• In the case of Harvela v Royal Trust 1986 ac 207 it was found that referential bids are not valid acceptances of unilateral contract offers
  • Where sellers indicate they wish to accept the highest offer and that the offers are to remain confidential, it is only consistent with a presumed intention to create a fixed bid sale and not an auction.

Facts of the Case

  • A Jersey trust company, (the first defendants) were one of the trustees of a settlement and the registered holders, on behalf of the trustees of shares in a company in which the claimants and the second defendant and his family also owned shares.
  • Whichever of the two groups acquire the shares, would also gain control of the company.
  • Both parties made offers
  • The first defendants decided to invite them to submit revised offers with identical terms and conditions.
  • By Telex, they invited each to submit any revised offers that they might wish to make by sealed tender or confidential telex to their solicitors by 3pm on 16 September 1981.
  • The solicitors were not to disclose any details of the revised position before that time.
  • Tenders were to be a single offer for all shares held by the first defendants.
  • Interest was to be payable upon the event that closing should take place after 30 days by 4 percent. Above prime rate for Canadian dollar loans.
  • The first defendants tied themselves to accept the highest offer received by them that complied with the terms of the telex.
  • Offers were received from both parties by 3pm of the specified date.
  • The claimant’s offer was over C$2,175,000 and the second defendant’s C$2,100,000.
  • On 29th September 1981, the first defendants via telex to the claimant and the second defendant saying that in the circumstances they were bound to accept and did accept the second defendants offer.
  • In an action by the claimant claiming the shares, Peter Gibson J, gave judgment in their favour and declared that they were not liable to pay interest on the purchase price.
  • He directed that the first defendants should retain and receive all dividends paid and to be paid on the shares from 16th October 1981 to completion.
  • The court of Appeal allowed an appeal by the second defendant and dismissed a cross appeal by the first defendants
  • The claimants appealed by leave of the House of Lords

Issues in Harvela v Royal Trust 1986 ac 207

  • Whether the second defendant’s referential bid was invalid.

Held by House of Lords

  • Appeal allowed

Lord Templemen

  • The referential bid was void and the defendant was only bound to accept the only valid offer made.
  • To allow a referential bid would create the possibility of conflicting obligations for the first defendant.
  • “Upon report . . . It is ordered and adjudged: . . . that the said order of Her Majesty’s Court of Appeal of 18 July 1984 complained of in the said appeal be and the same is hereby reversed. It is declared: (1) that the respondent the Royal Trust Company of Canada (C.I.) Ltd. (hereinafter referred to as “Royal Jersey”) is contractually bound to transfer the following shares in the capital of the respondent A. Harvey E & Co. Ltd. (hereinafter referred to as “the company”) that is to say 825 common shares 311 6 per cent, voting preference shares and 24337 non- voting redeemable preference shares (hereinafter collectively referred to as “the shares”) to the appellant Harvela Investments Ltd. (hereinafter referred to as “Harvela”) in accordance with the terms and conditions contained in the telexes respectively mentioned in paragraphs 10 and 12 .., of the statement of claim in the action at the purchase price of C$2,175,000. (2) That as a condition of the order for specific performance hereinafter made Harvela is liable to pay to Royal Jersey interest on the said purchase price from 15 October 1981 until actual payment at the short-term investment rate from time to time applicable to moneys paid into court but that Harvela is entitled to be paid on completion the amount of the dividend and interest (if any) paid or payable by the G company in respect of the said shares in respect of the said period.”  P.238

Study Law in the UK

  • This field is for validation purposes and should be left unchanged.