CIR v First National Industrial Bank Ltd 1990 3 SA 641 (A)

CIR v First National Industrial Bank Ltd 1990 3 SA 641 (A)

Issue: Whether a bank is liable to repay a customer for money paid under a mistake of law.

Facts:

First National Industrial Bank Ltd (FNB) was a commercial bank in South Africa. In 1987, the Commissioner of Inland Revenue (CIR) issued a ruling that banks were liable to pay stamp duty on certain transactions involving their customers' autocard machines.

FNB objected to the CIR's ruling, arguing that it was incorrect and that banks were not liable to pay stamp duty on those transactions. However, FNB paid the stamp duty under protest, fearing that if it did not, the CIR would impose penalties.

In 1989, the Supreme Court of Appeal held that the CIR's ruling was incorrect and that banks were not liable to pay stamp duty on the transactions in question. FNB then demanded that the CIR repay the stamp duty it had paid under protest.

The CIR refused to repay the stamp duty, arguing that FNB had not been under a mistake of law when it paid the stamp duty. The CIR claimed that FNB had been aware of the CIR's ruling and that it had paid the stamp duty simply to avoid penalties.

Held:

The Court held that FNB was entitled to a refund of the stamp duty it had paid under protest. The Court reasoned that FNB had been under a mistake of law when it paid the stamp duty. The court also found that the CIR had not acted in good faith when it refused to refund the stamp duty.

Key Facts:

• A bank paid stamp duty under protest, believing it was legally obligated to do so.
• The bank later learned that it was not legally obligated to pay the stamp duty and demanded a refund.
• The tax authority refused to refund the stamp duty, arguing that the bank had not been under a mistake of law.

Reasons:

• The Court held that the bank was entitled to a refund of the stamp duty.
• The Court reasoned that the bank had been under a mistake of law when it paid the stamp duty.
• The court also found that the tax authority had not acted in good faith when it refused to refund the stamp duty.

Conclusion:

The Court's decision in CIR v First National Industrial Bank Ltd 1990 3 SA 641 (A) is a significant case in South African law. The Court's decision clarified the law relating to the rights of parties who make payments under a mistake of law.