What does “pending” mean in the tax context?
In February 2014 the Cape High Court found that, in the legal context at least, “pending” means “proceedings having begun but not yet concluded”, as opposed to the applicants’ claim that it means “about to happen”. The court also found, in response to the applicants’ alternative challenge, that Part C of Chapter 5 of the Tax Administration Act 2011 (TAA) is not unconstitutional. Part C enables a judge to order an inquiry into a person’s tax affairs, and section 58 provides that, once a judge has ordered such an inquiry, it is not suspended despite the fact that civil or criminal proceedings are pending or contemplated against a person. Not for the first time, this decision indicates how difficult it is to impugn the constitutionality of tax legislation.
Two of the 13 applicants were the main protagonists. One was presently arraigned on fraud charges, several of which were income tax or VAT related charges; and he and another applicant were the respondents in an asset preservation order brought by SARS in terms of section 163(4) of TAA. Acting on an application by SARS in terms of Part C, Judge Davis of the Cape High Court had granted an order for an inquiry into the affairs of the two main applicants.
Because the fraud and preservation processes had already commenced, the applicants contended that the court was not at large to order an inquiry. Their reason lay in the wording of section 58 of TAA, which provides that, unless a court orders otherwise, an inquiry relating to a person “must proceed despite the fact that a civil or criminal proceeding is pending or contemplated against or involves the person…” The applicant contended that “pending” means “about to happen” and, because the fraud and preservation proceedings were already under way, a court was precluded from ordering an inquiry under Part C.
The court considered the meaning of “pending” with reference to the Shorter Oxford Dictionary and legal parlance, and concluded that it means “proceedings having begun but not yet concluded”. Thus “pending” in section 58 means that an inquiry must continue even during civil or criminal proceedings, unless a court orders otherwise. The order was thus valid.
The applicants then attacked the constitutionality of Part C of the TAA as a whole. They had been denied untrammelled access to the court file relating to the inquiry application and this, according to them, inhibited their ability to impugn the constitutionality of Part C. The court’s response was twofold: that their attack lay in the relevant sections themselves and not in the contents of the file; and that their interpretation had no prospect of being upheld. Their access to the file was thus refused along with the Constitutional attack.
The Cape High Court was required to decide this question in Gary Walter van der Merwe & others v CSARS & others, Case No 1984/14. Judgment was delivered on 17 February 2014.
Peter Surtees
