Aftermarket Network Australia Pty Ltd v Certain underwriters at Lloyd's subscribing to Policy No 6482/13(C)-13087

Introduction 1 This is a dispute about the meaning and operation of a warranty provision of a share sale agreement that is the foundation for the engagement of a buyer warranty and indemnity insurance policy. The applicant has in its originating application filed on 15 August 2016 sought declarations as to the proper construction of the provision and, in the alternative, declarations as to the relevant engagement and operations of ss 14 and 54 of the Insurance Contracts Act 1984 (Cth) (the Act). On 5 September 2016, I made an order for the separate determination of the construction question underpinning declaration (a) of the originating application. 2 The applicant claims that it is entitled to be paid sums under a warranty insurance policy issued by the respondents in connection with the purchase by the applicant of the share capital of a company. The respondents deny that entitlement by reason of what they say is a change of control clause in the relevant purchase agreement (cl 10.9 of the Share Sale Agreement (SSA), to which I will come) whereby any liability of a Vendor (for which the respondent insurers would be liable) has been extinguished in the circumstances that have transpired. For the reasons that follow, I would dismiss the claim for the declaration in (a) of the application. The answer to the construction question is not without its difficulty. The view I take will lead to a debate about the possible operation of s 54 of the Act. I indicated at the hearing that I would be minded to grant leave to appeal to the losing party. I am still of that view.

Facts 3 On 23 April 2014, the applicant, then known as Metcash Automotive Holdings Pty Ltd and now called Aftermarket Network Australia Pty Ltd (ANA) and the Vendors (comprising various corporations and an individual) executed the SSA under which ANA agreed to purchase from the various Vendors all the shares in Midas Australia Pty Ltd (Midas) which carried on a franchised automotive service business. Counsel for the applicant described the Vendors as private equity companies. That was not disputed, for such relevance as it may have. 4 A number of features of the SSA should be noted. By cl 10.1 the Vendors represented and warranted to the Purchaser (ANA) that each of the Warranties in Sch 8 were true and accurate at the date of the agreement and would, unless stated otherwise, be true and accurate on the Completion Date. There was, however, an important qualification to the Warranties (more fully elaborated in cl 15 referred to below). Clause 10.1 stated that the Vendors represent and warrant those matters to the Purchaser "for the sole purpose of allowing the Purchaser to pursue Subject Claims under the W&I Insurance Policy". 5 The phrase "W&I Insurance Policy" was defined as meaning: …the warranty and indemnity insurance policy in an agreed form to be issued by the Warranty Insurer for the benefit of the Purchaser as contemplated in clause 15. 6 The "Warranty Insurer" was defined as meaning: …Ironshore Australia Pty Limited ABN 43 149 117 724 acting as agent for the Underwriters. 7 The "Underwriters" were defined as meaning: …the underwriters, severally and not jointly, and limited only for the proportion of liability on a co-insurance basis, set out below: (a) Pembroke Syndicate 4000 at Lloyd's - 75%; and (b) International Insurance Company of Hannover Plc - Australian Branch ABN 58 129 395 544 - 25%. 8 Clause 15 concerned the W&I Insurance Policy. Clause 15.1 made it clear that, save in the case of fraud, the Vendors were not liable in respect of the Warranties: 15.1 Sole recourse (a) Despite any other provision of this deed or any other matter or thing: (i) no Vendor has or will at any time have any Liability to the Purchaser or any other person in respect of any Warranty Claims or Tax Subject Claims and the Purchaser releases the Vendors from such Claims; (ii) the Purchaser agrees that it is not entitled to make, will not make, and waives any right it may have to make, any Warranty Claims or Tax Subject Claims against any Vendor, except: (iii) in the case of a Vendor's fraud or the fraud of officers or executives of the Company prior to the Completion Date; or (iv) to the extent required to permit or facilitate a Claim by the Purchaser under the W&I Insurance Policy and only on the basis that the Vendors must have no Liability in relation to the facts and circumstances the subject of that Claim. (b) Except as contemplated by clause 15.1(a), the Purchaser's sole recourse in respect of any Warranty Claim or Tax Subject Claim is against the W&I Insurance Policy. (c) This clause 15.1 may be pleaded by the Vendors or any of their respective officers, employees and agents as a bar to any Warranty Claim or Tax Subject Claim instituted by the Purchaser in breach of clause 15.1(a). (It should be noted that cl 1.3 provided that headings were for ease of reference only and did not affect interpretation.) 9 Clause 15.2 dealt with the W&I Insurance Policy as follows: 15.2 W&I Insurance Policy (a) The Purchaser must take out the W&I Insurance Policy prior to Completion. (b) The Purchaser must not: (i) agree to any amendment, variation or waiver of the W&I Insurance Policy (or do anything which has a similar effect) without the express prior written consent of the Vendors' Representative (which may not be unreasonably withheld or delayed); or (ii) novate, or otherwise assign its rights under the W&I Insurance Policy (or do anything which has similar effect) or do anything which causes any right under the W&I Insurance Policy not to have full force and effect. (c) The costs and expenses of the W&I Insurance Policy will be borne by the Vendors as to one half and the Purchaser as to one half. 10 The phrase "Subject Claim" was defined as meaning: …a Claim by the Purchaser against one or more of the Vendors arising as a direct or indirect result of a breach of a Warranty, breach of any provision of this agreement (other than any provision in clauses 4.2, 7, 10.12, 10.14 or 18) or the entry into this agreement by the Purchaser and includes, for the avoidance of doubt, a Tax Subject Claim and a Warranty Claim but excludes a UST Indemnity Claim. 11 The taking out of the policy was not a condition precedent to completion. From that fact, and from the particularity of identification in the definition of "underwriters", it can be inferred that the parties to the SSA were aware of the likely terms of a policy, although one cannot conclude that the policy that was issued on 6 May 2014 (one day after completion on 5 May 2014) was a cognate document that was present and before the parties to the SSA for the purposes of the construction and interpretation of the SSA. 12 Clause 13 of the SSA dealt with the indemnity as to tax. Once again, it was clear from the terms of cl 13(a) that the indemnity was given "[f]or the sole purpose of allowing the Purchaser to pursue Claims under the W&I Insurance Policy". 13 The warranties that are the subject of the claims are: (a) warranty 6 - as to the state of the accounts and management accounts; (b) warranty 9 - as to franchisee loans; (c) warranty 12 - as to business contracts and party sureties; (d) warranty 15 - as to the existence of litigation; (e) warranty 23 - as to franchise agreements and disclosure documents; (f) warranty 24 - as to due diligence material; (g) the tax indemnity - as it relates to a land tax assessment. 14 Clause 10 addressed various aspects of the warranties. Relevantly, cl 10.9 provided as follows: 10.9 Other limits on Claims The liability of a Vendor in respect of any Subject Claim is reduced or extinguished (as the case may be) to the extent that: (a) the subject matter of any Subject Claim is provided for in the Accounts or in the Completion Statement; (b) the Subject Claim has arisen or is increased as a result of or in consequence of any negligent act or omission by the Purchaser or after Completion, the Company; (c) the Subject Claim would not have arisen but for any change in ownership of the Company after Completion; (d) the Subject Claim is as a result of or in respect of, or where the Subject Claim arises from, any increase in the rate of Tax liable to be paid or any imposition of tax not in effect at the date of this agreement; (e) the Subject Claim arises or is increased as a result of any change in Accounting Standards, or the application of Accounting Standards or policies to the Company (including to align those Accounting Standards or policies with those used by the Purchaser), after Completion; (f) the Purchaser has not complied with clauses 10.11, 10.12 or 14; (g) the Purchaser or any of its related bodies corporate has ceased to own or control shares in the Company or have a direct or indirect ownership interest in the Company. (h) the Subject Claim occurs or is increased as a result of a change after the date of this agreement in any: (i) Law (including any legislation not in force or in effect at the date of this agreement) or interpretation of Law; (ii) policy of any Governmental Authority; or (iii) administrative practice of a Tax Authority; (i) all or a substantial part of any business or assets of the Company in respect of which the Subject Claim arises has or have ceased to be owned or controlled by the Company; (j) anything related to the Subject claim entitles the Purchaser or the Company to any: (i) Tax Relief, credit, deduction, exemption, rebate, relief or set-off; (ii) compensation or indemnification including under any insurance policy; (iii) recovery under any Claim against a third party; or (iv) payment, reduction in Tax, reduction of Liability, corresponding net saving or other benefit; (k) the breach giving rise to the Subject Claim is capable of remedy and, within 20 Business Days after receiving notice of the Subject Claim in accordance with clause 10.11 or 14.1, the Vendors remedy the breach to the reasonable satisfaction of the Purchaser; (l) the Purchaser is fully compensated for the Subject Claim under a UST Indemnity Claim; or (m) the Claim is based on a contingent liability, unless and until the Loss becomes an actual Loss. 15 It is to be noted that the premiss of the clause is that liability of a Vendor exists and is reduced or extinguished by some circumstance or event. The argument of the respondents is that cl 10.9(g) operates in the circumstances here to extinguish the liability of the Vendors. I agree with the conclusion asserted by the underwriters, though my reasons vary somewhat from the argument initially propounded by them. 16 Importantly for cl 10.9, the phrase "related bodies corporate" was defined in cl 1.2(j)(v) (recognising the effect of cl 1.2(a)) as meaning related body corporate in s 50 of the Corporations Act 2001 (Cth): 50 Related bodies corporate Where a body corporate is: (a) a holding company of another body corporate; or (b) a subsidiary of another body corporate; or (c) a subsidiary of a holding company of another body corporate; the first-mentioned body and the other body are related to each other. 17 The definition of the word "control" in s 50AA of the Corporations Act was not expressly incorporated into the SSA. 18 Clause 10.15 provided for the right to make a claim to be personal as follows: Subject to clause 22.3, the rights of the Purchaser to make a Claim arising under, in relation to, or out of this agreement, including in relation to a breach of any Warranty, are personal to the Purchaser and may not be assigned to any other person. 19 Clause 22.3 provided for assignment as follows: A party may only assign this agreement or a right under this agreement with the prior written consent of each other party. 20 Clause 22.2 provided as follows: Except where this agreement expressly states otherwise, a party may, in its discretion, give conditionally or unconditionally or withhold any approval or consent under this agreement. 21 Clause 10.19 made clear the limits of the remedies of ANA as the Purchaser as follows: Despite any other provision of this agreement, the sole remedy of the Purchaser for a breach of Warranty is damages (and the Purchaser is the only person entitled to make a Claim for breach of Warranty) and in no event is the Purchaser entitled to terminate this agreement as a consequence of a breach of Warranty, the Purchaser may not terminate or rescind this agreement between the date of this agreement and Completion. 22 The warranty and indemnity policy issued on 6 May 2014. The Insured was ANA, and no other entity. Clause 3.1 was the insuring clause: Subject to the terms, conditions and limitations of this Policy, the Underwriters shall indemnify the Insured, or pay on the Insured's behalf, for all Loss which is notified by or on behalf of the Insured to the Underwriters during the Policy Period. 23 "Loss" was defined in cl 4.1: Subject to the other provisions of this Clause 4, Loss means a) the amount to which the Insured is contractually entitled, or would have been entitled to recover, under the Sale Agreement for a Breach; plus; b) any Defence Costs; less c) any Recovered Amounts, disregarding for the purposes of this Clause 4.1a) the effect of the Limitation Provisions. 24 "Breach" was defined in cl 1.1 as meaning a breach of cl 10.1 of the SSA in respect of General Warranties and the Tax Warranties, or any fact, matter or circumstance giving rise to a Policy Claim under the Tax Indemnity. 25 "Defence Costs" were defined by reference to the costs of demands by third parties. 26 "Recovered amounts" were defined by reference to amounts paid to or recovered by ANA from sources other than the insurers. 27 The "Limitation Provisions" were cll 10.7, 10.8, 10.10 and 15.1 of the SSA. It is unnecessary to set these out. 28 Clause 6.1 of the policy set out exclusions of liability under the policy. No reliance is placed by the respondents on any exclusion. 29 Clause 11.3 provided for assignment of the policy: a) Subject to Clause 11.3b), the Insured may not assign any of its rights or interest, nor transfer its obligations under this Policy without first obtaining the written consent of the Underwriters (such consent not to be unreasonably withheld, delayed or conditioned). b) The Insured may without the prior written consent of the Underwriters assign any or all of its interest in the proceeds of this Policy to a Financier provided that the Insured delivers an assignment notice to the Underwriters in the substance of the form set out in Appendix C. c) The Insured may without the prior written consent of the Underwriters assign this Policy in whole or in part to any other member of the Insured Group. d) The Insured may with the prior written consent of the Underwriters (such consent not to be unreasonably withheld, conditioned or delayed) assign its interests in this Policy in whole or in part to any person that acquires (i) more than 50% of the shares in the Insured or (ii) more than 50% of the assets (based on relative asset values) of the Insured. 30 Each of the SSA (at cl 22.9) and the policy (at cl 11.5) had an entire agreement clause. 31 On 18 March 2015, ANA submitted a claim under the policy. There were four claims in respect of four stores (at Rouse Hill, East Kew and Balwyn, Browns Plains and Hornsby). Two claims concerned warranties 6, 9, 23 and 24, one concerned warranties 6, 23 and 24, and one concerned the Tax Indemnity as it relates to a land tax assessment. 32 On 31 July 2015, Metcash Limited (Metcash), ANA's parent, sold all the shares in ANA to a third party buyer, Burson Group Limited, now called Bapcor Limited (Bapcor). It is agreed between the parties that since 31 July 2015 (to use the language of cl 10.9) Metcash has ceased to have any indirect ownership interest in Midas, though ANA continues to own (all) the shares in Midas and have a direct ownership interest in Midas. 33 A further claim was submitted to the respondents on 24 September 2015.

Issues 34 The essence of the dispute as to the engagement of the policy is whether the sale by Metcash to Bapcor of all its shares in ANA extinguishes, or would extinguish, all liability of underwriters under the policy by the operation of cl 10.9 of the SSA. 35 The question is to be addressed to the two claim notifications separately, because the applicant says that even if the second claim has been extinguished by cl 10.9, the first, made before the sale of ANA, has not been extinguished because it crystallised into rights against the insurer before any extinguishment took place.

The question of the significance of the claim notification in March 2015 before any change of control 36 It is convenient to deal with the significance of the timing of the first (and overwhelmingly important in terms of quantum) claim notification, some three months before the sale of ANA by Metcash to Bapcor. 37 The point was not relied on in submissions in chief. 38 There is a superficial attraction to the point. Clause 3.1 of the policy uses the expression "for all Loss which is notified". But this is part of the requirement for the claim to be notified within the period, thus (subject to the operation of s 54 of the Act) limiting the claims to claims notified within the policy period. The applicant seeks to crystallise any liability at that point, in particular referring to the present tense in the definition of "Loss" in cl 4.1(a) ("the amount to which the Insured is contractually entitled…"). 39 It is to be recognised, however, that cl 10.9 works to reduce or extinguish liability of the Vendors. The definition of "Loss" in the policy assumes the operation of the SSA. There is no reason why it should assume any limited operation, that is without the operation of cl 10.9 if, in the circumstances that have occurred, such operation is engaged. 40 As at the date the claim was notified (March), the applicant had Subject Claims against Vendors for the purpose of their pursuit under the policy. Assuming that the Vendors were liable (see the chapeau to cl 10.9 of the SSA) and the applicant was contractually entitled (see cl 4.1(a) of the policy) as at that date that liability of the Vendors was capable of being (contractually) affected by the operation of cl 10.9 - by being reduced or extinguished. To the extent that one or more of the paragraphs of cl 10.9 was or were engaged to cause such reduction or extinguishment, the Vendors would cease to be, in whole or in part, liable. I apprehend no commercial or textual reason why the insurers' responsibility to indemnify under cl 3.1 should not be based upon the applicant's entitlement under the definition of "Loss" in cl 4.1 being co-ordinate and equal to the Vendors' Liability under the SSA. Indeed, there is every commercial and textual reason to keep the two co-relative equivalents. The SSA is listed as item 2 in the Policy Schedule as the document to which the insurance relates and out of which the Insured's entitlement under cl 4.1(a) arises. The Insured cannot have an entitlement under the SSA, without a liability of the Vendors or one of them. 41 Thus, I do not see any significance in the timing of the claim notification.

The relationship between cll 10.1 and 10.9 of the SSA and the policy 42 Before examining the text and context of cl 10.9, it is necessary to deal with some matters that may be seen to affect the construction of the provision. 43 The applicant submitted that cl 10.9 of the SSA was incorporated into the policy as a term of the policy. This was so, it was submitted, through the insuring clause (cl 3.1) and the definition of "Loss" in cl 4.1 making the liability of the Vendors, as relevantly limited, the foundation of the indemnity. 44 Reliance was also placed on s 10(3) of the Act. Section 10 is in the following terms: (1) A reference in this Act to a contract of insurance includes a reference to a contract that would ordinarily be regarded as a contract of insurance although some of its provisions are not by way of insurance. (2) A reference in this Act to a contract of insurance includes a reference to a contract that includes provisions of insurance in so far as those provisions are concerned, although the contract would not ordinarily be regarded as a contract of insurance. (3) Where a provision included in a contract that would not ordinarily be regarded as a contract of insurance affects the operation of a contract of insurance to which this Act applies, that provision shall, for the purposes of this Act, be regarded as a provision included in the contract of insurance. 45 The respondents submitted that provisions of the SSA, such as cl 10.1 and 10.9 were not incorporated into the policy, rather the SSA operated as a contract negotiated between, and entered into by, other parties (including, of course, the Insured, ANA) and the policy indemnified one of those parties for the consequences of breach by the other parties to the contract. It was submitted by the respondents that the SSA was not part of the policy, but rather that it was the contractual document from which the rights and liabilities of the parties to it are worked out (even if notionally, in most circumstances: see cl 15.1) and as such provided the factual circumstances upon which indemnity was engaged. 46 The present significance of the debate is twofold. First, it may lead to a difference in the applicable principles of construction and interpretation, being those attending insurance contracts rather than the principles concerning the construction and interpretation of commercial contracts more generally. Secondly, if cl 10.9 is incorporated into or is part of the policy, there may be a greater requirement of congruence between cl 10.9 and the provisions of the policy. There may be further significance for other arguments not concerned with the ascertainment of the meaning of cl 10.9. 47 The relevant difference (if there truly be one) in the principles of construction and interpretation may be in the perhaps greater willingness of the Court to apply the contra proferentem rule as a last resort in respect of insurance policies than in other commercial contracts, most recently discussed by Kenny J in 470 St Kilda Road v Robinson [2013] FCA 1420; 308 ALR 411 at 427 [71] as approved on appeal by the Full Court in (sub nom) Chubb Insurance Company of Australia Limited v Robinson [2016] FCAFC 17; 239 FCR 300 at 335 [167]. As to the construction of commercial contracts and insurance contracts generally, see Todd v Alterra at Lloyds Ltd (on behalf of the underwriting members of Syndicate 1400) [2016] FCAFC 15; 239 FCR 12 at 21-23 [35]-[44] and 28-29 [71]-[77] and Chubb 239 FCR at 323-327 [98]-[116]. 48 As will become evident, I do not consider that the ascertainment of the meaning and content of cl 10.9(g) requires the application of the contra proferentem rule. The question of congruence of the terms of the policy and cl 10.9 is, however, of some importance. 49 As a matter of contractual analysis, cll 10.1 and 10.9 were not incorporated as terms of the policy. They were part of the underlying agreement, the rights and liabilities from which formed the subject matter of the insurance. It can be accepted that there was a close relationship between the SSA and the policy. Subject to fraud on the part of the Vendors, the warranties under the SSA were only intended to be the foundation of a right to claim under a policy that was anticipated. The Vendors, however, had an interest in the terms of the warranties because they could be liable, albeit only for fraud. Both the Purchaser (ANA) and the Vendors had an interest in the warranties being of a character that would be such as to attract an insurer for a reasonable premium, which both had to pay. In point of form and commercial substance, this is not sufficient to incorporate the SSA or parts thereof, into the policy. Such clearly would not be the case if there were no release in cl 15.1 and the Vendors were fully liable for any breach and ANA had taken out the policy to insure its entitlement, leaving the insurers to vindicate their position against the Vendors in a subrogated claim. I do not consider the form of cl 15.1 and the limited liability of the Vendors make any substantive difference. 50 Does s 10(3) make any difference? 51 The genesis of s 10 of the Act lay in cl 11 of the draft Insurance Contracts Bill recommended by the Australian Law Reform Commission (ALRC) in Insurance Contracts, Report No 20 (1982). Clause 11 of the Bill was in identical terms to s 10 of the Act. In the notes to the draft Insurance Bill, the following was said about cl 11: 1. Sub-cl.(1) provides that a contract of insurance does not cease to be so merely because it contains provisions that do not relate to insurance. 2. Sub-cl.(2) extends the definition of 'contract of insurance' to catch contracts which, while they might not ordinarily be regarded as contracts of insurance, do contain insurance provisions. An example is a contract to purchase property from an insurer under which the insurer also agrees to insure the property. The legislation operates on such contracts only in so far as they contain insurance provisions. 3. Sub-cl.(3) is necessary to ensure that the operation of the draft Bill is not circumvented by insurers requiring insureds to enter into other collateral contracts that would not ordinarily be regarded as contracts of insurance. 52 The Explanatory Memorandum to the Insurance Contracts Bill 1983 (as introduced to Parliament) was essentially taken from these notes and provided as follows: [26] Proposed Law - The Bill will apply not only to contracts which relate to insurance in their entirety but also to the insurance provisions included in contracts relating to other matters as well as insurance. This is so whether or not those contracts would ordinarily be described as contracts of insurance (clauses 10(1) and 10(2)). Where a provision in a contract not ordinarily regarded as a contract of insurance affects the operation of a contract of insurance to which the Bill applies, the provision will be regarded as a provision of a contract of insurance (clause 10(3)). [27] Rationale - This provision will ensure that the reforms effected by the Bill cannot be circumvented by an insurer's requiring an insured to enter into a contract which would not ordinarily be regarded as a contract of insurance. The Bill will apply equally to a contract pf household insurance as to a term in a contract for the sale and purchase of property to the effect that the seller, who happens to be an insurer, also insures the property. 53 The question is: What do the words "affects the operation of a contract of insurance" mean? One, of course, starts with the text, not the expressed aim in the ALRC Report on the Bill. The words chosen were "affecting the operation". This is an objective analysis of a state of affairs. It would be sufficiently wide to catch attempted circumvention by insurers; but one does not necessarily limit the operation of the sub-clause or sub-section to circumstances where an attempt at circumvention can be perceived. The words may, in achieving the stated purpose, pick up circumstances where there was no attempt at circumvention. But, it is the operation of the contract, not the results or consequences of its operation that are to be affected. A policy operates by the interplay of provisions leading to a conclusion of application of the policy. A distinction can be drawn between how the policy operates as a body of contractual provisions, and the application of a contract operating on found circumstances that either fall within or without the terms of the policy and with what consequences. That distinction is, however, blurred where the found circumstances, as here, are the operation of terms of a contract giving rise to rights and liabilities of parties, which are the subject matter of the indemnity. Nevertheless, the operation of the policy is to insure the amount of the liability of a third party (subject to the release in cl 15.1) to ANA. Nothing in the SSA alters how the policy operates. The policy operates to indemnify what would be the liability of the Vendors from another contract. The SSA and the operation of cll 10.1 and 10.9 are part of the found circumstances on which the policy operates. Its operation is not affected by cl 10.9.

The proper construction of cl 10.9(g) 54 The principles by reference to which the clause should be construed (assuming it not be a part of the policy) were not in dispute. The text and context of the provision were to be considered in the process of seeking to give it a business-like interpretation and to avoid making commercial nonsense or working commercial inconvenience. The purpose or object of the provision is relevant to the extent that the words of the agreement reveal some, or to the extent that admissible proof of surrounding circumstances reveals such. The latter was not relevant here. No evidence was led as to the surrounding circumstances of the sale. 55 Each of provisions (a) to (m) in cl 10.9 is capable of effecting a change to a liability of a Vendor, including a liability that has arisen. Some, but not all, of the 13 paragraphs refer to changes in circumstances. Paragraph (c) refers to the causal consequences of a change in ownership of the Company (Midas) after completion. It is not entirely clear in what circumstances this would operate. Nevertheless, it is not without importance because of the use of the phrase "change in ownership of the Company". Though generally expressed, I would take the phrase to mean effective control through ownership. The word "owner" and the abstract noun "ownership" are not without their subtleties of meaning and are not amenable to crisp, comprehensive definition in the abstract (cf Tisand Pty Ltd and Others v The Owners of the Ship MV "Cape Moreton" (ex "Freya") [2005] FCAFC 68; 143 FCR 43 at 65-67 [92]-[99] and 73 [119]; Kent v SS "Maria Luisa" (No 2) [2003] FCA 93; 130 FCR 12 at 33-36 [61]-[72]; Yanner v Eaton [1999] HCA 53; 201 CLR 351 at 368 [25] ). That said, in a practical business-like sense, it means the right to exercise all such rights of dominion and to dispose of the dominion in respect of the property concerned. It is greater than a beneficial interest. To own a company is to have ownership of so many of its shares as in the circumstances give the party a right to exercise rights of dominion over the company. There may be debate in any given circumstance how many shares that requires, but the concept of "ownership of the Company" involves the right to exercise rights of dominion over the company by ownership of shares. 56 Paragraphs (g) and (i) deal with changes in ownership or control of shares in, and ownership interests in, the Company and the business assets of the Company. 57 Plainly, from the text of paras (c), (g) and (i), the Vendors are to have the benefit of cl 10.9 in circumstances of change of ownership of control of the shares in the company or its business. 58 Paragraph (g) does not use the phrase "change in ownership or control" of Midas. Rather it uses wording that recognises (as was the case) that the Purchaser (ANA) may have a holding company (being a related body corporate). 59 The word "or" is used between "Purchaser" and "any of its related bodies corporate". The applicant says that it should either be viewed as a composite expression referring to the extent to which in the aggregate the Purchaser and its related bodies corporate have relinquished direct or indirect ownership of the company; or by construing the clause as if it were stated "to the extent that the Purchaser, either directly or through its related bodies corporate…". 60 The respondents fasten on the plain words: "or" means "or" - if either the Purchaser has ceased to own shares or have a direct ownership interest or if its holding company has ceased to control shares or have an indirect ownership interest. Yet, they do not seek to apply the plain words their full extent. They submit that the clause would not operate to reduce pro tanto the claim if ANA sold a 30% interest in Midas to a new joint venturer. The respondents' submissions were founded on the premiss that a sale of shares (any shares) was ceasing to hold shares. 61 Clearly cl 10.9(g) is concerned with change in relation to the ownership and control of the company. There is one immediate ambiguity and it arises from the word "cease". At the time of the entry into the SSA, it was anticipated (as occurred) that ANA would take 100% of Midas. If it later sold some shares in Midas (say 20%, or indeed any number) it would cease to hold (those) shares, but it would not cease to hold (other) shares in Midas (being the shares retained). Equally, in that situation, its parent company would cease to control (those) shares, but it would not cease to control (other) shares (being the shares retained by ANA). The parent would not cease to control shares in the Company until its ownership of shares in ANA was reduced to a level leading to a lack of control of ANA, so it could be said that it ceased to control the shares in Midas being the shares owned by ANA. 62 In my view, the words of the first part of cl 10.9(g) can be read straightforwardly if one recognises that the phrase "ceased to own or control shares" describes a state of affairs not a transaction. The state of affairs is (for ANA) not owning or (for Metcash) not controlling shares in Midas. The words used are "has ceased to own…shares". This is a state of affairs of a negative character; it is not directed to the act of sale of some shares. One only ceases to own shares in a company when one has no shares in the company in which one once had shares. One may cease to own a share or some shares if they are sold, but the state of affairs of ceasing to own shares in a company means just that. Ceasing to control shares means, in the context of a holding company, the circumstances when the control of the shares (though not owned by it) ceases. That is satisfied when a holding company ceases to own the shares in the relevant subsidiary that permitted it to control the subsidiary, and so to control the assets of the subsidiary, being here the shares in Midas. The selling of some (but not all) shares in Midas by ANA would not mean that Metcash had ceased to control shares in Midas, since it controlled ANA and ANA had shares in Midas. 63 So if ANA sells all its shares in Midas, or if Metcash disposes of sufficient shares in ANA so as to cease to control ANA and thus ceases to control the shares held by ANA, cl 10.9(g) is engaged. 64 The second half of the clause refers to "[ANA having] ceased to…have a direct ownership interest…in [Midas]" and to "[Metcash having] ceased to…have a…indirect ownership interest in [Midas]." 65 The phrase "ownership interest" directs attention to the notion of "ownership" (which I have discussed) but recognises that ownership (in that sense) may lie in more than one party; hence the notion of "interest". A business construction of this part of the clause would not have "ownership interest" mean individual constituent shares. Rather, it means ceasing to have such ownership of shares in Midas by ANA or control of ANA by Metcash as would provide an "ownership interest" in Midas directly by ANA or indirectly by Metcash. 66 Read this way, the provision can only operate to extinguish the Vendors' liability. 67 This construction of the clause has the advantage of conforming to the plain words of the clause, of giving meaning to "or", of permitting flexibility to ANA and Metcash to use some of ANA's shares in Midas for a commercial purpose, as long as any disposal (say to a prospective joint venturer) did not see the cessation of an "ownership interest" in Midas. Equally, there was flexibility in Metcash's ownership of ANA such that it could (say in respect of any prospective joint venturer) use some of the shares in ANA, as long as it did not cease to control it such that it controlled ANA's shares in Midas or had an indirect ownership interest in Midas through ANA's shares. 68 This construction also gives a practical and workable operation to the provision as a commercial change of control provision. That is not merely to give a label to a clause. Clearly the SSA in cl 10.9 was concerned with substantive changes in ownership and control, as can be seen from cl 10.9(c), (g) and (i). The benefit of the warranties and the anticipated insurance was only to be for the benefit of the applicant if there was no relevant change of ownership or control. It was for the benefit of ANA (as Purchaser) but only if ANA was owned or controlled by Metcash or only if ANA owned shares in or had an ownership interest in Midas. 69 This construction is consistent with the submissions put by the respondents, though varying in some respects. After the hearing of the matter, I put this construction to the parties for their submissions. The respondents embraced this construction. The applicant put a number of arguments to the contrary of it. 70 It was submitted that it was incorrect to focus on the kind of events apprehended by the second half of cl 10.9(g) because of the relevant admission that Metcash ceased to have an indirect ownership interest. With respect, the whole clause is to be understood for its meaning. 71 It was submitted that the purpose of the clause should not be derived from the facts that have happened. I agree. The commercial purpose of the clause should be drawn from the words of the contract. 72 The question of reduction or extinguishment of one or more of the circumstances will depend upon each clause in (a) to (m). The chapeau does not dictate that each clause must operate to reduce and extinguish in different circumstances. 73 I agree with the underwriters' submissions that it is not evident why a reduction in liability which is coextensive with a reduction in shareholding makes commercial sense. The commercial sense of the construction which I favour is rooted in control. 74 The orders that I would make are that the application for a declaration in paragraph (a) of the originating application dated 15 August 2016 be dismissed, that leave be granted to the applicant to appeal, that any such appeal be expedited, that if an appeal is to be filed, the applicant and the respondent agree upon a timetable that deals with the filing of a notice of appeal, submissions and a consolidated appeal book so that the appeal can be heard in February, March or April 2017 as a half day appeal, such agreed orders to be submitted to my Associate on or before 9 December 2016. Should the parties wish to progress the preparation of the relief claimed in paragraphs (b) and (c) of the originating application dated 15 August 2016, they are to liaise with my Associate for a case management hearing in December 2016. I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop.