Nash v Golden Dumps (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Corbett JA, Miller JA, Hoexter JA, Van Heerden JA and Nicholas JA
• Judgment Date: 27 March 1985
• Citation: 1985 (3) SA 1 (A)
• Hearing Date: 18 February 1985
• Court: Appellate Division

Corbett JA:

In this appeal the appellant is Mr Adrian Nash. I shall refer to him as Nash. The respondent is a company known J as Golden Dumps (Pty) Ltd ("Golden Dumps").

Corbett JA

Nash instituted action against Golden Dumps in the A 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 quo Nash now appeals against the whole of the judgment to this Court. The essential facts giving rise to the B 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 C 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 there he worked on the re-evaluation of the mine to see whether there were sufficient ore reserves to justify a continuation of D 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 E 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 Daggafontein and South Roodepoort mines. He also conducted underground mining operations with some considerable success. In 1978 a company known as Modder 74 (Pty) Ltd ("Modder 74") was formed to establish a plant at the New Modderfontein Mines for the F recovery of gold there by a new method of recovery, called 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 G Mining Areas Ltd ("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 H 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 mining interests in the East Rand would be acquired by GGMA against the issue to I 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 Ltd ("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 J of the Government,

Corbett JA

A 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 B 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 was accordingly on the look-out for someone with the right qualifications, who could be appointed to the position of C 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 Africa from England and that he might be the man that Pouroulis was seeking.

D At that time Nash was living in London. He was the proprietor of a small company known as Global Oil Ltd 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 E 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 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 F 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 G 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 in order to provide working capital for the new company to be created in terms of the merger. There is some dispute in the H 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 I "look around" and try to find such an investor on his return to London. If Nash found 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) a large block of J shares in the new company at a substantial discount.

Corbett JA

During the course of their discussions Pouroulis also told Nash A 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 B 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 C explore the possibilities of finding an investor, 15 October 1980 was agreed upon as a suitable date for him to 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 D 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 15 October 1980.

Your commencing salary will be R60 000 per annum, and you will E 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) Ltd and Government Gold Mining Areas (Modderfontein) Consolidated Ltd, 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

F 50 000 at R1 each."

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 G 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 H 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 Nash telephoned Pouroulis and told him what he had achieved. It was agreed that I Pouroulis would come to London on 6 October. On the following day Nash...