A Review of Constitutional Court Cases
7.4 Rudolph and Another v CSARS CCT 13/96
company and the creditors' and contributors' financial interests in the recovery assets must be weighed against this, peripheral, infringement of the right not to be subjected to seizure of private possessions. Seen in this light, I have no doubt that sections 417(3) and 418(2) constitute a legitimate limitation of the right to personal privacy in terms of section 33 of the Constitution."
On page 99 he continued:
"I am alive to the thrust of the applicants' argument that, as erstwhile auditors of the company, they co-operated fully and were at all times prepared to co-operate fully with the liquidators and their legal and other advisors to supply all relevant information required. If in the light hereof it was oppressive, or vexatious or unfair to summons or interrogate the applicants in the way they were summonsed or interrogated, their remedy was, as I have repeatedly stated, to approach the Supreme Court. Their alleged harassment and unfair treatment would not be in consequence of the substantive content of the provisions of sections 417 and 418 of the Act, but as a result of their improper application."
Although the case went against the appellant, this has important implications for the Commissioner for SARS as every time he claims to be exercising his powers of interrogation, inspection, audit and similar enquiries he has to ensure that his decision is not arbitrary and that all relevant considerations have been taken into account as this is what the courts will look to in their deliberations.
seized various documents. Rudolph subsequently brought an application before the Witwatersrand Local Division of the Supreme Court seeking an interim interdict restraining the Commissioner from exercising the powers of search and seizure as contemplated by section 74(3) of the Income Tax Act, pending a determination by the Constitutional Court of the constitutionality of that section.
The Court dismissed the application stating that the Interim Constitution specifically precluded the Supreme Court from making orders that suspended, in whole or in part, Acts of Parliament.
The appellants appealed to the Appellate Division (now the Supreme Court of Appeal) against this decision and directed their attack against the constitutionality of section 74(3) of the Income Tax Act. The matter was then referred to the Constitutional Court for a ruling on the common law grounds and failing this, the constitutionality of section 74(3). The Constitutional Court ruled that since the Interim Constitution did not operate retroactively, and the appellants were deprived of their possession, control and use of documents before the Interim Constitution came into force, it had no jurisdiction to rule on the matter and referred it back to the Appellate Division for it to rule on the common law grounds (Taxgram October 1994).
These were as follows :
• That an authorisation in terms of section 74(3), once issued and
executed, may not be used in perpetuity and that the use in April 1994 of the authorizations originally issued and executed in October 1993 was invalid.
• That the power to issue such authorizations was vested in the
Commissioner, that the delegation of this power to the Chief Director of Administration in the Department of Finance under section 3(1) of the Act was invalid and that the authorizations were therefore invalid.
• That the authorizations were invalid on the ground that they were vaguely and imprecisely worded.
Hefer JA, with Smalberger JA, Vivier JA, Nienaber JA and Plewman JA concurring, rejected the appellant's contentions and dismissed the application with costs.
It would appear at first glance that the taxpayer did not benefit at all from this judgement. In respect of Rudolph this may be true but for the taxpayer community at large there is an intriguing point to note and it is this - subsequent to this judgement the legislature was prompted to introduce new search and seizure procedures in the Income Tax Act, the Marketable Securities Act, the Transfer Duty Act, the Estate Duty Act, the Stamp Duties Act and the Value Added Tax Act. The essence of the changes made by the legislature was to require the Commissioner to have good reason for exercising his powers of search and seizure and to carry this out in a reasonable manner and at reasonable times. Furthermore, where the Commissioner found himself in the position that time was of the essence and that the search and seizure should be carried out immediately, without prior arrangement with the taxpayer and at odd hours, this could only be done by the issuing of a warrant by a Judge of the High Court after an ex parte application by the Commissioner.
The Commissioner was no longer permitted to authorize such a search and seizure. This is intriguing because in the Rudolph case the Court had found against the taxpayer.
The answer to this may lie in the case when it still lay before the Constitutional Court where the Commissioner's counsel made a concession in its written submission to the Court. J. Silke in his article in Vol 12 No 5 of The Taxpayer quotes on page 103 from the case:
" In the light of the aforegoing it is submitted that common law grounds for
invalidity of administrative action fall within the jurisdiction of the Supreme Court, including the Appellate Division, and that the Constitutional Court has no jurisdiction in such matters. Should it be held that this Court has such jurisdiction, it is conceded that one or more of the common law challenges
should succeed."
Again, although Rudolph lost his case on what may be considered to be a technicality of timing, the legislature took note of the Commissioner's concession and amended the aforementioned Acts before another attack arose against those provisions.