Indemnity clause liability
21 June 2022 12:00 by Merilyn Kader
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In Cornerstone Logistics (Pty) Ltd and Another v Zacpak Cape Town Depot (Pty) Ltd  2 All SA 13 (SCA), interpretation of indemnity clause – liability for customs duty, VAT, and other charges on goods initially stored in a warehouse and not exported.
By Merilyn Rowena Kader LLB (Unisa), Legal Editor at LexisNexis South Africa.
Trade (customs and excise) - Interpretation of indemnity clause – liability for customs duty, VAT, and other charges: In Cornerstone Logistics (Pty) Ltd and Another v Zacpak Cape Town Depot (Pty) Ltd  2 All SA 13 (SCA) the respondent (Zacpak), a licensee of a customs and excise warehouse, was liable, in terms of s 19(6) of the Customs and Excise Act 91 of 1964, for customs duties and VAT on all goods stored in its warehouse. Such liability only ceases when it is proved that the goods in question have been duly entered in terms of s 20(4) of the Act, either for home consumption or export, and have been delivered or exported in terms of such entry.
The appellant (Cornerstone) had applied to Zacpak for credit facilities in respect of warehousing services and signed the application form renouncing the benefits of excussion and division. Cornerstone instructed Zacpak to store goods in its warehouse. Zacpak subsequently released the goods to a road carrier (Bridge), who was supposed to export the goods to Mozambique. Although the consignments were entered for export to Mozambique, they were impermissibly diverted, thus entering for home consumption in South Africa. When the South African Revenue Service demanded payment of duties, Zacpak successfully enforced its indemnity clauses against Cornerstone in the court a quo. That led to the present appeal.
It was held that, in interpreting the indemnity and suretyship clauses, they had to be given meaning and business-like efficacy by having regard to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appeared; the apparent purpose to which it is directed; and the material known to those responsible for its production. Properly construed, in terms of the agreement, Cornerstone indemnified Zacpak against any loss incurred by Zacpak as a result of Zacpak complying with Cornerstone’s express or implied instructions. For the indemnity to become effective Zacpak merely had to establish, on a balance of probabilities, that it had released the goods to Bridge on Cornerstone’s instructions. Based on the evidence, the court a quo correctly found that Zacpak released the goods to Bridge on Cornerstone’s express instructions. The court also highlighted evidence of Cornerstone’s continued involvement with the goods beyond their entry into Zacpak’s warehouse. In the absence of any fault on the part of Zacpak in the wrongful release of the goods to Bridge, liability was attributed only to the appellants.
The court per Smith AJA (Gorven, Mothle, Zondi JJA and Phatshoane AJA concurring) also found against the second appellant, who in signing the agreement as surety, assumed liability accessory to that of Cornerstone.
The appeal was dismissed with costs.
Merilyn Rowena Kader
Legal Editor at LexisNexis