THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

NOT REPORTABLE
CASE NO 73/06

In the matter between

ASSURED FREIGHT SERVICES (PTY) LTD

Appellant

and

COMAIR LTD

Respondent

_____________________________________________________________________

CORAM:
HOWIE P, STREICHER, BRAND, COMBRINCK JJA et

SNYDERS AJA
_____________________________________________________________________

Date Heard:
6 March 2007

Delivered:
22 March 2007

Summary:
Misappropriation by appellant of amount paid to it by respondent
which appellant underlook to pay to SARS in settlement of a VAT
debt due by respondent to SARS – appellant unsuccessfully raising
defence of prescription to respondent’s claim for repayment
Neutral citation: This judgment may be referred to as Assured Freight Services
(Pty) Ltd v Comair Limited [2007] SCA 20 (RSA)
_____________________________________________________________________

HOWIE P

HOWIE P
[1] The respondent, Comair Ltd (Comair), paid the appellant, Assured
Freight Services (Pty) Ltd (AFS), R6 515 864,85, the bulk of which AFS
had, by agreement between them, to pay over to the South African
Revenue Service (SARS) on Comair’s behalf in settlement of a debt due
by Comair to SARS. The balance of the amount was owed by Comair to
AFS as a fee for its services as a clearing agent. Payment by Comair to
AFS occurred on 20 February 2001. In September 2004 Comair first
realised that AFS had not fulfilled its obligation to Comair to pay SARS.
In October 2004 Comair itself paid the debt owing to SARS and then
brought an application against AFS in the High Court at Johannesburg for
an order for repayment of the amount paid to AFS, less the agency fee.
AFS resisted the application, one of its defences being prescription. The
case came before Goldstein J. The learned Judge ordered repayment.
(Other issues unnecessary to mention here were referred to trial.) With
the leave of this Court AFS appeals. Due to late filing of the notice of
appeal, the appeal is subject to the grant of condonation. For practical
reasons the condonation application and the appeal were argued as one.

[2] The only issue for appeal is that of prescription.   The relevant facts
are briefly as follows. The debt due by Comair to SARS was in respect of
Value Added Tax (VAT) owing on the importation of an aircraft from the
United States of America into South Africa. Absent the VAT payment,
the aircraft could not lawfully have been cleared through customs.
[3] On 19 February 2001, prior to Comair’s paying AFS, the latter
invoiced Comair in the relevant amounts of VAT and agency fee
respectively. With the invoice AFS submitted a pro forma bill of entry
relating to the imported aircraft. It was the obligation of AFS to submit a
bill of entry to SARS together with the VAT payment once AFS was

informed that the aircraft was ready to be cleared through customs. Such
clearance was, of course, the process for which AFS was paid its agency
fee. It is not disputed that the aircraft was so cleared but the date of its
release from customs is not apparent from the record. Be that is it may,
Comair, under the impression that AFS had paid the VAT debt and had
submitted the original bill of the entry to SARS, proceeded to claim from
SARS the refund of input tax. The claim was made in March 2001 as part
of a refund claim in respect of all input tax paid by Comair for the period
February 2001. In May 2001 Comair received the refund claimed,
including the amount equivalent to the VAT payable on the aircraft in
question.

[4] At some stage prior to claiming the refund Comair tried on several
occasions to obtain the original bill of entry from AFS, it being its
impression that AFS possessed the original. These attempts met with no
success. However, when the VAT refund was effected Comair considered
it unnecessary to persist in the quest for the original bill and concluded
that it had been submitted to SARS by AFS.

[5] Nothing further that was material occurred until 8 September 2004
when Customs officials informed Comair that they were investigating
whether VAT had been paid, inter alia, in respect of the aircraft involved
in the present case. Comair endeavoured to confirm that AFS had paid
SARS but AFS failed to give any satisfactory response. The upshot was
that on 30 September Customs informed Comair that VAT had not been
paid after all and demanded payment. Having complied with that demand,
Comair instituted this litigation.

[6] On the record there can be no other conclusion than that AFS
wrongfully appropriated the amount which it ought to have paid to SARS
on Comair’s behalf.

[7] It is plain that proceedings in the case were commenced more than
three years after Comair paid AFS.

[8] In terms of s 12(1) of the Prescription Act 68 of 1969, the
prescriptive period begins to run as soon as the debt in issue is due but ss
(3) says that it is not deemed to be due ‘until the creditor has knowledge
of the ... facts from which the debt arises’. The subsection goes on –
‘Provided that a creditor shall be deemed to have such knowledge if he
could have acquired it by exercising reasonable care.’

[9] As indicated already, Comair did not know the facts from which
its claim arose until more than three years after it paid the
misappropriated sum. Precisely when misappropriation occurred one need
not determine. The basis of the defence is that Comair was in a position to
acquire knowledge of the relevant facts, by the exercise of reasonable
care, earlier than three years before the commencement of proceedings in
the court below.

[10] The case for AFS is essentially based on the provisions of s
16(2)(d) of the Value-Added Tax Act 89 of 1991. Those provisions as
applied to Comair, laid down that it was not permitted a deduction of
input tax unless it or its importation agent held the bill of entry and a
receipt for payment of the VAT, and unless those documents were
delivered to SARS in terms of the Customs and Excise Act 91 of 1964.

[11] Relying on those provisions, AFS argued that in order for Comair
to seek recovery of input tax as it did, it should have had, or should have
ensured that AFS had, the two required documents. Accordingly, so the
argument proceeded, had Comair properly complied with its obligations
under the VAT Act it would necessarily, and concomitantly by the
exercise of reasonable care, have discovered timeously that AFS never
had those documents and, consequently, that it had not only failed to pay
SARS but had misappropriated the money.

[12] It seems to me that whatever lack of reasonable care one might
assume there to have been in Comair’s record-keeping (and one cannot
find as a fact that there was such shortcoming) the argument for AFS
attempts, wrongly, to transpose that absence of reasonable care into the
reasonable care required by s 12(3) of the Prescription Act.

[13] The evidence does not justify the conclusion that Comair failed to
exercise the latter care. It entrusted the procedures necessary for clearance
of the aircraft, and payment of VAT, to AFS as its clearing agent. It may
be accepted for present purposes, in favour of AFS, that AFS was not
Comair’s importation agent and therefore that possession by AFS of the
original bill of entry and the tax receipt did not assist Comair to comply
with s 16(2)(d) of the VAT Act. But that is beside the point. Comair was
justified, having entrusted AFS with the procedures referred to, and
having been given the pro forma bill of entry by AFS, to believe that AFS
would acquire and present all necessary documentation when paying
VAT on Comair’s behalf. Then, when Comair sought and achieved a
VAT refund in an amount inclusive of the VAT amount payable in
respect if the aircraft and the aircraft was released, Comair was, by all
reasonable criteria, entitled to think that everything necessary for the

clearance of the aircraft, including payment of VAT by AFS, had all
taken place in accordance with the relevant statutory requirements.

[14] That being the state of Comair’s knowledge and belief there was
nothing which ought reasonably to have alerted it to possible
misappropriation by AFS and the need for timeous legal action against
AFS. The only factors which should have alerted it – and in any event did
alert it – were the intimations and demand by Customs officials in
September 2004.

[15] The exercise by Comair of such care as was reasonably required in
the proved circumstances prior to September 2004 would not have
revealed to it the facts from which AFS’s liability to Comair arose. It
follows that Comair cannot be deemed to have had knowledge of those
facts. The defence of prescription was therefore rightly rejected by the
Court below. In the light of this conclusion it is unnecessary to deal with
an argument for Comair based on s 12(2) of the Prescription Act.

[16] The application for condonation is dismissed, with costs. The
appellant is to pay the costs of appeal.

_______________________
CT HOWIE
PRESIDENT
SUPREME COURT OF APPEAL

CONCUR:
STREICHER JA
BRAND JA

COMBRINCK JA
SNYDERS AJA