Metals Australia Ltd and Another v Amakutuwa and Others (SA 31 of 2009) [2010] NASC 13 (05 November 2010);
REPORTABLE
CASE
SA 31/2009
IN
THE SUPREME COURT OF NAMIBIA
In
the matter between:
METALS METALS | FIRST SECOND |
and
MALAKIA MINISTER BRIAN MOORE | FIRST SECOND THIRD |
Coram:
Maritz JA, Chomba AJA et O’Regan AJA
Heard
on: 05/07/2010
Delivered
on: 05/11/2010
APPEAL
JUDGMENT
O’REGAN
AJA:
This
appeal concerns the validity of two agreements entered into between
the first appellant, Metals Australia Limited, and the first
respondent, Mr M J Amakutuwa, relating to two mineral licences to
prospect exclusively for uranium in certain parts of Namibia. The
High Court held that both agreements were null and void and the
appellants are appealing that decision.
Facts
In
mid-2005 Mr Amakutuwa (the first respondent) was issued two licences
in terms of section 70 of the Minerals (Prospecting and Mining) Act,
1992 (the Minerals Act) by the Ministry of Mines and Energy to
prospect for uranium in Namibia. Given the geographical areas to
which the licences relate, Exclusive Prospecting Licence (EPL) 3306
was referred to as the “Engo Valley” EPL and EPL 3308 as
the “Mile 72” EPL.
In
November 2005, after several months of negotiation between the first
appellant and the first respondent, a contract was entered into
between the first appellant (then known as Australian United Gold
Ltd), Mr Amakutuwa and a purported close corporation called Reliance
Investment Agencies CC (“Reliance”). Mr Amakutuwa
signed the agreement on his own behalf and purported to sign the
agreement on behalf of Reliance. The terms of the agreement
recorded that Reliance was “the beneficial owner” of the
two EPLs and was entitled to be the registered owner of them. The
agreement also recorded that Mr Amakutuwa was the current registered
owner of the EPLs and that he held the beneficial interest in the
licences “in trust’ for Reliance.
The
nub of the agreement was that Reliance agreed to sell and the first
appellant or its nominee agreed to purchase the EPLs in exchange for
a payment of US $30 000 and the issue of 5 million ordinary shares
in the first appellant to Reliance. A condition of the agreement
was that the consent of the Minister of Mines and Energy (the second
respondent a quo and in this appeal) to the transfer of the
EPLs would have to be obtained. A further term was that Mr
Amakutuwa would “do all things necessary” to transfer
the EPLs to Reliance.
Reliance
was not in existence at the time the agreement was signed and indeed
it has never come into existence. Mr Amakutuwa was aware of this but
the appellants were not. Despite the non-existence of Reliance, Mr
Amakutuwa took steps to transfer the EPLs from his name into that of
the first appellant’s nominee and, on 5 February 2006, the
Mining Commissioner transferred the EPLs directly to New Mining
Company (Pty) Ltd the predecessor to Metals Namibia (Pty) Ltd, the
second appellant.
Once
the EPLs had been transferred, Metals Australia discovered that Mr
Amakutuwa had overstated the known ore bodies in the geographical
areas for which the EPLs were issued and also misrepresented both
the size and location of the geographical areas for which the
licences had been granted. After a preliminary investigation, the
independent metallurgist advising the first appellant put it thus:
“you have been had”.
In
the light of this information, the appellants tendered return of the
EPLs to Mr Amakutuwa and Reliance against reimbursement of the
expenses they had incurred (approximately Aus $100 000). Mr
Amakutuwa was unable to reimburse them and so the licences were not
returned. Instead, on 2 February 2007, the first appellant entered
into a “deed of amendment and release” with Reliance, Mr
Amakutuwa and a Mr Moore (whose involvement in the events it is
unnecessary to describe). Mr Amakutuwa again signed this agreement
on his own behalf and purportedly on behalf of Reliance (which was
still not in existence, again without the appellants being aware of
this). One of the recitals to this agreement (recital E) stated:
“It has become apparent to all parties that the Prospecting
Licences do not contain the orebodies that the parties mistakenly
thought they did, and accordingly the parties have agreed to amend
the terms of the Heads as herein set out”.
The
terms of this second agreement were that the parties agreed that no
consideration was payable to Reliance in respect of the transfer of
the EPLs; that “the unencumbered legal and beneficial
interest” in the EPLs would be retained by the first appellant
or its nominee free of all claims by Reliance, Moore and Amakutuwa.
In consideration for this, the appellants agreed to release and
discharge Reliance, Moore and Amakutuwa from all claims that the
appellant might have had against them.
Subsequently,
the appellants undertook a metallurgical exploration of the areas in
respect of which the EPLs were issued. That investigation suggests
that there are in fact good deposits of uranium in the Mile 72 EPL
area, although this had not previously been known. The appellants
thus approached the Minister of Mines and Energy to obtain a renewal
of the two EPLs.
Proceedings in the High Court
Two
years after the second agreement had been signed, and following a
public announcement by the first appellant of the potential mineral
value of Mile 72, Mr Amakutuwa launched proceedings in the High
Court seeking a declaration that both the first and second
agreements were void ab initio and an order that the EPLs be
transferred back to him. The High Court granted the relief he
sought on the ground that, as Reliance was not in existence at the
time of signature of either agreement, no-one was authorized to sign
on its behalf and both agreements were thus null and void. The
order made by the High Court was the following: (a) both agreements
were declared null and void ab initio; and (b) the Minister
of Mines and Energy was ordered to transfer both EPLs back to Mr
Amakutuwa. The appellants now seek leave to appeal that order to
this Court.
Appellants’
submissions in this Court
The
appellants submit that the High Court erred in concluding that the
agreements were null and void simply because Reliance was not in
existence. Their arguments may be summarized as follows:
The
non-existence of Reliance did not render the contracts void because
Mr Amakutuwa had signed the contracts in his personal capacity (as
well as in a representative capacity on behalf of Reliance,) and he
was thus personally bound to perform in terms of the agreements
despite the non-existence of Reliance.
The non-existence of Reliance did not
render the contracts objectively impossible of performance.Section
46(a) of the Minerals Act was not a bar to the validity of the
contracts. (The first respondent argues that section 46(a) of the
Minerals Act does not permit a close corporation to hold mineral
rights.)The
second agreement constituted a transactio or compromise, the
validity of which is not dependent on the validity of the first
agreement. The effect of a compromise, they argue, is to settle all
past and future obligations between the parties.Recital
E of the second agreement which states that it has become apparent
to all the parties that the EPLs “do not contain the ore
bodies which the parties mistakenly thought they did” is not a
fraud as suggested by the respondents, but reflects the state of
affairs as known to the parties to the second agreement at the time
it was concluded.
First
Respondent’s submissions in this Court
The
first respondent’s submissions may be summarized thus:
The
first agreement was void because its conditions precedent were not
fulfilled (in particular, the consent of the Minister to the
transfer of the EPLs and the regulatory authorization for the
transfer of the shares to Reliance given the non-existence of
Reliance).Both
agreements were void because an agreement entered into on behalf of
a non-existent close corporation is null and void.To
the extent the agreements contemplated the transfer of the EPLs to
Reliance,1
they would be void because section 46(a) of the Minerals Act does
not permit close corporations to hold mineral rights.The
moral turpitude and unclean hands of the appellants should deprive
them of any defence.
Application to adduce further
evidence on appeal
A
preliminary procedural question arises. Mr Amakutuwa lodged an
application to adduce further evidence on appeal just over a month
before the hearing. In terms of this application, Mr Amakutuwa
seeks leave to introduce affidavits as evidence in these proceedings
that were lodged by the appellants in the High Court in opposition
to a rule 49(11) application by Mr Amakutuwa. The rule 49
application sought leave, pending the outcome of the appeal, to
implement the relief requiring the Minister of Mines and Energy to
transfer the EPLs back to Mr Amakutuwa. As it turned out, the rule
49(11) application was overtaken by events. It was enrolled for
hearing only eight court days before the hearing of the appeal. In
the circumstances, Mr Amakutuwa withdrew the application and the
parties agreed that the costs in that application would be costs in
the appeal.
The
evidence the first respondent seeks to have admitted is contained in
a supplementary affidavit made on behalf of the appellants to resist
the rule 49(11) application. In the affidavit, the appellants
disclose that low-level airborne radiometric data, that became
available from a Geological Survey of Namibia in 2007, had
established potential uranium deposits in the area of the Mile 72
prospecting licence. Thereafter extensive sampling by the
appellants over a substantial period of time had confirmed
significant uranium deposits within the area of Mile 72 that could
have an in-ground value of billions of dollars. The respondent
seeks to tender this evidence, over objection by the appellants, to
establish that the appellants’ assertions prior to 2007 that
the EPLs had little value to them were “disingenuous”.
The appellants oppose the admission of this evidence on the grounds,
amongst others, that it is irrelevant to the determination of the
appeal.
The
test for the admission of late evidence on appeal is well
established. An appellate court will exercise its powers to admit
such evidence “sparingly”.2
Leaving aside the question of the timing of the application to
tender evidence, and the need to avoid prejudice to the other party,
an applicant will also have to show that the evidence is “weighty
and material and presumably to be believed…”.3
The
question is whether the evidence in this case is material and
weighty given the issues that must be determined in the appeal. In
my view, it is neither material nor weighty. The evidence proffered
shows that the appellants now consider the Mile 72 prospecting area
to contain substantial uranium deposits. The discovery of uranium
deposits in the Mile 72 prospecting area is of no relevance to three
of the four arguments made by the first respondent (see para 11
above) and could not be admitted in relation to them.
The
only argument to which the tendered evidence could have some
tangential relevance is the argument relating to moral turpitude.
There is a dispute as to whether the first respondent abandoned this
issue in the court below. Assuming that the issue is live in this
Court,4
there is a sharp factual dispute between the parties as to whether
the appellants behaved improperly in the manner in which they
conducted their relationship with Mr Amakutuwa.
The
evidence concerning the discovery of uranium deposits in Mile 72
does not assist Mr Amakutuwa to establish that the appellants have
behaved improperly. The evidence merely shows that investigations
by the appellants established, after conclusion of the second
agreement, that there are valuable uranium deposits in the area of
the Mile 72 EPL. The evidence does not establish that at the time
the second agreement was signed, the appellants were aware of the
value of Mile 72. Nor does it suggest that the appellants acted in
any way improperly. When taken with the other evidence on the record
in these proceedings, it shows that the appellants thought the EPLs
to have little or no value after they received the report from their
independent metallurgiist referred to in paragraph 6 above, but that
subsequent investigations contradicted that at least in relation to
the Mile 72 EPL. The evidence tendered is also consistent with the
conduct of the appellants, who upon learning that the two EPLs were
not in the areas they had been led to believe they were, tendered
the return of the EPLs against compensation for the expenses they
had incurred in acquiring them. It is unlikely that they would have
done so if they believed the EPLS to contain substantial mineral
deposits.
The
tendered evidence is thus neither material nor weighty even in
relation to the argument going to impropriety. In the
circumstances, a case has not been made out for the admission of
this evidence on appeal and the application to tender the rule
49(11) affidavits must therefore be dismissed with costs.
Issues in this Court
The
question the Court has to decide therefore is whether the agreements
were void ab initio. It will be useful to start with the
second agreement, because if the second agreement is a self-standing
agreement and not void, then the issue of the validity of the first
agreement will not arise. It is only if the second agreement is
void, that the question of the validity of the first agreement will
arise. I turn first therefore to the validity of the second
agreement.
Validity
of the second agreement
The
appellants argue before this Court that the second agreement
constituted a transactio or
compromise. A compromise is a form of agreement the purpose of
which is to put an end to existing litigation or to avoid litigation
that is pending or might arise because of a state of uncertainty
between the parties.5
Ordinarily,6
the validity of an agreement of compromise does not depend on the
validity of a prior agreement.7
An agreement of compromise may follow upon a disputed contractual
claim but it may also follow upon any form of disputed right and
“may be entered into to avoid even clearly a spurious claim”.8
The effect of an agreement is that it bars the bringing of
proceedings on the original cause of action.9
The
argument that the second agreement constituted a compromise was not
raised in the High Court and the respondent argued in this Court
that the appellants were not permitted to raise it here. Where a new
legal point is raised on appeal, two questions arise: is the point
covered by the pleadings and would there be any unfairness to the
other party were it to be raised on appeal.10
If the legal point is covered by the pleadings, and no unfairness
to the other party would arise, then “the Court is bound to
deal with it”.11
The
parties squarely raise the nature and legal effect of the second
agreement in the affidavits. The parties have placed before the
court all the evidence relevant to the conclusion of the second
agreement and respondent’s counsel did not suggest otherwise.
Moreover, appellants’ argument relating to compromise was set
out in their heads of argument and respondent’s counsel had an
opportunity to deal with it in his written and oral argument. In
the circumstances, the legal argument relating to compromise is one
this court should decide.
Whether
the second agreement is indeed an agreement of compromise is a
matter of contractual interpretation. It is plain from the recitals
to the agreement that the agreement is being entered into because
the EPLs do not contain the orebodies that the parties mistakenly
thought they did. The core provisions of the second agreement are
that (a) there will be no payment to Reliance for the transfer of
the EPLs (as had been agreed in the first agreement); (b) the
“unencumbered legal and beneficial interest” in the EPLs
shall remain vested in the second appellant; and (c) the appellants
release Mr Amakutuwa and the other parties from all claims the
appellants may have against them but for the existence of the second
agreement.
It
is clear from the third of these provisions that there is a
possibility of litigation against Mr Amakutuwa (amongst others)
arising out of the events surrounding his relationship with the
appellants and that the appellants are expressly abandoning any
claims they may have against him. The possibility of litigation
arose because of the appellants’ allegation that Mr Amakutuwa
had misrepresented the areas of the EPLs prior to the first
agreement being signed, and also misrepresented, on their version,
the extent of the established ore bodies within the areas of the
EPLs. The purpose of the agreement is thus clear. It is to put an
end to any possibility of litigation between the appellants and Mr
Amakutuwa arising out of their prior relationship and to clarify
that the appellants have no obligation to pay Mr Amakutuwa for the
transfer of the EPLs and that the appellants will retain the EPLs.
This purpose determines that the agreement is an agreement of
compromise.
Counsel
for the first respondent argued that because the heading of the
second agreement described the agreement as a “Deed of
Amendment and Release”, the second agreement was an amendment
of the first agreement and not a compromise. The words “amendment
and release” are not inconsistent with a contract of
compromise, suggesting as they do that a prior agreement is being
varied, and that some party is being released from an obligation or
obligations. Be that as it may, the title of the agreement is not
determinative of the nature of the contract which must of course be
read as a whole. It is clear from the agreement as a whole that the
purpose of the second agreement is primariiy to put an end to the
possibility of litigation between the parties by redefining their
respective rights and obligations and as such, properly construed,
the second agreement is a compromise. That it is not called an
agreement of compromise does not alter this conclusion. For the
character of a contract depends on its terms and a contract of
compromise, even if called something else, remains a compromise if
on its terms it is a contract of compromise. The argument of counsel
that the agreement properly construed is merely an amendment of the
first agreement and not a compromise cannot be accepted.
The
validity of an agreement of compromise does not generally depend on
the validity of any contract it replaces. Nevertheless for it to be
a binding contract, the compromise agreement must have been properly
concluded. The respondent argues that because Reliance does not
exist and it is a party to the second agreement, the contract must
be void. This argument will only be correct if it can be shown that
the agreement of compromise could not stand without the existence of
Reliance. If the aspects of the agreement that relate to Reliance
can be severed without affecting the obligations between the
appellants and Mr Amakutuwa, the agreement will not be invalid. The
non-existence of Reliance may result in the invalidity and severance
of those portions of the agreement that affect Reliance.
There
are three aspects of the second agreement that relate to Reliance:
the first is the provision that Reliance is no longer entitled to
claim compensation for the transfer of the EPLs; the second is that
Reliance agrees that the EPLs shall remain the unencumbered property
of the second appellant; and the third is that Reliance will not be
sued by the appellants in respect of any claim arising. If these
three aspects of the second agreement are severed from the second
agreement, the following is clear: Mr Amakutuwa (and Mr Moore) may
not be sued by the appellants in respect of any claim arising. This
aspect of the contract can stand freely on its own even when the
provisions relating to Reliance have been severed. The respondent’s
argument that the non-existence of Reliance automatically renders
the second agreement void cannot therefore be sustained.
The
only other argument raised by the respondent to assert the
invalidity of the second agreement was based on duress. Counsel
argued that as the first respondent had been pressured by threat of
litigation to enter into the compromise agreement, the agreement was
tainted by duress. A compromise agreement will most often be
concluded in circumstances where uncertain legal relationships
between the parties give rise to a risk or threat of litigation.
Merely threatening to institute proceedings for contractual or
delictual damages does not constitute “duress” that will
vitiate an agreement of compromise. The threat of litigation is
part and parcel of commercial life and will not on its own be the
basis for concluding that an otherwise properly concluded contract
is void. To the extent that the first respondent suggested that the
duress arose from conduct other than a mere threat of litigation,
the appellants strenuously denied in their answering affidavits
having behaved improperly. To the extent that the allegation of
duress goes beyond a mere threat of litigation, there is a dispute
of fact between the first respondent and the appellants that, on the
ordinary rule, must be decided in favour of the appellants. The
argument that the second agreement was vitiated by duress must
therefore be rejected.
Similarly
the broad and somewhat vague assertion by counsel for the first
respondent that the second agreement should be found to be vitiated
because of the “moral turpitude” of the appellants was
refuted by the appellants both in their answering affidavits and in
argument. As these were motion proceedings a quo, the
appellants’ denials must be accepted and the first
respondent’s argument of moral turpitude rejected.
I
conclude therefore that the second agreement is a valid agreement of
compromise, intended to replace a previous agreement between the
parties, whether valid or not, and intended to avoid litigation
between them. Given the validity of the second agreement, it is
clear that there is no contractual basis upon which Mr Amakutuwa can
challenge the title of the second appellant to the EPLs. The
consequence of this conclusion is that it is not necessary to
determine whether the first agreement was void or not. Nor is it
necessary to determine the arguments relating to section 46 of the
Minerals Act or any of the other grounds advanced by the respective
litigants. The appeal must succeed and the order of the High Court
must be set aside.
The
appellants are entitled to their costs in this court and in the High
Court, and those costs should, as the parties agreed, include the
costs of the abandoned rule 49(11) application.
The
following order is made:
The
first respondent’s application to admit further evidence on
appeal is dismissed.
The
appeal is upheld.
The
order of the High Court is set aside and replaced with the following
order: “The application is dismissed with costs, such costs to
include the costs of one instructed counsel”.
The
respondent is to pay the costs of the appellants in this Court,
including the costs of the application for leave to adduce further
evidence, as well as the appellants’ costs in relation to the
abandoned rule 49(11) application in the High Court.The
costs in this court shall include the costs of two instructed and
one instructing counsel.
_______________
O’REGAN,
A.J.A.
I
concur
_______________
MARITZ,
J.A.
I
concur
_______________
CHOMBA,
A.J.A.
Counsel Assisted Instructed By: | Mr. Mr. LorentzAngula Inc |
Counsel Instructed By: | Mr. E. K. |
1
It should be noted here that only the first agreement contemplated
the transfer of the EPLs to Reliance.
2
Van
Eeden v Van Eeden 1999
(2) SA 448 (C0 at 450 J – 451A (per Comrie J), cited with
approval in Rail
Commuters Action Group v Transnet Ltd t/a Metrorail 2005
(2) SA 359 (CC) at para 42.
3
Colman v Dunbar 1933 AD 141 at 162. This approach has often
been cited by South African courts. See, for example, Knox
d’Arcy and Others v Jamieson and Others 1996 (4) SA 348
(SCA) at 378; Rail Commuters Action Group v Transnet Ltd t/a
Metrorail, cited above n1, at para 41.
4
An
appellate court is not ordinarily bound by an abandonment of a legal
argument in the court below. See Paddock
Motors (Pty) Ltd v Igesund 1976
(3) SA 16(A) at 23H – 24D (per Jansen JA).
5
See
Gollach
& Gomperts (1967) (Pty) Ltd v Universal Mills and Produce Co
(Pty) Ltd and Others 1978
(1) SA 914 (A) at 921 B – C.
6
There
is a narrow class of exceptions to this rule.
Where
the terms of the compromise are tainted by the same public policy
considerations which rendered the initial obligation unenforceable
the compromise will also be unenforceable. An example of this would
be the purported compromise of a gambling debt. See Georgias
v Standard Chartered Finance Zimbabwe Ltd,
2000 (1) SA 126 (ZS) at 140A – B. This exception has no
bearing on the facts of this case.
7See
Hamilton v Van Zyl 1983 (4) SA 379 (E) at 383 D – E
citing Wessels The Law of Contract in South Africa 2nd
ed Vol II para 2458.
9
Mothle v Mathole 1951 (1) SA 785 (T); Jonathan v Haggie
Rand Wire Ltd and Another 1978 (2) SA 34 (N); Hamilton v Van
Zyl, id, at para 383 G – H.
11
Cole v Union Government 1910 AD 263 at 272 (per Innes JA).
See also Naude and Another v Fraser 1998 (4) SA 539 (A) at
558.