LORDS DECISIONS

LORDS DECISIONS >>

LORDS

LORD FRASER OF TULLYBELTONLORD DIPLOCKLORD EDMUND-DAVIESLORD BRIDGE OF HARWICHLORD TEMPLEMAN

LORD FRASER OF TULLYBELTON.

LORDS, I HAVE HAD THE ADVANTAGE OF READING IN DRAFT THE SPEECHES OF MY NOBLE AND LEARNED FRIENDS LORD DIPLOCK AND LORD TEMPLEMAN, AND I AGREE WITH THEM. FOR THE REASONS STATED IN THEM I WOULD ALLOW THE APPEAL AND MAKE THE DECLARATIONS AND ORDERS PROPOSED BY LORD TEMPLEMAN.

LORD DIPLOCK.

LORDS, THE UNANIMOUS CONCLUSIONS OF THE APPELLATE COMMITTEE ON THE THREE ISSUES RAISED IN THESE PROCEEDINGS ARE VOICED IN THE SPEECH OF MY NOBLE AND LEARNED FRIEND LORD TEMPLEMAN. IN IT HE SETS OUT THE RELEVANT FACTS WHICH GIVE RISE TO THE THREE QUESTIONS OF LAW ABOUT LEGAL OBLIGATIONS RESULTING FROM THE CONTRACTUAL RELATIONS BETWEEN THE THREE PARTIES TO THE APPEAL AND CROSS-APPEAL TO THIS HOUSE. THESE I WILL CALL, FOR BREVITY, 'THE CONSTRUCTION QUESTION' (WHICH IS THE MAIN QUESTION IN THE APPEAL BY HARVELA), 'THE SECOND CONTRACT QUESTION' AND 'THE INTEREST QUESTION.' SINCE, LIKE THE REMAINDER OF YOUR LORDSHIPS, I AM IN FULL AGREEMENT WITH LORD TEMPLEMAN'S SPEECH, THE BRIEF OBSERVATIONS OF MY OWN WHICH I HAVE VENTURED TO APPEND ARE WRITTEN ON THE ASSUMPTION THAT WHAT HE SAYS HAS BEEN ALREADY READ AND DIGESTED. WHAT I MYSELF AM PROPOSING TO SAY SHOULD BE TREATED AS BEING IN THE NATURE OF FOOTNOTES TO IT, WHICH ARE DESIGNED TO INDICATE THE WAY IN WHICH THOSE THREE QUESTIONS OF LAW AND THE SOLUTIONS TO THEM REACHED BY THIS HOUSE ARE COMPATIBLE WITH CURRENT JURISTIC ANALYSES OF CONTRACTUAL OBLIGATIONS AS THEY HAVE BEEN DEVELOPED IN THE COURSE OF THE LAST 25 YEARS.

LORD TEMPLEMAN AS 'THE INVITATION' AND ADDRESSED TO BOTH HARVELA AND SIR LEONARD. IT WAS NOT A MERE INVITATION TO NEGOTIATE FOR THE SALE OF THE SHARES IN HARVEY & CO LTD, OF WHICH THE VENDORS WERE THE REGISTERED OWNERS IN THE CAPACITY OF TRUSTEES. ITS LEGAL NATURE WAS THAT OF A UNILATERAL OR 'IF ' CONTRACT, OR RATHER OF TWO UNILATERAL CONTRACTS IN IDENTICAL TERMS TO ONE OF WHICH THE VENDORS AND HARVELA WERE THE PARTIES AS PROMISOR AND PROMISEE RESPECTIVELY, WHILE TO THE OTHER THE VENDORS WERE PROMISOR AND SIR LEONARD WAS PROMISEE. SUCH UNILATERAL CONTRACTS WERE MADE AT THE TIME WHEN THE INVITATION WAS RECEIVED BY THE PROMISEE TO WHOM IT WAS ADDRESSED BY THE VENDORS; UNDER NEITHER OF THEM DID THE PROMISEE, HARVELA AND SIR LEONARD RESPECTIVELY, ASSUME ANY LEGAL OBLIGATION TO ANYONE TO DO OR REFRAIN FROM DOING ANYTHING.

LORD TEMPLEMAN. UNTIL THE JUDGMENT OF THE COURT OF APPEAL IN THE INSTANT CASE (SEE [1985] 1 ALL ER 263, [1985] CH 103) THE RATIO DECIDENDI OF THAT JUDGMENT OF LINDLEY MR HAS NEVER BEEN DOUBTED OR QUESTIONED. I AGREE WITH LORD TEMPLEMAN THAT THE GROUNDS ON WHICH THE COURT OF APPEAL SOUGHT TO DISTINGUISH THE INSTANT CASE FROM THE SOUTH HETTON CASE ARE UNSOUND. YOUR LORDSHIPS SHOULD TAKE THIS OPPORTUNITY OF CONFIRMING THE JUDGMENT IN THE SOUTH HETTON CASE AND THEREBY PUT IT BEYOND FURTHER QUESTION.

LORDS, I TURN NEXT TO THE SECOND CONTRACT QUESTION, THE ANSWER TO WHICH APPEARS TO ME TO BE SELF-EVIDENT. SIR LEONARD CLAIMS THAT A FRESH SYNALLAGMATIC CONTRACT COMING INTO EXISTENCE ON 29 SEPTEMBER 1981 WAS MADE BY HIS OFFER OF 16 SEPTEMBER 1981 TO BUY THE SHARES AT A PRICE OF $101,000 MORE THAN WHATEVER FIXED PRICE WAS BID BY HARVELA AND AN ACCEPTANCE OF THAT OFFER BY THE VENDORS' TELEX OF 29 SEPTEMBER 1981 TO SIR LEONARD. TO CREATE SUCH A FRESH CONTRACT THERE MUST HAVE BEEN AN INTENTION ON THE PART OF EACH PARTY, MANIFESTED TO THE OTHER, TO ASSUME FRESH CONTRACTUAL OBLIGATIONS TO THE OTHER PARTY WHICH HE HAD NOT HITHERTO BEEN UNDER ANY LEGAL LIABILITY TO PERFORM. IT SEEMS TO ME TO BE CLEAR BEYOND ARGUMENT THAT THERE WAS NO SUCH INTENTION BY EITHER PARTY AND NONE WAS MANIFESTED BY EITHER PARTY TO THE OTHER. SIR LEONARD'S ONLY INTENTION IN MAKING HIS OFFER OF 16 SEPTEMBER 1981 WAS TO COMPLY WITH THE CONDITION SUBSEQUENT SPECIFIED IN THE UNILATERAL CONTRACT OF 15 SEPTEMBER AND BY SO DOING TO CONVERT IT INTO THE SYNALLAGMATIC CONTRACT, THE TERMS OF WHICH WERE CONTAINED IN THE INVITATION, WHICH HE ASSERTED GAVE RISE TO THE CONTRACTUAL OBLIGATION ON THE PART OF THE VENDORS TO TRANSFER THE SHARES TO HIM; WHILE THE VENDORS' ONLY INTENTION, AS THE WORDING OF THEIR TELEX OF 29 SEPTEMBER MAKES CLEAR, WAS TO PERFORM THE LEGAL OBLIGATION TO SIR LEONARD BY WHICH THEY WERE ALREADY BOUND UNDER THE SYNALLAGMATIC CONTRACT INTO WHICH THE UNILATERAL CONTRACT THEY HAD MADE WITH HIM HAD, AS THEY BELIEVED, BEEN CONVERTED. THAT EACH HAD MISCONSTRUED THAT UNILATERAL CONTRACT CANNOT TRANSFORM THEIR COMMON INTENTION TO PERFORM AN EXISTING CONTRACT INTO AN INTENTION TO MAKE A FRESH AND DIFFERENT ONE.

LORDSHIPS' ORDER FOR SPECIFIC PERFORMANCE IS COMPLIED WITH, ALL OF WHICH DELAY, AMOUNTING NOW TO NEARLY FOUR YEARS, IS THE CONSEQUENCE OF THE VENDORS' ANTICIPATORY BREACH OF THEIR CONTRACTUAL OBLIGATION AND THE ENSUING LITIGATION, HARVELA HAS NOT RECEIVED THE DIVIDENDS DISTRIBUTED ON THE SHARES, THE AMOUNT OF WHICH IS TRIVIAL; BUT THE REST OF THE PROFITS MADE BY HARVEY & CO LTD AND ITS SUBSIDIARIES HAVE BEEN RETAINED IN THOSE COMPANIES, THUS ENHANCING THE VALUE OF THE SHARES WHICH WILL BE TRANSFERRED TO HARVELA UNDER YOUR LORDSHIPS' ORDER, IN RETURN FOR THE PAYMENT OF $2,175,000. IN THE MEAN TIME, HOWEVER, HARVELA HAS CONTINUED TO HAVE THE USE OF THAT SUM. TO FAIL TO MAKE ALLOWANCE FOR THE BENEFIT THAT HARVELA RECEIVED BY HAVING THE USE OF THE MONEY WOULD BE TO OVER-COMPENSATE IT, TO PUT IT IN A BETTER POSITION THAN THAT IN WHICH IT WOULD HAVE BEEN IF THE CONTRACTUAL OBLIGATIONS OF HARVELA AND THE VENDORS HAD BEEN TIMEOUSLY PERFORMED BY BOTH PARTIES. UNLESS THERE HAS BEEN UNCONSCIONABLE CONDUCT BY A PARTY AGAINST WHOM THE REMEDY OF SPECIFIC PERFORMANCE IS GRANTED SUFFICIENT TO DISPLACE THE GENERAL RULE EXPRESSED IN THE MAXIM OF EQUITY WHICH I HAVE MENTIONED, THAT RULE OUGHT TO BE APPLIED BY YOUR LORDSHIPS. FOR THE REASONS GIVEN BY LORD TEMPLEMAN IN HIS SPEECH I AGREE THAT NO UNCONSCIONABLE CONDUCT BY THE VENDORS HAS BEEN SHOWN AND THAT THE APPROPRIATE MEASURE OF THE VALUE TO HARVELA OF THE USE OF THE MONEY DURING THE PERIOD OF DELAY IS INTEREST THEREON RECKONED AT THE SHORT-TERM INVESTMENT RATE.

LORD EDMUND-DAVIES.

LORDS, I HAVE HAD THE ADVANTAGE OF READING IN DRAFT THE SPEECHES PREPARED BY MY NOBLE AND LEARNED FRIENDS LORD DIPLOCK AND LORD TEMPLEMAN, AND I GRATEFULLY ADOPT THEM. I WOULD ACCORDINGLY ALLOW THIS APPEAL AND CONCUR IN MAKING THE DECLARATIONS AND ORDERS PROPOSED BY LORD TEMPLEMAN.

LORD BRIDGE OF HARWICH.

LORDS, ON THE MAIN ISSUE I AGREE THAT FOR ALL THE REASONS GIVEN IN THE SPEECHES OF MY NOBLE AND LEARNED FRIENDS LORD DIPLOCK AND LORD TEMPLEMAN, SIR LEONARD'S REFERENTIAL BID WAS NOT, ON THE TRUE CONSTRUCTION OF THE INVITATION, A VALID OFFER. WITHOUT INTENDING TO DEROGATE IN ANY WAY FROM THE COGENCY OF THE OTHER GROUNDS FOR REACHING THAT CONCLUSION, THERE SEEMS TO ME TO BE ONE THAT IS DECISIVE. THE INVITATION EMBODIED AN UNDERTAKING NOT TO DISCLOSE THE DETAILS OF ANY OFFER TO ANY PARTY BEFORE THE DEADLINE OF 3 PM ON WEDNESDAY, 16 SEPTEMBER 1981. SIR LEONARD'S REFERENTIAL BID COULD NOT BE QUANTIFIED WITHOUT READING INTO IT THE AMOUNT OF HARVELA'S FIXED BID. TO DO THIS BEFORE THE DEADLINE WOULD HAVE BEEN, IN MY OPINION, A BREACH OF THE UNDERTAKING. TO DO IT AFTER THE DEADLINE WOULD HAVE BEEN TOO LATE.

LORD TEMPLEMAN, WITH THE CONCLUSIONS WHICH HE EXPRESSES AND THE ORDERS HE PROPOSES.

LORD TEMPLEMAN.

LORDS, BY TELEX MESSAGES (THE INVITATION) DISPATCHED ON 15 SEPTEMBER 1981 THE RESPONDENT VENDORS, ROYAL TRUST CO OF CANADA (CI) LTD, INVITED THE APPELLANT, HARVELA INVESTMENTS LTD (HARVELA), AND SIR LEONARD OUTERBRIDGE (SIR LEONARD), TO MAKE OFFERS TO PURCHASE THE VENDORS SHARES IN A HARVEY & CO LTD (THE SHARES). THE INVITATION STIPULATED THAT OFFERS MUST BE MADE BY SEALED TENDER OR CONFIDENTIAL TELEX WHICH WOULD NOT BE DIVULGED BY THE VENDORS BEFORE THE INVITATION EXPIRED AT 3 PM ON 16 SEPTEMBER 1981 WHEN THE VENDORS WOULD ACCEPT 'THE HIGHEST OFFER'. COMPLETION OF THE PURCHASE WAS TO TAKE PLACE WITHIN 30 DAYS OF 16 SEPTEMBER 1981 IN CANADIAN DOLLARS.

LORDSHIPS' HOUSE.

LORDS, IN MY OPINION THE ARGUMENT BASED ON THE POSSIBLE MEANING OF THE WORD 'OFFER' CONFUSES DEFINITION WITH CONSTRUCTION AND THE PROCEDURE ADOPTED BY THE VENDORS IS NOT OPEN TO JUSTIFIABLE CRITICISM BECAUSE THE INVITATION WAS CLEAR AND UNAMBIGUOUS. THE COURT IS NOT CONCERNED TO DEFINE THE WORD 'OFFER' IN ISOLATION WITHOUT REGARD TO ITS CONTEXT AND BY REFERENCE TO THE WIDEST POSSIBLE MEANING WHICH CAN BE CULLED FROM THE WEIGHTIEST AVAILABLE DICTIONARY. THE MERE USE BY THE VENDORS OF THE WORD 'OFFER' WAS NOT SUFFICIENT TO INVOKE ALL THE FRUSTRATING DANGERS AND UNCERTAINTIES WHICH INEVITABLY FOLLOW FROM UNCONTROLLED REFERENTIAL BIDS. THE TASK OF THE COURT IS TO CONSTRUE THE INVITATION AND TO ASCERTAIN WHETHER THE PROVISIONS OF THE INVITATION, READ AS A WHOLE, CREATE A FIXED BIDDING SALE OR AN AUCTION SALE. I AM CONTENT TO REACH A CONCLUSION WHICH REEKS OF SIMPLICITY, WHICH DOES NOT REQUIRE A DRAFTSMAN TO INDULGE IN PROHIBITIONS, BUT WHICH OBLIGES A VENDOR TO SPECIFY AND CONTROL ANY FORM OF AUCTION WHICH HE SEEKS TO COMBINE WITH CONFIDENTIAL BIDDING. THE INVITATION REQUIRED SIR LEONARD TO NAME HIS PRICE AND REQUIRED HARVELA TO NAME ITS PRICE AND BOUND THE VENDORS TO ACCEPT THE HIGHER PRICE. THE INVITATION WAS NOT DIFFICULT TO UNDERSTAND AND THE RESULT WAS BOUND TO BE CERTAIN AND TO ACCORD WITH THE PRESUMED INTENTIONS OF THE VENDORS DISCERNIBLE FROM THE EXPRESS PROVISIONS OF THE INVITATION. HARVELA NAMED THE PRICE OF $2,175,000; SIR LEONARD FAILED TO NAME ANY PRICE EXCEPT $2,100,000, WHICH WAS LESS THAN THE PRICE NAMED BY HARVELA. THE VENDORS WERE BOUND TO ACCEPT HARVELA'S OFFER.

LORD CORRESPONDED WITH A TENANT IN THE MISTAKEN BELIEF THAT THE TENANT HAD DULY EXERCISED AN OPTION BINDING ON THE LANDLORD TO RENEW THE LEASE. THAT CORRESPONDENCE DID NOT CREATE A CONTRACT OR ENTITLE THE TENANT TO A RENEWAL AFTER THE LANDLORD DISCOVERED THAT THE OPTION WAS NOT BINDING. BUCKLEY J SAID ([1960] 2 ALL ER 314 AT 322, [1960] 1 WLR 549 AT 558):

LORDSHIPS, I HAVE ANNEXED TO THIS SPEECH A DRAFT OF THE APPROPRIATE ORDER.