Page 777 - SAIT Compendium 2016 Volume1

CASE DIGEST 2013–2014
trucks nanced by it, but where the nancier had not intended and did not intend to take possession of the trucks until full payment was received. The court had to determine whether the parties were dealing with a simulated transaction as contended by the applicant. Furthermore, Wallis JA, through his obiter dictum, shed some light on the correct interpretation and application of the decision reached in South African Revenue Service v NWK Limited 2011 (2) SA 67 (SCA) in respect of simulated transactions.
Facts
The appellant, Roshcon (Pty) Ltd (Roshcon) was in the business of infrastructure development, civil and electrical infrastructure and waste bene ciation. In September 2008 it received a contract which required it to order ve trucks (three 9-ton trucks and two 14-ton trucks) which would need further modi cation to hold special cranes. The trucks were ordered from Toit’s Commercial (Pty) Limited (Toit’s), who in turn ordered the trucks from Nissan Diesel (SA) (Pty) Limited (Nissan Diesel). The transaction was nanced by Wesbank, who purchased the trucks from Nissan Diesel under a supplier agreement and who then subsequently supplied the vehicles to Toit’s through a oor plan agreement. Both the supplier agreement and the oor plan agreement were made subject to the suspensive condition that the ownership would remain with the selling party until such time as the dealer paid the full selling price. Wesbank paid the full purchase price to Nissan Diesel and subsequently obtained ownership in the vehicles.
The agreement between Wesbank and Toit’s determined that the trucks would be delivered to Toit’s or some other person that Toit’s may direct. Consequently, the ve trucks were delivered by Wesbank to Anchor Auto Body Builders CC (Anchor) to have the trucks modi ed. On 19 November 2008, two trucks were delivered to Roshcon after they had been modi ed and both representatives of Roshcon and Anchor signed the handover sheet for the two trucks in question. On 21 November 2008, Roshcon took delivery of the other three trucks by signing the handover sheet for them, but did not physically remove them as they remained in Anchor’s possession. Roshcon paid Toit’s for all ve trucks on 28 November 2008 and the documents constituting the proof of delivery were handed by Toit’s to Roshcon. However, Anchor who modi ed the trucks, refused to release the three trucks in its possession because Toit’s had not paid it. Roshcon subsequently paid Anchor for the modi cations and Toit’s went into liquidation without paying Wesbank for the ve trucks.
Given the fact that Toit’s had not paid Wesbank for the ve trucks, Wesbank claimed ownership of the ve trucks in terms of the suspensive clause in the oor plan agreement. Anchor released the three trucks in its possession to Wesbank, who subsequently sold two of them to Unitrans Supply Chain Solutions (Pty) Limited (‘Unitrans’).
Roshcon’s approached the court on the basis that it was the owner of the trucks and that the supplier and oor plan agreement were a simulation in that Wesbank could not reserve ownership where it never had or intended to take possession of the trucks. Roshcon contended that the oor plan agreement was a loan against the security of the trucks without Wesbank having to take possession thereof, thereby securing an advantage which the law would otherwise not allow. Wesbank reiterated that the onus of proving simulation rests upon Roshcon and that Roshcon had failed to discharge such an onus. Wesbank further contended that the proviso in the contracts to reserve ownership as security to protect itself was commonly used by many nancial institutions in South Africa in providing asset based nance.
Roshcon pleaded in the alternative that Wesbank was estopped from claiming ownership of the trucks to which Wesbank responded by contending that Roshcon had failed to discharge the onus as it never made any representation to Roshcon that Toit’s was the owner of the trucks or that Toit’s was entitled to dispose of the trucks. Roshcon then contended that it acquired ownership when it took delivery of the trucks and paid Toit’s in full and that Wesbank’s claim of ownership is based on simulated agreements contained in the supplier agreement and oor plan agreement. Roshcon further contended that the reservation of ownership in the oor plan agreement concealed a loan agreement secured by a pledge without possession, but purporting to be a sale agreement.
The court had to decide whether the parties to the contract intended to give effect to it in accordance with its tenor (ie whether the contract was simulated).
Held
In arriving at a decision the SCA examined the principles in both Zandberg v Van Zyl 1910 AD 302, CSARS v NWK 2011 (2) SA 67 (SCA) and Nedcor Bank Ltd v ABSA Bank Ltd 1998 (2) SA 830 (W) and held that it was not necessary to consider other cases as the decision as to whether simulation was present was fact-speci c. The Zandberg and NWK cases were considered from a general perspective, whilst the Nedcor case had very similar circumstances to the one before the court.
The court held that although Toit’s handed over all the necessary documents to Roshcon, it could not in law transfer ownership to Roshcon as the ownership was reserved to Wesbank until Toit’s paid the full purchase price with interest to Wesbank. The court further held that Roshcon was aware of the fact that Toit’s had not yet paid Wesbank and that it therefore took a risk in paying Toit’s the full amount.
In deciding whether simulation was present, the court con rmed the the principles in Dadoo and others v Krugersdorp Municipal Council 1920 AD 530 at 548, where it was held that parties may genuinely arrange their transactions so as to remain outside the scope of its provisions and that this fact on its own does not render a transaction a simulation.
With regards to the question of simulation, the SCA held that the ownership reserved to Wesbank in the oor plan agreement did not in itself constitute simulation and that Roshcon had failed to discharge the onus of proving that the agreement was simulated.
With regards to the question of estoppel, the court held that the estoppel principle will only apply to the two trucks in Roshcon’s possession and the one in Wesbank’s possession and that the onus of proving estoppel rests upon Roshcon. The court held that Wesbank had not made any representations to Roshcon and that Roshcon relied on the representation made by Toit’s. For that reason, the defence of estoppel had failed.
The appeal was consequently dismissed with costs.
SAIT CompendIum oF TAx LegISLATIon VoLume 1 769
CASE DIGEST 2013-2014