High Court Considers How To Interpret A Right Of First Refusal In A Shareholders' Agreement

The High Court has considered whether any special principles of contractual interpretation apply to the interpretation of a right of first refusal in a shareholders' agreement. It found that usual principles of contractual interpretation should apply, not the narrow so-called Greenhalgh principle.

Background

Under the so-called Greenhalgh principle, established in the context of construing pre-emption provisions in a private company's articles, there is an assumption that a share (being personal property) should be transferable. If the intention is to take away or somehow regulate that inherent right of transfer, the language imposing any such restriction must be written with sufficient clarity to make it clear that was the intention. Any ambiguity in transfer restrictions should be resolved in favour of the selling shareholder.

This contrasts with the usual rules of contractual interpretation under which the court must identify the objective meaning of the language of a contract. The court should consider the contract as a whole and, depending on the nature, formality and quality of the drafting of the contract, give more or less weight to elements of the wider context in determining that objective meaning.

Facts

United Company Rusal PLC (Rusal), Whiteleave Holdings Limited (Whiteleave) and Crispian Investments Limited (Crispian) were the major shareholders of PJSC MMC Norilsk Nickel (NN), a substantial Russian-listed company.

In 2012 Rusal, Whiteleave and Crispian entered into a shareholders' agreement governing their rights and obligations regarding any proposed transfers of their NN shares. In broad terms that agreement included a right of first refusal mechanism (ROFR) whereby Crispian was prohibited from selling any shares unless it offered them first to Rusal and Whiteleave at the price proposed by a "bona fide third party purchaser" or an average weighted market price.

In 2018 Bonico Holdings Co Limited (Bonico), which was a subsidiary of Whiteleave, made an offer to buy 3.99% of Crispian's shares in NN. Crispian accepted the offer and initiated the ROFR mechanism by serving a notice on Rusal and Whiteleave offering them its NN shares at the price offered by Bonico. Rusal then commenced proceedings, seeking a declaration that the ROFR notice was invalid.

Rusal's arguments concerning the validity of the notice included that:

the ROFR could only be triggered by an offer (and at a price) made by a "bona fide third party purchaser"...