[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> RGI International Ltd & Anor v Synergy Classic Ltd & Ors [2011] EWHC 3417 (Comm) (19 December 2011) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2011/3417.html Cite as: [2011] EWHC 3417 (Comm)

[New search] [Printable RTF version] [Help]

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Rolls Building Fetter Lane London EC4A 1NL
		19/12/2011

MR JUSTICE HAMBLEN :

Introduction

1. The First Claimant ("RGI') applies for summary judgment on two issues of construction which arise under a share Subscription and Option Agreement (the "SOA") between RGI and the Defendant ("Synergy") dated 21 May 2010, as amended on 6 July 2010.
2. The issues on which RGI seeks summary judgment are set out in the Application Notice of 28 June 2011 as follows:

(1) a declaration that RGI has not breached clause 5.2(b) of the SOA and that Synergy has no right to exercise the First Shares Put Option ("the First Issue");

(2) in the alternative a declaration that if the First Shares Put Option was validly exercised by Synergy, Synergy was obliged to return the "Option Shares" as well as the "First Shares" on the receipt of US$99 million ("the Second Issue").

3. It is accepted by Synergy that these are issues of construction that raise no relevant dispute of fact.

General background

4. RGI is a Guernsey-incorporated property development and management company focussed on residential and retail properties in the Moscow area. It is listed on the AIM market of the London Stock Exchange. The Second Claimant D.E.S. Commercial Holdings Limited ("DES") is its largest shareholder. The Third and Fourth Parties hold the entire issued share capital of DES.
5. Synergy is an investment company incorporated in the British Virgin Islands. RGI and Synergy entered into the SOA on 21 May 2010 as amended on 6 July 2010 for the purposes of Synergy making a substantial investment (US$90 million) in RGI. Synergy is directly or indirectly owned and/or controlled by Mr. Petr Shura ("Mr. Shura"). On the same dates, Synergy entered into a Shareholders Agreement with DES (and an amendment of that agreement). By clause 7.1 of the SOA, RGI undertook that the money invested by Synergy – the "Subscription Proceeds" - would be applied as set out in that clause.
6. The transaction documents provided for Synergy to have a representative on RGI's board – Mr. Shura held this role until February 2011 and it is currently held by Mr. Borisenko. When becoming a director, Mr. Shura signed a letter of appointment with RGI which provides for arbitration in London under the LCIA Rules.

The disputes between the parties

7. A number of disputes have broken out between the parties to these transactions. In particular RGI and DES contend that in October 2010 and, indeed, on various dates thereafter, Mr.Shura and Synergy issued press announcements which damaged RGI, wrongly published confidential information and impeded RGI's admission to the Main Market of the London Stock Exchange. RGI also challenges the exercise of the First Shares Put Option, which Synergy purported to exercise on 15 October 2010.
8. RGI and DES commenced proceedings on 29 October 2010 seeking relief in respect of their claims. RGI and DES obtained a without notice injunction against Synergy restraining disclosure of confidential information, but this was discharged by consent on 16 November 2010.
9. In addition to challenging RGI and DES's claims, and seeking their own relief in respect of the exercise of the First Shares Put Option, Synergy has also brought additional claims against the Claimants and three of its directors. It is alleged that RGI applied (approximately) US$4.9 million of the Subscription Proceeds other than in accordance with clause 7.1 of the SOA. It is also alleged that the Third to Fifth Parties intentionally induced or procured breaches of contract by RGI or conspired together to cause loss by unlawful means in respect of the performance of the First Shares Put Option by RGI and the application of the Subscription Proceeds.
10. Further, RGI has commenced arbitration proceedings against Mr. Shura in respect of alleged breach of the terms of his appointment and fiduciary duties with respect to the disclosure of confidential information and other matters, which are denied.

The SOA

11. The SOA envisaged that Synergy would acquire shares in two tranches: "the First Shares" and "the Option Shares".
12. The SOA provided that Synergy would "subscribe for the First Shares and the Company [RGI] shall allot and issue the First Shares to the Investor on the First Completion Date in accordance with the terms of this Agreement" (clause 2.1).
13. The key provision relating to the First Shares is clause 4 which provides as follows:

(1) On the "First Payment Date" (the date of the SOA) Synergy paid US$9 million (the "First Consideration") (clause 4.1(a)).

(2) If this was done, then on or before the 22nd business day from the First

Payment Date RGI "shall:

(a) convene the relevant Board Meeting in order to pass the First Shares Board Resolution ... and the Option Shares Board Resolution ..... and convene the EGM in order to pass the EGM Resolutions;

(b) apply for admission of the First Shares to trading on AIM;

(c) allot and issue the First Shares to the Investor;

and upon which:

(d) deliver the true copies of the First Shares Board Resolution ...., the Option Shares Board Resolution ... and the EGM Resolution(s) to the Investor; and

(e) issue a share certificate for the First Shares to the Investor (unless the Investor has given Notice to the Company no fewer than 5 (five) Business Days prior to the date of allotment of the First Shares that the Investor wishes the First Shares to be credited to a CREST account and supplying details of such account" (clause 4.3).

(3) If the First Shares Board Resolution, the Option Shares Board Resolution or the EGM Resolutions were not passed within 22 Business Days from the First Payment Date for a reason other than the failure of DES-appointed directors to vote in their favour, then the First Consideration was to be repaid (clause 4.5).

(4) If the reason for the failure to pass one or more of the resolutions was the failure of the DES-appointed directors to vote in their favour, then RGI had to repay the First Consideration and Expenses up to US$500,000, otherwise on the same terms (clause 4.6).

(5) Clause 4.7 addressed the position where the relevant Resolutions were passed "and the Company fails to allot and issue the First Shares to the Investor" within the 22 days. In these circumstances, RGI was to pay Synergy US$18 million.

(6) Finally, clause 4.8 addressed the position where RGI complied with its obligations under clauses 4.3(d) or 4.3(e) within 22 Business Days of the First Payment Date, providing that in these circumstances the "Termination Date" – 14 July 2010 unless extended – would be extended. RGI had covenanted not to issue any shares other than in accordance with the SOA until that date (clause 3.3); Synergy's right to acquire the Option Shares expired on the Termination Date (clause 5.1) and the SOA terminated if Synergy did not exercise its option to acquire the Option Shares by the Termination Date (clause 5.3).

14. RGI emphasised the following features of the regime governing the First Shares as being of particular relevance:

(1) Clause 4.3(c) created an obligation, when the appropriate conditions were met, on RGI to "allot and issue the First Shares to the Investor".

(2) That obligation having been performed – hence the words "and upon which" – a further obligation arose under clause 4.3(e) to issue a share certificate for the First Shares (unless the appropriate notice had been given, to credit the First Shares to a notified CREST account).

(3) Clause 4.7 addressed the failure to "allot and issue the First Shares" – i.e. the clause 4.3(c) obligation – providing that Synergy had the right to be repaid US$18 million as its sole remedy. The failure to perform the separate obligations in clauses 4.3(d) and (e) do not feature in clause 4.7.

(4) On the contrary, a failure to comply with clauses 4.3(d) and (e) had a separate and distinct consequence under clause 4.8, namely to extend the Termination Date.

15. The SOA also gave Synergy the option to acquire the "Option Shares" in certain circumstances, "whereupon the Company shall allot and issue the Option Shares to the Investor on the Option Completion Date in accordance with clause 5 and the other terms of this Agreement" (clause 2.2).
16. The key provision relating to the Option Shares is clause 5 which provides:

"5. OPTION PAYMENT AND COMPLETION

5.1 In the event that the Investor wishes to exercise the Option, the Investor shall pay the Option Consideration to the Company in accordance with clause 6 on or before the Termination Date and serve Notice on the Company on the Option Payment Date that it has so paid the Option Consideration and that it wishes to exercise the Option and subscribe for the Option Shares. For the avoidance of doubt, the Investor may not subscribe for less than all of the Option Shares.

5.2 Within 5 (five) Business Days following the Option Payment Date ("the Option Completion Date") the Company shall:

(a) apply for admission of the Option Shares to trading on AIM;

(b) allot and issue the Option Shares to the Investor;

and upon which:

(c) issue a share certificate for the Option Shares to the Investor (unless the investor has given Notice to the Company no fewer than 5 (five) Business Days prior to the date of allotment of the Option Shares that the Investor wishes the Option Shares to be credited to a CREST account, and supplying details of such account);

5.3 This Agreement shall terminate automatically if the Investor fails to pay the Option Consideration to the Company in accordance with clause 6 on or before the Termination Date.

5.4 In the event of a termination of this Agreement pursuant to clause 4.4 or clause 13 all rights of the Investor to subscribe for any New Shares that have not already been allotted or issued (including New Shares allotted conditional on receipt of the relevant consideration or admission of' the relevant New Shares to trading on AIM) will lapse unless agreed otherwise by the Parties.

5.5 In the event that the Investor pays the Option Consideration to the Company in accordance with clause 5.1 and clause 6 and the Company fails to allot and Issue the Option Shares to the Investor in accordance with clause 5.2(b), the Investor shall have the right to require, by Notice to the Company (the 'First Shares Put Option Notice"), that the Company procure that a subsidiary of the Company purchases the First Shares from the Investor for $99,000,000 (ninety nine million United States Dollars) (the "First Shares Put Option Price").

5.6 In the event that the Investor serves a valid First Shares Put Option Notice in accordance with this clauses 5, the Company shall procure that a subsidiary of the Company pays the First Shares Put Option Price in full to the Investor within 3 (three) Business Days of receipt of the First Shares Put Option Notice.

5.7 Subject to receipt by the Investor of the full amount which is payable by the Company to the Investor in accordance with clauses 5.5 and 5.6 the Investor shall on the same day as such amount is received by the Investor transfer all the First Shares to the subsidiary of the Company designated by the Company for such purpose with full title guarantee free from all Encumbrances together with all rights attaching to such First Shares including the right to receive all dividends or distributions declared, paid or made on or after the date of receipt by the Investor of the full amount of First Shares Put Option Price. The Company shall notify the Investor in advance in writing of the name of the relevant subsidiary of the Company for the purposes of this clause 5.7.

5.8 In the event of any failure of the Company to comply with its obligations under clause 5.2(b) then the Investor shall be entitled to exercise its rights pursuant to clauses 5.5 to 5.7. The Investor waives to the fullest extent permitted by law any rights that it may have in law or otherwise arising from any failure of the Company to comply with its obligations under clause 5.2(b) except for the right to be paid the First Shares Put Option Price under clauses 5.6 and 5.7 provided that nothing in this clause 5.8 shall limit or exclude any liability for fraud of fraudulent misrepresentation. Such waiver shall be conditional on payment of the First Shares Put Option Price by the Company to the Investor, in full, in accordance with clauses 5.5 and 5.6, provided that such payment is due and payable to the Investor in accordance with the terms of this Agreement."

20. Also of relevance are clauses 11 and 14 which provide as follows:

"11 NOTICES

11. Any notice or other communication to be given under or in connection with this Agreement (a "Notice") shall be:

(a) in writing in the English language;

(b) signed by or on behalf of the Party giving it; and

(c) delivered personally by hand or courier (using an internationally recognised courier company) or sent by first class post (or by airmail if overseas) or recorded delivery or by fax, to the Party due to receive the Notice, to the address and for the attention of the relevant Party set out in this clause 11 (or to such other address and/or for such other person's attention as shall have been notified to the giver of the relevant Notice and become effective in accordance with this clause 11) prior to dispatch of the Notice).

….

14 WAIVER

14.1 No variation of this Agreement shall be effective unless it is in writing and signed by, or on behalf of, each of the Parties. The expression "variation" shall, in each case, include any variation, supplement, deletion or replacement however effected.

14.2 No waiver of this Agreement or of any provision hereof will be effective unless it is in writing and signed by both Parties.

14.3 Any waiver or any right or default hereunder shall be effective only in the instance given and will not operate as or imply a waiver of any other or similar right or default on any subsequent occasion.

14.4 Any delay by any Party in exercising, or failure to exercise, any right or remedy under this Agreement shall not constitute a waiver of the right or remedy or a waiver of any other rights or remedies and no single or partial exercise of any rights or remedy under this Agreement or otherwise shall prevent any further exercise of the right or remedy or the exercise of any other right or remedy."

The factual background to the purported exercise of the First Shares Put Option

The First Shares

17. Synergy paid the US$9 million First Consideration on 19 May 2010. On 24 May

2010, the board of RGI passed the relevant Resolutions. In view of contentions raised in relation to the Option Shares, it is relevant to note the following:

(1) At 16.30 on 25 May 2010, Olivier De Tillere of Bank Julius Baer (on behalf of Synergy) informed Mr. Kuzinez of RGI that it had been asked to provide its CREST details to Mr. Kuzinez so that the shares could be delivered to the account of Synergy Classic Limited.

(2) This communication was sent in the context of clause 4.3(c) of the SOA, which allowed Synergy to "give Notice" to RGI that it wanted the shares to be credited to a CREST account.

(3) At 18.29 on 25 May 2010, Mr. Kuzinez forwarded the communication from Bank Julius Baer to Mr. Borisenko by e-mail, stating "I just wanted to make sure that the below are your bankers". At 18.49, Mr. Borisenko replied "Yes Olivier De Tillere from Julius Baer is a banker of Synergy. All right".

(4) These communications did not follow the terms of clause 13, but no complaint was made about this. Following Mr. Borisenko's confirmation, RGI thereafter exchanged various communications with Bank Julius Baer.

18. RGI asked Bank Julius Baer for their CREST Participant ID and Member Account ID (Jonathan Joffe to Dimitrios Giannakos of Bank Julius Baer of 16.06 on 25 May 2010) which was provided an hour later. At 17.25 local time on 25 May 2010, Mr. Giannakos sent an e-mail to Mr. Joffe stating "I need to know where the securities are coming from ... I need to set up an instruction to accept the shares ... so I need your crest ID and a trade/settlement date".
19. On 26 May 2010 (e-mail of 13.28 local time), Mr. Joffe informed Mr. Giannakos that the shares would be credited "this Friday" (28 May 2010). On 28 May 2010, the shares were admitted by the London Stock Exchange to the AIM, according to a press release at 08.00 London time that day. At 14.20 on 28 May 2010, Bank Julius Baer informed Jonathan Joffe of RGI that the shares should be issued to a CREST account designated BJB, in the name of Vidacos Nominees Limited (a nominee which would hold the shares on behalf of Synergy). At 16.59 on 28 May 2010, Mr. Joffe informed Mr. Giannakos that the shares had been registered in accordance with this request. This was confirmed by Mr. Giannakos at 09.38 on 31 May 2010.
20. The EGM Resolutions were passed on 11 June 2010, and on 13 June 2010 RGI sent Synergy a letter confirming the steps which had been taken to comply with the obligations under clause 4 of the SOA. That letter concluded:

"In respect of the allotment and issue of the Option Shares, we intend to instruct RGI's registrar to allot these to the CREST account used for the First Shares upon receipt of the Option Consideration unless you inform us otherwise".

The Option Shares

21. By fax on 8 July 2010, Synergy gave notice that it had paid the Option Consideration on that day and that it wished to exercise the Option. An associate of Skaddens, acting for RGI, asked Mr. Borisenko by e-mail at 15.19 on 8 July to "confirm that the Option Shares are to be credited to the same CREST account that the First Shares were credited to". In response, at 12.34pm local time on 8 July, Mr. Borisenko gave this confirmation.
22. On 12 July 2010, the Option Shares were registered in the name of Vidacos Nominees Limited (Synergy's nominee – "Vidacos") in the share register of RGI by Computershare Investor Services, who also credited the Vidacos CREST account Designation BJB (i.e. the same CREST account as for the First Shares), also on 12 July 2010.
23. However Bank Julius Baer had not recorded receipt of the Option Shares. The position is as follows:

(1) At 12.58 on 15 July 2010, Jonathan Joffe asked Mr. Borisenko to confirm that the shares had been credited to Synergy's account, Mr.Borisenko replied that the shares had not been credited to Bank Julius Baer, and asked that Mr.Joffe "confirm us transfer of shares to Synergy account".

(2) At 19.11 on 16 July 2010, Mr. Joffe informed Mr. Borisenko that RGI had re-checked with its CREST provider, who confirmed that the shares had been credited on 12 July.

(3) At 08.30 on 19 July 2010, Oliver De Tillere of Bank Julius Baer informed Mr. Joffe that it had not received any notification of delivery, forwarding an e-mail from Mr. Avsar Ahmet of Bank Julius Baer stating "please be advised that we are not in possession of any preadvice from any counterparty. As soon as we receive the demand you'll be contacted to approve this transfer". In response, at 08.44, Mr. Joffe informed Mr. De Tillere that the shares had been credited to CREST account DDOAD, Account Designation BJB in the name of Vidacos Nominees Limited.

(4) Sharon Williams of Ardel, for RGI, checked the position with Computershare Investor Services, at 12.49 on 19 July 2010, and was told that "the 34,200,000 were credit [sic.] to Vidacos Nominees Ltd A/C Designation BJB on 12/7/00".

(5) Confirmation of receipt was provided by Avsar Ahmet of Bank Julius Baer at 12.22 on 20 July 2010 and the Option Shares are shown in Bank Julius Baer valuations from that date

Events after the allotment and issue of the Option Shares

24. Under clause 4.1 of the Shareholders Agreement, within 15 Business Days of the Option Payment Date, it was agreed that Mr. Shura would be appointed a director of RGI, it being a condition of such appointment that Synergy had "acquired full legal and beneficial ownership of the New Shares" (i.e. the First Shares and the Option Shares): clause 2.1 of the Shareholders Agreement.
25. With effect from 2 August 2010, Mr. Shura took up his appointment and participated in the management of RGI until 25 February 2011 when he was removed inter alia as a result of allegations concerning trading in RGI's shares during a close period contrary to the AIM Rules and RGI's internal code on dealing in securities of the company.
26. However by an e-mail sent at 11.00 on 5 October 2010, Mr. Shura for Synergy informed Mr. Kuzinez of RGI that the 34.2 million shares had only been delivered and credited to Synergy's CREST account with Bank Julius Baer on 20 July, and not by midnight on 15 July 2010. Mr. Shura contended that this gave rise to a breach of clause 5.2(b) of the SOA, and Mr. Shura stated that Synergy was invoking the First Shares Put Option Notice and putting the First Shares to RGI in return for a payment of US$99 million under clause 5.5 of the SOA. This e-mail was followed by a faxed letter, to the same effect, sent at 16.59 on 15 October 2010. In response, RGI wrote to Synergy denying that Synergy had any valid basis for serving the First Shares Put Option Notice.
27. Since 12 July 2010 the shares have not moved from the account they were deposited into on that date.
28. It is to be noted that it is Synergy's position:

(1) That it became the beneficial owner of the Option Shares in July

2010 and was entitled by reason thereof to appoint a director to the board of RGI, which right it has exercised thereafter.

(2) That it remains the beneficial owner of the Option Shares.

(3) Notwithstanding this, that it was entitled to put the First Shares (but not the Option Shares) to RGI on the basis of an alleged failure to issue and allot the Option Shares in accordance with clause 5.2(b) of the SOA, and to receive an amount equivalent to (i) the US$9 million it paid for the First Shares; (ii) the US$81 million it paid for the Option Shares and (iii) an additional US$9 million, while retaining the Option Shares.

29. The lack of commercial merit in such a case is readily apparent. On Synergy's case it is entitled to a remarkable windfall.

The First Issue

RGI's case

30. RGI's case is that the relevant question is whether RGI had allotted and issued the Option Shares to Synergy by midnight on 15 July 2010, and not whether either a share certificate had been issued by that date or whether the shares had been credited to a CREST account identified by Synergy in accordance with clause 5.2(c) by that date. Subject to what is meant by allotting and issuing the shares to Synergy, this was not disputed.
31. As RGI submitted:

(1) Clause 5.2 divides into three distinct obligations: (a), (b) and (c). The separate and distinct nature of those obligations is reflected by the fact that the obligation in clause 5.2(c) arises "upon" the performance of the obligations in clauses 5.2(a) and 5.2(b) ("and upon which").

(2) The First Shares Put Option only arises if RGI "fails to allot and issue the Option Shares to the Investor in accordance with clause 5.2(b)": clause 5.5. This is reinforced by the express provision in clause 5.8 of the SOA that the right to performance of the First Shares Put Option arises "in the event of any failure of the Company to comply with its obligations under clause 5.2(b)" and that Synergy "waives … any rights that it may have in law or otherwise arising from any failure of the Company to comply with its obligations under clause 5.2(b)", with the exception of the First Shares Put Option right. No Put Option rights arise from any failure to perform the obligation in clause 5.2(c).

(3) In this respect, clause 5 dealing with the Option Shares mirrors the structure of clause 4 dealing with the First Shares: clause 4.3.

32. Secondly, RGI contended that it is clear that the Option Shares had been issued and allotted to Synergy before midnight on 15 July 2010. Again, subject to what is meant by allotting and issuing the shares to Synergy, this was not disputed.
33. As RGI submitted:

(1) Under English law, shares are allotted to a person when that person acquires an unconditional right to be entered on a company's register of members: National Westminster Bank Plc. v Inland Revenue Commissioners [1995] 1 A.C. 119 at 125H citing the-then section 738 of the Companies Act 1985. RGI is a Guernsey company and the evidence of Guernsey law put forward by RGI is that while there is no reference in the Guernsey company legislation to the concept of allotment, allotment occurs in Guernsey when a subscriber acquires an unconditional right to be included in a company's register of members. Synergy objected to this evidence but in the absence of expert evidence it is to be assumed that the position is the same as under English law, with the same result.

(2) Section 300 of the Companies (Guernsey) Law 2008 provides that "a share is issued when the name of the holder is entered on the register of members in respect of that share".

(3) Once the holder of a share has been entered on the register of members, the shares have been allotted and issued to that person. In this case the allotment was conditional on admission to the AIM which occurred a short time after the shares were issued.

(4) Here the shares had been entered on the register of RGI as shares issued to Synergy's nominees, Vidacos, on 12 July. This was made clear by the print out from the company's share register, maintained by Computershare Investor Services, showing the registration of the Option Shares in the name of Vidacos on that date, and the e-mails from Ms Cavey of Computershare of 12.49 on 19 July 2010 and 13.36 on 6 October 2010.

(5) The fact of registration on this date was not challenged.

Synergy's case

34. At the time of the purported service of the First Shares Put Option the reason given to justify its exercise was that the provisions of clause 5.2 had not been exercised in time in that the Option Shares had not been credited to Synergy's account with Julius Baer until 20 July 2010.
35. In the Defence it was stated that Option Shares could not be issued and allotted to Vidacos as nominee for Synergy "without reference to Julius Baer, who needed to take steps to set up an instruction to accept those shares", and that this did not occur until 20 July 2010.
36. At the summary judgment hearing this defence was not persevered with. Instead Synergy took the more fundamental point that the issue and allocation of Option Shares to Vidacos as nominee for Synergy did not comply with clause 5.2(b) since such Shares are not issued to "the Investor". The "Investor" means Synergy and shares are not issued to Synergy in circumstances where Vidacos is the registered member of RGI and the legal owner of the shares.
37. Synergy acknowledged that in circumstances where Notice had been validly given under clause 5.2(c) that the Option Shares be credited to a CREST account then the "Investor" could embrace a nominee identified in the Notice, but contended that no valid Notice had been given since the requirements of clause 13 had not been met and those requirements could not be waived either unilaterally or in any event by reason of clause 16.
38. The essential issue raised by Synergy's defence is whether as a matter of construction the "Investor" in clause 5.2(b) means and can only mean Synergy as legal and beneficial owner, r whether it also embraces Synergy as beneficial owner of shares held by a nominee.
39. In my judgment it is clear that clause 5.2(b) does not fall to be construed in the narrow and limited manner put forward belatedly by Synergy.
40. Firstly, it is apparent that the SOA contemplates Synergy holding shares through a nominee and not merely in its own name. In relation to both the First Shares and the Option Shares the SOA envisaged the shares being credited to a CREST account. Shares so held are commonly held through nominees.
41. The unchallenged evidence of Mr. Macaulay in relation to the CREST system was as follows:

"29 The shares of the First Claimant are traded through CREST. I understand that CREST is a computer-based system operated by Euroclear UK & Ireland Limited for the electronic settlement of transactions in shares and other securities (as well as the processing of a range of corporate actions). CREST allows for shares to be held in electronic form (uncertificated shares), rather than through physical share certificates (certificated shares). Pursuant to Rule 8 of the CREST Rules (exhibited at BEM4-3) and Article 16 of the First Claimant's Articles of Incorporation the shares of the company, registered in Guernsey, are eligible to be traded in CREST. However, such companies are required to maintain a register of members in respect of both uncertificated and certificated shares…..

….

30. I understand that it is possible for an investor to hold shares in CREST in a number of ways. In the case of the Defendant, in common, I believe, with a large number of investors, the Shares are held through a nominee or custodian, in this case Vidacos. Under this method of holding shares, the investor (i.e. the Defendant) appoints a nominee, who is a direct member of CREST, to hold shares on its behalf. The shares are held through a specially designated securities account. To be a direct member of CREST it is necessary to be linked directly to the CREST network, which, I understand, is unduly burdensome for all but the most active participants in the securities markets. As a result, I believe that the nominee or custodian method of holding shares is attractive to a large number of investors."

42. That the holding of CREST account shares through a nominee was contemplated is borne out by what in fact happened as both the First Shares and the Option Shares were so held, at Synergy's request.
43. To construe clause 5.2(b) as only applying to Synergy as legal and beneficial owner would therefore run contrary to the contractual scheme whereby shares were to be held through the CREST system.
44. Secondly, on Synergy's own case the word "Investor" is capable of embracing Synergy as beneficial owner of shares held by a nominee. Where a valid clause 5.2(c) Notice is given to credit the Option Shares to a CREST nominee account Synergy acknowledges that clause 5.2(b) would be satisfied. However, the meaning of "Investor" does not change according to the form of Notice which may be given. Either it is wide enough to cover a notified nominee or it is not. On Synergy's own case it is wide enough.
45. Thirdly, it would be remarkable if clause 5.2(b) is not met in circumstances where Option Shares are held through a nominee at Synergy's request. The ability to hold shares through a nominee is a matter for the convenience and benefit of Synergy. It is not disputed that Mr. Borisenko's confirmation that the shares be credited to the Vidacos CREST account was given with Synergy's authority. The form in which the confirmation was given does not affect the reality that RGI did exactly what Synergy requested with a result clearly contemplated by clause 5.2.
46. Fourthly, if "Investor" is to be construed in the narrow and limited manner suggested then there are other provisions of the SOA that would be rendered unworkable or insensible. For example, clause 5.5 provides for an RGI subsidiary to purchase the First Shares from the "Investor". If, as the SOA contemplated and as in fact happened, the First Shares were held through a CREST nominee, and if, as Synergy contends, "Investor" can only mean Synergy as legal and beneficial owner, then that purchase could not take place since it is not the legal owner of the First Shares.
47. Fifthly, Synergy's construction of clause 5.2 flouts and should be made to yield to business common sense, the importance of which has been re-emphasised in the recent Supreme Court decision in The Rainy Sky [2011] 1 WLR 2900. If to "allot and issue the Option Shares to the Investor" requires allotment and issue to Synergy as legal and beneficial owner then it follows that there has been a failure to do so "in accordance with clause 5.2(b)" thereby giving rise to Synergy's Put Option rights under clause 5.5. The consequence of Synergy's case on construction is that it becomes entitled to exercise the clause 5.5 Put Option notwithstanding that it has and will maintain beneficial ownership of all the Option Shares. It thereby gets paid back the US$81 million it paid for the Option Shares, but keeps the Shares and, moreover, is paid a further US$9 million for its trouble.
48. Synergy submitted that the "business commonsense" approach to construction only arises where there are two available meanings of the words used and here there is not. The "Investor" is Synergy and "Investor" in clause 5.2(b) can only mean Synergy as legal and beneficial owner. However, given the context of the SOA as a whole and clause 5 in particular, I consider that "Investor" in clause 5.2 is clearly also capable of embracing Synergy as beneficial owner of the shares held through a nominee. Shares which have been issued and allocated in this way can sensibly be understood as having been issued and allocated to Synergy. As the beneficial owner of those shares it is entitled to exercise the rights of ownership of the shares.
49. Synergy further submitted that there may be other legal means by which the apparently absurd consequences of their construction may be avoided, such as the law of penalties, or affirmation or estoppel. However, the possible availability of such after the event arguments does not bear on what the parties' intentions would reasonably be understood to be at the time that the contract was made and is not a good reason for accepting a construction that flouts business common sense.
50. For all these reasons I reject Synergy's case on the construction of clause 5.2(b) and alleged breach of that clause.
51. In those circumstances it is not necessary to address the further issue raised as to whether a valid clause 5.2(c) notice was given. Synergy accepted that a breach of clause 5.2(c) does not give rise to a right to exercise the Put Option under clause 5.5 and I have rejected its case that the validity of the Notice determines or affects the proper construction of clause 5.2(b). However, if it be relevant I would accept RGI's case that:

i) It was entitled to treat Mr. Borisenko's e-mail of 8 July 2010 as a Notice for the purpose of clause 5.2(c) notwithstanding the fact that it was not sent in the form of a signed fax or letter to the directors of RGI care of Bachmann Fund Administration Limited. It was not disputed that the e-mail was sent with Synergy's authority and Synergy cannot rely on defects in the form of transmission and address of its own communications.

ii) The provision that Notices to RGI must be sent to by a particular form of transmission and with a particular addressee is a provision which exists for RGI's benefit, which it was entitled to (and did) waive: see Chitty on Contracts (30th) paragraph. 2-158 ("where a condition is inserted entirely for the benefit of one party, that party may waive the condition"); Wilken and Villiers"The Law of Variation, Waiver and Estoppel" paragraph 23.17.

iii) Notwithstanding clause 16, there is no requirement that such waiver be in writing to be effective since clause 16 may itself be waived (see, for example, Credit Agricole Indo-Suez v. BB Energy BV [2004] EWHC 750 (Comm) at paras 32-33).

The Second Issue

52. In the light of my conclusion on the First Issue this further Issue does not arise as I have held that there was no breach of clause 5.2(b) and therefore no right to exercise the Put Option.

Conclusion

53. I accordingly conclude that RGI's application for summary judgment succeeds on the First Issue and that it is entitled to declarations accordingly.