Scott and Another v Poupard and Another

• Jurisdiction: South Africa
• Judge: Holmes JA, Jansen JA, Diemont AJA, Miller AJA and Kotzé AJA
• Judgment Date: 01 March 1971
• Citation: 1971 (2) SA 373 (A)
• Court: Appellate Division

Scott and Another v Poupard and Another
1971 (2) SA 373 (A)

1971 (2) SA p373

Citation	1971 (2) SA 373 (A)
Court	Appellate Division
Judge	Holmes JA, Jansen JA, Diemont AJA, Miller AJA and Kotzé AJA
Heard	February 18, 1971; February 19, 1971
Judgment	March 1, 1971

Flynote : Sleutelwoorde D

Contract — Breach of — Party frustrating fulfilment of condition — Doctrine of fictional fulfilment applied — Damages — Assessment of — Claim for value of shares — No evidence of value — Party not entitled to damages. E

Headnote : Kopnota

The two respondents had entered into a partnership agreement to give effect to a grant to the first respondent by the Government of Mauritius of the right to prospect for minerals "in and under any laws in the Colony of Mauritius and its Dependencies": The first respondent thereafter bad entered into a written contract with the appellants to form a company. The contract ceded to them the first respondent's right to prospect F and it provided that, upon the grant to the company by the Mauritian Government of the right to mine for minerals, certain shares were to be transferred into the name of the respondents and each was to be paid £100,000. In a letter from the Mauritian Government it stated that it was prepared to grant to the company the exclusive right to prospect and mine for all minerals. This offer was accepted. Thereafter the appellants withdrew from all arrangements regarding mineral rights in Mauritius and broke off all negotiations with the Mauritian G Government. The company was never formed. The respondents sued the appellants averring a failure to perform their obligations under the contract and for a deliberate frustration of the fulfilment of the conditions upon which the payment of money and delivery of shares to them were to be made under the contract. In their particulars they averred that the appellants had failed to procure the formation of the company and/or to complete the negotiations with the Government of Mauritius for the right to mine. They claimed, in terms of the contract, (a) £100,000 and (b) the value of the shares. The trial Court H awarded (a) but not (b) as there was no proof that if the company had been formed and shares issued, such shares would have had any value. In an appeal, and cross-appeal,

Held, that there was a preponderance of probabilities that the breaking off of negotiations with the Mauritian Government by the appellants was intended to frustrate the condition precedent to their liability to the respondents. Accordingly the award under (a) could not be disturbed.

Held, as to the cross-appeal, that this should be dismissed as there was no evidence as to the value of the shares.

The decision in the Witwatersrand Local Division in Poupard and Another v. Scott and Another, confirmed.

1971 (2) SA p374

Case Information

Appeal from a decision in the Witwatersrand Local Division (HIEMSTRA, J). The facts appear from the judgment of HOLMES, J.A.

G. A. Coetzee, Q.C. (with him G. Gordon ), for the appellants.

D. Reichman, S.C. (with him L. P. Lewis ), for the respondents.

Cur. adv. vult. A

Postea (March 1st). B

Judgment

Holmes, J.A.:

In the Witwatersrand Local Division, HIEMSTRA, J., awarded R170,360 to each of the present respondents. The issues on appeal are the interpretation of the contract between the parties and the applicability of the doctrine of fictional fulfilment. There is also a cross-appeal concerning a claim of damages which was dismissed. Some of the factual defences which C were raised at the trial are not persisted in on appeal, and it is therefore not necessary to canvass the evidence as fully as did the trial Judge in his factual analysis of graphic clarity.

Since there are two appellants and two respondents, and as the appellants are the respondents in the cross-appeal, I think it will be convenient to refer to the parties by name. Scott (the D first appellant) is a director of companies in Johannesburg and is specifically concerned in mining. Du Preez (the second appellant) is a wealthy businessman, likewise with mining interests. They have been business associates for several years. Poupard (the first respondent) is a general agent living E in Mauritius. Lobel (the second respondent) is a director of property-owning companies in Johannesburg.

On 13th July, 1967 Poupard acquired from the Government of Mauritius the right to prospect for minerals "in or under any land in the Colony of Mauritius and its Dependencies". The grant was valid for a year, subject to renewal. The grant was subject, inter alia, to the condition that within six months he should enter into a contract with a competent person, company, F partnership or syndicate for the carrying out of the prospecting. The document emphasised that the right to mine should be the subject of separate negotiations at some appropriate time. Poupard came to Johannesburg to discuss the matter with Lobel. His main concern was to find a mining G company which would undertake the prospecting and eventually the mining operations. The two men entered into an agreement of partnership on 10th November, 1967, in terms of which they would share equally in the sale of the prospecting rights and ultimately the mining rights.

On 9th April, 1968 Poupard entered into a written contract with Scott and Du Preez, who were to form a company. The contract H ceded to them Poupard's right to prospect for minerals, and it provided that, upon the grant to the company by the Mauritian Government of the right to mine for minerals (on terms which I shall discuss later), certain shares in the company were to be transferred into the name of Poupard and Lobel, and each of them was to be paid £100,000 sterling.

On the day after the signing of the contract in Johannesburg, most of the party went to Mauritius, that is to say, Scott, and his secretary Colonel Johnstone, and Poupard and Lobel. On the following day

1971 (2) SA p375

Holmes JA

Scott called on the Prime Minister of Mauritius and put forward in detail the basis on which he would form a company with an authorised capital of fifteen million rupees (about R2,000,000). The discussion was confirmed in a very full letter by Scott to the Prime Minister on 16th April, 1968, which A formally requested that the company to be formed be granted the exclusive right to prospect and mine for all minerals in Mauritius and its Dependencies.

On 19th April, 1968 (the day on which the party was due to return to Johannesburg) the appropriate Minister replied favourably in a Letter of Intent

"which will in due course be superseded by a formal contract B between your company and the Government of Mauritius".

Para. 3 of the letter stated that the Government agreed to grant exclusive rights to prospect and mine for all minerals. The terms and conditions were then set out in considerable detail in the paragraph. One of them was that the Government C was still examining Scott's proposals about the payment of royalties by the company, and that a further communication would be addressed to him. (I pause here to observe that Scott had suggested a royalty of 10 per cent, and the Government had in mind 15 per cent. The evidence is that this was no stumbling-block: it was hoped that the Government would accept less, but in any event the appellants were prepared to go to 15 D per cent).

On 23rd April, 1968 Scott replied to the Mauritian Government by letter from Johannesburg, saying -

"The terms and conditions under which the company to be formed in Mauritius will operate and as set down in para. 3 of your letter, are acceptable to us."

The letter went on to "offer the following two comments for E your consideration".

"Firstly, it is noted that in terms of para. 3 (b) the proposals regarding royalties are still being examined. We confirm our conversations with you that when finalising any scale of royalties to be paid to the Government, this should be done in conjunction with the scale of taxation to be applied to the profits of this prospecting and mining company.

Secondly, it would be appreciated if the Government would be F prepared, if necessary, to expropriate surface rights on behalf of the new mining company in order to carry out its undertaking in terms of para. 3 (g) of your letter.

May I take this opportunity of thanking you and colleagues in the Cabinet and in the Government for the courteous and helpful manner in which we were received. We look forward to a long, happy and financially beneficial association with you."

Meantime, Col. Johnstone was busy in the matter of the G formation of the company. And early in May, 1968, Scott went to Europe. Johnstone told Poupard that this was in connection with the Mauritian venture. Johnstone also wrote to Poupard saying that there was no obstruction in the way of reaching final agreement with the Government and forming a company.

Scott returned to Johannesburg on 16th May, 1968. Abruptly, on H 3rd June, 1968, Scott and Du Preez sent a cable to Poupard in Mauritius saying...