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SWINFEN
EADY J.

1909

Oct. 27, 28;

Nor. 3, 4,

24, 25. 1910

Feb. 10.

BRITISH SOUTH AFRICA COMPANY v. DE BEERS
CONSOLIDATED MINES, LIMITED.

[1906 B. 2882.]

Conflict of Laws Contract- Proper Law-Intention Contract to issue
Debentures-Floating Charge on Foreign Land-Clog on Equity of
Redemption-Chartered Company-Breach of Charter-Ultra vires.

The
proper law of a contract that is neither immoral nor contrary to
public policy must be determined by the intention of the parties.

Lloyd v. Guibert, (1865) L. R. 1 Q. B. 115, 120, 122; Chartered Mercantile Bank of India v. Netherlands India Steam Navigation Co., (1883) 10 Q. B. D. 321, 540; Jacobs v. Crédit Lyonnais, (1884) 12 Q. B. D. 389, 600; In re Fitzgerald, [1904] 1 Ch. 573, 587; Peninsular and Oriental Steam Navigation Co. v. Shand, (1865) 3 Moo. P. C. (N.S.) 272, 292; In re Missouri Steamship Co., (1889) 42 Ch. D. 321; Chamberlain v. Napier, (1880) 15 Ch. D. 614, 631; and Hamlyn & Co. v. Talisker Distillery, [1894] A. C. 202, 207, applied.

The English equitable rule against clogging the equity of redemption of a mortgage applies to an English contract for an issue of mortgage debentures to secure a loan and will be enforced by the English Courts against a contracting party in the jurisdiction although the floating security to be created by the debentures comprises foreign land, where the clog doctrine is possibly not recognized.

Noakes & Co. v. Rice, [1902] A. C. 24, 34; Bradley v. Carritt, [1903] A. C. 253, 261; and Sumuel v. Jarrah Timber and Wood Paving Corporation, [1904] A. C. 323 (clog cases); and Penn v. Lord Baltimore, (1750) 1 Ves. Sen. 444; 1 W. & T. L. C., 7th ed. p. 755; Mercantile Investment and General Trust Co. v. River Plate Trust, Loan and Agency Co., [1892] 2 Ch. 303; Ex parte Pollard, (1840) Mont. & Ch. 239; 4 Deac. 27; Coote v. Jecks, (1872) L. R. 13 Eq. 597; Hicks v. Powell, (1869) L. R. 4 Ch. 741; and Ex parte Holthausen, (1874) L. R. 9 Ch. 722 (jurisdiction in personam cases), applied.

Semble, the doctrine of ultra vires does not apply to a chartered company. Such a company has all the powers of a private person, and acts done in breach of its charter, though a ground for revocation by scire facias, are nevertheless valid.

Sutton's Hospital Case, (1612) 10 Rep. 1 a, 30 b; Riche v. Ashbury Railway Carriage and Iron Co., (1874) L. R. 9 Ex. 224, 263, 292; and Baroness Wenlock v. River Dee Co., (1883) 36 Ch. D. 675, n., 685, n., applied.

ACTION.

The plaintiff company was incorporated by Royal charter dated October 29, 1889, for the purpose of carrying into effect

EADY J.

1910

BRITISH

SOUTH AFRICA COMPANY

v.

DE BEERS
CONSOLI-
DATED

MINES,

divers concessions and agreements and carrying on operations in SWINFEN South Africa and for other purposes in the charter mentioned. The charter recited that the company desired to carry into effect divers concessions and agreements made by certain of the chiefs and tribes inhabiting the region of South Africa lying to the north of Bechuanaland and to the west of Portuguese East Africa, and such other concessions, agreements, grants, and treaties as the company might thereafter obtain within the said region or elsewhere in Africa, and provided (clause 1) that the LIMITED. principal field of the operations of the company should be the region of South Africa lying immediately to the north of British Bechuanaland and to the north and west of the South African Republic and to the west of the Portuguese dominions; (clause 2) that the company was thereby empowered to hold and retain the full benefit of the said concessions and agreements; (clause 3) that the company was thereby further empowered, subject to the approval of the Secretary of State, from time to time to acquire by any concession, agreement, grant, or treaty all or any rights, interests, authorities, jurisdictions, and powers of any kind or nature whatever, including powers necessary for the purposes of government and the preservation of public order in or for the protection of territories, lands, or property comprised or referred to in the concessions and agreements made as aforesaid or affecting other territories, lands, or properties in Africa or the inhabitants thereof, and to hold, use, and exercise such territories, lands, property, rights, interests, authorities, jurisdictions, and powers respectively for the purposes of the company and on the terms of the charter; (clause 6) that the company should always be and remain British in character and domicil, and should have its principal office in Great Britain, and the company's principal representative in South Africa; (clause 10) that the company should to the best of its ability preserve peace and order in such ways and manners as it should consider necessary, and might with that object make ordinances (to be approved by the Secretary of State), and might establish and maintain a force of police; (clause 11) that the company should discourage and abolish by degrees any system of slave trade or domestic servitude; (clause 12) that the company should regulate the traffic in

EADY J.

1910

BRITISH SOUTH AFRICA COMPANY

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SWINFEN intoxicating liquors, so as, as far as practicable, to prevent the sale to natives; (clause 13) that the company should not interfere with any religion except so far as might be necessary in the interest of humanity; (clause 14) that in the administration of justice regard should be had to the customs and laws of the tribes ; (clause 17) that the company should furnish annually to the Secretary of State accounts of its "expenditure for administrative purposes, and of all sums received by it by way of public revenue, as distinguished from its commercial profits," and should also before the commencement of each financial year furnish "an estimate of its expenditure for administrative purposes, and of its public revenue (as above defined) for the ensuing year." The charter proceeded as follows:

DE BEERS
CONSOLI-
DATED
MINES,
LIMITED.

Clause 20. "Nothing in this our charter shall be deemed to authorize the company to set up or grant any monopoly of trade; provided that the establishment of or the grant of concessions for banks, railways, tramways, docks, telegraphs, waterworks, or other similar undertakings, or the establishment of any system of patent or copyright approved by our Secretary of State, shall not be deemed monopolies for this purpose. . .

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Clause 22. "The company . . . shall provide such Courts and other requisites as may from time to time be necessary for the administration of justice."

Clause 23. "The original share capital of the company shall be 1,000,000l. divided into 1,000,000 shares of 11. each."

Clause 24. "The company is hereby further specially authorized and empowered for the purposes of this our charter from time to time

"I. To issue shares of different classes or descriptions, to increase the share capital of the company, and to borrow moneys by debentures or other obligations."

"III. To establish or authorize banking companies and other companies, and undertakings or associations of every description, for purposes consistent with the provisions of this our charter."

"IV. To make and maintain roads railways telegraphs harbours and any other works which may tend to the development or improvement of the territories of the company.

"V. To carry on mining and other industries, and to make SWINFEN concessions of mining forestal or other rights."

“VIII. To grant lands for terms of years or in perpetuity, and either absolutely, or by way of mortgage or otherwise."

"XII. To carry on any lawful commerce, trade, pursuit, business, operations, or dealing whatsoever in connection with the objects of the company."

EADY J.

1910

BRITISH
SOUTH

AFRICA

COMPANY

V.

DE BEERS
CONSOLI
DATED

MINES,

Clause 25 provided for the execution of a deed of settlement which was subsequently executed on February 3, 1891. Article 115 LIMITED. provided that its provisions were "to be deemed to be subject to and fully controlled by the provisions of the charter." The terms of this deed and of a supplemental charter of June 8, 1900, and a supplemental deed of May 1, 1901, are not material to this report.

The defendant company was a company registered and incorporated under the limited liability laws of the Colony of the Cape of Good Hope, having its head office at Kimberley in that Colony. In stating the following documents the two companies have been simply called the plaintiff company and the defendant company instead of the names actually appearing in those documents.

By an agreement made April 20, 1892, between the plaintiff company of the one part and the defendant company of the other part, after reciting that the plaintiff company was indebted to the defendant company in the sum of 80,500l. and that the plaintiff company contemplated an issue of first mortgage debentures to be secured by a trust deed specifically charging the plaintiff company's mineral and land rights in South Africa, but the time and amount of that issue had not yet been determined by the plaintiff company, and reciting that the plaintiff company had applied to the defendant company for further advances, it was mutually agreed as follows:

"1. The defendant company shall on the execution hereof advance to the plaintiff company 3500l. and on the first day of each calendar month of the present year the further sum of 35001. so that the total advances by the defendant company to the plaintiff company shall (including the said sum of 80,500l.) amount to 112,000l. by December 1, 1892, inclusive.

"2. The plaintiff company shall repay the defendant company

EADY J.

SWINFEN in London the said advances of 112,000l. on January 1, 1898, with interest at the rate of 61. per cent. per annum upon the aforesaid moneys so to be advanced as aforesaid such interest to be calculated from the date of the respective advances until repayment of the said 112,000l.

1910

BRITISH
SOUTH

AFRICA

COMPANY

v.

CONSOLI

"3. The plaintiff company shall not incur liabilities (including DE BEERS the said 112,000l.) exceeding 200,000l. during the currency of this agreement but excluding the amount of certain bills of LIMITED. exchange secured by a charge on the plaintiff company's unpaid capital called and uncalled.

DATED
MINES,

"4. In the event of the plaintiff company determining to make an issue of debentures as contemplated the defendant company shall be entitled to require debentures part of such issue to be issued to it at whatever may be the rate of issue in satisfaction of the said 112,000l. and accrued interest thereon and if the defendant company do so require the plaintiff company shall as to its diamondiferous ground south of the Zambesi enter into an agreement with the defendant company to the effect of the clause scheduled hereto.

"5. Should there be no issue of debentures by the plaintiff company as aforesaid or there being such issue the defendant company do not exercise the power given to it by the preceding clause but desire to have the benefit of the said scheduled clause the defendant company shall be entitled to decline to take repayment of the said 112,000l. which shall accordingly be retained by the plaintiff company and carry interest at the rate of 61. per cent. per annum and the defendant company shall be entitled so to decline for a period of five years and if the defendant company do so decline for such period then at the end thereof (whether payment of the said 112,000l. be or be not then demanded by the defendant company) the defendant company shall become entitled to the benefit of the said scheduled clause in perpetuity. During the said period of five years or such part of it as the defendant company decline to take repayment of the said 112,000l. the defendant company shall be entitled to the said scheduled clause if diamondiferous ground should be found during such period. Nothing in this clause shall prevent the defendant company in the absence of any other agreement

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