The Supreme Court of Appeal ('SCA') in the case of Vantage Goldfields SA (Pty) Ltd v Siyakhula Sonke Empowerment Corporation (Pty) Ltd and Another considered whether a sale of shares agreement – which would otherwise have lapsed due to the non-fulfilment of certain suspensive conditions – had been revived by subsequent addenda that had been entered into.
Background facts
On 1 November 2017, Vantage Goldfields SA (Pty) Ltd ('Goldfields') and Flaming Silver Trading 373 (Pty) Ltd ('Flaming Silver') entered into a written sale of shares agreement in terms of which Flaming Silver purchased the shareholding of Goldfields in two of its subsidiary companies and its claims in those companies for ZAR310 million. This principal agreement was nevertheless subject to the fulfilment of three conditions precedent.
Firstly, Flaming Silver was required to secure financing for the purchase price on or before 31 January 2018 ('financing condition'). Secondly, Flaming Silver had to pay ZAR10 million plus ZAR1.00 (of the purchase price) into the trust account of attorneys Martins Weir-Smith Inc before 1 or 2 January 2018 ('payment condition'). Thirdly, all regulatory and statutory approvals – including the Minister's consent in terms of section 11 of the Mineral and Petroleum Resources Development Act 28 of 2002 – had to be obtained by 31 January 2018 ('consent condition').
The agreement further provided that should any of these conditions precedent not be met by its due date, nor has its period of fulfilment been extended by the parties in writing prior to its expiry, then the agreement would lapse and be of no force and effect. Additionally, any variation or cancellation of the agreement had to be in writing and signed by the parties in person.
The conclusion of various addenda
On 21 December 2017, the parties concluded their first written addendum to the agreement which shifted the deadline dates for the financing and consent conditions from 31 January 2018 to 31 March 2018. The deadline date for the payment condition remained unaffected. On 3 May 2018 – after the expiry of the deadline date for the fulfilment of all three conditions precedent – the parties concluded a second addendum which deemed the financing and payment condition to have been fulfilled by 31 March 2018, whilst extending the consent condition to 30 July 2018.
On 2 August 2018, the parties concluded a third addendum which further extended the consent condition deadline date to 31 October 2018. Additionally, Goldfields would repay the ZAR10 million deposited into their attorney's trust account back to Flaming Silver who, in turn, would pay ZAR1.1 million to Goldfields for procuring post-commencement funding, as well as a further ZAR1 million as a 'non-refundable pre-payment' of the purchase price.
This third addendum also included an intervening party, Siyakhula Sonke Empowerment Corporation (Pty) Ltd ('Siyakhula'), who agreed to pay ZAR1.1 million per month for three months to Goldfields as part of the post-commencement funding. Flaming Silver also agreed to submit the section 11 application for the Minister's consent on 2 August 2018 and to pay the balance of the purchase price to Goldfields before the transfer of the sale but after proof that the Minister's consent had been obtained.
These three parties later concluded a fourth addendum on 31 October 2018 which recorded that all conditions precedent had been fulfilled, despite it also being recorded that the Minister's consent had not been obtained. Nevertheless, following an application brought by Flaming Silver for an order of specific performance against Goldfields under this addendum, the fourth addendum was subsequently set aside on the basis that it had not been properly authorised.
Flaming Silver and Siyakhula later brought another application seeking an order that the agreement had lapsed on 31 January 2018 (alternatively 1 April 2018 or 31 July 2018) and was thus void, and that the second and third addenda concluded were consequently void and unenforceable. They also sought an order requiring Goldfields to repay Siyakhula, alternatively Flaming Silver, the amount of ZAR1 million plus interest based on unjustified enrichment.
In its judgment, the High Court found that the agreement had lapsed on 31 January 2018 due to the non-fulfilment of the payment condition. All subsequent addenda concluded between the parties were accordingly void ab initio as the principal agreement was of no legal effect and could not be revived. Goldfields was ultimately found to have been unjustifiably enriched and ordered to repay Siyakhula ZAR1 million.
The matter before the SCA
On appeal before the SCA, Goldfields argued that an agreement which had lapsed due to the non-fulfilment of a suspensive condition could be revived by the parties if the relevant conditional term is amended to prevent the agreement from 'self-destructing' due to the non-fulfilment of that same condition. In this regard, it was argued that "the consensus of the parties, as expressed in the second and third addenda, revived the principal agreement by incorporating terms that protected the revived contract from 'self-destruction'".
Upon an examination of these background facts, the SCA agreed that the first addendum had validly extended the deadline dates for the financing and consent conditions, whilst maintaining the original agreed-upon date for the fulfilment of the payment condition. This is because this addendum had been concluded by the parties in writing prior to the expiry of these conditions precedent.
The SCA found the second addendum to be of no legal effect since it had been concluded on 3 May 2018, which was past the expiry date of the payment condition (1 or 2 January), as well as the amended dates of the financing and consent conditions (31 March 2018). As a result, the SCA held that the agreement had lapsed on 1 or 2 January 2018 due to the non-fulfilment of the payment condition. All further attempts to extend the deadline dates of these conditions precedent beyond this point via addenda were futile and incapable of reviving the principal agreement.
Additionally, the SCA held that the payment of ZAR1 million to Goldfields under the third addendum – described as a 'non-refundable pre-payment' of the purchase price – was not a 'self-standing obligation'. This payment obligation was directly linked to the agreement which had lapsed and was void. As a result, the SCA agreed with the High Court that Goldfields had been unjustifiably enriched.
The SCA concluded by highlighting that it is a trite principle of law that a lapsed contract cannot be revived unless the conditions precedent causing the lapse are properly amended in accordance with the agreement. Any attempt to extend these deadlines or deem conditions fulfilled after their expiry is legally ineffective unless permitted in terms of the agreement. Goldfields' appeal was accordingly dismissed with costs.
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