Contract Forwarding (Pty) Ltd v Chesterfin (Pty) Ltd 2003 (2) SA 253 (SCA)

Contract Forwarding (Pty) Ltd v Chesterfin (Pty) Ltd 2003 (2) SA 253 (SCA)

Issue: Whether a pledgee can obtain effective possession of movables pledged under a general notarial bond without taking physical possession of the movables.

Facts:

Contract Forwarding (Pty) Ltd (Contract Forwarding) granted a general notarial bond to Chesterfin (Pty) Ltd (Chesterfin) as security for a loan. The general notarial bond pledged all of Contract Forwarding's movable assets, including its business premises and the inventory of its business.

Contract Forwarding continued to operate its business after granting the general notarial bond. Chesterfin did not take physical possession of any of Contract Forwarding's movable assets.

Contract Forwarding subsequently defaulted on the loan and Chesterfin obtained an order from the court granting it leave to execute on the general notarial bond. The Sheriff served the order on Contract Forwarding and took symbolic possession of the business premises by affixing a notice to the door.

Contract Forwarding challenged the Sheriff's seizure of the business premises. Contract Forwarding argued that Chesterfin had not obtained effective possession of the business premises because Chesterfin had not taken physical possession of the business premises.

Held:

The Supreme Court of Appeal (SCA) held that Chesterfin had obtained effective possession of the business premises. The SCA reasoned that a pledgee can obtain effective possession of movables pledged under a general notarial bond without taking physical possession of the movables.

Key Facts:

• A debtor granted a general notarial bond to a creditor as security for a loan. The general notarial bond pledged all of the debtor's movable assets, including its business premises.
• The debtor continued to operate its business after granting the general notarial bond. The creditor did not take physical possession of any of the debtor's movable assets.
• The debtor defaulted on the loan and the creditor obtained an order from the court granting it leave to execute on the general notarial bond. The Sheriff served the order on the debtor and took symbolic possession of the business premises by affixing a notice to the door.
• The debtor challenged the Sheriff's seizure of the business premises on the ground that the creditor had not obtained effective possession of the business premises because the creditor had not taken physical possession of the business premises.

Reasons:

The SCA reasoned that a pledgee can obtain effective possession of movables pledged under a general notarial bond without taking physical possession of the movables. The SCA held that this is because a general notarial bond creates a real right in favor of the pledgee.

The SCA also held that the Sheriff's seizure of the business premises was valid. The SCA reasoned that the Sheriff's seizure of the business premises was a symbolic act that was sufficient to transfer possession of the business premises to Chesterfin.

Conclusion:

The SCA's decision in Contract Forwarding (Pty) Ltd v Chesterfin (Pty) Ltd 2003 (2) SA 253 (SCA) is a significant case because it clarifies the law relating to the pledge of movables under a general notarial bond. The SCA's decision emphasizes that a pledgee can obtain effective possession of movables pledged under a general notarial bond without taking physical possession of the movables.

The SCA's decision also provides guidance on the validity of symbolic acts of possession. The SCA's decision held that the Sheriff's symbolic seizure of the business premises was sufficient to transfer possession of the business premises to Chesterfin.