Commissioner of Customs and Excise v Randles Brothers & Hudson Ltd

• Jurisdiction: South Africa
• Judgment Date: 20 May 1941
• Citation: 1941 AD 369

Commissioner of Customs and Excise Appellant v Randles Brothers & Hudson Ltd Respondent
1941 AD 369

1941 AD p369

Citation	1941 AD 369
Court	Appellate Division
Judge	De Wet CJ, Watermeyer JA, Tindall JA, Centlivres JA and Feetham JA
Heard	March 20, 1941; March 21, 1941; March 25, 1941; March 26, 1941; March 27, 1941
Judgment	May 20, 1941

Flynote : Sleutelwoorde

Revenue — Customs — Rebate of duty — Goods transferred from importer to manufacturer — Transfer of ownership to comply with Regulation — Alleged simulated transaction — Liability for duty — Transaction in fraudem legis — Transfer of ownership — Essentials of — Act 36 of 1925, section 2 — Regulations of 1936 Nos. 7, 8 and 9.

1941 AD p370

Headnote : Kopnota

Prior to 1936 it was the practice of the defendant company to import goods and; then transfer them under a form prescribed by regulation to a registered manufacturer to be made up into shirts and pyjamas for the defendant upon the cut, make and trim principle. Under the existing regulations, framed under Act 36 of 1925, such goods were imported under rebate of customs duty,. In 1936 new regulations were promulgated requiring that, in such circumstances, in order that the goods might be imported under rebate of duty, the registered manufacturer to whom the importer transferred the goods should make a declaration that the goods were his own property. The defendant, thereupon, with the intention of complying with the new regulations, changed its procedure and purported to sell the goods to the manufacturer, and at the same time agreed to purchase the garments at the price of the sum at which the goods had been sold, plus the cost of making. The goods were duly delivered to the manufacturer, who signed the appropriate form declaring that the goods were his own property. Payments were effected when the manufacturer delivered the garments he had made, the final result being that the defendant paid in cash and the manufacturer received the agreed cost of manufacturing the garments. The Commissioner of Customs contended that, notwithstanding the procedure adopted by, the defendant, the latter remained at all times the owner of the goods, and that it was liable to pay full duty upon such goods.

Held (DE WET, C,.J., and TINDALL, J.A., dissenting), that, assuming it was a necessary implication from the regulations that it was a condition precedent to a, rebate of duty that the ownership in the goods had in fact passed from the importer to the manufacturer, on the facts the, plaintiff had not proved that the contracting parties did not genuinely mean to enter into contracts of sale and to transfer ownership of the goods when delivery was made in pursuance of those contracts, and that ownership in the goods had passed to the manufacturer, notwithstanding, the special features present in the transaction and, notwithstanding that the manufacturer had: bound himself contractually to deal with the goods delivered to him in a certain manner only.

The principle to be applied in deciding whether a transaction is in fraudem legis and the essentials for a passing of ownership discussed.

The cases of Dadoo Ltd. v Krugersdorp Municipal Council (1920 AD 530) McAdams v Fiander's Trustee (1919 AD 207), Zandberg v van Zyl (1910 AD 302), discussed.

The decision of the Durban and Coast Local Division in Commissioner of Customs and Excise v Randles, Brothers and Hudson, Ltd confirmed.

Case Information

Appeal from a decision of the Durban and Coast Local Division (CARLISLE, J.).

The facts appear from the judgment of WATERMEYER, J.A.

E.S. Henochsberg, K.C. (with him L. B. Caney), for the appellant: Ownership is the sum total of all the real rights in a corporeal thing. The essentials of ownership are: (a) the right to possession, (b) the right of use and enjoyment and (c) the right of

1941 AD p371

alienation. See Lee's Roman-Dutch Law (3rd ed., pp. 126, 1: 54); Maasdorp's Institutes of SA Law (5th ed., pp. 33-4).

The Court must inquire into the real nature of the transaction and give it legal effect. See Beckett v Tower Assets Co. (1891, 1 Q.B. 638, per FRY, L.J.).

To ascertain the intention of the parties regard must be had to the form of the transaction, but more particularly to the substance, the position of the parties and the whole of the circumstances under which the transaction came about. See Zandberg v van Zyl (1910 AD 302 at pp. 307, 309711, 312, 314, 319), quoting, with approval, CAVE, J., in Beckett v Tower Assets Co. (1891, 1 Q.B. 1 at p. 26); Treasurer-General v Lippert

(1 S.C. 291 at pp. 302-3 and 2 S.C. 172 at pp. 173,175); Ex parte Delhasse, in re Mogevand (7 Ch. D. 511 at p. 527); Pawsey v Armstrong (18 Ch. D. 698); McAdams v Fiander' s Trustee & Bell N.O. (1919 AD 207, at pp. 216, 223, 224, 228).

An essential of a sale is the fixing of a price with an intention that it should be exacted. See Voet (18.1.22).

There must be an intention, in case of transfer, to give and to take ownership. See Weeks and Another v Amalgamated Agencies Ltd. (1920 AD 218 at p. 230).

There is no analogy between the transactions in question and pacta de retrovendendo. See Voet (18.3.7, 8), as those pacts require the repurchase of the very article sold.

The transactions were in fraudem legis. To ascertain whether they were or not, the Court must adopt such a construction of the statute in question an will avoid the possibility of evasions which may perpetuate the mischief. See Magdalen College case (77 E.R. 1235 at p. 1242); Maxwell on Interpretation of Statutes (7th ed., pp. 99-100); and Jeffries and Others v Alexander and Others. (31 L.J., Ch. 9, at p. 14).

The rule of our law and the English law is a branch of the fundamental doctrine that the law regards the substance rather than the form of things, and it is an undoubted principle of our law that the provisions of a statute may not be circumvented by contraventions of its provisions in an indirect manner. See Dadoo Ltd and Others v Krugersdorp Municipal Council (1920 AD 530 at pp. 533, 547, 554-5, 557, 559-60), and Beckett v Tower Assets Co. (supra).

1941 AD p372

All that appellant need establish is proof sufficient to carry conviction to a reasonable mind. See Gates v Gates (1939 AD 150 at p. 155).

N. E. Rosenberg, K.C. (with him A. Milne), for the respondent: The object of the Act and the regulations is to afford protection to manufacturers in the Union of South Africa of garments made of imported dutiable material by means of a rebate on Customs duty, provided that the material is actually used for such manufacture. See Act 36 of 1925, sec. 2 and item 359; Act 19 of 1928, item 359; cf. sec. 4 of Act 39 of 1939; and Regulations 1-15.,

The word "property" must be given its ordinary meaning. See C.I.R. v George Forest Timber Co. Ltd. (1924 AD 516 at p.531) and C.I.R. v Wolf (1928 AD 177 at p. 184).

To establish the passing of ownership, it is necessary to show (a) transfer or delivery of the material, and (b) a mutual intention in fact that ownership is to pass. See Wessels on Contract (vol. I pp. 629-31); Weeks v Amalgamated Agencies Ltd. (supra at p.230); Conradie v Rossouw (1919 AD 279); Lucas's Trustee v Ismail and Amod (1905 T.S. 239); Daya v Gardee and Gartlee (1934 W.L.D. 31 at p. 42); Maasdorp's Institutes of South Africa (5th ed., vol. II, p. 72).

The fact that it was appreciated that ownership had to pass is an important element in determining whether there was in fact an intention to past; ownership. See Yorkshire Railway Wagon Co v Maclure (21 Ch. D. 309) and McAdam v Fiander's Trustee and Bell N.O. (supra at pp. 223, 227, 228, 237).

The fact that this ultimate result might be attained in various ways does not dispense with an investigation of the legal nature and effect of the transactions which were entered into in fact to attain the result. See Beckett v Tower. Assets Co. (supra at pp. 25, 26); Fox v Muller (1930 OPD 180); Naidoo v von Gerard and Chaplin (1931 AD 374 at p. 379).

As to pacta de Retrovendendo and de Retroemendo, see Norman on Purchase and Sale (2nd., pp. 158, 159); Mackeurtan on Sale (2nd ed., pp. 83-6); Voet (18.3.8).

It is not unusual for one who wants work done for him to supply part, or even all, of the material, and to contract that it should belong to the manufacturer. Cf. Dixon v London Small Arms Co. Ltd. (L.R. 1 A.C. 632).

1941 AD p373

As to the means of effecting payment, compensatio is well recognised legal method.

As to the suggestion that the transactions were in fraudem legis, where a statute prohibits something and the parties apparently bring themselves outside it, it is still possible to show that the apparent transaction is not the real one, and that, therefore, whilst apparently outside the statute, it actually falls within it. See Dadoo Ltd and Others v Krugersdorp Municipal Council (supra at pp. 543-8, 557-60); Fox v Muller (supra); Naidoo v von Gerard & Chapman (supra); Lawson & Kirk v SA Discount & Acc. Corp. (Pty.) Ltd. (1938 CPD 273 at p. 280); Craies on Statute Law (4th ed., p. 616); McAdams v Fiander & Trustee of Bell, N.O. (supra at p. 228); Daya v Gardee and Gardee (supra at p. 42).

There is a heavy onus on the appellant to prove affirmatively that (a) the transactions were not what they purported to be, (b) the intention to pass ownership was in fact a simulated intention, the real intention being that ownership should be retained by respondent. See Zandberg v van Zyl (supra at pp. 309, 314); Goldinger's Trustee v Whitelaw Son (1917 AD 66 at p. 81); Lawson & Kirk v SA Discount Acc. Corp. (Pty.) Ltd. (supra at pp. 280, 281, 296, 297).

The onus is heavy because it involves an allegation that all the parties conspired to commit a fraud on the Customs. See sec. 110 of Act 9 of 1913 and Regulation 21; Rex v Lifson (1938, C.P.D., 20th Dec.); Halsbury's Laws of England (Hailsham ed., vol. 13, para. 700) and Gates v...