THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 49/13

In the matter between:

ROSHCON (PTY) LIMITED

Appellant

and

ANCHOR AUTO BODY BUILDERS CC
First Respondent

FIRSTRAND BANK LIMITED

Second Respondent

THEODOR WILHELM VAN DEN HEEVER NO
Third Respondent

MPOYANA LAZARUS LEDWABA

Fourth Respondent

NISSAN DIESEL (SOUTH AFRICA)
(PROPRIETARY) LIMITED

Fifth Respondent

CMH COMMERCIAL WESTMEAD

Sixth Respondent

UNITRANS SUPPLY CHAIN SOLUTIONS
(PROPRIETARY) LIMITED T/A
UNITRANS SUGAR AND AGRICULTURE

Seventh Respondent

Neutral citation: Roshcon (Pty) Ltd v Anchor Auto Body Builders CC (49/13)
[2014] ZASCA 40 (31 March 2014)

Coram:
Maya, Shongwe, Wallis, Petse, Saldulker JJA

Heard:
12 March 2014

Delivered: 31 March 2014

Summary: Ownership – movable property – supplier and floor plan
agreements reserving ownership to finance house as security over
the trucks before they were fully paid for by purchaser – whether a
simulated or disguised  transaction – test to be applied – each case
to be decided on its own merits.

ORDER
_______________________________________________________________

On appeal from: North Gauteng High Court, Pretoria (Louw J sitting as court
of first instance):
The appeal is dismissed with costs including costs of two counsel.

JUDGMENT
________________________________________________________________

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

[1] This appeal in a nutshell revolves around the question 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
Limited (trading as Wesbank), was in 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 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
throughout Sub-Saharan Africa. The first respondent, Anchor Auto Body
Builders CC (Anchor), is in the business of repair and construction of truck sub-
frames 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) Limited (in
liquidation) (Toit‟s). The fifth respondent, Nissan Diesel (SA) (Pty) Limited
(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) Limited
(Unitrans).

[3] The facts are largely common cause. Roshcon was granted a contract in
early September 2008, which required it to purchase five trucks which were to
be fitted with specialized cranes to modify the trucks to suit the 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 provided finance to Toit‟s for the acquisition of motor
vehicles. The vehicles purchased by Wesbank from Nissan Diesel would be
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 ensure that ownership in
and to the vehicles shall pass to and remain vested in Wesbank until such time as payment
has been received therefore 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, 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‟.

[5] The five trucks were delivered to Anchor on Toit‟s‟ instructions to have
modifications undertaken to the sub-frames and load bodies to enable  cranes to
be fitted to the trucks. On 19 November 2008 two 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 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 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 as Toit‟s had
not yet paid for 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 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 proving a simulated
agreement rested on Roshcon and that Roshcon has 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 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.

[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 as 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 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 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 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 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 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 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) remarks that these simulations may be
detected by considering the facts leading up to the contract, and by taking account of any
unusual provision embodied in it: of its real substance and purpose‟.
In CSARS v NWK 2011 (2) SA 67 (SCA) para 55 Lewis JA postulated the test as
follows:

„In my view the test to determine simulation cannot simply be whether there is an intention to
give effect to a contract in accordance with its terms. Invariably where parties structure a
transaction to achieve an objective other than the one ostensibly achieved they will intend to
give effect to the transaction on the terms agreed. The test should thus go further, and require
an examination of the commercial sense of the transaction ….‟

[11] There is a plethora of cases dealing with transactions capable of being,
regarded as simulated and also containing reservation of ownership clauses,
such as Commissioner for Inland Revenue v Conhage (Pty) Ltd (formerly Tycon
(Pty) Ltd) 1999 (4) SA 1149 (SCA); Bank Windhoek Bpk v Rajie 1994 (1) SA
115 (A); Nedcor Bank Ltd v ABSA Bank Ltd 1998 (2) SA 830 (W); Vasco Dry
Cleaners v Twycross 1979 (1) SA 603 (A). On the view that I take that it all
depends on the facts of each case – it will not be necessary to compare and
contrast all these cases. Some of them have facts which are distinguishable from
the present case.

[12] It is appropriate at this stage to deal with the Nedcor case, supra, in which
Cloete J relied on the minority judgment of Nienaber JA in Bank Windhoek Bpk
v Rajie at 145C-D to conclude that the floor plan agreement was a simulated
transaction that did not have the effect in law of transferring ownership in the
vehicle. I am of the view that the facts in Rajie are distinguishable from the
Nedcor case and consequently from the facts of the present case. In Rajie the
motor dealer Hoosain, wished to donate a vehicle (which he already owned) to
his wife. What then happened was the dealer sold the vehicle to the bank which
in turn sold it back to the dealer for the same price, plus finance charges, in
terms of an instalment sale agreement. In the present case Toit‟s did not own the
trucks when they were financed by Wesbank. Wesbank instead paid Nissan
Diesel for the trucks and implemented the transaction between itself and Toit‟s
in terms of the floor plan agreement which reserved ownership to itself as
security. The facts in the present case seem to be on all fours with the facts in

Nedcor. In as far as Cloete J considered the floor plan agreement in Nedcor –
and perhaps all floor plan agreements which reserve ownership for purposes of
security – as simulated I consider that decision, with due respect, to be clearly
wrong.

[13] Turning to the facts of this case – Toit‟s approached Nissan Diesel, as per
their agreement, ordering the five trucks – Nissan Diesel referred the order to
Wesbank to vet and approve the transaction. In terms of the supplier agreement
which existed between Nissan Diesel and Wesbank, Wesbank paid for the
vehicles and invoiced Toit‟s – it stipulated, inter alia, that ownership of the
trucks is reserved to it. This procedure was followed in compliance with the
provisions of the supplier agreement and the floor plan agreement. In terms of
clause 5.1 of the floor plan agreement:
„Goods purchased by the Bank from a Supplier, other than the Bank, shall be delivered by the
Supplier direct to the Dealer who hereby agrees to accept delivery thereof, as agent for and in
the name of the Bank, or shall be delivered to such person as the Dealer may from time to
time direct as the agent of the Dealer and the Dealer or such person shall accept delivery of
the goods and hold them, subject to the terms and provisions of this agreement.‟
Delivery to Anchor on behalf of Toit‟s in consultation with Roshcon was in my
view proper delivery which made Wesbank the owner of the trucks. Toit‟s
handed over all the necessary documents to Roshcon – but could not in law
hand over or transfer ownership to Roshcon. At some stage Roshcon became
aware that Toit‟s had not yet paid for the trucks and therefore took the risk in
paying Toit‟s the full amount. That in itself should have raised a red flag to
Roshcon regarding the question of ownership.

[14] I agree with the court a quo that parties may arrange their affairs to avoid
statutory prohibitions, provided their arrangement does not result in a simulated
transaction and is consequently in fraudem legis. See Dadoo and others v

Krugersdorp Municipal Council 1920 AD 530 at 548 where Innes CJ reasoned
that –
„… parties may genuinely arrange their transactions so as to remain outside its provisions.
Such a procedure is, in the nature of things, perfectly legitimate. There is nothing in the
authorities, as I understand them, to forbid it. Nor can it be rendered illegitimate by the mere
fact that parties intend to avoid the operation of the law, and the selected course is as
convenient in its result as another which would have brought them within it. An attempted
evasion, however, may proceed along other lines. The transaction contemplated may in truth
be within the provisions of the statue, but the parties may call it by a name or cloak it in a
guise, calculated to escape these provisions. Such a transaction would be in fraudem legis; the
court would strip off its form and disclose its real nature, and the law would operate.‟
Also in Commission of Customs and Excise v Randles, Brothers & Hudson Ltd
1941 AD 369 at 395-396 where Watermeyer JA said:
„A transaction devised for that purpose, if the parties honestly intend it to have effect
according to its tenor, is interpreted by the Courts according to its tenor, and then the only
question is whether, so interpreted, it falls within or without the prohibition or tax.
A disguised transaction in the sense in which the words are used above is something
different. In essence it is a dishonest transaction: dishonest, in as much as the parties to it do
not really intend it to have, inter partes, the legal effect which its terms convey to the outside
world. The purpose of the disguise is to deceive by concealing what is the real agreement or
transaction between the parties. The parties wish to hide the fact that their real agreement or
transaction falls within the prohibition or is subject to the tax, and so they dress it up in a
guise which conveys the impression that it is outside of the prohibition or not subject to the
tax. Such a transaction is said to be in fraudem legis, and is interpreted by the Courts in
accordance with what is found to be the real agreement or transaction between the parties ….‟

[15] The fundamental issue therefore is whether the parties actually intended
that the agreement that they had entered into should have effect in accordance
with its terms. Wesbank, Nissan Diesel and Toit‟s did not have a secret
understanding between them, nor has Roshcon shown anything of that nature. In
determining whether a transaction is simulated, a crucial and often decisive

question is whether the parties to the contract intended to give effect to it
according to its tenor (see Michau v Maize Board 2003 (6) SA 459 (SCA) para
4). It is said that one of the most common forms of tax avoidance is where the
parties to a contract attempt to disguise its true nature in order to qualify for a
tax benefit that would not be available if the true contract between them were
revealed. Our courts require no statutory powers to ignore pretence of this kind,
and the law will always give effect to the real transaction between the parties.
(See Zandberg (supra) at 309).

[16] On 3 March 2009 Toit‟s was placed under provisional liquidation. It
failed to pay the purchase price of the trucks to Wesbank. Therefore it never
became the owner of the trucks nor was it able to pass ownership thereof to
Roshcon. I am of the view that Roshcon failed to discharge the onus of proving
that the agreement is simulated or disguised. The ownership reserved to
Wesbank in the floor plan agreement is good in law in the circumstances of this
case. On this aspect the appeal must fail.

[17] I now turn to the question of estoppel. Roshcon pleaded in the alternative
that in the event that this court finds that Wesbank became or remained the
owner of the trucks after delivery to Toit‟s (or its agent), then Wesbank should
be estopped from asserting ownership in respect of the two trucks in possession
of Roshcon as well as the three trucks already in the possession of Wesbank.
The correct position is that the estoppel principle will apply only to the three
trucks, two of which were already in Roshcon‟s possession and the one in
Wesbank‟s possession. The other two trucks had already been sold by Wesbank
to Unitrans who in turn sold them to CMH Commercial. It is not in dispute that
the onus is on Roshcon to prove estoppel – B&B Hardware Distributors (Pty)
Ltd v Administrator Cape 1989 (1) SA 957 (A) at 964D.

[18] It is trite that the requirements of proving estoppel are, (a) representation
by the owner, by conduct or otherwise, that the person who disposed of his
property was the owner or was entitled to dispose of it, (b) the representation
must have been made negligently in the circumstances; (c) the representation
must have been relied upon by the person raising the estoppel, and (d) such
person‟s reliance upon the representation must be the cause of his detriment.
(See Oriental Products (Pty) Ltd v Pegma 178 Investments Trading CC and
Others 2011 (2) SA 508 (SCA) para 19 and Oakland Nominees Ltd v Gelria
Mining & Investment Co Ltd 1976 (1) SA 441 (A) at 452 D-G). In Electrolux
(Pty) Ltd v Khota 1961 (4) SA 244 (W) at 247B-E Trollip J warned that:
„To give rise to the representation of dominium or jus disponendi, the owner's conduct must
be not only the entrusting of possession to the possessor but also the entrusting of it with the
indicia of the dominium or jus disponendi. Such indicia may be the documents of title and/or
of authority to dispose of the articles …‟.

[19] In the present case Wesbank could not have made any representation to
Roshcon because the trucks were delivered to Anchor, through the request of
Roshcon. Anchor was to effect certain modifications to the trucks. At that stage
Roshcon was not even aware of the involvement of Wesbank. Toit‟s was well
aware of the floor plan agreement and the fact that ownership had been reserved
in favour of Wesbank – therefore the indicia of the dominium was absent. The
facts in Quenty’s Motors (Pty) Ltd v Standard Credit Corporation Ltd 1994 (3)
SA 188 (A) are distinguishable from this case. Quenty’s dealt with goods sold
on consignment and I endorse the findings of the court a quo in this regard. The
requirement of negligence is also absent as Toit‟s was contractually barred from
disposing of the trucks without first paying for them. Wesbank could not
reasonably have suspected that Toit‟s may be wound up or that it may breach
the floor plan agreement. Wesbank and Toit‟s had been doing business together
for 10 years and therefore an element of trust and professionalism existed

between them. Clearly Roshcon could not have relied upon any representation
by Wesbank. The undisputed evidence shows that Roshcon relied on the
representation made by Toit‟s. For these reasons the defence of estoppel must
fail. It is not necessary to deal with the last requirement.

[20] The appellant‟s case throughout was that it became the owner of the
trucks upon delivery and handing over to Toit‟s. The evidence clearly shows
that ownership was indeed reserved to Wesbank in both the supplier and floor
plan agreements. Wesbank could not have transferred ownership to Roshcon
expressly or by conduct. On a conspectus of all the evidence Roshcon failed to
prove that the floor plan agreement and the supplier agreement are a simulation
or disguise. Nor did Roshcon prove that Wesbank is estopped from claiming the
three trucks. The result is the appeal is dismissed.

[21] The following order is made:
The appeal is dismissed with costs including costs of two counsel.

_______________________
J B Z SHONGWE

JUDGE OF APPEAL

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

[22] I have read the judgment of Shongwe JA with which I agree. I add
something of my own merely because it appeared from the submissions made to

us that there may be a misconception regarding the proper approach to
simulated transactions. In Roshcon‟s heads of argument it was submitted that in
South African Revenue Services v NWK Limited,1 this court developed or
clarified the test laid down in previous judgments of this court and thereby took
our law in that regard in a new direction.

[23] The foundation of our law in regard to simulated transactions is the
classic statement by Innes J in Zandberg v Van Zyl2 that:
„Now, as a general rule, the parties to a contract express themselves in language calculated
without subterfuge or concealment to embody the agreement at which they have arrived.
They intend the contract to be exactly what it purports; and the shape which it assumes is
what they meant it should have. Not infrequently, however (either to secure some advantage
which otherwise the law would not give, or to escape some disability which otherwise the law
would impose), the parties to a transaction endeavour to conceal its real character. They call
it by a name, or give it a shape, intended not to express but to disguise its true nature. And
when a Court is asked to decide any rights under such an agreement, it can only do so by
giving effect to what the transaction really is: not what in form it purports to be. The maxim
then applies plus valet quod agitur quam quod simulate concipitur. But the words of the rule
indicate its limitations. The Court must be satisfied that there is a real intention, definitely
ascertainable, which differs from the simulated intention. For if the parties in fact mean that a
contract shall have effect in accordance with its tenor, the circumstances that the same object
might have been attained in another way will not necessarily make the arrangement other
than it purports to be. The inquiry, therefore, is in each case one of fact, for the right solution
of which no general rule can be laid down.‟

[24] In Zandberg v Van Zyl a woman who owed £50 to her son-in-law
purported, some 18 months after incurring the debt, to sell a wagon to him in
exchange for her discharge from the debt. However, she retained the use and
possession of the wagon at all times and it was agreed between her and her son-

1 South African Revenue Services v NWK Limited 2011 (2) SA 67 (SCA).
2 Zandberg v Van Zyl 1910 AD 302 at 309.

in-law that she could repurchase the wagon at any time for £50. When her son-
in-law wished to use the wagon for his own purposes he was permitted to do so,
but always accompanied by one of Mrs van Zyl‟s other sons, and on the basis
that the wagon would be returned to her immediately he had finished his
business with it. The court held, having regard to all the circumstances, that the
parties intended to dress up what was in reality a pledge as a sale. The case is
but one of a number in which our courts have held that the device of a sale has
been used by a creditor, frequently one who is in a close personal relationship
with the debtor, to seek to secure the benefits of a pledgee, without depriving
the debtor of the use of the goods that are the subject of the transaction.3

[25] There is a common feature to many of these cases in that prior to the
transaction in question the goods that were the subject matter of the purported
sale were in the possession of the debtor and remained in their possession after
the sale. In other words they were cases where it was contended that delivery
had occurred by way of constitutum possessorium. That is a form of delivery
that is always carefully scrutinised by courts because it affords scope for third
parties dealing with the possessor of the goods to be deceived into thinking that
the possessor is also the owner thereof.4 In each case the court was not satisfied
that the debtor had truly intended after the purported sale to hold the goods on
behalf of the purchaser. That was the foundation in all but one of these cases5
for the decision that the sale was a simulated transaction.

3 See, for example, Hofmeyr v Gous (1893) 10 SC 115; Goldinger’s Trustee v Whitelaw & Son 1917 AD 66;
McAdams v Fiander’s Trustee & Bell NO 1919 AD 207; Vasco Dry Cleaners v Twycross 1979 (1) SA 603 (A)
and Bank Windhoek Bpk v Rajie en ‘n ander 1994 (1) SA 115 (A). There are also cases in which money-lending
transactions have been disguised as sales in order to avoid the application of statutes governing money-lending
and rates of interest. Lawson & Kirk v South African Discount and Acceptance Corporation (Pty) Ltd 1938 CPD
273; R v Port Shepstone Investments (Pty) Ltd and Another 1950 (4) SA 629 (A) at 632; S v Friedman Motors
(Pty) Ltd and Another 1972 (1) SA 76 (T) at 79D-E.
4 Goldinger’s Trustee v Whitelaw & Son at 74 and Bank Windhoek Bpk v Rajie en ‘n ander at 145C-D.
5 The exception is McAdams v Fiander’s Trustee & Bell NO, supra, fn 3 where the court held there was no
intention to buy or sell..

[26] On the other hand the law permits people to arrange their contractual or
business affairs so as to obtain a benefit for themselves that a different
arrangement would not permit or so as to avoid a prohibition that the law
imposes. That principle was laid down in Dadoo Ltd and others v Krugersdorp
Municipal Council,6 where Innes CJ said:
„… parties may genuinely arrange their transactions so as to remain outside [a statute‟s]
provisions. Such a procedure is, in the nature of things, perfectly legitimate.‟

[27] These two principles are but two sides of the same coin, as is apparent
from the fact that in both Zandberg v Van Zyl and Dadoo Innes CJ relied on the
principle embodied in the maxim plus valet quod agitur quam quod simulate
concipitur (the real intention carries more weight than a fraudulent pretence).
Whether a particular transaction is a simulated transaction is therefore a
question of its genuineness. If it is genuine the court will give effect to it and, if
not, the court will give effect to the underlying transaction that it conceals. And
whether it is genuine will depend on a consideration of all the facts and
circumstances surrounding the transaction.

[28] These principles were considered and applied in Commissioner of
Customs and Excise v Randles, Brothers & Hudson Ltd.7 The difference of
views between the majority and the minority in that case turned on a difference
of opinion between the judges as to the genuineness of the disputed
transactions. The respondent had previously imported cloth under rebate of duty
and delivered it to cut, make and trim manufacturers to be made up into goods
that it thereafter sold. Under amended regulations this could no longer be done
without incurring a liability to pay customs duty, but it was legitimate for an

6 Dadoo Ltd and others v Krugersdorp Municipal Council 1920 AD 530 at 548.
7 Commissioner of Customs and Excise v Randles, Brothers & Hudson Ltd. 1941 AD 369.

importer to import cloth under rebate of duty and sell it directly from bond to a
manufacturer. The respondent accordingly made arrangements with five
manufacturers to import cloth and sell it to them at cost. The cloth would then
be made into garments, which the respondent undertook to purchase from the
manufacturers at cost plus the manufacturers‟ cut, make and trim charges. The
Commissioner for Customs alleged that the transactions were not genuine and
the respondent disputed this.

[29] The dispute came to this court after a lengthy trial at the end of which the
trial judge held that the respondent‟s officials had honestly arranged the
company‟s affairs in a way that fell within the amended regulations and so as to
avoid payment of the duty. They had done so after careful discussion with the
Commissioner‟s staff and after being advised that provided the transactions they
concluded with the manufacturers were genuine they would have the desired
effect of avoiding the imposition of duty. It was in the light of that advice that
the respondent entered into the impugned agreements with the manufacturers.
The majority held that ownership of the cloth passed from the respondent to the
manufacturers when the cloth was delivered to the latter as reflected in the
documents when they were released from bond. They were strongly impressed
by the point that there was no purpose in the parties entering into a simulated
transaction when only a genuine sale by the importer to the manufacturers
would have the effect of avoiding the duty. A simulated transaction would not
only attract liability for the duty, but also liability for penalties and criminal
sanctions. There was accordingly no incentive for them to engage in deceit or
simulation.

[30] It is against that background that the well-known passages in the
judgment of Watermeyer JA must be read. Having cited both Zandberg v Van
Zyl and Dadoo he said:8
„I wish to draw particular attention to the words “a real intention, definitely ascertainable,
which differs from the simulated intention”, because they indicate clearly what the learned
Judge meant by a “disguised” transaction. A transaction is not necessarily a disguised one
because it is devised for the purpose of evading the prohibition in the Act or avoiding liability
for the tax imposed by it. A transaction devised for that purpose, if the parties honestly intend
it to have effect according to its tenor, is interpreted by the Courts according to its tenor, and
then the only question is whether, so interpreted, it falls within or without the prohibition or
tax.
A disguised transaction in the sense in which the words are used above is something
different. In essence it is a dishonest transaction: dishonest, in as much as the parties to it do
not really intend it to have, inter partes, the legal effect which its terms convey to the outside
world. The purpose of the disguise is to deceive by concealing what is the real agreement or
transaction between the parties. The parties wish to hide the fact that their real agreement or
transaction falls within the prohibition or is subject to the tax, and so they dress it up in a
guise which conveys the impression that it is outside of the prohibition or not subject to the
tax. Such a transaction is said to be in fraudem legis, and is interpreted by the Courts in
accordance with what is found to be the real agreement or transaction between the parties.
Of course, before the Court can find that a transaction is in fraudem legis in the above sense,
it must be satisfied that there is some unexpressed agreement or tacit understanding between
the parties. If this were not so, it could not find that the ostensible, agreement is a pretence.
The blurring of this distinction between an honest transaction devised to avoid the provisions
of a statute and a transaction falling within the prohibitory or taxing provisions of a statute
but disguised to make it appear as if it does not, gives rise to much of the confusion which
sometimes appears to accompany attempts to apply the maxim quoted above.‟

[31] The minority judgment of De Wet CJ does not in any way qualify these
principles. Instead it focussed on a number of features of the evidence and the
underlying transactions that were unusual. For example, it was entirely up to the

8 At 395-6.

respondent to determine how much cloth was imported and what garments
should be made. The manufacturers were not at any immediate financial risk
because they did not have to pay for the cloth until they had delivered and were
entitled to be paid for the garments. Furthermore the evidence on behalf of the
manufacturers was equivocal in regard to their intention to become owners of
the cloth. De Wet CJ‟s conclusion was that they had no genuine intention to
purchase the cloth but simply fell in with the arrangements made by the
respondent in order to obtain the cut, make and trim work, which was the staple
of their businesses.

[32] Nothing said subsequently in any of the judgments of this court dealing
with simulated transactions9 alters those original principles in any way or
purports to do so. However, in a number of them dealing with income tax, the
courts have been called upon to apply these principles in a different context.
The earlier cases dealt with cases of agreements being dressed up in a particular
form where the underlying intention of the parties was inconsistent with that
form. In the income tax cases a different problem arises.

[33]  In the income tax cases, the parties seek to take advantage of the
complexities of income tax legislation in order to obtain a reduction in their
overall liability for income tax. There are various mechanisms for doing this,
but they all involve taking straightforward commercial transactions and adding
complex additional elements designed solely for the purpose of claiming
increased or additional deductions from taxable income, or allowances provided
for in the legislation. The feature of those that have been treated as simulated

9 Du Plessis v Joubert 1968 (1) SA 585 (A); Vasco Dry Cleaners v Twycross 1979 (1) SA 603 (A); Skjelbreds
Rederi A/S and Others v Hartless (Pty) Ltd 1982 (2) SA 710 (A); Hippo Quarries (Tvl) (Pty) Ltd v Eardley 1992
(1) SA 867 (A); Bank Windhoek Bpk v Rajie en ‘n ander 1994 (1) SA 115 (A); Erf 3183/1 Ladysmith (Pty) Ltd
and Another v Commissioner for Inland Revenue 1996 (3) SA 942 (A); Relier (Pty) Ltd v Commissioner for
Inland Revenue (1997) 60 SATC 1; Commissioner for Inland Revenue v Conhage (Pty) Ltd (formerly Tycon
(Pty) Ltd) 1999 (4) SA 1149 (SCA); MacKay v Fey NO and Another 2006 (3) SA 182 (SCA).

transactions by the courts is that the additional elements add nothing of value to
the underlying transaction and are very often self-cancelling. Thus in Erf 1383/1
Hefer JA said that „there is a distinct air of unreality about the agreements‟.10 In
Relier Harms JA referred to the „unusual and unreal aspects‟ of the
transactions.11 The analysis by Lewis JA of the transactions in NWK12 clearly
demonstrated that a range of unrealistic and self-cancelling features had been
added to a straightforward loan. They served no commercial purpose, were
based on no realistic valuation of the different elements of the transaction and
were included solely to disguise the nature of the loan and inflate the deductions
that NWK could make against its taxable income. In those circumstances the
courts stripped away the unrealistic elements in order to disclose the true
underlying transaction.13

[34] The problem dealt with in NWK was the contention that, irrespective of
the unreality of most of the elements of the arrangement under scrutiny,
provided the parties intended to take all the steps provided for in the contractual
documents, in other words to jump through the contractual hoops as a matter of
form, the court could not find that the transaction was simulated. That is what
Lewis JA was dealing with, in para 55 of her judgment, when she said:
„In my view the test to determine simulation cannot simply be whether there is an intention to
give effect to a contract in accordance with its terms. Invariably where parties structure a
transaction to achieve an objective other than the one ostensibly achieved they will intend to
give effect to the transaction on the terms agreed. The test should thus go further, and require
an examination of the commercial sense of the transaction: of its real substance and purpose.
If the purpose of the transaction is only to achieve an object that allows the evasion of tax, or
of a peremptory law, then it will be regarded as simulated. And the mere fact that parties do

10 At 954D.
11 At 123.
12 Paras 56 to 90.
13 Kilburn v Estate Kilburn 1931 AD 501 at 507.

perform in terms of the contract does not show that it is not simulated: the charade of
performance is generally meant to give credence to their simulation.‟

[35] It appears that in some circles this, and particularly the statement that „If
the purpose of the transaction is only to achieve an object that allows the
evasion of tax, or of a peremptory law, then it will be regarded as simulated‟,
has been understood to condemn as simulated transactions any and all
contractual arrangements that enable the parties to avoid tax or the operation of
some law seen as adverse to their interests.14 But that fails to read this sentence
in the context of both the particular paragraph in the judgment and the entire
discussion of simulated transactions that precedes it. If it meant that whole
categories of transactions were to be condemned without more, merely because
they were motivated by a desire to avoid tax or the operation of some law, that
would be contrary to what Innes J said in Zandberg v Van Zyl in the concluding
sentence of the passage quoted above, namely that:
„The inquiry, therefore, is in each case one of fact, for the right solution of which no general
rule can be laid down.‟
That was manifestly not Lewis JA‟s intention.

[36] The problem with general statements of this type is apparent from those
by Cloete J in Nedcor Bank Ltd v Absa Bank Ltd,15 about floor plan agreements
being simulated transactions. My colleague rightly holds those statements to be
incorrect, based as they are, not on a consideration of a particular agreement in
its own commercial context, but on generalisations about the nature of such
agreements. For the avoidance of doubt, for so long as our law does not
recognise a pledge of movables without delivery of the item pledged to the

14 Trevor Emslie SC „Simulated transactions – A new approach?‟ (2011) 60 The Taxpayer 2 at 5-6; Eddie
Broomberg SC „NWK and Finders Hall‟ (2011) 60 The Taxpayer i187 at 197-8; C J Pretorius „Simulated
agreements and commercial purpose – Commissioner for the South African Revenue Service v NWK Ltd‟
(2012) 75 THRHR 688 at 696; Andrew Hutchinson and Dale Hutchinson „Simulated transactions and the fraus
legis doctrine‟ (2014) 131 SALJ 69.
15 Nedcor Bank Ltd v Absa Bank Ltd 1998 (2) SA 830 (W) at 836H-838G.

pledgee and its continued possession thereafter by the pledgee, commercial
arrangements directed at finance houses securing their interests by taking
ownership of the property that is the subject of a financing agreement, serve an
entirely legitimate commercial purpose. Lewis JA recognised that in her
acceptance that the transactions described in S v Friedman Motors (Pty) Ltd16
and Conhage,17 served legitimate commercial purposes.18

[37] For those reasons the notion that NWK transforms our law in relation to
simulated transactions, or requires more of a court faced with a contention that a
transaction is simulated than a careful analysis of all matters surrounding the
transaction, including its commercial purpose, if any, is incorrect. The position
remains that the court examines the transaction as a whole, including all
surrounding circumstances, any unusual features of the transaction and the
manner in which the parties intend to implement it, before determining in any
particular case whether a transaction is simulated.19

[38] In the present case, the reason for Wesbank and Nissan Diesel concluding
the supplier agreement was to provide Wesbank with the security of being the
owner of the vehicles, before providing finance to motor dealers. The agreement
said so explicitly and had a clear commercial purpose namely the provision of
appropriate security for a financial transaction, in the form of ownership of the
merx. Obtaining security in that way is no different from any commercial seller
stipulating that ownership of the goods sold will not pass until the full purchase
price is paid (pactum reservati domini). That is the foundation for hire purchase
contracts and financial leases. Similarly the floor plan agreement concluded
with Toit‟s was designed to ensure that, until Toit‟s discharged its obligations to

16 Footnote 1 supra at 80G-H.
17 Footnote 9 supra.
18 NWK paras 53 and 54.
19 This accords with the conclusion of Davis J in Bosch and Another v Commissioner, South African Revenue
Services 2013 (5) SA 130 (WCC) paras 78 to 92.

Wesbank in respect of a particular vehicle, Wesbank‟s security remained intact.
The contention that these are simulated transactions ignores the commercial
legitimacy of a finance house seeking security for the financing transactions that
they conclude.

[39]  For these further reasons I concur in the judgment of Shongwe JA.

M J D WALLIS JA
JUDGE OF APPEAL

Appearances
For the Appellant:
P Beltramo SC (with him T D Prinsloo)

Instructed by:

Bowman Gilfillan, Pretoria
Lovius Block, Bloemfontein

For the Respondent:
A Gautschi SC (with him C van der Spuy)

Instructed by:

Lanham-Love Attorneys, Pretoria

McIntyre & van der Post, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
31 March 2014
Status:
Immediate

Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal.
* * *
ROSHCON (PTY) LTD v ANCHOR AUTO BODY BUILDERS CC & OTHERS
This court dismissed an appeal by Roshcon (Pty) Ltd against Wesbank (Firstrand Bank)
wherein Roshcon claimed ownership of five Nissan trucks.

The salient facts are Nissan Diesel a manufacturer and supplier of trucks had a supplier
agreement with Wesbank and Wesbank in turn had a floor plan agreement with Toit’s
commercial (Pty) Ltd, (an authorized dealer in vehicles). In both agreements ownership in
and to the vehicles was reserved for Wesbank until such time that the dealer had paid for the
vehicles.

Toit’s had ordered the five trucks from Nissan Diesel for purposes of selling them to
Roshcon. Wesbank financed the transaction. The trucks were delivered to Toit’s’ agent,
Anchor, which was to modify the trucks on behalf of Roshcon. Roshcon took delivery of two
of the trucks and later took delivery of the three trucks – though did not remove them from

Toit’s agent.

Roshcon paid Toit’s in full for the trucks. In the meanwhile Toit’s was placed under
liquidation before it could pay Wesbank for the trucks. When Roshcon claimed the vehicles
from Toit’s agent, it refused to part with possession thereof. The reason being that Wesbank
instructed them not to release the trucks as it claimed ownership.

Roshcon claimed the trucks as the true owner – because it contended that the supplier and
floor plan agreements were a disguise or a simulation. It contended that the transaction
between Wesbank and Toit’s was a loan against the security of the trucks without Wesbank
having to take possession thereof. Roshcon contended that Wesbank was securing an
advantage which otherwise the law would not allow. Alternatively Roshcon contended that
Wesbank was estopped from claiming ownership.

This court concluded that there were good and sound reasons for Nissan Diesel, Wesbank and
Toit’s to structure their transactions in the way they did. That it looked at the facts of the case
and not to a particular legislation to find the intention of the parties. It further said that a
transaction devised for commercial purposes, if the parties honestly intend it to have effect
according to its tenor, is perfectly legitimate and cannot be said to be a simulation. It also
dismissed the alternative claim of estoppel because Roshcon failed to satisfy the court that
Wesbank ever made any representations to Roshcon.