REPUBLIC OF NAMIBIA

HIGH COURT OF NAMIBIA MAIN DIVISION, WINDHOEK

JUDGMENTCase no: A 128/2012

In the matter between:

WORKER FREIGHT SERVICES (PTY) LTD APPLICANT

and

THE COMMISSIONER FOR CUSTOMS & EXCISE 1ST RESPONDENTMINISTER OF FINANCE 2ND RESPONDENTJURAHA CLEARING SERVICES 3RD RESPONDENTTOMMY MUSHIMBA 4TH RESPONDENTNEDBANK NAMIBIA LTD 5TH RESPONDENT

Neutral citation: Worker Freight Services v The Commissioner for Customs and

Excise (A 128/2012) [2014] NAHCMD 38 (07 February 2014)

Coram: UEITELE, J

Heard: 25, & 26 March 2013

Delivered: 12 February 2014

2

Flynote: Revenue - Customs and excise - Liability of clearing agent for payment

of duty - 'Any person who exports' in terms of s 18 (2) of Customs and Excise Act, 1998

(Act No 20 of 1998) to pay customs and excise duties.

Principal and surety - Suretyship - What amounts to – Surety’s of obligation to pay is

dependent upon the existence of a particular state of affairs (the breach of contract by

the principal debtor or it’s agent) that is an obligation that arises when that state of

affairs exists and is enforceable as such.

Summary: This matter concerns the liability of a surety for the payment of customs

and excise duty. During June 2011 somebody, wanted to import a consignment of

cigarettes into Namibia from Zimbabwe. The truck carrying the consignment of

cigarettes was destined to enter Namibia from Zambia at the Wenela border post, on 02

June 2011. The truck was, in terms of the Customs and Excise Act, 1998 detained

under customs at the Wenela border post, pending the payment of excise duties

imposed in terms of the Customs and Excise Act, 1998.

The applicant authorised the consignment of the cigarettes to be cleared on the

applicant’s Multi-Purpose General Bond from the Zambezi Duty Free Bond Warehouse

to Angola through the Oshikango Border post. It, however, transpired that the

consignment of the cigarettes was not exported from Namibia. The first respondent

accordingly refused to acquit the applicant’s bond. Applicant as a consequence

instituted this application seeking to interdict the first respondent from presenting for

payment or enforcing the ‘Multi-Purpose General Bond’.

Held that when the applicant authorised its ‘multi-purpose bond’ to be used it accepted

liability to pay the debt (custom and excise duties) of another (ie the person who

imported the consignment of cigarettes into Namibia) and as such acted as a surety for

that person (whoever he or she may be).

Held further that the third respondent, in his capacity as agent for the person (the

principal debtor) who exported the consignment of the cigarettes, was in terms of the

Act liable to pay duty. As surety the applicant promised that the principal debtor would

3

perform and the applicant thus assumed the risk of breach of contract by the principal

debtor.

Held furthermore that the applicant's obligation to pay is dependent upon the existence

of a particular state of affairs (the breach of contract by the principal debtor or it’s agent)

that is an obligation that arises when the state of affairs exists and is enforceable as

such. In the result the applicant’s claim is dismissed with costs.

ORDER

The applicant’s claim is dismissed with costs.

JUDGMENT

UEITELE J

A. INTRODUCTION AND BACKGROUND

[1] This matter concerns the liability of a surety for the payment of customs and

excise duty. The matter arises from an application commenced in this court by the

applicant. Before I deal with the relief sought by the applicant, I will briefly set out some

of its background.

[2] The applicant is a company which is incorporated in terms of the laws of

Namibia. The applicant is a licensed clearing agent as contemplated in s 73 of the

Customs and Excise Act, 19981. I will in this judgment refer to this Act as “the Act”.

Section 73(3) requires any person who wishes to be registered as a clearing agent to

furnish security in the manner, form, nature or amount as the Commissioner requires.

1 Act No 20 of 1998.

4

On 25 June 2010 the applicant executed a 'Multi-Purpose General Bond' in favour of the

Government of Republic of Namibia (the terms of which I will set out later in this

judgment).

[3] During June 2011 somebody, (I say somebody because the applicant alleges

that it is the fourth respondent, the fourth respondent on the other hand denies that it

was the importer of the cigarettes into Namibia), wanted to bring a truck carrying a

consignment of cigarettes into Namibia from Zimbabwe. The truck would enter Namibia

through the Wenela border post between Namibia and Zambia.

[4] As I have indicated above, the truck carrying the consignment of cigarettes was

destined to enter and did enter Namibia from Zambia at the Wenela border post, on 02

June 2011. The truck was, in terms of the Act, detained under customs at the Wenela

border post, pending the payment of excise duties imposed in terms of the Act.

[5] I find it appropriate to point out that there are different versions relating to the

events surrounding the importation of the consignment of the cigarettes into Namibia.

According to the applicant, the fourth respondent initially approached the third

respondent for the latter to act as the fourth respondent’s clearing agent. The applicant

further alleges that the third respondent did not have adequate bond facilities to enable

the consignment of the cigarettes to be kept and removed in bond. The fourth

respondent as a result requested (through a certain Shidute2) the applicant for

assistance to have the goods removed in bond.

[6] The version of the applicant is furthermore that, the fourth respondent informed

Shidute that he (i.e. the fourth respondent) plans to remove the truck with the cigarettes

consignment to the Zambezi Duty Free Bonded Warehouse in Katima Mulilo and then

remove it to Angola through Oshikango border post.

[7] The fourth respondent on the other hand denies this version by the applicant. His

version is that during June 2011 he was telephonically contacted by the driver of the

truck which had the consignment of the cigarettes. At the time that he was contacted by

2 Mr Leonard Kicker Shidute is an employee of the applicant.

5

the driver of the truck, the truck was detained at the Wenela Boarder Post because the

consignment of cigarettes which his truck carried was not cleared (for want of payment

of customs and excise duties) for entry into Namibia. The driver allegedly asked the

fourth respondent whether the fourth respondent knew of a company which could

provide a “road bond” for its consignment because the third respondent, who was the

clearing agent for the importer, was unable to secure a road bond for the consignment

in question. Fourth respondent said it is then that he contacted Mr Shidute, with the

driver’s request.

[8] Mr Shidute arranged for the applicant’s 'Multi-Purpose General Bond’ to be used.

On 02 June 2011 a certain Mr Swartbooi addressed a ‘Bond Authorisation Letter’ to the

Controller of Customs and Excise. In that letter the applicant authorised the

consignment of the cigarettes to be cleared on the applicant’s bond, Bond No W.F.S –

KUC002 (MD 1018000009) from the Wenela border post to the Zambezi Duty Free

Bond Warehouse. It appears that the truck with the consignment of the cigarettes was

on 02 June 2011 released from the Wenela Border post, but kept in bond at the

Zambezi Duty Free Bond Warehouse in Katima Mulilo.

[9] On 20 June 2011 Mr Shidute issued a second ‘Bond Authorisation Letter’ to the

Controller of Customs and Excise. In this second letter of authorization the applicant

authorised the consignment of the cigarettes to be cleared on the applicant’s bond,

Bond No W.F.S – KUC002 (MD 1018000010) from the Zambezi Duty Free Bond

Warehouse to Angola through the Oshikango Border post.

[10] The truck carrying the consignment of the cigarettes was diverted from the

Oshikango Border post and allegedly went to the Katwitwi Border post. On 24 June

2011 an employee of the Ministry of Finance, a certain Lirumbu, stamped the custom

declaration forms. The customs declaration forms represented that the truck with the

consignment of the cigarettes left Namibia for Angola through the Katwitwi border post.

[11] On 25 June 2011 the first respondent received information to the effect that the

cigarettes consignment was allegedly exported to Angola through the Katwitwi border

post instead of the Oshikango border post. Senior officers of the first respondent, on

6

account of the information received, embarked on an investigation to determine how the

consignment of the cigarettes was diverted from the Oshikango border post and how it

was exported through the Katwitwi border post.

[12] The investigation by the first respondent’s senior officials revealed that Mr

Lirumbu fraudulently used the export stamp to stamp the custom declaration forms and

that no truck carrying cigarettes consignment passed through the Katwitwi border post

into Angola meaning that the consignment of the cigarettes was not exported from

Namibia. The customs officials on the Angolan side of the Katwitwi border post also

confirmed that no consignment of cigarettes was imported into Angola from Namibia

through that border post between the period of 01 June 2011 to 24 June 2011.

[13] The applicant contacted the first respondent in an endeavor to have the bond

acquitted. The first respondent refused to acquit the bond, on the ground that, no

satisfactory proof was presented to it, to show that the consignment of the cigarettes

was removed to an area outside the common customs area. The applicant is aggrieved

by the first respondent’s refusal to acquit the bond, and has thus commenced these

proceedings by way of application.

[14] In its Notice of Motion the applicant claims the following relief:

‘1.

Interdicting 1st and 2nd respondent from presenting for payment or enforcing the Multi-

Purpose General Bonds number MD 1018000009 and MD 1018000010 (the Bonds) with

applicant as principal and 5th respondent as surety pending the outcome of this

application.

2.

Declaring that neither applicant nor 5th respondent is liable for duties in respect of the

consignment in question and that neither of the Bonds can be applied for payment

thereof by 1st and 2nd respondent.

3.

7

Ordering 1st alternatively 2nd respondent to effect the release or acquittal of Bonds

forthwith’.

B. GROUNDS ON WHICH THE APPLICATION IS BASED AND OPPOSED

[15] The applicant argues that:

(a) It was never the importer, owner, licensee of the warehouse involved or

the agent as contemplated in s 110 of the Act;

(b) It authorised the third respondent to comply with procedural requirements

relating to security in the Act. It further argues that it was never applicant’s

intention to create liability for duties if the applicant complied with the

Customs and Excise laws as per the Act;

(c) The proof required for the acquittal of the bond as provided for in ss 17(4)

(b) and ss 18(2) of the Act was provided by a customs official.

(d) The liability for duties under the Act is not applicant’s nor did the applicant

in anyway accept liability for it. It further argued that the person who

removed the goods in bond from a Customs and Excise Warehouse is

liable for the duties.

(e) Applicant authorised the third respondent to use the Bond within very

particular parameters. The fact that the consignment was diverted from

Oshikango border post to Katwitwi border post and allowed to be so

diverted by customs officials renders the authorization to use the bond

void.

(f) The Bond is only applicable to a Customs and Excise warehouse in

Walvis Bay.

8

(g) The Bond conditions make it clear that it creates a relationship between

applicant and first respondent’s office and if the applicant observes the

Customs and Excise law of Namibia the Bond is void. It further argues that

the applicant did not break any law.

(h) Any ability that arose under the Bond for applicant is as a result of the

criminal action by an official in the employ of the second respondent and

that official was acting within his official capacity.

[16] The first respondent on the other hand opposes the relief sought by the

applicant. The basis on which it opposes the relief sought by the applicant is that, the

applicant’s liability commenced at the time that it authorised its bond to be used by the

third respondent as security to cover the potential loss of duties and taxes for the first

and second respondents in the event that the third respondent failed to comply with the

conditions relating to the purpose for which the goods were cleared. The first

respondent argued that:

‘Third respondent having failed to ensure that the goods left the country first and second

respondent now hold the bond (MD 1018000009) to do exactly what was envisaged, that

is to cover/prevent loss of duties and taxes.’

C. THE ISSUE FOR DECISION

[17] On 23 October 2012 the legal practitioners representing the parties held a case

management conference as is required by the rules of this court. At that conference the

parties amongst others identified the following issue as the issue which this court has to

resolve namely, whether the applicant or the fifth respondent is liable to pay the custom

and excise duties in respect of the consignment of cigarettes brought into Namibia

either by the fourth respondent or by the third respondent.

[18] I am of the view that the answer to that question is determinative of the dispute

between the parties and that is the question that I will answer in this judgment. To

answer that question I will start off by analyzing the relationship between the applicant

9

on the one side and the first and second respondent on the other side. I will thereafter

proceed to examine how liability to pay customs and excise duties arises and thereafter

answer the question.

D THE RELATIONSHIP BETWEEN APPLICANT AND FIRST AND SECOND REPONDENTS

[19] The first respondent is the person entrusted3 by the Act to administer the Act. It is

thus his responsibility to ensure that the customs and excise duties leviable in terms of

the Act are levied and collected. As I indicated above the applicant is a clearing agent

as contemplated in s 73 of the Act. The applicant therefore does, for the purposes of s

40 of the Act, for reward make entry of, or deliver a bill of entry relating to, any goods on

behalf of any importer or exporter of goods.

[20] In the present matter a person wanted to import a consignment of cigarettes into

Namibia, (I am of the opinion that the dispute as to who that person is, is for the

moment irrelevant for my decision) and allegedly export that consignment to Angola, but

that person did not have the necessary means to get the consignment released at the

border post or from the bonded warehouse. The assistance of the applicant was sought

and the applicant obliged and authorised its ‘multi-purpose bond’ to be used to release

the consignment of cigarettes from the bonded warehouse. In terms of the ‘multi-

purpose bond’ the applicant bound itself to pay debts which are due to the Government

of the Republic of Namibia in terms of the Act.

[21] I am of the view that when the applicant authorised its ‘multi-purpose bond’ to be

used it accepted liability to pay the debt (custom and excise duties) of another (i.e. the

person who wanted to import the consignment of cigarettes into Namibia) if that other

person itself failed to pay the custom and excise duty. The applicant in my view thus

acted as a guarantor/surety for the person who imported or cleared the consignment of

cigarettes.

3 See section 2 of the Customs and Excise Act, 1998.

10

[22] Forsyth & Pretorius4 opines that suretyship is a form of intercession, ie a

transaction in which one person undertakes liability for another’s debt and they define it

as follows:

‘Suretyship is an accessory contract by which a person (the surety) undertakes to the

creditor of another (the principal debtor), primarily that the principal debtor, who remains

bound, will perform his obligation to the creditor and, secondarily, that if and so far as the

principal debtor fails to do so, the surety will perform it or, failing that, indemnify the

creditor.’

[23] In a dissenting judgment in the matter Carrim v Omar5 Stegmann, J criticized that

definition, he said;

'In Caney the view is expressed that a surety undertakes primarily that the principal

debtor himself will perform and only secondarily that he (the surety) will perform. While it

can be accepted that it will, at the time of contracting, be in the contemplation of both the

creditor and the surety that the principal debtor will perform, it seems somewhat

pointless to say that the surety's primary undertaking is that the principal debtor will

perform as that ''primary undertaking'' obviously does not create a primary (or any)

obligation between the creditor and the surety. If such a primary obligation were indeed

created a creditor would presumably have to call on a surety to perform in terms of the

primary obligation (that is, call on the surety to persuade the principal debtor to perform)

before enforcing the secondary obligation and that, it is submitted, is not the law.

[24] In my view, there is force in the reasoning of Stegmann, J. I therefore prefer the

following definition of suretyship by the authors of the title 'Suretyship' in Joubert (ed)6

namely that:

'Suretyship is a contract in terms of which one person (the surety) binds himself as

debtor to the creditor of another person (the principal debtor) to render the whole or part

of the performance due to the creditor by the principal debtor if and to the extent that the

principal debtor fails, without lawful excuse, to render the performance himself.'

4 Forsyth CF & Pretorius JT Caney’s The Law of Suretyship 4th ed at p24-28. 5 2001 (4) SA 691 (W).6 The Law of South Africa 1st reissue vol 26 (1997) para 190.

11

[25] This definition also ties in with the definition by Trollip, J in the case of Orkin

Lingerie Co (Pty) Ltd v Melamed and Hurwitz7 where he said:

'…a contract of suretyship in relation to a money debt can be said to be one whereby a

person (the surety) agrees with the creditor that, as accessory to the debtor's primary

liability, he too will be liable for that debt.’

[26] In the Carrim v Oma8 case Stegmann, J also considered the accessory nature

and conditional nature of the contract of suretyship and said:

‘[45] The liability of the surety is always said to be accessory to that of the principal

debtor. What is meant by this term is considered in Wessels' Law of Contract in South

Africa 2nd ed by A A Roberts vol 2 at 997 - 8 para 3951. The conclusion derived by the

learned authors from a consideration of authorities may be summed up in the following

propositions relating to the accessory nature of suretyship:

(1) There can be no suretyship without a valid principal debt.

(2) The suretyship depends upon the principal debt and does not take its place: the

two contracts exist side by side.

(3) The extinction of the principal debt in any manner entails the extinction of the

suretyship.

(4) The legal scope of the two contracts is identical.

(5) The surety can plead every defence, not of a purely personal nature, that may be

pleaded by the principal debtor.

(6) The liability of the surety arises only when the principal debtor has made default

and therefore the surety can demand that the principal debtor be first excussed'

(Voet 46.1.14).

[46] It is, I think, correct to say that the liability of the surety to the creditor is

described as 'accessory' to that of the principal debtor because, whilst the liability of

each of them is precisely co-extensive with that of the other, there are two main

distinguishing features that render the surety's liability 'accessory' to that of the principal

debtor. The first is that the principal debt can exist without the suretyship, but the

suretyship cannot exist without the principal debt. The second is, as pointed out in (6) in 7 1963 (1) SA 324 (W).8 Supra footnote 5.

12

the previous paragraph, that the surety's liability is contingent, being conditional on the

default of the principal debtor.

The conditional nature of the surety's liability

[47] … the conditional nature of the surety's liability is not always clearly perceived

and that it is in reality the key to a proper understanding of the nature of suretyship. A

surety's liability at common law is subject to a suspensive condition: the condition is that

the principal debtor should first have committed a breach of contract. Only when that

condition has been fulfilled is the surety's undertaking enforceable against him.’

(Italicized and underlined for emphasis).

[27] Having found that the relationship between the applicant and the first defendant is

one of suretyship, I will now proceed to set out how the liability to pay the customs and

excise duties arose.

E LIABILITY FOR THE PAYMENT OF EXCISE DUTIES

Liability pursuant to section 18(2) of the Act.

[28] The obligation to pay customs and excise duties in respect of goods imported

into Namibia is created by ss 41(6) of the Act. That subsection reads as follows:

‘An importer of goods from any territory in the common customs area shall, upon

bringing such goods into Namibia and notwithstanding any provision to the contrary in

any other law contained, in the form, at the place, to the person and in accordance with

the procedures the Permanent Secretary may prescribe, make a declaration and pay the

duty, if any, payable in respect of such goods.’ (Italicized and underlined for

emphasis).

[29] I have indicated above that a person imported a consignment of cigarettes from

Zimbabwe into Namibia and that the truck carrying that consignment was, in terms of

the Act, detained at the Wenela border post (which is designated as an entry point in

terms of s 6 of the Act) pending the payment of custom and excise duties. I also

13

indicated that on the strength of a letter of authorization from the applicant the truck was

allowed to leave the Wenela border post for the Zambezi Duty Free Bond Warehouse.

Once the consignment of cigarettes was in the Zambezi Duty Free Bond Warehouse, s

18 (2) of the Act became applicable. That section applies to goods that are imported

into a customs and excise warehouse and then exported from the warehouse to a place

outside the common customs area. It attaches liability for the payment of duty upon any

'person who exports' the goods. Section 18 (1)-(3) read as follows:

'Exportation of goods from customs and excise warehouse

18 (1) Notwithstanding any liability for duty incurred thereby by any person in

terms of any other provision of this Act, any person who exports any goods from a

customs and excise warehouse to any place outside the common customs area shall,

subject to the provisions of subsection (2), be liable for payment of the duty on all goods

which he so exports.

(2) Subject to the provisions of subsection (3), any liability for the payment of

duty in terms of subsection (1) shall cease when it is proved to the satisfaction of the

Commissioner by the exporter that the said goods have been duly taken out of the

common customs area.

(3) If the exporter fails to submit any such proof as is referred to in subsection

(2) within a period of 30 days from the date on which the goods concerned were entered

for export, he shall upon demand by the Commissioner forthwith pay the duty due on

those goods.’ (Italicized and underlined for emphasis).

[30] Mr Coleman who appeared on behalf of the applicant argued that in terms of s

41(6) of the Act it is the person who imported the goods who is liable to pay the duties

and in terms of s 18(2) of the Act the person who exported the goods is the person who

is liable to pay the duties. He further argued that since the applicant was not the

importer or exporter of the ‘goods’ liability for the payment of the duties cannot be

visited on it.

14

[31] Section 1 of the Act defines ‘exporter’ to, at the time of export, include, a person

who owns any goods exported, carries the risk in respect of any goods exported,

represents that or acts as if he or she is the exporter or owner of any goods exported;

actually takes, or attempts to take, any goods from Namibia; has a beneficial interest in

any way whatsoever in any goods exported; and a person who acts on behalf of any of

the aforementioned persons. I have no doubt that the applicant is not the person who

had to export the goods from a customs and excise warehouse (i.e. the Zambezi Duty

Free Bond Warehouse) to any place outside the common customs area (i.e. Angola).

But the definition of exporter extends the word exporter to include a person who has

acted on behalf of an exporter.

[32] Mr Coleman further argued that the applicant could also not be caught by the

extended definition of ‘exporter’ because the applicant did also not act as the agent for

the importer/exporter of the cigarettes consignment. The first and second respondents

have no quarrel with that submission. The first and second respondents argued that the

applicant’s liability to pay the duties arises from the fact that the applicant authorised its

“security bond” to be used by the third respondent as security to cover potential loss of

duties in the event that the third respondent failed to comply with conditions relating to

the purpose for which the goods were cleared. This argument by the first and second

respondents now leads me to consider the question whether the applicant incurred any

liability to pay customs and excise duties under the multi-purpose general bond.

Liability pursuant to the multi-purpose general bond.

[33] It is common cause that the applicant authorised its ‘multi-purpose general bond’

to be used to release the consignment of cigarettes from the bonded warehouse. The

‘multi-purpose general bond’ reads as follows:

'REPUBLIC OF NAMIBIAMINISTRY OF FINANCECUSTOMS AND EXCISE

MULTI-PURPOSE GENERAL BOND

15

KNOW ALL WHOM IT MAY CONCERN:

That:

Woker Freight Services (Pty) Ltd

as principal (hereinafter referred to as the Principal) herein represented by –

(1) Hans-Werner Timke

(2) Kristian Woker

in their representative capacities as-

(1) Managing Director

(2) Director

they being duly authorised thereto by virtue of a resolution passed at a meeting

of the Board of Directors held at Walvis Bay on the 25th day of June 2010 and

the NEDBANK NAMIBIA LIMITED

as Surety/Sureties and co-principal debtors in solidum herein represented by

(1) Helmut Victor Gariseb

(2) Annelize Magda Sagner

in their representative capacities as-

(1) Credit Manager

(2) Credit Manager

they being duly authorised thereto by virtue of standard internal

banking/insurance regulations pertained to signing powers, are truly and lawfully

indebted and are held and firmly bound to the Government of the Republic of

Namibia in the sum of

N$10 000 000 (Ten million Namibian dollars)

to be paid on demand to the said Government, for which payment well and truly

to be made. We bind ourselves jointly and severally each for the whole, our

16

Heirs, Executors, Administrators and Assigns. FURTHERMORE we, the Principal

Debtor(s) and Co-Principal Debtor(s) renounce and waive the exceptions: (i)

Beneficium ordinis seu excussionis and (ii) Beneficium divisions, with the

meaning and effect of which we are fully acquainted.

AND WHEREAS the above Principal is desirous of transacting business with the

Office of the Commissioner of Customs and Excise for the Republic of Namibia

subject to the provisions, rules, and regulations of the laws of the Republic of

Namibia relating to Customs and Excise.

CONDITIONS OF BOND:

Whereas the above Principal is desirous of transacting business with the Office

of the Commissioner of Customs and Excise of the Republic of Namibia subject

to the provisions, rules and regulations of the laws of the Republic of Namibia

relating to Customs and Excise: Now the conditions of this obligation are such

that if the Principal shall, to the satisfaction of the Commissioner for Customs and

Excise, observe the Customs and Excise law of the Republic of Namibia

governing such business, then this obligation shall be void; otherwise it shall be

and remain in full force and effect. In addition to this general condition, the

Principal agrees to the following specific conditions as indicated by his initials in

the space provided.

*Customs and Excise Warehouse Licensee – Whereas the above

Principles is the occupier of a certain warehouse(s) approved in terms of

the provisions of the laws of the Republic of Namibia relating to Customs,

for the storage of bonded goods; the condition of this obligation is such

that if all the goods which are now and/or hereafter maybe from time to

time deposited in such warehouse(s), shall be either duly exported or the

full duties and taxes due and payable on the importation of such goods,

or such part thereof as shall not have been exported as aforesaid, be paid

to the Controller of Customs at the Port Walvis Bay according to the first

account taken of such goods upon the landing of the same, and it terms

of the provisions of the Customs laws of the Republic of Namibia then this

obligation to be void; otherwise to be and remain in full force and virtue.’

17

[34] The document (i.e. the multi-purpose bond was signed on behalf of Nedbank

Namibia Limited which was described as 'Surety and Co Principal Debtor', and on

behalf of the applicant which was described as 'Principal'.

[35] On behalf of the applicant, it was submitted that the applicant incurred no liability

other than in terms of the Act or in terms of the ‘multi-purpose general bond’. Mr

Coleman argued that under the bond liability is dependent upon the terms of the bond

and compliance with the terms of the bond, and that no fraud is committed. He further

argued that the terms of the bond are that:

(a) the applicant declared itself to be bound to pay the Government of the Republic

of Namibia the amount of N$ 10 000 000 (Ten Million Namibia Dollars) if the

applicant observes the Custom and Excise laws of the Republic of Namibia;

(b) the bond only covers goods stored in a warehouse occupied by the applicant;

and

(c) the applicant must transact business with office of the of the Commissioner of

Customs and Excise.

[36] It was further submitted on behalf of the applicant that because the consignment

of cigarettes did not come near a warehouse occupied by the applicant and because the

applicant did not transact any business with the Commissioner of Customs and Excise,

the bond cannot create liability for applicant to pay the duties contemplated in the Act.

[37] Mr Ndlovu on behalf of the first and second respondents, on the other hand,

argued that, the applicant, by authorizing the third respondent, to use its bond as

security to remove the consignment of cigarettes from the Zambezi Duty Free Bonded

warehouse, created liability for itself to pay the duties if the persons who were to export

the cigarettes to Angola failed to honour their obligations in terms of the Act.

18

[38] In the matter of Standard General Insurance Co Ltd v Commissioner for Customs

and Excise9 it was held that when a person appends his signature to a document that is

intended to create legal obligations the first rule in identifying those obligations is to give

effect to his intention as it has been expressed in the document.10 I am of the further

view that when interpreting any document, the correct approach is to have regard to the

normal grammatical meaning of the relevant words, the context in which they were used

in the document, including the nature and purpose of the document, and the

background circumstances which might explain the purpose of the document and the

matters properly present to the minds of the parties when they authored the document.

In this regard, the remark of Lord Steyn in R v Secretary of State for the Home

Department, ex parte Daly11 that ‘in law context is everything’ is apposite.

[39] The context in which the applicant authorised its multi-purpose general bond to

be used by the third responded is set by the Act. The object of the Act (insofar as it

relates to import duty) is to ensure that duty is collected on goods that are imported into

this country and its provisions are mainly directed towards that end. The Act in order to

achieve its object casts the net widely upon the importation of goods and also on those

who export the goods before the duty has been paid. Section 17 (6) & (7) therefore

provides as follows:

‘(6) No goods shall in terms of this section be removed in bond from the place where

they were landed in Namibia or where they entered Namibia, until they have been

entered for removal in bond, and such entry shall, for the purposes of this Act, be

deemed to be due entry at such place in respect of such goods.

(7) No entry for removal in bond shall be tendered by or may be accepted from any

person who has not furnished the security in the form, nature or amount as the

Commissioner may in writing require, and the Commissioner may at any time require

that the form, nature or amount of such security be altered in such manner as he or she

may in writing determine.’

9 2005 (2) SA 166 (SCA).10 Per Nugent JA et Lewis JA at p 178.11 [2001] 3 ALL ER 433 (HL) at 447a.

19

[40] In the present matter it is true that the applicant is not the export of the

consignment of the cigarettes and thus did not attract liability in terms of ss 41(6) of the

Act. It is also so that the applicant is not the person who exported the consignment of

the cigarettes and thus did not attract liability for the payment of duties in terms of

ss18(2), but the third respondent could not remove the consignment of goods except if it

had provided security to the satisfaction of the Commissioner that duty will be paid if the

goods are not removed from the common custom area. The security which the third

respondent provided is the applicant’s multi-purpose general bond, thus creating

accessory obligations for the applicant.

[41] The authors of Caney’s Law of Suretyship12 argue that for there to be a valid

suretyship between surety and creditor there has to be a valid principal obligation

between the debtor and the creditor. The learned authors further quote Lube as saying

that the surety only takes upon himself the risk of a breach of contract by the principal

debtor. They continue and say:

‘This marries well with the idea of a surety as one who promises that the principal

debtor will perform, not simply one who will indemnify the creditor for losses caused by

non-performance.’

[42] Applying those principles to the facts of this matter I cannot accept the

arguments advanced on behalf of the applicant, because I have already found that valid

suretyship relationship came into existence as between the applicant and the first

respondent. The fundamental question is whether there was a principal obligation. The

answer to that question is in the affirmative. The third respondent, in his capacity as

agent for the person (the principal debtor) who exported the consignment of the

cigarettes, was in terms of the Act liable to pay duty. As surety the applicant promised

that the principal debtor would perform and the applicant thus assumed the risk of

breach of contract by the principal debtor.

[43] The applicant's obligation to pay is dependent upon the existence of a particular

state of affairs (the breach of contract by the principal debtor or its agent) that is an

12 Footnote No. 4

20

obligation that arises when the state of affairs exists and is enforceable as such. In the

result I make the following order. The applicant’s claim is dismissed with costs.

---------------------------------SFI Ueitele

Judge

21

APPEARANCES

APPLICANT: G Coleman

Instructed by MB De Klerk & Associates,

Windhoek

FIRST & SECOND RESPONDENT: M Ndlovu

Of Government Attorney

THIRD RESPONDENT:

FOURTH RESPONDENT N Tjombe/Ms Mugaviri

Of Tjombe-Elago Law Firm Inc/Mugaviri &

Associates