Reed v Minister of Finance and Others (30832/2015) [2017] ZAGPPHC 916; 81 SATC 383 (2 June 2017)

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

NOT REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

REVISED.

2/6/2017

CASE NO. 30832/2015

In the matter between:

HILTON REED Applicant

and

THE MINISTER OF FINANCE First

Respondent

THE SOUTH AFRICAN REVENUE SERVICE Second

Respondent

THE COMMISSIONER FOR THE SOUTH

AFRICAN REVENUE SERVICE Third

Respondent

JUDGMENT

P F LOUW, AJ

[1] Mr Reed, a taxpayer, applied for relief from SARS in terms of the voluntary disclosure program that had been introduced by sections 225 to 233 of the Tax Administration Act of 2011. To qualify for the relief Mr Reed's disclosure had to be voluntary. SARS investigated the facts surrounding the disclosure and determined that it was not voluntary. Mr Reed took this decision on review on the ground that it is irrational. He focussed on the merits of the decision in his founding papers. In his heads of argument for Mr Reed, Mr Rossouw SC added another ground for review namely that the process that SARS followed in investigating the matter was flawed because the audi alteram partem principle was not applied. Counsel for SARS (led by Ms Rajab-Budlender) objected to the audi argument being included in the issues for decision because it was a late addition to the issues that had not been fleshed out in the affidavits. I upheld SARS' objection in my judgment and determined that the procedural or audi ground of review was not available to Mr Reed. I also found against him on his merits challenge and ultimately dismissed his application with costs.

[2] Mr Reed now seeks leave to appeal on 25 overlapping grounds. During argument Mr Rossouw reduced the grounds to three main considerations.

The first is that as a matter of procedural principle a party to application proceedings is at large to make any argument that can be based on the facts contained in the affidavits and an applicant is particularly not limited by the arguments indicated in the founding affidavit. Mr Rossouw argued on the facts on this point that the audi argument can be distilled from the founding affidavit and could thus be raised. The second consideration is the principle that if an error is indicated in an administrative process that lead to an administrative decision, then the decision must be set aside and sent back to the decision maker for reconsideration, no matter how inconsequential the error may be and notwithstanding that reconsideration will probably deliver the same result. Mr Rossouw argued on the facts that the decision in issue ought consequently to be set aside and sent back to the functionary. The third consideration is that there are reasonable prospects that another court may reach a different conclusion from my conclusion on the merits. Mr Rossouw argued that my interpretation of the relevant legislation is flawed.

[3] Before dealing with the three considerations in turn I should say something about the use of the term "merits" to describe a part of the case. Whilst review proceedings are normally aimed at the processes and procedures of administrative decision making, the constitutional and substantive cogency or legality of the exercise of discretions or the making of decisions are equally considered in review proceedings. This is what I mean with "merits". The procedural enquiry concerns the question: How was the decision made? The merits enquiry concerns the question: Is the decision a properly made decision? "Merits" in this sense still deals with the administrative process and must not be confused with the merits of a judicial decision that is subject to an appeal. The distinction between reviews and appeals or procedures of decision-making and the merits of a decision made, is complicated where the decision is dependent upon the finding of a fact. The present is an example of the complication: SARS had to determine, as a matter of fact, whether the disclosure in issue was voluntary - this has nothing to do with the exercise of a discretion or any other administrative act that requires judicial deference. If this were an administrative decision then it would be formally reviewable but it would stand judicial scrutiny if the process was good even though the decision as such is

open to doubt. Given the established divide in our law between reviews and appeal, judicial acceptance that courts may review the

factual findings of administrators was slow in coming. Cloete JA introduced it in Pepkor Retirement Fund v Financial Services Board 2003 6 SA 38 (SCA) at paragraph [47] and explained its application as follows in paragraph [48]:

"Recognition of material mistake of fact as a potential ground of review obviously has its dangers. It should not be permitted to be misused in such a way as to blur, far less eliminate, the fundamental distinction in our law between two distinct forms of relief: appeal and review. For example, where both the power to determine what facts are relevant to the making of a decision, and the power to determine whether or not they exist, has been entrusted to a particular functionary (be it a person or a body of persons), it would not be possible to review and set aside its decision merely because the reviewing Court considers that the

functionary was mistaken either in its assessment of what facts were relevant, or in concluding that the facts exist. If they were, there would be no point in preserving the time-honoured and socially necessary separate and distinct forms of relief which the remedies of appeal and review provide. Of course, these limitations upon a reviewing Court's power do not extend to what have come to be known as jurisdictional facts and, in my view, it will continue to be both necessary and desirable to maintain that particular category of fact."

[3] The Pepkor approach was retained in the era after the advent of the Promotion of Administrative Justice Act of 2000 as appears from the judgment of Farlam JA in Chairpersons' Association v Minister of Arts and Culture 2007 5 SA 236 (SCA) paragraph [48]. (The cases referred to in footnote 6 of my judgment followed on these decisions.)

[4] The underlying problem in this case is that Ms du Plooy had to determine a fact namely whether the disclosure was voluntary or not. Her determination of the fact would ordinarily be immune from a review unless it was a jurisdictional fact. The problem is compounded by the absence of any prescribed procedures that she had to follow in determining the said fact. She did not determine a dispute in accusatorial proceedings but had inquisitorially to find a fact.

[5] Against this background I now return to the first point identified above. Two principles of motion court practice must be distinguished.

The first is the general proposition that the issues have to appear from the founding papers because the affidavits serve the role both of pleadings and evidence. See for example MEC for Health Gauteng v 3P Consulting (Pty) Ltd 2012 2 SA 542 (SCA) at paragraph [27] with reference to Swissborough Diamond Mines (Pty) Ltd v The Government of the Republic of South Africa 1989 2 SA 279 (T) at 323 F to 324 C. The second is the general proposition that a litigant is free to make any argument on the evidence even if

the argument does not appear from the founding papers. This point was made in Van Rensburg v Van Rensburg 1963 1 SA 505 (A). Wallis JA summarised the second point as follows in Minister of Justice and Constitutional Development v SA Litigation Centre 2016 3 SA 317 (SCA) at paragraph [24]:

"But there is another consideration. It is that if a point of law emerges from the undisputed facts before the Court it is undesirable that the case be decided without considering that point of law. The reason is that it may lead to the case being decided on the basis of a legal error on the part of one of the parties in failing to identify and raise the point at an appropriate earlier stage. But the Court must be satisfied that the point truly emerges from the papers, that the facts relevant to the legal point have been fully canvassed and that no prejudice will be occasioned to the other parties by permitting the point to be raised and argued."

[6] The audi point raised in argument and not in the founding papers is not a legal argument but a fresh ground of review. It sought to introduce a further issue that required further evidence and would have amounted to an amendment of the pleadings component of the founding and supplementary affidavits if allowed. I found that it would be unfair and unjust to SARS to allow the case to migrate there and I see no reasonable prospect that another court may come to a different conclusion. That counsel's argument does not trump the case made out in the affidavit of the litigant that he or she represent appears pointedly from the judgment of Zondo J in Links v Department of Health, Northern Province 2016 4 SA 414 (CC) where he refused to entertain a clever argument on statutory interpretation that had not been foreshadowed in the litigant's affidavit:

''Therefore, to the extent that counsel for the respondent may have sought to rely upon that proviso in his written submissions, the reliance was misplaced. This is so because that was not the case that the respondent had advanced in the affidavit. The respondent's case as set out in those affidavits was simply that the applicant's cause of action arose on 26 June 2006 and the applicant had knowledge of all the relevant facts on that day."

[7] This finding brings an end not only to the first point but also to the second because in the absence of the audi point the remarks that I made obiter about immaterial irregularities are of no consequence. Given the centrality of this point in Mr Rossouw's argument I should nevertheless note my views on it. Mr Rossouw's argument is based on paragraph [28] of the judgment of Froneman J in Allpay Consolidated Investment Holdings (Pty) Ltd v Chief Executive Officer South African Social Security Agency 2014 1 SA 604 (CC) where he held that a determination that an administrative act is not in compliance with a statutory provision requires that the act must be declared constitutionally invalid. But, and this is the important point, the court must then determine what just and equitable remedy to apply. If the facts are such that it can be confident ly predicted that the re-running of a flawed process will provide the same result, then an order to re-run would be inequitable and should thus not be made. See also paragraph [29] of the judgment referring to Millenium Waste Management (Pty) Ltd v Chairperson Tender Board: Limpopo Province 2008 2 SA 481 (SCA) paragraphs [28) to [32].

[8] The Allpay rule is nothing new, Froneman J had prescribed the same methodology in Bengwenyama Minerals (Pty) Ltd v Genorah Resources (Pty) Ltd 20114 SA 113 (CC) to which I referred in footnote 14 of my judgment.

[9] In any event, the Allpay rule does not apply in the present matter because there has not been a finding of a flaw in a prescribed

statutory process. Assuming that Allpay also applies to the case of an audi procedural error (which is not clear to me) it is nevertheless irrelevant to this matter because there has not been a finding that the process followed by Ms du Plooy was flawed, in breach of the audi principle or unconstitutional in any manner of speaking It is thus not a case where it can be argued that there is a flaw but the flaw is immaterial. No flaw has been found to exist and Allpay does thus not apply.

[10] I have carefully considered Mr Rossouw's ex visceribus acta argument on the proper interpretation of the legislation in question which forms the substratum of the merits issue. To recap: Ms du Plooy can only be blamed for irrationality if she erred in her interpretation of the legislation in question. It was thus necessary to consider the key provisions of the voluntary disclosure program to set a yardstick against which Ms du Plooy's decision can be measured. I have reconsidered my interpretation of the provisions in issue and do not believe that there are reasonable prospects that another court may reach different interpretations. One of the pivotal issues is whether the term 'investigation" connotes only criminal investigations or also other investigations. Ms Rajab-Budlender presented an analysis of the Tax Administration Act and six provisions not touched on in my judgment that indicate that the "investigation" contemplated under section 226 includes non-criminal investigations. She referred me to sections 31, 32, 69(4), 70(7), 71 and 170 in this regard. In my view there is no reasonable prospect that another may u5 8

[12] In the premises Mr Reed's application for leave to appeal is dismissed with costs, including the costs consequent upon the

employment of two counsel.

________________

P.F. LOUW, AJ

JUDGE OF THE HIGH COURT

22 May 2017

APPEARANCES:

FOR APPLICANT: ADV AB ROSSOUW SC

CGVO SEVENSTER

Instructed by:

CJ Willemse, Muller & Babinsky Attorneys

Pretoria

FOR SECOND RESPONDENT: ADV N RAJAB-BUDLENDER

J BERGER

Mashiane, Moodley&Monana Inc, Sandton,

Malan Mohale Attorney, Pretoria