Case No 11283

• Jurisdiction: South Africa
• Judge: Jajbhay J
• Judgment Date: 19 August 2005
• Citation: 2005 JDR 1157 (JSpCrt)
• Docket Number: 11283

Jajbhay J:

Introduction:

This is an interlocutory application in terms of rule 13 of the rules promulgated under section 107A of the Income Tax Act, 58 of 1962 ("the Income Tax Act") for leave to amend the Appellant's Statement of Grounds of Appeal.

The Appellant seeks to add a new paragraph 3.2.4 to its Grounds of Appeal as follows:

"3.2.4 Put differently:

3.2.4.1 in the 1999 year of assessment, the Appellant was entitled to deduct the cost price of its 15.6% shareholding in A, being R300,724,524, in terms of section 22(2) of the Income Tax Act, as:

3.2.4.1.1 it was trading stock held and not disposed of by it at the beginning of the 1999 year of assessment;

3.2.4.1.2 such trading stock formed part of the trading stock of the appellant at the end of the immediately preceding year of assessment;

3.2.4.1.3 the said amount was, in the determination of the taxable income of the appellant for such preceding year of assessment, taken into account in respect of the value of such trading stock at the end of such preceding year of assessment;

3.2.4.2 the sale price of R141,021,605 was to be included in the appellant's 'gross income', as defined in section 1 of the Income Tax Act, in the 1999 year of assessment, as being a receipt not of a capital nature;

3.2.4.3 in the premises, the Appellant had a net income tax deduction or loss of R159,702,919.00 in the 1999 year of assessment pursuant to the holding and disposal of the said shares."

On 20 May 2005 the Respondent was given notice of the substance of the proposed amendment. On 24 May 2005 SARS requested a full explanation for the lateness of the amendment and the circumstances giving rise to it. On 31 May 2005 a full explanation was furnished.

Thereafter, on 13 June 2005 and on 27 June 2005, SARS indicated that it would "in all likelihood" agree to the amendment, but had not yet been able to obtain counsel's opinion on the matter. SARS undertook to revert on 8 July 2005. SARS did not honour this undertaking.

2005 JDR 1157 p2

Jajbhay J

On 14 July 2005 SARS changed its stance to being one of not agreeing to the amendment "at this stage" but said that the issue could be discussed at the pre-trial conference. The conference was convened on 19 July 2005. At this meeting, the Respondent's representatives insisted that a formal application be delivered to effect the proposed amendment.

The application for leave to amend was delivered eight court days thereafter. Six court days later the Respondent delivered an answering affidavit. This was the first time the Appellant knew that the application would definitely be opposed. This was also one court day before the hearing commenced. A replying affidavit was immediately prepared.

The Respondent's main ground of opposition to the amendment is that instead of seeking merely to clarify the existing Grounds of Appeal, the amendment introduces new grounds of appeal which, are bad in law, contradict the existing Grounds of Appeal, and finally, are contradicted by the common cause facts. It may well be that the effect of the refusal of the amendment will put an end to a lengthy trial of the issues such as whether certain expenditure incurred by the Appellant was of capital or revenue nature, which is the Appellant's principal contention on the merits.

The law pertaining to amendments :

In Commercial Union Assurance Co Ltd v Waymark NO 1995 (2) SA 73 (TK) at 76D to 77I the case law pertaining to amendments was summarised as follows:

"I turn now to the merits of the application, namely whether the amendment should be granted. The principles applicable to this issue have been set out in numerous cases. In Caxton Ltd and Others v Reeva Forman (Pty) Ltd and Another 1990 (3) SA 547 (A) Corbett CJ stated at 565G:

'Although the decision whether to grant or refuse an application to amend a pleading rests in the discretion of the Court, this discretion must be exercised with due regard to certain basic principles.'

The following statement by Watermeyer J, in Moolman v Estate Moolman and Another 1927 CPD 27 at 29 has been accepted and followed as reflecting the situation in our law:

'The question of amendment of pleadings has been considered in a number of English cases. See for example: Tildesley v Harper (10 ChD 393); Steward v North Met Tramways Co (16 QBD 556) and the practical rule adopted seems to be that amendments will always be allowed unless the application to amend is mala fide or unless such amendment would cause an injustice to the other side which cannot be compensated by costs, or in other words unless the parties cannot be put back for the purposes of justice in the same position as they were when the pleading it is sought to amend was filed.'

In Rosenberg v Bitcom 1935 WLD 115 at 117 Greenberg J, stated:

'Although it has been stated that the granting of the amendment is an indulgence to the party asking for it, it seems to me that at any rate the modern tendency of the Courts lies in favour of an amendment whenever such an amendment facilitates the proper ventilation of the dispute between the parties.' (My emphasis.)

In Zarug v Parvathie NO 1962 (3) SA 872 (D) at 876C Henochsberg J held:

2005 JDR 1157 p3

Jajbhay J

'An amendment cannot however be had for the mere asking. Some explanation must be offered as to why the amendment is required and if the application for amendment is not timeously made, some reasonably satisfactory account must be given for the delay.'

Caney J stated in Trans-Drakensberg Bank Ltd (under Judicial Management) v Combined Engineering (Pty) Ltd and Another 1967 (3) SA 632 (D) at 641A:

'Having already made his case in his pleading, if he wishes to change or add to this, he must explain the reason and show prima facie that he has something deserving of consideration, a triable issue; he cannot be allowed to harass his opponent by an amendment which has no foundation. He cannot place on the record an issue for which he has no supporting evidence, where evidence is required, or, save perhaps in exceptional circumstances, introduce an amendment which would make the pleading excipiable.' (My emphasis.)

And at 639B:

'The mere loss of the opportunity of gaining time is not in law prejudice or injustice. Where there is a real doubt whether or not prejudice or injustice will be caused to the defendant if the amendment is allowed, it should be refused, but it should not be refused merely in order to punish the plaintiff for his neglect.'

And at 642H:

'In my judgment, if a litigant has delayed in bringing forward his amendment, this in itself, there being no prejudice to his opponent not remediable in the manner I have indicated, is no ground for refusing the amendment.'

The principles enunciated in the abovementioned cases can be summarised as follows:

1. The Court has discretion whether to grant or refuse an amendment.

2. An amendment cannot be granted for the mere asking; some explanation must be offered therefor.

3. The applicant must show that prima facie the amendment 'has something deserving of consideration, a triable issue'.

4. The modern tendency lies in favour of an amendment if such 'facilitates the proper ventilation of the dispute between the parties'.

5. The party seeking the amendment must not be mala fide.

6. It must not 'cause an injustice to the other side which cannot be compensated by costs'.

7. The amendment should not be refused simply to punish the applicant for neglect.

8. A mere loss of time is no reason, in itself, to refuse the application.

9. If the amendment is not sought timeously, some reason must be given for the delay."

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