Petrus Willem Michau v The Maize Board

The appellant, a maize farmer in the Free State, entered into two written agreements with Rainbow Chicken Farms (Pty) Ltd in July 1994, styled an ‘Agreement of Lease Purchase and Sale’ and a ‘Management Agreement’. In terms of these agreements, Rainbow purportedly sold day-old chickens to the appellant and repurchased them after each growing cycle, while managing the entire broiler operation. The appellant supplied maize for feed. The undisputed purpose of structuring the agreements in this manner was to avoid payment of statutory maize levies payable to the Maize Board if maize were sold directly. During July and August 1994 the appellant delivered 2352,161 tons of maize and received payments equating to R390 per ton. The Maize Board alleged that the agreements were simulated and that the true transaction was a sale of maize by the appellant to Rainbow, triggering liability for levies under the Summer Grain Scheme.

The appeal was dismissed with costs, including the costs of two counsel, and the appellant was held liable for the maize levies claimed by the Maize Board.

The case reaffirms the South African doctrine of simulated transactions and provides a detailed factual application of the principle in the context of agricultural marketing schemes. It illustrates the distinction between lawful tax or levy avoidance and unlawful simulation, emphasizing that courts will look beyond contractual form to the substance of transactions.