RA Brierley Investments Ltd v Landmark Corporation Ltd

The facts are not complicated. The defendant, being minded to carry into effect a scheme involving the making of offers for the acquisition by it of fifty-one per cent of the issued shares in Hawkesbury for the sum of 17s. per share, gave to Hawkesbury on 16th September 1965, in obedience to the requirement of s. 184 (2) (a) of the Companies Act, 1961 N.S.W., a notice of the scheme together with a statement complying with Pt B of the 10th Sch. to the Act. On 1st October 1965, it sent to every person who on that date was a registered shareholder in Hawkesbury a letter with which was enclosed a document setting forth in detail the terms of the offer, a copy of the notice that had been sent to Hawkesbury, a copy of the statement under Pt B and a blank share transfer form.

The letter, which was headed: "To the Shareholders of Hawkesbury Development Company Limited" and began: "Dear Sir or Madam", described the enclosed offer as an offer for "fifty-one per cent of your shares" in Hawkesbury, and it contained the sentence: "The number of shares held by you to which this offer relates and the amount which will be payable to you if you accept the offer are set out below." Then it explained, as befitted its character as a circular letter, that in cases where fifty-one per cent of the number of shares held could not be calculated to a whole number, the next whole number had been adopted. (Where the shareholder held less than 600 shares an alternative offer was made, namely to acquire the whole of "the shares held by you" at the same price; and there were consequential differences in the rest of the letter. There is no need, however, to trouble further about these differences.) The letter ended by saying: "If you decide to accept the offer, please complete and sign the enclosed transfer, and return it in the envelope provided." At the foot of the letter was a box headed: "No. of Shares", and another headed: "Amount Payable". In the copy of this letter which reached the appellant there was entered in the first box "6,630", and in the second "£5,635.10.0".

The document which contained the detailed terms of the offer - we shall call it the formal offer - was similarly addressed to the shareholders of Hawkesbury and began: "Dear Sir/Madam". It said that the respondent "hereby offers to acquire from you fifty-one per cent of the shares held by you in the capital of (Hawkesbury) for the sum of 17s. per share ex dividend payable in cash". It contained a statement that the offer would remain open for acceptance for one month from its date (1st October 1965) unless it and all other offers under the take-over scheme should be totally withdrawn and every person released from any obligation incurred thereunder. The document stated that offers were being made simultaneously to "the holders of all other issued shares in the capital of" Hawkesbury, and that the offer "to you and to each such shareholder" was made upon and subject to certain terms and conditions which were set out in paragraphs numbered (i) to (ix). Only four of these are of immediate importance. The first (so far as material) was a condition that acceptance of offers under the take-over scheme be received within one month of the date of the offer in respect of not less than fifty-one per cent in nominal value of the issued shares in the capital of Hawkesbury. The second was that the respondent might accept from any one or more individual shareholders a number of shares in excess of fifty-one per cent of "their shareholding", but so that it should not be compelled to accept a total number of shares in excess of fifty-one per cent of the total issued shares; but this was qualified by a proviso the effect of which was that the respondent would nevertheless be bound to accept not less than fifty-one per cent of "its shareholding" of each individual shareholder who should accept the take-over offer. The third condition was that payment should be made in cash within twenty-eight days of receipt of "acceptance and transfers" totalling fifty-one per cent of the total issued capital of Hawkesbury. And the fourth was that the respondent as part of the offer undertook to acquire from those shareholders desirous of disposing of them the remaining forty-nine per cent of the issued shares in Hawkesbury for 17s. per share ex dividend not later than 30th September 1968.

On the date of the offer, 1st October 1965, the appellant was the registered holder of 13,000 shares only in Hawkesbury, and 6,630 is fifty-one per cent of that number. But it had bought and paid for 33,835 further shares in the company, and by 21st October 1965 it had become the registered holder of those shares, so that its total holding was then 46,825 shares. On 29th October 1965 it purported to accept the take-over offer in respect of 23,880 shares, being fifty-one per cent of its then registered shareholding, sending to the respondent the share transfer duly completed in respect of that number of shares and asking for a cheque for £20,298, which would be the proper amount for that number of shares at 17s. per share.

The first question to be considered arises at this point. It is whether the respondent had made an offer or offers which the appellant was entitled to accept in respect of 23,880 shares. Street J. thought it had not, and we respectfully agree. In the first place it seems to us to be clear that the respondent had addressed no offer to the appellant for the purchase of 23,880 shares. The only direct offer that was made to the appellant was that which was made by means of the letter of 1st October 1965 and its accompanying documents. On its face it was made to the appellant as one of a body of shareholders to each of whom a similar offer was being made, but it was itself an offer to the appellant individually as the holder of a particular parcel of 13,000 shares, as was shown by the fact that 6,630 was the number it mentioned as being fifty-one per cent of which it called "your shares". In specific terms the letter limited the formal offer so as to relate only to 6,630 of those shares, the shares described in the formal offer itself as "the shares held by you"; and the operative words of the offer were "to acquire from you fifty-one per cent of the shares held by you" in the capital of Hawkesbury. The meaning of "held by you" might no doubt have been controlled by an appropriate context so as to include shares of which the recipient was then entitled to become the holder, or of which it might become the holder during the currency of the offer, but there was no such context. From the statement that offers were being made simultaneously to the holders of all the other shares in Hawkesbury, and the statement in the covering circular letter that in cases where fifty-one per cent could not be calculated to a whole number the next whole number had been adopted, it was apparent that a separate offer was being made to each person who was a shareholder on 1st October 1965 in respect of fifty-one per cent only of the shares which he then held. The reader could have no doubt, we think, that the respondent was making offers which, if accepted, would involve it in liability to buy, at 17s. per share payable practically at once, fifty-one per cent of the share capital of Hawkesbury and no more. It undertook to buy any of the remaining forty-nine per cent not later than 30th September 1968, but it was not committing itself to buying immediately any more than fifty-one per cent of the total. This consideration, in our opinion, is decisive, for if the offer were to be construed as open for acceptance by any shareholder in respect of fifty-one per cent of any shareholding that he might have before the closing date of the offer it would mean that the respondent was exposing itself to acceptances which might commit it to buying, and paying at once for, much more than fifty-one per cent of the total share capital of the company. A simple illustration will make the point. Suppose every shareholder had accepted the offer as to fifty-one per cent of his shareholding on 1st October, and had then transferred his remaining shares to a fellow shareholder who became the registered holder of them before the month was out. If the purchasers were entitled in their turn to accept the offer as to fifty-one per cent of the shares they thus acquired the respondent would have to pay 17s. per share immediately for nearly seventy-six per cent of the share capital of the company. And if the process were repeated before the end of October the respondent would have to pay 17s. per share immediately for over eighty-eight per cent of the share capital of the company. The documents which the appellant received, therefore, were not fairly open to a construction under which the appellant might accept the respondent's offer in respect of more than the 6,630 shares that it held on 1st October 1965.

But the appellant contends that, even if the offer which was addressed to it should be understood as relating to fifty-one per cent of those shares only which it held on 1st October 1965, it was entitled after becoming registered as the holder of the other 33,825 shares to accept, in its own name and as to fifty-one per cent of those shares, the offers that had been made to the transferors thereof. These offers, it is said, were assignable and should be held to have been impliedly assigned to the appellant together with the shares, with the result that when the appellant sent its letter of acceptance in respect of 23,880 shares it was the offeree in respect of 6,630 shares and the assignee of offers in respect of the other 17,250.

The supporting argument may be divided into three propositions: (1) that the offer made to each shareholder was irrevocable within the month; (2) that an irrevocable offer is assignable unless so framed as to be personal to the offeree, and the offer here in question was not so framed; (3) that the offer, while open, inhered in the offeree's shares in the sense that without special mention it was assigned by a transfer of the shares so as to be capable of acceptance by the transferee in his own name.

We are disposed to concede the first proposition, because although the offer was neither under seal nor made for valuable consideration, and therefore was revocable unless made irrevocable by the Companies Act, s. 184 and par. 1 of the 10th Sch. of that Act seems to us, as at present advised, to disclose an intention that such an offer not only shall state that it will remain open for acceptance by the offeree for at least a month from its date but shall in truth be open for acceptance for that period: cf. Devine v. Devine and Queensland Insurance Co. Ltd. [1] .

For the second proposition the appellant relied upon such authorities as those which Higgins J. discussed in Carter v. Hyde [2] and which Swinfen Eady M.R. referred to in Whiteley Ltd. v. Hilt [3] , and we shall assume it to be correct for the purposes of this case. But the third proposition runs into difficulty. Indeed there may be more difficulties in it than one, but one at least appears to us to be fatal. The offer which the respondent made to each person who was a shareholder on 1st October 1965 was in respect of fifty-one per cent of his entire holding. If he were to transfer his entire holding to a third party it may be that the offer would be exercisable by the transferee, though we must not be taken as deciding that this would be so. But in fact the appellant did not acquire the entire holding of each of its transferors. There is among the exhibits a list showing inter alia who the transferors were, the total number of Hawkesbury shares each of them held on 1st October, and the number they had respectively sold and later transferred to the appellant. Most of them sold to the appellant all the shares they held in Hawkesbury, but four sold to it some only. What, then, became of the offers that had been made to those four shareholders? It was in each case a single offer for a specific proportion of the offeree's shares, and was therefore incapable of acceptance as to any smaller number: Ocean Coal Co. Ltd. v. Powell Duffryn Steam Coal Co. Ltd. [4] . Three of the four retained more than fifty-one per cent of their holdings, so that even after making the transfers to the appellant they were in a position to accept the respondent's offer and perform the resulting contract, whereas the appellant did not get enough of their shares to be able to do so. One of the four retained only forty per cent of his shares, and it might be hard to say whether the proper inference is that he intended the appellant to have the benefit of the respondent's offer or that he intended his sale to the appellant as a choice between the appellant and the respondent and therefore as a rejection of the respondent's offer. This question may be put on one side, however, for the three who retained more than fifty-one per cent of their holdings could not have intended to assign to the appellant the benefit of the offer the respondent had made to them. And no one could seriously maintain that there passed with each share that was transferred a proportionate part of the right to accept that offer.

1. (1923) 33 C.L.R. 115, at p. 129 et seq. 2. [1918] 2 K.B. 808, at p. 818. 3. [1932] 1 Ch. 654.

Accordingly, though everything else be assumed in favour of the appellant's contention, there is no escaping the fact that when the appellant purported to accept an offer (or offers) to buy 23,880 shares, the offer that had been addressed to it and the offers that had been addressed to those shareholders from whom it acquired fifty-one per cent or more of their holdings were, in the aggregate, offers for fewer than 23,880 shares. For that reason, if for no other, the purported acceptance in respect of 23,880 shares did not accord with any offer or offers that had been made, and no contract resulted.

The appellant's second contention, that what purported to be an acceptance of an offer for 23,880 shares was effectual in respect of the 6,630 shares which it held on 1st October, is, we think, likewise untenable. The acceptance was by means of a letter dated 29th October 1965, which was in the following terms:

We hereby accept your takeover offer of 1st October 1965 to purchase fifty-one per cent of our shareholding in Hawkesbury Development Co. Ltd. and enclose herewith the following documents: -

1. Share Transfer in respect of 23,880 shares, being fifty-one per cent of our registered shareholding as at today's date.

In accordance with the terms of your offer we shall be pleased to receive your cheque for £20,298. 0. 0.

This was no acceptance of two offers for separate numbers of shares, namely fifty-one per cent of the shares held by the appellant on 1st October and fifty-one per cent of the shares which it later acquired. Quite evidently the letter was intended as a single acceptance of what it treated as a single offer, namely an offer not tied, indeed not necessarily related at all, to the appellant's shareholding as at 1st October. Since, as we believe, there was no such offer which the appellant was entitled to accept, the letter could have no effect in law save as itself tendering an offer, namely to sell to the respondent 23,880 shares being fifty-one per cent of the appellant's then holding in Hawkesbury. It then rested with the respondent to decide whether it would or would not accept the appellant's offer thus made. It might do so within the terms of the take-over scheme, for by the second of the terms and conditions of the offer it had reserved to itself liberty to accept from any individual shareholder more than fifty-one per cent of his shares.

The appellant's argument in support of its third contention commences at this point. Its letter purporting to accept the take-over offer in respect of 23,880 shares evoked a quick response. On 1st November 1965 the respondent wrote pointing out that the offer that had been made was to purchase fifty-one per cent of the appellant's shareholding in Hawkesbury "as at the date of the offer"; and it added that it was "accordingly prepared to treat the acceptance of the offer as being a valid acceptance in respect of 6,630 shares". This was a clear rejection of the appellant's offer to sell 23,880 shares and amounted to a counter-offer. The appellant's reply took the form of a solicitors' letter under date 26th November 1965. The letter dealt not only with the matter we are concerned with in this appeal but also with some others that stood in a similar position. So far as it related to this matter, the letter recited that the appellant had accepted the take-over offer in respect of fifty-one per cent of its shareholding as at the time of the acceptance, and that the respondent had "purported to reject" the acceptance so far as concerned shares not registered in the appellant's name as at 1st October, and it went on to say that the appellant did not consider that the respondent was contractually entitled so to reject portion of the acceptance. It required the respondent to effect prompt payment for the 23,880 shares. Then on 1st December 1965 a firm of sharebrokers acting for the appellant sent to the respondent a letter which enclosed inter alia two share transfers from the appellant to the respondent, one of 6,630 shares and the other of 17,250 shares. It described the transfers as in respect of valid acceptances of the take-over offer of 1st October 1965 and referred to the respondent's letter of 1st November as having admitted liability in respect of 6,630 shares. On 3rd December 1965 the respondent's solicitors wrote denying that any proper acceptance had been received from the appellant "within the time limited by and/or in accordance with and in pursuance of any offer" made to the appellant in respect of any shares.

The first point to notice in these interchanges is that what the respondent offered by its letter of 1st November was not to treat the appellant's letter of 29th October as altered by substituting 6,630 shares for 23,880 shares, but to treat the acceptance of the take-over offer as valid in respect of 6,630 shares, while maintaining that there was no offer which was open to acceptance by the appellant in respect of the rest. Moreover the respondent's willingness in this regard was not expressed as conditional upon the appellant's agreeing to abandon the contention that it had validly accepted the take-over offer in respect of the excess over the 6,630 shares. The letter therefore left it open to the appellant to assent to the splitting of its purported acceptance into an admittedly valid acceptance as regards 6,630 shares and an acceptance of disputed validity as regards the rest. The reply which its solicitors made for it on 26th November does not explicitly assent to the proposal, but upon a careful reading it seems to us, as it did to the sharebrokers, to imply an assent to it plainly enough. This appears from two paragraphs. In one, the respondent's rejection of the appellant's acceptances of the take-over offer is described as being a rejection "so far as concerns shares not registered" in the name of the appellant as at 1st October; and in the other there is a denial of the respondent's right to reject "portion" of the appellant's acceptance. The intention appears to us plainly to be, not to insist that the purported acceptance of the take-over offer be treated as one and indivisible and therefore as valid for 23,880 shares or for none - for the question being debated was not whether the letter of acceptance should stand with an agreed notional substitution of 6,630 shares for 23,880 shares - but to make clear that whereas the parties were in agreement as regards the sale of the 6,630 shares, so that no more needed to be said about them, the appellant was persisting in its contention that a sale had been effected of the rest of the 23,880 also. The letter seems to us to imply, and therefore to convey, a clear assent to the proposition that the 6,630 shares were sold and that accordingly the only matter in difference was the validity of so much of the appellant's purported acceptance as related to the remaining 17,250.

In our opinion, therefore, the solicitor's letter of 26th November 1965 resulted in a contract for the sale of the 6,630 shares on the terms of the take-over offer. It is common ground that the condition had been duly satisfied that acceptance of offers under the scheme be received within one month of the date of the offer in respect of not less than fifty-one per cent in nominal value of the issued shares in the capital of Hawkesbury. It follows that in our view the appellant is entitled to specific performances in respect of the 6,630 shares.

We would allow the appeal and make a decree accordingly.

The decision of the Supreme Court, Street J., is in my opinion right. I have read the reasons for judgment of my brother Menzies and agree in them. The appeal should, in my opinion, be dismissed.

I am satisfied that neither directly, as a holder of shares on 1st October 1965, nor indirectly, as a transferee of shares subsequently to that date, did the appellant receive from the respondent a take-over offer for 23,880 shares in Hawkesbury Development Co. Limited (which I will refer to as "Hawkesbury") and that the appellant's attempt on 29th October 1965 to accept an offer which was not made to it was nugatory. I consider the only take-over offer which the appellant received was for 6,630 shares in Hawkesbury. The take-over offer made by the respondent to the shareholders of Hawkesbury was not one that could be regarded either as addressed to existing shareholders and their transferees, or as relating to shares of which the offeree might become the holder so long as the offer remained open. The covering letter and pars. 1 and 2 of the formal offer negative any such construction of the offer made. Each shareholder of Hawkesbury was informed explicitly that, simultaneously with an offer being made to him for a stated number of shares then held by the offeree, like "offers are being made to the holders of all other issued shares". Direct offers were therefore being made to all shareholders at the date of the offer, confined, except in the case of small shareholders, to fifty-one per cent of the existing shareholding. These offers to buy were accompanied by an undertaking to buy the remaining forty-nine per cent of the offeree's shares not later than 30th September 1968, if the shareholders should wish to dispose of the balance. In this way the proposal related to all the shares in the company, but the only offer to purchase immediately was - except in the case of small shareholders - an offer to buy fifty-one per cent of a present shareholding which was also expressed as a number of shares.

It appears to me that the acceptance of the contentions of the appellant would involve a complete departure from the appellant's clearly-stated proposal to buy a specified number of shares in 1965 - for which an offer was made - and the balance not later than 30th September 1968 - in respect of which an undertaking was proffered.

I have had the advantage of reading the judgment of the Chief Justice, Kitto and Windeyer JJ., which sets out in detail what happened and I agree with their reasons for thinking that the purported acceptance of an offer to buy 23,880 shares was not an acceptance of any offer which had been made and gave rise to no contract.

Further, I agree with the Chief Justice, Kitto and Windeyer JJ. that the appellant did not accept the take-over offer made to it for 6,630 shares. It purported on 29th October 1965 to accept an offer not made to it for 23,880 shares and asked for a cheque for £20,298, being 17s. per share for 23,880 shares.

The next question I have found more difficult, but I have come to the conclusion that Street J. was correct in deciding that there was no contract made between the appellant and the respondent independently of the take-over offer and that negotiations between the parties and their advisers did not produce a contract for the sale of 6,630 shares. By a letter from the appellant to the respondent dated 1st November 1965 the appellant rejected the assertion made on 29th October that it had purchased 23,880 shares from the respondent and stated that, as at 1st October 1965, the appellant's shareholding was 13,000 shares in Hawkesbury. The letter continued:

This Corporation is accordingly prepared to treat your acceptance of the offer as being a valid acceptance in respect of 6,630 shares. Upon receipt of a proper transfer document covering that number of shares payment of the purchase consideration therefor will be made in terms of the offer. A form of transfer is enclosed for this purpose. As I read this, the respondent was merely stating what it was prepared to do if the appellant should choose to take advantage of its proposal. Its proposal was to treat an ineffective acceptance of an offer not made as a valid acceptance of the offer that was made. The respondent's proposal was dealt with by a letter from the appellant's solicitors to the respondent dated 26th November. With this letter transfers and certificates covering 23,880 shares - but no separate transfer of 6,630 shares - were returned to the respondent and the solicitors recorded that they had been instructed that the respondent had duly accepted the appellant's offer for 23,880 shares. The letter continued: You will recall that your Company by letters dated the 1st instant to our respective clients purported to reject our clients' respective acceptances so far as concerns shares not registered in the names of our respective clients as at the 1st ultimo. Our clients do not consider that your Company is contractually entitled to so reject portion of their acceptances and require your Company to effect prompt payment to them for the above-mentioned respective shares - that is, in the case of the appellant, 23,880 shares. At this point there was, in my opinion, no acceptance of the proposal made in the letter of 1st November to treat the earlier acceptance as being what it was not, viz. a valid acceptance in respect of 6,630 shares. Indeed, it seems to me that what was proposed by the appellant in the letter of 1st November was actually rejected and it was asserted that there was in existence a valid contract covering 23,880 shares effected by the so-called acceptance on 29th October. Subsequently, on 1st December 1965 there was sent to the appellant on behalf of the respondent separate transfers for 6,630 shares and 17,250 shares and it was said that these were in respect "of valid acceptances of your take-over offer of 1st October 1965". The letter went on: It is noted from your letter of 1st November 1965 that you admit liability in respect of 6,630 shares Consequently the above alternative sets of transfers are tendered in anticipation of your immediate settlement of that part of the debt due by you for which you have already admitted liability, viz. £5,635. 10. 0 due to R. A. Brierley Investments Limited. This letter, it will be observed, asserts what the earlier correspondence shows conclusively was incorrect, namely, that the appellant had admitted liability for £5,635 10s. 0d., but it certainly could not be regarded as giving rise to any contract to pay that sum for 6,630 shares. On 3rd December 1965 the appellant's solicitors wrote to the respondent's solicitors denying that there had been any acceptance of any offer made by the appellant and asserting that no moneys were due for payment.

Having considered this correspondence, I agree with Street J. that no contract for the sale and purchase of 6,630 shares was made thereby.