Case No: A3/2001/1993
Neutral Citation Number:  [2002] EWCA Civ 317
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (The Vice-Chancellor)
Royal Courts of Justice
Strand, 
London, WC2A 2LL

Friday 15 March 2002
Before :

LORD JUSTICE ALDOUS
LORD JUSTICE ROBERT WALKER
and 
LADY JUSTICE HALE
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Between :

	EXPRESS NEWSPAPERS	Appellant	
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	TELEGRAPH GROUP LTD	Respondent	

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040,  Fax No:  020 7831 8838
Official Shorthand Writers to the Court)
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Mr John Brisby QC and Mr Richard Hill (instructed by Messrs Rosenblatt) for the appellant
Mr Charles Flint QC and Mr Matthew Collings (instructed by Simmons & Simmons) for the respondent

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Judgment
As Approved by the Court

Crown Copyright ©

Lord Justice  Robert Walker: 
Introduction
1.	This appeal is concerned with a joint venture between two very well-known publishers of national newspapers, Express Newspapers (“EN”) and Telegraph Group Ltd (“DT”).  The joint venture has been carried on through a company called West Ferry Printers Ltd (“West Ferry”), whose ordinary share capital is owned by EN and DT in equal shares.  West Ferry operates a printing works at West Ferry Road, London E14.  It is one of the largest newspaper printing works in Europe and it produces the southern editions of newspapers for EN (The Express, The Sunday Express and The Star), for DT (The Daily Telegraph and The Sunday Telegraph) and for some third parties (including The Financial Times and The Guardian, whose publishers have since 1995 each held 3m £1 redeemable preference shares in West Ferry).  
2.	The joint venture was established in 1987 and was initially regulated by a shareholders’ agreement (“the shareholders’ agreement”) and a printing agreement both made on 31 July 1987 between DT (under its then name of The Daily Telegraph plc), EN (then Express Newspapers plc) and West Ferry.  The terms of the shareholders’ agreement were from time to time amended and there was a consolidating agreement (“the restated agreement”) dated 29 June 1990 and a further agreement (“the amending agreement”) dated 4 August 1992.
3.	The joint venture appears to have operated successfully and amicably until the end of 2000, when there was a change in the control of the EN group.  On 22 November 2000 the group passed out of the control of United News and Media Group Ltd and into the control of the Northern and Shell Group, whose chairman is Mr Richard Desmond.  The change of control set in train a sequence of events culminating in two sets of proceedings which raised issues of law and fact: a main action for breach of contract brought by EN against DT, and a petition under section 459 of the Companies Act 1985 presented by EN seeking relief in relation to the affairs of West Ferry.
4.	These two sets of proceedings came before the Vice-Chancellor who on 31 July 2001 dismissed EN’s action and struck out its petition.  It is from that order that EN appeals with the permission of the Vice-Chancellor.  In granting permission to appeal he recognised that there was an issue of construction (of the shareholders’ agreement as reproduced in the restated agreement and as affected by the amending agreement) which was of some difficulty and was of central importance to both sets of proceedings.  It will be best to explain that issue of construction before addressing the factual issues and the Vice-Chancellor’s findings on them.
The provisions to be construed
5.	The provisions which are of central importance to the issue of construction are Article 10 of West Ferry’s articles of association (as renumbered by amendments made in 1996) and clause 15 of the shareholders’ agreement (as restated and amended by later agreements).  References in clause 15 to the original Article 9 have been altered to Article 10.  In addition clauses 5 and 6 of the amending agreement (relating to the identification and valuation of the so-called sale assets) are also material.  These provisions are lengthy and in places obscure.  It is necessary to set out much of them verbatim.
6.	At all material times DT has held all the ‘A’ ordinary shares and EN has held all the ‘B’ ordinary shares of West Ferry, each holding now consisting of 5000 shares of 1p each.  Article 10 provides as follows (with the omission of references to ‘C’ and ‘D’ ordinary shares, which were never issued, and of paragraphs (g) to (m) which are not relevant):
“10.	The right to transfer Ordinary Shares in the Company shall, prior to Flotation, be subject to the following restrictions:-
(a)	A member who intends to transfer Ordinary Shares in the Company (hereinafter called the “Vendor”) shall give notice in writing to the directors of his intention (hereinafter called the “Transfer Notice”) specifying the shares concerned (hereinafter together called the “Sale Shares”), and shall offer to sell the Sale Shares at their par value.  The Transfer Notice shall not be revocable.  A transfer by a member shall be of all of his Ordinary Shares and not some only.
(b)	The Transfer Notice shall constitute the directors the agents of the Vendor for sale of the Sale Shares to the other holders of Ordinary Shares in the Company (hereinafter referred to as “holders”) at their par value.
(c)	Subject to the provisions of the last sentence of this paragraph (c), within seven days after the receipt of the Transfer Notice the directors shall offer the Sale Shares to the other holders of shares of the same class as the Sale Shares in proportion as nearly as the circumstances will admit to the numbers of shares of that class in the Company held by them respectively.  Each such offer shall be made by notice in writing specifying the number and their par value and shall limit a time (not being less than 28 days) during which the offer if not accepted by notice in writing to the directors will be deemed to have been declined.  At the expiration of that time any Sale Shares not so accepted shall be re-offered in like manner and upon the same terms to those of the other holders of shares of that class who accepted all the Sale Shares previously offered to them and such re-offering shall be repeated until such time as all the Sale Shares have been accepted or unto all the other holders of shares of that class shall have declined it to accept any more of them.  Within seven days after the expiration of the final re-offering the directors shall offer any Sale Shares which have not been accepted by the holders of the same class of shares as the Sale Shares ... of “A” Ordinary Shares) to the holders of “B” Ordinary Shares and (in the case of “B” Ordinary Shares) to the holders of “A” Ordinary Shares, in each such case, in like manner and so that the foregoing provisions of this paragraph (c) shall mutatis mutandis apply thereto.  If the Sale Shares constitute all the shares of a class the directors shall within seven days of receipt of the Transfer Notice make the offer referred to in the preceding sentence.
(d)	If by the foregoing procedure the directors shall receive acceptances in respect of any of the Sale Shares they shall give notice thereof to the Vendor and he shall thereupon become bound upon payment of the appropriate price to transfer the accepted Sale Shares to the person or persons who have accepted the same and if in any case the Vendor having become so bound makes default in so doing the Company shall receive the price and the directors shall appoint some person to execute instruments of transfer of those of the Sale Shares concerned in favour of the relevant transferee and shall thereupon subject to such instruments being duly stamped cause the name of the relevant transferee to be entered in the Register of Members as the holder thereof and shall hold the price in trust for the Vendor.  The receipt of the Company shall be a good discharge to any such transferee.
(e)	If by the foregoing procedure the directors shall not receive acceptances in respect of all the Sale Shares they shall give notice thereof to the Vendor and the Vendor shall be at liberty within 90 days thereafter to transfer all or any of the unaccepted Sale Shares to any person or persons at any price not less than their par value
(f)	The provisions of this Article may be waived in any particular case or circumstances if all the holders of “A” Ordinary Shares and of “B” Ordinary Shares give their consent or shall have agreed in writing ...”
7.	Clause 15 of the shareholders’ agreement, in its final amended form provides as follows (with some passages of no direct relevance being summarised):
“15.1	Each of the Shareholders shall comply with the provisions of Article [10] in relation to any transfer or deemed transfer of its shares.  [There follow restrictions on transfer which are not material.]
15.2	Notwithstanding any other provision of this Agreement or the Articles EN shall not be entitled to transfer any of its shares to DT or to any third party until [West Ferry] achieves full production.
15.3	A Shareholder shall be deemed to have served a transfer notice for the purpose of Article [10] simultaneously with the occurrence of any of the following events in relation to that Shareholder:- 
15.3.1  [winding-up, receivership or similar event]
15.3.2  [material breach which is irremediable or not remedied within 30 days]
15.3.3  it becomes ultimately controlled by any person (which for the purpose of this clause 15.3.3 shall be deemed to include any person who is a connected person of such person within the meaning of Section 533 of the Income and Corporation Taxes Act, 1970) or group of persons who, at the date of this Agreement, does not possess such control, [followed by some definitions and a special provision about Mr Conrad Black]
15.3.4 [disposal of interest in newspaper titles]
15.3.5 [significant imbalance as between the shareholders in printing charges]
15.4	In the event of a Shareholder (hereinafter in this sub-clause called “the defaulting Shareholder”) being deemed to have served a transfer notice by reason of clause 15.3 the other Shareholder may at any time within 42 days thereof serve notice in writing (hereinafter called “the Default Notice”) on the defaulting Shareholder specifying and requiring:-
15.4.1  that the voting powers of the directors appointed by the defaulting Shareholder are forthwith suspended and the other Shareholder is thereby entitled to exercise the defaulting Shareholder’s power of appointing and removing directors as provided in the Articles; and/or
15.4.2  either:-
15.4.2.1  that the defaulting Shareholder is thereby deemed to have served a transfer notice for the purpose of Article [10] to which all the subsequent provisions of that Article shall be applicable, save so far as is hereinafter otherwise provided and save that the defaulting Shareholder shall not be entitled to withdraw such transfer notice, or 
15.4.2.2  that [West Ferry] forthwith cease to trade and within 3 calendar months thereafter be placed in voluntary liquidation and be liquidated by a Liquidator specified in such notice.
15.5	If the other Shareholder has not become bound to purchase the Shares in accordance with Article [10] by reason of a transfer notice deemed to have been served in accordance with clause 15.3 (and for the purposes of Article [10] such transfer notice shall be deemed to be capable of being accepted within the 42 day period provided in clause 15.4 and Article [10](e) shall not apply) and the other Shareholder has not given notice to liquidate in accordance with the provisions of clause 15.4.2.2, then the Default Notice served by that Shareholder under clause 15.4 shall cease to have effect and the voting powers of the defaulting Shareholder and its entitlement to exercise the power of appointing and removing Directors shall revive and the transfer notice in respect of its Shares shall be deemed to have lapsed and the defaulting Shareholder shall not be at liberty to transfer its Shares to a third party.
15.6	In the event of either Shareholder giving notice to terminate the printing agreement between [West Ferry] and itself pursuant to the terms thereof, that Shareholder shall be deemed to have served a transfer notice for the purpose of Article [10] to which all the subsequent provisions of that Article shall be applicable, save that the transfer notice shall be capable of being accepted by the offeree at any time up to six months prior to the date on which termination shall take effect, and the provisions of clauses 15.7, 15.8, 15.9 and 15.10 shall apply.  Completion pursuant to clause 15.9 shall take place on the date on which termination of the printing agreement shall take effect.  If the offeree (within the meaning of clause 15.7 or any third party to whom the Shares may be offered pursuant to Article [10] does not accept the offer comprised in the aforesaid deemed transfer notice then [West Ferry] shall forthwith cease to trade and the parties shall procure that [West Ferry] shall be placed in voluntary liquidation.
15.7	[This subclause was replaced by clauses 5 and 6 of the amending agreement set out below.]
15.8	No Shareholder shall be entitled to purchase Shares pursuant to this clause 15 without also agreeing to purchase the Sale Assets (or such of the Sale Assets as the Shareholders otherwise agree shall be sold and purchased).
15.9	Any transfer by either Shareholder of its Shares under this Agreement shall be effected by the transferor selling such Shares as beneficial owner free and clear of all claims, charges, liens, encumbrances and equities of any description and together with all rights attaching thereto.  Any such transfer shall be completed at the registered office of [West Ferry] within seven days from the date on which the obligation to make the transfer first arises (or, if later, the date on which the value of the Sale Assets is agreed under clause [6 of the amending agreement] when the transferring Shareholder shall: [complete in accordance with a specified procedure] against payment to the transferring Shareholder of the purchase price payable in respect of the Shares and the Sale Assets [etc]”

8.	Clauses 5 and 6 of the amending agreement (replacing clauses 15.7 and 17.1 of the restated agreement) provided as follows (with some abbreviation):
“5.1	In the event of a Shareholder serving or being deemed to have served a transfer notice pursuant to the terms of this Agreement or the Articles it shall be deemed that Shareholder (“the offeror”) shall also have offered for sale to the other Shareholder (“the offeree”) [various assets are specified in relation to DT and EN respectively, including with EN its leasing company Blackfriars] (the assets aforesaid to be offered for sale pursuant to this Clause 5.1 being hereinafter referred to as the “Sale Assets”).
5.2	[provisions as to the Lombard lease to DT]
5.3	The Sale Assets shall be deemed to be offered at a price assessed in accordance with the terms of Clause 6 and shall be sold by the offeror and, if applicable, Blackfriars as beneficial owner free and clear of all mortgages, claims, charges, liens, encumbrances and equities of any description and all liabilities arising therefrom and the offeror is hereby deemed to undertake to indemnify and keep indemnified the offeree in respect of any such liability attaching to or arising in connection with the Sale Assets other than in respect of the indemnity by the transferee referred to in Clause 15.9.4 of the Restated Shareholders’ Agreement.
5.4	The provisions of sub-clauses 5.1, 5.2 and 5.3 shall replace in their entirety the provisions of Clause 15.7 of the Restated Shareholders’ Agreement.
6.1	For the purposes of Clause 5.3 the value of Sale Assets (as defined in Clause 5.1) shall be assessed in the following manner:-
6.1.1	All assets owned by [West Ferry] and the DT Assets, the New DT Assets, the EN Assets, the New EN Assets and the Lombard Assets [with a special provision about the latter] together with the extension to the West Ferry Road Buildings [as defined] shall be valued together and such values shall be the original cost of such assets, whenever purchased, and in the case of the extension to the West Ferry Road Building shall be such part of the EN amended capital contribution as is referable to the extension to the West Ferry Road Buildings [as defined] after applying straight line depreciation thereto from the date that [West Ferry] became jointly operational (or from the date of purchase if that date is later) in accordance with the following asset lives: -
Presses			20 years
Buildings			50 years
Electrical equipment		5 years
Other equipment		10 years
6.1.2	The price of the Sale Assets shall be:- [basically one-half of the total value subject to a possible adjustment]
6.2	The provisions of Clause 6.1 shall replace in its entirety the provisions of Clause 17.1 of the Restated Shareholders’ Agreement and any reference in the Restated Shareholders’ Agreement to Clause 17 shall be read and construed as amended by the provisions of Clause 6.1.”
9.	The Vice-Chancellor did not closely analyse clauses 5 and 6 of the amending agreement, nor have counsel done so in their submissions.  Much of the detail is irrelevant to the issues of construction.  But two general points should be noted.  First, although most of the “Sale Assets” as defined were used by West Ferry but owned by DT or EN (or by a leasing company) the apparent effect of the opening words of clause 6.1.1 was to include the assets of West Ferry itself in what was to be valued (without any express provision for the deduction of creditors or other liabilities).  Secondly the process of valuation was intended to be relatively mechanistic, in that all assets were to be taken at book value, depreciated as provided for at the end of clause 6.1.1.  However the provision for arbitration in clause 17.3 of the restated agreement was not affected by the amending agreement, and it has in the event been invoked.  There has been an arbitration before Sir Anthony Evans in which he made a first award on 15 February 2002.  
10.	The first award by Sir Anthony Evans contains a characteristically lucid exposition of the problems of construction (even more difficult, perhaps, that those facing this court) which arise on clauses 5 and 6 of the amending agreement.  It has (in paragraph 36) some observations which have some resonance in the arguments which we have heard:
“Both parties appealed, at different points in the hearing, to what may be called broad commercial considerations, and at other times to the need for a strict legal interpretation and to the requirements of, for example, published auditing standards and the definitions they contain.  I asked at one point whether either party could claim to be entirely consistent in this, or whether each party supported a broad approach on some issues and a stricter approach on others.  Despite what was said later by both counsel, I remain unconvinced that either party can claim that it is totally committed to one approach rather than the other.  But this serves only as a reminder that the correct interpretation takes account both of the context and of the wording of the whole of the clause.”
The arbitrator’s conclusions can be stated (in an oversimplified form) as being that “assets” had a broad scope (not limited to assets in the legal ownership of West Ferry) and that only a limited range of liabilities was deductible.  The conclusions are therefore favourable to EN.  
The issues of construction
11.	Although the original shareholders’ agreement was for the most part competently drafted, clause 15 was not.  It may be helpful to identify the main inconsistencies and ambiguities which have to be resolved.  The identification of particular flaws is not at odds with the court’s task of making commercial sense of the whole clause in the context of the agreement in its entirety.
12.	There are at least five distinct flaws (although all or most may be derived from a basic indecision on the part of the draftsman as to whether he was incorporating Article 10 with modifications, or whether he would do better to forget about Article 10 and set out the whole ‘deemed transfer notice’ mechanism in clause 15; he seems to have fallen between these two stools).  
i)	The first puzzle is the duplication of the provision as to deemed service of a transfer notice, but with different timing.  The opening words of clause 15.3 state that the deemed service takes place “for the purpose of Article [10] simultaneously with the occurrence of” the event of default under clause 15.3.  But clause 15.4 provides an option for deemed service (by the defaulter) of a transfer notice on service (by the other party) of a default notice (that being the natural meaning of “thereby” in clause 15.4.2.1).  So if the time limits in Article 10 are relevant, there is doubt as to when they are first engaged.
ii)	The consequence of a default notice under clause 15.4.2.1 is that “all the subsequent provision of [Article 10] shall be applicable, save in so far as is hereinafter otherwise provided”.  (This is in line with clause 28, under which the shareholders’ agreement is to prevail over the Articles in case of any conflict.)  That is the background to the second and biggest puzzle, whether the parenthesis in clause 15.5 – “(and for the purposes of Article [10] such transfer notice shall be deemed to be capable of being accepted within the 42 day period provided in clause 15.4 and Article [10] (e) shall not apply)” – is intended to replace, or merely to supplement, the period (of at least 28 days) which Article 10 (c) requires the directors to lay down.
iii)	There is another respect in which the draftsman of the shareholders’ agreement, having set out to incorporate parts of Article 10, seems to have forgotten how the mechanism in that article works.  A transfer notice is given by an intending transferor to the board of directors of West Ferry.  It is then for the board of directors to send out the appropriate written offer and limit a time for its acceptance.  But clause 15.5 refers to a transfer notice being “capable of being accepted” (as does clause 15.6 in relation to the termination of the printing agreement).
iv)	There is doubt as to whether the variation in language in clause 15.8 (which refers to a purchase of shares but an agreement to purchase the sale assets) was intended to have any special significance (and if so, what its significance is).
v)	So far as Article 10(c) applies, it is directed to the offer for sale at par of part of West Ferry’s small ordinary share capital.  There is therefore no possible complication about valuation.  But the shareholders’ agreement (by clause 15.8 of the restated agreement and clause 5.1 of the amending agreement) links this simple offer of ordinary shares to assets sales which (although they are to be made, in principle, at book values) are far less simple and straightforward, as the arbitration has demonstrated.  It is debatable whether, when West Ferry’s directors had to fix a time limit for the purposes of a sale offer under Article 10(c), they could properly adopt a formula which depended on the valuation of the sale assets, a more complex transaction which is not within the contemplation of the Articles.  We were told that this point was raised in argument by the Vice-Chancellor and he considered it in the part of his judgment dealing with the strike-out application (but not as bearing on the issues of construction).  
13.	The Vice-Chancellor considered counsel’s submissions on the correct construction of clause 15 at paragraphs 24 to 32 of his judgment.  His conclusions are set out in paragraph 30:
“Thus I accept the submission of counsel for DT that unless and until DT serves a default notice under clause 15.4 specifying the purchase option under clause 15.4.2.1 the provisions of Article 10(b)-(d) have not come into operation.  If, as in this case, such a default notice is served within the time prescribed in clause 15.4 then those paragraphs of the Article must then be operated.  The seven days allowed to the directors of West Ferry have to be computed from the service of the default notice because they cannot be computed from the original event if the innocent shareholder is to be allowed the full 42 days permitted by clause 15.4 for considering whether and if so how to exercise his option.”
Before considering the Vice-Chancellor’s reasons for these conclusions, and the submissions made about them in this court, it is appropriate to go back to the facts and to consider the part which the issues of construction have played in the litigation as a whole.
The facts
14.	The Vice-Chancellor had to consider a sequence of events which began with the change of control of EN on 22 November 2000 and continued until the commencement of the two sets of proceedings on 19 April 2001.  Some of the exchanges between the parties are evidenced by correspondence but there were also some telephone calls and meetings as to which there was a conflict of evidence.  Only limited disclosure of documents has taken place.
15.	On 28 November Mr Jeremy Deedes, the managing director of DT, wrote to Mr Paul Rudd of EN (with a copy to Mr John Pannett, the company secretary of West Ferry) referring to “a transfer notice being deemed to have been given” by EN and proposing that Mr Rudd and he (as directors of West Ferry) should join with the other directors of West Ferry in giving notice to DT.  The matter was discussed at a DT board meeting on 29 November.  The Vice-Chancellor rejected the unpleaded assertion that the directors of West Ferry had in fact sent out an offer document on or before 29 November.
16.	On 11 December Mr Daniel Colson (the Deputy Chairman of DT) spoke to Mr Martin Ellice (then newly appointed as Joint Group Managing Director of EN) at a board meeting and finance meeting of West Ferry.  It was only the second time that they had met.  Mr Colson suggested to Mr Ellice that the 42-day time limit should be extended.  Mr Ellice said he would consult Mr Desmond.  Later there was a telephone call in which (according to Mr Ellice’s evidence) he asked Mr Colson
“Do you intend to buy us out of the agreement?  If so why extend?” 
	to which Mr Colson replied, 
“Irrespective of an extension to the 42 day period DT want to buy.  The extension would simply help us, as we do not want to upset our Christmas holidays.”
But the Vice-Chancellor had no hesitation in rejecting that evidence and accepted Mr Colson’s denial that he said that DT wanted to buy.
17.	On 20 December Mr Colson sent a fax to Mr Ellice referring to their meeting and repeating his suggestion of an extension of the 42-day period.  Mr Ellice did not contact Mr Colson.  On 27 December Mr Colson wrote enclosing a default notice under clause 15.4.  The operative part of the notice followed clause 15.4.1 and the first option in clause 15.4.2, as follows,
“This notice is a “Default Notice” within the meaning of clause 15.4 of the Agreement and [DT] hereby specifies and requires:
1	that the voting powers of the directors of West Ferry appointed by [EN] are forthwith suspended and that [DT] is hereby entitled to exercise the power of [EN] to appoint “B” Directors to, and remove “B” Directors from, the Board of West Ferry; and 
2	that [EN] is hereby deemed to have served a transfer notice for the purpose of Article 10 of West Ferry’s Articles of Association on the directors of West Ferry in respect of its entire holding of “B” Ordinary Shares in West Ferry.
Please also note that, as a result of [EN] being deemed to have served a transfer notice as specified above, [EN] is also deemed to have offered for sale to [DT] the Sale Assets (as defined in the Agreement).”
18.	On 29 December Linklaters & Alliance, on behalf of EN, acknowledged the notice and invited discussion of valuation procedure.  On the same day Mr Colson (on behalf of DT) gave notice to West Ferry removing its newly-appointed ‘B’ directors with immediate effect and appointing others in their place.  There has been no disclosure of minutes of any West Ferry board meeting which took place between 29 December 2000 and 3 January 2001.
19.	On 3 January 2001 Mr Deedes (on behalf of the board of West Ferry) wrote to DT (with a copy to EN) offering to DT at par the 5000 ‘B’ shares held by EN and stating as follows:
“The Offer shall remain open for acceptance by [DT] for a period commencing on the date hereof and ending on the date falling ten business days after the occurrence of the earlier of:
•	the date on which [DT] and [EN] notify [West Ferry] that they have reached agreement on the value of the Sale Assets; and 
•	the date on which the value of the Sale Assets is finally determined by arbitration.  The date on which the value is finally determined for these purposes shall be the latest of:
(I)	the date of receipt by [DT] of the arbitrator’s award;
(ii)	the date on which a final leave to appeal application is refused; and 
(iii)	the date on which a final court order appealing the arbitral award is made and from which no further right of appeal lies.
The Offer shall only be capable of acceptance by [DT] by notice in writing from [DT] to the Directors of [West Ferry].”
EN’s witnesses denied having received a copy of this letter.  As to that the Vice-Chancellor said, 
“It is not clear that receipt by EN is relevant to any issue now before me.  But in case it is I should make clear that I am satisfied that it was duly sent to and received by EN.”
The Vice-Chancellor then gave his reasons for that conclusion.
20.	On 10 January there was a meeting at Mr Desmond’s office between Mr Desmond and Mr Ellice on behalf of EN and Mr Colson and Mr Deedes on behalf of DT.  There was a conflict of evidence as to what was said at the meeting.  Later that day Rosenblatt Solicitors (“Rosenblatt”) on behalf of EN wrote to Mr Colson.  The letter referred to the meeting and went on,
“Following that meeting we understand that you no longer wish to acquire the 50% of [West Ferry] owned by our clients and that accordingly you intend to revoke the Default Notice served by you on the 27 December 2000.
The revocation of the Default Notice renders obsolete your notice of the 29 December 2000 purporting to remove Messrs Desmond, Sanderson, Myerson and Ellice as directors of West Ferry.
Accordingly these gentlemen, all officers of [EN] should be reinstated forthwith.”
The letter then referred to Mr Desmond’s plans for West Ferry.
21.	Mr Desmond (who made a witness statement but was not cross-examined) and Mr Ellice described this letter as “shadow-boxing” with the purpose of “teasing out” DT’s position.  The Vice-Chancellor roundly rejected that explanation.  On this point also he preferred the evidence of Mr Colson to that of Mr Desmond and Mr Ellice.
22.	On 11 January Mr Colson wrote to Rosenblatt (with a copy to Mr Desmond and Mr Ellice) refuting their letter and confirming that DT had no intention of revoking or cancelling its notices.  Rosenblatt wrote back expressing their client’s surprise and disappointment and enquiring when their client could expect to receive the consideration monies.  That request was repeated on 16 January.  
23.	After some delay Mr Colson wrote to Mr Desmond on 29 January making an offer (subject to contract) of £18.8m for the Sale Assets, and asking for a reply by 7 February 2001.  The figure of £18.8m was based on a valuation prepared by KPMG and enclosed with the letter (its preparation may have been the reason for the delay).  The valuation took West Ferry’s net assets as shown in its balance sheet as at 31 December 2000, with three adjustments:  a deduction for the preference share capital, an upwards adjustment for the less stringent depreciation provisions in clause 6.1.1 (as compared with those actually used in West Ferry’s audited financial statements), and a deduction for an increase in the deferred tax.
24.	Rosenblatt replied on 30 January, asserting that the valuation provisions contained no provision for the deduction of liabilities (which appeared in the balance sheet at rather more than £106m) and that the correct consideration for the sale assets should be either £66.5m or (if current assets were included) £83.5m.  This exchange of views makes the valuation process appear a good deal less mechanistic than it might at first sight appear, and the ensuing reference to arbitration less surprising.  The arbitrator’s first award has (as already mentioned) reached conclusions in principle which largely uphold EN’s contentions, although the outcome has yet to be quantified in financial terms.  It is unnecessary to set out more of the correspondence between the parties and their solicitors (Simmons & Simmons entered the correspondence on behalf of DT on 5 March 2001).
EN’s claims and the Vice-Chancellor’s decision
25.	In its particulars of claim in the main action EN pleaded its deemed service of a transfer notice on or about 22 November 2000 and DT’s service of a default notice on 27 December 2000 “purportedly in accordance with clause 15.4”.  EN’s pleaded case was that DT’s time for acceptance of the offer of its ‘B’ ordinary shares in West Ferry and its Sale Assets began to run on 22 November 2000 and expired 42 days later (that is on 3 January 2001).
26.	EN contended that DT had accepted this offer by the issue of the default notice and the letter of 29 December 2000 removing the EN-appointed directors of West Ferry.  It also relied, by way of estoppel, on Mr Colson’s letter of 11 January 2001, on DT’s participation in the arbitration process (“consistent only with DT’s offer having been accepted within the 42-day period”) and DT’s continuing refusal to reinstate the EN-appointed directors of West Ferry.  EN claimed specific performance and damages.
27.	In its section 459 petition EN relied on largely similar allegations to assert that the directors of West Ferry (all, at the material time, appointed by DT) had acted in breach of the agreements and of West Ferry’s Articles; had failed to act in good faith as regards West Ferry and the interests of EN as a joint venture partner; and had misused their powers to the detriment of West Ferry and EN.  The primary relief sought by the petition was that DT should be ordered to buy EN’s ‘B’ shares in West Ferry at a fair value and the Sale Assets at a price to be determined in accordance with clause 6 of the amending agreement. 
28.	DT’s defence in the main action denied that any contract had been concluded or that any estoppel arose.  The positive case pleaded in its defence (so far as there was one) was that the effective deemed service of a transfer notice occurred on the service of the default notice; that the time for acceptance of the offer of ‘B’ shares and Sale Assets was fixed (as a period of not less than 28 days) by the directors of West Ferry; and that the recipient of the offer was not obliged to accept it.  But Mr Deedes’ letter of 3 January 2001 was not mentioned in the defence.
29.	The Vice-Chancellor considered the parties’ pleaded cases, made findings of fact (the most important of which have already been mentioned) and reached conclusions in successive sections of his judgment headed The Offer, Acceptance, Estoppel and the Petition. 
30.	The section of the judgment headed The Offer included the important paragraphs, already mentioned, in which the Vice-Chancellor decided how clause 15.3 and 15.4 were meant to operate.  In line with his decision on construction he concluded that the default notice was properly served by DT on 27 December 2000, that the directors of West Ferry were then (for the first time) required to operate the procedure in Article 10(b) to (d), and did so, and that the time for acceptance of the offer did not expire on 3 January 2001 (42 days after the change of control on 22 November 2000).
31.	In the next section of his judgment (Acceptance) the Vice-Chancellor concluded (as followed more or less automatically from his decision on construction) that there had been no acceptance of the offer by DT.  But in case the matter went further, and because they were relevant to the estoppel issue and to the section 459 petition, the Vice-Chancellor made further findings of fact.  He set out his conclusion on this part of the case as follows (paragraph 48):
“It follows from my construction of clause 15 and Article 10 and my findings as to the content of the telephone conversation between Mr Ellice and Mr Colson on 14th  December 2000 that EN has failed to prove any acceptance of any offer to buy the shares of EN or the associated assets.  Mr Colson did not say that DT would buy them in any event, neither the notices nor the correspondence occurring before 3rd January 2001 purported to accept anything and the participation in the arbitral process and the refusal to reinstate EN’s nominee directors are consistent only with the rights of DT as I have found them to be.  There is no ground for the implication into the words or deeds of DT any acceptance of an offer to buy EN’s shares or associated assets.”
32.	The Vice-Chancellor then dealt shortly with the issue of estoppel.  He said (paragraph 49):
“The estoppel claim depends on the same matters alleged to constitute acceptance.  It is suggested that “DT is estopped from contending that it has not accepted EN’s deemed offer for the purposes of clause 15 of the Restated Agreement”.  This claim must fail too.  In the light of my construction of clause 15 and Article 10 there was no such deemed offer.  Similarly for the same reasons that the correspondence and conduct of DT cannot be regarded as an acceptance it cannot give rise to any sufficiently certain representation by DT.  EN relied on a passage in Spry on Equitable Remedies 5th Edition p.140 but on the facts as I have found them the principles there enunciated cannot apply.”
33.	Under the next heading, The Petition, the Vice-Chancellor considered whether he should strike out the section 459 petition (under CPR Rule 3.4(2), Rule 24.2 or the inherent jurisdiction) on the ground that it had no real prospect of success.  He rejected the submission that he should strike it out without further ado, because of his conclusions on the other issues.  He recognised that the petition raised a further issue which called for separate consideration.
34.	That issue was the propriety of the decision of West Ferry’s board of directors, communicated by the letter of 3 January 2001, keeping the offer of the ‘B’ shares to DT open until ten days after the consideration for the sale assets had been finally fixed by agreement, arbitration or court order.  The Vice-Chancellor considered three arguments attacking the directors’ decision,
“ ... because (a) it did not limit a time, alternatively (b) the time limited was excessive, alternatively (c) the directors did not consult with or consider the interests of EN.”
35.	The Vice-Chancellor concluded that none of these arguments had a reasonable prospect of success and that therefore the petition as a whole had no reasonable prospect of success and should be struck out.  He found it unnecessary to decide a further point as to whether premature (informal) advertisement of the petition would have constituted an abuse of process (and an alternative ground for striking out the petition) since he found that DT had not made out the factual basis for that alternative ground.
The issue of construction
36.	The main difficulties of construction have been identified in paragraph 12 above, but in this court the argument has ranged quite widely.  On the whole Mr John Brisby QC (appearing with Mr Richard Hill for EN) has concentrated more on close verbal analysis and Mr Charles Flint QC (appearing with Mr Matthew Collings for DT) has appealed to broader commercial realities, but neither side has had a monopoly of one type of argument.  Mr Brisby in his reply contended that his construction should prevail on grounds of clarity, consistency and workability (virtues which Mr Flint had claimed for his construction) and Mr Flint contended that Mr Brisby’s construction faced more linguistic difficulties than his own.  The fact is that clause 15 lacks clarity and consistency, and both sides have faced real linguistic difficulties.
37.	It is best to start, as the Vice-Chancellor did, by considering in general terms the commercial objectives which clause 15 was intended to achieve.  Mr Flint put this in the forefront of his submissions.  The joint venture represented a huge investment, on the basis of equality, in the largest newspaper-printing plant in Europe.  Equality necessarily imported the possibility of deadlock, so that the venture required a high degree of trust and co-operation.  Clause 15 was intended to protect each side (and it was emphasised that the clause could have applied impartially to one side or the other) against the possibility of the venture (and the very large investment which it represented) being threatened by the other party’s default – that is, by the other party getting into a situation falling within one of the five cases specified in clause 15.3.  Mr Flint accepts that that would not necessarily be the consequence of reprehensible conduct; nevertheless, he said, each of the five cases is regarded as a case of default, and the Vice-Chancellor was justified in referring to “the defaulting shareholder” and “the innocent shareholder” (the former phrase, but not the latter, being used in clause 15 itself).
38.	The Vice-Chancellor saw a good deal of force in this approach.  He observed (in paragraph 28), 
“It would be surprising if the default should of itself give rise to a process by which the innocent shareholder had to commit himself to a purchase within 42 days of the event in question and before the price for the associated assets had been ascertained.”
The same general point influenced the Vice-Chancellor’s approach to the striking-out application (see paragraph 57 of his judgment).  
39.	I too see the force of this, but I do not find it as powerful an argument as the Vice-Chancellor did.  Most of the events of default listed in clause 15.3 are likely to have been perceived as a gathering cloud (especially by a large commercial organisation whose business is news) rather than coming as a bolt from a clear blue sky.  If an event of default is a serious threat to the joint venture, urgent action is likely to be necessary in the interests of both sides.  Moreover the valuation of the sale assets should in theory be a very quick, mechanistic exercise involving no exercise of judgment.
40.	This last point may provoke scepticism (if not derision) in view of the long and expensive arbitration process which is still on foot before Sir Anthony Evans.  But the problems which the arbitration has been concerned with are issues of construction (which would never have arisen if the clauses had been competently drafted), not issues of valuation judgment.  Once the assets to be valued had been identified, the ascertainment of half of their aggregate adjusted book values should be a straightforward mathematical exercise.  Indeed groups with the accountancy and IT resources of EN and DT should have been in a position to produce the up to date figure almost instantaneously.
41.	I do not therefore approach the linguistic problems of clause 15 with a strong presumption that 42 days would probably be too short a period in which to determine the value of the sale assets.  The express provision for arbitration in clause 17.3 makes clear that 42 days might not be sufficient, but even then the difference between the parties was not likely to be as large as it has in the event proved to be.  The process was not likely to be as unpredictable as where a ‘fair value’ is to be fixed by auditors under pre-emption provisions or pursuant to an order on a section 459 petition.  
42.	The first puzzle (although of course the problems of construction have to be solved not serially, but by scanning through possible solutions to all the problems in order to find the least unsatisfactory answer overall) is the apparent duplication of deemed transfer notices under the opening words of clause 15.3 (“for the purpose of Article [10] simultaneously with the occurrence of” the event of default) and under clause 15.4.2.1, if it is invoked (“thereby deemed to have served a transfer notice for the purpose of Article [10] to which” [etc]).  
43.	Counsel agreed that there could be only one effective deemed transfer notice, but they differed as to how that result was to be achieved.  Mr Brisby emphasised the mandatory nature of the opening words of clause 15.3 and said that the Vice-Chancellor had ignored them.  A default notice under clause 15.4, by contrast, was optional, and if clause 15.4.2.1 was invoked it operated to do no more than confirm (and avoid any doubt about) what had already occurred under the opening words of clause 15.3.  The main linguistic difficulty about this construction is that “thereby” in clause 15.4.2.1 has to be read unnaturally as referring to the earlier event of default (a reading which is particularly difficult in view of the earlier “thereby” in clause 15.4.1, which must refer to the default notice; it is notable that the actual default notice served on 27 December 2000 reflects each “thereby” as “hereby”).
44.	Mr Flint, on the other hand, treated clause 15.4.2.1 (when invoked) as the provision which effectively triggered Article 10 (b), (c) and (d) (“all the subsequent provisions of that Article ... save so far as in hereinafter otherwise provided” [etc]).  On this view the opening words of clause 15.3 were inchoate in the sense that they triggered only Article 10(a).  Both arguments were developed with skill and refinement.  If this were the only point to be decided, the arguments would in my view be very evenly balanced.  But as I have said, these problems are not to be solved serially.
45.	The crucial subclause is clause 15.5, which raises the second and third problems identified in paragraph 12 above.  The Vice-Chancellor rejected the argument that the parenthesis in clause 15.5 limited the time within which an offer of shares (whether comprised in a deemed transfer notice or in a letter from West Ferry’s board of directors) could be accepted.  He did not (as I understand it) go so far as to accept the submission (put forward by Mr Flint in this court, and perhaps below) that “capable of being accepted” in the parenthesis meant no more than “capable of being acted on as a valid transfer notice”.  But the Vice-Chancellor did not attach weight to the reference in clause 15.6 to a transfer notice being “capable of being accepted by the offeree” (words which cannot possibly be explained as Mr Flint sought to explain the words in the clause 15.5 parenthesis) because he took the view that Article 10(c) was expressly applied by clause 15.4.2.1.  He considered that EN’s argument involved reading into the parenthesis the word “only”, and that there was no justification for doing so.
46.	The Vice-Chancellor found confirmation of this conclusion in clause 15.8 and clause 15.9 of the restated agreement and clause 5.1 of the amending agreement (which does not prescribe a 42-day period, or any other period, for acceptance of the deemed offer for sale of the sale assets).  Mr Flint described this deemed offer as a “standing offer” and submitted that when clause 15.8 refers to a shareholder not being entitled to purchase shares without agreeing to purchase the sale assets, it means that the shareholder is not entitled to call for a transfer of the shares in question.  But that seems inconsistent with clause 15.9, which provides in detail for the simultaneous completion of the purchase of both the shares and the sale assets.
47.	These are pure issues of construction of a commercial agreement, where there is no real dispute about the relevant matrix of fact.  The appellate function is not therefore inhibited.  Nevertheless it is with real diffidence that I differ from the clear and thorough judgment of the Vice-Chancellor, who has great experience in company and commercial matters.  But I have come to the conclusion that the parenthesis in clause 15.5 is in effect replacing, and not merely supplementing, the machinery in Article 10(c).  I consider that the transfer notice deemed to be served on 22 November 2000 was tantamount to an offer by EN capable of being accepted by DT, and that the time for acceptance of that offer expired on 3 January 2001.
48.	I have already indicated some of my reasons but I would supplement them and restate them as follows:
i)	I am not persuaded that a 42-day period is likely to prove unfairly short for the offeree (even though the offeree is ‘innocent’) or that it is obviously unacceptable that the offeree might have to make a decision before the price of the sale assets was finally determined.  Moreover a decision by the offeree to cause West Ferry to cease trading and go into liquidation (which might be regarded as the most drastic response) must on any view be taken within 42 days.
ii)	I do not regard DT’s arguments on the first particular problem (the identification of the effective deemed transfer notice) as being any stronger than EN’s.
iii)	On the second and third points (clause 15.5), I consider EN’s arguments to be distinctly stronger.  Mr Flint’s construction seems to deprive the parenthesis, and especially its opening words “(and for the purposes of Article [10] ... )” of any sensible meaning.  Mr Brisby’s construction also fits better with the part of clause 15.5 before the parenthesis, which is looking at the position after an offer has lapsed (and refers to a transfer notice under clause 15.3).
iv)	I respectfully disagree with the Vice-Chancellor’s view that EN’s construction involves reading the word “only” into the parenthesis.  “Only” is a word which lawyers can use to avoid any doubt, but often the natural meaning of a sentence is the same whether the word is used or not.  I think that is the natural meaning here.  
v)	The Vice-Chancellor was led to his conclusion by his view that the provisions of Article 10(c) were expressly applied by clause 15.4.2.1.  It says that “the subsequent provisions of that Article shall be applicable save so far as is otherwise provided”.  It seems to me that the parenthesis, fairly construed, does make other provision.  It substitutes a fixed period for a period which would otherwise have to be prescribed by West Ferry’s board of directors, which might by then (as in this case) consist exclusively of one side’s appointees.
vi)	I consider that this construction of the parenthesis is confirmed by the reference to acceptance by the offeree in clause 15.6.  I am not persuaded by Mr Flint’s submission that the context of clause 15.6 is quite different.
vii)	I consider that clause 15.8 and clause 15.9 fit in better with EN’s case than with DT’s.  Clause 15.9 makes clear that a party may have become contractually bound to purchase shares before the value of the sale assets has been determined.  The Vice-Chancellor noted this point but I respectfully think that he mistook its significance.  
viii)	Neither side made anything of the point that Article 10 is concerned only with the transfer of shares at par, on which no valuation difficulty can arise (the point is touched on in paragraph 52 of the judgment in relation to the section 459 petition).  I need not therefore say any more on that point.
Acceptance and Estoppel
49.	Mr Brisby accepted at the outset of the appeal that in order to obtain the relief which EN seeks in the main action he had to succeed not only on the issue of construction, but also to show that an offer (embodied in the deemed transfer notice itself) had been accepted (or would in the eyes of the law be treated as having been accepted, because of an estoppel) before it lapsed on 3 January 2001.  Mr Brisby sought to establish that there had been acceptance of the offer on or after 14 December 2000, the date of the meeting between Mr Colson and Mr Ellice at which West Ferry was discussed.
50.	The Vice-Chancellor, who had the advantage of seeing and hearing these two witnesses being cross-examined during the course of a four-day hearing, made very clear findings about the quality of their evidence.  He preferred Mr Colson’s evidence to that of Mr Ellice on every significant point of difference, and he gave convincing reasons for his preference.  Mr Brisby sought to attack the Vice-Chancellor’s evaluation of the evidence, but he was attempting a hopeless task.  The Vice-Chancellor’s findings of fact as to what happened at the meeting on 14 December are unassailable, and there is no other basis for asserting any express acceptance (written or oral) of the offer.  
51.	That leaves EN’s case on estoppel.  It needs to be revisited because the Vice-Chancellor’s reason for rejecting it was that there had been, on his view, no deemed offer for DT to accept, or for DT to be estopped from denying that it had accepted.  I should perhaps set out the passage in Spry, The Principles of Equitable Remedies, 5th ed p.140 referred to by the Vice-Chancellor:
“It should be noted that the operation of the doctrine of estoppel is here twofold.  In the first place, a distinct rule has evolved that a person negotiating with another person for entry into a contract is bound by the reasonable construction of his statements and acts; and any inconsistent intention on his part must be ignored unless it is proper to treat the other party as having known of that intention.  In the second place, the ordinary doctrines of estoppel apply where although no contract has come into existence the conduct of a party has been such that he is estopped from denying the existence of a valid and enforceable contract.”
52.	EN’s pleaded case on estoppel depended on three matters which were relied on as implied representations: (1) DT’s refusal (by the letter of 11 January 2001) to withdraw the default notices of 27 and 29 December 2000; (2) DT’s participation in the arbitration process; and (3) DT’s continuing refusal to reinstate the EN-appointed directors to West Ferry’s board.
53.	Those acts on the part of DT, which are not in dispute, could be viewed as amounting to a representation.  They showed that DT’s position was that it might become the purchaser of EN’s ‘B’ shares and of the sale assets, and that in the meantime it regarded itself as entitled to exclude EN from West Ferry’s board.  In the absence of Mr Deedes’ letter of 3 January 2001, they might have amounted to a representation that DT was already contractually bound to purchase.
54.	But the letter of 3 January (a copy of which was, as the Vice-Chancellor found, delivered to EN) showed that DT’s position was that of an offeree who was not yet contractually bound, and could defer a decision for up to ten days after the final conclusion of the arbitration.  On my view on the construction issue, DT was mistaken in that position.  But there is no finding (indeed, no suggestion at present) that DT’s executive directors did not honestly believe, after taking legal advice, that DT was in the position of an offeree which was not yet contractually bound, but was still in a position to accept the offer.
55.	There must be an objective test of the quality and effect of any course of conduct which is said to have amounted to a representation so as to give rise (after detrimental reliance) to an estoppel.  Judged objectively the pleaded acts on the part of DT were no more than a representation that it was still interested as an offeree.  Its apparent willingness to exclude the EN-appointed directors from the board of West Ferry for the duration of a long arbitration may be relevant to the section 459 petition, but EN’s case on estoppel cannot succeed.
The section 459 petition
56.	When he gave permission to appeal in both sets of proceedings the Vice-Chancellor recognised that his decision on the construction issue had implications for the striking-out of the section 459 petition.  The directors of West Ferry appointed by EN have now been excluded from board meetings (though not, we were told, from meetings of the finance committee) for well over a year when they should, on my view of the construction issue, have been reinstated (under clause 15.5) soon after 3 January 2001.
57.	Mr Flint submitted that if EN were to succeed on the construction issue only, the inevitable outcome would be the prompt reinstatement of the EN-appointed directors and the resumption of normal relations between the parties.  The section 459 petition would still, he said, have no proper purpose, and no prospect of success.  Mr Brisby submitted that that was quite unrealistic and that the petition could not properly be struck out merely because the DT-appointed directors might (after full disclosure and cross-examination) satisfy the court that their conduct had not been unfairly prejudicial to EN.
58.	It is earnestly to be hoped that the parties may now be able to resolve their differences without further expensive litigation.  But in my view the striking-out of the petition cannot stand, if the other members of the court agree that the offer lapsed on 3 January 2001.  In those circumstances it must be arguable that EN has suffered unfair prejudice, within the meaning of section 459, since then.  It is probably better to say no more about the petition’s prospects of eventual success.
59.	For these reasons I would dismiss the appeal in the main action, subject to the possibility (on which the court can hear further argument) of varying the Vice-Chancellor’s order so as to make an appropriate declaration as to the lapse of the offer.  I would allow the appeal against the striking-out of the petition.
Lady Justice Hale:
60.	I agree.
Lord Justice Aldous:
61.	I also agree.
Order: Appeal against the striking of the petition allowed; appeal in the main action dismissed; there will be no inquiry as to damages; the respondents to pay the petitioner’s costs here and below of the application to strike out the petition; the appellant to pay up to 50 per cent of the respondent’s costs of the action here and below; detailed assessment of the costs if not agreed.
(Order does not form part of the approved judgment)