Commissioner, South African Revenue Service v Hawker Aviation Services Partnership and Others

• Jurisdiction: South Africa
• Judgment Date: 26 November 2004
• Citation: 2005 (5) SA 283 (T)

Commissioner, South African Revenue Service v Hawker Aviation Services Partnership and Others
2005 (5) SA 283 (T)

2005 (5) SA p283

Citation	2005 (5) SA 283 (T)
Case No	34593/03 and 34724/03
Court	Transvaal Provincial Division
Judge	Patel J
Heard	December 9, 2003; December 10, 2003; December 11, 2003; June 14, 2004; June 15, 2004
Judgment	November 26, 2004
Counsel	J L van der Merwe SC (with R Ferguson, H G A Snyman and N L Tshombe) for the applicant. (J J Gauntlett SC for part only.); G J Marcus SC and M du P van der Nest SC (with L N Harris, M Chaskalson and A D Stein) for the respondents.

Flynote : Sleutelwoorde G

Revenue — Value-added tax — Additional tax — Value-Added Tax Act 89 of 1991, H s 40(2)(a) — Constitutionality of — 'Judgment' taken administratively by the filing by Commissioner with clerk of court a certificate of tax payable unconstitutional in that it amounts to someone other than court of law exercising judicial function. I

Headnote : Kopnota

During February 1992 income tax assessments were raised against one K, in the amount of R900 million. However, the tax debt in the present matter had its origin in a revised assessment against the vendor partnership, based on the apportionment rules contained in the Value-Added Tax Act 89 of 1991 (VAT Act), s 17(1). In two applications, the applicant had sought, on an J

2005 (5) SA p284

urgent basis, to sequestrate a partnership and to liquidate one of three partners in A that partnership. The partnership had claimed a 100% input tax credit on the acquisition cost of an aircraft, on the basis that it carried on the enterprise of an air charterer. The applicant found that, according to the aircraft's logbooks, it had for 50% of the time been placed at the disposal of K, a major stakeholder in two (later three) of the partners in the partnership, for no consideration. Presumably apportionment was based on the reasoning that the vendor B partnership was not conducting an enterprise for 50% of the time. The applicant had, in terms of s 40(2)(a) of the VAT Act, obtained a judgment based on its tax assessment.

Held, that there were no grounds for urgency because the applicant had, without explanation, procrastinated for three months before taking internal administrative steps to complete its assessments and protect its rights in respect of an alleged imminent disposal of C the aircraft (in paras [21] and [22] at 291I - 292A and 292F), and because that aircraft was properly hangared and not deteriorating in any material way. (Paragraph [23] at 292G - H.)

Held, further, that in seeking to sequestrate the partnership and one partner, the applicant had the impermissible ulterior purpose of seeking to execute against an asset of one taxpayer (the vendor partnership) in respect of the tax debt of other taxpayers D (K and a company in which K held an interest). (Paragraph [25] at 293C - D and 294B - C.)

Held, further, that, in the present matter, because the purpose and subject-matter was substantially similar to related litigation in which a court had already pronounced judgment unfavourable to the applicant, the applicant was abusing the courts by mounting a collateral action. (Paragraph [47] at 302E - F.) E

Held, further, that the 'judgment' taken administratively (pursuant to the VAT Act s 40(2)(a) by the filing by the applicant with the clerk of the court a certificate of tax payable) was unconstitutional in that it amounted to someone other than a court of law exercising a judicial function. In addition, a notice of assessment had not first been given to the respondents. To compound the F applicant's embarrassment on this point, the assessment and the s 40(2)(a) certificate were in different amounts (the applicant did not explain this difference), the certificate purported to levy additional tax at 300% instead of the maximum 200% authorised by s 60(1) of the VAT Act and a promised revised assessment had not first been issued, thereby frustrating the vendor partnership's legitimate expectation that this would first G happen. The imposition of additional tax and penalties, and consequently the judgment based thereon, was unlawful, invalid and unconstitutional. (Paragraphs [61] and [67] at 307G and 309H.)

Held, further, that the Court considered, but did not decide, the argument that additional tax in terms of ss 60 and 40 read with s 36 of the VAT Act was unconstitutional. (Paragraph [68] at 309H - I.) H

Held, further, that the application for sequestration was fatally defective, in that all the partners (save for an en commandite partner) had not been joined. (Paragraphs [70] and [73] at 310E - F and 311E.)

The Court further exercised its 'residual discretion' under s 345 of the Companies Act 61 of 1973, not to sequestrate or liquidate, because the partnership, in good faith, had disputed the debt by lodging objection and appeal under the VAT Act. (Paragraph [74] at 311I - 312B.) I

Held, accordingly, that both applications fell to be dismissed.

Held, further, that as both applications were brought on an urgent basis without due regard to the Court's process, the matter warranted an order of attorney and own client costs, including the costs consequent upon employment of four counsel. (Paragraphs [77], [78] and [79] at 313C and 313E - F.) J

2005 (5) SA p285

Cases Considered

Annotations A

Reported cases

Administrator, Transvaal, and Others v Traub and Others 1989 (4) SA 731 (A): referred to

Brummer v Gorfil Brothers Investments (Pty) Ltd en Andere 1999 (3) SA 389 (SCA): referred to B

De Beer NO v North-Central Local Council and South-Central Local Council and Others (Umhlatuzana Civic Association Intervening) 2002 (1) SA 429 (CC) (2001 (11) BCLR 1109): dictum in para [11] applied

Daund v President of the RSA [2000] 3 All SA 37 (T): referred to

F & C Building Construction Co (Pty) Ltd v Macsheil Investments (Pty) Ltd 1959 (3) SA 841 (N): referred to C

Fisheries Development Corporation of SA Ltd v Jorgensen and Another; Fisheries Development Corporation of SA Ltd v A W J Investments (Pty) Ltd and Others 1980 (4) SA 156 (W): referred to

Highstead Entertainment (Pty) Ltd t/a 'The Club' v Minister of Law and Order and Others 1994 (1) SA 387 (C): referred to

Intermares Corporation (Pty) Ltd v Seinsch 1971 (2) SA 570 (SWA): referred to D

Kalil v Decotex (Pty) Ltd and Another 1988 (1) SA 943 (A): referred to

Kloot v Interplan Inc and Another 1994 (3) SA 236 (SE): referred to

Lindsay Keller & Partners v AA Mutual Insurance Association Ltd and Another 1988 (2) SA 519 (W): referred to E

Lourenco and Others v Ferela (Pty) Ltd and Others (No 1) 1998 (3) SA 281 (T): referred to

Metcash Trading Ltd v Commissioner, South African Revenue Service, and Another 2001 (1) SA 1109 (CC) (2001 (1) BCLR 1): referred to

Metlika Trading Ltd and Others v Commissioner, South African Revenue Service 2004 JTLR 73 (SCA): referred to

Millward v Glaser 1950 (3) SA 547 (W): referred to F

P de V Reklame (Edms) Bpk v Gesamentlike Onderneming van SA Numismatiese Buro (Edms) Bpk en Vitaware (Edms) Bpk 1985 (4) SA 876 (C): referred to

President of the Republic of South Africa and Others v South African Rugby Football Union and Others 2000 (1) SA 1 (CC): referred to G

Rhino Hotel & Resort (Pty) Ltd v Forbes and Others 2000 (1) SA 1180 (W): referred to

Singh v Commissioner, South African Revenue Service 2002 (3) SA 94 (D): referred to

Singh v Commissioner, South African Revenue Service 2003 (4) SA 520 (SCA): dictum in paras [18], [20] - [22] applied H

South African Veterinary Council and Another v Szymanski 2003 (4) SA 42 (SCA): referred to

Swissborough Diamond Mines (Pty) Ltd and Others v Government of the Republic of South Africa and Others 1999 (2) SA 279 (T): referred to

Terblanche and Others v Offshore Design Co (Pty) Ltd 2001 (1) SA 824 (C): referred to I

Tjospomie Boerdery (Pty) Ltd v Drakensberg Botteliers (Pty) Ltd and Another 1989 (4) SA 31 (T): referred to.

Unreported cases

Commissioner, South African Revenue Service v Ben Nevis Holdings Ltd and Others (TPD case No 24869/02, 1 September 2003): referred to J

2005 (5) SA p286

Meiring and Others v Reichenberg and Others (TPD case No 11045/98, 18 May 1998): referred to. A

Foreign cases

Arthur J S Hall Co (a firm) v Simons; Barratt v Ansell and Others (trading as Woolf Seddon (a firm)); Harris v Scholfield Roberts & Hill (a firm) and Another [2000] 3 All ER 673 (HL): applied B

Ashmore v British Coal Corporation [1990] 2 QB 338: referred to

Council of Civil Service Unions and Others v Minister for the Civil Service [1984] 3 All ER 935 (HL): referred to

FAI Insurances v Goldleaf Interior Decorators (Pty) Ltd (No 2) [1988] 14 ACLR (CA: NSW) 287: referred to

Garland v Consumers' Gas Co [2004] 1 SCR 629 (200 SCC 25): referred to C

Han and Another v Commissioners of Customs and Excise [2001] 4 All ER 687 (CA): followed

Hunter v Chief Constable of West Midlands and Another [1982] AC 529 (HL) ([1981] All ER 727): applied

R v Cloarec 28 CRR 75: referred to D

R v Secretary of State for Transport, Ex parte Greater London Council [1985] 3 All ER 300 (QB): referred to

Reichel v McGrath (1889) 14 App Cas 665 (HL): referred to

R v Secretary of State of Home Department, Ex parte Khan [1985] 1 All ER 40 (CA): referred to

Secretary of State for Trade and Industry v Bairstow; Re Queen's Moat House plc [2003] 3 WLR 841([2003] E EWCA Civ 321; [2004] Ch 1; [2004] 4 All ER 325; [2003] 1 BCLC 696): dictum in para 38 applied.

Trimm v Durham Regional Police Force 32 CRR 244: referred to

Wigglesworth v R 32 CRR 219: referred to.

Statutes Considered

Statutes F

The Constitution of the Republic of South Africa Act 108 of 1996, s 174(7): see Juta's Statutes of South Africa 2004/5 vol 5 at 1-161

The Insolvency Act 24 of 1936...