Wake-Walker & Anor v AKG Group Ltd. & Ors

Friday, 7th March 2003

J U D G M E N T

1. LORD JUSTICE PETER GIBSON: I will ask Blackburne J to give the first judgment.

2. MR JUSTICE BLACKBURNE: This is an appeal brought with the permission of Aldous LJ against the decision given on 6 December 2002 of Mr Anthony Elleray QC sitting as a Deputy Judge of the Chancery Division. The decision was given in proceedings brought by the claimants, David Christopher Wake-Walker and Martin Rose Ltd, against the defendants, AKG Group Ltd, AKG Intermediaries Ltd and Dentons Pension Management Ltd, in which the claimants seek declarations as to their right to acquire from the first and second defendants, which I shall call "AKG" and "AIL", their shares in the third defendant, which I shall call "Dentons", pursuant to a shareholders' agreement dated 10 February 2000.

3. The shareholders' agreement regulates the rights of the shareholders in Dentons, which is a pension consultancy company, following its acquisition by the claimants, the trustees of a pension scheme called the David Wake-Walker Pension Scheme and AKG and AIL. AKG is an investment holding company and AIL its wholly owned subsidiary. They form part of what is referred to in the shareholders' agreement as the AKG Group. As a result of the acquisition, the claimants and pension trustees acquired 36.9% of Dentons' ordinary shares and AKG and AIL the remaining 63.1%.

4. The dispute which has given rise to these proceedings concerns the provisions of clause 12 of the shareholders' agreement and, in particular, whether in the events that happened the claimants and the pension scheme trustees, who are referred to in the agreement as "the Investors", acquired the right under that clause to require AKG and AIL to transfer to them the latters' 63.1% shareholding in Dentons at the price of £646,253.24. The claimants, who are the appellants before us, contend that they did, AKG and AIL, who are the respondents, that they did not. Dentons, although a defendant, has taken no part in the proceedings either before the judge below or before us. Curiously, although the pension scheme trustees claim to be one of those entitled to acquire the respondents' shares in Dentons, they are not represented before the court.

5. The relevant terms of clause 12, which is headed "Insolvency and Change of Control", are as follows:

"12.1 The provisions of this clause 12 shall apply on the occurrence of an Insolvency Event. It is an Insolvency Event if:

12.1.1 a court of competent jurisdiction makes an order or a resolution is passed, for the dissolution or administration of AKG, AIL or any holding company of AKG or any other member of the AKG Group which has an actual or expected turnover in any Financial Year of more than £500,000 (otherwise than in the course of a reorganisation or restructuring previously approved in writing by the investors); or

12.1.2 any person takes any step (and it is not withdrawn or discharged within thirty (30) days) to appoint a liquidator, manager, receiver, administrator, administrative receiver or other similar officer in respect of any assets which include either: (i) the Shares [by the definition clause that is a reference to the shares in Dentons] held by AKG or AIL, or (ii) shares in AKG, AIL or any holding company of AKG or any other member of the AKG Group which has an actual or expected turnover in any Financial Year of more than £500,000; or

12.1.3 AKG, AIL, any holding company of AKG or any other member of the AKG Group which has an actual or expected turnover in any Financial Year of more than £500,000 convenes a meeting of its creditors or makes or proposes any arrangement or composition with, or any assignment for the benefit of, its creditors."

6. Clause 12.2 provides that the provisions of the clause shall also apply if there is what is described as a "Change of Control". This refers, broadly, to the acquisition by a third party of a controlling interest in AKG or AIL or any holding company of AKG or, in the case of Martin Rose Ltd and subject to certain exceptions, a controlling interest in that company or any holding company of that company, or in the case of Mr Martin Rose and Mr Wake-Walker, if they should have died.

7. Clause 12 continues:

"12.3 If an Insolvency Event or Change of Control occurs in relation to a person identified in clause 12.1 or 12.2 (the Affected Party) the Affected Party shall:

12.3.1 if it is a member of the AKG Group, be obliged to notify the Investors;

12.3.2 if it is Martin Rose Ltd, be obliged to notify AKG and AIL; or

12.3.3 if it is the personal representative of (as the case may be) David Wake-Walker or Martin Rose, be obliged to notify AKG,

promptly of such Insolvency Event or Change of Control. At any time before the expiry of a period of ninety (90) days after the Change of Control or, if later, the public announcement of the Change of Control by any relevant market authority or, where applicable, the date the relevant party is notified that the Insolvency Event has occurred, the person(s) to whom notice is to be given pursuant to this clause 12.3 may make an offer for all the Shares (the Relevant Securities) collectively held by the Affected Party and/or any members of its Group.

12.4 The offer for the Relevant Securities referred to in clause 12.3 shall take the form of a notice to the Affected Party (the Offer Notice). The Offer Notice shall include the price offered (the Offered Price) and a statement that the offer may be accepted within thirty (30) days of the Affected Party receiving the Offer Notice.

12.5 If the Affected Party:

12.5.1 notifies the buyer within the thirty (30) day period that he does not accept the Offered Price; or

12.5.2 fails to respond to the buyer within that period,

an internationally recognised firm of accountants (the Expert) shall be appointed to determine the Fair Price. The Expert shall be such internationally recognised firm of accountants as the Affected Party and the buyer may agree or, if they fail to agree within fifteen (15) days of the end of the thirty (30) day period, the Expert shall be such internationally recognised firm of accountants, independent of both the Affected Party and the buyer, as the President for the time being of the Institute of Chartered Accountants in England and Wales appoints at the request of the Affected Party. Any such request must be made within fifteen (15) days of the end of the fifteen (15) day period (or such longer period as the Affected Party and the buyer may agree in writing). If the Affected Party fails to make such a request, it shall be deemed to have accepted the Offered Price. The Expert shall act as an expert and not as an arbitrator and its decision, which shall be incorporated in a certificate (the Certificate), shall be final and binding on the Affected Party and the buyer. The Affected Party and the buyer shall pay the Expert's fees and expenses equally.

12.6 If an Expert is appointed under clause 12.5, the buyer shall have the right to buy the Relevant Securities from the Affected Party at the Fair Price. The Buyer shall exercise the right to buy by giving notice to the Affected Party within thirty (30) days of the issue by the Expert of the Certificate to the Affected Party and the buyer.

12.7 Subject only to the Regulatory Approvals, the Affected Party shall be bound to sell and the buyer shall be bound to buy the Relevant Securities:

12.7.1 at the Offered Price, if the Affected Party notifies acceptance of the Offered Price under clause 12.4, or if the Affected Party fails to request the Expert to determine the Fair Price within the second fifteen (15) day period referred to in clause 12.5; or

12.7.2 at the Fair Price, if the buyer notifies the exercise of its rights under clause 12.6.

In such event, completion of the sale and purchase of the Relevance Securities shall take place within sixty (60) days of the day on which the parties become so bound (the Reference Date) or, if any Regulatory Approval has not been obtained by the end of that period, within ten (10) days of the date on which the last Regulatory Approval is to be obtained is obtained. If any Regulatory Approval has not been obtained within one-hundred and eighty (180) days after the Reference Date, the Offer Notice shall lapse and have no further effect.

12.8 The transfer of the Relevant Securities shall be on the following terms:

12.8.1 the Relevant Securities shall be sold free from all liens, charges and encumbrances and third party rights, together with all rights of any nature attaching to them including all rights to any dividends or other distributions declared, paid or made after the date of the Offer Notice.

12.8.2 the Affected Party shall deliver to the buyer duly executed transfer(s) in favour of the buyer, or as it may direct, together with, if appropriate, share certificate(s) for the Relevant Securities and a certified copy of any authority under which such transfer(s) is/are executed;

12.8.3 against delivery of the transfer(s), the buyer shall pay the total consideration for the Relevant Securities to the Affected Party by banker's draft for value on the completion date;

12.8.4 the parties shall ensure (insofar as they are able) that the relevant transfer or transfers (subject to their being duly stamped, stamp duty to be paid by the Buyer) are registered in the name of the buyer or as it may direct;

12.8.5 the Affected Party shall do all such other things and execute all other documents (including any deed) as the buyer may reasonably request to give effect to the sale and purchase of the Affected Party's Relevant Securities."

8. The matter came before the judge under CPR Part 24 following an order made by Master Price on 26 September 2002 directing the trial of three issues: (1) whether an insolvency event had occurred under the terms of the agreement by the service of a winding-up petition on 27 November 2001; (2) whether the claimants had served a valid offer notice pursuant to that agreement; and (3) depending on the outcome of those two issues, whether the claimants were entitled to the relief claimed by them in their claim form to some other and if so what relief.

9. The events which have led to these proceedings have as their immediate cause a falling-out between a Mr Michael Lynn and AKG in late 2001. As well as being a director of Dentons, Mr Lynn was an employee and a director of AKG until he resigned on 27 November 2001. That same day he presented a winding-up petition against AKG claiming damages for constructive dismissal and, separately, arrears of salary. The petition was contested. It was claimed in evidence before the court by a Mr Boles, AKG's chairman, that the petition was a deliberate tactic to attempt to extract a speedy settlement from AKG of disputed claims and that Mr Lynn was taking advantage of his knowledge of the terms of the shareholders' agreement. There was also a suggestion in Mr Boles' evidence that Mr Lynn was acting in collusion with the claimants. These matters were denied. They are not matters on which on this appeal a view can be taken. Nor did the judge below attempt to do so.

10. The trigger to the service by the claimants of an offer notice under clause 12.3 was a letter dated 27 December 2001 addressed by Mr Boles, as chairman of AKG, to Mr Martin Rose, as Chairman of Dentons, informing him that a winding-up "notice", as it was called, had been served upon AKG. The letter said that it was a "requirement" that he give him notice and added that "to date the notice has not been withdrawn".

11. In his evidence, Mr Boles denied that in writing that letter he believed that an insolvency event (as defined in the shareholders' agreement) had occurred. He said that his letter to Mr Rose was addressed to him not in his capacity as a party to the shareholders' agreement but in his capacity as chairman of Dentons because of his understanding that it was necessary to inform Dentons of the petition in as much as Dentons had a subsidiary company regulated under the Financial Services Act. The status of that letter has not been debated before us since it has not been suggested that, if there was an insolvency event within the meaning of clause 12 and the claimants did make an offer complying with the requirements of clauses 12.3 and 12.4, they were nevertheless disentitled from proceeding owing to AKG's failure to give notice under clause 12.3 that an insolvency event had occurred. Whether or not an insolvency event did occur must turn on whether under clause 12 the presentation of a winding-up petition constituted such an event, rather than on any admission that it had as a result of the letter of 27 December. The judge was correct to approach the issues before him on that basis.

12. On 25 March 2002 the investors wrote to AKG a letter headed "Offer Notice" in which, after referring to the letter of 27 December and to clause 12 of the shareholders' agreement, they made an offer for all of the shares in Dentons held by AKG and/or any member of its group. The letter stated that the offer constituted an offer notice as defined in the agreement. It valued the shares in question at £646,253.24, set out how that price had been reached and how the shares in question and the corresponding price were to be apportioned between the investors and then stated as follows:

"The net amount of the offer set out above ('the Offer') is payable in two equal instalments of £323,126.62 on completion and on the date six months thereafter.

The Offer expires on 24 April 2002 ('the Expiry Date'). In accordance with the Shareholders' Agreement, you must respond to us before the Expiry Date indicating whether you accept the Offer."

The letter was signed on behalf of the two claimants and the pension scheme trustees.

13. The offer was sent by post, which meant that, having regard to the provisions contained in the shareholders' agreement, it was deemed to have been received by AKG two days after posting, namely 27 March. This meant in turn, as the judge observed, that the latest date given by it for acceptances, namely 24 April, was two days short of the 30 days for acceptance for which clause 12.4 provided. However, as the judge observed, no point was taken before him by AKG or AIL that the notice was in that respect defective. Since the purpose of the notice was clear, namely that it was an offer notice as defined in the shareholders' agreement and having regard to what was said by the House of Lords in Mannai Investments Company Ltd v Eagle Star Life Assurance Company Ltd[1997] AC 749, that concession, in my judgment, was rightly made.

14. Mr Boles subsequently wrote to deny that there had been an insolvency event and to say that, even if there had been, the offer notice was invalid. He also said that the valuation upon which the offer was based was substantially less than the true value of Dentons. The upshot was that AKG rejected the offer and, despite being invited by the investors to do so, declined to agree to the appointment of an expert to determine the fair price of the shares as provided for by clause 12.5.2. It also failed to request the independent appointment of an expert within the period of 15 days as further provided for by that clause.

15. On 5 June, Mr Rose, acting on behalf of the investors, wrote to Mr Boles to say that, given its failure to comply with clause 12.5.2, AKG and AIL were bound to transfer their shares at the offered price. These proceedings then followed.

16. The judge held on the first of the three issues directed to be tried by the Master that an insolvency event had occurred by the service of the winding-up petition and on the second issue that the claimants had not served a valid offer notice. The third issue -- what relief the claimants were entitled to -- did not therefore arise. Instead, he dismissed the claim.

17. The claimants now appeal against the judge's conclusion on the second issue and the respondents, by a respondent's notice, challenge the judge's conclusion on the first issue. Although logically the first question is whether the judge was right to find that an insolvency event had occurred, I propose to deal first with the issue raised by the claimants' appeal, which is whether the claimants had served a valid offer notice.

18. Mr Howe appearing for the claimants/appellants submits that the judge was in error in his construction of clause 12 for essentially two reasons. First, he said that the judge was wrong to conclude that clause 12.8 sets out what is required to constitute a valid notice. The language of clause 12.8, he says, does not purport to do so. In truth, he says, clause 12.8 has a different role. Read with clause 12.7, its purpose is to provide for what Mr Howe describes as "default terms" which apply if an offer notice is rejected. In that event -- or in the event that AKG as offeree chooses simply to accept the offered price -- the machinery, including the transfer provisions contained in clause 12.8 will apply and the investors, as offerors, must accept that the price which they have offered must be paid in full on completion, whatever the terms may be on which they offered to make payment of the price in their offer notice. He submits that clause 12.8 does not and cannot specify the terms of transfer which apply if an offer in an offer notice is accepted because the effect of the acceptance is to create a new contract of sale with its own transfer terms. Instead, he says, the judge should have concluded that the only clause which sets out what constitutes a valid offer notice is clause 12.4. That clause provides in express terms what is required to constitute an offer notice, namely, that it should specify a price and that the offer remains open for 30 days. Both of those conditions, he says, were satisfied in this case. Second, he submits, the judge was wrong to consider that the scheme of clause 12 is such that it is implicit that an offer notice must provide for the consideration to be paid in one tranche. The judge was wrong, he says, for three reasons: (1) the judge's reasoning amounts to a decision that terms should be implied into clause 12; (2) there is no proper basis for implying such a term in that it is not necessary in order to give the clause business efficacy, in which context he referred us to the decision of the Court of Appeal in Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR page 742, in particular a passage in the judgment of Sir Thomas Bingham MR starting at the foot of page 480 and going over to the middle of page 481. The clause, he says, operates sensibly and effectively without implying such a requirement among the contents of an offer notice; (3) clause 20.1, which is a "whole agreement" provision, does not allow such an implication.

19. Mr Jackson appearing for the respondents submits that the judge was correct to construe clause 12 in the context of the agreement as a whole. He points in particular to the words of clause 10.1 of the agreement which says that the provisions of clauses 10, 11, 12 and Schedule 7 apply in relation to any transfer or proposed transfer of shares in the company or any interest in those shares. He submits that the question is not one of definition of an offer but of construction of the clause. He submits that the judge was correct to conclude that clause 12 provides for a single scheme for the expropriation of shares on an insolvency event and that to be valid under clause 12.4 an offer notice has to provide for completion in accordance with the provisions of clause 12.8. In so submitting he referred to paragraph 76 of the judge's judgment in which the judge said this:

"I conclude therefore as a matter of construction, that an offer for the purpose of clause 12 and thus an offer the subject of a valid clause 12.4 Offer Notice, must be on terms that will provide for completion in accordance with the provisions of clause 12.8, and that the provisions of clause 12 provide a single scheme on an Insolvency Event for the expropriation on the terms there provided of the defendants' shares."

20. He submits that, in view of a provision elsewhere in the shareholders' agreement, namely clause 10.2.3.4, enabling AKG to charge its shares in Dentons with up to £450,000 of the consideration paid for it in acquiring those shares and since, on completion of an acquisition under clause 12, the shares are to be transferred free of charge, it is improbable, he says, that the parties could have intended AKG to have to dispose of its shareholding other than upon receiving a sum representing the full value of those shares so as to enable the charge over them to be redeemed.

21. The question, he submits, is whether the offer contained in the offer notice fairly answers the description of what AKG bound itself to accept. He submits that AKG bound itself to a unilateral contract of sale at the offered price in accordance with the terms of clauses 12.7 and 12.8 if AKG should fail to call for determination of a fair price and should not have accepted the offered price. The price therefore must coincide with the term of the contract, and he submitted that the price offered must be a price capable of giving rise to the contract contemplated in clauses 12.7 and 12.8. He submitted that the practical effect of clauses 12.3 to 12.5, in the events that happened, was that, failing acceptance of the claimants' offer and failing a request for an independent appointment of an expert to value the shares, AKG became bound on 24 May 2002 (the latest date for seeking the independent appointment of an expert) to sell its shares to the investors at the offered price. It bound itself to sell its shares at the offered price if it accepted the offer or, as here, it was deemed to accept the offered price. It would have been similarly bound to sell, but at a fair price, if the price had been determined by an accountant as provided for by clause 12.7.2. In each of these three cases it bound itself to completion of the transaction within 60 days of the accrual of the obligation to sell. In any of those three circumstances, the terms of completion which are set out in clause 12.8 are the same and are mandatory in that clause 12.8 provides that the transfer "shall" be on the terms there set out. Among those terms is that the full consideration is to be paid on completion. The clause, he says, does not contemplate a separate sale contract in the event that the offered price is accepted. Instead, it envisages that the parties proceed to completion in accordance with clause 12.8. The reference in clause 12.8.3 to "total consideration" can only mean the full offered price.

22. The offer actually made provided for half of the purchase price to be paid six months after completion. Such an offer, he submits, was not capable of acceptance using the machinery for completion specified in the clause. It was not therefore an offer within the terms of clause 12.4.

23. In relation to Mr Howe's alternative ground of appeal Mr Jackson submitted that, although the judge did not in fact so hold, it is permissible, in order to give business efficacy to clause 12 to reflect the obvious intention of the parties that the right of expropriation under the clause carries with it an obligation to make payment in full, to imply a term that an offer capable of triggering the right to require AKG to sell its shares must be on terms that a transfer of the shares triggered by acceptance of the offered price should proceed to completion in accordance with the mechanism provided by clauses 12.7 and 12.8.

24. In my judgment, Mr Jackson's approach to the construction of the clause is to be preferred and, accordingly, the judge came to the right conclusion. The question is one of construction which turns on whether, for the purposes of clause 12.4, an offer notice is valid notwithstanding that it provides for some or all of the price to be paid subsequent to completion or whether it must be in terms that enable completion to be effected as envisaged by clauses 12.7.2 and 12.8. Relevant to this, in my judgment, is that clause 12.7.2 envisages that the regime for completion set out in 12.8 (most notably the requirement that all of the purchase consideration should be paid on completion) will apply as much when the offer price contained in the offer notice is accepted as when it is not and either the question of price is referred to an expert to determine or there is a "deemed" purchase. This regime is unworkable if the price offered provides for some part of the price to be paid after completion. As Mr Jackson submitted and the judge accepted, clause 12 sets out a composite scheme for the compulsory acquisition of the respondents' shares following an insolvency event. It is proper in my judgment to look at the clause as a whole and construe the requirement of a valid offer notice accordingly.

25. I do not consider that this involves implying a term into the clause that the offer contained in an offer notice must be on terms that, if accepted, the contract thereby arising can proceed to completion in accordance with clauses 12.7 and 12.8. But if it does, so be it. Such a term would, in my judgment, be necessary to give business efficacy to the agreement and I do not consider clause 20.1 would stand as a bar.

26. It is no answer to say that, if the offer contained in the offer notice had been accepted, there would have come into existence a contract to which the provisions of clauses 12.7 and 12.8 would have had no relevance whereas, if the offered price was the subject of a "deemed" acceptance, the investors would have been bound to follow the regime to make payment in full as required by clause 12.8. Such an approach to the clause would mean that, having made an offer to purchase on one set of terms, the investors would find themselves having to complete their purchase, in the event of a deemed acceptance of the offered price, on quite different terms as to payment. That strikes me as a very uncommercial result and one which it is scarcely likely that the parties could have intended by a business document of this kind. It would have the even odder consequence that if AKG had been willing to accept the offer, it would have been better advised to refuse it and to fail to agree or seek the appointment of an expert so that, by so failing, it could compel the claimants to pay over the consideration earlier than was envisaged by their offer notice.

27. For all of these reasons, I consider that the judge came to the right conclusion in relation to the second issue.

28. This means that the action must fail and the appeal be dismissed. It is not therefore strictly necessary to consider the respondents' challenge, by their respondents' notice, to the judge's conclusion on the first issue. This, it will be recalled, was that the presentation of the winding-up petition against AKG was an insolvency event for the purposes of clause 12. Since, however, the matter was fully argued, I will summarise the submissions and state briefly my conclusions.

29. Mr Jackson submits that the judge fell into error in holding that the presentation of the winding-up petition against AKG was an insolvency event. He submits that if presenting a winding-up petition is within clause 12.1.2, clause 12.1.1 -- which, so far as material, provides that "an order or a resolution ... for the dissolution or administration of AKG" is also an insolvency event -- serves no purpose. Indeed, he submitted that there was a conflict between the two provisions. This, he submits, is because a petition is necessarily presented before the court makes a winding-up order, or an administration order. He submits that something has gone wrong with the drafting of clause 12.1.1 and that the reference in that clause to "dissolution" must be understood to refer to liquidation or winding-up. He submits that it is not correct to treat a petitioner for a winding-up order as someone taking a step to appoint a liquidator -- which is the language used in clause 12.1.2. It is the court or the Secretary of State but not the petitioner who appoints the liquidator. He says that clause 12.1.1 is concerned with two situations: (1) where an order is made for the winding-up or administration of AKG (or AIL or any holding company of AKG or any other member of the AKG Group with the qualifying turnover) and (2) when a resolution is passed to wind-up voluntarily or to petition for an administration order.

30. Clause 12.1 2 by contrast is concerned with the appointment of a variety of persons -- manager, receiver, administrative receiver and the like -- over the assets of AKG or any of its related companies. He seeks to explain the inclusion of "liquidator" in the enumeration of appointees referred to in the clause by submitting that it refers to the appointment of a provisional liquidator under section 135 of the Insolvency Act. Such a person is invariably appointed, he says, to take charge of the company's affairs and maintain the status quo pending a decision on the winding up petition.

31. Finally, he says that if it had been intended that clause 12.1.2 should cover the event of the presentation of the petition, it is difficult to see why it could not simply have said so.

32. Mr Howe submits that applying ordinary canons of construction applicable to contracts, a winding-up petition is a "step ... to appoint a liquidator". He submits that presentation of the winding-up petition was a step taken in relation to all the assets of AKG -- which included its assets in Dentons and the shares it holds in AIL (thus meeting the requirement of clause 12.1.2 that the liquidator should be appointed "in respect of any assets which include ... the shares held in AKG or AIL"). He goes on to say that the winding-up petition was not withdrawn or discharged within 30 days. In short, he says, all of the requirements of clause 12.1.2 were met.

33. He submits that clause 12.1.1 is not concerned with winding-up petitions or orders. It refers, he points out, to dissolution of administration. There was no reference, he says, to liquidation or winding up. So it is wrong to contend, as the respondents do that clause 12.1.1 serves no purpose.

34. He submits, in answer to Mr Jackson's submission that clause 12.1.2 does not refer to a person appointing a liquidator, rather to a person taking a step to appoint a liquidator, that this is precisely what a petitioner with a winding-up order is doing.

35. He goes on to say that the Official Receiver is appointed under section 136(2) of the Insolvency Act 1986 to be and he remains liquidator until another person becomes a liquidator in his place. Even if he is not "appointed" to be a liquidator -- he made this submission in answer to a further point made by Mr Jackson -- a successful winding-up petition may and very often does result in the appointment of a liquidator by the company's creditors and contributories or by the court in the event of a dispute. The service of a winding-up petition is therefore, on the ordinary and natural meaning of the words, "a step to appoint a liquidator". He submits that it is mistaken to construe, as Mr Jackson seeks to do, the reference in clause 12.1.2 to "liquidator" simply as a reference to a provisional liquidator. The clause does not so provide and, besides, in terms of by whom or how a provisional liquidator is appointed, there is no material distinction between that and how and by whom an ordinary liquidator is appointed. The fact that there may be some overlap of provision between 12.1.1 and 12.1.2 is, he says, neither here nor there. Nor is it relevant that clause 12.1.2 is potentially wide-ranging in its operation. It is the bargain that the parties instructed. It is not open to the court to rewrite its terms and define its operation.

36. On any view, clause 12.1, in my judgment, is ill-worded. I agree with Mr Jackson that the reference in clause 12.1.1 to dissolution can only sensibly refer to "liquidation" or "winding-up". Courts do not order and resolutions are not passed for the dissolution of a company.

37. The broad scheme of the clause is, I think, this. All three sub-clauses involve a process prompted by AKG or AIL or one of the other qualifying companies in the group falling into financial difficulties. Clause 12.1.1 is concerned with liquidation -- whether compulsory or voluntary -- and administration -- where a person is appointed to wind-up or administer the affairs of the particular company. Clause 12.1.2 is or appears to be concerned with a process brought about by a third party -- someone outside the affected company -- whereby control is taken of particular assets of the affected company rather than of the company itself, for example, the appointment of an administrative receiver by a debenture holder or, I suppose, a Law of Property Act receiver by a mortgagee. Mr Jackson said it was the equivalent of somebody suffering execution over their goods. Clause 12.1.3 is concerned with an out of court process invoked by the affected company itself, for example a voluntary arrangement.

38. The difficulty about this analysis is, of course, the reference in clause 12.1.2 to "liquidator" and, I should add, to "administrator" as well. I am not persuaded by Mr Jackson that the reference to liquidator is to be understood as confined to a provisional liquidator. A provisional liquidator is appointed by the court following presentation of the winding-up petition but before the making of a winding-up order. Although his role is not same as that of a liquidator following the making of a winding-up order, I do not think that for the purpose of clause 12.1.2 it is materially different from that of a liquidator.

39. It is also difficult to think that clause 12.1.2 is to be read literally. If it is, then any step which has as its purpose the appointment of one of the named persons -- and however unlikely the step is to bring about the appointment -- will suffice. For example, a requisition by shareholders for the convening of an extraordinary general meeting of the company with a view to passing a resolution to wind-up. It will be a step which, if not withdrawn within 30 days, would (however mistakenly undertaken) give rise to an insolvency event and with it a right in the investors compulsory to acquire AKG's (and AIL's) shares in Dentons. Likewise, a wholly ill-founded winding-up petition presented against AKG. Unless successful in obtaining a striking out or withdrawal of the petition within the 30 days' grace period provided by the clause, an insolvency event will occur. It would not matter that the petition is dismissed or struck out a day or two later.

40. Although my mind has wavered on this issue, I am driven to the conclusion by the wording of clause 12.1.2 that the presentation of a winding-up petition is a step for the purpose of that provision and accordingly the judge came to the correct conclusion. Apart from the wording of the clause, three factors have weighed with me in reaching this conclusion. First, as was suggested in argument by Arden LJ, "a step" for the purpose of the clause must mean an objectively evident step, that is to say a step which becomes evident inter alia to AKG. In support of this, as Mr Howe submitted, clause 12.3.1 obliges the affected party, if it is a member of the AKG Group, to notify the investors of an insolvency event and to do so promptly. The second factor that has weighed with me is that the 30-day grace period, as I have described it, does at least provide AKG with some opportunity, admittedly not long, to take action to seek to negate a step which, if it was, has been taken in bad faith. The third factor is that there could be good reason for providing the investors with the opportunity to trigger the compulsory buy-out provisions contained in clause 12 in advance of an actual appointment under the subclause. The compulsory buy-out provision could or might be of no value if the triggering insolvency event coincided with but did not precede the appointment of a receiver over AKG's assets, including in particular its shares in Dentons.

41. For all of these reasons, in my judgment the judge reached the right conclusion on both issues. Therefore the appeal fails.

42. LADY JUSTICE ARDEN: I gratefully adopt the recitation of the facts, the issues and the argument already given by Blackburne LJ. I agree with him that the appeal must be dismissed for the reasons that he gives.

43. I desire to add a few short observations of my own and take first the issue whether the offer made by the appellants complied with clause 12 of the agreement dated 20th February 2000.

44. Mr Hugh Jackson for the respondent referred to BWE International Ltd v Jones[2003] EWCA Civ 298 in which, coincidentally, I gave the lead judgment. That case concerned the question of construction of pre-emption articles in the case of a transfer notice voluntarily given. At paragraph 21 I said that a share is a right of property and that the right of a shareholder to transfer a share is one of the rights attached to that property. A company's Articles should not be construed so as to cut down that right, unless that is the fair interpretation of the Articles. A share is a bundle of rights (see Borland's Trustee v Steel Bros[1901] 1 Ch 279) and the right to hold on to a share is as much a part of the right of property constituted by a share as the right to transfer it. Accordingly, whether the relevant provision which falls to be construed is a provision for compulsory transfer or a provision for voluntary transfer, the same principle of construction applies to that right, that the right is accordingly not to be taken away, whether by the company's Articles or by a shareholders' agreement, unless that is the fair interpretation of the Articles or the agreement.

45. That principle has been part of our company law for many years, but its importance is underscored by Article 1 of the First Protocol to the European Convention on Human Rights. Of course, the appellants also have rights under the agreement, but the fair interpretation which gives proper weight to the terms of the agreement which the parties have made is the most just way of balancing the respective rights of the parties.

46. On a fair construction of this agreement, I agree with the judge that the offer must be on terms which permit completion and payment of the price to occur simultaneously -- see clause 12.8.3, which my Lord has already cited, in particular its opening words:

"The transfer of the Relevant Securities shall be on the following terms:

12.8.3 against delivery of the transfer(s), the buyer shall pay the total consideration for the Relevant Securities to the Affected Party by banker's draft for value on the completion date."

47. In this particular provision the word "transfer" in the opening phrase in my judgment means "a contract for the transfer of the shares". Clause 12 constitutes a complete set of machinery for the compulsory transfer occurring on the happening of an insolvency event. I do not accept that the parties could within clause 12 agree to the completion on different terms. So to do would, in my judgment, involve a variation. By virtue of clause 20.1, a variation of the agreement cannot be imposed by one party unilaterally. Nor can it be agreed informally. In this case the appellants' offer could not be completed in accordance with clause 12.8 and therefore, in my judgment, could not constitute an offer for the purposes of clause 12.

48. On the question of the meaning of "insolvency event", I likewise do not entertain any doubt but that the judge was right for the following brief reasons. The wording of clause 12.1 contains a number of infelicities. For example, under the Companies Act the court does not have power to make an order for dissolution. It is apparent that there is an overlap between various provisions. For example, both clause 12.1.1 and clause 12.1.2 apply to liquidations. The court should therefore not construe the clause so as to avoid any overlap when that is clearly intended. I accept that there could be a series of connected events giving rise to a succession of insolvency events. Even so, there must be some limit on this. If the presentation of a winding-up petition is in itself the taking of a step, it is not, as I see it, every fresh step in the prosecution of that petition which will constitute a step for the purpose of clause 12.2.2. On the other hand, the word "step" is very wide. This may well have been a deliberate choice, as Blackburne J says, so that other parties could make an offer (before it is too late to do so) by virtue, for example, of the appointment of an administrative receiver.

49. In the context of clause 12.1.2 the words "to appoint" must clearly have meant "for the appointment of". So far as the appointment of a liquidator is concerned, it was pointed out that in the case of a compulsory winding-up the Official Receiver automatically becomes a liquidator. But, as I see it, he is nonetheless appointed, even if his appointment is automatic. Like Blackburne J, I do not accept that the word "liquidator" must be limited to the words "provisional liquidator". So to read the word "liquidator" would involve a rewriting of the parties' agreement. Nor do I accept that the word "dissolution" in clause 12.1.1 means "winding-up". As Lord Hoffmann said in Investors Compensation Scheme v West Bromwich Building Society[1998] 1 WLR 896 at 913, we should not easily assume that parties have made linguistic mistakes, particularly in a comprehensive agreement of this nature which was prepared by solicitors. It may not be possible for an English court to make an order for dissolution; but clause 12.1.1 applies to any court of competent jurisdiction, and so it is possible that such an order might be made by a foreign court.

50. Lastly, I am not concerned by the breadth of "any step" in clause 12.1.2. The distinguishing feature of the presentation of a winding-up petition is that it may lead to a winding-up order, and the winding-up order is essential if there is to be an appointment of a liquidator in a compulsory liquidation. The presentation of a winding-up petition is the obvious route for unpaid creditors, such as Mr Lynn asserted that he was, to obtain the appointment of a liquidator. Therefore, in my judgment, there is a sufficient connection between the presentation of a winding-up petition and the appointment of a liquidator for the presentation of a winding-up petition to fall within the clause 12.1.2.

51. In the present case, the winding-up petition is clearly served on the company. If it had been presented to the court but had not been served, an issue would have arisen as to whether the petitioner had indeed taken the step within clause 12.1.3. As I said in argument -- and Blackburne J has kindly quoted it -- there must be some objectively evident step for the purpose of this provision. Moreover, an issue would arise as to whether in the circumstances the actions of the person were sufficiently unequivocal and manifest to constitute "a step".

52. For all these reasons, I would dismiss the appeal.

53. LORD JUSTICE PETER GIBSON: I also agree that this appeal should be dismissed for the reasons given by Blackburne J.

Order: Appeal dismissed. We think that the appropriate order for costs, having regard to the success of the parties respectively, is that which the judge below ordered, that is to say the unsuccessful party should pay 50% of the costs of the successful party. We are asked to assess the costs summarily. We think it is appropriate, having regard to the figures that we should do that. We think that the figure in the statement of costs provided to us by the respondents is reasonable. Accordingly, subject only to the deduction of the VAT claimed, that is the sum we assess. 50% of that will be payable, therefore, by the unsuccessful appellant.

(Order does not form part of approved judgment)