ORD & FENTON V CALAN HEALTHCARE PROPERTIES LTD CA CA31/04

ORD & FENTON V CALAN HEALTHCARE PROPERTIES LTD CA CA31/04 7 October 2004IN THE COURT OF APPEAL OF NEW ZEALAND CA31/04 CA165/04BETWEEN RICHARD JOHN ORD AND COLLEEN MARY FENTON Appellants AND CALAN HEALTHCARE PROPERTIES LIMITED Respondent Hearing: 30 August 2004 Coram: Glazebrook J Hammond J William Young J Appearances: M J McCartney for Appellants B R Latimour and S C Price for Respondent Judgment: 7 October 2004JUDGMENT OF THE COURT DELIVERED BY WILLIAM YOUNG J Table of Contents Paragraph Number Introduction [1] The background facts [2] Were rights of pre-emption triggered?The key facts and documents [12]CHPL's argument [20]The appellants' arguments [21]The judgment of Fisher J [22]Discussion [31] The oppression argumentOverview [49]Some more facts [50]The oppression proceedings [56]The judgment of Keane J [57]Discussion [59] Disposition [67] Appendix I: Clause 8 of the Constitution of CHPL Appendix II: Transfer Notice of 11 August 2003Appendix III: Notice of Rights of Pre-emption Appendix IV: Letter of 18 August 2003 Appendix V Letter of 19 August 2003 Introduction[1] These are appeals against two judgments. The first (now reported as Ord v Calan Healthcare Properties Limited [2004] 2 NZLR 122) was delivered on 23 December 2003 by Fisher J who held that rights of pre-emption under the constitution of Calan Healthcare Properties Ltd ("CHPL") had been triggered. The second was delivered on 4 August 2004 by Keane J who declined to grant an interim injunction restraining the implementation of those rights.The background facts[2] CHPL is an unlisted company which manages a property and investment portfolio for Calan Healthcare Property Trust ("CHPT"). CHPT is a listed unit trust specialising in health care properties. [3] The original directors of CHPL were Brian Freestone, Martin Lyttelton and Richard Ord. They (or associated entities or parties) each held a third of the company's shares. [4] On 1 April 1996, Mr Ord resigned as a director of CHPL. This was apparently to enable an independent director to be appointed. [5] CHPL's current constitution was adopted in 1997. By this time the shares attributable to Messrs Freestone and Lyttelton were held by Calan Investment Management Ltd. This company is now known as Nalac Investment Management Ltd but for ease and consistency we will refer to it as CIML. CIML is owned and controlled by interests associated with Messrs Freestone and Lyttelton. The remaining one third of the shares (ie those attributable to Mr Ord) were held by the Crucible Trust. Mr Ord and Mr Darren Akehurst were the trustees of this trust.[6] On 14 March 1999, Mr Ord, exercising a power of appointment he holds in his capacity of appointor under the Crucible Trust, appointed the second appellant, Colleen Fenton (who is his partner and the second appellant) as a trustee of the Crucible Trust. On 17 September 2000, Mr Ord removed Mr Akehurst as trustee. On 26 March 2002, a share transfer giving effect to the changes of trustees was executed. It was eventually submitted to CHPL for noting in its share register on 13 May 2003. [7] The appellants are accordingly the current trustees of the Crucible Trust. They allege that CIML and the interested directors have acted oppressively and inappropriately by operating CHPL to the detriment of the Crucible Trust. For the purposes of the present appeals, the details of their allegations are of no moment. It is sufficient to note that there has been a complete breakdown in the relationship between Messrs Freeman and Lyttelton on the one hand and Mr Ord on the other. As a result, Messrs Freeman and Lyttelton wish to acquire, through CIML, the shares in CHPL held by the Crucible Trust. [8] CHPL and CIML have claimed that the actions referred to above in para [6] triggered rights of pre-emption under CHPL's constitution and the central issue in this appeal is whether this is so. There is an associated and alternative argument by the appellants to the effect that CHPL and CIML have acted oppressively (for the purposes of s 174 of the Companies Act 1993) in the way in which they have insisted on CIML's alleged rights of pre-emption. [9] So far the appellants have had no success in this litigation. [10] In the first of the judgments under appeal, Fisher J held that rights of pre-emption in favour of CIML were indeed triggered by the events referred to in para [6]. In the second of the judgments, Keane J declined to grant an interim injunction restraining implementation by CHPL of the alleged rights of pre-emption in favour of CIML.[11] In the succeeding sections of this judgment we will discuss first, whether rights of pre-emption were triggered and, secondly, the oppression arguments associated with the judgment delivered by Keane J.Were rights of pre-emption triggered?The key facts and documents[12] Before analysing the arguments which have been advanced and the approach taken in the High Court it is necessary to refer in a little more detail to the facts and the key documents. [13] The current constitution of CHPL was adopted on 23 May 1997. [14] Clause 8 of the constitution is set out in full in the first appendix to this judgment. The entire clause is relevant for the purposes of this case, but the key provisions are subclauses 4 and 8:8.4 A shareholder intending to transfer any shares ("the Transferor") must give a transfer notice in writing to the Board. The transfer notice shall state the number, class and asking price of the shares to be offered for sale. The transfer notice shall constitute the Board the Transferor's agent (to the exclusion of the Transferor) for the sale of the shares. . 8.8 If a Transferor fails to give a transfer notice in accordance with this clause 8, the Board may give a transfer notice on behalf of that shareholder and the provisions of this clause 8 shall apply.[15] The share transfer of 26 March 2002 which is referred to in para [6] above is expressed to be in the form of a transfer from Messrs Ord and Akehurst to Mr Ord and Ms Fenton for the nominal consideration of $1. [16] On 30 May 2003 there was a special meeting of the shareholders of CHPL. According to minutes which were produced in evidence, Mr Lyttelton advised Mr Ord that the share transfer had not been registered and that legal advice had beensought. Mr Ord offered to withdraw the transfer but was told that the constitution did not permit this. [17] On 11 August 2003, CHPL gave a transfer notice on behalf of Messrs Ord and Akehurst. The terms of the transfer notice are set out in the second appendix to this judgment. It is clumsily worded and typed and there is ambiguity as to whether it was purporting to identify $1 as the "asking price" for the shares. [18] On the same day, CHPL gave to CIML what was styled a pre-emptive rights notice. This is set out in the third appendix. There is further ambiguity in it as to the significance of the $1 nominal consideration specified on the share transfer notes. [19] On 18 August 2003, CHPL wrote to Messrs Ord and Akehurst. This letter is set out in the fourth appendix. This was followed the next day by a supplementary letter sent by CIML. This letter is set out in the fifth appendix. It is, perhaps, noteworthy that at this time CIML was not seeking to argue that it was entitled to acquire the shares of the Crucible Trust upon payment of $1.CHPL's argument[20] The arguments advanced by CHPL have been broadly along the following lines: (a) Messrs Ord and Akehurst, as trustees of the Crucible Trust, were "intending to transfer [their] shares" in CHPL as evidenced by the share transfer which they executed in favour of Mr Ord and Ms Fenton and perhaps the earlier changes of trustee. (b) Accordingly, clause 8.4 of the constitution required them to give a transfer notice constituting the board of CHPL as their agent for the sale of the shares. (c) As they did not give such a transfer notice, the board was entitled (and indeed required) to do so on their behalf under clause 8.8.(d) What subsequently happened was in accordance with clause 8.7 and Messrs Ord and Akehurst are now required to transfer the shares to CIML for a price to be fixed under clause 8.1(b) or (c). We note that at one time CHPL and CIML claimed that the nominal price of $1 specified in the share transfer, which was lodged and which is referred to somewhat equivocally in the notices prepared by CHPL, was to be treated as the prescribed price under clause 8.1(c)(i). We will discuss this a little later in the judgment. At this point, it is sufficient to note here that this argument has not been persisted with.The appellants' arguments[21] The appellants' arguments have evolved over time. Broadly, however, they come down to the proposition that clause 8.4 does not apply to a change of trustees. They maintain that a transaction is fairly regarded as a transfer only if it amounts to a disposal of the beneficial (or a beneficial interest) in shares or, alternatively, if it is by way of sale.The judgment of Fisher J[22] Fisher J considered that the case turned on the meaning of the word "transfer". He saw this word as referring to changes of legal title rather than beneficial interest. This was consistent with clause 8.1(a) which provides that "transfers" include transmissions. He was also influenced by clause 8.3 under which changes in the legal or beneficial ownership of a controlling interest are treated as transfers. [23] The Judge saw clause 8 as focusing on changes in the control of shares and regarded this as consistent with the principal purpose of the pre-emptive rights being to protect existing shareholders against a change in the influence exerted by other shareholders. He considered that this purpose and focus were applicable to changes in trustees.[24] The Judge noted that the definition of "shareholder" in s 96 of the Companies Act 1993 depends on entry on the share register, as distinct from underlying beneficial interests. This is reinforced by ss 89 and 92 which respectively make entry on the register prima facie evidence of legal title and preclude the entry of any trust on the register. Fisher J saw these provisions as consistent with the view that pre-emptive rights are triggered by proposed changes to the legal ownership resulting in changes to the share register. [25] Fisher J asserted that that the purpose underlying pre-emptive rights is to protect existing shareholders from involuntarily having to work with new shareholders of whom they might not approve. He also noted that, for private companies, shareholders have a relationship akin to partnership and that pre-emptive rights allow them to maintain agreeable business relationships. A mere change in trustees may impact upon the relationships between shareholders. Another implied purpose of pre-emptive rights is to maintain control over persons who will be personally bound by the company constitution. Thus, where the shares in a company are held on behalf of a trust, the focus is properly on the identity of the trustees and not the beneficiaries. [26] Fisher J referred to a number of English decisions: Hurst v Crampton Bros (Coopers) Ltd [2003] 1 BCLC 304 (ChD), Scotto v Petch [2001] BCC 889 (ChD and CA), Re Macro (Ipswitch) Ltd [1994] 2 BCLC 354 (ChD) and Safeguard Industrial Investments Ltd v National Westminster Bank Ltd [1982] 1 All ER 449 (CA). The Judge noted that English authorities have consistently held that transfers of the beneficial interest in shares do not trigger pre-emptive rights. He was of the opinion that this necessarily implies the converse, ie, the transfer of mere legal title does invoke pre-emption provisions. [27] Fisher J considered that the concept of transfer for the purposes of clause 8.4 included but was not confined to sales. The Judge said that given the underlying purposes, the pre-emptive provisions must apply whether or not a sale is involved. In any event the nominal consideration of $1 which was provided for on the share transfer meant that the transfer was a sale and could be regarded as the "asking price" for the purposes of clause 8.4.[28] For those reasons he concluded that the pre-emptive rights in CHPL's constitution had been triggered. [29] The Judge did not specifically refer to provisions in clause 8 which we will discuss shortly and which are specifically tailored to the circumstances of the parties as they were when the constitution was adopted. As well, there is an abstract quality to his judgment which is exemplified by the following paragraph:[8] The issue ultimately turns on the intentions of those who framed Calan's constitution. The constitution is a standard one for unlisted companies. The key question is the meaning of the word "transfer" in cl 8.4. The interpretation of the constitution on that point must, of course, produce a single meaning which applies regardless of the circumstances. Although in the end that meaning must be applied to the particular circumstances of the present case, it is important not to reverse the process and allow the circumstances of the present case to influence the interpretation of the constitution.[30] We note that the judgment of Fisher J has been criticised, see Dr Andrew Borrowdale "Share Transfers and Pre-emptive Rights" [2004] Company and Securities Law Bulletin 65.Discussion[31] CHPL has not been entirely consistent in identifying the precise conduct on the part of Messrs Ord and Akehurst which brings the situation within clause 8.4. [32] The actions of Mr Ord in appointing Ms Fenton and removing Mr Akehurst as trustees were in his capacity as appointor under the Crucible Trust. Those actions do not manifest an intention by a "shareholder" to "transfer" shares. Indeed, for some years after these changes occurred, Mr Akehurst remained on the register and thus retained a share of the legal title to the shares. We note in passing that s 43(2)(d) in the Trustee Act 1956 would appear to have been misinterpreted in the course of argument before Fisher J. This provision no doubt required Mr Akehurst to execute a transfer, if called upon to do so. It did not, however, as a matter of abstract legal obligation, require that such transfer be executed. If all relevant parties were content for Mr Akehurst to remain "on the title" there would have been no legal rule which would have been infringed. So, although the situation in whichMr Akehurst remained on the register was untidy and far from ideal as a matter of trust administration, there is no reason why it could not have continued indefinitely. We see this situation as broadly comparable to the circumstances in Safeguard Industrial Investments Ltd v National Westminster Bank Ltd, supra, it which it was held that a transfer notice was not required. [33] Presumably for this reason, Mr Latimour who argued the case for CHPL preferred to focus on the actions of Messrs Ord and Akehurst in executing and lodging with CHPL the share transfer. This focus enables us to identify in simple terms the key issue in respect of this part of the case: where there have been changes of trustee of the Crucible Trust, does the lodging of an up-dating share transfer establish that a "shareholder [is] intending to transfer any shares" for the purposes of clause 8.4? [34] This question falls to be determined as an ordinary matter of construction of this particular constitution and in light of the particular context in which it came to be adopted. That is why we have posed the question set out in the preceding paragraph in such precise terms and as referable to the Crucible Trust. [35] In this Court, Mr Latimour supported the Judge's reasoning. He stressed the point that, as a matter of commercial logic, the rights of pre-emption provided for by clause 8.4 must extend to gifts. He claimed that the corollary of this was that clause 8.4 cannot be read as confined to sales. Further, and importantly, he contended that the second and third sentences of clause 8.4 were referable to what had to go in the transfer notice and that the use of the word "sale" in those sentences did not mean that the clause as a whole was confined to intended transfers by way of sale. [36] Despite the thoughtful judgment of Fisher J and Mr Latimour's careful argument we are well satisfied that rights of pre-emption were not triggered in this case. [37] We think it sensible to start with a consideration of the overall scheme of clause 8.[38] Under this scheme, rights of pre-emption are triggered in three circumstances: (a) Under clause 8.3, in relation to changes of ownership and control in a company which is a shareholder in CHPL. We observe that clause 8.3 specifically exempted changes in ownership and control in relation to CIML from the operation of this subclause. (b) Under clause 8.5 by transfers associated with the death or bankruptcy of, or the making of a property order under the Protection of Personal and Property Rights Act 1988 in relation to, a shareholder (or one of two or more joint holders). Interestingly, this subclause does not to apply to transfers associated with the death or bankruptcy of, or the making of a property order in relation to, Mr Ord or any person with whom Mr Ord is registered as a joint holder of any shares. In a case which is caught by clause 8.5, clause 8.11 (to which we will refer shortly) does not apply. In the context of the clause as a whole, it seems sensible to treat "transmission" when used in clause 8.1(a) as referring to the situations contemplated by clause 8.5. (c) Under clause 8.4. [39] The paradigm case envisaged by clause 8.4 involves a sale. Clause 8.4 makes this clear by reference to the words "asking price of the shares to be offered for sale" and the constitution of the Board as the transferor's agent "for the sale of the shares". The stipulation of an asking price is very significant. Under clause 8.7, the other shareholders, if they wish to exercise powers of pre-emption, may either accept the asking price or alternatively seek to negotiate a value for the shares and, in default, require that value to be fixed by an expert (see clause 8.1(c) (ii) and (iii) and clause 8.7). If the value fixed by the expert is less than the "asking price" the transferor "may withdraw his of her offer", see clause 8.11. As already noted, clause 8.11 does not apply to circumstances which fall within clause 8.5 but it does apply in situations covered by clause 8.4 including those where the board acts under clause 8.8.[40] Clause 8.4, in the context of clause 8 as a whole, is not a good fit for the changes of trustee which have occurred in relation to the Crucible Trust. [41] On the assumption that clause 8.4 was triggered, Messrs Ord and Akehurst ought to have given a transfer price stipulating the "asking price" for the shares to be offered for sale. Given that Messrs Ord and Akehurst did not wish to sell the shares, the concept of an "asking price" is odd. But there is nothing in clause 8.4 which requires or authorises inclusion in the transfer notice given under it of the price-fixing mechanisms provided for by clause 8.1(c)(i) and (ii). In this situation, the right to fix an "asking price" would have been important. This is because a transferor has an absolute right under clause 8.11 to withdraw the transfer notice if the price fixing exercise results in a figure less than that stipulated in the transfer notice. Accordingly, if Messrs Ord and Akehurst had been given an opportunity to lodge their own transfer notice, they could have prevented the pre-emption process resulting in acquisition of the relevant shares by simply stipulating an unrealistically high price for the shares, say $1b. Unsatisfactory though the situation would have been, they (and Ms Fenton as the new trustee of the Crucible Trust) could, if necessary, have persisted with the ownership structure in which the shares were held by Messrs Ord and Akehurst as bare trustees (in effect on top of Mr Ord and Ms Fenton as trustees of the Crucible Trust). [42] The awkwardness of applying the clause to the facts of the case is evidenced by the clumsiness of the notices given by CHPL in relation to the fixing of the price for the shares. Whoever drafted these notices would appear to have endeavoured to leave it open to CHPL and CIML to argue that the $1 provided for as the nominal consideration in the share transfer could be treated as if it were an asking price stipulated in a transfer notice but at the same time leaving in play the processes contemplated by clause 8.1(c)(ii) and (iii). [43] It is important to remember that clause 8 fell to be determined in a particular commercial context. While the clause is in part in standard terms, it is also significantly tailored to the circumstances of the parties. We have in mind in particular the carve out from the scope of clause 8.3 of changes of ownership and control in relation to CIML and the similar carve out from the scope of clause 8.5 ofvarious contingencies which might affect the Crucible Trust shareholding. The effect of the carve out in favour of CIML was to prevent (in practical terms) rights of pre-emption applying to the only parcel of shares in the company other than that held by the Crucible Trust. The effect of the carve out in favour of the Crucible Trust was to permit changes of trustees in the circumstances contemplated by clause 8.5. [44] That Mr Ord's stake in the company was held by a trust at the time the constitution was adopted is of critical contextual significance in interpreting clause 8. If Mr Ord had realised, at the time the constitution was under consideration, that any change in the trustees of the Crucible Trust (other than under clause 8.5) might trigger rights of pre-emption in favour of CIML he would, we imagine, have refused to agree to the constitution except on terms which provided for a carve out from clause 8.4 in respect of changes of trustee. Given the carve outs agreed in relation to clauses 8.3 and clause 8.5, it is inconceivable that Messrs Freestone and Lyttelton would have disagreed. This suggests to us that it was regarded on all sides as so obvious that clause 8.4 did not apply to mere changes of trustee that no such carve out was required. We see this as a controlling consideration in terms of the interpretation of the clause. [45] It is not necessary for us to determine the extent to which clause 8.4 applies outside the obvious case of sales. It is sufficient for us to conclude (as we do) that it does not extend to changes of trustee affecting the Crucible Trust. [46] We note that Fisher J did not refer, specifically, in his judgment to the carve outs from clauses 8.3 and 8.5 (although he did set out clause 8.3). [47] Given the extent to which the provisions of clause 8 were tailored to meet the particular circumstances of the parties, we do not see authorities on differently expressed rights of pre-emption as particularly helpful. We will confine ourselves, therefore, to the following brief comments on the authorities: (a) Mr Latimour was unable to cite a single case in which a change of trustee has been held to trigger rights of pre-emption.(b) Dr Andrew Borrowdale in the article to which we have referred felt able to conclude that the cases relied upon by Fisher J (see para [27] above) did not warrant the conclusion reached. The point Dr Borrowdale made at 66 was that:To say that the term "transfer" does not catch the transfer of the beneficial interest [the situation largely addressed in the English cases] does not mean that it therefore, by exclusion, must catch a transfer of the legal title. Rather, it catches neither the beneficial nor the legal title in isolation, but only the two together; ie a transfer of the whole interest in a share.Ms McCartney for the appellants relied on, and Mr Latimour challenged, this reasoning. Given the approach we have taken, we do not need to express an opinion on it. [48] The upshot is that we are of the view that rights of pre-emption have not been triggered. The most probable corollary of this conclusion is that the transfer to Mr Ord and Ms Fenton will be registered. However, clause 10 of the constitution permits refusal or delay in registering transfers on certain specified grounds and conceivably the directors of CHPL may seek to invoke that clause against the transfer. Since we have not heard argument on the detail of any order which should be made, we will leave, in the first instance, the precise terms of the appropriate declaration to counsel. As will be apparent from the next section of our judgment, what we have just said should not be taken by the CHPL directors as an invitation to invoke clause 10 against the transfer.The oppression argumentOverview[49] Our conclusion that rights of pre-emption have not been triggered renders largely irrelevant the appeal against the judgment of Keane J. There are, however, costs issues which justify some brief discussion and evaluation of the oppression arguments. Further, an expression of our view in relation to the oppressionarguments may assist the parties in relation to any further disputes which arise in relation to the proposed transfer to Mr Ord and Ms Fenton.Some more facts[50] The judgment of Fisher J was released on 23 December 2003. [51] On 2 February 2004, CHPL gave notice to Mr Ord and Ms Fenton that on 12 February the shares would be transferred to CIML for $1 and that if they did not execute a transfer in those terms, its board would appoint an attorney to do so in their place. [52] This stance assumed that the share transfer which was lodged was a transfer notice and that the $1 nominal consideration identified in it was the "asking price" for the purposes of clause 8.4. As we have already noted the confusingly worded documentation created by CHPL in August 2003 (see the second and third appendices) left it open to CIML to claim an entitlement to acquire the shares for $1. This, however, had not been the initial stance adopted by CIML (see fourth and fifth appendices). [53] We accept that the comment made by Fisher J to the effect that the share transfer form could be regarded as a sale because of the reference to the nominal consideration of $1 and his comment that $1 was the "asking price" for the shares might have been seen as providing some justification for this stance. However, these passages in the judgment of Fisher J were, in a sense, throwaway lines. The share transfer form was not in itself a transfer notice for the purposes of clause 8.4. It is unrealistic to regard the reference to a nominal consideration of $1 as transforming the transaction into a sale. Still less is it reasonable to treat $1 as the "asking price" for the shares for the purposes of clause 8.4. In August 2003 CIML did not attempt to do so. In this context, it is at least arguable that CHPL was taking a provocative and unfair stance in February this year. We will revert to this point shortly.[54] The appellants sought the consent of the board of CHPL to withdraw the August 2003 transfer notice, which consent has not been forthcoming. [55] CHPL and CIML have abandoned the contention that the shares can be acquired for $1 and the current position is that CHPL has purported to appoint Grant Samuel as a valuer to fix the value of the shares; this in reliance on clause 8.1(c)(iii).The oppression proceedings[56] On 8 April, the appellants issued proceedings alleging oppression in relation to the affairs of CHPL. The allegations made included, but were not confined to, the conduct of CHPL in relation to pre-emption issue. In these respects, the relief sought included orders: (a) Requiring the CHPL board to permit the withdrawal of the share transfer notice; and (b) Amending the constitution so that a change of trustee shareholder does not trigger pre-emptive rights.The judgment of Keane J[57] The judgment of Keane J which is under appeal involved a refusal by him to grant an interim injunction preventing implementation of the "sale" of shares pursuant to the alleged rights of pre-emption in favour of CIML. [58] The Judge accepted, at least as a general proposition, that there was an arguable case as to oppression. But he declined to grant interim relief associated with the proposed implementation by CHPL of the rights of pre-emption in favour of CIML. In this respect: (a) He seems to have thought that the situation had developed past the point at which interim relief could be effective. He considered that once the right ofpre-emption was triggered, CIML's down-stream rights did not depend on the will of the board which had a continuing duty under clause 8.12 to offer the shares to CIML. (b) He saw it as relevant that the Crucible Trust's rights to pursue proceedings under s 174 did not require it, via the trustees, to continue to be a shareholder.Discussion[59] We recognise that there is some artificiality in us reviewing this judgment. Keane J's approach was necessarily premised on the assumption that rights of pre-emption had been triggered whereas we have already held that this is not the case. [60] That said, there are two aspects of what has happened which trouble us: (a) The attitude taken by CHPL and CIML throughout has arguably been very unreasonable. Messrs Freestone, Lyttelton and Ord started CHPL as quasi-partners and, despite the subsequent breakdown in personal relationships, it is arguably not right that CHPL and CIML should seek right to take advantage of what is, at best from their view point, no more than a technicality. (b) At a number of steps in the process CHPL appears to have taken the view most favourable to CIML and least favourable to the Crucible Trust. [61] The first of the points we have just mentioned is so obvious as to require no elaboration. The second, however, warrants some explanation. [62] The respects in which CHPL may have favoured CIML over the Crucible Trust are as follows: (a) Most importantly in treating the rights of pre-emption as having been irrevocably triggered. Mr Latimour sought to argue that CHPL has had nodiscretion about the steps it has taken. We disagree. Clause 8.6 permits a transfer notice to be withdrawn with the consent of the board. Clause 8.8 is expressed in discretionary terms. In those circumstances we see no reason why an intention to transfer shares, assuming it existed, could not be abandoned, thus obviating any need for the pre-emption process to continue. So we think that CHPL could have gone back to Mr Ord and Mr Akehurst to see whether they wished to proceed with the transfer or were content to remain on the register. It did not do so. We note that a similar point was made by Fisher J in the first of the judgments under appeal. (b) The question whether the proposed transfer to Mr Ord and Ms Fenton triggered rights of pre-emption was at best arguable. Before deciding to invoke the pre-emption procedure it would have been prudent and fair for the board to have sought generally the comments of Mr Ord and Mr Akehurst. (c) The board should not have settled the form of the transfer notice without consulting Mr Ord and Mr Akehurst. This is extremely important because, if given the opportunity to do so, the Crucible Trust could have scuttled the ability of CIML to acquire its shares compulsorily by the simple expedient of stipulating a very high "asking price". (d) The stance which CHPL took in February this year in asserting that it would transfer the shares to CIML for $1 has already been mentioned. [63] We note that CHPL has apparently acted throughout on legal advice. Given that the reasonableness of its actions were in issue and that it has sought to defend itself by reference to that legal advice, it was perhaps unwise to claim privilege, as it has, in respect of that advice. Nonetheless, if in the end it becomes relevant for the High Court to determine whether CHPL has acted oppressively in the respects under discussion, the nature of that legal advice will obviously be a relevant consideration. We emphasise that we are not making a substantive finding as to whether there has been oppression.[64] Making the assumption, for present purposes, that the lodging of the share transfer was a manifestation of an intention to transfer shares and that clause 8.4 was thus triggered, we see it as highly arguable that CHPL acted oppressively in relation to what followed so as to provide the appellants with a credible basis for seeking a final injunction to prevent implementation of any resulting sale to CIML. It follows that the appellants had an arguable case sufficient to warrant the injunction which they have sought. [65] The outcome of the oppression proceedings cannot sensibly be the subject of conjecture, but it is not necessarily going to be the case that the only possible outcome will be the acquisition of the appellants' shares by CIML. Further, the mechanism by which those shares would be valued should the current pre-emption process be allowed to continue (ie by Grant Samuel in the context of 8.1(c)(iii) of the constitution) would be potentially disadvantageous to the appellants. We say this for the following reasons: (a) The valuation process would not be subject to challenge. This is not necessarily a problem in itself but it may be significant given the other considerations we are about to mention. (b) In the course of argument the parties seemed to think that Grant Samuel would value the Crucible Trust's interest on a basis which involved a discount for its minority position. It is certainly likely that CIML would argue that this approach should be taken. It is far from clear to us that a discount for minority position would be appropriate in this context. (c) Any valuation exercised would probably, one way or another, have to allow for the claims made by the Crucible Trust as to mismanagement and oppression. Put in another way, the assets of CHPL which may fall to be considered as part of the valuation exercise may include claims for monetary relief against its directors. Certainly that would be the position taken by the Crucible Trust. In carrying out a valuation exercise in the context of clause 8.1(c)(iii) of the constitution, Grant Samuel would not be well placed to make appropriate allowances in this respect.[66] In those circumstances, had we been of the view that the rights of pre-emption had been triggered, we would have seen the balance of convenience as favouring the appellants.Disposition[67] The appeal against the judgment of Fisher J is allowed. The terms of the resulting declaration are to be fixed by counsel and in default of agreement, the parties may revert to this Court. On the basis of this conclusion, the appeal against the judgment of Keane J does not require decision save as to costs. [68] The appellants will have costs in this Court of $12,000 (ie $6,000 in relation to each appeal) together with disbursements (including the travel and accommodation expenses of counsel if any) to be fixed by agreement and, in default of agreement, by the Registrar. They are also entitled to costs in relation to both proceedings in the High Court to be fixed in that Court.Solicitors: Cockcroft d'Young Moorhouse, Auckland for Appellants Bell Gully, Auckland for RespondentAPPENDIX ICLAUSE 8 OF THE CONSTITUTION OF CHPLTRANSFERABILITY OF SHARES 8.1 For the purposes of this clause 8: (a) "transfer" shall include a transmission; (b) "Prescribed Period" means a period of three months from the date on which the transfer notice is actually received by the Board; (c) "Prescribed Price" means: (i) the sum per share specified in the transfer notice as that which the Transferor claims to be the sale values of the shares; or (ii) in any other case the value of the shares to be agreed upon between the Transferor and the Transferee within 7 days after the name and address of the Transferee is notified by the Board to the Transferor; or (iii) failing an agreement under subclause (ii), the value of the shares as determined on the application of either party as a fair value fixed by a single valuer (if the Transferor and the Transferee can agree on a single valuer) or by two valuers (one appointed by the Transferor and one appointed by the Transferee) and an umpire appointed by such valuers before entering into the determination of the Prescribed Price. Such valuer (if one is agreed on) or such umpire shall certify the sum that is in his or her opinion the fair value of the shares being offered for sale and each in giving such opinion shall be considered to be acting as an expert and not as a valuer. The provisions of the Arbitration Act 1996 shall not apply and the value of such shares shall not be the subject of arbitration. Failing the appointment of a valuer or umpire within 14 days after the name and address of the Transferee is notified by the Board to the Transferor, the Board may appoint the valuer or umpire, as the case may be. 8.2 Notwithstanding any restriction or prohibition contained in clause 8.3 below, a holder of any shares that is a corporation may transfer its shares to any company which, to the satisfaction of the Board (which may first require such evidence as it see fit), has thesame beneficial ownership and is under the control of the same person or persons as the shareholder transferring such shares. 8.3 A transfer notice shall be deemed to have been given by a company shareholder in respect of its shares in the Company in the event of a change of control or ownership of that shareholder, unless the change of control is previously consented to in writing by all of the shareholders in the Company. In this clause a change of ownership of a company shareholder shall be deemed to have occurred upon the transfer of voting securities in the company shareholder that results in controlling interest being held, whether beneficially or otherwise, by a person or persons other than the person or persons who held the controlling interest on the later of the date of adoption of this constitution or the date on which the company shareholder became a shareholder in the Company provided that this clause shall not apply to a change of control or ownership of Calan Investment Management Limited. The directors may, at their absolute discretion, declare that no such deemed transfer notice has been given. 8.4 A shareholder intending to transfer any shares ("the Transferor") must give a transfer notice in writing to the Board. The transfer notice shall state the number, class and asking price of the shares to be offered for sale. The transfer notice shall constitute the Board the Transferor's agent (to the exclusion of the Transferor) for the sale of the shares. 8.5 Notwithstanding anything to the contrary in any other clause of this constitution, in the event of death or bankruptcy of a shareholder (or one of two or more joint holders), or the making of a property order under sections 30 or 31 of the Protection of Personal and Property Rights Act 1988 in respect of a shareholder (or one of two or more joint holders), the personal representatives of the shareholder (and the other joint holders, if applicable) shall be deemed to have given a transfer notice on the day 60 days after the death, bankruptcy or the making of the order and the provisions of this clause 8, save for clause 8.11, shall apply. This clause shall not apply to the death or bankruptcy of, or a property order for, Richard John Ord or any person with whom Richard Ord is registered as a joint holder of any shares. 8.6 A transfer notice may not be withdrawn except with the consent of the Board, or as provided in this clause 8. Shares of different classes, if any, shall not be included in the same transfer notice. The transferor shall be under no obligation to sell or transfer part only of the shares specified in a transfer notice. 8.7 Subject to the preferential rights specified in clause 8.12, if the Board within the Prescribed Period finds a shareholder or other person or persons ("Transferee") willing to purchase all of the shares concerned and notifies the Transferor in writing accordingly, then the Transferor shall be bound upon payment of the Prescribed Price to transfer such shares to the Transferee. Every such notice shall state the name and address of the Transferee, the number of shares agreed to be purchased by the Transferee and whether the Transfereeaccepts the price per share specified in the transfer notice. If the Transferee does not accept the price per share specified in the transfer notice, the Prescribed Price shall be determined in accordance with clause 8.1(c)(ii) and (iii). Subject to the rights of the Transferor under clause 8.11, the purchase shall be completed at a place and time to be appointed by the Board not being less than seven days nor more than twenty-eight days after the date on which the price of such shares shall have been agreed upon or fixed as provided below. 8.8 If a Transferor fails to give a transfer notice in accordance with this clause 8, the Board may give a transfer notice on behalf of that shareholder and the provisions of this clause 8 shall apply. 8.9 If a Transferor, after having become bound to transfer any shares to a Transferee, defaults in transferring the shares, the Board may authorise any person to execute on behalf of and as attorney for the Transferor any necessary transfers. Following this the Board may receive the purchase money and cause the name of the Transferee to be entered in the register as the holder of the shares. The purchase money shall be held in trust for the Transferor. The receipt by the Board of the purchase money shall be a good discharge to the Transferee. After the name of the Transferee has been entered into the register the validity of the proceedings shall not be questioned by any person. 8.10 If the Board has not within the Prescribed Period found Transferees willing to purchase all of the shares, or if the Board within the Prescribed Period gives to the Transferor notice in writing that it has no prospect of finding purchasers for any of the shares, the Transferor may sell those shares to a third party transferee, at a price not less than the Prescribed Price within a further period of 3 months. 8.11 If the price determined under clause 8.1(c)(iii) is less than the sum specified by the Transferor in the transfer notice as that for which the Transferor wishes to sell, the Transferor may withdraw his or her offer within 7 days of receiving such determination. 8.12 All shares specified in any transfer notice must be offered by the Board to the following shareholders and in the classes and priority set out below: (a) To the other members of each class to which the shares offered belong and if more than one pro rata between them according to the number of shares in that class held. (b) If any member of a class shall decline to purchase such shares, to the other members of that class pro rata according to numbers of shares in that class held until that class is exhausted. (c) If any shares which are offered pursuant to this subclause shall not be purchased by members of that class in accordance with subclauses (a) or (b) above then any sharesincluded in such transfer notice and remaining to be sold shall be offered to the members of the other classes (excluding fixed rate shares) pro rata between them according to the number of shares held. (d) If shareholders do not wish to purchase all such shares then any balance of shares included in such transfer notice shall be offered to such person or persons as the directors resolve should be offered such shares. 8.13 The pre-emptive rights set out in clause 8.12 are to be non-assignable. Any offer of shares given to a shareholder pursuant to clause 8.12 shall be made by written notice giving the shareholder not less than 20 nor more than 30 days within which time such offer must be accepted and in default of such acceptance such offer shall be deemed to have lapsed. 8.14 Any shareholder may by written agreement or by notice in writing waive its rights under this clause. Any such waiver shall be limited to the specific circumstances for which it is given. Nothing in this clause 8 shall apply in relation to a transfer of any of the shares held by a shareholder which is the sole shareholder of the Company.APPENDIX IITRANSFER NOTICE OF 11 AUGUST 2003Calan Healthcare Properties Limited (the Company) Transfer NoticeThe transfer notice is given by the board of directors of the Company on behalf of Richard John Ord and Darren Jeffrey Akehurst pursuant to clause 8.8 of the Company's constitution.Background 1. Richard John Ord and Darren Jeffrey Akehurst (the Intending transferors) have delivered a share transfer to the Company in respect of all their shares in the Company (33,333 ordinary shares).2. Clause 8.4 of the Company's constitution requires a share holder who intends to transfer any shares in the Company to give a transfer notice in writing to the Company's board of directors (the Board).3. The intending transferors have not delivered a transfer notice to the Board as required by clause 8.4 of the Company's constitution.4. Clause 8.8 of the Company's constitution states that if a transferor fails to give a transfer notice, the Board may give a transfer notice on behalf of that shareholder.Transfer NoticeOn behalf of the Intending transferors, the Board gives notice that the intending transferors wish to transfer 33,333 ordinary shares in the Company. With consideration stated as being $1.00 for the shares.APPENDIX IIINOTICE OF RIGHTS OF PRE-EMPTIONCalan Healthcare Properties Limited (the Company) Pre-emptive Rights NoticeTo: Calan Investment Management Limited The board of directors of the Company (the Board) has received a transfer notice in respect of 33,333 ordinary shares in the Company (the Shares) held by Richard John Ord and Darren Jeffrey Akehurst (the transferors). In accordance with clause 8.12 of the Company's constitution, the Shares are offered to you as the only other shareholder in the Company. With consideration having been asked of $1.00 in the transfer notice. In accordance with clause 8.1(c) of the Company's constitution the price is to be agreed between you and the transferors with 7 days of the Board notifying the transferors that you wish to purchase the Shares or, failing agreement, by a valuer or valuers appointed under clause 8.1(c)(iii) of the Company's constitution. The transfer notice was received by the Board on the date of this notice. Please advise the Board within 3 months from that date whether you wish to purchase the Shares and we will notify the transferors accordingly.APPENDIX IVLETTER OF 18 AUGUST 2003Dear Richard and Darren Calan Investment Management Limited has confirmed it wishes to take up the pre-emptive rights in the shares as per the pre-emptive rights notice dated 11/8/2003 given by Calan Healthcare Properties Limited's Board. Calan Investment Management Limited wishes to commence good faith negotiations on price with you immediately. For the purposes of clause 8.1(C)(ii) of the Calan Healthcare Properties Limited constitution, please note the name and address of the proposed transferee is: Calan Investment Management Limited P O Box 6945, Auckland 1035 Fax: 303-0178 Attention: M LytteltonAPPENDIX VLETTER OF 19 AUGUST 2003Dear Richard and DarrenRe: Pre-Emptive RightsFurther to clause 8.1(C)(ii) of the Calan Healthcare Properties Limited constitution, Calan Investment Management Limited wishes to commence negotiations on the value of the shares. Calan Investment Management Limited is willing to negotiate the terms orally or by letter, fax or email. We write to you to make an offer to sell to get negotiations underway. If, for some reason, we cannot reach agreement within the 7 days allowed for negotiations in clause 8.1(C)(ii) of the Calan Healthcare Properties Limited constitution, we propose to nominate a single valuer, being grant Samuel & Associates Limited to certify the fair value of the shares. If we can agree on a single valuer (in the events that our negotiations do not lead to agreement), so much the better, but if not, please nominate your valuer. Please feel free to call me on 021 742 249 to discuss any aspect of the valuation/negotiation.