Court name
Supreme Court
Case number
SA 31 of 2009
Case name
Metals Australia Ltd and Another v Amakutuwa and Others
Media neutral citation
[2010] NASC 13












REPORTABLE


CASE
SA 31/2009





IN
THE SUPREME COURT OF NAMIBIA








In
the matter between:













METALS
AUSTRALIA LIMITED


METALS
NAMIBIA (PTY) LIMITED



FIRST
APPELLANT


SECOND
APPELLANT









and
















MALAKIA
JOSES AMAKUTUWA


MINISTER
OF MINES AND ENERGY, NAMIBIA


BRIAN MOORE



FIRST
RESPONDENT


SECOND
RESPONDENT


THIRD
RESPONDENT






Coram:
Maritz JA, Chomba AJA et O’Regan AJA





Heard
on:
05/07/2010





Delivered
on:
05/11/2010













APPEAL
JUDGMENT












O’REGAN
AJA
:









  1. 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



  1. 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.








  1. 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.








  1. 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.








  1. 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.








  1. 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”.








  1. 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”.








  1. 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.








  1. 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



  1. 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



  1. 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:




  1. 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.



  2. The non-existence of Reliance did not
    render the contracts objectively impossible of performance.


  3. 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.)


  4. 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.


  5. 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



  1. The
    first respondent’s submissions may be summarized thus:




  1. 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).


  2. Both
    agreements were void because an agreement entered into on behalf of
    a non-existent close corporation is null and void.


  3. 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.


  4. The
    moral turpitude and unclean hands of the appellants should deprive
    them of any defence.












Application to adduce further
evidence on appeal



  1. 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.







  1. 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.







  1. 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








  1. 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.







  1. 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.







  1. 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.







  1. 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



  1. 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



  1. 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







  1. 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








  1. 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.








  1. 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.








  1. 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.








  1. 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.








  1. 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.








  1. 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.








  1. 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.







  1. 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.







  1. 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.







  1. 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.








  1. The
    following order is made:








  1. The
    first respondent’s application to admit further evidence on
    appeal is dismissed.








  1. The
    appeal is upheld.








  1. 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”.








  1. 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.


  2. 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
on behalf of the Appellants:


Assisted
By:


Instructed By:



Mr.
J. Gauntlett SC


Mr.
F. Pelser


LorentzAngula Inc











Counsel
on behalf of 1st Respondent:


Instructed By:



Mr.
T. A. Barnard


E. K.
Kasuto Legal Practitioners







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
.
W
here
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.




8
Hamilton v Van Zyl, id, at 383 E – F.




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.




10
See Paddock Motors (Pty) Ltd v Igesund 1976 (3) SA 16 (A)




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.