The High Court in Johannesburg has dismissed an application for the release of funds transferred from a VAT refund that, according to its judgment, was obtained through fraud.
Cuba Dumakude approached the Court after Bidvest Bank froze his account. Hill Side Trading and Projects CC had transferred R900 000 into the account after receiving a VAT refund from the South African Revenue Service. Dumakude sought an order directing Bidvest to unfreeze the account and release the R448 838.35 held in it.
The judgment, delivered on 8 September 2026, dealt with two distinct mechanisms: Bidvest Bank’s contractual power to freeze an account where it had reasonable grounds to suspect fraudulent or unlawful activity, and SARS’s statutory power to appoint a third party holding money for a taxpayer to pay it to SARS in satisfaction of the taxpayer’s outstanding tax debt.
According to the judgment, Hill Side Trading submitted VAT returns on 8 October 2024 claiming a refund of R3 279 667.63. SARS paid the refund on 13 February 2025, and Hill Side Trading transferred R900 000 from its Capitec Bank account into Dumakude’s Bidvest Bank account four days later.
On 20 February, Capitec alerted several financial institutions that Hill Side Trading had been implicated in fraud involving SARS and that money from its account had been transferred to accounts at various banks. The alert identified the R900 000 transferred to Dumakude’s account. Bidvest froze the account on the same day.
The judgment records that SARS began investigating the authenticity of invoices submitted in support of Hill Side Trading’s VAT claims on 1 April 2025. The purported suppliers stated in affidavits that the invoices were not authentic, that they had not conducted business with Hill Side Trading, and that the close corporation had not been their customer. The investigation also found that Hill Side Trading’s registered business address was a daycare centre.
Bank relied on its contractual right to freeze the account
Dumakude contended that Bidvest had acted unlawfully and had violated the common-law duty of fairness and reasonableness in contractual relations by freezing his account.
The bank relied on clause 34 of the terms and conditions governing the account. The clause permitted it to suspend or restrict an account immediately and without notice if it suspected that the account was being used fraudulently or unlawfully, including in connection with money laundering.
Dumakude argued that the information received from Capitec was hearsay and was not supported by a confirmatory affidavit. Judge Mpostoli Twala rejected this argument, finding that Bidvest was entitled to rely on information received from another financial institution.
Judge Twala said the suspicion rested on “solid and reasonable grounds” because the information came from the bank at which Hill Side Trading held the account from which the R900 000 had been paid.
The Court found that Bidvest’s suspicion was based on objective facts and reasonable grounds, rather than conjecture. It therefore held that the bank’s decision to freeze the account was not unlawful and that it was contractually entitled to act without giving Dumakude notice.
SARS appoints Bidvest as a third party
On 8 April 2025, SARS issued a third-party appointment to Bidvest to secure R450 995.51. SARS laid criminal charges against Hill Side Trading the following day. On 10 April, it issued a further notice appointing Bidvest as a third party in respect of the R900 000 transferred into Dumakude’s account.
Section 179 of the Tax Administration Act (TAA) permits a senior SARS official to authorise a notice requiring a person who holds or will hold money for a taxpayer, or owes or will owe money to a taxpayer, to pay that money to SARS in satisfaction of the taxpayer’s outstanding tax debt.
A person who receives the notice must pay the money in accordance with it. If the person is unable to comply, the person must advise the senior SARS official of the reasons within the period specified in the notice.
Ordinarily, SARS may issue the notice only after delivering a final demand to the tax debtor at least 10 business days beforehand. However, section 179(6) provides that SARS need not issue a final demand if a senior SARS official is satisfied that doing so would prejudice the collection of the tax debt.
Dumakude challenged the notice on the grounds that he was not the tax debtor contemplated in section 179 and that SARS had not issued the required final demand before appointing Bidvest.
The Court rejected both arguments. It held that the notice had not been issued against Dumakude. Hill Side Trading was the taxpayer that owed the tax debt, whereas Bidvest was the appointed third party holding the funds.
The judgment records that a senior SARS official authorised the notice without a final demand. The Court found that the funds were at risk of being dissipated if they were not secured and that, in the circumstances, issuing a final demand to Hill Side Trading would have prejudiced the collection of the tax debt.
It held that the third-party notice had been validly issued and that Bidvest was legally obliged to comply with it.
No documents supporting the R900 000 payment
Dumakude sought a final interdict requiring Bidvest to release the funds. To obtain this relief, he had to establish a clear right, an injury committed or reasonably apprehended, and the absence of another satisfactory remedy.
The Court found that his application failed because he had not established a clear right to the money.
The judgment records that Dumakude did not produce invoices, delivery notes, a contract, or other documentation demonstrating legitimate business dealings with Hill Side Trading that could explain the R900 000 payment. The money had also been paid into a personal account that had been inactive for some time, rather than into his business account.
The Court further noted that Dumakude had attempted to withdraw substantial amounts in cash and make purchases at various retailers shortly after receiving the money. It found that this conduct was consistent with the dissipation of the funds rather than the conduct of a legitimate business.
Judge Twala concluded that the funds deposited into Dumakude’s account constituted the proceeds of unlawful activity resulting from Hill Side Trading’s fraud against SARS. The Court said the funds were not, merely because they were held in Dumakude’s account, his property. It concluded that he had therefore failed to establish a clear right to them.
The application was dismissed with costs.
Outcome linked to the particular facts
Richan Schwellnus, team lead: tax controversy and international tax at Tax Consulting SA, said the judgment illustrates that moving money out of a taxpayer’s bank account does not necessarily place it beyond SARS’s reach. He said recipients of money implicated in an improperly obtained tax refund may have difficulty securing its release if they cannot demonstrate a legitimate entitlement to it.
Tax Consulting SA cautioned that section 179 of the TAA should not necessarily be understood as giving SARS an unrestricted power to recover money from any person merely because the funds can historically be traced to a tax debtor.
Schwellnus said the outcome was closely linked to the facts of the case: the improperly obtained VAT refund, the evidence of fraudulent supporting invoices, the rapid movement of the funds, and Dumakude’s inability to establish a legitimate basis for the R900 000 payment.
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