Sars V Wiese - Asset Dissipation

AMENDED NOTICE CASK NO: 15065/2017
IN THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE DIVISION, CAPE TOWN)
In the matter between:
THE COMMISSIONER FOR THE SOUTH AFRICAN Plaintiff(s)

REVENUE SERVICES O FF ICE OF THE C H IEF JU S T iC E Applicant(s)
PRIVATE BAG X9020
CAPE TOWN 8000
and
2018 -05- 29
DR. CHRISTOFFEL HENDRIK WIES Er8oEr&IItIRSRS Defendant(s)
W ESTERING CAPE HIGH C O U R T Respondent(s)
NOTICE OF SKT 00%N SEMI-URGENT

Be pleased to take notice that pursuant to the provisions of the rules of this Court, the
abovementioned matter has been set down for hearing in the FOURTH DIV I S ION of this
Court on W K D NKSDAY 22 AUGUST 2018 at 10h00 or as soon thereafter as Counsel
may be heard.
In order to be assured of being heard you are reminded that Rule 62(4) must be complied
with at least five (5) davs prior to date of hearing.
DATED AT CAPE TOWN THIS 28"" DAY OF MAY 2018
RK R
RE T ED POS T
Messrs Norton Rose Fulbright South Africa inc,

Ref. AW,"KF"'SAR152
Private Bag X10
ROGG E BAAl
8012 (330)
1I, lessrs Edward Nathan Sonnenbergs

Ref. A C Hoeben/bb,"0409267
P 0 Box 2293
CAPE TOWN
8000 (123)
,'mdz
CASE NO: j5065Q017

(O'ESTERN CAPE DIVISION, CAPE TO JFN)
THE COMMISSIONER FOR TH i ntiff(s)

REVENUE SERVICES licant(s)
QCRvl C
and
DR. CHRISTOFFEL HENDRiK ' adant(s)

4 ondent(s)
NOTICE OF S) ~ ( g riot d8 ~1
t'
13e pleased to take notice that pi. this Court, the
abovementioned matter has been s VISION of this
Court on WE DNESDAY 6 JUN . ~s Counsel may
be heard.
with at least five (5) ~da sprior to date of hearing.
DATED AT CAPE WN T H I S 3 D A Y OF MAY 2018
RKG ISTRAR
REGISTER
Messrs Nor n s e Fulbright South Africa inc.
Ref. A W/KF/SAR152
Private Hag X10
ROGGEBAAl
8012 (330)
Messrs Edward Nathan Sonnenbergs

Ref. A C Hoeben/bb/0409261
gm -g"j- 0 3
P 0 Box 2293 rAD
CAPE 'f'OWN cApa rrOWhllKhhPb
'-"
L 8'r: 'l •"/i"
.' • ll t'Ca HOP
8000 (123)
/indz
CASE NO: 15065/2017
IN THE HIGH CQUR T OF SOUTH AFRICA

(WESTERN CAPE DIVISION, CAPE TOWV)
In the matter behveen:
THE COMMISSIONER FOR THE SOUT~HAF CA % - . . .

-
„ : Plaintiff(s)
REVENUE SERVICES ESTFnq CP /"- Applicant(s)
and Ply gg- 93

DR. CHRISTOFFEL HENDRIK WI SE gj+ZvH~E Defendant(s)
@Fe-~iIP H~~ Respond
ent( s)
NOTICE OF SET DOWN (SEMI-VRGENT)

Be pleased to take notice that pursuant to the provisions of the rules of this Court, the
abovementioned matter has been set down for hearing in the FOURTH DIV I S ION of this
Court on WEDNESDAY 6 SUNK 2018 at 10h00 or as soon thereafter as Counsel may
be heard.
with at least five (5)da
~ s prior to date of hearing.
DATED AT CAPE TO%N THIS 3 D A Y OF MAY 2018
REGISTRAR
REGISTK D ST
Mes on R se Fuibright South Africa Inc.

Ref. A F/ R152
Private Bag X10
ROGGEBAAI
8012 (330)
Messrs Edward Nathan Sonnenbergs

Ref. A C Hoeben/bb/0409267
P 0 Box 2293
CAPE TOWN
8000 (123)
/rndz
(WESTERN CAPE DIVISION,GAPE TOWN
CASE NO: 15065/17

T HE C O M NIISSIONER F O R T HE SO U T H Plaintiff
AFRICAN REVENUE SERVICES
and use
DR CHRISTOFFEL HENDRIK WIESE Firs Defendant
2018 -Ii>- o '-i
ISAK HENDRIK JOHANNES VISAGIE Second Defendant
CApE TowNtttpuaPSrAD
GERT CHRISTIAAN VILJOEN tNf.cs-KAAP HOE Ho Defendant
FREDERICK RAUTEN HOFIIEYR Fourth Defendant
NOTICE OF SET DOWN
TAKE NOTICE THAT the defendants' exception has been set down for hearing in
the in the Fourth Division of the above honourable court on Thursday, 24 IVlay 2018
at 10h00 or as soon thereafter as counsel may be heard.
KINDLY PLACE THE NIATTER ON THE ROLL ACCORDINGLY.
DATED at CAPE TOWN on the 9'" day of February 2018.
Norton Rose Fulbright South Africa Inc

Attorneys for the Plaintiff
15 Alice Lane, Sandton 2196
PO Box 784903 Sandton 2146
Tel +27(0)11 6858500
l4ortou RoseFttlbright South ASica Iuc
SARI 52/Daalci Brcicr
rcl- 021 405 I 200
EmaiL' dattici.brcicrOtortocroscfulbrigbtcom
Page 2
Fax +27 (0)11 301 3200

Ref: AW/KF/SAR152
Email:
andrew.wellsted nortonrosefulbri ht.com
C/0:
10th Floor Norton Rose House
8 Riebeek Street Cape Town 8001
Private Bag X10 Roggebaai 8012
Tel +27 (0)21 405 1200
Fax +27 (0)21 418 6900
Ref: D Breier/SAR152
Email: daniel.breier n ortonrosefulbri ht.com
The Registrar
High Court
CAPE TOWN
To,
Edward Nathan Sonnenbergs
(Attorneys for First to Fourth Defendants)
1 North Wharf Square
Loop Street, Foreshore
Cape Town
re reieptt oo py
herderi without p
t hu....„,i..d t' f , &et reiduire
oygee:l-..
l4; iQ
Tel; 021 410 2500
Email: ahoeben e n safrica,com 3vftit py.cayyt
Ref: A C. Hoeben/bb/0409267
A R SHOLTO-OOUGLAS S.C.
Tel: (021) 4234289
Fax: (02l) 424-2537
e-mail: sholtofkca char.ca.za
1515 Huguenot Chambers

40 Queen Victoria Street
CAPE TOWN
8001
G ( ~ ~P 24 Jaauary 2018
The Registrar to The Hon Mr Judge President Hlophe

High Court
Cape Town
Dear Ms Potgieter
SOUTH AFRICAN REVENUE SERVICES v C. WIKSE dk 3 OTHERS
The defendants in the abovementioned action have raised an ex '

o the plaintifFs
particulars of claim on the basis that the particulars are vague and embarrassing.
'
l l the les a r a v ' le t o ee ce on
We understand that dates for exceptions require the judge president's approval.
Should the judge president approve this date, please advise us so that we may attend to
preparinga court order and deliver same to you.
Yours sincerely
Alasdair Sholto- u g l as
Lizette Pot ieter
From: Lizette Potgieter

Sent: 25 January 2018 ll:48 AM
To: 'sholto@capebar.co,za'
Subject: SOUTH AFRICAN REVENUW SERVICES v C. WIESE 8. 3 OTHERS
Dear Alasdair
Hope you are well and I wish you all the best for 2018.
I refer to the abovernentioned matter and wish to advise that this matter can be heard by 1
Judge on the semi-urgent roll.
Kind regards,
LIZETTE POTGIETER ~ Floor, Room 329

35 Keerom Street
CHAMBERS OF THEHON. JUDGE PRESIDENT HLOPHE 021 480 2564
Western Cape
INTHE HIGH COURT OF SOUTH AFRICA High Coert
Western Cape bivision, CapeTown Private Bag x 9030, OB66431932 Ifax2emall)
OFFICE OFTHE CHIEF JUSTICE Cape Towrl, 621 4BB 2564
REPUBLIC OFSOUTH AFRICA 8000
E. Ep ot ieter 'otlcia .or .za
~ ~- DI , .
Y' rj
N
/
tN THE HIGH CO U R T O F SO U T H A F R ICA
CASE NO: 15065/1T
In the matter betwee
Plaintiff
THF CO M M I S S ONER' O R THE S8 8 H
AFRICAN REV Ug S E R V ICES)
4r'0 7-
+ -s.j '"~ . ,
~ Qp~ ~40
and ~~pe
DR CHRISTO F F E L H E N D R IK W IES E First Defendant
ISAK HEN D R IK JO H A N N E S VISAG IE Second Defendant
G ERT CHRISTIAAN V I L J O E N Third Defendant
FRED E R ICK RA U T E N H O F IIEYR Fourth Defendant
N OTICE OF INTENTION TO DE F E N D
BE PLEASED T O T A K E N O T I C E th at the abovenamed First to Fourth
Defendants hereby give notice of their intention to defend the above action.
Edward Nalnan Sonnenbergs

A C Hoeben Tel (021) 4102500
Bnx 123
FURTHER T A K E N O T I C E th a t t he F i rst to F o urth Defendants have
appointed our o f fices a t 1 N o r t h W ha r f Sq ua r e , L oop Street,
Foreshore, C a p e T o w n as t he address at which they will accept notice
and service of all process in these proceedings.
Dated at CAPE TOWN on the 5'" day of SEPTEMBER 2017.
E DW A T HA N SO N N E N B E R G S
Per
Attor s for First to Fourth Defendants

1No h Wharf Square
I oop Street, Foreshore
CAPE TOWN
Tel: 021 410 2500
Fax: 021 410 2555
E-Mail:ahoeben ensafrica.com
(Ref: A C Hoeben/bb/0409267)
TO: THE REGISTRAR

Western Cape High Court
CAPE TOWN
AND TO: N O R T O N R O S E F U L B R I G HT SO U T H
AFRICA INC.
AttorneYs for Plaintiff .-~ Rose FdMgf4
. -
15 Alice Lane, Sandton

Tel: 011 685 8500 g g gyp)foal 'l
Email: Andrew,wellsted n ortonrosefulbri t-.co capp~
(Ref: AW/KF/SAR152) wa
c/o NORTON ROSE FULBRIGHT SOUTH AFRI
INC.
10'" Floor, Norton Rose House
+ 9s i
8 Riebeeck Street
CAPE TOWN
Tel: 021 405 1200
Email: Daniel.breier n ortonrosefulbri ht.com
(Ref: D Breier/SAR152)
(WESTERN CAPE DIVISION,CAPE TOWN
CASE NO: 15065/17

T HE C O M M I SSIONER F O R TH E SO U T H Plaintiff
AFRICAN REVENUE SFRVICES
and
DR CHRISTOFFEL HENDRIK WIESE , „„- ~.~~~j '-'-"I irhtIDefendant

ESTER
ISAK HENDRIK JOHANNES VISAGIE Second defendant
)o7 -»- "~ Third Defendant
GERT CHRISTIAAN VILJOEN
FREDERICK RAUTEN HOFMEYR erg~. f ijurth-Befendant
FILING SHEET
Document filed herewith:
Amended Particulars of Claim
DATED at CAPE TOWN on the 2" day of November 2017.
Norton Rose Fulbright South Africa lnc

Tel +27 (0)11 685 8500
Fax +27 (0)11 301 3200
Ref: AW/KF/SAR152
Email:
andrew.wellsted nortonrosefulbri ht.com
Norton Rose Fulbnght South Africa inc

SARlSM)aniel Breier
Tel; 02 l 405 l200
Email: daniel.breier@nortonrosefutbriaht corn
Page 2
C/0:
Norton Rose Fuibright South Africa lnc
Tel +27 (0)21 405 1200
Fax +27 (0)21 418 6900
Email: daniel.breier n o rtonrosefulbri ht.corn
The Registrar
High Court
CAPE TOWN
To:
56 Shortmarket Street
Cape Town received copy hereof with ut preiudlce
Tel: 021 410 2500 Irts ..8'...., dugel+.......
'pm-
.,., -„„....20.E3.;.
" " " -
Email: ahoeben e n safrica.com ot..I:4.6.0a

Ref: A C Hoeben/bb/0409267 w em+ •
<Ol SOff leo cdfll
(WESTERN CAPE DIVISION, CAPE TOWN
CASE NO: 15065/17

T HE COM M I S S I ONE R F OR T HK SOUT H Plaintiff

DR CHRISTOFFKL HKN D RIK WIKSE First Defendant
ISAK HKNDRIK JOHANI'KS VISAGIK Second Defendant
GERT CHRISTIAAN VIL JOEN Third Defendant
FREDERICK RAUTKN HOFMKYR Fourth Defendant
AM E N D E D PA R T IC U L A R S OF CLAIM
1. The p l aintiff is The Commissioner for the South African Revenue Service
("SARS"), appointed in terms of section 6 o f t h e South Af rican Revenue
Services Act, 34 of 1997 ("the SARS Act").
SARS' principal place of b usiness is at L a hae L a Sars, 299 B ronkhorst
Street, Nieuw Muckleneuk, Pretoria, Gauteng Province.
3, The f i r st defendant is Dr Christoffel Hendrik Wiese, an adult male businessman,
care of ENS Africa, North Wharf Square, Loop Street, Foreshore, Cape Town.
4. The s e cond defendant is Isak Hendrik Johannes Visagie, an adult male
businessman, care of ENS Africa, North Wharf Square, Loop Street, Foreshore.
Cape Town.
Amended Page - 2-
5. T he t h i rd defendant is Gert Christiaan Viljoen, an adult male businessman care
of ENS Akica, North Wharf Square, Loop Street, Foreshore, Cape Town.
6. The f o u rth defendant is Frederick Rauten Hofmeyr, an adult male businessman
7. A ll o f t he defendants reside within the area of jurisdiction of this court.
8. On 2 6 September 2011, pursuant to an audit of the taxpayer, SARS assessed
Energy Africa (Pty) Limited ("the taxpayer") for additional income tax in
respect of the 2007, 2008 and 2010 years of assessment in the amounts of
R18 849 736 (plus penalties of R37 699470), R8 570 682 (plus penalties of
R 17 141 364) and R6 580 531 (plus penalties of R13 161 062) respectively,
being a total amount of R102 002 845.
On 27 September 2011, the income tax amount in respect of the 2010 year of
assessment was reduced to R6 566 951. The penalties remained unaltered. The
total amount of the tax, and penalties thereon for the 2007, 2008 and 2010 years
of assessmentwas therefore reduced to R101 989 265.
10. A c o p y of the notice of the said assessment is annexed hereto, marked "A".
11. A s a t 1 9 April 2013, the amounts of interest that had accrued on the aforesaid
amounts were R28 321 728 (2007), Rl 0 027 698 (2008) and R3 493 499 (2010),
being a total of R41 842 925.
12. O n 28 September 2012, SARS assessed the taxpayer to income tax in respect of
the 2011 tax year in the amount of R20 430 934.72. As at 19 April 2013, the
amount of i n t erest that ha d a ccrued o n t h i s a m ount w a s R l 8 8 1 348.

Amended Page - 3-
13. A c o p y of the notice of the said assessment is annexed hereto, marked "B".
14. On 1 6 November 2012, SARS addressed a letter to the taxpayer, in which it:
14.1. notified the taxpayer that SARS intended to:
14.1.1. make certain adjustments in respect of the taxpayer's 2007
income tax assessment, which would result in the inclusion of
capital gains tax ("CG7") on the disposal of a subsidiary in the
amount of R453 126 518 in terms of paragraph 8(b) read with
paragraph 648(3) of the eighth schedule to the IT Act; and
14.1.2. issuean assessment forthe taxpayer's 2007 tax year in respect
of secondary tax on companies ("STC") on a deemed dividend
in the amount of R487 205 316 in terms of section 64C(2)(a) of
the IT Act;
14.2. communicated to the taxpayer various findings pursuant to an audit of
information provided by the taxpayer; and
14.3. i ssued a notice in terms of section 80J(1) of the IT Act on the basis that
the transactions in question amounted to, inter alia, an impermissible tax
avoidance arrangement as defined in section 80L of the IT Act.
15. A c opy of the said letter is annexed hereto, marked

"C".
16. On 1 5 A pril 2013, the taxpayer's attorney addressed a letter to SARS, disputing
any tax liability to SARS.
17. A c o p y of the said letter is annexed hereto, marked 'D".

18. On 1 5 April 2013 and at all material times thereafter, theaxpayer's
t only asset of
material value was a loan claim against Titan Share Dealers (Pty) Ltd ("TSD") in
the amount of R216.6 million ("the loan claim" ).
19. On o r about 19 April 2013, the first defendant instructed the second defendant to
procure:
19.1. the d i stribution of t h e l o a n c l aim against TSD t o T i t a n P remier
Investments (Pty) Ltd ("TP1"); and
19.2. the sale of the taxpayer to Friedshelf 1395 (Pty) Ltd ("Friedshelf ').
20. On 1 9 A p ril 2013, the directors of the taxpayer (at the time the third and fourth
defendants) resolved at a meeting of the board of directors of the taxpayer as
follows:
"1. The Company has a loan claim against Titan Share Dealers
(Pty) Ltd in the amount of R216 600 000.00 (Two Hundred and
Sixteen Million an d Si x H u n dred Thousand Rand) ( " loan
claim ").
The Company wishes to distribute in specie the Loan Claim on

19 April 2013 (" the Distribution" ) to Elandspad 1nvestments
(Pty) Ltd ("Elandspad"), in its capacity as the holder of all the
ordinary shares in the Company.
3, T he Co m p any is a u t horised to m a ke t he D i s t ribution t o

Elandspad.
Pursuant to the authorisation in clause 3 above, the Company

hereby resolves to make the Distribution to Elandspad on 19
April 2013. "
21. A c o py of the resolution authorising the distribution of the dividend is annexed
hereto, marked "K".
22. O n 19 April 2013, the taxpayer effected the distribution of the loan claim to its
holding company, Elandspad (Pty) Ltd ("ElandspacP'),and advised the latter
thereof in a letter signed by the third and fourth defendants.
23. A co p y of the said letter is annexed hereto, marked "F".
24. On 1 9 A pril 2013, the board of directors of Elandspad authorised the distribution
by way of a dividend in specie of the loan claim to its holding company, being
TPI.
hereto, marked "G".
26. O n 1 9 April 2013 Elandspad effected the distribution of the loan claim to its
holding company, TPI, and advised the latter thereof in a letter signed by the
third and fourth defendants.
27. A c o p y of the said letter is annexed hereto, marked

"H".
28. Af t e r the distribution of the dividend

in specie referred to above and on or about
6 May 2013, TPI disposed of all of the shares in the taxpayer (through the sale of
Elandspad) to Friedshelf in terms of a written sale of shares agreement ("the sale
of sharesagreement") entered into by TPI, represented by the first and second
defendants,and Friedshelf,represented by the third and fourth defendants.
29. A co p y of the sale of shares agreement is annexed hereto, marked 'I' .

Amended Page - 6-
30. W it h f ul l and actual knowledge of what is set outin paragraphs 8 to 15 above,
the defendants knowingly caused, or assisted in causing, the taxpayer to
dissipate the loan claim by declaring and transferring it as a dividend in specie to
its holding company, Elandspad, which in turn declared and transferred the loan
claim as a d i v i dend in s p e cie to i t s o w n h o l d ing c ompany, TPI ( " t h e
dissipation").
31. T h ed issipation was effected at a time when, to the knowledge of the defendants,
the following debts constituted debts due to SARS for the purposes and in terms
of section 169 of the TA Act ("tax debts"):
31.1. the amount of R101 989 265, referred to in paragraph 9 above;
31.2. i nterest on the sum referred to in paragraph 31.1 of R41 842 925;
31.3. the amount of R20 430 934.72, referred to in paragraph 12 above;
31.4. i nterest on the amount referred to in paragraph 31.3 in the amount of
Rl 881 348;
31.5. the amount of R487 205 316 in respect of STC, referred to in paragraph
14.1.2above, which was then due, owing and payable, having become
due, owing and payable no later than the last day of the month following
the month in which the dividend cycle relevant to the dividend ended.
32. A cc o r dingly, at the time of the dissipation, the taxpayer had been assessed
to
income tax in the amount of R122 420 199.72 plus interest of R43 724 273 and
w as liable for ST C i n t h e a m ount o f R 4 8 7 2 05 316, being a t o tal o f
R653 349 788,72. (The tax debts referred to in paragraphs 31.1 to 31.4 above
Amended Page - 7-
were extinguished after the dissipation in terms of a settlement reached between
the taxpayer and SARS on 29 October 2015).
33. F u r t hermore, at the time of the dissipation, the defendants knew that SARS
intended to assess the taxpayer to tax in the amount of R453 126 518 on the
basis referred to in paragraph 14.1.1 above and that, upon assessment, such
claim would become a tax debt.
34. The d i ssipation was effected in order to obstruct the collection of the sum of the
amounts referred to in paragraphs 32 and 33 above, being Rl 106 476 306.72.
35. T he a mount of Rl 106 476 306.72 constituted a"tax debt" for the purposes of
section 183 of the TA Act at the time of the dissipation. In amplification:
35.1 The debts pleaded in paragraphs 31.1 to 31.5 above were due and
payable at the time of the dissipation.
35.2 The debt pleaded in paragraph 33, while not due and payable at the time
of the dissipation is, on a, proper construction of section 183 of the
TA Act, and for the purposes of that provision, also a tax debt.
36. A lt e r natively to paragraph 35 above, the amount of R653 349 788.72 was, at the
time of the dissipation, a tax debt for the purposes of section 183 of the TA Act.
37. On 2 1 August 2013, SARS addressed a finalisation of audit letter to the taxpayer
in which the taxpayer's additional income tax liability for the 2007 year of
assessment was fully described ("the finalisation of audit letter" ). The letter is
annexed as annexure "J" and records the following:

Amended Page - 8-
37.1. a notice of additional assessment in respect of the taxpayer's 2007
income tax assessment, resulting in the inclusion of capital gains tax
("CG7") on the disposal of a subsidiary in the amount of R453 126 518
in terms of paragraph 8(b) read with paragraph 64B(3) of the eighth
schedule to the IT Act, and understatement penalties of R679 689 777;
37.2. a notice of original assessment for the taxpayer's 2007 tax year in respect
of STC on adeeined dividend in the amount of R488 282 886 in terms of
section 64C(2)(a) of the IT A ct, and understatement penalties of
R732 424 329 (collectively "the audit assessments").
38. Su b sequent t o t h e c o n c lusion of the sale of shares agreement, on
11 September 2013 the attorneys for the taxpayer replied to the finalisation of
audit letter. In the reply, they advised that the taxpayer disputed any liability to
SARS and that the taxpayer did not have any cash or assets and could not pay
the disputed tax.
39. On 2 6 N o vember 2013, SARS issued a notice of assessment in respect of the
2012 tax year in terms of which it assessed the taxpayer to tax in the amount of
R3 261 106.06 and interest in terms of section 89quat(2) of the IT Act in the
amount of R207 895.51.
40. A copy of theadditional assessment isannexed hereto,marked "K"
41. T h e taxpayer objected to the audit assessments and, on 3 April 2014, SARS
issued a partial allowance of that objection and confirmed the remainder of the
audit assessments (" the revised audit assessments").

Amended Page - 9-
42. A copy of therevised audit assessment isannexed hereto,marked "L".
43. In t h e absence of an appeal against the revised audit assessments, on 26 June
2014, SARS issued a final demand for payment of R3 264 145 690.16 by the
taxpayer.
44. A c o py of the final demand is annexed hereto, marked "M".
45. O n 30 July 2014, SARS obtained a certified statement in terms of section 172(1)
of the TA Act in the amount of R3 278 805 100.
46. A co p y of the certified statement is annexed hereto, marked "N".
47. On 2 4 O ctober 2014, SARS was informed in an email addressed to it by the 3'
defendant that the taxpayer was dormant.
48. A c o py of the email is annexed hereto, marked

"0".
49. On 1 2 A p ri l 2016, the taxpayer was finally wound up by order of this Court
under case number 1646/16.
50. A co p y of the final winding-up order is annexed hereto, marked

"P".
51. On 2 5 October 2016, SARS gave the defendants notice in terms of sections 183
and 184 of the TA Act.
52. T h e four notices (without annexures) are annexed hereto, marked

"Q" to "T".
53. On 1 6 January 2017, the defendants responded in terms of section 184 of the TA
Act (' the responses *). The responses are annexed hereto, marked "U" to "X".
Amended Page — 10-
54. A s a p pears from annexures "Q" to"T" hereto, SARS contended therein that the
defendants are liable, jointly and severally, to pay to it the amount of R216.6
million.
55. A s a p pears from annexures "U" to"X" hereto, the defendants dispute that they
are liable to SARS on the grounds relied on by SARS.
56. H a v ing considered the responses, as contemplated by section 184(2) of the TA
Act, SARS determined on 3 August 2017 to hold the defendants liable for the
tax debts of the taxpayer in terms of section 183 of the TA Act.
57. Cop i es of said notices are annexed, marked "Y" to"BB".
WHEREFORE the plaintiff claims:
(a) An order declaring that defendants are liable, jointly and severally, to pay to
SARS the amount of R216.6 million in terms of sections 183 and 184 of the Tax
Administration Act, 28 of 2011 on the basis that they knowingly caused, or
assisted in causing, the taxpayer to dissipate a loan claim in the amount of
R216.6 million in favour of the taxpayer against Titan Share Dealers (Pty) Ltd
by declaring and transferring it as a dividend in specie to its holding company,
Elandspad Investments (Pty) Ltd, in order to obstruct the collection of the tax
debts referred to in paragraph 30 above;
(b) Payment by the defendants, jointly and severally, the one paying the other to be
absolvedof the sum of R216.6 million;
(c) Interest on the aforesaid amount &om 3 August 2017 at the legal ratea tempore
morae;
Amended Page - 11-
(d) Costs of suit;
(e) Further and/or alternative relief.
Dated at CAPE TOWN on this 18 day of AUGUST 2017.
AR Sholto-Douglas S.C.
Philip Myburgh
Shafia Mahorned
Counsel for the plaintiff
CASE NO' 1 5 0 65/17

/ep~~«N Capp ~
"+H CpUR~
THE COMMISSIONER FOR THE SOUT Plaintiff
AFRICAN REVENUE SEQ) flag
+E TOWN~
and Wps-KAAP qOEsrqo
DR CHRISTOFFEL HENDRIK WIESE First Defendant

GERT CHRISTIAAN VILJOEN Third Defendant
FREDERICK RAUTEN HOFMEYR Fourth Defendant
DEFENDANTS' NOTICE OF EXCEPTION IN TERMS OF RULE 23
PLEASE TAKE NOTICE that the defendants hereby notes an exception
to the plaintiff's particulars of claim ('the particulars') on the grounds that
same lack sufficient averments to sustain a cause of action, alternatively
and in any event that they are vague and embarrassing.
TAKE NOTICE FURTHER that Defendants' ground of exception is as
follows:

Tel: (021) 410-2500: A C Hoeben
Box 123
Ground of exce tion:
Section 183 of the Tax Administration Act 28 of 2011 ('the TAA')
imposes joint and several liability for the tax debt of a taxpayer 'if a
person knowingly assists in dissipating a taxpayer's assets in order
to obstruct the collection of a tax debt of the taxpayer, the person is
jointly and severally liable with the taxpayer for the tax debt' to the
extent that the person's assistance reduced the assets available to
pay the taxpayer's debt.
2. I n pa r agraph 30 of the particulars, the plaintiff alleges that

"with full
and actual knowledge of what is set out in paragraphs 8 to 15
above, the defendantsknowingly caused, or assisted in causing,
the taxpayer to dissipate the loan claim by d eclaring and
transferring it as a dividend in specie to its holding company,
Eiandspad, which in turn declared and transferred the loan claim as
dI'vidend in specie to it s o w n h olding company, TPI ("the
dissipation")."
3. In p a ragraph 34 of the particuiars,

the plaintiff alleges that "The
dissipation was effected in order to obstruct the collection of the
sum of the amounts referred to in paragraphs 32 and 33 above,
being R 1 106 476 306. TZ
4. The p laintiff relies upon the allegations in paragraphs

30 and 34 to
found the claim for declaratory relief in prayer (a), and as a

consequence the claim in prayer (b) for payment by the defendants
of the sum of R 216.6 million.
5, In p a ragraphs 8 to 15 of the particulars (referred to in paragraph 30)
the Plaintiff alleges that:
on 26, 27 and 28 September 2012 Plaintiff issued notices
of assessments in respect of Energy Africa (Pty) Ltd ('the
taxpayer') for the 2007, 2008, 2010 and 2011 tax year
(Annexures "A" and "B" to the particulars); and
5.2 on 1 6 November 201 2 (Annexure "C" to the particulars) the
Plaintiff addressed a letter to the taxpayer in which it:
5.2.1 not i fied the taxpayer that it intended to:
5.2.1.1 make certain adjustments in respect of
the t axpayer's 2 007 i ncome tax
assessment, which would result in the
inclusion of capital gains tax ('CGT') on
t he disposal of a s u bsidiary in t he
amount of R 453 126 518 in terms of
paragraph 8(b) read with paragraph
64B(3) of the eighth schedule to the
Income Tax Act ("ITA"); and

5.2.1.2 issue an assessment for the taxpayer's
2007 tax year in respect of secondary
tax oncompanies on a deemed dividend
in the amount of R 487 205 316 in terms
of section 64C(2)(a) of the ITA.
5.3 commu n icated to thetaxpayer various findings pursuant to
an audit of information provided by the taxpayer; and
5.4 iss u ed a notice in

terms of section 80J(1) of the ITA on the
basis that the transactions in question amounted to, inter
alia, an imperm
issibletax avoidance arrangement defined
in section 80L of the IT Act.
6. T he noticesand correspondence (annexure A, B and C to the
particulars) were addressed between 26 September 2011 and 16
November 2012 ('the reievant period').
7. The p articulars failto allege any facts in support of the allegation
made in paragraph 30 of the 'full and actual knowledge' of the
defendants of the events set out in paragraphs 8 to 15 of the
particulars.
8. Th e p articulars fail to allege what position the defendants occupied
in relation to the taxpayer during the relevant period, and in
particular whether they were then appointed as directors of the
taxpayer.
9, As a c onsequence, the particulars do not disclose any basis upon
which the 'full and actual knowledge' of the events during the
relevant period can be imputed to the defendants, as alleged in
paragraph 30, or any basis on which the defendants 'knowingly
assisted' the taxpayer for purposes of section 183 of the TAA in
order to obstruct the collection of the tax debts, as referred to in
paragraphs 30 and 34 of the particulars.
10. Ac c ordingly,
the allegations contained in the particularsare not
sufficient to visit joint and several liability on the defendants for
purposesof section 183 of the TAA, and do not disclose a cause of
action for purposes of the relief claimed in prayer (a), and, as a
consequence the relief claimed in prayer (b).
11. Al t e rnatively,
the failure by the plaintiff to allege material facts which
would give rise to the relief claimed in prayer (a) and (b) of the
particulars, renders the particulars vague and embarrassing.
WHEREFORE the Defendants pray for an order as follows:
(a) The exception isupheld;
(b) Plaintiff's particulars of claim is struckout;
(c) The Plaintiff is ordered to pay the costs of the exception;
(d) Further and/or alternative relief.
DATED AT CAPE TOWN THIS THE I 7 DAY OF JANUARY 2018.

tlat L. KUSCHKE (S.C.)
M O' SULLIVAN
Defendants' Counsel
EDWA NATHAN
SON BERGS
Per:
A ys f o r Defendants
CAPE TOWN
Tel: 021 410 2500
Fax: 021 4102555
E-mail:
ahoeben ensafrica.com
(Ref: AC
Hoeben/bb/0409267)
TO: N ORTO N R O S E FU L B R IGHT SO U T H
A FRICA I N C .
Attorneys for Plaintiff
T el: 0 1 1 6 8 5 8 5 0 0
Email:
A ndrew.we l l s te d nor t o n r o s e f u l b r i h t , c o
(Ref: AW/KF/SAR152)
c/o N ORTO N R O S E FU L B R IGHT SO U T H

A FRICA I N C .
10th Floor, Norton Rose House
8 Riebeeck S t r e e t
C APE TOW N
T el: 0 2 1 4 0 5 1 2 0 0 Norton RoseFutbright
Sou@AfrhaInc.
Email: f
Daniel.breier n o r t o n roseful htU JAN 291

ACCEPTED OUT
(Ref: D Breier/SAR152) P
Oj
(WESTERN CAPE OIVISlON, CAPE TOWN
CASE NO: 15065/17

THE C O IIMISSIONER F O R TH E SO U TH Plaintiff

and
DR CHRISTOFFEL HENDRIK WIESE Firs Defendant

ZOI8 -02- 0 8
GaPE <O~~ ~ PST ~ U
GERT CHRISTIAAN VILJOEN ~f.5-KAAMA8 Defendant
NOTICE OF SET DOWN
TAKE NOTICE THAT the defendants' exception has been set down for hearing in
the in the Fourth Division of the above honourable court on Thursday, 24 May 2018
at 10h00 or as soon thereafter as counsel may be heard.
KINDLY PLACE THE MATTER ON THE ROLL ACCORDINGLY.
DATED at GAPE TOWN on the th

9 day of February 2018.
Norton Rose Fuibright South Africa Inc

PO 8ox 784903 Sandton 2146
Tel +27 (0)11 685 8500
Norton Rose Fulbright South A&ica Inc
SAR152/Daniel Brcicr
Tel: 021 405 1200
Email: danieLbrcicr®norrouroscrulbrisht.corn
Page 2
Fax +27 (0)11 301 3200

Ref: AW/KF/SAR152
Email:
andrew.we listed nortonrosefulbri ht.com
C/0:
Norton Rose fu/bright South Africa Inc
Tel +27 (0)21 405 1200
Fax +27 (0)21 41 8 6900
The Registrar
High Court
CAPE TOWN
To:
Cape Town
reaeir~ aopy her@sf without p
toi• ....,..j.,~or or.~KM' rejud
ge
) ea .J...
• Tel: 0 2 1 410 2500 at i 4('~ a
Email: ahoeben e n safrica.com w
fur,l3afrlea corn
Ref: A C Hoeben/bb/0409267
Case No 15065/17
THE COMIIISIONER FOR THE SOUTH AFRICAN Plaintiff

REVENUE SERVICES
' ~~Wsygc
C4Pp „,
And ' '"O{g~
DR CHRISTOFFEL HENDRIK I E SE 2{ 7fg Fi t Defendant
5 op
ISAK HENDRIK JOHANNES I E '~roke+ econd Defendant
GERT CHRISTIAAN VILJOEN hird Defendant
INDEX TO EXCEPTION
ITEM DOC UIIENT PAGE
Summons 1-5
Filing sheet: amended particulars of claim, dated 6 6- 7
November 2017
Amended particulars of claim 8- 18
Annexure "A" to amended particulars of claim: Income 19 -2'I
tax notice of assessment for Energy Africa in respect of
the 2010 year of assessment
Annexure "B" to amended particulars of claim: income 22-23

3.3 Annexure "C" to amended particulars of claim: Letter 24-54
from the Plaintiff to the Second Defendant, dated 16
November 2012
3.4 Annexure "D" to amended particulars of claim: Letter 55-87
from Peter Dachs of Edward Nathan Sonnenburgs Inc
(ENS) to the Plaintiff, dated 15 April 2013
3.5 Annexure "E" to amended particulars of claim: Extract of 88-89
the minutes of a meeting of the board of directors of the
Energy Africa (Pty) Ltd (Energy Africa) held at Parow
on 19 May 2013
3.6 n Annexure "F" to amended particulars of claim: Letter 90
from the Third and Fourth Defendant of Energy Africa to
Elandspad Investments (Pty) Ltd (Elandspad), dated 19
April 2013
3.7 Annexure "G" to amended particulars of claim: Extracts 91 -92
of the minutes of the board of directors of Elandspad
held at Parow on 19 April 2013
3.8 Annexure "H" to amended particulars of claim: Letter 93
from Third and Fourth Defendant of Elandspad to Titan
Premier Investments (Pty) Ltd (TPI), dated 19 April 2013

Annexure "i"to amended particulars of claim: Heads of 94-98
agreement entered into between TPI and Friedshelf
1395 (Pty) Ltd, dated 19 April 2013
Annexure "J" to amended particulars of claim: Letter 99 - 139
from the Plaintiff to Third Defendant of Energy Africa,
dated 21 August 2013
Annexure "K" to amended particulars of claim: Income 140 - 142
Annexure "L" to amended particulars of claim: L e tter 143 - 183
from the Plaintiff to the T hird Defendant of E nergy
Africa, dated 3 April 2014
Annexure "M" to amended particulars of claim; Final 184 - 'i85
demand letter from the Plaintiff to Energy Africa, dated
26 June 2014
Annexure "N" to a mended particulars of claim: The 186
Plaintiff's debt management certified statement, dated
20 April 2014
Annexure "0" to amended particulars of claim: Email 187
from the Third Defendant to th e P laintiff, dated 24
October 2014
Annexure "P" to amended particulars of claim: Final 188
liquidation order in respect of Energy Africa, dated 12
April 2016
Annexure "Q" to amended particulars of claim: Debt 189 - 194
management notice of personal liability letter from the
Plaintiff to the First Defendant, dated 25 October 2016
Annexure "R" to amended particulars of claim: Debt 195 - 200
rnanagernent notice of personal liability letter from the
Plaintiff to the Second Defendant, dated 25 October
2016
Annexure "S" to amended particulars of claim: Debt 201 - 207
management notice of personal liability letter from the
Plaintiff to the Third Defendant, dated 25 October 2016
Annexure "T" to amended particulars of claim: Debt 208 - 214
rnanagernent notice of personal liability letter from SARS
to Fourth Defendant, dated 25 October 2016
Annexure "U" to amended particulars of claim: Letter 215 - 226
f rom ENS in r espect of th e F irst Defendant to t h e
Plaintiff, dated 15 January 2017
Annexure "V" to amended particulars of claim: Letter 227- 238
f rom ENS in respect of the Second Defendant to t h e

Annexure "W" to amended particulars of claim: Letter 239 - 251
from ENS in respect of the Third Defendant to the
Annexure "X" to amended particulars of claim: Letter 252 - 264
from ENS in respect of the Fourth Defendant to the
Annexure "Y" to amended particulars of claim: Letter 265 - 274
from the Plaintiff to the First Defendant dated 3 August
2017
Annexure "Z" to amended particulars of claim: Letter 275 - 284
from the Plaintiff to the Second Defendant dated 3
August 2017
Annexure "AA" to amended particulars of claim: Letter 285 - 293
from the Plaintiff to the Third Defendant, dated 3 August
2017
Annexure "BB" to amended particulars of claim: Letter 294 - 303
from the Plaintiff to the Fourth Defendant dated 3 August
2017
Defendants' notice of exception in terms of Rule 23(1), 304 - 309
dated 27 November 2017

Defendants' notice of exception in terms of Rule 23, 310 - 316
dated 17 January 2018
r<
Signed at
Cape Town on day ofINay 2018.

PO Box 784903, Sandton 2146
Email: kyle.fyfe@nortonrosefulb right.corn
Ref SAR152/ DCC/KF
c/o Norton Rose Fulbright South Africa Inc
10'" Floor Norton Rose House
8 Riebeek Street, Cape Town 8001
Tel: 021 405 1200
Fax: 021 418 6900
Email: daniel.breier@nortonrosefulbright.corn
To:
The Registrar of the High Court
Cape Town
And to:

(Attorneys for the First to Fourth
received copy hery>i v;i'tl)OtJ't <3":,f'"<ll <.
Defendants)
1 North Wharf Square at .Q,;+i..... rTl D~n
58 Shortrnarket street
Cape Town t it N S n< i rn r r m
Tel: 021 410 2500
Email: ahoeben@ensafrica.corn
Ref: A C Hoeben/bb/0409267
Received on 2018
SAR152 Indee
/IJ 06 J
CASE NO: ..........
>-'s.; "
THE COINIIISSIONER FOR THE SOUTH Plaintiff
AFRICAN REVF NUE SERVICES
20t7.Og
I
and c 4~< ~OW

hl
p.~ S
4iP gp,-
i
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ijpF
DR CHRISTOFFEL HENDRIK WIESE t Defendant
C O M B INED SUINMON S
To the Sheriff or his Deputy:

I
INFORIN
DR CHRISTOFFEL HENDRIK WIESE, an adult male businessman, who resides at100
The Ridge, Fourth Beach, Clifton, Cape Town, with place of employment at
36Stellenberg Road, Parow Industria, Ravensmed, Cape Town, Western Cape.
Norton Rose Fulbright SA Inc

Ref: A Welsted/D Breier/SAR152
Tel 021 — 405 1200
(hereinafter called "the first defendant"). The first defendant has authorised ENS
Africa, North Wharf Square, Loop Street, Foreshore, Cape Town to accept service of
the summons on his behalf.
and
ISAK HENDRIK JOHANNES VISAGIE, an adult male businessman, who resides at 3
Keerweder Street, Vygerboom, Durbanville, Western Cape (hereinafter called "the
second defendant"). The second defendant has authorised ENS Africa of North Wharf
Q Sq ua r e , Loop Street, Foreshore, Cape Town to accept service of the summons on his
behalf.
and
GERT CHRISTIAAN VILJOEN, an adult male businessman, who resides at 6 Beta
Close, Bakoven, Cape Town, and whose place of employment is at Kirkham Ventures,
185 Bree Street, Cape Town (hereinafter called "the third defendant" ). The third
defendant has authorised ENS Africa of North Wharf Square, Loop Street, Foreshore,
Cape Town to accept service of the summons on his behalf.
and
FREDERICK RAUTEN HOFMEYR, an adult male businessman, who resides at1 I inks
Road, Rondebosch,Cape Town, and who is employed atKirkham Ventures, 185 Bree
Street, Cape Town (hereinafter called "the fourth defendant"). The fourth defendant
has authorised ENS Africa of North Wharf Square, Loop Street, Foreshore, Cape Town
to accept service of the summons on his behalf.

Hereinafter collectively referred to as the "defendants"
that
THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE ("SARS"),
appointed in terms of section 6 of the South African Revenue Services Act, 34 of 1997
("the SARS Act') with principal place of business is at Lahae La Sars, 299 Bronkhorst
(hereinafter called "the plaintiff" ),
hereby institutes action against the defendants in which action the plaintiff claims the
relief and on the grounds set out in the particulars annexed hereto.
INFORM the defendants further that if they dispute the claim and wish to defend the
action, they shall-
(i) Within (10) TEN days of the service upon the defendants of this Summons, file
with the registrar of this Court at Keerom Street, CAPE TOWN a notice of their
intention to defend and serve a copy thereof on the attorneys for the plaintiff,
which notice shall give an address (not being a post office or poste restante)
referred to in rule 19(3) for the service upon the defendants of all notices and
documents in the action.
(ii) T h e reafter and within (20) TWENTY days after filing and serving notice of
intention to defend as aforesaid, file with the registrar and serve upon the plaintiff
a plea, exception, notice to strike out, with or without a counterclaim.

INFORM the defendants further that if they fail to file and serve notice as aforesaid,
judgment as claimed may be given against defendants without further notice to the
defendants, or if having filed and served such notice, the defendants fail to plead,
except, make application to strike out or counterclaim, judgment may be given against
the defendants.
INFORM the defendants further that the plaintiff is prepared to accept service of all
subsequent documents and notices in the suit by way of electronic mail. In the event of
the action being defended the plaintiff hereby requests the defendants to consent to the
exchange or service by both parties of subsequent documents and notices in the suit by
way of facsimile or electronic mail, failing which the plaintiff reserves its right to apply in
terms of rule 17(3)(f), for an order that the court grant such consent on such terms as to
costs and otherwise as may be just and appropriate in the circumstances.
AND immediately thereafter serve on the defendants a copy of this summons and return
the same to the Registrar with whatsoever you have done thereupon.
Q SIGN E D atCAPE TOWNthis the day of AUGUST 2017.
EGISTRA O F H E HI M COURT
C PE TOWN
I
/ . f
I
Cqfs
>O~ foal/ftp
4P~
3g
S7q~
'0= f.,
Tel +27 (0)11 685 8500
Fax +27 (0)11 301 3200
Ref: AW/KF/SAR152
Email: andrew.wellsted nortonrosefulbri ht.com
C/0:
Norton Rose Fulbright South Africa inc

Tel +27 (0)21 405 1200
Fax +27 (0)21 418 6900
Email: daniel.breier nortonrosefulbri ht.com
<~i l~ ~Z,-
CASE NO: 15065/17

in the matter between:
THE C O IMIIISSIONER FO R T HE SO UT H Plaintiff

and
DR CHRISTOFFEL HENDRIK WIESE ;-if NN'ID fendant

wE$TERij Q,.APE 'i
ISAK HENDRIK JOHANNES VISAGIE Second D fendant

7017 -l1- 02
~~~c ToviN«A >r'~~' .
FILING SHEET
Document filed herewith:
Amended Particulars of Claim
DATED at CAPE TOWN on the2" day of November 2017.

Tel +27 (0)11 685 8500
Fax +27 (0)11 301 3200
Ref: AW/KF/SAR152
Email:
andrew.wellsted n o rtonrosefulbri ht.com
Norton Rose Fulbright South A&ice Inc

SAR152/Daniel Breier
Tel; 021 405 1200
Email: dauieLbreienlnortonrosefu(bright.corn
Page 2
C/0:
Norton Rose Fulbright South Africa inc
Tel +27 (0)21 405 1200
Fax +27 (0)21 418 6900
The Registrar
High Court
CAPE TOWN
To:
56 Shortmarket Street
Cape Town
without prejudice
Tel: 021 410 2500 received copy hereof w' p
"
Email: ahoeben ensafrica.com „iLj4jq, ',

Ref: A C Hoeben/bb/0409267 •••• 2 • ' -
far sa elen caw

" - - - - - •
Q
I
CASE NO: 15065/17

THE CO M M I S S IONER FO R TH E S OU T H Plaintiff

DR CHM S T O FFEL HENDM K W IESE First Defendant
ISAK HENDMK JOH AVES VISAGIE Second Defendant
GERT CHMSTL~ VI L JOEN Third Defendant
FRKDERICK RAUTEN HOFMEYR Fourth Defendant
AM E N D E D PA R T IC U L A R S OF CLAIM
1. The p l aintiff is The Commissioner for the South African Revenue Service
("SARS"), appointed in terms of section 6 o f t h e South A & ican Revenue
Services Act, 34 of 1997 ("the SOS Act").
2. SAR S ' p r incipal place of business is at Lahae La Sars, 299 Bronkhorst
3. The 6 r s t defendant is Dr Christoffel Hendrik Wiese, an adult male businessman,
care of ENS Africa, North Wharf Square, I.oop Street, Foreshore, Cape Town.
4. The se c ond d efendant is I sak H endrik Johannes Visagie, an adult m ale
businessman, careof ENS A&ica, North Wharf Square, Loop Street,Foreshore,
Cape Town.
Amended Page - 2-
5. T he t h i r d defendantis Gert Christiaan Viljoen, an adult male businessman care
of ENS AIrica, North Wharf Square, Loop Street, Foreshore, Cape Town.
6. The f o urth defendant is Frederick Rauten Ho6neyr, an adult male businessman
7, A l l of th e defendants reside within the area of jurisdiction of this court.
On 26 September 2011, pursuant to an audit of the taxpayer, SARS assessed
Energy ANca (Pty) Limited ("the taxpayer") for additional income tax in
respect of the 2007, 2008 and 2010 years of assessment in the amounts of
R18 849 736 (plus penalties of R 3 7 699 470), R8 570682 (plus penalties of
R 17 141 364) and R6 580 531 (plus penalties of R 13 161 062) respectively,
being a total amount of R102 002 845.
On 27 September 2011, the income tax amount in respectof the 2010 year of
assessment was reduced to R6 566 951. The penalties remained unaltered. The
total amount of the tax, and penalties thereon for the 2007, 2008 and 2010 years
of assessment wastherefore reduced to R101 989 265.
10. A co p y of the notice of the said assessment is annexed hereto, marked "A".
11. As a t 1 9 April 2013, the amounts of interest that had accrued on the aforesaid
amounts were R28 321 728 (2007), R10 027 698 (2008) and R3 493 499 (2010),
being a total of R41 842 925.
12. On 2 8 September 2012, SARS assessed the taxpayerto income tax in respect of
the 2011 tax year in the amount of R20 430 934.72. As at 19 April 2013, the
amount o f i n t erest that h a d a c crued o n t h i s a m ount w a s R l 8 8 1 348.

Amended Page — 3- (C
13. A co p y of the notice of the said assessment is annexed hereto, marked "B".
14. O n . 16 November 20.12,. SOS addressedletter

a to the taxpayer, in which. it:
14.1. no tified the taxpayer that SARS intended to:
14.1.1. make certain adjustments in respect of the taxpayer's 2007
income tax assessment, which would result in the inclusion of
capital gains tax ("CGT") on the disposal of a subsidiary in the
amount of R453 126 518 in terms of paragraph 8(b) read with
paragraph 64B(3) of the eighth schedule to the IT Act; and
14.1.2. issue an assessment for the taxpayer's 2007 tax year in respect
of secondary tax on companies ("STC") on a deemeddividend
in the amount of R487 205 316 in terms of section 64C(2)(a) of
the IT Act;
14.2. conununicated to the taxpayer various findings pursuant to an audit of
information provided by the taxpayer; and
14.3. is sueda notice in terms of section 80J(1) of the IT Act on the basis that
the transactions in question amounted to, inter alia, an impermissible tax
avoidance arrangement as defmed in section 80L of the IT Act.
15. A c opy of the

saidletter is annexed hereto, marked "C".
16. On 1 5 A pril 2013, the taxpayer's attorney addressed a letter toSARS, disputing
any tax liability to SARS.
17. A c o p y of the said letter is annexed hereto, marked

"D".
18. On 1 5 A p ril 2013 and at all material times thereafter, the taxpayer's only asset of
material value was a loan claUn against Titan Share Dealers (Pty) Ltd ("TSD") in
the amount of R216.6 million ("the loan claim" ).
19. Qn o rabout 19 April 2013, the Grst defendant instructed the second defendant to
procure:
19.1. the distribution of the loan claim against TSD to T itan Premier
Investments (Pty) Ltd ("TP1"); and
19.2. the sale of the taxpayer to Friedshelf 1395 (Pty) Ltd ("Friedshelf ').
20. On 1 9 A p ril 2013, the directors of the taxpayer (at the time the third and fourth
defendants) resolved at a meeting of the board of directors of the taxpayer as
follows:
"1. The Company has a loan claim against Titan Share Dealers
(Pty) Ltd in the amount of R216 600 000.00 (Two Hundred and
Sixteen Million and Si x Hu n dred T housand Rand) (" loan
claim" ).
ompanywishes to distribute in specie the Loan Claim on

The C
19 April 2013 ("the Distribution" ) to Elandspad Investments
(Pty) Ltd ("Elandspad"), in its capacity as the holder of all the

3. T he Co m p any i s a u t h orised to m a ke t he D i s tribution t o

Elandspad,
4. Pursu a nt to the authorisation in clause 3 above, the Company

hereby resolves to make the Distribution to Elandspad on 19
April 201 3. "
hereto, marked "E".
22. O n 19 April 2013, the taxpayer effected the distribution of the loan claim to its
holding company, Elandspad, (Pty) Ltd ("Elandspad"), and advised the latter
thereof in a letter signed by the third and fourth defendants.
23. A co p y of the said letter is annexed hereto, marked "F".
24. O n 19 April 2013, the board of directors of Elandspad authorised the distribution
by way of a dividend in specie of the loan claim to its holding company, being
TPI.
25. A co p y of the resolution authorising the distribution of the dividend is annexed
hereto, marked "G".
26. O n 1 9 April 2013 Elandspad effected the distribution of the loan claim to its
holding company, TPI, and advised the latter thereof in a letter signed by the
third and fourth defendants.
Q 27. A co p y of the said letter is annexed hereto, marked "H".
28. AA e r the distribution of the dividend

in specie referred to above and on or about
6 May 2013, TPI disposed of all of the shares in the taxpayer (through the sale of
Elandspad) to Friedshelf in terms of a written sale of shares agreement("the sale
of shares agreement") entered into by TPI, represented by the 6rst and second
defendants, and Friedshelf, represented by the third and fourth defendants.
29. A copy of thesale of shares agreement isannexed hereto,marked "I".

Amended Page - 6-
30. W it h f u l l and actual knowledge of what is set out in paragraphs 8 to 15 above,
the defendants knowingly caused, or assisted in causing, the taxpayer to
dissipate the loan claim by declaring and transferring it as a dividend in specie to
its holding company, Elandspad, which in turn declared and transferred the loan
claim as a d i v i dend in s p e cie t o i t s o w n h o l d ing c o mpany, TPI ( " t h e
dissipation").
31. The d i ssipation was effected at a time when, to the knowledge of the defendants,
the following debts constituted debts due to SARS for the purposes and in terms
of section 169 of the TA Act ("tar debts"):
31.1. the amount of R101 989 265, referred to in paragraph 9 above;
31.2. interest on the sum referred to in paragraph 31.1 of R41 842 925;
31.3. the amount of R20 430 934.72, referred to in paragraph 12 above;
31.4. i n terest on the amount referred to in paragraph 31.3 in the amount of'
Rl 881 348;
31.5. the amount of R487 205 316 in respect of STC, referred to in paragraph
14.1.2above, which was then due, owing and payable, having become
due, owing and payable no later than the last day of the month following
the month in which the dividend cycle relevant to the dividend ended.
32. A c c ordingly, at the time of the dissipation, the taxpayer had been assessed to
income tax in the amount of R122 420 199.72 plus interest of R43 724 273 and
was liable for STC in the amount of R487 205316, being a total of
R653 349 788.72. (The tax debts referred to in paragraphs 31.1 to 31.4 above
Amended Page - 7-
were extinguished after the dissipation in terms of a settlement reached between
the taxpayer and SARS on 29 October 2015).
33. Fur t h ermore, at the time of the dissipation, the defendants knew that SARS
intended to assess the taxpayer to tax in the amount of R453 126 518 on the
basis referred to in paragraph 14.1.1 above and that, upon assessment, such
claim would become a tax debt.
34. T he d i ssipation was effected in order to obstruct the collection of the sum of the
amounts referred to in paragraphs 32 and 33 above, being Rl 106 476 306.72.
35. T he a m ount of Rl 106 476 306.72 constituted a"tax debt" for the purposes of
section 183 of the TA Act at the time of the dissipation. ln amplification:
35.1 T h e d ebts pleaded in paragraphs 31.1 to 31.5 above were due and
payable at the time of the dissipation.
35.2 T h e debt pleaded in paragraph 33, while not due and payable at the time
of the dissipafion is, on a proper construction of section 183 of the
TA Act, and for the purposes of that provision, also a tax debt.
36. Al te r natively to paragraph 35 above, the amount of R653 349 788.72 was, at the
time of the dissipation, a tax debt for the purposes of section 183 of the TA Act.
37. O n 21 August 2013, SARS addressed a finalisation of audit letter to the taxpayer
in which the taxpayer's additional income tax liability for the 2007 year of
assessment was fully described ("the finalisation of audit letter" ). The letter is
annexed as annexure "J' and records the following:

Amended Page - 8-
37.1. a notice of additional assessment in respect of the taxpayer's 2007
income tax assessment, resulting in the inclusion of capital gains tax
("CGT") on the disposal of a subsidiary in the amount of R453 126 518
in terms of paragraph S(b) read with paragraph 648(3) of the eighth
schedule to the IT Act, and understatement penalties of R679 689 777;
37.2. a notice of original assessment for the taxpayer's 2007 tax year in respect
of STC ona deemed dividend in the amount of R4S8 282 886 in terms of
section 64C(2)(a) of the IT A ct, and understatement penalties of
R732 424 329 (collectively "the audit assessments").
3S. Su b s equent t o t h e c o n clusion o f t h e s a l e o f sh a res a greement, on
11 September 2013 the attorneys for the taxpayer replied to the finalisation of
audit letter. In the reply, they advised that the taxpayer disputed any liability to
SARS and that the taxpayer did not have any cash or assets and could not pay
the disputed tax.
39. On 2 6 N o v ember 2013, SARS issued e notice of sssessment in respect of the

Qs
2012 tax year in terms of which it assessed the taxpayer to tax in the amount of
R3 261 106.06 and interest in terms of section S9quat(2) of the IT Act in the
amount of R207 895.51.
40. A c o py of the additional assessment is annexed hereto, marked "K'
41. T he t a xpayer objected to the audit assessments and, on 3 April 2014, SARS
issued a partial allowance of that objection and confirmed the remainder of the
audit assessments("the revised audit assessments").

Amended Page - 9-
42. A co p y of the revised audit assessment is annexed hereto, marked

"L".
43. In t h e absence of an appeal against the revised audit assessments, on 26 June
2014, SARS issued a final demand for payment of R3 264 145 690.16 by the
taxpayer.
44. A co p y of the final demand is annexed hereto, marked "M".
45. O n30 July 2014, SARS obtained a certified statement in terms of section 172(1)
of the TA Act in the amount of R3 278 805 100.
46. A co p y of the certified statement is annexed hereto, marked "N".
47. On 2 4 O ctober 2014, SARS was informed in an email addressed to it by the 3'
defendant that the taxpayer was dormant.
48. A co p y of the email is annexed hereto, marked

"0".
49. O n 1 2 April 2016, the taxpayer was finally wound up by order of this Court
under case number 1646/16.
50. A c o py of the fmal winding-up order is annexed hereto, marked

"P".
51. On 2 5 October 2016, SARS gave the defendants notice in terms of sections 183
and 184 of the TA Act.
52. T h e four notices (without annexures) are annexed hereto, marked

"Q" to "T".
53. On 1 6 January 2017, the defendants responded in terms of section 184 of the TA
Act ("theresponses"). The responses are annexed hereto, marked "U" to "X".
Amended. Page - 10-
54. A s a p pears &om aanexures

"Q" to "T" hereto, SARS contended therein that the
defendants are liable, jointly and severally, to pay to it the amount of R216.6
million.
55. A s a ppears &om annexures "U" to "X" hereto, the defendants dispute that they
are liable to SARS oa the grounds relied on by SARS.
56. H a v ing considered the responses, as contemplated by section 184(2) of the TA
Act, SARS determined on 3 August 2017 to hold the defeadaats liable for the
tax debts of the taxpayer in terms of section 183 of the TA Act.
57. Copies ofsaid notices are annexed, marked "Y" to "BB".
WHEREFORE the plaintiff claims:
(a) An order declariag that defendants are liable, jointly and severally, to pay to
SARS the amount of R216.6 million ia tetrns of sections 183 and 184 of the Tax
Administration Act, 28 of 2011 on the basis that they knowingly caused, or
assisted in causiag, the taxpayer to dissipate a loan claim in the amount of
R216.6 million in favour of the taxpayer against Titan Share Dealers (Pty) Ltd
by declaring and transferring it as a dividend in specie to its holding company,
Elandspad Investments (Pty) Ltd, in order to obstruct the collection of the tax
debts referred to in paragraph 30 above;
(b) Payment bythe defeadants, jointly aad severally, the one payiag the other to be
absolved of the sum of R216.6 million;
(c) Int e rest on the aforesaid amount Rom 3 August 2017 at the legal rate tempore
a
morae;
Amended Page - 11-
(d) Costs of suit;
(e) Further and/or alternative relief.
Dated at CAPE TOWN on this 18 day of AUGUST 2017.
AR Sholto-DouglasS.C.
Philip Myburgh
ShafiaMahomed
Counsel for the plaintiff
I NCOME T A X ITA34
Notice ofAssessment
Enquiries should be addressed to SARS:
ALI5ERTON
ENERGY AFRICA PTY LTD 1528
PO BOX 5700 Tel: 0800 0 07277 Webslte: vvww sefs.gov.zn
TYGERVAL,LEY
7536 Always riuote thle
Reference number: 55134134718
referencenumber
Document number: 30060 whencontacting
Date: 2011430-27 8ARS
Year of assessment: 2010
Type af assessment; A4Ntlenet Assessment
Period (days): 366
Due dale: 2011-1 WI1
Second date; 2011-11-30
tlrltt, sssesserL
Taxable income isstteer.ee
Tax calculation
assessedlaxslier reberes terteot3.e
Tax credits and ediustmtxua
ftet emount payable under this assesststent after allowable oredlts 20786193,81,
unprocessed payments 0.$0 Provisional taxpayer

Selected for auditer veri ocatlori
all lstalrdliie retllnts sets
Dear ENERGY AFRICA PTY LTD
Thank you for submitting yaur income tax return for the 2010 year of assessmenL Your assessment has been concluded and reflects an amount
payable by you of R 20706193.81. Payment should be made by 2011-11-30 alter which interest will accrue on this assessment as from
2011-11-01
Please note that this amount only reflects your income tax assessment and does nat rellect tax payable under any previous assessment or any
other balances on your account. The current balance on your assessed account is R 1366664164 00 For a statement reflecting your final balance
(including afl amounts payable or refundable under any previous assessment, refunds, payments, additional taxes/ understatement penalties,
penalties and interest), please request your statement of account from SARS through the foflowlng channels:
- Electronically via eFi'ing

- Call the SARS Contact Centre
- At your nearest SARS branch
The final balance is reflected on the remittance adv'tce at the bottom of the Stalement of Account. Please note that interest accrues an all taxes
payable after the due date so yau are advised to pay in fuf on or before the due date.
The reference ta additional tsx/understatement penalty in this nol!ce of assessment depends upon the circumstances,
(i) If addiiional tax was imposed before the commencement dale of the Tax Administration Act (TAA) then adjustment to that additional tax may be
made by an assessment issued in terms of the TAA after the commencement date of the TAA
(ii) An assessment issued after the date of commencement of the TAA. in respect of any period that preceded the commencement date of the
TAA, may be subject to the imposition of an Understatemenl Penalty in terms af the TAA as an "understatement" is considered to be a continuing
act or amiss on in terms of the TAA
(iii) An assessment issued afler the commencement date of the TAA. for a period that commences after the commencement date of the TAA, may
include the levy of an Understatement Penally.
According to the information you declared in your income tax return, you were liable to pay provisional tax for this year of assessmenL Kindly note
that should your tax circumstances remain the same for the next tax year, as a provisional taxpayer you are required tasubmit an IRP6 tax return
that reflects an esiirnate of your taxable income for that tax year. A provisional tax payment based an the estimated taxable income must also
accompany the IRP 6 tax return For more information on provisional tax, how you can obtain your IRP6 tax return and submission due dates you
can visit the SARS website www.ears.gov.za, or you can contact the SARS Cali Centre an 0800 00 SARS (7277)
Below you wlfl find the amounts of income included and deduct! ans allowed in calculating th s assessment, it is very important that yau check
these amounts to ensure:
1. They are correct
Reference Number $13 4 13471$ ITA34 RO 2oty.oo.oo 01/03

INCOMK TAX 1YA34
Notice of Assessment
Document number: 30090
Year of assessment; 2010
I . •
Code . Descrlpllon and detail Com n s 8 adjustments ,,..., Amount assessed

I Assessed loss = not rlnu fenced
Income
• • • • • •
~ uuu ou ruuunlndruul ComputationsS'adjustments '. .

- Amount
aiseised rt .
; Assessed loss hrooaht farwsrd from the prevlons year •20503470.00
43M ' At4arant hsa -20$$3$78.00
Calcnlatod prost enclndlnu Income from Contronsd Soralen Companies lCPC) «05$5rsM
25M O a ar nat spented
, Calctrlated loss O,M
Imputed net Incomefrom Conironed Porolen Companies lCSC) 0,00
Capital aaln I lass • Local 4$5M.M
4250 c apnst Oain tac tacdlAI ennmta aartrued hrespact el cGThoa haanaaaounhd hr In the dehnninalan 07000.00
of Saintoss)
Appty Inchahnrate nltM.M
Capital asln I lass Sorelin 0.00
Tenant• Passive Income
Taxable Income before donatlonn
a-• • •
'
Code Doser) pl)on'and detail Computathes L idjusiminli.»-:.- Ainount
asieised
tseduotlons~lowtSd»
Cadi' .;Description!end»dsisll Amount aseesiid l9

Taaahia Income- austen to normaltau
Code Discrlpt)on.and ditai) COinpuadlena mgpetmenle u' AmOuntaiieieed
F«dines «ash
rarelOnTasCredits potu«tat I ascharSed
AdditionaltauI Understatement Penally g101052.M
Gnosdon otincome titatcei W
\ • ' Snhtetal 'I0724012,14
Prevlauaassesemararasuil
. Cnrrenl assessment- hefore provisionalton credits and Section ae oaat Interest ' '10724013,1$
tas aedita'
nrctauSOO
uatt2) int«est on mdnpaymentatprwishnel tas 0701005$
Net amount iiay'able andes this assessment n7051 5101
'This ataunt IaSepnateiy reilactad anyaur Shtauenl ot A«aunt
AmOuntasieiied
1 neconcnlatlon ol hnlances carried forward
tt a ss e ssed loss
Bahnca cameo tarward tram previous year ot aasasameni -2M03$70 05
Reference Itumher 0134 134710 ITA34 RO 2017.00.00

fNCOIIIJE TAX ITAS4
Notice of Assessment
Enquiries should be addressed to SARS:
AI.86RTON
P 0 BOX 6100 Tell 00040 47277 Wabsite. wwvy.care.gaum
PAROW EAST
7501
Reference number. 9'I 3413471 6 Always quac this
Document number. 34091 reference number
when contacting
Date: 2412-06-26 SARS.
Year of assessmsnt; 2411
Type of assessmanl: Original Assessment
Period (days): 366
Due date: 201 2-11-01
Second date: 2412-11 30
L k- p rA!flaunt'8
7299792440
raasble Incom
e
Taa calculadon
Acaasnad lan sacr rebalea 2042aa432
Tsa mmpia and mtummenm t913gg.84
Nat amount payable under this assessment after allowabla credits . '-Z) 443636.36
Uoprecesssd psymenia 0.00 Reelslemd provisional Iaspsyer

Selected lar audit ov vedaaaaon lt
Thank you for subinitting your income tax return for the 2011 year af assessment. Your assessment has been concluded and reflects sn amount
payabls by you af R 21443968.56 . Payment should be insde by 2012-11-30 alter which interest will accrue on this assessment as from
2012-11-01
Please nots that thisamount only re6ects your income tax assessment and does not reflect tax payable under any previous assessinent or any
other balances on your account. The current balance on your assessed account is R 159496770.79. For a full statement reflecting your final
balance (induding sll amounts payable ar refundable under any previous assessment, refunds, p ayments, add iTional taxes, penalties and
interest), please requesta Statement ofAccount via eFiling. your lacal SARS branch ar the SARS Contact Centre on 0800 00 SARS (7277). The
balance ls reflected on Ihe remittance advice at the bottom of the Statement of Account. Please note that interest accrues on all taxes
ht after the due date so you are advised ta pay in full on or before the due date.
According to lhe inforlnatlon you declared in your income tax return, you were liable to pay provisional tax for this year of assessment. Kindly note
that should your tax circumstances remain the same for ths next tax year,as a provisional taxpayer yau are required to subinit an IRP8 lax return
that reflects an estimate of your taxable income for that tax year. A provisional tax payment based on the estimated taxable Income must also
accompany the IRP 6 tax return. For mors information an provisional tax, haw you can obtain yaur IRP6 taxreturnand submission due dates yau
can visit the SARS website www.sais,govzs, or you can contact ths SARS Call Centre on 0800 00 SARS (7277).
Beh2w you will find the amounts of income included snd deductions allowed In calculating this assessment. It is very i
mportan
t thatyoucheck
1. They are correct
2. They reflect all your taxable income and allowable deducllons for the year
If yau are of ths view that the assessment contains a pracessing. calculation or other error. you should requesta revised assesslnant.
If you are unsure haw the assessment was arrived at or the reasons for any adjustmsnts made, yau may writea letter requesting SARS to provide
further information about haw this assessment was made This letter must be delivered to your nearest SARS branch within 30 days after the date
of this assessment or sending it via registered mail to the address st the top af this notice.
NOTE: Your obligation ta pay any outstanding amount reflected on this assessment and on your Statement of Account by the due date, is nat
suspendedby any objection orappealprocess.
Sincerely
South African Revenue Service
Reference Number 913 4 13471B ITA34 RO 3013,10.00 01I03

1
I NCOME T A X ITA34
Notfce of AssessfT)ent
Year of assessrnent: 2011
etaQR' cs)tj f))NE)) gidjiR))nen ounfgiesspd

Capitol Saln - losel
Neh br hdddmdsTlmCdnadhnni Smetpetee CnpSSStint Inee el eCGTymreahnmhte0 le e
plmey modems vs be Imposedcaen SnpmpenyIesebi piner mh ~ e n d I mmaiee In
ennmney cfpmpedyh epptcebls
Seslnoss9 trade snd professional Insome geol. rental)
Osscrfpllorc Ocscrlplfon: NONE
I I
Uebpn Ideneler.UASonbhntter. N00005000N
oelerminellon of petit I loss
• '
Oter nnl epedscd r206705c,00 7205r52S40

Oescrlpllan: Oescrfp$on; NONE I
udtan blenster,UnlqeeIdndrsc ONOSONNN I

' ' •
Oelermineaon ofproat I loss

bpelml SdhCemeroon O'C . -'
'aN
94r SN6762l40
• ' •
uusI)
1
ru '.J9qtqyii~~ , ~ 7 ' . ~~ i ,
VCI I
I II
Terelde Income-enbiem le
nmmel me
'
jd))50)IQ)SINleSpEr mgf 4
Sshtetal
Prmdmn
esceesmenl rema
Cnrrenl assessment before pmvlslonat tax credits and Seellen $$ neat Interest '
paddedlecomen ' ;I' ,04I
'
- " . '"
, " . " . . - -
, : . : '
.
SecSon
Nnsa ft) Inlensl no nnbnpoynantet ~ em
' IOI505100
e'C)Ltgifsjtiti '
'iti 2l tis50$00
,9 99 9
1 tnfermatlen deslarod that Imposes this ossessmentr
Reference Number 612412471$ ITA24 RO 2012.16.00 02I02

Large Business
Certtre
Office 50vthAfrican Revenue 5ervice
Westere Cape
Enctuirlee The Public Officer
Alletair Kene Large Bustness Centre
Energy Africa (Pty) Ltd
Switcitboard PO Box 6100
(025 ) .413 6000 19th Floor, Project 168 Bulldtng,
PAROW EAST 22 Hans Strlidom Avenue,
Dlreot Line 7501 Cape Town
(021) 413 6686 (No postal deliveries to this address)
E-Mall
eke neosare.9ov.za
Private Ba9 X9188, Cape Town, 8000
Refereoce
9134/134/71J8
Date
18 November 2012
*
Dear Mr Visagie
-INCONIETAX' AUDIT FINDINGS 8 SECTION80J(1) NOTICE-
TAX PERIOD: 2007
1. T h is letter is written on behalf of the Commissioner of the South African Revenue

Service (" the Commissioner" ) and refers to the correspondence exchanged, the
documentation provided and the information made available to me (collectiveiy
"the information"), all ln respect of the 2007 tax year of Energy Africa (Pty) Ltd
("EAL").
2. B o t h the factual findings made and the legal conclusions drawn are based on the
information. Accordingly, I reserve the right tomake adjustments to these findings
and conclusions should new information come to light.
3. T h e purpose of this letter is threefold:
3.1 Firstiy to notify you that the Commissioner intends to make the following
adjustmentsto EAL's 2007 assessment:
income Tax: Taxpayer reference number 91341 34718
Tax Provisions of the Brief description of the Amount of tax

Period Income Tax Act ad ustment
2007 Paragraph 8(b) Inclusion of capital R 453 126 518
read with gain on disposal of (R 3 125 010 470
paragraph 648(3) subsidiary (B 50% © 29%)
of the Eighth
Schedule
Secondary tax on companies: Taxpayer reference number 9134134718
Tax Provisions of the Brief description of the Amount of tax

Period Income Tax Act ad ustment
2007 Section 64C(2)(a) Secondary tax on R 487 205 316
companies — deemed
dividend
3.2 Secondly to communicate the findings pursuant to an audit of the

information; and
3.3 Thirdly to issue a notice in terms af section 80J(1) of the Income Tax Act
No. 58 of 1962 ("lhe Act");
4. A l l references to sections are to the Act.
*'
5. T h e applicable provisions of the Act are included in "Annexure Ato this letter.
T he n dl n s
Introduction
6. The i nitial focus is on the suite of agreements ("the agreements") entered into
by EAL and other entities.
7. Two groups ofcompanies were involved in the agreements.
First there was the Tuilow group with Tullow Oil Pic, a company listed an the
London Stock Exchange, at its head (the "Tullow group" and "Tullow UK").
Tullow UK had a number af subsidiaries, including Tullow Overseas Holdings
B,V., a company incorporated in the Netherlands ("TOH"). Prior to the
conclusion of the agreements, Tullow UK was also the holder of 100'lo of the
shares in EAL and EAL in turn held 100% of the shares in Energy Africa
Holdings Limited, a company incorporated In the British Virgin Islands ("EAH").
EAH was and remains the 100e/e shareholder in a number of companies, mainly
active in oil exploration and related activities in Africa ("the African oil
exploration companies" ). EAL is no longer owned by the Tuliow group.
However, the African oil exploration companies remain part af the Tullow group.
The secand group of companies is owned or controlled by Titan Group

Investments (Pty) Ltd and/or the various entities under its control ("the Titan
group"). In particular, Titan Premier Investments (Pty) Limited (" Titan" ), a South
African company holds 'I00'/e of Elandspad Investments (Pty) Urnite
Page 2 3
2/
("Elandspad"). Eiandspad in turn acquired 100% of the shares in EAL by way of
the agreements, and remains the sale shareholder of EAL.
10. B e f ore the conclusion of the agreements, it would appear that there was no link
between the two groups of companies.
11. I n a basic sense the effect of the agreements was to transfer the shares in EAL
from the Tullow group to the Titan group, but not the underlying assets (the
African oil expioration companies). The latter remain in the hands of the Tullow
group and there was never any intention for It ta be otherwise.
12. H o wever, while the African oil exploration companies are still in the hands
of the
Tullow group, EAL has been excised as an intermediate South African holding
company.
13. I a m of the view that:

13.1. the Tullow group at no stage intended to shed its interest in the African
oil exploration companies and neither did the Titan group intend to
acquire the interest;
13.2. the disposal of EAL to Elandspad was never intended to be a disposal of

Tullow UK's African oil exploration interests, nor was it such;
13.3. the Tullow group's stated objective was to restructure itself so as to

eliminate the perceived risks of a n i n termediate South African
subsidiary/holding company, and to achieve cost savings;
13.4, the Tullow group's true objective was, having created valuable assets in
the African oil exploration companies, to transfer the ownership of these
assets out af South Africa withaut EAL paying capital gains tax ("CGT")
or secondary tax on companies ("STC");
13.5. the Titan group's stated objective was to make a US$1.2 million profit;
13.6. The Titan group's true objective was to "acquire" the assessed loss of
EAL as a quid pro quo for assisting the Tullow group in achieving its true
objective,
The a reements
The re-sale a reernent
14. O n 2 2 January 2007 a "sa/e ofbusiness agreemeni" (known as the pre-sal

agreement) was entered into between EAL and Tullaw South Africa (Pty
PIQUE
3ol
'J/
Limited ("TSA"), both subsidiaries of Tullow UK at the time of signing the
agreement. The effective date of the agreement was 20 November 2006.
15. I n t erms of the agreement, TSA purchased the business from EAL as a going
concern, the business being the "entire business of the Seller (excluding only its
investment in the Excluded Assets), being the business of providing
consultancy services to the subsidiaries of the Seller end other Tullow group
companies, as carried on by the Seller as at the Effective Date, as e going
concern, which comprises the Business Assets and the Business Liabilities,"
(clause 1.2.4).
16, T S A also stepped into the shoes of EAL in respect of any contracts (clause 9.1)
and took over all the employees of EAL (clause 10).
17. S i g nificantly, certain assets were excluded from the agreement, the EAM shares
and claims (clause 1,2-1.2.18.2), i.e. the African oil exploration assets.
18. T h e agreement was signed for both EAL and TSA by W M Torr.
19. T h e pre-sale agreement divested EAL of all but the excluded assets, However,
the business as defined above remained in South Africa, but was housed in
TSA rather than EAL.
20. I t i s significant that while the effective dateis in November 2006, the date of
signature of the agreement, 22 January 2007, is one day prior to the signature
of most of the other agreementsthat will be dealt with below.
TOH'a resolution
21. O n 1 8 January 2007, i,e. after the effective date of the pre-saleagreem
ent, but
prior to its signing, a shareholders' resolution was passed by TQH. In terms of

this resolution, TOH issued one new share with a nominal value of C1.00 to its
holding company, Tullow UK. In return Tuliow UK made a non-cash contribution
to TOH consisting of a receivable. The receivable contributed was that which
Tullow UK had against Elandspad in the amount of US$543.76 million.
22. B yway of this resolution, an indebtedness was created between Tullow UK and
TOH, which indebtedness would be utliised at a later stage.
The restructure a raement
23. T h e next agreement entered into on 23 January 2007 between Tullow UK,
TOM, EAL and Elandspad was the "restructure agreement". A number of
aspects of the restructure agreement are highlighted.
a% e32
24. T h e restructure
agreement makes reference to the whole suite of agreements,
namely the capitalisatlon agreement (clause 1.1.3), the EAH sale agreement
(clause 1.1.7), the EAL sale agreement (clause 1.1.11), and the pre-sale
agreement (clause 1.1.16). Furthermore, the "group restructure agreements"
are stated to encapsulate the EAL sale agreement, the EAH sale agreement
and the capitalisation agreement (clause 1.1.15).
25. I t i s then stated that"after due consideration of all relevant factors (it is not set
out what these relevant factors are) Tullow UK has concluded that the optimal
method of achieving such restructure would be by way of the restructure
transactions" (clause 2.3). It is also noted that the restructure transactions are
interdependent (clause 2.4).
26. T h e restructure agreement then records that:
"The parties agree that:
3.1 the pre-sale agreement shel/ be implemented in accordance with

its terms, resu/ting in EAL having no liabilities other than share
capital, share premium and reserves and no assets other than
the EAH shares and the EAH claim;
3.2 eac h of the group restructure agreements shall be signed by the

respect/ve parties thereto;
3.3 the E AL sale agreement shall be implemented in accordance

with its terms, resulting in:
3.3,1 Elandspad acquiri

ng the EAL shares; and
3,3.2 Tullow acquiring the Elandspad claim; and
3.4 the c apita/isation agreement shall be implemented in accordance

with its terms, resulting /n TOH acquiring the E/andspad claim;
end
3.5 the E AH sale agreement shall be concluded and implemented in

accordance with its terms, resulting in:
3.5.1 TOH acquiring the EAH shares and the EAH claim; and
3.5.2 EAL acquir/ng the Elandspad claim."(c,'ause 3)
of 22
27. Th ep arties then agreed to implement the various restructure transactions. The
implementation clause reads as follows:
"4.2 Th e parties accordingly agree fhat:
4.2.1 all the group resfructure agreements shall be signed by

each of the parties thereto;
4,2,2 Eiandspadshallreceive:
4.2.2.1a duly adopted resolution of the board of directors

of Tu//otN aufh arising the c o nclusion and
implementation of the EAL sale agreement and
fhe capi
tal/sation
agreement;

of EAL, authorising the transfer of the EAL shares
fo Eiandspad;
4.2.3 Tullcw shall receive.
4.2.3.1 a duly adopted resolution of the board of directors

of Elandspad, authorising l'he conclusion and
implementation of the EAL sale agreement;

o f TOH, a u thorising t h e conclusion and
implementation of the capitalisatlon agreement;
4,2.3.3 a duly adopted resolution of the shareholders of

T OH, a u thorising t h e c onclusion a n d
implementation of the capitalisation agreement;
4.2.4 TOH shall

receive:
4.2.4.1 prior to fhe conclusion of the capitalisatlon

agreement, a duly adopted resolution of the
board of directors of Tu//ow, author/sing fhe
conclusion an d i m p lementation o f t h e
capital/sation agreement;
4.2.4.2 after the conclusion and implementation of the

EAL sale agreement, but prior to the conclusion
of the EAH sale agreement, a duly adopted
8 a(32
resolution of shareholders of EAL authorising
the sale by EAL of the EAH shares and the
EAH claim in terms of the EAH sale agreement;

resolution of the board of directors of EAL,
authorising the conclusion and implementation
of the EAH sale agreement;
4.2.5 EAL shall receivea duly adopted resolution of the board

of directors af the EAH, authorising the transfer of the
EAH shares to TOH." (clause 4.2)
28. T h e r estructure agreement thus provided the framework for the various
agreements that constituted- the whole transaction:- It emphasised that the
agreements were interdependent.
The EAL sale a reement
29. O n the same date, i.e. 23 January 2007, Tullow UK and Elandspad entered into
an agreement in terms of which Tuilow UK sold the shares in EAL ta Etandspad
for US$543.76 million with effect from 23 January 2007 (clause 3).
30. In terms of TOW's resolution the same amount was owed by Tullow UK to TOH.
At this stage the following situation pertained: Tullow UK owed TOH
US$543.76 million, Elandspad awed the same amount to Tullow UK and the
underlying assets, i.e. the African oii exploration companies were in the hands
of Elandspad.
31. T h e agreement was signed by Messrs Torr and Viljoen on behalf of Tullow UK
and Elandspad respectively.
32. The claimagqinstElandspad was then ceded by Tullow UK to TOM as an out

and out cession, thereby extinguishing the indebtedness of US$543.76 million
of Tullow UK to TOH (clause 1.1.3). Elandspad now ostensibly owed the money
to TOW, because lt had bought a company with underlying assets (the African
ail exploration companies) valued at that amount.
The ca 'talisation a rsernent
33. O n 2 3 January 2007, in terms of the "capitalisation agreement", TOH issued

one new share to its shareholder (Tullow UK),
Psg a 32
34. T h e new share was issued at par of EUR 1 000, and was fully paid up in cash.
35. T u l low UK also contributed, transferred and assigned the receivable of

US$543.76million owing by Elandspad to TOH as the share premium
contribution,
36. T O W accepted this receivable as a non obligatory share premium contribution.
The EAH sale a reement
37. T h e n ext leg of the transaction (the EAH sale agreement) occurred on
25 January2007, i.e. two days later than the preceding agreements. This
brought EAW, the owner of the African oil exploration assets, back Into the
hands of the Tullow group. This was done by TOH purchasing the shares in
EAW from EAL, as well as the claims that EAL had in respect of EAW. Clause 3
reads as follows:
"3.1 pr o vided that:
3.1.1 the GAL sale agreement hss been duly implemented;

and
3.1.2 TOH has received the Elandspad Claim from Tullow in

terms of the cepitallsation agreement
EAL hereby sells end TOH hereby purchases the EAH shares
and EAH claim for the BAH Purchase Price with effect from the
EAH Closing Date.
3.2 Th eEAH Purchase Price shall be apportioned as follows:
3.2.1 the EAH claim shall be taken over et its face value; and
3.2.2 the EAH sharesshallbe taken over atthe EAH Purchase

Price, less the amount attributable to the &AH claim."
38. T h i s clause emphasises the interdependence of the various agreements.
39. l n t e r ms of this agreement TOH'purchased' the African oil exploration

companies, i.e. the assets of EAL, at a premium of US$1.2mlliion (I.e.
US$544.96 million) (clause 1.1.8).
40. P ayment would be as follows:

"4.2.1 In discharge of TOH's obligations to pay to EAL the ZAR
equivalent of US$1 200 000.00 (converted to ZAR at the S ot
Peg I f 32
Rate) of fhe EAH Purchase Price, TOH shall pay the ZAR
equivalenf of US$1 200 000.00 (converted to ZAR at the Spot
Rate) in cash, wifhout any deduction or setoff, by way of
electronic transfer in a bank account in the name cf EAL with
Firstrand Sank Limited in South Africa nominated ln writing by
EAL to TOH for such a purpose on or before the EAH Closing
Date ("fhe EAL bank account");
4.2.2 ln discharge of TOH's obligation to pay the balance of the EAH

Purchase Price in an amount equal to the ZAR equivalent of
US$543780000(converted to ZAR af the Spot Rate), TOH
hereby cedes and transfers the Elandspad claim to EAL, as an
out and ouf cession.
4.3 EA Lh ereby accepts the cession and transfer of fhe Elandspad

claim ln terms of clause 4.2.2 in discharge of the obligation of
TOH ta pay the ZAR equivalent of US$543 760 000 (converted
to ZAR at the Spot Rate) of the EAH Purchase Price.
4.4 EA Lu ndertakes in favour of TOH and Tullow that it shall not,

prior to the third anniversary of the EAL Closing Date, withdraw
or transfer any amount out of the EAL bank account. For the
avoidance of doubt, TOH, Tullow and EAL agree that after the
third anniversary of the EAL Closing Date, EAL shall be entitled
to withdraw or transfer any amount out of the EAL bank
account."(clauses 4.2.1<.4)
41. T h u s by way of the last

of the agreeme
nts, the brief nexus between the two
groups ofcompanies was broken. The Tullow group once mora owned the
d did not awe any of the Titan group of
African oil exploration companiesan
companies any money,
42. E i a ndspad owed EAL US$543.76 million on loan account, but this was an
"amicable" indebtedness between a holding company and a 100'Yo subsidiary.
Furthermore this "indebtedness" bears no relationship with what was actually
bought by Elandspad. The only things of value that ware acquired were the
payment of US$1.2miiion (which could only be accessed after three years)
and the spes that EAL would be entitled to utilise the assessed loss.
Business of EAL ost the a reements
43. A f t er the transaction, EAL, which initiaily was a company that managed the
African oil exploration companies as well as holding the shares in such, was
af 32
'J(
converted to being a holder of investments and a trader fn single stack futures.
It was provided with both financial assets and cash by one of the companies in
the Titan group in order to da so.
44. E A L made a profit in the 2007 tax year in the form of profit from the trading of
single stock futures, as well as a management fee, facility fee and interest,
which it then sought to offset against the assessed loss,
Prima unde - Substanceover rm
45. A p p lying the doctrine of substance over form to the agreements, I am of ths
view that:
45.1. the Tuilow group did not intend to dispose of the African oil exploration
companies;
45.2. the Titan group did not intend ta acquire the African oil exploration
companies; .
45.3. the true consideration for the disposal/acquisition af the shares of EAL
was US$1.2million, and to ths extent that it is contended to bs
US$543.76 millian or US$544.96 million, such amounts are simulated;
45.4. the effective date of the EAH sale agreement, 25 January 2007, was
simulated in order to create the illusion that, upon the disposal of the
EAH shares and the EAH claim to TOH, EAL and TOH were not
connected persons;
s ubst ce of th transa ian is t t EAL dis d o it

45.5. he t
n ate v lue tha did n t refl an
subsid' E A H t a conn cted e
CGT
46. E A L relies on the participation exclusion provided for in paragraph 648(2) of the
Eighth Schedule to the Act in order to avoid payment of CGT on ths disposal of
the shares in EAH to TOH. (Henceforth, references ta paragraphs will be to
paragraphs in the Eighth Schedule),
47. P aragraph 64B(2) provides that:

"(2) . . . e person must disregard any capital gain or capital loss
determined in respect of the dispassl of any interest in the equity
share in any foreign company (ather than e foreign financial
instrument holding company or an interest contemplated in
paragraph2 (2)), if-
(a) th at person (in the case of a company, together with any

othercompany in the same group of companies as that
company) immediately before that disposai-
(i) held at least 20A of the equity share capital ln that

foreign company; and
(/i) held the interest contemplated in sub item (i) for a

period of at least $8 months prior to that disposal,
unless that person is a company and that interest
was acquired by thatcompany from any other
company which forms part of the same group of
companiesand that company and other company in
aggregate held. that. interest for. more .then. 48
months: ... and
(b) that interest is disposed of to a person who is not a

resident..."
48. A s a point of departure l accept that the requirements for paragraph 64B(2)
were met in that EAL held all the shares in EAH, and EAH was a foreign
company, and EAL held the shares for at least 18 months prior to the disposal
4 B3 lsanant avoid nce rovi ionw I h ualN s ara ra h 4B2.
49. T h ere are four requirements that must

be met before the participation exclusion
is overridden by paragraph 648(3).
50. P a r agraph 64B(3) reads as follows:

"(3) Par a graph8(b) applies in respect of any capital gain determined
in respect of any disposal of any interest in the equity share
.capital
of any foreign company by a person which is or was
disregarded in terms of subparagraph (2) in a ny y ear o f
assessment,
if-
(a) the foreign company prior to that disposal was a

controlled foreign company in relation to that person or
any othercompany in the same group of companies as
that person;
fb) the interest in the equity share capital of that foreign
company was disposed of toa connected person in
relation to that person either before or after that disposal;
and
(c) that person-
(I) disposed of that equity share capital for no

consideration or for consideration which does not
reflect an arm's length price, other than a
distribution contemplated in (il);
(ii) disposed of that equity share capital by means of

a distribution unless the full amount of that
distribution-
(aa) w as subject to or would, but for l h e

provisions of section 64B(6)(f), have been
subjectto secondary tax on companies; or
(bb) was included in t he income o f a

shareholder of that company or would but
for the provisions of section t0(4)(k)(N)(dd)
have been so included; or
(iii) disposed of any consideration received or accrued

from the disposal of that equity share capital (or
any amount received In exchange therefor) in
terms of any transaction, operation or scheme of
which the disposal of the equity share capital
forms part-
(aa) for no consideration or for consideration

which does not reflect an arm's length
price ( o ther than a distribution
contemplated in (bb));
(bb) by means of a distribution by a company,

unless the full amount of that distributlon-
(A) was subject to or would, but for the

provision of section 64S(5)(f), have
Ply 12
been subjectto secondary fax on
companies, or
(8) wes included in the income of a

shareholder ofthaf company or
would but for the provisions of
section f0(f)(k)(ii)(dd) have been
so included; snd
(d) that foreign company ceased in terms of any transaction,

operafion or scheme of which the disposal of the equity
share capital forms part, to be a co ntrolled foreign
company in relation to that person or other company in
the same group of companies as that person (having
regard solely to any rights contemplated in paragraph (a)
of the definition of 'participation rights' in section 9D end
ivithout having regeid to any election exerct'sed in'terms
of section 9D(13))."
51. I a m of the view that all four requirements have been met and thus that the
participation exclusion relied upon by EAL is overridden by paragraph 64B(3).
My view is based on the following:
51.1. the first and fourth requirements are uncontentious and there cannot be
any doubt that they have been met;
51.2. regarding the second requirement, paragraph 64B(3)(b) provides that

the dtspositton (of the EAH shares) must hove been to e ~eorm ted
~rson (to ths taxpayer) "either before or after" the disposal:
51.2.1. up until two days before ths signature of the EAH sale
agreement on25 January 2007, EAL and TOH were connected
persons.On 23 January 2007 EAL contends they ceased to be
connected persons by virtue of the EAL sale agreement;
51.2.2. however, EAL, In its letter dated 12 September 2011, states

that the sale transactions were implemented over ths course of
a few days, and that there was no significance to be attached to
the two day delay between the transactions;
51,2.3. l am of the view that the sole reason for this two day delay was
to ensure that upon the disposai of the EAH shares and the
claims,TOH and EAH were not connected persons;
51.2.4. the purpose of the timing was thus to escape the connected
persons requirement in paragraph 648(3)(b);
51.2.5. the effective date of the EAH sile agreement (25 January 2007)
should therefore be regarded as simulated;
5 1.2.6. furthermore, each o f t h e restructure transactions was

interdependent. None of them could have been concluded
without the others. In the case of Eh' 3183/1 Ladysmith (Pty)
Ltd and Another v CIR 1996 (7) SA 942 (A) it was held that
the relevant agreements could not be regarded separately: they
were all signed simultaneously and were plainly interdependent
to the. extent that nona of them would have been concluded
without the others. Accordingly, each one had to be considered
in the context of all the others to discover their total effect;
51,2.7. the restructure agreement set out the salient terms of each of
the various restructure transactions, and stated that they were
interdependent;
51.2.8. further evidence of the interdependence is reflected in the terms

of the EAL sale agreement, where the shares in EAL were
ceded by Elandspad in security and pledged to Tullow UK - to
be released upon the payment and delivery In respect of the
sale of the EAH shares and claim in terms of the EAH sale
agreement;
51.2.9. the EAH sale agreement provides stiii further evidence of the
interdependence, where the agreement stipulated the following
provisos to the conclusion of the sale:
(a) the implementation of the EAL sale agreement; and
(b) the receipt by TOH from Tullow UK of the Elandspad

claim in terms of the capitalisation agreement;
51.2.10. the commercial sense of the timing of the transactions needs

also to be examined. There was no substantive reason for the
delay of two days between the conclusion of the restructure
P 14 o f 32
agreement,the EAL sale agreement, the capitalisation
agreement, and then the EAH sale agreement, other than the
avoidance of tax;
51.2.11. the timing of the contracts was not a coincidence. It wes

designed that way. The wording of the restructure agreement
makes it clear that the EAH sale agreement would be
concluded after the other restructure transactions. The security
cessionand pledge, and the undertakings made by Elandspad
in the EAL sale agreement confirm the intention of the parties to
ths EAL sale agreement that the EAH sale agreement would be
concluded on a date after the conclusion of the EAL sale
agreernsnt;
51.2.12. the security of the EAH shares and claim was also retained by
Tullow UK until the conclusion of the EAH sale agreement (this
was achieved through the woiding of the EAL sale agreemsnt).
Tullow UK clearly never intended for the EAH shares and claim
to reside outside the Tullow group, hence the security terms
included in the EAL sate agreement. If Tullow UK was
concerned about the security of the EAH shares and claim,
which clearly it was, then why did EAL not sell the EAH shares
and claim to TOH prior to the sale of EAL to Elandspad'7
51.2.13. there was no commercial purpose to delay ths conclusion of the

sale of the EAH shares and claim to TOH until two days after
the conclusion of the EAL sale agreement, other than ths
avoidance of tax;
51.3. Regarding the third requirement (648(3)(c)(I)), I am of the view that the
EAH shares were disposed of for no consid ration r consideraton
wh' h did no reflect a r m's le h rice:
51.3.1. Elandspad never intended to incur a bona fide liability In the

amount of US$543.76 million to a third party in respect of the
shares in EAL. EAL's predominant asset was its share in EAH.
When Eiandspad entered into the EAL sale agreement,
however, it never intended to acquire EAL for its predominant
asset;
51.3.2. neither party intended that the EAL sale agreement would inter
partes have effect according to its tenor. The transaction was
Pa 1 of 32
1
JQ
engineered to achieve the illusion that an arm's length price

was paid for EAL, which in turn, through the workings of the
remainder of the restructure transactions, would ensure that it
moved that the EAH shares were disposed of at an arm's length
price;
51.3.3. furthermore, Elandspad paid USS 543.76miNon to acquire a

company on which it performed no fo al due diii enc, and on
which it relied on a valuation commissioned by the directors of
the target company to establish the purchase price — it lacks
commercial sense to disregard prudent commercial protocol
when entering into so significant a transaction;
51.3.4. EAL's r esponse cf 14 June 2010 to my r equest for a n

explanation as to how the purchase price in respect of the EAL
sale agreement was determined, simply refers 'to a copy of the
valuation d'ated 22 August 2006 performed by Deloltte 8
Touche (the "Oeloitte valuation" );
51.3.5. EAL elaborated, in the same letter, with respect to the disposal
of the EAH shares and claims that:
"We are instructed that the p urchase price was

determined with r eference to a v a l uation dated
Touche
22 August 2006 performed by O e loiffe 4
('Deloittes valuation' ). Although the valuation relates to
EAL, sincethe EAH shares were the predominant asset
of EAL, its value was regarded as being the same as that
of the EAH shares."
51.3.6. the Deloitte valuation was prepared for the benefit of, and
addressed to the board of directors of EAL. Elandspad has
Informed me that in its determination of the market value of
EAL, reliance was placed on this valuation;
51.3.7. Ilt lacks commercial sense for parties to enter Into a share sale
agreement where the price ls the same as the market value of
an asset of the target company and the purchaser will never
enjoy any of the predominant commercial benefits of such
asset. Yet this is precisely what happened in the EAL sale
agreement;
1$el 32
51.3.8. the EAL sale agreement stated that the beneficial ownership of,
and risk and benefit in respect of, the EAL shares would pass
from Tullow UK to Elandspad upon delivery of the share
certificates on 23 January 2007. However, on 23 January 2007
EAL owned theEAH shares and claims, and R4000 in cash.
Elandspad, however, undertook to 'not do anythirig in relation to
the BAH shares or EAH claim, including exercise any rights
attaching to those assets until delivery and payment in terms of
the EAH s ale a greement', some two d ays l ater, on
25 January 2007. Elandspad therefore never enjoyed any of the
predominant commercial benefits associated with its purchase
of EAL as owner of the EAH shares and claims;
51.3.9. Elandspad knew full well that it would never enjoy these
benefits, and it also knew that in return for it incurring a liability
of US$543.76million, it would, through the workings of the
EAH sale agreement and the capitalisation agreement, acquire
a subsidiary with US$1.2million of encumbered cash, and
share capital and reserves of approxirnateiy US$543 million-
matched by an unsecured, interest free receivable from
Elandspad itself;
51.3.10.the EAL sale agreement stated that the amount owing in

respect of the sale of EAL shares shall remain outstanding as
an interest free claim, payable on demand. If the real Intention
of the parties to the EAL sale agreement was the creation of a
bona fide liability and receivable of US$543.76 million in
respect of the sale of the EAL shares, the terms of repaym
ent
would have been stipulated clearly in the EAL sale agreement,
and interest would probably have been charged on the
outstanding balance - irrespective of the cessionsthat were to
take place in termsof the remaining restructure transactions;
51.3.11. that neither interest was levied, nor repaym

ent terms stipulated,
is reflective of a lack of commer ial sub tance with respect to
the price;
51.3.12.application for the approval of the group restructure was

submitted to the South African Reserve Bank ("SARB") on
12 July 2006 ("the application" ), using Rand Merchant Bank as
agents. Included in the steps described in the application were
Pe e Tof22
that Elandspad would purchase 100% of the shares in EAL
from Tuilow UK on short-term loan account, with 'commercial
terms and conditions', and that the loan account remaining
between EAL and Elandspad(the Elandspad claim)could be
extinguished by the taxpayer declaringa dividend to Eiandspad;
51.3.13. the'commercial terms and conditions', were set out above, that
the payable was interest free and repayable on demand — terms
hardly considered commercial between parties acting at arm' s
length.
51.3.14. on 2 October 2006 SARB advised EAL that it had no objection

to the proposed restructuring, provided that the matter was
"cleared with all th e a p propriate authorities (specifically
including the South African Revenue Services)". No such
clearance was obtained from the South African Revenue
Services.
52. in th e c i rcumstances, I am of the view that the ostensible consideration

(USS 543.76 million) was a sham.
53. F o r present purposes. I assume that the valuation accurately reflects the value
of the underlying assets. However, the value does not equate to t he
consideration paid. The consideration, if the suite of agreements is looked at
hoiisticaily, is the US$1.2 million paid by TOH when the Tullow group bought
back" its own assets. That was the true consideration. There was never any
Intention that the EAH shares would be disposed of by EAL for anamount equal
to the valuation.
54. l t i s my view that all four of the requirements for the application of paragraph
648(3) have been fulfilled. The capital gain disregarded as a result of the
participation exclusion in paragraph 64B(2) should therefore be treated as a net
capital gain under paragraph 8(b),
The capital gain is determined as follows:
54.1. in terms of paragraph 38(1)(a), where a person disposed of an asset to a

person who is a connected person in relation to that person for a
consideration which does not reflect an arm's length price, that person
who disposed of that asset must be treated as having disposed of that
asset far an amount received or accrued equal to the market value of
that asset as at the date of that disposal;
11 of 32
54.2. the market value of tha equity share capital of EAH is regarded by EAL
as being US$543.76 million. The average exchange rate for January
2007 wa s U S D 1 : ZAR 7.1838, r esulting i n pro c eeds of
R 3 906 263 088'
54.3. inthe absence ofany base cost being presented by EAL, Ihave adopted
20 per cent of the proceeds as the valuation date value of the asset in
terms of paragraph 26;
54.4. the capital gain is thus R 3 125 010 470.
Deemed dividend — STC
55. I n t erms of the provisions of section 64C(2)(a),a dividend is deemed to be

declared by a company if an asset is distributed by that company to a
shareholder or any connected person in relation to that shareholder. To the
extent that the company receives any consideration in exchange for the asset
that was distributed, transferred or othenNise disposed of, the distribution is not
a deemed dividend.
56, H a v ing regard to the true substance of the restructure transactions results,
there was a distribution by EAL of the EAH shares and claim to TOH on the
23 January2007, in exchange for consideration of US$ 1 . 2 m iiiion. On that
date,TOH was a connected person to EAL, as wellas a connected person in
relation to EAL's shareholder, Tullow UK.
57. T h e re is thus a deemed dividend to the extent that the value assigned to the
EAH shares and claims, of US$543.76 million, exceeds the consideration of
US$1.2milllon. STC is consequently payable on the deemed dividend of
US$542.56 million (R3 897 642 528 at the average exchange rate for January
2007).
Alternative rounds — Part IIA of the Act
58. I h e r eby notify EAL In terms of section 80J of my intention to appiy the
provisions of the Act as contained in sections 80A to 80L to the series of
transactions entered into by EAL. Section 80I provides that the Comrnlssloner
may apply the provisions of Part IIA of the Act in the alternative, or in addition
to, any other basis for raising an assessment. Without prejudice to the primary
grounds mentioned above, the Commissioner hereby reserves the right to apply
Part IIA of the Act based on the discussion set out below.
32
Im ermissible tax avoidance arran ement
59. I n my view the agreements amount to an impermissible avoidance arrangement

as defined in section 80L.
60, T h ere are four requirements which inust be met for sections 80A to 80L to be
applied,
61. I n t he erst instance one must have an arrangement which

is defined as "any
transection, operation, scheme, agreement o r understanding [whether
enforceable or not J, including sll steps therein or parts thereof, and includes any
of the foregoing involving the alienation of property"(section 80L).
62. T i r uir e ment is met in hi b virtue of the fact that EAL was a
artl i ant in a number of a re m nt .
63. Secondly, the arrangement, as defined above, must be an avoidance

arrangement. This =is simply defined as-"any arrangement that, but for this part',
results in e tex benefit" (section 80L). The tax benefit sought by EAL in this
instance is the avoidance of payment of CGT and/or STC and this certainly falls
within the definition of "tex benefif' as defined in section 80L, which states that
"tax benefit includes any avoidance, postponement or reduction of any liability
for tsx",
64. T h e t hird requirement is that the avoidance arrangement (which I add is

presumed in terms of section 80G to have been carried out with the sole or
main purpose of obtaining a tax benefit) had as its sole or main purpose the
obtaining of a tax benefit (section 80A).
65. T h e facts and circumstances and the series of transactions considered

as a
whole certainly provide proof that the obtaining of a tax benefit was the main
purpose, if not the sole purpose, of EAL getting Involved in the transactions.
There appears to be no other reason.
66. T h u s, and without repeating my comments made in the context of the doctrine
of substance over form, it is my view that the obtaining of the tax benefit was
the sole or main purpose of the avoidance arrangement.
67, T h e fourth requirement

is that the avoidance arrangement must meet ~n
f f he - i ts, na mely:
67,1. the avoidance arrangement "was entered into or carried out by means or
in e manner whichwould not normally be employed for bona fi
de
bu i ess u r o s e, ot h er t han o btaining a t ax b e nefit"(section
80A(a)(i)); or
67.2. the avoidance arrangement "has created rights or obligations that would
not normally be created between persons dealing at arm's length"
(section 80A(c)(l));or
67,3. the avoidance arrangement "lacks comnlercia! s ance in whole or in

part, taking into account the provisions of section 80C" (section
SOA(a)(ii); or
67.4. the avoidance arrangement "would result directly or indirectly in the

misuse or abuse of the provisions of this Act (including the provisions of
this part)"(section 80A(c)(ii)), [our emphasis]
68. W I t hout excluding reliance on the first two grounds, I highlight the latter two.
69. I n t h e first instance the agreements lack commercial substance. taking into
account section 80C which reads as follows:
"Lack ofcommercial substance.-
(f) For thepurposes of this Part, an avoidance arrangement lacks

commercial substance if it would result in a significant tax benefit
for a party (but for the provisions of this Part) but does not have a
signNcant effect on either the business risks or net cash flows of
that party apart from any effect attributable to the tax benefit that
would be obtained but for the provisions of this Part.
(2) For the purposes of this Part, characteristics of an avoidance

arrangement that are indicative of a l a c k o f c o mmercial
substance include but are not limited to-
(a) the le g al s u bstance or e f fect o f th e av o i dance

arrangement as a whole is inconsistent with, or differs
significantl from, the legal form of its individual steps; or
(b) the inclusion or presence of-
(i) roundtrip financing as described in section 8QD; or
(ii) sn a c c ommodating or tax indiiFerent party as

described in section 80E; or
(iii) el e ments that have the effect of off-setting or
cancelling each other."
70. I h i ghlight
a number of aspects of the series of transactions in the context of
section 80C:
70.1. that the net effect of the series of transactions is a significant tax benefit
for EAL, there is no other slgnTiicant effect upon the business risks or
cash flows of EAL. Thus the Titan group entered into s number of
agreements of sale at more than half a billion US$ yet in reality acquired
only the shares in a company with no assets other than US$1.2 million
(which it could only access at a future date) and the spes that it could
utilise the assessed loss. That wss the net effect of the elaborate suite of
agreements;
70.2. the arrangement as a whole certainly differs significantly from the legal
form of its Individual steps. The individual steps are primarily sales, but
viewed as a whole the underlying assets remain within the Tullow group.
71. The a re ments thus ck commercial subs ce.
72. I a m also of the view that the transactions result in the misuse or abuse of th
73. I q u ote the reievant extracts from the Comprehensive Guide to Capital Gains
Tax (issue 4), which, with respect to paragraph 64B(3), is in all material aspects
lifted from clause 79 subclause b of the explanatory memorandum on the
Revenue Laws Amendment Bill, 2005,
"12.18 Disposal of equity shares in foreign company (paragraph

64B)
12.18.2 Background
in the 2003 Budget Review, the Minister of Finance

announced his intent to aflow the tax-free repatriation of
foreign dividends back to South Africa. This dividend
exemption, known as the 'participation exemption', was
subsequently introduced into s 10(f)(k)(ii)(dd). One of
the requirements for the exemption is that the South
African shareholder receiving the dividend must hold at
least 20oAof the equity share capital and voting rights in
theforeign company (before8 No vember 2005 = 25%).
The participatIon exemption is frequently found in
continental European systems, such a s F r a nce,
Netherlands, Belgium and Denmark. This exemption
olten exists alongside the tax-frea sale of foreign shares
involving the same percentage stake because profits
from.the sa/e of shares. merely represent retained
dividends. Paragraph 648 gives effect to this tax-free
disposal. It is probably best described as a participation
exclusion', since it applies fo both capita( gains and
losses,/n broad terms South African shareholders are
allowed to make a tax-free sale of foreign shares in a
foreign company in which they hold an interest of at
least 20% as long as that sale is made to non-residents.
The latter fequirement encourages the repatriation of
foreign funds to South Africa
12.18.5 Capital gain on disposal of CFC fo c o nnected

person (paragraph 64B(3))
The capita/ gains participation exclusion operates in

conjunction with the partic/pation exemption for foreign
dividends contained in s 40(1)(k)(ii)(dd). The exclusion
of capital gains is i n tended to f acilitate internal
restructurings of offshore foreign subsidiaries. The
exclusion also allowed for the sale of certain foreign
shareholdings to foreign persons with the expectation
that the loss of foreign shareholdings would be replaced
with valuable consideration. However, i t b e came
apparent that some multinationals were seeking to use
the exclusion so as to divest themselves of their foreign
subsidiaries with foreign s ubsidiary ownership
transferring abroad with /ittle or no c onsideration
remaining within South Africa's jurisdiction. These
transactions also contained schemes that attempted to
avoid any STC so as to achieve a wholly tax-free
divestiture. Inorder to r e medy t hese concerns
paragraph GAB(3) and (4) were introduced. These ant/-
avoidance m easures came i n t o o peration o n
8 November 2005.
Pay 2 of 22
Under paragraph 648(3) any capital gain disregarded as
a result of the participation exclusion in paragraph
648(2) or (5) is treated as a net capital gain under
paragraph 8(b) in certain circumstances. The treatment
of an amount as a net capital gain has the effect that no
capitallosses for the year of assessment or assessed
capital loss brought forward from the preceding year of
assessment may be set off against the amount."
74. I n my view, EAL Is seeking to achieve precisely what the Legislature intended to
curb through the Introduction of paragraph 648(3).
75. E A L , part of
a multinational group, seeks to use the participation exclusion In
paragraph 648(2) to divest itself of its foreign subsidiary, with little or no
consideration remaining within South Africa's jurisdiction.
76. I nm y view, the avoidance arrangement has resulted directly in the misuse or
abuse of the provisions of the Act, specifically the provisions of paragraph
648(2) and paragraph 648(3).
77. T h e remedies available to deal with an

impermissible avoidance arrangement"
are set out In section 808, which reads as follows:
"Tax conserfuences of impermtssib!e tax avoidance.-
(1) The Commissioner may determine the tax consaguences under

this Act of any impermissible avoidance anangement for any
party by-
(a) disregarding, combining, or rewharacterising any stepsin

or parts of the impermissible avoidance arrangement;
(b) disregarding any accommodating or tax indifferent party

or treating any accommodating or tax indifferent party and
any otherparty es one or the same person;
(c) deeming persons who are connected persons in relation

to each otherto be one and the same person for the
purposes of determining the tax treatment of any amount;
(d) reallocating any gross income, receipt or accrual of a

capital nature, expenditure or rebate amongst the parties;
PNIa a2
(e) re- c haracterising any grossincome, receipt or accrual of e
capital nature or expenditure; or
(f) tre a ting the impermissible avoidance arrangement

as if it
had not been entered into or carried out, ar in such other
manner ss i n t h e circumstances of the case the
Commissionerdeems appropriate for the prevention or
diminution of the relevant tex benefit.
(2) Sub ject to the time limits imposed

by section 79, 79A(2)(a) and
81(2)(b), the Commissioner must maire c ompensating
adjustments that he or she is satisfied are necessary and
appropriate to ensure the consistent treatment of all parties to the
impermissible avoidance anangement."
78. T h e C ommissioner intends applying the provisions of section 808 to the

arrangement In the following manner: '
78.1. it intends to disregard the disposai by Tullow UK of the EAL shares to

Elandspad for sn a mount of U S $ 543.76 mNion (the EAL sale
agreement), i.e. disregard the actual quantum;
78.2. it intends to disregard Tullow UK's cession of the Elandspad claim to

TOH (part of the capitalisation agreement);
78.3. it intends to rewharacterlse the EAH sale agreem

ent to the effective
date of 23 January 2007; and
78.4. it intends to disregard TOH's cession of the Elandspad claim to EAL

(part of the EAH sale agreemant).
79. T h e result of the above is to bring the transaction, whereby the shares in EAH
were disposed of by EAL firmly within the construct of paragraph 648(3). TOH
and EAL were connected at the time of disposal of the EAH shares, and the
consideration received or accrued did not reflect an arm's length price.
80. T h er e i s a n a v oidancearrangement as defined, and this avoidance

arrangement has as its sole or main purpose the obtaining of a tax benefit.
81. I n a ddition, the avoidance arrangement lacks commercial substance and has
resulted directly in the misuse or abuse of the provisions of the Act.
82. T here is therefore an impermissible avoidance arrangement as defined.
Page 2S 2
83. Before the Commissioner determines EAL's liability for tax should Part IIA of the
Act be applied in the alternative, in terms of section 80J(2) the taxpayer is
provided the opportunity to submit reasons within 60 calendar days as to why
the provisions of Part llA of the Act should not be applied to the arrangements.
lf I am not persuaded otherwise by your response, the Commissio
ner may
invoke the provisions of section 806 and issue additional assessments should it
become necessary.
84. I n t erms of the Tax Administration Act No. 28 of 2011, relevant penalties and
interest will be imposed.
85. A n y documents or statements necessary to substantiate the repmes should

also
be provided. Also provide written reasons as to why any understatement
penalty (previously additional tax) shoul'd not be imposed.
86. P l e ase provide copies of the relevant material and retain the originals for your
records.
87, D e s pite the required retention period you are obliged to retain all records
relevant to this audit until the audit is concluded.
Should you have any queries relating to the audit, please contact the SARS official
mentioned above.
Sincerely,
A Kane G Ol Ier
ISSUED ON BEHALF OF THE COMMISSIONER FOR —'IF' SOUTH AFRICAN
REVENUE SERVICE
P890 I raa
AN EXUREA-THELAW
Section 801. I mper m issible tax avoidance arrangements. An

- avoidance
arrangement is an Impermissible avoidance arrangement if its sole or main purpose
was to obtain a tax benefit and
(a) i n the context ofbusiness-
(i) it w as entered into or carried out by means or in a manner which would not
normally be employed for bona ffde business purposes, other than
obtaining a tax benefit; or
(li) i t lacks commercial substance, in whole or in part, taking into account the
provisions of section 80C;
(b) in a context other than business, it was entered into or carried out by means or in
a manner which would not normally be employed for a bone ffde purpose, other
than obtaining a tax benefit; or
(c) in any context-
(i) i t h a s created rights or obligations that would not normally be created

between persons dealing at arm's length; or
(ii) it would result directly or indirectly in the misuse or abuse of the provisions of
this Act (including the provisions of this Part).
Section SOB. Tax' consequences of impermissible tax avoidance - (1) The

Commissioner may determine the tax consequences u nder this Act o f a n y
impermissible avoidance arrangement for any party by-
(a) d isregarding, combining, or re-characterising any slaps in or parts of the

impermissible avoidance arrangement;
(b) d isregarding any accommodating or tax-indifferent party or t reating any

accommodating or tax-indifferent party and any other parly as one and the same
person;
(c) deeming persons who are connected persons in relation to each other to be one
and lhe same person for purposes of determining the tax treatment of any
amount;
(d) reallocating any gross income, receipt or accrual of a capital nature, expenditure
or rebate amongst the paNes;
1
(e) r e-characterising any gross income, receipt or accrual of a capital nature or

expenditure; or
(f) ireating the impermissible avoidance arrangement as if it had not been entered
into or carried aut, or in such other manner as in the circumstances of the case
the Commissioner deems appropriate for the prevention or diminution of the
relevant tax benefit.
(2) Subject ta the time limits Imposed by section 79, TQA(2) (a) and 81(2) (b), the
Commissioner must make compensating adjustments that he or she is satisfied
are necessary and appropriate to ensure the consistent treatment of all parties to
fhe impermissible avoidance arrangement.
Section80C. Lack of commercial substance. - (1) For purposes of this Part, an

avoidance arrangement lacks commercial substance ifit would result in a significant tax
benefit for e party (but far the provisions of this Part) but does nat have a significant
effect upon either the business risks or net cash flows of that party apart fram any effect
attributable to the tax benefit that would be obtained..but for the provisions. of this Pert.
(2) For purposes of this Part, characteristics of an avoidance arrangement that are
indicative of a lack of commercial substance include but are nat limited to-
(a) the legal substance ar effect of the avoidance arrangement as a whole is
inconsistent with, or dil'fera significantly from, the legal f orm of its individual
sfeps; or
(i) round trip financing es described in section 80D; or
(ii) an accommodating or tax indi7ferent party as described in section 808;
ar
(iii) elements that have the effect of offsetting ar cancelling each other.
Section 80G. PresumptIon of purpose. - (9) An a v oidance arrangemenf is

presumed to have been entered Into or carried out far fhe sole or main purpose af
obtaining a tax benefit unless and until the party obtaining a tax benefit proves that,
reasonably considered In light of the relevant facts and circumstances, obtaining a tax
benefit was not the sale or main purpose of the avoidance arrangement.
(2) The purpose of a step In ar part of an avaldance arrangementmay be different

fram a purpose attributable fo the avoidance arrangement as a w hale.
Sectlon80H. Appllcatlan to steps in or parts of a n a rrangement. - The

Commissioner msy apply the provisions of this Part to steps in or parts of an
arrangement.
Section 80!. - The Commissionermay apply the provisions

Us e in the alternative.
of this Part in the alternative for or in addition to any other basis for raising an
assessment.
Pag a f 32
Section 80J. No t i ce. - (1) The Commissioner must, prior to determining any liabiTily
of a party for Iax under section 808, give the party notice that he or she believes that
the provisions of this Pert mey apply in respect of an arrangement and must set out in
the notice his or her reasons therefor.
(2) A party who receives notice In lerms of subsection (1) may, within 60 days after the
date of that notice or such longer period as the Commissioner may allow, submit
reasons to Ihe Commisiionei why the provisions of this Part should not be applied.
(3) The Commissioner must within 180 days of receipt of Ihe reasonsor the expiry of
the period contemplated in subsection (2)-
(e) request additional information in order Io determine whether or not this Part
applies in respect of an arrangement;
(b) g i ve notice to the party that the notice in terms of subsection (1) has been
withdrawn; or
(c) determine the liability of that party for tax in terms of this Part.
(4)- If at - a ny stage after giving notice to the party in teims of subsection ('1),
additional information comes to the knowledge of the Commissioner, he or she may
revise or modify his or her reasons for applying this Part or, if the notice has been
withdrawn, give notice in terms of subsection(1).
Section 80K. Interest. - Where the Commissioner hes a pplied this Part l n
determining a party's liability for tax, the Commissioner may not exercise his or hei'
discretion in terms of section 89quat(3) or (3A) to direct that interest is not payable in
respect of that portion of any tax which is attributablefo the application of this Part.
- For purposes of thisPart-

Section 80I D e f initions.
"arrangement" means any transaction, operation, scheme, agreement or
understanding (whether enforceable or not), including all steps therein or parts thereof,
and includes any of the foregoing involving the alienation of property;
"avoidance arrangement" means eny arrangement that, but for this Part, results in a
tax benefit;
"impermissible avoidance arrangement" means any avoidance arrangement

described in section80A;
"party" means any-

(a)person;
(b) permanent establishment in the Republic of a person who is not e resident;
(c) permanent establishment outside the Republic of e person who is a resident;
(d) partnership; or
Pae 29 f32
(e) joint venture,
who participates or takes part in an arrangement;
"tax" includes any tax, levy or duty imposed by this Act or any other Act administered
by the Commissioner,
"tsx benefit" includes any avoidance, postponement or reduction of any liability for tax.
Paragraph 8. Net capital gain. - A person's net capital gain for the year of
assessment is the sum of-
(a) the amount by which that person's aggregate capital gain for that year exceeds
that person's assessed capital loss for lhe previous year of assessment; and
(b) where paragraph 848(3) becomes applicable during that year of assessment, the
amount of the capital gain which was disregarded in terms of paragraph 848(2)
during that year or any previous year, as contemplated in paragraph84B(3).
Paragraph 38. Disposal by way of donation, consideration not measurable in

money and transactions between connected persons not at an arm's length
prlcL~
(1) Subject to subparagraph(2) and paragraphs 12(5) and 87, where a person disposed
of an asset by means of a donation or for a consideration not measurable in money or
to a person who is a connected person in relation to that person for a consideration
which does not reflect an arm's length price-
(a) the person who disposed of that asset must be treatedas having disposed of that
asset for an amount received or accrued equal to the market value of that asset
as at the date of that disposal; and
(b)
paragraph 84B. Disposal of Interest In equity share capital of foreign oompany.

QJ For purposes of this paragraph-
"foreign company"means a foreign company as defined ln section 9D;
e foreign financial
"foreign financial instrument holding company" means
instrument holding company as defined in section41.
(2) Subject to subparagraph (5), a person must disregard eny capital gain or capital loss
determined In respect of the disposal of any interest iri the equity share capital of any
company cr an
foreign company (other than a foreign financial instrument holding
'nferest contemplated in paragraph2(2)), if- 132
pU
(a) that person (whether alone or together with any other person forming part of lhe
same group of companies as that person) immediately before that disposal-
(I) held at least 20 per cent of lhe equity share capital and voting rights in that
(ii) held the interest contemplated in subitem (i) for a period of at least 18
months prior to that disposal, unless that person is a company and that
Interest was acquired by that company from any other company which
forms partof the same group of companies and thatcompany and other
company in aggregate held that interest for more than 18 months:
Provided that in determining the total equity share capital in a foreign company,
there shall nof be taiten into account any share which would have constituted a
hybrid equity instrument, as contemplated In section 8E, but for the three year
period requirement contained in that section; and
(b) that interest is disposed of-
(i) to any person other than a resident or a controlled foreign company;
(ii) In the circumstances contemplated in paragraph 12(2) (a), where those

circumstances arise directly or indirectly as a result of a disposal to a
person contemplaled in subitem(I); or
(iii) by a person to a controlled foreign company in relation to that person or to

any other controlled foreign company that I'orms part of the same group of
companies as that person.
(3) Paragraph 8 (b) applies in respect of any capital gain determined in respect of any
disposal of any interest in the equity share capital of any foreign company by a person
which is or was disregarded in terms of subparagraphs (2) and (5) ln any year of
assessment, if-
(a) th a foreign company prior to that disposal was a controlled foreign company in
relation to that person or any other company in lhe same group of companies as
that person;
(b) tha interest in the equity share capital of that foreign company was disposed of to
a connected person in relationto that person either before or after that disposal;
(c) that person-

or for
(i) disposed of that equity share capital for n o c onsideration
consideration which does not reflect an arm's length price, other than a
distribution contemplated in (Il);
(ii) disposed of that equity share capital by means of a distribution unless the
full amount of that distribution-
lrt 32
(ea) was subject to or would, but for the provisions of section 54B(5) (I),
have beensubjectto secondary tax on companies; or
(bb) was included in the income of a shareholder of that company or

would but for the provisions of section 10(1) (k) (ll) (dd) have been so
included; or
(ili) disposed of any consideration received or accrued from the disposal of that
equity share capital (or any amount received in exchange therefor) in terms
of sny transaction, operation or scheme of which the disposal of the equity
share capital forms part-
(sa) for no consideration or for consideration which does not reflect an

arm's length price (other than a distribution contemplated in (bb) );
(bb) by means of a distribution by a company, unless the full amount of

that distribution-
(A) wa s subject to or would, but for the provisions of section 848(5)

(F), have been subject to secondary tax on companies; or
(S) wa s included in the income of

a shareholder of that company or
would but for the provisions of section 10(1) (k) (ii) (dd) have
been so included; and
(d) that foreign company ceased in terms of any transaction, operation or scheme of
which the disposal of the equity share capital forms part, to be a controlled foreign
company in relation to that person or other company in the same group of
companies as that person (having regard solely to any rights contemplated in
paragraph (a) of the definition of 'participation rights' in section SD and without
having regard to any election exercised in terms of section QD(13)),
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Infnoans.cosa dnsdthua
ilr Allatalr Kans P Dacha/N Selt/0341077

The SouthAfrican Revenue Service yetu tuf
Large Business Centre 15.April 2013
Private Bag X9188
Cape Town
8000
Dear Mr Kans
Re; Energy Africa (Pty) I.td - Response to letter of findings snd notice in terms of section SOJ(1) of
the Income Tax Act 58 of 1962
We refer to the letter of findings dated 18 November 2012 issued by the Commissioner for the South Afrlcafy
Revenue Service ("Commissioner' cr "SARSu) to Energy Africa (Pty) Ltd."the
(, Taxpayer" or "EAL") u( letter of
findings"),
Forease of reference,the definitions used in the letter of findings are. used-in: this letter, unless otherwise
specified.
All references.to sections In this letter are to sections of the IncomeTaxAct No. 68 of 1962 (uACI'), Unless
otherwise specified.
We act for the Taxpayer In respect of the matters raised In the letter of findings and have been requestedby
the Taxpayer to respond to the lett'er of Ifndlngs on its behalf.
It is recorded that the Taxpayer was afforde extension for the submission of a response to the letter of
findings to 16 April 2013.
lsvv I touI forunolss I IP I africa • tumid nmhonoannenboiOL'etceipc«lod reotousuonnumbor2ouufotsuaoSI
tprecm« hLL Kma{chaff«ant P-C, Fsborfchfofaaecuuvef. SL hluualrmtdufaaychief mecudyel ILAbsrdor A Aou4r ISA Afcach AC Atoaoudor D.B. Auatuoyr lb.AnSumy
eurcudvos CJAudsoen GC.OodonharoP J.Saudn D,Sand FM,SSkoh' C.Socket' AF.Bembddue A:Basse s LJ Ssdvlc ScrSBoden LSyoomd' R Soda A Bschau
snd J:Brodboch' T.suttdet chlsuu Acbmay" DJLcamvctmotvo chepyn ILchstht Lchrloue DLcofoo psllcelyn 0 J,ctoems' FILO«shr p J,Dacha
ccsnuhenta c, osnlsls M 8, oorosl Thloeomond R. ds 4 Harps lhK de omit P. Doocro coso M 0 F 0 s. Combo«B. 4u Plscsfo' I, du Placate J c du P«oc F- sbisMfs
2.shraNm ILEIys As«amus' H.For«cd AD.Fe4rtdlnr LLJ.Folno4fni ILLFeshun LpFeoyane Japinia J s Jotreccmdsoo AphlFoesi'a AILFlsa'.
flL Fervtar hLR. Fdedmen R,hLGs4 ah Garden C.Delbert R, Goodman P F.L Cero«oat SLW.Gratpdos C,L Green' LDr svrsuara S,SIIL.IlsnS 0 IAL.klaateon
s Honky JTp.Hoy4och LK Hayes 8 B. Hsyoo I. Hoimsn Jo, Hereon OIL Hsrhobu ILLL Itorivddt s, Hoyoioh, AC.Hoobon p«flLB. Hutchlum' A v.hmeu
P«IAJ.hzlkuwha' LJolfe C.v.Johnson LAJohnvsn Jo Jones D.Kamsno' B.Ksooon Spate I C,Kata thpJ.Koihrmon' RH.Kelly. I Knfuot' EJ.F,Lal
luna' hl.leos DM.Ls«bort JLLLsno4rd ISVLLawre««LS LeGlanoo ILC Lddonuon A,Lao PA'Kiss«« WP;IsRmm ILB.Lava4n SALswle hLLopes
AD.l.oubocr L Lmru S A Mockayclsvldsen O. MocRobortt V. htooubane KW.L4khubo.e Chhtolan K. Markman O.tf.hisrhst' M.W. Mouse B,L I&eats
YA.MoadalostvtAT.Moyiruv D.B,INsavsrechaNL A.hlinnaer hhILIJafepoc,Mptuan J.O,Memvoay M,G.Mcldrcn hLAc.hhuphy H,hluaaycNnell NArHhpfer.
J.B.Hoods' AB. Kohen' NJL Holed AJL. H«tsn 0;hh Nude G.Hyalany! G,J. Oerlel J 7 ooouadcen KF. Oibame T PapatEtcfsuu T.D.papier hl Pothst'-
Bihpeaorrsn H.pamy CV SII«sn JAPousvon' JP,Pistyrkl • OJhLReld P;Rokhum Ao.f uchsia' ARecher P..Reams AGLlh®lh ILILRudofyh J,Ruach
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v. Sswail Aw Bymlnoien 8 P JA Truss«not' t. Tank«sny hLB. Tucker J hl vsydn w 0 0 vender collf 'v L van cupponbeson L BL vsnderhler'
s A, vanHiokerk 0 hlvan uloketh L venRenrbuto LW. %faun 8 vfvfare G. vouolman' s. R,vrmschimdlao L vcrstor' DA. wonb44
c. vsh Laohotesbot
S. Words«on H.Wocoals P A Wuwr C,L'Wtaholvt BLVbdokon J IIL2toff
' nct euomvyfnal dtoclnr, r o4ocutivsconodlonL r consu!lant, r vpodol IP ceunrol lovel e BBBEB
tauno
In the letter of find"ngs, it fs Indicated that the Commissioner proposes lo make an adjustment to the taxable
income of the Taxpayer by virtue of lhe Inclusion of a capital gain therein and to levy secondary tax on
companies ("STC") for the 2007 year of assessment based on hfs contentions set out therein, In particular,
the Cornrnissionsr's proposed adjustmenls arise from his reliance ona primary ground of substance over
form, and an alternative ground based on the anti tax-avoidance legislatfon contained In sections 80A to 80L
of the Act.
1. Int r oduclfon
1.1. I n p a ragraphs 14 - 42 of lhe letter of findings, the Commlssfaner refers ta certain

transactions entered inta by the Taxpayer, Tullow Oil Pla ("Tullow"), Efandspad Investments
(Pty) Ltd ("Efandspad") and Tullow Overseas Holdings BV ("TOH"). We do nat repeat the
transactians so referred to herein and the terminology utillssd by the Commissioner to refer
lo the transactions is utiiissd, unless otherwise specified.
1.2. I t a ppears that the Commissioner scrutinises the purpose of the transactions In arriving at
his findings. We therefore set aut below the purpose of the Taxpayer in respect of the
applicable transacilons and thereafter we set out the Taxpayer's responses to some of the
specific contentions and allegations made In lhe letter of findfngs.
Purposeof the frensactions
1.3. T u l low is a company which fs Incorporated In the United Kingdom and whfch Is listed on the
London Stock Exchange.
1,4. P rior ta the transactions under consideration, Tullow held all the shares in the Taxpayer,
whfch In turn, held 100'k of the shares In EAH. EAH, in turn, held lhe shares in various
African subsidiaries which carry on business in the ail exploration industry.
1.6. The Taxpayer understands that the halding structure wasa resull of the acquisition by
Tullow of EAL fram Engen during 2004 and that the Tullaw Group wished ta streamline the
holding structure and erase fnefflciencles snd Impractfcafftfes. In particular, during the
period under conslderatlon, the Taxpayer understands that the Tullow Graup decided lo
restructure various of Its international Investments as subsidiaries of a Dutch holding
company, TOH.
1.8, T h e Taxpayer understands that the Tullaw Group had no further need for the Taxpayer,
since it moved its South African operations aut of the Taxpayer and wished to hold Its
African Investmenls directly from TOH, The elimination af the Taxpayer from the Tullow
Group offered imrriediate efficiencies and savings in running costs and management time of
local and offshore directors andselling the company remaved 'ihe need for the Tullow Group
ta further deal with ths entity, eg by liquidating it stc, This also removed the need for the
Tullow Group to apply for exchange control approval through the Taxpayer each time it
wished ta expand its African opsraUons. It should be noted that this is the Taxpayer's
understanding and this shou'ld be confirmed by the C
ommissioner with the relevant entities.
1,7. T h e restructure Included the acquisition by Elandspad of the EAL shares and the
subsequent acquisition by TOH af the EAH shares and claims. The Taxpayer understands
that the purpose of and reason for the various transactions was therefore the Implementation
of the Tullaw restructure and in particular the objectives of removing South Africa from the
holding structure and for the African subsidiaries to be held by TOH. As stated above, this
should be confirmed by the Comm issioner with the relevant parties.
1.8. T h e Taxpayer understands that Elandspsd was prepared to acquire the shares ln the
Taxpayer fram Tullaw and ensure that the Taxpayer disposed of the EAH shares and claims
to TOH in order to meet the restructure objectives of the Tullow Group, since Eiandspad
benefitted from the transaction as the acquisition by Elandspad of the shares in the
Taxpayer allowed Elandspad ta take control of the Taxpayer with a view to the Taxpayer
realising its predominant asset, the EAH shares and claims, resulting in proceeds for the
Taxpayer which could be distributed ta Elandspsd.
Primary ground for fi ndings —

substance over form
2.1. I n the context of the varlaus transactions, applying his interpretation of the substance over
form doctrine, the Cornmissloner alleges the following in paragraphs 45.1 —45.5 of the letter
of findings:
2.1.1. the T u l low Group did not intend to dispose af the African oil exploration
comp
anies;
2.1,2. the Titan Group did not Intend to acquire the African oil sxpiaraUon companies;
the true consideration for the disposal/acquisition of the shares of EAL was US$
1.2 million, and ta the extent that It Is contended to be US$543.78 million or
US$544.9S mllllon, such amounts are simulated;
the effecUve date af the EAH sale agreement, 25 January 2007, was simulated
In order to create the Illusion that, upon the disposal af the EAH shares and ths
EAH claimto TOH, EAL and TOH were notconnected persons;
21.5. Ihe t r ue substance of the transaction is that EAL disposed of lts subsidiary EAH
to a connected person at a value that did not reflect an arm's length price.
2.2, I n light af ths above, with regard to the Commissianer's primary ground In terms of which he
proposes to make the proposed adjustments set out in the letter of findings, it appears that
the Commissioner accepts Ihat all traneactlans and/or agreements were validly entered Into
between the parties (I.e. valid rights and obligations wars created), but that cer1aln elements
of the transactions were simulated (which is denied for the reasons set out below). In
particular, ft does not appear that the Commissioner proposes to set aside any of the
agreernsnts, but that he proposes ta disregard certain elements thereof.
2.3. Al t hough the Commissioner accepts that ths requirements of paragraph 648(2) of the Eighth
Schedule to the Act were met fn relation to the sate by the Taxpayer of Ihe EAH shares ta
TOH, on the basis of his allegations set aut ln paragraph 2.1 above, the Commissioner
contends that all four requirements of paragraph 648(3) of the Eighth Schedule ars met and
that the participation exclusion In paragraph 64B(2) thus does not apply.
2.4. I n addition, the Commissioner slleges that the true substance of the restructure transactions
resulted In a distribution by the 'Taxpayer of the EAH shares and claim to TOH on 23
January 2007 in exchange for US$1.2 m'lllon, when he considers TOH ta have been a
connected person In relation to the Taxpayer. Therefore, he contends that there was a
deemed dividend in terms of section 64C(2)(s) af the Act to the extent that the value
assigned to the EAH shares and claim of US$543.76 mi won exceeded the alleged
consideration of US$1.2 million.
2.5. W e commence by setting aut below the applicabls legal princfples which govern Ihe
substance over farm/simulation dactrlne. Thereafter, we address your allegations ln the
letter of findings ln general,aswelf as certain specific allegations made.
2.6. I n our view, It ls unnecessary to deaf with each and every one of yaur allegallons,
statements and/or conclusians, However, aur failure Io do so Is not to be construed as an
admission as to the correctness thereof. If need be, such allegations, statements and/or
conclusions will be traversed In due course.
Substance overform —general legal principles
2.7. Th e principle of substance over form fs a general legal principle which has repeatedly been
affirmed by South African Courts In a lang line of cases slretchlng back over 100 years. As
was stated in the case ofZendberg v Ven Zyl 1$10 AO 302, the local classicus on simulated
transactions:
"Now, as a general rule the parties to e contract express themselves in language

calculated without subterfuge or concealment to embody the agreement at which
they have arrived. They intend the cantrect to be exactly whatIt purportai and the
shape which it assumes Is whet they meant it should have. Not Infrequently,
however (either to secure some advantage which otherwise the Iew would not give,
or to escape some dlsebflity which otherwise thelew would Impose), the parties to a
3
PIOS5alS
lransacllon endeavour to conceal Its real character. They call it by s name, or give It
a shape, intended not to express but to disguise its true natura. And when a Court
Is asked to decide any rights under such an agreement,It can only do so by giving
affect to what the transaction really ls; not what in form It purports lo be. The
maximum then applies plus valet quod agitur quern quod simulate concipitur" (l.e.
what ls actually dans ls more important than that which seems to have been done).
2,8. T h e test ln determ"ning whethera transaction amounts to a simulation was laid down In the
Zandberg-case, being that there must be a real Intention, definitely ascertainable, which
differs from ihe simulated intent(on. This test has been aNrmed ln various Appellate Division
cases following the Zandberg-case (see for exampleCommissioner of Customs and Excise
v Rsndles Brothers 4 Hudson, Ltd 1941 AD 469, Erf 3183/I Ladysmith (Pty) Ltd v
Commissioner (ar Inland Revenue 1996 (3) SA 942 (A) and Mlchsu v Maize Board 2003 (6)
SA 459 (SCA)).
2.9. I n Ma cKay v Fsy NO8 Another 2006 (3) SA 182 (SCA), Scott JA said the following ln
paragraph (26] at 194:
lt hss lang been recognised that, where parties to s transaction for whatever reason
attempt lo conceal ils true natura by giving il some form different from what they
really Intend, a Court called upon to give effect to the transaction will do so In
accordance wilh its substance, nol its form. Sea generally Bf 3$83ff Ladysmith ...
and the cases therein cited. It Is important Io emphaslsa that e transaction which ls
disguised in this wsy ls essentially s dlshonesl transaction; the object of the
disguise, which Is common to the parties, is to deceive the outside world. Before a
Court will hold a trsnsacllon to be simulated or dishonest In this sense it must
therefore be satisfied thai there is some unexpressed or tacit understanding
between the parties to the agreement which hes been deliberately concealed."
2.10. The inquiry ls In each case one of fact and no general rule can be laid down. All
circumstances must be taken Into account to get tc the actual intention of tha parties. In
considering the issue, the Courts have taken the following factors into consideration:
2.10.1, anomalies between the terms of the agreements and the reality, Indicating a
tacit agreement (seeErf 3183/1 Ladysmith (Pty) Ltd v Commissioner for Inland
Revenue (supre));
2,10.2. whe r e a party did not understand the transaction, the Court deduced that It did
not reflect his Intentions (see ITC 1654 61 SATC 131);
2.10.3, w h ether all the terms of the agreement were duly Implemented <see
ITC 1825
89 SATC 383)',
2,10.4, w h e ther, but for one aspect, the Commissioner assessed the Taxpayer on all
the other tax consequences flowing from the alleged simulatedagreem
ent (see
I TC 162559 SATC 383);
2.10.5. w h e ther there was

a written memorial of agreement or any evidence of the
agresmsnt between the parties (sssITC 1863 61 SATC 383);
2.10.6. ths subsequent conduct of the parlies ln implementing the agreements (see
Mlchsu v Maize Board (suprs),sss also ITC 1816 69 SATC 62 where the Court
referred to Rane investment Trust v Commissioner for South African Revenue
Service 2003 (6) SA 332 (SCA));
2,10.7. the historicai background to the transacllon, including the nature of negotiations
between the pariies, the purpose which ths parties sought to achieve by
entering Into the transaction and ths various options avallabls to the parties
whereby their purposes could be achieved (sseITC 1816(suprs) where the
Court referred to the case ofCommissioner for Inland Revenue v Conhsgs (Pty)
Ltd1999 (4) SA 1149 (SCA)); snd
2.10.8. the t erms of the agreement concluded, by themselves and in the light of the
surrounding circumstances (sse ITC 1816 (supra)).
2.1'l. It is thersfare trite law that courts will always look at the substance of a transaction or a
series of transactions and not simply at their form. This means that If parties purport to
conclude a transaction or transactions which do not reflect the true agreement ar
agreements, the courts will disregard the purported transaction or transactions and wIII apply
ths Iaw In accordance with the true agresmsnt or agreem
ents.
2.12. There has been an on-going debate as to whether, in order to treat the substance of a
transaction as differing from its form, it ls necessary ihat there be some form af dishonesty
or deception by the parties to lhe transaction, This can be explained on the basis that, in
saying that dishonesty Is not a requirement, the relevant cases are referring, not to the
ahern/simulation doctrintt but to the different but parallel principle that courts will not be
bound by the label which parties give to their agreement or to their subjective perception as
to the nature of ths agreement, but will Instead determine the legal consequences af the
agresmsnt by having regard to the true nature of the rights and obligations agreed to by the
parties.
2.13. In the recent case of Commissioner for South African Revenue Service v NWK Limited 2011
(2) SA 67 (SCA) ths Court held as follows:
2.13,1. T h e Ladysmith+ass
(supra) distinguishes between two principles:
2.13.1.1. A person may arrange his affairs so as to remain outside the
provision ofa particular statute; and
2.13.1,2. The Court will not be deceived by the form of a transaction, but will
rend aside the veil in which the transacgon Is wrapped and examine
Its true natura and substance.
2.14. The Court confirmed that, as stated In the Ladysml(h case, these two principles are not In
conflict.
2.16. The court In the NWK case held that in determining whether the substance of a transaction
differs from ils form and, in particular, in deciding whether the parties had a real Intention
which differed from the simulated inlentlon, the Court must examine the commercial sense
of the relevant transaction and"whether there wss a real and sensible commercial purpose
ln the transaction" and "not just an intention to echieve s tex benefi or to avoid the
sppHcstion of e tsw". The Court 'must consider, when simulation is en issue, vrhet the
parties really sought to echieve'.
2.16. In addition, the Court in the NWK case endorsed the principle that a taxpayer may organise
Its financial affairs in sucha way as to pay the least amount of tax.
2,17. The Commissioner's line of reasoning per the letter of findings appears to be baaed on the
NWK case In particular, s!nce the commercial purposes of the transactions (or the tack
thereof as perceived by the Commissioner) are viewed as an indicator that the substance of
the transactions (or at least elements thereof) do not accord with the form thereof. In this
regard, the Taxpayer refers to the recent judgement In Nertsne Bosch and Another v
C:SARS (Case no: A 91I2012). In this case, counsel for the Commissioner railed on the
Judgement of Lewis SA In the NWK case, where It was hald that whilst accepting tha
fundamental principle thata taxpayer is entitled to arrange his or her affairs as to remain
outside of the provisions of the Act, a court will not be deceived by Ihe form of a transaction
but will examine its true nature and substance. In accordance with Lewis JA's Judgment,
counsel therefore argued that the onus which rests upon a taxpayer in terms of section 82(a)
of the Act is not dischargedsimply bya party showing that effect was given to the contract in
accordance with its terms.
2.18. However, the Court, In Afarfens Bosch(supra) held that in the NYVK case, the Court was
confronted with a starkly clear set of simulated transactions. The facts ot the case
i llustrated, without a doubt, ha the artie had not c te e bl n
d con r t d oa to ena le r r tax b . And
furthermore:
"Beyond this finding, there Is nothing in lhe careful judgment af Lewis JA which supports
the argument that the reasoning as employed in NWK was intended to alter the settled
princip/es developed over more than a century regarding the determination of a simulated
transacfion for the purposes of tax."
2.19. The court then continued to consider the history with regard to lhe determination of
simulated transactions. Reference was made to the decisionaf Commissioner of Customs
& Excise v Randles, Brothers and Hudsen Lfd (1 941AD 369 at 395- 6), where Watermeyer
JA (as he then was) said:
"A transaction devised for that purpose, If the psrfies honestly intend to have effect
according ta its tenor, Is interpreted by the Courts according to its tenor, and then the only
quest/an is whether, so interpreled, it falls within the or without the prohibition af tax..."
I e s ense sa u ab I som
/fferent. In ess nce itis adis on ish one he art/
do not real/ inta v I r srt e c on l ot e
outside wor/d. The purpose of the disguise is to deceive by concealing what is the real
agreement or transaction between the parties. The parties wish to hide the fact that the/r
real agreement or transaction falls within the prohibition or Is subjecf to the tax, and so
they dress if up /n a guise which conveys fhe impression that it Is outside of the
prah/bit/on or not subject to the fax. Such a transaction ls said to be In ~udenntgjg, and
is Interpreted by the Courts in accordance with whet is found to be fhe real agreement or
transaction between the parties.
Of course efore I hat a trs i n fraudem in th e

r Is sad a of
standn be "(ouremphasis).
2.20. Reference was further made to the decision In Grf 3983!I Ladysmith (Pty) Ltd (supra) at 962
where Hefer JA said.'
"(fjhe Court only becomes concerned with the substance rather than the farm of the
transaction when if has to decide whether the party concerned has succeeded In
avoiding the application ofa statule by an effecfive arrangement of his affairs...."
"The Court must be salisf led that there is a real intention, definitively ascertainable.
which differs from tha slmulslad intention..."
PIqe• ate
2.21. In summary, Davis JA held that;
"the ces n e r Ith i n his can ex oensura hatlhebod of h

a c t an din WK e unex
It appears fhal the Infentlon of this paragraph Is to point in the direction which the
mandated enquiry must take ln such cases namety to examine the real commercial sense
of fhe transection. e i s no c ommerci I i st n c er st fo of
th e seeks t o resan c o m o a fhentheevoidance oft x e t
sole of he transaction wo Id t we r fuf ustiflcetton f r a in
he se ct s i n theman arun e a b Courl in N W . I n t h lswayfhe
dictum in a reletively recent case of Scott JA in the Alackay v Fey NO and another2008
p) SA $82 (SCA) at para 26 can be reconciled with paragraph 65 of NWK:
re a Court will ho d a t m e d o r dis one i n this sans i

e t t e I n r a ni
between he a i a e I c Ied.'
In my view, without an express deciarallon to that effect, NWK should be Interpreted to fit
within a century of esfabiished principle, rather than consulllng a dramatic rupture" (our
emphasis).
2.22. In accordance wllh the above judgment In the Mariana Bosch case, absent any dishonesty
or tacit understanding between the parties outside the scope of the agreements which has
deliberately been concealed, the Commissioner cannot hold that a transacllon was
simulated. The Taxpayer submits that this Is ths correct approach,
r or I Ie a l r l nci ieand t a a I n m h a n ls
2.23. The principle of substance over form Is not a tax principle. It Is a general legal principle In
terms of which the law will attach to an agreement the consequences which the parties
actually Intended (as opposed to those which they simulated), in accordance with the maxim
plus vale! quod agitur quern quod simulate concipitur.The principle Is accordingly applicable
In determining gal of the legal consequences of an arrangement and not only the jilt
Implications thereof. For example, the rights of the contracting parties will be determined
having regard to lhe substance of the arrangemsnt and not Its form. See for example BC
Plant Hire CC tieBC Carriers v Grenco(SA) (Pty) Ltd [2004] 1 Ail SA 812 (C) where the
Court held that when dealing with a dispute regarding rights under an agreement, the Court
had to give effect to what the transaction really was, and not the form lt purported to be.
ral ra ail o t e te r de endenceaf he rsnsac
2.24. The Commissioner makes various references to the interdependence of the restructure
transactions and agreements (refer paragraphs 26, 28, 38 and 61 of the letter of findings)
and many of his contentions appear to be aimed at providing support that there was a link
between the sale of the EAL shares by Tuliow to Sandspad and the sale of the EAH shares
and claims by Ihe Taxpayer to TOH.
2.25. The Taxpayer does not dispule that these transactions were interlinked. This aspect
inevitably flows from the purpose of these transacliansas detailed above, I.e. for EAL to be
removed from the Tullow Group and for EAH to be restructured so that it is held directly by
TOH ln accordance with the restructure objectives of the TuIow Group. The restructure
necessarily involved a series of lransactian steps and each of the transactions was
implemented in order ta achieve the purpose thereof as detailed abave I.e. for Elandspad to
acquire EAL and for the EAH shares and claims ta be sold to TOH.
2.26. However, the existence of such a link Is not indicative of, or proof that any of the
transactions was simulated. The parties, being third parties acting at arm's length, intended
to and did Implement the relevant restructure agreements, resolutions and share transfers to
achievethe commercial objectives assetoutabove.
2.27. As the Commissioner correctly points out, clause 2.4 of the Restructure Agreement
acknawledges that the restructure lransactions are Inter-dependent, This is svklence that
there was no dishonesty or any tacit agreement between the parties, but that the
agreements reflect the true Intention of the Taxpayer, Elandspad, TOH and Tullow and that
they Intended to give effect thereto.
General comme I r s t I f din s
2.28, The Taxpayer has knowledge of various of the transactions and can therefare set aut its
views In this response. However, it only entered Into a limited number of the relevant
transactions. The Taxpayer cannot speak to the Intention (purpose) of any other
taxpayer/party to the transactions. In order for the Commissioner to maintain its argument
regarding simulation/substance over form It must also,infer elis, determine the purpose af all
the relevant taxpayers,
2.29. For example In paragraph 46.1 of the letter of findings where It Is stated that the Tutiow
group did not intend to dispose of the African exploration compeniea"this ls a question for
the Tullow Group. SimIarly, the statement in paragraph 45.2 of the letter of findings ls a
question for the relevant entity in the Titan Group. The statement In paragraph 46.3 of the
I'atter of findings ls a question for Elandspad as the shareholder of EAL,
Psgelt el'
Gene onse to th c n n i ara ra h et er offi di
2.30. The Commissioner, on the basis of his allegations in paragraphs 45.1 to 45.5 (I.e. the
primary grounds) of the letter of findings, seeks to adjust certain terms or the effective date
of certain of the agreemenls, The Commissioner then concludes that the true substance of
the transaction (presumably he ls referring to the various agreements entered Into) is that
EAL disposed of Its subsidiary EAL to a connected person at a value that did not reflect an
arm's length price.
2.31. As a paint of clarification, our Interpretation of the Commissioner's findings Is that he does
not dispute that any of the transactions should be disregarded, Le. he accepts that Tullow
disposed of the EAL shares to Elandspad and that the Taxpayer subsequently disposed of
the EAH shares to TOH. We therefore proceed on the basis that the Commlsslaner accepts
and recognlses that these transactions took place, and that he is seeking to only disreg~rd
or re-characterise certain elements of these transactions on the basis of the substance over
form doctrine.
2,32. Applying the various considerations laid down by the Courts in determi
ning whetherthe
substance af anarrangement accards with its form, as set out in paragraph 2.10 above, to
the present case:
2.32.1. there are no anomalies between the terms of the agreements entered Into by
the Taxpayer and the reality;
2.32.2. there are no unusual and unreal aspects ln respect of the abavementlaned
agreements which indicate that the agreements did nat reflect the true
agreement between the parties. We deal with the Commissioner's cantentlons
regarding the lack of "commercial purpose" of elements of the transactions
beiaw;
2.32.3, It ls understood by the Taxpayer that each of the relevant paNes ta the
agreem
ents entered into by the Taxpayer understaad the transactions and the
terms thereaf;
r
2.32.4. all o f the terms of each of the agreements were duly Implemented;
2.32.5. there were written agreements between the relevant parties, and the relevant
resalutians and share transfers were duly implemented;
2.32.6. the subsequent conduct of the parties accords with the terms of t he
agreements. The Taxpayer underslands that this Is so not only In respect of 'Ihe
agreem
ents entered Into by it, but also in respect of the other relevant
agreements. For example Elandspad took transfer of ths EAL shares, ths loan
accounts were duly dealt with in tha manner intended on the basis as
communicated to and approved by the South African Reserve Bank, whsreafter
TOH took transfer of the EAH shares and claims, etc;
2.32.7. as discussed In paragraph 1 above, the Taxpayer understands that the purpose
of the transactions was to restructure the Tullow Group lo achieve ths
commercial objectives detailed above. Nothing In the background to the
transaction Indicates that the true intention of the parties was not to conclude
and Implement the restructure, In fact, the Taxpayer understands that the
restructure was the only reason why the transactions were concluded at all;
2.32.8. the terms of the agreements were In fact implemented, which in turn accords
with the purpose discussed In paragraph 1.2 and following above. Theterms of
the agreements were a c cordingly consistent with th e s u rrounding
circumstances.
2.33. Th eagrsemsnts entered into by the Taxpayer were therefore entered into to implement the
restructure of ths Tullow Group to achieve the commercial objecllvss set out In paragraph
1.2 and foilowing above and no dishonesty or tacit understanding was present between ths
parties.
2.34. In particular,as stated above, as the Commissioner correclly points out, clause 2.4 of the
Restructure Agreement acknowledged that the restructure transactions were inter-
dependent, which evidences that there was no dishonesty or any tacit agreement between
the parties, but that the agreemsnts rellect the true Intention of,fnter alla, the Taxpayer.
2.35, Th eTaxpayercontends that:
2.36.5. the terms of the agreements entered into by it (and related Implementation
steps, such ss the share transfers etc) speak for Itself and reflect its true
Intention and the true terms of ths various transactions as evidenced by these
agreemsnts, both in form and In substance, There were no other terms,
agreements or understandings, whether express or tacit, between the Taxpayer
and any other party which were Inconsistent with the terms reflectedin these
agreements;
2.35.2. it was the true intention of the Taxpayer to give effect to the agrsernsnts and in
concluding these agreements, the Taxpayer truly contemplated that the
agreements would be implemented according to ths respective terms and were,
in fact, implemented in accordance wilh the relevant terms;
2.36.3. t h e Taxpayer intended the transactions under consideralon and as evidenced
by ths agreements to have the precise effect that they had;
2.35.4. th e substance of the arrangement does not differ from Its form;
2.35.5. the r e is no disguises or dishonesty In relation to any af the agreements or

arrangements between the parties; and
2,35.6, t h ea rrangements all have rea( commercial purpose and substance as

contemplated In the NWK judgment.
2.36, The Taxpayer understands that this applies equally to all the agrsemsnts entered into by ait
the relevant paNes. However, as stated above, each taxpayer/party to the transaction must
be tested by ths Commissioner in relation to its intention/purpose.
2.37. On th's basis, the Taxpayer denies that the legal form of the agreements doss not reflect the
substance thereof.
2.38. We now address the specific contentions of the Commissioner in relation to his analysis af
his primary ground af substance over form.
Rss o se to the ca 2. o 51.2.13 of hs le ter of il I
2.39. The Taxpayer's failure to deny any sllegstlan contained In the letter of findings and In
particular, paragraphs 61 to 67 thereof should not be construed as an admission or
acceptance of the correctness of such allegations. Suffice it to say that insofar as the
allegations and conclusions of SARS In the letter of findings are inconsistent with what Is
stated ln this letter, the Taxpayer denies the correctness thereof.
2.40. I n relation to paragraph 848(3)(b) of the Eighth Schedule, the Commissioner contends,inter
alia, that there was no "commercial sense" or "comrnsrclal purpose" in the timing of the sale
by Tuilow of the shares ln the Taxpayer to Elandspad and the subsequent sais af the EAH
shares by ths Taxpayer to TOH.
2.41. As stated above, this allegatian does not appear to question the validity ar substance of any
of the agreements entered inta and In pedicular the sale by Tultaw of the EAL shares to
Elandspad and the subsequent sale by the Taxpayer of ths EAH shares and cialrns, but Is
limited toa statement that no commercial purpose was served by the delay of the sale of the
EAH shares snd claims until two days later, other than the avoidance of tax and in particular
to escape the connected persons requirement In paragraph 648(3)(b) of ths Eighth
Schedule. These allegatlans appear to lead the Commissioner to a conclusion that the
effective date af the EAH sale agreement was simulated.
2.42. Firstly, this allegation does nat relate taa transacllon as such and does not contest the fact
that the parties created I r , but attempts to scrutlniss the timing
of various transactions, I.e. it does not dispute that the relevant rights and obligations were
created, but disputes the timing thereof. Secondly, the Commissioner concludes that ths
sofa purpose of the "delay" between the various transactions (snd not the transactions
themselves) wss the avoidance of tax and thus that the effective date of the sale by the
Taxpayer af ihe EAH shares and claims were simulated.
2,43. There was a true commercial purpose far the sale of the shares and loan claims by EAL In
EAH to TOW. There wss no "delay' in the sale of the EAH shares and loan claims and
therefore the statenIent in paragraph 61.2.13 of the letter of findings that "there wee no
commercial purpose to deley the conclusion of the sale of the EAH shares end claim to TOH
until two deye after the conclusion of the EAL sale agreement, other then the avoidance of
tex" Is misfounded. As stated above, the Taxpayer understands that the Tullow Group
wished to dfspose of EAL, but wished to retain EAH and its subsidiaries, It therefore sold
EAL ta Elendspad and EAL sold EAH to ths Tullaw Group.
2.44, We briefly deal below with the purpose of the transactions and the cammsnts of the
Cammlsslaner regarding the two day "delay" and the impact thereof.
2.46. The Taxpayer's understanding of the commercial purpose of the various transactions
entered Into fs set out In paragraph 1.2 and fof lowing. These transactfons were implemented
over the course of a few days. In particular, there was na significance attached ta the two
day "delay" between the transactions and In addition, there wasa clear commercial purpose
for the transactions entered into, and there is no basis upon which to allege ths simulation of
the effective date of the sale of the EAH shares and claims on this graund.
2.48. In particular, the agreements Involved third parties and In such circumstances, the rights and
obligations created between the third parties cannot be dfsrsgardsd. In particular, it Is not
possible to disregard the effective date of the sale of the EAH shares and claims, since both
transactions were entered Into between third parties (being Tullaw and Efandspad and then
the Taxpayer and TOW) and as such, these parties needed to ensure that they could
perform In terms of their respective ablfgatlons. It was necessary for the agreement fn terms
of which the EAL shares were sold to Elandspsd, as weil as ths capitalisa0on agreement ln
terms of which the claim which arose on such sale was, accarding to ths Taxpayer's
understanding, ceded ta TOH to be duly completed and implemented before the EAH shares
and claims could bs disposed of. The Taxpayer understands that the various transactions,
which Involved various jurisdictions, therefore took a few days to Implement.
2.47. As detailed by ths Commissioner In paragraph 51.2,1'I of the letter of findings, the security
cession and pledge and the undertakings by Elandspad In the EAL sale agreement confirm
the Intention that the EA W
sale agreement would be concluded subsequent to the conclusion
of the EAL sale agreement.
ommissioner'
2.48, As stated above, ln terms of our understanding of the C s position,he accepts
the occurrence of the EAL share sale by Tullow to Elandspad and the subsequent sale of
the EAH shares and claims to TOH. In particular, one of the Commissioner's findings Is that
the purchase price In relation to the sale of the EAL shares Is considered by him to be
simulated, but he does not dispute that the transaction occurred on 23 January 2007 or
contend that any of Its terms are simulated. He also does nol appear to dispute the
sequence of the transactions and In particular, the fact thai Tuliow so'Id the EAL shares to
Elandspad whereafter EAL sold the EAH shares and claims to TOH.
2.49. On this basis, even lf the two day 'deleye Is Ignored (as ls proposed by the Commissioner by
deeming the effective date of the sale of the EAH shares and claims by Elsndspad to TOH
to be 23 January 2007) on the basis that the Commissioner accepts that Tullow sold the
EAL sharesto Elandspad on 23 January 2007, but contends that, on the same day,
Elandspad then sold the EAH shares end claims to TOH in accordance with the terms of the
various agreements, this wou'Id nct have resulted ln EAL snd TOH being connected parties
at the time of the sale of the EAH shares end claims to TOH, The test in relation to whether
the seller end the purchaser of shares ln paragraph 848(3)(b) are connected does not test
the relationship between the parties at the beginning or end of the day of a transaction, but
with reference to the moment immediately before and Immediately after the transaction.
Given that the Commissioner appears to accept the fact of and sequence of the transactions
as they in fact occurred, even if the effective date of the EAL and EAH share sales Is
deemed to be the same day, there would have been no connected person relationship
between EAL and TOH when the EAH shares and claims were sold to TOH, either
Irnrnedistely before or Immediately thereafter, and thus this requirement of paragraph 848(3)
Is not mst.
2.50. In summary, as mentioned above, the substance over form doctrine Is not a tool In terms of
which a person is taxed where the transaction does not meat what is regarded by SARSas
being a sufficient ccmqerclal purpose. However, even following the reasoning of the
Commissioner In this regard, It ls submitted that Ihis does not render the result as envisaged
by the Commissioner that the sale cf the EAH shares end claims becomesa transaction
behveen connected persons, since as mentioned above, even if the two day 'delay" is
ignored and the sale of the EAH shares and claims took place immediately subsequent to
the sale ofthe EAL shares on ths same day,this would nothave caused TOH and EAL to
be connected persons.
2,51. In addition, there was no "delay" in the sale of the EAH shares and loan claims by the
Taxpayer to TOH.
2.52. Therefore, regardless of the Commissioner's contentions, and whether or not the legal basis
for these contentions are sound (which Is denied for the reasons sst out above), the second
requirement In paragraph 64B(3)(b) Is still not met.
e re io et of 5 din
2.53. I t appears Ihat the general crux of the Commissioner's allegations contained ln paragraphs
51.3 of the letter of Sndlngs is to illustrate the Commissioner's view that there was no
"commercial sense" In terms of the pricing of the EAL sale agreement and that the terms of
the loan which arose between Tullow and Eiandspad as a result of the EAL sale Is reflective
of a lack of commercial substance with respect to the price and that such terms are"terms
hardly considered commercial behveen parties ecfing et arm'e lenglh".
2.64. I n particular, the Commissioner alleges the following;
2.54,i. Elan d spad never Intended to incur

a bona fide 'labillly in the amount of US$
543.76 million to a third party in respect of the EAL shares.
2.54.2. Neither party intended that the EAL sale agreement wouldinter partes have
effect according to Its tenor, but the transaction was engineered to achieve the
Illusion that an arm's length price was paid for EAL. This contention again
confirms that the Commissioner accepts that the EAL sale agreement was
entered into snd acknowledges the transaction and all Its terms and ls only
disputing the formulation of the purchase price.
2.55, The factors on which the abovemsntionad allegations of the Commissioner appear to be
premised Is as follows;
2.56.4. E l a ndspsd paid U8$543.76 million to acquire a company on which it p erform

ed
no formal due diligence.
2.55.2. T h e p urchase price was determined with reference only to a valuation

commissioned by the directors of EAL; and
2.55.3. that It lacks commercial sense for parties to enter into a share sale agreement
where the price Is the same as the market value of an asset of the target
company and the purchaser will never enjoy any of the predominant commercial
benefits of such asset.
2.66, In addition, it is stated that if the reai intention of ihe parties to the EAL sale agreement was
the creation of a bone Ne liability and receivable of U8$543.1'6 million, the terms of
repayment would have been stipulated clearly In the EAL sale agreement and interest wouid
probably have been charged on the outstanding balance. The Commissioner then concludes
that since neither interest was levied ncr repayment terms stipulated, there ls a lack of
commercial substance with respect to the price.
2,57. These arguments relate to the arrangemsnt between Elandspad and Tullow. The Taxpayer
is not a party Io these arrangements, but has knowledge thereof. The Taxpayer therefore
sets out its views snd understanding in relation to these arrangements, partlculariy in the
context of its subsequent transaction with TOH. However, the Commissioner should obtain
the relevant information In particular in relation to the purpose of the various parties from
those transacting parties.
2.68. I t should also bs noted that paragraph 52 of the letter of findings states that "ln the
circumstances, I sm of the view that the ostensible conslderetlan (US$543.76 million)wss e
sham". This ls based on the analysis In paragraph 51.3.1 - 51.3.14 of the letter of findings
which deals with the transaction between Elandspsd and Tullow, It does not deal with or
analyse the terms of the relevant sais agreement, namely, that between Ihe Taxpayer and
TOH in respect of the sate af lhe EAH shares snd claims. In terms of the sate agreement,
tha purchase consideration was US$544.96 million, being the srm's length price negotiated
between the parties.
2.59. In this regard the amount of US$544.96 miNanreflected the arm's length price negotiated
between EAL and TOH.
2,60. It appears that, again, the Commissioner's enquiry Is directed as to the purpose of the
purchase consideration. Far example, hs states that "neither party intended that the EAL
sale agreement would Inter partes have effect according ta Its tenor. The Transaction wss
engineered ta achieve the Illusion that sn arm's length price wss paid for FAL...".
2.65. The Commissioner commences his discussion by alleging that Eiandspad never Intended to
incur a bona fide liability in lhe amount of US$643.76 million to a third party in respect of the
acquisition of the EAI. shares, He makes this alsgatian on the basis that EAH was the
Taxpayer's predominant asset and that Elsndspsd never intended to acquire the Taxpayer's
shares for its predominant asset.
2,62. The Taxpayer understands that It wss the true intention af Elandspad and Tullow, as third
parties, that Elandspad should acquire the EAI. shares fara purchase consideration of US$
643.76 million and to give effect to this agreement. In concluding this agreement, ths parties
truly contemplated thai this agreement would be implemented according to its terms and it
was, in fact, implemented Inaccordance with the relevant terms.
2.63. Most of ths Commissioner's contentions In relation to his allegation that Elandspad never
Intended to incur a IlabINy of US$543.76 million In relation to the EAL sale are based on his
perceplan that Elandspad wauld never have enjoyed the"predominant commercial benefits"
of lhe EAL shares, i.e, EAH and Its subsidiaries.
2.64. A s stated above, the Taxpayer understands that the Tullow Group wished to transfer its
shares ln EAL, but wished ta retain EAH and its subsidiaries. The transactions were
therefore entered into to ach/eve this result. Elandspad first acquired the shares in EAL for
US$543.76 million. This achieved the Tuilow Graup's objscUve of selling EAL. EAI. then
sold EAH to the Tullow Group, which then achieved its second objective. Elandspad always
intended to acquire EAL and EAL always intended to sell EAH. The transactions ware
entered into on an arm's length basis.
2,65. Furthermore, we note that the capacity ta dispose of an asset ls a key Incidence of
ownership. In particular, one of the key benefits of acquiring an asset Is the ability to sell
that asset or in this instance where shares were acquired, assets of such company acquired.
2.66. T herefore, lt is difficult to understand why the Commissioner regards the transaction
whereby Elandspad acquired the EAL shares from Tullow for US$543.76 million as lacking
"..commercial sense.... and the purchaser will never enjoy any af lhe predominant
commercial benefits of such asset." The acquisition by Elandspad of the EAL shares
aiiowed Elandspad ta take cantral of EAL with a view to EAL realising its predominantasset,
the EAH shares and claims, resulting In proceeds for EAL which could then be distributed to
Elandspad.
2.67. With regard to the Commissioner's contention that the transaction lacks commercial
substance as a result of the fact that no forrnal due diligence was performed, we note that In
the Taxpayer's view, the absence of a formal due diligence does not indicate a lack of
commercial substance. There are many commercial transactions of a similar nature that are
entered Into regularly without being preceded bya 'formaldue diligence". In particular, in
this Instance, ihe Taxpayer understands that the tsx and legal risks for Elandspsd relating to
EAL for the period befare the Closing Dataas defined In the EAL sale agreement were
addressed therein by way of the warranties provided by Tullow to Elandspad (refer
Annexuref3 of the agreement), as well as the Indemnity provided by Tugow In terms of
Clause 9 of the agreement, The Taxpayer understands that since Elandspad obtained these
warranties and Indemnities, which cover certain corporate commercial, administrative and
tax considerations, Elandspad did not cansider it necessary to carry out a formal due
diligence In relaUon to lhe aspects so covered. This should be confirmed with Elandspad,
2.68. In addition, Elandspad agreed with Tullow that It would Indemnify Tullow against anyclaim
or liability for tax which may be made against Tullow by SARS In connection with the
Implementation of the restructure transactions. In this regard, as previously advised, the
Taxpayer understands that Elandspad obtained a report from its legal advisors reviewing
certain aspects pertinent to the South African tsx Iinpllcatlons for EAL af the disposal of the
shares In EAH.
2.69. We do nat comment on the Commissioner's cantentfons regarding the reliance placed by
Elsndspad on the valuation which was perfarmsd by Deloitte ln respect of the EAH shares,
other ihsn to state that, In the Taxpayer's view, ft Is normal practfce for a company to ba
valued with reference to its predominant assets. The Commissioner's contentions in thfs
regard, fncludlng hfs contention In paragraph 5$.3.7 of the letter of findings, have been dealt
with above.
2,70. The Commissioner alsa contends that the purchase price of US$543.76 million lacked
commercial substance on the basis that the relevant loan account wss repayable on
demand snd interest-frss, The parties were free to negotiate the terms of the loan as they
swv fit, In addition, the faan was repayable on demand and therefore, if for soma reason,
the restruclure transactions were not completed, Tullaw could have immediately demanded
repayment of the loan, Again, this should be confirmed with Elandspsd and Tullow.
2.71. Therefore, insummary, the Taxpayer submits that ths Commlsslansr's contentions on which
he bases his finding that the purchase price of US$843,76 million far the EAL shares was a
sham are incorrect and on this basis his finding cannot stand.
2.72, In concluding this agreement, the Taxpayer understands that ths parties truly contemplated
that thfs agreement would be implemented according to Its terms snd it was, in fact,
implemented in accordance with the relevant terms.
2.73. The Commissioner has nat dealt with the relevant transaction between EAL and TOH. The
letter of findings analyses the transaction between Clandspad and Tuflow.
2.74. In terms of the subsequent transactlans, the Taxpayer understands that Tullow capitalisad
TOH with the loan of US$543.76 million. EAL sold the EAH shares and claims to TOH far a
purchase canslderatian of US$544.96 million, which purchase consideration was
discharged by TOH ceding and transferring the loan owing to it by Elandspad, to EAL and by
making a cash payment of US$ 1.2 mi%lon to EAL.
2.75. On the basis of the Taxpayer's submissions sst aut above, the Taxpayer received purchase
consideration ln the amount of US$644.96 million in respect of the sale of the EAH shares
and claim, which was the purchase consideration agreed between third parties acUng at
arm's length.
2.76. It is therefore clear that the third requirement of paragraph 648(3) of the Eighth Schedule to
the Act has not been met, since EAL sold the EAH shares and claims for an arm's length
price.
Iage%Nial
Deemed dividend
2.77, SARScontends that, having regard to ths true substanceof lhe transactions, EAL
distributed the EAH shares and claim to TOH on 23 January 2007, in exchange for
consideration of US$1.2 million, SARS further contends that TOH and EAL constituted
connected persons in relation to each other on that date and in addiUon, that TOH
constituted a connected person In relation to Tullow.
2.78. It should be noted that this contradicts the Commissioner's position In relation to paragraph
64B of the Eighth Schedule to the Act where It states at paragraph 45.5 that "the true
substance of the transactionls that FAL disposed of Its subsidiary BAH to e connected
person sts valuethat did not reflect en arm' s-length p rice.
2.79. We repeat that the terms of each of the agreements entered into speak fcr itself and reflect
both Ihe true intention of the parties and the true termsof the various transactions as
evidenced by these agreemsnls, both in form and In substance, and there were no other
terms, agreements or understandings, whether express or tacit, between the parties, which
were inconsistent with the terms reflected in these agreements. The Taxpayer thus denies
that ths legal form of the agreements does not reflect the substance thereof.
2.80. I n r elation to the Commissioner's specific allegation that TOH and EAL constituted
connected persons on 23 January 2007, we assume that the Commissioner's conclusion In
this context ls based on his findingsand contentions as set out In paragraphs 45.1 - 45.5 of
the letter of findings and that his contentions set out under the heading "CGT" simgarly
apply. In this regard, we repeat hareoursubmissions in paragraphs 2.41 to 2.50 above in
relation to the relationship betweenTOH andEAL on the Commissioner's view of the timing
of the transactions and also paragraphs 2.53 to 2.75 above In relation to his allegationthat
an erm's length price was not paid by TOH to EAL for the EAH shares and claims.
2.81. On the basis ot the submissionsabove, in the Taxpayer's view, TOH end EAL were not
connected persons even In the circumstances envisaged bythe Commissioner and an arm's
length price was paidfor the EAH shares and claims. Therefore, the deemed dividend
provision contained in section
r
84C(2)(a) of the Act are not applicable,
2.82. No STGIs therefore payable.
3, Res ponse to notice In terms of section 80J(1) - impermissible avoidance arrangement
impermissible avoidance arrangement
3.1. A n "Impermissible avoidance arrangement" Is defined in section 80L of the Act as any
avoidance arrangement described in section 80A of the Act.
3.2. I n terms of section 80A of the Act, an avoidance arrangement Is an m
Iperm
issible avoi
dance
arrangement ff:
3.2.1. Its sole or mafn purpose was lo obtain

a tax benefit; ~a
3.3. I n the context of business.
3.3.1. it was entered Into or carried out by means or in a manner which would not
normally beemployed for bonefide business purposes, other than obtaining a
tax benefit; or
3.3.2. it lacks commercial substance, In whole or fn part, taking Into account the
provisions of section BOC of the Act;
3A. i n a context other than business, it was entered into or carried out by means or In a manner
which would not normally be employed fcr bonatide purposes, other than obtaining a tax
benefit; or
3.5, I n any context:
3.5.1. it has created rights or obligations that would not normally be created between
persons dealing at arm's length; or
3.5.2. it wo u ld result directly cr indirectly in the misuse or abuse of the provisions of

the Act including the provisions of Part IIA of the Act.
3.6. An "avoidance arrangement" ls defined In section 80L of the Act as any arrangement that,
but for Part IIA of the Act (I.e. sections BOA toBOLof the Act), resuils In a tax benefit,
3.7. A "tsx benefit" was defined, In relation to the Taxpayer's 2007 year of assessment, In section
BOL of the Act as Including any avoidance, postponement or reduction of any liability tor tax.
3.8. "Tax" ls defined in section BOL of the Act as Including any tax, levy or duty imposed by the
Act or any other Act administered by the Commissioner.
3.9. B a s ed on case law, the liability for the payment of any tax, 'levy or duty that it must be sought
to avoid, postpone or reduce ls not an accrued or existing liability, but an anticipated liability.
lt has been held that to avoid liability in this sense ls "to get out of the wsy of, escape or
prevent sn anticipated liability".
3.10. In ITC $625(1996) 69 SATC 383, Wunsh J hald that the test to be applied ln determining
whether a transaction had tha effec'I of avoiding tax was to ask whether "thetaxpayer would
have suffered tax but for the transaction". The court stated that"If the transaction ln issue
had not been entered into the taxpayer would not have acquired the property, It would not
have earned the income sndlt would not have lncuned the interest expenditure"and thus
tha court could find "no basis cn which it can successfully be argued that by Incurring
expenditure on Interest In order to earn the income on which It hss lc pay tax the taxpayer
avoided tax or reduced tax."
3.11. The Supreme Court of Appeal ("SCA") in Smith v CIR 1984 (1) SA 324 (A) held that the
Uabgity in question ls sn anticipated liability. It was further held that the ordinary, nalural
meaning of the term "tax benefit' must prevail, I.e. to avoid, escape or prevent an anticipated
lia
bility."
3.12. The Commissioner contends that the tax benefits sought by the Taxpayer in the context of
the various transactions was the avoidance of the payment of GGT and/or STC and that
these constitute "tsx benefits" as envisaged in secUon BOL of the Act. The Commissioner
seems to conf late two concepts in this contenUon, i.a. the exlstsncs of tax benefits and the
purpose of ths transactions.
3.13. In relation to the Commissioner's allsgaUon insofar as CGT Is concerned, if, for argument's
sake, the transaction was ccnstructsd in a manner where EAL disposed of its subsidiary
EAH to TOM directly, the relief In paragraph 64B(2) would stIII have been available to EAL
and the requirements in paragraph 64B(3) would not have been met on the basis that the
sale would have been effected for an arm's length consideration. Therefore, regardless of
the manner ln which the restructure objectives of the Tullow Group was achieved, the
posiUon for EAL from a CGT psrspscUve would have been the same, Le. It would have
qualified for the participation exclusion contained in paragraph 64B(2) and it can therefore
not be said that the appllcaUcn of this exemption constituted s "iex benefit" arising from the
restructure transactions as they were Implemented. As stated above, for a tax benefit to
exist, In this context, Is to gst out of the wsy of, escape or prevent an anticipated liability".
3.14. The Commissioner also contends that the perceived tsx benefits alleged by him were the
sole or main purpose of"EAL getting Involved in the transactions'. We are not sure why the
Commissioner, given his knowledge of the purpose of the restructure transactions and the
commercial obfsctivas of ihe Tullow Group, considers the avoidance of tax the only reason
for EAL being involved In the transactions, since ln terms of the Taxpayer's understanding,
EAI. Is the entity which the Tullow Group sought to remove from the group and It is EAL that
held ths EAH shares snd claim which the group sought to restructure so that it could be held
from its Netherlands holding company, TOH. Therefore, regardless of the manner in which
the commercial objectives were achieved, EAL would necessarily always have been a party
to the transactions,
3.16. The Commissioner then alleges that the "avoidance arrangement" had as lt sole or main
purpose the obtaining of a tax benefit. We proceed Io address this requirement below.
3.16. In terms of tha preamble to section 80A of the Act, the firstrequirem
ent for an impermissible
avoidance arrangement to exist ls that the "sole or main purpose" of the transaction under
consideration must be to obtaina tax beneflL If the relevant Iransactlon or arrangsmsnt
does not comply with this requirement, the arrangement will not constitute an impermissible
tax avoidance arrangemsnt, The requirements In section 80A(a) to (c) of the Act only
become relevant once a determination has been made that the sole or main purpose of a
particular transaction Is to obtain a tax benefit.
3.17. I n paragraph 64 of the letter of findings, ths Commissioner alleges that"...facts snd
circumstances end the series of transactions considered ss e whole certainly provide proof
that the obtaining ofs tsx benefit wss the mein purpose, if not the sole purpose, of PAL
getting Involved in the transactions." From this statement, It appears that the Commissioner
regards the enquiry into the purpose ln the context of section BOA to be an objective test.
3.18. However, the test as to the taxpayer's purpose Is s subjective matter snd the subjective
Intention of the Taxpayer must be determined, considering ths facts and circumstances of
the arrangement.
3.19. In the case ofSIR v Gellegher1978(2) SA 463 (A) ("Gallagher"), section 103(1) of the Act
had as one of its requirements that:
"the avoidance, postponement or reduction of the amount of such llabliily wss, In the
' tlcn
opinion of the Secretary, the I n of he e of
3.20. The provision referring to tha"sole or one of the mein purposes of c ion n
~or sc fttgfe ls directly comparable to the wording In section 80A of the Act which refers to "Ql
sole or main purpose".
3.21. In that case the (then) Appellate Division held that:
"In the circumstances it Is appropriate to state that, in my view, the teat ls

undoubtedlys subjective one...section 103(1) draws a clear distinction between the
"effect" of s schemeend the purpose" thereof...end this virtually rules out en
interpretation which seeks to give "purpose sn objective connotation snd to equate
it more or less, to "effect . If Ihe subjective approach be adopted (ss it must), then it
is obvious that of prime importance in determining the purpose of the scheme would
be the evidence of respondent, the progenitor of tha scheme,as lo why it was
carried oui.'
3,22. In terms of section 80L of the Act (see below), the definition of 'tax benefit" reed with the
definition of "avoidance arrangement" necessarily have regard to the result/eNect of an
arrangement and therefore the aforementioned comments by the Appellate Division In
Gallagher are equally applicable to the new General Anti Avoidance Rote provisions
introduced In 2006. Specifically, Part IIA of Ihe Act draws a distinction between the objective
result/effect of an arrangement that results in a tax baneilt (and therefore constitutes an
avoidance arrangementas delnad), and its subjective purpose. Based on Gallagher, such
distinction therefore rules out an interpretation which seeks to give 'purpose" an objective
connotation and to equate it more or less, to effect".
3.23. Section 103(4) provided a rebuttable presumption that any transaction which results ln the
avoidance or postponement of a iax liability, ls presumed to have been entered Into solely or
mainly for the purposes of avoiding, postponing or reducing a liability for tax.
3.24. The presumption contained in section 80G provides a rebuttable presumption where It has
been established that there Is an avoidance arrangement, that the arrangement was entered
Into solely or mainly for the purpose of deriving a tax benefit.
3.25, Section 80L defines an "avoidance arrangement" as "any arrangement that results ln a tax
banally, and defines "tax benefit" as including "any avoidance, postponement or reduction of
any liability for tax".
3,28. As such, the provisions of section 80G essentially retain the presumption previously
contained in section 103(4) of the Act. The addition of the words"reasonably considered In
light of the relevant facts and circumstances"add no weight to the presumption, nor do they
facilitate the rebuital of tha presumption.
3.27, Therefore, the 'sole or main purpose" test has remained Intact after the 2006 legislative
amendments to the anti-tax avoidance provisions and the existing case Iaw can be used in
order to determine whether a transaction contravenes this requirement. If this requirement
ls not contravened, then a transaction, operation or scheme does not fail foul of the
provisions of Part IIA of the Act, and In particular ls not an Impermissible avoidance
arrangement as contemplated In section 80A of the Act.
3.28. Since the test as to the Iaxpayer's purpose Isa subjective matter, a taxpayer may, cognisant
of the lax advantages a transaction holds, nevertheless enter into the transaction with the
main purpose of pursuing the business needs of the company. This principle thata taxpayer
may structure his affairs as hs deems fit within the confines of the law, whether or not in so
doing he achievesa tax advantage, was confirmed by the SCA in the case of Commissioner
For inland Revenue v Conhege (Pty) t.td (formerly Tycon (Pty) Ud),1999 (4) SA 1149 (SCA)
("Conhege").
3.29. Therefore, ln terms of the principle confirmed by the SCA In theConhage case, a taxpayer
may, cognlsant of the lax advantages a transection holds, nevertheless enter Into the
transaction with the main purpose of pursuing the business needs af the company, thereby
escaping the ambit of this provision.
3.30. In the Conhagecase, the SCA held as follows;
"JThe raising af finance]

wes the fons et origo af the transactions and lt remained lhe
underlying end beslc purpose thereof...This whole arrangement.„was to achieve the
predominant purpose of raising finance but, because of the welcome by-producl of the
tex benefit, the vehicles chosen were the sale and Iessebacir transactions...lt Is
submitted on behalf of the Commissioner that lhe only reeson why sales and leesebecks
were preferred to e straightforward loan was thai e loan would not bring about such
advantageous tax deductions. This is nat entirely correct because there were other
commercial reasons tao. But, e l ul e r e ft n w s ch s e el
h e tex benefits it w l b to i nore the fact ths he on not n eed d
i w Id n a secion at ell. Tycon did not approach
Firstcorp in order to alleviate its fax burden; it did so because itwas in need of capital end
this plainly remained the maIn purpose of the transactions"(our ernphaSIS.
3.31, Therefore, provided there Isa commercial transaction to be entered Into by a taxpayer and
the sole or main purpose of the taxpayer ls to enter Into such transaction, l.e., absent the
commercial drivers there wauld be no transsctlan, then, In terms of the principle set out ln
the Conhage case, tha taxpayer is entitled ta structure such transaction ln a tax eNcient
manner.
3.32, The Taxpayer's purpose in relation to the transactions under canslderatlan Is set out below.
Application to the Taxpayer
3.33. In order to contravene Ne pravlslons of section 80A of the Act, it is necessary that GAL's
purpose is to obtain a tax benefit and that the abnormality requirements are met. In
parUcular ln reiaUan Io an "arrangement" entered into bya taxpayer it Is necessary to test
whether such taxpayer obtains a tax benefit and then, lf so, to test whether that taxpayer's
sole or main purpose was ta abtaln such tax benefit.
3.34. In particular one may not, far exampIe, test another party's purpose and attribute this to the
Taxpayer. The only circumstances where theremay be a departure from this principle ls ln
terms of section 808(1)(c) of the Act. In terms af this provision, lt Is first necessary ta
examfne the dsffnltlon of an "fmpsrmlssfble avofdance arrangement" as defined in section
80A af the Act. If the requirements of an "Impermissible avoidance arrangement" are met in
relationla a particular taxpayer, then the next question Is whether another party participated
fn such "Impermissibis avoidance arrangement", i.e. any af the steps of the arrangsmsnt If
so, then the provisions of sectian 808(1)(c) of ths Act may apply if that other parly is a
connected person to lhe Taxpayer. In particular, in those.circumstances the other party may
be deemed to bs the same person as the Taxpayer for purpose of determining the tax
treatment of any amount rscefvsd ar accrued by lhe Taxpayer.
3.M. S e ction 80e does not permit the Commissioner to re-characterlse the arrangernenls In the
manner set out In paragraphs 78.1 -78.4 af the latter of Ifndlngs.
3.36. As slated above, Tullow, a UK company, held all the shares fn the Taxpayer, which in turn
hald 100% of the shares in EAH, EAH, in turn, held the shares in various subsfdiarles which
carry on business In the oil exploration business,
3.37. The Taxpayer understands that the holding structure was a result of the acquisition by
Tullow of EAL from Engen during 2004 and the Tullow Group wished to streamlfns the
holding structure and erase ineNcisncies snd Impracticalities. In particular, during the period
under consldsratlan, the Taxpayer understands that the Tullaw Group decided ta restructure
various of;ts international investments as subsldfariesof a Dutch holding company, TOH.
3.38. The Taxpayer understands that the Tullow Group therefore had no further need for the
Taxpayer, since it moved ils South African operations out ai EAL and wished to hold its
African investments directly from TOH. This also removed the need far the Tullaw Group to
apply for exchange control approval each lime it wished to expand ils African operations,
since it no longer held Its African subsidiaries through South Africa, The eliminationof the
Taxpayer fram the Tuifow Graup also offered Immediate efficiencies and savings ln running
costs and management time of local and offshars directors and selling the company
removed the need for the Tullow Group to further deal with the entity, sg by Iiquidallng Itetc.
3,39. The restructure included the acquisition by Elandspad of the EAL shares and the
subsequent acquisition by TOH cf the EAH shares and claims. The Taxpayer understands
the rationale for lhe entering into of these transactions was thsrefars the restructureof
Tullaw's various international Investments as subsidiariesaf TOH, I,e. but for the restructure,
na transaction would have laken place. The saleor main reason for the various trsnsactfons
was therefore the implementation of the Tullow restructure andta remove South Africa from
the holding slructure, Ihersby removing the inefflciencies detailed above.
Paat P el%
3.40. Th e Commissioner, ln his analysis, focuses on ths purpose af EAL in relation to the
transactions and ln particular states lhe obtaining of etex benefit vries the mein purpose, lf
nol the sole purpose, of EAL getling involved in the transactions".
3,41, On ths basis that EAL received proceeds on the sale of the EAH shares and the EAH claims
lt should eisa bs considered whether the Taxpayer had a "purpose" in relation to, In
particular, the arrangement In terms of which a change Inils shareholding occurred.
3.42, In this regard, ths change ln the shareholding of the Taxpayer was decided upon and
implemented by its then shareholder, Tullow as part of the restructure objectives of lhe
Group. The subsequent disposal by the Taxpayer of the EAH shares and claim was part of
the restructure arrangements. Therefore, Ihe Taxpayer's purpose 'n relation to the various
transactions was aligned with Iis understanding of the overall purpose of the Tullow Group in
relation to the restructureas detailed above.
3.43. The sole or main reason for lhe various transactions was therefore lhe Tullow restructure l.e.
but for the Tullow restructure and in particular the objectives mentioned above, the
transactions would not have taken place.
3.44. The Tullow Group, Including the Taxpayer, wished to achieve the commercial rationale in a
tax efficient manner. In terms of the Conhsge case, the Taxpayer Is entitled to achieve
these commercial benefits in a tsx efficient manner.
3 45. Therefore, in light af the dscisian In theConhege csee, the Taxpayer's sole or main purpose
of entering Into the transactions was not lo obtain any tax benefit. Its soleor main purpose
in entering into the transactions was la receive the proceeds in terms of the sale of the EAH
shares and claim.
3.46. In achieving its commercial objectives, Tu)low and the Taxpayer were entitled to choose the
mast lax efficient manner in whichto achieve its commercial objectives.
3.47. A s stated above, the Taxpayer understands that the Tullow Graup wished to transfer Its
shares in EAL but wished to retain EAH and Its subsidiaries. The transactions were
therefore entered into. Elandspad acquired the shares In EAL for US$543.76 million, This
achieved the Tullow Group's objective of selling EAL. EAL then sold EAH to the Tullow
Group which then achieved its second objective. Elandspad always intended to acquire EAL
and EAL always intended to sell EAH. These transactions were entered into on an arm' s
length basis. The purpose of EAL was therefore to dispose of EAH shares and claim to ths
Tullow Group and to realise ths proceeds In respect of suchassets.
3.48. The transactions under consideration do Iherefore not constitute impermissible avoidance
arrangements as envisaged in section 80A of the Act snd therefore ihe Commissioner is not
entitled to invoke the provisions of section 808 of the Act as he proposed to do.
3.49. On the basis of our views set aut above, we do not deal with the Cammlsslonsr's
contentions regarding Ihe alleged lack of cammercial substance as envisaged in section 80C
of the Act. Most of the Commissioner's contentions appear to be based an his contenttana
set out under his primary ground, subslancs over form, which have been dealt with above.
3.50. In any event, since the sole or main purpose of the Taxpayer was not to obtain a tax benefit,
the transactions under consideration do therefore not canstitute Impermissible avoidance
arrangements ss envisaged In section 80A of the Acl, and It Is not necessary to take the
enquiry further.
Penalties and interest
4.1. I n paragraph 84 of the letter of findings, the Commissioner indicates that the relevant
penalties and interest wilt be imposed in accordance with ihe Tax Administration Act No 28
of 2011 ("Admln Act") and the Taxpayer is invited to provide written reasons why any
understatement penalty should nct be imposed.
4.2. T h e relevant provisions af the Admln Act in terms of which an understatement penalty and
interest can be levied and remitted, stipulate certain requirements, which include
requirements which, should these provisions find application to the present matter, had to be
complied with by the Taxpayer prior to ihe Adrnln Act becoming law. The legislature could
never have intended that provisions which stipulate requlremenls which could not have been
known ta Ihe relevant taxpayer at the relevant time, to operate retrospectively nor could the
legislature have truly Intended to apply understatement penalties to transactions entered Into
by a Iaxpeyer prior to the promulgation of the Admin Act for the same reasan that the
provisions of the Admln Act could nat have bean known to the taxpayer.
4.3. T h e views detailed above are canttrmed by the transitional provisions in the Admin Act. In
particular,. section 269(5) of the Admin Act provides that a right or entitlement enjoyed bya
person under the repealed or amended provisions of a lax Act, that had not been exercised
before the commencement date of the Admln Act, Is a valid right or entitlement of that
person In terms of any comparable provision of the Admln Act, as from the data that the
right, entitlement or obligation first arose, subject to the provislans of the Admin Act,
4 4. I n sddltian, section 270(6)(a) of the Admin Act provides that any"additional tsx, penalty or
fnterest which but for therepeal of the leglslatlon ln Schedule 1 would have been capable of
being imposed, levied,assessed or recovered by the commencement date of this Act, may
be Imposed or levied asif the repeal hsd not been effected..."The Taxpayer submits that the
contrary must necessarly, also apply, i.e. any additional tax, penalty or interest which a
taxpayer would have been capable to request SARS to remit, but for the repeal of,inter alia,
the Act, must be capable of being remitted as lf such repeal had not been affected.
4.5. l n this regard, we submit that since the Taxpayer had a right to request the Commissioner to
exercise its discretion in favour of the Taxpayer not to levy penaltlss and to remit interest ln
terms of section 76(2) and section 89quil(3) of the Act and which rights hed not been
exercised by the Taxpayer before 1 October 2012, such rights of the Taxpayer should
endure, despite the Introduction of the Admln Act.
4.6. A c cordingly, the understatement penalty and Interest provisions of the Admin Act will not find
appllca(ion to the present case.
Additional fax in terms of section 76 of the Act
4.7. S h o uld the Commissioner, notwithstanding the aspects eet out ln paragraphs 4.2 to 4.6
above proceed to levy penalties as indicated per the lelter of findings, such penalties should
be levied ln accordance with the provisions of section 76(1) of the Act (if applicable).
4,8. S ection 76(1) of the Act provides that a taxpayer"shall be required to pay in addition to the
tax chargeable In respect ofhia taxable income:
a) If he makes a default In rendering a return in respect of any year of assessment, sn

amount equal lo twice tha tax chargsabls in aspect of his taxable income for that
yearofasieiimenl;or
b) If hs omits from his return any amount which ought tohave been included therein,
an amounl equal to twice the difference belsen the laxai calculated In respect of
the taxable Income returned by him end the tsx properly chargeable in respect of his
taxable incomeai determined after including the amount omitted;
c) If he makes an incorrect statement in any return rendered by him which results or

would if accepted result in theassessmentof the normal tsx at an amount which ls
less than the tetr properly chargeable, an amount equal lo twice the difference
betweenthetax is assessed in accordance with the return m ade by him and the tax
whichwouldhave been properly chargeable."
4.9, F o r the reasons mentioned above, the Taxpayer submits that lt made no default ln rendering
any return in respect of the 2007 year of assessment, that no amounts of CGT and/cr STC,
which should have been included in its return for the 2007 year of assessment wereomitted
therefrom and no incorrect statement was made in the Taxpayer's returns for the 2007 year
of assessment which would, If accepted, result in the assessment of the normal tax at sn
amount which Is iess than the tax properly chargeable.
4.1G, Insofar as the Commissioner relies on section 80A as the basis for any assessments to be
raised,additional tax In terms of section 76 cannot be imposed as neither paragraph (b) nor
paragraph (c) of section 76(1);s then applicable.
4.11. However, if notwllhstanding the above, the Commissioner were Io proceed with any
adjustments to the Taxpayer's taxable income and to levy STC, we note that section
76(2)(a) providesas follows:
"The Commis ioner me remit the additional charge imposed under subsection (f J
there were extenuating circumstances, he she I so re t i e l e s t iefled he e

o of ex e e r r eferrsd to in paragraph
(s), (5) or(cj ofsubsection
(1) w edonewithintenttoeved e ' (ouremphasis).
4.12. In terms of section 76(2)(a), the Commissioner accordingly has a discretion to remit lhe
additional tsx, or any part thereof, "ashe msy think lfi". However, the Commissioner shall
not remit additional tax if he is satisfied that the taxpayer acted with an Intention to evade,
except where the Commissioner Is satisfied that there are extenuating circumstances.
4.13. The ordinary meaning of "evade", as we understand It, Is to Intentionally not do what is
required. As detailed above, In entering into the transactions, EAL had no purpose or
Intention to evade tax. In particular,the terms of the relevant agreements entered into by it
(and related Implementation steps, such as the share transfers etc) speak for itself snd
reflect its true Intention and the true terms of the various transactions as evidenced by these
agreements, both ln form and in substance. There were no other terms, agreements or
understandings, whether express or tacit, between the Taxpayer and any other party which
were inconsistent with the terms reflectedIn these agreements. There was also no element
of dishonesty or some other concealed agreement between the parties. Therefore,the
Taxpayer did not Intend to evade fax.
4.14. The Taxpayer is further Of the view that it had valid and substantive grounds for relying on
paragraph 64B(2) of the Eighth Schedule to the Act and to thereby disregard any capital
gain or loss arising on the disposal of the EAH shares and claim. The fact that there was no
Intention to evade tax ls further evidenced by the detailed Information provided to SARS
during the course of the correspondence between the parties with regard to SARS' audit.
4.15, Should an intention io evade tsx have been present (which Is denied on the basis detailed
herein), the Commissioner may remit additional lax if there are extenuating circumstances,
r
I
Payt01 a! R
1
4.18. The Taxpayer understands that advice was obtained from professional advisors ln relation to
the transactions snd its Income tax returns were based on such advice. The Taxpayer was
therefore not careless, Inadvertent or negligent ln completing its tax returns on the basis that
lt did.
4.17, Therefore, even lif the Taxpayer had an Intention to evade tax (which ls dented), the above
constitutes extenuating circumstancesas referred to in section 1B(2) of the Act.
4.18. The purpose of Ihe additional tax levied by section7B of the Act, as examined by the court In
ITC f 430 50 SATC 51 (E), ls threefold. It was determined,inter ella, thaL'
It Is clear thet the additional cherges referred to in sectian 78 of the Act are 'in essences
penalty' (lsreelsohn v CIR 1962 (3) SA 529 (AD) at 639-640) snd are nol 'e tex on
Income,' CIR v McNeil 1959 (1) SA 481 (AD) at 487 (F), although such charges are
collected vie the machinery of assessment (Isreelsohn's case et 539 G). The main
purpose of such addilional charges is to ensure the accuracy of returns, upon which the
whole income fax system is based, snd to thereby avoid the loss of revenue to the fiscus
(Israelsohn's case et639&F).
I se ms he im osition of ch dit i onel sw n dcl
remit th reo f i nvolves h e factors n eu I n of the x e er the
d ffect on he x er hi m eil' h deter nt o e e e r "( o u r !

I
emphasis). !
Ii !
i
4.19. From the above, It appears that the purpose of additional tax ls to ensure the accuracy af !
returns. Baaed on this court decision, It Is submitted that this factor should have an
enormous bearing and Indeed be a decisive factor, which SARS should take Into
consideration when deciding to remit the additional tax.
4.20. As ia the three factors'.
4,20.1. A scontended above, the Taxpayer had no intent(on to evade taxatlon. There Is
therefore no basis far any punishment cf the Taxpayer to be taken into account
by the Cammlsslaner ln exercising his discretion.
4.20.2. There Is no need for any deterrent effect on the Taxpayer In light of the facts
under consideration, as the Taxpayer complied with the income tax Isglslatlan,
This Is illustrated by the level of information and co-operation provided to BARS
ln this matter, The Taxpayer cannot be deterred from holding abone fide belief,
based on ks reasonable reliance on the expertise and experience of Its oNce
holders and of its counterpart and advisors.
4.20.3. It is submitted that lt would be unreasonable to penalise the Taxpayer by the

levying of the additional tex In order to deter other taxpayers. Even if the
Taxpayer was incorrect In relying on the provisions of paragraph 641 to
disregard any capital gain arising from the disposal of the EAH shares (which is
denied on the basis sel out above), this is not an aclon which should be
punished. Therefore, this factor shoutd not have any bearing on ihe
Commissioner's discretion to remit the additional tax.
4.21. As a result, it ls submitted that the Cornrnisslonar ls empowered to, and should, remit any
penalty proposed to be levied in terms of section 76(1), assuming such penalty Is Iaviabie in
the first place.
4.22. On the basis of the above, the Taxpayer requests that SARS does not levy any additional
tax.
interestin terms of section 8gquat
4.23. Should the Commissioner, notwithstanding the submissions made above, proceed to levy
Interest as indicated per the letter of findings such interest should be levied in accordance
with the provisions of section89quat of the Act.
4,24, Section 89quat(3) of the Act, as it applied to the Taxpayer's 2007 year of assessment,
providedas follows:
"Where the Commissioner v o the of s is sat i sfied that

eny amount hss been Included in the taxpayers taxable income or that ~~ ded gttgtt,
allowance,disregarding or exclusion c ed r as n llowed and
the taxpayer aao that such amount should not have
i
i t sts d bythe taxpayer on som uch ofthe said normaltax as
ls attributable to the Inclusion of such amountor the disallowance of such deduction,
allowance, disregarding or exclusion"(our emphasis).
4,25. The Taxpayer submits that no grounds exist for levying interest ln terms of section89quat of
the Act as, for the reasons set out above, the provisions of paragraph 641(2) of the Eighth
Schedule to the Act appl;ed during the relevant year of assessment and as the Taxpayer
had no liability for STC.
4.26. If, notwithstanding the reasons set out above, ths Commissioner proceeds to make the
proposed adjustments, it ls noted that:
4.28.1, the T axpayer has on reasonable grounds contended (set out In this letter) that
the exclusion In paragraph S48(2) of the Eighth Schedule Io the Act ls
applicable and that no STC ls due.
4.28.2. T h e Taxpayer relied on professional advice.
4.27. We further note that the Issue of Inter~st has bean considered by the SCA In a number of
judgments quite recently. In particular;
4 .27.1. In De f y Limited
v CSARS (72 SATG 99) It was indicated that a taxpayer does
not act Improperly merely because it attaches a different interpretation toa
statute;
4.27.2. I n C SARS vFoskor (72 SATC 174) interest was remitted in full not only
because of the delays of SARS, but also pursuant to an opinion that was
obiained by Foskcr confirming Its views;
4.27.3. In Case Number $2441 (28 October 2010) interest wss also remitted even in
circumstances where opinions obtained by tha taxpayer were "at best for the
applicant equivocal". The question ls whether the taxpayer acts reasonably ln
the circumstances; and
4.27.4. In the latest Judgment of the SCA InCSARSv Founders Hill (73 SATC 183)
Interest was also remitted pursuant to Founders Hil acting on legal advice"snd
in the mistaken belief thatss a resiisatlon company it wss doing no more than
sailing its property to bestadvantage."
4.28. In 5ght of the above, the Taxpayer therefore submits that the Commissioner should exercise
his discretion under secllon 89qust(3) of the Act in favour of the Taxpayer and remit any
Interest which the Commissioner propose to impose.
Yours sincerely
Edward Nathan Sonnsnbergs Inc
Per.
pr o a
ENERGY AFRICA PROPRIETARY LIMITED
f'
(Registration No.1995/007140/07)
(the "Compauy") CERTIFIED A TRUE CQPV
OF THE ORIGWAL
EXI'RACTS OF THE 1VXPKFI'ES OFA MEETING OF THE BOARD OF DIRECTORS

OF THE COMPANY HELD AT PAROW ON 19 APRIL 2013
Francois Verloren van Themaat
Non - Practising Attorney
Comm saner o a hs, Kx Otficio
36 Stelienberg Road
Parasol Industrie, 7499
WHEREAS: Tel: Q21 929 4765, Fax: Q21 931 7
l. The Company has a loan claim against Titan Share Dealers Proprietary Limited in the
axnount of R216600000.00 (Two hundred aud sixteen million and six hundred
thousand Rand} ("Loan Claim" ).
!
2. The Company wishes to distribute in specie the Loan Claim on 19 April 2013 (the I
"Distribution" )to Elandspad Investments Proprietary Limited ("Elandspad"), in its I
capacityas the holder ofallofthe ordinary shares in the Company.
!
RESOLVED THAT:
3. The Cotnpany is authorised to make the Distribution to Elandspad.
4. Puxsuant to the authorisation in clause 3 above, the Company hereby resolves to make
the Distribution to Hlandspad on 19 April 2013.
5. The board of directors has applied the solvency and liquidity test in accordance with
section 4 of the Companies Act and the board of directors has reasonably concluded
that the Company will satisfy the solvency and liquidity test immediately afhr
completing the Distribution.
6. The amount of the STC credits of the Company which is allocated to the
abovementioned distribution is Rand Nil, as defined in Section 64J of the Income Tax
Act No. 58 of 1962.
7. No Dividend Tax (DT) is payable and withheld on the distribution.
Q
c
RESOLVED FURTHER THAT:
1. Mr GC Viljoen or any director of the C ompany

acting irt his capacity as director of
the Company (an "Authorised Signatory" ), be and are hereby authorised and
empowered to:
1.1 si g n and/or despatch auy notice and/or other documents, notices to

be signed
aud/ordespatched by or on behalf of the Company under or in connection with
the declaration and making of the Distribution (collectively the "Approved
Documents" );and
1.2 Ge n erally do everyttung that may be necessary for the implementation and the
declaration and making of the Distribution.
I'
2. To the extent that any Authorised signatory(ies) has/have already signed the said
A pproved Documentssnd/or other deeds or documents which may be necessary for
Sga.
the ~plemmhHon of theApprov~ D ocument. OKbeef of the Company, their
actions in this regard be and are hereby ratified.
C SOX N
D CT O R OR
CEKAFlEO A TRUECOPY
OF THE ORlGIHAL
FrencOlS VerlOrert Veri Therrtaat

Non - Practising Attorney
Commlsionar of Oaths, Ex OrAdo
36 Stellenberg Road
Par ow InSustria, 7493
Tel: 0219294765, Fax: 0219317038-
II
PQ
ENERGY'AFRICA (PTY) L7B 'IQ '
(Reglskatlon Ho. 109$90714QI07)
(TEL) +27 21 929 4760 P 0 BOX 6100

(FiVQ +27 21 031 7038
PAROW PAST 7$01
38 ST LCEHBBRG RD
DIRECTORS; NIL QC VILJOEII, NIL FFI IIOFMSYR
PA ROW IHDUS TRIA
19 April 2013 CERTIFlEQ ATRUE Co

pF THE pRIGINAL
Elandspad investments (Pty) I td Fz

36 Stellenberg Road
Parow Industrie Francols Verloren van Thernaat
7490 Non- Practising Attorney
Commisioner of Oaths, Ex Orooio
36 Stellenherg Road
Parow IndIIstria, 7493
Dear SIr Tel. 021 929 4765, Fax: 021 931703g
Energy Africa (Pty) Ltd having resolved to make a distributionin specie of its loan claim in
the amount cf R216 600 000.00 (Two hundred and sixteen million and six hundred thousand
Rand) against Titan Share Dealers (Pty) Ltd (" Distribution" ) in favour Df Eiandspad '
investments (Pty) Ltd on 19 April 2013, will pay such Distribution on such date.
We, the issuer, declare as follows (as contemplated in Section 64J(1)(b) and Section
64 J(2)(b) of the South African IncomeTax Act No. 58 of 'I 962, as amended):
• The Distribution will carrya STC credit of Rand Nil.
Yours sincerely,
. GC L J OEN OFMEYR
DIRECTOR DIRECTOR
ELANDSPAD INVESTMENTS PROPM E T ARY LIMITED
(RegistrationNo.2006/001716/07) CERTiFiED ATRUECOPY
(the "Company") OF THE OR! GINAL
KXTI44CTS OF THE MXNUTES OF A MEETING OF THE BOARD OF DIRECTORS

OF THE COMPANV HELD AT PAROW ON 19 APRIL 2013
Francols Verleren vart Themast
ision - Practising Attorney
ornrnu oner o a , E a Offido
36 Stallenberg Road
Parow Industria,7493
WHEREAS: Tel: 021 929 di765, FaL021 931 7038
I. The Company has received a distnbtttion in specie by its sluueholder Energy ARca
Proprietary Limited of a loan claim of R216 600 000.00 (Two hundred aud sixteen
million and six hundred thousand Rand) against Titan Share Dealers Proprietary
Limited (the 'Loan Claim" ).
2. The Company now wishes to declare and make a distribution in specie of the Loan
Claim on 19 April 2013 (the 'D istribution" ) to Titan Premier investments
Proprietary Limited (" Titan Premier" ), in its capacity as the holder of all of the
RESOLVED THAT:
3. The Company is authorised to make the Distribution to Titan Premier
4. Pursuant to the authorisation in clause 3above, the Company hereby resolves to make
theDistribution to Titan Premier on l9 April 2013.
5. The board of directors has applied the

section4 of the Companies Act 2008 and the board of directors has reasonably
concluded. that the Company will satisfy the solvency and liquidity test imm ' y
after c
omp
letingthe Distribution.
6. The amount of the STC credits of the Company which is allocated to the
abovementioned distribution is Rand ¹il, as defined in Section 643 ofthe Income Tax
Act No. 58 of 1962.
Q 7, No DividendTss (DT) is psyebtesnd withheld on the distribution.
RESOLVXD FURTIB t2L THAT:
1. Mr GC Viljoenor any director of the Company acting in his capacity as director of

the Company (an"Authorised Signatory"), be and are hereby authorised and
empowered to:
1.1 s i g n and/or despatch any notice aud/or other documents, notices to be signed
and/ordespatched by or on behalf of the Company under or in connection with
the declaration and making of the Distribution (collectively the "Approved
Documents"); and
1,2 G e n erally do everything that may be necessary for the implementation and the
declaration and making of the Distribution.
Ly g
4
2. To the extent that any Authorised signatory(les) les/have already signed the said. -I' 7
A pproved Documents and/or other deeds or documents which may be necessary for
the implementation of the Approved Docutnents on behalf of the Company, their
actions iu this regard be and are hereby ratifiecL
JOEN
CTOR R
CERTIFIED A TRUE COPY
OF THE ORI6INAL
Frastcols Verloren van Themaat

Non - PractisIng Attorney
Cornmisioner of Oaths, Ex OffIdo
36 StellenberII Road
Pa row Industrie, 7493
Tel: 021 929 4765, Fax: 021 931 7038
I
EI ANBZPAH /N V E S 7htEN7S (PRY) 1.7 Q

(Rel nor 2006I001716NTI
(TEL)+27 21 62$ 4762 P 0 Bcor6100

(F)UQ+27 21 931 7038 PAROLV PAST T501
36 SVKLLEhlaERG RD
PAROW IhfDUSTRIA
DIRECTORS: l4ll Qn VILJonn, hln Fn HoneEVR
eIRTIFIEDA TRUE COPY

':I' THE ORIGINAL
19 Apni 2013
Titan Premier Investments (Pty) Ltd

36 Stellenberg Road Franeols Verloren van Themeat
Parow industrie Non - Practising Attornev
Commlsloner of Oaths, Ex Ofhcio
7490 36 Stellenberg Road
Parow Industrie, 7493
Tel: 021929 4765,Fax: 021 931 7038
Dear Sir
Elandspad Investments (Pty) Ltd having resolved to make a distribution fn specie of its loan
claim in the amount of R216 600 000.00 (Two hundred and sixteen million and six hundred
thousand Rand) against Titan Share Dealers (Pty) Ltd (" Distribution" ) in favour of Titan
Premier Investments (Pty) Ltd on 19 April 2013, wil pay such Distribution on such date.
We, the issuer, declare as follows (as contemplated in Section 64J(1)(b) and Section
64J(2)(b) of the South African Income Tax Act No. 58 of 1962, as amended);
• The Distribution will carry a STC credit of Rand NiL
Yours sincerely,
GC OEN MR. HO F M EYR
DIRECTOR DIRECTOR
535
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HEADS OF AGREEIIENT
entered into between
TITAN PREMIER INVESTMENTS PROPRIETARY LIMITED
(Registration Number. 1979/000776/07)
a
(aSeller")
and
FRIEDSHELF 1395 PROPRIETARY LIIIITED
(Registration Number. 2012/1 84676/07)

iNTRODUCTiON
1,1. T h e Seller is the registered and beneficial owner of the entire issued share capital ("the Sale
Shares') of Eiandspad investments Proprietary Limited ( the Company' ).
1,2. T h e Seller and the Purchaser (collectively 'the

Parties') have agreed to concludea sale of
shares agreement, pursuant to which the Seller shall sell the Sale Shares to the Purchaser
("the Sale of Shares Agreement' ).
1.3. T h e P arties wish to enter into this agreement ( the Agreement" ) to record the principle
terms upon which the Saic of Shares Agreement will be signed and i mpleme
nted,andto
provide for various incidental matters.
l
1 4. Th i s Agreement constitutes a binding agreem
ent between the Parties, and shall be effeciive
0 from the signature date hereof ( the Signature Date" ).
1 5. T h e Parties shall negotiate in good faith with each other with a view to agreeing the Sale of
Shares Agreement as soon as reasonably practicable after the Signature Date, it being their
mutual intention that such agreem
ent shall be concluded by no later than 22 Apni 2013.
2. SALE O F S H ARESAGREEMENT
The Parties hereby agree to the following principles, which will be recorded andior further detailed in
the Sale of Shares Agreement, namely:-
2.1. The S eller shall sell the Sale Shares to the Purchaser, with effect from the effective date of
the Sale of Shares Agreement ("the Effective Date" ), curn any dividend, distribution and
right declared, paid, made or created on or after the Effective Date, but free from all liens,
charges, encumbrances, options or equities.
2.2. T h epurchase consideration payable by the Seller to the Purchaser for the Sale Shares on
the Effective Date shall be an amount of R 150,000.00 (one hundred and fffty thousand
rand).
2.3. T h eSeller shall provide the Purchaser with such warranties regarding the internal affairs of
the Company as would ordinadly be regarded as material to a transaction such as the
transaction contemplated in the Sale of Shares Agreement and the nature of the business
conducted by the Company and its subsidiaries ("the Warranties ).
2.4. Ea c h of the Warranties provided in respect of the Company shall be limited to the period
comm
encing on the date upon which the Seller initially acquired the Sale Shares a ending
on the Effective Date.
g iL
3, CONF I DENTIALITY
3,1, E a c h Party will keep confidential and will not, without the prior written consent of the other
Party, disclose to any person;
the details of this Agreement, the details of the negotiations leading to this
Agreement, and the Information handed over to such Party during the course of
negotiations, as well as the details of all the transactions or agreements
contemplated in this Agreement; and
3,1,2. all information relating to the business or the operations and affairs of the other
Party.
3.2. T h e P arties shall agree to the wording and timing of all public announcements and
statements relating to confidential information (if any) prior to any public announcement or
statement being made in respect thereof.
4. NOT IC E S AND DOMICILIA
4.1. For the purposes of the giving of notices and the serving of legal process in terms of this
Agreement, each of the parties chooses adomiciliurn cifarjdi et executandi ('domicilium") at
their respective addresses:
Seller:
Address: 3 6 STELLENBERG ROAD, PAROW INDUSTRIA
E-mail; ISAKTSD@GLOBALCO.ZA
Attention: ISAK H J VISAGIE (021 929 4762)
~Pg ~ s e .
Address: 18 5BREE STREET, CAPE TOWN
E-mail: GERTO K IRKHAMVENTU RES.COM
Attention: GE R T VILJOENI RAUTEN HOFMEYR (021 423 1022)
4 2. A n y Party may at any time, by notice In writing to the other Party, change its dornicilium to
any other address within ils country of domicile which is not a post office box or post
reste nte.
4.3 A no t i ce shall be deemed to have been duly given (unless the contrary is proved)
4.3.1, if de l ivered by hand, on the dat d e l ivery; or

4.3,2. if sant by courier, on the dateof delivery by the courier senrice concerned, or
4.3.3. if sent by e-mail, on the expiration of 12 (twelve) hours after the time of
transmission
5. GOVE R NING LAW
This Agreement shall be governed by and interpreted in accordance with the laws of the Republic of
South Africa.
6, GENER A L :
6.1. T h e Parties shaH respecffvely cause all resolutions to be passed and undertake to sign all
such other documents and do such other things as shall be necessary or requisite to give
I
proper and due effect to the terms of this Agreement, or any other matter arising therefrom,
'9 according to its intent and purpose.
6,2. N o a l teration, cancellation, variation of, or addition hereto shall beof any force or effect
unless reduced to writing and signed byall Parties or their duly authorised representatives.
6,3. Th i s Agreement may be executed In separate counterparts, each of which shall be deemed
to be an original and, taken together, shall constitute one agreement and any Party may
enter into this Agreement by executing a counterpart.
QS+ '
« f
For: TITAN PREIIIER IN ESTIIIIENTS PROPRIETARY I IMITED

I
Signature:
w rre nls th e i she is a u t h odsed I r io
Name:
Oate:
Place;
Witness:
Witness:
For. FRIEDSHELF 1395 PROPRIETARY LINIITED
Signature:
o wa nts that her she Is doly authorised thereto
pgpoEA'JDC. + tA7~ SF ' ~
7 (ig i5g~
jg gfg/L ZG I~
ppgaW
Place:
Witness:
Witness;
I ange Business
Centre
Offfce South African Revenue Serv/ce
Western Cape
Enqufrles- The Public Officer
Allstalr Kans Large Business Centre
Energy Africa (Pty) Ltd
Switchboard PO Box 8100
(021) 413 6000 19th Floor, Project 188 Building,
PAROW EAST 22 Hans Strtjdorn Avenue,
Dtrect Une 7501 Cape Town
(021) 413 6586 (No postal dellvertes to this address)
P=Nlet t-
aken etm
sarss.gov.za
Private Bag X91 88, CapeTown, 8000
Reference
9134/134/71/8
Date- Att: Nlr G Vlljoen SARB online: V.Z
21 August 2013
cc: Ms Nicolette Srnit
'0 BY EMAIL: gerttijtirkhamventttres,corn
:nsmtt@e ns.co.za
Dear Mr VIljoen
FINALISATION OF AUOIT
I refer to your letter dated 15 April 2013 ("the response"), in answer to my letter dated
16 November 2012 ("the 'atter"). The South African Revenue Service (SARS)
completed the audit for the lax types and tax periods listed below.
Tax type Taxpayer Tax periods

reference number
Income Tax 9134134718 2007
Seconds Tax on Com anise 9134134718 2007
' This is a notice of an addiIonal assessment of income tax and original assessment of
secondary tax on companies for the 2007 year of assessment made and issued In
terms of sections 91, 92 and 96 of the Tax Administration Act No. 28 of 2011 ("the TA
Act"), pursuant to the audit completed by SARS ("the assessment letter").
Based on the audit findings, the following adjustments have been made to your
assessments.
Summary and explanation of adjustments made:
Income Tax: Taxpayer reference number 9134134718
Tax Provisions of the Brief description AdJustment Understatement

Period Income Tex Act of adjustment amount (tax) penalty (150%)
No.58 of 1962 es
amended ("the IT
Act"
2007 Paragraph 8(b) Inclusion of R 453 126 518 R 679 689 777
read with capital gain on (R 3 125 010 470
paragraph 648(3) disposal of © 50%© 29ok)
of the Eighth subsidiary
Schedule to the
IT Act
Total R 453 126 518 R 679 689 777
Tax Provisions of the IT Brief description Adjustment Understatement

Period Act of ad ustment amount tax enait 1 5 0'k
2007 Section 64C(2)(a) Secondary tax R 488 282 886 R 732 424 329
on campanies-
d earned
dividend
Total R 488 282 886 R 732 424 329
DETAILS IN TERMS OF SECTION 96 OF THE TA ACT
Name of taxpayer Energy Africa (Pty) Ltd

Taxpayer reference number 91341 3471 8
Date of assessment 21 August 2013
Amounts of
assessment Refer tables above
Tax periods Refer tables abave
Date forpaying the amounts assessed 30 August 2013
Summary af obJection procedures Refer Annexure EI
1. T h i s assessment letter is issued on behalf of the Commissioner of the South

African Revere Service ("the Commissioner" ) and refers to the correspondence
exchanged, the documentation pravided and the information made available to
me (col'lectively "the infarmatlan"), all in respect of the 2007 tax year of Energy
Africa (Pty) Ltd ("ttte taxpayer" or "EAL").
2. A l lr eferences to sections are to the IT Act unless otherwise stated.
3. T h e applicable provisions of the IT Act are included in "Annexure A" to this letter.
Page
Summary and explanation of adjustments made:
income Tax: Taxpayerreference number 9134134718
Tax Provisions af the Brief description Adjustment Understatement

Period Income Tax Act af adjustment amount (Iax) penalty (150%)
Na.58 of 1962 as
amended ( the IT
Act"
2007 Paragraph 8(b) Inclusion of R 453 126 518 R 679 689 777
read with capital gain on (R 3 125 010 470
paragraph 648(3) disposal of (e 50%© 29%)
of the Eighth subsidiary
Schedule to the
IT Act
Total R 453 126 518 R 879 689 777
Tax Provisions of the IT Brief description Adjustment Understatement

Period Act of ad ustment amount \ax a nalt 1 5 0 %
2007 Section 64C(2)(e) Secondary lax R 488 282 886 R 732 424 329
on companies-
deerned
dividend
Total R 488 282 886 R 732 424 329
DETAILS IN TERMS OF SECTION 96 OF THE TA ACT
Name of taxpayer Energy Africa (Pty) Ltd

Taxpayer reference number 9134134718
Date of assessment 21 August 2013
Amounts
ofassessment Refer tables above
Tax periods Refer tables above
Date for paying the amounts assessed 30 August 2013
Summary of objection procedures Refer Annexure 8
1. T h i s assessment letter is issued on behalf of the Commissioner of the South

African RevenUe Service ("the Commissioner" ) and refers to the correspondence
exchanged, the documentation provided and the information made available to
me (collectively "the information"), all in respect of the 2007 tax year of Energy
Africa (Pty) Ltd ("ti1e taxpayer" or "EAL").
2. A l i references to sections are to the IT Act unless otherwise stated.
3. T h e applicable provisions of the IT Act are included in "Annexure A" to this letter.
page r
4. N o te that I do not traverse each statement or assertion made in the response. My
lL1
failure to do so should not be construed as acceptance of any such statement or
assertion.
Intro~dcgorl
5. i wi l l first focus on the suite af agreements (" the agreements") entered into by
the taxpayer and other entities.
6. Tw ogroups of companies were involved in the agreements.
First there was the Tullow group with Tuilow Oil Pic, a company listed on the
London Stock Exchange, at its head (the "Tullow group" and "Tullow UK").
Tullow UK had a number of subsidiaries, including Tullow Overseas Holdings
B.V., a company incorporated in Ihe Netherlands ("TOH"). Prior to the
conclusion of the agreements, Tullow UK was also the holder of 100% of the
shares in the taxpayer and the taxpayer in turn held 100% of the shares in
Energy Africa Holdings Limited, a company incorporated in the British Virgin
Islands ("EAH").' EAH was and remains the 100% shareholder in a number of
companies, mainly active in oil exploration and related activities in Africa ("the
African oil expioratfon companies"). The taxpayer is no longer owned by the
Tuiiow group. However, the African oil exploration companies remain part of the
Tuiow group.
8. The second group of companies is owned or controlled by Titan Group

Investments (Pty) Ltd and/or the various entities under its control ("the Titan
group"). In particular, Titan Premier Investments (Pty) Limited ("Titan"), s South
African company holds 100% of Elandspad investments (Pty) Limited
("Elandspad"). Elandspad in turn acquired 1004k of the shares in the taxpayer
by way of the agreements, and remains the sole shareholder of the taxpayer.
9. Bef o re the conduslon of the agreements, it would appear that there was no link
between the two groups of companies.
10. I n a basic sense the effect of the agreements was to transfer the shares in the
taxpayer from the Tuilow group to the Titan group, but not the underlying assets
(the African oil exploration companies). The latter remain in the hands of the
Tuliow group and there was never any intention for it to be otherwise.
' The Tullow group acquired EAL l'n May 2004 for a conslderaUon of approximately US$570 million, just
prl or to the effective date of paragraph 648 of the Cighlh Schedule.
11. H o wever, while the African oil exploration companies are still in the hands of the
Tullow group, the taxpayer has been excised as an intermediate South African
holding company
12. D e spite the assertions made:,n the response, I remain of the view that:
12.1. the Tullow group at no stage Intended to shed its interest in the African
oil exploration companies and neither did the Titan group intend to
acquire the Interest;
12.2. the disposal of the taxpayer to Elandspad was never Intended to be a

disposal of Tullow UK's African oil exploration interests, nor was It such;
12.3. the Tullow group's stated objective was to restructure itself so as to

eliminate the perceived risks of a n i n termediate South African
12.4. the Tullow group's true objective was, having created valuabie assets in
the African oil exploration companies, to transfer the ownership of these
assets out of South Africa without the taxpayer paying capital gains tax
("CGT") or secondary tax on companies {"STC");
12.5. the Titan group's stated objective was to makea US$1.2 million profit;
'I2.6. The TItan group's true objective was to "acquire" the taxpayer's
assessed loss as a quid pro quo for assisting the Tullow group in
achieving its true objective.
The a recreant
The re-sale a reement
13. Qn 22 January2007 a "sale of business agreement" (known as the pre-sale

agreement) was entered into between the taxpayer and Tullow South Africa
(Pty) Limited ("TSA"), both subsidiaries of TuOow UK at the time of signing the
agreement, The effective data of the agreement was 20 November 2006.
14. l nterms of the agreement, TSA purchased the business from the taxpayer as a
going concern, the business being the "entire business of the Seller (excluding
only its investment in the Excluded Assets), being the business of providing
' These assessed tosses had e potential value of sppro!dmately R57.5 million, nearly 7 times the amount
of the USS !.2 melon profit. As discussed be!ow. the Titan group immediately sought to use these losses
lo offset lnvestrnent!ncome snd had almost completely exhausted them by the end of its 2011 year o
assessment;
Pasa4 at
bs~-.s .
consultancy services to the subsidiaries of the Seller end other Tullow group
companies, es carried on by the Seller as et the Effecdve Date, as a going
concern, which comprises the Business Assets and the Business Liabilities"
(clause 1.2.4).
15. T S A also stepped Into the shoes of the taxpayer In respect of any contracts
(clause 9.1) and took over sil the employees of the taxpayer (clause 10).
16. S i gnificantly, certain assets were excluded from theagreem

ent, the EAH shares
and cIaims (clause 1.2-1.2.18.2), i.e. the African oil exploration assets.
17. T h e agreement was signed for both the taxpayer and TSA by W H Torr.
18. T h e pre-sale agreement divested the taxpayer of all but the excluded assets.
However, the business as defined above remained in South Africa, but was
housed! in TSA rather than the taxpayer.
19. I t i s significant that while the effective date is in November 2006, the date of
signature of the agreement, 22 January 2007, is one day prior to the signature
of most of the other agreements that will be dealt with below.
TOH'e resolution
20. O n 18 January 2007, l,e. after the effective date of the pre-sale agreement, but
prior to its signing, a shareho!ders' resolution was passed by TOH. In terms of
this resolution, TOH would issue one new share with a nominalvalu e of
EUR 1000 to its ho'Idlng company, Tullow UK, In return Tuilow UK would make
a non-cash contribution to TOH consisting of a receivable. The receivable
contributed would be that which would be created by Tullow UK against
Elandspad ln the amount of US$543.76 ml(lion.
21. T h i s resolution laid the groundwork for the capltaiisation agreement, signed on
23 January 2007, which created an obligation on Tullow UK's part to contribute
US$543.76 million to TOH and to settle that obligation through the contribution,
transfer and assignment of the Elandspad claim.
The restructure a reemen
22. T h e next agreement entered Into on 23 January 2007 between Tullow UK,
TOH, the taxpayer and Elandspad was the "restructure agreement". A number
of aspects of the restructure agreement are highlighted.
23. ure agreement makes reference to the whole suite of agreements,

T h e restruct
namely the capitalisation agreement (clause 1.1.3), the EAH sale agreement
Pay 5 f40
)I5'S -4
(clause 1.1.7), the EAL sale agreement (clause 1.1.11), and the pre-sale
agreement (clause 1.1,16). Furthermore, the "group restructure agreements"
are stated to encapsulate the EAL sale agreement, the EAH sale agreement
and the capitalisation agreement (clause 1.1.15).
24. I t i s then stated that

"after due consideration of sll relevant factors (it is not set
out what these relevant factors are) Tv/low UK has concluded that the optimal
method of achieving such restructure would be by way of the restructure
Vsnsactions" (clause 2.3)'. It is also noted that the restructure transactions are
interdependent(clause 2.4).
25. The restructure agreement then records that
3.1 th epre-sale agreemenf shall be implemented in accordance with

ifs terms, resulting in EAL having no liabilities other than share
capital
, share premium and reserves and no assets other than
the EAH shares and the EAH claim;
3.2 each of the

group restructure sgreemenfs shallbe signed by the
respective parties thereto;
3.3 th e E AL sale agreement shell be implemented in accordance

with its terms, resulfing in:
3.3.1 Elandspadacquiring the EAL shares; and
3.3.2 Tullow acquiring the Elandspad claim; and
34 th ecapitalisation agreement shall be implemented in accordance

with its terms, resu/Vng in TOH acquiring the Elandspad claim;
and
3.5 th eEAH sale agreement shall be concluded and implemented in

accordance with its terms, resulting in;
3.5.1 TOM acquiring the EAH shares and the EAH claim; and
3.5.2 EAL acquiring the Elandspad claim."(clause 3)
26. T h e parties then agreed to imp'lament the various restructure transactions. The
implementationclause reads as follows:
s In fact, apart from the anticipated tax beoeSt. Ns so-caSed 'optimal method' increased the cost of the
restructuring by apprOX/mately Ft 9-mnlcn Page ot 0
"4.2 The parties accordingly agree that:
4.2.1 all the group restructure agreements shall be signed by

each of the parties thereto;
4.2.2 Elandspad shall receive:
4.2.2. 9a duly adopted resolution of the board of directors

of Tullow authorising the conclusion and
implementation of the EAL sale agreement and
the capilalisalion agreement;

of EAL, authorising the transfer of the EAL shares
to Elandspad;
4.2.3 Tuilow shall receive:

of E/andsped, authorising the conclusion and
implementation of the EAL sale agreement;

of TOH, a u thorising the conclusion and
implementation of the capitallsation agreement;
4.2.3.3a duly adopted resolution of the shareholders of

TOH, au t h orising the c o n clusion end
implementation of the capitallsation agreement;
4.2.4 TOH shall receive:
4.2.4.1 prior to the conclusion of the capltallsatlon

board of directors of Tullow, authorlsing the
conclsuion and implementation o f t h e
capitallsation agreement;

resolution of shareholders of EAL authorising
the saleby EAL of the EAH shares and the
EAH claim in terms of the EAH sale agreement;

Page f 0
resolution af the board of directors of EAL,
eutharising the conclusion and implementation
of the EAH sale agreement;
4.2.5 EAL shallreceive e duly adopted resolution of the board

of directors of EAH, authorising the transfer of the BAH
shares to TOH."(clause 4.2)
27, T h e r estructure agreement thus provided the framework for the various
agreements that constituted the whale transaction. It ernphasised that the
agreements ware interdependent.
28. O nthe same date, i.e. 23 January 2007, Tullow UK and Elandspad entered into
an agreement in terms of which Tuiiaw UK sold the shares in the taxpayer to
Elandspad for US$543.76 millton with effect from 23 January 2007 (clause 3).
29. I nterms of TOH's resolution the same amount was owed by Tullow UK to TOW.
At this stage the foIIawing situatIon pertained: Tuiiaw UK owed TOH
US$543.76 mioion, Eiandspad awed the same amount to Tullaw UK and the
underly ng assets, i.e. the African oil exploration companies were In the hands
of Elandspad.
30. T h e agreement was signed by Messrs Torr and VIIjoen on behalf of Tullow UK
and Elandspad respectively.
31. T h e claim against Elandspad was then ceded by Tullow UK to TOK as an out
and out cession, thereby extinguishing the indebtedness of US$543,76 million
of Tulow UK to TOH (clause 1.1.3). Elandspad now ostensibly owed the money
to TOK, because it had bought a company with underlying assets (the African
oil exploration companies) valued at that amount.
The ca italisatian a reernent
32. On 2 3 January 2007, in terms of the "capitalisation agreement", TOH issued

one new share to its shareholder (Tullow UK).
33. T h e new share was issued at par of EUR 1 000, and was fully paid up in cash.
34. T u i low UK also contributed, transferred and assigned the race.vable of

US$543.76million owing by Elandspad to TOH as the share premium
contributian.
35. T O K accepted this receivable as a r.on-obiigatory share premium contributio

@~gs 40
The EAH sale a reement
36. Th e ne xt leg of the transaction (the EAH sale agreement) occurred on

25 January2007, l.e. two days later than the preceding agreements. This
brought EAH, the owner of the African oil exploration assets, back into the
hands of the Tullow group. This was done by TOH purchasing the shares ln
EAH from the taxpayer,ss well as the claims that the taxpayer had in respect of
EAH. Clause 3 reads as follows:
"3.1 pr o vided that:
3.1.1 the EAL sale agreement has been duly implemented;

and

terms of fhe capitalisation agreement
EAL hereby sells end TOH hereby purchases the EAH shares
and EAH claim for the EAH Purchase Price with effect from the
EAH Closing Date.
3.2 The EAH Purchase

Price shallbe apport
ioned as follows.
3.2.1 th e EAH claim shall be taken over at its face value; and
3.2.2 the EAH shares shall

be taken over at the EAH Purchase
Price, less the amount attributable to the EAH claim."
37. T h is clause emphasises the interdependence of the various agreements.
38. I n t e rms of this agreement TOH'purchased the African oil exploration

companies,.i.e. the assets of the taxpayer, ata premium of US$1,2 million (i.e.
US$544.96 million) (clause 1.1.8j.
39, P a yment would be as follows:
"4.2.1 In discharge of TOH's obligations to pay to EAL the ZAR

equivalent of US$1 200 000.00 (converted to ZAR at the Spot
Rate) of the EAH Purchase Price, TOH shall pay the ZAR
• equivalent of US$1 200 000.00 (converted to ZAR al the Spot
Rate) in cash, without any deduction or setoff, by way of
electronic transferin s bank account in the name of EAL with
Ffrsfrand Bank Limited in South Africa nominated in writing by
EAL to TOH for such a purpose on or before fhe EAH Closing
Date ("the KAL bsnir account");
4.2.2 In discharge of TOH's obligation to pay the balance of the EAH

Purchase Price in. an amount equal to. the- ZAR equivelen f
Pag 40
553 - iO
3 Q~
US$543 760000(converted to ZAR at the Spot Rate), TOH
herebycedes and transfers the Eiandspad claim to EAL, as an
out and out cession.
4.3 EA L hereby accepts

the cession and transfer of the Elandapad
claim in terms of clause 4.2.2 in discharge of the obligation of
TOH to pay the ZAR equivalent of US$543 760 000 (converted
to ZAR at the Spot Rate) of the EAH Purchase Price.
4.4 EA L u ndertakes in favour of TOH and Tullow that it shan not,

avoidance of doubt, TOH, Tuilow and EAL agree that after the
third anniversary of the EAL Closing Date, EAL shall be entf'tied
to withdraw or transfer any amount out of the EAL bank
account." (clauses 4.2. $-4.4)
40. T h u s by way of the last of the agreements, the brief

nexus between the two
groups ofcompanies was broken. The Tullow group once more owned the
African oil exploration companies snd did not owe any of the Titan group of
companies any money. Simiiariy, Elandspad ended up with a wholly-owned
sabsrrfla h o s e only asset (apart from the deferred tax asset attributable to
L's assess l o s ses) was Elandspad's owno bligation to pay i h e
US$573.76 million purchase price for that subsidiary.
41. F u er m ore t "indebtedness' bears no relationship with what was actually

bought by Elandspad. The only things of value that were acquired were the
payment of US$1,2 million (which could only be accessed after three years)
and the spes that the taxpayer would be entitled to utIIise the assessed loss,
8usineea of EAL ost the a raements
42. A f t er the transaction, the taxpayer, initially a company that held shares in,
managed and provided services to the African oil exploration companies,was
converted to being a holder of investments and a trader ln single stock futures.
lt wss providhd with both financial assets and cash by one of the companies in
the Titan group In order to do so.
43. T h e taxpayer made

a profit in the 2007 tax year in the form of profit from the
trading of single stock futures, as well as a management fee, facilityfee and
interest, which it then sought to offset against the assessed loss.
44. A r e view of the taxpayer's financial

statements showa essentially the foilowin:
P 1 of W
Qg
44,1. In the 2006 financial year (the year end was December) the income
consisted af R 125 000 in interest earned and R 34 mNlan for services
rendered to companies in the Tullow Group. The nature of the taxpayer's
business was thus the provision af services to the Tullow Group.
44.2. In the 2007 financial year (the year end wss September) the taxpayer
earned R 35.8 million ln Interest, R 10 million as an "inter group facility
fee", R 10 million as an "inter group management fee and R 9,2 million
being a profit on single stock futures. In this year fixed deposits of
R 657 million were introduced inta the taxpayer by the Titan Group and it
was noted that the taxpayer was engaged in investment holding,
operated principally in South Africa and held single stock futures of
R 80 million.
44.3. In the 2008 financial year the taxpayer earned R 85 millian in interest
and suffereds loss on the dispasaf of single stock futures in the amount
of R53.3milllon. The nature of the taxpayer's business remained
unchanged.
44.4. In the 2009 financial year the taxpayer earned R 67 million in interest,
R 3.6 million in dividends and a loss of R57 million In a joint venture
partnership with Titan Share Dealers (Pty) Ltd. The nature of business
remained unchanged.
44.5. In the 2010 financial year the laxpayer earned interest in the amount of
R873000 and a profit on single stock futures in the amount of
R54.7million. The nature af the business remained unchanged, but
significantly, the fixed deposits that had been Introduced in 2007 were
either liquidated or moved out of the taxpayer.
44.6. In the 2011 financial year the taxpayer declared taxable income before
any assessed loss braught forward of R 72.9 millian.
44.7. Thus the taxable Income earned in the 2007 to 2011 years amounts to
approximately R192 million, which dovetails with the assessed loss of
appr
oximately R198 miIIIon that was acquired by the Titan Group. (I
note that at the time of the writing I do nat have the audited financial
statements far the 2011 year.)
Psgel a
L05$- I2
ill
45, Th e c onclusion I draw is that the main objective of the Titan Group was ta shift
earnings
activities into the taxpayer to utilise the assessed lass and thereafter Io
remove the activities once the assessed loss had been utillsed.
Prima r o u nds - Substance over form
46, A p plying the doctrine of substance over form ta the agreements, I am of the
view that:
46.1. the Tullow group did not intend to dispose of the African oil exploration
companies;
46.2. the Titan group did not intend to acquire the African ail exploration
companies;
46.3. the t r u e co n sideration f o r the tra n saction w a s ne i t her

US$544.96 million, nor US$543.76 million, and ta lhe extent that it is
contended to be either of the two, such amounts are simulated and were
determined in the context of simulated transactions;
46 4. the effective data of the EAH sale sgreemenl, 25 January 2007, wss
simulated in order ta create the illusion that, upon the disposal of the
EAH shares and the EAH claim lo TOH, the taxpayer and TOH were not
connected persons;
46.5. th e true substance of the transaction is that the tax a er dis ased of its
s ubsidla EA H to a canna e d rs o n at a value a id at r e ct a n
arm' s-len th 'ce.
CGT
47. T h e taxpayer relies on the paAicipation exclusion provided for In paragraph

648(2) of the Eighth Schedule to the Act in order to avoid payment of CGT on
the disposal of the shares in EAM to TOH. (In respect of CGT, references to
paragraphs will be to paragraphs In the EIghth Schedule unless otherwise
stated).
48. P a r agraph 64B(2) provides that:
'(2) .. . a pe rson must disregard any capital gain or capitalloss

determined in respect of the disposal af any interestin the erlul'ty
share in any foreign company (other then a foreign financial
instrument holding company or an interest. contemplated in
paragraph 2 (2)), if-
(a) t hat person (in the case a( a compeny, together with any
other company inthe same group of companies as that
company) immediately before that disposal-
(ij held at least 20% of the equity share capital in that

(ii) he l d the interest contemplated in sub item (i) for a

period of at least f8 months prior to that disposal,
unless that person is a company end that interest
was acquired by that company from any other
company whichforms part of the same group of
companiesand that company and other company in
aggregate held that interest for more than 08
months..... and
(b) that intersect is disposed of to e person who is not a

resident..."
49. A s a point of departure I accept that,on the face of it, the requirements for
paragraph 648(2) were met ln that the taxpayer held all the shares in EAH (and
EAH was a foreign company), and the taxpayer held the shares for at least 18
months prior to the disposal and disposed of the shares to a non-resident, i.e.
TOH. However ar a ra h 648 3 is an anti-avoi vision which ualifie
50. T h ere are four requirements that must be met before the participation exclusion
Is overridden by paragraph 648(3).
51, Pa r agraph 648(3) reads as follows:
"(3) Pa r a graph 8(b) applies in respect of any capital gain determined

in respect of any disposal of any interest in the equIty share
capitalof any foreign company by a person which is or was
disregarded in terms of subparagraph (2) in any year of
assessment, if- -
(a) the foreign company prior to that disposal was a

any othercompany in the same group of companies as
that person;
(b) t h e interest in the equity share capital of that foreign

aS4O
555-IV
relation to that person either before or after that isposal;
and
(c) t h a t person-
(i) disposed of that equity share capital for no

consideration or for consideration which does not
ref/ect an arm's length price, other than a
distribution contemplated in (ii);
(ii) di s posed of that equity share capital by means of

a distribution unless the full amount of that
distr/but/on-
(aa) wa s subject to or would, but for the

provisions of section 648(5)(f}, have been
subjectto secondary tax on companies; or
( bb) w a s i n cluded i n t h e i n come o f a

shareholder of that company or would but
for the provisions of section 10(1)(kj(li)(dd)
have been so inc/uded; or
(iii} d i s posed of any consideration received or accrued

from the disposal of that equity share capital (or
any amount receivedin exchange therefor} in
terms of any transaction, operation or scheme of
which the disposal of the equity share capital
forms part-
(aa) f o r no consideration or for consideration

which does not refiect an arm's length
price (other t h a n a dist r ibution
(bb) b y means of a distribution by a company,

unless the ful/ amount of that' distributlon-
(A) wa s subject to or would, but for the

provision of section 648(5)(f), have
been subjectto secondary tax on
companies, or
(8) was included in the income of a

shareholder of thatcompany or
Pale 4
$53- t5
section 10(1)(k)(Ji)(dd) have been
soincluded; and
(d) t h a t foreign company ceased in terms of any transaction,

operation or scheme of which the disposal af the equity
share capital forms part, to be a co ntrolled foreign
company in relation to that person or other company in
the same group of companies as that person (having
regard solely to any rights contemplated in paragraph (a)
of the definition of 'participation rights'in section 9D and
without having regard to any election exercised in terms
of section9D(13))."
I am af the view that all four requirements have been met and thus that the
participation exclusion relied upon by the taxpayer is overridden by paragraph
648(3). My view is based on the following.
52.1. the first and fourth requirements are not cantentiaus and there cannot be
any doubt that they have been met;
52.2. regarding the second requirement, paragraph 64B(3)(b) provides that
the disposition (of the EAH shares) must have been to a ~ nnet ted
person (to the taxpayer) "either before or alter the dI"sposal:
52.2.1. up until two days before the signature af the EAH sale
agreement on 25January 2007, the taxpayer and TOH were
connectedpersons. On 23 January 2007 the taxpayer contends
they ceased to be cannected persons by virtue of the EAL sale
agreement;
52.2.2. however, the taxpayer, in its letter dated 12 September 2011,

states that the sale transactions were implemented over the
course af a few days, and tha there was no sl niflcance to be
a ttached to th tw dele b e tw the transactions;
52.2,3. I am of the view that the sole reason for this twa day delay was
to ensure that upon the disposal of the EAH shares and the
claims,
TOH and EAK did notappearto be connectedpersons;
52.2.4. the purpose of the ti ming wasthus to escape the connected
persons requirement in paragraph 64B(3)(b);
52.2.5. the effective date of the EAH sale agreement (25 January 2007)
should therefore be regarded as simulated;
40
i)SS- t4
52.2,6. furthermore, each o f t h e r e structure transactions v/as

interdependent. None of lhem cauld have been concluded
without the others. In Erf 3183/1 Lscfysmith (Pty) Ltd ancf
Another v CJR 1998 P) SA 942 (AJ it was held that the
relevant agreements could not be regarded separately: they
were all signedsimul
taneouslyand were plainly interdependent
lo the extent that none of them would have been concluded
without the others. Accordingly, each one had to be considered
in the context of all the others to discover their total effect;
52,2.7. the restructure agreement set out the salient terIns of each of
the various restructure lransactfons, and stated that they were
Interdependent',
52.2.8. further evidence of the interdependence is reflected in the terms

of the EAL sale agreement, where the shares in the taxpayer
were ceded by Elandspad fn security and pledged to Tullow UK
— to be released upon lhe paymentand delivery in respect of
the sale af the EAH shares and claim in terms of the EAH sale
agreement;
52.2.9. the EAH sale agreement provides still further evidence of the
interdependence, where the agreement stipulated the following
provisos to the conclusion of the sale:
(a) the Implementation of the EAL sale agreement; and
(b) the receipt by TOH from Tullow UK of the Elandspad

claim in 'lerms of the capitalisation agreement;
examined. There was no substantive reasonfor the delay of two

days between the conclusion of the restructure agreement, the
EAL safe agreement, the capitalisatfon agreement, and then the
EAHsale agreement, other than the avoidance of tax;
52.2.5'i. the timing of the contracts was not a cofncidence. It was

designed that way. The wording of the restructure agreement
makes it clear that the EAH sale agreement would be
concluded after the other restructure transactions. The security
cessfonand pledge, and the undertakings made by Elandspad
in the EAL sale agreement confirm the intention of the parties to
the EAL sale agreement that the EAH sale agreement would be
concluded after the conclusion of the EAL sale agreem
ent;
l>)> - }7
I r+-
52.2.12. the security of the EAH shares and claim was also retained by
Tullow UK untU the conclusion of tha EAH sale agreement (this
was achieved through the wording of the EAL sale agreement).
Tullow UK clearly never intended for lhe EAH shares and claim
to reside outside the Tullow group, hence the security terms
included in the EAL sale agreement. If Tullow UK was
concerned about the security of the EAH shares and claim,
which clearly it was, then why did the taxpayer not sell the EAH
shares and claim to TOH prior to the sale of the taxpayer to
Elandspadt
52.2.13. there was no commercial purpose to delay the conclusion of the

sale of the EAH shares and claim to TOH until two days after
the conclusion of the EAL sale agreement, other than the
avoidance of tax;
52.3. Regarding the third requirement (64B(3}(c)(i)), I am of the view that the
EAH shares were disposed of for no consideration or consideration
wi d i d noteflectanarm'alenth rice:
52.3.'l. Elandspad never intended to incur a bona ftda liability in the

amount of US$543.76 million to a third party in respect of the
shares in the taxpayer. The interest in EAH constituted
approximately 99.9993% of EAL's total assets (apsrt from the
deferred tax asset attributable to its assessed lasses).Yet when
Elandspad entered into the EAL sale agreement, it specNcaily
foreswore the entire bundle of rights comprising those shares,
leaving the "target" company in this so-called acquisition with
nothing more than valueless pieces of paper and R4000 in
cash for a preordained forty eight hour period;
52.3.2. neither party intended that the EALsale agreement would inter
partes have effect according to Its tenor. The transaction was
engineered to achIeve the illusion that an arm's length price
was paid for the taxpayer, which in turn, through the workings of
the remainder of the restructure transactions, would ensure that
the EAH shares were disposed of at what appeared to be an
arm's length price but in reality was not;
52.3.3. furthermore, Elandspad paid US$543.76 million to acquire a

company on which it performedno formai due dili ence, and on
which it relied on a valuation commissioned by the directors of
ths target company to establish the purchase price — it lacks
PION'
tu-
'b) > -1'E
commercial sense to disregard prudent cominerciai protocol

3/g
when entering inta so significant a transaction;
52.3.4. The taxpayer's response of 14 June 2010 to the request for an

explanation as to how the purchase price in respect of (he EAL
safe agreement was determined, simply refers to a copy of the
valuation dated 22August2006 performed by Deloitte 8
Touche (the "Deloitte value t'.an" );
52.3.5. The taxpayer elaborated, In the same letter, (with respect to the
disposal of the EAH shares) claimed that:
"VYe a re instructed that the p urchaseprice was

determined with reference to a va l uatian d ated
22 August 2006 performed by O e laitte 8 Tou c he
('Oefoittes valuation' ). Although the valuation relates ta
EAt., since the EAH shares were the predominant asset
of EAL, its value was regarded as being the same as that
of the EAH shares."
5 2.3.6. the Deloitte valuation was prepared for the benefit of t h e

taxpayer, and addressed to its board of directors. Elandspad
has informed ine that in its determination af the market value of
the taxpayer, reliance wss placed on this valuation;
52.3.7. it lacks commercial sense for parties ta enter into a share sale
agreement where the pdce is the same as the market value of
an asset of the target company and the purchaser will never
enjoy any of the predom
inant commercial benefits of such
asset. Yet this is precisely what happened in the EAL sale
agreement;
52.3.8. the EAL sale agreement stated that the beneficial ownership of,
and risk and benefit in respect af, the EAL shares would pass
fram Tullow UK to Elandspad upon delivery of the share
certif
icates on 23 Januaiy 2007. However, on 23 January 2007
' thetaxpayer owned the EAH shares and claims, and R4 000 in
cash. Elandspad, however, undertook to 'nat do anything in
relation to the EAH shares or EAH claim, including exercise any
rights attaching ta those assets until delivery and payment ln
terms ofthe EAH sale agreernen', some two days iater,on
25 January 2007. Elandspad therefore never enjoyed any of the
predominarrt commercial benefits assaciated with its purchase
qf the tsNpayer as owner of the EAH. shares and. claims;
'be% - li
52,3.9. Eiandspad knew fu;I weII that it would never enjoy these
II7
benefits, and It also knew that in return for it incurring a liability
of US$543.76million, It would, through the workings of the
EAH sale agreement and Ihe capitalisation agreement, acquire
a subsidiary with US$1.2 million of encumbered cash, and
share capital and reserves of approximately US$543 milllon-
matched by an unsecured, interest free receivable from
Elandspad itself;
52.3.10.the EAL sale agreement stated that the amount owing in

respect of the sale of the taxpayer's shares shall remain
outstanding as an interest free claim, payabie on demand. If the
real intention of the parties to the EAL sale agreement was the
creation of a bon a fi d e li a bility and receivable of
US$543.76miliion in respect af the sale of the taxpayeCs
shares, the terms of repayment would have been stipulated
clearly in the EAL sale agreement, and interest would probably
have been charged on the outstanding balance - irrespective of
the cessfons that were to take place in terms of the remaining
restructure transactions;
52.3.11. that interest was not levied, nor repayment terms stipulated, is
reflective of a iack of commer ia b with r e spect to the
price;
52.3.12.application for the approval of the group restructure was

submitted to the South African Reserve Bank ("SAR8") on
12 July 2006(" the application" ), using Rand Merchant Bank as
agents. Included in the steps described In the application were
that Elandspad would purchase 100% of the shares in the
taxpayer from Tullow UK on short-term loan account, with
'commercial terms and conditions", and that the loan account
remaining between the taxpayer and Elandspad (the Elandspad
claim) could be extinguished by the taxpayer declaring a
' dividend to Elandspad;
52.3.13.the 'commercial terms and conditions' stipulated that the

payable was interest free and repayable on demand — terms
that cannot be considered commercial between parties acting at
arm's length.
52,3.14, on 2 October 2006 SARB advised the taxpayer that it had no

objection to the proposed restructuring, provided that the matter
Pose ~ CO
was "cleared with a/i the appropriate authorities (specifically
including the South African Revenue Services)". No such
clearance was obtained from the South African Revenue
Services,
53. I n t h e circumstances, I am of the view that the ostensible consideration

(US$543.76 million) was a sham as part of lhe simulated transactions already
discussed.
54. F o r p resent purposes, I assume that the valuation of US$543.76million

accurately reflects the value of the underlying assets. However, the value does
not equate to the consideration paid. The consideration, if the suite of
agreements is looked at holistically, is the US$1.2 million paid by TOH when
the Tullow group "bought back" its own assets along with the exchange or
barter of tax benefits between the Tullow group and the Titan group. In return
for the US$1.2 million and an assessed loss the Titan group assisted the
Tullow group in getting its assets out of South Africa without paying the tax it
was obliged to pay and provided an Indemnification in respect of the tax
consequences that might ensue. That was the true nature of the transaction and
tha true consideration. There was never any Intention that the EAH shares
would be disposed of by the taxpayer for an amount equal to the valuation.
55. I t i s my view that all four of the requirements for the application of paragraph
648(3) have been fulfilled. The capital gain disregarded as a result of the
participation exclusion in paragraph 64B(2) should therefore be treated as a net
capital gain under paragraph 8(b).
The capital gain is determined as follows:
55.1. in terms of paragraph 38(1)(a), where a person disposes of an asset to a

person who is a connected parson in relation to that person for a
consideration that does not reflect an arm's length price, the person who
disposed of that asset must be treated as having disposed of that asset
for an amount received or accrued equal to the market value of that
asset as at the date of that disposal;
55.2. the market value of the equity share capital of EAH ls regarded by the
taxpayer as beIng US$543.76 million. The average exchange rate for
January 2007 was USD1:ZAR7.1838, resulting In proceeds of
R 3 906 263 088;
553- ~ l
55.3. in the absence of any base cost being presented by the taxpayer, I have
)I
adopted 20 per cent of the proceeds as the valuation date value of the
asset in terms of paragraph 26;
55.4. the capital gain is thus R 3 125 010 470,
Deemed dividend — 7
58. I n t erms of the provisions of section 84C(2)(a), a dividend is deemed to be

declared by a company if an asset is distributed or transferred by lhat company
to a shareholder or any connected person in relation to that shareholder. To the
extent that the company receives any consideration in exchange for the asset
that was distributed, transferred or otherwise disposed of, the distributionis not
a deemed dMdend.
57. H a ving regard to the true substance of the restructure transactions, there was a
transfer by the taxpayer of the EAH shares and claim to TOH on the
23 January 2007, ln exchange for consideration of US$1.2 million, other than
by way of a dividend or liquidating distribution. At the time af this transfer, TOH
was a connected person to the taxpayer, as well as a connected person in
relation to the taxpayer's shareholder, Tuiiow UK.
58, Th e r e is thus a deemed dividend to the extent that the value assigned to the
EAH shares and claims, of US$543.76 million, exceeds any consideration
received in exchange for those shares. In this Instance, the US$1,2 million was
not paid in exchangefor the EAH shares; it was paid in exchange for
Elandspad's willingness to facilitate and participate in this simulated transaction.
STC is consequently payable on the deemed dividend of US$543.76 million
(R 3 906 263 088 at the average exchange rate for January 2007),
Alternat ve rounds — Part liA of the Ac
59. S e c tion 80l provides that the Commissioner may apply the provisions of Part IIA
of the Act in the alternative, or ln addition to, any other basis for raising an
assessment. VYithout prejudice to the primary grounds mentioned above, the
Commissioner hereby reserves the right to appiy Part IIA of the Act based on
the discussion set out below.
Im ermissibletax avoidancearran ement
60. I n my view the agreements amount to an Impermissible avoidance arrangement

as defined in section 80L
40
Ql -7 Q
7Q
61. Th e r e are four requirements which must be met for sections 80A to 80L to be
applied.
A~rrerr emerr
62. I n the first instance one must have an arrangement which is defined as"any
transaction, operation, scheme, agreement or u nderstanding (whether
enforceable or not J, includingall steps therein or parts thereof, end includes any
af the foregoing involving the alienation of property"(section BQL).
63, T h is re u re m t in this case b virtue of the fact ha the tax e r was

artlci an In b r fa re e n t s.
~T~be~ne r

arrangement. This is simply defined as "any arrangement that, but for this part,
results in a tax benefit"(section 80L), The tax benefit sought by the taxpayer in
this instance is the avoidance of paymentaf CGT and/ar STC and this certainly
falls within the definition of etax benefit" as defined in section 80L, which states
that etax benefit' includes any avoidance, postponement or reduction af any
liability for tax".
S oleormain u r s
65. T h e third requirement is that the avoidance arrangement(which is presumed in

terms of sectian 80G to have been carried out with the sole or main purpose of
obtaining a tax benefit) had as its sole or main purpose the obtaining of a tax
benefit (section 80A).
66. I nterms of section 80G, an avoidance arrangement is presumed to have been

entered intoor carried aut far the sole or main purpose af obtaining a tax benefit
unless and until the party obtaining a tax benefit proves that, reasonably
considered in light of the relevant facts and circumstances, obtaining a tax
benefit was nat the sole or main purpose of the avoidance arrangement.
67. I n Iight of the relevant facts and circumstances discussed above, the taxpayer's
statements regarding its alleged sub]ective intent are not sufficient to rebut the
presumption of purpase in this case.
oi 40
68. T h us, and without repeating my comments made in the context of the doctrine
of substance over form, it remains my view that the obtaining of the tax benefit
was the sole or main purpose of the avoidance arrangement,
'n ed elements
69. T h e fourth requirement Is that the avoidance arrangement must meet

one af
four furthe ub-re uirernents, namely;
69.1. the avoidance arrangement "wasentered into or carried out by means or

in a menner which would not normally be employed far bona fide
b siness ur ose alb e r t han obtaininga ts x b e nefit" (section
80A(e)(I)); or
89.2. the avoidance arrangement"has created rights or obligations that would
not normally be created between persons dealing at arm's length'
(section 80A(c)(i)); or
69.3. the avaidance arrangement"lac ommerclal substa e in w hole or in
part, taking into account the provisions of section 80C" (section
80A(a)(li); or
69.4. the avoidance arrangement "would result directly or indirectly in the
this part)" (section SOA(c)(ii)). tmy emphasis]
Business ses
70. T h e suite of agreements is an elaborate set of arrangements that have no

business purpose other than obtaining a tax benefit. A bona fide business
purpose would, for example, be the purchase of assets by one entity from
anather and thus would typically be achieved by way of an agreement of sale.
To the extent that it might appear that there was a saleof assets (the African oil
exploration companies), this is a simulation. Once the agreements had been
given effect to, the assets remained in the same hands they were befare the
agreements were concluded. The manner (i,e. the scheme of agreements
undoing each other) is not typical of what would be employed far bona fide
business purposes.
R i hts and ab' i ns
71. I t i s not normal for persans dealing at arm's length to create rights and
obligations as was dane by wsy of the suite of agreements. The only
reasonable Inference is that the cooperation between the two groups was done
in order to obtain tax benefits.
Pop 2 oi 40
Comm ciai substance
72. I n t h e IIrst instance the agreements lackcommercial substance taking into

accaunt section 80C which reads as follows:
(7) For the purposes of this Part, en avoidance arrangement lacks

commercial substance ifif would result in a significant tax benefif
for a party (but far the provisions of this Part) but does not have a
significant effect on either the business risks or net cash flows of
that party apart from any effect attributable to the tax benefit that
would be obtained but for the provisions of this Part.
(2) For the purposes of this Part, characteristics of an avoidance

arrangement that are indicafive of a la c k o f c o mmercial
subsfance include but are not limited to-
(a) the legal s u bstance o r e ff ec t o f the avoidance

arrangement as a whole is inconsistent with, or differs
significanfly from, the legal form of its individual steps; or
(b)
73. I h i ghlight a number
of aspects of the series of transactions in the context of
section 80C, applied in conjunction with section 80F:
73.1. The steps in the arrangement involving the interposition of Elandspad in

the transfer of the EAH shares and EAH claim by EAL to TOH resulted
in a significant tax benefit for the Tullow graup, but did not have a
significant Impact on its business. risks and net cash flows. Even if the
taxpayer's allegations regarding the desire to eliminate South African
"country" risk are accepted for the sake of argument, the steps in
question had nothing to do with the elimination of that risk, but rather
with the avoidance of CGT and STC on the transfer of the EAH shares
and EAH claim by EAL to TOH;
73.2. the practical effect of thy arrangement as a whole differs signNcantly

from the legal form of its Individual steps. This arrangement was a
single, composite transactian that resulted in a preordained transfer of
the EAH shares and EAH claim by EAL to TQH for a non-arm's length
consideratian; and
73.3. the arrangement also involves round trip financing, as described in

section 80D. The term "funds", as defined by that section, Includes any
cash, cash equivalents ar any right ar obligation to receive or pay the
b5S-2.5
same. In this Instance, the Titan group incurred an obligation to pay USS
543.76 miliion In cash ta the Tullaw group, whereupon the Tullow group
immediately transferred the right to receive those funds back to the Titan
group.4 Theae tranaferS WOuld haVe resulted in a taX benefit far EAL (but
for lhe provisions of the GAAR). At the same time, they signlTicantly
reduced any risk of non-payment that the Tullow group might otherwise
have Incurred.' Finally, the equal and opposite rights to receive US$
543.76 million and the equal and opposite obligations to pay that amount
which were created between the Titan and Tutlow groups aiso constitute
offsetting or self-cancelling elements In the arrangement.
7 4. T h e agreem
ents thus lack commercial substance.
MIsuse or abus
75. I a m also of the view that the transactions result in the misuse or abuse of the
provisions of the Act.
76, I q u ote the relevant extracts from the Comprehensive Guide ta Capital Gains
Tax(issue 4), which, with respect to paragraph 64EI(3), is in all material aspects
lifted from clause 79 sub-clause b of the explanatary memorandum ori the
Revenue LawsAmendment Bill
,2005.
"12.18 Disposal of equity shares in foreign company (paragraph

64B)
12.18.2 Background
In the 2003 Budget Review, the Minister of Finance

announced his Intent ta allow the tax-free repatriation af
foreign dividends back to South Africa. This dividend
exemption, known as the 'participation exemption', was
subsequently Introduced into s 10(1)(k)(ii)(dd). One of
the requirements for the exemption is that the South
African shareholder receiving the dividend must hold at
least 20% of the equity share capital and voting rights ln
the fareign company (before 8 November 2005 = 25%).
4
Section 80F authotlses Ihe Commissioner, inter alia, lo treat persons who are connected persons ln
relation to each other as one and the same person for purposes of applying section 80C.
The same result would apply If Titan had secured a bridge loan, actually paid the US$843.76 million io
the Tullow group, immediately received that cash back from them, and then used It lo repay the bridge
loan. Theta is no requirement under section 80D that cash acIually change hands. Subsection (2)
specifically provides, Infer alia, that lhe section applies lo any round tripped amounts without regard to any
tracing of funds, the timing or sequence of lhe transfer or receipt of the round-tripped amounts, or the
means by or manner ln which those amounts are transferred or received. The fact that the parties chose
lo deal in obilgallons to pay and rights to receive cash, rather than ln cash itself, ls thus Irrelevant to the
appllcallon of this seollon:
PSQ at 40
ASS->4,
I
The participation exemption is rrequentIy found in

continental European systems, such as France,
hletheriands, Belgium and Denmark. This exemption
often exists alongside the tax-free sale of foreign shares
involving the same percentage stake because profits
from the sale of shares merely represent retained
dividends. Paragraph 64B gives effect to this tax-free
disposal. It is probably best described as a 'participation
exclusion', since it applies to both capital gains and
losses.In broad terms South African shareholders are
allowed to make a tax-free sale of foreign shares in a
foreign company in which they hold an interest of at
least 20% as long as that safe is made to non-residents.
The latter reguirement encourages the repatriation of
foreign funds to South Africa.
$2,18.5 Capital gain on di s p o sal o f C F C t o co n n e c ted

person (paragraph 648(3))
The capital gains participation exclusion operates in

conjunction with the participation exemption for foreign
dividends contained in s 10(1)(k)(ii)(dd). The exclusion
of capital gains is i ntended to f acilitate internal
restructurlngs of offshore foreign subsidiaries. The
exclusion also allowed for the sale of certain foreign
shareholdings to foreign persons with the expectation
that the loss of foreign shareholdings would be replaced
with valuable consideration. However, it b e came
apparent that some multinationals were seeking to use
the exclusion so as to divest themselves of their foreign
subsidiaries with f o r eign s u bsidiary o w nership
transferring abroad with little or n o c o nsideration
remaining within South Africa's jurisdiction. These
transactions also contained schemes that attempted to
avoid any STC so as to achievea whollyfax-f
ree
divestiture. In o rder t o r e medy t hese c oncerns
paragraph 848(3) and (4) were introduced. These anti-
avoidance measures came into operation on
8 November 2005.
P s2
=
b 5 3, 2.7,
Under paragraph 84B(3) any capital gain disregardedas
a result of the participation exclusion in paragraph
848(2) or (5) is treated as a net capital gain under
paragraph 8(b) in certain circumstances. The treatment
of an amountas a net capital gain has the effect that no
capital losses for the year of assessment or assessed
capital
loss brought forward from the preceding year of
assessmentmay be setoffagainst the amount."
77. I n my view, the taxpayer

is seeking to achieve precisely what the Legislature
intended to curb through the introduction of paragraph 648(3).
78. T h e taxpayer, part of a multinational group, seeks to use the participation

exclusion in paragraph 648(2) to divest itself of its foreign subsidiary, with little
or no consideration remaining w'thin South Africa's fiscal jurisdiction.
79. I n my view, the avoidance arrangement has resulted directly in the misuse or
abuse of the provisions of the Act, specifically the provisions of paragraph
648(2) and paragraph 648(3).
~Summe
80. T h ere i s a n a v oidance arrangement as defined, and this avoidance

61. I n a ddition, ths avoidance arrangement would not normally be employed for
bone fidebusiness purposes, has created rights and obligations that would not
normally be created between persons dealing at arm's length, lacks commercial
substance and has resulted directly in the misuse or abuse of the provisions of
the Act.
82, T h ere Is therefore an impermissible avoidance arrangement as defined.
The
~ remed
83, T h e remedies available to deal with an

"impermissible avoidance arrangement"
are set out in section 808, which reads as follows;
"Tsx consequences of impermissible tax avoidance.-
(f) The Commissionermay determine the fax consequences under

this Act of any impermissible avoidance arrangement for any
party by-
Tof40
Ip
(a) disregarding, combining, or re-characterising any steps in

or parts of the impermissible avoidance arrangement;
(b) disregarding any accommodating or tax indifferent party

or treating any accommodating or tax indifferent party and
any other
part
y as one or the same person;
(c) deemingpersons who are connected persons in relation

to each other to be one and the same person for the
purposes of determining the tax treatment of any amount;
(d) reallocating any gross income, receipt or accrual of a

capital nature, expenditure orr ebete amongst the parties;
(e) re-character
ising any gross income, receiptoraccrual ofa
capita/ nature or expenditure; or
(fl tre a ting the impermissible avoidance arrangement as if it

had not been entered into or carried out, or in such other
manner es in the circumstances of the case the
Commissioner deems appropriate for the prevention or
diminution of the relevant tex benefit.
(2) Subject to the time limits i mposedby section 79, 79A(2)(a) and
8t(2)(b), the Commissioner must make compensating
adjustmsnts that he or she is satisfied are necessary and
eppropr)ete to ensure the consistent treatment of all parties to the
impermissible avoidance arrangement."
84. I n order to gfva effect to the true substance of the restructure transactions, the
Commissioner intends applying the provisions of section 80B to the
arrangement to disregard the steps in and parts of the arrangements involving
the interposition of Eiandspad in the transfer of the EAH shares and EAH claim
by EAL to TOH, more particularly:
84.i. l t intends to disregard the dlspossi by Tuilow UK of the taxpayer's

shares to Elandspad for an amount of US$543.76 million (the EAL sale
agreeme
nt), l.e.disregard the actual quantum;
84.2. it intends to disregard Tullow VK's cession of the Elandspad claim to
TOH (part of the capitslisation agreement);
84.3. It intends to combine the EAM sale agreement and the EAL sate
agreement, with an effective date of 23 January 2007; and
844. i t I ntends to disregard TOH's cession of the Elandspad claim to EAL

(part of the EAH sale agreement).
86. T h e result of the above Is to reflect the true substance of the restructure
transactions, which Is that there was a transfer by the taxpayer of the EAH
shares and claim to TOH on the 23 January2007 for a non-arm's length
consideration. At the time of the transfer, TOH was a connected person to the
taxpayer, as welt as a c onnected person in relation to the taxpayer's
shareholder, Tullow UK.
86. F r om Ihe perspective of CGT, the effect of the above is Io bring the transaction,
whereby the shares in EAH were disposed of by the taxpayer, within the
provisions of paragraph 648(3). All four of the r
equi
rementsforthe application
of paragraph 64B(3) were fulfilled, in particular TOH and the taxpayer were
connected at the time of disposal of the EAH shares, and the consideration
received or accrued did not reflect an arm's length price. The capital gain
disregarded by the taxpayer as a result of lhe participation exclusion in
paragraph 64B(2) is t herefore treated as a n a t c a pital gain u nder
paragraph 8(b).
87. T h ere is also

a deemed dividend in terms of the provisions of section 64C(2)(a)
e qual to t h e v a lue a ssigned lo t h e E A H s h ares and c l aims o f
US$543.76 miIIIon.
88. T h e calculations of the capitai gain in respect of CGT, and STC payable in
respect of the deemed dividendare set out in the primary grounds above.
Penal A ssessment
89. I n the present case, an "understatement" exists as there was an omission from
both the income tax return and the STC return. The taxpayer has also made a
number of incorrect statements. It sought, by way of the suite of agreements, to
misrepresent the facts to SARS. For example, the taxpayer created the
pretence of the sale of assets by the Tullow group where in fact there was no
intention of a real transfer of assets at all.
90. T h ese understatements created "shartfalls" as defined in section 222(3) of the

TA Act.
91. T h e relevant facts and circumstances were considered when evaluating which
of the behaviours contained in section 223 of the TA Act apply in the present
case.
af 40
L>54 30
I~ 'r
92. A s t h e matter did not form part of any voluntary disclosure made by the
taxpayer, and this is the first instance of an adjustment to taxabie incame under
the TA Act, the adjustments were viewed as a "standard case .
93. W i t h respect to the sppttcatIan of the doctrine of substance over form, it is the
view of the Commissioner that the taxpayer deliberately concealed the true
substance of the transactions undertaken, and in doing so knowingly created a
sham as described earlier with the intention af evading tax. The taxpayer
knowingly intended to reduce the amount of tax that should have been paid.
94. W i th respect to the alternative grounds, it is the view of the Cammissianer that
the arrange
m
ent referred to objectively met the requirements af section 80A in
that the taxpayer knowingly intended to reduce the amount af tax that should
have been paid. Reasonably considered in 'light of the relevant facts and
circumstances, it is the Commissioner's view that the taxpayer knowingly
entered into the avoidance arrangement with the sole or main intention of
abtaining a tax benefit which would not otherwise have been available to it. This
view has been elaborated an in the body of this letter.
95, T h e intention of a company is determined by reference to the expressions af Its

directors. In the case of the taxpayer, and as mentioned above, there was a
changing of the guard. The Tullow directors' objective was to engineer the exit
of the African exploratian companies from South Africa without paying an exit
charge and/or to avald doing so in the future. The intention of the Titan directors
was to acquire the assessed loss. The two sets of directors worked together by
way of a suite af agreements to further their respective interests.
96. R e garding CGT and STC, the intention of the taxpayer was cleariy to engineer
a way of removing the assets from South Africa without paying tax. The conduct
of the taxpayer is, however, more blameworthy when one considers the
acquisition of the assessed loss. There was no reason for the Titan group to be
involved in the transaction at all. It sought out the transaction and did so in order
to acquire the assessed toss. it sought out the opportunity and Involved itself in
a transaction that had nothing to do with It.
97. F a r the reasons set out above the behaviour category "Intentional tax evasion"
Is applicable to the taxpayer.
98. I n terms of section 223 of the TA Act, the Commissioner is entitled ta impose a
penalty equal to 150% of the relevant shortfall as determined under
section 222(3) of the TA Act.
Q~53 - )I
~7
99. i n the circumstances the Commissioner has imposed a pena! ty of 150%.
Interest
100. Interest has been levied in terms of the provisions of section 89quat in respect
of the CGT assessment, and secUon 648(9) in respect af the STC assessment.
Should you have any queries relating to this audit, please contact the SARS official
mentioned above.
Should you have any other queries please call the SARS Contact Centre Contact on
0800 00 SARS (7277). Remember to have your taxpayer reference number at hand
when you call to enable us to assist you promptly.
Sincereiy,
A Kane G Olivl r
ISSUED ON BEHALF OF THE CO M M ISSIONER FO OUTH AFRICAN
REVENUE SERVICE
Page e
ANNEX -T W
The income Tax Act No.56 of 1962
Section 8M. I mpermissible tax avoidance arrangements. - An av oidance

arrangement is en impermissible avoidance arrangement if its sale or main purpose
wss to abtain a tax benefit and
(s) in the context of buslness-
(i) it was entered into or carried aut by means or in s manner which would not
normallybe employed for bone fide business purposes, other then
obtaining a lax benefit; or
(li) it l acks commercial substance, in whole or in part, taking inta account the
provisions of section80C;
(b) in a context other than business, it wss entered into or carried out by means or in
a mannerwhich would not narmally be employed for a bona fide purpose, other
than obtaining a fax benefit; or
(c) in any context-
(i) it hss crested rights or obligations that would not normal!y be created
between persons dealing et arm's length; or
(fi) It would result directly ar indirectly in the misuse or abuse of the provisions of
this Act (including the provisions of this Part).
Section 808. Ta x consequences of impermissible tsx avoidance - (1) The

Commissioner msy determine the tex consequences u nder this Act o f a n y
impermissible avoidance arrangement for any party by-
(a) di s regarding, combining, ar re-characferlsing any steps ln ar parts of the

impermissible avoidance arrangement;
(b) d i sregarding any accommodating or fa x-indifferent party or t reating any

accommodating ar tax-indifferent party and any other party as one and the same
person;
(c) d e eming persons who sre connected persons ln relation fo each other lo be one
and fhe same person for purposes of determining the tsx treatment of any
amount;,
(d) r eallocating any gross income, receipt or accrual of e capital nature, expenditure
or rebate amongst the parties;
(e) rewharacterising any grass income, receipt ar accrual of a capital nature or

expendifure; or
(f) t r e ating the impermissible avoidance arrangement as if it hsd not been entered
into or carried aut, ar in such other manner as ln the circumstances of the case
the Commissioner deems appropriate for the prevention or diminution of the
relevant tax benefit.
(2) Su bjectto the time limits.~mposed by section 79, 79A(2) (a) and 81(2) (b), the
Commissioner must make compensating adjustments that he or she is satisfied
are necessary and appropriate to ensure the consistent treatment of all parties to
the Impermissible evoidence arrangement.
Section80C. Lack of commercial substance. - (1) For purposes of this Pert, an

avoidance arrangement lacks commercial substance if It would result in a significant tax
benefit for a party (but for the provisions of this Part) but does not have a significant
effect upon either the business risks or net cash flows of that party apart from any effect
attributable to the tax beneflt that would be obtained but for the provisions of this Part.
(2) For purposes of this Part, characteristics of an avoidance arrangement that are
indicative of a lack of commercial substance include but are not limited to-
(e) the legal substance or effect of the avoidance arrangement as a whole is
inconsistent with, or differs significantl from, the legs/ form of its individual
steps; or
(I) round trip flnancing as described in section 80D; or
(ii) an accommodating or tax indifferent parly as described in section 80E;
ol
(iii7 elements that have the effect of ol'fsetting or cancelling each other.
Section 80D. Round trip f i nancing: (1 ) Ro und trip f i n a ncin includes eny
avoidance arrangement in which-
(a) funds are transferred between or among the parties (round lripped amounts); and
(b) the transfer of the funds would-
(i) result, directly or indirectly, In a tax benefit but for the provisions of this
Part; end
(ii) slgniflcahtly reduce, oNset or eliminate eny business risk incurred by
any party in connection with the avoidance arrangement.
(2) This section applies to any round tripped amounts without regard to-
(e) whether or not the round tripped amounts can be traced to funds transferred to or
received by any party In connection with the avoidance errangement;
(b) the timing or sequence in which round tripped amounts are transferred or
received; or
(c) the means by or manner ln which round tripped amounts are transferred or
received.
(3) For the purposes of this section, the term "funds" includes eny cash, cash
equivalents or any right or obligation to receive or pay the same.
I40
f~v
Section 809. Presumption of purpose. - (1) An a voidance arrangement fs
presumed to have been entered into or carried out ior the sole or main purpose of
obtaining a tax benefit unless and until the party obtaining a tax benefit proves that,
reasonably considered in I/ght of the relevant facts and circumstances, obtaining e tax
benefit was not the sole or main purpose of the avoidance arrangement.
(2) The p urpose of a step in or part of an avoidance snangeinent inay be different

from a purpose attributable to the avoidance arrangement as a whole.
S ection 80H. Application to s teps in o r p arts o f a n snsngement. - The

Commissioner may apply the provisions of this Part to steps in or parts of an
arrangement.
SectIon 80l. Use in the alternative. - The Commissioner may apply the provisions
of this Part in the alternative for or in addition to any other basis for raising an
assessment.
Section 80J. No t i ce. (1)- The Commissioner must, prior to determining any liability
of s party for fax under section 808, give the party nofice that he or she believes that
the provisions of this Part may apply in respect of an arrangement and must set out in
lhe notice his or her reasons therefor,
(2) A party who receives notice in terms of subsection (1) mey, within 60 days after the
date of that notice or such longer period as the Commissioner may allow, submit
reasons to the Commissioner why the provisions of this Pert should not be applied.
(3) The Commissioner must within 180 days of receipt of the reasons or lhe expiry of
the period contemplated in subsection (2)-
(e) re q uest additional information ln order to determine whether or not this Part
applies in respect of an arrangement;
(b) g ive notice to the party that the notice in terms of subsection (1) hes been
withdrawn; or
(c) de t ermine the liability of that party for tax in terms of this Part.
(4) lf at s n y s tage alter giv/ng notice to /he party in terms of subsection(1),

additional information comes to the Anew/edge of the Commissioner, he or she may
revise or modify his or her reasons for applying this Part or, if the notice hes been
withdrawn, give notice in terms of subsection(1).
Section 80K. Interest. - Where the Commissioner has applied this Pert in
determining a party's liabi7ity for tax, the Commissioner mey not exercise his or her
discretion in terms of section 89qual(3) or (3A) lo direct that interest is not payable in
respect of that portion of any tax which is stlributsble to the application of this Part.
Section 80L D e finit/ons. - For purposes of this Part-
"arrangement" means any transacti on, operation, scheme, agreement or
understanding (whether enforcesbie or not), /ncluding ail steps therein or parts thereof,
and Includes any af Ihe faregc/ng involving the a!/enation of property;
"avoidance arrangement" means any arrangement that, but far this Pert, results in a
tax benefit;
"Impermissible avoidance arrangement" means any avoidance snangement

described in sect/an 80A;
"party" meansany-
(a) person;
(b) permanent establishment in the Republic of a person who is nofa residenf;
(c) permanent establishment outside the Republic of a person who is e resident;
(d) partnership; or
(e) joint venture,
who participates or takes partin an arrangement;
"tsx" includes any fax, levy or duty imposed by this Act or any other Act adminisfered
by the Commissioner/
"tax benefit"Includes any avoidance, postponement or reduction of any liability far lax.
Paragraph 8. Net capital gain. - A p erson's net capital gain for the year of
assessmentis the sum of-
(a) the amount by which that person's aggregate capital gain for that year exceeds
that person's assessed capital loss for lhe previous year of assessment; and
(b) where paragraph 84B(3)becomes applicable during that year of assessment, the
amount of the capital gain which was disregarded In terms of paragraph 84B(2)
during that year or any previous year,as contemplated in paragraph 84B(3).
Paragraph 3$. D/aposa/ by wey of danat/on, considerationnat measurable in

money snd transactionsbetween connected persona not et an arm's length
price:
(1) Subject Ia subparagraph (2) and paragraphs 12(8) and 87, where a person disposed
of an essef by means of s donation or for a consideration not measurable in money ar
to a person who ls e connected person in relation to that person for e consideration
which does not reflect an srm's length price-
(a) the person wha disposed of that asset must be treated as having disposed of that
asset for an amount received ar accrued equal to the market value of that asset
as af the date of that d/sposel; end
Paragraph 648. Disposal of Interest /n equity share capItal of foreign company. -
(1) Far purposes of this paragraph-
"foreign company"means a foreign company as defined in sect/an 9D;
"foreign financial instrument holding company" ineens a foreign financial

instrument holding company es defined In section 41.
(2) Subject to subparagraph (5), a person must disregard any capital gain or capita( loss
determined in respect af the disposal of any interest ln the equity share capita/ of any
foreign company (other than e lareign financial instrument holding company ar an
interest conteinplated in paragraph 2(2)), if-
(a) th a t person (whether alone ar logether with any other person forming part of the
same graup of campanies as that person) immediately before that disposal-
(i) h e l d at least 20 per cent af the equNy share capital and voting rights in that
foreign campany; and
(ii) h eld the /nterest contemplated In subitem (i) for a period of at /east 18
months pnor to that disposal, unless that person is a company and that
interest wes acquired by that company from any other company which
forms part of the same group of campsnies and thatcompany and other
company in aggregate held that interest for mare than 18 months:
Provided that in determining the total equity share capital in s foreign company,
there shall not be taken into account eny share which would have constituted a
hybrid equity /nstrument, as contemplated in section 88, but fior the three year
period requirement contained in that section; and
(b) Ihet interest is disposed af-
(i) to any person other thana resident ar a contra//ed foreign company;
(ii) i n t h e circumstances contemplated in paragraph 12(2)(a), where those

circumstances arise directly or indirectly as a result of a disposal to a
person contemplated In subitem(i); or
(iil) by a persan to a controlled fareign company in re/ation ta that person or to

any other controlled foreign company that forms part af the same graup of
companies es /het person.
(3) Paragraph 8(b) applies in respect of any capital gain determined /n respect of any
disposal of any interest in the equity share capital of any foreign company by a person
which /s or was disregarded in terms af subparagraphs (2) and (5) in any year af
assessment, if-
of 40
7
Q
(a) the foreign company prior to that disposal was e controlled foreign company in
relation to that persan or any other company in Ihe same group of companies as
lhat person;
(b) the interest in the equity share capital of that foreign company wes disposed of to
s connected person in relation to that person either before or after that disposal;
(c) th at person-
(i7 dispased of that equity share capital for no consideration or for

consideration which does not refiect an srm's length prie, other than e
distribution cantempleled In (fi);
(rr) disposed of that equity share capital by mesne of a distribution unless the
full amount of that dislributlon-
(sa) was subject to ar would, but for the provisions of section 848(5)(f),
have beensubjectto secondary tax on companies; or
(bb) was included in the income of a shareholder oF that company or

would but for lhe provisions of seclion 10(f)(k)(il)(dd) have been so
included; or
(iii) disposed of any consideration received or accrued fram the disposal of that
equity share capital (or any amount received In exchange therefor) in terms
of any transaction, operation or scheme of which the disposai of the equity
(ea) for no consideration or I'or consideration which does not reflect an

arm's length price (other thane distribution contemplated in (bb));
(bb) by means of a distnbutian by a company, unless the tuti amount of

that distribution-
(A) wa s subject to or would, but for the provisions of section

648(5)(f)
, have been subject to secondary fax an companies;
or
(8) wa sincluded In the Income of a shareholder of that company or
would but for the provisions af section 10(1)(lr)(ii){dd) have
been so included; and
(d) that fareign company ceased in terms of any transaction, operation or scheme of
which the disposal of the equity share capital farms part, to be a controlled foreign
company in relation to that persan or other company in the same group of
companies as that person (having regard solely ta any rights contemplated in
paragraph (a) of the definitio of 'participation rights' in section 90 and without
having regard to eny eiectlon exercised in terms of section 9D(13)).
+53-s3
ANNEXURE B: SUMMARY OF PROCEDURES FOR LODGING AN OBJECTION TO
T HE A S S ESSMENTS {EXTRACT F R O NI SARS S H O R T G U ID E T O T H E
ADNIINISTRATIONACT, 2051 ("TAAct') - SARS Version 1)
9A. Objection against assessment or decision
9.4.1. What assessments and decisions msy be obJected against'P
A taxpayer may object against:
Li Any assessment where the taxpayer is aggrieved by the assessment;
I A decision by SARS not to extend the period for objection or appeal where the
taxpayer requested such extension;
Li Any decision that may be objected to or appealed against under a tax Act;
D A decision not to authorise a refund;
D A decision not to remit an administrative non-compliance penalty;
0 A decision not to remit an understatement penalty.
TAAct distinguishes between an assessment and a 'decision' subJect to objection and

appeal. Regarding 'decisions' that may be objected Io or appealed against under a tax
Act, TAAct effects amendments to, for example, ITA g3 to include in that section most
of the 'decisions' under the ITA that are subject to objection and appeal. In the VAT Act
these 'decisions' are mostly to be found in VAT Act fj32.
The requirements for a valid objection are regulated by the rules, which rules will
essentially prescribe that an objection must be:
U Lodged within 30 business days after the date of assessment;
D Lodged in the prescribed form;
G Specify the grounds of objection in full;
O Specify an address at which the taxpayer witl accept notice and delivery of
documents for purposes of the dispute;
D Signed by the taxpayer or duly authorised representative;
Delivered at the SARS address specified for this purpose in the assessment.
An objection that does not comply with any of the above requirements will be regarded
as invalid and of no effect, unless the taxpayer remedies the invalidity within a
prescribed period after delivery of SARS's notice of Invalidity to the taxpayer. A
taxpayer may not always be required to file an objection against an assessment or a
'decision' made by SARS to correct an assessment. If there is an undisputed error in
an assessment the taxpayer can request SARS to correct the mistake by issuin a
Pa
$53 - VI
='7
reduced assessment and the taxpayer need not file an objection unless SARS does nat
agree that it is an undisputed error.
9.4.2. SARS's decision on abjection
TAAct provides that SARS must consider a valid objection in the manner and within the
period prescribed under TAAct and the rules. TAAct provides that:
SARS may dlsallaw the objection or allow it either in whale or in part and alter
the assessment accordingly;
A SARS must inform a taxpayer by notice of the disallowance or partial allowance

of an abjection, which notice must:
o state the basis for the decision; and
o contain a summary of the procedures for appeal.
9.4.3. Condonation of late objection
SARS is authorised to extend the deadline of the period within which an objection must
be filed, but the procedure and graunds for such extension are prescribed.
The requirements for and limitations of the condonation af a tate objection are:
i3 An application for the extension of the period within which an objection must be
filed must be submitted lo SARS in the prescribed form before the deadline
expires unless-
o reasonable grounds exist for the delay and the appllcatian is submitt
ed
within 21 days of the deadline; or
o the delay is due ta an exceptiorial circumstance referred to in TAAct

g218 or any other circumstance of analogous seriousness and the
application is submitted within three years of the deadline;
I3 To qualify for an extension for a late objection, the taxpayer has to prove that-
o for an extension of the abjection period for a period of less than 21

buslnyss days, reasonable grounds exist for the delay; or
o far an extension of the objection period for a period of more than 21

business days, exceptional circumstances exist for the deiay;
The objection period may not be extended by SARS in the following
circumstances:
o if more than three years have lapsed from the date of assessment or
'decision' that is subject ta objection, in other words, SARS may not
9el40
condone a late objection that ts lodged more than three years after the
date of assessmenl; or
o if the grounds of the objection Is based on a change tn a practice

generaÃy prevalltng which applied on the date of assessment or the
'decision'.
The ordinary dictionary meaning af "reasonabte" Is "having sound judgement;
moderate; ready io listen to reason; not absurd; within the limits af reason; not greatly
tees or more than might.be expected; talerable; fair". Essentially, for a decision to be
reasonable the C ommissioner is required ta constder all retevant matters. The
Constitutional Court hss held that there fs no absalute standard of reasonableness-
what Is "reasonable" would depend on the particular circumstances of each case.
The concept "exceptional circumstances" is not defined In TAAct in this context, but it is
accepted law that when an Act refers to "exceptional circumstances" it
conte
something out of the ordinary and of an unusual nature. The Constituttonal mplat
Court es
has
held that the lawgiver cannot be expected to prescribe that which ts inherently
incapable of delineation — if something can be i
magined and outltned tn advance, it is
probably because it is not exceptional. Each case must, therefore, be considered
according to its own merits in order to determine whether the reeson for requesting an
extension of time beyond the prescribed period after the date af assessment, ts
exceptional and, therefore, juslifies the requested extension. In TAAct $218(2)
examples of what would constitute exceptional circumstances for purposes of the
remittal of penalties are included.
Page tea
0
INCOME TAX l 34
Notice ofAssessment
Enquiries should be addressed ta SARS:
ALBERTON

PO BOX 5700 0000007277
TYGERVALLEY Tel. VVettolte www.as ra.goy,za
7536
Reference number. 8134134718 Always quota this
301 00 referencenumber
Document number; when ColttaCthlg
Date: 201 3-'l 1-2$ SARS
Year of assessment; 2012
Type of assessment OHglnal Assessment
Period (days): 368
Due date. 2014-01-01
Second date: 2014-0'I 31
,.ip'eQ"C. ")~-s, ~ s e @ ;y ..' + t Q Q i+

$ g rt f ' : f-' 9 t .trial v't2 .~~~a 'j'. 4e f'Ej' 4rAmaunt Sssffftaettr-
oe
able Income
Taa calculation
Assessed taa aflarretratas 2261166.66
Tax creditsandadiostmeree 26786Ht
Net amount payable under tftie assessment after allowable credits 3499661.5 j
Unprocessed paymanta Q.OQ Registered provisional taapayer ,Y

Seleoted for audit or verlfloadon Y
Thank you for subrniNing your income taxreturn for the 2012 year of assessment, Your assessment has been concluded and reflects an amount
payable by you of R 3469001.57 . Payment should be made by 20t4-01-31 after which interest w'.ll accrue on this assessmenl as from
2014-01-01
Please note that this amount only reflects your income tax assessment and does nat reflec tax payable under any previous assessment or any
other balances on your account. The current balance on your assessed account is R 1$24 114$50,40, For a statement reflecting your final balance
( including all amounts payabre or refundable under any previous assessment, refunds, payments, additional taxesl understatement penaltim," r , .
-"rfalties and interest). please request your statement of account from SARS through tha fallowing channels:
ronically via eFillng

-~ II the SARS Contact Centre
- At your nearest SARS branch
The final balance is reflected on the remittance advice at the boNoin of the Statement of Account. Please note that interest accrues on all taxes
payable after the due date so you are advised to pay in full on or before tha due date.
The reference to additional tax/understatement penalty in this notice of assessment depends upon the circumstances.
(i) If additional tax was imposed before the cofnmencement date of the Tax Administration Act (TAA) then adjustment to that additional tsx may be
made by an assessment:ssued In terms af the TAA afler the commencement date of the TAA
(ii) An assessment issued after the date of commencement of the TAA, in respect of any period that preceded the commencement date of the
TAA, may be subject to the ',mposition of an Understatement Penalty in terms af the TAAas an "understatement" is considered to be a continu.ng
act or omission in terms of tha TAA
(iii) An assessment issued after the camfnencement date of the TAA, for a period that commences after the commencement date of the TAA may
include the levy of an Understatement Penalty.
Please note. however. that tle information provided by you in your income tax return does not match the information in tha possession of SARS or
yaur return has been selected for verif cation. Attached you will finds letter containing further instructions far you to resolve th!s Please note that
any refund which may be due will be withheld pending final|sation of this matter,
According to the;nfarmation yau declared in your income tax return, you were Vab a ta pay prov:sional tax far this year of assessment. K;nd.'y nate
that should your tax circumstances remain the same for the next tax year.as a prov'sional taxpayer you are required to submit an IRP6 tax return
Ihst reflects an estimate of your taxable incarne for that tax year. A provisianai tax payment based an the estimated taxable income must also
accompany the IRP 6 tax return. For more information on provisional tax, how you can obtain your IRP6 tax return and submission due dates you
Reference Number 0134 1 3471$ lTA34 RO 2013.02. 00 01603

t
can visit the SARS website www.sara gov.za, or you can contact the SARS Call Centre on 0800 00 SARS (7277).
Selow you will find the amounts of income included and deductions allowed in calculating this assessmenL It is very important that you check
1. They are correct
2. They reflect all your taxable income and al:owable deduct:ons for the year
If you are of the view that the assessment contains a processing. calculation or other error, you should submit a revised return.
If you are unsureas to how the assessment was concluded or the reasons for any of the adjustments made, you may write a letter requesting
SARS to provide further informat'.on as to how the assessment was concluded. Ths leNer must be delivered to your nearest SARS branch w.th n
30 days of the date of this assessment or sant via registered mail to the address at the top of this notice.
If you are aggrieved by this assessment, you may submit a Nolice of Objection (NOO) using the form available from eFing or your nearest branch
to you or by calling 0800 00 SARS (7277). You have 30 days from the date of this assessment in which to do this.
NOTE; Your obligation to pay any amount due is not suspended by any objection or appeal. However, SARS will consider a motivated application
for the suspension of payment pending the finalisatlon of an objection or appeal as stipulated in the Tax Administration Act.
Sincerely
ISSUED OhlBEHALF OF THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE
Reference Number 9134 13471S ITA34 Ri3 2613,02.00

INCOME TAX ITA34
Notice of
Assessment .-
lr-I7
Year of assessment: 2012
Cede Ddscfil35an and'dsfsN

Capital dain local
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Reference Pltttnber 9134 1 3471$ ITA34 RO 2013.02.00

• i
I
Large Business Centre

office The Public Oflicer
Cape Town
Energy Africa (Pty) Ltd Large Business Centre
anblulrlss PO Box 6100
Alistair Kana 19 Floor, Project 166 Building,
PAROW EAST
Telephone 22 kans Striidorn Avenue,
7501 Cape Town
l021 ) 413-6686
(No postai deliveries)
a-meit
akane@sars govern Private Bag x9188, Cape Town, 8000
Reference Websitewww sara,gov.za
9134/134!71/8
Gate
3. April 2814
Att: Mr 6 Viljoen
cc: Ms Nicolette Smit
BY ENIAIL: gert@kirkhamventures.corn
: nsfnit©ens.co.za
Dear Mr Viljoen
PARTIAL ALLOWANCE OF OBJECTION

YEAR OF ASSESSMENT: 2007
CASE NUMBERS: 0823011113655 8 OB230111'I3656
Introduction
This letter constitutes a response to Energy Africa (Pty) Ltd {" the taxpayer" or
"EAI ") in relation to two objections filed on its behalf on 1 November 2013 to
the finalisation of audit letter (" the assessment") dated 21 August 2013. The
first objection deals with the assessment in respect of income tax ("the IT
grounds") and the second with the assessment in respect of secondaly
on companies (" the STC grounds") (collectively "the grounds" ). The tie types
and periods are as follows:
Tax type Taxpayer Tax period

reference number
Income Tax (" IT" 9134134718 2007
Secondary Tax on Companies 9134134718 30 September 2007
N
STQ»
2. in a d d ition, this letter constitutes a response to the taxpayer in relation to two

further objections filed on its behalf on 20 March 2014 to the understatement
penalties imposed in the assessment. The first objection deals with the
Page 1 of 41
i D>l ' - l
u nderstatement penalty in r espect of I T a n d t h e second with t he

nderstatement penalty in respect of STC (collectively the "USP grounds").
3. For e ase of reference all references to sections are to the Income Tax Act
No.58 of 1962, as amended ('the Act") unless otherwise stated, and all
references to paragraphs are to the Eighth Schedule to the Act unless
otherwise stated.
4. The o b e i ona have been considered and ou areereb notified that orth
reasons set ou ow t h e o b'ections have been disallow save th
artial allowa ce has been made ertainin to t orei n exch
translation rate used in the assessment of income and a I I
lowance has been ma t o t e understatement enalties im o d
5. This document does not traverse each assertion made or conclusion

reached on behalf of the taxpayer and this ls not to be construed as an
admission, agreement or concession in respect of such assertions and/or
conclusions. Assertions and conclusions that are repeated will only be dealt
with once.
Back round
A number of agreements were entered into by the taxpayer and other

entities, being the Tullow group, with Tullow Oil Pic, a company listed on the
London Stock Exchange, at its head ("Tullow UK") and the Titan Group
represented in all the agreements by Elandspad Investments (Pty) Ltd
("Elandspad").
Tullow UK had a number of subsidiaries, including Tullow Overseas Holdings

B.V., a company incorporated in the Netherlands ("TOH"). Prior to the
conclusion of the agreements, Tullow UK was also the holder of 100 per cent
of the shares in the taxpayer and the taxpayer in turn held 100 per cent of
the shares in Energy Africa Holdings LImited, a company incorporated in the
British Virgin Islands ("EAH"). The Tullow group acquired the taxpayer in May
2004 for a consideration of approximately US$570 million, immediately prior
to the effective date of paragraph 648 of the Eighth Schedule. EAH was and
remains the 100 per cent shareholder in a number of companies, mainly
active in oil exploration and related activities in Africa ("the African oil
exploration companies" ). While the taxpayer is no longer owned by the
Tullow group, the African oil exploration companies remain part of the Tullow
group.
Page 2af 41
I~~Ds
8, Elandspad was owned and controlled by the Enact Trust, whose trustees
and beneficiaries are various partners and employee
s of Edward Nathan
Sonnenbergs Incorporated ("ENS"). On 20 April 2007 the shares in
Efandspad were transferred from the E nact Trust to T itan Premier
Investments (Pty) Ltd (" Titan" ), Titan in turn, is owned by Titan Group
Investments (Pty) Ltd ("the Titan Group" ). At the time of the assessment the
involvement of the Enact Trust was not known to the Commissioner for the
South African Revenue Service ("the Commissioner") .The Commissioner
does not know the terms of the agreement whereby the transfer f rom the
Enact Trust to Titan was effected as it is still awaiting the response to a
request for this information. The Commissioner reserves the right to deal with
whatever emerges in the response at a later stage if necessary.
9. Ela n d spad now owns 100 per cent of the shares in the taxpayer. However,
before the conclusion of the agreements, there was no apparent link
between the two groups.
10. T h e effect of the agreements in a basic sense was:
10.1. the excise of an intermediate South African holding company (the

taxpayer) by the Tullow group;
10.2. the removal (by the Tullow group) of the underlying assets of the
taxpayer (the African oil exploration compa
nies) from South Africa
without the payment of capital gains tax ("CGT") or STC;
10.3. the transfer of ownership in the taxpayer from the Tullow group to the
Titan group;
10.4, the acquisition of the assessed loss of the taxpayer by the Titan
group.
11. D e s pite the assertions made in the grounds of objections, I remain of the
view that:
11.1. the Tullow group at no stage intended to shed its interest in the
African oif exploration companies and neither did the Titan group
intend to acquire such interest;
11.2. the Tullow group's stated objective was simply to restructure itself so
as to eliminate the perceived risks of an intermediate South African
11.3. the Tullow group's true objective was, having created valuable assets
in the African oil exploration compa
nies, to transfer the ownership of
Pags 3of41
these assets out of South Africa by way of an elaborate scheme
intentionally designed to facilitate the evasion of CGT and STC;
".f,4. the stated objective of the Titan group was to make a USS 1.2 million
profit;
11.5. the true objective of the Titan group was to "acquire" the taxpayer's
assessed loss as the quid pro quo for assisting the Tv!low group in
achieving its true objective. This assessed loss had a potential value
of approximately R 57.5 millton, significantly in excess of the amount
of US$1.2 million.
11.6. The Titan group then set about using the assessed loss to offset
income on Investments, which it transferred into the taxpayer in order
to utilise the loss. By 2012 the taxpayer had exhausted the assessed
losses and transferred the investments out of the taxpayer.
12. W h i le I make reference to the intention of the Tullow and Titan groups, these
intentions found expression within the taxpayer, Le, when the taxpayer
transferred its underlying assets out of South Africa and excised itself from
the Tullow group, it was giving effect to the intention of the greater Tullow
group. When the taxpayer used Its assessed loss to offset income f rom
investments transferred into it by the greater Titan Group, it was giving effect
to the intention of the Titan group.
13. T h as sssnttat nature of the~arran amen between ths two groups waa an
exchange of tax benefits. For the assistance of the Titan group in facilitating
the exit of African oil exploration assets from South Africa without paying
CGT or STC, the Tullow group paid the Titan group US$1.2 million. For the
assistance of the Tullow group facilitating the acquisition of a Ft 198 million
assessed loss, the Titan group indemnified the Tullow group against any
potential South African tax liability.
14. T h e exchange of tax benefits was the reason why the two groups transacted.
There was no other reason for them to do so.
Page 4 of 41
The a reements
The re-sale a reement
15. On 22 January2007 a sale ofbusiness agreement" (known as the pre-sale

agreement) was entered into between the taxpayer and Tullow South Africa
(Pty) Limited ("TSA"), both subsidianes of Tullow UK at the time of sIgning
the agreement. The effective date of the agreement was 20 November 2006.
16. In t e rms of the agreement, TSA purchased the business from the taxpayer
as a going concern, the business being the "entire business of the Seller
(excluding only its investment in the Excluded Assets), being the business of
providing consultancy services to the subsidiaries of the Seller and other
Tullow group companies, as carried on by the Seller as at the Effective Date,
as a goingconcern, which comprises the Business Assets and the Business
Liabilities" (clause 1.2A).
17. T S A also stepped into the shoes of the taxpayer in respect of any contracts
(clause 9.1) and took over all the employees of the taxpayer (clause 10).
18. S i g nificantly, the EAH shares and claims (clause 1.2-1.2.18.2) (i.e. the
African oil exploration assets) were excluded.
19. T h e agreement was signed for both the taxpayer and TSA by Mr W H Torr.
20. T h epre-sale agreement divested the taxpayer of its operations or business,

but not its underlying assets. The business remained ln South Africa, but was
housed in TSA rather than the taxpayer.
21. It i s significant that while the effective date is in November 2006, the date of
signature of the agreement was 22 January 2007, i.e. one day prior to the
signature of most of the other agreements which will be dealt with below.
TOH's resolution
22. On 1 8 January 2007 (i.e. after the effective date of the pre-sale agreement,
but prior to its signing), a shareholders' resolution was passed by TOH. In
terms of this resolution, TOH would issue one new share with a nominal
value of FUR 1000 to its holding company, Tullow UK. In return Tullow UK
would make a non-cash contribution to TOH consisting of a receivable. The
receivable contributed would be that which would be created by Tullow VK
against Eiandspad in the amount of US$543.76 million.
Page 6 of 41
Q ~ 057 - f
I
23. T h i s resolution laid the groundwork for the capitalisation agrsemsnt, signed
on 23 January 2007, which created an obligation on Tullow UK's part to
contribute US$543.76 million to TOH and to settle that obligation through the
contribution, transfer and assignment of ths Elandspad claim.
The restructure a resmsnt
24. T h enext agreement entered into on 23 January 2007 between Tuiiow UK,
TOH, the taxpayer and Elandspad was the "restructureagreement". A
number of aspects of the restructure agrssmsnt are highlighted,
25, T h s r e s tructure agreement makesreference to th e w hole suite of

agreements, namely the capitalisation agreement (clause 1.1.3), ths EAH
sate agreement (clause 1.1.7), the EAL sale agreement (clause 1.1.11), and
the prs-sale agreement (clause 1.1,16). Furthermore, the "group restructure
agreements" are stated to encapsulate the EAL sale agreement, the EAH
sale agreement and the capitalisation agreement (clause 1.1,15),
26. It i s then stated that"after due consideration of a/I relevant factors (it is not
set out what these relevant factors are) Tullow UK has concluded that the
optimal method of achieving such restructure would be by way of t he
restructure transactions" (clause 2.3), The Commissioner remains of the view
that, apart from the anticipated tax benefit, this so-called "optimal method"
increased the cost of the restructuring by approximately R 9 million. It is also
noted that ths restructure transactions are interdependent (clause 2.4).
27. T h e restructure agreement then records that:
3. f the pr e-saleagreement shall be implemented in accordance

with its terms, resulting in EAL having no liabilities other than
share capital, share premium and reserves and no assets
other than the EAH shares and the EAH claim;
3.2 e a chof the group restructure agreements shall be signed by

the respective parties thereto;
3.3 the E ALsale agreement shall be implemented in accordance

with its terms, resuitingin:
3.3.1 Elandspad acquiring the EAL

shares; end
3.3 2 Tu llow acquiring the Elandspad claim; and

PIQI 6 of 43
bS7-7
Cf )L~
3.4 the ca p i ta/isationagreement shall b e i m plemented in
accordance with its terms, resulting in TOH acquiring the
Elandspad claim; and
3.5 the EAH sale agreement shall be concluded and implemented

in accordance with its terms, resultingin:
3.5.1 TOH acquiring the EAH shares and the EAH claim;
and
3.5.2 EAL acquiring the Elandspad claim."(clause 3)
28. T h e parties then agreed tomplement

i the various restructure transactions.
The implemen
tation clause readsasfollows:
"4.2 The parties accordingly agree that:
4.2.1 ail the group restructure agreements shel/ be signed

by each of the parties thereto;
4.2.2 Elandspad shall receive.
4.2.2.1a duly adopted resolution of the b oard of

directors of Tu//ow authorising the conclusion
and implementation of the EAL sale agreement
and the capita/isation agreement;
4.2.2.2a duly adopted resolution of the b oard of

directors of EAL, authorising the transfer of the
EAL shares to Elandspad;
4.2.3 Tu llow shall receive:
4.2.3.1 a duly adopted resolution of the b oard of

directors o f E i a ndspad, authori sing the
conclusion and implementation of the EAL sale
agreement;
4,2.3.2 a duly adopted resolution of the b oard of

directors of TOH, authorising the conclusion
and implementation of the c api
ta/isation
agreement;
Page 7of 41
4.2.3.3 a duly adopted resolution of the shareholders
of TOH, a u thorising the c onclusion and
implementation of the capitalisation agreement;
4.2.4 TOH shallreceive:
4.2.4.7 prior to the conclusion of the capitalisation

board of directors of Tullow, authorising the
conclusion an d i m p lementation o f t h e
capitalisation agreement;
4.2.4.2 after the conclusion and implementation of

the EAL sale agreement, but prior to the
conclusion of the EAH sale agreement, a
duly adopted resolution of shareholders of
EAL authorising the sale by EAL of the EAH
shares and the EAH claim in terms of the
EAH sale agreement;
4.2.4.3 after the conclusion and implementation of

the EAL sale agreement, but prior to the
conclusion of the EAH sale agreement, a
duly adopted resolution of the board of
directors of EAL, authorising the conclusion
a nd implementation o f the EAH s ale
agreement;
4.2.5 EAL shall receive a duly adopted resolution of the

board of directors of K4H, authorising the transfer of
the FAH shares to TOH." (ciause 4.2)
29. T h e r e structure agreement thus provided the framework for the various
agreements that constituted the whole transaction. It emphasised that the
agreements were interdependent.
Page 8 of41
30. O nt he same date (i.e. 23 January 2007), Tuiiow UK and Elandspad entered
-nto an agreement in terms of which Tullow UK sold the shares in the
t axpayer to El and spad for US$543.76 million with effect from
23 January 2007 (clause 3).
31. In t e rms of TOH's resolution thesame amount was owed by Tuliow UK to

TOH. At this stage the following situation pertained: Tullow UK owed TOH
US$543.76 million, Elandspad owed the same amount to Tullow UK and the
underlying assets, i.e. the African oil exploration companies were in the
hands of Elandspad,
32. T h eagreement was signed by Messrs Torr and Viljoen on behalf of Tullow
UK and Elandspad respectively.
33. The claim againstElandspad was then ceded by Tullow UK to TOH as an

out and o u t c e ssion, thereby extinguishing th e i n debtedness of
US$543.76million of Tullow UK to TOH (clause 1.1.3). Eiandspad now
ostensibly owed the money to TOH, because it had bought a company with
underlying assets (the African oil exploration companies) valued at that
amount.
The ca italisation a reement
34. O n2 3 January 2007, in terms of the"capitalisation agreement",TOH issued

one new share to its shareholder (Tullow UK).
35. T h enew share was issued at par of EUR 1 000, and was fully paid up in
cash.
36. T u l low UK siso contributed, transferred and assigned the receivable of

US$543,76million owing by Elandspad to TOH as the share premium
contribution.
37. T O H a c c epted this receivable as a n o n -obligatory share premium

contribution.
Page 9 of 41
)l57 - I 0
The EAH sale a reement I &~ i
38, T h e n ext leg of the transaction (the EAH sale agreement) occurredon
25 January2007, i.e. two days later than the preceding agreements. This
brought EAH, the owner of the African oil exploration assets, back into the
hands of the Tullow group. This was done by TOH purchasing the shares in
EAH from the taxpayer, as weil as the claims that the taxpayer had in respect
of EAH. Clause 3 reads as follows:
"3.1 pr o v ided that:
3.1.1 the EAL sale agreement has been duly implemented;

and

terms of the capitalisation agreement
EAL herebysell
s and TOH hereby purchases the EAH shares
and EAH claim for the EAH Purchase Price with effect from
the EAH Closing Date.
3.2 The E AH Purchase Price shall be apportioned as follows:
3.2.1 the EAH claim shall be taken over at its face value;
and
3.2.2 the EAH shares shallbe taken over at the EAH

Purchase Price, less the amount attributable to the
EAH claim."
39. Th i sclauseemphasises the interdependence of the various agreements.
40. In t e rms of thisagreem

ent TOH 'purchased' the African oil exploration
companies, i.e. the assets of the taxpayer, at a premium of US$ 'l,2 million
(i.e. US$544.96 million) (clause 1.1.8).
41. Pa y ment would be as follows:
"4.2.1 ln discharge of TOH's obligations to pay to EAL the ZAR

equivalent of US$1 200 000.00 (converted to ZAR at the Spot
Rate) of the EAH Purchase Price, TOH shall pay the ZAR
eguivalent of US$1 200 000.00 (convarted to ZAR at the Spot
Rate) in cash, without any deduction or setoff, by way of
electronic transfer in a bank account in the name of EAL with
Firstrand Bank Limited in South Africa nominated in writing by
Page 10 of 41
Q57- II
,i, f
EAL to TQH for such a purpose on or before the EAH Closing

Date ("the EAL bank account");
IH
4.2.2 ln d ischarge of TOH's obligation to pay the balance of the
EAH Purchase Price in a n a mount equal to th e ZAR
equivalent of US$543 760 000 (converted to ZAR af the Spot
Rate), TOH hereby cedes and transfers the Elandspad claim
to EAL,as an out and out cession.
4,3 EA L h ereby accepts the cession and transfer of the Elandspad

claim in terms of clause 4.2.2 in discharge of fhe obligation of
TOH to pay the ZAR equivalenf of US$543 760 000 (converted
fo ZAR at the Spot Rate) of the EAH Purchase Price.
4.4 EAL u n dertakes in favour of TOH and Tullow that it shall not,
avoidance of doubt, TOH, Tullow and EAL agree that after the
third anniversary of the EAL Closing Dafe, EAL shall be entitled
to withdraw or transfer any amount out of the EAl bank account."
(clauses 4.2.1-4.4)
42. Th u s by way of the last of the agreements, the brief nexus between the two
groups was broken. The Tullow group once more owned the African oil
exptoration companies and did not owe the Titan group any money. Similarly,
Elandspad ended up with a wholly-owned subsidiary whose only asset (apart
from the deferred tax asset attributable to EAL's assessed losses) was
Elandspad's own obligation to pay the US$573.76 million purchase price for
that subsidiary.
43. Fu r t hermore this

'indebtedness'bears no relationship with what was actually
bought by Elandspad. The only things of value that were acquired were the
payment of US$1.2 million (which could only be accessed after three years)
and the spes that the taxpayer would be entitled to utilise the assessed loss.
P age 11 of 41
Substance over form )aQ )
44. T h e principles appiicabl'e to the doctrine of substance over form are set out in
the IT grounds (pp 7-11) and are not contentious. However, what is stated
thereafter under the heading 'application to the taxpayer' (pp 16-19) is
incorrect.
45. T h et axpayer points out that the agreements were validly entered into and
implemented. While this is a relevant factor, it certainly is not dispositive of
the issue. The suite of agreements is an elaborate daisy chain designed to
achieve a purpose which remains unstated. The unstated purpose of Tullow
UK was to remove the underlying assets of the taxpayer from South Africa
withou a ' n C G T or STC.The Titan group's purpose was to acquire the
taxpayer's assessed loss, which it achieved by way of the agreements validly
entered into and implemented.
46. T h e doctrine of substance over form allows the Commissioner to scrutinise

both the whole and different parts of a t ransaction/agreement that is
srmulated. The Commissioner holds the view that the effective date of the
EAM sale agreement is in substance the same as that of the other
agreements. There is no reason for the two day hiatus between the EAH sale
agreement and the other agreements other than the creation of the illusion
that EAH and TOW were not connected persons as the time of t he
agreements.
47. T h us, the Commissioner remains of the view that:

47.1. the Tullow group did not intend to dispose of the African oil
exploration companies;
47.2. the Titan group did not intend to acquire the African oil exploration
compa
nies;
47.3. th e t r u e co n sideration f o r t h e tra n saction w a s ne i t her
US$544,96 million, nor US$543.76 million, and to the extent that it is
contended to be either of the two, such amounts are simulated and
were determined in the context of simulated transactions;
47.4. making t h e e f f ective d at e o f the EA W s a l e a g r eement

25 January 2007 was only done in order to create the illusion that,
upon the disposal of the EAH shares and the EAH claim to TOH, the
taxpayerand TOH were notconnected persons;
Page 12 of 41
g>(-i)
65
47,5. the true substance of the ransaction is that the tax a er dis osed of
its subsidi E A H t o a connected erson at a valve that did not
reflect an arm's-ien th rice.
48. I t i s stated in point 2.35.3 of the IT grounds that:"the Taxpayer intended the
Transactions to have the precise effect that they had;", The effect was a
transfer of EAH from ons Tullow group company (the taxpayer) to another
(TOH) for a consideration that did not reflect an arm' s-length price. This is
precisely the effect that was intended by the taxpayer, and is the basis on
which the Commissioner has regarded the transactions.
Conduct of the tax a er o s t the a rsernsnts
49. Af t e r the transaction, the taxpayer, initially a company that held shares in,
managed and provided services to the African oil exploration companies,
was converted to being a holder of investments and a trader in single stock
futures. It was provided with both financial assets and cash by one of the
companies in the Titan group in order to do so.
50. T h e taxpayer made a profit in the 2007 tax year in the form of profit from the
trading of single stock futures, as well as a management fee, facility fee and
interest, which it then sought to offset against the assessed loss.
51. A rev i ew of t he t axpayer's financial statements shows essentially the

following:
51.1. In the 2006 financial year (ths year end was December) the income
consisted of R 1 25000 in interest earned and R 3 4 million for
services rendered to companies in the Tullow Group. The nature of
the taxpayer's business was thus the provision of services to the
Tullow Group.
51.2. In ths 2007 financial year (the year end was September) the taxpayer
earned R 35.8 million in interest, R 10 million as an "inter group
facility fee", R10 million as an "inter group management fse" and
R 9,2 million being a profit on single stock futures. In this year fixed
deposits of R 657 million were introduced into the taxpayer by the
Titan Group and it was noted that the taxpayer was engaged in
investment holding, operated principally in South Africa and held
single stock futures of R 80 million.
51,3, In the 2008 financ:al year the taxpayer earned R85 million in interest
and suffered a I'oss on the disposal of single stock futures in the
Page 13 of 41
amount of R53.3million. The nature of the taxpayer's business
remained unchanged.
51 4. In the 2009 financial year the taxpayer earned R 67 million in interest,
R 3.6 million in dividends and incurred a loss of R 57 million in a joint
venture partnership with Titan Share Dealers (Pty) Ltd. The nature of
business remained unchanged.
51.5. In the 2010 financial year the taxpayer earned interest ln the amount
of R873000 and a profit on single stock futures in the amount of
R 54.7 million. The nature of the business remained unchanged, but
significantly, the fixed deposits that had been Introduced in 2007 were
either liquidated or moved out of the taxpayer.
51.6. In the 2011 financial year the taxpayer declared taxable income
before any assessed loss brought forward of R72.9milion. This
included interest income in the amount of R 5.3 million and a profit on
single stock futures in the amount of R 71.8 million. The nature of the
business remained unchanged.
51.7. In the 2012 financial year the taxpayer declared taxable income
before any assessed loss brought forward of R 8 ,5million. This
included interest income in the amount of R 5.1 million. The nature of
the business remained unchanged, but significantly, the remainder of
the investments that had been introduced since 2007 were either
liquidated or moved out of the taxpayer.
51.8. Thus the taxable income earned in the 2007 to 2012 years amounts
to approximately R200million, which dovetails with the assessed
loss of appr
oximately R198 milllon that was acquired by the Titan
group.
52. agreem
T h e main objective of the Titan group in entering into the ents, which
it achieved using the taxpayer, was to access the assessed loss. Once it had
done so and exhausted the tax benefit of the assessed loss, it withdrew the
activities it had introduced. The taxpayer is now dormant.
53. T h econclusion drawn by the Commissioner remains that the main objective
of the Titan group, upon and subsequent to its acquisition of Elandspad, was
lo shift earnings activities into the taxpayer to utilise the assessed loss and
thereafter to remove the activities once the assessed loss had been utilised,
54. I t is contended on behalf of the taxpayer that the purpose for Elandspad of its
involvement in concluding the agreements, was that the acquisition of the
Page 14 of 41
0 ) ( IQ
shares in the taxpayer would enable Elandspad to ensure that the KAH
/' '
shares and EAW claims were sold to TOH, in respect of which transaction the
taxpayer could realise a profit, which could be distributed to Elandspad as
shareholder (i.e. to generate a profrt of US$1.2 million). This contention is
untenable and not to be believed since the amount of US$1.2 million is
dwarfed by the taxpayer's assessed loss of R 198 million.
CGT
55. T h etaxpayer relied on the participation exclusion provided for in paragraph

64B(2) in order to avoid payment of CGT on the disposal of the shares in
EAH to TOH. lt is the Commissioner's view that it is not entitled to do so.
56. Pa r agraph 64S(2) provides that:
"(2) .. . a p e rson must disregard any capital gain or capital loss

determined in respect of the disposal of any interest in the
equity share in any foreign company (other than a foreign
f inancial instrument holding c ompany o r an interest
contemplatedin paragraph 2 (2)), if-
(a) that person (in the case of a company, together with any
other company in the same group of companies as that
company) immediately before that disposal-
(i) hel d a t least 20% of the equity share capital in

that foreign company; and
(ii) he l d the interest contemplated in sub item (i) for

a period of at least 18 months prior to that
disposal, unless that person is a company arrd
that interest was acquired by that company from
any other company which forms part of the same
group ofcompanies and thatcompany and other
company ln aggregate held that interest for more
than 18 months: ... and
(b) that interest is disposed of to a person who is not a

resident..."
57. A s a point of departure the Commissioner accepts that, on the face of it, the
requirements for paragraph 64B(2) were met in that the taxpayer held all the
Pege 15 of 41
U > l'- I (o
('I
y
shares in EAH (and EAH was a foreign company), and the taxpayer held the
shares for at least 18 months prior to the disposai and disposed of the
shares to a non-resident, i.e. TOH.However ara a h 64B 3 ls an anti-
avoidance rovision which ualifles ara ra h 6482 .
58. T h ere are four requirements that must be met before the participation
exclusion is overridden by paragraph 64B(3).
59. P a ragraph 64B(3) reads as follows:
"(3) Pa r agraph 8(b) applies in respect of any capital gain

determined in respect of any disposal of any interest in the
equity share capital of any foreign company by a person
which isor was disregarded interms ofsubparagraph (2)in
any yearof assessment, if-
(a) t h e f o reign company prior to that disposalwas a

any other
cornpanyin the same group ofcompanies as
that person;
(b) t h ei nterest in the equity share capital of that foreign

relation to that person either before or after that
disposal; and
(c) t h at person-
(i) dis p o sed of that equity share capital for no

consideration or for consideration which does
not reflect an arm's length price, other than a
distribution contemplatedin (ii);
(ii) di s p o sed of that equity share capital by means

of a distribution unless the full amount of that
distribution-
(aa) wa s su bject to or would, but for the

provisions of section 648(5)(e have
been subject to secondary tax on
companies; or
Page 16 of 41
L'~ i- I/,
(bb) w a s i n c luded in t h e i n come of a

shareholder of fhaf company or would
but fo r t h e p r ovisions of section
70(1)(k)(ii)(dd) have been so included;
OI
(iii) d i s p osed o fan y c onsideration received or

accrued from the disposal of that equity share
capital (or any amount received in exchange
therefor) in terms of any transaction, operation
or scheme of which the disposal of the equity
(ea) f o r no consideration ar for consideration

which does not reflect an arm's length
price ( o ther t h a n e dist r ibuf ion
( bb) b y me a n s o t a di s t ribufion b y a
company, unless the full amount of that
distribution-
(A) was subjectto or would, but for

the provision of section 64B(5)(f),
have been subject to secondary
tax on companies, or
(B) w a s included in the income of a

shareholder of fhat company or
section 10(7)(k)(ii)(dd) have been
soincluded; and
(d) that foreign company ceased i n t e r ms of any

transaction, operation or scheme of which the disposal
of the equity share capital forms part, to be a controlled
foreign company in relation to that person or other
company inthe same group of companies as that
p erson ( having r e gard s o lely t o any r i ghts
contemplated in paragraph (e) of fhe definition of
'participation rights'in secfian 9D and wf'fhout having
Page 17 af 41
regard to any election exercised in terms oi section
9D(1'3))."
60, T h e Commissioner remains of the view that sll four

requirem
ents have been
met and thus that the participation exclusion relied upon by the taxpayer is
overridden by paragraph 64B(3). This view is based on the following:
60.1. the first and fourth requirements are not contentious and there cannot
be anydoubt thatthey have been met;
60.2. regarding the second requirement, paragraph B4B(3)(b) provides that

the disposition (of the EAH shares) must have been toa connected
lterson (to ths taxpayer) "either hefore or atter" the disposal:
60.2.1. up until two days before the signature of the EAH sale
agreement on25 January 2007, the taxpayer and TOH were
connected persons. On 23 January2007 the taxpayer
contends they ceased to be connected persons by virtue of
the EAL sale agreement;
60.2.2. however, t he tax p a yer, l n i ts let t e r dat e d

12 September 2011, states that the sale transactions were
was n s i n ificance to be atta hed to the two da d e la

between the transa i s;
B0.2.3. the Commissioner remains of the view that the sole reason
for this two day delay was to ensure that upon the disposal
of the EAH shares and the claims, TOH and EAH did not
appear to be connected persons;
60,2.4, the purpose of the timing was thus to escape the connected
persons requirement in paragraph B48(3)(b);
6 0.2.5. the e f f ective d a t e of t h e E A H sa l e ag r e ement
( 25 January 2007) should t h erefore b e regarded as
simulated;
60,2.6. f urthermore, each of t h e restructure transactions was

interdependent. None of them could have been concluded
without the others. fn &f 3183/1 Ladysmith (Pty) Ltcf and
Another v C/R 1998 (7) SA 942 (A) it was held that the
relevant agreements could not be regarded separately; they
were a l l s i g ned s i multaneously and w er e p l a inly
interdependent to the extent that none of them would have
Page 380f4$
been concluded without the others. Accordingly, each one
had to be considered in the context of all the others to
discover their total effect;
60.2.7. the restructure agreement set out the salient terms of each
of the various restructure transactions, and stated that they
were interdependent;
60.2.8. further evidence of the interdependence is reflected in the

terms of the EAL sale agreement, where the shares ln the
taxpayer were ceded by Elandspad in security and pledged
to Tuiiow UK — to be released upon the payment and
delivery in respect of the sale of the EAH shares and claim in
terms of the EAH sale agreement;
60.2.9. the EAH sale agreement provides still further evidence of the
interdependence, where the a g reement stipulated the
following provisos to the conclusion of the sale:
(a) the implementation of the EAL saic agreement;and

(b) t h e receipt by TOH from Tullow UK of the EIandspad
claim in terms of the capitalisation agreement;
60.2.10. the commercial sense of the timing of the transactions must

be examined. There was no substantive reason for the delay
of two days between the conclusion of the restructure
agreement, the EAL sale agreement, the capitaiisation
agreement, and then the EAH sale agreement, other than
the avoidance of tax;
60.2.11.the timin a n d s e u ence of t he c o ntracts was n ot a

coincidence. It was designed that way, The wording of the
restructure agreement makes it clear that the EAH sale
agreement would be concluded after the other restructure
transactions. The security cession and pledge, and the
undertakingsmade by Elandspad inthe EAL sale agreement
confirm the intention of the p arties to t h e EA L s a le
agreement that the EAH sale agreement would be concluded
after the conclusion of the EAL sale agreement;
60.2.12. the security of the EAH shares and claifn was also retained
by Tuilow UK until the conclusion of the EAM sale agreement
(this was achieved through the wording of the EAL sale
agreement). Tullow UK clearly never intended for the EAH
Pa9e 19of41
l.
g
shares and claim to reside outside the Tullow group, he ce
the security terms included in the EAL sale agreement. If
Tullow UK was concerned about the security of the EAH
shares and claim, which clearly it was, then the taxpayer
could have sold the EAH shares and claim to TOH prior to
the sale of the taxpayer to Elandspad.
60,2.13. there was no commercial purpose to delay the conclusion of

the sale of the EAH shares and claim to TOH until two days
after the conclusion of the EAL sale agreement, other than
the avoidance of tax;
60.2.14. It has been stated in point 2.47 of the IT grounds that:
"Itwas necessary for the agreement in terms of which

the sharesin the Taxpayer were sold to E/andspad, as
we/l as the capitallsation agreement in terms of which
the claimwhich arose on such sale was, according to
the Taxpayer's understanding, contributed to TOH, to be
dulycompleted and implemented before the EAH shares
and claimscould be disposed of."
No grounds,commercial or otherwise, have been provided

for this statement, Indeed, other than the tax b enefit
associated with the sequence and timing of the agreements,
the question remains as to why this particular sequence was
selected when the objectives of the Tullow group could have
been achieved more efficiently through a simple sale or
t ransfer of EAH t o T OH, I t r emains the view o f t h e
Commissioner that the sequence was planned with the sole
purpose of ensuring that the connected person requirement
was not met.
60.2.15. In addition, it should be noted, in response to the assertions

in point 2.51 of the IT grounds, that the Commissioner does
not accept the sequence of the transactions in the form in
which they occurred. This is expressed in the assessment,
and the transactions have been effectively combined by the
Commissioner to reflect their true substance.
60.3. Regarding the third requirement (paragraph 648(3)(c)(i)), the

Commissioner remains of the view that the EAH shares were
disposed of for no consideration or conside tion which did not reflect
an arm's Ien Ih r i ce:
Page 20 of 41
)i57 - 1i
60.3.1. Elandspad never intended to incur a bona ride liability in
e
amount of US$543.76 million to a third party in respect of
the shares in the taxpayer. The interest in EAM constituted
approximately 99.9993 per cent of EAL's total assets (apart
from the deferred tax asset attributable to its assessed
losses). Yet when Eiandspad entered into the EAL sale
agreement, it specTiically foreswore the entire bundle of
rights comprising those shares, leaving the "target" company
in this so-called acquisition with nothing more than valueless
pieces of paper and R 4 000 in cash for a preordained forty
eight hour period;
60.3,2. neither party intended that the EAL sale agreementwould

inter partes h ave e ffect according to i t s t e n or. T h e
transaction was engineered to achieve the illusion that an
arm's length price was paid for the taxpayer, which in turn,
through the workings of the remainder of the restructure
transactions, would ensure that the EAH shares were
disposed of at what appeared to be an arm's length price but
in reality was not;
60.3.3. furthermore, Elandspad paid US$643,76 million to acquire a

company on which it performed no formal ue dili ence, and
on which it relied on a valuation commissioned bythe
directors of the target company to establish the purchase
price — it lacks commercial sense to disregard prudent
commercial protocol when entering into so significant a
transaction;
60,3,4. the taxpayer's response of 14 June 2010 to the request for

an explanation as to how the purchase price in respect of the
EAL sale agreement was determined, simply refers to a copy
of the valuation dated 22 August 2006 performed by Deloitte
8 Touche (the "Deloitte valuation" );
60.3.5. The taxpayer eiaborated as follows, in the same letter (with

respect to the disposal of the EAH shares):
"We are instructed that th e p urchase price was

determined with r eference to a v a l uation d ated
22 August 2006 performed by D e loitte 8 To u che
('Delor'ttes valuation') . Although the valuation relates to
EAL, since tha EAH shares were the predominant asset
Page 21 of41
)51- Z2.
'S
of E4L, its value was regarded as being the sam as
that of the BAH shares."
60.3.6. the Deloitte valuation was prepared for the benefit of the
taxpayer, and addressed to its board of directors. Elandspad
has indicated that in its determination of the market value of
the taxpayer, reliance was placed on this valuation;
60.3.7. it lacks commercial sense for parties to enter into a share

safeagreem
ent where the price is the same as the market
value of an asset of the target company and the purchaser
will never enjoy any of the predominant commercial benefits
of such asset. Yet this is precisely what happened in the EAL
sale agreement;
60.3.8. the EAL sale agreement stated that the beneficial ownership
of, and risk and benefit in respect of, the EAL shares would
pass from Tullow UK to Elandspad upon delivery of the
share certificates o n 2 3 January 2007. However, on
23 January 2007 the taxpayer owned the EAH shares and
claims,and R4 000 incash. Elandspad, however, undertook
to 'not do anything in relation to the EAH shares or EAH
claim, including exercise any rights attaching to those assets
until delivery end payment in terms of the BA H s ale
agreement', some two days later, on 25 January 2007.
Elandspad therefore never enjoyed any of the predominant
commercial benefits associated with its purchase of the
taxpayer as owner of the EAH shares and claims;
60,3.9. Elandspad knew full weil that it would never enjoy these
benefits, and it also knew that in return for it incurring a
liability of US$543.76 million, it would, through the workings
of the EAH sale agreement and the capitalisation agreement,
acquire a subsidiary with US$1.2 million of encumbered
cash, and share capital and reserves of approximately
US$543 million - matched by an unsecured, interest free
receivable from Elandspaditself,
60.3.10. the EAL sale agreement stated that the amount owing in
respect of the sale of the taxpayer's shares shell remain
outstanding as an interest free claim, payable on demand. If
the real intention of the parties to the EAL sale agreem
ent
was the creation of a bona fide liability and receivable of
Page 22 of 41
D57 - 2.3
US$543.76 million in respect of the sale of the taxpayer's
shares, the terms of repayment would have been stipulated
clearly in the EAL sale agreement. and interest would
probably have been charged on the outstanding balance-
irrespective of the cessions that were to take place in terms
of the remaining restructure transactions;
60.3.11. that interest was not levied, nor repayment terms stipulated,
ls reflective of a lack of comm rcial sub tance with respect
to the price;
60.3.12. application for the approval of the group restructure was

submitted to the South African Reserve Bank ("SARB") on
12 July 2006 ("the application" ), using Rand Merchant Bank
as agents. Included in the steps described in the application
were that Elandspad would purchase 100 per cent of the
shares in the taxpayer from Tulfow UK on short-term loan
account, with 'commercial terms and conditions', and that the
loan account remaining between the taxpayer and
Elandspad (the Etandspad claim) could be extinguished by
the taxpayer declaring a dividend to Elandspad;
60.3.13. the 'commercial terms and conditions' stipulated that the

payable was interest free and repayable on demand — terms
that cannot be considered commercial between parties
acting at arm's length.
60.3.14. on 2 October 2006 the SARB advised the taxpayer that it

had no objection to the proposed restructuring, provided that
the rnatter was "cleared with all the appropriate authorities
(specifically including the South African Revenue Services)",
No such clearance was obtained from the South African
Revenue Services ("SARS").
61. In th e c i rcumstances, the Commissioner remains of the view that the

ostensible consideration (US$543.76 million) was a sham as part of the
simulated transactions already discussed.
62. For p resent purposes, it is assumed that the valuation of US$543.76 million
accurately reflects the value of the underlying assets. However, the value
does not equate to the consideration paid. The consideration, if the suite of
agreements is looked at holistically,!s the US$1.2 million paid by TOH when
the Tullow group "bought back" its own assets along with the exchange or
Page 23 of 41
Ir>7 - ~>
I(pg
barter of tax benefits between the Tulfow group and the ENS group Iand later
the Titan group). In return for the US$1.2 million and an assessed toss the
Titan group assisted the Tullow group in getting its assets out of South Africa
without paying the tax it was obliged to pay and provided an indemnification
in respect of the tax consequences that might ensue. That was the true
nature of the transaction and the true consideration. There was never any
intention that the EAH shares wouid be disposed of by the taxpayer for an
amount equal to the valuation.
63. It h a s been explained in point 2.8, and reiterated in point 2.39.5 of the IT
grounds, with respect to the purpose of the transactions, that: "...Elandspad
benefitted from the transaction as the acquisition by Elandspad of the shares
in the Taxpayer allowed Elandspad to take control of the Taxpayer with a
view to the Taxpayer realising its predominant asset, the EAH shares and
claims, resulting in proceeds for the Taxpayer which could be distributed to
Elandpsad."This explanation is flawed in at least lwo respects:
63.1.1. the taxpayer has still not provided any commercial reasons,
other than the obtaining of the tax benefit, why Elandspad
was required to facilitate the Tullow group's restructure
objectives of transferring the EAH shares and claims to TOH;
63.1,2. the proceeds for the taxpayer, from the disposal of its
predominant asset, was in the form of a cession of the
Elandspad claim, and the US$1.2 million cash. In substance
the only value achieved by Elandspad for its involvement in
the restructure arrangements was the tax benefit of the
assessed loss, and the US$1.2 million cash, and not the
value from the realisation of the taxpayer's predominant
asset.
64. I t t herefore remains the Commissioner's view that all four of the requirements
for the application of paragraph 64B(3) have been fulfilled. The capital gain
disregarded as a result of the participation exclusion in paragraph 64B(2)
should therefore be treated as a net capital gain under paragraph 8(b).
65. T h e capital gain is determined as follows (after taking into account the partial
ailowance of the objection (which is detailed later)):
65.1. In terms of paragraph 38(1)(a), where a person disposes of an asset

to a person who is a connected person in relation to that person for a
consideration that does not reflect an arm's length price, the person
who disposed of that asset must be treated as having disposed of
Page24ot41
bS7- ~s.
(o -'-
that asset for an amount received or accrued equal to th mar et
value of that asset as at the date of that disposal;
65.2. the market value of the equity share capital of EAH was regarded by
the taxpayer as being US$543.76 million. It has been asserted in the
grounds that the Commissioner shouid have reduced the value
assigned to the EAH shares by the amount allocated in the EAH sale
agreement to the EAH claim, of R311351 701. However, in the
taxpayer's letter of 14 June 2010, it is stated that: "We areinstructed
that the purchase price (of the EAH shares] was determined with
reference to a valuation dated 22 August 2006 performed by Deloitte
8 Touche ("Deloittes valuation' ). Although the valuation relates to
GAL, si ce the EA s h ares were he redominant esse of EAL its
value was re arded as bein the same as that of the FAH shares"
(emphasis added). It is on this basis that the Commissioner applied
the market value of US$543.76 million to the equity share capital of
EAH.
65.3. the relevant spot rate on 23 January 2007 was USD 1: ZAR 7.11699
(per www.oanda.corn), resulting in proceeds of R 3 869 934 482;
65.4. in the ab ence of an ase cost bein e s e nted b e tax e r ,the

Commissioner adopted 20 per cent of the proceeds as the valuation
date value of the asset in terms of paragraph 26;
65.5. the capital gain is therefore R 3 095 947 585.
66. 7 h e objection fn respect thereof has consequently been disallowed.
Page 25of41
Deemed dividend — STC l(y~g i
67. In t e rms of the provisions of section 64C(2)(a), a dlviderid is deemed to be
declared by a company if an asset is distributed or transferred by that
company to a shareholder or any connected person in relation to that
shareholder. To the extent that the company receives any consideration in
exchange for the asset that was distributed, transferred or otherwfse
disposed of, the distribution is not a deemed dividend.
68. Ha v ing regard to the true substance of the restructure transactions, there
was a transfer by the taxpayer of the EAH shares and claim to TOH on the
23 January2007, in exchange for consideration of US$1.2 million,
other
than by way of a dfvidend or liquidating distribution. At the time of this
transfer, TOH was a connected person to the taxpayer, as well as a
connected person in relation to the taxpayer's shareholder, Tuf low UK.
69. Th e re was thus a deemed dividend to the extent that the value assigned to
the EAH shares and c laims, of U S $ 5 4 3.76 million,exceeds any
consideration received in exchange for those shares. In this instance, the
US$1.2 million was not paid in exchange for the EAH shares; it was paid in
exchange for Elandspad's willingness to facilitate and participate in this
simulated transaction. STC therefore remains payable on the deemed
dividend of US$543.76 million (R 3 906 263088 at the average exchange
rate for January 2007).
70. T h e objection in respect of the STC has consequently been disallowed.
Disallowance of ob ection - Alternative rounds — Pari;IIA of the Act
71. Se c t ion 80f provides that the Cornmfssioner may apply the provisions of Part
IIA of the Act in the alternativ, or in addition to, any other basis for raising an
assessment. Without prejudice to the primary grounds mentioned above, the
Commissioner hereby reserves the right to apply Part IIA of the Act based on
the discussion set out below.
frn errnlssible tax avoidance arran ement
72. I t r e mains the view of the Commissioner that the agreements amount to an
impermissible avoidance arrangement as defined in section 80L.
73. Th e re are four requirements which must be met for sections 80A to BOL to be
applied.
Pags 26 af 41
74. I n the Arst instance one must have an arrangement which is defined "any
as
transaction, operation, scheme, agreement or understanding (whether
enforceable or notj, including all steps therein oi parts thereof, and includes
any of the foregoing involving the alienation of property" (section BOL).
75. Thi s re uirement is met in this case b virtue of the fact th the tax a er
wa a a rtici s t in g num erofa reemens.
Tax benefit

arrangement. This is simply defined as "any arrangement that, but for this
part, results in a tax benefif' (section 80L). Despite the assertions in the
grounds, the tax benefit sought by the taxpayer in this instance is the
avoidance of payment of CGT snd/or STC and this certainly falls within the
definition of "tax benefit" as defined in section 80L, which states that "tax
benefit includes any avoidance, postponement or reduction of any liability for
fax",
77, I th as been asserted In point 2.89 of the IT grounds that:
"/n this regard, if the Transactions were constructed in a manner where

the Taxpayer disposed of its subsidiary FAH to TOH directly, the relief in
paragraph 84B(2) would still have been available to the Taxpayer and
the requirements in paragraph 64B(3) would not have been met on the
basis that the sale would have been effected for an arm's length
consideration..."
This is however a hypothetical comparison. The fact is that the transactions

were not constructed in this manner (although it is submitted that this
appears tobe the most comm
ercially sensible method, ignoring the tax
benefits). In addition, the assertion presupposes that the transaction would
have occurred at an arm's length price, which would have left a bona fide
liability owing by the Tullow group to the taxpayer. Remittance of these
proceeds to Tullow UK would have been subject lo STC, which is what the
taxpayer sought to avoid.
Page 27 of 41
Sole or main ur ose
78. requirem
T h e third ent is that the avoidance arrangement (which is presumed
in terms of section 80G to have been carried out with the sole or main
purpose of obtaining a tax benefit) had as its sole or main purpose the
obtaining of a tax benefit (section 80A).
79. In t e rms of section 80G, an avoidance

arrangem
ent is presumed to have
been entered into or carried out for the sole or main purpose of obtaining a
tax benefit unless and until the party obtaining a tax benefit proves that,
reasonably considered in light of the relevant facts and circumstances,
obtaining a tax benefit was not the sole or main purpose of the avoidance
arrangement.
80. In l i ght of the relevant facts andcircumstancesdiscussed above, the

taxpayer's statements regarding its alleged subjective intent are not sufficient
to rebut the presumption of purpose in this case.
81. Th u s , and without repeating the comments made in the context of the
doctrine of substance over f orm, it remains the Commissioner's view that the
obtaining of the tax benefit was the sole or main purpose of the avoidance
arrangement.
The tainted elements
82. T h efourth requirementis that the avoidance arrangement must meet ~

oe of
four f her sub-re uirements, namely:
82.1. the avoidance arrangement "was enteredinto or carried out by means

or in a manner which would not normally be employed for bona fide
business ur oses ot her than obtaininga tax b enefit" (section
80A(a)(i)); or
82.2. the avoidance arrangement "has created rights or obligations that

would not normally be created between persons dealing at arm' s
length" (section 80A(c)(i)); or
82.3. the avoidance arrangement "lacks cominercial substance in whole or

in part, taking into account the provisions of section 80C" (section
80A(a)(ii); or
Page 28of 41
D&7- " "I
82.4. the avoidance arrangement "would result directly or indirectly in t
Me
misuse or abuse of the provisions of this Act (including the provisions
of this part)"(section 80A(c)(ii)). [my emphasisj
Business u o s es
83, T h es uite of agreements is an elaborate set of arrangements that have no

business purpose other than obtaining a tax benefit. A bona fide business
purpose would, for example, be the purchase of assets by one entity from
another and thus would typically be achieved by way of an
agreem
ent of
sale. To the extent that it might appear that there was a sale of assets (the
African oil exploration companies), the Commissioner remains of the view
that this is a simulation. Once the agreements had been given effect to, the
assets remained in the same hands they were before the agreements were
concluded. The manner (i.e. the scheme of agreements undoing each other)
is not typicai of what would be employed for bona fide business purposes.
Ri hts a d obli ations
84. T h e C ommissioner remains of the view that it is notnormal for persons

dealing at arm's length to create rights and obligations as was done by way
of the suite of agreements. The only reasonable inference is that the
cooperation between the two groups was done in order to obtain tax benefits.
Commercial s bstance
85. I n th e first instance the agreements lack commercial substance taking into
account section 80C which reads as follows:
(1) Fo r the purposes of this Part, an avoidance

arrangem
ent lacks
commercial substance if it would result in a significant tax
benefit for a party (but for the provisions of this Part) but does
not have a significant effect on either the business risks or nat
cash flows of that party apart from any effect attributable to the
tax benefit that would be obtained but for the provisions of this
Part.
Page 29 of 41
U >t >U
(2) For t he purposes of this Part, characteristics of an avoidance

arrangement that are indicative of a l ack of commercial
substance include but are not limited to-
(a) t he le g a l s u bstance or e f fect oi t h e avoidance

anangement as a whole is inconsistent with, or differs
significantly from, the legal form of its individual steps;
or
(b)
86. I h i g hfight a number of aspects of the series of transactions in the context of

section 80C, applied in conjuncton with section 80F:
86.1. The steps in the arrangement Involving the interposition of Elandspad

in the transfer of the EAH shares and EAH claim by EAL to TQH
resulted in a significant tax benefit for the Tullow group, but did not
have a significant impact on its business risks and net cash flows.
Even if the taxpayer's allegations regarding the desire to eliminate
South African "country" risk are accepted for the sake of argument,
the steps in question had nothing to do with the elimination ofthat
risk, but rather with the avoidance of CGT and STC on the transfer of
the EAH shares and EAH claim by EAL to TOH;
86.2. the practical effect of the arrangement as a whole differs significantly

from the legal f orm of its individual steps. This arrangement wes a
single, composite transaction that resulted In a preordained transfer
of the EAH shares and EAH claim by EAL to TOH for a non-arm' s
length consideration; and
86.3. the arrangement also involves round trip financing, as described in

section 80D. The term "funds", as defined by that section, includes
any cash, cash equivalents or any right or obligation to receive or pay
the same. In this instance, the Titan group incurred an obligation to
pay US$543.76million in cash to the Tullow group, whereupon the
Tulfow group immediately transferred the right to receive those funds
back to the Titan group. Section BOF euthorises the Commissioner,
inter alia, to treat persons who are connected persons in relation to
each other as one and the same person for purposes of applying
section 80C. These transfers would have resulted in a tax benefit for
the taxpayer (but for the provisions of the general anti-avoidance
rules ("GAAR')). At the same time, they significantly reduced any risk
page s0 of 41
of non-payment that the Tullow group might otherwise have incurred.'
Finally, the equai and opposite rights to receive USS 543.76 million
and the equal and opposite obligations to pay that amount which
were created between the Titan and Tullow groups also constitute
offsetting or self-cancelling elements in the
arrangem
ent,
87. T h e C o mmissioner thus refnains of the view that the agreements lack
commercial substance.
Misuse a b use
SS. T h e Commissioner remains of the view that the transactions result in the
misuse or abuse of the provisions of the Act, The relevant extracts from the
Comprehensive Guide to Capital Gains Tax (Issue 2), which, with respect to
paragraph 64B(3), is in all material aspects lifted from clause 79(b) of the
explanatorymemorandum on the Revenue Laws Amendment Bill, 2005,
read as follows:
"12.1S Disposal of equity shares in foreign company (paragraph

84B)
12.18.2 Background
ln the 2003 Budget Review', the Minister of Finance

announced his intent to allow the tax-free repatriation
of foreign dividends back to South Africa. This
dividend exemption, known as the 'participation
exemption', ytras subsequently introduced into s
10(1)(k)(ii)(dd). One of th e r equirements for the
exemption is that the South African shareholder
receiving the dividend must hold at least 20% of the
equity share capital and voting rights in the foreign
company (before8 November 2005 = 25%). The
p articipation exemption i s f r e quently found i n
continental European systems, such as Fr a nce,
Netherlands, Belgium and Denmark. This exemption
often exists alongside the tax-free sale of foreign
shares involving the same percentage stake because
' The same resuit would apply lf Titan had secured a bridge loan. actually paid the US$543.76 million tothe Tullow
group, immediately received that cash back from them. snd then usedit to repay the bridge loan, There is no
requirement under SeCtlOn60D that Caah aCtually Change handa. SubaeottOn(2) Speotfieally prayideS, inter alia, that
the section applies to any round tripped amounts without regard to any tracing of funds,the timing or sequence of
the transfer or receipt of the round-tripped amounts, or Iha means by or manner in which those amounts are
Page 31 of 41
bc~-52.
profits from the sale of shares merely represen
l7
retained dividends. Paragraph 64B gives effect to this
tax-free disposal. /t is probably best described as a
'participation exclusion', since it applies to b o th
capital gains and losses. /n broad terms South
African shareholders are allowed to make a tax-free
sale of foreign shares in a foreign company in which
they hold an interest of at least 20% as long as that
sale is made to non-residents. The latter requirement
encourages the repatriation of foreign funds to South
Africa.
12.18.5 Capita/ gain on disposal of CFC to connected

person (paragraph 848(3))
The capital gains participation exclusion operatesin

conjunction with th e participation exemption for
foreign dividends contained in s 10(1)(k)(ii)(dd). The
exclusion of capita/ gains is intended to facilitate
internal restructurings of offshore foreign subsidiaries.
The exclusion also allowed for the sale of certain
foreign shareholdings to foreign persons with the
expectation that the /oss of foreign shareholdings
would be r eplaced with valuable consideration.
H owever, i t became a p parent t hat s o m e
multinationals were seeking to use the exclusion so
as to divest themselves of their foreign subsidiaries
with foreign subsidiary ownership transferring abroad
with /f'tt/e or no consideration remaining within South
Africa's j u risdiction.
These t ransactions also
contained schemes that attempted to avoid any STC
so as to achieve a wholly tax-free divestiture. /n order
to remedy these concerns paragraph 64B(3) and (4)
were introduced. These anti-avoidance measures
cameintooperation on 8 November 2005.
Under paragraph 648(3) any capital gain disregarded

as a result of the participation exclusion in paragraph
transferred or received. The fact that the parties chose to deal in obligations to pay snd rights to racehe cash,
rather than in cash itseif, is thus irrelevant to the app.ication of this section.
Page 32 of 41
57 ~z
84S(2) or (5) is treated as a net capital gain under
paragraph 8(b) in certain circumstances. The
treatment of an amount es e net capital gain has the
e ffect that n oc a pital losses for t h e y e a r of
assessment orassessed capitalloss brought forw ard
from the preceding year of assessment may be set
off against the amount."
89. It r e mains the view of the Commissioner that the taxpayer sought to achieve
precisely what the Legislature intended to curb through the introduction of
paragraph 64B(3).
90. T h et axpayer, part of a multinational group, sought to use the participation

excfusion in paragraph 648(2) to divest itseff of its foreign subsidiary, with
little or no consideration remaining within South Africa's fiscal jurisdiction.
91. It th e r efore remains the C ommissioner's v iew that t h e avoidance

arrangement resulted directly in the misuse or abuse of the provisions of the
Act, specNicalfy the provisions of paragraph 64B(2) and paragraph 64B(3).
S
~ umma
92, Th e r e i s a n a v oidance arrangement as defined, and this avoidance

93. In a d dition, the avoidance arrangement would not normally be employed for
bone fide business purposes, has created rights and obligations that would
not normalfy be created between persons dealing at arm's length, lacks
commercial substance and has resulted directly in the misuse or abuse of
the provisions of the Act.
94. T h ere is therefore an i

mpermiss
bl
ie avoidancearrangement asdefined.
~The rerned
95. T h e r e m ediesa vailabfe to d ea l w it h a n "impermissible avoidance
arrangement" are set out in section 80B, which reads as follows:
"Tex consequences ofimpermissible tax avoidance,-
(1) The C o m missioner may determine the tax consequences

under this Act of any impermissible avoidance arrangement
for any party by-
Page 33 of 41
5S7- 3tl.
(a) disr e garding, combining, or re-characterising an steps
in or pa r t s of the impermissible avoidance
arrangem
ent;
(b) d i s r egarding any accommodating or tax indifferent
party or treating any accommodating or tsx Indifferent
partyand any other part
y as one or the same person;
(c) deeming persons who are connected persons in

relation to each other to be one and the same person
for the purposes of determining the tax treatment of
any amount;
(d) re a l locating any gross income, receipt or accrual of a

capital nature, expenditure or rebate amongst the
parties;
(e) re - c haracterising any gross income, receipt or accrual

of a capital nature or expenditure; or
(fl tre a ting the impermissible avoidance arrangement asif

it had not been enteredinto or carried out, or in such
other manner as in the circumstances of the case the
Commissioner deems appropriate for the prevention or
diminution of the relevant tax benefit.
(2) S u b j ect to the time limits imposed by section 79, 79A(2)(a)

snd 81(2)(b), the Commissioner must make compensating
adjustments that he or she is satisfied are necessary and
appropriate to ensure the consistent treatment of all parties to
the impermissible avoidance anangement."
96. ln o r d er to i ve effect o the true substa ce of t e restructure tr nsaction,

the Commissioner maintains his intention to apply the provisions of section
808 to the arrangement to disregard the steps in, and parts of t he
arrangements involving the interposition of Elandspad in the transfer of the
EAH shares and EAH claim by the taxpayer to TOH, more particularly:
96.1. he intends to disregard the disposal by Tullow UK of the taxpayer's

shares to Elandspad for an amount of US$543.76 million (the EAL
sale agreement), i.e. disregard the actual quantum;
Page 34 of 41
96.2. he intends to disregard Tullow UK's cession of the Elandspad claim to
TOH (part of the capitalisation agreement);
96.3. he intends to combine the EAW sale agreement and the EAL sais
agreement, with an effectiv date of 23 January 2007; and
96.4. he intends to disregard TQH's cession of the Elandspad

claim to the
taxpayer (part of the EAH sale agreement).
97. T h e r esult of the above is to reflect the true substance of the restructure
transactions, which is that there was a transfer by the taxpayer of the EAH
shares and claim to TOH on the 23 January2007 for a non-arm's length
consideration. At the time of the transfer, TOH was a connected person to
the taxpayer, as well as a connected person in relation to the taxpayer's
shareholder, Tullow UK.
98. Fr o m the perspective of CGT, the effect of the above is to bring the
transaction, whereby the shares in EAH were disposed of by the taxpayer,
within the provisions of paragraph 648(3). All four of the requirements for the
application of paragraph 648(3) were fulfilled, in particular TOH and the
taxpayer were connected at ths time of disposal of the EAH shares, and the
consideration received or accrued did not reflect an arm's length price. The
capital gain disregarded by the taxpayer as a result of ths participation
exclusion in paragraph 64B(2) is therefore treated as a net capital gain under
paragraph 8(b).
99. Th e r e rs also a deemed dividend in terms of the provisions of section

64C(2)(a) equal to the value assigned to the EAH shares and claims of
US$543.76 million.
100. The calculations of the caprtal gain In respect of CGT, and STC payable in
respect of the d eemed dividend are set out in the assessment and the
disallowance of objection in respect of the p
rimary grounds above.
101. The objection in respect of the alternative grounds is therefore disallowed.
Partial allowance of ob ection — understatement enalt
102. Th e C ommissioner's position remains that i n t h e p r esent case,

an
"understatement" exists as there was an
omission from both the IT return
and the STC return. The taxpayer has also made a number of incorrect
statements. It sought, by way of the suite of agreements, to misrepresent the
Page 350f 41
Q~7~ c
facts to SARS. For example, the taxpayer created the pretence of the sale f
assets by the Tullow group where in fact there was no intention of a real
transfer of assets at ail.
103. In response to the assertions tn points 3.7 lo 3.9 of the IT grounds, the
original and additional assessments made by the Commissioner were made
to correct the prejudice that occurred as a result of the omission and
incorrect statements described above. Therefore, insofar as the application
of the alternative grounds of assessment is concerned (section 808), it is
irrelevant when these powers were utilised by the Commissioner,
104. In addition, the Commissioner denies that the provisions of section 270(6) of
the Tax Administration Act No.28 of 2011 as amended (the "TA Act") apply,
as is contended in the grounds, The application of Part IIA of the Act requires
the issue of a notice as provided for in section 80J(1) and precludes any
further action by the Commissioner until at least such time as the taxpayer
indicates that no response to that notice will be forthcoming. In the present
case, the audit investigations into the arrangements were only concluded in
2013 and the notice was issued on 16 November 2012.
105. The understatements created "shortfails" as defined in section 222(3) of the

TA Act, and the relevant facts and circumstances were considered when
evaluating which of the behaviours contained in section 223 of the TA Act
applied in the present case.
106. As the matter did not form part of any voluntary disclosure
made by the
taxpayer, and this is the first instance of an adjustment to taxable income
under the TA Act, the adjustments were viewed as a "standard case".
107. With respect to the application of the doctrine of substance over form, it
r emains the view of the C ommissioner that the taxpayer deliberately
concealed the true substance of the transactions undertaken, and In doing so
knowingly created a sham as described earlier with the intention of evading
tax. The taxpayer knowingly Intended to reduce the amount of tax that should
have been paid.
1 08. W ith respect to the alternative grounds, it remains the view of the
Commissioner that the a rrangement referred to o bjectively met t h e
requirements of section BGA in that the taxpayer knowingly intended to
reduce the amount of tax that should have been paid. Reasonably
considered in I'ight of the relevant facts and circumstances, it remains the
Commissioner's view that the taxpayer knowingly entered into the avoidance
Page 36 of41
557- S
arrangement with the sole or main intention of obtaining a tax benefit which
I Jp.
would not otherwise have been available to it.
109. The intention of a company is determined by reference to the expressions of

its directors. In the case of the taxpayer, and as mentioned above, there was
a changing of the guard. The Tullow directors' obJective was to engineer the
exit of the African exploration companies from South Africa without paying an
exit charge and/or to avoid doing so in the future. The intention of the Titan
directors was to acquire the assessed loss. The ENS group facilitated this.
110. Regarding CGT and STC, the intention of the taxpayer was clearly to
engineer a way ofremoving the assets from South Africa without paying tax.
The conduct of the taxpayer remains, however, more blameworthy when one
considers the acquisition of the assessed loss. There was no reason for
Elandspad (through the ENS group) to be involved in the transaction at all. It
sought out the transaction and did so in order to acquire the assessed I'oss
and facilitate the exit of the African exploration companies from South Africa
without paying an exit charge and/or to avoid doing so in the future. The
Titan group sought out the opportunity to acquire the assessed loss and in
doing so involved itself in a transaction that had nothing to do with it.
111. Fo r the reasons set out above the behaviour category "Intentional tax
evasion" remains applicable to the taxpayer.
112. I n terms of section 223 oi the TA Act, the Commissioner is entitled to impose
a penalty equal to 150 per cent of the relevant shortfall as determined under
section 222(3) of the TA Act.
113. H owever, the extenuating circumstances pertaining to the matter have been
considered by the Commissioner and you are advised that, based on this
consideration, the C ommissioner has decided to r emit pert o f the
understatement penalties imposed in the assessment as provided far in
section 270(6D)(a) of the TA Act, thus reducing the understatement penalty
percentage from 150 per cent to 100 per cent in respect of both the IT and
STC assessments.
Page 37of4l
Disallowance of ob'ection - Interest tt (
114. I nterest was levied in terms of the provisions of section 89quat in respect of
the CGT assessment, and section 64B(9) in respect of the STC assessment.
115. The Commissioner is of the view that the taxpayer's contention that the
exclusion in paragraph 64B(2) is applicabie, has not been contended on
reasonable grounds.
116. I n a ddition, the assertion in the grounds that the taxpayer relied on
professional advice cannot be considered by the Commissioner since the
taxpayer has declined to provide copies of such advice to the C
ommissi
oner
on the basis of legal privilege.
117. The objection in respect of the interest levied in terms of section 89quat is
therefore disallowed.
118. As regards the objection to the interest imposed in terms of section 648(9),
the taxpayer is incorrect in stating that the discretion afforded to the
Commissioner in section 89(2) af the Act applies to interest on unpaid STC.
Section 89(2) provides inter alia as follows:
'"If the taxpayer fails to pay any tax in full within the period for
payment notified by the Commissioner in the notice of assessment or
within the period for payment prescribed by this Act, as the case mey
be, interest shall unless he Co m issioner bavin
r ar d o t h e
circumstances o thecase rants an xtension of such
riod a d
otherwise dir cts be aid b the tax a er..."(emphasisadded)
119. The discretion provided for in section 89(2) clearly only applies to interest
imposed by section 89(2) and not to interest imposed in terms of section
64B(9). The provisions of section 648(11) do not operate so as to apply
section 89(2) In addition to or in lieu of section 64B(9).
120. Th e objection to the interest imposed in terms of section 648(9) has

therefore been disallowed.
Page38 of 41
b57- Sa
Clarification of facts
IRQ
121. The taxpayer has identiTied a number of aspects it describes as factual
errors. These are addressed below.
Reference to the Titan Group

122. The taxpayer points out that on the reievant dates that the restructure
agreements were concluded, the shareholder of Elandspad was the Enact
Trust, and that subsequently, on 20 Ap
ril 200T, Titan acquired ali the shares
in Elandspad from the Enact Trust, Thus, and assuming this information is
correct, on the relevant dates that the restructure agreements were
concluded, the Titan group did not hold shares in either Elandspad or the
taxpayer.
123. At the time the trustees and beneficiaries of the Enact Trust were various
directors of ENS and thus, on the face of it, the taxpayer was controlIed by
the trustees of the trust, and not by the Titan group. Elandspad itself was
incorporatedon 20 January 2006 and was a dormant, 'shelf company up to
the data of the restructure agreements.
124. R egarding the involvement of the Enact Trust, the taxpayer has not
explained:
124.1. why it was involved in the transaction and what role it played;
124.2. the terms of theagreem

ent between it and Titan;
124,3. whether or not the Enact Trust was a nominee of sorts for Tftan;
124.4. what benefit the Enact Trust, and its trustees or beneficiaries,
received by virtue of its involvement in the transaction.
125. l n any event, the assessment raised by the Commissioner is neither founded
on nor rendered invalid by the involvement of the Enact Trust.
Increased cost of the restructuring

126. Th e following statement in the assessment has been referred to in the
grounds: "apart from the anticipated tax benefi'ts, this so-ceiled "optimal
method" increased the cost of the restructuring by approximately R 0 million,"
This statement has been denied in the grounds on the basis that ft is not
apparent what the statement is based on, and in particular, what the
transaction is that the Commissioner has compared the transactions to in
order to arrive at his conclusion regarding the increased cost.
Page 39 of 41
127. I clarify:
127.1. Tullaw UK concluded that the optimal (i.e. best) way ta achieve its
objectives was by way of the restructure agreements;
1 27.2. The Tullow group p aid t h e t a xpayer US$1.2 mNion for i t s

participation in the agreements, which amount appeared to be the
only benefit the taxpayer derived from the transaction; and
127.3. The involvement of Elandspad in the restructuring (through the so-

called "optimal method") thus had the effect of Increasing the cost of
the restructuring to the Tullow group by US$1,2 million. The amount
equates to approximately R9 million after applying an average
ZAR:USD exchange rate.
Receipt ot'STC assessment

128. The assessment is considered to be the relevant notice of assessment for
STC (as well as IT).
Partial allowance of ob ection- a iicatlon of ara ra h 43

129. I t has been alleged in the grounds that the Commissioner, in calculating the
capital gain, did not take into account the provisions of paragraph 43.
130. Paragraph 43(1) states that where a person during any year of assessment
disposes of an asset for proceeds in a currency other than the currency of
the Republic after having incurred expenditure in respect of that asset in the
same currency, that person must determine the capital gain or capital loss on
the disposal in that currency and that capital gain or capital loss must be
translated to the currency of the Republic by applying the average exchange
rate for the year of assessment in which that asset was disposed of or by
applying the spot rate on the date of disposal of that asset.
131. The Commissioner calculated the caplital gain after taking the provisions of
paragraph 43(1) into account, however, with respect to the translation rate
used by the Commissioner, the Commissioner appli
ed the average
USD:ZAR exchange rate for January 2007 instead of the spot rate as at
23 January 2007.
132. The relevant spot rate on 23 January 2007 was USD 1: ZAR 7.11699 (per
www,oanda.corn), resulting in proceeds of R 3 869 934482.
Page 40 of 4f
133. A s s tated in the assessment, in the absence of any base cost being
presented by the taxpayer, twenty per cent of the proceeds was adopted as
the valuation date value of the asset in terms of paragraph 26.
134. Th e c apital gain is t hus revised to a n a m ount of R 3 0 9 5 947585,

representing a reduction of R29062885 from the capital gain per the
assessment.
135. The objection has consequently been allowed insofar as the assessment is
affected by this reduction in the capital gain.
Any reasons or explanations which have been advanced in support of the disallowance
and partial allowance are without prejudice to any additional reasons or explanations
which the Commissioner may advance in the future.
You may appeal against this decision by completing the prescribed Notice of Appeal
(ADR2) form.
' N" '" " " » " ' I *

may be requested through the following channels
• At your nearest SARS branch
• By c alling the SARS Contact Centre
The appeal must be delivered to the Clerk of the Tax Board, Mandy Botha using any of
the following channels:
• by post to Private Bag X9188, Cape Town, 8000
delivered to 22 Hans Strijdom Avenue, Project 166 Building, Cape Town, 8000
• emailed to mbotha5©sara.gov.za
The assessment becomes final If no appeal is filed within 30 days after the date of this
notice.
Should you have any quenes relating to this fetter, please contact the SARS official
mentioned above.
Sincerely
Alistair Kane Gran • i r

ISSUED ON BEHALF OF THE COMMISSIONER THE SOUTH AFRICAN
REVENUE SERVICE
P'Q
~FF SARS DBST MAkAGEMRkT
FINAL DEMAND
Enquiries should be addressed to SAaS
ENERGY AFRICA PTY LTD Name: Sharlena eaglano

PO BOX S700 Tel No: 011 602 3457
TYGERVALLEY Fax No: 011 602 4020
7S36 Krnaib sgagiano@sars.gov.za
2014E)6-26
Dear Taxpayer
FINAL DEMAND
Registered Name: ENERGY AFRICA PTY LTD

Trading Name: ENERGY AFRICA PTY LTD
Co reg.: 1995/007140/07
I refer to the letter dated 29 May 2014 sent on behalf of Energy Africa Pty Ltd ("the Taxpayer" ), wherein it was
confirmed that no notice of appeal would be submitted by the Taxpayer in respect of the partial disallowance of the
objections to the assessments pertaining to the tax debt below.
T etaxd t e r t i i n t o ereleva tasses entsi ther f e f i nal.
According to the records South African Revenue Service (SARS) You have failed to pay your tax debt of
R 3 264 145 690-16
Full payment must be made within M business days from the date of this notice. Failure to make payment will result
in:
The appointment of any third party who owes you money or holds money for you to immediately pay the
money to SARS,and / or
A civil judglnent being entered against you in which casea warrant of execution
the Court to attach and sell your assets. may be issued for the Sheriff of
When you make a payment, use the payment reference number(s) (PRN) column below.
• - •
. •
Taxpa er Reference Number TaxTypa paN Amount Due~

9134134718 Assess 9134134718700000000
9134134718 R 1 612 405 122.32s
STC 9134134718519950901 R 1 651 740 567.84
TOTAL DUE R 3 264 145 690.16
~ Please note that interest is levied ot the prescribed rate on outstanding income Tax ond VAT on the~
dail bosis in respect of outstanding PAVE,UlF, SDL ond STC. fr ~gg of a month and on
a~
formlo: OMFMDW
The following payment channels are available to you:
• SAR S eFiling
• SARS e@syFile Employer
• Electronic Fund Transfer (EFT)
• A t a br anch af ABSA, FNB, Nedbank or Standard Bank
• Cheque payment at aSARSbranch (only if under R 100 000)
Please use the full name "South African Revenue Service" and not the abbreviation "SARS" when making cheque
payments.
Ta avoid legal action, proof of payment(s) must be e-mailed to:
E-mailed address: sgagiana@sars.gov,za
Should you have any queries relating to this notice, please contact the SARS official mentioned above.
Sincerely
ISSQto ON BEHAI.F
OF THE COMMISSlONER FOR THE SOUTH AFRICAN REVENUE SERVICE
Perm 0: DMF0017W
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F fe, Kyle
From: Gert Vitjoen cgert@kirkhamventures.corn>

Sent 24 October 2014 08:42 AM
To: Alistair Kana
Cc: Rauten Hofmeyr
Subject Energy Africa Ltd - 20l3 Accounts
Attachments: Energy Africa - 30 April 2013.pdf
Dear Alistair,
As discussed yesterday, please find attached please find managements accounts, dated 30 April 2013. We
are in the process of getting these accounts audited for the Sep 2103 financial year end. Given that the
company is dormant, these accounts will effectively be restated and audited for the Sep year end.
We noticed that you are in the Western Cape. Should you wish to discuss any aspects, kindly let us know.
I
wishes
FINAL LIQUIDATION Case No. 1646/

(WESTERN CAPE DIVISION, CAPE TOWN) IRj
CAPB TOWN: Tuesday 12 April 2016
Before the Honourable Mr Justice Schippers
THE COMM S SIONBR FOR SOUTH AFRICAN REVENUE

SERVICE Applicant
ENERGY AFRICA (PTY) LTD Respondent

Registration No. M1995/007140/07
' Registered ofEce:
36 Stellenberg Road
PAROW INDUSTRIA
Western Cape
Having heardthe Legal Representative for the Applicant

aiid having read the documents filed of record;
IT IS ORDERED:
That the rule nisi granted on 26 February 2016 is made absolute and the
Respondent is placed under Final Liquidation.
PQU TH DIVISION
M -Pti- 'l5
Ti N / K DAPSTAD
L."" w' 4 P '".«<i=%OF
COURT
330 Norton Rose Fulbright South A&ica Inc

CAPB TOWN
/ec
~<547$
$0uth African Revenue Service 1
D RSYIIAMAO E N R N Y
Noticeo PersonaIUa i ty
PER E-MAIL: chwieaetad©global.co.xa Enquiries

must be addressed to:
• . •
AND Name: Allstalr Kane

Tel Number. O21 413 6366
HAND DELIVERED Faas 021 413 6504
E-maH.' akanegsars.gov.za
Referencenumberlsi: 9 1 34134718
Date: 2016-10-25
Dear Sir
RE: NOTI O F PERSONAL LIABILITY IN TE MS OF SECTION 18 F THE TAX

ADMINISTRATION ACF 2011 "TAA"
TAXPAYER/ VENDOR: Energy Africa (Pty) Ltd ("the taxpayer")

REGISTRATION No: 1995/007140/07
TAX TYPE(5): Income Tax
REFERENCE NUMBER(S): 9134/134/71/8
TOTAL AMOUNT OF TAX DUE: R3 495 705 686
PERSON ASSISTING IN THE DISSIPATION

OF ASSETS: Dr Christoffel Hendriit Wiese
ID NUMBER: 4109105008085
CAPACITY: Person as defined in Section 183 of the TAA
1. Acc o r ding to the records of the South African Revenue Service (hereilnafter referred to
asSARS),
you area person who has knowingly assisted in the dissipation of the taxpayer's assets in order
to obstruct the collection of a tax debt of the taxpayer as provided for in section 183 of the TAA.
Z. You are therefore regarded to be liable, jointly and severally, for the tax debt with the taxpayer
to the extent to which your assistance reduced the taxpayer's assets available to pay its tax debt.
3. Outs t anding Tax liability
3.1. T h e Taxpayer is indebted to SARS in the amount of R3 495 705 686 (inclusive of penalties and/or
interest but exclusive of interest which accrues after the date of this notice).
3.2, T h is tax liability as at the date of this letter was incurredas a result of the non-payment of
income tax (" IT" ) and secondary tax on companies ("STC").
4. Re a sons why you are considered to be personally liable
4.1. O n 26 September 2011, SARS assessed the taxpayer for IT in respect of its 2007, 2008 and 2010
years.These assessments were issued pursuant to an audit of the taxpayer in respect of its
utili
sation of an assessed loss. The assessment isannexed as Annexure "A".
4.2. On 13 December 2011,the taxpayer filed an objection to the assessment. The objection is
annexed as Annexure "B".
4.3. On 23 February2012, SARS disallowed the objection. The disalfowance of objection Is annexed
as Annexure "C",
4.4. O n 10 April 2012, the taxpayer appealed the disallowance of objection. The appeal is annexed as
Annexure "0".
4.5. On 28 September 2012,SARS assessed the taxpayer in respect of the 2011 tax year in the
amount ofR20 430 934.72, The notice of assessment is annexed asAnnexure "K".
ts i
4.6. O n 16 November 2012, SARS addressed a letter to the taxpayer, the purpose of which was three-
fold:
4.6.1.to notify the taxpayer that SARS intended to make a number of adjustments in
respectofthe taxpayer's 2007 IT tax assessment;
4 .6.2. to communicate to th e t axpayer various findings pursuant to a n a udit o f

information provided by the taxpayer;
4.6.3. to issue a notice in terms of section 803(1) of the Income Tax Act No. 58 of 1962
("the ITA").
4.7. The adjustmentsthat SARS intended to make to the assessment that had been leviedin respect
of thetaxpayer's 2007 tax year were to include in the assessment of CGT on the disposal of a
subsidiary of the taxpayer, the amount of R453 126 518.00 in terms of paragraph 8(b) read with
paragraph648(3)ofthe eighth schedule to the ITA and to issue an assessment forthetaxpayer's
2007 tax year in respect of STC on a deemed dividend in the amount of R487 205 316.00 ln terms
of section 64C(2)(a) of the ITA,
4.8. S A RS also cornrnunicated its determination that the transactions in question amounted
to,inter
alia, an impermissible tax avoidance arrangement as defined in section 80L of the ITA. The letter
is annexed as Annexure "F".
4.9. O n 15 April 2013 the taxpayer's attorney addressed a detailed letter to SARS disputing any tax
liability to SARS. This letter is annexed as Annexure "6".
4.10. In theknowledge of the above correspondence, allof which was addressed to the taxpayer,
and/or its attorney, at a time that you were a director of the taxpayer, you knowingly assisted
the taxpayer in dissipating Its only asset of value in order to obstruct the collection of a tax debt.
You did this by way of assisting in a suite of transactions which had the effect of separating the
taxpayer from Titan Premier Investments Proprietary Limited ("TPI"), of which you were alsoa
director, (in other words, the taxpayer ceased to be a subsidiary of TPI) and divesting the
taxpayer of is only asset of value (a loan claim of R216 600 000 against Titan Share Dealers (Pty)
Ltd ("TSD")) by way of a declaration of a dividend in specie. I elaborate:
4.10.1 On 19 April 2013, at a meeting of the board of directors of the taxpayer, it was recorded
that;
The Company hos a loan claim against Titan Share Dealers (Pty) Ltd in the amount
of R216600000.00 (Two Hundred andSixteen Million and Six Hundred Thousand
Rand) (" loan claim" ).
2. T h e Company wishes to distribute in specie the Loan Claim on

19 April 2013 ("the
Distribution" ) to Eiandspod investments (Pty) Ltd ("Elandspad ), in its capacity as
the holder of all the ordinary shares in the Company."
The Board of DIrectors then resolved that:
"3. The Company is authorised to make the Distribution to Elandspad

4. Pur s uant to the authorisation in clause 3 above, the Company hereby resolves to
make the Distribution to Elandspad on 19 April 2013."
The resolution is annexed as Annexure "H".
4.11. You assisted the taxpayer in divesting itself of its only real asset, being this loan claim against
TSD.
4.12. The taxpayer communicated the distribution to its holding company, Elandspad, in a letter on
the same day. This letter is annexed as Annexure "I".
4.13. On thesame day, the Board of Directors of Elandspad made a sim ilarresolution except that the
distribution by way of a dividend In specie was to the holding company of Elandspad, being TPI.
This resolution and the letter, both dated 19 April 2013, are annexed as Annexures "j" and "K".
4,14. The taxpayer, having been stripped of its remaining real asset, was then disposed of by TPI. This
was effectedby way of;
4.14.1 the heads of agreement between TPI and Friedshelf 1395 (Pty) Ltd ("Friedshelf") dated 19
April
2013 and signed by yourself. Iannex the heads ofagreementasAnnexure "L",
4.14.2 a resolution of the board of directors of TPI, of which you were one, also on 19 April
2013. The resolution is annexed as Annexure "M",
4.14.3 a resolution of the board of directors of Friedshelf on the same day. The resolution is
annexed as Annexure "N and,
4.14A a sale of shares agreement between TPI, Friedshelf, Frederick Rauten Mofmeyr and Gert
Christiaan VIljoen entered into on or around 6 May 2013 and signed by yourself. The sale
of sharesagreement isannexed as Annexure "0".
4.15. On orabout 19 April2013 you resigned as a directorofthe taxpayer and Elandspad.
5. I hi g h light the events subsequent to 19 April 2013:
5.1. O n 2 1 August 2013, SARS addressed a finalisation of audit letter to the taxpayer in which the
taxpayer's additional IT liability for the 2007 year of assessment was fully described. The letter is
annexed as Annexure "P".
5.2. On 11 Septemb
er 2013, the attorney for the taxpayer responded to the finalisation of audit
letterinforming SARS inter alia that the taxpayer did not have any cash or assets and was
therefore not able to make payment of the "disputed tax". This letter is annexed as Annexure
ter
tl p
5,3, On 26 November 2013,SARS assessed the taxpayer in respect of the 2012 tax year in the amount
of R3 261 106,06, The notice of assessment is annexed as Annexure "R".
5.4. O n 3 April 2014, SARS issued a partial allowance of objection in respect of the taxpayer. The
partial allowance of objection Is annexed as Annexure "S".
5.5. On 15 IVlay2014, the attorney for the Enact Trust addressed a letter to SARS providing
information and relevant material (including the documents referred to in 4.14 above). The
letteris annexed as Annexure 'T".
5.6. On 29 May 2014,the attorney for the taxpayer addressed a letter to SARS Inw hich itinformed
SARS that an appeal to the partial disallowance of objections would not be submitted. The letter
is annexed as Annexure "U".
5.7. On 26 June2014, SARS issued a final demand for payment of R3 264 145 690.16 by the taxpayer.
The demand is annexed as Annexure "V".
5.8. O n 30 July 2014, SARS obtained a certified statement in terms of section 172(1) of the TAA in the
amount ofR3 278 805 100.00. The certified statement is annexed as Annexure "W".
5.9. O n 24 October 2014, the taxpayer informed SARS that it was dormant. The email is annexed as
Annexure "X".
6, The eventssubsequent to the suite oftransactions dated 19 April2013 show thatyou knowingly
assisted the taxpayer in the dissipation of its only real asset of value, regardless of the fact that
the suite of transactions outlined above would obstruct the collection of a tax debt of the
taxpayer.
7. Req u est for written representations
7.1, You are therefore given an opportunity to submit a comprehensive written representation,
detailing why you should not be held liable in your personal capacity, to the extent that your
assistanceobstructed the payment oF a tax debt by the taxpayer.
7.2. Y o u r response should be submitted to the designated SARS official whose details are reflected
on page one of this letter within 14 (Fourteen) business days from the date of this letter. Your
response may be submitted to the designated SARS official by emailing it to the emaii address or
faxing it to the number reflected on page 1 of this letter or by hand delivering it to 19'" Floor, 22
Hans Strijdom Avenue, Foreshore, Cape Town for the attention of the designated SARS official.
8. Leg a l Action
8.1. F a i lure by you to satisfy SARS that you are not liable to the extent that your assistance
obstructed the collection of the tax debt of the taxpayer may result in SARS attributing liability to
you in your personal capacity in terms of section 183 of the TAA.
8.2.
• • S h ould this happen, SARS will initiate formal recovery steps against you in your personal capacity
as contemplated in section 184(1) of the TAA, which may include, but shall not be limited to:
8.2.1. SARS issuing a notice in terms of section 179(1) of the TAA to your bank, and or any
other personwho may hold funds that are due to you; and
8.2.2. the filing of a certified statement in terms of section 172 of the TAA with the relevant
competentcourtand execute on such judgment.
9. I n the event
that you may have any enquiriesregarding this notice or to make arrangements to
deliverthe material requested, you may contact the designated SARS oNcialon the telephone
numbers as indicated on page 1 of this letter.
Yours faithfully
Alistair Kane P s Ri e demann

Specialist: Audit Specialist: High Court Litigation Unit
For the Commissioner of the SOUTH AFRICAN REVENUE SERVICE

South Atrican Revenue Service l! i~>
DES% NANAOEIIIEl4T
No ce Persona.La I ty
6nquirles must be addressed tcn

P f R E-NIAIL: Isaktsd©global.co.za
AND Name: Alistair Kane

Tel Number. 021 413 6586
HAND DELIVERE D Fax Number, 021 413 6504
8-mall: akanel!sara.gov.za
Reference numherisi: 9134134718

Date: 2016-10-25
Dear Sir
RE: NOTICE OF PERSONAL LIABILITY IN TERMS OF SECTION 183 OF THE TAX

ADIVIINISTRATION ACT 2011 "TAA"
TAXPAYER / VENDOR: Energy Africa (Pty)Ltd ("the taxpayer")

RKGISTRA'nON No: 1995/007140/07
TAX TYPE(S): Income Tax
REFERENCE NUIVISKR(S): 9134/134/71/8

OF ASSETS! Mr Isak Hendrik johannes Visagie
ID NUMBER: 5910155011088
1. Acc ording tto

he records of the South African Revenue Service (hereinafter referred to as SARS),
you are a person who has knowingly assisted in the dissipation of the taxpayer's assets in order
2. You a re therefore regarded to be liable, jointly and severally, for the tax debt with the taxpayer
to theextent to which your assistance reduced the taxpayer's assetsavailable to pay its tax debt.
3. Out s t anding Tax liability
3.1. T h e taxpayer is indebted to SARS in the amount of R3 495 705 686 (inclusive of penalties and/or
3.2. T h is tax liability as

at the date of this letter was incurred as a result of the non-payment of
Income tax (" IT" ) and secondary tax on companies ("STC"),
years. These assessments were issued pursuant to an audit of the taxpayer in respect of its
utili
sation of an assessed loss. The assessment, which was addressed to you, is annexed as
Annexure "A".
4.2. On 13 December 2011,the taxpayer filed an objection to the assessment. The objection written
on behalf of the taxpayer, in terms of a power of attorney signed by you, Is annexed as Annexure
4.3. O n 23 February 2012, SARS disallowed the objection. The disallowance of objection is annexed
as Annexure "C",
4.4. O n 10 April 2012, the taxpayer appealed the disallowance of objection. The appeal is annexed as
Annexure "D".
• •
amount of
R20 430 934.72. The notice ofassessment is annexed asAnnexure "E".
4.6. O n 16 November 2012, SARS addressed a letter to the taxpayer, the pur pose of which
was three-
fold:
4.6.1. tonotify the taxpayer that SARS intended to make a number of adjustments in
respect of the taxpayer's 2007 IT tax assessment;
4.6.2. to communicate to the taxpayer various findings pursuant to an audit of
4.6.3. to issue a notice in terms of section 80(J)(1) of the Income Tax Act hlo, 58 of 1962
("the ITA").
4.7. T h e adjustments that SARS intended to make to the assessment that had been levied in respect
of thetaxpayer's 2007 tax year were to include inthe assessment of CGT on the disposal of a
paragraph64B(3)of the eighth schedule to the ITA and to issue an assessment forthe taxpayer's
2007 taxyear in respect of STC on a deemed dividend Inthe amount of R487 205 316.00 in terms
4.8. SARS also communicated its determination that the transactions in question amounted to, inter
alia, an inipermissibte tax avoidance arrangement as defined in section 80L of the ITA. The letter,
addressed to you, is annexed as Annexure "F".
4.9. On 15 April2013 the taxpayer's attorney addressed a detailed letter to SARS disputing any tax
liability to SARS, This letter is annexed as Annexure "G".
4.10. In theknowledge of the above correspondence, allof which was addressed to the taxpayer,
and/orits attorney, at a time that you were the secretary and publicofficerof the taxpayer, you
knowingly assisted the taxpayer in dissipating its only asset of value in order to obstruct the
collectionof a tax debt. You did this by way of assisting in a suite oftransactions which had the
effect of separating the taxpayer from Titan Premier Investments Proprietary Limited ("TPI"), (in
other words, the taxpayer ceased to be a subsidiary of TPI) and divesting the taxpayer of is only
asset of value (a loan claim of R216 600 000 against Titan Share Dealers (Pty) Ltd ("TSD")) by way
of a declaration of a dividend in specie. I elaborate:
that:
"I. The Company has a loan claim agoinst Titan Share Dealers (Pty) Ltd in the amount
of RZI6600 000.00 (Two Hundred and Sixteen Million ond Six Hundred Thousand

I9 Aprl/2013 ("the
Distribution" ) to Elandspad investments (Pty) Ltd ("Elandspad"), in its capacity as
the holder of all the ordinary shares in the Company,"
The Board of Directors then resolved that:
"3. The Companyis authorised to make the Distribution to Elandspad

4. Pur s uant to the authorisation in clause 3 above, the Company hereby resolves to
make the Distribution to Eiandspad on 19 April 2013."
The resolution is annexed as Annexure "H",
TSD,
the same day.This letter is annexed asAnnexure "I".
4.13. On the same day, the Board of Directors of Elandspad made a similar resolution except that the
distribution by way of a dividend in specie was to the holding company of Elandspad, being TPI.
This resolution and the letter communicating the distribution, both dated 19 April 2013, are
annexed as Annexures "3" and "K".
4.14. The taxpayer, having been stripped of its remaining real asset, was then disposed of by TPI. This
was effectedby way of:
4.14.1 the heads of agreement between TPI and Friedshelf 1395 (Pty) Ltd ("Friedshelf") dated 19
April 2013 and signed by yourself. I annex the heads of agreement, signed by you as
witness, as Annexure "L",
4.14.2 a resolution of the board of directors of TPI, also on 19 April 2013. The resolution is
annexed as Annexure "M",
4.14.3 a resolution of the board of directors of Friedshelf on the same day, The resolution Is
annexed as Annexure "N" and,
4,14.4 asale of shares agreement between TPI, Frledshelf,Frederick Rauten Hofmeyr and Gert
Christiaan Viljoen entered into on or around 6 May 2013 and signed by yourself. The sale
of sharesagreement, signed by you as witness, is annexed as Annexure "0",
5,1. O n 21 August 2013 SARS addressed a finalisation of audit letter to the taxpayer in which the
annexedasAnnexure "P".
5.2. On 11 September 2013,the attorney for the taxpayer responded to the finaiisation of audit
letter informing SARS inter alia that the taxpayer did not have any cash or assets and was
thereforenot able to make payment of the "disputed tax". This letter is annexed as Annexure
II II
Q
5.3. On 26 November 2013,SARS assessed the taxpayer in respect of the 2012 tax year in the amount
of R3261 106.06. The notice of assessment is annexed as Annexure "R".
5.4. O n 3 April 2014, SARS issued a partial allowance of objection In respect of the taxpayer. The
partial allowance of objection is annexed as Annexure "S",
5.5. O n 1 5 Ma y 2014, the attorney for the Enact Trust addressed a letter to SARS providing
Information and relevant material (including the documents referred to in 4.14 above). The
letter is annexed as Annexure "T".
5.6. On 29 May 2014,the attorney for the taxpayer addressed a fetter to SARS inwhich it informed
5.7. On 26 June2014, SARS issued a finaldemand for payment of R3 264 145 690.16 by the taxpayer.
5,8. O n 30 July 2014, SARS obtained a certified statement in terms of section 172(1) of the TAA in the
amount ofR3 278 805 100.00, The certified statement Isannexed as Annexure "W".
5.9. On 2 4 October 2014, the taxpayer informed SARS that it was ormant.
d Theemailis annexed as
Annexure "X".
The eventssubsequent to the suite oftransactions dated 19 April2013 show thatyou knowingly
taxpayer.
7.1. Y o u are therefore given an opportunity to submit a comprehensive written representation,

assistanceobstructed the payment of a tax debt by the taxpayer.
7.2. Y our response should be
submitted to the designated SARS official whose detaiis are reflected
on page one of this letter within 14 (Fourteen) business days from the date of this letter. Your
response may be submitted to the designated SARS official by emailing it to the email addressor
faxing it to the number reflected on page 1 of this letter or by handdelivering it to 19 Floor, 22
Hans Strijdom Avenue, Foreshore, Cape Town forthe attention of the designated SARS official.
8. Leg al Action
8.1. F a ilure by you to satisfy SARS that you are not liable to the extent that your assistance
you inyour personal capacity in terms of section 183 of the TAA.
8.2. S h ould this happen, SARS will initiate formal recovery steps against you in your personal capacity
8.2.1,SARS issuing a notice in terms of section 179(1) of the TAA to your bank, and or any
other person who may hold funds that are due to you;
competentcourt and execute on such Judgment; and
8.2.3, SARS may institute proceedings for the sequestration of your personal estate as
provided for In terms of section 177 of the TAA.
9. In the event that you may have any enquiries regarding this notice or to make arrangements to
deliver the material requested, you may contact the designated SARS official on the telephone
numbers asindicated on page 1 ofthis letter.
Yours faithfully
Alistair Kane Pe s Riedemann

Specialist: Audit Specialist: High Court Litigation Unit
For the Commissioner of the SOUTH AFRICAN REVENUE SERVICE

~if SARS
DRBY MAN A Q E IIRNT

Noteeo Persona Uabiity
PER E-MAIL:gert©kirkhamventures.corn Enquiries must be addressedto:
AND Name: Alistair Kana

Tel Number. 021 413 6586
HAND DELIVERED
fax ftumber, 021 413 6504
K-maib akana
sasara.gov.za
1'.
Reference numberls): 9134134718

Date: 2016-10-2S
Dear Sir
RE: NOTI E OF PERSONAL LIABILITY IN TERNIS OF SECTION 183 OF THE TAX

ADMINISTRATION ACI' 2011 "TAA"

REGISTRATION No: 199S/007140/07
TAX TYPE(5): Income Tax
REFERENCE NUMBER(S).' 9134/134/71/8
TOTAL AMOUNT OF TAX DUE: R3 495 70S 686
PERSON ASSISTING INTHE DSSIPATION

OF ASSETS: Mr Gert Christiaan Viljoen
ID NUMBER: 6908105042087
CAPACITY' Person as defined in Section 1$3 of the TAA
1. Acco r ding to
the records of the South African Revenue Service (hereinafter referred to as SARS),
you are a person who has knowingly assisted inthe dissipation of the taxpayer's assets in order
Z. You are therefore regarded to be liable, jointly and severally, for thetax debt with the taxpayer
to the extent to which your assistance reduced the taxpayer's assetsavailable to pay its tax debt.
3. Out s t anding Tax liability
.QL
3.1. T h e Taxpayer is indebted to SARS in the amount of R3 495 705 686 (inclusive of penalties and/or
3,2. T h is tax liability as at the date of this letter was incurred as a result of the non-payment of
income tax (" IT" ) and secondary tax on companies ("STC").
4.1. O n 26 September 2011 SARS, assessed the taxpayer for IT in respect of its 2007, 2008 and 2010
years. Theseassessments were issued pursuant to an audit of the taxpayer in respect of its
utili
sation of an assessed loss. The assessment isannexed as Annexure "A".
4.2. On 13 December 2011,the taxpayer filed an objection to the assessment. The objection is
annexed as Annexure "8".
4.3. O n 23 February 2012, SARS disallowed the objection. The disallowance of objection is annexed
as Annexure "C",
4.4. On 10 April
2012,the taxpayer appealed the disallowance of objection. The appeal is annexed as
Annexure "D".
4.5. O n 2 8 September 2012, SARS assessed the taxpayer in respect of the 2011 tax year in the
amount ofR20 430 934.72. The notice of assessment isannexed as Annexure "K".
4.6. On 16 November 2012,SARS addressed a letterto the taxpayer,the purpose of which was three-
• •
fold:
respectofthe taxpayer's 2007 IT tax assessment;
4.6.2. to communicate to the taxpayer various findings pursuant to an audit of

4.6.3. to issue a notice in terms of section 80())(1) of the Income Tax Act No. 58 of 1962
("the ITA").
4,7. The adjustmentsthat SARS intended to make to the assessment that had been levied in respect
of thetaxpayer's 2007 tax year were to include in the assessment of CGT on the disposal of a
subsidiary of the taxpayer, the amount of R453 126 518,00 in terms of paragraph 8(b) read with
paragraph648(3) of the eighth schedule to the ITA and to Issue an assessment forthe taxpayer's
2007 taxyear in respect of STC on a deemed dividend inthe amount of R487 205 316.00 in terms
of section 64C(2)(a) of the ITA,
4.8. S ARS also communicated its determination that the transactions in question amounted to, inter
4.9, On 15 April2013, the taxpayer's attorney addressed a detailed letter to SARS disputing any tax
liability to SARS. This letter is annexed as Annexure "6".
4.10. With knowledge of the tax debt to which the above correspondence pertains you knowingly
assisted the taxpayer in dissipating its only asset of value in order to obstruct the collection of a
tax debt. You did this by way of assisting in a suite of transactions which had the effect of
separating the taxpayer from Titan Premier Investments Proprietary Limited ("TPI") (In other
words, the taxpayer ceased to be a subsidiary of TPI) and divesting the taxpayer of is only asset
of value (a loan claim of R216 600 000 against Titan Share Dealers (Pty) Ltd ("TSD")) by way of a
declaration of a dividend in specie. I elaborate:
4.10.1 On 19Aprii2013, at a meeting of the board of directors of the taxpayer, it was recorded
that:
The Company has a loan claim against Titan Share Dealers (Pty) Ltd in the amount
of R216 600000.00(Two Hundred and Sixteen Million and Six Hundred Thousand
Rand) ("laan claim").
2. T h e Company wishes ta distribute in specie the Loan Claim

on 19 April 2013 (" the
Distribution" ) to Elandspad Investments (Pty) Ltd ("flandspad"), in its capacity as
the holder of all the ordinary shares ln the Company."
"3. The Company is authorised ta make the Distribution to Elandspad

4. Pur s uant to the outhorisation in clause 3 above, the Company hereby resolves to
make the Distribution to Elandspad on 19 April 2013."
The minute reflecting the resolution, signed by you as director, is annexed as Annexure
lt CJ
H
TSD.
the same day. This letter, signed by you as director, is annexed as Annexure "I".
4.13. On thesame day, the Board of Directors of Elandspad made a similar resolution except that the
This resolution and the letter communicating the distribution, both dated 19 April 2013 and
signed by you as director, are annexed as Annexures"j" and "K",
4.14. Thetaxpayer,having been stripped of itsremaining

real asset, was then disposed of by TPI. This
4.14.1 the heads of agreement between TPI and Friedshelf 1395 (Pty) Ltd ("Friedsheif") dated 19
April2013 and signed by yourself. I annex the heads of agreement, signed by you as
director of the latter, as Annexure "L",
4.14.3 a resolution of the board of directors of Friedshelf on the same day. The resolution,
signed byyou as director,is annexed as Annexure "N" and,
4.14.4 asale of shares agreement between TPI,Friedshelf, Frederick Rauten Hofmeyr and Gert
4.15. On or about 19 April 2013, you were appointed as a director of the taxpayer and Elandspad.
5.1. O n 21 August 2013, SARS addressed a finalisation of audit letter to the taxpayer in which the
5.2. O n 1 1 September 2013, the attorney for the taxpayer responded to the finalisation of audit
letter informing SARS inter alia that the taxpayer did not have any cash or assets and was
thereforenot able to make payment of the "disputed tax". This letteris annexed asAnnexure
tl qH
of R3261 106,06. The notice of assessment isannexed as Annexure "R".
5.4. O n 3 April 2014, SARS issued a partial allowance of objection in respect of the taxpayer. The
partial allowance of objection is annexed as Annexure "S".
5.5. On 15 May 2014, the attorney for the Enact Trust addressed a letter to SARS providing
information and relevant material (Including the documents referred to tn 4.14 above). The
5.6. On 29 May 2014,the attorney forthe taxpayer addressed a letter to SARS in which it informed
5.7. On 26 June2014, SARS issued a fi

• • naldemand for payment of R3 264 145 690.16 by the taxpayer.
amount of R3 278 805 100.00. The certified statement is annexed as Annexure "W".
5.9. O n 24 October 2014, you Informed SARS that the taxpayer was dormant. The email is annexed
as Annexure "X",
6. The e vents subsequent to the suite of transactions dated 19 April 2013 show that you knowingly
taxpayer.

assistanceobstructed the payment of a tax debt by the taxpayer.
7.2. Y o ur response should be submitted to the designated SARS official whose details are reflected
on page one of this letter within 14 (Fourteen) business days fromthe date of this letter. Your
response may be submitted to the designated SARS ofAcial by emailing it to the email address or
Hans Strijdom Avenue, Foreshore, Cape Town for the attention of the designated SARS official.
8. Le g al Action
8.1. Failure byyou to satisfy SARS that you are not li

able to the extent that your assistance
8.2.1. S*RS issuing a notice in terms of section 179(1) of the TAA to your bank, and or any
otherperson who may hold funds that are due to you; and
competentcourt and execute on such judgment; and
8.2.3. SARS may institute proceedings for the sequestration of your personal estate as
provided for in terms of section 177 of the TAA.

. c7
9. In the event
that you may have any enquiries regarding this notice or to make arrangements to
deliver the material requested, you may contact the designated SARS oNcial on the telephone
numbers as indicated on page 1 of this letter.
Yours faithfully
Alistair Kane Pe R i e d emann
Specialist: Audit Specialist: High Court Utigation Unit
0 For the Commissioner of the SOUTH AFRICAN REVENUE SERVICE

~<SAHS
DRBTIIANAO EIIINT
Notice Persona a ty
pER F-MAii.: rauten@kirkhamventurea.corn Enquiries must be addressedttn
AND Name: Alistair Kane

Tel Number. 021 413 6686
HAND DELIVERED Fax Number. 021 413 6504
f-malh akanefesars.gov.za
Reference numherls): 9134134718

Date: 2016-10-25
Dear Sir
RE: NOTICE OF PERSONAL. LIABILITY IN TERMS OF SECTION 183 OF THE TAX

ADMINISTRATION ACT 2011 "TAA"

TAX TYPE(S): Income Tax

OF ASSETS: Mr FrederickRauten Hofmeyr
ID NUMBER: 69U065018089
1. Acc ording to the records of the South African Revenue Service (hereinafter referred to as SARS),
you are a person who has knowingly assisted linthe dissipation of the taxpayer's assetsin order
2.— You are therefore regarded to be liable, jointly and severally, for the tax debt with the taxpayer
to the extent to which your assistance reduced the taxpayer's assets available to pay its tax debt.
3. Out s t anding Tax liabHIty
3.1. T h e Taxpayer is indebted to SARS in the amount of R3495

705 686 (inclusive of penalties and/or
3.2. T h is tax liability as at the date of this letter was incurred as a result of the non-payment of
Income tax (" IT" ) and secondary tax on companies ("STC").
years. Theseassessments were issued pursuant to an audit of the taxpayer in respect of its
utili
satlon ofan assessed loss.The assessment isannexed asAnnexure "A".
4.2, On 13 December 2011,the taxpayer filed an objection to the assessment. The objection Is
annexed asAnnexure "8".
4.3. On 23 February2012, SARS disallowed the objection. The disallowance of objection is annexed
as Annexure "C".
4.4. O n 10 April 2012, the taxpayer appealed the disallowance of abjection. The appeal is annexed as
Annexure "D".
amount ofR20 430 934.72. The notice of assessment is annexed as Annexure "E",
r
4.6. O n 16 November 2012, SARS addressed a letter to the taxpayer, the purpose of which was three-
fold:
respect of the taxpayer's 2007 IT tax assessment;
4.6.2. to communicate to the t axpayer various findings pursuant ta an audit of
4.6.3. to issue a notice in terms of section 80(J)(l) of the income Tax Act No. 58 of 1962
("the ITA").
4.7. The adjustmentsthat SARS intended to make to the assessment that had been levied In respect
of thetaxpayer's 2007 tax year were to include inthe assessment of CGT on the disposal of a
paragraph 64B(3) of the eighth schedule to the ITA and to issue an assessment for the taxpayer's
2007 taxyear in respect of STC on a deemed dividend inthe amount of R487 205 316,00 in terms
4.8. S ARS also communicated Its determination that the transactions in question amounted to, inter
4.9, O n 15 April 2013, the taxpayer's attorney addressed a detailed letter to SARS disputing any tax
liability to SARS. This letter is annexed as Annexure "G",
4.10. With knowledge ofthe tax debt to which the above correspondence pertains,you knowingly
assisted the taxpayer in dissipating its only asset of value in order to obstruct the collection of a
tax debt, You did this by way of assisting in a suite of transactions which had the effect of
separating the taxpayer from Titan Premier Investments Proprietary LImited ("TPI") (in other
words, the taxpayer ceased to be a subsidiary of TPI) and divesting the taxpayer of is only asset
of value (a loan claim of R216 600 000 against Titan Share Dealers (Pty) Ltd ("TSD")) by way of a
declaration of a dividendin specie. I elaborate:
that:
The Company hos a loon claim against Titan Shore Dealers (Pty) Ltd in the amount
of R216 600000.00(Two Hundred and Sixteen Million and Six Hundred Thousand

19 April 2013 ("the
Distribution") to Elandspod Investments (Pty) Ltd ("Elandspad"), in its capacity as
the holder of oil the ordinary sharesin the Company."
"3. The Company is authorised to make the Distribution to Elandspad

4. Pur s uant ta the authorisation in clause 3 abave, the Company hereby resolves to
make the Distribution ta Elandspad an 19 April 2023."
The minute reflecting the resolution, signed by you as director, is annexed as Annexure
tl II
H
TSD.
4.12. The taxpayercommunicated the distribution to its holding company, Elandspad, in a letter on
the same day. This letter, signed by you as director, is annexed as Annexure "I".
4.13. On the same day, the Board of Directors of Elandspad made a similar resolution except that the
This resolution and the letter, both dated 19 April 2013 and signed by you as director, are
annexed asAnnexures "j" and "K".
4.14. The taxpayer, having been stripped of its remaining real asset, was then disposed of by TPI. This
4.14.1 the heads of agreement between TPI and Friedshelf 1395 (Pty) Ltd ("Friedshelf') dated 19
April2013 and signed by yourself. I annex the heads of agreement, signed by you as
witness, as Annexure "l.",
4.14.3 a resolution of the board of directors of Frledshelf on the same day. The resolution,
signed byyou as director,is annexed as Annexure "N and,
4.14.4 a sale of shares agreement between TPI, Friedshelf, Frederick Rauten Hofmeyr and Gert
4.15. On or about 19 April 2013, you were appointed as a director of the taxpayer and Elandspad,
5,1. On 21 August2013, SARS addressed a finalisation of audit letter to the taxpayer in which the
5.2. O n 1 1 September 2013, the attorney for the taxpayer responded to the finalisation of audit
letter informing SARS Inter alia that the taxpayer did not have any cash or assets and was
therefore not able to make payment of the "disputed tax". This letter is annexed as Annexure
of R3261 106.06. The notice of assessment isannexed as Annexure "R".
5,4. O n 3 April 2014, SARS issued a partial allowance of objection in respect of the taxpayer. The
partial allowance of objection Is annexed as Annexure "S".
5.5. On 15 IVlay2014, the attorney for the Enact Trust addressed a letter to SARS providing
information and relevant mater/al (including the documents referred to in 4.14 above). The
5.6. O n 29 May 2014, the attorney for the taxpayer addressed a letter to SARS in which it i nformed
5.7. O n 26 June 2014, SARS issued

a final demand for p ayment ofR3 264 145 690.16 by the taxpayer.
amount ofR3 278 805 100,00. The certified statement is annexed as Annexure "W".
5.9. O n 24 October 2014, the taxpayer informed SARS that it was dormant. The email is annexed as
Annexure "X".
6. The eventssubsequent to the suite of transactions dated 19 April2013 show thatyou knowingly
taxpayer.

assistanceobstructed the payment ofa tax debt by the taxpayer.
7.2. Your response should be submitted to the designated SARS official whose details are reflected
on page one of this fetter within 14 (Fourteen) business days from the date of thisletter. Your
response may be submitted to the designated SARS official by emailing it to the email address or
Hans Stri
jdom Avenue, Foreshore, Cape Town forthe attention ofthe designated SARS official,
8. Leg a l Action
8.1. F a ilure by you to satisfy SARS that you are not liable to the extent that your assistance
as contemplated in section 184(1) of the TAA, which may include, but shaH not be limited to:
8.2.1. SARS issuing a notice In terms of section 179(l) of the TAA to your bank, and or any
other person who may hold funds that are due to you;
competentcourtand execute on such judgment; and
8.2.3. SARS may institute proceedings for the sequestration of your personal estate as
provided for in terms of section 177 of the TAA.
9, Inthe eventthat you may have any enquiries regarding this notice or to m ake arrangements to
deliver the material requested, you may contact the designated SARS official on the telephone
numbers as Indicated on page 1 of thisletter.
Yours faithfully
Alistair Kane P tr ied e mann

Specialist: Audit Specialist: High Court Utigation Unit
For the Commissioner of the SOUTH AFRICAN RBIENUE SERVICE

wt i
ja hV"
afrtca
1 NOnh • erf Sttuere
Loop Street Foreshore Ceqe Town 8001
P 0 Box 2283 Cape Town South Africa 8000
docex 14 Capo Teem
let +2721 410 2500
info@ENSafrica cont ENEefrica.corn
Comfnissioner for the South African Revenue Service P Dachs I N Smit

19th Floor, ttatrref
22 Mans Strijdom Avenue
Foreshore, Cape Town
Attention: Mr Allstalr Kana 16 January 2017
Dear Alistalr
RE: NOTICE OF IN TERMS OF S E C TION 184, READ WITH SECTION 183 OF THE TAX
ADMINISTRATION ACT, 2$ OF 2011
We refer to the notice issued to Dr CK Wiese in terms of section 184 of the Tax Administration Act, 28 of
2011 ("TAA") (" Notice" ).
In terms of the Notice, the South African Revenue Service (nSARS n) requests Dr Wiese to fnake written
representations detailing why he should not be held liable in his personal capacity in terms of section 183 of
the TAA ( nsection 1$3 n), on the basis of allegations by SARS that ha knowingly assisted in dissipating the
assets of the taxpayer, Energy Africa (Pty) Ltd("EAL") inorder to obstruct the co$ection of a tax debt of EAL.
We set out below certain background facts relevant to the matter, as well as the written representations, on
behalf of our client, Dr Wiese.
Background facts
1.1, D u ring January 2007, Tullow Oil Pic and its subsidiaries ("Tuilow
Group" )undertook a
restructure of its African operations. At the relevant time, EAL forfned part of the Tullow
Group.
1.2. At t h e t ime of such restructure, Titan Premier Investments (Pty) Ltd ("TPln) and its
subsidiaries (" TitanGroup" )and Dr Wiese did not hold any interest in the Tuiiow Group, nor
were they involved in any manner whatsoever with the Tullow Group or the restructure of its
operations
1,3. N e arly 3 months after the Tuilow restructure, Dr Wiese and Mr Visagie were approached by
representatives of the Enact Trust (a third party not related to the Titan or Tullow Groups)
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which, at that time, was the sole shareholder of Elandspad Investments (Pty) Ltd
("Elsndspsd") which, in turn, held 100% of the shares in EAL. TPI was presented with a
proposal to acquire the shares in Elandspad from the Enact Trust. In April 2007, TPI
acquired the shares in Elandspad, and indirectly in EAL, for cash in the amount of
R8.6million.
1A. T h e "tax debt' to which the Notice refers arose from additional assessments raised by SARS
on EAI. on 21 August 2013 in respect of secondary tax on companies ("STC") and income
tax (imposed on a capital gain) in its 2007 year of assessmsnt ("STC Assessment" and
"CGT Assessment" ) in respect of the Tullow restructure transaction ("the relevant tax
debt" ). In other words, the events giving rise to the re'levant tax debt arose before ths Titan
Group or Dr Wiese had any Involvement with or connection to EAL.
1.5, T h e STC and CGT Assessments were preceded by a letter of audit findings and section 80J
notice issued by SARS on 16 November 2012, ENSafrica responded to such letter on
15 April 2013 on behalf of EAL.
1.6. O n ce TPI had purchased the shares in Elandspad, EAL traded in single stock futures in
respect of which profits were realised and it also earned interest income, which gave rise to
profits of approximately R192 million. In order to commence trading in single stock futures,
EAL was funded by Titan Share Dealers (Pty) Ltd ("TSD"), a company which forms part of
ths Titan Group. The Titan Group therefore introduced assets, in the form of cash, to EAL to
commence its business, after the acquisition of Elandspad.
1.7. SA R S disallowed the sst-off of these profits against the assessed loss of EAL in its 2007 to
2011 years of assessment in terms of section 103(2) of the Income Tax Act, 58 of 1962 (ths
"Act") by raising additional assessments on 26 September 2011 on the basis that the sole or
main purpose for the Titan Group acquiring the shares in EAL was to utilise the assessed
loss ("Section 103(2) Assessments" ). EAL disputed the Section 103(2) Assessments. The
tax debt in that context ("the section 103(2) tax debt ) was secured bya pledge of shares
by TPI, The disputes arising from the Section 103(2) Assessmsnts in each of the relevant
years of assessment were subsequently settled with SARS and the settlement amounts
were paid in fu i.
1.8. On 1 8 April 2013, Dr Wisse and Advocate JD Wiese resigned as directors of Elandspad and
EAL and Messrs Vlljosn and Hofmsyr were appointed as directors of these companIes.
1,9. T h e S ARS ailegations that Dr Wiess assisted in dissipating assets of EAL relates to the
declaration of a dividend on 19 April 2013, pursuant to which a loan of R 216,600,000 of
EAL against TSD wa s d i stributed in sp e cie to i t s s h a reholder, Elandspsd (the
"Distribution").
'l.10. On 19 April 2013, Messrs Viljoen and Hofmeyr, in their capacities as the directors of EAL
and Elandspad, respectively, authorised the Distribution.
2. Repr e s entations
2.1. S e ction 183 of the TAA provides that:
a @~gjtt of the taxpayer, the person is jointly and severally liable with the taxpeyei for the tax debt
to the extent that the person's assistance reduces the assets available to pay the taxpayer's tax
debt"(our emphasis).
2.2. F o r section 183 to apply, the following requirements must be satisfied:
2.2.1. Ther e must be a tax debt of a taxpayer;
2.2.2. The r e must be a dissipation of the taxpayer's asset(s);
2.2.3. The p erson to whom section 183 is to be applied ("the relevant person") must
have knowledge of the tax debt;
2.2.4. The r e levant person must knowingly assist in dissipating the asset(s) of the
taxpayer,
2.2.5. The r elevant person must do so in order to obstruct the collection of the tax
debt,
2.3. I n the Notice SARS contends that these requirements were satisfied on the following bases:
2.3,1. SARS contends that the relevant tax debt constituted a "tax debt" falling within
section 183. SARS also refers in the Notice to the section 103(2) tax debt but it
is not clear whether or not SARS contends that this tax debt constituted the "tax
debt" for the purposes of the application of section 183;
2.3.2. SARS contends that there was a dissipation of EAL's asset, namely its loan
claim of R 216,600,000 against TSD, by declaring this as a dividendin specie to
Efandspad, on 19 April 2013;
2.3.3, SARS contends that Dr Wiese had knowledge of the relevant tax debt;
2.3.4. SARS contends that Dr Wiese knowingly assisted in the alleged dissipation of
the asset;
2.3.5 SARS contends that Dr Wiese did so in order to obstruct the collection of the
relevant tax debt.
IQ
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2.4. N o ne of the requirements of section 183, to which we have referred above, was satisfied. In
particular;
At tha relevant time, there was no tax debt of EAL (we deal with this in
paragraph 3 bal'ow);
2.4.2. There was no dissipation of an asset of EAL (we deal with this in paragraph 4
below);
24,3, Dr WIese did not have knowledge of the relevant tax debt (we deal with this in
paragraph 5 below);
2.4.4. Dr Wiese did not assist in the alleged dissipation of an asset of EAL, whether
knowingly or otherwise (we deal with this in paragraph 6 below); and
2.4.6. The alleged dissipation of an asset was not done in order to obstruct the
collection of the relevant tax debt (we deal with this in paragraph 7 below).
3. Ther e was no "tax debt" at

the relevant time
3.1. F o rs ection 183 to apply,a "tax debt must have been in existence at the time when tha
alleged "dissipation" of assets took place (in this case, the Distribution).
3.2. It l s clear from the section that this refers to the "tax debt" which has not been collected.
Therefore, the existence of the section 103(2) tax debt is irrelevant in this context. As stated
above, that tax debt was settled with SARS and the settlement amounts were paid in full.
3.3. T h eq uestion, therefore, is whether the relevant tax debt existed at the time of the alleged
dissipation of the asset, namely on 19 April 2013.
3.4. A d etailed analysis of the applicable provisions of the TAA and the Act, as well as cases
decided upon by our courts are attached as Annexure A, In summary, Dr Wiese submits as
follows:
3.4,1 The term "tax debt" is defined in section 1 of the TAA as an amount referred to
in section 169(1) of the TAA. In terms of section 169(1)"(a Jn amount of tax due
or a able in term of a a ct is a tax debt due to SARS for the benefit of the
National Revenue Fund'.
3.4,2. Therefore, for there to be a "tax debt", there must be an amount of tax due or
payable. An amount of tax arising in terms of the Act cannot be due or payable
until an assessment has been issued for that amount
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3.4.3. This is clear from Metcash Trading Ltd v Commissioner for South African
Revenue Service 2001 (1) SA 1109 (CC) n which the Constitutional Court
stated the following, at paragraph (16] page 1121G-H, in respect of the
determination of a tax liability under the VAT Act and income tax mors
generall'y;
the first significant point to note is that VAT, quite ur>li%e income tar does nol ive rise
t o alialiili on l on c a n e l has been made (our emphasis).
3.4.4. In Esselmann v Secretary of Finance 1991 (3) SA 681 (Nm SC)) the Namibian
Supreme Court held that before there can be a liability to pay income tax, there
must havebeen an assessment,which assessment must have been served on
the taxpayer (per Barker C J at pages 686E —
687H).
3.4.5. See tao Singh v Commissioner, South African Revenue Service2003 (4) SA
520 (SCA), for example
at paragraph (12].
3.4.6. Further, with regard to when tax is "~d ", a tax debt will only arise g0ge
e he
assessmenthas been issued by SARS and the taxpayer has been notifi
ed of
such assessment. The amount of tax will only become ~sable at the date
specified in the notice of assessment to the taxpayer as envisaged fn section 96
of the TAA
Conclusion and appgcat]on to the facts
3.5. Th e D i stribution occurred prior to the raising of the STC and CGT Assessments. The
Distribution occurred on 19 April 2013 and the STC and CGT Assessments were raised an
21 August 2013,
36. The r efore, there was nantax debt" at the ti me of the alleged dissipation of an asset and,
accordingly, section 183 cannot apply.
4. Ther e waa na dissipat/on of

an asset
41. T h e word "dissipating is not defined in the TAA. Regard must thus be had to the ordinary
meaning of the ward in its context, as well as any judicial pronouncements in relation to the
meaning thereof,
4.2. in Ca r mel Trading Co Ltd v Commissioner, South African Revenue Service and Others
2008
(2) SA 433(SCA) the court stated at para (3j that in order for the applicant ta succeed with
an anti-dissipation order at common law, he must satisfy the court that the respondent is
wasting or secreting assets with the intention of defeating the claims of creditors." Nle
contend that lhe dissipation of assets in the context of section 183 bears the same meaning
and therefore enteils the w~astin or ~
secreiin of assets.
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4.3. I n Kn ox O'Arcy Ltdand Others v Jamieson and Others 1996 (4) SA 348 (A), the court
considered — see pages 372D-I whether it was necessary for an applicant at common law to
establish that the respondent was likely to dissipate his assets with the intention of defeating
the applicant's claim to those assets. In this regard, the court stated at page 372G that it was
necessary to "show a particular state of mind on the part of the respondent, le. that he is
gentler rrifd dof ths fundsor , is likely to do so, with ihe intention of defeating lhe oleim of
creditors...except possibly in exceptional cases' (our emphasis).
4.4. T h e court also approved an earlier

dictum in Mcitiki and Another v Maweni 1913 CPD 684,
wherein it was stated at page 687 that applications for an antI-dissipation order:
"...all proceed upon the wish of the Court that the plaintif should not have an injustice done to him
by mason of leaving his debtor possessed of funds sufficient to satisfy the claim, when
circumstances show that such debtor is westin or e l lln ri d of such funds to defeat his creditors,
or is likely to do sd s
(our emphasis).
Conclusion and application to the facts
4.5, Ca s e law, in relation to the ordinary meaning of "dissipation", considers dissipation to refer
to
the wasting or secreting of assets,
4.6. T h e DIstribution did not constitute the wasting or secreting of EAL's assets as envisaged in
section 183. Where, as here, the distribution of assets by a company to its shareholderis
occurs by way of a dividend, it is a common and normal corporate action. It is also a
disposal of an asset in the ordinary course of business. The legislature could not have
intended that a such a distribution by way of a dividend declaration would be regarded as
the dissipation of the money or asset declared as a dividend, for the purposes of section
183. In particular, the protection of creditors of a company against unwarranted declarations
of dividends is provided by the solvency and liquidity requirements of the Companies Act,
71 of 2008 ("CA 2008"), A dividend declaration in contravention of these requirements is
liable to be nullified by court order in terms of section 218 (1) of CA 2008,
4,7. F u rther, there were sound commercial reasons for the Distribution, Dr Wiese, on behalf of
the Titan Group, wished to sell the shares in Elandspad (and thus EAL) to Friedshelf (Pty)
Ltd. In order to do so, TPI (the shareholder of Elandspad) could have increased the
purchase price for the shares by an amount of R216,600,000, on the basis that EAL held an
asset of that value, being the loan claim against TSD. As an alternative, such asset could
be distributed by EAL to ils shareholder, Elandspad, and subsequently by Elandspad to TPI,
whereafter the purchase price for the shares in Elandspad could be reduced by the amount
of the distribution, As Dr Wiese did not wish for a third party to hold a claim against TSD. a
company in the Titan Group. it was decided that EAL woud d'stribute the loan claim to
E'andspad, and thereafter, Elandspad would distriibute same to TPI, whereafter the shares
we e sold.
'I
P~
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4.8. T h erefore, the Distribution did not constitute the "dissipation" of EAL's assets under section
183 of the TAA.
5. Dr W i ese did not have knowledge of the relevant

tax debt
5.1. We h a ve pointed out above that the relevant "tax debt" did not exist at the time of the
Distribution. However, even if the relevant tax debt which was subsequently assessedis
regarded as a "tax debt" for the purposes of section 183, Dr Wiese did not have knowledge
of that "tax debt" at the time of the distribution. In particular, while the letter of audit findings
and section
80J notice had been issued by SARS on 16 November 2012,the vi
ew was held
in good faith that EAL was not liable on the grounds stated in that letter. Indeed, this was
stated in the response to the letter dated 16 November 2012, dated 15 April 2013.
5.2. In addition, Dr Wiese and lUIr Visagie placed reliance on the representations and warranties
received when they negotiated the acquisition of Elandspad from the Enact Trust that advice
had been sought from tax advisors, and that tax opinions were obtained from senior counsel
when the restructure of the Tullow Group was undertaken, who confirmed that no CGT and
STC implications should arise in the hands of EAL in terms of the restructure transactions.
Therefore, Mr Visagie did not believe that EALwas liable for tax on the basis contended by
SARS in the letter dated 16 November 2012.
6. Dr Wi e se did not assist in the alleged dissipation of

an asset of EAL
6.1. Fo r s ection 183 to apply, it was necessary that Dr Wiese knowingly assisted in dissipating
EAL's assets.
6.2. As p o inted out, we understand that SARS contends that the declaration and distribution of
the dividend ln specie on 19 April 2013 constituted the dissipation of an asset for the
purpose of section 183.
6.3. W e h ave pointed out that Dr Wiese resigned as a director of EAL on 18 April 2013.
Therefore, he was not a director and did not participate in the resolution of the board of
directors to declare the dividend, on 19 April 2013.
6.4. H e did not in any other manner assist in the declaration of the dividend orits
indistribution,
6,5 In t h e Notice, SARS contends that:
*
at the time that you were a director of the taxpayer, you knowingly assisted the taxpayer in
dissipating its only asset of value in order to obstruct lhe collection of a tax debt, You did so by way
of assisting in a suite of transactions which had the effect of separating the taxpayer from Titan
Premier Investments Proprietary Limited ('TPI7, of which you were also a director, (in other words,
the taxpayer ceased to be a subsidiary of TPI) and divesting the taxpayer ofits only asset of value
S of12
(e loan claim of R 216 600 000 against 77tan Share Dealers (Pty) Ltd ('TSD')) by way of a dividend
in specie "
6.6. O t her than its contention that Dr Wiese participated in the declaration of the dividend
in
specie, at the time when he was a director of the taxpayer (which, as we have pointed out
above, is factually incorrect), SARS does not explain how he is alleged to have"assist(edj in
6 suite of transactions", precisely what these transactions were or how they resulted in the
alleged dissipation of the loan claim of EAL against TSD. SARS' contentions in this regard
are so vague and unclear that it is practically impossible to deal specifically with them, We
record, however, that Dr Wiese denies that ha assisted in the dissipation by EAL of the loan
claim against TSD in any manner whatsoever.
7. The a l leged dissipation of an asset was not done in order to obstruct the collection of the
alleged tax debt
7.1. It i s c lear that the wordsin order to obstruct the collection of a tax debt" require that the
dissipation of the taxpayer's asset must be done for the purpose of obstructing the collection
of the tax debt.
7,2. We h ave denied that Dr Wiese assisted in the alleged dissipation of the asset of EAL.
However, if there is any basis for contention (which is denied) that he did assist in the
dissipation, he denies that he did so for the purpose of obstructing the collection of the tax
debt. Insofar as he had any involvement or participated in any actions or transactions at the
time he did so for sound commercial reasons. In this regard, we refer to paragraph 4,7
above. He also beiieved that such actions or transactions were undertaken in the ordinary
course of business,
7.3. As s t ated above, whiie Dr Wiese was aware of the receipt by EAL of the letter of audit
findings and section 80J notice, dated 16 November 2012, he entertained the good faith
belief that the SARS contentions that EAL was liable for tax on the grounds stated therein
were not justified. In particular, as stated above, Dr Wiese placed reliance on the
representations and warranties obtained from the Enact Trust at the time that TPI acquired
the shares in Elandspad which included that, when the Tuilow Group undertook the
restructure of its group, advice was sought from tax advisors, and opinions were obtained
from senior counsel who confirmed that no CGT and STC implications should arise in the
hands of EAL in terms of the restructure transaction.
7.4. In a n y event, on no basis would Dr Wiese have been prepared to participate in or be

involved in any acts taken for the purpose of obstructing the collection of a tax debt. In the
event, he did not participate in and was not involved in any such steps.
9 of12
8. Con c lusion
8.1. I n light of the above we contend, on behalf of Dr Wiese. that he cannot be held personally
liable in terms of section 183 of the TAA as he did not knowingly assist in dissipating the
assets of EAL in order to obstruct the coilection of a tax debt.
8.2. I f any aspectof this representation is required to be amplified, or should you require any
further information or detail to enable you to favourably consider this representation, please
do not hesitate to contact us,
8,3, O u r failure to deal with each and every contention in the Notice must not be construed as an
admission of the correctness thereof. If necessary the detailed contentions will be traversed
'n due course. Suffice it to say at this stage that any contentions which are inconsistent with
what is said in this letter are denied.
Kindly acknowledge receipt of this letter and furnish us with your reply at your earliest convenience.
In the event that Dr Wiese's representations are rejected, please provide detailed reasons for such rejection.
Yours sincerely
EDWARD NATHAN SONNENBERGS INC.
Per.
Peter ache i Smlt

10 of12
ANNEXURE A
"Tax debt" is defined in section 1 of the TAA as an amount as referred to in section 169(1) of the
TAA, In terms ofsection169(1) anemoun of tax due or l e in t er s o a tax Act is alex debt
due to SARS for the benefit of the National Revenue Fund.
2. Sec t ion 169(2) of the TAA provides that a tax debt is recoverable by SARS under Chapter 11 of the
TAA.
3. The definition of a "tax debt" as provided for under section 169 therefore requires that the amount of
tax be due or payable under a tax Act asa matter of objective fact and Iaw. Any amount of tax which
is "due" isfurther a ableatsuchdateand laces ecifiedb S ARS.
4. The words "due" and "payable" are not defined in the TAA nor Act and regard must therefore be had
to the ordinary meaning of the words.
in Singh v Commissioner, South African Revenue Service 2003(4) SA 520 (SCA), the Supreme
Court of Appeal ("SCA") rejected the court a quo's proposition (in the context of value-added tax)
that any amount which the Commissioner assesses has already become due and payable, without
the need of any preceding action by him. The SCA held at para [15j page 526D that;
Albeit that an assessment may be a 'mental act in the nature of a decision'.„counsel's submission that it
ls suticient for the assessment to exist purely in the Commissioner's head cannot be correct; the law is not
generally concerned with thoughts but with their outward manifestation..."
Notwithstanding the fact that under the Value-Added Tax Act ("VAT Act") a taxpayer must make a
determination of the amount of a tax liability by way of self-assessment, themajority stated that the
hypothetical (or assumed) knowledge by the taxpayer of the correct amount of his liability at the date
of rendering his return is a convenient fiction for the determination of a date of liability and payment,
but the reality is that no taxpayer(bona fide or dishonest) who is kept in ignorance of the fact of an
assessment and its content can be expected to reconsider his liability and pay what he owes.
As regards the summary nature of the recovery proceedings under section 40(2) of the VAT Act
which enables the Commissioner to file for judginent and proceed to execution, which recovery
powers are broadly similar in wording and scope to the recovery provisions contained in Chapter 11
of the TAA, the majority of the court held that
"it would be extraordinary if the legislature had intended to authonse the taking of a judgment in respect of
err radebredlleas sr whish rrle fax re sr trad arrr drwmerrrr~rrewrad s..dhe sebsiaadai dsperrers Imm the
common law that such an authonsation would bring about and the seriousness of the potential
consequences to the taxpayer..." (our emphasis).
11 o/12
8. In a c oncurring minority Judgment in

Singh (supra), Oiivier JA made the following salient points with
regard to when a person becomes liable for tax on the basis that a tax amount is "due";
8.1. t h e ordinary meaning of "due", as held The

in Mas/er v I L Back and Co Ltd and Others
(1983 (1) SA 986 (A)), is that "there must be a liquidated money obligation presently
claimable by the creditor for which an action could presently be brought against the
debtor...the debt must be one in respect of which the debtor is under an obligation topay
immediately" (para [51] page 533D); and
8.2. t h e amount reflected in the return furnished by a taxpayer to SARS under the VAT Act must
be paid immediately because it is "due" in the sense referred in paragraph 8.1 above.
However, there"may be e future or contingent /iability to pay more than that reflected /n the
relurn de endin on the f/nal decisions of the res ondent(i.e. SARS) or a court. ~c
li bi it is not 'due' because it is not e t l i uidated b a co u rtor b a re e ment..."(our
emphasis) (para [56] page 634C-D) .
9. Fur t her relevant, in

Metcash Trading Ltd v Commissioner for South African RevenueService (2001
(1) SA 1109 (CC)) the Constitutional Court stated the following at para [1 6] page 11216-H In respect
of the determination ofa tax liability under the VAT Act and income tax more generally:
" the /irst signi//cent point to nole is the/ VAT, quite u i n e se

one as assess an e a "(our emphasis).
10, Sy im p l c atfon, according to the Constitutional Court,

a tax liability for income tax only arises once an
assessment has been made.
11. T h i s contention is further supported by the case Secretary

of for Financev Esse/mann (1988 50
SATC 1). In this case, Esselmann, the widow, executrix and sole heir of her late husband's estate
prior to receiving assessments in respect of the estate awarded all the assets of the estate to herself
as sole heir. Consequently, after the assessments were issued, no tax could be collected from the
estate as it no longer had any assets.
In the court a quo it was held that a representative taxpayer is liable for tax in his representative
capacity, whether or not an assessment in respect of such tax has been ssued. It was held that this
is so, since a liability to tax arises when income ls received or accrued to the taxpayer, and not when
an assessment is issued. This means that the representative taxpayer may become personally
liable for that tax once an assessment is issued if the income concerned is disposed of by him prior
to the issue of an assessment, but subsequent to the receipt or accrual of income giving rise to a
Iiabiilty to tax.
13. M r s Esselmann appealed against this judgment Esse/mann

In v Secretary of Finance (1991 (3) SA
681 (Nm SC)) the Namibian Supreme Court heid that before there can be a liabiht to a in c o me
. ~t3
12 of12
lax theremust have been an assessment which assessment must have been served on the
lax a er a e s 686E- 687M .
=
14. An as s e ssment" is defined in the TAA as'the determinetiori of the amount of a tax liability or
refund...". Further, section 96 of the TAA stipulates that a notice of assessment issued to a taxpayer
r.
the due date for payment) and the rocedures for lod in an ob ectionto an assessment.
15. S e c tion 162(1) of the TAA states that

tax must be paid by the day and at the place notified by SARS
or as specified in a tax Act. In termsof section 162(3), a senior SARS official may, notwithstanding
section 96(1)(f) snd section167if t,here ars reasonable grounds to believe infer eiiethat a ~
tax a er
will dissi ate t e tax a er's assets, require the taxpayer to pay the full amount immediately upon
recei t of the notice of assessment.
Further, with regard to when tax ls "due" it is clear from the above that where SARS has audited a
taxpayer and following from such audit determines that the taxpayer Is Hable for an amount of
income tax, a tax debt will only arise once the assessment has been issued by SARS and the
taxpayer hss been notified of such asssssmsnt. The amount of tax will further only become ~sable
at the date specified ln the notice of assessment to the taxpayer as envisaged in section 96 of the
TAA,
17. Further support for the fact that a ntax debt" can only exist once an assessment has been raised by
SARS appears from sections 165 to 168 of the TAA. Each of these sections deals with the concept
of a tax debt in the context where this refers to an assessment that has been raised. SpecNcally,
section 165(3)(c) refers to the interest payable on outstanding tax debts in the context of the relevant
taxpayer account maintained by SARS (wh'ch account can presumablyonly bemaintained by SARS
on its system once an assessment has been issued). Further, section 166 refers to the allocation of
payments to the oldest amount of an outstanding tax debt. Again, this can only referto a tax debt in
the context of an assessment which has been raised, since otherwise such an allocation should not
be possible, Sections 166(3), 167 and 168 also refer to tax debts in the same context, i.e. these
provisions envisage a otax debt" in the context of assessments which have been raised.
ENssfrlcs
1 North Whar( Squats
Loop Street Foreshore Cope Town 8001
F 0 Scar2299 Ceps Town South A(r(cn 8000
r(ocerr 14 CapeTawn
lel +2721 410 2500
info(S(SNSs(i(cs corn SNSsfr(cs,corn
Commissioner for the South African Revenue Service P Dacha t N Sm(t

19th Floor, treUrral
22 Hans Strijdom Avenue
Attention: Mr Alistalr Kana 16 January 2017
Dear Alistair
RE: NOTICE OF I N T E R II S O F S E CTION 184, READ WITH S ECTION 183 OF TH E T A X

ADIllNISTRATION ACT, 28 OF 2011
We refer to the notice issued to Mr IHJ Visagie in terms of section 184 of the Tax Administration Act, 28 of
2011 ("TAA") (" Notice" ).
In terms of the Notice, the South African Revenue Service ("SARS') requests Mr Visagle to make written
representations detailing why he should not be heldliable in his personal capacity in terms of section 183 of
the TAA ("section 183"), on the basis of allegations by SARS that he knowingly assisted in dissipating the
assets of the taxpayer, Energy Africa (Pty) Ltd ("EAL") in order to obstruct the collection of a tax debt of EAL.
We set out below certain background facts relevant to the matter, as weltas the written representations, on
behalf of our client, Mr Visag(e.
Background facts
1,1. D u ring January 2007, Tullow Oil Pic and its subsidiaries
("Tullow Group" )undertook a
restructure of its African operations. At the relevant time, EAL formed part of the Tuliow
Group,
1,2, A t t h e time of such restructure, Titan Premier investments (Pty) Ltd("TPI') and its
subsidiaries("Titan Group" )and Mr Visagie did not hold any interest in the Tullow Group,
nor were they involved in any manner whatsoever with the Tullow Group or ihe restructure of
its operations.
1,3. Ne a rly 3 months after the Tuliow restructure, Dr Wiese and Mr Visagie were approached by
representatives of the Enact Trust (a third party not related to the Titan or Tuliow Groups)
law ( ias l rerensica ( IP Bdwald isa(rara eaNI • neafos Irrrsrrpcrered repsrreaannrllllaer 2MM'l82omtt
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level 2 BBBESratios
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2 of 12
which, at that time, was the sole shareholder of Elandspad Investments (Pty) Ltd
("Elandspad")which, in turn, held 100% of the shares in EAL. TPI was presented with a
proposal to acquire the shares in Elandspad from the Enact Trust fn April 2007, TPI
acquired the shares in Elandspad, and indirectly In EAL, for cash in the amount of
R8,6 million.
1A. T h e "tax debt" to which the Notice refers arose froin additional assessments raised by SARS
on EAL on 21 August 2013 in respect of secondary tax on companies("STC ) and income
tax (imposed on a capital gain) in its 2007 year of assessment ("STG Assessment' and
"CGT Assessment" ) in respect of the Tullow restructure transaction ("the relevant tax
debt" ). In other words, the events giving rise to the relevant tax debt arose before the Titan
Group or Mr Visagie had any involvement with or connection to EAL.
1.5. T h e STC and CGT Assessments were preceded by a letter of audit findings and section 80J
notice issued by SARS on 16 November 2012. ENSafrica responded to such letter on
15 April 2013 on behalf of EAL.
1.6. O n ce TPI had purchased the shares in Elandspad, EAL traded in single stock futures in
respect of which profits were realised andit also earned Interest income, which gave rise to
profits of approximately R192 million. In order to commence trading in single stock futures,
EAL was funded by Titan Share Dealers (Pty) Ltd ("TSD"),a company which forms part of
the Titan Group. The Titan Group therefore introduced assets, in the form of cash, to EAL to
commence its business, after the acquisition of Elandspad.
1.7. SA R S disallowed the set-off of these profits against the assessed loss of EAL in its 2007 to
2011 years of assessment in terms of section 103(2) of the income Tax Act, 58 of 1962 (the
"Act') by raising additional assessments on 26 September 2011 on the basis that the sole or
main purpose for the Titan Group acquiring the shares in EAL was to utilise the assessed
loss ("Section 103(2) Assessments" ). EAL disputed the Section 103(2) Assessments. The
tax debt in that context ("the section 103(2) tax debt") was secured by a pledge of shares
by TPI. The disputes arising from the Section 103(2) Assessments in each of the relevant
years of assessment were subsequently settled with SARS and the settlement amounts
were paid in full.
1.8. O n 18 April 2013, Dr Wiese and Advocate JD Wiese resigned as directors of Elandspad and
EAL and Messrs Viljoen and Hofrneyr were appointed as directors of these companies. Mr
Visagle was at no time a director of EAL nor Elandspad.
1.9. T h eS ARS al,'egations that IVIr Visagie assisted in dissipating assets of EAL relates to the
EAL against TSD and sped (the
wa s d i stributed in sp e cie to i t s s h a reholder, El
"Distribution").
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1 10, On 19 April 2013, Messrs Viljoen and Hofmeyr, in their capacities as the directors of EAL
and Elandspad, respectively, authorised the Distribution.
2 Repr esentations
2.1. Se c t ion 183 of the TAA provides that
a taaxd at et the texpaysrthe p,crenate jntndy snd severetty dantewith the taxpayer Ihr the tax dear
to the extent that the person's assistance reduces the assets avaiiable to pay the taxpayer's tax
debt" (ouremphasis).
2.2. F o r section 183 to apply, the following requirements must be satisfied:
2.2.1. There must be a fax debt of a taxpayer;
2.2.2. The r e must be a dissipation of the taxpayer's asset(s);
2,2.3. The person to whom section 183 is to be applied (nthe relevant person") must
2,2.4. The r e levant person must knowingly assist in dissipating the asset(s) of the
taxpayer,
2.2.5. The re l evant person must do so in order to obstruct the collection of the tax
debt.
2.3. I n the Notice SARS contends that these requirements were satisfied on the following bases.-
2,3.1. SARS c o ntends that the relevant tax debt constituted a "tax debt" falling within
section 183, SARS also refers in the Not ca to the section 103(2) tax debt but it
is not clear whether or not SARS contends that this tax debt constituted the atax
debt" for the purposes of the application of section 183;
2.3.2. SARS contends that there was a dissipation of EAL's asset, namely its loan
Elandspad, on 19 April 2013;
2.3.3. SARS contends that Mr Visagie had knowledge of the relevant tax debt;
2.3.4 SARS contends that Mr Visagie knowingly assisted in the alleged dissipation of
the asset;
2.3 5 SARS contends that Mr Visagie did so in order to obstruct the collection of the
relevant tax debt.
/~ 7Q
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2.4. N o ne of the requirements of section 183, to which we have referred above, was satisfied. In
particular:
2.4.1 At the relevant time, there was no lax debt of EAL (we deal with this in
paragraph 3 below);
2.4.2. The r e was no dissipation of an asset of EAL (we deal with this in paragraph 4
below);
Mr Visagle did not have knowledge of the relevant tax debt (we deal with this in
paragraph 5 below);
2,4,4, IVIr Visagie did not assist in the alleged dissipation of an asset of EAL, whether
knowingly or otherwise (we deal with this in paragraph 6 below); and
2.4.5. The alleged dissipation of an asset was not done in order to obstruct the
3. Ther e wae no "tex debt" et the relevant time
3.1. F o rs ection 183 to apply, a "tax debt" must have been in existenceat the time when the
alleged "dissipation" of assets took pface (in this case, the Distribution).
3.2. It i s c lear from the section that this refers to the "tax debt" which has not been collected.
Therefore, the existence of the section 103(2) tax debt is irrelevant in this context. As stated
above, that tex debt was settled with SARS and the settlement amounts were paid in full.
3.3. T h eq uestion, therefore, is whether the relevant tax debt existed at the time of the alleged
dissipation of the asset, namely on 19 April 2013.
3.4. A d etailed analysis of the applicable provisions of the TAA and the Act, as
well as cases
decided upon by our courts are attached asAnnexure A. In summary, Mr Visagie submits
as follows.
3.4.1 The term 'tax debt is defined in section 1 of the TAA as an amount referred to
in section 169(1) of the TAA. In terms of section 169(1)"(ajn amount of tax due
or a able in terms of a tax Act is a tax debt due to SARS for the benefit of the
National Revenue Fund".
3.4.2 Therefore, for there to be a "tax debt". there must be an amount of tax due or
payable, An amount of tax arising in terms of the Act cannot be due or payable
until an assessment has been issued for that amount,
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3.4,3. Thi s i s clear fromMetcesh Trading Ltd v Commissioner for South African
Revenue Service 2001 (1) SA 1109 (CC) 'n which the Constitutional Court
stated the following at paragraph [16] page 1121G-H in respect of the
determination of a tax liability under the VAT Act and income tax more
generally
'the lirst significant point to noteis that VA T, quite i 'k 've 'se
i i % o n l o n e a a ss a s a -
"(oui'emphasis).
3 .4.4, In Fs s elmann v Secretary of Finance

(1991 (3) SA 681 (Nm SC)) the Namibian
must havebeen an assessment, which assessment must have been served on
the taxpayer (par Berker C J at pages 686K - 687H).
3.4.5. See t o o Singh v Commissioner, South African Revenue Service2003 (4) SA

520 (SCA), for example at paragraph [12].
3.4.6 Further, with regard to when tax is "~", a tax debt will only ariseonce the
assessmenthas been issued by SARS and thetaxpayer has been notifi
ed of
such assessment. The amount of tax will only become gyyJtt at the date
specified in the notice of assessment to the taxpayer as envisaged in section 96
of the TAA.
3.5 T h eDistribution occurred pr'.or to the raising of the STC and CGT Assessments, The
Distribution occurred on 19 April 2013 and the STC and CGT Assessments were raised on
21 August 2013,
3.6. T h erefore, there was no "tax debt" at the time of the alleged dissipation of an asset and,
4. The r e was no dissipation of an asset
4,1 The w ord 'dissipating" is not defined in the TAA, Regard must thus be had to the ordinary
meaning of the word in its context, as well as any judicial pronouncements in relation to the
meaning thereof.
4 .2 In Ca r mel Trading Co Ltd v Commissioner, South African Revenue Service and Others
2008
I2) SA 433(SCA) the court stated, at para [3), that in order for the applicant to succeed w th
"wasting or secreting assets with the intention of defeating the claims of creditors,"We
contend that the dissipation of assets in tha context of section 183 bears the same meaning
and therefore entatts the w~asttn or seorettnrtof assets.
r
i
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4.3. I n Kn ox D'Arcy Ltd and Others v Jamieson and Others1996 (4) SA 348 (A), the court
necessary to "show a particular state of mind on the part of the respondent, i.e. that he is
~etln rid of the fundsor , is ttkalyto do so, tstth lhe infention of defeating the claim of
creditors... except possibly in exceptional cases"(our emphasis).
4.4. T h e court also approved an earlier dictum Mcitik/

in and Another v Ntaweni 1913 CPD 684,
wherein it was stated, at page 687, that applications for an antidlssipation order.
"„, all proceed upon the wish of the Court that the plaintif should not have an injustice done to him
by meson of leaving his debtor possessed of funds sufficient to satisfy the claim, when
or ls likely to do so"(our emphasis).
4.5. C a se law, in relation to the ordinary meaning of "dissipation", considers dissipation to refer to
the wasting or secreting of assets.
4.6. T h e Distribution did not constitute the wasting or secreting of EAL's assets
as envisaged in
section 183. Where, as here, the distribution of assets by a company to its shareholder(s)
intended that such a distribution by way of a dividend declaration by a company would be
regarded as the dissipation of the money or asset declared as a d.'vidend, for the purposes
of section 183. In particular, the protection of creditors of a company against unwarranted
declarations of dividends is provided by the solvency and liquidity requirements of the
s
Companies Act, 71 of 2008 ("CA 2008 ). A dividend declaration in contravention of these
requirements is liable to be nullified by court order in terms of section 218 (1) of the CA
2008.
4.7. F u rther, there were sound commercial reasons for the Distribution. The Titan Group wished
to sell the shares in Elandspad (and thus EAL) to Friedshelf (Pty) Ltd. In order to do so. TPi
(the shareholder of Elandspad) could have increased the purchase price for the shares by
an amount of R216,600,000, on the basis that EAL held an asset of that value. being the
loan claim against TSD As an alternative, such assai could be distributed by EAL to its
shareholder, Elandspad, and subsequently by Elandspad to TPI, whereafter the purchase
price for the shares in Elandspad cou.'d be reduced by the amount of the distnbution. As the
Titan Group (of which Mr Visagie was a representative) did not wish for a third party to ho!d
a claim against TSD, a company in the Titan Group, it was decided that EAL would distribute
I
1~ '
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the loan c'aim to Elandspad, and thereafter, Elandspad would distribute same to TPI,
whereafter the shares were sold.
4,8, Th e r efore, the Distribution did not constitute the "dissipation"

of EAL's assets under section
183 of the TAA,
5. Mr Vl s agle didnot have knowledge of the relevant tsx debt
5.1. W e have pointed out above that the relevant tax debt" did not exist at the time of the
Distribution. However, even if the relevant tax debt which was subsequently assessed is
regarded as a "tax debt" for the purposes of section 183, Mr Vlsagie did not have knowledge
of that "tax debt" at the t me of the distribution. In particular, while the letter of audit findings
and sectio
n 80J notice had been issued by SARS on 16 November 2012, the view was held
in good faith that EAL was not liable on the grounds stated in that letter. Indeed, this was
stated in the response to the letter dated 16 November 2012, dated 15 April 2013,
5.2. I n addition, Dr Wiese and Mr Visagie placed reliance on the representations and warranties
received when they negotiated the acquisition of Elandspad from the Enact Trust that advice
had been sought from tax advisors, and that tax opinions were obtained from senior counsel
when the restructure of the Tullow Group was undertaken, who confirmed that no CGT and
STC implications should arise in the hands of EAL in terms of the restructure transactions.
Therefore, Mr Visagie did not believe that EAL was liable for tax on the basis contended by
SARS in the letter dated 16 November 2012.
6. Mr Vl s agle did not assist in the alleged dlsslpatlon of an asset of EAL
6.1. F o r section 183 to apply, it was necessary that IVIr Visagie knowingly assisted in dissipating
EAL's assets.
6.2. As p o inted out, we understand that SARS contends that the declaration and distribution of
the dividend in specie on 19 April 2013 constituted the dissipation of an asset for the
purpose of section 183.
6.3. We h ave pointed out that Mr Visagie was never a director of EAL. Therefore, he could not
and did not participate in the resolution of the board of directors to declare the dividend, on
19 April 2013. Further, the fact that Mr Visagie was the secretary and I or public officer of
the taxpayer did not authorise him to undertake such actions.
6.4, H e did nol in any other manner assist in the declaration of the dividend or in its distribution
6.5. I n the Notice, SARS contends that;
"ot a tinie that you were the secretary and public officer of the taxpayer, you knowingly ass
isted the
taxpayer in dissipating its only asset of value in order to obstruct the collection of a tax debt, You
8 o(12
did this by way of assisting in a suite of transactions which had the effect of separating the taxpayer
from Titan Premier Investments Propnetary Limited ('TPI')... and divesting the taxpayer of its only
as et of value (a loan claim of R218 600040 against Titan Share Dealers (Pty) Ltd ('TSD)) by way
of a dividend in specie."
6.6. O t her than its contention that Mr Visagie assisted with the declaration of the dividend
in
specie, at the time when he was the secretary and public officer of the taxpayer (which, as
we have pointed out above, is irrelevant in the context of a distribution of a dividend by the
relevant company), SARS does not explain how he is alleged to have"assistjedjin a suite of
transactions', precisely what these transactions were or how they resulted in the alleged
dissipation of the loan claim of EAE against TSD. SARS' contentions in this regard are so
vague and unclear that it is practically impossible to deal specifically with them. We record,
however, that Mr Visagie denies that he assisted in the dissipation by EAL of the loan claim
against TSD in any manner whatsoever.
7. The a l l eged dissipation of an asset waa not done in order to obstruct the collection of the
alleged tax debt
7.1. It i s clear that the wordsin order to obstruct the collection of a tex deb(" require that the
of the tax debt.
7.2. W ehave denied that Mr Visagie assisted in the alleged dissipation of the asset of EAL
However, lf there is any basis for contention (which is denied) that he did assist in the
dissipation, he denies that he did so for the purpose of obstructing the collection of the tax
debt, Insofar as he had any involvement or participated in any actions or transactions at the
time he did so for sound commercial reasons, In this regard we refer to paragraph 4,7
above. He also believed that such actions or transactions were undertaken in the ordinary
course of business,
7.3 A s s tated above, while Mr V.sagie was aware of the receipt by EAL of the letter
of audit
f."ndings and section 80J notice, dated 16 November 2012, he entertained the good faith
belief that the SARS contentions that EAL was liab'le for tax on the grounds stated therein
were not justified. In particular, as stated above, Mr Visagie placed reliance on the
representations and warranties obtained from the Enact Trust at the time that TPI acquired
the shares in Elandspad wh'ch included that, vvhen the Tullow Group undertook the
restructure of ils group, advice was sought from tex advisors, and opinions were obtained
from san'or counsel who confirmed that no CGT and STC implications should arise in the
hands of EAL in terms of the restructure transaction.
9of12
7.4. I n any event. on no basis would Mr Visagie have been prepared to participate in or be
involved in any acts taken for the purpose of obstructing the collection of a tax debt. In the
event he did not participate in and was not involved in any such steps.
8. Conc l usion
8.1, I n light of the above we contend. on behalf of Mr Visagie, that he cannot be held personally
Nable in terms of section 183 of the TAA as he did not knowingly assist in dissipating the
assets of EAL in order to obstruct the collection of a tax debt.
8.2. I f any aspect of this representation is required to be amplified, or should you require any
further informat.on or detail to enable you to favourably consider this representation, please
do not hesitate to contact us,
8.3. O u r failure to deal with each and every contention in the Notice must not ba construed as an
admission of the correctness thereof, If necessary the detailed contentions will be traversed
in due course. Suffice it to sayat this stage that any contentions which are inconsistent with
Kindiy acknowledge receipt of this letter and furnish us with your reply at your earliest convenience.
In the event that Mr Vsagie's representations are rejected, please provide detailed reasons for such
rejection.
Yours sincerely
Peter Dacha I k It
10 of12
ANNEXURE A
"Tax debt" is defined in section 1 of the TAA as an amount as referred to in section 169(1) of the
TAA ln terms of section 169(1) an amount of tax due or a able in terms of a tax Act is a tax debt
2 Secti on 169(2) of the TAA provides that a tax debt is recoverable by SARS under Chapter 11 of the
TAA.
3. The definition of a 'tax debt" as provided for under section 169 therefore requires that the amount of
tax be due or payable under a tax Act as a matter of objective fact and law. Any amount of tax which
is "due;sfurther a ableatsuch date and laces ecifiedb S ARS.
4, The w ords "due" and "payable" are not defined in the TAA nor Act and regard must therefore be had
to the ordinarymeaning
of the words.
In Singh v Commissioner, South African Revenue Service (2003 (4) SA 520 (SCA)), the Supreme
Court of Appeal ("SCA") rejected the court a guo's proposition (in the context of value-added tax)
the need of any preceding action by h m. The SCA held that:
"rrtlbelt that an assessment may be a 'mental act in the nature of a decision'...counsel's submission that it
is sufficient for the assessment to exist purely in the Commissioner'shead cannot be correct; the law is not
generally concerned with thoughts but wilh their outward manifestation..."
determination of the amount of a tax liability by way of self-assessment, the majority stated that the
but the reality is that no taxpayer (bona fide or dishonest) who is kept in ignorance of the fact of an
assessment and its content can be expected to reconsider his liability and pay what he owes,
As regards the summary nature of the recovery proceedings under section 40(2) of the VAT Act
which enables the Commissioner to file for judgment and proceed to execution, which recovery
powers are broadly simi!ar in wording and scope to the recovery provisions contained in Chapter 11
of the TAA, themajority of the court held that
"rt would be extraordinary if the legislature had intended lo authorise the taking of a judgment in respect of
sn ir l it d n ass nf wlxcli Ihe lax n ar hail or~I deerucd lu>owlorlc e lhe substantial departure from the
common law that such an authortsation would bring about and the seriousness of the potential
consequences to the taxpayer... (our emphasis).
8. In a concurring minority judgment, OI'ivier JA made the following sa!ient points with regard to when
a
person becomes liabl'e for tax on the basis that a tax amount is "due":
8,1. t h e ordinary meaning of due', as held in

The Master v I L Back and Co Ltd and Others
(1983 (1) SA 986 (A)), is that "there must be a liquidated money obligation presently
debtor...the debt must be one in respect of which the debtor is under an obligation to pay
immediately"; and
8.2. t h e amount reflected in the return furnished by a taxpayer to SAR S under the VAT Act must
However, there "may be a future or contingent liability to pay ore t t led i n t h e
return de endin on the final decisions of the res ondent (i,e. SARS) or a court. Such
i bilil i s n o 'due' because it is not e t li uidated b a c ourtor b a r e a m ..." (our
emphasis).
9 Furt her relevant, in

Metcash Trading Ltd v Commissioner for South African Revenue Service (2001
(1) SA 1109 (CC)) the Constitutional Court stated the following in respect of the determination ofa
tax liability under the VAT Act and income tax more generally:
"the first significant point to note ls that VAT, quite u ilike ' ic 'v ii o e I ' abilit onl
once esassessment hes bee made" (ouremphasis).
10. By i m plication. according to the Constitutional Court, a tax liability for income tax only arises once an
This contention is further supported by the case of Secretary for Finance v Esselmann (1988 50
prior to receiving assessments in respect of the estate awarded all the assets of the estate to herself
as sole heir, Consequently, after the assessments were issued, no tax could be collected from the
estate as it no longer had any assets
12. I n t he courta quo it was held that a representative taxpayer is liable for tax in his representative
capacity, whether or not an assessment in respect of such tax has been issued. It was held that this
is so. since a liability to tax arises when income is received or accrued to the taxpayer, and not when
an assessment is issued. This means that the representative taxpayer may become personaliy
I;able for that tax once an assessment is issued if the income concerned is disposed of by him prior
to the issue of an assessment, but subsequent to the receipt or accrual of income giving rise toa
liability to tax.
13. M r s Esselmann appealed against this judgement and6'sselmann

in v Secretary of Finance (1991 (3)
SA681 (NmS)) the Supreme Court held that before there can be a Iiabilit Io a in c o me lax there
must havebeen an assessment which assessmeni must have been served on the tax a er,
13 of13
14. A n " assessment" is defined in the TAA asthe determination of the amount ofa tex liability or
*
the due date for payment) and the rocedures for lod ln an ob ectionto an assessment.
15, Sec t ion 162(1) of the TAA states that tax must be paid by the day and at the place notified by SARS
or as specified in a tax Act. In terms of section 'l62(3), a senior SARS oNcial may, notwithstanding
sertion gait i(ti and seotion thy, it there are reasonable grounds to believeinter alia that a t~ax a er
will dissi ate the tax a er's assets, require the taxpayer to pay the full amount immediately upon
16, Fur t her, with regard to when tax is "d~u" it is clear from the above that where SARS has audited a
taxpayer and following from such audit determines that the taxpayer is liable for an amount of
Income tax, a tax debt will only arise once the s n ha b n iss u ed bySARS and the
taxpayer has bean notitted oi suoh assessmanh The amount oi tax witt iurther oniy beoomega
a abta
at the date specified ln the notice of assessment to the taxpayer as envisaged in section 96 of the
TAA,
17. F u r ther support for the fact that a "tax debt" can only exist once an assessment has been raised by
SARS appearsfrom sections 165 to 168 of the TAA. Each of these sections deal with the concept of
a tax debt in the context where this refers to an assessment that has been raised. SpeciTically,
section 165(3)(c) refers to the interest payab!e on outstanding tax debts in the context of the relevant
taxpayeraccount maintained by SARS (which accountcan presumably only be maintained by SARS
on its system once an assessment has been issued), Further, section 166 refers to the allocation of
payments to the oldest amount of an outstanding tax debt. Again, this can only refer toa tax debt in
the context of an assessment whichhas been raised, since otherwise such an allocation should not
be possible. Sections 166(3), 167 and 168 also refer to tax debts in the same context, i.e. these
provisions envisage a "tax debt" in the context of assessments which have been raised.
NSafrlea
~N o r l h herf Square
I.oop Slreef Foreshore Ce Town B001
P 0 BOX 2203 Cape TOWn Saith Afrfae B000
docex 14 e
Cps Town
lel +2721 410 2500
lnfoesffsefrice corn SNSelrlce corn
Commissioner for the South African Revenue Service P Dacha / N Smit

191h Floor, frau rar
22 Hans Strijdom Avenue
Attention: Mr Alistair Kane 16 January 2017
Dear Alistair
RE.' NOTICE OF IN TERMS O F S E CTION 184, READ WITH SECTION 183 OF THE T AX
ADIIINISTRATION ACT, 2B OF 2011
We refer to the notice issued to Mr GC Viljoen in terms of section 184 of the Tax Administration Act, 28 of
2011 ("TAA') (oNotice").
ln terms of the Notice, the South African Revenue Service ("SARS") requests Mr Viljoen to make written
representations detailing why he should nat be held liablein his personal capacity in terms of section 183 of
the TAA (osection 183"), on the basis of allegations by SARS that he knowingly assisted in dissipating the
assets of the taxpayer, Energy Africa (Pty) Ltd ("EAL") in order to obstruct the cogection of a tax debt of EAL.
We set out beiow certain background facts relevant ta the matter, as well as the written representations, on
behalf of our client, Mr Viljoen.
Background facts
1.1 Dur i ng January 2007, TullowOil Pic and its subsidiaries (eTuilow Group" ) undertook a
restructure of its African operations. At the relevant time, EAL formed part of the Tullow
Group,
s
1.2. At t h e t i me of such restructure, Titan Premier Investments (Pty) Ltd ( TPI") and its
subsidiaries ( nTitan Group" )did not hold any interest in the Tullow Group, nor was it
involved in any manner whatsoever with the Tullow Group or the restructure of its
operations. Mr Viljoen was not an investor in the Titan and I or Tullow Groups at the time.
Mr Viljoen, however, acted as advisor to the Tullow Group (in his capacity as a director of
Edward Nathan Sonnenbergs, Inc ("ENSafrica")) in as much as he c o-ordinated the
law I tar I forensics I irr Edward Neman Bannenasrgs Incarrrraled r a g lslralian rumcer 2008101$2gcl21
M M Kala (chairman) M Mgudlwa (chief areculivef
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level 2 BBBEEralmg
AFRICA-
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obtaining of the legal, tax and exchange control advice in relation to the restructure of its
operations.
1.3, Ne a rly 3 months after the Tullow restructure, Mr Viljoen, as representative of the Enact Trust
(a third party not related ta the Titan or Tullow Groups) which, at that time, was the sole
shareholder of Elandspad investments (Pty) Ltd ( Elandspad")which, in turn, held 100% of
the shares in EAL, approached Dr CH Wiese and Mr I Visagie as representatives of the
Titan Group, TPI was presented with a propasai to acquire the shares in Elandspad fram
the Enact Trust. Mr Visagie indicated that TPI was willing to buy such shares on the basis
that it did not assume any historic obligations or liabilities that may arise from the
restructuring of the Tullow Group's affairs. In April 2007, TPI proceeded to acquire the
shares in Elandspad, and indirectly in EAL, for cash in the amount af R8.6 million.
1,4. I t is further relevant to record that Friedshelf (Pty) Ltd ("Friedshelf"), a company of which
Mr Viljoen is a sharehalder, acquired all the shares in Elandspad on 22 April 2013. This
transaction arose after Mr Visagie contacted Mr Viljoen advising that there is an inquiry into
the affairs of EAL arising from the restructure transactions undertaken by the Tullow Group
and requesting Mr Viljoen to take over the company in order to deal with such inquiry,
1.5. T h e "tax debt" to which the Notice refers arose from additional assessments raised by SARS
on EAL on 21 August 2013 in respect of secondary tax on companies ("STC') and income
tax (imposed an a capital gain) in its 200l year of assessment ("STC Assessment"and
"CGT Assessment" )in respect of the Tullow restructure transaction ("the relevant tax
debt"). In other words, the events giving rise to the relevant tax debt arose before the Titan
Group had any involvement with or connection ta EAL.
1,6. Mr V i ljoen, as shareholder of Friedshelf, understands that the STC and CGT Assessinents
were preceded by a letter of audit findings and section 80J notice issued by SARS on
16 November 2012. ENSafrica responded to such letter on 15 April 2013 on behalf of EAL.
1.7. M rV i ljoen understands that once TPI had purchased the shares in Eiandspad, EAL traded in
single stock futures in respect of which profits were realised and it also earned interest
income, which gave rise to profits of approximately R192 million, In order to commence
trading in single stock futures, EAL was funded by Titan Share Dealers (Pty) Ltd("TSD"),a
company which forms part of the Titan Group, The Titan Group therefore introduced assets,
in the form of cash, to EAL to commence its business, after the acquisition of Elandspad.
1,8, M r V i ljoen is aware that SARS disallowed the set

=off of these profits against the assessed
loss of EAL in its 2007 ta 2011 years of assessment in terms of section 103(2) of the Income
Tax Act, 58 of 1962 (the "Act") by raising additional assessments on 26 September 2011 on
the basis that the sole or main purpose for the Titan Group acquiring the shares in EAL was
to utilise the assessed loss (" Section 103(2) Assessments"). EAL disputed the Section
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103(2) Assessments. The tax debt in that context ("the section 103(2) tax debt") was
secured by a pledge of shares by TPI, The disputes arising from the Section 103(2)
Assessments in each of the relevant years of assessment were subsequently settled with
SARS and the settlement amounts were paid in fu'lL
1.9, O n 18 April 2013, Dr Wiese and Advocate JD Wiese resigned as directors of Elandspad and
EAL and Messrs Viljoen and Hofmeyr were appointed as directors of these companies.
1,10, T h e SARS allegations that Mr Viljoen assisted in dissipating assets of EAL relates to the
EAL against TSD wa s d i stributed in s p e cie to i t s s h a reholder, Elandspad (the
"Distribution").
1,11. O n 19 April 2013, Messrs Viljoen and Hofmeyr, in their capacities as the directors of EAL
and Elandspad, respectively, authorised the Distributions.
2. Repr e sentations
2.1. Se c t ion 183 of the TAA provides that:
a fax~ett t of the taxpayer, the person is jointly and severally liable with the taxpayer for the tax debt
debt" (ouremphasis),
2.2. Fo r section 183 to apply, the following requirements must be satisfied;
2.2.1. There must be a tax debt of a taxpayer,
2.2.2. There must be a dissipation of the taxpayer's asset(s);
2.2.3. The person to whom section 183 is to be applied ("the relevant person") must
2.2.4. The relevant person must knowingly assist in dissipating the asset(s) of the
taxpayer; and
2.2.5. The relevant person must do so In order to obstruct the collection of the tax
debt,
2.3, In t h e Notice, SARS contends that these requirements were satisfied on the following bases;
2.3.1 SARS contends that the relevant tax debt constituted a "tax debt" falling within
section 183, SARS also refers in the Notice to the section 103(2) tax debt bul it
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is not clear whether or not SARS contends that this tax debt constituted the "tax
debt" for the purposes of the appliIcation of section 183;
SARS contends that there was a dissipation of EAL's asset, namely its loan
2,3.3. SARS contends that Mr Viljoen had knowledge of the relevant tax debt;
2.3.4. SARS contends that Mr Viljoen knowingly assisted in the alleged dissipation of
the asset;
SARS contends that Mr Viljoen did so in order to obstruct the collection of the
relevant tax debt.
2.4. E a ch of the requirements of section 183, to which we have referred above, was not satisfied,
In particular:
2.4.1, At the relevant time, there was no tax debt of EAL (we deal with this in
paragraph 3 below);
2,4,2, Ther ewas no dissipation of an assetof EAL (we deal with this in paragraph 4
below);
2.4.3. Mr Viljoen did not have knowledge of a relevant tax debt (we deal with this in
paragraph 5 below);
2.4.4. The al l eged dissipationof an asset was not done in order to obstruct the
collection of the relevant tax debt (we deal with this in paragraph 6 below),
3. Ther e was no "tax debt" at the

relevant time
3.1. Fo r s ection 183 to apply, a "tax debt" must have been in existence at the time when the
alleged dissipation" of assets took place (in this case, the Distribution).
3,2, It i s c lear from the section that this refers to the "'tax debt" which has not been collected,
Therefore, the existence of the section 103(2) tax debt is irrelevant in this context, As stated
above, that tax debt was settled with SARS and the settlement amounts were paid In full.
3,3. Th equestion, therefore, is whether the relevant tax debt (i.e. which arose from the CGT and
STC Assessments) existed at the tiIme of the alleged dissipation of the asset, namely on
19 April 2013.
)LI ~
5 of13
3.4. A d etailed analysis of the applicable provisions of the TAA and the Act, as well as cases
decided upon by our courts, are attached as Annexure A. In summary, Mr Viljaen submits
as follows;
3.4.1. The term "tax debt" is defined in sectian 1 of the TAA as an amount referred to
iln section 169(1) of the TAA, In terms of section 169(1)Ta]n amount of tax due
or a able in terms of e tax Actis a tax debt due to SARS for the benefit of the
3.4,2. Ther e f ore,for there to be a atax debt", there must be an amount of tax due or
until an assessment has been issued for that amount.
3.4.3. This is clear from Metcesh Trading Ltd v Commissioner for South Afncen
Revenue Service (2001 (1) SA 1109 (CC)) in which the Constitutional Court
stated the following, at paragraph [16j page 1121G-H, in respect of the
generally:
"the first significant point to note is that VA7, quite unlike income tax rtoes not ive
rise o a iabilit ont ance en assessment hes been marte"(our einphesis).
3 4,4. In Esselmannv Secretary of Finance (1991 (3) SA 681 (NmS)) the Namibian
must havebeen an assessment, which assessment must have been served on
the taxpayer (per Berker CJ at pages 686E —
687H),
3.4.5. See too Singh v Commissioner, South African Revenue Service 2003 (4) SA
520 (SCA), for example at paragraph [12].
3.4.6. Further, with regard to when tax is "due", a tax debt wlII only arise once the
assessment hasbeen issued by SARS and the taxpayer has been notif
ied of
such assessment. The amount of lax will only become tta
a able at the date
specified in the notice of assessment to the taxpayer as envisaged in section 96
of the TAA.
3.5. Th e D i stribution occurred prior to the raising of the STC and CGT Assessments. The
Distribution occurred an 19 April 2013 and the STC and CGT Assessments were raised on
21 August 2013.
3.6 The r efore, there was no "tax debt" at the time of the alleged dissipation of an asset and,
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4, Ther ewas no dissipation of an asset
4.1. Th e word "dissipatilng" is not defined in the TAA Regard must thus be had to the ordinary
meaning of the word in its context, as well as any judicial pronouncements in relation to the
meaningthereof,
4.2. I nCarmel Trading Co Ltd v Commissioner, South African Revenue Service
and Others 2008
(2) SA 433(SCA) the court stated at para [3] that in order for the applicant to succeed with
an anti-dissipation order at common taw, he must satisfy the court that the respondent is
"wasting or secreting assets with the intention of defeating the claims of creditors." We
contend that the dissipation of assets in the context of section 183 bears the same meaning
end therefore enlsils lhe w~sstin or ~secretin of esssts.
4.3. I n Kn ox D'Arcy Ltd and Others v Jamieson and Others1996 (4) SA 348 (A), the court
the applicant's claim to those assets. In this regard, at page 372G, the court stated that it
was necessary to "show a particular state of mind on the part of the respondent, i.e. that he
is geehin rirt of the fundso r i s tik, stylo do so, with the intention of defecting the cteim of
creditors... except possibly in exceptional cases' (our emphasis).
4.4. Th ec ourt also approved an earlierdictum in Mcitfid end Another v Maweni 1913 CPD 684,
wherein it was stated at page 687 that applications fo'r an anti-dissipation order:
"„,all proceed upon the wish of the Court lhaf the plaintiff should not have an injustice done to him
by reason of leaving his debtor possessed of f unds sufficient to satisfy the claim, when
circumstances show that such debtor is waslln or e l l ln r id of such funds to defeat his creditors,
oris likely to do so"(our emphasis).
4.5, Ca s e law,in relation to the ordinary meaning of "dissipation', considers dissipation to refer to
4,6, Th e D istribution did not constitute the wasting or secreting of EAL's assets as envisaged in
section 183. Where, as here, the diistribution of assets by a company to its shareholder/s
occurs by way of a dividend, it is a cornrnon and normal corporate action. It is also a
disposal of an asset in the ordinary course of business, The legislature could not have
intended that a such a distribution by way of a dividend declaration would be regarded as
the dissipation of the money or asset declared as a dividend, for the purposes of section
183, In particular, the protection of creditors of a company against unwarranted declarations
of dlv dends is provided by the solvency and liquidity requirements of the Companies Act,
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71 of 2008 "CA 2008"). A dividend declaration in contravention of these requirements is

liable to be nullified by court order in terms of section 218 (1) of CA 2008,
4.7. Fu r t her, there were sound commercial reasons for the Distribution. The Titan Group wished
to sell the shares in Elandspad (and thus EAL) to Friedshelf. In order to do so, TPI (the
shareholder of Elandspad) could have increased the purchase price for the shares by an
amount of R216,600,000, on the basis that EAL held an asset of that value, being the loan
claim against TSD, A s a n alternative, such asset could be distributed by EAL to its
price for the shares in Elandspad could be reduced by the ainount of the distribution. It was
decided that EAL would distribute the loan claim to Elandspad, and thereafter, Elandspad
would distribute same to TPI, whereafter the shares were sold.
4.8. Th e r efore, the Distribution did not constitute the "dissipation" of EAL's assets under section
183.
5. Mr Vi l j oen did not have knowledge of the relevant tax debt
5,1. We h a v e pointed out above that the relevant "tax debt" did not exist at the time of the
Distribution. However, even if the relevant tax debt which was subsequently assessed is
regarded as a "tax debt" for the purposes of section 183, Mr Viljoen did not have knowledge
of that "tax debt" at the time of the Distribution. In particular, while the letter of audit findings
and section80J notice had been issued by SARS on 16 November 2012, the view was held
that EAL was not liable on the grounds stated in that letter and, indeed, this was stated in
the response to that letter dated 15 April 2013.
5,2, In a d dition, IVlr Viljoen, who was involved with the Tullow restructure as advisor was aware
that when the restructure was undertaken, advice was obtained from tax advisors, and tax
opinions were obtained from senior counsel, who confirmed that no CGT and STC
implications should arise in the hands of EAL in terms of the restructure transaction.
Therefore,, he did not beilieve that EAL was liable for tax on the basis contended by SARS in
the letter dated 16 November 2012.
6 The al l e ged dissipation of an asset was not done in order to obstruct the collection of the
alleged tax debt
6.1. It i s clear that the words in order to obstruct the collectionof a tax debt" require that the
of the tax debt.
6.2 Mr V i ljoen denies that he assisted with the Distribution (being the alleged dissipation) for the
purpose of obstructing the collection of the tax debt. Insofar as he had any involvement or
sof13
participated in any actions or transactions at the time, he did so for sound commercial
reasons, being the following:
Mr Vlljoen has a longstanding relationship with the Titan Group, spanning more
than 15 years.
6,2.2. During 2007, Mr Viljoen approached Mr Visagie of Titan with a proposal to

acquire the shares in Elandspad (and thus indirectly EAL) which, at the time,
had threeassets,being a bank account and reserves.
6.2,3, Mr Visagie, on behalf of Titan, agreed to acquire such shares on the basis that
TPI does not assume any historic obligations or liabilities that may arise from
the restructuring of the Tullow Group's affairs. In April 2007, TPI proceeded to
acquire the sharesin EIandspad, and indirectly in EAI., for cash in the amount
of R12 rni8ion.
6.2,4. During 2011, Mr Viljoen resigned as director of ENSafrica and started hts own
business, together with Mr Rauten Hofmeyr, namely Kirkham Ventures (Pty) Ltd
(now renamed to Brea Street Capital (Pty) Ltd), which company originates
unsecured debt in the capital market on behalf of investment grade corporates.
6.2.5. During 2013, Mr Visagie contacted Mr Viljoen advising that there is an inquiry
into the affairs of EAL arising from the restructure transactions undertaken by
the Tullow Group and requesting Mr Viljoen to take over the company in order
to deal with such inquiry as it was never TPI's intention to have to deal with
such historic transactions with which it had no involvement whatsoever.
6.2,6, Mr Viljoen agreed and Friedshelf acquired all the shares in Elandspad on
22April 2013. Mr Viljoen agreed to such acquisition due to his ongoing
relations with the Titan Group and since he considered it in the interest of his
business to step into the shoes of TPI and resolve the dispute with SARS. This
was for the foilowing reasons:
6.2.6.1. Mr Viljoen considered himself, together with ENSafrica, to be best

placed to deal with SARS' enquiries, considering that same arose
from the restructure transaction undertaken by the Tullow Group of
which the Titan Group had no details and was not involved with, but
where Mr Viljoen was involved as advisor at the time; and
6 2,6.2. Br e e Street Capital's main business is debt origination on behalf of

~investment grade corporates into debt capital markets. I n t h is
regard, it was relevant for Mr Viljoen that in the Titan Group, TSD
z' Li,7
9 of13
has a majo
rityinterest in Shoprite Holdings Limited, an investment
grade corporate. The Titan Group further has a significant stake in
Steinhoff International Holdings Limited("Steinhofl"), an investment
grade corporate. In addition, Steinhoff is themajority shareholder of
the Pepkor Group, also an investment grade corporate, Mr Viljoen
thus considered it in the interest of his business to acquire the
shares in EAL as requested by Mr Visagie.
6.2.7. At the time that Friedsheif negotiated to acquire the shares in EAL, it was
agreed between the parties and resolved that EAL would declare a dividend to
its 100% shareholder, Elandspad prior to such sale and subject to the solvency
and liquidity test being satisfied at such time. This was to ensure that EAL's
remaining asset, being a loan claim against TSD in the amount of R216 million,
was removed in order to give effect to the sale of the shares for the purchase
price of R150,000.
6.2.8. Mr V i l joen, through Friedshelf, therefore acquired the shares in EAL in the
interest of its business operations and, as director, authorised the Distribution.
6.3. F u rther, as stated above, while Mr Viljoen was aware of the receipt by EAI of the letter of
audit findings and section 80J notice, dated 16 November 2012, he did not believe that the
SARS contentions that EAL was liable fortax on the grounds stated therein were justified. In
particular, (1) the abovementioned letter contained allegations and statements which were
factually incorrect and (2) he was aware that when the restructure was undertaken, advice
was obtained from tax advisors, and tax opinions were obtained from senior counsel, who
confirmed that no CGT and STC implications should arise in the hands of EAI in terms of
the restructure transaction.
6.4. I n any event, on no basis would Mr Viljoen have been prepared to participate in or be
involved in any acts taken for the purpose of obstructing the collection of a tax debt and,
indeed, he did not participate in and was not involved in any such steps.
7. Concl u s ion
7.1, In l i ght of the above we contend, on behalf of Mr Viljoen, that he cannot be held personally
assets of EAL in order to obstruct the collection of a tax debt,
7.2. If a n y aspect of this representation is required to be amplified, or should you require any
do not hesitate to contact us.
$0 of13
7,3, O u r failure to deal with each and every contention in the Notice must not be construed as an
admission of the correctness thereof, )f necessary the detailed contentions will be traversed
in due course, Suffice it to say at this stage that any contentions which are inconsistent with
Kindly acknowledge receipt of this letter and furnish us with your reply at your earliest convenience,
In the event that Mr Viljoen's representations are rejected, please provide detailed reasons for such
rejection.
Yours sincerely
Q per :
II
Peter chs i it
11 of13
ANNEXURE A
'I. "Tax debt' is defined in section 1 of the TAA as an amount as referred to in section 169(1) of the
TAA, ln terms ofsection169(1) anamount of tax due or a able in terms of a tax Act isa lax debt
due to SARS for the benefit of the National Revenue Fund,
2. Sect i on 169(2) of the TAA provides that a tax debt is recoverable by SARS under Chapter 11 of the
TAA,
3, The d e f inition of a "tax debt as provided for under section 169 therefore requires that the amount of
tax be due or payable under a tax Act as a rnatter of objective fact and law. Any amount of tax which
is "due" is further a ableatsuchdateand laces ecifledb S ARS.
4, The w o rds "due and "payable" are not defined in the TAA nor Act and regard must therefore be had
to the ordinary meaning of the words.
ln Singh v Commissioner, South Afiican Revenue Service(2003 (4) SA 620 (SCA)), the Supreme
Court of Appeal ("SCA") rejected the court a quo's proposition (in the context of value-added tax)
the need of any preceding action by him. The SCA held that:
"Albeit that an assessment may be a 'mental act in the nature of a decision'...caunsel's submission that it
is sufficient for the assessrrient to exist purely in the Commissioner's head cannot be conect; fhe law is nat
generally cancemed with thoughts but wifh their outward manifestatlan..."
determination of the amount of a tax liability by way of self-assessment, the majority stated that the
hypotheticai (or assumed) knowledge by the taxpayer of the correct amount of his liabifity at the date
but the reality is that no taxpayer(bona fide or dishonest) who is kept in ignorance of the fact of an
assessment and its content can be expected to reconsider his liabiility and pay what he owes,
As regards the suinrnary nature of the recovery proceedings under section 40(2) of the VAT Act
which enables the Commissioner to file for judgment and proceed to execution, which recovery
powers are broadly similar in wording and scope to the recovery provisions contained in Chapter 11
of the TAA, the majority of the court held that',
'it would be extraordinary if the legislature had intended to authorise fhe taking of a judgmentin respect of
an irxfebtarfrras af which fhe iax a er had arrl <Iaemed krrowled e...lhe substanfial departure from the
common lew that such an authonsation would bring about and the seriousness of fhe potential
consequences to the taxpayer..." (aur emp
hasizes).
12 ot13
8 In a c oncurring minority judgment, Olivier JA made the following salient points with regard to when a
person becames liable for tax an the basis that a tax amount Is "due":
8.1. t h e ordinary meaning of "due", as held The

in Master v I L Back and Co Ltd and Others
(1983 (1) SA 986 (A)), Is that "there must be a liquidated money obligation presently
debtor...the debt must be one in respect of which the debtor is under an obligation ta pay
immediately"; and
8.2. t h e amount reflected in the return furnished by a taxpayer to SARS under the VAT Act must
However, there "may be e future or contingent liability to pay more than that reflected in lhe
return de endin o n the final decisions of the res andent (Le. SARS) or a court. Such
liabilil is not 'due' because it is not e t li uidaled b a c o urt or b a r e ement..."(our
emphasis).
9. Fur t her relevant, in

Metcash Trading Ltd v Commissioner for South African Revenue Service(2001
(1) SA 1109 (CC)) the Constitutional Court stated the following in respect of the determination of a
tax liability under the VAT Act and income tax more generally;
the first significant point to note is that VAT, quite unlike income lax does no i v e ri e to a iiabilit onl
once asassessman has been made" (ouremphasis).
10. By i m plication, according to the Constitutional Court, a tax liability for income tax only arises once an
11. Thi s c ontention is further supported by the case ofSecretary for Finance v Esselmenn (1988 50
priar to receiving assessments in respect of the estate awarded aII the assets of the estate to herself
as sole heir. Consequently, after the assessments were issued, no tax could be collected from the
estate as it no longer had any assets.
12. ln the court e quo it was held that a representative taxpayer Is liable for tax in his representative
is so, since a liability to tax arises when income is received or accrued to the taxpayer, and not when
an assessment is issued. This means that the representative taxpayer may become personally
liable for that tax once an assessment ls issued if the income concerned is disposed of by him prior
ta the Issue of an assessment, but subsequent to the receipt ar accrual of income giving rise to a
liability to tax.
13, M r s Esselmann appealed against this j

udgement and InEsselmenn v Secretary of Finance (1991 (3)
SA 681 (NmS)) the Supreme Court held that before Ihere can be a liabilil la a in c o me Iax there
must havebeen an assessmenl which assessment must have been served an the tax~ger.
13 of 13
14. A n " assessment" is defined in the TAA as

"the determination of the amount of a tax liability or
refund...", Further, section 96 of the TAA stipulates that a notice of assessment issued to a taxpayer
I' " '" 'W' ' " '
the due date for payment) and the rocedures for lod in an ob'ectionto an assessment.
15. S e c tion 162(1) of the TAA states that tax must be paid by the day and at the place notified by SARS
or as specified in a tax Act. In terms of section 162(3), a senior SARS official may, notwithstanding
section 96(t)(rj and section toy, ii there are reasonable grounds to believe inter alia that a ~tax a er
will dissi ate lhe tax a er's assets, require the taxpayer to pay the full amount immediately upon
16. Fur t her, with regard to when tax Iseduc" it is clear from the above that where SARS has audited a
taxpayer has been notrfied or such assessment. The amount oi tex witt further only become ~cable
at the date specNed in the notice of assessment to the taxpayer as envisaged in section 96 of the
TAA.
Further support for the fact that a ntax debt" can only exist once an assessment has been raised by
SARS appears from sections 165 to 168 of the TAA. Each of these sections deal with the concept of
a tax debt in the context where this refers to an assessment that has been raised, Specifically,
taxpayeraccount maintained by SARS (whichaccount can presumably only be maintained by SARS
payments to the oldest amount of an outstanding tax debt. Again, this can only refer to a tax debt in
be possible, Sections 166(3)• 167 and 168 also refer to tax debts in the same context, i.e. these
v.
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1 North Whed Square
Loop Street Foreshore Cape Town 8001
fv 0 Box 2202 Cape Town South Africa 0000
docex14 Cape Town
let +2721 410 2500
info@BNBafrfce corn ENSefrtca.corn
Commissioner for the South African Revenue Service P Dachs/ N Smit

19th Floor, iroor ref
22 Hans Strijdofn Avenue
Attention: Mr Aiistair Kane 16 January 2017
Dear Alistair
RE: NOTICE OF IN TERMS O F S E CTION 184, READ WITH SECTION 'I83 OF THE TAX
ADMINISTRATION ACT, 28 OF 2011
We refer to the notice issued to Mr FR Hofmeyr in terms of section 184 of the Tax Administration Act, 28 of
2011 ("TAA") ("Notice ).
ln terms of the Notice, the South African Revenue Service ("SARS") requests Mr Hofmeyr to make written
representations detailing why he should not be held liable in his personai capacity in terms of section 183 of
the TAA ("eection 183"), on the basis of allegations by SARS that he knowingly assisted in dissipating the
assets of the taxpayer, Energy Africa (Pty) Ltd ("EALo) in order to obstruct the collection of a tax debt of EAI .
We set out below certain background facts relevant to the matter, as well as the written representations, on
behalf of our client, Mr Hofmeyr.
1. Back g round facts
1.1. Du r ing January 2007, Tullow Oil Pic and its subsidiaries(oTullow Group" )undertook a
restructure of its African operations. At the relevant time, EAL forfned part of the Tuilow
Group.
1,2. At t h e t ime of s uch restructure, Titan Premier investments (Pty) Ltd (oTPI") and its
subsidiaries (" Titan Group" )did not hold any interest in the Tullow Group, nor was it
involved in any manner whatsoever with the Tuliow Group or the restructure of its
operations. Mr Hofmeyr was not an investor in the Titan and / or Tullow Groups at the time
and had no other involvement and / or knowledge of such restructure.
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AFRICA.
2 of13
Nearly 3 months after the Tullow restructure, Mr Viljoen, as representative of the Enact Trust
(a third party not related to the Titan or Tullow Groups) which, at that time, was the sole
shareholder of Elandspad Investments (Pty) Ltd ("Elandspad")which, in turn, held 100% of
the shares in EAL, approached Dr CH Wiese and Mr I Visagie as representatives of the
Titan Group, TPI was presented with a proposal to acquire the shares in Elandspad from
the Enact Trust. Mr Visagie indicated that TPI was willing to buy such shares on the basis
that it did not assume any historic obligations or liabilities that may arise from the
restructuring of the Tuilow Group's affairs. In April 2007, TPI proceeded to acquire the
shares ln Elandspad, and indirectly in EAL, for cash in the amount of R8,6 million.
It is further relevant to record that Friedshelf (Pty) Ltd ( Friedshelf"), a company of which
MrViljoen and Hofmeyr were shareholders, acquired all the shares in Elandspad on
22April2013. This transaction arose after Mr Visagie contacted Mr Viljoen advising that
there is an inquiry into the affairs af EAL arising from the restructure transactions undertaken
by the Tullow Group and requesting Mr Viljoen to take over the company in order to deal
with such inquiry.
The 'tax debt" to which the Notice refers arose from additional assessments raised by SARS
on EAL on 21 August 2013 in respect of secondary tax on companies ("STC") and income
tax (imposed on a capital gain) in its 2007 year of assessment ("STC Assessment"and
"CGT Assessment" )in respect of the Tullow restructure transaction ("the relevant tax
debt"). In other words, the events giving rise ta the relevant tax debt arose before the Titan
Group had any involvement with or connection to EAL.
Mr Hofmeyr, as shareholder of Frledshelf, understands that the STG and CGT Assessments
were preceded by a letter of audit findings and section 80J notice issued by SARS on
16 November 2012. ENSafrica responded to such leNer an 15 April 2013 on behalf of EAL.
Mr Hofmeyr understands that once TPI had purchased the shares in Elandspad, EAL traded
iin single stock futures in respect of which profits were realised and it also earned interest
»ncorne, which gave rise to profits of approximately R192 million. (n order to commence
trading in single stock futures, EAL was funded by Titan Share Dealers (Pty) Ltd ("TSD"), a
company which forms part of the Titan Group, The Titan Group therefore introduced assets,
in the form of cash, to EAL to commence its business, after the acquisition of Elandspad.
Mr Hofmeyr is aware that SARS disallowed the set-off of these profits against the assessed
loss of EAL in its 2007 to 2011 years of assessment ln terms of section 103(2) of the Income
Tax Act, 58 of 1962 (the "Act") by raisIng additional assessments on 26 September 2011 on
the basis that the sole or inain purpose for the Titan Group acquiring the shares in EAL was
to utilise the assessed loss (" Section 103(2) Assessments" ), EAL disputed the Section
103(2) Assessments. The tax debt in that context ("the section 103(2) tax debt') was
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secured by a pledge of shares by TPI. The disputes arising from the Section 103(2)
Assessments in each of the relevant years of assessment were subsequently settled with
SARS and the settl'ement amounts were paid in full.
1.9, O n 18 April 2013,Dr Wiese and Advocate JD Wiese resigned as directors of Elandspad and
EAL and Messrs Viljoen and Hofrneyr were appointed as directors of these companies.
1.10. The SARS allegations that IVlr Hofmeyr assisted in dissipating assets of EAL relates to the
EAL against TSD wa s d i stributed in s p e cie to i t s s h a reholder, Elandspad (the
"Distribution").
1.11, O n 19 April 2013, Messrs Viljoen and Hofrneyr, in their capacities as the directors of EAL
and Elandspad, respectively, authorised the Distributions.
2, Repr e sentations
2,1, S e ction 183 of the TAA provides that:
a lax deb! of the taxpayer, the person is jointly and severally liable with the taxpayer for the tax debt
debt" (ouremphasis).
2,2. F o r section 183 to apply, the following requirements must be satisfied:
2.2.1. There must be a tax debt of a taxpayer,
2.2,2, There must be a dissipation of the taxpayer's asset(s);
2.2,3, The person to whom section 183 is to be applied ("the relevant person'")must
2.2.4. The relevant person must knowingly assist in dissipating the asset(s) of the
taxpayer,
2,2,5. The relevant person must do so in order to obstruct the collection of the tax
debt.
2,3. In t he Notice, SARS contends that these requirements were satisfied on the following bases
2,3.1, SARS contends that the relevant tax debt constituted a "tax debt" fal ing within
section 183. SARS also refers in the Notice to the section 103(2) tax debt but it
is not clear whether or not SARS contends that this tax debt constituted the tax
debt for the purposes of the application of section 183.
4of $3
2.3,2. SARS contends that there was a dissipation of EAL's asset, namely its loan
2.3.3. SARS contends that Mr Hofmeyr had knowledge of the relevant tax debt;
2.3,4. SARS contends that Mr Hofmeyr knowingly assisted in the alleged dissipation
of the asset;
2.3,5. SARS contends that Mr Hofmeyr did so in order to obstruct the colIection of the
relevant tax debt,
2.4. No n e of the requirements of section 183, to which we have referred above, was satisfied, In
particular,
2.4.1. At the relevant time, there was no tax debt of EAL (we deal with this in
paragraph 3 below);
2,4.2. There was no dissipation of an asset of EAL (we deal with this in paragraph 4
below);
2,4.3. Mr Hofmeyr did not have knowledge of a relevant tax debt (we deal with this in
paragraph 5 below); and
2,4,4. The alleged dissipation of an asset was not done in order to obstruct the
3, Ther e was no "tax debt" at the relevant time
3.1. F o rs ection 183 to apply, a "tax debt" must have been in existence at the time when the
alleged "dissipation of assets took place (in this case, the Distribution).
3.2. It i s clear from the section that this refers to the "tax debt" which has not been collected.
Therefore, the existence of the section 103(2) tax debt is Irrelevant in this context. As stated
above, that tax debt was settled with SARS and the settlement amounts were paid in full.
3,3, T h eq uestion, therefore, is whether the relevant tax debt existed at the time of the alleged
dissipation of the asset. namely on 19 April 2013.
34 A de t a iled analysis of the applicable provisions of the TAA and the Act, as well as cases
decided upon by our courls are attached as Annexure A.
5 of 13
3.5. I n summary, Mr Hofrneyr submits as follows;
3,5.1. The term 'tax debt' is defined in section 1 of the TAA as an amount referred to
in section 169(1) of the TAA, In terms of section 169(1) ja]n amount of taxdue
or a able in terms ofa tax Actis a tax debt due to SARS for the benefit of the
3.5.2, Ther efore, for there to be a "tax debt", there must be an amount of tax due or
until an assessment has been issued for that amount.
3,5,3. Thils is clear from ilffietcash Trading Ltd v Commissioner for South Afiican
Revenue Service 2001 (1) SA 1109 (CC) in which the Constitutional Court
stated the following at paragraph [16] page 1121G-H in respect of the
generally:
the first signilicent point to note is that VAT, quite finlilre income tex does not ive
rise to e liebilit onl once en ess ssment hes been marte"<ouremphasis).
3.5.4. in Esselmann v Secretary of Finance(1991 (3) SA 681 (NmS)) the Namibian

must havebeen an assessment,which assessment must have been served on
the taxpayer (per Barker C J at pages 686E —687H).
3.5,5. See too Singh v Commissioner, South African Revenue Service 2003 (4) SA
520 (SCA), for example at paragraph [12],
3,5.6. Further, with regard to when tax is educ", a tax debt will only arise once the
assessment hasbeen issued by SARS and the taxpayer has been notified of
such assessment. The amount of tas witt only become ageable at the date
specifiled in the notice of assessment to the taxpayer as envisaged in section 96
of the TAA,
3.6, T h e D i stribution occurred prior to the raising of the STC and CGT Assessments. The
Distribution occurred on 19 April 2013 and the STC and CGT Assessments were raised on
21 August 2013,
3.7 The r e fore, there was no "tax debt" at the time of the alleged dissipation of an asset and,
6 of 13
4, The r e was
no dissipation of an asset
4.1, Th eword "dissipating"is not defined in the TAA. Regard must thus be had to the ordinary
meaning of the word ln its context, as well as any judicial pronounce
ments in relation to the
meaning thereof.
4.2, In Carmel Trading Co Ltdv Commissioner, South African Revenue Service and Others2008
(2) SA 433(SCA) the court stated at para [3] that in order for the applicant to succeed with
nwasting or secreting assets with the intention of defeating the claims of creditors." We
contend that the dissipation of assets in the context of section 183 bears the same meaning
and therefore entails the w~astin or~encratic of assels.
4.3. In Kn o x D'Arcy Ltd and Others v Jamieson and Others1996 (4) SA 348 (A), the court
necessary to "show a particular state of mind on the part of the respondent, i.e. that he is
geet tfn rid of ihe fundsor is l, ikely to doso, wiih the intention of defeating the claim of
creditors... except possibly in exceptional cases"(our emphasis).
4.4, Th ec ourt also approved an earlier dictum inMcitiki end Another v Maweni 1913 CPD 684,
wherein it was stated at page 687 that applications for an anti-dissipation order:
"...all proceed upon the wish of the Court that the plaintiff should not have an injustice done to him
by reason of leaving his debtor possessed of funds sufficient to satisfy the claim, when
circumstances show that such debtoris weslin or e l t in r id of such funds to defeat his creditors,
oris likely to do sd' (our emphasis).
4,5. C a se law, in relation to the ordinary meaning of "dissipation", considers dissipation to refer to
4.6. T h e Distribution did not constitute the wasting or secreting of EAL's assets as envisaged in
section 183. Where, as here, the distribution of assets by a company to its shareholder(s)
intended that such a distribution by way of a dividend declaration would be regarded as the
dissipation of the money or asset declared as a dividend, for the purposes of section 183. In
particular, the protection of creditors of a company against unwarranted decarations of
dividends is provided by the solvency and liquidity requirements of the Companies Act, 71 of
2008 ("CA 2008").
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4.7. Fu r t her, there were sound commercial reasons for the Distribution. The Titan Group wished
to sell the shares in Elandspad (and thus EAL) to Friedshelf. In order lo do so, TPI (the
shareholder of Elandspad) could have increased the purchase price for the shares by an
amount of R216,600,000, on the basis that EAL held an asset of that value, being the loan
claim against TSD. A s an alternative, such asset could be distributed by EAL to its
price for the shares in Elandspad could be reduced by the amount of the distribution. It was
decided that EAL would distribute the loan claim to Eiandspad, and thereafter, Elandspad
would distribute same to TPI, whereafter the shares were sold.
4.8. Th e r efore, the Distribution did not constitute the "dissipation"

of EAL's assets under section
183.
5. Mr Hof m eyr did not have knowledge of the relevant tax debt
5.1. We h a ve pointed out above that the relevant "tax debt" did not exist at the time of the
Distribution, However, even if the relevant tax debt which was subsequently assessed is
regarded as a "tax debt" for the purposes of section 183, Mr Hofmeyr did not have
knowledge of that "taxdebt" at the time of the Distribution. In particular, while the letter of
audit findings and section 80J notice had been issued by SARS on 16 November 2012, the
view was held that EAL was not liable on the grounds stated in that letter and, indeed, this
was stated in the response to that letter dated 15 April 2013.
5.2. I n addition, Mr Hofmeyr, as shareholder

of Friedshelf, was informed that when the Tullow
restructure was undertaken, advice was obtained from tax advisors, and tax opinions were
obtained from senior counsel, who confirmed that no CGT and STC implications should
arise in the hands of EAL in terms of the restructure transaction. Therefore, Mr Hofmeyr did
not believe that EAL was liable for tax on the basis contended by SARS in the letter dated
16 November 2012.
6, The a l l eged dissipation

of an asset was not done In order to obstruct the collection of the
alleged tax debt
6,1. It i s clear that the words"in order to obstruct the collection of a tax debt" require that the
of the tax debt.
6.2. I V l r Hofmeyr denies that he assisted with the Distribution (being the alleged dissipation) for
the purpose of obstructing the collection of the tax debt. Insofar as he had any involvement
or participated in any actions or transactions at the time, he did so for sound commercial
reasons, being the following;
8 of13
Mr Hofmeyr understands that Mr VIIjoen (being Mr Hofmeyr's business partner

and fellow shareholder of Frledshelf) has a longstanding relationship with the
Titan Group, spanning more than 15 years;
Mr Hofmeyr further understands that during 2007, Mr Viljoen approached

Mr Visagie of Titan with a proposal to acquire the shares in Elandspad (and
thus indirectly EAL) which, at the time, had three assets, being a bank account
and reserves;
Mr Visagie, on behalf of Titan, agreed to acquire such shares on the basis that
TPI does not assume any historic obligations or liabilities that may arise from
the restructuring of the Tultow Group's affairs. In April 2007, TPI proceeded to
acquire the shares in Elandspad, and indirectly in EAL, for cash in the amount
of R12 million;
During 2011, Mr Viljoen and Mr Wofmeyr started their own business, namely
Kirkham Ventures (Pty) Ltd (now Bree Street Capital (Pty) Ltd), which company
originates unsecured debt in the capital market on behalf of investment grade
corporates',
During 2013, Mr Visagie contacted Mr Viljoen advising that there is an inquiry

into the affairs of EAL arising from the restructure transactions undertaken by
the Tullow Group and requesting Mr Viljoen to take over the company in order
to deal with such inquiry as it was never TPI's intention to have to deal with
such historic transactions with which it had no involvement whatsoever;
Mr Viljoen discussed this with Mr Hofmeyr, who agreed that Friedshelf should
acquire all the shares in Elandspad on 22 April 2013. Mr Hofrneyr agreed to
such acquisition in the interest of the business of Bree Street Capital, This was
for the following reasons:
6.2.6.'I. Mr Viljoen advised Mr Hofmeyr that he, together with ENSafrica,

were best placed to deal with SARS' enquiries, considering that
same arose from the restructure transaction undertaken by the
Tullow Group of which the Titan Group had no details and was not
involved with, but where Mr Viljoen was involved as advisor at the
time; and
6.2.6.2. Brea Street Capital's main business is debt origination on behalf of

investment grade corporates into debt capital markets. In this
regard, it was relevant for Mr Hofmeyr that in the Titan Group, TSD
has a majority interest in Shoprite Holdings Limited, an investment
l
9 of13
grade corporate. The Titan Group further has a significant stake in

Steinhoff International Holdings Limited ("Stelnhoff'), an investment
grade corporate. In addition, Steinhoff is the majority shareholder of
the Pepkor Group, also an investment grade corporate. Mr Hofmeyr
thus considered it in the interest of his business to acquire the
shares in EAL as requested by Mr Visagie.
6.3. A t the tiine that Friedshelf negotiated to acquire the shares in EAL, it was agreed between
the parties and resolved that EAL would declare a dividend to its 100% shareholder,
Elandspad prior to such sale and subject to the solvency and liquidity test being satisfied at
such time. This was to ensure that EAL's remaining asset, being a loan claim against TSD
in the amount of R216 million, was removed in order to give effect to the sale of the shares
for the purchase price of R150,000.
6.4. Mr H o fmeyr, through Friedshelf, therefore acquired the shares in EAL in the interestof its
business operations and, as director, authorised the Distribution.
6.5. Fu r t her, as stated above, white Mr Hofmayr was aware of the receipt by EAL of the letter of
audit findings and section 80J notice, dated 16 November 2012, he did not believe that the
SARS contentions that EAL was liable for tax on the grounds stated therein were justified. In
particular, (1) the abovernentioned letter contained allegations and statements which were
factually incorrect and (2) he was aware that when the restructure was undertaken, advice
was obtained from tax advisors, and tax opinions were obtained from senior counsel, who
confirmed that no GGT and STC implications should arise in the hands of EAL in terms of
the restructure transaction.
6.6. In a n y event, on no basis would Mr Hofmeyr have been prepared to participate in or be

involved in any acts taken for the purpose of obstructing the collection of a tax debt and,
indeed, he did not participate in and was not involved in any such steps.
7. Concl u s i on
7,1. In l i ght of the above we contend, on behalf of Mr Hofmeyr, that he cannot be held personally
assets of EAL in order to obstruct the collection of a tax debt.
7.2. If a n y aspect of this representation is required to be amplified, or should you require any
do not hesitate to contact us.
7.3. Ou rfailure to deal with each and every contention in the Notice must not be construed as an
admission of the correctness thereof, If necessary the detailed contentions will be traversed
QMi
10 of13
in due course. SuNce it to say at this stage that any contentions which are inconsistent with
Kindly acknowledge receipt of this letter and furnish us with your repiy at your earliest convenience.
In the event that Mr Hofrneyr's representations are rejected, please provide detailed reasons for such
rejection.
Yours sincerely
Per.
Peter Oachs
3
11 of13
ANNEXURE A
nTax debt' is defined in section 1 of the TAA as an amount as referred to in section 169(1) of the
TAA. In terms of section 169(1) an arnounl of lax due or a able in terms of a tax Act is a tax debl
2, Sect i on 169(2) of the TAA provides that

a tax debt is recoverable by SARS under Chapter 11 of the
TAA.
3. The d efinition of a "tax debt as provided for under section 169 therefore requires that the amount of
tax be due or payable under a tax Act as a matter of objective fact and law. Any amount of tax which
ls "due" is further a able at such date and lace s ecified b SARS.
4, The w o rds "due and "payable" are not defined in the TAA nor Act and regard must therefore be had
to the ordinary meaning of the wards.
5. In Sin g h v Commissioner, South African Revenue Service

(2003 (4) SA 520 (SCA)), the Supreme
Court of Appeal ("SCA') rejected the court a qua's proposition (in the context of value-added tax)
the need of any preceding action by him. The SCA held that:
"Albeit that an assessment may be a 'mental act in the nature of a decision'...counsel's submission that it
is sufficient for the assessment to exist purely in the Commissioner's head cannot be correct; the lewis not
generally concerned with thoughts but with their outward manifestation„,"
determination of the amount af a tax liability by way of self-assessment, the majority stated that the
but the reality is that no taxpayer (bana fide or dishonest) wha is kept in ignorance of the fact of an
assessment and its content can be expected to reconsider his liability and pay what he awes.
7 As reg a rds the summary nature of the recovery proceedings under section 40(2) of the VAT Act
which enables the Commissioner to file for j udgment and proceed to execution, which recovery
powers are broadly similar in wording and scape to the recovery provisions contained in Chapter 11
of the TAA, the majority of the court held that;
it would be extraordinary if the legislature had intended to authonse the taking of a judgmentin respect of
an f~>do la>rlrreasnf el>lair I>n Ins I a nrd <I e r>mll Irn el ...Ih s snhsfanlraf depannm fmmfhe
common law that such an authonsation would bnng about and ihe seriousness of ihe potenlial
consequences to the taxpayer„." (our emphasis).
12of13
8, In a concurring minority Judgment, Olivier JA made the following salient points with regard to when a
person becomes liable for tax on the basis that a tax amount is "due":
8.1, th e o rdinary meaning of "due', as heldin The Master v I L 8ack and Ca Ltd and Others
(1983 (1) SA 986 (A)), ls that "there must be a liquidated money obligation presently
debtor„,the debt must be one in respect of vvhich the debtor is under an obligation topay
immediately"; and
8.2. th e amount reflected in the return furnished by a taxpayer to SARS under the VAT Act must
be paid immediately because it is "due in the sense referred in paragraph 8.1 abave,
However, there "may be a future or contingent liability to pay more than that reflected in lhe
return de endin o n the final decisions of the res ondenl (i.e. SARS) or a court. Such
iiabilit is not 'due' because it is not e t li uidated b a co u rtor b a re e ment..."(aur
emphasis).
9. Furt h er relevant, inMetcash Trading Ltd v Commissioner for South African Revenue Service(2001
(1) SA 1109 (CC)) the Constitutional Court stated the following ln respect of the determination of a
tax liablgty under the VAT Act and income tax more generally:
"the first significant point to note is that VAT, quite unlike income fax does not ive rise to a lisbilit onl
onc s e (our emphasis).
e s smenthas been made"
10. 8 y i mplication, according to the Constitutional Court, a tax liabiiity for income tax only arises once an
11, Thi s c antention is further supported by the case of Secretary for Finance v Esselmann (1988 50
prior to receiving assessments in respect of the estate awarded all the assets af the estate to herself
as sole heir, Consequentiy, after the assessments were issued, notax could be collected from the
estate as it no longer had any assets,
12. In the court a guo it was held that a representative taxpayer is liable for tax in his representative
is so, sInce a liiabllity to tax arises when income is received or accrued to the taxpayer, and not when
an assessment is issued, This means that the representative taxpayer may became personally
liable for that tax once an assessment ls issued if the Income concerned Is disposed of by him prior
to the issue of an assessment„but subsequent to the receipt or accrual of income giving rise to a
liability to tax.
13 Mr sEsselrnann appealed against this judgement and in

Esselmann v Secretary of Finance (1991 (3)
SA 681 (NmS)) the Supreme Court held that before there can be a Iiabihl ta a i n c ome tax there
must havebeen an asse sment which assessmeni must have been served an the tax a er.
13 of13
14. A n " assessment" is defined in the TAA as

"the determination of the amount of a tax liability or
the due date for payment) and the rocedures for lod in an ob ectionto an assessment,
15. S e c tion 162(1) of the TAA states that

taxmust be paid by the day and at the place notified by SARS
or as specified in a tax Act. In terms of section 162(3), a senior SARS official may, notwithstanding
section 96(1)fi) and section 167, if there are reasonable grounds to believe infer alia that a ~tax a ar
will dissi ate the lax a er's assets, require the taxpayer to pay the full amount i mmedia
tely upon
16. Fur t her, with regard to when

tax is "due" It is clear from the above that where SARS has audited a
taxpayerhssbeen notified of such assessment. The amount of tax will further oniy become bearable
at the date specified in the notice of assessment to the taxpayer as envisaged in section 96 of the
TAA.
17 Fu r ther support for the fact that

a "taxdebt" can only exist once an assessment has been raised by
SARS appears from sections 165 to 168 of the TAA, Each of these sections deal with the concept of
a tax debt in the context where this refers to an assessment that has been raised, Specifically,
taxpayer account maintained by SARS (which account can presumably only be maintained by SARS
payments to the oldest amount of an outstanding tax debt. Again, this can only refer to a tax debt in
be possible. Sections 166(3), 167 and 168 also refer to tax debts in the same context, i.e. these
Legal CoLliisel~.;";;;-'=:.; ' - .
Del(very;SupportROIspute',-"-~
South Afri
can Revenue Service
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PER E-MAIL:chwiesetsd I o b a l.co.za

.EAUS.1 DIu ' " - ~
' <~g 18 floor

22 Hans Strydorn Avenue
3+@at. 1,;- AND Cape Town
8001
HAND DELIVERED
V
4I •
RK: NOTICE OF PERSONAL LIABILITY IN TERMS OF SE ION 1 3 OF THE TAX

ADMINISTRATION ACT 2011 rA Act" - FINAL DEMAND
l. I ~ •
4'
• „
TAX TYPE(S)' Income Tax
I'
REFERENCK NUMBER(5): 9134/134/71/8
TOTAL AMOUNT OF TAX OUE: R3 654 496 818
AMOUNT CLAIMED: R 216 600 000
•Y
I'
OF ASSETS: Or Christoffel Hendrilt Wtese
Pl+ g., IO NUMBER: 4109105008085
CAPACITY: Person as defined in Section 183
( ~~ +'y l
of the TA Act
1. I refe r t o the letter written on your behalf dated 16 january2017 ("the Representatians") in
respanse to the notice issued to you by the South African Revenue Service ("SARS") in terms
of section 184 of the TAAct ("the Notice" ) dated 25 Octaber 2016.
2. This l e t ter represents a response

to the Representations,
I4' ~;,' W.,i;4& %'.l':j 3. Desp i t e t h e Representations, which have been carefully considered, the Commissioner
remains af the view that yau are a person who has knowingly assisted in the dissipation of the
taxpayer's assets in order to obstruct the collectian of a tax debt af the taxpayer as provided
for in section 183 of the TA Act.
4. You a r e therefore jointly and severally liable with the taxpayer far the tax debt, ta the extent
ta which your assistance reducerl the taxpayer's assets available to pay its tax debt.
The reasons for the Commissioner having initiagy decided as such are set aut in detail in aur
earlier correspondence and you are referred ta that correspondence, which should be read in
conjunction with this letter. After briefly recording the relevant background facts, we deal
with the further issues raised in the Representations below.
8ackground
6. The t a x payer is indebted to SARS the

in amount of R3654496818 (indusive of penalties and
Interest but exciusive of interest which accrues from the date of this letter) on the grounds
set out in our earlier correspondence.
This tax liability was incurred as a result of the non-payment of income tax {" IT" ) and
secondary tax on companies ("STC").
On 26 September 2011, pursuant to an audit of the taxpayer, SARS assessed the taxpayer for
additional income tax in respect of the 2007, 2008 and 2010 years of assessment in the
amounts of R1$849736 (plus penalties of R 37699470), R8570682 (plus penalties of
R 17 141364) and R6580531 (plus penaitles of R 13161062) respectively, being a total

amount of R102 002 845.
On 27 September 2011, the Income tax amount in respect of the 2010 year of assessment was
reduced to R6 566951. The penalties remained unaltered. The total amount of the tax, and
penalties thereon for the 2007, 2008and 2010 years of assessment was therefore reduced to
R101 989 265.
10. As at 19 April 2013 the amounts of interest that had accrued on the aforesaid amounts were
R2$321 72$(2007),R10 027 69$ (200$)and R3493 499 (2010),beinga totalofR41$42 925.
11. On 2 8 September 2012, SARS assessed the taxpayer to income tax in respect of the 2011 tax
year in the amount of R20 430934.72. As at 19 April 2013 the amount of interest that had
accrued onthis amount was R1881 348.
12. On 16 November 2012, SARS addressed a letter to the taxpayer, in which it;
12,1, n o t i fied the taxpayer that SARS intended to:
12.1.1. mak e certain adjustments In respect of the taxpayer's 2007 income tax
assessment, which would result in the inclusion of capital gains tax

{ "CGT") on the disposal of a subsidiary in the amount of R453 126 518 In
terms of paragraph 8(b) read with paragraph 648(3) of the eighth
schedule to the IT Act; and
12.1,2, issu e an assessment for the taxpayer's 2007 t.e year in respect of STC on
a deemed divirlend in the amount of R487 205 316 in terms of section

64C(2){o) of the IT Act;
l>.2, c o m p rehensively communicated its findings to the taxpayer pursuant to u> .audit of
informationprovided by the taxpayer;

12.3. i s s ued a notice in terms of section 80J(1) of the IT Act on the basis that the
transactions in question amounted to, inter alia, an impermissible tax avoidance

arrangement as defined in section 80l. of the IT Act.
13. On 15 A p ril 2013, the taxpayer's attorney addressed a letter to SARS, disputing any tax
liability to SARS.
14. On 15 A p r il 2013 andat all material ti mes thereafter, the taxpayer's only assetaf material
value was a loan claim against Titan ShareDealers(Pty) Ltd ("TSD") In the amount af R216,6
million ("the loan claim" ).
On or about 19 April 2013, you instructed Mr lsak Visagie to procure:
15.1. the distributionof the loan claim against TSD to Titan Premier investments (Pty) Ltd
("TPI"); and
15.2. t h e sale of the taxpayer to Friedshelf 1395 (Pty) Ltd ("Friedshelf").
16. O n 19April 2013,the directors of the taxpayer (at the time Mr Gert Vljoen and Mr Frederick
Rauten Hofmeyr) resolved at a meeting of the board of directorsof the taxpayer as follows:
"1. The Company has o loan claim against Titan Shore Deolers (Pty) Ltd in the
amount of R216600000.00 (Two Hundred and Sixteen Million ond Six

Hundred Thousond Rand) ("loon claim" ).
2. The C o mpany wishes to distribute in specie the Loan Claim on 19 April 2013
("the Distribution" ) to Eiandspod investmenls (Pty) Ltd ("Eiandspad"), in its
capacity as the holder of all the ardinory shores in the Compony.
The Compony is authorised to make the Distribution to Elandspad.
Pursuant to the outharisation in clause 3 above, the Company hereby
resolves to make the Distribution to Elandspad on 19 April 2013."
D. On 19 A p r i l 2013, the taxpayer effected the distribution of the loan claim to its holding
company, Elandspad (Pty) Ltd ("Elandspad"), and advised the latter thereof in a letter signed
by Mr Gert Viljaen and Mr Frederick Rauten Hofmeyr.
18, On 19 A p ril 2013, the board of directors of Elandspad authorised the distribution by wayot' a
dividendin specieof the loan claim to its holding company, being TPI,
19. On 19 A pril 2013 Elandspad efFected the distributlan of the loan claim ta its holding company,
TPI, and advised the latter thereof In a letter signed by Mr Gert Vil}aen and Mr Fred rick
Rauten I lofrneyr.
20, Aft er t he di:iribution of the dividend inspecie referred ta abave an;I an or about 6 May 2013,
TPI disposed of ail of the shares in the taxpayer (through the sale of EIandspad) to Filedsheif
in terms of a written sale of shares agreement ("the sale of shares agreement") entered inta
by TPI, represented by you and Mr Isak Visagie, and Friedshelf, represented by Mr Gert
Viljoen and Mr Frederick Rauten Mofmeyr.
In the premises, with full knowledge of what is set aut in paragraphs 8 to 12 above, yau
knowingly caused, or assisted in causing, the taxpayer to dissipate the loan claim by deciaring
and transferring it as a dividend in specie to its holding company, Elandspad, which in turn
declared and transferred the loan claim as a dividend inspecie ta its own holding company,
TP I in order to obstruct the collection of the following tax debts:
21.1. t h e amount of R101 989 265, referred to in paragraph 9 above, which was then due,
awing and payable;
21.2. I n t e rest on the amounts comprising the sum referred to in paragraph 21.1 of
R41 842 925;
21,3. t h e amount of R20430 934.72, referredto in paragraph 11 above, which was then
due, owing and payable;
21.4. i n terest on the amount referred ta in paragraph 21.3 In theamountof Rl 881 348;
21.5. t h e amount of R453 126 518, referred to in paragraph 12.1.1 above, which, while
not
then due, owing and payable, was nonetheless a debt claimed by SARS; and
21.6, t h e amount of R487 205 316 ln respect of STC, referred ta in paragraph 12.1.2 above,
which wasthen due,owingand payable,having become due,owing and payable no
later than the last day af the month followingthe month in which the dividend cycle
relevant to the dividend ended.
22, Accor d ingly, at the time of the conclusion of the sale of shares agreement, the taxpayer had
been assessed to income tax in the amount of R122 420 199.72 plus interest of R43 724 273,
was liable for STC in the amount of R487 205316, and had been notified of SARS' claim
against it in a further sum of R453 126 518, being a total of Rl 106 476 306.72.
23, The f u l l amaunt of Rl 106476 306.72 constitutes

a "tax debt" for the purposes of section 183
of the TA Act.
On 21 August 2013, SARS addressed a finalisation of audit letter to the taxpayer in which the
taxpayer's additional IT Hability for the 2007 year of assessment was fully described ("the
finalisrrtiarr of audit letter" ). The letter records the fogowing;
24.1. a n o t ice of additional assessment In respect of the taxpayer's 2007 Income tax
assessment, resulting in the inclusion of CGT on the disposal of a subsidiary in the
amount of R453 126 518 in terms of paragraph B(b) r;ad with paragrapir 648(3) of
the eighth schedule to the IT Rcr, and understatement penal!Ies af R679 689 777;
and
24.2. a n o t ice of original assessment for the taxpayer's 2007 tax year in respect of STC on a
deemed dividend in the amount of R488 282 886 in terms of section 64C(2)(o) of the
IT Act, and understatement penalties of R732424329 (collectively "the audit
assessments").
25. Sub s equent to the conclusion of the sale of shares agreement, on 11 September 2013 the
attorneys for the taxpayer (your current attorneys) replied to the Ainalisation of audit letter. In
the reply, they advised that the taxpayer disputed any liabgity to SARS and that the taxpayer
did not have any cash or assets and could not pay the disputed tax.
26. On 2 6 November 2013, SARS issued a notice of assessment in respect of the 2012 tax year in
terms of which it assessed the taxpayer to tax in the amount of R3 261 106.06 and interest in
terms of section 89quot(2) of the IT Act in the amount of R207 895.51.
27. The t a xpayer objectedto the audit assessments and, on 3 April 2014, SARS issued a partial
allowance of that objection and confirmed the remainder of the audit assessments ("the
revised audit assessments").
28. In t h e absence of an appeal against the revised audit assessinents, on 26 June 2014, SARS
issued aAnal demand for payment ofR3 264 145 690.16 by the taxpayer.
29. On 3 0 July 2014, SARS obtained a certified statement in terms

of section 172(1) of the TA Act
in theamount of R3 278 805 100.
30. On 1 2 April 2016, the taxpayer was finally wound up by order of the High Court of South
Africa (Western Cape Dhrlsion) under case number 1646/16.
31. On 2 5 O ctober 2016, SARS gave you notice in terms of sections 183 and 184 of the TA Act
("the Notice" ).
3 2, On 16 J a n uary 2017, you responded in t e rms of section 184 o f t h e T A Ac t ( " t h e
Representations" ).
33. As a p p ears from the Notice, SARS contended therein that you are liable, jointly and severally,
to pay to it the amount of R216.6 million.
34. As a p p ears from the Representations, you dispute that you are liable to SARS on the grounds
relied on by SARS.
35. Havi n g considered Ihe contents of the Representations horeio a., rnntvn>plate
il by section
184(2) of the TA Act, SARS has determined to hold yoii iiablo for ti>.. 'ax ilr.bts of ' he • ixpayer
in terms of section 183 of the TA Act.
36. The e v ents surrounding the suite of transaciions dated 19 hp

iiI 2u ' .ho':. that y ou k,:.vin< ly
a ivied the taxpayer in the dis;ipaiio» oi i's nnly r . i ass, u : ! , i .- ii i riI": o'.Iu' farl
that the suite of transactions outlined above would obstruct the collection of a tax debt of the
taxpayer.
37. We no w d eal with the different issues raised in the Representationsseriotim.
Issues raised ln the Re resentations
Tax debt
38. Th eessence of the argument contained in the Representations is that,"For Section 183 to
apply, a "tax debt" must have been in existence at the time when the alle ed "dissi ation" o
assets took lace in this case the Oistribut ion."' (emphasis added)
39. Fi rs t ly, as at 19 April 2013, when the dividendin specie to a value of R216600000 was
dissipated, there was, as demonstrated by the summary paragraph 21 above, substantially

more than that amount owing by the taxpayer in the form of tax that was then due, owing
and payable. Accordingly, on any interpretation, a tax debt was in fact in existence at the time
when the disposition of assets took place.
40. Sec o n dly, the view that the "tax debt" must have beenin existence (i.e. due, owing and
payable) when the dissipation took place Is premised on a particular interpretation of section
183 of the TA Act, which providesas follows:
"283. L l ab/lity of person assisting in a dissipation of assets.
/f a person knowingly ossists in dissipoting a taxpayer's assets in order to obstruct the
collection of o tax debt of the taxpoyer, the person is jointly ond severolly liable with
the taxpayer for the tax debt to the extent thot the person's assisronce reduces the
assets available to pay the taxpayer's tax debt."
41. This being a question of interpretation rather than fact, regard should be had to the proper
approach to such matters as set out in a number of more recent decisions of the SCA and
Constitutional Court, including Natal Joint Munici al Pension Fund v Endutneni Munici ali
in which the SCA held that:
"Interpretation is the process of at tributin meanin ta t h e w o rds used in a

document, be It legislation, some orher statutory instrument, or contract, h~ovin
re ard to the context provided by reading the particular provision or provisions in the
fight af the docament as a whole and rhe circamsmnces attendant a a~

nits comin
into existenct;"(emphasis added)
Paragraph 3. t af the Representaltans

012 (4) SA 693 I SCA)
Englengeni al ital
a2. Thus, a s d id the courtina ndurneniweconsiderthe~lan ua eoft h e proviso,itscontextand
the problem that the provision seeks to atidress fi.• . its ~ur i~use .
43. Th e p r ovision ifnposes liability for something knowingly done (i,e. consciously or
intentionally). I t d o es not impose liability for soinething dane inadvertently (this
requirem
ent is a reflection of the nature of the provision).
44. As t o t h e exact content of the requisite intent, it is the rendering ofassistance to a taxpayer
to ~dissi ate the taxpayer's assets in arder to abstruct the payment of atax debt.
In the Representations it Is contended that,"For section 183 ta opply, a "tax debt" must have
beenin existenceat the time when the alleged "dissipotion" of assets took place... and that:
"It is clear from the section that this refers to the "tax debt" which has nat been collected.
Section 1 and section 168(l) of the TA Act are relied an in the Representations, the latter of
which provides that "(a]n amount of tax due or a a l e in terms 0 a tax Act is a tax debt due
ta SARS jar the benefit of the National Revenue Fund. Al so relied upon is the notion that,
untg "an assessment has been issued", there is no "tax debt".'
We disagree that the use of the term "tax debt" in section 183 of the TA Act is correctly
interpreted as a debt that only arises once an assessment (as that term is defined) has taken
place. Interpreting the provision in that manner would mean that a dissipation after an
engagement between SARS and the taxpayer in relation to the latter's tax liability, but before
an actual assessment, would be treated differently ance the assessment has taken place. That
is manifestly an illogical and unbusinesslike interpretation of a section designed to prevent
the assets of a taxpayer being dissipated in the face of a claim for the payment of tax. The
third party who sees the as-yet unassessed tax debt on the h orizon, and deliberately
dissipates the taxpayer's assets to obstruct collection of the anticipated debt would, in our
view, fall squarely within the parameters of section 183.
48. It ca n n ot, lin our view, be so that a third party who knowinglyand intentionally causes a
taxpayer to dissipate its assets for the very purpose of obstructing the collection of a debt
that the third party knows will arise upon assessfnent, falls outside of section 183. The third
party's intention may be (as it was in this case) to ensure that the taxpayer had been denuded
of assets by the time SARS had assessed the taxpayer to tax in circumstances where the third
party understood that that was precisely what SARS intended to do. In other words, the tftird
party acted intentionally in a manner aimed at obstructing the collection of a tax debt once
that tax debt had come into exi.ienco l-.y assessmetit. In our view, the wording of section 18 I
covers this position, The third patty is in those rtrt:umstaftces "a person knowingly [wito)
Chambers 20 Century Otcttonary, New oditlt.th t 2 .. ',; t 700

' Paragraph 3.1 of the Representations
Paragraph 3.2 cf the Representations
Paragraph 3.4,'I of the Representations
Paragraph 3A.2 uf the Representations
assistsin dissipating a taxpayer's assets in order to obstruct the collection of a tax debt of the
taxpayer".
49. We ho l d the view that the clear purpose of section 183, on the face of the provision itself, is
to deal with and combat the scourge af the abuse of the corparate identity af taxpayers by
third parties. Differently put, the purpose is to impose liability upon third parties who
deliberately frustrate the recovery of a tax debt by SARS.
50. Any r e ading ar any construction of the provision which is at odds with this purpose, is in our
view Insensible and unbusinesslike and should be avoided.
~Olssl ation
51. It i sargued in the Representations, with reference to the Carmel case, that dissipation means
the "wasting or secreting of asrets" and with reference to the ~
Knot WAr c as e' t h a t
dissipation involves "getting rid af the funds". The third case referred to is that of Mcitiki"
where dissipation Is also found to constitute the "wasting or getting rid of" funds or assets.
52. The s e authorities interpret the word consistently with its dictionary definition, which is"to
scatter, to squander; to waste; to dispel . Dissipation is defined as"dispersion; state of being

dispersed .'
53. The p u rpose of the provision

is ta prevent third parties from frustrating the collection of a tax
debt by the removal or transfer of assets from the taxpayer. Any manner of achieving this,
including by declaring a dividend, would, in our view, constitute a dissipation for the purposes
of section 183.
54. It is a l s o suggested in the Representations that it is relevant whether the assets were
squandered (or nat) after dissipation. This is in aur view a fanciful suggestion. What happens
to the assets after they have been dissipatedis irrelevant ta application of secdon 183.
~
anowted a
55. In the Representations it is argued that you did not have knowledge of the tax debt at the
time of the dissipation, in the sense that what you knew of at the time (i.e. the letter of audit
findings) did not constitute a tax debt. This argument is in our view cantrived and nat
supported by the facts, which we have dealt with comprehensively above. In particular, it is
clear that the only purpose for tha,tctians described above as a wdissipation" was to ensure
that there were no assets available io me t the taxpayer's tax oblignttons,
'CarmetTgedinqCo,Lidv Commissioner,eooitfk ' : n n ; tt.v t ttrg=' it fs rsottfu .2Gfss( ) RA~33(o('.n'

Knox O'Arcy Liftttted & others v Jamieson & clif t c ' . d ( t) A 3 14i. ):it JTArt .
Mcitiki & another v Movreni t913 CPO 684 ot GG '
' r hnfnbers 3)'" Cenlurg Dictionary. New todiiion i . 3 , . ' . i
• •
j i'~
56. It i s u ncontested that at the time of the assistance and dissipation, yau were aware of both
the letter of audit findings and the taxpayer's response. Despite this, you knawingty assisted
in arranging to dissipate the only asset of the taxpayer, with indifference to the outcome of
the dispute between the taxpayer and SARS.
Assistance
57. The c r ux of the argument on your behalf is that as you had resigned as a director of the
taxpayer on 18 April 2013, a day before the declaration of the dividend on 19 April 2013, it
cannot be said that you assisted in the dissipation.
58. Th i s is in our view

a contrived argument. The relevant third parties (including yau) were all
Involved In the suite of transactions concluded over a few days, with the clear purpose, firstly,
ta dissipate the only asset of the taxpayer by way of a declaration of the dividendin specie,
and secondly, to delink the taxpayer (and hence its tax liability) from TPI, its wholly owned
subsidiary TSD and other related entities("the Titan group").
59. To p u t I t p lainly, you sought to drive a wedge between the Titan group and that of the
problematic taxpayer and to prevent SARS from laying its hands on the only remaining asset
af the taxpayer.
60. Mes s r s Viljoen and Hofmeyr partidpated in the transaction in order to f acilitate your
objective and in so doing to maintain the businessrela
tionship between them on the one
hand and the Titan group (represented by you and Mr Visagie) on the other.
61. It wa s no t possible to carry out the transaction without the participation of all the third
parties. It is not a prerequisite of section 183 that you were a director at the time of the
declaration of dividendin specie. All that is required is that you assisted in the dissipation and
this you could do as a director or in anather capacity.
Obstruct the collection of a tax debt
62. In a u r view, the only plausible reason for the declaration of the dividend
in specie was to
obstruct the collection af a tax debt by ensuring that SARS was unable to recaver the loan
claim the taxpayer enjoyed against TSD.
63. As a l r eady mentioned, the Titan group (represented by yau and Mr Visagie) wanted to creata
distance between itself and the taxpayer. The taxpayer was facing a significant tax debt and
yau made it clear that yau did nat understand this to be your (or the Titan group's) problem
or responsibility. Hence, you insi".ted nn Mr Viljoen and Mr IIafrneyr buying back what had
been sold ta the Titan group.
64. I Ia v r ever, there was the laan rl. Ini. You were awar.. Ihat SARS <ntanded
(unless p" r u .<Ical
otherwise) ta recaver what it cau! i uf the tax debt. If left as it was, this would mean Iha' ',he
Inxpilil/er (anrI pa'amenti;.Ily Flat 0'0 ) i nr other mem:ars of tlsa Titan pron!i ta wl>."I I ~ I' *
10
dividend had been on-paid) would have to pay SARS R216.6 million, something you sought to
prevent
6S. It i s clear that you deliberately assisted the taxpayer in thwarting the collection of a tax debt.
Conclusion
66. We a r eth usof the view that the parties who arranged the dedaration of the dividend in
specie i.e. Dr Wiese, Mr Visagie, Mr Viljoen and Mr Hofmeyr, should be held liable for the
R216.6 million dissipated, along with interest calculated from the date of this notice.
67. Pay m e nt is demanded

within 10 business days, failing which SARS will commence with action
proceedings out of the High Court to recover the amount.
yours fal fully
etrus Riedemann Diane Susan Lalor
Specialist: High Court Senior Specialist: High Court
forCOMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE
'vIw.sero,gov.z's
Legal,Couiisel+ -.„.".$'
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Delivery. Support;8 Qh'ptljsb.'~+ ~WSARS
MR I H J VISAGIE Khanyisa Building
3 Keerweder Street 281 Middel Street,
Vyge boom Nieuw Muckleneuk, 0181
~g;.
0; Laior/.P RITidentate7~
Durbanvjlle Private Bag X923, Pretoria, 0001
, Tile" ho 7550 BARS online: www.ears.gov.za
021(:;418'",6%6I'~ Switchboard: (01 2) 422-4000
. 021 ". $655qi,
18~ Floor
22 Hans Strydom Avenue
PER E-MAIL: I I I. .za Cape Town
8001
3
vt HAND DELIVERED
C
y ( Dear Sir
RE: NOTI E OF PER ONAL IABILITY IN TERM OF SECTION 1 3

OF THE TAX ADMINI TRATION ACT 2011 "TA -FINAI DEMAND '
TAXPAYER/ VENDOR: Energy Africa (Pty) Ltd ("the

taxpayeV')
TAX TYPE(S) 1 Income Tax
TOTAL AMOUNT OF TAX DUE' R3 654 496 818
AMOUNT CLAIMED' R 216 600 000

OF ASSETS: Mr Isak Hendrlk Johannes Vlsagie
ID NUMBER: 5910155011088
CAPACITY: Person as defined in Section 183 of
the TA Act
I refer ta the letter written an your behalf dated 16 January 2017 I"the Representations" ) in
response ta the notice issued ta you by the South African Revenue Service I"SARS") in terms
of section 184 of the TAAct (" the Notice" ) dated 25 October 2015.
This letter represents a responseto the Representations.
Oesptte the Representations, which have been carefully considered, the Commissioner
remains af the view that you are a person who has knowingly assisted in the dissipation of the
taxpayer's assets in order to obstruct the collection af a tax debt of the taxpayer as provided
for in section 183 of the TA Act,
Yau are therefore jointly and severally liable with the taxpayer for the tax debt, to the extent
to which yaur assistance reduced the taxpayer's assets available ta pay its tax debt.
The reasons for the Commissioner having initially decided as such are set aut in detail in our
earlier correspondence and yau are referred to that correspondence, which should be read in
Background
6. The t axpayer
is indebted to SARS in the amount of R3 654496818 (inclusive of penalties and
interest but exclusive of interest which accrues from the date of this letter) on the graunds
set aut in our earlier correspondence.
This tax llabgity was incurred as a result of the non-payment of income tax (" IT" ) and
On 26 September 2011, pursuant to an audit of the taxpayer, SARS assessed the taxpayer for
additiona'I income tax in respect of the 2007, 2008 and 2010 yearsof assessinent In the
amounts of R18849736 (plus penalties of R 37699470), R8570682 (plus penalties af

R 17141364) and R6580531 (plus penalties of R13161062) respectively, being a total
amount of R102 002 845.
eptember2011, the income tax amount in respect of the 2010 year af assessmentwas
On 27 S
reduced to R6 566 951. The penalties remained unaltered. The total amount of the tax, and
penalties thereon for the 2007, 2008 and 2010 years of assessment was therefore reduced to
R101 989 265.
10. As at 19 April 2013 the amounts of interest that had accrued on the aforesaid amounts were
R28 321728 (2007),R10 027 698 (2008) and R3 493 499 (2010),being a totalaf R41 842 925.
11. O n 28 S eptember 2012, SARS assessed the taxpayer to income tax in respect of the 2011 tax
year in the amount of R20 430 934.72. As at 19 April 2013 the amount of interest that had
accrued onthis amount was Ri 881 348.
12. On 16 November 2012, SARS addressed a letter to the taxpayer, in which it:
12.1. n o t i fied the taxpayer that SARS intended

to:
12.1.1. mak e certain adjustments In respect of the taxpayer's 2007 income tax

("CGT") on the disposal oF a subsidiary in the amount of R453 126 518 in
terms of paragraph 8(b) read with paragraph 64B(3) of the eighth

12,1,2, iss u e an assessment for the taxpayer's 2007 tax year in respect af STC on
a deemed dividend in the amount af R487 205 3I6 in terms of section
64C(2)(a) ol the IT Act,

12.2. comprehensively communicated its findings to the taxpayer pursuant to an audit of
12.3. i s s ued a notice in terms of section 80J(l) of the IT Act on the basis that the
transactions in question amounted to, inter olio, an Impermissible tax avoidance
arrangement as definedin section 80L of the ITAct.
liability to SARS.
X4. On 1 5 A p ril 2013 and at all material times thereafter, the taxpayer's only asset of material
value was a loan claim against Titan Share Oeaiers (Pty) Ltd ("TSD") In the amount of R216.6
million ("the loan claim" ).
15. On o r a bout 19 April 2013, you were instructed by Dr Christoffel Wiese to procure;
15.1. t h e distribution of the loan claim against TSO to Titan Premier investments (Pty) Ltci
("TPI"); and
15.2. t he sate of the taxpayer to Frledshelf 1395 (Pty) Ltd ("Frledshelf").
On 19 April 2013, the directors of the taxpayer (at the time Mr Gert Viljoen and Mr Frederick
Rauten Hofmeyr) resolved at a meeting of the board of directors of the taxpayer as follows:
"1. The Company has a loon claim against Titan Shore Deolers (Pty) Ltd in the
amount of R216600000.00 (Two Hundred and Sixteen Million and Six
Hundred Thousand Rand)("loan claim").
2. The C o mpony wishes to distribute in specie the Loan Claim

on 19 April 2013
("the Distribution") to Elandspod Investments (Pty) Ltd ("Eiandspad"), in its
capacity os the holder of all the ordinory sharesin the Company.
The Company is outhonsed to make the Distribution to Elandspad.
Pursuant to the authorisotion in clause 3 above, the Company hereby

resolves to moke the Distribution to Elandspad on 19 April 2013."
17, Qn 19 A p ril 2013, the taxpayer effected the distribution af the loan claim to its holding
company, Elandspad (Pty) Ltd ("Elandspad'"), and advised the latter thereof in a letter signed
by Mr Gert Viljoen and Mr Frederick Rauten Hofmeyr.
18. On 1 9 April 2013, the board of directors of Elandspad authorised the distribution by way of a
dividend in specie of the loan claim to its holding company, being TPI.
19. On 1 9 April 2013 Elandspad effecteiI the distributton ot tne loan claim to its hrjf~iing company,
TPI, and advised the latter thereof in a letter signed by IV~r Gert Viijoen and Nlr Frederick
Rauten Iiofmeyr.
20, Afte r the distribution of the dividendinspecie referred ta above and an or about 6 May 2013,
TPI disposed of all of the shares in the taxpayer (through the sale of Elandspad) to Friedshelf
in terms of a written sale af shares agreement ("the sale of shares agreement") entered into
by TPI, represented by you and Dr Wlese, and Friedshelf, represented by Mr VIljoen and Mr
Hofmeyr.
21, In t h e premises, with full knowledge of what is set out in paragraphs 8 to 12 above, you
knowingly caused, or assisted in causing, the taxpayer to dissipate the loan claim by declaring
and transferring it as a dividend in specie to its holding company, Elandspad, which in turn
declared and transferred the loan claim as a dividendin specie to its own holding campany,
TP I In order to obstruct the collection of the following tax debts:
21.1, t h e amount of R101 989 265, referred to in paragraph 9 above, which was then due,
awing and payable;
21.2. i n t e rest on the amaunts comprising the sum referred to in paragraph 21.1 of
R41 842 925;
21.3. t h e amount of R20430934.72, referred to in paragraph 11 abave, which was then
21.4. I nterest on the amount referred to in paragraph 21.3 In the amount of R1881348;
21.5. t h e amount of R453 126 518, referred to In paragraph 12.1.1 above, which, while not
then due,owing and payable,was nanetheless a debt claimed by SARS; and
21.6. t h e amountof R487 205 316 in respect of STC, referred to in paragraph 12.1.2 above,
which was
then due, awing and payable,having become due,owing and payable no
later than the last day of the month following the month in which the dividend cycle
relevant ta the dividend ended.
Accordingly, at the time of the conclusion of the sale af shares agreement,the taxpayer had
was liable for STC in the amount of R487 205316, and had been notified af SARS' claim
against it in a further sum of R453 126 518, being a total af Rl 106 476 306.72.
23, The f u ll amount of 81 106 476 306.72 constitutes a "taxdebt" for the purposes of section 183
af the TA Act.
On 21 August 2013, SARS addressed a finaiisation of audit letter ta the taxpayer in which the
taxpayer's additional IT liability for the 2007 year of assessment was fully described (" the
finalisation af audit letter" ). The letler records the fol'awing:
24.1, a »a t i ce of additional assessm»t inrespect of the taxpayer's 2007 income tax
assessment, resulting!» the inriusian of CGT on lha disposal of a subsidiary in th»

amount af R453 126 518 rn ten»s af P~rngr Pli:l(b) read with paragraph 64L(3) oi
the eighth schedule to the IT Act, and understatement penalties of R679689 777;
and
24.2. a n o t ice af original assessment for the taxpayer's 2007 tax year in respect of STC on a
deemed dividend in the amount of R488 282 886 in terms of section 64C{2)(a) of the
IT Act, and understatement penalties of R732 424 329 (collectively "the audit
assessments").
25, Subs e quent ta the conclusion of the sale of shares agreement, on 11 September 2013 the
attorneys far the taxpayer (your current attorneys) replied to the finalisation of audit letter. In
the reply, they advised that the taxpayer disputed any liability to SARS and that the taxpayer
did not have anycashor assets and cauld not pay the disputed tax.
26. On 26 N ovember 2013, SARS issued

a notice of assessment in respect of the 2012 tax year in
terms of which It assessed the taxpayer to tax in the amount af R3 261 106.06 and interest in
terms of section 89quat(2) of the IT Act in the amaunt af R207 895.51.
27. The t a xpayer objectedto the audit assessments and, on 3 April 2014, SARS issued a partial
allowance af that objection and canfirmed the remainder of the audit assessments {" the
revisedauditassessments").
28. In the a bsence of an appeal against the revised audit assessments,on 26 June 2014, SARS
issued a final demand for payment of R3 264 145 690.16 by the taxpayer.
29. On 3 0 July 2014, SARS obtained a certified statement in terms of section 172(1) of the TA Act
30. Qn 12 A p r il 2016, the taxpayer was finally wound up by order of the High Court of South
Africa {Western Cape Division) under case number 1646/16.
31. On 25 O c tober 2016, SARS gave you notice in termsof sections 183 and 184 of the TA Act
("the Notice" ).
32. On 16 J a n uary 2017, yau responded In terms of section 184of th e T A A ct ( " t h e

Representations" ).
33. Asa p pears fram the Notice, SARS contended therein that you are liable, jointly and severally,
ta pay to it the amount of R216.6 million.
34. As ap p e ars From the Representations, you dispute that you are liable ta SARS on the grounds
relied an by SARS,
35. Iiav i n g considered the canteiits af thr Representations hereto as contemplated by section
18~I{2) of the TA Act, SAIIS has deterininr d to hnkl yoii lialile for ilia tax deb's of the taxpayer
in terms oF sectioii 183 of tiie TA;'icL

36. The e v ents surrounding the suite of transactions dated 19 April 2013 show
that you knowingly
assisted the taxpayer in the dissipation of its only real asset of value, regardless of the fact
taxpayer.
37. We n o w deal with the different issues raised in the Representations

senotim.
issuesraised inthe Re resentations
Tax debt
3$. The e s sence of the argument contained in the Representations is that,"For Section 283 to
apply, a "tax debt" must have been in existence at the time when the alle ed "dissi ation o
assets took lace in this case the Distribution ." (emphasis added)
39. Firs t ly, asat 29 April 2013, when the dividend in specie to a value of R226600000 was
and payable. Accordingly, on any interpretation, a tax debt was In fact in existence at the time
40. Sec o n dly, the view that the "tax debt" must havebeen in existence (I.e. due, owing and
payable) when the dissipation took placeis premised on a particular interpretation of section
1$3 of the TA Act, which provides as follows:
"183. I.i a blilty of person assisting in a dissipation of assets.
I f a person knowingly assistsin dissipoting o taxpayer's assets in order to obstruct the

collection of o tax debt of the taxpayer, the person is jointly and severoily lioble with
the toxpoyer for the tax debt to the extent that the person's assistance reduces the
assets available to pay the taxpayer's tox debt."
42. This being a question of interpretation rather than fact, regard should be had to the proper
Constitutional Court, including Natal Joint Munici al Pension Fund v Endumoni Municl ali
"Interpretation is the process of at tributin meanin to t h e w o rds used in a

document, be it legislation, some other statutory instrument, or contract, ~hvvin
rettord tn the cnntevt provided hi res imp
the pcrrti cater pravi iart or pravisiansin tite
' Paragraph 3.1 el iha Raprasan(a~dans

' gn l 2 (4) $A 593 (SCA)
light of the document as a whole and the circumstances attendant u on its comin
into existence." (emphasis added) '
a2. Th u s , as did the Court in

Endumeni we consider the tsn
~ ua e of the proviso, its context and
uroset.
the probiem that the provi • ion seeks io addrem fi e. its ttu
43. Th e p r ovision imposes liability for something knowingly done (i.e. consciously or
intentionally). It do e s n o t i m pose liability for s omething done inadvertently (t his
requirement is a reflection of the nature of the provision).
44. As t o t h e exact content of the requisite intent, it is the rendering of assistance to a taxpayer
to d~issi ate the taxpayer's assets in order to obstruct the payment of a tax debt.
45, In t h e Representations lit is contended that,

"For section 1N to apply,a "tax debt" must have
been in existence at the time when the alleged "dissipation" of assets took place... an d that:
mltis clear fram the section that this re fers to the "tax debt" which has not been collected,
46. Sec t i on1 and section 168(1) of the TA Act are relied an in the Representations, the latter of
which provides that "(a(n amount of tax due or a able interms o a tax Act is atox debt due
to SARS for the benefit of the National Revenue Fund." Also relied upon is the nation that,
until "an assessment has beenissued", there is no mtax debt".
47. We disagree that the use of the term "tax debt" in section 183 of the TA Act is correctly
place. Interpreting the provision in that manner would incan that a dissipation after an
engagement between SARS and the taxpayer in relation to the latter's tax liability, but before
an actual assessment, would be treated differently ance the assessment has taken Place. That
third party who sees the as-yet unassessed tax debt on the horiton, and de/iberately
view, fall squarely within the parameters of section 183.
48. It ca n n ot, in our view, be so that a third party who knowingly and intentionally causes a
that the third party knows will arise upon assessment, falls outside of section 183. The third
of assets by the time SARS had assessed the taxpayer tn tax in circumstances where the third
party understood that that was ftf ri.ely what SARS intended to do. In other viords, the tliird
Endomeni at $1tt}
' Chambers 20 Century Oicticnafy, Nevi editioff, I2 ' t 3, at 100
Paragraph 3.1 of the Representations
Paragraph 3.2 of the Representations
' Paragraph 3A.1 of tho Representations
Paragraplt 3.1.2 of the ReprosentaUons
that tax debt had come into existence by assessment. In our view, the wording of section 183
covers this position, The third party is in those circumst
na
ces "a person knowingly [who)
assistsin dissipating a taxpayer's assetsin order to obstruct the collection af a tax debt of the
taxpayer".
49. We h o ldtheview that the clear purpose of section 183, an the face of the provision itself, is
to deal with and combat the scourge of the abuse of the corporate identity of taxpayers by
50. An yreading or any construction of the provision which Is at odds with this purpose, is in our
view insensible and unbusinesslike and should be avoided.
~Wtsi ation
51. It i s argued in the Representations, with reference to the Carmel case, that dissipation means
the "wasttng or secreting or ossets" and with reference to the ~
snot D'Ar cas e' t h a t
dissipation involves "getting nd of the funds". The third case referred to is that of Mcitiki'
where dissipation is also found to constitute the "wasting or getting rid of" funds or assets.
52. The s e authorities interpret the ward consistently with its dictionary definition,which Is "ta
scatter; to squander; to waste; to dispel". Dissipation is defined as "dispersion; state of being
dispersed
".
53. The p urpose of the provision is to prevent
third parties from frustrating the collection of a tax
including by declaring a dividend, would, in our view, constitute a dissipation far the purposes
of section 183.
54, It is a l s o suggested in the Representations that it is relevant whether the assets were
squandered (or nat) after dissipation. This is in aur view a fanciful suggestion. What happens
to the assets after they have been dissipated is irrelevant to application of section 183.
snowted e
~
55. In t h eRepresentations it is argued that you did not have knowledge of the tax debt at the
time of the dissipation, in the sense that what you knew af at the time {I.e. the letter of audit
findings) did not constitute a tax debt, This argument is in our vt! w cantrived and not
supported by the facts, which we have di.alt with comprehensively above. In particular, it is
' Carmel Trading Co. Ltrt v Commissioner, South African R venue Service 8 cthers. 2003 (2) 5A t3 t;5CA) nt [3)
Knox O'Arcy Lhnited rt others v Jamieson It olhera 1996 ( i) 5A 3 l8 (A) at 372D.I
Mcitiid 8 another v 41awcnt I913 Ct D 684 at 687
t:hambera 20 ' Conlury Dictionaiy, New Ediiion tu63: J33
clear that the only purpose for the actions described above as a "dissipation" was to ensure
that there were no assets available to meet the taxpayer's tax obligations.
5 6. It is un contested that at the time of the assistance and dissipation, you were aware of both
the letter of audit findings and the taxpayer's response. Despite this, you knowingly assisted
Assistance
57. The c r ux of the argument on your behalf is that as you were the secretary and / or public
officer, and not a director, of the taxpayer, you could not and did not participate ln the
resolution of the board of directors to declare the dividend on 19 April 2013, Further, that in
no other manner did you assist in the dissipation.
58. Thi s i s in our view a contrived argument. The relevant third parties (including you) were all
involved in the suite of transactions concluded over a few days, with the clear purpose, firstly,
to dissipate the only asset of the taxpayer by way of a declaration of the dividendin specie,
and secondly, to delink the taxpayer (and hence its tax liability) from TPI, its wholly owned
subsidiary TSD and other related entities ("the Titan group"),
59. To p u t it plainly, you sought to assist in driving

a wedge between the Titan group and that of
the problematic taxpayer and to prevent SARS from laying its hands on the only remaining
asset of the taxpayer.
60. Mes s rs Viljoen and Hofmeyr participated in the transactionin order to facilitate that objective
and in so doing to maintain the business relationship between them on the one hand and the
Titan group (represented by you and Dr Wiese) on the other.
61. It wa s no t possible to carry out the transaction without the participation of all the third
parties. It is not a prerequisite of section 183 that you were a director at the time of the
declaration of dividendin specie. All that is required is that you assisted in the dissipation and
this you could do as a secretary and / or public officer or in another capacity.
62. In o u r v iew, the only plausible reason for the declaration of the dividendin specie was to
obstruct the collection of a tax debt by ensuring that SARS was unable to recover the loan
63. As al r e ady mentioned, the Titan, group epresented

(r by you and!)r Wiese) wanted to create
distance between itself and the taxpayer, The taxpayer was faciiii; a sir nificant tax debt and
you and Dr Wiese did not under'tand this to be the Titan group's problem or iesponsibiiity.
Hence, it was insisted that Mr Viljoen:nd Mr Hofmeyr buy back what hrd been sotri to the
Titan group.
10
64. Howe v er, there was the loan claim. You were aware that SARS i~tended {unless persuaded
otherwise) to recover what it could of the tax debt. If left as it was, this would mean that the
taxpayer (and potentially Elandspad or other members of the Titan group to whom the
dividend had been on-paid) would have to pay SARS R216.6 million, something you sought to
prevent.
65. It i s clear that you deliberately assisted the taxpayer in thwarting the collection of a tax debt.
Conclusion
66. We a r et hus of the view that the parties who arranged the declaration of the dividend in
specie i.e. Dr Wlese, Mr Visagie, Mr Viljoen and Mr Hofmeyr, should be held liable for the
R216.6 million dissipated, along with interest calculated from the date of this notice.
67. Payment is demanded within 10 business days, failing which SARS

will commence with action
Yours faithfully
P rus Riedemann Diane Susan Lalor
for COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE

L
LegiI, COLinaeI ~ ".-;;:
;-,.;;
Delivery;Support:&.Dispute-.-..',~„'
)'
Resoiufori..-.,'-.i"-r'-';.+',-:;;;,'.-:, ".:
~ff SARS
Cape:Town'~.:I,::".; = "-" i Mr G C Viljoen ' ' -. ' '. t Khanyisa Building

185 Brea Street 281 Middel Street,
fitquirirls",", „',„.I Cape Town
Nieuw Muckleneuk, 0181
" ' , : ' : - " ' ' - .
D-Lalorl P Ried emaiin;.'~'„

=";=; <
8001 Private Bag X923, Pretoria,
Tefe hone5'~.g~' )~-„-:A':z4~) 0001
021 4138788"':g'.,
021 41.3.8550,-+ SARS oniine: www.sara.gov.za
Switchboard; (012) 422-4000
EAU8183/DL~';-, Pf R f-MAILI geit@breeatreetCapital.COm 18~ Floor

22 Hans Stiydom Avenue
3;AuO
I(st&1,7 Cape Town
8001
HANO Df LIVERf D
- )1
0, ' ' ) : : : ~ '

Dear Sir
RE: N TI E OF PEilSONALLIA8ILITY IN TERMS OF SECTION 18$ FTHETAX

t) ~ )
.'>' '
. s s' r ADMINISTRATION ACT ROil "TA Ac Y' — FINAL DEMAND

r ~ ) ,
't

REGSTRATION No: 1995/007140/07
))
TAX TYPE(5): Incame Tax
') REFERENCE NUMBER(S): 9134/134/71/8
'~@ TOTAL AMOUNT OF TAX DUE: RS 654 496 818
'V
AMOUNT CLAIMED: R 216 600000

OF ASSETS: Mr Gert Christiaan Viljoen
ID NUM8ER: 690810S042087
CAPACITY: Person asdefined in Section 188
of the TA Act
1. I ref e r to the letter written on your behalf dated 16 January 201/ (" the Representations" ) in
I
response to the notice issued to you by the South African Revenue Service ("SARS") in terms
of sectian 184 of the TA Act ("the Notice" ) dated 25 October 2016.
This letter represents a response to the Representations.
Despite the Representations, which have been carefully considered, the Commissioner
) remains of the view that you are a person who has knowingly assisted in the dissipation of the
.•)
taxpayer's assets in order to obstruct the collection of a tax debt of the taxpayer as provided
• ')
for in section 183 of the TA Act.
) g ) ) i ) .
1
Yau are therefore iaintly and severally liabI with the taxpayer for 'he t.:: debt, ta the extent
ta which your assistance reduced the taxp~ycr's assets avarlahlc ta ray ir; tax deb',
The reasons for the Commissioner having initially decided as such are set out in detail in our
earlier correspondence and you are referred to that correspondence, which should be read in
Background
6. The t a x payer is indebted to SARS in the amount of R3 654496818 (inclusive of penalties and
interest but exclusive of interest which accrues framthe date of this letter) on the graunds
This tax liability was Incurred as a result of the non-payment af income tax (" IT" ) and
On 26 September 2011, pursuant ta an audit of the taxpayer, SARS assessedthe taxpayer for
amounts of R18 849 736 (plus penalties of R 37699 470), RB 570682 (plus penalties of
R17 141364) and R6580531 (plus penalties of R13161062) respectively, being a total
amount of R102 002 845.
On 27 September 2011, the income tax amount In respect of the 2010 year of assessment was
reduced to R6 566 951. The penalties remained unaltered. The total amount of the tax, and
R101 989 265.
10. As a t 19 April 2013 the amounts of interest that had accrued on the aforesaid amounts were
R28 321 728(2007),R 10 02 7 698 (2008) and R3 493 499 (2010), being a totalof R41 842 925.
11. On 2 8 September 2012, SARS assessed the taxpayer to income tax in respect of the 2011 tax
year in the amount af R20 430 934.72. As at 19 April 2013 the amount of interest that had
accruedon thisamount was R1 881 348.
12. On 1 6 November 2012, SARS addressed a fetter to the taxpayer, in which it:
12.1. n o t i f ied the taxpayer that SARS intended to:
12.1.1, inake certain adjustments in respect of the taxpayer's 2007 income tax
assessment, which would result in the Inclusion af capital gains tax

("CGT") an the disposal of a subsidiary in the amount of R453 126 518 in
terms af paragraph 8(b) read with paragraph 648(3) of the eighth

srheriu!e to the I I' Act; and
12.1.2. issue an assessiiient for Lh ta~p.iyer's 2007 Iax year in respect of Sl C on
a deemed divid=nd in the .amount of R487 205 316 iii ternis oF seciion
G4C(2)(a) of the I I Act;

L6 7
12.2. c o m prehensively
communicated its findings to the taxpayer pursuant to an audit of
Information provided by the taxpayer;
12.3. i s s ued a notice in terms of section 80J(1) of the IT Act on the basis that the
transactions in question amounted to, inter olio, an impermissible tax avoidance
arrangement as defined in section 80L of the IT Act.
13, On 1 5 A pril 2013,the taxpayer's attorney addressed a letter to SARS, disputing any tax
liabNty to SARS.
14. On 1 5 April 2013 and at all material times thereafter, the taxpayer's only asset of material
value was a loan claim against Titan Share Dealers (Pty) Ltd ("TSD") in the amountof R216.6
million
("the loanclaim").
%5. O n or ab o ut 19 April 2013, Mr Isak Visagie, alternatively Dr Christoffel WIese (or other
representatives of Titan Premier Investments (P ty) Ltd ("TPI")) engaged with you to procure:
15.1. th e d istribution of the loan claim againstTSD to TPI; and
15.2. th e sale of the taxpayer

to Friedshelf 1395 (Pty) Ltd ("Frledshelf').
15. In ord e r to procure the transactions described in paragraph 15 above, yau

and Mr Frederick
Rauten Hofmeyr were appointed as directors of the taxpayer an 19 April 2013.
On 19 April 2013, the directors of the taxpayer (at the time youandMr Hofmeyr) resolved at
a meeting of the board af directors of the taxpayer as follows:
"1. The Company hos a loan claim against Titan Share Dealers (PtyJ Ltd in the
amount of R216600000.00 (Two Hundred and Sixteen Million and Six

Hundred Thousand Rand J ("loan claim"J.
2, The C o mpany wishes

to distribute in specie the Loan Cloim on 19 April 2013
(" the Distribution") to Elondspod Investments (Ptyf Ltd ("Elondspad"J, in its

capacity as the holder of oil the ordinary sharesin the Company.
The Compony is outhorised to make the Distribution to Elandspad.
Pursuant to the authorisation in clause 3 obove, the Company hereby

resolves to make the Distribution to Elondspad on 19 April 2013."
18, On 19 A p r il 2013, the taxpayer effected the distribution of the loan claim to its holding
company, Eiandspad (Pty) i.td ("Elandspad"), and advised the tatter thereof in a letter signed
by you and Mr Hofmeyr,
19. On 19 A pril 2013, the board of direi.tars oi Elandsi)ad authorised the distribution by way of a
dividendin specieof the loan claim to its holdin~ coml."any, being TPI.
20. On 1 9 April 2013 Elandspad effected the distribution of the loan claim to its holding company,
TP I, and advised the latter thereof in a letter signed by you and Mr Hafmeyr.
21, Aft e r the distribution of the dividend in specie referred to above and on or about 6 May 2013,
TPI disposed of all of the shares in the taxpayer (through the sale of Elandspad) ta Friedshelf
in terms of a written sale of shares agreement ("the sale af shares agreement") entered into
by TPI, represented by Mr Isak Visagie and Dr Christoffel Wiese, and Friedsheif, represented
by yau and Mr Hofmeyr.
In the premises, with full knowledge af what Is set out in paragraphs 8 to 12 above, you
knowingly caused, or assisted in causing, the taxpayer to dissipate the loan claim by declaring
and transferring it as a dividend in specie to its holding carnpany, Elandspad, whirh in turn
declared and transferred the loan claim as a dividend in specie ta its own holding company,
TPI in orderto obstruct the collectian of the following tax debts:
22.1. t h e amount of R101989265, referred to in paragraph 9 abave, which was then due,
owing and payable;
22.2. i n t e rest on the amounts comprising the sum referred to In paragraph22.1 of
R41 842 925;
22.3. t h e amount of R20430934.72, referred to in paragraph 11 above, which was then

22.4. i n t e rest on the amount referred to in paragraph 22.3 in the amount of R1 881 348;
22.5. t h e amount of R453 126 518, referred to In paragraph 12.1.1 above, which, while not'
then due,owing and payable, was nonetheless a debt claimed by SARS; and
22.6. t h e amount of R487 205 316 in respect af STC, referred to in paragraph 12.1.2 above,
which wasthen due, awing and payable,having become due, owing and payable na
later than the last day of the month following the month in which the dividend cycle
Accordingly, at the time of the conclusion of the sale of shares agreement, the taxpayer had
been assessed to income tax in the amount of R122 420199,72 plus interest of R43 724 273,
was liable far STC in the amount af R487 205 316, and had been notified of SARS' claim
against it in a further sum af R453 126 518, being a total of Rl 106 476 306.72.
24. The f u ll amount of Rl 106 476 306.72 can titutes a"tax debt" for the purposes of section 183
af the TA Act,
25, On 2 1 August 2013, SARS addres:ed > iinn! Isation «I audit letter to the tz'f>a;. r in which tl •
taxpayer's additional IT liabiliiy .'ar ti . 07 y r a ' o f as:essment 'vas fully desc>ILe<I ("Ilr >
finalisatiar> afauditletter"). Thr. Isttn, r rar!; th'., >Ilc>wi >8:

25.1. a n o t ice of additional assessment in respect of the taxpayer's 2007 income tax
assessment, resulting in the inclusion of CGT on the disposal of a subsidiary in the

amount af R453 126 518 in terms of paragraph 8(b) read with paragraph 648(3) of
the eighth schedule ta the IT Act, and understatement penalties of R679 689 777;
and
25.2. a no t i ce af originai assessment for the taxpayer's 2007 tax year in respect of STC on
a
deemed dividend in the amount of R488 282 886 in terms of section 64C(2)(a) of the
assessments").
26, Su b sequent to the conclusion of the sale of shares agreement, on 115eptember 2013 the
attorneys far the taxpayer (your current attorneys) replied to the finalisation of audit letter. In
did not have any cash or assets and could not pay the disputed tax.
27. On 26 November 2013,

SARS issued a notice of assessment in respect of the 2012 tax year in
terms af which it assessed the taxpayer to tax in the amount of R3 261106.06 and interest In
terms of section 89quot(2) of the IT Act in the amount of R207 895.51.
28. Th etaxpayer objected to the audit assessments and, on 3 April 2014, SARS issued a partial
allowance of that objection and confirmed the remainder of the audit assessments ("the
revised audit assessments").
29, In th e a bsence of an appeal against the revised audit assessments, on 26 June 2014, SARS
issued a final demand for payment of R3 264 145 690.16 by the taxpayer.
30. On 3 0July 2014, 5ARS obtained a certified statement in terms of section 172(1) of the TA Act
31, On 1 2 A p ril 2016, the taxpayer was fmally wound up by order of the High Court of South
Africa (Western Cape Division) under case nuinber 1646/16.
32, On 2 5 O ctober 2016, SARS gave yau notice in terms af sections 183 and 184 of the TA Act
("the Notice" ).
3 3, On 16 J a n uary 2017, yau responded in t erms of s ection 184 of t h e TA Ac t ( " t he

Representations" ).
As appears from the Notice, SARS canteiided therein that you are liable, jointly and sever, illy,
to pay to it the amount af R216,6 migion.
35. As a ppears from theepresen

R tatl. »:, ',ou dispute that you ara iiabI t'n SARS oii 'he grai:a<Is
relied on by SARS.
36. Hav i n g considered the contents of the Representations hereto as contemplated by section
184(2) of the TA Act, SARS has determined to hold you liable far the tax debts of the taxpayer
37. The e vents surrounding the suite of transactions dated 19 April 2013 show that you knowingly
taxpayer.
38. We n o w deal with the different issues raised in the Representations seriatim.
Issues raised In the Re resentations
Tax debt
39. Th e essence of the argument contained in the Representations is that,

"For Section 183 ta
apply, a "tax debt" must hove been in existence at the time when the alle ed "dissi ation" a
assets taak lace in this case the Distribution ." (emphasis added)
40. Firs t ly, as at 19 April 2013, when the dividendin specie to a value of R216600000 was
41. Secondly, the view that the "tax debt" must have been in existence (I.e. due, owing and
payable) when the dissipation took place Is premised on a particular interpretation of section
183 of the TA Act, which provides as follows:
"183. Li a b ility of
person assisting in a dissipation of assets.
if a person knowingly assistsin dissipating a toxpayer's assets in order to obstruct the

collection of a tax debt of the taxpayer, the person is jointly and severally liable with
the taxpayer for the tax debt to the extent that the person's assistance reduces the
42. Thi s b eing a question of interpretation rather than fact, regard should be had to the proper
2
Constitutional Court, including Natal Joint Munici al Pension Fund v Endumeni Munici ali
"Interpretation is the process of at tributin md*onin to ri t e wo rds u ed in a
document, be it legislation, some other statutory instrument, or ccntruct, ltavinrt
rerrnrd to rise cnnte tpravided hp.".rcdinp the parrtcviar pravi io s or pa'visions in the
' Paragraph 3.1 of the Ropnmortlationa

2012 •II) sh 598 I sch)
light of the document as a whole and the circumstances attendant u onit s comin
into existence." (emphasisadded)
aa. Thu s , as did the court in

Endumeni we consider the~
lan ua e oithe proviso, its context and
the brobiem that the provision seeks to address (i.e. its auur.i~use .
44. The p r ovision i m

pose
s liability for somethingknowingly done (i.e. consciously or
intentionally). It do e s n o t i m pose liability for s omething done inadvertently (this
requirement is a reflection of the nature of the provision).
aa. As t o t h e exact content of the requisite intent, itis the renderingof assistance to a taxpayer
disci ate the taxpayer's assetsin order to obstruct the payment oi a taxdebt.
to ~
46. I n the R epresentations it is contended that,"For section 289 to apply, a "tax debt" must hove
been in existenceat the time when the olleged "dissi pation" of assets took place... and that:
"lt is clear from the section tho t this refers ta the "tax debt" which hos not been collected.'
47. Sec t i o n 1 and section 168(1)

of the TA Act are relied on in the Representations, the latter of
which provides that "(aJn amount of tax due ar a a blein terms o a tox Actis a tox debt due
to SARS for the benefit of the IVatianal Revenue Fund." Also relied upon is the notion that,
until "an ossessment has been issued", there is no "tax debt".
48. We disagree that the use of the term "tox debt" in section 183 of the TA Act is correctly
engagem
ent between SARS and the taxpayer in relation to the latter's tax liability, but before
an actual assessment, would be treated differently once the assessment has taken place. That
third party who sees the as-yet unassessed tax debt on the horizon, and deliberately
view, fall squarely within the parameters of section 183,
of assets by the time SARS had assessed the taxpayer to tax in circumstances where the third
party understood that lliat was precisely what SARS intended to do. In oth.r v.ords, tho thiirrl
Eodumenl at (18]
' Chambers 20th Ceittury Diclionary, New edltiotr, l2 a 3, al 700
" Paragrapli 3,1 of the Represeotalioos
Paragraph 3 2 of Ihe Represeolalioos
' Paragraph 3,4,1 cf lltc Rcprcsenlalioos
' I'aragraph 3.4.2 cf ihe Represenlalioos
2 97
that tax debt had came into existence by assessment. In aur view, the wording of section 183
covers this position. The third party is in those circumstances "o person icnowirrgiy [wha)
assists in dissipating a taxpayer s assets in order to obstruct the col/ection of a tax debt of the
taxpayer".
50. We hold the view that the clear purpose of section 183, on the face of the provision Itself, is
to deal with and combat the scourge of the abuse of the corparate identity af taxpayers by
51. Any r e ading or any construction of the provision which is at odds with this purpose, is in our
~DI551 ation
52. It i s argued in the Representations, with reference to the Carmel case', that dissipation means
Knox WAr
the wasting ar secreting of assets"and with reference to the ~ ca s e' t h a t
dissipation involves"getting rid of the funds". The third case referred to Is that of Mcitiki"
where dissipation is also found to constitute the"wasting or getting rid of" funds or assets.
53. The s e authorities interpretthe word consistently with Its dictionary definition, which is "to
scatter; to squander; to waste; to dispel". Dissipation is defined as "dispersion; stateof being
dispersed".
54. The p u r pose of the provision Is to prevent third parties from frustrating the collection ofa tax
debt by the removal or transfer of assets from the taxpayer. Any mannerof achieving this,
including by declaring a dividend, would, in our view, constitute a dissipation for the purposes
of section 183.
55. It i s a l s o suggested in the Representations that itis relevant whether the assets were
squandered (or not) after dissipation, This is In our view a fanciful suggestion. What happens
to the assets after they have been dissipated is irrelevant to application of section 183.
Knowied e
~
56, In t h e Representations lt is argued that you did not have knowledge of the tax debt at the
time af the dissipation, in the sense that tvhat you knew of at the lime (i.e. the letter of audit
findings) did not constitute a tax debt, This c1rgument is in our viev f contrived and not
supported by the facts, which we have dtaolt .vith comprehenslvt I! above. In particular, it is
' Carmel I roding Co. Lld v Commissiorter, So«ih Air't'. t> nt.'vt;ttt ttvSorvit a ."t olhers' '",09 (2) '5,' 133 (SCA) al l3)
' Kt>OXD'ArCy Limaed & Olhere V Jamieean & Olh:r.", i.'i'., > I 1) at't .„,10If') -, JT ") I
McNiki & another v Mewehi 1913 CPD 664 at 63/
Cltori>ters 20' Century Olctiohardt. Nevf Edition I J'> I: Jt:.'l
57. It i s u n contested that at the time of the assistance and dissipation, you were aware of both
the letter af audit findings and the taxpayer's response. Despite this, you knowingly assisted
58. In o u rv i ew, the only plausible reason for the declaration of the dividend in specie was to
obstruct the collection of a tax debt by ensuring that SARS was unable to recover the loan
59. As already mentioned, the Titan group (represented by Dr Wiese and Mr Visagie) wanted to
createdistance between itselfand the taxpayer. The taxpayer was facing a significant tax debt
and the representatives of the Titan group did not understand this to be its problem or
responsibility. Hence, it was insisted that you and Mr Hofmeyr buy back what had been sold
ta the Titan group.
60. Howe v er,there was the loan claim. You were aware that SARS intended (unless persuaded
otherwise) to recover what lt could of the tax debt. If left as it was, this would incan that the
taxpayer (and potentially Elandspad or other members of the Titan group to whom the
dividend had been on-paid) would have to pay SARS
R216.6 million, something yau sought to
assist in preventing.
61. It i sclear that you deliberately assisted the taxpayer in thwarting the collection of a tax debt,
Conclusion
62, We a r et hus of the view that the parties who arranged the declaration of the dividendin
specie i.e. Dr Wiese, Mr Visagie, Mr Viljoen and Mr Hofmeyr, should be held liable far the
R216.6 million dissipated, along with interest calculated from the date of this notice,
63, Pay m e nt is demanded

within 10 business days,failing which SARS will commence with action
proceedings aut of the High Court to recover the amount.
Y ours fa ully
Petrus e m a nn Diane Susan alar

cialist: High Court Senior Spi cialist: I-,'i;h Court
for COMIVIISSIONER FOR TIIE SOUTI I AFRICAi'I IEVEN UE

SERV! Ct:
w.v.'iaru. Qov,zd
• ~
-
-
'~ t. r . -. ~ .').> .. (-"-'-',
*
' Legal Co'Ijiis'el-"='-+!~'jg
~// SARS
Khanyisa Building
Mr. R Mofmeyr 281 Midde) Street,
D Laiorl, P; RJedeptarIIIaj'b Q~ 1 Links Road
Rondebosch
Nieuw Muckleneuk, 0181
Private Bag X923, Pretoria,
Tele 'o Cape Town 0001
(02$413'67BI'
,(OatrigeS60t..
r S.g ~
-+ .' ',v
; 7700 SARS online: www.sars.gov.za
• >C:
Switchboard: (012) 422-4000
L71. c
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I'
•Refsirenei'.
.EAM8$8 18'" FiooI'
s&~%-.~ 22 Hans Strydom Avenue
D~ PER E-MAIL:rauten@kirkhamventures.corn Cape Town
8001
J•
AND
MAND DELIVERED
Dear Sir
RE.' NOTICE OF PERSONAL LIABILITYIN TERMS OF SKTION 183 OF THE TAX

ADMINISTRATION ACT 2011 "TA Act" — FiNALDEMAND
TAXPAYER/ VENDOR: EnergyAfrica (Pty) Ltd ("the taxpayer")

i':
TAX lyPE(S): Income Tax
s F.
"f
AMOUNT CIAIMED: R 216 600000
.~< t

• .
OF ASSETS: Mr Frederlclt Rauten Hofmeyr

t
ID NUMBER: 6911065018089
'r ' ~
CAPACITY: Person as defined in Section 183

af the TA Act
1. I refe r t o the letter written on your behalf dated 16 January 2017 ("the Representations" ) in
response to the notice issued to you by the South African Revenue Service ("SARS") in terms
of section 184 of the TA'Act("the Notice" ) dated 25 Octaber 2016.
This letter represents a response to the Representations.
~'L,r Despite the Representations. which have been carefully considered, the Commissioner
remains af the view that you are a persan who has knowingly assistedin the dissipation of the
taxpayer's assets in order to obstruct the collection of a tax debt of the taxpayer as provided
for in section 183 af the TA Act.

you are therefore jointly and severally iiable with the taxpayer far the tax debt, to the extent
to which your assistance reduced the taxpayer's assets available to pay its tax debt.
The reasons for the Commissioner having initially decided as such are set out in detail In our
earlier correspondence and you are referred ta that correspondence, which should be read in
canjunction with this letter. After briefly recording the relevant background facts, we deal
Background
6. The t a x payer
is indebted to SARS in the amount of R3 654496 818 (inclusive of penalties and
Interest but exclusive af interest which accrues from the date of this letter) on the grounds
This tax liabigty was incurred as a result of the nan-payment of income tax (" IT" ) and
On 26 September 2011,pursuant ta an auditof the taxpayer, SARS assessed the taxpayer far
amounts af R18849736 (plus penalties of R37699470), R8570682 (plus penalties of
R 17 141364) and R6580531 (plus penalties of R 13161062) respectively, being a total
amount of R102 002 845,
On 27 September 2011, the income tax amount In respect of the 2010 year of assessment was
reduced to R6 566951. The penalties remained unaltered. The total amount af the tax, and
R101 989 265.
1 0. As at 19 April 2013 the amaunts of interest that had accrued on the aforesaid amounts were
R28 321 728(2007),R10 027 698 (2008) and R3 493 499 (2010), being a totalofR41 842 925.
11, On 2 8 September 2012, SARS assessed the taxpayer to income tax in respect of the 2011tax
year in the amount of R20430934.72. As at 19 April 2013 the amount of interest that had
accrued anthis amount was Rl 881 348.
12. On 16 November 2012, SARS addressed a letter to the taxpayer, in which it:
12.1, n o t i f ied the taxpayer that SARS intended ta:
12.1.1. mak e certain adjustments in respect of the taxpayer's 2007 income tax

("CGT") on the disposal of a subsidiary in the amaunt of R453 126 518 in
terms of paragraph 8(b) read ~vith paragraph 648(3) oi the eighth

12.1.2. iss u e an assessment for the taxpayer's 2007 tax year in respect of STC on
a deemed dividend in the amount of R487 205 316 in terms of section
64C(2)(a) of the IT Act;
12,2. com p r ehensively communicated its findings to the taxpayer pursuant to an audit of
informationprovided by the taxpayer;
123, is s ueda notice in te rms of section 80J(1) of the IT Act on the basis that the
transactions in quest/on amounted to, inter alia, an impermissible tax avoidance
arrangement as definedin section 80L of the IT Act.
liability to SARS.
14. On 1 5 April 2013 and at all material times thereafter, the taxpayer's only asset of material
value was a loan claim against Titan Share Dealers (Pty) Ltd ("TSD") in the amount of
R216.6 miigon ("the loan claim" ).
15. On or ab o ut 19 April 2013, Mr Isak Visagie, alternatively Dr Christoffel Wiese (or other
representatives of Titan Premier Investments (P ty) Ltd ("TPI")) engaged with you to procure:
15.1. t he distribution of the loan claim againstTSDto TPI; and
15.2. t h e safe of
the taxpayer to Friedshelf 1395 (Pty) Ltd ("Friedshelf").
16. In o r der to procure the transactions described in paragraph 15 above, you and Mr Gert
Christiaan Viljoen were appointed as directors of the taxpayer on 19 April 2013.
17. On 19 A p ril 2013,the directors of the taxpayer (at the time you and Mr Gert Christiaan
Vlljoen) resolved at a meeting ofthe board of directors of the taxpayer as follows:
The Company has a loan claim against Titon Share Deolers (Ptyf ltd in the
amount of R216600000.00 (Two Hundred ond Sixteen Million and Six

Hundred Thousand Rand) ("loan claim "J.
The Compony wishes to distribute in specie the loan Claim on 19 April 2013
(" the Distribution "J to Elandspad Investments (Pty) ltd ("E/ondspod"), in its
capacity as the holder of oil the ordinory shores in the Company.
The Componyis authorised to moke the Distribution to Elandspad.
Pursuant to the autirorisotion in clause 3 above, the Company hereby
resolves to make the Distribution to Elandspad on 19 April 2013."
On 19 April 2013, the taxpayer effected the distribution of the loan claim to its hrrlriing
company, Elarrdspad (I'ty) Ltd ("EIar~d«ad"), arid advised the latter thereof iri a Irrtter signed
hy you and Mr Vilioen.

19. On 1 9April 2013, the board of directors of flandspad authorised the distribution by way of a
dividendin specie af the loan claim to its holding company, being TPI.
20. On 1 9 April 2013 flandspad effected the distribution of the loan claim to its holding company,
TPI, and advised the latter thereof in a letter signed by you and Mr Viljoen.
2L Aft e r t he distribution of the dividendinspeciereferred to abave and on or about 6 May 2013,

TPI disposed of all of the shares in the taxpayer (through the sale of f tandspad) to Friedshelf
in terms of a written sate of shares agreement ("the sale of shares agreement") entered inta
by TPI, represented by Mr Isak Visagie and Dr Christoffel Wiese, and Friedshelf, represented
by you and Mr Gert Viljaen.
22. In th e p r emises, with full knowledge of what is set out in paragraphs 8 to 12 above, you
knawingly caused, or assisted in causing, the taxpayer to dissipate the loan claim by declaring
and transferring it as a dividendin specie to its holding company, flandspad, which in turn
declared and transferred the loan claim as a dividend in specie ta its own holding company,
TP I in order to obstruct the collection of the following tax debts:
22.1. t h e amaunt of R101989 265, referred to in paragraph 9 above, which was then due,
owing and payabie;
22.2. i n t e rest on the amountscomprisingthe sum referred to in paragraph 22.1 of

R41 842 925;
22.3. t h e a mount of R20430934.72, referred to in paragraph 11 above, which was then

22.4. i n t e rest on the amount referred to In paragraph 22.3 In the amount of R1 881 348;
22.5. t h e amount of R453 126 518, referred to in paragraph 12.1.1 above, which, while not
then due,owing and payable, was nonetheless a debt claimed by SAAS; and
22.6. t h e amountof R487 205 316 in respect of STC, referred to in paragraph 12.1.2 above,
which wasthen due, owing and payable, having become due, owing and payabie no
later than the last day of the month following the month in which the dividend cycie
23. Acco r d ingly,at the time of the conclusian of the sale of shares agreement, the taxpayer had
was liable for STC in the amount of R487 205316, and had been notified of SARS' claim
against it in a further sum of R453 126 518, being a total of II 1 106 476 306.72.
24, The f u l l amount of 81106~l76306,78 constitutes "Iovdebt"

a for the purpose of section 183
af the TA Act,
2$, On 2 1 August 2013, SARS addressed a finalisation of audit letter to the taxpayer in which the
taxpayer's additional IT liability for the 2007 year of assessment was fully described ("the
finalisation of audit letter" ). The letter recards the following:
25.1. a n o t ice of additional assessment In respect of the taxpayer's 2007 income tax
assessment, resulting in the inclusion af CGT on the disposal af a subsidiary in the
amount af R453 126 518 in terms of paragraph 8(b) read with paragraph 648(3) af
the eighth schedule to the IT Act, and understatement penalties of R679 689 777;
and
25.2. a notice of original assessment for the taxpayer's 2007 tax year in respect of STC ona
deemed dividend in the amount of R488 282 886 in terms of section 64C(2){a) of the
assessments").
26. Sub s equent to the conclusion of the sale af shares agreement, on 11 September 2013 the
attorneys for the taxpayer (your current attorneys) replied to the flnalisation of audit letter. In
did nat have any cash or assets and could not pay the disputed tax.
On 26 November 2013, SARS issued a notice af assessinent in respect of the 2012 tax year in
terms of which it assessed the taxpayer to tax in the amount of R3 261 106.06 and interest In
terms of section 89quat(2) of the IT Act in the amount of R207 895.51.
28, The t a xpayer objected to the audit assessments and, on 3 April 2014, SARS issued a partial
allowance of that objection and confirmed the remainder of the audit assessments {" the
revisedauditassessments").
29. In t h e absence of an appeal against the revised audit assessments, an 26 June 2014, SARS
issued a final demand far payment of R3 264 145 690.16 by the taxpayer.
30, On 3 0 July 2014, SARS obtained a certified statement in terms of section 172(1) of the TA Act
31. On 1 2 A p ril 2016, the taxpayer was Anally wound up by order of the High Court of South
Africa (Western Cape Division) under case number 1646/16.
32. On 2 5 OCtober 2016, SARS gave you notice in terms of sections 183 and 184 of Ihe TA Act
('the Notice" ),
33, On 16 J a n uary 2017, you responded in t erms of section 184 » f t h e T A Ac t (" the
Reprasantations").
34, As a p p ears from the iioiice, SARS < rnteniied theroin ';hat yau ore liable, jointly and srveraliy,
to p~y to it the amount of R216,6 million.

35, As a p p ears from the Representations, you dispute that you are liable to SARS on the grounds
relied on by SARS.
36. Havi n g considered the cantents of the Representations hereto as contemplated by section
184(2) of the TA Act, SARS has determined to hold you liable for the tax debts of the taxpayer
37, The e v ents surrounding the suite of transactions dated 19 April 2013 show that you knowingly
that the suite of transactions outlined above would obstruct the callection of a tax debt of the
taxpayer,
38. We n o w deal with

the different issues raised in the Representations seriatim.
Issues raised In the Re resentatlans
Tax debt
39. The e s sence of the argument containedin the Representations is that, "For Section 183 to
apply, a "tax debt" must hove been in existence at the time when the alle ed "dissi t i a n" o
assets took lace in this case the Distribution ."' (emphasis added)
40. Fir s tly, as at 19 April 2013, when the dividend

in specie to a value of R216600000 was
mare than that amount owing by the taxpayer in the form of tax that was then due, owing
when the disposition of assets took place,
41. Secondly, the view that the "tax debt" must have been in existence (i.e. due, owing and
payable) when the dissipation took place is premised on a particular interpretation of section
183 of the TA Act. which provides as follows:
"283. Li a b ility of
personassisting in a dissipation af assets.
If a person knowingly assists in dissipating a taxpayer's assetsin order ta obstruct the

collectionof a tax debt of the taxpayer, the personis jointly and severally liable with
the taxpayer for the tax debt ta the extent that the person's assistance reduces the
42, Thi s b eing a question oi interpretation rather than fact, regard should bo had to the proper
approach to such matters as set out in a number of moro recent decisions of the SCA and
' ~nraur >ph 3.t of u>e Rep(e" entalions

Constitutional Court, including Natal Joint Munici al Pension Fund v Endumeni Munici ali
in which the SCA held that;
"interpretation is the process af at tributin m e a nin to the words used in a

document, be it legislation, some other statutory instrument, or contract, ~hovin
re ard to the context provided by reading the particular provision or provisions in the
light of the document as a whole and the circumstances attendant u on its comin
into existence."(emphasis added)'
aa. Thu s ,as did the court in Endumeni we cansider the lan
~ ua e of the previse. its context and
the brobiem that the provision seeks to address p.e. its p~ur ~use .
44. The p r ovision imposes liability for something knowingly done (i.e. consciously or
intentionally' ). It does not impose liability forsomething done inadvertently (this requirement
is a reflection of the nature of the provision).
aa. As t o t h e exact content oi the requisite intent. it is the rendering oiassist

~ nce to a taxpayer
to ~dissi ate the taxpayer's assets in order to obstruct the payment oi a tax debt.
46. In t h e Representations it is contended that,

"For section 183 to apply, a "tax debt" must have
been in existence ot the time when the alleged "dissipation" of assets took ploce.,' an d that:
"It is clear from the section that this re fers to the mtax debt" whi ch has not been collected.
47. Se c t ion 1 and section 168(1) of the TA Act are relied on in the Representations, the latter of
which provides that "(aJn amount oftaxdue or a ab le in terms o a tax Actisa taxdebtdue
to SARS for the benefit of the Notional Revenue Fund." Also relied upon Is the notion that,
until "on ossessment has been issued", there is no mtax debt".
48. We di s agree that the use of the termmtax debt" in section 183 of the TA Act is correctly
engagement between SARS and the taxpayer in relation to the latter's tax gability, but before
an actual assessment, would be treated differently once the assessment has taken place. That
third party who sees the as-yet unassessed tax debt on the horizon, and deliberately
dissipates the taxpayer"s assets to obstruct collection of the anticipated debt would, in our
view, fall squarely within the parameters of seclton 183.
2012 I4) SA 593 I SCA)

Entiumeni at (1 aI
Chambers 20 Century Dictionary, New edilloith 12 6:t,, ',,'t.n
' Paragraph 3 1 of the Representations
Paragraph 3 2of the Representations
' Paragraph 3 S. i of ihe Representations
Porngrnph 3 5.2 of ihe Representations
of assets by the time SARS had assessedthe taxpayer to tax in circumstances where the third
party understood that that was precisely what SARS intended ta do. In other words, the third
that tax debt had come into existence by assessment. In our view, the wording of section 183
covers this position. The third party is in those circumstances "a person knowingly [who)
assists in dissipating a taxpayers assetsin order ta obstruct the collection of a tax debt of the
taxpayer".
50. We ho l d the view that the clear purpose of section 183, on

the face of the provision Itself, fs
to deal with and combat the scourge of the abuse of the corporate identity of taxpayers by
third parties. Differently put, the purpose is to I mposeliability upon third parties who
51. Any r e adingor any constru«tian of the provision which is at odds with this purpose, is In our
Otsst
~ ation
52. It i sargued in the Representations, with reference to theCarmel case, that dissipation means
tha "wasting or secreting of assets snd w"ith reference to tha ~Knox O'Ar ca s e t ha t
dissipation involves "getting rid af the funds". The third case referred to is that of Mcitiki"
where dissipation is alsofound to constitute the wasting ar getting rid af" fundsar assets.
53, Thes e a uthorities interpret the word consistently with its dictionary definition, which is "ta
scatter; to squander; ta waste; ta dispel". Dissipation is defined as "dispersionl state af being
dispersed"."
The purpose of the provision is to prevent third parties from frustrating the collection of a tax
including by declaring a dividend,, would, in our view, constitute a dissipation for the purposes
of section 183.
55. It is a l s o suggested In the Representations that it is relevant vfhether the assets were
squandered (or not) after dissipation. This is in nur view a fanciful suggestion. What happens
to the assets after they have been dis'ipatedis irrelevant to application of section 183.
Carmel Trsdinn Co, t.td v Commissioner, Soulh hf icon Revenue Scrvicn 6 othc~s' 2006 (') SA 133 (SCA) at [3)
Knox D'hrcy Lirnitcd 6 others v Jamieson P~ otl etf 1006 ( 1) ' 'L st46 (h) t 372D-1
" t.tcitiki 6 another v hlewent 1913 GPD 66 1 ol 66/
' ( hnmhers 20th Century Dictionary, htevf Edii,'ion 10.'3 30'3
Knowled e
~
56. In t h e Representations it is argued that you did nat have knowledge of the tax debt at the
time of the dissipation, in the sense that what you knew of at the time (i.e. the letter of audit
findings) did not constitute a tax debt. This argument is in aur view contrived and not
supported by the facts, which we have dealt with comprehensively above. In particular, it is
57. It i s uncontested that at the time of the assistance

anddissipation, you were aware of both
the letter of audit findings and the taxpayer's response. Despite this, you knowingly assisted
Obstruct the collection of a tax d bt
Sg, In o u r view, the only plausible reason for the declaration of the dividend
in specie was to
obstruct the collection of a tax debt by ensuring that SARS was unable ta recover the loan
59, As a lready mentioned, the Titan group (represented by Dr Wiese and Mr Visagie) wanted to
create distance between itself and the taxpayer, The taxpayer was facing a significant tax debt
and the representatives of the Titan group did not understand this to be its problem or
responsibility. Hence, it was insisted that you and Mr VIljoen buy back what had been sold to
the Titan group.
60. Ho w ever, there was the loan claim. You were aware that SARS intended (unless persuaded
otherwise) to recover what it could of the tax debt. If left as it was, this would mean that the
taxpayer (and potentially flandspad or ather members of the Titan group to whom the
dividendhad been on-paid)would have to paySARS R216.6 million,something
you saughtto
assist in preventing.
61. It i sclear that you deliberately assisted the taxpayer in thwarting the collection of a tax debt.
Conclus/on
62. We a r et hus of the view that the parties who arranged the declaration af the dividend in
specie I.e. Or Wiese, Mr Visagie, Mr Viijoen and Mr Hofmeyr, should be held liable for the
R216.6 million dissipated, along 'vith interest calculated from the date of this notice.
'Qp 'i
10
63. Payme n t is demanded

within 10 business days, failing which SARS will commence with action
yours faithfully~
Petrus Rledemann Diane usan Lalor
forCOMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE

IN THE HIGH COURT Of SOUTH AFRICA
CASE NO: 1 5 065/17
THE COMMISSIONER FOR THE SOUTH Plaintiff

Af RICAN REVENUE SERVICES
and

DEFENDANTS' NOTICE IN TERMS Of RULE 23(1)
PLEASE TAKE NOTICE that the defendants intend excepting to the
plaintiff's particulars of claim ('the particulars') on the grounds that same
lack averments to sustain an action, alte

rnatively and in any event that
they are vague and embarrassing.
The respects in which the particulars tack averments to sustain an action,
or alternatively are vague and embarrassing, appear from the ground of
intended exception set out fully hereinbelow.

A C Hoeben Tel. t021) 410-2500
Box 123
,C'
THE GROUND of intended exception is as follows:
1. Sec t i on 183 of the Tax Administration Act 28 of 2011 ('the TAA')
to obstruct the collection of a fax debt of the taxpayer, the person is
pay the taxpayer's debt.
2. In p a r agraph 30 of the particulars, the plaintiff alteges that"with full
and actual knowledge of what is set out in paragraphs 8 to 1 5
above, the defendants knowinglycaused, or assisted in causing,
t he taxpayer t o d i s sipate th e l o a n c l aim b y d e c laring a n d
transfemng it as a d i vidend in specie to its holding company,
Elandspad, which in turn declared and transferred the loan claim as
dividend in s p e cie t o i t s o w n h o l ding c ompany, TP I ( " the
dissipation")."
tn paragraph 34 of the particulars, the plaintiff alleges that "The
sum of the amounts referredto in paragraphs 32 and 33 above,
being R 1 106 476 306. 72"

4. The p l aintiff relies upon the allegations in paragraphs 30 and 34 to
f ound the claim for declaratory relief in prayer (a), and a s a
5. In p a ragraphs 8 to 15 of the particulars (referred to in paragraph 30)
5.1 on 26, 27 and 28 September 2012 Plaintiff issued notices
5.2 on 1 6N o vember 2012 (Annexure "C" to the particulars) the
5.2.1 noti f ied the taxpayer that it intended to:
5.2.1.1 make certain adjustments in respect of
t he t a x payer's 2 0 0 7 in c o m e ta x
t he disposal of a s u b s idiary i n t h e
paragraph 8(b) r ead w it h p a ragraph

2007 tax year in respect oi secondary
5,3 comm u n icated to the taxpayer various findings pursuant to
5,4 issu e d a notice in terms of section 80J(1) of the ITA on the
alia, an impermissible tax avoidance arrangem

ent defined
in section 80L of the IT Act.
6. T he notices and correspondence (annexure A, 8 and C to the
November 2012 ('the relevant period').
The particulars fail to allege any facts in support of the allegation
defendants of the events set out in paragraphs 8 to 15 of t he
particulars.
8, The p a rticulars fait to allege what position the defendants occupied
in relation to the t axpayer during the relevant period, and in
taxpayer.
9. As a c o n sequence, the particulars do not disclose any basis upon
10. A c c o rdingly, the allegations contained in the particulars are not
purposes of section 183 of the TAA, and do not disclose a cause of
consequence the relief claimed in prayer (b),
11. Att e m ativejy,the failure by the plaintiff to allege material facts which
INASMUCH AS one of the bases of the Defendants' intended exception is
that the particulars are vague and embarrassing, the Plaintiff is hereby
afforded an opportunity in terms of Rule 23(1), within fifteen (15) days of
delivery of this notice, to remove the causes of complaint.
y2
DATED AT CAPE TOWN THIS THE + DAY OF NOVEMBER 2017.
E DWA N HA N SO N N E N B E R G S
Per:
Attor for D e fendants

1 N h Wharf Square
CAPE TOWN
Tel: 021 410 2500
Fax: 021 410 2555
E-mail:ahoeben ensafrica.com
(Ref: A C Hoeben/bb/0409267)
TO: N O R T O N R O S E F U L B R I GHT SOU T H

A FRICA IN C .
A ttorneys fo r P l a i n t if f
1 5 Alice L a ne , S a n d t o n
T el: 0 1 1 6 8 5 8 5 0 0
Email:
A ndrew.wellste d n o r t o n r o s e f u l br i h t . c o m
( Ref: A W / K F / S A R 1 5 2 )
c/o N OR T O N R O S E F U L B R I G H T S O U T H
A FRICA IN C . i c. l /3 /
1 0th Floor, N o r to n R os e H o u s e /
8 Riebeeck S t r e e t r
CAPE TOW N
T el: 0 2 1 4 0 5 1 2 0 0 2 l tlOV 20'll
Email: r r~r-";! FD QflTllOUT Ch
D aniel.breie r no rtonrose
fulbri co» ~J UDlc"
(Ref: D B r eier/SAR152) Cgg-
G/ ig
CASE NO: 1 5 0 65/17
THE COMMISSIONER FOR THE SOUTH Plaintiff

and

DEFENDANTS' NOTICE OF EXCEPTION IN TERMS OF RULE 23
PLEASE TAKE NOTICE that the defendants hereby notes an exception
to the plalntifl"s particulars of claim (' the particulars') on the grounds that
same lack sufficient averments to sustain a cause of action, alternatively
and in any event that they are vague and emba

rrassing.
TAKE NOTICE FURTHER that Defendants' ground of exception is as
follows:
Edward Nathan Sonnenberga

Teb (021) 410-2500 .' A C Hoeben
Box 123
Section 183 of the Tax Administration Act 28 of 2011 ('the TAA')

to obstruct the collection of a tax debt of the taxpayer, the person is
pay the taxpayer's debt,
In paragraph 30 of the particulars, the plaintiff alleges that with full
and actual knowledge of what is set out in paragraphs 8 to 15
above, the defendants knowingly caused, or assisted in causing,
the taxpayer to dissipate the loan claim by d e claring and
transferring it as a d ividend in specie to its holding company,
Elandspad, which in turn declared and transferred the loan claim as
dividend in specie to i t s o w n h olding company, TPi ( "the
dissipation")."
3. In p a r agraph 34 of the particulars, the plaintiff alleges that"The
sum of the amounts referred to in paragraphs 32 and 33 above,
being R 1 106476306.TZ
4. The p laintiff relies upon the allegations in paragraphs 30 and 34 to
found the claim for declaratory relief in prayer (a), and as a

5. In p a ragraphs 8 to 15
of the particulars (referred to in paragraph 30)
5.1 on 2 6 , 27 and 28 September 2012 Plaintiff issued notices
5.2 on 1 6 November 2012 (Annexure

"C"to the particulars) the
5.2.1 not i fied the taxpayer that it intended to:
make certain adjustments in respect of
the t axpayer's 2 007 i n come tax
t he disposal of a s u bsidiary in t he
paragraph 8(b) read with paragraph

2007 tax year in respect of secondary
5.3 co mmunicated to the taxpayer various findings pursuant to
5.4 iss u ed a notice in terms of section 80J(1) of the ITA on the
alia, an impermissible tax avoidance arrangement defined
in section 80L of the iT Act.
6. T he notices and correspondence (annexure A, B and C to the
November 20'l2 ('the relevant period').
7. The p articulars fail to allege any facts in support of the allegation
defendants of the events set out in paragraphs 8 to 15 of the
particulars.
8. The p articulars fail to allege what position the defendants occupied
in relation to the taxpayer during the relevant period, and in
taxpayer.
As a consequence, the particulars do not disclose any basis upon
10. Ac c o rdingly, the allegations containedin the particulars are not
purposes of section 183 of the TAA, and do not disclose a cause of
consequence the relief claimed in prayer (b).
11. Al f e rnatively,
the failure by the plaintiff to allege material facts which
WHEREFORE the Defendantspray for an order as follows:
(a) The exception is upheld;
(b) Plaintiff's particulars of claim is struck out;
(c) The Plaintiff is ordered to pay the costs of the exception;
(d) Further and/or alternative relief.
DATED AT CAPE TOWN THIS THE l 7 DAY OF JANUARY 2018.

L. KUSCHKE ($ C )
II O' SULLIVAN
Defendants' Counsel
EDWA NATHAN
SO N BE RG S
Per:
A ys f o r Defendants
L oop Street, Foreshor 5 5 -
-/8
CAPE TOWN
Tel: 021 4102500 ~ +~co
nj~,.
ah oeben ensafri ro l e~<,
s7p
(Ref: AC
Ho eben/bb/040926
l
~
TO; N O RT O N R O S E FULBRI GHT SOUTH
A FRICA I N C .
A ttorneys fo r P l a i n t i f f
T el: 0 1 1 6 8 5 8 5 0 0
Email:
A ndrew.w e l i s te d n or t o n r o s e f u i b r i h t . c o
(Ref: A W / KF/SAR152)
c/o N ORTO N ROS E FULBR IGHT SO U T H

AFRICA INC.
10th Floor, Norton Rose House
8 Riebeeck Street
CAPE TOWN
Tel: 02 1 405 1200
Email:
D aniel.br e ie r nor t o n r o s ef ulbri h t . c o
(Ref: D B r eier/SAR152)

Sars V Wiese - Asset Dissipation

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AMENDED NOTICE CASK NO: 15065/2017

IN THE HIGH COURT OF SOUTH AFRICA

THE COMMISSIONER FOR THE SOUTH AFRICAN Plaintiff(s)

NOTICE OF SKT 00%N SEMI-URGENT

DATED AT CAPE TOWN THIS 28"" DAY OF MAY 2018

Messrs Norton Rose Fulbright South Africa inc,

1I, lessrs Edward Nathan Sonnenbergs

IN THE HIGH COURT OF SOUTH AFRICA

THE COMMISSIONER FOR TH i ntiff(s)

DR. CHRISTOFFEL HENDRiK ' adant(s)

DATED AT CAPE WN T H I S 3 D A Y OF MAY 2018

Messrs Edward Nathan Sonnenbergs

IN THE HIGH CQUR T OF SOUTH AFRICA

THE COMMISSIONER FOR THE SOUT~HAF CA % - . . .

and Ply gg- 93

NOTICE OF SET DOWN (SEMI-VRGENT)

DATED AT CAPE TO%N THIS 3 D A Y OF MAY 2018

Mes on R se Fuibright South Africa Inc.

Messrs Edward Nathan Sonnenbergs

CASE NO: 15065/17

FREDERICK RAUTEN HOFIIEYR Fourth Defendant

NOTICE OF SET DOWN

at 10h00 or as soon thereafter as counsel may be heard.

KINDLY PLACE THE NIATTER ON THE ROLL ACCORDINGLY.

DATED at CAPE TOWN on the 9'" day of February 2018.

Norton Rose Fulbright South Africa Inc

Fax +27 (0)11 301 3200

Tel: (021) 4234289

Fax: (02l) 424-2537

e-mail: sholtofkca char.ca.za

1515 Huguenot Chambers

The Registrar to The Hon Mr Judge President Hlophe

SOUTH AFRICAN REVENUE SERVICES v C. WIKSE dk 3 OTHERS

The defendants in the abovementioned action have raised an ex '

From: Lizette Potgieter

LIZETTE POTGIETER ~ Floor, Room 329

(WESTERN CAPE DIVISION, CAPE TOWN)

CASE NO: 15065/1T

In the matter betwee

DR CHRISTO F F E L H E N D R IK W IES E First Defendant

ISAK HEN D R IK JO H A N N E S VISAG IE Second Defendant

G ERT CHRISTIAAN V I L J O E N Third Defendant

FRED E R ICK RA U T E N H O F IIEYR Fourth Defendant

BE PLEASED T O T A K E N O T I C E th at the abovenamed First to Fourth

Edward Nalnan Sonnenbergs

appointed our o f fices a t 1 N o r t h W ha r f Sq ua r e , L oop Street,

Foreshore, C a p e T o w n as t he address at which they will accept notice

and service of all process in these proceedings.

Dated at CAPE TOWN on the 5'" day of SEPTEMBER 2017.

Attor s for First to Fourth Defendants

TO: THE REGISTRAR

15 Alice Lane, Sandton

CASE NO: 15065/17

DR CHRISTOFFEL HENDRIK WIESE , „„- ~.~~~j '-'-"I irhtIDefendant

FREDERICK RAUTEN HOFMEYR erg~. f ijurth-Befendant

Document filed herewith:

Amended Particulars of Claim

DATED at CAPE TOWN on the 2" day of November 2017.

Norton Rose Fulbright South Africa lnc

Norton Rose Fulbnght South Africa inc

Email: ahoeben e n safrica.com ot..I:4.6.0a

CASE NO: 15065/17

T HE COM M I S S I ONE R F OR T HK SOUT H Plaintiff