Neutral Citation Number: [2007] EWHC 770 (Comm)
Case No: 2003 FOLIO 420
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

04 April 2007

Before :

THE HONORABLE MR JUSTICE LANGLEY
- - - - - - - - - - - - - - - - - - - - -
Between :

	(1) OXUS GOLD PLC

(2) OXUS RESOURCES CORPORATION	First Claimant and Part 20 Defendant

Second Claimant	
	- and -		
	TEMPLETON INSURANCE LIMITED	Defendant and Part 20 Claimant	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Mr M. Bloch QC and Ms L. Frazer (instructed by Clifford Chance LLP) for the First Claimant/Part 20 Defendant
Mr A. Steinfeld QC and Mr R. Ritchie (instructed by Kingsley Napley) for the Defendant/Part 20 Claimant

Hearing dates: 19th- 22nd March 2007
- - - - - - - - - - - - - - - - - - - - -
Judgment 

The Hon. Mr Justice Langley : 
Introduction
1.	On 27 August 2006, Cooke J gave judgment on the liability issues in this action. The Defendant (“Templeton”) won and the First Claimant (“Oxus”) lost. On 30 June 2006 Cooke J granted Declaratory Relief in the following terms:
“(A) the Warrants Deed dated 8th August 2001 issued by [Oxus] remained in full force and effect until it was exercised on 31 December 2003 and the purported cancellation thereof by [Oxus] on 4th August 2003 was null and void; and
(B) [Templeton] duly exercised the warrants contained in the said deed on 31st December 2003 (Provided always that it is open to [Oxus] to contend that there has been no valid exercise in respect of any number of shares in excess of 5 million and to dispute the number of shares above that figure to which the said warrants relate).”
2.	The consequence of these Declarations is that Templeton is entitled to damages for breach by Oxus of the terms of the Warrants Deed by which Templeton was entitled to subscribe for shares in Oxus at an exercise price of 15.25 pence per share.
3.	The present hearing concerned the quantification of the damages payable to Templeton. It gave rise to several issues, including the number of shares (if any) in excess of the 5 million shares (to which the Warrants Deed expressly related) to which Templeton was entitled under the terms of “adjustment” provisions in the Deed, the measure of damage in law, and the loss in fact suffered by Templeton by reason of Oxus’ refusal to issue any shares which Cooke J held to have been a breach of the Deed.
The Evidence
4.	The court read and heard evidence of fact only from witnesses called on behalf of Oxus. The evidence was directed to the operation of the adjustment provisions, and so to what I shall call “the adjustment issue” and to the question of the timing of when Oxus was in breach of its obligation to deliver the shares, to which I shall refer as the “timing of delivery issue”. The witnesses of fact on the adjustment issue were William Staple, formerly of Brown Shipley, Oxus’ broker, Jonathan Kipps, a director of Oxus, and Richard Shead, a former director of Oxus. During the hearing, Mr Steinfeld QC, for Templeton, indicated that Templeton did not seek to cross-examine Mr Shead (who was in court and available to give evidence) and so his witness statement was accepted in evidence as written. The witnesses of fact on the timing of delivery issue were Joanna Solino and Katherine Campbell. Ms Solino’s evidence was given by a hearsay notice relying on the fact that she lived in Australia. In addition two paragraphs of a statement made by Richard Steele on behalf of Templeton, for the purposes of the liability trial, were referred to by Mr Bloch QC for Oxus. Mr Steele was an employee of a company in the Knox D’Arcy (KDA) group of companies to which group Templeton also belonged.
5.	Expert evidence on the adjustment issue was given on behalf of Templeton by James Riddiough, a director in the transaction services team within the Assurance & Business Services Division of Smith & Williamson Limited, and on behalf of Oxus by Chris Osborne, the European managing director of LECG Limited. Expert evidence on the relevant sale or purchase price of the shares the subject of the Warrants Deed was given on behalf of Templeton by Elizabeth Wynne-Roberts, an associate director in the investment management team within Smith & Williamson Limited, and on behalf of Oxus by Martin Dobson, a partner and investment adviser of HansonWesthouse Limited.
The Hearing
6.	Substantial written skeleton arguments were prepared. After a short oral opening by Mr Steinfeld and Mr Bloch, Mr Staple and Ms Campbell gave evidence on the first day of the trial. On the second day Mr Kipps gave evidence, followed by Ms Wynne-Roberts and Mr Dobson. Mr Dobson’s evidence was completed on the third day and Mr Riddiough and Mr Osborne gave evidence. Mr Osborne’s evidence was completed on the morning of the fourth day and oral closing speeches from Mr Steinfeld and Mr Bloch followed. There was insufficient time to complete everything that leading counsel wished to say. At the court’s invitation, it was agreed that further submissions would be accepted in writing to an agreed timetable. As a result, submissions were received from both parties on 28 March and replies to those submissions on 2 April 2007.
7.	I am quite satisfied that all the witnesses of fact were truthful witnesses who gave evidence to the best of their recollection. The experts complied fully with their responsibilities. As will be apparent from what follows, I much preferred the opinions and evidence given by Mr Osborne and Ms Wynne-Roberts.
Oxus
8.	Oxus is, and was, a smallcap gold mining company. In 2001 it required finance to construct and develop a gold mine in Uzbekistan. The shares in Oxus have at all material times been listed in the Alternative Investment Market (“AIM”) of the London Stock Exchange. Although referred to later in another context for which it was prepared, an indication of the movements in the price of Oxus shares in AIM between October 2001 and the end of November 2003 can be seen from the last two columns of the first Appendix to this judgment, which itself is taken from the report of Templeton’s expert, Mr Riddiough, with a column showing the market price on the day preceding the various share issues listed added to it. In October 2001 the close mid-market price was 7.5 pence. By July 2003 the price had risen to about 23 pence. In September 2003 it more than doubled to 58.50 pence, and in November 2003 it again achieved a significant increase to 78.75 pence.
9.	Appendix 2 shows the prices between 5 and 19 January 2004 (the dates concerned in the ‘rival contentions’ as to when the shares should have been delivered following execution of the warrants). It will be seen the price fell from a high of 90 pence on 5 January to a low of 74.50 pence on 19 January. It was on 5 January that the intraday high of 90 pence was achieved. Hence the dispute as to the date of delivery. The difference of 10p per share for 5 million or more shares is a significant sum. Between 20 January and 10 February 2004 the price fell further from 76 pence to 68 pence.
Templeton
10.	Templeton, as stated, is a member of the KDA group. Templeton is licensed to carry on insurance business in the Isle of Man. The context of the Warrants Deed was an agreement whereby Templeton would start work to obtain secondary finance of £5 million for Oxus towards the cost of the construction and development of the mine in Uzbekistan. In fact Templeton did not obtain the finance.
The Warrants Deed 
11.	The Warrants Deed, executed on 8 August 2001, entitled Templeton to subscribe for 5 million shares of 1 penny each in Oxus at an Exercise Price of 15.25 pence with an Exercise Period of 5 years. The material conditions to which the Warrants were subject were conditions 2,4,5,6,7,9 and 12 of which 6 and 9.4 are most material to the issues to be resolved. So far as relevant they provided as follows:
“2. Subscription
Each Warrant entitles the holder(s) thereof, subject to these Conditions to require the Company to issue to the Warrant-holder or as he may direct, one Ordinary Share of 1 penny nominal value in the Company upon payment of the exercise price of 15.25 pence … for each Ordinary Share. The Exercise Price and the said number of Ordinary Shares are subject to adjustment as determined in accordance with Condition 6 hereof.
4. Exercise of Warrants 
4.1 In order to exercise one or more Warrants the Warrant-holder shall deposit such Warrant(s) with the Company at any time during the Exercise Period accompanied by full payment of the relevant moneys in Sterling and accompanied by a written notice signed by or on behalf of the Warrant-holder to the effect that such holder elects to exercise all or some only (in which case the relevant number shall be specified) of the Warrants comprised in the certificate.
4.2 The relevant Warrant(s) shall be treated as exercised at the close of business in London on the next business day (being a day other than a Saturday, Sunday, or bank holiday in England) after the deposit referred to in Condition 4.1 above (the "Exercise Date").
4.3 The Company will issue and despatch to the Warrant-holder share certificates following the exercise of Warrants. If the Company's share capital is for the time being listed or dealt in on any Stock Exchange or public securities market, the Company will use its best endeavours to ensure that all shares issued on exercise of Warrants will be admitted to listing or dealing (as the case may be). 
….
5. Shares Issued upon Exercise of Warrants
All shares issued following exercise of Warrants and the payment of the exercise price shall be Ordinary Shares each issued credited as fully paid or ordinary shares of such other nominal value credited as fully paid into which the Ordinary Shares in issue at the date of issue of the Warrants shall have been consolidated, sub-divided, reduced, redesigned or otherwise converted, the Exercise Price therefor being adjusted accordingly as provided in Condition 6 below. All shares issued following exercise of Warrants shall rank pari passu in all respects with the shares in issue on the relevant Exercise Date and shall accordingly entitle the holders thereof to participate in full in all dividends and other distributions paid or made on the shares after the relevant Exercise Date, other than any dividend or other distribution which shall previously have been declared or recommended or resolved by the directors of the Company to be paid or made on the shares if the record date for such dividend or other distribution shall be prior to the Exercise Date.
6. Adjustment
The Exercise Price and/or the number of Ordinary Shares to be subscribed are subject to adjustment (so as to ensure that the Warrant-holders are not disadvantaged) as considered appropriate and approved by the Auditors for the time being of the Company (or as determined by an expert as mentioned further below) on an alteration of the nominal value of the Ordinary Shares as a result of consolidation or sub-division or, subject to Condition 9, to take account of any capitalisation issue or rights or other issue (otherwise than on an allotment of fully paid shares in lieu of dividend) made prior to the date of exercise. The Warrant-holders will be given notice of all adjustments in accordance with Condition 12 below. Until such time as the Objection Period shall have expired without any Warrant-holders having notified any disagreement with such adjustment, or until such time as the adjustment shall have been agreed or determined as hereinafter mentioned, any adjustment shall be provisional. In the event that the Warrant-holders notify the Company, within 14 days (the "Objection Period") following the giving by the Company of such notice of adjustments, that they disagree with such adjustments then, unless within the period of seven days following the expiry of such fourteen day period all of the Warrant holders agree with the Company on the adjustments to be made, the Company shall instruct a firm of chartered accountants nominated by the President of the Institute of Chartered Accountants to determine, acting as experts and not as arbitrators, the nature and extent of the adjustments and their determination shall be final. The costs of such expert shall be borne by the Company unless no change is made to the adjustments as previously approved by the Auditors, in which event the Company and the Warrant-holders (collectively but, as between themselves, pro rata to the proportion of warrants held by them) shall bear such costs equally.
7. Liquidation
If any effective resolution is passed on or before any Event of Exercise for the voluntary winding-up of the Company then:-
(a) if such winding-up be for the purpose of a reconstruction or amalgamation pursuant to a scheme or arrangement approved by an Extraordinary Resolution of the Warrant-holders, the terms of such scheme or arrangement will be binding on all the Warrant-holders;
(b) in any other case, the Company will give notice to Warrant-holders stating that a resolution for the voluntary winding-up of the Company has been passed and a Warrant-holder shall be entitled at any time within three months after the date of such notice to elect by notice in writing to the Company to be treated for the purposes of proof in such winding-up as if he had, immediately before the date of the passing of the winding-up resolution, exercised the rights comprised in his Warrants and he shall in such case be entitled to receive an amount calculated by reference to the amount which would otherwise be available out of the assets in the liquidation to the holders of shares, such a sum, if any, as he would have received had he been the holder of, and paid for, the shares to which he would have become entitled by virtue of such exercise, after deducting from such sum an amount equal to the moneys which would have been payable by him in respect of such shares if he had exercised the Warrants, but nothing contained in this sub-paragraph shall have the effect of requiring a Warrant holder to make any actual payment to the Company.
9. Covenants by the Company
While any Warrants remain exercisable the Company will inter alia:-
9.1 at all times keep available for issue and free from pre-emptive rights, out of its authorised but unissued capital, such number of shares as would enable the rights arising under the Warrants and all other rights of subscription for and conversion into shares to be satisfied in full;
9.2 subject to the Articles of Association and not, without the sanction of an Extraordinary Resolution of Warrant-holders, make any reduction of share capital, share premium account or capital redemption reserve involving the repayment of money to shareholders (other than to shareholders having the right on a winding-up to a return of capital in priority to the holders of Ordinary Shares) or reduce any uncalled liability in respect thereof or purchase or redeem any of its share capital;
9.3 not, without the sanction of an Extraordinary Resolution of Warrant holders, issue or pay up any securities by way of capitalisation of profits or reserves unless adjustment is made pursuant to Condition 6 hereof;
9.4 not, without the sanction aforesaid, make any offer or invitation to holders of shares to subscribe or purchase any shares, debentures or other securities of the Company or any other person unless the offer or invitation is extended to Warrant-holders on the same terms as if they had exercised their Warrants unless adjustment is made pursuant to Condition 6 hereof;
9.5 not, without the sanction aforesaid, in any way modify the rights attaching to the Ordinary Shares nor issue any other class of equity share capital; but so that nothing in this sub-paragraph shall prevent (i) the issue of any equity share capital to employees (including directors holding executive office) of the Company or any of its subsidiaries by virtue of their office or employment pursuant to any scheme in existence on the date hereof or (ii) any consolidation or sub-division of the shares in the Company;
9.6 not make any issue, grant or distribution or take any other action if the effect thereof would be that on the exercise of the Warrants it would be required to issue shares at a discount. 
12. Notices
Any notice to the Warrant-holders required for the purposes of these Conditions shall be given by sending it through the post in a pre-paid letter addressed to each Warrant-holder at his registered address. Any notice so given shall be deemed to have been served at the time at which the letter would be delivered in the ordinary course of post and, in proving such service, it shall be sufficient to prove that the envelope containing the notice was properly addressed, stamped and posted.”
The Subscription Form
Attached to the Warrants Deed, following the Conditions, there was a printed subscription form in the following terms:
“TO: OXUS MINING PLC
The undersigned holder of the attached Warrant hereby subscribes for _____________ ordinary shares (the “Ordinary Shares”) of OXUS MINING PLC (or such number of Ordinary Shares and/or other securities and/or property to which such subscription entitles the undersigned holder in lieu thereof or addition thereto under the provisions of the Warrant) pursuant to the terms of the Warrant at the Exercise Price (as defined in the Warrant) per share on the terms specified in the Warrant and confirms payment of US$ ________ made as follows:
(a) by cheque or bank draft made payable to OXUS MINING PLC attached hereto, or 
(b) by bank transfer to the bank account numbered 50477273 of Oxus Mining plc at Barclays Bank plc, Woking Business Centre, PO Box 673, Town Gate House, Church Street East, Woking (branch code 20-97-58).
The undersigned irrevocably hereby directs that ______ Ordinary Shares be issued to the undersigned and be registered as follows:
___________________________________________________Name and Address
The undersigned irrevocably hereby directs that the certificate for the said Ordinary Shares be delivered to:
___________________________________________________Name and Address
DATED this ____ day of _________< 200__
__________________________________________________Name of Holder
___________________________________________________Signature:”
Preliminary Comments on the Warrants Deed 
12.	A warrant-holder is in the privileged position, relative to a shareholder, that for so long as the exercise period for the warrants has not expired, he may choose whether or not to exercise the warrant and generally will only exercise it when the exercise price is lower than the share price and so it is “in the money” and the shares can be sold at an immediate profit. If there has been a payment for the grant of the warrants that may and probably will affect the calculations but in this case there was no or no relevant consideration of that kind. 
13.	A shareholder is in the privileged position, relative to a warrant-holder, that the shareholder is entitled to dividends declared by the company but a warrant-holder is not, and the shareholders are empowered to determine certain corporate acts, such as share splits and consolidations, or a return of capital, by the company. Those acts could, of course, cause significant prejudice to warrant-holders. An obvious example would be a resolution to make a two-for-one sub-division or split of the shares which in simplistic terms would halve the current share price because it doubles the number of issued shares without changing the perceived value of the company. But the warrant-holder, absent “adjustment”, remains entitled to the same number of shares at the same exercise price. Arithmetically the warrant-holder requires twice the number of warrants at half the exercise price to be returned to his pre-split position.
14.	Condition 5 of the Warrants Deed, which introduces the concept of adjustment, by its terms addresses the sort of changes to the shares I have sought to describe. Some, of course, (such as a consolidation) could require an adjustment by a reduction in the number of warrants and/or an increase in the exercise price to achieve the original parity between shareholder and warrant-holder.
15.	Condition 6 is the “adjustment” clause. The words in parentheses so as to ensure that the Warrant-holders are not disadvantaged give rise to the first, and probably most important, difference between the rival constructions. Mr Steinfeld and Mr Ritchie, in their Skeleton Argument, submitted that:
“The insertion of these words does not alter the essence of clause 6. These words do not amount to a condition or pre-condition of [Templeton’s] entitlement to an adjustment. The fact that they are placed in parenthesis illustrates this. They are simply words of explanation.”
16.	I cannot accept this if it is intended to suggest the words are immaterial. The words are there for a reason. The obvious reason is to explain the purpose and so limits of condition 6. They are in parenthesis possibly because they are there to state the obvious or what might otherwise be a necessary implication, but it matters not in my judgment.
17.	The real issue, as it emerged in the oral submissions, is whether the “disadvantage” to warrant-holders is (as Mr Steinfeld submitted) simply some disadvantage discernible between the value of their rights before the relevant corporate event (say, a split) and after it, or whether the word is used as a comparator between the rights of shareholders and warrant-holders so that it requires a disadvantage for the latter as against the former and equal pain or equal gain does not give rise to the operation of condition 6 at all. The experts are agreed that the word has no technical meaning.
18.	Condition 6 only refers expressly to two (consolidation and sub-division) of the five circumstances (reduction, redesignation, conversion) referred to in clause 5. But it also refers (“subject to clause 9”) to “any capitalisation issue rights or other issue (otherwise than on an allotment of fully paid shares in lieu of dividend) made prior to the exercise” of the warrants. 
19.	The dispute, which is closely related to the previous dispute, is whether or not these words, read with condition 9, are such as to extend the circumstances in which an adjustment may be appropriate to events which do not impact directly on the number or value of shares in issue, or which “advantage” shareholders, to events which may relate only to third parties, for example a share issue to an institution to raise working capital.
20.	Condition 7 is an example of a condition which seeks to equate the interests of shareholders and warrant-holders. Conditions 9.2, 9.5 and 9.6 have the same purpose. Shares and warrants were also subject to the same provisions for registration transfer and the issue of certificates, pursuant to condition 8.4.
21.	Both conditions 9.3 and 9.4, in the circumstances to which they refer, require either the agreement of warrant-holders by an extraordinary resolution (which required a majority of not less than three-quarters of the votes) or an adjustment pursuant to condition 6.
22.	Condition 9.3 is not in issue but is, again, an example of a circumstance in which the interests of shareholders and warrant-holders could unfairly diverge if there were no such provision.
23.	Condition 9.4 is, on any view, not elegantly worded. If the words “or any other person” were omitted, the condition would readily fit the pattern of the other conditions to which I have referred: any offer made to shareholders should also be extended to warrant-holders as if they, too, were shareholders, or the terms of the warrants should be adjusted to achieve fairness between them. The words “or any other person” could be read, and Mr Bloch submits should be read, as an alternative to “the Company” and so as meaning a related corporate entity (such as a subsidiary or company in which Oxus held an interest). Indeed the location of the words would, I think, favour such a construction. The warrant certificate defined the “Company” as Oxus (in its then name of Oxus Mining Plc). The second-named claimant is and was a subsidiary. On the other hand, condition 9.5 uses the words “the Company or any of its subsidiaries” and the word “person” can mean, and perhaps more usually does mean, any legal entity either individual or corporate.
24.	It is Mr Steinfeld’s submission that the words should be read as an alternative to “holders of shares” so that they refer to Oxus making any offer or invitation to anyone to subscribe or purchase any shares or debentures or other securities of Oxus whether or not that offer or invitation was also made to shareholders. But the criterion for extending an offer to warrant-holders is “as if they had exercised their warrants” and so become shareholders. That has no relevance to such an offer unless it was made to shareholders. If Templeton was right, in a case where shareholders were not included, warrant-holders would be advantaged vis a vis shareholders as they would be entitled to participate in the same offer or invitation or to an adjustment, but shareholders would not, unless, of course, in such a case the only fair “adjustment” would be no adjustment.
25.	Condition 6 also provides that warrant-holders will be “given notice of all adjustments” by post. The adjustments referred to are (unless challenged) those “considered appropriate and approved by the auditors” of Oxus. It is not in dispute that the auditors never approved any adjustments and so no notices were given. Mr Kipps’ evidence was that in the summer of 2003 he met with the partner in charge of the auditors (BDO Isle of Man) and was advised that “there was absolutely no cause for adjustments to the warrants” in respect of any events to that date. He also said that was the view of the board of directors of Oxus. Mr Steinfeld questioned this evidence, in particular because of the lack of any written record and the fact that the partner in BDO (Ian Cook) had not given a witness statement to support it. Nonetheless, I am satisfied that Mr Kipps was telling the truth about this. It is of some relevance that the “nature and extent” of any adjustments was a matter first, for the auditors and, second, if objected to by warrant-holders, for accountants acting as experts. That plainly suggests that at least in some instances the value of adjustments would be a matter of opinion and/or a complex calculation.
26.	The conditions relating to the exercise of the warrants are material to the timing of delivery issue. 
27.	Condition 4 required the warrant-holder to deposit the warrants, accompanied by payment, with Oxus. Payment (as can be seen from the subscription form) could be by cheque, bank draft, or transfer to Oxus’ bank account. The warrants “shall be” treated as exercised on the next business day. Share certificates are “despatched” and Oxus was obliged to use its best endeavours to ensure that the shares were quoted on AIM.
28.	No express provisions were included for the timing of the provision of the share certificates. It is agreed that cheques (Templeton paid by cheque) take up to 3 days to clear and that the same time is involved in giving notification to AIM about the issue of shares to be listed. It is also agreed that the law would imply a term that the certificates be provided “in a reasonable time”.
THE FACTS
October 2001 to July 2003
29.	As can be seen from Appendix 1, between October 2001 and July 2003, Oxus issued numbers of shares and warrants in various different circumstances: exercise of options by employees of Oxus; issues of shares to employees; issues of shares and warrants and an open offer and a share issue to existing shareholders.
30.	On Appendix 1, those issues marked with an asterisk in the penultimate column are said by Mr Riddiough to have been made “at a discount”. It will be seen that the “discount” to which Mr Riddiough refers is a discount against the mid-market closing price of Oxus’ shares on the date of the various issues. Thus where that price is lower than the “Issue Price” of the shares no claim on the discount basis is made. Each event is given an “Issue reference” number which I will also use.
Employee Options
31.	All the options issued to employees were, as can be seen from the Appendix, issued at about the “market price” shown by Mr Riddiough. They were issued as remuneration. Mr Osborne described them as “a cost of doing business” which did not “give rise to an economic disadvantage to the holders of any warrants relative to shareholders”. That, I think, is plainly right in fact.
Share Issue (item 4)
32.	This share issue in November 2001 involved the placement to outside investors at 8.5 pence per share of 6.6 million shares. The funds were needed to ensure that Oxus would satisfy its going concern status for audit purposes at the end of the 2001 financial year.
33.	The price was a discount of 2.9% to the closing share price on the previous day and of 2.2% to the average price over the preceding 4 weeks.
Share Issue and Open Offer (items 5a and 5b)
34.	On 24 May 2002, Oxus announced that it intended to place 23,790,137 shares with institutional and other investors at 10 pence per share. On the same date Oxus also announced an open offer of 26,209,863 shares at 10 pence per share. The open offer was made to existing shareholders in the form of one share for every five shares held. The object was to raise, through the placement and offer together, £5 million before expenses. Oxus was then capitalised at some £16 million. Templeton had approved the inclusion of reference to its name in the prospectus by 20 May.
35.	The placing and offer were fully underwritten. The price was determined on the evening of 20 May. Oxus shares closed at 10.75 pence per share on that evening. The “discount” on that basis was 7.8%. The price had averaged 10.85 pence over the 4 weeks up to and including 23 May and it closed at 12 pence on 23 May, rising to 13.5 pence the next day.
36.	In the event, of the 26,209,863 shares offered to shareholders only 8,649,283 (less than a third) were taken up. Some shareholders had agreed not to participate in the offer to encourage institutional investment in Oxus. The balance were placed under the placing, hence the figure of 41,350,717.
37.	As regards the pricing, Mr Osborne rightly noted that the quantity of shares concerned was well in excess of daily trading volumes and said he had seen no evidence that the price obtained was “other than the highest achievable in the circumstances”. Nor have I. Indeed I accept Mr Staple’s evidence that the placing was done at the best price available and provided Oxus with cash equivalent to the value of the shares it issued. Mr Osborne also said that when a company makes a placement to new investors the interests of shareholders and warrant-holders “are in principle aligned”. I agree. There are two further factors. Plainly some shareholders were not convinced that the open offer represented good value evidenced by the level of take-up. The market, however, marked the shares up at close of business on the day the placing and offer were announced (to 13.5 pence) which, as Mr Osborne said, suggests that they were seen as beneficial to the value of Oxus.
38.	It is sensible to record here, as the offer to shareholders is the one instance where Mr Osborne accepted that there was at least a reasonable argument for justifying an adjustment, that both parties expressly agreed, in answer to questions from the court, that they wished the court, if it concluded that the offer (or any other item) should, pursuant to condition 6, have been referred to the auditors of Oxus and thence, if required, to an expert, to determine as a matter of probability (not chance) what the outcome would have been.
Management Change
39.	In November 2002 the management of Oxus changed substantially. It was at this time that Mr Kipps and Mr Shead joined the company along with a new chief executive (Mr Trew). 4 directors resigned. Oxus was in financial difficulties because of the collapse of certain financing proposals. Cash reserves were running out. New management accepted reduced salaries (relative to previous management) and were incentivised and to an extent paid by options and shares.
The Warrant Issues
40.	The warrant issue and share issue (items 10 and 11(a) on Appendix 1) were made in the context of the acquisition by Oxus from Conquest Resources Limited of shares in a company called Norox Mining Company Limited. The consideration was the issue of new shares and warrants as shown in the Schedule. Both were issued at a premium. Valuation of the commercial transaction with Conquest would not be easy. But no claim for a discount adjustment is made. The warrants were on substantially the same terms as the Templeton Warrants Deed as regards “adjustments”.
41.	The warrant issues in February and April 2003 (items 8 and 9) were made (item 8) as remuneration to Standard Bank and WestLB AG due to the participation of those banks in a project finance facility of up to $30 million for Oxus which had been announced in January 2003. The funds were needed to develop the Amantaytau goldfield project in Uzbekistan. The warrants were an element of the success fee payable for completion of the financing. Item 9 was a further element of the success fee payable to Standard Bank. These warrants also were on substantially the same terms as regards adjustments as the Templeton Warrants Deed.
42.	It will be seen from Appendix 1 that the execution price of the warrants the subject of item 8 was 10 pence and the mid-market closing price on the day of issue was 10.13 pence. The price had closed at 10.12 pence on the previous day. The average price over the previous 4 weeks had been 9.83 pence. The execution price of the warrants the subject of item 9 was 10.25 pence and the mid-market closing price on the day of issue was 11 pence. The shares had closed at 10.25 pence on the previous day. They had averaged 10.87 pence over the previous 4 weeks. Mr Osborne, again rightly, said these warrant issues represented in principle a cost of business for Oxus. Mr Kipps said, and I accept, that Oxus “received (more than) equivalent value for those warrants”.
Employee Shares
43.	The grant of shares (item 11b in Appendix 1) to various (3) employees in May 2003 for 10.4 pence a share was made in lieu of fees which the employees had earned in late 2002 and the first quarter of 2003. The shares were priced at the average mid-market price for the period January to March 2003. The further grant (item 15) was made for the same reason in respect of the second quarter of 2003 and priced in the same way for that quarter. The price followed the advice of Mr Staple to use the mid-market price for the quarter over which the fees were earned which he said was consistent with the rules, best practice and the most favourable impact for shareholders.
Share Issue
44.	Item 12 in Appendix 1 relates to the issue of 12.5 million shares in June 2003 to outside investors at a price of 18 pence per share. The closing mid-market price on the date of issue was 21.75 pence. The “discount” was, however, only 1.4% to the closing price (18.25 pence) on the previous day, and was at a premium of 7.3% to the price over the preceding 4 weeks. Mr Shead said, in relation to this placement, that he was “ecstatic” at the price he achieved in negotiation with RBC Capital Markets, the cash injection, and the bonus of a highly reputable firm’s institutional clients as investors. The subsequent movement in the Oxus share price suggests the market agreed with him, to the benefit of both shareholders and warrant-holders. Templeton admits that these negotiations were conducted at arm’s length. They also, on the evidence, achieved the best available price.
“Cancellation” of the Templeton Warrants
45.	On 7 August 2003 Oxus purported to cancel the Warrants Deed. Thereafter, and indeed since the end of April 2003, Oxus and Templeton were in dispute about the validity of the Deed. 
The August Announcement
46.	On 26 August 2003, Oxus announced the commencement of operations at the Amantaytau goldfield project. The announcement said Oxus was “right on track” to pour the first gold in December 2003, would initially start mining at the rate of 1 million tonnes per year and expected to produce 200,000 ounces of gold at a cash cost of $106 per ounce. No doubt this was the trigger for the rise in the share price in September.
September to December
47.	In September and until the end of December 2003 the further events (items 16 to 36 in Appendix 1) took place in respect of which (where there is an asterisk) Templeton also claim adjustments on the discount basis pursuant to condition 6 of the Warrants Deed. All the items for which such a claim is made are “employee shares” the subject of grants made on 17 October (items 17 to 33). These issues were announced to the London Stock Exchange on 22 October 2003. They were made as consideration for fees due to the non-executive directors and partial consideration for directors’ fees for the period 1 July to 30 September 2003. At the close of business on 17 October the mid-market price was 59 pence. The night before the issue the price was 56 pence. The average price over the previous 4 weeks was 55.8 pence. The issue prices appearing in Appendix 1 were respectively the average mid-market price for the period 1 July to 30 September 2003 (38.77 pence); the average mid-market price for July (24.33 pence); the average mid-market price for August (38.80 pence) and the average mid-market price for September (53.19 pence). Again, Mr Osborne said “the discount element of these remuneration-related issues are in principle a cost of doing business and do not give rise to any economic disadvantage to the holders of any warrants outstanding relative to shareholders”. Mr Kipps said, and I accept, that the non-executive directors had agreed to take their fees in shares and in their case the calculation was to be made over the relevant quarter. In the case of the executive directors they had agreed when their salaries were increased that the greater part would be ‘paid’ in shares to preserve cash at least until gold was poured. In their case it was agreed that the calculation would be made on a monthly basis at the average mid-market price of the shares for the month. If the share price had fallen, the directors would have lost. Oxus needed to protect its cash resources where it could.
The 30 October Williams de Broe note
48.	In October Williams de Broe were brokers to Oxus. They put out a note dated 30 October 2003 on Oxus entitled “A Major Transformation” referring to the “new mining focused management”, “fast-tracking” Oxus 50% interest in Amantaytau and stating that “Oxus aims to be a 500,000 oz gold producer by 2008”. The broker said “our valuation for the company is US$338m, or 93p per diluted share”. The comments were made that this valuation was “sensitive to the gold price despite 260,000 oz sold forward at US$323oz”, but “conservative” partly because the gold price used was US$350 an ounce when the current price was then $380 to $390 an ounce.
Public Announcements of Share Issues
49.	All the various share issues in Appendix 1 were reported publicly. Oxus made no adjustment to the warrants for any of the issues. Neither Templeton, nor any of the other warrant-holders with warrants on similar terms, questioned the lack of adjustments or raised any issue about adjustment.
Exercise of the Warrants
50.	In the afternoon of Tuesday 30 December 2003 Templeton’s solicitors spoke to Oxus’ solicitors. In accordance with that discussion, Kingsley Napley wrote to Clifford Chance that day, enclosing a letter addressed by Templeton to Oxus, dated 24 December and “exercising our client’s rights under the Deed of Warrant dated 8th August 2001”. They also enclosed the original Deed of Warrant and “two subscription forms with two cheques”. The letter continued:
“You will see from these documents that our client is seeking to exercise the Deed of Warrant …. Obviously, if your client seeks to encash our client’s cheques, the shares must be issued and delivered to our client care of this firm”.
51.	The letter dated 24 December addressed by Templeton to Oxus referred to the enclosed original Deed of Warrant, “Subscription forms for [8,198,971] ordinary shares in Oxus” and “our cheque in the sum of £396,672.40 + £762,500”. This letter continued:
“We are exercising our rights under the Deed of Warrant dated 8th August 2001 to subscribe for shares taking into account the adjustment provisions contained in that Deed of Warrant and in particular clauses 6 and 9 thereof.
An encashment of the enclosed cheque will be your acknowledgement that we are entitled to the issue and release of the shares pursuant to the Deed of Warrant. We invite you to issue those shares and return the same as directed in the subscription notices to Kingsley Napley Solicitors of Knights Quarter, 14 St. Johns Lane, London EC1M 4AJ (reference BRS/38339.1.)
Would you please note that it is our wish to sell these shares once issued at the earliest opportunity.
We have asked the bearer of this letter to obtain from you a receipt for this letter and its enclosures which are being hand-delivered.”
52.	It is the statement by Templeton in this letter that it was the company’s “wish to sell these shares once issued at the earliest opportunity” which underlies the dispute about the proper measure of damages for the failure to deliver the shares. Mr Steele said Templeton’s intention at the time was to sell the shares in the market on the first business day after the holiday, namely 5 January.
53.	The two Subscription Forms enclosed were also dated 24 December. Both directed that the relevant share certificates be delivered to Kingsley Napley. The first related to the 5 million shares at 15.25 pence per share expressly the subject of the Warrants Deed. It tracked the relevant parts of the form attached to the Deed (paragraph 11 above). A cheque for £762,500 was attached in payment. The second, in its operative part, read:
The undersigned holder of the attached Warrant hereby subscribes for three million one hundred and ninety eight thousand and seventy one ordinary shares (“the Ordinary Shares”) of Oxus Gold Plc (formerly Oxus Mining Plc) pursuant to the terms of the Warrant and on the terms specified in the Warrant. The figure of 3,198,971 shares is calculated as per the attached schedule in which is also stated the exercise price in respect of each tranche, at an average price of 12.40 pence. The total amount due is £396,672.40 payment of which is made by cheque payable to Oxus Gold Plc and attached hereto.”
54.	The present claim was put forward for 3,313,380 additional warrants at an average price of 12.40 pence or a total of £410,859.12, based on the items and figures set out in Appendix 1 save for the final column and the last 3 items. The schedule attached to the subscription form included the first four columns of all the items numbered 1 to 33 in Appendix 1. The claim as finally expressed in Mr Riddiough’s Supplemental report dated 15 March 2007, and the Re-Re-Amended Points of Claim on Quantum, is for a total of 5,484,211 warrants at an exercise price of 13.90 pence.
Acknowledgment
55.	Clifford Chance acknowledged the letter from Kingsley Napley the next day, 31 December, which was a Wednesday. Thursday 1 January was a Bank Holiday. Clifford Chance said “we will take instructions and we hope to revert to you next week”. “Next week” commenced on Monday 5 January. The Oxus’ office was closed from Friday 19 December 2003 to Monday 5 January 2004.
The 31 December Announcement
56.	Oxus announced that the first casting of gold was expected in a few days.
The 5 January Announcement
57.	Oxus announced that gold production had commenced on schedule. The share price rose briefly to 90 pence (from 85 pence) after the announcement.
The 9 January Announcement
58.	Oxus announced that “we look forward to the full commissioning of the plant and achieving our objective of producing at least 200,000 ounces of gold this year”. That day the share price opened at 80.50 pence, rose to a high of 86.81 pence, with the last traded price 82.50 pence.
Oxus’ Response to exercise of the warrants
59.	On 13 January, Clifford Chance wrote to Kingsley Napley in reply to their letter dated 30 December. They wrote:
“As you know, those from whom we take instructions were in Uzbekistan until late last week and we are now responding formally to both of your letters.
Your client has purported to exercise its rights under the Deed of Warrant dated 8 August 2001 (the “Deed”). The Deed was cancelled on 5 August 2003 and, as you know, our client is seeking a declaration that it was entitled to cancel the Deed for the reasons set out in our client’s draft Amended Particulars of Claim. Your client’s opposition to this claim (on the basis that the claim had no real prospect of success) failed in the hearing in November last year. We hereby return your client’s cheques and the original Deed of Warrant (by courier).”
Exercise of Other Options/Warrants
60.	On 14 January 2004, Oxus announced that application had been made for 17,688,610 shares of 1p each to be admitted to trading on AIM, with dealings to commence on 20 January. Of these shares, 14,150,000 represented options exercised by directors of Oxus, 966,250 options exercised by others, and 2,429,696 warrants exercised by Standard Bank and Barclays Capital.
61.	Templeton referred to the circumstances in which the options and warrants were exercised in the context of the time required to achieve delivery of the shares. The evidence about them is, however, very sketchy. The options were exercisable on commencement of gold production. Some of the forms signed by option-holders seeking to exercise their options were signed on 9 January (Mr Kipps) and 13 January (Mr Wilkins) and, at least one, it seems, received only on 23 January (Mr de Villiers). The Board met on 13 January and approved the issue of shares and instructed Mr Wilkins to arrange the issue and their admission to trading on AIM.
62.	Mr Steinfeld submitted, and cross-examined Ms Campbell on the basis that this evidence demonstrated that in fact all the necessary requirements for the issue of shares upon exercise of options or warrants could be completed in a short timescale. On the other hand, I think it may almost have gone without saying that the directors’ options would be exercised and I feel unable to read anything material into these events, save that they demonstrate that a Board meeting was convened for 13 January at which approval was given both for the allotment of shares by way of fees and salary and upon the exercise of warrants by Standard Bank and Barclays, and upon the exercise of the options on the commencement of gold production. The dates on which the banks exercised their warrants are not known.
A Reasonable Time
63.	Ms Solino was employed by Oxus as Investor Relations Officer only from April 2004. Her “familiarity” with the process of arranging for Oxus shares to be issued on the exercise of Oxus share warrants was therefore limited to a period after the time when the Templeton warrants were exercised. Although she said the process was the same in December 2003, in fact no warrants were exercised before that time. Mr Wilkins, then and now the Company Secretary of Oxus, was not a witness.
64.	Ms Solino said that on receipt of the subscription form, original warrant deed and cheque(s) the details would be checked to ensure they were correct, the cheque would be banked and 3 days allowed for it to clear. A board minute authorising the issue and a Regulatory News Service (RNS) announcement would be drafted and a board meeting arranged, probably a telephone meeting. The signed minutes and RNS would be e-mailed to Oxus’ broker for checking before authorising release to the London Stock Exchange. The minutes would also be e-mailed to the company registrar instructing the issue of the shares and (in this case) posting them first class to Kingsley Napley as directed in the subscription form. Notice would be given to AIM to arrange for the shares to be listed which also takes 3 clear working days. Ms Solino said the period of time from receipt of the subscription form to receipt by the warrant-holder of share certificates “would usually be between 7-14 days”. However, it was clear that there was no “usual” time at all, as there had never been an occasion to test it.
65.	Ms Campbell was employed by Oxus as Investor Relations Officer from December 2001 to May 2004. She said she agreed with what Ms Solino had said. She added that the broker would draft the application to list the new shares but it had to be signed by a director before submission. Directors were often abroad and in different time zones so it could take some time to contact them to obtain a signature. She also said that if a Board meeting had already been arranged for the near future approval of share issues following execution of a warrant would be left to that meeting. She was in the Oxus office on 5 January and, had there not been a dispute with Templeton, it would have been she who would then have been responsible for processing the subscription forms delivered by Kingsley Napley or, as on that hypothesis would have been more likely, by Templeton itself.
The Gold Price
66.	The price of gold in July to November 2002 was in the region of USD 320 an ounce. By July 2003 it had risen to about USD 350 an ounce. Thereafter it rose quite steeply to USD 370 an ounce in September, and to USD 380 to 430 in November 2003 to January 2004. It rose by 49% over 2002 and 2003. It reached its highest level for 14 years (USD431.5) on 6 January 2004 triggered by a weak dollar. Ms Wynne-Roberts believed gold was in January 2004 expected to continue to be a good investment and investors would continue to show interest in mining stocks such as Oxus. In fact the mining sector started to drift down towards the end of January 2004.
THE MEASURE OF DAMAGE
67.	The basic rule is that where a party sustains a loss by reason of a breach of contract (here the non-delivery of at least 5 million shares) he is so far as money can do it to be placed in the same situation with respect to damages as if the contract had been performed.
68.	It is Oxus’ case that had it performed the contract Templeton would have received and sold the shares and so its loss is the loss of the profit it would have earned but did not earn on such a sale. That was Templeton’s expressed intention: paragraph 52.
69.	It is Templeton’s case that the correct measure of damages for non-delivery of shares is the market price of the shares at the time they should have been delivered less the contract price.
70.	There can, in my judgment, be no real doubt that authority binding upon me supports Templeton.
71.	In Shaw v Holland (1846) 15 M&W 136 the court applied the prima facie rule in what is now section 51(3) of the Sale of Goods Act 1979 to a sale of shares. Although shares are “choses in action” not goods the analogy is clearly apposite: Parke B at pages 145-6, with whom the other members of the court agreed.
72.	Section 51 of the 1979 Act provides:
“(1) Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for non-delivery.
(2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller’s breach of contract.
(3) Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered or (if no time was fixed) at the time of refusal to deliver.”
73.	Although Mr Bloch submitted that the sale of shares under a warrant was not the same as a sale of shares he could not offer any distinction between the two which even began to amount to a difference of principle sufficient to support application of some other analogy. There is no dispute that there was an available market for Oxus shares. The reason why the measure of damage is potentially so important is the wide divergence of opinion between Mr Dobson and Ms Wynne-Roberts as to the price which could have been realised on a sale of 5 million or more Oxus shares compared to the price which would have to be paid to buy the same number.
74.	In Rodocanachi, Sons & Co v Milburn Bothers (1887) 18 QBD 67 the buyers, whose cargo of cotton was not delivered, had sold on the cargo at a price less than the market price at the port of discharge at the time the cargo should have been delivered. The Court of Appeal decided that the buyer was nonetheless entitled to the market price.
75.	Lord Esher, M.R. at pages 76-7 said:
“I think that the rule as to measure of damages in a case of this kind must be this: the measure is the difference between the position of a plaintiff if the goods had been safely delivered and his position if the goods are lost. What, then, is that difference? If the goods are delivered he obtains them, but in order to obtain them he must pay the freight in respect of which there is a lien on them. If there were no lien, he would be entitled to the goods without paying anything. Upon getting the goods he could sell them. He therefore would get the value of the goods upon their arrival at the port of discharge less what he would have to pay in order to get them. But what is to be the rule in getting at the value of the goods? If there is no market for such goods, the result must be arrived at by an estimate, by taking the cost of the goods to the shipper and adding to that the estimated profit he would make at the port of destination. If there is a market there is no occasion to have recourse to such a mode of estimating the value; the value will be the market value when the goods ought to have arrived. But the value is to be taken independently of any circumstances peculiar to the plaintiff. It is well settled that in an action for non-delivery or non-acceptance of goods under a contract of sale the law does not take into account in estimating the damages anything that is accidental as between the plaintiff and the defendant, as for instance an intermediate contract entered into with a third party for the purchase or sale of the goods. It is admitted in this case that, if the plaintiffs had sold the goods for more than the market value before their arrival, they could not recover on the basis of that price, but would be confined to the market price, because the circumstance that they had so sold the goods at a higher price would be an accidental circumstance as between themselves and the shipowners; but it is said that, as they have sold for a price less than the market price, the market price is not to govern but the contract price. I think that if the law were so, it would be very unjust. I adopt the rule laid down in Mayne on Damages, which gives the market price as the test by which to estimate the value of the goods independently of any circumstances peculiar to the plaintiff, and so independently of any contract made by him for sale of the goods.”
76.	Lindley and Lopes L.JJ gave judgments to the same effect with the same reasoning, the latter contrasting the measure of damages appropriate in a case of late delivery as opposed to non-delivery.
77.	Rodocanachi was approved and followed by the House of Lords in Williams Brothers v Agius [1914] AC 510. The relevant goods were a cargo of coal. The buyer (B) bought at 16s 3d per ton from (S) and sold at 19s to (C). (C) sold the coal back again at 20s per ton and “ceded” to (S) his rights against (B). (S) did not deliver to (B). The market price at the time delivery should have been made was 23s 6d per ton. (B) claimed the difference between the contract price, 16s 3d, and the market price 23s 6d. (S) contended for the difference between the contract price and the price agreed between (B) and (C). Claims by (S) against (B) for breach of (B)’s contract with (C) were not determined. (B)’s contention succeeded.
78.	Viscount Haldane LC, at page 520, agreed with the law as stated in Rodocanachi adding that it was unaffected by section 51(2) of the Sale of Goods Act 1893 which was in the same terms as section 51(2) of the 1979 Act. Lord Dunedin’s speech was to the same effect at pages 522-3. So, too, Lord Atkinson at page 529. Lord Moulton, at pages 530 to 531 said, with reference to Rodocanachi:
“That case rests on the sound ground that it is immaterial what the buyer is intending to do with the purchased goods. He is entitled to recover the expense of putting himself into the position of having those goods, and this he can do by going into the market and purchasing them at the market price. To do so he must pay a sum which is larger than that which he would have had to pay under the contract by the difference between the two prices. This difference is, therefore, the true measure of his loss from the breach, for it is that which it will cost him to put himself in the same position as if the contract had been fulfilled.”
79.	As Mr Steinfeld submitted, if an actual on-sale is to be ignored, then an intended one can hardly be relied upon to achieve a different outcome. Lord Moulton, in any event, used the language of intention. The law is, therefore, that it is the market price of acquiring the goods the buyer was entitled to have which is the measure of the loss. 
80.	I confess (with some very limited encouragement from the recent decision of the House of Lords in Golden Strait Corporation v Nippon Yusen Kubishka Kaisha [2007] UKHL 12) to the wholly irrelevant and presumptuous thought that there is not much to be said for a law of damages as absolutist as this. It does not apply in cases of delayed delivery: Wertheim v Chicoutimi Pulp Co [1911] AC 301. Nor do I find it unjust that a buyer may only recover for loss on an on-sale at a higher than market price in circumstances where the seller may be caught by the second rule in Hadley v Baxendale, because if there is a market he can buy in and still obtain his bargain. To my mind, in circumstances such as the present, which are probably unusual, the law might be better served by a straightforward application of the usual principles of causation. In this case, as a matter of probability, it is easy to conclude (as I find) that had Oxus delivered the shares, Templeton would have sold them and would in doing so have realised less than the cost of buying them in the market. Although I have yet to address the expert evidence on the sale and purchase prices, it will be seen that I think there was a measurable difference between the two. It would have been commercially irrational for Templeton to have bought the shares.
81.	If they will forgive me, try as they did, Mr Bloch and Ms Frazer could find no way out of these decisions, long-standing and well-established as they are. They referred to the authorities on delayed delivery; but they are, on authority, different. Kwei Tek Chao v British Traders [1954] 2 QB 459 was a case of delayed delivery. It was also a case where, unusually, the buying and selling prices of the relevant goods were significantly different. At pages 497-8, Devlin J said the buying price was only relevant in a case of non-delivery when the buyer “has to buy” to put himself in the same position as if the goods had been delivered, and continued:
“In this case the buyer has received the goods, and a calculation which supposes, incorrectly and notionally, that he should go out and buy another quantity of the same goods, has nothing to do with the reality of the matter.”
82.	The difficulties to which the authorities give rise are illustrated by the differing views of the members of the court of appeal in Bence Graphics v Fasson [1998] QB 87, in particular per Auld LJ at pages 102-5. But that was a case of breach of warranty of quality.
83.	The law is, in my judgment, clear and settled at the highest level. The measure of damages is the market value of the shares in Oxus on the date they should have been delivered to Templeton and that value is the purchase price of the shares at that date. It matters not whether Templeton, as on my findings it would have done, would have sold the shares had they been delivered to it.
HOW MANY SHARES?
84.	Oxus accepts that Templeton was entitled to 5 million shares at a price of 15.25 pence a share. Oxus denies that Templeton is entitled to any further shares by way of adjustments.
85.	Templeton asserts that it is entitled to adjustments of two different kinds. The first has been referred to as the claim based on “dilution”; the second is the claim based on share issues said to have been made at a discount and alleged to be those marked with an asterisk in the penultimate column of Appendix 1.
The Dilution Claim
86.	The dilution claim is simple to state and apply. Templeton claims that whenever and in whatever circumstances and on whatever terms a new issue of shares, warrants or options took place it is entitled to an adjustment to secure to it the same percentage interest in the share capital of Oxus as it would have had if it was assumed that the warrants had been exercised at the time the Deed of Warrant was executed. At that date, on that assumption, Templeton was entitled to 3.453% of the fully diluted share capital. “Fully diluted” assumes that all then existing options and warrants were executed. 
87.	The submission is that the percentage level of holding (or potential holding because the warrants may never be worth exercising) is itself economically significant and so, if it is diluted, Templeton would be “disadvantaged” within the meaning of condition 6 and for that reason entitled to an adjustment to restore its percentage interest.
88.	This is a bold submission. It was supported by Mr Riddiough. In my judgment it is plainly wrong. The issue is one of the proper construction of condition 6. But the commercial ramifications of such an entitlement, were it to exist, are striking. Oxus would have granted a fixed 3.453% interest in its share capital to Templeton (should Templeton choose to want it) for a period of 5 years without, on any view, expressly agreeing to do so. If and whenever Oxus were to issue shares to raise funds or to incentivise or pay its staff, Templeton (and indeed other warrant-holders entitled to the same terms) would be entitled to both further warrants to maintain their potential percentage interest in Oxus and to receive that share of the economic benefit derived by Oxus from the share issue. Moreover that would be an entitlement not available to existing shareholders and one for which the consideration provided by others, certainly in the case of the staff, or fees payable to Banks, could hardly be provided by Templeton. As Mr Osborne also demonstrated, in section 3 of his report dated 9 March 2005, the consequences of Mr Riddiough’s opinion that adjustments are required on both the dilution and discount bases is that Templeton in fact becomes the holder of a larger percentage (about 4%) of Oxus’ share capital than 3.453%. Anyone, of course, could buy shares in the market if they were concerned to keep a given share of the share capital.
89.	These consequences are, to my mind, sufficiently unreasonable and so improbable that it is most unlikely that the parties could have intended them absent a clear condition to that effect: see Wickman Tools v Schuler A.G. [1974] AC 235 per Lord Reid at page 251E.
90.	The very fact that if the word “disadvantaged” is used in condition 6 not as a comparison with shareholders, but simply as a comparison between the interests of Templeton itself before and after the relevant event, it could give rise to such arguments is, I think, a powerful indication that such is not the true construction. It is, of course, in any circumstance in which Oxus receives full economic value for its shares, arguably no disadvantage to Templeton, even on the construction it favours, because Templeton will have warrants in a more valuable company and so a smaller percentage of a more valuable Oxus. Calculations of that sort would no doubt be potentially complex, but, in my judgment, in such a case, the auditors, and if called upon, an expert acting under condition 6 would in any event probably determine that a nil adjustment was appropriate. There would be nothing to determine, save a mechanical arithmetic calculation if the percentage interest was always to be maintained.
91.	In my judgment, condition 6 is to be construed as Oxus contends. As Mr Osborne put it, “an option or warrant does not normally confer on its owner the right to a specified percentage of a company’s shares. Rather it confers rights in respect of a specific number of shares”. The Warrants Deed is plainly of the latter kind. The “disadvantage” against which warrant-holders are to be protected is a disadvantage in the economic value of their warrants (and so potential shareholdings) against the economic value of the shareholdings of existing shareholders. Mr Osborne’s evidence (and he was a most impressive witness) was that such would be the normal purpose of adjustment clauses whilst of course acknowledging that the actual wording could provide otherwise. 
92.	I think the overall thrust of all the provisions of the Warrants Deed support this construction. The exception in condition 6 for issues of shares by way of allotment fully paid in lieu of dividends, despite Mr Steinfeld’s submission to the contrary, is, I think, consistent with the construction for which Oxus contends and which I favour. Shareholders, but not warrant-holders, are entitled to dividends. It makes commercial sense that if shares are issued to shareholders in lieu of ordinary dividends then warrant-holders should not be entitled to an adjustment because they were not entitled to the dividends. But if Templeton was otherwise always entitled to its 3.453% it is difficult to see why this event should be the only exception to it.
93.	It is only the words “or other issue” in condition 6 and “or any other person” in condition 9.4, on which understandably Mr Steinfeld relied, which, I think, can be read so as to be inconsistent with this construction: see paragraphs 18, 23 and 24 above. But I think to determine so radical an issue of construction on this basis would be to let the tail wag the dog. The words in Condition 6 are expressly linked to condition 9. It would, as Mr Bloch submitted, be bizarre if condition 6 had a wider purpose than condition 9.4 as it would mean Oxus had an obligation to consider an adjustment in circumstances in which Templeton did not even have the right to participate in the relevant issue of shares. 
94.	The words in condition 9 are capable of being read as Mr Bloch submits they should be read. They are ill-placed if they are to be read as Mr Steinfeld contends and if so read would in my judgment change the commercial sense and purpose of the condition and Deed. I would repeat my preliminary comments in paragraph 24. The condition expressly looks to the position of Templeton “as if they had exercised their warrants”. That of itself is only consistent with the need for and emphasis on a comparison between warrant-holders and shareholders. Templeton is only entitled to the same offer it would have received if it was a shareholder. It also presupposes an offer made to Templeton on the same terms as made to those to whom the offer is addressed, which can readily be applied where the offer is made to shareholders but not, as I have said, otherwise.
95.	It follows that I think the Dilution claim fails entirely.
The Discount Claim
96.	If I am right in the construction of conditions 6 and 9, it also follows that, save in the single case of item 5 of Appendix 1 (either to the extent the offer to shareholders was taken up, which is the figure shown, or to the extent the offer was made: see paragraph 34) the claim by Templeton for adjustments on this basis must also fail. All the other allegedly discounted issues were issues made not to shareholders as such but for consideration provided by others or in other capacities.
97.	I would, in any event, add that on the evidence which I have sought to summarise, I am quite satisfied that, consistent with their duty as directors, it is artificial to describe the other share issues as made at a “discount” or, more relevantly, as made on terms which “disadvantaged” Templeton. All were made for money or (in the case of employees) money’s worth. In the case of the issues not made to employees, I am satisfied that Oxus got full value for the shares it issued and so that the value of Templeton’s warrants was unaffected, or at least Templeton cannot sensibly be described as “disadvantaged” even if that word is confined to Templeton’s before and after interests. That is the opinion of Mr Osborne and I accept it. 
98.	It follows, in my judgment, on a balance of probabilities, that even had Oxus operated condition 6 and the various share issues had been referred to the auditors or an expert to determine the nature and extent of any adjustments the probability is that the auditors and such an expert would have determined that no adjustment was appropriate.
99.	For these reasons, I reject the discount claim in respect of all the items in Appendix 1 save item 5a to which I will now turn.
Item 5a
100.	Item 5a is the only issue of shares in Appendix 1 made as a result of an offer to shareholders: see paragraphs 34 to 38. Mr Osborne, rightly in my judgment, considered that in deciding whether or not an offer was made at a discount the mid-market or closing price on the day of the offer was an inappropriate criterion for the simple reason that the offer itself could and often would influence that price and there would be no way of telling if the shares were issued at a discount when they were placed. That, as I find, was the case with the share issue and open offer made together. When the 10 pence price was agreed, the discount to the closing price on that day (10.75 pence) was 7.8% (paragraph 35) and, as I have held (paragraph 37) the 10 pence price was the highest achievable in the circumstances. Thus the price was the best price at which Oxus could raise such an amount of money from outside investors and the same terms were made available to existing shareholders. It would also be commercially irrational for a well-received issue of shares to result in an adjustment but for a poorly-received one not to do so.
101.	Mr Osborne acknowledged, however, (as I have said: paragraph 38) that it was reasonably arguable that the shares were offered to shareholders at a discount and that for that reason some adjustment was due to Templeton. He calculated the discount by reference to the closing price on the day before the issue (12 pence), a discount of 16.7%. He also gave figures dependent on whether it was right to base any adjustment on the number of shares (8,649,283) in fact subscribed for and issued or the number of shares offered (26,209,863). These calculations appear in paragraphs 4.15 to 4.18 of his report dated 15 January 2007, and are summarised in paragraph 1.13 of that report.
102.	Mr Osborne, in a notable example of the proper discharge of his duties as an expert, said that the auditors or an expert could, faced with these facts, have determined that an adjustment was appropriate on one or other of the bases referred to. His own view, on balance, was that the conclusion which would have been reached was that no adjustment should be made.
103.	I see no reason to disagree with him. Full value had been obtained by Oxus. The value of the shares rose as a result of the success of the placing and issue. Templeton was a beneficiary of that rise. Oxus needed the money.
104.	I, therefore, also reject Templeton’s claim for an adjustment in respect of item 5a.
A REASONABLE TIME
105.	On the expiry of a reasonable time to deliver the shares in response to Templeton’s subscription notice, on my findings Templeton is entitled to the market price at which 5 million Oxus shares could have been purchased by a purchaser then buying or seeking to buy that number of shares, less 15.25 pence per share.
106.	Templeton contends that the share certificates should have been delivered by 5 January 2004 or at the latest the next day. It is submitted (rightly in fact) that clearance of the cheque and notification to AIM could have been done simultaneously and the relevant Board approval readily achieved by telephone.
107.	Oxus contends that the subscriptions would only have been addressed when their office re-opened on 5 January and the relevant date would have been 19 or 16 January or, at the earliest, 13 January, the date on which Clifford Chance wrote returning the cheque and warrant (paragraph 59) and the date the Board meeting was held at which other share issues were approved (paragraph 62). The share price during the period can be seen in Appendix 2.
108.	As a matter of law, the relevant date is the last date for delivery which would still qualify as delivery in a reasonable time. Templeton submits that the fact Oxus’ office was closed until 5 January “cannot be relevant”. I do not agree. Anyone choosing to exercise such rights on the afternoon of 30 December should, I think, have anticipated there might be a hiatus until the beginning of the following week. I would not think it unreasonable if the subscription forms had only been processed on and after 5 January. Moreover, assuming that Templeton had claimed the adjustments that they in fact claimed some care would have been needed in the process as well as the mechanics of clearing the cheque and the other formalities. The use of cheques rather than a bank transfer also does not suggest great urgency.
109.	On the other hand, the Oxus share price was fairly volatile and Oxus should have known that delays could be prejudicial to Templeton and, assuming, as the evidence suggests, a sufficient number of directors could have been contacted to approve the issue I do not think in such a context waiting for the 13 January Board meeting (even if it had been fixed by 5 January, as to which there is no evidence) would have been reasonable.
110.	In my judgment, had the shares not been delivered on or by 13 January, a reasonable time for their delivery would have expired. It is, therefore, by reference to delivery of 5 million shares on that day that Templeton’s damages are to be measured.
THE MARKET VALUE
The Relevant Value
111.	Mr Dobson and Ms Wynne-Roberts are in substantial agreement that in January 2004 a purchaser wanting to buy 5 million Oxus shares could have done so at the quoted market price but might have had to pay a premium of up to 5%. Ms Wynne-Roberts takes an average of the high and low prices on the relevant day. Mr Dobson takes the closing mid-price. He also deducts commission.
112.	The purchase would have been effected by a broker approaching existing institutional shareholders to see if they were interested in selling. It would have taken one or two days to reach agreement and buy the full 5 million shares. Only if such shareholders were reluctant sellers would a premium have been required to be paid. By 13 January, as Appendix 2 shows, the Oxus share price had begun to fall, so, too, had the gold price. More shares were about to be issued as a result of the 13 January Board meeting. In those circumstances I do not think any premium would have been required to find sellers of the shares. I would accept Ms Wynne-Roberts’ opinion that the mid-market price on 13 January is the appropriate price but not that commission should be deducted. Templeton was entitled to have the shares delivered by Oxus. As agreed, I will leave it to the parties to try to agree the figure for damages to which this gives rise. If it cannot be agreed it can be the subject of a further hearing after this judgment has been formally handed down. It was supplied to the parties in draft on 3 April 2007.
The Sale Price
113.	If this judgment is right, the sale price of the shares is not relevant. But I will comment briefly upon the evidence relating to it. Ms Wynne-Roberts and Mr Dobson agree that sale of such a number of shares would have been done by way of a placement. But Mr Dobson considers the market would have believed that the Oxus’ share price had peaked with the result that the shares could only have been placed at a substantial discount to the market price of between 20-25% on 5 January and between 22 and 27% between 14 to 19 January. Ms Wynne-Roberts does not consider that any discount would have been appropriate.
114.	Ms Wynne-Roberts is a “fundamentalist” in the sense that she considers the “value” of a share or shares is substantially an analytical exercise turning on key factors derived from available financial data such as accounts, cash flow and forecasts, and the performance of other companies in the sector, which may be reflected in analysts’ reports and the like. Hence she saw the gold price as a significant factor as well as the Williams de Broe note and the other announcements to which I have referred. She was markedly sceptical of the works and theses of ‘chartists’ which she described as based on the belief that “the herd instinct, fear and greed” governed the behaviour of stock markets.
115.	Mr Dobson’s first report did not refer either to the gold price or the Williams de Broe note (because he was unaware of it). Much of the report was addressed to a plot of Oxus’ share price which he said showed a “head and shoulders” pattern which would be seen in the market by those who tracked such things as a sign the price had peaked and was to reduce. 
116.	I, like Ms Wynne-Roberts, was unimpressed by the head and shoulders. Such material as there was to support it strongly suggested that if it was perceived to have relevance it was when applied to a market index (such as the FTSE) or perhaps a market sector (such as gold shares) and not to a single stock. Nor do I think, in agreement with Ms Wynne-Roberts, that the discounts which Mr Dobson put forward sit easily with his evidence that a purchase of the shares might require a small premium.
117.	Had it been necessary to resolve this dispute between the experts, I would have preferred the approach of Ms Wynne-Roberts. She, too, was an impressive witness. However, by 13 January, as I have said, the Oxus share price and the gold price had started to fall, and a placing of 5 million shares would have been a significant amount for the market to absorb. The average daily volume traded in the period 5 to 19 January was just over a million shares. The largest amount traded in any one day was 1,938,000 
118.	shares, with the largest single trade 538,000 shares. At the risk, which on the evidence is unavoidable, of speculation, I think some discount to the market price would have been required but I would put it at a level of only 5%. I think Ms Wynne-Roberts opinion that the average of the high and low price on the relevant day is appropriate, and that the costs which would have been incurred had such a placement been made would fall to be deducted from the resulting figure to calculate the loss to Templeton on this basis.
Other Matters
119.	If I decided that Templeton was entitled to some adjustments, but not such as to amount to exercise rights over as many as 3,198,971 shares (the number claimed in the subscription form: paragraph 53) then Oxus submitted that Templeton had failed properly to exercise their rights under condition 4 of the Warrants Deed by seeking more shares than they were entitled to receive and (see paragraph 51) stating that the encashment of the relevant cheque would amount to an acknowledgment by Oxus of Templeton’s entitlement to those shares. 
120.	This submission does not now need to be addressed. But, had it been, I think the submission by Oxus is correct but largely of no consequence. Templeton could and should have said it wished to exercise all the warrants to which it was entitled. The subscription form attached to the Warrants Deed and condition 4 expressly provided for such an exercise but the words were deleted in the form used by Templeton (paragraph 53). In fact Templeton had the relevant information shown in Appendix 1 but must or should have appreciated that its claims were likely to be challenged regardless of the issue concerning the validity of the Warrants Deed. On the other hand if and insofar as Templeton was entitled to adjustments, Oxus was obliged under condition 6 not only to refer the matter to the auditors but also to give notice of them and was in breach of that condition. Had notice been given the adjustments would have been established and, it is reasonable to infer, Templeton would have exercised that number rather than embarking on the calculation they in fact advanced. Templeton could then, as Mr Steinfeld submitted, have claimed damages in an equivalent amount assuming, as is probable, that Oxus would still have refused to deliver any shares. But it is right to record that the validity of the claim made by Templeton on this basis was not fully developed in submissions. 
121.	I will hear the parties on any matters arising from this judgment which cannot be agreed on a date to be fixed.