METALLON CORP LTD v STANMARKER MINING (PVT) LTD 2007 (1) ZLR 301 (S)

Flynote

Partnership ” formation ” essentials for an agreement to create a partnership ” need to show that business was being carried out for joint benefit of both parties

The plaintiff was a Zimbabwean registered mining company and the defendant a South African mining company. Both had separately entered into negotiations with a British company to acquire that company's shares in another Zimbabwean company which owned five mines in Zimbabwe. The plaintiff and defendant met with a view to making a joint bid for the E shares. They drew up "heads of agreement", most of which were stated not to be binding once a formal contract was concluded. They agreed that the defendant would negotiate with the British company to acquire the shares, while the plaintiff would facilitate matters in Zimbabwe. They agreed that for a period of three months neither would negotiate with anyone else for the purpose of acquiring the shares. The plaintiff claimed that in spite of the agreement the defendant, after the three month period had expired, acquired the shares for itself. The plaintiff claimed damages for breach of contract but later claimed that the "heads of agreement" constituted a partnership and claimed damages

for breach of the partnership agreement. The defendant denied that there was a partnership agreement.

Held, that in determining whether the heads constituted a partnership between the parties, the only provisions to consider were the legally binding provisions. The rest of the provisions were irrelevant because they were not legally binding on the parties, and the existence of the partnership was in dispute.

Held, further, that the essential ingredients of partnership agreement are that (a) each of the partners brings something into the partnership, or binds himself to bring something into it, whether it be money, or his labour or skill; (b) the business should be carried on for the joint benefit of both parties; and (c) that the object should be to make profit. The second of these ingredients is crucial.

Held, further, that none of the legally binding clauses of the heads indicated that any business was to be carried on for the joint benefit of both parties during the relevant period. The heads were nothing more than a set of principles which formed the basis of the negotiation and conclusion of a future shareholders' agreement.

Held, further, that there being no partnership agreement, the parties had no obligations to each other after the restraint period was over.

Judgment of Omerjee J in Stanmarker Mining (Pvt) Ltd v Metallon Corp Ltd 2006 (1) ZLR 306 (H) overruled.