Breach of the alleged Valibhoy Agreement
149 Valra pleads that in around December 2005, Rahim for and on behalf of the A Rahim Valibhoy Trust, Comintra and Amin on behalf of the trustees of the MA Valibhoy Trust entered into an oral agreement which contained express terms that they would (i) invest in MMH by each purchasing a parcel of shares in MMH; and (ii) act collaboratively and cooperatively in respect of their parcels of shares and in particular that they would 'act as a block of shares by voting collectively on their respective parcels of shares in relation to MMH'.
150 Certain particulars of the alleged agreement were sought and provided. It was said that the Valibhoy Agreement was reached over the course of several discussions in person in Perth and over the telephone in or about December 2005 between Rahim for and on behalf of the A Rahim Valibhoy Trust, Shariff on behalf of Comintra and Amin on behalf of the MA Valibhoy Trust. When asked for further particulars of the alleged face-to-face discussions in Perth and the phone discussions, Rahim's response was that he does not recall what was said at each meeting and/or during each discussion but recalls the terms as alleged.
151 Shariff denies any agreement was entered into between the brothers, whether to the pleaded effect or at all, as to how they would vote or otherwise retain, sell or deal with the respective shares owned by the relevant entities.
152 In order to assess whether Valra has established the existence of an agreement and its terms, it is necessary to consider the competing oral evidence and look to any documentary or other evidence that might shed light on those matters. It is then necessary to consider whether the evidence is sufficient to establish that there was contractual intention and sufficient certainty of terms.
153 It is well established that the courts strive to uphold bargains: Hillas & Co Ltd v Arcos Ltd [1932] All ER Rep 494. To that end, the courts will construe the terms of an agreement with an inclination to give effect to the intention of the parties, even if that intention has been obscurely expressed: Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191:
[6] There are two limbs to the uncertainty doctrine. A contract (or a term thereof) is void for uncertainty if (1) all the essential and critical terms of the bargain have not been agreed upon or (2) the language used is so obscure and incapable of any precise or definite meaning that the court is unable to attribute to the parties any particular contractual intention: Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 436-437; Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101. Under the first limb, the contract is incomplete. Under the second limb, the court is unable to attribute a meaning to the language used by the parties. I refer to the latter as linguistic uncertainty. Both limbs apply only to essential terms.
[7] Where, as in this case, contractual intention is proven, courts should be astute to adopt a construction which will preserve the validity of the contract: Meehan v Jones (1982) 149 CLR 571; Anaconda Nickel.
[8] The appellant claimed that the expressions 'a price equal to at least ninety percent (90%) of the average closing prices for buying of Shares' and 'similar to' in cl 10.2 are linguistically uncertain. The claim is without merit for the reasons given by the trial judge and Buss JA.
154 Where the absence of an express provision in an agreement can be supplied by implying a term in order to give efficacy to the bargain, the courts will make the necessary implication: Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60 at [51].
155 Rahim's evidence-in-chief was that:
At some point in early 2006 Mohamed Shariff told me that Mohamed Amin and I should start with an initial investment of $135,000 each.
Mohamed Shariff told me that the company was called Mag Men Holdings Pty Ltd (MMH).
Mohamed Shariff also told me that his, Mohamed Amin's and my collective MMH shareholding would be large enough to prevent a unilateral takeover by a majority shareholder.
Mohamed Shariff also said that we would act collectively as one voting block or unit on all matters in relation to MMH and that he would manage the investment for the three of us.
I verbally agreed with Mohamed Shariff's proposal as did Mohamed Amin.
156 Shariff gave evidence that he made no such statement as to acting collectively as one voting block and that there was no such agreement as alleged. In particular, Shariff said that he:
did not enter into any agreement with Rahim and Amin in around December 2005 or at any other time in terms to the effect … that we would invest in MMH by each purchasing a parcel of shares, and act collaboratively and cooperate in respect of our parcels of shares, including voting collectively.
157 Under cross-examination, Shariff expressly denied on a number of occasions making any such agreement. This was not something about which he had any hesitation.
158 As already indicated, I have reservations about the reliability and credibility of Rahim's evidence generally. He was unable to give any detailed evidence of the circumstances in which the alleged conversations took place or the timing. Rahim said he 'imagined' that it was entered into in about 2005 because 'that's around the time we went in'. Allowing for the passage of time, it is perhaps not surprising that particular details were not remembered, but it would then seem surprising, in the absence of any explanation for the difference in recall, that Rahim claimed to specifically recall the alleged terms of the agreement.
159 I also have no reason to doubt Shariff's evidence. In such circumstances, I would not be satisfied that Rahim has established on the balance of probabilities that any agreement was reached unless there is reliable corroborating evidence by way of documents or conduct that supports such a finding and undermines Shariff's evidence.
160 In my view, there is no such documentary or other reliable evidence that corroborates the making of any such agreement. There were no emails or other written communications between 2006 and 2014 that referred to any such agreement (noting it is permissible to have regard to evidence that post-dates the entry into a contract in order to assess whether or not any such contract exists). Rahim conceded as much in cross-examination.
161 In contrast, there were communications in which Valra was described as a shareholder but without any reference to being part of any collective block. Rahim's email to Ravi of 5 December 2013 is an example. During the telephone discussion of 13 March 2014 between Rahim and Vali, despite being told by Vali that shareholders holding more than 90% of the issued shares agreed to Tactracom's proposal, Rahim did not refer to any such agreement. Nor does he refer to it in his email to Vali of 14 March 2014 (the email sent late after the call with Rahim of 13 March 2014) or in any of the communications between Rahim and Vali after the transfer of 18 March 2014, 19 March 2014 or 7 April 2014.
162 It is also interesting to consider the content of two letters written on Valra's behalf by its then solicitors, Williams & Hughes, after the events of 18 March 2014.
163 On 3 July 2014 Williams & Hughes wrote to MMH's solicitors setting out what they said were instructions relating to the recent events, but making no mention of the alleged Valibhoy Agreement.
164 By separate letters from Williams & Hughes to Amin and Sofiah's children of the same date, Valra's solicitors referred to an alleged agreement between Amin and Rahim to the effect that Amin and Rahim via their respective trusts would together hold at least 10% of the shares in MMH and 'act together in relation to all decisions relating to MMH so as to avoid the compulsory sale provision under cl 15 of the MMH Shareholder's Deed'.
165 I note that the agreement referred to in the second Williams & Hughes letter was limited to an alleged agreement between Amin and Rahim and specifically refers to cl 15 of the Shareholder's Deed. In cross-examination, Rahim suggested that the second letter was making reference to the Valibhoy Agreement. However, clearly on its terms it is referring to an alleged agreement of a different nature. When challenged, Rahim explained that his solicitors had mis-conveyed in the letter the information that he had given. I do not find that explanation convincing, in light of the very particular description of the alleged terms provided by Williams & Hughes.
166 In an email from Sahil to Shariff of 19 April 2007, Sahil refers to various shareholder percentage scenarios and refers to the brothers 'as one block'. Rahim said in his evidence that he did not have any discussions with Sahil about the investment in shares and there is no evidence of details of the alleged agreement being conveyed to Sahil. Further, if Sahil was indeed informed of such an arrangement, it is surprising that when the Shareholders Deed, and in particular cl 15 of the Shareholders Deed, was amended in 2009, Sahil apparently did not address the existence of a fixed voting block with the shareholders. Such a collateral arrangement had the potential to undermine the efficacy of cl 15 of the Shareholders Deed or leave other minority shareholders more vulnerable to its implementation. One would have thought such matters would have been worthy of comment by a director of MMH. I am not convinced that the use by Sahil of the expression 'one block' is evidence of the existence of a contractual agreement as pleaded.
167 It is true that in 2009 the Deed of Variation introduced the defined term 'Valibhoy' as follows:
Insert a new defined term 'Valibhoy' with definition
Means the following three (3) shareholders collectively,
(a) Comintra Pty Ltd (ACN: 068 778 905) a company incorporated in Australia and having its registered office at 64 Broadway, Camberwell, Vic 3124
(b) Valra Pty Ltd (ACN: 126 540 841) a company incorporated in Australia and having its registered office at 57 Philip Road, Dalkeith, WA 6009
(c) Mohamed Valibhoy and Sofiah Valibhoy ATF MA Valibhoy Superannuation, having their joint address at 74 Viking Road, Dalkeith, WA 6009;
who shall act through their representative, Shariff Valibhoy of 64 Broadway, Camberwell, Vic 3124 (the Valibhoy Representative). A decision or act of Valibhoy under this Shareholders Deed will only be valid where made or confirmed in writing under the signature of the Valibhoy Representative, or any other person nominated in writing by the Valibhoy Representative to the Company.
168 However, I accept the respondents' submission that that definition does not disclose or evidence the formation of the Valibhoy Agreement as pleaded. It does no more than provide that when that expression is used in the Shareholders Deed, it is a reference to the relevant shareholders acting collectively, and it entitles them to act through a representative. The appointment of a representative without more does not purport to describe or create obligations as between each member when they are not acting collectively, and does not compel them to act collectively. Relevantly, the defined term 'Valibhoy' is not used in cl 15 which uses the word 'Shareholders' and does not incorporate in any manner the Valibhoy definition. Therefore, as a matter of construction, cl 15 applies to the Valibhoy entities as separate and distinct shareholders in any event. It is telling that the definition was not introduced into cl 15 despite other amendments to that clause effected by the Deed of Variation.
169 Nor is there any evidence of conduct on Shariff's part that supports Valra's claim about the Valibhoy Agreement. Rahim said in cross-examination that he expected that Sofiah would comply with the Valibhoy Agreement in her capacity as trustee of the relevant trust. Shariff's evidence was that he did not discuss the Tactracom acquisition of shares with Sofiah, which is consistent with his contention that there was no contractual commitment as to voting. There was no evidence that Rahim or anyone else informed Sofiah about the Valibhoy Agreement.
170 I take into account that Rahim and Shariff had many communications about their MMH investments, apparently until their falling out. Rahim said in his evidence in chief that until December 2013 Shariff was his main point of contact regarding MMH and that he was happy to be a silent investor and to be guided by him. Those communications, nor the fact that the brothers communicated, do not establish that there was a contractual agreement as pleaded. They do not establish a commitment to vote in any particular manner.
171 I am not satisfied that there is sufficient evidence to establish Valra's claim that the Valibhoy Agreement was made.
172 Furthermore, I am not satisfied that the express terms pleaded, even if agreed, were sufficiently clear or complete to evidence the contractual intentions of the parties. Even if there was agreement between Rahim, Shariff and Amin as pleaded, the terms of the agreement without more are unworkable. For example, nothing is said as to how disputes between the three brothers as to how shares were to be voted would be resolved. Nothing is said as to what course should be undertaken if any of the brothers wished to sell their shares. Nor is it clear whether the alleged agreement was confined to the shares being purchased in early 2006 (namely 130,000 by Comintra and 135,000 by each of Rahim and Amin's trusts) or was also intended to operate with respect to any further shares purchased. The terms do not address shares that were already held at that time by Comintra.
173 A term that impinges on the rights of a person or entity to exercise voting rights, particularly where it may influence the ability to realise shares, is a matter of some significance. It would be expected that the question of what mechanism was to operate if a party wished to vote differently would have been addressed if there were in fact an agreement between the parties. Valra contends that such gaps can be completed by a court if necessary. I do not agree. There would seem to be no means of ascertaining the intention of the parties as to what would happen in that scenario. Would there be a process by which the dissenting shareholder was compelled to sell their shares to the others in the group? Would the parties abide a majority decision? The purpose of a detailed shareholders deed is to attempt to address the many issues that might arise between shareholders of a company, and there sensibly was one in place between the shareholders of MMH. The general and uncertain terms of the separate Valibhoy Agreement, by contrast, tell against it being an enforceable contract in any event.
174 In conclusion I am not satisfied that the Valibhoy Agreement was ever made. It follows that no breach of any such contract is established.
175 I should add that the pleaded conduct said to comprise a breach of the purported Valibhoy Agreement is Sofiah's and Comintra's alleged failure to consult in relation to the Takeover Proposal (defined as the proposal that Tactracom would purchase all shares in MMH for $100) and their alleged failure to act collectively with Valra in relation to the Takeover Proposal. The alleged breach highlights the difficulty with the lack of certainty as to the terms of the alleged Valibhoy Agreement. Whilst it could be said that Shariff and Sofiah did not consult, neither did Rahim. There was no suggestion that Rahim attempted to consult with them about the proposal. Even had there been consultation, whether or not the three persons would have wanted to act in the same manner is doubtful. Absent agreement, even if the decision was made that they should act in accordance with a 2:1 majority or agree to act separately, the result would have been the same and the acquisition would have proceeded. There would have been no loss to Valra.