Sometimes a litigant wants to avoid long, drawn-out factual disputes and attempts to resolve a dispute by approaching a court for declaratory relief that may be decisive in a matter. For instance, where one party says the law says one thing and another party contends it says something different, it is useful to seek an order from a court as to what the law is.
The courts will not, however, entertain declaratory relief that is academic or hypothetical in nature. There must be a real need for clarification given the consequences of the decision. In terms of section 21(1)(c) of the Superior Courts Act 10 of 2013, a high court may, at its discretion, and at the instance of any interested person, enquire into and determine any existing, future, or contingent right or obligation, notwithstanding that such person cannot claim any relief consequential upon the determination. An applicant who seeks declaratory relief must satisfy the court that he is a person interested in an existing, future or contingent right or obligation, and if the court is satisfied on that point, it must decide whether the case is a proper one for the exercise of the discretion conferred on it.
In the area of customs law, it often happens that Sars has one interpretation of regulatory requirements and importers, exporters, licensees and the like may have a different interpretation. Clearly, certainty as to the correct interpretation is important for everyone, and more importantly, may be decisive of otherwise extremely time-consuming and costly internal remedies (doomed to fail because Sars has already declared a contrary interpretation of the law) or litigation. Declaratory relief in such instances is an extremely useful and practical remedy for all concerned. Or at least until recently so it was thought…
The Supreme Court of Appeal (“SCA”) grappled with a test for declaratory relief in the case of Pasiya and others v Lithemba Mining (Pty) Ltd and others[1]. The court quoted with approval the Cordiant[2] case which formulated a two-stage approach, namely: Firstly, the court must satisfy itself of the existence of a future of contingent right or obligation that stands to be prejudiced (the jurisdictional grounds); Secondly, a court is not bound to grant declaratory relief unless following an examination of all relevant factors the court finds that such factors warrant the exercise of the court discretion to grant relief (the grounds for exercise of discretion).
However, in a recent case of Lueven Metals (Pty) Ltd v Commissioner for the South African Revenue Service[3] the SCA found that there was no basis for tampering with the high court’s decision to dismiss an application for declaratory relief. In doing so, the appeal court upheld the high court’s decision that there is a narrow basis for entertaining application for declaratory relief in tax matters where the legislation provides for various internal remedies to be followed to challenge an impugned decision[4]. (underlining for emphasis)
- The appeal court found that when seeking declaratory orders in terms of section 21(1)(c) of the Superior Court’s Act it must be borne in mind that the relief is a discretionary remedy. The SCA reiterated that declaratory relief was dependent on a two-stage enquiry as to (1) whether the jurisdictional requirements are met, and if so (2) whether the case is a proper one for the exercise of the court’s discretion.
- The court went on to say that since the legislative scheme ensured an objection and appeal process by way of internal remedies, it was envisaged that such remedies should be exhausted[5] before a high court can be approached.
- The court, in its commentary, seems to draw a distinction “where the dispute involves no question of fact and the question is simply one of law” and where discretionary relief might be more appropriate.
- However, it is clear that the court’s reasoning suggests that “a general and without more” approach that the high court can be approached for declaratory relief, would be an incorrect application of the principles. The court held that while there may well be tax disputes for which declaratory orders can rightly be sought and made, it is likely to be rare and their circumstances exceptional, hence the warning bells. The court refrained from setting down a clear test as to when declaratory relief might be an appropriate remedy.
Clearly, litigants must be cautious in their approach to seeking declaratory relief, more particularly where the legislation provides for potential internal remedies before approaching the high court.
– Authored by: Quintus van der Merwe, senior partner at Shepstone & Wylie Attorneys.
[1] Pasiya and others v Lithemba Mining (Pty) Ltd and others [2023] JOL 62062 (SCA)
[2] Cordiant Trading CC v Daimler Chrysler Financial Services (Pty) Ltd [2005] ZASCA 50
[3] Lueven Metals (Pty) Ltd v Commissioner for the South African Revenue Service (Case no 728/2022) [2023] ZASCA 144 (8 November 2023)
[4] Molemela JA gave an interesting minority dissenting judgement, which perhaps reflects a more balanced and open approach to declaratory relief.
[5] The reasoning is akin to that of section 7 of the Promotion of Administrative Justice Act, 2000 which requires that internal remedies be exhausted prior to approaching the court by way of review.