Nyathi Company Limited v St. Francis Marine CC (AC05/2006) [2006] ZAWCHC 68 (2 June 2006)

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[2006] ZAWCHC 68
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Nyathi Company Limited v St. Francis Marine CC (AC05/2006) [2006] ZAWCHC 68 (2 June 2006)

IN THE HIGH COURT OF
SOUTH AFRICA
(CAPE OF GOOD HOPE
PROVINCIAL DIVISION)
CASE NO: AC05/2006
T
HE
NYATI COMPANY LIMITED
Applicant
a
nd
ST
FRANCIS MARINE CC
Respondent
IN RE: THE SPIRIT OF
INYATI
JUDGMENT:
2/06/006
VAN
REENEN, J:
1] This
is an application for an order setting aside the arrest
of a catamaran “The Spirit of Inyati” (the vessel) by virtue of
a warrant of arrest issued by the Registrar in the exercise
of this
court’s admiralty jurisdiction, in an action
in
rem
instituted by the respondent against the vessel under Case No
AC5/2006 on 18 January 2006.
2] The
applicant is a company incorporated in the British Virgin Islands
with its registered office at Beoufort House, Road Town,
Tortola,
British Virgin Islands.
3] The
respondent is a close corporation incorporated in accordance with the
provisions of the
Close Corporations Act of 1984
carrying on business
as a builder of sailing vessels at St Francis Bay, South Africa.
4] On
6 December 2002 the applicant and the respondent entered into a
written agreement (the Agreement) in terms whereof the respondent

undertook to build and sell to the applicant a St Francis sailing
catamaran in accordance with specifications set out in an annexure

thereto, marked “A”, at a purchase price of US Dollars 591 880
(all further references herein to Dollars are to the currency
of the
United States of America) exclusive of taxes, duties and delivery
charges F.O.B., St Francis Bay. The Agreement provided
that the
purchase price had to be paid as follows –
4.1 197
293
Dollars upon signature;
4.2 R1797343
on the bonding of the hull and deck; and
4.3 R1797
343 on delivery after completion of sea trials.
It
in addition provided that payment in respect of any extras were to be
made within 21 days of the presentation of invoices.
5] It
is common cause that the vessel was launched on 2 September 2005 at
St Francis Bay and sailed to Cape Town by a skipper and
crew provided
by the respondent for the purpose of its being exhibited and
demonstrated at a boat show that was held in Cape Town
from 30
September to 2 October 2005 and that the applicant’s
alter
ego
Mr Hendrik Jacobus Greeff (Mr Greeff) utilised the vessel to undergo
a course in sailing, after the crew had returned to St Francis
Bay.
6] The
vessel remained in Cape Town until its arrest by the sheriff in terms
of section 3(5) of the Admiralty Jurisdiction Regulation
Act, No 105
of 1983 (the Act) on 18 January 2006.
7] The
respondent avers in the Writ of Summons that it is the owner of the
vessel and that it has been dispossessed thereof by the
applicant
alternatively, Mr Greeff with full knowledge of its ownership, and
that either the one or the other of them has remained
in possession
thereof. Those averments - which were reiterated in the respondent’s
Particulars of Claim - were denied by the
applicant in its plea and
the applicant, in turn, pleaded that it is the owner of the vessel,
pursuant to the delivery thereof
during September 2005 in accordance
with the terms of the Agreement.
8] The
respondent oppose
s
the relief sought in this application - which had been launched on
30 January 2006 - and has duly delivered and filed answering

papers. The applicant, in turn, has delivered papers in reply.
9] The
pivotal issue for determination herein is whether ownership in the
vessel has remained vested in the respondent as the seller
thereof,
as contended by Mr Wragge SC (who with Mr Howie) appeared for the
respondent, or whether ownership therein has passed
to the applicant,
as contended by Mr Coetzee SC who appeared for the applicant.
10] Mr
Wragge accepted, in my view correctly, that the respondent bears the
onus of showing that the arrest for the vessel was justified.
In
order to discharge such onus the respondent has to show the existence
of a
prima
facie
case in respect of the merits of the cause of action as formulated in
the action
in
rem
by putting forward evidence which, if accepted, would establish that
it is the owner of the vessel (See:
Cargo
Laden and Lately Laden on Board the MV Thalassini Agvi v MV
Dimitris
1989(3) SA 820 A at 834 C;
Weissglass
NO v Savonnerie Establishment
1992(3) SA 928 (AD) at 936 F – H). Steyn J said the following in
Bradbury
Greatorex Co (Colonial) Limited v Standard Trading Co (Pty) Ltd
1953(3) SA 529 (W) at 533 C – E as regards proof of the existence
of a
prima
facie
cause of action: -
“
The authorities
and considerations to which I have referred seems to justify the
conclusion that the requirement of a
prima
facie
cause of action, in relation to an attachment to found jurisdiction,
is satisfied where there is evidence which, if accepted, will
show a
cause of action. The mere fact that such evidence is contradicted
would not disentitle the applicant to the remedy. Even
where the
probabilities are against him, the requirements would still be
satisfied. It is only where it is quite clear that he
has no action,
or cannot succeed, that an attachment should be refused or discharged
on the ground here in question.
That
approach has received the imprimatur of the Supreme Court of Appeal
in
MT
Tigr: Owners of the MT Tigr v Transnet Ltd
1998(3) SA 861 at 868 C – I.
11]
It
has been held that it is not proper to enter into the merits of a
case and to attempt to adjudicate the credibility of deponents
to
affidavits and assess the probabilities or prospects of success in
determining whether a
prima
facie
cause of action has been established (See:
Intaltrafo
Spa v Electricity Supply Commission
1978(2) SA 705 (W) at 709 B – C;
Butler
v Banimar Shipping Co SA
1978(4) SA 753 (SE) at 709 B – C;
Weissglass
NO v Savonnerie Establishment
(supra) at 938 G – H).
Accordingly,
a vessel will be released from arrest only if it is quite clear that
the party who is the respondent in an application
for its release
does not have a cause of action in the action that prompted the
arrest therein or cannot succeed.
12] The
subject-matter of the Agreement was a St Francis sailing catamaran
which still had to be constructed and equipped in accordance
with
agreed specifications. Despite the fact that the respondent was in a
number of the clauses therein referred to as “the
builder” it is
common cause that, in addition to being styled “Agreement of
Sale”, the Agreement in fact embodied the sale
of a completed
vessel in a sail-away condition.
13] The
conclusion of an agreement of sale in respect of a movable does not
per
se
pass ownership therein from the seller to a purchaser. Ownership
only passes if delivery is accompanied by an intention on the
part of
the seller to transfer and an intention on the part of the purchaser
to acquire ownership therein (See:
Weeks
and Another v Amalgamated Agencies Ltd
1920 AD 218
at 230). In the absence of an express or implied
agreement to the contrary, ownership in the subject-matter of a sale
passes only
if, in addition to the delivery thereof to the purchaser,
the price has been paid in full, in the event of a cash sale, or
credit
has been extended. A cash sale is one in which payment of the
purchase price is required to be made against delivery of the
purchased
goods, whereas a credit sale is one in which the time for
payment has been postponed for a non-negligible period after
delivery.
Whether a sale is of the one kind or the other is a matter
of express or tacit agreement between the parties judged from the
terms
of their agreement, the surrounding circumstances and their
conduct. In the absence of express agreement as regards the nature

of a transaction a cash sale is presumed. Such presumption is
rebuttable but it is not permissible to infer that credit has been

extended merely because delivery has taken place but the purchase
price has not been paid. A cash sale may be transformed into
a
credit sale by a subsequent express or a tacit agreement (See:
Lendalease
Finance (Pty) Ltd v Corporacion de Mercadeo Agricola and Others
1976(4) SA 646 (A) at 494 in fin – 495 E, referred to with
approval in
De
Wet v Santam Bpk
1996(2) SA 629 (AD) at 638 E – J).
14] Clause
1.2 of the Contract provides that the last of the three payments
provided for therein had to be made “… on delivery
after
completion of sea-trials” and clause 1.3 that “… the purchaser
shall not be entitled to take delivery of the product
until
all
amounts due
by the purchaser to the builder
in
respect of the yacht
have been paid” (underlining provided). By contrast, provision is
made for extras to be paid within 21 days of presentation
of invoice.
I, on the basis of those provisions, find myself in agreement with
the submission of counsel for the respondent that
the parties to the
Agreement had agreed expressly that the sale of the vessel would be
for cash and that, in the absence of a subsequent
agreement
transforming it into a credit sale, ownership therein would remain
vested in the respondent until the purchase price
has been paid in
full. As clause 1.1 specifically states that the purchase price
excludes all taxes and the ordinary meaning of
the concept “exclude”
is “to leave out, omit purposely, except” (See:
The
Oxford English Dictionary,
Vol
III, s.v. exclude) any dispute relating to liability for the payment
of value-added tax in terms of the provisions of the Value-Added
Tax
Act, No 89 of 1991, in my view, does not have any bearing on the
question of whether or not the purchase price has been paid
in full.
1
5] It
is not in dispute that the sail-away price of the vessel was the Rand
equivalent of 535 000 Dollars. As the purchase price
as reflected in
the Agreement is 591 880 Dollars it follows logically that it
included extras to the value of 56880 Dollars. In
the light thereof
the term “extra’s to be paid within 21 days of presentation of
invoice” could only have been intended
to refer to extras, if any,
other than those included in the purchase price. As is apparent from
the statement which emanated
from the respondent dated 26 September
2005 (Annexure G23), it also does not appear to be in issue that the
extras amounted to
only 30 650 Dollars so that the final contract
price was only 561 230 Dollars. Although the Agreement reflected the
purchase price
in Dollars it provides that only the first instalment
of 197 293 Dollars had to be paid in that currency and that two equal
instalments
of R1797 343 had to be paid in the local currency. As
the purchase price of the vessel as well as the amounts of the two
instalments
payable in local currency were clearly determined with
reference to an exchange rate of R9.11 to the Dollar, the last of the
instalments
needs to be reduced by an amount of R238 955,30 i.e. 56
880 Dollars minus 30 650 Dollars = 26 230 dollars multiplied by
R9.11.
1
6] Despite
the fact that clause 8 of the Contract, dealing with “Warranties /
Representations”, provides as follows:
“
The purchaser
acknowledges that the order form, the relevant specification/s and
these General Conditions of Contract constitute
the entire agreement
between the parties, and that no warranties or representations have
been made by or on behalf of the builder
save and except for those
contained in such documents.
No addition to or variation of the
order form, specification/s and/or these General Conditions shall be
effective and binding upon
the parties unless reduced to writing and
signed by them.”
the
respondent
relies
on an oral agreement concluded between it, represented by Mr Duncan
Stewart Lethbridge (Mr Lethbridge) and the applicant,
represented by
Mr Greeff, in terms whereof the latter was obliged to effect payment
of the second and third instalments in Dollars
calculated on the
basis of the Dollar / Rand exchange rate prevailing on the date of
payment, despite the fact that clause 1.2
of the Agreement
specifically provided for payment in Rands. The respondent in its
answering affidavit foreshadowed an application
for the rectification
of that clause of the Agreement and sought support for the existence
of such an agreement in the wording
of the last paragraph of an
e-mail (annexure DL 2) dispatched by him to Mr Greeff on 7 November
2002 (prior to the conclusion
of the written agreement) by reading
into it a meaning that severely strains the clear language used.
17]
Mr
Lethbridge also alluded to an arrangement concluded during or about
April 2005 in terms whereof Mr Greeff, because the Rand,
contrary to
his expectations, had strengthened considerably against the Dollar,
put forward a proposal articulated by him in the
following terms: -
“
20. Mr Greeff
accordingly proposed to me that, in order to delay having to pay the
balance of the purchase price in US Dollars at
that stage, (because
the SA Rand cost of US Dollars was increasing) he would advance a
loan in South African Rands to the Respondent
so as to enable the
Respondent to support its cash flow requirements. This South African
Rand loan would be interest free and
would be redeemable upon the
Applicant paying the balance of the purchase price and any additional
amounts due for extras, in US
Dollars.
By this stage the Respondent had
spent a great deal of time and money in the construction of the
catamaran. I believed that the
Respondent had little alternative
but to agree to Mr Greeff’s proposal.
During the period 28 June to 14
December 2005 Mr Greeff advanced four amounts totalling R2 650
000,00 to the Respondent. In terms
of the Respondent’s agreement
with Mr Greeff this amount would be repaid to him when the Applicant
paid the balance of the
purchase price for the catamaran and extras
in US Dollars.
The amounts making up R2 650 000,00
are recorded in the accounts of the Respondent as a personal loan
from Mr Greeff.”
18]
Mr
Greeff in his replying affidavit admitted having paid amounts
totalling R2 650 000 to the respondent during the period 28 June
2005
to 14 September 2005 but disavowed that such payments constituted
loans which were to be repaid at a later stage. He in support
of
such disavowal placed reliance on certain calculations made by an
auditor Mr Mornay Schafer from which he alleged it appears
that the
applicant had “at that stage” already paid Dollars in excess of
the sail-away price, as well as the extras that had
been quoted in
that currency, despite the fact that no invoices has been rendered in
respect thereof. He alleged that such amounts
were paid by him
simply because Mr Lethbridge had requested him to do so. In view of
the fact that all payments made by the applicant
to 15 March 2005 had
been made in Dollars and all subsequent payments in Rands and the
statements of account provided by the respondent
(annexures G34 and
G23) reflected such payments as “Advance Loan”, without any
protest from the applicant, Mr Greeff’s
denial that such payments
constitute loans, is anything but convincing, in my opinion.
19] In
my view it is fair to infer from the rationale provided by the
respondent for such loans namely, that it was “… to support
its
cash flow requirements …” that they were to be utilized by the
respondent in its business operations that would have encompassed
the
costs of completing and equipping the vessel, and be repaid only when
the balance of the purchase price and extras in Dollars
was paid. As
Mr Letheridge attributed the reason for that request to either
financial difficulties in the part of Mr Greef or
a reluctance to
purchase Dollars at the then prevailing exchange rate - in the hope
that the rate of exchange would become more
favourable - and absent
an agreed cut-off date for that arrangement, the conclusion appears
to be inescapable that the respondent,
on its own version, permitted
the applicant to deviate from the express terms of the Agreement as
regards payment of the purchase
price, by having permitted Mr Greeff
to provide loans in local currency in lieu of the applicant
discharging its obligations in
Dollars.
20] The
legal position is that the acceptance by a seller of security for the
payment of the purchase price, accompanied by delivery
of the
subject-matter of the sale to the purchaser, brings about the passing
of the ownership therein as credit is considered to
have been granted
by implication (See:
Lendalease
Finance (Pty) Ltd v Corporation de Mercadeo Agricula and Others
(supra) at 490 (C)). The concept security, in a comparable context,
has been held to mean “… speaking generally, anything
that makes
the money more assured in its repayment or more readily recoverable”
(See:
Seamen
Bros v Collett
1928 EDL 170
at 173). As the loans by Mr Greeff, in addition to
providing working capital, would have rendered payment of the balance
of the
purchase price in Dollars more readily recoverable - in the
sense that he, in order to ensure the repayment thereof, would have

to procure payment by the applicant of the balance of the purchase
price in Dollars - they in my view, amounted to the providing
of
security in the afore-mentioned sense and furthermore brought about
the transformation of the transaction from a cash to a credit
sale
(Cf:
Lendalease
Finance Ltd v Corporation de Mercadeo Agricola and Others
at 490 C).
21
] The
applicant contended that, despite the fact that the sea-trials
envisaged in the contract had not taken place, the respondent

effected physical delivery of the vessel to it by having consented to
its removal from its premises to the harbour by means of
a trailer;
by having handed the keys thereof as well as the owner’s manual to
Mr Greeff; and by having assisted and participated
in the launching
thereof on 2 September 2005. The vessel as on that date was not in a
sail-away condition because, inter alia,
the mast and rigging had not
been installed and two further substantial payments amounting to R1
150,00 (subsequently made on
3 September 2005 and 14 September 2005
respectively) had not been effected as yet. Accordingly, that
contention has an air of
unreality about it as in my view, it is
unlikely that the applicant would have taken delivery of an
incomplete vessel and that
the respondent would in the circumstances
have deprived itself of a potential object of security in the form of
a lien.
22] The
respondent contended that the vessel had at that stage been
“delivered” to the applicant subject to an express agreement
that
it would be returned to the respondent for completion, the conducting
of sea-trials, as well as commissioning after the boat
show. It
averred that Mr Greeff was merely permitted to use the vessel for
exhibition and demonstration at the Cape Town Boat
Show as well as
for the undergoing of a course in sailing, whereafter it would be
returned to the respondent. Mr Lethbridge averred
that the
respondent’s crew, accompanied by Mr Greeff, sailed the vessel to
Cape Town for exhibition at the Cape Town Boat Show;
that they
participated in sailing demonstrations on 3 October 2005; that they
in response to demands from Mr Greeff permitted
him to take
possession of the keys of the vessel and move in on board it; and
used it to do a course in sailing before they left
Cape Town and
returned to St Francis Bay on 6 October 2005. It needs to be noted
that Mr Lethbridge departed for the Annapolis
Boat Show on 2 October
2005 so that any averments in his affidavit to events that occurred
in Cape Town after that date, are clearly
hearsay as no affidavits in
support thereof have been filed. For that reason Mr Greeff’s
version of such events is to be preferred
to that of Mr Letheridge.
According to Mr Greeff only the respondent’s factory manager and
electrician were present in Cape
Town on 3 October 2005 and that
neither they nor any of the respondent’s crew, who had left shortly
after their arrival in Cape
Town, took part in any sailing
demonstrations. He furthermore denied that he had compelled any
members of the respondent’s staff
to hand the keys of the vessel to
him.
23] As
certain
defects in the vessel and/or its equipment manifested themselves
whilst Mr Greeff used it, voluminous correspondence ensued
between
him or his attorneys and the respondent thereanent and also the
various items that needed to be attended to; who would
be liable for
the costs thereof; and the terms under which the applicant would be
prepared to return the vessel to the respondent.
As no accord could
be reached in regard to those matters the vessel has to date not been
returned to the respondent.
24] On
the basis of the facts alleged by Mr Letheridge, as modified by Mr
Greeff’s version of events in Cape Town after 2 October
2006, the
aforementioned conduct on the part of those who represented the
respondent’s interests in Cape Town, with the knowledge
of Mr
Letheridge, in my view, constituted the physical delivery of the
vessel from the respondent to Mr Greef as the
alter
ego
of the applicant. Such delivery, coupled with the aforementioned
transformation of the transaction from a cash into a credit sale,
in
my opinion, brought about the transfer of the ownership in the vessel
from the respondent to the applicant (Cf:
Groenewald
v Van der Merwe
1917 AD 233
at 238 et seq). The fact that the respondent had not
asserted ownership of the vessel until it instituted the action
in
rem
is consonant with that conclusion.
25] As
in my opinion it is quite clear from the aforegoing that the
respondent cannot succeed with the cause of action as formulated
in
the action
in
rem,
the arrest of the spirit of Nyati under Case No AC5/2006 is herewith
set aside with costs and it is directed that it be released
from
arrest forthwith.
______________
D.
VAN REENEN