Stillwell Trucks P/L Nectar Brook Investments P/L Stillwell Trucks P/L

[1993] FCA 363

STILLWELL TRUCKS PTY. LTD. v. NECTAR BROOK INVESTMENTS PTY. LTD.; STILLWELL
TRUCKS PTY. LTD. and ROBERT NEIL BRIGDEN
Nos. SG3052 of 1992 and SG3006 of 1993
FED No. 363
Number of pages - 10
Corporations - Contract
(1993) 10 ACSR 615
(1993) 115 ALR 294

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIAN DISTRICT REGISTRY
GENERAL DIVISION
O'Loughlin J(1)

CATCHWORDS

Corporations - articles of association - employees' shares - rights of transfer - restrictions on those rights - whether an employee- shareholder must transfer his shares to the directors' nominee immediately on cessation of employment or whether the requirement to transfer does not occur until directors make a request - date upon which the outgoing employee's share is to be valued.

Contract - articles of association - whether an interpretation of an article that denies a shareholder any right of transfer of his shares is an illusory term.

The Corporations Law s180

Palmer's Company Precedents 17th ed.

Australian Corporation Law, Principals and Practice,

K. Lewison, Interpretation of Contracts (1989)

M. Dalley and Co Pty Ltd v Sims (1968) 120 CLR 603

O'Donnell v Thor Industries Pty Ltd (1977) 136 CLR 297

Holmes v Keyes (1959) Ch 199

Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310

Australian Metropolitan Life Assurance Co Ltd v Ure (1923) 33 CLR 199

In re Smith and Fawcett Limited (1942) Ch 304

Lyle and Scott Ltd v Scott's Trustees (1959) AC 763

Greenhalgh v Mallard (1943) 2 All ER 234

Placer Development Ltd v The Commonwealth of Australia (1969) 121 CLR 353

Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130

HEARING

ADELAIDE, 6 April 1993

#DATE 28:5:1993

Counsel for the Applicant: Mr A. Sullivan QC and Mr G. Griffin

Solicitors for the Applicant: Messrs Ross McCarthy

Counsel for the Respondent: Mr D.P.F. Officer QC and Mr D.H.

Darke

Solicitors for the Respondent: Messrs Ledlin Partners

ORDER

THE COURT ORDERS THAT:

1. The respondent bring in, within 28 days of this date, short minutes of order.

2. There be liberty to the parties to speak to those minutes.

3. The applicant pay the respondent's costs which are to be taxed in default of agreement.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

O'LOUGHLIN J The applicant in these proceedings, Stillwell Trucks Pty Ltd, ("the company") dismissed Raymond Russell from its employ on 17 September 1991. Some years earlier, in 1984, during the course of his employment, Mr Russell had applied for and had allotted to him 2,000 ordinary 'E' class shares in the capital of the company ("the shares"). At the time when he acquired the shares, for which he paid $2,000, and at all times since, the provisions of article 4B of the company's articles of association were as follows:

"B. Notwithstanding any other provisions contained in these articles the transfer and transmission of the Ordinary 'E' Class, 'F' Class, 'G' Class and 'H' Class shares shall only be as provided by this article and for the purpose of this article the expression 'Shares' means and refers only to the Ordinary 'E' class, 'F' class, 'G' class and 'H' class shares in the capital of the Company.

(i) the Shares shall only be issued or allotted to persons who are employed by the Company and such persons shall only be entitled to retain and hold the same so long as they remain employed by the Company and if by death resignation retirement dismissal or otherwise any such person ceases to be employed by the Company he or his executors administrators or legal representatives (as the case may be) shall be bound by request in writing of the Directors of the Company to transfer all such Shares to such person or persons as may be nominated by the Directors of the Company and if any such person is not an employee of the Company then such person shall at all times upon request of the Directors of the Company transfer all such Shares to any other person nominated by the Directors of the Company who is an employee of the Company.

(ii) If any person who in conformity with the provisions of this Article is required to transfer any Shares makes default in transferring same, the Directors of the Company may by writing under the common seal appoint any person to make the transfer on behalf of the person in default and a transfer by such Appointee shall be as effective as if it were duly executed by the person so in default and a certificate under the Common Seal that such power of appointment has arisen shall be conclusive for all purposes.

(iii) In the event of any transfer or transmission of Shares in conformity with the provisions of this Article the fair value of such Shares to be transferred or transmitted shall be determined by two independent duly qualified Chartered Accountants appointed by the Directors of the Company who shall issue a Certificate in writing of the amount to be paid by any Transferee in respect of such Shares and in so certifying such Accountants shall be construed to be acting as experts and not as arbitrators and accordingly the Arbitration Act shall not apply.

All moneys payable in respect of such Shares shall be paid by the Transferee to the Transferor or his executors administrators or legal representatives (as the case may be) within a period not exceeding nine (9) calendar months from the date of transfer of the Shares.

(iv) In this article 'employee of the Company' means and includes any Manager, Departmental Manager, foreman, clerk or workman. The term does not include Directors or Auditor."

1. Although not named as such, it is obvious that article 4B is dealing with special classes of shares that are commonly called "employees' shares". It is widely accepted in commercial circles that such shares constitute an incentive to employees. The theory that advocates of such schemes advance is that employees will work more efficiently and more productively for the company if they stand to gain not only as employees but also as shareholders. If articles of association contain provision for employees' shares it is common for them to contain special restrictive provisions with respect to those shares. For example, employees who hold such shares in the company may be deprived of the normal rights of a shareholder to transfer or alienate them. Conversely, once employees, for whatever reason, cease to be employees of the company, the articles of association might provide for the mandatory transfer of the shares by the employee to another employee or to the company's nominee.

2. These proceedings have arisen because of the company's attempts to force Mr Russell to transfer his shares to the company's nominee. Nectar Brook Investments Pty Ltd, Mr Russell's family company, has been named as the respondent because, notwithstanding the provisions of article 4B, the company had permitted a transfer of the shares from Mr Russell to Nectar Brook in June 1985. In separate proceedings, that were instituted by Nectar Brook in the Supreme Court of New South Wales and cross-vested to this court and consolidated with these proceedings, Nectar Brook had sought relief claiming that the company's attempts to compulsorily divest it of the shares were void and of no effect. Robert Neil Bridgen had been named as a co-defendant with the company in the Supreme Court proceedings as he was the company's nominee to take a transfer of the disputed shares. Neither counsel sought to rely on the involvement of Nectar Brook and I was invited, in effect, to determine the substantive issues as if Mr Russell had continued at all times to be registered as the holder of the shares.

3. Subsequent to Mr Russell's dismissal, the board of directors of the company resolved in February 1992 to obtain a valuation of the disputed shares from two independent chartered accountants. In so doing, the company claimed that it was acting in conformity with the provisions of paragraph (iii) of article 4B. The valuation, which was dated 6 August 1992, valued the shares at par as at the date of Mr Russell's dismissal in September 1991.

4. On 16 September 1992, the solicitors for the company wrote Nectar Brook enclosing a notice allegedly issued by the company on 11 September pursuant to paragraph (i) of article 4B. A share transfer form was also enclosed with the letter. Nectar Brook was requested to execute the transfer and to return it together with the relevant share certificate within 14 days under threat that legal proceedings would otherwise be instituted. The notice read as follows:
   

"TAKE NOTICE that pursuant to article 4B(i) of the Articles of Association of Stillwell Trucks Pty Ltd you are requested to transfer all ordinary 'E' class shares held by you (that is 2,000 ordinary 'E' class shares numbered 1,200,001 to 1,202,000 (inclusive) to ROBERT NEIL BRIGDEN of 6 BOGAN PLACE, RUSE, NSW 2560 (an employee of Stillwell Trucks Pty Ltd).

In accordance with the provisions of article 4B the transfer price of the aforesaid shares in $2,000.00. The Certificate of two independent duly qualified chartered accountants appointed by the Directors of Stillwell Trucks Pty Ltd pursuant to article 4B(iii) of the said articles of association is annexed hereto."

1. The company had, in fact, issued an earlier notice on 21 October 1991 which, arguably, was intended as a request from the directors that the shares be transferred. However it was made clear at the commencement of these proceedings by counsel for the applicant that the company was not relying on that notice. It is not, therefore, necessary to consider the relief that was claimed by the respondent with respect to that notice save for the question of costs.

2. Nectar Brook did not comply with the request that issued in September 1992; accordingly, the company appointed its secretary, Brian Fitzgerald, to execute a transfer of the shares in the name of Nectar Brook and in favour of Mr Brigden. In so acting the company and Mr Fitzgerald were purportedly acting under the powers contained in paragraph (ii) of article 4B. Mr Fitzgerald duly executed a form of transfer of 2,000 'E' class shares in the capital of the company showing Nectar Brook as the transferor. However, no further action has been taken with respect to that transfer pending the determination of these proceedings.

3. The dominant issue in this case is the date upon which the shares should be valued. It was not suggested that it was beyond the power of the directors to request a transfer of the shares but the date of the making of any such request was an essential issue in determining the question of value. For the company, it was submitted that the relevant date upon which to value the shares was the date of the termination of employment, 17 September 1991. The respondent, however, argued that the correct date was the date upon which the notice requiring the respondent to transfer its shares to the company's nominee was served, that is, 16 September 1992 or thereabouts. If the latter date is the correct date then the respondent further argues that the notice given by the company to Nectar Brook in September 1992 was invalid by virtue of its reference to a transfer price of $2,000 (the inclusion of the accountants' certificate made it clear that this was the value at the date of termination).

4. Several editions of Palmer's Company Precedents contain examples of articles that establish an incentive scheme for employees. It is clear that paragraphs (i), (ii) and (iv) of article 4B have their source in paragraphs (d), (e) and (f) of Form 509 of the 17th edition of that work. For example, the precedent in Palmer provides that "such employee shall be entitled to retain and hold the (shares) so long as he remains as employee of the company". The same entitlement and the same restriction (with minor grammatical variations) appears in paragraph (i) of article 4B. In the precedent, the obligation on the part of the outgoing employee to transfer is, like the obligation in article 4B, based upon a request in writing of the directors. The relevant passage from the precedent is as follows:
   

"... and if by death, resignation, withdrawal, dismissal, or otherwise, he cease to be an employee of the Company, he or his executors or administrators shall be bound, upon the request in writing of the Directors, to transfer such share (at the par value thereof) to such person as the Directors may nominate; and, if such person is not an employee of the Company, such person shall at any time, on the request of the Directors, transfer such share to any employee of the Company."

1. The words in parenthesis in the precedent "at the par value thereof" do not, of course, appear in article 4B because of the special provisions dealing with "the fair value" of the shares in paragraph (iii) of the article. Subject to that qualification, however, the nature and effect of the obligation on the outgoing employee to transfer his shares is the same in both cases.

2. An article based on the precedent in Palmer's case was considered by the High Court in M. Dalley and Co Pty Ltd v Sims (1968) 120 CLR 603. The case, however, was decided on a threshold issue for it was held, having regard to the peculiar facts of the case, that the relevant shares had been issued as ordinary shares and not as "employees' shares" and that they were not therefore subject to compulsory disposal at the request of the directors. Although of limited significance, there was nothing of a critical nature in the judgments of the members of court concerning the restrictive language of the article and the absence of any right of transfer in the outgoing employee.

3. O'Donnell v Thor Industries Pty Ltd (1977) 136 CLR 297 was also concerned with "employees' shares". In that case, however, the rights attaching to such shares and the power to compel a transfer of shares was contained in cl.XIV of the company's memorandum of association. That clause read as follows:
   

"XIV. Shares of the Class 'E' shall bear equal voting rights with shares of the class 'G' share for share, and shall bear no less dividend rights than shares of the class 'G' provided always that such shares may only be issued to and held by employees of the Company so long as such holder remains in the employment of the Company and upon the termination of such employment for any reason whatsoever such shares shall be transferred to such other employee or employees in part or in whole as the Governing Director shall direct, and in the event of no such employee or employees being nominated or directed by the Governing Director, then such shares shall be transferred to the Governing Director."

1. It is to be observed that the language in this clause is much stronger than that in the article which is under consideration in these proceedings. In O'Donnell's case there was no provision for a request from the directors of the company; the clause stipulated that upon the termination of employment "such shares shall be transferred..." This led Barwick CJ, Stephen, Mason, and Aiken JJ, Jacobs J dissenting, to the conclusion that upon the termination of the employment of a holder of class 'E' shares, the holder was obliged to transfer the shares as directed in accordance with the provision in the memorandum and was not entitled to receive any consideration for the transfer. Barwick CJ, did not consider it a matter of expropriation. As he explained it:
   

"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. 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." (298)

1. Stephen J, with whom Mason and Aikin JJ agreed, also made a temporal connection between cessation of employment and the obligation to transfer. Speaking of cl.XIV, he said that it was:
   

"... designed to ensure that only those who are for the time being employees of the company shall hold shares of this class. It does this by two measures, first the requirement that such shares may only be issued to and held by employees; secondly the requirement that upon termination of employment those shares shall be transferred to such other employees as the governing director may direct or, failing any such direction, to the governing director himself." (300-301)

1. If, therefore, cl.XIV had contained a provision for transfer for value, there is no doubt that the relevant date for the purpose of determining value would have been the date of cessation of employment. Does that conclusion necessarily apply to the construction and interpretation of the present article?

2. Mr Sullivan QC, counsel for the company, submitted that the only proper construction that could be placed on article 4B was one which compelled the directors to give the "request in writing" that is referred to in paragraph (i) immediately upon an employee ceasing to be an employee of the company. Such an interpretation, if correct, would naturally call for a valuation of the shares to be made as at the date of the cessation of employment. In support of this submission he pointed to the nature of the shares: that is, they were "employees' shares" which could only be allotted to employees to the limited right of entitlement to such shares and employees were only entitled "to retain and hold the same so long as they remain employed by the company". Mr Sullivan also pointed to the directors' power, which arose as a consequence of the cessation of employment for any reason, to compel the disposal of the shares. The combination of those factors all pointed, according to the submission, to the conclusion that the compulsion on the employee to transfer was coterminus with his cessation of employment and that being the case the inevitable consequence was that the outgoing employee should be paid the value of his shares as at the date when he ceased to be an employee.

3. To support his proposition Mr Sullivan emphasised that the ordinary rights of transfer, elsewhere set out in the articles of association of the company, were not available to the holders of 'E' class shares. The opening words of article 4B make this clear:
   

"Notwithstanding any other provisions contained in these articles the transfer and transmission of the Ordinary 'E' class, 'F' class, 'G' class and 'H' class shares shall only be as provided by this article..."

1. It is true that a construction of article 4B, other than one compelling the directors to give the "request in writing" immediately upon an employee's cessation of employment, would leave the outgoing employee locked into his position as a shareholder without any right to dispose of his shares. He could not give to the company the "transfer notice" contemplated by article 37.1 nor could he make use of article 45 which permits a transfer of shares from a shareholder to members of his family. Transfers of 'E' class shares can only be effected in the manner provided by article 4B and that article does not give the holder of an 'E' class share any initiating right of transfer either during his term of employment or thereafter.

2. The memorandum and articles of association of a company have the effect of a contract under seal between the company and (inter alia) each member under which the company and the members each agree to observe and perform the provisions of the memorandum and articles as in force for the time being so far as those provisions are applicable to the company and a member (see s180 The Corporations Law and the definition of "Constitution" in s9). Mr Sullivan used this fundamental concept of Company Law as a platform to argue that any contract which had the effect of locking in a shareholder and denying him any right to dispose of his shares - which left him at the whim of the directors who may or may not determine to make the necessary "request in writing" - was illusory. According to Mr Sullivan, such an interpretation would deny the articles business efficacy and common sense insofar as they purported to contain provisions dealing with a shareholder's right to transfer his shares.

3. It is well established that the articles of association of a company are business and commercial documents and are to be interpreted as such. For example, Jenkins LJ has said in Holmes v Keyes (1959) Ch 199 at 215.
   

"I think that the articles of association of the company should be regarded as a business document and should be construed so as to give them reasonable business efficacy, where a construction tending to that result is admissible on the language of the articles, in preference to a result which would or might prove unworkable. In my view, the doctrine of relation back for which the plaintiffs contend would produce a wholly unreasonable result, and I decline to adopt it unless constrained to do so by the terms of the Act and the articles."

1. A court, therefore, in construing a set of articles ought to be astute to give effect to the evident or discernible commercial purpose. This is another way of saying that a construction consonant with business efficacy should be preferred (see, for example, Australian Corporation Law, Principals and Practice, para 2.4.0040; K. Lewison, Interpretation of Contracts (1989) paras 1.06 - 1.07; and also Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-314).

2. To assess the arguments that have been advanced on behalf of the company it is necessary to balance the prima facie right of any shareholder to dispose of his shares against the undoubted right of a company to insert restrictions on transfers of shares in its memorandum or articles. In Australian Metropolitan Life Assurance Co Ltd v Ure (1923) 33 CLR 199 at 216 Isaacs J described a share in a limited company as "personal property" adding that:
   

"... the right to deal with it, to sell and to buy it is absolute, except so far as that right is lawfully restricted by the regulations of the company."

1. That right is not "to be cut down by uncertain language or doubtful implications" (In re Smith and Fawcett Limited (1942) Ch 304 at 306 per Lord Greene MR). In that case the relevant article imposed the heaviest possible restriction on transfer; it provided:
   

"The directors may at any time in their absolute and uncontrolled discretion refuse to register any transfer of shares..."

1. In holding that the article was valid Lord Greene MR, with whom Luxmoore LJ and Asquith J agreed, explained the principles governing the powers of directors with regard to transfers of shares in these terms:
   

"They must exercise their discretion bona fide in what they consider - not what a court may consider - is in the interests of the company, and not for any collateral purpose. They must have regard to those considerations, and those considerations only, which the articles on their true construction permit them to take into consideration, and in construing the relevant provisions in the articles it is to be borne in mind that one of the normal rights of a shareholder is the right to deal freely with his property and to transfer it to whomsoever he pleases. When it is said, as it has been said more than once, that regard must be had to this last consideration, it means, I apprehend, nothing more than that the shareholder has such a prima facie right, and that is not to be cut down by uncertain language or doubtful implications. The right, if it is to be cut down, must be cut down with satisfactory clarity. It certainly does not mean that articles, if appropriately framed, cannot be allowed to cut down the right of transfer to any extent which the articles on their true construction permit. Another consideration which must be borne in mind is that this type of article is one which is for the most part confined to private companies. Private companies are in law separate entities just as much as are public companies, but from the business and personal point of view they are much more analogous to partnerships than to public corporations. Accordingly, it is to be expected that in the articles of such a company the control of the directors over the membership may be very strict indeed. There are, or may be, very good business reasons why those who bring such companies into existence should give them a constitution which confers on the directors powers of the widest description." (Emphasis added) (306)

1. Lyle and Scott Ltd v Scott's Trustees (1959) AC 763 at 777 and 784 is another example of an article that empowered the directors, in their absolute discretion, and without assigning any reason, to decline to register any transfer of any share.

2. It seems, therefore, that the concept of a locked-in shareholder is not, per se, objectionable so long as the language of the articles of association is abundantly clear and allows for no other interpretation. Greenhalgh v Mallard (1943) 2 All ER 234 is an example of an article that was lacking in clarity. In that case para(a) of article 10 of the company's articles of association provided that no share in the company should be transferred to a person not a member of the company so long as any member of the company might be willing to purchase them at a fair value in accordance with para(b). Paragraph (b) began by providing that if any member desired to sell or transfer any of his shares, he should notify his desire to the directors by sending them a notice in writing to that effect. It was unsuccessfully contended that the restriction on transfers in para(b) extended to all transfers of all shares including proposed transfers to existing members. In concluding that a member of the company was free to transfer shares to another member, Lord Greene MR (with whom Luxmore and Goddard LJJ agreed) emphasised the member's prima facie right of transfer. He said (using much the same language as he had used a year earlier in In re Smith and Fawcett Limited):
   

"If the right of transfer, which is inherent in property of this kind, is to be taken away or cut down, it seems to me that it should be done by language of sufficient clarity to make it apparent that that was the intention." (237)

1. What consequences would flow if, properly interpreted, article 4B was construed as meaning that an outgoing employee had no right to transfer his shares unless and until requested to do so by the directors and that the directors were under no compulsion to make any such request? Would that amount to an illusory term as submitted by Mr Sullivan?

2. A convenient starting point in considering illusory terms is the decision of the High Court in Placer Development Ltd v The Commonwealth of Australia (1969) 121 CLR 353. The plaintiff company and the Commonwealth had entered into an agreement which contained a clause calling on the Commonwealth, in certain circumstances, to pay the plaintiff a subsidy "of an amount or at a rate determined by the Commonwealth from time to time..." It was held by Kitto, Taylor and Owen JJ, Menzies and Windeyer JJ dissenting, that under the clause the Commonwealth was not obliged to determine an amount or rate of subsidy or to pay a subsidy. Relying on the decisions in Loftus v Roberts (1902) 18 TLR 532 at 534 and Broome v Speak (1903) 1 Ch 586 at 599, Kitto J explained the principle in these terms:
   

"It is that wherever words which by themselves constitute a promise are accompanied by words showing that the promisor is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which an action can be brought at all." (356)

1. In their joint judgment, Taylor and Owen JJ explained the difference between illusory terms and those which are real but uncertain at 359-360:
   

"But a promise to pay an unspecified amount of money is not enforceable where it expressly appears that the amount to be paid is to rest in the discretion of the promisor and the deficiency is not remedied by a subsequent provision that the promisor will, in his discretion, fix the amount of the payment. Promises of this character are treated by Pollock (Principles of Contract, 12 ed. (1946), pp38, 39) not as vague and uncertain promises - for their meaning is only too clear - but as illusory promises..."

1. In Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 McHugh JA made the same point but in slightly different language when he said that a "... consideration is illusory if its payment or fulfilment depends upon an unfettered discretion in the promisor" (151). This passage, in my opinion, shows the way to a resolution in this matter. It emphasises the need to identify that which the outgoing employee legitimately expects to be fulfilled. In other words, where in the articles of association or under the general law is the legitimate expectation of the outgoing employee that he will be free to dispose of his shares or that his shares will be acquired forthwith upon the cessation of his employment? It may well be true to say, in respect of article 4B, that the directors have an unfettered and uncontrolled discretion whether they will request the outgoing employee to transfer his shares. But that avails the employee nothing unless that discretion frustrates some expectation or promise that is to be found in the company's articles. In my opinion, the language of article 4B establishes, with appropriate clarity, that an employee who acquires 'E' class shares in the capital of the company is to be regarded as having done so in the knowledge that he has no right to transfer or dispose of those shares other than as a consequence of a request from the directors subsequent to the termination of his employment and that there is no compulsion on the directors to make any such request. That, in my opinion, is the natural and ordinary meaning of the language of the article and it is an interpretation which affords to the company time within which to find a replacement employee and perhaps, also time within which to reflect upon the desirability of permitting the outgoing employee to remain as a shareholder for a time.

2. This particular case has arisen, presumably, out of a state of bitterness and dispute. I assume that because Mr Russell's employment was terminated and the parties are engaged in expensive litigation. But article 4B is not limited in its operation to acrimonious issues. Employment may cease in harmonious circumstances as a consequence of retirement or in upsetting circumstances because of death or illness. Nevertheless, in each case there will be a cessation of employment. Any suggestion therefore that article 4B is to be read as if it were concerned only with a disputive relationship would be quite wrong. Allowing for the fact that cessation of employment may occur for a variety of reasons, it would seem to me that it would be more beneficial to all parties to avoid an interpretation that demands an immediate disposal of an ex-employee's shares.

3. For the reasons that are set out above I am satisfied that article 4B of the articles of association does not contain terms that are illusory. In my opinion the directors are entitled - but not bound - at any time after the cessation of an employee's employment to request that employee to transfer his shares to the directors' nominee.

4. Where such a request is made, para(iii) of article 4B thereafter comes into operation with its reference to "the fair value of such shares to be transferred...". That language indicates that the first act will be the directors' request; the date of that request will then become the relevant date for the purpose of valuing the shares. The second act will be the ascertainment of the value of the shares as at the date of the request. Normally that act of valuation might be expected to take place after the making of the request but I do not see anything wrong in a valuation preceeding it (providing always, of course, that the valuers can adhere to the accepted principles of valuation). It was submitted by Mr Officer QC, counsel for the respondent, that because the September 1992 notice had stated that the transfer price of the shares was $2,000 (it being evident from the enclosed accountants' certificate that the date of valuation had been the date of termination of employment), the notice was wholly void. I do not agree. In my opinion the giving of the notice and the contents of its first paragraph was the event that activated the operation of the transfer provisions in paragraph (i) of article 4B. The fact that the notice thereafter included extraneous (and erroneous) material does not effect the efficacy of the notice. It merely means that it is now incumbent on the company to obtain the necessary valuation of the shares as at 16 September 1992.

5. I direct the respondent to bring in, within 28 days of this date, short minutes of order to reflect the conclusions that I have reached. There will be liberty to the parties to speak to those minutes. The applicant is to pay the respondent's costs which are to be taxed in default of agreement.