THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
CASE NO: 155/03
Reportable
In the matter between
UKUBONA 2000 ELECTRICAL CC                                         First Appellant
ABB SOUTH AFRICA (PTY) LIMITED                                Second Appellant
and
CITY POWER JOHANNESBURG
(PTY) LIMITED                                                                 Respondent
CORAM:   HOWIE P, CLOETE, LEWIS, HEHER JJA, PATEL AJA
HEARD:  17 MAY 2004
DELIVERED:
Summary :  Section 84 of the Insolvency Act  24 of 1936 does not create a
statutory  hypothec for a creditor who does  not own  the merx  at time of the
insolvency of the debtor. Definition of  ‘instalment sale transaction’ in s 1 of
the Credit Agreements Act 75 of 1980 interpreted  to include a sale in terms of
which the purchase price is payable in one lump sum in the future.
JUDGMENT
PATEL AJA

[1] Drivecor (Pty) Ltd (Drivecor), prior to its final liquidation on 17
September 2002, carried on business as a manufacturer and
supplier of electrical and electronic equipment.  The first appellant,
Ukubona 2000 Electrical CC, and the second appellant, ABB
South Africa (Pty) Ltd, applied to the Johannesburg High Court
(Trengove AJ) for an order declaring, inter alia, that they held
security in respect of certain electronic components in the
possession of Drivecor by virtue of s 84 read with s 83 of the
Insolvency Act 24 of 1936 (‘the Act’). The respondent, on the other
hand, claimed ownership of these components.
[2] The appellants’ claims were dismissed with costs. This is an
appeal against that portion of the judgment of the court a quo
dismissing the appellants’ claims to be declared secured creditors
of Drivecor, as contemplated by s 84 of the Act.
[3] In the court below, the appellants also sought an order
declaring an action commenced by the respondent in the same
court, in which it had claimed ownership of the various goods, to
be frivolous and vexatious.  That part of the relief claimed was also
dismissed. The action by the respondent relates to the very goods

over which the appellants are claiming a statutory hypothec.  That
action has not yet proceeded to trial.
[4] The factual background, very briefly, is the following. In 2001
Drivecor entered into a contract with the respondent in terms of
which it undertook to manufacture, supply, install and commission
control panels at two electrical substations run by the respondent
on behalf of the municipality of Johannesburg
[5] Drivecor purchased from the appellants some of the
electrical and electronic equipment it required for the manufacture
of the control panels.  The appellants had, in turn, acquired these
components from various suppliers.  It is over these components
that the parties lay competing claims.  Besides purchasing
components from the first appellant, Drivecor also subcontracted
the first appellant to perform a part of the work required for the
manufacture and the commissioning of the panels.  To this end, it
delivered the control panels to the first appellant’s premises.  Once
the first appellant had completed its part of the work, it would have
returned the control panels to Drivecor for completion and
installation at the power station.

[6] At the time of Drivecor’s liquidation, the control panels were
still being assembled and some of these panels were located at
the premises of the first appellant.  The components supplied by
the first appellant had been built into the incomplete panels.  At all
material times Drivecor had not fully paid the appellants for the
components although the outstanding amount is not clear from the
record.
[7] The respondent had made substantial payments to Drivecor
and claimed to have acquired ownership over the panels.  It is the
respondent’s case that it had entered into an agreement with
Drivecor whereby ownership was transferred to it by attornment.
[8] The liquidators of Drivecor, whilst supporting the claims of
the appellants, elected to abide the decision of the court both in
the application and in this appeal.
[9] The crisp question to be answered now is the contention by
the appellants that they have statutory hypothecs over the
components in terms of s 84 of the Act, in that their contracts with
Drivecor for the supply of the components were ‘instalment sale

transactions’ as contemplated by s 1 of the Credit Agreements Act
75 of 1980.
[10] The documents relating to these transactions between the
appellants and Drivecor show that the purchase price was payable
in one lump sum on a future date.  It is common cause that
Drivecor had not fully paid the appellants for the parts which were
used in the panels.
[11] In the court below it became common cause that the
appellants are not the owners of the electronic parts over which
they seek the hypothec since the suppliers from whom they had
purchased them had reserved ownership and these suppliers had
not been paid.
[12] Can non-owners, in the position of the appellants who have
sold goods where the purchase price is payable in one lump sum
on a future date, claim to have a statutory hypothec in terms of s
84 of the Act?  If the answer is in the negative, the appellants must
fail.

Section 84 (1) of the Act provides as follows:
‘ If any property was delivered to a person (hereinafter referred to as the
debtor) under a transaction which is an instalment sale transaction
contemplated in paragraphs (a) and (b) of the definition of “instalment sale
transaction” in section 1 of  the Credit Agreements Act, 1980, such a
transaction  shall be regarded on the sequestration of the debtor’s estate as
creating  in favour of the other party to the transaction (hereinafter  referred to
as the creditor) a hypothec over that property whereby the amount still due to
him under the transaction is secured. The trustee of the debtor’s insolvent
estate shall, if required by the creditor, deliver the property to him, and
thereupon the creditor shall be deemed to be holding that property as security
for his claim and the provisions of section 83 shall apply.’
Paragraphs (a) and (b) of the definition of “instalment sale
transaction’ in s 1 of the Credit Agreements Act 75 of 1980, read
as follows;
‘ “instalment sale transaction” means a transaction in terms of  which-
(a)  goods are sold by the seller to the purchaser against payment by the
purchaser to the seller of a stated or determinable sum of money at a
stated or determinable future date or in whole or in part in instalments
over a period in the future; and

(b) the purchaser does not become owner of those goods merely by virtue
of the delivery to or the use, possession or enjoyment by him thereof.’
[13] In Sandoz Products (Pty) Ltd v Van Zyl NO 1996 (3) SA 726
(C), Blignault AJ, in my view correctly, held that  that a transaction
for the sale of goods in terms of which the purchase price is
payable by way of one lump sum at a future date would be
covered by the terms of para (a) of the definition of ‘instalment sale
transaction’ in s 1 of the Credit Agreements Act. The effect of this
judgment is that the definition encompasses a sale where the
purchase price is payable in a lump sum at a future date as well as
one where the purchase price is payable, in whole or in part, in
instalments.  The contrary view by Professor J M Otto1  cannot be
supported as it results in an interpretation of the Afrikaans version
of the definition which is irreconcilable with the English version.  It
is unnecessary to repeat the  interpretive analysis in Sandoz of the
meaning of para (a) of the definition of ‘instalment sale
transaction’. In my view it is persuasive.  It is only necessary to
add that if the interpretation were to exclude the instance where
the purchase price is payable in one lump sum, then it would have
this anomalous consequence.   A seller in such a case would be

1 Lawsa vol 5 Part 1(First Reissue) p8 para 7.

accorded no rights in terms of s 84 of the Act.  By contrast s 36 of
the Act allows the seller to reclaim property sold for cash where
ownership has passed, and s84 (1) of the Act grants the seller a
hypothec where the purchase price is payable in instalments.  On
this leg of the enquiry, I find that the transactions of both the
appellants fall within the ambit of para (a) of the definition of
‘instalment sale transaction’.
[14] Section 84(1) creates a statutory hypothec in favour of the
seller of the goods sold whereby the balance still due under the
transaction is secured. Where the creditor/seller is the owner of the
goods, ownership over the goods of necessity passes to the
trustee of the buyer’s insolvent estate.2 The reason is that no-one
may have a hypothec over his own property. If authority is required
for this obvious proposition it is to be found in D13.7.29 and
50.17.45; Voet ad Pandectas 20.6.1 and SA Loan, Mortgage, and
Mercantile Agency v Cape of Good Hope Bank and Littlejohn 6 SC
163 at 187) . It is  contrary to principle for the owner of the merx to
be given a restricted real right in the form of a statutory hypothec

2 Williams Hunt (Vereniging) Ltd v Slomowitz  1960 (1) SA 499 (T) at 501 E-G; Van Zyl NO v
Bolton 1994 (4) SA 648 (C) at 652 E-G;  E Spiro The Hire-Purchase Agreement in South
African Law and its Problems (1940) 57 SALJ 263 at 273;  Mars  The Law of Insolvency in
South Africa  8 ed (1988) at 152 (para 8.15);  LAWSA vol 11 (First Issue) 163 para 177;
Meskin, Insolvency Law  5-72 para 5.2.1.8.2;  Smith, The Law of Insolvency 3rd ed (1988) at
166-8;  Wille’s Mortgage and Pledge  3 ed (1987) 105.

over property he owns.  The effect of s 84 (1) therefore is that the
seller’s ownership in the goods sold is replaced with a hypothec
over the merx.  His right is thus diminished.
[15 ] The essential question, however, is whether the legislature
when drafting s 84(1) contemplated a non-owner of the merx
enjoying a statutory hypothec over the property.
[16] As to whether a non-owner of the merx can qualify as a
creditor in terms of s 84(1), the section  was first introduced to
regulate what were, in effect, common law hire-purchase
agreements.  The relevant portion of s 84(1) in its original
formulation read:
‘ If any property was delivered to a person (hereinafter referred to as the
debtor) under an agreement which provided for the passing of the ownership
of that property when certain payments prescribed in the agreement have
been made, such agreement shall be regarded on the sequestration of the
debtor’s estate as creating in favour of the other party to the agreement
(hereinafter referred to as the creditor) a hypothec over that property whereby
the amount still due to him under the agreement is secured. ‘

That formulation clearly envisaged only a creditor/owner enjoying a
hypothec since it is only a creditor who is the owner who would be
in a position to pass ownership.
[17] Section 84 was amended by the Hire Purchase Act 36 of
1942 by the substitution in subsection (1) for the words ‘provided
for the passing of the ownership of that property when certain
payments prescribed in the agreements have been made’ of the
words ‘ is a hire-purchase agreement in terms of section one of the
Hire-Purchase Act, 1942’.  Under the Insolvency Amendment Act
101 0f 1983 the subsection was made to refer to ‘instalment sale
transactions’ as defined in s 1 of the Credit Agreements Act.  The
creditor/ seller was not further defined.  Both forms of hire-
purchase agreement defined in the Hire-Purchase Act, as well as
an instalment sale agreement as defined in the Credit Agreements
Act, contemplated that when ownership passes to the buyer it
passes from the seller. If the original reason of the law is to be the
life of the law then ‘creditor’ can have no  meaning in s 84(1), other
than the owner of the merx.
[18] I accordingly conclude that the legislative intent in s 84(1)
was to allow only a creditor/seller who is the owner of the merx to

be secured for the amount due to him which is achieved by
replacing his ownership with a hypothec.
[19] Because the appellants were not owners of the components
when Drivecor’s insolvency intervened, their appeal must fail.  It
may be mentioned in passing that the first appellant would in any
event have failed on the ground that it did not reserve ownership in
the goods as is required by part (b) of the definition of ‘instalment
sale transaction’.
[20] It is not necessary to deal with the various other matters
raised on the papers or in argument since those matters are not
decisive of the appeal and could properly be ventilated, in so far as
necessary, at the trial where the respondent seeks to vindicate the
components.
[21] The respondent asked for costs of two counsel. I am
satisfied that the appeal has raised an issue of law sufficiently
complex as to warrant the employment of two counsel.  Because
two counsel were not employed at all stages of the appeal
process, this must be reflected in the order.

[22] Accordingly the appeal is dismissed with costs, such costs to
include costs of two counsel where two counsel were employed.
________________
C N PATEL AJA
Concur:
Howie P
Cloete JA
Lewis JA
Heher JA