Ikea Trading und Design AG v BOE Bank Ltd, an important case in South Africa

South Africa

The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...

n property

South African property law

South African property law regulates the "rights of people in or over certain objects or things." It is concerned, in other words, with a person's ability to undertake certain actions with certain kinds of objects in accordance with South African law....

 law, was heard in the Supreme Court of Appeal

Supreme Court of Appeal of South Africa

The Supreme Court of Appeal is an appellate court in South Africa; it is the highest appeal court except in constitutional matters, which are ultimately decided by the Constitutional Court...

 on March 18, 2004

2004 in South Africa

-January:* 1 January – Asher Karni, an Israeli and South African businessman from Sea Point, Cape Town who is alleged to have supplied nuclear technology to Pakistan, is arrested at Denver International Airport, Colorado-March:...

, with judgment handed down on April 1.

Facts

The first respondent was the holder of a general covering notarial bond, passed in its favour by W CC over the assets of the latter. When W CC was placed in final liquidation, the first respondent applied to the High Court for an order declaring that the liquidation and distribution account in respect of W CC had to be redrawn so as to reflect its preference by virtue of that bond. The argument was raised that the bond did not comply with the requirements of the Security by Means of Movable Property Act, because it failed to specify and describe the assets referred to in the bond in a manner which rendered the assets readily recognisable.

Issue

The central issue in the instant appeal was whether or not a bond registered under the Act. complied with the requirements so that the "mortgagee" acquired security in the movable property referred to in the bond and therefore ranked as a secured creditor in the event of the liquidation of the debtor.

Judgment

It was clear to the court that, without reference to invoices and other documents in respect of the items listed, or without the intervention of some person who was able to say that the particular items listed were subject to the bond, the items could not be identified as those listed in the bond. The court held that the bond had to specify and describe the property so as to render it readily recognisable. Nothing could be added to an instrument that had the effect of creating a real right that availed against third parties. The third party had to be able to identify the items by reference to the document alone, by correlating the descriptions contained therein with property fitting such descriptions.

The court held further that, in the instant case, the items enumerated in the bond had not been specified and described in the manner required by the Act. It was not possible for third parties, even the liquidators, to take the bond and to correlate the descriptions with the assets on the premises. In the circumstances, the bond had failed to create a deemed pledge over the property of W CC, with the result that the appellant was not a secured creditor.

The appeal was thus dismissed, and the decision in the Eastern Cape

Eastern Cape

The Eastern Cape is a province of South Africa. Its capital is Bhisho, but its two largest cities are Port Elizabeth and East London. It was formed in 1994 out of the "independent" Xhosa homelands of Transkei and Ciskei, together with the eastern portion of the Cape Province...

Division of the High Court, in BOE Bank Ltd v Ikea Trading und Design AG, confirmed.