Editorial

• Jurisdiction: South Africa
• Date: 01 April 2024
• Pages: v-vii
• Author: Blumberg SC Matthew
• Published date: 01 April 2024
• Published By: Siber Ink
• DOI: 10.10520/ejc-btclq_v15_n1_a1

v

© Juta and Company (Pty) Ltd

Editorial

MATTHEW BLUMBERG SC

The three articles in this edition analyse recent pronouncements of the

courts relating to (i) the piercing of the corporate veil (the fi rst article), and

(ii) understatement penalties under Part A of Chapter 16 of the Tax Admin-

istration Act 28 of 2011 (‘the TAA’) (the second and third articles engaging

with different facets of the understatement penalty regime).

* * *

The fi rst article, by Dr Albertus Marais, follows upon the SCA’s recent

judgment in The Butcher Shop and Grill CC v The Trustees for the time being of

the Bymyam Trust.1 In that matter, the appellant (‘Butcher Shop’), the lessee

of certain premises, had sought a remission of the rental payable to the

lessor (the respondents) in circumstances where vis maior (the disruptions

caused by the Covid pandemic) had interfered with the benefi cial use and

occupation of the premises by Butcher Shop’s sub-tenant, Apoldo.

Butcher Shop contended that it was entitled to claim a remission of

rental on the basis of the loss of benefi cial occupation suffered by Apoldo.

Its alternative contention, based on the fact that it and Apoldo had the

same sole shareholder (x), was that the lessee and sub-lessee (i e Butcher

Shop and Apoldo) were in effect shareholder x in corporate guise, and

therefore one business entity. On that basis, Butcher Shop is, or should

be, entitled to claim remission of rental because of its sub-tenant’s loss of

benefi cial occupation — or so the contention went.

This contention amounted to an attempt by x, as shareholder, to pierce

the corporate veil of Butcher Shop and Apoldo — which is known as ‘reverse

piercing’ (referring to piercing of the corporate veil at the instance of the

shareholder of the company concerned, as distinct from piercing at the

instance of a third-party outsider).

The SCA rejected both contentions.

In his article, Dr Marais analyses the reasoning of the SCA. The article

tracks the acceptance and development of the piercing doctrine in the

common law, and its more recent introduction into the Companies Act 71

of 2008 (in section 20(9) thereof).

The view is expressed that the SCA correctly identifi ed and applied the

legal principles relating to piercing of the corporate veil, which require

not only the presence of equitable considerations that favour piercing, but

more fundamentally — and as a threshold requirement — an abuse of the

separate corporate personality of the company or companies concerned.

1

(038/2022) [2023] ZASCA 57 (21 April 2023).