This one went up in smoke!

By Hylton Cameron, Director

Recently, the Supreme of Appeal case of Lion Match Company (Pty) Ltd (‘Lion’) v CSARS [2025] ZASCA 112, was handed down.

A rather interesting and somewhat complex case.

Two main issues were in dispute:

When can a taxpayer postpone a hearing which is set down in the Tax Court?; and
Can the Tax Court increase a tax assessment at the request of SARS at court, if the other party is not present?

Rather unusually, at least of late, the decision was not unanimous, with a split of 4 v 1.

Overall facts - summarised
Lion sold some shares and there was a dispute in regard to the capital gain with SARS. The matter was set down for hearing at the Tax Court on 18 November 2019.

Lion’s attorneys ceased to represent Lion on 17 October 2019, and on the day of the hearing at the Tax Court, an advocate appeared for Lion and asked for a postponement.

The postponement was refused, and the matter continued, albeit with SARS being the only party. Due to the matter proceeding, SARS requested that the assessment be increased. The Tax Court did not allow the increase, as Lion was not represented.

Lion appealed the refusal to allow the postponement to the Full Court in Pretoria (‘the Full Court’). There was also a cross appeal by SARS, as SARS wanted to increase its assessment, and this was not allowed in the Tax Court.

The Full Court dismissed Lion’s appeal for postponement and allowed SARS’s cross appeal (to increase the assessment).

This led to a petition to the Supreme Court of Appeal (‘the SCA’), and special leave was refused in regard to the postponement but allowed for the Cross-Appeal. Lion applied to the President of the SCA to reconsider the postponement issue. The matter before the SCA, per the current judgment was therefore:

Whether the SCA should allow the postponement issue to be considered; and
Whether the decision for the Cross-Appeal was correct.

Further facts, issues and the judgment of the SCA
On 18 November 2019 Lion, through its advocate, requested a postponement. The reasons for the postponement were provided in terms of an affidavit handed to the Tax Court. The Tax Court held that the affidavit did not address the most basic fundamentals for a postponement, which included that Lion was bona fide in seeking the indulgence.

On the basis that the postponement was refused, the legal representatives for Lion left, as their brief was only in regard to the postponement. SARS then proceeded to call its witnesses and the matter continued in the Tax Court.

On 12 December 2019 the Tax Court received a letter from the attorneys who had represented Lion. In essence, Lion had not re-imbursed the attorneys for disbursement costs (including costs of two Counsel) and hence they withdrew. There also seemed to be a conflict of interest between the attorney and Lion (the attorney of the law firm representing Lion was also a director of Lion).

The postponement issue was appealed to the Full Court and on 29 May 2023, and per a unanimous judgment, the postponement was dismissed.

Various reasons for the dismissal were provided, including that there was lack of good cause and bona fides on the part of Lion. With the final word being in view of the withdrawal on 17 October 2019, there was time to serve a substantial application for postponement, as opposed to the brief affidavit.

Lion then appealed to the SCA and two judges of the SCA refused such appeal on the grounds that there were no special circumstances meriting an appeal to the SCA.

There was then a reconsideration application by Lion to the President of the SCA. An interesting legal issue is that a decision to refuse or grant an application to the SCA is final. Provided that the President of the SCA may in exceptional circumstances, on his own accord or on application filed within one month of the decision, refer the decision for the court for reconsideration and if necessary, variation. From 3 April 2024 the exceptional circumstances test has been replaced with “in circumstances where a grave failure of justice would otherwise result or the administration of justice may be brought into disrepute”.

The SCA emphasised that such reconsideration process is not meant to allow the person a second bite at the cherry. There must be something exceptional. The issue is therefore, for the current matter, is there something exceptional?

The SCA stated that in this regard Lion simply put forward arguments that it had already provided which had been rejected. No exceptional grounds existed to justify a re-examination of the Full Court’s dismissal.

For the Full Court, in order for Lion to be successful (regarding the postponement) it needs to be evident that the lower court did not exercise its discretion judicially, was influenced by wrong principles or committed a material misdirection of facts. Lion bears the onus of proving this.

The Court stated:
“The party applying for postponement must demonstrate good cause why it should be granted. The factors to be taken into account include: whether the application was timeously made; the reason for the lateness if it was not timeously made; whether the explanation given by the applicant for postponement is full and satisfactory; whether there is prejudice to any of the parties; whether the application is opposed; the broader public interest; the prospects of success on the merits; the conduct of counsel; the costs involved in the postponement; the potential prejudice to other interested parties; the consequences of not granting a postponement; and the scope of the issues that must ultimately be decided. The list is not exhaustive.”

Lion did not provide any reason for the lateness of the application to postpone (from the date the attorneys withdrew on 17 October 2019 to when the matter was heard on 18 November 2019).

The SCA then concluded that Lion Match dismally failed to make out a case in support of its application for a postponement. No exceptional circumstances had been established. There was no probability of grave individual injustice to Lion. It is rather a situation where the administration of justice would be brought into disrepute if the reconsideration application were to be granted. As a result, the application for reconsideration should be struck from the roll, together with an appropriate order as to costs.

The cross appeal – a few brief comments
Per the comments above, the Tax Court stated it could not amend the assessment after Lion had effectively withdrawn from the appeal in the Tax Court. Therefore, when Lion appealed to the Full Court, SARS cross appealed to allow the assessment to be amended (obviously to increase the tax due).

The Full Court allowed the amendment, and an additional R2.2m tax was due. The reasons for the different approach by the Full Court are not provided in the SCA judgment. However, the SCA in its judgment stated that the Tax Court’s interpretation of the provisions of the TAA was incorrect.

The point being (per the SCA) that just because the other side withdraws from the proceedings, the Tax Court can still hear the appeal per s129(2) upon request of the party that does appear, and proof that Notice (of the hearing) was served.

The SCA quoted from another cases and stated that the Tax Court is a court of revision: it hears the whole matter and the Tax Court can substitute its own decision for that of the Commissioner. It could therefore order the assessment to be adjusted upwards or downwards.

The Dissenter – Norman AJA
The issues in the dissenting judgment were whether the refusal of a postponement was in the interests of justice (taking into account the reason that there was a conflict of interest by Lion’s attorney), and whether the cross-appeal (to increase the assessment) was correct.

The first reason (which I have not seen before and is somewhat amusing) is that the Full Court relied upon irrelevant authorities in support of its findings, which is a misdirection.

In terms of the conflict of interest and the withdrawal of the attorney, the attorney withdrew from Lion, Lion did not terminate the attorneys’ mandate. If Lion had terminated it would be expected to have considered its timing and its ability to find legal representation. This was a misdirection of the Full Court.

Norman AJA continued to state the Full Court further misdirected itself by considering the letter provided by the attorney which was delivered to the Tax Court judge on 12 December 2019, which was after the order for the postponement was refused on 18 November 2019 but before judgment was delivered on 25 February 2020. The reason being no such process (submission of a letter to the Tax Court judge) exists, and if such letter was to be considered, Lion should at the least have been allowed to respond to such letter.

Various other reasons were put forward by the judge, with her final comments being that she would have allowed the postponement, possibly with a suitable order in regard to costs against Lion.

My view
When one reads the above, I would arguably side with Norman AJA. The waters do become more muddy in trying to decide if the reconsideration application in the SCA should succeed with the test being whether there were exceptional circumstances. Per the reasons advanced there would seem to be such exceptional circumstances, although for this test the matter is certainly debatable.

When the matter was first heard by the Full Court, the bar (for Lion) was much lower; however, the Full Court agreed that Lion had not provided sufficient reasons for warranting a postponement, and specifically that no good cause had been shown.

In my view this this could have been possible on the papers although, without knowing all the history, one would have expected a better defence/attack when Lion was requesting the postponement in the Tax Court.

Whereto from here?
The short issue is if you in a dispute with SARS, try to remain on good terms with your legal representative, especially if the matter is about to be heard. Being a legal representative, I accept that I could be somewhat biased, or to use the words of the case – conflicted.

However, and more importantly, while generally one would expect with most matters with SARS a cost order would suffice for postponement, it clearly does not. This takes into account (although this may not have been argued) assuming the postponement is given, if SARS wins at the least there will be interest and potentially penalties on late amounts, so one would expect that there will be no “real” further disadvantage to the fiscus if a postponement is granted.

Despite the aforesaid, if you as the taxpayer are seeking a postponement, you should have sufficient time to prepare a decent argument as to why a postponement should be granted - and time and costs should be spent on this!

Failing which per this case, you incur costs to appeal, then appeal again and then ask the court to allow the appeal per a reconsideration application, which provides a high bar to overcome – and even if you win, you spent a considerable amount of time and cost, on just going back to the beginning.