Court slams big tobacco player Martin Wingate-Pearse in Sars dispute

The wheels of justice seem to be turning in favour of the SA Revenue Service (Sars), with the latest judgment in the high court in Johannesburg going against a big player in the tobacco and clothing industry.

Judge Pieter Meyer found the review application by businessman Martin Wingate-Pearse — shareholder of the controversial tobacco company Carnilinx — “vexatious”, dismissing it and slapping him with two punitive cost orders on attorney-and-client scale on Wednesday last week. 

One was for costs incurred by Sars and the finance minister; the other for costs incurred during an interlocutory application in April 2018.

Wingate-Pearse brought the review application in 2015, more than a decade after initial tax assessments by Sars, to have a multimillion-rand tax debt set aside.

Wingate-Pearse claimed to have been a victim of the so-called Sars “rogue unit”. Carnilinx and its lawyer, Belinda Walter, were at the centre of media reports containing allegations about the unit.

In support of his argument, Wingate-Pearse relied on the report of the panel chaired by advocate Muzi Sikhakhane, which found the establishment of the High-Risk Investigations Unit unlawful. The Sars advisory board, headed by judge Frank Kroon, confirmed this finding.

However, the Nugent commission of inquiry into tax administration and governance at Sars, appointed by President Cyril Ramaphosa, found there was nothing in the report to persuade the commission that the establishment of the unit was unlawful. The Sunday Times withdrew the allegations made in its reports about the unlawfulness and activities of the unit and apologised. And Kroon told the Nugent commission he was wrong to have relied on the report by the Sikhakhane panel.

Public protector Busisiwe Mkhwebane recently found that public enterprises minister Pravin Gordhan violated the constitution when the unit was “illegally” set up when he was Sars commissioner. Gordhan is challenging those findings.

In his ruling, Meyer went into great detail to show why Wingate-Pearse’s victim argument does not hold water. The investigations into his affairs, sparked by information given to Sars by the police’s organised crime unit, commenced in 2002. The Sars unit was only established in 2007 and was disbanded in 2014, shortly after the appointment of Tom Moyane as Sars commissioner.

In 2005 Sars launched one of its biggest search-and-seizure operations, seizing more than 2,000 documents from the Wingate-Pearse premises. The next year, it issued additional assessments for Wingate-Pearse totalling R41.7m.

Wingate-Pearse first objected to the additional estimated assessments in June 2006, after which the total was reduced to R22.7m. He again objected and it was reduced to R9.3m.

Elle-Sarah Rossato, head of tax controversy and dispute resolution at PwC, said this is one of Sars’s legacy cases.

“It is clear from the judgment that the court has zero tolerance for potential filibustering taxpayers who deploy delaying tactics in order to prevent their matters from being ventilated in court,” she said.

Wingate-Pearse has launched several urgent applications, interlocutory applications and appeals since 2007. His appeal against the final assessment of R9.3m was set to start in 2010, but has yet to be heard.

Meyer said the premise from which Wingate-Pearse departs in his “quest” to have the decisions relating to the additional assessments set aside is “fatally defective and bad in law”.

The fact that he only brought the review application more than a decade after he received the additional assessments is “unreasonable” and he “dismally failed” to explain the reason for the long delay.

Rossato said it is clear from the judgment that the taxpayer had been grabbing at straws. Given his comments, it appears the judge was annoyed by Wingate-Pearse’s delaying tactics.

She said the fact that the judge deviated from the general practice of awarding the successful party its costs and instead awarded costs at the punitive scale of attorney-to-client reflects not only his irritability, but also that he did not believe the application was true and honest.

Rossato said it is clear from a superficial reading of the judgment that Sars was eager to have the matter ventilated in court, but that Wingate-Pearse had used delaying tactics to stay out of court.

“The judge saw through this and penalised him with an extreme cost order … Maybe the days of protracted litigation with Sars is no longer the most cost-effective way of resolving tax disputes,” she said.

The obvious next step is for the matter to be placed before the tax appeal court to be heard on the merits.