Krok and Another v Commissioner, South African Revenue Service

JurisdictionSouth Africa
Citation2015 (6) SA 317 (SCA)

Krok and Another v Commissioner, South African Revenue Service
2015 (6) SA 317 (SCA)

2015 (6) SA p317


Citation

2015 (6) SA 317 (SCA)

Case No

20230/2014
[2015] ZASCA 107

Court

Supreme Court of Appeal

Judge

Maya JA, Mhlantla JA, Wallis JA, Dambuza AJA and Meyer AJA

Heard

May 15, 2015

Judgment

August 20, 2015

Counsel

P Ginsburg SC (with G Goldman) for the first applicant.
AE Franklin SC
(with SW Burger) for the second appellant.
NGD Maritz SC
(with HGA Snyman SC) for the respondent.

Flynote : Sleutelwoorde B

Revenue — Double taxation agreement — Amendment of to provide for mutual assistance in tax recovery — Whether applicable to tax debts arising prior to such amendment becoming effective. C

Headnote : Kopnota

This case concerns an appeal against a preservation order granted by the court a quo against the first appellant (the taxpayer) pursuant to an application by the South African Revenue Service (Sars) for tax recovery on behalf of a foreign government, as contemplated in s 185 read with s 163 of the Tax D Administration Act 28 of 2011 (the Act). The application followed a request by the Australian Tax Office (the ATO) — made in terms of art 25A of the double taxation agreement (the DTA) between South Africa and Australia — for the conservancy of the taxpayer's locally situated assets pending collection of a tax debt.

Article 25A provides for mutual assistance in the collection of taxes and was E inserted by a Protocol amending the DTA with effect from 12 November 2008. In terms of art 13(2)(a)(ii) of the Protocol, with regard to Australian tax, the Protocol applies to 'income, profit or gains of any year of income beginning on or after 1 July in the calendar year next following the date on which the protocol enters into force'; and in terms of art 13(d) of the Protocol, it applies 'for the purposes of [art] 25A, from a date to be agreed F in an Exchange of Notes through the diplomatic channel', which date was 1 July 2010. The main issue before the Supreme Court of Appeal was the taxpayer's jurisdictional challenge to the preservation order, namely that since the taxes claimed here arose before the temporal limitation imposed by art 13(2)(a)(ii), they fell beyond the scope of the DTA and thus there was no basis for the invocation of the conservancy provisions of the Act. G

2015 (6) SA p318

A Held

Art 13 did not purport to form part of the DTA: its plain wording merely provided the dates from which the amendments to the DTA would come into effect. Article 2 (which dealt with taxes covered by the DTA) said nothing whatsoever about any time limitations. The new art 2.4 of the DTA provided that for the purposes of art 25 and the new art 25A, the taxes to which the B DTA applied were 'taxes of every kind and description imposed under the . . . tax laws [of Australia]'. Article 25A was concerned with proceedings for enforcement and had no bearing on liability to tax; the taxes to which it related need not be limited by reference to the date of their accrual. Therefore, when art 25A entered into force on 1 July 2010 in terms of art C 13(2)(d), it applied to a revenue claim, ie an amount owed in respect of taxes of every kind and description, to which art 13(2)(a)(ii) had no application. The taxpayer's jurisdictional challenge to the preservation order accordingly failed. In the result, the appeal was dismissed. (Paragraphs [33] – [41] and [46] at 332H – 336F and 337H.)

Cases Considered

Annotations D

Case law

Southern Africa

Adampol (Pty) Ltd v Administrator, Transvaal 1989 (3) SA 800 (A): referred to

Commissioner of Taxes, Federation of Rhodesia v McFarland 1965 (1) SA 470 (W): E referred to

Commissioner, South African Revenue Service v Krok and Another 2014 (3) SA 453 (GP) ([2014] 2 All SA 66): confirmed on appeal

Estate Kemp and Others v McDonald's Trustee 1915 AD 491: referred to

Gallo Africa Ltd and Others v Sting Music (Pty) Ltd and Others 2010 (6) SA 329 (SCA): referred to

Labuschagne v Labuschagne; Labuschagne v Minister van Justisie 1967 (2) SA 575 (A): referred to F

Lendalease Finance (Pty) Ltd v Corporacion De Mercadeo Agricola and Others 1976 (4) SA 464 (A): dictum at 489H – 490A applied

Marcard Stein & Co v Port Marine Contractors (Pty) Ltd and Others 1995 (3) SA 663 (A): referred to

Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) ([2012] 2 All SA 262; [2012] ZASCA 13): referred to G

R v Grainger 1958 (2) SA 443 (A): referred to

Swanepoel v Johannesburg City Council; President Insurance Co Ltd v Kruger 1994 (3) SA 789 (A): dictum at 793I – J applied.

England H

Ben Nevis Holdings Ltd and Metlika Trading Ltd v Commissioners for HM Revenue & Customs [2013] EWCA Civ 578: applied

Fothergill v Monarch Airlines Ltd [1981] AC 251 ([1980] 2 All ER 696 (HL)): referred to

Government of India, Ministry of Finance (Revenue Division) v Taylor and Another I [1955] AC 491 ([1955] 1 All ER 292 (HL)): dictum at 299 applied

Hardwick Game Farm v Suffolk Agricultural and Poultry Producers Association Ltd (William Lillico & Son Ltd and Another, Third Parties; Henry Kendall & Sons and Another, Fourth Parties) [1966] 1 All ER 309 (CA): referred to

R v St Mary, Whitechapel (Inhabitants) 116 ER 811 ((1848) 12 QB 120): J dictum at 814 applied

2015 (6) SA p319

Re Delhi Electric Supply & Traction Co Ltd [1953] 2 All ER 1452 (CA): A referred to.

Case Information

P Ginsburg SC (with G Goldman) for the first appellant.

AE Franklin SC (with SW Burger) for the second appellant.

NGD Maritz SC (with HGA Snyman SC) for the respondent. B

An appeal from the Gauteng Division of the High Court, Pretoria (Fabricius J). [*]

Order

The appeal is dismissed with costs, including the costs of two counsel. C

Judgment

Maya JA (Mhlantla JA, Wallis JA, Dambuza AJA and Meyer AJA concurring):

[1] This appeal concerns the correctness of the confirmation of a preservation order by the Gauteng Division of the High Court, Pretoria D (Fabricius J). The order was obtained on an ex parte basis by the respondent, the South African Revenue Service (Sars), against the first appellant (Mr Krok) to secure assets for purposes of satisfying an alleged tax debt and for the appointment of a curator bonis in terms of ss 163 and 185 of the Tax Administration Act 28 of 2011 (the Act). E The determination of this question depends on the temporal scope of the provisions of a double taxation agreement between the Republic of South Africa and the government of Australia — the Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income of 1 July 1999 (the DTA), subsequently amended by a protocol signed on 31 March 2008 (the Protocol) — which F made provision for mutual assistance in the collection of taxes. The appeal serves before this court with the leave of the court below. [1]

[2] The litigation arose from requests made to Sars, in terms of the DTA, by the Australian Tax Office (the ATO) which represents the Commissioner of Taxation of the Commonwealth of Australia (the Australian Commissioner), in January 2012 and again in February 2013. [2] The ATO G

2015 (6) SA p320

Maya JA (Mhlantla JA, Wallis JA, Dambuza AJA and Meyer AJA concurring)

A sought assistance with the collection of income taxes allegedly due by Mr Krok to the Australian Commissioner, in the sum of Australian $25 361 875,79 plus interest, [3] for the period 30 June 2004 to 30 June 2009 (the income years). The ATO thus sought the conservancy of Mr Krok's assets situated in South Africa pending the collection of the B tax debt. The request was accompanied by a formal certificate, as envisaged in ss 185(2) and (3)(a) and (b) of the Act. These provisions deem the allegations contained in the certificate conclusive proof of the existence of the alleged liability and prima facie proof of the allegations it contains: here that Mr Krok's South African assets were at risk of C dissipation. [4]

[3] The facts which led to the request may be gleaned from two documents which were attached to Sars' founding affidavit. One is a document entitled 'Submission on Objections to the Assessments' dated 5 April 2012 (the submissions document). It was lodged with the D Australian Commissioner on Mr Krok's behalf in response to notices of assessment of his taxable income and liability to pay a penalty in respect of the income years and the ATO's reasons for its decision. (The answering affidavit filed on Mr Krok's behalf, which was deposed to by his attorney of record, expressly incorporated the contents of this document.) The other document is the ATO's 'Reasons for Decision' E dated 7 December 2011, which contains its analysis of the facts, its interpretation of the relevant law as applied to those facts, the issues it identified and its decision on those issues (the reasons document).

[4] The assets in issue originated from the Abraham Krok Trust. This trust was formed out of donations made to its trustees in 1973 by F Ms Sarah Krok for the benefit of the six children of her son, Mr Abraham Krok, of whom Mr Krok was one. In 1994 Mr Krok's father created new separate trusts to which the assets of the Abraham Krok Trust were

2015 (6) SA p321

Maya JA (Mhlantla JA, Wallis JA, Dambuza AJA and Meyer AJA concurring)

transferred for the benefit of each of these children. One of the new trusts A was the Mark Krok 1994 Trust (the trust) in which Mr Krok accumulated considerable capital assets, valued at R71 713 807 as at 28 February 2003. These assets at that stage mainly comprised shares in various listed and unlisted South African companies and cash investments. [5]

[5] The saga began with Mr Krok's emigration to Australia in B April 2002. According to the submissions document, prior to this event he sought...

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3 practice notes
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    ...(CC) (2005 (1) SACR 111; 2004 (10) BCLR 1009;[2004] ZACC 5): referred toKrok and Another v Commissioner, South African Revenue Service 2015 (6) SA317 (SCA) ([2015] ZASCA 107): referred toKruger v President of Republic of South Africa and Others 2009 (1) SA417 (CC) (2009 (3) BCLR 268; [2008]......
  • Gihwala and Others v Grancy Property Ltd and Others
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    • Invalid date
    ...Minerals Ltd 1970 (1) SA 674 (C): compared and dictum at 677H applied Krok and Another v Commissioner, South African Revenue Service 2015 (6) SA 317 (SCA) ([2015] ZASCA 107): dictum in para [40] L & P Plant Hire BK en Andere v Bosch en Andere 2002 (2) SA 662 (SCA) C ([2001] ZASCA 147): dict......
  • Does the Bill of Rights Apply Extraterritorially for Tax Administration Purposes?
    • South Africa
    • Juta Stellenbosch Law Review No. , June 2020
    • 1 June 2020
    ...da Cu nha “Extraterritorial En forcement of Tax Laws” (undated) TTN net/pdfs/Essays/Rita_Correia_Ess aypdf > (accessed 23-03-2020) 41 2015 6 SA 317 (SCA) For the South Af rican law per taining to th e enforcement of foreig n civil judgmen ts, see Government of th e Republic of Zim babwe v F......
2 cases
  • Earthlife Africa and Another v Minister of Energy and Others
    • South Africa
    • Invalid date
    ...(CC) (2005 (1) SACR 111; 2004 (10) BCLR 1009;[2004] ZACC 5): referred toKrok and Another v Commissioner, South African Revenue Service 2015 (6) SA317 (SCA) ([2015] ZASCA 107): referred toKruger v President of Republic of South Africa and Others 2009 (1) SA417 (CC) (2009 (3) BCLR 268; [2008]......
  • Gihwala and Others v Grancy Property Ltd and Others
    • South Africa
    • Invalid date
    ...Minerals Ltd 1970 (1) SA 674 (C): compared and dictum at 677H applied Krok and Another v Commissioner, South African Revenue Service 2015 (6) SA 317 (SCA) ([2015] ZASCA 107): dictum in para [40] L & P Plant Hire BK en Andere v Bosch en Andere 2002 (2) SA 662 (SCA) C ([2001] ZASCA 147): dict......
1 books & journal articles
  • Does the Bill of Rights Apply Extraterritorially for Tax Administration Purposes?
    • South Africa
    • Juta Stellenbosch Law Review No. , June 2020
    • 1 June 2020
    ...da Cu nha “Extraterritorial En forcement of Tax Laws” (undated) TTN net/pdfs/Essays/Rita_Correia_Ess aypdf > (accessed 23-03-2020) 41 2015 6 SA 317 (SCA) For the South Af rican law per taining to th e enforcement of foreig n civil judgmen ts, see Government of th e Republic of Zim babwe v F......

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