CSARS v Shabangu and Another (121282/2023) and CSARS v Shabangu NO and Others (121275/2023)

Case Information

Court: High Court of South Africa, Gauteng Division, Pretoria

Case number: 121282/2023 and 121275/2023

Citation: Commissioner for the South African Revenue Service v Shabangu and Another (121282/2023); Commissioner for the South African Revenue Service v Shabangu NO and Others (121275/2023)

Applicant: The Commissioner for the South African Revenue Service

Respondent: Case 121282/2023: Ngwane Roux Shabangu (First Respondent) and Nomzamo Perserverence Shabangu (Second Respondent). Case 121275/2023: Ngwane Roux Shabangu NO, Proe Shabangu NO, Stembile Alphonsina Shabangu NO, and Nomzamo Perserverence Shabangu NO, cited in their capacities as appointed trustees of the Roux Shabangu Family Trust, IT 4848/05 (First to Fourth Respondents).

Jurisdiction: South Africa

Judgment date: 27 May 2026

Judgment Summary

These proceedings concerned two sequestration applications brought by the Commissioner for the South African Revenue Service (SARS) against the personal estate of Mr Ngwane Roux Shabangu (case number 121282/2023) and the Roux Shabangu Family Trust, IT 4848/05 (case number 121275/2023). The applications were heard simultaneously, though not consolidated, as they were interrelated [2].

Provisional sequestration orders had been granted on 15 October 2024 [1]. The matters came before Tolmay J on the return dates. After the hearing, the Trust paid its entire tax debt to SARS, prompting a substantial exchange of further affidavits before judgment was delivered on 27 May 2026 [10, 11].

The court held that all three requirements under section 12(1) of the Insolvency Act 24 of 1936 were satisfied on a balance of probabilities, that the applications were not mala fide or an abuse of process, and that final sequestration orders should be granted in both matters [34, 35].

Background

Prior to the sequestration applications, SARS obtained a final preservation order against Mr Shabangu and the Trust under section 163 of the Tax Administration Act 28 of 2011 (the TAA) [1].

On 22 April 2024, tax returns were filed on behalf of Mr Shabangu for the 2021 and 2022 assessment years, claiming credits of R129 588 870.00, which would have extinguished his tax liability. These returns were fraudulent. Mr Shabangu acknowledged the fraud but attributed it to his tax advisor. Following his subsequent admission of liability, the fraud became irrelevant to the sequestration proceedings [4].

Mr Shabangu owed SARS R126,068,305.80 for the 2006 and 2009 to 2020 periods based on his tax returns. By 5 August 2024, when SARS filed a supplementary affidavit, the amount had grown to R221,151,047.33 due to interest. No outstanding objections or appeals concerning the original and additional assessments existed [5].

The Trust owed SARS R7,046,501.10 in respect of income tax for the 2008, 2011, 2013, and 2016 years of assessment. This indebtedness was also not disputed [6].

SARS argued that Mr Shabangu's requests for a debt compromise under section 200 of the TAA constituted an act of insolvency under section 8(e) of the Insolvency Act, and that his correspondence indicating inability to pay constituted an act of insolvency under section 8(f) [7].

The application to sequestrate Mr Shabangu's personal estate was originally brought against both Mr Shabangu and his wife because SARS could not determine their marital regime. During the provisional sequestration hearing, SARS accepted that section 21 of the Insolvency Act would afford the concursus creditorum sufficient protection, and the provisional order was granted against Mr Shabangu's estate only [3].

Core Dispute

Mr Shabangu and the Trust did not dispute the underlying tax indebtedness [4, 6]. Their principal opposition was that the sequestration applications were mala fide and an abuse of process [9, 29].

After the hearing, the Trust paid its entire tax debt to SARS. Mr Shabangu argued that this extinguished the basis for the Trust's sequestration and that SARS's continued pursuit of both applications demonstrated bad faith and an ulterior motive [11, 12, 15, 18].

SARS contended that the payment could not be accepted because it might constitute an impeachable transaction, that the source of the funds was suspicious and required investigation, that neither Mr Shabangu nor the Trust had the legal capacity to procure loans or encumber assets without the consent of the provisional insolvency trustee, and that outstanding cost orders remained unpaid [13, 14, 16, 17].

A further dispute arose over whether SARS's use of its investigative powers under section 46 of the TAA constituted an abuse of those powers [15].

Court Findings

The court confirmed that SARS has the authority to institute a sequestration application under section 177 of the TAA. The argument that SARS lacked such authority was abandoned by the respondents [20].

On the three requirements of section 12(1) of the Insolvency Act, the court found as follows. The threshold requirement of indebtedness was incontrovertible at the time the applications were launched and when the provisional orders were granted [23]. Both Mr Shabangu and the Trust committed acts of insolvency under section 8(f) by being unable to pay their debts to SARS, and the requests for debt compromises under section 200 of the TAA constituted acts of insolvency under section 8(e) [23]. On advantage to creditors, the court was satisfied that a sequestration order would be to the advantage of creditors [28].

In reaching the conclusion on advantage to creditors, the court relied on the principle that a creditor need only prove a reason to believe that sequestration will be to the advantage of creditors, not certainty. The investigative powers of a trustee, including the ability to interrogate the insolvent, examine financial records, and set aside certain dispositions, were relevant to establishing a reasonable prospect of pecuniary benefit [24, 25, 26]. The court found that the contentious source of the payment made after the hearing, together with conflicting information about whether Mr Shabangu or the Trust was the borrower, and the fact that both were under provisional sequestration when the loan was allegedly procured, amply illustrated the need to investigate the financial affairs of both Mr Shabangu and the Trust [28].

The court rejected the mala fides and abuse of process arguments. It found that SARS initiated proceedings where an undisputed debt existed and where acts of insolvency had been committed. The court found no basis on the papers to characterise the applications as an abuse of process or as mala fide [31]. The Trust's payment of its tax debt after the provisional sequestration order and final hearing did not automatically preclude the granting of a final sequestration order, and SARS's argument that the payment could form part of an impeachable transaction had merit [32, 33]. The Trust's payment subsequent to the hearing did not render the continuation of the applications abusive or mala fide [33].

The court exercised its discretion to grant final sequestration orders in both applications [34].

Outcome

Final sequestration orders were granted in both case number 121282/2023 (Mr Shabangu's personal estate) and case number 121275/2023 (the Roux Shabangu Family Trust) [35]. The costs of the applications were ordered to be costs in the sequestration [35].

Major Issues / Areas of Contention

• Whether SARS had the authority to bring sequestration applications under the Tax Administration Act 28 of 2011 as an alternative to other tax debt collection remedies provided in that Act.
• Whether the three requirements of section 12(1) of the Insolvency Act 24 of 1936, namely a liquidated claim of at least R100.00, an act of insolvency or factual insolvency, and advantage to creditors, were established on a balance of probabilities.
• Whether fraudulent tax returns filed on 22 April 2024 claiming credits of R129 588 870.00 affected the validity or quantum of Mr Shabangu's admitted tax liability of R221,151,047.33 as at 5 August 2024.
• Whether requests for a debt compromise under section 200 of the TAA constituted an act of insolvency under section 8(e) of the Insolvency Act.
• Whether the Trust's payment of its entire tax debt of R7,046,501.10 to SARS after the hearing required the court to discharge the rule nisi and dismiss the sequestration application against the Trust.
• Whether the source of the funds used to pay the Trust's tax debt was legitimate, given conflicting information about whether Mr Shabangu personally or the Trust was the borrower, and the fact that both were under provisional sequestration when the loan was allegedly procured.
• Whether SARS could lawfully refuse to accept the Trust's payment on the basis that it might constitute an impeachable transaction.
• Whether the sequestration applications were mala fide and an abuse of process, as alleged by Mr Shabangu and the Trust.
• Whether SARS abused its investigative powers under section 46 of the TAA by issuing request letters to various entities to trace the source of the payment.
• Whether outstanding cost orders from the section 163 preservation application and from the provisional trustees constituted independent grounds for continuing the sequestration of the Trust after its tax debt was paid.

Read the full judgment (PDF) (Source: SARS)