The Lion Match Company (Pty) Limited v Commissioner for the South African Revenue Service

Lion Match disposed of shares in Kimberley-Clark entities during the 2008 year of assessment, which were pre-valuation date shares acquired before 1 October 2001 (introduction of capital gains tax). Lion Match computed taxable capital gain using market values as at 1 October 2001 based on a KPMG valuation. SARS issued an additional assessment on 30 April 2012 with adjusted base costs for the shares, which Lion Match objected to in July 2013. The objection was disallowed in March 2014, and Lion Match appealed to the tax court in May 2014. The matter was set down for 18-29 November 2019. On 17 October 2019, Lion Match's attorney Mr Trikamjee (a director of both the law firm and Lion Match) withdrew due to a conflict of interest. On 18 November 2019, the first day of the hearing, Lion Match applied for a postponement through new attorneys who only had a brief for the postponement application. The tax court refused the postponement and proceeded in Lion Match's absence. SARS called witnesses seeking an upward adjustment of the assessment. The tax court refused to make the upward adjustment finding it lacked jurisdiction once Lion Match's appeal was "withdrawn". Lion Match appealed the refusal of postponement and SARS cross-appealed against the tax court's refusal to adjust the assessment upward.

• Whether the tax court correctly refused the application for postponement
• Whether the principles governing postponement applications were properly applied
• Whether the Tax Court has jurisdiction under ss 107 and 129 of the Tax Administration Act 28 of 2011 to upwardly adjust an assessment at the behest of SARS in the willful absence of the taxpayer or its legal representatives
• Whether rule 44(7) of the Tax Court Rules permits the tax court to proceed and decide the appeal in the taxpayer's absence
• Whether exceptional circumstances exist to warrant reconsideration under section 17(2)(f) of the Superior Courts Act

1. The reconsideration application in terms of section 17(2)(f) of the Superior Courts Act 10 of 2013 is struck from the roll with costs, including those of two counsel. 2. The appeal is dismissed with costs, including those of two counsel. The order of the full court was upheld, which included confirming the tax court's refusal of the postponement and varying the tax court's order to: confirm the disallowance of deductions of R6,409,109; alter the base cost of shares from R135,450,709 to R97,865,000 for KCSA shares and from R146,990,209 to R115,858,000 for KCSA Holdings shares; alter the taxable capital gain from R85,356,152 to R119,715,112; and alter the tax from R7,419,555 to R9,620,509.

The binding legal principles established are: (1) An application for postponement made on the day of hearing, rather than when the grounds arose, is not timely and does not demonstrate bona fides absent compelling explanation. (2) A taxpayer seeking postponement must provide full and satisfactory explanation of circumstances, which must address attempts to secure alternative representation and the nature of any claimed impediment to proceeding. (3) The Tax Court has jurisdiction under ss 107, 129 of the TAA and rule 44(7) of the Tax Court Rules to decide an appeal and adjust an assessment (including upward adjustments) when a taxpayer fails to appear, provided proper notice was given and the court has sufficient information to make its determination. (4) The withdrawal of a party's legal representative does not constitute withdrawal of the appeal itself. (5) The Tax Court functions as a court of revision that can substitute its own decision for that of SARS and is not bound by the assessment under appeal. (6) Reconsideration under s 17(2)(f) of the Superior Courts Act requires demonstration of exceptional circumstances amounting to probable grave injustice or circumstances that would bring the administration of justice into disrepute; mere repetition of arguments previously rejected does not suffice. (7) When exercising discretion on postponements, courts must balance: timeliness of application, adequacy of explanation, prejudice to parties, public interest, complexity of issues, and overall interests of justice.

The majority judgment observed that had the tax court granted the postponement in the circumstances presented, it would have brought the judiciary into disrepute. Meyer JA noted that it is not uncommon for litigants to seek postponements when their attorney withdraws rather than appointing new representation, and stated that judicial officers have a duty to curtail this abuse. The Court also observed that Ms Mahomed's affidavit contained inadmissible hearsay evidence regarding instructions from the board of G&B to Mr Trikamjee. The minority judgment by Norman AJA made extensive obiter observations including: that attorneys must withdraw timeously when conflicts arise and bear the risk if they delay hoping for payment; that conflict of interest is a matter for the legal practitioner, not the client, and details cannot be demanded due to privilege; that in complex tax matters involving expert evidence and taxpayer elections (such as valuation methods for pre-valuation date assets), fairness demands the taxpayer be heard and represented; that prejudice from postponement to SARS could be cured by a costs order on attorney-client scale; and that the full court erred in multiple respects including relying on incorrect authorities, improperly considering ex parte correspondence, and failing to properly apply interests of justice considerations. Norman AJA also noted the inappropriateness of Mr Trikamjee's letter directly to the judge and the tax court's consideration of it without affording Lion Match an opportunity to respond.

This judgment is significant for establishing important principles in South African tax law and civil procedure: (1) It clarifies that the Tax Court, as a court of revision under ss 107 and 129 of the Tax Administration Act, has the power to upwardly adjust assessments even in the absence of the taxpayer, provided procedural fairness and constitutional principles are observed. (2) It confirms that rule 44(7) of the Tax Court Rules permits the court to proceed and decide appeals when a party fails to appear. (3) It reaffirms strict application of postponement principles, requiring timely applications with full explanations and demonstration of bona fides. (4) It illustrates the high threshold for exceptional circumstances under s 17(2)(f) of the Superior Courts Act for reconsideration of petition refusals. (5) The split decision highlights ongoing tension between procedural efficiency and substantive fairness, particularly regarding legal representation in complex tax matters. The case demonstrates the consequences of late withdrawal of legal representation and emphasizes attorneys' duties when conflicts of interest arise.