Commissioner for Inland Revenue v First National Industrial Bank Ltd

• Jurisdiction: South Africa
• Judge: Corbett CJ, Botha JA, Kumleben JA, Nicholas AJA and Nienaber AJA
• Judgment Date: 18 May 1990
• Citation: 1990 (3) SA 641 (A)
• Hearing Date: 15 March 1990
• Court: Appellate Division

Nienaber AJA:

What was essentially a secondary point in the Court below - whether and from when mora interest is to run - has become the principal one in this Court. In the Court below the principal issue between the Commissioner for Inland Revenue (the appellant in this Court but the respondent in the Court below) and the First National Industrial Bank Ltd (the applicant in the Court below and the respondent in this B one) was whether a certain autocard scheme administered by the Bank between 1984 and 1986 constituted a 'credit card scheme' (as it was then defined in s 1 of the Limitation and Disclosure of Finance Charges Act 73 of 1968, now called, in terms of s 9 of Act 42 of 1986, the Usury Act) and as such attracted stamp duty in terms of s 3 read with Schedule C 1 of the Stamp Duties Act 77 of 1968. (That issue, incidentally, is no longer a live one: the Usury Act has been amended to cater for it.)

The Bank throughout contended that its scheme did not attract stamp duty. But when the Commissioner, notwithstanding representations to the contrary, insisted that it did, the Bank resolved to pay the duty D (amounting in all to R488 353,80) 'under protest'. Each payment was made under cover of a letter (annexure I) containing this formula:

'As we have not yet finalised this matter with the authorities, in order to avoid any penalty in terms of the new s 19 of the Stamp Duties Act, 1968 (as inserted by s 8 of the Revenue Laws Amendment Act, 1984), E we hereby make payment, under protest, of stamp duty in respect of the... debit entries to our Auto Card holders.'

Having made such payments during the period from 21 August 1984 to 20 May 1986 the Bank, on 11 August 1986, formally claimed repayment of all the amounts thus paid. When this was refused it launched an application F for such repayment, with interest a tempore morae, in the Witwatersrand Local Division, which was served on the Commissioner on 26 March 1987.

Two issues were debated before the Court a quo: (1) the primary one whether stamp duty was properly chargeable and accordingly whether the Commissioner was obliged to repay the capital sums paid to his office; G and (2) if so, the secondary one whether the Commissioner was bound, in addition, to pay interest on the capital sums that had to be repaid, from the respective dates on which each payment was made by the Bank to the Commissioner.

The Court a quo decided both questions in favour of the Bank and H accordingly granted judgment in the following terms:

'Judgment is given against the respondent in favour of the applicant for:

(1)

payment of an amount of R488 353,80;

(2)

interest on the amounts from the dates and at the rates set out in annexure X to the draft order handed in;

(3)

costs of suit including the costs of two counsel.' I

Annexure X is a schedule setting out the date and the amount of each payment made by the Bank to the Commissioner and the legal rate of interest appropriate to it.

The Commissioner accepted the decision of the Court a quo on the first but not on the second issue. Hence the present appeal, brought with J leave of the Court a quo,

Nienaber AJA

A 'against para 2 of the judgment and order in terms of which the respondent was awarded interest on the amounts from the dates and at the rates set out in annexure X to the draft order, given by the above honourable Court on 28 April 1988'.

The issue before this Court is therefore a comparatively narrow one, B namely, whether, and if so from which date, the Commissioner is obliged to pay 'interest a tempore morae ' on stamp duties he collected when he should not have done so and which were paid to him 'under protest'.

When the Bank initially applied for a refund in its letter of 11 August 1986, it did so in terms of s 32(1)(a) of the Stamp Duties Act 1968. In its application before the Court below the Bank broadened the C base of its claim by stating:

'In the premises, I submit that the respondent is legally obliged to exercise the discretion conferred upon him in terms of s 32(1)(a) of the Stamp Duties Act, and to make a refund to applicant of the amount of R488 353,80 representing stamp duties overpaid. I submit further and in any event that the said amount was paid by the applicant to the respondent under protest, as appears from annexure I, and that the D respondent is obliged to repay the said amount to the applicant with interest a tempore morae.'

The Court a quo held that s 32(1)(a) was not applicable to the Bank's claim for a refund and that the legal relationship between the Commissioner and the Bank was what the Court described as an 'ordinary common law legal relationship flowing from unjust enrichment'. Counsel E for the Commissioner, on the other hand, contended in this Court that s 32(1)(a) not only applies but that 'it is the only possible legal and factual basis' for a refund; and since the section does not expressly provide for interest, no interest is recoverable. Counsel for the Bank, in turn, submitted that the Bank's true claim is either the condictio indebiti or one under contract, and that the Bank's initial reliance on F s 32(1)(a) did not prejudice its claim under either head.

Even though the claim for a refund has been conceded it thus becomes necessary to examine s 32(1)(a) more closely. It reads:

'(1) The Commissioner may make, or authorise to be made, a refund in respect of:

(a)

the amount of any overpayment of duty or any penalty properly G chargeable in respect of any instrument, if application for the refund is made within two years after the date of such overpayment.'

'The present claim', so it was stated by the Court below,

'does not, in my view, fall under the provision of s 32 of Act 77 of 1968. This section authorises the Commissioner to make or authorise to H be made a refund in respect of any overpayment of the duty properly chargeable in respect of any instrument. In this case there was not an overpayment of duties payable. There was a payment of duties not payable.'

I agree with these remarks. What the section contemplates is a payment made in respect of duties rightly chargeable but wrongly calculated. To I the extent of any excess there would be an 'overpayment' and it would be an overpayment of duties 'properly chargeable'. The taxpayer could then claim, and the Commissioner would be empowered to authorise, a repayment in terms of the section without recourse to the technicalities of a common law condictio. But this was not such a case. Here the Court a quo J found that the payments were made by the Bank and accepted by the

Nienaber AJA

A Commissioner in respect of 'an instrument' which did not, in reality, attract duty at all. This was not, therefore, a case where the Bank paid in excess of what it should have paid; this was a case where it should not have paid anything at all. Hence there was no overpayment of duties 'properly chargeable'. Section 32(1)(a) accordingly did not apply.

B That being so, I cannot agree with the main submission of counsel for the Commissioner that s 32(1)(a) was conclusive of the entire issue and that, since the section was silent on interest, no interest was payable at all. (Contrast Commissioner for Inland Revenue v NCR Corporation of South Africa (Pty) Ltd 1988 (2) SA 765 (A) at 775E - H.) Section 32(1)(a), moreover, is not the sole and exclusive vehicle for claiming C repayment. The section does not, either in terms or context, purport to create a comprehensive remedy. What it does is to empower the Commissioner, in particular circumstances, to make or approve a refund. But that does not mean that an aggrieved party is precluded from advancing a claim for repayment on a different basis, or that the D section precludes a claim for mora interest where the overpayment is legally recoverable at common law. The fact that the Bank in its initial letter of demand may have misconceived its remedy, and that its main ground for redress in the application was not the appropriate one, is not in itself, therefore, fatal to its case.

Having correctly concluded that s 32 was not applicable the Court a E quo went on to say:

'Since the applicant's payment was made not in error but under protest the condictio indebiti does not seem to be applicable to the present set of facts'

and again,

'the legal relationship between the Commissioner and the applicant is an F ordinary common law legal relationship flowing from unjust enrichment. It is not a relationship created by any statutory provisions.'

The assertion that the condictio indebiti is inapplicable simply because the payment in question was not made in error is, with respect, something of an oversimplification. Whatever may have been the position in Roman-Dutch law (cf De Vos Verrykingsaanspreeklikheid in die G Suid-Afrikaanse Reg 3rd ed at 172), our present law appears to have assimilated the basic notion of English law with regard to 'payments made under duress of goods'. Thus it was stated by Innes CJ in Union Government (Minister of Finance) v Gowar 1915 AD 426 at 433 - 4:

'It would be in the highest degree inequitable that the Treasury H should be permitted to retain what it had no right to claim; and the question is whether the law will allow it to take up such a position.... It seems to me that money wrongly exacted by the possessor of goods from the true owner as a condition precedent to their delivery, and paid by the latter not as a gift, but in order to obtain possession of his own property and with a reservation of his rights would be recoverable by a condictio.... Where goods have been wrongly detained and where I the owner has been driven to pay money in order to obtain possession, and where he has done so not voluntarily, as by way of gift or compromise, but with an expressed reservation of his legal rights, payments so made can be recovered back, as having been exacted under...