Southern Witwatersrand Exploration Co Ltd v Bisichi Mining plc and Others

• Jurisdiction: South Africa

Southern Witwatersrand Exploration Co Ltd v Bisichi Mining plc and Others
1998 (4) SA 767 (W)

1998 (4) SA p767

Citation	1998 (4) SA 767 (W)
Case No	23059/96
Court	Witwatersrand Local Division
Judge	Cameron J
Heard	May 23, 1997
Judgment	June 30, 1997
Counsel	PA Solomon (with him GE Turner) for the applicant; MD Kuper (with him DN Unterhalter) for the first, second, sixth and seventh respondents

Flynote : Sleutelwoorde E

Company — Directors and officers — Board of directors — Resolutions of — Validity of — Directors of company signing resolution waiving condition precedent to contract by fax — Resolution finally constituted by two pieces of paper — Articles of association not exhaustive of methods of decision-making or ways in which directors' assent able to be F signified — No reason why directors' assent to be contained in single document — Rationale of relevant clause in articles to avoid requirement of directors' meeting while providing for written, signed, unanimous resolution — Such resolution existing, although in two parts, and complying with articles — Resolution valid.

Waiver — Communication of — What constitutes — Where rightholder claiming reliance on properly evidenced waiver, G requirement of communication not absolute — In casu, director of applicant company also director of second respondent company — Communication of waiver to director of second respondent accordingly simultaneous communication thereof to applicant — Parties contemplating corporate communication of notices by fax — This entailing H faxing copy of waiver to number specified — Formal communication to entire board of applicant unnecessary.

Headnote : Kopnota

The issue leading to the instant application was an agreement, the validity of which depended on the fulfilment or waiver of a condition precedent. The applicant argued that the condition had been neither fulfilled nor waived and I accordingly the agreement had not come into force. This had resulted in a previous agreement, which the agreement in dispute had intended to supersede, not being cancelled. The condition precedent had been inserted in the agreement solely for the benefit of the second respondent and could, in terms of the agreement, be waived in writing. The process by which the directors of the second respondent had chosen to waive the condition J

1998 (4) SA p768

precedent had led to the applicant's argument that the condition had not been properly waived. Each of the four A directors of the second respondent had signed a resolution waiving the condition but the third and fourth directors had each signed a separate copy of the resolution. This had occurred because the first and second directors had faxed the resolution, duly signed by themselves, to the third director, who had signed the faxed B copy and transmitted it back to the first and second directors. The fourth director had however been on holiday at the time. The third director's secretary had accordingly faxed a copy of the resolution received from the first and second directors, without the third director's signature, to the fourth director. The fourth director had signed this copy and transmitted it to the first and second directors. The third and fourth directors asserted that they had agreed to waive the condition as was reflected in their respective copies of the resolution. The resolution was C accordingly constituted not in a single document, as required by the applicant's argument, but by two pieces of paper.

The Court had to consider whether, by the process utilised in the circumstances, the second respondent had D effectively waived the condition, an act which would normally have required a directors' decision which had been formally expressed at a meeting and duly minuted, and whether the second respondent's waiver had been properly communicated to the applicant as a party to the agreement in issue. The second respondent's articles of association provided that 'a resolution in writing, signed by all the directors, shall be as valid and effectual as if it E had been passed at a meeting of the directors duly convened and held'. The company's shareholders' agreement contained a similar clause but only required the resolution to be signed by the majority of the directors and furthermore provided that where the clauses in the shareholders' agreement were in conflict with the articles, the agreement would take precedence. In this way the company had articulated an alternative method for passing valid company resolutions.

Held, that the articles of association did not purport to be exhaustive of the ways, outside of meetings, in which F the director's assent could be signified nor did it purport to exclude the creation or adoption of any other method of decision-making or the manner in which it was evidenced. Specifically, nothing in the second respondent's articles expressly prohibited its members from agreeing to a procedure whereby its directors, even without a G formal meeting, were empowered validly to signify their assent to a resolution signed by the majority of them. The second respondent therefore could use the procedure created in the shareholders' agreement to waive the condition. In any event, the actions of the second respondent's directors did in fact yield a resolution in writing signed by all the directors, which accordingly complied with the requirements of the articles of association. (At 774I--775A, 775F/G--G and 776F--H.) H

Held, further, that the applicant's argument that the expression of the directors' assent had to be contained in a single document sought to elevate an evidentiary convenience to the level of a substantive requirement for validity. There was no reason in statute, in the articles or in principle why this should be so and to require such compliance I would be an exercise in undue formalism which could have stultifying effects upon commercial transactions. The question of proof was principally relevant to what substantive compliance with a specified procedure required insofar as it had a bearing on the rationale of the procedure. In casu, the rationale for the stated clause in the articles was the avoidance of the requirement that a directors' meeting be formally convened and held while providing for a written, signed, unanimous resolution. As there had been such a resolution, J

1998 (4) SA p769

although it existed in two parts, there had accordingly been compliance with the clause in the articles. (At A 777G--H, 778C/D and D/E--F.)

Held, further, that where the rightholder did not seek to enforce the right but claimed reliance on a properly evidenced waiver that the right had perished, the requirement of communication was not absolute. This did not mean, however, that proper proof of waiver was not always required. Nevertheless, as the third director of the B second respondent and the director of the applicant were the same person, the knowledge on the part of the third director that the condition had been waived therefore simultaneously constituted communication of the waiver to the applicant. Furthermore, the address supplied by the applicant for the receipt of notices included a fax number which confirmed that the parties had contemplated that corporate communication of notices would be effected by telefax transmission. In the specific case of the waiver, this would entail the faxing of a copy to the number C specified. This had in fact been done and the applicant's contention that formal communication to the entire board of the applicant was required was unacceptable. (At 780B, F, 781F--G, 782D--E and 781G/H--I.) Application dismissed.

Cases Considered

Annotations D

Reported cases

Ally and Others NNO v Courtesy Wholesalers (Pty) Ltd and Others 1996 (3) SA 134 (N): referred to

Alpha Bank Bpk en Andere v Registrateur van Banke en Andere 1996 (1) SA 330 (A): considered E

Blue Grass Estates (Pty) Ltd en Andere v Minister van Landbou en Andere 1992 (4) SA 406 (A): compared

Botha (now Griessel) and Another v Finanscredit (Pty) Ltd 1989 (3) SA 773 (A): distinguished

Dublin v Diner 1964 (1) SA 799 (D): dictum at 802A applied

Gohlke & Schneider and Another v Westies Minerale (Edms) Bpk and Another 1970 (2) SA 685 (A): F considered

Ledingham v Commercial Union Insurance Co of SA Ltd 1993 (2) SA 760 (C): referred to

Lipschitz and Another NNO v Landmark Consolidated (Pty) Ltd 1979 (2) SA 482 (W): distinguished

Mutual Life Insurance Co of New York v Ingle 1910 TPD 540: distinguished G

Partnership in Mining Bpk v Federale Mynbou Bpk en Andere 1984 (1) SA 175 (T): considered

Ex parte Premier Paper Ltd 1981 (2) SA 612 (W): considered

Quadrangle Investments (Pty) Ltd v Witind Holdings Ltd 1975 (1) SA 572 (A): considered

S v Heller 1971 (2) SA 29 (A): referred to H

Sugden and Others v Beaconhurst Dairies (Pty) Ltd and Others 1963 (2) SA 174 (E): referred to

Trans-Natal Steenkoolkorporasie Bpk v Lombaard en 'n Ander 1988 (3) SA 625 (A): distinguished

Traub v Barclays National Bank Ltd; Kalk v Barclays National Bank Ltd 1983 (3) SA 619 (A): I distinguished.

Case Information

Application for an order declaring waiver of condition precedent in a contract invalid. The facts appear from the reasons for judgment.

P A Solomon SC (with him G E Turner) for the applicant.

M D Kuper SC (with him D N Unterhalter) for the first, second, sixth and seventh respondents. J

1998 (4) SA p770

Cur adv vult. A

Postea (June 30).

Judgment

Cameron J :

Introduction B

This application arises from a dispute between the shareholders in a coal mining operation near Middelburg. At issue is an agreement whose validity depends on the fulfilment or waiver of a condition precedent. The applicant's case is that the condition was neither fulfilled nor waived. The respondents (of whom all but...