Magnus Diamond Mining Co Ltd v Welgegund Diamond Mining Co Ltd [1910] ZAHCORC 6 (14 March 1910)

Cancellation of lease.-Non-notarial prospecting contract.-.Res litigiosa. -Company.-Pre-incorporation contract.-Adoption and ratification.- Knowledge of pending action.

In an action previously instituted by M Co. against H and D, H and D had been ordered inter alia to pass transfer of the diamondiferous farm W to the M Co. on the ground that Hand D had acquired it as trustees for the M Co. W Co. was formed after pleadings had been closed in that action, H and D  and the firm of attorneys acting for them in the action signing the memorandum of association and one member of the firm becoming chairman of the local board of the company. W Co. on flotation purported to take over from a syndicate and to adopt a prospecting contract as regards the farm W, and entered into a notarial lease of the property two days later. Held, that W Co.'s acquisition of prospecting rights over the farm W could not be taken as dating before the notarial lease, which was a new contract; that W Co. must be taken to have been aware of the pending action between M Co. and Hand D; that W Co. could acquire no greater rights under the lease than H and D were previously entitled to and that the lease must be cancelled.