Green v Murray

• Jurisdiction: South Africa
• Citation: 1924 AD 265

Green Appellant v Murray Respondent
1924 AD 265

1924 AD p265

Citation	1924 AD 265
Court	Appellate Division, Bloemfontein
Judge	De Villiers JA, Kotzé JA and Wessels JA
Heard	March 21, 1924
Judgment	March 28, 1924

Flynote : Sleutelwoorde

Contract — Construction — Appeal on facts.

Headnote : Kopnota

In an action in which the plaintiff claimed against the defendant a declaration of his interest in the ownership of a plant erected for the purpose of manufacturing wattle bark extract and in the profits of the business carried on with such plant together with damages for wrongful dismissal or alternatively salary and damages, the Durban Circuit Local Division upon some of the issues raised found for the plaintiff and upon others for the defendant, but on an appeal by plaintiff and cross-appeal by defendant the Appellate Division upon the facts, varied this decision, dismissing the appeal and allowing the cross-appeal.

The decision of the Durban Circuit Local Division in Green v Murray, varied.

Case Information

Appeal from a decision of the Durban Circuit Local Division

(MATTHEWS, A.J.).

The facts appear from the following reasons of MATTHEWS, A.J.

MATTHEWS, A.J.: This action was tried before me in the July Sessions of this Court, having been transferred thereto by the Provincial Division. In it the Plaintiff claims: -

(1)

A declaration of his interest in the ownership of a plant elected by the defendant, for the purpose of utilising a process for the manufacture of wattle bark extract: an Order to procure its release from a mortgage over it effected by the defendant, or alternatively for £4,000, the alleged value of plaintiff's interests in the plant.

(2)

A declaration of his interests in the profits of the wattle extract business carried on with the plant by the defendant, and an account of such profits taken separately for the years 1916 to 1921 inclusive, debate of such amount and judgment for such amount as may be found due for any year in which such profits were made.

(3)

Similar declarations and Orders in respect of the share and interest of one Tod in the plant and business, which share and interest the Plaintiff avers that he has acquired.

(4)

Damages for wrongful dismissal by the defendant as his manager in this business or alternatively salary at a certain rate up to a certain date and such damages.

It appears to me to be desirable first to narrate fully but as briefly as possible the history of the business relationship between the parties. This however will involve a somewhat, lengthy statement of facts. Those material facts which at the close of the trial seemed to me to be no longer in dispute, are as follows: -

The plaintiff who is an engineer became in October, 1916, the cessionary of a half interest of a process for extracting the soluble contents of wattle bark. For that process a letters patent had been granted in the name of one Tod, in 1915.

1924 AD p266

The plaintiff had taken part in working out this process while engaged in managing a colliery in Northern Natal, where Tod was also then employed. In November 1916, the plaintiff, the defendant and Tod together with one Doherty and one Halford Smith entered into an agreement for the formation of the company to acquire the patent rights of the plaintiff and Tod in this process and to put up a small plant to test the commercial value of the process. If, after a thorough test, the result was satisfactory to Doherty and the defendant who were to subscribe the necessary capital, all the parties to the agreement were to form a company to acquire and work the patented process, the nominal capital of such company being fixed at 20,000 shares of £1 each, £4,500 of which (or 221/2 per cent.) were to be allotted to Tod and the plaintiff. These two were also to obtain a preference in any appointment to the staff of the company. Doherty and the defendant were each to receive £5,000 fully paid shares in consideration of their subscribing in cash the working capital of £10,000. Halford Smith, the promoter of the company, was to receive 5,500 shares. The company was however never formed, but the defendant shortly after acquired premises and plant in Milne Street, Durban, and the patented process was there utilised with certain adaptations or alterations rendered necessary owing to the impossibility of procuring copper at the time. In the meantime Doberby one of the partners to the agreement appeared to be unwilling to undertake his responsibility under it.

If he dropped out it would leave the defendant at liberty to make other arrangements with Tod and the plaintiff. Tod came to Durban to assist the defendant about the middle of 1917, and in October of that year the plaintiff resigned his position on the colliery and came to Durban ban to assist Tod. Shortly after this time they began to produce wattle extract by means of the adapted process, and by December of 1917 the parties seemed to have been satisfied that the extract could be produced at a profit. Tod and the plaintiff then wrote on the 6th December, 1917, a joint letter to the defendant referring to the agreement of November, 1916, and calling attention to the fact that they (Tod and the plaintiff) had now complied with clause 2 of the agreement which provided that Doherty and the defendant would, if the test were satisfactory, form within six months from the date when the plant was erected and producing extract, a company to acquire the patent and work the process. On the 13th December, 1917, they wrote a further letter to the defendant Murray confirming a conversation which took place that day. In this conversation Murray had stated that he was willing to proceed with the agreement and the construction of the plant as soon as possible, but that, pending the formation of the company, Tod and the plaintiff were to continue manufacturing the extract. This letter went on to state that they noted with satisfaction that, arrangements were being made for the carrying out of clause 2 of the agreement.

These letters though signed by Tod and Green were drafted by Murray himself. The reason for this was that they all desired to test finally Doherty's willingness to implement his part of the agreement of November 1916. Doherty did not do so, and from that time, viz., December, 1917, Tod and Green continued till July, 1918, working under an, arrangement whereby Murray found the necessary capital for working the plant and Tod was paid a small salary or small sums from time to time to cover his living expenses. Green, drew no salary whatever until July 1918 when he started to draw a salary of £50 a month. Green told Murray that the process was now in proper working order and could be utilised commercially. Thereupon certain letters passed from the defendant to Tod and Green and from them to the defendant. These letters are dated the 2nd and 6th August, 1918. respectively.

1924 AD p267

As part of the narrative of events it seems desirable here to set out the terms of these letters, but leave the question of their interpretation to be dealt with later. In the letter of 2nd August 1918, the defendant wrote to Tod and Green as follows: - "We now beg to confirm the agreement made between us that you both engaged yourselves to us to work with the plant we have installed at Milne Street, and any other plants that we may instal for the production of wattle extract, at a salary to be agreed upon from time to time. In addition to the salary agreed you are to receive between you 22.5 per cent. 'of all nett profits, this arrangement to last so long as we continue to manufacture wattle extract or until any other mutual change may be agreed upon." The reply of Tod and Green to this letter is an acknowledgment of its receipt and a confirmation of the arrangement it records. "Subject to this that should any circumstance arise whereby we no longer supervise the working of the plant, we shall retain to ourselves and to our respective heirs and executors the 22.5 per cent. share of the profit, and 22.6 per cent. share of the plants. The costs of the plants to be paid out of the profits at a rate not to exceed 33 per cent. per annum."

Whatever was the arrangement made, by these letters, their scope and interpretation never appear to have been definitely discussed between Green and Murray until shortly before the events occurred which gave rise to this action: and this notwithstanding that they were often in daily intercourse with each other. But the intention of Murray to form a company was never lost sight of by him or Green: some negotiations to that end went on from time to time. Whatever was the arrangement made by the letters August, 1918, it was intended to be no more than a temporary one until the company could be formed. The defendant erected a factory and wattle extract plant at Greytown and Tod went there about October, 1918, to manage it. Plaintiff continued at the works at Durban for another year, when a project was formed of erecting additional works at Mid-Illovo. Murray, Green and Tod went to that place to inspect the proposed site of those new works and on the way back lunched at Campordown where they discussed the question of the formation of a company and their respective rights and interests when it should be formed. No finality was then arrived at, but the parties got to a stage of negotiations from which a formal draft could be prepared. This is the draft set out an annexure

"E" to the plaintiff's declaration. This draft provided for the cession by Murray, Tod and Green of all their rights and interests in the wattle extract department of the firm of Robert Murray & Co., to a company which was to be formed in accordance with its terms. The cession was to take place as from the 1st January 1920. The draft provided however that the agreement was to be of no effect until a statement of...