Court rules in favour of Rift Valley on Kangankude Hill mining: Dismisses Lindian Resources Ltd

Commercial Division of the High Court in Lilongwe has refused to award Lindian Resources Limited a refund of USD100, 000 [approximately K750 million] plus interest at 10 per cent and general damages the firm claimed to have suffered through a botched mining project agreement in 2018.

Judge Kenan Manda: Delivered the ruling

The firm commenced a court action against Rift Valley Resource Developments Limited (first defendant) and Michael Saner (second defendant) claiming the sum of USD100, 000, which was paid to the defendant as consideration for an exclusivity period of 120 days.

The claimant further stated that as a result of the defendants’ action, they lost an opportunity to invest in the first defendant’s company and the Kangankude Hill Mining project.

As a consequence, the claimant thus claimed that the refund of the USD100, 000 plus interest at 10 per cent above the commercial bank’s base lending rate from the 10th of August, 2018, general damages for breach of contract, an order of specific performance and costs of the action.

According to the 10-page ruling, which was delivered by Justice Ken Manda on Tuesday this week, on 26th July 2018 and 6th August of the same year, the parties entered into a contract in which it was agreed that the claimant will have a right to acquire a 75 per cent stake in the first defendant company.

By implication, this also meant that the defendant would also acquire a similar stake in a mining project at Kangankude Hill, which the first defendant company had expressed interest in and had hitherto been granted a mining licence.

As part of the agreement, it was agreed that the claimant would pay the defendant the sum of USD100, 000 for the defendant to be granted an exclusivity period of 120 days during which period the defendants were not going to negotiate or deal with any other person relating to an investment in or acquisition of the project.

According to the claimant, after the lapse of the 120 days exclusivity period, the contract provided that the claimant had a right to acquire the 75 per cent stake in the defendant company at a price of USD6 million and that the same was to be paid in two phases.

Following this agreement, Lindian Resources Limited fulfilled its obligation by paying USD100, 000 to the defendant on August 10, 2018. However, that in breach of the contract, the defendants purported to terminate the contract and offered the claimant to acquire 100 per cent of the shares in the defendant company at a price of USD70 million, which the defendant demanded to be paid at once.

It was further alleged that the second defendant (Michael Saner) also transferred 1, 000 shares in the first defendant company (Rift Valley Resource Developments Limited) to Safwan Master before the expiry of the exclusivity period and that this was done without informing the claimant and that this was done on 19th October, 2018.

It was on this basis that the claimant argued that the defendants had changed the capital structure of the defendant company and thus breached the contract. On 31st October 2018, the claimant received communication from the defendant to the effect that the defendant would not be proceeding with the contract on account that the agreements had been taken over by events and were not capable of enforcement.

The defendant denied that the claimant suffered any form of loss or that they had breached the agreements. Rather it was the defendant’s contention that the claimant did not have capacity to acquire the Kangankude project. The defendant further says there was no agreement that the project would be purchased for a price tag of no more than USD9 million as asserted by claimants.

According to the defendants, the price tag for the project was not going to be lower than USD25 million and that any reference to a price lower than that amount was only done to comply with the Australian Stock Exchange regulations.

The defendants thus pleaded with the court to dismiss the action with costs. They also sought declarations that Lindian Resources Limited lawfully rescinded the contract or that alternatively they accepted that claimant’s repudiation of the same.

In his ruling, Manda observes that the intentions of the parties had always been about the investment in the mining project.

But the judge wonders why the claimant decided to go ahead to enter into agreement with the defendants while fully aware that all the defendants had was an award by the High Court and not mineral rights.

He further states that the claimant was also aware of the fact that there was need for a ministerial approval before any mineral rights could be transferred to them.

“It follows then that without there being no mineral rights to transfer and no ministerial approval, there was no subject matter of the agreement and that the agreement would have had no force at all. In other words, the claimant did not acquire any enforceable rights under the purported agreements. In this regard then, I don’t think that the claimant can assert that the exclusivity period had been breached,” says Manda in his ruling.

Manda adds that from the facts and evidence presented before him, it was clear that the defendants did not have any mineral rights, which they could have transferred to the claimants.

He says this rendered any agreement between the claimant and defendant regarding the transfer of mineral rights ineffectual and without force.

Manda further states that since the claimant was clearly aware of these facts, they cannot claim that there was any breach of contract or indeed try to enforce those contracts.

He says the contracts were void from inception and, in this regard, he found that the agreements not binding and enforceable.

“Let me add that an agreement to agree remains an unenforceable agreement that merely implies the binding of two parties to a future agreement, but does not guarantee it. It the present instance, in the absence of a ministerial approval or any mineral rights, when the parties agreed to agree, the claimant was not guaranteed future agreement with the defendants. Further still, since the claimant cannot enforce the agreements to agree and it would foloow that there cannot be specific performance of the stated agreements. The prayer for specific performance by the claimant thus fails,” says the learned justice.

He also states that the claimant had failed to demonstrate that they had suffered any damage because of the 10 per cent share offer the defendants made to a third party.

Manda therefore concludes that the claimant was not entitled to claim back USD100, 000 because it was expressly agreed by the parties that the sum would not be refundable and, additionally, it was paid under contracts which were unenforceable.

“As earlier noted, the claimants did concede that they were aware of the fact that there was no ministerial approval and that the defendants had not mineral rights, but rather an award from the High Court. With this in mind, the claimant still brought this action to court and I find that there was no good grounds for the claimant to take this action. I thus condemn the claimant in costs of this action,” pronounces Manda.

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