Assured Freight Services (Pty) Ltd v Comair Ltd

Comair Ltd paid Assured Freight Services (Pty) Ltd (AFS) an amount of R6 515 864,85 on 20 February 2001. The bulk of this amount was to be paid by AFS to the South African Revenue Service (SARS) on Comair’s behalf to settle VAT due on the importation of an aircraft, with the balance constituting AFS’s agency fee as clearing agent. AFS invoiced Comair and provided a pro forma bill of entry, and the aircraft was cleared through customs. Comair, believing VAT had been paid, claimed and received an input VAT refund in May 2001. In September 2004 Customs officials informed Comair that VAT on the aircraft had never been paid. Comair then paid SARS directly and instituted proceedings against AFS for repayment of the misappropriated funds. AFS opposed the claim, raising prescription as a defence.

The appeal was dismissed. The defence of prescription was rejected, and AFS was ordered to pay the costs of appeal. The application for condonation was also dismissed with costs.

The case clarifies the application of section 12(3) of the Prescription Act in situations where a debtor’s wrongdoing is concealed and the creditor reasonably relies on an agent. It confirms that prescription does not begin to run merely because a creditor could, in theory, have uncovered the facts, but only where reasonable care in the circumstances would have revealed them. The judgment is important for agency relationships and for disputes involving latent misappropriation and tax payments.