HEADNOTE
[This headnote is not to be read as part of the judgment]
The respondents together held all the shares in TravelEdge Pty Ltd. TravelEdge held 40% of the shares in STA Travel Academic Pty Ltd. STA Travel Holding AG held the remaining 60%. A shareholders' agreement between the two required a party to notify the other of any change in their "Control". A failure to notify enlivened a right in the non-defaulting shareholder to compulsorily acquire the other's shareholding in STA Travel Academic by payment under an agreed calculation.
In 2019, the appellant, QBT Pty Ltd, executed a share sale agreement with the respondents, for the sale to the appellant of the respondents' entire shareholding in TravelEdge. The purchase price consisted of three amounts, one of which was a "Deferred Amount" of $4,000,000. Clause 4.4 of the share sale agreement determined when the Deferred Amount would be payable, as follows: "(a) if STA Travel Holding AG consents in writing to the change in control of the Company triggered by Completion (STA Consent Event) and, accordingly, the Company retains its shareholding in STA Travel Academic in accordance with the STA JV Agreement", and "(b) if STA Travel Holding AG does not consent in writing to change of control of the Company triggered by Completion and elects to purchase the STA JV Stake (STA Non-Consent Event)".
But STA Travel Holding AG soon entered into administration and did not exercise its right to acquire TravelEdge's shareholding in STA Travel Academic. As a result, STA Travel Holding AG's "consent in writing" was not obtained, but TravelEdge still retained its shareholding, so neither sub-clause of the definition of the Deferred Amount applied in terms.
At trial, the primary judge held that the Deferred Amount was payable even though STA Travel Holding AG did not expressly give its consent in writing. It was held that clause 4.4 was intended to apply depending only on whether TravelEdge retained its shareholding. In any event, the primary judge held that a transfer under a deed of company arrangement, whereby STA Travel Holding AG transferred its shares in STA Travel Academic to TravelEdge (thereby terminating the shareholders' agreement), constituted "consent in writing".
On appeal, the appellant argued that the primary judge erred in (a) its construction of clause 4.4 which overlooked the plain words, turning as they do upon the existence of "consent in writing", (b) holding that evidence of the STA Travel Holding AG's knowledge of its right to acquire shares was relevant to determine whether the share transfer form constituted "consent in writing", and (c) finding that the share transfer form constituted "consent in writing".
The Court held, dismissing the appeal:
(1) Clause 4.4 was intended to provide for a binary outcome. The drafting of clause 4.4 evidently miscarried the parties' intention, which was that $4,000,000 be payable if TravelEdge retained its shareholding in STA Travel Academic, and that the amount calculated under clause 4.4(b) be payable otherwise. Many textual and contextual considerations favoured that conclusion. A literal construction would lead to the absurd outcome that clause 4.4, which was a definition, would fail to attribute an amount to the "Deferred Amount", and would mean that the purchaser would receive a windfall by failing to pay for a shareholding which it indirectly receives: [58]-[82].
Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53; Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11, applied.
(2) Obiter: Although the execution of the share transfer form under the deed of company arrangement brought the shareholders' agreement to an end, that did not mean that it constituted "consent in writing" for the purposes of clause 4.4 of the shareholders' agreement. The clause requires a document in which the occasion for consent is clearly contemplated or acknowledged: [89]-[90].