THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case No: 211/2021

In the matter between:

THE COMMISSIONER FOR THE SOUTH
AFRICAN REVENUE SERVICE
APPELLANT

and

CANDICE-JEAN VAN DER MERWE
RESPONDENT

Neutral Citation: Commissioner for the South African Revenue Service v
Candice-Jean van der Merwe (211/2021) [2022] ZASCA
106 (30 June 2022)
Coram:
VAN DER MERWE, MOLEMELA and PLASKET JJA, MUSI
and SALIE-HLOPHE AJJA
Heard:
17 May 2022
Delivered:
30 June 2022
Summary:
Income tax – Application for default judgment in terms of rule
56 of the rules prescribed by the Tax Administration Act 28 of 2011 –
application failed to meet jurisdictional requirements even on unopposed basis.

______________________________________________________________

ORDER
______________________________________________________________

On appeal from: Western Cape Division of the High Court, Cape Town (Ndita,
Cloete and Mantame JJ, sitting as court of appeal):
The appeal succeeds with costs, including the costs occasioned by the
employment of two counsel.
The order of the high court is set aside and replaced with the following:
‘The appeal is dismissed with costs, including the costs of two counsel.’

______________________________________________________________

JUDGMENT
______________________________________________________________

Molemela JA (Van der Merwe and Plasket JJA and Musi and Salie-Hlophe
AJJA concurring):

Introduction
[1] This is an appeal against the order and judgment of the majority of the
full court of the Western Cape Division of the High Court, Cape Town, per
Mantame J with Ndita J concurring and Cloete J dissenting (the high court),
delivered on 30 October 2020, in terms of which it upheld an appeal against a
judgment of the Tax Court, Cape Town, per Rogers J (the tax court). The
respondent, Ms Candice-Jean van der Merwe (the taxpayer), had approached
the tax court under rule 56(2) of the tax court rules seeking default judgment
against the appellant, the Commissioner for the South African Revenue Service
(SARS), based on SARS’s alleged failure to file a statement disclosing its
grounds for dismissing her objection to the additional income tax assessment
raised by SARS in February 2016 concerning the 2014 year of assessment. In
addition, the taxpayer sought an order reducing this assessment to nil and an
order compelling SARS to repay the amount the taxpayer had paid on the
assessment.

[2] A preliminary procedural question raised before the tax court was
whether the opposing papers were timeously filed and, if not, whether the late
filing should be condoned. Further procedural questions related to whether the
taxpayer should be permitted to rely on two supplementary replying affidavits
and whether SARS should be permitted to rely on an affidavit in response to a
matter contained in the replying and supplementary replying papers.

[3] The tax court heard argument on the preliminary matters and stated that
it would give its ruling on them as part of its judgment in due course. The tax
court subsequently decided to allow the affidavits. It dismissed the application
for default judgment on the basis that the jurisdictional requirements for an
application in terms of rule 56(2) of the Tax Court Rules published in terms of s
103 of the Tax Administration Act 28 of 2011 (TAA)1 (the rules) were not
satisfied, insofar as the taxpayer’s rule 56 application was not preceded by a
valid objection and valid notice of appeal. It also ordered the taxpayer to pay
the costs of the application on a punitive scale.

[4] The taxpayer approached the high court on appeal. The appeal was
successful; the high court finding that its judgment was limited to the
interlocutory applications, but dispositive of the appeal. In allowing that appeal,
the high court found that the appeal ought to succeed, but omitted to replace
the order of the tax court. I will return to this aspect.

[5] Aggrieved by the high court’s decision, SARS approached this Court,
which granted it special leave to appeal. The issue before us is whether the
high court had correctly upheld the taxpayer’s appeal. SARS seeks an order
that the order granted by the high court be replaced with an order that the
taxpayer’s appeal from the tax court be dismissed with costs, including the
costs of two counsel.

1 Section 103 of the TAA empowers the Minister of Finance to, after consultation with the
Minister of Justice and Constitutional Development, prescribe the rules governing the
procedures to lodge an objection and appeal against an assessment or decision under Chapter
9 of the TAA. The rules envisaged in s 103 of the TAA were promulgated in GN 550, GG 37819,
11 July 2014.

[6] A preliminary point raised before the hearing of the appeal in this Court
was an application in terms of which the taxpayer’s father, Mr Gary Walter van
der Merwe sought this Court’s leave to allow him to represent the taxpayer
during the appeal proceedings. That application was considered on the papers
and dismissed prior to the hearing of the appeal. The reasons for that order
follow later in this judgment.

The facts
[7] On 30 August 2013, SARS obtained an ex parte preservation order
against the taxpayer’s father, the taxpayer herself and a number of associated
entities. The order was eventually confirmed and a curator bonis appointed.
The preservation order was to apply pending the outcome of an action to be
instituted by SARS to declare that the respondents therein were liable for the
various tax debts which SARS assessed. That action was instituted, the
taxpayer being one of the defendants. She defended the action and delivered
a counterclaim.

[8] The taxpayer’s tax return for the 2014 tax year reflected taxable income
of R365 919. She also declared a receipt of R142 901 673 as a ‘gift from her
companion abroad'. In January 2015, SARS raised an original assessment in
accordance with this return. The ‘donation’ was not subjected to tax. After
rebates, tax credits and adjustments, the net amount payable was R13 807,
which the taxpayer paid.

[9] In February 2015, SARS started a process of interrogating the tax return
and the foreign ‘donation’. Settlement was also explored. In the settlement
communications the taxpayer was represented first by DP&A Incorporated
Attorneys (DPA) and then by Werksmans Attorneys (Werksmans). In a letter
dated 21 July 2015, SARS informed DPA that it could not consider an offer that
did not comply with the settlement provisions of Part F of Chapter 9 of the TAA
(ss 142-150).

[10] On 7 December 2015, MacRobert Attorneys (MR), which was by this
time representing SARS, wrote to Werksmans (who had taken over from DPA),

enclosing a draft letter of audit findings. The view expressed in the draft findings
was that the amount of some R142.9 million was not a gratuitous donation and
was subject to income tax.

[11] On 18 December 2015, Werksmans sent a settlement proposal to MR,
the essence of which was that: (a) of the R142.9 million, a sum of about R110.3
million be treated as taxable income; (b) the balance be treated as a foreign
donation not subject to tax; (c) SARS not raise interest or penalties on the late
payment of tax on the sum of R110.3 million; and (d) the funds which the
taxpayer’s foreign benefactor would pay to enable her to meet the tax on the
sum of R110.3 million be recognised as a foreign donation not subject to tax.
After a few inconsequential adjustments, a final version of this letter, dated 21
January 2016, was sent by Werksmans to MR.

[12] On 18 February 2016, MR wrote to Werksmans stating that SARS had
approved the settlement proposal. The amount payable was R44 175 675. MR
confirmed that no penalties or interest would be raised and that the money
received by the taxpayer from her benefactor to enable her to meet the tax
obligation would not in itself be subject to any tax. It was pointed out that once
MR had received a letter from Werksmans confirming that they held the amount
of R44 175 675 in trust and had irrevocable instructions to pay it to SARS in
terms of the agreed assessment, SARS would apply for the discharge of the
preservation order as against the taxpayer and would withdraw its action
against her, she simultaneously withdrawing her counterclaim. The penultimate
paragraphs of the letter read thus:
‘10.
We do draw to your attention that in terms of section 95(3) of the Tax
Administration Act where SARS and a taxpayer [have] agreed in writing for an agreed
assessment to be issued, such an assessment will not be subject to objection and
appeal. Therefore the agreed assessment in terms of the 2013 and 2014 [tax] years
will be final and conclusive. We propose that the representations on behalf of the
taxpayer referred to above [ie those contained in Werksmans’ letter of 21 January
2016], this letter and a letter by you in reply to this letter confirming that you have
instructions on behalf [of your client] to agree to this, will serve as the written
agreement for purposes of the said section.

11.
Kindly confirm that this letter correctly records the settlement of the issues set
out above, and if so, provide us with the written confirmation referred to above.’

[13] The additional assessment (form ITA34) was dated 17 February 2016
and accorded with the settlement communications summarised above. Its
‘document number’ was ‘23’. On the same day, Werksmans emailed MR
attaching the taxpayer’s ‘Statement of Account: Assessed Tax’ (form ITSA),
asking, ‘[i]s this the assessment?’. The statement of account was not in fact the
assessment, but did reflect the 2014 additional assessment, identified as
document 23, among the transactions by which SARS arrived at the net amount
payable by the taxpayer, namely R44 175 675.

[14] On 7 March 2016, Werksmans wrote to MR confirming that MR’s letter
of 18 February 2016 correctly recorded the settlement of the issues referred to
therein. Werksmans confirmed that they held sufficient funds in trust to pay
SARS R44 175 675 and irrevocable instructions to pay same to SARS on
discharge of the preservation order. They confirmed that the parties would file
notices to withdraw their claims and counterclaims in the action.

[15] On 10 March 2016, Werksmans sent MR ‘proof of payment of the
settlement consideration’. The attached proof of payment showed that the sum
was paid from a Werksmans’s account. On the same day, the preservation
order was discharged against the taxpayer and SARS and the taxpayer filed
notices of withdrawal in the action.

[16] On 10 September 2018, the taxpayer lodged a notice of objection to the
additional assessment of 17 February 2016 together with an application
condoning the late filing of the objection. This set in motion the events leading
to the application for default judgment that served before the tax court, in terms
of which the taxpayer sought to reverse what her attorneys had plainly agreed
on her behalf. The taxpayer lodged her objection via her electronic filing (SARS
eFiling) profile. She had not obtained an extension of time prior to doing so. In
the objection itself she gave the following as the reasons for her late
submission:

‘The additional assessment to tax that was raised by SARS was not provided to the
taxpayer and was for the first time ever seen when same was accessed and printed
on the taxpayer’s e-filing profile, the additional assessment was allegedly raised on [17
February 2016] but not provided to the taxpayer for objection as provided for in the
TAA, in addition to the above three years have not passed from the alleged date.’
The taxpayer’s ground for challenging the additional assessment on its merits
was that tax was imposed on non-taxable income and paid on the basis of the
‘pay now, argue later rule’.

[17] On 21 September 2018, SARS granted the condonation sought by the
taxpayer. On 14 December 2018, however, SARS wrote to the taxpayer
informing her that the decision to allow the late submission was ‘under review’
for various reasons. These included: (a) that no exceptional circumstances
existed to allow an extension of more than 30 days; (b) that SARS disputed that
the taxpayer only became aware of the assessment on 7 September 2018; and
(c) that the additional assessment was raised in terms of s 95(3) and was not
subject to objection or appeal. SARS stated that although it was not obliged to
do so, it was offering the taxpayer until 15 January 2019 to make
representations on the matter.

[18] This letter was posted to the postal address given by the taxpayer in her
notice of objection. It was also emailed to an email address for her, which SARS
had obtained from MR. She later denied having received the letter and accused
SARS of having fabricated it after the event. The email stated, incorrectly, that
the attached letter was one withdrawing the condonation. On 19 December
2018, SARS emailed the taxpayer to correct that misdescription. On 20
February 2019, the taxpayer delivered a notice in terms of rule 56, putting
SARS on terms for its failure to respond to her objection in accordance with the
rules.

[19] On 22 February 2019, SARS addressed a letter to the taxpayer stating
that in terms of s 9 of the TAA it was withdrawing its condonation for her late
objection. The letter was posted and emailed to the same email address as

before. Once again, the taxpayer says she did not receive it; and once again,
she accused SARS of fabrication.

[20] On 25 February 2019, SARS issued, via the taxpayer’s SARS eFiling
profile, a ‘notice of invalid objection’. The notice stated that her objection did not
comply with the rules, because the assessment in question was an agreed
assessment raised in terms of s 95(3) and not subject to objection or appeal.

[21] On 4 March 2019, and in accordance with the taxpayer’s request that
SARS communicate henceforth with her father, MR sent a letter to Mr van der
Merwe per his email address. MR stated that there was no valid objection, as
condonation had been withdrawn and that the assessment in question was, in
any event, not subject to objection or appeal. Mr van der Merwe was asked to
address all further correspondence to MR. SARS’s letters of 14 December 2018
and 22 February 2019 were attached to MR’s letter. According to the taxpayer
and her father, this was when those letters came to their attention.

[22] On 5 March 2019, the taxpayer caused a notice of appeal to be filed. In
the notice of appeal, the taxpayer asserted that SARS’s reliance on s 95(3) was
rejected. She inter alia asserted that ‘there was no estimation of assessment
raised, but rather an additional assessment on which the tax was paid on the
basis of pay now, argue later’.

[23] On 8 March 2019, SARS responded to the notice of appeal and advised
that the objection that had previously been submitted had been declared invalid.
Accordingly, the appeal was also invalid as it did not comply with the TAA read
with the rules. A notice of appeal had to be preceded by an objection. On the
taxpayer’s own version, it is clear that by 8 March SARS had: (i) withdrawn the
condonation for the taxpayer’s late filing of the objection; (ii) invalidated the
objection; and (iii) advised the taxpayer that the notice of appeal is invalid. On
11 March 2019, Mr van der Merwe replied, disputing the invalidity of the notice
of appeal. SARS responded by stating that if the taxpayer was aggrieved at
SARS’s decision, she was at liberty to seek relief in terms of rule 52(2)(b).

[24] On 15 May 2019, the taxpayer delivered a further notice in terms of rule
56, this time regarding SARS’s alleged failure to respond to her notice of appeal
by delivering its grounds of assessment in terms of rule 31. SARS was informed
that if it failed to remedy its default within 15 days, the taxpayer would seek a
default judgment and final order in terms of s 129(2) of the TAA.

[25] On 6 June 2019, the taxpayer delivered her application for default
judgment. SARS delivered a notice of opposition on 1 July 2019. On 10 July
2019, MR wrote to the taxpayer, care of her father, to say that in SARS’s view
there was no basis in fact or law for the application; that the assessment in
question was issued by agreement in terms of s 95(3); and that SARS’s view
of the application was that it was ‘cynical, vexatious and an abuse of the court
procedures’. The taxpayer was invited to withdraw it by 15 July 2019, failing
which SARS would file an answering affidavit and request a punitive costs
order.

[26] The taxpayer did not withdraw the application. Instead on 15 July 2019,
she delivered a notice requesting the registrar to issue a hearing date. On 19
July, SARS delivered its opposing papers. A replying affidavit by Mr van der
Merwe followed on 29 July 2019. On 9 August 2019 (which was a public
holiday), supplementary replying affidavits by Mr van der Merwe and the
taxpayer were emailed to MR. SARS’s ‘duplicating affidavit’ was delivered on
22 August 2019. This forms the background of this appeal.

Discussion
[27] Of importance in arriving at a decision in this matter is a consideration of
the nature of the application before the high court. SARS’s primary contention
was that since it had issued a notice of invalid objection and therefore did not
determine the objection, the taxpayer was not entitled to file a notice of appeal,
nor to seek default judgment in consequence of SARS’s failure to file a
statement of grounds of assessment in terms of rule 31. It was on that basis
that SARS contended that the jurisdictional requirements of the rule on which
the application was hinged (rule 52) were not satisfied.

[28] It is necessary to consider the provisions of the TAA and the relevant
rules. In doing so, one must bear in mind the following approach to the process
of interpretation:
‘. . . Interpretation is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument, or contract, having regard
to the context provided by reading the particular provision or provisions in the light of
the document as a whole and the circumstances attendant upon its coming into
existence. Whatever the nature of the document, consideration must be given to the
language used in the light of the ordinary rules of grammar and syntax; the context in
which the provision appears; the apparent purpose to which it is directed and the
material known to those responsible for its production. Where more than one meaning
is possible each possibility must be weighed in the light of all these factors. The
process is objective not subjective. A sensible meaning is to be preferred to one that
leads to insensible or unbusinesslike results or undermines the apparent purpose of
the document. Judges must be alert to, and guard against, the temptation to substitute
what they regard as reasonable, sensible or businesslike for the words actually used.
To do so in regard to a statute or statutory instrument is to cross the divide between
interpretation and legislation. In a contractual context it is to make a contract for the
parties other than the one they in fact made. The “inevitable point of departure is the
language of the provision itself”, read in context and having regard to the purpose of
the provision and the background to the preparation and production of the document.’2

[29] With that approach in mind, I turn now to the various provisions of the
TAA and the rules. The raising of assessments is regulated by ss 91 to 100 of
the TAA. Section 95(3) of the TAA reads:
‘If the taxpayer is unable to submit an accurate return, a senior SARS official may
agree in writing with the taxpayer as to the amount of tax chargeable and issue an
assessment accordingly, which assessment is not subject to objection or appeal.’
(Emphasis added.)

[30] SARS contended that the assessment against which the taxpayer
objected was an agreed assessment in terms of s 95(3) of the TAA, which was

2 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA
593 (SCA); [2012] 2 All SA 262 (SCA) para 18.

‘not subject to objection or appeal’. This contention was largely based on
correspondence exchanged between SARS’s attorneys and those of the
taxpayer. It is clear from that correspondence that litigation pertaining to the
preservation order resulted in settlement negotiations which culminated in an
agreed income tax assessment being raised. In terms of that agreement, a
portion of the ‘donation’, which the taxpayer received from her overseas
benefactor, was assessed for tax and thereafter paid by the taxpayer to SARS,
apparently with funds from a further ‘donation’ received from her benefactor.
This is how the dispute pertaining to the additional assessment was settled.

[31] The letters sent on behalf of SARS make it pertinently clear that the
pending litigation would only be withdrawn on certain conditions, which included
payment of the money on a full understanding that the provisions of s 95(3)
would be applicable. The taxpayer’s attorney expressly agreed to all the
conditions and also mentioned that the payment was made irrevocably. In short,
the settlement agreement provided that s 95(3) would apply to the agreed
assessment.

[32] Under these circumstances, the taxpayer’s assertion (in the notice of
appeal) that the amount was paid on a ‘pay now, argue later’ basis is simply
untrue. To boot, despite the payment of such a substantial amount – in excess
of R44 million – a period of two years passed without any further enquiries being
directed at SARS regarding the matter.

[33] On the conspectus of all the relevant facts, the inference is irresistible
that the taxpayer paid the agreed amount within the contemplation of s 95(3)
and not on the basis of the ‘pay now, argue later’ principle, as alleged in the
taxpayer’s notice of appeal. Notably, the respondent’s papers were quite terse
on this aspect and did not disclose any facts pertaining to the correspondence
on the basis of which SARS alleged that the dispute had been settled.

[34] Once it is accepted, as it must, that the provisions of s 95(3) are
applicable, it follows that the respondent’s additional assessment cannot be the
subject of an objection or appeal. In terms of s 104(1) of the TAA, a taxpayer

who is aggrieved by an assessment made in respect of the taxpayer may object
to the assessment. Insofar as the respondent purports to have lodged an
objection to the additional assessment, the provisions of s 106 of the TAA are
significant. It reads, in relevant part:
‘(1)
SARS must consider a valid objection in the manner and within the period
prescribed under this Act and the “rules”.
(2)
SARS may disallow the objection or allow it either in whole or in part.
(3)
If the objection is allowed either in whole or in part, the assessment or
“decision” must be altered accordingly.
(4)
SARS must, by notice, inform the taxpayer objecting or the taxpayer’s
representative of the decision referred to in subsection (2), unless the objection is
stayed under subsection (6) in which case notice of this must be given in accordance
with the “rules”.
(5)
The notice must state the basis for the decision and a summary of the
procedures for appeal.’ (Emphasis added).
Based on the provisions of subsec (1), there can be no doubt that SARS was
correct in asserting that the taxpayer’s objection was invalid. In this regard, it is
important to bear in mind the provisions of rule 7(4),3 which empowers SARS
to regard an objection that does not comply with the requirements of subrule
(2) as invalid. This, in substance, was what SARS conveyed to the taxpayer in
terms of the notice of invalid objection.

3 Rule 7 of the Tax Court Rules reads:
‘7.
Objection against assessment
(1)
A taxpayer who may object to an assessment under section 104 of the Act, must deliver
a notice of objection within 30 days after-
(a)
delivery of a notice under rule 6(4) or the reasons requested under rule 6; or
(b)
where the taxpayer has not requested reasons, the date of assessment.
. . .
(4)
Where a taxpayer delivers an objection that does not comply with the requirements of
subrule (2), SARS may regard the objection as invalid and must notify the taxpayer accordingly
and state the ground for invalidity in the notice within 30 days of delivery of the invalid objection,
if-
(a)
the taxpayer used a SARS electronic filing service for the objection and has an electronic
filing page;
(b)
the taxpayer has specified an address required under subrule (2)(c); or
(c)
SARS is in possession of the current address of the taxpayer.
(5)
A taxpayer who receives a notice of invalidity may within 20 days of delivery of the notice
submit a new objection without having to apply to SARS for an extension under section 104(4).
(6)
If the taxpayer fails to submit a new objection or submits a new objection which fails to
comply with the requirements of subrule (2) within the 20 day period, the taxpayer may
thereafter only submit a new and valid objection together with an application to SARS for an
extension of the period for objection under section 104(4).’ (My emphasis.)

[35] Section 107(1) of the TAA describes the circumstances under which a
taxpayer may file a notice of appeal. It reads:
‘After delivery of the notice of the decision referred to in section 106(4), a taxpayer
objecting to an assessment or “decision” may appeal against the assessment or
“decision” to the tax board or tax court in the manner, under the terms and within the
period prescribed in this Act and the “rules”.’
It is clear that it is only after delivery of the notice of a decision that a taxpayer
may appeal against the assessment.

[36] Notably, s 107(3) of the TAA stipulates that a notice of appeal ‘that does
not satisfy the requirements for subsection (1) is not valid’. An undeniable fact
discernible from all the provisions mentioned above is that the right to pursue
an appeal to the tax board or the tax court depends on whether a valid objection
was filed and decided upon in terms of s 106.

[37] As stated before, the respondent’s application for default judgment was
predicated on rule 56. However, the stumbling block for the taxpayer was that
she failed to show that, notwithstanding SARS’s notification about the
taxpayer’s invalid objection, she was entitled to lodge an appeal. To reiterate,
an appeal must be preceded by a valid objection and a decision thereon. In the
absence of any one of those, there can be no appeal. The taxpayer simply did
not meet the jurisdictional requirements that warranted the consideration of an
application, which presupposes compliance with all the prerequisites.

[38] It is clear from the provisions of rule 574 that an applicant who files an
application is required to support his or her application with an affidavit that
contains the facts upon which the applicant relies for relief. Although the
taxpayer deposed to the affidavit at a stage when SARS had already asserted
that the taxpayer’s objection was invalid on account of the assessment and

4 Rule 57 of the Tax Court Rules reads:
‘57.
Notice of motion and founding affidavit
(1)
Every application must be brought on notice of motion which must set out in full the order
sought, be signed by the applicant or the applicant's representative and be supported by a
founding affidavit that contains the facts upon which the applicant relies for relief.’

payment being agreed upon as envisaged by the provisions of s 95(3) of the
TAA, the taxpayer’s affidavit curiously failed to address this material issue.
There was simply no allusion to the correspondence which recorded the
agreement that formed the basis of the payment made by the taxpayer, nor to
the circumstances that led to SARS asserting that the assessment was agreed
upon pursuant to the settlement of a dispute.

[39] A court considering an application for default judgment is duty bound to
determine whether a proper case has been made out on the papers. The tax
court remarked as follows:
‘. . . [T]he provisions of the rules presuppose that one is dealing with an application
which may permissibly be brought in terms of those rules. . . The [taxpayer’s] rule 56
application is only a proper application under that rule if it was preceded by a valid
objection and valid notice of appeal. If not, one is dealing with a wholly irregular
application . . .’5
I agree. In the same vein, the tax court was correct in finding that in order to
obtain default judgment, the taxpayer had to show that SARS was indeed in
default of an obligation to file a rule 31 statement.

[40] It is clear from the provisions of rule 31 that SARS’s obligation to file its
statement of grounds of assessment would only arise from a valid notice of
appeal. It is plain that the taxpayer’s rule 56 application was premised on the
incorrect legal conclusion that SARS was under an obligation to file a notice in
terms of rule 31, but failed to do so. It was an ill-fated application, because the
taxpayer failed to show that she was entitled to deliver a notice of appeal. Rule
52(2)(b) of the Tax Court Rules affords a taxpayer the right to apply to the tax
court for an order that an objection is valid, where SARS treated the objection
as invalid. That is the course the taxpayer should have followed.

[41] In the founding affidavit the taxpayer sought to circumvent these
difficulties by contending that the notice of invalid objection was a constructive
disallowance of the objection as envisaged in s 106(2) of the TAA. It did the

5 Paragraph 35 of the tax court judgment.

opposite, however, because the notice expressly stated that ‘the agreed
assessments [were] not subject to a Notice of Objection or a Notice of Appeal'.
It is thus clear that the notice of invalid objection could not have been construed
as a disallowance of the objection on the merits within the meaning of s 106(2)
of the TAA. This means that the notice of appeal was invalid for want of
compliance with s 107(4) of the TAA.

[42] The upshot of what is set out in the preceding paragraph is that even
without considering the contents of the answering affidavit, the tax court was
entitled to find, on an unopposed basis, that the jurisdictional requirements for
the lodging of an appeal had not been satisfied, and to refuse to grant the order
sought. It is of no moment that the tax court proceeded to consider whether or
not to condone the late filing of the answering affidavit, because its decision to
grant condonation does not detract from the fact that even on an unopposed
basis, the taxpayer failed to make out a proper case for the relief sought. In the
same vein, the criticism directed at the tax court for not making a ruling
regarding the application to strike out certain averments from the answering
affidavit is unfounded.

[43] Regrettably, the high court did not engage with the tax court’s finding
that a proper case was not made out on the basis of non-compliance with the
provisions of the TAA. This Court could have benefitted from its opinion on the
merits of the matter. Equally regrettable is its finding that the tax court’s failure
to make a ruling on the application to strike out vitiated the proceedings, and
that the final judgment was ‘not arrived at in a fair, transparent and just manner’,
as it is not borne out by the facts. As mentioned before, its order was also
incomplete insofar as it stated that the appeal was successful but failed to set
aside the order of the tax court. However, nothing turns on these shortcomings,
because as shown above, the order of the high court falls to be set aside.

[44] What remains now is to provide reasons why Mr van der Merwe’s
application for leave to represent the taxpayer in this Court was dismissed. The
taxpayer’s father, Mr van der Merwe, represented the taxpayer before the tax
court and also before the high court. Mr van der Merwe prepared a substantive

application asking for leave to represent the taxpayer in the appeal before this
Court. The application was refused a week before the hearing of the appeal.
On the date of the hearing of the appeal, the taxpayer was legally represented
by counsel.

[45] In terms of the common law, it is not permissible for a lay person to
represent a natural person in a court of law. This common-law position now
finds support in s 25 of the Legal Practice Act 28 of 2014, which provides in
relevant part that:
‘(1)
Any person who has been admitted and enrolled to practise as a legal
practitioner in terms of this Act, is entitled to practise throughout the Republic, unless
his or her name has been ordered to be struck off the Roll or he or she is subject to an
order suspending him or her from practising.
(2)
A legal practitioner, whether practising as an advocate or an attorney, has the
right to appear on behalf of any person in any court in the Republic or before any board,
tribunal or similar institution, subject to subsections (3) and (4) or any other law.’

[46] It follows that there is no discretion to allow a lay person to represent a
natural person in a court of law. In Shapiro & De Meyer Inc v Schellauf
(Shapiro),6 this Court accordingly held that the respondent’s wife was not
entitled to appear and argue the appeal on behalf of the respondent. There is
no justification for this Court to depart from its established practice, which is in
accordance with the common law. The pitfalls of a natural person being
represented by a person who is not a legal practitioner are obvious. The
clearest example that comes to mind is that the rules of this Court would not
oblige such a lay representative to file a power of attorney. This could cause a
party to subsequently deny the authority of the representative, to the detriment
of the administration of justice. These are the reasons why this Court refused
to grant Mr van der Merwe leave to represent the taxpayer.

Ruling

6 Shapiro & De Meyer Inc v Schellauf [2001] ZASCA 131 (SCA) para 10.

[47] To sum up on the main issue in this appeal, the application in the tax
court was premature, because SARS was not in default as envisaged in rule
56(1). Therefore, the jurisdictional requirements for an application in terms of
rule 56(2) were not satisfied. In my view, the tax court’s finding that the
taxpayer’s rule 56 application was not preceded by a valid objection and valid
notice of appeal is unassailable. As correctly stated in the dissenting judgment
per Cloete J, the tax court was entitled to make that finding even on an
unopposed basis.

[48] For all the reasons set out in the foregoing paragraphs, I am of the view
that the order of the tax court was correct. Thus, the majority judgment of the
high court came to the wrong conclusion. It upheld the appeal when it should
have dismissed it. It follows that SARS’s appeal against the order of the high
court must succeed.

Order
[49] In the result, the following order is made:
The appeal succeeds with costs, including the costs occasioned by the
employment of two counsel.
The order of the high court is set aside and replaced with the following:
‘The appeal is dismissed with costs, including the costs of two counsel.’

_________________
M B MOLEMELA
JUDGE OF APPEAL

Appearances

For appellant:
H G A Snyman SC (with C Naudé)
Instructed by:
MacRobert Attorneys, Pretoria

Lovius Block Incorporated, Bloemfontein

For respondent:
P Tredoux
Instructed by:
Webbers Attorneys, Bloemfontein
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL
From:
The Registrar, Supreme Court of Appeal
Date:
30 June 2022
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and
does not form part of the judgments of the Supreme Court of Appeal
Commissioner for the South African Revenue Service v Candice-Jean van der Merwe
(211/2021) ZASCA 106 (30 June 2022)
The Supreme Court of Appeal (SCA) today upheld an appeal with costs against the order and
judgment of the majority of the full court of the Western Cape Division of the High Court, Cape
Town, per Mantame J with Ndita J concurring and Cloete J dissenting (the high court), in terms
of which the high court upheld an appeal against a judgment of the Tax Court, Cape Town,
per Rogers J (the tax court). The costs order included the costs occasioned by the employment
of two counsel.

The respondent, Ms Candice-Jean van der Merwe (the taxpayer), had approached the tax
court under the auspices of rule 56(2) of the Tax Court Rules published in terms of s 103 of
the Tax Administration Act 28 of 2011 (TAA) seeking default judgment against the appellant,
the Commissioner for the South African Revenue Service (SARS), based on SARS’s alleged
failure to file a statement disclosing its grounds for dismissing her objection. In addition, the
taxpayer sought an order reducing to nil the additional income tax assessment raised by SARS
in February 2016 concerning the 2014 year of assessment and an order compelling SARS to
repay the amount the taxpayer previously paid on the agreed assessment.

The facts of the matter were as follows. The taxpayer’s tax return for the 2014 tax year
reflected taxable income of R365 919. She also declared a receipt of R142 901 673 as a ‘gift
from her companion abroad'. In January 2015, SARS raised an original assessment in
accordance with this return. The ‘donation’ was not subjected to tax. In February 2015, SARS
started a process of interrogating the tax return and the foreign ‘donation’. Settlement was
also explored.

On 7 December 2015, MacRobert Attorneys (MR), which represented SARS, wrote to
Werksmans Attorneys (Werksmans), which represented the taxpayer, enclosing a draft letter
of audit findings, which stated that the amount of some R142.9 million was not a gratuitous
donation and was subject to income tax. On 18 December 2015, Werksmans sent a settlement
proposal to MR. On 18 February 2016, MR wrote to Werksmans stating that SARS had
approved the settlement proposal. The amount payable was R44 175 675. On 10 March 2016,
Werksmans sent MR ‘proof of payment of the settlement consideration’.

On 10 September 2018, the taxpayer lodged a notice of objection to the additional assessment
of 17 February 2016 together with an application for the late filing of the objection. That set in
motion the events leading to the application for default judgment that served before the tax
court, in terms of which the taxpayer sought to reverse what her attorneys had plainly agreed
on her behalf. The taxpayer lodged her objection via her electronic filing profile. She had not
obtained an extension of time prior to doing so. The taxpayer’s ground for challenging the
additional assessment on its merits was that tax was imposed on non-taxable income and
paid on the basis of the ‘pay now, argue later rule’.

The SCA found that on the conspectus of all the relevant facts, the inference was irresistible
that the taxpayer paid the agreed amount within the contemplation of s 95(3) of the TAA and
not on the basis of the ‘pay now, argue later’ principle, as alleged in the taxpayer’s notice of
appeal. The SCA found that the assessment against which the taxpayer objected was an
agreed assessment in terms of s 95(3) of the TAA, against which the taxpayer was, in terms
of that provision, ‘not subject to objection or appeal’. This, the SCA found, was largely based
on correspondence exchanged between SARS’s attorneys and those of the taxpayer, in which
it was clear that the settlement negotiations culminated in an agreed income tax assessment
being raised. In short, the settlement agreement provided that s 95(3) would apply to the
agreed assessment.

The SCA found further that once it was accepted that the provisions of s 95(3) were applicable,
it followed that the respondent’s additional assessment could not have been the subject of an
objection or appeal. This, the SCA found, was because an appeal had to be preceded by a
valid objection and a decision thereon. In the absence of any one of those, there could be no
appeal. The SCA found that there was no doubt that SARS was correct in asserting that the
taxpayer’s objection was invalid. In this regard, the SCA found that it was important to bear in
mind the provisions of rule 7(4), which empowered SARS to regard an objection that did not
comply with the requirements of subrule (2) as invalid. This, in substance, was what SARS
had conveyed to the taxpayer in terms of the notice of invalid objection. The SCA thus found
that the taxpayer simply did not meet the jurisdictional requirements that warranted the
consideration of an application, which presupposed compliance with all the prerequisites.

Accordingly, the SCA held that the application in the tax court was premature, because SARS
was not in default as envisaged in rule 56(1) of the Tax Court Rules promulgated in terms of
s 103 of the TAA. Therefore, the jurisdictional requirements for an application in terms of rule
56(2) of the Tax Court Rules were not satisfied. The SCA thus held that the tax court’s finding
that the taxpayer’s rule 56 application was not preceded by a valid objection and valid notice
of appeal was unassailable. The SCA held further that the tax court was entitled to make that
finding even on an unopposed basis, as correctly stated in the dissenting judgment per Cloete
J.

~~~~ends~~~~