The matter dealt with a claim by the appellants for an equal portion of shares in the 2nd respondent (a company).
The background to the case is that the 1st applicant and 1st respondent entered into an agreement to pursue a joint mining venture. The parties signed an MOU which stated that they would hold shares in the 2nd respondent. The applicants contended that the MOU implied that they would hold 50 per cent shares in the 2nd respondent.
The court considered the interpretation of the words in the MOU. The court gave the words their ordinary and natural meaning. It was concluded that in the absence of the usual qualifying or quantifying words, the natural and proper conclusion was that, at the time of signing the M0U, the 1st applicant and 1st respondent had not agreed as to the exact percentages of their respective holdings.
The court dismissed the application with costs to the respondents.
IN THE HIGH COURT OF LESOTHO
In the matter between:-
TORO DIAMONDS LESOTHO (PTY) LTD 1 APPLICANT
BATLA MINERALS SA 2 APPLICANT
NAMAKWA DIAMONDS LTD 1 RESPONDENT
STORM MOUNTAIN DIAMONDS (PTY)LTD 2 RESPONDENT
AFRICAN ALLIANCE LESOTHO LTD 3 RESPONDENT
THE GOVERNMENT OF LESOTHO 4 RESPONDENT
THE ATTORNEY-GENERAL OF LESOTHO 5 RESPONDENT
Coram : Honourable Justice J.D. Lyons (Acg)
Date of Hearing : 21 November, 2011
Date of Judgment : 30 November, 2011
Mining ventrure – interpretation of terms of memorandum of understanding –peculiar nature of mining venture – surrounding circumstances examined in case of ambiguity or where parties consent.
MTK Saagmeule Pty Ltd v Killyman Estates Pty Ltd 1980 (3) SA 1 A and Telcordia Technologies Inc v Telkom SA Ltd 2007 (3) SA 266 (SCA) at para 91).
LYONS J. (AGT)
 By Notice of Motion filed 22 June 2011 the applicants sought, amongst other relief,
that it be declared that the First Applicant and First Respondent are, jointly, entitled to all of the shares in the Second Respondent presently registered in the name of the First Respondent, subject to the rights of the citizens of Lesotho to subscribe to 12,5% of the shares in Second Respondent.
 That, pending the actual subscription by the Lesotho citizens to their allocated shares or the transfer of allocated shares to an employees’ trust, all of the shares in the Second Respodnent presently registered in the name of the First Respondent be transferred and registered into the names of the First Applicant and the First Respondent jointly
 This court cannot acceed to the application.
 The Kao diamond mine is situated in the North-Eastern highlands of Lesotho in Butha-Buthe district. It has had a checkered history. As for as I understand the mine has never been fully productive, certainly not of recent times.
 The previous owner of the mine went bust and was put into provisional liquidation in either 2008 or early 2009. It has since been finally put to the sword. In 2010 the provisional liquidation became final.
 The 2nd applicant (‘Batla’ – a company domiciled in France) and the 1st respondent (Namakwa – a company domiciled in Bermuda) got wind of the difficulties the (then) owners of the Kao mine were in. Both Batla and Namakwa were already engaged in diamond mining in other places. One of Batla’s subsidiaries (“Alluvial”) was already mining in the Butha-Buthe district at Letšeng. This was (and still is) a successful venture.
 In early 2009 Batla and Namakwa had some preliminary talks about the Kao mine. Namakwa was represented principally by Mr. Nel and its attorney, Mr. Van Zyl. Batla was principally represented by Mr. Reynolds with assistance from Mr. Reteif, Mr. Van der Walt and Mr. Courtenay Cornelissen.
 As a preliminary to deciding to pursue the mining lease of the Kao mine Nel had discussions with the Lesotho Government. He gained the impression that the Government would like Alluvial (or an associated company) involved in the Kao mine. This was a sensible suggestion. The Kao mine had a recent history of trouble. This trouble included serious incidents of civil unrest. Alluvial not only had a track record of successfully mining for diamonds in the district (not to say that Namakwa’s success elsewhere counted for nought) but most importantly, Alluvial was trusted by the locals. This, as I understand the notorious history of Kao (which included the nefarious conduct of a convicted fraudster from the antipodes, one Alan Bond), would be of invaluable assistance in finally getting the Kao mine into full and profitable production – if at all possible given the inherrent uncertainties of mining ventures. It did not seem to me that Nel took this as an ultimatum or a ‘condition precedent’ but rather as a sensible suggestion for making the way forward a little easier.
 In the morning of the 30 June 2009 the representatives of Batla and Namakwa met in a coffee shop at the Waterfront Mall in Bloemfontein. Batla was represented by Reynolds and Cornelissan. Nel represented Namakwa. Van Zyl had scurried off to get an advocate’s advice on the best way approach the acquisition of the lease. He turned up later in the morning. What transpired at that meeting is the cause of some controversy.
 It was what I would term an informal business meeting. It can hardly have been a meeting where binding terms of a large mining joint venture were contemplated – unless the business practices of the participants are seriously undeveloped (which I doubt). There was no formal meeting structure, no formal agenda, no minutes or contemporaneous notes were taken and nothing was reduced to writing. In fact, as far as I can determine from the bundles of documents presented to the court, there was no follow-up memoranda between the parties confirming what was discussed and/or agreed. It has to be understood that Reynolds and Van Zylk are attorneys, and experienced ones at that, notably in the mining industry. Any junior attorney knows of the necessity fo taking notes and of sending a written confirmatory follow-up when attending a formal meeting where it is intended to reach (or try to reach) a binding consensus. Either Reynolds and Van Zyl are both sadly lacking in the fundamental essentials, or the meeting of 30 June 2009 was intended to be (and was) a preliminary, exploratory and informal discussion held over a convivial morning cup of coffee. In my opinion it was the latter.
 The applicants (relying on Reynolds as supported in the usual perfunctory manner by Cornellison – I pause to ask of what possible evidential weight are those short word-processed confirmatory affidavits?) - contend that at this meeting in the coffee shop on 30 June, they and Namakwa concluded a binding agreement to undertake the Kao mining project as a joint venture on a 50% to 50% basis. Reynolds claims that the parties reached ‘Mazaal’ in this respect. Apparantly when parties ‘Mazaal’ – a term used in the diamond industry - it means they have reached a binding agreement. The term was not further explained (for example; is a handshake or some other act done to ‘Mazaal’).
 Nel on the other hand strongly denied any binding agreement was reached. His recollection was that the parties had discussions and agreed to work together to try and conclude an arrangement whereby they could obtain the lease for the Kao mine. According to Van Zyl, when he arrived at the coffee shop, Nel, in the presence of Reynolds and Cornellison, updated Van Zyl as to what had transpired in his absence. Nel made no mention of a 50/50 agreement. There was no evidence that either Reynolds or Cornellison corrected Nel as to the supposed 50/50 joint venture agreeement that had supposedly been reached in Van Zyl’s absence.
 I am not persuaded that this ‘Mazaal’ was reached. I did not find Reynolds evidence to be reliable on this point. His responses in cross-examinition tended towards being evasive, guarded and long-winded. He appeared to be uneasy in his demeanour and it seemed to me as if he was holding something back. He appeared to be uneasy with the situation he found himself in. That is not to say he is dishonest. That would be an unfair thing to say, particularly given his position. I rather gathered the impression that he was caught up in events that led him to a point where like a jaded ‘widget’ salesman, he had to sell a product he did not quite believe in.
 I much preferred Nel’s evidence on this point. He was direct, unmoved in cross-examination and, as he has moved on from Namakwa, had no vested interest. And his version of events had the ring to truth and reality.
 After this meeting in the coffee shop, Van Zyl went off to Maseru to speak with the creditors. The others went about their business. Emails, phone calls and meetings followed as the applicants and respondents sought to complete the agreements needed to go forward with the Kao mine.
 The first time any mention was made of a 50/50 agreement is in an email from Reynolds to Mr. Kruger of Namakwa dated 28 August 2009, two months (give or take a day or two) from the meeting in the coffee shop.
 Reynolds wrote ‘there must be a 50/50 agreement with regard to shareholding and financing of Kao.’
 I am unable to reconcile this language (of demand) with any suggestion of a prior binding agreeement on the very point demanded. On my understanding of the evidence, these parties call a spade a spade. Their language was to the point and, at times, colourful. Had there been a prior bending agreement Reynolds would have referred to it directly, not in the manner of a basic requirement but as a done deal. That it was raised in this way, and 2 months later, is inconsistent with any suggestion that it had already been agreed.
 Matters progressed to a point that the parties were ready to apply for a lease. In prior negotiations it was determined that the creditors and former employees of the Kao mine be paid in full. Namakwa took care of this.
 It was decided that a new company be formed as the vehicle to carry the mine forward. It was originally named from an amalgamation of Namakwa and Batla Diamonds, but eventually the 2nd respondent Storm Mountain Diamonds Pty Ltd (‘Storm’) was settled on.
 The Government of Lesotho required some shares in Storm. A range from 20% to 25% was suggested.
 Another requirement was that shares would be made available to the citizens of Lesotho. An allocation of 5% was first proposed. That left a balance of between 75% of the shares in Storm (on the upside) and 70% (on the lower side) available for allocation between Namakwa and Batla. At around this time, August 2009, Batla had decided to form another subsidiary company to hold its allocation of shares in Storm. This was subsequently formed under the name of the 1st Applicant (Toro). To avoid confusion I will refer to the 1st applicant now as “Toro”.
 With betweeen 70% to 75% of the shares to work with, Namakwa and Toro were better able to forge an agreement as to their respective participation ratios.
 For sensible commercial reasons, Namakwa insisted on being the majority shareholder in Storm. Toro acquiesced to this. As between Namakwa and Toro it was agreed that Namakwa would hold 50.1% of the shares in Storm and Toro would hold 19.9% of the shares. The balance of 30% would be held (it was hoped) as to 25% for Government and 5% for the Lesotho citizens.
 This overall participation ration suited the parties – or should I say the two main parties. And so it should be. Granted in this modern post-colonial era the original ‘owners’ of the resource, being the local inhabitants, should have a real interest beyond just a monthly pay packet. In saying this, however, it has to be recognized that the real risks lie with the entities that actually put their hand in their pockets and pay for the development of the resource and who bring the know-how to the project. In any successful venture in the modern era there has to be a fair quid pro quo. Overreaching or exploitation is quaranteed to cause dischord that sooner or later causes the venture to fail - with the inevitable result that everyone is left with zilch. On such a rock has many a venturesome vessel floundered.
 For all intents and purposes (importantly, at least from Namakwa and Toro’s viewpoint) the deal was done. A memorandum of understanding was drawn up and signed (MOU.1). But the devil lurked in the detail or rather the lack of it. Government still hedged between 20% and the high end 25%. But the share requirement of the Lesotho citizens (previously 5%) was lifted to 12.5% - a combined total of between 32.5% and 37.5%.
 This scuttled the previously reached agreement between Namakwa and Toro of a 50.1% and 19.9% (plus an attractive sub-contract) participation ration in what had been a 70% balance. The hope that the Kao mine would finally turn the corner and become productive (with all the social benefits that it would bring) disintegrated. Namakwa and Toro were left with 67.5% or 62.5% of the remaining shares to divide as they would agree - assuming they could agree.
 Well, they could not agree.
 Namakwa and Toro had reached a workable commercial deal. It is they who are taking the risk of getting a non-productive and troubled mine into full production.
 Namakwa wanted the majority shareholding in Storm. This is commercially understandable. Already Namakwa had dug deep into its pocket and paid out probably in excess of R150 million. It is not a fly-by-night operation but is a mining compnay with a proven record. It does not have bottomless pockets. Obviously it needs to go to the market and raise funding for the forward operation of the mine. Having the majority shareholding in Storm offers its investor’s confidence. After all it is providing the lion’s share of the funds and taking the corresponding lions’ share of the risk. Should it not have some carrot to offer its lenders?
 Toro, through its affilliation with Batla and particulary Alluvial, also has a good track record. As was recognized by Government, having Toro (through the Alluvial tie-up) on board was invaluable. Toro would bring to the project the local knowledge and it was most likely trusted by the local workforce.
 Toro, however, needs more than the lowest minority that (were Namakwa to keep the majority) the 7.25 % hike in the Government/Lesotho citizens share would have handed it. Toro also does not have bottomless pockets. It may well need to go to the market place to raise funds when required. It says it has R50million available up front and the possibility of raising a further R49 million (or thereabouts) on unencumbered assetts. It has not put any money in as yet, but, for the purposes of discussion I will accept the above figures.
 Mining is a capital intensive industry with no gilt edged quarantee of any return. Once signed up, Toro may well have the need to raise more capital. The lowest minority shareholding in Storm is unattractive collateral to all but those lenders of last resort who offer terms and conditions only attractive to the desperate.
 From my understanding of the evidence, I get the sense that both Namakwa and Toro had ventured to the outer edge of their respective financial viabilities as regards this project. This is not to imply that either is short of funds. Rather it is to say that, in these trouble finacial times, both proceeded towards the point where responsible borrowing ended and financially irresponsible ‘high-gearing’ began. (It is instructive to read Reteif’s in-house email of 9 October 2010). In any commercial venture there is a “point of no return” where the financial returns are swallowed up by the costs of chasing that return. The sense I get is that by forcing Namakwa and Toro to stretch further than the approximated capital outlays that MOU 1 and prior discussions had envisaged (but without reasonably attractive collateral), would be to venture beyond that point.
 As it presently stands the Kao mine is once again at a standstill. From a now-defunct agreement between the 2 major entities, the negotiations soon descended into acrimony and distrust.
 Namakwa (who were already committed financially) and Toro boxed on. The Government were anxious to get the lease tied up. Another attempt was made during September through November of 2009 to explore alternative methods of meeting both Namakwa and Toro’s commercially sensible requirements, notwithstanding the workable 70% remainder had now been cut to an unworkable and immutable 62.5%. shareholding in Storm.
 By 1 December 2009 all parties had signed a new memorandum of understanding (MOU.2). Herein lies the rub.
 Clause 2.4 of MOU.2 reads:
“And whereas Namakwa, Batla Diamonds has been formed wherein between 62,5% (sixty two point five percent) and 67.5% (sixty seven point five percent) of the shares will be issued to Namakwa and Toro Diamonds between 20% (twenty percent) and 25% (twenty five percent) of the shares will be issued to the Government, and 12.5% (twelve point five percent) of the shares will be issued to the Lesotho Citizen subscribers.”
 Toro urges that this clause means that it and Namakwa are jointly entitled to an even 50/50 split of the remaining 62.5% (Government has since opted for 25%).
 Under cross-examiniation by Mr. Viljoen S.C., Reynolds agreed that “jointly” was implied from the wording.
 Namakwa disagrees. It says that the clause constitutes nothing more than an indication that it and Toro will take the 62.5% and divide the shares in a participation ration yet to be agreed upon.
 The 3rd and 4th respondents agree that the natural and normal interpretation of this clause does not favour the implication advanced by Toro.
 It is well settled that the first approach to be taken is to look at the words used and interpret them as to the natual useage of those words. As I read clause 2.4 it means that of the 100% of shares in Storm (formely Namakwa Batla Diamonds) 12.5% is to go to the Lesotho citizens, 25% (as it transpired) is to be issued to Government and the balance (62.5% as it turned out) are simply to be issued to Namakwa and Toro. There are no quantifying (or qualifying) words such as jointly or evenly or as to a defined percentage.
 As this is the case, it cannot be upheld that there is to be an even/joint dispensing of the shares. Nor can any particular ratio be used to determine the respective shareholdings. Given the absence of the usual qualifying/quantifying words, the natural and proper conclusion is that, at the time of signing M0U.2, Namakwa and Toro had not agreed as to the exact percentages of their respective holdings.
 Some support for this can be gained from clause 3.2 for example. What that provides is that if Government decided to take up less than the high-end 25%, any balance would be divided “proportionately between Namakwa and Toro in accordance with their respective shareholding (my underling)”. Again the absence of any precise quantification leads to the conclusion that, at the time of signing, Namakwa and Toro had not reached such an agreement.
 Further clause 4.1 requires that the Business Activities and any capital expenditure and working capital will be funded and contributed to as required in accordance with the participation ratios of the members of Storm (save for Government which is not required to contribute under this clause). Whilst not as strong an indicator as clause 3.2, the absence of enumerated participation ratios lends some support to the argument that, at the time of signing, Namakwa and Toro had not reached such an agreement. I say this with caution, though. Clause 3.2 can assist because it is not subject to variation. Either Government took 25% or it took less, thus invoking clause 3.2. It was a “one-off” clause. Clause 4.1, on the other hand is subject to variations in the ratio as the project moved forward. For example: the ratios may vary due to a subsequent use of the dilution for non-contribution clause as in clause 4.4.
 Whilst I have no difficulty in interpreting clause 2.4 and therefore udnerstanding the intent of Namakwa and Toro, the parties both led evidence of both prior and subsequent conduct. They both pointed to this to assist in clarifying what they saw as an ambiguity (see: MTK Saagmeule Pty Ltd v Killyman Estates Pty Ltd 1980 (3) SA 1 A and Telcordia Technologies Inc v Telkom SA Ltd 2007 (3) SA 266 (SCA) at para 91).
 In my judgment an exmination of this conduct and the surrounding circumstances does not assist Toro. I have already decided that there was no 50/50 joint venture agreement made at the coffee shop on 30 June 2009. Without labouriously combing through the materials, it is sufficient to say that at no time was there even a hint of Namakwa and Toro reaching a binding 50/50 participation ratio. The best that Toro could offer is when Reynolds wrote the Namakwa demanding such a ratio and Nel responded by saying (and quite properly so) that he would have it discussed internally. Toro was stretching the limits of reasonable persuasion by claiming that Nel’s lack of an immediate response must somehow be interpreted as tacit consent or an admission of prior agreement. Of course it is not so. It is standard and prudent business practice for a senior executive (as was Nel) to refer important matters (as this was) to his board for discussion.
 What Toro’s argument denies is reality. This involved two experienced entities negotiating the undertaking of a large mining venture. Mining ventures have a unique feature when put along side most other business ventures. In most other ventures (for example; building a large shopping mall or opening a chain of restaurants) information can be gathered and assessed, similar business models can be examined, future population trends can be approximated and reasonably accurate predictions as to the potencial profitability can be made. Not so with mining. With a mining venture one cannot accurately forecast when the proposed venture will strike pay dirt - or even if it will.
 Consequently what proposed mining joint ventures do is precisely what Namakwa and Toro did – they make an assessment based on their available financial resources as to how much capital they are prepared to throw into the venture. Hopefully (I accept a certain amount of science is useful – albeit far from a certainty) the venture will hit rich deposts before the money runs out. Mining demands considerable capital and presents substantial risks.
 With this in mind, one can see how the parties conducted their negotiaitons. The negotiations were not driven by some percentage share/ratio but by notions of available capital. These were ‘back-of-the enveloppe’ figures. Neither Namakwa nor Toro had done an in depth due deligence study. They started at around R200million as a likely figure to fund the venture. Toro said it had R50 million plus perhaps another R49million or so could be raised. Then, after further examination and expenditure by Namakwa to satisfy the liquidators and Government, the up front estimate escallated to R350million. This is how they arrived at the 5.2 ratio (or 50.01% and 19.9%). Toro had retreated somewhat from its R49 million in borrowed funds but did not completely count it out. Toro had conceded the majority shareholding to Namakwa but it brought local knowledge and expertise to the table. This intangible and the concession were worth something. Namakwa was confident of putting in R250 million - as a ‘ball-park, back of the envelope’ figure. Toro’s countribution (similarly worked out) was worth around R100 million. Hence the 5:2 ratio.
 This deal was money up front. That did not mean cash on the barrel-head. It meant each party deciding how much it could reasonably afford and how much was it prepared to throw at the venture. The negotiations were captial driven, not percentage ratio propelled.
 After the unfortunable collapse of the MOU.1 agreement, and with Toro not agreeing to take the full 7.5% reduction necessitated by the position taken by the other two minority and essentially non-contributing parties, the capital driven method continued with considerable force. Namakwa was not prepared to give up the majority. The estimate of required capital expanded rapidly. R350 million went up to R400 million and even during the trial the estimated figure of R500 million was suggested by Van Zyl. Toro sat on the R50 million. Namakwa was driving up the total estimated capital to a point where Toro will be left (mathematically, at least) with marginally less than ? (one eighth) - or the 12.4% that will leave Namakwa with the 50.1%. majority in Storm.
 On the other hand Toro has abandoned the capital driven method and have resorted to the percentages. The strategy is that if it gets a 50/50 findng, it will force Namakwa to actually spend the money before any dilution takes place as provided for in MOU.2. Thus to get Toro’s holding down to 12.4 % and Namakwa’s up from 31.25% to 50% plus of the available shares, Namakwa will have to actually put in the R350 plus million. That will test Reteif’s query (expressed in his internal email referred to above) as to whether or not Namakwa has the money.
 Discussion of strategies aside, the above serves to illustrate that the matter of percentage participation ratios was not a stand alone consideration but rather the negotiations were mainly driven (and calculated in the case of MOU.1) by the all important consideration of available capital input. As such was the case it cannot be said that clause 2.4 of MOU.2 “implied” (to use Reynolds’ word) a participation ration of 50% to 50% of the availabe shareholding in Storm.
 Unhappily, (and I say this will reference to all the parties for it was most unfortunate that MOU.1 did not come to fruition) I dismiss Toro’s application.
 The applicants are to pay the respondents costs on a party/party basis, to be taxed if not agreed.
 I certify for two counsel where applicable.
 In closing I must address Mr. Viljoen’s complaint on the matter of discovery, Mr. Viljoen is quite correct. The manner in which the bundles of documents were presented was unacceptable. The rule is very clear. (Rule 5 2000 High Court Rules ammendment. Also in the new rules presently being gazetted). I should not have to spell it out. The plaintif/applicant and the defendant/respondent get together to prepare a properly indexed and paginated COMMON bundle. Regretably the rule is observed in the breach not the compliance. The practice is that the documents are treated as admissible and true as to content unless otherwise indicated by the parties.
 The late delivery of the bundles (it happens regularly) is discourteous to the court and counsel. In this case the delivery on the very eve of trial to senior council, Mr. Viljoen, of a memory USB stick comprising over 800 pages was most discourteous and smacks of unfairness.
 Despite being seriously tempted, I will not award costs against the applicants. In fast-tracked applications, “things happen” as they say. Surpringly I have yet to hear a trial where the rule on trial bundles has been properly observed.
 I leave it to the applicant’s legal representatives to suitably address the discourtesy to senior counsel in the time-honoured and convivial traditions of The Bar.
For Applicants: Mr. H.M. Scholtz SC with Mr. J.A. Beyers (inst. by Du Preez, Liebetrau & Co.)
For 1st and 2nd Respondents : Mr. J.P. Vorster SC with Mr. M.M. Heyster
For 4th & 5th Respondents : Mr. H.P. Viljoen SC.
( all respondents counsel inst. By Webber Newdigate)
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