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Last Updated: 11 August 2004
THE SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Case number: 236/03
In the matter between:
THE
DIRECTOR-GENERAL:
DEPARTMENT OF TRADE
AND INDUSTRY
FIRST APPELLANT
THE MINISTER OF TRADE
AND INDUSTRY
SECOND APPELLANT
and
SHURLOCK INTERNATIONAL
(PTY) LIMITED
RESPONDENT
CORAM: HARMS, FARLAM, MTHIYANE, NUGENT JJA et VAN HEERDEN
AJA
HEARD: 2 MARCH 2004
DELIVERED: 25 MARCH
2004
SUMMARY: General Export Incentive Scheme Guidelines (Revision 2)
– whether exporter must repay an incentive payment if original documents
listed in para 3.9 of Scheme Guidelines cannot be produced within five year
period thereafter.
JUDGMENT
FARLAM JA
[1] The issue for decision in this appeal is whether, upon a
proper interpretation of Revision 2 of the General Export Incentive Scheme
Guidelines (which became effective on 1 October 1992), an exporter whose claim
for payment of an export incentive under the Scheme
had been checked and paid by
the Department of Trade and Industry and who is unable subsequently within the
five year period provided
for in the Scheme Guidelines to furnish the original
documents listed in paragraph 3.9 thereof will automatically forfeit his right
to the earlier payment.
[2] The scheme, which I shall hereinafter call
GEIS, was introduced as a State prerogative. It was designed to encourage the
export of
certain goods in order to generate foreign currency income for the
country. The essential features of the original export incentive
scheme
introduced by the Department of Trade and Industry and of GEIS, which replaced
it, have been considered by this Court in Dilokong Chrome Mines (Edms) Bpk v
Direkteur-Generaal, Departement van Handel en Nywerheid 1992 (4) SA 1(A) and
South African Co-operative Citrus Exchange Ltd v Director-General: Trade and
Industry and Another 1997 (3) SA 236 (SCA). In both of these cases (the
Dilokong Chrome case at 22E and 32A-C and the Co-operative Citrus
case at 239F) it was pointed out that the scheme has pro tanto the
force of legislation and must be interpreted in the same
manner.
[3] The paragraph to be interpreted in this case is paragraph
3.11, read with paragraphs 3.9 and 3.10.
These paragraphs read as
follows:
‘3.9 The following documentary evidence in substantiation of
claims is required: Bill of Entry for Export (DA550 or DA25 or
DA28 as the case
may dictate), Declaration in Regard to Foreign Exchange Proceeds (F178), Bill of
Lading (or Air Waybill) and Commercial
Invoice. Of these documents, certified
copies of the DA550 (or DA25 or DA28) and the F178 must be submitted with
claims. The original copies of all the above-mentioned documents must be
kept available for inspection by the Department for a period of
at least five
years. The Department may, however, request the submission of any further export
documents such as the Commercial Invoice
and/or the Bill of Lading (Air Waybill)
at any time, if it so desires.
3.10 The Department will check all claims and
make a determination as regards the amount of the claim.
3.11 The decision by
the Director-General as to the eligibility of any product for benefits under the
General Export Incentive Scheme
as well as the determination of the amounts of
the incentives will be final and conclusive. Nothing in this document shall be
construed
as an offer open to acceptance constituting any contractual or in fact
any other obligation or any enforceable right against the
Department. The
Director-General may at any time conduct a full-scale investigation to verify
any information furnished by a claimant.
If the Director-General is satisfied
that the claim was based on false information or that the claimant has furnished
misleading
information, he may disallow the claim and recover the full amount
paid out to the claimant. Interest on bona fide overpayments will
be levied at
the rate prescribed in terms of section 1(2) of Act No. 55 of
1975.’
[4] The Department of Trade and Industry became liable in
June 2000 to pay the respondent, an exporter, an amount of R387 644 as its
export
incentive under the scheme for the period 1 January 1997 to 11 July 1997.
It refused to pay this amount to the respondent because,
so it contended, the
respondent was obliged to repay to it sums totalling R106 422, which had
previously been paid as export incentives
(plus interest thereon) to the
respondent in respect of the periods from July 1992 to December 1992 and from
January 1993 to June
1993. The respondent instituted an action in the Transvaal
Provincial Division of the High Court against the Director-General of
the
Department and the Minister of Trade and Industry claiming payment of the amount
of R387 644 plus interest and costs. The appellant
defended the action. They
admitted that the respondent became entitled to payment of the amount claimed
but averred that the department’s
indebtedness to the respondent in this
amount was extinguished by set-off. The defence of set-off was based on the
allegation that
the respondent owed the Department the amount of R1 066 422 to
which I have referred above. The first appellant also brought a
counterclaim
against the respondent for R678 778, being the balance of the amount of R1 066
422 (after deduction of the respondent’s
claim of R387 644) which he
alleged the respondent owed to the department.
[5] The first
appellant’s contention that the amount of R1 066 422 was repayable to the
department was based on the fact that the
documents which the respondent was
obliged to keep for five years were lost when it moved offices at some stage
after the export
incentives in question were paid. Although the first appellant
originally averred also that he was satisfied that the respondent
had furnished
misleading information in respect of the claims, this contention was abandoned
before the trial commenced. (At no stage
was it alleged that the
respondent’s claims had been based on false information.)
[6] At
the trial there remained two issues for determination, viz.
(a) whether the payments made to the respondent in respect of the claims for the two periods referred to in para 4 above were provisional payments which were conditional upon the claims being capable of verification; and
(b) whether the automatic consequence of the respondent’s having lost the relevant documents and thus being unable to furnish them to the department on request was that the department became entitled to recover the amounts paid to the respondent in respect of its claims for the said periods.
[7] The trial came before De Vos J, who rejected
both of the contentions advanced on behalf of the appellants and gave judgment
in favour
of the respondent in the amount claimed. The present appeal is against
that judgment.
[8] Counsel for the appellants contended that upon a
proper interpretation of the GEIS Guidelines a claimant’s entitlement to
payment
of an export incentive is conditional upon compliance with its
obligation to keep for verification purposes the prescribed documents
and that
the respondent, having lost the documents in question before a full-scale
investigation as envisaged by paragraph 3.11 had
been conducted, was not
entitled to retain the benefit of the payments received, which (so it was
contended) were provisional. In
developing this submission counsel contended
that the Guidelines envisage a two-phase process of determination by the
department
of an exporter claimant’s entitlement to the incentive. The
first phase, which is conducted in terms of paragraphs 3.9 and
3.10, culminates
in what was described as a provisional determination, which is followed by a
provisional payment. The provisionality
of the determination and of the
subsequent payment falls away and the initial determination and payment become
final either on the
effluxion of the five year period referred to in paragraph
3.9 or when a full-scale investigation under paragraph 3.11 leads to the
verification of the claim.
[9] Counsel conceded that neither the
provisionality of the initial determination and the subsequent payment nor the
conditionality of
a claimant’s entitlement to an incentive were expressly
stated in the Guidelines but he submitted that they were a necessary
inference
from the Guidelines. When asked to formulate what precisely the necessary
inference was, he said that it read as follows:
the entitlement to the incentive
is conditional upon compliance by the claimant with the obligation imposed upon
the exporter in
the third sentence of paragraph 3.9. This obligation he
contended was a mandatory obligation. It followed, so he submitted, that
a mere
failure on the part of the exporter to keep the necessary original documentation
led automatically to forfeiture of the entitlement
even if certified copies were
available and/or a full-scale investigation to verify the entitlement was still
possible.
(As a fact copies of all the necessary documents were not available
and a full-scale investigation to verify the entitlement was not
possible. This
is, however, not relevant in the present matter because the correctness of
counsel’s submission has to be tested
in the context of cases where copies
are available and where a full-scale investigation is possible. It is also only
fair to the
respondent to record that the appellants accepted that the
respondent had acted bona fide at all times and that the loss of the
documents in the present case does not give rise to any sinister
inference.)
In my opinion it is not possible to draw the necessary inference
for which counsel contended.
[10] On the face of it there is no
expressly stated sanction for a failure on the part of an exporter to keep the
necessary documents but
it hardly needs stating that such a failure may well
give rise, in appropriate cases, first to a suspicion and thereafter
satisfaction
on the part of the first appellant that a claim was either based on
false information or that misleading information had been furnished.
If the
first appellant were so satisfied, then the necessary jurisdictional fact for
the invocation by him of his power to disallow
a claim and recover the full
amount that had been paid would be present. It is significant in my view that
the first appellant’s
power to disallow a claim and to recover what was
paid was expressly made subject to the presence of one or other of the
jurisdictional
facts I have mentioned. It is clear, however, from the wording
used that, even if one or other of those jurisdictional facts were
present, the
first appellant still had a discretion as to whether he would use his power to
disallow a claim. On the other hand,
if counsel’s argument is correct, the
mere failure of an exporter to keep the necessary original documents (even if
such failure
were due to a factor entirely beyond his control, such as a fire at
his premises, and even if the missing documentation could be
reconstructed
and/or a full scale investigation still be conducted) will lead automatically to
a forfeiture of the claim, which would
be a very harsh result indeed.
[11] I cannot see the necessity to draw such an inference from the
wording of the Guidelines nor do I see any necessity to read in the
word
‘provisional’ in paragraph 3.10 before the word
‘determination.’ After all, the determination in paragraph
3.10 was
intended to follow the submission of certified copies of the bill of entry for
export and the declaration in regard to foreign
exchange proceeds and the
department had the full right, while checking a claim and before making a
determination, to request the
submission of any further export documents. It is
true that claims were provisional in the sense that they were subject to
disallowance
by the appellant, but on the plain wording of paragraph 3.11 the
power of disallowance was made expressly subject, as I have said,
to the
presence of one or other of the jurisdictional facts stated, neither of which is
present in this case.
[12] In the circumstances I am satisfied that
the contentions advanced by counsel for the appellants cannot be accepted and it
follows
that the appeal must fail.
[13] The following order is
made:
The appeal is dismissed with costs, including those occasioned by the
employment of two counsel.
.................
IG FARLAM
JUDGE OF APPEAL
CONCURRING
HARMS JA
MTHIYANE JA
NUGENT JA
VAN
HEERDEN AJA
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