Court considered itself bound by Langholm Farms’ judgment is evident from para 4 of that
judgment, where the following was stated: ‘In its opposing affidavit, in argument before the high court,
and in its heads of argument in this court, SARS argued that UMK’s application was premature as the
audit process had not yet been finalised. It contended that UMK should have awaited the outcome of
that process and then pursued its internal remedies under the Tax Administration Act 28 of 2011, by
way of objection and appeal against any assessment with which it d id not agree. Alternatively, it
contended that it was inappropriate for UMK to seek relief by way of a declaratory order. However, after
the parties’ attention was drawn to a recent judgment of this court dealing with a similar argument , we
were informed that SARS no longer persisted with these points and would confine its arguments to the
legal issue raised by UMK concerning the proper interpretation of the relevant provisions of the Royalty
Act’. (Own emphasis.).
47 It was not submitted before us that any of the two judgments were wrongly decided.
19
by parity of reasoning that in the present case, where the only issue for determination
was the interpretation of a provision of the VAT Act, the high co urt indeed had the
jurisdiction to entertain the application for declaratory relief . On that basis, nothing
precluded the high court from entertaining th at application for a declaratory order
within the contemplation of s 21(1) (c) of the Superior Courts Ac t. Moreover, both
counsel stated from the bar that the jurisdiction issue was not raised before the high
court. Against the backdrop of the discussion canvassed above, it is hardly surprising
that the high court’s judgment did not make any pronouncements o n the aspect of
jurisdiction. That should really be the end of the matter insofar as the issue regarding
whether the jurisdiction of the high court was engaged or not is concerned.
[41] From my point of view, considerations regarding the utility of the re medy and
whether, if granted, it would settle the questions at issue between the parties (as
alluded to in para 28 of the majority judgment) are aspects that arise during the
exercise of the discretion whether to grant the declaratory relief. Thus, when
declaratory relief is refused on account of the court not being satisfied on those two
aspects, it simply means that the court, in its discretion, held the view that such a relief
was not appropriate, given the circumstances of the particular case; this does not
equate to the court not being competent to entertain the declarator. It bears noting that
in Langholm Farms, this Court did not uphold the interpretation given by the high court
to the relevant provision; instead, it held that the declaratory orders were granted on
the mistaken view of the law. It replaced the high court’s order with one dismissing the
application for the declarator. It did not find that the high court had incorrectly
entertained the application for a declarator.
[42] Lastly, i t is evident from the papers that both parties held the view that the
declarator pertained to the interpretation of s 11(1)(f) of the VAT Act and believed that
the high court’s interpretation would lead to greater certainty for all concerned. The
majority judgment correctly asserts that o n the appellant’s own showing, the parties
had adopted divergent views not only in rel ation to the law but also the facts . I am of
the view that given the factual disputes alluded to in the majority judgment, the granting
of declaratory relief was not appropriate under those circumstances (even though the
20
court did have the jurisdiction to entertain the application for the declarator). 48 That
being the case, it follows that the high court’s dismissal of the application for
declaratory relief cannot be faulted. On this score, there is no basis for tampering with
the high court’s decision to di smiss the application for declaratory relief, p recisely
because ultimately an appeal lies against an order and not the reasons.
[43] For all the reasons mentioned in this separate concurrence, I agree that the
appropriate order is to dismiss the appeal with costs, including those occasioned by
the employment of two counsel.
____________________
MB MOLEMELA
PRESIDENT OF THE SUPREME COURT OF APPEAL
48 See Mobile Telephone Networks (Pty) Ltd v Commissioner for the South African Revenue Service
[2022] ZASCA 142; [2023] 1 All SA 330 (SCA); 2023 (1) SA 420 (SCA); 85 SATC 235 paras 17 and 27.
21
Appearances
For the appellant: PA Swanepoel SC and CA Boonzaaier
Instructed by: Edward Nathan Sonnenbergs Inc., Pretoria
McIntyre van der Post Inc., Bloemfontein.
For the respondent: EC Coetzee SC and S Maritz
Instructed by: VLZ Inc., Pretoria
Honey Attorneys, Bloemfontein.