CCT CASE NO: 208/2017 In the matter between:
ALAN GEORGE MARSHALL N.O. First Applicant RENE PIETER DE WET N.O. Second Applicant KNOWLEDGE LWAZI MBOYI N.O. Third Applicant JOHN ANDREW DE MARTIN N.O. Fourth Applicant RAY SITHOSOMHLE SITHEMBELE MSENGANA N.O. Fifth Applicant KOVIN SHUNMUGAM NAIDOO Sixth Applicant SAMSON MAKHUDU GULUBE Seventh Applicant (In their capacities nomine officii as current and duly
authorised Trustees of the SA RED CROSS AIR MERCY SERVICE TRUST)
and
THE COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE SERVICE Respondent
RESPONDENT’S SUBMISSIONS IN RESPONSE TO DIRECTIONS DATED 22 NOVEMBER 2017
1. The parties have been invited to file written submissions of no more than 10 pages on the extent to which a court may consider or defer to an administrative body’s interpretation of legislation, such as Interpretation Note 39 (“IN39” or "the note") issued by the South African Revenue Service
on 8 February 2013, and whether the approach of the Supreme Court of Appeal ("SCA") was in accordance with this.
The extent to which a court may consider or defer to an administrative body’s interpretation of legislation, such as IN 39
2. In Commissioner, South African Revenue Service v Bosch and Another1 the SCA, per Wallis JA in a unanimous judgment, held as follows:
“[17] There is authority that in any marginal question of statutory interpretation, evidence that it has been interpreted in a consistent way for a substantial period of time by those responsible for the administration of the legislation is admissible and may be relevant to tip the balance in favour of that interpretation. This is entirely consistent with the approach to statutory interpretation that examines the words in context and seeks to determine the meaning that should reasonably be placed upon those words. The conduct of those who administer the legislation provides clear evidence of how reasonable persons in their position would understand and construe the provision in question. As such it may be a valuable pointer to the correct interpretation….” [Footnotes omitted].
3. The authority referred to in the first sentence of paragraph [17] of Bosch includes Nissan SA (Pty) Ltd v Commissioner for Inland Revenue 1998 (4) SA 860 (SCA) at 870E-H, which dealt with the doctrines of subsecuta observatio and contemporeana expositio.
4. LAWSA vol 25(1) 2ed par 370 explains the meaning of these terms:
1 2015 (2) SA 174 (SCA) at paragraphs [17] and [18]
“…Contemporaneae expositiones are explanations of the meaning of an Act implicitly offered by public officials more or less simultaneously with or shortly after its commencement. …. A subsecuta observatio, on the other hand, is a custom or continuous practice which emerges after an Act has commenced and which inter alia derives its authority from long duration. A contemporanea expositio and a subsecuta observatio can in principle, therefore, not be regarded as one and the same thing, the latter bearing more interpretive weight than the former. It should, however, be emphasised that the courts do not maintain this distinction and seldom if ever make mention of a subsecuta observatio.”
5. In Secretary for Customs and Excise v Millman NO 1975 (3) SA 544 (A) the court considered the interpretation to be given to a section in the Customs and Excise Act, 91 of 1964. During the course of its judgment the court observed at 551D-F:
“ We were in fact informed from the Bar that the Department of Customs and Excise, by whom the Customs and Excise Act, 91 of 1964, is administered, does not hold the view that a detention in terms of sec.
114(2) is not a condition precedent to the establishment of a lien under sec.
114(1)(a).
We do not know for how long this view has been held by the Department, but it is a factor which, in view of the ambiguous language of sec. 114(1)(a), cannot be overlooked, and it may, together with the considerations I have mentioned, well be invoked to tip the balance where the language of sec.
114(1)(a) may fairly be construed in either of two ways. (Dig., 1.3.37; Voet,
1.3.19; R. v. Lloyd, 1920 A.D. 474 at p. 485; R. v. Detody, 1926 A.D. 198 at pp. 202-203).”
6. In the later case of Nissan SA (cited as authority in Bosch) caution was expressed about the application of the doctrines in the absence of evidence as to how long the view in question had been held. In general terms, however, it was said that:
“Those doctrines rest upon two foundations. One is that there must at least be room for the interpretation in the language of the provision. The other is that the interpretation must have been accorded it for sufficiently long without being gainsaid that it provides good reason for concluding that that is what it was intended to mean (see Rex v Detody 1926 AD 198 at 202- 203).”
7. The application of these doctrines coincides with formulation of the approach to the interpretation of documents reiterated in Endumeni,2 which includes the following statement:
“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.” [Emphasis added]
2 Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) at paragraph [18]
8. This passage was quoted with apparent approval by this court in KwaZulu- Natal Joint Liaison Committee v MEC for Education, KwaZulu-Natal and Others3. It has been referred to authoritatively in a number of other judgments of this court, including that in Democratic Alliance v African National Congress and Another.4
9. Not only is the note a document to which a court may have regard “in any marginal question of statutory interpretation” and as constituting evidence of the “conduct of those who administer the legislation”, it constitutes evidence of the material known to those responsible for the production of the legislation. The note forms part of the proper contextualisation of the relevant statutory provision (Cool Ideas 1186 CC v Hubbard and Another 2014 (4) SA 474 (CC) at paragraph [28]).
10. In ITC 1893 79 SATC 159 the court held that:
"On 10 December 2010 Income Tax Interpretation Note No 59 (‘the Interpretation Notes’) was issued in respect of the tax implications of, inter alia, the receipt or accrual of government grants. The weight that should be given to an interpretation note has been set out as follows by Zulman J:
‘Departmental practice is not necessarily, of course, an indication of what the law means. However, it seems to me that the departmental practice is a very sensible approach to what should be done in this type
3 2013 (4) SA 262 (CC) at paragraph [129].
4 2015 (2) SA 232 (CC) at paragraph [136].
of case. Plainly the procedure and the practice laid down by the Commissioner in that regard, is, if nothing else, commercial wisdom and good sense.’"5
Was the approach of the SCA was in accordance with the law?
11. The structure of the judgment of the SCA was to provide an introduction at paragraphs [1] to [10]; to summarise SARS’ argument at paragraph [11]; to summarise the applicants’ argument at paragraphs [12] to [15]; to set out the legal framework at paragraphs [16] to [23] prior to embarking on an independent interpretation of the relevant provisions - after setting out the legal framework within which the competing contentions of the parties are to be viewed - at paragraphs [24] to [30]. This interpretational exercise was carried out having regard to the approach to the interpretation of documents set out in Endumeni and independently of IN39.
11. In paragraphs [31], [32] and [33] the SCA had regard to IN39. It did so in the context of stating in paragraph [31] that "The various aspects of the argument made by the Trust are addressed in interpretation note 39, issued by SARS on 8 February 2013". It concluded paragraph [33] with the statement that:
“These Interpretation Notes, though not binding on the courts or a taxpayer, constitute persuasive explanations in relation to the interpretation and application of the statutory provision in question. Interpretation Note 39 has
5 ITC 1572 (1993) 56 SATC 175 at 186
been in circulation for years and has not been brought into contention until now.” (Footnote omitted).
13. The SCA clearly appreciated that IN39 served to explain the rationale behind the current wording and application of sections of the VAT Act (paragraph [31]) and that the note was not binding on the courts or a taxpayer (paragraph [33]). It treated IN39 as an aid to interpretation and, in the context, one that served only to confirm a conclusion at which it had already arrived (as the extract quoted in paragraph [31] establishes). The SCA did not suggest that IN39 amounted to a persuasive interpretation of the relevant sections, but rather that interpretation notes are “persuasive explanations in relation to the interpretation and application of the statutory provision in question”.
12. The SCA did say, in paragraph [33], that the note had been “in circulation for years and had not been brought into contention until now”. It also, as we have said, stated that the note explained the rationale behind the current wording of the statutory provisions in issue. As such, IN39 was permissibly taken into consideration.
13. We submit that the SCA did not defer to IN39 in its interpretation of the Act.
However, to the extent that the statement that interpretation notes are
“persuasive explanations in relation to the interpretation and application of
the statutory provision in question” exhibits any “deference” to IN39, we submit, on the strength of the exposition of the law contained in the first portion of this note, that the SCA was entitled to do so.
Conclusion
14. To answer the questions posed in the directions of the Chief Justice, we submit that the extent to which a court may have regard to an administrative body’s interpretation of legislation is limited to the extent to which that interpretation constitutes “evidence that it has been interpreted in a consistent way for a substantial period of time by those responsible for the administration of the legislation” in order to “tip the balance” in a case of
“marginal statutory interpretation”.
24. The SCA did not defer to IN39. It first interpreted the relevant provisions of the Act independently of IN39. Its reference to IN39 only served to confirm its interpretation. This reference was permissible in order to contextualise the legislation and is in compliance with an approach to statutory interpretation that is both well-established in our law and in conformity with the current view on the subject.
A R SHOLTO-DOUGLAS SC H CASSIM
Respondent’s Counsel Chambers, Cape Town 1 December 2017
