Brocsand (Pty) Ltd. vs. Tip Trans Resources (Pty) Ltd. and Others.

South Africa

04.11.2020

Mines and Minerals

Grantee cannot acquire more rights than those afforded by the grantor

Present appeal is directed against an order of the High Court, which upheld the exception raised by the Respondent, Tip Trans Resources (Pty) Ltd. (Tip Trans), against the particulars of claim of the Appellant, Brocsand (Pty) Ltd. (Brocsand), on the ground that they did not disclose a cause of action. It also dismissed Brocsand's application for leave to amend its particulars of claim under Rule 28(4) of the Uniform Rules of Court.

The High Court essentially agreed with Tip Trans’s objections, noting that the Doornkraal aspect of the 2015 agreement did not breach Brocsand’s right of first refusal in relation to the extraction of laterite and sand on Red Hill. Brocsand had no contractual relations with Global Pact and was thus not entitled to step into the shoes of Tip Trans in respect of a contract concluded between Tip Trans and Global Pact. It was held that, the Oryx mechanism did not extend to matters beyond the original agreement; it was limited to the subject matter of the original agreement, in this case the extraction of laterite and sand on Red Hill.

The main premise for Brocsand’s claim to rights on Doornkraal was that, by invoking the Oryx mechanism, it had 'stepped into the shoes' of Tip Trans not only in respect of the Red Hill aspect, but also in respect of the Doornkraal aspect of the January 2015 agreement. Brocsand sought to 'step into the shoes' of Tip Trans in respect of both parts of the January 2015 agreement.

Present Court made it very clear that, the metaphoric ‘stepping into the shoes’ in terms of the Oryx mechanism does not make the grantee a party to the contract between the grantor and the third party. An independent contract between the grantor and grantee comes into existence. It follows that the Oryx mechanism permits the grantee to obtain rights only as against the grantor and only in respect of the subject matter of the preferent right, here the right of first refusal.

The Red Hill and Doornkraal aspects of the 2015 agreement were undoubtedly severable. Full Score granted rights in respect of the former, while Global Pact granted rights in respect of the latter. The two aspects involved the exploitation of different minerals at different prices. Brocsand’s right of first refusal was a right against Full Score, in respect of laterite and sand, on Red Hill.

Yet, Brocsand sought to step into the shoes of Tip Trans not only in respect of the Red Hill aspect, but also in respect of the Doornkraal aspect of the 2015 agreement. It argued that, this extension of the Oryx mechanism was justified on grounds of equity, since the parties to the 2015 agreement acted mala fide, alternatively 3 improperly, with knowledge that their conduct would infringe upon Brocsand’s right of first refusal. The Oryx mechanism permits the grantee to obtain rights only as against the grantor and only in respect of the subject matter of the preferent right. Application of the Oryx mechanism could thus not vest rights in Brocsand that it would then be able to exercise against Global Pact and in respect of Doornkraal.

The Supreme Court held that, Brocsand’s reliance on the doctrine of notice, in order to strengthen its argument for an extended application of the Oryx mechanism, was misplaced. While the doctrine may allow a grantee to enforce its preferential right against persons other than the grantor of that right, it did not in any way extend the content of the right. It was held that the ambit of the Oryx mechanism could not be enlarged, with recourse to the doctrine of notice, so that a grantee is permitted to enjoy rights that were never the subject of the original grant. The Oryx mechanism and the doctrine of notice could only apply in respect of the Red Hill aspect of the January 2015 agreement, which was a separate and distinct contract from the Doornkraal aspect. Appeal dismissed.

Tags : Contract Rights Entitlement

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