Cornerstone Logistics (Pty) Ltd and Another v Zacpak Cape Town Depot (Pty) Ltd

Cornerstone Logistics (Pty) Ltd (first appellant), a licensed clearing agent, contracted with Zacpak Cape Town Depot (Pty) Ltd (respondent), a licensed customs warehouse operator, for warehousing services. Preston Cheslin Aitken (second appellant) signed as surety and co-principal debtor. Between August 2017 and November 2018, Cornerstone instructed Zacpak to store various consignments of alcohol in its customs warehouse. The goods were released to Bridge Shipping for export to Mozambique but were impermissibly diverted for home consumption in South Africa. In December 2018, SARS demanded payment from Zacpak of R37,416,153.27 in duties, VAT and other charges, alleging that Zacpak failed to provide proof of export and that the CN2 forms (proof of export) were false and invalid. Zacpak sought to enforce indemnity and suretyship clauses against the appellants. The appellants disputed that they had instructed release of goods, claimed the indemnity did not apply where Zacpak was at fault, and argued the suretyship was limited to storage charges up to R30,000.

• Whether Cornerstone gave instructions to Zacpak regarding the release of goods to Bridge Shipping
• Whether Zacpak's liability to SARS arose as a result of its own fault, thus excluding the indemnity
• The proper interpretation of indemnity clauses 14.1 and 14.6 in the Standard Terms and Conditions
• Whether Mr Aitken's liability as surety was limited to storage charges up to R30,000 or extended to the SARS claim
• Whether the application was urgent and whether procedural objections (hearsay evidence, late filing of replying affidavit) were valid
• The application of the integration (parol evidence) rule to Mr Aitken's assertion regarding his intention when signing the suretyship

The appeal was dismissed with costs, including the costs of senior counsel. Cornerstone Logistics (Pty) Ltd and Preston Cheslin Aitken were held jointly and severally liable to indemnify Zacpak Cape Town Depot (Pty) Ltd for whatever amount Zacpak was required to pay SARS arising out of the demand for payment made on 7 December 2018.

1. Where an indemnity clause obliges a client to indemnify a customs warehouse licensee for liability arising from compliance with the client's express or implied instructions, the indemnity applies once it is established on a balance of probabilities that the licensee acted on such instructions, regardless of subsequent diversion or fraud by third parties. 2. An indemnity clause excluding liability 'caused by the fault' of the licensee does not exclude liability where the licensee's exposure to SARS arises from falsified documents produced by third parties, absent evidence of the licensee's complicity in the falsification. 3. A suretyship clause binding a surety for 'any amount due' by the principal debtor encompasses all contractual liabilities of the principal debtor, including indemnity obligations under the same contract, and is not limited to amounts due for specific services or to credit limits applicable to particular transactions. 4. The integration (parol evidence) rule prohibits reliance on a party's subjective intention to contradict, add to or modify the clear and unambiguous meaning of a written contract. Extrinsic evidence of intention is inadmissible where it does not provide context or establish purpose but seeks to alter the plain meaning of the contractual terms. 5. A surety's liability is accessory to that of the principal debtor; where the principal debtor is liable under indemnity clauses, the surety is similarly liable unless the suretyship is expressly limited in clear terms.

1. The Court noted that the issue of Zacpak's ultimate liability to SARS did not fall for decision in this appeal, as Zacpak had instituted separate proceedings to challenge the SARS demand. The Court expressly stated that nothing in the judgment should be construed as pronouncing on SARS's entitlement to hold Zacpak liable. 2. The Court observed that customs warehouse licensees assume 'onerous obligations' under the Customs and Excise Act 91 of 1964, including liability for customs duties and VAT on all goods stored from the time of receipt until proof of lawful delivery or export. The Court noted it is 'not surprising' that astute licensees adopt 'belt and braces' approaches by incorporating multiple indemnity clauses. 3. The Court commented that licensees are 'wholly dependent on third parties' for proof of export and have 'no control over whether the goods are in fact exported or not', beyond ensuring that proper authorisation documents are presented. 4. The Court noted that extrinsic evidence should be used 'as conservatively as possible' in contractual interpretation, clarifying the University of Johannesburg v Auckland Park Theological Seminary dictum that context evidence does not mean extrinsic evidence is 'always admissible'. 5. Regarding the interpretation of section 19(7) of the Customs and Excise Act, the Court noted an argument that 'delivered' refers only to goods entered for domestic consumption versus export, but stated it was unnecessary to decide this issue on the facts.

This case is significant for its interpretation of indemnity and suretyship clauses in customs warehousing contracts. It clarifies that: (1) indemnity clauses in favour of customs warehouse licensees will be enforced where the licensee acts on the client's instructions, even where the goods are fraudulently diverted by third parties; (2) an indemnity excluding liability caused by the licensee's 'fault' does not apply where liability arises from falsified documents produced by third parties without the licensee's complicity; (3) a surety's liability is accessory to the principal debtor and extends to all amounts due under the contract, not merely to specified credit limits for particular services; (4) the integration (parol evidence) rule precludes a surety from relying on subjective intention to limit the scope of an otherwise clear and unambiguous suretyship clause; and (5) the case reinforces the onerous statutory obligations of customs warehouse licensees under the Customs and Excise Act 91 of 1964 and the commercial necessity for robust indemnity protection. The judgment applies the Endumeni principles of contractual interpretation, emphasizing text, context and purpose.