Page 765 - SAIT Compendium 2016 Volume1

CASE DIGEST 2013–2014
dictum of Savage AJ in Commissioner for the South African Revenue Service v CJ van der Merwe [2014] ZAWCHC 59, where it was held that that the test for what constitutes ‘required’ is not one of necessity. Adding to this, Rogers J held at para [32]:
‘...preservation of assets could be said to be “required to secure the collection of tax” if preservation would confer a substantial advantage in the collection of the tax. I venture to suggest that, once one has concluded that a “substantial advantage” has been shown, one could simultaneously conclude that there was “an element of need” suf cient to meet the “required” (ie “‘reasonably required”) test.’
The learned judge did, however, disagree with Savage AJ’s comments regarding dissipation not being the focus of the s 163, concluding the opposite in this regard.
It was further submitted at para [36] that (own emphasis):
‘In every case where a taxpayer is liable or likely to become liable for tax, there is a theoretical possibility that the value of its assets may for some or other reason be diminished by the time SARS is able to execute. I do not think the lawmaker intended that a preservation order would routinely be available to SARS in every case of an actual or anticipated tax liability. There must be something by way of ‘requirement’ which places the particular case outside the ordinary run of cases.’
Based on this assertion, the Commissioner was required to show that there was a material risk that assets which would otherwise be available in satisfaction of tax would, in the absence of a preservation order, no longer be available. Unfortunately SARS was unable to discharge this onus, leading Rogers J to surmise:
‘One gains the distinct impression that SARS launched the application not so much because a preservation of the respondents’ assets was required but in order to bring matters to a head by placing legal pressure on the respondents... While I can understand SARS’ frustration, that is not the purpose of the preservation application.’ [paras 54–55]
Section 163, as stated by the court, is a procedure for preserving assets, not an execution mechanism.
SARS’ submission in seeking the con rmation of the preservation order seemed to have been solely based on the fact that the respondents had been very late in submitting their tax returns for the different periods. The court, however, held
the view that:
‘Delinquency in the conduct of a taxpayer’s tax affairs may in appropriate circumstances be part of the material from which one could infer that there is an appreciable risk that assets available for collection of tax will be diminished. There is, however, no automatic connection between the two. A person may be disorganised and late in regard to its tax administration without there being any appreciable danger that its assets will be diminished by the time tax comes to be collected’ [para. 41]
In conclusion the preservation order was not found to be ‘required’ to secure the collection of tax within the meaning of s 163 (3).
Appointment of a curator bonis
Regarding the appointment of the curator, the court considered whether such action would achieve an appreciable advantage for SARS, in the sense that there would be a material risk of Tradex being in a worse position to meet its tax liabilities if a curator was not appointed. The court held that Tradex would not be managed better under the care of a curator bonis. The court [para. 71] also commented on SARS’ standard practice to appoint a curator in terms of the provisional order, which the court noted was not only costly but a great intrusion on the taxpayer’s rights. Such appointment the court stated should only be done in provisional orders where, on the facts of the case, it is reasonably required.
The respondents had made certain open tenders in good faith to SARS as a sign that they intended to settle whatever nal tax liabilities were found to be owing, irrespective of whatever the court’s ndings may be. These included the cession of Tradex’s book debts, Wigget’s personal suretyship for the debts of BWA and Tradex and the caveats over BWA’s two properties.
The application was dismissed with costs.
13. CSARS v Van der Merwe GW and 21 others – HC 2013 WC (28 February 2014)
Introduction
This case considers whether the provisional preservation orders which were granted ex parte by Rogers J against 22 respondents should be con rmed as nal preservation orders. The orders were brought on application by the Commissioner for the South African Revenue Service (‘the Commissioner’) in terms of s 163 of the Tax Administration Act 28 of 2011 (‘the TAA’).
In order to prevent any realisable assets from being disposed of, which may frustrate the collection of the full amount of tax that is either currently payable or there are reasonable grounds for SARS believing the tax may be due, s 163(1) of the TAA allows a SARS of cial to authorise an ex parte application to the High Court for an order for the preservation of any assets of a taxpayer or other person prohibiting any person, subject to the conditions and exceptions as may be speci ed in the preservation order, from dealing in any manner with the assets to which the order relates.
It was the application for con rmation of the provisional order speci cally made against the second respondent, Candice-Jean van der Merwe, which was considered before the Western Cape High Court. This order prohibited her from disposing of, or removing from the country, various luxury vehicles and monies held in her name or held in trust for her, in various bank accounts across the country.
Please note that this case dealt with various other legal implications. For our purposes, only the tax aspects of the case will be considered.
SAIT CompendIum oF TAx LegISLATIon VoLume 1 757
CASE DIGEST 2013-2014