Roshcon (Pty) Ltd v Anchor Auto Body Builders CC and Others

• Jurisdiction: South Africa
• Judge: Maya JA, Shongwe JA, Wallis JA, Petse JA and Saldulker JA
• Judgment Date: 31 March 2014
• Citation: 2014 (4) SA 319 (SCA)
• Docket Number: 49/13 [2014] ZASCA 40
• Hearing Date: 21 March 2014
• Counsel: P Beltramo SC (with TD Prinsloo) for the appellant. A Gautschi SC (with C van der Spuy) for the second respondent.
• Court: Supreme Court of Appeal

Shongwe JA (Maya JA, Wallis JA, Petse JA and Saldulker JA concurring):

C [1] This appeal in a nutshell revolves around the question of who is the lawful and true owner of five Nissan trucks (the trucks). These were three 9-ton trucks and two 14-ton trucks. The appellant, Roshcon (Pty) Ltd (Roshcon), claimed to be the true owner of all the trucks. It was in possession of two of the 9-ton trucks when litigation started, and the second respondent, FirstRand Bank Ltd (trading as Wesbank), was in D possession of the third. When the application for a declaration of rights commenced in the North Gauteng High Court, there were seven respondents. But the lis was eventually limited to Roshcon, Wesbank and Unitrans. Wesbank filed a counter-application for an order directing Roshcon to deliver to it the two trucks in its possession. The application was dismissed with costs and the counter-application was granted with E costs. This appeal is with leave of the court a quo.

[2] It is instructive to mention, without elaborating, the parties involved in this matter. The appellant, Roshcon, is in the business of infrastructure development, civil and electrical infrastructure, and waste beneficiation F throughout sub-Saharan Africa. The first respondent, Anchor Auto Body Builders CC (Anchor), is in the business of repair and construction of truck subframes and load bodies. The second respondent is FirstRand Bank, trading as Wesbank (Wesbank). The third and fourth respondents are cited in their official capacities as the provisional liquidators of Toit's Commercial (Pty) Ltd (in liquidation) (Toit's). The G fifth respondent, Nissan Diesel (SA) (Pty) Ltd (Nissan Diesel), is a supplier of motor vehicles, and in particular supplied the five trucks which form the subject of this appeal. The sixth respondent is CMH Commercial Westmead, a Nissan Diesel franchise dealership (CMH). The seventh respondent is Unitrans Supply Chain Solutions (Pty) Ltd H (Unitrans).

[3] The facts are largely common cause. Roshcon was granted a contract early in September 2008, which required it to purchase five trucks which were to be fitted with specialised cranes to modify the trucks to suit the I particular project. Roshcon ordered the five trucks from Toit's. Toit's in turn ordered the trucks from Nissan Diesel. This transaction was financed by Wesbank. Nissan Diesel supplied the vehicles under a 'supplier agreement' it had concluded with Wesbank in terms of which it sold and Wesbank purchased and paid for the vehicles that authorised Nissan dealers, such as Toit's, wanted for their customers. Toit's had a separate 'floor plan agreement' with Wesbank in terms of which Wesbank J provided finance to Toit's for the acquisition of motor vehicles.

Shongwe JA (Maya JA, Wallis JA, Petse JA and Saldulker JA concurring)

The vehicles purchased by Wesbank from Nissan Diesel would be A delivered directly to Toit's or to such person as Toit's may from time to time direct.

[4] Clause 6.1 of the 'supplier agreement' reads as follows:

'6.1

It is recorded that it is the express purpose of this agreement to B ensure that ownership in and to the vehicles shall pass to and remain vested in Wesbank until such time as payment has been received therefor from the relevant authorised dealer.'

Whereas clause 8.1 of the 'floor plan agreement' reads as follows:

'8.1

The sale of the goods is made on the suspensive condition that, C until payment of the selling price be made by the Dealer in full in terms of the relevant invoice with interest thereon as shall from time to time be stipulated by the Bank and all other amounts, if any, due in terms of or in connection with the agreement, the ownership in the goods shall not pass to the Dealer but shall be and remain with the Bank, and nothing herein contained nor any act or omission of the Bank shall be deemed to vest ownership in the goods in the Dealer until such payment shall have been made.' D

[5] The five trucks were delivered to Anchor on Toit's' instructions to have modifications undertaken to the subframes and load bodies to enable cranes to be fitted to the trucks. On 19 November 2008 two E trucks were delivered to Roshcon, having been modified. The other three trucks would be delivered on 21 November 2008. A handover sheet for the two trucks was signed by the representatives of Roshcon and Anchor. On 21 November 2008 Roshcon took delivery of the remaining three trucks, though it did not physically remove them, but only signed the handover sheet. There was apparently a technical misunderstanding F which required the trucks to be modified further, in that the outrigger supports for the cranes would not fit in the trucks as modified, so that they would require further modification. This resulted in a further delay in the payment process by Roshcon to Toit's. On 28 November 2008 the documentation constituting proof of delivery was handed over to G Roshcon and Roshcon effected payment for all five trucks to Toit's. However, Anchor was not prepared to release the three trucks because Toit's had not paid for the modifications. Then Roshcon paid for the work done by Anchor, but by then Toit's had gone into liquidation, and Anchor refused to release the trucks on the instructions of Wesbank, which claimed ownership of the trucks since Toit's had not yet paid for H them.

[6] The matter was now in the hands of the attorneys who exchanged letters and emails. On 22 December 2009 Anchor released the three trucks to Wesbank. Wesbank then sold the two 14-ton trucks to I Unitrans.

[7] Roshcon contended that the supplier agreement and the floor plan agreement were a disguise or simulation. It alleged that the floor 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 contended that the onus of J

Shongwe JA (Maya JA, Wallis JA, Petse JA and Saldulker JA concurring)

A proving a simulated agreement rested on Roshcon and that Roshcon had failed to discharge such onus. Wesbank regarded this transaction as a simple arm's length agreement between a manufacturer which wished to sell its products and a bank which wanted to make money by financing transactions of this nature. Toit's on the other hand, a reputable dealer B that was in the business of selling vehicles, including Nissan trucks, wanted to sell vehicles to its customers, but required finance. Wesbank further contended that this procedure is employed by most financial institutions in South Africa today in effecting asset-based finance with the proviso to reserve ownership as security to protect itself.

C [8] Roshcon pleaded in the alternative that Wesbank was estopped from claiming ownership of the trucks. Wesbank contended that Roshcon failed to discharge the onus since it never made any representation to Roshcon that Toit's was the owner of the trucks or was entitled to dispose of them. Roshcon contended that by conduct Wesbank represented to it that Toit's had had the authority to transfer ownership. In D claiming ownership Roshcon contended that it acquired ownership when it took delivery of the trucks and paid Toit's in full for the five trucks. It contended that ownership claimed by Wesbank is based on simulated agreements contained in the supplier agreement and the floor plan agreement, which are ineffectual. Roshcon further contended that the E reservation of ownership in the floor plan agreement concealed a loan agreement secured by a pledge without possession, but purporting to be a sale agreement.

[9] The court a quo found:

'In my view there were sound reasons for the parties to structure their F transactions in the way they did, and the agreements make commercial sense. A dealer needs vehicles to sell but doesn't have the money to pay for the vehicles. He will be able to pay for the vehicles when he sells them but needs finance in the interim. The financial institution (bank) agrees to provide the finance but requires security. Security in the form of a pledge is impractical because, for it to be effective, the bank has to G be in possession of the vehicles. But the dealer needs to be in possession in order to offer the vehicle for sale to its customers. The supplier agreement and the floor plan agreement provide the bank with the security which it requires and enables the dealer to offer the vehicle for sale to its customers. Should the dealer dispose of a vehicle without first paying the bank, the bank will be entitled to vindicate the vehicle from H whoever is in possession thereof.'

And I agree with this conclusion.

[10] For a court to declare a transaction a simulation it does not have to look at any particular legislation but has to look at the facts of each I particular case. Both Roshcon and Wesbank referred to Zandberg v Van Zyl 1910 AD 302, at 309, in respect of the test to be applied when considering an agreement which may or may not be said to be a simulation. Innes J in Zandberg said:

'The inquiry, therefore, is in each case one of fact, for the right solution of which no general rule can be laid down. Perezius (Ad. Cod., 4.22.2) J remarks that these simulations may be detected by considering the facts

Shongwe JA (Maya JA, Wallis JA, Petse JA and Saldulker JA concurring)

leading up to the contract, and by taking account of any unusual A provision embodied in it: of its real substance and purpose.'

In Commissioner for the South African Revenue Service v NWK Ltd 2011 (2) SA 67 (SCA) ([2011] 2 All SA 347; [2010] ZASCA 168) para 55 Lewis JA postulated the test as follows:

'In my view the test to determine simulation cannot simply be whether B there is an intention to give effect to a contract in accordance with its terms. Invariably where parties structure a transaction to achieve...