P G Bison Limited and Others v The Master of the High Court, Grahamstown and Another

The appellants were proved creditors of Pats Planks CC, a close corporation in liquidation. About a year before liquidation, the corporation executed a general covering cession of its book debts to the appellants in securitatem debiti. The deed of cession included an additional clause stating that the cession would not be implemented unless the account was overdue by 30 days and seven days’ notice of intention to implement had been given. At liquidation, the account was overdue but the seven days’ notice had not been given. The Master of the High Court ruled that, due to the additional clause, the transfer of rights had been suspended and that the book debts formed part of the free residue, not secured assets. The appellants challenged this ruling.

The appeal was upheld. The Master’s direction was set aside. The encumbered asset account reflecting the book debts as secured was confirmed. Costs were ordered as costs of administration in the winding up.

The case clarifies the interpretation of cessions in securitatem debiti, particularly the distinction between transfer of rights and enforcement of rights. It confirms that conditions relating to implementation or notice do not necessarily suspend the transfer of rights, reinforcing commercial certainty in security arrangements involving book debts.