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Patrick Lorenz Martin Gaertner & others v Minister of Finance & others 12632/12

16 April 2013   (0 Comments)
Posted by: Herman van Dyk
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By SAIT Technical

The Western Cape High Court delivered its judgment in the matter between Gaertner ("first applicant), Klemp ("second applicant”), OCS ("third applicant”) and the Minister of Finance ("first respondent”) and the Commissioner: SARS ("second respondent”) and nine others on 8 April 2013.

Background facts

The first and second applicants (‘Gaertner’ and ‘Klemp’) are directors of the third respondent (‘OCS’). OCS conducts business as an importer and distributor of bulk frozen foodstuffs.

SARS officials conducted a search at the premises of OCS in Muizenberg on 30 and 31 May 2012 and a search at Gaertner’s home at Silverhurst Estate in Constantia on 1 June 2013.

These actions were taken in terms of s 4(4) of the Customs and Excise Act 91 of 1964 (‘the Act’) in terms of which no warrant was required for the searches.

The applicant’s launched the current proceedings on 2 July 2012 in which they sought the following orders:

a. declaring the relevant part of s 4 to be unconstitutional to the extent that it permitted targeted non-routine searches to be conducted without judicial warrant

b. in any event declaring the searches to have been unlawful by virtue of the way they were conducted

c. requiring SARS to return everything taken or copied.

The searches were conducted after SARS compared invoices annexed to proceedings instituted by Sloan Valley Dairies Ltd of Canada (‘SVD’) against invoices OCS had submitted to SARS in support of the declared value for customs duty purposes. OCS’ version of the invoices reflected substantially lower prices.

SARS suspected that OCS had fraudulently manipulated the invoices so as to pay less duty, thereby committing various offences under the Ac tand therefore resolved to conduct a search of OCS’ premises.

SARS officials arrived at OCS’ Muizenberg premises and told Gaertner that they were there to conduct a bond inspection. When Gaertner later asked the purpose of the search, he was now told that SARS was investigating under-declaration of the customs values of certain imported goods (SARS was concerned that revealing the true purpose of the search at the start would result in staff removing or concealing files).

When Gaertner asked for warrant, he was told that section 4 of the Act allowed SARS to perform the search without a warrant. Gaertner asked for time to call his attorney. After the attorney did not arrive, SARS began the search.

SARS told Gaertner that it would be an offense to obstruct SARS. OCS staff were required to stand clear from their computers.

SARS asked to see a number of files and looked among various papers including papers relating to the pending court action with SVD. SARS also accessed computers and copied electronic data to a storage device.

Before leaving, SARS sealed OCS’ computer server room in preparation for a visit the next day by its forensic experts removed from OCS’ bonded warehouse and took away with them the milk powder which was the subject of the SVD dispute (in terms of section 88(1)(a) of the Act – pending possible seizure and forfeiture).

SARS returned on the next day with computer experts to make mirror images of data on various computers and iPads. OCS’ attorney requested that the search parameters be properly defined and that data be copied and sealed in Gaertner’s presence. This request was rejected.

On 1 June 2012 SARS proceeded to search Gaertner’s home in Constantia after allegedly not finding the SVD import documentation at the premises of OCS. After Gaertner’s attorney failed to arrive within 15 minutes, SARS initiated the search which lasted for two hours. No data was copied and no relevant documents were found.

The applicant’s attorneys, Maurice Phillips Wisenberg (‘MPW’), wrote to SARS on 13 June 2012 stating the applicants’ intention to bring legal proceedings and seeking certain undertakings. A temporary undertaking was given on 19 June 2012. The current application was launched on 2 July 2012.

Pursuant to an agreed order made on 19 September 2012 the respondents’ answering papers were due by 3 October 2012. Instead SARS on that date, through the State Attorney, tendered to return all seized material (including copies) and the computer mirror images and to pay the applicants’ costs to date on a party and party scale.

SARS did not concede that s 4 was invalid or that the searches had been unlawful.

On 8 October 2012, and following interactions at counsel level, SARS improved its tender by offering costs on an attorney and client scale. MPW replied that while the applicants accepted the tender they persisted in the relief claimed in the notice of motion.

Material was returned through the State Attorney between 16 October 2012 and 22 November 2012.

The Minister and SARS both asserted that the constitutionality of s 4 and the lawfulness of the searches were moot in the light of the tender which the applicants had accepted. They denied in any event that s 4 was in any respect invalid, asserting that any encroachment on the right to privacy was justifiable under s 36 of the Constitution. SARS also denied that the searches had been conducted in an unlawful manner.

The applicants contended that section 4 infringed the privacy right guaranteed by section 14 of the Constitution.

Although SARS in its answering papers defended the impugned provisions in their entirety, SARS conceded in its heads of argument that ss 4(4) to (6) were constitutionally invalid.

The differences between the applicants and SARS concerned:

[a] the reasons for and thus the extent of the invalidity;

[b] whether the declaration of invalidity should be suspended and rendered non-retrospective and whether in the meanwhile words should be read into the impugned provisions to make them constitutionally acceptable.

The applicants asserted that the criterion for distinguishing between the justified and unjustifiable parts of the impugned provisions was the distinction between routine searches on the one hand and non-routine (targeted) searches on the other. They submitted that the impugned provisions were unjustifiable to the extent that they permitted warrantless non-routine searches

By contast, SARS asserted that the criterion for the distinction justified and the unjustifiable parts of the impugned provisions was between premises which receive special attention in the Act ("designated premises”) and other premises. SARS asserted that the provisions were justified to the extent that they related to designated premises.


The issue to decide was whether sub-paras (i) and (ii) of s 4(4)(a) of the Customs and Excise Act 91 of 1964 and ss 4(4)(b), 4(5) and 4(6) are unconstitutional.


It was held that whenever a statutory inspection power is challenged, it is necessary to undertake the limitation analysis in s 36 of the Constitution to determine whether the limitation of the privacy right is reasonable and justifiable in an open and democratic society.

The matter of Magajane v Chairperson, North West Gambling Board 2006 (5) SA 250 (CC) was cited. This case concerned section 65 of the North West Gambling Act which

permitted warrantless searches of premises. The Constitutional Court held that the provisions allowing inspections without a warrant, were an unconstitutional violation of the right to privacy.

In the present case, it was held that the investigation of crime is not one of the purposes of the Act.

It was held that:

Warrantless routine searches are justifiable under the Act in respect of the business premises of persons registered in terms of s 59A, of persons licensed under Chapter VIII, of person registered under s 75(10) and of persons who operate pre-entry facilities, to the extent that the search relates to the business for which such person is registered or to the business for which such premises are licensed or registered or to the business of operating the pre-entry facility.

Warrantless non-routine searches are justifiable under the Act in respect of pre-entry facilities, licensed warehouses and rebate stores, to the extent that the search relates to the business of operating the pre-entry facility or to the business of the licensed warehouse or rebate store.

Searches without judicial warrant are not justifiable in other cases. In particular, there is no justification for dispensing with the requirement of a warrant in the case of [i] searches of the premises of unregistered and unlicensed persons; [ii] non-routine searches of the premises of registered persons.

Accordingly, it was held that sub-paras (i) and (ii) of s 4(4)(a) of the Act is inconsistent with the Constitution and invalid. Such declaration was held not to be retrospective and its effect was suspended for 18 months to afford the legislature the opportunity to amend the provisions to make them valid in terms of the Constitution (own emphasis).

It was held that a retrospective order could prejudice SARS and the public interest by jeopardising tax collections as it was the only search provision available to SARS.

The respondents (The Minister, SARS et al) were ordered to pay the cost of the applicants.

Please click here to download the full judgment delivered by Rogers J.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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