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1985
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[1985] ZASCA 6
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Nash v Golden Dumps (Pty) Ltd. (44/85) [1985] ZASCA 6; [1985] 2 All SA 161 (A) (27 March 1985)
IN THE SUPREME COURT OF SOUTH AFRICA
(APPELLATE DIVISION)
In the matter between
ADRIAN CHARLES NASH
appellant
and
GOLDEN DUMPS (PROPRIETARY) LIMITED
... respondent
Coram
: CORBETT, MILLER, HOEXTER, VAN HEERDEN et NICHOLAS JJA.
Date
of hearing
: 18 February 1985
Date of judgment
: 2 March 1985
JUDGMENT
CORBETT
JA: In this appeal the appellant is Mr Adrian Nash. I shall
refer to him as Nash. The respondent is a company known as Golden Dumps
(Pty)
Ltd ("Golden Dumps").
/ Nash
2
Nash instituted action against Golden Dumps in the Witwatersrand Local
Division claiming certain relief (the nature of which I shall
detail later).
After a protracted trial the Court ordered absolution from the instance and made
a special order as to the costs of
the case. With the leave of the Court a
guo
Nash now appeals against the whole of the judgment to this Court. The
essential facts giving rise to the dispute between the parties
may be summarized
as follows.
Golden Dumps was incorporated in 1977. At all times material the chairman of,
and sole shareholder in, the company was a Mr Loucas
Pouroulis. Pouroulis, a
Greek Cypriot by birth, emigrated to and settled in South Africa in 1964. He
held a diploma in what he described
as "mining engineering and metallurgical
engineering" from the National Technical University of Athens. After his arrival
in South
Africa he
obtained employment in the mining division of the Anglo
American Corporation at the East Daggafontein Mines.
/ While
3
While there he worked on the re-evaluation of the mine to see whether there
were sufficient ore reserves to justify a continuation
of mining. In 1971 he
left the Anglo American Corporation to start his own business. In the course of
time he acquired a large number
of claims in respect of mines which had been
closed down and where the mining rights had lapsed, and also certain surface
rights,
which entitled him to search for. and extract gold which had been left
behind in slimes dumps, rock dumps and elsewhere in and around
the mining plant.
In the exercise of these rights he carried out highly profitable "clean-up"
operations at the East Dagga-fontein
and South Roodepoort mines. He also
conducted underground mining operations with some considerable success. In 1978
a company known
as Modeler 74 (Pty) Ltd ("Modder 74") was formed to establish a
plant at the New Modderfontein Mines for the recovery of gold there
by a new
method of recovery, called
/ the
4
the carbon-in-pulp method. Pouroulis was the sole shareholder in Modder 74.
The function of Golden Dumps was to hold on his behalf
certain of the mining
rights acquired by Pouroulis and to provide management services for the
group.
In 1979 Pouroulis acquired a 20% interest in Government Gold Mining Areas
Limited ("GGMA") and Golden Dumps took over the management
of GGMA. The other
major shareholder in GGMA was Mercabank Ltd ("Mercabank"). At the time
the
managing director of Mercabank was a Dr C Ferreira. In late 1979 and as a
result of a suggestion emanating from Ferreira negotiations
commenced for the
take-over by GGMA of Pouroulis's shareholding in Modder 74 and his other mining
interests. These negotiations continued
into 1980 and eventually on 26 June 1980
Mercabank published an announcement to the effect that agreement had been
reached in principle
that (I mention only the more important and relevant
matters) the L C Pouroulis
/ Group
5
Group mining interests in the East Rand would be acquired by GGMA against the
issue to Pouroulis of 4 300 000 ordinary shares in GGMA
in consideration of a
purchase price of approximately R6 000 000; that the name GGMA would be changed
to Consolidated Modderfontein
Mining Limited ("Modderfontein"); and that
application would be made to the Johannesburg Stock Exchange to have the shares
in Modderfontein
listed. The announcement further stated that this agreement was
subject to the approval of the Government, of the shareholders in
general
meeting and of the Johannesburg Stock Exchange.
This proposed transaction was generally referred to in the evidence as "the
merger". Some six months were to elapse, however, before
(on 6 January 1981) a
formal agreement giving effect to the merger was executed. It was during this
period of six months that the
events giving rise to the dispute between the
parties occurred.
It had become apparent that the management team employed by Golden Dumps,
whose strength lay in mining metallurgy, lacked someone
with financial and
administrative expertise.
/ Pouroulis
6
Pouroulis was accordingly on the look-out for someone with the right
qualifications, who could be appointed to the position of financial
director of
the group and could act as his "second-in-command". He discussed his problem
several times with a business associate
of his, a Mr David McKay, a director of
Rand Merchant Bank. . Towards the end of July/beginning of August, 1980 McKay
mentioned to
Pouroulis that Nash was coming to South African from England and
that he might be the man that Pouroulis was seeking.
At that time Nash was living in London. He was the proprietor of a small
company known as Global Oil Limited and was engaged in what
he described as
"commodity trading and commission broking", particularly in the crude oil
market. During 1980 he found it very difficult
to make a reasonable living and
he and his wife thought it would be a good idea to emigrate. He decided to come
to South Africa to
try to find employment here and, if successful, to start
/ a new
7 a new life here. He spoke to McKay, an
old friend, and McKay promised to do what he could to assist him.
Nash arrived in South Africa on 7 September 1980. McKay met him and he was
invited to stay at McKay's home. The first person Nash
was introduced to was
Pouroulis. They met at the home of Pouroulis on the evening of 7 September.
Thereafter they met on a number
of other occasions prior to Nash's return to
London on 20/21 September. Pouroulis described to Nash the composition of his
group
and its activities and the nature of the, proposed merger. He also told
Nash that he was looking for a financial director. Nash made
a good impression
on Pouroulis and on the other senior executives in the group.
One of the matters which was raised in discussions between Nash and'Pouroulis
was the possibility of raising money
/ overseas
8
overseas in order to provide working capital for the new company to be
created in terms of the merger. There is some dispute in the
evidence as to the
background to and nature of these discussions concerning the raising of working
capital. According to Nash, Pouroulis
told him that for the merger to be
successful he needed a substantial amount of investment capital. Nash indicated
that he knew "certain
people" overseas, including some Arab institutions, who
might be interested in providing the investment capital. Pouroulis then asked
him to "look around" and try to find such an investor on his return to London.
If Nash found someone who was interested in principle,
he was to inform
Pouroulis, who would then join him in London and continue the negotiations. Nash
was to have no. authority to conclude
any contract. Pouroulis told Nash that if
he (Nash) could successfully introduce the investor, he (Pouroulis) would make
available
to him
/ (Nash)
9
(Nash) a large block of shares in the new company at a substantial
discount.
During the course of their discussions Pouroulis also told Nash that he
planned to "internationalize" the group, ie undertake mining
and associated
projects overseas, and in this connection Pouroulis stated that he was
investigating a project in Venezuela. Pouroulis
also wished to have the shares
of the company listed on the London Stock Exchange. He asked Nash, while in
London, to make preliminary
enquiries in regard to these matters as well.
On 19 September 1980, according to Nash, he had lunch with Pouroulis. During
the course of conversation the latter indicated that
the position of financial
director would be offered to Nash and, since Nash would require some time to
explore the possibilities
of finding an investor, 15 October 1980 was agreed
upon as a suitable date for him to
/ commence
10
commence employment with the company. Pouroulis said that he would put this
in writing. After lunch a letter was drafted and handed
to Nash by Pouroulis. It
is written on a Golden Dumps letterhead and is signed "L.C. Pouroulis Chairman."
It is dated 19 September
1980. The body of the letter reads as follows:
"Dear Adrian
I am pleased to be able to offer you a position with our Group in the capacity
of Financial Director with effect from 15th October
1980.
Your commencing salary will be R60 000,00 per annum, and you will have the free
use of a Mercedes 230 Automatic motor car.
On conclusion of your negotiations abroad of all matters concerned with the
re-organisation and amalgamation of Modderfontein Seventy-Four
(Pty) Limited and
Government Gold Mining Areas (Modderfontein) Consolidated Limited, you will be
entitled to 200 000 shares in the
new company broken down as
follows:
75 000 at 1c each
75 000 at 50c each, and
50 000 at R1,00 each."
Nash
11
Nash stated in evidence that, after the letter was handed to him, he looked
at it and "accepted it" (meaning, presumably, the offer
contained in the
letter). It was then that he learned for the first time the number of shares
that were being offered to him and
the prices. On the following day Nash left
for London. Pouroulis's version of the events leading up to the writing and
handing over
of this letter differs from Nash's mainly in regard to whether the
shares were promised as a
quid pro quo
for introducing an investor. I
shall refer to his contrary version later.
Shortly after arriving in London Nash made approaches to a Mr Henry Howard, a
certain Mr Omar Namouk, an executive of the First Arabian
Trading Corporation,
and a solicitor, Mr Anthony Lawson-Smith of the firm Spinks, Lawson-Smith, Berry
and Co. He had various meetings
and discussions with them. Namouk, in
particular, showed interest. On
/ 30 September
12
30 September Nash telephoned Pouroulis and told him what he had achieved. It
was agreed that Pouroulis would come to London on 6 October.
On the following
day Nash sent a telex to Pouroulis listing the information and documents that
the latter should bring with him to
London. On the same day Nash had a
discussion with Lawson_Smith, as a result of which it was arranged that
Pouroulis should meet
a Mr Gordon of the stock-broking firm of Laing and
Cruickshank. It appears from the evidence that Laing and Cruickshank is one of
the largest broking firms in London and that it specialises in the raising of
money for mining purposes. The initial aim of this
meeting with Mr Gordon is a
factual issue between the parties, with which I shall deal later.
Pouroulis duly arrived in London on Monday 6 October 1980. On that day and
the next day (Tuesday) Pouroulis met Henry Howard, Omar
Namouk and
Lawson-Smith.
/ The
13
The meeting at the offices of Laing and Cruickshank took place on Wednesday 8
October. Although there is some dispute as to exactly
what happened at this
meeting, the essentials are clear. Shortly after the meeting had commenced and
it had become apparent what
Pouroulis was seeking, viz. the raising of
investment capital, a Mr Tim Hoare was called in. Hoare, a director of Laing and
Cruickshank,
was in charge of "international affairs and mining" and had a
special knowledge of the South African gold mining industry. As he
put it, it
was his job "to know everything that happens inside the South African gold
mining industry". He had heard of Pouroulis
and knew about the proposed merger.
He suspected from the start that Pouroulis was "looking for money". Pouroulis
outlined the group's
mining rights and activities. Hoare was impressed with what
he heard and told Pouroulis that if these facts were all correct he (Hoare)
"would try very hard to raise the money for him".
/ They
14
They discussed the amount of money that would be required. Pouroulis
mentioned a figure of RIOm. Hoare suggested an amount of R15m.
Hoare advised
that the simplest way of raising the money was by way of a rights issue
underwritten by Laing and Cruickshank. He explained
in evidence that when Laing
and Cruickshank underwrote a rights issue in this way, it arranged for the issue
to be sub-underwritten
by a number of financial institutions, with whom Laing
and Cruickshank shared the underwriting commission. Hoare also advised Pouroulis
that, as an incentive, there be a private placing of shares with the
institutions asked to act as sub-underwriters. Hoare told Pouroulis
that he
would be visiting South Africa in about three weeks' time and would then visit
the mine and further investigate the whole
proposition. Hoare asked that in the
meanwhile he be given a feasibility study, covering the whole project, by 14/15
October 1980.
Pouroulis returned to South Africa on 8 October.
/ Nash
15
Nash stayed behind. According to Nash, Pouroulis was delighted with the
result of the meeting with Laing and Cruickshank and instructed
Nash to notify
the First Arabian Trading Corporation that he no longer wished to proceed with
negotiations with it. Nash did so.
Nash was also asked, before leaving London,
to prepare and deliver the feasibility study requested by Hoare. This was done.
Hoare
then indicated that he would need a fuller feasibility report, showing
full capital expenditure schedules, profit and loss forecasts,
and generally
giving much more detail.
Nash returned to South Africa on 17 October 1980 and assumed his position as
financial director of Golden Dumps and the group. At
the invitation of Pouroulis
he stayed from then until his return to London on 8 December 1980 at the
former's home. He and other
executives of the group worked on an expanded
feasibility study. Towards the end of October Hoare visite the mine and on the
same
day the new feasibility study was handed to him. At about the same time
Lawson-Smith came to South
/ Africa
16
Africa in order, as he put it, "to lend a helping hand in getting the package
together". Hoare examined the project and had discussions
with Pouroulis and
others. On 11 November 1980 Hoare came to "an agreement in principle" with
Pouroulis that Laing and Cruickshank
would go ahead with "the deal".
As Hoare explained, however, an agreement in principle was "a long way from"
an underwriting agreement. There was much to be done
by the company in putting
together a prospectus, obtaining the necessary approvals and so on. On Hoare's
side, he had to persuade
the board of Laing and Cruickshank to agree to
underwrite the rights issue; he had to persuade a suitable number of financial
institutions
to agree to act as sub-underwriters and he had to organize the
rights issue at the London end. One of the practical problems at this
juncture
was an unstable gold price. It reached a high point of over 0700 at about the
time of the negotiations in October/November
1980, but after that showed a rapid
decline
/ and
17
and by mid-December was hovering around the $600 mark. This tended to sap the
confidence of would-be investors.
On 8 December 1980 Nash returned to London. Now that (as he thought) his
future was settled, he had to settle his affairs in London,
arrange for the
removal of his possessions to South Africa and for his wife and child to travel
to South Africa. While in London
he also attended meetings with Lawson-Smith and
Laing and Cruickshank in regard to the merger and the rights issue. He kept in
telephone
and telex communication with Pouroulis. On 22 December he returned to
Johannesburg with his wife and baby son. They stayed at the
house of David
McKay, who was elsewhere on holiday. Theyspent Christmas day at the home of
Pouroulis. On that occasion, according
to Nash, he raised with Pouroulis the
question of the transfer to him of the 200 000 shares referred to in the letter
of 19 September.
Pouroulis reassured him that
/he
18
he would arrange to have the matter concluded shortly.
(Nash had prior to this made the necessary arrangements
with his bank to provide the funds to pay for the shares.)
In evidence Pouroulis denied this conversation about the
shares.
Two days later, on 27 December, came the bombshell. Nash attended a meeting
at the company offices at the request of Pouroulis. Present,
apart from
Pouroulis himself, were the managing director, Mr Holmes, Mr Willis, the
company's security officer, and Pouroulis's secretary.
The meeting was
tape-recorded and a transcript, put in as an exhibit at the trial, gives a full
and explicit account of what occurred.
From the start and, as the trial judge
aptly put it, "in language redolent of the gutter", Pouroulis launched into a
violent personal
attack on the wholly unsuspecting Nash. It is not easy to
follow portions of this somewhat rambling tirade, but in essence Pouroulis
charged
/ Nash
19
Nash with various administrative shortcomings, eg not arriving at meetings on
time or at all, with having misrepresented his background
and qualifications or
not having disclosed certain discreditable facts in regard thereto, and with
having misused his position as
financial director, eg by attempting to change
the group's attorneys, running up excessive telephone bills, etc. One of the
main
complaints was that it had been represented to Pouroulis that Nash was a
chartered accountant and had an engineering degree and that
Pouroulis had
ascertained that this was not true. (This alleged representation later
constituted one of the issues at the trial.)
Pouroulis concluded this so-called
meeting by informing Nash that he was dismissed, with immediate effect, from his
position in the
company. At no stage was Nash given any opportunity to answer
the charges against him. Indeed, when on a few occasions he intervened
and asked
to be given a chance to explain, Pouroulis rudely shut him up and
/ continued
20
continued with the tirade. Pouroulis later conceded under cross-examination
that he was "not interested" in Nash defending himself
in any way.
What induced Pouroulis to take this action and behave in this fashion? It
would seem, from the evidence, that initially Pouroulis
was very impressed with
Nash. Nash was charming and articulate. Pouroulis took an immediate liking to
him. He offered Nash the position
of finance director without any real
investigation of his background and qualifications. Subsequently, largely as a
result of comments
made by others, eg Lawson-Smith and Hoare, he began to
entertain doubts about Nash's competence and suitability for the position.
This
culminated in his sending Willis to London early in December 1980 with
instructions to investigate Nash's background and the
truthfulness of a
curriculum vitae which Nash had provided towards the end of November. Willis
returned from London on 23 December
and made a verbal report to Pouroulis
/ over
21
over the telephone. He followed this with a written report delivered to
Pouroulis on 27 December. Pouroulis read it shortly before
the meeting at which
Nash was dismissed. The report is a damning document. It reflects adversely on
Nash's competence, qualifications,
private and domestic life, on the correctness
of some of the claims made in Nash's
curriculum vitae
, on Nash's
financial position, on his character in general and on his business integrity.
If the report is correct, it demonstrates
Nash's unsuitability for the position
to which he had been appointed by Pouroulis. The report obviously enraged
Pouroulis, evidently
a man of few inhibitions, and this accounts for his
behaviour at the meeting of 27 December.
In the new year Nash reacted. On 6 January 1981 his attorneys wrote a letter
to Golden Dumps, for the attention of Pouroulis. The
letter was delivered by
hand and received by Pouroulis on 8 January. The relevant portion of this
letter
/ reads
22
reads as follows:
"We have been consulted by and act for Mr A C Nash.
We understand from Mr Nash that on the 29th December 1980 you purported to
terminate his employment with the company and that such
purported termination
constituted an unlawful repudiation of the contract as recorded in a letter from
you to Mr Nash dated the 19th
September 1980. Mr Nash hereby accepts such
repudiation and cancels the contract on the grounds of such repudiation.
In terms of this contract with you our client, in addition to his salary and
certain other benefits, was entitled to the transfer
to him of 200 000 shares in
Government Gold Mining Areas (Modderfontein) Consolidated Limited (to be renamed
Consolidated Modderfontein
Mines Limited) on the following basis: 75 000 shares
at 1-cent each; 75 000 shares at 50-cents each; 50 000 shares at R1,00 each.
Our client's entitlement to the transfer of those shares was to arise upon
the conclusion of his negotiations overseas 'of all matters
concerned with the
reorganisation and amalgamation of Modderfontein Seventy-Four (Pty) Limited and
Government Gold Mining Areas (Modderfontein)
Consolidated Limited'. We are
instructed that these negotiations were successfully concluded by our client
prior to the 29th December
1980.
/ Accordingly
23
Accordingly, our client hereby tenders payment of the sum of R85 750,00
against delivery of the shares in negotiable form to us. Payment
will be by way
of a currently dated bank guaranteed cheque. Should delivery of the shares not
be made to us by close of business
on Friday, 9th January 1981, our client will
institute proceedings to compel such transfer."
On 9 January the attorneys acting for Golden Dumps replied,
denying liability and refusing to accede to Nash's demands.
In the meanwhile the parties concerned went ahead with the implementation of
the merger and the rights issue. Towards the end of December
1980 difficulties
arose because of the aforementioned fluctuations in the gold price. The
sub-underwrite] became nervous and there
was uncertainty about the price at
which the new shares were to be offered. Pouroulis went to London to assist
Hoare in persuading
sub-underwriters to participate and generally in the
implementation of the project. Ultimately they were successful. On 6 January
1981 the acquisition agreement giving effect to the merger was concluded between
Pouroulis
/ and
24
and GGMA and on the following day the underwriting agreement, between GGMA
and Laing and Cruickshank, was signed. Significant dates
in the implementation
of the rights issue were: 22 January 1981, being the date of the general meeting
of shareholders of GGMA called
to approve the merger and the rights issue (which
involved an increase in authorised and issued share capital); 26 January,
commencement
of dealings in letters of allocation; 30 January, the opening date
of the rights offer; and 20 February, the closing date of the
rights offer.
In February 1981 Nash instituted his action against Golden Dumps claiming
delivery of 200 000 shares in negotiable form in Modderfontein,
against which
Nash tendered payment of the sum of R88 250, being the total cost of such shares
in terms of the letter of 19 September
1980. Certain other claims were also
made, but they later fell away and need not be mentioned In his particulars of
claim Nash alleged
:-
/ (1) the
25
(1) the conclusion of "an oral agreement" between the parties, the "material
terms whereof" were set forth in the letter of 19 September;
(2) that it was an implied term of the agreement that the shares in the new
company, referred to in the letter, would be delivered
to Nash by Golden Dumps
upon the date the shares were issued or, alternatively, on the date they became
available in negotiable form
-these dates being alleged to have been 22 January
1981 and 26 January 1981 respectively;
(3) that pursuant to the agreement Nash concluded negotiations abroad on all
matters concerned with the reorganisation and amalgamation
of Modder 74 and
GGMA; and
(4) that in the premises he was entitled to delivery of the shares claimed.
/ Further
26
Further particulars were requested,
inter alia
, as to the nature of
the negotiations to be concluded abroad, and these were furnished by Nash. I
shall refer to these particulars
in more detail later. Golden Dumps pleaded, in
essence (I shall elaborate later) —
(1) the conclusion of an oral agreement between the parties "in or about"
September 1980, of which the letter of 19 September was
said to be "a brief
confirmation" and alleged that this agreement contained terms which are
different from those alleged by Nash;
(2) that Nash had failed to do what was required of him under the contract;
(3) that Nash had made to Pouroulis, acting on behalf of Golden Dumps, material
misrepresentations which induced Golden Dumps to
enter into the contract, viz.
that he held a B.Sc degree in engineering
conferred
/on
27
on him by a university and that he was a qualified chartered accountant
(other misrepresentations were alleged, but not pressed at
the trial), and that
on 27 December 1980 Golden Dumps had accordingly cancelled the agreement with
Nash and terminated his employment
with immediate effect; and
(4) that in the circumstances Nash was not entitled to the shares.
Various sets of further particulars and a repli
cation followed, but it is
not necessary at this stage to re
fer to these, save to note a denial in the
replication that
Nash made the misrepresentations alleged.
The main findings of the trial Judge (COETZEE J) at the conclusion of the
trial appear to have been -
(a) that the agreement between the parties as
reflected in. the letter of 19 September was -
".... a typical remuneration package of a senior executive in a substantial
company.
/ It
28
It combines a big salary with a motor car and a share option...."
and that the portion of the agreement relating
to the shares did not constitute a separate
mandate;
(b)
that Golden Dumps had
failed to prove the alleged misrepresentations;
(c)
that the condition upon which Nash's right to the shares depended
(viz. that everything necessary for the successful launching of
the
reconstituted and recapitalised company (Modderfontein) had been done) had been
fulfilled on 7 January 1981, when the underwriting
agreement was
signed;
(d)
but that inasmuch as Nash's right
to these shares
had accrued due, and become
enforceable as a cause
of action only after the cancellation of the
contract, Nash was precluded by the principle of
law stated in
Crest Enterprises (Pty) Ltd v Rycklof
/
Belegaings
29
Belesgings (Edms) Bpk
,
1972 (2) SA 863
(A)
from enforcing his right to delivery of the shares. Hence the order of
absolution from the instance.
As to credibility, the trial Judge had the following to say about the main
protagonists, Nash and Pouroulis;
"As far as the plaintiff is concerned, I did not get the impression that,
generally speaking, he was as a witness, unworthy of belief.
Various aspects I
think, as I've already pointed out, he possibly over-emphasised whilst
under-emphasising others, e.g. his view
of the agreement was less probable than
that of Pouroulis, but he was generally quite careful and not given to
extravagance or over-statement.
Pouroulis is almost the opposite. He is a
strange amalgam of smooth efficiency and crudity, of generosity and cruelty. His
is an
overbearing bulldozing personality. He can be utterly impatient and
impetuous. This was particularly demonstrated in the witness
box. Very
frequently he would hardly have gathered the general drift of the questioner's
question, even that of his own counsel,
before completely ignoring it and
confidently propounding whatever he had in his own mind, as if the speaker's
enquiry
did not exist In the course of carrying
on in this fashion in the witness box he, at times, recklessly disregarded
the truth, for the moment."
/ The
30
The learned Judge then proceeded to give examples in support of his general
assessment of the credibility of Pouroulis.
In all it amounts to a fairly devastating indictment. It appears to me to be
well justified.
I proceed now to consider the merits of the appeal.
First the contract: What constituted the contract between the parties and
what was its meaning and effect? Despite what had been stated
in the pleadings,
it was common cause in argument before this Court that the letter of 19
September constituted a written offer to
Nash, which the latter accepted
verbally or, at any rate, by conduct. As to the meaning and effect of the
letter, however, the parties
were very far from being ad
idem
. It was
Nash's case that the letter comprised (i) an employment "package", viz.
appointment as financial director of the group with
effect from 15 October 1980
at a commencing salary of R60 000 per annum and including the free use of a
motor-car, and (ii) a mandate
/to
31
to conduct negotiations abroad, upon the successful conclusion
of which he (Nash) would become entitled to 200 000 shares in
the new company at the prices stipulated. In evidence Pouroulis,
on behalf of Golden Dumps, presented a fundamentally different
interpretation of the contract. According to him, the entire
letter merely set out Wash's employment package, which included
the appointment to the position of financial director and,
by way of
remuneration, a salary, free use of a motor-car
and a share option. He denied
that the share option was in
any way linked to what Nash had been asked to do
in London;
nor had he said that it was in discussions leading up to
the
conclusion of the contract. Had Nash still been employed
by the
company when the shares became available he would have
been entitled to
purchase them, irrespective of whether he was
a good or bad financial
director. In support of his version
Pouroulis pointed to the fact that other
senior employees of
the company had also been given options to shares in the new
company.
/ The
32
The trial Court, as I have indicated, preferred
the version put forward by
Pouroulis. With reference to the
submission of Nash's counsel that the letter
of 19 September
contained a mandate, COETZEE J said:
"The plaintiff's difficulty is that this letter of the 19th September 1980,
which is the agreement between the parties, does not say
anything like this at
all. A mandate has to be tortured out of it. Making allowance for the fact that
it was composed in a hurry
and that the letter itself is not explicit (and in
certain respects, vague) it seemed to me on the first reading to be a typical
remuneration package of a senior executive in a substantial company. It combines
a big salary with a motor car and a share option.
After taking into account
every background and surrounding fact urged upon me by Mr Grbich, this remains
my impression after a last
reading of this letter. I think that the
probabilities are really overwhelmingly against the plaintiff."
With respect, I am unable to agree with this conclusion. The letter itself
expressly links Nash's entitlement to the shares with the
conclusion of his
(Nash's)
/ negotiations
33
negotiations abroad of the matters mentioned. This is wholly
inconsistent
with the notion that the share option was merely
part of Nash's remuneration
package, to which he would, willy-
nilly, have become entitled had he still
been the financial
director when the shares in the new company became
available.
Moreover, in evidence Pouroulis, who after all drafted
the
letter, was hard pressed to explain the words "On conclusion
of your
negotiations abroad ". He appeared to con
cede at one stage that once the
negotiations were concluded
and the merger successfully completed Nash would
become en
titled to the shares, but almost immediately thereafter
added:
"But as part and parcel of him being a financial
director". He explained that
he wrote the words in question
"in the heat of the moment"; and at one stage
went so far
as to suggest that the "negotiations" mentioned in the
letter
did not refer to the period while Nash was in England between
19
September and 15 October but to some other unspecified time:
/ "Later. Could
34
"Later. Could be the next year."
On the other hand, the only link between the share option and the employment
package is that they are contained in the same letter.
Bearing in mind, however,
that both the employment package and the mandate to conduct negotiations abroad
had been discussed by the
parties and that the purpose of the letter was to
record what had been agreed upon between them, this is not surprising. What is
surprising is that if, as Pouroulis insists, Nash's entitlement to the shares
was solely dependent on his being financial director
when the shares became
available, Pouroulis should have drafted the letter the way he did.
A fundamental weakness in the case as presented by Pouroulis on behalf of
Golden Dumps is the fact that Pouroulis's version of the
contract as given in
evidence by him is not to be reconciled with what, on his instructions, had been
stated in the
/ respondent's...
35
respondent's plea. Here it was alleged that in terms of the agreement
Nash was required, with regard to the amalgamation and reconstruction
of the
companies (Modder 74 and GGMA) to do a number of things, including the finding
of "a prospective lender abroad" of the moneys
required to finance the merger
project, and that upon the conclusion of a contract between such lender and the
reconstructed company,
and the issue of shares in the new company, Nash would be
entitled to purchase shares in the new company in the quantities and at
the
prices stated in the letter of 19 September. The plea went on to allege that,
for various reasons, Nash had failed to perform
his "mandate" (the plea uses
this very word) and, therefore, did not become entitled to receive any shares.
It is to be noted that
the version of the contract thus given in the plea
broadly accords with that advanced by Nash, both in his pleadings and in
evidence.
Pouroulis, on the other hand,
/ was
36
was not able adequately to explain the disparity, between his version of the
contract, as given in evidence, and the plea.
The trial Judge considered that the probabilities were "overwhelmingly"
against Nash's version of the contract. In so far as it is
relevant and
permissible to have regard to probabilities arising from the circumstances
surrounding the conclusion of the contract,
they appear to me to favour Nash's
version rather than Paroulis's. The evidence establishes that as at 19 September
1980 Pouroulis
was keen to go ahead with the merger, but that a substantial
injection of investment capital was urgently needed to make the merger
a viable
proposition. Pouroulis, under cross-examination, resisted the suggestion that he
was then "desperate for money", but the
objective facts tend to belie his
denial. Modder 74 was running at a substantial loss, had never declared a
dividend and owed the
State some R498 000. Golden Dumps had a bank overdraft of
about R500 000. GGMA was operating at a substantial loss
/ and
37
and was also non-productive of dividend income. There was, therefore, reason
for Pouroulis to be prepared to reward substantially
any person who succeeded in
finding abroad the necessary investment capital. In this connection I may
mention that it was common
cause that the parties to the contract contemplated
that Pouroulis would provide and make available to Golden Dumps the shares in
the new company (Modder) required to discharge the obligation to Nash. Pouroulis
was due to acquire 4 300 000 such shares in terms
of the merger and could thus
provide the shares without difficulty.
The size of the share option given to Nash is a factor of some significance.
It far exceeded the number cf shares (50 000) granted
by way of option to,eg,
the managing director, who had been in the service of the company for a number
of years. This suggests, on
the probabilities, a reward for a successful
conclusion of negotiations to be
/ conducted
38
conducted abroad rather than the ordinary incentive shares given to senior
executives. It is true that Pouroulis may well have also
had in mind that Nash
was to be a senior member of his management team and visualized him holding a
number of company shares, but
it does not follow from this that the real
consideration for the shares was not to be the successful conclusion of
negotiations abroad
or that Nash would qualify for the shares only if he was the
financial director at the time of their issue.
For these reasons I am of the view that, contrary to the finding of the Court
a
quo
, the share option contained in the letter of 19 September was
contingent, as the letter indicates, on the successful conclusion by
Nash of the
negotiations abroad. It was in effect the reward for the carrying out of a
mandate.
/Continuing
39
Continuing with the interpretation of the contract, the next matter to be
considered is what negotiations were contemplated by the
agreement. The letter
merely speaks of "your negotiations abroad of all matters concerned with the
reorganization and amalgamation"
of Modder 74 and GGMA. In order to identify
what negotiations the parties had in mind it is permissible to have regard to
the evidence
as to what was arranged in this connection by Nash and Pouroulis.
According to the further particulars to plaintiff's (Nash's) claim,
"reorganization" and "amalgamation" in this context were understood by the
parties to mean —
"(i) The acquisition of GGMA of
certain of the mining interests of one L C POUROULIS ("POUROULIS"), the sole
shareholder of the Defendant's issued shares in East
Rand and the entire issued
share capital of MODDERFONTEIN 74;
(ii) The raising of additional working
capital for CONSOLIDATED MODDERFONTEIN MINES LIMITED ("CONSOLIDATED
MODDERFONTEIN") for its proposed mining activities after the acquisitions
referred to in paragraph (i) above;
/ (iii) The
40
(iii) The execution of all matters incidental and necessary to give effect to
the aforegoing."
This appears to be borne out by the evidence. In effect, therefore, Nash's
main task was to introduce someone overseas who was prepared
to provide the
additional working capital required to enable the new company Modderfontein to
carry on its proposed mining activities.
About this there does not appear to be
much dispute. It is implicit in this that the negotiations referred to in the
letter were
to be successful negotiations. This was common cause.
To sum up, I am of the view that the last paragraph of the letter of 19
September did constitute a separate mandate in terms whereof
it was provided
that if Nash successfully concluded abroad negotiations which were aimed mainly
at introducing a source of additional
working capital, he would become entitled
to purchase 200 000 shares in the new
/ company
41
company, if and when the new company was formed and the shares became
available. Thus, the mandate having been successfully carried
out, Nash's
entitlement to the shares was still contingent upon the occurrence of a future
uncertain event and could be implemented
only after that event had occurred.
The next issue to be considered is whether Nash
did what he was required to do in order to earn the right to
the 200 000 shares in the new company. The trial Judge
found that Pouroulis —
" conceded that whatever Nash could
have done 'abroad', had been done by the 15th October 1980 and he (meaning
Pouroulis) was obviously then very satisfied with what
Nash had achieved at that
stage."
A conclusion that Nash had done what was required of him to earn the right to
the shares is also implicit in the Court's finding that
by 7 January the
condition upon which Nash's right to the shares depended had been fulfilled; and
generally in the Court's reasons
for non-suiting Nash on the ground of the
Crest Enterprises
principle.
/ In
42
In my view, this conclusion is amply borne out by the evidence. There is no
question that, through Lawson-Smith, Nash introduced Pouroulis
to the firm of
Laing and Cruickshank; that Laing and Cruickshank were interested in the project
from the moment of introduction;
that Laing and Cruickshank ultimately entered
into an underwriting agreement with GGMA; and that this underwriting agreement
enabled
GGMA (later called Modderfontein) to raise the required working capital
by way of a rights issue.
It was submitted on behalf of respondent that Nash did not effect the
introduction of Laing and Cruickshank to Pouroulis at all; and
that, in any
event, the purpose of the meeting at which Pouroulis met Gordon and Hoare, of
Laing and Cruickshank, on 8 October was
not the raising of money, but to discuss
the listing of shares on the London Stock Exchange (the so-called 163 listing).
The first
of
/ these
43
these submissions may be likened to grasping at a straw. It is based on
certain evidence given by Pouroulis that on a number of occasions
prior to
September 1980 he had heard from a stockbroker in South Africa, a Mr Peter
George, that if at any time he needed to "raise
finance" for "the merged
operation" Laing and Cruickshank of London would be interested in helping him to
do so; and on evidence
given by Hoare that he knew and kept in touch with Peter
George and from him had heard about Pouroulis. Pouroulis's evidence in this
regard is, to my mind, somewhat suspect; and, in any event, I do not think that
it assists the respondent's case. If Peter George
did give Pouroulis this
information about Laing and Cruickshank (and here it is to be noted that George
was not called as a witness),
it is strange that, when the company urgently
needed working capital, Pouroulis should not, of his own initiative, have
approached
Laing and Cruickshank, either directly or through
/ George . ...
44
George; or, at any rate, have instructed Nash to do so while in London.
Moreover, it is also strange that, when Pouroulis was told
in London that a
meeting had been arranged with Laing and Cruickshank, he should not have
mentioned to either Lawson-Smith or Nash
that this was the very firm George had
advised him to approach about finance. Having regard to these factors and also
bearing in
mind the finding by the trial Judge in regard to Pouroulis's
credibility generally, I find this evidence unconvincing. Be that as
it may, the
person who was actually instrumental (through Lawson-Smith) in bringing together
Pouroulis and Hoare, of Laing and Cruickshank,
was Nash. There is no gainsaying
this introduction. Nor do I think that the fact that Hoare may have heard, in
some vague fashion,
about Pouroulis before the meeting makes any difference.
This prior knowledge may have made Hoare more receptive to the approach
by
Pouroulis, but it does not, in my view, detract from the significance and
efficacy of the introduction by Nash.
/ The..
45
The submission that the purpose of the meeting was not to discuss the raising
of money is also, in my opinion, without foundation.
One's immediate reaction to
this submission is: if that is so, then it is remarkable how quickly discussion
at the meeting turned
to the raising of money, Nash's evidence is that the
meeting was arranged in order to discuss the raising of capital. This is
contradicted
by Lawson-Smith. Lawson-Smith's evidence in this regard appears to
be unreliable. The arrangements for the meeting were made tentatively
by
Lawson-Smith on 2 October, some four days before the arrival of Pouroulis in
London. It is clear from the contemporary notes made
by him that on 1 October he
had a lengthy meeting with Nash at which he was fully informed as to the
proposed merger and the plans
for development and expansion by the new company.
The notes of this meeting conclude with the following:
/"Cash
46
"Cash requirement for 4 ventures and SA is $20 m. Still short. Recommended
Laing and Cruickshank.
(Richard Morris)."
Under cross-examination Lawson-Smith conceded that
money-raising was discussed at this meeting (and that he recommended Laing and
Cruickshank in this connection), but he drew a distinction between money
required for overseas development and that required for
the South African
development of the merged interests of Pouroulis and GGMA. The need for the
latter, he says, was raised for the
first time on either 6 or 8 October, and
then by Pouroulis. I find this alleged distinction between external and internal
capital
requirements improbable and unconvincing. It also appears to be
contradicted by Lawson-Smith's note (quoted above); and at one stage
in his
evidence he virtually conceded this. If, as seems probable, Nash on 1 October
discussed with Lawson-Smith all the capital
requirements of the group and
Lawson-Smith recommended in this connection Laing and Cruickshank, it seems
inescapable that one, at
any rate, of the
/ purposes
47 purposes of the meeting with Laing and Cruickshank was to
discuss the raising of capital for the merger and the South African operations
of the new merged company. At that stage the plans for overseas development were
somewhat nebulous and the need for such capital
not urgent. The need for "South
African capital", on the other hand was real, clearly defined and urgent. It may
be that a 163 listing
was also on the agenda for the meeting (and that in this
regard Nash's evidence to the contrary is incorrect), but in that event
it was
merely a minor item compared with the raising of capital.
Respondent's counsel raised certain other arguments in support of the
submission that Nash did not "earn" his entitlement to the shares.
None of them,
in my view, is well-founded; and they do not merit discussion.
On appeal respondent's counsel also argued the defence of misrepresentation,
which foundered in the Court
/ a
quo
48
a
quo
. In his judgment COETZEE J dealt comprehensively and cogently
with this defence. Nothing was said in argument on appeal to show that
his
conclusion was wrong. I am convinced that it was correct and I agree with the
reasons given, I do not consider it necessary to
elaborate. This defence,
therefore, cannot succeed.
I come now to the final issue in the case, viz. the applicability of the
principle laid down in the
Crest Enterprises
case. Where one party to a
contract, without lawful grounds, indicates to the other party in words or by
conduct a deliberate and
unequivocal intention no longer to be bound by the
contract, he is said to "repudiate" the contract (see
Van Rooyen v Minister
van Openbare Werke
1978 (2) SA 835
(A), at 845 A-B). Where that happens, the
other party to the contract may elect to accept the repudiation and rescind the
contract.
If he does so, the contract comes to an end upon
/ communication
49
communication of his acceptance of repudiation and rescission to the party
who has repudiated (see 5 LAWSA par 226). The consequence
of this is that the
rights and obligations of the parties in regard to the further performance of
the contract come to an end and
the only forms of relief available to the party
aggrieved are, in appropriate cases, claims for restitution and for damages.
Where,
however, a right to performance under the contract has accrued to one
party prior to rescission, this right is not affected by the
rescission and may
be enforced despite rescission. This rule was enunciated by GREENBERG J (with
SOLOMON J concurring) in
Walker's Fruit Farms Ltd v Sumner
,
1930 TPD 394.
In the
Crest Enterprises
case,
supra
, it was held (at p 870 G)
that -
"....the rule in the
Walker
case,
supra
, is confined to cases
where, prior to the rescission of a contract by one party's acceptance of the
other's repudiation, there exists
a right which is accrued, due, and enforceable
as a cause of action independent of any executory part of the contract."
/It
50
It would seem that a similar rule applies in English law,
see
Hyundai Heavy Industries Co Ltd v Papadopoulos and Others
1980 [2] All ER 29 (HL), at pp 34-6, 39-40, 45.
It was common cause in the present case that Nash's right to receive the 200
000 shares in the new company, against payment of the
option price, did not
become "accrued, due and enforceable as a cause of action" until after 8 January
1981, the date upon which
Nash's letter of rescission was delivered by hand to
Golden Dumps. The Court a
quo
concluded that in view of this, and
applying the rule stated in the
Crest Enterprises
case, Nash's rescission
of the contract on 8 January 1981 precluded him frcm enforcing a right to
delivery of the shares. The learned
Judge nevertheless expressed the feeling
that non-suiting Nash appeared to him to be an "inequitable" application of the
rule, since
by 8 January there was nothing further that Nash had to do or could
do. Nash "...was indeed entitled to what was about to be created,
of which
/ there
51
there was certainty in the minds of all the persons concerned and involved in
the scheme. They, of course, included the very parties
to the contract". The
learned Judge suggested that this Court might add a suitable qualification to
the rule in order to avoid inequitable
results. In the view I take of the matter
it is unnecessary to consider this suggestion.
The trial Judge's conclusion
was probably an inevitable consequence of his holding that the letter of 19
September, as accepted by
Nash, constituted "a typical remuneration package",
combining a salary, the use of a motor-car and a share option. Contrary to this,
I have found that the share option was the consideration or reward for carrying
out the mandate relating to the successful conclusion
of negotiations
abroad.
This mandate was quite distinct from Nash's duties as financial
director under his contract of employment. In fact at the time when
the
agreement was made on 19 September 1980 it was contemplated that the
negotiations would be completed, successfully or otherwise,
prior to 15 October
1980,
the date upon which Nash's contract of employment was due to
/ commence
52
commence. In truth, therefore, though the employment contract and the share
option/negotiation mandate were contained in the same
agreement and were linked
in a practical sense, juristically they were separate agreements, with
independent sets of reciprocal rights
and obligations. (Cf. Wessels,
Law of
Contract
, 2nd ed., par 1615). This general view of the contract leads one,
in my view, to a conclusion different from that reached by the
trial Judge in
regard to the applicability of the rule in the
Crest Enterprises
case.
When Pouroulis dismissed Nash from his position as financial director, he
made no mention whatever of the share option. His repudiation
related, and must
be taken to have. been intended to relate, only to the employment contract. In
the circumstances it was, in my
opinion, open to Nash to accept the repudiation
of the employment contract only; and his acceptance thereof would not affect the
rights and obliga-
/ tions
53 tions relating to the share option. (See 5 LAWSA par. 226; De
Wet and Yeats,
Kontraktereg en Handelsreg
, 4th ed., pp 155-6; Christie,
Law of Contract
, pp 522-3; cf
Salzwedel v Raath
1956 (2) SA 160
(E), at p 163 E - F). Indeed, it may be doubted whether in the circumstances it
was open to Nash to do more than accept repudiation
of the employment
contract.
What did Nash do? He wrote, or caused to be written, the letter of 6 January
1981. The full text of the relevant portion of this letter
has been quoted
above. The letter is somewhat unclear in that, having averred that Golden Dumps
purported to terminate Nash's employment
with the company and that such
purported termination constituted an unlawful repudiation of "the contract" as
recorded in the letter
of 19 September, it proceeds to state that Nash accepts
such repudiation and cancels "the contract" on the grounds of such repudiation.
The use of the words "the contract" in this context is somewhat ambiguous. The
words may be intended to refer only
to the contract of employment or they may
refer to both the
/ contract
54
contract of employment and the mandate. Two factors, however, point to the
former alternative. Firstly, Pouroulis, acting on behalf
of Golden Dumps, had
only purported to terminate the contract of employment. Nash appreciated this,
and in fact the letter refers
to this. Secondly, after announcing Nash's
acceptance of the repudiation, the letter proceeds to refer to Nash's
entitlement to the
200 000 shares in Modder-fontein and to demand delivery of
the shares against payment of the option price. This clearly negatives
any
suggestion of a rescission of the contractual obligations relating to the
shares. It is true that the letter seems to indicate
that Nash and his attorneys
thought that his entitlement to the shares had already accrued at the time of
writing, but, in my view,
that cannot gainsay the whole tenor of the letter
which is: "I accept the termination of my employment as financial director, but
I insist upon the implementation of the obligation of Goden Dumps to deliver the
shares to me".
/ In
55
In view of the legal separability of the contract of employment and the
mandate, it was competent for. Nash to adopt this attitude
and, in my judgment,
that is in substance what he did. If that is so, then clearly the
Crest
Enterprises
principle does not apply because the rights and obligations of
the parties in regard to the share option/mandate were never rescinded.
On appeal, respondent's counsel raised the argument that Nash's summary
dismissal had been justified. The trial Judge rejected a defence
based on a
similar argument on the ground that it had not been properly pleaded. Before us
respondent's counsel sought to remedy
this by applying for leave to amend
respondent's plea and asking that the matter be remitted to the Court a
quo
for the hearing of further evidence on this issue. Respondent's
counsel conceded, however, that if the Court's finding were that
the contract of
employment and
/ the
56 the mandate were separable, this defence and the applications
to amend and for remittal fell away. Accordingly, no more need be
said of
this.
For these reasons I am of the view that Nash is entitled to the order claimed
by him.
The appeal is allowed with costs and the order of the Court a
quo
is
altered to read:
"(1) Defendant is ordered to deliver to
plaintiff 200 000 shares in negotiable form in Consolidated Modderfontein
Mines Limited against payment by plaintiff to defendant
of the sum of R88
250,00.
(2) Defendant is ordered to pay costs
of suit."
M M C0RBETT MILLER, JA)
NICHOLAS, JA)