The Commissioner for the South African Revenue Service and Another v TFN Diamond Cutting Works (Pty) Ltd

TFN Diamond Cutting Works, a diamond cutting and polishing company, sent its director Mr Glowiczower to New York with a consignment of diamonds on 20 October 2000. Upon his return to Johannesburg International Airport on 8 November 2000, Glowiczower declared the remaining unsold diamonds to customs officials. Due to inability to produce the original invoice, the diamonds were detained and placed in a sealed plastic pouch in a locked safe within a strongroom at the customs hall. The safe was under the control of Joseph Matshiva, an employee of SARS. When an agent returned on 10 November 2000 with proper documentation to collect the diamonds, employee Tycoon Khosa reported they were missing. The trial court found that Matshiva had stolen the diamonds during his shift while in control of the strongroom and safe.

• Whether the employer (SARS) was vicariously liable for theft committed by its employee (Matshiva) of goods entrusted to him
• Whether section 17(3) of the Customs and Excise Act 91 of 1964 exempted SARS from liability for loss of goods stolen from a state warehouse by its employee
• Whether theft by an employee constituted conduct within the course and scope of employment

The appeal was dismissed with costs. The trial court's order holding the appellants jointly and severally liable to the respondent for loss of the diamonds was upheld.

An employer is vicariously liable for theft committed by an employee of goods entrusted to that employee in the course of employment. Where an employee's duty is to safeguard property and the employee steals that property, this constitutes a breach of duty within the course and scope of employment. There is no distinction for vicarious liability purposes between an employee acting negligently or intentionally - both negligence and intention are forms of fault. Section 17(3) of the Customs and Excise Act 91 of 1964, which exempts the State from liability for loss of goods in a state warehouse, does not extend to theft by the State's own employees and must be strictly construed. To interpret the exemption as covering theft would create the absurd result of allowing a dishonest officer to invoke protection for his own wrongdoing.

The court assumed without deciding that the strongroom in the customs hall at Johannesburg International Airport constituted a 'state warehouse' as defined in the Customs and Excise Act. This assumption was made in favour of the defendant for purposes of determining whether section 17(3) applied, but the court did not make a definitive finding on this point.

This case is significant in South African law for clarifying the scope of vicarious liability in cases of employee theft, particularly distinguishing between negligent and intentional conduct. It establishes that an employer cannot escape vicarious liability simply because an employee acted intentionally rather than negligently when both involve breach of the same duty. The case also provides important guidance on the interpretation of statutory exemption clauses in the Customs and Excise Act, confirming that such exemptions must be strictly construed and do not extend to theft by employees. It reinforces the public policy underlying vicarious liability - that employers who create risks through their employees must bear responsibility for harm caused.