Commissioner, South African Revenue Service v Van der Merwe

• Jurisdiction: South Africa
• Judge: Ponnan JA, Wallis JA, Mbha JA, Fourie AJA and Mayat AJA
• Judgment Date: 28 May 2015
• Citation: 2016 (1) SA 599 (SCA)
• Docket Number: 20152/2014 [2015] ZASCA 86
• Hearing Date: 06 May 2015
• Counsel: RWF MacWilliam SC (with A Kantor) for the applicant for condonation. JJ Gauntlett SC (with FB Pelser) for the appellant.
• Court: Supreme Court of Appeal

Ponnan JA (Wallis JA, Mbha JA, Fourie AJA and Mayat AJA concurring):

G [1] In this matter the appeal by Ms Candice-Jean van der Merwe lapsed for failure on her part to prosecute it timeously. The initial question before us, in relation to her appeal, is thus whether her default should be condoned and the appeal revived. There is, as well, an appeal by the other party to the litigation, the Commissioner for the South African H Revenue Service (Sars). Before turning to a consideration of either the application for condonation by Ms Van der Merwe (the applicant) or Sars' appeal, it may be convenient to first describe how both appeals arose and the one came to lapse.

[2] The principal protagonists in the matter are Sars and the applicant's father, Mr Gary van der Merwe. The latter declared R60 000 taxable I income for each of the 2004, 2005 and 2006 years of assessment and R70 000 taxable income for the 2007 year of assessment. He appears not to have declared any taxable income for the subsequent years of assessment and submitted zero returns to Sars for that period. In respect of the 2002 and 2003 years of assessment, Sars raised additional J estimated assessments in respect of Mr Van der Merwe in terms of the

Ponnan JA (Wallis JA, Mbha JA, Fourie AJA and Mayat AJA concurring)

Income Tax Act 58 of 1962 (the ITA), which resulted in a tax debt of A R30 222 881,70. As at 31 July 2011 the amount, inclusive of penalties, additional taxes and interest, stood at R66 206 256,53. Mr Van der Merwe did not object to the assessments and they have become final and conclusive. On 9 September 2011 Sars obtained a tax judgment against Mr Van der Merwe by way of an entry in the judgment book of the B Registrar of the High Court, as contemplated by s 91(1)(b) of the ITA. [1] Sars contends that, despite Mr Van der Merwe having amassed substantial wealth, he claims not to own any assets, which, so the contention goes, is a stratagem designed to obstruct tax collection.

[3] According to Sars, Mr Van der Merwe has over a number of years C been associated with certain juristic entities that have fraudulently claimed VAT refunds from Sars. They, so Sars asserts, are collectively liable to it for tax, additional tax, penalties and interest in an amount in excess of R225 million. In the result, on 19 August 2011 Sars applied to the Western Cape Division of the High Court, Cape Town, against a total of 22 respondents, including Mr Van der Merwe, the applicant D (Ms Van der Merwe) and a host of corporate entities, for a preservation order, as also the appointment of a curator bonis in terms of s 163(4)(d) of the Tax Administration Act 28 of 2011 (the TAA).

[4] In support of the application Ms Elle-Sarah Rossato, a senior Sars E official as contemplated in s 163 of the TAA, who deposed to the founding affidavit, stated that:

'The preservation order is sought to secure assets, which may be executed against in respect of existing indebtedness to SARS, but also in respect of indebtedness still to be established. All indications are that such indebtedness will be for a considerable amount, which I believe F will be in excess of the values of the assets made subject to this order.'

She added that Sars entertained the 'reasonable belief that Mr Van der Merwe uses the respondents, other persons and entities to hide his assets' and asserted that 'the appointment of a curator bonis will be required for the collection of the outstanding taxes'. G

[5] Despite relatively modest earnings from her modelling career — she declared taxable income of R20 023, R20 912, R24 995 and R45 336 for the 2009 – 2012 tax years — Lady Luck, it would seem, suddenly smiled on the applicant during 2013. According to Sars, it had H been made aware by the Financial Intelligence Centre that the Standard Bank of South Africa had received USD 15,3 million for her benefit on 16 May 2013. The remitter of those funds, which had been transferred from the Bank Med Sal in Lebanon, was identified as Muhamad Nazih Rawwas. Moreover, she acquired two motor vehicles during May and June of that year, namely an Audi R8 Spyder and a Range Rover Evoque, I collectively valued in excess of R2,5 million. Sars asserted that (a) the applicant was simply a conduit and had received the funds in question on

Ponnan JA (Wallis JA, Mbha JA, Fourie AJA and Mayat AJA concurring)

A behalf of and for the benefit of her father; and (b) the income declared by her could not sustain the acquisition of those vehicles.

[6] On 20 August 2013 Rogers J issued a provisional preservation order in terms of s 163(4)(d) of the TAA. But the learned judge, who dealt with the matter ex parte and in chambers, did not appoint the curator bonis B sought by Sars. In respect of the applicant, the order read:

'5.

A provisional order is made in respect of the second respondent (Candice van der Merwe) as follows:

(a)

Candice van der Merwe is interdicted from dealing with, disposing of, encumbering or removing from the Republic any of the following assets:

(i)

C Audi R8 Spyder (CA 481415; engine BUJ008480);

(ii)

Land Rover Evoque;

(iii)

any moneys standing to the credit of any bank accounts in her name or in respect of which she has signing powers to the extent that such moneys represent any residue of the sum of US$15,3 million (converted into the rand amount D of R142 901 673) received by her on or about 16 May 2013, such accounts to include (without derogating from the generality of the foregoing) any amounts held in any of the following bank accounts: FirstRand Bank account xxxx in the name of xxxx; Standard Bank third party administration account xxxx; and Standard Bank Marketlink E account xxxx;

(iv)

any moneys held on trust by Perold & Associates and/or Bill Tolken Hendrickse in the name of or for the benefit of Candice van der Merwe or in the name of any other person or entity on whose behalf Candice van der Merwe is accustomed to give instructions in respect of such F monies;

(v)

any other assets acquired by Candice van der Merwe from the proceeds of the said amount of R142 901 673.'

The order continued:

'(b)

This provisional preservation order is granted to preserve assets in respect of which there is prima facie evidence G indicating —

(i)

that the assets in question in truth belong to Gary van der Merwe and are thus realisable in respect of his alleged tax debts;

(ii)

alternatively, that they will be realisable to satisfy any claim which Gary van der Merwe may have against H Candice van der Merwe in respect of funds made available to her at his instance;

(iii)

alternatively, that Candice van der Merwe may, in terms of s 182 or s 183 of the Act, be held jointly and severally liable for the tax debts of Gary van der Merwe by virtue of her participation in the receipt and further handling of I the sum of R142 901 673 previously mentioned.'

But para 5(b) is, in truth, an explanatory note and ought not to have formed part of the order.

[7] After the grant of the order by Rogers J, the applicant alone chose to J anticipate the return day, with the result that Sars' application in relation

Ponnan JA (Wallis JA, Mbha JA, Fourie AJA and Mayat AJA concurring)

to her proceeded separately from the other respondents. In her answering A affidavit she explained her acquisition of the two vehicles and this large sum of money as follows:

'12.

When I was 15 I had met Ryan Hignett (Hignett). He books models to travel to the Seychelles (and possibly other destinations) B to be in attendance at such resorts. I was too young at that time to travel and work abroad on my own. When I was 19 years old he contacted me and asked me if I was interested in travelling to the Seychelles for this work. I replied in the affirmative. He then contacted Ice Models on my behalf for this purpose.

13.

In 2012 I was contracted th[r]ough Ice Models to travel to the C Seychelles to the Plantation Club on Mahé Island.

14.

The Plantation Club is a private resort in the Seychelles which is owned and frequented by some of the richest private individuals in the world. They include multi US dollar billionaires for whom money is no object. This type of resort is the playground of the super wealthy where they can relax in total privacy away from the D intrusions that normally accompany their lifestyles such as paparazzi and constant security threats due to their extreme wealth and status. Privacy and more importantly security is paramount to these persons. For this reason only people who have been vetted and security checked are allowed at the resort. It often poses a E security risk should it be public knowledge that a specific high profile individual is at a specific location. It is the norm for lavish parties and events to be held at the resort. Such parties and events will often feature celebrity entertainers or disc jockeys with international acclaim. Models from only the trusted agencies are routinely flown in from all over the world to lend a sense of glamour and exclusivity to these events and by definition the resort. F

15.

Models such as myself who are employed at the Plantation Club are prohibited from taking photographs or disclosing the identity of any persons who they meet at the resort. When we arrive we are picked up in a bus. Our passports are taken from us and only returned when we leave. If you are found taking a photograph, your contract is terminated and you are sent home. G

16.

On my first trip to the Seychelles from 13 October to 17 October 2012 I got on very well with the persons I met at the private resort. While I cannot be certain as to the reasons for this, I suspect that it included the following factors: I have a very healthy lifestyle and H I do not smoke at all or drink alcohol other than in...