The Mine Workers' Union v J J Prinsloo; the Mine Workers' Union v J P Prinsloo; the Mine Workers' Union v Greyling

• Jurisdiction: South Africa
• Judge: Tindall ACJ, Greenberg JA and Schreiner JA
• Judgment Date: 26 June 1948
• Citation: 1948 (3) SA 831 (A)
• Court: Appellate Division

The Mine Workers' Union v J J Prinsloo; the Mine Workers' Union v J P Prinsloo; the Mine Workers' Union v Greyling
1948 (3) SA 831 (A)

1948 (3) SA p831

Citation	1948 (3) SA 831 (A)
Court	Appellate Division
Judge	Tindall ACJ, Greenberg JA and Schreiner JA
Heard	June 9, 1948; June 10, 1948
Judgment	June 26, 1948

Flynote : Sleutelwoorde

Contract — Made on behalf of corporation — Trade Union — Constitution of — Necessary steps of internal management not taken — Position of other party — 'Rule in Royal British Bank v. Turquand' — Effect of — Sale — Lex commissoria — Validity — 'Rouwkoop' — Meaning.

Headnote : Kopnota

South African law has adopted the 'Rule in Royal British Bank v Turquand', viz. that a person dealing with a corporation is bound by the terms of the statutes or constitution governing its contractual power, but that the necessary acts of internal management of the corporation are presumed to have been performed. The rule is not to be limited to trading organizations but is applied to corporations generally, including registered trade unions, which in South Africa, though not in England, are bodies corporate. Though a party cannot rely on this assumption if he knows that the necessary steps of internal management have not in fact been taken. the presumption that such steps have been taken does not depend on the party's having actual knowledge of the constitution, at any rate in a case which falls wholly within the limits of Turquand's case.

Notwithstanding its penal nature, a provision in a contract of sale (lex commissoria) which expressly entitles the seller on breach of such contract to cancel the contract and to retain such portion of the purchase price as he has been paid is valid and enforceable.

(Cloete v Union Corporation (1929 TPD 508), approved.

It may be that the Court will not enforce a provision that bears some similarity to, but does not conform with, the requirements in Voet (18.3.3).

In terms of clause 56 (8) of the constitution of appellant trade Union, which was registered by the Industrial Registrar and accessible to the public but unknown to respondents, its Executive Committee had power to purchase immovable property on behalf of the Union, 'provided that no immovable property shall be acquired . . . until at least three weeks' notice of intention to do so has been given to the members through the branch secretaries: and further provided that after expiry of the three weeks' notice such acquisition shall be approved by the General Council'. Respondents sold property to the Union, the Executive Committee having authorised the purchase. The resolution of the Executive Committee was exhibited to respondents. No notice of the purchase was given to members nor was it approved by the General Council, but respondents had no knowledge of the omissions. It was a term of the sales by second and third respondents that on the failure of the purchaser to pay arrear

1948 (3) SA p832

instalments of the price as provided therein, the seller should be entitled to cancel the agreement 'and any monies paid by the purchaser shall be forfeited to the seller and shall be retained by the seller as 'rouwkoop''. Appellant had defaulted after having paid certain sums to second and third respondents and claimed cancellation of the deeds of sale on the grounds that they were not binding on it, and repayment of amounts paid thereunder. First respondent claimed in reconvention the amount due in terms of the deed and second and third respondents claimed declarations that they were entitled to retain amounts paid by reason of appellant's default. On appeal from a judgment of a Provincial Division upholding respondents' contentions,

Held, that the purchase having been authorised by the Executive Committee within its powers was binding on appellant, the notice to members and approval by the General Council being steps in the internal management of the Union which respondents were entitled to assume had been taken.

Held, further, that the forfeiture clauses in the deeds of sale were valid and enforceable.

Per TINDALL, A.C.J.: The use of the word 'rouwkoop' puts it beyond doubt that the seller is entitled to enforce the clause literally. In the context the effect of the word is that the payments forfeited are regarded as money paid by the purchaser which the parties have agreed shall be forfeited by him to get quit of liability in respect of the contract. The clause operates not merely as a penalty, but in favour of the purchaser by limiting his liability for damages.

The decision of the Transvaal Provincial Division in The Mine Workers' Union v J. J. Prinsloo and Others (1947 (4), S.A.L.R. 690), confirmed.

Case Information

Appeal from a decision of the Transvaal Provincial Division (MILLIN, J.). The facts appear from the judgment of GREENBERG, J.A.

B. A. Ettlinger, K.C. (with him J. D. Schwartz), for the appellant: The authority which appellant's President and General Secretary had was not effective to bind the appellant inasmuch as the requisite three weeks notice to members under clause 56 (8) of the Constitution had never been given and the purchases had never been submitted to appellant's General Council, much less approved by it as required by the clause quoted. Nor is the rule in Royal British Bank v Turquand (1856, 6 E.L. and B.L. 327) applicable because (a) the Executive Committee's Resolution of 21st March, 1946, was ex facie insufficient authority under appellant's Constitution, the contents of which the respondents were in law deemed to have known; see Halsbury (2nd ed., vol. 8, para. 128); (b) over and above the resolution of the Executive Committee, a separate act was required, i.e. a resolution of the General Council; for upon a proper construction of clause 56 (8) it is really the General Council that concludes the contract on

1948 (3) SA p833

behalf of the appellant and not the Executive Committee; cf. Pacific Coast Coal Mines, Ltd v Arbuthnot (1917, A.C. 607); Welgedacht Exploration Ltd v Transvaal & Delagoa Bay Investment Co., Ltd. (1909, T. H. 90 at pp. 104 - 8, 109); (c) the resolution of the 21st March, 1946, did not suggest that the matters were ever considered, much less approved of, by the General Council; (d) the requirement that an acquisition of immovable property should be approved of by the General Council was a condition subsequent and no acquisition of immovable property could be binding on the appellant unless and until such approval was obtained; (e) the rule in Turquand's case (supra) is really based on ostensible authority and does not extend to bind a corporation to a contract made on its behalf without its authority, merely because under its Constitution power to make the contract might have been validly conferred on the person who made it; see Palmer, Company Precedents (15th ed., vol. 1, p. 71); Mahony v East Holyford Mining Co. (1875, 7 H.L. 869, at pp. 893 - 4); Houghton & Co v Northard, Lowe & Mills (1927, (1) K.B. at pp. 246 - 266); Kreditbank Cassel v Schenkers, Ltd. (1927 (1) K.B. 826, 844); British Thomson-Houston Co v Federated European Bank, Ltd. (1932 (2) K.B. 176); Morris v Kannsen (1946, A.C. 459, 474); (f) as appellant is a registered Trade Union in terms of Act 36 of 1937, its Constitution having been registered after approval by the Industrial Registrar in terms of sec. 4 of the Act, non-compliance with the requirements of the Constitution is not a matter of internal management. As to 'rouwkoop', it is conceded that under the Roman-Dutch law, amounts paid as arrha are forfeited on breach of a contract of sale by the purchaser, whether or not there is an express condition to this effect; see Grotius, Introduction to Dutch Jurisprudence (3.14.32; Lee's trans. p. 369); Van Leeuwen, Roman-Dutch Law (4.20, para. 2; Kotze's trans. vol. II, p. 162); Mangold Bros v Greyling's Trustee (1910, E.D.L. 471). It is submitted, however, that a provision for forfeiture of whatever may have been paid by way of purchase price is in fact, and should be regarded as, a provision for a penalty and that the law relating to penalties should be applied; see Voet, 18.3.3, Lee's Commentaries on Grotius (III, XIV, 32, pp. 291 - 2), Pothier, Sale (sec. 474); Cluley v Muller (1924 TPD 720, 726); Cloete v Union Corporation Ltd. (1929 TPD 508, 527 - 9). Arbor Properties, Ltd v Bailey (1937, W.L.D. 116) should not be followed. The principles laid down in Pearl Assurance Co v Union Government (1934 AD 560) should

1948 (3) SA p834

be applied; cf. Kilmer v British Columbia Orchard Lands, Ltd. (1913, A.C. 319). It is suggested that Voet in the passage cited was not dealing generally with contracts for the sale of property irrespectively of the amount of the instalments payable thereunder or the period within which such instalments had to be paid.

W. Pollak, K.C. (with him R. S. Welsh), for the respondents: Appellant was bound by the deeds of sale under the rule in Royal British Bank v Turquand (1856, 119 E.R. 886). Upon a proper construction of clause 56(8) of appellant's Constitution the power to acquire immovable property by way of purchase is vested not in the General Council but in the Executive Committee. The exercise of such power is subject to the fulfilment of two conditions precedent, namely (1) notice must have been given to members of the intention to acquire the property by way of purchase and (2) the General Council must have approved of the acquisition by way of purchase; the first and second provisos impose conditions precedent; 'such acquisition' means such proposed acquisition and 'approved' means sanctioned; the effect of the second proviso is that the sanction of the General Council must have been obtained before the Executive Committee concludes a purchase. The requirement that an acquisition of immovable property should be approved by the General Council is not a...