Victoria Falls & Transvaal Power Co Ltd v Consolidated Langlaagte Mines Ltd

• Jurisdiction: South Africa
• Judge: Innes CJ, Solomon JA and De Villiers AJA
• Judgment Date: 01 February 1915
• Court: Appellate Division

Innes, C.J.:

This is an action to recover damages for breach of contract. The facts have been so fully stated to the trial Judge, that it will be unnecessary to do more than refer to such of them as are essential to the due appreciation of the matters in dispute. The Johannesburg Consolidated Investment Company is a corporation which represents, and to a certain extent controls, a group of subsidiary companies, of which the plaintiff is one. On the 1st January, 1909, an agreement was entered into between that corporation and the defendant, in terms of which the latter undertook to supply to any of the subsidiaries (called contracting companies) such quantity of electric power as might be fixed by contracts entered into with them. It also undertook to furnish any additional supply bona fide required upon due notification of such requirement. The notice to be given was calculated on a sliding scale, commencing with six months for a supply not exceeding 300 kilowatts, and ending with eighteen months for an amount not more than 3,000 kilowatts. For an order in excess of that limit, it was stipulated that special arrangements should be made between the contracting parties to what may he conveniently styled the group agreement. On the first day of the following year a contract was entered into (which may be called the consumer's agreement) between the plaintiff and the defendant. It provided that the former should be entitled to all the benefits and he subject to all the obligations of a contracting company under the group agreement; and it stipulated that, subject to the terms of clause 1 of the said agreement, the defendant should supply electric power at such time and in such quantities as the plaintiff might require. Reference will be made to other portions of this contract at a later stage; for the present it is sufficient to Dote that the initial necessities of the company were thereafter fixed as being 500 kilowatts at a potential of 525 volts.

The plaintiff's mining property consists of two parts: an outcrop

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or northern section and a deep level or southern section, with a dyke running east and west between them. In connection with the outcrop section, there was in existence prior to and during all times relevant to the present dispute a steam-driven mill and battery capable of crushing about 22,000 tons per month. The company embarked on a course of further improvement by erecting new cyanide works; and it was for the benefit of this plant that the original supply of 500 kilowatts was taken. Two vertical shafts were also sunk on to the reef in the southern section; and as electric power was needed to work the pumps, requisition was made by letter of 16th November for a supply of 300 kilowatts at a potential of 2,100 volts. This was duly furnished about August of the following year; but the order in question has no direct connection with the present dispute. About this time the plaintiff's consulting engineer, Professor Lawn, was devising a scheme for working the property, which involved the erection of a new reduction plant and the abandonment of the old mill. His proposal, with a calculation of the cost was considered by a London committee of directors, who in January, 1911, cabled their approval. Thereafter Professor Lawn, under date 25th February, 1911, wrote to the defendant notifying that, in terms of the group agreement, the plaintiff would require "the following supplies of electric power." In addition to the 300 kilowatts cabled for in November, 1910, a supply at the same potential would be needed for operating two electric hoists; the mean for each hoist would be in the neighbourhood of 700 kilowatts, or a total of 1,400 for the two. With regard to power at a potential of 525 volts, he pointed out that over and above the original supply of 500 kilowatts, an addition of approximately 1,200 would be required in connection with the new reduction works about to be built. "These reduction works," he proceeded, "should be in full operation by the 1st July, 1912, whilst the hoists should be put in operation by the end of 1911, and I trust that you will do everything necessary to arrange for the above supplies by those dates." On the 6th March, 1911, the general manager of the defendant wrote acknowledging receipt of the above, and continued: "We have duly noted these requirements, and will make the necessary arrangements. As the anticipated demand made by the two electric hoists is 1,400 kilowatts, we are not able to give the supply

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under shorter notice than fifteen months, but we note that you expect to have the hoists ready by the end of the year. If we find it possible to do so, we will give you the supply by the time required, but we cannot at present undertake to have the supply available within shorter notice than that mentioned in the agreement. You may be sure, however, we shall do all we can to meet you on this point." Professor Lawn's reply to this letter was to the following effect: "I note that you are not liable to give the supply under shorter notice than fifteen months, and wish to thank you for your offer to do all you possibly can, with the object of giving us the supply by the time required." On the 7th December, 1911, the defendant was notified that the plaintiff would require an addition of 600 kilowatts at a potential of 2,100 volts for operating an electric compressor which it proposed to instal. It was pointed out that, under the agreement, this power was only claimable nine months after the date of order, but that the compressor was expected to be ready in about eight months; and the, hope was expressed that the defendant would endeavour to provide the supply by that time. That supply, it was specially observed, was additional to those notified in the letter of 28th February. The defendant's general manager replied on the 15th December that the power would be available at the latest by June of the following year. Finally, under date the 28th December, 1911, the, plaintiff's consulting engineer wrote summarising the requirements already notified, which totalled 4,000 kilowatts, and requisitioning, in terms of clause I of the group agreement, a further supply of 300 kilowatts, "for various services, thus making the total notified requirements 4,300 kilowatts." This order was acknowledged on 5th January, 1912, and the plaintiff was informed that "the necessary steps were being taken to meet these loads."

The defendant, however, soon discovered that it would be unable to carry out the obligations which it had undertaken. And the plaintiff was verbally informed towards the end of February that the increased power would not be available by the 1st July, 1912. The causes of this failure are not relevant to the present dispute; because it is not contended that they were of a nature to relieve, the defendant from the liability under the agreements into which it had entered. Correspondence ensued between the parties, in the course of which the defendant expressed a hope that by 1st

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September a supply of power would be available for the use of the plaintiff. That hope was not realised, however, until the 29th September after which date the defendant was placed in a position to operate its new reduction plant. During the months of July, August, and September the working of the old mill and battery, which it had been intended to abandon, was continued. But the company, so soon as it was informed that power to work the new Plant would not be forthcoming on 1st July, took steps to curtail its complement of natives. Orders were given during the first week in March to stop all further recruiting, and no new labourers were taken on till May. The wisdom or reasonableness of this policy was a question much debated at the bar, and some further reference to it will become necessary; but it is very difficult upon the evidence before us to determine with accuracy its results. Obviously, however, the non-supply of electric power (1,200 kilowatts) for the new mill during three months was productive of grave loss to the plaintiff; and this action to recover the consequent damages was commenced. Compensation is claimed under four heads: The residues dumped from the old plant during the period in question admittedly contained more gold than would have been the case had the ore been treated in the new works. There is no means of profitably recovering that gold, and loss in extraction is, therefore, the first ground of damage relied on. The second head refers to what are called third profits. The difference is calculated between the estimated profits of the new and the actual profits of the old plant for the months of July to September inclusive, allowance being made for the return from accumulated slimes and for the amount claimed under the first head. The figures thus adjusted, it is contended, represent profits actually lost to the plaintiff, but recoverable at the end of the life of the mine. And the sum alleged to be due is arrived at by deducting from these figures the present value of the sum they represent payable at the expiration of that period. The third and fourth heads purport to represent the amounts by which the cost of development and shaft sinking, respectively, were increased owing to the delay in starting the new mill. The trial Court approved in each instance of the principles involved under these heads. As to loss in extraction, the figures were common cause if once liability was established. With regard to items 3 and 4,

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the learned Judge, calculating the average cost before the opening of the new works over an extended period, arrived at amounts substantial in themselves, but considerably less than those claimed. In dealing with the...