In its judgment on 6 March 2019 the Pretoria High Court found in favour of SARS in CSARS v Naude & others, case number 51712/2017 (not yet reported) but awarded costs against SARS for disregarding the Uniform Rules and order of the court in the course of the dispute between the applicant and SARS. As the court put it, “[n]o party should be allowed by his own indolence to treat the rules of court with disdain”. One can imagine the warm applause this statement must have caused in the embattled and frustrated community of tax practitioners.
The matter in question related to SARS’ decision to disallow certain refunds claimed by the applicant in terms of section 75(1A) of the Customs and Excise Act, 1994. The time line gives the reason for the court’s ire towards SARS.
On 26 July 2017 the applicant launched an application seeking an order setting aside SARS’ decision to disallow the refunds, setting aside all collection steps taken by SARS and that SARS be ordered to pay the amount of R664 637 in respect of funds collected by SARS through a third party agency procedure. The application was served on SARS on 2 August 2017.
On 24 August 2017 the State Attorney filed notice of intention to oppose the application on behalf of SARS. The answering affidavit had to be delivered by 14 September 2017. SARS failed to file its answering affidavit when it fell due, so the applicant set the main application down on the unopposed roll on 19 December 2017. On that date the parties agreed that SARS would file its answering affidavit by 22 January 2018 together with application for condonation, failing which the matter would revert to the unopposed roll. This agreement was made an order of court. SARS filed the answering affidavit, without an application for condonation, only on 30 January 2018, yet another six days late.
On 19 March 2018 the applicant’s attorneys addressed a letter to the State Attorney indicating that unless they received SARS’ condonation application within 14 days they would proceed to set the matter down on the unopposed roll. This letter apparently finally stirred SARS from its inertia and resulted in the present application. The applicant opposed the application on three grounds:
- that the answering affidavit in the main application was filed extremely late;
- that SARS’ conduct and that of its attorneys was grossly negligent, inexcusable and in contempt of court; and
- as a result, the applicant had suffered immense prejudice.
The court traversed the law relating to condonation for failure to comply with the Rules of Court. It was settled law that condonation was not to be had “merely for the asking” but on good cause shown. The applicant claimed that SARS was obliged to seek condonation for both the September and the January delays. The court rejected this contention, based on a letter by the applicant’s attorneys referring only to the January delay.
The court then proceeded to hear SARS’ reasons for the delay as SARS pleaded for condonation. It makes head-shaking reading. Due to internal bureaucratic processes, the State Attorney had only on 11 and 18 October 2017 received SARS’ instruction to appoint counsel. The SARS auditor seized with the matter was stationed in Standerton while input had been required from the SARS diesel rebates officials at head office in Pretoria.
The first consultation with counsel took place only on 29 November and on 14 December 2017 counsel circulated the first draft affidavit. By that time the applicant had already placed the matter on the roll of 19 December, on which day the parties agreed to the 22 January 2018 date which, as indicated above, was made an order of court.
The relevant SARS officials then went on leave, which meant that they could only consult with counsel again on 12 January 2018. The additional work on the draft took far longer than had been anticipated, exacerbated by the fact that documentation had to be brought from Standerton to Pretoria in the process.
The 147 page answering affidavit was signed and commissioned on 22 January 2018 and sent to the State Attorney on 23 January – already one day overdue. The State Attorney’s office finally delivered the affidavit on 30 January. The reason for this further delay was that the State Attorney’s office was understaffed and under-capacitated with only three messengers servicing 80 attorneys.
Counsel for the applicant submitted that SARS and the State Attorney were both “culpably remiss and indifferent to the consequences of their failure to attend to the case diligently and timeously”. By the time the matter was in court on 17 December 2017, almost five months after the application had been served, a final draft of the answering affidavit was not even ready. SARS had ignored “even the basic principles of collegiality” of a request for extension of time. In other words, they couldn’t be bothered to pick up the phone and have a word with the applicant’s attorneys.
Counsel for SARS contended that:
- the six day delay from 22 to 30 January was not extreme;
- the prospects of success by SARS in the main case were good, which is one factor courts have to consider in deciding on a condonation application;
- the applicant would not on the applicant’s founding affidavit alone be able to prove that SARS’ decision to disallow the rebate was reviewable;
- the case was important to SARS in that the policy issue raised in its answering affidavit had to be adjudicated in order to ensure that the diesel refund regime is effective, especially since VAT issues were entwined here as well.
Counsel for SARS submitted that the applicant had suffered no prejudice as a result of the late filing and would not suffer any if the application were granted. This would allow the main application to be adjudicated upon properly and bring finality to the dispute.
Counsel for the applicant argued that the State Attorney had provided no explanation for the failure to arrange for the answering affidavit in his possession on 22 January 2018 to be served by email. In comment on this absence of any explanation, counsel referred to the judicial principle that condonation was not to be made for the mere asking. The person seeking condonation must show sufficient cause to enjoy the court’s indulgence. This required a full explanation for the non-compliance and must be reasonable enough to excuse the default. As Bosielo J had stated in Grootboom v The National Prosecuting Authority & another [2014] (2) SA 68 CC: “The respondents are not ordinary litigants. They constitute an essential part of government. In fact, together with the office of the state attorney, they sit at the very heart of the administration of justice. As organs of state, the Constitution obliges them to ‘’assist and protect the Courts to ensure the independence, impartiality, dignity, accessibility and effectiveness of the Courts’”. The court agreed with these sentiments and found that SARS and the State Attorney were indifferent to the consequences of their failure to attend to the case diligently and timeously.
Nonetheless, the court found that SARS had fully explained the reasons for the delay, showing that it was not due to delaying tactics. In the interest of justice, SARS should be given the opportunity to present its case. The condonation was therefore granted.
However, the sting for SARS then followed. The court rejected SARS’ argument that there was no plausible reason why the applicant had opposed the condonation application and the applicant should therefore suffer the costs. The court felt differently. Having treated the Rules of Court with disdain by disregarding and ignoring compliance with the court order, there was no reason why SARS should be allowed to behave in this matter. The court therefore ordered SARS to bear the costs.
I would suggest that a legion of taxpayers could be found to testify to SARS officials rejecting objections and appeals because they were less late than the six days for which SARS was punished. It is with wry amusement that one reads that SARS found nothing wrong with its indolence and, dare one say, arrogant disdain for the Rules. Perhaps the new regime at SARS will implant an attitude in staff that is more accommodating of taxpayers, who are, after all, not only their clients but their employers.
