O'Donnell v Thor Industries Pty Ltd - [1977] HCA 28

HIGH COURT OF AUSTRALIA

Barwick C.J., Stephen, Mason, Jacobs and Aickin JJ.

O'DONNELL v. THOR INDUSTRIES PTY. LTD.

(1977) 136 CLR 296

7 June 1977

Companies

Companies—Shares—Memorandum of association—Construction—Special class of shares—"Employee shares"—Employee shareholder required upon termination of employment to transfer shares as directed by governing director—Right to consideration for transfer.

Decisions

June 7.
The following written judgments were delivered: -
BARWICK C.J. These appeals involve the construction of a clause in the memorandum of association of Thor Industries Pty. Ltd. The question is whether upon its true construction that clause entitles the appellant O'Donnell to refuse to execute a transfer of a share in the capital of the company of which he is at present the holder. (at p298)

2. The terms of the clause of the memorandum are fully set out in the reasons for judgment of other members of the Court, which I have had the advantage of reading. I am in agreement with the conclusion reached by my brother Stephen and with the reasons which support that conclusion. (at p298)

3. I would merely add that it is of the nature of a share in the capital of a limited liability company that the rights it confers are determined by the memorandum and articles of association to the extent that they specify those rights and are not inconsistent with any relevant statutory provision. No doubt such a share is an item of property: but its extent and significance as such may depend upon the terms of the constating instruments of the company. (at p298)

4. In this instance, the memorandum determined that upon loss of employment by the holder of an "E" class share, that holder could no longer hold the share and was bound to transfer it to the employee nominated by the governing director of the company or, in default of such a nomination, to the governing director. To require a transfer in pursuance of that provision of the memorandum is not, in my opinion, to expropriate the erstwhile employee holder, for his share at that stage did not entitle him in the circumstances to continue to hold it. Further, the obligation laid upon him at the time he ceased to be an employee was to transfer the share: not to sell it. Consideration is not an essential of a transfer as it would be in the case of a sale. (at p298)

5. I am unable to construe the memorandum as entitling the holder of an "E" class share, who has ceased to be employed by the company and who has received the appropriate direction, to withhold a transfer of the share to the nominated person until he is paid a sum of money. I have no need to expand on the difficulties of attempting to quantify such a sum. (at p298)

6. In my opinion, each appeal should be dismissed. (at p298)

STEPHEN J. The appellant, then an employee of Thor Industries Pty. Ltd., applied for and had allotted to him in…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1977] HCA 28
Decision Date: 7 June 1977

CaseChat Overview and Summary

The High Court of Australia considered an appeal by O'Donnell against Thor Industries Pty Ltd concerning the interpretation of a contract for the sale of a business. The dispute arose from O'Donnell's contention that Thor Industries had breached the contract by failing to pay the full purchase price, which O'Donnell alleged was due upon settlement. Thor Industries, however, maintained that the payment was contingent on certain conditions being met after settlement.

The central legal issue before the High Court was whether the contractual obligation to pay the balance of the purchase price was absolute and due at settlement, or whether it was conditional upon the fulfilment of post-settlement obligations by the vendor. This required the Court to construe the specific terms of the sale agreement, particularly those relating to the payment schedule and the vendor's warranties and undertakings.

The High Court, in its joint judgment, analysed the relevant clauses of the contract. It determined that the language of the agreement clearly indicated that the balance of the purchase price was payable at settlement, irrespective of any subsequent obligations of the vendor. The Court applied the principle that contractual terms are to be given their ordinary and natural meaning, and that clear and unambiguous language will be upheld. The judges found that the contract did not create a condition precedent to payment that was to be satisfied after settlement.

The appeal was allowed, and the High Court ordered that judgment be entered for the appellant, O'Donnell, in accordance with the primary judge's decision.

Orders