Earlier this year, the North Gauteng High Court delivered judgement in an interesting case where a taxpayer sued SARS on the basis of unjustified enrichment. The taxpayer wrote a cheque marked ‘not transferable’ for SARS for R400 000. The money was owed to SARS in respect of VAT collected. The post-dated cheque was delivered to SARS, where it was accepted by an employee. But it wasn’t credited to SARS, which requested – and was given – another cheque.
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The taxpayer instituted action, making use of a common law remedy, the condictio indebiti, in order to obtain a refund of the first cheque. An amount of money corresponding to that of the first drawn cheque had been withdrawn from the taxpayer’s account. This cheque, it was established at trial, had been stolen after delivery to SARS.
Payment was effected by means of a ‘cloned cheque’ that was in all respects, but for the payee, similar to the genuine one. The real cheque was used to complete the process of collection between the different banks. Once located, the genuine cheque also sported date stamp irregularities between itself and the deposit slip.
Needing to prove Impoverishment
In order to succeed in the action, the taxpayer had to prove that he was impoverished, that SARS was enriched at his expense and that there was a causal connection between these two factors. It was submitted on the taxpayer’s behalf
that the delivery of the cheque constituted payment, and that a ‘deeming’ should take place, in that the SARS branch should ‘be deemed’ to have received the funds.
However, the SARS counsel contended that the collecting bank had acted negligently in making payment on a cheque with date stamp irregularities. Furthermore, SARS had not received payment from the first cheque. The second payment made by the taxpayer was received by the revenue service and the proceeds of this cheque were used to clear his VAT liability. SARS was therefore not enriched at the expense of the taxpayer. It was acting within the scope of its statutory mandate in collecting the proceeds of the second cheque. The court agreed: the taxpayer was not impoverished, despite the fact that his account had been debited twice, once by a fraudster and once by the revenue service.
Bank possibly at fault
Instead, the taxpayer had a potential claim against the bank involved, which had effected payment of the irregular cheque.
The claim was equal to the amount of the fraudulent payment, which was, of course, R400 000. (The court did not rule against the bank because the bank was not a party to the proceedings.)
Therefore, the taxpayer could not succeed in his claim under the condictio indebiti, and the action was dismissed in favour of SARS.
Peter O’Halloran is head of tax at BDO, Gaborone. Phone him on 00267 390 2779.