Pellow NO and Williams NO v Club Refrigeration CC

Fisher Foods SA (Pty) Ltd concluded a lump sum building contract (locatio conductio operis) with Club Refrigeration CC for the construction of a factory and the supply of certain movable equipment. The tender incorporated a reservation of ownership clause providing that all equipment would remain the property of Club Refrigeration until paid for in full, and the contract incorporated the JBCC Principal Building Agreement. Before full payment was made, Fisher Foods was placed in liquidation. The IDC, as secured creditor, had a perfected general notarial bond over Fisher Foods’ movables. Competing claims arose between Club Refrigeration and the IDC regarding ownership of certain movable goods supplied but unpaid for. By agreement, the goods were sold to a third party and the proceeds were held pending a court determination as to entitlement.

The appeal was dismissed with costs, confirming that Club Refrigeration was entitled to the proceeds of the sale of the goods.

The case clarifies the effect of reservation of ownership clauses in lump sum building contracts where the employer becomes insolvent, and confirms that such clauses can validly preserve ownership of movables supplied under a contract of locatio conductio operis. It also limits the application of section 84(1) of the Insolvency Act to instalment sale transactions only.