Proper Construction
11The applicable legal principle is uncontroversial and was restated by the High Court of Australia in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 at [35] as follows:
The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.
12Having regard to those considerations, I have reached the view that Clause 10.1(b) does not compel a sale by tender. The clause simply does not say that the Rights must be sold by tender. Relevantly, the obligation is confined to "offering the Contract to the market by tender". That can occur without the Rights actually being sold by tender. The defendants' competing construction requires that some additional restriction, implication or qualification be read into Clause 10.1. The plaintiffs' construction adheres more faithfully to the actual language and syntax used in the clause.
13Implicit in the defendants' construction is that the process of submitting the REC to tender could be required in certain circumstances (such as in this case) to proceed indefinitely - until the tender is successful and a bid is submitted and accepted. That is because, on their case, there is only one permissible contractual outcome contemplated by Clause 10.1(b), namely a sale by tender. A private sale is not permitted. It is obvious that, if no bid is received during the initial tender process, the result of this construction might well be inconvenient and probably also commercially absurd. For example, a tender process could last weeks. The tender process in this case cost approximately $60,000. It would usually be pointless to stage another tender process immediately following one that has failed to produce a bid. A number of months might therefore pass by. In the meantime, the REC would remain unused. And during all that time, V8 Holdings would be precluded from negotiating with a potential purchaser that may be willing to enter a car immediately at a commercially advantageous price.
14All of this seems unlikely; certainly not what a reasonable person of business would have contemplated. And, as I have observed, it is not compelled by the express language of the clause, let alone by its syntax or apparent commercial purpose and object. Having a market tender is a useful mechanism for ascertaining a market price. But an actual sale by tender is not required. The function of the tender process is to invite interested buyers to submit offers for the Rights. But when an offer is received, the Special Majority of the V8 Holdings Board (which includes a Teams representative) is not obliged by Clause 10.1(b) to accept the offer. Conversely, if no bid is received, the Special Majority is not precluded from selling to a third party, as long as the requirements of Clause 10.1(b) have been satisfied.
15Clause 10.1(c) is however different. Its language is unambiguous. And it deals with a different subject matter, namely the surrender or forfeiture of the Rights rather than their sale to a third party. The process of surrender or forfeiture by V8 Holdings involves the Class A preference share held by the Team being transferred to a nominee of V8 Holdings. The object of paragraph (b) is not quite the same as that contemplated by paragraph (c). And the choice of language in each paragraph is markedly different. Under paragraph (b), there need only be a process of 'offering the Contract to the market by tender'. In contrast, paragraph (c) requires that there must be a price 'negotiated with a proposer purchaser by tender'.
16I do not think that the plaintiffs' construction is 'extraordinary or unreasonable'. By its terms, Clause 10.1(b) operates to provide protection for the Team and flexibility for V8 Holdings in the selling process. On the other hand, when Clause 10.1(c) is activated, it will result in additional protection for the Team and less flexibility for V8 Holdings. There is no basis for assuming that this dichotomy is unfair; or that it necessarily enables V8 Holdings to undertake the sale process under paragraph (b) in a manner that may be opportunistic or unfairly prejudicial to the legitimate interests of the Team.
17Finally, there is no foundation for the defendants' contention that, as a matter of construction, the only sale contemplated by Clause 10.1(b) is one that excludes a sale to a related entity of V8 Holdings. The safeguards that protect the interests of the Team are express and have two components. V8 Holdings must ensure that the price is as commercially advantageous as possible having regard to the current market situation. It must do so by offering the Contract to the market by tender. There is no hint in the actual or contextual language of the contract of any basis for imposing, as a matter of construction, some further limitation or protection by reference to the identity of the buyer. There is no requirement that the sale be arms length and no warrant, as a matter of construction, for concluding that a sale to a related entity of V8 Holdings is not otherwise a sale within the meaning of Clause 10.1(b).