Barrett v Rewi Bulawayo Development Syndicate Ltd

• Jurisdiction: South Africa
• Citation: 1922 AD 457

Barrett Appellant v Rewi Bulawayo Development Syndicate Ltd
1922 AD 457

1922 AD p457

Citation	1922 AD 457
Court	Appellate Division, Bloemfontein
Judge	Innes CJ, De Villiers JA and Juta JA
Heard	June 16, 1922
Judgment	July 5, 1922

Flynote : Sleutelwoorde

Contract — Construction — Sale of mining claims — "Monthly payments according to profits" — Pleading — Exception — Practice.

Headnote : Kopnota

Plaintiff sold to defendant certain mining claims under a written agreement, which provided that the price for the claims should be £500 cash and £2,500 "payable out of profits, if any, derived from the working of the said claims at the rate of 50 per cent. of such profits. . . by monthly payments according to such profits." The agreement defined profits as "the difference between working expenses and the value of the gold won," and made provision for a monthly audit of defendant's books and for the preparation of a monthly statement.

On an exception taken by plaintiff to defendant's plea.

Held (JUTA, J.A., dissenting), that upon a true construction of the agreement in the monthly statement made thereunder any losses in working incurred in previous months, should be taken into account in calculating profits, and that each month should not be separately dealt with and the profits of each ascertained without any reference to prior working.

Exception should not be taken to particular sections of a pleading unless they are self-contained and amount in themselves to a separate claim or a separate defence, as the case may be, but the exception should be to the pleading as a whole. (Per INNES, C.J.)

The decision of the High Court of Southern Rhodesia in Barrett v Rewi Bulawayo Development Syndicate Ltd confirmed.

Case Information

Appeal from a decision of the High Court of Southern Rhodesia (TREDGOLD, J.)

1922 AD p458

Plaintiff sued defendant syndicate to recover the purchase price of certain mining claims bought by defendant under a written agreement. Defendant filed a plea raising a defence based upon the proper construction of the agreement to which plaintiff excepted as bad in law. The High, Court dismissed the exception and plaintiff appealed after obtaining the leave of that Court.

The facts are stated in the judgment of INNES, C.J.

P. U. Fischer, for the appellant: When "monthly" or "annual" profits are referred to it does not follow that such profits can only be ascertained by wiping off all past deficits. Each period can be dealt with separately.

See Ammonia Soda Co. v Chamberlain (1918, 1 Ch. D at p. 289); Dent v London Tramways Co. (16 Ch. D. 344); Lee v Neuchatel Asphalte Co. (41 Ch. D. 1).

H. F. Blaine, K.C. (with him C. A. Beck), for the respondent: Expenses incurred in mining, milling and maintenance are of the nature of capital and when they exceed the revenue the loss must be made up out of future revenue. See Verner v General and Commercial Investment Trust (1894, 2 Ch. D. 239).

When the money spent in procuring revenue exceeds that revenue there can be no profit. See In re National Bank of Wales (1899, 2 Ch at p. 670); Ammonia Soda Co. v Chamberlain (supra, at p. 287); Bond v Barrow Haematite Steel Co. (1902, 1 Ch at p. 365), In re Spanish Prospecting Co. (1911, 1 Ch. 92). Dent's case (supra) is distinguishable.

This was not a matter for exception. Paragraph 4 of the plea did not constitute a defence and was not a fit subject for exception. See Richter v Bloemfontein Town Council (1922, A.D.

Fischer replied.

Cur adv vult.

Postea (July 5th).

Judgment

Innes, C.J.:

This is an appeal - the leave of the trial Court having been duly obtained - against an order of the High Court of Southern Rhodesia dismissing an exception to the defendant's plea. The exception was faulty in point of form; for it attacked a single paragraph (sec. 4) of the plea as being bad in law and

1922 AD p459

Innes, C.J.

affording no defence to the action. Now, it was the plea as a whole which embodied the defence; if the matters relied on were insufficient in law the entire plea should have been excepted to on that around. Exception should not be taken to particular sections of a pleading, unless they are self-contained and amount in themselves to a separate claim or a separate defence as the case may be. See de Wet v Hollow (1914, A.D., p. 157); Stephens v de Wet (1920, A.D., p. 279). The paragraph in question, however, was very important., for it dealt with the legal effect of the contract sued upon. It would have been quite competent to except to the plea as based upon a wrong construction of that contract. And the dispute may be dealt with as if it had come up in that form.

The action is brought to recover portion of the purchase price of certain claims bought by the syndicate from the plaintiff's husband, whose rights she has acquired. The price is payable out of the profits of the claims; and the parties are at issue as to the method of calculation. The syndicate contends that in the monthly statements which the contract requires, any losses in working incurred in previous months should he taken into account in calculating profits; the plaintiff maintains that each month should be separately dealt with, and the profits of each ascertained without any reference to prior working. That is the controversy which the trial Court decided in favour of the syndicate and which is now submitted to us.

The subject-matter of the contract consisted of claims and mining plant; the latter was to be paid for in cash against delivery; as to the claims, £500 was to be paid on transfer and a balance of £2,500 in manner specially provided. Now, the governing clauses which indicate the intentions of the parties in regard to the payment of such balance are, I think, sec. 2 and the definitive portion of sec. 6. The other clauses are subsidiary and provide for the carrying out of the intention so expressed. Sec. 2 provides that the price for the claims should be £500 cash and £2,500 "payable out of profits, if any, derived from the working of the said claims at the rate of 50 per cent. of such profits... by monthly payments according to such profits." And sec. 6 defines profits as "the difference between working expenses and the value of the gold won." Before considering the

1922 AD p460

Innes, C.J.

effect of the provisions above quoted, I may say that from the English cases to which we were referred no general principle decisive of the point at issue is deducible. They turned for the most part upon their own circumstances and upon the documents or statutes which were applicable; just as the present dispute, turns upon the construction of the agreement sued upon. The position is this: - The seller, receiving cash for his plant and 1500 in respect of his claims, was content to depend for the balance of £2,500 upon the future working of the property and to accept payment only out of profits, that is, out of the difference between the working expenses and the value of the gold won. He became, though not a partner, jointly interested for an indefinite period in the venture. Now, the provisions above set out clearly indicated a fundamental intention that the balance due to the seller should only come out of his half-share of any excess in value of gold won over the expenditure duly incurred in winning it. But it was naturally important to him that the profits in which he was to share should materialise without undue delay. A too generous allowance for depreciation, or a too expansive policy of development, might postpone indefinitely the profit earning stage. Hence, conditions were inserted (sec. 5) limiting the depreciation allowance, and it was stipulated (sec. 6) that no charge should be made for development work in excess of the ordinary and usual requirements of mines of a similar size and, nature. The second clause had already provided that the seller's share of the profits, if any...