CBP Centre Pty Ltd v VentureCrowd Pty Ltd [2024] QSC 139 (2024) 19 QR 682

SUPREME COURT OF QUEENSLAND CITATION: CBP Centre Pty Ltd v VentureCrowd Pty Ltd [2024] QSC 139 PARTIES: CBP CENTRE PTY LTD ACN 108 424 731 AS TRUSTEE FOR THE VIDATYARONINE TRUST ABN 70 184 532 255 (applicant) v VENTURECROWD HOLDINGS PTY LTD ACN 164 416 040 (respondent) FILE NO: BS 6069/23 DIVISION: Trial PROCEEDING: Originating Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 28 June 2024 DELIVERED AT: Brisbane HEARING DATE: 3 June 2024; 25 June 2024 JUDGE: Freeburn J ORDERS: 1. Judgment be given for the applicant against the respondent for $2,431,903.57 plus pre-judgment interest pursuant to section 58 of the Civil Proceedings Act 2011 (Qld) from 27 February 2023 until judgment. 2. I will hear the parties on the form of the order, the calculation of interest and on costs. CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where there is a shareholder agreement for the buy back of shares – where the applicant has transferred the shares – where the respondent has not paid – where interpretation of the agreement is required – where an interpretation is that payment is due on the Completion Date – where the Completion Date has not occurred, and is in the hands of the respondent – where a converse interpretation is that payment is due upon the transfer of shares – whether there is an ambiguity – whether certain interpretations lead to an absurdity – whether notwithstanding the proper interpretation, the Completion Date has passed Arnold v Britton [2015] AC 1619, considered Charter Reinsurance v Fagan [1997] AC 313, cited -- 1 of 18 -- 2 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, applied Firm PI v Zurich Australian Insurance [2015] 1 NZLR, cited Glynn v Margetson & Co [1893] AC 351, cited Kay v Playup Australia Pty Ltd [2020] NSWCA 33, explained Re Piccolo; McVeigh (Trustee of the Bankrupt Estate of John Peter Piccolo) v National Australia Bank Ltd (2000) 278 ALR 429; [2000] FCA 187, cited COUNSEL: AJ Schriiffer for the applicant NJ Shaw for the respondent SOLICITORS: CE Corporate Lawyers for the applicant Resolve Litigation Lawyers for the respondent REASONS Introduction [1] The applicant, CBP Centre Pty Ltd,1 owned 5,344,843 shares in the respondent company, VentureCrowd Holdings Pty Ltd. On 24 June 2022 VentureCrowd offered to buy-back all of CBP’s shares in VentureCrowd at $0.455 per share – a total of $2,431,403.2 The offer was accepted, and the terms of the transaction are recorded in a Buy-Back Agreement.3 [2] The shares were then transferred to VentureCrowd. By operation of s 257H(3) of the Corporations Act 2001 (Cth) the ‘bought-back’ shares were then cancelled. [3] CBP seeks an order that VentureCrowd pay the agreed contract price of $2,431,903. CBP argues that the obligation to pay the contract price arises on the “Completion” as that term is defined in the Buy-Back Agreement – that is when the shares were transferred. VentureCrowd resists paying the contract price and argues that its obligation to pay only arises when the “Completion Date”, as defined, occurs. That date, VentureCrowd contends, has not yet arrived. [4] And so, the first issue is an issue of interpretation of the Buy-Back Agreement.4 If that issue is decided in favour of CBP then the sum claimed is payable. If that issue is decided in favour of VentureCrowd’s interpretation, then there is a second issue, a factual question: Has the Completion Date (as defined) occurred? Under the Buy- Back Agreement the Completion Date occurs if either of two events occur: there has been an external capital raise, or another date been nominated as the Completion Date. CBP contends that both of those events have occurred. 1 CBP’s full title is as specified in the court heading. 2 The buy-back was a selective share buy-back pursuant to Division 2 of Chapter 23 of the Corporations Act 2001 (Cth). 3 The Buy-Back Agreement is dated 20 May 2022 but is in a standard form that constituted an offer made by CBP on 24 June 2022 and accepted by VentureCrowd on 26 June 2022. 4 Neither party pleaded that the principles of restitution had any application here. -- 2 of 18 -- 3 The Contract [5] The recitals to the Buy-Back Agreement are relatively straight-forward: Recitals: A. In compliance with the provisions of Division 2 of Chapter 2J of the Act, the Company [VentureCrowd] intends to undertake a selective share buy-back of ordinary shares on issue in the Company. B. The Holder [CBP5] is the registered owner of the Shares. C. In an offer dated 20th May 2022 the Company has offered to buy back shares in the Company subject to the terms of this Agreement. D. The Holder has agreed to accept the buy-back offer by executing this Agreement. E. This Agreement sets out the terms and conditions on which the Company will buy back the Shares from the Holder and the Holder will transfer the Shares to the Company. [6] The operative clause is clause 3: 3. Buy Back of Shares (a) The Holder accepts the Company's offer to buy back the Shares and agrees to transfer the Shares to the Company on the terms and conditions set out in this Agreement, and subject to Division 2 of Chapter 2J of the Act, the Company agrees to buy back the Shares from the Holder on the terms and conditions set out in this Agreement. (b) The Holder agrees to transfer the Shares to the Company on and with effect from the Completion Date free from all Security Interests. [7] And so, the main object of the transaction is a sale of shares by CBP to VentureCrowd. [8] Clause 4 provides for the time and means of payment of the price: 4. Transfer Price (d) In consideration of the transfer and buy-back of the Shares, the Company must pay to the Holder the Transfer Price on the Completion Date. (e) All payments of any nature to the Holder under this Agreement must be made: (i) unless otherwise specified in this Agreement, to the Holder or to the person or persons and in the manner that the Holder directs in writing on the due date for payment; and (ii) by bank cheque or electronic transfer to an account or accounts nominated by the Holder in Item 4 of Schedule 1 or otherwise in cleared funds. [9] The problems of interpretation arise because of clause 4(d) above and clause 5. Clause 5 provides: 5 Nine shareholders are specified in the schedule as “Holder”. CBP is the last of those nine. -- 3 of 18 -- 4 5. Completion (a) Completion of the transfer and buy-back of the Shares must take place on the Completion Date. (b) Subject to clause 5(d), on Completion the Holder must deliver to the Company: (i) a duly executed and completed transfer in favour of the Company for all of the Shares in registrable form and in the form of Schedule 3; and (ii) share certificates (if any) in respect of the Shares. (c) The Holder authorises the Company to complete on behalf of the Holder, in accordance with the terms of this Agreement, any share transfer provided by the Holder to the Company for the purposes of satisfaction of the obligations of the Holder under clause 5(b). (d) The Holder irrevocably appoints each director or secretary of the Company severally the attorney of the Holder with power: (i) in the name of the Holder to complete, execute and deliver to the Company a transfer of shares for the transfer of the Shares from the Holder to the Company and also to do anything necessary or desirable (including to complete, execute and deliver to the Company any other document in connection with or incidental to a transfer of shares) to effect such transfer of shares; and (ii) to delegate his or her powers (including, without limitation, this power to delegate) to any person who is an employee of the Company for any period and to revoke a delegation. (e) On Completion the Company must pay to the Holder the Transfer Price. The Problem [10] There is an ambiguity inherent in clause 5.6 Clause 5(a) specifies that the Completion of the sale must take place on the Completion Date. That date is defined as either the second business day after the next ‘external capital raise’, or any other date which VentureCrowd nominates as the Completion Date.7 However, clause 5(e) specifies that the transfer price must be paid on Completion. That word is defined as “the completion of the transfer and buy-back of the Shares in accordance with clause 5.” [11] Ordinarily, the completion of a sale would occur when both parties received what they bargained for. Here, that would mean that the shares are transferred to VentureCrowd and CBP receives, in return, the transfer price. But in this case VentureCrowd argues that, although the shares have been transferred, VentureCrowd is not obliged to pay the transfer price. [12] Counsel for VentureCrowd put his argument in this way: The source of the respondent’s contractual obligation to pay is anchored in the “Completion Date”. This is explicit in clause 4(d). Clause 5(e) confirms that payment 6 There is also an element of circuitousness because clause 5(e) refers to the price being paid at Completion – which is defined as the completion of the transfer in accordance with clause 5. 7 The definition of Completion Date is discussed in more detail below. -- 4 of 18 -- 5 is to be made on “Completion”, but this is also anchored in the meaning of “Completion Date” because clause 5(a) makes it clear that completion can only occur on the Completion Date. There is no possible way to make sense of these clauses other than that the respondent was required to pay on the Completion Date. The Completion Date (by its definition in the [Buy-Back Agreement]) only arises in two circumstances: (a) Upon the closing of an external capital raising by the respondent; or (b) Another date if nominated by the respondent and notified to the applicant.8 [13] Thus, even though it is common ground that the share transfer forms were signed by both parties (stipulating the agreed transfer price of $2,431,903), and it is common ground that VentureCrowd then lodged with the Australian Securities and Investment Commission a Form 484 recording that the applicant’s shareholding in the respondent had been reduced by 5,344,843 ordinary shares to zero shares, VentureCrowd argues that it is not obliged to pay the transfer price because the Completion Date has not yet arrived. [14] Therefore, the central tension or ambiguity in the interpretation of the Buy-Back Agreement is whether the transfer price is to be paid on the Completion Date, or whether it is to be paid when the shares are transferred. In other words, which has priority – the provision as to timing or the provision as to the exchange of the transfer for the price. When is the Completion Date? [15] It is important to observe that whether and when the Completion Date arrives is completely in the hands of VentureCrowd.9 That is because the Completion Date is defined as: (a) the second Business Day after the closing of the next external capital raise by VentureCrowd which results in the issue of new securities in VentureCrowd or a subsidiary of VentureCrowd to third party investors; or (b) any other date nominated by VentureCrowd to be the Completion Date notice of which has been given to CBP in writing. [16] In fact, the Completion Date may never occur, or it may not occur in the foreseeable future.10 VentureCrowd may never activate, and then close, an external capital raise. And VentureCrowd may never give a written notice nominating another Completion Date. [17] Counsel for VentureCrowd argued that the Completion Date was not completely within the control of VentureCrowd. That was because, he argued, whether the targets set by VentureCrowd’s external capital raising were met depended on the market and 8 Paragraphs 6 and 7 of the respondent’s outline of submissions. 9 Or almost completely – see the discussion below. 10 That the Completion Date may never occur is a realistic possibility. Or, at least, there is a prospect that the Completion Date may not occur in the reasonably foreseeable future. The share transfer forms were executed in February 2023. As will be explained, at that time an external capital raising had been begun in September 2022. Mr Maarbani’s evidence is that the capital raising has not closed at the time of the hearing in June 2024. -- 5 of 18 -- 6 whether VentureCrowd was able to attract sufficient investment to enable it to meet its target investment and thus close the capital raising. But the investment target is determined by VentureCrowd. [18] Subsequent to the Buy-Back Agreement, VentureCrowd did put an investment opportunity to the market. The investment opportunity qualifies as an external capital raising. There are three documents recording this investment opportunity. One is an Opportunity Review dated September 2022 and the second and third comprise two versions of an Information Memorandum dated November 2022 and July 2023. All three documents offer an opportunity to invest up to $14.5 million at a share price of $2.55. The purpose of the capital raising was stated to be technology development ($8 million) foreign market expansion ($3 million) key personnel and working capital ($1 million) and redemption of preference shares ($2.5 million). None of the three documents imposed a time limit or even a timeframe.11 [19] In his affidavit, the CEO and Managing Director of VentureCrowd, Mr Maarbani says that, as at the date of the swearing of the affidavit (November 2023) $8.7 million of the target of $14.5 million had been raised. He says that the external capital raise effort is “live and continuing”. His evidence is that the external capital raise has not closed. No evidence suggests that situation has changed. And so, nearly 2 years after the capital raising commenced it has not closed. There is no date fixed for the capital raising to close, and there is no clarity as to if, and when, the investment target will be met. [20] However, that discussion concerns events that occurred after the offer in May 2022 and after the entry into the Buy-Back Agreement in June 2022. As at June 2022 VentureCrowd had the freedom to embark on an external capital raising whenever it wished, aimed at whatever target it wished, and on whatever terms it wished. If the external capital raising was an open-ended capital raising it could decide when that capital raising closed. [21] For all practical purposes, both limbs of the definition of the Completion Date were within the control of VentureCrowd. How did we get here? [22] It is necessary to explain how CBP came to transfer the shares without receiving the purchase price in return. [23] It can be seen from clause 5(b) that, on Completion, CBP was obliged to deliver to VentureCrowd a duly executed and completed share transfer in favour of VentureCrowd for all of CBP’s shares in registrable form. Presumably in the light of that obligation,12 on 27 January 2023 VentureCrowd sent a share transfer form executed by VentureCrowd to CBP. On 1 February 2023 CBP executed and returned the share transfer form to VentureCrowd. On 4 February 2023 VentureCrowd executed the share transfer form.13 On 27 February 2023, VentureCrowd lodged a 11 The Buy-Back Agreement contains a ‘Sunset Clause’ for the Buy-Back of the shares, but there seems to be no equivalent in the capital raising documents. 12 Another possibility is that the form was sent pursuant to the alternative arrangement discussed below. Or perhaps it was both. 13 An oddity is that the evidence is that VentureCrowd seem to have executed the share transfer twice. But nothing turns on that. -- 6 of 18 -- 7 form 484 with ASIC recording that CBP’s shareholding in VentureCrowd had been reduced by 5,344,843 ordinary shares to zero on the earliest of 4 February 2023 for the total paid of $0. [24] The share transfer form records this: I/We the registered holder(s) and undersigned seller(s) for the above consideration [$2,431,903] do hereby transfer to the above names hereinafter called the Buyer(s) the securities as specified above standing in my/our name in the books of the abovenamed Company [VentureCrowd], subject to the several conditions on which I/We held the same at the time of signing hereof and I/We do hereby agree to accept the said securities to the same conditions… [emphasis added]14 [25] And so, both parties willingly executed the share transfer form, a form which is attached to the Buy-Back Agreement, and which provides for the immediate transfer of the shares for a stated consideration of $2,431,903.15 VentureCrowd accepted and signed the transfer and registered the transfer with ASIC. That had the effect of cancelling the shares bought back by VentureCrowd. No doubt there was an effect on the value of the remaining shares in VentureCrowd. [26] Counsel for VentureCrowd points out that the Information Memorandum for the buy- back is attached to the Buy-Back Agreement. That Information Memorandum speaks of VentureCrowd undertaking an external capital raising in order to fund the transfer price. Curiously, though, the Information Memorandum also provides that: “The buy- back will facilitate the rationalization of the share register in advance of the proposed external capital raise.” That rather suggests the buy-back is to occur before the external capital raise rather than vice versa. And, the Information Memorandum explicitly says that the buy-back is proposed for 2 business days after the close of the proposed capital raise or “such earlier date as [VentureCrowd] determines…”. [27] Importantly, though, nothing in the Buy-Back Agreement itself makes the sale of the shares, or the payment of the price, conditional on VentureCrowd obtaining finance. And the Information Memorandum attached to the contract does not go so far as to suggest that the parties contemplated that VentureCrowd’s liability to pay for the shares was dependent on a certain level of capital raising. The Alternative Arrangement [28] Paragraph 9C of VentureCrowd’s defence records that on or about 16 January 2023 Mr Darren Tasker on behalf of VentureCrowd had a telephone conversation with Mr Marc Withnall on behalf of CBP. The conversation is said to be to the following effect: (a) Mr Tasker said he wanted to see if CBP would be willing to move from the wording of the Buy-Back Agreement to a promissory note; (b) Mr Tasker said VentureCrowd needed to set up a time frame where it could realistically raise capital to buy CBP’s shares and suggested a debt structure with an interest rate to give more security than what is offered under the Buy- Back Agreement; 14 There was an argument about it but it is clear that CBP does not sue separately on the share transfer form. 15 The words “hereby transfer” make it clear that an immediate transfer of the shares was contemplated. -- 7 of 18 -- 8 (c) Mr Tasker asked if Mr Withnall was willing to consider a draft of a promissory note that was more attractive than the current VentureCrowd preference share offer at 12% and was a debt structure; (d) Mr Withnall said words to the effect that he was ok with that as long as there was a sunset date of 90 days and enforceable security and that the arrangement needed to be kept simple and not overcomplicated. [29] The conversation is not alleged to constitute an agreement, or even a part of an agreement. Neither party is alleged to be bound by anything said in that conversation. The conversation is entirely prospective in the sense that both participants were speaking in a broad way about some of the terms of a possible future agreement.16 The evidence of Mr Darren Tasker, VentureCrowd’s Executive Director, makes clear that “the conversation was introductory and intended to open the door to negotiations”. He says he suggested a number of options to Mr Withnall of CPB.17 [30] Nothing in the 16 January 2023 conversation is alleged to supersede, or replace, or alter, the parties’ obligations under the Buy-Back Agreement. Indeed, the likelihood is that what Mr Tasker was seeking to do was to come to an agreement about how and when the transfer price was to be paid rather than an arrangement that varied the Buy-Back Agreement. [31] The defence then alleges that, following that preliminary conversation, there were certain steps taken by Mr Tasker: (a) one was to have a conversation with another representative of VentureCrowd about “his understanding of the effect of the conversation [with Mr Withnall]”; (b) another was for various steps to be taken by those within VentureCrowd to execute the share transfer form, and to forward it to CBP; (c) a further step was for VentureCrowd to register the share transfer form with ASIC; (d) a further step was for VentureCrowd to arrange for an associated company, VentureCrowd Services Australia Pty Ltd, to issue a promissory note in favour of CBP.18 [32] Presumably that last step was designed to secure payment of the transfer price. [33] The internal conversation within VentureCrowd, of course, can have no contractual consequences.19 Indeed, none of the conversations are pleaded as having any contractual effect. There is no allegation that the Buy-Back Agreement was varied by the conversations. The sole point of the plea of this ‘alternative arrangement’ is to provide an explanation as to why VentureCrowd took the steps it did. In paragraph 27 of their submissions VentureCrowd contends that the actions in transferring the shares was pursuant to what was “thought” to be the alternative arrangement agreed with CPD. 16 Mr Tasker’s evidence (paragraph 16) makes clear that there was no agreement and that what was contemplated was a review of a draft by Mr Withnall. 17 Paragraph 16 of Mr Tasker’s affidavit. 18 More on the promissory note later. 19 CBP was not a party to the conversation, and, in any event, the conversation did not, and is not alleged to have had any contractual effect. -- 8 of 18 -- 9 [34] I am not satisfied the evidence even goes that far. Mr Tasker knew that there was no specific arrangement or agreement with CBP. All that had happened was that on 16 January 2023 he and Mr Withnall had opened the door to negotiations. Some two weeks later steps were taken to proceed with the share sale. The only agreement then in place, and in fact the only arrangement then in place, was the Buy-Back Agreement. I am not satisfied that either party was proceeding under an alternative agreement or arrangement. [35] Certainly, a promissory note was proffered but I am unable to find that it was proffered under some alternative agreement or arrangement. Taken at its highest, it may be that different people within VentureCrowd had different understandings, but I cannot conclude that VentureCrowd, as a corporate entity, was proceeding pursuant to any particular perception of what had been arranged between Mr Tasker and Mr Withnall. And the evidence does not enable me to conclude that CBP was proceeding under any agreement or arrangement other than the Buy-Back Agreement. [36] Under that agreement, VentureCrowd maintains the rather surprising stance that it was entitled to receive the shares from CBP, but it is not obliged to pay for them – unless and until the Completion Date occurs. The occurrence of that date, as explained, is within VentureCrowd’s control. The Interpretation Principles [37] The principles applicable to the contract interpretation questions are not controversial. The Buy-Back Agreement should be construed in accordance with the principles applicable to construing a commercial contract; that is, objectively by reference to the text of the document and its ordinary meaning, together with the context, being the entire text of the agreement and matters referred to in it, and the purpose of the document.20 Often the purpose will be identified by reference to the contract alone. However, identification of the purpose may involve consideration of the genesis of the transaction, the background, the context and the market in which the parties are operating.21 Further, evidence of surrounding circumstances is admissible to assist in the interpretation of a contract if the language is ambiguous or susceptible of more than one meaning.22 [38] Thus, the task of identifying the legal meaning of provisions in a commercial contract is the task of identifying the imputed intention of the parties,23 by reference to the contractual text construed in light of its context and purpose.24 [39] In Electricity Generation Corporation v Woodside Energy Ltd25 French CJ, Hayne, Crennan and Kiefel JJ said: 20 See LD Family Holdings Pty Ltd v Iceland Cold Storage Australia Pty Ltd [2023] VSC 206 at [106]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 at [16]. 21 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46], [49]. 22 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352. 23 The purpose of the interpretation process is to determine and give effect to the common intention of the parties, although, of course, the intention is to be ascertained objectively from the words of the document rather than the parties’ subjective intentions: see JW Carter, Contract Law in Australia, 8 th ed at [12.03]. 24 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]; Mount Bruce Mining v Wright Prospecting (2015) 256 CLR 104 at [46]–[51] and [108]–[109]. 25 (2014) 251 CLR 640 at [35]. -- 9 of 18 -- 10 [35] … The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. [40] Here, the purpose of this commercial contract can be discerned from the words of the Buy-Back Agreement itself. The purpose of this Buy-Back Agreement was to transfer the shares for the agreed price. What has happened is that VentureCrowd has secured the shares but has failed and refuses to pay the agreed price. [41] There are three aspects to the proper interpretation of the Buy-Back Agreement: the nature of the bargain, the resolution of an ambiguity, and conformity with the main object of the contract. Nature of the Bargain [42] It will be recalled that clause 4(d) of the Buy-Back Agreement provided that: “In consideration of the transfer and buy-back of the Shares, the Company must pay to the Holder the Transfer Price on the Completion Date.” That clause contemplates an exchange of the transfer of the shares for the price, and that the exchange is to occur on the Completion Date. [43] As was the case with the share sale agreement in Kay v Playup Australia Pty Ltd,26 Completion and the Completion Date are different concepts. Completion refers to an event - the actual act of completion of the sale. That is, the exchange of the transfer of the shares for the transfer price. The Completion Date is the date on which the event of Completion was due to take place, even if Completion did not in fact happen on that date. Thus, the event of completion of the sale and the timing of that event, are different things. The parties may agree that completion is to occur earlier or later than required by the contract. [44] Here, without any express agreement, the parties proceeded to transfer the shares from CBP to VentureCrowd. They both participated in that transfer process.27 [45] What, then, is to be made of the timing provisions, that is the words to requiring payment of the transfer price “on the Completion Date” in clause 4(d) and the words “Completion of the transfer and buy-back of the Shares must take place on the Completion Date” in clause 5(a). [46] Before considering the proper interpretation of those two clauses, it is important note the caution that courts should not create an ambiguity where it does not really exist,28 26 [2020] NSWCA 33 at [30]. In that case the “Completion Date” was defined as two business days after the buyer received regulatory approval to operate the business, or such other date as the parties agreed in writing. 27 On one view, by their conduct, the parties brought the Completion Date forward. However, CBP did not plead that there was such an agreement by their conduct. 28 See the discussion by Richard Calnan in Principles of Contractual Interpretation 2 nd ed, Oxford University Press at [6.23]. -- 10 of 18 -- 11 and that ambiguity is not to be equated with a difficulty in interpretation.29 It is also relevant to observe that the presence of an ambiguity in a contract is a conclusion.30 Clause 4(d) [47] Applying a common-sense interpretation reveals a problem with clause 4(d). The clause connects, or links, the transfer of the shares and the payment of the transfer price.31 The clause explicitly provides that “in consideration of the transfer” of the shares, VentureCrowd must pay the transfer price to CBP. In other words, the transfer of the shares and the payment of the price are linked.32 They are either dependent or concurrent promises.33 The price is paid for the transfer. [48] However, the timing provision, “on the Completion Date”, might apply to the payment of the transfer price, or it may apply to the both the transfer of the shares and the payment of the transfer price. Both interpretations are plausible. The presence of the comma in clause 4(d) suggests the timing applies to the payment of the transfer price. But the explicit connection between the transfer of the shares and the payment of the price, which is the main purpose of the transaction, means that the better interpretation is that what was contemplated was that both the transfer of the shares and the payment of the transfer price would occur on the same day and time - on the Completion Date. [49] That is the interpretation that is most likely to give effect to the objective intention of the parties. A reasonable businessperson could hardly have contemplated that CBP would part with the shares but would have no reciprocal right to the transfer price. Clause 5(a) [50] It will be recalled that clause 5(a) provides that “Completion of the transfer and buy- back of the Shares must take place on the Completion Date.” Again, there is an ambiguity, perhaps two. When clause 5(a) speaks of “Completion of the transfer and buy-back of the Shares” the clause could be addressing when the transfer of the shares must occur, or when the event of completion must occur – that is the transfer of the shares and the payment of the transfer price. [51] Oddly, clause 5(a) does not simply say: “Completion must take place on the Completion Date.” The use of the expression “Completion of the transfer and buy- 29 Schuler v Wickman Machine Tool Sales [1974] AC 235 at 261. 30 Rather than a precondition to the admissibility of evidence of surrounding circumstances: see Cherry v Steele-Park (2017) 96 NSWLR 548 at [76]-[85]. It is also important to acknowledge that there is no requirement to identify an ambiguity: see Allsop P’s analysis of the High Court cases in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at [14]. 31 Professor Carter refers to the use of a “linking word” as rebutting the former presumption in favour of independent obligations: Carter, Contract Law in Australia, 8 th ed JW Carter Publishing at [28-06], [28-07]. 32 The linking of the two promises is implicit in the use of the words “in consideration of”. For an example of a case considering that expressions see In re Hodge, Hodge v Griffiths [1940] 1 Ch 260. 33 See Dixon J in Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 463-4 and Supangat v Byrnes [2010] QCA 176 at [55], [57] (referred to by counsel for CBP). In those cases reference is made to ‘interdependent’ promises but there seems no material difference to ‘dependent’ promises. See also the discussion of this topic in Newcombe v Newcombe (1934) 34 SR (NSW) 446 at 450–451; Hillam v Iacullo (2015) 90 NSWLR 422 at [93]–[109]; both of which were discussed by Brereton JA in Kay v Playup Australia Pty Ltd [2020] NSWCA 33 at [62]-[66]. See the discussion of this topic by JW Carter, Contract Law in Australia, 8th ed JW Carter Publishing at [28-06]-[28-08]. -- 11 of 18 -- 12 back of the Shares” rather than simply “Completion” invites an inquiry as to whether the words “of the transfer and buy-back of the Shares” are designed to limit the timing to the transfer of the shares only, rather than the transfer of the shares and the price. On balance, given that the nature of this bargain is an exchange of the shares for the transfer price, the likely common intention is that the transfer was contemplated to occur on the same day. It can hardly be likely that the common objective intention was that CBP would part with $2.4 million worth of shares with no payment of the price and with not even a promise that the price would be paid at some time in the future. [52] The interpretation adopted above is consistent with clause 5(b) which provides that at completion CBP must deliver to VentureCrowd a duly executed and completed transfer in favour of VentureCrowd for all of the shares in registrable form and in the form of Schedule 3. As explained, that form, attached to the Buy-Back Agreement, expressly provides that, for the consideration of $2,431,903, CBP “hereby transfer” the shares to VentureCrowd. The immediacy of the phrase “hereby transfer” makes plain that the agreement contemplates that the transfer and the price are to be exchanged. A Further Ambiguity? [53] There is a further ambiguity exposed and highlighted by the present situation. Clause 5 makes specific provision for what is to happen at completion. CBP’s obligation was to deliver to VentureCrowd a duly executed and completed transfer of the shares and any share certificates.34 That was the effect of clause 5(b). Then, clauses 5(c) and (d) provided machinery for VentureCrowd to complete the transfer form on behalf of CBP, and for VentureCrowd’s representatives to act as CBP’s attorney to complete, execute and deliver the transfer form and any associated documents. Finally, clause 5(e) provided that, on Completion, VentureCrowd must pay the transfer price. [54] And so, at the core of the procedure for Completion, to take place on the Completion Date, was CBP’s obligation to deliver an executed transfer form and VentureCrowd’s obligation to pay the transfer price. None of that is surprising. And the Buy-Back Agreement does not explicitly deal with the situation where the parties proceed with the transfer of the shares in advance of the Completion Date. Again, that is not surprising. Basic agreements like this rarely anticipate the myriad of factual situations that may arise. [55] Therefore, the essential tension is between: (a) the timing provisions in clauses 4(d) and 5(a) to the effect that both the transfer of the shares and the payment of the transfer price must occur on the Completion Date;35 and (b) the provision in clause 4(d), and the scheme of clause 5, to the effect that the event of completion will involve the simultaneous exchange of the executed transfer and the price.36 34 It was not contended that there were share certificates. 35 This is based on the interpretation of these clause discussed above. 36 Ibid. -- 12 of 18 -- 13 [56] What would a reasonable businessperson have understood these terms to mean?37 As explained above, in my view, a reasonable businessperson would have regarded the agreement to deliver an executed transfer of the shares, and the promise to pay the transfer price as concurrent and dependent promises.38 And a reasonable businessperson would have regarded the Completion Date as merely a part of the machinery.39 [57] Whether the parties intended the timing provision to be essential is determined from an interpretation of the contract.40 Here, a reasonable businessperson would hardly regard the requirement that completion occur on the Completion Date as essential where both parties have embarked on the event of completion prior to the Completion Date. On the other hand, the parties objectively contemplated that completion of the sale would occur by the simultaneous transfer of the shares and the price. No reasonable businessperson would have understood that, in the absence of clear words, VentureCrowd would be entitled to take the benefit of the shares without paying anything for them, let alone the agreed price, and with the prospect that, if the Completion Date did not arrive, they would be entitled to $2.4 million of shares for free. [58] It could be said that construing the Buy-Back Agreement as entitling VentureCrowd to retain the shares without paying for them would lead to an absurd or very unreasonable result.41 But it is unnecessary to place the bar there.42 The interpretation choice comes down to deciding which interpretation is more reasonable considered as a matter of commercial efficacy or common sense.43 The exchange of the share transfer for the price is the main purpose of this contract. [59] For those reasons, I would interpret the contract as requiring the transfer price to be paid on the transfer of the shares, and that is the case even if the transfer of the shares took place before the occurrence of the Completion Date. In practical terms, the ambiguities can be resolved by reading the words “on the Completion Date” in clause 4(d) as if they read ‘by the Completion Date’. Similarly, in clause 5(a) the words “must take place on the Completion Date” can be read as ‘by the Completion Date’ or as ‘on or before the Completion Date’. Alternatively, one can merely read the timing requirement as subject to or subordinate to the provision requiring an exchange of the transfer of the shares for the transfer price.44 37 This paraphrases the words of French CJ, Hayne, Crennan and Kiefel JJ in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35] (quoted above). 38 See the discussion above. 39 In Ward v Eltherington [1982] Qd R 561, for example, the agreed time provision for the payment of the architect’s fee (when the clubhouse was constructed, or the first beer pulled) did not occur but that did not have the effect that payment of the fee never became due or recoverable. 40 Christensen and Duncan, The Construction and Performance of Commercial Contracts, 3 rd ed Federation Press at [10.2]. 41 Summers v Commonwealth (1918) 25 CLR 144 at 149; Schuler v Wickman Machine Tool Sales [1974] AC 235 at 251; Carter, Contract Law in Australia, 8 th ed JW Carter Publishing at [12-26]. 42 The test of absurdity is not easily satisfied, and a court is not justified in disregarding unambiguous language simply because the contract would have a more commercial and business-like operation if an interpretation different from that dictated by the language were adopted: Christensen and Duncan, The Construction and Performance of Commercial Contracts, 3rd ed Federation Press at [2.6.1]. 43 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 at 562, which relied on Gollin & Co Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455 at 464. 44 A similar resolution was arrived at by Refshauge J in Canberra Hire Pty Ltd v Koppers Wood Products Pty Ltd [2013] ACTSC 162 at [431]. -- 13 of 18 -- 14 [60] Of course, in some cases the parties may intend that the timing provision have some primacy, and that the payment of the transfer price is delayed, perhaps indefinitely.45 But, in my view, that is not this case here. [61] Counsel for CBP argued that there was no ambiguity. It follows from what has been explained above, that I do not accept that submission. If one accepts that the Buy- Back Agreement contemplates an exchange of the share transfer and the transfer price, and the use of the words “In consideration of…” compels that conclusion, then there is a conflict with the provision that requirement that completion “must” occur on the Completion Date. That timing requirement, expressed in that mandatory language, makes it difficult to reconcile the provisions requiring an ‘exchange’ and the timing requirements. [62] However, it is appropriate to accept counsel for CBP’s submission that if there is an ambiguity, it can be resolved by giving priority to the provisions relating to exchange rather than the timing provision. A Second Reason [63] Even if that were not the correct interpretation of the Buy-Back Agreement, there is a second reason for requiring payment of the transfer price. [64] Very occasionally, words and even whole clauses may be rejected if they are inconsistent with the main object of the contract, as ascertained from a reading of it as a whole.46 In Glynn v Margetson & Co Lord Halsbury LC said: It seems to me that in construing this document, which is a contract of carriage between the parties, one must in the first instance look at the whole of the instrument and not at one part of it only. Looking at the whole of the instrument, and seeing what one must regard, for a reason which I will give in a moment, as its main purpose, one must reject words, indeed whole provisions, if they are inconsistent with what one assumes to be the main purpose of the contract. The main purpose of the contract was to take on board at one port and to deliver at another port a perishable cargo…47 [65] Numerous instances of the principle can be found. For example, in Re Piccolo; McVeigh (Trustee of the Bankrupt Estate of John Peter Piccolo) v National Australia Bank Ltd Finkelstein J said: …an instrument is not to be interpreted solely by reference to the ordinary meaning of words used if they are in conflict with the intent of the parties. Thus it is permissible to reject words, and even whole provisions, if they are inconsistent with the parties' intention or for other reasons.48 45 By interpretation, the courts can require parties to spell out very clearly if they are intending to be unreasonable: Calnan (supra) at [7.18]. 46 Lewison and Hughes, The Interpretation of Contracts in Australia, Law Book Co at [9.09]. 47 [1893] AC 351 at 357. Parts of this passage are quoted by Lewison and Hughes. This is the decision of the House of Lords. The Court of Appeal’s decision was to similar effect: Margetson & Co v Glynn [1892] 1 QB 337. Williams JA referred to the principle in Glynn v Margetson & Co as ‘often quoted words’ in Francis v NPD Property Development Pty Ltd [2005] 1 Qd R 240 at [41]. 48 (2000) 278 ALR 429 at [39]. His Honour here refers to Glynn v Margetson & Co [1893] AC 351; Suisse Atlantique Societe d'Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361; National Bank of New Zealand v West [1978] 2 NZLR 451. His Honour’s judgment is a dissent. -- 14 of 18 -- 15 [66] Almost as numerous are warnings about the over-use of the principle. In Charter Reinsurance v Fagan Lord Mustill said: This practical rule of thumb (if I may so describe it with respect) must however have its limits. There comes a point at which the court should remind itself that the task is to discover what the parties meant from what they have said, and that to force upon the words a meaning which they cannot fairly bear is to substitute for the bargain actually made one which the court believes could better have been made. This is an illegitimate role for a court. Particularly in the field of commerce, where parties need to know what they must do and what they can insist on not doing, it is essential for them to be confident that they can rely on the court to enforce their contract according to its terms…In the end…the parties must be held to their bargain.49 [67] To similar effect are the remarks of Arnold J in Firm PI v Zurich Australian Insurance: “there is reason to be cautious in this area because commercial absurdity tends to lie in the eye of the beholder”.50 And so, in Arnold v Britton51 the majority of the UK Supreme Court gave effect to the wording of a rather poorly drafted clause in a lease even though it produced an odd and uncommercial result. Lord Neuberger, in delivering the reasons of the majority, usefully set out the relevant principles, one of which was as follows: …while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. Experience shows that it is by no means unknown for people to enter into arrangements which are ill-advised, even ignoring the benefit of wisdom of hindsight, and it is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party. [68] Is it the case that something has gone wrong because the obvious meaning of the words produces a result which is so absurd that it cannot have been intended?52 The word ‘absurd’ is not an essential element. Other expressions have been used such as ‘flouting business common sense’, ‘commercially nonsensical’ and ‘aberrant’.53 As Calnan observes: These expressions give some idea of the size of the hill to be climbed by someone who wishes to deny that words are to be given their ordinary meaning in context. But no one expressed the point more tellingly than Lord Reid in Schuler v Wickman Machine Tool 49 [1997] AC 313 at 387-8. This passage is quoted by Richard Calnan in Principles of Contractual Interpretation 2nd ed, Oxford University Press at [7.13]. That text contains a very useful discussion of this topic in Chapter 7. 50 [2015] 1 NZLR 432 at [90]. 51 [2015] AC 1619. 52 This is the way Calnan expresses it (supra) at [7.34]) based on the judgment of Lord Hoffman in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 at 913. See also Fitzgerald v Masters (1956) 95 CLR 420. 53 The Antaios, Antios Compania Naviera v Salen Rederierna [1985] 1 AC 191 at 201; City Alliance v Oxford Forecasting Services [2001] 1 All ER (Comm) 233 at [13]; Kooee Communications v Primus Telecommunications [2008] NSWCA 5 at [2]. These and similar expressions are discussed by Calnan (supra) at [7.44]. -- 15 of 18 -- 16 Sales Limited54 when he said that: ‘[t]he more unreasonable the result, the more unlikely it is that the parties can have intended it’. The important point is that it shows there is a sliding scale of absurdity/fantasy/unreasonableness. The test can be stated relatively clearly, but where the line is drawn in practice depends on the personal reactions of the arbitrator or the judge to the issue in hand. One person’s absurd result is another’s good deal.55 [69] Here, it is plain that ‘something has gone wrong’.56 At least a partial completion of the sale has been performed in that the shares have been transferred to VentureCrowd. But, having received the shares VentureCrowd refuses to pay for them on the basis that the Completion Date specified in the Buy-Back Agreement has not yet arrived. That date may never arrive. At the least, that is a commercially nonsensical result. One party has parted with shares with a designated value of $2.4 million and has received nothing. The other party has received an equivalent benefit and has paid not one dollar. If the position were reversed, and VentureCrowd had paid $2.4 million but CBP refused to transfer the shares, VentureCrowd could rightly complain that it has been deprived of what it bargained to receive. Indeed, VentureCrowd could then deploy the authority in clause 5(c) and/or the attorney provisions in clause 5(d) to ensure the transfer of the shares. Or VentureCrowd could sue for specific performance. [70] The only possible commercial justification for that result is that the parties contemplated that there would be an external capital raising in order to fund the transfer price. Counsel for VentureCrowd argued that was the case. As discussed earlier, the Information Memorandum speaks of VentureCrowd undertaking such an external capital raising. But that is a proposed method for VentureCrowd to fund its purchase of the shares. The Buy-Back Agreement does not make the sale of the shares, or the payment of the price, conditional on VentureCrowd obtaining funding through that source. [71] And, of course, VentureCrowd was entitled to delay completion of the sale until it had secured that funding. But VentureCrowd chose to proceed with the sale. It accepted the shares. It cannot both proceed with the sale and not pay for them. [72] In my view, it is clear what was intended.57 VentureCrowd had the ability to delay completion of the sale in order to secure funding via an external capital raising. However, having decided to proceed with the transaction, VentureCrowd is obliged to pay for the shares it acquired. That was the whole object of the transaction. [73] It follows that there should be judgment for CBP. Another Argument [74] Before considering the second issue, it is necessary to deal with a further argument raised by counsel for VentureCrowd. He contended that CBP was required to establish by evidence that there was, not only a transfer of the shares, but also that “the transfer was intended to be an act of completion of the [Buy-Back 54 [1974] AC 235 at 251. 55 Calnan (supra) at [7.45]. 56 This is the expression used by Lord Hoffman in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 at 913. 57 That it is clear what was intended is the second requirement: Calnan (supra) at [7.49]. -- 16 of 18 -- 17 Agreement]”.58 There is no legal basis for such a contention. A party who performs a contract, or at least performs that party’s obligation under a contract, is not required to prove that they did so with any particular subjective intent. [75] Counsel for VentureCrowd continued: This is submitted because it cannot be the case that any transfer of shares would trigger completion under the [Buy-Back Agreement]. Such a construction would be absurd – it would mean that if the applicant and respondent separately contracted for a sale of the applicant’s shares for consideration, it would still be required to pay the transfer price under the [Buy-Back Agreement]. Thus, the applicant’s construction, if accepted, must require the applicant to demonstrate that the transfer of shares was intended by the parties to be the completion process in the [Buy-Back Agreement]. [76] It is sufficient to say that on the evidence there was no question as to what shares were being transferred, or the agreement pursuant to which they were transferred. There were no other share transfers being considered by the parties and the shares transferred correspond exactly with those referred to in the Buy-Back Agreement. The form used by the parties coincides exactly with the form attached as schedule 3 to the Buy-Back Agreement. The Second Issue [77] Although it is not strictly necessary to proceed to decide the second issue, it is desirable that I consider that issue in case I am wrong in relation to the first. [78] It will be recalled that, under the Buy-Back Agreement, the Completion Date occurs if either of two events occur: there has been the closing of an external capital raise, or another date been nominated as the Completion Date. I will deal with those two events in reverse order. [79] Counsel for CBP argues that the second limb to the definition of Completion Date has been satisfied. The definition requires another date to be “nominated by [VentureCrowd] to be the Completion Date notice of which has been given to [CBP] in writing.” CBP argues that such a notice was given when Ms Taylor of VentureCrowd sent to CBP, via DocuSign, the share transfer form. CBP submits that by sending the share transfer form VentureCrowd unambiguously conveyed an intention that VentureCrowd would proceed with the buy-back of the shares. Even assuming that is true, a mere sending of the form does not do what the definition requires – that is to nominate a date as the Completion Date. The same applies to the accompanying email and to Ms Taylor’s email of 31 January 2023. [80] Counsel for CBP relies on the first limb of the definition of Completion Date. That part of the definition specifies that “Completion Date means the second Business Day after the closing of the next external capital raise by [VentureCrowd] which results in the issue of new securities in [VentureCrowd] or a subsidiary of [VentureCrowd] to third party investors…”. [81] The focus of this part of the definition is the closing of “the next external capital raise”. The capital raise need not be any particular capital raise. It is merely the next 58 VentureCrowd’s outline of submissions at [24]. -- 17 of 18 -- 18 one, in the context where the Buy-Back Agreement was dated 20 May 2022, but the parties agreed to it on 26 June 2022. [82] It is not entirely clear what was intended by the expression ‘external capital raise’ and no expert evidence was directed to any particular customary or trade usage of the expression. VentureCrowd argued that the expression referred to or at least comprehended the broad capital raising that was begun in September 2022. Mr Maarbani’s evidence is that the broad capital raising has not closed. He says that capital raise is “live and continuing”. No evidence contradicts that. [83] Counsel for CBP argues that there are six other share issues that constitute an ‘external capital raise’. Those share issues span the period from 14 February 2023 to 1 August 2023 and total nearly $9.5 million. Ordinarily those issues of shares would qualify as an ‘external capital raise’. The problem is that the requirement is that there be a ‘closing of the next external capital raise’. That suggests a process of capital raising beyond the mere issue of shares. On that interpretation I am unable to conclude that there has been a ‘closing of the next external capital raise’. [84] For those reasons, I am not satisfied that the definition of Completion Date has been met because there has been no closing of an external capital raising and there has been no nomination of another date as the Completion Date. Conclusion [85] Because of my conclusions on the first issue, it is appropriate to give judgment for CPD against VentureCrowd for $2,431,903.57 plus pre-judgment interest pursuant to section 58 of the Civil Proceedings Act 2011 from 27 February 2023 until judgment. [86] I will hear the parties on the form of the order, the calculation of interest and on costs. -- 18 of 18 --