Harvela Investments Ltd. Appellants v.

Royal Trust House of Lords 1985 June 4, 5, 6, 10; July 11

[1986] A.C. 207

*207 Harvela Investments Ltd. Appellants v. Royal Trust Company of Canada (C.I.) Ltd. and Others Respondents House of Lords HL Lord Fraser of Tullybelton, Lord Diplock, Lord Edmund-Davies, Lord Bridge of Harwich and Lord Templeman 1985 June 4, 5, 6, 10; July 11 Contract--Formation--Offer and acceptance--Sealed competitive tender--Highest single offer required--Bid comprising sum ascertainable by reference to rival bid-Whether referential bid impliedly excluded by terms of invitation--Delay in completion due to dispute as to successful bidder--Whether vendors entitled to interest on purchase money from completion date The first defendants, a Jersey trust company, were one of the trustees of a settlement and the registered holders, on behalf of the trustees, of shares in a company in which the plaintiffs and the second defendant and his family also owned shares. Whichever of the latter two groups acquired the trustees' shares would gain control of the company. Offers were made by both, and the first defendants then decided to invite them to *208 submit revised offers on identical terms and conditions. By telex, they invited each to submit any revised offer that it might wish to make by sealed tender or confidential telex to their solicitors by 3 p.m. on 16 September 1981. The solicitors undertook not to disclose details of any such revised offer to any party before that time. Tenders were to be a single offer for all shares held by the first defendants. In the event that closing should not take place within 30 days other than by reason of any delay on the first defendants' part, interest was to be payable by the purchaser at 4 per cent. above prime rate for Canadian dollar loans. The first defendants bound themselves to accept the highest offer received by them that complied with the terms of the telex. Offers were received from both parties before 3 p.m. on 16 September 1981. The plaintiffs' offer was C$2,175,000, the second defendant's "C$2,100,000, or C$101,000 in excess of any other offer... expressed as a fixed monetary amount, whichever is the higher." On 29 September 1981, the first defendants by their solicitors sent a telex to the plaintiffs and the second defendant saying that in the circumstances they were bound to accept and did accept the second defendant's offer. In an action by the plaintiffs claiming the shares, Peter Gibson J. gave judgment in their favour and declared that they were not liable to pay interest on the purchase price. He directed that the first defendants should retain and receive all dividends paid and to be paid on the shares from 16 October 1981 to completion. The Court of Appeal allowed an appeal by the second defendant and dismissed a cross-appeal by the first defendants. On appeal by the plaintiffs by leave of the House of Lords: Held, allowing the appeal, (1) that whether the first defendants had invited the plaintiffs and the second defendant to participate in a fixed bidding sale, only inviting fixed bids, or in an auction sale, enabling each bidder's bid to be adjusted by reference to the other bid, depended on the first defendants' presumed intention, which was to be deduced from the terms of the invitation read as a whole; that their undertaking to accept the highest offer, showing that they were anxious to ensure a sale, their extension of the same invitation to both the plaintiffs and the second defendant, showing that they wished each to have the same opportunity of buying the shares, and their insistence that the offers were to remain confidential until the time limit for the submission of offers had elapsed, showing that they wished to provoke offers of the best price that

each party was prepared to pay, were only consistent with a presumed intention to create a fixed bidding sale; that the use in the invitation of the word "offer" did not displace that presumed intention; and that, accordingly, the invitation on its true construction had created a fixed bidding sale and the second defendant had not been entitled to submit, and the first defendants had not been entitled to accept, a referential bid (post, pp. 223F-G, 224A, 225B - 226A, 228C-F, 230E - 231B, 233D-G). South Hetton Coal Co. v. Haswell, Shotton and Easington Coal and Coke Co. Ltd. [1898] 1 Ch. 465, C.A. approved. S.S.I. Investors Ltd. v. Korea Tungsten Mining Co. Ltd. (1982) 449 N.Y.S. 2d 173 applied. (2) That the telex message of 29 September 1981 had been sent by the first defendants with the intention of fulfilling what *209 they thought was their existing obligation due to their mistaken belief that they were bound to accept the second defendant's referential bid, not of creating any new obligation, and, accordingly, no second contract independent of the invitation had come into existence as a result of that message (post, pp. 223F-G, 224A, 226C-G, 228C-F, 235D-G). Beesly v. Hallwood Estates Ltd. [1960] 1 W.L.R. 549 applied. (3) That, although the first defendants' conduct in declining to complete with the plaintiffs had not been blameworthy, the failure to complete had been due to delay on their part within the meaning of the invitation, and, accordingly, they were not entitled to interest at the contractual penal rate imposed by the invitation; that, however, the plaintiffs should not in all the circumstances have the benefit of the interest attributable to the purchase money as well as the profits attributable to the shares since 15 October 1981, and, accordingly, as a condition of being granted specific performance they should be required to pay interest to the first defendants on the purchase price of 2,175,000 from that date until actual payment at the shortterm interest rate (post, pp. 223F-G, 224A, 227D - 228B, C-F, 236B-C, 237D- E). Decision of the Court of Appeal [1985] Ch. 103; [1984] 3 W.L.R. 1280; [1985] 1 All E.R. 261 reversed. The following cases are referred to in their Lordships' opinions: Beesly v. Hallwood Estates Ltd. [1960] 1 W.L.R. 549; [1960] 2 All E.R. 314 S.S.I. Investors Ltd. v. Korea Tungsten Mining Co. Ltd. (1981) 438 N.Y.S. 2d 96; (1982) 449 N.Y.S. 2d 173 South Hetton Coal Co. v. Haswell, Shotton and Easington Coal and Coke Co. Ltd. (1898) 14 T.L.R. 176; [1898] 1 Ch. 465, C.A.. The following additional cases were cited in argument: Allied London Investments Ltd. v. Hambro Life Assurance Plc. (1985) 274 E.G. 148, C.A.. Bartlett v. Barclays Bank Trust Co. Ltd. (No. 2) [1980] Ch. 515; [1980] 2 W.L.R. 430; [1980] 1 All E.R. 139 Birch v. Joy (1852) 3 H.L.Cas. 565, H.L.(E.). Booker v. Palmer [1942] 2 All E.R. 674, C.A.. Burton v. Todd (1818) 1 Swans. 255 Caledonian Railway Co. v. North British Railway Co. (1881) 6 App.Cas. 114, H.L.(Sc.). Hewitt's Contract, In re [1963] 1 W.L.R. 1298; [1963] 3 All E.R. 419 Hillas & Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503, H.L.(E.). Liverpool City Council v. Irwin [1977] A.C. 239; [1976] 2 W.L.R. 562; [1976] 2 All E.R. 39, H.L.(E.). Luxor (Eastbourne) Ltd. v. Cooper [1941] A.C. 108; [1941] 1 All E.R. 33, H.L. (E.) Moorcock, The (1889) 14 P.D. 64, C.A.. Reigate v. Union Manufacturing Co. (Ramsbottom) Ltd. [1918] 1 K.B. 592, C.A.. Shirlaw v. Southern Foundries (1926) Ltd. [1939] 2 K.B. 206; [1939] 2 All E.R. 113, C.A.. Smith v. Cooke [1891] A.C. 297, H.L.(E.). Trollope & Colls Ltd. v. North West Metropolitan Regional Hospital Board [1973] 1 W.L.R. 601; [1973] 2 All E.R. 260, H.L.(E.). *210 APPEAL from the Court of Appeal. This was an appeal by leave of the House of Lords by the plaintiffs, Harvela

Investments Ltd., from the judgment of the Court of Appeal (Waller, Oliver and Purchas L.JJ.) [1985] Ch. 103 on 18 July 1984 by which they allowed an appeal by the second defendant, Sir Leonard Outerbridge, and dismissed a cross- appeal by the first defendants, the Royal Trust Company of Canada (C.I.) Ltd., and the third defendants in the second defendant's counterclaim, the Royal Trust Company of Canada, from the judgment of Peter Gibson J. [1985] Ch. 103 on 29 November 1983 in favour of the plaintiffs. The Court of Appeal refused the plaintiffs leave to appeal, but on 18 December 1984 the Appeal Committee of the House of Lords (Lord Fraser of Tullybelton, Lord Diplock and Lord Brightman) allowed a petition by the plaintiffs for leave to appeal. The facts are set out in the opinion of Lord Templeman. Michael Essayan Q.C. and Michael Driscoll for the plaintiffs. The principal issue in this appeal raises a question of construction of the invitation telex. Did a referential bid of the kind submitted by the second defendant answer the description of what by the terms of the invitation telex the first defendants had bound themselves to accept? This is similar to the question that was posed and answered in the negative by the Court of Appeal in South Hetton Coal Co. v. Haswell, Shotton and Easington Coal and Coke Co. Ltd. [1898] 1 Ch. 465. The invitation telex invited a bid in the form of a sealed tender or confidential telex. The confidential nature of each bid was confirmed by the undertaking given by the first defendants' solicitors not to disclose the details of any bid to another bidder before the closing time for submitting bids. The Court of Appeal, while accepting that the issue between the parties was one of the proper construction of the invitation telex, did not address their minds to the question formulated above. They did not consider, as they ought to have done, whether the emphasis in the invitation telex on the confidential nature of the bids to be submitted as a matter of construction and necessary implication excluded a referential bid from being a proper acceptance of the offer contained in the invitation telex inasmuch as such a referential bid could only be quantified by referring to the amount of another person's bid, which was ex hypothesi confidential. In particular, Waller L.J. does not appear to have considered the provisions of the invitation telex as to confidentiality to be relevant to the principal issue: see [1985] Ch. 103, 133D-E. The decision of the Court of Appeal gives no meaning or effect to such provisions, and defeats the essential purpose of sealed bidding. The essential purpose of sealed bidding is that the bids are secret bids that are intended by the vendor and expected by bidders to be kept confidential as between rival bidders until such time as it is too late for a bidder to alter his bid. Sealed bidding means and must be understood by all those taking part in it to mean that each bidder must bid without actually knowing what any rival has bid. The reason for this, as every bidder must appreciate, is that the vendor wants to avoid the bidders bidding (as they would do in open bidding such as at an auction) by *211 reference to other bids received and seeking merely to top those bids by the smallest increment possible. The vendor's object is to get the bidders to bid "blind" in the hope that then they will bid more than they would if they knew how far other bidders had gone. Additionally, from each bidder's point of view his own bid is confidential and not to be disclosed to any other bidder, and he makes his bid in the expectation, encouraged by the invitation to submit a sealed bid, that his bid will not be disclosed to a rival. If, therefore, a rival has disclosed to him by the vendor the amount of another's bid and uses that confidential information to pitch his own bid enough to outbid the other, this is totally inconsistent with the basis on which each bidder has been invited to bid, and the rival's bid is not a good bid; likewise if the rival adopts a formula that necessarily means that he is making use of what should be confidential information (viz. the bid of another) in composing his own bid. In such a case, the amount of the other's bid is being constructively divulged to him. By the invitation telex, the first defendants bound themselves to accept the highest bid submitted by 3 p.m. London time on 16 September 1981, which meant that in order to comply with the terms of the invitation telex any such bid had to be in a form that could give rise to a complete contract by 3 p.m. Inasmuch as the referential limb of the second defendant's bid could not be quantified except by reference to the amount of the plaintiffs' bid, which was information that could not be disclosed to the second defendant before 3 p.m., it could not give rise to a complete contract by 3 p.m. Accordingly, by 3 p.m. the only bid submitted by the second defendant which

could give rise to a complete contract was the fixed limb of his bid which was lower than the plaintiffs' bid. The Court of Appeal in this case lost sight of the essential purpose of sealed bidding (see per Peter Gibson J. [1985] Ch. 103, 115A-F and S.S.I. Investors Ltd., v. Korea Tungsten Mining Co. Ltd. (1982) 449 N.Y.S. 2d 173, 174-175) and never properly analysed the concept of it. They wrongly assumed that the procedure of sealed competitive bidding under which the vendor bound himself to accept the highest offer was a rare occurrence, although no evidence has been adduced before Peter Gibson J. or the Court of Appeal that that was so. The South Hetton case, the S.S.I. Investors case and the present case are all examples of this procedure being adopted. The Court of Appeal wrongly assumed that there would be no adverse effect if a referential bid were made in sealed bidding where the vendor had not undertaken to accept the highest offer. In the case of such sealed bidding the bidder still knows that his best chance of securing the property lies in submitting the highest bid, even though the vendor has not bound himself to accept it. The essential purpose of inviting sealed bids therefore remains as set out above and is likewise liable to be defeated by a referential bid. Waller L.J. erred in stating at p. 134C-D, that the Court of Appeal had been given examples of referential bids that would not have any unfortunate effect, inasmuch as all forms of referential bidding are potentially destructive of sensible and fair bidding in that they may well either frustrate the whole bidding process or deflate the level of bids submitted, *212 as pointed out by Peter Gibson J., at pp. 112E-113F. Oliver L.J. erred in considering, at pp. 137H-138A, that there could be any similarity in the context of sealed bidding between a bid that was referential in the sense that it was based on some objective standard (e.g. a stock exchange quotation) and a bid that was referential in the sense that it was based on another bid; it is only the latter that defeats the purpose of sealed bidding. A stock exchange quotation represents information that is available to all bidders, in contrast to the amount of another person's bid, which is confidential. The Court of Appeal erred in distinguishing the South Hetton case. The referential limb of the second defendant's bid was invalid; in consequence, his only bid was the fixed amount offered by him (which was less than the plaintiffs' bid); alternatively, he submitted no valid bid at all. Waller L.J. at pp. 135E-136B, appears to have distinguished the South Hetton case on the basis that the second defendant's bid contained an offer of a fixed amount, but such a distinction produces the following dilemma. On the one hand, if regard can be had to the bid of a fixed amount and the referential bid is valid, then the second defendant made two offers and not a single offer as required by the invitation telex. On the other hand, if, as Waller L.J. went on to accept, the only offer by the second defendant was the referential limb of his bid (being higher than the fixed amount), then the fixed amount was never offered at all and it is impossible to distinguish South Hetton on the basis that the second defendant offered a fixed amount. The decision of the Court of Appeal is at variance with the decision in and policy of the law as enunciated in the Court of Appeal's decision in the South Hetton case, a decision that has stood for some 80 years. If South Hetton is distinguishable (which it is not), it may mean that subtle and fine distinctions will turn on the wording of the sealed bids invitations issued and on the wording of the referential bids submitted in each case. It is of general importance that in the commercial world these sorts of distinction should not arise, and the House should take the opportunity of laying down a general principle applicable to all cases of sealed bids where there is no express exclusion of referential bids. Waller and Oliver L.JJ. were wrong in saying that the terms of the first defendants' offer were fully set out in the invitation telex. The terms set out in the invitation telex were substantially the terms of the contractual obligations as between the vendor and the highest bidder that would fall to be performed after acceptance of the highest valid bid. The terms of the first defendants' obligation to accept the highest bid were not fully set out and the invitation telex left it to be determined as a matter of construction or implication what was and what was not a proper bid for that purpose. There can be no objection to implying a term into an offer, for the reason given by Peter Gibson J. in his judgment, at p. 114A. To have any sensible meaning, "sealed bidding," as a matter of construction or necessary implication for the reasons that Peter Gibson J. gave, must exclude bids based on the bids of others.

Anyone receiving this invitation telex would have known that he was expected to make his bid without knowing what anyone else's bid was. There was no other point to the provision for sealed bids. There is a *213 distinction between an invitation to treat and a case where the vendor binds himself to accept the highest offer in that compliance or non-compliance with an invitation to treat has no legal consequences. The second defendant's offer was capable of being accepted, but only outside the terms of the contract contained in the invitation telex. It was a counter-offer. The reasoning in the South Hetton case is extremely applicable to the facts of the present case. "Net money" in the judgment of Sir Nathaniel Lindley M.R. is not a valid distinction for the purpose of saying that the passage in question was obiter. Alternative offers would not be a single offer. If one were to bid "$1m or [FN1]., whichever is the higher," that would not be a single offer. [Reference was made to S.S.I. Investors Ltd. v. Korea Tungsten Mining Co. Ltd. (1981) 438 N.Y.S. 2d 96.] FN1 Fraction goes here "Implied term" is another way of saying the same thing: i.e. either "highest offer" means no referential bids or one must insert the implied term "(excluding referential bids)": see Liverpool City Council v. Irwin [1977] A.C. 239, 252H - 254H (Lord Wilberforce), 258E - 259B (Lord Cross of Chelsea), 266F-H (Lord Edmund-Davies), 270B-C (Lord Fraser of Tullybelton). The question always is: "what have they bound themselves to accept?" The plaintiffs satisfy the test of necessity in Liverpool City Council v. Irwin because without the exclusion of referential bids the contract becomes futile, inefficacious and absurd. Alternatively, it would be right to imply such a term on Sir Natahaniel Lindley M.R.'s ground of "trickery." (South Hetton Coal Co. v. Haswell, Shotton and Easington Coal and Coke Co. Ltd. [1898] 1 Ch. 465, 468). A referential bid is ex hypothesi taking advantage of confidential information contained in someone else's bid. It may be that one could frame referential bids so that they did not cancel each other out, but that does not overcome the main objection that this is completely contrary to the purpose of sealed bidding. The existence here of a fixed bid is a distinction without a difference so far as distinguishing South Hetton is concerned. The second defendant here was making a series of alternative, contingent offers. Leolin Price Q.C. and James Denniston for the second defendant. The second defendant's bid: (1) was an offer to purchase the shares; (2) was the highest offer received by the first defendants; and (3) complied with all the provisions (whether express or implied) of the invitation telex governing the form and content of an offer; it therefore constituted a valid and effective offer made in compliance with the terms of the invitation telex. As a matter of ordinary language and general contractual principles it is clear that the second defendant's bid constituted, at 3 p.m. on 16 September 1981, an effective and unambiguous offer to purchase the shares at a price of $2,276,000. It was an offer that was capable of having effect: (a) whether or not any other bid was made; and (b) whether or not any other referential bid (in whatever form) was made. It was an offer that: (a) the first defendants were not bound to accept if (inter alia) it did not comply with such express or implied terms; but (b) nevertheless constituted an effective contractual offer capable of acceptance. Suppose, for example, that the second defendant had bid a *214 fixed monetary sum of $2,276,000 but subject to the condition that completion should take place within 50 days (rather than 30 days as specified in condition 2 of the invitation telex) of 16 September 1981. Such a bid would not have complied with the terms of the invitation telex but would nevertheless have remained an effective offer. As to the plaintiffs' contention that the second defendant's bid was not a "single offer" as required by condition 1 of the invitation telex: (a) The phrase "single offer for all shares," when construed in the context of (i) the form of previous offers made by the parties and (ii) the communications between the parties leading up to the invitation telex, must be interpreted as meaning that a tender should be an offer which (in the words of Oliver L.J. [1985] Ch. 103, 137E) "embraced all the shares, of whatever class, in one parcel and [could not] be accepted piecemeal as regards different classes." The second defendant's bid was such an offer. (b) In any event, the second

defendant's bid was an offer of only one amount. Although the form of the bid required the recipient to consider different figures for the purpose of ascertaining which was the higher and thereby calculating the amount of the offer, the offer was a single offer of one figure, viz. $2,276,000. The qualifying phrase "whichever is the higher" made it clear that there was only one offer, not two alternative offers. Accordingly, the second defendant's bid was a single offer for all the shares that complied with the express terms of condition 1 of the invitation telex. As to the plaintiffs' contention that the second defendant's bid did not comply with an implied term of the invitation telex, namely that the amount offered by one bid must not be calculated by reference to the amount specified in another bid, the second defendant adopts the reasoning of the Court of Appeal for rejecting this contention. In order to establish the implied term contended for, the plaintiffs must show that: (a) the transaction was of such a familiar nature or the surrounding circumstances were such that the parties would, if asked, unhesitatingly have agreed that referential bids were prohibited by the invitation; or (b) that in order to make the transaction entered into by the first defendants (by sending out the invitation telex) work at all it is necessary to imply the suggested term into the invitation telex; or (c) that the transaction entered into by the first defendants in sending out the invitation telex is one in which (irrespective of the actual or presumed intentions of the first defendants) the law implies such a term in the invitation telex on the basis of Liverpool City Council v. Irwin [1977] A.C. 239. The second defendant comments on each of the three heads as follows: As to (a), there was no evidence before the court that suggests that there was any established usage or custom supporting the implication of a term excluding referential bids. Nor can it be said that the parties would, if asked, unhesitatingly have agreed that the invitation prohibited referential bids. The second defendant plainly believed that such bids were permissible. The first defendants themselves had no objection to the referential nature of his bid; their only doubt (which was set at rest by their London solicitors and leading counsel) was whether that bid constituted a "single offer" for all the shares. The *215 plaintiffs do not, so far as the second defendant is aware, seek to imply the suggested term on these grounds. As to (b), implication of the suggested term cannot be justified on the grounds that it is necessary to give business efficacy to the transaction. The invitation telex and the transaction entered into by the first defendants in sending that invitation work perfectly well without such an implication. The test is of necessity, not reasonableness, and that test is not satisfied here. The arrangement by the first defendants for the sale of the shares was not frustrated or complicated by the second defendant making a bid in the form in which he did make it nor could any difficulty have been caused even if one or more competing bidders had used the same form of bid as he did. That the referential form of his bid did not in any way restrict or prejudice the business efficacy of the invitation telex is emphasised by the facts that the first defendants had no difficulty in construing his bid as an offer of $2,276,000; that less than two hours after the deadline for receipt of bids in response to the invitation telex the second defendants were already able to inform the plaintiffs' Newfoundland lawyers that the plaintiffs' bid was unsuccessful; and that the effect of the second defendant's bid was to secure for the first defendants a purchase price of $101,000 higher than it would otherwise have received. Any reasonable bidder contemplating making a referential bid would, like the second defendant, have taken care to word his bid in such a manner that it was capable of taking effect as a valid and certain offer in any circumstances. The fact that it is possible to imagine certain unlikely circumstances (e.g. if the bidders were unwise enough to make referential bids in such a crude form that their bids could not take effect as certain offers) where the making of referential bids could lead to the invitation being abortive is not by itself sufficient to justify the implication of a term excluding any referential bid on this ground. Just as implication on the grounds of business efficacy was held by the House of Lords not to be permissible in Irwin, a fortiori the implication of a term excluding a bid in the form of the second defendant's bid cannot be said to be necessary in the present case. As to (c), there is no justification for implying a term on this basis. The test here is one of necessity, and it is not necessary to imply a term in the invitation telex

excluding referential bids, in particular a bid in the form of the second defendant's. One should look at the invitation telex bearing in mind the preceding history. There had been some argument about confidentiality attaching to one offer by the plaintiffs. The invitation telex was "without prejudice to all and every offer currently before us." What was in the mind of the invitors at the time of the telex is relevant, and they wanted to keep the offers open. "Any offer made by you" might have been the offer still on the table, but, be that as it may, "any offer" are words that carry the widest significance, whereas the plaintiffs say that by some process of construction or implication the word "offer" is rendered something less wide than the meaning that it has in its ordinary connotation: that it is of restricted character. Whether one says "of course that is its meaning" or whether one implies terms into a contractual document does not *216 matter: the second defendant is seeking to establish what, objectively, looking at this telex, the reference to "offer" must be taken as being, i.e. what offer is contemplated. One is trying to divine the intention. In looking to see whether the law will presume any intention of the invitor regarding the very ordinary word "offer," it is not insignificant that the reaction of the second defendant and his advisers was that a referential bid would be an "offer." It is also a matter for comment that within a very short time the first defendants and their advisers were of the same view. [LORD BRIDGE OF HARWICH. That is no answer to the question what was the second defendant's bid if it had been opened before any other bid had been opened. One could not have said what it was.] The relevant time was 3 p.m. on 16 September 1981. Before that, any party could have withdrawn. It is at that moment that the comparison has to be made. There was no room for uncertainty at 3 p.m. on 16 September. At that time, the second defendant's bid was an offer of an ascertained figure, and it was higher than any other amount. Otherwise, the trustees' whole object would have been defeated, because, instead of getting $2,276,000, they would have got only $2,175,000. The manifest purpose of getting the highest available price would have been defeated. It requires some strong and compelling case to establish that the innocent word "offer," unqualified by an express prohibition of a bid in this form, has that penalising effect. The House should reject the contention that this case has implications for referential sealed bids generally and is not to be decided on its particular facts. A bid of "$5 or $1 more than any other bid" would be a good bid, but one must look at the practicalities: it is most unlikely, against the background, that anyone would have put in such a bid. "$101,000 over any bid of fixed amount " would be all right, though someone reading South Hetton Coal Co. v. Haswell, Shotton and Easington Coal and Coke Co. Ltd. [1898] 1 Ch. 465 might think that it would not be. As to the argument below [1985] Ch. 103, 130C, it is dangerous to suppose that there is any essential purpose of sealed bidding: it depends on the circumstances of the case. Why this larger bid should be rejected, not by the vendors but by some process of judicial intervention, is hard to see. As to confidentiality, the second defendant did not have to submit his bid without knowing what the plaintiffs had bid. As to "essential purpose," he might have asked: "What is that? I have faithfully followed the prescribed procedure." As to making use of what he was not allowed to know, no one has said that he could not do so. At 3 p.m. on 16 September 1981 comparison of the offers was essential, and at that time the bids would have been known. As to the suggestion that that amounts to a "constructive disclosure," what reasonable man would have thought of such a thing? The referential part of the bid was not unfair to the plaintiffs at all: it was as open to them as it was to the second defendant to make a bid in that form. If the second defendant had put in a similiar referential bid, but with different figures, there would have been no more difficulty *217 than if both had bid $2m. If it is said that the second defendant's system produces preposterous results, the answer is that it is not his system; it is that of the first defendants. It is clearly not obvious that this sort of bid is excluded when two parties both thought that it was valid. The law ought not to make contracts, or reword contractual documents, for the parties. It should accept them in the form they are in. If that produces unsatisfactory results, that is the fault of the originator of the document, not of the law: see [1985] Ch. 103, 130D (arguendo) and The Moorcock (1889) 14 P.D. 64, 68, per Bowen L.J.: "as must have been intended ... must have been in the contemplation of both parties." So, one asks:

must the first defendants in formulating the invitation telex be presumed to have intended that bids of this kind should not be considered? The compulsion simply is not there. See also Reigate v. Union Manufacturing Co. (Ramsbottom) Ltd. [1918] 1 K.B. 592, 605: a party here could not have said "oh, of course referential bids are forbidden." [LORD BRIDGE OF HARWICH. Could you devise a formula for sealed bids on terms that referential bids will in all circumstances be accepted?] It would not permit referential bids in every form, but one could permit them of a certain kind. One could put in a reserve price. One does not know whether the plaintiffs thought that referential bids were possible; there were queries from the parties regarding some of the terms. [Reference was made to Shirlaw v. Southern Foundries (1926) Ltd. [1939] 2 K.B. 206, 227 ("so obvious that it goes without saying"); Luxor (Eastbourne) Ltd. v. Cooper [1941] A.C. 108, 117 (Viscount Simon L.C.), 137 (Lord Wright); Trollope & Colls Ltd. v. North West Metropolitan Regional Hospital Board [1973] 1 W.L.R. 601 (the court does not make a contract for the parties).] The only answer suggested to the question why "offer" in this contract does not have its ordinary wide meaning is that the bids are going to be confidential until 3 p.m. Regarding South Hetton Coal Co. v. Haswell, Shotton and Easington Coal and Coke Co. Ltd. (1898) 14 T.L.R. 176; [1898] 1 Ch. 465, the second defendant stresses the word "entirely" at p.469: i.e., if there were no other tender. If the defendant had said "31,000 or..." Sir Nathaniel Lindley M.R. could not have used that dismissive sentence. His observations about trickery and making a bad precedent come after the rationale of the decision, building on it, without examination of the possibilities to which he referred. They were wrong. The observations about supposed subversion made in S.S.I. Investors Ltd. v. Korea Tungsten Mining Co. Ltd., 449 N.Y.S. 2d 173, 174-175 were wholly unnecessary to the decision of the case. The bid there was wholly uncertain. As to interpretation: (1) in construing all written instruments the grammatical and ordinary sense of the words used is to be adhered to unless to do so would lead to some absurdity: see Caledonian Railway Co. v. North British Railway Co. (1881) 6 App.Cas. 114, 131 (Lord Blackburn). (2) A qualification of that proposition is that one does not depart from the grammatical interpretation because one does not like the result or because one's initial reaction is that one does not like the consequences: see Smith (J. T.) v. Cooke [1891] A.C. 297, 298-299 (Lord Halsbury L.C.). *218 There are various alternative ways of drafting an invitation excluding referential bids. How does one choose between two alternatives if one is looking for interpretation? If the second defendant had bid "$2 [FN2]. now and $ [FN3]. in six months " that would not have complied with the terms of the telex, but it would clearly have been the highest offer. It would be crazy if it could not be accepted. So with his actual offer. FN2 Fraction goes here FN3 Fraction goes here It was unnecessary, and unusual, for the first defendants to bind themselves to accept the highest bid. The second defendant abandons his contentions in his printed case that the invitation telex was a mere invitation to treat and that the plaintiffs did not give sufficient consideration to make any contract between them and the first defendants binding on the first defendants. The note at p.2 of the Journal of The Law Society of Scotland, January 1967, vol. 12, no. 1, is merely a recommendation against accepting referential offers; it is not saying that they are not an "offer" within the law. The note is concerned with excluding referential bidding in express terms; it is not saying that as a matter of interpretation they are not an "offer." Edward Nugee Q.C. and Oliver Weaver Q.C. for the first defendants and the Royal Trust Company of Canada. In an open market permitting referential bids the result of

any offer produces neither capricious nor uncertain results even where the vendor binds himself to accept the highest offer. This case is to be distinguished on its own facts from obiter dicta in South Hetton Coal Co. v. Haswell, Shotton and Easington Coal and Coke Co. Ltd. [1898] 1 Ch. 465 and S.S.I. Investors Ltd. v. Korea Tungsten Mining Co. Ltd., 438 N.Y.S. 2d 96; 449 N.Y.S. 2d 173. A fixed bid is a simple bid of a fixed amount (e.g. 100). A referential bid is a bid that is determined by reference to a competing bid (e.g. 10 more than any other bid). A mixed bid contains a fixed bid (e.g. 50) and a referential bid element (e.g. 10 more than any other bid) and may be limited in overall amount (e.g. 200). The referential bid element can only operate when the amount of other bids has been determined because either other bids are fixed at the outset or other bids have become fixed whether notionally or by reference to any overall limit placed on them. In a tender where mixed bids are allowed, where the referential bid element operates only on the fixed element in other bids (e.g. 10 more than any other bid expressed as a fixed sum) a bidder can strengthen his position by a combination of a defensive low fixed element (to reduce his opponent's base) (e.g. 10) and an aggressive high referential bid element (to increase his own bid) (e.g. 50 more than any other fixed bid). Thus, there will be an incentive on any such bidder to keep his referential bid element as high as possible. This will, however, in turn, expose him to a high fixed bid. Any bidder making a bid with a high referential bid element would in practice defend his ultimate exposure by an overall upper limit. Where the referential bid element operates on the combined fixed and referential elements in other bids (e.g. 10 more than any other bid not exceeding 200 in all), each bid will defeat the other up to their respective limits, when all save one become fixed. In *219 that event, the bidder imposing the highest limit wins with a bid of his referential bid element over the next highest limit. While, however, one such bidder who imposes no limit on his bid will succeed, a combination of such unlimited bids will be self-cancelling. Thus, no bidder would be advised to put in such a bid without a limit, because, if there is another such bid, he will thereby ensure that he does not succeed. Thus, in practice, the market will be regulated by the limit that each bidder will place on his referential or mixed bid. Where the referential bid element operates on other referential or mixed bids, the bidder with the highest limit on his referential or mixed bid succeeds at a price in excess of the next highest limit. Where the referential bid element operates on only the fixed bid element in other bids (including fixed bids), the requirement for a successful bidder making a low fixed bid to make a high increment bid to defeat another similarly-minded bidder will expose each of them to a realistic fixed bid to the consequent benefit of the offeror. This possibility will, in practice, mean that referential and mixed bidders will adopt the former course. In these circumstances, the mischief suggested by the Court of Appeal in the South Hetton case will not, in practice, arise, and the vendor will in fact obtain a price higher than anyone other than the successful bidder is prepared to pay. This is not so if the bids are limited to fixed bids, for in this case (contrary to what Peter Gibson J. said [1985] Ch. 103, 115D) each bidder will bid the minimum amount that he thinks will secure the contract. The special features of this case are: (i) the invitation telex was sent only to the plaintiffs and the second defendant. Contrast the facts in the S.S.I. case (see 438 N.Y.S. 2d. 96, at pp.98 and 101), where the offer was by public advertisement in accordance with an established and well-recognised practice of sealed competitive bidding which, at all events in New York, is adopted in relation to almost all contracts for public improvements and many for private improvements (anglice "developments"). (ii) The plaintiffs and the second defendant had each made to the trustees substantial previous offers for the shares which remained outstanding, and each knew that the two offers were similar in amount. (iii) The second defendant's bid did not depend for its efficacy on the existence of another bid. (iv) The referential bid element in the second defendant's bid was a substantial increase over the plaintiffs' bid. (v) The invitation telex did not seek to exclude referential bids. (vi) By the invitation telex the first defendants had bound themselves to accept the highest offer received. There was no condition that Bischoff & Co. would not open any tender before 3 p.m. (as there was in the S.S.I. case). So they were in a position to quantify the second

defendant's bid before 3 p.m. There was not really a breach of confidence here: it was like bidding blind at an auction, leaving one's bid with the auctioneer. This is a very peculiar case. What is clear is that, if the second defendant's claim is rejected, the first defendants will not get the best price that anyone was prepared to pay. There is no reason to suppose that the second defendant did not have it in mind that the plaintiffs might also put in a referential bid. So his fixed bid of $2,100,000 may have been genuine. The plaintiffs were not required to reply on the principal issue. *220 Nugee Q.C. on the second contract issue. The invitation telex was an offer and not a mere invitation to treat by reason of the obligation to accept the highest bid complying with the specified terms. That offer was accepted when the highest bid complying with the terms of the invitation telex was received irrespective of difficulties in determining which of the plaintiffs' or the second defendant's bids so complied. Acceptance of the offer produced a binding contract either for the sale of the shares or to enter into a contract for the sale of the shares. The distinction is immaterial, as Lord Wright said in Hillas & Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503, 515. Thereafter, the first defendants had no intention of making any further contract with the second defendant for the sale of the shares, and the further telex was only for the purpose of giving effect to its belief of pre-existing rights: see per Buckley J. in Beesly v. Hallwood Estates Ltd. [1960] 1 W.L.R. 549, 558. [Reference was made to Booker v. Palmer [1942] 2 All E.R. 674, 677C (Lord Greene M.R.)]. The first defendants will not seek to argue that in the event of the second defendant succeeding on the second contract issue he is confined to nominal damages for breach of such contract. Price Q.C. on the second contract issue. Peter Gibson J. rightly held that, on the hypothesis that the first defendants had already entered into a contract on 16 September 1981 to sell shares to the plaintiffs for $2,175,000, they had nevertheless entered into a second contract on 29 September 1981 to sell them to the second defendant for $2,276,000. The second defendant's bid constituted an effective offer to purchase the shares for $2,276,000, capable of acceptance by the first defendants. On 29 September 1981, the first defendants sent a telex to the second defendant's London solicitors accepting that offer by the second defendant. The communication of that acceptance to the second defendant's agents constituted a binding contract between the first defendants and the second defendant whereby the first defendants agreed to sell the shares to the second defendant for $2,276,000, completion to take place within 30 days of 16 September 1981. In so far as the first defendants accepted the second defendant's offer in the mistaken belief that they were bound by the terms of the invitation telex to accept such offer, that mistake was a mistake of law and does not validate the contract. There was an intention here to create a legal relationship. The first defendants took a deliberate step apparently actually binding themselves in a contractual relationship with the second defendant, which was completed on 29 September 1981 and not at any earlier time. [Reference was made to Beesly v. Hallwood Estates [1960] 1 W.L.R. 549, 558 and Booker v. Palmer [1942] 2 All E.R. 647, 677.] As to damages, the second defendant is not entitled to specific performance of the second contract, he is entitled to an order for an inquiry as to what damage he has sustained in consequence of the failure of the first defendants to transfer the shares to him. There is ample material to support the inference that he would suffer some damage. Nugee Q.C. on the interest point. As to contractual interest, "delay on our part" imports the concept of fault or responsibility (see the definition of "delay" in the Shorter Oxford English Dictionary) and does *221 not extend to a circumstance forced on the first defendants by matters outside their control. It means, as a matter of plain language, delay for which the first defendants are responsible. Given the inevitability of litigation to determine the principal issue, unless "delay on our part" does import the concept of fault or responsibility the first defendants could never have been entitled to interest under the contract, whether by electing or by refusing to complete with either or both parties. Further, it would be absurd if the question of interest depended on whether the first defendants or the purchaser had been restrained at the suit of the other bidder. The construction of "delay on our part"

should be approached having regard to the normal rule that a purchaser pays interest from the date fixed for completion and, in the absence of express provision, can excuse himself only by showing default on the part of the vendor: see In re Hewitt's Contract [1963] 1 W.L.R. 1298, 1301-1302. The rule is based on the fundamental principle that as from that date the purchaser is considered the owner of the property sold and the vendor the owner of the purchase money: Birch v. Joy (1852) 3 H.L.Cas. 565, 590-591 (Lord St. Leonards L.C.); Burton v. Todd (1818) 1 Swans. 255, (Sir Thomas Plumer M.R.). Had the first defendants sought to transfer the shares to the plaintiffs at any time prior to the order of Peter Gibson J. made on 29 November 1983, the second defendant would have sought and obtained an injunction. That was accepted by Peter Gibson J. The delay in the completion of the contract was due to a supervening outside event, namely the intervention of the court in the Jersey proceedings to determine the principal issue. To constitute delay "on our part," the plaintiffs must show that, but for something that the first defendants did, or failed to do, the transfer of the shares to the plaintiffs would have been completed on the date fixed for the completion of the contract. Further, since the order of Peter Gibson J., which incorporated a stay of all proceedings to enforce the declarations and orders made in favour of the plaintiffs, and the subsequent order of the Court of Appeal, the first defendants have been powerless to transfer the shares to the plaintiffs. They could not have completed on 16 October whatever course they had taken. "Delay " may mean the action of delaying or the mere fact of being delayed. The addition of "on our part" makes it clear that the word was being used in the first sense. It cannot be said that the first defendants had contracted out of their right to interest. There was nothing that they could have done to secure the speedy completion of the contract once the second defendant had made that bid. There would have been just as much delay. If the first defendants had taken out an interpleader summons it would have been difficult to criticise them. There would then have been delay in completion, and it would have been "on our part" in the sense that the first defendants would have taken out the summons. They cannot be said to have been responsible for the delay in any real sense. The word "frustrating" in the judgment of Purchas L.J. [1985] Ch. 103, 150F is wrong: it is enough that there should be a supervening outside event. Oliver and Waller L.JJ. wrongly dissected "delay" and "on our part." As to equitable interest, this is claimed as an incident of specific performance. The basis of such an award is to compensate for *222 non- receipt of money that ought to have been received (Bartlett v. Barclays Bank Trust Co. Ltd. (No. 2) [1980] Ch. 515, 547B (Brightman L.J.)), coupled with the principle that, as from the date fixed for completion, the vendor is considered in equity to be the owner of the purchase money. It is inequitable to allow a purchaser to retain the rents and profits earned over a delayed completion and at the same time be relieved of paying interest. To displace this principle a strong case must be made out (see In re Hewitt's Contract [1963] 1 W.L.R. 1298, 1301-1302 (Wilberforce J.)), such as fault on the part of the purchaser. Prima facie, interest is payable in the case of any specifically enforceable contract. This contract does not displace that rule. It should be approached with the presumption that interest is payable unless there is a clear indication that it is not. The plaintiffs have had the use of the purchase money since the date fixed for completion, or alternatively have been relieved of the burden of borrowing any part of it. Since the date fixed for completion of the contract, the company has earned substantial profits, which will enure largely for the benefit of the purchaser of the shares (who will thereby obtain effective control of the company). In a case such as this, where the subject- matter of the sale includes a holding of shares on which no dividends are paid but which give control of a family company earning substantial profits, it is neither realistic nor just to hold that the only compensation to which the vendor is entitled for non-receipt (through no fault of his own) of the purchase price is the modest dividends paid on other shares that happen also to be included in the sale. The plaintiffs could have put the purchase price on deposit. If the House holds that the contract does not entitle the first defendants to interest, the right course in equity would be to require the plaintiffs to pay interest at the conventional rate, i.e. the short-term investment rate, which is the normal rate to award in equity (see Bartlett v. Barclays Bank Trust Co. Ltd. (No. 2) [1980] Ch. 515,

547B (Brightman L.J.) and much the same rate as the first defendants would have obtained if they had put the purchase price on deposit; see also Allied London Investments Ltd. v. Hambro Life Assurance Plc. (1985) 274 E.G. 148, 151 and Birch v. Joy (1852) 3 H.L. Cas. 565, 590- 591 (Lord St. Leonards L.C.). Essayan Q.C. on the interest point. If the plaintiffs are successful on the principal issue, they should not be required to pay interest to the first defendants on the purchase price of the shares either under the terms of the contract or on equitable principles, for the reasons given by Peter Gibson J., with which Oliver L.J. agreed and from which Waller and Purchas L.JJ. did not dissent. Why was the contract not completed on 15 October 1981? The answer can only be: because the first defendants of their own volition decided not to sell to the plaintiffs but to sell to the second defendant instead; because they erroneously thought that they were bound to do so. That was "of their own volition" because there was nothing to stop them completing with the plaintiffs. As to the liability to pay interest as a condition of specific performance, the ground of that is that the purchase money in equity *223 belongs to the vendor and the property to the purchaser. That is subject to the qualification expressly indorsed in In re Hewitt's Contract [1963] 1 W.L.R. 1298, that it does not apply where there is delay on the part of the vendor and there is a gross disproportion between the interest payable and the benefit derived. The plaintiffs have had no benefit from the property at all. It is now too late to give the plaintiffs any benefit retrospectively because control has been exercised meantime by the second defendant. If a vendor fails to complete due to his fault, it may turn out that the purchaser is better off because he has had the money meanwhile. The figure given in the first defendants' written case of $1,917,116 for 1981 profits is misleading, because that is what the plaintiffs were paying for anyway. In applying the equitable rules, one applies them consistently with the terms of the contract. It is accepted that, as a condition of granting specific performance, the court can grant some kind of interest, but it ought to be influenced by the contractual provisions, and, if the party cannot get interest on a contractual basis, it should not get it on equitable grounds. The contractual rate of interest is a penal rate. There should be no question here of compound interest, whether at LIBOR or any other rate. The plaintiffs could not have got an undertaking in damages to cover them for what happened up to 29 November 1983: they were the party seeking the injunction. Driscoll following. If it is accepted that under the terms of the contract the first defendants are not entitled to interest, then to grant specific performance of that contract on terms that the plaintiffs pay interest would be to grant specific performance not of that contract but of some other. In considering whether it would be unconscionable for the plaintiffs not to have to pay interest the contract should be taken into account, not rewritten. This was not an unusual provision as to interest. Their Lordships took time for consideration. July 11. LORD FRASER OF TULLYBELTON My Lords, I have had the advantage of reading in draft the speeches of my noble and learned friends, Lord Diplock and Lord Templeman, and I agree with them. For the reasons stated in them I would allow the appeal and make the declarations and orders proposed by Lord Templeman. LORD DIPLOCK My Lords, the unanimous conclusions of the Appellate Committee upon the three issues raised in these proceedings are voiced in the speech of my noble and learned friend, Lord Templeman. In it he sets out the relevant facts which give rise to the three questions of law about legal obligations resulting from the contractual relations between the three parties to the appeal and cross-appeal to this House. These I will call, for brevity, "the construction question " (which is the main *224 question in the appeal by Harvela), "the second contract question," and "the interest question." Since, like the remainder of your Lordships, I am in full agreement with Lord Templeman's speech, the brief observations of my own which I have ventured to append are written on the assumption that what he says has been already read and

digested. What I myself am proposing to say should be treated as being in the nature of footnotes to it, which are designed to indicate the way in which those three questions of law and the solutions to them reached by this House are compatible with current juristic analyses of contractual obligations as they have been developed in the course of the last 25 years. The construction question turns upon the wording of the telex of 15 September 1981 referred to by Lord Templeman as "the invitation" and addressed to both Harvela and Sir Leonard. It was not a mere invitation to negotiate for the sale of the shares in Harvey & Co. Ltd. of which the vendors were the registered owners in the capacity of trustees. Its legal nature was that of a unilateral or "if" contract, or rather of two unilateral contracts in identical terms to one of which the vendors and Harvela were the parties as promisor and promisee respectively, while to the other the vendors were promisor and Sir Leonard was promisee. Such unilateral contracts were made at the time when the invitation was received by the promisee to whom it was addressed by the vendors; under neither of them did the promisee, Harvela and Sir Leonard respectively, assume any legal obligation to anyone to do or refrain from doing anything. The vendors, on the other hand, did assume a legal obligation to the promisee under each contract. That obligation was conditional upon the happening, after the unilateral contract had been made, of an event which was specified in the invitation; the obligation was to enter into a synallagmatic contract to sell the shares to the promisee, the terms of such synallagmatic contract being also set out in the invitation. The event upon the happening of which the vendor's obligation to sell the shares to the promisee arose was the doing by the promisee of an act which was of such a nature that it might be done by either promisee or neither promisee but could not be done by both. The vendors thus did not by entering into the two unilateral contracts run any risk of assuming legal obligations to enter into conflicting synallagmatic contracts to sell the shares to each promisee. The two unilateral contracts were of short duration; for the condition subsequent to which each was subject was the receipt by the vendors' solicitors on or before 3 p.m. on the following day, 16 September 1981, of a sealed tender or confidential telex containing an offer by the promisee to buy the shares for a single sum of money in Canadian dollars. If such an offer was received from each of the promisees under their respective contracts, the obligation of the promisor, the vendors, was to sell the shares to the promisee whose offer was the higher; and any obligation which the promisor had assumed to the promisee under the other unilateral contract came to an end, because the event the happening of which was the condition subsequent to which the vendors' *225 obligation to sell the shares to that promisee was subject had not happened before the unilateral contract with that promisee expired. Since the invitation in addition to containing the terms of the unilateral contract also embodied the terms of the synallagmatic contract into which the vendors undertook to enter upon the happening of the specified event, the consequence of the happening of that event would be to convert the invitation into a synallagmatic contract between the vendors and whichever promisee had offered, by sealed tender or confidential telex, the higher sum. To this I shall advert briefly when I come to mention the fresh contract question and the interest question. The answer to the construction question itself, however, appears to me to present no difficulties in so far as it leads to the conclusion that the condition subsequent to which the vendors' obligations under the unilateral contracts were subject was incapable of being fulfilled by either promisee except by a self-contained offer of a purchase price for the shares expressed as a fixed sum of money which did not necessitate, for its quantification, reference to offers made by any other bidders. I appreciate that this cannot be quite so obvious as I myself have thought throughout, seeing that the Court of Appeal felt compelled to come to a different conclusion. In the case of a unilateral contract, until it is converted, if it ever is, into a synallagmatic contract between promisor and promisee, the only question of construction is: what legal obligation would the words used by the promisor reasonably convey to the promisee that it was the intention of the promisor to assume towards him? The invitation invited each promisee to whom it was addressed to specify by a fixed

hour on the following day the price at which he was willing to accept the promisor's offer to sell the shares upon the terms set out in the invitation. Such price was to be specified, not by an offer of which the other promisee could obtain knowledge, but by sealed tender or confidential telex the contents of which the promisor undertook should not be disclosed to the other promisee until it was too late for him to make a timeous offer. The whole business purpose of unilateral contracts inviting two or more promisees to submit sealed tenders of a purchase price for property which are not to be disclosed to any competing promisee and imposing on the promisor a legal obligation to transfer the property to the promisee whose tender specifies the highest price is that each promisee should make up his mind as to the maximum sum which he estimates the property is worth to him, not a sum of money the amount of which cannot be determined except by reference to amounts specified in sealed tenders received from other promisees of which, under the terms of the unilateral contract, he is to be denied all knowledge before the time for making his own tender has expired. That business purpose would be defeated by a tender which took the form of an offer to purchase the property not for a specified fixed sum of money but for a sum greater by some specified amount than the fixed sum specified in the sealed tender lodged by some other promisee by the terms of a unilateral contract in identical terms. What other sensible reason could there be for making it *226 a term of each unilateral contract that the promisee should be kept in ignorance of the amounts offered by any other promisees? The business purpose of a unilateral contract of this type providing for sealed tenders and the resulting construction placed upon it of excluding referential bids of the kind made by Sir Leonard was judicially recognised as long ago as 1898 in South Hetton Coal Co. v. Haswell, Shotton and Easington Coal and Coke Co. [1898] 1 Ch. 465, cited by my noble and learned friend, Lord Templeman. Until the judgment of the Court of Appeal in the instant case the ratio decidendi of that judgment of Sir Nathaniel Lindley M.R. has never been doubted or questioned. I agree with Lord Templeman that the grounds on which the Court of Appeal sought to distinguish the instant case from the South Hetton case are unsound. Your Lordships should take this opportunity of confirming the judgment in the South Hetton case and thereby put it beyond further question. My Lords, I turn next to the second contract question, the answer to which appears to me to be self-evident. Sir Leonard claims that a fresh synallagmatic contract coming into existence on 29 September 1981 was made by his offer of 16 September 1981 to buy the shares at a price of $101,000 more than whatever fixed price was bid by Harvela and an acceptance of that offer by the vendors' telex of 29 September 1981 to Sir Leonard. To create such a fresh contract there must have been an intention on the part of each party, manifested to the other, to assume fresh contractual obligations to the other party which he had not hitherto been under any legal liability to perform. It seems to me to be clear beyond argument that there was no such intention by either party and none was manifested by either party to the other. Sir Leonard's only intention in making his offer of 16 September 1981 was to comply with the condition subsequent specified in the unilateral contract of 15 September and by so doing to convert it into the synallagmatic contract, the terms of which were contained in the invitation, which he asserted gave rise to the contractual obligation on the part of the vendors to transfer the shares to him; while the vendors' only intention, as the wording of their telex of 29 September makes clear, was to perform the legal obligation to Sir Leonard by which they were already bound under the synallagmatic contract into which the unilateral contract they had made with him had, as they believed, been converted. That each had misconstrued that unilateral contract cannot transform their common intention to perform an existing contract into an intention to make a fresh and different one. I come finally to the interest question. A telex was sent on 29 September 1981 by the vendors to Harvela notifying Harvela of the terms of the offers which had been received from Harvela and Sir Leonard, and stating that the vendors were bound to and did thereby accept Sir Leonard's alternative offer expressed as $101,000 in excess of Harvela's offer which, unknown to Sir Leonard, was for the sum of 2,175,000. This constituted an anticipatory breach of a fundamental term of the

synallagmatic contract by the vendors with Harvela to sell the shares to Harvela, into which the unilateral contract of 15 September 1981 had been converted at 3 p.m. on 16 September 1981 by the offer *227 by Harvela of $2,175,000 for the shares, which was higher than the only fixed sum that had been offered at that time and date by Sir Leonard, viz. $2,100,000. Upon receipt of the telex Harvela had the choice of electing between either treating the vendors and Harvela itself as continuing to be under a legal obligation to perform that synallagmatic contract in accordance with its terms, or of treating as terminated the primary obligations of both parties not yet performed, and in the case of those primary obligations of the vendors, but not those of Harvela, replaced by secondary obligations to pay compensation by way of damages to Harvela for any loss sustained by it as a result of the vendors' failure to perform them. Harvela elected to hold the vendors to their primary obligations under the synallagmatic contract; but this necessitated it seeking from the High Court its aid in compelling the vendors to do so. The form in which such aid was available was by the equitable remedy of specific performance - a remedy which, before the creation, by the Supreme Court of Judicature Act 1875, of a unified Supreme Court and the fusion of common law and the rules of equity, could only be granted by a court of Chancery. It was not available in courts of common law, where the only remedy took the form of compelling the payment of monetary damages. Just as damages at common law for breach of contractual obligations are intended to put the party not in breach in the same position, so far as money can do so, as if the contractual obligations had been performed by the other party, so too the equitable remedy of specific performance is intended to put both parties in the same position as if their respective contractual obligations had been timeously performed by both of them. This finds expression in the maxim "equity treats as done that which ought to have been done." In the instant case if both the vendors and Harvela had performed their respective obligations under the synallagmatic contract the vendors would have transferred the shares to Harvela not later than 15 October 1981, the closing date, and Harvela on the same day would have paid to the vendors the purchase price of $2,175,000 by banker's draft payable at sight. If that had been done Harvela would have become registered owners of the shares on 15 October 1981 and entitled to any dividends distributed on the shares thereafter, while the vendors would have had the use of the $2,175,000 to invest or deal with as they thought fit in the interest of the beneficiaries of the trust of which they were trustees. Instead of that, because of the delay on the part of the vendors between the closing date and that date on which your Lordships' order for specific performance is complied with, all of which delay, amounting now to nearly four years, is the consequence of the vendors' anticipatory breach of their contractual obligation and the ensuing litigation, Harvela has not received the dividends distributed on the shares, the amount of which is trivial; but the rest of the profits made by Harvey & Co. Ltd. and its subsidiaries have been retained in those companies, thus enhancing the value of the shares which will be transferred to Harvela under your Lordships' order, in return for the payment of $2,175,000. In the meantime, however, Harvela has continued to have the use of that sum. To fail to make allowance for the benefit that Harvela received by having the use of the *228 money would be to overcompensate it; to put it in a better position than that in which it would have been if the contractual obligations of Harvela and the vendors had been timeously performed by both parties. Unless there has been unconscionable conduct by a party against whom the remedy of specific performance is granted sufficient to displace the general rule expressed in the maxim of equity which I have mentioned, that rule ought to be applied by your Lordships. For the reasons given by Lord Templeman in his speech I agree that no unconscionable conduct by the vendors has been shown and that the appropriate measure of the value to Harvela of the use of the money during the period of delay is interest thereon reckoned at the short-term investment rate. LORD EDMUND-DAVIES My Lords, I have had the advantage of reading in draft the speeches prepared by my noble and learned friends, Lord Diplock and Lord Templeman, and I gratefully adopt them. I would accordingly allow this appeal and concur in making the declarations and

orders proposed by Lord Templeman. LORD BRIDGE OF HARWICH My Lords, on the main issue I agree that, for all the reasons given in the speeches of my noble and learned friends, Lord Diplock and Lord Templeman, Sir Leonard's referential bid was not, on the true construction of the invitation, a valid offer. Without intending to derogate in any way from the cogency of the other grounds for reaching that conclusion, there seems to me to be one that is decisive. The invitation embodied an undertaking not to disclose the details of any offer to any party before the deadline of 3 p.m. on Wednesday, 16 September 1981. Sir Leonard's referential bid could not be quantified without reading into it the amount of Harvela's fixed bid. To do this before the deadline would have been, in my opinion, a breach of the undertaking. To do it after the deadline would have been too late. On all the other issues I agree, for the reasons given in the speech of my noble and learned friend, Lord Templeman, with the conclusions which he expresses and the orders he proposes. LORD TEMPLEMAN My Lords, by telex messages ("the invitation") despatched on 15 September 1981 the respondent vendors, the Royal Trust Company of Canada (C.I.) Ltd., invited the appellants, Harvela Investments Ltd. ("Harvela") and Sir Leonard Outerbridge ("Sir Leonard"), to make offers to purchase the vendors' shares in A. Harvey & Co. Ltd. ("the shares"). The invitation stipulated that offers must be made by sealed tender or confidential telex which would not be divulged by the vendors before the invitation expired at 3.00 p.m. on 16 September 1981 when the vendors would accept "the highest offer." Completion of the purchase was to take place within 30 days of 16 September 1981 in Canadian dollars. Harvela offered C$2,175,000. Sir Leonard offered C$2,100,000 "or C$101,000 in excess of any other offer which you may receive which is expressed as a fixed monetary amount, whichever is the higher." Harvela *229 claim the shares at the price of $2,175,000. Sir Leonard claims the shares at the price of $2,276,000 as a result of his referential offer of $101,000 more than Harvela's fixed offer. Peter Gibson J. found in favour of Harvela. The Court of Appeal (Waller, Oliver and Purchas L.JJ.) found in favour of Sir Leonard. This appeal is brought by Harvela with the leave of your Lordships' House. The issued share capital of A. Harvey & Co. Ltd. ("the company") was held as to 43 per cent. by the Harvey family, represented by Harvela, 40 per cent. by the Outerbridge family, represented by Sir Leonard, and 12 per cent. by the vendors. Acquisition of the shares by Harvela or by Sir Leonard would confer control of the company on the purchaser. When the vendors were tempted to sell the shares, an initial offer of $443,600 by Harvela blossomed by 15 September 1981 into an offer by Harvela of $1,741,612, and an offer by Sir Leonard of $1,741,942, but the terms and conditions of the two offers were different. The Harvela offer was due to expire at close of business on 15 September 1981, and Sir Leonard's offer was due to expire at 5 p.m. on 16 September 1981. On 15 September 1981, the invitation was despatched to Harvela and Sir Leonard. The full terms of the invitation, as subsequently amended, were as follows: "We have before us two similar offers but subject to differing terms and conditions and value. Accordingly we invite you to submit to the Royal Trust Company of Canada (C.I.) Ltd. the registered holder of the shares referred to below any revised offer which you may wish to make by sealed tender or confidential telex to be submitted to our London solicitors, Messrs. Bischoff & Co., City Wall House, 79/83, Chiswell Street, London E.C.1 by 3 p.m. London time Wednesday 16 September 1981. Attention J. Jowitt who has undertaken not to disclose any details of any revised offer to any party before that time.... Tenders are to be submitted on the following terms: 1. That tenders are a single offer for all shares held by us. 2. That payment of the agreed purchase price shall be within 30 days of 16 September 1981. (The date of actual payment hereafter called the 'closing date.') 3. Payment shall be in full on the closing

date without any deduction. 4. The closing shall take place at Messrs. Bischoffs' office, payment being by banker's draft payable at sight drawn on the head office of a London clearing bank in Canadian dollars. 5. In the event that closing shall not take place within 30 days other than by reason of any delay on our part interest shall be payable by the purchaser on the full purchase price at a rate higher by 4 per cent. than the Bank of Montreal prime rate from time to time for Canadian dollar loans. We hereby agree subject to acceptance by us of any offer made by you:... (c) We confirm that if any offer made by you is the highest offer received by us we bind ourselves to accept such offer provided that such offer complies with the terms of this telex...." Before the invitation expired, Harvela and Sir Leonard made the offers which resulted in this litigation, namely, by Harvela $2,175,000 and by Sir Leonard $2,100,000 "or C$101,000 in excess of any other *230 offer which you may receive which is expressed as a fixed monetary amount, whichever is the higher." Where a vendor undertakes to sell to the highest bidder, the vendor may conduct the sale by auction or by fixed bidding. In an auction sale each bidder may adjust his bid by reference to rival bids. In an auction sale the purchaser pays more than any other bidder is prepared to pay to secure the property. The purchaser does not necessarily pay as much as the purchaser was prepared to pay to secure the property. In an auction a purchaser who is prepared to pay $2.5m. to secure a property will be able to purchase for $2.2m. if no other bidder is prepared to offer as much as $2.2m. In a fixed bidding sale, a bidder may not adjust his bid. Each bidder specifies a fixed amount which he hopes will be sufficient, but not more than sufficient, to exceed any other bid. The purchaser in a fixed bidding sale does not necessarily pay as much as the purchaser was prepared to pay to secure the property. But any bidder who specifies less than his best price knowingly takes a risk of being outbid. In a fixed bidding sale a purchaser who is prepared to pay $2.5m. to secure the property may be able to purchase for $2.2m. if the purchaser offers $2.2m. and no other bidder offers as much as $2.2m. But if a bidder prepared to pay $2.5m. only offers $2.2m. he will run the risk of losing the property and will be mortified to lose the property if another bidder offers $2.3m. Where there are two bidders with ample resources, each determined to secure the property and to prevent the other bidder from acquiring the property, the stronger will prevail in the fixed bidding sale and may pay more than in an auction which is decided not by the strength of the stronger but by the weakness of the weaker of the two bidders. On the other hand, an open auction provides the stimulus of perceived bidding and compels each bidder, except the purchaser, to bid up to his maximum. Thus auction sales and fixed bidding sales are liable to affect vendors and purchasers in different ways and to produce different results. The first question raised by this appeal, therefore, is whether Harvela and Sir Leonard were invited to participate in a fixed bidding sale, which only invited fixed bids, or were invited to participate in an auction sale, which enabled the bid of each bidder to be adjusted by reference to the other bid. A vendor chooses between a fixed bidding sale and an auction sale. A bidder can only choose to participate in the sale or to abstain from the sale. The ascertainment of the choice of the vendors in the present case between a fixed bidding sale and an auction sale by means of referential bids depends on the presumed intention of the vendors. That presumed intention must be deduced from the terms of the invitation read as a whole. The invitation contains three provisions which are only consistent with the presumed intention to create a fixed bidding sale and which are inconsistent with any presumed intention to create an auction sale by means of referential bids. By the first significant provision, the vendors undertook to accept the highest offer; this shows that the vendors were anxious to ensure that a sale should result from the invitation. By the second provision, the vendors extended the same invitation to Harvela and Sir Leonard: this *231 shows that the vendors were desirous that each of them, Harvela and Sir Leonard, and nobody else should be given an equal opportunity to purchase the shares. By the third provision, the vendors insisted that offers must be confidential and must remain confidential until the time specified by the vendors for the submission of offers had elapsed; this shows that the vendors were desirous of provoking from Sir Leonard an offer of the best price he was prepared to pay in ignorance of the bid made by Harvela and equally provoking from

Harvela the best price they were prepared to pay in ignorance of the bid made by Sir Leonard. A fixed bidding sale met all the requirements of the vendors deducible from the terms of the invitation. A fixed bidding sale was bound to result in a sale of shares save in the unlikely event of both Harvela and Sir Leonard failing to respond to the invitation. A fixed bidding sale gave an equal opportunity to Harvela and Sir Leonard to acquire the shares. A fixed bidding sale provoked the best price, or at any rate something approximate to the best price, which the purchaser was prepared to pay to secure the shares and to ensure that the rival bidder did not acquire the shares. On the other hand, if the invitation is construed so as to create an auction sale by means of referential bids, the requirements of the vendors deducible from the terms of the invitation could not be met. First, if referential bids were permissible, there was a danger, far from negligible, that the sale might be abortive and the shares remain unsold. The shares would only be sold if at least one bidder submitted a fixed bid and the other bidder based his referential offer on that fixed bid. In the events which happened, Harvela put forward a fixed bid of $2,175,000 and Sir Leonard made a referential bid of $101,000 more than Harvela's fixed bid, thus enabling Sir Leonard's referential bid to be quantified at $2,276,000. But if Sir Leonard's referential bid had not been expressed to be based on Harvela's fixed bid, or if Harvela had not made a fixed bid but only a referential bid, then Sir Leonard's bid could not have been quantified. Similarly, if Harvela had made a referential bid not expressed to be tied to Sir Leonard's fixed bid, or if Sir Leonard had not made a fixed bid but only a referential bid, then Harvela's bid could not have been quantified. The sale would have been abortive although both bidders were anxious to purchase and submitted offers. Secondly, if referential bids were permissible, there was also a possibility, which in fact occurred, that one bidder would never have an opportunity to buy. In the present case Harvela, by putting forward a fixed bid, could never succeed in buying the shares although the invitation had been extended to them. Harvela's only part in the sale was unwittingly to determine the price at which Sir Leonard was entitled and bound to purchase the shares. Harvela could not win and Sir Leonard could not lose. There was nothing in the invitation to warn Harvela that they must submit a referential bid if they wished to make sure of being able to compete with Sir Leonard. There was nothing in the invitation which indicated to Sir Leonard that he was entitled to submit a referential bid. But no one has argued that the invitation did *232 not invite fixed bids; indeed, Sir Leonard submitted a fixed bid, albeit as an unsuccessful alternative to his referential bid. Thirdly, if referential bids were permissible, the vendors' object of provoking the best price that Harvela and Sir Leonard were each prepared to offer in ignorance of the rival bid was frustrated. Harvela put forward the fixed bid of $2,175,000 which represented the amount which Harvela hoped would exceed Sir Leonard's bid and which, because Harvela were bidding in ignorance of Sir Leonard's bid, must be or approximate to the best price which Harvela were prepared to pay to secure the shares and to ensure that Sir Leonard did not acquire the shares. Sir Leonard did not put forward his best price; Sir Leonard put forward his worst price, $2,100,000, but declared that he would pay $101,000 more than Harvela. Sir Leonard could have achieved the same purpose by offering five dollars or one dollar more than Harvela. If Sir Leonard had appreciated that he was taking part in a fixed bidding sale, then, judging by his minimum fixed bid of 2,100,000 and his unlimited referential bid, he might have been prepared to offer as his best price more than the sum of $2,276,000 which he now claims to be the purchase price of the shares. We shall never know because Sir Leonard did not reveal his best price. Finally, if referential bids were permissible by implication, without express provision in the invitation for that purpose, and without any indication in the invitation of the nature of the referential bids which would be acceptable, the results could have been bizarre. In the present case, Sir Leonard bid $2,100,000 or $101,000 in excess of Harvela's fixed bid. If Harvela had bid $2,000,000 or one dollar more than Sir Leonard's fixed bid, then Sir Leonard would have become the purchaser with his referential bid of $2,101,000 as against Harvela's referential bid of $2,100,001. But if Harvela had offered $1,900,000 or one dollar more than Sir Leonard's fixed bid, then

Harvela would have been the purchaser at their referential bid of $2,100,001 as against Sir Leonard's referential bid of $2,001,000. Sir Leonard's bid in the second example is the same as his bid in the first example but he loses. Harvela's bid in the second example is lower than Harvela's bid in the first example but Harvela wins. The vendors are worse off by $999 in the second example. It would have been possible for the vendors to conduct an auction sale through the medium of confidential referential bids but only by making express provision in the invitation for the purpose. It would not have been sufficient for the invitation expressly to authorise "referential bids" without more. For such an authorisation would have rendered the result of the sale uncertain and random in view of the illustrations and examples I have already given. It would have been necessary for the invitation to require each bidder who made a referential bid to specify a maximum sum he was prepared to bid. That requirement would ensure that the sale was not abortive and that both bidders had a genuine chance of winning. A maximum bid requirement would ensure a sale at a price in excess of the maximum bid of the unsuccessful bidder, but it would not necessarily procure a sale at the maximum price of the successful bidder. The sale would in effect be an auction sale and produce the consequences of an auction sale because the vendors would *233 have made express provision for bids to be adjusted and finalised by reference to the maximum bid of the unsuccessful bidder. But without such express provisions the invitation is not consistent with an auction sale. To constitute a fixed bidding sale all that was necessary was that the vendors should invite confidential offers and should undertake to accept the highest offer. Such was the form of the invitation. It follows that the invitation upon its true construction created a fixed bidding sale and that Sir Leonard was not entitled to submit and the vendors were not entitled to accept a referential bid. The argument put forward by Mr. Price on behalf of Sir Leonard was that the referential bid is an "offer" and therefore Sir Leonard was entitled to submit a referential bid. In acceding to this argument, the Court of Appeal recognised that the consequences could be unfortunate and would be unforeseeable; the Court of Appeal were inclined to blame such unfortunate and unforeseeable consequences on the vendors for binding themselves to accept the highest bid or for not expressly forbidding the submission of a referential bid. My Lords, in my opinion the argument based on the possible meaning of the word "offer " confuses definition with construction and the procedure adopted by the vendors is not open to justifiable criticism because the invitation was clear and unambiguous. The court is not concerned to define the word "offer" in isolation, without regard to its context and by reference to the widest possible meaning which can be culled from the weightiest available dictionary. The mere use by the vendors of the word "offer" was not sufficient to invoke all the frustrating dangers and uncertainties which inevitably follow from uncontrolled referential bids. The task of the court is to construe the invitation and to ascertain whether the provisions of the invitation, read as a whole, create a fixed bidding sale or an auction sale. I am content to reach a conclusion which reeks of simplicity, which does not require a draftsman to indulge in prohibitions, but which obliges a vendor to specify and control any form of auction which he seeks to combine with confidential bidding. The invitation required Sir Leonard to name his price and required Harvela to name their price and bound the vendors to accept the higher price. The invitation was not difficult to understand and the result was bound to be certain and to accord with the presumed intentions of the vendors discernible from the express provisions of the invitation. Harvela named the price of $2,175,000; Sir Leonard failed to name any price except $2,100,000 which was less than the price named by Harvela. The vendors were bound to accept Harvela's offer. I am also content to follow the decision reached by Sir Nathanial Lindley M.R. and Rigby and Vaughan Williams L.JJ. in South Hetton Coal Co. v. Haswell, Shotton and Easington Coal and Coke Co. [1898] 1 Ch. 465. In the South Hetton case there was no fixed bid but only a referential bid by one bidder of 200 more than the amount offered by the other bidder who offered 31,000. The referential bid was held to be invalid. The South Hetton case was decided by a powerful court, has stood unchallenged for over 80 years and was binding on the Court of Appeal in the present

case. It was argued that Sir Leonard's unsuccessful *234 valid bid of $2,100,000 in some unexplained fashion transformed his invalid referential bid into a valid bid, but the argument owes everything to wishful thinking and nothing to logic. It was also argued that the South Hetton case was distinguishable because the vendors in that case undertook to accept "the highest net money tender," whereas in the present case the vendors undertook to accept "the highest offer." The argument seeks to elevate a trivial difference into a legal distinction. The decision in the South Hetton case was followed by a majority of the members of the New York Court of Appeals in S.S.I. Investors Ltd. v. Korea Tungsten Mining Co. Ltd. (1982) 449 N.Y.S. 2d 173. The majority judgment, at pp. 174-175, succinctly and cogently summarised the reasons for rejecting referential bids as follows: "The very essence of sealed competitive bidding is the submission of independent, self-contained bids, to the fair compliance with which not only the owner but the other bidders are entitled... to give effect to this or any similar bidding practice in which the dollar amount of one bid was tied to the bid or bids of another or others in the same bidding would be to recognise means whereby effective sealed competitive bidding could be wholly frustrated. In the context of such bidding, therefore, a submission by one bidder of a bid dependent for its definition on the bids of others is invalid and unacceptable as inconsistent with and potentially destructive of the very bidding in which it is submitted." The second question raised by this appeal relates to events which occurred after the vendors became bound at 3 p.m. on 16 September 1981 to sell the shares to Harvela for $2,175,000 pursuant to the invitation and to the offer made by Harvela. Sir Leonard claims that on 29 September 1981 the vendors accepted his referential offer of $2,276,000 so as to create a contract independent of the invitation. Sir Leonard admits that any second contract in his favour relating to the shares cannot be specifically performed because of the earlier first contract in favour of Harvela, but Sir Leonard seeks damages for breach by the vendors of the alleged second contract. Sir Leonard's claim to a second contract is based on a telex message despatched by the vendors' solicitors on 29 September 1981 to Sir Leonard and to Harvela. The telex message reproduced the offers which had been submitted to the vendors by Harvela and Sir Leonard in response to the invitation and continued: "In the circumstances our clients are bound to accept and do hereby accept the offer received from Sir Leonard Outerbridge and give notice that they propose and require the purchase of the shares to be completed on 15 October next on which date (conditional upon the payment of the purchase price and upon the terms of the invitation telex) they will do all such acts and things as are pursuant to the invitation telex to be done on the closing date. Regards." It is clear that the vendors were acting under the erroneous belief that Sir Leonard's referential bid entitled him to the shares. When Harvela disputed the right of Sir Leonard to claim the shares pursuant *235 to the invitation, the vendors were debarred from completing with Sir Leonard until the outcome of this present litigation. If Sir Leonard was already entitled to the shares, a second contract was unnecessary. If Harvela were entitled to the shares a second contract to sell to Sir Leonard was unthinkable. In Beesly v. Hallwood Estates Ltd. [1960] 1 W.L.R. 549, a landlord corresponded with a tenant in the mistaken belief that the tenant had duly exercised an option binding on the landlord to renew the lease. That correspondence did not create a contract or entitle the tenant to a renewal after the landlord discovered that the option was not binding. Buckley J. said, at p. 558: "These letters were all written at a time when the plaintiff and her solicitors and the directors of the defendant company and their solicitors all believed that the option was exercisable by the plaintiff and enforceable against the defendant company. They were written with the mutual intention of giving effect to what were believed to be existing rights of the plaintiff. I am satisfied that none of the parties concerned thought or intended at the time that any new contractual rights would or should be created by this correspondence ... Any transaction between two or more parties can, in my judgment, only result in a contract between them if they enter into that transaction with an intention to create binding contractual obligations or in circumstances in which such an intention must be attributed to them. The facts of the present case negative such an intention, for these letters were written with the

intention of carrying out what were thought to be existing obligations, not of creating any new obligation." Similarly in the present case the telex message of 29 September 1981 was despatched with the intention of carrying out what were thought to be existing obligations. Mr. Price submitted that when the vendors in the telex message of 29 September 1981 affirmed that the vendors "do hereby accept the offer received from Sir Leonard" the vendors were entering into an independent contract with Sir Leonard, but, in my opinion, this submission also founders because it considers the expression relied upon by Mr. Price in isolation and ignores the context and contents of the telex message which are only consistent with a mistaken belief by the vendors that the vendors were by the invitation bound to accept Sir Leonard's referential bid. Accordingly, and contrary to the views expressed by Peter Gibson J., I do not consider that a second contract came into existence. The third question is whether the vendors are entitled to be paid by Harvela interest on the purchase price of $2,175,000 from the closing day, namely, 15 October 1981 until payment. The invitation specified that: "In the event that closing shall not take place within 30 days other than by reason of any delay on [the vendors'] part interest shall be payable by the purchaser at the full purchase price at a rate higher by 4 per cent. than the Bank of Montreal prime rate from time to time for Canadian dollar loans." *236 On behalf of Harvela, Mr. Essayan submits that Harvela made a fixed bid of $2,175,000 which proved to be the highest bid, and Harvela became entitled to the shares pursuant to the invitation. The sale was not completed because the vendors declined, mistakenly as it now appears, to recognise and fulfil their duties under the invitation to sell to Harvela. On behalf of the vendors, Mr. Nugee submits that interest is payable unless the vendors were to blame for the delay. The delay was due to Sir Leonard who submitted the referential bid and maintained that he was entitled to the shares. The vendors were powerless to complete until the inevitable litigation was resolved. In my opinion, in the events which have happened, the vendors are not entitled to interest at the contractual penal rate imposed by the invitation. Harvela made the highest bid and were ready, willing and able to complete on the completion date. The conduct of the vendors was not blameworthy but they declined to complete. As between Harvela and the vendors, the failure to complete was due to delay on the part of the vendors. It would have been possible for the vendors to seek an interlocutory order barring Sir Leonard from the equitable remedy of specific performance and confining him to damages at the option of the vendors even if he succeeded in establishing his claim to be the purchaser pursuant to the invitation unless Sir Leonard undertook that he would pay to the vendors interest at the contractual rate from the completion date if, in the event, Harvela established their claim to be the purchasers. Corresponding relief could have been granted to the vendors against Harvela. On behalf of the vendors, Mr. Nugee submitted in the alternative that if the vendors are not entitled to interest at the contractual rate pursuant to the express provisions of the invitation, nevertheless the court should, in the exercise of its discretion in awarding the equitable remedy of specific performance, decline to make any such order at the behest of Harvela save on terms that Harvela pay a reasonable rate of interest from the completion date to the date of actual completion. On behalf of Harvela, Mr. Essayan submits that if the vendors fail to establish their contractual claim in interest at law, they are not entitled to be allowed any interest in equity. Although the sale was not completed on 15 October 1981 because of delay on the part of the vendors, the conduct of the vendors was not unreasonable. Harvela could have sought and obtained an interlocutory injunction restraining the vendors from completing with Sir Leonard; Sir Leonard could have sought and obtained a similar injunction restraining the vendors from completing with Harvela until the litigation had finally established the rights of the parties. There is a well recognised principle that, subject to any contractual provision to the contrary, the vendor ought to be entitled from the completion date to interest on the purchase money, which in equity belongs to the vendor, and the purchaser ought to be entitled from the completion date to the fruits of the property, which in equity belongs to the purchaser. A corresponding principle is that if the vendor is not to blame for the delay in completion, then again

subject to any contractual provision to the contrary the purchaser should not be allowed to claim the fruits of the property and *237 to retain the benefit of interest which was or could have been earned by the purchaser on the purchase price which in equity belongs to the vendor. Every case must be judged on its merits. In the present case the vendors are not blameworthy, Harvela had the use of the purchase price of 2,175,000 for nearly four years, Harvela could have paid the purchase price into court, and Harvela will benefit from the profits made by the company since 16 September 1981. Those profits have not been distributed save to honour preferential dividends. In these circumstances it will be unconscionable for Harvela to enjoy the purchase price and the benefit of profits attributable to the shares and available to Harvela once completion takes place and Harvela assume control of the company. Mr. Essayan submitted that there was no sufficient evidence that the company made profits during the past four years. The company has provided accounts which disclose the profits of the company but do not disclose the profits owned by the subsidiaries of the company. The accounts show that the company has made profits in the region of hundreds of thousands of dollars and that, consistently with the year preceding the accounts, it is likely that the subsidiaries have made profits of millions of dollars which could be but have not yet been distributed to the company. At any rate, Harvela having offered $2,175,000 for 12 per cent. of the share capital of the company, and having sought specific performance, show no signs of repenting their bargain and I conclude that Harvela are not entitled to the benefit of interest attributable to the purchase money as well as the profits attributable to the contractual property. Harvela could have paid the purchase price of 2,175,000 into court on the completion date to earn interest at the short-term investment rate. In my opinion, as a condition of specific performance, Harvela should pay to the vendors interest at that rate from 15 October 1981 until actual payment of the purchase price. Harvela will be entitled to the preference dividends received by the vendors in respect of the shares since 15 October 1981. There remains the question of costs. As between Harvela and Sir Leonard, the battle over the shares has been won by Harvela. In accordance with principle, Sir Leonard must pay the costs of Harvela of all the present proceedings, claim and counterclaim, here and below, although Sir Leonard was temporarily successful in the Court of Appeal and has the doubtful privilege of contributing to precedent. The vendors were necessarily parties to the litigation which decided the destination of the shares but the battle for the shares was waged between Harvela and Sir Leonard. The vendors, through Mr. Nugee, permitted themselves some helpful observations on the theory and practice of referential bids and expressed some wistful regrets that victory for Harvela would deprive the vendors of the additional referential bid which Sir Leonard was willing to make. Both Harvela and Sir Leonard claimed against the vendors at various stages of this litigation that interest was not payable on the purchase price. As between Harvela and Sir Leonard on the one hand, and the vendors on the other hand, the vendors have established that they are now entitled to interest though not at the contract rate. The interest battle has been decided in favour of the vendors and against Harvela and Sir Leonard. In addition, Sir Leonard claimed and *238 failed to establish that the vendors entered into a second contract with him. In the circumstances, I would order Sir Leonard to pay four-fifths of the costs of the vendors in all the proceedings here and below, claim and counterclaim, and order Harvela to pay the remaining one-fifth of the cost of the vendors. Sir Leonard must bear his own costs. The vendors accepted that Harvela were entitled to an inquiry as to the damages (if any) sustained by Harvela by reason of delay in completion of the sale of the shares. All parties accepted that Sir Leonard is liable for the damages (if any) sustained by Harvela and the vendors as a result of the stay ordered by Peter Gibson J. on 29 November 1983. Sir Leonard is also liable on his undertaking given to the vendors and Harvela on 29 November 1983 for any damages payable under those undertakings, such damages to be assessed by an inquiry. The vendors and Harvela have very helpfully submitted a draft minute of order and, based on those drafts and on the conclusions reached by your Lordships, I have annexed to this speech a draft of the appropriate order.

Representation Solicitors: Slaughter & May; McKenna & Co.; Bischoff & Co. Appeal allowed. Order of Court of Appeal set aside and order in terms of annexure to speech of Lord Templeman substituted. (M. G. ) THE ANNEXURE Draft Minutes of Order Upon report... It is ordered and adjudged:... that the said order of Her Majesty's Court of Appeal of 18 July 1984 complained of in the said appeal be and the same is hereby reversed. It is declared: (1) that the respondent the Royal Trust Company of Canada (C.I.) Ltd. (hereinafter referred to as "Royal Jersey") is contractually bound to transfer the following shares in the capital of the respondent A. Harvey & Co. Ltd. (hereinafter referred to as "the company ") that is to say 825 common shares 311 6 per cent. voting preference shares and 24337 nonvoting redeemable preference shares (hereinafter collectively referred to as "the shares") to the appellant Harvela Investments Ltd. (hereinafter referred to as "Harvela") in accordance with the terms and conditions contained in the telexes respectively mentioned in paragraphs 10 and 12 of the statement of claim in the action at the purchase price of C $2,175,000. (2) That as a condition of the order for specific performance hereinafter made Harvela is liable to pay to Royal Jersey interest on the said purchase price from 15 October 1981 until actual payment at the short-term investment rate from time to time applicable to moneys paid into court but that Harvela is entitled to be paid on completion the amount of the dividend and interest (if any) paid or payable by the company in respect of the said shares in respect of the said period. It is ordered: (1) that the said contract be performed specifically and carried into execution; (2) that the following accounts be taken, that is to say: (A) an account of what is due to Royal Jersey for the said purchase price and interest; (B) an account of what is due to Harvela for the said dividends and interest; (3) that what shall be found due on the said account numbered (2)(B) be deducted from what shall be found due on the said account numbered (2)(A) and the balance certified; (4) that upon Harvela (i) paying to Royal Jersey at the offices of Messrs. Bischoff & Co. in London and at a time and day to be fixed by the *239 court the amount of the balance certified as aforesaid or so much thereof as Harvela shall be liable to pay after making such withholding therefrom in respect of Canadian tax on capital gains as is required by Canadian law and (ii) delivering to Royal Jersey at such place and time and day as aforesaid all such certificates and other matters in respect of such tax as aforesaid as may be required under Canadian law or as Royal Jersey may reasonably require Royal Jersey do deliver to Harvela's solicitors at such place and time and day as aforesaid (i) the certificates representing the shares duly indorsed by Royal Jersey in favour of Harvela and (ii) an irrevocable power of attorney appointing Harvela and its successors and assigns as nominee representative or proxy to cast the votes attached to the shares at any general or class meeting of shareholders, (5) that the following inquiries be made, that is to say: (C) an inquiry as between Harvela and Royal Jersey as to what damages (if any) have been sustained by Harvela by reason of the delay of Royal Jersey in completion of the said contract; (D) an inquiry as between Harvela and the respondent Sir Leonard Outerbridge (hereinafter referred to as "Sir Leonard") as to what damages (if any) have been sustained by Harvela by reason of the stay ordered by Peter Gibson J. on 29 November 1983 or by reason of the undertakings then given by Sir Leonard to Peter Gibson J. or by reason of such stay and such undertakings; (E) an inquiry as between Royal Jersey and Sir Leonard Outerbridge as to what damages (if any) have been sustained by Royal Jersey by reason of the stay ordered by Peter Gibson J. on 29 November 1983 or by reason of the undertakings then given by Royal Jersey to Peter Gibson J. or by reason of such stay and such undertakings; (6) that Sir Leonard do pay to Harvela its costs of the claim and counterclaim in the courts below to be taxed by the taxing master if not agreed and the costs incurred by Harvela in respect of the said appeal to this House the amount of such last mentioned

costs to be certified by the Clerk of the Parliaments if not agreed and do pay to Royal Jersey and the Royal Trust Company of Canada (hereinafter referred to as "Royal London") four-fifths of their costs of the claim and counterclaim in the courts below and in this House to be taxed and certified as aforesaid if not agreed; (7) that Harvela do pay to Royal London one-fifth of their costs of the claim and counterclaim in the courts below and in this House to be taxed and certified as aforesaid if not agreed; (8) that Harvela be and is hereby discharged from further compliance with the undertakings given by it to Her Majesty's Court of Appeal and that all sums (including interest) standing to the credit of joint deposit bank accounts opened pursuant to those undertakings be paid forthwith to Harvela and that Sir Leonard, Royal Jersey and Royal London do respectively sign such documents and do all such acts as may be required to procure such payment as aforesaid. and the parties are to be at liberty to apply to the High Court. (c) Incorporated Council of Law Reporting For England & Wales [1986] A.C. 207