1987 PLP 272 (CLC)

Participants have now agreed to provide Esso with the required waiver subject to the following pre‑conditions: (1) The Government has approved the sale and purchase of Products Agreement including the shareout formula. (2) The Government succeeds to our (Esso's) rights and obligations under the Refinery Agreement as amended to date including the Agreement agreed to on November 21, 1975. (3) The Government provides a letter to the other participants as follows: ‑ "In consideration of your granting a waiver of certain pre‑emptive rights you enjoy with respect to the disposal of the shares of P.R.L., now held by Esso, the Government of Pakistan gives its assurance that it has no intention of directing the Government Corporation, which it is proposed shall become the owner of said shares, to amend its lifting patterns and volumes in any manner not consistent with its off‑take obligations under the Refinery Agreement and the sale and purchase of products Agreement to each of which it will have become a party." Your prompt action in this matter will be greatly appreciated.

20. A reply dated 21‑8‑1976 was sent by Director‑General, Petroleum, Government of Pakistan to (1) Burmah Oil Co. Ltd., (2) The Shell Petroleum Co. Ltd. and (3) The Caltex Petroleum Corporation, in which the assurance called for in the letter noted above were offered in the following terms: ‑ "The assurance contained in this letter are conditional upon the waiving by all the three companies; Burmah Oil Company Limited, Shell Petroleum Company Limited and Caltex Petroleum Corporation of their pre‑emptive rights to the said shares and the proposed sale of said shares being concluded."

21. The dispute has arisen because the defendant No.l are disposing of the 15$ shares held by them to the defendant No.2.

22. The contention raised by the learned counsel for the plaintiff is that the plaintiffs being the purchaser of 'B' Class shares of Esso, have become Esso's successors in all respects and are entitled to all the privileges, benefits and advantages which are attached to the shares and were enjoyed by their predecessors namely Esso.

23. When the counsel talks of the benefit and rights in the shares, he vigorously emphasises on the benefit accruing to them through Article 11.02 of the 'Participants Agreement'. Under this Article the plaintiffs have a pre‑emptive right to purchase the shares which any one of the participants may desire to sell.

24. The learned counsel for the plaintiffs contends that on a true interpretation of Article 11.02 the 15$ shares of defendant No.l now being disposed of, must first be offered on identical terms to other participants on the ratio of their respective shareholding percentage. The transfer of the entire lot of 15$ shares to defendant No.2 is against the text and substance of Article 11.02. Such a unilateral transfer would result in a heavy weightage in favour of defendant No.2 and would disturb the equilibrium .which was sought to be achieved among the four founding members of the Pakistan Refinery Ltd. In the final analysis the plaintiffs who are by now the senior most member of the club of four would hereafter be reduced in size and stature as against defendant No.2 who would command 30$. As the controlling power of the Refinery vests in the 'B' Class shareholders only, it is not difficult to visualise the enormous strength and voting punch that the defendant No.2 would acquire after becoming owners of the 'B' Class shares of defendant No.l to the exclusion of the plaintiffs, who being successors in interest of Esso, are entitled to claim shares to the extent of 18% in the total number of shares available for disposal on account of the defendant No.l's intention to retire.

25. The contention of the learned counsel for the defendant on the other hand is that the plaintiffs not being a party to the "Participants Agreement" is not entitled to the advantages and benefits flowing out of this agreement and the defendant No. l is free to sell and defendant No.2 is free to purchase the shares belonging to the defendant No.l. Question arises whether by purchasing Esso's shares the plaintiffs have become entitled to all the benefits including the right of first option of purchase of shares of a co‑participant which admittedly vested in Esso, or they cannot claim this right.

26. The learned counsel for the defendant at least for the purposes of this application, has not been able to show why the plaintiffs, who have acquired the shares of Esso after full concurrence of the defendants, should not be allowed all the benefits which are attached to these 'B' Class shares.

27. I am afraid the arguments advanced by the learned counsel were not only incoherent, but are contradiction in terms. The learned counsel, relying on Article 11.05, tried to argue that clause (a) of this Article prescribes that "the participant whose shares are to be transferred, shall procure that the third party purchaser shall become a party to and be bound by all the provisions of this and all other applicable Agreements". Learned counsel submits that because the plaintiffs "a third party purchaser from Esso" have not signed this agreement, they are not entitled to the benefits enshrined in this "Participants Agreement". But in the next breadth the learned counsel relies on a letter dated 27‑8‑1976 which is Annexure 'I' to the Counter Affidavit of Mr. Donald M. Keith. This letter is addressed to Esso and the defendants have written to say that in view of the assurance given by the Government of Pakistan, Ministry of Fuel, Power and Natural Resources, the Burmah Oil Co. Ltd., Shell Petroleum Co. Ltd. and the Caltex Petroleum Corporation agreed to waive our rights under Articles 11.02 and 11.03 of the "Participants Agreement" dated 26‑3‑1970. The letter further goes to say that: "We further waive the requirement of Article 11.05 (a) of the Participants Agreement to the effect that the President of Pakistan or his nominees as third party purchaser must become a party to and be bound by the Participants Agreement."

28. This argument seems to be at cross with the earlier contention raised by the learned counsel. On the one hand he contends that a new‑comer is obliged to become a party to and be bound by the provisions of the Participants Agreement and on the other hand he himself relies on this letter, which in clear terms "waive he requirement of Article 11.05 (a) of the Participants Agreement to the effect that the President of Pakistan or his nominee as third party purchaser must become a party to and be bound by the Participants Agreement."

29. The learned counsel then picks up another line of argument. The contention raised is that because the requirement of becoming a party to the Participants Agreement vide Article 11.05 (a) has been waived, the plaintiffs purchaser have not acquired any rights flowing out of the Participants Agreement. But waiver would operate only against a promissor and not against a promisee. If the defendants are waiving the requirement of Article 11.05 by releasing the new purchaser from becoming a party to the Participants Agreement, it does not mean that they are also entitled to deprive the new‑comer from the benefits attached to the shares unless the new‑comer also waives his right of claiming those benefits in Pxoress terms. This letter in my humble opinion, cannot be read as estoppel against the purchaser /plaintiffs because they have not agreed to waive any of the rights which goes with the shares they have purchased; and what they have purchased is not A merely the share scripts, but "shares free from all charges or liens or any other encumbrances and with all rights attached thereto."

30. The above discussion would show that while contracting to sell their shares, the former owner of these shares had expressly assigned to the plaintiffs /purchasers all the rights attached thereto. But assuming for the sake of arguments that an express assignment of the rights attached to these shares was not made, and, as erroneously argued by P the learned counsel of the defendants only the right to collect dividends was transferred, in my opinion the attending circumstances are speaking louder than any argument. In the peculiar situation of the case we will have to read such an assignment even if we ignore the express words in the several clauses of the agreement dated 15‑9‑1970.

31. Two cases have been placed where in more or less similar situation the House of Lords and the Privy Council have taken the same view. (1) Case from "House of Lords (1903) Appeal Cases P.414" and (2) a case from "Privy Council reported in 1951 Madras 532."

32. In the case of House of Lords, one Tolhurst, owner of quarries of chalk, entered into a contract with a company known as Imperial Portland Cement Company Ltd. for supply of at least 750 tons and, if needed, even more quantity of chalk, per week for the manufacture of Portland cement by the company for a period of fifty years.

33. The Imperial Portland Cement Company, after a couple of years assigned the contract and sold its land, undertaking, works and business to another much larger company. The Associated Portland Cement Manufacturers Ltd., who had a‑ potential to consume far larger quantity of chalk than the quantity Tolhurst had agreed to supply at a fixed rate for 50 years. Tolhurst tried to avoid the contract while Associated Company tried to enforce it as assignee of the original Imperial Co. Cross actions were filed by the parties. Mathew, J. who tried both, gave judgment for Tolhurst relieving him from the bargain viz‑z‑viz a stranger. The action of Associated Co. against Tolhurst was dismissed.

34. The Court of Appeal revised these decisions and decreed performance of contract by Tolhurst in favour of Associated Co. Tolhurst filed appeal to the House of Lords. Four Lords concurred in the opinion that in spite of absence of the right of assignment in the contract the nature and circumstances justify that the right of assignment should be read in the contract and as such the Assignee was entitled to enforce the contract against the owner of quarry. Lord Robertson dissented. It would not be without interest to have a look on the opinion expressed by each member of House who recorded separate concurring judgment. Earl of Halsbury L . C . held:‑ "The circumstances which have induced me to change the view I originally entertained are the length of duration of the contemplated contract, the persons engaged in it, and the nature of the contract itself. I quite agree that the fact of the word assigns' not being in the contract is immaterial if it is ascertained that the intention of the contract is that it should be assigned. Under these circumstances I acquiesce in the judgment which is intended to be moved by my noble and learned friend Lord Macnaghten, but it is with very great hesitation." Lord Macnaghten held:‑ "Two alternative constructions have been proposed. One follows the letter of the instrument and adheres to it closely; the other favours a more liberal interpretation, supplying, it is said, nothing more than what is required in order to carry out the obvious intention of the parties." It was further held:‑ "It seems to me that the contract is to be read and construed as if it contained an interpretation clause saying that the expression "Tolhurst" should include Tolhurst and his heirs, executors, administrators and assigns, owners and occupiers of the Northfleet quarries, that the expression "the company" should include the company and its successors and assigns, owners and occupiers of the Northfleet Cement Works, and that the words "his" and "their" should have a corresponding meaning. That, I think, was the plain intention of the parties." Lord Lindley held: "The nature of the agreement and the time it was to last negative the idea that it was confined to the parties to it. The word 'assigns' does not occur in the agreement. But this does not show that the benefit of the contract is not assignable. An agreement for a lease, and even an option to require a lease or a renewal of a lease, is assignable in equity even although there is no mention of executors, administrators, or assigns."

35. In the Privy Council case father and minor sons of a Hindoo Joint family sold a village to the defendant by a deed, dated 27‑1‑1891. A 'counter‑part document' was also executed by the purchaser the same day, promising to reconvey the property to the seller if the latter had paid the same price back to the purchaser after 30 years. In 1897 the seller was adjudicated an insolvent and his property passed into the hands of the official assignee. The father died and the son sold the property to a stranger by a deed dated 12‑5‑1910 assigning to the purchaser the right of repurchase. The transaction was approved by the official assignee. In 1919 the seller's son who had sold the property in 1910, as well as the original purchaser died. On 12th July, 1920 the new purchaser invoking the right of repurchase in the deed dated 27‑1‑1891 sued for specific performance seeking release of the property. The heirs of the original purchaser contested the suit and pleaded that the plaintiff was a stranger and the assignment in his favour was ineffective. The trial Court dismissed the suit. In the appeal to the High Court the suit was decreed. The heirs of the purchaser under the original deed dated 21‑1‑1891 appealed to the Privy Council. The Privy Council dismissed the appeal and concurred with the conclusion of the High Court It was held by the Privy Council: "It was not intended that the option could be exercised only by Venkata Subrahmanya and Krishnasami personally. The terms of the contract and the time at which the option was to be exercised go to show that the intention was that the option might be exercised by the abovementioned two persons or their heirs. It was not disputed that, if the transaction of the 27th January, 1891 amounted to a completed contract, as their Lordships have decided, the benefit of the contract could be assigned."

36. The above two cases no doubt lend strong support to the view that the Court has a duty to spell out the real meaning of the expressions used in contracts and to discover and discern the real intentions of the parties behind those expressions.

37. The case on hand relates to a controversy between two shareholders to purchase the same lot of shares now put up for sale by a third shareholder, who is retiring. The shares in question are not simple dividend earning shares, but carry a potential of being utilised for a number of other purposes in a variety of ways. They confer upon their owner enviable power and prestige, in addition to the right to earn dividend. The chances to obtain contracts of "feed material" to the Pakistan Refinery Ltd. and off take rights of its product depend to a large measure on their acquisition and the consequential opportunity of manoeuverability that their holder would enjoy as a member of the Board of Directors in the parent Company.

38. All these situations were fully comprehended by the original four "Participants" of the parent Company and taken care of by serialising all eventualities in the 'Participants Agreement'. Now does it stand to reason that a successor‑in‑in trest standing in the shoes of one of the founding father of the company should be stripped of all other benefits and advantages which the original owner of these shares possessed? Would it not mean that out of "B" Class shareholders two sub‑clauses are being split up now one who has a pre‑empting right to purchase the shares of a retiring 'Participant' and the other who is without such a right. On what rationable such a distinction can be created?

39. I am afraid I had to examine this part of the case a little deeper even though it is an interlocutory stage. I had to do so to evaluate the merit of the arguments of the learned counsel for the defendants that defendant No.l has full right to dispose of his shares to the defendant No.2 and defendant No.3 is bound to act accordingly by entering the name of the transferee of shares in all the books of the defendant No.3.

40. I may, however, add that it goes without saying that any opinion expressed in this order would be tentative.

41. In the circumstances I am satisfied that the plaintiffs have a prima facie case, but only to the extent of 18% of the shares flow being transferred. The prayer for a prohibitory injunction for all the shares, prima facie has no merit.

42. Now the question arises, how the equities in the case can be served causing minimum inconvenience to the defendants and yet safeguarding the interest of the plaintiffs?

43. An argument was advanced by the learned counsel for the defendants that the shares be allowed to be transferred, but subject to the decree in the suit. But this might cause irreparable injury to the plaintiffs. As holder of these shares, the defendant No.2 would be owner of about 50$ of the 'B' Class shares and by the time the suit is matured for hearing, they may exploit this position to such an extent that it may make conditions unbearable for the plaintiffs.

44. The order proposed to be passed is as follows:‑ (1) The defendant No.l is restrained from selling and defendant No.2 from purchasing such number of shares as may form 18$ of the lot now being disposed of by defendant No. 1. (2) The two defendants would be free to deal with the remaining shares without any restraint from the Court including disbursement of the dividends to the purchaser. This will be subject to obtaining refusal of opitions by other participants as provided in Clause 11.02 of Article XI of the participation agreement. (3) That the defendant No.2 should not be entitled to exercise voting right or claim any additional pecuniary or non‑pecuniary advantage on the basis of the newly‑purchased shares till such time that the dispute regarding disposal of 18$ shares is resolved (4) The 18$ disputed shares would continue to remain with the defendant No.l and they would continue to enjoy all the rights and benefits which they have been enjoying before till now. Order accordingly. A.A. ‑‑‑‑ Order accordingly.