Leadenhall Australia Ltd v Digicall Group Ltd
[1996] FCA 76
•22 FEBRUARY 1996
CATCHWORDS
CORPORATIONS - MISCELLANEOUS MATTERS - options to subscribe for ordinary shares - options issued subject to terms and conditions - special resolution passed by company reducing its share capital - reduction effected under s.195 of the Corporations Law - nature and effect of special resolution - principal object of special resolution was reduction of capital - proper construction of option contract's terms and conditions - object of option contract was to limit power of company to reorganise capital in order to provide protection to option holders
INTERPRETATION OF INSTRUMENTS - GENERAL RULES OF CONSTRUCTION OF INSTRUMENTS - court should try to place reasonable meaning on language used unless utterly impossible - distinction between difficulty of interpretation and absence of meaning - commercial contracts should be construed fairly and broadly
Corporations Law ss193, 195
Australian Stock Exchange Listing Rule 3G
Cases Considered
Forsayth Oil & Gas NL v Livia Pty Ltd (No.2) (1985) 59 ALJR 746
Re Southern Acceptance Corporation Ltd [1954] SASR 124
Hillas & Co. Ltd. v Arcos Ltd. (1932) 147 LT 503
LEADENHALL AUSTRALIA LIMITED v DIGICALL GROUP LIMITED
No. SG 115 of 1995
BEAUMONT, HILL AND TAMBERLIN JJ.
SYDNEY
22 FEBRUARY 1996
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. SG 115 of 1995
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
OF AUSTRALIA
BETWEEN:LEADENHALL AUSTRALIA LIMITED
Appellant
AND:DIGICALL GROUP LIMITED
Respondent
CORAM: BEAUMONT, HILL AND TAMBERLIN JJ.
WHERE MADE: SYDNEY
DATE: 22 FEBRUARY 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
Appeal allowed.
Set aside the orders made at first instance; in lieu thereof order that the separate question be answered as follows:
"On the assumption stated, the appellant is entitled to options to subscribe for 616,500 shares of 20 cents each in the capital of the respondent at an issue price of 20 cents per share."
Make no order for costs at first instance or on the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. SG 115 of 1995
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
OF AUSTRALIA
BETWEEN:LEADENHALL AUSTRALIA LIMITED
Appellant
AND:DIGICALL GROUP LIMITED
Respondent
CORAM: BEAUMONT, HILL AND TAMBERLIN JJ.
DATE: 22 FEBRUARY 1996
REASONS FOR JUDGMENT
THE COURT
INTRODUCTION
The appellant, Leadenhall Australia Limited ("Leadenhall"), commenced proceedings in the Court seeking, in its application, declaratory and other relief in respect of the issue to it of 616,500 fully paid note options ("the options") to subscribe for ordinary shares of 50 cents each in the capital of the respondent, Digicall Group Limited ("Digicall"). A Judge of the Court dismissed the application in circumstances to be described below. Leadenhall now appeals from that judgment.
THE ISSUE OF THE OPTIONS
There is no dispute about the facts. It is common ground that the options, issued prior to 8 October 1993, were issued subject to the terms and conditions contained in a document headed "Terms and Conditions of Options". That document provides, relevantly, as follows:
"1.Each Option entitles the holder to subscribe for one Ordinary Share of $0.50 in the capital of the Company at an issue price of 50 cents per share (i.e. par value).
Each share issued upon exercise of an Option will rank equally in all respects with shares in the Company issued before that share.
An Option may be exercised at any time until 5.00 pm Sydney time 4th day of May 1998 but lapses automatically if not exercised by that date. If the holder of the Option does not already hold a marketable parcel of shares, sufficient Options must be exercised to result in the holder of the Option holding a marketable parcel of shares.
Options are exercisable only by completing a Notice of Exercise in the usual form and delivering it with payment (which is effective only if any cheque is paid in the ordinary course of business) for the sum of 50 cents for each Option to the registered office of the Company.
...
An Option is transferable at any time prior to its expiry date. Separate option certificates will be issued."
Paragraphs 11 and 12, important for our purposes, are as follows:
"11.If all or any of the shares in the Company are subdivided or consolidated during the currency of the Option, the Option will be deemed to be for shares of the same nominal value as the shares resulting from the subdivision or consolidation, and the number of Options held and the subscription price will be reduced or increased as the case requires in proportion to the subdivision or consolidation.
12.If at any time and from time to time during the currency of the Options, the Company reduces capital so the number of shares held by members is reduced, the number of Options held by each Option holder will be correspondingly reduced as if when capital is reduced all of the Options were shares. If capital is reduced by reducing the paid up amount of shares, the Option will entitle the holder to a share of the same par value as other ordinary shares and the exercise price will be reduced in proportion to the proportion (if any) of the par value paid to holders of shares upon the reduction of capital."
THE REDUCTION OF CAPITAL
On 29 November 1994, the members of Digicall passed the following special resolution pursuant to s.195 of the Corporations Law:
"That subject to the confirmation of the Supreme Court of New South Wales and to any conditions imposed by the Supreme Court of New South Wales:-
(a)the issued capital of the Company be reduced from $6,266,448.50 made up of 12,532,895 shares to $2,506,579 divided into 12,532,895 shares of 20¢ each by cancelling paid up capital which has been lost or is unrepresented by available assets to the extent 30¢ of the paid up value of such shares without payment of any amount to the holders thereof; and
(b)the authorised capital of the Company be changed from $45,000,000.00 divided into 90,000,000 shares of 50¢ each to $45,000,000 shares [sic] divided into 220,000,000 [sic -
sc. 225,000,000] shares of 20¢ each by such reduction of capital and the consolidation and subdivision of the existing unissued shares and creation of new shares.
This reduction of capital shall take effect on the business day after the lodgement of the certified copy of this resolution and an office copy of the order of the Supreme Court of New South Wales with the Australian Securities Commission."
By order dated 2 December 1994, the Supreme Court of New South Wales confirmed, without conditions, the reduction of share capital of Digicall. Such reduction took effect on 7 December 1994.
By letter dated 26 September 1995, Leadenhall purported to exercise 541,250 options to subscribe for ordinary shares of 20 cents each in Digicall. Tendered with the letter was a cheque in the sum of $108,250.00. The purported exercise of the options was made on the basis that Leadenhall had an entitlement to 1,541,250 options for shares of 20 cents each at an issue price of 20 cents per share. But Digicall disputed Leadenhall's entitlement.
THE COURSE OF THE LITIGATION
Leadenhall applied to the Court for an order, amongst others, for the specific performance of its claimed entitlement to 541,250 shares of 20 cents each for the subscribed amount of $108,250.00. The parties proposed, and the Judge ordered, that a separate question be determined as follows:
"Whether, on the assumption that the resolution of November 1994 is effective according to its terms, the consequence of the resolution is:-
(a)that the applicant is entitled to options to subscribe for 1,541,250 shares of 20 cents each in the capital of the respondent at an issue price of 20 cents per share; or
(b)that the applicant is entitled to options to subscribe for 616,500 shares of 20 cents each in the capital of respondent at an issue price of 50 cents per share."
The primary Judge answered the question in the terms of para.(b) above and, accordingly, dismissed the application.
THE REASONING AT FIRST INSTANCE
It was common ground that the question for determination depended upon the proper interpretation of the conditions of issue of the options.
In interpreting these conditions, the primary Judge held that, because their language was ambiguous, and since it should be presumed that the parties knew of the applicable listing rules of the Australian Stock Exchange, and in particular, Listing Rule 3G, the contract should be construed against the background of those rules. Listing Rule 3G provides as follows:
"(1)Options to take up unissued shares in a company shall only be issued if -
...
(d)it is a condition of the option that in the event of a reconstruction (including consolidation, sub-division, reduction or return) of the issued capital of the company, the number of options and the exercise price of options shall be reconstructed in the same proportion as the issued capital of the company is reconstructed and in a manner which will not result in any additional benefits being conferred on optionholders which are not conferred on shareholders ... but in all other respects the terms for the exercise of options shall remain unchanged ... ."
The primary Judge rejected an argument advanced on behalf of Leadenhall that para.11 of the Terms and Conditions was brought into operation by para.(b) of the special resolution passed on 29 November 1994. The Judge held that, on its true interpretation, para.11 applied only in the case of a subdivision or consolidation of issued, as distinct from unissued, shares. Since para.(b) of the special resolution spoke only of the consolidation and subdivision of unissued shares, para.11 could not apply.
Turning to para.12, the Judge held that its first sentence was inapplicable since the special resolution did not have the effect of reducing capital "so the number of shares held by members is reduced". The number of shares held remained constant in the present case.
Proceeding to the second sentence, the primary Judge held that the special resolution had the effect of reducing capital "by reducing the paid up amount of shares" to 20 cents, so that each option holder was entitled to a share of
that par value, bearing "the same par value". However, the Judge continued:
"But what of the exercise price of such options? The second part of para.12 provides that `the exercise price will be reduced in proportion to the proportion (if any) of the par value paid to holders of shares upon the reduction of capital.' In the circumstances which happened no amount of the par value was paid to holders of shares upon the reduction of capital effected by the special resolution. As a consequence the exercise price upon which the options may be exercised was not reduced. Para.1 of the document `Terms and Conditions of Options' provides that it is to be 50 cents.
In my view, the words of the above paragraphs from the document `Terms and Conditions of Options' are plain and unambiguous. There is, therefore, no need to call in aid evidence as to the objective background against which the option contract was entered into."
Accordingly, as has been noted, the Judge answered the question in terms of para.(b).
THE GROUNDS OF APPEAL
By its grounds of appeal, Leadenhall now challenges the judgment at first instance on the grounds that the learned trial Judge erred (1) in finding that the words `shares in the company' in para.11 refer to issued share capital only; and (2) in holding that Listing Rule 3G was to be considered as part of the surrounding circumstances against which the contract between the appellant and the respondent was to be construed.
CONCLUSIONS ON THE APPEAL
(a) The character of the rights conferred by the options
It is well settled that the only rights granted by the options were contractual; and that, in the absence of specific provisions such as paras.11 and 12, a company is not fettered in its activities by granting options. Subject to the operation of such provisions, a company is free, in the absence of fraud, to reorganise its capital as it thinks fit, with such advantages or disadvantages as might ensue to option holders (see Forsayth Oil & Gas NL v Livia Pty. Ltd. (No. 2) (1985) 59 ALJR 746 at 747 per Lord Brightman).
The real issue for the primary Judge was whether, on analysis, the terms of the special resolution had any particular impact upon paras.11 or 12. These were, as the Judge said, questions of construction and interpretation of that resolution and of those conditions.
(b) The character of the special resolution
It is convenient to consider the nature and effect of the special resolution by reference, in the first place, to the statutory context; we will then consider the terms of the resolution themselves.
Capital may be reorganised in several ways. We will turn first to a reorganisation of capital by way of a reduction.
Section 195(1) of the Corporations Law provides that, subject to confirmation by the Court, a company may, if so authorised by its articles, by special resolution reduce its share capital in any way. In particular, a company may: (a) extinguish or reduce the liability on any of its shares not paid up; (b) cancel any paid-up share capital that is lost or is not represented by available assets; or (c) pay off any paid-up share capital that is in excess of its needs. The company may then alter its memorandum accordingly by reducing the amount of its share capital and of its shares.
Section 195(2) provides that a reduction in the paid-up share capital of a company does not, of itself, operate to reduce its nominal share capital.
In the present case, the reduction was effected, pursuant to s.195(1)(b), by cancelling 30 cents of capital which had been paid up to 50 cents on each of the shares that had been issued. This was achieved, in terms, by para.(a) of the special resolution. Paragraph (b) of the special resolution then addressed consequential amendments to the memorandum and the amount of the share capital and the shares, as is envisaged by s.195(1), by providing that, in accordance with s.195(2), the amount of the nominal share capital would remain at $45,000,000, yet all shares, issued or unissued, would be 20 cent, not 50 cent, shares; that is, instead of 90,000,000 shares of 50 cents each, there would be (as corrected) 225,000,000 shares of 20 cents each. In accordance with para.(a) of the special resolution, the number of issued shares would remain constant at 12,532,895 shares, but they would be treated as paid up to 20 cents, rather than 50 cents.
We turn next to the provisions relating to a reconstruction by way of consolidation or subdivision.
Section 193(1) empowers a company to alter its share capital (if so authorised by its articles but without the need for court confirmation) in several ways. By s.193(1)(b) a company may consolidate and divide all, or any, of its share capital into shares of larger amounts than its existing shares. By s.193(1)(d), a company may subdivide its shares, or any of them, into shares of smaller amounts. (By s.193(1)(e) a company may cancel shares that have not been taken, or agreed to be taken, again without court approval, but this has no application here.)
A consolidation has no effect on a company's nominal, issued or paid-up capital. Further, on a subdivision, a company's nominal, issued and paid-up capital are not altered. In the rare case where a company wishes to reduce only its authorised capital, shares not taken, nor agreed to be taken, may be cancelled without court approval. But, in general, once a limited liability company has allotted shares, it cannot reduce the number of shares allotted or reduce their nominal value. The exceptional circumstances in which this may occur are prescribed, as has been noted, by s.195(1) (see, e.g., Ford and Austin's Principles of Corporation Law, 7th ed. at pp.642-3).
In Re Southern Acceptance Corporation Ltd. [1954] SASR 124, Mayo J. observed (at 126) that "[p]rima facie the notion underlying [the companies legislation] is that a reduction will, when effective, lessen the amount of share capital, whether paid-up or not."
In the case of a cancellation of part of the capital paid up on shares, the company is presented with several alternatives. The shares could be left as partly-paid shares with their original par value (in this case 50 cents), or (as was done in the present case) they could remain as fully-paid shares with a lower par value (here 20 cents) (see Ford & Austin, above, at p.738).
It is true that in para.(b) of the special resolution, the language of consolidation and subdivision is used. But it is clear that no separate, or free-standing, consolidation or subdivision was involved here. The consolidation and subdivision were merely incidental to the reduction, so that the transaction is properly characterised as a reduction of capital.
(c)Did either para.11 or para.12 apply here?
In Forsayth, there were no terms and conditions providing for the effect of a reconstruction of capital on the rights of the option holders; that is, the contract was an "open" one. The case is, accordingly, distinguishable, although Lord Brightman referred (at 748) to the use of devices drafted with a view to protecting option holders. Ford and Austin (at p.641) describe such provisions as "usual".
It may be that the provisions of Listing Rule 3G should be taken into account for present purposes as part of the context, background or surrounding circumstances as an aid to interpretation (see Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 per Mason J. at 352). But we need not decide this now, as it is plain from the language of paras. 11 and 12 themselves that the objective of those paragraphs was to limit the power of the company to reorganise its capital so as to provide some degree of protection to option holders. Specifically, in our view, it appears from the language and plain effect of those conditions that their object was to achieve, so far as is practicable, a proportional outcome for option holders in the event of a capital reorganisation (cf. Kalmet Resources NL v Australian Stock Exchange Ltd, French J., 13 July 1992, unreported at 28-9).
That is to say, to take para.11 first, it appears, we think, that the aim of this provision was to ensure that, on a subdivision of shares, the option would operate in respect of an increased number but at a reduced price, in each instance proportionately. The position is the converse in the case of a consolidation, but again a proportionate approach is taken.
Did para.11 apply here? In our opinion, it did not.
As we have said, the transaction now in question is properly characterised as a reduction rather than a consolidation and subdivision, notwithstanding the incidental or consequential element of consolidation and subdivision in the special resolution. Moreover, in our view, where (as here) a specific provision (in this instance para.12) is directed at the topic of capital reduction, then prima facie that provision (i.e. para.12) governs all types of reductions, even if an incidental consolidation or subdivision is inherent in a particular reduction.
Put differently, in our opinion, paras.11 and 12 were intended to cover exhaustively their respective subject matters. Thus, para.11 applies where the main object is consolidation or subdivision, whereas para.12 applies where the principal aim is a reduction. When para.11 speaks of a subdivision or consolidation, it is addressing a transaction where all that is effected is solely or mainly that result.
The matter may be tested by considering the case of a reduction by "payment off", of part of the amount paid up, followed by a consequential subdivision and consolidation. Such a case would clearly fall within the opening words of the second sentence of para.12 -
"If the capital is reduced by reducing the paid up amount of shares... ."
Prima facie at least, this sentence is applicable here. There is no mention of a subdivision or consolidation anywhere in this sentence, and thus no suggestion that the presence of an incidental or consequential subdivision or consolidation should, in some way, divest the operation of para.12. In other words, there is nothing in the language of para.12, and no practical consideration which would suggest, that the existence of an incidental or consequential consolidation or subdivision should have the consequence that, although prima facie applicable, para.12 should not apply for that reason.
Another way of testing the point is to consider the operation of ss.193 and 195 of the Corporations Law in the present case. It will be recalled that s.193 empowers a company to subdivide or consolidate without seeking Court approval. On the other hand, by s.195 the approval of the Court is required in the case of a reduction. The principal object of the special resolution here was to reduce, rather
than to subdivide or to consolidate, capital. Hence s.195, rather than s.193, applied and Court approval was required. It was not open to the company to point to the reference to subdivision and consolidation in the special resolution and then contend that s.193, and not s.195, governed the matter so that Court approval was not required. That would be an impermissible attempt to do indirectly what could not be done directly, where the main object of the resolution was reduction, and subdivision and consolidation were merely incidental.
Likewise, in our view, para.11 would only apply where the sole, or at least main, object of a reorganisation was subdivision or consolidation. Conversely, para.12 was intended to apply, to the exclusion of para.11, where (as here) the main object was reduction.
What operation, if any, did para.12 have in the present case?
It is common ground that the first sentence of para.12 could not apply here since, as has been noted, the number of shares held remained constant.
But prima facie, at least, the second sentence was, we think, applicable to the special resolution by virtue of its opening words -
"If capital is reduced by reducing the paid up amount of shares... ."
The sentence then proceeds to provide that -
"... the Option will entitle the holder to a share of the same par value as other ordinary shares... ."
It follows thus that Leadenhall was "entitled" to a 20 cent share, as the primary Judge held, in the same total number as before; that is, options to take up 616,500 (i.e. not 1,541,250 as Leadenhall contended) 20 cent shares.
The difficulty, as the learned Judge recognised, was to determine what, on the true construction of the contract, was the exercise price. The problem arises because of the concluding words of the sentence -
"... and the exercise price will be reduced in proportion to the proportion (if any) of the par value paid to holders of shares upon the reduction of capital."
If the sentence had ended with the words "and the exercise price will be reduced in proportion", the difficulty would have been removed. That is to say, the sentence would clearly mean that the exercise price would be 20 cents.
The present issue exists because of the words in the sentence which then follow -
"...to the proportion (if any) of the par value paid to holders of shares upon the reduction of capital."
The meaning of this part of the provision is not at all obvious. In particular, it does not indicate what the statement "(if any)" after "proportion" is intended to qualify. If there was a "payment off", a proportion would necessarily be disclosed in every case between the original issued capital and the issued capital as reduced by the "payment off". Perhaps there was a mistake in that it was intended that the words "(if any)" be inserted later in the sentence, possibly after "paid", or after "shares", or at the end of the sentence. Be that as it may, this part of the second sentence does not identify, at least explicitly, what "proportion" is intended.
Another problem, as the primary Judge also recognised, is that, although the concluding words of the sentence dealing with exercise price address the possibility of a reduction in the form of a "payment off", there appears to be nothing then said on the subject of the exercise price where, as here, the reduction took another form, viz., a cancellation of the lost part of the paid-up capital. It will be recalled that the Judge held that para.12 was silent on this aspect, with the consequence that para.1 still applied in one respect, notwithstanding the reduction.
There appear to be four possible outcomes in the present context:
(1) The whole of the second sentence of para.12 is void for uncertainty with the consequence, as in Forsayth, that in material respects, the option arrangement is "open", that is, without special conditions in the event of a reduction of capital, including one by "payment off". There is little to recommend such an outcome. It is clear that the conditions were intended to deal with reductions along proportional lines. To strike down the whole of this sentence would frustrate that intention.
(2) The last lines of para.12 are meaningless and thus void and should be ignored, so that the sentence will be treated as ending with the words "and the exercise price will be reduced in proportion ... ." It would then follow that this price would be 20 cents in the present case. There is some force in this approach. Where surplus material is meaningless, it may be ignored (see Nicolene Ltd. v Simmonds [1953] 1 QB 543; Fitzgerald v Masters (1956) 95 CLR 420 per Dixon C.J. and Fullagar J. at 426-7).
(3) Treat, as the primary Judge did, the latter portion of para.12 (commencing with the words "and the exercise price ...") as applicable only to a "payment off", and thus inapplicable where, as here, there was a cancellation, with the consequence that para.1, referring to an exercise price of 50 cents, is applicable.
(4) Paragraph 12 applies to the extent held by the primary Judge, but instead of applying para.1 to reveal the exercise price (i.e., 50 cents), that price is, as a matter of implication, read into para.12 as being 20 cents, on one of several possible bases:
(i)as a term implicit in para.12 or implied (in the sense of logically spelt out from the language used - see Halsbury's Laws of England, 4th ed., Vol.9 at 224 (para.351) - by reason of the notion of proportionality, made explicit elsewhere in para.12);
(ii)as an implication made for reasons of business efficacy; or
(iii)as the implication made where an agreement for the sale of goods is silent as to price, that is, the law imposes an implied obligation to pay a reasonable sum (see J.W. Carter and D.J. Harland, Contract Law in Australia, 2nd ed. at p.74) which, in this connection, would presumably be the reduced par value the subject of recent Court approval, at least indirectly, under s.195(1).
On the true construction of para.12, in the event of a reduction by "payment off" or by cancellation, the exercise price should, in our view, be reduced proportionately to 20 cents for the following reasons.
First, we accept that the Court should endeavour to place a reasonable meaning on the language used unless this is utterly impossible and that difficulty of interpretation should be distinguished from absence of meaning (see J.W. Carter and D.J. Harland, above, at pp.68-9 and the cases there cited). But whilst we are not persuaded that the whole of para.12 is void for uncertainty, it cannot be disputed that there are serious obscurities in its concluding words. Several possibilities emerge, as we have said. One is that the concluding words, commencing with "to the proportion" are void for uncertainty. Yet this is a commercial contract and, as Lord Wright said in Hillas & Co. Ltd. v Arcos Ltd. (1932) 147 LT 503 at 514, the Court should construe such a contract "fairly and broadly, without being too astute or subtle in finding defects" (see also Australian Broadcasting Commission v Australasian Performing Right Association Ltd. (1973) 129 CLR 99 per Gibbs J. at 109). Although the words "(if any)" appear to be in the wrong place or although something appears to have been omitted in identifying the relevant proportion, it is possible, as we think should be done here, that such inconsistencies may be reconciled in the ordinary processes of construction (see Fitzgerald v Masters, above, per McTiernan, Webb and Taylor JJ. at 437). We would, then, interpret the second sentence of para.12 to mean that, at least on a reduction by "payment off", the exercise price is to be reduced in the same proportion. But was it intended that this sentence also extend to other forms of reduction, in particular, a cancellation, including a partial cancellation?
Although the primary Judge held otherwise, we respectfully take a different view. In our opinion, a capricious outcome would follow if it were to be held that the second sentence of para.12, which is undisputably obscure in its operation, did not also apply to reduction by partial cancellation.
In the APRA case, above, Gibbs J. said (at 109):
"If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, `even though the construction adopted is not the most obvious, or the most grammatically accurate'... ."
As has been seen, there is a choice between, on the one hand, a construction to the effect that the exercise price here should be 50 cents, being the original paid-up value, and on the other, a construction to the effect that such price should be 20 cents, being the reduced paid-up value. In our view, the former interpretation should be rejected as
capricious and inconsistent with the expressed intention favouring a proportional approach. We would, accordingly, favour the latter construction upon a reading of the whole of the instrument. (If it were necessary to refer to it, Listing Rule 3G would also support such a construction.)
We would add that, even if this broad approach were not open, there may be another alternative way in which the same result is achieved. In our view, there is much to be said for the view that there has been omitted inadvertently from the second sentence any reference to partial cancellation although it appears that this must have been intended. There is no reason, of principle or of a practical kind, to distinguish a "payment off" and a partial cancellation in the present context. But we need not pursue this.
In the events which have happened, we would construe the terms and conditions as a whole to mean that Leadenhall is now entitled to options to subscribe for 616,500 shares of 20 cents each at an exercise or issue price of 20 cents per share.
ORDERS
In the result, we would not answer the question asked in terms of para.(a) or (b), but in the terms we have mentioned. Accordingly, the appeal is allowed, and the orders
made at first instance are set aside. In the circumstances, there should be no order for costs either at first instance or on the appeal.
I certify that this and the preceding twenty-two (22) pages are a true copy of the Reasons for Judgment herein of their Honours Justice Beaumont, Justice Hill and Justice Tamberlin
Associate
Dated: 22 February 1996
Counsel and Solicitors Mr. A.E. Vrisakis instructed
for Appellant: by Phillips Fox (Adelaide)
Counsel and Solicitors Mr. A. Emmett Q.C. with
for Respondent: Mr. M.J. Steele instructed by
Garland Hawthorn Brahe
Date of hearing: 13 February 1996
Date Judgment delivered: 22 February 1996