Wingate-Pearse v Commissioner for the South African Revenue Service and others  JOL 45120 (GJ)
Name of Court: High Court of South Africa, Held at Johannesburg
Date of decision: 17 July 2019
Case number: 29208/15
S. Africa: Judgment handed down by High Court against Martin Fraser Wingate-Pearse
On 17 July 2019, the High Court held at Johannesburg delivered its judgment in the case as mentioned above.
SARS received information from the SAPS’ Organised Crime Unit and investigated the Applicant. The investigation revealed non-compliance on his part. SARS applied for a warrant, executed it and, in the process, seized approximately 2 000 documents. The documents revealed under-declaration by the Applicant of income tax. SARS estimated that he had grossly under-declared his taxable income for the relevant period of assessment. Specific original assessments which were older than three years were re-opened. SARS issued additional estimated income tax assessments during April 2006 in respect of the 1998 to 2005 years of assessment. The Applicant’s tax liability was increased. Objections were lodged against these assessments and were partially disallowed. The Applicant appealed to the Tax Court, and this dispute is not yet finalised.
The Applicant launched a review application on 17 August 2015. On 19 April 2018, the Applicant instituted an interlocutory application for leave to file a supplementary founding affidavit. SARS opposed both the review- and interlocutory application. It was agreed between the parties that the court would hear and determine both applications.
THAT HRIU’S ESTABLISHMENT WAS INCONSISTENT WITH THE CONSTITUTION
The Applicant claimed that he was the victim of a SARS “covert intelligence unit” known as “HRIU”. He contended that the operations of this unit infringed constitutionally protected rights. The court stated that motion proceedings in which final relief is sought could not be used to resolve factual issues because they are not designed to determine probabilities. The facts, as alleged by SARS, must, therefore, be accepted. This rule is known as the Plascon Evans rule. Once this rule is applied and the facts alleged by SARS accepted, the Applicant cannot succeed with the relief he sought.
THAT THE CONDUCT OF SARS AND A SARS OFFICIAL WAS BIASED, PREJUDICIAL, DISCRIMINATORY AND INCONSISTENT WITH THE CONSTITUTION
In this regard, the court found that the order sought is too generalised and vague to render the relief incompetent. The court referred to City Capital SA Property Holdings Ltd v Chavonnes Badenhorst St Clair Cooper and others 2018 (4) SA 71 (SCA) wherein it was stated that “Orders of court must comply with this standard: vague provisions in a court order violate the rule of law“.
THAT INVESTIGATIONS BASED ON FALSE INFORMATION ARISING FROM UNLAWFUL MONITORING AND INTERCEPTION OF COMMUNICATIONS AND APPLYING FOR A WARRANT BE REVIEWED AND DECLARED INCONSISTENT WITH CONSTITUTION
The information SARS received from SAPS Organised Crime Unit, its decision to investigate his tax affairs, the process of investigation or the decision to apply for the warrant, could not in itself adversely affect the rights of the Applicant in a manner that has a direct and external legal effect and could not be said to constitute an administrative action.
THAT DETERMINATIONS THAT HE DEFAULTED IN FURNISHING INFORMATION, IN ESTIMATING HIS TAXABLE INCOME AND DETERMINATIONS THAT INCOME WAS NOT ASSESSED DUE TO FRAUD BE DECLARED INCONSISTENT WITH THE CONSTITUTION
The court stated that although the Applicant does not intend to challenge the correctness of the additional estimated assessments, in substance what he seeks is for the court to decide upon the merits of the additional estimated assessments. Even though the High Court has jurisdiction to hear and determine tax cases, these issues are best decided by the tax court.
UTILISING OF FALSE INTERCEPTED INFORMATION DURING THE CONDUCT OF TAX APPEALS BE DECLARED INCONSISTENT WITH THE CONSTITUTION
In this regard, the court stated that if permitted, it will lead to piecemeal litigation. A further irregularity will be that a parallel court is requested to issue binding orders concerning pending litigation in the tax court. It was held that the tax court is the appropriate forum that may decide this question in due course.
THAT HIS RIGHT TO PRIVACY WAS VIOLATED BY EVIDENCE OBTAINED BY SARS AND SUCH EVIDENCE MUST BE DECLARED INADMISSIBLE
The Applicant’s argued that the use of that information will render the tax appeal unfair to him and will be detrimental to the administration of justice. The court stated that the relief sought herein is factually unsustainable when the Plascon Evans test is applied to the factual dispute.
REVIEW AND SETTING ASIDE OF SARS’ DECISION TO ISSUE ADDITIONAL ESTIMATED ASSESSMENTS
The Applicant’s argument was based on the grounds that the jurisdictional requirement for the issuing of additional assessments had not been met and the requirements of audi alteram partem had not been satisfied before the issuing of the additional estimated assessments.
Before its amendment by the Tax Administration Act (“TAA”), Section 79(1) of the Income Tax Act (“ITA”) made provision for the issuing of additional assessments after the expiration of 3 years from the date of the assessment. This was subject to SARS’ satisfaction that the amount which should have been assessed to tax was not so assessed due to fraud, misrepresentation or non-disclosure of material facts. Section 92 of the TAA empowers SARS to make an additional assessment if it ‘is satisfied’ that an assessment does not reflect the correct application of a tax Act to the prejudice of SARS.Such assessment may not be made five years after the date of assessment of an original assessment by way of self-assessment by the taxpayer, unless the full amount of tax chargeable was not assessed due to fraud, intentional or negligent misrepresentation or non- disclosure of material facts.
The Applicant argued that SARS must be satisfied on reasonable grounds, which test is according to him, is objective, that the original assessment is wrong. He furthermore argued that the evidentiary burden of SARS’ allegations of fraud, misrepresentation and non-disclosure had not been met.
In the pre-constitutional judgment of Rabie CJ, Kabinet van die Tussentydse Regering vir Suidwes-Africa v Katofa 1987 (1) SA 695 (A) it was held that the phrase of “is satisfied” conferred a subjective discretion.
In Walele v City of Cape Town  ZACC 11; 2008 (6) SA 129 (CC) it was stated that the decision-maker must show that the subjective opinion it relied on for exercising power was based on reasonable grounds.
In Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Others  ZACC 15; 2004 (4) SA 490 (CC) O’ Regan stated that a reasonable decision would depend on the circumstances of each case and relevant factors may be used to determine the reasonableness of a decision.
The court stated that although the words “is satisfied” used in the sections mentioned above confer a subjective discretion on SARS, an objective approach must be adopted to that subjective discretion. SARS must show its subjective satisfaction was based on reasonable grounds. Considering the wording of the sections mentioned above, the scope for judicial review is limited.
The court held that SARS’ required subjective satisfaction has been shown to have been founded on reasonable grounds.
The Appellant argued that SARS had breached the principle of audi alteram partem by failing to take his responses into account when the additional estimated assessments were raised. It was found that there was no merit in this ground of review. At the time the additional estimated assessments were raised, no statutory rights were afforded to a taxpayer as are now in terms of Section 42 of the TAA.
THAT THE DELAY IN BRINGING THE APPLICATION BE DECLARED AS NOT UNREASONABLE ALTERNATIVELY THAT CONDONATION BE GRANTED
A delay exceeding 180 days is unreasonable per se, and the court is only empowered to entertain a review application under PAJA if the interests of justice dictate an extension in terms of Section 9.
In Opposition to Urban Tolling Alliance v South African National Roads Agency Ltd  4 All SA 639 (SCA) it was stated that at common law, an application of the undue delay rule required a two-stage enquiry: firstly, whether there was an unreasonable delay and, secondly, if so, whether the delay should in all the circumstances be condoned.
In South African National Roads Agency Ltd v Cape Town City 2017 (1) SA 468 (SCA) the court stated in considering whether to extend the 180-day period all the facts and circumstances must be considered. When one is considering condoning a delay, the interests of justice criterion applies.
In Buffalo City Metropolitan Municipality v Asia Construction (Pty) Ltd  ZACC 15 Theron J said that with regards to undue delay within the context of legality, the first question will be one of reasonableness and if the delay is found to be unreasonable, whether the interests of justice require an overlooking of that unreasonable delay.
The court found that the Applicant lacked an acceptable explanation for the delay Where a delay is not satisfactorily explained and justified, it is not reasonable. The court was unable to hold that the interest of justice dictates that an extension in terms of Section 9 of PAJA should be granted or the undue delay should be overlooked.
The litigation was undertaken to assert the financial interest of the Applicant rather than constitutional rights. As a result, the rule that unsuccessful litigants who have sought, in good faith, to vindicate constitutional rights, ought not to have costs awarded against them, was not applied.
The question was whether the costs should be awarded on the scale applicable as between attorney and client as requested by SARS. The court referred to Nel v Waterberg Landbouwers Ko-Operatiewe Vereeninging 1946 AD 597 at 607 wherein Tindall JA demonstrated that the award of attorney and client costs is not so much intended as a penalty to be imposed but instead where justice requires that the winning party should not be out of pocket because of the limitations inherent in the usual party and party order.
The court held that both the review and interlocutory application was dismissed, and the Applicant was ordered to pay SARS’ and the Minister of Finance costs on the attorney-and-client scale.