Vasco Dry Cleaners v Twycross is a classic 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, and illustrative of the courts' treatment of simulated transactions. It was heard in the Appellate Division on August 28, 1978

1978 in South Africa

-January:* Former African National Congress member, Steve Mtshali who turned state witness in various trials is shot and wounded-February:* An unexploded bomb "capable of destroying a 22 storey building" is found in a Johannesburg office block and defused...

, with judgment handed down on November 16.

Facts

In 1967, "C" sold his dry-cleaning business, Vasco Dry Cleaners, to AC (Pty) Ltd, which was controlled by "D." A term of the contract of sale stipulated that, in respect of the the dry-cleaning machinery, the passing of ownership would be suspended until the purchase price, to be paid in instalments, had been met in full; in the meantime, ownership remained with "C."

Before the final instalment had been paid, AC ran into financial difficulties, and "D" approached "T" for help. "T" agreed to purchase the dry-cleaning machines from AC and pay the price directly to "C." "T" also entered into another agreement with AC whereby "T" resold the machines to AC at exactly same purchase price, in instalments. No actual delivery took place, and AC remained in control of the machines.

AC later sold and delivered the machines to Vasco without paying all the instalments due to "T," who then claimed the machines from Vasco on the ground that they were the owners because they had paid "C" and taken delivery first by means of traditio brevi manu, and then from AC by constitutum possessorium.

Judgment

The court found that this constituted a simulated transanction. This was evident from the fact, inter alia, that "D" did not want dispose of the machines, that "T" did not need the machines, and that the sale was based not on market value but on the purchase price. The parties did not intend to enter into sale and resale; they intended to create a pledge.