APT SEA Gas Holdings Pty Ltd v ANP SEA Gas Holdings Pty Ltd

[2010] NSWSC 1221

CITATION:	APT SEA Gas Holdings Pty Ltd v ANP SEA Gas Holdings Pty Ltd and anor [2010] NSWSC 1221
HEARING DATE(S):	18 October 2010
JUDGMENT DATE :	22 October 2010
JURISDICTION:	Equity Division Duty Judge List
JUDGMENT OF:	Brereton J
DECISION:	Declarations to effect that plaintiff had effectively accepted offer contained in transfer notice so as to constitute binding contract for purchase of 50% of sale shares.
CATCHWORDS:	CONTRACTS – General Contractual Principles – Formation of contractual relations – Acceptance – whether unconditional – whether within time
LEGISLATION CITED:	(NSW) Uniform Civil Procedure Rules 2005, r 14.18(2)
CATEGORY:	Principal judgment
CASES CITED:	Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Lissenden v CAV Bosch Ltd [1940] AC 412 Peninsula & Oriental SN Co v Britnell (1892) 18 VLR 580 Pridmore v Magenta Nominess Pty Ltd (1999) 161 ALR 458 Redowood Pty Ltd v Mongoose Pty Ltd [2005] NSWCA 32
PARTIES:	APT SEA Gas Holdings Pty Ltd (plaintiff) ANP SEA Gas Holdings Pty Ltd (first defendant) REST SEA Gas Pipelines Pty Ltd (second defendant)
FILE NUMBER(S):	SC 10/323974
COUNSEL:	PM Wood w MS Henry (plaintiff) IM Jackman SC w P Zappia (first defendant) TF Bathurst QC w DFC Thomas (second defendant)
SOLICITORS:	Chang, Pistilli & Simmons (plaintiff) Freehills (first defendant) Clayton Utz (second defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Friday, 22 October 2010

2010/323974 APT SEA Gas Holdings Pty Ltd v ANP SEA Gas Holdings Pty Ltd and anor

JUDGMENT

1 HIS HONOUR: Each of the plaintiff APT SEA Gas Holdings Pty Limited ("APT"), the first defendant ANP SEA Gas Holdings Pty Limited ("ANP"), and the second defendant REST SEA Gas Holdings Pty Ltd (“REST”) is the holding company of, and owns 100% of the shares in, two special purpose vehicles (SPVs) which together comprise the six partners in the ‘SEA Gas partnership’, under a partnership agreement dated 11 February 2002 (“the Partnership Agreement”), in connection with a high pressure natural gas pipeline between Iona in Victoria and Adelaide. APT owns 100% of the shares in APT SPV2 Pty Ltd and APT SPV3 Pty Ltd ("APT Partners"); ANP owns 100% of the shares in ANP SEA Gas SPV2 Pty Ltd and ANP SEA Gas SPV3 Pty Ltd ("ANP Partners"); and REST SEA Gas Holdings Pty Ltd (“REST”) owns 100% of the shares in REST SEA Gas SPVl Pty Ltd and REST SEA Gas SPV2 Pty Ltd ("REST Partners"). On 25 August 2010, ANP agreed to sell its shares in the ANP Partners to a third party (State Infrastructure Holdings (SEA Gas) Pty Ltd) (“SIH”) for a price of $98,849,053. That sale was subject to rights of pre-emption enjoyed by APT and REST under the Partnership Agreement. Accordingly, on 25 August, at 1540, ANP gave a notice to APT and REST under clause 22 of the Partnership Agreement offering them the whole of ANP’s shares in ANP Partners for the same price ("the Transfer Notice"). The offer contained in the Transfer Notice was expressed to be open for a period of twenty Business Days from the date of the Notice (that is, until 22 September 2010). The terms and conditions of the offer contained in the Transfer Notice were said to be those contained in the Notice itself and the attached Share Sale Agreement with SIH ("SSA") and Escrow Agreement.

2 At approximately 1240 on 22 September, REST delivered a notice to the Chair of the Partnership Committee, unconditionally accepting ANP’s offer in respect of 100% of the shares in ANP Partners. At approximately 1430 on 22 September, APT faxed a notice to the Chair of the Partnership Committee, purporting to accept the offer in respect of 50% of the shares. The effect of this notice is the main issue in the case. Further, at approximately 1622 and 1716 on 22 September 2010, APT emailed and faxed further correspondence to the Chair of the Partnership Committee; the effect of this correspondence is also an issue in the proceedings. On 24 September 2010, ANP by its solicitors asserted that only REST had validly accepted the offer in the Transfer Notice and that, accordingly, ANP was obliged to transfer 100% of the shares in ANP Partners to REST upon payment of the purchase price stated in the Transfer Notice. On 29 September 2010, APT obtained ex parte interlocutory relief preventing ANP from taking any steps to transfer more than 50% of the shares in ANP Partners to REST. That relief was subsequently continued, by consent, pending the final hearing.

3 Four main issues arise in the proceedings:

(1) Did APT, by the acceptance notice sent at 1430 on 22 September 2010, unconditionally accept the offer constituted by the Transfer Notice in accordance with clause 22 of the Partnership Agreement)?

(2) If not, would the correspondence sent by APT at 1622 and 1716 , if within time, have resulted in an unconditional acceptance of the offer constituted by the Transfer Notice?

(3) If so, was that correspondence received while the offer remained open?

(4) If there was no valid acceptance by APT, was the Transfer Notice valid and effective for the purposes of clause 22 of the Partnership Agreement?

Unconditional acceptance by 1430 Acceptance Letter?

4 The dispositive issue is whether APT’s 1430 facsimile acceptance letter was an unconditional acceptance of the offer contained in the Transfer Notice. In my opinion it was, for the following reasons.

5 The pre-emption provisions of the Partnership Agreement. Clause 20.1 of the Partnership Agreement imposes on the partners and their holding companies (APT, ANP and REST) a general restriction on dealing with their partnership interests or shares in a partner respectively, without the unanimous approval of the partners or as otherwise expressly required by the agreement, provided that in respect of a proposed transfer by a partner to a third party of its interest, or by a holding company of its shares in a partner, such approval could be withheld only if, in the reasonable opinion of the partner, the proposed new partner or holding company was not or would not remain solvent with the financial capacity to perform its obligations under the agreement. Clause 21 gives pre-emptive rights to the other partners where one partner wishes to transfer any or all of its partnership interest. As what was proposed in this case was transfer, not of a partner’s partnership interest, but of a holding company’s shares in its subsidiary partners, this clause was not engaged.

6 Clause 22 of the Partnership Agreement, entitled "Pre-emptive rights over shares in Partners", gives pre-emptive rights to the other holding companies where one holding company wishes to transfer all or any of its shares in a partner to a third party. It was this provision that was engaged. Clause 22.1(a) provides:

If a Holding Compan y ("Transferor") wishes to transfer all or any of its shares in a Partner to a third party or third parties (other than pursuant to paragraph 20.1(d)) (the "Sale Interest") it must give a notice ("Transfer Notice") to each of the other Holding Companies ("Remaining Holding Companies") and to the chairperson of the Partnership Committee.

7 Clause 22.2 specifies the effect of a Transfer Notice:

A Transfer Notice constitutes an unconditional offer ("Offer") by the Transferor to transfer the Sale Interest to any and all of the Remaining Holding Companies upon the terms set out in the Transfer Notice. The Offer must remain open for a period stated in the Transfer Notice, being not less than 20 Business Days from the date of the Transfer Notice ("Offer Period").

8 Clause 22.3 provides for the acceptance of such an Offer, relevantly as follows:

(a) At any time during the Offer Period any of the Remaining Holding Companies ("Acceptor") may give notice in writing to the chairperson of the Partnership Committee ("Acceptance Notice") accepting the Offer in respect of some or all of the Sale Interest. The chairperson of the Partnership Committee must give a copy of the Acceptance Notice to each Remaining Holding Company.
(b) The contract so formed ("Sale Contract") will be subject to the terms of this clause 22.
…
(e) Acceptance of an Offer pursuant to this clause 22.3 must be unconditiona1.

9 Clause 23 provides for a deemed transfer notice upon an “event of default”, which includes where “a Partner or its Holding Company effects or purports to effect a Dealing other than in accordance with this Agreement”, and “a Change in Control has occurred in respect of a Partner” without the written consent of all others. For this purpose, “Control” includes control of the composition of the board, or of 50% of the share capital, or of 50% of the votes in general meeting.

10 The Transfer Notice. On 25 August 2010, ANP gave to APT and REST a Transfer Notice under clause 22, in the following form:

Transfer Notice
On 25 August 2010, ANP Sea Gas Holdings Pty Ltd (ANP Holdco) and International Power (Australia) Pty Ltd (IPRA) entered into a Share Sale Agreement (SSA) to sell ANP Holdco’s one-third interest in the Partnership (the Sale Interest) to State Infrastructure Holdings (SEA Gas) Pty Ltd.
Capitalised terms not otherwise defined in this letter have the meaning given to them in the partnership agreement between, among others, the ANP Partners, APT SEA Gas SPV2 Pty Ltd and APT SEA Gas SPV3 Pty Ltd (together the APT Partners), REST SEA Gas SPV1 Pty Ltd and REST SEA Gas SPV2 Pty Ltd (together the REST Partners) and South East Australia Gas Pty Ltd originally dated 11 February 2002 and most recently amended on 29 July 2007 (the Partnership Agreement).
Transfer Notice
The Sale Interest is offered for sale to REST SEA Gas Pipelines Pty Ltd (REST Holdco) and APT SEA Gas Holdings Pty Ltd (APT Holdco) in accordance with clause 22 of the Partnership Agreement on the following terms:
(a) this letter constitutes a Transfer Notice and is an unconditional offer (Offer) to transfer the Sale Interest to REST Holdco and APT Holdco;
(b) the sale interest comprises 100% of ANP Holdco’s shareholding in each of ANP Sea Gas SPV2 Pty Ltd (ANP SPV2) (100 fully paid ordinary shares) and ANP SEA Gas SPV3 Pty Ltd (ANP SPV3) (100 fully paid ordinary shares) (together the ANP Partners); and
(c) the aggregate price for the Sale Interest is $98,849,053 (being the initial Purchase Price as defined in the SSA).
All of the other terms and conditions upon which the Sale Interest is offered for sale are set out in the SSA which is attached as Attachment 1 to this Transfer notice and the Escrow Agreement which is attached as Attachment 2 to this Transfer Notice.
Timetable
In accordance with clause 22.2 of the Partnership Agreement, the Offer is open for a period of 20 Business Days from the date of this Transfer Notice (the Offer Period) and is subject to any extension of the Offer Period pursuant to clause 22.3(c) of the Partnership Agreement.
Please inform us and the chairperson of the Partnership Committee as soon as possible whether APT Holdco will be accepting the Offer in respect of some or all of the Sale Interest. In accordance with clause 22.3(e) of the Partnership Agreement, acceptance of the Offer must be unconditional.

11 The Dealing Consent Request. On the same day, ANP sent to the APT Partners and the REST Partners a letter requesting consent under clause 20.1(a) to the dealing constituted by the proposed sale to SIH, relevantly as follows:

Transfer Consent Letter – request for consent to sale of shares in ANP SEA Gas SPV2 and ANP SEA Gas SPV3 (together the ANP Partners)
On 25 August 2010, ANP SEA Gas Holdings Pty Ltd (ANP Holdco) and International Power (Australia) Pty Ltd (IPRA) entered into a Share Sale Agreement (SSA) to sell ANP Holdco’s one-third interest in the Partnership (the Sale Interest) to State Infrastructure Holdings (SEA Gas) Pty Ltd (SIH).
Capitalised terms not otherwise defined in this letter have the meaning given to them in the partnership agreement between, among others, the ANP Partners, APT SEA Gas SPV2 Pty Ltd and APT SEA Gas SPV3 Pty Ltd (together the APT Partners), REST SEA Gas SPV1 Pty Ltd and REST SEA Gas SPV2 Pty Ltd (together the REST Partners) and South East Australia Gas Pty Ltd originally dated 11 February 2002 and most recently amended on 29 July 2007 (the Partnership Agreement).
Consent
The sale of the shares in the ANP Partners to SIH will constituting a Dealing under clause 20.1(a) of the Partnership Agreement, requiring the unanimous approval in writing of the APT Partners and the REST Partners. Accordingly this letter constitutes a request for written approval of each of the APT Partners to the sale of the shares in the ANP Partners to SIH (Dealing Consent).
Clause 20.1(b) of the Partnership Agreement provides that each of the APT Partners and the REST Partners may only withhold the Dealing Consent in the limited circumstances where, in the relevant Partner’s reasonable opinion, SIH is not, or will not remain, solvent with the financial capability to perform its obligations under the Partnership Agreement
Details of Buyer
…
Timetable
Pursuant to clause 20.1(f)(ii) of the Partnership Agreement, each of the APT Partners and REST Partners must communicate in writing their approval of the Dealing or otherwise to all other Partners within 15 Business Days of receiving this request.
Pre-Emptive Rights and Change of Control
Each of APT SEA Gas Holdings Pty Ltd (APT Holdco) and REST SEA Gas Pipelines Pty Ltd (REST Holdco) have been provided with a Transfer Notice in accordance with clause 22 of the Partnership Agreement. Each of the APT Partners and the REST Partners have also been provided with a Change of Control consent letter pursuant to which they have been requested to consent to a sale of the shares in ANP Holdco, rather than a sale of the shares in the ANP Partners.
If
(a) APT Holdco and REST Holdco choose not to fully exercise their rights either jointly or separately in respect of the Transfer Notice within the Offer Period (such that Acceptance Notices are not received in respect of all of the Sale Interest); and
(b) the APT Partners and the REST Partners do not consent to the proposed Change of Control which would result from a sale of the shares in ANP Holdco,
then, subject to receiving the Dealing Consent from the APT Partners and the REST Partners, ANP Holdco will proceed with the sale of the Sale Interest to SIH in accordance with clause 22.5 of the Partnership Agreement.

12 The Change of Control Consent Request. Also on the same day, ANP sent to the APT Partners and the REST Partners a letter requesting Change of Control Consent under clause 23.1(e) to an alternative structure, namely an “upstream” sale of all the shares in ANP Holdco by its holding company, International Power (Australia) Pty Ltd (“IPRA”) to SIH, relevantly as follows:

Change of Control Consent Letter – request for consent to a sale of shares in ANP SEA Gas Holdings Pty Ltd
On 25 August 2010, ANP Sea Gas Holdings Pty Ltd (ANP Holdco) and International Power (Australia) Pty Ltd (IPRA) entered into a Share Sale Agreement (SSA) to sell ANP Holdco’s one-third interest in the Partnership (the Sale Interest) to State Infrastructure Holdings (SEA Gas) Pty Ltd (SIH).
Capitalised terms not otherwise defined in this letter have the meaning given to them in the partnership agreement between, among others, ANP SEA Gas SPV2 Pty Ltd and ANP SEA Gas SPV3 Pty Ltd (together the ANP Partners), REST SEA Gas SPV1 Pty Ltd and REST SEA Gas SPV2 Pty Ltd (together the REST Partners) and South East Australia Gas Pty Ltd (the Manager) originally dated 11 February 2002 and most recently amended on 29 July 2007 (the Partnership Agreement).
Background
The SSA provides for the sale of the Sale Interest to occur by way of a sale by ANP Holdco of all of the shares in the ANP Partners, unless each of the APT Partners and each of the REST Partners give the consent requested in this letter, in which case the sale will proceed by way of a sale by IPRA of all the shares in ANP Holdco.
The SSA (attached to the Transfer Notice sent to APT Sea Gas Holdings Pty Ltd (APT Holdco) on the same date as this letter) provides that a sale of shares in ANP Holdco is on the same terms as a those governing the sale of the shares in the ANP Partners, subject only to the mechanical amendments effected by Schedule 5 of the SSA and the requirement for the additional consent requested in this letter.
If the sale set out in the SSA proceeds by way of the sale of the shares in the ANP Partners, SIH, the Manager, the APT Partners and the REST Partners will be required to enter into a number of new or amended documents to effect the replacement of ANP Holdco with SIH as the relevant Holding Company under the Partnership Agreement. Attachment 1 to this letter contains a non-exhaustive list of the documents which are required to be executed in this event. This majority of these documents will not be required if the sale proceeds as a sale of shares of ANP Holdco.
Change of Control Consent
Any sale of the shares in ANP Holdco amounts to a Change of Control and requires the consent of the APT Partners and the REST Partners in accordance with clause 23.1(e) of the Partnership Agreement. Accordingly this letter is a formal request to obtain the written consent of each of the APT Partners to the Change of Control which would occur as a result of the sale of the Sale Interest proceedings as a sale of the Shares in ANP Holdco (Change of Control Consent).
Advantages of providing the Change of Control Consent
ANP Holdco has delivered to APT Holdco a Transfer Notice with respect to the sale of the shares in the ANP Partners in accordance with clause 22 of the Partnership Agreement. If APT Holdco chooses not to accept the offer constituted by the Transfer Notice, and you are satisfied that SIH is, and will remain, solvent with the financial capability to perform its obligations under the Partnership Agreement, then we believe that you will not be disadvantaged by providing the Change of Control Consent. Rather, provision of the Change of Control Consent will significantly reduce the unnecessary administrative burden on each of Australian Pipeline Trust, The Retail Employees Superannuation Trust, the Manager and the Partnership, by removing the need to draft, review and execute a number of documents, some of which will involve the Manager’s financiers.
If you do not provide the Change of Control Consent, ANP Holdco will proceed with the sale of the shares in the ANP Partners, subject to the pre-emptive rights process in clause 22 of the Partnership Agreement and the consent requirements in clause 20 of the Partnership Agreement.
We request that you communicate in writing your response to our request for the Change of Control consent at the same time as the APT Holdco response to the Transfer Notice.

13 On 1 September, the APT Partners sent a letter to ANP, relevantly as follows:

Change of Control Consent Letter – request for consent to a sale or shares in ANP SEA Gas Holdings Pty Ltd
We refer to your letter dated 25 August 2010 bearing the same heading (subject matter) as this letter. Terms used in this letter bear the same meaning as in that letter.
We note that you have requested that we respond to your request for the Change of Control consent at the same time as APT Holdco responds to the Transfer Notice.
APT Holdco will send a letter regarding to the purported Transfer Notice on the same date as this letter, with certain requests.
We understand that APT Holdco intends to formally respond as to whether or not the offer made in accordance with the Transfer Notice will be accepted (assuming it is valid).

We intend to respond on the request made for consent to a sale of shares in ANP SEA Gas Holdings Pty Ltd at the same time.

14 On 2 September, ANP sent a letter to APT, relevantly as follows:

APT correspondence of 1 September 2010 in respect of the Transfer Notice dated 25 August 2010
We refer to each of:

· our Transfer Notice dated 25 August 2010 as delivered to APT SEA Gas Holdings (APT Holdings) by hand delivery at 3.40pm on 25 August 2010 (the ANP Transfer Notice); and

· your letter dated 1 September 2010 entitled “Transfer Notice” received by us by facsimile on 1 September 2010 (the APT Letter).
…
1. Confirmation of the Offer Period which applies to the ANP Transfer Notice
(a) The ANP Transfer Notice constitutes a Transfer Notice for the purposes of the Partnership Agreement. Accordingly, pursuant to clause 22.2 of the Partnership Agreement, the Offer Period (as defined in clause 22.2 of the Partnership Agreement) expires at 4.00pm on 22 September 2010.
(b) Nothing in paragraphs 2 or 3 of this letter in way affect or extend the date referred to in paragraph 1(a) of the letter.
…
3. REST Holdings
For the avoidance of doubt REST Holdings confirmed each of the matters set out in paragraph 1(a) of this letter in respect of itself on Friday 27 August 2010.

15 REST Acceptance Letters. At 1240 on 22 September 2010, REST sent two letters to the Chair of the Partnership Committee. The first addressed the Transfer Notice, as follows:

SEA Gas Pipelines – Acceptance Notice
I refer to the transfer notice dated 25 August 2010 received from ANP Holdco in relation to its one third Interest in the Partnership, a copy of which is attached (Transfer Notice). Unless the context otherwise requires, capitalised terms used in this letter but not defined have the same meaning giving to them in the Transfer Notice.
In accordance with clause 22.3 of the Partnership Agreement, by this notice (Acceptance Notice) REST SEA Gas Pipelines Pty Ltd (Rest Holdco) accepts the Offer in respect of 100% of the offered Sale Interest.
I acknowledge that the resulting Sale Contract (as that term is referred to in clause 22.3(b) of the Partnership Agreement) is subject to the terms of clause 22 of the Partnership Agreement. Further, in accordance with clause 22.3(e) of the Partnership acceptance of the Offer is unconditional.

16 The second addressed the Change of Control Consent, as follows:

SEA Gas Pipelines – request for consent to a sale of shares in ANP SEA Gas Holdings Pty Ltd
I refer to your letter dated 25 August 2010, titled ‘ Change of Control Consent Letter – request for consent to a sale of shares in ANP SEA Gas Holdings Pty Ltd ’ (Change of Control Consent Letter). Unless the context otherwise requires, capitalised terms used in this letter but not defined have the same meaning given to them in the Change of Control Consent Letter or the Partnership Agreement.
As set out in an Acceptance Notice dated 22 September 2010, REST SEA Gas Pipelines Pty Ltd (REST Hold Co) has exercised its pre-emptive right under clause 22 of the Partnership Agreement and accepted the Offer in respect of 100% of the offered Sale Interest.
In that context, for the purposes of clause 23.1(e) of the Partnership Agreement, the REST Partners:
1. Do not consent to the Change in Control contemplated in the Change of Control Consent Letter (namely, a sale by IPRA of all the shares in ANP Holdco to SIH).
2. Consent to a Change in Control occurring in respect of the ANP Partners as a consequence of a sale by IPRA of all the shares in ANP Holdco to REST Hold Co pursuant to the exercise by REST Hold Co of its pre-emptive rights under clause 22 of the Partnership Agreement.

17 APT Acceptance Letter. At 1430 on 22 September 2010, APT sent a letter to the chair of the Partnership Committee, by facsimile transmission, as follows:

International Power Correspondence – Transfer Notice Letter Acceptance Notice
We refer to the letter from ANP SEA Gas Holdings Pty Ltd (ANP Holdco) dated 25 August 2010 headed “ Transfer Notice ” (Transfer Notice) and our respective correspondence in this matter. Terms used in this letter bear the same meaning as those used in the Transfer Notice or the Partnership Agreement.
In accordance with clause 22 of the Partnership Agreement, we accept ANP Holdco’s Offer in respect of 50% of the Sale Interest.
In light of this Acceptance Notice in respect of 50% of the Sale Interest, we note that if you receive a valid Acceptance Notice from REST Holdco for 50% or more of the Sale Interest (for example if REST Holdco gives an Acceptance Notice in respect of 100% of the Sale Interest), the Acceptance Notices “will be deemed to be in proportion to the Partnership Interests of the Acceptors’ Partners and the Sale Interest will be so allocated” (clause 22.3(d) of the Partnership Agreement).
Accordingly, for the avoidance of doubt, in that scenario based on the equal aggregated Partnership Interests of the APT Partners and the REST Partners (ie a 50/50 ratio or proportion between their respective aggregate Partnership Interests), REST Holdco’s Acceptance Notice will be deemed to be for only half of the Sale Interest (with our Acceptance Notice for the other half of the Sale Interest).
We note from the premise of ANP Holdco’s Change of Control Consent Letter dated 25 August 2010, together with Schedule 5 of the SSA, ANP Holdco’s and International Power (Australia) Pty Ltd’s (IPRA) preference for the sale set out in the SSA to proceed to way of a sale of the shares in ANP Holdco.
Therefore, subject to the Partnership Agreement and in accordance with the Transfer Notice and the SSA, APA Group is willing to accede to your preference and to instead acquire 50% of the issued share capital in ANP Holdco from IPRA. A mechanical consequence of your preference is that rather than the “Buyer” being APT Holdco, for consistency with the present SEA Gas Structure, APT Holdco proposes that the “Buyer” is to then be APT Pipelines (SA) Pty Ltd (ACN 124 754 347), namely the parent of APT Holdco. APT Pipelines Limited will be the “Buyer Guarantor”.
As ANP Holdco will appreciate, certain other mechanical, consequential changes to the SSA and the Escrow Agreement flow from this to give effect to this Acceptance Notice (for the purposes of clause 22.3(a)).
We have sought to identify in the Annexures to this letter those consequential changes (in a table and handwritten format) for ease of reference. Annexures 1 and 2 address the SSA’s consequential changes and Annexures 3 and 4 address the Escrow Agreement’s consequential changes.
If you would like to discuss any of these mechanical amendments, please let us know.
We would then expect that you would promptly provide us with relevant execution versions of the SSA and Escrow Agreement. Please advise us of your process to exchange executed counterparts.
Please also advise us if the Offer Period is automatically extended by a further 10 Business Days in accordance with clause 22.3(c) of the Partnership Agreement.

18 As it indicated, a table of suggested “Mechanical Amendments” to the SSA accompanied the letter, the more material amendments in which included:

(a) the threshold above which the Seller Parties were liable for claims by the Buyer Parties was halved, from $1 million to $500,000: clause l0.6(a);

(b) the ‘materiality’ threshold for warranty claims in clause 2.3 of Schedule 1 of the SSA was reduced by 50%;

(c) the definition of “SEA Gas Material Adverse Change Termination Event” in Schedule 1 was altered so as to reduce, by 50%, the threshold at which the Buyer enjoyed a right to terminate the SSA pursuant to clause 6.1(d)(3); and

(d) the Buyer of the shares was nominated as APT Pipelines Limited.

19 Subsequent correspondence. At approximately 1622 on 22 September 2010, APT emailed and faxed a further letter to the Chair of the Partnership Committee, relevantly as follows:

We confirm that our acceptance of the ANP Holdco’s Offer in respect of 50% of the Sale Interest is unconditional.
We had sought to identify in the Annexures to our Acceptance Notice consequential changes. These proposed consequential changes incorporated amendments effectively halving warranty claim thresholds and caps. International Power has indicated that this is unacceptable. We accept that position and we will provide you with an amended table shortly.

20 And at approximately 1716 on 22 September 2010, APT emailed and faxed yet a further letter to the Chair of the Partnership Committee, as follows:

We refer to the letter from ANP SEA Gas Holdings Pty Ltd (ANP Holco) dated 25 August 2010 headed “Transfer Notice” (Transfer Notice) and our Acceptance Notice and follow-up confirmation letter of today’s date. Terms used in this letter bear the same meaning as those used in the Transfer Notice or the Partnership Agreement.
Following from our confirmation letter, we now attach an amended Annexure 1 to the Acceptance Notice removing the proposed consequential changes to the SSA relating to warranty claim thresholds and caps.

21 Unconditional acceptance. The requirement in clause 22.3(e) of the Partnership Agreement that acceptance of an Offer must be unconditional reflects the position that obtains at genera1 law. An acceptance will not be unconditional if it is hedged with conditions (for example, it is expressed to be subject to finance, or to a third party’s consent, or to some amendment of the terms of the offer). A purported acceptance will be construed objectively, by reference to what a reasonable recipient would have understood the document to mean, and the subjective intentions of the purported ‘acceptor’ are irrelevant. As Tobias JA said in Redowood Pty Ltd v Mongoose Pty Ltd [2005] NSWCA 32 (at [76]):

In Carter [v Hyde (1923) 33 CLR 115] the High Court stated that what must be determined is whether a reasonable recipient of the acceptance would have regarded it as corresponding to the offer or whether they would have taken the acceptance to be qualifying the original offer such that it would amount to a counter-offer or, at any rate, not an unconditional acceptance of what was originally offered. Thus Isaacs J (at 126), referring to the circumstance where the offeror had not objected to the offeree’s purported acceptance (bearing in mind that in Carter the acceptance was personally delivered), observed :
In those circumstances the appropriate question is that of Romer J in Jones v Daniel, namely ‘Now what would anybody when he received that letter fairly understand to be the meaning of it?’ and I add, of course, ‘in the circumstances of its receipt’ ...

22 The context in which the APT Acceptance Letter was sent and received is of importance. First, clause 22.1(e) of the Partnership Agreement required that an acceptance be unconditional; a requirement that was repeated in the Transfer Notice itself. That makes it improbable that a purported acceptance would be intended to be other than unconditional. Secondly, ANP had stipulated for a concurrent response to its request for Change of Control Consent, so it would have been contemplated that, with APT’s response to the Transfer Notice, there would be a concurrent response to the alternative proposal involved in the Change of Control Consent. Thirdly, rightly or wrongly, the parties were apparently operating on the basis that the closing time for acceptance was, or at least might be, 1600 on 22 September, as asserted by ANP in its letter of 2 September 2010. Fourthly, as required by the Partnership Agreement in respect of an acceptance, it was sent not to ANP (which might have been appropriate for a counter-offer), but to the chair of the Partnership Committee.

23 So too is the content of the Acceptance Letter. It was entitled, “Transfer Notice Letter Acceptance Notice”. The first three paragraphs, had they stood on their own, would have been unambiguously an acceptance of the Transfer Notice offer. In that respect, they are reinforced by the last paragraph. There is nothing in the letter that explicitly states that the acceptance expressed in those paragraphs is other than unconditional. The remaining paragraphs, which are said to amount to the implicit imposition of conditions on the acceptance, in my opinion do not have that effect. As is indicated in the opening words of the fourth paragraph (“We note from the premises of ANP Holdco’s Change of Control Consent Letter …”), the subject matter switches at that point from the response to the Transfer Notice, to a response to the Change of Control Consent Request. In that respect, the response notes ANP’s preference, and states that, subject to various matters, APT is willing to accede to your preference and instead acquire 50% of the issued share capital in ANP – that is, instead of the consequences of acceptance of the Transfer Notice. That amounts to no more than an expression of a willingness to accede to a request to substitute a different arrangement, and not the attempted imposition of a condition upon what had already been accepted. The substitution of APT Pipelines as buyer is proposed in that light – in the event that the alternative arrangement is to proceed, not imposed as a condition of acceptance of the Transfer Notice. The various proposed alterations to the Share Sale Agreement are what APT perceives to be the “mechanical consequences” of “your preference” – namely to proceed by way of “upstream” sale.

24 ANP points to the paragraph:

As ANP Holdco will appreciate, certain other mechanical, consequential changes to the SSA and the Escrow Agreement flow from this to give effect to this Acceptance Notice (for the purposes of clause 22.3(a)). We have sought to identify in the Annexure to this letter those consequential changes (in a table and handwritten format) for ease of reference.

25 It argues that the only transaction provided for under clause 22.3(a) was a transfer of shares in the ANP Partners (ie the primary transaction), and that dealings in shares in ANP (ie the alternative transaction) were regulated by clause 23 of the Partnership Agreement, which contained no offer/acceptance regime and had the effect of requiring the consent of all holding to any change in ownership of ANP; the notice therefore explicitly recognised that amendments contained in the annexed table also related to the sale of shares in the ANP Partners; accordingly, the terms of the notice were contrary to the submission that the proposed changes to the SSA were limited to those flowing from ANP’s preference for the alternative transaction.

26 I do not accept this. First, the words “from this” in the above excerpt relate back to “your preference” in the preceding paragraph, which ties it to the proposed alternative transaction – the “upstream” sale. Secondly, even if APT were seeking to apply some of the so-called “mechanical consequences” – such as halving various warranty thresholds – to the primary transaction (the contract arising from acceptance of the Transfer Notice simpliciter), in the context that REST had also accepted, their very description as “mechanical” or “consequential” is telling: APT was not seeking to propose substantive changes to the contract that was brought into existence by unconditional acceptance of the Transfer Notice, but merely to suggest what consequential changes to the documentation would be required, in the events that had transpired, to give effect to the contract that arose upon acceptance of the Transfer Notice. In my view, this was not an attempt to propose new or different terms, but at the highest to suggest necessary formal amendments in order to document accurately the terms of the contract that would automatically arise upon acceptance – this was seen as necessary because not all the terms of the SSA with SIH which related to 100% of the shareholding were applicable in the context of a sale of 50% of the shareholding to each of APT and REST.

27 It is useful to consider two questions.

28 First, in the context that the Acceptance Letter was sent, 90 minutes before the offer lapsed, to the person nominated for receipt of notices of acceptance (as distinct from the offeror); that any acceptance was required to be unconditional; that the Acceptance Letter expressed in terms acceptance of the offer contained in the Transfer Notice, and did not state that it was other than unconditional, nor expressly impose any condition; and that it concurrently addressed the Change of Control Request, in circumstances where a concurrent reponse to that request had been sought: could the recipient reasonably have thought that APT was really saying, not (as the letter did) “In accordance with clause 22 of the Partnership Agreement, we accept ANP Holdco’s offer in respect of 50% of the Sale Imnterest”, but instead “We are prepared to accept ANP Holdco’s offer only if ANP agrees to substitution of a different purchaser, and the various alterations set out in the attached table”? That is not what the letter explicitly said, and in my view a reasonable recipient would in the circumstances not have regarded it as implicitly doing so.

29 Secondly, if ANP were the plaintiff, suing to enforce an agreement said to arise from the Acceptance Letter, could APT have succeeded in an argument that it had not accepted the Transfer Notice offer, but rejected it and made a counter-offer? In my view, plainly not.

30 It follows that, in my opinion, APT accepted the offer contained in the Transfer Notice by its letter of 1430 on 22 September 2010. The other issues do not therefore arise. However, lest I be incorrect on the dispositive issue, I shall briefly record my views in respect of them.

Unconditional acceptance by later correspondence?

31 Were they within time, APT’s subsequent communications of 1622 and 1716 on 22 September put beyond doubt that APT’s intention was unconditionally to accept the offer.

32 I do not accept that, even if the 1430 letter was not an unconditional acceptance, it had the consequence that thereafter the offer was no longer available for acceptance. A rejected offer does not always lapse, and may remain operative if in the circumstances it should be treated as remaining on foot and available for acceptance [Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, [80]]. Here, the offer was required to remain open until the stipulated closing time, and did not lapse just because there was at first, at worst, an equivocal response.

Subsequent correspondence out of time?

33 The offer was required to remain open for a period stated in the Transfer Notice, being not less than twenty Business Days from its date. A Business Day was defined as a day other than a Saturday, Sunday or public holiday; but there is nothing in the definition to limit it by hours, and in particular nothing to indicate that it ends at 1600; accordingly, for present purposes, a Business Day, like any other day, ends at 2359.

34 Clause 22.3(a) of the Partnership Agreement provides that "at any time during the Offer Period" a Remaining Holding Company may "give notice in writing to the chairperson of the Partnership Committee ... accepting the Offer". The Transfer Notice was dated 25 August, and delivered at about 1540 that day. It was uncontroversial that that 22 September was the 20th Business Day after the date of the offer. The Transfer Notice stated that it was open for a period of twenty Business Days from its date (not from its hour). In my view, that means until the close of twenty complete Business Days after the date of the offer, not only until the expiration of twenty 24-hour periods on Business Days from the moment of the offer. The Offer Period therefore expired at 2359 on 22 September.

35 Clause 31 of the Partnership Agreement is entitled "Notices". Clause 31.1 requires a "notice or other communication ... given under this Agreement" to be in writing, signed by or on behalf of the sender. I agree that the Acceptance Notice required to be sent by an accepting Remaining Holding Company under clause 22.3(a) is, by definition, a notice given under the Partnership Agreement, and falls within the scope of clause 31.

36 By clause 31.2, a notice may be given to the addressee by hand delivery, pre-paid mail or facsimile transmission. Clause 31.3 provides for deemed receipt of postal notices on the third Business Day after posting (or the tenth Business Day if posted outside of Australia), unless it is in fact received earlier. In other words, it facilitates proof of service, but permits proof of actual service at an earlier time.

37 Clause 31.4 provides for deemed service of notices sent by facsimile to certain specified facsimile numbers:

Subject to this Agreement, a Notice sent by facsimile transmission to the facsimile number shown for the addressee in Schedule I will be deemed to have been received by the addressee when transmission of all pages of the Notice has been confirmed by the sender’s facsimile machine.

38 Clause 31.4 facilitates proof of service in the cases to which it applies. However, it does not apply to service on the Chair of the Partnership Committee, who is not listed in Schedule 1. Contrary to REST’s submission, the words “Subject to this Agreement” do not permit the clause to be read as if the Chair were listed with a facsimile number in Schedule 1, when he is not. Thus “deemed” service under clause 31.4 is not available in the case of service on him; actual notice must be proved – although here, it was not in issue.

39 Clause 31.4 does not contain a provision, equivalent to that in clause 31.3, permitting proof of actual service earlier than deemed service. This is unsurprising, because of the instantaneous nature of facsimile transmission. However, clause 31.5 provides:

If clause 31.4 would deem a Notice to have been received on a day other than a Business Day or at a time after 4.00pm on a Business Day, that Notice will be deemed to have been received by the addressee at 10.00am on the next Business Day after transmission.

40 Clause 31.5 also does not expressly contain a provision, equivalent to that in clause 31.3, permitting proof of actual service earlier than deemed service. However, the purpose of clause 31.5 is to mitigate the rigours of deemed service under clause 31.4. In my view, it does not apply where ”deemed” service is not relied upon, but actual notice is established. This is consistent with the provisions of clause 31.3, allowing for proof of earlier actual notice. It is also consistent with the circumstance that there is no limit (to 4.00 pm or otherwise) in respect of service by hand, which could therefore take place until 2359, if the Chair could be found. In those circumstances, there is no reason for excluding proof of earlier actual notice by facsimile, where deemed service is not relied upon.

41 Accordingly, clauses 31.3, 31.4 and 31.5 are about deemed service. They facilitate proof of service. They do not exclude proof of earlier actual service.

42 Here, the chair of the partnership committee is shown to have actually received the supplementary acceptance communications before the close of the twentieth Business Day after the date of Transfer Notice, albeit after 1600. In those circumstances, they were within time. The deeming provisions need not be – indeed, because the chair is not listed in the schedule, cannot be – invoked.

43 It follows that the supplementary APT acceptance correspondence was in time, and even if (contrary to my principal conclusion) the 1430 Acceptance Letter did not have effect as an unconditional acceptance, any doubt was removed by the subsequent correspondence.

Validity of the Transfer Notice

44 APT did not ask me that the Transfer Notice be held invalid if I concluded, as I have, that it had effectively accepted the offer. The defendants argued that APT was precluded from impugning its validity, and that in any event it was valid.

45 I would not accept that APT was precluded, on any of the various bases advanced by the defendants, from contending in the alternative that the Transfer Notice was not a valid one. All the “preclusion” arguments arose, in one way or another, from the circumstance that APT had purported to accept the offer, which was said to be inconsistent with contending that there was no valid offer.

46 Estoppel. It was argued that APT was estopped, either by an equitable estoppel or a conventional estoppel, founded on an assumption entertained by the defendants and either encouraged or shared by APT, that the Transfer Notice was valid, upon which the defendants are said to have acted. However, any change in the defendants’ positions arose from REST’s acceptance of the Transfer Notice, which was undertaken without reference to anything done or omitted by APT. Moreover, APT’s letter to ANP of 1 September had referred to “the purported Transfer Notice”, and to a contemplated response by APT “assuming it is valid”, in a manner that left open the question of the validity of the Transfer Notice. In my view, no estoppel arises.

47 Common law election. It was argued that by (of necessity, unconditionally) accepting the Transfer Notice offer, APT elected against impugning its validity. However, there were no inconsistent rights between which APT had to elect. There were no concurrent rights to rescind or affirm: APT could if it wished state, “we do not accept that this is a compliant offer, but lest it is we unconditionally accept it”. The requirement that any acceptance be unconditional does not dispense with any entitlement to dispute the validity of the offer; it means only that the acceptance cannot be hedged with conditions (for example, made subject to finance approval, or to a third party’s consent).

48 Approbation and reprobation. It was argued that, by accepting the offer in the Transfer Notice and then disputing the validity of the offer, APT was impermissibly “approbating and reprobating” the Transfer Notice. The complaint of “approbation and reprobation” is commonly made, but is usually inapt: the doctrine is of limited application, being indistinguishable from that of equitable election [Lissenden v CAV Bosch Ltd [1940] AC 412, 417; Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570, 588 [57]], by which equity fastens on the conscience of a person talking under a deed or will to refuse to permit him or her to take the benefit conferred free of the conditions attached to the gift [Pridmore v Magenta Nominess Pty Ltd (1999) 161 ALR 458, 470]. The circumstances necessary to attract the doctrine – in effect, a conditional gift – do not exist here.

49 Inconsistent pleading. It was argued that to plead the invalidity of the Transfer Notice was inconsistent with pleading valid acceptance of it. So it is, but the rules permit the pleading of inconsistent cases in the alternative [(NSW) Uniform Civil Procedure Rules 2005, r 14.18(2)]. Specifically, it is permissible for a defendant in a claim for breach of contract to deny the contract, and alternatively to plead that if there was one, then then plaintiff was in breach and liable to pay damages to the defendant [Peninsula & Oriental SN Co v Britnell (1892) 18 VLR 580].

50 Validity. However, I would not accept that the Transfer Notice was invalid. Essentially, the argument was that because various aspects of the SSA with SIH (such as the “purchaser guarantor”) were not relevant or capable of application to a sale to REST and/or APT under the pre-emption provisions, and others such as the warranty thresholds arguably required adjustment, the offer in the Transfer Notice either was not capable of immediate acceptance, or was too uncertain to found a contract. But although I accept that some difficulties arise from the form of the SSA, they are not insuperable; they are capable of resolution by a process of construction. The requirement of clause 22.1(b)(iii), that the Transfer Notice contain “all the other terms …, which must be the same as those of the proposed Third Party transfer”, must be read as if it included words to the effect: “mutatis mutandis and so far as relevant to the pre-emptive transaction”. While that may leave some room for dispute, it is a dispute that can be resolved by a process of construction of the Partnership Agreement and the SSA. Any contrary conclusion would wholly defeat the intention of the parties that there be an enforceable pre-emptive regime.

Conclusion

51 APT accepted the offer contained in the Transfer Notice by its letter of 1430 on 22 September 2010. In the context that the Acceptance Letter was sent, 90 minutes before the offer lapsed, to the person nominated for receipt of notices of acceptance (as distinct from the offeror); that any acceptance was required to be unconditional; that the Acceptance Letter expressed in terms acceptance of the offer contained in the Transfer Notice, and did not state that it was other than unconditional, nor expressly impose any condition; and that it concurrently addressed the Change of Control Request, in circumstances where a concurrent response to that request had been sought: the recipient could not reasonably have thought that APT was really not accepting the offer (as the letter stated) but instead insisting on various amendments.

52 The other issues do not therefore arise. However, even if (contrary to my principal conclusion) the 1430 Acceptance Letter did not have effect as an unconditional acceptance, the subsequent APT acceptance correspondence was in time, and removed any doubt.

53 Although I would have rejected each of the so-called preclusion arguments, I would not have accepted that the Transfer Notice was invalid. The requirement of clause 22.1(b)(iii), that the Transfer Notice contain “all the other terms …, which must be the same as those of the proposed Third Party transfer”, must be read as if it included words to the effect: “mutatis mutandis and so far as relevant to the pre-emptive transaction”, and while that may leave some room for dispute, it is a dispute that can be resolved by a process of construction of the Partnership Agreement and the SSA.

54 I make declarations in accordance with claims 1, 3 and 4 in the Summons. I order that the defendants pay the plaintiff’s costs.

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