ROUGH DIAMOND SALES – METHOD OF TRANSFER – CUSTOM AND THE SOUTH AFRICAN LAW – MAZAL AND BROCHA

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The following are the facts relating to the matter which was referred to our firm.

The digger from the Kimberley district had come to Johannesburg to show a very
valuable diamond which he had recently won at his diggings, to a few leading diamond
manufacturing companies.

After showing the stone to a few select companies the digger agreed to sell the stone
to a diamond manufacturing company which our firm represented.

At the time of the sale the following procedure was adopted in finalising the deal which
procedure was and still is the method of legal transfer of a rough diamond:-

The parties agreed on a price and both parties exchanged the following words

“Mazal and Brocha”;

The parties then cachetted the stone. They wrapped the stone in a white

envelope and then bound the envelope with tape.

Both parties signed on the tape.

Our client (the purchasing company) agreed to make payment within seven days and on payment the digger would then release payment to our clients.

The digger returned to Kimberley with the stone and our client began making the
necessary arrangements to raise the purchase price which was substantial.

A couple of days after the sale was concluded and before the purchaser had raised the
purchase price, the purchaser, our client, heard in the market place that the digger had
returned to Johannesburg and had effectively resold the diamond to a third party for a
higher price but basically on the same terms as set out in paragraph 4 above.

Our firm was asked to intervene in the matter on behalf of the first purchaser and to
secure the stone for his company.

We accordingly applied to court by way of an ex parte application wherein we asked
the court to recognise that:

the procedure adopted in paragraph 4 above and in particular the exchange of words Mazal and Brocha; and

the cacheting of the diamonds was a valid form of transfer and that the digger
was therefore precluded from selling the diamond to any third party and was
obliged to sell the diamond to our client and was obliged to deliver the diamond
to our client on the payment of the purchase price.

We further requested the court to make an order:
forbidding the seller to disposing of the diamond to any third party;
to physically deliver the diamond to our client against payment of the purchase price;

The application was heard by the court and an order was granted preventing the
dealer from disposing the diamond to anyone other than our client.

Our client subsequently travelled through to Kimberley and presented the order to the
digger together with the tender of the purchaser price whereupon the digger reluctantly
agreed to hand over the diamond to our client in lieu of the purchase price.

Notwithdstanding the fact that the applicant purchaser was successful in the matter the
question remains whether or not if the application was defended and the matter argued
before the court, whether the court would still have recognised ultimately that the
procedure used as more fully set out in paragraph 4 above is tantamount to a valid
transfer of the diamond.

Our firm was recently involved in a similar matter which was about to come before the
High Court in Namibia but the matter was settled before the matter could be argued
before the court and a judgment handed down.

The interesting question therefore still remains whether or not the cacheting of the
diamond together with the words Mazal and Brocha would be accepted as legal and
valid transfer of a rough diamond.

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