Meskin, NO v Anglo-American Corporation of SA Ltd and Another

• Jurisdiction: South Africa
• Judge: Jansen J
• Judgment Date: 05 September 1968
• Court: Witwatersrand Local Division

Jansen, J.:

The plaintiff is the liquidator of a company, hereinafter called Titanium, and he sues the defendants jointly and severally for damages on behalf of Titanium. The defendants have each excepted to the C plaintiff's particulars of claim alleging that they disclose no cause of action.

The relevant paragraphs of the particulars are:

'8. At all times material hereto:

(a)

A company, duly incorporated with limited liability in accordance with the company laws of the Republic of South Africa and known as Umgababa Minerals Ltd. (hereinafter called Umgababa), carried on business as a miner of ilmenite at Umgababa, Natal;

(b)

D Second defendant was chairman of the board of directors of Umgababa;

(c)

Second defendant was appointed a director of Umgababa and chairman as aforesaid, as the nominee of first defendant;

(d)

Second defendant was employed by first defendant;

(e)

Second defendant carried out all his functions and duties as a director of Umgababa and as chairman of the board of directors of Umgababa, within the course and scope of his employment with first defendant.

9. On 25th June, 1956 Titanium applied for and was allotted 200 shares E of R1 each in Umgababa, which shares were fully paid for by Titanium.

10. In or about December, 1956 Titanium applied for and was allotted a further 199,800 shares of R1 each in Umgababa, which shares were fully paid for by Titanium.

11. Prior to 10th December, 1957, Umgababa entered into a certain contract with a company known as British Titan Products Ltd., in terms F whereof Umgababa agreed to sell to British Titan Products 225,000 tons of ilmenite during the period mid - 1958 to 1962 at a price of R8 per long ton f.o.b. Durban.

12. The said quantity of ilmenite represented a major portion of the total anticipated production of Umgababa during the said period.

13. The said price of R8 per long ton F.O.B. Durban was:

(a)

a price less than the cost to Umgababa of producing a long ton of ilmenite;

(b)

a price considerably less than the ruling world market price for ilmenite;

(c)

G accordingly, a price at which Umgababa was unable to sell ilmenite profitably.

14. On or about 10th December, 1957 plaintiff was invited by second defendant to subscribe for a further 50,000 of R1 shares in Umgababa.

15. On 10th December, 1957 first defendant offered in writing to Titanium to purchase from it its entire shareholding in Umgababa, including the said further 50,000 shares for a price of R1.15 per share, that is to say, for a total consideration of R287,500.

H 16. A copy of the said offer is hereto annexed, marked 'A'.

17. The said offer was transmitted to Titanium by second defendant and was so transmitted in the expectation that Titanium would subscribe for and be allotted the said further 50,000 shares.

18. At the time the said offer was made and Titanium was invited to subscribe for the said further 50,000 shares, defendants knew:

(a)

of those matters set out in paras. 11, 12 and 13 hereof;

(b)

that the said contract with British Titan Products Ltd. would cause Umgababa to carry on business at a loss;

(c)

that Titanium was unaware of the existence of the said contract or of its terms;

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(d)

that Titanium would subscribe for and be allotted the said further 50,000 shares;

(e)

that had Titanium been aware of the existence of the said contract or its terms it would, upon being allotted the said further 50,000 shares, have accepted the said offer.

19. By reason of the premises, defendants were in duty bound, in A inviting Titanium to subscribe for the said 50,000 shares and in making the said offer to Titanium, to disclose to Titanium the existence of the said contract and its terms.

20. In breach of their said duty, and with the intention of inducing Titanium to subscribe for the said further 50,000 shares and of inducing Titanium to refuse the said offer upon its being allotted the said further 50,000 shares, defendants concealed the existence of the said contract and its terms from Titanium.

21. In consequence of defendants' aforesaid non-disclosure:

(a)

Titanium subscribed for and was allotted the said further 50,000 B shares by Umgababa on 21st March, 1958, which shares were fully paid for by Titanium;

(b)

Titanium refused the said offer.

22. The shares held by Titanium in Umgababa, totalling in all 250,000, are valueless.

23. In the premises, Titanium has suffered damage in the sum of R287,500.

24. Defendants are, accordingly, jointly and severally liable to C plaintiff in the said sum of R287,500.'

Annexure 'A' referred to in para. 16, purports to be a letter dated 10th December, 1957, from the first defendant to the chairman of Titanium, reading as follows:

'We refer to the letter dated 10th December, 1957, addressed to you by the chairman of Umgababa Minerals Ltd., and hereby offer to purchase D from your company the following shares in that company:

Either

(a)

your existing holding of 200,000 shares of 10s. each in Umgababa Minerals Ltd., together with (subject to the same being taken up and paid for by you) the additional 50,000 shares of 10s. each which will be offered to your company in January, 1958, at par - for a total consideration of £143,750 (equivalent to 11s. 6d. per share); or

(b)

subject to the same being taken up and paid for by you, the E additional 50,000 shares of 10s. each in Umgababa Minerals Ltd., which will be offered to your company in January 1958 at par - for a total consideration of £27,500 (equivalent to 11s. per share).

These offers will remain open for acceptance by the board of directors of your company for a period of seven days from the date of this letter, whereupon, one or other of them be accepted before that date, the offers will ipso facto lapse. It is agreed, however, that should the board of F directors of your company agree within the aforementioned period of seven days to accept this offer, then the offer will remain open until such time as a general meeting of shareholders of your company has, if necessary or deemed desirable, been convened for the purpose of confirming and ratifying the sale of the shares concerned, such meeting to be convened by you at the earliest convenient date.'

The defendants have filed separate notices of exception, but the ground G raised is identical. In the notice of the first defendant it is stated as follows:

'that the said particulars lack averments which are necessary to sustain an action for the relief claimed and disclose no cause of action, in that, even if the facts alleged by the plaintiff are true, as a matter of law the first defendant was under no duty to disclose to Titanium the existence or the terms of the contract referred to in para. 11 of the H particulars of claim, and the first defendant is accordingly not liable for any damage which Titanium may have suffered as a result of not accepting the first defendant's offer to which reference is made in paras. 15 and 16 of the particulars of claim'.

Before stating the defendants' main contentions it may be as well to make certain preliminary observations. The basis of the plaintiff's claim is that in breach of their duty

'defendants concealed the existence of the said contract and its terms from Titanium'

(para. 20). The word 'conceal' is ambiguous: it may e.g. mean no

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more than 'refrain from disclosing or divulging' (Oxford English Dictionary); it may import the existence of a duty

'a man cannot be said to conceal what he is not bound to reveal, suppress what he is under no duty to express, or keep back what he is not required to put forward'

A (Spencer Bower on Actionable Misrepresentation, para. 91, 2nd ed., p. 95); it may suggest

'that active concealment which consists in taking measures for the prevention of the discovery of the truth'

(Salmond and Williams on Contract, 1954 ed., p. 278) or convey

'a guilty and fraudulent hiding away, or covering up, or obscuring, of B the thing undisclosed'

(Spencer Bower on Actionable Non - disclosure, paras. 184, 629, pp. 160 and 559). In the context it appears that the plaintiff is using 'conceal', not in the sense of 'active concealment', but in the sense of non-disclosure merely (but qualified by the knowledge and intent, and the duty, alleged).

C The issue between the parties is whether there was a duty upon the defendants to disclose

'the existence or the terms of the contract referred to in para. 11 of the particulars of claim'

(hereinafter referred to as 'the contract'). The main contention on behalf of the defendants is that, in offering to purchase the shares D from Titanium, there was no duty upon them to disclose to Titanium (the prospective seller) any defect (if such it were) in the shares. The contention is mainly based on the following passage from Wessels, Law of Contracts, 2nd ed., para. 1078:

'When non-disclosure will be regarded as fraud and when not depends upon the surrounding circumstances. The position of the buyer differs from E that of the seller. The former is not bound to disclose facts within his knowledge which would enhance the value of the subject-matter of the contract. Thus, if a purchaser suspects or discovers a latent value in a farm he wishes to buy, there is no duty cast upon him to reveal why he is desirous of purchasing (per KOTZE, J.P., in Josephi v Parkes, 1906 E.D.C. 138) . . .'

The present argument is a fortiori: if the purchaser is not under a duty F to disclose to the ignorant seller his knowledge of factors enhancing the value of the merx (e.g. the presence of diamonds on a farm) there can be even less question of a duty to disclose knowledge of factors affecting the value adversely. In the first instance the buyer is able to exploit his superior knowledge to the disadvantage of the seller; in the latter, this is not the position...