Oxus Gold Plc & Anor v Templeton Insurance Ltd

For non-delivery of shares where there is an available market, damages are prima facie measured by the market price at the time delivery ought to have occurred, less the contractual price. The buyer’s intended resale and the price obtainable on resale do not alter that measure.

An adjustment clause protecting warrant-holders from disadvantage ordinarily concerns the economic value of their warrants compared with shareholders’ interests. It does not normally preserve a fixed percentage of the company’s share capital. Adjustment is therefore unavailable for share issues made for full value or otherwise not offered to shareholders on terms engaging the clause.

Liability had previously been determined in favour of Templeton. The court was required to quantify damages for Oxus’s failure to issue shares following Templeton’s exercise of warrants.

The issues were the number of shares covered by contractual adjustment provisions, the proper measure of damages for non-delivery, the date by which delivery should reasonably have occurred, and the market value of the shares at that date.

1. Damages. The basic contractual rule was applicable. The authorities on non-delivery of goods, including Shaw v Holland, Rodocanachi, Sons & Co v Milburn Brothers and Williams Brothers v Agius, established that where there was an available market the measure was the market price at the date of delivery, less the contract price. The fact that Templeton intended to sell the shares did not justify substituting the eventual sale price.
2. Adjustment provisions. Condition 6 was directed to protecting the economic value of warrant-holders’ rights compared with the economic value of shareholders’ holdings. It did not confer a right to maintain a fixed percentage interest in Oxus. Such a construction would produce commercially improbable consequences and required clear contractual language, which was absent. Conditions 6 and 9.4 were to be read together.
3. The dilution claim therefore failed. The discount claim also failed, including the claim concerning the open offer. The evidence showed that Oxus obtained full value, the offer was made on the same terms to existing shareholders, and the share price rose following the issue. No adjustment would probably have been determined even if the contractual referral procedure had been followed.
4. Reasonable time and valuation. Delivery by 13 January 2004 would have been within a reasonable time, but delivery after that date would not. Damages were consequently to be assessed by reference to the price at which 5 million shares could have been purchased on 13 January, without deduction for commission. The parties were directed to agree the resulting figure or return for further determination.