Robinson v Randfontein Estates Gold Mining Co Ltd

• Jurisdiction: South Africa
• Judge: Innes CJ, Solomon JA, CG Maasdorp JA, Juta JA and Bristowe AJA
• Judgment Date: 19 February 1921
• Citation: 1921 AD 168
• Court: Appellate Division

Innes, C. J.:

In the year 1906 large mineral interests in the farms Randfontein, Uitvalfontein and Waterval were held by a number of associated companies, all members of the Robinson group., of which the Randfontein Estates - hereinafter referred to

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as the plaintiff - was the principal or parent company. The others were subsidiaries floated from time to-time to exploit propositions which the plaintiff had acquired. The reef had been traced throughout and considerable development and mining work had been undertaken; but upon Waterval miming operations had not then been commenced. The plaintiff's interest in that farm took the form of a lease of the mineral rights; and to appreciate the position in 1906 it will be necessary to refer briefly to the origin and history of that lease. It was secured in January, 1887, by Sir Joseph Robinson, whom in this judgment I call the defendant, from the owner, one J. J. C du Toit. It ran for 5 years certain, but was renewable thereafter for further periods of 5 and 10 years, so as finally to terminate, if the renewals took effect, on the 24th January, 1907. The defendant would have preferred to purchase the property, but he could not come to terms with du Toit, and therefore contented himself with a mineral lease. Certain negotiations took place at the time regarding the eventuality of a future sale. These it will be necessary to discuss more fully later on. In February, 1889, the plaintiff company was formed and on the 6th March of that year the defendant ceded to the company the Waterval lease and also a mijnpacht which he had taken out on the basis of it. The lease was duly renewed it the end of 5 years, but not apparently in 1897. However this omission was cured by a notarial agreement executed in June, 1898 which specialty extended the original lease for 12 years, reckoned from the 24th January, 1907, at an increased rental. This agreement was made between the defendant, on behalf of the plaintiff company, and two representatives of the heirs of du Toit, who had died in - 1889, leaving a will which directed that his widow should enjoy the usufruct of Waterval during her life, and that at the expiration of the 20 years term of the original lease the farm should be sold and the proceeds divided in manner specified. As a fact she did die in 1905. Meanwhile in 1899 three subsidiary companies had been floated to work the Waterval mijnpacht, which was apportioned equally among them. They were styled the Ferguson, the Van Hulsteyn, and the Johnston Randfontein. All their shares were held by the plaintiff or its nominees. Their working capital was small, the war interferred with joint stock operations, and they never did any real

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mining work. So that in 1906 these three subsidiaries had, a period of little more than 12 years within which to exploit the only mineral rights which they possessed, and which up to that time had remained practically intact. That was the position when, in the middle of 1906, the defendant, through his agent Langerman, bought an undivided half share of Waterval for £60,000. He wanted to acquire the whole, but the heirs at that time refused to sell more than the half; their representatives, however, verbally promised to let him know in case they decided to part with the remainder. The half thus acquired the defendant sold in February, 1907, for £275,000, to the Waterval Trust Company. That concern was floated in January, 1907, under circumstances hereinafter to be discussed, for the purpose of acquiring and holding, for a brief space, the farm Waterval. All its shares were held by the plaintiff, which under the articles enjoyed the sole right of appointing directors; and the period of its duration was limited to the 31st December, 1908, unless prolonged by special resolution of the shareholders. The defendant was paid the price of £275,000 by draft drawn on the plaintiff and by June of the same year the Trust had purchased the other hall of Waterval for 199,000. About that time an extensive scheme was being undertaken for consolidating the Robinson subsidiaries with a view to cheaper and more efficient working. A new company called the Randfontein Central was formed in March, 1907, which amalgamated three of the centrally situated subsidiaries, and in 1909 absorbed the three Waterval companies. In the amalgamation were included in 1909 certain blocks of claims, put in under circumstances, which it is alleged, amounted I,) a purchase by the plaintiff from the defendant. They were known as the Beaconsfield, the Erlank, the Scholtz and the Home, Syndicate Blocks, and had been acquired by him at various times, - in the years 1895, 1903, 1906 and 1909. They 'cost him in all about £45,000, and he received for them 164,000 shares in the Randfontein Central, which were valued for purposes of transfer duty at £297,250. The policy of consolidation was steadily pursued until the Randfontein Central had absorbed all the subsidiaries, and concentrated in its own hands the mining operations which they had been formed to undertake. It became a large gold producer and a prosperous concern; and in 1916 the defendant, who had through

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out been the guiding spirit of the group, disposed of practically the whole of his interests in the plaintiff and the Randfontein Central companies to the Johannesburg Consolidated Investment Company. A re-arrangement of directors followed; and in the course of investigating a certain unvouched payment to Langerman, the attention of the new board was drawn to the transactions abovementioned. As a result the present proceedings were instituted for a refund of the profits made. The declaration is not very clearly drawn; but the main ground relied upon is that Sir Joseph Robinson stood in a fiduciary relationship towards the Randfontein Estates, when he acquired the freehold of Waterval and the above blocks of claims; and that under the circumstances he cannot retain the resulting profits. These contentions are of course traversed by the defendant and there is in addition a special defence of statutory prescription. After a lengthy hearing the Provincial Division, by a majority, gave judgment for the plaintiff for £215,000 (the difference between £275,000 and £60,000) in respect of Waterval less any additional costs and expenses incurred. An account of such costs and expenses was directed, and interest at 6 per cent. awarded on the ascertained balance, as from the 27th February, 1907. With regard to the claims a decree of absolution was entered. WESSELS, J.P., who dissented, thought that judgment should have been for the defendant on both counts. An appeal and two cross appeals are now before us. The defendant appeals against the order-as to Waterval, and the plaintiff cross appeals not only against the decree of absolution, but also against the main award which it is contended should be increased by an amount of £10,360. All these matters have been fully and ably discussed and the arguments on both sides on the intricate questions involved, have been of material assistance to the Court. The enquiry resolves itself into two branches; but before dealing seriatim with them, it will be convenient to refer in general terms to the legal principles which govern the inquiry. Where one man stands to another in a position of confidence involving a duty to protect the interests of that other, he is not allowed to make a secret profit at the other's expense or place himself in a position - where his interests conflict with his duty. The principle underlies an extensive

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field of legal relationship guardian to his ward, a solicitor to his client, an agent to his principal, afford examples of persons occupying such a position. As was pointed out in The Aberdeen Railway Company v Blaikie Bros. (1 Macqueen 474), the doctrine is to be found in the civil law (Digest 18.1. 34.7), and must of necessity form part of every civilised system of jurisprudence. It prevents an agent from properly entering into any transaction which would cause his interests and his duty to clash. If employed to buy, he cannot sell his own property; if employed to sell, he cannot buy his own property; nor can he make any profit from his agency save the agreed remuneration; all such profit belongs not to him, but to his principal. There is only one way by which such transactions can be validated, and that is by the free consent of the principal following upon a full disclosure by the agent. In such a case the special relationship quoad that transaction falls away and the parties deal at arms length with one another. The general doctrine is clear enough; but the remedies available to a principal who discovers that he has purchased his agent's own property depend upon considerations of some nicety. Obviously he is not bound by the contract unless he chooses; he may elect therefore either to repudiate or confirm it. But, if he wishes it to stand and also claims the resulting profit, he must show that such profit arises from transactions completely covered by the prohibitive operation of the relationship. That is a point which may be conveniently considered in connection with the' more recent English decisions regarding sales by directors. A director is, of course, an agent; generally he acts in conjunction with his co-directors; but he may be duly authorised to act alone, and like any other agent, he may, without antecedent authority, place himself in such a position that a Court will not allow him to say that he did not so act. See Benson v Heathorn (I Y. & C., at p. 340). Now the question of the remedies available against a director who, without due disclosure, disposes of his own property to his company has been dealt with in a number of comparatively recent English decisions, the high authority of which renders unnecessary the consideration of earlier...