Harvela Investments Ltd v Royal Trust Company of Canada (C.I.) Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WALLER,LORD JUSTICE OLIVER,LORD JUSTICE PURCHAS |
| Judgment Date | 18 July 1984 |
| Judgment citation (vLex) | [1984] EWCA Civ J0718-3 |
| Docket Number | 84/0305 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 July 1984 |
[1984] EWCA Civ J0718-3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE GIBSON)
Royal Courts of Justice,
Lord Justice Waller
Lord Justice Oliver
Lord Justice Purchas
84/0305
1983 H. No. 556
MR MICHAEL ESSAYAN, Q.C., and MR M. DRISCOLL (instructed by Messrs. Slaughter & May) appeared on behalf of the Appellants.
MR EDWARD NUGEE, Q,C., and MR C. WEAVER (instructed by Messrs. Bischoff & Co.) appeared on behalf of the Respondents (1st Defendants).
MR LEOLIN PRICE, Q.C., and MR J.K.S. DENNISTON (instructed by Messrs. McKenna & Co.) appeared on behalf of the Respondent (2nd Defendant).
This is an appeal from a decision of Mr. Justice Peter Gibson making an order for specific performance of a contract between Harvela Investments Ltd., (Harvela), plaintiffs, and the Royal Trust Company of Canada Ltd. (Royal Jersey), the first defendants. The appellant is Sir Leonard Outerbridge (Sir Leonard) who claims specific performance of a contract to sell the shares to him. There is also a cross appeal by Royal Jersey on the question of interest payable by the purchaser, but it is first necessary to decide which party is the purchaser.
The shares are in a company called A. Harvey and Co. Ltd. (Harveys) who were third defendants in the court below. Approximately 43% of the shares are held by Harvela representing members of the Harvey family and approximately 4O% of the shares are held by members of the Outerbridge family. The shares in issue in this case represent approximately 12% of the voting strength and are held by Royal Jersey, the first defendants. If Harvela purchase the shares in issue the Harvey family will have the majority holding in Harveys and if Sir Leonard purchases the shares the Outer-bridge family will have the majority holding. I do not need to set out all the facts leading up to the events of September, 1981; they are fully set out in the judgment of the learned Judge reported in (1984) 2 W.L.R. 884 It is sufficient to say that in August, 1981, in response to an invitation from the Trustees, Royal Jersey, Harvela and Sir Leonard each made bids which, though similar in the size, were different in content. I now take up the narrative by quotation from the learned Judge: "The trustees then decided that they should invite both Harvela and Sir Leonard to submit revised offers on identical terms and conditions. They sent a telex ("the Invitation Telex") to each of Harvela and Sir Leonard asking each to continue its or his existing offer to 3 p.m. on 16th September 1981 and containing (so far as material) the following terms and conditions: 'We have before us two similar offers but subject to differing terms and conditions and value. Accordingly we invite you to submit to (Royal Jersey) any revised offer which you may wish to make by sealed tender or confidential telex to be submitted to our London solicitors, Messrs. Bischoff and Co.…by 3 p.m. London time Wednesday 16th September 1981, attention J. Jowitt who has undertaken not to disclose any details of any revised offer to any party before that time.…
Tenders are to be submitted on the following terms:—
1. That tenders are a single offer for all shares held by us.…
5. In the event that closing shall not take place within 30 days interest shall be payable by the purchaser on the full purchase price at a rate higher by 4 per cent. than the Bank of Montreal prime rate from time to time for Canadian dollar loans.
We hereby agree subject to acceptance by us of any offer made by you:—
C) We confirm that if any offer made by you is the highest offer received by us we bind ourselves to accept such offer provided that such offer complies with the terms of this telex.'
Two amendments to those terms were made by the trustees by a telex dated 16th September 1981 and sent to each of Harvela and Sir Leonard before either had responded to the Invitation Telex, I need refer only to the amendment to term 5, the words "other than by reason of any delay on our part" being inserted after the words "within 30 days". Further on 16th September Royal Jersey orally confirmed to Sir Leonard and Harvela that the promise in paragraph C to accept the highest offer was not qualified by the words "subject to acceptance by us of any offer made by you."
Thus each of Harvela and Sir Leonard knew that the other had already bid a sum of an amount similar to its or his bid of $1 3/4m. without knowing which of the earlier bids was the higher. Each knew that it was likely that it or he would have to increase its or his previous bid to be successful but each had the assurance that the trustees were promising to be bound to accept the highest offer made in accordance with the terms of the Invitation Telex.
On 16th September, 1981 before 3 p.m. Mr. Chalker (for Harvela) telexed to Mr. Jowitt (for Royal Jersey) Harvela's revised offer; this was in the sum of $2,175,000. Also on l6th September before 3 p.m. the London solicitors of Sir Leonard sent his written revised offer to Mr. Jowitt. That offer was expressed as follows: "The amount of our client's tender is C$2,100,000 or C$101,000 in excess of any other offer which you may receive which is expressed as a fixed monetary amount, whichever is the higher."
At 4.47 p.m. the same afternoon Mr. Broughton, the assistant manager of Royal Jersey's trust department, telexed Mr. Chalker that Harvela's tender was unsuccessful. Royal London however decided not to notify Sir Leonard of acceptance of his offer unless Mr. Nugee advised that the offer was valid and satisfied the conditions of Royal Jersey's invitation and that Royal Jersey was bound to accept. Mr. Nugee advised orally on 22nd September and in writing on 29th September. Whilst confessing to a feeling of unease regarding the form of the offer, Mr. Nugee advised that Sir Leonard's offer was a valid offer of $2,276,000 which Royal Jersey was bound to accept. Mr. Nugee further advised that Royal Jersey should advise both parties of the tenders which it had received, that it proposed to complete with Sir Leonard and that if Harvela wished to dispute the validity of Sir Leonard's offer it would have to do so by proceeding against both Royal Jersey and Sir Leonard. On 18th September Mr. Chalker asked that the details of the successful tender should be telexed to him and that request was repeated on 27th September. On 29th September Royal Jersey in accordance with advice from Mr. Jowitt telexed each of Sir Leonard and Harvela giving the details of each bid, and concluded: "In the circumstances our clients are bound to accept and do hereby accept the offer received from Sir Leonard Outer-bridge and give notice that they propose and require the purchase of the shares to be completed on the 15th October next."
Harvela, having thus been put on notice, started proceedings in Jersey but by agreement between the parties the present proceedings were started in the Chancery Division and the Jersey action was not proceeded with.
As I have already said the learned Judge gave judgment for Harvela deciding that they had made the highest bid. He came to this conclusion because he found that in contracts where sealed bids were made, a term had to be implied that referential bidding was not allowed. Accordingly the bid of Sir Leonard remained at the fixed price and was lower than that of Harvela. The main ground of this appeal is that the learned Judge was in error in this conclusion.
The first question to consider is what is the proper construction to put upon the telex sent by Royal Trust inviting Harvela Ltd., and Sir Leonard to submit revised offers. Only two of the terms in the telex are important for the decision of this part of the case. The first is: "Tenders are to be submitted on the following terms: (1) That tenders are a single offer for all shares held by us." and then later in the telex: "We confirm that if any offer made by you is the highest offer received by us we bind ourselves to accept such offer provided that such offer complies with the terms of this telex". This court has to consider whether this telex was an invitation to treat or a binding offer to enter into a contract with the highest bidder or an offer which the bidder who was highest could accept. In my judgment the clause confirming that the Royal Trust bound themselves to accept the highest offer received by them made it clear that it was not a mere invitation to treat. It emphasised that if the offer complied with the terms of the telex, Royal Trust would accept the highest offer and therefore it was either an offer which when the highest bid was received completed a contract of sale or at least completed a contract to enter into a contract of sale. (See e.g. Carhill v. Carbolic Smoke Ball Co. (1893) 1 Q.B. 256). The question of whether it would be a complete contract of sale or a contract to enter into a contract of sale as it seems to me is purely a question of words, the effect is a contract of sale. I find support for this view in the speech of Lord Wright in Hills & Co. Ltd. v. Arcos Ltd. 147 L.T. 503 at 515 where he says: "A contract de praesenti to enter into what in law is an enforceable contract is simply that enforceable contract, and no more and no less; and if what may not very accurately be called a second contract is not to take effect till some future date but is otherwise an enforceable contract the position is as in the preceeding illustration, save that the operation of the contract is postponed. But in each case there is eo instanti a...
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