Commissioner for the South African Revenue Service v Virgin Mobile South Africa (Pty) Ltd (1303/2023) [2025] ZASCA 77 (4 June 2025)
THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 1303/2023
In the matter between
COMMISSIONER FOR THE
SOUTH AFRICAN
REVENUE
SERVICE
APPELLANT
and
VIRGIN
MOBILE SOUTH AFRICA (PTY) LTD
RESPONDENT
Neutral
citation: Commissioner
for the South African Revenue Service v Virgin Mobile South Africa
(Pty) Ltd (1303/2023) [2025] ZASCA 77
(04 June 2025)
Coram:
NICHOLLS AND KEIGHTLEY JJA AND MUSI, WINDELL AND
MOLITSOANE AJJA
Heard:
28 February 2025
Delivered:
This judgment was handed down electronically by
circulation to the parties’ legal representatives by email,
publication on
the Supreme Court of Appeal website, and by release to
SAFLII. The date and time for hand-down is deemed to be 11h00 on 04
June
2025.
Summary:
Tax law – Tax Administration Act
28 of 2011 – default judgment – condonation –
whether a party is exempted from applying for condonation for the
late filing
of a Rule 31 statement when that party files their
statement after receiving a notice in terms of Rule 56(1) –
whether the high court correctly interpreted the provisions of Rule
56(1) of the Tax Court Rules.
ORDER
On
appeal from: Gauteng
Division of the High Court, Pretoria Mabuse J (minority) Van Niekerk
AJ and Sethusha-Shongwe AJ (majority), sitting as a
court of appeal:
1
The appeal is upheld with costs, including the costs of two Counsel.
2
The order of the high court is set aside and replaced with the
following:
‘2.1
The appeal is upheld with costs.
2.2
The order of the tax court is set aside and replaced with the
following:
“2.2.1
The application for default judgment is declared an irregular step
and set aside.
2.2.2
The taxpayer is ordered to pay the costs of this application.”’
JUDGMENT
Musi AJA (Nicholls and
Keightley JJA and Windell and Molitsoane AJJA concurring):
Introduction
[1]
This appeal is against the majority judgment and order of the full
court of the Gauteng
Division of the High Court, Pretoria
(the
high court), in which it dismissed an appeal against a judgment from
a single judge of that court, sitting as the Tax Court
(the tax
court). The tax court had dismissed an application in terms of Rule
30(1) of the Uniform Rules in which the appellant,
the Commissioner
for the South African Revenue Service (SARS), sought an order to set
aside a default judgment application against
it by the respondent,
Virgin Mobile South Africa (Pty) Ltd (taxpayer), as an irregular
step. Before the hearing, this Court requested
the parties to file
supplementary heads of argument on whether the full court’s
order is appealable. Any reference to the
Rules in this appeal is a
reference to the Tax Court Rules,[1]
unless otherwise stated.
[2]
SARS issued an additional assessment against the taxpayer for the
2014, 2015 and 2016 tax years.
The taxpayer filed a notice of appeal
against the assessment on 22 May 2019. In terms of Rule 31, SARS
was then obliged to
file a statement within 45 days in response to
the appeal. SARS failed to file its statement.
[3]
Despite compliance reminders being sent to SARS, it remained in
default. On 13 October 2020,
the taxpayer filed a notice in
terms of Rule 56(1)(a) calling upon SARS to remedy its default
within 15 days, failing which, it would apply for default judgment
against it. On 20 October
2020 (five days after the notice was
served) SARS complied with the notice and filed its Rule 31
statement. Notwithstanding SARS’
compliance with the notice,
the taxpayer applied for default judgment, on 30 November 2020.
[4]
On 14 December 2020, SARS filed a notice in terms of Rule 30 of the
Uniform Rules, read with Rule
42, calling upon the taxpayer to
withdraw the default judgment application, failing which, it would
launch an application to set
it aside as an irregular step. SARS
contended that it had complied with the taxpayer’s notice,
thereby curing its default.
[5]
The taxpayer disagreed, prompting SARS to launch the Rule 30
application, which the tax court
dismissed with costs. SARS, in turn,
appealed against the tax court’s order to the high court, the
majority of which dismissed
the appeal with costs. This Court granted
SARS leave to appeal. I now turn to decide the appealability issue
before determining
the merits.
[6]
The taxpayer argued that the order is not appealable because: (a) it
is not final in effect, and
(b) it is interlocutory. SARS contended
that it would be in the interests of justice for this Court to decide
the main issue due
to the divergent judgments in different tax
courts. It further contended that a decision of this Court would
create certainty.
[7]
Section 117(3) of the Tax Administration Act 28 of 2011 (TAA) deals
with the jurisdiction of the
tax court. In terms of s 117(3), it may
hear and decide an interlocutory application or ‘an application
in a procedural matter
relating to a dispute under … Chapter 9
as provided for in the “rules”.’ Section 129(2) of
the TAA prescribes
the powers of the tax court. It provides:
‘In
the case of an assessment or “decision” under appeal or
an application in a procedural matter referred to in s 117(3),
the
tax court may–
(a)
confirm the assessment or “decision”;
(b)
order the assessment or “decision” to be altered;
(c)
refer the assessment back to SARS for further examination and
assessment; or
(d)
make an appropriate order in a procedural matter.’
[8]
Section 133(1) addresses the issue of appealability in respect of
decisions of the tax court:
a taxpayer or SARS may appeal against ‘a
decision of the tax court under ss 129 and 130’. Section 130
has no relevance
to this appeal. The question is thus whether the
dismissal of an application in terms of Rule 30 of the Uniform Rules
is a decision
as contemplated in s 129(2) of the TAA.
[9]
Section 129(2)(d) gives the tax court the power to make appropriate
orders in procedural matters.
This power is linked to that court’s
jurisdiction under s 117(3) to hear applications in procedural
matters relating to disputes.
The taxpayer’s appeal against
SARS’ additional assessment was a dispute under Chapter 9 of
the TAA. Was the Rule 30
application filed by the taxpayer a
procedural matter relating to that dispute? If so, the decision of
the tax court is appealable.
The Rules do not provide for a procedure
akin to Rule 30 of the Uniform Rules. In the absence of any Rule in
this regard, a party
may, in terms of tax court Rule 42, utilise the
most appropriate Rule under the Uniform Rules. In this instance, it
appears that
rule 30 of the Uniform Rules is the most appropriate
rule to have a step declared irregular. In SA
Metropolitan Lewensversekeringsmaatskappy Bpk v Louw[2]
it was said:
‘I
have no doubt that Rule 30 (1) was intended as a procedure whereby a
hindrance to the future conducting of the litigation, whether
it is
created by a non-observance of what the Rules of Court intended or
otherwise, is removed.’[3]
[10]
Essentially an irregular step is taken when one party takes a
procedural step inconsistent with the Rules,
in order to advance the
litigation, to the prejudice of the other party. This was illustrated
in Wingate-Pearse
v Commissioner South African Revenue Service
(Wingate-Pearse),[4]
in which this Court held that an application in a procedural matter
relating to a Chapter 9 dispute as provided in the Rules, is
appealable.
[11]
Black
Mountain Mining (Pty) Ltd v Commissioner for the South African
Revenue Service (Black Mountain)
[5]
qualified the appealability of an order in a procedural matter thus:
‘We
therefore conclude that the reference to an “interlocutory”
application in s 117(3) refers to a simple interlocutory
application
and resulting order, whilst reference to “an application in a
procedural matter relating to a dispute under this
Chapter as
provided for in the “Rules”, refers to those orders
arising from applications specifically provided for
in the Rules;
provided they are final in effect and cannot be altered by the Tax
Court, are definitive of the parties’ rights
and dispositive of
at least a substantial portion of the issues.’[6]
[12]
The proviso, in Black
Mountain,
with regard to the appealability of orders in procedural matters, as
described in the TAA, is couched in similar terms as the
common law
test for appealability laid down in Zweni
v Minister of Law and Order[7]
(Zweni).
It postulates a bifurcated enquiry in order to determine the
appealability of an order in a procedural matter. First, it must
be
subjected to the Zweni
test and, if it does not meet those requirements, then the interests
of justice standard should be applied.
[13]
The factors in Zweni,
though still relevant, have been subsumed by the interests of justice
standard which is now the only standard to be met.[8]
Whether it would be in the interests of justice to determine the
appealability of an order in a procedural matter must be decided
on a
case-by-case basis, after weighing-up all the relevant factors,
including those in Zweni.
In my view, the better approach would be that an application in a
procedural matter relating to a dispute under Chapter 9 of the
TAA is
appealable, provided it is in the interests of justice to consider
the appeal. I turn to consider the relevant factors in
this matter.
[14] In
terms of Uniform Rule 30(2)(a) an application to set aside an
irregular step may be made only if the applicant has not taken a
further step in the cause with
knowledge of the irregularity. If SARS
were to apply for condonation, it would amount to a further step in
the progress of the
matter and it would not be able to utilise the
Rule to complain about the same irregular step. The order has a final
effect and
cannot be revisited by the tax court.
[15]
There are conflicting decisions in the tax court on the main issue,
which creates uncertainty. Uncertainty
as to the correct legal
position is not in the interest of justice. Rather, the interests of
justice require clarity regarding
the proper interpretation of Rule
56(1).
[16]
Accordingly, the application in terms of Uniform Rule 30(1) to remove
the irregular step, is an application
in a procedural matter as
contemplated in the TAA and it would be in the interests of justice
to hear and determine the appeal.
I turn now to the merits of the
appeal, commencing with the relevant Rules.
[17]
Since SARS had not complied with Rule 31, this Rule serves as a
convenient starting point. It states:
‘Statement
of grounds of assessment and opposing appeal
(1) SARS must deliver to
the appellant a statement of the grounds of assessment and opposing
the appeal within 45 days after delivery
of—
(a) the documents
required by SARS under rule 10(5);
(b) if alternative
dispute resolution proceedings were followed under Part C, the notice
by the appellant of proceeding with the
appeal under rule 24(4) or
25(3);
. . . .
(2) The statement of the
grounds of opposing the appeal must set out a clear and concise
statement of—
(a)
the consolidated grounds of the disputed
assessment;
(b)
which of the facts or the legal grounds in the
notice of appeal under rule 10 are admitted and which of those facts
or legal grounds
are opposed; and
(c)
the material facts and legal grounds upon which
SARS relies in opposing the appeal.
(3)… ’
[18]
Rule 4 reads:
‘Extension
of time periods
(1) Except where the
extension of a period prescribed under the Act or these rules is
otherwise regulated in Chapter 9 of the Act
or these rules, a period
may be extended or shortened by agreement between—
(a)
the parties;
(b)
a party or the parties and the clerk; or
(c)
a party or the parties and the registrar.
(2) A request for an
extension must be delivered to the other party before expiry of the
period prescribed under these rules unless
the parties agree that the
request may be delivered after expiry of the period.
(3) If SARS is afforded a
discretion under these rules to extend a time period applicable to
SARS, SARS must in the notice of the
extension state the grounds of
the extension.
(4) . . . ’
[19]
Rule 52(6) provides:
‘A
party who failed to deliver a statement as and when required under
rule 31, 32 or 33, may apply to the tax court under this Part
for an
order condoning the failure to deliver the statement and the
determination of a further period within which the statement
may be
delivered.’
[20]
Rule 56(1) stipulates:
‘(1)
If a party has failed to comply with a period or obligation
prescribed under these rules or an order by the tax court under
this
Part, the other party may—
(a)
deliver a notice to the defaulting party informing
the party of the intention to apply to the tax court for a final
order under
section 129(2) of the Act in the event that the
defaulting party fails to remedy the default within 15 days of
delivery of the
notice; and
(b)
if the defaulting party fails to remedy the
default within the prescribed period, apply, on notice to the
defaulting party, to the
tax court for a final order under section
129(2).’
[21]
The tax court held that where a party has not complied with the
period in Rule 31 it must request an extension
of time in terms of
Rule 4(2). It found that the delivery of a Rule 56(1) notice and
timeous response thereto, does not exempt
the defaulting party from
compliance with Rule 4(2). It reasoned that, absent an application
for condonation or a Rule 4(2) extension,
there is no impediment
against an application for default judgment by the innocent party
because in these circumstances the Rule
31 statement is invalid.
[22]
The majority of the high court found that ‘obligation’ in
the context of Rule 56(1) read with
‘default’ refers to
SARS’ obligation to file a statement in terms of Rule 31 which
complies in substance, form
and time with the prescripts of Rule 31
and failing which SARS must cure the defect in terms of Rule 4 or
Rule 52(6). It opined
that to hold otherwise, would render Rules 4
and 52(6) superfluous. The minority found that, since SARS complied
with the Rule
56(1) notice, there was no need for it to apply for
condonation or an extension of time. It would have held that the
application
for default judgment was an irregular step.
[23] In
this appeal, SARS argued that the 15 days in the Rule 56(1) notice is
an extension of a period ‘otherwise
regulated’ as
contemplated in Rule 4(1) and that the latter Rule is therefore not
applicable. It further argued that it cured
the default as called
upon and nothing further was needed. However, the taxpayer contended
that, above and beyond SARS’ compliance
with Rule 56(1), it had
an obligation to apply for condonation. SARS’ failure to do so
opened a pathway for it to apply for
default judgment.
[24] An
interplay between the above Rules is discernible. Rule 4 governs
agreements between the parties to extend
or shorten periods. If a
party fails to comply with Rules 31, 32 or 33, it may approach the
tax court with a condonation application,
in terms of Rule 52(6), and
request a further period within which it may deliver the statement.
This is a voluntary application
by a party who has failed to comply
with the Rules. Rule 56(1) is coercive in that the innocent party
endeavours to force the defaulting
party to comply on pain of a final
order being made against it.
[25] It
is common cause that SARS did not seek an agreement with regard to
the extension of any time periods.
Rule 4(2) does not contain an
outer limit within which SARS could request an extension. However,
SARS argued that given the history
of legal skirmishes with the
taxpayer, such a request would not have yielded a positive result.
[26]
Rule 56(1) states that if a party has failed to comply with a period
or
obligation prescribed under the Rules or a tax court order (my
emphasis), the innocent party may deliver a notice to the defaulting
party calling upon it to remedy the default within 15 days, failing
which, the innocent party may apply, on notice to the defaulting
party, for a final order under s 129(2).[9]
It is significant that the rule maker used the disjunctive ‘or’
and not the conjunctive ‘and’.
[27]
It is trite that words should be given their ordinary grammatical
meaning, unless doing so would lead to
an absurdity. In Natal
Joint Municipal Pension Fund v Endumeni Municipality[10]
it was said that in interpreting a document regard must be had to the
text, context and purpose of the document. The process of
interpretation is unitary and objective. A sensible meaning is to be
preferred to one that leads to insensible or unbusinesslike
results.
[28]
There is no reason why ‘or’ in the Rule should be read as
‘and’; the Rule makes sense
as it is. There is no
indication that ‘and’ would have been more sensible in
this context. Rule 31 simultaneously contains
a time period and
obligations. SARS must deliver its statement within 45 days after the
taxpayer has, inter alia, delivered its
notice of appeal and failure
to comply with the period could trigger a Rule 56(1) notice. However,
non-compliance with the period
is one basis for a Rule 56(1) notice.
Another basis would be if SARS delivered an otherwise non-compliant
statement and in so doing
failed to comply with its obligations under
the Rules.
[29] In
terms of Rule 31(2), SARS must set out a clear and concise statement
of (a) the consolidated grounds of
the disputed assessment; (b) which
facts or legal grounds in the notice of appeal are admitted and which
are opposed; and (c) the
material facts and legal grounds upon which
SARS relies in opposing the appeal. These are obligations that SARS
has to fulfil.
Non-compliance with these obligations would only come
to the other party’s knowledge after the statement had been
delivered.
If it fails to meet any of these obligations, it would be
in default and the innocent party would be able to serve a Rule 56(1)
notice on SARS. That is why it is either the period or the obligation
that can trigger the Rule 56(1) notice.
[30] If
the tax court has determined that SARS should, in terms of Rule
52(6), file its Rule 31 statement on a
particular day and it fails to
comply with the order, the innocent party may enforce compliance by
way of a Rule 56(1) notice.
This notice would be delivered because
the defaulting party had not complied with the time determined by the
court for the other
party to receive the Rule 31, 32 or 33 statement.
The innocent party would enforce the court order because the court
gave it a
procedural right to receive the relevant statement on a
determined date. The order thus creates an obligation on the
defaulter
towards the innocent party.
[31]
Any of the scenarios in paragraphs 29 to 31 above can trigger a Rule
56(1) notice being served on the defaulter.
The Rule 56(1) notice
serves the purpose of a compliance notice. It is a procedural
mechanism which assists an innocent party to
advance the appeal,
either by ensuring compliance or by securing a default judgment.
Absent compliance, the innocent party may,
after giving the defaulter
notice of its application, apply for default judgment. Since a final
order under s 129(2) can be drastic,
sufficient notice should be
given before it is sought. However, the underlying objective of the
Rule 56(1) notice procedure is
not punitive. It is aimed at
facilitating finality of the dispute by coercing compliance. Once
compliance has been achieved, the
Rule will have served its purpose.
[32] It
is for this reason that, after compliance with the notice, there is
no need for the defaulter to apply
for condonation. Rule 56(1) is
self-contained: its purpose was achieved when SARS complied with the
demand that it files its Rule
31 statement within the period
specified in the notice. The notice in this matter called upon SARS
to remedy its failure to file
its Rule 31 statement but incorrectly
stated that SARS had ‘consequently failed to comply with the
periods and obligations under the Rules’. (My emphasis.)
[33]
Firstly, it incorrectly used the word ‘and’. Secondly, it
assumed, without the benefit of the
statement, that SARS would not
comply with its obligations. An application for condonation was, at
this stage, not one of SARS’
obligations. It is trite that a
party seeking condonation must make out a case entitling it to the
court’s indulgence.[11]
The duty to apply for condonation for non-compliance with the Rules
is a matter between the court and the defaulting party, whereas
the
reference to obligations in Rule 56(1) relates to obligations between
the parties.
[34]
The majority of the high court opined that SARS’ contention
that the defaulting party need not apply
for condonation after
delivery of a Rule 56(1) notice is incorrect because it would render
Rules 4 and 52 superfluous. It does
not. Rules 4 and 52 serve
different purposes before the delivery of a Rule 56(1) notice:
respectively an extension of time by agreement
and a determination of
time by the tax court. The purpose of Rule 56(1) is to coerce
compliance because a party has shunned the
Rules, including Rules 4
and 52.
[35]
The majority of the high court found it irrational that a party can
ignore the Rules and wait for a Rule
56(1) notice to comply therewith
and so avoid having to apply for condonation. It is how the Rules
were designed. They allow a
party to play possum even beyond
non-compliance with a Rule 56(1) notice but before default judgment
is granted. In Taxpayer
v Commissioner for the South African Revenue Services,[12]
the
taxpayer’s application for default judgment was refused after
SARS failed to comply with a Rule 56(1) notice, without
having
applied for condonation. In that instance SARS did not comply within
the 15-day period allowed by Rule 56(1).
[36]
Compliance with a Rule 56(1) notice is akin to complying with a
notice of bar in terms of Rule 26 of the
Uniform Rules. If a party is
served with a notice of bar, it is enjoined to file the required
pleading in the five days set out
in the notice. If such party
complies, the bar is automatically lifted by dint of compliance with
the notice. A condonation application
is therefore not necessary.
[37]
In terms of the Uniform Rules, a defendant may file a notice of
intention to defend and fail to deliver a
plea for years. Nothing
will happen to advance the matter, until the plaintiff decides to
deliver a notice of bar.[13]
The defaulting defendant may then deliver its plea without applying
for condonation. It may even do so after the application for
default
judgment had been filed, subject to an adverse costs order. No
condonation application is necessary under these circumstances.
[38] In
an adversarial system such as ours, where the Rules allow the parties
to regulate the advancement of a
matter, specifically before litis
contestatio, it is important for the innocent party to timeously
invoke a Rule that is aimed at ensuring compliance with the Rules.
The innocent
party must be vigilant. The law favours and assists
those who timeously pursue their procedural and substantive rights,
and not
those who delay or neglect them. The taxpayer could have
invoked Rule 56(1) immediately after the lapse of the 45 days
stipulated
in Rule 31.
[39]
The high court ought to have held that a party who is served with a
Rule 56(1) notice need not apply for
condonation after complying with
the notice. It should have found that the default judgment
application was an irregular step and
granted the Uniform Rule 30
application.
[40]
There is no reason why the costs should not follow the cause. SARS
was successful and is entitled to its
costs.
[41] I,
accordingly, make the following order:
1
The appeal is upheld with costs, including the costs of two counsel.
2
The order of the high court is set aside and replaced with the
following:
‘2.1
The appeal is upheld with costs.
2.2
The order of the tax court is set aside and replaced with the
following:
“2.2.1
The application for default judgment is declared an irregular step
and set aside.
2.2.2
The taxpayer is ordered to pay the costs of this application.”’
C J MUSI
ACTING
JUDGE OF APPEAL
Appearances
|
For
|
K W
|
|
Instructed
|
Van
|
|
|
Hendre
|
|
For
|
M J
|
|
Instructed
|
Osborn
|
|
|
Honey
|
[2]
SA
Metropolitan Lewensversekeringsmaatskappy Bpk v Louw
1981 (4) SA 329 (O).
[4]
Wingate-Pearse
v Commissioner, South African Revenue Service
[2017] ZAGPJHC 218; 2017 (1) SA 542 (SCA) para 14.
[5]
Black
Mountain Mining (Pty) Ltd v Commissioner for the South African
Revenue Service
[2021] ZAGPJHC 800; 2021 JDR 3319 (GJ).
[12]
Taxpayer
v Commissioner for the South African Revenue Services
[2019]
ZATC 17.
[13]
Uniform
Rule 22 read with Rule 26. See Magdelena
v Road Accident Fund
[2024] ZAGPPHC 398 (unreported Case no: 24056/2020 Gauteng Division,
(Pretoria)) delivered on 15 April 2024 in which the defendant
failed
to file a plea for three years.
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