THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 876/2020

In the matter between:

ENGEN PETROLEUM LIMITED

APPLICANT

and

FLOTANK TRANSPORT (PTY) LTD

RESPONDENT

Neutral citation:
Engen Petroleum Ltd v Flotank Transport (Pty) Ltd (876/20)
[2022] ZASCA 98 (21 June 2022)

Coram:
MAYA P, ZONDI, MAKGOKA JJA, MEYER AND SAVAGE AJJA

Heard:
23 May 2022

Delivered:
21 June 2022

Summary: Interpretation of cession – whether a pledge or out-and-out cession
incorporating a pactum fiduciae – effect of out-and-out cession on ceded debts
upon liquidation of cedent – appeal upheld with costs.

ORDER
________________________________________________________________

Application for leave to appeal from:  Northern Cape Division of the High Court,
Kimberley (Makoti AJ sitting as court of first instance):
Leave to appeal is granted.
The appeal is upheld with costs.
The order of the high court is set aside and replaced as follows:
‘1. The respondent is to pay to the applicant the following amounts:
1.1
R342 389.38 with interest thereon at the legal rate from
12 December 2014 to date of payment, both days inclusive;
1.2
R344 239.14 with interest thereon at the legal rate from
19 December 2014 to date of payment, both days inclusive;
1.3
R152 817.80 with interest thereon at the legal rate from
22 December 2014 to date of payment, both days inclusive;
1.4
R313 137.14 with interest thereon at the legal rate from
24 December 2014 to date of payment, both days inclusive;
1.5
R339 052.39 with interest thereon at the legal rate from
2 January 2015 to date of payment, both days inclusive;
1.6
R198 613.68 with interest thereon at the legal rate from
9 January 2015 to date of payment, both days inclusive;

1.7
R230 571.36 with interest thereon at the legal rate from 16
January 2015 to date of payment, both days inclusive;
1.8
R276 046.04 with interest thereon at the legal rate from
23 January 2015 to date of payment, both days inclusive;
1.9
R34 794.85 with interest thereon at the legal rate from
30 January 2015 to date of payment, both days inclusive.
2. The respondent is to pay the applicant’s costs.’

JUDGMENT

Savage AJA (Maya P, Zondi, Makgoka JJA and Meyer AJA concurring)
Introduction
[1] The applicant, Engen Petroleum Limited (Engen), seeks leave to appeal to
this Court against the judgment and order of the Northern Cape Division of the
High Court, Kimberley (the high court), dated 29 March 2020. This was after the
high court dismissed with costs Engen’s application to enforce against the
respondent, Flotank Transport (Pty) Ltd (Flotank), the terms of a cession
agreement concluded between Engen and Windsharp Trading (Pty) Limited
(Windsharp). Engen applied for leave to appeal. This was refused.
[2] Following the refusal by the high court of Engen’s application for leave to
appeal, Engen petitioned this Court for leave to appeal. The application was
referred for oral argument in terms of s 17(2)(d) of the Superior Courts Act 10 of
2013. The parties were advised to be prepared, if called upon to do so, to address
this Court on the merits. Having regard to the prospects of success, apparent from
the reasons which follow, leave to appeal to this Court is granted.

Relevant factual background
[3] In January 2009 Engen and Windsharp entered into an Engen Diesel Club
(EDC) agreement. Under the terms of the EDC agreement, Windsharp became
indebted to Engen in an amount which, by June 2014, exceeded R5.5 million. As
security for the debt, Engen and Windsharp concluded two deeds of cession, in
April 2012 and June 2014. Clause 1 of the first cession, entered into on 3 April
2012 (the 2012 cession), recorded that:
‘1.
CESSION AND PLEDGE
The Cedent hereby cedes, transfers and makes over to the Cessionary all the Cedent’s
right, title and interest in and to the Debts (as defined in clause 2) as a continuing general
covering security for the due performance and discharge of every obligation and
indebtedness from whatsoever cause and howsoever arising which the Cedent may now
or at any time hereafter have toward the Cessionary; and without limiting the generality of
the foregoing, whether such indebtedness be a direct, indirect or contingent liability;
whether it be matured or not; whether it may be or may have been incurred by the Cedent
individually or jointly with others or by any firm in which the Cedent has or holds or may
hereafter have or hold any interest; and whether it arises through any acts of suretyship,
guarantee, warranty, indemnity or other undertaking signed by the Cedent solely or jointly
with others or otherwise.’
[4] Clause 1 of the second cession entered into on 30 June 2014 (the 2014
cession), which replaced the first cession, was similar to clause 1 of the first
cession, but with the insertion in italics at the end of that clause of the following:
‘…The Cession hereby granted by the Cedent to the Cessionary includes any and all
reversionary rights the Cedent might otherwise have had in and to the claim hereby
ceded.’
[5] Clause 14.2 of the 2014 cession provided that:
‘14.2
Execution of this memorandum has discharged –

(a)
every prior agreement between the parties to the extent within the scope of the
subject matter of this agreement, whether or not inconsistent with the provisions of this
memorandum; . . .’
[6] On 5 November 2014, at Engen’s instance, a provisional order of liquidation
was obtained against Windsharp. That order was made final in January 2015.
On 9 December 2014, Engen notified Flotank in writing of the existence of the June
2014 cession and of Engen’s intention to claim the debt ceded to it by Windsharp.
Engen called upon Flotank, pursuant to the terms of the 2014 cession, to make
payments directly to it. Flotank was cautioned that should it fail to do so it would
not be absolved of liability towards Engen for any amounts paid to Windsharp.
[7] In response to Engen’s notice, on 12 December 2014 Flotank sought that,
by 13h00 the same day, Engen provide it with a copy of the relevant cession.
Engen failed to do so. Thereafter, Flotank, in disregard of Engen’s notice, made
nine payments to Windsharp, from 12 December 2014 to 30 January 2015, in
respect of debts due by it to Windsharp. In May 2017, on the basis that Windsharp
had ‘ceded its book debts in securitatem debiti’ to it, Engen applied to the high
court for an order that Flotank pay Engen the nine amounts it had paid to
Windsharp.
[8] Flotank opposed the application inter alia on the basis that, on liquidation,
Windsharp’s ceded book debts resorted with its liquidators, with Engen becoming
a secured creditor of Windsharp from the date of liquidation; and that Engen held
a claim against Windsharp’s liquidators. In addition, Flotank contended that since
Engen had failed to provide it with the cession relied upon, no proper perfection of
the cession had occurred.
[9] The high court found that the concursus creditorum was created by
operation of law on 5 November 2014 when Windsharp was placed into provisional
liquidation. The court rejected Flotank’s contention that Engen had failed to
‘perfect’ the cession by not having provided a copy of the cession to Flotank and

that notice to Flotank by Engen of the cession had been sufficient. The court found,
however, that it was Windsharp’s liquidators and not Engen that were entitled to
claim that which had been ceded in securitatem debiti to Engen. This, reasoned
the court, was so in that the cession entered into had amounted to a pledge, which
was the basis on which the case had been conducted before the court.
[10] For the first time in its application for leave to appeal to this Court, Engen
argued that, properly construed and as a matter of law, the 2014 cession was not
a pledge and that the high court had erred in treating it as such. Since the
reversionary rights of the cedent were vested in Engen as the cessionary, it was
contended that an out-and-out cession to Engen existed and that it was entitled to
the relief sought against Flotank.
[11] The matter was opposed by Flotank on the basis that the cession relied
upon by Engen was not an outright cession and should be construed as a pledge.
This, it was submitted, was so even where there is a clear expression of the
intention of the parties otherwise.
Discussion
[12] The issue turns on the interpretation of the terms of the second cession
agreement. The true character of a cession in securitatem debiti depends on the
intention of the parties,1 with the wording of the cession being the appropriate point
of departure to determine such intention.2 In Grobler v Oosthuizen (Grobler)3 this
Court, recognised the existence of opposing theories in our law regarding cessions
in securitatem debiti, namely the ‘pledge theory’ and the ‘outright cession theory’.

1 Grobler v Oosthuizen [2009] ZASCA 51; 2009 (5) SA 500 (SCA) (Grobler) para 11; Thorogood v
Hoare 1930 EDL 354; Fisher v Schlemmer 1962 4 SA 651 (T); Nahrungsmittel GmbH v Otto [1992]
ZASCA 228; 1993 1 SA 639 (A); African Consolidated Agencies (Pty) Ltd v Siemens Nixdorf
Information Systems (Pty) Ltd 1992 (2) SA 739 (C) at 744.
2 Grobler para 11.
3 Grobler paras 11-15.

However, it found it unnecessary to resolve the debate between these theories
one way or another.4
[13] On ‘the pledge theory’ the principal debt is ‘pledged’ to the cessionary on
the basis that the cedent retains ‘bare dominium’ or a ‘reversionary interest’ in the
claim against the principal debtor.5 On such construction, only the right to enforce
the right upon non-payment is ceded.6 Since a cession ordinarily entails a transfer
of a right, it is the retention by the cedent of the very substance of the right around
which the doctrinal debate regarding the pledge theory has centred. This Court, in
Grobler, recognised however that such debate had been resolved, primarily for
pragmatic reasons, with the pledge theory accepted as the default position.7 On
this basis a cession in securitatem debiti is now taken to resemble a pledge, unless
the intention of the parties is different.8
[14] On the alternative theory –
‘. . . a cession in securitatem debiti is in effect an outright or out-and-out cession on which
an undertaking or pactum fiduciae is superimposed that the cessionary will re-cede the
principal debt to the cedent on satisfaction of the secured debt. In consequence, the ceded
right in all its aspects is vested in the cessionary. After the cession in securitatem debiti the
cedent has no direct interest in the principal debt and is left only with a personal right
against the cessionary, by virtue of the pactum fiduciae, to claim re-cession after the
secured debt has been discharged.’9

4 Grobler para 15. National Bank of South Africa Ltd v Cohen’s Trustee 1911 AD 235.
5 Grobler para 15 with reference to Picardi Hotels Ltd v Thekweni Properties (Pty) Ltd [2008]
ZASCA 128; 2009 (1) SA 493 (SCA) para 3 and other authorities.
6 Ibid para 16 with reference to Land- en Landboubank van Suid-Afrika v Die Meester 1991 (2) SA
761 (A) 771C-G; Development Bank of Southern Africa Ltd v Van Rensburg 2002 (5) SA 425 (SCA)
para 50.
7 Grobler para 17 with reference to Leyds N O v Noord-Westelike Koöperatiewe
Landboumaatskappy Bpk 1985 (2) SA 769 (A) at 780E-G; Bank of Lisbon and South Africa Ltd v
The Master and Others 1987 (1) SA 276 (A) at 291H-294H; Incledon (Welkom) (Pty) Ltd v Qwa
Qwa Development Corporation Ltd [1990] ZASCA 85; 1990 (4) SA 798 (A) at 804F-J; Millman N O
v Twiggs [1995] ZASCA 62; 1995 (3) SA 674 (A) at 676H; Development Bank of Southern Africa
Ltd v Van Rensburg fn 6 para 50.
8 Grobler para 17.
9 Grobler para 17.

[15] Although the pledge construction has been recognised as the default form
of security cession, there is no support for a conclusion that it has subsumed the
field of security cessions.10 This is so since our law favours a recognition of both
constructions of security cession.11 It therefore remains open to the parties to
structure a cession either as a pledge or as an out-and-out cession, upon which a
pactum fiduciae is superimposed. This is to be determined by reference to the clear
intention of the parties.12
[16] The 2014 cession expressly ceded to Engen the debt as defined, with any
reversionary rights Windsharp may have to the debt ceded. From the wording
used, it is clear that the parties’ express intent was to achieve an out-and-out
cession on which the pactum fiduciae could, as a matter of law, be superimposed.
Although Engen, as indicated earlier, did not assert an out-and-out cession with a
pactum fiduciae in the high court, it is open for it to do so for the first time on appeal,
since the correct interpretation of a cession is a question of law.13
[17] The result is that given that the 2014 cession was an out-and-out cession,
the debt ceded by Windsharp was an asset in the estate of Engen.14 Windsharp
held no right to receive payment from Flotank of the principal debt ceded to Engen
but retained a claim by virtue of the pactum fiduciae to re-cede once that debt was
discharged. It follows that Flotank was obliged, on receipt of notice of the cession,
to make payments to Engen and not to Windsharp. In finding differently the high
court erred.
[18] It follows for these reasons that the appeal must succeed with costs.

10 3 Lawsa 3 ed para 180.
11 2 Lawsa 2 ed para 53; Van der Merwe Kontraktereg 4th ed (2012) at 427.
12 Grobler paras 11-14; Worman v Hughes and Others 1948 (3) SA 495 (A) at 505; Byron v Duke
Inc [2002] ZASCA 58; 2002 (5) SA 483 (SCA). This was also applied by this Court in Freddy Hirsch
Group (Pty) Ltd v Chickenland (Pty) Ltd [2011] ZASCA 22; 2011 (4) SA 276 (SCA) para 15.
13 Government of the Republic of South Africa v Von Abo [2011] ZASCA 65; 2011 (5) SA 262 (SCA)
paras 18-19; CUSA v Tao Ying Industries [2008] ZACC 15; 2009 (2) SA 204 (CC) at para 68.
14 Van der Merwe, fn 12, at 429; MT Argun: Master & Crew of the MT Argun v MT Argun 2003 (3)
SA 149 (C) at 158.

Order
[19] The following order is made:
1 Leave to appeal is granted.
2 The appeal is upheld with costs.
3 The order of the high court is set aside and replaced as follows:
‘1. The respondent is to pay to the applicant the following amounts:
1.1
R342 389.38 with interest thereon at the legal rate from 12
December 2014 to date of payment, both days inclusive;
1.2
R344 239.14 with interest thereon at the legal rate from 19
December 2014 to date of payment, both days inclusive;
1.3
R152 817.80 with interest thereon at the legal rate from 22
December 2014 to date of payment, both days inclusive;
1.4
R313 137.14 with interest thereon at the legal rate from 24
December 2014 to date of payment, both days inclusive;
1.5
R339 052.39 with interest thereon at the legal rate from 2
January 2015 to date of payment, both days inclusive;
1.6
R198 613.68 with interest thereon at the legal rate from 9
January 2015 to date of payment, both days inclusive;
1.7
R230 571.36 with interest thereon at the legal rate from 16
January 2015 to date of payment, both days inclusive;
1.8
R276 046.04 with interest thereon at the legal rate from 23
January 2015 to date of payment, both days inclusive;
1.9
R34 794.85 with interest thereon at the legal rate from 30
January 2015 to date of payment, both days inclusive.
2. The respondent is to pay the applicant’s costs.’

________________________
K M SAVAGE
ACTING JUDGE OF APPEAL

Appearances

For applicant:
M Tsele
Instructed by:
MCH Attorneys Inc., La Lucia Ridge
Webbers, Bloemfontein

For respondent:
P Zietsman SC

Instructed by:
Van der Wall Inc., Kimberley
EG Cooper Majiedt Inc, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:

21 June 2022
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does not
form part of the judgments of the Supreme Court of Appeal
Engen Petroleum Ltd v Flotank Transport (Pty) Ltd (876/20) [2022] ZASCA 98 (21 June 2022)
Today the Supreme Court of Appeal (SCA) handed down judgment upholding, with costs, an appeal
against the decision of the Northern Cape Division of the High Court, Kimberley (the high court).
In January 2009 Engen and Windsharp entered into an Engen Diesel Club (EDC) agreement. Under
the terms of the EDC agreement, Windsharp became indebted to Engen in an amount which, by June
2014, exceeded R5.5 million. As security for the debt, Engen and Windsharp concluded two deeds of
cession, in April 2012 and June 2014. On 5 November 2014, at Engen’s instance, a provisional order
of liquidation was obtained against Windsharp.  On 9 December 2014, Engen notified Flotank in writing
of the existence of the June 2014 cession and of Engen’s intention to claim the debt ceded to it by
Windsharp. Engen called upon Flotank, pursuant to the terms of the 2014 cession, to make payments
directly to it. Flotank was cautioned that should it fail to do so it would not be absolved of liability towards
Engen for any amounts paid to Windsharp. After Engen failed to provide Flotank a copy of the cession
relied upon, Flotank disregarded Engen’s notice and made nine payments to Windsharp, from 12
December 2014 to 30 January 2015, in respect of debts due by it to Windsharp.
In May 2017, Engen applied to the high court for an order that Flotank pay Engen the nine amounts it
had paid to Windsharp. Flotank opposed the application inter alia on the basis that, on liquidation,
Windsharp’s ceded book debts resorted with its liquidators, with Engen becoming a secured creditor of
Windsharp from the date of liquidation; and that Engen held a claim against Windsharp’s liquidators. In
addition, Flotank contended that since Engen had failed to provide it with the cession relied upon, no
proper perfection of the cession had occurred. The high court found that the concursus creditorum was
created by operation of law on 5 November 2014 when Windsharp was placed into provisional
liquidation. The high court rejected Flotank’s contention that Engen had failed to ‘perfect’ the cession
by not having provided a copy of the cession to Flotank and found that notice to Flotank by Engen of
the cession had been sufficient. The high court found, however, that it was Windsharp’s liquidators and
not Engen that were entitled to claim that which had been ceded in securitatem debiti to Engen. It
reasoned that this was so because the cession entered into had amounted to a pledge, this having
been the basis on which the matter proceeded in the high court.
In its reasoning, the SCA recognised the distinction between the ‘pledge theory’ and the ‘outright
cession theory’. On ‘the pledge theory’ the principal debt is ‘pledged’ to the cessionary on the basis that
the cedent retains ‘bare dominium’ or a ‘reversionary interest’ in the claim against the principal debtor.
In essence, under such theory, only the right to enforce the right upon non-payment is ceded. The
alternative theory is that of an out-and-out cession. In terms of this theory, an undertaking or pactum
fiduciae is superimposed that the cessionary will re-cede the principal debt to the cedent on satisfaction
of the secured debt, with all ceded right in all aspects vested in the cessionary.
The SCA held that, although the pledge construction has been recognised as the default form of security
cession, it had not subsumed the field of security cessions. Our law favoured a recognition of both
constructions of security cession. It remains open to the parties to structure a cession either as a pledge

or as an out-and-out cession upon which a pactum fiduciae was superimposed. The form adopted is to
be determined by reference to the clear intention of the parties. The SCA held that, from the wording of
the 2014 cession, the parties’ express intent was to achieve an out-and-out cession on which the
pactum fiduciae could, as a matter of law, be superimposed. Although Engen did not rely on the cession
as constituting an out-and-out cession with a pactum fiduciae in the high court, it was open for it to do
so for the first time on appeal, since the correct interpretation of a cession was a question of law. As a
result, the SCA held that the 2014 cession amounted to an out-and-out cession and that the debt ceded
by Windsharp was an asset in the estate of Engen. Windsharp held no right to receive payment from
Flotank of the principal debt ceded to Engen but retained a claim by virtue of the pactum fiduciae to
have the debt re-ceded if such debt was discharged. It followed that Flotank was obliged, on receipt of
notice of the cession, to make payments to Engen and not to Windsharp. The SCA found that the high
court erred in its decision and for those reasons the appeal was upheld with costs.

~~~~ends~~~~