REPUBLIC OF SOUTH AFRICA

THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Reportable
Case Number:  070 / 04

In the matter between

THE COMMISSIONER FOR THE
SOUTH AFRICAN REVENUE SERVICE
FIRST APPELLANT

THE MINISTER OF FINANCE
SECOND APPELLANT

and

TFN DIAMOND CUTTING WORKS (PTY) LTD
RESPONDENT

Coram :

ZULMAN, STREICHER, LEWIS, HEHER and PONNAN  JJA

Date of hearing :

22 MARCH 2005

Date of delivery :

31 MARCH 2005

SUMMARY

Employer – vicarious liability of – for theft by employee of goods entrusted to
him – s17(3) of the Customs and Excise Act 91 of 1964 - does not exempt an
employer from liability for loss occasioned in consequence of a theft
perpetrated by its employee.
___________________________________________________________________

J U D G M E N T
___________________________________________________________________

PONNAN  JA
[1] In an action on certain separated issues before Swart J in the High
Court (Pretoria), the appellants were held jointly and severally liable to
the respondent 'for the loss of its diamonds in such damages as may be
agreed or proved'; and were ordered to pay the costs of that portion of
the proceedings. The first appellant, the Commissioner of the South
African Revenue Service (the first defendant in the court below), was
cited in his capacity as the official of state charged with the
administration of the Customs and Excise Act No 91 of 1964 (the Act).
The second appellant, the Minister of Finance (the second defendant in
the court below), was cited as the Minister of State under whose control
the Commissioner administers the Act. They appeal with leave of the
trial court.  For convenience I will refer to the appellants and the
respondent as ‘the defendant’ and the ‘the plaintiff’ respectively.

[2] TFN Diamond Cutting Works (Pty) Ltd (the plaintiff in the court
below), as the name suggests, purchases rough diamonds from a
variety of sources in South Africa, which it then cuts and polishes for
resale.  On 20 October 2000, Mr W S Glowiczower, a diamond dealer of

long standing and a director of the plaintiff, travelled to New York with a
consignment of diamonds.  The diamonds had been duly inspected and
sealed by the South African Diamond Board in accordance with the
prescribed practice of the South African customs authorities.

[3] The requisite documentation for the export (and in due course
possible re-importation) of the diamonds had been lodged with the
designated employees of the defendant.  Some of the diamonds were
sold in New York.  The remainder accompanied Glowiczower on his
return to South Africa.  Upon his arrival at the Johannesburg
International Airport on 8 November 2000, Glowiczower declared the
diamonds to employees of the defendant.  He was met at the red zone in
the customs hall by Sean Sadler an employee of Brinks SA (Pty) Ltd, a
clearing agency.  As a result of some miscommunication the original
invoice for the diamonds could not be produced.  A faxed copy did not
satisfy the customs officials on duty and the diamonds were detained.
The consignment was placed into a plastic pouch supplied by Sadler
and sealed.  Sadler then accompanied Daniel Khomolo and Cuthbert
Lebang, both employees of the defendant, to a strongroom at the
customs hall where the sealed pouch was placed in a locked safe.
Sadler was issued with a detention slip and an appropriate entry
recording the detention of the package was made in a bond book.

[4] Sadler went to the airport with the duly completed documentation
on 10 November 2000 to secure release of the diamonds. Those
documents he presented to Tycoon Khosa, an employee of the
defendant, who was then on duty.  Having accepted the documentation
without any query, Khosa returned from the safe and informed Sadler
that the diamonds were missing.  Glowiczower and the SAPS were duly
notified of the loss.

[5] The plaintiff alleged that the diamonds had been stolen by one
Joseph Matshiva, an employee of the defendant.  The plaintiff's cause of
action in the first instance, one not persisted with before the trial court,
was that the defendant was in breach of its obligations to the plaintiff
under a contract of deposit.  In the alternative, the plaintiff asserted a
delictual cause of action, based on the alleged breach of a duty of care
owed to it by the defendant.

[6] The defendant admitted that a package allegedly containing
diamonds had been detained by its employees, who had undertaken to
return the package upon due entry of its contents.  The trial court had
little hesitation in concluding that the package detained by the
employees of the defendant contained diamonds as testified to by
Glowiczower.  On the evidence adduced on behalf of the defendant the

trial court was satisfied that the diamonds had been stolen during
Matshiva's shift whilst he was in control of the strongroom and safe.  The
irresistible inference, said the trial judge, was that Matshiva stole the
diamonds.  None of those findings were attacked on appeal.

[7] Before this court the defendant contended: first, that in stealing the
diamonds Matshiva did not act within the course and scope of his
employment with it and accordingly it was not vicariously liable; and,
secondly, that it was exempt from liability to the plaintiff by virtue of
s17(3) of the Act. Each of those contentions will be considered in turn.

[8] As to the first:
In Ess Kay Electronics (Pty) Ltd v First National Bank of Southern Africa
Ltd 2001 (1) SA 1214 (SCA), Howie JA stated (paras 7 and 8):
‘Vicarious liability is imposed on innocent employers by a rule of delictual law.
The rule in its most simple form is that the liability arises when an employee commits
a delict within the course of such employee’s employment.  The foundational
formulation of the rule is to be found in Mkize v Martens 1914 AD 382 at 390. The
dictum in question goes on to warn that an act done solely for the employee’s own
interests and purposes, and outside the employee’s authority, is not done in the
course of employment even if done during such employment.  Uncertainty created by
later judicial pronouncements as to the content and ambit of the rule was removed
by the decision in Minister of Law and Order v Ngobo 1992 (4) SA 822 (A).

The reason for the rule is often stated to be public policy.  See, for example,
Salmond and Heuston on the Law of Torts 19th ed at 507.  And an underlying reason
for that policy has been held in Feldman (Pty) Ltd v Mall 1945 AD 733, in a passage
at 741, to be the consideration that because an employer’s work is done “by the
hand” of an employee, the employer creates a risk of harm to others should the
employee prove to be negligent, inefficient or untrustworthy.  The employer is
therefore under a duty to ensure that no injury befalls others as a result of the
employee’s improper or negligent conduct “in carrying on his work”…’
The question is always as Howie JA put it (para 10), ‘were the acts in the
case under consideration in fact authorised; were they in fact performed
in the course of the employee’s employment?’

[9] Against that backdrop I revert to the present facts.  Glowiczower
was obliged to hand over the diamonds to employees of the defendant.
Those diamonds were secured in a safe which was located in a
strongroom in the customs hall of the airport building.  The keys to the
safe were entrusted to Matshiva.  The safe, as also its content, was in
his custody.  Counsel for the defendant conceded that had Matshiva
been negligent in safeguarding the contents of the safe there would
have been no doubt that his employer would have been vicariously liable
for any loss occasioned in consequence thereof.  Negligence is but a
form of fault.  So, too, is intention.  If liability were to attach to the
defendant in consequence of Matshiva’s negligent failure to safeguard

the diamonds, why, it must be asked, would it escape liability if he acted
intentionally?  Put simply, Matshiva’s duty as an employee of the
defendant was to keep the diamonds safe. In that he failed.  It follows
that the defendant cannot escape liability for the theftuous conduct of its
employee.

[10] As to the second:
S 17(3) of the Act provides:
‘The State or any officer shall in no case be liable in respect of any loss or diminution
of or damage to any goods in a State warehouse or in respect of any loss or damage
sustained by reason of wrong delivery of such goods.’
‘State warehouse’ is defined in the Act as:
‘Any premises provided by the State for the deposit of goods for the security thereof
and of the duties due thereon, or pending compliance with the provisions of any law
in respect of such goods.’

[11] On appeal, as also before the court below, counsel for the plaintiff
submitted that the strongroom in the customs hall at the Johannesburg
International Airport was not a state warehouse as contemplated in the
Act.  For the purposes of this judgment, I shall assume in the
defendant’s favour, without deciding, that the strongroom in which the
safe was located from which the diamonds were stolen, was indeed a
state warehouse as envisaged in the Act.

[12] It is by now well established that a statutory provision such as this
should be strictly construed. (See Benning v Union Government
(Minister of Finance) 1914 AD 180 at 185; Administrateur, Transvaal v
Carletonville Estates Ltd 1959 (3) SA 150 (A) at 152H-153A.) The main
thrust of the defendant’s argument is that the words ‘any loss’ in s17(3)
encompasses theft as well.  I cannot agree.  First, had the legislature
intended to include theft within the scope of the exemption, it ought to
have said so in express terms.  Secondly, the construction sought to be
placed on the section by the defendant is untenable. The section seeks
to indemnify both the state and ‘any officer’.  Any officer in that context
would include the person who perpetrated the theft.  That an officer who
has been entrusted with the responsibility of safeguarding goods could
with impunity steal and thereafter invoke the protection afforded by
s 17(3) is plainly preposterous. Such an absurd result could not have
been the intention of the legislature. (See Venter v Rex 1907 TS 910.)
Accordingly, the second defence raised by the defendant is also devoid
of substance.

[13] It follows that the appeal must fail.  In the result the appeal is
dismissed with costs.

V M  PONNAN
JUDGE OF APPEAL
CONCURRING:

ZULMAN  JA
STREICHER  JA
LEWIS  JA
HEHER  JA