South Africa: Western Cape High Court Rules On Purpose Of Preservation Orders

Last Updated: 25 November 2014
Article by Beric Croome

Most Read Contributor in South Africa, July 2019

Section 163 of the Tax Administration Act 28 of 2011 ("TAA") provides that a senior SARS official may authorise an ex parte application to the High Court for an order for the preservation of any assets of a taxpayer, or other person prohibiting any person, subject to the conditions and exceptions as specified in the preservation order, from dealing in any manner with the assets to which the order relates.

The TAA provides that a preservation order may be granted if required to secure the collection of tax. The preservation order will apply in respect of realisable assets seized by SARS in terms of section 163(2), which allows SARS to attach assets in anticipation of being granted a preservation order by the court. Furthermore, the preservation order would typically be granted in respect of realisable assets as may be specified in the order, and which may be held by the person against whom the preservation order is being made. In terms of section 163(4) of the TAA, the court to which an application is made may grant a provisional preservation order having immediate effect. In addition, the court may grant a rule nisi calling on the taxpayer or any other person, on a business day mentioned in the rule, to appear and satisfy the court as to why the preservation order should not be made final.

The TAA requires that the preservation order must provide for notice to be given to the affected taxpayer and the person from whom the assets are seized.

Where a preservation order is granted in terms of section 163 of the TAA, the court may make any ancillary orders regarding how the assets must be dealt with, including:

  • authorising the seizure of all movable assets
  • appointing a curator bonis in whom the assets of that taxpayer or another person liable for tax vests
  • realising the assets in satisfaction of the tax debt
  • making provision as the court may think fit for reasonable living expenses of a person against whom the preservation order is made, or
  • any other order which the court considers appropriate for the proper, fair and effective execution of the order.

The court which grants the preservation order may vary or rescind that order if the circumstances set out in section 163(9) of the TAA are complied with.

Once a preservation order has been granted, it remains in force pending the setting aside thereof on appeal, or until the assets subject to the preservation order are no longer required for purposes of the satisfaction of the tax debt.

The TAA provides that assets seized under section 163 of the TAA must be dealt with in accordance with the directions issued by the High Court which granted the relevant preservation order.

Rogers J in Commissioner for the South African Revenue Service v eTradex (Pty) Ltd (case number 12949/2013) as yet unreported, was required to decide whether to confirm the provisional preservation order granted in terms of section 163(4) of the TAA. In the eTradex case the affected taxpayers had been delinquent in that tax returns had not been submitted timeously to SARS, and it was accepted that amounts were due to SARS for various tax debts payable to SARS.

In the case before the court, the taxpayers repeated an offer of security made in negotiations with SARS by way of continued operation of caveats in respect of various immovable property which the taxpayer contended had a value of approximately R7.5 million. In addition, Tradex offered SARS a cession in securitatem debiti of the company's book debts to the value of R10.5 million.

SARS, in its papers filed with the court, continued to be dismissive of the value of the book debts offered as security by the taxpayer.

SARS approached the court for confirmation of the preservation order and that the taxpayers be prohibited from disposing, dissipating of any assets and that SARS be authorised to cause caveats to be registered over the taxpayer's immovable properties. In addition, SARS sought that a Mr Nel be appointed as the taxpayer's curator bonis with all of the taxpayer's assets vesting in him. Rogers J expressed the view that he did not think that the legislature intended that a preservation order would routinely be available to SARS in every case of an actual or anticipated tax liability. The court was of the view that there must be a material risk that assets will be dissipated in order to justify the granting of a final preservation order.

In the case at hand, SARS did not satisfy the court that there was an appreciable risk of the assets owned by the taxpayer being diminished. SARS did not in its replying and supplementary replying papers allege that the taxpayer was causing the company to dissipate its assets by distributing dividends or paying unreasonable salaries or engaging in other suspicious transactions.

At paragraph 54 Rogers J stated as follows:

"One gains the distinct impression that SARS launched the application not so much because a preservation of the respondents' assets was required but in order to bring the matters to a head by placing legal pressure on the respondents."

The court expressed the view that the granting of a final preservation order would have the effect of forcing the company to shut down and the granting of a preservation order in such circumstances would not be just. The court made the point that the taxpayers had offered SARS caveats over the immovable property and had those been accepted by SARS, the litigation would have been resolved far earlier than what was the case.

In the result the court ordered that the caveats registered against the immovable properties remain in place unless the taxpayer and SARS agree thereto in writing or the court otherwise directs.

The court was critical of the appointment of the curator bonis by way of the provisional preservation order on the basis that that appointment increases the costs of the taxpayer and was not strictly necessary to preserve the assets in question. The court also made the point that section 163 of the TAA is a procedure for preserving assets and is not a means of execution on the basis that once tax has been assessed or is otherwise due and payable, the "pay now, argue later" rule applies. In terms of the provisions of the TAA, SARS has various provisions in terms of which it can institute proceedings to recover assessed tax from a delinquent taxpayer.

The court ordered SARS to pay a large portion of the taxpayer's costs and dismissed SARS' application to confirm the provisional preservation order.

The grant of a preservation order is an intrusion into the life of a taxpayer and confirmation of an interim preservation order will not be granted lightly by the courts, based on the decision of Rogers J.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions