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MARGARET
INSAIDOO J (MS).
JUDGMENT
The plaintiff's prayer to this
court is for the following reliefs:
1)
An order rescinding or setting
aside the memo of agreement (MOA)
dated 3rd November,
2003 on grounds of fraud and
deceit.
2)
An order rescinding or setting
aside the Memo of Agreement for
total failure of consideration.
3)
An order for perpetual injunction
restraining the defendant from in
any way dealing with Plaintiff's
7/i% interest in the Riyadh
concession or continuing to breach
the MOA pending the final
determination of the suit
FACTS
The brief facts are that the
plaintiff used to have a 100%
interest in a concession at Bawdie
in the Western Region of the
Republic of Ghana; this was known
as the Riyadh Concession.
The plaintiff after prospecting
the concession for some time,
decided to assign it to a third
party. On 5th March
1999, to be precise, an assignment
was signed between the plaintiff
and Orovi Ghana limited. By this
deed of assignment, the plaintiff
transferred its interest in Orovi
Ghana Limited to Orovi Limited
subject to a 7/i net smelter
royalty interest, which the
Plaintiff retained in the
concession. In fact annexure C of
the Deed of Assignment which is an
agreement dated September 5, 1994
and made between Plaintiff and
Orovi Ghana, then known as African
Crown Limited (AC) provided as
follows:-
"Once in production, AC will pay
to the owner
a
royalty payment of (7J/z) seven
and a Half percent to all
production from the mining of hard
rock lode deposits within the
concession and a royalty
payment of (10)% ten
percent on all production from the
mining of alluvial (placer) gold
and diamonds".
In Clause 9A of this same
agreement it was provided that
Plaintiff would be entitled to a
one time payment of $25,000.00
based on production returns of the
first 10,000 tons. These were
covenants that run with the land.
In 1999 Orovi Ghana Limited
executed an option agreement with
Bogoso Gold Limited and Golden
Star Resources Ltd whereby Orovi
Ghana granted to Bogoso/Golden
Star an option to acquire a 100%
stake in Riyadh Ghana Limited. In
2003 the defendant acquired the
entire shares of Orovi Corporation
in Orovi Ghana Limited and
subsequently executed a share
transfer agreement in December
2003. The Defendant, Pinnacle
Resources thus assumed control of
the Riyadh Concession.
The Defendant in a memorandum of
agreemer;1t executed in November
2003 agreed to acquire 7/i%
royalty interest in the Riyadh
concession in accordance with the
terms of the MOA.
After the execution of the MOA,
the Defendant negotiated the sale
of the concession to a third party
for the sum of four hundred
thousand dollars (US$400,000); out
of this amount, US$200,000 was
paid to the defendant.
The Plaintiff's case is that
contrary to the terms of the MOA
the defendant sold a concession
without enhancing its commercial
value, or consulting the plaintiff
as it had undertaken to do and or
refusing to provide any
consideration. The Plaintiff only
got to know of this transaction
later through its own diligent
efforts. The Plaintiff thus
concluded that they had been
deceived and defrauded, and
subsequently commenced this
instant suit.
The Defendant in its statement of
defence stated that, the Riyadh
concession has still not been
disposed of but admitted that it
had negotiated for the sale of the
concession with Bogoso Gold/Golden
Star Resources for an amount of
US$400,000 after consulting the
plaintiff. The Defendant also
claimed that the US$200,000 it
received from Golden Star
Resources was a loan and not a
partpayment
of the purchase price for the
concession. Thus the defendant's
case was that the plaintiff was
not entitled to its claim.
The issues for the trial were as
follows;
a)
Whether or not by virtue of
the Memorandum of Agreement the
Plaintiff had lost its rights
under the concession.
b)
Whether or not the
Memorandum of Agreement was
procured by fraud or deceit.
EVALUATION OF THE EVIDENCE
The Plaintiff testified through
one of its Directors Abubakari
LawaI.
He testified that the Plaintiff
Company Riyadh had a prospective
license dated 23rd.March
1992. That in 1996, the Plaintiff
assigned the rights to the said
license to Orovi Ghana, formerly
known as African Crown in exchange
for a royalty interest of 7~% net
smelter, upon the production of
gold.
The Plaintiff's representative
further testified that in 1996
Orovi entered into an Option
Agreement with Bogoso Gold Limited
and that the terms of the
agreement were not made known to
the Plaintiff.
He testified that sometime in
2003, Defendant herein acquired
the interest of Orovi Ghana and
that pursuant to this acquisition,
Defendant entered into an
agreement with the Plaintiff. The
said agreement was tendered and
marked as Exhibit 'B'.
Plaintiff testified that Defendant
approached Plaintiff to enter into
the MOA contained in Exhibit "B"
because Defendant represented to
the Plaintiff that it was
having difficulty in raising funds
or in finding Partners to work the
concession because of the
Plaintiff's 7~% net smelter
residual interest.
Plaintiff further testified that
the instant action was commenced
because the Defendant had
negotiated the sale of the
concession and had collected
$200,000.00 without the knowledge
of the plaintiff contrary to the
terms of the MOA which provided
that the plaintiff had to be
consulted before the defendant
could sell the concession.
He also testified that the
defendant had not enhanced the
commercial value of the
concession, as the defendant had
not invested any money in the
concession. Further, the defendant
failed to provide consideration
when it signed the MOA. The
plaintiff's case was that when the
defendant acquired the Riyadh
Concession, it assumed the rights
and obligations of Orovi Ghana
limited. DW1
agreed when cross- examined as
follows:
Ques:
Now at all times these series of
assignments were subject to
Riyadh's 7~% royalty interest in
the concession?
Ans:
Since Pinnacle took over an
existing agreement then if that is
so in all previous agreement then
I agree with you.
The Issue of the Purchase price
The plaintiff's contention was
that the defendant had negotiated
a ridiculousl{low price for the
concession. Under clause 2.9 of
the option agreement, Exhibit"2",
entitled "Purchase price
determination", the purchase price
of the concession is determined as
follows:
"The purchase price shall be equal
to (i) the amount obtained by
multiplying (a)$10 by (b) the
number of gold ounces of proved
and probable ore reserves
specified in the independent study
that may be processed and treated
using the optionee's Bogoso
facility as in existence at the
time of the independent study,
less (ii) any amounts previously
paid to the optionor under this
agreement".
The independent study was to
determine the proved o"r probable
ounces of gold on the concession.
Exhibit "4", which was a notice
that was posted on the internet,
soon after the acquisition of the
plaintiff concession by the
defendant. The defendant
represented to the world at large
that the concession was as
follows:-
"The Riyadh property consists of a
20.000 acre prospecting license on
the world renowned Ashanti Gold
Belt. A limited drilling program
on the Southern portion of the
Rjyadh property has already proven
a resource of 250,000 ounces of
gold as reported by an independent
expert who examined the property".
This was the situation as at 29th
October, 2003. The data available
would generate a value of
$2,500,000.00 as the purchase
price of the concession.
The question one may ask is
whether the alleged negotiated
price of $400,000.00 was a fair
price?
In the view of the plaintiff,
obviously no. How then did the
defendant arrive at that price?
The defendant per its witness,
said in Exhibit 5, the fax, as
follows:- ''Dear Peter, We
were pleased to hear that GSR
is willing to commence with
serious exploration on the Riyadh
Concession. Of course, we
are hopeful that GSR would just
take over the shares of Orovi
Ghana upon payment of the $1
million we quoted and
then GSR could do what it wants
without answering to Pinnacle.
In any event, Pinnacle is
agreeable to wait for the
exploration results before
receiving payment in full for
Orovi Ghana Ltd. However our
willingness to extend the option
for another year is subject to
a
minimum work commitment and
a redefinition of the content
for the "reserve" study. In
consideration of this alternative
scenario we would accept
your offered payment of
$200,000 that would serve as an
advance against the full purchase
price. The final payment would be
determined by a re-defined
reserve report due October 1,
2005, but we would agree
to set up a cap of $1.5
million less the $200,000
advance.
In another alternative, perhaps
GSR would be willing to grant
Pinnacle an option to acquire the
Pampe concession.
Sincerely Yours,
R. A. Hildebrand
Glen Gamble"
On the issue of whether or not the
Plaintiff was consulted, the
Defendant presented exhibit 3
paragraph 2 page 10
"
We have internally discussed
the proposal that you made to us
and have an interest in it as
we would prefer to continue to
explore and review the Riyadh in
concert with our exploration of
the neighouring Pamper property
and to NOT have to generate a
feasibility study at this time
to simply satisfy the requirements
of the option agreement."
Was the $200,000.00 payment a loan
as suggested by the Defendant?
It
is also Plaintiff's case that when
the Defendant stated in paragraph
4 of Exhibit 'B' that "it promises
to consult Riyadh Mining Company
Limited in due time before
disposal of the property or
agreeing to any other contracted
arrangement with third party
involving the Riyadh Property"
it'did not mean to abide by this
undertaking since it had already
committed itself to the sale of
the property to Bogoso Gold
Ltd/Golden Star."
Exhibit "3" dated 2nd
June 2005 - purports to consult
the Plaintiff.
The Plaintiff said that the
proposal was merely forwarded to
it and that it did not amount to
consultation.
In addition, per exhibit "4" (The
Notice on the World Wide Web), the
Defendant had declared to the
whole world that Golden Star
Resource had committed itself to
acquire the concession. This was
dated October 29, 2003. Yet in
Exhibit "B" dated 3/11/03 the
Defendant gave an undertaking to
"Consult Riyadh Mining Co. Ltd in
due time before disposing of the
property or agreeing to any other
contractual arrangement with a 3rd
party involving Riyadh property."
It
is the Plaintiff's contention that
the Defendants were in dire need
of cash and this was supported by
Exhibits "7" & "8".
"Dear Bruce,
The last thing I want to do is to
create
a
diversion or concern for Peter
while he is on his safari holiday.
But if someone other than Peter
can address our issue I want him
to know our problem.
I
believe that I forwarded to you
the correspondence addressed to
Peter that mentioned that we were
in dire need of cash and that our
lowball offer was contingent on
our being able to get the cash by
June 17.
We cannot wait for
a
Ministry in Ghana to make a
decision even though we are
confident that they eventually
will approve our deal.
I
suggest that you authorize an
advance secured by the Riyadh
property.
Please let
me know what you think can be
done.
Regards. J]
The defendant was so desperate for
cash that it was even prepared to
circumvent the law pertaining to
minerals and mining that is the
Minerals and Mining Law, 1986,
PNDCL 153 in order to obtain the
cash.
Exhibits "5","7","8" state
cle.arly that the payment was on
account of payment for the
purchase price.
Also this further goes to buttress
Plaintiff's claim that it was not
consulted contrary to Exhibit 'B',
the MOA which required the
Defendants to consult the
Plaintiff before doing any of the
following:
i) Disposing
of the property
ii) Agreeing
to any other contractual
arrangement with a third party
involving
the Riyadh property.
Further even if it was a loan, the
Riyadh property was used as
collateral to secure the loan.
The Plaintiff's submission
therefore, was that agreeing to a
loan transaction with Golden Star
Resource without consulting the
Plaintiff amounted to fraud.
The Defendant's Case
The Defendants gave evidence
through its lawful Attorney
Colonel (retired) Yusef Disu per
power of Attorney Exhibit "1"
His testimony was that indeed the
MOA, Exhibit "B" was entered into
by the parties herein.
Further that the Defendant Company
intended an Option agreement, when
it was over the interests of Orovi
and that per the option agreement,
the Optionee Bogoso Gold Ltd, is
the only person the concession
could be sold to.
Exhibit "2" - a copy of the option
agreement dated 15th
November 1999 was tendered in
support. Defendant further
testified that further to the MOA
signed between the parties on 3rd
November 2003, the Defendant
negotiated with Golden Star
Resources for the sale of the
concession.
The Defendants case was that it
consulted the Plaintiff through
emails. In support of this
assertion, exhibit"3" was tendered
showing correspondence between
Dutch Hilderbrand of the defendant
company and Tijani Lawai of the
plaintiff company. He testified
that the defendant had agreed to
sell the concession to Golden Star
Resources for $400,000.00 but that
this amount had not been paid by
GSR yet.
The defendant denied that it had
acted fraudulently when it entered
into the MOA with the plaintiff.
He said that the plaintiff's
averment that it did not know that
Bogoso Gold Resources (BGL) had an
Option agreement in respect of the
Concession cannot be correct as
the plaintiff knew of the
existence of the agreement long
before the defendant acquired the
interest in Orovi in 2003.
According to the defendant, it
never represented to the plaintiff
in the MOA that it would invest
money in the concession. That
since there was an Option Bogoso
Gold Resources (BGL), on the land
at the time of the execution of
the MOA, no other person could
have invested money into the
concession. The witness testified
that what was meant by "to
maximize the commercial benefit"
of the concession was to negotiate
and obtain a fair price for the
concession which the Defendant
did.
He denied that the Defendant had
received part payment of $200,000
from Golden Star Resources but
admitted that they took a loan of
$200,000.00 which would be paid
back when the purchase price for
the concession is paid. He thus
denied that the
Defendant had breached any of the
terms contained in the MOA and
asked the court to dismiss the
plaintiff's claim. The defendant
under the cross
examination,
insisted that the $200,000.00 was
a loan and that $400,000.00
negotiated for the property was
the best price.
Application of the law
Fraudulent Misrepresentation
Black's Law Dictionary defines
fraudulent misrepresentation as
follows-
"A false statement as to material
fact, made with intent that
another rely thereon, which is
believed by other party and on
which he relies and by which he is
induced to act and does act to his
injury, and statement is
fraudulent if the speaker knows
statement to be false or if it is
made with utter disregard
of its truth or falsity. "
Do the contents of exhibit "2" and
"4" that existed prior to the
execution of exhibit "B" amount to
fraud and misrepresentation?
Did the conduct of the Defendant
support this assertion? It is my
belief and conviction that based
upon the evidence adduced at the
trial that the conduct of the
defendant in the transaction with
the third party amounted to
fraudulent misrepresentation.
What relief is the plaintiff
seeking from this court?
According to the Modern Principles
of Equity by A.K.P. Kludze, at
page 193,
"Rescission is defined as:-
Rescission is the remedy by which
one party to
a
transaction may set aside that
transaction. The transaction may
be, and often is, a
contract; but rescission may also
be available in other cases,
including settlements, gifts,
releases and other unilateral
transactions. If rescission takes
place, the general effect is to
restore the parties, as far as
practicable, to their former
positions prior to the
transaction, as if to all intents
and purposes the transaction never
took place. For this reason,
rescission is normally accompanied
by restitution and is, as a
rule, subject to the availability
of restitution."
"Rescission has the effect of
dissolving the legal relationship,
so that, as far as practicable,
the parties revert to their
respective positions as they were
prior to the rescinded
transaction. To the extent that it
results in the dissolution of the
contract or relationship,
rescission bears
a
close affinity to other modes
of termination of contracts and
othf!r transactions. Indeed, it is
often confused with them. Such
similar methods of termination
include the discharge of contracts
by breach, contracts void for
mistake, and those void for
illegality orimmorality.
"In Alabama Football, Inc. v.
Stabler, the Plaintiff/Respondent,
Stabler, 551, 319, So. 2d
678 [1975]
had entered into
a
contract to play American
football for the club. The terms
of his contract provided that he
could not contract to play for any
other club or team. Because of
financial difficulties, the club
could not make payments under the
contract. The relief could have
been characterized as repudiation,
based on the inability of Alabama
Football to discharge its
obligation under the contract, in
effect alleging a failure
of consideration. If it were
treated as repudiation, there
could be no arguments about lack
of notice or failure to make an
offer of restitution. The
Plaintiff/Respondent, however,
sought rescission of the contract
on the ground that it had been
breached by Alabama Football.
The court held that the player was
entitled to rescind the contract
because it had become clear that
Alabama Football could not
discharge its obligations.
Because the plaintiff sought
rescission rather than repudiation
for breach of contract, he was
expectedly resisted with the
defences inter alia that he had
not served
a
notice of intention to rescind
and had not tendered restitution.
The claim for rescission was
upheld by the Supreme Court of
Alabama but only because it
concluded that, having regard to
persistent demands and the clear
evidence of the club's inability
to pay the moneys due, a
further and formal notice was
unnecessary. The Supreme Court
further held that an offer of
restitution was·not absolutely
necessary in the circumstances
because the club had in fact
greatly profited from the contract
with the plaintiff player in the
form of increased ticket sales.
"In Redgrave v. Hurd,
[1881] 20 Ch. D. 1, 13
a
retiring solicitor honestly
overstated
the gross returns of his legal
practice to the defendant to whom
the practice was to be transferred
along with the purchase of the
solicitor's suburban residence.
The defendant was shown the papers
relating to the legal practice but
did not properly examine them. If
the papers were examined, the
defendant
.~ - would have discovered the
true worthlessness of the
business,-hedeclined to complete
the contract to purchase the
residence. The Plaintiff brought
an action for specific
performance. The defendant not
only resisted specific performance
but also counterclaimed for
rescission of the contract on the
ground of misrepresentation.
The Court
of Appeal unanimously reversed
the decision of Fry J.
and held that the defendant, in
spite of the alleged
negligence, was entitled to
rescission for innocent
misrepresentation: In granting
rescission, Jessel M.R. said:
"When
a
person makes a material
representation to another to
induce him to enter into a
contract, and the other enters
into that contract, it is not
sufficient to say that the party
to whom the representation is made
does not prove that he entered
into the contract, relying upon
the representation. JJ
Dzotope vs. Harhomene III
[1987-1988] GLRD 108 SC, the
Supreme Court held that fraud
vitiates all proceedings. In this
case, the defendant falsely
misrepresented to the plaintiff
since the defendant did not intend
the terms of the MOA to be
fulfilled.
In addition, I find that the
parties were not ad idem as in the
case of SA Turqui & Bros V Lamptey
[1961] GLR 190, where Ollenu J.
said:
"It is quite clear to me that the
minds of the parties were not ad
idem as to what the estimated cost
of [45 Ghanaian pounds] included.
There is therefore no binding
contract between the parties ...
There being no enforceable
contract between the parties,
their minds not being ad idem,
each must be restored to as nearly
the same position he was in
immediately prior to the
conclusion of the abortive
agreement;"
CONCLUSIONS
1)I find as a fact that the
Defendant had negotiated the sale
of the Riyadh property to Golden
Star Resources for $400,000.00
2)I also find as a fact that
$200,000.00 had been paid to the
Defendant as part payment for it.
The defendant urged the court to
believe on the mere say so by the
Defendant that it was a loan.
I
reject the Defendants assertion
that it was a loan since nothing
was offered in support of that
assertion. Exhibit 5, 7 and 8
clearly indicate that it was a
part-payment but not a loan. The
burden of proof shifted to the
defendant in establishing whether
or not it was a loan. On the
balance of probabilities the
payment was for the property. Even
if it was a loan, it was secured
by the Riyadh property.
I
find that the defendant
misrepresented the facts of the
sale of the Riyadh concession to
the plaintiff. Indeed the
defendant failed to inform the
plaintiff on the terms of the sale
and whether or not it had received
payment for same .•
4)
I find as a fact that the
Riyadh property' was valued as
having a proven resource of
250,000 ounces of gold as at 29th
October 2003. I therefore find
that the purchase price of
$400,000 was under-priced and far
from maximizing the commercial
value of the concession as the
defendant was required to do in
accordance with the terms of the
MOA. This affected the contract
between the parties, to the extent
that the plaintiff is entitled to
rescind the agreement. The effect
will be that the parties will
revert to their original positions
before the signing of the MOA.
I
therefore make these orders:-
i)
The Memorandum of agreement
of 3rd November 2003 is
hereby rescinded.
ii) The Defendant cannot be
allowed to enrich himself at the
expense of the Plaintiff. Equity
will not allow a wrong to be
without a remedy. The Defendant is
therefore to pay an amount of
$20,000 being 10% of sum of
$200,000 received by the Defendant
for the sale of the Riyadh
Concession. The cases of Hyundai
Shipbuilding & Heavy Industries
Co. Ltd. v Pournaras [1978]
2 Llyod's Rep 502 and Hyundai
Heavy Industries Co. Ltd. v
Papadopolous [1980] 2 All ER 29
cited in support.
Costs of Twenty Million cedis
(˘20,000,000.00) awarded to the
Plaintiff.
(SGD.) MARGARET INSAIDOO J (MS)
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