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Timber Rooftech CC v Mendel Welding and Engeneering (Pty) Ltd and Another (Civil Appeal No. 46 of 1996) [1997] BWCA 30; [1997] B.L.R. 83 (CA) (25 July 1997)

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IN THE COURT OF APPEAL OF THE REPUBLIC OF BOTSWANA HELD AT LOBATSE
CIVIL APPEAL NO. 4 6 OF 1996 CONSOLIDATED HIGH COURT CIVIL MATTERS MISCELLANEOUS APPLICATION NO. 395/95 CIVIL CASE NO. 285/96
In the matter between:
TIMBER ROOFTECH CC       Appellant
and
MENDEL WELDING & ENGINEERING TPTY1 LTD 1st Respondent
DEPUTY SHERIFF MODONGO   2nd Respondent
Mr. E. Khan for the Appellant
Mr. B.D. Leburu for the Respondent
JUDGMENT
CORAM: T.A. AGUDA, J.A. P.H. TEBBUTT, J.A. G.G. HOEXTER, J.A.
TEBBUTT J.A.
First Respondent leased certain premises belonging to it to a company known as Cal Roy Holdings [Pty] Ltd trading as Timber Rooftech Gaborone ["the company"]. The company fell into arrears in its rental payments and, relying on its landlord's hypothec, and pursuant to an order of the High Court, first respondent attached goods and machinery on the leased premises. Appellant claimed that some of the machinery attached belonged to it and applied to the High Court for an order releasing that machinery and restoring possession of it to appellant. Naanunu J. who heard the application, dismissed it, with costs. Appellant now

Hi
'? '<?'-
2        in
appeals to this Court against that decision.     ||!
Second respondent is cited as a party to these proceedings       Hi
merely because he executed the attachment order and the goods are        Hi
presently being held by him pending the outcome of this appeal.  if!
It is accordingly convenient, as first respondent is the         %
principal respondent in the appeal, to refer to it herein, for   Hi
the sake of simplicity, as "the respondent".     i|i
The following facts are common cause. Respondent is the  %
owner of Lot 14440 Gaborone West ["the premises"]. It leased     Hi
them to the company in a written lease agreement on 21 July,     Hi
1993. The machinery in question was at that time in the  \l\
possession of the company. It obtained the machinery on loan     Hi
from the appellant in February 1993, the goods coming into       iiii
Eotswana from South Africa by virtue of a Bill of Entry dated 11         Hi
February 1993. To the latter was attached a declaration "in
respect of goods leaving the Rand Monetary Area without the      iiii
accrual of Foreign Exchange Proceeds in which the goods were     Hi
described as "goods despatched for analysis, treatment assaying
etc. and subsequent return to the Rand Monetary Area". In the    Hi
declaration mentioned, appellant also declared that "we will     Hi
return the above mentioned goods to the Rand Monetary Area within
six months". The latter never occurred. Instead the machinery
which appellant says it loaned to the company, "to use to boost
its business and to train its employees" was installed in the    iiii
premises in July 1993. It was still being used for the same      iiii
purposes in February, 1996.      ||i

3        i
In July 1994, one Pooventhiran Naidu and one Myenthran
Naidoo, who owned 30 and 33 shares respectively in the company,
entered into an agreement with one Calvin Kamanakao, who owned
34 shares in the company, in terms of which they sold their
shares in the company to Kamanakao.
The machinery is specifically alluded to in the agreement.       H
In clause 1.13 it is stated that:-
"Timber Rooftech's Assets shall mean the
machinery which is the property and is owned by  H
Timber Rooftech CC. [Durban] and which machinery
is in the possession of the company."    \\
[Timber Rooftech CC [Durban] is, of course the appellant] .      \\
The machinery is further dealt with in the agreement in  \\
clause 8.2 thereof as follows:-  i|
" ^Timber Rooftech's Assets' shall remain the    ]\
ownership of Timber Rooftech and ownership shall         if
only pass once all the terms and conditions of   \\
this agreement have been fulfilled."     ;l
The agreement contained the usual clauses that should
Kamanakao breach any of the terms of the agreement, including a  if
failure to pay the purchase price instalment payments timeously,         if
the sellers would be entitled to cancel the agreement. The       \\
latter also provided that Naidu and Naidoo would resign as       if
directors of the company as from the effective date of sale.     if
They were therefore up until July 1994 shareholders and directors        if
of the company. The machinery was accordingly brought onto the   \l
premises and installed there with the full knowledge and consent         if
of the appellant. Pooventhiran Naidu is the managing director    if
of appellant.    iij

4
It is further common cause that neither the company through any of its officers, including Naidu and Kamanakao, nor the appellant informed the respondent that the machinery did not belong to the company but to the appellant. Naidu has admitted this in specific terms, saying he left it to the company to do so. It is not disputed that the respondent only knew that the machinery did not belong to the company on 13 February 1996 when it received a letter to that effect. By then it had exercised its hypothec and attached the machinery, the order to do so being granted on 2 November 1995. In an affidavit by Kamanakao he obliquely suggests ,'in meetings with respondent and its attorneys he told respondent that the machinery belonged to appellant. He does not say when he allegedly did so or when these meetings took place but disingenuously says "I signed a personal guarantee and acknowledgement of debt on behalf of the company to this effect". Those documents make no reference to the ownership of the machinery and, in any event, are signed on 30 November 1995, long after the machinery was attached.
It is also clear that the company, of which Naidu and Kamanakao were directors when the lease was entered into and the machinery brought on to the leased premises, and the appellant, of which Naidu was the managing director, knew who the lessor of the premises was and its address and were at all times in a position to have informed the lessor that the machinery belonged to the appellant had they been minded to do so but, as stated above, they did not do so.

5
The law in regard to a landlord's hypothec where assets of a third party are on the leased premises when the landlord seeks to exercise his hypothec is well settled. A third party's assets will be subject to the hypothec if:-
[a]    
the lessor is unaware that they are owned by the third party;
[b]    
the goods are brought on to the leased premises with the knowledge and consent, express or implied, of their owner and he, although in a position to do so, fails to notify the lessor of his ownership;
[c]    
the goods are brought on to the leased premises for the use of the lessee; and
[d]    
the goods are brought on to the leased premises with the intention that they are to remain there indefinitely.
[see The Law of South Africa riAWSAl: Vol 14 para 160 p 154;
Cooper: Landlord and Tenant 2nd Edn p 184] . The above statement
of the law follows the authoritative setting out of the legal
position as to when a third party's movable assets are subject
to a landlord's tacit hypothec by the Appellate Division in South
Africa in Bloemfontein Municipality v Jacksons 1927 AD 266 where
at 271, Curlewis J.A. said:-
"When goods belonging to a third person are brought on to the leased premises with the knowledge and consent, expressed or implied, of the owner of the goods, and with the intention that they should remain there indefinitely for the use of the defendant, and the owner, being in a position to give notice of his ownership to the landlord fails to do so, and the landlord is unaware that the goods do not belong to the defendant, the owner will thereby be taken to have consented to the goods being subject to the landlord's tacit hypothec, and liable to attachment."

6
That, I hold, also represents the law in Botswana.
In his judgment dismissing the appellant's application Nganunu J. found that all the above conditions had been met. He accordingly held that it must be taken that the owner consented to the goods being subject to the landlord's tacit hypothec and impliedly consented to their attachment.
In his argument before this Court, Mr. Khan for the appellant did not seek to challenge the presence of the first three of the conditions mentioned. He was clearly correct in doing so. As set out, the respondent was not aware until 13 February 1996 that the goods were owned by the appellant; the goods were brought on to the leased premises with the knowledge and consent of the appellant who, although in a position to notify respondent of its ownership, failed to do so; and the goods were brought on to the premises for the use of the company, the lessee. Mr. Khan submitted, however, that the respondent had not established that the goods had been brought on the leased premises with the intention that they were to remain there indefinitely.
The question which arises is what is meant by the word "indefinitely" as used by Curlewis J.A. in the passage cited from the Bloemfontein Municipality case, supra, and repeated in the many case in which that statement of the law had been followed, and by the authors on the subject of lease. The ordinary meaning of the word "indefinitely" is, according to the Shorter Oxford Dictionary, "for an indefinite period" and "indefinite", in turn,


jfi      is defined as "of undetermined extent". What that extent may be  jfi
jfj      has been the subject of several judicial decisions and academic  jfi
jfi      pronouncements in South Africa, which would also be of persuasive        jjj
jfj      authority in Botswana.   jfj
if!      The basis of the law has its origins in the opinions of the      jfj
jfj      early writers on the Roman-Dutch law [see those referred to in   ill
i|j      Cooper op.cit. p 183 note 209]. For example Voet 20.2.5 gives    i^j
ill      as the reason for allowing a lessor a tacit hypothec over a third        ijjj
<^. jfj  party's property the fact that the owner is presumed, by         jjjj
|||      permitting his property to be brought on to the leased premises  jfj
ifj      for the benefit of the lessee, to have consented to the property         jfj
ill      being subject to a hypothec in favour of the lessor for rent owed        jfj
ill      by the lessee. That presumption arises, and the owner's consent  jfj
|||      is implied, if the owner allows the impression to be created that        jfi
||l      the property which he leaves in the tenant's possession, is that         jfi
||i      of the latter [see De Wet and Van Wyk: Die Suid-Afrikaanse       jfj
j|;      Kontraktereg en Handelsrea 5th Edn pp 269-270] . Normally a
W ill    lessor will not get that impression if the property is only      ifj
jfi      temporarily on the hired premises but when it is there with a    jfi
\i\        degree of permanence, that impression will be created [see Cooper        jjjj
op.cit. p 189-190]. In Mangold Bros Limited v Hirschman Bros
%        1917 T.P.D. 187 at 19C, de Villiers J.P. said that the word
jfi      "indefinitely" was a better one than the words "in perpetuity".  ijjj
ij;      What was required was "some element of permanence" in the
jfi      arrangement between the lessee and the third party. Cooper
111      op.cit. At p 183 note 209 refers to the view of the Roman-Dutch  jfj

J/^^AMWAWJl^W/^///^^ W/^///^^//// yW^^JlMWJ^^^JWJ^M/y^y /^////<V ^^
writer, Bodenstein that the requirement of "permanency" means    !|
no more than that the goods should not be on the premises "merely        jf
temporarily". This approach also found favour with Matthews J.   if

? \
in Sercombe v Colonial Motors TNatall Ltd 1929 NPD 58 at 65 where        !!
he held that "indefinitely" meant "not for a temporary purpose"  if
[see too T.R. Services fPtyl Ltd v Poynton's Corner Ltd 1961 [1]         if
S.A. 773 [D & CLD] at 776 H] .   j(i
In the present case the machinery was brought on to the  iij;
property in July 1993. It was still there in February 1996       \b
although under attachment pursuant to the Court order of 2       ijji
November 1995. This, in my view, shows that the machinery was
certainly not on the premises merely temporarily or for a        HI
temporary purpose.       \j\
Mr. Khan, however, argued that two factors pointed to the        \l\
fact that it was not the intention that the goods should be on   Hi
the premises indefinitely. The first was the declaration that
the goods would be returned to the Rand Monetary Area within six
months of February 1993. It is clear, however, that this
intention was superseded by subsequent events. The goods were
taken on to the leased premises by the tenant company with the   ijjj
knowledge and consent of the owner i.e. the appellant in July
1993, which was five months after the declaration in February or
one month before the six-month period from February 1993 expired.        if;
This shows that there was a clear intention that they would be   ifi
there for a period in excess of six months. In the founding      if;
affidavit to the application before Nganunu J, Naidu, in regard  iiij

9
to the six-months return period, said this:-
"Applicant [i.e. the present appellant] loaned machinery ....[to the company] to boost its
business and to train its employees     
Applicant would from time to time facilitate extension periods of the machinery outside the Rand Monetary Area."
This is a clear statement of the fact that appellant did not intend the machinery to be returned to South Africa after six months or to be used only temporarily. It is clear that it was to be used for an indefinite period. This also appears from an affidavit by Kamanakao dated 19 February 1996 that the machinery was being used for the purposes mentioned "to this day". Moreover, the property was still in the possession of the tenant, and being used for its purposes, a year later when the agreement for the sale of the company's shares was concluded in July, 1994; as is evidenced by clause 1.13 of the agreement.
That agreement is also of great significance. It is quite clear from it that it was the appellant's intention that the machinery should continue to remain in the possession of the tenant company and that the latter would become owner of it when all the terms and conditions of the agreement had been fulfilled. Clause 8.2, as set out above, provides for that in specific terms.
Mr. Khan submitted, as his second factor, that Clause 8.2 provides that the ownership of the goods was that of the appellant and that, if Kamanakao breached the terms of the agreement, the machinery would remain the appellant's property. That, he submitted, evidenced the intention that the machinery

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10
was not intended to be on the leased property indefinitely. So far from supporting that intention, however, it establishes clearly that it was the appellant's intention that the machinery would remain on the leased premises indefinitely and, as stated, that ownership thereof would eventually pass to the company. It was obviously contemplated by the parties to the agreement when they entered into it that Kamanakao would fulfil his obligation under it and that when that had occurred the company would become the owner of the machinery. Nowhere is it suggested that until that happened the machinery would not remain on the leased premises. The agreement, furthermore, provides that the full purchase price for the shares would be paid by 31 October 1994 and that thereafter a further sum of R90 000 would be paid in monthly instalments of P5 000 commencing 1 June 1995 i.e. over a further period of 18 months or until December 1996. It was, accordingly, obviously in the contemplation of the parties that the machinery would remain in the company's possession until the end of December 1996 and, therefore, for the entire duration of the lease which was to terminate on 28 February 1996, if the company did not seek to exercise its option for a further five year period. It can accordingly again not be said that it was the appellant's intention that the machinery would be on the leased premises for a temporary purpose.
Mr. Khan also argued that in the event of a breach of the agreement by Kamanakao the appellant could cancel the agreement. Kamanakao breached the agreement by not paying the purchase price
'///AWM'//////.v////w////r/'//////////////'////^^^

v^^^yvvv^^.v.v*^^.%v^y^^.-^yvwvy*/^ v*/w ^^^^.v*^* >ft*^^^ v v^

11
instalments timeously and appellant sent him letters of demand
on 20 September 1994 and 21 November 1994. There is, however,
no evidence from, or statement by, appellant that Kanamakao had
failed, in response to the demands, to pay the amounts involved,
or that appellant had as a result cancelled the agreement, or
that, if the appellant had done so, it had reclaimed the
machinery. On the contrary, from 21 November 1994 until February
1996 and even after the attachment of the machinery in November
1995 i.e. over a year later, the machinery remained in the
possession of the tenant company and appellant did nothing to get
it back and was content that it should remain on the hired
premises.
It is, in my view, clear that from the fact that the
machinery was at all times on the leased premises and being used
by the tenant and the respondent had no knowledge that the
appellant was the owner, and was not told that it was the owner
by appellant, the impression was created that the machinery was
that of the tenant. As stated in De Wet and van Wyk loc. cit.
[translated by Cooper op.cit. At p 189]:
"[A] person who leaves his property in the possession of another creates the impression that the other person is its owner; if the other person is a lessee and brings the property on to hired premises, the property will be bound just as if it were the lessee's own property; if the owner wants to prevent this, he must ensure that others are not misled by the impression and he personally must accept responsibility of finding out whether the property is being kept on hired premises, and, if it is, ensure the lessor receives notice that the property does not belong to the lessee; if he does not do so, he must be content with his property being subject to the

12       if;
lessor's tacit hypothec."        Ui
I, therefore, conclude that Naanunu J. was correct in    ill
holding that the fourth requirement set out above has been met   If!
and, as a result, in dismissing the application before him.      j|;
Mr. Khan took a further point on appeal which was neither        i|i
raised by appellant in the Court a quo nor in the Notice of      jfi
Appeal. It is this Naanunu J. found that the landlord's  ifi
hypothec had been perfected, as it must in order to render the   if!
hypothec effective. The learned Judge had erred, in so finding,  \l\
so Mr. Khan submitted, in that the order of the High Court,      \l\
granted as a rule nisi on 26 October 1995 and confirmed on 2     \l\
November 1995, did not refer specifically to the machinery in    \l\
question. It was not, he argued, movable goods or stock-in-      \l\
trade. There is no substance in this point. The order is for     ifi
the attachment of "Respondent's [the company's] movable goods    \l\
and/or assets and stock-in-trade" [my emphasis] . The assets     ifi
would obviously include the machinery. At the stage the order    \l\
was granted there was no suggestion that any of the machinery,   jiH
and particularly the machinery involved in this appeal, did not  ijii
belong to the company. In any event, where a landlord's hypothec         jiii
is perfected by an order of Court, as this one was, that hypothec
would extend to all assets subject to the hypothec, including    ijii
those of a third party in the circumstances set out in the       ijii
Bloemfontein Municipality case. Were this not so, a landlord's
hypothec, where some of the assets are owned by a third party,   If!
could never be perfected by a judicial order. That would be an   i;ii

13
untenable proposition. This point must therefore also fail.
It follows that the appeal must be dismissed, with costs, and it is so ordered.
DELIVERED IN OPEN COURT AT LOBATSE THIS 25th DAY OF JULY, 1997.
P.H. TEBBUTT [JUDGE OF APPEAL]
I agree  T.A. AGUDA
[JUDGE OF APPEAL]
I agree  G.G. HOEXTER
[JUDGE OF APPEAL]

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