I quite understand a contract between a company and its shareholders—of which we have here a specimen—by which the shareholders are not at liberty to sell their shares without first making an offer of these shares to the company, or, if the company does not itself wish to take the shares, without giving the company an opportunity of communicating the right to take up the shares to the individual shareholders, so that any of the shareholders may if they please take the shares in terms of the offer, or on such other conditions as may be specified. A provision of this sort seems to me a perfectly intelligible and practicable provision. In the case now before us the shares belonged to a firm of the name of Colquhoun & Company, I think, which had been sequestrated, and the trustee in the sequestration had to consider in the interests of the creditors as to the disposal of these shares. Now, having regard to the requirements of article 4 of the company's articles of association, the trustee in the sequestration on 31st January 1900 made intimation of his intention to sell the shares in the company which belonged to the bankrupts. This letter of intimation bore that the trustee offered to the company the shares specified, and stated that the offer was made under article 4 of the articles of association of the company. That article provides as follows:— [His Lordship quoted article 4]. Now, it is not said—on the contrary the reverse is now admitted—that the directors desired to take up the shares on behalf of the company, and after the lapse of a year and a-half the truth is that the company itself is not willing to acquire the shares on its own account. But on the 10th February 1900 the directors proceeded to follow the alternative course provided in article 4 of the company's articles of association, by sending a circular letter to the B shareholders intimating that the trustee in the Colquhouns' sequestration had resolved to sell the shares specified under the conditions set forth in article 4 of the company's articles of association at the prices mentioned, and requesting the shareholder if he desired to offer for these shares to forward a sealed offer to the secretary of the company by twelve o'clock on Monday 12th February. On the same day, that is to say on the 10th February, a Mr Robert Crawford sends a written offer to purchase the shares at the prices specified by the trustee in his letter of 31st January. Then the directors of the company, according to their minute of meeting, on 12th February proceeded to open the replies from the B shareholders to the circular of the 10th February. The minute bore that Mr Crawford's letter, to which I have referred, was the only reply received, and then, after
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In the meantime, however, on 5th February, Mr Wilson the trustee had written to the company withdrawing his offer to sell the shares belonging to the bankrupts, and this action has been brought in consequence of that withdrawal of his offer by the trustee on 5th February. The trustee's letter of 5th February is a withdrawal of the offer to sell the shares, and it is expressed in terms as distinct and unequivocal as it is possible to use. The purpose of the action is in substance to have it declared that this distinct and unequivocal withdrawal of his offer by the trustee is invalid and ineffectual. The real pursuer of the action is Mr Crawford, the shareholder who had offered to purchase the shares, as the company, who also appear as pursuers, have really no interest in the matter since the directors had resolved not to purchase the shares on behalf of the company, and the company appear as pursuers merely on the ground that their instance was necessary in justice to Crawford, in order to enforce the contract by which it is said the defender is under obligation to transfer the shares to him. Now Crawford was under no obligation whatever to the defender or to anyone else in regard to these shares prior to his letter of 10th February, and that being so I am unable to see on what principle it could be held that the defender was under any obligation to Crawford in regard to these shares when on 5th February he sent his letter withdrawing his offer to sell the shares. Besides, the persons to accept the offer were not the directors of the company; what article 4 says is that the offer “shall be accepted by the seller,” that is in the present case the defender, the trustee for the Colquhouns, and he could not accept consistently with his letter of withdrawal of 5th February. It is said that the trustee after making his offer of 31st January was not entitled to withdraw that offer on 5th February. I know of no authority or principle in law or in reason for that proposition. Mr Campbell argued that the trustee had a duty to make that offer. I asked whether there was any authority for that but none was cited to us, and I know of none. I assume that the trustee made the offer in the exercise of his duty as trustee, in the interests of the bankrupt estate which he represents, but I know of no principle or duty which forbids him to withdraw that offer before it has been accepted if he finds that he can get a better price for the shares. He will I assume have to realise the shares in the exercise of his duty as trustee, and in realising he will have to keep in view the provisions of clause 4 of the articles of association under which the bankrupts held the shares, but there is nothing in the case now before us which requires us to deal with that matter.
On the whole matter I agree with the Lord Ordinary, and think that his interlocutor should be affirmed.
Lord Trayner —I am of the same opinion. The pursuer concludes for decree affirming (1) that there was a contract of sale; (2) for decree ordaining the defender to implement that contract; and (3) for interdict against the defender selling or transferring the shares which were the subject of the alleged contract otherwise than in accordance with that contract, or otherwise than as provided for in the articles of association of the pursuers' company. The conclusion for interdict obviously depends on the pursuer's success with regard to the other conclusions. If there has been no contract made such as the pursuers allege, no interdict can proceed which would deprive the pursuer of his right to deal with his shares in any way he pleases, consistently always with any conditions which may be validly imposed upon him by the articles of association. Against any infringement of the articles of association these articles afford the pursuers ample protection and render any interdict on that account quite unnecessary. If the defender attempts to transfer his shares otherwise than as provided for in the articles of association the pursuers may refuse to register his transfer.
If, however, the contract alleged was made, then the defender may be interdicted from doing anything which puts specific performance thereof out of his power. Accordingly, the main question in the case is—Was there a contract?
The alleged contract is said to have been constituted by offer and acceptance. I cannot assent to the view that any contract was here constituted by offer and acceptance. Article 4 of the articles of association on which the question depends is not very happily expressed. It begins by saying that “if any holder of ordinary B shares wishes to sell his B shares he shall before doing so, or transferring them to any party, offer them to the company in writing, specifying the price which he is willing to accept for said B shares, and the directors shall either take said shares on behalf of the company at such price,” &c. Now, I think that so far the use of the word “offer” is right enough. The idea is that the company if it pleased should accept the shareholder's offer to sell the shares by sending him a letter of acceptance and thereby completing the contract, assuming that the company could legally purchase its own shares. But the company did not accept, and never intended to accept, the shares which the defender offered to sell. There is no contract therefore between the company and the defender as to the sale of these shares.
Article 4 then proceeds, after the passage which I have quoted, to make provision for the event of the company not purchasing
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I think that this is sufficient for the disposal of the action, but I agree with what has been said as to the defender's right to withdraw his offer, as he did on 5th February before there was any acceptance, or professed acceptance of his offer. I can find nothing in article 4 to exclude him from exercising the ordinary right of a seller to withdraw an offer to sell before acceptance. I can find nothing to suggest that an offer made under article 4 is to be regarded as a “firm” offer binding the offerer not to withdraw his offer for fourteen days, and as the defender had withdrawn his offer before the 12th February, I think it was competently withdrawn whatever view may be taken of the so-called acceptance on that date.
I agree with the Lord Ordinary that we can take no account of the alleged sale by the defender of his shares to Mr Stevenson. If Mr Stevenson has any rights in regard to these shares, he will be entitled to enforce these rights if necessary in competent proceedings for the purpose, but we cannot enter into that question in this action, to which Mr Stevenson is not a party.
Lord Moncrieff —I also think that the Lord Ordinary is right. The contention of the pursuers was that under article 4 of the company's articles of association a shareholder who has intimated to the company his intention to sell his shares was not entitled to withdraw that intimation although he has abandoned his intention of selling his shares, and although there has been no acceptance of an offer to sell in terms of the article. I am unable to spell any such condition out of article 4. There is no doubt that at common law a person who has made an offer to sell is entitled to withdraw the offer at any time before acceptance, unless he has bound himself to leave the offer open for a specified time. I cannot find anything in article 4 to introduce a condition altering the common law on this point. Now, the defender withdrew his offer to sell his shares on 5th February before he received intimation of any acceptance of his offer, and I have no doubt that he was entitled so to withdraw his offer. It would have been a different question if any of the B shareholders had sent in an offer for the defender's shares before the defender had withdrawn his offer. In that case he might have been held bound. But as I have said the defender withdrew his offer before anything was done in the way of accepting it. As regards the conclusion for interdict, I do not think that the pursuers have set forth a relevant case, for they expressly aver that the alleged sale to Stevenson was subject to the right of preemption contained in article 4 of the articles of association.
The Court adhered.
Counsel for the Pursuers and Reclaimers— W. Campbell, K.C.— Cullen. Agents— J. W. & J. Mackenzie, W.S.
Counsel for the Defender and Respondent— Clyde. Agents— Webster, Will, & Co., S.S.C.