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[2007] ZASCA 20
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Assured Freight Services (Pty) Ltd v Comair Ltd (73/06) [2007] ZASCA 20; 69 SATC 91 (22 March 2007)
IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
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)
________________________________________________________________________
J U D G M E N T
________________________________________________________________________
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