Pathescope (Union) of South Africa Ltd v Mallinick

• Jurisdiction: South Africa
• Judge: Innes CJ, De Villiers JA, Wessels JA, Hutton AJA and Stratford AJA
• Judgment Date: 02 February 1927
• Citation: 1927 AD 292
• Hearing Date: 29 September 1926
• Court: Appellate Division

De Villiers, J.A.:

The respondent, a school teacher of Bertrams Junior Government School, Johannesburg, who on the 4th August, 1922, had applied for 100 £1 shares in the appellant company which were duly allotted to her and on which she paid £10, on the 22nd December, 1925, issued a declaration against the company in the Transvaal Provincial Division for the rescission of the contract to take the shares, the removal of her name from the register of members of the company and the repayment of the £10. The action was based upon the alleged misrepresentations of one Wheatley, the duly authorised agent of the company. The misrepresentations were stated in the declaration to be the following:

"Sec. 3. Plaintiff was induced to apply to the company for an allotment of the said shares, by the following representations made by the company's duly authorised agent, Alfred Joseph Wheatley on the 4th day of August, 1922: -

(a) That the company had special permission from the Education Department of the Union, to canvass school teachers of the Union to become shareholders of the company, and that school teachers would be the only persons privileged to purchase such shares in the company.

(b) That the company was to acquire the sole right of all educational films, and the sole right to exhibit such films in the Union of South Africa and elsewhere.

(c) That the Education Department of the Union of South Africa were directly interested in, and were furthering the interests of the company, which was, in fact, fostered by the Education Department, and was formed under the patronage of the Education Department of the Union.

(d) That Dr. Viljoen of the Education Department, and Chief Justice ROSE-INNES were on the directorate of the company and that General J. C. Smuts, at that time the Prime Minister of the Union of South Africa, had expressed his approval of the company's objects, and that he himself was to become a director of the company, and had, furthermore signified his intention of converting the company into a Government institution, and had, m a matter of fact, arranged to frank all correspondence and films of the company, that is to say, all correspondence were permitted to go through the post free of charger, and stamps, and all films could be imported free of customs duty.

De Villiers, J.A.

(e) That the company had purchased and acquired the entire interest of the firm known as Pathe Freres of America, including Pathe Freres' films, showing all over the world in bioscopes and picture houses, which films had become the property of the company, together with the sole right to exhibit and show such pictures all over the world.

(f) That payment of shares would be in quarterly instalments, but in the event of the plaintiff or any other applicant for shares; being unwilling, at any time, before payment in full, to take up, any shares allotted to them, then the company would itself take up such balance of shares, allotted to any such applicant, at par, and the plaintiff and other applicants would have the option to retain such shares allotted to them, in respect of which payment had already been made by them, and that the company would release any applicants from any further liability in respect of any application made for a greater number of shares, in respect of which payment had not yet been made."

In sec. 4 the representations were alleged to be of material facts, that they are false, that they were made with the object of inducing the plaintiff to take up the said shares and that they did induce he plaintiff to do so. It was further stated that in or about the month of December, 1925, the plaintiff discovered that the representations were false and that immediately thereafter she repudiated her contract to take up the shares. The substantial defence to the action was that as early as November, 1922, the plaintiff had been aware of all the facts set out in sec. 3 and 4 of the declaration, that notwithstanding such knowledge plaintiff did not until December, 192.5, take steps to have the said contract rescinded and have her name deleted from the share register, and that by reason of plaintiff's delay after full knowledge, in taking steps for rescission of the said contract and for removal of her name from the share register, she was not now entitled in law to have the relief she claims. The action was not based specifically on fraud: but that most of the representations were false to flip knowledge of Wheatley was not disputed. The Court found that Wheatley had practised a deliberate fraud upon respondent and that the company shortly afterwards became, aware of the fact: also that Wheatley was convicted and sentenced for fraud in February, 1923. The action was tried before KRAUSE and VAN PITTIUS, J.J who, misconceiving the plea as

De Villiers, J.A.

one of estoppel, gave judgment in favour of the plaintiff as prayed. It is from this judgment that the present appeal is brought.

Mr. Taylor, on behalf of the respondent, did not attempt to support the reasoning of the learned Judges in the court below, and as the evidence left no doubt as to the respondent's knowledge of the misrepresentations as early as November, 1922, he either abandoned or did not seriously press the respondent's case in so far as the allegations in (b) (d) (e) and (f) are concerned. That leaves only (a) and (c).

Taking these in their order, the appellant admitted that the representation that the company had special permission from the Education Department of the Union to canvass school teachers to become shareholders of the company had been made by Wheatley, but submitted that it was substantially true. As regards the, representation that Wheatley had represented to the respondent that school teachers would be the only persons privileged to purchase shares in the company, the Court found that that had been proved. That that allegation was false was not disputed. But that is not enough to enable her to succeed. The respondent must also satisfy the Court that the representation was made with the intention of inducing her to take the shares, and that she was induced by it to enter into the contract. If she establishes that, she would be entitled to the order asked for, unless the appellant can show some reason sufficient in law to debar her from such relief. What constitutes such a defence will have, to be considered later on.

Now the facts of the case are set out at length in, the, reasons prepared by KRAUSE, J., in the court below, so that it is unnecessary to repeat them. But in order to decide whether the representation was material it is necessary shortly to set out the circumstances under which it was made. In the year 1922, the appellant company was formed for the purpose of acquiring the rights of a company called Pathescope (S.A.) Ltd., which h ii been established in Cape Town in 1919 for the purpose of installing in schools in South Africa what are called Pathescope machines. Already in 1921, one Harris, later the manager of the appellant company, had interviewed the Education Department as manager of Pathescope (S.A.) Ltd., and on 24th February, of that year obtained from Mr. Scott, at that time

De Villiers, J.A.

Secretary to the Education Department, the following letter: -

"To Principals of Government schools,

I am directed to inform you that the bearer of this letter is Mr. A. Harris, who is the manager of the Pathescope (S.A.) Ltd. This department is in favour of developing instruction by means of the cinematograph and Mr. Harris will no doubt be able to explain to you how funds have been raised in the Cape Province to provide for the use of the cinematograph in school.

H. SCOTT,

Secretary, The Transvaal Education Department."

Thereafter in the beginning of August, 1922, the agent of The company, Wheatley, during school hours visited the Newtown Junior Government school, Johannesburg, where the respondent at the time was teaching, and on the representation that the Director of Education had given his permission to approach the teachers during school time for the purpose of canvassing them to take shares, the school work was interrupted and a meeting held in the staff room with the respondent and three other lady teachers. The respondent in her evidence (no evidence was called on behalf of the appellant) states: -

"Mr. Wheatley came to the school and told me he had been sent by the...