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IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO:   A225/2014

Dpp Ref No: 9/2/5/2-2014/0292

Reportable: YES

Of interest to other judges: YES

Revised.

23 September 2016

In the matter between:

GRAYSTON TECHNOLOGY INVESTMENT (PTY) LTD                                First Appellant

PIETERS, BERNADUS HERMANUS                                                        Second Appellant

And

THE STATE                                                                                                         Respondent

 

JUDGMENT

SPILG J

INTRODUCTION

1. Grayston Technology Investment (Pty) Ltd (‘Grayston’) and Mr Pieters were charged in the Regional Court with numerous tax related offences.  Grayston was identified in the charge sheet as accused no.1 duly represented by Pieters.

In addition Pieters was separately charged in his personal capacity as accused no.2. It is common cause that he was the sole shareholder and managing director of the company. He was also its public officer for tax purposes.

It is therefore evident that Pieters would be personally liable for outstanding amounts owed by Grayston to the Commissioner: South African Revenue Services (‘SARS’) under s180 of the Tax Administration Act 28 of 2011 (‘TAA’) if his negligence or fraud resulted in the failure to pay any tax debt[1].

2.  The first set of charges concerns the failure to submit VAT returns under the Value-Added Tax Act 89 of 1991(the ‘VAT Act’) and the failure to submit PAYE returns under the Income Tax Act 58 of 1962 (counts 1 to 66).

3. In addition both appellants were charged with common law theft of both VAT monies amounting to R946 038.92 (30 counts) and PAYE monies totalling R844 554.32 (63 counts), with alternative counts of contravening various provisions of the VAT Act and the Fourth Schedule of the Income Tax Act respectively (counts 67 to 96 and 97 to 160).

The alternative counts related to a failure to pay over to SARS VAT monies when they fell due in contravention of s 58(d) read with ss 28(1) and (2) of the VAT Act (alternative counts 68 to 96) and also a failure to remit PAYE monies in contravention of para 30(10) (a) of the Fourth Schedule to the Income Tax Act (alternative counts 97 to 160).

It is common cause that the total capital amount involved was paid over before the prosecution was instituted against them.

4. The appellants were convicted of failing to submit the tax returns and received suspended sentences. Pieters was also convicted on four separate counts of failing to render personal income tax returns. 

In addition both appellants were convicted on all the theft charges and received suspended sentences.

5. The trial magistrate refused to grant leave to appeal. However a petition to the judge president was successful in respect of the theft convictions for both VAT and PAYE (being counts 67 through to 160).

 

THE ISSUES 

6. The trial court held that the appellants had stolen from the fiscus VAT and PAYE monies. The basis was that: “The money never belonged to them and therefore they had no right to dispose of it….SARS never consented to it being used by the accused and never would have consented either. The fact is, the accused never had the right to use the money for their own purposes, no matter how pressing the need was to do so”.[2]

The appellants contend that no relationship of trust was established between Grayston and SARS. They also submit that there was no intention to steal.

7. Prior to the hearing a case which subsequently was reported as Director of Public Prosecutions, Western Cape v Parker 2015 (2) SACR 109 (SCA)  (77 SATC 224) came to the attention of the appellants and was introduced via the supplementary heads of argument prepared by the appellants’ attorney Mr van Schalkwyk.

8. In Parker the Supreme Court of Appeal dealt with the following legal question:

‘Whether a VAT vendor who has misappropriated an amount of VAT which it has collected on behalf of Sars can be charged, with the common-law crime of theft.[3]

9.  The SCA held that the relationship created between SARS and the vendor under the VAT Act was one of debtor and creditor and not one of agency or one akin to that of a trustee[4].

10. Adv Karam who represented the appellants at the hearing argued that the ratio in Parker is dispositive of all the issues before us. Adv Simpson on behalf of the State submitted that the SCA judgment was concerned with the nature of the relationship established under the VAT Act between SARS and a vendor which, he submitted, differs from the one imposed on an employer under the Fourth Schedule of the IT Act and that neither statute deals with the liability of the individual by whose hand a corporate taxpayer commits theft.

11. Prior to the hearing the parties were requested to also consider whether the offences and penalties prescribed under the relevant taxing statutes, expressly or by necessary implication,  precluded the appellants from being charged with the common law crime of theft even if the charges were otherwise competent.

12. In light of Parker the State accepted that the appeal must succeed in respect of Grayston’s theft conviction for VAT monies. The issues which remain are:

a. Whether Pieters personally  can be found guilty of theft in respect of the VAT monies;

b. Whether both appellants are guilty of theft of the amounts deducted as PAYE from the employees’ pay packages;

c. Whether the appellants can be charged with common law theft or only with the statutory offences under the relevant tax legislation.

 

REQUIREMENTS FOR THEFT

13. The historically accepted definition of theft is to be found in R v von Elling, 1945 AD 234 where the Appellate Division said at 236[5]

'The ordinarily accepted definition of theft which I take from Gardiner and Lansdown on Criminal Law is as follows: 'Theft is committed when a person fraudulently and without claim of right made in good faith takes or converts to his use anything capable of being stolen with intent to deprive the owner thereof of his ownership, or any person having any special property or interest therein of such property or interest'

The court in von Elling continued[6]:

‘But a fraudulent taking of a thing from its owner, or any other fraudulent dealing with it, cannot, as a general rule, deprive the owner of his legal right of ownership in the thing. It can, however, deprive him of the benefits of his ownership (such as use and possession), and so long as the thief remains in adverse possession or control of the stolen thing, he is continuously guilty of a fraudulosa, contrectatio which deprives the owner of those benefits’.

14. More recently, in S v Boesak [2000] ZASCA 112; 2000 (3) SA 381 (SCA)  at para 96, Smalberger JA defined theft as follows:

‘Theft, in substance, consists of the unlawful and intentional appropriation of the property of another (S v Visagie [1990] ZASCA 124; 1991 (1) SA 177 (A) at 181I). The intent to steal (animus furandi) is present where a person (1) intentionally effects an appropriation (2) intending to deprive the owner permanently of his property or control over his property, (3) knowing that the property is capable of being stolen, and (4) knowing that he is acting unlawfully in taking it (Milton South African Criminal Law and Procedure vol II 3rd ed at 616)’.

15. In the present case the issues concern whether the property or interest in dispute was capable of being stolen in law and if so whether it was owned by SARS or whether SARS had any special property or interest in the funds they represented, or alternatively, and as will be examined later, whether there was a failure to effect proper accounting entries pursuant to funds that were received under an obligation to so account.

It should be added that the theft of funds from a bank account would not only arise where monies are standing to the credit of the accountholder but also if there is an available balance on an overdraft facility granted in respect of the account.

16. Aside from the element of unlawfulness, the crime of theft is generally understood to require that the thing stolen is moveable incorporeal property, that the  property belongs to or is in the lawful possession of the victim and that the intention to appropriate includes an intention to permanently deprive the victim of possession. See generally Prof CR Snyman, Criminal Law (6^th ed) at 475.

17. The case before the court raises issues concerning whether the thing stolen is limited to property, and if so whether it is one of the exceptions in terms of which incorporeal property can be stolen, whether the victim had to be in possession of the right at some stage prior to the theft and if so how delivery would be have been effected if the right was held or otherwise under the control of the perpetrator or a third party. A final issue is; what would be required to constitute the unlawful act of appropriation if an interest short of ownership can be stolen while it is under the control of another?

In Criminal Law  at 493 -500 the author collates these special cases under the rubric; “credit, including the unauthorised appropriation of trust funds”.

18. Generally cases allow a theft conviction in respect of funds standing to the credit of the perpetrator’s account if the victim enjoyed a right established by reason of a relationship of trust in respect of any portion of those funds, provided the relationship was not solely that of debtor-creditor. See Parker. This would appear to equate to where the account holder owed a fiduciary duty to the person who has a protectable right or interest in the funds in the account.

In such cases an agent who regularly purchases and sells merchandise on behalf of his principal using funds initially provided by the latter and who only has to repay the net profits at some future date will not be guilty of theft on this ground since the relationship is based purely on the personal rights established by a contractual debtor-creditor relationship. However, as appears below that is not the only basis on which a theft of monies can be committed.

19. The common denominator in the trust or fiduciary relationship type cases concerning money held in an account is that the courts approach the requirements that only property is capable of being stolen and that theft requires an act of appropriation from the perspective of whether the victim enjoyed a right or interest to either claim funds available in an account or to have it retained and applied in a particular manner and what was the mechanism (ie; the method) used to appropriate the right or interest in question.

Case law accepts the commercial reality that the mechanism used to unlawfully appropriate moneys standing to the credit of an account (even if it is only an electronically generated credit) will involve either the direct withdrawal from an account of an amount in which the victim has a special property or interest, or a dishonest accounting (including a total failure to account) to the victim for the way in which the funds were dealt with.

20. These developments arose as a consequence of the accelerated pace of commercial and banking  activity which inaugurated, and has evolved into, an electronic banking system and a resultant cashless society for all but minor transactions- thereby obviating the physical transfer of cash each time a payment is made or a bank transfer is effected.  

The application of legal principles regarding theft is however complicated by reason of three particular features of our common law. Firstly that the bank, and not the  customer,  is the owner of the money available in the account; secondly, that once money is deposited into an account it loses its identity through commingling (‘comixtio’), a situation exacerbated by  bank  transfers effected solely by means of book entries; and finally because our law adopted the requirement of a physical handling to satisfy the previously more limiting requirement of  contrectatio - a feature that would be absent in the case of an incorporeal or where, to the knowledge of the account holder, a cheque was incorrectly  deposited into his account yet he nonetheless withdrew the funds it represents for his own benefit.[7] The requirement of contractatio has since been replaced with the broader and more flexible concept of appropriation, which includes a dissipation of a protectable right or interest.

See the detailed analysis by Milne J (at the time) in S v Harper  1981 (2) SA 638 (D) at 664G-666H.[8]

21. Case law reflects how the courts  have grappled with the complexity of commercial transactions, the monetary system and financial instruments in circumstances where the property or the thing in question has lost its identity, through commingling or by undergoing a metamorphosis and no longer existing in its original form , and where there was no physical act of handling involved despite the actions of another person having the effect of taking away the right or interest from the person entitled to it. Most cases concern the appropriation of funds from a bank account. However the issues involved in the financial sector extend to the use of credit card facilities, derivatives and the plethora of other financial instruments such as uncertified securities[9]. The issues also extend to other incorporeal things which my brother Lamont J in S v Ndebele and Others  2012 (1) SACR 245 (GSJ) at 254I -255A identified as including a  “characteristic which attaches to a thing” in order to find that electricity could be stolen. It is implicit that the court was referring to a thing which still maintained  the intrinsic quality of  ''’n selfstandige deel van die stoflike natuur' (literally; an independent or free-standing part of a physical nature (which would include an element).[10]

See generally Snyman Strafreg 3 ed at 493.

22. The evolutions which occurred in banking and general monetary exchange systems resulted in our criminal law accepting that the incorporeal right in funds standing to the credit of an account could be stolen and that in such circumstances accounting entries may be equated with physical transfer.

The operation of a bank account was explained by Selikowitz J in Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1995 (4) SA 510 (C) at 531J-532C   as follows:

‘In a current account where the account reflects a credit balance, the customer is the creditor and the bank his debtor. The customer does not own the cash in the bank. What flows from this is that whenever the bank is required by its customer to pay money to that customer or, on his instruction, to a third party, the bank pays out with its own money and not with the money of the customer. The bank then recovers the money paid out by debiting the customer's account. (See, for example, Kearney NO v Standard Bank of South Africa Ltd  1961 (2) SA 647 (T) at 650.) For the sake of completeness, it should be noted that, although the money deposited in the bank ceases to be the customer's money, he nevertheless has a 'special property or interest' in the money reflected in his bank account (see S v Kotze (supra at 125); S v Graham  1975 (3) SA 569 (A) at 576-7).

 Where the customer's current account is overdrawn, the role of the bank and the customer are reversed. The bank becomes the creditor and the customer is the debtor. It is important to note, however, that the agency relationship is not affected and the bank still acts as agent when carrying out the instructions of its customer to make payments against the customer's overdrawn account.’[11]

19. The automated accounting system which generated transfers of two or three decades ago (which included a general banking purposes facility[12]) has been succeeded by virtual money in the form of electronic debit and credits effected through accounting systems software programs. However the principle remains the same, as appears from Ndebele at 254E -255A where Lamont J provides a description of the nature of property created by electronically generated credit entries in a bank account:

“The credits exist electronically and constitute a cash value sounding in money. The rights reflected by the credit record with the customer/ banker contract, however, vest in the customer who can use the credits at his will. The customer whose account was debited to create the credit in the other customer's bank account has diminished claims against the bank in his account. On the authority of Nissan, such person has lost a thing capable of being stolen and that thing is stolen when the customer uses the credit to which he is not entitled. There is no physical handling of anything.”

23. The development of our criminal law in relation to the theft of money in an account, and I believe its extension to certain other incorporeals and fungibles should in my respectful view not be construed as exceptions to the Roman Dutch common law base which was grounded on the fraudulent physical appropriation of real rights in corporeal property or a physical manifestation of a component of such right, the most obvious being the right of possession.

24. While intention is an element for all common law crimes, the three unique  requirements for theft, being that the property is limited to corporeals, that the appropriation must be by way of the actual handling of the property (contrectatio) and that such handling can only be unlawful if it is “fraudulent”[13], are intimately  linked. By way of illustration the requirement of physical handling cannot be satisfied in the case of an incorporeal, and a corporeal can only be appropriated provided it is physically taken or continues to be held without the permission of the true owner or the person who the true owner has allowed to exercise a possessory or usufructuary right. The requirement of “fraud” in the technical sense used in crimes of theft was necessary in order to distinguish an appropriation based on the consensual transfer of corporeal property. 

25. The difficulties faced by our common law in its more pristine civil law application when dealing with money held in a bank account arise because money in a bank account does not constitute the property of the account holder but is that of the bank[14] and that money, being a fungible, loses its identity through commingling (commixtio) with the other funds in the account, including the bank’s own borrowings to the account holder by way of an overdraft facility[15].

The civil law needed to find a way of allowing an account holder whose funds have been depleted by unauthorised withdrawals to ‘follow’  and recover amounts that are traceable back to the original wrongful appropriation which remain standing to the credit of the thief’s account [16].

26. The basis for allowing such an action is not as an exception to the rei vindicatio (which cannot apply to fungibles since they lose their identity)  but on the basis relied on by Thirion J in  Commissioner of Customs and Excise v Bank of Lisbon International Ltd and Another  1994 (1) SA 205 (N).

The court found that the fraud was of such a fundamental nature as to vitiate the entire transaction thereby depriving the delivery into the thief’s own bank account of any legal effect[17]. The court relied on Graham at 574. In Graham the court held that the transaction was void and not voidable because there was no contractual nexus between the parties that could account for the transaction and because the victim never surrendered dominium in the right which was stolen[18].

27. It would appear that the court in Bank of Lisbon however considered that this by itself did not allow for a remedy to follow the funds for purposes of afforded a right of recovery.

The court therefore undertook an enquiry to establish whether our law afforded a right of recovery similar to that of a tracing order in English law, which allows for this provided the stolen money is “traceable either in specie or in its proceeds or investment”.[19]

As part of the reasoning the court considered it necessary to determine whether the victim enjoyed a right recognised in law which could link the entitlement he had to the funds which had been appropriated out of his account at Bank A with the funds which became commingled in the account held by the thief in Bank B, despite Bank B in law now becoming the owner of the funds. The court relied on the victim retaining a “special property or interest” in the stolen money[20] .

The court concluded that the victim could rely on the actio Pauliana “where the fraudulent debtor had neither been declared insolvent nor was in insolvent circumstances at the time when he disposed of the property which he had fraudulently obtained from the creditor”. [21]

Aside from the actio Pauliana, the court considered that  an unjust enrichment action was also available under the condictio sine causa.[22]

The underlying premise in Bank of Lisbon was that the victim ought to be able to recover the balance of the proceeds of the theft which might still remain in the thief’s account.[23]  

28. In the subsequent case of Nissan South Africa (Pty) Ltd v Marnitz NO and Others (Stand 186 Aeroport (Pty) Ltd Intervening)  2005 (1) SA 441 (SCA) the SCA echoed Thirion J’s  concern that the remedy needed to adequately protect the victim of a theft or fraud of monies in the event of the insolvency of the debtor.[24]

Streicher JA approved Thirion J’s reasoning in Bank of Lisbon insofar as fraud will vitiate the entire transaction with the effect that delivery into the thief’s account has no legal effect. The SCA considered that once this is so “it was not necessary in Bank of Lisbon to resort to the actio Pauliana”.[25] The court however left open the availability of this remedy or that of unjustified enrichment to afford a preferential right of recovery.[26]

29. In  Trustees, Estate Whitehead v Dumas and Another  2013 (3) SA 331 (SCA) a line was drawn between the Nissan and Bank of Lisbon type cases where there was no contractual relationship accounting for the transfer of funds and the case before it where the victim invested money with the insolvent pursuant to a contract induced by fraud. The SCA found that the payment arose out of a debtor-creditor relationship.[27]

30. Shorn of legal terminology the courts in providing a civil remedy of recovery are not concerned with the niceties of fungibles and ownership of funds in an account but rather focus on whether the victim had retained his right in the funds standing to the credit of an account (referred to in the criminal law case of Graham as the victim not having surrendered his “dominium” in the right which was stolen[28]).

31. The principles enunciated in these cases readily apply where the balance of stolen moneys that were deposited can still be identified as remaining in the thief’s account by a chronological reference to the bank’s records of funds entering and being withdrawn from that account. This would also apply to an erroneous bank transfer. See Nissan at para 23 and also Absa Bank Ltd v Lombard Insurance Co Ltd  2012 (6) SA 569 (SCA) at para 14.

32. A somewhat different legal situation arises where funds standing to the credit of someone’s account have either entered that account by reason of a special relationship in terms of which the holder of the account is in fact a nominee, trustee or agent in respect of the monies. It may also occur where the holding of the funds in the account are to be treated as transferred to another although they may only be paid out at some future date. An example is where an attorney holds money for his client and then agrees to retain it as stakeholder pending the outcome of a dispute between his client and a third party (a situation which might have presented itself in Eds South Africa (Pty) Ltd v Nationwide Airlines (Pty) Ltd and Others  2011 (5) SA 158 (SCA) if there had been an agreement that the attorney would hold his client’s funds as a stakeholder).

These cases allow a person in appropriate circumstances, and absent estoppel[29], to follow incorporeal rights for purposes of recovery.

33. The first point of departure between criminal law and civil law in relation to theft is the remedy afforded. Criminal law is concerned solely with whether there has been an unlawful act of appropriation. By contrast the civil law of theft is premised on allowing a right of recovery against an account controlled by the party who wrongfully appropriated the funds (as per Nissan and possibly also based on the actio Pauliana or an unjust enrichment claim as  raised in Bank of Lisbon).

34. The second is that in relation to the unlawful appropriation of monies in an account our criminal law did not proceed on the basis of developing the Roman Dutch Law, save possibly by replacing the requirement of a ‘contractatio fraudulosa’ with an unlawful appropriation as discussed by Milne J in the Harper judgment at 665D-666B.  Nor did it arise through the direct reception of the English Law doctrine of conversion or any of its other special remedies.

On the contrary Innes CJ in R v Rorke 1915 AD 145 rejected the concept of theft by conversion in favour of ‘ theft, fraudulosa contrectatio’[30] and in civil law Lord de Villiers had said  in the earlier case of Marcus v Stamper and Zoutendijk 1910 AD 58 at 75 that:

“I confess that I am unable to attach a definite meaning to the words "special property." It is a phrase of the English law which has not, so far as I know, found general acceptance in our law”

Innes J (at the time) echoed the same sentiment at 80:

“Nor is he driven to rely upon the doctrine of special property in the thing sold --- an idea expressed in the terminology of the English law, and of doubtful efficacy, according to Roman-Dutch practice, to supply a right of action if none were present without it.”

35. The developments in our criminal law relating to the unlawful appropriation of monies in an account arose from the introduction of sections 179 and 183 of

the Native Territories' Penal Code (Cape) Act 24 of 1886. The Act applied in the then Transkeian territories which were under the direct control of the Governor of the Cape and came to be known as the Transkeian Penal Code.[31] It will be referred to as the ‘Penal Code’.

36. In R v Zonele  1959 (3) SA 319 (A)  at 326G Holmes AJA (at the time) explained the genesis of the Penal code:

 ‘In 1886 the Cape Legislature passed The Native Territories Penal Code, Act 24 of 1886. It was a comprehensive penal code expressly for the Transkeian Territories. It contained 270 sections. According to Gardiner and Lansdown's Criminal Law and Procedure, vol. 1 ed. 6, it was drafted by 'a body of eminent South African jurists'.’

37. Despite it limited application, in a fundamental way the Penal Code came to inform our criminal law jurisprudence. It came to be applied more broadly and by the 1890’s certain of its sections were regarded as correctly expressing the law of the Cape Colony. This might explain why it was considered in appropriate circumstances to correctly set out the Roman Dutch criminal law system while in others as an acceptable basis for extending it.

38. Accordingly, although drawn by South African jurists the Penal Code introduced several English law developments which did not have a counter-part in our jurisprudence. Among these were the concept of common purpose contained in  s 78 of the Penal Code [32], the requirements for perjury in s106 which the court in  R v Ah Chee 1912 AD 231 considered was ‘equally applicable to the law of the rest of the Colony’ and  the principles  relating to provocation contained in s 141 (until the case of R. v. Butelezi 1925 AD 160 at 162-163 was disapproved of by Holmes JA in S v Mokonto  1971 (2) SA 319 (A) at 325A-D and 326G-H).

39. It appears that s179 and s183 of the Penal Code statutorily modified both the nature of the right which was capable of being stolen and the requirement of appropriation. While it may be tempting to consider the latter section as simply an addendum to the first, the fact that they are self-contained already indicates that the first did not cover certain trading activities where there was a duty to account for money or any other thing handed over by a customer to an agent (or possibly someone else consequent on a fiduciary relationship), or for the proceeds of such money or thing, in an otherwise purely debtor-creditor relationship.

40. Section 179  defined theft as:

"The fraudulent or without colour of right taking or converting to one's use anything or the use of anything capable of being stolen, with intent to deprive the owner thereof or to deprive any person having any special property or interest therein of such property or interest." [33]

(emphasis added)

The definition covered not only the conventional theft of corporeals but in its terms distinguished between property and interest[34]. This allowed for not only property being subject to theft, but any special interest in property and, more extensively, any interest in an interest.

It would appear that in order to overcome the difficulty that an interest cannot be stolen by physical handling the term ‘conversion’ replaced the limitations that would have been perceived in requiring a contrectatio. Under the Westminster system of government Parliament is sovereign and the courts were compelled to find a meaning to the terms introduced by a statute, even if it had not been received into the common law. Moreover the requirement that the appropriation must have been fraudulent would not meet all the contemplated exigencies and the concept of there being no lawful right was added (ie; “or without colour of right’).

By the beginning of the last century Gardiner & Lansdown on Criminal Law defined common law theft in the manner set out in the von Elling extract mentioned earlier. The definition included the passage that theft could be committed not only by depriving an owner of his property but also by depriving “any person having any special property or interest therein of such property or interest”.[35]

41. Section 183 of the Penal Code provided that:

‘every one commits theft, who, having received any money, valuable security or other thing whatsoever, on terms requiring him to account for or pay the same or the proceeds thereof to any other person, though not requiring him to deliver over in specie the identical money, valuable security, or other thing received, fraudulently converts to his own use, or fraudulently omits to account for the same, or to account for or pay any part of the proceeds which he was required to account for or pay as aforesaid; : Provided that if it be part of the said terms that the money or other thing received, or the proceeds thereof, shall form an item in a debtor and creditor account between the person receiving the same and the person to whom he is to account for or pay the same and that such last-mentioned shall rely only on the personal liability of the other as his debtor in respect thereof, the proper entry of any part of such proceeds in such account shall be deemed a sufficient accounting for the part of the proceeds so entered.”  [36]

42. Despite its radical concept of theft involving a dematerialised right to a proper account this section was readily embraced as correctly reflecting our common law. Within ten years of its promulgation in R v Golding (1896) 13 SCR 210 De Villiers CJ was able to state at 215 that:

‘I have always regarded the 183rd section of the Native Territories' Penal Code as fairly stating the law of the Colony proper in regard to thefts by agents.’

In  R v Satisky 1915 CPD 574 it was fully applied and  Beadle CJ accepted that it was part of the South African common law in R v Harlen 1964 (4) SA 44 (SR). Although Satisky and Graham are cited in subsequent cases the pedigree remains embedded in the acceptance, since Golding, that s183 correctly reflects our law.

43. It would appear that s 183 served a two-fold purpose.

Most significantly it provided that theft could be committed under certain defined circumstances in respect of an accounting  that  should have been made to another person in respect of money, a negotiable instrument or any other thing that was received. Accordingly the property which had existed in coin, commercial paper or other thing when received by the thief had become dematerialised into a right to an accounting if there was an obligation to account to another person for it or part of it at some later stage. It effectively created a reverse onus on an accused to produce an accounting, with the State then being required to demonstrate that it was not a proper accounting.  

While s 183 was a radical departure from the standard concept of property, one now finds in s53 of the Companies Act 71 of 2008 a means of creating a limited real right of ownership in the case of uncertified securities. In its terms s53(2) provides not only for ownership by way of registration but more significantly that transfer is  effected without delivery of script, a standard bookkeeping double entry suffices, and is effected by way of debiting  the account in the register from which the transfer is effected and crediting the account in the register to which the transfer is effected. In addition s 53(4) provides for a deemed estoppel save in the case of a transferee who had knowledge of any fraud, illegality or insolvency that affected the securities or resulted in the transfer being effected.

The second significant purpose of s183 was that the relationship in terms of which theft could be committed was not limited to one that was likely to be covered by existing common law or s179 where the funds were held in trust or as nominee for another or where the person was an agent for collection. Section 183  extended theft beyond the case of money actually paid over to  the agent on behalf of the principal[37] to cover the ordinary relationship of agency where there was a requirement to account  to the principal at some future date for such portion of what was received from another person or its proceeds.

The provisions of s183 therefore appear to have been directed at a fiduciary relationship which did not impose a duty to collect on behalf of the principal but only a duty to account for what had been paid by the agent’s customers. This fell outside the s179 situation which insisted on more than a basic debtor-creditor relationship by requiring some recognised interest in the funds themselves not in how they were utilised.[38] 

44. In S v McPherson 1972(2) SA 348 (E) the court at 375F held that as long as the account rendered to the principal was not false it was irrelevant that the corresponding side of the double entry elsewhere in the agent’s books of account had been falsified. The court considered that the fraudulent entry had to come to the knowledge of the principal because it understood that there had to be an appropriation. The court concluded that the appropriation had to be constituted by the falsification of the account to the principal. In drawing these conclusions the court relied on R v Harlen 1964(4) SA 44 (SR) at 47F-G.

This part of the McPherson judgment is critical to an aspect of the present case and therefore requires closer consideration.

45.  The starting point is to have regard to the legislation itself which became integrated into our law and consider the ordinary grammatical meaning of the words used having regard to the context of the legislation as a whole and the mischief it sought to remedy.

46. In my respectful view the section dealt with two main situations.

In the one the agent deposits say cheques drawn in his own name into his bank account although the payment itself is made and received on behalf of and for the account of the principal (whether disclosed or undisclosed). In this case theft will be committed if the funds that the cheques represent are not paid over to the principal but are appropriated by the agent for his own use. The proviso to s 183 does not apply in such a case.

47. The other situation envisaged by s183 arises where cheques are not paid by the customer to the agent for the benefit of the principal but the agent has a contractual obligation to account to the principal for all amounts received even though the funds may be turned over to purchase other items for resale or to cover overheads portion need eventually be paid over at the end of the agreed period.

48. In this case the money would not be received as agent for collection, nor would any portion have to be earmarked and set aside for the principal. The agent could utilise the amount received as he wishes as there was no special property or interest in the funds when received or at any time after that.

Since the principal does not acquire any rights in the funds paid by the customer or in their proceeds, but only enjoys a personal right against the agent arising out of their agency agreement, a proper accounting will discharge the agent from liability for theft, the corollary being that a falsification of the accounting would constitute fraud. It would therefore appear that s183 could cover both falsifying accounts and not accounting fully or at all.

Simply put, the theft arises because the money that was received from the customer cannot be properly accounted for in circumstances where there was an obligation to account by the person receiving the money to another. This would ordinarily arise where there is a fiduciary duty giving rise to a duty to account. See Phillips v Fieldstone Africa (Pty) Ltd and another  2004 (3) SA 465 (SCA) at para 27.

49. Since the crime is of statutory origin it may not be useful to determine what replaces the act of appropriation. The elements of the offence appear from the terms of the statute which, rightly or wrongly, was introduced wholesale into our common law. It is now firmly established and shores up a material gap that arose from the development of the monetary system and commercial relationships based on a fiduciary duty to account, which might go beyond only agency relationships.[39] For present purposes it is only necessary to consider an agency agreement imposing a duty to account and the illustrations will be confined to such a relationship.

50. This leg of the enquiry imposes a duty to record a “proper entry” in the debtor and creditor account between the parties. An agent who squanders all the money which the customer paid is nonetheless relieved from criminal liability if he properly recorded in the accounting to his principal the amount received from the customer, the expenses incurred and correctly reflected  the net amount due.

In short, this extension of the crime of theft has, at least notionally in law, nothing to do with the way the funds are used but everything to do with the regularity of the debtor and creditor account by the agent to the principal.

I would understand that the accounting envisaged comprises an accounting of all receipts of income and all expenditures incurred which explains the net amount to be paid over as the proceeds derived from the original sales made or services provided qua agent.  

51. Adopting the words of s 183 the obligation to account arises from an agreement (express, implied, or tacit) in terms of which the agent “must account … to any other person … for … having received any money, valuable security or other thing whatsoever, … or account for … the proceeds thereof (ie; the proceeds of the money etc. which would be the net amount due to the principal from the sales made by the agent to its customers).

It is evident that the property envisaged by the term “other thing whatsoever” must be such that in terms of the agency agreement it is not required to be delivered to the principal in the same form it was received from the agent’s customer.

52. The other element of the accounting requirement is that theft will occur where there is either a complete failure to account or a failure to make proper accounting entries. The terms used are “fraudulently omits to account for “what was received or does not make a “proper entry of any part of such proceeds in such account” (eg; the proceeds of what was received from the customer). This is a reference to the “debtor and creditor account between the person receiving same and the person to whom he is to account”

The proviso does not concern itself with a complete failure to account, which per se will amount to theft, but only in the situation where there is a failure to account properly. A proviso is not self-standing but is qualified by what precedes it. See Mphosi v Central Board for Co-operative Insurance Ltd  1974 (4) SA 633 (A) at 645C-E. [40]

53. McPherson relied on Satisky and Harlen for  concluding that a correct entry in the account rendered to the principal will suffice to meet the proviso’s requirements, even if the entry in the agent’s own books is false.[41]

54. In my respectful view this does not take into account the principles of double entry book-keeping. In my respectful view an interpretation of s 183, which reflects our common law, envisages that if either side of the entry that is required to be made is incorrect then there has not been a proper accounting for what happened to the receipts or their proceeds. An analysis the factual findings in  McPherson indicates  that there had been a proper accounting to the client which reflecting the liability, but that the agent had used the proceeds for his own purposes.

55. The judgment may however be queried in respect of whether the court should have found that the property received, for the purposes of a s183 type offence,  was the script (albeit a right to one or more of a pool of unallocated scripts) which required to be accounted for and that the failure to account to the principal for the sale of the script and receipt of the proceeds constituted theft.

The broad wording of s183 would appear to cover it, particularly if one considers that had the stockbroker taken all the scripts purchased on behalf of all his clients it would be difficult to conclude that there was not a theft perpetrated against all of them.

56.  McPherson however raises the important distinction that was mentioned earlier; the mere fact that the money may no longer be available does not mean that the statement that is presented to the principal and which reflects a net amount due is not a proper accounting which satisfies the proviso.

57. It should be added that in Satisky there were no accounting records at all, the accused being practically illiterate. The court however found that the accused was expected to, and did, make reports of the monies and cheques he had received in respect of the transactions and found that ‘these reports must be considered as taking the place of a debtor and creditor account”[42].  In that case the omission related to the amount received.

Satisky is significant because de Villiers AJ  identified  that only three elements were required for a conviction for  theft arising in a s 183 type situation; an omission to pay, an omission to enter (by which should be understood an omission to enter correctly) and a fraudulent intent.[43] It is implicit from the judgment that this type of theft can only be committed if there is a duty arising from the relationship to account to another for what is received or for its proceeds.

58. In Harlen Beadle CJ was concerned with an agent who had correctly entered all receipts on behalf of a syndicate of land developers. The developers had cut up a piece of land into lots which the agent was selling on their behalf. The agent also was a member of the syndicate.[44]

It was argued that as long as the correct entry was made at the time the money for the sale of the lots was receipted there was compliance with our law (which the court accepted as being properly stated in s183). Although all receipts were correctly reflected, in the statement to the complainant syndicate the agent raised a disbursement. He claimed that an amount had been paid to discharge a bond on the property. The agent however had not paid the amount over but merely reflected in his own books a credit in favour of the syndicate for that amount with a contra debit owing by the agent to the mortgagee and not as a debt still owed by the syndicate which it was obliged to pay. The agent had since gone into liquidation.[45]

The court dealt with the issue by reference to the accounting entry which preceded the agent’s utilisation of the money. Since these would have been the original entries that were properly effected on receipt of the monies from the purchasers, the court was driven to look at the account which was rendered to the principal. The court concluded that the accounting to the syndicate showed disbursements which were never made.[46]

59. It is significant that the court in Harper considered that, on an ordinary reading of the section, the relevant time of the accounting was when the funds were receipted. It is for this reason that the court found it necessary to select the date of  actual accounting to the complainants. But in doing so the court took into account whether the accounting to the syndicate correctly reflected the true position as contained in the agent’s own books of account, not simply whether there was a formally correct accounting. These aspects may be discerned from the following passages at 47G-48A

‘The vital account would therefore appear to be the account rendered to the principal. Whatever the logic of this may be, it is certainly commonsense; because there can be no real check on what the agent does in his own books. He could always make proper entries in his own books post facto, and thus escape prosecution for theft. There is, however, an absolute check on what he renders to third persons.

I accept the statement of the law as laid down by DE VILLIERS, A. J., therefore, and hold that it is the account rendered to the complainants in this case which must be looked to, and not the entries in the accused's own books. These accounts show all the receipts correctly; but they also show disbursements which were never made. In deciding whether the accounts are proper or not, I do not think it is sufficient to look only at the receipts; the accounts must be looked at as a whole; and as a whole I do not think they are 'proper entries'. The false entry of the disbursements affords evidence of fraudulent intention.’

(emphasis added)

60. It is evident that by 1915, and as a consequence of cases such as Golding and Satisky, ss 179 and 183 were treated by the courts and the leading textbook on criminal law, Gardiner and Lansdown, as correctly expressing our common law principles of theft.

In 1945 the AD in von Elling endorsed this position.[47]

61. In R v Scoulides 1956 (2) SA 388 (AD)  the court considered the argument that theft required an invasion of a right of ownership in the thing stolen which, it was submitted,  could not arise where bank notes are voluntarily delivered to a thief without expectation of being returned in specie. Schreiner JA at 394G-395A said that this argument had not been successfully advanced in cases before the Appellate Division and that :

“These cases establish that the ownership at different points of time of the individual notes or coins is not important in deciding whether a theft of them has been committed. What is decisive is whether the sum of money, considered as such and not as made up of individual notes and coins, which the accused person took or consumed was already wholly his to deal with as he pleased for his own benefit, or whether it was really held in trust for the complainant. In a case like the present the purchaser hands over the banknote, not in order to make the seller unconditionally the owner thereof, but only in order to make him the owner if and when the goods and the right change are tendered. Where a seller takes a bank-note tendered by a purchaser in payment for goods to be handed over at once in exchange for the money and where the seller intentionally gives less change than, to his knowledge, is due, the law would indeed be gravely deficient if it treated the seller, not as a thief, but only as a contract breaker, liable to be sued civilly. It is satisfactory to know that our law is free from any such defect.”

62.  The cases to which Scoulides referred were R v Solomon  1953 (4) SA 518 (AD), R v Manuel 1953(4) SA 523(A), R v Milne and Erleigh (7) 1951 (1) SA 791[48]. See subsequently S v Kotze  1965 (1) SA 118 (A) at 123C-G and 124A-125C, and Holmes JA in S v Heller 1971 (2) SA 29 (A) at 41H-42F.

63. In the mid-1970’s Holmes JA in the Graham case confronted the criticism of purists and said at 576F-577A, in the context of when and how monies can be stolen from a bank account,:

‘It may well be that, strictly according to Roman-Dutch law, only corporeal things were capable of being stolen; see the submissions made in R. v Milne and Erleigh,  supra at p. 800. However, the Roman-Dutch law is a living system, adaptable to modern conditions; see Phame (Pty.) Ltd. v Paizes,  1973 (3) SA 397 (AD) at pp. 418G - 419. In that case this Court held that aedilitian relief was available in respect of a sale of incorporeals, i.e., the shares of a company. The Court referred to the expressed view of Sir John Wessels, author of "History of Roman-Dutch Law", and later CHIEF JUSTICE, that

"if the Roman-Dutch law is to survive, it must adapt itself to changing circumstances, whilst retaining its essential features".

In this regard, too, VAN DEN HEEVER, J.A., said in his dissenting judgment in R. v Sibiya,  1955 (4) SA 247 (AD) at p. 261:

"Nowadays in cases of theft we are apt to look at the economic effect of the act by which a person fraudulently converts value to his own use rather than be hypnotised by the concrete mechanics by means of which the crime is committed." (emphasis added)

Similar observations were made by GREENBERG, J.A., in a passage referred to in R. v Solomon,  1953 (4) SA 518 (AD) at p. 522G:

"It must be borne in mind that, under our modern system of banking and paying by cheque or kindred process, the question of ownership in specific coins no longer exists in cases where resort to that system is made."

And so it has evolved that this Court has come to regard money as being capable of being stolen even where it is not corporeal cash but is represented by a credit entry in books of account. See, for example, R. v Herholdt and Others,  1957 (3) SA 236 (AD) at pp. 257E et seq. The foregoing decisions have not escaped academic criticism, but they stand as judgments of this Court. They were referred to in the arguments in the instant case without criticism and I need say no more than that I am unpersuaded that they are manifestly wrong. They are therefore binding.”

(emphasis added).

64. Since Graham the criminal law relating to theft of credit has developed further to meet modern technological and commercial exigencies as appears from Ndebele, although it has only influenced commercial law thinking to a much lesser degree.[49]

65. In Criminal Law at 498 (para 15(g)) Prof Snyman accepts that the dishonest accounting of money is capable of constituting the theft of credit by means of the unauthorised appropriation of trust funds. The author contends that theft will be committed if money is entrusted to a person who intentionally omits to account for it  or intentionally “gives a false account of what he did with the money … provided the circumstances are such that the inference may be drawn that he appropriated the money for himself”.

66. It is therefore apparent that theft of credit has been entrenched in our law for a significant period with the case of R v Satisky 1915 CPD 574, which I will come back to, affording a good illustration[50].  The passage from Milne & Erleigh quoted earlier indicates that theft might be inferred where money is appropriated from an account and utilised (ie consumed) even if there is an intention to pay it back at some future date.

67. An examination of our case law indicates that one should not conflate the crime of theft as developed under s179 with that as developed under s183 of the Penal Code.

68. Firstly there is the clear case already recognised by the common law where the perpetrator holds funds in his account solely as trustee, nominee or as receiving agent for collection directly on behalf of his principal. In these cases the right which the principal has in the funds is clear. He is the owner of the property in issue; which in the case of a bank account would be the right to the funds available in the account.[51]

69. Section 179 recognised this type of theft but also extended it to where the thief unlawfully appropriates funds standing to the credit of his account but in respect of which the victim has a special proprietary right or interest, short of ownership, even if the funds or the interest in the funds is represented by a credit entry in books of account. See Graham at 576H and 577E.

If a trust relationship is established then there will exist a special property or interest either in the available funds in an account (per Rorke) or to the credit entry that is passed to evidence it (per Graham).

70. Under the s183 development there is a complete dematerialisation of money and theft will be committed where there is no special property or interest in the funds but where he fraudulently fails to properly account to the victim in circumstances where he has a fiduciary duty to do so. In this limited situation theft can be committed even though the underlying basis is only a personal contractual right.[52]

In Golding De Villiers CJ dealt directly theft committed solely on the basis of a failure to account in circumstances where there only existed a personal relationship of agency between the parties and succinctly stated:

“… if the terms of the agent’s employment are that he is to be an ordinary debtor in respect of moneys received on behalf of the principal, and that the personal liability only of the debtor is to be relied upon then the appropriation by him of moneys so received does not amount to theft, provided that they are properly entered in the debtor and creditor account rendered by him to the principal”

Both the Cape Full Court decision in Satisky and the case of Harlen found that the crime of theft had been committed after finding respectively that the relationship between the parties was one of an “agent standing in the position of ordinary debtor to his principal” and “was merely that of debtor and creditor”[53]

71. In the  s179 type situation and by reason of Graham “a credit entry in books of account” will constitute property for purposes of theft[54]. 

However an outstanding question is how to prove the mental element of the offence; ie, that the accused intended to permanently deprive the victim of his or her property by appropriating the funds represented by the credit in question.

72. Our law readily accepts that appropriation or dispossession occurs where an agent or nominee takes the principal’s property without authority. So too where a person appropriates to himself property in which, to his knowledge, someone else has a vested right.

Irrespective of whether legally one considers money or the funds it represents as standing to the credit of a bank account it is treated as a consumable. Accordingly the mere fact that the accused intended to utilise what he appropriated will be strong if not incontrovertible evidence of an intention to permanently deprive the complainant of the property in question. It was pointed out in the minority concurring judgment of Schreiner JA in Milne & Erleigh at 865F-H that;

‘the intention to  deprive permanently is proved when it is shown that the taker meant to consume what he took even if he intended later to return other money or similar goods. The distinction is not only technically valid, the taker having no intention to return what he plans to consume; it is also a sensible one for the consumption increases the risk that the taker, even if he intends to replace, may not be able to do so, and the difficulty of proving what has happened to consumables that have been taken makes it harder than in the case of other goods to test any statement by the accused that he intended to replace. Where, therefore, a person takes another's money without authority to do so and intending to consume it (actual consumption is, I think, only important as evidence of intention) he commits theft, even if he intends to return other money, if it is proved that he did not, when he took it, believe that he had the right to take it or that the owner, had he been consulted, would have consented to the taking. Where the consent that the taker might have relied on is that of an agent of the owner it must be such as the agent, acting honestly in the interests of his principal and with knowledge of the facts, might have been expected to give.’

This passage was subsequently endorsed by the AD in several cases including Heller at 46A, Graham 577A-B and Visagie at 183D-E. See however the possibility of knowledge of unlawfulness not being proved if there was an immediately available liquid fund to replace the amount taken[55].

For present purposes it is unnecessary to consider whether the relevant time for the purposes of appropriation can be other than when the VAT or PAYE “monies” allegedly came into existence

73. It therefore appears that theft of credit is committed when an agent for collection, nominee or person in a relationship of trust appropriates or dissipates funds which, if regard is had to proper accounting practice represents “a credit entry in books of account”[56] held on behalf of a principal or in respect of which, to his knowledge, another person has a has a special proprietary right or interest despite the fact that the former can access the funds in question or exercises a degree of control over them[57].

Theft will also be committed in cases where only the personal liability of the debtor can to be relied on provided there is a duty to account for monies, negotiable instruments or other property (or their proceeds) received from a third party and there is not a proper accounting in the debtor and creditor account between the debtor and the person entitled to the accounting.

 

FINDINGS OF FACT

74.  The main issue is whether the learned magistrate erred in finding that both the VAT and PAYE monies were monies held in trust for and on behalf of SARS. Aside from this issue, which is more a question of law, the following factual findings were not challenged.  

75. Grayston was registered with SARS for income tax, PAYE and VAT purposes.

The court found that Pieters was solely responsible for running the company and was its only decision maker. These facts demonstrate that he had a ‘special responsibility’ and therefore, if a theft was proved, would be liable in his personal capacity. Adv Simpson referred the court to S v Coetzee [1997] ZACC 2; 1997 (1) SACR 379 (CC)

Pieters sold his interest in Grayston in 2010 and in September 2011 the company was placed under voluntary winding-up

76. It was common cause that payments in respect of VAT and PAYE returns were not paid over timeously. They were only paid in part after SARS obtained civil judgments.   

In order to determine whether the accused had the necessary intention to steal, the  court noted that on no less than 30 occasions  Grayston had failed to pay over the VAT due and that for a period of eight years it had failed to pay the PAYE amounts that had been deducted from the employees’ remuneration. The amounts had accumulated over a protracted period and totalled almost R1.8million. At no stage were there available liquid funds that could be utilised. On the contrary the company was in a precarious financial position with no realistic prospect that the monies could be paid over to SARS.

77. The judgment accepted that monies due to SARS were used to pay salaries, other creditors, rent, loan account payments and the like. Despite being used in part to pay the loan  account, the court, when sentencing the accused found  that there was no indication that he had led an extravagant lifestyle or that the monies were used for his personal benefit (as opposed to providing Pieters with a basic salary), but rather that the monies were used to sustain the business.

This must be accepted despite the State contending that the accused gave preference to using monies to pay his loan account..  With penalties and interest the amount owed by the accused to SARS totalled some R3.3million which Pieters personally had to pay. The court found that he might lose his house in order to do so.

The record itself reveals that on occasional months PAYE was paid, albeit late. Grayston developed software solutions in the credit administration field and provided consulting services. It had between six to seven staff members. The company had experienced serious cash flow problems occasioned by customer’s delaying payment and on occasion was not be able to pay employees on time. Pieters testified that in 2006 all the programmers  left because their salaries were paid two weeks late and that arrear rentals had mounted to R250 000. This indicates the extent of the financial difficulties Grayston encountered in the market.

78. It appears from the charge sheet that since April 2003 EMP 201 monthly returns were generally submitted within the month of falling due. However the annual EMP501reconciliations were submitted timeously, save for the 2008 tax year and remained outstanding in 2010 when the accused were indicted.   During re-examination Pieters explained that although technically PAYE is deducted from the gross remuneration, in practice he looked at the net cash to be paid out to SARS and the net amount due to SARS[58]. 

 

THE VAT ISSUE

Nature of property allegedly appropriated

79. The State alleges that “VAT payments” were appropriated.

80. In Parker the SCA was required to decide on the following legal question[59]:

‘Whether a VAT vendor who had misappropriated an amount of VAT which it has collected on behalf of SARS can be charged with the common law crime of theft”

The State had originally contended that the property appropriated was money[60] but during argument  disavowed that it was the owner of the VAT amount and conceded that the vendor itself has a right to the money (at paras 6 and 7)[61].

The State’s argument then proceeded on the basis that the vendor was the agent for collection of VAT monies but, as already mentioned, effectively conceded that the vendor had a right to the money[62].

81. The final argument which the State advanced in Parker was that the vendor acted on the basis of a relationship of trust that was established with SARS by reason of the collection provisions under the VAT Act. In dismissing this argument the SCA  held that  the vendor was not the tax-collector for SARS[63]  and that the vendor did not have to keep separate books of account or ensure that it had sufficient liquidity  ‘at any given time in order to cover the outstanding VAT’[64] which would have been the case in a trust type relationship.

82. It is therefore evident that the State relied on the theft of a sum of money (in the sense referred to by Graham) which it alleges was held on the basis of some trust relationship by Grayston on behalf of SARS. 

 

Were VAT monies held in the basis of a trust relationship?

83. Irrespective of whether the property was money or a right to money standing to the credit in Grayston’s bank account or even credits in Grayston’s books of account, Parker is clear authority that no part of any payment when entering Grayston’s bank account whether in the form of cheques, cash deposits or credit transfers could have been held on behalf of SARS either by reason of the provisions of the Vat Act, the law of agency or any other trust relationship. See Parker at paras 9 and 13-16.

84. Parker is also authority for the proposition that the moneys which entered Grayston’s account could not at any stage have become SARS’ moneys, not even when VAT became due and payable under section 28(1)(b) of the VAT Act (at para 12). The relationship remained strictly one of debtor and creditor based on a personal liability. It was not established by reason of a trust relationship and Grayston could not have been the collecting agent for SARS (at paras 9). It is evident from Parker that no other type of agency relationship could have existed pursuant to which a duty to account arises (at para 15).  VAT must generally be accounted for on an accrual, not receipt, basis which brings into question how the State would ever be able to prove an appropriation of receipting based purely on the returns.

85. Accordingly SARS at no stage had any special right or interest whether under statute or contract to either that portion of any payment which represented the VAT amount added onto the price of the goods or services supplied by Grayston or to the net VAT amount that became payable under section 28(1) (b), and when moneys were received from clients there was no duty to separately account.

86. That being so, any appropriation by Grayston under the hand of Pieters could not have satisfied the requirement of unlawfulness for theft. It should also be recalled that Parker in addition found that  the VAT Act codified the offences which a person mentioned in its provisions may become  subjected to precluding charges under the common law.

The appeal by Pieters against his theft convictions must therefore succeed.

 

THE PAYE ISSUE

Nature of property allegedly appropriated

87.   The structure of collecting and accounting for VAT by a vendor under the VAT Act differs significantly from the taxation of employees under the Fourth Schedule of the IT Act.

88. Under the VAT Act  a vendor must add to the value of the supply of goods and services (a taxable supply) ,  value-added tax , currently at 14%, which is then accounted for by him  every second month in a VAT return (generally on an accrual as opposed to a receipt basis) through a process of netting off such VAT, termed output tax, against input tax deductions  (being the  VAT payable by him in the course of making a taxable supply and subject to certain exemptions, exclusions and zero rating provisions). See generally the section 1 definitions and sections 7, 10, 11, 12 and 23,).

Parker confirmed that the relationship established between the vendor and SARS in respect of the collection and accounting of VAT was one of debtor and creditor and that the criminal penalties are confined to the provisions of  section 58 of the VAT Act (at para 16). One may however add sections 234 to 237 of  TAA read with section 1 of that Act (definition of “tax Act”) and  section 4 together with Schedule 1 (item 6) of the South African Revenue Service Act 34 of 1997.

89. By contrast, under the Fourth Schedule at the end of each month an employer ordinarily must deduct or withhold employees’ tax from the remuneration paid or payable by it to the employee. The employees’ tax to be deducted or withheld is reckoned in accordance with the tax deduction tables as prescribed pursuant to  para 9 of the Fourth Schedule. [65]

A payment of employees’ tax to SARS must be accompanied by a return on form EMP201 (see Para 14(2)).

90. At the end of each year of assessment the employer must, within a specified time, furnish its employees with an IRP5 tax certificate disclosing the total remuneration earned and the total amount of employees’ tax deducted or withheld (see Paras 13(1), (1A) and (2)).   Another certificate must be issued to each employee who is awarded a fringe benefit.

In addition the employer must furnish SARS with a statement in respect of each employee reflecting all accrued remuneration and the tax deductions paid over to SARS during the year of assessment.  The employer must then account to SARS for any shortfall of PAYE over the tax year.[66]

91. An employee who is obliged to, or elects to, submit a tax return is entitled to the set-off of a tax credit in the amount deducted or withheld by the employer. This is in terms of Para 28(1) of the Fourth Schedule which reads;

‘There shall be set off against the liability of the taxpayer in respect of any taxes (as defined in subparagraph (8) due by the taxpayer, the amounts of employees tax deducted or withheld by the taxpayer's employer during any year of assessment for which the taxpayer's liability for normal tax has been assessed by the Commissioner and the amounts of provisional tax paid by the taxpayer in respect of any such year, and if-

(a) the sum of the said amounts of employees tax and provisional tax exceeds the amount of the taxpayer's total liability for the said taxes, the excess amount shall be refunded to the taxpayer; or

(b) the taxpayer's total liability for the aforesaid taxes exceeds the sum of the said amounts of employees tax and provisional tax, the amount of the excess shall be payable by the taxpayer to the Commissioner.’

92. In terms of Para 2(1) of the Fourth Schedule the employer must deduct or withhold and, within seven days after the end of each month, pay over employees’ tax to SARS. The provision reads:

‘2(1) Every-

(a) employer who is a resident; or

(b) representative employer in the case of any employer who is not a resident,

(whether or not registered as an employer under paragraph 15) who pays or becomes liable to pay any amount by way of remuneration to any employee shall, unless the Commissioner has granted authority to the contrary, deduct or withhold from that amount, or, where that amount constitutes any lump sum contemplated in paragraph 2 (1) (b) of the Second Schedule, deduct from the employees benefit or minimum individual reserve as contemplated in that paragraph, by way of employees' tax an amount which shall be determined as provided in paragraph 9, 10, 11 or 12, whichever is applicable, in respect of the liability for normal tax of that employee, or, if such remuneration is paid or payable to an employee who is married and such remuneration is under the provisions of section 7 (2) of this Act deemed to be income of the employee's spouse, in respect of such liability of that spouse, and shall, subject to the Employment Tax Incentive Act, 2013, pay the amount so deducted or withheld to the Commissioner within seven days after the end of the month during which the amount was deducted or withheld, or in the case of a person who ceases to be an employer before the end of such month, within seven days after the day on which that person ceased to be an employer, or in either case within such further period as the Commissioner may approve.’

93. The records an employer is obliged to maintain include details of the remuneration paid or due to each employee and the amount of employees' tax deducted or withheld from such remuneration (Para 14(1) (a) and (b)). In terms of Para 14(2) the employer is also obliged to submit a return to SARS when making any payment of employees' tax.

94. According to Silke (supra) at para 201.15 an employer cannot use the employees’ tax for any purpose other than to pay it over to SARS. The authors contend that:

‘In effect, he holds the tax in trust for the Commissioner. Strictly speaking, he ought to keep it separate and apart from his own funds from the date of deduction until the due date for payment to the Commissioner’

No authority is provided. However the underlying premise seems to be that the employees’ tax constitutes property.

95. The first question is whether the amount withheld or deducted as employees’ tax can constitute property in which SARS has a special right or interest for the purposes of theft. If not then it must be asked whether there was a duty to account for monies received or for their proceeds and whether there had been a proper accounting in the debtor and creditor account between Grayston and SARS. 

96. The following provisions of the Fourth Schedule  would support the proposition that employees’ tax constitutes property which is capable of being held in trust in cases where the employee is actually paid remuneration (ie; excluding where it is due but has not been paid):

a. Para 2 refers to the amount of PAYE being deducted or withheld from the employee’s remuneration.

This indicates that the legislature contemplated a specific amount being set aside to pay remuneration to an employee and from this amount PAYE is taken off . It is difficult to comprehend the word “deduct” or “withheld” being used other than in respect of an amount that has already been appropriated to the benefit of the employee and vests in him or her but which is then required to be specifically set aside in the books of account of the employer for payment to SARS as PAYE.

b. The amount deducted or withheld as employees’ tax must be paid over to SARS within seven days under pain of a fine or imprisonment not exceeding twelve months. See Paras 2(1)(b) and 30(1)(b);

c. Para 3 prevents an employer from reducing or extinguishing its liability to deduct or withhold any amount of employees’ tax despite having a valid claim against the employee and despite the existence of any law preventing such amount from being reduced or being subject to attachment[67].

This provision does not suggest a mere undertaking but a book entry involving the earmarking or separation of funds that become ring-fenced and cannot be tampered with. But again it presupposes that there are available funds.

It is difficult to concretely apply Para 3(2) if the legislature did not envisage an amount that came into existence at least from the time when the employer’s gross remuneration became due and payable and provided further that the employer had access to cash resources or facilities to cover it when it earmarked, or ought to have earmarked, the remuneration for payment by means of the appropriate bookkeeping entries.

d. Subject to certain exceptions which do not disturb the principle, the employer’s obligation to deduct PAYE in accordance with the prescribed tax tables is absolute and any agreement to the contrary between the employer and employee  is void (see Para 7).

Accordingly PAYE is a pre-determinable and specific amount that must be calculated, save in clearly defined circumstances which are not relevant here, strictly in accordance with the tax tables on the date when the employees remuneration is paid or is payable (see Para 2). 

This is distinguishable from a VAT liability which is derived by netting two amounts, only one of which is the output tax of 14% charged by the vendor for goods and services. The SCA in Parker found that VAT monies could not be held in trust for SARS by the vendor because it could not be separately earmarked.

e. Para 28(1) provides that the amount of employees’ tax deducted or withheld will be set-off against the employee’s liability for normal tax. Moreover the IRP5 tax certificate constitutes prima facie proof that the employee has deducted the PAYE amount (Para 28(2)).

These provisions indicate the existence of more than just a debtor-creditor relationship between the employer, the employee and SARS once the deduction of PAYE is made by the employer from the employee’s pay slip. This will be revisited when considering the hardship that would arise to an employee if the PAYE portion of the total remuneration was deducted or withheld by the employer but not paid over to SARS.

f. The Fourth Schedule requires proper accounting records to be maintained showing the amount of remuneration paid or payable  to each employee, the amount of employees’ tax deducted or withheld from such remuneration and the employee’s tax reference number if a registered taxpayer (Para 14(1)). It also requires that a return must be submitted to SARS when making any payment of employees' tax (Para 14(2)). Under TAA it is an offence not to keep these records or submit a return, punishable by a fine or up to two years imprisonment   (see ss.29 (1) (b), 29(2) and 234(d) and (e)).

Under Paras 13(1), 13(1A) and 13(2) an employer is also required to deliver an IRP5 tax certificate to each employee or ex-employee within the prescribed time. A failure to do so is a criminal offence punishable by a fine or imprisonment not exceeding twelve months[68].

g. In terms of Para 14(5) an employer may not deliver an IRP 5 tax certificate until an EMP 501 return has been rendered to SARS, unless the latter otherwise directs.

97.  Against this is the reference in Para 4 to the amount required to be deducted or withheld being ‘a debt owed to the State’. [69] The terminology used suggests a debtor-creditor relationship. However if regard is had to all the provisions mentioned in the preceding paragraph and to the Schedule as a whole  the phrase appears to be used not to characterise the nature of the right in question but simply to confirm the existence of the liability.

98. Perhaps the strongest evidence in order to establish whether there is a special right or interest in monies that are deducted from the employee for PAYE is if an employee would be entitled to interdict the employer from dissipating funds up to that value which are available in its account prior to paying the amount over to SARS.

When the employer deducts the PAYE it would have first credited the employee in its books with the full remuneration payable and then deducted from that the PAYE. This would have been recorded by a debit entry against the employee and a reciprocal credit entry in favour of SARS. On the principles clarified in Graham the amount representing the deduction or withholding of the PAYE from the employee’s pay package, with or without the appropriate ‘credit entry in the books of account’, would constitute incorporeal property, despite there de facto only being a single pool of funds available in the employer’s bank account.

This is reinforced by the framework of the Fourth Schedule which is directed at requiring the employer to pay over to SARS within the week the exact amount of PAYE deducted or withheld from the employee’s salary or wages.

99. For ease of reference I will simply refer to this incorporeal property as the PAYE monies.

 

Has there been a theft of the PAYE monies in which SARS has a special right or interest

100. In the present case the appellants provided payslips and rendered returns reflecting that PAYE monies had been deducted, albeit at some later stage. However the monies generally were not paid over to SARS even within the seven day period after the relevant return was eventually submitted.  The first question is whether there could be a theft of monies from SARS or whether the theft was from the employee, or possibly both.

101. I proceed to consider whether there was a theft constituted by an appropriation of funds standing to the credit of an account in which SARS claims to have a special right or interest.

This requires the consideration of a number of Paragraphs in the Fourth Schedule. In doing so it should be born in mind that the scheme of the Fourth Schedule is to create an efficient mechanism for the collection of taxes from the vast majority of individuals who are subject to tax and who are likely to only have a single source of non-exempt taxable income. The mechanism adopted is to make the source of the remuneration, being their employer, responsible for its collection.

102. Firstly Para 4 renders the employer absolutely liable for PAYE unless otherwise provided.[70]

The full text reads:

Any amount required to be deducted or withheld in terms of paragraph 2 shall be a debt due to the State and the employer concerned shall save as otherwise provided be absolutely liable for the due payment thereof to the Commissioner.

(emphasis added)

103. However the difficulty confronting the State is that Grayston did not have the funds available to meet the PAYE portion of the liability. On the evidence Grayston barely had money to pay its employees. Accordingly the State could not show at any stage when the appropriation was made by crediting the employee with his or her gross salary that there was an amount available to meet the PAYE. Pieters testified that he simply took the net cash amount that was available and paid his staff with it, which would also account for the late payment of staff and the late rendering of returns.

104. There is therefore no evidence of either an unlawful appropriation of funds or that there the requisite intent was present; the State failing to prove that, at the time the credit entry was made, the company had any available funds that were capable of being appropriated and in respect of which SARS could have a special property or interest (per Graham); Grayston just went deeper and deeper into debt.

 

Has there been a theft of the PAYE monies by reason of a failure to properly account

105. Grayston was obliged to account to both SARS and the employee for the receipt of that portion of the gross salary deducted as PAYE. In my view Grayston stood in the shoes of an agent in respect of either a statutory or civil law obligation of debtor and creditor pursuant to which relationship it attracted an obligation to pay over in specie to SARS or to account for the money actually received or its proceeds.

106. In order to be convicted of theft on this ground, aside from demonstrating that PAYE was not paid over to SARS on due date (which was conceded), the State would have to prove that initially an amount was received from the employee (via the deduction entry made) for which it was obliged to account to SARS and that that there was a fraudulent omission to do so , or a failure to make a proper entry in respect of the PAYE amount deducted from the employees’  salaries.

107. In the present case the State did not attempt to make out a case of theft based on fraudulent accounting but sought to rely on a relationship of trust in respect of the PAYE monies themselves. It therefore did not lead evidence of how the actual accounting to SARS deviated from the accounting by Grayston in its own books nor did it rely on any IRP5 certificate that might have been issued.  According to Pieters’ testimony PAYE was accounted for in Grayston’s books as a liability owed to SARS. The State did not challenge this.

108. There are other fundamental obstacles in the State’s path. Firstly in terms of the Fourth Schedule the returns submitted to SARS must be made at the time the remuneration falls due; not necessarily when it is paid. Accordingly the returns do not necessarily constitute a representation that payment was made, only that payment is due. The prosecution was required to lead further evidence to make out a case of an actual representation to SARS in an account that payment had been made to it.

109. The State would have to rely on some entry or accounting document produced to SARS which reflected that the salary had actually been paid and was not simply due in order to constitute an improper accounting to SARS. The State did not do so.  

110. Accordingly the State failed to prove a receipt of monies which Grayston was required to account for as contemplated in the Golding type case and failed to produce evidence to demonstrate that Grayston failed to properly record any part of the proceeds of such monies in its accounting to SARS.

I am therefore of the view that Grayston should not have been found guilty of common law theft. It follows that neither can Pieters be guilty of this  crime.

111. In case I am wrong it is necessary to consider the last issue which is whether the TAA read with the Fourth Schedule codified or limited the criminal liability that could be imposed for a tax offence under that Schedule. 

STATUTORY LIMITATION ON CRIMINAL LIABILITY

112. Statutes may impose criminal sanctions or may decriminalise conduct[71]and leave a civil remedy. They may create administrative or other sanctions or add these to criminal sanctions[72].

113. In  Parker the SCA also refused to allow a charge of common law theft to stand because the VAT Act limited the nature of offences which could be committed to those contained in the body of the enactment (and presumably under TAA). See at paras 9 and 16.[73]

114.  There are a number of criminal and administrative penal sanctions that can be imposed for a failure to render PAYE returns or to pay over to SARS the employees’ tax deducted.

115. Criminal sanctions include the following:

a. A person who wilfully and without just cause uses or applies any amount deducted or withheld  as employees’ tax for a purpose other than paying such amount to SARS commits an offence  under Para 30(1)(b) rendering that person  guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding 12 months:

b. If an employer issues an erroneous or false document required to another person or fails or neglects to withhold and pay to SARS an amount of tax as and when required under a tax Act, then the criminal sanction would be a fine or imprisonment of up to two years under sections 234(g) or (p) respectively of TAA. Silke considers that the issuing of a false IRP5 certificate would be included[74]:

c. In terms of section 235(1)(a) of TAA an employer will be liable to a fine or imprisonment for a period not exceeding five years if he or she intentionally evades, or assists another to evade, liability for tax by making  a false statement or entry in a return or other document, or signs a statement, return or other document so submitted without reasonable grounds for believing it to be true. Accordingly making a false statement in the monthly returns or in the employees’ tax certificate  would be liable under this section (see Silke at para 20.18)

116. In addition to criminal sanctions there are administrative penalties  that will be imposed if an employer fails to pay employees’ tax with the intention to evade its obligations will incur;

a. penalties under section 213 of TAA equal to 10% of the employees’ tax liability;

b. an understatement[75] penalty  in terms of section 222 of TAA which is also percentage based as provided for in section 223 tables: in the “standard case” of intentional tax evasion in addition to payment of the tax shortfall  a 150% penalty is imposed on the shortfall of tax due. In a repeat case or if the taxpayer is “obstructive” the penalty goes up to 200%.

The individual responsible for the failure to pay tax is similarly liable to prosecution and to personally pay the administrative penalties if the company is unable to pay.

117.  It appears that the legislature has created a series of statutorily defined criminal sanctions with a further layer of onerous administrative penalties being imposed. While a court may in an ordinary criminal case order the accused to compensate the victim in addition to a custodial or non-custodial sentence, it will have considered the nature of the crime, the personal circumstances of the offender and the interests of society.

118. If regard is had to the cumulative effect of the criminal and administrative sanctions imposed under tax legislation it is difficult for the State to convince a court that the three factors that should weigh when imposing a sentence were not considered by the legislature to comprise a suitable punishment . Presumably the legislature was also alive to the fact that lengthy terms of imprisonment may be counter-productive in the sense that the company and those who run it may go out of business or dis-incentivise the taking of entrepreneurial risk on the one hand and affect job creation and the future stream of employees’ tax revenues to SARS on the other.

119. Section 336 of the CPA also appears to restrict the State. It provides that:

“Where an act or an omission constitutes an offence under two or more statutory provisions or is an offence under statutory provision and the common law, the person guilty of such act or omission shall, unless the contrary intention appears, be liable to be prosecuted and punished under either statutory provision or, as the case may be, under the statutory provision or the common law, but shall not be liable to more than one punishment for the act or omission constituting the offence”.

This provision may be read together with s 106(1)(e) of that Act which allows an accused to plead that he has already been convicted of the offence for which he is charged.

120. It therefore appears that, if regard is had to the Fourth Schedule as read with the TAA and that common law theft of the nature described in the present case requires the equivalent of a fraudulent act, the legislature has provided a comprehensive set of criminal and administrative sanctions which specifically encompass acts of theft and fraud. And if the criminal and administrative penalty sanctions imposed are considered ineffectual then that is a matter for the legislature to remedy.

 

THE CONVICTIONS AND SENTENCE

121. The convictions for common law theft in respect of both the VAT and PAYE monies must be set aside.

122. The learned magistrate found [76]  that the appellants had failed to pay the monies over to SARS when they became due and payable. The appellants accept this.

123. In their heads of argument the appellants also concede that if they are acquitted of the common law crimes then they must be found guilty of the statutory offences relating to the failure to make payment of these taxes.

124. An issue of double jeopardy might have arisen. However the evidence before the court did not indicate what administrative penalties were imposed, nor could they be determined because the interest portion of the judgment debts was not disclosed. In addition the issue was not ventilated as both parties accepted that the suspended sentences would not change. This case should therefore not be regarded as finding that double jeopardy may not have arisen. In brief the issue of double jeopardy may have arisen by reason of the following.

125. There would appear to be a constitutional safeguard against double jeopardy irrespective of whether the forum empowered to impose the sanction is a criminal court, a civil court or an administrative tribunal. Section 35(3)(m) of the Constitution gives expression to a fundamental principle which transcends the confines of purely criminal procedure. The provisions of that section are illustrative of the broader concept which underpins the plea of autrefois convict and acquit, and also res judicata; nl, “. . . die eenvoudige feit dat dit weersinwekkend is vir ons gevoel van billikheid en regverdigheid, dat . . . die gestrafte vir die tweede maal . . . weens dieselfde misdaad vervolg sou word” R v Manasewitz 1933 (AD) 165 at 177.

Section 33 of the Constitution which deals with just administrative action is also relevant.

126. These doctrines give expression to the same legal sentiment; a person should be protected from being repeatedly brought to answer in respect of the same conduct. They are intended to secure justice and reasonableness through the finality of proceedings.

127. Support for this proposition is found in S v Vorster 1961 (4) SA 863 (O) where Eksteen J was of the view that the plea of autrefois acquit derived both from the doctrine of res judicata and from considerations of reasonableness expressed in the maxim “nemo debet bis vexari pro una et eadem causa” which has the effect of preventing repeated prosecutions arising out of the same cause of action.

Further support may be found in the express provisions of s 39 of the Constitution which deal with the interpretation of the Bill of Rights

128. Double jeopardy cannot arise every time two different tribunals consider holding the same person responsible for some act or omission.

Examples of a criminal sanction combined with an administrative penalty or civil liability are ss 5, 6 and 7 of the old Insider Trading Act 135 of 1998 and ss 78, 82 and 104 of the new Financial Markets Act 19 of  2012, See also the Insolvency Act 24 of 1936.

129. The issue of when double jeopardy arises in a broader context was considered by the Strasbourg Courts of the European Community. They were required  to determine what constitutes a “criminal charge” under Article 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms. The Article provided that:

“In the determination of the civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”.

130. The decisions of that court were considered and applied by the English Court of Appeal in the VAT related matter of Han & Another v Commissioner of Customs & Excise & similar cases [2001] EWCA Civ 1040; [2001] 4 All ER 687 (CA). The case gains greater  relevance by reason of ss 39(1)(b) and (c) of the Constitution.

The court was concerned with civil penalties imposed by the Commissioner of Customs and Excise on taxpayers for dishonest evasion of VAT where there existed parallel provisions for criminal proceedings in respect of the same conduct.

131. Although the court was split 2-1, it was unanimous as to the requirements for determining whether or not a person had already been subjected to a “criminal charge” as that term is understood in the European Convention.

In interpreting the term “criminal charge”, the court agreed that it was necessary to have regard to the “substantive” rather than the “formal” conception of the term “charge”, and, quoting from a Strasbourg Court decision, said that this “. . . impels the Court to look behind the appearances and examine the realities of the procedure in question in order to determine whether there has been a “charge” within the meaning of Article 6. In particular the Applicant’s situation under domestic legal rules in force has to be examined in the light of the object and purpose of Article 6, namely the protection of the rights of the defence” (at 703e–f).

The purposive approach adopted in interpreting our Constitution would achieve the same result.

132. Both the majority and minority in Han were agreed that the laws developed by the European Community Courts identified three factors which determine whether a person has been subject to double jeopardy for purposes of Article 6. They are:

a. the classification of the proceedings in domestic law;

b. the nature of the offence;

c. the nature and degree of severity of the penalty that the person concerned risked incurring”.

It was pointed out that the three factors are to be considered cumulatively. The point of departure between the majority and minority in Han lay in the weight to be placed on the first factor.

133. The majority in Han considered that the categorisation of the proceedings is not decisive. A Court is simply concerned with whether or not the allegations required to sustain the sanction are criminal in character (at para 65 and para 75). In that case, the VAT legislation under scrutiny (s60) provided for a civil penalty pursuant to the de-criminalisation of elements of the VAT Act.

134. The court held by a majority that there was double jeopardy. In Tax Board Decision No 198, p 21 (Gauteng West Tax Board) of 1 November 2004 where the three factors were canvassed in greater detail by reference to the relevant provisions of  tax legislation  I held that  although the taxpayer was placed in double jeopardy, the prejudice was removed by the deductions effected in the revised assessment and the revised assessment was allowed to stand.[77]

135. In respect of Grayston the magistrate suspended the passing of sentence in respect of the convictions under counts 7 to 160 for a period of three years. There is no need to alter that.

However in respect of the same counts 67 to 160 a sentence of five years imprisonment suspended for three years was imposed on Pieters provided he is not convicted of theft or attempted theft committed during the period of suspension.

136. It appears pointless to remit the matter to the magistrate to consider sentence afresh in respect of the convictions to be imposed in respect of the alternative charges to counts 7 to 160. Neither the appellants nor the State sought it.

Moreover the magistrates’ reasoning for imposing suspended sentences in respect of the theft counts would apply equally to the alternative counts. Only the sentence imposed on Pieters requires suitable amendment  to reflect the alternative offences to counts 67 to 160 for which he has now been convicted.

137. The maximum period of imprisonment under s 58(d) of the VAT Act is two years. The maximum period of imprisonment for offences under Paragraph 30(1)(a) of the Fourth Schedule is 1 year.

 

 

ORDER

138. In the  result;

1. The appeal in respect of counts 67 to 160 is upheld

2. The convictions on the main charges of common law theft in respect of counts 67 to 160 are set aside and replaced with the following;

Both accused are found guilty in respect of;

a. the alternative charges to counts 67 to 96 of failing to pay over VAT monies to the Commissioner of SARS (‘the Commissioner’) ; namely,  the contravention of s 58(d) read with s28(1) and (2) of the Value Added Tax Act 89 of 1991; and

b. the alternative charges to counts 97 to 160 of failing to  remit PAYE monies to the Commissioner ; namely, the contravention  of Paragraph 30(1)(a) of the Fourth Schedule of the Income Tax Act 58 of 1962;

3. The sentence in respect of accused no. 2 is set aside and replaced with the following;

a. In respect of counts 67 to 96, taken as one for the purposes of sentence, two years imprisonment;

b. In respect of counts 97 to 160, taken as one for the purpose of sentence, one year imprisonment;

c. The sentence imposed in respect of counts 97 to 160 is to run together with that imposed in respect of counts 67 to 96 and

d. All the sentences are wholly suspended for three years on condition that accused no. 2 is not convicted of the same offence, respectively, committed during the period of suspension.

 

__________________

SPILG, J

 

I agree

___________________

MODIBA, J

 

DATE OF JUDGMENT:                               23 September 2016

LEGAL REPRESENTATIVES:

FOR APPELLANTS:                                   Adv S Janse Van Rensburg

Attorney JO van Schalkwyk  (Heads of argument)

BDK Attorneys

FOR THE STATE:                                      Adv A Simpson

                                                                        Office of the Director of Public Prosecutions

 

[1] Section 180:

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